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TMI Blog2012 (4) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... t be determinative of whether the assessee has claimed it as reimbursement or no - restored to the file of the Assessing Officer for necessary verifications on this factual aspect. - ITA No.1288/Kol/2011 - - - Dated:- 17-2-2012 - Pramod Kumar, N Vijaykumaran, JJ. For Appellant: S Sadhu For Respondent: Anjan Prasad Roy ORDER Per: Pramod Kumar: 1. By way of this appeal, the assessee appellant has called into question correctness of CIT(A)'s order dated 28th July 2011, in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act') for the assessment year 2006-07, on the following grounds: 1. For that the learned Commissioner of Income Tax (Appeals) was not justified in confirming the addition of Rs 28,05,085 to total income made by the learned Assessing Officer in application of Section 40(a)(ia) and Section 194J of the said Act. 2. For that the learned Commissioner of Income Tax (Appeals) was wrong in holding that the appellant has raised composite bills for the entire works on its clients on presumptions and without taking into consideration the evidence adduced to him that there were separate bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, the Assessing Officer disallowed the balance amount of Rs 28,05,085 under section 40(a)(ia). Aggrieved, assessee carried the matter in appeal before the CIT(A). As evident from the submissions noted by the CIT(A) at page 5 of the impugned order, the assessee inter alia submitted that (a) the expenditure which is not claimed by the appellant in the computation of total income as appeared in the return and the profit and loss account should not be disallowed in application of section 40(a)(ia) of the said Act and (b) in view of the fact that the payment of Rs 28,05,085 was not charged to profit and loss account in order to ascertain income chargeable under the head profits and gains of business and profession' as contemplated by Section 28 of the Act, the learned Assessing Officer erred in law in invoking Section 40(a)(ia) of the Act . None of these submissions, however, impressed the CIT(A). He rejected these arguments, and, while doing so, observed as follows: 5 . The contention of the AR that the rigour of section 40(a)(ia) is not applicable in this case since the appellant did not book any expenditure against fees paid or payable to the counsels for deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] Explanation.-For the purposes of this sub-clause,- (i) commission or brokerage shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii) professional services shall have the same meaning as in clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes have been deducted by the end user of the legal services cannot be determinative of whether the assessee has claimed it as reimbursement or not. There is no need to infer as to whether the bills were composite bills or whether these payouts to outside lawyers were claimed as reimbursements. These facts can be verified by examining the copies of bills raised by the assessee on its clients. In case the assessee has separately itemized, in the bills raised on its clients, the payments made to the outside counsel and claimed reimbursements in respect of the same, these expenses cannot of such a nature as to seek deduction in respect of the same. When the expenses are being reimbursed by the clients, these expenses cease to be expenses of the assessee, and, therefore, there is no question of deduction in respect of the same. However, when assessee has raised composite bills for professional services, on gross basis and without giving details of payouts to outside lawyers on behalf of his clients, the payments to outside lawyers will be in the nature of deduction to be claimed by the assessee. Without there being any categorical finding to the effect that the payments to outside l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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