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2014 (12) TMI 1108 - AT - Income TaxDetermination of agricultural income Held that - The assessee is cultivating coffee plantation in 150 acres - AO estimated the agricultural income at ₹ 4000/- per acre which worked out ₹ 6 lakhs as against the estimation of income by the assessee at ₹ 23,07,737/- CIT(A) considered the agricultural income at ₹ 8252/- per acre working out at ₹ 12,37,850/- when the assessee has not maintained proper books of accounts regarding actual income generated from the coffee plantation, it is inevitable that the estimation of income is to be done - CIT(A) after considering the report of the Coffee Board observed that the actual production of coffee in the Annamalai area was 0.64 MT/hectare. Since the assessee s area is rocky and barren area in the estate, the CIT(A) considered 70% of 150 acres, i.e. 105 acres of area wherein coffee plantation was carried on by the assessee and since the yield in this area is less, he considered the yield from this area as only 0.38 MT/hectare - the estimation made by the CIT(A) is very reasonable based on the report from Coffee Board - assessee has not produced contrary material to controvert his findings - in the absence of positive evidence by the assessee to support the assessee s argument, the order of the CIT(A) cannot be reversed - the estimation of agricultural income made by the CIT(A) is confirmed Decided against assessee. Disallowance of expenses and telescoping the same against the agricultural income of the assessee under the head Other Sources Held that - The disallowance was made by the Revenue authorities on account of lack of proper evidence like vouchers/bills produced by the assessee in support of the expenditure - when the assessee claims any expenses, it is the duty of the assessee to prove that the expenses were actually incurred for the purpose of earning income. - there is every chance of inflating expenses incurred for agricultural purposes to business purposes - If the assessee has placed necessary evidence to show that it was incurred for the purpose of business, then the Revenue would be in a position to pinpoint the discrepancies if any - most of the expenses are unvouched for and are supported by self-vouchers - when the assessee makes self-vouchers, there is every chance of inflating the same - being so, in the absence of necessary evidence to show that it was actually incurred for business purposes, the order of the CIT(A) cannot be reversed Decided against assessee. Disallowance of 50% of the increase in traveling expenses Held that - The CIT(A) has very reasonably considered that no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched - CIT(A) found that self-made vouchers were made only for traveling expenses of staff and Directors and hence she disallowed 50% increase in traveling expenses at ₹ 1,54,464/- CIT(A) has taken a reasonable view and the same is confirmed Decided against assessee. Disallowance of foreign travel expenses Held that - Assessee has not produced any evidence to prove that the above expenses were incurred for the purpose of business - the assessee s business is confined to Kerala - the Directors went abroad to mobilize deposits for the purpose of assessee s business - what are the activities done by the assessee s Directors with regard to the business of the assessee are not brought on record - in the absence of the details of the activities carried out by the assessee s Directors with regard to the business at abroad, the order of the CIT(A) is upheld Decided against assesse. Disallowance of depreciation on vehicles Held that - The assessee is a limited company - the lower authorities have disallowed 1/4th of the total expenses on vehicles - assessee is a limited company and the vehicles are used by the Company for frequent visits to its 78 branches in Kerala for business purpose - Being so, disallowance is not warranted towards depreciation on vehicles for personal use - the running expense of vehicle was allowed by the Assessing officer and it was held that the expenses were incurred solely for the purpose of business Decided in favour of assessee. Addition of payment made for consultation charges without deduction of TDS deleted Held that - The reason for deleting the disallowance was that the payment was made to the person who has retired from PF Department who has no professional qualification and it was not paid for rendering professional services and hence, provisions of sec. 194J was not attracted so as to apply the provisions of sec. 40(a)(ia) - if the payment has been made to the person in excess of the prescribed limit for which sec. 194J is applicable, relief cannot be given on the reason that the person who has rendered services is not a professional person - there is no necessity of professional qualification for rendering services and receiving payment - provisions of sec. 194J is directly applicable and the assessee is duty bound to deduct tax - assessee failed to deduct tax and hence the payment would attract the provisions of sec. 194J and non-deduction of tax under the section would attract the provisions of section 40(a)(ia) the order of the CIT(A) is upheld Decided partly in favour of revenue.
