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M/s Chunder Khatore & Associates Versus Income Tax Officer

TDS u/s 194J - Non deduction of Tax at Source on consultancy & accounting charges - genuineness of expenses - Held that:- Expenditure claimed by the assessee under the head consultancy & accounting charges does not represent the professional services as explained under section 194J of the Act. Merely the assessee has claimed the nomenclature under the head consultancy will not amount to professional services. No doubt the services given by the CA firm to its clients in the instant case amounts t .....

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sons. We accordingly, considering the totality of the facts of the present case, we are inclined to reverse the orders of Authorities Below. - Decided in favour of assessee

Disallowance out of office expense - Held that:- Assessee has shown reimbursement of expense for an amount of ₹ 8,39,858/- exactly as against the receipt of ₹ 8,39,858.00. The AO during the assessment proceeding observed that in support of the expenditure self-made vouchers were available and in some ca .....

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xpense and expenditure claimed in the form of reimbursement expenses are equal. Therefore, in our considered view, the question of having any income out of reimbursement of expense does not arise. Therefore, we are inclined to reverse the orders of Authorities Below - Decided in favour of assessee - ITA No. 2489/Kol /2013 - Dated:- 17-6-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Appellant : Shri S.M.Surana, Advocate For the Respondent : S .....

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and bad in law. 2. For that the Ld. CIT(A) erred in confirming the addition of ₹ 1257,040/- being the payment made for hiring charges in connection with the completion of specified work where services for physical verification of assets along with location thereof, the closing stock, different statutory registers and books and various other related jobs was to be carried out for a number of clients for which there were receipts of over ₹ 46 lakhs. 3. For that the Ld. CIT(A) erred in .....

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red were proved with reference to the nature of work done by them. 5. For that the Ld. CIT(A) erred in disallowing the remaining sum of ₹ 2,86,040/- (Rs.12,57,040 - 9,71,000/-) without any finding that the said payment was not genuine. 6. For that the Ld. CIT(A) erred in disallowing the payment of hiring charges to 7 parties amounting to ₹ 2,33,652/- without any adverse finding when 7 parties appeared before the Ld. CIT(A) and accepted having receive the hiring charges. 7. For that t .....

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i A.K.Pande, Ld. Departmental Representative appeared on behalf of Revenue. 2. Ground No.1 to 6 in this appeal of assessee are common and interconnected, we clubbed together and pass consolidated order for the sake of convenience. The issue raised is that Ld. CIT(A) erred in confirming the order of Assessing Officer by disallowing a sum of ₹ 12,57,040/- on account of two reasons i.e. Non deduction of Tax at Source (TDS for short) u/s 194J of the Act and genuineness of expenses. Facts in br .....

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s in support of its expenditure. However, assessee failed to furnish the same and claimed that the expense shown under the head consultancy & accountancy charges are factually shown under the wrong head but it should be under the head hiring charges . It was submitted that certain persons were hired for physical verification stock and fixed assets of the clients. As such no professional/ technical services were involved in the activity of physical verification. Therefore, the provision of Se .....

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ed an appeal before Ld. CIT(A) whereas assessee submitted that the provision of Sec. 194J of the Act applies for the expense of professional services and technical services. Therefore the provisions to Sec. 194J are attracted only in case where the services are rendered by a person of professionally educated in a particular discipline. In the instant case, payments are made to ladies and gentlemen who are not much educated and have been hired to conduct clerical workings like counting, recording .....

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ired information about the people to whom the charges were paid. It is also to note that hired people were non-technical but all of them were working under the supervision of a technical person. Accordingly, the contention of assessee is that work cannot be rendered by the non-technical person is not valid. In proving the genuineness of the expences, assessee had submitted written submission and relevant extract is reproduced below:- 3.4 The A/R of the appellant filed his written submission, the .....

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ctively carrying out the professional services. The Ld. Assessing Officer had disallowed the expenses U/s 40(a)(ia) of the Income Tax Act, 1961 on the ground that TDS u/s. 194J of Income tax Act, 1961 has not been deducted. It is humbly submitted in this regard that the consultancy charges are in the nature of hiring charges paid for hiring non qualified personnel. Section 194J reads as follows: 194J.(1) Any person, not being an individual or a Hindu undivided family, who I responsible for payin .....

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on in the curse of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. Thus, section 194J is attracted only in cases where the services are rendered by a professional educated in a particular discipline. In the present case, as rightly pointed out by the AO, the payments are made t .....

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Sec.194J of the Act. 3.1 Ld. CIT(A) also doubted the genuineness of the expenditure claimed by assessee on the ground that the alleged persons to whom payments were made did not appear in response to summon issued to them. In many occasion, summons issued came back as un-served. Ld. CIT(A) also rejected the documents submitted by the assessee at the time of hearing on the ground that documents submitted are not reliable and he confirmed the action of AO. Being aggrieved by this order of Ld. CIT .....

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of various persons, the details of the clients for which physical verification of the stock / fixed assets were carried out which is placed on record. He requested the Bench to decide the issue on merit. On the other hand, Ld. DR relied on the orders of Authorities Below. 5. We have heard the rival contentions and perused the materials available on record. From the aforesaid discussion, we find that assessee has incurred the expenses by hiring the 30 people for the activity of physical verifica .....

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appeared before Ld. CIT(A). So the total 28 persons out of 30 persons have made representation before Income Tax Authorities. Therefore, the genuineness of the parties for having the transactions cannot be doubted. The possibility of non-submission of supporting documents in two/ three cases cannot be ruled out and that cannot be the basis for making the disallowance. Besides the above we find that the observation of the ld. CIT(A) that the payment was made inter-alia to the students pursuing C .....

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eering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. Notified professions under section 44AA are in terms Notification No. S.O. 17(E), dated 12th January, 1977 issued under section 44AA prescribed the following professions : (a) The profession of authorised representative "Authorised representative" means .....

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lm, whether produced by him or by any other persons as (i) an actor; (ii) a cameraman; (iii) a director, including an assistant director; (iv) a music director, including an assistant music director; (v) an art director, including an assistant art director; (vi) a dance director, including an assistant dance director; (vii) an editor; (viii) a singer; (ix) a lyricist; (x) a story writer; (xi) a screen play writer; (xii) a dialogue writer; and (xiii) a dress designer. The Notification number S.O. .....

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t;fees for technical services" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9. The Explanation 2 to clause (vi) of sub-section (1) of section 9 states that "Fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any cons .....

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onal services. No doubt the services given by the CA firm to its clients in the instant case amounts to professional services but the services availed by the firm from outside for the physical verification of stock do not amount to professional services. Hence the payments made are covered under the provisions of section 194C of the Act. We also further find that in none of the case, the payment has exceeded ₹ 50,000/-, We also find that 28 persons had made representation before Income Tax .....

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t of 10% of ₹ 8,39,858/-. During the year assessee has claimed reimbursement expense for an amount of ₹ 8,39,858/- by crediting in its profit and loss account. This reimbursement expense was claimed by assessee from its clients on actual basis of the expenditure incurred. Against the receipt of such reimbursement expenses and assessee has claimed expenses of ₹ 8,39,858/- exactly same amount by debiting the profit and loss a/c. On verification of expense claimed by assessee, the .....

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