SHRI FAREDOON EDAL DESAI,MUMBAI vs. ITO-22(1)(3), MUMBAI, MUMBAI

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ITA 6000/MUM/2019Status: DisposedITAT Mumbai04 October 2021AY 2013-144 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of 10% of expenses was ad-hoc and lacked specific findings of personal nature, thus deleting it. It also held that the interest expense was for a business-related motor car and the assessee had sufficient own funds for investments, hence no disallowance under Section 14A was warranted.

What were the facts?

The assessee claimed certain expenses which the Assessing Officer disallowed by estimating 10% as personal. The CIT(A) confirmed this disallowance. The assessee also incurred interest expenses on a motor car, which the AO disallowed under Section 14A.

What were the issues?

Whether disallowance of expenses based on ad-hoc estimation is justified. Whether interest expenses on a motor car are disallowable under Section 14A when the assessee has sufficient own funds.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Appellant: Shri Abhay Agrawal, AR
Hearing: 04.10.2021Pronounced: 04.10.2021

O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: This appeal of the assessee is arising out of order of the Commissioner of Income Tax (Appeals)]-34, Mumbai [in short CIT(A)], in appeal No. CIT(A)-34/ITO-22(1)(3)/IT-10043/16-17 vide dated 04.06.2019. The Assessment was framed by the Income Tax Officer, Circle-22(1)(3), Mumbai (in short ITO/ AO) for the A.Y. 2013-14 vide order dated 16.03.2016 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2.

The first issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of expenses amounting to ₹73,574/-. For this, assessee has raised the following ground:- “Section 37(1) of the Income Tax Act, 1961:-

1.

2 Shri Faredoon Edal Desai; AY 13 -14 Disallowance of Expenses The learned AO erred in disallowance of the expenses of ₹73,514/- which is business expenditure and the documents related to the same were produced before the Assessing Officer.”

3.

I have heard both the sides and gone through the facts and circumstances of the case. I noted that the assessee is in the business of insurance and proprietor of Ahura Insurance Inc. and claimed the following expenses:-

Sr. No. Nature of expenses Amount of % Amount expenditure claimed Disallowed disallowed 1. Staff Welfare 89,025/- 10% 8,902/- 2. Petrol expenses 2,24,220/- 10% 22,422/- 3. Travelling expenses 14,592/- 10% 1,459/- 4. Advertisement 26,091/- 10% 2,609/- Expenses 5. Conveyance 2,13,980/- 10% 21,398/- 6. Sales Promotion 31,910/- 10% 3,91/- 7. Office expenses 1,35,331/- 10% 13,533/- 4. The Assessing Officer disallowed 10% of expenses by treating that there is a possibility of personal element. But no other reasons were adduced. The CIT(A) simply confirming the action of the Assessing Officer. I noted from the above expenses that the Assessing Officer has just disallowed by estimating at 10% being personal in nature but neither the Assessing Officer nor CIT(A) has given any finding that how and by what nature it is personal. Since, this is adhoc disallowance, I delete the disallowance and allow the issue of assessee’s appeal.

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