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2016 (5) TMI 1029 - ITAT CHENNAI

2016 (5) TMI 1029 - ITAT CHENNAI - TMI - Salary income or professional income - Amount received by the managing director as consultancy charges - TDS was deducted u/s 194J - Disallowance of expenditure land and professional income is treated on par with salary income of the assessee - Held that:- The assessee is eligible to receive consultancy fees and claim expenditure. The nature of expenditure being travelling, lodging, conveyance incurred at various places of Thermal power station, refinery .....

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ng ld. Counsel drew our attention to the statement of salary and professional income received for assessment year 2006-07 and 2007-08 explaining with comparable turnover of the company and export turnover. The assessee is rendering service for past several years and connected with the company and due to his efficient advice the company could able to increase its turnovers. We found as per the provisions of section 17 of the Act which includes certain items of receipts as salary but in order that .....

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the business due to national and international experience in the field of Boilers and has rightly offered the income under the profession and claimed establishment expenditure. Therefore, we direct the Assessing Officer to exclude the professional income clubbed in salary income and we allow the appeal of the assessee. - I.T.A. Nos.2044 & 2045/Mds/2015 - Dated:- 19-4-2016 - SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant by : Shri. Keerthir .....

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ard together, and disposed of by this common order for the sake of convenience. We take up ITA No.2044/Mds/2015 of assessment year 2006-07 for adjudication. 2. The assessee has raised only one substantive ground that Commissioner of Income Tax (Appeals) erred in confirming the findings of the Assessing Officer on disallowance of expenditure land and professional income is treated on par with salary income of the assessee. 3. The Brief facts of the case, the assessee is a Managing Director of M/s .....

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B8,61,820/-. The return of income was processed u/s.143(1) of the Act and as per scrutiny norms notice u/s.143(2) was issued and Assessing Officer considered the information and the submissions of the assessee and completed assessment u/s.143(3) of the Act by disallowing 10% of expenditure being B24,358/- due to non availability of any supporting evidence. Subsequently, the Commissioner of Income Tax-II, Trichy passed Revision order Sec.263 dated 20.03.2013 in C.No.7143(2)/CITII/ TRY/2012-13 an .....

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Commissioner of Income Tax is of the opinion that professional receipts are to be considered as salary income and the assessee is not eligible to claim any expenditure and set aside the order. In compliance to the directions, the Assessing Officer issued notice u/s.142(1) of the Act and called for the details. The ld. Authorised Representative of the assessee appeared on various dates and submitted the details and explained that the assessee is maintaining separate office for his profession and .....

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of the assessee for professional consultancy and obtain the report of the Inspector referred at page 3 of the order as under:- "I have visited the office of the Shri V. Rajagopal in 100, , IV Cross Street, BHELPUR, Tiruverumbur, Trichy-13 on 28/11/2013 which is the residence of the assessee In the upstairs first floor, the office is situated. There is no board displaying an office in that building. Shri. V. Rojagopal is not present at the time of my visit. The enquiry is for verifying the c .....

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savings devising methods for fuel efficient systems and for modification of existing machinery for improving the conservation of power etc. for boilers. It is stated that there is no agreement of terms between the company and Mr. RaJagopol for the consultancy work done by him. During my visit, in the office threeemployeii5 were present. Regarding, those employees claimed to have been employed in the office duing the financial year 2005-06, it is found that there were eight employees only os per .....

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ht persons, viz, Shri. S. Haridas, V. Kumar, L. Chandrasekar, R. Sukumor, P. Selvam, P. Subramanian, , B Subbash and. R. Baskar,. who the assessee claimed were not presently employed in his office. Neither the assessee furnished any address of those employees who worked during the period 2005-06 nor their Identification details furnished for verification. Subsequently on being directed on 10/3/2014, I hove verified the three employees presently working in the office in writing. Shri R. Rajarajan .....

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9;e is getting salary of ₹ 8,OOO/- p.m,. Further, the assessee has confirmed that presently there (are three employees are only working in his office by his letter dated ll/3/20I4. From this" it Is clear that this claim personnel employment lacks any credible proof to prove the claim. But, it is stated that none of them have any PF, ESI account or they have any appointment order for their employment. Further for the said consultancy for product development for energy savings, devising .....

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e claim of the assessee is not verifiable In the course of assessment, after report of Inspector was obtained the assessee filed letter dt 28.12.2013 with the copy of minutes of Geeco Enercon Pvt. Ltd for services to be rendered by the assessee to the company. The scope of work allocated to the assessee to offer consultancy in designing air pre-heaters, modification to the existing pre-heaters, the inspection of boilers at various sites and give advice on the latest technology for manufacture of .....

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p; methods for boilers. The expenditure does not bear the details of bills raised with the companies and no TDS details were furnished. The Assessing Officer assumed arbitrarily as the assessee is a Managing Director is receiving salary and professional income and treated entire receipts as salary income and passed the order. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). 4. In the appellate proceedings, the ld. Authorised Representative of .....

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on of power and is purely on assessee s knowledge and experience. The product working of the company is based on the advice of the assessee expertise. Further technology has to be upgraded and there is also a separate consultancy setup to develop engineering and design with unique networks with the consultancy. The knowledge product has created a demand in the export market and improved the global image of the company and exposure to international business opportunities. The salary was paid to t .....

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or the product. The Managing Director is appointed as per the provisions of Companies Act and salary is determined based on the managerial remuneration provided under the law. The assessee has two different roles as Administrator and Consultant. In the appellate proceeding, the ld. Authorised Representative substantiated his arguments with the decisions and objected to consideration of professional receipts as salary income and professional expenditure was not allowed b y the Assessing Officer. .....

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s) concurred and confirmed the order of Assessing Officer and dismissed the assessee appeal. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 5. Before us, the ld. Authorised Representative reiterated the submissions of assessment and appellate proceedings and the provisions of law and judicial decisions. The facts being the assessee is a Managing Director in M/s. Geeco Enercon (P)Ltd and also rendering consultancy services and the sal .....

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he ld. Authorised Representative argued that PF and ESI was not deducted as the strength of works are much below the limit. The contention of the Assessing Officer that the assessee has not paid electricity charges but it was explained that assessee render services in outstation projects and therefore electricity expenses of office are meager. The assessee receives professional income only from above company and due to consultancy services and opinions, the company is getting orders globally whi .....

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e business and pleaded for allowing the appeal. 6. Contra, the ld. Departmental Representative relied on the orders of the lower authorities and vehemently opposed to the ground and prayed for dismissal the appeal. 7. We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Authorised Representative contention that the assessee has been appointed as Managing Director to look after administrative work and salary is payable for such company works and at .....

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on and due to expertise opinion of the assessee, the company could fetch export orders and improved the brand image which is not disputed by the Assessing Officer. The ld. Assessing Officer relied on report of the Inspector that assessee does not make payments of ESI & PF on behalf of employees. The assessee being professional and employees are below the limit for applicability of ESI and PF provisions. The assessee most of time is out stations and electricity bills are meagre and claimed in .....

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