TaxTMI 
TaxTMI 
2016 (6) TMI 801
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....term capital gain of the current year. From the profit and loss account filed by the assessee the AO noted that the only income disclosed by the assessee is from sale of land at Bhugaon which has been offered as long term capital gain. No other income has been shown and neither there is any opening or closing work in progress. However, the assessee has claimed various expenses such as Salaries of personnel including site development expenses, other expenses and depreciation as per Schedule 4, 5 and 6 of the audit report. He, therefore, asked the assessee to explain as to how the said expenditure are allowable as business expenditure when there is no business activity of development and construction during the year. 3. It was submitted th....
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....t satisfied with the explanation given by the assessee. He held that the personnel cost of Rs. 12,01,641 includes salary of Rs. 8.27 lakhs to the Directors. Further, the salary paid to 7 persons out of which 2 are Receptionists, 3 are Accountants, 1 is Architect and 1 Estate Manager. Therefore, the expenditure claimed on account of personnel is against the principle of commercial expediency especially when the business is in dormant condition. In view of the above, the AO disallowed 50% of remuneration paid to the Directors out of personnel cost and accordingly made addition of Rs. 4,13,500/-. 4.1 Similarly, on account of rent and usage charges claimed by the assessee the AO noted that a substantiall amount has been incurred towards rent....
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....of the assessee are residing and the residence of one of the Directors. The AO also disallowed an amount of Rs. 1,86,448/- out of the job works claimed by the assessee on the ground that substantial amount of job work expenditure pertains to Radhika's Bungalow and flat at Modibagh which are residential premises of the Director and his relatives. Thus, the AO made total disallowance of Rs. 13,10,151/-. 7. In appeal the Ld.CIT(A) gave part relief to the assessee for which the assessee is in appeal before us with the following grounds : "1. In the facts & circumstances of the case, the Ld.CIT(A)-I, Pune erred in confirming the disallowance of the following expenses : Remuneration to Directors - Rs. 4,13,500/- Rent....
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....the payment of salary to the Directors as being not wholly and exclusively for business purposes. We find the CIT(A) upheld the action of the AO on the ground that the assessee except stating that the disallowance was totally uncalled for, unjustified and untenable could not justify incurring of such expenditure especially when the business was totally dormant during the year and no activity relating to construction business was carried out by the assessee. He therefore upheld disallowance of 50% of the remuneration to Directors. It is the submission of the Ld. Counsel for the assessee that in the subsequent year the assessee company has started getting revenue receipts and the personnel cost has also gone up to Rs. 15.23 lakhs as against R....
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....s uncalled for under the facts and circumstances of the case. We, therefore, uphold the order of the CIT(A) in disallowing the rent expenses of Rs. 3 lakhs. 13. So far as the disallowance of Rs. 1,63,978/- out of travelling, postage and telephone expenses is concerned, we find the assessee has travelled to Bangkok, Malaysia and Kaulalumpur which are mainly tourist spots. Nothing has been produced before us that the assessee has gone to these places in relation to his business activity and which has resulted into some business. No such proof was also filed that he had discussed with some people/business houses there on account of mining activity. Merely stating that assessee travelled to these places for venturing into new business of min....