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TMI Blog2014 (10) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... ord to exhibit the services having been rendered by the different payees, and toward which the payments have ostensibly been made – it cannot be considered as an argument in favour of the assessee having made a claim for expenditure, which on facts stands proved and/or established, which would amount to turning the A.O.’s observation/argument on its head, much less of the assessee having thus proved the expenditure in terms of section 37(1), so that the only detriment to its allowability is the non-deduction of tax at source - The assessee’s claim, made before us, that the only reason for the disallowance, or its sustenance, is invocation or applicability of section 40(a)(ia) is without basis in facts. The assessee has claimed the impugned sum as expenditure u/s. 37(1) r/w s. 40(a)(ia) by depositing TDS, ostensibly as commission, for AY 2010-11, thereby debunking its claims, both qua share of profit and diversion by overriding title - The ‘acceptance’ of its’ claim for A.Y. 2010-11 by the Revenue would be of no consequence - A return processed u/s.143(1) cannot be regarded as an acceptance of the assessee’s return, the provision, w.e.f. 01.06.1999, does not even entitle the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ia) stood attracted. On the same footing was the payment of ₹ 5 lacs to one, Mrs. Darshanna Bhatt, claimed in respect of a receipt, from Deepak Fertilizers Petrochemicals Ltd., at a gross amount of ₹ 8,46,059/-. The disallowance, being thus at a total of ₹ 42 lacs, stood confirmed by the Tribunal (in ITA No. 6383/Mum(B)/2008 dated 07.05.2010). It found that the nature of the receipt had not been established. It is only, where so, that the nature of the payment/s, stated to be toward undertaking work in relation to the project/s, for which the remuneration had been received, could be confirmed. The penalty proceedings u/s.271(1)(c), initiated at the completion of the assessment on 28.12.2007, were accordingly proceeded with. 3. Before us, the assessee s case was in terms of having included the entire receipt as its income in its accounts (under the account head professional fee /PB pgs.11-34). The payments to Grand Foundry Ltd. and Bharuchas, as also to Mrs. Darshanna Bhatt, stood confirmed by them. Non-deduction of tax at source, leading to a disallowance u/s.40(a)(ia), could not be a ground for levy of penalty, as explained by the tribunal in Dy. CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstante clause of s.40(a)(ia), as indeed would be the case for any other provision. There is, to begin with, no question of the assessee having not claimed the impugned sum for the relevant year. The assessee has debited the said payments in its accounts (under a nominal account professional fees /PB pgs.11-33), which gets thus reflected in its profit and loss account for the year, maintained on cash basis, at a net of ₹ 90.64 lacs (PB pgs.6-8), i.e., as against the gross receipt of ₹ 133.46 lacs. The said accounting treatment, which is in any case not determinative of the matter, enables the assessee to plead its case of the impugned sum (Rs.42 lacs) either as an expense or for its exclusion by way of overriding title, and which, as we shall presently see, it indeed does, or at least attempts to. We shall, accordingly, examine the assessee s case from both the stand points, the two claims being complementary or pari materia, at least in-so-far as the penalty proceedings are concerned in-as-much as they both lead to a reduction in its income chargeable to tax for the relevant year by the impugned sum. Qua the claim for expenses, there is no iota of evidence on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies had agreed to share the legal fees arising to it, as their share in the profit of the JV. The A.O. rejected the assessee s case on merits for two reasons. Firstly, in that case the income was of the AOP consisting of the assessee and the three payees as its members, which is clearly not the case; the entire payment having been made to the assessee-firm and there being no separate maintenance of accounts of the AOP. Further, the shares in the receipt having been fixed, there was no scope for shared control and losses, referring to the decision by the hon ble apex court in Faguni Chand Gulati vs. Uppal dated 07.08.2008. Two, the assessee had, though thus considered only a part of the legal fee, i.e., ₹ 11,44,500/- and ₹ 3,46,059/- as its income (PB pgs.35, 36), it had claimed TDS on the entire sum received by it, i.e., at ₹ 3,42,419/-, on payments to it by Britannia Industries Limited and Deepak Fertilisers Petrochemicals Ltd. (at a gross of ₹ 56.905 lacs). The payments were made to it as a firm, and the subsequent payments by it to the payees were only allocations made by way of self-made mutual arrangements (refer para 6 of the tribunal s order supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference to the gross fees received by the assessee. If their share was released after the completion of their work, it is a case of sub contract of a part of the work, in which case they would only raise a bill on the assessee for the same nothing more and nothing less. Or at least confirm so, while even their confirmations, which are by way of confirming the payment statement on the assessee s letter head, state of the payments being made and received as share of profit in the joint venture project. There is no material on record, except for self assertions, that would link the impugned payments to the receipt from the two payee companies. It is this complete lack of clarity in the matter that was sought to be emphasized by the tribunal vide its order in the quantum proceedings. Even so, we could be prepared to extend the benefit of doubt to the assessee, so that though liable to be taxed in its hands, the assessee had reasonable reason/s to consider it as not so; the genuineness of the payments having presumably been not doubted. However, even qua this parameter we are unable to consider the assessee s case as falling within the realm of a reasonable explanation. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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