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Income Tax Appellate Tribunal, BENCHES “B”,MUMBAI
Before: Shri G.S. Pannu, & Shri Pawan Singh
आदेश / O R D E R
Per Pawan Singh, J.M: This appeal under section 253 of Income Tax Act is directed by assessee against the order of CIT(A)-17 Mumbai, dated 19/02/2014 for assessment year 2010-11. The assessee has raised the following grounds of the appeal. Grounds of Appeal: 1) Under the facts and circumstances the learned CIT(A) erred in confirming the addition of Rs. 5,77,953/- being deemed rent income, made by the Assessing Officer. 2) Under the facts and circumstances the learned CIT(A) erred in confirming the addition of Rs. 12,500/- u/s. 14A r.w. Rule 8D, made by the Assessing Officer. 3) Under the facts and circumstances the learned CIT(A) erred in confirming the addition of Rs. 17,500/- on account of payments to traffic police for Police Bandobust stating non- business expenditure made by the Assessing Officer. 4) Under the facts and circumstances the learned CIT(A) erred in confirming the addition of Rs. 45,411/- on account of Non deduction of TDS on interest paid on car Loan made by the Assessing Officer. 5) Under the facts and circumstances the learned CIT(A) erred in confirming the addition of Rs. 1,17,160/- being purchase of Fuel (Diesel) in cash made by the Assessing Officer. 6) Under the facts and circumstances the learned CIT(A) erred in confirming the disallowance of Rs. 1,23,517/- out of Business Promotion expenses made by the Assessing Officer. 7) The Appellants crave leave to add, amend alter; delete the ground/s of appeal at or before the hearing of appeal.
We have heard the Ld. AR of the Assessee and the ld DR for Revenue. At the outset the Ld. AR of the Assessee submits that Ground No.1, 2, 4 and 6 are covered in his favour by the decision Tribunal in the Assessee’s own case for Assessment Year 2009-10.
The Ground No7 is general in nature and need no adjudication. The Ld. DR for the Revenue not disputed the contention of Ld. AR of the Assessee.
First ground of appeal
relates to the confirming the addition of Rs. 5,77,953/- on account of deemed rental income.
4. We have seen that the similar addition was made against the Assessee in Assessment Year 2009-10 and the Assessee approached the Tribunal. The Tribunal in assessee’s appeal for AY 2009-10 in following order:
“We have heard the rival submissions and perused the material before us. We find that assessee was owner of two flats, that same were rented in the earlier years and it had offered the rental income in its returns, that before the AO / FAA it was claimed that during the year under consideration repair and renovation was carried out and the flats were not rented out, that it was also claimed that the flats were used for office premises, that in the subsequent years the AO had not made any addition under the head beings rental income. Once the assessee had produced the bills of repairs and renovation of the flats and the AO had treated the said expenditure as capital expenditure, there was no justification for making any addition under the head house property income. Both the authorities have not proved that the flats were rented out during the year under Appeal. As per the settled principles of taxation if any sum has to be taxed the AO has to bring on record the necessary facts for taxing the same. In our opinion, the AO has not discharged the onus in that regard. Therefore, reversing the order of the FAA, we decide the first ground of appeal in favour of the Assessee.”
Considering the decision of Tribunal in assessee’s own case for AY 2009-10, when the facts for the year under consideration are also similar. Therefore, keeping in view the principal of consistency this ground of appeal
is allow in favour of assessee.
6. Ground No. 2 relates to addition of Rs. 12,500/- under Section 14A read with Rule 8D. We have seen that similar addition was made against the Assessee for Assessment year 2009-10 and the assessee file appeal before the Tribunal and the following order was passed vide order dated 06/01/2017.
“We have heard the rival submissions. We find the assessee had not incurred any expenditure nor had it claimed any expenditure with regard to the tax-free income during the year under consideration. Therefore, there was no justification of any kind to make any disallowance invoking the provisions of Section 14A of the Act. The basic precondition for making disallowance under the said section is earning of tax-free income and incurring of expenditure by the assessee. As both the preconditions are absent in the case under consideration therefore, in our opinion, the order of the FAA has to be reversed. Ground number two is decided in favour of the assessee.”
