ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(2), BANGALORE vs. M/S GLOBAL FINSOL PVT LTD , BANGALORE

None appeared on behalf of the revenue. The Ld Counsel appearing for the assessee also sought adjournment. However, we notice that the issue contested by the revenue in the present appeals are simple and not complicated. Hence we proceed to dispose of the appeals. Accordingly the adjournment request of the assessee is rejected.

We heard Ld A.R and perused the record. The assessee is a corporate agent of Bajaj Alliance Life Insurance Company Ltd (BALIC) and is earning commission income. The revenue carried out search and seizure operations in the hands of the assessee on 20-10-2011. Consequent thereto, the present assessments were completed u/s 143(3) r.w.s. 153A of the Income-tax Act,1961 ['the Act' for short] for assessment years 2008-09 to 2012-13. The AO, inter alia, had fully disallowed printing expenses incurred by the assessee in the years relevant to assessment year 2008-09 to 2012-13. The assessee challenged the additions by filing appeals before Ld. CIT(A) and then to ITAT. The Tribunal, vide its combined order dated 12.12.2014 passed for assessment years 2008-09 to 2012-13 set aside the assessment order with a direction to examine following four aspects:- i. Whether the expenditures disallowed pertain to the relevant Assessment year. ii. Whether the payments (expenses) disallowed by the assessing officer, were such that they violate the IRDA regulations and are therefore hit by the Explanation to Section 37(1). iii. Whether the expenses disallowed were indeed business expenditure with reference to the details of expenses and the benefits derived from them. iv. Whether the expenses disallowed, were also claimed by the sister concerns. And if the payments were in the nature of reimbursements, then whether the reimbursement and the related expenses were duly accounted in the books of the sister concerns.

Following the above said orders, the AO made identical disallowance of 50% of Printing & Stationery expenses in AY 2013- 14 in the order passed u/s 143(3) of the Act.

The Ld. CIT(A) deleted the said disallowance in all the years under consideration with the following observations: “It is observed that the Assessing Officer disallowed 50% of the expenditures incurred under this head without bringing sufficient evidence on record. The disallowance was mainly adhoc and without any objective basis. The Appellant Company on the other hand established that the expenditure was truly incurred for the purpose of business, which is also admitted by the A.O. Moreover, these expenses are duly vouched and payments were made mostly by account payee cheques. Another contention of the Assessing Officer was that the printed brochures were distributed by the coordinators who were not employees of the Appellant Company. The Authorized representative argued that the contents of the printed materials were all of the products of insurance which were the business of the Appellant. The mere fact that it was distributed by the coordinators will neither reduce the expenditure nor disentitle the Appellant to claim such expenditure under Section 37 of the Income Tax Act, 1961 as these were incurred wholly and solely for the purpose of Appellant’s business. I find strength in the arguments canvassed by the Authorised representatives. Since, the disallowances were on adhoc basis, it cannot stand in view of the decisions of the Honourable Delhi High Court in the case of COMMISSIONER OF INCOME TAX V. KOHINOOR FOODS LTD (2015) 373 ITR 682 (Del) and various other judgements of

We notice that the relief allowed by Ld CIT(A) in AY 2009-10, 2011-12 and 2013-14 are Rs.90.52 lakhs, Rs.63.65 lakhs and Rs.35.75 lakhs respectively. The tax effect of the above said relief in each of the years is less than Rs.50.00 lakhs. At this juncture, we prefer to extract the Circular No.17/2019 dated 08th August, 2019 issued by the CBDT below:- Circular No. 17/2019-Income Tax F. No. 279/Misc. 142/2007-ITJ(Pt.) Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes Judicial Section New Delhi, 8th August 2019 Subject: – Further Enhancement of Monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court – Amendment to Circular 3 of 2018 – Measures for reducing litigation.

The above cited Circular of CBDT makes it clear that the tax effect has to be computed separately in each of the year, even if the Ld CIT(A) has passed a combined order on the common issue. We have noticed that the tax effect involved in the appeals filed by the revenue for AY 2009-10, 2011-12 and 2013-14 are less than Rs.50.00 lakhs, being the monetary limit prescribed by the CBDT for preferring appeals before the Tribunal against the order passed by Ld CIT(A). Accordingly, we dismiss the appeals of the revenue filed for AY 2009-10, 2011-12 and 2013-14 in limine, on the ground of low tax effect.

Now we shall take up the appeals filed by the revenue for AY 2008-09, 2010-11 and 2012-13. We notice that the Ld CIT(A) has deleted the disallowance by observing that the AO has made disallowance on adhoc basis. We notice from the assessment order that the AO on the reasoning that the assessee has failed to explain satisfactorily the manner in which the materials published were used for the purpose of business of the assessee, i.e., it appears that the entire printed materials were not used for the purposes of business carried on by the assessee and hence he has restricted the claim to 50%. It is well settled proposition of law that the onus to prove the expenditure and its connection with the business carried on by the assessee would lie upon the assessee.

In the result, the appeals filed by the revenue for AY 2008-09, 2010-11 and 2012-13 are treated as allowed for statistical purposes. The appeals filed by the revenue for the remaining three years are dismissed. Order pronounced in the open court on 18th Jan, 2021.