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TMI Blog2017 (12) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... old the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue and dismiss ground no 1 of the revenue’s appeal. Disallowance on account of business promotion expenses - Held that:- After having considered the nature of business of the assessee which warrants the incurring of expenditure on business promotion, the Ld. CIT(A) allowed the claim of the assessee for business promotion expenditure to the extent of 90% and sustained the disallowance only to the extent of 10% on account of personal and unverifiable element involved in the said expenditure. As rightly contended by the learned DR, the relief given to the Ld. CIT(A) to the assessee on this issue to the extent of 90% is quite excessive and unreasonable keeping in view the case made out by the A.O. showing the involvement of personal and unverifiable element, which has remained uncontroverted even before the Ld. CIT(A). Having regard to all the facts and circumstances of the case, we are of the view that it would be fair and reasonable to allow the expenses claimed by the assessee on business promotion to the extent of 75% and disallow the balance 25%. We accordingly modify the impugned order of the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly owned by M/s. Equus Commotrade Pvt. Ltd., M/s. Kanistha Pvt. Ltd. and M/s. Panchavati Vincome Pvt. Ltd. and after taking the same on lease on an annual rent of ₹ 1,80,000/-, the same was let-out by the assessee to M/s. Japan Power Service Pvt. Ltd. from 01.04.2007. Since the assessee was not the owner of the said office space, the rental income received from the same was declared by him as his business income. According to the A.O., the said income however constituted income of the assessee from other sources. In the profit and loss account, a sum of ₹ 25,74,066/- was debited by the assessee on account of municipal taxes and penalties in respect of the said office space letout to M/s. Japan Power Service Pvt. Ltd. From the relevant municipal demand, the Assessing Officer noted that the municipal taxes were in respect of earlier period from 1988 to 2004 and the person liable to pay the said arrears was the then owner, M/s. Janapriya Finance Industrial Investment (I) Ltd. and M/s. Lansdowne Properties Ltd. and not the assessee or the 3 companies who were the present owner of the property. He held that the expenditure on payment of municipal tax arrears thus was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08. The appellant has also filed copies of assessment order for earlier years and as well as for subsequent year i.e. for assessment year 2010-11 in support of the contention that the appellant had taken many flats on rent at 14/1, Burdwan Road, Kolkata and earned income of ₹ 1,64,54,896.85 by subletting to different persons and the same was also assessed as income from business. Rental income is assessable as income from other sources, when there is ancillary services and where service agreement is dependent of rental agreement as also where there is inseparable letting income. In CIT vs A.V.K. Constructions (P) Ltd. (2007), 292 ITR 512 (Mad), it was held that since lessee was not owned of the property, the rental income received by lessee from transaction of sub-letting would not be assessable as income from house property, but was assessable in the circumstances of the case as business income. Considering the facts of the case, I did not find any justification from departing from the past and subsequent action in assessing the income from sub-letting of the flat as the appellant s income from profits and gains of business or profession. For this reasons, I am of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was entitled for deduction on account of property tax arrear in the year under consideration on payment basis under section 43B of the Act. 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the deduction claimed by the assessee on payment of municipal tax arrears was disallowed by the A.O. on the ground that the said expenditure pertained to the earlier years and the assessee was not liable to pay the same. Since the corresponding rental income received by the assessee from sub-letting of the property was held by the A.O. as chargeable to tax in the hands of the assessee under the head income from other sources , he held that the expenditure incurred by the assessee on payment of municipal tax arrears was not wholly and exclusively laid out or expended for earning the rental income and the same, therefore, was not eligible for deduction under section 57(iii) of the Act. The Ld. CIT(A), however, allowed the claim of the assessee for deduction on payment of municipal tax arrear, inter alia, on the basis that the corresponding rental income earned by the assessee from the sub-letting of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure was challenged by the assessee in the appeal filed before the Ld. CIT(A) and after considering the submission made by the assessee as well as the material available on record, the Ld. CIT(A) restricted the disallowance of ₹ 8,40,113/- to ₹ 84,011/- thereby giving relief of ₹ 7,56,102/- to the assessee on this issue for the following reasons given in paragraph no. 5.6.3 of his impugned order: There is no denying the fact that the expenses were incurred by payments through credit card and club payments. Apparently, the Assessing Officer has not made any effort to ascertain the veracity of the payments before making 100% disallowance. The appellant is in the hospitality business and in order to attract customers, it is obliged to incur expenses for development of business. The mere fact that vouchers are not kept for such expenditure itself will not render whole of the expenditure as disallowable. However, the appellant being an individual entity, the possibility of incurrence of expenses for personal use cannot be over ruled. Therefore, in my view, a disallowance of 10% of the expenses for un-vouched and unverifiable nature of expenditure will meet th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the said exempt income however was offered by the assessee as required by the provisions of section 14A. The A.O., therefore, worked out such expenditure at ₹ 4,23,745/- by applying Rule 8D and made a disallowance to that extent under section 14A of the Act. On appeal, the Ld. CIT(A) restricted the said disallowance to ₹ 1,09,861/- for the following reasons given in paragraph no 5.8.3 of his impugned order: I have considered the facts, the finding of the Assessing Officer and the mate placed on record. Since the appellant had not made any investment in shares out of the borrowed capital during the year to earn the exempted income, no part of interest expenses could be disallowed under section 14A of the Act. As regards disallowance u/s 14A out of administrative expenses i.e. 0.5% of the average investment in quoted share I find the working as made by the appellant at ₹ 1,09,861/- reasonable. Having regard to the facts, the disallowance under section 14A is restricted to ₹ 1,09,861/-, the appellant gets relief of ₹ 3,13,893/- on this ground. 14. We have heard the arguments of both the sides on this issue and also perused the relevant mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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