Physical fitness expenditure not incurred wholly and exclusively for profession duly disallowed

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:

With regard to foreign. travel expenses, the Assessing Officer held that 6n perusal. of the details filed and copy of the ledger a/c filed during the course of assessment proceedings, it was observed that the appellant has undertaken a. pleasure trip with his family members and it cannot be said to be incurred wholly and exclusively for the purpose of assessee’s business/profession and disallowed 50% of the travel expenditure.

During the course of -appeal proceedings, the appellant stated that the foreign trip, was undertaken .to promote its, film, maintain physical and mental facilities and enrich its knowledge in the profession.

In this regard, it is to be noted that the appellant could not produce .an y other evidences to substantiate the nexus that the trip was exclusively for ‘its professional. purposes except for merely making-a statement in this regard. It is to be noted that the onus-11 0S on the °appellant of proving admissibility of the aforesaid expenditure Wider’ section: 37 of ‘the Act. The Assessing Officer has been generous enough to allow 50% of the expenditure considering the profession of the appellant . and the appellant has also not denied that the family had accompanied him-for the trip and the; proportionate payment was incurred by the family. In view of the above, the action of the Assessing Officer in disallow­ing 50% of the. foreign travel expenditure is upheld and the ground no.4 is’ ‘dismissed accordingly.

With regard to disallowance of 10% of physical fitness expenses, the Assessing Officer held that ‘the appellant has debited an amount of Rs. 1,75,188/- towards physical fitness in the profit and loss account whereas he has disallowed an amount of Rs:1,21,493i- in the statement of income and .accordingly disallowed 10% of the ‘difference amount of Rs.53,095/-, amounting to Rs. 10,739/- Further, the Assessing Officer also rejected the appellant’s contention that disallowance was inadvertently made in the computation of income :filed by the appellant. Therefore, the total disallowance on account of physical fitness (Rs.1,21,493 + Rs.10,739).

During the course of appeal proceedings, the appellant reiterated its contentions and stated that disallowance was inadvertently made in the computation of income and that the physical, fitness expenses are incurred for the profession of the appellant.

In this regard, it is to be noted that physical fitness is important for everyone as such and cannot be held. to be incurred wholly and exclusively for the profession of the appellant. However, considering the profession of the appellant, it has much more significance compared to other individuals and it is ‘imperative for the appellant to maintain physical well-being for its profession. It is a matter of fact that certain professions like sports, films etc require more emphasis on physical well-being to ensure better performance and incentives, However, as stated above, physical well-being is essential for everyone and cannot wholly- and exclusively related to the profession of the appellant and. accordingly the Assessing Officer is directed to disallow 25% of the total physical fitness expenses of Rs. 1,75,1.88/-. Thus, the total disallowance with regard to Physical fitness expenses works out to Rs.43, 17/- and the appellant in all is allowed a sum of Rs. 1,31,391/- ‘on this account, the Assessing Officer -has made an addition of Rs. 10,739/- over and above Rs. 1,21,493/- which make’s it a total disallowance of Rs. 1,32,232/-, the -appellant thus gets a relief of Rs.88,435/- on this account and the ground no.5 is partly allowed accordingly.

• With regard to disallowance of 20% of Other expenses considered .as Personal expenses, the Assessing Officer held that the appellant using his residence for the purpose of his Professional/business activities and ‘therefore there is a definite element of personal expenditure with regard to the expenses and accordingly disallowed 20% of such expenses.

During the course of appeal proceedings, tie appellant stated that there is no basis to make the ad-hoc disallowance of 20% and that all the expenses were incurred in conducting the-profession of the appellant.

With regard to disallowance of 10% of security charges, the Assessing Officer held that the appellant has claimed security charges for his office cum residence and, therefore. there is a definite element of personal expenditure with regard to the expenses and accordingly disallowed 10% of such expenses.

• With regard. to disallowance of 50% of swimming pool charges, the Assessing Officer held that: the appellant has claimed charges for its swimming poll and since the appellant’s family members would also be using the exclusive swimming pool, there is a definite element of personal expenditure with regard to the expenses and accordingly disallowed 50% of such expenses.

During the course of appeal proceedings, the appellant stated that the expenses are legitimate arid no ad hoc disallowance can be made.

