Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
the Order of the Commissioner of Income Tax (Appeals)-2, Chennai, in dated 01.03.2016 for the AY 2011-12.
Mr.M.Palanichamy, JCIT, represented on behalf of the Revenue and Mr.S.Sridhar, Adv., represented on behalf of the assessee.
ITA No.1219/Mds/2016 :- 2 -:
It was submitted by the Ld.AR that the assessee is a Chartered Accountant who is a Partner in M/s.CNGSN & Associates as also in M/s.Geeth Finance & Investments, M/s.G.F. Securities and M/s.GK Holdings. The assessee had received salary income and share of income from the partnership firm M/s.CNGSN & Associates. It was a submission that the assessee when filing his return had claimed expenses to an extent of Rs.48,09,817.64 against the salary income and the other incomes earned by him. It was a submission that the assessee being a partner in the firms as per the provisions of Sec.28(v), the assessee had offered his income under the head profits and gains of the business and had claimed the expenses. The AO had allowed 25% of the expenses relating to the car representing the car loan interest, depreciation, petrol expenses and vehicle repair expenses and disallowed the balance of 75% along with all other expenses claimed. It was a submission that the AO had disallowed the same by holding that the expenditure claimed by the assessee is on account of earning of income from different entity, whose accounts are already audited and that the assessee had failed to establish the genuineness by producing the evidence in the form of bills and vouchers except a few vouchers on vehicle repairs. The Ld.AR drew our attention to the Paper Book filed by the assessee containing 180 pages to submit that all the details and evidences in relation to the expenses claimed had been produced before the AO. It was a further submission that substantial portion of the payments were made by cheque, debit cards or credit cards.
It was a submission that on appeal, the Ld.CIT(A) had confirmed the ITA No.1219/Mds/2016 :- 3 -: disallowance made by the AO by holding that there is no commercial expediency and also questioning the genuineness. It was a submission that as the income of the assessee has been assessed by applying the provisions of Sec.28(v) under the head income from the profits of the business, the assessee was entitled to claim all expenditure in respect of which vouchers and details had already been produced before the AO. It was a submission that the disallowance as made by the AO may be deleted.
In reply, the Ld.DR submitted that the provisions of Sec.28(v) was a deeming provision and the expenses were not for the purpose of earning the income which has been assessed by applying Sec.28(v). It was a submission that the order of the Ld.CIT(A) was liable to be confirmed.
We have considered the rival submissions. At the outset, it has to be noticed that the Revenue has not challenged the fact that papers which have been submitted in the Paper Books were not produced before the AO or the Ld.CIT(A). The Paper Book contains the proof of various expenses which have been claimed. Some of the payments pertain to various clubs, the vouchers in respect of the books and periodicals, payments have been made by a credit card, boarding and lodging by his credit card, interest by cheque payments, salary expenses by cheque/NEFT, telephone by cheques, travel is also by cheques. The assessee has also produced the bank account from which the payments have been made. The AO has ITA No.1219/Mds/2016 :- 4 -:
disallowed the said expenses only on two grounds that the assessee’s claim of expenditure is on account of earning income from different entity, whose accounts are already audited being one which cannot be accepted as the Accountant of the partnership firm M/s.CNGSN & Associates has categorically confirmed that the said expenses which have been claimed in the assessee’s return have not been claimed in the hands of the firm. The issue of the genuineness, which is a second limb of the reason for the disallowance made by the AO also, does not survive in so far as the assessee is not making any claim in respect of any cash payments. They are substantially made by cheque and credit cards. The Ld.DR argued that the provisions of Sec.28(v) is a deeming provision also does not hold water in so far as the provisions of Sec.28(v) do not talk of any deeming provision at all. The provisions of Sec.28(v) was reads “any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm shall be chargeable to income tax under the head profit and gains business or profession”.
Once the said income is chargeable to income tax under the head profits and gains business or profession then the assessee is entitled to claim any expenses which he has incurred for the purpose of earning such income.
The AO has taken a stand that the expenses were not for the purpose of earning income. The AO has held certain expenses in respect of Ladies Club to be personal in nature. Further, in the course of the assessment, the assessee himself has volunteered for disallowance of 25% of the expenses to be disallowed. In these circumstances, considering the fact
ITA No.1219/Mds/2016 :- 5 -: that the assessee is a Chartered Accountant and professional, the requirement of his having to entertain clients at clubs and travel for his business requirements. We are of the view that it cannot be held that all the club expenses are personal in nature. The bank charges admittedly are for the purpose of assessee’s business. The assessee would have to attend various meetings consequently boarding and lodging. To keep up- to-date books and periodicals have to be purchased and expenses incurred. So also telephone charges, travelling expenses and other subscriptions, keeping an employee to look after his works would also incur salary expenses. A perusal of the income expenditure account of the assessee clearly shows that the assessee has not claimed any specific personal expenses in the said income expenditure account and the expenses are clearly allowable expenses while computing the income under the head profits and gains business or profession. However, considering the fact that the assessee has agreed to a disallowance of 25% before the AO, as also considering the fact that the AO has allowed 25% of the vehicle expenses as allowable expenses, the AO is directed to restrict the disallowance to 25% of the expenses as claimed by the assessee, in the interest of natural justice, the balance 75% of the expenses are directed to be allowed.
ITA No.1219/Mds/2016 :- 6 -:
In the result, the appeal filed by the assessee is partly allowed.