2022 (12) TMI 1163 - AT - Income Tax

Disallowance for bad debt - Allowable business loss - AO requires the assessee to explain the genuineness of claim of bad debt as required under the provision of 36(1)(iii) of the Act i.e. the amount claimed represents debt arising out of business transaction the amount has been included in the computation of income and the amount has been written off in the books of accounts - HELD THAT - It is the trite law that the nomenclatural given by the assessee for making a claim is not a decisive factor. The claim of the assessee whether allowable or disallowable has to be seen in the light of the provisions of the Act. Thus we are of the view that no disallowance can be made for the claim made by the assessee which was wrongly classified as bad debts. As such it was the duty of the authorities below to verify the nature of the claim based on the documents whether such bad debts can be classified as business loss and allowable under the provisions of section 28 or 37 of the Act. Though the assessee before the authorities below has contended that the impugned claim of the assessee represents the business loss but we note that no one has verified the agreement filed by the assessee in support of its claim which is available on record. Thus we are of the view that the claim of the assessee needs to be re-verified at the level of the AO de-novo as per the provisions of law. Therefore we hereby set aside the issue to the file of the AO for fresh adjudication. Hence the ground of appeal of the assessee is allowed for the statistical purposes. TDS u/s 194J - Disallowances of production expenses - Addition u/s 40(a))(ia) - HELD THAT - As coordinate bench of Hyderabad Tribunal in case of BBR Project (P.) Ltd 2020 (8) TMI 69 - ITAT HYDERABAD where the bench set aside the issue to file of the AO for fresh adjudication with a direction to verify whether the assessee is an assessee in default under the provision of section 201(1) of the Act or not - In view of the above and in the interest of justice and fair play we are inclined to restore the issue to the file of the AO for de novo assessment as per the provisions of law and in the light of the documents available on record. Hence the ground of appeal of the assessee is allowed for the statistical purposes. Non-deduction of tax at source - Studio Renewal charges includes addition of new facilities such mike sound system and lighting in recording studio in which no labour was included - HELD THAT - we note that the assessee before the learned CIT(A) contended that legal expenses of Rs. 5 lakh and studio renewal expenses of Rs. 6.5 lakh include reimbursements of certain expenditure where the provisions of TDS are not applicable. The assessee in support of its contention has also filed necessary documentary evidence besides raising its contentions before the authorities below. However the documents filed by the assessee have not been verified by the Authorities below. The learned AR for the assessee at the time of hearing also contended that recipients of the impugned amount are regular tax filing assessee and paying taxes on the income earned by them. Therefore in such circumstances the assessee should be provided with the benefit available under second proviso to section 40(a)(ia) of the Act. In this regard we find the coordinate bench of Hyderabad Tribunal in case of BBR Project (P.) Ltd 2020 (8) TMI 69 - ITAT HYDERABAD where the bench set aside the issue to file of the AO for fresh adjudication with the direction to verify whether the assessee is an assessee in default under the provision of section 201(1). Disallowances of cash payment - addition under the provision of section 40A(3) - AR for us contended that the payment made for the purchase of the capital assets exceeding the threshold limit provided under section 40A(3) of the Act cannot be made subject to the disallowance in pursuance to the circular issued by the CBDT bearing number 34 F. No. 13A/92/69/-IT(A-II) dated 05-03- 1970 - HELD THAT - As the assessee has filed necessary documentary evidence besides raising its contentions before the authorities below to justify that provisions of section 40A(3) of the Act are not applicable. However the documents filed by the assessee have not been verified by the AO during the assessment proceedings. Therefore in the interest of justice and fair play we are inclined to restore the issue to the file of the AO for de novo assessment as per the provisions of law and in the light of the documents available on record. Hence the ground of appeal of the assessee is allowed for the statistical purposes.

Summary

Issues Involved:
1. Disallowance of bad debts amounting to Rs. 79,00,000/-
2. Disallowance of production expenses of Rs. 95,170/- due to short deduction of TDS
3. Disallowance of expenses of Rs. 11,50,000/- due to non-deduction of TDS
4. Disallowance of Rs. 1,13,226/- on account of cash payment
5. Disallowance of Rs. 21,473/- on account of traveling and repair and maintenance expenses

Detailed Analysis:

1. Disallowance of Bad Debts Amounting to Rs. 79,00,000/-:
The assessee claimed a deduction for bad debts of Rs. 79 lakh, which was disallowed by the AO on the grounds that the assessee failed to establish the debt's connection to the business and its inclusion in the profit and loss account. The assessee argued that the amount was a business loss rather than bad debts. The CIT(A) upheld the AO's decision, stating that the assessee did not provide sufficient documentary evidence. The Tribunal noted that the classification of the amount as bad debts was not decisive and that the nature of the claim should be verified. The issue was remanded to the AO for fresh adjudication to verify the agreements and documents provided by the assessee.

2. Disallowance of Production Expenses of Rs. 95,170/- Due to Short Deduction of TDS:
The AO disallowed Rs. 95,170/- under section 40(a)(ia) of the Act because the assessee did not deduct TDS on the entire amount paid to Reliance Media Works. The CIT(A) confirmed the disallowance, noting the assessee's failure to provide evidence that the recipient included the amount in its income. The Tribunal remanded the issue to the AO for verification of whether the recipient had included the amount in its income, allowing the assessee to benefit from the second proviso to section 40(a)(ia) of the Act.

3. Disallowance of Expenses of Rs. 11,50,000/- Due to Non-Deduction of TDS:
The AO disallowed legal expenses and studio renewal charges due to non-deduction of TDS. The assessee argued that part of the expenses were reimbursements and not subject to TDS. The CIT(A) upheld the disallowance, citing insufficient evidence. The Tribunal remanded the issue to the AO for fresh adjudication, directing verification of the assessee's claims and whether the recipients included the amounts in their income.

4. Disallowance of Rs. 1,13,226/- on Account of Cash Payment:
The AO disallowed cash payments exceeding Rs. 20,000/- under section 40A(3) of the Act, including depreciation on capital expenditure. The CIT(A) confirmed the disallowance, noting the lack of documentary evidence. The Tribunal remanded the issue to the AO for fresh adjudication, emphasizing the need to verify the documentary evidence provided by the assessee.

5. Disallowance of Rs. 21,473/- on Account of Traveling and Repair and Maintenance Expenses:
The AO disallowed 10% of traveling and repair maintenance expenses due to lack of supporting documents. The CIT(A) dismissed the ground as the assessee did not press it during the appellate proceedings. The Tribunal upheld the disallowance, noting the assessee's concession before the authorities below.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes, remanding several issues to the AO for fresh adjudication and verification of documentary evidence. The disallowance of traveling and repair maintenance expenses was upheld.