IOL INFOTECH (INDIA) LATD,THANE vs. ACIT CIR 1, MUMBAI

The assessee is engaged in the business of running a call centre, web content development etc. The AO noticed that the assessee has leased out its premises and did not carry on any business activities during the year under consideration. Hence he disallowed the expenses claimed by the assessee,

The first issue relates to the disallowance of Rs.1,25,000/- made u/s 40(a)(ia) of the Act. The Ld A.R submitted that the assessee has actually deducted TDS from this payment and it could not furnish the relevant details before the tax authorities for the reasons beyond its control. The Ld A.R furnished a copy of Form No.16A issued to the payee and submitted that the said TDS certificate gives all the details. Alternatively the Ld A.R submitted that the disallowance is not required to be made if the payee has accounted the same and filed income tax return offering the same. In this regard, he placed reliance on the second proviso to sec. 40(a)(ia) and also on the decision rendered by Hon’ble Delhi High Court in the case of Cit Vs. Ansal Land Mark Township P Ltd (2015)(377 ITR 635).

The Ld D.R submitted that the factual details submitted by the assessee requires verification.

Having heard rival submissions, we are of the view that this issue requires to be set aside to the file of the AO, since factual details submitted by the assessee require verification. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the details of TDS deducted by the assessee. The AO may also consider the alternative contentions of the assessee, if required, in accordance with the decision rendered by Hon’ble Delhi High Court in the case of Ansal Land Mark Township P Ltd (supra).

We have heard Ld D.R on this issue. Since the facts relating to the payees require verification, in the interest of natural justice, we restore this issue also to the file of the AO with the direction to examine the claim of the assessee and decide the same in accordance with the decision rendered by Hon’ble Delhi High Court in the case of Ansal Land Mark Township P Ltd (supra).

The next issue relates to the disallowance of expenses. The AO initially disallowed expenses aggregating to Rs.20,23,912/- for want of evidences. Before Ld CIT(A), the assessee furnished various details and hence a remand report was called by Ld CIT(A) from the AO. In the remand report, the AO reported that expenses have been incurred by way of cash and further they are supported by self made vouchers. In reply to the remand report, the assessee pointed that it has incurred various expenses through cheque also. After considering the remand report and reply, the Ld CIT(A) took the view that the assessee has rented out its premises and did not carry on any business activity and hence the expenses are not allowable. The assessee is aggrieved by the said decision.

We heard the parties on this issue and perused the record. The Ld A.R submitted that the assessee has closed down its business operations temporarily and did not close the business activities at all. He submitted that this factual position has been appreciated by the AO in the assessment order passed u/s 143(3) of the Act for AY 2007-08 and all expenses claimed by the assessee has been allowed. He submitted that the expenses have been (A.Y. 2008-09) M/s. IOL Infotech (India) Ltd. vs. ACIT allowed in AY 2011-12 also by the AO in the order passed u/s 143(3) of the Act. On the contrary, the Ld D.R strongly supported the order passed by Ld CIT(A).

Having heard rival submissions, we are of the view that there is merit in the submissions of the assessee. The fact that the assessee has not closed down its business activities has not been disputed by the revenue. The expenses claimed by the assessee have been allowed in the preceding assessment year 2007-08 and also in succeeding AY 2010-11. It is stated that the assessee has closed down the business activities only temporarily due to temporary lull in the business. It is a settled proposition that the expenses should be allowed when the activities have been suspended due to temporary lull in the business. Accordingly we are not able to agree with the view taken by Ld CIT(A). Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the expenses.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.