TaxTMI 
TaxTMI 
2021 (1) TMI 742
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....se deed which showed said amount of stamp duty paid for five years." 2. "i. On facts and in circumstances of case, Ld. CIT(A) has erred in law in deleting addition of Rs. 1.25.87.414 /- without appreciating facts that assessee is not fulfilling conditions laid down in section 30(a)(i) of Income-tax Act, 1961 since assessee company has not undertaken to bear cost of repair / civil construction as per registered lease agreement of assessee." "ii. On facts and in circumstances of case, Ld. CIT(A) has erred in deleting addition of Rs. 1,25,87,414/- without appreciating facts that assessee company has not incurred expenditure on lease premises was more than cost of leased premises. 3. "i. On facts and in circumstances of case, Ld. CIT(A) has erred in law in deleting addition of Rs. 93,00,000/- made on account of excess rent u/s 40(A)(2)(a) of Income-tax Act, 1961 without appreciating facts that assessee has claimed to have incurred expenditure on rent of Rs. 1,80,00,000/- whereas cost of lease rental property is less than rental income i.e. cost of Rs. 1,19,39,365/- and therefore, expenditure incurred is excessive or unreasonable having regard to fair market v....
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....reas cost of lease rental property is less than rental income i.e. Rs. 1,19,39,365/- and therefore, expenditure incurred is excessive or unreasonable having regard to fair market value of such payment of rent ii. on facts and in circumstances of case, learned CIT (A) has erred in deleting addition of Rs. 90 lakhs on account of consultancy charges u/s 40A (2) (a) of income tax act, 1961 without any basis and material evidence on record iii. on facts and in circumstances of case, learned CIT (A) has erred in deleting addition of Rs. 8,663,244/- made on account of consultancy charges from Messer signature group India private limited without any basis and material evidence on record iv. on facts and in circumstances of case, learned CIT - A has erred in law and on facts in deleting disallowance u/s14A rwr 8D of Rs. 450,000/- out of total disallowance of Rs. 1,180,642/- by admitting fresh explanation of assessee without referring to AO for verification which is in violation of provisions of sub rule (3) of rule 46A. v. On facts and in circumstances of case, learned CIT - A has erred in law and on facts in deleting disallowance u/s 14 A read with rule ....
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....Disallowances/ additions of Rs. 8,11,76,086/- as undisclosed management fees. vii. Disallowances of rental expenses of Rs. 3 lakhs being 50% total rental expenditure applying provisions u/s 40A (2) (a) of The Act. 6. The assessee preferred appeal before Ld CIT (A). The LD CIT (A) deleted disallowances of stamp duty expenditure holding that there is no doubt about genuineness of such expenditure and it is revenue in nature. With respect to expenditure of renovation, he held that assessee submitted details of such expenditure and no new asset has come into place. He therefore, considering decision of Hon'ble Delhi High Court in 205 CTR 574 in CIT Vs. Escorts Finance Ltd held that expenditure incurred by assessee was only required to make premises operational and functional. He further held that it did not bring in to existence any new asset of an enduring nature. He also noted that assessee has also incurred capital expenditure separately and assessee capitalized it. Thus, he deleted disallowances. With respect to disallowance of rent expenditure, he held that Ld AO has not been able to show that expenditure incurred was excessive or unreasonable having regard to the fair....
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....ges of Rs. 15,60,000/-. The LD AO held that as lease is for 5 years, only 1/5th of lease rent charges are allowable and therefore, 4/5th of such charges should be disallowed. The ld AO relying decision of Hon'ble Supreme Court in case of Madras Industrial Investment Corporation Ltd Vs. CIT 225 ITR 802 disallowed Rs. 12,48,000/- being 4/5th of such expenditure and allowed Rs. 3,12,000/- only against total claim of assessee of Rs. 1,56,000/-. The LD CIT (A) held that above expenditure is revenue expenditure and therefore, it is to be allowed in the year in which it is incurred. He held that lease agreement though was entered for five years but for registration itself, registration fees is to be paid and therefore, it is revenue in nature. The learned departmental representative relied upon judgment of honourable Supreme Court in case of Madras industrial investment Corporation Ltd versus CIT 225 ITR 802. We find that issue before honourable Supreme Court was allowability of debenture discount whether it should be spread over a number of years for redemption of debenture, as payment was to secure a benefit of a number of years. It was a continuing benefit to business of company over e....
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..... Stamp duty was required to be paid in order to bring about document of Lease. Expenses so incurred for securing premises on lease for a short period of five years were, therefore, allowable as revenue expenditure. We do not find any infirmity in order of LD CIT (A) and therefore, ground No. 1 of appeal of LD AO is dismissed. 11. Ground No. 2 is with respect to disallowance of Rs. 125874141/- incurred by assessee as renovation expenditure deleted by LD CIT (A). Fact shows that assessee has incurred expenditure of Rs. 1,25,87,414/- under head of repairs and maintenance expenditure of premises taken on lease. The assessee has incurred expenditure of Rs. 2.5 crores out of which Rs. 1,25,87,414/- has been claimed as revenue expenditure during year and balance is capitalized. The LD AO asked details of such expenditure. The assessee submitted details stating that above expenditure of Rs. 5,06,119/- is for civil work, Rs. 44,00,000/- is for tiles and stone, Rs. 1,42,000/- is for floor furnishing and other expenditure are such as partition wall, paneling and cladding, doors and shutters, sanitary fixtures and fittings, painting and storage, internal signage's and special items. The LD....
