TMI Blog2017 (1) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, reversing the order of the FAA,we decide the first ground of appeal in favour of the assessee. Addition under section 14 A read with Rule 8D - Held that:- We find that assessee had not incurred any expenditure nor had it claimed any expenditure with regard to the tax-free income during the year under consideration. Therefore,there was no justification of any kind to make any dis-allowance invoking the provisions of section 14 A of the Act. The basic precondition for making disallowance under the said section is earning of tax-free income and incurring of expenditure by the assessee.As both the preconditions are absent in the case under consideration therefore, in our opinion,the order of the FAA has to be reversed. - Decided in favour of the assessee. TD u/s 194C - disallowance on account of non-deduction of tax at source on advertisement expenses and business promotion expenses - Held that:- Matter should be restored back to the file of the AO. He is directed to afford a reasonable hearing to the assessee to prove its claim that tax was actually paid by the recipient. The assessee is directed to produce all the necessary evidence before the AO. Ground number thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad carried out any such exercise. If the AO had any doubt, it was his duty to make further investigation and pinpoint the actual expenditure not incurred for the business of the assessee. We are of the opinion that making and upholding the disallowance was not justifiable. Reversing the order of the FAA, we decide ground in favour of the assessee. - I.T.A./7605/Mum/2012 - - - Dated:- 6-1-2017 - Sh.Rajendra,Accountant Member and Amarjit Singh,Judicial Member For The Revenue by: Shri Saurabh Kumar Rai-DR For The Assessee : Shri I.C. Jain PER Rajendra A.M. - Challenging the order,dated 09/10/2012 of the CIT (A)-17,Mumbai the assessee has filed the present appeal.Assessee-company,engaged in business of running amusement park,filed its return of income on 27/09/2009,declaring income of ₹ 1,21,31,886/-.The Assessing Officer (AO)completed the assessment u/s.143(3),on 22.12.2011,determining the income of the assessee at ₹ 1,54,07,290/-. 2. First ground of appeal is about addition of ₹ 5,00,604/-.During the assessment proceed - ings,the AO found that the assessee had ownership of two flats,that is it was showing the flats under the heads current a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the authorities have not proved that the flats were rented out during the year under appeal.As per the settled principles of taxation if any sum has to be taxed the AO has to bring on record the necessary facts for taxing the same. In our opinion,the AO had not discharged the onus in that regard. Therefore, reversing the order of the FAA,we decide the first ground of appeal in favour of the assessee. 3. Second ground deals with addition of ₹ 12,500/- under section 14 A read with Rule 8D of the Income Tax Rules, 1962 (Rules). During the assessment proceedings the AO found that assessee had shown investment in shares amounting ₹ 25 lakhs, that it had not made any disallowance under section 14 A of the Act. On a query by the AO in that regard, the assessee stated that it had not earned any tax-free income during the year under consideration, that therefore no disallowance was made. However, the AO made a disallowance of ₹ 12, 500/- (of percent of the average value of investment). 3.1. Before the FAA,the assessee argued that it had not incurred/claimed any direct/indirect expenses on the tax-free income, that the AO was not justified in making the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,after considering the material on record, held that as per the provisions of section 194C the assessee had to deduct the tax at source,that the AO was justified in making the disallowance. 4.2. Before us, the AR contended that second proviso to section 40 (a) (ia) of the Act was inserted by Finance Act at 2012, that as per the proviso wherever payee pays the tax the payer is not supposed to deduct the tax, that the parties to whom the assessee had made the payments had paid the taxes, that the matter could be restored to the file of the AO for verification. The DR left the issue to the discretion of the bench. 4.3. After considering the rival submissions we are of the opinion that matter should be restored back to the file of the AO. He is directed to afford a reasonable hearing to the assessee to prove its claim that tax was actually paid by the recipient. The assessee is directed to produce all the necessary evidence before the AO. Ground number three is decided in favour of the assessee,in part. 5. Next ground is about addition of ₹ 79,722/- for non-deduction of tax on payment of interest on car loan to Mahindra and Mahindra Finance Company Ltd. Following o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. The AO/FAA has not given any finding as to whether the assessee was following the same accounting policy in the earlier and subsequent years of claiming pre paid expenditure on account of crystallised expenditure in the later years.There is no doubt about the genuineness of the payment and therefore same has to be allowed in one of the years. Considering the peculiar facts and circumstances of the case and the fact that assessee had made the payment after the receipt of the bills in the subsequent year,we are of the opinion that ground number 5,filed by the assessee ,should be allowed. 7. Next ground of appeal is about disallowance of remuneration paid to the directors. During the assessment proceedings, the AO found that the assessee had paid ₹ 6 lakhs to one of the directors, namely Ritika Muchala(RM).He directed the assessee to explain as to why the remuneration paid to RM should not be disallowed for the reason that she had not rendered any service to the company.In its reply,the assessee submitted that RM was director of the company since inception and was actively involved in the day-to-day matter of the business activities, that she had declared the income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, it was argued that assessee was a private limited company, that expenses were incurred during the course of business and for the purpose of business, that there could not be any expenses for personal purposes. The FAA held that the assessee had not produced any evidence to rule out any personal expenses out of the business promotion expenses incurred through the credit card. He upheld the order of the AO. 8.2. We have heard the rival submissions and perused the material before us. We find that the AO had held that assessee had incurred an expenditure of ₹ 8.31 lakhs through credit cards, that he did not call for any details in that regard, that he had made an ad hoc disallowance at the rate of 20%, that the FAA had confirmed his order. In our opinion in case of corporate assessees disallowance on account of personal element can be made only if the expenditure incurred was for the personal use of any of the directors/employee and that expenditure did not have any relation with the carrying out of the business. We don t find that AO/FAA had carried out any such exercise. If the AO had any doubt, it was his duty to make further investigation and pinpoint the actual ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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