TMI Blog2021 (4) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld. AR for the assessee. The Hon'ble Gujarat High Court in CIT Vs Sarjan Realities Ltd [ 2014 (8) TMI 206 - GUJARAT HIGH COURT] held that unless payment of interest was in excess of market rate, merely because the assessee has paid interest at the different rate to different companies, payments of interest could not be held to be excessive or unreasonable. In view of the above factual and legal discussions, ground No. 2 of the appeal is allowed. TDS u/s 194J OR 194C - Disallowance of exhibition expenses u/s 40(a)(ia) - no tax was deducted at sources while making payment made to Focus Trade Fairs Pvt. Ltd -assessee submits that it is not a case of non-deduction of tax at source, rather it is a case of short deduction of tax at source - HELD THAT:- The Hon'ble Calcutta High Court in CIT Vs SK Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] and CIT Vs Prayas Engineering Ltd. [ 2014 (11) TMI 1086 - GUJARAT HIGH COURT] held that there is nothing in this section to treat the assessee as a defaulter where there is a shortfall of the deduction. It was also held that section 40(a)(ia) of the Act refer only to the duty to deduct tax and pay to Government accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Dr. ARJUN LAL SAINI, Hon'ble ACCOUNTANT MEMBER Assessee by : Shri Parimalsinh Parmar Advocate Revenue by : Smt. Anupama Singla Sr.DR ORDER PER PAWAN SINGH, JUDICIAL MEMBER 1. This appeal filed by the Assessee is directed against the order of Learned Commissioner of Income Tax (Appeals)-Valsad, Valsad dated 04.05.2016 for the A.Y. 2012-13. The Assessee raised the following grounds of appeal: 1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in upholding action of the Assessing Officer (herein after referred as AO ) of assessing income of appellant firm at ₹ 33,67,563/-, as against returned income of ₹ 25,73,040/-. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in upholding action of the AO making disallowance of ₹ 3,50,030/- out of interest expenses by invoking provisions of section 40A(2)(b) without appreciating the submission made by the appellant. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in upholding action of the AO in making disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer disallowed the entire payment of ₹ 1,44,493/-. The Assessing Officer further noted that assessee claimed foreign tour expenses of ₹ 5,53,517/-. On showcase notice to explain the purpose and nature of expenses. The assessee explained that partner of the firm made foreign tour for promotion of export sales in foreign countries. The Assessing Officer noted that no details of the expenses and nature of expenses and purpose of visit, is verified in absence of evidence, thus, the Assessing Officer made ad hoc disallowance of ₹ 1.00 lakh. The Assessing Officer further noted that assessee has shown job work expenses of ₹ 33,83,143/-. On some of the bills, nature of labour charges is also not mentioned. The assessee had purchase readymade diamonds jewellery on which no labour charges was required to pay. The assessing officer noted that out of total purchase of ₹ 8.40 crore, the assessee made purchase of diamond studded gold jewellery to the tune of ₹ 1.93 crores from Kiah Life Style Pvt. Ltd. The assessee was asked to produce skilled worker karigar register to quantify the job work. No such register was produced. The Assessing Officer made ad hoc dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest @ 18% to related parties is reasonable. Reliance is further placed on Anilkumar P. Soni in ITA No. 2511/Ahd/2013 wherein the interest @ 24% per annum was held to be reasonable. It was and also submitted that in any case, the assessing officer is not supposed to decide the reasonableness or any expenditure. It is submitted that the prerogative of a businessman to determine the amount of expenditure. The Assessing Officer cannot step into the shoes of a businessman to determine quantum of such expenditure and under such circumstances, impugned disallowance is unwarranted. 5. On the other hand, ld. Departmental Representative (DR) relied on the orders of Lower Authorities. The ld. DR for the revenue submits that the assessing officer made disallowance on reasonable basis. 6. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. The assessing officer disallowed the interest expenses paid the related parties in excess of interest @15% per annum and worked out the disallowance of ₹ 3.50 lakhs. Before us, the Ld. AR for the assessee vehemently argued that interest @18% per annum to related parties i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 201, but that cannot be a ground for disallowance under section 40(a)(ia) of the Act. In support of his submission, the Authorised Representative relied upon the following decisions; CIT Vs S.K. Tekriwal - 361 ITR 432 (Cal); Kandwala Integrated Financial Services Pvt. Ltd., Vs JCIT (ITA No. 634 532/Ahd/2011) and CIT vs. Prayas Engineering Ltd. (Tax Appeal No. 1237 of 2014) (Gujarat High Court). 