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TMI Blog2017 (5) TMI 1482X X X X Extracts X X X X X X X X Extracts X X X X ..... SAINI , ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER Appellant by : Sh. Anil Bhalla, Adv. Respondent by : Sh. Rajesh Kumar, Sr.DR O R D E R PER BEENA A. PILLAI, J.M : 1. These are two appeals filed by assessee for assessment year 2006-07 and 2008-09 against orders dated 20.04.2012 and 30.09.2011 respectively passed by Ld. CIT (A)-IX, New Delhi. As the issues involved are more or less common, we are disposing of these appeals by way of a common order. Grounds raised by assessee in this appeal are as under: ITA no. 4193/Del/2012 (AY 2008-09) (2006-07 ) 1. The learned Commissioner of Income-Tax (Appeals) has erred both on facts and in law in upholding the action of the learned Assessing Officer in disallowing interest paid amounting to ₹ 9,84,375/-, u/s 40(2) of the Act allegedly on the ground that the same is excessive. 2. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the learned Assessing officer s action in further disallowing on ad hoc basis expenses amounting to ₹ 68350/- u/s 14A in addition to ₹ 40,194/- disallowed by the appellant company in its return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m International to be excessive thereby reducing liability by 2.25%. Ld. AO made a disallowance of ₹ 9,84,375/- being 2.25% on ₹ 4,37,50,000/-. 6. Ld. AO also made disallowance under section 14A amounting to ₹ 68,530/- on dividend income and long term capital gain earned by assessee. 7. Aggrieved by order of Ld. AO assessee preferred appeal before Ld. CIT(A), who confirmed addition in hands of assessee. 8. Aggrieved by order of Ld. CIT(A) assessee is in appeal before us now. 9. Ld. AR submitted that amount of ₹ 4,37,50,000/- has been received by assessee in the earlier years which has been converted into loan and has been included in the work in progress in the real estate project. Ld. AR referred to page 50 of the paper book, where monies have been utilized as work in progress. Ld. AR submitted that available surplus funds were used to give short-term loans with main objective to have money available in view of ongoing real estate project. He submitted that interest paid to Magnum International at 12.5% stood utilized, and were different than interest of 10% received on temporary loans advanced to Big India Malls Pvt. Ltd., and 12% compounded qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n comparison with the rate at which assessee has advanced money to other companies. Such kind of comparison under this section defeats the basic intent of legislature. 15. It is further observed that assessing officer has to base his opinion of excessiveness or unreasonableness in regard to fair market value of goods, services or facilities for which payment is made. In the present case, assessing officer do not have any materials on record in respect of existing market rate of interest, that would be applicable in similar circumstances that of assessee. 16. In a nutshell entire onus lies upon assessing officer to establish that expenses incurred by assessee is excessive. In the facts of present case assessing officer has neither done any exercise nor has brought any material/evidences on record based on which an opinion could be formed for disallowance of expenses incurred by assessee. 17. In our considered opinion disallowance made in this manner will not stand test of law. Accordingly, we allow this ground of appeal raised by assessee. 18. Ground No. 2 is in respect of disallowance of ad hoc expenses under section 14A of the Act. 19. Ld. AR submitted that assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the appellant company the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the order of the learned Assessing Officer in disallowing consultancy charges amounting to ₹ 16,44,711/- allegedly on the ground that the same has not been incurred wholly exclusively for the purposes of business and therefore not allowable in terms of Section 37(1) of the Act. 3. That on the facts and in the circumstances of the appellant company the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the order of the learned Assessing Officer in enhancing the disallowance of expenses u/s 14A from ₹ 4,90,212/- to ₹ 11,12,896/- and thereby making an addition of ₹ 6,22,684/- by wrongly invoking Rule 8D of the Income Tax Rules, 1962 and thereby not following the decision of the Hon'ble juris die tional High Court dated 18.11.2011 in Maxopp Investment Ltd. brothers ITA 687/2009. 4. The appellant craves leave to add, alter or amend the ground of appeal at a later stage. 25. Brief facts of case are as under: Assessee filed its return of income for the year under consideration on 30.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow entire agreements, income tax details of all consultants and evidence of tax deducted at source in respect of these consultancy payments made for the year under consideration. He thus urged for the addition to be deleted. 33. Ld. DR relied upon orders of the authorities below. 34. We have perused submissions advanced by both sides in the light of the records placed before us. 35. It is observed that consultancy expenses paid by assessee were towards legal and professional charges, project management fees supervisory charges etc. Looking into nature of business carried on, the assessee needs consultants for handling various issues of projects. Assessee is carrying on with business of real estate which requires services of specialised consultants like architects, interior decorators etc. 36. It is observed that Ld. CIT(A) confirmed the addition as assessee did not explain the nature of services and basis of apportioning the expenses into 75:25. 37. Assessee has incurred similar expenses in the preceding assessment years, which has not been disputed by Ld. AO. In fact for A. Y. 2006-07, which has been argued before us, no such disallowances have been observed to have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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