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TMI Blog2012 (2) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue is directed against the order dated 26.8.09 passed by the ld. CIT (A) for the A.Y 2005-06. 2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacturing and sale of surgical dressings filed return declaring total income at Rs. 6,19,790/-. However, the assessment was completed at an income of Rs. 17,13,470/- including the addition of Conversion charges paid u/s 40(a)(ia) Rs. 6,14,930/-, Administrative charges u/s 40(a)(ia) Rs. 3,60,000 and Bad debts written off Rs. 1,18,753/- vide order dated 24.12.2007 passed u/s 143(3) of the Income Tax Act, 1961 (the Act). On appeal, the ld. CIT(A) deleted the additions made by the A.O. 3. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 4. Ground No. 1 2 read as under:- (1) The order of the CIT(A) is opposed to law and facts of the case. (2) On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in holding that provisions of section 40(a)(ia) were not applicable to payments of Rs. 12,29,860/- towards conversion charges and Rs. 3,60,000/- towards administrative charges which is contrary to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heads which were shown towards administrative expenses. All the above charges were reimbursed or shared on the basis of its turnover and as per cost. In reimbursing this expenditure no profit element is added and there cannot be any profit element in reimbursing actual expenditure. Thus, there was no need to deduct TDS on the above type of expenses. Similarly, conversion charges were paid and the nature of conversion charges was towards factory salary, stores, consumables, power, fuel, staff welfare etc. This expenditure was apportioned on the basis of turnover and the working and basis were explained to the A.O. and details in this regard were submitted to him. The conversion charges were also calculated as per cost only. In reimbursing this expenditure, no profit element was added as they were actual expenditure. Similarly, in this type of expenditure also there was no need to deduct TDS. 6. The ld. CIT(A) observed that the assessee has paid conversion charges and administrative expenses without any formal agreement with M/s Goldwin Medicare Ltd., hence, the provisions of section 194C are not applicable to the facts of the case. The assessee has reimbursed expenses like offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn case in ITA No. 4006/Mum/05 for A.Y. 2001-02 order dated 9th May, 2008, the Tribunal on the similar facts and circumstances has held vide para No. 9, 9.1 9.2 as under:- After considering the submissions and perusing the relevant material on record, we find that the assessee deserves to succeed in this ground also. There is no dispute that the payments made by the assessee at Rs. 44,88,001/- are on account of reimbursement of expenses to the principal company Aramex International Ltd. The details of the payments and vouchers received from the principal company are placed on record and it is seen that whatever the principal company have incurred on behalf of the assessee those were debited to the accounts of the assessee and bill was raised and on receiving the bills, the assessee has reimbursed the expenses to its principal company. This is, therefore, purely on account of reimbursement of expenses where no profit element is involved. It is also seen that the supplies were made from abroad to the assessee and therefore, it is also not correct that these supplies are made within the country. On similar facts, in the case of Modicon Network (P) Ltd. D Bench of the Delhi Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges to its group concern in proportion to sales. However, the A.O. has noted that the statement of the assessee is not correct. He has also noted that the payment of conversion charges is not in proportion to the sales e.g. in the case of M/s Alves Healthcare Pvt. Ltd. the expenses have been allocated @ 14.02% which should be Rs. 18,15,015/- whereas the expenses has been recovered only Rs. 7,36,720/-. The A.O. also pointed out some other discrepancies in recovering the conversion charges. Accordingly, the A.O. disallowed 50% of conversion charges amounting to Rs. 6,14,930/- u/s 40A(2). He also disallowed administrative expenses of Rs. 3,60,000/- paid to M/s Goldwin Medicare Ltd. in addition to the above said conversion charges for which no written agreement is in existence and in the absence of any details of payment of Rs. 3,60,000/- as administrative expenses to the group concern. However, he did not make any separate addition in this regard on the ground that the entire expenses have already been disallowed u/s 40(a)(ia). On appeal, the ld. CIT(A) while observing that none of the directors are holding any substantial interest in either of the companies and the A.O. has not given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a contradiction in the facts, we are of the view that, in the interest of justice, the matter should go back to the file of the ld. CIT(A). and accordingly we set aside the order passed by the ld. CIT(A) on this account and send the matter back to the file of ld. CIT(A) who shall decide the same afresh in the light of our observations hereinabove and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the Revenue is therefore partly allowed for statistical purpose. 15. Ground No. 4 reads as under:- On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance of debt of Rs. 1,18,753/- which had not become irrecoverable and bad as provided in section 36(1)(vii) of the I.T. Act. 16. Brief facts of the above issue are that the A.O. observed that the assessee has claimed bad debts of Rs. 1,18,753/- on account of 3M India Ltd. The assessee company is having regular business with the above said party. During the year, the assessee has sold goods worth Rs. 49,14,528/- to the above said party. Considering these facts, the assessee was asked to furnish the copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refully heard the submissions of the rival parties and perusing the material available on record we find that the disallowance was made by the A.O. on the ground that the assessee has failed to file relevant evidence i.e copies of bills or debit notes raised by the assessee and the assessee has filed no evidence to show that the debts which has been written off were accounted for in the earlier years. However, the ld. CIT(A) without verifying the same, merely on the copy of ledger extracts and keeping in view the provisions of law and also the decision in the case of CIT vs. Star Chemicals (Bombay) P. Ltd. (supra) deleted the disallowance made by the A.O. Even at this stage, the assessee has filed no material on record to show that the assessee has issued bills/debit notes to the party and has duly accounted for the corresponding income in the relevant A.Y. This being so and in the interest of justice, we consider it fair and reasonable that the matter should go back to the file of ld. CIT(A) and accordingly we set aside the order passed by the ld. CIT(A) on this account and send back the matter to his file who shall decide the same afresh in the light of our observations hereinabo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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