M/s. Kishens Accounting Solutions Pvt. Ltd. v. Income-tax Officer 9(2)(2), Mumbai
[Citation -2016-LL-0923-197]

Citation 2016-LL-0923-197
Appellant Name M/s. Kishens Accounting Solutions Pvt. Ltd.
Respondent Name Income-tax Officer 9(2)(2), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 23/09/2016
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags deferred revenue expenditure • opportunity of being heard • leave and licence • license agreement
Bot Summary: 09.2016 O R D E R PER AMARJIT SINGH JM: The assessee has filed the present appeal against the order dated 29.10.2014 filed by the assessee passed by Commissioner of Income Tax 20 Mumbai hereinafter referred to as the CIT(A) Mumbai relevant to A.Y.2011-12. Disallowance of Defferred Revenue Expenditure Rs.25 880 - being 1 5th of the pre-operative expense:- On the facts and circumstances of the case and in law the AO has erred in treating the pre-operative expenses as covered u s.35D and disallowed 1 5th of the same claimed by the assessee. Thereafter the Assessing Officer disallowed certain expenses and assessed the income of the assessee to the tune of Rs.2 11 507 -. Since the assessee was not satisfied with the assessment assessed by the Assessing Officer therefore the assessee filed an appeal before the CIT(A) who confirmed the order of the Assessing Officer therefore the assessee has filed the present appeal before us. The rent has been paid 2 ITA 7581 M 14 A.Y.2011-12 by the assessee to the licensor under the head agreement of amenities lies at page 14 of the paper book. The Assessing Officer disallowed the same on the ground of that the paid up capital of the assessee company was only Rs.1 00 000 - and only 5 of the same can be allowed u s.35D of the Act. The assessee company without having cash were claiming the expenditure therefore the Assessing Officer declined the claim of the assessee and the CIT(A) has also confirmed the same.


IN INCOME TAX APPELLATE TRIBUNAL J BENCH MUMBAI BEFORE SHRI R.C.SHARMA AM AND SHRI AMARJIT SINGH JM I.T.A. No.7581 Mum 15 ( Assessment Year: 2011-12) M s. Kishens Accounting Income Tax Officer 9(2)(2) Solutions Pvt. Ltd. Aayakar Bhavan Vs. Office No.404 4 t h Floor Churchagate Near Borivali Petrol Pump Mumbai Borivali West Mumbai - 400092 . .PAN GIR No. : AADCK7393L ( Appellant) .. ( Respondent) Assessee by: Shri Sushil U. Lakhani Department by: Shri B.S.Bist Date of Hearing: 03.06.2016 Date of Pronouncement:23.09.2016 O R D E R PER AMARJIT SINGH JM: assessee has filed present appeal against order dated 29.10.2014 filed by assessee passed by Commissioner of Income Tax (Appeals) 20 Mumbai [hereinafter referred to as CIT(A) ] Mumbai relevant to A.Y.2011-12. ITA 7581 M 14 A.Y.2011-12 2. appellant has raised following grounds:- 1. Disallowance of Rent of Rs.215 000 -:- On facts and circumstances of case and in law AO erred in disallowing Rs.215 000 - being compensation paid by assessee under Agreement for Extra Amenities for use of premise. 2. Disallowance of Defferred Revenue Expenditure Rs.25 880 - being 1 5th of pre-operative expense:- On facts and circumstances of case and in law AO has erred in treating pre-operative expenses as covered u s.35D and disallowed 1 5th of same claimed by assessee. 3. Addition u s.69C of Rs.58 635 -:- On facts and circumstances of case and in law AO erred in making addition of Rs.58 635 - on grounds that there were negative cash balances appearing in cash book on various dates. 3. brief facts of case are that assessee filed its return of income on 09.09.2011 declaring total loss to tune of Rs.95 789 -. return was processed u s.143(1) of Income Tax Act 1961 ( in short Act ). Subsequently case was selected for scrutiny and notice u s.143(2) of Act was issued on 27.09.2012. Later on notice u s.142(1) of Act was issued on 16.08.2013 and 11.12.2013 and 03.01.2014. Thereafter Assessing Officer disallowed certain expenses and assessed income of assessee to tune of Rs.2 11 507 -. Since assessee was not satisfied with assessment assessed by Assessing Officer therefore assessee filed appeal before CIT(A) who confirmed order of Assessing Officer therefore assessee has filed present appeal before us. ISSUE NO.1:- 4. Under this issue assessee has challenged confirmation of disallowance of rent to tune of Rs.2 15 000 -. rent has been paid 2 ITA 7581 M 14 A.Y.2011-12 by assessee to licensor under head agreement of amenities lies at page 14 of paper book. This agreement is part and parcel of leave and license agreement executed by licensee i.e. assessee and licensor. CIT(A) has declined this piece of evidence on ground of that said agreement for extra amenities nowhere speaks about this fact that what kind of amenities was being provided by licensor. vouchers produced by licensees assessee has also been declined. We are of view that these grounds are not sufficient to deny claim of assessee. leave and licence agreement dated 06.01.2011 which lies at page one of paper book. Whereas other agreement for extra amenities is also on record which was executed by licensor assessee for paying amount of Rs.55 000 - as amenities charges for period w.e.f December 2010 to December 2013. veracity of these documents are required to be ascertained by Assessing Officer as well as CIT(A) but they did not do. Licensor has also confirmed payment for extra amenities which has been produced before us and lies at 17 of paper book. Further TDS has also been deducted by assessee to tune