TMI Blog2019 (2) TMI 1895X X X X Extracts X X X X X X X X Extracts X X X X ..... building was used as registered office and disallowed the balance as major part of the premise was used for residential purpose of the directors and their family. Legal professional charges, the Ld. CIT(A) has allowed payment of ₹ 2, 78, 700/-to m/s Vaish Associates against income from other sources. The expenses of ₹ 22,060/- have been found related to let out property and accordingly he has disallowed. Expenses paid to two professionals namely Mr. Suren Singh Rasaily and Mr. Dilip Sudhakar Deshmukh, the Ld. CIT(A) himself summoned the persons and carried out the enquiries, and after detailed enquiry, he concluded that payment of professional charges were not incurred wholly and exclusively for the purpose of earning income from other sources . Similarly he has examined allowability of the depreciation allowance , office maintenance expenses and other expenses under the head income from other sources . We do not find any error in the above factual findings of the Ld. CIT(A). - ITA No.3613/Del/2015 - - - Dated:- 28-2-2019 - Shri Amit Shukla,Judicial Member And Shri O.P. Kant, Accountant Member Assessee by: Shri Ajay Vohra, Sr. Advocate Shri Bharat, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort the Act) was issued and complied with. In the assessment completed u/s 143(3) of the Act on 31/03/2014, the Assessing Officer made addition for deemed dividend amounting to ₹ 12,37,000/- and also disallowed business expenses amounting to ₹ 92,91,007/- claimed by the assessee. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who deleted the addition of deemed dividend, however the disallowance of business expenses was only partly allowed. Against the disallowance sustained, the assessee is an appeal before the Tribunal raising the grounds as reproduced above. 3. In the grounds raised mainly two issues are involved. The first issue is regarding the service charges of ₹ 11,50,970/-and furniture hire charges of ₹ 13,80,000/- received by the assessee, which are held by the Ld. CIT(A) as income under the head income from other sources whereas according to the assessee same falls under profit and gains of business and profession . The second issue is disallowance of the various expenses claimed by the assessee by the AO/CIT(A) on the ground that in absence of any business activity same cannot be allowed to the assessee except expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professionals. In view of the above, he submitted that order of the Ld. CIT(A) might be sustained. 6. We have heard the rival submissions and perused the relevant material on record. We find that the assessee was engaged in business activity of travel agent in earlier years but in the year under consideration, the assessee has shown income from renting out a property in Mumbai amounting to ₹ 1,20,00,000/- which has been offered under the head income from house property . Against the said rental income, the assessee has already claimed deduction @30% for expenses towards maintenance of the property. The assessee has also shown income from service charges of ₹ 21, 50,970/-from other group companies and hire charges on furniture leased to group company. According to the assessee, the service charges and the hire charges from the furniture falls under the business activity of the assessee and should be assessed as profit and gain of business, whereas according to the Ld. Assessing Officer and the Ld. CIT(A) both these incomes falls under the head income from other sources . The contention of the lower authorities are that the assessee has already claimed 30% of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is reproduced as under:- Name Amount (Rs.) 1. SH. Bhupender Kumar 117000.00 Accounts Officer 2. Sh. Upendra Prasad 87000.00 Accounts Assistant 3. Sh. Subhash Chandar 75000.00 Executive 4. SH. Hakesh Sharma 73367.00 Computer Operator 5. Sh. Ravinder Singh 74800.00 Executive 6. 5h. Shiv Nandan 50665.00 Driver 7. Krishan Dutt Shukla 49400.00 Driver 8. Sh.Ramesh Chand jukhwal 34800.00 Peon 9. Sh.ShankarRawat 38400.00 Chartered Accountant 10. ' Sh. Dhirender Panday 14000.00 Assistant 11. Ms. Pooja Gupta 4000.00 Computer operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed the income from service charges and hire charges under the head profit and gains of the business . On perusal of the said assessment order for assessment year 2012-13 and 2013-14 available on page 179 and 196 of the paper book respectively, we find that in both the orders the Assessing Officer has not analysed as why the income from service charges and hire charges should be assessed under the head profit and gains of the business . The Assessing Officer has simply accepted the income filed by the assessee without going into detail reasoning for assessing the said income under relevant head. We find that in the year under consideration the Ld. CIT(A) has analysed as to why the income from service charges and hired charges of furniture should be assessed under the head income from other sources . 11. On this issue the Ld. CIT(A) has mentioned the detail of the expenses claimed by the assessee and the nature of the income earned during the year. The Ld. CIT(A) observed that no documentary evidence in support of the services rendered by the assessee was submitted. After analysis of the facts and circumstances, he held that assessee was not continuing with the travel bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,412,209 Rent 208,392 Electricity Water 247,515 Officer Maintenance 383,373 Printing Stationery 17,160 Postage, Telegrams Couriers 4,606 Repairs Maintenance - Telephone Trunk Calls 179,454 Travelling Conveyance 274,629 Car Maintenance 249,242 Computer Consumable 12,470 Bank charges Commission 5,172 Insurance 34,258 Interest on Car loan 183,600 Interest paid - Internet expenses 61,816 Staff Welfare 29,414 Staff Medical 51,900 Staff Uniform 3,885 Subscriptions 15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said agreement, it