SHREE AHUJA PROPERTIES P. LTD.,MUMBAI vs. ITO WD, 9 (3)(1), MUMBAI

This set of three appeals out of which two cross appeals for Assessment Year 2012-13 and assessee’s appeal for Assessment Year 2011-12 are directed against the order of ld. CIT(A)-21, Mumbai dated 16.05.2016 & 16.02.2016 respectively. The assessee has raised certain common grounds of appeal for both the Assessment Years. Therefore, all the appeals were 5161 & 4987 Mum 2016-Shree Ahuja Properties P. Ltd. clubbed, heard and are decided by a consolidated order to avoid the conflicting decision. In appeal for Assessment Year 2011-12, the assessee has raised the following grounds of appeal:

Facts in brief are that the assessee is a Private Limited Company engaged in the business of Builders & Developers. For Assessment Year 2011-12, the assessee filed return of income on 28.09.2011 declaring total income of Rs. 26,31,392/-. The case was selected for scrutiny. The Assessing Officer while passing the assessment order made a disallowance of Business Promotion Expenses of Rs. 9,59,300/- and disallowance of excessive interest under section 40A(2)(a) of Rs. 5,95,43,939/-. On appeal before the ld. CIT(A), both the additions/disallowance were confirmed.

We have heard the submission of both the parties and perused the record carefully. , 5161 & 4987 Mum 2016-Shree Ahuja Properties P. Ltd.

Ground No.A relates to disallowance on account of Business Promotion Expenses. The ld. AR of the assessee submits that assessee is incurred these expenses for promotion of its business. The assessee incurred major expenses which consist of corporate membership of Mumbai Cricket Association, on social functions and donation. The AO has recorded the expenses in para of his order in the following manner:

The ld. AR of the assessee submits that the expenses were incurred for advertising of the business of the assessee and the major expenses which consist of membership to Mumbai Cricket Association were incurred on account of corporate membership to have a meeting with various clients.

On the other hand, the ld. Departmental Representative (DR) for the revenue relied upon the order of lower authorities. The ld. DR for the revenue further submits that the assessee failed to substantiate that assessee incurred expenses wholly and exclusively for the purpose of business.

We have considered the rival submission of the parties and gone through the orders of authorities below. The Assessing Officer during the assessment noted that the assessee has claimed expenses of Rs. 9,59,300/- which has been recorded by Assessing Officer in para-4 of his order. The assessee was asked to substantiate the expenses. The assessee furnished the copy of receipt of Rs. 545/- paid to Mumbai Cricket Association. For expenses incurred for Dahihandi, the assessee stated that expenses were incurred for the business purpose for putting hoarding of the assessee. For the expenses incurred on putting hoarding of Unnati Seva Sangh & United Association, it was explained that assessee incurred expenses on making hoarding for upcoming projects and rest of the amount which was paid on account of donation to various parties. The ld. CIT(A) confirmed the action of Assessing Officer on similar line. We have noted that the assessee is a corporate entity. The assessee claimed to have made the 5161 & 4987 Mum 2016-Shree Ahuja Properties P. Ltd. expenses by putting hoarding for its advertisement, Rs. 5000/- were incurred for distribution of note books to the poor student, Rs. 1,10,000/- on social education and public welfare in Dahihandi function. The other major expenses consist of expenses incurred on hoarding and payment made to Unnati Seva Sangh and United Association of Rs. 1,02,222/- besides the membership expenses of Rs. 5,45,200/-. Rest of the amount are very meagre amount paid on account of donation either in the form of distribution of Notebook to poor student, donation to ISCON, JVS Jain Sangh Lokhandwala, Vishnu Narayan MahilaAdharManch, Tukaram Mokal nad Surendra Pathare.

