ART HOUSING FINANCE (INDIA) LIMITED,GURGAON V. DCIT CIRCLE-3(1), NEW DELHI

ITA 7635/DEL/2019

AI Insights

The case involves Art Housing Finance (India) Limited appealing against the disallowances made by the Assessing Officer (AO) and upheld by the CIT(A) on various business expenses claimed under profits and gains from business and profession for the assessment year 2016-17. The main issues revolved around the disallowance of commission expenses, stamp duty, trademark registration expenses, and professional and advertisement expenses. The Tribunal examined the submissions and evidence presented by both parties, including the details of work done by Direct Selling Agents (DSA) for commission expenses and the nature of stamp duty and trademark expenses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706969 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 17-09-2019
• Other Referred Cases: CIT vs. Cinecita (P) Ltd. 137 ITR 652
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Keywords: Revenue expenditure; Depreciation
• Section: 143(3); 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘A’’ : NEW DELHI) BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No. 7635/Del/2019 Asstt. Year : 2016-17 Art Housing Finance (India) Limited, vs. DCIT, Circle 3(1), 49, Udyog Vihar, Phase-IV, New Delhi Gurgaon, Haryana-122015 (PAN: AAGCR4981A) (Appellant) (Respondent) Appellant by : None Respondent by : Sh. Ajay Kumar Arora, Sr. DR. Date of Hearing 26.06.2025 Date of Pronouncement 09.07.2025 ORDER PER MAHAVIR SINGH, VP: This appeal by the assessee is emanating from the order of the Ld. CIT(A)-I, New Delhi dated 18.07.2019 relevant to assessment year 2016-17 on the following grounds:- 1. Disallowance of commission expense under the head profits and gains from business and profession. 2. Disallowance of stamp duty expenses under the head profits and gains from business and profession. 3. Disallowance of Trademark Registration Expense under the head profits and gains from business and profession. 2 | P a g e 4. Disallowance of professional and advertisement expense under the head profits and gains from business and profession. 2. Brief facts of the case are that the assessee company is engaged in the business of financial service providers. The assessee had filed the return of income on 14.10.2016 declaring total loss of Rs. 1,73,85,744/-. The case was selected for scrutiny under CASS. The assessment was completed u/s. 143(3) of the Act vide order dated 25.12.2018 and income was assessed at loss of Rs. 1,07,54,590/-. In the assessment order, AO made addition of Rs. 36,17,745/- on account of commission expenses, Rs. 7,00,000/- on account of excess claim of depreciation, Rs. 6,96,324/- on account of Trade Mark expenses, Rs. 5,43,145/- on account Miscellaneous expense and Rs. 10,73,946/- u/s. 14A of the Act. Aggrieved, assessee preferred the appeal before the Ld. CIT(A), who vide his impugned order dated 18.07.2019 has partly allowed the appeal of the assessee. Against the order of the Ld. CIT(A), assessee is in appeal before us. 3. As regards disallowance of Rs. 3,61,775/- being 10% of the Total Commission Expenses amounting to Rs. 36,17,745/- is concerned, it is the contention of the assessee that Ld. CIT(A) has wrongly disallowed Rs. 3,61,775/- as the same is without giving any appropriate reason/ground and AO disallowed the entire expenditure of commission by stating that no details of work done has been provided. The assessee during the appellate proceedings furnished complete details of work done by the DSA (Direct Selling Agents) alongwith the percentage on which commission has been paid. However, Ld. CIT(A) after considering the submissions of the assessee 3 | P a g e company, granted partial relief to the extent of 90% of the disallowance, but sustained the disallowance to the extent of 10%, without stating any reasons/ grounds for disallowing an amount in dispute, which needs to be deleted. Per contra, Ld. DR relied upon the order of the Ld. CIT(A) on this issue. 3.1 We have given our thoughtful consideration to the assessee’s contention made in the grounds of appeal and Revenue’s foregoing vehement contentions. We are of the considered view that neither party’s submissions herein deserve to be accepted in entirety as the assessee on the one hand has not been able to prove his claim nor the department could draw any comparable in the very line of business for estimating the adhoc disallowance @10% of the total commission expenses. Therefore, we deem it appropriate in the larger interest of justice to assess the assessee’s foregoing total commission expenses @4% with a rider that the same shall not be treated as a precedent. Accordingly, AO shall finalize its computation in very terms. Ordered accordingly. 