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2021 (3) TMI 325 - ITAT CHENNAIAllocating expenses to agricultural income and non-agricultural income - Apportionment of the expenses relatable to the earning of exempted agricultural income for making disallowance and consequently erred in sustaining the addition in the computation of taxable total income without assigning proper reasons and justification - HELD THAT:- As gone through orders of the authorities below Admittedly, the assessee has maintained separate books of accounts for agricultural activity and for Head Office operations. Further, at Head Office level except interest income, no other business activity was carried out for impugned assessment year. On perusal of expenses claimed at Head Office level, we find that except director remuneration all other expenses are related to business activity of the assessee. As claim of assessee before the AO that director salary is related to agricultural operations because director personally takes care of estate activity. We are of the considered view that if at all allocation of expenses is required between agricultural income and non-agricultural income, then only director’s remuneration can be apportioned to agricultural operations and non-agricultural operations. Since assessee himself has admitted that agricultural operations were taken care of by the director, we are of the considered view that remuneration to the director amounting to ₹ 3,00,000/- is related to agricultural operations and hence, direct the Assessing Officer to restrict apportionment of expenses to the extent of director’s remuneration. Accordingly, apportionment of all other expenses in the ratio of agricultural income and non-agricultural income has been deleted. AO has assessed interest income under the head income from other sources and further disallowed total expenditure incurred at Head Office on the ground that said expenditure is relatable to agricultural operations of the assessee - AO having accepted fact that Head Office expenses needs to be apportioned between agricultural income and non-agricultural income, has erred in disallowing total expenses for impugned assessment year without there being any change in facts. We are of the considered view that Assessing Officer has erred in disallowing total expenditure incurred at Head Office and considered as expenditure incurred for agricultural operations - for impugned assessment year also, if we consider nature of expenditure incurred at Head Office, director remuneration and other expenditure are similar to expenditure incurred for previous financial year. Further, for immediately preceding financial year, we have considered identical issue and held that except director remuneration no other expenses can be apportioned to agricultural income and non-agricultural income. Therefore, consistent with view taken by us for immediately preceding year, we are of the considered view that only director remuneration can be apportioned to agricultural operations because director is personally taking care of estate activity. Hence, we direct the Assessing Officer to consider director remuneration to agricultural operations. Interest income - Assessing Officer in the immediately preceding year has accepted interest income offered by assessee under the head income from business has suddenly changed head of income to ‘income from other sources’ without there being any change in facts and circumstances for impugned assessment year. Therefore, we direct the Assessing Officer to consider interest income under the head ‘income from business’ as claimed by assessee and further direct the Assessing Officer to allow expenditure incurred at Head Office except director salary against interest income.
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