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TMI Blog2019 (10) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities below to disallow the amount in question - set aside the Orders of the authorities below and delete the addition made by the A.O Disallowance of Office expenses and office maintenance expenses - A.O. disallowed the amounts in question by applying the provisions of Section 40A(2)(b) - HELD THAT:- even for applying the provisions of Section 40A(2)(b) it is for the A.O. to make out a case that expenditure incurred is excessive or unreasonable having regard to the fair market value of such services. No efforts in this regard have been made by the A.O. Therefore, there were no justification for the A.O. to divide the entire amount between 16 parties to make the disallowance. The method applied by the A.O. is not acceptable in view of the language prescribed under section 40A(2)(b) of the I.T. Act, in which A.O. has made disallowance. The Hon ble Supreme Court in the case of Upper India Publishing House Pvt. Ltd., [ 1978 (12) TMI 2 - SC ORDER] held that before applying the provisions of Section 40A(2)(b) the A.O. should have prove that the expenditure is excessive or unreasonable. It may also be noted here that A.O. disallowed both the expenses considering that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty shares. The income from investment in equity comes to ₹ 98,81,855/- which is claimed as exempt. The A.O. noted that against the three source of income, company has claimed administrative and selling expenses ₹ 26,25,989/- The assessee has received exempt dividend income of ₹ 69,08,245/- whereas it has added back only ₹ 10,000/- as disallowance under section 14A of the I.T. Act. The assessee was required to explain as to why disallowance under section 14A of the I.T. Act should not be made. The assessee submitted before A.O. that A.O. has desired that disallowance in respect of administrative expenses should be considered on the following expenses and be made in proportion to the exempt income earned to the total income i.e., Office Rent, Legal and Professional Charges, Office Maintenance, Printing Stationery and General Expenses. On the basis of this, assessee has worked-out a fresh calculation, according to which, the total disallowance amount worked-out at ₹ 62,701/-, against which, assessee has already considered ₹ 10,000/- in the return. Assessee, therefore, explained that still if A.O. feels that disallowance considered by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have to record its satisfaction to that effect. Learned Counsel for the Assessee, therefore, submitted that addition is wholly unjustified. 5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below. 6. After considering the rival submissions, we are of the view that addition is wholly unjustified. The assessee has various sources of income and mostly from the Group Company. The assessee has received exempt dividend income of ₹ 69,08,245/- and added back ₹ 10,000/- on account of proportionate disallowance under section 14A of the I.T. Act. The A.O. however, desired the assessee to workout afresh disallowance under section 14A to be made in proportion to the exempt income earned to the total income. The assessee made a fresh working and offered for disallowance a sum of ₹ 62,701/- against ₹ 10,000/- already added back in the return of income. The A.O. did not point-out any infirmity in the fresh calculation of the assessee. The A.O. has not recorded any satisfaction in the assessment order as to how the calculation made by assessee was incorrect. The A.O. relied upon Order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure facilities belonging to M/s. Ritu Nanda Insurance Services Pvt. Ltd. For this purpose, the assessee pays ₹ 70,000/- per month for use of such facilities. In addition, the proportionate electricity charges are also paid. The assessee company has also made payments to M/s. Technovative Engineers Pvt. Ltd. for providing manpower in the nature of helper, assistants and drivers. The said company has been entrusted with task of housekeeping, day to day maintenance, job of equipments, handling of mails and mails delivery, managing electrical and communication equipments etc. This party was being paid for such services @ ₹ 41,865/- per month up-to June 2010. With effect from 01.07.2010, their service charges have been increased to ₹ 47,760/ - per month The A.O. further found that assessee company has not entered into any agreement with the related party i.e. M/s. Ritu Nanda Insurance Pvt. Ltd. The assessee company has simply produced a letter without specifying the area and value of rent expenditure charged. Further it is stated that M/s. Ritu Nanda Insurance Pvt. Ltd. is paying 4,76,100/- Per month for this off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was also found that M/s. Ritu Nanda Insurance Pvt. Ltd., was also paying monthly rent of ₹ 4,76,100/- from May, 2010 for this Office space. The office space is utilised by 16 companies including related party and the assessee. It is, thus, clear that assessee company sharing office space with M/s. Ritu Nanda Insurance Pvt. Ltd., along with other group related parties. It is not a denying fact that assessee was using office space for the purpose of business and at the time of visit of the Inspector also assessee was found to have using the office space on rent and that assessee was also paying maintenance charges. The A.O. disallowed the amounts in question by applying the provisions of Section 40A(2)(b) of the I.T. Act. The assessee has explained before the authorities below the circumstances in which the payments have been made. There is nothing unreasonable in this regard. In any case, even for applying the provisions of Section 40A(2)(b) of the I.T. Act, it is for the A.O. to make out a case that expenditure incurred is excessive or unreasonable having regard to the fair market value of such services. No efforts in this regard have been made by the A.O. Therefore, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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