D. Venkatesh Vs Deputy Central Circle 1(2) (ITAT Hyderabad)
ITAT Hyderabad held that assessee being a film artist, physical fitness is a part and parcel of his profession, but it cannot be held to be incurred wholly and exclusively for the profession of the assessee. Hence, disallowance of physical fitness expenditure justifiable in law.
Facts- The appellant has preferred the present appeal contesting that CIT(A) has erred in the order of the assessing officer in disallowing foreign travel expenses, Other expenses, security service charges , Swimming pool rent, adhoc disallowance under 14A are against the principles of justice, weight of evidence and probabilities of the case of the appellant.
Conclusion- Held that assessee has shown Rs. 1,75,188/- towards physical fitness expenses in the profit and loss account. Though the physical fitness was a part and parcel of assessee’s profession but it cannot be held to be incurred wholly and exclusively for the profession of the assessee. Even the assessee has not filed any evidence to show that he underwent any weight loss program to fulfill his professional commitment. Hence, we do not find any reason to interfere with the finding of ld.CIT(A) on this issue. Thus, this ground of the assessee dismissed.
Held that even before us, the assessee has not filed any evidence to prove that these expenses are wholly and exclusively incurred for his profession. Hence, we confirm the action of Assessing Officer in disallowing 10% security charges. Thus, this ground of the assessee is dismissed.
Held that ld.CIT(A) while passing his order has categorically mentioned that disallowing Rs.50,000/- u/s 14A of the Act is fair and reasonable to cover up any expenses as such with regard to exempt income and granted part relief to the assessee. We do not find any reason for disagreeing with the findings of the ld.CIT(A) on this issue. Hence, we dismiss this ground also.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by the assessee feeling aggrieved by the order of Commissioner of Income Tax (Appeals) – 11, Hyderabad dt.04.03.2022 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).
2. The appeal filed by the assessee is barred by limitation by 122 days. Assessee has moved a condonation petition explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
3. The grounds raised by the assessee read as under :
“1. The order of the Learned Commissioner of Income Tax Appeals, Hyderabad, in upholding the order of the assessing officer in disallowing foreign travel expenses, Other expenses, security service charges , Swimming pool rent, adhoc disallowance under 14A are against the principles of justice, weight of evidence and probabilities of the case of the appellant
2. The Learned Assessing Officer and the Appellate Commissioner have erred in justifying the disallowance of 50% of foreign travel expenses and ignoring the fact that the appellant as a professional in the field of film industry and thus has to enrich his knowledge and new trends in the industry and this foreign travel is expense incurred wholly and totally, necessary and absolutely required for the appellant in carrying his profession.
3. The Learned Assessing Officer and Commissioner of Income Tax, Appeals were wrong in disallowing! upholding a sum of Rs.43797/- (25% of physical fitness expenses) as physical fitness is a part and parcel of the appellant’s profession as a film artiste and disallowance of same on ad hoc basis is against the provisions of the Act
4.The Learned Assessing Officer and Commissioner of Income Tax, Appeals are not justified in disallowing! upholding 20% of other expenses which are professional expenses and in course of carrying on his profession. The learned assessing officer and Commissioner of Income Tax, Appeals should have seen that the other expenses in the form of a) costume expenses are special incurred for photo shoots, fan mails and promotions etc., b) water charges incurred for refilling the swimming pool which is used during for physical fitness which is in the course of film shootings c) telephone and trunk call expenses in his office which are purely professional expenses d) club fees and renewal fee , credit card fees are all purely professional and all these should have been allowed as professional expenses in the course of profession and hence no disallowance is warranted.
5. The Learned Assessing Officer and Commissioner of Income Tax, Appeals are not justified in disallowing ! upholding 10% of security charges stating that there are personal element without any basis.
6. The Learned Assessing Officer and Commissioner of Income Tax, Appeals erred in disallowing!upholding 50% of rent paid to land on which swimming pool is constructed stating that there is probability of family member usage without any proper justification.
7. The Learned Assessing Officer and Commissioner of Income Tax, Appeals erred in disallowing/upholding the disallowance of Rs.50,000/- under section 14A on adhoc basis without any proper satisfaction and have erred to see that the assessee has not incurred any expenditure in relation to earning exempt income.
