TMI Blog2018 (1) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... ade necessary enquiries and verification at level of AO as well learned CIT(A) whose powers are coterminous with that of the AO which unfortunately the Revenue did not do so while the assessee placed all the facts before the authorities below. We do not find any justification in sustaining/confirming additions made by the AO/CIT(A) under the factual matrix of the case which we hereby ordered to be deleted. Addition u/s 14A - Held that:- There is no evidence on record that the assessee has not received any exempt dividend income during relevant previous year as also the taxability of dividend income receivable from foreign company namely Pyramid Engineering & Consulting Limited , UK in which assessee has claimed to have invested is also required to be gone through as these aspects are not been gone through by the authorities below. It is settled principle of law that tax can only be levied by or under the authority of law which is also the mandate of the Constitution of India under Article 365. Merely acquiescence to pay tax on the income which is not subjected to tax under the provisions of law will not make that income chargeable to tax which is certainly not the mandate of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased to exist and the additions were made to the income of the assessee u/s. 41(1) under the head cessation of liability, vide assessment order dated 11.03.2014 passed by the AO u/s 143(3). 4. Aggrieved by the assessment order dated 11-03-2014 passed by the AO u/s 143(3), the assessee carried the matter in appeal before the learned CIT- A and following submissions were made by the assessee as under:- Appellant Company was procuring business in Kuwait through its commission agent M/s Bader Al Safran. Commission was payable at the rate of 25% subject to realisation/remittance from the respective customers procured through commission agent. Through Al-Safran, appellant company got the business of M/s Finesco International, M/s Mushriff Trading Constrution co., M/s Dar Consulting Engineers, M/s Gulf Leighton LLC, M/s Integral Services Co., Petrochemical Industries Co. and M/s Arabi Entertech. Total outstanding amount receivable from the above debtors were ₹ 1,38,36,345/- as at 31.03.2011. Copy of Agreement is enclosed. Total commission due to M/s Al. Safran from F.Y 2004-05 till F.Y 2010- 11 was ₹ 1,31,61,824/- out of which appellant company has paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i (ITA. No. 3298/Mum/2010), where it was held that, when the A.O. allowed the expenditure claim in profit and loss account as genuine, outstanding balance cannot be added back to the income. Copy of decision is enclosed. In the case of the appellant company, there was no evidence or any specific communication from the creditor that he had foregone the claim, and in case the claimant comes forward to lodge claim, appellant has to honour the debt and in that case it cannot be said to be remission or cessation of liability. The same view was held in the case of M/s Nash Machines Electronics Pvt. Ltd. Vs JCIT. Range-II, Nashik (ITA no.163/PN/2008). Copy of the order is enclosed . The learned CIT-A, after considering the submissions of the assessee rejected the claim of the assessee by holding as under, vide appellate order dated 31- 12-2015:- I have carefully considered facts of the case, finding of the A.O in the assessment order, submission of the Ld. DR and material on record. From the facts of the case, it is noticed that the appellant company had paid commission @ 25% to Mr Al Badran Safran against various services claimed to had been rendered by him, in Kuwait, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary arrangements for assisting principal for collecting the considerations from customers. Associates shall also develop the necessary infrastructure for making such collection. X Provide information on Government regulations, Commercial Law, Constitutional changes etc as may be required by the principal for successfully conducting business in Kuwait. XI. Associate shall not enter into any agreement with other companies providing similar services as the principal. Associate shall also keep principal informed about his dealings with any other companies, whether association, employments, agency etc. I have carefully gone through the contents of the above MOU and noticed that the same has been prepared on plain paper (not even on stamp paper) and not registered with the appropriate authority, hence not enforceable, in the eye of law, before any court. In view of these facts, the signature mentioned in the above MOU, actually belongs to Mr Badar A Safran, It is further noticed that the rate of commission i.e. 25% appears to be very high and nature of services rendered by the above party does not match with the rate of commission, claimed to had been provided. