TaxTMI 
TaxTMI 
2018 (12) TMI 191
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....sallowance of telephone expenses amounting to Rs. 371,201 incurred at the director's residence, as estimated by the Assessing Officer. 4. The learned CIT(A) erred in not directing the Assessing Officer to allow the entire foreign air travel expenses amounting to Rs. 2,115,097 in respect of foreign travel of the wives of two directors, incurred by the Appellant. 5. The learned CIT(A) erred in not directing the Assessing Officer to allow the entire local travel expenses amounting to Rs. 88,365 in respect of local travel of the wife of the director, incurred by the Appellant. 6. The learned CIT(A) erred in not directing the Assessing Officer to allow the amount of Rs. 6,649,703, disallowed by the Assessing Officer on an estimated basis towards expenditure incurred by the Appellant for earning dividend income, which had been claimed as exempt under section 10(33) of the Act. 7. Without prejudice to ground 6, the learned CIT(A) erred in not directing the Assessing Officer to reduce the amount of donations from administrative expenses for computing the disallowance under section 14A of the Act. 8. The learned CIT(A) erred in failing to pass a clear and speaking order a....
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....espect of those investments which have yielded dividend income during the year under consideration and the disallowance should be restricted to 0.5% of the average value of such investments." 4. One common issue raised in these appeals relates to the disallowance of expenditure being the professional fee paid to Preroy AG. On this issue, the Assessing Officer has made the disallowance of strategies consultancy fee paid for the concerned assessment years, which was confirmed by the learned CIT(A). 5. At the outset, on this issue the learned counsel of the assessee fairly submitted that this ground is covered by the ITAT order against the assessee in assessee's own case for Assessment Year 1995-96 to Assessment Year 1997-98 which was subsequently followed while passing the order for Assessment Year 1998-99 and Assessment Year 1999-2000. However, the learned counsel of the assessee submitted that following points need consideration : "1) Since the professional fees received by PAG from STPL have been assessed in the hands of PAG as its income, it was not open to the Incometax Department to disallow the said expenditure in the assessment of the Appellant. In this regard, reliance ....
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....le, invoice no. 1 dated 1st November 2014 for US $ 10,000. The narration on the invoice and the supporting documents in this regard are as follows: OKS India- Carl Bechem GmbH, Hagen Negotiation on behalf of STPL in March 1994, in respect of development of a proposal for the manufacture of specialty grease at OKS plant in Mysore Supporting documents a) Preroy's file note setting out a summary of services rendered and the recommendations made to STPL b) Sushil'sfiile note on the meeting at OKS Munich on March 7,1994 discussing several issues such as 1993-94 sales of OKS 'grease plant' issue, financing situation of STPL, Bechem Product pricing etc c) Corporate Brouchers of OKS and Carl Bechem 10. Clearly, the work is done by SKP, the meeting is taken by the SKP and it pertains to the investments of the assessee is OKS. When a meeting is taken by director of the company, analysis is done by the director of the company and the recommendations are made by director of the company, it is difficult to be persuaded by the contention that these services are required to be treated as rendered by the Preroy AG because, the director was also a one hundred percent owner and ....
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.... yet billing for the work done in the course of trips so undertaken at the cost of the assessee company, has been done in the name of Preroy AG. There is nothing on record to show that these foreign trips were undertaken by SKP at the cost of Preroy AG or in the course of his work as director or owner of Preroy AG. Take, for example, the meeting at KLM lounge at Amsterdam on 1st July 1994 referred to earlier in this paragraph. We find that, as evident from details of travelling expenses filed at pages 77 onwards in the paper book before us, the visit to Germany, Netherlands and UK, which lasted from 30th June to 12th July 1994, is stated to have been undertaken by SKP for attending "business meetings and representing STPL in a meeting with potential business partners". When it comes to claiming the travelling expenses, the assessee travels as director in STPL (i.e. the assessee) to attend the business meetings, yet the assessee claims to have actually met the potential business partner in a different capacity, i.e. as a representative of Preroy AG, and seeks a deduction for fees paid to Preroy AG in respect of the same. The same is the position with respect to almost all the invoic....
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....that "the fees in respect of any assignment will be agreed upon by the parties before PAG commence work on the said assignment". There is, however, no evidence lead before us which suggests that the fees for any assignment was agreed to before any assignment commenced. There is hardly any basis for the billing work done. There seems to a charge of US $ 10,000 on every billing point. There is no evidence for any work done by a person other than SKP and the SKP has done this work, during his visits abroad, in the capacity of director in the STPL (i.e. the assessee)- as is clearly discernible from the details of foreign travelling expenses on record. The justification for the impugned payment does not, in our considered view, does not exists, as there are no independent services rendered by the assessee. Learned counsel for the assessee has laid lot of emphasis on the contention that the assessee was in the business of making investments and, therefore, even expenses incurred in connection with the business of his subsidiary, OKS India, will also be eligible for deduction as these expenses are to protect his investment. There does not seem to be any issue with the legal principles emb....
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....fully following the precedent as above, we uphold the disallowance made by the Assessing Officer on this issue. As regards the point submitted by the learned counsel of the assessee for consideration, we find that the above order of the ITAT has already been appealed by the assessee before the Hon'ble High Court. We note that the matter is already before the Hon'ble High Court and we are of the considered opinion that these points referred by the learned counsel of the assessee are not cogent. Accordingly, we decline to accept these submissions, and consequently we do not find it proper to distinguish the consistently held view of the tribunal. 9. One common issue raised relates to disallowance u/s 14A. On this issue also, the learned counsel for the assessee submitted that this issue also is covered by the ITAT order in assessee's own case for Assessment Year 1998-99 and Assessment Year 1999-2000 wherein ITAT has held that disallowance u/s 14A of the Act should be made only in accordance with the Special Bench ruling in the case of ACIT vs Vireet Investments [2017] 82 taxmann.com 415 (Delhi). As per the said ruling, disallowance u/s 14A should be made in respect of only t....
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....eta Premchand, wife of the director, who accompanied her on the official tours. The Assessing Officer noted that there was no evidence that NP's foreign travelling was for the purpose of business. In appeal, learned CIT(A) confirmed the disallowance. The assessee is not satisfied and is in further appeal before us. 16. Having heard the rival contentions and having perused the material on record, we find that as no evidence has been lead before us to demonstrate and establish that the travel by director's wife was "wholly and exclusively for the purposes of business of the assessee", and in the light of Hon'ble Kerala High Court's full bench decision in the case of Ram Bahadur Thakur Ltd. Vs CIT [(2003) 261 ITR 390 (Ker FB)], the action of the authorities below deserves to be confirmed. We, therefore, confirm the stand of the authorities below and decline to interfere in the matter." Respectfully following the precedent as above, we uphold the disallowance in this regard. 13. On the issue relating to disallowance of business expenses, the learned counsel for the assessee submitted that in Assessment Year 1999- 2000, the Tribunal had held that the same should be done pro-ra....