TMI Blog2020 (12) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... e has failed to deduct the TDS and applied the provisions of Section 40(a)(ia) - contentions of the Ld. AR that the Audit fee was not credited to the Auditors Account and was lying in the provision for audit fees payable account - alternative contention submitted by the Ld. AR, that the recipient has offered the income for income tax purpose and paid taxes as per the second proviso to Section 40(a)(ia) of the Act, and therefore the payee has discharged his obligation - HELD THAT:- We considering the submissions and the facts, are of the opinion that the matter requires examination and verification of fact that the payee has discharged its obligation to pay the taxes on Audit fees. Hence to meet ends of justice, we provide one more opportunity to the assesses to substantiate the claim before the Assessing Officer with proof of offering of income by the payee for income tax purpose. Accordingly, we set aside the order of the CIT (Appeals) on this disputed issue and restore the entire disputed issue for limited purpose to the file of AO to examine and verify the claim and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the details and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed. The Assessing Officer on perusal of the financial statements found that the assessee has paid an amount of ₹ 5 Crores to Deputy Commissioner, Bellary Agenda Task Force (BATF), for the purpose of improving the infrastructure like roads, health centre, drinking water and schools in rural areas. The assessee has filed explanations vide letter dt. 26.12.2012, that the assessee has contributed the amount after a long deliberations with the Dy. Commissioner and the local mine owners. The Dy. Commissioner has fixed the amount to be contributed based on various criteria and to maintain cordial relationship with the local administration and give benefit to the deprived class of the society. The amount paid is out of business expediency and has to be allowed under Section 37(1) of the Act. But the Assessing Officer observed that, merely incurring of expenditure on infrastructure and other developments cannot be considered as business expenditure incurred for the purpose of business and further, there is no compulsion for commercial expediency and made disallowance of ₹ 5 crs. The assessee has made a provision for audit fees of ₹ 15 lakhs and whereas, the AO has ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the Hon'ble jurisdictional High Court in the case of Kanhaiyalal Dudheria Vs. JCIT Another (2019) 418 ITR 410 (Kar), and CIT Vs. Infosys Technologies Ltd. (2014) 360 ITR 714 (Kar).Further, the earlier decision of CIT Vs. Infosys Technologies Ltd. 349 ITR 588 (supra) was considered in the later Hon'ble High court decisions and prayed that the contribution to BATF has to be allowed as deduction under Section 37(1) of the Act. 5. On the second disputed issue of non-deduction of TDS and provision for audit fees, the Ld. AR submitted that the recipient has offered the income, for tax purpose and the second proviso to Section 40(a)(ia) of the Act is applicable and supported his arguments with the Paper Book and prayed for allowing the appeal. Contra, the ld. DR supported the orders of CIT (Appeals). 6. We heard the rival submissions and perused the material on record. The Ld. AR made submissions on the first disputed issue of contribution to BATF of ₹ 5 Crores, which was made as per the Directions of the local Dy. Commissioner for the entire Bellary District Administration to contribute for the purpose of improving infrastructure facilities like roads, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the assessee and it is well settled that it is the duty of the police to regulate the traffic and the amount, spent towards regulation of traffic can at the most be considered as donation as rightly held by the AO and cannot qualify as deduction under Section 37 of the Act. We are also supported by the decision of the Division Bench of this Court in CIT vs. M.N. Swaminathan (Deed) by LRs (2010) 47 DTR (KAR) 359 wherein it is held that contribution made to traffic police would not qualify for deduction under Section 37 of the Act. Therefore, the said question of law is answered against the assessee and in favour of the Revenue. 23. In the above said judgment, reliance is placed on the Division Bench of this Court in the case of COMMISSIONER OF INCOME TAX Vs. M.N. SWAMINATHAN (DECD) BY LRs., reported in (2010) 47 DTR (KAR) 359, it was held as under: 6. If any payment is made towards the security, towards the business of the assessee, such amount is an allowable deduction, as the amount spent for the maintenance of peace and law and order in the business premises of the assessee as he was running two cinema theatres. But the amount spew in the instant case claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tomorrow. Any expenditure laid out or expended for their benefit, if it satisfied the other requirements, must be allowed as deduction under Section 37(1) of the Act. Expenditure primarily denotes the idea of spending or paying out or away. It is something which is gone irretrievably, but should not be in respect of an unascertained liability of the future Expenditure in this sense is equal to disbursement which, to use a homely phrase means something which comes out of the traders pocket. 25. Therefore in the instant case, admittedly the assessee is having their establishment at Bannerghata Circle. Nearly about 500 employees are working in the said Unit. There was severe traffic congestion. Employees had to wait for longer time to reach the office. It seriously affected the business of the assessee, resulting in delay in completing the project. In order to facilitate its employees to reach their establishment safely and early, the assessee has installed traffic signals at Bannerghata Circle. Though it is the responsibility of the State and in particular, the Police Department either to install the traffic signal or control the traffic, the fact remains that in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We respectfully follow the judgment of Hon'ble Karnataka High Court rendered in the case of M/s. Kanhaiyalal Dudheria Vs. JCIT (supra) and decide the issue in favour of the assessee. We, considering the facts and evidences filed find that, the contribution made by the assessee to BATF as per the directions of Dy. Commissioner of Bellary District Administration for the purpose of infrastructure development and to maintain cordial relationship with the Government and provide social facilities to the deprived class and which has a nexus with the assessee business. We find that the Assessing Officer has not disputed the genuineness of the expenditure and of the view, that it is not connected to the business and not allowable under Section 37(1) of the Act. We considered the judicial decisions and the provisions of law, are of the opinion that the contribution made by the assessee is wholly and exclusively for the purpose of business and is allowable under Section 37(1) of the Act. Accordingly, we set aside the order of CIT (Appeals) on this disputed issue and direct the Assessing Officer to delete the addition and allow the ground of appeal of the assessee. 7. On the second ..... X X X X Extracts X X X X X X X X Extracts X X X X
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