TMI Blog2015 (11) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... hat expenses shown in the profit and loss a/c were in any way attributable specifically for earning rental income. But has made ad hoc disallowance of ₹ 1,50,000/- deeming that there has been some nexus of some portion of the expenses incurred by the assessee company during the year to earn rental income. Therefore, in view of the above and for the lack of proper working to show that expenses specifically for earning rental income having claimed as expenditure under the head business or profession, we are of the view that AO was not justified in making such ad hoc disallowance. - Decided in favour of assessee. - ITA No.2612/Ahd/2011 - - - Dated:- 9-10-2015 - Shri S. S. Godara, JM, Manish Borad, AM. For The Appellant by Shri Anil R. Shah, AR For The Respondent by Shri Rajdeep Singh, Sr.DR ORDER PER Manish Borad, Accountant Member. This appeal of the assessee is filed against the order of CIT(A)- VI, Ahmedabad, dated 4.10.2011 for AY 2008-09. Assessment was framed under section 143(3) of the Income-tax Act, 1961 (in short the Act) on 19.11.2010 by ITO, Wd-1(3), Ahmedabad. Assessee has raised the following grounds of appeal - 1) The CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the facts of the case, assessment order and appellant s submission. Appellant made substantial investment in shares and securities on which exempt income or income taxable in capital gain head were earned. From the profit and loss account it is seen that appellant incurred expenses is to the extent of ₹ 17.99 lacs for earning various incomes. From the P L account it can be seen that appellant earned rent of ₹ 17.42 lacs, warehouse income of ₹ 17.61 lacs and income from investments ₹ 28.28 lacs. Therefore it can be seen that substantial income is earned by the appellant from which expenses are not allowable. Part of such income is exempt from tax. Therefore, it is clear that appellant incurred expenses which are relating to exempt income but still appellant did not disallow any part under section 14A. Since appellant did not disallow any expense treating the same as relating to exempt income, assessing officer held that administrative another expenses are partly relating to exempt income not allowable under section 14A. The disallowance is worked out by the AO as per rule 8D which is mandatory from this assessment year. There is no dispute over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CIT vs. Torrent Power Ltd. (2014) 363 ITR 474 (Guj) has held that disallowance u/s 14A is not justified if assessee had sufficient funds for making investment and it had not used borrowed funds for such purposes and there is nothing on record to indicate that there had been in fact any actual expenditure incurred by the assessee for earning tax free income. Similarly, the co-ordinate Bench in the case of ACIT vs. Sahitya Mundranalaya P. Ltd. (2014) 33 ITR (Trib) 108 (Ahmedabad) has held - We find that the AO has not shown any nexus between the borrowed funds of the assessee and the investment made by the assessee to establish that the borrowed funds were utilized by the assessee in making the investments. Therefore, we find no error in the order of the CIT(A) holding that the assessee had interest free funds far in excess of the investment made by it as at the year ending on March 31, 2007 and deleting the disallowance of interest expenditure of ₹ 3,15,370/-. Thus, this ground of appeal of the Revenue is dismissed. Applying the facts of assessee on the above referred judicial pronouncement it is very clear that in the case of assessee no bank borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and capital gain head. But it does not mean that expenses were incurred only for business head and no expenses were incurred for income taxable under the other heads. When the common P L account is prepared for entire expenses incurred by the appellant, onus is on the appellant to prove that which expenses relates to which income. It cannot be presumed that all the expenses debited in P L account relates to only business income which does not constitute even one third of the total income. Since appellant has not submitted details of expenses attributable to particular income, appellant did not discharge its onus and accordingly AO is justified in estimating the expenses relating to earning of rental income. The disallowance made by the AO is just ₹ 1.50 lakhs which is very small as compared to the discussion made in earlier para. The decisions relied upon by the appellant are not applicable to the specific facts of this case since appellant claimed all expenses relating to all incomes taxable under different heads and no bifurcation of expenses relating to each income has been made. It cannot be said that the rental income and capital gain were earned without spend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hoc disallowance made by the AO without supporting evidence was not sustainable. Modi Exports vs. ACIT 117 TTJ page 913 (Delhi) (iii) Even though the AO has given categorical finding that the expenditure was for the purpose of the business and commercially expedient and the same was admissible as deduction he made a token disallowance of 20% of such expenses on the ground that element of excessiveness in such reimbursement cannot be ruled out. Not justified-AO has accepted that the accounts were duly audited Disallowance was inherently biased on surmises and conjectures and devoid of a legality sustainable foundation CIT(A) justified in deleting the disallowance. ACIT vs. Arthur Anderson Co. 94 TTJ Page 736 (Mum) (iv) Where assessee company was carrying out various business activities and also deriving rental income from house property and AO without pointing out any specific item of expenditure being incurred by assessee towards management of house property from which assessee had offered rental income for tax purposes, had simply made an ad hoc proportionate disallowance towards personnel/administrative expenses after excluding financial expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductible as the same is permitted by the provisions of law. Whether business expenditure is deductible or not would depend upon the relevant provisions of law and not how the income was earned after incurring that expenditure. We, therefore, hold that the Tribunal was right in holding that the deduction in respect of the expenditure of ₹ 18,536, ₹ 10,089 and ₹ 19,722 was allowable for the assessment years 1973-74, 1974-75 and 1975-76. In the result, the question is answered in the affirmative, that is against the Revenue and in favour of the assessee. No order as to cost. 9. We have heard the rival contentions and gone through the facts and circumstances of the case as well as judicial pronouncements referred to by the ld. AR in Paper Book filed and also the judgment of Hon ble Gujarat High Court in assessee s own case (supra). Assessee has earned rental income of ₹ 11,41,703/- and has shown the same under the head income from house property, claimed 30% deduction for repairs allowable under section 24A. Assessee s books are audited and it is a limited company and working since 94 years. AO in his assessment order has not been able to bring an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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