What did the Tribunal hold?

The Tribunal, following a coordinate bench's decision in the assessee's own case for AY 2010-11, found that the ad-hoc disallowance of administrative expenses was not justified. The assessee had provided sufficient details and the disallowance was made without proper basis.

The assessee, engaged in leasing commercial properties, had 20% of its administrative expenses disallowed by the Assessing Officer for AYs 2011-12 and 2012-13. The CIT(A) upheld this disallowance.

What were the issues?

The primary issue was the validity of the ad-hoc disallowance of administrative expenses by the Assessing Officer and upheld by the CIT(A).

Timestar Ltd vs Addl CIT Cir 9(3) | ITAT Mumbai 2018

Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI

Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN

For Appellant: Ms. Neha Paranjpe, AR

For Respondent: Mr. V. Justin, DR

Hearing: 30/01/2018Pronounced: 30/01/2018

ORDER PER N.K. PRADHAN, A.M. The captioned appeals filed by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-21, Mumbai and arise out of the assessment completed u/s 143(3) of the Income Tax Act 1961 (the ‘Act’). As common issues are involved, we are proceeding to dispose them off through a consolidated order for the sake of convenience.

The ground raised by the assessee in this appeal is against the order of the Ld. CIT(A) restricting the disallowance of expenses to the tune of 20% of the total administrative expenses.

Timestar Ltd. 2 5501/Mum/2015

Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2011-12 disclosing total income of Rs.1,92,21,231/- and Rs.58,53,967/-for the AY 2012-13. The nature of business of the assessee is leasing of commercial properties. The Assessing Officer (AO) disallowed 20% of the administrative expenses in both the assessment years. Thus, he made a disallowance of Rs.12,68,318/- in the AY 2011-12 and Rs.17,06,437/- in the AY 2012- 13.

Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) agreed with the disallowance made by the AO and dismissed the appeal filed by the assessee. 5. Before us, the Ld. counsel of the assessee relies on the order of the ITAT ‘E’ Bench, Mumbai, in assessee’s own case for the AY 2010-11. On the other hand, the Ld. DR relies on the order passed by the Ld. CIT(A). 6. We have heard the rival submissions and perused the relevant materials on record. We find that the AO has mentioned at para 2 of his assessment order dated 21.03.2014 for the AY 2011-12 and dated 31.10.2014 for the AY 2012-13 that “in response to the notices, Anup Pandya, Chartered Accountant attended from time to time as authorized representative of the assessee, discussed the case and filed the details from time to time.” Thus there was sufficient compliance by the assessee in filing the details.

Timestar Ltd. 3 5501/Mum/2015 We also find that similar issue arose before the ITAT ‘E’ Bench, Mumbai in assessee’s own case for the AY 2010-11 in ITA No. 6534/Mum/2013. The Tribunal held as under: “5. After hearing both the parties and on perusal of the finding given in the impugned orders and material placed before us, we find that the assessee has shown income from various streams including construction business and loosing income / rental income under the head “income from house property”. The administrative and other expenses debited has been shown at Rs.32,47,554/-. The authorities below have disallowed the proportionate expenditure on the ground that there is no bifurcation of administrative expenses under each head and how all the administrative expenses can be held to be exclusively related to the construction business. Such a reasoning cannot be upheld because, once the assessee had shown income from two different heads and has computed the income accordingly, then it cannot be held that expenses debited against the business income should be proportionately disallowed on the ground that the same must be allocated in relation to the other income also. Even if there is no construction activity carried on this year then also it cannot be held that administrative expenses should be allocated or even proportionately for earning of rental income. Before us, the Ld. Counsel had categorically stated that, in the next year, the construction activity has again started. He also drew our attention to working of work-in-progress and also the details of sales during the year. Thus, on these facts, we are unable to appreciate the stand taken by the revenue that, some proportionate disallowance on account of administrative expenses should be made by allocating the same for earning of lease / rental income, which admittedly is assessable under the head “income from house property”. Accordingly, ground no. 1 is treated as allowed.”

TIMESTAR LTD,MUMBAI vs. ADDL CIT CIR 9(3), MUMBAI

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