2019 (1) TMI 1585 - AT - Income Tax

Disallowance of guest house rent and related expenses - allowable business expenditure - HELD THAT - All the emails talk about a trip to India, but none of them refer to the guest house in particular. Even before us, prima facie, the assessee has not filed any evidence in the form of Guest House Register containing the details of check-in check-out of guest, number of days of stay of the guest, etc. Absolutely, there was no corroborative evidence produced by the assessee for the usage of the premises as guest house. Denial of the expenditure by the authorities below was not merely on the ground that the address of the guest house was not mentioned in the correspondence, but, there was no concrete evidence for the usage of the premises as guest house. Each assessment is distinct and we have to adjudicate the issue purely based on the facts of the case in hand even though the assessee has not filed copy of the order of authorities below having allowed the guest house expenditure in the earlier assessment years. We are inclined to concur with the conclusion as drawn by the ld. CIT(A), who has considered each and every aspect of the issue before arriving at the conclusion drawn by him when no contrary material has been provided by the assessee with regard to the usage of the premises as guest house and thus, the ground raised by the assessee stands dismissed.

Summary

Issues:
Disallowance of guest house rent and related expenses.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of guest house rent and related expenses for the assessment year 2013-14.

2. The Assessing Officer observed that the assessee paid rent to a relative of the company's directors for a guest house. However, upon verification, it was found that there were no records of guests staying at the premises for business purposes. The Assessing Officer disallowed the claim of guest house rent and related expenses totaling to &8377;47,97,932.

3. The assessee argued before the Tribunal that the guest house was used for hosting office events and maintaining it incurred expenses. The assessee claimed that similar expenses were allowed in previous assessment years without objection. The Tribunal noted the lack of evidence supporting the usage of the premises as a guest house for business purposes.

4. The Tribunal examined emails submitted by the assessee, which did not specifically mention the guest house in question. The absence of a guest house register or concrete evidence of guest stays further weakened the assessee's case. The Tribunal emphasized that each assessment must be considered independently, and without sufficient evidence of the guest house's business use, the disallowance was upheld.

5. Ultimately, the Tribunal concurred with the Commissioner of Income Tax (Appeals) that the assessee failed to provide substantial evidence of the guest house's business use. As a result, the appeal filed by the assessee was dismissed, and the disallowance of guest house rent and related expenses was upheld.