TMI Blog2015 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... orate status alive, minimum expenses on account of salary should be allowed to the assessee. Therefore, we allow the salary of one Account Assistant amounting to ₹ 87000/-; Computer Operator ₹ 73,367/-; Driver ₹ 49,400/-; Peon ₹ 38,400/- and salary of one CA ₹ 24,000/- only and salary for others claimed by the assessee and the other expenses are disallowed. AO is directed to recompute the income of the assessee, as per the directions given as aforesaid. - Decided in partly in favour of assessee. Services charges - assessed under the head “income from other sources” OR "profit and gains from business and profession" - Held that:- receipts by way of service charges does not form a continuous and systematic course of activity for the appellant. Some stray "referrals" in the case of its own directors and their relatives (for example director's son Sh. R. Malhotra and couple of business associates) resulted in booking of tickets through Span Excursions Pvt Ltd. Against that purchase, a few thousand by way of service charges has been received during the year. The income, therefore, was more of a casual nature. Keeping in view of the facts noted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) erred on facts and in law in confirming the action of the assessing officer in assessing service charges of ₹ 19,610 and interest income of ₹ 1,52,970 under the head 'Income from other sources' instead of 'Profits and Gains from Business and Profession', as declared by the appellant. 2. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the disallowance of the following expenditure holding the same to be personal expenditure of the directors of the appellant: 1. Electricity water expenses - ₹ 1 ,46,739; and 2. Watch ward expenses Rs.1,08,000 2.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that the above expenditure were incurred in respect of the registered 'office of the appellant. 2.2 That the Commissioner of Income' Tax (Appeals) further failed to appreciate that these cannot be disallowance of any expenditure in case of a corporate assessee on account of personal expenses. 3. That the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) erred on facts and in law in confirming the disallowance of the travelling expenditure to the extent of ₹ 4,48,227 holding the same to be personal expenditure of the directors of the appellant. 3.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in alleging that the appellant failed to produce any details justifying the above travelling expenditure. 3.2 That the Commissioner of Income Tax (Appeals) further failed to appreciate that these cannot be disallowance of any expenditure in case of a corporate assessee on account of personal expenses. 4. That the Commissioner of Income Tax (Appeals) erred on facts and in law in making ad-hoc disallowance of 50% out of the total director's remuneration of ₹ 4,80,000 on the ground that part of such remuneration pertains to earning of rental income. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal before or at the time of hearing. 5. The grounds raised in the Revenue s Appeal No. 983/Del/2012 (A.Y. 2008-09) read as under:- 1. Whether Ld. CIT(A) was correct on facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-06 has continued the same business activities. In the past the assessee company have been General Selling Agent for Japan Airlines and Alitalia and had been having branch offices in Punjab, Haryana, Bengal and many other states and cities. Further, after termination of contracts by Japan Airlines and Alitalia the branch offices were closed. The main income of the assessee company consists of leave and license fee, service charges and interest. Assessee further submitted that for the purpose of carrying on the business the assessee company has incurred expenses on salaries, rent of office, electricity, printing and stationery, audit fee. telephone, filing fee of registrar of companies, watch and ward, depreciation etc. The assessee has filed the profit and loss accounts contains the detail of the said expenses. Assessee further submitted before the AO that in the past the said expenses have been allowed by the AO by completing the assessment under section 143(3) of the I.T. Act. 6.1 The AO considered the contention of the assessee considered and found in accurate as assessee company not only not carrying out its business activities since past 7-8 years but also not carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against income from house property. He stated that the assessee has claimed business expenses as well as 30% deduction u/s 24 against house property of ₹ 41,11,890/- and against income from other sources of ₹ 1,72,580/- deliberately with special motive to reduce its income from house property and income from other sources in spite of the fact that no business activity in any manner were carried out by the assessee. Finally, he argued that Ld. CIT(A) has wrongly restricted the disallowance of expenditure of ₹ 8,68,705/- on account of electricity, water expenses and watch and ward expenses and Director s remuneration which is contrary to the law and facts of the case. He requested that the AO has passed the assessment order as per law and the Ld. CIT(A) s order is contrary to the law and the same may be cancelled. 