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TMI Blog2024 (10) TMI 1659X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred this appeal. 2. Subject matter of this appeal are four additions in respect of disallowance of expenditure recorded as bad debts of Rs. 16,97,639/-, disallowance of Rs. 46,40,500/- claimed towards consultancy charges, disallowance of Rs. 32,43,680/- claimed towards expenditure for third party vendors Rs. 1,81,67,730/- claimed towards direct expense recorded as business development expense. Both the authorities below held that the claim of expenditure under these stands is not be allowed. Hence, this appeal. 3. Brief facts of the case are that the assessee is a permanent establishment of foreign company located in USA and is engaged in the business of engineering and engineering consultancy services. It filed its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taken a view that since it is a verifiable fact as to whether or not the assessee offered the amounts covering the short payments also in the Financial Years 2014-15 and 2015-16, the same cannot be brought to tax again and it has to be allowed as bad debt. 5. Though the learned DR vehemently contended that since the assessee committed breach of contract, NHAI withheld the amounts, therefore, such short payment amounts to levy of penalty and the same cannot be allowed as deduction. 6. On careful consideration of the matter, we are of the opinion that if really the assessee took the entire amount into consideration and offered the same to tax during the relevant Financial Year and subsequently, there was short payment there of, on verific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d breach of contractual terms and conditions or services to be rendered or violated the terms of contract cannot be taken as final and any attempt of the assessee to get it tested in a judicial forum cannot be termed as defendant's offence. Here we have to keep it in mind that payment of fine or penalty is different from incurring a litigation expense before such penalty or sentence is finally passed. After the judicial forum speaks finally confirming the penalty, the subsequent payment alone can be treated as sentence for offence, but not litigation expense. We, therefore, are of the considered opinion that the litigation expenses incurred by the assessee to defend their stand against the Circular passed by the NHAI, debarring the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee could gather ledger confirmations from three parties and is willing to produce such relevant information before the learned Assessing Officer provided an opportunity is granted. 12. We have heard the learned DR also on this aspect and the learned DR submitted that the assessee could not produce such confirmations and other material not only during the assessment proceedings, but also during the first appellate and remand proceedings resulted in disallowance of such payments which are made to particular four parties, who did not respond to the notices issued during the remand proceedings. 13. On consideration of the factual situation, we are of the opinion that when once the assessee engaged third parties in order to avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44C to the tune of Rs. 1,80,90,376/-, this particular business development expense of Rs. 1,91,23,625/- has also to be allowed since this is exclusively attributable to the requirement of assessee only. She further submitted that an identical issue had arisen in assessee's own case for the assessment year 2021-22 and after considering the issue in extenso in the light of the decision of coordinate bench in the case of DDIT Vs. Samsung Engg. Co. Ltd (2011) 43 SOT 38, Fraport A.G. Frankfurt Airport Services Worldwise Vs. ACIT/ADIT [2023] 151 taxmann.com 370 and Addl. DIT Vs. Bank of Bahrain & Kuwait [2011] 44 SOT 693 and the Hon'ble High Court of Bombay in the case of CIT Vs Emirates Commercial Bank Ltd.[2004] 134 Taxman 682 (Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis for each employee in the organization by recording the manhours on daily basis and if such exclusive nature of such expenditure is established then such expense has to be excluded from the purview of section 44C of the Act. In this case, it is evident from the record that since the authorities have taken a stand that salaries and perks to the employees fall under section 44C of the Act and did not proceed further to verify the evidence in the light of the decisions of the coordinate Bench in the case of Samsung Engg. Co. Ltd. (supra), we deem it just and proper to restore this issue to the learned Assessing Officer to verify this fact and if it is found that such expenses were exclusively attributable to the Indian project not to make ..... X X X X Extracts X X X X X X X X Extracts X X X X
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