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TMI Blog2017 (11) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... - merely on account of the fact that some of the repayments which have been made by the assessee in cash are not verifiable, the same cannot form the basis for disallowance. During the course of hearing, the assessee has submitted that it has adequate internal controls for repayment of caution money to the students and books of accounts have been audited and no adverse finding has been given by the auditors. Further, details of repayments in terms of caution money ledger, vouchers and other details were submitted during the course of assessment proceedings which is also not disputed by the Revenue. Further, the question of disallowance comes where there is a claim of expenditure at first place which is not the case before us. In the entirety of facts and circumstances of case, we are of the considered view that there is no basis for adhoc disallowance of 15% of caution money which has been refunded to the students during the year. We accordingly set-aside the findings of the AO and the ld CIT(A) and the disallowance of caution money so refunded is deleted in entirety. In the result, ground of assessee’s appeal is allowed Addition u/s 40A(2)(b) on account of salary payment to A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited on 28.08.2009. Considering the above, it is of the opinion that the building was completed and put to use during the second half of current financial year. The AO is therefore directed to delete addition Disallowance of deduction claimed by assessee u/s 80G - Held that:- Setting aside the matter to the file of the AO for a limited purpose to verify the validity of the approval granted by the Commissioner of Income Tax under the provisions of section 80G(5)(vi) to Bansal Public School Education Society for the financial year relevant to the impunged assessment year. Where the Assessing officer finds that the approval granted under section 80G(5)(vi) to Bansal Public School Education Society is valid and in force for the financial year relevant to the impunged assessment year, he is hereby directed to allow the necessary relief to the assessee company by way of allowing the necessary deduction in terms of provisions of section 80G of the Act as claimed by the assessee company in its return of income. The ground of the revenue is disposed off accordingly. Disallowance towards advertisement expenditure - Held that:- No evidence has been submitted to substantiate the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M SINGH YADAV, AM For The Assessee : Shri B.V.Maheshwari (CA) For The Revenue : Shri Varindra Mehta (CIT) ORDER PER: SHRI VIKRAM SINGH YADAV, A.M. These are cross appeals filed by the assessee and the revenue directed against the orders passed by ld. CIT(A), Kota dated 21.08.2014, 22.08.2014, 19.01.2016 03.02.2017 for A.Y. 2010-11, 2011-12, 2012- 13 2013-14 respectively. Given the similarity of facts and common grounds of appeal involved in all these cases, all these appeals were heard together and are being disposed off by this consolidated order. ITA No. 698/JP/14 738/JP/14 2. First, we take up the cross appeals for AY 2010-11 wherein respective grounds of appeal are as under: Assessee s grounds of appeal (ITA No. 698/JP/14) 1. That the ld. CIT(A) grossly erred in not allowing the Software expenses of ₹ 99031.00 treating them as Capital expenditure. The ld. AO disallowed ₹ 119429.00 out of this and the ld. CIT sustained the disallowance of ₹ 99031.00. 2. That the ld. CIT(A) grossly erred in not deleting the addition made by ld. AO on account of caution money of ₹ 5,00,000/-. The ld. AO mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be capital in nature which should be capitalized in the hands of the assessee. 5. Before the ld. CIT(A), the assessee submitted that the software licences expenses are paid to 2 entities namely M/s Taxsoft Marketing Pvt Ltd. and M/s Momentum Infocare Pvt Ltd. It was submitted that Taxsoft Marketing Pvt. Ltd is the maker of computation software which is installed for filing of TDS return and allied work and for which annual renewal charges are paid every year by the assessee. Regarding payment to M/s Momentum Infocare Pvt Ltd, it was submitted that it relates to renewal of yearly licence pack software which is used for internal operating system and its firewall protection amount and it is paid every year. It was submitted that for using any software of these softwares for which annual renewal fee is paid by the assessee, it cannot be said that capital expenditure has been incurred by the assessee and which has any enduring benefit. The ld.CIT(A) has gone through the details and held that expenditure of ₹ 99,031/- relate to purchase of software whereas expenditure of ₹ 2,750/- and ₹ 17,648/- was related to use of software for one year and renewal of softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication for LAN. In light of the same, we donot see any infirmity in the findings of the ld CIT(A). The expenditure of ₹ 99,031 is held to be capital expenditure and being in the nature of intangible assets, the assessee shall however be entitled for depreciation as prescribed for intangible assets under section 32 of the Act. The ground of the assessee s appeal is disposed off accordingly. 