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2015 (10) TMI 2237 - ITAT KOLKATA

2015 (10) TMI 2237 - ITAT KOLKATA - TMI - Disallowance of General Expenses - CIT(A) restricted disallowance to 10% - Held that:- The revenue has accepted the restriction of disallowance at 10% and no further appeal was preferred for both the years i.e. AY 2002-03 and 2003-04 against the order of CIT(A) of the assessment order. In view of the above, we are of the view that the AO has not given any reasoning for making specific disallowance of expenses and even genuineness of expenditure is not in .....

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tion - Held that:- AO has not made addition of notional interest but this interest has accrued to the assessee on fixed deposit of ₹ 30 lakhs made with SBI. The assessee neither credited any interest income to the P&L Account nor disclosed in the return of income. This fact when confronted to Ld. Counsel for the assessee, he fairly conceded that this addition can be confirmed. Accordingly, we are of the view that the addition on account of interest income accrued on fixed deposit of ₹ .....

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e since FY 2002-03 no interest has been charged and revenue has not made any addition qua this earlier years also. In view of the above facts, we confirm the order of CIT(A) in deleting the addition and this issue of revenue’s appeal is dismissed. - Decided against revenue.

Addition made under the head loss on account of share trading - CIT(A) deleted the addition - Held that:- Purchase and sale bills of shares wherein complete details are enclosed in the paper book. In view of the ab .....

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IT(A) has rightly allowed the claim of loss and we confirm the same - Decided against revenue.

Addition made under the head speculation loss - CIT(A) deleted the addition - Held that:- both the representatives of revenue and assessee conceded that the issue is identical and the facts are common to the ground of appeal for AY 2005-06. Since we confirmed the action of CIT(A) and dismissed the ground of appeal of revenue for AY 2005-06, and since the issue is identical and facts are comm .....

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enditure. The revenue in earlier years had not made any disallowance on this aspect and accepted the claim of legal expenses. Even for the sake of consistency also, these expenses should have been allowed - Decided against revenue.

Disallowance u/s. 14A of the Act read with Rule 8D - Held that:- We find that the dividend income earned by the assessee is to the extent of ₹ 17,40,745/-. The AO is unable to prove any nexus with the disallowance of expenditure and that of the earnin .....

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the AO to make disallowance to the extent of 1% of the dividend income. The AO is directed accordingly. Both the ground of appeal of revenue and that of the assessee are partly allowed as indicated above.

Addition under the head repair charges - CIT(A) deleted the addition - Held that:- We find that the assessee before the AO has filed complete details in respect to repair expenses and this is verified by the CIT(A) as observed by him in his order. Even otherwise, the assessee now bef .....

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led before Tribunal also wherein complete details of Corporation Tax paid is enclosed at annexure-7. The relevant details are given at page 35 of assessee’s paper book, which clearly proves that the assessee has paid the Corporation tax and it is the responsibility of the owner only to pay the Corporation tax and not the tenant. Accordingly, we confirm the order of CIT(A) - Decided against revenue.

Disallowance of motor car expenses - CIT(A) deleted the addition - Held that:- The asse .....

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t:- We find that the AO made the disallowance on account of personal use of telephones. The assessee contended that the expenses are genuine and incurred for business purposes. The CIT(A) restricted the disallowance to 10% instead of 25% as made by AO by observing that personal use of telephone cannot be ruled out and the disallowance as made by AO is on higher side. We find no infirmity in the order of CIT(A) in restricting the disallowance to 10% as the disallowance made by AO is on higher sid .....

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t revenue. - I.T.A No. 882/Kol/2010, CO No. 48/Kol/2010, I.T.A No.886/Kol/2010, CO No. 49/Kol/2010 - Dated:- 22-9-2015 - Shri Mahavir Singh, JM And Shri Waseem Ahmed, AM For the Appellant : Shri M. K. Biswas, JCIT, Sr. DR For the Respondent : Shri S. Jhajharia, & Shri Sujoy Sen ORDER Per Shri Mahavir Singh, JM Both these appeals by revenue and Cross Objections by assessee are arising out separate orders of CIT(A)-XX, Kolkata in appeal Nos. 488/CIT(A)-XX/Cir-34/07- 08/Kol dated 22.02.2010 a .....

