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2018 (12) TMI 749 - AT - Income TaxTDS u/s 194C - Disallowance of commission expenses u/s 40(a)(ia) - assessee has made provisions of commission at the year end but did not deduct TDS - Held that - We find that the assessee has credited amount of expenses as provisions in the account hence, the liability has been credited in books of accounts therefore, the assessee was liable to deduct TDS thereon. Hence, the finding of CIT (A) are upheld. , The issue is covered by the decision of Co-ordinate Bench in assessee s own case 2013 (9) TMI 1227 - ITAT RAJKOT - Decided against assessee. Disallowance of expenses incurred towards increase in authorized share capital - nature of expenditure - revenue or capital - claim of deduction under section 35D - Held that - We find that the expenditure has been incurred towards increase of authorized capital of the company. Hence, expenditure related to enduring benefit therefore, same has been rightly held to be capital in nature. Therefore, following decision of PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED 1996 (12) TMI 6 - SUPREME COURT and BROOKE BOND INDIA LIMITED 1997 (2) TMI 11 - SUPREME COURT we upheld the same. So far the claim of deduction under section 35D is concerned, the same is not allowable as the expenditure is not related to plants and machinery as it was related to increase of share capital. - Decided against assessee. Disallowance of foreign traveling expenses u/s 37(1) - Held that - AO has pointed out that expenditure was incurred for pleasure trip to Four Season Multitrade Pvt. Ltd. Resorts, Bali. Further, vouchers prepared and passed are self-prepared without any check. The expenses were incurred on gift articles and DVD as well as CDs. Therefore, in such circumstances and in absence of anything brought on record to show that thing are different for this year as in A.Y.2006-07. In view of this matter, respectfully following the findings of tribunal in assessee own case in preceding assessment year. Therefore, the finding arrived at by the lower authorities are confirmed. Accordingly, this grounds of appeal is therefore, dismissed. Disallowing of gift expenses and Diwali Gift expenses u/s 37 (1) - Held that - We find that the expense were incurred on account of gift for the person who are not connected with the business of the assessee. Therefore, the expenses are not wholly and exclusively incurred for the purpose of business carried on by the assessee. Further, the facts are identical of A.Y. 2006-07 and same has not been controverted by the assessee. Therefore, respectfully following decision of tribunal in assessee s own case for the A.Y. 2006-07 dtd. 13.09.2013, we are of the view that Ld. CIT (A) was justified in restricting the disallowance to 35% of claim. Addition on account of bad debt written off claimed by the assessee u/s 36(1)(viia) - Held that - We find that the issue is squarely covered by the decision of Hon ble Supreme Court in the case of T. R. F. Ltd. vs. CIT 2010 (2) TMI 211 - SUPREME COURT . As the assessee was not required to establish the debt become bad if it has been written off in books of accounts as irrecoverable. Therefore, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Disallowance of gift expenses on account of alleged non business purpose - Held that - We find that the expense were incurred on account of gift for the person who are not connected with the business of the assessee. Therefore, the expenses are not wholly and exclusively incurred for the purpose of business carried on by the assessee. Further, the facts are identical and same has not been controverted by the assessee. Therefore, respectfully following decision of tribunal in assessee s own case for the A.Y. 2006-07 dtd. 13.09.2013, we are of the view that Ld. CIT (A) was justified in restricting the disallowance to 35% of claim. Disallowance foreign travelling expenses u/s 37(1) - Held that - in the assessee s own case also shows that the details of each and every items of expenditure was discussed and it was noticed that expenses incurred by Jay Mehta and Juhi Mehta , Shri Raj Poddar and his wife were not wholly and exclusively for the business purpose. Therefore, in such circumstances and in absence of anything brought on record to show that thing are different for this year. In view of this matter, respectfully following the findings of tribunal in assessee own case in preceding assessment year. Such disallowances have been also confirmed in A.Y.2007-08. Thus, the finding arrived at by the lower authorities are therefore, confirmed. Disallowance of business promotion expenses - Held that - We find that expenditure has been incurred for the purchase of movie tickets, T20 Match tickets, Kashmiri Shawls, silver boxes and other gift articles. Though the assessee has given the copies of the bills / vouchers but the names of beneficiaries of the impugned expenditure has not been supplied, therefore, it cannot be said that the expenditure was incurred wholly and exclusively for the purpose of business and the same was incurred in relation to expenditure on dealer, suppliers etc. In view of these circumstances, we do not find any infirmity in the order of the CIT (A). Accordingly, same is upheld. Disallowance of club expenses - Held that - We find that expenditure has been incurred for corporate membership of club for the officials and clients of the assessee company. The assessee is being company, there cannot be any personal element involved. Hence, we concur with the findings of the CIT (A). Therefore, This ground of appeal is dismissed. Disallowance of deduction claimed from book profit under clause (vii) of explanation to section 115JB available to sick company - Held that - the benefit of exclusion of the entire profit under the above sub-clause shall be available for the year in which net worth becomes positive and the company shall be liable to pay tax under section 115JB from the next year. This view if further, supported by the decision of Hyderabad ITAT in PRAGA TOOLS LTD. 2013 (12) TMI 1412 - ITAT HYDERABAD wherein it was held that that the benefit of reduction of the entire profit given under subclause (vii) is available for the year in which the net worth becomes positive. Therefore, the CIT (A) has rightly followed the said decision of Tribunal. In view of these facts and circumstances, were have no reason to interfere with the findings recorded by the Ld. CIT(A). In view of this matter, this ground of appeal is dismissed.
