TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 1140
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.... income of Rs. 4,23,15,150/-. Thereafter, the return was processed u/s. 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). Subsequently the case of the assessee was selected for scrutiny and notices u/s. 143(2) and 142(1) of the Act was issued on the assessee company. Pursuant to the notices, the AO acknowledges that the Ld. AR of the assessee company appeared from time to time and submitted the requisitioned documents. Subsequently, the AO passed the assessment order dated 30/12/2016 assessing total income at Rs. 8,18,63,245/-. 3. Aggrieved by the additions/disallowances made by the AO, the assessee filed an appeal before the Ld. CIT(A) who partly allowed the appeal of the assessee. Still not satisfied with the order passed by the Ld. CIT(A), the assessee is in appeal before us by raising the revised ground no. 1 which reads as under: "That, the Ld. CIT(A) erred in sustaining the disallowance of Rs. 59,54,395/- being 90% of the total site expenses of Rs. 66,15,994/- as unexplained expenses, on the alleged ground that most of the payments against expenses incurred were through case in spite of the fact that the appellant for providing support services at ....
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....ry etc. The Ld. AR thereafter invited our attention to the sample offer letters and subsequent appointment letters of Shri Sujash Dutta, Souparna Kumar Das and Anjan Mondal which are placed at Page 84-97 PB, who were recruited as trainees and were paid stipends. According to Ld. AR, these trainees on subsequent successful completion of the probation period were recruited as permanent employees and included in the payrolls of the company. As regards the AO's allegation that these expenses were incurred in cash, the Ld. AR explained that the trainees were mostly appointed at sites located at remote areas of West Bengal where Banking Services were not available. According to Ld. AR, it is common knowledge that mobile/cellular towers are located at faraway places away from the main city. Further, the amount of stipends paid to individual employee/trainees were very meager and therefore disbursed in cash. In order to buttress this fact, the Ld. AR drew our attention to Page 68-70 of the paper book, which shows that a sum of Rs. 4,606/- each was paid to 121 trainees on 13-04-2013 aggregating to Rs. 5,56,720/-. Further, on perusal of page 78-80 of the paper book, it was brought to our....
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....e fan, cable tie, silicon, pliers, screw driver etc), reimbursement of expenses, petty cash expenses and for salaries & wages. He pointed that no further details were either sought by the AO nor was any further enquiry made by the AO in the remand proceedings, which according to him, showed that the AO was unable to point out any infirmity or defect in the details/evidences furnished for the relevant year. Instead the AO had alleged that the ledger copy of 'site expenses' and sample offer letters did not establish that the genuineness of expenses claimed. Referring to the remand report, the Ld. CIT(A) also did not agree with the contentions of the assessee and upheld disallowance of site expenses to the extent of 90% by sustaining addition of Rs. 59,54,395/-.Narrating the aforesaid facts, the Ld. AR contended that the impugned disallowance was based on suspicion and the lower authorities were simply swayed by the special audit report of earlier year which was neither relevant nor applicable in the relevant assessment year. He thus urged that the impugned disallowance be deleted. 8. The Ld. AR further submitted that the addition made u/s. 69C of the act was itself erroneous....
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.... 11. The Ld. AR also brought to our attention that the actual site expenses incurred by the assessee company during the year was Rs. 1,02,95,994/- (66,15,994 + 28,80,000 + 8,00,000). He pointed out that the sum of Rs. 28,80,000/- was the salary paid to the trainees/employees who are stationed at different sites and therefore the same ought to have been transferred to the ledger account of 'site expenses' but inadvertently, the accountant of the company transferred the amount of Rs. 28,80,000/- from the ledger of 'Salaries & Wages' to the ledger of 'Transportation Expenses' by way of a journal entry passed on 31.03.2014. For this, he drew our attention to the ledger of Transportation Expenses(refer entry dated 31-03-2014, placed at page 104 of paper book. It is seen that the narration of the entry is 'SALARY AND WAGES AMT. TRF'. Further, it was brought to our notice that the same accountant transferred a sum of Rs. 8,00,000/- pertaining to the ledger 'Site Expenses' to the ledger 'Office Expenses'. The Ld. AR submitted that this mistake was noticed only during the course of assessment proceedings and since the accountant was unable to ....