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ance made by AO at ₹ 17,92,993/-. For this, revenue has raised following ground no.1 and assessee has also raised following ground no.1 in Cross Objection: Revenue s Ground No. 1: 1. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of general expenses of ₹ 16,13,694/- made by the AO. Assessee s ground No. 1: 1. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in not fully deleting the arbitrary, a .....

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penses amounting to ₹ 17,92,993/- for the reason that the assessee has claimed expenses against rental income of ₹ 1,60,36,143/-, motor car hire charges of ₹ 8,91,631/- and dividend income of ₹ 17,40,745/-. According to AO, this general expense does have any nexus with earning of income and claim of expenditure. Accordingly, he disallowed the entire claim of general expense. Aggrieved, assessee preferred appeal before CIT(A), who relying on his predecessor s order for AY .....

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for both the years i.e. AY 2002-03 and 2003-04 against the order of CIT(A) of the assessment order. In view of the above, we are of the view that the AO has not given any reasoning for making specific disallowance of expenses and even genuineness of expenditure is not in doubt. Accordingly, we confirm the order of CIT(A) restricting the disallowance at 10%. This common issue of both the appeal of the revenue and that of the Cross Objection of the assessee is dismissed. 4. The next common issue .....

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on in the head of club expenses of ₹ 25,342/- made by the AO. 5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has made disallowance on account of claim of club expenses considering the same as personal nature based on tax audit report of the assessee. The assessee before AO and also before CIT(A) claimed that these are genuine business expenditure. He clarified that the claim relates to club expenses does not include club members .....

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ss. He also took note of the fact that 10% of general expenses have already been disallowed in earlier ground which includes club expenses. Before us also, Ld. Counsel for the assessee reiterated the above facts and placed reliance on the decision of Hon ble Delhi High Court in the case of CIT Vs. Nestle India Ltd. (2008) 296 ITR 682 (Del) and also other judgments. Hon ble Delhi High Court in the case of Nestle India Ltd., supra has held as under: Held, dismissing the appeal, that since the Asse .....

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imed. In view of the above, the club expenses are to be allowed because it is not admission fee of club but these expenses are in the nature of business and not personal in nature. Accordingly, we confirm the order of CIT(A) and this issue of revenue s appeals are dismissed. 6. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO under the head interest on fixed deposit amounting to ₹ 2.55 lacs. For this, revenue has raised .....

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st @ 8.5% and added the same to the returned income of the assessee. The CIT(A) deleted the addition by observing that the fixed deposit was made with the SBI in the FY 1995-96 as a lien to secure banking facility for Anantha Udyog (P) Ltd. and not for earning any interest. According to CIT(A), no interest was received from this fixed deposit and even the principal amount was forfeited and ultimately written off in the books of account for FY 2005-06. According to him, no notional interest can b .....

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t when confronted to Ld. Counsel for the assessee, he fairly conceded that this addition can be confirmed. Accordingly, we are of the view that the addition on account of interest income accrued on fixed deposit of ₹ 30 lacs is to be sustained. Accordingly, we confirm the addition and reverse the order of CIT(A) on this count. This issue of revenue s appeal is allowed. 9. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO .....

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sad but no interest was charged thereon. This loan was given to Shri Jaidev Prasad in FY 2002-03 but since then no interest has been received by the assessee and even the principal is outstanding. Therefore, the interest has not been charged on the loan. The assessee before the AO contended that this is interest free loan. The AO did not accept the explanation of the assessee and charged notional interest @ 12% on the loan of ₹ 15,00,000/- and accordingly, made addition of ₹ 1.80 lac .....

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we confirm the order of CIT(A) in deleting the addition and this issue of revenue s appeal is dismissed. 11. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made under the head loss on account of share trading. For this, revenue has raised following ground no. 5: 5. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of loss on account of share trading of ₹ 76,05,429/- made by the AO. 12 .....

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#8377; 66,04,500 (ii) Globe Stock & Securities Ltd. ₹ 3,91,300 (iii) Sangatri Construction Ltd. ₹ 4,77,309 (iv) Stanbey Securities Ltd. ₹ 1,32,320/- The AO also observed that the major portion of share loss of ₹ 66,04,500/- has been claimed to have from the transaction of share of Assam Roofing Ltd., which is a company related to the assessee as a sister concern or as a financier. He also noted that the assessee has received a sum of ₹ 6,94,559/- as interest fro .....

