TMI Blog2017 (2) TMI 1512X X X X Extracts X X X X X X X X Extracts X X X X ..... through all the relevant agreements entered into by the assessee and give a finding as to whether the same would fall within the objects of the assessee trust so as to fall within the ambit of business income of the assessee. In case if the same is to be construed as income from other sources, even then the allowability of the various expenses would have to be considered in the light of the provisions of section 57(iii) of the Act. We agree with the arguments of the ld AR that the findings given in the earlier years with regard to incubation of new entities does not apply to the facts during the year under appeal. We hold that the lower authorities had not adjudicated the various streams of income in the correct perspective for the year under appeal. Accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to set aside the entire assessment to the file of the ld AO for denovo adjudication, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. Accordingly the grounds raised by the assessee are allowed for statistical purposes. - I.T.A. No. 962/Mds/2016 - - - Dated:- 16-2-2017 - SHRI M. BALAG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited the following expenses :- Staff costs ₹ 3,36,42,884/- Administration other exps. ₹ 29,39,31,902/- 4. Out of the aforesaid expenditure, the assessee had voluntarily disallowed in the memo of income a sum of ₹ 24,94,26,022/-. The remaining sum of ₹ 7,81,48,764/- was claimed as incurred for the purpose of business. These expenses were incurred towards salaries and other staff costs, rent and amenities, repairs and maintenance, postage telegrams, printing stationery, telephone expenses, consumables, travelling conveyance, consultancy charges, legal professional charges, brokerage commission, conference seminar expenses, recruitment charges, office expenses, subscription, sponsorship charges, website maintenance and internet expenses, auditors remuneration and miscellaneous expenses. The ld AO show caused the assessee at to why the allowability of expenses debited in the profit and loss account should be restricted only to 2% of gross receipts as that incurred for earning the income in accordance with the appellate orders for the earlier years. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness as income under the head 'Income from Other Sources'. 5.3 The CIT(A) grossly erred in disregarding the Segment II business activities carried on the Appellant. 5.4 The CIT(A) failed to appreciate that unlike the preceding AY, during the subject A Y, the Appellant was not engaged in incubation of entities and as such the assessment order passed by the Assessing Officer on the basis of misconceived facts is void ab initio. 5.5 The CIT(A) grossly erred in following the order of his predecessor for the earlier AY 2009-10 without appreciating that the facts of the earlier AY 2009-10 were completely different and is not applicable for the subject AY 2012-13. 5.6 The CIT(A) grossly failed to appreciate that during the subject AY, the Appellant was not involved in incubation of new entities and it was in fact pursuing Segment II business activity of providing shared and infrastructure services and as such the income generated from such business activity and credited to P L should be assessed as 'Profits and gains of business' and it should not treated as 'Income from Other Sources'. 5.7 The CIT(A) ought to have appreciated that all expenditure d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure which is incurred wholly and exclusively for the purpose of business is allowable as deduction, subject to other provisions of the Act. 5.15 Without prejudice to the above, even assuming without accepting that the incomes credited to P L account is held to be assessable under the head income from other sources , the corresponding expenditure incurred wholly and exclusively for the purpose of earning such income should be allowable under Section 57(iii) of the Act. Estimate of expenditure at the rate of 2% 5.16 Without prejudice to the above, the CIT(A) erred in confirming that ad-hoc expenditure at the rate of 2% of the gross receipts of the Appellant is reasonable and allowable as deduction while computing the total income. 5.17 The CIT(A) erred in holding that ad-hoc expenditure at the rate of 2% of the gross receipts of the Appellant is reasonable and allowable as deduction without considering the actual expenditure debited to the Profit Loss account. 5.18 The CIT(A) grossly erred in not considering the cost statement filed by the Appellant which categorically states the direct expenses incurred/debited to P L account to earn the incomes credited to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re service income vide pages 146 to 147 of PB ; sample invoice copies reflecting collection of infrastructure service fees along with service tax vide pages 148 to 151 of PB and working indicating the profit derived from infrastructure services based on accelerated recovery of security deposit vide page 152 of PB. The assessee had offered the income derived from the above services (i.e. income from shared services , infrastructure services , interest on loans etc) under the head profits and gains of business or profession on the premise the same were earned out of the business activities of the assessee and claimed the expenses incurred for the purpose of business against such income. It is a fact that the assessee had not carried out any Segment I business activity i.e. incubation of new entities during the year under appeal. It had only carried out Segment II business activities during the year under appeal. The various streams of income derived from Segment II business activities were stated elsewhere hereinabove in this order. This fact was lost sight by the lower authorities and the findings given by the appellate forums in earlier years were simply copy pasted while disposi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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