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Issues Involved:
1. Disallowance of legal and professional charges. 2. Disallowance of foreign travel expenses. 3. Disallowance of ESI contribution. 4. Levy of interest under Sections 234A and 234B. Issue-wise Detailed Analysis: 1. Disallowance of Legal and Professional Charges: The first ground of appeal concerns the confirmation of the disallowance of Rs. 4,75,000 on account of legal and professional charges. The assessee company, engaged in manufacturing and trading of auto components, made a payment of Rs. 4,75,000 to IL&FS Merchant Banking Services Ltd. for the placement of preference shares and claimed it as business expenses. The AO disallowed this expense, treating it as capital expenditure for procuring an enduring benefit. On appeal, the CIT(A) upheld the AO's decision, stating the expenditure was for arranging funds for share capital, which provided an enduring benefit to the company. The Tribunal, referencing the case of Punjab State Industrial Development Corpn. Ltd. vs. CIT, agreed with the CIT(A) that the expenses were of a capital nature and upheld the disallowance. 2. Disallowance of Foreign Travel Expenses: The second ground of appeal pertains to the disallowance of Rs. 4,79,016 on account of foreign travel expenses. The assessee claimed foreign travel expenses for Mr. Kireevshikh Louri and Dr. Reazoldary, but failed to provide detailed evidence for Rs. 4,79,016. The AO disallowed this amount due to lack of evidence. The CIT(A) sustained the disallowance, noting that despite opportunities, the assessee did not provide corroborative evidence to show the amount was spent on boarding and lodging. The Tribunal found no merit in the assessee's claim that details were not requested and upheld the CIT(A)'s decision. 3. Disallowance of ESI Contribution: The third ground of appeal involves the disallowance of Rs. 31,381 out of ESI contribution. The AO disallowed Rs. 36,337 for late payment of employer's contributions to PF and ESI. The CIT(A) sustained the disallowance of Rs. 31,381, noting that payments were made late. However, the Tribunal, referencing the jurisdictional High Court's decision in CIT vs. Avery Cycle Industries (P) Ltd., held that since the payments were made before the due date for filing the return under Section 139(1), the same is allowable. The Tribunal directed to delete the disallowance. 4. Levy of Interest Under Sections 234A and 234B: The fourth ground of appeal relates to the levy of interest under Sections 234A and 234B. The AO levied interest based on the tax liability computed under Section 115J. The CIT(A) held that the charging of interest under these sections is mandatory, referencing the Supreme Court's decision in CIT vs. Anjum M.H. Ghaswala. The Tribunal discussed the applicability of these provisions in the context of Section 115JA, referencing the Karnataka High Court's decision in Kwality Biscuits Ltd. vs. CIT, which was affirmed by the Supreme Court. The Tribunal concluded that the rationale for non-charging of interest under Section 115J equally applies to Section 115JA, and thus, no interest under Sections 234B and 234C is chargeable. The Tribunal reversed the lower authority's order and held in favor of the assessee. Conclusion: The appeal was partly allowed, with the Tribunal upholding the disallowance of legal and professional charges and foreign travel expenses, but allowing the ESI contribution and reversing the levy of interest under Sections 234A and 234B.
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