TMI Blog2013 (9) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer is ad hoc addition as the assessee had furnished partial vouchers and bills raised by parties, were not maintained - In the interest of justice and to plug the leakage of revenue, restricted the disallowance at one per cent of the total expenditure. Disallowance of expenditure under the head "repair and maintenance" – Expenditure was incurred on replacement of electricity installation and also for the purchase of new furniture – Held that:- No merit in the claim of the assessee that it was a case of mere replacement and not the case of coming into existence of new fixed asset. The expenditure incurred on purchase of new furniture cannot be held to be replacement and the same being in the nature of capital expenditure, is not to be allowed as a deduction while computing the income of the assessee – Further, assessee had failed to bring on record any evidence to establish its claim of having replaced the electric installation or the nature of the electric installation so replaced – Decided against the Assessee. - - - - - Dated:- 28-9-2012 - Order The order of the Bench was delivered by Ms. Sushma Chowla (Judicial Member).-These five appeals filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance without appreciating that the office premises was very much in use during the year and in the assessment year 2007-08, the same had gone for redevelopment ; therefore, the disallowance is not justified and the same may be deleted. 5. The appellant craves leave to add, alter or amend all or any of the above grounds of appeal." The brief facts of the case are that the assessee is the film maker and also an event manager. The assessee also releases music album. During the year under consideration, the assessee had filed return of income declaring loss of Rs. 1,06,06,222. During the course of assessment proceedings, the Assessing Officer noted that against the rental income of Rs. 3,60,000 the assessee had claimed interest expenditure of Rs. 10,49,604 on account of interest paid on borrowed capital taken from UTI bank, under the head"Income from house property". The Assessing Officer has reproduced the loan certificate issued by the UTI bank at pages 3 and 4 of the assessment order and noted that similar certificate had been produced during the course of assessment proceedings of Shri Gurdas Mann. The Assessing Officer noted that deduction of Rs. 20,59,208 was claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed authorised representative for the assessee further submitted that in the hands of Shri Gurdas Mann an interest of Rs. 5,14,802 was claimed and was allowed by the Assessing Officer. However, in the hands of the assessee before us the interest was claimed at Rs. 10,29,604 by an error. We have heard the rival contentions and perused the record. The assessee in the computation of income filed for the year under consideration, placed at pages 1 and 2 of the paper book had declared income from house property. The annual rental value of the said property was declared at Rs.3,60,000 against which deduction under section 24(a) of Rs. 1,08,000 was claimed. Further deduction was claimed by the assessee on account of interest on borrowed loans paid to UTI bank of Rs. 10,29,604. The copy of capital account reflects the assessee to have claimed interest on housing loan of Rs. 5,14,802. The assessee is the owner of flat No. 2801/B in Oberoi Sky Heights, Oshiwara, Andheri Mumbai as is apparent from the perusal of the purchase agreement placed at pages 51 to 106 of the paper book. The rental income from property admittedly declared by the assessee has been accepted by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned the name of the applicant to be Shri Gurdas Mann and name of co-applicant to be Smt. Manjit Mann. The total loan of Rs. 1.50 crores has been utilised for the purchase of the aforesaid two flats, i.e., flat No. 2801 and 2802 in Oberoi Sky Heights, Oshiwara, Andheri Mumbai, which admittedly are owned by the assessee and her husband Shri Gurdas Mann. In the abovesaid facts and circumstances we find merit in the claim of the assessee in relation to the interest paid on housing loan totalling Rs. 5,14,802. Consequently, we direct the Assessing Officer to allow interest paid on borrowed capital totalling Rs. 5,14,802 as deduction while computing the income from house property in the hands of the assessee. Ground No.1 raised by the assessee is thus allowed. The issue in ground No. 2 raised by the assessee is against the disallowance of Rs. 35,27,500. The brief facts relating to the issue are that during the year the assessee had shown receipt from films, music album and old film income. The assessee had claimed expenditure on account of production of films and music album and had claimed expenditure of Rs. 35,27,560. The explanation of the assessee in this regard is incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and costume, interest on loan of Rs. 4,30,059, miscellaneous expenses of Rs. 1,82,195 and telephone charges of Rs. 3,60,325, etc. The assessee has followed project completion method in respect of its film business, the music album