TMI Blog2014 (1) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts paid to the lawyers were never claimed as deduction - The issue has been restored for fresh adjudication. Addition on account of advances received in cash - Held that:- The assessee is an advocate who maintains cash system of accounting and has received advances from clients - Advances received from clients do not become his income unless assessee renders his professional services and bills for the same are raised - Merely that the assessee followed cash system of accounting does not mean that any sum received as advance for his future use becomes his income – Decision in CIT Vs. Sandersons & Morgans [1968 (4) TMI 17 - CALCUTTA High Court] followed - When a solicitor receives money from his clients, he does not to do so a trading receipt but he receives the money of the principal in his capacity as an agent and that too in a fiduciary capacity - The money thus received does not have any profit making quality about it when received - It remains money received by a solicitor as "clients's money" for being employed in the clients cause – The addition made by CIT(A) deleted - The solicitor remains liable to account for this money to his client – Decided in favour of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) of the Act wherein there is error while computing the WDV carried forward on such assets. Closing WDV reads as under: Asset Cost of assets used for more than 180 days Cost of assets used for less than 180 days Total cost of assets Depreciation for the year WDV of Books Annual Publications 20,555 34344 33887 29434 54,442 63,7781,18,220 22,499 49,061 71,560 31,104 3,410 46,660 The Ld. counsel for the assessee further stated that the above clearly reveals that the WDV arrived at by deducting depreciation for the year from the total cost of assets have been mistakenly computed by the AO and he referred to correct figures as per his written submission as under: Books Annual Publications TOTAL COST Less: Depreciation 54,442 22,499 31,943 63,77849,061 14,717 From the above figures and computations, it is clear that the computation of depreciation on books and publications has to be made in accordance with the provisions of the Act using the correct WDV. The correct WDV as computed by the assessee and produced before us in his written submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments. As the assessee failed to deduct TDS, the AO disallowed the sum of Rs.19,20,785/- by invoking the provisions of section 40(a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO by observing as under: "In the instant case, the appellant is an advocate. In the course of his profession, the appellant receives advances from his clients and hires advocates for dealing the cases, assigned to the appellant by his clients. After incurring expenses like Advocates' fees, purchase of stamps and other miscellaneous expenses, the balance amount is retained by the appellant towards his professional fees. In other words, the appellant undertakes to render the required professional services to h s clients. In this regard, he hires certain advocates for the purpose of dealing his clients cases. Therefore, the payment made by the appellant to the advocates, was not on behalf of his clients, because once he has taken up the cases, of his clients, it is his responsibility to attend those cases. It is entirely up to the appellant as to whether he himself attends to those cases or he h res, at his discret on, a particular advocate for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with law." As in the present case also the assessee has been reimbursed by assessee's clients the amounts paid to the various lawyers and the amounts paid to the lawyers were never claimed as deduction. Once this is the position, we feel that this issue needs re-examination in the light of this decision of Tribunal in the case of Sharma Kajaria Co. supra. Hence, we set aside this issue to the file of AO with the direction to decide the issue in terms of the above cited decision. This issue of assessee's appeal is allowed for statistical purposes. 9. The next issue is as regards to the disallowance of telephone charges at Rs.11,160/- and further issue i.e. disallowance of depreciation of Rs.25,268/- on estimate basis. For this, assessee has raised following ground nos. 3 and 4: "3. The Ld. CIT(A) erred in disallowing telephone charges of Rs.11,160/- on an estimate basis. 4. The Ld. CIT(A) erred in disallowing depreciation on motor car of Rs.25,268/- on estimate basis." 10. We find that the AO as well as CIT(A) has confirmed the disallowance at 10% of the telephone expenses and depreciation on car and according to us which is quite reasonable because there is no deni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came for consideration before the Hon'ble High Court of Kolkata in the case of Sandersons and Morgans referred to bove. The Hon'ble High Court of Kolkata has held as under :- "Since the money so received was impressed with the character of price, from the inception, the contingency that the part of the money was refundable did not change the character of the unrefunded money. The receipt thus constituted trading receipt. In the instant case, we have already observed, the money received was money of the principal received by the agent in a fiduciary capacity, for being employed for the work of the principal entrusted to the agent. We have already seen that the balance of the money was refundable by the agent to the principal. Since the money was impressed with the character of somebody else's money, namely, clients money, it did not become the income of the assessee. It may be, n the absence of a rule like the Solicitors' Account Rules in this country, the assessee mixed up this mony with its own money and may have deposited the money in its own bank account; it may be that this mony remained part of the general assets of the assessee for a long time; but this mixing up did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is an advocate who maintains cash system of accounting. Further facts are that assessee received advances from clients and the same is declared as liability in the Balance Sheet. The assessee also maintains client deposit account in his books of account, where the amount collected from clients are kept as an impressed and these amounts are to meet the expenditure incurred on behalf of the clients. It is also a fact that the assessee is maintaining cash system of accounting on actual receipts and payment basis but advances received from clients is a liability of the assessee. According to us, advances received from clients do not become his income unless assessee renders his professional services and bills for the same are raised. Merely that the assessee followed cash system of accounting does not mean that any sum received as advance for his future use becomes his income. This view of ours is also supported by Hon'ble Supreme Court in the case of CIT Vs. Sandersons Morgans (1970) 75 ITR 433 (SC), wherein it is held as under: "When a solicitor receives money from his clients, he does not to do so a trading receipt but he receives the money of the principal in his capaci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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