TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 639
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....eal :- ITA No. 129/JP/2014 AY 2009-10 : 1. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in deleting the disallowance of "Financial Services Charges" of Rs. 86,26,198/- made u/s 40(a)(ia) of the I.T. Act, 1961. 2. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in deleting the disallowance of Rs. 5,81,868/- made by the AO under the provisions of section 14A r.w. rule 8D of the I.T. Rules. 3. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in deleting the disallowance of Rs. 50,000/- out of staff & labour welfare expenses which were not found verifiable by AO. 3. The first ground relates to the deletion of addition made on account of disallowance of Financial Services Charges of Rs. 86,26,198/- by the ld. CIT (A) by directing the AO to initiate proceedings for non deduction of TDS on the amount paid to the employees of the company, the same is liable to be taxed u/s 17 of the IT Act, 1961 (hereinafter referred to as the Act). 3.1. The ld. D/R submitted that the assessee had claimed a sum of Rs. 86,26,198/- as Financial Services char....
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....on 17. Therefore, he submitted that the AO was not justified in making disallowance and the ld. CIT (A) was not justified in holding that such payments were liable to be taxed under section 17 of the Act. 3.3. We have heard rival contentions, perused the material on record and gone through the orders of the authorities below. It is the contention of the assessee that such expenditure has been claimed in the past and was allowed by the revenue in the scrutiny assessment. The contention of the assessee with regard to the nature of the payment has been that the assessee is engaged in sale of tractors. The tractors are mostly sold to the village farmers who avail bank loan facility for buying the tractor. For availing bank loan facility, certain paper work are required to be carried out, which as per assessee is undertaken by itself and in the process of the same, the assessee has incurred expenses in the nature of fee to Advocate, typing charges, revenue officials fee etc. It is contended that these expenses are borne by the assessee and is necessarily related to the business of the assessee, hence the same is allowable deduction. The AO has rejected the claim of the assessee by obse....
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....bsence of even a single supporting voucher or any other documentary evidence which could prove assessee's claim that the said expenses were reimbursements to the salesmen. The AO treated such payment as the payment of commission or brokerage to the employee. In support of such finding, the AO has not placed any material on record suggesting that these payments were in the nature of brokerage or commission. In the absence of such material, in our considered view, merely on the basis of conjectures, the payments made to the employees would not partake the character of payment of brokerage or commission. Another aspect of the matter, which the AO has not appreciated that in the normal loan transaction, the bank mostly debit the amount of processing charges. The AO has also not verified from the banker whether the said expenditures were debited to the account of the loan beneficiary by the banker or not. Whether there was any agreement between the banker and the assessee company in this behalf. Even the assessee has not furnished the requisite details in support of its claim that such payments were nothing but reimbursement to the employees and such expenditure is allowable deduction. ....
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....ified and in that event only he can proceed for making disallowance. He submitted that the assessee was having sufficient own funds for making investment. No borrowed funds have been utilized. He further submitted that the dividend income is of Rs. 30,000/- and disallowance made is Rs. 5,81,868/- which is also against the decision of Hon'ble Delhi High Court. 4.3. We have heard rival contentions and perused the material on record. As per section 14A of the Act, the AO has to satisfy himself in respect of the claim of expenditure. In the event the AO finds that the expenditure related to the exempt income have also been claimed by the assessee while computing its income, then the AO is empowered to make disallowance in the manner prescribed in rule 8D. In the instant case, the AO has not given any finding in respect of the disallowance of expenses. On the contrary, the assessee has pointed out that it had sufficient own funds and investment has been made out of its own funds. Therefore, the disallowance related to the interest was not justified. Thus we do not find any reason to interfere in the orders of the ld. CIT (A). 4.4. In respect of administrative disallowance, as the asse....