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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SMT. BEENA PILLAI & MS PADMAVATHY S
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:
2. At the outset, the Ld.AR submitted that Ground nos. 1 and 2 are general in nature and therefore do not require adjudication.
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.”
The Ld.CIT(A) thus denied the claim of assessee u/s. 36(1)(vii). Aggrieved by the order of Ld.CIT(A), assessee is in appeal before this Tribunal. We have heard both sides and perused the records based on the arguments advanced.
The short issue that needs to be considered is in respect of the commercial expediency towards advancement of money by the proprietary concern to the private limited company. The Ld.AR submitted that assessee had advanced these money way back on or before 2008. Thereafter time and again, assessee kept advancing money to the company which was also in the business of electronic advertising like that of the proprietary concern of assessee. It is also submitted that assessee is a shareholder company to which the money was advanced. Admittedly, the assessee has not established the commercial expediency for advancing the money in the past years. In our opinion, this issue needs to be reverified by going through the ledger accounts of the assessee as well as the private limited company and the cash flow statements. We deem it appropriate to remand this issue to the Ld.CIT(A). The Ld.CIT(A) shall verify all the relevant documents Page 5 of from the period when the money is said to have been advanced during the year under consideration. Based on all these evidences, the issue would be considered in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 17th October, 2022.