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2016 (4) TMI 1120 - AT - Income TaxDisallowance of staff welfare expenditure - Held that:- As find from the order of the AO, the detail of the expenditure reflects that there is no material to show that the said expenditures were not incurred. We have also gone through the contents of Sec.37 of IT Act, where there are certain bars for allowing the expenditures described in Section 31-36 of the IT Act. The wordings of Sec.37 reflects that if the expenditure not being Capital or personal expenditure but incurred wholly and exclusively for the purpose of business or profession, it shall be allowed to be excluded in computing the income eligible under the head “profits and gains of business or profession”. In our considered view, both the authorities below have acted on presumption and on their notions as seen from the AO’s Order, he also considers the expenditure as personal in nature . Assessee being a corporate body so question of expenditure being personal in nature does not arise. It is clear that the said staff welfare expenses were incurred directly and exclusively for the purpose of business, because the staff welfare is the paramount in social arena for the growth and development of business therefore, we are the considered view to allow 100% expenditure qua staff welfare expenditure claim of the Assessee. Deduction under the head bad debt - Held that:- After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Respectfully following judgment of Apex Court in M/s TRF Limited Vs CIT (2010 (2) TMI 211 - SUPREME COURT ), we are inclined to allow deduction under the head of bad debt. Disallowance under the head ‘commission’ - Held that:- As the AO allowed more than 75% of the claimed amount under the head “commission”, but disallowed to the tune of ₹ 5.00 lakhs only on the presumption that what was the necessity of paying the commission to unknown persons and it was also not clear as to what are the nature of services rendered by the recipients to the companies. When the major portion of the amount of commission has been allowed by the AO, there is no material/evidence to prove contrary to the claim of the assessee therefore, we feel it appropriate to allow 100% under the head ‘commission’. Ad hoc disallowance on motor vehicle hiring expenses - Held that:- AO added ₹ 5.00 lakhs out of ₹ 80,69,000/- just on the assumption and on wrong presumption that the element of personal use cannot be totally denied. Even otherwise, learned CIT(A) also failed to give any special reason while confirming the disallowance. Therefore, we feel it appropriate to allow the claimed amount of ₹ 80,69,000/- under the head motor vehicle hiring expenses as deduction in its entirety . Computation of deduction u/s 10A - whether the export turnover should not be reduced from the figure of export turnover - Held that:- AO was pleased to reduce the aforesaid amount from the export turnover for the reason that the same has not been brought into India, till the date of order passed u/s 143(3) of the IT Act, or even during the appellate proceedings, the assessee failed to bring on record any evidence to substantiate the above amount that has been received in or brought into India. Hence we are inclined to dismiss the instant ground raised by the Assessee. Telecommunication expenses - Held that:- AO felt that major amount would have been incurred in respect of export than for other purpose, therefore he had taken the value of telecommunication at ₹ 2,00,00,000/- as adopted. The Ld CIT (A)n failed to adjudicate this head. We feel that the ld AO adopted value at the higher rate only on the assumption but not on any basis relevant to, hence we restrict the amount under head of telecommunication to ₹ 73,73,107/- only and the same can be excluded but not otherwise. Expenses Incurred Towards Overseas Travelling - Held that:- As it is evident from the operative part of order that the Ld AO only on assumption held that the Assessee is providing technical services and coming to this conclusion, failed to point out any material in support of the conclusion. The ld. AO also taken expenses incurred towards overseas travelling of ₹ 10.00 Crores and an amount of ₹ 15 lakhs being expenditure incurred on payment of commission to one Mr. Les Lawrence, a foreign national only on estimate basis. We feel it appropriate that because the Ld AO failed to bring any material on record qua providing of technical service by the Assessee and even otherwise , the amount worked out also to be on estimate basis which seems to be on assumptions therefore the said amount of ₹ 10 Crores and 15.00 Crores under the head of expenses incurred towards overseas travelling and expenditure incurred towards commission, respectively are not to be excluded, hence, exclusions made by the ld. AO are set aside. Consideration received for services rendered to overseas clients outside India - Held that:- As it reflects from the relevant part of the order passed by the learned AO that he adopted the figure under the aforesaid head at the rate of 20% of the above receipts and worked out to ₹ 2,94,75,502/-. We have also considered the Clarificatory circular no.1/2013 dated 17-01-2013 issued by CBDT to address various contentious issues leading to tax dispute in cases of entities engaged in export of computer software which are availing tax benefit under section 10A, 10AA and 10B of the IT Act, 1961. Hence, we are of the view that the said amount cannot be excluded from export turnover, hence exclusions made by the ld. AO under the instant head is set aside.
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