ITAT decision: Assessee's appeal allowed on disallowance of professional fees & book profit addition

The ITAT allowed the appeal of the assessee regarding the disallowance of professional fees under section 40A(2)(b) and the addition to book profit under section 115JB. The decisions were based on the lack of evidence to support the disallowances and the actual nature of the payments made by the assessee.

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Issues:
1. Disallowance of professional fees under section 40A(2)(b).
2. Disallowance of an amount in computing book profit under section 115JB.

Issue 1: Disallowance of professional fees under section 40A(2)(b):
The assessee appealed against the order of the ld. CIT(A) confirming the disallowance of professional fees paid to a partnership firm with substantial interest. The AO disallowed a portion of the fees, and the CIT(A) partly allowed the appeal based on the reduced amount debited in the accounts. The assessee relied on a previous ITAT order in their favor for the assessment year 2007-08. The Coordinate Bench decision highlighted that the Revenue failed to discharge the onus under section 40(A)(2) and directed the deletion of the disallowance. Following the precedent, the ITAT allowed the appeal for the assessment year in question.

Issue 2: Disallowance of an amount in computing book profit under section 115JB:
The AO added an amount to the book profit under section 115JB, contending it was not an ascertained liability. The ld. CIT(A) confirmed this addition, stating that the amount, though shown below the line, was not an unascertained liability and should be considered in computing book profit. During the hearing, the AR argued that the amount represented actual payment of management fees and should not be disallowed. The ITAT agreed, noting that the amount was an actual payment and not a provision towards an unascertained liability under section 115JB(2)(c). The ITAT further clarified that as long as the amount was charged to the profit and loss account in accordance with the Companies Act, it should be allowable in computing book profits. Therefore, the ITAT allowed the appeal on this ground.

In conclusion, the ITAT allowed the appeal of the assessee concerning the disallowance of professional fees under section 40A(2)(b) and the addition to book profit under section 115JB. The decisions were based on the lack of evidence to support the disallowances and the actual nature of the payments made by the assessee.

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