TMI Blog2020 (12) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of excess process stock - HELD THAT:- On almost similar fact on similar ground of appeal in appeal for assessment year 2005- 06,this ground of appeal is covered by the decision of Tribunal in earlier years. Hence, we affirms the order of ld CIT(A). No contrary facts or law is brought to our notice to take the other view. Respectfully following the same, this ground of appeal raised by revenue is dismissed. Exclusion of expenses of Orisha unit on the basis of turnover of the whole company and TG-3 unit for which assessee claimed deduction under section 80IA - HELD THAT:- while allocating the expenses for power generation unit considered the overall cost of employee and other expenses , which consist of employee cost and other expenses of Orisha unit. CIT (A) after considering the submission of assessee that the Orisha unit has no connection with the generation of power by TG-3 unit, directed the assessing officer to reallocate the expenses by excluding the expenses of Orisha unit. No contrary fact or evidence is brought to our notice that the expenses incurred in Odis are unit have any casual connection with the cost incurred in power production in TG-3 unit, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the total expenses. The assessing officer simply concluded that the arguments of the assessee company are considered in but the same are not acceptable without specifying any reason - CIT(A) while granting relief to the assessee noted that assessing officer has not even try to deal with the expenses under different head and merely made ad-hock disallowance which is not sustainable. We have noted that like other ad-hock disallowances which were ultimately deleted by learned CIT(A), no contrary fact or evidence is brought to our notice to take other view. Disallowance of 5% of employee welfare expenses and other benefits - HELD THAT:- has not examined the details furnished by the assessee. AO has not find any defects in the books of account maintained by assessee. The assessing officer has not specified even a single discrepancy either in the documents or in the reply furnished by assessee. CIT(A) while granting relief to the assessee recorded that the assessing officer has not doubted that these expenses were not genuine. Even before us no contrary fact or law is shown to take other view except to raise the plea that the disallowances were made on reasonable basis. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 991 (4) TMI 53 - BOMBAY HIGH COURT ] TDS u/s 195 - disallowance under section 40 a (i) - seminar fees paid to London School of Economics -assessee submits that assessee paid fee for attending seminars and recipient has no business connection in India, thus no income accrues or arise to them in India within the meaning of section 9(1)(i) - The services for which the assessee made payment were rendered outside India. - HELD THAT:- In absence business connection in India, no income accrues or arise to them in India within the meaning of section 9(1)(i) of Income Tax Act. Therefore, on the services for which the assessee made payment were rendered outside India, the assessee was not required to deduct tax at source. However, the ld CIT(A) has categorically held that no that no details about the payment was made to London School of Economics was furnished the veracity of claim could not be verifiable. Hence, we direct the assessing officer to verify the details of the expenses and grant the relief to the assessee. In the result this ground of appeal is allowed for statistical purpose. - I.T.A No.1100/Ahd/2014, I.T.A No.2905/Ahd/2014, I.T.A No.1963/Ahd/2016, I.T.A No.1610/Ahd/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of expenses claimed as commission paid to Directors of ₹ 5,25,600/-, as the assessee has not provided any documentary evidences regarding service provided by them. (7) Whether on the facts and circumstances of the case, learned CIT(A) is right in deleting the addition made on account of this allowance of expenses claimed as commission paid to agents on sales of ₹ 6,74,300/-, when the assessee has not provided any documentary evidences regarding services rendered by them. (8) Whether on the facts and circumstances of the case, learned CIT(A) is right in deleting the addition made on account of this allowance of 5% of various expenses amounting to ₹ 1,29,65,250/- especially when the assessee was unable to prove the expenses claimed was wholly and exclusively incurred for business purpose and was revenue in nature. (9) Whether on the facts and circumstances of the case, learned CIT(A) is right in deleting the addition made on account of this allowance of 5% of expenses claimed as employee welfare and other benefits of ₹ 62,31,600/- keeping in view that the assessee was unable to prove that expenditure was incurred wholly and exclusively for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of bad debts 33,15,084/- 8 Disallowances of expenses claimed in company s profit and loss account in respect to on Power Generation unit TG-3, situated at Central Pulp Mill Surat 3,28,28,034/- 9 On account of excess depreciation claimed (as per para-12) 2,62,262/- 10 On account of excess depreciation claimed (as per para-13) 11,96,731/- 11 Disallowances on account of commission paid to Directors 5,25,600/- 12 Disallowances on account of commission on sales 6,74,300/- 13 Disallowances on account of various expenses 1,29,65,250/- 14 Disallowance on account of staff welfare expenses 62,31,600/- 3. On appeal before