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the same, CIT(A) deleted the addition by observing as under: Ground no. 5 relates to addition of ₹ 1,80,000/- on account of interest. The AO found that the appellant has given loan of ₹ 15,00,000/- to Shri Jaidev Prasad, but no interest was charged thereon. It was explained before the AO that the loan was given in FY 2002-03, but, since then, no interest has been received by the appellant; and, even the principal has not been returned. The appellant has therefore not charged any inte .....

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oan. The AO was not justified in making the addition on account of notional interest. Ground no. 5 is allowed. Aggrieved, now revenue is in appeal before us. 13. We have heard rival submissions and gone through facts and circumstances of the case. Before us Ld. Counsel for the assessee filed complete paper book consists of pages 1 to 62 and another supplementary paper book consists of pages 1 to 68. Ld. Counsel for the assessee drew our attention to page 62 of the assessee s paper book wherein v .....

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s, purchase and sale bills of shares wherein complete details are enclosed in the paper book. In view of the above details available in the assessment record and the fact that the assessee has entered into transactions by virtue of which incurred loss in share trading business is proved. Moreover, the AO has not carried out any verification despite the fact that he was having complete information before him. The addition made by AO is totally on the basis of conjecture and surmises. The assessee .....

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the addition in the head of speculation loss on account of ₹ 79,30,000/- made by the AO. 15. At the time of hearing, both the representatives of revenue and assessee conceded that the issue is identical and the facts are common to the ground of appeal for AY 2005-06. Since we confirmed the action of CIT(A) and dismissed the ground of appeal of revenue for AY 2005-06, and since the issue is identical and facts are common to the ground of appeal of revenue for AY 2006-07, following the same .....

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claim of legal expenses of ₹ 1,39,836/- by noting that the legal expenses are incurred with regard to acquisition of properties and maintenance of properties and these are not related to business. Hence, he disallowed the expenses being capital in nature. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) allowed the claim of the assessee by observing that the AO has not brought any material on record to show that expenses are capital or personal in nature. Hence, he deleted th .....

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t and accepted the claim of legal expenses. Even for the sake of consistency also, these expenses should have been allowed. Accordingly, we confirm the order of CIT(A) on this issue and the revenue s ground of appeal is dismissed. 19. The next common issue in revenue s appeals and the Cross Objections of the assessee is as regards to the order of CIT(A) in directing the AO to compute the disallowance u/s. 14A of the Act read with Rule 8D of the I. T. Rules, 1962. For this, revenue has raised fol .....

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of expense on a/c of interest paid on loan u/s. 14A of the Act read with Rule 8D of the I T Rules allegedly attributable to the earning of exempt dividend income of ₹ 17,40,745/- without establishing the direct nexus between the expenses incurred and the dividend earned and also without considering the fact and the law that the new Rule 8D introduced w.e.f. 24.03.2008 was not applicable for the relevant AY 2005-06. 3. For that in view of the facts and in the circumstances the Ld. CIT(A) is .....

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t it had taken loan of ₹ 15,48,11,638/- and invested in shares at ₹ 7,73,33,203/- which represents 49.95% of the loan taken and balance 49.85% borrowing represents loans given to parties. The assessee debited a sum of ₹ 35,81,188/- on account of interest paid/payable to parties and accordingly, he made disallowance u/s. 14A of the Act qua the exempt income but restricted the disallowance to the extent of exempt income only at ₹ 17,40,745/-. Aggrieved, assessee preferred a .....

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f the earning of exempt income. However, the relevant assessment year involved is 2005-06 and Rule 8D of the I. T. Rules will not apply to this assessment year as held by Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. Vs. DCIT (2010) 328 ITR 81 (Bom), the provision being prospective and not retrospective. In term of the above, we are of the view that the Tribunal is taking a consistent view and restricted the disallowance at 1% of the exempt income. Hence, we also direct the .....