is seen that the appellant has agreed to provide the following services: (1) Maintenance of day to day account on computer; (2) Reconciliation of Bank statement on monthly basis: and (3) Raising the client invoice every month, study the same to respective clients and follow-up payment of the invoice. The appellant was asked to produce evidences in' support of the claim of delivery of such services to the client based in USA, which include maintenance of day to day accounts on computers while, the company has opening WDV of computers of ₹ 17,628/- only and no new computer/software were purchased. Similarly, to maintain accounts in terms of Accounting Standard applicable in USA, requires US-specific software and personnel who are well versed with US accounting practices. The appellant has not purchased any software. The appellant has claimed payment of salary to three persons, claimed to be accountant executive, namely; Vikar Arya (₹ 66,600), Mr. Gaurav Nautiyal (₹ 63,800) and Mr. Bhpinder Agrawal (₹ 3,15,900). No evidences of their professional skill/experience with regard US accounting system that too for on-line accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from other sources . The ground No. 1 of the appeal is accordingly dismissed. 13. In ground No. 2 to ground No. 6, the assessee has challenged various expenses claimed under the profit and loss account. 14. We have heard the rival submission of the parties on the issue of disallowance of the various expenses confirmed by the Ld. CIT(A). Since the Ld. CIT(A) has held the income from service charges and hire charges from furniture taxable under the head income from other sources , he has examined the allowability of the expenses claimed under the profit and loss account against the income assessed under the head income from other sources . Wherever, he found that the expenses are incurred wholly in exclusively for running the income, he has allowed the same. The Ld. CIT(A) has sustained the disallowance observing as under: 6.4.6 Having held this, I hold that the following expenses are allowable in the hands of appellant, being required for keeping the company alive and for earning 'income from other sources' with or without earning business income: (1) Auditor's remuneration (2) Newspaper periodical (3) Subscription (4) Printing stationery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar maintenance, interest on car loans and depreciation on car loans, which are for use of the car by the directors, also cannot be allowed against Income from other sources. With regard Director's remuneration, other expenses , staff compensation expenses (other than for 3 Accountants and peons), it cannot be held that the same were incurred wholly and exclusively only for earning the 'income from other sources' and allowable u/s 57(iii) and hence, the same are also disallowed. 6.4.10 With regard the payment of legal and professional charges of ₹ 29,50,460/-, I have already held that the payment of ₹ 2,78,700/- to M/s Vaish Associates for Income Tax Compliance Activities was allowable against income from other sources. Similarly, fees of ₹ 2500/- paid to Siddiqui Associates for Corporate Law compliance activities is also held as allowable. However, it is seen that the appellant had paid an amount of ₹ 22,060/- from Rajesh Shah Engineers Consultancy Pvt. ltd. for consultation and professional services for preparing valuation reports of the office premises no.701 and no.705 at Mumbai, which was let out on which the appellant had earned rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mr. Malhotra. In response to Question no.5, in which Mr. Suren Singh Rasaily was asked to inform about the manner in which the services was sought by Mr. Malhotra on day to day basis, it was informed that his role was limited to evaluating opportunities and offering advice as and when sought by Mr. Rajiv Malhotra. It was also informed by him in response to Question no.9 that he visited Karol Bagh office only two-three times for signing the documents and picking up the cheques. The above facts clearly show that Mr. Suren Singh Rasaily who is a professional in designing business strategy in the IT and service apartment service was actually working for Mr. Rajiv Malhotra, who is based on USA and not for appellant company. As clearly mentioned by him, Mr. Malhotra had interest in starting intellectual property-centric business in India and abroad for which his service was sought. Since none of the above business activities are being carried out by the appellant, I do not find any justification for allowing such expenses in the books of the appellant. No doubt, bonafide of such payment stands proved, however, it is evident that Mr. Rasaily was actually working for Mr. Rajiv Malhotra a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at property at Maharani Bagh, is to be allowed 1/6th of the expenditure. The AD is directed to allow full amount of depreciation on computer, generator, refrigerator, office equipments and electrical fittings and table wall box. 6.4.14 With regard the office maintenance expenses, on perusal of the details filed by the appellant it is seen that out of the total expenses of ₹ 3,83,373/- the major bulk is towards payment to Mr. Malkit Singh (₹ 1,37,000)and Mr. Shapat Ali (₹ 1,23,400/-).The details of the bills of repair from these charges were called for which shows that these bills were towards the property at Maharani Bagh. Keeping in view my above decision, 1/6th of such expenses are held as allowable towards registered office located in a small part of that premises. 15. Before us the Ld. Counsel could not point out any error in the order of the Ld. CIT(A) except that the expenses claimed are business expenses and thus allowable under section 37(1) of the act. The Ld. CIT(A) has examined each and every expenses sustained by him. As regard the watch and ward , water and electricity , telephone expense , Internet expense and office maintenance expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