9. Regarding the 2nd ground of appeal wherein assessee has challenged the sustenance of addition made by the AO on account of caution money of ₹ 5 lakh. The Revenue is also in cross appeal in ground No. 1 wherein it has challenged the deletion of addition of ₹ 11,68,525/- made by the ld. CIT(A) out of total addition of ₹ 16,68,525/- made by the AO on account of caution money. 10. In this regard the facts of the case are that the AO made a disallowance and an addition of ₹ 16,68,825/- towards caution money to the returned income by observing as under:- The assessee has shown caution money refund closing balance as on 31.03.2010 at ₹ 71,53,000/-. Details of the receipts and payment during the year under consideration in respect of caution money is stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are kept by the assessee. In the absence of proper evidence regarding refund of caution money in cash and due to non appending of the signatures of the respective recipients, the caution money refunded during the year under consideration cannot be verified in entirety. Moreover, all the cases where caution money has been refunded in cash, cannot be verified in the absence of complete particulars of the concerned students. In view of these facts, 15% of the total caution money refunded at ₹ 1,11,25,500/- i.e a sum of ₹ 16,18,825/- was disallowed and added to the assessee s total income. 11. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) and vide its letter dated 24.6.2014 submitted as under:- Caution Money: The learned A.O. has disallowed amount out of the payment of Caution Money based on surmises and conjectures. The Caution Money is explained that when any student is admitted for education in our institute, ₹ 1000/- on account of Caution Money has been fixed to be received from him. The said amount is deposited by him and it is kept intact till he is in our institute and when he leaves the institute the said Caut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him out of the total refund, is totally wrong, baseless, based on his own thinking, hence it should be deleted. We also submit that this is the procedure followed by the Company since its inception and in no year such type of baseless disallowances were made in the past. 12. We now refer to the findings of the ld CIT(A) which are under challenge before us: I have gone through assessee s submission and AO s findings. The assessee claimed that it has not claimed any expenditure against repayment of caution money. The AO added a sum of ₹ 16,68,825/- on the basis of example of ₹ 10,000/- paid in cash without obtaining any signature. In my opinion, caution money is received during the course of business and if the same is not refunded, the same can be treated as income as and when the liability to pay such amount is written off in the books of accounts. During the year, assessee had shown to have paid ₹ 1,11,25,500/-. If any of the repayment was not actually made, the same would form the income of assessee. Considering the above, I am of the opinion that some addition was justified. However, making addition of ₹ 16,68,825/- on the basis of defects of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the caution money, paid to the students, is to be allowed fully and there is no scope of any disallowance. 14. We have heard the rival contentions and pursued the material available on record. The caution money is received from the students at the time of seeking admission for the various coaching classes being run by the assessee. It is a security deposit which is refundable to the students at the time of either completion of their classes or leaving the institute, as the case may be. The character of the caution money at the time of receipt is therefore clearly capital in nature. The same is evidenced by the fact that during the year under consideration, the assessee has received caution money of ₹ 12,754,000 from the students who have sought admission during the year and which has been treated by the assessee as current liabilities and duly accepted by the Revenue by accepting the said treatment and not bringing the same to tax as revenue receipt. 