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....er the disbursal of the same were made mainly through cash. Although the AO noted that 'site expenses' were to the tune of Rs. 66,15,994/-, but it is noted that due to inadvertent error on the part of the accountant, certain items of site expenses to the tune of Rs. 28,80,000/- & Rs. 8,00,000/- were erroneously transferred to the ledgers of 'transportation expenses' and 'office expenses' respectively. We thus note that the actual site expenses was to the tune of Rs. 1,02,95,994/- (Rs. 66,15,994 + Rs. 28,80,000/- + Rs. 8,00,000/-). It is noted that the assessee had filed vouchers/ledgers for discharging the burden to prove the veracity of the claim (refer pages 33-83 of paper book). The details of sample appointment letters (refer pages 84-97 of paper book) and the rationale for payment of stipends in cash has already been discussed in earlier paragraphs. Even the Ld. CIT(A) has acknowledged that assessee operates in more than 3000 sites scattered around the state and that the assessee had produced the documents called for, which contained in the document number, document date, cheque number, cheque date and narration. In the light of these facts, we are of t....
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....f 90% was made by him without any cogent reasoning. Even though the assessee had filed all the documents to substantiate its claim, the Ld. CIT(A) allowed only 10% of the claim, which cannot be accepted for the simple reason that if the Ld. CIT(A) was of the opinion that the assessee failed to produce material evidence to prove the expenditure then, he was at liberty to pin point the specific item of expenditure which he finds to be non-genuine for cogent reasons. On these facts, the action of the Ld. CIT(A) in disallowing 90% of the expenses is per se held to be arbitrary and whimsical in nature and against the 'Rule of Law'. The reliance placed by the Ld. AR on the judgment of the Hon'ble Mumbai ITAT in the case of TUV India Pvt. Ltd. Vs DCIT (ITA No. 6628/Mum/2017) reported in [2019] 110 taxmann.com 175 (Mumbai) in this regard, is found to be apt, wherein it was held that, "The assessee also submitted break up of these expenses before Ld. CIT(A) during appellate proceedings anti before the AO during remand proceedings which are placed in paper book. The Remand Reports were called for by Ld. CIT(A) from the AO with respect to additional evidences filed before it kee....
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....ssee in cash. Keeping in view the nature of the business of the assessee, there was nothing unusual in making the payment of truck hire charges in cash through self-made vouchers so as to doubt the genuineness of the expenditure incurred by the assessee on truck hire charges. Moreover, as rightly held by the Ld. CIT(Appeals), the ad hoc disallowance of Rs. 30,00,000/- made by the Assessing Officer was without any basis. In the case of Ranjit Singh Prem Singh Ahuja -vs.- DCIT (ITA No. 961/PN/2014 dated 24.06.2015), a similar issue had come up for consideration before the Pune Bench of this Tribunal and the disallowance of 2% of transport expenses made by the Assessing Officer by raising trivial objection was held to be not sustainable by the Tribunal on the ground that no material discrepancy whatsoever had been pointed out by the Assessing Officer in the books of account and other record maintained by the assessee in support of its claim for transport expenses. Keeping in view the decision of the Coordinate Bench of this Tribunal in the case of Ranjit Singh Prem Singh Ahuja (supra) and having regard to all the facts of the case, we are of the view that the ad hoc disallowance of Rs....
