TMI Blog2021 (1) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... into account for finding out whether any asset of an enduring character was acquired. Stamp duty was required to be paid in order to bring about document of Lease. Expenses so incurred for securing premises on lease for a short period of five years were, therefore, allowable as revenue expenditure - Decided against revenue. Disallowance of renovation expenditure - assessee has incurred expenditure under head of repairs and maintenance expenditure of premises taken on lease - HELD THAT:- The facts show that cost of renovation was incurred by assessee who is lessee in respect of premises. It is not a long lease of property but only for five years. Rent of assessee is also not concessional as LD AO himself disallowed some part of this. It is not case that by incurring this expenditure some additional floors or some extra construction was carried out. In view of this, we do not find any infirmity in order of LD CIT (A) in deleting disallowance holding them to be revenue expenditure. More so, decision is correct for reason that assessee out of total expenditure of ₹ 2.5 crores itself classified some of expenditure as capital expenditure and only claimed revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as earned income from related parties but has not paid sums to related parties. Thus expenditure incurred by assesses was not to related parties, therefore application of provisions u/s 40A (2) is misplaced. Accordingly, we do not find any infirmity in order of learned CIT A in deleting disallowance. Disallowance of foreign travel expenses - director of assessee has incurred an expenditure towards foreign travel expenditure for visiting various places in Malaysia, Hong Kong, Goa, USA and Dubai - CIT-A deleted the addition - HELD THAT:- On perusal of details of travelling expenditure, LD AO should have clearly stated which details were not on record in respect of travelling expenses. He further held that merely on suspicion LD AO has disallowed above expenditure and that too on an ad hoc basis. He further held that in addition on estimated basis could not be sustained. Therefore, he deleted above addition/disallowance. We do not find any infirmity in order of learned CIT A as learned assessing officer has disallowed only 50% of expenditure on d hoc basis without pointing out any infirmity in details submitted by assessee and assessee has also given a detailed justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that if above expenditure is unverified expenditure, learned assessing officer should have disallowed 100 % of such expenditure, where as he has disallowed only 50% of expenditure on estimated basis. There is no reference to market price of such services. In view of this, we do not find any infirmity in order of learned CIT A in deleting above disallowance of consultancy charges. Disallowance u/s 14 A - CIT A only corrected figures of average value of investment at ₹ 146,158,495 and confirmed disallowance of 0.5% - HELD THAT:- Principally CIT A has upheld disallowance made by learned assessing officer however directed to correct only arithmetic inaccuracy in the order. Before us, learned departmental representative could not show that figure adopted by learned CIT A for confirming above disallowance are not correct. - ITA No. 3938/Del/2015, ITA No. 3939/Del/2015 And ITA No. 5470/Del/2016 - - - Dated:- 19-1-2021 - Shri Bhavnesh Saini, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri C. S. Anand, Adv For the Revenue : Shri H. K. Chaudhary, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on account of legal and professional fees and consultancy charges u/s 40(A)(2)(a) of Income-tax Act, 1961 without any basis and material evidence on record 5. On facts and in circumstances of case, Ld. CIT (A) has erred in law in deleting addition of ₹ 3,32,000/- made on account of foreign travelling expenses without appreciating facts that assessee has failed to furnish material evidence on record showing that said expenses were wholly and exclusively spent for business purposes. 6. On facts and in circumstances of case, Ld. CIT (A) has erred in deleting addition of ₹ 8,11,76,086/- made on account of undisclosed management fee since revenue is recognized in this year as tax was deducted during year on this amount and assessee company has claimed credit in this year also and that deductee party i.e. M/s Alliance Promoters hat claimed deduction Of expenditure in this under reference. 7. In facts and in circumstances of case, Ld. CIT (A) has erred in deleting addition of ₹ 3,00,000/- made on account of excess rental expenses u/s 40(A)(2)(a) of Income-tax Act, 1961 without appreciating facts that assessee has failed to produce any material on record t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 90 lakhs made on account of excess rent u/s 40 A(2)(a) of income tax act, 1961 without appreciating fact that assessee has claimed to have incurred expenditure on rent of ₹ 1,80,00,000 whereas cost of lease rent property is less than rental income i.e. cost of ₹ 1,19,39,365/ . Therefore, expenditure incurred in excessive or unreasonable having regarded to fair market value of such payment of rent. ii. On facts and Under circumstances of case, learned CIT A has erred in deleting addition of ₹ 90 lakh/ made on account of consultancy charges u/s 40A (2) (a) of income tax act, 1961 without any basis on record. 