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2017 (8) TMI 1687 - AT - Income TaxDisallowance towards foreign travel expenses - expenditures are not supported by bills and vouchers - business expediency of the said foreign travel not proved - CIT-A deleted the addition - HELD THAT:- We are in agreement with the arguments advanced by the ld AR that the visit to Zurich (Switzerland) for onward visits to Boston / Brussels etc were done only as a stop over location by complying with the aviation rules. Ultimately the directors and top executives of the company had visited the countries where exports were indeed made by them during the year under appeal. AO had made this disallowance based on surmises and conjectures by making unwarranted allegations against the assessee. CIT-A had appreciated the entire details filed towards the foreign travel expenses filed on record and it is not the case of the ld AO that the expenditures are not supported by bills and vouchers. The business expediency of the said foreign travel is also proved beyond doubt from the details filed thereon. Hence we hold that the ld CIT-A had rightly deleted the said disallowance. Accordingly the Ground raised by the revenue is dismissed. Disallowance of additional depreciation - AO treated the costs incurred towards construction activities as spent towards building and refused to treat the same as part and parcel of value of plant and accordingly denied additional depreciation u/s 32(1)(iia) thereon - AO also refused additional depreciation on the pre-operative expenses and interest that were capitalized to the cost of the plant - AO observed that the Weighing machine is not used in the manufacturing process and hence the same is not eligible for additional depreciation - HELD THAT:- Calcutta High Court in Tribeni Tissues Ltd vs CIT [1991 (1) TMI 98 - CALCUTTA HIGH COURT] wherein it was held that Tube well and Weighing machine used in the production of paper are held to be ‘Plant’. Based on these observations, the ld CIT-A correctly agreed to the contentions of the assessee that ETP was necessary for the purpose of pollution control and construction of drain etc was essential part of ETP and was not in the nature of building. The assessee company having fulfilled the conditions precedent, is entitled for claim of normal and additional depreciation by treating the same as ‘Plant’. Moreover, the pre-operative expenses and interest till the date of installation was properly capitalized to the cost of plant and machinery and accordingly assessee is indeed entitled for additional depreciation on the same - Ground raised by the revenue is dismissed. Disallowance made u/s 14A - AO observed that the assessee was in receipt of exempt income and applied the provisions of all the three limbs of Rule 8D(2) and made disallowance - HELD THAT:- As gone through the same and we are convinced of the fact that the said expenditure represents custodian charges paid to Regsitrar and Share Transgfer Agents of the company who maintained the records of the shares issued by the company to its shareholders and hence the same has got nothing to do with the investments made by the assessee. Hence the said expenditure does not fall under the ambit of direct expenditure incurred for earning exempt income so as to fall within the mischief of Rule 8D(2)(i) . Hence the same is hereby directed to be deleted. With regard to the second limb and third limb of Rule 8D(2) we find that in any case the disallowance cannot exceed the exempt income - Accordingly we direct the ld AO to disallow only a sum of Rs 1,486/- u/s 14A of the Act in the year under appeal. Accordingly, the Ground No. 4 raised by the revenue is partly allowed TDS u/s 195 - Disallowance of commission paid - payments made to 4 foreign agents without deducting any tax - HELD THAT:- As overseas commission agents had indeed rendered due services to the assessee for which commission had been paid to them and the same requires to be allowed in full. It is well settled that the said commission payments would not fall under the ambit of disallowance u/s 40(a)(i) of the Act and hence we find that the ld CITA had rightly deleted the same. Assessee had paid commission to Indian agents for export sales made by the assessee - AO had disallowed the commission paid to these agents on the ground that they are similar to services that are to be rendered by the foreign agents as could be seen from the agreements entered into with Indian agents and foreign agents, and that predominant portion of the said commission has been paid to the same family members having surname ‘Mandhania’ - AO nowhere stated that these agents had not rendered any services to the assessee for payment of commission. We hold that once the rendering of services by these commission agents are not in dispute , there is no reason to disallow the same in the assessment. Incidentally , we find that the said commission and brokerage payments have been duly subjected to deduction of tax at source as per the Indian laws , though that may not be the criterion for allowability of an expenditure. We find in the instant case, the assessee had indeed made payment of commission and brokerage to Indian agents for procuring export orders and the said agents had indeed rendered services to the assessee,, which is not in dispute, and hence the same has been rightly allowed by the ld CIT-A - we hold that the ld CIT-A had rightly deleted the disallowance of commission paid - Decided in favour of assessee.
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