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TMI Blog2014 (11) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... . 83,108/- made by the AO on account of mutual funds." 3. Briefly stated the facts giving rise to this appeal are that the assessee is engaged in the manufacture and export of engineering components including hoses, clamps, auto parts, etc. The assessee filed return of income on 31.10.2006 disclosing total income of Rs. 90,33,000/-. Subsequently, during the scrutiny assessment proceedings, the Assessing Officer found that legal and professional charges of Rs. 33,000/- had been paid to an advocate in connection with the case titled as "Superex Steel Products Pvt. Ltd. Vs DESU" and as the assessee could not establish the nexus of such expenses with its business, the claim of expenditure was disallowed. The Assessing Officer also found that the telephone expenses of Rs. 4,57,160/- had been debited to the Profit and loss account out of which Rs. 49,947/- related to the residential telephones and Rs. 2,23,627/- were related to payment of mobile phones of the partners. The Assessing Officer disallowed entire expenses of residential telephones, and disallowed 50% of the expenditure of mobile phones of the partners, and made a disallowance of Rs. 1,61,761/-. The AO further found that elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utstanding electricity bill of Rs. 13,12,347/- was inclusive of Rs. 6,73,947 which was a provision being in the nature of contingent liability which cannot be allowed as allowable expenses in the year under consideration. The DR further contended that the CIT(A) granted relief for the assessee without any cogent and justified basis. Ld. Counsel of the assessee submitted that on disposal of writ filed before the Hon'ble Delhi High Court, DESU raised a bill of Rs. 13,12,347/- on 5.3.2006 which included the arrears of earlier years and the impugned amount was debited to profit and loss account against the arrears. Therefore, it was not a contingent liability. Ld. Counsel of the assessee supported the impugned order and submitted that the AO was misconceived about the facts of the case, therefore, the baseless disallowance was rightly allowed by the CIT(A). 8. On careful consideration of above submissions, we observe that the electricity charges debited to the P&L account of the financial year under consideration included the impugned amount which was related to the arrears of the earlier years. In this situation, we are of the considered opinion that the claim of the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant, but the owner of the premises was M/s Superex Steel Products Pvt. Ltd. and the, electricity bills were in their name, hence the case before the Delhi High Court was also in the name of the company concerned. However the legal bills pertained to the appellant firm, and copy of the bill of Advocate K. C. Mittal has been filed in evidence thereof. Considering the explanation filed, it is held that the legal dispute pertained to the electricity bills of the appellant, and therefore the disallowance made out of legal expenses amounting to Rs. 33,000/- is deleted." 12. In view of above, we observe that the AO has not disputed the fact that the assessee obtained premises situated at F-89/24, Okhla Phase I on lease from M/s Superex Steel Products Pvt. Ltd. who was recorded owner of the premises. We further observe that the AO has not disputed the fact that the assessee had to file a litigation before Hon'ble Delhi High Court related to dispute on payment of electricity charges. Accordingly, we are inclined to hold that when the immoveable property/premises belonged to a particular person or entity and the same is leased and handed over to another person or entity, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order and submitted that the revenue has raised a baseless ground. 14. From impugned order, we observe that the CIT(A) has granted relief for the assessee on this issue of telephone expenses with following conclusion:- "6. Ground of appeal no. 4 relates to disallowance of Rs. 1,61,761/- out of telephone expenses being treated as personal in nature. The appellant has argued that adhoc disallowance of expenditure without identifying the personal expenses requires to be deleted. It has also been submitted that disallowance out of such expenses in the Assessment Year 2004-05 was restricted to 10% of the expenses by the learned CIT(A) vide order dated 18.02.2008. The appellant has argued that the partners have to conduct business with overseas customers who are in different time zones, and the residential telephones as well as mobile phones of the partners are largely used for international calls and internet. Moreover it is seen that fringe benefit tax has been paid on the telephone expenses. After considering that the value of use of telephones has been included in the return of fringe benefit tax, the disallowance of Rs. 1,61,761/- is deleted." 15. On careful consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in the Act." It is respectfully submitted as under:- American Express Bank Ltd. has no "Liquid Plus Dividend Investment Plan". The firm has not directly made the investment of funds to Templeton Mutual Fund Liquid Plan, but has given instruction and mandate to American Express Bank to transfer any amount in excess of Rs. 2,00,000 lying in the appellants account to Mutual Fund Investment Account of Templeton. The dividend income on these investments is received directly into the appellant's bank account and is eligible for exemption u/s 10(35) only by appellant and not by American Express as is suggested by the assessing officer, as it is an investment made in the name of the appellant. Assessing officer admits that the information available to him under AIR shows investment transactions on various dates during the year in the name of the appellant. Assumption that the dividend received on these investment transactions "is in the nature of floating kind of interest on investment" received from American Express is factually incorrect. Since, the investment has been made in the name of the appellant and dividend is also credited in the bank account of the appellant, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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