RAMANLAL JIVRAJBHAI PATEL,THANE vs. THE INCOME TAX OFFICER, WARD-1, HIMATNAGAR

The Learned CIT(A) has erred in law and on facts as much as confirming the addition of Rs.2,70,507/- made by the learned AO without considering the facts that the assessee is eligible for deduction u/s. 80C for payment of LIC premium of his son to the extent of Rs.1,50,000/-. Further the learned CIT(A) has erred in law and on facts as much as Ramanlal Jivrajbhai Patel vs. ITO confirming the addition of Rs.2,70,507/- made by the learned AO without considering the facts that the assessee has actually claimed deduction u/s. 80C of Rs.1,50,000 only and not of Rs.2,70,507/-, as it is maximum permissible deduction u/s. 80C of the Income Tax Act, 1961. 3. The Learned CIT(A) has erred in law in facts as much as confirming the addition of Rs.4,44,595/- made by the learned AO without considering the facts that the assessee has earned income which falls under section 28(v) of the Income Tax Act, which is considered as business income and expenditure incurred viz Driver Salary of Rs.1,92,000/-, Bank Charges of Rs.555/-, Car Expenses of Rs. 1,42,500/, Depreciation of Rs.11,555/- and Office and Other Expenses of Rs.98,540/-, these expenses are very reasonable and incurred for earning business income, which is allowable expenditure u/s. 37(1) as per Income Tax Act, 1961. Such expenditures incurred for wholly and exclusively for business purpose only.

Therefore, it is prayed that such additions need to be deleted by passing appropriate order. Further, the assessee craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal.

The Ld.Counsel for the assessee contended that the salary of Rs.9,60,000/- paid to the assessee's son is a legitimate business expenditure as it was incurred wholly and exclusively for the purpose of business. He further stated that the assessee is partner in three firms, and he needed assistance in executing the business of these firms. Assessee’s son is also engaged in the similar business and have expertise in real estate business, hence he was assisting the assessee for conducting business of one firm. He also stated that the details with copy of return of income of his son, Paresh

In the present case, the assessee has derived following economic benefits from one of the firms i.e. Raj Group (PAN: AALFR9689K): Amount of Benefit % to Total - Share of profit – Exempt u/s 10(2A) Rs. 18,71,013 43.80% - Remuneration from the firm Rs. 24,00,000 56.20% Total ……. Rs. 42,71,013 100%

However, the assessee has claimed deduction towards salary paid to his son of Rs.9,60,000/- only against taxable part of benefit, i.e. Remuneration from the firm of Rs.24,00,000/-. Therefore, in our opinion, this expenditure will be reasonable if allowed proportionately. We, therefore, allow Salary to the extent of Rs.5,39,520/- (i.e. 56.20% of Rs.9,60,000/-). Thus, Ground No.1 of assessee’s appeal is partly allowed.

The assessee's counsel argued that the disallowance of Rs.2,70,507/- made by the AO in respect of insurance premium of son of the assessee under Section 80C of the Act is incorrect as the same is allowed under the Act. He further stated that the same is paid out of the bank account of the assessee. To support this claim, he submitted bank statement and premium paid certificate. He also contented that when assessee has claimed deduction of Rs.150,000/- disallowance should not be of Rs. 2,70,507/-.

As per clause (b) of sub-section (4) of Section 80C of the Act, insurance premium paid in respect of a child is allowed as deduction irrespective of the child being dependent or independent, minor or major, married or unmarried. For the sake of clarity, we produce the relevant part of the same – (4) The persons referred to in sub-section (2) shall be the following, namely: — (a) for the purposes of clauses (i), (v), (x) and (xi) of that sub-section, —

Therefore, legitimate claim for deductions under the provisions of section 80C of the Act should not be disallowed without proper justification. Therefore, the ground of the assessee is allowed.

The assessee's counsel submitted that the expenses amounting to Rs.4,44,595/- disallowed by the AO and also confirmed by Ld.CIT(A) were incurred wholly and exclusively for the purpose of business and are allowable under Section 37(1) of the Act.

Details of the such expenses as confirmed by CIT(A) are – Salary, Rs.1,92,000/-, Car Expenses Rs. 1,42,500/-, Depreciation Rs. 11,555, Office and Other Expenses Rs. 98,540/-.

We have gone through the details and evidence submitted. In our opinion, the reasonableness of business expenditure should be judged from the point of view of the businessman and not the Revenue. However, while allowing such claim as business expenditure u/s.37 of the Act, provisions of section 40A(3) of the Act should not be ignored. We have observed that entire amount of salary of Rs.1,92,000/- is paid in cash (Rs.16000/- per month). Also, Car expenses to the extent of Rs.21,800/- (Rs.10,500/- and Rs.11,300/-) are incurred in cash. When the assessee is claiming any expenditure against the business income provisions related to such claim need to be adhered to. In light of the provision of section 40A(3) of the Act, we, therefore, upheld the addition of Rs.2,13,800/- and delete the remaining Ramanlal Jivrajbhai Patel vs. ITO addition confirmed by the Ld. CIT(A). Thus, Ground No.3 of the assessee’s appeal is partly allowed.

In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in the Open Court on 11th June, 2024 at Ahmedabad. (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER

""यथ" / The Respondent. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त ( अपील ) / The CIT(A)-(NAFC)

"वभागीय ""त"न"ध , आयकर अपील"य अ"धकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड" फाईल /Guard file.