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2015 (5) TMI 392 - AT - Income TaxEx-gratia payment disallowed - payments made to ex-employees - Assessing Officer has raised allegation against the assessee that no employee was on the role of assessee company and impugned payment has been made either on behalf of M/s Ranbaxy Laboratories Ltd. or M/s Solrex Pharmacetuicals Company but this allegation has been made on the basis of doubt without bringing out any sufficient material or evidence. In this situation, when the quantum of payment has not been doubted and the assessee company is contended that Ms. Christen D Souza worked as a Secretary from 6.10.1999 and Mr. Chetan Madan worked as marketing executive posted at Ratlam from 01.04.1997. We, therefore, are of the considered view that it would be just and proper to allow assessee to show evidence of services rendered by them and evidence payment of ex-gratia payment as claimed by the assessee for the assessment year under consideration. - Decided in favour of assessee for statistical purposes. Disallowance of irrecoverable dues from Government department - Held that - In this regard to issue of allowability of ₹ 2,42,543/- Assessing Officer has pointed out this amount but has not made any addition or disallowance in this regard. But the CIT(A) picked up this issue and made a disallowance by holding that the requires details names of the employees and amount dues is not ascertainable. It was contended by the Ld. DR that there was no issue before the CIT(A) in regard to Ground No.2 but Form No.35, we clearly observe that this issue has been raised by the assessee before the CIT(A) as Ground No.1. We further note that the Assessing Officer ignored to adjudicate the allowability amount of bad debt to the employees and the CIT(A) made the addition by holding that no details and evidence have been filed in this regard without providing any opportunity of being heard for the assessee. Therefore, this issue was not properly adjudicated by the Revenue authorities below and the disallowance and addition has been made in a casual manner. We may point out that if the Assessing Officer has raised same issue it has not made any addition then the CIT(A) cannot picked up this issue making further disallowance and enhancement without adopting due opportunity of hearing of the assessee by simply holding that no details or evidence have been filed. Thus restore to the file of the AO for proper examination and verification - Decided in favour of assessee for statistical purposes. In respect to disallowance of ₹ 82,722/-, CIT(A) was not justified in holding that the government departmental dues cannot be claimed as irrecoverable, until and unless such a decision is taken by the respective government department and a letter to this effect issued by it. However, we are of the considered view neither the Assessing Officer nor the CIT(A) has examined the issue properly as they have not asked any explanation from the assessee to show that the claim amount of deposit and interest is due from which department, from which date and what efforts have been made by the assessee company to recover this amount. Even the details of departments and the dates of deposit and interest accrued thereon has not been given, therefore, we again find it appropriate, just and proper to restore this issue to the file of the AO for proper verification and examination in the light of observation made by the coordinate Bench of the Tribunal in the case of Quintegra Solutions (P) Ltd. (2011 (9) TMI 920 - ITAT CHENNAI). - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A of the Act r.w.r. 8D - CIT(A) rejected the contention of the assessee that the disallowance u/s 14A of the Act r.w.r. 8D of the IT Rules cannot exceed the amount of actual general and administrative expenses claimed by the assessee - Held that - CIT(a) approach was not proper and contrary to the basic principal vivid from the order of the Tribunal in the case of Gillette India Pvt. Ltd.(2012 (6) TMI 406 - ITAT DELHI ). We may further point out that the Assessing Officer has noted that the excess amount of ₹ 64,23,249/- debited to P&L account is being added back to the net profit but we are unable to see any basis for this segregation by the Assessing Officer for calculating and making and disallowance u/s 14A of the Act r.w.r. 8D(2) of the IT Rules 1962. At this juncture, we respectfully take cognizance on the decision of CIT Vs. Taikisha Engineering India Ltd. reported in (2014 (12) TMI 482 - DELHI HIGH COURT ) wherein a clear mode of calculation of disallowance has been given. Under the above facts and circumstances of the case, we find it appropriate that the issue of disallowance u/s 14A of the Act r.w.r. 8D of the IT Rules 1962 requires proper examination and verification at the end of AO and we restore the same to the file of AO with a direction that the issue should be decided afresh. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Disallowance of ex-gratia payment to ex-employees. 2. Disallowance of sum written off in Books of Account. 3. Disallowance under Rule 8D(2)(iii) of the Income Tax Rules. 4. Disallowance of deposits and accrued interest deemed irrecoverable. Issue-Wise Detailed Analysis: 1. Disallowance of Ex-Gratia Payment to Ex-Employees: The assessee contested the disallowance of Rs. 12,60,194/- paid to ex-employees Ms. Christen D'Mello and Mr. Chetan Madan. The CIT(A) upheld the disallowance, citing discrepancies in the appointment letters and lack of evidence for the payments. The Tribunal noted that the assessee had submitted appointment letters and evidence of payments, but these were not properly considered by the AO. The Tribunal directed the AO to re-examine the evidence and verify the payments, restoring the issue to the AO for proper verification and examination. 2. Disallowance of Sum Written Off in Books of Account: The assessee argued against the disallowance of Rs. 82,772/- debited as irrecoverable dues from government departments. The CIT(A) disallowed this amount, stating that no details or evidence were provided. The Tribunal observed that the AO did not make any disallowance but noted the amount. The CIT(A) made the disallowance without proper examination or verification. The Tribunal restored the issue to the AO for proper verification and examination, allowing the assessee to submit the necessary details and evidence. 3. Disallowance under Rule 8D(2)(iii) of the Income Tax Rules: The assessee challenged the disallowance of Rs. 63,74,000/- under Rule 8D(2)(iii) for administrative expenses related to investment activities. The CIT(A) upheld the disallowance, stating that the rule does not limit the disallowance to the actual expenses claimed. The Tribunal noted that the disallowance should not exceed the actual expenses claimed by the assessee. Citing the decision in the case of M/s Gillette Group India Pvt. Ltd., the Tribunal directed the AO to re-examine the disallowance in light of the actual expenses and the relevant legal precedents, restoring the issue for fresh adjudication. 4. Disallowance of Deposits and Accrued Interest Deemed Irrecoverable: The assessee claimed that deposits and accrued interest from government departments, totaling Rs. 82,722/-, were irrecoverable and should be allowed as bad debts or business loss. The CIT(A) disallowed the claim, stating that the assessee did not provide evidence of efforts made to recover the amounts. The Tribunal referred to the decision in the case of Quintegra Solutions (P) Ltd., which held that there is no distinction between private and government debts for the purpose of Section 36(1). The Tribunal restored the issue to the AO for proper verification and examination, allowing the assessee to provide evidence of efforts made to recover the amounts. Conclusion: The Tribunal allowed the appeal of the assessee for statistical purposes, restoring all issues to the AO for proper verification and examination, and directed the AO to provide due opportunity for the assessee to present evidence and explanations. The Tribunal emphasized that the disallowances should be re-examined in light of relevant legal precedents and proper verification of the facts.
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