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TMI Blog2015 (10) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... company thus the Assessing Officer has correctly applied Section 40A(2)(b) which is confirmed by the CIT(A).- Decided against assessee. Disallowance of Photo Films and Software expenses - revenue v/s capital expenditure - Held that:- The evidence submitted before the AO was insufficient in respect of administrative expenses. The AR has pointed out certain documents which has to be looked upon. Therefore in this respect the matter is remanded back to the Assessing Officer. Matter remanded back to the Assessing Officer.- Decided in favour of assessee for statistical purposes. Income from other sources instead of business income - AR submitted that a lump sum amount was prepaid earlier and thus the said expenses has to be treated as expenses in this year - Held that:- In the present case it appears that neither the AO nor the Ld. CIT(A) examined this fact that the expenses were paid in earlier year but pertained to this year. The assessee also did not furnish the relevant material to establish that it was the reimbursement of the expenses. We therefore in the absence of the clear facts on record, deem it appropriate to remand this issue back to the file of the AO to be adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and defensive driving and sale of safe driving manual, safe driving equipments, education books and equipment for driving. 3. As regards Ground No. 1, the Assessing Officer observed that as per profit loss account of the company, the assessee claimed legal and professional charges of ₹ 2,60,000/- which were stated to be given to Mr. Sanjay Verma and ₹ 1,60,000/- were given to Mr. M. H. Pandey (wrongly mentioned as M/s Mukesh Aggarwal Co.). When the AR of the assesses was confronted in this regard for furnishing of justification and evidences for deduction of Tax on sources, the AR of the assessee could not furnish any justification and evidences for deduction of Tax on source. The legal and professional charges claimed by the assessee to the extent of ₹ 4,20,000/- (Rs.2,60,000+1,60,000) was disallowed and added to the income of the assessee by the Assessing Officer. 4. The CIT(A) held that the AO has also disallowed an amount of ₹ 1,60,000/- on account of payment made to Mr. M. H. Pandey, one of the Directors of the company for services rendered by him. The above payment is covered by the provisions of Section 40A (2) (b) of the Income Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y could not furnish any justification and evidences including lease agreement in support of substantial increase in rent for Jan., 2006 to March, 2006 to the same landlady. In view of these facts, it is clear that the assessee claimed excessive rent of the premises for the month of Jan, 2006 to March 2006. In these circumstances, the rent for Jan, 2006 to March, 2006 was restricted to ₹ 15,000/- p.m. and balance excessive rent claimed by assessee amounting to ₹ 1,80,000/- was disallowed by the Assessing Officer. 9. The CIT(A) held that the assessee had taken the premises on rent from Mrs. Ranjana Pandey who was the wife of Mr. Mike Pandey one of the Directors of the assessee company. Since the above payment had been made to the wife of Director, therefore, the provisions of Section 40A (2) (b) are applicable in this case. The onus is on the assessee to prove that the expenditure is not excessive or unreasonable as compared to the fair market value of the services or facilities for which the payment has been made. In the instant case it is seen that no evidences regarding the fair market value of the above premises which were taken on rent was filed by the assessee be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences in support thereof and also not furnish any justifiable reason for its allowability. In these circumstances, the expenses debited in the month of March amounting to ₹ 15,00,000/- was disallowed in the absence of supporting evidences and justification and added to the income of the assessee. 14. The CIT(A) held that the assessee had claimed an expenditure of ₹ 15.00 lakhs on account of making 3 films on traffic education on behalf of M/s Hubert Ebnor Gambh, Austria. The assessee had claimed the above expenditure as revenue expenditure but the AO disallowed the above expenditure, in view of the facts that the assessee could not submit any evidences in support of the above expenditure. The AO disallowed the above expenditure of ₹ 15.00 lakhs but however, allowed depreciation @ 60% on the above photo film and software amounting to ₹ 4.50 lakhs thus resulting in a net disallowance of ₹ 10.50 lakhs. The expenditure claimed by the assessee on account of making films and software is clearly in the nature of capital expenditure. Since no evidences were filed by the assessee regarding the above expenditure and also in view of the fact that the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of agreement regarding the making of films and also getting reimbursement of expenditure for the above purpose was filed by the assessee before the AO. In view of the findings above the action of the AO in assessing the above income as income from other sources was upheld by the Ld. CIT(A). Now the assessee is in appeal. 21. The AR submitted that a lump sum amount was prepaid earlier and thus the said expenses has to be treated as expenses in this year. 22. The DR submitted that the same capital expenditure and reimbursement cannot be interlinked with the same. 23. We have perused the records and heard the arguments of both the parties, in the present case it appears that neither the AO nor the Ld. CIT(A) examined this fact that the expenses were paid in earlier year but pertained to this year. The assessee also did not furnish the relevant material to establish that it was the reimbursement of the expenses. We therefore in the absence of the clear facts on record, deem it appropriate to remand this issue back to the file of the AO to be adjudicated afresh, in accordance with law after providing due and reasonable opportunity of being heard to the assessee. 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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