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2016 (8) TMI 1579 - AT - Income TaxAllowable business expenses u/s 37(1) - expenses incurred for the running of the business of the assessee OR Income from house property - disallowing the claim of expenses from the business income on the alleged plea that the said expenses was claimed by the appellant against the Income from Houses Property - as per DR All the expenses have to be included for disallowance as business is composite - HELD THAT - Respectfully following the afore-stated decision of the co-ordinate bench of this Tribunal in assessee s own case in the immediately preceding assessment year 2016 (4) TMI 1435 - ITAT MUMBAI for assessment year 2010-11 as facts are identical in the instant appeal, we are also inclined to set aside the matter to the file of the A.O. for verification of the various expenses like business promotion expenses , advertisement expenses and any other expenses debited to Profit and Loss which are directly attributable to earning of lease rental income having regards to the account of the assessee , will be disallowed by the A.O. It is also noted that in the preceding assessment year , the assessee suo motu voluntarily disallowed electricity expenses incurred in relation to R-Mall but the same are not disallowed in the instant assessment year under appeal which aspect shall also be looked into by the AO. This disposes of Ground No. 1, 2 3 raised by the assessee in the memo of appeal filed with the Tribunal as set out above. We order accordingly. Disallowance u/s 14A - as contended no expenses have been incurred for earning the exempt income as the assessee was having sufficient own funds for the investments made in the shares - HELD THAT - We find that on identical facts in the immediately preceding year, the co-ordinate Bench of this Tribunal in assessee s own case 2016 (4) TMI 1435 - ITAT MUMBAI for assessment year 2010-11 has set aside the matter back to the file of the A.O. to decide the matter in accordance with the ratio of case of Cheminvest Ltd. 2011 (11) TMI 267 - DELHI HIGH COURT and also work out disallowance of interest expenses after considering the availability of assessee s own funds vis- -vis investments made which yields exempt income - thus we set aside and restore the matter back to the file of the A.O. with the same directions as were given in the Tribunal afore-stated order for the immediately preceding assessment year. Disallowance u/s 40(a)(ia) being the alleged difference between amount mentioned in the tax audit report and the return of income - assessee is in second appeal before the Tribunal - HELD THAT - As observed that the assessee has failed to deduct tax at source on the work-in-progress - Since the work-in-progress is part of the P L account , the assessee was required to disallow the same on the grounds of non-deduction of tax as per provisions of Section 40(a)(ia) of the Act and the same cannot be claimed as expenses while computing income from business as the tax has not been deducted at source. Assessee has submitted that it has disallowed voluntarily the said amount of its own in WIP while filing return of income which needed verification by the authorities below and hence we are inclined to set aside and restore this issue to the file of the AO for de-novo determination of the issue on merits after considering the relevant evidences of the assessee. Needless to say proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law. Disallowance u/s 80G - Difference as per the tax audit report the deduction calculated and assessee had claimed deduction u/s 80G - HELD THAT - The assessee submitted that if an opportunity is provided to the assessee, the necessary documents in support of the claim of the assessee can be submitted which can be verified by the AO and deduction can then be allowed on merits as per provisions of Section 80G of the Act. The ld. D.R. submitted that he has no objection in granting an opportunity to the assessee to submit the relevant documents and matter may be restored to the file of AO for verification. In our considered view and in the interest of justice, we set aside and restore this issue to the file of the A.O. for verification of the claim of the assessee with respect to allowability of deduction on account of donation paid by the assessee as per provisions of Section 80G. Assessee s appeal partly allowed for statistical purposes.
Issues Involved:
1. Disallowance of expenses claimed against business income. 2. Disallowance of expenses related to rental income. 3. Application of the principle that the option beneficial to the assessee should be followed. 4. Disallowance under Section 14A of the Income Tax Act. 5. Disallowance under Section 40(a)(ia) of the Income Tax Act. 6. Disallowance of deduction under Section 80G of the Income Tax Act. Detailed Analysis: 1. Disallowance of Expenses Claimed Against Business Income: The assessee, a builder and developer, also engaged in renting properties, claimed expenses of ?1,73,03,946 against business income. The AO observed that while the assessee claimed standard deductions for repairs under house property income, it did not proportionately disallow the expenses related to rental income in its business income computation. The CIT(A) upheld the AO’s decision, noting that the assessee failed to furnish specific details of expenses incurred for business income. 2. Disallowance of Expenses Related to Rental Income: The AO disallowed ?1,73,03,946, asserting that the assessee took advantage of the 30% standard deduction for repairs without disallowing corresponding expenses in business income. The Tribunal, referencing its decision in the assessee's case for AY 2010-11, directed the AO to verify and disallow expenses directly attributable to earning lease rental income, such as advertisement and business promotion expenses, if they are not related to business income. 3. Application of Principle Beneficial to Assessee: The assessee argued that the AO should have chosen the option more beneficial to it. The Tribunal noted that the AO chose the higher disallowance figure of ?1,73,03,946 instead of ?87,04,840, calculated based on the proportion of rental income to gross revenue. The Tribunal directed the AO to verify and disallow only those expenses directly attributable to rental income. 4. Disallowance Under Section 14A of the Income Tax Act: The AO disallowed ?35,30,813 under Section 14A, related to exempt income from share of profit in a partnership firm. The CIT(A) upheld this, citing Rule 8D. The Tribunal, following its decision in the assessee’s case for AY 2010-11, directed the AO to re-examine the disallowance considering the availability of interest-free funds and the principle that disallowance should not exceed exempt income as per the Delhi High Court's decision in Cheminvest Ltd. 5. Disallowance Under Section 40(a)(ia) of the Income Tax Act: The AO disallowed ?16,000 for non-deduction of TDS, which the assessee claimed was already disallowed and added back to work-in-progress, leading to double addition. The Tribunal directed the AO to verify the claim of double addition and rectify if found true. 6. Disallowance of Deduction Under Section 80G of the Income Tax Act: The AO restricted the deduction under Section 80G to ?49,80,497 as per the tax audit report, against the assessee’s claim of ?50,53,960. The Tribunal remanded the matter to the AO for verification of the assessee’s claim, directing the AO to consider all relevant documents and provide an opportunity for the assessee to substantiate its claim. Conclusion: The Tribunal partly allowed the appeal for statistical purposes, setting aside various issues to the AO for verification and re-adjudication, ensuring compliance with legal principles and providing the assessee an opportunity to substantiate its claims.
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