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TMI Blog2017 (8) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... - amount below the threshold limit of TDS specified - Held that:- Hon’ble Delhi High Court in case of CIT Vs. DLF Commercial Project Corporation (2015 (7) TMI 576 - DELHI HIGH COURT) wherein it has been held that obligation to deduct TDS is only with respect to income as amounts paid as reimbursement of expenses do not have the character of income. In-fact, the effective amount paid towards handling charges was only ₹ 4,477/- including taxes which is much below the threshold limit of TDS specified in Section 194C of the Act. Therefore, the Ld. AR’s contention that this amount was not liable to TDS and no disallowance under Section 40(a)(ia) can be made is accepted. Disallowance of certification fees over a period of 5 years - Held that:- CIT(A)’s finding that the CC Certification was valid for 5 years but in the manner which the CIT(A) has directed to allow 20% of the said expenses in each of the 5 years by stating that the expenses are revenue in nature is not proper. If it is Revenue expense then the same should be allowed in full in the year of incurrence even though it provides long term benefit. Once, it is stated that it is a Revenue expenditure the assessee is entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of proprietorship concerns namely M/s. Garg Industries and M/s D.P. Garg sons respectively. During the year the assessee has declared taxable income under the head Profit Gains from Business and Profession and income from other sources. On going through the balance sheet and profit loss account for the assessment year under reference and for immediate preceding year it is noticed that the total turnover of M/s. Garg Industries was shown for Assessment Year 2007-08 at ₹ 18,26,26,453/- which has been increased in Assessment Year 2008-09 to ₹ 19,71,50,240/-. The increase, shown in turnover as compared to the immediate preceding Assessment Year is 7.95% whereas a perusal of P L a/c shows that the assessee has paid interest at ₹ 19,49,889/- in Assessment Year 2007-08 which has increased to ₹ 86,09,999/- in Assessment Year 2008-09. Total increase in interest expenditure as compared to immediate preceding year works out at 341.56%. It is noted that the Proprietor s capital account as on 31/3/2008 was negative by Rs.(-) 1,36,21,274/-, whereas it was at ₹ 69,32,998/- as on 31st March 2007. Similarly, secured loan was shown at ₹ 9,38,87,705/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer disallowed ₹ 9,24,810/-. 5. Being aggrieved by the order of the Assessing Officer, the Assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 6. The Ld. AR submitted that Ground No. 1 is not pressed. As relates to Ground No. 2, the Ld. AR submitted that the Assessing Officer disallowed an amount of ₹ 33,50,716 by holding that business purpose of some travels was not proved and CIT(A) sustained the disallowance of ₹ 17,29,436/- for the expenses incurred towards the foreign travel to UK by Arshia Garg, Rama Garg, Varun Garg and Adiya Singh as well as ₹ 6,57,593/- for foreign travel to USA by the assessee and Mr. Rakesh Jindal to USA stating that the assessee failed to prove the business relation with USA. The Ld. AR submitted that the CIT(A) has allowed the foreign travel expenses incurred in case of Mr. Varun Garg (travel 1, 2 and 5 as stated in CIT(A) order) and Rama Garg (travel 5) for their other visits to UK when they accompanied the assessee which shows that this is accepted that they were looking after the business of the assessee. All these were qualified to look after the business. Evidences regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of handling expenses and therefore liable to TDS. (Para 7.1 page 31 of CIT(A) order) These expenses were incurred towards cargo expenses for sending samples for an exhibition Practical World 2008 in Cologne Germany. This amount included reimbursement of air freight charges and other expenses incurred in clearing the goods in Germany which does not constitute part of his handling charges. Copies of bills are at pages 207 and 211 in PB. Copy of Airway bill for ₹ 37,968/- is on page 208 which proves that the said amount was paid by R.E.Rogers on behalf of the assessee and included the said amount in its bill for reimbursement of the same. Page 209 is the bill for terminal charges. Similarly, bill at page 211 shows that the amount of ₹ 37,475/- is towards reimbursement of expenses in foreign currency. No TDS is required to be deducted on reimbursement of expenses. Reliance is placed on the judgment in the case of CIT Vs. DLF Commercial Project Corporation 12015-TIQL-1609-HC-DEL-IT1 DoD; 15/07/15 wherein it has been held that the obligation to deduct TDS is only with respect to income . As amounts paid as reimbursement of expenses do not have the character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deleted and the entire expense of ₹ 10,56,925 should be allowed in this year. 7. The Ld. DR submitted that the CIT(A) has rightly made an addition on account of travel expenses incurred towards two foreign travel. The CIT(A) also has analyzed while disallowing the said expenses. The CIT(A) has analyzed those foreign trips of those particular persons and found that there is no direct connection/nexus with the business of the assessee. In-fact, the assessee has also not given any documentary proof as related to the said foreign travels in respect of business activities. The Ld. DR further submitted that the CIT(A) has rightly held that disallowance of ₹ 8,45,540/- which is 80% of ₹ 10,56,925/- by allowing as the certification was valid only for 5 years. Thus, the CIT(A) has rightly directed to allow 20% of the said expense in each of the 5 years for which the certificate is valid. Thus, the CIT(A) has accepted the said expense to be revenue in nature. The Ld. DR further submitted that disallowance of 78,075/- u/s 40(a) (ia) for amount paid towards Trade Fair Expenses has also been properly determine that all the expenses are covered under the definition of han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to Trade Fair Expenses, no TDS is required to be deducted on reimbursement of expenses for which the Ld. AR relied upon the judgment of the Hon ble Delhi High Court in case of CIT Vs. DLF Commercial Project Corporation (2015-TIOL-1609-HC-DEL-IT order dated 15.07.2015) wherein it has been held that obligation to deduct TDS is only with respect to income as amounts paid as reimbursement of expenses do not have the character of income. In-fact, the effective amount paid towards handling charges was only ₹ 4,477/- including taxes which is much below the threshold limit of TDS specified in Section 194C of the Act. Therefore, the Ld. AR s contention that this amount was not liable to TDS and no disallowance under Section 40(a)(ia) can be made is accepted. 10. As relates to disallowance of ₹ 8,45,540/- for allowing the certification fees over a period of 5 years, the CIT(A) s finding that the CC Certification was valid for 5 years but in the manner which the CIT(A) has directed to allow 20% of the said expenses in each of the 5 years by stating that the expenses are revenue in nature is not proper. If it is Revenue expense then the same should be allowed in full in ..... 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