5. Firstly, we state facts for A Y 2010 11. Brief facts shows that assessee is a company engaged in business of real estate infrastructure. It filed its return of income on 15.10.2010 declaring income of ₹ 3,79,21,780/-. Case of assessee was picked up for scrutiny and assessment under/ section 143(3) of The Income Tax Act [ The Act] was passed on 22.03.2013, wherein, income was assessed at ₹ 19,75,17,730/-. The following additions were made:- i. Disallowance on account of stamp duty on lease agreement for five years of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held that necessary assessee provided details of travelling expenditure to LD AO, however, LD AO has made disallowance merely on basis of surmises and conjectures and on ad hoc basis. Thus, he deleted that disallowances of ₹ 3,32,000/- out of travelling expenditure. With respect to addition of ₹ 81176086/- on account of management fees paid, he held that it is contended by assessee that above sum pertained to succeeding year and in subsequent year, assessee has offered above sum for taxation as period of income to which it relates to was in succeeding year. Therefore, he directed LD AO to verify this aspect that if assessee has shown above income in subsequent year then addition made in this year deserves to be deleted. With respect to disallowance of ₹ 3 lakhs out of rent he held that AO has not been able to show that expenditure incurred was excessive or unreasonable. Therefore, he deleted disallowances. 7. Now LD AO is aggrieved by that order of LD CIT (A) and has preferred this appeal. 8. We have heard LD CIT DR on behalf of LD AO and LD AR for assessee. The LD CIT DR vehemently supported order of LD AO. He submitted that most of disallowance made by L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in its entirety in year in which it is incurred. It cannot be spread over a number of years even if assessee has written it off in his books over a period of years. However, facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In present case, even for first year if registration charges/stamp duty is not deposited, assessee is not eligible for occupying premises. The Commissioner (Appeals) had categorically given a finding that Assessing Officer was not correct in holding that expenses on account of stamp duty should be allowed as deferred revenue expenditure. The revenue did not file any appeal against aforesaid finding nor did it make any claim of stamp duty expenditure being allowed as deferred revenue expenditure before Tribunal. In fact during hearing before us, only issue, which appears to have been in dispute, was whether stamp duty paid for leased premises is capital expenditure or revenue expenditure. Period of lease for which property has been taken, cannot be regarded as a decisive test to determine nature of expenditure. In any case, it is not disputed that stamp duty amount has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul looking at business needs of assessee. He further held that whether tenant will get deduction of 30% of rent would only depend upon whether repairs and maintenance is because of owner or tenant. However, that cannot decide about disallowability of expenditure in hands of tenant. We have carefully considered rival contentions. The facts show that cost of renovation was incurred by assessee who is lessee in respect of premises. It is not a long lease of property but only for five years. Rent of assessee is also not concessional as LD AO himself disallowed some part of this. It is not case that by incurring this expenditure some additional floors or some extra construction was carried out. In view of this, we do not find any infirmity in order of LD CIT (A) in deleting disallowance of ₹ 42587414/- holding them to be revenue expenditure. More so, decision is correct for reason that assessee out of total expenditure of ₹ 2.5 crores itself classified some of expenditure as capital expenditure and only claimed revenue expenditure of ₹ 125,00,000/-. Accordingly, ground No. 2 of appeal is dismissed. 12. Ground no. 3 of appeal is with respect to additions/ disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionately and without any bias from viewpoint of a reasonable and honest person in business. Aforesaid ratio elucidated relies and refers to several earlier judgments including CIT v. Edward Keventer (P.) Ltd. [1972] 86 ITR 370 (Cal) which was affirmed by Hon Supreme Court in CIT v. Edward Keventer (P.) Ltd. [1978] 115 ITR 149 (SC) and CIT v. Shatrunjay Diamonds [2003] 261 ITR 258/128 Taxman 759 (Bom). Similar view has been expressed by Hon. Delhi High Court in Sigma Corpn. India Ltd. v. Dy. CIT [IT Appeal No. 795 of 2016, dated 15-2-2017]. Assessee company as well as sister company, both are assessed to income tax at maximum marginal rate, and, therefore it cannot be said that rent is paid to respondent company at an unreasonable rate to evade income tax. Further In absence of any material before Assessing Officer, such as comparative chart etc. to suggest that any excessive