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2017 (1) TMI 934 - ITAT MUMBAI

2017 (1) TMI 934 - ITAT MUMBAI - TMI - Income from house property - determination of annual value of the income from house property - Held that:- We find that assessee was owner of two flats, that same were rented in the earlier years and it had offered the rental income in its returns,that before the AO/FAA it was claimed that during the year under consideration repair and renovation was carried out and the flats were not rented out, that it was also claimed that the flats were used for office .....

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um has to be taxed the AO has to bring on record the necessary facts for taxing the same. AO had not discharged the onus in that regard. Therefore, reversing the order of the FAA,we decide the first ground of appeal in favour of the assessee. - Addition under section 14 A read with Rule 8D - Held that:- We find that assessee had not incurred any expenditure nor had it claimed any expenditure with regard to the tax-free income during the year under consideration. Therefore,there was no justif .....

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ertisement expenses and business promotion expenses - Held that:- Matter should be restored back to the file of the AO. He is directed to afford a reasonable hearing to the assessee to prove its claim that tax was actually paid by the recipient. The assessee is directed to produce all the necessary evidence before the AO. Ground number three is decided in favour of the assessee,in part. - Non-deduction of tax on payment of interest on car loan - Held that:- We find that legal payments were m .....

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nt and therefore same has to be allowed in one of the years. Considering the peculiar facts and circumstances of the case and the fact that assessee had made the payment after the receipt of the bills in the subsequent year,we are of the opinion that ground number 5,filed by the assessee ,should be allowed. - Disallowance of remuneration paid to the directors - Held that:- AO had disallowed the entire remuneration paid to the director, that the FAA restricted it to 50%, that the director had .....

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no justification for restricting the expenditure to ₹ 3 lakhs. Reversing the order of the FAA, we decide ground in favour of the assessee. - Disallowance of the business promotion expenditure - AO had held that assessee had incurred an expenditure through credit cards, that he did not call for any details in that regard, that he had made an ad hoc disallowance at the rate of 20%, that the FAA had confirmed his order - Held that:- In our opinion in case of corporate assessees disallowa .....

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nce was not justifiable. Reversing the order of the FAA, we decide ground in favour of the assessee. - I.T.A./7605/Mum/2012 - Dated:- 6-1-2017 - Sh.Rajendra,Accountant Member and Amarjit Singh,Judicial Member For The Revenue by: Shri Saurabh Kumar Rai-DR For The Assessee : Shri I.C. Jain PER Rajendra A.M.- Challenging the order,dated 09/10/2012 of the CIT (A)-17,Mumbai the assessee has filed the present appeal.Assessee-company,engaged in business of running amusement park,filed its return of inc .....

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m the properties,that in the earlier years the said flats were rented out.He directed the assessee to file explanation in that regard. The assessee replied that it was using the flats for office premises.The AO held that as per the provisions of section 23 (1) of the Act,annual value of the income from house property had to be worked out he made an addition of ₹ 5, 00,604/-to the total income of the assessee under the head income from house property. 2.1. Aggrieved by the order of the AO, .....

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d renovation in the office premises of the assessee, that the AO himself has treated the repair expenses as capital expenditure,that he did not make any addition on account of rental income while computing the assessment order for the AY. 2011-12, that it had filed an affidavit before the AO in the assessment proceedings of the subsequent years in that regard and he had not made any addition. He referred to pages number 13,70-76 and 107 of the paper book.The Departmental Representative (DR) supp .....

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AO had not made any addition under the head beings rental income. Once the assessee had produced the bills of repairs and renovation of the flats and the AO had treated the said expenditure as capital expenditure,there was no justification for making any addition under the head house property income.Both the authorities have not proved that the flats were rented out during the year under appeal.As per the settled principles of taxation if any sum has to be taxed the AO has to bring on record th .....

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e under section 14 A of the Act. On a query by the AO in that regard, the assessee stated that it had not earned any tax-free income during the year under consideration, that therefore no disallowance was made. However, the AO made a disallowance of ₹ 12, 500/- (of percent of the average value of investment). 3.1. Before the FAA,the assessee argued that it had not incurred/claimed any direct/indirect expenses on the tax-free income, that the AO was not justified in making the disallowance. .....

