TaxTMI 
TaxTMI 
2026 (7) TMI 1817
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....AO and CIT(A) be kindly allowed. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act, of 30% from the payment of professional fees of 21,30,350 to Soumiachandran KN by your Appellant, despite deduction of tax at source. Your Appellant prays that the deduction of expenditure of INR 39,105 disallowed by the learned AO and CIT(A) be allowed. 3.On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance of expenses made by the Assessing Officer of INR 1,27,44,990 under section 37(1) of the Act from the genuine year end provisions made on best estimate basis following the mercantile system of accounting. Your Appellant prays that the deduction of expenditure of INR 1,27,44,990 disallowed by the learned AO and CIT(A) be allowed. 4.Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that the Appellant had already suo moto disallowed 30% of the expenditure under section....
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....y disallowed 30% of the said provision amounting to Rs.54,62,139 under section 40(a)(ia) of the Act, while computing its income. The assessee submitted that the provisions were created on an estimated basis in accordance with the mercantile system of accounting, were reversed on the first day of the succeeding financial year and the actual expenditure was accounted for on receipt of invoices from the vendors. The assessee also contended that since the payees were not identifiable and the liability had not crystallised in favour of any particular person, there was no obligation to deduct tax at source. 5. The Assessing Officer did not accept the explanation. He observed that the assessee itself had admitted that the amount payable and the identity of the payees were uncertain. According to Ld. AO, the assessee was unable to establish the nature of the expenditure, failed to identify the beneficiaries of the provisions and was unable to demonstrate that the estimates were made on a reasonable basis. The Assessing Officer held that there being no reasonable certainty regarding the estimates, the provisions were contingent in nature. The Assessing Officer held that the year-end prov....
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....y evidence placed on record. Pages 104, 105 and 107 of the Paper Book clearly demonstrate that the legal professional expenses were initially incurred by CSLA and thereafter apportioned amongst its members, including the assessee, on an agreed basis. The assessee merely reimbursed its share of the actual expenditure incurred by the Association. Nothing has been brought on record by the Revenue to establish that CSLA recovered any amount over and above the actual expenditure incurred or any profit or income element was embedded in such recovery. 12. Further, from page 260 of the Paper Book, we observe, that while making payment to the concerned legal professionals, CSLA had duly deducted tax at source in accordance with the provisions of the Act. Therefore, the statutory obligation to deduct tax at source was discharged by CSLA at the stage of payment to the actual recipients of the professional fees. 13. The learned CIT(A), upheld the disallowance on the ground that the assessee had accounted for the same under the head "Professional Fees". In our considered opinion, the nomenclature adopted in the books of account cannot determine the true character of the transaction. The r....
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....d by the assessee. The Assessing Officer treated the provisions as contingent liabilities primarily on the ground that the assessee had not been able to furnish details regarding the nature of the expenditure, the identity of the parties, the basis of quantification and the material to prove that the liabilities had crystallised during the relevant previous year. The learned CIT(A) affirmed the action of the Assessing Officer on the same reasoning. 20. During the course of hearing before us, the learned counsel for the assessee placed a chart containing the break-up of the provision of Rs.1,82,07,129. The chart contains the names of the respective parties, the amount of provision made in each case and a brief description of the underlying dispute or claim, such as commercial disputes, recovery proceedings, cheque dishonour cases, detention and demurrage claims, labour disputes, customs proceedings, contractual disputes and other pending litigations. According to the learned counsel, this break-up was produced before us to demonstrate that the provisions were not general or ad hoc provisions but were made with reference to specific parties and for specific issues. 21. It is, h....