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....therefore, applied provisions of section 40A (2) (a) and disallowed 50% of rent i.e. Rs. 93,00,000/- as excessive. The LD CIT (A) deleted same holding that LD AO has failed to show that rent was excessive or unreasonable having regard to market price of rent. He further noted that assessee has provided a copy of similar lease agreement where lease rent was Rs. 80 sq ft whereas assessee has paid only Rs. 50 sq ft. He therefore, deleted disallowances. Honourable Delhi High Court in Hive Communication (P.) Ltd. v. CIT [2011] 12 taxmann.com 287/201 Taxman 99 (Delhi)/[2013] 353 ITR 200, has observed that any determination on question of reasonableness and excessiveness requires several facets and parameters to be kept in mind, albeit approach has to be from standpoint of a reasonable and prudent businessman. The Assessing Officer's judgment of disallowance, if any, to be made has to be an objective and fair decision, as provision is made to check evasion of tax and not to cause hardship in bona fide and genuine cases. Arms-length price paid for a fair market value should not be disallowed. The factors to be taken into consideration are those specified in Section 40A(2)(a); i.e. fair....
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....annot be made. In view of this, we find no infirmity in order of LD CIT (A) in deleting disallowance of Rs. 93,00,000/- out of rent paid. Accordingly, ground number 3 of appeal is dismissed. 13. Ground number 4 is against deletion of disallowance of Rs. 54,552,447 made on account of legal and professional fees and consultancy charges u/s 40 A (2) (a) of The Income Tax Act 1961. The fact shows that assessee has claimed deduction of consultancy charges of Rs. 69,067,616/- and legal charges of Rs. 40,237,278. The learned assessing officer has disallowed 50% of above consultancy charges by applying provisions of Section 40 A (2) (a) of The Act. The learned assessing officer noted facts that M/s Alliance promoters private limited is appearing as a related party of Opus reality development Ltd, thus he held that it is a closely held company by assessee. He noted that about 80% of total expenses incurred by assessee are either on account of consultancy expenses of legal expenses has been shown to be claimed in name of related parties. He noted that modus operandi of assessee is diverting funds in name of various companies and thereby claiming deduction has been proved. He noted that....
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.... design and later on marketing product in international market. Accordingly, company executive and directors are required to visit different places across countries. The main investor of company also belongs to Bahrain and director's entire board meeting etc was held in Dubai. Architects are also of Hong Kong and Malaysia. Therefore assessee stated that these are all business expenditure incurred by assessee which are allowable u/s 37 (1) of The Act. The learned assessing officer rejected contention of assessee and disallowed 50% of such expenditure holding that they appear to be a clear pleasure trip of directors of company. The learned CIT - A noted that assessee has clearly furnished requisite details before Learned assessing officer which were examined by him and if AO found that there are certain expenditure which are not related to business, he should have disallowed entire such sum. On perusal of details of travelling expenditure, LD AO should have clearly stated which details were not on record in respect of travelling expenses. He further held that merely on suspicion LD AO has disallowed above expenditure and that too on an ad hoc basis. He further held that in addition o....
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....of March 2010. Admittedly, assessee has offered balance sum in next year as it on basis of period of consultancy services pertains to next financial year. The amount of tax deduction or its period is the responsibility of payer and it does not determine the liability of the recipient as income. For determining the income in the hands of the recipient, method of accounting of recipient as well as the nature of income is required to be examined. The learned CIT - A l has also given direction to Ld assessing officer to verify above aspect whether a sum of Rs. 81,176,086 has been offered by assessee in subsequent year or not. There is no denial from the ld DR that above sum is not offered by assessee as income in next Financial Year. Thus, we do not find any infirmity in order of learned CIT - A and accordingly ground number 6 is dismissed. 16. Ground number 7 of appeal is with respect to deletion of disallowance of Rs. 3 lakhs made on account of excess rental expenditure u/s 40 A (2) (a) of income tax act. Brief facts shows that Assessee Company has claimed rental expenses in name of its sister concern at Rs. 6 lakhs for property at PatparGanj industrial area, New Delhi. Assessee s....
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....Therefore, he applying provisions of Section 40 A (2) (a) disallowed 50% of such expenditure. The learned CIT - A deleted above disallowance holding that AO has not been able to show that expenditure incurred was excessive or unreasonable having regard to fair market value of services for which payment was made. Undoubtedly, genuineness of expenditure is not doubted otherwise Learned-assessing officer should have disallowed whole of expenditure. The learned assessing officer has also failed to show that expenditure incurred was excessive or unreasonable having regard to market price. We have also deleted the similar disallowance made in assessment year 2010 - 11 as per ground number 4 of that appeal. Therefore, for similar reasons we uphold order of learned assessing officer deleting above disallowance. Accordingly, ground number 2 of appeal is dismissed. 20. Ground number 3 of appeal is with respect to deletion of disallowance of Rs. 8,663,244/- made on account of consultancy charges paid to Signature Group India Private Limited. The disallowance made by learned assessing officer shows that assessee has claimed expenditure of Rs. 1, 73,26,487 for taking consultancy services fro....