2021 (4) TMI 341 - AT - Income Tax

Disallowance of expenditure not exclusively for business - whether the expenditure incurred by the assessee wholly and exclusively for the purpose of earning remuneration from the partnership firm are allowable to the assessee or not from remuneration received from partnership firm which is chargeable to tax u/s. 28(v)? - HELD THAT - It is not in dispute that assessee has already disallowed personal expenditure and expenditure under Section 14A of the Act. For assessment year 2013-14 the assessee has disallowed the expenditure on his own for assessment years 2013-14 and 2014-15 respectively. The identical issue has been considered in the case of Mr. Anand Prasad 2020 (10) TMI 1237 - ITAT DELHI . DR could not controvert the above finding in that decision as to why it does not apply. It is not case of revenue that assessee has not incurred those expenditure or those are not incurred in the business of the assessee. We allow the appeal of the assessee

Summary

Issues:
Confirmation of disallowance of expenditure for assessment years 2013-14 and 2014-15.

Analysis:
1. The appellant, a partner in a law firm, filed I.T. Appeal 3830 (Del) of 2017 against the order of the Ld. CIT (Appeals)-20 for assessment year 2013-14. The issue pertained to the confirmation of disallowance of expenditure amounting to ?11,51,875/-. Similar facts were presented for assessment year 2014-15 in I.T. Appeal 7052 (Del) of 2017, where the disallowed expenditure was ?9,98,401/-.

2. The Assessing Officer disallowed the expenditure, contending that as the appellant was a partner drawing remuneration, the expenses were not allowable deductions. The appellant argued that the income was chargeable under business income, making the expenditure allowable if incurred wholly and exclusively for business purposes. The disallowance was upheld by the Ld. CIT (Appeals).

3. The issue was compared to a similar case, and it was noted that the income was taxable under Section 28(v) as business income, entitling the appellant to deductions under sections 30 to 37(1). The appellant had already disallowed personal and Section 14A expenditure. The decision in a co-ordinate bench case supported the appellant's claim for deduction of expenditure incurred for business purposes.

4. The Tribunal found that the expenditure was incurred wholly and exclusively for business purposes to earn remuneration from the partnership firm. The Ld. DR did not refute this finding, leading the Tribunal to allow the appeal for assessment year 2013-14 and direct the deletion of the disallowance.

5. In a similar vein, for assessment year 2014-15, the Tribunal allowed the appeal as the facts were identical to the previous year, directing the deletion of the disallowance. Consequently, the orders of the lower authorities were reversed, and the disallowances were deleted for both years.

6. In a separate case, I.T. Appeal 3831 (Del) of 2017 for assessment year 2013-14, the appellant, a partner in a law firm, claimed deduction of expenditure against remuneration received. The Assessing Officer disallowed the deduction, which was confirmed by the Ld. CIT (Appeals). However, following the decision in a similar case, the Tribunal directed the deletion of the disallowance, allowing the appeal.

7. The Tribunal, based on the above analysis and findings, allowed the appeals of the appellants for all the relevant assessment years, directing the deletion of the disallowances made by the lower authorities.

Judgment:
The Tribunal allowed the appeals of the appellants for assessment years 2013-14 and 2014-15, directing the deletion of the disallowances of expenditure made by the lower authorities.