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TMI Blog2015 (8) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee incurs any expenditure in respect of which payment has been paid or is to be made to any person referred to in clause (b) of section 40A(2) and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. Therefore, the AO has first to determine the reasonableness or excessiveness having regard to the fair market value of the services rendered. In the case in hand, the AO has made disallowance on the basis that no verifiable record was placed before the AO which could indicate the fact that Director, namely Shri Mehool N.Bhuva imparted any technical services to the assessee-company. The AO was of the opinion that mere holding of qualification does not lead to inference that he has indeed rendered any services. There is no dispute with regard to the fact that the issue in question is identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hd/2012 - - - Dated:- 7-8-2015 - SHRI G.D. AGARWAL AND SHRI KUL BHARAT, JJ. For The Appellant ; Shri S.N.Divatia, AR For The Respondent : Shri Narendra Singh, Sr.DR ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : These three appeals by the Assessee are directed against the separate orders of the Ld.Commissioner of Income Tax(Appeals), Ahmedabad/Baroda ( CIT(A) in short) dated 22/09/2003 (CIT(A)-IV, Ahmedabad) for AY 2000-01, dated 05/01/2007 (CIT(A)-I, Baroda) for AY 2000-0 (reopening proceedings), dated 16/07/2012 (CIT(A)-V, Baroda) for AY 2006-07 respectively. These appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. First, we take up the Assessee s appeal in ITA No.4518/Ahd/2003 for AY 2000-01. The Assessee has raised the following grounds of appeal:- All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the Assessing Officer in making a disallowance of 20% of Legal Professional Fees amounting to ₹ 5,000 by invoking the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ground No.1 is against disallowance of ₹ 5,000/- made on account of provisions of section 40A(3) of the Act. During the course of hearing, the ld.counsel for the assessee submitted that he does not wish to press the ground being smallness of the amount involved. However, he reserves his right for the legal submissions. The ld.Sr.DR has no objection. After hearing both the parties, we dismiss the ground as not pressed on account of smallness of the amount involved. 5. Ground No.2 is against confirmation of addition of ₹ 64 lacs by invoking the provisions of section 68 of the Act. The ld.counsel for the assessee submitted that all the details were submitted by the assessee before the authorities below. He submitted that the authorities below were not justified in making the addition. It is submitted by the ld.counsel for the assessee that the confirmation letter of Narendra Holing Pvt.Ltd. who had raised money on behalf of the assessee is given. He drew our attention towards letter of confirmation of Narendra Holding Pvt.Ltd. dated 26/03/2003, wherein it is confirmed that the amount of ₹ 64 lacs was paid to the 3rd parties on behalf of the assessee against call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO and the issue travelled upto the state of this Tribunal (ITAT B Bench Ahmedabad) and the Tribunal in ITA No.721/Ahd/2001 vide its order dated 17/05/2013 has confirmed the deletion made by the ld.CIT(A). He submitted that the Hon ble High Court of Gujarat in Tax Appeal No.1071 of 2013, order dated 28th Januaray-2014 has affirmed the order of the Tribunal. Under these facts, he submitted that the disallowances deserves to be deleted. 7.1. On the contrary, the ld.Sr.DR submitted that every assessment year is an independent year. He submitted that the expenditure is claimed by the assessee on account of the remuneration paid to its Director. The assessee was required to demonstrate the services rendered by the Director to ascertain the reasonableness of the payment made to the Director. He submitted that the assessee failed to provide the information with regard to the services rendered by the Director to whom the remuneration has been paid. 7.2. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. It is settled position of law that the provisions of section 40A(2)(b) of the Act can be invoked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly allowed. 9. Now, we take up the Assessee s appeal in ITA No.1407/Ahd/2007 for AY 2000-01. The Assessee has raised the following grounds of appeal:- All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in invoking the provisions of section 147 for reopening the assessment. 2. