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TMI Blog2016 (9) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... e @ 1/5th of the expense claimed. The submissions made have not been appreciated. At any rate the disallowance is highly excessive. (ii) That the learned Commissioner of Income tax (Appeals), has erred in sustaining the disallowance of Rs. 1,05,779/- and Rs. 22,016/- u/s 40(a)(ia). The legal as well as the factual position on this issue has not been appreciated. (iii) That the learned Commissioner of Income tax (Appeals) has erred in sustaining disallowance out of Car expenses, Car depreciation & Car Insurance @ 1/5th of these expenses. The disallowance made is highly excessive." 3. The brief facts of the case as noted in the assessment order are that the assessee is engaged in the business of manufacturing and export of sports goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as the assessee was engaged in the manufacturing & exports of sports goods and the mobile phones and telephones installed at the residence of the partners were being used to communicate with the customers who are situated outside India. 7. Without prejudice it was submitted that the disallowance was on a higher side and cited a few cases to demonstrate that a nominal disallowance out of Telephone expenses was a reasonable disallowance. In view of the above, it was submitted that the disallowance may be deleted and alternatively a reasonable relief may be provided. Similar arguments were advanced in respect of disallowance out of Car expenses. 8. As regards the disallowance u/s 40(i)(ia), the learned AR submitted that the amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essional services has been given in the explanation below. Sub-section (3) of Section 194J and the nature of service rendered by the above referred party is clearly not covered by Sec. 194J. Reliance in this respect was placed in the case of Siti Multimedia Network vs. ITO. Copy of which was stated to be placed at (PB page 22 to 27). 9. Without prejudice the learned AR submitted that the balance outstanding at the end of the year as on 31.03.2008 was only Rsw.30,319/- therefore, disallowance if any under the provisions of Sec.40(a)(ia) had to be restricted to this amount as the legislature has deliberately used the expression "payable" and therefore, section will not cover the amounts which have already been paid. Reliance in this respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses related to Mobile Phones and Telephone installed at the residence of partners. In earlier years, similar disallowance was made for A.Y.2005-06 which was accepted by the assessee firm as noted by Assessing Officer in his order. The arguments of learned AR that a nominal disallowance was made in various decisions of various Benches of ITAT do have some force. In the facts and circumstances of the present case we hold that a disallowance equal to 1/10th of expenses is a reasonable disallowance. The observation of Assessing Officer in the case of assessee that in Asst. Year 2005-06, the assessee had accepted 1/5th as disallowance do not hold much force as every year is a different year & moreover the Assessing Officer has not disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are predominantly physical resulting into tangible work. In the present case admittedly payee has not carried out any physical work resulting into tangible work and has only provided services to the assessee which cannot be categorized under the provisions of Sec. 194C for the purpose of deduction of tax at source. Therefore, the provisions of Sec.194C are not applicable to the assessee. 15. As regards the applicability of Sec.194J, we find that the Section requires the assessee to deduct TDS for any payment made as fee for 'professional services, or fee for 'technical services' and for making payments for royalty and or any sum referred to Clause V of Sec.28. The section vide explanation to section has explained the meaning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen they are judged to be less effective than they ought to be. Management thus pervades all organizations. Technical: In the case of Skycell Communications Ltd. Vs DCIT, the Hon'ble High Court had held that the popular meaning associated with the word 'technical' is involving or concerning applied and industrial science. Consultancy: is generally understood to mean an advisory service. Further, it may be fair to state that not all kinds of advisory could qualify as technical services. For any consultancy to be treated as technical services, it would be necessary that a technical element is involved in such advisory. Thus, the consultancy should be rendered by someone who has special skills and expertise in rendering such advisory. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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