learned Commissioner (Appeals), the assessee was granted partial relief in respect of additions/disallowances made at serial No. 1 8, however, the additions were de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing these product. In order to ensure regular supply of raw material, the assessee took various steps to ensure adequate supply of raw material. The assessee provided seeds to the farmer, supply of high-quality sapling developed and grown by assessee on the basis of in-house research and development activities, technical assistant to the farmers in growing trees, arranging financial assistance. There were two ways in which sapling were developed by the assessee. The assessee purchased seeds for the plantation of bamboo trees and grows them in its nurseries which provide for environment suitable for the better health of such plants like proper soil, proper water, and irrigation facilities, proper and sufficient sunlight etc. The assessee entered into agreement with the farmers at the time of sale of saplings for procurement of fully grown trees after a certain period of time. The procurement of seeds, cutting from others plant, development of sapling, research and development activities, technical assistance to farmers, entails expenditure in the hand of assessee. The assessee is not engaged in the agricultural activities. The assessee incurred expenses wholly and exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to rework the disallowance in accordance with the directions laid down by the Tribunal. With these brief background, we have been informed that on identical facts ITAT 'C' Bench Ahmedabad for A.Y. 2008-09 in an appeal of the assessee bearing ITA No.2262/Ahd/2011 and Cross Appeal bearing ITA No.2505/Ahd/2011 vide an order dated 24th of May, 2012 has held vide paragraph no.31 at page 9 that the ground in required to be decided against the assessee. Even the learned CIT(A) has followed an earlier order of the Tribunal dated 4.9.2009, wherein the quantification was made as under: Following out order for the assessment year 2002-03 only the expenses to the extent of ₹ 15.15 lacs would be considered as agricultural expenses out of total claim of expense at ₹ 80.95 lacs and would not be allowed. Against this the assessee has shown sale of agricultural produce (relatable to growing of saplings through land) at ₹ 5.72 lacs and sale of saplings not relatable to agricultural operations at ₹ 1.42 lacs. Therefore, agricultural loss would be only ₹ 15.15 - 5.72 = 9.43 lacs. The sale of saplings at ₹ 1.42 lacs would be non-agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer made addition by taking similar view that outstanding balance was for more than 3 years and that the assessee failed to furnish any confirmation. The learned CIT (A) the deleted additions by following the order of earlier year and taking view that creditors are old in respect of which the purchases were made in the earlier years. There is no much variation in facts for the year under consideration. 11. We have heard the considered the submission of both the parties and have gone through the orders of lower authorities. We have noted that on almost similar fact on similar ground of appeal in appeal for assessment year 2009- 10, the coordinate bench of Tribunal passed the following order; 10. Ground No.2 is reproduced below: On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made of ₹ 5,14,850/- on account of unexplained creditors as the assessee failed to prove the genuineness of the transactions with the creditors. 10.2 At the outset, we have been informed that on identical facts, the Tribunal in A.Y.2008-09 (supra) had held that there was no change in the facts of the case already considered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41(1) cannot be invoked as per those judgment of Hon'ble Apex Court even after the insertion of Explanation (1) in Section 41(1). These two judgments of Hon'ble Apex Court will not be applicable where the assessee has written back the liability but where assessee has not written back the liability in the books Section 41(1) cannot be invoked as per these two judgments of Handle Apex Court even after the insertion of Explanation (1) to Section 41(1) of the Act. Since in the present case, assessee has not written back the liability in question, provisions of Section 41(1) cannot be invoked and hence, we decline to interfere in the order of ld. CIT(A) on this issue. Ground No.1(d) of the assessment year 2006-07 and ground No.1(c) for assessment year 2007-08 are rejected. 2.4.2 Since no difference in the fact could be pointed out by the ld. DR. in the present year also, we decide this issue in favour of the assessee by respectfully following the Tribunal order in earlier two years as per the relevant para reproduced above. Accordingly, this ground of the revenue is also rejected. 12. Considering the consistent decision of Tribunal on similar set of fact, we are in agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the bank is absolutely on estimated bases without any actual physical verification and the same was not supported by books of account and the determining the value of a stock also the average cost of the preceding month is considered. The learned CIT(A) granted relief to the assessee by appreciating the fact in proper perspective. 