9911796707
TMI Blog2008 (10) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income declaring total income of Rs. 48,90,427. 4. The first ground of appeal by the assessee as also by the revenue is in respect of disallowance of foreign travelling expenses. The Assessing Officer found during the course of assessment proceedings that foreign travel had been undertaken during the instant year by the assessee himself, as well as assessee's son Rajesh Arora who was also an employee of the sole proprietorship concern of the assessee M/s. Arora & Associates as well as by D.N. Arora who is brother of the assessee and who is also working for the assessee. The Assessing Officer directed the assessee to substantiate the claim for expenditure on foreign travelling by filing the copies of the bills as also the purpose for which such foreign travelling has been undertaken. Being dissatisfied with the explanation so furnished impugned disallowance has been made by holding that the tour expenses were not attributable to business and were private tours. This resulted into disallowance of Rs. 26,09,688 being the entire foreign travelling expenses incurred by the assessee. Before the learned CIT(A) elaborate arguments were made. The learned CIT(A) after considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , CEO of the proprietorship concern of the assessee to visit USA and meet various clients in New Orleans, Houston, Sandiago and Los Vegas regarding their office premises requirement in India for further expansion. Similarly for the Dubai visit there is a invitation by a Indian Restaurant called CHAPPAN Bhog in Abu Dhabi where the assessee has been invited to meet the proprietor of that Restaurant as also the proprietors of two more stores for holding further negotiations and discussion for arranging showroom space in Delhi. The assessee has explained that all these visits were necessary in the line of business of assessee since the nature of business is such that it can be promoted only by meeting successful businessmen and in understanding their needs for real estate in Delhi and for personally giving them offers in respect of properties available in Delhi. The assessee has also furnished details of income earned by him from foreign parties in various years and it is seen that in assessment year 1999-2000 commission income of Rs. 50,93,437 was earned by the assessee from foreign parties. Similarly in assessment year 2002-03 and the instant year the assessee has received commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to bring on record any material to show that any specific expenditure incurred on the family members of the assessee has been claimed by the assessee as his business expenses. It is a settled law that merely because there is no immediate benefit to assessee's business this alone cannot be a sufficient ground for disallowance of tour expenses. Reliance in. this regard is placed on the judgement of Delhi Bench of ITAT in the case of UP Ceramics & Potteries Ltd. 52 TTJ 499 wherein the Managing Director of that company had undertaken foreign tour to build foreign market and to study the latest technology and it was held that such expenditure was allowable and that it was not necessary that there is a immediate benefit to the assessee out of the foreign tours. In my considered opinion what is important for allowance of deduction on account of foreign travel expenses is to see if the expenditure has been incurred for business consideration or is the expenditure incurred for private purposes. The mere fact that there has been no immediate benefit to the assessee's business is not a sufficient ground for disallowance of foreign tour expenses. As regards the Assessing Officer's observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been considered by the CIT(A). However, having found that the travel was undertaken for the purpose of business, no part thereof could have been disallowed on ad hoc basis. When the travel was undertaken for the purpose of business, the airfare was required to be paid and hence disallowance of 20 per cent of expenditure incurred on ticket is not justifiable as the entire expenses are for the purpose of business. Similarly when the assessee travels abroad, he has to incur necessary boarding and lodging expenses. In the foreign tour nothing is personal as tour is undertaken for the purpose of business. Reliance was placed on the decision of ITAT in the case of a Asstt. CIT v. Amtek Auto Ltd. [2007] 112 TTJ (Delhi) 455. 7. The learned DR Shri T. Vasanthan on the other hand, relied upon assessment order. He submitted that not only the assessee but also his son as well as his brother travelled abroad. In a way it was a personal tour and this is evident from the fact that no business was procured while travelling abroad. Therefore, the entire expenses need to be disallowed. In reply the learned counsel for the assessee submitted that the expenses on the family members have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions made by the AR have been considered. As far as telephone expenses are concerned it is seen that none of the telephones has been installed at residential premises of the assessee and therefore the disallowance as made is excessive. The disallowance of Rs. 50,163 made by the Assessing Officer is therefore directed to be restricted to Rs. 10,000 on account of personal use by the assessee. However, as regards, the vehicle maintenance expenses, the disallowance made is very modest and the same is upheld. In the result assessee gets a relief of Rs. 40,163 out of disallowance in respect of telephone expenses and the ground of appeal in relation to vehicle repair and maintenance and depreciation is dismissed." 