15. The limited case of the Revenue is that caution money amounting to ₹ 1,11,25,500 has been refunded in cash during the year and for which no proper receipt/evidence has been adduced by the assessee and he accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, it is noticed that the assessee company has made payment of salary to the following persons specified u/s 40A(2)(b); S. No. Name of the person Relation with the Director Salary paid in F.Y. 08- 09 Salary paid in F.Y. 09- 10 Increase in salary during the F.Y. 09-10 Percentage of increase in salary 1. Smt. Aarti Bansal Daughter 34,00,000/- 40,50,000/- 6,50,000/- 19.11% 2. Smt. Mahima Bansal Wife of Director 16,50,000/- 24,00,000/- 7,50,000/- 45.45% Considering the hefty increase in salary payment to the above noted ladies covered u/s 40A(2)(b); the assessee was asked to justify salary increase vide order sheet entry dated 05.03.2013. The assessee has failed to explain such abnormal increase in payment of salary to the said ladies, with any supportive evidence. Smt. Aarti Bansal has been looking after the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to work, her qualification degree certificate enclosed, experience and time devoted, the salary was increased from ₹ 34 lacs to 40.5 lacs and this increase is justified with the turnover of the Ajmer which has been increased from 134.32 lacs to 156.99 lacs. That growth as calculated by Ld. A.O. comes to around roughly 17% and increase in salary comes to roughly around 19% but he forget to consider the most important fact that she is not only managing Ajmer Branch but also contributing to Kota Head Office and in that scenario the increase is well deserved justified. Also the comparison between Profitability and Salary is not well justified it is evident that even some companies that are incurring losses are increasing staff remuneration as due to business expediency then as per ld. AO these employees are not even deserving salary as company is loss making but it is not so the case. The profitability of the Company is around 60% hence on the increased turnover of ₹ 22 lacs the increase @ 60% comes to ₹ 13.2 lacs out of that ₹ 6.5 lacs have been increased whereas this increase or the income is due to the entire efforts of said Smt. Arti Bansal. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer Branch was ₹ 1,56,99,720/-. Payment of ₹ 40,50,000/- to Smt. Arti Bansal appeared to be excessive, considering the fact that total turnover was only ₹ 1,56,99,720/- and there were other teachers also. Therefore, disallowance of ₹ 2,42,000/- related to Smt. Arti Bansal is confirmed. The AO has not given any reason for disallowance of salary to Smt. Mahima Bansal. Therefore, AO is directed to delete addition of ₹ 5,52,000/-. 20. During the course of hearing, the ld. AR submitted that this is in relation to the payment made to Mrs. Arti Bansal treating it to be the payment u/s 40A(2). It is submitted that Mrs. Arti Bansal is the daughter of Mr. V.K. Bansal and after getting her qualifications, she started taking coaching classes along with her father in Kota. After her marriage, she shifted to Ajmer and a branch of Bansal Classes was opened there and she started taking coaching classes over there as a Head of the branch. In consideration to that she was paid the salary. Since she was looking after entire institution at Ajmer, hence salary of ₹ 40.50 lacs was paid in place of ₹ 34 lacs paid in earlier year. It was an increase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faculty member in the Mathematics Department in IIT-JEE Division for Kota Center with over 8 years of experience. Her Job responsibilities include taking 4-5 lectures each day of Class XI/XII/XIII Target IIT-JEE, test paper setting and its solutions, DPP/Literature development, etc. As per her annual appraisal report, keeping in view her past performance and her current responsibilities, her salary was fixed at ₹ 24 lacs per annum for the financial year 2009-10 which was increased to ₹ 37.50 lacs for the subsequent financial year 2010-11, thereafter increased to ₹ 60 lacs for the financial year 2011-12 and thereafter, increased to ₹ 69 lacs for the financial year 2012-13. 26. As per AO, salary payments made to these two ladies is considered to be excessive, unreasonable and unjustifiable and in view of the incremental factor and inflationary trends, increase of salaries @ 12% is considered to be fair and judicious and the remaining salary was held excessive and disallowed in all these financial years. 