ESMART ENERGY SOLUTIONS LTD.,MUMBAI vs. DCIT - 1 (1)(2), MUMBAI

On the facts and in the circumstances of the case the said learned Commissioner of Income tax has also erred in confirming the disallowance of software development expenses of Rs. 19,50,000/- particularly when the said expenses were incurred for remote meter reading, which is business of the appellant and has also submitted invoice for the same.

On the facts and in the circumstances of the case the said learned Commissioner of Income tax has also erred in restricting the disallowance under section 14A of the Act, particularly when, the appellant had invested in shares and mutual funds Rs. 24,20,65,605/- out of its own fund of Rs. 33,78,56,341/- and thus not following the judgement of jurisdictional High Court.

On the facts and in the circumstances of the case the said learned Commissioner of Income tax has also erred in restricting the disallowance under section 14A of the Act.

Facts in brief are that the assessee being resident corporate assessee stated to be engaged in providing consultancy services was assessed for the year under consideration u/s 143(3) on 15/03/2016 wherein the loss was determined at Rs.143.23 Lacs after certain adjustments / disallowances as against returned loss of Rs.244.07 Lacs filed by the assessee on 28/09/2013. The following additions form subject matter of present appeal before us: - No. Nature of Disallowance Amount (Rs.) 1 Travelling Expenses 2,61,557/- 2 Software Expenses 19,50,000/- 3 Disallowance u/s.14A 27,62,173/- 3. We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper- 3 Esmart Energy Solutions Private Limited Assessment Year: 2013-14 book. Our adjudication on the stated issues would be as given in succeeding paragraphs. 4.1 Disallowance of Travelling Expenses During assessment proceedings, it transpired that the assessee debited travelling expenses of Rs.24.27 Lacs out of which expenses of Rs.13.80 Lacs were towards foreign travelling expenses. Besides disallowing foreign travel expenses, Ld. AO estimated additional disallowance of 25% on balance travelling expenses of Rs.10.47 Lacs which came to Rs.2.61 Lacs. The assessee is aggrieved by estimation of 25%. The stand of Ld. AO, upon confirmation by learned first appellate authority, is under challenge before us. The prime argument of Ld. AR would revolve around the fact that the expenditure was an allowable deduction and complete details was available on record and therefore, the disallowance was on higher side. The Ld. DR submitted that the estimation was fair. Upon due consideration of details filed by the assessee, we find that estimation of 10% would meet the end of justice and would mitigate the litigation further. Therefore, we restrict the impugned addition to 10% of Rs.10,46,229/- which comes to Rs.1,04,623/-. The balance addition stands deleted. The ground stands partly allowed. 4.2 Disallowance of Software Expenses It transpired that the assessee debited an amount of Rs.19.50 Lacs on account of software expenses. The said amount was prima-facie an advance paid to an entity namely UTJ wireless Pvt. Ltd. In the absence of any supportive documents, the said expenditure was disallowed. For the same reasons, depreciation was also disallowed. The Ld. CIT(A) confirmed the same since the assessee could not substantiate the said