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TMI Blog2019 (4) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have examined the correctness of the statement made by the assessee that no expenses were incurred for earning the exempt income during the year and if and only if the Ld. AO is not satisfied on this account after making reference to the accounts, he is entitled to adopt the method under Rule 8D of the Rules. While allowing the plea of the assessee direct AO to delete the addition made on this score also. Ad hoc disallowance on account of telephone and vehicle expenses - 1/8th of these expenses was disallowed u/s 37(1) being of personal nature - CIT(A) restricted the addition to 1/10th of the expenses claimed - HELD THAT:- Entire addition is wholly unjustified. The AO has not pointed out on which items personal element was involved in claiming the aforesaid expenses. AO has not pointed out any specific item which is used by the assessee for personal purposes. It is ad hoc addition made by the AO by disallowing 1/8th out of these expenditures. It is well settled law that ad hoc addition cannot be sustained unless AO has pointed out any specific item in which personal element is involved. There was thus, no justification to make any disallowance out of these expenditures. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s 143(1) of the Act. The case was selected for scrutiny. The AO after giving opportunity of being heard to the assessee made certain additions/disallowances to the tune of ₹ 20,37,664/- which was challenged before Ld. CIT(A). The Ld. CIT(A) partly allowed the appeal of assessee. 4. In the background of these facts, we proceed to decide the grounds of appeal as under: 1. That the Ld. CIT(Appeals) has grossly erred both in law and on facts in partially sustaining the additions/disallowances made by the Ld. Assistant Commissioner of Income Tax, since such additions/disallowances made are wholly unwarranted on facts and in law. 2. That the Ld. CIT(A) has grossly erred in sustaining the disallowance of interest debited in the profit and loss account of ₹ 1,42,376/-, failing to appreciate that aforesaid interest has been paid in respet of loan taken for the purchase of car, and such car has been used for the profession of the appellant and in respect of such car depreciation has also been allowed. 2.1 That the Ld. CIT(A) has erred in failing to appreciate that Ld. ACIT has disallowed the aforesaid interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 That in doing so, the Ld. CIT(A) has failed to appreciate the judicial mandate of Hon ble Jurisdictional High Court in the case of CIT vs. Asahi India Safety Glass Ltd. allowed as revenue expenditure. 6.2 That the Ld. CIT(A) while sustaining the instant assessment has proceeded on irrelevant and extraneous considerations, by disregarding the submissions/material/evidence furnished by the assessee appellant in shape of detailed replies and information s and as such, the addition so sustained, is wholly untenable on facts and also in law. 7. That the Ld. CIT(A) has grossly erred in recording adverse findings which are perverse and have been recorded without considering the factual substratum of the case and hence such findings are vitiated and deserves to be deleted. 8. That the Ld. CIT(A) has grossly erred in sustaining the assessment without providing to the assessee, a fair and proper and meaningful opportunity of being heard, thereby violating the principles of natural justice and thus such an order is vitiated both on fact and in law. 5. Ground no. 1 is general and need no adjudication. 6. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as has been considered in AY 2009-10. He has submitted that assessee preferred appeal before ITAT D Bench in AY 2009-10 and appeal of assessee has been allowed on the similar ground, vide order dated 15.11.2018 in which the Tribunal in para 6 held as under: 6. Ld. AR submitted that this car loan was the only interest-bearing loan that was taken by the assessee during the year and all the other funds are either interest free loans or the balance of capital account available with him. We find force in the submission of Ld. AR that the car loan of ₹ 50 lacs is no match against the amounts advanced during the year under consideration which are to the tune of ₹ 2.98 crores by the assessee. Further, it is not the case of the Ld. Assessing Officer that the car loan was diverted for any other purpose, because there isno denial of the statement of the assessee that the loan amount was directly disbursed to the seller of the car. Inasmuch as the loan was for the purpose of business and no question of diversion of such funds had taken place, merely because the assessee placed his own funds and also the interest free loans for some other purposes, is not open f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D disallowed expenditure of ₹ 6,08,180/- which is attributed to the earning of exempt income. 