Issues Involved:
1. Condonation of delay in filing the Revenue appeal. 2. Determination of agricultural income. 3. Disallowance of expenses claimed by the assessee. 4. Disallowance of 50% of the increase in traveling expenses. 5. Disallowance of foreign travel expenses. 6. Disallowance of depreciation on vehicles. 7. Deletion of addition for consultation charges without deduction of TDS. Detailed Analysis: 1. Condonation of Delay in Filing the Revenue Appeal: The Revenue appeal in I.T.A. No. 291/Coch/2011 was delayed by 8 days. The delay was attributed to the absence of a regular Commissioner at Kottayam and the officials being on election duty. The Tribunal found the reasons bona fide and condoned the delay, admitting the appeal for adjudication. 2. Determination of Agricultural Income: The main issue was the sustenance of an addition of Rs. 10,69,887 out of Rs. 23,07,737 claimed as agricultural income. The assessee claimed income from 250 acres of land, with 150 acres under coffee cultivation. The Assessing Officer did not accept the assessee's claims due to lack of proper documentation and estimated the income based on the Coffee Board's report. The CIT(A) partially accepted the assessee's claim but reduced the agricultural income to Rs. 12,37,850, bringing the balance to tax under "Other Sources." The Tribunal upheld the CIT(A)'s estimation, finding it reasonable based on the Coffee Board's report and the lack of contrary evidence from the assessee. 3. Disallowance of Expenses Claimed by the Assessee: The Assessing Officer disallowed Rs. 23,54,109 due to lack of proper evidence for the expenses claimed. The CIT(A) upheld this disallowance, noting the disproportionate increase in expenses compared to the previous year and the lack of proper vouchers. The Tribunal confirmed the disallowance, emphasizing the necessity for the assessee to provide evidence for claimed expenses. 4. Disallowance of 50% of the Increase in Traveling Expenses: The Assessing Officer disallowed 80% of the increase in traveling expenses due to lack of vouchers. The CIT(A) found that only traveling expenses were supported by self-made vouchers and disallowed 50% of the increase, amounting to Rs. 1,54,464. The Tribunal confirmed this reasonable approach by the CIT(A). 5. Disallowance of Foreign Travel Expenses: The assessee incurred Rs. 3,99,910 for a business development tour to the USA. The Assessing Officer disallowed the expenses due to lack of evidence showing the trip was for business purposes. The CIT(A) upheld this disallowance, and the Tribunal confirmed it, noting the absence of details on the business activities conducted during the trip. 6. Disallowance of Depreciation on Vehicles: The Assessing Officer disallowed 1/4th of the depreciation on vehicles for personal use. The CIT(A) confirmed this, but the Tribunal reversed it, noting that the vehicles were used for business purposes, including visits to 78 branches, and allowed the depreciation claim. 7. Deletion of Addition for Consultation Charges Without Deduction of TDS: The assessee paid Rs. 1,06,000 towards consultation charges without deducting TDS. The CIT(A) found that the payment was for part-time services of a retired PF Department employee and not for professional services, thus not attracting TDS provisions. The Tribunal reversed this finding, stating that the nature of services rendered required TDS deduction under section 194J, and upheld the disallowance under section 40(a)(ia). Conclusion: The Tribunal dismissed the assessee's appeals in I.T.A. No. 296/Coch/2009 and 542/Coch/2009, and the Revenue's appeals in I.T.A. Nos. 363/Coch/2009 and 10/Coch/2010. The assessee's appeal in I.T.A. No. 241/Coch/2011 and the Revenue's appeal in I.T.A. No. 291/Coch/2011 were partly allowed. The judgment was pronounced in the open court on 24-12-2014.
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