Issues Involved:
1. Disallowance of commission expenses under section 40(a)(ia). 2. Disallowance of expenses towards increase in authorized share capital. 3. Disallowance of foreign travelling expenses under section 37(1). 4. Disallowance of gift and Diwali gift expenses under section 37(1). 5. Deletion of addition made on account of bad debt written off. 6. Disallowance of business promotion expenses. 7. Disallowance of club expenses. 8. Deletion of disallowance of deduction claimed from book profit under clause (vii) of explanation to section 115JB. Issue-Wise Detailed Analysis: 1. Disallowance of Commission Expenses under Section 40(a)(ia): The Assessee's appeal regarding the disallowance of ?19,59,390/- under section 40(a)(ia) was dismissed. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was liable to deduct TDS on the credited amount of expenses as provisions in the account. This decision was consistent with the Tribunal's earlier order for the assessment year 2006-07. 2. Disallowance of Expenses Towards Increase in Authorized Share Capital: The Assessee's appeal against the disallowance of ?1,14,30,400/- incurred towards ROC fees to increase authorized capital was dismissed. The Tribunal agreed with the CIT(A) that the expenditure was capital in nature and not allowable under section 35D since it was related to the increase of share capital. The decision was supported by the Supreme Court rulings in Brooke Bond India Ltd. vs. CIT and Punjab State Industrial Development Corporation. 3. Disallowance of Foreign Travelling Expenses under Section 37(1): The Assessee's appeal against the disallowance of ?97,33,000/- for foreign travelling expenses was dismissed. The Tribunal found that the expenses were not wholly and exclusively incurred for business purposes, as evidenced by the purchase of gift items and personal expenses. This decision was consistent with the Tribunal's earlier order for the assessment year 2006-07. 4. Disallowance of Gift and Diwali Gift Expenses under Section 37(1): The Assessee's appeal against the disallowance of ?66,99,528/- for gift and Diwali gift expenses was dismissed. The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 35% of the claimed expenses, consistent with the earlier assessment year 2006-07. The expenses were deemed not wholly and exclusively incurred for business purposes. 5. Deletion of Addition Made on Account of Bad Debt Written Off: The Revenue's appeal against the deletion of ?3,32,77,919/- claimed as bad debt written off was dismissed. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was not required to establish that the debt had become bad if it was written off in the books as irrecoverable. This decision was supported by the Supreme Court ruling in T.R.F. Ltd. vs. CIT. 6. Disallowance of Business Promotion Expenses: The Assessee's appeal against the disallowance of ?26,59,000/- for business promotion expenses was dismissed. The Tribunal agreed with the CIT(A) that the expenses were not adequately substantiated with evidence to prove they were incurred wholly and exclusively for business purposes. 7. Disallowance of Club Expenses: The Revenue's appeal against the deletion of ?88,357/- for club expenses was dismissed. The Tribunal upheld the CIT(A)'s decision, confirming that the expenses were incurred for corporate membership of clubs for company officials and clients, with no personal element involved. 8. Deletion of Disallowance of Deduction Claimed from Book Profit under Clause (vii) of Explanation to Section 115JB: The Revenue's appeal against the deletion of ?50,60,02,295/- claimed from book profit under clause (vii) of explanation to section 115JB was dismissed. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was eligible for the exclusion of profit in the year in which the net worth became positive, based on the BIFR's order and consistent with the Hyderabad ITAT decision in M/s. Praga Tools Ltd. Conclusion: All appeals by the Assessee and Revenue for the assessment years 2007-08 and 2010-11 were dismissed, with the Tribunal upholding the decisions of the CIT(A) based on consistent application of legal principles and precedents.
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