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2019 (2) TMI 1895
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.... a. Rs. 6,61,800 paid to Mr. Suren Singh Rasaily; b. 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. ....
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....fession" and the assessment order wherein the Assessing Officer accepted this fact of business activity from providing professional services and hiring of furniture and interiors. The 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 ass....
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.... activities. During the assessment year in dispute assessee has shown its income from house property of Rs. 41,11.89/- and income from other sources Rs. 1,52,970/- and service charges of Rs. 19,610/-. 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....
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....vant records available with us, we are of the considered view that no doubt the issue in dispute in the present cross appeals are identical, but in the present appeal, with regard to ground no. 1, we find that Ld. CIT(A) has followed the findings of asstt. Year 2005-06 and thus assailed that 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 17....
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....plores various business opportunities. It was informed that the said service charges were paid to the appellant for the purpose of various activities such as management consultancy charges, for which the appellant had hired two professionals, Mr. Dilip Sudhakar Deshmukh, Pune to whom an amount of Rs. 19,85,400 was paid 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 18....
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....econciliation of Bank statement on monthly basis: and (3) Raising the client invoice every month, study the same to respective clients and follow-up payment of the invoice. The appellant was asked to produce evidences in' support of the claim of delivery of such services to the client based in USA, which include maintenance of day to day accounts on computers while, the company has opening WDV of computers of Rs. 17,628/- only and no new computer/software were purchased. Similarly, to maintain accounts in terms 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 professional....
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....med under the profit and loss account. 14. We have heard the rival submission of the parties on the issue of disallowance of the various expenses confirmed by the Ld. CIT(A). Since the Ld. CIT(A) has held the income from service charges and hire charges from furniture taxable under the head "income from other sources", he has examined the allowability of the expenses claimed under the profit and loss account against the income assessed under the head "income from other sources". Wherever, he found that the expenses are incurred wholly in 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 ....
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....ich are for use of the car by the directors, also cannot be allowed against Income from other sources. With regard Director's remuneration, "other expenses", staff compensation expenses (other than for 3 Accountants and peons), it cannot be held that the same were incurred wholly and exclusively only for earning the 'income from other sources' and allowable u/s 57(iii) and hence, the same are also disallowed. 6.4.10 With regard the payment of legal and professional charges of Rs. 29,50,460/-, I have already held that the payment of Rs. 2,78,700/- to M/s Vaish Associates for Income Tax Compliance Activities was allowable against income from other 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', s....
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....s asked to inform about the manner in which the services was sought by Mr. Malhotra on day to day basis, it was informed that his role was limited to evaluating opportunities and offering advice as and when sought by Mr. Rajiv Malhotra. It was also informed by him in response to Question no.9 that he visited Karol Bagh office only two-three times for signing the documents and picking up the cheques. The above facts clearly show that Mr. Suren Singh Rasaily who is a professional in designing business strategy in the IT and service apartment service was actually working for Mr. Rajiv Malhotra, who is based on USA and not for appellant company. As clearly mentioned by him, Mr. Malhotra 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 clo....
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.... The AD is directed to allow full amount of depreciation on computer, generator, refrigerator, office equipments and electrical fittings and table wall box. 6.4.14 With regard the office maintenance expenses, on perusal of the details filed by the appellant it is seen that out of the total expenses of Rs. 3,83,373/- the major bulk is towards payment to Mr. Malkit Singh (Rs. 1,37,000)and Mr. Shapat Ali (Rs. 1,23,400/-).The details of the bills of repair from these charges were called for which shows that these bills were towards the property at Maharani Bagh. Keeping in view my above decision, 1/6th of such expenses are held as allowable towards registered office located in a small part of that premises." 15. Before us the Ld. Counsel could not point out any error in the order of the Ld. CIT(A) except that the expenses claimed are business expenses and thus allowable under section 37(1) of the act. The Ld. CIT(A) has examined each and every expenses sustained by him. As regard the "watch and ward", "water and electricity", "telephone expense", "Internet expense" and "office maintenance expenses" towards the premise at B-40, Maharani Bagh, he allowed 1/6th of the expenses....