8. In alternative submissions the learned AR for assessee submits that insertion of second proviso to Section 40(a)(ia) is declarative and curative in nature and has retrospective effect from 01.04.2005 and hence, if recipients have already paid tax on such sum no disallowance under section 40(a)(ia) is called for in prayer's hands. Reliance is placed in case laws in Janak Bhupatrai Parekh - HUF vs. ITO in ITA No. 2891/Ahd/2011 wherein Hon'ble ITAT has followed CIT vs. Ansal Land Mark Township Pvt. Ltd., 377 ITR 635 (Del) wherein Hon'ble Delhi High Court has affirmed the view taken in Rajiv Kumar Agarwal vs. ACIT 45 taxmann.com 555 (Agra Tribunal). 9. On the other hand, ld. Departmental Representative relied on the orders of Lower Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign visits helped in increasing export of the assessee's business. The Ld. AR for the assessee furnished a chart showing that export turnover of the assessee was increased. With regards CIT(A)'s observation that a part of foreign tour expenses has been incurred on foreign trip of Urvashiben Soni, who is employee of assessee and handles counter sales. The Ld. AR for the assessee explained that she had built very good repo with many Non Resident Indian lady customers who used to visit assessee's showroom for purchase of jewellery. Owing to her skills, she was helping in augmenting business and hence, expenditure in question is justified. With regards to Kishorebhai Soni, the ld. AR for the assessee explained that he is partner of assessee firm. His foreign trips were also for business purpose and hence, the impugned disallowance is absolutely unjustified. 12. The ld. AR for the assessee further submits that the books of accounts are duly audited under section 44AB. And the expenses in question are supported by documentary evidences. The fact that such expenses have been incurred for the business purpose has not been doubted by assessing officer. However, assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificant labor work is required to prepare jewellery, ornaments, articles of precious metals like gold, diamonds, etc. Such job work require intense skills which requires physical abilities such as close-range vision for detail work, manual dexterity, arm/hand steadiness, control and precision for machine work, attention to details and discriminatory ability with color and category details. Thus, the job work is highly skill oriented and hence, assessee needs to incur such job work expenses to get such work done. 16. The AR for assessee submitted that documentary evidences relating to the expenses in question i.e., Tax Audit Report, Annual Accounts, Ledger of Job work, Bills issued by the concerned parties, Ledgers of the concerned parties and TDS certificates (Form 16A) were furnished, copies of which are also filed. The assessing officer made the disallowance broadly on the three counts; (i) in certain details were missing in some of the bills, (ii) Karigar register was not produced and (iii) hefty expenses were incurred by assessee. The Ld. AR for the assessee explained that job-work bills were generated by third parties and assessee does not have control over such parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses. The Ld. DR for the revenue prayed for dismissal of the ground raised by the assessee. 18. We have considered the rival submission of the parties and have gone through the orders of the authorities below. The assessing officer made ad hock disallowance of job work expenses of ₹ 2.00 lakhs, out of total expenses of ₹ 34 lakhs (approx.) for the want of verification of bills and vouchers and non-maintenance of karigar register containing the details of job work and charges thereof. The Ld. CIT(A) also affirmed the disallowance with the similar observation. The Ld. CIT(A) also held that in absence of karigar register, the attendance, details and genuineness of expenses cannot be verified. Before Ld. CIT(A) the assessee admitted that no karigar registrar was maintained. Before us the Ld. AR for the assessee vehemently argued that job-work done from outsiders and not from in-house labourers. Hence, there is no requirement to maintain any such karigar register. No such plea was raised before the lower authorities. Now the assessee has come with new pleas, which was not raised before lower authorities. The new explanation given by the assessee does not inspire confid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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