TMI Blog2018 (10) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... In holding so, we find support and guidance in the case of Neo structo construction Ltd. [2013 (7) TMI 851 - GUJARAT HIGH COURT], thus we note that if performance guarantee has forfeited by the concern party then the same is allowable as deduction to the assessee. - decided in favour of assessee. - ITA No. 593/Ahd/2017 - - - Dated:- 8-10-2018 - Shri Rajpal Yadav, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Assessee : Written Submission For the Revenue : Ms. Apoorva Bhardwaj, Sr. D.R. ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the appellate order of the learned Commissioner of Income-Tax (Appeals)-5, Ahmedabad [ CIT(A) in short] relevant to Assessment Year 2013-14. 2. Assessee has raised the following grounds of appeal:- 1. The ld CIT(A)-5, Ahmedabad erred in confirming the action of assessing Officer in disallowing bank guarantee expenses of ₹ 3,94,626/- u/s 37(1) of the act by treating the same as capita in nature. 3. The only issue raised by the assessee is that ld CIT(A) erred in confirming the disallowance of ₹ 3,94,626/- u/s 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d submission made by the appellant. It is worth here to mention that in appellant's own case in appeal for A.Y. 2010-11, the undersigned vide order in appeal No. CIT(A)- 5/ITO.Wd.5(2)(3)/216/2015-16 dtd. 20.07.2016 has confirmed the disallowance made by the AO in respect of Bank guarantee expenses for the reasons discussed in para -4.3 to 4.15 of the appellate order which is reproduced as under:- 4.3. During the assessment proceedings the AO has noticed that the assessee has debited an amount of ₹ 12,12,525/- under the head bank guarantee expenses. The assessee has paid the same to the bank for procuring bank guarantee in ' favour of Air Port Authority of India as per the terms of tender contract. In the assessment order, the AO has held that performance deposit confers right on the assessee to carry out work and commission borne for providing such deposit is a capital expenditure. Accordingly, the AO has disallowed the same and added to the income of the assessee. 4.4. During the course of appellate proceedings, the appellant has contended that the said expenditure was incurred in order to execute the work awarded to it in normal course of such work a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO was confirmed in appellate proceedings for A.Y. 2010-11 and the issue identically involved in the appeal under consideration, the disallowance made in respect of bank guarantee expenses is confirmed. Thus the ground of appeal is dismissed. Being aggrieved by the order of Ld CIT(A) assessee is in appeal before us: 6. There was no authorized representative appeared from the side of the assessee at the time of hearing. However, the assessee filed its written submission which is reproduced as under: The only ground of appeal is regarding disallowance of bank guarantee expenses of ₹ 3,94,626/- u/s.37(1) of the Act by treating the same as capital in nature. At the outset, it is submitted that the learned Commissioner (Appeals) have confirmed above mentioned disallowance on the basis of appellate order of A.Y. 2010-11. However, since the appellant has not received said appellate order till date of A.Y. 2010-11, no further action is taken by the appellant in this regard. Hence, these submissions may kindly be considered; With respect to ground of appeal, the contentions of the appellant are as follows: (i) The said expenditure was incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below: 8. We have heard the rival contentions and perused the materials available on record. In the instant case, the assessee has incurred commission expenses for availing the bank guarantee favoring to Airport Authority of India. The bank guarantee was taken by the assessee for satisfactory completion of the work undertaken by it. Indeed, the bank guarantee was taken prior to the commencement of the project undertaken by it from the Airport Authority of India. Therefore, the AO treated the expenses incurred on account of such bank guarantee as capital in nature and therefore, the same was disallowed u/s 37(1) of the Act. The view taken by the AO was subsequently confirmed by the ld CIT(A). From the preceding discussion, we note certain undisputed facts as detailed under: i. The assessee started its business activities in the year 2008-09 which evidences that the business was setup and commenced in the earlier years. ii. The assessee claimed before the lower authorities that it has no fixed assets in its business. The argument of the assessee was not disputed by any of the lower authority. iii. The amount of commission expenses was treated as capital in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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