M/S. DHIR & DHIR ASSOCIATES,NEW DELHI vs. ACIT, NEW DELHI

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ITA 2169/DEL/2014Status: DisposedITAT Delhi16 June 2017AY 2010-117 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowances were made on an estimation basis without any specific findings of personal expenditure or non-allowable expenses. The assessee maintained audited books of accounts.

What were the facts?

The assessee, a law firm, had its income assessed at Rs.4,96,50,012/- after additions for interest on loan, telephone expenses, vehicle maintenance, and business promotion. The CIT(A) deleted the interest on loan addition but confirmed the others.

What were the issues?

Whether disallowances of telephone, vehicle maintenance, and business promotion expenses were justified without specific evidence of personal use or non-business nature, given audited accounts.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

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O R D E R. PER I. C. SUDHIR, J. M. :

This is an appeal filed by the assessee against the order dated 29.01.2014 passed by the learned CIT (Appeals). The assessee is a Law Firm (Advocates & Solicitors). It has filed its return of income declaring total income of Rs.4,86,96,900/-. The assessment was computed by the Assessing Officer at an income of Rs.4,96,50,012/- after making the following additions :-

(i) Interest on Loan expenditure : Rs.5,11,832/- (ii) Telephone expenses, vehicle maintenance expenditure : Rs.2,47,906/- (iii) Business promotion expenses : Rs. 93,374/-

2. Aggrieved by the order of the learned CIT (Appeals), the assessee came in appeal before the learned CIT (Appeals). The learned CIT (Appeals) in its order dated 29.01.2014 deleted addition of Rs.5,11,832/- in respect of interest on loan expenditure. However, she confirmed the other two disallowances.

3. Aggrieved by the order of the learned CIT (Appeals), the assessee is in appeal before us. It was contented by the learned AR that the learned CIT (Appeals) was not justified in confirming the disallowances. All these expenses have been incurred wholly and exclusively for the purposes of the business. The assessee is maintaining regular books of accounts. These books of account have been audited and tax audit report has also been filed. The auditor has also certified that there is no personal element in any of the expenditure recorded in the books of account.

3.1 It was further contented that the learned Assessing Officer has disallowed the expenditure by indulging into surmises and conjecture and merely on estimation. The appellant is a law firm which has engaged a number of lawyers and personnel to provide the services in the area of corporate litigation and these expenses have been incurred while performing its services and hence no disallowance is called for. The ld. AR placed reliance on the following decisions :-

(i) ACIT Vs. Amtek Auto Limited (2005) 112 TTJ 455; (ii) Shri Devender Kumar Vs. ITO in [order dated 30.08.2016]; (iii) Shri Gagan Goyal Vs. JCIT in ITA. No. 1514/Del/2015 [order dated 2.08.2016]; (iv) DCIT Vs. FCB Ulka Advertising Pvt. Ltd. in ITA. No. 5404/Mum/2007 [order dated 21.05.2014].

3.2 In reply, the learned Sr. DR relied upon the orders passed by the lower authorities.

3.3 We have considered the rival submissions and perused the record. On going through the same we note that the disallowance has been made by the Assessing Officer merely on estimate basis. The learned CIT (Appeals) has also confirmed the same holding that the entire expenses are not admissible as per the provisions of Section 37(1) of the Act. The disallowance has been made merely by indulging into surmises. The appellant has been maintaining regular books of accounts. These books of accounts have been audited. None of the authorities below have given any instance of the personal expenditure having been recorded or any expenditure not being allowable under Section 37(1) of the Income Tax Act. In the absence of any specific finding, we are of the view that the learned CIT (Appeals) was not justified in confirming the disallowance made by the Assessing Officer.

3.4 Accordingly we direct the Assessing Officer to delete the disallowances of Rs.2,47,906/- on telephone and vehicle maintenance and Rs.93,374/- on account of the business promotion expenses.

4.

In the result the appeal of the assessee is allowed.

5. The order is pronounced in the Open Court on : 16th June, 2017.

Sd/- Sd/- ( L. P. SAHU ) ( I. C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : the 16th June, 2017. *MEHTA* Copy of the Order forwarded to:- 1. Appellant;

2.

Respondent;

3.

CIT;

4. CIT (Appeals);

5.

DR, ITAT, ND.

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