8. The assessing officer erred in making various disallowances on adhoc basis without pointing out any defects in the books of account maintained and without rejecting books of account thus ignoring various decided case law which were given at the time of hearing and the Learned Commissioner of Income Tax(Appeals) also erred in confirming the additions made by the assessing officer though granting some relief under vinous heads of disallowance without taking in to account the basic objection regarding adhoc additions made and also without taking in to account various case law cited and without not even discussing about the same.
9. All the case law quoted both before the assessing officer and also the Commissioner of Income Tax (appeals) which were not even considered should be considered on various issues of disallowances and the principles of natural justice.
10. The Learned assessing officer and Commissioner of Income Tax, Appeals erred in charging/ upholding interest under section 234D when the refund due was not been issued or granted to the ”
4. The brief facts of the case are that assessee is a film artist and doing business of film production and distribution. Assessee filed his return of income electronically on 28.09.2009 for the A.Y. 2009-10 admitting total income of Rs.2,34,65,640/- and the same was processed u/s 143(1) of the Act. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Act dt.23.08.20 10 was issued. During the course of assessment, Assessing Officer noticed that assessee has claimed Rs.5,28,703/- as foreign travel expenditure stating that the same was incurred as legitimate professional expenses. However, the Assessing Officer disallowed the said expenditure stating that the same cannot be said to be incurred wholly and exclusively for the purpose of assessee’s profession. Assessee has debited an amount of Rs. 1,75,188 / – towards his physical fitness in the profit and loss account. As the difference in the said amount worked out to Rs.53,695/- and 20% of the same amounting to Rs. 10,739/- was disallowed by the Assessing Officer as the same was personal in nature and added it to the total income of the assessee. Assessing Officer also disallowed Rs.902/- towards loss in Venkatesh Enterprises.
4.1. The assessee has also claimed Rs.2,06,493/- (Rs.63,423/- + Rs.1,07,564/- + Rs.10,066/- and Rs.25,400/-) towards his costumes, water charges, telephone bills and club payment, respectively. As the assessee was using his residence for the purpose of his professional / business activities and therefore, Assessing Officer opined that there was a definite element of personal expenditure and hence, disallowed 25% on total expenditure of Rs.2,06,943/- which amounting to Rs.41,298/- and added the same to the total income of the assessee.
4.2. On perusal of the evidence, Assessing Officer found that assessee has incurred an amount of Rs.3,27,382/- towards security expenses paid towards office cum residence in Jubilee Hills, Hyderabad and as the assessee was using the said premises for his residential purpose also, Assessing Officer has disallowed 10% of the security expenses amounting to Rs.32,738/- and added it to the total income of the assessee. Thereafter, considering the involvement of personal element, Assessing Officer disallowed 50% of rent @ Rs.60,000/- per month paid by the assessee to his sister towards the land on which swimming pool was constructed, as the same was using by the assesse’s family members also, which amounting to Rs.30,000/- and lastly Assessing Officer has disallowed Rs.3,30,506/- u/s 14A of the Act. Thus, he completed the assessment and passed assessment order on 27.12.2011.
5. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before the ld.CIT(A), who partly allowed the appeal of assessee.
5.1. Ground nos. 1, 8, 9, 11 and 12 are general in nature and requires no adjudication. The ground nos.2 to 7 and 10 are discussed hereinbelow :
6. GROUND NO.2 – Foreign Travel Expenses
Before us, with respect to ground No.2, ld. AR has submitted that the lower authorities erred in restricting the foreign travel allowances to 50%. In this regard, he has drawn our attention to Page 3 of the order of Assessing Officer, which is to the following effect :
“……….
The assessee is a film artiste and therefore, the necessity of being fit and healthy is essential. It may be mentioned that for any professional weather a Doctor, Lawyer, Chartered Accountant, Company Secretary or a business person the necessity of maintaining the individual physique is of paramount importance but to claim that the individual can only be healthy by studying the latest trends in the industry in abroad is not acceptable, since such expenditure cannot be said to be incurred wholly and exclusively for the purpose of his profession. Hence, 50% of the travel expenditure of Rs.528703/- is disallowed and added to the total income of the assessee.”
6.1. Ld. AR has also drawn our attention to Para 6 of the order of ld.CIT(A) which is to the following effect :
“6. The Decision :
In the instant case, the assessment was completed u/s 143(3) by making, the following additions / disallowances:
