TMI Blog2016 (10) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue, which is upheld. Disallowance on account of Commission Expenses - Held that:- From the record it clearly emerges that the assessee has submitted full address and PAN of the commission agents. It is also observed that the amount has been paid through cheque by deducting TDS which clearly indicates that the services have been rendered by these commission agents for the appellant’s business. Therefore, find no infirmity in the order of the ld. CIT(A) on this issue, which is upheld. Disallowance of interest u/s 40A(2)(b)- Held that:- CIT(A) has duly considered the factual aspect and demonstrated that the Barclays Bank loan in effective terms cost 18.31% to the assessee as against assessee has charged 18% from the related parties. Section 40A(2)(b) is not applicable to assessee’s case. Thus, the order of the ld. CIT(A) is upheld on this issue and this ground of the Revenue is dismissed. - ITA No. 2170/Ahd/2013 - - - Dated:- 30-8-2016 - SHRI R.P. TOLANI, JUDICIAL MEMBER For The Revenue : Shri Aditya Shukla, Sr DR For The Assessee : Shri H.V. Gandhi, AR ORDER This appeal by the Revenue is directed against the order of the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant during the course of appellate proceedings. I find that the evidences have been filed before AO. The evidences on record are (a) Evidences from excise department; (b) Evidences from insurance department; (c) Evidences from police department; (d) Evidences from Newspapers etc. There is no denying the fact that there has been major fire in the factory premises of appellant, the fact which remained uncontroverted by the AO in the assessment order. The AO has not allowed the loss booked in books of accounts as the same has not been reimbursed by the insurance company. The factual position is analysed. The expenses on account of loss due to fire have been debited into the Profit Loss account as under:- (i) Loss due to fire (stock)........................ ₹ 1,27,51,163/- (ii) Loss due to fire (party cylinder)............Rs. 76,02,000/-- (iii) Loss of party cylinder difference............Rs. 43,315/- (iv) Loss on assets (building -Rajpur).......... ₹ 6,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount received from insurance company has been credited in books of accounts. This is stark reality as the crossverification is not possible for something which has lost in fire. But how one can assume that fire engulfed only part of stock and not the stock not reimbursed by the insurance company. I am convinced that fire shall be nondiscriminatory, if the part of stock destroyed which relate to successful insurance claim, so it will be for stock for which insurance claim has not been through. It is decided that loss of stock is genuine and supported by third party evidences duly certified by auditor in audit report, therefore, the loss on stock by fire of ₹ 18,90,239/-is allowed. Loss of cylinders Loss of cylinders due to fire has been valued vide Insurance Company report dated 12/02/2010 at ₹ 3,33,64,181/-. The claim further valued by Insurance Company as on 30/03/2010 at ₹ 69,00,000/-. The loss of stock is stated to be covered under insurance policy up to ₹ 1,20,00,000/-, i.e. stock not covered by insurance company is at ₹ 2,13,64,181/-. The appellant has booked loss of stock at ₹ 76,45,315/-. However, actual claim passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the insurance company. I am convinced that fire shall be non-discriminatory, if the part of cylinders destroyed which relate to successful insurance claim, so it will be for cylinder for which insurance claim has not been through. There is no evidence which can indicate that such a loss has been recouped by the appellant directly or indirectly. I decide that loss on cylinders by fire of ₹ 39,74,201/- is genuine claim and same is allowed out of total claim of ₹ 54,23,737/-. 5.1 Ld. Departmental Representative relied on the order of the Assessing Officer. 5.2 On the other hand, ld. Counsel for the assessee contends that ld. CIT(A) has given elaborate findings in the appellate order. It is not disputed that the fire incident took place. The relevant valuation of damaged goods was made and submitted to the insurance authorities which was duly processed and an amount of fire claim was allowed. Ld. DR has not pointed out any evidence to the effect that the loss has been recouped by the assessee directly or indirectly from any other sources. In view thereof, there is no infirmity in the order of the ld. CIT(A) which may be upheld. 