TMI Blog2022 (3) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... nt disallowed - whether same has been undertaken wholly and exclusively for the business of Appellant Company? - HELD THAT:- While the names of the cities, the names of the Directors and the amount spent on each of them were specified there were no further details furnished to indicate that the expense was for purely business purposes. The AO was not, in the considered view of this Court, acting unreasonably in concluding that in the absence of better particulars to substantiate the claim that it was only for business purposes, it could not be wholly allowed. In the circumstances, disallowing 20% thereof cannot be held to be improper or legally impermissible. Since the claim of the Assessee was that the expenses of wholly and exclusively for the business of the Assessee, and for no other purpose, it was incumbent on the Assessee to discharge the burden of substantiating that fact. In the considered view of the Court, the Assessee cannot be said to have discharged said burden satisfactorily.- Decided against assessee. - I.T.A. No.20 of 2014 - - - Dated:- 4-3-2022 - DR. S. MURALIDHAR CHIEF JUSTICE AND R.K. PATTANAIK, JUDGE Appellant : Mr. Sachit Jolly, Advocate Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The Assessee then filed a Special Leave Petition (Civil) No.16689 of 2010 in the Supreme Court of India against the said judgment. By an interim order dated 7 th February 2011, the Supreme Court directed the Assessee to continue paying the admitted amount of demand and as regards the disputed amount, it was directed to be deposited in an escrow account till further orders. The said SLP is stated to be pending in the Supreme Court. The Assessee states that it has been complying with the aforementioned interim order till date. 6. During the AY 2009-10, the Assessee debited ₹ 11,42,61,000/- in the profit and loss (P L) account on account of electricity duty. Of this, a sum of ₹ 6,29,11,949/- was shown to have been deposited in a designated escrow/ no-lien account with the State Bank of India in terms of the directions issued by the Supreme Court. Thus, the Assessee claimed the entire amount of electricity duty as deduction from its income for the purposes of calculating profit and gains of the business. 7. Additionally, the Assessee claimed export promotion expenses in the form of foreign travelling expenditure of its Directors under the broad head of selli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 290 ITR 282 (Guj) was distinguishable on facts. In that case, the Gujarat High Court had negatived the plea that furnishing of a bank guarantee would amount to actual payment for the purposes of Section 43B of the Act, whereas here the Assessee had actually parted with the amount. Mr. Jolly submits that the AO, CIT (A) and the ITAT had erred in reading into Section 43 B of the Act a requirement was not specified therein viz., that not only the amount would have to be actually paid but the payee had to also receive the amount. 11. On the second issue, Mr. Jolly submits that there was no occasion for the AO, CIT (A) and the ITAT to disbelieve the Assessee s contention that it had spent the aforementioned amount on the foreign travelling and tour expenses of its four Directors which was obviously for business purposes. He submits that there was no requirement that the complete tour programme and every detail of the activity of the touring Directors had to be furnished to the Income Tax authority. He accordingly submits that the authorities were not justified in disallowing 20% of the expenditure claimed on this account. Submissions of counsel for the Department 12. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid and the evidence of such payment is furnished by the assessee along with such return. 15. The scope of Section 43 B of the Act was elaborated in a Department circular dated 8th December 1983, where it was explained as under: 35.1. Under Section 145 of the Income-Tax Act, 1961, profits and gains of business or profession are computed in accordance with the method of accounting regularly employed by the assessee. Broadly stated, under the mercantile system of accounting, income and expenditure are accounted for on the basis of accrual and not on the basis of actual receipts or disbursements. For the purposes of computation of profits and gains of business or profession, Section 43(2) of the Income Tax Act defines the word 'paid' to mean 'actually paid or incurred' according to the method of accounting on the basis of which the profits or gains are computed. 35.2. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, etc., for long periods of time, extending sometimes to several years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been actually paid. While the Assessee as payer may have parted with the amount, it has not totally lost control over it. The payment has been made conditional and it has been ensured that if the Assessee ultimately succeeds in the litigation, the amount will not be actually paid to the State Government. Therefore, a via media has been put in place whereby the Assessee does not fully lose control of the money or has no recourse to it after having paid it. The sum has been paid into a no-lien/escrow account, and the State Government does not have access to it. In the considered view of the Court, such payment of the disputed amount of electricity duty this will not satisfy the requirement of the amount having been actually paid for the purposes of claiming deduction under Section 43 B of the Act. 18. In Mugat Dyeing and Printing Mills v. ACIT (supra), the question that arose was whether furnishing of a bank guarantee by the Assessee for the disputed amount of excise duty would satisfy the requirement under Section 43 B of the Act of the Assessee having actually paid the disputed amount of excise duty. The Gujarat High Court answered the question in the negative. It held, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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