2015 (9) TMI 492 - AT - Income Tax

Disallowance of expenses in agricultural activity - CIT (Appeals) ought to have seen that assessee is running farm tourism - Held that - No good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) in sustaining the disallowance of agricultural expenses . Thus, we affirm the order of the Commissioner of Income Tax (Appeals) on this issue and reject the grounds raised by the assessee for both the assessment years. - Decided against assessee. Disallowance of depreciation claimed on temporary structures - assessee submits that structures were only temporary structures and therefore claim of depreciation at 100% is justified - Held that - Before us, the assessee could not substantiate as to whether the structures are temporary and what kind of construction was erected and when it was demolished, therefore in the absence of any such details the Assessing Officer appears to be justified in restricting the claim of depreciation to 5%.- Decided against assessee. Dispute relating to grant of interest under section 244A - whether is to be decided by jurisdictional Commissioner or the Chief Commissioner? - Held that - In view of the decision of Tata Communications Ltd. Vs. ACIT 2014 (1) TMI 1277 - ITAT MUMBAI the grounds of appeal raised by the assessee is a valid one warranting adjudication by the Commissioner of Income Tax (Appeals). Since the Commissioner of Income Tax (Appeals) has not gone into merits and held that matter is not appealable, we restore the issue back to the Assessing Officer to decide the issue in accordance with law, after providing adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of advertisement & publicity expenses and office expenses - Held that - Expenses were disallowed by the Assessing Officer stating that assessee incurred these expenses as donation to church. The Commissioner of Income Tax (Appeals) however partly allowed such expenses holding that certain payments were made for publicity and such expenses are to the extent of ₹ 1,55,000/- and confirmed expenses of ₹ 55,000/-. We do not see any infirmity in the order of the Commissioner of Income Tax (Appeals) in partly allowing the expenses incurred for publicity. Thus, we affirm the order of the Commissioner of Income Tax (Appeals) - Decided against assessee.

Summary

Issues Involved:
1. Disallowance of agricultural expenses.
2. Disallowance of depreciation on temporary structures.
3. Appealability of interest under section 244A.
4. Disallowance of advertisement and publicity expenses and office expenses.

Issue-wise Detailed Analysis:

1. Disallowance of Agricultural Expenses:
The common issue in both appeals was the disallowance of agricultural expenses by the Assessing Officer (AO). The AO disallowed agricultural expenses of Rs. 4,98,385/- and Rs. 5,66,276/- for the assessment years 2003-04 and 2004-05, respectively, on the grounds that the assessee credited agricultural income to its profit and loss account and debited agricultural expenses, resulting in a net loss from agricultural operations, which is not allowable. The AO also held that the loss from agricultural activity cannot be allowed as a deduction under section 14A of the Act as it is an expenditure incurred to earn exempt income. The Commissioner of Income Tax (Appeals) sustained the disallowance, noting discrepancies in the assessee's claims and the lack of verifiable evidence. The Tribunal affirmed the Commissioner's findings, rejecting the grounds raised by the assessee.

2. Disallowance of Depreciation on Temporary Structures:
For the assessment year 2003-04, the AO restricted depreciation on temporary structures to 5%, treating them as permanent structures. The assessee contended that the structures were temporary and demolished later due to a notice from Trivandrum Corporation, justifying a 100% depreciation claim. However, the assessee failed to substantiate the nature and timeline of the structures. Consequently, the Commissioner of Income Tax (Appeals) upheld the AO's decision, and the Tribunal dismissed the grounds raised by the assessee on this issue.

3. Appealability of Interest under Section 244A:
The assessee contested the withdrawal of excess interest granted under section 244A. The Commissioner of Income Tax (Appeals) dismissed the appeal, stating that disputes relating to interest under section 244A should be decided by the jurisdictional Commissioner or Chief Commissioner. The Tribunal, referencing the Mumbai Bench's decision in Tata Communications Ltd. Vs. ACIT, held that the appeal was valid and warranted adjudication. The Tribunal restored the issue to the AO to decide in accordance with the law after providing the assessee an opportunity to present its case.

4. Disallowance of Advertisement and Publicity Expenses and Office Expenses:
For the assessment year 2004-05, the AO disallowed Rs. 2,14,700/- under advertisement and publicity expenses and Rs. 55,000/- under office expenses, stating that some expenses were donations to a church and not related to business. The Commissioner of Income Tax (Appeals) partially allowed the advertisement expenses to the extent of Rs. 1,55,000/- and confirmed the office expenses disallowance. The Tribunal found no infirmity in the Commissioner's order and upheld the partial allowance of expenses, rejecting the grounds raised by the assessee.

Conclusion:
The Tribunal affirmed the disallowance of agricultural expenses and depreciation on temporary structures, restored the issue of interest under section 244A to the AO for adjudication, and upheld the partial allowance of advertisement and publicity expenses. The appeal for the assessment year 2003-04 was partly allowed for statistical purposes, and the appeal for the assessment year 2004-05 was dismissed.