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2017 (12) TMI 305 - AT - Income TaxDisallowance on account of demand for outstanding municipal taxes - Held that:- The assessee has established on the basis of the relevant lease agreement that the property was occupied by the assessee as lessee from 1st April, 2002 and he was liable to pay all the property taxes out-goings and other burdens whatsoever payable to local or other authority upon the demised premises. He has also established on the basis of the demand notice issued by the municipal authority that the amount in question was paid by the assessee on account of municipal taxes for the period from 1st April, 2002 along with the interest thereto. Moreover, the said payment, as pointed out for the assessee, was made on 13.12.2008 i.e. during the year under consideration and the assessee, therefore, was entitled to claim deduction for the same on payment basis as per section 43B of the Act. Thus we are of the view that the disallowance made by the A.O. on account of municipal tax arrears paid by the assessee was not sustainable and the CIT(A) is fully justified in deleting the same. In that view of the matter, we uphold the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue and dismiss ground no 1 of the revenue’s appeal. Disallowance on account of business promotion expenses - Held that:- After having considered the nature of business of the assessee which warrants the incurring of expenditure on business promotion, the Ld. CIT(A) allowed the claim of the assessee for business promotion expenditure to the extent of 90% and sustained the disallowance only to the extent of 10% on account of personal and unverifiable element involved in the said expenditure. As rightly contended by the learned DR, the relief given to the Ld. CIT(A) to the assessee on this issue to the extent of 90% is quite excessive and unreasonable keeping in view the case made out by the A.O. showing the involvement of personal and unverifiable element, which has remained uncontroverted even before the Ld. CIT(A). Having regard to all the facts and circumstances of the case, we are of the view that it would be fair and reasonable to allow the expenses claimed by the assessee on business promotion to the extent of 75% and disallow the balance 25%. We accordingly modify the impugned order of the Ld. CIT(A) on this issue and sustain the disallowance made by the A.O. on account of business promotion expenditure to the extent of 25%. Ground no 2 of the revenue’s appeal is thus partly allowed. Addition under section 14A - Held that:- There being net interest income earned by the assessee during the year under consideration, there was no question of making any disallowance on account of interest under section 14A of the Act. As regards the remaining disallowance made under section 14A r.w.r. 8D on account of administrative expenses, it is observed that the same was worked out by the A.O. at ₹ 2,29,022/- being 0.5% of the average investment. The Ld. CIT(A) however has restricted the same to ₹ 1,09,861/- purportedly on the basis of some working filed by the assessee. At the time of hearing before us, the said working is not furnished by the assessee. Even the assessee has not able to explain the basis on which the disallowance of ₹ 2,29,022/- is restricted by the Ld. CIT(A) to ₹ 1,09,861/-. We, therefore, confirm the disallowance made by the A.O. under section 14A r.w.r. 8D to the extent of ₹ 2,29,022/- and allow partly ground no 3 of the revenue’s appeal.
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