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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI G.S. PANNU
The captioned appeal by the assessee is directed against the order of CIT(A)-9, Mumbai dated 14.01.2015, pertaining to the Assessment Year 2010-11, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 31.01.2013 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, assessee has raised the following Grounds of appeal :-
“1. CIT(Appeal) erred in fact and in law by disallowing expense of Rs.711227/- incurred as business expense but CIT(A) has considered said amount incurred for earning interest income.
2 Kenhans Shares & Stock Pvt. Ltd.
2. CIT(Appeal) erred in fact and in law by disallowing claim of set off of business loss of Rs.7,82,889 against income from other sources of Rs.19,24,425/- as per income tax act without any reasons.”
In order to appreciate the controversy in the present appeal, I may summarize as follows. The appellant before me is a company incorporated under the provisions of Companies Act, 1956 and for Assessment Year 2010-11 it filed return of income declaring net taxable income of Rs.19,24,425/- under the head ‘income from other sources’ which was on account of interest income and loss of Rs.7,82,889/- under the head ‘business and profession’. After setting off the loss of Rs.7,82,889/- under the head ‘business and profession’ against the positive income from other sources of Rs.19,24,425/-, net taxable income was declared at Rs.11,41,540/-. Notably, the return of income was also accompanied by a copy of the audited Balance-sheet and Profit & Loss Account for the year under consideration. In the course of scrutiny assessment, Assessing Officer concluded that assessee had not done any major business during the year under consideration and that the administrative expenses debited to the Profit & Loss Account of Rs.7,11,227/- could not be allowed. The Assessing Officer further noticed that assessee had earned interest income on FDs of Rs.19,24,425/- and that the aforestated expenses could not be allowed against such interest income. As a consequence, the Assessing Officer disallowed administrative expenditure of Rs.7,11,227/- and computed the loss under the head ‘business and profession’ at Rs.71,662/- as against Rs.7,82,889/- returned by the assessee. After setting-off such loss against the income from other sources of Rs.19,24,425/-, the Assessing Officer computed the total income at Rs.18,52,760/-. The 3 Kenhans Shares & Stock Pvt. Ltd.
aforesaid action of the Assessing Officer has since been affirmed by the CIT(A) against which the assessee is in further appeal before the Tribunal.
Before me, the learned representative for the assessee pointed out that there was no justification for the Assessing Officer to have disallowed the administrative expenses of Rs.7,11,227/-, which were of similar nature as were incurred in the preceding two years ending on 31.03.2009 and 31.03.2008. By referring to the relevant details placed in the Paper Book at page 23, it was pointed out that there was no difference in the nature of expenses incurred in this year, and in the past in Assessment Year 2009-10 under identical circumstances, in an assessment finalised u/s 143(3) of the Act dated 20.11.2011, similar administrative expenses have been allowed. Further, it has also been pointed out that the Assessing Officer is wrong in contending that there was no business income and, for that purpose, reference has been made to page 14 of the Paper Book, wherein is placed the Profit & Loss Account for the year under consideration. It is pointed out that on the credit side, assessee has received income from F&O (Future & Options), share trading income of Rs.20,698/- and interest income of Rs.19,24,425/-. According to the learned representative merely because in the instant year the level of business receipts have gone down, it would not justify disallowance of administrative expenses which were, in any case, much lower than in the immediately preceding assessment year. In this context, the learned representative pointed out that in Assessment Year 2009-10 assessee had incurred administrative expenses of Rs.15,57,296/-, whereas in the instant year
4 Kenhans Shares & Stock Pvt. Ltd. the same have come done to Rs.7,11,227/-. The learned representative submitted that due to the lower scale of business, the administrative expenses have also decreased, but there was no justification for its wholesale disallowance.
On the other hand, the Ld. DR appearing for the Revenue has placed reliance on the order of Assessing Officer by pointing out that there was no major business undertaken by the assessee and, therefore, the Assessing Officer had disallowed the administrative expenses to the tune of Rs.7,11,227/-.
I have carefully considered the rival submissions. In the present case, Assessing Officer has disallowed the entire administrative expenses amounting to Rs.7,11,227/-. The administrative expenses incurred by the assessee are on account of audit fee, bank charges, computer expenses, conveyance, electric expenses, interest on car loan, legal and professional fees, motor car expenses, office expenses, rent, salary, etc. The details of such expenses placed at page 18 of the Paper Book clearly show that they are of routine nature and are to be incurred in the course of business activities. It is also evident that the business receipts of the assessee by way of share trading income has reduced considerably than in the immediately preceding year. So however, the same cannot be construed as a closure of business so as to say that no administrative expenses are allowable. The appellant has also pointed that similar nature of expenses stand allowed in the preceding Assessment Year 2009-10 in an assessment made u/s 143(3) of the Act. Even otherwise, I find that in the instant assessment year it is not the 5 Kenhans Shares & Stock Pvt. Ltd.
case of Assessing Officer that any of the impugned expenses was not genuine or that it was not routine expenditures, which are being incurred by the assessee even in the past. Therefore, having regard to the fact that there is no challenge to the bona fide of the expenses incurred, in my view, the Assessing Officer misdirected himself in disallowing the administrative expenses of Rs.7,11,227/- while computing the business loss. Therefore, I set-aside the order of CIT(A) and direct the Assessing Officer to determine the business loss without disallowing the administrative expenses of Rs.7,11,227/-.
As a consequence, the Assessing Officer is directed to recompute the total income of assessee in terms of aforesaid directions, and as per law.
In the result, appeal of the assessee is allowed, as above.
Order pronounced in the open court on 26th August, 2016.