10. Shri Rohit Jain and Shri Rohit Garg, Chartered Accountants appeared for the assessee and argued that the AO has wrongly observed that assessee was not carrying out the business activities during the year under consideration and has wrongly assessed the services charges and interest income as income from other sources. In fact the assessee has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,380.00 To Repairs and Maintenance 113,247.00 To Telephone AND Trunk Calls 124,403.00 To Travelling AND Conveyance 449,418.00 To Car Maintenance 198,855.00 To Bank Charges AND Commission 5,606.00 To Insurance 11,849.00 To Staff Welfare 16,202.00 To Staff Medical 16,531.00 To Staff Uniform 4,275.00 To SubScriptions 21,770.00 To News Papers AND Trade Journals 2,799.00 To Filing Fee 2,454.00 To Bonus 9,000.00 To Auditors Remunerations 19,980.00 To Legal AND Professional Fees 22,500.00 To Documentation 3,497.00 To Watch AND Wards 108,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following expenses are directed to be disallowed. (a) Electricity Water Expn. (Rs. 1,23,970) (b) Watch Ward (Rs. 1,08,000) (c) Travelling Exp. (Rs. 2,96,735) (d) Directors Remunerati on (Rs. 2,40,000/-) Totaling ₹ 8,68,705/- 11.2 After considering the aforesaid finding of the AO as well as by the Ld. CIT(A), we are of the considered view that it is an admitted fact that the assessee is a company and its business is travelling related activities. During the assessment year in dispute assessee has shown its income from house property of ₹ 41,11,89/- and income from other sources ₹ 1,52,970/- and service charges of ₹ 19,610/-. Against this income assessee has claimed expenses of ₹ 27,40,339/- and the AO has disallowed the total expenses on the ground that assessee company not carry out any business since 7-8 years and but also not carried out any business activities in future 2-3 years and only expenses incurred u/s 57 u/s. 24 of the I.T. Act are allowable. Ld. CIT(A) treated services charges as income from other sources, but according to the assessee that the assessee is entitled for all business expenses even during lu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - has wrongly been allowed by the Ld. CIT(A). After examining the same, we are of the view that under the facts and circumstances of the case and to keep the corporate status alive, minimum expenses on account of salary should be allowed to the assessee. Therefore, we allow the salary of one Account Assistant amounting to ₹ 87000/-; Computer Operator ₹ 73,367/-; Driver ₹ 49,400/-; Peon ₹ 38,400/- and salary of one CA ₹ 24,000/- only and salary for others claimed by the assessee and the other expenses are disallowed. AO is directed to recompute the income of the assessee, as per the directions given as aforesaid. 12. As regards the Assessee s Cross Appeal NO. 3884/Del/2011 (A.Y. 2005-06) in which assessee has raised four grounds of appeal and challenged the impugned order passed by the Ld. CIT(A), 12.1 As regard No. 1 raised in the assessee s appeal is concerned, we find that the assessee has assailed the findings of the Ld. CIT(A) in holding that services charges of ₹ 19,610/- and interest income of ₹ 1,52,970/- both have to be assessed under the head income from other sources , instead of profit and gains from business and professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier years. However, the fact remains that neither in the impugned assessment year nor in subsequent 2 assessment years there is any regular source of income from any activity, which can be categorized as business or trade or adventure in the nature of trade within the meaning of section 2(13) of the I. T. Act. (iii) The assessee's other argument that in the earlier assessment years, such income has been disclosed under the head profit and gains from business and profession and, therefore, this accepted view of the department should not be disturbed, has no merit because as can be seen from the details given below, there was not enough reason to do so in earlier years because in those years, the appellant company was receiving income from secretarial and other support services, which activity actually fell under the head business . A.Y. Amount in (Rs.) 2001-02 3,60,000 2002-03 3,60,000 2003-04 6,30,000 2004-05 5,40,000 (iv) Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment is separate and independent. In another recent decision, the Hon'ble Delhi Tribunal in a case reported in K.K. Khullar vs. DCIT 304 ITR (AT) 295 (Del) has held the same view in the following words: Coming to the issue of consistency of assessments, it may be mentioned that the Hon'ble Supreme Court itself mentioned in Radhasoami Satsang vs. CIT 193 ITR 321 (SC) that their findings should not be followed in every case. We may add that if a manifestly wrong decision is taken by the AO in one year or in a number of years, it will not bind the AO in the assessment of a subsequent year because there cannot be any estoppel against the law 4.10. Hence, the assessee's contention to treat service charges as income from business cannot be accepted. Accordingly, as in the case of interest on FDs as well as interest on income tax refund, the service charges of ₹ 19,610/- is also to be treated as income from other sources. Accordingly, Ground No.2 stands dismissed. 12.2 Keeping in view of the facts noted by the Ld. CIT(A) we are in agreement with his findings that there was no business income earned during the year and the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the written submissions dated 1.11.2011, but the same has also not been appreciated by the Ld. CITA(). He requested that the assessee is entitled for the expenses under section 30 to 37, even during the lull period. But in the present case the assessee has run its business as pointed out to the revenue authority as stated above. He requested that the issue involved in the present asstt. year required re-examination at the level of the AO and he requested that the issue in dispute may be set aside to the AO to allow the admissible expenses under section 30 to 37 of the Act. 6.1 Ld. DR has not raised any objection to the request of the assessee s counsel. 17. We have heard both the parties and perused the relevant records available with us, we are of the considered view that no doubt the issue in dispute in the present cross appeals are identical, but in the present appeal, with regard to ground no. 1, we find that Ld. CIT(A) has followed the findings of asstt. year 2005-06 and thus assailed that the service income is to be income under the head income from other sources . In this regard, we find that in the year under consideration the business has revived and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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