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the disallowance of employee s contribution towards PF/ESIC of ₹ 15,37,391/- made by the AO u/s.36(i)(va) of the Act. 3. The learned Commissioner of Income Tax (Appeals) has erred in fact and in law in confirming the action of the Assessing Officer in disallowing the employer s contribution towards PF/ESIC of ₹ 16,02,019/- u/s.43B of the Act. 4. The learned Commissioner of Income Tax (Appeals) has erred in fact and in law in confirming the action of the Assessing Officer in charging interest u/s.234D of the Act. 5. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort Corporation(supra). Therefore, this issue may be decided in favour of the Revenue. He submitted that the judgement of the Hon ble Jurisdictional High Court would be binding precedent. 14. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the Hon ble Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation reported at (2014) 366 ITR 170(Guj.)::(2014) 41 Taxmann.com 100 (Guj.) has decided this issue in favour of the Revenue. 14.1. In view of the judgement of the Hon ble Jurisdictional High Court rendered in the case of CIT vs. Gujarat State Road Transport Corporation(supra), we do not find any reason to interfere with the orders of the authorities below, the same are hereby upheld. Thus, this ground of assessee s appeal is rejected. 15. Ground No.3 is against disallowance of employer s contribution towards PF/ESIC. The ld.counsel for the assessee submitted that this issue is settled in favour of the assessee that in case the employees contribution is made before the due date of filing of return, no disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance of ₹ 93,080/- on account of travelling expenses, disallowance of ₹ 1,72,798/- on account of belated payment of PF ESI and disallowance of ₹ 23,14,032/- on account of sundry balances written off. Against the said assessment order, the assessee preferred an appeal before the ld.CIT(A), who after considering the submissions partly allowed the appeal. While allowing the appeal, the ld.CIT(A) confirmed the disallowance of ₹ 23,14,032/- against which the assessee has filed the present appeal. 21. The ld.counsel for the assessee reiterated the submissions as were made before the ld.CIT(A). The ld.counsel for the assessee submitted that the appellant had debited the amount in the AY 2006-07 in the Profit Loss account as sundry balances written off. The amount is debited into Profit Loss account as per provisions of section 37(1) of the Act. The appellant is eligible to get the deduction in the year under consideration. The ld.counsel for the assessee submitted that out of disallowance of ₹ 23,14,032/-, assessee submitted break-up of the same. For a sum of ₹ 10,50,000/- regarding IRBI, the assessee-company had applied to the IRBI f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sundry balance written off account. Hence, such expenditure of ₹ 27,000/- is also allowable as business expenditure u/s.37(1) of the Act. For a sum of ₹ 10,000/- regarding other deposit Modi Xerox, the ld.counsel for the assessee submitted that the assessee-company had made contract with Modi Xerox Ltd. for taking photocopy of their machine. For this company has given deposit of ₹ 10,000/-. Due to shut down of the Modi Xerox Ltd., the assessee has not received the deposit and written off in the books of account as irrecoverable. For a sum of ₹ 2,16,052/- regarding Ingersoll Rand India Ltd., the ld.counsel for the assessee submitted that Ingersoll Rand India Ltd. was supplier of the assessee-company. Assesseecompany had paid advance payment for purchase of spares and material. Due to shut down of the plant, company has not purchase the material of the balance amount. Since the amount is not fully recoverable the balance amount is written off. For a sum of ₹ 5,00,000/- regarding Six Steel Pvt.Ltd., the ld.counsel for the assessee submitted that the assesseecompany has paid advance to Six Steel Pvt.Ltd. for purchase of spareparts. However, since furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve discussion the claim of the bad debts of the assessee is rejected . 23.1. From the above finding, it is evident that the ld.CIT(A) has followed the judgement of Hon ble High Court of Gujarat rendered in the case of Dhall Enterprises and Engineers P.Ltd. vs. CIT (207 CITR 729) [Guj.]. However, the Hon ble Apex Court in the case of TRF Ltd. vs. CIT reported at (2010) 323 ITR 397(SC) has held as under:- 4. This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the AO has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors. As stated above, the AO has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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