ITO 2(3)(2), MUMBAI vs. SHOPPE TILL U DROP P.LTD, MUMBAI

This is an appeal filed by the revenue and Cross Objection by the assessee against the order of CIT(A) for the assessment year 2010-11. 2. In the appeal filed by revenue, revenue is aggrieved for deleting the addition on account of salary expenses of Rs.53,54,334/-. 3. Rival contentions have been heard and record perused.

During the course of assessment, AO found that assessee has incurred expenditure on account of salary under the head ‘work in progress’. However, these expenditures were not claimed in the P & L account, but was carried forward in the balance sheet. AO disallowed part of the salary expenses on the plea that assessee failed to substantiate the claim of expenses.

By the impugned order, CIT(A) deleted the disallowance of salary expenses after observing as under:- 5.10. As regards the salary expenses of Rs.53,54,334/-, no comment has been offered by the AO in the remand report. The appellant has submitted that all the details were submitted to the AO and such expenses have been paid by the group company, M/s.Cox and Kings on behalf of the assessee for three employees viz. Mr. Aroop Sen Rs.23,29,950/-, Ms. Renuka Balasubramaniam -Rs.12,29,309/- and Mr. Yusuf Poonawala Rs.17,95,075/-. The appellant has enclosed From NO.16 for Rs.50,22,444/- and stated that the balance of Rs.3,31,892/- pertains to employer's contribution to the provident fund and bonus. Further, the appellant has stated that M/s.Cox and Kings Ltd. who has paid the expenses on behalf of the appellant has not claimed the said expenses in its return of income for A.Y.2010-11 or in other assessment years. They have also not shown the expenses as fixed assets of acquisition. Further, tax has been deduced while making the said payments. M/s.Cox & Kings Ltd. have also shown expenses as recoverable from the appellant and the appellant has shown the same as current liability. Hence, the expenses of RS.53,54,334/- is an allowable expenditure and the AO is directed to allow the same. In the CO 201/Mum/2016 M/s. Shoppe Till U Drop Pvt. Ltd., result, expense of Rs.7,93,301/- is disallowed and the balance is allowed. The ground is partly allowed.

Against the above order of CIT(A), revenue is in further appeal before us.

I have considered rival contentions and found that after calling the remand report, CIT(A) recorded categorical finding to the effect that salary expenses have been paid by a group company M/s.Cox and Kings on behalf of the assessee for three employees. Assessee has also filed Form No.16 for Rs.50,22,444/- and balance Rs.3,31,892/- pertaining to employee’s contribution to the provident fund and bonus. As per the finding recorded by CIT(A) M/s. Cox and Kings who has paid expenses on behalf the assessee has not claimed the said expenses in its return of income for assessment year 2010-11 or in other assessment years. The detailed finding recorded by CIT(A) has not been controverted. Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the salary expenses of Rs. 53,54,334/-. 9. It is pertinent to mention here that in this case return income of Rs.23,043/- was assessed by the AO at nil income. Whatever the AO has disallowed was the capital work in progress, because the salary expenses were not debited to the P & L account but was added in the capital work in progress which was not accepted by the AO. Since the income assessed by AO was at nil, it comes within SMC power. Accordingly, the above case was heard in SMC bench and decided accordingly.