27. Regarding salary payment to Arti Bansal, the contention of the assessee is that besides being a qualified faculty member where she takes classes at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. In the instant case, the revenue has not brought on record any such contemporary data in terms of other educational institutions of same scale-and size and having similar strength of student and infrastructure wherein faculty member holding the dual responsibility have been paid lesser salary. Further the Courts have held from time to time that the reasonableness of the expenditure is to be adjudged from the point of view of a business man and not of the Revenue. In other words, the reasonableness has to be seen vis-a-vis legitimate needs of the assessee company and benefit derived or accruing to the assessee company and as determined by the assessee company. In the entirety of the facts and circumstances of the case, we are of the view that the salary paid to Arti Bansal is commensurate with qualifications and experience as well as area of her work responsibility in terms of faculty, management and day to day affairs of the Ajmer branch and commensurate vis-a-vis legitimate needs of the assessee company and benefit derived or accruing to the assessee company. In the result, disallowance of salary payment to Arti Bansal under the provisions of section 40A(2)(b) is hereby delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 8 lacs in financial year 2011-12 relevant to assessment year 2012-13 and by ₹ 6 lacs in financial year 2012-13 relevant to assessment year 2013-14. The said findings of the ld CIT(A) is therefore in consonance with our reasoning given above in case of Arti Bansal. However, there is no comparative data that is available and analysed for the financial year 2009-10 and 2010-11. We accordingly confirm the deletion of addition of salary payments to Mahima Bansal for AY 2010-11 and AY 2011-12. For AY 2012-13 and AY 2013-14, we confirm the addition as sustained by the ld CIT(A) and balance addition is deleted. The respective grounds of appeal are disposed off accordingly. 32. Regarding ground no. 2 of revenue s appeal wherein the action of the ld CIT(A) has been challenged in deleting the addition of ₹ 19,65,348/- made by the AO on account of depreciation on PLD unit building on the basis of additional evidence admitted in violation of Rule 46A. 33. In this regard, briefly stated the facts of the case are that the AO made an addition of ₹ 19,65,348/- observing as under:- The assessee has claimed that the PLD Unit Building was constructed and its constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oo was finished by December, 2009. As such the Company claimed depreciation @ 5% treating it to be in use below 6 months. The learned A.O. has called upon some information such as electricity bill, completion certificate etc. However, we have submitted the copy of the electricity bill since the bills are common for the entire premises. As regards completion certificate, it was submitted that it is not a system in Kota to obtain any completion certificate. However, we got it valued from the valuer. He has also mentioned about completion of it, but by that time the certificate was given, the assessment was complete. We are now submitting a completion certificate of a registered valuer which contains therein the details of the expenditure incurred. The foremost thing is that the expenditure was last incurred in December, 2010, hence it is presumed that by December, 2010 the said building was complete. We also submit that in relation to the valuation certificate the same query was raised by the learned A.O. in the last year and in our reply we filed the valuation certificate from a reputed architect of Kota which has also been confirmed by the same that it is a two page report, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the electricity bills are common for both the premises. The assessee submitted that after completion of new building, the electricity load was got increased. The assessee further submitted that in Kota, there is no system of obtaining a completion certificate. I have gone through the construction account of the building and it was seen that in the current financial year, last payment was made on 21.12.2009. It was also seen that assessee applied for increase in electric load from 350KW to 500 KW on 27.07.2009 and demand note was issued (by Jaipur Vidhyut Vitran Nigam Ltd.) on 21.08.2000, which was deposited on 28.08.2009. Considering the above, I am of the opinion that the building was completed and put to use during the second half of current financial year. The AO is therefore directed to delete addition of ₹ 19,65,348. This ground of appeal is allowed. In the result, the ground of the revenue is dismissed. 