Commissioner of Income Tax, Delhi vs R.D. Ramnath Company (HUF)

In this appeal u/s 260A of the income tax Act, 1961 (''Act''), the revenue is aggrieved by an order dated 18-5-2007 passed by the income tax Appellate Tribunal, Delhi Bench ''D'', New Delhi (''Tribunal'') in ITA No. 4338/D/2004 for the assessment year 2001-02. The present proceeding stems from an assessment order dated 26-3-2004 whereby the Assessing Officer disallowed Rs. 53,08,815 being 60% of the expenses claimed by the assessee under the head ''Employees Salaries and Benefits, Office Expenses''. The Assessing Officer after noticing that other items of income included rental income of Rs. 2,30,39,441 case to the conclusion that the size of the non-business activities was huge enough to justify corresponding expenses on manpower and establishment. On the basis that such expenses could not be entirely relatable the business activities of the assessee, the Assessing Officer disallowed expenses to the extent mentioned.

In the appeal filed by the assessee, the Commissioner of income tax (Appeals) reserved the order of the Assessing Officer holding that the disallowing has been made entirely on surmises and conjectures. This view of the Commissioner (Appeals) has been concurred with by the Tribunal in the impugned order.

We have considered the submissions of Ms. Prem Lata Bansal, learned Senior Standing counsel for the revenue. She seeks to support the order of the Assessing Officer by reiterating that the huge amount of rental income has to have a corresponding expenditure. The expenses on this score could not be entirely related to the business activity of the assessee.

After examining the orders we are unable to be persuaded to take a view different from the one taken by the Commissioner (Appeals) and the Tribunal. There is no perversity vitiating the orders of either of the said authorities. No substantial question of law arises.