TMI Blog2018 (3) TMI 1970X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal are similar to the facts in the case of Indo Saudi Services (Travels) P. Ltd.[ 2008 (8) TMI 208 - BOMBAY HIGH COURT] respectfully following the same, we set aside the order of the ld. CIT(A) and delete the disallowance. Considering the fact that similar set of fact the addition was deleted by Guarantee Commission of Tribunal. We do not find any justification in sustaining the disallowance when the order of Tribunal was brought in the notice of Ld. CIT(A). Even there are no variations of fact related with the issue under consideration in this year. Thus, respectfully following the principle of consistency, the Ground No. I of the appeal is allowed. Disallowance of Travelling Expenses - AO disallowed 50% of the expenditure on his observation that no evidence has been furnished by the assessee - CIT(A) after considering the comparative rate furnished by assessee for Guest house charges and prevalent rate of Five Star hotel concluded that the rate of Guest house are not less than the Five Star hotels - HELD THAT:- Hon'ble Gujarat High Court in Sayaji Iron Engineering Co. [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] while considering the grounds related with Business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration. In our view, the assessee was entitled for deduction of the said Prior Period Expenses. In the result, this ground of appeal is allowed. - ITA No.754/Mum/2016 - - - Dated:- 23-3-2018 - SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For the Assessee : Dr.K. Shivram with Ms Nilam Jadhav -Advocates For the Revenue : M s. Pooja Swaroop ( Sr. DR) Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee under section 253 of Income Tax Act ( the Act ) is directed against the order of Ld. Commissioner of Income-Tax (Appeals)-10, Mumbai, [for short the ld. CIT(A)] dated 20.11.2015 for Assessment Year 2011-2012 which in turn arises from the assessment order passed by Assessing Officer under section 143(3) of the Act dated 20.03.2014. The assessee has raised the following grounds of appeal: I. Disallowance of Guarantee Commission ofRs.1.51.50.000/- u/s. 37(1) 1. The Learned CIT(A) erred in confirming the disallowance of Guarantee Commission of Rs. 1.51.50.000/- u/s 137 paid to Promoters Share Holder Directors at the rate of 1% of the each guarantee for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , disallowed Rs. 4,06,200/- on account of Travelling Expenses, disallowed Rs. 6,26,228/- on account of prior period expenses and Rs. 2,33,533/- under section 14A of the Act. On appeal before the ld. CIT(A), all the disallowances made by assessing officer was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us. 3. We have heard the Ld. Authorized Representative (AR) of the assessee and Ld. Departmental Representative (DR) for the Revenue and perused the order of authorities below. Ground No. I relates Disallowance of Commission payment. The Ld. AR of the assessee submits that assessee-company paid the guarantee commission to its two Director as they stood personal guarantee to the Bank of India for getting loan/credit facilities for the purpose of business. The assessee paid Rs. 75,75,000/- each to Ms. Soumyalatha S. Shetty and Shri Sameer Shetty. The assessee furnished all the details related with sanction of credit facility issued by State Bank of India on 13.03.2010, certificate of personal guarantee and the guarantee commission paid to the Directors. The assessee vide its letter dated 20.03.2014 furnished the note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity enjoyed by the assessee in order to compensate the risk factor, the company paid commission @ 1% each to both the Directors. The assessee also furnished the copy of sanction of over limit dated 13.03.2010 issued by lender Bank. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer concluded that the Directors have only given guarantee to get the loan sanctioned from the Bank, which is a basic necessity to sanction a loan. The Directors have not performed any extraordinary work, the work done by the Directors are normal routine business. The assessee has sufficient asset for mortgage for availing eligible loan. The assessee has no where justified the commission in Profit Loss A/c. The Ld. CIT(A) confirmed the action of Assessing Officer on his observation that the Directors were inactive Directors. 