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2016 (4) TMI 630 - ITAT LUCKNOW

2016 (4) TMI 630 - ITAT LUCKNOW - TMI - Addition u/s 40A(3) - Held that:- Since the ld. CIT(A) has not applied his mind to these provisions and has not examined the nature of payment whether it was made on account of business exigencies or under any exceptional clause, we are of the view that let the matter should go back to the ld. CIT(A) for adjudication of the issue in the light of the provisions of section 40A(3A) of the Act. Accordingly, the order of the ld. CIT(A) is set aside and the matt .....

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40A(3) - CIT(A) has deleted the addition - Held that:- Assessing Officer has not examined the complete facts of the case whereas the ld. CIT(A) has appreciated the explanations furnished by the assessee. Since the assessee was simply a facilitator for the purchase of medicines from M/s Agrima Medicos for the patients and the payments were made by the patients, the disallowance, if any, can only be made in the hands of the patients, if the payments exceed the limit, but not in the hands of the a .....

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details furnished by the assessee and he deleted the addition. He, however, has confirmed the addition of ₹ 2 lakhs on account of certain expenditures, which were not proved to have been incurred for business purposes. Since no specific infirmity has been pointed out in the order of the ld. CIT(A), we confirm his order. - ITA No.203/LKW/2015 - Dated:- 3-3-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER For The Appellant : Shri. Amit Nigam, D.R. For .....

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er of Income Tax (Appeals) has erred in law and on facts in allowing the relief of ₹ 1,79,000/- on account of unpaid liability of bonus without appreciating the fact that the assessee has not paid bonus during the year and the same is disallowable u/s.43B. 3. The Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the relief of ₹ 40,89,974/- on account of payment 'made to M/s Agrima Medicos without appreciating the fact that the assessee has made cash p .....

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Tax Act, 1961 (hereinafter called in short the Act") for non-production of details of suppliers and bills & vouchers, against which an appeal was filed before the ld. CIT(A) with the submission that the expenditure debited during the year can only be considered for disallowance under section 40A(3) of the Act; whereas this expenditure of ₹ 3,31,560/- is debited to the profit and loss account for assessment year 2010-11 under the head repairs and maintenance of building . The same .....

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repair and maintenance building has not been disallowed. Therefore, redemption of such liability made during the year in cash cannot attract the provisions of section 40A(3) of the Act. Being not convinced with the explanations of the assessee, the ld. CIT(A) deleted the addition. 3. Now the Revenue is in appeal before the Tribunal with the submission that when payment of earlier debts are made in cash, the same can be disallowed under section 40A(3) of the Act, but this aspect was not examined .....

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payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees. But the provisions of sub-section (3A) of section 40A of the Act deals with old liability incurred by the assessee for any expenditure and subsequently during any previous year, the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, then the .....

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f the Act and deleted the addition. For the sake of reference, we extract the relevant portion of the order of the ld. CIT(A) as under:- Ground No.3 relates to disallowance of ₹ 3,31,560/- under section 40A(3). The Assessing Officer has disallowed ₹ 3,31,560/- under section 40A(3) for non-production of details of supplier and bills and vouchers. The A.R. of the assessee has submitted that the expenditure debited during the year can only be considered for disallowance under section 40 .....

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aintained. The A.R. of the assessee has vehemently argued that the return of income filed by the assessee for the assessment year 2010-11 has been scrutinized by the Assessing Officer and the expenditure debited under repairs and maintenance building has not been disallowed. Redemption of such liability made during the year in cash cannot attract the provisions of section 40A(3). This disallowance is beyond the stretch of imagination of provisions of section 40A(3). Accordingly, the addition nee .....

