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TMI Blog2017 (4) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... d in view of the factual and legal position discussed as above. - Decided against revenue Disallowance of Travelling and Conveyance - CIT(A) restricted addition to 5% - Held that:- The assessee had filed complete details of reimbursement of travelling expenses in the present case before CIT(A). When these details were forwarded to the AO the AO did not find any fault. He however, has stated in his remand report that the assessee could not produce certain other details called for as to what were the other details called for is not spelt out in the remand report. It is therefore clear that there is no valid basis for sustaining the disallowance made by the AO. The CIT(A) has however has taken a conservative approach and disallowed 5% of the reimbursement of travelling expenses. We are of the view that no fault could be found with the approach adopted by CIT(A).- Decided against revenue Disallowance of Labour Supply Expenses - CIT(A) restricted addition to 5% - Held that:- We are of the view that the order of CIT(A) on this issue does not call for any interference. As already observed despite filing of all the details, the AO has given a vague remand report that some of the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neries worth ₹ 2.46 crores which were additions to the plant and machinery during the relevant previous year were basically installed at various customer s site. The assessee further explained justification for installation of the plant and machinery at customer s site as owing to the nature of business of the Assessee. The Assessee provides water treatment, process-focused programs and emissions reduction across a broad range of end users in various industries. For the above purpose the Assessee supplies chemicals. The effect of the chemicals on the purpose for water treatment or emission reduction etc., requires constant monitoring for which the Assessee also installs equipments at the premises of the client where the chemicals are used. It was further explained that the chemicals warrant specificity in dosing. Under or over does of products can lead to system damages of vary high proportion including questions on customer equipment integrity. It is with this very intent that the Assessee provides customers equipments which can deliver precise quantity either by way of electro-mechanical (dosing pumps) or precise dye based technology like 3D, trasar equipment which are desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the AO, the assessee did not charge any rent for those machineries nor enhanced its sale prices. The AO thereafter concluded that the Assessee was not entitled to depreciation or additional depreciation since the machineries were not installed at the assessee's factory premises and not used for the purpose of the assessee's business. The quantum of depreciation on plant and machinery installed at customers site disallowed was worked as under:- 1. Plant and machineries installed for more than 180 days amounting to ₹ 2,22,86,680/-. Depreciation and additional depreciation 15% + 20% =35% on ₹ 2,22,86,680/- . ₹ 7800338/- 2. Balance plant and machineries installed for less than 180 days amounting to ₹ 24,00,000/-. Depreciation and additional depreciation @ 17.5% .. ₹ 4,20,000/- Hence, total depreciation disallowed was ₹ 82,20,338/- 5. On appeal by the assessee CIT(A) deleted the disallowance on depreciation. Before CIT(A) the assessee reiterated submissions as were made before the AO. It was submitted that without the equipments which were deployed at customers' sites it was not possible to monitor the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m lease is shown as income in the account of the lessor. I have considered the finding; of the AO and the written Submission as well as case law filed by the A.R. during the appellate proceeding. I think assessee's case on this issue is squarely covered by the ratio decided by the Hon'ble Supreme Court in the case of ICDS Ltd. (supra). Thus, assessee's appeal on ground no : 1 (a) and 1 (b) are allowed. 8. Aggrieved by the order of CIT(A) the revenue has raised ground no.1 and 2 before the Tribunal. The ld. DR reiterated the stand of the AO as reflected in the order of assessment. According to him the terms of the agreement between the assessee and the customers with regard to the ownership of the equipments which were allowed to be installed in the premises of the assessee s client has not been produced. It was also submitted by him that the assessee has not correlated each of the items which were installed in the customer s premises and as to how installation in the customer s site was necessary for the purpose of performing the obligation of the assessee to its customers. The ld. Counsel for the assessee reiterated the submissions as were made before CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling. The AO called upon the Assessee to furnish details of such travelling made by the employees, places of visit, amount incurred from their pockets and how it was reimbursed. The Assessee in reply furnished a list of 122 persons to whom reimbursement was made. According to the AO, the Assessee did not file any other details. According to the AO, the Assessee also failed to prove the business exigencies in support of such huge reimbursement of travelling expenses. The AO therefore held that genuineness of such reimbursement of expenses on account of travelling was not established by the assessee. Regarding the balance expenditure of ₹ 2,75,74,507/- the AO observed that the assessee has given a brief description of party wise payments made for local travelling expenses and also the payments made to the travel agents. According to the AO therefore, it was not understood why a sum of ₹ 3.15 crores was paid by the employees from their pocket and subsequently reimbursed by the assessee. The AO therefore held that the assessee failed to substantiate its claim with supporting documents, the reimbursement made to the employees on account of travelling and conveyance. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no valid basis for sustaining the disallowance made by the AO. The CIT(A) has however has taken a conservative approach and disallowed 5% of the reimbursement of travelling expenses. We are of the view that no fault could be found with the approach adopted by CIT(A). Ground no.3 raised by the revenue is dismissed. 17. Ground No.4 raised by the revenue reads as follows :- 4. That on the facts and circumstances of the case Ld. CIT(A) erred in restricting the disallowance of Labour Supply Expenses to 5% of total disallowance ₹ 1,06,11,230/- i.e. ₹ 5,30,560/- without considering the facts of the case as well as the information brought on record by the AO. in the course of assessment proceeding as well as in the remand proceedings. 18. The AO disallowed 5% of the labour supply expenses of ₹ 1,06,11,230/- for want of details as to the list of charges in connection with which these expenses were incurred. The following were the relevant observations of the AO in this regard :- 5. The assessee has claimed labour supply expenses of ₹ 5,33,16,000/- which includes site expenses reimbursed of ₹ 1,06,11,230-. Ne details of such exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our supply expenses. We do not find any fault with the approach of CIT(A). Consequently we dismiss ground no.4 raised by the revenue. 22. Ground No.5 raised buy the revenue reads as follows :- 5. That on the facts and circumstances of the case Ld. CIT(A) erred in allowing the 'Misc. Expenses of ₹ 51,98,275/- without considering the facts of the case as well as the information brought on record by the AO. in the course of assessment proceeding as well as in the remand proceedings. 23. The assessee claimed a sum of ₹ 3,54,58,000/- on account of miscellaneous expenses. According to the AO the details of such expenses showed that an amount of ₹ 1,03,96,550/- was on account of sundry expenses. According to the AO no details of such sundry expenses was produced by the Assessee and therefore the genuineness of such claim was not properly established. Accordingly, 50% of such expenses i.e. ₹ 51,98,275/- was disallowed in absence of proper bills and vouchers. 24. Before CIT(A), the Assessee submitted details of all such sundry expenses. The details were forwarded to the AO for his comments. In his remand report the AO reiterated his stand as ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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