TaxTMI 
TaxTMI 
2021 (10) TMI 65
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....ut pointing out any specific items. The disallowance as made by the Assessing Officer and confirmed by the Ld. CIT(A) being based on erroneous views and / or non-appreciation of the facts and law deserves to be deleted. 2. That the Ld. CIT(A) has erred in confirming the disallowance of Rs. 55,14,741/- out of legal and professional expenses made by the Assessing Officer by invoking the provisions of section 40(a)(i). The Ld. CIT(A) has wrongly treated the said payments as Fee for Technical Services. As per the respective DTAA, the payments involved are either business income of payee or are independent personal services. In absence of any PE or fixed place of business in India of the payee, as per the respective DTAA, the said payments are not chargeable to tax in India and as such no TDS is applicable thereon. The disallowance as made by the Assessing Officer and confirmed by the Ld. CIT(A) is based on erroneous views and / or non-appreciation of the facts and law. 3. No TDS was deductible out of legal and professional expenses either under the Act or under certain relevant provisions of the DTAA. As such, section 40(a)(i) is not applicable and the disallowance of....
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....d gifts incurred wholly and exclusively. 4. At the outset, Ld. Counsel for the assessee submitted that the additions have been made purely on adhoc basis. 5. On the contrary, Ld. Sr. DR supported the orders of the authorities below. 6. We have heard the rival contentions and perused the material available on record. We find merit in the contentions of the Ld. Counsel for the assessee that the addition has been made purely on adhoc basis. The Assessing Officer has not pointed out any specific item related to the personal uses. Therefore, the addition made by the Assessing Officer and sustained by Ld.CIT(A) is not justified hence, deleted. 7. Ground Nos.2 & 3 raised by the assessee are against the disallowance of Rs. 55,14,741/- out of legal and professional expenses by invoking section 40(a)(i) of the Act. 8. Ld. Counsel for the assessee submitted that under the identical facts, the disallowance made by the Assessing Officer for Assessment Year 2009-10 deleted by the Tribunal and confirmed by the Hon'ble Delhi High Court. 9. On the contrary, Ld. Sr. DR supported the orders of the authorities below. However, he conceded the fact that the issue has been decided in fa....
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....d the fact that similar addition was made in the earlier year which has been deleted by the Tribunal. 15. We have heard the rival contentions and perused the material available on record. The issue is identical to the issue involved in the earlier year. The matter travelled to Hon'ble High Court. Hon'ble High Court has confirmed the deletion made by the Tribunal by observing as under:- "So far as the second issue, i.e. the disallowance under section 36(1)(iii) is concerned, the addition was made purely on the basis that the funds were borrowed by a Director and that interest needed to be charged. This was wholly erroneous premise because the amounts were given to the Director for purely business purpose of the entity, i.e. to acquire guest house. The proposal did not materialize and eventually the money was returned. It is not Revenue's case that the amounts were utilized by the Director for her own purpose. In these circumstances, the ITAT appropriately relied under CIT vs Bharti Televentures Ltd. (2011) 331 ITR 502 (Del.). The finding with respect to commercial expediency, in the circumstances, does not call for interference." 16. Respectfully following the binding....
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....lawful. 4. That the Ld. CIT(A) has erred in confirming the disallowance of Rs. 25,88,314/- out of the total disallowance of Rs. 34,99,078/- in respect of legal and professional expenses by invoking the provisions of section 40(a)(i). The Ld. CIT(A) has wrongly treated the said payments as Fee for Technical Services. Either under the Act or under the respective DTAA, the payments involved are either business income of payee or are independent personal services. In absence of any business connection/PE or fixed place of business in India of the payee, the said payments are not chargeable to tax in India and as such no TDS is applicable thereon. The disallowance as made by the Assessing Officer and confirmed by the Ld. CIT(A) being based on erroneous views and /or non-appreciation of the facts and law deserves to be deleted. 5. No TDS was deductible out of legal and professional expenses either under the Act or under certain relevant provisions of the DTAA. As such, section 40(a)(i) is not applicable and the disallowance of Rs. 25,88,314/- out of Rs. 34,99,078/- is liable to be deleted. 6. That the disallowances have been made and certain adverse comments ma....
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....r reduction." 34.1. We find that Ld.CIT(A) had issued direction by observing as under:- 4.1.2. "From the Ledger Account it is evident that large number of above payments are cash payment. Total cash payment is Rs. 1,39,963/ which include several payments that have been made to a person in a day exceeding Rs. 20,000/- which is not allowable u/s 40A(3) of the I.T.Act, as under:- Date Amount (Rs.) Remark 01.11.2010 23,860/- Being cash paid to Mr. Naveen Garg. 12.11.2010 27,775/- Being cash paid for staff. 24.11.2010 39,477/- Being cash paid to Mr. S N Pandey. 26.11.2010 23,500/- Being cash paid to Mr.S N Pandey. Total 1,14,612/- In view of cash payments without any detail the disallowance made by the AO is fully justified. Further, considering the provisions of Sec. 40A(3) if the circumstances as prescribed in Rule 6DD are not fulfilled in the case of the assessee, the disallowance is to be enhanced to Rs. 1,14,612/-. AO is directed to verify whether the circumstances as prescribed in Rule 6DD are fulfilled by the assessee, before enhancing the disallowance. Therefore, appeal fails in this ground with di....