9911796707
TMI Blog2024 (11) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenditure without pointing out any element of such expenditure. It is noted that only requiring u/s 37 of the Act is that the expenses, which are not capital or personal in nature, can be claimed for the purpose of the business or profession. There is no need to demonstrate that a certain expense relates to a particular income in order to claim such expense. However from the discussion made above, it is clear that the appellant, in more than one we, has substantiated necessity and genuineness of expenses claimed.. The CIT(A) in his order has rightly deleted the adhoc disallowance. Ground no.2 of the appeal of the revenue is rejected. - S. Rifaur Rahman, Accountant Member And Shri Vimal Kumar, Judicial Member For the Assessee : Shri Gautam Jain, Advocate, Shri Lalit Mohan, CA For the Revenue : Ms. Kirti Sankratyayan, Sr. DR. ORDER PER S.RIFAUR RAHMAN, AM: 1. This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax Appeals/National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to Ld. CIT (A) ) dated 29.02.2024 for AY 2015-16. 2. Brief facts of the case are, assessee an individual having income from House Property , Capital Gain s and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant submissions below: 6.1. The assessee is an individual having income from house property capital gains and other sources . The assessee has declared foreign income aggregating to Rs. 2,90,32,093/- [Rs. 2,90,30,165 (foreign income-Dividend) + Rs. 1,928/- (foreign income-Interest)] and claimed expenditure of foreign expenditure of Rs. 2,30,39,645/-. 6.2. The factual matrix is that a trust was created by M/s Merrill Lynch (hereinafter referred to as ML ) for the benefit of the assessee and his family members and both the trust and the underlying investment company were being managed by ML through its financial advisor in USA. The income of the trust and the underlying investment company is being included in the income of the assessee every year. Since, the assessee had no direct control over the account/investments, as he was residing in India and also lacking in accounting knowledge, his financial advisor at ML took advantage and misappropriated lot of funds from the accounts of the trust/investment company and did lot of unauthorized transactions in these accounts and also there were various other irregularities in these accounts. 6.3. It is submitted that pending enquiries aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire expenditure of Rs. 2,30,36,645/- without giving adequate opportunity to the assessee. The learned Assessing Officer in the order of assessment in paras 4.4 and 4.5 has held as under: 4.4 Further even if for the sake of discussion, we consider the argument of assessee that these expenditure were for bringing income of Rs. 2,90,32,094/- back into the country and in the safe custody of the assessee, no evidences/documents were provided by the assessee which can prove that these professional charges were actually paid for the above mentioned purposes. The assessee has mentioned that all the accounts were freezed by the ML and he had to engage expert professionals. No evidences were provided by the assessee that his profile was represented by these professional with ML nor did he bring any correspondence with ML proving that there is any legal feud of assessee with ML. 4.5 On perusal of the submissions given by the AR, it is found Besides, it is worth noting that no ensure the inflow of Rs. 2,90,32,094/- crores back into the country and in the safe custody of the assessee, the financial advisor charged a fee of Rs. 2,30,36,645/- crore, i.e. more that 75% fee/commission. Nowhere in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v. Rajendra Prasad Moody reported in 115 ITR 519. It is submitted that the quantum of expenditure is neither determinative nor relevant for allowability of expenditure. It is also submitted that evidences on record in respect of disallowance of sum of Rs. 2,30,36,645/- u/s 57(iii) of the Act is as under:- Sr. No. Name of the party Services rendered Amount (Rs.) i) A G Corporate Services (P) Ltd. Professional charges towards handling advising on banking, FEMA, Tax and other related matters from time to time Evidence Sr. No. Nature of evidences pages of Paper Book i) Copy of invoice of A G Corporate Services (P) Ltd. 152 ii) Copy of Form No. 16A of A G Corporate Services (P) Ltd. 188 189 iii) Copy of write-up explaining issues with Merrill Lynch and role of the team of professionals and correspondence with Merrill Lynch and there council from/to Adv. PunjalaSunithaNarhari on the dispute. 261 274 1,12,36,000 ii) PunjalaSunithaNarahari Fee towards rendering legal advisory services in connection with the FINRA arbitration matter initiated to recover the monies with Merrill Lynch (New York, USA) including towards review of papers, preparing briefs, co-coordinating with l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,36,645/- u/s 57(iii) of the Act, for the reason that the expenditure claimed by the assessee is more than 75% of the fees or income earned by the assessee. There is no correlation to the income earned under the head income from other sources. In our view, the issue is covered by the judgment of Hon ble Apex Court in the case of Rajendra Prasad Moody (115 ITR 519) wherein it was specifically held that once genuineness of an expenditure was not disputed by the Assessing Officer, disallowance cannot be made in terms of the provisions of section 57(iii) of the Act. The relevant findings reads as under: It is also interesting to note that, according to the Revenue, the expenditure would disqualify for deduction only if no income results from such expenditure in a particular assessment year, but if there is some income, howsoever small or meager, the expenditure would be eligible for deduction. This means that in a case where the expenditure is Rs. 1000/-, if there is income of even Re. 1/-, the expenditure would be deductible and there would be resulting loss of Rs. 999/- under the head 'Income From Other Sources'. But if there is no income, then, on the argument of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the deduction of an expense. 8. We observed that the learned CIT(A) followed the judgment of Apex Court in the case of Rajendra Prasad Moody (supra) and deleted the disallowance. The relevant portion of the learned CIT(A) s decision on the issue is reproduced below: 12 The issue is squarely covered by the order of the Hon ble Apex Court in the case of Rajendra Prasad Moody [1978] 115 ITR 519 (SC), wherein it was specifically held that once genuineness of an expenditure was not disputed by the Assessing Officer, disallowance cannot be made in terms of the provisions of section 57(iii) of the Act. The underlying principle of netting logically gets attracted as no prudent businessman would allow taxation of the interest income de-hors the expenditure incurred for earning such income. Therefore it was incumbent upon the AO to prove otherwise before making any disallowance. 12.1 In the present case, authenticity of expenditure was never doubted by the AO. On the other hand, from the submissions made by the appellant, it clearly appeared that there were indeed legal issues and disputes involved with the foreign bank and the investments of the appellant. This necessitated hiring of prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding as under: 13 Coming to the second ground of appeal it was noted that the addition of Rs. 2,10,000/- was made by the AO u/s 37 of the Act on the basis of estimation. No specific bill or voucher was singled out to buttress the inference drawn and conclusion reached. In contrast, only requiring u/s 37 of the Act is that the expenses, which are not capital or personal in nature, can be claimed for the purpose of the business or profession. There is no need to demonstrate that a certain expense relates to a particular income in order to claim such expense. However from the discussion made above, it is clear that the appellant, in more than one we, has substantiated necessity and genuineness of expenses claimed. 13.1 It is also of common knowledge that whenever any estimation is required to be made, lot of guesswork gets involved. Therefore, various courts have held on a regular basis that conjecture and surmise cannot serve as the bedrock of any disallowance. Respectfully following such coordinated judgments, AO is directed to delete the impugned addition. Accordingly, Ground of Appeal at 2 is answered in favour of the appellant. 11. On careful consideration and after hearing both ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