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....appeal of the assessee is against the action of the Ld. CIT(A) in confirming the disallowance of office expenses of Rs. 7,18,878/-. 22. Brief facts are that, according to the AO the assessee had incurred an amount of Rs. 14,37,756/- which was shown as 'Office Expenses' as compared to the sum of Rs. 5,39,518/- incurred in the last year. So, the assessee was asked to explain the significant increase. Pursuant to the query, the assessee explained that a sum of Rs. 8,00,000/- was on account of 'salary and wages' payable at different sites which ought to have been transferred to the ledger of 'Site Expenses' but due to inadvertent error of the accountant of the company, it was wrongly transferred to the ledger of 'Office Expenses' and therefore if such sum is excluded, then the actual Office Expenses incurred by the assessee was only Rs. 6,37,756/- (Rs. 14,37,756 - Rs. 8,00,000) which was comparable to the earlier year. In this regard, the Ld. AR drew our attention to the copy of the ledger of 'Office Expenses' which is enclosed at page 154-172 of the paper book, and particularly the entry dated 31-03-2014 (Page 172 of paper-book) whose narration....
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....snacks, coffee, stationary, coffee and tea for vending machines etc. which is necessary for units work sites also spreading to 3000 places. These items were purchased in the normal course of business and are found to be necessary for the smooth functioning of the business. Further, as already discussed while adjudicating Ground No. 1, Section 69C cannot be invoked n the facts of the present case. It is not a case that the expenses were not recorded in the books of accounts or that their source of payments were in doubt. The case laws cited by the AO/Ld. CIT(A,) as discussed while adjudicating Ground no. 1, is not applicable in the assessee's case. For the reasons as aforesaid, we do not countenance the action of the lower authorities in disallowing office expenses and accordingly direct the AO to delete the impugned addition of Rs. 7,18,878/-. Ground No. 2 stands allowed. 24. Ground No. 3 is against the action of the Ld. CIT(A) confirming the disallowance of "Transportation Expenditure" of Rs. 25,92,000/-. 25. Brief facts are that the AO noted from the ledger account of "Transportation Expenditure" of Rs. 31,20,457/- that the assessee had booked expenses of Rs. 28,80,000/- on....
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....ous and is accordingly directed to be deleted. Ground No. 3 is accordingly allowed. 27. Ground nos. 4 of the appeal of assessee is against the disallowance of sum of Rs. 2,99,999/- debited under the head 'Misc. Expenses written off'. The AO had disallowed the said claim on the ground that the assessee is not able to substantiate its claim by furnishing documentary evidences. During the course of appellate proceedings before the Ld. CIT(A), the assessee submitted the details of miscellaneous expenses with supporting vouchers enclosed at page 110-125 of the paper book. So, the Ld. CIT(A) called for remand report from AO. It was brought to the notice of the Ld. CIT(A) and the AO that, it would be evident from the supporting vouchers, the said expenses were incurred for the purpose of security licences fees, procuring sanitary items such as hand soaps, bleaching powders, purchase of food items such as tea/coffee/snacks for the staff, arranging review meetings at sites and etc. These expenses were incurred in the normal course of business and were actually office expenses which was inadvertently booked under the ledger 'Misc. Expenses written off. The AO however refused to ....
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....annot be disbelieved for making disallowance in the hands of the assessee. It is noted that the Ld. CIT(A) has not recorded any specific finding to allege that the expenses incurred by the assessee were either in-genuine or not incurred for the purposes of business. The only anomaly pointed out by Ld. CIT(A) has been found to be duly explained in the preceding paragraph. The disallowance impugned before us is therefore directed to be deleted. Ground No. 4 stands allowed. 31. Ground no. 5 of appeal of the assessee is against the disallowance of subscription and donation of Rs. 1,71,861/-. Brief facts as noted by the AO are that during the year, the assessee incurred an amount of Rs. 1,71,861/- on account of subscription and donation paid to local puja committee and local clubs. The AO opined that since donation and subscription paid to local puja committee and local clubs are not eligible for deduction u/s. 80G of the Act, such donation is not wholly and exclusively for the purpose of business and hence the sum was disallowed in the assessment order. On appeal, the Ld. CIT(A) confirmed the same. Aggrieved, the assessee has come before us. 32. Heard both the parties. It is noted th....