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have heard the rival submissions.We find that assessee had not incurred any expenditure nor had it claimed any expenditure with regard to the tax-free income during the year under consideration.Therefore,there was no justification of any kind to make any dis-allowance invoking the provisions of section 14 A of the Act. The basic precondition for making disallowance under the said section is earning of tax-free income and incurring of expenditure by the assessee.As both the preconditions are abse .....

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essee had not detected tax at source while making payments to 3 parties he directed the assessee to file explanation in that regard. After considering the submission of the assessee, the AO held that the assessee had incurred the expenses for promotion of its business, that as per the provisions section 194C of the Act the assessee had to deduct tax for all the payments exceeding ₹ 20,000/-. Referring to the provisions of section 40 (a) (ia) of the Act he made a disallowance of ₹ 1.3 .....

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at source,that the AO was justified in making the disallowance. 4.2. Before us, the AR contended that second proviso to section 40 (a) (ia) of the Act was inserted by Finance Act at 2012, that as per the proviso wherever payee pays the tax the payer is not supposed to deduct the tax, that the parties to whom the assessee had made the payments had paid the taxes, that the matter could be restored to the file of the AO for verification. The DR left the issue to the discretion of the bench. 4.3. A .....

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an to Mahindra and Mahindra Finance Company Ltd. Following our order for the earlier ground,we restor back the issue to the file of the AO for making verification, that the recipient of the income had paid tax on the disputed amount. The assessee would produce relevant documents before the AO.Ground number four is partly allowed. 6.Ground number five is about addition of ₹ 1.04 lakhs, being the pre paid expenses.During the assessment proceedings, the AO found that assessee had paid ₹ .....

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or reliability to pay and not the actual payment, that the expenses were of the prior period and hence were not allowable. Accordingly he made an addition of ₹ 1,04,531/-. 6.1. Before the FAA, the assessee argued that it had made payments to Bekay Advocates, amounting to ₹ 84,000/- after deducting the tax at applicable rates the bill dated 4/03/2008 was settled on 08/08/2008, that the petty expenses for the period 21/03/2008 to 31/03/2008, amounting to ₹ 20,531/- was settled on .....

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oked in the year when they were settled for payment, the payment to Beekay Legal was made on 08/08/2008. The DR supported the order of the AO and the FAA. 6.3. We have heard the rival submissions. We find that legal payments were made during the year under consideration and the amounts in question pertain to earlier year. Prior period expenses, as per the taxation principles, can be allowed if they are crystallised during the subsequent year. The AO/FAA has not given any finding as to whether th .....

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led by the assessee ,should be allowed. 7. Next ground of appeal is about disallowance of remuneration paid to the directors. During the assessment proceedings, the AO found that the assessee had paid ₹ 6 lakhs to one of the directors, namely Ritika Muchala(RM).He directed the assessee to explain as to why the remuneration paid to RM should not be disallowed for the reason that she had not rendered any service to the company.In its reply,the assessee submitted that RM was director of the c .....

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ively for the purpose of business. Finally, he disallowed the demolition paid to RM, amounting ₹ 6 lakhs. 7.1. Before the FAA, the assessee argued that RM was attending all day-to-day affairs of the company,that she had given personal guarantee to banks, that she had paid tax on the remuneration received from the company.Referring to the order of the FAA for the AY. 2008-09, he restricted the disallowance to ₹ 3 lakhs. 7.2. Before us, the AR argued that remuneration paid to RM(Rs. 6 .....

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income in her individual return of income, that the return of the director was accepted by the Department, that the AO had not made any enquiry about the assertion made before the assessee before him, that it was claimed that she was attending the day-to-day affairs of the company and had stood as guarantor to the banks, that in the subsequent year the AO had allowed the remuneration (Rs. 6 lakhs) paid to her. Considering these facts we are of the opinion that there was no justification for rest .....

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