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2014 (11) TMI 476

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..... d be titled in the name of the owner of the property/premises - it cannot be said that the expenses incurred by the assessee on legal and professional charges paid to Shri K.C. Mittal were not pertaining to the assessee firm - the legal and professional charges paid by the assessee in the case before Hon'ble Delhi High Court which was titled in the name of recorded owner of the premises are certainly the expenditure wholly and exclusively for the purpose of the business of the assessee which is allowable u/s 37 of the Act – the order of the CIT(A) is upheld – Decided against revenue. Mobile expenses disallowed – Held that:- The AO has not disputed the fact that fringe benefit tax has been paid by the assessee firm on telephone expenses - The AO has not also disputed the fact that the partners of the assessee firm have to operate the business of the assessee with overseas clients and customers who reside in different time zones around the world - the explanation of the assessee is acceptable that the residential telephones as well as mobile phones of the partners were largely used for international calls and internet - the CIT(A) rightly granted relief for the assessee – Decided .....

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..... of ₹ 4,57,160/- had been debited to the Profit and loss account out of which ₹ 49,947/- related to the residential telephones and ₹ 2,23,627/- were related to payment of mobile phones of the partners. The Assessing Officer disallowed entire expenses of residential telephones, and disallowed 50% of the expenditure of mobile phones of the partners, and made a disallowance of ₹ 1,61,761/-. The AO further found that electricity expenditure claimed include provision of ₹ 6,73,947/-, which was disputed before the Delhi High Court in litigation. The AO treated the same as a contingent liability and made a disallowance of ₹ 6,73,947/-. The AO further held that the dividend income disclosed from mutual funds of ₹ 83,108/- was not exempt u/s 10(35) of the Income Tax Act, 1961, having been received from American Express Bank in the nature of floating interest, and not being dividend received from a mutual fund as per provisions of the Act. The AO assessed the same as income from other sources and made an addition to the returned income of the assessee. 4. The aggrieved assessee preferred an appeal before the CIT(A) which was allowed on all four is .....

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..... the assessee supported the impugned order and submitted that the AO was misconceived about the facts of the case, therefore, the baseless disallowance was rightly allowed by the CIT(A). 8. On careful consideration of above submissions, we observe that the electricity charges debited to the P L account of the financial year under consideration included the impugned amount which was related to the arrears of the earlier years. In this situation, we are of the considered opinion that the claim of the assessee cannot be said to be comprised of contingent liability and the CIT(A) rightly deleted the disallowance and addition thereunder. We are unable to see any ambiguity or perversity in the impugned order and we uphold the same by dismissing ground no. 1 of the revenue. Ground no.2 9. Apropos ground no.2, ld. DR submitted that the assessee could not establish that the payment of ₹ 33,000 as legal and professional charges made to Shri K.C.Mittal had a direct nexus with the earnings of the business of the assessee as the case was assailed by M/s Superex Steel Products Pvt. Ltd. The DR further contended that the AO disallowed the same on justified basis which was deleted b .....

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..... the assessee obtained premises situated at F-89/24, Okhla Phase I on lease from M/s Superex Steel Products Pvt. Ltd. who was recorded owner of the premises. We further observe that the AO has not disputed the fact that the assessee had to file a litigation before Hon'ble Delhi High Court related to dispute on payment of electricity charges. Accordingly, we are inclined to hold that when the immoveable property/premises belonged to a particular person or entity and the same is leased and handed over to another person or entity, then in case of any dispute pertaining to the electricity payment raised, the dispute would be titled in the name of the owner of the property/premises and the same facts have emerged in the present case. In this situation, it cannot be said that the expenses incurred by the assessee on legal and professional charges paid to Shri K.C. Mittal were not pertaining to the assessee firm. Per contra, we are of the view that the legal and professional charges paid by the assessee in the case before Hon'ble Delhi High Court which was titled in the name of recorded owner of the premises are certainly the expenditure wholly and exclusively for the purpose of t .....

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..... e order dated 18.02.2008. The appellant has argued that the partners have to conduct business with overseas customers who are in different time zones, and the residential telephones as well as mobile phones of the partners are largely used for international calls and internet. Moreover it is seen that fringe benefit tax has been paid on the telephone expenses. After considering that the value of use of telephones has been included in the return of fringe benefit tax, the disallowance of ₹ 1,61,761/- is deleted. 15. On careful consideration of above submissions and conclusion of the CIT(A), we observe that the AO has not disputed the fact that fringe benefit tax has been paid by the assessee firm on telephone expenses. The AO has not also disputed the fact that the partners of the assessee firm have to operate the business of the assessee with overseas clients and customers who reside in different time zones around the world. In this situation, the explanation of the assessee is acceptable that the residential telephones as well as mobile phones of the partners were largely used for international calls and internet. Under these circumstances, the CIT(A) rightly granted rel .....

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..... ested by the assessing officer, as it is an investment made in the name of the appellant. Assessing officer admits that the information available to him under AIR shows investment transactions on various dates during the year in the name of the appellant. Assumption that the dividend received on these investment transactions is in the nature of floating kind of interest on investment received from American Express is factually incorrect. Since, the investment has been made in the name of the appellant and dividend is also credited in the bank account of the appellant, the appellant is entitled to exemption u/s 10 (35) of the Act and no addition on this account is called for. 18. From a glance at the impugned order, we see that the CIT(A) has granted relief for the assessee with following conclusion and findings:- 8. Ground of appeal no.6 relates to, the disallowance of exemption u/s 10(35) in respect of dividend on mutual funds of ₹ 83,108/-. It has been explained by the appellant that it had given mandate to American Express bank to transfer any amount in excess of ₹ 2,00,000/- lying in the appellant's current account to the Franklin Templeton Mutua .....

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