5.3 I have heard the rival co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 25,18,120/- is concerned, the appellant has considered opinion that it is not amenable to TDS provisions. The issue, therefore, is whether TDS should have been deducted on reimbursement of expenses or not. The charging section 4 of I. T. Act 1967 says (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and [subject to the provisions (including provisions for the levy of additional income-tax of, this Act] in respect of the total income of the previous year [***] of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1) Income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. So far as reimbursement of expenses is concerned, it is beyond the ambit of charging section as the same cannot be income of the appellant as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) was upheld. The AO is, therefore, directed to be deleted the disallowance of ₹ 25,18,121/-. The ground of appeal is accordingly allowed. 6.1 Ld. Departmental Representative supported the order of the Assessing Officer. 6.2 On the other hand, ld. Counsel for the assessee contends that the amount paid in question clearly amounts to reimbursement of expenses which cannot be held as any payment of income made by the assessee liable for TDS. Reliance is placed on the order of Mumbai High Court in the case of Information Architects (supra), ITAT Jodhpur Bench decision in the case of Minpro Industries (supra) and the decision of ITAT Delhi Bench in the case of Dr. Willmar Schwabe India (P) Ltd. (supra). Ld. AO has misconstrued the CBDT Circular and arbitrarily held that the reimbursement of expenses is liable for TDS. The ld. CIT(A) has rightly appreciated the issue and deleted the disallowance. 6.3 I have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. From the record it clearly emerges that the impugned amount paid by the assessee is in the nature of reimbursement of expenses for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0074, BOB Dt. 12.01.11 Rs.57457, Chq. No. 223, BOB Dt. 28.03.11 5 PR Shah 37,Sweet Home Society, Ambavadi, Ahmedabad (Gujarat) ACIPS7111 G 156059.00 15803.00 140256.00 Rs.150000, Chq.No. 737, BOB Dtd. 07.10.10 6 Harshit Dalai 37,Sweet Home Society, Ambavadi, Ahmedabad (Gujarat) AJHPD 7286 K 202321.00 20232.00 182089.00 Rs.150000, Chq.No.725, BOB Dtd. 01.10.10 Rs.32089, Chq. No.222, BOB, Dtd. 28.03.11 7. Hiten Ranghani A-4 103, Yogi Palace, Yogi Nagar, Eksar Road, Boriwali West, Mumbai-400092. AFKPR7313C 22000.00 1133.00 20867.00 Rs.11014, Chq. No.640, BOB, Dtd. 18.05.2009 ₹ 10000, Chq. No.513, BOB, Dtd. 20.06.2009 8. Samir Samant B-6, Nandadeep, Opp. Bhagwati Hospital, SVPRoad, Boriwali West, Mumbai-400103 AFBPS0886A 18108.00 932.00 1717 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services rendered by them as well as voucher numbers, dates of payments, PANs of the agents, amount of invoices, rate of commission, etc. and the AO having not found the payment of commission to be bogus payments, deduction thereof is allowable. The appellant has submitted copy of debit notes of commission agents, full addresses, PAN and the amount has been paid through cheque by deducting TDS, indicates that the services have been rendered for appellant's business by these commission agents. In my opinion, the appellant has discharged its onus by filing all possible details including debit notes and TDS and successfully established that the genuine expenditure has been expended for the business purposes. On the other hand, the AO could not gather the positive evidences for the department and taken decision based on presumptions and not on the facts on record. The ground of appeal for commission expenses of ₹ 8,31,013/- is allowed and the rest is confirmed. The ground of appeal is accordingly partly allowed. 7.1 Ld. Departmental Representative relied on the order of the Assessing Officer. 7.2 Ld. Counsel for the assessee, on the other hand, contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the ratio laid down therein is relevant to the k issue under consideration as it is not proved that there is evasion of tax by the appellant. The appellant has relied on the following case laws:- (i) ACIT Vs. Alfa Rubber Industreis [172 Taxman 35 (ASR-Trib)] (ii) Anandi Shah Vs. CIT [181 ITR 171 (Kerala)] (iii)India Cine Agencies Vs. ACIT [54 ITD 257 (Mad-Trib)] In view of these facts and case laws cited above, the addition made u/s. 40A(2)(b) of the I.T. Act, 1961 is deleted. The ground of appeal is accordingly allowed. 8.1 Ld. Departmental Representative relied on the order of the Assessing Officer. 8.2 Ld. Counsel for the assessee, on the other hand, contends that interest @ 18% was given to related parties which is neither unreasonable nor excessive. The assessee gave a comparative instance of Barclays Bank @ 17% and gave a working that the effective rate of interest comes at ₹ 18.31% thereon. The ld. AO has not controverted this instance to hold that the assessee s payments to related concerns were unreasonable in terms of Section 40A(2)(b). 8.3 I have heard the rival contentions, perused the material available on record and gone t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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