TMI Blog2012 (8) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed Ad-hoc disallowance – disallowance is made on ad-hoc basis as the expenditure is not properly supported by vouchers – Held that:- Ad-hoc disallowance at Rs. 15 lakhs is on higher side - Assessing Officer directed to disallow only 5% of the cash expenses unvouched by proper bills and receipts if it is not a statutory payment since there are chances of inflating the cash expenses. This ground is partly allowed. Disallowance of legal charges on account of non TDS - assessee submitted that each payment is less than Rs. 20,000 on various dates and provisions of section 40(a)(ia) are not applicable – Held that:- Whether the payments are less than Rs. 20,000 is required to be examined by the Assessing Officer - matter Assessing Officer - ground is allowed for statistical purposes - appeal of the assessee is partly allowed. - ITA No.797/Hyd/2011 - - - Dated:- 22-3-2012 - Chandra Poojari, Saktijit Dey, JJ. For Appellant: Shri P Murali Mohan Rao For Respondent: Shri GSSS Gopinath ORDER Per: Chandra Poojari: This appeal by the assessee is directed against the order of the CIT(A)-IV, Hyderabad dated 31.3.2011 for assessment year 2007-08. 2. The first ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r attention to calculations in respect of bank guarantee claims and other related correspondence between the assessee JV and PCL and M/s. Rithwik Projects Ltd., dated 31.3.2007. 5. The DR submitted that the Assessing Officer by way of his report dated 21.3.2011 has submitted that as per column No. 9 of the Memorandum of Understanding dated 6.9.2002 "the parties to the AOP at the request of M/s. Progressive Construction Ltd. had advanced sums for providing bank guarantees and the respective contributions shall be treated as capital of the AOP and the parties hereto will not have any independent claim thereto." The Assessing officer submitted that the above showed that the members of the AOP had advanced bank guarantee margin money to the principle contractor, i.e. PCL, for providing bank guarantees. He reiterated that the interest on fixed deposits, i.e. margin money provided by the member of the AOP, had not been offered to tax by the joint venture AOP. The Assessing officer submitted that since the interest income was not offered to tax by the AOP, the expenditure incurred towards bank guarantee commission is also not allowable. Accordingly, it was submitted that even after veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it cannot be disputed that the work had been subcontracted on 100% back to back basis to the appellant. At the same time, however, the bank guarantees had been agreed to be provided to THDC by the Principal contractor itself, even before the works were sub contracted to the assessee JV. Even though the funds for such guarantee were provided by the constituents of the JV itself, the same was to be treated as capital of the assessee JV. Further, it is seen that though it had been specified that the parties to the AOP would have no independent claim over the sums advanced for Bank guarantee, none of the agreements ever mentioned that the assessee JV was to be under any obligation to bear the expenses towards bank guarantee commission. It cannot be said that while deciding the portion of the payments to be retained by the principal contractor, the element of expenses towards commission on bank guarantees was not considered by them as covered. The DR submitted that even though the entire arrangement between the principal contractor and the JV, as also it constituents, was made by way of specific agreements, none of those show that the assessee was under any obligation to bear the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration. 11. The next ground is with regard to disallowance of interest expenditure on secured loans at Rs. 11,68,589. Brief facts of the issue are that with regard to interest expenditure of Rs. 11,65,589 is concerned, the Assessing officer noted that as per the ledger produced by the assessee in respect of 'Interest on Batching and Mixing Plant' the said interest had only 'accrued' and 'was not due', as the debit was shown as "being the interest provision made up to 31.3.2006 Rs. 11,68,589/-". The Assessing officer opined that there was no evidence to the effect that the assessee had paid any tax or made TDS thereon. Since the said amount was only a provision, the claim of the expenditure of Rs. 11,68,589 was disallowed. 12. The learned counsel for the assessee submitted that similar issue came up for consideration before this Tribunal in assessee s own case for A.Y. 2006-07 in I.T.A. No. 719/Hyd/2010 wherein the Tribunal given the findings in favour of the assessee and the issue has to be decided in assessee's favour. The findings of the Tribunal are as follows: "9. We have heard both the parties and also perused the material on record. It is an admitted fact that TH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the vouchers in support of the expenses, it was found that some of them were not properly/fully vouched. Considering the nature of business and the facts of the case, he disallowed an amount of Rs. 15 lakhs out of the total expenditure. 16. We have heard both the parties and perused the material on record. The disallowance is made on ad-hoc basis as the expenditure is not properly supported by vouchers. Considering the nature of discrepancy noticed by the Assessing Officer, we are of the opinion that ad-hoc disallowance at Rs. 15 lakhs is on higher side and, in our opinion, to meet the ends of justice, disallowance of 5% of the expenditure will be proper. Accordingly we direct the Assessing Officer to disallow only 5% of the cash expenses unvouched by proper bills and receipts if it is not a statutory payment since there are chances of inflating the cash expenses. This ground is partly allowed. 17. The last ground is with regard to disallowance of legal charges at Rs. 4,04,000 on account of non TDS. Brief facts of the issue are that with regard to the disallowance of legal charges, the Assessing officer noted that the appellant had debited a total amount of Rs. 4,04,000 in res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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