The Hon’ble jurisdictional High Court in Otis Elevator (supra) held that when the assessee incurred expenses for promotion of club fees with a view to enable the assessee to improve its relation and prospects, the payment must be allowed as business expenditure. Similarly the other expenses, genuineness of which were not disputed by the lower authorities which mainly consist of either donation to various charitable organizations, distribution of Notebook to poor student and expenses incurred during the festival season for erecting hoarding are also allowable expenses. Therefore, considering the nature and expenses, the Assessing Officer is directed to allow all the expenses and delete the disallowance accordingly. In the result, Ground No.A of the appeal is allowed. , 5161 & 4987 Mum 2016-Shree Ahuja Properties P. Ltd.

Ground No. B relates to disallowance of interest under section 40A(2)(a).

The ld. AR of the assessee further submits that on same set of fact in assessee’s group case in Puspanjali Realtors Pvt. Ltd. In dated 17.01.2018, wherein the assessing officer treated similar rate interest paid by that assessee as unreasonable, however, on appeal, the ld. CIT(A) deleted the entire interest addition, on further appeal before the Tribunal the order of ld. CIT(A) was affirmed. The ld. AR of the assessee finally submits that this ground of appeal is covered in favour of assessee. In support of his submission, the ld. AR of the assessee also relied upon the decision of Hon’ble Bombay High Court in case of CIT vs. Indo-Saudi Services (Travel) P. Ltd. (310 ITR 306), wherein the Hon’ble High Court held that when the revenue was not in a position to point out how the assessee evaded payment of tax by alleged payment to higher commission to its sister concern, sister concern was also paid tax at higher rate, the disallowance of excess commission to sister concern was not justified. The ld. AR of the assessee vehemently submitted that there is no allegation of revenue that there is any evasion of payment of tax. , 5161 & 4987 Mum 2016-Shree Ahuja Properties P. Ltd.

We have considered the submission of both the parties and have gone through the orders of authorities below. We have further noted that in case of assessee’s sister concern in Puspanjali Realtors Pvt. Ltd (supra)., the similar disallowance was made for making payment of interest at similar rate of interest, however, on appeal before the ld. CIT(A), the addition/disallowance was deleted. On further appeal before the Tribunal, the action of ld. CIT(A) was affirmed vide order dated 17.01.2018 (Puspanjali Realtors Pvt. Ltd. In ITA No. 483/Mum/2016). We have further noted that the assessee has availed unsecured loan from its sister concern. The ld. AR of the assessee has filed a copy of assessment order of M/s Ahuja Properties and Associates (PAN No. AAHFA4921B), wherein the interest income from assessee-company for Assessment Year 2011-12 was accepted in the assessment order passed under section 143(3) dated 20.03.2014. 13. Therefore, considering the facts of the present case and the submission of ld. AR of the assessee, we have noted that neither the Assessing Officer has brought on record that the interest paid by the assessee is on higher 5161 & 4987 Mum 2016-Shree Ahuja Properties P. Ltd. side as compared to the market rate for getting the unsecured loan for such business as undertaken by assessee. Nor the Assessing Officer has recorded that assessee made the payment to its sister concern for evasion of tax. Moreover, we have noted that on similar rate of interest, the addition was deleted in assessee’s group case in Puspanjali Realtors (supra) and on appeal before the ITAT, the order of ld. CIT(A) was confirmed. In view of the above discussion, and respectfully following the order of the coordinate bench in Puspanjali Realtors Pvt. Ltd. In ITA No. 483/Mum/2016, (supra) the ground of appeal

We have noted that the assessee has raised identical Ground of appeal

The ld. AR of the assessee submits that the tax effect involved in the revenue’s appeal is less than the monetary limit is less than Rs. 50,00,000/- as prescribed by CBDT Circular No.17/2019 dated 8th August 2019. Therefore, the present appeal is squarely covered by the CBDT Circular No. 17/2019 dated 8th August 2019. On the other hand the ld. DR for the revenue submits that in case at the later stage it is discovered that the tax effect is more than monetary limit the revenue be given liberty to get the appeal revive. Considering the facts that the tax effect in the present appeal is less than the monetary limit of Rs. 50 lakhs as prescribed by CBDT, hence the appeal filed by the revenue is dismissed.

In the result, appeal of the revenue is dismissed.