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2018 (12) TMI 191
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.... CIT(A) erred in not directing the Assessing Officer to allow the disallowance 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 14....
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.... "On the facts and in the circumstances of the case and in law, the Appellant prays that the disallowance under section 14A of the Act, if held to be applicable, may be made only in respect 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 STP....
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.... line of demarcation is thus drawn up between what SKP does as director of the assessee company and what SKP does as director of Preroy AG even as subject matter of his work is the interest of the assessee only. Take for example, 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 direct....
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....nd a rank outsider commercial entity, owned by the director, is being paid for the work done by the director. It appears that the foreign trips, during which the work is claimed to have been done, were taken up in the capacity as director of the assessee company, and, 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....
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....recommended by PAG. 12. As regards the compensation for these services, we find that the agreement merely states, at clause E 1, that "for the services rendered by PAG under this agreement, STPL shall pay fees to PAG at rates to be agreed by the parties on a case to case basis" and 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 w....
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....confirmed and even if the ld. Commissioner of Income Tax (Appeals) made some observation that does not affect the outcome of this appeal. Accordingly, following the aforesaid precedent in assessee's own case, we uphold the Assessing Officer's order making the disallowance of Rs. 1.52 crores." 8. Respectfully 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 a....
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....lowing ITAT order for Assessment Year 1995-96 to Assessment Year 1997-98 in which the issue was adjudicated as under, "15. As regards the second ground of appeal, i.e. against disallowance of Rs. 5,99,832 in respect of the travelling expenses, this disallowance pertains to the travelling expenses in respect of Mrs. Neeta 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 ....