TaxTMI 
TaxTMI 
2018 (1) TMI 1188
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....aw, the Ld. Assessing Officer ("AO") has erred in adding the outstanding balance of creditor M/s Badar Al Safran of Rs. 34,90,058/- to the total income. 2. On the facts and in the circumstances of case and in law, the Ld. AO has erred in disallowing Rs. 2,64,062/- u/s 14A. The appellant craves leave to add, amend, supplement, alter and/or delete any of the above Grounds of Appeal." 3. The brief facts of the case are that assessee is an engineering and designing services company . On perusal of the details of sundry creditors called for by the AO during the course of assessment proceedings u/s 143(3) r.w.s. 143(2), it was observed by the A.O. that no address was given of one sundry creditors namely Badar Al Safran . The total outstanding payable was Rs. 34,90,058/- to the said creditor which was outstanding for more than 1460 days. The assessee was asked by the AO whether the said creditor has made any request for clearance of the outstanding payment and if yes then to furnish the proof of the same. The assessee could not submit any proof of the creditor making any request to the assessee for clearance of the outstanding payment and hence the A.O. treated that t....
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.... that for invoking provisions of section 41 (1) following two conditions should be fulfilled: 1- There has to be remission or cessation of liability and 2- Remission or cessation has to be during the previous year under consideration. In the appellant company's case both the above elements were missing, as there was no evidence to prove that there was a remission or cessation of liability and that too during the previous year relevant to the assessment year. The above view is also supported by the decision of Hon'ble Gujarat High Court in the case of C1T vs. Bhogilal Ramjibhai Atara(2014) 43 taxmann.com 55 (Gujarat) where it was held that "Where assessee in return of income had shown certain amount by way of his debts and Assessing Officer applying provisions of section 41 (1) added back said amount in income of assessee as deemed income, since there was nothing on record to suggest that there was remission or cessation of liability that too during assessment year relevant to the previous year under consideration, above amount could not be added back in income of assessee. " We also rely on the decision in case of Nitin C. Desai ....
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.... interest from time to time in Kuwait. Associate shall provide report on visits and outcome of various meetings to Principal every two weeks. III. Use its best endeavours to promote the interest of the principal with the concerned parties in Kuwait and keep the principal informed about the project / tenders in Kuwait on continuous basis. IV Obtain approvals, visas, registrations as may be required by the principal for visiting Kuwait and other middle east countries. The associated cost shall be reimbursed by the principal. V Provide postal address, telephone and fax contact for principal to establish local office in Kuwait. VI. If necessary, personally submit on time i.e. on or before submission date, the principals bid(s) / Qualification(s) to the customer and shall be present, if needed during the opening of bid(s) / qualification(s) and shall report to the principal the results. VII. Support the activity of Principal's Representative and Delegates, joining them in the negotiations with the customers where and when required by the principal VIII. Respond promptly to information received from the principal and shall provide....
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.... debt, by writing off the same from the books. The case laws relied by the Ld AR are also not comparable to the facts of the case, as the appellant could not establish, with credible documents, the genuineness of the above MOU, working of the commission, genuineness of the liability and existence to the said. Considering these facts, in my considered opinion, the appellant has failed to establish the genuineness of the liability, therefore the disallowance of Rs. 34,90,058/- made by the A.O is hereby sustained. This ground of appeal is dismissed." 5. Aggrieved by the appellate order dated 31-12-2015 passed by learned CIT(A), the assessee has come in an appeal before the tribunal. Ld. Counsel for the assessee submitted that assessee is in the business of oil & gas industry rendering design and engineering services. It was submitted that the services were rendered outside India to the overseas parties in the field of Oil and gas sector. It was submitted that Badar Al Safran was appointed as an agent to procure business for the assessee in Kuwait. A copy of MoU with said Badar Al Safran is placed on record in paper book filed with the tribunal which stipulates payment of commission....
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....the assessee that the assessee has reflected these amounts payable to the creditor in its books of accounts and hence same cannot be added to the income of the assessee. The assessee relied upon the decision of Hon'ble Madras High Court in Swarna Paper Cutting Works v. Indian Express ( Madurai ) , 1999 (3) CTC 167(Mad. HC) and decision of Hon'ble Supreme Court in the case of Bombay Dyeing & Manufacturing Company Ltd. v. State of Bombay 1958 AIR 328 . It was submitted that there is an acknowledgment of liability in books of accounts of the assessee that the liability is outstanding for payment and hence it cannot be added u/s. 41(1) and there is no cessation of liability . The assessee also relied upon decision of Hon'ble Bombay High Court in the case of CIT v. Chase Bright Steel Limited (1989) 42 Taxman 146(Bom) and decision of Hon'ble Supreme Court of India in the case of Bombay Dyeing and Manufacturing v. The State of Bombay & Ors. 1958 AIR 328. The Ld. DR on the other hand submitted that no evidence is available for both debit and credit amount payable as well receivable as it could not be linked that the said commission is payable for these outstanding recoveries receivable ....
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....sion is payable only on actual recovery of sale proceeds. These facts were before the AO as well learned CIT(A) . The power of learned CIT(A) is co-terminus with powers of the AO. It is claimed by the assessee that the revenue has allowed this commission payable to Badar Al Safran in the earlier years as an expense as well as no material is brought on record by Revenue that the said commission was disallowed by the revenue in preceding years. There is no evidence on record brought by Revenue to disprove this contention of the assessee .The assessee by withholding of the commission payments of its agent Badar AL Safran on overdue payment from its debtors has acted in a manner which is consistent with principles of commercial expediency in accordance with the terms of MOU and Revenue cannot direct assessee to act in a manner in defiance to the principles of commercial expediency and in turn to damage its own business interest. The assessee's payment for whatever reasons got struck overseas for services rendered to Oil & Gas industry and in order to protect its interest and in consistent with MOU with its agent , it withheld the corresponding payment of commission payable to its agent....
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....sment order dated 11-03-2014 passed by the AO u/s 143(3), the assessee carried the matter in appeal before the learned CIT-A , wherein the assessee admitted before the learned CIT-A to said addition of Rs. 2,64,062/- u/s. 14A r.w.r. 8D and submitted that the assessee does not want to persue this ground of appeal and since this ground of appeal was not pressed , learned CIT(A) dismissed this ground and sustained the additions as were made by the AO, vide appellate order dated 31-12-2015 passed by learned CIT(A). 9. The assessee has now raised this ground before the tribunal and it is contended that there was no exempt dividend income received by the assessee during relevant previous year and hence keeping in view ratio of decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT (2105) 378 ITR 33(Del) and Joint Investments Private Ltd. v. CIT (2015) 372 ITR 694(Del) , no addition is sustainable in the hands of the assessee. Ld. DR submitted it is not clear from the order of the authorities below whether any dividend income was received by the assessee or not and assessee has also admitted to the sais additions before learned CIT(A) and hence same should be upheld....