2012 (9) TMI 716 - AT - Income Tax

Tribunal decision: Disallowance upheld on royalty, expenses, but fees and charges set aside for verification.

Dr. Francis P Candes Versus The Income Tax Officer, Ward 11(2) (3), Mumbai

The Tribunal upheld the disallowance of royalty payment to the Court Receiver under section 40(a)(ia) and interest on loans due to lack of justification. ... Dis-allowance u/s 40(a)(ia) - royalty paid to the Court Receiver deemed to be covered u/s 194J - Held that:- It is impermissible for the parties to reargue the same matter time and again before the tribunal in an attempt to unsettle the settled position. The view taken by the tribunal in a preceding year (2011 (4) TMI 508 - ITAT, MUMBAI) deserves utmost respect in so far as the subsequent years involving the similar point before the tribunal are concerned, unless there is some change in the factual or legal position. - We, therefore, uphold the impugned order on this issue by holding that the amount in question is in the nature of royalty payment covered u/s 194J and resultantly disallowance u/s 40(a)(ia) is called for - Decided against assessee Loan to relatives without Interest - held that:- As no nexus between the interest bearing loans and its utilization for the purpose of profession was shown, the A.O. disallowed proportionate interest attributable to interest free deposit of loan as being not wholly and exclusively for profession. - Decided in favor of revenue. Issues:1. Disallowance of royalty payment to Court Receiver under section 40(a)(ia).2. Disallowance of interest on loans.3. Disallowance of motor car and telephone expenses.4. Disallowance of professional fees and security charges for non-deduction of tax at source.Issue 1: Disallowance of royalty payment to Court Receiver under section 40(a)(ia):The appeal concerned the disallowance of Rs.42,00,000 as royalty paid to the Court Receiver, treated as covered under section 194J of the Income Tax Act. The Tribunal upheld the disallowance based on the previous year's decision, emphasizing judicial consistency and the binding precedent principle. The appellant argued against the classification of the amount as royalty and the consequent disallowance. However, the Tribunal maintained the disallowance, citing the earlier decision and the need for legal remedies if aggrieved. The Tribunal directed the Assessing Officer to verify the payment details for further assessment.Issue 2: Disallowance of interest on loans:The second ground involved the disallowance of interest amounting to Rs.72,963 out of total interest paid on loans. The disallowance was based on the lack of justification for interest-free loans advanced for business purposes. As the appellant failed to substantiate the claim, the Tribunal upheld the disallowance, considering the consistency in facts and the absence of supporting details.Issue 3: Disallowance of motor car and telephone expenses:The third ground challenged the disallowance of 20% of motor car and telephone expenses. The Assessing Officer made the disallowance due to the absence of a log book to prove business use of the car. The Tribunal upheld the disallowance, noting the lack of evidence supporting the business purpose of the expenses and the previous acceptance of similar disallowances by the appellant.Issue 4: Disallowance of professional fees and security charges for non-deduction of tax at source:The final ground contested the disallowance of professional fees and security charges due to non-deduction of tax at source in the preceding year. The appellant claimed deduction for the current year based on the disallowance in the previous year. The Tribunal acknowledged the appellant's argument but requested verification of the tax payment evidence. Consequently, the Tribunal set aside the order on this issue, directing the Assessing Officer to reevaluate the claim.In conclusion, the Tribunal partly allowed the appeal for statistical purposes, maintaining disallowances in some instances while ordering further verification for specific deductions.