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2016 (5) TMI 587 - ITAT MUMBAI

2016 (5) TMI 587 - ITAT MUMBAI - TMI - Claim of business loss - Treatment of business income or income from house property - Held that:- CIT(A) was right to hold that the assessee did not carry on any business activity in the nature of rendering professional services to its parent company as claimed and that the entire arrangement between them was with a view to claim expenses which are not otherwise allowable under the head income from house property and interest income. We, therefore, uphold t .....

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not carry out any business activity in the year under consideration and therefore disallowed the assessee’s claim of business loss.

In this view of the matter, the assessee had income from only two activities/sources, i.e. earns ‘income from house property’ given on rent and ‘interest income’. The authorities below have also observed that the assessee had already availed deduction of ₹ 26,96,445/- which covered all those expenses the assessee required for day to day maintenanc .....

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13 - Dated:- 11-5-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Applicant : Shri Milind Thakore For the Respondent : Shri A. Kumbhar ORDER Per Jason P. Boaz, A.M. This appeal by the assessee is directed against the order of the CIT(A)-6, Mumbai dated 11.03.2013 for A.Y. 2009-10. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, a company engaged in the business as a shipping agent, filed its return of income for A.Y. 2009-10 on 3 .....

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utation of income filed with the revised return of income. The assessment was concluded under section 143(3) of the Act vide order dated 09.12.2011 wherein the income was assessed at ₹ 76,69,068/- wherein the income from house property and income from other sources were accepted as returned. However, the loss from business as claimed by the assessee at ₹ 26,18,100/- was disallowed which included ₹ 19,11,600/- expenses claimed against business income. 2.2 Aggrieved by the order .....

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erred in confirming the action of Assessing Officer ("AO") in not allowing the loss from business as claimed by the appellant. 2. The learned CIT(A) erred in holding that the employees of the appellant actually work for parent company viz. Forbes & Company Limited and the parent company pays salary to them in the form of reimbursement. 3. The learned CIT(A) further erred in stating that the entire arrangement has been made to claim expenses which are otherwise not allowable under t .....

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6. The learned CIT(A) erred in not specifically directing the AO to grant the credit for balance TDS of ₹ 2 1,93,696 as claimed in the return of income. Ground 4: Interest under section 234C 7. The learned CIT(A) ought to have directed the AO to compute interest under section 234C i.e. Rs. Nil based on the returned income. Ground 5: Interest under section 244A 8. The learned CIT(A) erred in not specifically directing the AO to grant interest under section 244A upto the date on which the r .....

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rent company M/s. Forbs & Company Ltd. and the parent company pays their salary in the form of reimbursement and (ii) that the entire arrangement has been made to claim expenses which are not otherwise allowable under the head income from house property and interest income. 4.1.2 The learned A.R. for the assessee was heard in support of the grounds raised and reiterated the submissions put forth before the learned CIT(A) vide letters dated 08.11.2013, 17.12.2012 and 09.01.2013 and also filed .....

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k in an effort to show that the assessee had earned ₹ 26,45,091/- from rendering of services to its holding company Forbs & Company Ltd. and also to the computation of income for A.Y. 2009-10 filed with the revised return of income. It was contended that their six employees who worked for M/s. Forbs & Company Ltd. had rendered professional services for which they were reimbursed and this constituted business activity of the assessee carried out in the year under consideration and t .....

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at the assessee had carried out no business activity in this year and therefore the business loss claimed was not allowable. According to the AR all the assessee did was to get six persons who were on its roll on paper only to work for the parent company, who reimbursed the salary paid to them. No remuneration was paid to the assessee for alleged professional services rendered by the assessee nor was there any agreement between the assessee and the parent company for provision of professional ch .....

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between the assessee and the parent company for provision of services at a fixed cost which was at cost plus a mark up thereon. The learned D.R. contended that the order of the learned CIT(A) on this issue ought to be upheld as the assessee s submission that it recovers professional fees on an estimate basis goes to prove that the entire arrangement has been made to claim expenses which are otherwise not allowable under the head income from house property and interest income. 4.3.1 We have heard .....

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horities below revealed that the assessee did not actually provide any professional services at all, but six persons (General Manager, Manager, Executive, Manager, Asst. Manager, Asst. Manager and a Peon) who were employees of the assessee on paper but actually work for the parent company, Forbs & Company Ltd., who pays their salary in the form of reimbursement thereof through the assessee. There is admittedly no agreement between the assessee and its parent company, Forbs & Company Ltd. .....

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such business loss in the earlier and subsequent years by the Department holds no water, since in the earlier years, the assessee was carrying on business as shipping agent, which business has since been merged with its parent company. In subsequent years, the learned A.R. for the assessee admitted that there were agreements between the assessee and its parent company for carrying on business on which we decline to comment as those years are not before us for adjudication. 4.3.2 In our view, th .....

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ncome from house property and interest income. We, therefore, uphold the impugned order of the ld CIT(A) disallowing the assessee s claim of business loss. Consequently, ground 1 (1 to 3) of the assessee s appeal are dismissed. 5. Ground No. 2 (4 & 5): Disallowance of Expenses - ₹ 19,11,600/- 5.1 In this ground, the assessee contends that the learned CIT(A) erred in upholding the AO s disallowance of expenses to ₹ 19,11,600/- against business income of the assessee which were in .....

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s claim for allowing these business expenses be allowed. 5.2 Per contra, the learned D.R. for Revenue placed strong reliance on the findings rendered in the orders of the authorities below. The learned D.R. contended that once the authorities below had clearly established that the assessee had no business activity during the year under consideration, then consequently deduction of expenses claimed under the head business income are not allowable. The learned D.R. further contended that since th .....

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filed in the assessee s paper book. In paras 4.3.1 and 4.3.2 of this order (supra), we have upheld the factual findings of the learned CIT(A) that the assessee did not carry out any business activity in the year under consideration and therefore disallowed the assessee s claim of business loss. In this view of the matter, the assessee had income from only two activities/sources, i.e. earns income from house property given on rent and interest income . The authorities below have also observed tha .....

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