Bharat Anand, New Delhi V. ACIT, Circle-61(1), New Delhi

ITA 8595/DEL/2019

AI Insights

The case revolves around an appeal by Bharat Anand against the order of the Assistant Commissioner of Income Tax, Circle-61(1), New Delhi, which was upheld by the Commissioner of Income Tax (Appeals)-20, New Delhi. The dispute centered on the disallowance of business expenses amounting to Rs.80,71,758 claimed by the Assessee for the assessment year 2015-16. The lower authorities had restricted the allowance of expenses to 50% of Rs.46,00,000 against a gross professional income of Rs.1,33,50,000, citing provisions under section 44AD of the Income Tax Act, 1961. The ITAT, referencing a prior decision in the Assessee's own case for a different assessment year, allowed the appeal in favor of the Assessee, thereby rejecting the restrictions imposed by the lower authorities.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130883 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 03-11-2019
• Other Referred Cases: Bharat Anand vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37; 44AD; 143(3)

Judgement Text

Page 1 of 7 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE, SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.8595/Del/2019 (ASSESSMENT YEAR 2015-16) Bharat Anand 1, Jaipur Estate Nizamuddin East New Delhi-110 013 PAN-AKYPA 2495D Vs. Asst. CIT Circle-61(1), New Delhi (Appellant) (Respondent) Appellant by Mr. B.K. Anand, CA Respondent by Mr. Kanv Bali, Sr. DR Date of Hearing 25/07/2023 Date of Pronouncement 31/07/2023 ORDER PER M. BALAGANESH AM: This appeal of the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-20, New Delhi, [hereinafter referred to as ‘Ld. CIT(A)’] in Appeal No.10246/2017- 18 dated 07/08/2019 against the order passed by Assistant Commissioner of Income Tax, Circle-61(1), New Delhi (hereinafter ITA No.8595/Del/2019 Bharat Anand vs. ACIT Page 2 of 7 referred to as the ‘Ld. AO’) u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 28/12/2017. 2. The assessee has raised the following grounds of appeal: “1. That the authorities below erred in not allowing the assessee claim for business expense of Rs.80,71,758/- as per the books of account and documents furnished. 2. That, without prejudice for the aforesaid ground of appeal, the learned CIT(A) having followed as guiding principle the provisions of section 44AD erred in restricting the allowance for expenses claimed by the assessee at 50% of Rs.46,00,000/- as against gross professional income Rs.1,33,50,000/-” 3. We have heard the rival submissions and perused the material available on record. At the outset, we find that the ground No.1 raised by the assessee is already decided by this Tribunal in assessee’s own case in ITA No.3844/Del/2019 for AY 2014-15 dated 08/06/2023. For the sake of convenience, the entire order reproduced herein under: THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 3844/Del/2019 : Asstt. Year: 2014-15 Bharat Anand, 1, Jaipur Estate, Nizamuddin East, New Delhi-110013 Vs. ACIT, Circle-63(1), New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AKYPA2495D ITA No.8595/Del/2019 Bharat Anand vs. ACIT Page 3 of 7 Assessee by : Sh. B. K. Anand, CA Revenue by : Sh. Kanv Bali, Sr. DR Date of Hearing: 06.06.2023 Date of Pronouncement: 08.06.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-42, New Delhi dated 20.02.2019. 2. The assessee has raised the following grounds of appeal: “1. That the Authorities below erred on the facts of the case in disallowing Rs.22,48,117/- in respect of Business Promotion expenses. 2. That the Authorities below erred on the facts of the case in disallowing Rs. 15,31,511 in respect of Tour & Travel expenses. 3. That the Authorities below erred in not considering that the expenses incurred by the assessee on Business Promotion and Tour & Travel were for the advancement of his professional activity and incurred solely in respect of his income from the firm where he was partner, as the assessee had no other income assessable under the head Income from Business or Profession and it is not their case that such expenses were “personal expenses” of the assessee.” Business Promotion Expenses and Tour & Travel Expenses: ITA No.8595/Del/2019 Bharat Anand vs. ACIT Page 4 of 7 3. As per the revenue, in the instant case, two major expenses have been incurred across the years which include Business & promotion expenses (31% of total expenditure) and Tour & travel expenses (21% of expenses). The revenue held that the appellant is partner in Khaitan & Co, LLP and contractual arrangement with KCO, hence there is no justification to claim expenses in the nature of 'business & promotion' and 'Tour & travel'. 4. The revenue held that any 'business and promotion expenditure' is required to be incurred either by KCO or KAHITAN & Co., LLP because the business is run by the aforesaid entities. The revenue held that the appellant has claimed the expenditure against the receipt from KCO where the relationship is of only contractual in nature, if any and in such a situation, there is no binding on the appellant to incur expenditure either on 'business & promotion' or 'on Tour & travel'. Hence, the expenses like Conveyance, courier/postage, electricity, journal, lease, printing & stationery, security guard, salary to staff, staff welfare, telephone, vehicle running & maintenance etc. claimed in profit & loss are admissible as deduction under section 37 of the act, have been disallowed. 5. We have gone through the partnership deed of Kaithan & Co. LLP for the period 01.04.2013 to 30.09.2013 and for the period 01.10.2013 onwards. We find that the assessee is in whole time practice of his profession as an advocate. He joined the Firm Khaitan & Co. Advocates & Solicitors, at their office in New Delhi as a Partner. The Firm was later ITA No.8595/Del/2019 Bharat Anand vs. ACIT Page 5 of 7 converted into a LLP and named changed to Khaitan & Co. LLP. Any professional work the assessee undertakes is for the said Firm. Further, as per the terms Partnership of the Firm the assessee cannot carry on any other professional or other similar activity because if he derives any income outside the activity of the Firm, he is to account it to the Firm. KCO being an associate entity of the firm Khaitan & Co LLP, he is engaged in professional assignments for them but this flow as part of his activity being a partner of the Firm and there exists no relationship in the nature of employer and employee between him and KCO. The income therefore is a part of his total professional income whether as partner’s salary, interest on capital balance in the firm, share in profit or amount remitted as professional remuneration. Accordingly, the amount of remuneration received by the assessee from KCO is in the course of his discharge of his professional duties as a partner of Khaitan & Co. LLP and is not arising out of any independent agreement or employment between him and the said entity. The assessee has accordingly claimed expenses on his total professional earnings irrespective of the bifurcation that has been made because it does not affect the net assessable income as determined and returned. Hence, the appeal of the assessee is liable to be allowed. ITA No.8595/Del/2019 Bharat Anand vs. ACIT Page 6 of 7 6. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 08/06/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Respectfully following the aforesaid decision, the ground no.1 is hereby allowed. 4. In view of above decision for ground no.1, the adjudication of ground No.2 would become academic in nature and the same is hereby left open. 5. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 31 st July, 2023. Sd/- Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31/07/2023 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No.8595/Del/2019 Bharat Anand vs. ACIT Page 7 of 7