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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘A’ MUMBAI
Before: Shri Joginder Singh, & Shri Jason P. Boaz
आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 05/04/2013 of the Ld. First Appellate Authority, Mumbai. The first ground raised
in the present appeal, pertains to confirming the disallowance of Rs.7,64,907/-, considering the same as not being incurred for “business purposes” of the assessee.
2. During hearing, the ld. counsel for the assessee, Shri Mandar Vaidya, contended that the expenditure was incurred for business purposes, therefore, it is an allowable expenditure. On the other hand, the ld. DR, Shri A. Ramachandran, strongly defended the addition by contending that it was not incurred for business purposes, therefore, it was rightly denied. 2.1. We have considered the rival submissions and perused the material available on record. The facts, and the brief, are that the assessee is engaged in commission business of the last many years and is a broker for Mafatlal Industries Ltd. The assessee is also an investor in shares and other securities, the assessee, declared income of Rs.19,45,902/- and the assessment was completed on 08/12/2009 assessing the total income at Rs.28,42,818/- u/s 143(3) of the Act. While doing so, the ld. Assessing Officer made disallowance of Rs.7,64,907/- out of Rs.14,11,181/-. 2.2. The assessee carried the matter in appeal before the Ld. Commissioner of Income Tax (Appeal), wherein, the stand taken in the assessment order was affirmed. The assessee is in further appeal before this Tribunal, we find that the assessee earned commission income of Rs.10,50,021/- and interest income of Rs.4,04,245/- (total Rs.14,45,266/-) from its proprietary concern namely M/s Ashwinkumar Ramniklal. The proprietary concern received commission from M/s Mafatlal Industries Pvt. Ltd. and offered as business income and against this income, the assessee claimed expenditure amounting to Rs.14,11,181/-. Since, the assessee offered commission income and interest income only, the claimed expenses were found unreasonable. The ld. Assessing Officer asked the assessee to explain its justification for such expenses. The explanation claimed that he was a guarantor broker for the territory of Andhra Pradesh for all textile products manufactured by M/s Mafatlal Industries Ltd. and the assessee was responsible for fixing dealers network. The ld. Assessing Officer as well as the Ld. Commissioner of Income Tax (Appeal) were not satisfied with the explanation. The claimed expenses includes salary expenses, travelling expenses, conveyance expenses, depreciation expenses, entertainment expenses, electricity expenses and other miscellaneous expenses. We are satisfied with the observation made in the impugned order as well as the assertion made by the ld. DR that the claimed expenses are abnormally high in comparison to quantum and that to without any justification. The assessee did not furnish the necessary evidence as to the activities carried out by the assessee in relation to the claimed expenses except certain letters. How foreign travel expenses can be co-related with the commission income/interest income. Even otherwise, as per section 37 of the Act, such expenses needs to be incurred wholly and exclusively for the purposes of business and the assessee has to establish the same. Considering the totality of facts and in the absence of genuineness of the claim, 50% of the expenses were rightly disallowed, thus, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal) so far as, the impugned ground is concerned. His stand is affirmed.
The next ground pertains to confirming the action u/s 14A of the Act by claiming that no expenses were incurred by the assessee to earn the exempt income, thus, section 14A of the Act is not applicable. The exempt income was claimed to be Rs5,97,527/-. On the other hand, the ld. DR defended the conclusion arrived at in the impugned order. 3.1. We have considered the rival submissions and perused the material available on record. We find that the assessee claimed to have earned exempt income of Rs.5,97,527/- and long term capital gain of Rs.80,77,152/- by claiming the same as exempt u/s 10(38) of the Act. The ld. Assessing Officer as well as the ld. DR are of the view that earning of such tax exempted activity necessarily requires expenditure, thus, the ld. Assessing Officer was right in computing disallowance u/s 14A of the Act r.w.r. 8D of the Rules The undisputed fact is that assessee earned substantial income which includes long term capital gains amounting to Rs.80,77,152/- from sale of shares, exempt PPF interest of Rs.1,34,159/- and dividend on shares amounting to Rs.5,97,527/-. The sub and substance of the argument before us is that the disallowance made by the Assessing Officer is unreasonably high. The Ld. Commissioner of Income Tax (Appeal), in principle, upheld the disallowance. The ld. Assessing Officer has also mentioned the submissions of the assessee in the assessment order by calculating the expenditure to the tune of Rs.1,21,999/-. Considering the totality of facts and the submission, we reduce the disallowance upto 50% of the disallowance sustained by the Ld. Commissioner of Income Tax (Appeal), thus, this ground of the assessee is partly allowed. Finally, the appeal of the assessee is partly allowed. This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 07/07/2016.
Sd/- Sd/- (Jason P. Boaz) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 07/07/2016 f{x~{tÜ? P.S //.�न.स.
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai