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TMI Blog2021 (1) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... s U/s 38(1) - We are of the view that the relevant facts for deciding this ground of appeal are not available on records of the Tribunal; and that these relevant facts are needed to be brought on record. Therefore, we set aside this issue to the file of the AO with the direction to pass a fresh order as per law for deciding the issue regarding allowability of rent paid after providing the assessee a reasonable opportunity. Disallowance towards director remuneration - HELD THAT:- Whether the assessee has deducted tax at source under Section 192 of I.T. Act in respect of the disputed amount of enhanced remuneration paid to the Director, is also not available on our record. We find that the lower authorities, AO as well as Ld. CIT(A), have also not examined these aspects; and have not brought relevant facts on record. We find that for the purposes of Section 40A(2) relevant facts pertaining to enhanced remuneration paid to the Director, such as free market value, legitimate needs of assessee s business and benefit derived by / accruing to the assessee are not available on the records. For deciding this ground of appeal are not available on records of the Tribunal; and that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,161/- (rounded off to 2,26,70,160/-). In the aforesaid fresh assessment order dated 03.12.2018, additions amounting to ₹ 1,00,66,740/- (on account of disallowance of interest on loan); ₹ 6 lakhs (on account of disallowance out of Director s Remuneration ) and ₹ 54 lakhs ( on account of disallowance of rent) were made by the AO. The relevant portion of the Assessment Order is reproduced below for ease of reference: 6. Further vide notesheet entry dated 13.11.2018, the CA/AR of the assessee was asked to submit reply according to questionnaire dated 26.09.2018 alongwith documentary evidences. In response, neither anybody attended nor filed any written submission till date. The onus to prove genuineness of transactions is on assessee to substantiate its claim in return o income. But the assessee has failed to do the same. As the assessee has failed to substantiate its claim, the following disallowance /addition is being made:- (i) Interest on loan:- The assessee company has advance long term loan of ₹ 22,54,94,660/- to M/s Durga s Global Hotel U.K. ₹ 24,44,560/- to Sikandra Auto India , ₹ 9,00,000/- to S.C. S.C. bloc and ₹ 9,98,570/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenditure is not incurred wholly and exclusively for the purpose of business. (Disallowance of ₹ 54,00,000/-) 6.1 In view of the above, I have reasons to believe that the assessee has furnished inaccurate particulars of its income and therefore penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for furnishing inaccurate particulars of income mentioned at para 6 above. (C) The assessee filed an appeal before the Ld. CIT(A). Vide impugned appellate order dated 13.11.2019, the Ld. CIT(A) dismissed assessee s appeal, sustaining all the aforesaid additions made by the AO in the aforesaid fresh Assessment Order dated 03.12.2018. The relevant portion of the aforesaid impugned appellate order dated 13.11.2019 is reproduced as under for ease of reference: 6.1 Ground no.1:- This ground is directed against addition of ₹ 100,66,740/- u/s 36(l)(iii) on account of disallowance of interest as the appellant extended interest-free advances by diverting interest-bearing funds for non-business purposes. During the hearing of set aside case, the appellant submitted that the appellant is expected to get better returns in future an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of disallowance of rental expenditure. The AO has noted that the lease deed for rented/leased property clearly shows that the premises were exclusively used by the director for residential purposes. However, the appellant had submitted that the property was not utilized personally by the director. As the documentary evidence goes against the submission of the appellant, the AO made addition accordingly. 6.8 During the appellate proceedings, it was agitated that the rent paid for residential accommodation of the director is a business expenditure. No legal justification or any judicial precedence has been relied on by the appellant in support of the claim. The submission is devoid of merit and is rejected. This ground is ruled against the appellant. (D) Assessee filed the present appeal in Income Tax Appellate Tribunal ( ITAT , for short) against the aforesaid impugned appellate order dated 03.12.2018 of Ld. CIT(A). Vide order dated 06.03.2020 in S.A. No. 162/Del/2020, coordinate Bench of ITAT, Delhi stayed the entire demand in the case of the assessee which resulted from the aforesaid impugned appellate order dated 13.11.2019 of the Ld. CIT(A). In the appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the order of the AO and Ld. CIT(A) have already been reproduced in foregoing paragraphs (B) and (C) of this order respectively. At the time of hearing before us, the ld. Counsel for assessee drew our attention to order of ITAT, Mumbai in the case of Acuity Holdings Pvt. Ltd. vs. DCIT in ITA No. 4011/Mum/2017. The Ld. Counsel for the assessee also relied on the submissions made before the Ld. CIT(A) in written submissions dated 05th November, 2019 which is reproduced as below: 6. Ground- of Appeal No. 3: The ground of appeal relates to disallowance of ₹ 54,00,000 paid by the assesses Company for lease property taken on lease for the purpose of business of the assessee company.' During the course of the assessment proceedings the' AO, following the direction of learned C.I.T. sought reason why such expense may not be disallowed as the premises was used by director, The assessee filed reply which is reproduced in the assessment order, but the AO being dissatisfied disallowed the rent paid holding that- the expenditure is not incurred wholly and exclusively for the purpose of business. 7. It is humbly submitted that the AO erred in disallowing the said r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available before us in the records. The assessee has also made a reference to Section 38 of I.T. Act for apportionment of expenses U/s 38 of I.T. Act. Under Section 38 of I.T. Act, a portion of the expenses is allowable to the assessee as deduction, having regard to use of the premises / building for the purposes of assessee s business. We find that the lower authorities the AO as well as the Ld. CIT(A) - have not considered the applicability of Section 38 of I.T. Act; and further, that the relevant facts are not available on the records on the basis of which fair apportionment can be made. Moreover, neither the assessee has furnished details for such apportionment; nor the lower authorities - the AO as well as the Ld. CIT(A)-have considered apportionment of expenses U/s 38(1) of I.T. Act. In view of these facts and circumstances, we are of the view that the relevant facts for deciding this ground of appeal are not available on records of the Tribunal; and that these relevant facts are needed to be brought on record. Therefore, we set aside this issue to the file of the AO with the direction to pass a fresh order as per law for deciding the issue regarding allowability of rent p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides. We have perused the materials on record. We have considered the judicial pronouncement brought to our attention. Although it has been contended by the Ld. Counsel for the assessee, for claiming benefit of CBDT Circular dated 6-7-1968, that the assessee company as well as the Director are both in the highest tax bracket; relevant papers to show the rate at which the Director is taxed is not available on our records. Moreover, whether the assessee has deducted tax at source under Section 192 of I.T. Act in respect of the disputed amount of enhanced remuneration paid to the Director, is also not available on our record. We find that the lower authorities, AO as well as Ld. CIT(A), have also not examined these aspects; and have not brought relevant facts on record. Further, we find that for the purposes of Section 40A(2) of I.T. Act, relevant facts pertaining to enhanced remuneration paid to the Director, such as free market value, legitimate needs of assessee s business and benefit derived by / accruing to the assessee are not available on the records. In view of the foregoing, we are of the view that the relevant facts for deciding this ground of appeal are not available on re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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