Considering the findings of the Tribunal in Assessee’s own case for assessment year 2009-10, we find that the ground of appeal raised by assessee in the present appeal is squarely covered in favour of 3 assessee as the facts of this year are also not at variance, hence this ground of appeal is allow in favour of the assessee.
8. Ground no. 3 relates the confirming the addition of Rs. 17,500/- on account of payment to Traffic Police for Police arrangements (Bandobast). The Ld. AR of the assessee argued that the assessee is managing a Water Part at Thane and at the time of functions on New Year’s celebration, annual function the Police arrangements are made to manage the public and certain payments were made to the Traffic Police. Such payments are made for the purpose of business. Thus, the expenses are allowable expenses under section 37 of the Act. On the other hand Ld. DR for the Revenue argued that the assessee has not proved that the expenses were made for business expediencies. The assessee has not filed any evidences to substantiate its contention.
We have considered the rival contention of parties and gone through the orders of the authorities below. The Assessing Officer while framing assessment noticed that in the ledger account the assessee has claimed Rs. 17,500/- paid to traffic police for traffic police expenses. The Assessing Officer observed that payment made to traffic police are not wholly and exclusively for the purpose of business of the assessee disallow the same. The Ld. CIT(A)during the first appellate proceedings confirmed the action of Assessing Officer holding that the addition made by the Assessing Officer are passed on sound principles that only expenses allowable, which are incurred wholly and exclusively for the purpose of business. Making of payment to police for day-to-day routine work is not for the purpose of assessee business and therefore, cannot be allowed as per the provision of Section 37. We have seen that the Assessee has not filed any receipt of payment on record to substantiate his claim. The assessee is claiming that Rs. 17,500/- were paid to traffic police for traffic police expenses. The contention of assessee are vague even during the submission of the Ld. AR of the assessee could not substantiate under which provision the said expenses were paid to the traffic police. It is not the contention of Ld. AR of the assessee that the said expenses were deposited with the account of traffic police for making the necessary arrangements at the Water Park or the payment was made as statutory expanses. The assessee has failed to substantiate its contention that the expenses were paid wholly and exclusively for the purpose of business. The Hon’ble Karnataka High Court in CIT Vs Neelavathi & others (2010) 322 ITR 643(Kar) held that payments made to police or rowdies to keep away from the business premises is not allowable as business expenses. Thus, we did not find any illegality or infirmity in the order of Ld. CIT(A) hence, this ground of appeal is dismissed.
10. Ground no. 4 relates to confirming the addition of Rs. 45,411/- due to non-deduction of TDS on interest paid on car loan. We have seen that similar disallowance was made against the assessee for assessment year 2009-10 and on appeal before Tribunal the identical ground was restored to the file of Assessing Officer for making verification. The Tribunal passed the following order;
“Next ground is about addition of Rs. 79,722/- for non-deduction of tax on payment of interest on car loan to Mahindra and Mahindra Finance Company Ltd. Following our order for the earlier ground, we restore back the issue to the file of the Assessing Officer for making verification, that the recipient of the income had paid tax on the disputed amount. The assessee would produce relevant documents before the Assessing Officer. Ground number four is partly allowed.”
Considering the decision of earlier year in assessee’s own case, this ground of appeal is also restored to the file of Assessing Officer to decide the fresh in accordance with the direction in order dated 06/01/2017 in ITA No. 6705/M/2012.Thus, this ground of appeal is allowed of statistical purpose.
12. Ground No. 5 relates to confirming the disallowance of Rs.1,17,060/- under section 40A(3) of the Act for purchase of diesel in cash. The Ld. AR of assessee argued that assessee is running the water park in Thane. In the said area there is frequent power cut and in order to maintain back up and to run the water slides continuously the assessee purchase diesel for their generators as and when required. The assessee purchases the fuel of less than Rs. 20,000/- at a time. At no point of time the purchase of fuel exceeds the amount of Rs. 20,000/- on one time. The Ld. AR of assessee submitted that the receipts of fuel are available at page number 66 to 69 of the paper book. On the other hand the Ld. DR for the Revenue supported the order of the authorities below and argued that after the amendment in the relevant section [40A(3)] by Finance Act w.e.f. 01.04.2009 the word “or aggregate of payments made to a person in a day, otherwise than by account payee cheque drown on a banker account payee draft, exceeds twenty thousand rupee” has been brought in the statue book.
