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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH&
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-21, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-21/ITO-13(1)(2)/IT-98/2016-17 dated 15-05-2017. The Assessment was framed by the Income Tax Officer, ward 13(1)(2), Mumbai (in short ITO) for the assessment year 2013-14 vide order dated 29-03-2016 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of marketing expenses of ₹ 1,06,742/- , annual maintenance charges of ₹ 1,29,878/-, Travelling expenses 1,66,442/-. For this assessee has raised the following grounds: -
“A) On the facts and circumstances of the case, the Learned CIT(A) has not considered the submission, and agreed to disallowance of Marketing Expenses of Rs.1,06,742/- by the assessing officer by misunderstanding the appellant claimed against Income from Interest on Fixed deposit and short term capital gain whereas the appellant has set oft Loss under head Business against capital gain and income from other source. As per section 71 sub section (2) of the Income Tax Act, 1961 appellant is entitled to set off the business loss against capital gain and income from other sources for the same assessment year.
B) On the facts and the circumstances of the case. The Learned CIT(A) has not considered the submission, and agreed to disallowance of Rs. 1,06,742/- and addition to the total income and also in work in progress without considering the facts that expenditure incurred was a Revenue expenditure. Hence your appellant submits that the said Disallowance should be deleted and assessing officer should be directed to reduce from work in progress.
On the facts and in the circumstances of the case, The Learned CIT(A) has not considered the submission, and agreed to disallowance of maintenance charges of Rs. 1,29,878/- without
considering the nature of expenditure. The maintenance charge is paid every year to government authorities for maintaining the lease property, hence classified as revenue expenditure. Hence your appellant submit that assessing officer should be directed that addition should be deleted.
3. On the facts and circumstances of the case, the learned CIT(A) has not considered the submission, and agreed to disallowance of ₹ 1,66,442/- on account of travelling expenses without considering the facts that expenses was incurred by office staff, faculty and administrative head. Hence your appellant submits that the said Disallowance should be deleted and assessing officer should be directed to reduce from work in progress.”
I have heard the rival contentions and gone through the facts and circumstances of the case. I find form the assessment order that the AO disallowed the marketing expenses of ₹ 1,06,742/-, Maintenance Charges of ₹ 1,29,878/- and Travelling Expenses of ₹ 1,66,442/- for the simple reason that the assessee has booked income to the tune of ₹ 20,000/- and these expenses are not relatable to the business activity of the assessee. I find from the facts of the case that the assessee company is covered under section 8 of Companies Act 2013, erstwhile section 25 of the companies Act 1956 engaged in the object of promoting education and learning in various fields. Admittedly, the company is not registered under section 12A of the Act as claimed by the assessee. I find that these expenses are relatable to office staff and administrative heads. The expenses relating to marketing expenses relates to designing of corporate brochures, course booklet, hoardings, handout and electronic presentation for the marketing of the academy. Similarly the expenses relatable to travelling expenses relates to the administrating, supervising of construction site at Abu Road, Udaipur is treated as capital work in progress and therefore disallowed and added to the total income of the assessee. I find that the CIT(A) also confirmed the same on identical reasoning. Aggrieved, assessee came in second appeal before Tribunal.
I find from the facts of the case that the assessee is running an academy for training of chartered accountants i.e. courses to CA aspirants. This being initial years the assessee has incurred second expenditure to maintain the identity no doubt the receipts are not commensurate to the expenses. But these being business expenditure, I am of the view that the same is allowable because neither the AO nor CIT(A) has disallowed the expenditure for the reason that the same is unreasonable or not a business expenditure. Accordingly, I allow the claim of the assessee and all the three grounds of the assessee’s appeal are allowed.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 23-02-2018