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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश /O R D E R Per G. MANJUNATHA, AM:
This appeal filed by the assessee is directed against order of learned Commissioner of Income Tax (Appeals)-11, Chennai, dated 21.08.2018 and pertains to assessment year 2012-13.
The assessee has raised the following grounds of appeal:-
1. The order of The Commissioner of Income Tax (Appeals) - 11, Chennai dated 21.08.2018 in I.T.A.No.389/2014-15 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in partly disallowing the disallowance of expenses charged under various heads in the computation of taxable total income without assigning proper reasons and justification.
The CIT (Appeals) went wrong in recording the findings in this regard in para 6 of the impugned order without assigning proper reasons and justification
The CIT (Appeals) failed to appreciate that the apportionment of expenses in para 6 of the impugned order had no sanctity and ought to have appreciated that the expenses were incurred for maintaining the income earning apparatus while such expenses were allowable in terms of section 37(1) of the Act, thereby vitiating the related findings in para 6 of the impugned order.
5. The CIT (Appeals) failed to appreciate that the reference to the provisions of section 14A of the Act was wholly unjustified and ought to have appreciated that the provisions of section 14A of the Act had no application to the facts of the case.
6. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law. 7. The Appellant craves leave to file additional grounds/arguments path the time of hearing.
3. The brief facts of the case are that the assessee is an investment company filed its return of income for assessment year 2012-13 admitting total income of Rs.6,44,030/-. The case was taken up for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee is not carrying out any business activity and hence, after considering relevant submissions of the assessee disallowed total expenses debited under the head ‘other expenses’ of Rs.2,25,980/- by holding that there is no nexus between expenditure debited into the profit & loss account and business activity of the assessee. The assessee carried the matter in appeal before the first appellate authority and the ld.CIT(A) for the detailed reasons recorded in his appellate order allowed partial relief in respect of loan processing charges, where amount of Rs.75,327/- held to be pertains to loans / advances of lending activity and the balance amount of Rs.1,50,653/- was sustained. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
3.1The ld.AR for the assessee referring to nature of expenses incurred by the assessee submitted that if we go through the nature of expenses, all expenses debited under the head ‘other expenses’ are in the nature of routine expenses to be incurred for maintaining corporate status of the assessee and thus, merely for the reason for no revenue from operations, relevant expenditure cannot be disallowed.
4. The ld.DR on the other hand supporting order of the ld.CIT(A) submitted that the assessee has failed to justify expenditure debited into profit & loss account with business activity and thus, there is no error in the order of ld.CIT(A) in sustaining various expenses debited into profit & loss account.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, if you go through the nature of expenses like filing fees for ROC, office electricity, postage expenses, printing & stationery and secretarial / other expenses, all expenses are in the nature of routine expenses required to be incurred by any corporate entity for maintaining corporate status of the assessee. Therefore, these expenses cannot be disallowed merely for the reason that there is no revenue from operations. Hence, we direct the AO to delete additions made towards filing fees for ROC, office electricity, postage expenses, printing & stationery and secretarial / other expenses.
5.1 As regards processing charges, it was finding of the ld.CIT(A) that 2/3rd of processing charges relates to loans / advances of lending activity of the assessee and hence, apportioned said expenses between business activity of the assessee and non-business activity and thus, allowed relief of Rs.75,327/-. Facts remain unchanged. The assessee has failed to bring on record any evidences to prove that said expenditure was wholly and exclusively incurred for the purpose of business of the assessee. Hence, we are inclined to uphold findings of the ld.CIT(A) and reject arguments taken by the assessee.
5.2 To sum up, out of total disallowance of Rs.2,25,980/-, all expenses excluding processing charges is allowed and insofar as processing charges, findings of the CIT(A) is sustained.
In the result, the appeal filed by the assessee is partly allowed.