2014 (6) TMI 144 - AT - Income Tax

Disallowance of brokerage claim Held that - CIT(A) was rightly of the view that the onus in this regard is on the assessee to establish that the expenditure on payment of brokerage charges was wholly and exclusively incurred for the purposes of its business the assessee has failed to discharge the onus, there was no justifiable reasons to interfere with the orders of CIT(A) confirming the disallowance made by AO on account of brokerage paid by assessee to Shri Ishwarchand Goel for both the years under consideration Decided against Assessee. Disallowance of depreciation on building Held that - The onus was on the assessee to substantiate its claim for the expenditure incurred on the construction of additional building by producing the relevant documentary evidence such as bills, vouchers etc. - The statement of the assessee and indication in the relevant seized documents was not sufficient to establish that the amount was incurred by assessee on account of construction of additional factory building and that too to its existing building in MIDC, Dombivali. It is not a case where the statement or relevant seized documents are partly accepted and partly rejected by the authorities below as sought to be contended by the assessee the statement and the relevant seized documents were not sufficient to establish the case of the assessee of having spent an amount for the construction of additional factory building and the claim of the assessee for depreciation on such additional building was disallowed - the assessee failed to substantiate the said claim by bringing any documentary evidence there was no infirmity in the orders of authorities below in disallowing the assessee s claim of depreciation Decided against Assessee.

Summary

Issues:
1. Disallowance of brokerage charges paid to Shri Ishwarchand Goel.
2. Disallowance of depreciation on additional factory building.

Issue 1: Disallowance of Brokerage Charges
The appeals filed by the assessee for assessment years 2006-07 and 2007-08 involved a dispute regarding the disallowance made by the Assessing Officer (AO) on account of brokerage claimed to be paid to Shri Ishwarchand Goel. The AO disallowed the brokerage claim as similar claims in the past were also disallowed. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the disallowance citing lack of evidence to prove the expenditure was incurred for business purposes. The Tribunal upheld the CIT(A)'s decision, emphasizing the assessee's failure to establish the purpose of the brokerage payments, despite payment by cheque and TDS deduction. The onus was on the assessee to prove the expenditure was wholly and exclusively for business purposes, as per the Supreme Court's ruling in CIT v. Calcutta Agencies.

Issue 2: Disallowance of Depreciation on Building
In the appeal for assessment year 2008-09, the assessee challenged the disallowance of depreciation on an additional factory building. The AO disallowed the claim due to lack of documentary evidence supporting the expenses incurred on construction. The CIT(A) upheld the disallowance, stating that the onus was on the assessee to prove the genuineness of the expenditure. The Tribunal, after considering arguments from both sides, found no fault in the CIT(A)'s decision. Although some documents indicated the utilization of sales proceeds for building work, the Tribunal held that this alone was insufficient to prove the expenditure on construction. The onus was on the assessee to substantiate the claim with relevant documentary evidence, such as bills or building plans. As the assessee failed to do so, the disallowance of depreciation was upheld. The Tribunal dismissed the appeal for the assessment year 2008-09.

In conclusion, the Tribunal dismissed all three appeals of the assessee, upholding the disallowances of brokerage charges and depreciation on the additional factory building. The decisions were based on the assessee's failure to provide sufficient evidence to support their claims, as required by law.