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issue. 7. Apropos ground No.2, the Assessing Officer has disallowed ₹ 1.79 lakhs under section 43B of the Act as unpaid bonus liability, as it is noted that the liability of bonus of ₹ 2.90 lakhs and ₹ 6 lakhs whereas the payment is made only for ₹ 7.16 lakhs, thereby the disallowance was of ₹ 1.79 lakhs, against which an appeal was preferred before the ld. CIT(A) with the submission that he has debited ex-gratia and bonus to other of ₹ 6 lakhs and ₹ 2. .....

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of income. The advance payment of ₹ 1.16 lakhs paid to staff has wrongly been taken as bonus by the Assessing Officer, thereby, the total bonus has been taken by the Assessing Officer at ₹ 7.16 lakhs. The ld. CIT(A) re-examined the details of payments and was convinced that the assessee has shown liability of ex-gratia bonus to the Directors at ₹ 2.95 lakhs and ex-gratia payment to other at ₹ 6 lakhs. He has placed that ₹ 2.95 lakhs ex-gratia bonus has been paid to .....

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and simply placed reliance upon the order of the Assessing Officer; whereas the ld. counsel for the assessee has contended that the ld. CIT(A) has examined the details of payments and being convinced with the explanations of the assessee, he has deleted the addition. 9. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the ld. CIT(A) has examined the details of payment and was of the view that there is no unpaid liability before fi .....

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ietary concern of Mrs. Dipti Mishra, who is running a medical shop in the hospital premises. The assessee-company as such has not business dealing with M/s Agrima Medicos except providing medicines to the concerned patients of the hospital. The assessee-hospital is entertaining the patients of Government employee and their relatives, thereby their payments are reimbursed by the respective employer. The medicines required immediately and administered to the patients are supplied by M/s Agrima Med .....

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organization. It was further contended that the assessee-company has been maintaining separate ledger account of M/s Agrima Medicos only for facilitating the payments on account of supply of medicines to various patients and payments received from respective employer/insurance company. The assessee-company being hospital, requires supply of medicines as per the requirements of the patients, thereby the business expediency and the necessity requires such an arrangement of supply of medicines in .....

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patients admitted to the assessee hospital and the payments have been made by the concerned employer/insurance organization according to bills raised to the various patients. The A.R. of the assessee has very clearly mentioned all the aspects of the transactions in his submission and the arguments as placed above. Here M/s Agrima Medicos raises bills in the name of the patients and the payments are made by the concerned employer/Government Organization. Such supply of medicines are neither part .....

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to various patients. The assessee hospital is nowhere responsible for any non-payment or short payment to M/s Agrima Medicos. Accordingly, the disallowance made by the Assessing Officer under section 40A(3) is misplaced and the same is hereby deleted. 12. Aggrieved, the Revenue is in appeal before the Tribunal and placed reliance upon the order of the Assessing Officer, whereas the ld. counsel for the assessee has placed strong reliance upon the order of the ld. CIT(A) with the submission that s .....

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cilitator for the purchase of medicines from M/s Agrima Medicos for the patients and the payments were made by the patients, the disallowance, if any, can only be made in the hands of the patients, if the payments exceed the limit, but not in the hands of the assessee. Since the ld. CIT(A) has properly examined the issue in the light of the detailed submissions of the assessee, we find no infirmity in his order on this issue and we accordingly confirm the same. 14. Apropos ground No.4, it is not .....

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yments to Doctors are mostly in cheque and the permanent staffs are also paid in a mixed manner. However, the permanents staffs are already in the role of P.F. register and their payments are also monitored by other authorities. The casual staffs are employed on temporary basis and as and when need be, sometimes on day-to-day basis also. They do not have any bank account and the payments were made immediately in cash. All the cash payments are duly recorded in the books and duly reconciled with .....

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he submissions and the arguments placed by the A.R. of the assessee along with the contents of the assessment order. It is undisputed that the salary and wages debited to profit and loss account has been reconciled with the cash book and the assessee has been maintaining the books of account along with the payments slip and their muster. The A.R. has submitted the evidence of payments made to the various staff along with the evidence of payment vouchers. He has been emphasizing as discussed abov .....

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