Tribunal Ruling: Commission Payments, Depreciation, Foreign Travel Expenses

The tribunal allowed the commission payment to directors, disallowed the addition under section 14A without applying Rule 8D, permitted 60% depreciation on computer peripherals, printers, UPS, directed to allow foreign travel expenses, noted no TDS deduction required for certain payments, and allowed the claim of bad debts written off. The tribunal set aside the disallowance under section 14A for re-adjudication and dismissed the appeal regarding commission paid to employee directors. The order was pronounced on 18th August 2016.

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Issues Involved:
1. Addition on account of commission paid to directors.
2. Addition under section 14A on account of expenditure incurred for earning exempt income.
3. Disallowance of depreciation on computer peripherals, printers, UPS.
4. Disallowance of foreign travel and conveyance expenses.
5. Disallowance of expenditure where TDS was not deducted.
6. Disallowance of bad debts written off.

Issue-wise Detailed Analysis:

1. Addition on Account of Commission Paid to Directors:
The assessee contested the addition of Rs. 8,25,697/- made by the AO on account of commission paid to directors. The tribunal noted that similar payments were made in previous years and were approved by the Board of Directors. The Hon'ble Jurisdictional High Court in CIT vs. Dalmia Promoters Developers (P) Ltd. held that there should be a material change in facts or law to reject the view taken in earlier years. Since there was no such change, the tribunal allowed the commission payment under section 36(1)(iii) and ruled in favor of the assessee.

2. Addition Under Section 14A on Account of Expenditure Incurred for Earning Exempt Income:
The AO made an addition of Rs. 3,11,30,314/- under section 14A read with Rule 8D. The tribunal noted that Rule 8D is applicable prospectively from the assessment year 2008-09, as per the jurisdictional High Court's decision in M/s Maxopp Investment Ltd. vs. ACIT. The tribunal set aside the issue to the AO for recalculating the disallowance under section 14A without applying Rule 8D.

3. Disallowance of Depreciation on Computer Peripherals, Printers, UPS:
The assessee claimed depreciation at 60% on computer peripherals, printers, and UPS, which the AO and CIT(A) allowed at 15%. The tribunal referred to its decision in the assessee's case for the assessment year 2008-09, where 60% depreciation was allowed. Since these items form an integral part of the computer, the tribunal allowed the depreciation at 60%.

4. Disallowance of Foreign Travel and Conveyance Expenses:
The AO disallowed Rs. 31,66,650/- included in foreign travel expenses, considering it as a provision for dividend. The CIT(A) remanded the issue to the AO for verification. The tribunal observed that the provision for dividend was already added back in the computation of taxable income and directed the AO to allow the expenses.

5. Disallowance of Expenditure Where TDS Was Not Deducted:
The AO disallowed Rs. 32,17,320/- for external services and recruitment expenses without TDS deduction. The CIT(A) remanded the issue for verification. The tribunal noted that payments were made to a non-resident entity with no permanent establishment in India, and no TDS was required as per CBDT circulars. The tribunal remanded the issue to the AO for verification in light of the jurisdictional High Court's decision in CIT vs. EON Technology (P) Ltd.

6. Disallowance of Bad Debts Written Off:
The AO disallowed Rs. 29,39,405/- claimed as bad debts, doubting the genuineness since the companies were well-known. The CIT(A) upheld the disallowance. The tribunal noted that the debts were written off in the profit and loss account and referred to the Supreme Court's decision in M/s Vijaya Bank vs. CIT, which allows such write-offs. The tribunal allowed the claim of bad debts.

Separate Judgments for Assessment Year 2010-11:

1. Assessee's Appeal (ITA No. 1057/Del/2014):
The only issue was the disallowance under section 14A. The tribunal followed its decision for the assessment year 2009-10 and set aside the issue to the AO for re-adjudication.

2. Revenue's Appeal (ITA No. 2280/Del/2014):
The issue was the deduction under section 36(1)(ii) for commission paid to employee directors. The tribunal dismissed the appeal, following its decision for the assessment year 2007-08.

3. Assessee's Cross Objections (CO No. 16/Del/2015):
The cross objection was dismissed as infructuous since the revenue's appeal was dismissed.

Order Pronounced:
The order was pronounced in the open court on 18th August 2016.

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