2016 (7) TMI 397 - AT - Income Tax

Deduction for the electricity charges paid for the renting premises - Held that - Once the Assessing Officer is accepting the rental income of the properties in the accounts of the assessee, the electricity consumed in such rental properties cannot be attributable to the assessee and if the assessee has paid any expenses in relation to the rental properties, the same are required to be allowed. In view thereof, the disallowances made by the ld Assessing Officer and confirmed by the ld CIT(A) are directed to be deleted and the assessee is held to be entitled to the deduction for the electricity charges. - Decided in favour of assessee. Addition on estimation of rent from Chitra koot land - sole basis of making addition on account of report of Inspector - Held that - The Inspector has given rate of rent in respect of plots as well as for the party halls/ air conditioned rooms. Thus, in our view, the report can not to be relied upon for any purposes. The ld Assessing Officer has relied upon the report and has concluded that both the plots have been occupied for three months. The ld CIT has also mentioned the size of the land and has also suggested that there are parking problems and locational disadvantages to the assessee and therefore, the big parties cannot adjust in these premises. In our view the order of the ld CIT(A) upholding the addition was without any basis as the very basis of making the addition i.e. the Inspector s report was in respect of built up air conditioned area and the land appurtenant thereto cannot be relied upon f. Therefore, no clear cut conclusion was required to be placed on record as to the rent which was recovered by the assessee by letting it out for functions and Garba festivals. In our view the estimation made by the ld CIT(A) is a higher side and required to be modified in the light of what is stated hereinabove. We, therefore, reduce it to ₹ 5.00 lacs - Decided partly in favour of assessee Disallowances of foreign tour expenses being personal in nature - Held that - It is not reliable to the business of the assessee and there is no commercial expediency. It is not the case of the assessee that the foreign travelers are coming to the premises of the assessee for the purposes eating and staying. The assessee has not placed on record any documents to show the marketing was done by him overseas on account of foreign travellings, therefore, all these foreign travels expenses have not rendered to the advancement to the business of the assessee. Therefore, all these expenses are required to be confirmed. Accordingly, we uphold the order of the ld CIT(A). - Decided against assessee

Issues Involved:

1. Addition for disallowances out of power expenses.
2. Addition for estimation of rent from Chitrakoot land.
3. Addition for disallowance of foreign tour expenses being of personal nature.
4. Restricting and deleting various additions made by the AO regarding income from Chitrakoot & Panchwati, purchases, interest on advances, and capital introduction.

Detailed Analysis:

1. Addition for Disallowances out of Power Expenses:

The assessee claimed power expenses of ?6,81,341, out of which ?4,16,525 was recovered from tenants, leaving a net expense of ?2,64,814. The Assessing Officer disallowed 30% of the claimed expenses (?79,444) due to a lack of specific details on the apportionment of electricity costs among associate concerns. The CIT(A) confirmed the disallowance, noting insufficient evidence for the recovery claimed by the assessee.

The Tribunal, however, found that since the rental income was accepted by the Assessing Officer, the related electricity expenses should be allowed. Thus, the disallowance was deleted, and the assessee was entitled to the deduction for electricity charges. Ground No. 1 of the assessee’s appeal was allowed.

2. Addition for Estimation of Rent from Chitrakoot Land:

The Assessing Officer added ?44,40,000 based on an Inspector's report, which estimated rent for Chitrakoot and Panchwati plots. The CIT(A) reduced this addition to ?22,01,740, citing a lack of detailed evidence from the assessee and the Inspector's report.

The Tribunal found the Inspector's report unreliable as it was based on hearsay and lacked specifics. It noted that the CIT(A)'s estimation was high and reduced the addition to ?5,00,000, partly allowing the assessee’s appeal on this ground.

3. Addition for Disallowance of Foreign Tour Expenses:

The Assessing Officer disallowed ?30,863 of the ?48,464 claimed for foreign travel expenses, citing a lack of details to verify the expenses' business nature. The CIT(A) upheld this disallowance, noting no evidence was provided to show the expenses were business-related.

The Tribunal agreed with the lower authorities, stating the foreign travel expenses did not show any direct or indirect business advancement. Thus, the disallowance was confirmed, and the assessee’s appeal on this ground was dismissed.

4. Revenue's Appeal on Various Additions:

The revenue's appeal involved restricting the addition for income from Chitrakoot & Panchwati, deleting additions for purchases, interest on advances, and capital introduction. The Tribunal noted that the tax effect in the appeal was below ?10 lacs, making it non-maintainable per CBDT Circular No. 21 of 2015. Consequently, the revenue’s appeal was dismissed as not pressed/withdrawn.

Conclusion:

The assessee's appeal was partly allowed, with the Tribunal deleting the disallowance of power expenses and reducing the addition for rental income estimation. The disallowance of foreign tour expenses was upheld. The revenue’s appeal was dismissed due to the low tax effect. The judgment was pronounced in open court on 04/07/2016.

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