TMI Blog2015 (10) TMI 2779X X X X Extracts X X X X X X X X Extracts X X X X ..... 1). We further find from the memorandum explaining to provisions of the Finance Bill 2012 that as per clause No.71 it was specifically mentioned that there was no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. We find the provisions of section 194J(1)(ba) speaks of any remuneration or fees or commission by whatever name called other than those on which tax is deductible u/s.192 to a director of a company on which tax has to be deducted at the applicable rate and the above provision has been inserted by the Finance Act, 2012 w.e.f., 01-07-2012. We, therefore, find force in the submission of the learned counsel for the assessee that no tax is required to be deducted u/s.194J out of such director's sitting fees for the A.Y. 2007-08. In this view of the matter, the order of the CIT(A) is set-aside and the ground raised by the assessee on the issue of TDS on sitting fees paid to Directors is allowed. Disallowance of bad debts written off u/s 36(2) - HELD THAT:- We find that the assessee had claimed bad debts of ₹ 57.73 lacs only in the books of accounts and the AO and the FAA had not considered the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of printing,publishing and outdoor advertising etc.filed its return of income on 25.9.2009 declaring income of ₹ 1.13,12,537/-.The Assessing Officer(AO)completed the assessment on 30.3.2011,determining the income of the assessee at ₹ 5.67 crores. 2. First ground of appeal [Ground No.(A)] is about disallowance u/s. 14A r.w.Rule 8D of the Act amounting to ₹ 1.02 crores. During the assessment proceedings he AO found that the assessee s investment in shares and securities as on the balance sheet date was at ₹ 9631.12 lacs as against the previous year s closing balance of ₹ 7,433.93 lacs, that it had received dividend income of ₹ 1.06 lacs.He held that the assessee had earned exempt income that it had incurred expenses and same were related to earning of exempt income that they were not allowable within the meaning of provisions of section 14A of the Act. He further noted that the assessee had disallowed ₹ 63,523/- paid as STT in its return of income. He held that the disallowance made by the assessee was not satisfactory if quantum of investment made and the dividend received were considered. During the assessment proceedings he as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res were not acquired from borrowed funds, that the assessee had sold part of subsidiary publishing business. He relied upon the cases of Excel Industries Ltd.(ITA8278/Mum/201112);Crompton Greaves Ltd.(ITA/6277/Mum/2012),Four Dimensions Securities(India)Ltd. (ITA/6395/Mum/2011),Pinnacle Brocom Ltd.(ITA/6247/Mum/2012),HDFC Bank Ltd.(366 ITR505).Departmental Representative(DR)supported the order of the FAA. 2.3. We have heard the rival submissions and perused the material before us. We find that the assessee had received dividend of ₹ 1.06 lakhs during the year hat the AO and FAA had applied the provisions of section 14A of the Act r.w. Rule 8D hat the arguments of strategic investment and availability of funds were not dealt with. If the shares were not purchased from the borrowed funds then there was no justification in making disallowance of interest expenditure. The provisions of section 14A were brought in to Act to prevent the mischief of claiming expenses against the exempt income. But that does not mean that whenever an assessee claims exempt income automatic disallowance has to be made. The AO and the FAA have without considering the relevant facts made the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectfully following the principles enumerated in the above mentioned judgment we decide ground A in favour of the assessee. 3. Next Ground of appeal deals with disallowance made u/s. 40(a)(ia) of the Act, amounting to ₹ 2.70 lacs. During the course of assessment proceedings he AO asked the assessee to explain as to whether tax had been deducted on the fee paid to the directors. After considering the reply of the assessee,dtd.16.11.2011 he AO held that the directors sitting fee was in the nature of professional fee paid, that the assessee was required to deduct tax at source in accordance with the provision of section 194J of the Act that it had failed to comply with the provisions of Chapter XVII-B of the Act. Finally the disallowed the claim made by the assessee. 3.1. During the appellate proceedings he assessee argued that section 194J had been amended by the finance Bill 2012 hat the amendment was effective from 1.5.2012 and that it was not applicable for the year under consideration. The FAA held that payments made as directors sitting-fee fell within the definition of professional fee hat the assessee was required to deduct tax at source. He confirmed the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94J(1). We further find from the memorandum explaining to provisions of the Finance Bill 2012 that as per clause No.71 it was specifically mentioned that there was no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. We find the provisions of section 194J(1)(ba) speaks of any remuneration or fees or commission by whatever name called other than those on which tax is deductible u/s.192 to a director of a company on which tax has to be deducted at the applicable rate and the above provision has been inserted by the Finance Act, 2012 w.e.f., 01-07-2012. We, therefore, find force in the submission of the learned counsel for the assessee that no tax is required to be deducted u/s.194J out of such director's sitting fees for the A.Y. 2007-08. In this view of the matter, the order of the CIT(A) is set-aside and the ground raised by the assessee on the issue of TDS on sitting fees paid to Directors is allowed. Respectfully following the above,we decide ground no.8 in favour of the assessee. 4. Next effective ground of appeal (Ground of appeal C to E) deals with bad debts. During the assessment proceedings the AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with BEST Undertaking that it had written off only net amount receivable from BEST Undertaking amounting to ₹ 54.66 lacs. The AR referred to page No.32,52, and 61 of the paper book and stated that assessee had added back ₹ 6.23 crores and had claimed bad debts of ₹ 57.73 lacs only hat ₹ 57.53 lacs was part of ₹ 86.00 lacs of outdoor and TV division. He referred to the case of United Vander (ITA/68/Mum/2010-Legal paper Book 162) and stated that case of the assessee was covered by the decision of Hon ble Supreme Court delivered in the case of TRF Ltd.(323ITR397).DR supported the order of the FAA. 4.3.We have heard the rival submissions and perused the material. We find that the assessee had claimed bad debts of ₹ 57.73 lacs only in the books of accounts and the AO and the FAA had not considered the amounts added back by it that it had written off only net amount receivable from BEST Undertaking. In our opinion he assessee is the right person to decide as to whether a particular amount has become bad or not. The AO/FAA cannot decide the issue referring to the entity from whom money is to be recived. If the assessee had in its books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st for the amount advanced, that it had borrowed funds of ₹ 995 lacs that it had paid interest of ₹ 1,10,76,615/-.He asked the assessee to explain as to why the claim of interest to the extent chargeable on loan and advances should not be disallowed treating the same as not incurred wholly and exclusively for the purpose of business. Vide its letter,dtd.13.12.2011 he assessee stated that the amount given to Ferarri Investment was toward the purchase of shares and that it was not for any loan or advance hat the above fact was mentioned in the note to accounts at Pt. No. 14B hat the sole intention of the advance was investment purpose and business expediency, that the advances were not made from the interest bearing funds of the assessee. However, the AO was not convinced and calculated the disallowance as under : Date Debit Credit Daily Balance Interest 01/04/2008 17,18,00,000 17,18,00,000 37,84,306 05/06/2008 91,00,000 18,09, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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