In this regard, it is clear that the disallowance of all the above mentioned expenses (20% of Other expenses, 10% of security charges and 50% of swimming pool charges) has been based on the contention of the Assessing Officer .that all the above expellees have certain personal element involved. On perusal of the nature of expenses, it is clearly a matter of fact that there is certain amount of personal expenditure involved with regard to the said expenses apart from the family Members of the^– appellant being part of certain expenses. The Assessing Officer did not -completely disregard the claim of the appellant and has disallowed only certain portion of the expenditures on account of having a personal element involved. The appellant has not been able to prove that the said expenses were wholly and exclusively incurred for its profession. In view of the above discussion, the action of the Assessing Officer in disallowing various proportions of expenses viz., 20% of other expenses, 10% of security charges and 50% of a-swimming pool charges is upheld and the ground no.6, 7 and 8 are dismissed accordingly.

With regard to disallowance U/s 14A of Rs.3,30,306/-, it is seen that the disallowance has been double of the actual disallowance. Thus, the actual disallowance would be only Rs.1,65,253/-. The appellant gets necessary relief to that extent. Further, it is Seen that-the expenses have been in the nature of personal expenses have already been disallowed in the case of the appellant. The appellant has investment in Shares and partnership firm. The agriculture land purchase cannot form part of exempt asset within the meaning of 14A unless agriculture activity is carried out and explicit maintenance charges are brought out by the Assessing Officer ha-view of the same, it would be fair to disallow an adhoc sum of Rs.50,000/- to cover up for any expenses as such with regard to exempt income. In view of the same, the ground no.9, 10 and 11 arc partly allowed accordingly.

With regard to disallowance on loss froth proprietary concern of the appellant, the Assessing Officer did not make any specific observation with regard to the same but for taking the disallowance while computing the income.

During the course .of appeal proceedings, the appellant stated that the loss of Rs. 902/- was incurred on account of loss from proprietary concern of the appellant. The appellant is directed to file relevant evidences before the Assessing Officer and the Assessing Officer is directed to allow the same if the said loss was. on account of the proprietary concern of the appellant. In view of the saine, the ground no.13 is partly allowed subject to the directions given.

The ground No.12 is non-specific and a mere statement and does not lead to any specific conclusion, nor the same has been brought out in the submission and is dismissed accordingly. The ground no.1, 2, 3, 14 and 15 are general in nature and need no separate adjudication.”

7. In this regard, ld. AR further submitted that the assessee has provided all the details to the Assessing Officer as well as the ld.CIT(A). However, both the authorities have failed to take into consideration the expenditure incurred by the assessee.

8. Per contra, ld. DR submitted that the orders of lower authorities are in accordance with law.

9. We have heard the rival contentions and perused the material on record. The ld.CIT(A) at page 42 of his order reproduced hereinabove had categorically mentioned that the assessee has failed to produce any evidence to substantiate any nexus with the foreign trip with the professional activities carried out by the assessee more particularly when the expenses of film shoot / stay were taken care of by the producers.

9.1. During the course of arguments, we have also enquired from the ld. AR for the assessee as to whether the assessee has provided the details to the lower authorities. To that he has drawn our attention to page 1 of the paper book which is as    under :

9.2. From the perusal of page 1 of the paper book, we are not able to draw an inference that the expenditure incurred by the assessee has co-relation with the professional activities of the assessee, for example, the assessee had claimed Rs. 1,8 1, 125/- towards the foreign currency purchased for US Travel for 4500 USD. The said amount spent by the assessee was merely for converting Indian currency into foreign currency. However, what is required to be demonstrated by the assessee before was for what purposes, the US Dollars were spent by the assessee in U.S. but nothing was brought on record to show for what purposes the amount of Rs.1,81,125/- was spent.

9.3. Similarly, the assessee had claimed another foreign currency of Rs. 1,49,578/- towards purchase of foreign currency for USA Travel Trip. However, against the ‘nature’ of foreign travel, it was mentioned that the amount was spent towards fitness program but no evidence was produced by the assessee to show that amount of Rs. 1,49,578/- was spent towards fitness program. However, what was required to be produced by the assessee was that he had joined in fitness program of any club or at any fitness coach and had paid the said amount for that purposes. Since no evidence was brought on record by the assessee to substantiate his claim, therefore, lower authorities have rightly restricted the claim of the assessee to an extent of 50% thus making the addition of Rs.2,64,351/-. Thus, we do not find any reason to interfere in the finding recorded by the ld.CIT(A). Accordingly, ground No.2 is dismissed.

10. GROUND NO.3 – Physical Fitness Expenses.

With respect to physical fitness expenses, ld. AR has submitted that physical fitness expenses were incurred for the profession of the assessee and contended that physical fitness was a part and parcel of the assessee’s profession being a film artist and submitted that the Assessing Officer has erred in making the addition. With regard to these expenses, Assessing Officer held that assessee has debited an amount of Rs. 1,75,188/- towards physical fitness in the profit and loss account whereas he has disallowed an amount of Rs. 1,21,493/- in the statement of income and accordingly, Assessing Officer has disallowed 20% of the difference amount of Rs.53,695/- amounting to Rs. 10,739/- as being personal in nature and added to the income of the assessee.

