2014 (11) TMI 222 - HC - Income Tax

Expenses on adhoc basis Whether the assessee failed to adduce proof of having incurred expenditure Held that - The Tribunal, taking note of the various heads under which the expenses were claimed and also considering the merits of the assessee s claim for expenditure incurred on account of travelling, wig material, makeup and other supporting professional expenses, justified the order of the CIT(A) - The assessee pleaded before the CIT(A) as well as before the AO that he is professional actor and expended amount on account of wigs, makeup and other accessories for the purpose of his profession as a cine artist and also incurred expenditure on account of his professional calling as an actor - While major part of the claim was disallowed under Section 40A(3) of the Act, the CIT(A) found that there is reasonableness in the claim of the assessee insofar as the expenses incurred towards travelling, wig, makeup, costumes, etc. - The CIT(A) has decided the issue on the basis of the statement made by the assessee and taking into consideration the overall expenditure claimed under various heads, thought it fit to allow the expenditure in a sum of ₹ 25 Lakhs under these heads for the assessment year 2007-2008 and ₹ 35 Lakhs for the assessment year 2008-2009 as such no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
1. Allowance of expenditures on ad hoc basis without proper evidence.
2. Justification of expenditure for business purposes.
3. Relief granted by Commissioner of Income Tax (Appeals) without concrete evidence.
4. Disallowance based on lack of supporting evidence.

Issue 1: Allowance of Expenditures on Ad Hoc Basis
The Revenue challenged the order of the Income Tax Appellate Tribunal regarding the allowance of certain expenditures on an ad hoc basis without concrete evidence. The Tribunal justified this decision by accepting the plea made by the respondent/assessee for allowable expenditure, which was partly allowed by the Commissioner of Income Tax (Appeals) in favor of the assessee. The Tribunal noted that while the language used by the Tribunal may not be appropriate, there was justification to accept the plea for certain expenditures claimed by the assessee.

Issue 2: Justification of Expenditure for Business Purposes
The assessee, a leading film artist, claimed professional expenditures for the assessment years 2007-2008 and 2008-2009. The Assessing Officer disallowed some expenses for lack of evidence, but the Commissioner of Income Tax (Appeals) partially allowed the claim considering the nature of the assessee's professional occupation. The Commissioner noted that expenses on costumes, makeup, wig material, and other professional requirements for a film actor cannot be ruled out, leading to the deletion of certain additions made by the Assessing Officer.

Issue 3: Relief Granted Without Concrete Evidence
The Commissioner of Income Tax (Appeals) allowed relief for certain expenses despite the lack of supporting evidence, citing the nature of expenses incurred by a film actor. The Tribunal upheld the Commissioner's decision, emphasizing that expenses on traveling, makeup, and other professional requirements are justifiable for a professional actor, and there was no need to interfere with the relief granted by the Commissioner.

Issue 4: Disallowance Based on Lack of Supporting Evidence
The Revenue contended that the expenditure was allowed on an ad hoc basis without proper evidence of expenses incurred for business purposes. However, the Tribunal upheld the Commissioner's decision, stating that the expenses claimed by the assessee were justified based on the nature of the profession and the specific requirements of a film actor. The Tribunal found no reason to interfere with the relief granted by the Commissioner of Income Tax (Appeals).

In conclusion, the High Court dismissed the appeals, stating that the issues raised were questions of fact without substantial legal implications. The Court found no merit in the appeals as the orders of the Commissioner of Income Tax (Appeals) and the Tribunal were not considered perverse or in violation of any law. Therefore, the appeals were dismissed with no costs incurred.