income and had shown loss from film business and profit from music album. In addition to the abovesaid income, the assessee had shown receipts from old film income, i.e., royalty of about Rs.12 lakhs, doordarshan, telecast rights of film of Rs. 5 lakhs, satellite rights of movie of Rs. 7,50,000. The assessee had further claimed common expenditure of Rs. 35,27,560. The perusal of the expenditure at page 19 of the paper book reflects its nature. Certain expenditure no doubt are for carrying on the business and being business expenditure are to be allowed as an expenditure. The details reflect the assessee to have booked certain day-to-day expenses which are directly relatable to the business being carried on by the assessee. However, certain expenses like dress and costume totalling Rs. 1,08,540, publicity expenses of Rs. 1,19,250, lodging and boarding expenses of Rs. 1,16,424, society maintenance expenses of Rs.62,152 and telecast expenses of Rs. 10,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in I. T. A. No. 304/ Chd/2012 are as under: 1. Disallowance under section 40A(3)-Rs. 1,66,732. The learned Assessing Officer erred in confirming the disallowance under section 40A(3) without appreciating that the same were incurred under exceptional circumstances as recipients had insisted only cash and the individual payment in cash does not exceed more than Rs. 20,000 on a single day. Therefore, the disallowance is uncalled for and the same may be deleted. 2. Ad hoc (10 per cent.) disallowance of various expenses-Rs. 1,35,825 The learned Commissioner of Income-tax (Appeals) erred in confirming 10 per cent. disallowance summarily without appreciating that entire range of business expenses had direct business nexus and as substantial personal family withdrawals (Rs. 26,71,527) were made for a small family of three, no ad hoc disallowance on the alleged personal element is called for and the same may be deleted. 3. Ad hoc disallowance to cover up discrepancy in bills/vouchers Rs.75,000 The learned Commissioner of Income-tax (Appeals) erred in confirming the summary disallowance without verifying any specific defects in the bills/vouchers and since the appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd publicity. Thus, ground No. 2 raised by the assessee is partly allowed. Ground No. 3 raised by the assessee is against the disallowance of Rs.75,000. The Assessing Officer vide paragraph 5 noted from the books of account and the bills/vouchers, certain discrepancies and it was noticed that some bills/vouchers were not verifiable. The said discrepancies were confronted to the assessee and after discussion disallowance of Rs. 75,000 was made to cover up the said expenses. The contention of the assesse that the vouchers were produced before the Assessing Officer was rejected by the Commissioner of Income-tax (Appeals) as the addition was made after discussion with the assessee. We find no merit in the present ground of appeal raised by the assessee where the said addition was agreed upon on confrontation during the assessment proceedings. Ground No. 3 raised by the assessee is thus dismissed. Ground No. 4 raised by the assessee is general and argumentative and hence the same is dismissed. I. T. A. No. 300/Chd/2012 : 2006-07 : Shri Gurdas Mann: The revised grounds of appeal filed by the assessee in I. T. A. No. 300/Chd/2012 are as under: 1. Addition on account of alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. one lakh was shown in advance show account. The explanation of the assessee before the Commissioner of Income-tax (Appeals) is placed at page 43 of the paper book and copy of the ledger account is placed at pages 30 to 35. From the perusal of the abovesaid ledger account we find merit in the claim of the assessee and accordingly direct the Assessing Officer to delete the addition of Rs. 3,08,425. Ground No. 1 raised by the assessee is thus allowed. Ground No. 2 raised by the assessee is against disallowance of Rs.5,72,970 being foreign tour expenses. The Assessing Officer at page 4 under paragraph 4 had tabulated the details of foreign shows performed by the assessee along with dates of foreign shows. The expenditure booked by the assessee was on dates which were at variance with the dates of foreign shows. Consequent thereto, disallowance of Rs. 5,72,970 was made in the hands of the assessee. The learned authorised representative for the assessee though vehemently argued that the said expenditure was allowable in the hands of the assessee but was unable to explain the nature of the said expenditure and also the date of incurrence of the said expenditure in co-relation with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law, the Commissioner of Income-tax (Appeals) Chandigarh, (CIT) erred in confirming the addition of Rs. 2,18,623 made by the Assessing Officer disallowance under section 40A(3) of the Act. 2. The Commissioner of Income-tax failed to appreciate that : (a) The assessee did not have any expenditure covered under section 40A(3). (b) No evidence is placed on record to justify the disallowance by the Assessing Officer and additions are made based on surmises and conjecture. 