rent payment was made to sister concern and 50 % ad hoc disallowance was made on payment made under Section 40A(2)(b) of Act to Aditya Prakash entertainment private limited solely on ground that party to whom payment was made, it is a sister concern and there is an attempt to evade Tax and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were made for purpose of business and therefore are allowable as a business expenditure thus he deleted disallowance. He further noted that provisions of Section 40 A (2) clearly provides that assessing officer has to prove that expenditure incurred was excessive or unreasonable having regard to fair market value of services for which payment was made which learned assessing officer has failed. Even before us, assessee has also given a detail of expenses incurred of consultancy charges of ₹ 69,067,616 and legal and professional charges of ₹ 40,237,278 at paper book page number 35 and 36. It is also to be noted that assessee has also earned consultancy income, which is placed at page number 37 of paper book, such income is of ₹ 201,609,736 also from sister concerns such as opus reality development of ₹ 90 lakhs and from Alliance Promoters Ltd of ₹ 104,787,858. It is in fact to be seen that assessee has not paid any sum to Opus Reality Development Or Alliance Promoters Ltd any legal and professional fees but in fact, it has earned such professional fees from them and shown it as income. Thus, assessee has earned income from related parties but has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven a detailed justification for incurring such expenditure, which was not found to be incorrect. In view of this ground number 5 of appeal of ld AO is dismissed. 15. Ground number 6 of appeal is with respect to deleting addition of ₹ 81,176,086/ on account of undisclosed management fee. The facts shows that during year under reference assessee company has received a management fee of ₹ 101,696,600 from M/s Alliance Promoters Ltd out of which ₹ 1, 10,23,930 was disclosed as a taxable income and rest of amount of ₹ 81,176,086 was carried forward to a subsequent year as advance received. The learned assessing officer asked assessee about discrepancy which was explained by assessee that above income is for a particular period and which is required to be segregated between two periods as it belongs to two different financial years. The learned assessing officer rejected contention of assessee and applying matching principle made an addition of ₹ 81,176,086 in hands of assessee. The learned CIT A noted that assessee has offered above amount in subsequent year as it pertained to that financial year. The learned CIT A further set-aside issue to file o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty Prakash Amusement Rights And Fun Word Private Limited, total cost of factory building is only ₹ 2,385,623 and only some portion thereof is stated to be given on rent. The learned assessing officer noted that Assessee Company is reducing its taxable income by claiming rent in name of assesse s sister concern and provisions of Section 40 A (2) (a) are clearly applicable in this case and therefore he disallowed 50% of such expenses. The learned CIT A deleted above disallowance. As facts and reasoning are similar to ground number [3] of above appeal, we do not find any infirmity in order of learned CIT A in deleting above disallowance. Accordingly, ground number 7 of appeal is dismissed. 17. Accordingly, appeal of learned assessing officer for assessment year 2000 11 in ITA number 3938/Del/2015 is dismissed. 18. Coming to appeal of Learned assessing officer for assessment year 2011 12, ground number 1 is identical to ground number 3 of appeal for assessment year 2000 11. The parties confirmed that facts and reasons for disallowance by learned assessing officer and for deletion of above disallowance by learned CIT A are similar. As we have already decided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has submitted complete details with respect to above payment in form of agreement as well as necessary invoices. The learned assessing officer has disallowed above expenditure without giving any reason but based on disallowance in previous years. He further noted that AO is required to show that above expenditure incurred was excessive and unreasonable, which he failed. It is also to be noted that in earlier year assessee has paid a sum of ₹ 270,58,844 as consultancy expenditure to signature group India private limited. For current year, it has only paid consultancy charges of ₹ 173,26,487 to that party. It is also fact that if above expenditure is unverified expenditure, learned assessing officer should have disallowed 100 % of such expenditure, where as he has disallowed only 50% of expenditure on estimated basis. There is no reference to market price of such services. In view of this, we do not find any infirmity in order of learned CIT A in deleting above disallowance of consultancy charges of ₹ 8,6,63,244/ accordingly ground number 3 of appeal of learned assessing officer is dismissed. 21. Ground number [4] is with respect to disallowance u/s 14 A of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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