ITAT Appeal Outcome: Partially Allowed with Disallowances for Telephone & Promotion Expenses

M/s Span Securities Ltd., Versus Income Tax Officer, Ward-9 (1), New Delhi.

M/s Span Securities Ltd., Versus Income Tax Officer, Ward-9 (1), New Delhi. - TMI Issues:
- Disallowance of payment to NSE as penalty for trading violation
- Disallowance of telephone expenses for personal usage
- Disallowance of business promotion expenses on an ad hoc basis
- Disallowance of house tax paid despite being allowable under the Income Tax Act

Analysis:
1. Payment to NSE as Penalty for Trading Violation:
The Assessing Officer disallowed Rs. 99,808 paid to NSE for trading violation. The Ld CIT(A) upheld this disallowance, considering it as a penalty, despite the argument that it was not a violation of law. However, the ITAT found that the penalties imposed by NSE were not for legal violations but for breaching norms. The ITAT allowed this ground of appeal, noting that similar penalties were allowed in previous years.

2. Disallowance of Telephone Expenses for Personal Usage:
The Ld CIT(A) upheld the disallowance of Rs. 42,493 for telephone expenses due to lack of a log book to verify business calls. The ITAT, however, considered the disallowance of 20% reasonable, as the telephone was also used for personal purposes, especially since it was installed at the director's residence. The ITAT differentiated this case from previous judgments cited by the appellant.

3. Disallowance of Business Promotion Expenses:
The disallowance of Rs. 22,123 for business promotion expenses was upheld by the Ld CIT(A) due to insufficient details. The ITAT found a 20% disallowance reasonable based on the limited client base of the assessee. The ITAT distinguished this case from the precedent cited by the appellant, emphasizing the specific circumstances.

4. Disallowance of House Tax Paid:
The disallowance of Rs. 2,21,014 for house tax paid after selling the property was upheld by the Ld CIT(A). However, the ITAT disagreed, noting that the tax was paid for the relevant year and that the seller is typically responsible for past accrued taxes. The ITAT found the disallowance unjustified, as the tax liability should have been cleared by the seller before the sale.

In conclusion, the ITAT partially allowed the appeal, overturning the disallowances related to penalty for trading violation and house tax paid, while upholding reasonable disallowances for telephone expenses and business promotion expenses.