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TaxTMI 
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2023 (6) TMI 1265
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....nses. 3. That on facts and in law, the learned CIT(A) has grievously erred in holding that even otherwise provisions of section 40A(3) of the Act are applicable to payments of Rs.1,16,433/- 4. That on facts and in law, the learned CIT(A) has grievously erred in enhancing the assessment by including excise duty component of Rs.4,89,852/- in closing stock of consumables. 5. That on facts, and in law, the learned CIT(A) has grievously erred in enhancing the assessment by making disallowance out of consultancy expenses by treating the following expenses as capital in nature : i) Matters with due diligence 30,27,548/- ii) Property valuation matter 11,236/- iii) Business financial consultant 70,78,680/- iv) Management consultant fee for software 1,29,032/- V) Management consultant in finance matters 3,00,000/- v) Fee for rating matters 2,07,525/- Total 1,07,54,021 The appellant craves leave to add, alter, amend any ground of appeal." 4. The assessee has also raised the following additional Grounds of appeal: "The following ground was left out to be raised at the time of filing of Appeal before ITAT through oversight: The ....
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...., therefore, justified in deleting the addition. 5. As a result, departmental appeal is dismissed." 7. In view of the above observations made by the ITAT, ground number 1 of the assessee's appeal is allowed. Ground number 2: disallowance of Attimari Coolie expenses: 8. The brief facts in relation to this disallowance are that the assessee claimed Attimari Coolie expenses amounting to 4,73,245/- out of which Ld. CIT(Appeals) confirmed disallowance of 25% amounting to 1,18, 311/- under section 37 of the Act for want of supporting evidence. The Ld. CIT(Appeals) held that considering the fact that the entire expenditure has been made in cash, the genuineness of expense cannot be verified. He accordingly disallowed 25% of such expenses under section 37 of the Act. 9. Before us, the counsel for the assessee submitted that the ITAT in the assessee's own case vide order dated 04-07-2018 in ITA number 3476/Mum/2016 for assessment year 2011-12, had restricted the disallowance to 25% of Attimari Coolie expenses. Accordingly, the counsel for the assessee submitted that it shall not be pressing ground number 2 and 3 (which are also related to the same disallowance) in light....
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....see has to: a) Establish the practice prevailing in That line of business for making such payments: b) To adduce satisfactory evidence to establish The payments: and c) To satisfy the authorities that the payments were made for the purpose of business. The appellant may have sufficiently established the practice prevailing but the payments have not been established nor the extent of the requirement or purpose for business. Looking to the entirety of the facts, I restrict the disallowance to 25% of the expenses. Therefore, the disallowance of Rs.28,47,339/- is upheld to the extent of Rs. 7,11,835/- and the remaining disallowance is directed to be deleted." 5. The learned Sr. Departmental Representative, relied on the assessment order. On the other hand, the learned Counsel for the assessee filed copy of CIT(A) order for AY 2009-10 and 2010-11, wherein similar disallowance deleted by CIT(A). In AY 2009-10, the CIT(A) in appeal No CAS-l/231/11-12 vide order dated 08.03.2013 deleted the addition by observing in Para 7.4 and 7.5 as under: - "7.4 From a perusal of bills, it is noticed that the entire payment to workers' associations has been made in cash. Moreover, ....
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....Mumbai in the assessee's own case for assessment year 2011-12 has confirmed the addition to the extent of 25%, the assessee shall not be pressing for grounds of appeal number 3. 12. In the result, ground number 3 of the assessee's appeal is being dismissed as not pressed. Ground number 4: inclusion of excise duty component of 4,89,852/- in the closing stock of consumables 13. The brief facts in relation to this ground of appeal are that the Ld. CIT(Appeals) enhanced the assessment order by including the excise duty component of 4,89,852/- in the closing stock of consumables. The counsel for the assessee submitted that this ground of the assessee is covered in favour of the assessee by various decisions on this issue. In response, DR relied on the observations made in the order of the Ld. CIT(Appeals) and accordingly, Ld. CIT(Appeals) has not erred in facts and in law in enhancing the scope of additions made during the course of assessment proceedings. 14. We have heard the rival contentions and perused the material on record. 15. We are in agreement with the argument of the counsel of the assessee that on merits, this issue is covered by various decisions, includi....
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.... stock of finished goods at end of accounting period. 16. In view of the above decisions including one rendered by the jurisdictional Gujarat High Court in the case of Narmada Chematur Petrochemicals supra, ground number 4 of the assessee's appeal is allowed. Ground number 5: CIT erred in enhancing the assessment by making disallowance out of consultancy expenses by treating the expenses as capital in nature 17. The brief facts relating to this ground of appeal are that during the course of appellate proceedings before Ld. CIT(Appeals), he held that certain expenses more particularly payment towards due diligence study to M/s AZB Partners amounting to Rs.30,27,548/-, payment of Rs.70,78,680/- made to M/s Sagacious Financial Services Private Limited for business financial consultancy (services primarily related to financial consultancy for raising private equity finance) and payment of Rs.1,12,60,215/- to M/s BJ Services Middle East Limited was capital in nature and could not be claimed as revenue expenditure. Besides the above, Ld. CIT(A) also held that some other expenses amounting to Rs.4.40 lakhs approximately were also required to be capitalized by the assessee. Accordingly....
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....he assessee company. These services were availed at the behest of M/s Franklin Templeton, who wanted a due diligence study conducted on the company so as to decide whether financial investments could be made in the assessee company. In the case of Onmobile Global Ltd. [2021] 129 taxmann.com 254 (Karnataka), the High Court held that Legal and professional expenditure incurred for conducting due diligence in report of a company which was to be acquired by assessee would be eligible for deduction under section 37(1) of the Act. Again, in the case of Intercontinental Hotels Group India (P.) Ltd. [2013] 33 taxmann.com 153 (Delhi - Trib.), the ITAT held that where assessee in course of providing support services to its foreign based parent company engaged in hotel business, availed services of a Singapore based company for carrying out due diligence and risk analysis of target hotels, payments made in respect of said services was to be allowed as business expenditure. Therefore, looking into the facts of the instant agreement, we are of the considered view that the payment towards due diligence services made to M/s AZB Partners is revenue in nature. The assessee also paid a sum of Rs. 1,....