TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1895
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..... Rs. 19,85,400 paid to Mr. Dilip Sudhakar Deshmukh; c. Rs. 22,060 paid to Rajesh Shah Engineers & Consultants Pvt Ltd 3. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the disallowance of Directors remuneration amounting to Rs. 8,40,000. 4. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the disallowance of salaries of administrative manager, and other employees. 5. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the disallowance of:- a. Staff medical expenses ofRs. 51,900. b. Staff welfare Rs. 29,514 and c. leave travel allowance of Rs. 36,000 d. Telephone expenses of Rs. 1,79,454. e. Travelling expenses of Rs. 2,74,629. f. Out of Internet expenses of Rs. 51,513. g. Insurance expenses of Rs. 34,258. 6. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the disallowance out car expenses:- a. Car maintenance Rs. 2,49,242 b. Interest car loan Rs. 1,83,600 c. Depreciation Rs. 3,47,530 7. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal before or at the time of heari....
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....Ld. Counsel submitted that in view of the principle of consistency as laid down in the case of Radhasoami Satsang versus CIT 193 ITR 321 (SC) the finding of the Assessing Officer, which is sustained by the Ld. CIT(A), need to be reversed . In view of the above, the Ld. Counsel submitted that the expenses debited in profit and loss account are related to the business activity and need to be allowed to the assessee. According to him, once it is held that business was carried on by the assessee, then all the expenses incurred by the assessee are allowable u/s 37(1) of the Act including the expenses which has been allowed u/s 57(iii) of the Act. 5. On the contrary, the Ld. DR relied on the order of the Ld. CIT(A) and claimed that the Ld. CIT(A) has made detailed analysis of the sources of the income in the year under consideration and the business activity of travel agent in earlier years and came to the conclusion that income from service charges and hiring of furniture from associated concerns is assessable under the head "income from other sources" and not as "profit and gains of business and profession". He submitted that when the Ld. CIT(A) has already rejected the claim of the a....
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..../-. Against this income assessee has claimed expenses of Rs. 27,40,339/- and the AO has disallowed the total expenses on the ground that assessee company not carry out any business since 7-8 years and but also not carried out any business activities in future 2-3 years and only expenses incurred u/s 57 & u/s. 24 of the I.T. Act are allowable. Ld. CIT(A)treated services charges as income from other sources, but according to the assessee that the assessee is entitled for all business expenses even during lull period in the business as covered under section 30 to 37 of the l.T. Act. All expenses are to be allowed to either keep the corporate status alive or incurred for the purpose of business during the period of lull. Therefore, the Ld. CIT(A) after examining all the expenses has restricted the disallowance to the tune of Rs. 8,68,705/- and given the relief of Rs. 18,35,634/- out of the total disallowance of Rs. 27,04,339/-. We have considered the arguments advanced by both the parties and the order of the Revenue Authority atongwith the details of expenses incurred by the assessee as well as expense allowed by the Ld. CIT(A). As per the details submitted by the assessee In Paper Bo....
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....t the service income is to be income under the head "income from other sources". In this regard, we find that in the year under consideration the business has revived and therefore, the matter needs to be considered afresh by the AO in order to find out the source from which the service income has been earned. Accordingly, Ground No. 1 is set aside to the file of the AO to consider the same afresh." 9. In view of the above, the contention of the Ld. Counsel of the assessee that the Tribunal has allowed the issue in dispute in favour of the assesee in assessment year 2008-09, is not correct. 10. The Ld. Counsel has contended that the Assessing Officer in subsequent assessment years has assessed the income from service charges and hire charges under the head "profit and gains of the business". On perusal of the said assessment order for assessment year 2012-13 and 2013-14 available on page 179 and 196 of the paper book respectively, we find that in both the orders the Assessing Officer has not analysed as why the income from service charges and hire charges should be assessed under the head "profit and gains of the business". The Assessing Officer has simply accepted the income fil....
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....id while to Mr. Suren Singh Rasaily an amount of Rs. 6,61,800 was paid during the year. 6.3.2 As against the above income of Rs. 1,61,71,381, the appellant had claimed various expenses amounting to Rs. 92,91,007/-, the details of which are given below: INCOME Leave & Licence fee 12,000,000 Hire Charges - Furniture 1,380,000 Service Charges 640,411 16,171,381 EXPENSES Salaries 2,412,209 Rent 208,392 Electricity & Water 247,515 Officer Maintenance 383,373 Printing Stationery 17,160 Postage, Telegrams & Couriers 4,606 Repairs & Maintenance - Telephone & Trunk Calls 179,454 Travelling & Conveyance 274,629 Car Maintenance 249,242 Computer Consumable 12,470 Bank charges & Commission 5,172 Insurance 34,258 Interest on Car loan 183,600 Interest paid - Internet expenses 61,816 Staff Welfare 29,414 Staff Medical 51,900 Staff Uniform 3,885 Subscriptions 15,627 News Papers & Trade Journals 4,614 Auditors Remunerations 25,000 Legal & Professional Fees 2,950,460 Watch & Wards 158,832 Directors Remuneration 840,000 Hire Charges - Other expenses 167,572 Depreciation 769,807 Profit for the year carried for....
