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TMI Blog2014 (12) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... report from Coffee Board - assessee has not produced contrary material to controvert his findings - in the absence of positive evidence by the assessee to support the assessee’s argument, the order of the CIT(A) cannot be reversed - the estimation of agricultural income made by the CIT(A) is confirmed – Decided against assessee. Disallowance of expenses and telescoping the same against the agricultural income of the assessee under the head “Other Sources” – Held that:- The disallowance was made by the Revenue authorities on account of lack of proper evidence like vouchers/bills produced by the assessee in support of the expenditure - when the assessee claims any expenses, it is the duty of the assessee to prove that the expenses were actually incurred for the purpose of earning income. - there is every chance of inflating expenses incurred for agricultural purposes to business purposes - If the assessee has placed necessary evidence to show that it was incurred for the purpose of business, then the Revenue would be in a position to pinpoint the discrepancies if any - most of the expenses are unvouched for and are supported by self-vouchers - when the assessee makes self-voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualification and it was not paid for rendering professional services and hence, provisions of sec. 194J was not attracted so as to apply the provisions of sec. 40(a)(ia) - if the payment has been made to the person in excess of the prescribed limit for which sec. 194J is applicable, relief cannot be given on the reason that the person who has rendered services is not a professional person - there is no necessity of professional qualification for rendering services and receiving payment - provisions of sec. 194J is directly applicable and the assessee is duty bound to deduct tax - assessee failed to deduct tax and hence the payment would attract the provisions of sec. 194J and non-deduction of tax under the section would attract the provisions of section 40(a)(ia) – the order of the CIT(A) is upheld – Decided partly in favour of revenue. - I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011, I.T.A. Nos.363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 - - - Dated:- 24-12-2014 - Shri N. R. S. Ganesan, JM And Chandra Poojari, AM,JJ. For the Petitioner : Shri Kuriyan Thomas, Adv. For the Respondent : Shri K.K. John, Sr. DR ORDER Per Chandra Poojari, Accountan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of agricultural income. 7. We are inclined to consider the facts as narrated in the assessee appeal in I.T.A. No. 296/Coch/2009. The main grievance of the assessee in this appeal is with regard to sustaining of addition of ₹ 10,69,887/- out of ₹ 23,07,737/-. It was noticed that as per the Profit and Loss account an amount of ₹ 24,30,000/- was credited as agricultural income under the head Other Income and the corresponding agricultural expenses debited to the Profit and Loss account was ₹ 1,22,262/-, the net agricultural income being ₹ 23,07,737/-. The assessee contended that it owned 250 acres of agricultural land at Valparai wherein coffee, an cash crops such as potato, carrot, cabbage, cauliflower, plantain and tomato were cultivated. The assessee claimed that the said cash crops were planted in 50 acres and balance area was under coffee cultivation. During the assessment proceedings, the assessee stated that the agricultural products were sold in advance before harvesting to an agent Shri V. Murali from whom a statement was recorded before the Assessing officer that he was an agent for various estate owners at Valparai including th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be only 70% of 150 acres though the assessee contended that 90% of the area was cultivated. The CIT(A) found from the remand report that the yield from this area was only 0.38 MT/hectare and as per the report of Coffee Board the price of Arabica parchment for the year 2005 was ₹ 3878 for 50 Kgs. Hence, the CIT(A) estimated the income from the estate as under: Area under cultivation 70% of 60 Hectares 42 Hectares Average yield taken as 60% of 0.64MT 0.38 MT Production estimated in quantity 42x0.38 15.96 MT average price of parchment as per Coffee Board ₹ 12,37,850/- for Tamil Nadu ₹ 3878 for 50 kgs. Being so, the CIT(A) estimated the income from 150 acres of estate owned by the assessee at Annamalai area at ₹ 12,37,850/- as against ₹ 23,07,737/- treated as agricultural income by the assessee and the balance of ₹ 10,69,887/- was brought to tax as income under Other Sources . 9. The Ld. AR submitted that yield per hectare of coffee considered by the CIT(A) is very low and he has determined 0.38 MT as yield per acre instead of 0.64 MT which is supported by the statement issued by the Coffee Board. He further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area as only 0.38 MT/hectare. Hence, the CIT(A) estimated the income from the estate as under: Area under cultivation 70% of 60 Hectares 42 Hectares Average yield taken as 60% of 0.64MT 0.38 MT Production estimated in quantity 42x0.38 15.96 MT average price of parchment as per Coffee Board ₹ 12,37,850/- for Tamil Nadu ₹ 3878 for 50 kgs. 12. In our opinion, the estimation made by the CIT(A) is very reasonable based on the report from Coffee Board. The assessee has not produced contrary material to controvert his findings. In the absence of positive evidence by the assessee to support the assessee s argument, we are not in a position to reverse the findings of the CIT(A). Accordingly, the estimation of agricultural income made by the CIT(A) is confirmed for all the assessment years. Accordingly this ground in the assessee appeals in I.T.A. Nos. 296 542/Coch/2009 241/Coch/2011 as well as the Revenue appeal in I.T.A. No. 363/Coch/2009, 10/Coch/2010 291/Coch/2011 is dismissed. 