9911796707
TMI Blog2022 (12) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4790086 instead of Rs. 5642822 even Assessee claimed respective income in the respective year in which TDS was claimed. 2. Under the facts and circumstances of the case, the learned CIT(A) misconstrued/Mis-Interpret the facts and law and the denial of tax credit for TDS under rule 37BA which is contrary to facts, unjustified, arbitrary, erroneous and bad, both in the eye of law and on facts and legally not tenable. 3. Under the facts and circumstances of the case, the decision of learned CIT(A) is quite illegal, arbitrary, without any basis and based on guess, conjectures and bad in law. 4. The appellant prays to leave to, add, alter or amend aforesaid grounds of appeal's at or before the time of hearing of appeal." 3. In ITA No. 295/JP/2022, the Revenue has taken following grounds in this appeal; "1. Whether under the facts and the circumstances, the Ld.CIT(A) was justified in deleting the additions made u/s 37(1) of the Act of Rs. 2,63,00,865/-." 4. The fact as culled out from the records is that return of income was filed on 28/10/2018 declaring total income of Rs. 83,47,660/-. The case of the assessee was selected for limited scrutiny assessment under the E-assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifically provides that credit of tax deducted at source and paid to the Central Government shall be given for the AY for which such income is assessable. The income of Rs.90,23,072/- on which tax of Rs.8,52,736/- was deducted has been assessed in the year under consideration and therefore as per the provisions of the Act, credit of the same has to be allowed in the year under consideration. In the return filed for AY 2017-18 in which such tax was deducted at source, assessee has not claimed the credit as is evident from S. No.15B1 (APB 35-40) where such amount has been reflected as carried forward. Therefore, the Ld. CIT(A) has erred in taking a view that the deductor should revised the TDS return for earlier year as well as of this year ignoring that there is no provision for such revision under the Act. 5. Reliance is placed on the decision of Hon'ble ITAT, Indore Bench in case of Shivganga Drillers (P) Ltd. Vs. CPC (2022) 195 ITD 555 where it is held that if assessee company had offered to tax relevant income out of which TDS was deducted in AY 2017-18, credit of TDS was to be allowed during AY 2017-18 in accordance with mandate of section 199 read with Rule 37BA even though p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect in audited accounts has been pointed out. Accordingly, the disallowance made by the AO was deleted. Submission:- 1. At the outset it may be noted that assessee vide its reply dt. 16.04.2021 (DPB 14-22) has furnished the complete details along with the bills/ invoice of the entire sales promotion expenses with nature of services provided, purpose for incurring the expense and name of the customer for whom the expense was incurred. These details are placed at DPB 24-48. From the same it can be noted that assessee has furnished the complete name and address of the vendor and the nature of services obtained from them. All the payments are through banking channel. Section 37(1) of the Act provides that any expenditure not being in the nature of capital expenditure or personal expense of the assessee, laid out or expended wholly and exclusively for the purpose of business shall be allowed in computing the income chargeable under the head business. The AO has not pointed out any expenses claimed by the assessee which is of capital nature or personal expense or for non business purpose or bogus or inflated. Hence, the disallowance made by AO u/s 37(1) of the Act has been rightly d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes and not for other extraneous considerations. Kamal Raheja Vs. ITO (2017) 162 ITD 55 (Luck.) (Trib.) Where AO disallowed on adhoc basis expenses claimed by assessee under head conveyance and entertainment by assuming that there was disproportionate increase, since section 37(1) nowhere empowers AO to disallow expenditure in above said manner and expenses had been incurred wholly and exclusively for purpose of business, disallowance of said sum should be deleted. DCIT Vs. ABC Bearing Ltd. (2017) 157 DTR 242 (Mum.) (Trib.) Assessee having produced complete details of expenditure, adhoc disallowance by AO at 25 per cent as reduced by CIT(A) to 10 per cent on mere surmises without indicating any instance of non-business expenditure could not be sustained. Pricewaterhouse Coopers Pvt. Ltd. Vs. ACIT (2020) 183 ITD 354 (Kol.) (Trib.) Where DRP/AO without rejecting books of account of assessee had made adhoc disallowance on suspicion while there was no material showing expenditure not for purpose of business, adhoc additions were to be deleted. Katira Construction Ltd. Vs. ACIT (2020) 185 ITD 173 (Rajkot) (Trib.) Where books of account of assessee have not been rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year for which such income is assessable." Therefore as per the provisions of the law, TDS credit carried forward by assessee in AY 2017-18 of Rs.8,52,737/- should be given in AY 2018-19 as the assessee has amount on which TDS is deducted in AY 17-18 is assessed in AY 18-19. In view of above, it is kindly requested to direct AO to give TDS credit of Rs.8,52,737/- to the assessee. UNQUOTE 6.2 I have considered the matter. The procedure for giving credit to TDS is laid down in Rule 37BA. The same is extracted as under: [Credit for tax deducted at source for the purposes of section 199. 