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realisation of proceed from debtors. It was submitted that complete details such as copy of ledger account of Badar Al Safran as well copy of MOU was placed before the authorities below also. It is submitted that there is payment recovery of ₹ 1,38,36,345/- outstanding as on 31.03.2011 from the parties from whom the Al Badran Safran generated the business in favour of the assessee in Kuwait. It was submitted that the total commission due to be paid to Badar Al Safran from F.Y. 2004- 05 till 2010-11 was ₹ 1,31,61,824/- , out of which assessee had paid ₹ 96,71,766/- to said Badar Al Safran and the balance is still payable as on 31-03-2011 because the principle debtors had not paid their outstanding amount which was to be paid to the assessee . It was submitted by learned counsel for the assessee that the assessee got business of M/s Finesco International, M/s Mushriff Trading Constrution Co., M/s Dar Consulting Engineers, M/s. Gulf Leighton LLC, M/s Integral Services Co., Petrochemical Industries Co. and M/s Arabi Entertech . The copy of MOU entered into by the assessee with said Badar Al Safran is placed on record in the paper book filed with the tribunal along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the first time as additional evidences and the matter can go back to the A.O. for verification. 6. We have considered rival contentions and perused the material on record. We have observed that the assessee is engaged in the business of engineering and design services with respect to the oil gas industry. The assessee had entered into MOU with Badar Al Safran for procuring business in Kuwait for the assessee. As per this MOU said agent is to be paid commission @ 25% during the period for the business generated in favour of the assessee and the said sum is payable on realisation by the assessee from the debtors from whom this agent has procured business in favour of the assessee. This MOU was before the AO as well learned CIT(A) as well the ledger account of Badar Al Safran from financial year 2004-05 to financial year 2010-11 was also before the authorities below. It is claimed that the said agent was generating the business from various parties in Kuwait in favour of the assessee from year to year for which commission expenses of ₹ 1,31,61,824/- is stated to payable to the said agent Badar Al Safran for the financial year 2004-05 to 2010-11, which in fact was allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Badar Al Safran generated as claimed by the assessee. It was incumbent on the learned AO as well learned CIT(A) to have gone into greater scrutiny and examination to disprove the contentions of the assessee and merely making bald statement is not sufficient. The assessee has also produced details of court cases at Kuwait and correspondences with its overseas buyers/agents w.r.t. its efforts for making recovery etc to justify that these payments are still due from the customers albeit the same was produced before the tribunal for the first time. The Revenue has not brought on record any incriminating material to support its stand despite having sufficient opportunity to had made necessary enquiries and verification at level of AO as well learned CIT(A) whose powers are coterminous with that of the AO which unfortunately the Revenue did not do so while the assessee placed all the facts before the authorities below. We do not find any justification in sustaining/confirming additions made by the AO /learned CIT(A) under the factual matrix of the case which we hereby ordered to be deleted. We order accordingly. 7. The A.O observed that the assessee has taken large sum of loan from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were stated to be invested in the securities/share application money . The average investment in the shares is ₹ 65,96,124/- and average of the total value of assets in the balance sheet is ₹ 9,50,68,212/- and the amount of expenditure directly related to the income which does not from part of total income was ₹ 33,30,517/- which led to the disallowance of interest of ₹ 2,31,081/- as also disallowance of 0.5% of average investment which comes to ₹ 32,981/- , which were made by the AO which was later confirmed by learned CIT(A) as the assessee had admitted to such additions before learned CIT(A). The assessee has now raised legal grounds that since there is no exempt income earned by the assessee during relevant previous year, it is claimed that no disallowance can be made keeping in view ratio of decision of Hon ble Delhi High Court in the case of Cheminvest Ltd. v. CIT (2105) 378 ITR 33(Del) and Joint Investments Private Ltd. v. CIT (2015) 372 ITR 694(Del) . It is not discernible from the orders of the authorities below as to the quantum of exempt income earned by the assessee during relevant period but perusal of the statement of facts filed before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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