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TMI Blog2018 (3) TMI 1970X X X X Extracts X X X X X X X X Extracts X X X X ..... may be allowed u/s. 37(1) of the Act. 2. The Learned CIT(A) erred in not following the earlier year order for AY 2010- 2011 passed by the Hon'ble ITAT in which the issue of disallowance of Guarantee Commission was deleted. Hence, not following order of the higher authority is not correct as per law. II. Adhoc Disallowance of Travelling Expenditure of Rs. 4,06.200/- u/s. 37(1) 3. The Learned CIT(A) erred in confirming the adhoc disallowance of Travelling Expenses of Rs.4,06,200/-, without appreciating that the said Stay Charges and Travelling expenditure is lower than the stay charges at other five star hotels. Hence the same may be deleted. III. Disallowance of Prior Period Expenditure of Rs.6,26,228/-. 4. The learned CIT(A) erred in confirming the disallowance of Prior period expenditure of Rs.6,26,228/- without appreciating that the said expenditure accrued and crystalized in current years. Hence, the same may be allowed as business expenditure in the same year and not as prior period expenditure. IV. Disallowance of 14A of Rs.2,33,533/- 5. The Learned CIT(A) erred in confirming the 14A disallowance, without appreciating that the investment in SBI Mutual Fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed the guarantee commission on his observation that no extraordinary work has been performed to pay such huge guarantee commission. The guarantee given by the Directors in normal routine of business. Performance of Directors has not affected the sale of the assessee and that the money siphoned to understate the income. The Ld. AR of the assessee further submits that similar guarantee commission was allowed in assessee's own case for Assessment Year 2010- 11. The Copy of the decision was filed before ld CIT(A), the Ld. CIT(A) despite having the knowledge of order of Tribunal, upheld the addition. The order of Tribunal is a binding precedent on the lower authority. The Revenue has not challenged the said order of Tribunal before the Hon'ble High Court. The Ld. AR of the assessee further submits that by the personal guarantee of the founder Director, the assessee has been able to obtain the Bank Finance of Rs. 75.75 crore. Extending the personal guarantee was pre-condition of lender/Bank for credit facility. Therefore, guarantee commission has been paid fully and exclusively for the purpose of business and is allowable deduction. 4. On the other hand, the Ld. DR for the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion the Tribunal on almost similar ground of appeal as passed the following order; ( for comparison of facts we are extracting the major part of the order) "4. Brief facts of the case are that the assessee company is engaged in the business of manufacturing, exporting and trading of industrial valves, erection, commissioning A and civil works. During assessment proceedings, the Assessing Officer observed that assessee company has paid commission to two directors Mrs. Soumyalatha S Shetty and Mr. Sameer S Shetty. The assessee contended before the Assessing Officer that these two directors have given personal guarantee on behalf of the company for the bank facility of Rs.75.75 crores and 1% commission on the bank loan was paid to them as commission on which tax deducted at source which is matter of records before us. The Assessing Officer did not agree with the submission of the assessee on the ground that the directors have only given the guarantee to get the bank loan which is basic necessity for sanction of loan. The performances of directors have not affected the sale / business of the assessee. Therefore, the commission paid to the directors is nothing but siphoning of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his appeal are similar to the facts in the case of Indo Saudi Services (Travels) P. Ltd., respectfully following the same, we set aside the order of the ld. CIT(A) and delete the disallowance of Rs. 1,52,68,356/-. 7. 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. 8. Ground No. II relates to disallowance of Travelling Expenses. The Ld. AR of the assessee submits that during the relevant Financial Year, the assessee incurred expenditure of Rs. 8,12,400/- on account of Travelling Expenditure. The Assessing Officer disallowed 50% of the expenses on adhoc basis. No reason for adhoc disallowance is recorded by Assessing Officer. The registered officer of the assessee is at Mumbai; however, the manufacturing unit of Industrial valves are located at Bangalore and Aurangabad. The Directors of the assessee-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 198 of Companies Act, therefore, not be any non-business purpose so far as the assessee companies are concerned. It was further held that it was wrong in disallowing 1/6 of the total Car expenditure and depreciation claimed by assessee-company on account of personal use of the Car which has been used by the Directors. In our view, it is settled law that the Revenue authority cannot step into the shoes of businessmen to dictate them how to make the expenditure for running their business. The lower authorities have not brought anything on record that visit of the Directors namely Suchitra Hegde and Ritvik Hegde was not for the purpose of business. In absence of any finding or any material on record that the visit and stay of Directors was for stay of personal use, this ad-hock disallowance in not justifiable. Thus, we do not find any justification in adhoc disallowance on account of Travelling Expenses. In the result, Ground No.II of the appeal is allowed. 12. Ground No.III relates to disallowance of Prior Period Expenditure of Rs.6,26,228/-. The Ld. AR of the assessee submits that during the year, the assessee-company declared bonus @ 20% instead of 8.33% to the employee. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord that bonus was declared in October/November 2010 and the difference of bonus was paid as ex-gratia to the employee. The bonus was declared by management of the assessee after completion of the balance-sheet on the profit prevailing for Financial Year 2009-10. Thus, the assessee was entitled to debit the difference from the current Financial Year i.e. 2010-11. 14. The Hon'ble Delhi High Court in case of CIT Vs. Exxon Mobile Lubricants (P) Ltd. (supra) while considering the ground related with Prior Period Expenditure held that when the liability of the assessee under agreement had arisen and accrued in August 2002 when agreement was executed, therefore, the liability of the assessee to pay for the period January 2002 to March 2002 arose and crystallized in August 2002. If the assessee had shown the Prior Period Expenses and the Assessing Officer had not excluded while working out the current year taxable income than there was no reason on the part of Assessing Officer to disallow only one part of the Prior Period Adjustment i.e. Prior Period Expenditure. It was held that the addition by Assessing Officer was not sustainable. We have noted that the facts of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer failed to consider the same. The assessee raised specific ground of appeal before the Ld. CIT(A) vide Ground No.7. The Ld. CIT(A) failed to decide the issue. The Ld. AR of the assessee finally submits that this ground of appeal may be restored to the file of Assessing Officer for considering the disallowance afresh. 18. On the other hand the Ld. DR for the Revenue supported the order of authorities below. The Ld. DR for the revenue further submits that the Assessing Officer has recorded its satisfaction about the working of disallowance furnished by assessee, before invoking the provisions of Rule 8D(2)(ii). The assessee has not taken into consideration the investment of Rs. 1,73,65,327/- in SBI Mutual Fund. The Ld. DR for the Revenue submits that he has no objection if this ground of appeal is restored to the file of Assessing Officer for considering it afresh. 19. We have considered the rival submissions of the parties and perused the material available on record. Considering the contention of Ld. AR of the assessee that Assessing Officer has not considered the claim of assessee regarding the dividend income of Rs. 13,15,324/- on SBI Mutual Fund. We have also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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