13. The next ground in assessee appeal in I.T.A. No. 296/Coch/2014 is with regard to disallowance of expenses claimed by the assessee and telescoping the same against the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flating the same. Being so, in the absence of necessary evidence to show that it was actually incurred for business purposes, we are not in a position to reverse the findings of the lower authorities. Accordingly, we are inclined to confirm the order of the CIT(A) on this issue. The assessee relied on the judgment of Delhi High Court in the case of CIT vs. Dalmia Cement (B.) Ltd. (254 ITR 377) which cannot be applied to the fact of this case. Accordingly, the appeal of the assessee in I.T.A. No. 296/Coch/2009 is dismissed. 17. The second ground in assessee appeal in I.T.A. No. 542/Coch/2009 is with regard to disallowance of 50% of the increase in traveling expenses of ₹ 1,54,464/-. The Revenue appeal in I.T.A. No. 10/Coch/2010 is against giving relief to the assessee. 18. The brief facts of the case are that the Assessing officer found that there was substantive increase in expenses as compared to last year. After finding that vouchers were available only for small part of expenses, the Assessing officer disallowed 80% of the increase in expenses. The Assessing officer noticed that whereas receipts/turnover had increased from the base assessment year 2004- 05 at 16.97%, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary 2) Rent 3) Printing and Stationery 4) Electricity charges 5) Rates and Taxes 6) Repairs and Maintenance 7) Bank Charges and Commission 8) Legal Expenses 9) Internal audit expenses 10) Audit fee 11) Telephone Charges 12) Cash Transfer Tax 13) Traveling Expenses 14) Labour Welfare Funds 15) Donation According to the CIT(A), no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched. The CIT(A) found that payments against the self made vouchers are made only for traveling expenses of staff and Directors. According to the CIT(A), donation is disallowed in the computation of income itself. However, the CIT(A) was of the opinion that disallowance of agricultural expenses was not justifiable since agricultural expenses are not claimed as business expenditure. In view of these facts, the CIT(A) disallowed only 50% increase in traveling expenses at ₹ 1,54,464/- and the disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that this trip helped to control the unusual trend of withdrawal of fixed deposits to a large extent and the fixed deposit outstanding in A.Y. 31.3.2006 was ₹ 210.88 crores which has come down to ₹ 193.83 as on 31.3.2007. Therefore, it was submitted that this timely visit has averted a severe business crisis. Being so, the assessee submitted that the disallowance of expenditure is not justifiable. 25. The CIT(A) observed that nothing has been produced in the form of any documents to show that the trip was for the purpose of business. The assessee s business is confined to Kerala and there was no justification for the foreign trip in connection with the business of the assessee. Accordingly, the CIT(A) confirmed the disallowance made by the Assessing officer on this issue. Against this, the assessee is in appeal before us. 26. We have heard both the parties and perused the record. The assessee has not produced any evidence to prove that the above expenses were incurred for the purpose of business. As observed by the lower authorities, the assessee s business is confined to Kerala. However, the ld. AR submitted that the Directors went abroad to mobili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1,06,000/- towards consultation charges. When the assessee was asked to clarify whether tax was deducted from this payment, the assessee submitted that the expense was incurred for keeping statutory records and filing etc. for P.F. Department and this honorarium was paid to a retired person of the P.F. Department and TDS was not applicable. The Assessing officer did not accept the argument of the assessee and held that the payment in question partakes the character of fee for professional services and the assessee was under liability to deduct tax u/s. 194J of the Income Tax Act and in view of the assessee s non-compliance, the expenses claimed was disallowed u/s. 40(a)(ia) of the Act. 33. On appeal, the CIT(A) observed that the assessee is doing business through its 78 branches and the payments towards repairs and maintenance of computers comes within the scope of contract fees even if there is no written contract. Since the assessee has failed to deduct tax u/s. 194C, the CIT(A) upheld the disallowance of expenses u/s. 40(a)(ia) of the Act. However, for the amount of ₹ 1,06,000/- deducted towards consultation charges, the CIT(A) found that this payment was actuall ..... 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