11. After considering the submissions made by both the counsels we do not find any reason to interfere in the finding given by the learned CIT(A). When the personal element for the user of telephone and vehicles is not denied, the learned CIT(A) was justified in estimating such personal user so as to disallow the same. 12. Ground No. 4 in the appeal by the assessee is against upholding a disallowance of Rs. 30,476 out of total disallowance of Rs. 1,01,863 made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Maruti Udyog Ltd.'s case (supra). 15. We have considered rival submissions and the decision of Tribunal cited above. We find that for applicability of section 14A, it is for the Assessing Officer to demonstrate that the expenditure were incurred by the assessee in relation to income which does not form part of the total income. When the assessee specifically denied having incurred any expenditure and having also proved that the expenditure was incurred in the business of real estate agent, it was for the Assessing Officer to prove that such expenditure was not incurred in the course of carrying on business but were incurred for earning exempt income. The Assessing Officer having failed to do such exercise cannot presume and allocate the expenditure in the ratio of exempt income to total income. The finding has to be specific. The nexus has to be proved. In absence of such finding or nexus, provisions of section 14A cannot be invoked so as to disallow the expenses on proportionate basis. The decisions relied by learned counsel for assessee squarely applies. We, therefore, delete the disallowance of Rs. 30,476. 16. Ground No. 3 in revenue's appeal is against deletion of additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1135737 = 927398 12467560 The assessee was asked to show cause as to why difference in the cost of investment in the property may not be added under section 69B of the Act and the Assessing Officer was not satisfied with the reply so submitted and made addition of Rs. 4,36,700 to the income of the assessee being 50 per cent of the amount of Rs. 9,27,398. 17. Before the learned CIT(A) it was submitted that the addition has been made on the basis of DVO's report ignoring the approved valuer's report obtained by the assessee. The assessee has also raised objection to the report of DVO which has not been considered by the Assessing Officer while considering the addition. Some mistakes in the DVO's report were pointed out. It as submitted that even the measurement taken in respect of covered area is wrong which results into excess valuation to the extent of Rs. 5,18,406. It was also submitted that part of the building material of old building was utilized in the construction of new house. The credit for self-supervision has been given at the rate of 7.5 per cent which should have been 12.5 per cent. It was also contended that the assessee has maintained comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so not pointed out any specific item of construction expenditure where cost has been suppressed by the assessee. The assessee on the other and has furnished complete details of each and every expenditure incurred on construction of this house property. The details of expenses incurred by other co-owners has also been considered by the Assessing Officer since he has made the assessments in all the three cases together. No discrepancy in such detail has been pointed out. The addition has been made only on the basis of Departmental Valuation Officer's report which is a mere estimate and cannot be taken to be gospel truth, moreso when details regarding actual expenditure are available and in which no discrepancy is found. It is a settled principle of law now that where cost of construction was regularly recorded by the assessee in records maintained by him and duly supported by vouchers etc., wherein no discrepancy was found then no addition could be made merely on the basis of DVO's report, I agree with A.R, of the assessee that the assessee's case is fully covered by the following judgments cited by the assessee before the Assessing Officer :- (i) Shri Har Swaroop Gold Storage & Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the Assessing Officer, The assessee has sold his flats in Enkay Tower, Gurgaon during the instant year which were acquired by him in 1996 and also a property at West Patel Nagar, According to the Assessing Officer since the assessee is engaged in the business of real estate commission agency therefore these are his stock in trade. 21. Before the learned CIT(A) it was submitted that the assessee never carried on business as dealer in property rather he was earning commission on property dealt with or negotiate through him. Due to this activity the assessee happened to purchase certain properties but the business of the assessee was never dealing in property. It was also contended that in earlier three years the assessee has never sold any property. The frequency of transaction does not show that the assessee is trader in property. The learned CIT(A) after considering the submissions held as under :- "17. I have considered the submissions made as also the relevant material brought on record by the AR. It is found that the assessee has been consistently declaring the immovable properties held by him under the head "Flats" in audited balance sheet, copies whereof have been f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the properties sold by the assessee were his stock in trade or that the transactions of sale were transactions of trade. The Assissing Officer is accordingly directed to recompute the income from sale of such property under the head "Income from capital gains" by allowing indexation as per law." 22. On careful consideration of relevant facts we do not find any reason to disturb the findings arrived at by the learned CIT(A). The fact that the assessee is engaged only in consultancy business or as a broker in real estate is not denied. The assessee never acquired property so as to deal in the same rather the property acquired way back in 1996 was sold after a gap of six years. This does not make the assessee a dealer in property. Therefore, there is no infirmity in the order of the learned CIT(A). 