AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 244
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.... along with said return a sum of Rs. 26,61,183/- was debited by the assessee on account of commission and salary to the Directors. On verification, it was found by the AO during the course of assessment proceedings, that the said amount was claimed a sum of Rs. 10,85,214/- paid by the assessee company to its Managing Director on account of commission for the financial year 2009-10 relevant to assessment year 2010-11. It was seen that the assessee has followed a mercantile system of accounting, AO held that the said expenditure pertaining to earlier year could not be allowed in the year under consideration. He accordingly disallowed the claim of the assessee on account of commission to the Directors to the extent of Rs. 10,85,214/-. 3.1. The disallowance made by the AO on account of commission paid to Directors was challenged by the assessee in the appeal filed before the Ld. CIT(A). After considering the submission made by the assessee as well as material available on record. The Ld. CIT(A) deleted the said disallowance for the following reasons given in paragraph no. 5.2.3 of his impugned order. "5.2.3. I have carefully considered the facts of the case, the finding of ....
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....ourt held that "where a liability arising out of a contractual obligation is disputed, the assessee is entitled, in the assessment year relevant to the previous year in which the dispute is finally adjudicated upon or settled, to claim a deduction in that behalf. In view of the facts of the case, and the principle of law laid down in the cases cited supra, I am of the considered view that the Assessing Officer was not justified in making the impugned disallowance. His apprehension that the claim of expenditure relating to two different assessment years in a single assessment year when receipts are accounted for in different assessment years on the basis of real income theory in mercantile system of accounting is not based on correct principle of law. Further, on the same analogy, his observation that section 115JB would be applicable in respect of the prior period expenses is unfounded. Having regard to the facts and circumstances, the disallowance of Rs. 10,85,214/- is hereby deleted. This ground of appeal is accordingly allowed." 4. We have heard the arguments on both the sides and also perused the relevant material available on record. The Ld. DR has contended that t....
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....s. 28,76,896/- paid by the assessee to the foreign shipping lines u/s 40(a)(ia) of the Act for non-deduction of tax at source. 5.2. The disallowance made by the AO u/s 40(a)(ia) of the Act was challenged by the assessee in appeal filed before the Ld. CIT(A) and after considering the submission made by the assessee as well as the material available on record, the Ld. CIT(A) deleted the said disallowance for the following reasons given in paragraph no. 5.3.3 of his impugned order. "5.3.3. I have carefully considered the facts of the case and the submissions of the AR. I am inclined to accept the submissions of the appellant. In the case of shipping business of non-residents, the provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to deduction at source are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any part in India by a ship, under the provisions of sections 172. There would be cases where payments are made to shipping agents of non-resident ship-owners of charters for carriage of passengers etc., ship....
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....half of the assessee company that the relevant bad debts were written off in its books of accounts for the year under consideration, the AO held that it was a back dated entry made by the assessee company in its books of accounts and the actual decision to write off the bad debts having been taken only in the previous relevant Assessment year 2012-13 the assessee was not entitled for deduction u/s 36(1)(vii) in the year under consideration. Accordingly, he disallowed the claim of the assessee for bad debts written off. 8.1. The disallowance made by the AO on account of bad debts written off were challenged by the assessee in the appeal filed before the Ld. CIT(A) and after considering the submissions made by the assessee as well as material available on record, the Ld. CIT(A) deleted the said disallowance for the following reasons given in paragraph 5.4.3 of his impugned order. "5.4.3. I have carefully considered the facts of the case, the findings of the Assessing Officer and the submissions put forth on behalf of the appellant. The AO has based his findings on the note put up to the Managing Director of the Accounts Department on 09.04.2011 by the Senior Accounts Mana....
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....on the ground that profit being under-estimated under the impugned method of accounting. If the Assessing Officer comes to the conclusion that there is under-estimation of profits, he must give facts and figures in that regard to demonstrate that the impugned method of accounting adopted by the assessee results in underestimation of profits and is therefore rejected. Otherwise the presumption would be that the entire exercise is revenue neutral as held in CIT v. Realest Builders and Services Ltd. [2008] 307 ITR 202. In the case of CIT v. Woodward Governor India P. Ltd [2009] 312 ITR 202, it has been held that under the mercantile system of accounting, what is due is brought into credit before it is actually received; it brings into debit an expenditure for which a legal liability has been incurred before it is actually disbursed. In the appellant company's case, there is no finding of the Assessing Officer that there has been any under-estimate of profits during the year and that there has been any change in the method of accounting which affected the profits of the financial year relevant for the assessment year under consideration.! It is well-settled that as the Assessing Office....
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.... that the disallowance to write off the relevant bad debt having been taken by the management of the assessee company only after the end of the year under consideration, it is not understandable how the entry to write off the bad debts was made in its books of accounts for the previous year. He had contended that the said entry made by the assessee company was clearly a back dated entry and its claim for bad debts written off was rightly disallowed by the AO. However as submitted by the ld. counsel for the assessee there was a proposal to write off the relevant bad debts in the month of March, 2011 itself and approval for the same was sought and obtained in the month of April, 2011 after closing of the financial year. Moreover, the fact that remains to be seen is that the relevant bad debts were written off by the assessee company in its books of accounts of the year under consideration and his position was not disputed by the AO although the relevant entry was done by him as a back dated entry. As per the relevant provisions contended section 36(1)(vii) the condition stipulated for the allowability of deduction on account of bad debts written off is that the relevant bad debts sho....