3. The appellant prays that the disallowance of expenses of Rs.2,18,623 made under section 40A(3) be deleted. Ground IV 1. On facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) Chandigarh, (CIT) erred in confirming the aid of Rs. 8,01,254 made by the Assessing Officer disallowance out of the foreign travelling expenses. 2. The Commissioner of Income-tax failed to appreciate that: (a) The assessee had classified the expenses relating to foreign tour and foreign travelling expenses all of which was not incurred during the visit. (b) The Assessing Officer erred in co relating the date of expenditure with the foreign visit ignoring the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee are allowed for statistical purposes. The issue in ground No. 2 raised by the assessee is against disallowance of Rs. 4,37,158 out of repair and maintenance expenses. The Assessing Officer, vide paragraph 3.1 of the assessment order had noted that the assessee had debited sum of Rs. 4,87,255 under the head "Repair and maintenance". The Assessing Officer requisitioned the assessee to produce the bills for repair and maintenance. The Assessing Officer noted from the said bills that the same were on account of electrical installations and purchase of new furniture. The said items as per the Assessing Officer constituted capital expenditure. The issue was confronted to learned counsel for the assessee during the assessment proceedings but no reply was filed on this issue. The Assessing Officer held the said expenditure to be capital in nature, however, depreciation was allowed on the aforesaid amount and remaining sum of Rs. 4,37,158 was added as income of the assessee. Before the Commissioner of Income-tax (Appeals), the contention of the assessee was the he had replaced certain electric installation and furniture during the year and no new fixed asset had come in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign travelling expenses of Rs. 8,01,254. Ground No. 5 raised by the assessee is against disallowance of one-tenth out of telephone and car expenses because of personal use by the Commissioner of Income-tax (Appeals) in paragraph 6.3 of the appellate order. The said disallowance is upheld in view of our reasoning in paras hereinabove. The said ground No. 5 is hereby dismissed. I. T. A. No. 302/Chd/2012 : 2008-09 : Shri Gurdas Mann : The grounds of appeal raised by the assessee in I. T. A. No. 302/Chd/ 2012 are as under : Ground I 1. On facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) Chandigarh, (CIT) erred in confirming the addition of Rs. 3,85,172 made by the Assessing Officer disallowance under section 14A calculated under rule 8D. 2. The Commissioner of Income-tax failed to appreciate that: (a) The assessee has shown the nexus of loans to the business. (b) The assessee has not used any of the funds for earning/investing in the tax-free income. 3. The appellant prays that the disallowance of interest Rs. 3,85,172 made under section 14A be deleted. Ground II 1. On facts and circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer had applied the provisions of rule 8D to compute disallowance of Rs. 3,85,172 under section 14A of the Act. The Commissioner of Income-tax (Appeals) confirmed the order of the Assessing Officer. The learned authorised representative for the assessee at the outset pointed out that the dividend income earned by the assessee was nil and consequently there was no merit in making the aforesaid disallowance. The learned Departmental representative for the Revenue placed reliance on the order of the Commissioner of Income-tax (Appeals). We have heard the rival contentions and perused the record. The year under appeal before us is the assessment year 2008-09 and the provisions of rule 8D are applicable from the instant assessment year in order to work out disallowance under section 14A of the Act, as held by the hon'ble Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT [2010] 328 ITR 81 (Bom), I. T. A. No. 626 of 2010. In the facts of the present case the perusal of the computation of income furnished at pages 1 and 2 of the paper book reflects the assessee not to have declared any dividend income in the instant assessment year. In the absence of any income earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed for statistical purposes. The issue in ground No. 3 is against the ad hoc disallowance out of expenses amounting to Rs. 13,68,392. The perusal of the assessment order reflects that vide paragraph 4 at page 4 of the assessment order the Assessing Officer had considered the undermentioned expenses incurred by the assessee: (Rs.) (1) Diwali expenses 2,25,575 (2) Flowers, bouquets and gift 3,40,713 (3) Lodging and boarding 1,71,709 (4) Repairs and maintenance 7,49,536 (5) Telephone 4,15,606 (6) Travelling 17,77,703 (7) Vehicle maintenance 10,37,770 (8) Business promotion 4,62,837 (9) Conveyance 6,34,873 (10) Petrol and parking 3,74,807 (11) Staff welfare 4,27,961 (12) Personal development expenses 2,22,870 Total 68,41,960 The Assessing Officer had disallowed 20 per cent. of the said expenditure for personal use by the assessee totalling Rs. 13,68,392. The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
