Assessee's Appeal Partly Allowed: Verification of Expenses Ordered

The tribunal partly allowed the appeal filed by the assessee, directing the A.O. to verify and potentially allow certain expenses based on further evidence. The disallowance of prior period expenses, electricity expenses, and rates and taxes expenses was upheld. However, the disallowance of travelling expenses was set aside, and the issue was remanded back to the A.O. for verification of the purpose and documentation. The assessee was instructed to provide necessary evidence to substantiate the business purpose of the travel expenses.

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Issues Involved:
1. Sustaining the disallowance of prior period expenses of Rs. 3,00,000.
2. Sustaining the disallowance of Rs. 1,36,795 out of electricity expenses.
3. Sustaining the disallowance of Rs. 3,07,636 out of rates and taxes expenses.
4. Sustaining the disallowance of travelling expenses of Rs. 9,77,444.

Issue-wise Detailed Analysis:

1. Sustaining the Disallowance of Prior Period Expenses of Rs. 3,00,000:
The assessee argued that the expenditure was incurred in respect of furnishing and furniture under perquisites as salary to its Directors, and the approval for this expenditure was received in the next financial year, thus crystallizing the expense in the year under appeal. However, the tribunal agreed with the CIT(A)'s finding that the expenditure was incurred in the earlier period and merely approving it in a subsequent board meeting does not change its nature as a prior period expense. The tribunal upheld the disallowance of Rs. 3,00,000, directing the A.O. to allow the expenditure in the year it was incurred if permissible by law.

2. Sustaining the Disallowance of Rs. 1,36,795 out of Electricity Expenses:
The assessee contended that the electricity expenses were incurred during the vacancy period before the property was occupied by the tenant and should be allowed as business expenses. However, the tribunal noted that the property was rented out from October 2012 and the rent was credited in the profit & loss account. Since the assessee could not furnish evidence of the property being vacant in December 2012, the tribunal upheld the disallowance of Rs. 1,36,795, agreeing that the expenditure was not used wholly and exclusively for business purposes.

3. Sustaining the Disallowance of Rs. 3,07,636 out of Rates and Taxes Expenses:
The assessee claimed that the amount of Rs. 2,90,285 pertained to lease rent and maintenance charges paid to MPAKVN on the premises let out to Netlink Software Pvt. Ltd. However, the tribunal upheld the CIT(A)'s observation that since the assessee had already claimed a 30% deduction under section 24(a) of the Act for rental income, the additional expenses related to the property could not be treated as business expenses. The tribunal dismissed the ground, maintaining the disallowance of Rs. 3,07,636.

4. Sustaining the Disallowance of Travelling Expenses of Rs. 9,77,444:
The assessee argued that the travelling expenses were incurred for business purposes, specifically for attending meetings in Japan with the major shareholder, Fujitsu. The tribunal noted that the CIT(A) disallowed the expenses due to the lack of evidence such as agenda papers, minutes of meetings, and details of participants. However, considering the totality of facts, the tribunal set aside the impugned order and remanded the issue back to the A.O. for verification of the purpose and minutes of the meeting. The assessee was directed to furnish the necessary evidence to substantiate the business purpose of the travel expenses. If the evidence is satisfactory, the A.O. would delete the addition.

Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes, with specific directions for the A.O. to verify and potentially allow certain expenses based on further evidence. The tribunal upheld the disallowance of prior period expenses, electricity expenses, and rates and taxes expenses, while remanding the issue of travelling expenses for further verification. The order was pronounced in the open court on 26.12.2019.

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