2016 (8) TMI 1573 - AT - Income Tax

Addition on account of commission paid to directors by the assessee company - HELD THAT - We have perused the records placed before us and orders referred and relied upon by the Ld. AR in assessee s own case for assessment year 2005-06 and 2006-07. It is observed that the similar payment has been made to the same employee directors during those preceding years. The facts and circumstances being similar and identical to the year under consideration we respectfully following the decision of the coordinate bench of this tribunal in assessee s own case for the previous assessment years hold that the payment of commission was justified and is allowable under section 36 (1) (iii) . Addition made u/s 14 A read with Rule 8D on account of expenditure incurred for incurring dividend, being exempt income - HELD THAT - It is undisputed facts that Rule 8D is not retrospective and therefore is applicable from assessment year 2008-09. We accordingly set aside this issue to the Ld. AO for calculating the disallowance under section 14 A of the act by applying the ratio laid down by the Hon ble jurisdictional High Court in the case of M/s Maxopp Investment Ltd 2011 (11) TMI 267 - DELHI HIGH COURT Depreciation at the rate of 60% on addition of computer peripherals, printers, UPS etc - AO and CIT (A) allowed the depreciation @ 15% on the basis that the UPS is not an integral part of the computer as the computer can function without these peripherals - HELD THAT - As decided in own case 2014 (7) TMI 1314 - ITAT DELHI since the expenditure is with regard to the computer peripherals, printers, UPS which cannot be used stand alone, therefore, in view of the decision relied upon by the appellant, I agree that in the facts and circumstances of the appellant's case, he is entitled for depreciation @ 60%. Allowability of foreign travel and conveyance expenses - AR submits that the details of the foreign travel expenses have been provided in the paper book which include the provision for dividend - HELD THAT - We agree with the contentions of the Ld. AR that the provision for dividend has been added back in the computation. Therefore we are inclined to modify the directions issued by the Ld. CIT (A) that the Ld. AO may allow the same as an expenses. TDS u/s 195 - No deduction of TDS on payment of external services and recruitment expenses - HELD THAT - In the instant case the assessing officer has not discussed any factual aspect in respect of the payment made by the assessee to the non-resident. The Ld. AR has submitted before us the MOU dated 10/07/2006 entered into by the assessee with the non-resident. We accordingly remand the issue to the Ld. AO for verifying the details as submitted by the assessee before the Ld. CIT (A) and to examine the issue in the light of the decision by Hon ble High Court in the case of CIT versus EON Technology Private Limited 2011 (11) TMI 20 - DELHI HIGH COURT Accordingly this issue raised by the assessee stands allowed for statistical purposes. Bad debt and advances reimbursed - bad debts being outstanding for more than a year and a recovery was remote - assessee claimed the said amount as bad debt under section 36 (1) (vii) - AO rejected assessee s contentions as the companies were well-known group and there was no reason for the bad debts to become bad - HELD THAT - During assessment proceedings the Ld. AO was well possessed with these details, to prove that the debts were written off. A similar issue arose before Hon ble Supreme Court in the case of M/s Vijaya Bank versus CIT and Anr. 2010 (4) TMI 46 - SUPREME COURT wherein the Hon ble court has held that an assessee debits the amount of bad debts to the profit and loss account and credits the said account it would constitute a write-off of actual bad. In the light of the ratio laid down by Hon ble Supreme Court in the case of M/s Vijaya bank Vs.CIT (supra) the claim of bad debts stands allowed.

Issues Involved:
1. Addition on account of commission paid to directors.
2. Addition under section 14A on account of expenditure incurred for earning exempt income.
3. Disallowance of depreciation on computer peripherals, printers, UPS.
4. Disallowance of foreign travel and conveyance expenses.
5. Disallowance of expenditure where TDS was not deducted.
6. Disallowance of bad debts written off.

Issue-wise Detailed Analysis:

1. Addition on Account of Commission Paid to Directors:
The assessee contested the addition of Rs. 8,25,697/- made by the AO on account of commission paid to directors. The tribunal noted that similar payments were made in previous years and were approved by the Board of Directors. The Hon'ble Jurisdictional High Court in CIT vs. Dalmia Promoters Developers (P) Ltd. held that there should be a material change in facts or law to reject the view taken in earlier years. Since there was no such change, the tribunal allowed the commission payment under section 36(1)(iii) and ruled in favor of the assessee.

2. Addition Under Section 14A on Account of Expenditure Incurred for Earning Exempt Income:
The AO made an addition of Rs. 3,11,30,314/- under section 14A read with Rule 8D. The tribunal noted that Rule 8D is applicable prospectively from the assessment year 2008-09, as per the jurisdictional High Court's decision in M/s Maxopp Investment Ltd. vs. ACIT. The tribunal set aside the issue to the AO for recalculating the disallowance under section 14A without applying Rule 8D.

3. Disallowance of Depreciation on Computer Peripherals, Printers, UPS:
The assessee claimed depreciation at 60% on computer peripherals, printers, and UPS, which the AO and CIT(A) allowed at 15%. The tribunal referred to its decision in the assessee's case for the assessment year 2008-09, where 60% depreciation was allowed. Since these items form an integral part of the computer, the tribunal allowed the depreciation at 60%.

4. Disallowance of Foreign Travel and Conveyance Expenses:
The AO disallowed Rs. 31,66,650/- included in foreign travel expenses, considering it as a provision for dividend. The CIT(A) remanded the issue to the AO for verification. The tribunal observed that the provision for dividend was already added back in the computation of taxable income and directed the AO to allow the expenses.

5. Disallowance of Expenditure Where TDS Was Not Deducted:
The AO disallowed Rs. 32,17,320/- for external services and recruitment expenses without TDS deduction. The CIT(A) remanded the issue for verification. The tribunal noted that payments were made to a non-resident entity with no permanent establishment in India, and no TDS was required as per CBDT circulars. The tribunal remanded the issue to the AO for verification in light of the jurisdictional High Court's decision in CIT vs. EON Technology (P) Ltd.

6. Disallowance of Bad Debts Written Off:
The AO disallowed Rs. 29,39,405/- claimed as bad debts, doubting the genuineness since the companies were well-known. The CIT(A) upheld the disallowance. The tribunal noted that the debts were written off in the profit and loss account and referred to the Supreme Court's decision in M/s Vijaya Bank vs. CIT, which allows such write-offs. The tribunal allowed the claim of bad debts.

Separate Judgments for Assessment Year 2010-11:

1. Assessee's Appeal (ITA No. 1057/Del/2014):
The only issue was the disallowance under section 14A. The tribunal followed its decision for the assessment year 2009-10 and set aside the issue to the AO for re-adjudication.

2. Revenue's Appeal (ITA No. 2280/Del/2014):
The issue was the deduction under section 36(1)(ii) for commission paid to employee directors. The tribunal dismissed the appeal, following its decision for the assessment year 2007-08.

3. Assessee's Cross Objections (CO No. 16/Del/2015):
The cross objection was dismissed as infructuous since the revenue's appeal was dismissed.

Order Pronounced:
The order was pronounced in the open court on 18th August 2016.

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