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2011 (7) TMI 1203 - AT - Income TaxDisallowance u/s 40(a)(ia) - non deduction of TDS - Expenditure paid to Advocate - The assessee said that the amount paid to the advocate is towards reimbursement of expenses for publishing public notices - Such amount was disallowed by CIT(A) - HELD THAT:- No bills issued by such newspapers or of any agent has been filed either before the AO or before the Ld. CIT(A) or even before us. The AO had already given a finding that the public notices issued in three separate news papers were issued by Advocate on behalf of her client. Under these circumstances, the payment made to advocate towards reimbursement of expenses appears doubtful. We, therefore, concur with the findings of the lower authorities that the same is towards professional fees paid to the advocate. The bill issued by advocate, in our opinion, is merely a self securing document. Since the payment made to advocate is liable for deduction of tax, therefore, the lower authorities are justified in disallowing the same u/s.40(a)(ia) of the Act. Accordingly the order of the Ld. CIT(A) on this issue is upheld - Decision against Assessee. Advertisement Expediture - Expenditure was made on advertisements and TDS was not deducted for the same - HELD THAT:- On the basis of facts and emails, the said expenditure is clearly towards advertisement of the product. Since the assessee has violated the provisions of law by not deducting tax, the same is liable for disallowance u/s.40(a)(ia). Further, apart from an email no other document has been filed. Even otherwise also the same is towards keeping the goods of the company in the display box which in our opinion amounts to advertisement. We, therefore, uphold the order of the Ld. CIT(A) on this issue - Decision against Assessee. Capitalizing the Expenses to Work-in-Progress - CIT(A) confirmed the addition by disallowing the expenses and treating the same as work in progress - Assessee contended that he entered into Joint venture Agreement and according to the joint venture, he was not to do any construction activity but was to only finance the project. As such there was not work in progress with him - HELD THAT:- The clauses in the Development agreement, Supplementary agreement and the Cancellation agreement supports the contention of the Ld. Counsel for the assessee that the assessee is only a Financer and not a Developer. Further, from the details of expenses furnished in the paper book, we find force in the submission of the Ld. Counsel for the assessee that these are nothing to do with the development of property. We also find force in the submission of the Ld. Counsel for the assessee that even if the expenditure has to be capitalized, the same has to be capitalized in the books of the Joint venture account and not in the books of the assessee. We, therefore, concur with the submission of the Ld. Counsel for the assessee that the lower authorities were not justified in capitalizing the various expenses to work- in- progress - Decision in favour of Assessee. Interest on Presumed Accrual Basis - Assessee has credited an amount as interest income which the assesses has actually received during the year. CIT(A) held that the interest has been received on the advance made and this is prior to commencement of business of construction. Since the project has not yet commenced, the action of the AO in treating the expenses as capital in nature is correct - HELD THAT:- Following the decisions in the judgement of SUSHILA SHANTILAL JHAVERI VERSUS UNION OF INDIA AND ANOTHER. [2006 (7) TMI 136 - BOMBAY HIGH COURT] and COMMISSIONER OF INCOME-TAX VERSUS BALARAMPUR COMMERCIAL ENTERPRISES LTD. [2003 (3) TMI 83 - CALCUTTA HIGH COURT], when the assessee is aware that it is not going to receive anything over and above what has already been received and credited in the book of accounts, and when the agreements and correspondences between the parties do indicate such things, although after the balance sheet date, therefore, income on notional basis in our opinion, cannot be brought to tax. In this view of the matter, we set aside the order of the Ld. CIT(A) and direct the AO to allow the various expenses in the question claimed by the assessee.
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