of Rs.19 250 - and challan in this regard has also been produced which lies at page 25 of paper book. licensor has also produced affidavit confirming transaction which lies at page 42 of paper book. assessee licensee has also produced bank statement on record which lies at page 29 of paper book. All these piece of evidences speaks about payment to tune of Rs.55 000 - w.e.f December 2010 to December 2013. In view of said circumstances we are of view that learned CIT(A) has wrongly appreciated evidences produced before him but did not consider relevant evidence on record therefore in view of said circumstances we of view that finding of CIT(A) is wrong against law and facts therefore same is not 3 ITA 7581 M 14 A.Y.2011-12 liable to be sustainable in eyes of law. Therefore we set aside finding on this issue and allowed payment of rent to tune of Rs.2 15 000 - on account of extra amenities for period December 2010 to December 2013. Accordingly this issue is decided in favour of assessee against revenue. ISSUE NO:-2 5. Under this issue assessee has challenged disallowance of deferred revenue expenditure to tune of Rs.25 880 -. Assessing Officer disallowed same on ground of that paid up capital of assessee company was only Rs.1 00 000 - and only 5% of same can be allowed u s.35D of Act. Therefore assessee was found eligible for deduction claimed of Rs.1000 - being 1 5th claim of Rs.5000 - against total claim of Rs.26 880 -. appellant had incurred certain preoperative expenses amounting to Rs.1 35 395 -. In earlier this amount was deferred and claimed over period of 5 years. Assessing Officer disallowed said expenses on ground of that same was not allowable u s.35D of Act. contention of appellant is that appellant did not raise any claim u s.35D of Act but has deferred revenue expenses. only question which is required to be decided by us is that whether deferred revenue expense is required to be allowed or not. In this regard matter of controversy has been adjudicated by Hon ble High Court of Bombay in case of Commissioner of Income Tax 2 Mumbai V s. Raymond Ltd. [2012] 21 taxmann.com.60 wherein it is specifically held that preoperative expenses which are in nature of revenue is liable to be allowed in interest of justice. In view of said circumstances we are of view that learned CIT(A) has wrongly confirmed order of Assessing Officer which is not liable to be sustainable in eyes of law. In view of 4 ITA 7581 M 14 A.Y.2011-12 above said law we are of view that CIT(A) has wrongly confirmed order passed by Assessing Officer therefore we set aside order of CIT(A) on this issue and direct Assessing Officer to allow deferred revenue expenses to tune of Rs.25 880 -. Accordingly this issue is decided in favour of assessee against revenue. ISSUE NO.3:- 6. Under this issue assessee has challenged confirmation of disallowance to tune of Rs.58 635 - u s.69C of Act. contention of assessee is that employees of appellant incurred various expenses on behalf of appellant from time to time. Accountant of appellant used account for these expenses on date on which expenses were incurred by employee and not on day on which it was reimbursed to employees. These circumstances left to negative balance being reflected in cash book. However in some cases expenses and withdrawal from bank were on same date. As expenses were booked before withdrawal entry therefore there was no negative balance. authority was of view that no doubt there was negative entry in cash book but it was also on record that no cash lies with assessee company. assessee company without having cash were claiming expenditure therefore Assessing Officer declined claim of assessee and CIT(A) has also confirmed same. On seeing cash book authority disallowed claim. matter was not properly examined by authority to arrive at this conclusion that expenditure was justifiable or not. contention of assessee was not discussed at all. All negative cash balance was added to income of assessee u s.69C of Act. expenditure is in connection with 5 ITA 7581 M 14 A.Y.2011-12 expenditure incurred by employee of assessee due to their exigency. All work and thereafter this expenditure was entered into cash book without reimbursement to said employees. However after reimbursement on record entries were recorded in account books. This contention was not discussed by Assessing Officer as well as CIT(A). Therefore in view of said circumstances we are of view that expenditure to tune of Rs. 58 635 - is required to be further examined in view of accounts book material available on record in accordance with law. Therefore we set aside finding of CIT(A) on this issue and matter is hereby ordered to be restored to Assessing Officer for re-examination of this issue by giving opportunity of being heard to assessee in accordance with law. Accordingly this issue is decided in favour of assessee against revenue. 7. In result appeal filed by assessee is hereby allowed for statistical purpose. Order pronounced in open court on 23rd September 2016. Sd - Sd - (R.C.SHARMA) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated : 23rd September 2016 MP 6 ITA 7581 M 14 A.Y.2011-12 Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. ) ( CIT(A)- 4. CIT 5. DR ITAT Mumbai 6. Guard file. BY ORDER True Copy (Dy. Asstt. Registrar) ITAT Mumbai 7 M/s. Kishens Accounting Solutions Pvt. Ltd. v. Income-tax Officer 9(2)(2), Mumbai
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