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2016 (3) TMI 547 - ITAT CHENNAI

2016 (3) TMI 547 - ITAT CHENNAI - TMI - Disallowance of incentives to Dock Labour Board Workers - CIT(A) directed the Assessing Officer to restrict the disallowance to 15% only - Held that:- Expenditure is incurred as a regular practice in the business of forwarding and clearing agencies at Dock and Ports for loading and unloading of goods and claimed as General and Miscellaneous expenses necessarily for the purpose of conducting business. The Revenue has accepted 15% disallowance in the earlier .....

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ated expenditure as business expenses and deleted the addition - Held that:- We are of the opinion that the magnitude of business is high and to develop business relations, it is common to incur expenditure on foreign visitors. Therefore, we do not interfere with the order of Commissioner of Income Tax (Appeals) on this ground and uphold the same. - Decided against revenue

Disallowance of subscription to associations - CIT(A) deleted the addition - Held that:- We after hearing the riv .....

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and assessee disallowed expenditure on two cars which is not disputed but on remaining cars the assessee fails to maintain log book and not produced evidence in assessment proceedings and there is a scope for element of personal usage considering the luxury sedans. Therefore we set aside the order of Commissioner of Income Tax (Appeals) on this ground and confirm the order of the Assessing Officer in making disallowance - Decided against assessee

Disallowance of foreign travel expense .....

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issue to the file of the Assessing Officer who shall verify fund flow statement based on the capital account and balance sheet of the firm and allow deduction after examination - Decided in favour of revenue for statistical purpose.

Addition on account of difference in receipts as per clients account - Held that:- We are of the opinion considering the submissions and material produced and the circumstances and the type of clients and the nature of expenditure and accounting treatment .....

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orage charges as per the directions and due to High Court stay in Writ Petition the amount could not be refunded and the outcome of the Writ Petition is pending and there is a liability falling on the assessee firm to discharge. We are of the opinion on the current circumstances, the assessee shall be allowed deduction on payments based on the outcome of the High Court decision and so far as this assessment year is concerned, we do not interfere with the Commissioner of Income Tax (Appeals) find .....

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ee for statistical purpose. - I.T.A. No.2209/Mds/2010, I.T.A. No.93/Mds/2011 - Dated:- 11-2-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Assessee : Shri. R. Vijayarghavan, Advocate For The Department : Dr. Nischal, IRS, JCIT. ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: These are cross appeals directed against the order of Commissioner of Income Tax (Appeals)-IX, Chennai in ITA No.61/09- 10, dated 25.10.2010 for the assessment year 2007-2008 passe .....

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and assessment was completed. The ld. Assessing Officer on perusal of final accounts found that the assessee has claimed expenditure under import and export headings and assessee filed separate profit and loss account in respect of two departments wherein the assessee as an agent maintained receipts and payments of import and export of goods. Subsequently, the profits from each department transferred to Profit and Loss account. The ld. Authorised Representative explained that the assessee has b .....

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by the assessee wholly and exclusively for the purpose of business falls within the definition of Sec. 37 of the Act and assessee voluntarily has disallowed 15% of such expenses in the Books of Accounts and subjected to tax. The ld. Assessing Officer found expenditure is against public policy and made further disallowance of ₹ 48,80,686/-. Against this, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 3. The ld. Commissioner of Income Tax (Appeals) has deal .....

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hat the assessee has not proved such expenditure has been incurred wholly and exclusively for the purpose of business. The ld. Authorised Representative filed reply to the remand report and submitted that the payment of money is not disputed and Revenue accepted as speed money to expedite the work to have a edge over the competitors and further supported his arguments on the Jurisdictional High Court decision of CIT vs. South India Corporation Agencies 293 ITR 237 (Mad) and prayed for deletion o .....

