9911796707
TMI Blog2014 (1) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the ld. AO on account of miscellaneous office expenses and treating the same as capital expenditure". In respect of Ground No.1 of the appeal, the relevant facts are that the assessee is engaged in the business of development of properties and building residential projects. The assessee follows mercantile system of percentage completion method for revenue recognition for its projects. 2. There was a search and seizure action u/s 132(4) of the Income Tax Act, 1961(the Act) in the case of Lokhandwala Group of Companies on 23.12.2008 and subsequent dates. The assessee is covered under the search action u/s 132(1) of the Act on the Lokhandwala Group Companies. Pursuant thereto notice under section 153A of the Act issued and the assessee filed its return of income declaring total income of Rs.6,12,66,572/- as against originally returned income which was filed on 2.11.2007 u/s 139(1) at Rs.5,95,12,822/-. During the course of enquiries by Dy.DICT (Inv), Unit-VIII(1), Mumbai, it was established that M/s Nischal Corporate Services Pvt Ltd. (hereinafter referred to as NCSPL) has issued accommodated bills/entries on account of professional fees to various persons. AO has stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter referred to as NSPL) on 1.11.2006 and referred pages 29 to 31 of the paper book. Ld. AR submitted that the AO was confused that both payments were made to the same party viz. NSCPL but ignored the fact the other payment of Rs.17,53,750/- was made to NSPL. Ld. AR submitted that the said disallowance of Rs.35,07,500/- made by the authorities below is not justified in view of the above facts. In reply, to a query, the ld. AR admitted that the payment of Rs.17,53,750/- to NSCPL was admitted by assessee to be not genuine and hence the said disallowance was made by the assessee itself in the return filed u/s 153A of the Act. 5. On the other hand, ld. DR admitted the fact that the assessee made disallowance of Rs.17,53,750/- in the return filed u/s 153A of the Act but submitted that both the payments of Rs.17,53,750/- each were only to one party i.e. NSCPL and hence further disallowance of Rs.17,53,750/- is to be made as against Rs.35,07,500/- by authorities below. The ld. DR further submitted that the matter may be restored to the file of the AO for his verification. 6. We have carefully considered the submissions of ld. Representatives of both the parties and the orders of authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was deducted by assessee, the genuineness of payment be rejected/doubted. Even otherwise as per bills and ledger confirmation placed at pages 1 and 2 of the paper book, there is only one payment of Rs.17,53,750/- made to NSCPL on 4.11.2006 and NSCPL was indulged in "Hawala" transaction and/or providing bogus accommodation entries to various entities/persons and the assessee also obtained the benefit of said accommodation entries. There is no evidence on record that NSPL also was indulged in providing accommodation and /or bogus entries to the parties and assessee made said payment of Rs.17,54,750/- on 1.11.2006 to NSPL against bogus bill/accommodation entries. We observe that the Permanent Account Number of NSPL is also given in the confirmation letter placed at page 33 and also TDS was deducted as per certificate placed at page 31 of the paper book. Considering the said facts, we are of the considered view that payment of NSPL cannot be disallowed. Since assessee itself disallowed Rs.17,53,750/- of payment made to NSCPL, in the return filed hence to disallow the said amount by AO, amounts to disallowance twice. Therefore we delete the disallowance made by AO and sustained by ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture was incurred by assessee with a main intent of promoting its business and therefore, the expenditure is in the nature of advertising expenditure . That the payments are made under a contractual obligation for the purpose of enabling the assessee to gain better visibility in respect of its on-going projects. Therefore, the payments are covered by TDS provision u/s 194C of the Act. The ld. CIT(A) has stated that in the list of 109 payments identified by AO a large number of payments not exceeding Rs.20,000/- each are seen. He has stated that considering the quantum of payment in each of these instances, AO is hereby directed to accept the self made vouchers wherein there is also no requirement of complying with the TDS provisions u/s 194C of the Act. However, in respect of the payment made in each case exceeding Rs.20,000/- or in cases wherein the aggregate payments exceeded Rs.20,000/-, the assessee had to necessarily comply with TDS provision u/s 194C of the Act. The ld. CIT(A) has stated that on account of failure on the part of the assessee to deduct TDS in respect of payment exceeding Rs.20,000/-, the disallowance u/s 40(a)(ia) of the Act is attracted. Therefore, the ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act would be applicable. However, if person has taken particular space on rent and thereafter sub-let the space fully or in part for putting up hoarding, he would be liable to deduct TDS u/s 194I and not u/s 194C of the Act. There is no dispute to the fact that the said mandals are registered as trust. We observe that the said mandals have reserved certain space for the purpose of putting the banner and hoardings inter alia by assessee at the space hired by them and against which the assessee made payment to these mandals The assessee has stated that it has taken said space on rent for a particular period and therefore, the said payment is in the form of rent. Whereas the department's contention is that it is just a lump sum payment to those mandals and the said mandals have allowed the assessee to put its hoardings and banners for the purpose of advertisement only. We observe that the ld. CIT(A) has mentioned in the impugned order that the assessee has made the said payment under a contractual obligation for the purpose of enabling the assessee to put its hoarding in respect of its on going projects and accordingly, the ld. CIT(A) has concluded that the said payments are sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volved is capital in nature and the assets purchased ought to have been incorporated into the block of assets and the depreciation at the applicable rates ought to have been claimed. Based on a policy of a company which is consistently followed, expenditure laid out for purchase of items not exceeding certain threshold limit, say Rs.5,000/- may be treated as items of revenue nature. In the instant case, the appellant company has not placed on record any such accounting policy consistently followed which does not interfere with the concept of block of assets and the methodology of depreciation required to be adhered to under the Income Tax Act. Further it is noticed that purchase price of Sharp LCD is shown as Rs.75,990/- and mobile phone purchases include Black Berry, Motorola , Nokia which are expensive items. Considering the large number of mobile phones shown as purchased during the relevant previous year, it was required that the cost of the entire purchases of Furniture, Mobile phones, TV were taken into account in the appropriate block of assets and depreciation was claimed. Therefore, the claim of the appellant that the entire cost of Rs.5,31,213/- ought to have been allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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