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2023 (2) TMI 554 - AT - Income TaxDisallowance of rent expenditure - bogus claim of rent and being disallowance u/s 40(a)(ia) for non-deduction of tax on rent paid - HELD THAT:- We find that when the matter travelled before CIT(A), he erred in considering the correct figures of rent disallowance. He ought to have dealt with the issue of disallowances of rent separately but in the finding, he has deleted the disallowance u/s 40(a)(ia) of the Act but wrongly mentioned Rs. 3,30,000/- which ought to have been correctly mentioned at Rs. 3,67,500/-. Therefore, so far as the disallowance u/s 40(a)(ia) is concerned, the same already stands deleted by ld. CIT(A). Disallowance of Rs. 3,30,000/- is concerned the assessee has claimed that the same was paid through banking channel and included payment Paid to Mrs. Sangeeta Bhartia, Mrs. M. Mallickavalli and Smt. G. Nookaratnam. Necessary evidences have also been filed in the paper book in support of this claim. CIT(A) has not dealt with this issue, however looking to the fact that the assessee being a private limited company of which books of accounts are regularly audited and has paid the rent through account payee cheque and permanent account numbers of all the three parties are duly submitted, we find no reason to doubt the genuineness of the said claim. Therefore, the disallowance at Rs. 3,30,000/- is deleted. Hence ground no. 1 [1(a) & 1(b)] raised by the assessee is allowed. Disallowance of technical service charges - said amount was paid to Bhavishya International towards the consultancy charges from April, 2014 to March, 2015 but the contents of the bill were not clear as to whether they pertain to the year under consideration - HELD THAT:- The issue needs to be restored to the file of ld. AO for necessary verification and the assessee is directed to file all the relevant details including bank statement and the nature of consultancy services taken from M/s. Bhavishya International and whether the same can be allowed as a business expenditure. Needless to mention that proper opportunity of being heard should be provided to the assessee. The assessee is also directed to remain vigilant and file necessary documents, if considered necessary, in support of its grounds of appeal and should not take adjournment, unless otherwise required for reasonable cause. Disallowance of statutory audit fees - HELD THAT:- CIT(A) could not appreciate the fact that as per the mercantile system of accounting, the assessee has rightly claimed the statutory Audit fees as expenditure for the year to which it pertains. The alleged statutory audit fees was for the FY 2014-15 i.e. AY 2015-16 for which the audit work is to be carried out from the close of the year till the finalization of the balance sheet and profit & loss account. In our considered view such claim was rightly made by the assessee. Therefore, finding of ld. CIT(A) is set aside and disallowance of statutory audit fees made by AO is deleted. In the result, ground no. 4 raised by assessee is allowed. Disallowance of business promotion expenses - HELD THAT:- Assessee being unable to furnish relevant details before both the lower authorities but considering the larger interest of justice since the Directors have to incur various expenses on day-to-day basis in the regular course of business of a company, are of the considered view that disallowance of 25% of the said sum of Rs. 13,97,949/- will meet the end of justice. We accordingly confirm the disallowance partly. Disallowance of commission charges - disallowance was made by ld. AO on account of mismatch of figures - HELD THAT:- The assessee failed to succeed before ld. CIT(A) also. However, before us the assessee has made reference to the reconciliation statement providing the details that total debits for the FY 2014-15 was Rs. 9,13,458/- out of which a sum of Rs. 1,74,000/- was reduced towards reimbursement of expenses incurred by agent during direct shipment on which tax not deductible and on the remaining net commission TDS of Rs. 82,162/- was worked out and therefore, the gross commission was Rs. 8,21,620/- as per the Form No. 16A. We, thus find merit in the submissions made by the assessee and hold that disallowance for commission charges. Ground of assessee is allowed.
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