ITAT allowed expenditure and deleted disallowance

1. Primary Real Estate Pvt Ltd was in the business of advisory and consultancy services in real estate industry.

2. It incurred travelling expenses of Rs 11,40,768.

3. AO disallowed 40% of such expenditure on adhoc basis considering the same as non-business expenses, as detailes regarding the expenses were not provided.

4. Assessee claimed payment of commission of Rs 15,00,000 to one of its directors for the services rendered by him.

5. AO observed that there was no increase in turnover of the assessee company as compared to last year, but the commission had increased by Rs 5,00,000.

6. AO Disallowed rs 5,00,000 u/s 37(1) r.w.s. 40(2)(b).

7. CIT(A) restricted the expenditure to 20%, and confirmed the disallowance.

On appeal, the ITAT held as under:

8. We find that in the case the assessee has not given any supporting evidence to justify its claim, i.e. travelling expenses so the Assessing Officer was at liberty to make whole disallowance but he has not done so which shows that he has accepted the genuineness of part expenses.

9. Again the CIT(A) has restricted the same to 20% on the same basis following same line.

10. This adhoc approach of Revenue is not justified.

11. This work has not been done by them so the addition in question cannot be justified and the same is directed to be deleted.

12. In sum and substance the Assessing Officer has not based his findings vis-à-vis genuineness of the expenses.

13. Not increasing turnover vis-à-vis increase in commission cannot be basis for making such disallowance.

14. Such approach of making disallowances is not justified so the same is directed to be deleted.

Case Reference - Primary Real Estate Advisors P. Ltd. Vs Income Tax Officer.

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI

BEFORE SHRI SHAILENDRA KUMAR YADAV, JM

AND SHRI RAMIT KOCHAR, AM

ITA No. 850/Mum/2014

(Assessment Year: 2010-11)