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....erms of Accounting Standard applicable in USA, requires US-specific software and personnel who are well versed with US accounting practices. The appellant has not purchased any software. The appellant has claimed payment of salary to three persons, claimed to be accountant executive, namely; Vikar Arya (Rs. 66,600), Mr. Gaurav Nautiyal (Rs. 63,800) and Mr. Bhpinder Agrawal (Rs. 3,15,900). No evidences of their professional skill/experience with regard US accounting system that too for on-line accounting purpose, were filed. Evidently, 2 of the said executives were paid low salary around Rs. 5000/PM, which is not commensurate with market rate for professionals, who are aware of on-line accounting with knowledge of US accounting. Moreover, the appellant may have required these accountants for its own activities as well. Further, it is also seen that in terms of the said agreement, the appellant was required to raise client invoice on behalf of IP Engine LLC(USA), send the same to client and followup on payment. No evidences of any of such activities undertaken by the appellant was filed before me. 6.4.5 With regard professional fee of Rs. 70,000/-p.m. claimed to have been received ....
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....exclusively for running the income, he has allowed the same. The Ld. CIT(A) has sustained the disallowance observing as under: "6.4.6 Having held this, I hold that the following expenses are allowable in the hands of appellant, being required for keeping the company alive and for earning 'income from other sources' with or without earning business income: (1) Auditor's remuneration (2) Newspaper periodical (3) Subscription (4) Printing stationery (5) Computer consumable (6) Professional fee for income tax matter (7) Rent (8) Accountant's salary (9) Proportionate maintenance charges 6.4.7 Further, with regard, 'income from other sources', the following expenses can be held as allowable: (1) Bank Charges (2) Postage & telegram & courier (3) Computer consumable 6.4.8 It is seen that the appellant has claimed significant expenses in the nature of watch and ward, water & electricity, telephone expenses, internet expenses office maintenance expenses towards a premises at B-40, Maharani Bagh. It was informed that at that premise, the company was having a registered office. The said premise has a covered area of 593.69 square mtrs. in w....
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....r sources. Similarly, fees of Rs. 2500/- paid to Siddiqui & Associates for Corporate Law compliance activities is also held as allowable. However, it is seen that the appellant had paid an amount of Rs. 22,060/- from Rajesh Shah Engineers & Consultancy Pvt. ltd. for consultation and professional services for preparing valuation reports of the office premises no.701 and no.705 at Mumbai, which was let out on which the appellant had earned rental income which have been offered for tax 'income from house property', since the appellant has offered this income as house property income, such expenses also cannot be allowed. 6.4.11 The appellant had claimed to payment of pay Rs. 6,61,800/- to Mr. Suren Singh Rasaily and Rs. 19.,85,400/- to Mr. Dilip Sudhakar Deshmukh towards management consultancy services. The appellant was asked to explain the purpose of such expenses. The appellant informed that the appellant had rendered professional services during the year, on which income of Rs. 21,50,970/- income was earned. It was informed that for this purpose, the appellant had hired 2 professionals one Mr. Suren Singh Rasaily and Mr. Dilip Sudhakar Deshmukh to render these services a....
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....otra had interest in starting intellectual property-centric business in India and abroad for which his service was sought. Since none of the above business activities are being carried out by the appellant, I do not find any justification for allowing such expenses in the books of the appellant. No doubt, bonafide of such payment stands proved, however, it is evident that Mr. Rasaily was actually working for Mr. Rajiv Malhotra and not for the appellant company and since Mr. Malhotra is a Director in this closely-held company, the payment to Mr. Rasaily by the appellant was only in the nature of an arrangement, with Mr. Malhotra however, for the appellant company, no services was actually rendered by him. With regard the second professional Mr. Dilip Deshmukh also summons u/s 131, were issued. However, he refused to attend as he is based in Pune. In view of the above, the appellant was asked on 19.3.2015 to furnish justification of the service rendered by Mr. Dilip Deshmukh as in the appellant's explanation before me only a short justification given is that 'Mr. Deshmukh was providing Management consultancy services'. The Ld. AR also informed that Mr. Deshmukh was an exp....