M/S PRESTIGE AMUSEUMENTS PRIVATE LIMITED ,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-5(1)(2), BANGALORE

The assessee has filed this appeal challenging the order dated 1.3.2018 passed by Ld. CIT(A), Bengaluru and it relates to assessment year 2014-15.

The assessee is aggrieved by the decision of Ld. CIT(A) in confirming the addition of Rs.1,43,13,879/- relating to Mall shopping festival expenses and Rs.27,09,868/- relating to parking amount due to land lord.

The facts relating to the case are stated in brief. The assessee is engaged in the business of managing commercial properties. It

The A.O. noticed that the assessee has not debited profit & loss account with the amount of Rs.1,43,13,879/- relating to Mall shopping festival expenses. When questioned about it, the assessee explained that it has earned gross collections of Rs.1,63,16,060/- on account of conducting Mall shopping festival and incurred expenditure of Rs.1,43,13,897/- on conducting the said festival. Accordingly, there was net income of Rs.20,02,163/- and the same was shown in the P&L account under the head “income from facilities & maintenance”.

With regard to the parking amount, it was submitted that parking income and expenditure do not belong to assessee and the net income has to be given to the owners of the Mall. It was submitted that the parking expenses was debited to the Mall Owner’s account. It was submitted that both the above items were included in the “Statement of large expenses” submitted to the AO, since they relate to the mall.

Since the Mall shopping festival expenses of Rs.1,43,13,879/- was not debited to P&L account, the A.O. added the same to the total income of the assessee. With regard to Parking expenses, the A.O. expressed the view that the assessee has included expenses of Prestige Amusements Pvt. Ltd., Bangalore Rs.27,09,868/- in the details of large expenses furnished to him. Since this expenditure is not relatable to the assessee, the A.O. added the same to the total income of the assessee.

The Ld. CIT(A) confirmed both the additions and hence the assessee has filed this appeal before us.

The Ld. A.R. submitted that the assessee has received gross collections of Rs.1,63,16,060/- on account of conducting Mall shopping festival and incurred expenditure of Rs.1,43,13,897/- in that regard. Accordingly, there was net income of Rs.20,02,163/-. He submitted that the assessee has included this amount under the head “Income from facilities & maintenance” and the same is reported as “Revenue from Operations”. The Ld. A.R. invited our attention to Schedule 16 of the Annual report, which gives details of Revenue from Operations. Under the said head, the Income from Facilities & Maintenance was disclosed at Rs.22,41,89,479/-. The Ld A.R submitted that the assessee has furnished the details of “income from facilities and maintenance” and the said details would show income from shopping festival expenses at Rs.20,02,163/-. Accordingly he submitted that the net income disclosed in the above list, i.e., Rs.20,02,163/- represents net amount of Gross collections of Rs.1,63,16,060/- less expenditure of Rs.1,43,13,879/-. Accordingly he submitted that the above said expenditure has been reduced from related income, instead of showing separately in the debit side of Profit and Loss account. Accordingly he submitted that the tax authorities are not right in presuming that the assessee has not claimed the above said expenditure and accordingly they are not justified in making this addition.

With regard to the parking expenses payable to the landlord, the Ld. A.R. submitted that the relevant expenditure has been debited to the Mall owner/Landlord account titled as “Parking & MP Payable to LO Eva” account and it was not claimed by the assessee as expenditure at all. He submitted that the said amount, however, was included in the Statement of large expenses” furnished to the A.O. Accordingly, the Ld. A.R. submitted that there is no necessity to make separate disallowance of an item, which was not claimed by the assessee at all.

The Ld. D.R. on the contrary, placed her reliance on the order passed by Ld. CIT(A).

We heard the parties and perused the record. The first addition relates to Mall shopping festival expenses of Rs.1,43,13,879/-. The assessee has submitted that the gross income earned out of that fund is Rs.1,63,16,060/- and the expenditure incurred was Rs.1,43,13,879/- resulting in net income of Rs.20,02,163/-. The above said amount was included under the ledger account “income from facilities & maintenance” amounting to Rs.22,41,89,479/-, which is reported under the head “Revenue from operations” in the profit & loss account. The assessee furnished the details of income from facilities & maintenance as under:

It can be noticed from the above list that the assessee has disclosed the amount of Rs.20,02,163/- as Income from shopping festival expenses. Since the assessee has included net income, there was no necessity for the assessee to disclose the expenditure separately again in the profit & loss account.

It was submitted that the assessee has disclosed the “mall shopping festival” expenses also in the Statement of large expenses called for by the assessee, even though it was netted off against the Prestige Amusements Pvt. Ltd., Bangalore income. We have notice earlier that there was no necessity to show expenses separately in the profit & loss account, when the expense are netted off against the relevant income. Accordingly, it is noticed that the assessee has accounted for the expenditure of Rs.1,43,13,879/- in the books of accounts and also in the profit & loss account in the form of netting off the same against the relevant income. Hence, the tax authorities are not justified in assessing the same again in the hands of the assessee. Accordingly, we set aside the order passed by Ld. CIT(A) and direct the A.O. to delete this addition.

The next issue relates to addition of Rs.27,09,868/- relating to parking expenses. The assessee submitted that the parking income & expenses do not belong to it. Since the A.O. has called for details of large expenses relating to the Mall operations, the assessee included the same in the statement of expenses furnished to the assessee. The Ld. A.R. invited our attention to the ledger account copies and demonstrated that the parking expenses of Rs.27,09,868/- has been debited to the Mall owner/land lord account. Accordingly he submitted that above said amount was not claimed as expenditure in the P&L account.

The Ledger account of Mall owner/land lord account titled as “Parking & MP Payable to LO Eva” is showing a credit balance of Rs.72,59,328/- as detailed below:-

Hence, it is amply clear that the assessee has not claimed the above said amount of Rs.27,09,868/- as expenditure in the books of accounts. Accordingly, the tax authorities are not justified in making disallowance of an item which is not claimed by the Prestige Amusements Pvt. Ltd., Bangalore

In the result, the appeal filed by the assessee is allowed.