| The Tax Publishers2021 TaxPub(DT) 0241 (Ahd-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where the assessee was in the process of expanding its operation therefore for the purposes of holding meeting with the brokers and parties it had taken the apartment on rent to save high cost of staying in the hotel and claimed such expenses as business expenditure then AO was not justifying in disallowing such expenses in the fact of the case.
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Business expenditure - Rent expenses - Flat taken on rent in Mumbai for stay of directors -
During the course of assessment, the assessing officer noticed that the assessee had claimed rent expenses as business expenses in reference to a flat rented at Mumbai. The assessee explained that it was in the process of expanding its operation therefore for the purposes of holding meeting with the brokers and parties it had taken the apartment on rent to save high cost of staying in the hotel. However, the assessing officer was of the view that assessee had not incurred the rent expenses for the purpose of business therefore he disallowed the sum of rent. The assessee has submitted before the assessing officer that the rented apartment has been used for the stay of company's directors for the purpose of business of the assessee. The assessee had submitted copy of rent agreement to the assessing officer and categorically explained that the said premise was used by the directors to hold business related meetings and used for commercial purposes as well as for temporary residential purposes of the directors. Held: It is categorically mentioned that nature of leave and license was for the purpose of using for all the directors of the company and it was not taken for personal living purpose of any particular director. That after deletion of section 37(3) with effect from 1-4-1998 guest house expenses are allowable under the Act. Looking to the revenue from operation of the assessee company to the amount of Rs. 1,33,38,36,680 for assessment year 2012-13, the impugned expenses of Rs. 8,80,000 was only 0.05% of the total revenue from operation and there was increased in the revenue from operation from Rs. 1,33,38,36,680 for assessment year 2012-13 to Rs. 1,76,28,64,861 for assessment year 2013-14 which demonstrate expansion in the business operation of the assessee company. It was also undisputed fact that similar rent expenses were incurred by the assessee in respect of same property in subsequent year 2014-15 and 2015-16 and the assessing officer had allowed the same while framing scrutiny assessment year under section 143(3) of the Act. In the light of the above facts and circumstances, that the action of assessing officer in disallowing the rent expenses in the year under consideration was not justified.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2013-14
INCOME TAX ACT, 1961
Section 69C
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