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2016 (5) TMI 492 - DELHI HIGH COURT

2016 (5) TMI 492 - DELHI HIGH COURT - TMI - Disallowance of miscellaneous expenses and depreciation - ITAT confirmed CIT(A) order deleting the addition - Held that:- CIT(A) has examined the record and the accounts produced by the assessee and after scrutiny of the same returned findings of fact that the expenditure was justified. No rationale has been given by the AO for disallowing 50% of the expenses incurred. Neither is there a finding that the expenditure is not genuine nor have the books of .....

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been reversed and the interest actually received has been offered to tax. It is not the case of the appellant that the actual interest income received has not been offered to tax. The AO has only taken into account the ‘Journal’ entries credited in the account. The AO has not taken into account the corresponding ‘Journal’ entries debited. The CIT(A) as well as the Tribunal on perusal of the account statement have returned findings of fact that there is no suppression of interest income and the e .....

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x Appellate Tribunal (hereinafter referred to as the Tribunal) confirming the order dated 26.10.2012 passed by the Commissioner of Income Tax (Appeals) {hereinafter referred to as the CIT(A)} whereby the assessment made by the Assessing Officer (AO) disallowing expenditure and depreciation to the tune of ₹ 1,30,01,214/- was deleted and further deleting the addition of ₹ 1,27,21,738/- made by the AO. 2. The assessment year in issue is 2008-09. 3. The appellant contends that the follow .....

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e appeal of the Revenue and deleting the addition of ₹ 1,27,21,738/- made by the AO on account of disallowance of interest income accrued on time deposits? 4. With regard to question - A i.e., disallowance of ₹ 1,30,01,214/- made by the AO, it may be noted that the AO had made the disallowance on the basis that the assessee was not doing any business activity but acting as a real estate developer. The expenses claimed debited to its profit and loss account were held to be not related .....

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, fiscal, taxation, personnel, marketing and solving general management problems related to Hotel and food entrepreneurs. It was noted that the assessee had rendered services in the hospitality line and earned the income. However, the expenses incurred on running the hospitality business exceeded the receipts. The assessee had maintained a pool of staff/personnel for providing such services and maintained infrastructure for that. In support of the expenditure, the assessee filed copy of accounts .....

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any business establishment and in the absence of these expenses an establishment could not be run. The AO had disallowed 50% of the expenditure and depreciation of the assets related to business but had not held that the balance expenditure was not genuine. The CIT(A) held that the disallowance of 50% of the expenditure was not based on any scientific method or any specific defects were pointed out in the books of account. The disallowance of 50% of the expenditure and depreciation was held to b .....

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genuine nor have the books of accounts been rejected by the AO. There is no perversity in the findings of fact returned by the CIT(A) and affirmed by the Tribunal. 8. With regard to the question - B, i.e., deletion of the addition of ₹ 1,27,21,738/- on account of interest income accrued on time deposits, the AO held that the interest income of ₹ 6,22,35,272/- had accrued to the assessee out of which only ₹ 4,95,13,545/- had been offered to tax and ₹ 1,27,21,738/- had not .....

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7,21,738/- were memorandum entries and had no relation with the actual interest earned. The CIT(A) held that there was no suppression of income accrued on the fixed deposits (FDs) and the entire income received had been offered to tax. The addition of ₹ 1,27,21,738/- was accordingly deleted. The Tribunal has confirmed the order passed by the CIT(A). 10. The statement of account as filed before the Tax Authorities were also produced before us. Perusal of the same shows that the interest inc .....

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accrual of interest on quarterly basis for the purpose of closing of quarterly results and on receipt of the actual interest from the bank, the interest amount was credited to the account and the journal entry was reversed. Corresponding debit entries with voucher type Journal also appear in the account statement. The six credit Journal entries as tabulated below had been made in the accounts: Date Particulars Vch. Type Vch. No. Debit Credit 9/21/2007 Interest accrued on Time Deposits Journal 5 .....

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817.00 Being interest accrued on time deposits upto 20.12.2007 as per the FD Details attached 12/28/2007 Interest accrued on Time Deposits Journal 1092 Rs. 29,11,075.00 Being interest accrued on time deposits upto 28.12.2007 as per the FD Details attached 12/31/2007 Interest accrued on Time Deposits Journal 1109 Rs. 21,54,406.00 Being interest accrued on time deposits upto 31.12.2007 as per the FD Details attached 11. The account also reveals that the corresponding six debit entries had also bee .....

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