2018 (6) TMI 1569 - AT - Income Tax

Disallowance u/s 43B - Held that - As assessee claimed that the impugned amount was not debited to profit & loss account and further was not claimed as expenditure and thus cannot be added under section 43B of the Act. This fact was claimed to be expressly stated in the tax audit report at annexure-VII to clause 21(Business)(i) & (ii). This factual aspect was not controverted by the Revenue. There is uncontroverted finding in the impugned order that such expenses has not been claimed by the assessee, therefore, the addition was rightly deleted, consequently, we affirm the stand of the CIT (Appeal). Disallowance on account of rent payment - assessee explained that the office space was shared between the assessee and its group affiliates as per clause -14 of the agreement on assignment - Held that - Since, the office was utilized for business purposes, which is even not disputed by the Assessing Officer, pursuant to an agreement and TDS was deducted under section 194-I as per leave and license agreement dated 29/06/2007 entered between M/s TAG Enterprises and M/s Brnad Marketing India Pvt. Ltd., the licensor permitted the licensee M/s Brand Marketing India Ltd., the right to assign the premises as per clause-14 of the agreement, which has been reproduced in the impugned order and uncontroverted fact that above two group companies along with the assessee shared the premises and the rent/amenities, therefore, it is an allowable expenditure. The stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed.

Summary

Issues:
1. Disallowance under section 43B of the Income Tax Act, 1961.
2. Disallowance of rent payment to M/s TAG Enterprises.
3. Cross objection of the assessee.

Analysis:
1. The first issue revolves around the disallowance made under section 43B of the Income Tax Act, 1961. The Revenue challenged the disallowance amounting to &8377; 1,57,41,631/- before the Ld. First Appellate Authority, Mumbai. The assessee contended that the amount was not debited to the profit & loss account and was not claimed as an expenditure, thus cannot be added under section 43B. The tax audit report supported this claim, and the Revenue did not dispute this fact. The impugned order found that the expenses were not claimed by the assessee, leading to the deletion of the addition. The Tribunal affirmed the decision of the Ld. Commissioner of Income Tax (Appeal) in favor of the assessee.

2. The second issue concerns the disallowance of &8377; 1,39,73,469/- on account of rent payment to M/s TAG Enterprises. The assessee explained that the office space was shared with group affiliates as per the agreement, and TDS was deducted under section 194-I. The agreement allowed the licensee to assign the premises to specific affiliates, including the assessee. The Assessing Officer did not dispute that the office was utilized for business purposes. The Tribunal upheld the Ld. Commissioner of Income Tax (Appeal)'s decision, considering the shared premises and rent as allowable expenditure.

3. The final issue is the cross objection of the assessee, which became in-fructuous due to the affirmation of the Ld. Commissioner of Income Tax (Appeal)'s stand on the Revenue's appeal. The Tribunal dismissed the cross objection as a result. Ultimately, both the appeal of the Revenue and the cross objection of the assessee were dismissed during the hearing on 05/06/2018.