2018 (1) TMI 1706 - AT - Income Tax

Depreciation and society charges claimed on Housing accommodation - Disallowance made as these expenses are not incurred wholly and exclusively for the purpose of the Appellant's business - HELD THAT - We find that the E Bench of the Tribunal in 2016 (2) TMI 1356 - ITAT MUMBAI for the assessment year 2009-10 as held claim of the assessee was denied by the authorities below in the absence of the particulars of the person having not been provided by the assessee. In all fairness we are of the view that the matter needs to be looked into by the AO, in order to verify claims of the assessee. Following the principles of natural justice we may it fit deem to the restore this issue back to the file of the AO to verify the names of the employees to whom the premises have been allotted and in whose hands the perk has been offered. Reasonable opportunity of hearing shall be afforded to the assessee. The ground of appeal no. 4 raised by the assessee is thus allowed for statistical purposes Adhoc disallowance being 5% of various expenses debited to the Profit Loss A/c as not incurred wholly and exclusively for business purpose - HELD THAT - While deciding the issue of ad hoc disallowance of 5% out of various expenses, the Tribunal did not interfere in the matter and upheld the disallowance. Following the order of the Tribunal For assessment year 2008 09 we uphold the disallowance by dismissing the ground raised by the assessee.

Summary

Issues:
1. Disallowance of depreciation and society charges on housing accommodation.
2. Adhoc disallowance of expenses debited to the Profit & Loss A/c.

Issue 1: Disallowance of Depreciation and Society Charges on Housing Accommodation:
The appeal was against the order of CIT(A)-33, Mumbai for the assessment year 2011-12. The assessee contested the disallowance of depreciation and society charges on housing accommodation, arguing that these expenses were incurred for business purposes. The Tribunal referred to a similar case for the assessment year 2009-10 where the issue was decided in favor of the assessee. The Tribunal noted that the Assessing Officer disallowed the deductions claimed by the assessee for depreciation and society charges. The Commissioner (Appeals) also upheld the disallowance. However, based on previous Tribunal decisions, the matter was restored back to the file of the Assessing Officer for fresh consideration. The Tribunal emphasized the need for the Assessing Officer to verify the claims made by the assessee regarding the usage of residential premises for business purposes. Consequently, the Tribunal restored the matter back to the Assessing Officer for further examination, following the principles of natural justice.

Issue 2: Adhoc Disallowance of Expenses Debited to the Profit & Loss A/c:
The second ground of appeal related to the adhoc disallowance of expenses amounting to 5% of various expenditure totaling a specific amount. The Assessing Officer made this disallowance due to the lack of supporting details and vouchers. The Commissioner (Appeals) confirmed the disallowance, and the Tribunal upheld this decision based on a previous order for the assessment year 2008-09. The Tribunal did not interfere with the adhoc disallowance and dismissed the ground raised by the assessee. Consistent with the earlier Tribunal decision, the Tribunal upheld the adhoc disallowance of expenses debited to the Profit & Loss A/c.

In conclusion, the appeal filed by the assessee was partly allowed for statistical purposes, with the Tribunal restoring the matters back to the Assessing Officer for further examination in both issues. The order was pronounced in the open court on 31st January 2018.