23. The next ground of appeal is against allowing relief of Rs. 4,88,554against addition of Rs. 6,12,475 made on account of annual value of the property. The Assessing Officer found that the property at Flat No. 504-A, Ambadeep Building (2/3rd share), New Delhi, farm house at Ghaziabad, and at 5, Appu Ghar, New Delhi which is owned by the assessee and in respect of which no ALV has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer amounting to Rs. 1,23,930 is sustained. As a result this ground of appeal is partly allowed and out of total addition of Rs. 6,12,475 the assessee is allowed relief of Rs. 4,88,545 (697933 (-) 30 per cent which is the amount of notional value included in the total income on account of Amba Deep property." 24. At the tune of hearing both the counsels agreed that similar issue arose before ITAT in appeal by revenue for assessment year 2002-03. The Tribunal after considering the submissions held as under :- "12, After considering rival submissions, we are in agreement with the finding of learned CIT(A). The law in this regard is very clear. The assessee demonstrated that earlier the property at Ambadeep was let out and was vacant during the whole year and owing to such vacancy there was no actual rent received by the assessee in respect of said property. Therefore, the annual letting value is to be taken as nil as no amount is received or receivable in respect of said property, Accordingly, Ground No. 3 fails." Since the issue in appeal before us was regarding ALV of Ambadeep building which was deleted by the learned CIT(A) and upheld by us, there being no change in the facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no discontinuation. Only because slow down of business, the nature of expenses does not loose its character as incurred during the course of carrying of business. The learned CIT(A) after considering the submissions held as under :- "4. I have considered the findings of the Assessing Officer which led him to make the impugned disallowance as also the contentions of the AR, and the supporting documents filed by him in his paper book, I have also perused the copies of audited Profit and Loss Account of the assessee for the instant year as well as for the preceding two years filed by the assessee. It is seen that the assessee has been carrying on business of property broking in all these years. In fact the finding of the Assessing Officer in para 2 of the assessment order is very relevant which is reproduced as under; 'The assessee derived income from the commission on sale/purchase/renting of the properties as business income'. This finding shows that even the Assessing Officer is aware of the fact that the assessee is in the business of earning commission on sale/purchase and renting of the properties. The total commission income earned by the assessee in financial year 2000-01 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies whereof have been placed at pages 54 to 66 of the paper book as also on pages 87 to 88 has furnished complete details of each and every expenditure incurred by him for running of his business during the instant year. A comparative chart of expenses incurred during the instant year vis-a-vis the expenses incurred in the immediate preceding year have also been filed before the Assessing Officer and it has been explained to him that because of the slow down in business the assessee had also reduced its expenses considerably during the instant year as total expenses had also gone down from Rs. 47,80 lacs in the last year to Rs. 13.59 lacs during the instant year. It was further explained that since the assessee was still in business, therefore it was necessarily required to incur certain expenses to keep the business alive and could not have discontinued the business totally as he could not have closed down his business merely because there was a slow down in the business. The contention of the A,R. that merely because there was a slow down in the business it could not be held that no expenses would be incurred, is found to be justified. The Assessing Officer himself has not doubte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investment under section 69B of the Act in the construction of house property at E-114, Malcha Marg, New Delhi. 33. We find that the assessee is one of the co-owner of the property along with Shri K.J. Arora, The addition was made on pro rata basis. The issue has been discussed at length in the case of Shri KJ. Arora. For the reasons stated above, we confirm the deletion of addition of Rs. 2,31,849. 34. The next ground of appeal by revenue is on account of treating the income from sale of properties under the head "Capital gain" as against "Business income" assessed by the Assessing Officer. 35. We find that the issue is similar to that of in the case of Shri K.J. Arora, Both the counsels agreed that the facts in these two cases are identical. For the reasons stated in appeal of Shri K.J. Arora, the action of the learned CIT(A) in treating the income on sale of properties as capital gain is upheld. 36. In the result, the appeal of the assessee is allowed and that of the revenue is dismissed. ITA No. 123/Delhi/2007 37. This appeal by the revenue is directed against the order of the learned CIT(A)-II, New Delhi, dated 9-10-2006 for the assessment year 2003-04. 38. The first ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