37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. (2)279(i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of information contained in the return of income. In case of present assessee, the income is taxable in this year. But the deductor deducted tax in the earlier year and apparently, included the same in the TDS return of that year. Under this circumstances, the order of the AO cannot be faulted. The only option available, in my considered view, is that the deductor should revise the TDs returns for earlier year as well as that of this year. The TDS on payment for this year should be included in the TDS return for this year. Once the deductor revises the TDS return, the AO can give credit to the balance amount of TDS. In view of the above, the AO cannot be directed to give credit to TDS which is not reflected in the deductor's TDS return." 8. Feeling aggrieved and dissatisfied from the findings of the ld. CIT(A) the assessee has taken up this issue vide ground no. 1 & 2 by filling an appeal against the order of the ld. CIT(A). On this issue the ld. AR of the assessee submitted before the bench that in the ITR-6 for A.Y. 2017-18 there is specific column from where assessee can carry forward and disclose the amount of TDS deducted for taking carryforward to subsequent year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rward with that of the income offered in the year under consideration. 11. In the light of these facts, ground no. 1 & 2 raised by the assessee is allowed. Ground no. 3 & 4 being general in nature the same did not require any adjudication. 12. In terms of these observation the appeal filed by the assessee in ITA No. 293/JPR/2022 is allowed. ITA No. 295/JP/2022 for the Revenue 13. In the appeal filed by the revenue, effectively one ground is taken challenging the action of the ld. CIT(A) deleting the addition made by the ld. AO out of the sales promotion expenses for an amount of Rs. 2,63,00,865/-. The fact as succinctly culled from the assessment order is that there is considerable increase in the claim of sales promotion expenses for A.Y. 2018-19 as compared to A. Y. 2017-18 & 2016-17, the sales promotion expenses to turnover ratio 25 % and 16% respectively. Whereas the assessee claimed sales promotion of Rs. 5,51,07,678/- which is 48% of total turnover of Rs. 11,52,27,253/-. To verify this claim of sales promotion expenses, the details were called from the assessee. The assessee submitted client wise sales promotion expenses chart showing sales promotion, bills and bank state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNIVERSAL SOMPO GIC LTD 1,22,955 86,914 71 Grand total 9,06,26,927 5,51,07,677 61 13.2 It is surprised to see that in once case, more expenses have been incurred than the revenue generated from that client. No prudent business enterprise will spend 109%, 91%, 71%, 51% of its earning on the sales promotion of the client. 13.3 The increase of 23% in the claim of sales promotion expenses as compared to earlier year is not realistic as not supported by the details and supportive documents. However for each entry of sales promotion expense, the assessee has not furnished the purpose for such expenses, nature of service provided by those parties, details of event, and how such expenses were utilized wholly and exclusively for the purpose of the business of the assessee. The few hotel bills submitted by the assessee were for stay of some persons, but how it is related to sales promotion activity for clients is not explained. For the limited details submitted by the assessee, it cannot concluded that sales promotion expenses has been incurred wholly and exclusively for the business of the assessee. The onus is on the assessee to prove that sales promotion of Rs. 551,07,678/- has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. In this regard, the AO had not pointed out any specific instance of booking of bogus expenses. No particular defect has been pointed out in the audited account. In view of this, lump sum disallowance is uncalled for." Ground no. 1 is allowed. 15. Revenue did not accept the finding of the ld. CIT(A) in deleting the addition of Rs. 2,63,00,865/- this appeal is filed by the revenue solely challenging the action of deleting the addition. To support the contention raised in this appeal the revenue has relied upon the written submission and the same is reiterated here in below: "Written brief by the DR in support of departmental appeal May I please to your Honors The above cited appeal has been filed by the department against the order of Id CIT(A), NFAC, Delhi in Appeal No NFAC/2017-18/10020255 dated 6.6.2022. Appeal was filed by the assessee against the order of the FAO u/s 143(3) of the Act dated 4.5.2021. Brief facts: The assessee is in the field of providing services to corporates for infrastructure/market support. It has claimed sales promotion expenses of Rs 5,51,07,678 against receipts of Rs. 11,52,27,253 which are around 48% of receipts. Selection of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the case. The expenses have been incurred by the assessee for its own business of providing services to its clients and for such services, it has incurred the expenses. So how it affects the reasonableness or genuineness of such expenses, if these are incurred for the services of clients. 