TaxTMI 
TaxTMI 
2021 (8) TMI 2
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....0,94,370/- with regard to Sikkim Manipal University (SMU) admission expenses (which inter alia include discount and referral bonus given to the students, waiver of late fees etc), which sustaining of disallowance of Rs. 10,94,370/- is most arbitrary, unjust, untenable in fact and in law and in the alternative excessive w.r.t facts and circumstances of the case. 4. That the learned Commissioner (Appeals) erred in confirming disallowance of Rs. 87,687/- being 50% of total disallowance of expenses of Rs. 1,75,374/- (out of computer installation expenses at Rs. 35,000/- plus out of cash payments of Rs. 3,61,500/- made to various persons in regard to expenses incurred on visiting faculties at Rs. 90,375/- plus out of vehicle running & maintenance and depreciation at Rs. 30,000/- plus out of telephone/mobile expenses at Rs. 20,000/-) made by the AO, which confirmation of disallowance of Rs. 87,687/- is most arbitrary, unjust and in the alternative excessive w.r.t facts and circumstances of the case." 2. At the outset, it is noted that there is delay in filing the present appeal. In this regard, the ld. AR submitted that the assessee on receipt of the order from the ld. CIT(A)....
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....roduce in the course of assessment proceedings. Ground of Appeal No. 2 1. That the learned CIT(A) failed to appreciate that the assessee regularly maintained books of account consisting of cash book, ledger, stock register, purchase/sale invoices and vouchers for expenses during the previous year relevant to assessment year under appeal and the same were produced before him. 2. That the books of accounts are duly audited by a Chartered Accountant and Tax audit report u/s. 44AB stood already filed before the A.O. 3. That neither the A.O. nor the learned CIT(A) has given a single finding that such and such expenditure booked by the assessee is false or fabricated or not incurred for business purposes. Moreover books of accounts have not been rejected. 4. That it is settled principle of law that no addition under the head business income can be made without rejecting books of accounts. Grounds of Appeal No. 3,4 & 5 1. All these three grounds of appeal are in regard to full or part disallowance out of various expenses, namely SMU admission expenses (Ground of Appeal No. 3), computer installation exp., visiting faculties exp....
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....itted that SMU (Sikkim Manipal University) doesn't accept fees in cash. In such a situation where most of the students bring a demand draft prepared in the name of SMU from their parents for payment of fees and then they go to different centres bargaining for more discounts. Since DD for the fees stands already made the assessee is forced to return the amount of discount to the student in cash. As most of the students don't have bank account and many of them also don't like to give the amount of discount back to their parents who arranged fees for their education the assessee is compelled to pay the students the amount of discount in cash and such amount of discount is debited by assessee in his books of accounts under the head SMU admissions expenses. As the amount paid to each student varied between 1000 to 5000, no infringement of provisions of section 40A(3) was made by the assessee because the payment was below the then. d. The assessee would also like to submit that during F.Y. 2009-10 (relevant to A.Y. 2010-11) the total fees collection under the head distance education program was of Rs. 6,63,174/-. In F.Y. 2010-11 (relevant to A.Y. 2011-12) the fee collection for ....
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.... between the ranges of Rs. 1000/- to Rs. 5000/- depending upon the payment of fees recovered from the students. Sometimes students deposited lower amount towards there admission fees by deducting the discount amount suo-moto and in such cases appellant had to deposit the full amount of fees to the Sikkim Manipal University. Sometimes the appellant had to return the discount and/or referral amount to the discount claimers after receiving the income from the Sikkim Manipal University. h. It will not be out of place to mention that while disallowing the SMU admission expenses reliance has been placed by lower authorities on following judgments of Hon'ble Supreme court. It is respectfully submitted that in view of under mentioned reasons all these three cases are not at all applicable in the facts and circumstances of the appellant assessee's case:- S.no Case Name Reasons of non applicability of these S.C.cases 1. SumatiDayal vs. CIT 214 ITR 801 This case is under section 68 of the IT Act. 2. C. Vasantal& Co. 45 ITR 206 (SC) This case is related to applicability of evidence Act in relation to proceedings under the IT Act 3. ChaturbhujPanauj AIR....
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....elation to payment to various persons (i.e. visiting faculties) for teaching to students of the appellant assessee and also resolving the queries and subject related problems of such students. b. In the course of assessment proceedings the assessee furnished a detailed list of the visiting faculties(i.e. experts of a particular subject) containing the particulars like date of their visit, name and complete postal address of the visiting faculty and the amount paid to each of them aggregating to Rs. 4,00,100/-. c. In the year under appeal the appellant assessee called as many as 26 visiting faculties and total payment of Rs. 4,00,100 was made to them. By no canon of law such a small payment to 26 visiting faculties against an income of SMU at Rs. 65,53,723 can be termed as unjustified iii. Disallowance out of Vehicle running and maintenance and depreciation expenses of Rs. 4,22,780/- a. The A.O. made disallowance of Rs. 30,000/- on adhoc basis out of above mentioned expenses mainly for the reason that personal use of vehicles by the assessee and his family members cannot be denied and the assessee has not maintained log book. b. In above ....
