Appeal partly allowed, remanded for verification. Business expenditure principle applied. Prior ruling followed on interest expenditure. Ad-hoc expenses disallowance partially upheld. Legal charges remanded for payment verification.

The Tribunal partly allowed the appeal, remanding specific issues for further verification and deciding in favor of the assessee on others. The disallowance of bank guarantee commission was remanded for fresh consideration based on the business expenditure principle. The interest expenditure on secured loans was allowed following a previous ruling. The ad-hoc disallowance of expenses was partially upheld, directing a reduced disallowance. The disallowance of legal charges due to non-deduction of TDS was remanded for verification of payment amounts.

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Issues Involved:
1. Allowability of bank guarantee commission.
2. Disallowance of interest expenditure on secured loans.
3. Ad-hoc disallowance of expenses.
4. Disallowance of legal charges due to non-deduction of TDS.

Issue-wise Detailed Analysis:

1. Allowability of Bank Guarantee Commission:
The assessee claimed a debit of Rs 58,61,347 towards 'Bank Guarantee Commission'. The Assessing Officer disallowed this claim, arguing that the assessee had no obligation to meet such expenditure as per the contract terms between THDC, Progressive Constructions Ltd. (PCL), and the assessee. The AO also noted that the interest on fixed deposits (FDs) used as margin money for the bank guarantees was claimed by the JV partners individually, not by the assessee.

The assessee argued that the principal contractor, PCL, issued the bank guarantees on their behalf, making the commission a business expenditure. The DR reiterated that the agreements did not obligate the assessee to bear the bank guarantee commission expenses.

The Tribunal referred to the jurisdictional High Court's judgment in ACIT vs. Akkamba Textiles Ltd., which held that if an expenditure is related to the carrying on of business, it should be considered a business expenditure. The Tribunal decided that the matter should be verified and remanded the issue back to the Assessing Officer for fresh consideration.

2. Disallowance of Interest Expenditure on Secured Loans:
The AO disallowed an interest expenditure claim of Rs. 11,68,589, stating it was only a provision and not an actual payment, with no evidence of tax payment or TDS deduction.

The assessee cited a previous Tribunal ruling in their favor for the assessment year 2006-07, where it was established that THDC, a joint venture of the Government of India and UP, deducted the interest from the RA Bill, and no TDS was required as per section 194A(3)(iii)(f) of the Income-tax Act, 1961.

The Tribunal found that the facts were similar for the current year and ruled in favor of the assessee, allowing the interest expenditure claim.

3. Ad-hoc Disallowance of Expenses:
The AO made an ad-hoc disallowance of Rs. 15 lakhs due to improperly vouched expenses.

The Tribunal acknowledged the discrepancy in the vouchers but considered the disallowance amount excessive. To meet the ends of justice, the Tribunal directed the AO to disallow only 5% of the unvouched cash expenses, provided they were not statutory payments, as there was a possibility of inflating cash expenses. This ground was partly allowed.

4. Disallowance of Legal Charges Due to Non-deduction of TDS:
The AO disallowed Rs. 4,04,000 in legal charges paid to Sri Kuljeet Singh, citing non-deduction of TDS under section 40(a)(ia).

The assessee contended that each payment was less than Rs. 20,000, making the TDS provisions inapplicable.

The Tribunal remanded the issue back to the AO to verify if each payment was indeed less than Rs. 20,000 and decide accordingly. This ground was allowed for statistical purposes.

Conclusion:
The appeal was partly allowed, with specific issues remanded for further verification and others decided in favor of the assessee based on previous rulings and legal principles.

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