2015 (1) TMI 1245 - AT - Income Tax

Deduction towards electric power - whether the same is incurred in the course of business - Held that - As the assessee has already been allowed depreciation on the amount of electric power capitalized and no case for allowing the same as revenue expenditure could be made before us, and accordingly, the ground of the assessee is dismissed. - Decided against assessee Disallowance 50% traveling expenses - Held that - Disallowance was made out of foreign travelling expenses, but the assessee could not file complete details such as, person who has travelled, his designation and purpose of visit etc. The assessee has only filed the bills in support of the tickets purchased for foreign travelling. In these facts, we see no reason to interfere with the order of the CIT(A) - Decided against assessee Disallowance towards interest paid to ABN Ambro Bank Ltd - Held that - No evidence in support of the claim of the assessee could be filed by the assessee before us.- Decided against assessee Disallowance of garden expenses - Held that - We find that the garden expenses were incurred by the assessee for the business purpose and copies of bills were also produced before the AO and the CIT(A), and therefore, there is no case for disallowance of 20% of the total garden expenses claimed by the assessee. - Decided against revenue Disallowance of consultancy charges - Held that - . We find that the CIT(A) has given a finding that the amount of ₹ 2,92,815/- is not incurred wholly and exclusively for the purpose of business. The assessee could not establish that the promotional charges were paid for the business run by the assessee-company.The expenses incurred even though genuine could not be allowed till it is proved that the same was incurred for the business purpose only - Decided against assessee Addition on estimation of profit - CIT(A) deleted the addition - Held that - We find that the assessee has declared sales of ₹ 50.57 lakhs during the year as against ₹ 1023.40 lakhs in the immediately preceding assessment year. The assessee has declared loss in the current year, as against GP rate of 9.05% in the immediately preceding assessment year. No cogent defect in the account books of the assessee could be pointed out by the department except that the assessee could not maintain day-to-day consumption register of the items of raw-material, which are stated to be one thousand in number. The fact that the assessee has to close down its business after sometime, could not be controverted by the Revenue. We find that the CIT(A) has passed well reasoned order on this issue and held that in the books of the accounts of the assessee cannot be rejected and has deleted the addition. There being no mistake in the order of the CIT(A), the same is confirmed - Decided against revenue Penalty under section 271(1)(c) - certain disallowances - Held that - As all the material facts necessary for the assessment of the case of the assessee were filed along with return of income. The assessee has filed explanation in this regard, which seems to be bona fide. It seems that this is a case of honest difference of opinion between the assessee and the Revenue with regard to allowability of certain expenses claimed by the assessee. Merely because certain expenses were capitalized and/or certain disallowances were made, it cannot be said that the assessee is guilty of concealment of income or filing of inaccurate particulars of income. The CIT(A) has deleted the penalty by following the decision in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd., (2010 (3) TMI 80 - SUPREME COURT ). There being no mistake in the order of the CIT(A) in deleting the penalty in this case, we confirm his order and the ground of the appeal of the Revenue is dismissed.- Decided against revenue

Summary

Issues:
1. Deduction of electric power expenses
2. Disallowance of 50% of traveling expenses
3. Disallowance of interest paid to ABN Amro Bank Ltd.
4. Disallowance of garden expenses
5. Disallowance of consultancy charges
6. Deduction under section 10 for SEZ Unit
7. Addition made by AO on estimation of profit
8. Penalty imposed under section 271(1)(c) for various disallowances

1. Deduction of Electric Power Expenses:
The assessee claimed a deduction of &8377; 4,98,402 for electric power expenses incurred in the course of business. However, the department had already allowed depreciation on this amount, considering it as a capitalized expense. The tribunal found that the assessee had been granted depreciation on the capitalized electric power expenses and dismissed the claim for further deduction.

2. Disallowance of 50% of Traveling Expenses:
The tribunal upheld the disallowance of 50% of foreign traveling expenses amounting to &8377; 3,31,474 as the assessee failed to provide complete details supporting the expenses, such as the purpose of the visit and the designations of the individuals traveling. Despite producing bills for ticket purchases, insufficient documentation led to the dismissal of the appeal.

3. Disallowance of Interest Paid to ABN Amro Bank Ltd.:
The tribunal dismissed the appeal regarding the disallowance of &8377; 3,68,208 interest paid to ABN Amro Bank Ltd. as the assessee failed to provide evidence supporting the claim. The lack of documentation led to the confirmation of the disallowance.

4. Disallowance of Garden Expenses:
The tribunal allowed the appeal against the disallowance of &8377; 51,216 garden expenses, as the assessee had provided complete details and bills supporting the business purpose of the expenses. The tribunal found no basis for the disallowance and deleted the amount.

5. Disallowance of Consultancy Charges:
The tribunal dismissed the appeal for the disallowance of consultancy charges amounting to &8377; 2,92,815 as the expenses were not proven to be incurred wholly and exclusively for business purposes. The tribunal held that even though the expenses were genuine, their business purpose was not established, leading to the dismissal of the appeal.

6. Deduction under Section 10 for SEZ Unit:
The tribunal did not adjudicate on the appeal regarding the deduction under Section 10 for the SEZ Unit, deeming it as merely academic in nature.

7. Addition on Estimation of Profit:
The tribunal confirmed the deletion of an addition of &8377; 26 lakhs made by the AO on estimation of profit. The assessee's decline in sales and subsequent loss, leading to business closure, was considered valid. The tribunal upheld the CIT(A)'s decision to delete the addition due to the absence of any significant defects in the assessee's account books.

8. Penalty Imposed under Section 271(1)(c) for Disallowances:
The tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) for disallowances made by the AO. It was noted that the assessee had disclosed all material facts, and the disallowances were a result of an honest difference of opinion rather than concealment of income. The penalty was deleted following the decision in CIT Vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC).

In conclusion, the tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeals in both quantum and penalty matters.