TMI Blog2016 (6) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 cases there was no voucher available. The AO accordingly opined that personal expense cannot be ruled out and he made the addition @ 20% at ₹ 8,39,858/- which was reduced by Ld. CIT(A) at 10%. From the facts of the case, we find that AO has not brought out any specific ground so as to disallowing the expense as claimed in assessee’s profit and loss a/c. He has disallowed the expenses on ad hoc basis without appreciating the fact that income shown by assessee in the form of reimbursement of expense 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of accounting the reimbursement of the expenses of ₹ 8,39,858/- was shown in both the sides of the Income and Expenditure account. 8. For that on the facts and circumstances of the case the order of the CIT(A) be modified and the assessee be given the relief prayed for. Shri S.M.Surana, Ld. Authorized Representative appeared on behalf of assessee and Shri 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 brief are that assessee a partnership firm of Chartered Accountants and rendering professional services. During the year under consideration, assessee claimed an expense of ₹ 15,12,750/- under the head Consultancy Accounting charges . During the course of assessment proceedings, AO observed that expenses cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 relevant portion of which is reproduced herein below:- 1. It is humbly submitted that the appellant firm is a Chartered Accountants firm rendering professional services. The appellant firm had rendered service in the nature of taking physical verification of stock, of clients fixed assets etc., during the year and had engaged the services of various personnel to whom hiring personnel charges of ₹ 12,57,040/- have been paid. The amount has been paid for contracting / hiring people for effectively 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the purview of TDS provision as specified u/s. 194C of the Act. Further, Ld AR stated that assessee has submitted the copies of IT returns along with PAN 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 verification of fixed assets and stock of the client. The AO treated the payment to the said persons as professional charges and disallowed the same on account of non-compliance of the provisions of section 194J of the Act. The AO also disallowed the same due to non production of the supporting documents. However we find from the order of Ld. CIT(A) payments were made to 30 persons and out of 30 persons 17 persons had submitted documents; 4 persons had appeared before Assessing Officer and 7 persons had appeared before Ld. CIT(A). So t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... designer. The Notification number S.O. 2675 dated 25th September, 1992 under section 44AA prescribed profession of Company Secretary. Profession defined under section 2(36) Section 2(36) defines profession includes vocation. But this definition cannot be used for section 194J because the Explanation to section 194J specifically defined professional services for purpose of section 194J. Technical services Fees for technical services is defined in Explanation (b) to section 194J. It states that 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 construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head salaries . In view of above, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival contentions and perused the materials available on record. At the outset, we find 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 cases there was no voucher available. The AO accordingly opined that personal expense cannot be ruled out and he made the addition @ 20% at ₹ 8,39,858/- which was reduced by Ld. CIT(A) at 10%. From the facts of the case, we find that AO has not brought out any specific ground so as to disallowing the expense as claimed in assessee s profit and loss a/c. He has disallowed the expenses on ad hoc basis without appreciating the fact that income shown by assessee in the form of reimbursement of expense 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 and issue raised by assessee is allowed. AO is directed accordingly. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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