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2018 (8) TMI 56 - AT - Income TaxAddition u/s 14A r.w.r 8D - Held that:- Once the assessee has submitted before the Assessing Officer that no expenditure had been incurred for earning the dividend income, the Assessing Officer was under legal obligation to demonstrate as to how he was not satisfied with the contention of the assessee and only, thereafter, he could have proceeded to make a disallowance. As is evident from the assessment order, the satisfaction of the Assessing Officer before invoking provisions of section 14A r/w Rule 8D is missing. CIT (A) has also taken a similar view while deleting the disallowance. Under the circumstances, we find no reason to interfere with the findings of the Ld. CIT (A) in this regard and accordingly, ground nos. 1 and 2 of the department’s appeal are dismissed. Ad hoc disallowance @25% of the conferences and seminars expenses - Held that:- Assessing Officer has not pointed out any specific defect in the details/accounts submitted by the assessee. It is also pertinent to note that the Assessing Officer had made inquiries from two parties viz. M/s Imperial and M/s Habitat World in respect of payments made to them by issuing notices u/s 133(6) of the Act and it is a matter of record that these two parties had confirmed the transactions with the assessee. It is well settled by now that ad hoc disallowance cannot be made unless specific defects are brought on record by the Assessing Officer. This is not the case in the present appeal before us. There is a plethora of judicial rulings wherein it has been held that ad hoc disallowance without specific pinpointing of defect is not sustainable. Directors’ remuneration - Held that:- As to how the Assessing Officer has reached this conclusion has not been elaborated. Further, the Board resolution approving the appointing of directors passed in the extraordinary general meeting is available on record. The Ld. CIT (A) also did not undertake the exercise of examining the evidences but rather addressed the issue in a casual way by holding that remuneration of ₹ 40 lakh was fair and reasonable. CIT (A) has also not elaborated as to how he has reached the conclusion that an amount of ₹ 40 lakh was fair and reasonable towards payment of directors’ remuneration. Accordingly, in view of the lack of examination with respect to this issue by both the lower authorities, we deem it appropriate to restore the issue to the file of the Assessing Officer to reexamine evidences which have been submitted in this regard after giving proper opportunity to the assessee to present its case. Accordingly, ground no. 4 of the department’s appeal and ground no. 3 of the assessee’s appeal are allowed for statistical purposes. TDS u/s 195 - Held that:- Addition made by the Assessing Officer by invoking provisions of section 40(a)(i) it is seen that the Assessing Officer in his remand report has himself accepted that in view of the provisions of Double Taxation Avoidance Agreements between India and US and India and India and UAE, the payment to Mr. Renee Mauborgne amounting to ₹ 47, 52, 000/- and of ₹ 17, 67, 150 to Mr. Shashi Tharoor did not attract the rigors of provisions for deduction of tax at source. The Ld. CIT (A) seems to have ignored this admission by the Assessing Officer in the remand report. In view of the comments of the Assessing Officer in this regard as contained in the remand report, we delete the disallowance of ₹ 47, 52, 000/- and ₹ 17, 67, 150/-. AO is directed to delete these additions. We also note that the remaining payment of ₹ 3, 06, 181/- was made to M/s KPMG Helion which was in the nature of reimbursement on which TDS had also been deducted by them. Accordingly, no further tax was required to be deducted on this reimbursement. Thus, this amount of ₹ 3, 06, 181/- is also directed to be deleted and the Assessing Officer is directed to allow consequential relief. Addition by treating the payment made for carrying out due diligence and valuation of business as capital expenditure - Held that:- The copies of invoices placed show that invoice of ₹ 3, 06, 181/- was raised for professional services rendered in connection with Project Quest and the other invoice for ₹ 7, 82, 440/- was raised for professional services rendered in connection with Project Chip. However, the nature of the services rendered is not discernible from these invoices. In view of the inability of the assessee to demonstrate as to how these invoices pertained to capital expenditure, we are unable to differ with the findings of the lower authorities in this regard and we dismiss ground no. 4 of the assessee’s appeal.
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