10.1 Before the lower authorities, ld. AR submitted that disallowance was inadvertently made in the computation of income filed by the assessee. However, the ld.CIT(A) directed the Assessing Officer to disallow 25% of the total physical fitness expenses of Rs. 1,75,188/-   and thereby granted relief of Rs.88,435/- to the assessee.

10.2. We have heard the rival submissions and perused the material on record. On perusal, we find 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.

11. GROUND NO.4 – Other Expenses

With respect to ground no.4 i.e., 20% of other expenses considered as personal expenses, ld. AR has submitted that the lower authorities are not justified in upholding 20% of other expenses which are exclusively come under profession expenses like costume expenses, telephone bills, water bills, club payment, credit card bills etc, totally amounting to Rs.41,298/-. In this regard, he has drawn our attention to Page 4 of the order of Assessing Officer, which is to the following effect :

“Miscellaneous Expenses : The assessee has claimed the following expenses in his profit and loss account.

1. Costume – Rs.63,423/-

2. Water Charges – Rs. 10,066

3. Telephone and Trunk Call charges (includes purchase of mobile telephone) – Rs. 1,07,564/-

4. Club Payment – Rs.25,440/-

The assessee is using his residence for the purpose of his professional / business activities and therefore, there is a definite element of personal expenditure with regard to the expenses. Claimed towards water charges and trunk call charges. Further the telephone charges included purchase of mobile phone. The assessee has claimed club subscription of Rs.25,440/- as business expenditure. As personal element cannot be ruled out as a disallowance of 25% is made on the total expenditure of (Rs.63423 + 10066 _ 107564 + 25440 = Rs.2,06,493/-) amounting to Rs.41,298/-“

11.1. Ld. AR has also drawn our attention to Para 6 of the order of ld.CIT(A) which was reproduced hereinabove at Para 6.1.

11.2 In this regard, ld. AR further submitted that Assessing Officer had made the additions without any valid basis and that these expenses were incurred in the course of profession of the assessee. The ld. AR further submitted that Assessing Officer has not found any defects on the claim of the assessee and further submitted that the assessee himself had transferred 50% of the costumes acquired to his drawings account and that they are absolutely professional expenses and hence, no disallowance is required to be made.

12. With respect to water charges, ld. AR submitted that the same were not water charges, but it was the water tax paid to Corporation of Chennai on the property held by the assessee at Chennai and hence, the property tax paid should be treated as business expenditure. Ld. AR further pointed out that Assessing Officer has not pointed out any defects in the books of accounts maintained and got audited by the assessee and that without rejecting the books of account, no addition can be made.

13. AR further submitted that even no personal usage of the telephone was established by the Assessing Officer before making an adhoc addition out of the expenses and that mobile phone was given to production manager / in-charge as a goodwill gesture and thus, the same comes under business expenditure.

14. Per contra, ld. DR submitted that the orders of lower authorities are in accordance with law.

15. We have heard the rival contentions and perused the material on record. The ld.CIT(A) at page 42 of his order reproduced hereinabove had mentioned that Assessing Officer had not totally disregarded the claim of assessee as he found that nature of these expenses were having element of personal and family expenses and were not wholly and exclusively spent for professional work. In our view, no fault can be found in the reasoning of Assessing Officer / ld.CIT(A) as nature of expenses claimed by assessee comes under mixed basket of profession and personal expenses and it is not possible to segregate preciously professional with personal expenses. Hence, we do not find any reason to interfere with the decision of learned lower authorities. Thus, this ground is dismissed.

16. GROUND NO.5 – Security Charges

With respect to security charges, ld. AR has submitted that lower authorities have erred in disallowing / upholding of 10% of security charges stating that there is personal element without any basis. In this regard, he has drawn our attention to Page 5 of the order of Assessing Officer, which is to the following effect :

“A perusal of the details submitted during the course of assessment proceedings and also debited security charges in the profit and loss account that the assessee has incurred an amount of Rs.3,27,382/- towards security expenses. The payment is in respect of monthly security charges paid towards office cum residence in Jubillee Hills, Hyderabad as seen from the evidence filed. Since the assessee is using the said premises for his residential purpose also disallowance of 10% is made towards personal element involved.”

16.1. Before the ld.CIT(A), ld. AR has submitted that security charges are legitimate charges and no adhoc disallowance can be made. However, the ld.CIT(A) confirmed the addition made towards rent paid to swimming pool.