4. As regards disallowance of Rs. 5,50,000/- on account of stamp duty paid on rented agreement is concerned, it is the contention of the assessee that Ld. CIT(A) has disallowed Rs. 5,50,000/- by stating that stamp duty payment of Rs. 5,50,000/- has been incurred on account of rent agreement for taking the office space of Guragon for a period of twelve years. The stamp duty of 4 | P a g e Rs. 5,50,000/- has been paid for a long term lease and it has enduring benefits. Hence, it should not be allowed as expenditure for the year under consideration. However, it was the contention of the assessee that the amount of Rs. 5,50,000/- has been calculated at 6% of the average annual rent, which comes to Rs. 11,00,000/- approx. This amount has been shared equally with the owner of the property and the stamp duty payment has no nexus with the period of lease agreement, accordingly, it has no enduring benefits. It was further contended that it is well proved that the expense for stamp duty is a one time cost for the registration of the lease, which is not correlated to the period of lease. This amount would have been incurred irrespective of the period of lease, be it 6 months or any lease period. It was further contended that on exactly similar facts the Bombay High Court in the acse of CIT vs. Cinecita (P) Ltd. 137 ITR 652 where the assessee incurred Rs. 10,700/- by way of registration fee, stamp duty and solicitors’ fees in connection with the drawing up of the lease deed and claimed deduction of the said amount as revenue expenditure. Ld. DR relied upon the order of the order of the authorities below on this issue. 4.1 We have given our thoughtful consideration to the assessee’s contention made in the grounds of appeal and Revenue’s foregoing vehement contentions. We are of the considered view that this amount 5 | P a g e of Rs. 5,50,000/- has been shared equally with the owner of the property and the stamp duty payment has no nexus with the period of lease agreement, accordingly, it has no enduring benefits, as it is the expense of stamp duty is a one time cost for the registration of the lease, which is not correlated to the period of lease and on the anvil of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Cinecita (P) Ltd. 137 ITR 652 where the assessee incurred Rs. 10,700/- by way of registration fee, stamp duty and solicitors’ fees in connection with the drawing up of the lease deed and claimed deduction of the said amount as revenue expenditure. Accordingly, the addition in dispute is hereby deleted and this ground of appeal is allowed. 5. As regards disallowance of Rs. 39,640/- on account of Trademark expenses is concerned, after hearing both the sides and perusing the records, we note that this amount has been incurred for the registration under Trademark Act and other allied expenses and the registration has been taken for registration of the logo/identity of the company, ‘Art’, which is not related to expenses being capital in nature. Accordingly, the addition in dispute is hereby deleted and this ground of appeal is allowed. 6. As regards disallowance of Rs. 5,43,145/- being 10% of the Total Professional Expenses & Advertisement Expenses amounting to Rs. 54,31,449/- is concerned, it is the contention of the assessee that Ld. CIT(A) 6 | P a g e has wrongly disallowed Rs. 5,43,145/- by noting that the assessee has made many debit entries which are in the nature of provisions. In addition to it, the assessee has incurred many expenses which were paid in cash without supporting bills and vouchers. It was the contention of the assessee that CIT(A) failed to appreciate that the books of accounts maintained by the company are on mercantile basis and hence the company has not make provisions for their expenses which have been incurred during the year, but to be paid in following year. During the appellate proceedings, Ld. CIT(A) did not intend to examine the correctness and appropriateness of the provisions made nor any examination done on their future payments, but disallowed expenses without any examination of the case. The disallowance was made without any specific reasons being recorded, in any arbitrary and adhoc manner, which needs to be deleted. It was the further contention that the cash payments were below Rs. 20,000/- which is permissible under Income Tax Act. Per contra, Ld. DR relied upon the order of the Ld. CIT(A) on this issue. 6.1 We have given our thoughtful consideration to the assessee’s contention made in the grounds of appeal and Revenue’s foregoing vehement contentions. We are of the considered view that neither party’s submissions herein deserve to be accepted in entirety as the assessee on the one hand has not been able to prove his claim nor the department could draw any comparable in the very line of business for 7 | P a g e estimating the adhoc disallowance @10% of the total professional expenses and advt. expenses. Therefore, we deem it appropriate in the larger interest of justice to assess the assessee’s foregoing total commission expenses @4% with a rider that the same shall not be treated as a precedent. Accordingly, AO shall finalize its computation in very terms. Ordered accordingly. 7. In the result, the Assessee’s appeal is partly allowed. Order pronounced in the Open Court on 09.07.2025. Sd/- Sd/- (AMITABH SHUKLA) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT SRBhatnagar Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT Assistant Registrar, ITAT, "