Relief for Goldman Sachs: ITAT Sets Aside Disallowance of Rs. 1.87 Crore Occupancy Expenses, Directs AO to Verify Claim Afresh [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) granted relief to Goldman Sachs (India) Finance Pvt. Ltd., setting aside the disallowance of Rs. 1.87 crore claimed as Occupancy Expenses and directing the Assessing Officer(AO) to verify the claim afresh for Assessment Year (AY) 2020-21

Goldman Sachs (India) Finance Pvt. Ltd.,appellant-assessee, was a private non-banking finance company (NBFC). It filed its AY 2020-21 return on 15.02.2021, declaring income of Rs. 187.37 crore. The case was selected for scrutiny, and the AO disallowed Rs. 35.18 lakh as depreciation on Occupancy Expenses, Rs. 1.89 crore as ESOP expenses, and Rs. 13.87 lakh for reversal of gratuity provision.

On appeal, the Commissioner of Income Tax (Appeals)[CIT(A)] confirmed the ESOP disallowance, deleted the gratuity disallowance, and increased the Occupancy Expenses disallowance to Rs. 1.87 crore, reflecting the full allocation from Goldman Sachs India Securities Pvt. Ltd(GSISPL).

The assessee counsel argued that the AO did not issue any show-cause notice before enhancing the disallowance of Occupancy Expenses, and the CIT(A) also did not inform them about the proposed increase. The counsel added that referring to AY 2022-23, where the AO disallowed the full expense, could not justify enhancing the disallowance without notice.

The Departmental Counsel argued that the AO had disallowed the Occupancy Expenses in AY 2022-23 due to lack of evidence, and the CIT(A) asked the assessee for supporting documents, which were not provided. Therefore, the CIT(A) directed the AO to disallow the full amount, and no separate show-cause notice was needed.

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The two member bench comprising Saktijit Dey (Vice President) and Padmavathy S (Accountant Member) heard the parties and reviewed the records. The CIT(A) noted that the assessee claimed Occupancy Expenses of Rs. 1.87 crore, including depreciation, for space rented from group entity GSISPL under a cost allocation agreement. The AO had disallowed the full amount in AY 2022-23 as the assessee did not provide supporting documents.

The appellate tribunal observed that the disallowance was due to lack of documents. The assessee counsel said collecting the details from the group entity required time, which was not given.

Considering this, the tribunal allowed the plea and sent the issue back to the AO to examine afresh. The AO was directed to verify the details and decide on merits, and the assessee was directed to provide the requested documents without unnecessary delays.