We have consider the contention of both the parties have gone through the order of authorities below. The Assessing Officer while framing assessment noticed that assessee claimed fuel and generators expenses of Rs. 7,39,872/-. The assessee was asked to furnish the details of fuel expenses for the period from 01/04/2009 to 31/03/2010. The assessee furnished the details of fuel expenses.
From the details the Assessing Officer observed that the assessee made the fuel expenses in cash exceeding Rs. 20,000/- to M/s.
Kailash Service Station on a single day. From the details furnished to Assessing Officer, the Assessing Officer noticed that assessee purchased fuel of Rs. 28,808/- on dated 02/05/2009, Rs. 28,808/- on dated 03/05/2009,Rs. 28,808/- on dated 05/05/2009 and Rs. 30,736/- on dated 26/02/2010. Thus, the assess made the purchase of Rs. 1,17,160/- which is not in conformity with the provision of section 40A(3) of the Act. The assessing officer before making disallowance, recorded in its order that the assessee has agreed for the disallowance of the aggregate amount of Rs. 1,17,160/- under section 40A (3). On appeal before CIT(A), the disallowance was confirmed holding that such payment were made in cash to M/s Kailash Service Station and no expenses are allowable as expenditure incurred in cash on a single day. The ld CIT(A) further concluded that the Assessee has not furnished any details to show that this expenditure is covered under exceptions laid down as per Rule 6DD.
We have seen the copy of receipt placed on record at page number 66- 69 that consist of receipts are as below:
Sr.No. Date Rs. Receipt No. 1. 02/05/2009 14,404.00 63110 2. 02/05/2009 14,404.00 63174 3. 03/05/2009 14,404.00 63352 4. 03/05/2009 14,404.00 63345 5. 05/06/2009 14,404.00 83091 6. 05/06/2009 14,404.00 83103 7. 26/02/2010 15,368.00 38637 8. 26/02/2010 15,368.00 38629 Total 1,17,160.00/- We have seen that though none of the receipt is exceeded Rs.
20,000/- at one time, yet the assessee made aggregate purchases of more than Rs. 20,000/- in cash in a day, on four occasions which is prohibited by Section 40A(3) of the Act. Though, the identity and the payments made to the party are not in dispute. After the amendment in section 40A(3) w.e.f. 01.04.2009, such expenses are allowable only if covered by the exception otherwise provided under Rule 6DD of Income Tax Rule 1962. The assessee has not pleaded any of the exceptions provided under Rule 6DD. On careful reading of Rule 6DD we do not find any exception which may come in rescue of the assessee. Thus, this ground of appeal raised by assessee is dismissed.
14. Ground No. 6 relates to confirming the disallowance of Rs. 1,23,517/- for business promotion expenses.
We have seen that similar disallowance was made against the assessee for assessment year 2009-10 on ad hoc basis, which were confirmed by ld CIT(A). On appeal by assessee before Tribunal the following order was passed. “We have heard the rival submissions and perused the material before us. We find that the AO had held that assesse had incurred an expenditure of Rs. 8.31 lakhs through credit cards, the AO did not call for any details in that regard, that he had made an ad hoc disallowance at the rate of 20%, that the FAA Muchhala Magic Land had confirmed his order. In our opinion in case of corporate assessee disallowance on account of personal element can be made only if the expenditure incurred was for the personal use of any of the directors / employee and that expenditure did not have any relation with the carrying out of the business. We don’t find that AO / FAA had carried out any such exercise. If the AO had any doubt, it was his duty to make further investigation and pinpoint the actual expenditure not incurred for the business of the assessee. In the circumstances, we are of the opinion that making and upholding the disallowance was not justifiable. Reversing the order of the FAA, we decide the last ground in favour of the assessee.” 16. Considering the decision of earlier year in the assessee own case and we find that the similar ad hoc disallowance was deleted by Tribunal for AY 2009-10. Thus, respectfully following the decision of coordinate bench in earlier year this ground of appeal
is allowed in favour of assessee.
17. In the result appeal of the assessee is partly allowed. Order was pronounced in the open court on 26th day of May 2017.