6. We have noted that the similar disallowance was made in Assessment Year 2010-11. We have further noted that the assessee has furnished the copy of order of Tribunal. The Ld. CIT(A) despite the fact that the order of Tribunal dated 16.09.2015 was brought in the notice of Ld. CIT(A). In the written submission/statement of fact furnished before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, while dismissing the appeal held that the assessee apart from paying handling charges at the rate of 9.5 per cent to its sister concerns had paid handling charges at the same rate to other agents also. For the assessment years 1986 -87 and 1987-88) the assessee had paid handling charges at the rate of 10 per cent to the sister concern and such charges were considered to be reasonable by the Revenue. For the assessment year 1989-90, the assessee had reduced the payment of handling charges to 9.5 per cent and had been allowed after due scrutiny. For the assessment year 1990-91, claim of the assessee at the rate of 9.5 per cent had been allowed though it not been dealt with by the Assessing Officer specifically in the order. For the assessment year 1993-94, the rate of 9.5 per cent had been held reasonable and had been allowed. When the matter reached before the Hon 'ble Bombay High Court, the Court observed that the Tribunal was correct in coming to the conclusion that the Commissioner of Income-Tax (Appeals) was wrong in disallowing half per cent commission paid to the sister concern of the assessee during assessment years 1991-92 and 1992-93 and accordingly dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee raised objection on the expenditure shown on Travelling Expenses. During the assessment, the assessee has not filed any evidence to substantiate justification of the expenditure. The guest house for which expenses was claimed is owned by one of the shareholders. 10. We have considered the rival submission of the parties and perused the record. The Assessing Officer disallowed 50% of the expenditure on his observation that no evidence has been furnished by the assessee. The Ld. CIT(A) after considering the comparative rate furnished by assessee for Guest house charges and prevalent rate of Five Star hotel concluded that the rate of Guest house are not less than the Five Star hotels. 11. The Hon'ble Gujarat High Court in Sayaji Iron Engineering Co. v CIT (supra) while considering the grounds related with Business Expenditure for use of vehicle of assessee-company by its Director held that when vehicle were used by Directors in a limited company Even if they proportionately used by the Director, because the limited company by its nature cannot have personal use , the limited company is an any intimate person and there cannot be anything person about such entity. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the mercantile system of accounting. The expenditure claimed by the assessee was not related to the year under consideration. 13. We have considered the rival submission of the parties and perused the order of authorities below. During the assessment, the Assessing Officer noted that assessee claimed an expenditure of Rs. 6,26,228/- as Prior Period Expenses. The assessee was asked to substantiate the payment of Prior Period expenses. The assessee filed its reply dated 27.02.2014. In the reply the assessee contended that as per Bonus Act, bonus was paid @ 8.33% for Financial Year 2009-10. However, the bonus was declared @ 20% after completion of balance-sheet and the profit declared for Financial Year 2009-10. The difference is debited to the current year account and hence, the liability is debited to current financial year 2010-11. The bonus was declared in October/November 2010; hence, difference of bonus is paid as ex-gratia to the employee of the company. The contention of the assessee was not accepted by Assessing Officer as the assessee is following the mercantile system of accounting. The Ld. CIT(A) concurred with the finding of Assessing Officer holding that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27/-. The assessee voluntary disallowed Rs. 4,318/- under section 14A r.w.Rule 8D. The assessee also furnished the working under section 14A before the Assessing Officer. The Assessing Officer disallowed Rs. 2,33,533/- by invoking the provision of Rule 8D r.w.s. 14A. The Ld. AR of the assessee further submits that the assessee earned dividend income from the investment made in mutual funds. The investments were made from the surplus fund available with the assessee-company. The assessee s capital, profit reserves, surplus and current account deposits were higher than the investment made in the tax free securities. The assessee made an investment from its own fund. The assessee made investment of Rs. 1,75,54,727/- against reserve and surplus fund of Rs. 17,83,07,003/-. The Ld. AR of the assessee further submits that interest disallowance under Rule 8D(2)(ii) cannot be made in view of the decision of jurisdictional High Court in case of CIT Vs. HDFC Bank (366 ITR 505) (Bom). The Ld. AR of the assessee further submits that the assessee during the assessment made a claim before the Assessing Officer that dividend of Rs. 13,15,325/- on SBI Mutual Fund not claimed as exempt income and re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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