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TMI Blog2017 (12) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... Court that amendment brought by Finance Act 2012 in section 40(1)(ia) and 201(1) is declaratory and curative and therefore, such an amendment shall have retrospective effect from 1.4.2005. Accordingly, we are setting aside the entire matter to the file of the Assessing Officer who shall examine the matter in view of the amended provisos and the onus would be upon the assessee to produce the certificates in respect of interest paid to other NBFCs also and Assessing Officer shall examine all the certificates and decide the issue in accordance with the law. Thus, the assessee’s appeal is treated as allowed for statistical purposes. Allowance of business expenditure - prove that the expenses incurred is purely for business purpose and or for commercial expediency - Held that:- CIT(Appeals) merely by comparing the net profit of the earlier years has deleted the said disallowance which according to us may not be the correct approach while dealing with the issue of disallowances of expenses debited and claimed as revenue expenditure. Expenses debited and claimed qua that year needs to be proven. If bills and vouchers are not available for some reasons, then other corroborative evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before or during the course of the hearing of the appeal. 2. We first take up the appeal of the assessee. The brief facts and background of the case qua the issue involved are that the assessee is engaged in the business of car rental services mainly for corporate clients and multinational companies. The Ld. Assessing Officer noted that the assessee has debited expenses in the P L account amounting to ₹ 1,23,52,682/- on account of interest paid. Out of the said expenses amounts aggregating to ₹ 61,24,633/- was paid to various NBFC companies from whom the assessee had taken loan for the purchase of cars. However on such interest payment the assessee had not deducted TDS and accordingly, held that the expenses is to be disallowed in terms of provision of section 40(a)(ia). 3. Before the ld. CIT (Appeals), the assessee took a plea that the assessee did not deduct TDS on the interest paid on a bona fide belief that such payment of interest is akin to payment of interest to scheduled banks on which no TDS is required to be deducted. It was further contended that all these companies must have computed their due tax including the interest paid and therefore, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . reported in 377 ITR 365, wherein it has held that the provisos inserted by the Finance Act 2012 in section 40(1)(ia) and 201(1) are declaratory and curative in nature and therefore have to be given retrospective effect from 1.4.2005. Along with the said petition the assessee has also filed certificates from Chartered Accountant of the respective companies. 5. On the other hand the Ld. DR submitted that these are purely additional evidences and that to be only in respect of 3 companies, that is, the assessee has given certificates from 3 companies which too have not been verified by the Assessing Officer. Therefore, these evidences require verification at the end of the Assessing Officer. 6. We have heard the rival submissions, perused the relevant material on record and also the relevant findings given in the impugned order. Admittedly, the assessee under the statute was liable to deduct TDS on the interest paid to NBFCs. However, before us the ld. Counsel has taken a plea that these NBFC companies have given certificate in Form 26A certifying that they have shown interest income in their return of income filed u/s 139(1). Therefore, in view of the second proviso to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any copies of bills and vouchers and also books of accounts in support of expenses claimed. In response to the show cause notice the assessee submitted that he has been maintaining ledger accounts and bank book in computerized system, however the bills and vouchers which were lying in the office premises got destroyed in the fire which broke on 4.1.2010. The relevant reply of the assessee before the Assessing Officer in this regard reads as under:- 1. As submitted earlier vide our letter dated 25.11.2011 regarding the books of accounts along with bills/vouchers, we produce the Cash Book, Ledger and Bank Book as were maintained regularly by the assessee in computerized system as in the past for your kind verification. A few files containing bills of vendors were also produced. Regarding the balance bill/vouchers, it was submitted that unfortunately on 04.04.2010 at 00.30 hrs a fire was broke out at the office premises of the assessee located at Prakash House no.l, Opp. State Bank of Patiala, Mahipal Pur Road, New Delhi. It was immediately informed to the local police and local public call the fire bridge also. With the help of fire engines the fire bridge brought the fire unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Car at ₹ 3,16,86,533/- and repair and maintenance of vehicle at ₹ 1,51,22,819/- also, as per the AO, the assessee could not produced the copies of bills/ vouchers etc. in support of these expenses incurred. Therefore, in the absence of any documentary evidences in respect of these expenses, AO held that it would be reasonable that expenses that @10% should be disallowed out of the above expenses of ₹ 7,20,80,098/- (i.e. ₹ 2,52,70,746/- + ₹ 3,16,86,533/- + ₹ 1,51,22,819/-) which works out to ₹ 72,08,010/-. 