36. Regarding the ground No. 4 of revenue s appeal wherein the revenue has challenged the action of ld CIT(A) in deleting the addition of ₹ 4,90,07,505/- made by the AO on account of disallowance of deduction claimed by assessee u/s 80G of the Act. 37. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 ₹ 10,00,000/- 16 29 15.03.2010 ₹ 1,00,00,000/- 17 39 16.03.2010 ₹ 1,00,00,000/- 18 40 17.03.2010 ₹ 1,00,00,000/- 19 41 17.03.2010 ₹ 1,00,00,000/- 20 46 19.03.2010 ₹ 1,00,00,000/- 21 47 19.03.2010 ₹ 1,00,00,000/- The above noted donations aggregating ₹ 9,80,00,200/ - have been disallowed by the assessee in the computation of income; but deduction of ₹ 4,90,07,505/- has been claimed u/s 80G against the gross total income computed at ₹ 98,01,50,108/-. During the course of assessment proceedings, the assessee was asked vide this office letter dated 29.10.2012 to produce register u/s 301 of the Company Law, maintained by it for the year under consideration so as to verify the veracity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract or arrangement which is proposed to be entered into on behalf of the company. Such disclosure is to be made at the meeting of Board of Directors. Section 299(1) of the Companies Act, reads as under Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose, the nature of his concern or interest at a meeting of the Board of directors. The words in any way , whether directly or indirectly, proposed contract or arrangement entered into or to be entered into would indicate that scope of the section is wider and covers all possible transactions with relatives, firms, companies in which the director is associated by virtue of his office or otherwise. In the case of assessee company, no such disclosure has been made in the so called resolution dated 12.05.2009. The Directors of the Company are also either trustees of the Bansal Public Education Society, Registered Office, 5-A-13, Vigyan Nagar, Kota or close relatives of the trustees, as detailed below:- 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of section 80G, what is required is to donate the amount to any entity registered u/s 80G. If the activities of such entity are doubtful, then the donation can be added in the hands of such entity. The fact of donation was not doubted. Section 80G does not prohibit donations to exempted entities controlled by related persons. Section 80G does not require that the donation should have nexus with the business purposes of donee. Section 80G does not require that the donation should be for commercial expediency. Most of these things are required for allowing deduction of business expenditure u/s 37 of the I.T. Act. Considering the facts, it is held that assessee has fulfilled all the conditions necessary for claiming deduction u/s 80G. The AO is therefore directed to delete addition of ₹ 4,90,07,505/- 39. During the course of hearing, the ld AR reiterated his submissions made before the ld CIT(A). Further, he submitted that the donations have been made after due approval from the Board of Director s of the assessee s company. He further submitted that there is no violation of any of the provisions of the Companies Act. He further submitted that the Bansal Public School E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to the Assessing officer to verify the same. We are accordingly setting aside the matter to the file of the AO for a limited purpose to verify the validity of the approval granted by the Commissioner of Income Tax under the provisions of section 80G(5)(vi) to Bansal Public School Education Society for the financial year relevant to the impunged assessment year. Where the Assessing officer finds that the approval granted under section 80G(5)(vi) to Bansal Public School Education Society is valid and in force for the financial year relevant to the impunged assessment year, he is hereby directed to allow the necessary relief to the assessee company by way of allowing the necessary deduction in terms of provisions of section 80G of the Act as claimed by the assessee company in its return of income. The ground of the revenue is disposed off accordingly. ITA No. 699/JP/14 739/JP/14 44. We now come to cross appeals filed for AY 2011-12 wherein the respective grounds of appeal are as under: Assessee s grounds of appeal (ITA No. 699/JP/14) ( 1) That the ld. CIT(A) grossly erred in not deleting the addition made by ld. AO on account of caution money ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 10,000/- was not justified. Considering the facts of the case, in my opinion, an addition of ₹ 5,00,000/- would meet the end of justice. The AO is directed to delete balance addition of ₹ 11,50,450/-. This ground of appeal is therefore partly allowed. 