Pr. Commissioner Of Income Tax-I, Chandigarh v. M/S Srbs Entertainment, Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. L.T.A. No. 280 of 2016 (O&M )DATE OF DECISION: 18.01 2018 Pr. Commissioner of Income Tax-I, Chandigarh APPELLANT Versus M/s SRBS Entertainment, Chandigarh RESPONDENT CORAM :- HON'BLE MR. JUSTICE S.J. VAZIFDAR, CHIEF JUSTICEHON'BLE MR. JUSTICE AVNEESH JHINGAN Present:Ms. Urvashi Dhugga, Senior Standing Counsel,|for the appellant.for the appellant. Ms. Radhika Suri, Senior Advocate, withMr. Manpreet Singh Kanda, Advocate,for the respondent. "SRO AVNEESH JHINGAN, J. This 1s an appeal against the order of the Income Tax Appellate Tribunal confirming the order of the CIT (Appeals) whereby the order of the Assessing Authority disallowing the lease rent paid by the assessee wasquashed. |The matter pertains to the assessment year 2010-11. 3)According to the appellant, the following substantial questions of law arise in this appeal :- (4)Whether on the facts and circumstances of the case andin law, the Hon'ble ITAT 1s right in deleting the additionot|=72,00,000/- by holding that if the payment for leasein law, the Hon'ble ITAT 1s right in deleting the additionot|=72,00,000/- by holding that if the payment for lease rental has been made by cheque after deducting the dueTDS, then genuineness & business expediency of anyexpenditure stands established? (11)Whether on facts and circumstances of the case and inlaw, the Hon'ble ITAT 1s right in deleting the addition of472,00,000/- by ignoring the fact that the assessee couldnot prove the business expediency of expenses when thesaid premises had not been used for the purpose ofbusiness?law, the Hon'ble ITAT 1s right in deleting the addition of472,00,000/- by ignoring the fact that the assessee couldnot prove the business expediency of expenses when thesaid premises had not been used for the purpose ofbusiness? 3]The Assessing Officer finalished the assessment under Section143 (3) of the Income Tax Act, 1961 (for short, the Act’), vide order dated28.02.2013. The Assessing Officer doubted the payment of lease rent anddisallowed the payment of =72,00,000/- as lease rent on the ground that theassessee did not submit proof regarding the use of the premises for businessPUTPOSEs. | 4The CIT (Appeals) allowed the assessee's appeal vide orderdated 31.12.2014. The CIT (Appeals) held as under :- “3.3 I have considered facts of the issue. Thappellant firm had taken the premises at Mohalion rent (for which lease rental ofc~ 72,00, 000PA. has been claimed) with a view to generaterevenue through catering and banqueting tomaintain and run the community centre and toexpand business. The appellant had taken thesepremises on rent to keep its furniture and otherbulky tentage and catering equipments. Two thepartners of the firm had gone to England andthey could not return back in time because of ITA No. 280 of 2016 4The CIT (Appeals) allowed the assessee's appeal vide orderdated 31.12.2014. The CIT (Appeals) held as under :- “3.3 I have considered facts of the issue. Thappellant firm had taken the premises at Mohalion rent (for which lease rental ofc~ 72,00, 000PA. has been claimed) with a view to generaterevenue through catering and banqueting tomaintain and run the community centre and toexpand business. The appellant had taken thesepremises on rent to keep its furniture and otherbulky tentage and catering equipments. Two thepartners of the firm had gone to England andthey could not return back in time because of ITA No. 280 of 2016 which business did not take off adequately.According to the appellant, it got electricityconnection almost after eight months from thedate ofsigning ofagreement, which was the mainreason for delay and going back ofpartners forsometime to England. The Assessing Officerdisallowed the amount for the reason that theappellant did not submit any documentaryevidence to support its reply and did not give anyevidence regarding business use of the premises.The amount of lease rental was paid throughcheques on which tax had been duly deducted atsource. The fact ofdelay in getting the electricityconnection cannot be denied, which also couldhave been the reason for being not able to startthe business, since it is not possible to carry onthe business without electricity. In order toreduce losses, the