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le . and based on the ratio of the case, the Commissioner of Income Tax (Appeals) directed the Assessing Officer to restrict the disallowance to 15% only and allowed the ground. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue has filed an appeal before the Tribunal. 3.1 The ld. Departmental Representative submitted that the Commissioner of Income Tax (Appeals) has erred in deleting the addition of ₹ 48,80,686/- which takes the nature of illegal money or spee .....

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ion to page nos.4 to 6 of paper book explaining the expenditure incurred by the assessee and characteristic of expenditure and the Department has accepted expenditure in earlier years. 3.3 We heard the rival submissions and perused the material on record and judicial decisions cited. We are of the opinion that the expenditure is incurred as a regular practice in the business of forwarding and clearing agencies at Dock and Ports for loading and unloading of goods and claimed as General and Miscel .....

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of the Department is dismissed. 4. The second ground raised by the Department in regard to disallowance of Business Promotion Expenses aggregating to ₹ 1,88,860/- by Assessing Officer. 4.1 In the assessment proceedings, the Assessing Officer disallowed business promotion expenses to the extent of ₹ 1,88,860/- incurred through credit cards of partners and managers as entertainment expenses. 4.2 The Commissioner of Income Tax (Appeals) considered the submissions and also potential of t .....

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ome Tax (Appeals) has erred in deleting the addition even though assessee could not produce any supporting evidence and expenditure was incurred for the business. 4.4 On the other hand, the ld. Authorised Representative supported his arguments that the business promotion expenses incurred by the Partners and Senior Employees are in the nature of entertainment expenses and to develop the business. Considering the working of agencies, entertainment expenses are meager and relied on the order of th .....

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id amount on the ground that assessee could not substantiate with evidence and there is no nexus between business and associations. 5.2 The ld. Commissioner of Income Tax (Appeals) relied on the judicial decisions and submissions of the ld. Authorised Representative that the expenditure of membership is necessary which enable the assessee to improve business prospects. Such membership subscription also educate on business policies and trade delegations indirectly to improve business universally .....

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siness prospects in domestic and international markets and also participation fees paid to various seminars and conference and we confirm the order of Commissioner of Income Tax (Appeals) in deleting the addition of ₹ 8,69,067/- and dismiss the ground of the Revenue. 6 The fourth ground raised by the Department on deletion of disallowance of motor car expenses ₹ 10,31,034/-. 6.1 The assessee company claimed expenditure on the cars maintenance and the ld. Authorised Representative sub .....

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Before us, the ld. Departmental Representative submitted that Commissioner of Income Tax (Appeals) has not appreciated that some of the cars are luxury sedans and are used by partners for personal purpose also and the assessee could not prove to the satisfaction of Assessing Officer with any documentary evidence nor log book maintained or any evidence that the cars are used exclusive for the purpose of business. 6.4. Contra, the ld. Authorised Representative of the assessee filed list of cars an .....

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usage considering the luxury sedans. Therefore we set aside the order of Commissioner of Income Tax (Appeals) on this ground and confirm the order of the Assessing Officer. The ground of the Revenue is allowed. 7. The fifth ground raised by the Department on deletion of disallowance of foreign travel expenses ₹ 9,50,000/-. 7.1 The assessee firm incurred foreign travel expenses amounting to ₹ 19,00,000/- and in the assessment proceedings due to non availability of information the ass .....

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report found such travel expenses incurred by Managing Partner and Senior Managers only and not any of their family members and deleted the addition. 7.3 Before us, the Revenue has reiterated that assessee has not produced this evidence in the assessment proceeding before the Assessing Officer which could not be examined and contested the submissions of fresh evidence. 7.4 The ld. Authorised Representative referred to page no.55 of paper book containing the list of travelled Countries made by th .....

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e firm has made interest free advance of ₹ 2,31,62,036/- to M/s. Deepak Agencies Pvt. Ltd and other concerns. The assessee has borrowed funds and paid interest on HP Loans and Motor Car Loans aggregating to ₹ 15,52,134/-. The presumption of the Assessing Officer that assessee firm has borrowed from individuals and paid interest to the banks and allowed interest free advance to the business concerns. The ld. Assessing Officer on the suspicion that the borrowings made by the assessee i .....

