Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 1711 - AT - Income TaxDisallowance of club membership of fee - AO disallowed partial amount of total club membership expenses on the ground that the assessee failed to furnish evidences - HELD THAT:- It is the contention of the assessee that it has filed details for balance amount of ₹ 2,30,623/- before the Ld. CIT(A) vide its submission dated 22.01.13. Such details have been furnished before us in the form of paper book. Therefore, we are of the considered view that the issue needs to be reexamined by the AO, in the light of evidences filed by the assessee. Hence, we set aside the issue to the file of AO and direct him to consider the issue afresh after affording a reasonable opportunity of hearing to the assessee. Disallowance of expenses incurred in relation to exempt income under section 14A r.w.r. 8D - HELD THAT:- Once the assessee has proved the availability of own funds in excess of value of investments, then the question of disallowance of interest expenses under rule 8D(2)(ii) does not arise. In this case, the assessee has filed necessary details to prove availability of own funds. Hence, we are of the considered view that the AO was incorrect in disallowing interest expenses under rule 8D(2)(ii) of Income Tax Rules, 1962 and accordingly direct him to delete disallowance of interest expenses worked out under rule 8D(2)(ii). Disallowance of direct expenses under rule 8D(2)(i) - suo moto disallowance by assessee - AO has not recorded his satisfaction before disallowing further expenses - HELD THAT:- We find no merits in the arguments of the assessee for the reason that the AO has arrived at a satisfaction by rejecting computation worked out by the assessee towards suo-moto disallowances which means that the AO has considered the nature of expenses incurred by the assessee and also disallowances quantified in the light of exempt income earned for the year and hence we are of the considered view that the AO was right in invoking rule 8D(2)(iii) to quantify disallowance in respect of expenses incurred in relation to exempt income. Hence, we are of the considered view that there is no error in the computation worked out by the AO under rule 8D(2)(iii). Disallowance of gift expenses - assessee has failed to file any evidences to prove necessity of gifts given to employees, associates and government officials in relation to its business activity - HELD THAT:- Basically the expenses in the nature of gifts and rewards are in the nature of personal expenses and hence cannot be allowed as deductable under section 37(1). Mere payment of fringe benefit tax on such expenses would not discharge the assessee’s obligation to prove such expenses to say that these are incurred wholly and exclusively for the purpose of business. The Ld. CIT(A) after considering the relevant submissions has rightly confirmed additions made by the AO. We do not find any error or infirmity in the order of the Ld. CIT(A). Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground raised by the assessee. Disallowance of compensation payment u/s 40(a)(ia) - non deduction of tds - HELD THAT:- Although the assessee claims that payment made to Mr. SS Mohla is in the nature of compensation for which the provisions of TDS has no application, on perusal of facts available on record, we find that such payment is in the nature of commission for securing orders, therefore, we are of the considered view that mere change in nomenclature of the expenses does not absolve the assessee from the responsibility of complying with applicable TDS provisions. In this case, the assessee itself has admitted that it has paid commission for securing orders. Once the payment is in the nature of commission obviously the assessee ought to have deducted TDS under section 194H - Since the assessee has failed to deduce TDS, the AO has rightly disallowed such expenditure under section 40(a)(ia) - CIT(A) after considering the relevant submissions has rightly confirmed additions made by the AO. In so far as case laws relied upon by the assessee, we find that all the case laws are rendered on different set of facts and has no application to the facts of the assessee’s case. Hence, we are inclined to uphold the finding of the Ld. CIT(A) and reject the ground raised by the assessee. Disallowance of write off of doubtful deposits - assessee had claimed deduction of write off of deposits which were long outstanding and had become irrecoverable - HELD THAT:- Deposits written off by the assessee are balance sheet items and not part of trading receipts. If the assessee has given deposits out of its tax suffered income, then obviously such deposits are coming within the ambit of bad debts written off under section 36(1)(vii) of the Act. If the assessee has given such deposit out of its borrowings then obviously it does not fulfill the conditions prescribed under section 36(2) of the Act. Hence, the Ld. CIT(A) has rightly set aside the issue to the file of AO to verify whether such advances are trade advances or not. Therefore, we are of the considered view that the Ld. CIT(A) was right in setting aside the issue to the file of the AO to verify the nature of advances. There is no grievance is caused to the assessee. The assessee can file necessary evidences before the AO to prove whether such advances are in the nature of trade advances or not. