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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI N.K. SAINI & SHRI KULDIP SINGH
Date of Hearing : 05.07.2016 Date of Order : 12.07.2016
O R D E R PER KULDIP SINGH, JUDICIAL MEMBER :
Both the aforesaid inter-connected appeals raising identical question of law and facts are taken up together for disposal by way of consolidated order in order to avoid the repetition of discussion.
The Appellant, Smt. Anita Anand (hereinafter referred to as ‘the assessee’) by filing the present appeal being sought to set aside the impugned order dated 06.01.2012 passed by the Commissioner of Income-tax (Appeals)- XXVI, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-
“1. That the order dated 11.11.2013 passed by the Ld. CIT(A)-XXVI, New Delhi is against facts and is bad in law.
2. That on the facts and in law, the Ld. CIT(A) was not justified in upholding the action of the Assessing Officer in disallowing expenses to the tune of Rs. 1,91,100/- claimed against remuneration and interest received as partner from partnership-firm of M/s Diamate Exports.
3. That the above expenses incurred towards payments made towards for diwali festival expenses, taxi drivers and petty back office expenses were incurred wholly and exclusively for earning remuneration and interest from the partnership firm assessable as business income u/s 28(v) of the Income-tax Act, 1961 and hence, allowable deduction u/s 37(1) of the Act.”
3. The Appellant, Shri Rupinder Anand (hereinafter referred to as ‘the assessee’) by filing the present appeal being sought to set aside the impugned order dated 11.11.2013 passed by the Commissioner of Income-tax (Appeals)- XXVI, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-
“1. That the order dated 11.11.2013 passed by the Ld. CIT(A)-XXVI, New Delhi is against facts and is bad in law.
2. That on the facts and in law, the Ld. CIT(A) is not justified in upholding the action of the Assessing Officer in disallowing expenses to the tune of Rs.3,12,000/- claimed against remuneration and interest received as partner from partnership-firm of M/s Diamate Exports.
That the above expenses incurred towards payments made to security guards and peon were incurred wholly and exclusively for earning remuneration and interest from the partnership firm assessable under the head business income u/s 28(v) of the Income-tax Act, 1961 and hence, allowable deduction u/s 37(1) of the Act.”
& 6655/DEL/2013 4. Briefly stated the facts of this case are : during scrutiny proceedings, it was noticed by the Assessing Officer that assessee has claimed expenses to the tune of Rs.3,12,000/- from the business as well as professional income. In reply to the show- cause notice, assessee stated to have claimed deduction towards expenses incurred directly to earn the income from the business.
Assessee further explained that expenses related to payment made to the security guard, peon, Diwali/festival expenses, customary expenses to taxi drivers etc. were not debited in the books of the firm. However, explanation furnished by the assessee found not acceptable by the AO on the ground that the expenses claimed are not attributable to the business run by the assessee individually and separate from the firm’s business nor the assessee has furnished any documentary evidence to prove the expenses and thereby disallowed the expenses amounting to Rs.1,91,100/- and Rs.3,12,000/- in case of and ITA No.6655/Del/2013 respectively.
Assessee carried the matter before the ld. CIT (A) by way of an appeal who has dismissed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by challenging the impugned order passed by the ld. CIT (A) by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Ld. Counsel for the assessee contended inter alia that all the expenses disallowed by the AO have been incurred by the assessee being partner in the interest of business expediency; that assessee has been dealing in the sale of precious jewellery and their customer are mostly foreigners and NRIs; that since the remuneration and interest income represented the business income of both the assessee in view of section 28 (v) of the Act, they claimed the expenditure in the interest of business expediency for protecting and preserving their profit earning estate. However, on the other hand, ld. DR relied upon the order passed by the ld. CIT (A).
In the backdrop of the aforesaid facts and circumstances and contentions raised by the parties, the sole question arises for determination in both the cases is :-
“as to whether assessees have incurred an amount of Rs.1,91,100/- and Rs.3,12,000/- in case of and M/s. Diamate Exports for business expediency eligible to be allowed as business expenses?”
Undisputedly, both the assesses who are husband and wife are partner of M/s. Diamate Exports and incurred expenditure claimed during the year under assessment as per para 4 page 2 of the synopsis to the following effect :- (a) Diwali festival expenses Rs.45,000/- (b) Tips to tax drivers for braining customers Rs.97,000/- (c) Petty back office expenses Rs.49,100/- Rs.1,91,100/-
(a) Security Guard (day and night) Rs.1,92,000/- (b) Peon Rs.1,20,000/- Rs.3,12,000/-
It is also not in dispute that aforesaid expenses have not been incurred to earn the income by both the assessee as partners from M/s. Diamate Exports. It is also not in dispute that both the assessees as partners have earned remuneration from M/s. Diamate Exports at Rs.40,000/- per annum but incurred the expenses of Rs.1,91,100/- in case of Smt. Anita Anand and Rs.3,12,000/- in case of Shri Rupinder Anand.
In the backdrop of the aforesaid undisputed facts and circumstances, we are of the considered view that it does not fit into any business model that a partner has incurred Rs.1,91,100/- or Rs.3,12,000/- as the case may be to earn Rs.40,000/- per annum as remuneration; that these expenses by their very nature are having no nexus with the business being run by M/s. Diamate Exports of which both the assessees are partners by any stretch of imagination; that no such expenses have ever been claimed by the assessee in the earlier years nor has come up with any explanation as to what was the business expediency to incur such expenses in the year under assessment; that these expenses are not required to be incurred to earn the meager remuneration and interest income by the assessees as partners from M/s. Diamate Exports.
In view of what has been discussed above, we find no illegality or infirmity in the findings returned by the ld. CIT (A), hence both the aforesaid appeals are hereby dismissed. Order pronounced in open court on this 12th day of July, 2016.