appellant had given a part ofpremises on rent to Ms. Madhu Ahuja at the endof the year and this also proves the genuinenessof appellant's case on the issue. It is, therefore,held that the Assessing Officer was not right indisallowing the amount of lease rental. It mayalso be mentioned that the Assessing Officer hasdisallowed the amount u/s 40A(2)(a) of the Act,but the amount was not paid to any personcovered u/s 40A (2) (b) and so the observation ofthe Assessing Officer in this regard is not correct.In any case, since I have held that the appellantis eligible for deduction of this amount, thisfinding of the Assessing Officer is not material, The ground of appeal taken against the additionmade is accordingly allowed. 4 The Tribunal confirmed the reasonings given by the CIT(Appeals) and dismissed the appeal by the impugned order dated04.03.2016. The order is based on an appreciation of the facts. Theconclusion is certainly a possible one. It cannot be said to be perverse orirrational. The appeal therefore does not raise a substantial question of law. 6.The assessee was carrying on the business of running alCommunity Centre Club at Silver City Zirakpur. In order to expand itsbusiness and to venture in the business of catering and banqueting, a shedwas taken on lease for keeping the furniture such as sofas, bulky tentage andcatering equipment. There were various hiccups in starting the new businessand it included the delay in getting electric connection by almost eightmonths. As the business could not be started, part of the said property takenon lease was given on rent to one Ms. Madhu Ahuja. In all this, two partnersof the firm went to England who had to return shortly for looking after thebusiness but due to their family problem and business compulsions, theycould not return within a reasonable time. Admittedly, the lease rent waspaid through cheque and even TDS as required under the Act was dulydeducted. Both the Appellate Authorities took into consideration all thesefactors and held that the claim of lease money paid cannot be denied. Theconclusion reached 1s logical. TdQuestion No.| is framed incorrectly. The question has beenworded to suggest that the authorities held that 1f the payment of lease rent ITA No. 280 of 2016 TdQuestion No.| is framed incorrectly. The question has beenworded to suggest that the authorities held that 1f the payment of lease rent ITA No. 280 of 2016 has been made by cheque and TDS has been deducted, the genuineness ofthe same and the business expediency stands established. Indeed merepayment by cheque purportedly towards lease rent and the deduction ofTDS would not establish a case for deduction. However, the AppellateAuthorities have not allowed the claim merely on the basis of paymentbeing made by cheque and TDS having been deducted. The facts in entiretyhave been considered and thereafter, a conclusion has been arrived at that itwas a business expenditure which was genuinely made towards payment oflease rent. |Question No.2 challenging the deletion of addition made as theassessee failed to prove the business expediency as the said premises wasnot used for business purposes is not a question of law, much less asubstantial question of law, Q Merely because there was some difficulty faced by the assesseein commencing the use of the premises it does not follow that the expensesclaimed were not for the purpose of the assessee's business. If the expectedfruits are not reaped from a business proposition, it will not be a basis tochallenge the business expediency. Even if there was a delay in getting theelectricity connection, that may be a result of non-fulfilment of contractualobligations, for which the assessee can claim damages. It would not be openfor the department to suggest that in such circumstances, the lease shouldhave been terminated. It 1s a business decision to be taken by the assessee. Itis not the case of the department that the expenses have not been incurred or ITA No. 280 of 2016 that they were made under an understanding camoutlaged as a leaseagreement. 10.The appeal raises questions of fact. No substantial question oflaw arises. There 1s no warrant for interference with the order passed bythe Tribunal. 11.The appeal is, therefore, dismissed, (S.J. VAZIFDAR )CHIEF JUSTICE January 18, 2018ndj (AVNEESH JHINGAN )JUDGE