46. We have already examined this issue at length and our findings and directions contained in ITA No. 698/JP/14 738/JP/14 shall apply mutatis mutandis to this year as well. In the result, assessee s ground of appeal is allowed and revenue s ground of appeal is dismissed. 47. Regarding ground No. 2 of assessee s appeal, briefly stated facts of the case are that the AO made a disallowance towards advertisement expenditure of ₹ 57,200/- observing as under:- As per details filed, the assessee has claimed the following amounts as expenditure under the head advertisement :- Secretary RA.MA Vidyalaya Civil Lines : ₹ 5,100/- Kota District Cricket Association : ₹ 50,000/- Kota Zila Body Building : ₹ 2,100/- Total : ₹ 57,200/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d facts of the case are that the AO disallowed a sum of ₹ 2,00,000/- observing as under:- The assessee company has debited an amount of ₹ 2,00,000/- on 14.09.2010 under the head Public Welfare Expenses, with the following citation:- Conference Hall construction for Police Force. During the course of assessment proceedings, the assessee was asked to justify the said payments as to how this amount qualifies for claim as revenue expenditure. The assessee has not been able to give any plausible explanation, except stating vide reply filed on 13.03.2014 that Public welfare expenses are the need of today we have to contribute something for public it is part of business . Payment of this amount as per the assessee s version has no nexus with the business purposes of the assessee company and there was no commercial expediency to justify this expenditure, which is otherwise not admissible as per law. Hence; it cannot be held that the said expenditure has been incurred wholly and exclusively for the business purposes u/s 37(1). In view of these facts, this amount of ₹ 2,00,000/- is disallowed and added to the assessee s total income. 51. The relevant findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by assessee u/s 80G, the relevant finding of the CIT(A) is reproduced as under:- I have gone through assessee s submission and Assessing Officer s findings. The assessee had made payment of ₹ 9,01,00,000/- to Bansal Public Education Society and ₹ 5,00,000/- to Indian Association of Muscular Dystrophy. The AO held that there was no nexus of huge donation made to the said society with the business purpose of the assessee and there was no commercial expediency in making such donations. The AO held that it was a clever strategy to divert profits of the company under the garb of donations to the trust. In my opinion, for the purposes of section 80G, what is required is to donate the amount to any entity registered u/s 80G. If the activities of such entity are doubtful, then the donation can be added in the hands of such entity. The fact of donation was not doubted. Section 80G does not prohibit donations to exempted entities controlled by related persons. Section 80G does not require that the donation should have nexus with the business purposes of donee. Section 80G does not require that the donation should be for commercial expediency. Most of these things ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,442/- ₹ 10,328/- HP Printer ₹ 450/- ₹ 1,347/- Total ₹ 54,763 Accordingly, excess depreciation of ₹ 54,763/- is disallowed and added to the assessee s income. 57. The relevant findings of the ld CIT(A) is as under: I have gone through assessee s submission and AO s findings. On similar facts, the Hon ble ITAT in the case of Shri Ram Kishan Verma (ITA No. 589/JP/2011, A.Y. 2006-07) has allowed depreciation @ 60% on printers and deleted the addition. Following the decision of Hon ble ITAT, the AO is directed to delete addition of ₹ 54,763/-. This ground of appeal is allowed. 58. We have heard the rival contentions and purused the material available on record. Nothing has been brought on record to suggest that Xerox machine cannot function independent of the computer system unlike a printer whose functionality is interconnected with a computer system. In light of the same, we upheld the action of the AO in treating Xerox machine as eligible for depreciation @ 15% as a standalo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct clearly establish that the PLD Unit building is still incomplete as on 31.03.2011 and hence; the incomplete valuation report dated 20.04.2013 is absolutely incorrect, ingenuine and is unacceptable. In the absence of the relevant documentary evidence, regarding completion and occupation of the said building, it is not proved that the assessee has used this asset for its business purposes. Accordingly; depreciation claimed at ₹ 38,23,006/- on the PLD Building is disallowed and added to the assessee s total income. 