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Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI A. D. JAIN
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH: AGRA
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER
I.T.A No. 43/Agra/2017 (ASSESSMENT YEAR-2012-13)
M/s Agra Cinema Exibitors, (P) Vs..ITO-4(1) Ltd., 25, Nehru Nagar, Agra (U.P.) Agra. PAN No.AABCA3732F (Assessee) (Revenue)
Assessee by Shri Navin Gargh, AR. Revenue by Shri Waseem Arshad, Sr.DR.
Date of Hearing 21.08.2017 Date of Pronouncement 29.09.2017
ORDER This is assessee’s appeal for Assessment Year 2012-13, against the ld. CIT(A)’s action by confirming the addition made by disallowance of total expenditure of Rs.9,463/- debited to the Profit & Loss account. 2. The AO observed as under: “The assessee company has debited expenses of Rs. 9463/- in its Profit & Loss account which comprises Employee benefit expenses, finance cost other expenses. The assessee has not shown any business activity during the previous year 2011-12 relevant to the A.Y. 2012-13 and none of these expenses have been incurred to earn the FDR interest shown by the assessee. In view of this,
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the expenses of Rs. 9463/- debited in the Profit & Loss account is disallowed and added to the income of the assessee.
That complete vouchers have been maintained and produced which has already been verified w.r.t. above expenses. (Assessment Order, Pg.1, Para2).”
The assessee filed the following written submissions before the ld. CIT(A): “That complete vouchers have been maintained and produced which has already been verified with regard to above expenses. (Assessment Order, Pg.1, Para2)
In response to the above notices and order sheet queries, Sh. Navin Gargh, Advocate and authorized representative of the assessee attended time to time and filed the required details which are placed on record. Books, of accounts, bills vouchers etc. were produced by him which were put to test check. The case was discussed with him.
That the above expenses are quite reasonable & justified, further the above expenses are necessary to be incurred every year to run the Company.
That the impugned expenditure has been incurred wholly & exclusively for the purpose of business and commercial expediency.
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That in the peculiar fact of the case along with the evidences the disallowance made is wrong, illegal and liable to be deleted.
Reliance placed: - 65ITR381 (SC)
CIT vs. Walchand And Co. Private Ltd (Copy enclosed Pg. 3/1 to 3/7)
In applying the test of commercial For determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the revenue.”
The CIT(A) has held as follows: “I have considered the facts of the case, written submissions filed by the Ld. AR for the appellant and perused the order of the AO. I find force and credence in the finding of the AO given in assessment order. During the year under consideration no business activity has been shown by the appellant. Only income from interest on FDRs has been shown, which is to be assessed u/s 56 of the Act as income from other sources. As per provisions of Explanation (iii) to section 57 of the Act any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income is allowable. The Ld. AR could not establish that the expenditure debited to I & E A/c was laid
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out to earn interest on FDRs, the only income, which has been shown In view of these facts, the contentions raised by the appellant's AR have no force and credence. Therefore, this ground is decided against the appellant.” 5. The ld. Counsel for the assessee has contended that the expenditure of Rs.9,463/- comprising of employee benefit expenses, finance cost and other expenses debited in Profit and Loss account are the fixed expenses necessary to run the business. These expenses are not affected by the business income and are wholly and exclusively for the purpose of business and commercial expediency. 6. The ld. DR has placed reliance on the impugned order. 7. I have heard both the parties and have perused the relevant material on record. The expenditure of Rs.9,463/- comprising of employee benefit expenses, finance cost and other expenses debited in Profit and Loss account are the fixed expenses necessary to run the business. These expenses are not affected by the business income and are wholly and exclusively for the purpose of business and commercial expediency. These expenses are as per the statement of Profit & Loss account (APB-7) and the break-up thereof is in the Notes to the Financial Statements. (APB-11), as per which, employee benefit expenses of 3600 comprise salary and incentives. Financial Cost of 300 represent bank charges. Other expenses of 5563 constitute Audit Fees of 3600, documentation expenses of 500, interest adjustment of FDR mature 1351 and stationery expenses of 112. None of
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these expenses can be stated to be affected by the assessee’s business income. They are also not shown to have not been incurred wholly and exclusively for the assessee’s business. Incurrence of such expenditure is evidently unavoidable, despite no business activity having been carried out during the year.
In view of the above, the claim is accepted.
In the result, the appeal is allowed.
Order pronounced in the open court on 29/09/2017.
Sd/- (A.D. JAIN) JUDICIAL MEMBER Dated 29/09/2017 *AKV* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR