2022 (12) TMI 108 - AT - Income Tax

Disallowing electricity expenses - AO has disallowed the business expenses on the ground that the assessee is using the premises/security services/ electricity along with other 17 companies and the same was borne by the assessee for its group companies and therefore the said expenses are held to be not incurred for the business of the assessee - Assessee submitted that the 17 Companies are having registered address at the premises of the assessee company which were not doing any business/activities in the said premises those companies were merely having the registered address of the premises of the assessee and the entire expenditure have been incurred by the assessee for its business purpose - HELD THAT - It is the specific case of the assessee before us that the Ld.CIT(A) has not considered the paper book produced by the Assessee which comprising of all the explanation and details to prove the case of the assessee. We found that the Lower Authorities have not given any finding on the documents produced by the assessee in the paper book. Therefore in our considered opinion the issue requires to be remanded to the file of the A.O. for de-novo consideration and to pass appropriate order after considering the documents produced by the assessee. Accordingly we partly allow Assessee s Ground No. 1 for statistical purpose by remanding the issue to the file of A.O. for de-novo consideration. Gift and presentation expenses - Disallowance on various expenses made by the A.O. which have been remanded by CIT(A) to the file of A.O. with a direction to consider the same in view of the claim of the Assessee that the same have already been disallowed in computation of assemble income for the year under consideration - HELD THAT - Assessee has not proved before the lower authorities that the said expenses are related to the business therefore the Ld.CIT(A) has rightly upheld the view of the A.O that gift and presentation expenses for crockery expenses and unrelated to the business of the assessee and disallowed the same. CIT(A) has directed the A.O. to verify the contention of the assessee and further also directed to delete the addition if the same has already been disallowed in computation of assemble income for the year under consideration so as to avoid the double addition. Very same direction has also been given by the CIT (A) in respect of disallowanc claimed by the assessee under the head fine and penalties . The said action of the Ld.CIT(A) found to be legal and reasonable which cannot be found fault with. Allowable expenses u/s 37(1) - allowability of Business promotion expenses Sales promotion expenses Diwali expenses Entertainment expenses and Membership fee expenses - Personal expenses HELD THAT - It is for the Assessee to prove that the expenses so incurred are for the purpose of the Business in the true word and spirit of Section 37 of the Act. Ergo we deem it fit to remand the above issue also to the file of the Ld. A.O. for de-novo consideration with a direction to assessee to justify his contention before the Ld. A.O. and the A.O. shall decide the same in accordance with law. Accordingly the Ground No.3 of the Assessee is partly allowed for statistical purpose.

Summary

Issues:
1. Disallowance of various business expenses by the Assessing Officer.
2. Confirmation of disallowance of business expenses by the Commissioner of Income Tax (Appeals).
3. Remand of certain expenses back to the Assessing Officer for verification.

Analysis:
1. The Assessing Officer disallowed business expenses of Rs. 42,19,164 claimed by the assessee, stating they were not incurred for the business of the assessee but for group companies. Additionally, various other business expenses were disallowed, and a sum of Rs. 8,615 was disallowed under section 14A of the Act. The Commissioner of Income Tax (Appeals) confirmed the disallowance of Rs. 42,19,164 but remanded the disallowance of Rs. 2,22,200 for verification. The appellate tribunal remanded the issue back to the Assessing Officer for reevaluation, directing a fresh decision based on the documents provided by the assessee.

2. The disallowance of Rs. 2,22,200 on various expenses was challenged by the assessee. The Commissioner of Income Tax (Appeals) upheld the disallowance of certain expenses but directed the Assessing Officer to verify if they had already been disallowed in the computation of assessable income. The appellate tribunal dismissed the ground of the assessee, agreeing with the decision of the Commissioner.

3. The disallowance of Rs. 8,05,494 on business promotion, sales promotion, Diwali expenses, entertainment expenses, and membership fee was contested by the assessee. The Commissioner upheld the disallowances, stating the expenses were not adequately justified as business-related. The appellate tribunal partially allowed the ground of the assessee, remanding the issue back to the Assessing Officer for further consideration based on the lack of supporting documents provided by the assessee.

In conclusion, the appellate tribunal partially allowed the appeal for statistical purposes and remanded certain issues back to the Assessing Officer for reevaluation. The tribunal emphasized the need for proper justification and documentation to support business expenses claimed by the assessee.