2014 (5) TMI 851 - HC - Income Tax

Remand back made to the AO - Disallowance of Business Promotion Expenses Held that - The Tribunal remanded the matter to the Assessing officer to consider this claim as per the facts and materials brought on record and in accordance with law - The explanation given by the assessee for not being able to place the documents earlier on record has been accepted - The technical view taken by the lower authorities is thus corrected there was no error on the part of the Tribunal when the assessee is given an opportunity, or its order is vitiated by any error of law apparent on the face of record thus, no substantial question of law arises for consideration Decided against Revenue. Disallowance of guarantee commission paid to the two Directors Held that - Tribunal found that the Accountant of the Company committed a mistake in paying the commission @ 3.51% to the Directors and the assessee conceded before the Tribunal that this was a mistake and the commission has been restricted not 1% as claimed by the Revenue but 1.77% - The total payment, therefore is not more than Rs.10,52,000 - the Tribunal did not commit any error in upholding the limited payment and particularly when it is not found to be unreasonable or excessive thus, the order of the Tribunal is upheld Decided against revenue. Disallowance of deduction u/s 80IB of the Act Held that - The Tribunal has noted that the AO should have given an opportunity to submit the audit report in the new form - The disallowance is only because the audit report has not been filed by the assessee in the prescribed format - The matter was thus of form and not of substance - All that the Tribunal has permitted is that the audit report be brought on record - The reasons assigned by the assessee are found to be bonafide - If they are not attributing any deliberate or intentional act to the assessee then the Tribunal was justified in allowing the claim - The Tribunal performed its duty as the last fact finding authority and exercising appellate jurisdiction no substantial question of law arises for consideration - Decided against Revenue.

Summary

Issues:
1. Disallowance of Business Promotion Expenses
2. Disallowance of Guarantee Commission paid to Directors
3. Disallowance of deduction under section 80IB of the Income Tax Act

Analysis:
1. Disallowance of Business Promotion Expenses:
The court examined the issue of disallowance of Business Promotion Expenses for the Assessment Year 2004-05. The Tribunal remanded the matter to the Assessing Officer to allow the assessee an opportunity to substantiate the claim with additional evidence, correcting the technical view taken by lower authorities. The court found that the Tribunal's decision was in line with principles of natural justice and did not exhibit any perversity or legal error, thus not raising any substantial question of law.

2. Disallowance of Guarantee Commission paid to Directors:
Regarding the disallowance of guarantee commission paid to Directors, the court noted that the Tribunal found the payment to be reasonable after a mistake in the commission calculation was rectified. The court agreed with the Tribunal's decision, stating that the payment was not excessive or unreasonable, and the Tribunal's view was not legally flawed. Therefore, this issue did not raise any substantial question of law.

3. Disallowance of deduction under section 80IB:
The court addressed the disallowance of deduction under section 80IB amounting to Rs.28,07,464. The Tribunal observed that the Assessing Officer should have allowed the submission of the audit report in the correct format. The court agreed with the Tribunal's decision to permit the audit report to be filed, as the omission was not deliberate or false, and the defect was rectified at the appellate stage. The court found the Tribunal's decision justified and not raising any substantial question of law.

In conclusion, the court dismissed the Appeal, emphasizing that the Revenue should not file Appeals merely due to adverse orders, especially when they serve the interest of justice. The court criticized the Revenue for undermining the authority of the Income Tax Appellate Tribunal, affirming the Tribunal's decisions in the present case.