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TMI Blog2017 (5) TMI 1414X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO on this issue to the extent of 42,03,229/-. Moreover, as rightly pointed out by the assessee, the Revenue has challenged the relief given by the CIT(Appeals) on this issue in the ground raised with specific reference of 40(a)(i) of the Act for the failure of the assessee to deduct tax at source from the relevant payment whereas the provisions of Sec. 40(a)(i) of the Act introduced with effect from assessment year 2004-05 are actually not applicable to the year of A.Y. 2003-04. Disallowance u/s. 40A(3) - Held that:- It is observed that the expenditure incurred by the assessee in cash was partly covered by the exceptional circumstances as prescribed in Rule 6DD inasmuch as the said expenditure was incurred by the assessee at different sites situated in remote places where banking facilities were not available. A finding of fact in this regard has been recorded by CIT(Appeals) in his impugned order after verifying the relevant details and documents furnished by the assessee and after obtaining remand report from the AO wherein no adverse comments were offered. At the time of hearing before us, the Ld. DR has not been able to rebut or controvert these finding recorded by CIT(Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the business of manufacturing of Relays as well as signaling equipment for Railways. The return of income for the year under consideration i.e. A.Y. 2003-04 was filed by it on 27.11.2003 declaring total income of ₹ 26,81,000/-. In the balance-sheet field along with the said return, sales tax of ₹ 2,29,787/- and Central Sales Tax of ₹ 15,72,174/- was shown to be payable by the assessee. During the course of assessment proceedings, the details of payment of the said outstanding amounts were called for by the AO and on verification of the same, he found that the outstanding amount of sales tax and central sales tax was paid by the assessee only after 30.11.2003 i.e., the due date of filing of return for the year under consideration. He therefore invoked the provision of Sec. 43B and made a disallowance of ₹ 18,01,961/- on account of outstanding sales tax and central sales tax. He also observed that deduction for the same was allowable to the assessee in the year in which the payment of sales tax and central sales tax was made by the assessee. 5. The disallowance of ₹ 18,01,961/- made by the AO on account of outstanding sales tax and central sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue has challenged the action of CIT(Appeals) in deleting the disallowance of ₹ 60,92,457/- made by the AO u/s40(a)(i) on account of payment of consultancy charges made without deducting tax at source. 8. During the year under consideration, the assessee had claimed deduction on account of consultancy charges of ₹ 60,92,457/- paid to M/s Alcatel ACL AG, Germany. In this regard, it was noticed by the AO that out of said amount, tax at source was deducted by assessee in respect of payment of ₹ 35,82,767/- only and no tax was deducted from the balance amount of ₹ 60,92,457/-. When this position was confronted by the AO to the assessee, the latter explained that payment of ₹ 60,92,457/- was made in relation to cost of software and hardware purchased by the assessee on which no tax at source was required to be deducted. This explanation of the assessee, however was not accepted by the AO on the ground that entire amount of ₹ 96,76,223/- paid to M/s Alcatel ACL AG, Germany was claimed by the assessee as consultancy charges. He, therefore, invoked the provision of Sec. 40(a)(i) and made for disallowance of ₹ 60,92,457/- on this issue. 9. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consultancy charges and since the same was established by the assessee by bringing relevant and cogent evidence in the form of invoice issued by the supplier, we are of the view that the CIT(Appeals) was fully justified in accepting the claim of assessee on this issue and deleting the disallowance made by AO u/s 40(a)(i) by holding that tax at source was not required to be deducted by assessee from the payment of ₹ 60,92,457/- as the same was made towards supply of software and hardware. We, therefore find no infirmity in the impugned order of CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss ground No.2 of the Revenue's appeal. 11. In ground No.3, the Revenue has challenged the action of the CIT(Appeals) in deleting the addition of ₹ 42,03,229/- made by the AO on account of consultancy charges. 12. The details of consultancy charges furnished by the assessee during the course of assessment proceedings revealed that a sum of ₹ 44,00,846/- was paid by the assessee to various persons/parties in India. The claim of the assessee for the said consultancy charges was examined by the AO and on such examination, he found that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the claim of the assessee that the amount of ₹ 42,03,229/- paid to the persons/parties in India and booked under the head "consultancy charges" was actually paid on account of purchase/supply of material was duly supported by the documentary evidence filed by the assessee for the first time before the CIT(Appeals) and since the said evidence was not filed by the assessee before the Assessing Officer during the course of assessment proceedings for the reason explained by the assessee, the CIT(Appeals) forwarded the same to the assessee for his verification and comments. In the remand report submitted to the CIT(Appeals), the AO however did not make any adverse comment on the additional evidence filed by the assessee in support of its case and keeping in view the same as well as all the other facts of the case, we find no infirmity in the impugned order of CIT(Appeals) deleting the disallowance made by the AO on this issue to the extent of ₹ 42,03,229/-. Moreover, as rightly pointed out by the Ld. counsel for the assessee, the Revenue has challenged the relief given by the CIT(Appeals) on this issue in the ground raised with specific reference of 40(a)(i) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8DD and the disallowance made by the AO u/s 40A(3) of the Act to that extent was not sustainable. Keeping in view this submission made on behalf of assessee which was duly supported by relevant details and documents and the remand report submitted by the AO thereon wherein no specific adverse comments were made, the CIT(Appeals) accepted the stand of the assessee and deleted the disallowance of ₹ 2,25,258/- made by the AO u/s. 40A(3) of the Act to the extent of ₹ 1,87,458/-. 18. We have heard argument of both the sides on this issue and also perused the relevant material on record. It is observed that the expenditure incurred by the assessee in cash was partly covered by the exceptional circumstances as prescribed in Rule 6DD inasmuch as the said expenditure was incurred by the assessee at different sites situated in remote places where banking facilities were not available. A finding of fact in this regard has been recorded by CIT(Appeals) in his impugned order after verifying the relevant details and documents furnished by the assessee and after obtaining remand report from the AO wherein no adverse comments were offered. At the time of hearing before us, the Ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said expenses and the quantum of turnover. It was also brought to the notice of CIT(Appeals) by the assessee that there was no adverse finding recorded by the AO in his assessment order as regards genuineness of the relevant expenditure as well as their business purpose. It was contended that the disallowances out of various expenses were made by the AO on the basis of surmise and conjecture and mathematical correlation in percentile increase which was not justified. When these submissions made by the assessee were forwarded by CIT(Appeals) to the AO for his comments, the AO did not specifically offer any adverse comments except reiterating the stand taken by him in the assessment order. Keeping in view the submissions made by the assessee as well as the material available on record including the remand report submitted by the AO, the CIT(Appeals) held that the ad hoc disallowance made by the AO out of various expenditure on arbitrary basis was excessive and unreasonable and accordingly he restricted the same to the extent as indicated above. 22. We have heard the arguments of both the sides on the issues involved in ground No. 2 to 6 of the Revenue's appeal relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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