TMI Blog2017 (2) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... ht on record by the assessee for reconciling the difference. Addition u/s 40 A (2) (b) - Held that:- As could be seen out of five years for which payment of royalty was to be made by the assessee, except the impugned assessment year, in no other assessment year assessee’s claim has been disallowed, though, assessments have been completed u/s 143 (3) of the Act. Therefore, applying the rule of consistency no disallowance should have been made in the impugned assessment year. Further, on perusal of the assessment order we have noted that the assessing officer has not recorded any reason to demonstrate that the payment made by the assessee is unreasonable as mandated by Section 40 A (2)(b). That being the case disallowance of the expenditure claimed by invoking Section 40 A (2) of the Act, is not proper. Hire charges paid for hiring equipment - revenue or capital expenditure - Held that:-Assessee has brought material on record to demonstrate that it has brought on hire computers and peripherals from third parties and deduction claimed was on account of payment made to those parties towards hire charges. This fact is demonstrated from the TDS certificate submitted by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge bill. The assessing officer, however, did not find merit in the submissions of the assessee and concluded that the difference represents assessee s unaccounted sales. Further, the assessing officer observed, since the assesse has claimed credit of the TDS in the impugned assessment year corresponding income has to be assessed in this year only. Accordingly, he added back the amount of ₹ 6,65,330/-. Assessee challenged the addition before the CIT(A). However, Ld. CIT(A) also confirmed the addition by agreeing with the reasoning of the AO. 2. The Ld. AR submitted before us, the assessee in course of the assessment proceeding itself and again before the CIT (A) has not only explained the reason for difference in receipts but also furnished all necessary and relevant details reconciling the difference. In this context the Ld. AR drawing our attention to party wise details of receipts as per the TDS certificate and as shown in the profit and loss account wanted to demonstrate that the difference was solely on account of 4% VAT payment. Ld. AR submitted, the assessee had also filed rectification application u/s 154 of the Act before the assessing officer on 12.06.2013 poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that both the directors were having their proprietary business of hiring computers and peripherals. Both the directors decided to merge their proprietary business with the assessee company in order to conclude business, improve synergies and get better scales of economy. It was submitted, the directors have transferred their contracts, networks, and business assets without receiving any goodwill. Therefore, they were compensated by way of royalty. The assessee further submitted that since the directors have shown the royalty received as their income and have paid taxes any further disallowance in the hands of the company would amount to taxing the same income twice. The assessing officer however, rejected the explanation of the assessee by observing that no supporting evidences were submitted by the assessee to indicate that directors were instrumental in bringing business. The assessing officer observed, since the payment were made to related parties provisions of section 40A (2)(b) is applicable. Accordingly, he proceeded to disallow the deduction claimed by the assessee. Assessee challenged the disallowance before the CIT (A). The CIT (A) appreciating the fact that the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see he allowed the deduction claimed on account of royalty. The same is also the fact in assessment year 2008-09 and 2009-10, wherein assessments completed u/s 143 (3) of the Act, the assessing officer has allowed assessee s claim of deduction on account of payment of royalty. Thus, as could be seen out of five years for which payment of royalty was to be made by the assessee, except the impugned assessment year, in no other assessment year assessee s claim has been disallowed, though, assessments have been completed u/s 143 (3) of the Act. Therefore, applying the rule of consistency no disallowance should have been made in the impugned assessment year. Further, on perusal of the assessment order we have noted that the assessing officer has not recorded any reason to demonstrate that the payment made by the assessee is unreasonable as mandated by Section 40 A (2)(b). That being the case disallowance of the expenditure claimed by invoking Section 40 A (2) of the Act, is not proper. Accordingly, we uphold the order of CIT(A) by dismissing the ground raised. In ground no. 3 department has challenged the deletion of addition of ₹ 45,67,301/-. Briefly the facts are, during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the assessing officer being of the view that the payments made by the assessee were towards purchase of assets has treated the expenditure as capital in nature. However, it is evident, assessee has brought material on record to demonstrate that it has brought on hire computers and peripherals from third parties and deduction claimed was on account of payment made to those parties towards hire charges. This fact is demonstrated from the TDS certificate submitted by the assessee before the departmental authorities. It is also a fact on record that assessee has deducted tax at source on payment of hire charges in terms of Section 194 J of Act. Thus, prima facie it is proved that the payment is towards hire charges and not for acquiring any capital assets. That being the case, the expenditure claimed is allowable. As far as the observation of the assessing officer that the amount is otherwise disallowable u/s 40 (a)(ia), we do not find any merit in the same considering the fact that the assessee has deducted tax at source on such payment u/s 194 J. As far as the allegation of the department that CIT (A) has admitted additional evidence in violation of rule 46A we are not convinced w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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