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This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals)–XXVI, New Delhi, dated 20.01.2015, for assessment year 2012-13. The assessee has contested
ITA. 1977 (Del) of 2015. Mahagun India P. Ltd. 2 the disallowance under section 14A of the Income Tax Act and ad-hoc disallowance out of vehicle repair and maintenance expenses confirmed by the learned CIT (Appeals). The learned CIT (Appeals) has also held that profit on sale of agricultural land is not exempt.
The brief facts of the case is that assessee is a Pvt. Ltd. company, who filed its return of income at Rs.10,24,64,401/-. The notice under section 143(2) of the Act was issued on 14.08.2013. The learned Assessing Officer disallowed a sum of Rs.30,02,502/- under section 14A of the Act whereas the exempt income earned by the assessee was only Rs.11,068/-. The learned Assessing Officer also disallowed 10% of repairs and maintenance expenses and depreciation on motor cars on account of personal use of vehicles as the Directors of the company did not own any personal vehicle. Further the assessee has sold a piece of land at Village Bhudka for Rs.10 lakhs and disclosed long term capital gains of Rs.40,71,532/- in its return of income. However, same was offered for taxation under capital gain. The assessee submitted that though assessee is engaged in the business of real estate development, the above land was purchased with the intention of holding it for a long time and it was not stock-in-trade of the assessee. The learned
ITA. 1977 (Del) of 2015. Mahagun India P. Ltd. 3 Assessing Officer did not consider the explanation of the assessee proper and held that profit on sale of plot amounting to Rs.47,25,000/-, which was disclosed by the assessee in its profit and loss account is a business profit. Therefore, he treated the capital gain as business income and made the addition of Rs.6,53,468/- being the difference between the capital gain shown by the assessee of Rs.40,71,532/- and amount disclosed in the profit and loss account of Rs.47,25,000/-. Consequently the total income of the assessee was assessed at Rs.10,68,76,353/- against the returned income of Rs.10,24,64,401/-.
The assessee preferred appeal before the learned CIT (Appeals). However, none remained present on behalf of the assessee before the learned CIT (Appeals) and, therefore, the learned CIT (Appeals) decided the appeal ex-parte, upholding the disallowance under section 14A of the Act. She further confirmed the disallowance on account of vehicle expenses and depreciation. However, she accepted the argument of the assessee in its written submission and held that the capital gain may be chargeable to tax as offered by the assessee and not as business income. However, with respect of claim of the assessee about agricultural income as the land sold
ITA. 1977 (Del) of 2015. Mahagun India P. Ltd. 4 was an agricultural land, same was rejected as there was no evidence furnished by the assessee. Therefore, assessee aggrieved with the order of the learned CIT (Appeals) preferred appeal before us.
We have heard the rival contentions of both the parties.
The ground No. 1 of the appeal is with respect to the disallowance under section 14A of the Income Tax Act. Admittedly the assessee has shown exempt income of Rs.11,068/-, therefore, we restrict the disallowance to the extent of the exempt income only. It is also the claim of the learned authorized representative. In view of this, ground No. 2 of the appeal of the assessee is allowed.
Ground No. 3 of the appeal is with respect to disallowance of 10% of vehicle repair maintenance and depreciation expenditure. We have noted that the assessee is a company and, therefore, it cannot have any personal expenditure. Though the Directors do not own any vehicle and if the same is used by them for their personal purposes, same is chargeable to tax in the hands of those
ITA. 1977 (Del) of 2015. Mahagun India P. Ltd. 5 Directors under the head ‘salary’. The disallowance made by the learned Assessing Officer is an ad-hoc disallowance without pointing out any instances or use of those vehicles for personal purposes of the directors. The provisions of section 37(1) bars the allowance of any expenditure which is personal expenses of the assessee. In the present case, the assessee is a company which does not have any personal identity. Furthermore, with respect to the disallowance of the depreciation on motor car, it could not be said by the learned Assessing Officer that same are not used for the purposes of the business of the assessee. In view of this, we reverse the finding of the lower authorities in disallowing the vehicle expenditure. Accordingly, ground No. 3 of the appeal is allowed.
Ground No. 4 of the appeal is with respect to the claim of the assessee that impugned land sold by the assessee is an agricultural income and, therefore, same cannot be charged to tax as it is exempt under the provisions of section 10(2) of the Act. The learned CIT (Appeals) has rejected this contention of the assessee as assessee could not prove by producing sufficient evidence that the land sold is an agricultural land under section ITA. 1977 (Del) of 2015. Mahagun India P. Ltd. 6 2(1A) of the Act. No evidences were produced before us also. In absence of assessee failing to produce any evidence at all the three stages, before the Assessing Officer, learned CIT (Appeals) and us, the claim deserves to be rejected.
In the result, ground No. 4 of the appeal is dismissed.
All other grounds of appeal are general in nature and hence, they are dismissed.
In the result, appeal of the assessee is partly allowed.
The order is pronounced in the Open Court on : 16th July, 2018.