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TMI Blog2011 (4) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... facts TDS was deducted and paid by the assessee on these expenses of Rs.15,57,857/-, no disallowance can be made u/s 40(a)(ia) of the Act and hence there is no infirmity in the order of Ld. CIT(A) regarding this part of deletion of disallowance. Legal expenses - The assessee has to explain each item for which bill has been raised by M/s Dua Associates and it has to be explained and satisfied that the same is not in connection with increase in capital or other capital related matters - Thereafter, the Assessing Officer should pass necessary order as per law after providing adequate opportunity of being heard to the assessee - This ground of the revenue is allowed for statistical purposes. - ITA No. 4704 /Del/2010, - - - Dated:- 13-4-2011 - I.P. Bansal, A.K. Garodia, JJ. Mona Mohanty, Sr. DR for the Appellant Surinder Mehra, CA for the Respondent ORDER A.K. Garodia:- 1. This is revenue's appeal directed against the order of Ld CIT(a)-XIII, New Delhi dated 20.8.2010 for assessment year 2006-07. 2. Ground No.1 is general. Ground No.2 of the appeal is as under:- "2. On the facts and in the circumstances of the case, the CIT(A) has erred in del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us. 4. It was submitted by the Ld. DR of the revenue that the Assessing Officer has made disallowance on this basis that these expenses are incurred by the assessee to earn goodwill and this aspect has not been considered and decided by Ld. CIT(A).It is also submitted that Ld. CIT(A) has followed the judgment of Hon'ble Delhi High Court rendered in the case of CIT v. Salora International Ltd. as reported in 308 ITR 199 but this judgment is not applicable in the present case because the facts are different. 5. As against this, Ld. AR of the assessee supported the order of Ld. CIT(A). 6. We have heard the rival submissions and have gone through the material available on record. We find that this issue has been decided by Ld. CIT(A) as per para No.2.1. of his order, which is reproduced below:- "2.1. I have gone through the facts of the case and submissions made by the appellant company and I find that the nature of expenditure incurred in appellant's line of business is absolutely essential for day to day conduct of the business of the appellant company and the same is allowable as revenue expenditure. It is also observed that there is a direct nexus between the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal. In that case, the expenditure in dispute was for launching of its products by the assessee. In that case also, the Assessing Officer was of the view that such expenditure was of an enduring nature and he treated 1/3rd of the expenses as capital expenditure and allowed remaining 2/3rd of the expenditure. Under these facts, it was held by the Tribunal that there was direct nexus between the advertising expenditure and the business of the assessee and held that entire expenditure on advertisement is of revenue nature and allowed the same. Hon'ble High Court of Delhi has confirmed this Tribunal order in that case. In the present case also, we have noted that clear finding has been given by ld. CIT(A) that the expenses incurred by the assessee company has a direct nexus with the business carried on by the assessee and hence, the ratio of this judgment is applicable in the present case also. We, therefore, decline to interfere in the order of Ld. CIT(A). This ground of the revenue is rejected. 8. Ground No.3 of the revenue's appeal is as under:- "On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the disallowance of expenses on account of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is noted by the Ld. CIT(A) that the assessee company has categorized these expenses under three category. First category of expenses is those expenses on which tax was deducted and paid and the expenses incurred under this category is Rs.15,57,857/-. In the light of these facts TDS was deducted and paid by the assessee on these expenses of Rs.15,57,857/-, no disallowance can be made u/s 40(a)(ia) of the Act and hence there is no infirmity in the order of Ld. CIT(A) regarding this part of deletion of disallowance. 12. The second category is of those expenses on which, tax was not required to be deducted and it is noted by the Ld. CIT(A) that list of these items has also been given in the paper book along with the copy of invoices and the same is related to hotel/purchase/supply bills and a credit note in one case and no tax was deductible on these amounts. This finding of Ld. CIT(A) could not be controverted by the Ld. DR of the revenue that tax was not deductible on this category of expenses totaling Rs.21,34,680/-. Hence, for this part of disallowance also, we do not find any infirmity in the order of Ld. CIT(A). 13. The third category is of those expenses on which tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Assessing Officer in the assessment order that these expenses are incurred for consultation for increase of capital and other capital related matters. Thereafter, the Assessing Officer has stated that he is disallowing these expenses u/s 35D of the Income Tax Act, 1961. While deleting this disallowance, Ld. CIT(A) has proceeded on this basis that the provisions of section 35D are not applicable in the present case. But he has not given any finding regarding first aspect i.e. the allegation of the Assessing Officer that these expenses are incurred for consultation for increase of capital and other capital related matters. From the bill of M/s Dua Associates, it is seen that this aspect is not getting cleared as to whether the whole or part of this legal expenses are in connection with increase in capital or other capital related matters as has been alleged by the Assessing Officer. Under these facts, we feel that this matter should go back to the file of the Assessing Officer for a fresh decision. Hence, we set aside the order of the Ld. CIT(A) on this issue and restore this matter back to the file of the Assessing Officer for a fresh decision. The assessee has to explain e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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