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Charitasri Hospitals Ltd. Versus ACIT, Range-2, Vijayawada

Addition towards sundry creditors for others u/s 68 - assessee failed to furnish details of creditors like partywise breakup, confirmation duly attested in the account copy and bank account details of the creditors - Held that:- Once the genuineness of the expenditure was not doubted, the creditors arised out of such expenditure cannot be added u/s 68 of the Act, for the simple reason that the assessee has failed to furnish confirmation letters from parties. We further observed that the assessee .....

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uine, the A.O. was erred in treating the creditors arised out of such expenditure as unexplained credits u/s 68 of the Act. The CIT(A) after considering relevant submissions of the assessee and also analyzing the ledger extracts, rightly directed the A.O. to delete the additions made towards sundry creditors for others shown under the head current liabilities. We do not find any error in the order of the CIT(A). - Decided against revenue. - Disallowance of 10% expenditure incurred under the .....

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ld not have gone into the genuineness of expenditure. The CIT(A) after considering the nature of expenditure and also fact that most of the expenditure are supported by self-made vouchers rightly directed the A.O. to disallow 10% of total expenditure incurred under the head Arogya Shree scheme. We do not find any error in the order of the CIT(A). - Decided against assessee. - TDS u/s 194J - professional charges paid to Doctors u/s 40(a)(ia) for failure to deduct tax at source - Held that:- O .....

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expenditure has been paid before the end of the financial year - alternative plea of the assessee - Held that:- As in the case of Merilyn Shipping and Transporters Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) has considered the issue and after considering the relevant provisions of the Act, observed that no disallowance can be made u/s 40(a)(ia) of the Act, if expenditure has been paid on or before 31st March of the financial year. In this case, the assessee has filed necessary evidences t .....

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JUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri S. Ravi Shankar Narayan, DR ORDER PER Shri G. Manjunatha, Accountant Member: These cross appeals filed by the assessee, as well as the revenue are directed against order of the Commissioner of Income Tax (A), Vijayawada dated 28.11.2014 and it pertains to the assessment year 2011-12. Since, the facts are identical and issues are common, they are clubbed, heard together and disposed-off by way of this co .....

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se to notices, the authorized representative of the assessee appeared from time to time and produced the relevant details as called for. During the course of assessment proceedings, the A.O. noticed from the balance sheet filed for the year that the assessee has shown an amount of ₹ 1,17,53,802/- under the head current liabilities as sundry creditors for others. The A.O., to ascertain the nature of liability issued a show cause notice and asked to explain the assessee to furnish details of .....

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al camps across the state to identify the patients for the benefit of Arogya Shree Scheme for which it has incurred certain expenditure, which has been shown as payable in the books of accounts. The assessee further submitted that the company conducts various medical camps to screen the patients for which it has engaged marketing team. The marketing team arranges medical camps around 300 villages in the neighboring district, for which it has spent expenditure in the nature of provision of free f .....

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hra Pradesh releases payments towards Arogya Shree scheme, the assessee reimbursed expenditure to the marketing team. 3. The A.O. after considering the explanations of the assessee observed that the assessee failed to furnish necessary details of sundry creditors for others such as party-wise breakup of all the creditors, confirmation duly attested in the account copy and bank account of the creditors. The A.O. further observed that in the absence of identity proof, which is primary onus of the .....

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al for preliminary estimate of the bill amount based on which the District Medical authorities will authorize the estimate due to which the concerned patient will be given treatment in the hospital. In the scheme, the role of intermediate marketing people is very minimal and the explanation of the assessee in the absence of supported evidence cannot be relied upon and accordingly sundry creditors of ₹ 1,70,53,802/- shown as outstanding is added as unexplained credits. Similarly, the A.O. h .....

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essee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The CIT(A) after considering explanations of the assessee, observed that the amount shown under sundry creditors for others represents outstanding expenditure payable in respect of Arogya Shree expenses because of delay in realization of bills from the Government. The CIT(A) further observed that the assessee has furnished details of expenditure incurred along with ledger .....

