2019 (2) TMI 1190 - AT - Income Tax

Allowable business expenditure u/s 37 - expenses of professional fees, security charges, travelling expenses, etc. against the meagre director sitting fees - the assessee s claim is that to earn the said fee, he had to do liasoning with various government authorities, and the expenses have been incurred genuinely - HELD THAT - By no stretch of imagination, it can be accepted that the assessee has incurred these expenditure for earning the director sitting fees. The authorities below are quite correct in arriving at a conclusion that there is no nexus between this expenditure incurred and the meagre income shown from other sources. We find that the alternative submissions of the assessee deserve consideration as the assessee has earned remuneration which is assessable as business income. These expenses can be considered u/s. 37(1) as business expenses after factual examination of the nexus with earning the business income. In this regard, the ld. Counsel of the assessee has agreed that the matter may be remitted to the file of the A.O. to examine this aspect. We, accordingly, accede to this request. DR s objection to the alternative request being additional ground not raised earlier cannot be entertained. As it was expounded by the Hon ble Apex Court in the case of Goetze (India) Ltd. v. CIT 2006 (3) TMI 75 - SUPREME COURT that the ITAT has powers to admit the grounds raised otherwise than by filing the original return. Accordingly, the alternative issue raised stand remitted to the A.O.

Summary

Issues:
1. Disallowance of deduction of expenses claimed under section 57(iii) under the head "Income from Other Sources."
2. Imposition/recomputation of interest under section 234B and 234D of the Income Tax Act.

Issue 1: Disallowance of Deduction of Expenses under Section 57(iii)
The appellant appealed against the disallowance of deduction of expenses amounting to ?48,43,622 claimed under section 57(iii) of the Income Tax Act. The Assessing Officer (A.O.) noted that the assessee had claimed various expenses against a meager income, including interest on car loan, professional fees, security charges, and traveling expenses. The A.O. observed that the assessee failed to establish a nexus between the income earned and the expenses claimed. The A.O. disallowed most of the expenses, except for bank charges, as they were not incurred for earning income from other sources. The assessee contended that the expenses were directly attributable to the director's sitting fees and should be allowed under section 57(iii). However, the Commissioner of Income Tax (Appeals) upheld the disallowance, citing legal precedents and stating that the expenses were not laid out wholly and exclusively for earning the income. The appellant's claim was deemed remote and far-fetched, with no direct connection between the expenses and the income earned. The appellant's argument that the expenses were necessary for conducting business was rejected. The Tribunal partially allowed the appeal, remitting the issue back to the A.O. to examine the expenses under section 37(1) as business expenses.

Issue 2: Imposition/Recomputation of Interest under Section 234B and 234D
The appellant also challenged the imposition/recomputation of interest under sections 234B and 234D of the Income Tax Act. The grounds of appeal included errors in law and facts in upholding the interest imposition in the order passed by the A.O. The Tribunal's decision did not specifically address this issue in the detailed analysis provided.

In conclusion, the judgment addressed the disallowance of deduction of expenses under section 57(iii) and the alternative consideration of expenses under section 37(1) for business purposes. The Tribunal partially allowed the appeal, remitting the issue back to the A.O. for further examination. The judgment did not provide a detailed analysis of the imposition/recomputation of interest under sections 234B and 234D.