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TMI Blog2016 (12) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company it is seen from Profit and Loss A/c that assessee company received following incomes during the year under consideration:- A. Consultancy Income of Rs. 16,85,400/- out of which a sum of Rs. 15,11,804/- was not received but shown as debtor, from Group company Celcious Technologies Pvt Ltd, 9B, Wood street, Kolkata- 16. No other income was received by company except dividend of Rs. 5,00,000/- and Income Tax Refund of Rs. 3,72,307/- which are Income from Other Sources. B. Against the aforesaid activity, assessee claimed Operating and Administrative Expense of Rs. 1,87,99,058/-, Interest Payment Rs. 1,57,070/- fully related to Investment activity, Bad Debts W/off of Rs. 6,66,667/-. No detail of the same were filed nor explanation was furnished on the nature of debt. C. On examination of break up of details of Salary, it is seen that Salary of Rs. 29,38,623/- was paid to person specified U/s.40A{2b) out of total salary payment claimed at Rs. 66,47,086/-. It is seen that this person is employed to look after the activities of other group companies and projects carried out by different group associates as it is evident from the nature of activity of accommodation carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out any real business activity. Consultancy Charges received from group Companies amounting to Rs. 16,85,400/- is Income from Other Sources and accordingly assessed. Interest on IT Refund of Rs. 3, 72,307/- is also an Income from Other Sources and accordingly assessed. The Business expenditure and other claims in Profit and loss A/c are merely accommodation expenses on behalf of the assessee's group associates and not related to assessee's earning of income. Hence, it is disallowed." 3. Aggrieved from the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals)-16, Kolkata, who also confirmed the action of the Assessing Officer by observing the following:- "5. The AO has made the addition on the ground that as per para 5, consultancy income of Rs. 16,85,000/- which is being shown by the assessee. Rs. 15,11,804/- is not received by the assessee, but shown as debts from group company of the assessee. No other income except dividend and Income Tax Refund. are received. In para 5(0) of the assessment order, the AO has tried to give break- up and the nature of various expenses by the assessee. As per the break-up, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income. 4) That the Learned Commissioner of Income Tax (Appeals)-16, Kolkata erred in confirming the disallowance of Rs. 6,66,667 made by the Assessing Officer, on account of bad debts claimed by the Assessee Company, in complete disregard of the binding judgment of the Hon'ble Apex Court rendered in T.R.F. Ltd. vs. CIT [2010] 323 ITR 397 (SC). 5) That the Learned Commissioner of Income Tax (Appeals)-16, Kolkata erred in upholding the disallowance made by the Assessing Officer on account of the Depreciation of Rs. 10,97,669 which was admissible as per the provisions of Income Tax Act, 1961 read with Income Tax Rules, 1962. 6) That the Learned Commissioner of Income Tax (Appeals)-16, Kolkata erred in upholding the disallowance made by the Assessing Officer of the deduction of Rs. 4,90,000 claimed by the Appellant Assessee company under section 80G of the Income Tax Act, 1961. 7) That the Learned Commissioner of Income Tax (Appeals)-16, Kolkata erred in confirming the assessment of income of Rs. 16,85,400 under the head of "Income from other sources"against the head "business income" as claimed by the Appellant Assessee Company. 8) That the Learned Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tence and it is not a new company. In support of the contentions, the ld.AR of the assessee has relied on the following judgments:- ITA No.2940/Mum/2011 AY 2007-08, the order dated 27-07-2016 in the case of Pinebridge Investments Capital (I) P.Ltd (formerly known as AIG Capital (I) P.Ltd vs. ITO, Range 6(1)(4), Mumbai, wherein on identical issue, disallowance being consultancy charges paid to the legal advisor was partly allowed by the ITAT. 7. The ld.DR for the revenue primarily has reiterated the stand as taken by the Commissioner of Income-tax (Appeals), which we have already noted in our earlier para of this order, and is not being repeated for the sake of brevity. 8. Having heard the rival submissions and perused the material available on record, we are of the view that there is merit in the submissions of the assessee. As the propositions canvassed by the ld.AR for the assessee are supported by the Judgment of the ITAT (supra) and facts narrated above, Ld.AR has adduced the proof by showing the I.T return for the previous year that the so-called assessee company was in existence. The assessee also produced before us the object clause of the memorandum of Association, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has shown a comparative chart of income being consultancy charges receipt during the previous years ending in 2008, 2013, 2014 and 2015. The ld.AR also demonstrated before us the lease agreement of the building where the assessee company is situated/registered office of the company is situated. He has also explained that the assessee company has been doing its business continuously since its inception/incorporation. It is not necessary for a businessman that he should earn always profit. During the year under consideration, the assessee has shown loss by way of heavy incurred expenditure. Looking to the facts and nature of heavy expenditure which occurred heavy loss, the AO presumed that the assessee company has not been doing any business activity. It engaged in providing accommodation entires. The AO in his order finally mentioned that the assessee company in question was engaged in the business of providing of accommodation entry. In this regard, the ld.AR of the assessee has submitted that the AO did not bring any cogent material/evidence on record to show that the assessee company was engaged in the business of providing accommodation entry and did not do any business. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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