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curred towards Arogya Shree scheme and subsequently reimbursed the same to the marketing team as and when it gets amount from the State Government. From the above description, it is clear that the amount shown under the head Sundry Creditors for others are nothing but Arogya Shree expenses outstanding at the end of the year and not sundry creditors in the general sense as normally appear in trading and other business concerns. Hence, the additions made by the A.O. treating them as unexplained cr .....

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expenditure incurred in the year, however, he has disallowed 10% on expenditure incurred by cash. Therefore, directed the A.O. to disallow 10% of the total expenditure incurred of ₹ 1,49,63,563/-. In so far as disallowance of professional charges u/s 40(a)(ia) of the Act, for failure to deduct tax at source u/s 194J of the Act, the assessee failed to offer any explanations for non-deduction of tax at source on remaining amount of professional charges paid to the Doctors. During the appell .....

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owance of 10% expenditure incurred under the head Arogya Shree schemes. The A.O. made additions of ₹ 1,17,53,802/- u/s 68 of the Act, on the ground that the assessee failed to furnish details of creditors, confirmation from the parties and also bank account details of the creditors proving the identity and genuineness of the transactions. The A.O. was of the opinion that the assessee failed to prove the identity of the creditors, therefore, the question of verification of genuineness of th .....

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ntly as and when the bills are received from the State Government. The assessee has accounted bills submitted by the marketing agents towards expenditure incurred for Arogya Shree schemes, however settled the bills subsequently in the next financial year because of delay in realization of bills from the State Government. The A.O. without examining the details simply made additions u/s 68 of the Act towards outstanding expenses payable which is incorrect. 6. Having heard both the sides and consid .....

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,09,761/- was incurred in cash which was not supported by proper bills and vouchers. From this, it is clear that the remaining amount of expenditure has been accepted genuine. Once the genuineness of the expenditure was not doubted, the creditors arised out of such expenditure cannot be added u/s 68 of the Act, for the simple reason that the assessee has failed to furnish confirmation letters from parties. We further observed that the assessee has filed a paper book containing details of expendi .....

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ised out of such expenditure as unexplained credits u/s 68 of the Act. The CIT(A) after considering relevant submissions of the assessee and also analyzing the ledger extracts, rightly directed the A.O. to delete the additions made towards sundry creditors for others shown under the head current liabilities. We do not find any error in the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. 7. In so far as adhoc disallowance of expendit .....

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cash. The assessee claims that the CIT(A) ought not to have directed the A.O. to disallow 10% expenditure incurred under Arogya Shree schemes, as the assessee has filed necessary bills and vouchers in support of expenditure. We do not find any merits in the arguments of the assessee, for the reason that since the expenditure incurred under the head Arogya Shree schemes mostly remains payable at the end of the year, it is very difficult to ascertain the genuineness of expenditure and also mode of .....

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tal expenditure incurred under the head Arogya Shree scheme. We do not find any error in the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the assessee. 8. The next issue that came up for our consideration is disallowance of professional charges paid to Doctors u/s 40(a)(ia) of the Act, for failure to deduct tax at source u/s 194J of the Act. The A.O. disallowed a sum of ₹ 16,62,503/-, out of the total expenditure incurred of ₹ 1,7 .....

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assessee had not deducted tax at source as the assessee not obliged to deduct tax at source in case the payment does not exceed the threshold limit. The assessee alternatively contended that the expenditure incurred under the head professional charges has been paid during the same financial year on or before 31st March, therefore, no disallowance can be made u/s 40(a)(ia) of the Act, if the expenditure incurred is paid within the end of the financial year in view of the special bench decision o .....

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provided u/s 194J of the Act. The assessee has filed a ledger extract of professional charges paid to doctors. On perusal of the ledger extract filed by the assessee, we noticed that the assessee has paid professional charges to visiting consultants on day to day basis, which is much below the threshold limit provided u/s 194J of the Act for deduction of tax at source. Therefore, we are of the view that the assessee not obliged to deduct tax at source on such professional charges. The A.O. witho .....

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