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....; 35. The detailed ledger and supporting journal entry were brought to the notice of authorities below and is found placed at pages 152-153 of the paper book. In this regard, it is noted that the assessee company had paid excess TDS on contractor amounting to Rs. 1,75,312/- and excess VAT of the Rs. 40,550/- in the earlier years and therefore, the same was lying outstanding in the books, since these excess statutory payments were no longer realizable, the assessee decided to write off these amounts standing in the books. Since the balances were written off in the normal course of business, the assessee claimed that it is allowable u/s. 37 of the Act. However the Ld. CIT(A) did not appreciate the same and sustained the order of the AO. In this context, it is noted that since these excess statutory payments were no longer realizable, the assessee has written off these amounts standing in the books. According to assessee, since these balances were written off in the normal course of business, the same is allowable u/s. 37 of the Act. However, it is not clearly discernible as to whether the assessee had actually written off this claim in the books of the assessee so, the same is resto....
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....43B of the Act. So, it is first required to be ascertained as to whether the interest paid on TDS qualifies as expenditure within any of the provisions contained in Section 30 to 37 of the Act. Before that, it is relevant to first ascertain the nature and allowability of the tax withheld/deducted by the payer. Admittedly, the withholding tax liability is a vicarious liability. The payer of expenditure is required to withhold the tax component (say Rs. 10) set out in Chapter XVII-B of the Act from the gross amount of expenditure (say Rs. 100). The payer acting as the agent of the Government is required to pay the said tax component (Rs. 10) to the credit of the Government. The expenditure (net of TDS) (Rs. 90) is paid to the payee. It is not in dispute that the gross sum (Rs. 100) viz., the net expenditure paid (Rs. 90) and the withholding tax component thereon (Rs. 10) is deductible as business expenditure in terms of Section 37 of the Act. To put it simply, the withholding tax/TDS is not in the nature of 'income-tax' as defined for the purposes of Section 40(a)(ii) of the Act. Instead the TDS deducted and paid on the business expenditure and is thus a deductible item u/s. ....
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....)(ii) disallows any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. As held in the foregoing, the TDS paid by the assessee is not in the nature of 'income-tax' of the assessee or 'tax levied on its profits and gain of business' and therefore the TDS component paid on the expenditure is not disallowable u/s. 40(a)(ii) of the Act. The Hon'ble Supreme Court in the case of Bharat Commerce & Industries Ltd. v. CIT (230 ITR 733), has held that if the income-tax is to be disallowed, then the consequent interest thereon should also be disallowed. The relevant observations are as follows: "If income-tax itself is not a permissible deduction under section 37, any interest payable for default committed by the assessee in discharging his statutory obligation under the Act, which is calculated with reference to the tax on income cannot be allowed as a deduction." (emphasis supplied) 41. Applying the above proposition laid down by the Hon'ble Supreme Court to the facts of the present case, since the TDS itself is not disallowabl....
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.... payment of TDS also cannot be disallowed u/s. 40(a)(ii) of the Act. For the reasons as aforesaid, the disallowance of interest paid on belated payment of TDS is hereby deleted. This ground stands allowed. 43. Ground no. 8 is against the disallowance in respect of Claim of Gratuity and Leave Encashment Payment of Rs. 71,18,021/-. Brief facts of the issue are that, the assessee had originally e-filed its return of income for AY 2014-15 on 26-11-2014 declaring total income of Rs. 4,94,33,170/-. Subsequently, the assessee e-filed revised return declaring total income of Rs. 4,23,15,150/-. On perusal of the return it was observed that the assessee had claimed deduction for the Gratuity and Leave Encashment of Rs. 71,18,021/- written back in the P&L A/c. According to AO, the TAR did not reflect that the Gratuity and Leave Encashment of Rs. 71,18,021/- was actually paid before the due date of filing the return and therefore the AO rejected the claim of the assessee and disallowed sum of Rs. 71,18,021/- in the assessment order. 44. During the course of appellate proceedings before the Ld. CIT(A), it was submitted that Gratuity and Leave Encashment of Rs. 71,18,021/- was debited in the b....