15. We have heard the considered the submission of both the parties and have gone through the orders of lower authorities. We have noted that on almost similar fact on similar ground of appeal in appeal for assessment year 2005- 06, in order dated 04.09.2009, the coordinate bench of Tribunal passed the following order; 31.5 we have considered the rival submissions and produce the material on record. It is not known what basis the assessing officer and the learned CIT(A) has given the funding that there is a difference in terms of quantity in a stock a statement submitted to the bank and what is recorded in the books. We however, restore the matter to the file of assessing officer to verify the statementsJ-1,J-4 J-7 and any other statement which is in the possession of AO pointing out the difference in a stock in terms of quantity. If there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to clarify whether expenses claimed in these two heads were divided into same ratio between the power plant unit and the other units or not. The assessing officer by taking view that power generation does not require much manpower and that assessee has not maintained proper record regarding the employee deputed on power production unit. The assessing officer made disallowance of 2.87% of employee and other cost to the cost of power generation unit. The learned CIT(A) directed to exclude the expenses of paper unit despite the fact that assessee admitted that there was no proper record of actual expenses. The learned DR prayed for reversing the order of learned CIT (A) and to restore the order of assessing officer. 18. On the other hand the ld. AR for the assessee submits that the assessing officer has considered the expenses of paper manufacturing unit located at Orisha, which has no connection with the generation of power at TG- 3 unit in Surat. It was further submitted that if the expenses of Orisha unit is excluded for allocation purpose which is ₹ 82.29 Crore, the common cost for the purpose of allocation would be ₹ 54.98 Crore as against ₹ 137.27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer was of the view that passing of resolution by board is not sufficient to prove the genuineness of the commission paid to the Directors other than the Managing or whole time Directors of the assessee. Since the assessee failed to submit any documentary evidence to prove that commission was paid to the Directors other than Managing Director or whole time Directors was essential for the purpose of business, the assessing officer reasonably disallowed 10% of the total commission. The learned DR for the revenue prayed for restoring the order of assessing officer by reversing the order of CIT(A). 21. On the other hand the learned of the assessee supported the order of learned CIT (A). The learned AR of the assessee further submitted that assessing officer made ad-hock disallowance without any basis. The similar commission expenses were claimed in earlier years and no such disallowance was made by the assessing officer. It was further submitted that the ratio of turnover and the commission expenses for the last three years indicate there were is no abnormal rise in the commission expenses as compared to its turnover in the year under consideration. The ad-hock disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to high competition in the market, in order to achieve the sale target the assessee was required to pay higher incentive to its dealer. The similar commission was paid and claimed in earlier years, wherein no such disallowance was made by assessing officer. The ld. AR prayed for dismissal of the ground. 25. We have considered the submission of both the parties and gone through the orders of authorities below. We have noted that the assessing officer made ad-hock disallowance. The contention of assessee that similar commission expenses were allowed in earlier years was not examined or discarded by the assessing officer. The assessee provided the complete details regarding sale and the commission paid to the dealers as recorded by learned CIT(A) in para 12.2 of his order. The genuineness of the expenses was not doubted by the assessing officer. Considering the fact that genuine business expenses are allowable, and the learned CIT(A) after considering the fact that in earlier years similar commission expenses were allowed, allowed relief to the assessee. Before us no contrary fact or evidence is brought to take other view. Therefore, we do not find any reason to interfere with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d-hock disallowance which is not sustainable. We have noted that like other ad-hock disallowances which were ultimately deleted by learned CIT(A), no contrary fact or evidence is brought to our notice to take other view. Therefore we affirm the order of learned CIT (A). In the result this ground of appeal is also failed. 29. Ground No. 9 relates to deleting the disallowance of 5% of employee welfare expenses and other benefits. The learned DR for the revenue like other grounds of appeal relied on the order of assessing officer. It was argued that during the assessment the assessing officer noted that the assessee claimed ₹ 1246.32 lakhs under the head expenses claimed as employee welfare and other benefits . The assessee was asked to provide bifurcations of the expenses and justification of the same. The assessing filed its reply. The reply furnished by assessee was not find favorable to the assessing officer. The assessing officer held that assessee company failed to prove the expenses incurred wholly and exclusively for the purpose of business. The assessing officer reasonably disallowed 5% of the expenses amounting to ₹ 62,31,600/- out of total expenses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tribunal in assessee s own case for AY 2002-03 to 2004-05 dated 04th September 2009 and AY 2006-07 dated 18.10.2016. 