2019 (3) TMI 203 - AT - Income Tax

Traveling expenses claimed against the amount received from house property against use of amenities in the said house property - Deduction u/s.57 on travelling expense against compensation for amenities shown under other source of income - HELD THAT - The assessee in this case is claiming travelling expenses against the amount received from house property against use of amenities in the said house property. The assessee s plea is that the assessee had to incur huge expenditure in travelling to India to manage the property. We find that this submission of the assessee has been rejected by the authorities below. We find ourselves in full concurrence that no travelling expenses can be allowed for assessee s international travel for income received related to house property in India. This is more so when the amount claimed is lump sum without any supporting whatsoever. Assessment of Interest on refund as income - Interest Received u/s 244A - addition to income - return being processed u/s 143(1) - HELD THAT - Interest on refund granted was withdrawn when the demand of ₹ 24,67,560/- was raised for the same assessment year subsequently. Hence, when the income stood withdrawn there is no question of the assessee offering the same as income. We find that this view also gets support from the ITAT decision in the case of Assistant Director of Income-tax, (International Taxation) - 1(1), Mumbai vs. Credit Agricole Indosuez 2013 (9) TMI 364 - ITAT MUMBAI . In this case, it was expounded that only that much interest u/s. 244A can be brought to tax which is finally determined on assessment. In the present case, in the final assessment huge demand has been raised and there was no question of assessment of any interest income.

Summary

Issues Involved:
1. Disallowance of traveling and other expenses under Income from Other Sources.
2. Assessment of interest received on income tax refund for A.Y. 2009-10.

Analysis:

Issue 1 - Disallowance of Traveling and Other Expenses:
The appellant, a non-resident individual, claimed a deduction of &8377; 2,00,000 for traveling expenses related to managing his property in India against compensation for amenities under other sources of income. The Assessing Officer disallowed the claim, which was confirmed by the Commissioner of Income Tax (Appeals). The appellant argued that the expenses were incurred for managing the property and should be allowed. However, the Commissioner held that the expenses must be laid out exclusively for earning the income, which was not demonstrated. The appellant's claim was rejected, and the appeal was made to the ITAT Mumbai. The ITAT upheld the decision, stating that no traveling expenses for international travel could be allowed against income from a property in India without proper support.

Issue 2 - Assessment of Interest on Income Tax Refund:
The appellant received interest of &8377; 1,57,692 on a refund for A.Y. 2009-10, which was not shown as income in the return. The Assessing Officer considered this interest as income, leading to an appeal by the appellant. The Commissioner of Income Tax (Appeals) upheld the AO's decision. However, the ITAT found merit in the appellant's submission that the interest was withdrawn by the AO when a demand was raised for the same assessment year. Citing a precedent, the ITAT determined that only interest finally determined on assessment can be taxed. Since the interest income was withdrawn along with the demand, the ITAT set aside the lower authorities' orders and deleted the addition, partially allowing the appeal.

In conclusion, the ITAT Mumbai ruled in favor of the revenue department regarding the disallowance of traveling and other expenses, while it sided with the appellant in the assessment of interest on the income tax refund. The judgment provides clarity on the criteria for allowing deductions and taxing interest income, emphasizing the need for expenses to be exclusively laid out for earning income and taxing only the interest finally determined on assessment.