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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 ..... . 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 Rs. 5,000 by invoking the provisions of section 40A(3) of the Income Tax Act, 1961. 2. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the addition of Rs. 64,00,000 u/s.68 of the Income Tax Act, 1961, being receipt of call money from shareholders by rejecting the materials and evidences produced by the appellant necessary for the purpose. 3. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the disallowance of payment of remuneration to Mr.Mehool Bhuva, the Director of the company considering the same as excessive to the extent of Rs. 30.00 lacs and therefore required to be disallowed u/s.40A(2)(b) of the Income Tax Act, 1961. The Assessing Officer disallowed the same on grounds which were all together irrelevant and without appreciating the submissions made by the appellant and also the facts and circumstances of the appellant's case. 4. Your appellant craves the right toad to or alter, amend, substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Holding Pvt.Ltd. dated 26/03/2003, wherein it is confirmed that the amount of Rs. 64 lacs was paid to the 3rd parties on behalf of the assessee against calls in arrears and share premium. The ld.counsel for the assessee placed reliance on the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Chanakya Developers reported at 43 taxmann.com 91 (Guj.). 5.1. On the contrary, ld.Sr.DR submitted that the assessee was required to submit confirmation from the parties who have received money from Narendra Holding Pvt.Ltd. on behalf of assessee. The assessee has not placed any material on record and also the letter issued by M/s.Narendra Holding Pvt.Ltd. does not mention the names of the parties to whom the payments were made. Under these facts, the authorities below were justified in making the addition. 6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The assessee has claimed the expenditure on account of calls in arrears and share premium. The contention of the assessee is that by providing the confirmations of M/s.Narendra Holding Pvt.Ltd., the initial onus has been discharged b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the event where 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 qualific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in withdrawing interest u/s.244A of the Act. 10. Briefly stated facts are that the case of the assessee was reopened for assessment and the assessment u/s.143(3) rws 147 of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 27/02/2006. While framing the assessment, the Assessing Officer made addition on account of disallowance of employees' contribution towards PF/ESIC of Rs. 15,37,391/- u/s.36(i)(va) of the Act and also made addition on account of disallowance of employer's contribution towards PF/ESIC of Rs. 16,02,019/- u/s.43B of the Act. Against the said assessment order, assessee preferred an appeal before the ld.CIT(A), who after considering the submissions dismissed the appeal. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us. 11. Ground No.1 is against validity of the reopening of the assessment u/s.147 of the Act. The ld.counsel for the assessee submitted that the AO was not justified in reopening the assessment. 11.1. On the contrary, the ld.Sr.DR supported the orders of the authorities below and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontribution is made before the due date of filing of return, no disallowance is called for. 15.1. On the contrary, ld.Sr.DR supported the order of the AO. 16. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the disallowance is made on the basis that the PF/ESIC contribution was not deposited even before the due date of payment but contention of the assessee is that the same was deposited before due date of filing of return. This fact is not controverted by the ld.DR and, therefore this ground of appeal is allowed. 17. Apropos to Ground Nos.4 and 5, no submissions were made on behalf of the assessee. Hence, both the grounds are dismissed for want of submission on behalf of the assessee. 18. In the result, assessee's appeal, i.e. ITA No.1407/Ahd/2007 is partly allowed. 19. Now, we take up the Assessee's appeal in ITA No.2282/Ahd/2012 for AY 2006-07. The Assessee has raised the following grounds of appeal:- 1.1. The order passed u/s.250 on 16.7.2012 for AY 2006-07 by CIT(A)- V, Baroda upholding the disallowance of Rs. 23,14,032 is wholly illegal, unlawful and against the principles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term loan of Rs. 10 crore for modernization and expansion project. For this, the company had to pay upfront fee (commitment charges) of Rs. 10,50,000/-. Due to discontinuous of the project, the loan facility was not availed and commitment charges paid become irrecoverable. Hence the same amount of Rs. 10,50,000/- is written off. The assessee-company has also approached to IRBI regarding refund of such amount through legal notice of its advocate and RBI. However, IRBI has rejected the refund of such charges of Rs. 10,50,000/-. Copies of such letter of communication are enclosed by the assessee in the paper-book. Commitment charges payable by a party on the unused portion for the loan which has not been drawn, has to be taken as an expenditure laid out wholly and exclusively for the purposes of the business and, therefore, permissible as a revenue deduction under section 37(1). Circular No.2-P(XI-6)[F.No.10/67/65-IT(A)-I] dated August 23, 1965. Hence, such expenditure of Rs. 10,50,000/- is allowable as business expenditure u/s.37(1) of the Act. For a sum of Rs. 4,50,000/-, regarding Security Deposit Gujarat State Fertilizers & Chemical Limited (GSFC), the ld.counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- is written off. For a sum of Rs. 50,000/- regarding Prakalp Builder, the ld.counsel for the assessee submitted that the assessee-company had made advance payment to Prakalp Builders for certain repairs work at the factory. The said work is not completed and amount is irrecoverable hence the balance amount of Rs. 50,000/- is written off. For a sum of Rs. 10,978/- regarding R.R. Construction, the ld.counsel for the assessee submitted that the assessee-company had made advance payment to R.R. Construction for certain repairs work at the factory. The said work is not completed and amount is irrecoverable hence the balance amount of Rs. 10,978/- is written off. The ld.counsel for the assessee submitted that in view of the above, assessee requests to allow the sundry balance written off of Rs. 23,14,032/- u/s.37(1) of the Act. 22. On the contrary, the ld.Sr.DR supported the orders of the authorities below. 23. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. So far the expenditure are concerned, the same are related to the business of the assessee. The ld.CIT(A) has given his finding as under:- " I h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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