TaxTMI 
TaxTMI 
2017 (2) TMI 783
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....nbsp; Since common and inter-related issues are involved, we dispose-off all the appeals by this common order for the sake of convenience and brevity. First, we take up Assessee's Appeal ITA No. 3253/Mum/2009 as the lead case which is against the order of Ld. Commissioner of Income Tax (Appeals)-VIII [CIT(A)], Mumbai dated 17/03/2009 qua solitary issue of confirmation of disallowance of certain professional fees of Rs. 2,78,33,048/-. 2. Briefly stated, the assessee was resident corporate assessee engaged in the business of execution of infrastructure projects and providing technical support at the project site. It filed its return of income for impugned AY on 20/10/2003 declaring loss of Rs. 4,59,78,700/- which was subjected to scrutiny assessment u/s 143(3) vide Assessing Officer [AO] order dated 30/09/2005 wherein the total income was determined at Rs. 1,82,220/-after making certain disallowances and adjustments. The assessee had paid certain professional fees of Rs. 2,88,33,048/- to one entity namely 'M/s P.A.Shah & Associates' [PASA/Payee] and claimed the same as business expenditure u/s 37(1). AO noted that these expenses were very huge in comparison to the turnover of t....
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...., there being no change in facts or circumstances. Further, the assessee was associated with a foreign entity and was created in India for limited purpose of facilitating various projects on behalf of foreign entity. After fulfillment of its objectives, it was in the process of winding up its business operations and stopped all business activities. There was no one to look after the various legal /statutory compliances including tax proceedings /assessments etc. in India which were pending at various stages and hence, the assessee engaged the services of the consultant payee. The payee was engaged to perform multi faceted services and was also responsible to hire professional attorneys to carry out the task assigned to the payee. Therefore, the payee, in fact, acted as solicitor on behalf of assessee to carry out statutory obligations and wind up Income Tax proceedings at various levels. The engagement terms clearly spelt out the responsibilities of the payee and the payee assumed risk to carry out these activities and in fact, attended various proceedings from time to time pursuant to this agreement as against contrary observations made by lower authorities. Moreover, the payments....
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....s. The quantum of payment was exorbitant vis-à-vis payment made to other professional. Further, the impugned payments were opposed to public policy as per Section 23 of the Indian Contracts Act and hence hit by explanation to Section 37(1). The assessee failed to produce any partner of the firm to confirm the impugned payment despite being provided with several opportunities and further, deduction of TDS, by itself, do not validate the impugned payment unless they pass the test of 'incurred wholly and exclusively for the purpose of business' as provided in Section 37(1). All these factors cast serious doubts on the genuineness of the whole arrangement and therefore, the additions have rightly been made by the lower authorities. Further, each year was unique unit of assessment and the principles of res-judicata do not apply to Income tax proceedings and the matter of earlier years is already sub-judice before Hon'ble Bombay High Court and also CIT(A) distinguished the facts of the impugned year and therefore, the action of the lower authorities should be confirmed. Moreover, the assessee has already been allowed heavy deduction of Rs. 10.00 Lacs incurred by him to engage lega....
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....lly wrong, nothing to shock the conscience, nothing against public policy and public morals in such a transaction per se, that is to say, when a legal practitioner is not concerned. But that is not the question we have to consider, However much these agreements may be open to other men what we have to decide is whether they are permissible under the rigid rules of conduct enjoyed by the members of a very close professional preserve so that their integrity, dignity and honour may be placed above the breath of scandal. That is part of the price one prays for the privilege of belonging to a kind of close and exclusive "club" and enjoying in it privileges and immunities denied to less fortunate persons who are outside its fold. There is no need to either its portals and there is no need to stay, but having entered and having elected to stay and enjoy its amenities and privileges, its rules must be obeyed or the disciplinary measures which it is entitled to take must be suffered. The real question therefore is whether this kind of conduct is forbidden to the elect or whether, if it was once forbidden, the ban has since been removed, either directly or by implication, be legislative acti....
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....lso perused the various Income Tax Assessment orders passed by various authorities, which are placed in the paper-book wherein we find that that representative of the payee namely Sh.D.Kumar appeared from time to time and the perusal of invoices reflects that services of varied natures have been provided by the payee. Therefore, following judicial discipline and in the light of facts and circumstances of the cases and in view of our various discussion / observations in the preceding paragraphs, we are of the considered opinion that the impugned payments were incurred by the assessee against services rendered and for the purposes of the assessee's business and hence, allowable. The appeal of the assessee stands allowed. ITA 3369/Mum/2009 8. This is assessee's appeal for AY 2004-2005 where assessee on identical facts and circumstances suffered similar disallowance of Rs. 3,00,75,574/- towards professional fees paid to M/s P.A.Shah & Associates vide assessing officer order dated 31/10/2006 which was confirmed by First Appellate Authority to the extent of Rs. 2,90,75,574/-. Since, we have already decided this issue in favor of assessee for AY 2003-2004, there being no change in f....