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2016 (5) TMI 70 - AT - Income TaxIncome recognition - Advance received in the nature of imprest money held in the fiduciary capacity for his overseas client Ace Step Management Ltd., UAE - as alleged by revenue that within two days of receipt of the so called advance amount, the assessee disbursed more than ₹ 2 crores for making payments to his own firm, Hindu undivided family, wife, son and daughter and remaining amount was used for making payments towards preferential share amount of Dhanlaxmi Bank - Held that:- Facts and circumstances are similar and synonymous to the facts and circumstances in the case of CIT v. Om Prakash Khaitan [2015 (7) TMI 785 - DELHI HIGH COURT ] and respectfully following the same, we hold that the amount of professional advances received by the assessee accepting money from its clients on account to meet expenses for and on behalf of its clients and appropriating fees as per bill received against the client, then, the amount of advance cannot be treated as income in the hands of the assessee. We may further point out that the assessee received the amount in question on April 9, 2008, pertaining to the financial year 2008-09 relevant to the assessment year 2009-10 and it was the first year of receipt and the assessee has shown the balance at the end of the financial year, i.e., ₹ 6,44,44,813 as sundry creditors, after adjusting the professional fees and amount paid towards reimbursement on behalf of the client, then this amount cannot be treated as income of the assessee for the assessment year 2009-10. Finally, respectfully following the proposition laid down by the hon'ble jurisdictional High Court in the case of CIT v. Om Prakash Khaitan [supra] we hold that the present issue raised is clearly covered on all four corners in favour of the assessee and therefore, we dismiss the view taken by the Assessing Officer and upheld by the learned Commissioner of Income-tax (Appeals) wherein the entire amount of advance has been treated as income of the assessee for the assessment year 2009-10. Before we part with the adjudication of this issue, we may point out that we are in agreement with the contentions of the learned Departmental representative that income earned by the assessee himself, by his own firm, by his Hindu undivided family and by his wife, son and daughter, from investments of funds, so received by them out of advance amount in question, may be added to their respective taxable income. - Decided in favour of assessee. Disallowance u/s 14A - Held that:- We are in agreement with the contention of the learned Departmental representative that the Assessing Officer, after recording satisfaction has invoked section 14A read with rule 8D and has computed disallowance under clause (iii) of sub-rule (2) in accordance with the relevant provisions of the Act. It is pertinent to note that the language used by the Legislature in section 14A as well as in rule 8D of the Rules mandates that the provisions of sub-section (2) of section 14A of the Act shall also apply in relation to a case where the assessee claims that no expenditure has been incurred by the assessee in relation to the income which does not form part of the total income under this Act. In the present case, undisputedly and admittedly, the assessee has not made any suo motu disallowance. Therefore, we may safely presume that the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income under this Act. Therefore, after recording satisfaction, the Assessing Officer rightly invoked the provisions of section 14A read with rule 8D(2)(iii) of the Rules and we hold that the disallowance made by the Assessing Officer and upheld by the learned Commissioner of Income-tax (Appeals) is based on proper invocation and application of the relevant provisions of the Act and Rules and thus, we uphold the same - Decided against assessee.
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