2017 (12) TMI 130 - HC - Income Tax

Expenditure made on account of certified data purchase - Tribunal has recorded a finding of fact that the assessee had actually engaged in the activity of the sale of data to Bajaj Allianz for which it had purchased certain data from another entity - Held that - The finding of the Assessing Officer and the argument advanced on that basis that the assessee had failed to establish the contents of utility of the data and the process by which it was obtained etc. are largely irrelevant to the issue of the assessment of the income of the assessee. Once it had been established and accepted by the department that the assessee was infact engaged in the activity of purchase and sale of data and had generated revenue therefrom, the finding as to its utility etc., was not a matter that was decisive. While considering the claim of expenditure during the assessment. It is settled principle of Income Tax Law that the Assessing Officer cannot sit in the seat of the assessee and try to conduct the business in the manner he considers prudent. Thus the finding of fact recorded by the Tribunal has not been shown to be perverse. - Decided in favour of assessee. Disallowance of salary expenditure - Held that - Though the revenue does not dispute the existence of form-16 in respect of the salary disbursement, yet, the existence of such certificates is not enough to establish that such expenditure was genuine or that such payments had actually been made by the assessee. Neither the assessee produced the salary payment register nor it produced the vouchers in support of the salary payments which the Assessing Officer noted to have been made @ ₹ 2000/- to ₹ 8000/- each nor the assessee established total number of its employees, nor it disclosed their names, addresses etc. nor the assessee produced any affidavits of confirmation by any such employee acknowledging the salary payment as claimed by the assessee. The Tribunal has clearly misconstrued this issue and hurriedly concluded that the Assessing Officer had not pointed out the deficiency of vouchers. The finding of the Tribunal is thus, clearly not supported by any evidence. It is, therefore, perverse.Therefore, instead of remanding the matter to the Tribunal to decide the matter afresh, we consider it proper to remand the matter to the CIT (Appeals), which authority had dismissed the appeal of the assessee for his non-appearance. Part disallowance the Referral Fee - Held that - The expenditure on account of Referral Fee is supported by complete data voucher, form 16A with regard to TDS, PAN numbers of the persons giving their references and also TIN payments made, datewise. Though, the Tribunal found that the expenditure was duly established and genuine, nothing has been shown to doubt the correctness of the finding of the Tribunal in this regard. Accordingly, we find that the Tribunal has not committed any error in accepting the claim of the assessee with regard to the expenditure on account of payment of Referral Fee . The said finding is a finding of fact based on evidence on record. Therefore, the question no.3 raised by the revenue is answered in favour of the assessee

Summary

Issues:
1. Justification of disallowance under 'Certified Data Purchase'
2. Disallowance of salary and wages expenditure
3. Disallowance of referral fees

Issue 1: Justification of disallowance under 'Certified Data Purchase'

The appellant challenged the ITAT's finding that the disallowance under 'Certified Data Purchase' was unjustified. The Assessing Officer doubted the genuineness of the data purchased by the assessee. However, the Tribunal accepted the genuineness of the expenditure based on evidence presented, acknowledging that the data was purchased and utilized by the assessee for generating revenue. The Tribunal emphasized that once the department accepted the nature of the business activity, the details of the data's utility were not decisive for assessing income. The Tribunal's finding was considered well-founded, as it was based on evidence and relevant facts. Hence, the first question of law was answered in favor of the assessee.

Issue 2: Disallowance of salary and wages expenditure

The Assessing Officer disallowed the salary expenditure due to lack of supporting vouchers for entries disclosed by the assessee. The Tribunal, however, reasoned that the Assessing Officer failed to specify which vouchers were missing. The absence of vouchers and evidence supporting the salary payments raised doubts on the genuineness of the expenditure. The Tribunal's hasty conclusion that the AO did not identify the voucher deficiencies was deemed unsupported and perverse. The matter was remanded to the CIT (Appeals) for reassessment, granting the assessee an opportunity to present additional evidence on the salary disbursement issue. The second question was answered accordingly.

Issue 3: Disallowance of referral fees

The third question pertained to the partial disallowance of 'Referral Fee'. The Tribunal found the nature of the business activity conducted by the assessee to be genuine, as evidenced by consistent filings and allowances in previous years. Detailed evidence, including data vouchers, TDS forms, PAN numbers, and TIN payments, supported the 'Referral Fee' expenditure. The Tribunal's acceptance of the claim was upheld, as it was a factual finding based on the evidence presented. Therefore, the third question was answered in favor of the assessee. The appeal was partly allowed based on these findings.