9. The Learned CIT (Appeals) has deleted the aforesaid additions observing as under:- (5) In connection with the disallowance of various expenses, it is contended that the books of accounts, retrieved from the back up available with the auditor, had been produced before the Assessing Officer, hence the finding that books of account were not produced is incorrect. It is stated that the Assessing Officer was mistaken in making adhoc disallowances without rejecting the books of account u/s 145(3), and moreover the assessment has been completed, not u/s 144, but u/s 143(3), It is contended that the appellant was hot allowed a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous administrative expenses and 10% of expenses related to running of the cars. Accordingly, the additions made of ₹ 7,74,723/- and 72,06,010/'- are deleted. 10. The ld. DR submitted that in absence of any bills and vouchers being produced before the AO or maintaining appropriate books of accounts, the disallowance made by the Assessing Officer is not only reasonable but also justified on the facts and circumstances of the case. The Learned CIT(Appeals) merely relying upon the comparable expenses of the earlier years has deleted the said disallowance without appreciating that the expenses claimed for the business purpose needs to be justified through proper evidences and the onus lies heavily upon the assessee. Thus, the disallowance made by the Assessing Officer should be upheld. 11. On the other hand the ld. AR of the assessee submitted that so far as the observation of the Assessing Officer that the books of accounts have not been produced is not correct as they were duly produced. It was only the bills and vouchers could not be produced due to fire at the office premises. In any case all these expenses have incurred mostly through accounts payee cheques and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the law. Thus, ground no. 1 and 2 are treated as allowed for statistical purposes. 13. In ground no. 3 the revenue has challenged disallowance of ₹ 25,42,015/- being pre-paid expenses. In this regard, it has been informed by the ld. Counsel for the assessee that this issue stands squarely covered in favour of the assessee by the decision of the Hon'ble Tribunal of Delhi Bench in assessee s own case for the assessment year 2008-09. The assessee has debited sum of ₹ 45,26,938/- in his profit and loss account which included pre paid insurance charges of ₹ 25,42,015/-. The Assessing Officer held that such pre-paid expenses on account of vehicle insurance cannot be allowed. The Learned CIT (Appeals) following the appellate order for the A.Y. 2008-09 has allowed the appeal. 14. We find this issue has been dealt in detail and decided by the Hon'ble Tribunal in the following manner:- 5. We have heard the Id. DR and gone through the facts of the case. Admittedly, insurance premium is paid year after year for a period of 12 months only. The benefit of premium paid in the preceding year would have been available for a portion of period in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras High Court in the case of CIT Vs. Southern Roadways Ltd.,282 ITR 379(Mad) in respect of similar claim in respect of telex rent, telephone rent, postal franking machine rent, rates and taxes. Hon ble High Court, relying upon their earlier decision held that: The above issues are squarely covered by a Division Bench decision of this court in the case of CIT v. Southern Roadways Ltd. reported in [2004] 265 ITR 404, wherein it has been held as follows (page 407): The assessee paid a sum of ₹ 26,729 out of which a sum of ₹ 22,034 has been paid towards postage, telegram, telephone, etc., and a sum of ₹ 4,695 has been paid as rates and taxes. The assessee-company in its accounts treated them as prepaid and showed it as an asset in its balance-sheet. However, the payments were made in pursuance of demands raised by the postal, telephone and telegraph departments, etc., the same was claimed as a deduction in computing the income from business. The Assessing Officer negated the claim for deduction of such expenses. In the appeal, the Commissioner of Income-tax accepted the contention of the appellant. On second appeal, the Tribunal held that in principl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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