34. We have considered the rival submissions of the parties and perused the order of the lower authorities. The assessing officer made adjustment by taking view that there is no provision for any adjustment in respect of MAT credit to the profit and loss accounts and the same is required to be reduced from the net profit for computing book profit and accordingly added to the book profit. The ld CIT(A) granted relief to the assessee by following the order of Tribunal for AY for AY 2002-03 to 2004-05 dated 04th September 2009. The Tribunal in appeal for AY 2002-03 to 2004-05 in its order dated 04th September 2009 clearly held that no disallowance can be made beyond the adjustment provided under section 115JB. Further we have noted that similar adjustment while computing book profit was made in AY 2006-07 and 2008-09, however, on appeal before Tribunal the same was deleted. Before us no contrary facts or law is brought to our notice except making submissions that decision of the Tribunal has been challenged by the department before Gujarat High Court and the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Process stock declared to bank 3 3 4 Deduction u/s 80IA- allocation of expenses 4 -- 5 Directors Commission Ad-hock disallowance 6 4 6 Sales Commission Ad-hock disallowance 7 5 7 Misc Expenses Ad-hock disallowance 8 6 8 Employee Expenses and welfare Ad-hock disallowances 9 7 9 MAT credit to P L Account 10 -- 10 Amortization of expenses 11 -- 11 Section 14A disallowance added to Book profit u/s 115JB 11 8 41. Considering the facts that we have already dismissed identical grounds of appeal in AY 2010-11and affirmed the order of ld CIT(A), therefore, following the principal of consistency all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned AR further submits that the nature of payment is agency commission paid to a non-resident, the assessee was liable to deduct TDS on the said payments. 48. On the other hand the learned AR of the assessee supported the order of CIT(A). The ld AR submits that learned CIT(A) allowed relief to the assessee by following the decision of honorable Supreme Court in case of CIT versus Toshoku Limited (125 ITR 525 SC). The learned AR for the assessee submits that the recipient has no business connection in India and not liable to tax in India, therefore the assessee was not liable to make TDS on such commission payment. 49. We have considered the rival contention of both the parties and perused the order of lower authorities. During the assessment of the assessing officer noted that assessee made foreign remittance of ₹ 7,100,00/- to non-resident on account of export commission, on which no tax was deducted at source as required under section 195 of the Act. The assessee was issued show cause notice as to why a disallowance under section 40 a (i) should not be made. The assessing officer after considering the submission of assessee made disallowance of ₹ 71 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,63,976/- out of total club expenses of ₹ 16.85 lakhs. Therefore, disallowed 75% of the total expenses. The learned CIT(A) granted partial relief to the assessee. The assessee is entitled for full allowance on account of expenses incurred on club membership fees. In support of his submission the learned of the assessee relied upon the decision of Gujarat High Court in Gujarat State Export Vs CIT (209 ITR 649 Guj ) and Tribunal in ACIT Vs Eastern Silk Milk Industries Ltd (2019) 109 taxmann.com 204 (Kolkata Trib). 52. We have considered the rival submission about the parties and perused the order of lower authorities carefully. The assessee claimed club expenses of ₹ 16.85 lakhs. The assessing officer allowed 25% of the expenses on a top basis. The learned CIT sustained the disallowance of ₹ 5 lakhs by taking view that possibility of using of these facilities being used exclusively for personal purpose of Directors and their friends could not be ruled out. 53. The Hon'ble Bombay High Court in Otis Elevator Co. Ltd. (1992) 60 Taxman 216 while considering the question of law about the allowance of club fees incurred/paid to employees, allowed the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on account of non-deduction of tax at source on the payments made to non-resident. The assessing officer after considering the submissions of the assessee disallowed the entire expenses under section 40a(i). The ld CIT(A) affirmed the action of assessing officer by taking view that no details about the payment was furnished and thus veracity of claim cannot be verified. The ld CIT(A) also concluded that rendering any technical or managerial services attracts the provisions of section 195 of the Act. The other submissions of the assessee that the recipient has no business connection in India was also not accepted by ld CIT(A) by taking view that whether there is business connection or not, any income by way of fee for technical services (FTS) is covered by section 9(1)(vii) of the Act. 58. Before us, the ld. AR for the assessee vehemently relied on the decisions of Tribunal in ITO Vs Veeda Clinical Research (P) Ltd (supra) wherein it was held that the law is settled so far as the connotations of 'make available' clause in the definition of fees for technical services in the contemporary tax treaties are concerned. It is held to be a condition precedent for invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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