2012 (11) TMI 1247 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of consultancy charges paid to Boston Consulting Group (BCG).
2. Disallowance of travelling expenditure.
3. Disallowance u/s 43(B) of the Income Tax Act in respect of unpaid Service Tax.

Summary:

1. Disallowance of Consultancy Charges Paid to Boston Consulting Group (BCG):
The issue raised by both the revenue and the assessee pertains to the disallowance of Rs. 1,05,00,000/- paid as consultancy fees to BCG. The Tribunal noted that this issue was covered by its earlier decision in the assessee's own case for A.Y 2006-07. The Tribunal had previously restricted the disallowance to 10% of the payment made to BCG, recognizing that while some elements of the consultancy report were outside the scope of the assessee's business, the majority of the expenditure was for business purposes. Consequently, the Tribunal followed its earlier decision and restricted the disallowance to 10% for A.Y 2007-08 as well. Ground No.1 of the assessee's appeal was partly allowed, and Grounds No.1 & 2 of the revenue's appeal were dismissed.

2. Disallowance of Travelling Expenditure:
The assessee did not press Ground No.2 regarding the disallowance of Rs. 9,56,624/- in respect of travelling expenditure. Consequently, this ground was dismissed as "not pressed."

3. Disallowance u/s 43(B) of the Income Tax Act in Respect of Unpaid Service Tax:
The AO had disallowed Rs. 4,42,775/- u/s 43(B) for unpaid Service Tax, which was upheld by the CIT(A). The assessee contended that the service tax liability was not debited to the P&L Account and was dependent on the realization of payment for services rendered. The Tribunal, considering the assessee's contention and the need for verification, restored this issue to the AO for re-adjudication as per law after providing a reasonable opportunity of hearing. This ground was allowed for statistical purposes.

Conclusion:
The departmental appeal was dismissed, and the appeal filed by the assessee was partly allowed in the manner specified. The order was pronounced in the open court on the 9th day of Nov. 2012.