K HARISH KUMAR,BENGALURU vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(2)(1), BANGALORE

ORDER

PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against the order dated 18/03/2020 passed by Ld.CIT(A)-1, Bangalore for A.Y. 2014-15 on following grounds of appeal:

3. Assessee do not wish to press Ground nos. 5-7. Accordingly, the Ld.AR has submitted that these grounds are not pressed. We are therefore dismissing Ground nos. 5-7 as not pressed. 4. The only issue that arises is in respect of the amount written off by the assessee as business expenditure u/s. 37(1) of the Act. 5. Brief facts of the case are as under: The assessee is an individual and derives income from proprietorship business of advertising named and styled Ambal Advertisement Agency, besides income from House Property and other sources. The assessee has returned income of Rs.44,55,470/- vide original return dt: 09/10/2014.The case was selected for scrutiny by issue of notice u/s. 143(2) dated 03/09/2015 and the assessment was completed u/s 143(3) on 22.12.2016 in course of which the AO assessed the total income at Rs. 76,55,527/- after disallowing sum of Rs. 8,01,620/- u/s 40(a)(ia) on which there was a failure to deduct tax, and Rs.23,73,435/- claimed as bad debts during the year. Aggrieved by the addition made by the Ld.AO, assessee is in appeal before the Ld.CIT(A). 6. The Ld.CIT(A) while considering the issue observed as under: “4.7 The other conditions for allowability of expenditure u/s 37(1) is that it should not be in The nature of capital or personal expenditure and that it should have been laid out or expended wholly or exclusively for the business or profession. In other words the expenditure must be of revenue nature the liability for payment of which arose during the relevant year. As noticed from the submissions, the amounts were advanced in past AYs as loans by the appellant to a company M/s Ambal Enablers Pvt. Ltd. and the same were reflected as unsecured loan from Director in Page 4 of the books of the company. During the relevant AYs these amounts were not claimed in the accounts rf the appellant as expenditure. The appellant has not submitted any evidence to substantiate that these loans were advanced wholly or exclusively for its business and that they were revenue in nature. In Travancore Titanium Products Ltd. v CIT [1966} 60 ITR 277(SC) it was held that the expenditure must be directly and intimately connected with the business and must be laid out by the taxpayer in his character as trader. In view of these it is difficult to accept that any liability for payment of such amounts arose during the AY in question. In the light of the same the alternative ground that the impugned amounts should be allowed as expenditure u/s. 37(1) lacks substance.”