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....pporting evidence in the form of invoices and vouchers were produced before the A.O. in the course of assessment proceedings iii. That the learned A.O. has not pin pointed any specific defects in the books of accounts including bills and vouchers. So much so the trading receipts declared by the assessee have been accepted as it is by the A.O. himself. iv. That the learned A.O. has also not found any flaw in the nature of expenses nor in supporting evidence produced by the assessee. v. That disallowance of expenses have been made on adhoc basis without pointing out any specific instance of non-maintenance of voucher by the assessee or disallowable nature of expenditure . vi. That the A.O. has categorically mentioned the fact of examination of books of accounts including bills and vouchers maintained by the assessee in the last para of page. 1 and starting lines in page 2 of the relevant assessment order and no adverse observation has been made by him in respect of the books of accounts maintained by the assessee. vii. It is respectfully submitted that it is well settled law that no disallowance of expenses can be made on adhoc basis witho....
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.... P&L a/c, the assessee has shown income from SMU amounting to Rs. 65,53,723/-. Against the above expenses, the assessee has claimed SMU admission expenses of Rs. 11,47,370/-. These expenses were claimed on account of discount & referral amount paid to various students during the year under consideration. During the assessment proceedings, vide note sheet dated 31.12.2014, the assessee was asked to produce students to whom discount & referral amount paid on account of admission in SMU. In compliance, the assessee did not produce the students for examination. He had submitted only affidavit in total four cases without their production. Later on, vide this office letter dated 16.02.2015, the assessee was asked to show cause as to why claim of SMU admission expenses of Rs. 11,47,370/- should not be disallowed u/s 37 of the Income-tax Act, 1961. In reply, vide his letter dated 23.02.2015, the assessee submitted that in the SMU admission expenses of Rs. 11,47,370/- , Rs. 10,08,185/- has been shown as paid cash towards discounts and incentives. Out of this Rs. 40,000/- is towards purchase of material for marketing, Rs. 9,33,185/- has been booked as discounts and Rs. 35,0....
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....yment was made in cash and none of the recipient of payment of referral fee/discount claimed were produced for verification. On perusal of overall facts, I find that entire payment of discount/referral for is made in cash to the student. Appellant has not filed supporting evidence to prove the same except four affidavits. The absence of verification of payment, the genuineness of expenses cannot be accepted. Therefore, action of Assessing Officer in making disallowance out of Sikkim Manipal University (SMU) discount is upheld. However, credit for the person whose affidavits were filed could be allowed which comes to Rs. 13,000/- and balance is upheld. This ground of appeal is partly allowed. 2.3.1 So far as disallowance out of computer installation visiting faculty, vehicle running, phone expenses are concerned, the same is excessive, therefore the same is restricted to 50% of the disallowance made which works out to Rs. 87,687/-. Regarding disallowance of Rs. 36,270/- out of birthday expenses, this is a personal expense and therefore Assessing Officer correctly disallowed the same. This ground of appeal is partly allowed." 8. We have heard the rival c....
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....by the assessee to this effect is a ledger account of SMU admission expenses and affidavit of four students which to our mind is not sufficient enough in support of the claim of the expenses. As we have noted above, there are matters which needs to be examined in detail and relevant facts brought on record. Therefore, we are of the considered view that it would be just and appropriate that the matter is set-aside to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. In the result, the ground of appeal no. 3 is allowed for statistical purposes. 11. Regarding disallowance of computer AMC expenses, the AO has disallowed the same for the reason that no proper vouchers have been maintained and expenses have been incurred in cash. Therefore, the reason for disallowance is not maintenance of proper vouchers coupled with the fact that payment has been made in cash and in view of the same, the expenses so claimed by the assessee have not been substantiated. Even before the ld CIT(A) or during the present proceedings, nothing has been brought on record in support of said claim of expenses in form of terms of AMC arrangement/contract and ....
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....receipts offered to tax could be a starting point for examination, however, the same by itself cannot be a sole determinative of claim of the expenditure and therefore, merely because the quantum of expenditure, as per assessee's own yardstick is small, the same cannot be a basis for allowability of the expenditure so claimed. In our view, what is more relevant for the assessee to substantiate and for the AO to examine is whether as many as 26 faculty members were actually been employed as so claimed during the year under consideration, the courses/subject matter in respect of which they were employed, how much amount was received from the University towards such faculty arrangement and whether the amount paid to them is commensurate with time and assistance provided by them to the students. However, there is nothing on record which has been submitted by the assessee to substantiate his claim and consequently, no finding of the AO in this regard. 14. Having said that, if we look at the specific reasons as so specified in the assessment order as to why the AO has disallowed the faculty expenses, the same is on account of non-production of these faculty members for examination bef....
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.... and no logbook has been maintained and personal use of the vehicles by the assessee and his family members cannot be denied and a sum of Rs. 30,000/- out of total expenses claimed by the assessee amounting to Rs. 4,22,780/- has been disallowed by the AO. In his submissions, the assessee has submitted that it is merely on suspicion that the vehicles have been used for personal purposes, the disallowance has been made by the AO and further, depreciation is a statutory allowance u/s 32(1) and there cannot be any disallowance out of such statutory allowance. It is no doubt true that mere suspicion cannot be a basis for disallowance, however, where the AO has asked the assessee to substantiate his claim by producing the vehicle logbook and where the assessee failed to produce the same or any other document, the findings of the AO cannot be termed as based on mere suspicion but are in form of definitive finding that the vehicles have not been used exclusively for business purposes in absence of necessary substantiation by the assessee. Regarding claim of depreciation u/s 32(1), no doubt it is a statutory allowance and even in cases, where the assessee has not claimed, there is a statuto....