61. The relevant finding of the CIT(A) is reproduced as under:- I have gone through assessee s submission and AO s findings. The AO disallowed the depreciation mainly on two counts. No electricity bill was produced. No completion certificate was produced. Two payments of ₹ 5.00 Lac were made to Man Projects Construction Pvt. Ltd. on 24.02.2011 28.03.2011. I have held (AY 2010-11- Appeal No. 70/2013-14) as under:- The assessee submitted that the new building was adjacent to the existing building and both the buildings have common connection and the electricity bills are common for both the premises. The assessee submitted that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO grossly erred on law facts in making the addition by disallowing the salary paid to Smt. Mahima Bansal by invoking sec. 40A(2)(b) of I.T. Act, 1961 and the ld. CIT grossly erred in sustaining the part of addition of ₹ 800,000/-. ( 3) That the ld. AO as well as ld. CIT(A) grossly erred in disallowing the Advertisement expenses ₹ 56000/- ( 4) That the ld. AO as well as ld. CIT(A) grossly erred in making the disallowance of ₹ 100,000/- the expenses incurred on Public welfare i.e. contribution to police welfare fund. Revenue s grounds of appeal (ITA No. 298/JP/16) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in:- ( i) deleting addition of ₹ 8,57,450/- out of total addition of ₹ 12,57,450/- made by disallowing refund of caution money; ( ii) deleting addition of ₹ 35,20,000/- out of total addition of ₹ 43,20,000/- made by invoking provisions of section 40A(2)(b) on account of excess salary payment; ( iii) deleting addition of ₹ 1,03,00,000/- made by disallowing deduction claimed by the assessee company u/s 80G of the Act; ( iv) deleting addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahima Bansal under section 40A(2)(b), we have already examined this issue at length in ITA No. 698/JP/14 738/JP/14 and as discussed therein, the order of the ld CIT(A) is confirmed. Accordingly, both the revenue s and assessee s appeal is dismissed. 67. Regarding ground No. 3 of the assessee s appeal, the relevant finding of the CIT(A) is reproduced as under:- I have gone through the assessee s submission and AO s findings. My predecessor in the earlier Year had on part expenses of similar nature in the same head of expenditure had held that- Last year, I have allowed similar payments on the ground that the same were made for the purposes of advertisement. However, no evidence was submitted to show that the payments in current year were for the purposes of advertisement. Therefore, it cannot be held that these payments were for the purposes of business. Alternatively, these payments can be claimed as donation. Donations etc. can be claimed under the provisions of Act after fulfilling certain conditions, e.g. donations can be claimed u/s 80G etc. As assessee has failed to fulfill any of the condition for claiming deduction, the disallowance by AO was justified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provision of act after fulfilling certain conditions, e.g. donations can be claimed U/s 80G etc. As assessee has failed to fulfill any of the conditions for claiming deduction, the disallowance by AO was justified. Therefore, the addition of ₹ 1,00,000/- is confirmed. The ground of appeal, therefore, dismissed . 71. In our view, the contention of the assessee that the contribution towards police welfare fund has a necessary nexus with the safety of the students in and around Kota and hence, with the business of the assessee cannot be rejected. It is an expenditure which has been laid down to develop and strengthen the coordination and working relationship with the local police department. Given the budgetary constraints which, at times, are faced by police department, where an assessee contributes certain amount for welfare of the police personnel to help improve their extreme work conditions where they are deployed in close proximity to assessee s area of operations, the necessary nexus is certainly established with the business of the assessee. In our view, such an expenditure will be eligible for allowance under section 37(1) as incurred for the purposes of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: Assessee s grounds of appeal (ITA No. 296/JP/17) 1. That the Ld. AO grossly erred on Law facts in making the addition to wards payment of caution money and the ld. CIT(A) also erred in sustaining the disallowance of ₹ 50,000/- out of ₹ 1,78,650/- the /- addition made by A.O. 2. That the Ld. AO grossly erred on Law facts in disallowing the salary by invoking sec. 40A(2) (b) and the Ld. CIT(A) also erred in sustaining the addition of ₹ 600,000/-. 