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2016 (9) TMI 639 - AT - Income TaxTDS u/s 194H - Addition made on account of disallowance of Financial Services Charges - non deduction of TDS on the amount paid to the employees of the company - Held that:- Both the authorities below have misdirected themselves for not appreciating the fact that the nature of payment as made by the assessee is neither a payment in the nature of salary nor related to employer-employee relationship. The payment is made in respect of the expenditure claimed to have been incurred for facilitating the loan transaction. The AO in the assessment order has considered this claim of the assessee i.e. expenditure being the reimbursement to the employees, and rejected the same on the ground that not a single bill was available with the assessee. As observed that these expenses were incurred for the services provided by the salesmen and that there was an absolute absence of even a single supporting voucher or any other documentary evidence which could prove assessee’s claim that the said expenses were reimbursements to the salesmen. The AO treated such payment as the payment of commission or brokerage to the employee. In support of such finding, the AO has not placed any material on record suggesting that these payments were in the nature of brokerage or commission. In the absence of such material, in our considered view, merely on the basis of conjectures, the payments made to the employees would not partake the character of payment of brokerage or commission. Another aspect of the matter, which the AO has not appreciated that in the normal loan transaction, the bank mostly debit the amount of processing charges. The AO has also not verified from the banker whether the said expenditures were debited to the account of the loan beneficiary by the banker or not. Whether there was any agreement between the banker and the assessee company in this behalf. Even the assessee has not furnished the requisite details in support of its claim that such payments were nothing but reimbursement to the employees and such expenditure is allowable deduction. After considering the totality of the facts and circumstances of the present case, it would be in the interest of justice if the issue is restored to the file of the AO for decision afresh. Hence we set aside the impugned order and restore the matter to the file of the AO with the direction to verify from the bank whether any loan transaction was carried out as claimed by the assessee and also to verify whether the expenditure incurred in respect of documentation of the loan transaction, the expenditure related to verification of title deeds/ownership title was carried out by the banker or by the assessee company - Decided in favour of revenue for statistical purposes. Addition u/s 14A read with Rule 8D - Held that:- As per section 14A of the Act, the AO has to satisfy himself in respect of the claim of expenditure. In the event the AO finds that the expenditure related to the exempt income have also been claimed by the assessee while computing its income, then the AO is empowered to make disallowance in the manner prescribed in rule 8D. In the instant case, the AO has not given any finding in respect of the disallowance of expenses. On the contrary, the assessee has pointed out that it had sufficient own funds and investment has been made out of its own funds. Therefore, the disallowance related to the interest was not justified. Thus we do not find any reason to interfere in the orders of the ld. CIT (A). In respect of administrative disallowance, as the assessee has stated that exempt income was directly credited to the bank account of the assessee, but it cannot be presumed that no administrative expenditure related to such exempt income was incurred. Therefore, in respect of administrative disallowance, we set aside the order of ld. CIT (Appeals) and restrict the disallowance to the extent of earning of exempted income of ₹ 30,000/-. Thus out of total disallowance of ₹ 5,81,868/-, the disallowance to the extent of ₹ 30,000/- qua the administrative expenses is sustained. - Decided in favour of revenue partly Disallowance of staff & labour welfare expenses - Held that:- The ld. CIT (A) held that the expenses under the head salary and labour welfare are necessary for carrying on the business. He observed that there is no evidence to suggest that the expenses incurred by the assessee were either inflated or bogus. At the time of hearing of the appeal, the ld. D/R has not controverted these findings of the ld. CIT (A). We, therefore, do not find any reason to interfere in the order of the ld. CIT (A), the same is hereby upheld. - Decided against revenue
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