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2020 (4) TMI 394 - AT - Income TaxPrior period expenses disallowance - expenses crystallized during which Financial Year - case of the assessee before the CIT(A) is this that though the said expenses pertain to prior period that is F.Y. 2008-09 there were some dispute between those parties and hence expenses were not claimed in the A.Y. 2009-10 - HELD THAT:- It is the settled principle that merely because the expense relates to earlier years the same cannot be said to be payable always in the same year unless and until it is crystallized. It appears from the record of the assessee is in the practice of claiming the prior period expenses as and when it is crystallized. Since in this particular case we have verified from the documents that the said expense of ₹ 46,52,291/- made to the parties during A.Y. 2010-11 upon resolving the dispute between those parties, the same actually been crystallized in A.Y. 2010-11 and such expenses are allowable in nature. In this aspect we relied upon the judgment passed in the matter of Deepak Fertilizers and Petrochemicals Corp. Ltd. vs. DCIT [2007 (9) TMI 290 - ITAT BOMBAY-G] where principle of consistency were followed. Thus, we find no justification in disallowing such expenses - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - TDS u/s 172 or 194C or 195 - payment of freight expenses to non resident shipping agencies agent - HELD THAT:- Payment made to the non-resident shipping company in foreign currency by such agents is reimbursement of actual expenses and thus no tax is required to be deducted at source on the same as it appears from the records which has been duly taken care of by the Learned CIT-A. As per CBDT circular No. 723 dated 19.09.1995 since agents acts on behalf of the non-resident ship-owner he therefore steps into the shoes of the principal. Accordingly provision of Sec.172 shall apply and provisions of Sec.194C and Sec.195 would not apply. Having regard to the this particular aspect of the matter the Learned CIT(A) has deleted such disallowance made under section 40(a)(ia) of the Act. Alternatively in the event the C&F agents have declared terminal handling charges, documentation charges etc. as income and pay tax thereon disallowance under section 40(a)(ia) is not called for. In this regard the assessee relied upon the judgement passed by the Hon’ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] - In that view of the matter the order passed by the Learned CIT(A), in our considered opinion, just and proper and without any ambiguity so as to warrant interference. Thus, the order is passed in the affirmative i.e. in favour of the assessee and against the Revenue. Disallowance in respect of interest and insurance expenses claimed on vehicles - part disallowance in respect of depreciation and incidental expenses claimed on vehicle - HELD THAT:- It is the settled principle of law that though cars are brought by a company the name of its director, the company is eligible for claiming depreciation on the same. In this regard, the assessee relied upon the judgement passed in the matter of CIT vs. Aravalli Finlease. [2011 (8) TMI 814 - GUJARAT HIGH COURT] which we have carefully perused. CIT(A) deleted additions made in respect of “Interest ₹ 82,121/-” and “Insurance ₹ 23,370/-”; However, addition in respect of “Depreciation ₹ 1,36,000/-” and “car expense ₹ 28,995/-” has been partly deleted to extent of 75% i.e. 25% which according to us is unambiguous taking into consideration of the assesses books of accounts maintained in regard to the said asset as it appears from the records and thus we uphold the same. Hence, this ground of appeal preferred by the Revenue is dismissed. Disallowance of expenses for web designing and development - HELD THAT:- Assessee has also deducted tax at source while releasing such payments. Thus, it becomes amply clear that the underlying expenses have been incurred for day-to-day running of the business of the assessee. No asset has come into existence on account of incurring such expenditure, and such expenditure has not resulted into any enduring benefit to the assessee. More so, expenses have been incurred wholly and exclusively in connection with the business of the assessee. In view of the above, the underlying expenses are undoubtedly revenue. In this regard, the Learned AR relied upon the judgement passed by the Hon’ble jurisdictional High Court in the matter of PCIT vs. Zydus Wellness Ltd [2017 (4) TMI 920 - GUJARAT HIGH COURT] - We have perused the judgement and find that since the underlying expenses has undoubtedly revenue in nature, the impugned disallowance has been rightly deleted by the Learned CIT(A) relying upon the ratio laid down by the judgement as aforesaid. Hence, we find no merit in the ground of appeal preferred by the Revenue. The same is, thus, dismissed. Disallowance for market survey and production of TV commercial - HELD THAT:- expenditure in question has not resulted into any enduring benefit to the assessee. Further that such expenses have been incurred wholly and exclusively in connection with the business of the assessee as it appears from the records being revenue in nature, and relying upon the judgement passed by the jurisdictional High Court in the matter of PCIT vs. Zydus Wellness Ltd. [2017 (4) TMI 920 - GUJARAT HIGH COURT]we find no ambiguity in the order passed by the Learned CIT(A). Hence, we reject the ground of appeal preferred by the Revenue. Disallowance of expenses paid to Triton Communication for making advertisement film - HELD THAT:- These expenses have been incurred wholly and exclusively in connection with the business of the assessee - underlying expenses are undoubtedly revenue in nature and hence, the disallowance has rightly been deleted. Thus, we reject the ground of appeal in the absence of any ambiguity being found in the order passed by the Ld. CIT(A). Disallowance being credit card expenses - HELD THAT:- These expenses have been incurred in relating to the business of the assessee. Whenever directors go out for business promotion it is not always convenient for them to pay various expenses in cash and thus the expenses are made through credit card. We have also carefully considered the ledger of credit card of those concerned expenses which appear at Page 254 to 255 of the Paper Book on record before us. Assessee’s turnover is ₹ 16,64,10,392/- for the year under consideration which appears at Page 54 of the Paper Book. Accordingly, the impugned expense is only 0.07% of the total turnover. Thus, ultimately, the impugned expenses have been found to be incurred wholly and exclusively for the business of the assessee by the ld.CIT(A), which finding according to us is without any ambiguity and needs no interference. The same have been deleted by the Ld. CIT(A). Hence, we reject this ground preferred by Revenue. Under-invoicing of sales made to sister concern - HELD THAT:- Pick and choose method has been adopted by AO and various factors affecting the price have been completely overlooked; - Apart from that Assessee’s exports to its sister concern for AY 2010-11 are of ₹ 2,42,67,490/- whereas AO has worked out under-invoicing of exports to a huge sum of ₹ 13,44,47,290/- i.e. almost 5.54 times of exports to sister concern shown by the assessee. We also find that the total turnover for Asst. Year 2010-11 is ₹ 16,64,10,392/- as appears at Page No. 54 of the Paper Book. After addition of ₹ 13,44,47,290/- in respect of alleged under invoicing the Gross Profit rate and Net Profit rate shall be 64,79% & 46.38% which is not possible. In fact, a survey was took place on 22.02.10 which is at the fag end of the year. The assessee are duly audited all books of accounts. After taking into consideration the entire aspect of the matter, we find the Ld. CIT(A) has rightly deleted the impugned disallowance.
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