AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 2
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmission 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) in month of August, 2019 has instructed his counsel to file the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arned 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., vehicle running, maintenance and depreciation, telephone/mobile exp. (Ground of Appeal No. 4), staff members birthday celebration ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom 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 distance education program was Rs. 17,74,171/-. During these two years the assessee was not offering aggressive discount and incentives to students. After two years of low bus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng 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 1969 255 (SC) This case is related to land acquisition Act passed on 23/07/1968 i. That during the course of assessment proceedings, the appellant submitted the list of all the students and persons to who....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g 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 regard it is respectfully submitted that the Hon'ble Apex Court has in very many cases held that there must be something more than the bare suspicion to support an assessment. But in assessee's case there is not an iota of evidence of disallowable nature of expenditure nor is there any expenditure which is of disallowabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....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 without pointing out any specific defect or instance of non-maintenance of vouchers. Further, the disallowance also can't be made merely on the ground that payment has been made in cash unless the parties to whom payment is made are not genuine. The Hon'ble bench will very kindly find that no doubt regarding genuinenity of the parties has been raised by the lower authorities. viii. That there is a consensus of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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. 35,000/- has been booked as incentives. He further submitted that distance education is a very competitive market and for getting business all possible business decision which not only include giving advertisements and online marketing but also have to offer discounts to students as well as incentives to existing students for bringing their friends for new admission. The reply of the assessee is not acceptable due to the following reasons:- i) During the assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 contentions and perused the material available on record. Firstly, the issue under consideration relates to claim of SMU admission expenses. The assessee has explained that the nature of these expenses are discount, referral bonus, waiver of late fees etc given to existing and new students to increase enrollment for various courses/progammes of Sikkim Manipal University through the distant education centre which is being run by him. In response to the show cause notice issued by the AO, the assessee has submitted that distant educat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the invoices/bills raised by the vendor towards the AMC. Inspite of the same, we find that the AO has been reasonable enough in disallowing a sum of Rs. 35,000/- only out of total expenses of Rs. 3,86,352/- and which has already been restricted to Rs. 17,500/- by the ld CIT(A). Therefore, we donot find any infirmity in the findings of the lower authorities and the disallowance so made and sustained by the ld CIT(A) is hereby confirmed. 12. Regarding disallowance of visiting faculty expenses, the assessee has submitted that during the ye....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 before him and the fact that the amount has been paid to them in cash. No doubt, where the faculty members are regularly employed by the assessee, the onus is clearly on the higher side on the assessee and where the AO wishes to call for these persons for verification, the assessee is expected to reach out to his faculty members and take necessary steps to ensure their presence and attendance before the AO for necessary examination subject of course to academic and merely submitting a list and particulars of faculty members cannot be said to disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 statutory recognition that the AO should allow the same. At the same time, the provisions of section 32(1) are subject to provisions of section 38(2) wherein it has been provided that where the plant and machinery (which includes vehicles) are not used exclusively for the purposes of business, the AO is empowered to restrict the depreciation to a fair proportionate part thereof having regard to use of such plant and machinery for the purposes of business. Therefore, in the instant case, where the AO has recorded a finding that the vehicles have not bee....