TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 997
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....lease furnish evidence of communication dated 04.05.2017 and 19.05.2017. 2. You have furnished as copy of document which shows outsourcing of domestic and international trade operation by JMC Project (India) P. Ltd. Please furnish copy of MOM signed by the directors of M/s JMC and copy of agreement made between you and JMC. 3. Evidence of payment of expenditure. 4. Electricity/water bills for FY 2017-18 - 2018-19 other utility bills. 5. Total asset of Rs. 12.7 lac and security expenses of Rs. 8.66 lacs justify that business produce evidence." 3. In response, assessee has submitted as under and observations of the AO are also reproduced below :- "For query no.l dated 15.02.2022, the assessee submitted that "The discussions with Sh. Rajesh Narain Gupta were over the phone and meetings in person at his office premises." Rebuttal: The assessee has not submitted any evidence with regard to such vast legal documentation and preparation like visit evidence, stay evidence, any email evidence, any postage evidence, etc to ascertain that the statement and submission of the assessee is justified. Therefore, the expenses Incurred is not ....
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.... for the purpose of business. It is observed that no new and relevant document/material was filed by the appellant to substantiate its claim before the Assessing Officer and the undersigned during the course of proceedings in compliance to the directions of IT AT. In my opinion, the Assessing Officer has correctly dealt with the directions of the ITA T based on the submissions made and material provided by the appellant during the course of current proceedings. Both the additions are being discussed in the following paragraphs. 4.1.13 With regard to the claim of expenditure namely business expense of Rs. 10,00,000 being Lawyer's Fees incurred for obtaining a legal opinion the appellant provided a copy of bill by Sh. Rajesh Narain Gupta, Advocate amounting to Rs. 10,00,000/- towards professional fees for providing legal opinion and drafting of various legal documents. This bill does not specify the nature of legal opinion and the details of legal documents. The appellant could not provide any evidence during the assessment or the appellate proceedings that the business of the appellant company had not ceased to exist during the year. If there was no business then there ....
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....th the order of the Assessing Officer and the disallowance made by the Assessing Officer is confirmed. Accordingly, Ground Nos. 1 to 5 of appeal are dismissed." 6. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- "1. That on the facts and circumstances of the case and in law, the order dated 09.03.2022 passed u/s. 254 r.w.s. 143(3) of the Income-tax Act, 1961 ("Act") by the DCIT, Central Circle 5 and affirmed vide order dated 03.08.2023 by the CIT(A)-24, Delhi ("AO/Ld. CIT(A)"] is bad in law and liable to be Quashed. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the principles of commercial expediency of the following genuine business expenses incurred wholly and exclusively for purposes of business with intent to revive the same, allowable u/s. 37 of the Act even if no, revenue from business activities was generated during the year under consideration, disregarding the facts and explanations placed on record by the assessee: a. Rs. 10 lacs on account of lawyer fees. b. Rs. 8.66 lacs, on account of security charges incurred for s....
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....s 2012 to 2017, viz., expense eligible u/s.37(1) C. Business Running & Maintenance Expenses, viz., - Telephone - Audit Fees - RoC fees - Depreciation 2,53.144/- - Communication - Statutory Compliances - Maintaining Office Assets - Audited Financial Statements Pages 190 - 206 - ROC Fees Receipts - Assets explanation and details Snapshot of Disallowances and Order dtd 27.11.20 of Hon'ble ITAT Expenses allowed by AO C 2.53.144/- Expenses disallowed by AO/CIT(A) A (A.1+ A.2) + B 18,86.568 Disallowance deleted/Expenses allowed by ITAT A.2 20,000/- Professional Services for MCA/RoC Compliances Para 7 Pg 4 of ITAT Order Expenses allowable by ITAT subject to verification by AO of business purpose A.1+ B 18,66,568 Lawyer Fees for Legal Opinion for Explanations provided and documents submitted to AO after remand by ITAT Pages 38 to 211 and Pages 214 to 239 Business not abandoned 1.8. Admittedly there was a lull in revenue earnings of the business but the business activities had not ceased during the year under consideration. Through it's Dir....
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....ouse for it's records and accounting, having corporate offices in Le Meridien. 3.2. It is respectfully submitted that business operations is a wider term than business revenue. Business operations would include all such activities and expenses that are undertaken and incurred, to keep alive the corporate entity by maintaining it's existence and office, viz., statutory compliances and office location, assets and communication channels, while it tries to find ways to generate business prospects in periods of adverse market conditions and/or lull in business and/or evaluate revamp or reorganization of business. 3.3. During the year under consideration, the Company minimised its expenses, incurring only what it deemed essential for purposes of it's business, e.g., Statutory compliance costs like, ROC and Audit Fees, Telephone expenses, besides Depreciation and Professional fees, as it attempted to evaluate new business prospects in the area of trade finance with the help of legal advise. 3.4. It is settled law that absence of business receipts is not a ground for disallowance of expenditure u/s. 37(1) of the Act. 3.5. Reliance is placed o....
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....in Gupta over telephone and/or in person meetings during his visits to Delhi. Ld. AO misconstrued Lawyer Fees as Fees for purported Litigation by Ld. AO 4.2. The Ld AO has inadvertently misconstrued the Lawyer Fees as being towards litigation. Incidentally, the Ld. AO did not query the assessee on these presumptions during the course of the hearing, his query being confined to "mode of communication" with the Lawyer. Please see pages 37 and 38 - 47 of the Paperbook, being the query notice and the response thereto, respectively. 4.3. The engagement of the lawyer was for advice and guidance on financial laws to evaluate business options including approval/licencing requirements for NBFC and FDI etc. The same was duly submitted. along with copy of the legal opinion and client proposals. Copies placed at pages 70-189; 48-57; 58-67 and 68-69 of the paperbook, respectively. Security Charges 4.4. The other expense is on account of Security Charges for one guard posted at the Thapar House. As the appellant continued to be at Thapar House, the Security Guard also helped be the communication bridge for the company besides attending to the appellan....
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....expenses were capital and/or personal in nature. Nor is there any finding that the expenses are not genuine/actually incurred wholly and exclusively for purposes of business. 7.3. The assessee has demonstrated prudence and cut down all possible expenses, incurring only what it deemed as important for it's business in the year under consideration. The Director took on the larger task of exploring and pursuing business options in Trade Finance. The prudence of the Company may further be noted that in the preceding year (A Y 17-18), the Director was paid Remuneration of Rs. 15,00,000. Despite doing all the running around, no salary/remuneration has been paid to the Director in the year under consideration. Copy of the Assessment Order u/s. 153A for AY 17-J 8 is enclosed as Annexure 1, wherein the returned income has been accepted." 8. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 9. Considered the rival submissions and material placed on record. We observe that AO has disallowed expenditures claimed by the assessee relating to security service charges and professional charges paid to Rajesh Narain Gupta. He observed from t....