2016 (11) TMI 253 - AT - Income Tax

TDS u/s 195 - Disallowance of expenses - no particulars were filed in respect of the lease rentals paid, the legal and professional cost and travel cost were in the nature of provision and no TDS has been made in respect of the selling cost - Held that - AR has filed voluminous documents and details as part of the paper book evidencing that the above expenses were actually incurred and the same were for the purpose of the assessee s business. Similarly, with regard to the selling cost the Ld. AR has filed exhaustive details with regard to the payments made to various non-resident parties and the services rendered by the said parties alongwith copies of agreements and invoices. It is argued that the payments made to the said non-resident parties were for the purpose of marketing and consultancy services rendered outside India and the said payments were not exigible to tax deduction at source u/s 195 of the Act as there was no income accruing or arising in India in the hands of the said non-resident parties in view of Section 9(1)(vii) of the Act read with Section 90(2) and the treaty provisions as per the India-USA DTAA. Thus the finding of the CIT(A) that the AO has completely misconstrued the facts and legal provisions with regard to the above additions is correct. The AO has also not given any adverse material observation whatsoever against the above submission of the assessee and the voluminous details filed as part of the remand proceeding. The AO has also not been able to make out any case for TDS u/s 195 of the Act in the case of selling cost. In view of the above, the impugned additions made by the AO was rightly rejected by the CIT(A). - Decided against revenue

Summary

Issues:
1. Disallowance of lease rental paid
2. Disallowance of legal and professional cost
3. Disallowance of travel cost
4. Disallowance of selling cost due to non-deduction of TDS

Issue 1: Disallowance of Lease Rental Paid

The appellant claimed a deduction of ?63,82,442 as lease rental paid, which was disallowed by the Assessing Officer (AO) due to lack of supporting documents. The AO added this amount to the declared income. The CIT(A) observed that the AO's disallowance lacked detailed discussion and specific requests for expense details. The appellant argued that the expenses were genuine and submitted evidence supporting the claim. The CIT(A) found the AO's decision erroneous, stating that the lease rental expenses were legitimate business expenses. Consequently, the disallowance was deleted.

Issue 2: Disallowance of Legal and Professional Cost

The AO disallowed ?11,11,500 from the legal and professional cost claimed by the appellant, considering it a mere provision without actual expenditure. This amount was added to the appellant's income. The CIT(A) reviewed the case and noted that the AO's decision lacked substantial reasoning and specific demands for expense particulars. The appellant provided detailed documentation proving the legitimacy of the expenses. The CIT(A) concluded that the disallowance was unfounded and allowed the appellant's appeal, deleting the addition.

Issue 3: Disallowance of Travel Cost

Regarding the travel cost, the AO disallowed ?52,56,526, considering it a provision without actual expenditure. This disallowed amount was added to the appellant's income. The CIT(A) examined the case and found the AO's decision lacking in-depth analysis and specific requests for expense details. The appellant furnished extensive evidence demonstrating the genuineness of the expenses. The CIT(A) determined that the disallowance was unjustified and, therefore, deleted the addition.

Issue 4: Disallowance of Selling Cost due to Non-Deduction of TDS

The AO disallowed ?1,17,85,481 of selling cost due to non-deduction of TDS on payments made to overseas vendors. The AO held that no supporting documents were provided for these payments. The CIT(A) analyzed the case and found the AO's decision lacking detailed examination and specific demands for payment evidence. The appellant presented comprehensive details, agreements, and invoices supporting the payments made to non-resident parties. The CIT(A) concluded that the AO misinterpreted facts and legal provisions, leading to the unjust disallowance. Consequently, the disallowance was overturned.

In conclusion, the CIT(A) dismissed the Revenue's appeal, emphasizing that the AO's disallowances lacked substantial justification and detailed scrutiny. The CIT(A) found the appellant's expenses genuine and allowable, deleting the additions made by the AO. The decision was pronounced on October 20, 2016.