17. Per contra, ld. DR submitted that the orders of lower authorities are in accordance with law.

18. We have heard the rival contentions and perused the material on record. 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.

19. GROUND NO.6 – 50% Swimming Pool Charges.

With respect to this ground, ld. AR has submitted that the lower authorities have wrongly erred in disallowing 50% rent paid to land on which swimming pool was constructed stating that there is probability of family members usage without giving any proper justification. In this regard, he has drawn our attention to Page 5 of the order of Assessing Officer, which is to the following effect :

“A perusal of the 44AB report shows that in point 8 with reference to 40A(2)(b) it has been stated that land lease has been paid to the assessee’s sister Mrs. Lakshmi Naidu. However, a perusal of records shows that the assessee has constructed a swimming pool exclusively for his use on the land belonging to his sister to whom he is paying Rs.60,000/- p.a. and also claiming depreciation. The assessee has stated that the above expenditure is incurred wholly and exclusively for his profession. The assessee also stated that the assessee being a well known movie star cannot use public swimming pool with general public thronging to such places which may lead to law and order problem and hence, should have a private pool.

The assessee’s contentions are not fully acceptable since the assessee’s family members would also be using the exclusive swimming pool and the payments being made to the assessee’s sister. Considering the above facts and involvement of personal element 50% of the claim made on Rs. 60,000/- amounting to Rs.30, 000/- is disallowed.”

19.1. In this regard, ld. AR further submitted that the assessee has provided all the details to the Assessing Officer as well as the ld.CIT(A). However, both the authorities have failed to take into consideration the expenditure incurred by the assessee.

19.3. We have heard the rival contentions and perused the material on record. On perusal, we find that ld.CIT(A) while passing his order has categorically mentioned that on perusal of nature of expenses, it is clear that there was a certain amount of personal expenditure involved with regard to the said expenses. Before us, Ld. AR reiterated the contentions made by the assessee before the lower authorities. The contentions of the assessee are that he assessee has constructed swimming pool exclusively for his use on the land belonging to his sister to whom he was paying rent @ Rs.60,000/- p.m and that being a film star, he cannot use public swimming pool. If he constructed the pool on the land belonging to his sister itself, then obviously, there will be a probability of using the facility by his family members also. Hence, we cannot deny the involvement of personal element in this aspect. In view of the above, we do not find any reason for disagreeing with the findings of the ld.CIT(A) on this issue. Thus, this ground of the assessee is dismissed.

20. GROUND NO.7 – Disallowance u/s 14A

With respect to this ground, ld. AR has submitted that the lower authorities have wrongly made disallowance of Rs.50,000/- u/s 14A of the Act on adhoc basis without any proper satisfaction and also erred to see that the assessee has not incurred any expenditure in relation to claiming exempt income.

20.1. Ld. AR further submitted that firstly, the Assessing Officer has to examine the accounts of the assessee and when he was not satisfied with the correctness of the claim of the assessee and then only, the Assessing Officer can determine the expenditure which should be disallowed as per Rule 8D. Here, the Assessing Officer has invoked Rule 8D without recording her satisfaction with the claim of the assessee. Ld. AR further submitted that when no expenditure was incurred which could be attributable to earning of such income, the question of disallowance does not arise and that Assessing Officer failed to show the nexus between the expenditure incurred and the exempted income earned by giving valid reasons.

20.2 Ld. AR has also drawn our attention to Page 45 of then order of ld.CIT(A) which is to the following effect :

“………. With regard to disallowance U/s 14A of Rs.3,30,306/-, it is seen that the disallowance has been double of the actual disallowance. Thus, the actual disallowance would be only Rs. 1,65,253/-. The appellant gets necessary relief to that extent. Further, it is Seen that-the expenses have been in the nature of personal expenses have already been disallowed in the case of the appellant. The appellant has investment in Shares and partnership firm. The agriculture land purchase cannot form part of exempt asset within the meaning of 14A unless agriculture activity is carried out and explicit maintenance charges are brought out by the Assessing Officer ha-view of the same, it would be fair to disallow an adhoc sum of Rs.50,000/- to cover up for any expenses as such with regard to exempt income. In view of the same, the ground no.9, 10 and 11 arc partly allowed accordingly.”

20.3. Per contra, ld. DR submitted that the orders of lower authorities are in accordance with law.

21. We have heard the rival contentions and perused the material on record. On perusal, we find 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. Thus, ground No.7 of the appeal memo is dismissed.

22. In the result, the appeal of the assessee is dismissed.

Order pronounced in the Open Court on 8^th November, 2023.