15. The addition was challenged before Ld. CIT(A). The written submission of the assessee is reproduced in the appellate order in which it was stated that AO has not specified or pointed out any expenses, whatsoever claimed by assessee for earning the said dividend income. The assessee relied upon the decisions of Delhi High Court in the cases of CIT vs. Taikisha Engineering India Ltd. 275 CTR (Del.) 316 and Joint Investments (P) Ltd. vs. CIT 275 CTR 471. The Ld. CIT(A), however, confirm the addition and dismiss the appeal of assessee. 16. After considering the rival submissions, we are of the view that addition is wholly unjustified. Ld. Counsel for assessee submitted that similar issue was considered by ITAT Delhi D Bench in the case of assessee for AY 2009-10 vide order dated 15.11.2018 (supra) and similar addition has been deleted. The findings of the Tribunal in para 8 of the order above is reproduced as under: 8. We have gone through the findings of the Ld. Assessing Officer on this aspect. Ld. Assessing Officer recorded tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We, therefore, while allowing the plea of the assessee direct the Ld. Assessing Officer to delete the addition made on this score also. Copy of the order is provided to the Ld. DR who did not dispute the same. 17. Considering the facts of the case, in the light of the findings of the Tribunal in AY 2009-10 (supra), we are of the view that issue is covered in favour of the assessee by above order of the Tribunal in the case of the same assessee. Following the reasons for the decision of the same, we set aside the orders of the authorities below and delete the addition. 18. Ground no. 3 of appeal of assessee is allowed. 19. On ground no. 4 assessee challenged the ad hoc disallowance of ₹ 2,00,538/- on account of telephone and vehicle expenses. The AO referred to audit report which stated that personal element of amount debited to the profit and loss account could not be ascertained. AO noted that assessee has claimed telephone and telex, vehicle running and maintenance expenses and depreciation on vehicle in profit and loss account. The total expenses are amounting to ₹ 20,05,388/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses of NDSE office are allowable. 23. Ld. CIT(A) considering the bills and explanation of the assessee partly allowed the claim of the assessee. The Ld.CIT(A), however, disallowed the following expenses: 1. ₹ 13,700/- on account of electricity and water for farm house at Satbari, Mehrauli. 2. ₹ 37,858/- were disallowed as 1/3rd of the electricity and water charges of residence-cum-office at Navjeevan Vihar, New Delhi. 3. ₹ 22,880/- were disallowed for residence at Panchsheel Park, New Delhi. 24. After considering the rival submission, we are of the view that no interference is called for in the matter. The assessee pleaded that bills of Satbari, Mehrauli Farm house may be disallowed which CIT(A) disallowed. The assessee also pleaded that 1/3rd of the expenses of residence-cum-office at Navjeevan Vihar, Delhi may be disallowed which Ld. CIT(A) disallowed. The Ld. CIT(A) also disallowed electricity expenses of residence of the assessee for which Ld. Counsel for assessee could not make any submission as to why the disallowance was not justified. Considering the above findings of Ld. CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are enables groups of computers to communicate with each other, while language software provides with tools required to write programmes. The aforesaid would show that what the assessee acquired through A was an application software which enabled it to execute tasks in the field of accounting, purchases and inventory maintenance. The fact that the application software would have to be updated from time to time based on the requirements of the assessee in the context of the advancement of its business and/or its diversification, if any; the changes brought about due to statutory amendments by law or by professional bodies like the Institute of Chartered Accountants of India, which are given the responsibility of conceiving and formulating the accounting standards from time to time, and perhaps also, by reason of the fact that expenses may have to be incurred on account of corruption of the software due to unintended or intended ingress into the system ought not give a colour to the expenditure incurred as one expended on capital account. Given the fact that there are myriad factors which may call for expenses to be incurred in the field of software applications, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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