2023 (10) TMI 19 - AT - Income Tax

Allowability of business expenses - Disallowance of interest of loan, commission paid, brokerage paid, professional charges paid, depreciation of car and 50% towards petrol and maintenance expenses of car - HELD THAT - Except for disallowance made towards petrol and maintenance expenses on car, we find that assessee had substantiated the claim of its expense with corroborative documentary evidence which are justified taking into account the line of business in which it is engaged. We note from the order of AO that nothing specific has been pointed out to justify the disallowances/additions made except for a general statement that claim of the assessee is not tenable. We have gone through the documents referred by the learned counsel as stated above and find force in the submissions so made. The expenses claimed by the assessee as stated above are legitimate business expenses which are allowable u/s 37(1) (depreciation on car under Section 32 of the Act). The conditions prescribed under Section 37(1) and 32 of the Act have not been violated by the assessee, since, nothing is brought on record by the authorities below as well as by the learned Sr. DR to demonstrate otherwise. Accordingly, we delete the addition/disallowances made by AO for which the assessee is in appeal before the Tribunal except for expenses toward petrol and maintenance of car which have been disallowed by restricting it to 50% by the learned Commissioner of Income-tax(Appeals). For the disallowance made towards petrol and car maintenance expenses the addition is sustained. Accordingly, grounds taken by the assessee except for the one towards petrol and car expenses are allowed. Appeal of the assessee is partly allowed.

Summary

Issues:
The judgment involves the assessment of various additions made by the authorities, including interest paid on loan, commission paid, brokerage paid, professional charges, and depreciation of car expenses.

Interest on Loan:
The assessee had taken a loan and paid interest on it. The Tribunal found that the assessee provided documentary evidence, including confirmation of the loan, TDS certificates, and bank statements, to substantiate the transaction. The Tribunal held that the addition made by the authorities was baseless, and the interest payment was legitimate, thus deleting the addition.

Commission Paid:
The commission paid to an individual was challenged. The Tribunal noted that the assessee presented written submissions, confirmations, TDS certificates, and bank statements to support the commission payment. It was established that the individual had a long-standing association with the assessee and provided valuable services, justifying the commission expense. Consequently, the Tribunal allowed this expense.

Brokerage Paid:
The brokerage paid for arranging a property on rent was disputed. The Tribunal reviewed the rent agreement, confirmation letters, TDS certificates, and bank statements provided by the assessee. It was concluded that the brokerage payment was a legitimate business expense incurred for securing a property, making it an allowable deduction. Therefore, the Tribunal upheld this expense.

Professional Charges:
Professional charges paid to an individual were questioned. The Tribunal considered the qualifications and experience of the professional, along with supporting documents such as confirmation letters, TDS certificates, and bank statements. It was determined that the charges were incurred for legitimate business purposes, and the expense was deemed allowable. Hence, the Tribunal accepted this deduction.

Depreciation of Car Expenses:
The disallowance of depreciation on car expenses was contested. The Tribunal clarified that depreciation is a statutory allowance that should not be restricted based on personal use. As the car was owned by the assessee and used for business purposes, the disallowance of depreciation was deemed unjustified. Therefore, the Tribunal directed the deletion of this disallowance.

Petrol and Maintenance Expenses:
Regarding the disallowance of 50% of petrol and maintenance expenses of the car, the Tribunal noted that the car was a business asset used solely for business purposes. The Tribunal found the ad hoc disallowance of 50% as personal expenses unjustified, and thus allowed this expense.

Conclusion:
The Tribunal upheld most of the expenses claimed by the assessee, except for the disallowance of petrol and maintenance expenses at 50%. The Tribunal found that the assessee had provided sufficient evidence to support the legitimacy of the expenses, and therefore, partially allowed the appeal.