2016 (7) TMI 509 - AT - Income Tax

Disallowance being 50% of travelling expenditure - Held that - CIT(A) has noted the facts that the husband of the assessee is actively involved in carrying on the business of the assesee and further authorised signatory of the proprietary concern. Further facts brought to our notice that during the year opening of three showrooms by the assessee and therefore the travelling expenses have been incurred. Furthermore merely because the expenses of the husband of the assessee have been shown same cannot be disallowed unless there is a specific finding that these expenses are not incurred by the assessee wholly and exclusively for the purpose of the business. In the present case it is not controverted that husband of the appellant is actively engaged in the business of the assessee. In view of this we confirm the finding of the Ld. CIT(A) in deleting the disallowance.- Decided in favour of assessee Disallowance being repairs and maintenance of three new shops - Held that - According to the provisions of section 30 (a)(ii) any expenditure on repairs and maintenance of the premises not owned by the assessee are allowable as deduction . Ld. CIT(A) has categorically held that expenditure towards electrical work, wooden flooring, AC fittings and other professional charges, which are of revenue nature and no advantage of enduring nature, has been obtained by the assessee as these are routine expenditure. On verification of expenditure by CIT (A), he has deleted the disallowance. Revenue did not controvert or could not point out specifically any expenditure resulting in to capital assets. In view of this we do not find any infirmity in the order of the Ld. CIT(A) and we confirm the order of the Ld. CIT(A) in deleting the disallowance - Decided in favour of assessee Addition on account of lower GP - Held that - Addition has been deleted because of the reason that assesee is maintaining regular books of accounts and no defects could be pointed out by the AO. Furthermore in case of the payment of job work charges assessee has submitted the details showing the name, address, permanent account number of the job workers and the payment made to them is through banking channels. Furthermore, out of the four job workers two job workers responded and confirmed the transactions. In view of the above facts and in absence of any defect in the books of accounts and merely because two job workers did not respond to notices 133(6) , no addition on account of books results can be made. We are of the view that Ld. CIT(A) has rightly deleted the addition - Decided in favour of assessee Addition on unsecured loan which is outstanding for many years - Held that - We agree with the views of the Ld. CIT(A) that merely because the outstanding unsecured loan is carrying in the books of accounts for many years same cannot be added to the income of the assessee during this year. Further the arguments of the Ld. DR that provisions of Section 41(1) of the Income Tax Act are applicable can also not be accepted by us and it is not reason for which addition has been made by the AO and further it is also not the cessation of any trade liability for which deduction in earlier years have been granted to the assessee. In view of this we confirm the finding of the Ld. CIT(A) in deleting the addition - Decided in favour of assessee

Summary

Issues:
1. Deletion of addition for traveling expenditure involving the assessee's husband.
2. Treatment of repair expenses for new shops as revenue or capital expenditure.
3. Deletion of addition for lower gross profit rate.
4. Deletion of addition for unsecured loan outstanding for many years.

Issue 1 - Traveling Expenditure:
The revenue challenged the deletion of the addition of Rs. 1,50,419 for traveling expenditure incurred by the assessee, including the husband. The CIT(A) deleted the disallowance, considering the husband's active involvement in the business. The Tribunal confirmed the deletion, emphasizing that the husband's expenses were incurred for business purposes. The revenue's appeal on this ground was dismissed.

Issue 2 - Repair Expenses for New Shops:
The revenue disputed the deletion of Rs. 32,24,345 addition for repair expenses of new shops, arguing it should be treated as capital expenditure. The CIT(A) ruled in favor of the assessee, stating the expenses were revenue in nature. The Tribunal upheld the CIT(A)'s decision, noting that the expenses were routine and did not create capital assets. The revenue's appeal on this ground was dismissed.

Issue 3 - Lower Gross Profit Rate:
The revenue contested the deletion of Rs. 47,60,195 addition due to a lower gross profit rate. The AO made the addition based on an average GP of the previous years. However, the CIT(A) deleted the addition, citing proper maintenance of accounts and payment details to job workers. The Tribunal upheld the CIT(A)'s decision, stating that no defects were found in the books of accounts. The revenue's appeal on this ground was dismissed.

Issue 4 - Unsecured Loan Addition:
The revenue challenged the deletion of Rs. 1,14,700 addition for an outstanding unsecured loan. The CIT(A) deleted the addition, noting it did not relate to the current assessment year. The Tribunal upheld the CIT(A)'s decision, stating that the loan's age alone was not a valid reason for addition. The revenue's appeal on this ground was dismissed.

Overall, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The judgment was pronounced on 16/06/2016.