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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 27.06.2016 घोषणा की तायीख /Date of Pronouncement : 22.08.2016 आदेश / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 5.5.2016 is against the order of the CIT (A)-13, Mumbai dated 16.2.2016 for the assessment year 2010-2011. In this appeal, assessee raised two main grounds ie (i) CIT (A) erred in confirming the disallowance of Rs. 4,40,523/- u/s 37 of the Act on account of „business expenditure‟ and (ii) CIT (A) erred in confirming the disallowance of electricity expenses of Rs. 1,81,016/- against sub-lease rent.
Briefly stated relevant facts of the case are that the assessee is in the business of NBFC since 1998. Assessee filed the return of income declaring the total loss of Rs. 3,21,350/- under the normal provisions and Rs. 12,58,312/- u/s 115JB of the Act. Assessment was completed u/s 143(3) of the Act and the assessed income was determined at Rs. 3,00,189/-. During the assessment proceedings, AO came to the conclusion that the assessee has not done business in the year under consideration. Accordingly, AO disallowed sum of Rs. 4,40,523/- in tune with disallowance made in the preceding assessment year 2009-2010. Aggrieved, assessee carried the matter in appeal before the first appellate authority.
During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) confirmed the same. Again aggrieved with the said decision of the CIT (A), assessee is in further appeal before the Tribunal by raising ground no.1 of the appeal.
During the proceedings before the Tribunal, Ld Counsel for the assessee brought my attention to page 47 of the paper book and submitted that the assessee did NBFC business in the year under consideration. Further, bringing our attention to page 8 of the paper book, Ld Counsel for the assessee submitted that the details of expenditure debited in the P & L Account under the „general officer expenses‟. Schedule-I shows the said expenses are incurred for officer expenditure, which are permanent in nature. He further mentioned that the assessee has given loans exceeding an amount of Rs. 5 lakhs as part of the NBFC activity and also earned income of Rs. 5,25,000/- on loans (page 13 of the paper book is relevant in this regard). Thus, this is the case of giving loans and for earning interest income, therefore, it is not proper for the AO to conclude that there is no business activity in the year under consideration. On the issue of allowability of expenses, which are required for maintenance of the office, Ld Counsel for the assessee mentioned that it is a legally decided issue that the assessee is entitled to the claim of such expenses. Relying on the judgment of the Hon‟ble Kolkata High Court in the case of CIT vs. Ganga Properties Ltd (199 ITR 94) (Kol) as well as the division bench decision of the ITAT in the case of Tansy Investments Pvt Ltd vs. ACIT (ITA No.3722/Mum/2009) (AY 2004-05), Ld Counsel for the assessee submitted that as per para 5 of the said order of the Tribunal, the expenses need to incur to keep afloat and have its continued existence and such expenses should be allowed as there is no business or otherwise. For the sake of completeness of this order, relevant lines from the said para are extracted as under:- “5. We seen no reasons to take any other view of the matter than the view so taken by the coordinate Bench, and we are in considered agreement with the same. The assessee being an artificial juridical person, it needs to incur certain expenditure to keep itself afloat and have its continued existence. Unlike a natural person, a company can only operate through other natural persons – whether employees or others. It is not the case of the Assessing Officer that the expenditure of the assessee-company are excessive or unreasonable vis-a-vis its legitimate business requirements. The Hon‟ble High Courts, as referred to in the coordinate bench order, have consistently held that in the case of corporate assessees such expenses have to be allowed as deduction