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TMI Blog2015 (6) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing the required explanation to the Assessing Officer. Even before the Learned CIT(Appeals), it does not appear that the assessee had furnished the required explanation to justify the payment. In such a situation, the only option left with Assessing Officer was to estimate the disallowance taking note of some comparable instances. No such effort has been made by the Assessing Officer. Thus set aside the matter to the file of the Assessing Officer to decide the issue afresh - Decided in favour of assesse for statistical purposes. Disallowance of management support expenses of - as per CIT(A) such expenses falls within the definition of “fee for technical services” and accordingly tax is required to be deducted on the same - application for allowing the additional evidence - Held that:- As relying on CIT v/s TEXT HUNDRED INDIA PVT. LTD. [2013 (6) TMI 72 - DELHI HIGH COURT] wherein the Hon’ble High Court has been pleased to approve the order of the Tribunal to allow such documents to be produced for substantial cause. In the present case before us, it has not been seriously disputed that the additional evidence for which the assessee seeking permission for consideration are rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and written down method are recognized, therefore, once the amount of depreciation actually debited to the profit and loss account is certified by the auditors, then, the issue has to be answered in favour of the assessee. Thus set aside the matter to the file of the Assessing Officer to decide the issue afresh - Decided in favour of assesse for statistical purposes - ITA No.4614/Del /2009 - - - Dated:- 29-5-2015 - SHRI I.C. SUDHIR AND SHRI T.S. KAPOOR, JJ. For the Appellant : Shri Ajay Vohra, Sr. Advocate and Ms. Bhavita, Advocate For the Respondent: Smt. A. Mishra, CIT, DR. ORDER PER SHRI I.C. SUDHIR, JM: 1. The assessee has questioned first appellate order on the following grounds:- 1. That on the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) [ Ltd. CIT(A) ] has erred in sustaining disallowance of 25 per cent of the total increase in the salary of the managing director under section 40A(2). 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the disallowance of management support expenses of ₹ 43,32,025/- by holding that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the payment in question had been made in consideration of services rendered by ALAP to the assessee pursuant to Management Support Agreement dated 01.10.2004 ( the agreement ) entered into between the said companies. He submitted that the said agreement was made available before the Assessing Officer as well as Ld. CIT(A). Neither the Assessing Officer nor the Ld. CIT(A) has doubted the genuineness or validity of the agreement. The emails, being presently filed as additional evidences, merely elaborate the nature of services listed in the agreement. 5. The Ld. AR further submitted that under almost similar facts and circumstances the Hon ble Jurisdictional High Court of Delhi in the case of CIT Vs. Text Hundred India P. Ltd. 239 CTR 263 (Delhi) has upheld the order of the Tribunal in admitting additional evidence in the form of emails which could not be produced earlier on account of technical difficulties. The Ld. AR also placed reliance on the following decisions: i) CIT Vs. Virgin Securities and Credits (P) 332 ITR 396 (Del) ii) CIT Vs. Hewlett Packard India: 314 ITR 55 (Del). iii) CIT Vs. Chittosoh Motors:11 Taxmann.com 81 (P H) 6. The Ld. DR on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble High Court has been pleased to approve the order of the Tribunal to allow such documents to be produced for substantial cause. The relevant paras 15 thereof is reproduced hereunder: 15. In the present case the reason which was given by the assessee in support of its plea for admission of additional evidence was that the assessee could not produce these records before the lower authorities due to non retrievability of e-mail on the date because of technological difficulties. This reason was specifically mentioned in the application filed. No reply to this application was filed refuting this averment, though the departmental representative had opposed the admission of the additional evidence. The ground pleaded by the assessee was not confronted. In this backdrop, the Tribunal looked into the entire matter and arrived at a conclusion that the additional evidence was necessary for deciding the issue at hand. It is, thus, clear that the Tribunal found the requirement of the said evidence for proper adjudication of the matter and in the interest of substantial cause. Rule 29 of the Income Tax (Appellate Tribunal) Rules categorically permits the Tribunal to al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amount of ₹ 10,41,172 had been paid for school fees of his children. In absence of explanation of the assessee in this regard, the Assessing Officer observed that effective remuneration of the Managing Director increased by ₹ 19,80,495 is covered under sec. 40A (2)(b) of the Income-tax Act, 1961. The Assessing Officer disallowed 50% of increase in salary (including school fee) with this noting that the assessee company did not provide any justification and explanation for the unusual increase in the salary and perks of the Managing Director. The same was questioned before the Learned CIT(Appeals) but the assessee could not succeed. 13. In support of the ground, the Learned AR submitted that the Assessing Officer had not given any comparable instances before coming to the conclusion that the salary and perks of the Managing Director paid during the year was excessive and unreasonable. The Learned CIT(Appeals) has also failed to appreciate this material aspect of the issue. He submitted further that the employee had paid tax on entire salary. In this regard, he referred page Nos. 1 to 91 of the paper book i.e. copies revised return of the assessee, audit report and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion by furnishing the required explanation to the Assessing Officer. Even before the Learned CIT(Appeals), it does not appear that the assessee had furnished the required explanation to justify the payment. In such a situation, the only option left with Assessing Officer was to estimate the disallowance taking note of some comparable instances. No such effort has been made by the Assessing Officer. The Learned CIT(Appeals) while estimating the disallowance by 25% of the total increase has noted that it was also not clear as to whether the total turnover and the profits of the company have gone up substantially, which can be attributed to the managing director of the company for increasing his salary and emoluments. Under the circumstances and to the interest of justice, we find it proper to set aside the matter to the file of the Assessing Officer to decide the issue afresh as discussed above after affording opportunity of being heard to the assessee. The ground No.1 is accordingly allowed for statistical purposes. 16. Ground No.4: The Assessing Officer was of the view that the assessee had claimed excess depreciation of ₹ 12,84,985. The assessee tried to justify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In our opinion, it is now an established position of law that when on an identical issue, different views of different Hon'ble High Courts except the Hon'ble jurisdictional High Court are available, the view favourable to the assessee is followed. The accounting standard (AS)- 6 (revised 1994) on changing from one method of providing depreciation to another, speaks as under: 15. The method of depreciation is applied consistently to provide comparability of the results of the operations of the enterprise from period to period. A change from one method of providing depreciation to another is made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise. When such a change in the method of depreciation is made, depreciation is recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective recomputation of depreciation in accordance with the new method is adjusted in the accounts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra) has answered the issue as to whether it is opened to the Assessing Officer to make adjustment to the book profits beyond what is authorized by the definition given in Explanation to section 115J of the Income-tax Act, 1961, if the accounts are prepared and certified to be in accordance with Parts-II and III of Schedule-VI to the Companies Act, 1956?, in favour of the assessee. In this regard, the Hon'ble Allahabad High Court has discussed the decision of Hon'ble Bombay High Court in the case of Kinetic Motor Co. Ltd. (supra) and followed the decision of Hon'ble Supreme Court in the case of Apollo Tyre Ltd. (supra) holding that while computing the income under sec. 115J of the Act, the Assessing Officer has only power to examine whether the books of account were certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. It is further held that the Assessing Officer thereafter has limited powers of making increases and reductions as provided for in the Explanation to the said section. It was further held that the Assessing Officer does not have the jurisdiction to go beyond the net profits sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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