9911796707
TMI Blog2016 (5) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... essee got partial relief. Still aggrieved, the assessee has filed these appeals before the Tribunal. 4. The first issue urged in both the years relates to the disallowance made u/s 14A of the Act. At the time of hearing learned AR placed reliance on the decision rendered by Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Powers Ltd.(313 ITR 340)(Bom) and DCIT Vs. HDFC Bank Ltd. (366 ITR 505) and submitted that interest free funds available with the assessee is more than the investment made by it and hence disallowance of interest is not called for. With regard to the disallowance made out of expenses, the Ld A.R submitted that they have been incurred for its regular business only. 5. On the contrary, the Ld D.R placed strong reliance on order passed by Ld CIT(A). 6. We have heard the parties on this issue and perused the record. A perusal of Balance Sheet as at 31-03-2008 shows that the assessee is having interest free funds of Rs. 4.25 crores and Rs. 5.81 crores as on 1.4.2007 and 31.3.2008 respectively. The investments held by the assessee stand at Rs. 2.11 crores and Rs. 2.00 crores as at the beginning of the year and end of the year respectively. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if the own funds available with the assessee is more than the amount of investments. If it is not the case, then the AO adjudicate this matter in accordance with the law, after hearing the assessee. 9. With regard to the disallowance out of administrative expenses, we notice that the assessee has received dividend income of Rs. 2.25 lakhs and the fresh investment made was Rs. 48 lakhs. The assessee has redeemed investment to the tune of Rs. 41 lakhs. Thus, we notice that the level of investment activity has reduced during the year under consideration and the dividend income has also gone down considerably. Consistent with the view taken in the immediately preceding year, we direct the AO to restrict the disallowance towards administrative expenses to 5% of the dividend income. 9. The next issue relates to the inclusion of the amount disallowed u/s 14A of the Act to the Book profit computed u/s 115JB of the Act. The Ld A.R contended that the provisions of sec. 14A cannot be extended to the computation of book profit u/s 115JB of the Act. However, we notice that clause (f) of Explanation 1 given below sec. 115JB(2) provides that the expenditure relatable to income exempt u/s 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the sale consideration. The AO noticed that the sale consideration based on the brokerage amount of 2% should have been Rs. 45,99,000/-. Hence, he conducted enquiries with the broker and also recorded a statement from him. The broker replied that the amount of brokerage received by him includes reimbursement of expenses incurred by him. The AO did not believe the said explanations as he was of the view that the broker has given replies as per the instructions of the assessee. Accordingly, he took the sale consideration at Rs. 45,99,000/- and accordingly held that the assessee has suppressed sale consideration to the tune of Rs. 7,30,000/-. The AO added the same to the total income of the assessee. With regard to the brokerage paid, the AO held that the said payment related to a building falling in the block of assets and hence the same is required to be adjusted in the depreciation schedule. Accordingly he made necessary adjustment in the depreciation by disallowing the claim. The Ld CIT(A) also confirmed the same. 13. The contention of the Ld A.R is that the sale consideration shown by the assessee is more than the ready reckoner rate and the brokerage amount paid includes r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When questioned about the nature of payment, the assessee submitted that he carries out internal audit of the concern and the payment made includes reimbursement of out of pocket expenses. The AO asked the assessee to furnish the internal audit report given by the above said Chartered Accountant. The assessee replied that the defects noticed during the course of audit are discussed with the directors and no separate audit report is prepared. It was further submitted that the above said C.A also looks after the taxation matters, service tax/P.F/ESI matters. It was further submitted that the C.A. is only an independent director and does not hold any share in the share capital of the company. The AO noticed that the bills are raised by the C.A with the narration "Retainership fees". It did not disclose any details about the nature of work. Since the directors are covered by sec. 40A(2)(b), the AO took the view that the amount paid to the C.A, who is also a director of the company, is excessive or unreasonable in terms of sec. 40A(2)(a) of the Act. Accordingly he restricted the expenditure to Rs. 2,40,000/- and accordingly disallowed a sum of Rs. 15,44,710/-. The Ld CIT(A) also confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioning the reasonableness of payment made to the C.A by the assessee, when the assessee has taken a conscious decision to pay the same. It is also pertinent to note that the assessing officer has not brought any material on record to show that the professional fee payment has been inflated or beyond market rates, except making an observation in that regard. It is stated that the C.A is carrying out all types of taxation and compliance work and he is well experienced and knowledgeable. Hence we are of the view that the tax authorities cannot question the choice exercised by the assessee without bringing any material on record. We have also noticed that the disallowance has been made without bringing any material on record. For these reasons, we are of the view that the disallowance made u/s 40A(2)(a) is not justified. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the disallowance. 20. In AY 2009-10 also identical disallowance was made out of the professional fee paid to the C.A. For the identical reasons discussed above, we set aside the order of Ld CIT(A) and direct the AO to delete the disallowance. 21. The last issue contested in AY ..... X X X X Extracts X X X X X X X X Extracts X X X X
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