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TMI Blog2024 (6) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles are used by the directors, even if they are personally used by the directors the vehicles are personally used by the company, because a limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provision of section 40(c) and section 40A(5). The findings of the CIT(A) cannot be sustained as same is bereft of any specific finding about the expenses under question. It is well-settled that a bald assertion would not be sufficient concluding that the expenditure is personal in nature when admittedly, the assessee is a company. Assessee appeal allowed. - Shri Kul Bharat, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Appellant : Shri R.K. Sharma, Adv. For the Respondent : Shri Kanv Bali, Sr.DR ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee is directed against the order passed by Ld.CIT(A), National Faceless Appeal Centre ( NFAC ), Delhi dated 18.07.2023 for the assessment year 2017-18. 2. The assessee has raised following grounds of appeal:- That the Ld. A.A completely erred on facts and in law in passing the impugned Assessment Order for A.Y- 2017- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no error is committed by the lower authorities in disallowing the expenses. 8. We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) after having considered the material on record and has given a detailed finding on facts. For the sake of clarity, the relevant contents of such finding are reproduced herein below:- 5. DECISION I have considered the grounds of appeal, statement of facts and also the written submissions filed by the appellant very carefully. Both the grounds raised in this appeal are taken up together for the sake of convenience. They are adjudicated as follows: (i). The only addition made in the assessment was Rs. 3,26,214/- being the disallowance of club expenses. As per AO: During the course of assessment proceedings, it was observed from 3CD its audit report that the assessee has claimed club expenditure and fee and subscription of Rs. 3,26,214/-, The assessee was asked to furnish justification, but assessee has not offered any plausible explanation. The said expenditure is personal nature. Therefore, the amount of club expenditure of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion rests with the taxpayer. The taxpayer must be able to demonstrate that the expense was incurred wholly and exclusively for the purpose of the business or profession, and that it was not for personal or private purposes. The assessee was claiming expenditure under section 37 of the Act, the burden was on the assessee to establish that expenditure was laid out or expended wholly and exclusively for the purpose profession and the aforesaid burden of business or could not have been shifted on the Assessing Officer to allow the expenses without production of supporting evidence, when a notice under section 142(1) was issued to furnish clarification and evidence concerning the return of income filed by the appellant. As laid down by the Supreme Court in the case of Swadeshi Cotton Mills Co. Ltd. v. CIT [1967] 63 ITR 57, that the question whether an amount-claimed as expenditure was laid out or expended wholly or exclusively for the purpose of the assessee's business, profession or vocation has to be decided on the facts and in the light of the circumstances of the each case. The mere existence of an agreement between the assessee and the commission agent, assuming, there was suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 'B' was: IT Expenses incurred on cultural events which has no nexus with assessee's business cannot be allowed as business expenditure . The Hon'ble ITAT has held that: Section 37(1) of the Income-tax Act, 1961 Business expenditure - Allowability of Assessment year 2008- 09 Assessee was engaged in business of mining and trading in minerals It spent Rs. 1.20 lakh on cultural events, like events to help blind and deaf children, organizing rose shows or musical events - It claimed such expenses to be business expenditure under section 37(1) Whether since there was nothing on record to show any nexus between events in question and assessee's business, claim under section 37(1) was to be disallowed - Held, yes [In favour of revenue] . (B). In another case reported in [2018] 93 taxmann.com 291 (Madras)/[2018] 255 Taxman 362 (Ma --in the case of L. Jairam Parwani. v. Deputy Commissioner of Income-tax, City Circle VI (Inv.), Chennai, in T.C. (A) NOS. 857 AND 858 OF 2008, DATED:APRIL 9, 2018, the issue before the Hon'ble High Court of Madras was: IT: Payment for acquiring membership in a social club was not a business expenditure, in absence of any evidence to effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred was personal in nature. This finding in our view is erroneous. Undisputedly, the assessee is a company, it would have no expenses of personal in nature. The AO ought to have verified whether such expenses were incurred in the course of business and for the business of the assessee. The company being juristic person would not have any personal expenses and would not incur personal expenses unlike living being. The body corporate operates through living beings. The authorities below failed to advert to this fundamental question. Hon ble Gujarat High Court in the case of Sayaji Iron Engg.Co. vs CIT 253 ITR 749 [Guj.High Court] under the similar facts held as under:- There is one more aspect of the matter which requires to be considered. The assessee which is a private limited company is a distinct assessable entity as per the definition of person under section 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, even if they are personally used by the directors the vehicles are personally used by the company, because a limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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