TaxTMI 
TaxTMI 
2017 (2) TMI 1512
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....penditure on adhoc basis, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a private trust established under the Indian Trusts Act on 19.10.2006 with an object to primarily finance the rural segment, support rural entrepreneurs, promote innovative business opportunities in rural areas and earn income from such business ventures. The assessee trust is taxable at maximum marginal rate under the Act. The assessee derived income during the year under appeal from the following activities :- Income from shared services - Rs. 1,50,07,467/- offered as business income Income from Infrastructure Services - Rs. 3,69,15,813/- offered as business income Interest on loans to third parties - Rs. 57,67,741/- offered as business income Interest on FD out of surplus Funds - Rs. 19,73,656/- offered as income from Other sources Interest on investments - Rs. 3,39,176/- offered as business income Provisions written back - Rs. 13,60,881/- offered as business income Other income - Rs. 30,72,985/- offered as business income Total Rs. 6,44,37,719/- Against this income, the assessee debited t....
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....e parties to whom it had in turn let out the space over a period of 7 years. The assessee also provided cabins & workstations to various parties by providing infrastructure services and had recovered the same from those parties which had been offered as income in the form of infrastructure services. The relevant documents in this regard were also submitted before the ld AO. The ld AO without appreciating this fact, completed the assessment u/s 143(3) of the Act on 31.3.2015 determining total income at Rs. 6,31,48,970/- under the head 'income from other sources' after giving an adhoc allowance of 2% of gross receipts as expenditure for earning the income. This action was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us on the following grounds :- 5.1 The CIT(A) erred in confirming the order of the Assessing Officer ('AO') in treating the gross receipts of the Appellant as income under the head 'Income from Other Sources'. 5.2 The CIT(A) erred in confirming the order of the AO in assessing the income earned by the Appellant in the regular course of business as income under the head 'Income from Other Sources'. 5.3 The CIT(A) gross....
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....ties of the Appellant. 5.12 The CIT(A) ought to have appreciated that even going by the "principles of matching", all the expenses debited to P&L account in the subject AY is relatable only to incomes credited to the P&L account (i.e. Segment II business activity) and as such all the expenses are allowable as tax deductible expenditure. 5.13 The CIT(A) ought to have appreciated that the AO had incorrectly concluded that there is no "principle of matching" between expenditure incurred and income earned without appreciating that income from shared/infrastructure services has been earned through incurrence of expenditure in the form of 'Rent', 'Staff Costs' and 'Administrative expenses' and interest income from loans and investments have been earned through incurrence of expenditure by way of 'Interest/Finance Charges' and 'Administrative & Other Expenses'. Therefore, the CIT(A) failed to appreciate that these expenses are directly relatable to the income earned by the Appellant. 5.14 The CIT(A) ought to have appreciated that, under the Act, any expenditure which is incurred "wholly and exclusively for the purpose of business" is allowa....
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....s, the ld DR agreed for setting aside of the appeal to the file of the ld AO in the facts and circumstances of the case. 7. We have heard the rival submissions and perused the materials available on record including the details of various expenses filed by the assessee in its paper book. We find that the assessee had not debited any expenditure towards "incubation expenses" during the year under appeal. We find that the assessee had taken a space on lease from IIT Madras Research Park and had utilized the same by letting out the same to various parties and collected income from shared services. We also find that the assessee had also provided infrastructure in the form of providing cabins and work stations and had recovered the cost of the same with margins from various parties and had derived income from infrastructure services. We have gone through the agreement for providing infrastructure and shared services vide pages 103 to 130 of the Paper Book ; break up of income earned in relation to infrastructure & shared services vide page 102 of PB ; cost working for arriving at infrastructure service income vide pages 146 to 147 of PB ; sample invoice copies reflecting colle....