2018 (5) TMI 1637 - AT - Income Tax

Claim of expenses u/s 37(1) - contrbution for construction of Rajasthan Bhawan Mumbai - Held that - assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees visiting at Mumbai - assessee has received the benefit in the shape of accommodation against the expenditure for construction of Rajasthan house and thus an allowable expenditure u/s 37(1) - Decided in favor of assessee.

Summary

Issues:
Disallowance of contribution towards Rajasthan Bhawan Mumbai under Section 37(1) of the Income Tax Act.

Detailed Analysis:
The appeal was against the confirmation of the addition of ?1,00,00,000 on account of disallowance of contribution towards Rajasthan Bhawan Mumbai. The assessee contended that the contribution was made for the construction of Rajasthan Bhawan Mumbai, allowing employees to stay at nominal charges. The AO and CIT(A) disallowed the claim, stating it did not fall under Section 37(1) and was on capital account.

The ld. DR argued that the contribution did not qualify under Section 37(1) and was on capital account as the asset did not belong to the assessee. The ld. AR cited precedents where similar issues were decided in favor of the assessee, emphasizing the business advantage gained from the asset. The Government of Rajasthan also allowed a rebate for staying in Rajasthan Bhawan Mumbai.

The Tribunal referred to previous cases where contributions towards similar assets were deemed allowable expenditures under Section 37(1). The Tribunal emphasized that the accommodation facility provided by the asset was a crucial factor. The AO was directed to re-examine the matter in light of the accommodation facility available to the assessee in Rajasthan Bhawan Mumbai.

Considering the previous decisions and the benefit received by the assessee in the form of accommodation, the Tribunal held that the contribution was an allowable expenditure under Section 37(1). The appeal of the assessee was allowed based on the Tribunal's earlier rulings and the accommodation benefits received.

In conclusion, the Tribunal upheld the appeal of the assessee, emphasizing the business advantage gained from the contribution towards Rajasthan Bhawan Mumbai. The order was pronounced in favor of the assessee on 22/05/2018.