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground raised by the assessee. Disallowance of irrecoverable advances - debit balance outstanding in DEPB provision account and amount receivable for duty drawback for recovery from Vietnam exports as the same were irrecoverable - AO disallowed written off of irrecoverable advances on the ground that such advances were not bad debts of customers and hence could not be allowed under section 36(1)(vii) - HELD THAT:- When export incentive is offered to tax in the earlier period by showing the amount as receivable, then write off of such advance as irrecoverable is in the nature of bad debt which can be claimed as deduction under section 36(1)(vii) - there is a contradiction in the claim made by the assessee in its books of accounts and the submissions made before the authorities. The assessee has claimed an amount of ₹ 51,45,651/- as irrecoverable advances, however, as per the submissions the amount written off was at ₹ 39,39,160/-. Therefore, we are of the view that the issue needs to be reexamined by the AO in the light of submissions of the assessee. Hence, we set aside the issue to the file of AO and direct him to examine the claim with necessary evidences before allowing the claim. If the assessee is able to file evidences to the extent of ₹ 51,45,651/-, then the AO is directed to allow write off irrecoverable advances. Adhoc disallowance of 50% of payment made to subsidiary company for supply of support services and supply of manpower - AO has disallowed amount paid to associate concern on the ground that the payments were excessive and unreasonable - HELD THAT:- We find force in the arguments of the assessee for the reason that the assessee has furnished necessary details of payment made to its subsidiary company for rendering services. The AO has made adhoc disallowance of 50% without any reference to comparable cases to come to the conclusion that payments made by the assessee are excessive and unreasonable. Hence, we direct the AO to delete additions made towards disallowance of payments made under section 40(2)(b) . Disallowance of unrealized foreign exchange loss - AO disallowed such loss on the ground that it pertains to capital assets which ought to have been added to the concerned asset - HELD THAT:- CIT(A) has already set aside the issue to the AO to consider it afresh in the light of decision in the case of CIT V/s. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT]. Therefore, we are of the considered view that there is no grievance caused to the assessee. The assessee can file necessary details before the AO to prove the loss whether it pertains to revenue or capital in nature. We further observe that the assessee itself has admitted while giving effect to the order of the Ld. CIT(A) the AO has allowed unrealized foreign exchange loss. Therefore, we are of the considered view that there is no merits in the ground taken by the assessee and accordingly we reject ground taken by the assessee. Non adjudication of additional ground by Ld. CIT(A) - ground filed by the assessee relating to the allowance of claim which was wrongly disallowed by the assessee while filing the return of income u/s 40(a) - HELD THAT:- we find that the assessee is within its right to raise the additional ground qua the deduction not claimed before the AO during the year. The assessee has raised the issue before the first appellate authority who has not adjudicated the same. In our opinion, the issue needs to be restored to the file of the Ld. CIT(A) so that the same could be decided on merits. The case of the assessee is squarely covered by the ratio laid down in the case of CIT vs. “CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.” [2012 (7) TMI 158 - BOMBAY HIGH COURT]as held that the assessee can raise before the appellate authorities any additional ground qua the deduction which was not claimed in the return of income. Disallowance of product trial expenses - HELD THAT:- Assessee is eligible for deduction towards product trial expenses under section 37 In so far as assessee’s claim of weighted deductions under section 35, we find that the assessee has failed to file any kind of evidences to prove that such R&D expenditure has been approved by the competent authority to be eligible for weighted deduction, therefore we are of the considered view that there is no merit in the arguments of the assessee that the assessee is eligible for weighted deduction under section 35 of the Income Tax Act, 1961. The Ld. CIT(A) after considering the relevant submissions has rightly allowed the claim. We do not find any infirmity in the order of the Ld. CIT(A). - Decided against revenue.
|