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TMI Blog2018 (8) TMI 1903X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case and in law the Commissioner of Income tax (Appeals) erred in upholding the disallowance under Section 40(a)(i) of the Income tax Act, 1961 of Rs..77,22,510/- being professional fees paid to KPMG LLP, United Kingdom. 2) On the facts and circumstances of the case and in law the Commissioner of Income tax (Appeals) erred in upholding the disallowance to the extent of Rs..1,00,000/- on an adhoc basis in respect of staff welfare expenses. 3) On the facts and circumstances of the case and in law the Commissioner of Income tax (Appeals) erred in upholding the disallowance of Rs..78,704/- being interest paid on service tax. 4) On the facts and circumstances of the case and in law the Commissioner of Income tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal and the Tribunal in its order in Para No. 5 and Para No. 5.1 held as under: - "5. In the above background, we have carefully considered the rival submissions. Pertinently, the issue revolves around the payments made by the assessee to certain non-resident entities for professional services rendered by them outside India. It has been consistently explained by the assessee that the services of such entities were availed during the course of the execution of engagements of assessee firm. The assessee firm did not deduct the tax at source and, therefore, the Assessing Officer invoked the provisions of section 40(a)(i) of the Act and disallowed such expenditure. The details of the entities alongwith the amounts paid have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 40(a)(i) of the Act to disallow such expenditure is not tenable. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT(Appeals) has found that such entities are eligible for the benefit of Article -15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified." 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that assessee furnished details in respect of expenses incurred for more than Rs..1,50,000/- which amounted to 98.25% of the total amount and the balance constitute only 1.75% which was stated as the "other amounts". The Assessing Officer did not call for details on "other amounts" and the disallowance made by the Assessing Officer is without any specific finding and only based on surmises and conjectures. Similarly, he submitted that the adhoc disallowance of Rs..1,00,000/- each made from Miscellaneous expenses and Seminars/Conference and meetings expenses without any specific finding that the particular expenditure was not incurred for the purpose of business but only made observation that proper bills and vouchers were not furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. 12. In the case of CIT v. Vallbh Glass Works Ltd., (supra) the Hon'ble Gujarat High Court held that no question of law arose for consideration on merits on the decision of the Tribunal wherein the Tribunal upheld the order of the Ld.CIT(A) who has held that when the audited accounts were available with regard to the expenses claimed by the assessee and in the absence of any adverse comments of the auditors no disallowance out of such expenses should be made. 13. In view of the above and in the absence of any specific defects pointed out by the Assessing Officer in making adhoc disallowance other than general observation that complete vouchers were not furnished, we hold that there should not be any disallowance on adho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed by the Assessing Officer observing that the same is penal in nature and not an allowable expenditure which was confirmed by the Ld.CIT(A). Before us, it is contended that such interest payment on delayed remittance of service tax is only compensatory in nature and is supported by the decision of the Delhi Bench. On a perusal of the decisions relied on by the Ld. Counsel for the assessee, we find that the Tribunal held that interest on service tax is compensatory in nature and not penal in nature and is therefore allowable expenditure. On a perusal of the Explanation to Section 37(1) of the Act which says that any expenditure incurred by an assessee for any purpose which is an offense or which is prohibited by law shall not be dee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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