2. Second finding of the Id CIT(A) is unjustified and contrary to the facts of the case. There is nothing on record to show that the assessee had received markup amount of 10% only and all the expenses were incurred by the concerned party/client. It is factually incorrect. The AU Small finance Bank has not incurred any expenses directly but has actually paid Rs 4.23 crore to the assessee for providing marketing services and it is the assessee, who has incurred and claiming expenses of Rs. 3.84 crore for promotion of business of AU Small finance bank. The Bank has made due TDS on entire payment of Rs 4.23 crore. Had the sales promotion expenses were incurred directly by the Bank, then there was no need to pay the amount to the assessee and deduct tax on that. 3. The theory of markup amount has simply been conceived from the letter of the Bank dated 15.4.21 filed by the assessee (Copy enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 592 dated 21.4.17 to 25.4.2017 but on page No 1, there are bill No 675 to 694 issued before 21.4.17. How is it possible to issue bills of 675 to 694 prior to 21.4.17 when Bill No 589 was issued on 21.4.2017? These bills are prima facie manipulated bills. Some bills are for purchase of costly dinner sets (Bill of Kanwal Collection, page No 4), and Bill of purchase of locket and necklace (Bill of Kalyan Jewellers, page No 5). These bills are not supported with any document as to whom these items were given and how the same was related to promotion of the business and of which specific client. Some of the bills are with narration of number of purchase order but other bills of the same concern are without any reference of purchase order (Bills of Classic Signage P Ltd page No 6 and 7). Some bills of same work item, placed by same purchase order but huge difference in rates of work item (Bills of M/s Expand page 8 and 9). Certain Hotel Bills are without any service tax/vat, whereas these taxes are mandatory for hotel business (Bill of Sunshine resort, compare with bill of Hotel Heeralal page 10 and 11). In hotel bills, nothing is there as to for whom or for which event these were raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies who are ready to provide the services to assessee's client at much lower rates as compared to assessee. Assessee has no option other than to reduce its margin/rates. The severe competition has affected the assessee so badly that its business has almost vanished. In 2018, the revenue has gone down to Rs.1152 lacs as against Rs.3408 lacs in 2017 and in 2019 to Rs.87 lacs only." 17. The ld. DR also drawn our attention to the details filed by the assessee and submitted that in connection with the claim of the expenses specific questions raised by the Assessing Officer relating two questions that who attended the conferences who are persons stayed in the hotel. Secondly, the gift articles purchased and claimed by the assessee as sales promotion expenditure are purely in the nature of personal expenditure and how it is related to the business of the assessee is not explained. The ld. DR drawn our attention to chart wherein the claim of sales promotion expenses and the relevant revenue from the client receipt is declared by the Assessing Officer and the relied upon part is extracted herein below:- "7. The assessee has furnished a chart with the date of payment. However for each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal expenditure of the assessee. He also drawn our attention to explanation (1) of section 37(1) which contains as under:- "37 (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 [***] and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession." [Explanation 1]- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]" 19. Since the assessee has not submitted all these details and without submission of these details or allowing the ld. AO to have his version the ld. CIT(A) has vide non speaking order deleted the addition. Thus, the claim was incorrectly allowed by the ld. CIT(A) and he has summarily without giving any detailed finding on the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt the expenditure incurred are not verifiable so as to confirm whether the expenditure incurred and claimed by the assessee are in the nature of prohibited under the common law and are not of the personal nature of the assessee. The assessee is merely receiving it as reimbursement of the expenditure incurred on behalf of the respective payee. The ld. AR of the assessee drawn our attention to Para 3.1 to 13 of the assessment year wherein the ld. AO has made comparison of sales promotion expenses for A.Ys 2017-18 & 2016- 17, the expenditure ranging between 25% and 16% respectively which itself proves that the expenditure claimed under this head purely in the nature of reimbursement of expenditure paid on behalf of the client and the same is allowable as the income is offered gross and not net of the reimbursement received. 21. In fact, the department has not made any submission before NFAC. The Department should not raise these appeals. As regards, the expenditure incurred for 109% in case of receipt from Raghav Enterprises raised where the services was related to supply of men power. Therefore, it has resulted expenditure more as compared to the income received by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable is applicable or not is not verified as the assessee has not given complete details. Based on these set of arguments ld. DR submitted that let the assessee prove before the AO, the claim made by the assessee as per provision of section 37(1) of the Act as the explanation 1 of section 37(1) restrict the expenditure even otherwise it is allowable. The ld. DR further submitted that there is no mention whether these payments were made in cash or cheque and whether the relevant applicable rate of TDS is made or not. Since, the assessee has not filed complete details he submitted that for this aspect revenue also needs an opportunity to consider the claim of the assessee. 23. We have heard the rival contentions and also gone through the orders of lower authorities. It is not disputed by both the parties that the assessee is engaged in the business of Business Support Services. Therefore, the expenditure is required to be incurred by the assessee as per instructions of the client. We have also gone through the orders of the lower authorities and details submitted by the assessee. The contentions as raised by the Revenue are factual and based on the inadequate details filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