3. That the Ld. AO grossing erred on Law Facts in disallowing the students promotion expenses ₹ 1492788/-. The ld. C(T(A) also erred in sustaining the addition of ₹ 500,000/- out of said amount of ₹ 14,92,788/-. 4. That the Ld. AO grossly erred on Law Facts in disallowing the travelling expenses ₹ 3,02,888/- and the Ld. CIT(A) also erred in sustaining ₹ 1,51,444/-. Revenue s grounds of appeal (ITA No. 345/JP/17) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in :- (i) Deleting addition of ₹ 1,28,650/- out of total addition of ₹ 1,78,650/- made by disallowing refund of caution money; (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry dated 24.02.2016, assessee asked to submit the justification of these huge expenses in comparison to last year. The assessee vide his reply dated 08.03.2016 has submitted as under : The source of an income in a coaching institute is student and any promotion that is been done to promote source is well justified expenses as it is directly relatable to the income therefore it is most sacrosanct expenses that is fully allowable therefore the student promotion expenses that has various subheads as enclosed ledger is paid majorly towards rankers and best performing student through performing Farewell function or giving scholarships to top rankers or all India Rankers prizes etc and to all students at large in form of medical tie-ups and student walfares it in classrooms. Therefore all these expenses are directly relatable. Secondly there are down fall in revenues of the company and various new centres have been increased during the year to promote business therefore in current year both the expense and is its percentage has increased but this is one the most necessary expenditure and is paid by cheques so should be allowed fully. The above reply filed by the assessee has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for want of proper supporting documentation. Merely generalization and holding that payments have been made in cash doesn t necessarily lead to disallowance of eligible expenditure. There is no basis for adhocism in the eyes of law. In the result, disallowance made by the AO is hereby deleted. The assessee s ground of appeal is allowed and revenue s ground of appeal is dismissed. 83. Regarding common ground no. 4 of assessee s appeal and ground no. 5 of the revenue s appeal, the relevant facts are as under:- On examination of Profit Loss A/c of the company it is seen that assessee has claimed Travelling Expenses of ₹ 30,28,885/-. Vide order sheet entry dated 05.02.2016, assessee asked to submit the justification of these expenses. The assessee vide his reply dated 08.03.2016 has submitted as under: During the year as the revenue from Kota Centre are on fall so Management is aggressively involved in setup of new centres as to reduce the dependency on Kota Centre therefore these expenses are incurred. Therefore further relating the Commercial Expediency, expenditure may not be incurred under any legal obligation but yet it is allowable as business expenditure if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant finding of the CIT(A) is reproduced as under:- In my opinion, in this year also, the fact of donation was not doubted. Sec. 80G does not prohibit donations to exempted entities controlled by related persons. Sec. 80G does not require that the donation should have nexus with the business purposes of done. Considering that the facts involved in this year are exactly similar to the previous year, I am inclined to follow the order of my predecessor in the earlier year as mentioned above. Accordingly, it is held that assessee has fulfilled at the conditions necessary for claiming deduction u/s 80G. The AO is therefore directed to delete addition of ₹ 1,50,25,500/-. This ground of appeal is allowed. 87. We have already examined this issue at length and our findings and directions contained in ITA No. 698/JP/14 738/JP/14 shall apply mutatis mutandis to this year as well. In the result, revenue s ground of appeal is allowed for statistical purposes. In the result, all the appeals of the revenue and the assessee for the respective years are disposed off with above directions. Order pronounced in the open Court on 31/10/2017. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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