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for AY 2006-07 and assessee has raised following grounds nos. 1 and 2 in cross objection for AY 2006-07: Revenue s ground for AY 2006-07: 3. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in giving relief to the assessee in the head of disallowance u/s. 14A of ₹ 5,87,902/-. Assessee s grounds for AY 2005-06: 1. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in directing the AO to compute the disallowance of expense claimed on differen .....

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e aforesaid direction to the AO to compute the disallowance of expense u/s. 14A of the Act read with Rule 8D of the I. T. Rules, without first directing the deletion of the arbitrary, ad hoc and estimated disallowance of ₹ 10,29,476/- made in assessment. 23. At the time of hearing, both the representatives of revenue and assessee conceded that the issue on hand is identical and the facts are common to the ground of appeal for AY 2005-06. In this case also the AO is unable to prove any nexu .....

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% of the exempt income. Hence, we also direct the AO to make disallowance to the extent of 1% of the dividend income. The AO is directed accordingly. Both the ground of appeal of revenue and that of the assessee are partly allowed as indicated above. 24. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO under the head repair charges at ₹ 12,58,563/-. For this, revenue has raised following ground no. 8: 8. The ld. CIT(A)- .....

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and even there is no requirement of any repair to be carried out. Accordingly, he made disallowance of repair expenses. Aggrieved, assessee preferred appeal before CIT(A), who deleted the disallowance on the reasoning that the necessary details in respect to repair expenses were filed before AO which are available in assessment records. According to him, these expenses are in respect to general repairs and up-keeping of the business premises of the assessee. Hence, he allowed the claim. Aggriev .....

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infirmity in the order of CIT(A) and hence, this issue of revenue s appeal is dismissed. 27. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition of corporation tax made by AO amounting to ₹ 14,91,863/-. For this, revenue has raised following ground no. 9: 9. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of Corporation Tax of ₹ 14,91,863/- made by the A.O. 28. We have heard rival .....

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at annexure-7. The relevant details are given at page 35 of assessee s paper book, which clearly proves that the assessee has paid the Corporation tax and it is the responsibility of the owner only to pay the Corporation tax and not the tenant. Accordingly, we confirm the order of CIT(A) and this issue of revenue s appeal is dismissed. 29. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the disallowance of motor car expenses at ₹ 9,70,629/- .....

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/- as no details were furnished before AO. Aggrieved, assessee preferred appeal before CIT(A), who deleted both the disallowances by observing that all the details were furnished before the AO and even in Ay 2003-04 the ad hoc disallowances made @ 20% by the AO was deleted by CIT(A). The CIT(A) observed that he has verified from the records that necessary details were filed before the AO and no specific particular of item is held to be non-genuine or not related to the business. Accordingly, he .....

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sue of revenue s appeal is dismissed. 32. The only issue before us in the Cross Objection of assessee for AY 2005-06 is against the order of CIT(A) restricting the disallowance of telephone expenses at ₹ 25,058/- @ 10% of the total expenses of ₹ 2,50,580/-. For this, assessee has raised following ground no. 4: 4. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in not fully deleting the arbitrary, ad hoc and estimated disallowance of ₹ .....

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disallowance on account of personal use of telephones. The assessee contended that the expenses are genuine and incurred for business purposes. The CIT(A) restricted the disallowance to 10% instead of 25% as made by AO by observing that personal use of telephone cannot be ruled out and the disallowance as made by AO is on higher side. We find no infirmity in the order of CIT(A) in restricting the disallowance to 10% as the disallowance made by AO is on higher side and hence, the same is hereby u .....

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t the assessee submitted a detailed list of bad debts at ₹ 42,22,131/- without any evidence that the amounts have been treated as income in earlier years or any recovery measure including legal action have been taken against the debtors. In the absence of the same, the AO disallowed the bad debts. Aggrieved, assessee preferred appeal before CIT(A), who after considering the fact that the assessee has written off the debts in its books of account, which is arising out of the business transa .....

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us in the paper book. In term of the above, the CIT(A) held that the deduction is allowable under the provisions of section 36(1)(vii) read with section 36(2) of the Act. Aggrieved, revenue is in appeal before us. 36. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has filed complete details before the AO as well as before CIT(A) and there is no dispute with regard to the transaction made by the assessee with the debtors. The asses .....

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