2021 (11) TMI 101 - AT - Income Tax

Revenue's Appeals Dismissed, Expenses Upheld

ACIT, Circle-36, Kolkata Versus M/s. Rohit And Co.

ACIT, Circle-36, Kolkata Versus M/s. Rohit And Co. - [2022] 97 ITR (Trib) 223 (ITAT [Kolk]) Issues Involved:1. Condonation of delay in filing the appeal.2. Deletion of addition on account of rent expenses.3. Deletion of addition on account of excess interest claimed on unsecured loans.4. Deletion of addition on account of commission paid to selling agents.5. Deletion of addition on account of sales promotion expenses.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The revenue's appeals were time-barred by 59 days. The Tribunal condoned the delay after considering the reasons provided, finding a reasonable cause for the delay, and admitted the appeals for hearing on merits.2. Deletion of Addition on Account of Rent Expenses:The AO disallowed Rs. 1,05,60,000/- claimed as rent expenses, questioning the genuineness of the claim due to the property being owned by partners and their relatives. The AO noted discrepancies such as electricity bills in the name of the developer and premises occupied by domestic helps. However, the CIT(A) deleted the addition, noting that the assessee provided sufficient evidence, including rental agreements, TDS certificates, and proof of payment. The CIT(A) emphasized the need for large business premises given the high turnover of Rs. 458.91 crores. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee had demonstrated the business use of the premises and the genuineness of the rent expenses.3. Deletion of Addition on Account of Excess Interest Claimed on Unsecured Loans:The AO benchmarked 8% as a reasonable interest rate and disallowed Rs. 7,12,705/- paid above this rate to unrelated parties. The CIT(A) deleted the addition, noting that the assessee paid varying interest rates to different lenders and provided justifications for higher rates, including urgent business requirements. The CIT(A) relied on the Supreme Court's decision in S.A. Builders Ltd., emphasizing commercial expediency. The Tribunal upheld the CIT(A)'s decision, confirming that the interest expenses were justified and reasonable.4. Deletion of Addition on Account of Commission Paid to Selling Agents:The AO disallowed Rs. 1,61,35,327/- paid as commission, questioning the genuineness due to the absence of written agreements and insufficient evidence of services rendered. The CIT(A) deleted the addition, noting that the assessee provided substantial evidence, including party-wise details, confirmations, and tax audit reports. The CIT(A) emphasized the business necessity of commission payments given the high turnover. The Tribunal upheld the CIT(A)'s decision, confirming the genuineness and necessity of the commission expenses.5. Deletion of Addition on Account of Sales Promotion Expenses:The AO disallowed Rs. 1,06,54,614/- claimed as sales promotion expenses, questioning the distribution of gifts without proper ledger entries. The CIT(A) deleted the addition, noting that the expenses were part of a scheme by Tata Steel to incentivize dealers and end-users. The CIT(A) emphasized that the purchases and distributions were genuine and necessary for business promotion. The Tribunal upheld the CIT(A)'s decision, confirming the genuineness and business purpose of the sales promotion expenses.Conclusion:The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s decisions on all issues, confirming the genuineness and business necessity of the disputed expenses.