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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-36, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-36/AP.182/14-15 dated 28-04-2016. The Assessment was framed by the Assistant Commissioner of Income Tax, Central Circle- 2, Mumbai (in short ACIT) for the assessment year 2010-11 order dated 20-03-2014 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) allowing 50% of expenditure from interest earned on FD bonds. For this Revenue has raised following ground No. 1: -
Ld.CIT(A) erred in al/owing 50% of the expenditure and not appreciating that no business activity had been carried out by the assessee during the year and that the only income earned by the assessee during the year was Interest on F.O. Bonds for which the assessee failed to prove the nexus of the expenditure being wholly and exclusively for earning of interest income."
Briefly stated facts are that a search under section 132 of the act was carried out in the Gitanjali group of cases on 29-11-2011. The AO noted during the course of proceedings that seized material belonging to the assessee was found and accordingly, proceedings under section 153C were initiated. The assessment was completed under section 143(3) read with section 153C of the Act vide order dated 20-03-2014 disallowing expenses under the head of personal, office expenses, administrative expenses, depreciation, bank charges and interest comprising of business loss claimed by assessee at ₹ 83,68,516/-. Accordingly, the AO assessed the interest income as income from other sources amounting to ₹ 7,77,367/-. Aggrieved, assessee preferred the appeal before CIT(A), who also relying on assessee’s own case for AY 2012-13 partly allowed 50% of expenses by observing in Para 5.1.4 as under: -
“5.1.4 In the instant case it is seen that business of the appellant has commenced and that it has incurred similar expenses to those discussed in the above cited order. In the submissions made the appellant has stated that details regarding the role of administrative staff, director etc. was specified before the AO as well as in appeal proceedings. However, on the perusal of the submissions and the impugned order, no such details are found to be reflected. Accordingly following my decision on appellant's own case for A.Y.2012-13 vide appeal No. CIT(A)-36/AP.184/14-15 dated 30.12.2015 the disallowance made by the AO is upheld to the extent of 50% i.e. Rs.41,84,258/- and the ground raised by e appellant is partly allowed.”
Aggrieved, Revenue is in appeal before us.
At the outset, the learned Counsel for the assessee filed copies of Tribunal orders in for AY 2012-13 vide order dated 13-12-2017, wherein the Tribunal exactly on identical issue has deleted the disallowance by observing in Para 5 as under: -
We have heard the rival contentions and “5. gone through the facts and circumstances of the case. First of all, we have to go through the nature of expenditure and the details are reads as under: - P&L A/c Head Amount (₹) Description / Nature Travelling & 2,36,830 Travelling expenses conveyance incurred in relation to administrative staff Repairs & 2,02,112 Maintenance charges Maintenance incurred at the H.O. (Others) Professional fees 3,40,995 Professional fees paid to consultants for business promotion activities; paid to other consultants for ROC filings and other operational charges Telephone & Mobile 1,00,858 Internet & Telephone charges charges paid for P&L A/c Head Amount (₹) Description / Nature connectivity and communication at HO Motor Car Expenses 10,47,304 Travelling and conveyance expenses incurred by the administrative staff grouped under this head Auditor’s 1,37,875 Audit fees for FY remuneration 2011-12 Investment W/off 5,00,000 Investment written off disallowed in the return of income Miscellaneous 3,50,910 Housekeeping, expenses printing & stationery ROC fees, filing fees, other rates & taxes, etc. Salary and 16,21,113 Salary paid to Allowances Administrative staff and director for the purpose of conducting day to day business operations Staff welfare 1,27,258 Staff welfare relation to administrative staff Depreciation 1,46,173 Depreciation on office equipments, furniture and computers Bank Interest 95,87,250 Interest on loan taken from M/s Gitanjali Gems Ltd. (having direct nexus with the interest income earned) 6. From the above details of expenditure declared it is clear that these expenditures are in the nature of administrative expense and assessee’s project for development and construction is in nascent stage and this cannot be attributed to any specific project, this could not be held as work in progress because this expenditure is rightly incurred and it will not given any enduring benefit to the assessee. Going by the nature of expenditure, it is clear that these are revenue in nature and hence, allowable. We allow the expenditure subject to the condition that 5,00,000/- investment written off cannot be allowed reason being the same cannot be an expense. The assessee’s counsel contended that this has already been disallowed by the assessee in its return of income and this can be verified by the AO while giving appeal effect to the order of the Tribunal. Except this amount of ₹ 5,00,000/-, other expenses are allowed. This fact of AO will verify. The appeal of the assessee is allowed in term of the above.”
Respectfully, following the Tribunal orders, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.
In the result, the appeal of Revenue is dismissed.
Order pronounced in the open court on 31-01-2018.