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rest payments to bank are on HP loans disbursed directly to the dealers and relied on the decision of Apex Court in the case of S.A. Builders vs. CIT 288 ITR 1, where it is held that the interest on borrowed funds advanced in the course of business cannot be disallowed and also supported with High Court decision in the case of Hotel Savera vs. CIT 239 ITR 795 (Mad) and CIT vs. Reliance Utilities Industries & Powers Ltd. 313 ITR 340 (Bom) where it is held that if there is sufficient balance a .....

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ld. Authorised Representative drew attention to the paper book explaining details of interest payments and submitted Balance Sheet disclosing interest free funds availability and ledger copies of the parties to whom money was advanced. 8.5 We after hearing the submissions, found that assessee could not submit these details in the assessment proceedings and also not demonstrated with fund flow statement to prove that there are adequate funds available with the firm. Therefore, we set aside the d .....

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133(6) of the Act to leading clients of the assessee to reconcile and confirm the income from the assessee firm on each transaction. In compliance to letters, four major clients filed confirmation and ld. Assessing Officer on comparison the balance with the receipts accounted in the assessee s books of account found that the assessee has excluded receipts to the extent of ₹ 3,51,42,613/-. The ld. Authorised Representative contested that the difference in receipts is due to reimbursement of .....

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t charges, customs duty, storage charges etc are debited to the respective ledger overheads account and after completion of the job, invoices are prepared on the clients for the expenses incurred on behalf of them and are debited to client accounts. If any reimbursement of expenses they are credited to the appropriate expenses account and balance if any is shown in sundry creditors in Balance Sheet. Further, such expenses are subject to TDS wherever applicable and if any net difference it is tra .....

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Assessing Officer in assessment proceedings and ignoring the contentions raised by the Assessing Officer in remand report filed after verification of documentary evidence furnished by the assessee in appellate proceedings. 9.4 On the other hand, the ld. Authorised Representative drew our attention to the paper book page Nos.102 to 132 showing details of invoices raised in respect of clients. The confirmation letters are examined and accounting system reflected in the ledger accounts. Copy of rec .....

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Assessing Officer for verification and examination. The Assessing Officer shall pass the order on merits after providing opportunity of being heard and in accordance with law. This ground of the Department is partly allowed for statistical purpose. 10. In the result, the appeal of the Department in ITA No.93/Mds/2011 is partly allowed for statistical purpose. 11. We take up the assessee appeal in ITA No.2209/Mds/2010:- The first ground raised by the assessee with regard to addition of ₹ 67 .....

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ns, the assessee has collected revised charges from importers. But the Assessing Officer considered that the assessee has not paid money to Madras Port Trust after contesting before Jurisdictional High Court and believed that money was utilized by the assessee for the purpose of business and treated as income of the assessee and ld. Assessing Officer treated money collected as integral part of transactions and brought to tax by addition of ₹ 67,73,600/-. 11.2 The ld. Commissioner of Income .....

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cannot be taxed but ld. Commissioner of Income Tax (Appeals) confirmed the addition made by the Assessing Officer. Aggrieved by the order of the Commissioner of Income Tax (Appeals) the assessee assiled an appeal before the Tribunal. 11.3 Before the Tribunal, the ld. Authorised Representative argued the liability is fastened on the agency firm and the amounts were collected as per the guidance of Chennai Steamer Agents Association purely to safeguard against the interest of all agencies and ult .....

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entative relied on the orders of the Commissioner of Income Tax (Appeals) and vehemently argued on this ground. 11.5 After hearing the rival submissions on this issue and Judicial Decisions and Jurisdictional High Court Writ Petition, the fact that the assessee has collected storage charges as per the directions and due to High Court stay in Writ Petition the amount could not be refunded and the outcome of the Writ Petition is pending and there is a liability falling on the assessee firm to disc .....

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