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TMI Blog2020 (5) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... of BMC taxes amounting to ₹ 7,99,519/- could be attributed to licensed premises. The proportionate amount comes to ₹ 1,51,900/-. In our opinion, this amount shall be added back to the rental income of ₹ 76 Lacs earned by the assessee. Consequently, the deduction of ₹ 1,51,900/- shall be allowable to the assessee. The rental income, after statutory deduction of 30%, would work out to ₹ 53.20 Lacs.Ground No.1 2 stand partly allowed. Allowability of business expenditure - HELD THAT:- We find that the assessee has not practically carried out any business activity during the year. Therefore, the expenditure on account of directors remuneration would not be allowable to the assessee. However, the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. GROUND No. III: DISALLOWANCE OF ALL EXPENDITURE DEBITED TO P/L ACCOUNT AMOUNTING TO ₹ 44,52,054/- 1. On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the Assessing Officer ( AO ) in disallowing the expenditure debited in the P/L Account alleging that the business of the appellant had not commenced and, therefore, the expenditure so incurred could not be allowed as a deduction. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that for allowing deduction of expenses, setting up of business is relevant and not commencement of business. 3. The Ld. CIT(A) failed to appreciate that in the earlier three assessment years it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iming statutory deduction of 30%, the rental income thus offered to tax amounted to ₹ 47.60 Lacs. Although the assessee claimed business expenditure of ₹ 44.52 Lacs but did not reflect any business income. The broad break-up of business expenditure, except BMC Taxes, as claimed by the assessee was as follows: - No. Particulars Amount (Rs.) (R/o) 1. Directors Remuneration 30.00 Lacs 2. Salaries 1.20 Lacs 3. Audit Fees 3.37 Lacs 4. Preliminary Expenses written off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t undertake to pay the liability of a third party. Therefore, the deduction of the same, while computing Income from House Property, was denied and the income of the assessee was determined at ₹ 53.20 Lacs. 3.1 Before Ld. CIT(A), the assessee filed additional evidences which were in the shape of license issued by Health Department of Municipal Corporation of Greater Mumbai in support of the fact that the business was already set-up. Against the same, a remand report was called from Ld. AO which was duly considered. 3.2 Upon due consideration, Ld. CIT(A) opined that the licensee was required to pay the rent as well as municipal taxes. Thus, the total liability of the licensee would work out to ₹ 83.99 Lacs which would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement dated 02/12/2011 as placed on record would reveal that the assessee has leased out certain area on the ground floor (referred to as Licensed premises) of the building previously known as Sail Sagar (now known as Dream House) A Wing standing on Plot No. 5, Dadar Matunga Division, near Dadar Railway Station to one Shri Mahendra Shivji Udeshi for a sum of ₹ 9.50 Lacs per month for the first 12 months starting from 01/08/2011. Accordingly, the assessee has earned rental income for 8 months amounting to ₹ 76 Lacs during the year under consideration. As per clause-4, the licensee alone was liable to pay all taxes, levies, outgoings etc. pertaining to the licensed premises. In case of failure, the licensor may, at i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the terms of lease and license agreement, the licensee alone was liable to pay all taxes / outgoings with respect of leased premises. However, the same could be paid by the assessee and the same were reimbursable by licensee. This position has also been reiterated by the assessee in its submissions. However, the liability to pay the taxes was with respect of licensed premises only which was approx. 19% (232 Sq.Meters out of 1246.66 Sq. Meters) of total area of the building. Therefore, 19% of BMC taxes amounting to ₹ 7,99,519/- could be attributed to licensed premises. The proportionate amount comes to ₹ 1,51,900/-. In our opinion, this amount shall be added back to the rental income of ₹ 76 Lacs earned by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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