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TMI Blog2018 (2) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... s made the disallowance merely on the basis that the Postal Department has returned the notice issued to them with the remarks that ‘Not Known’ which action we don’t countenance. We note that the Ld. CIT(A) has appreciated the facts in the right perspective and therefore rightly deleted the addition of ₹ 3,14,392/- since the bad debt is an allowable deduction u/s. 36(1)(vii). Once the assessee has written off the bad debt as irrecoverable in its books in the previous year in which claim of deduction is made, then the amount written off as irrecoverable in the accounts of the assessee for the previous year in question has to be allowed. We note that these debts were included in sales in earlier years and, therefore, relying on the decision of the Apex Court in the case of TRF Ltd. Vs. CIT (2010 (2) TMI 211 - SUPREME COURT), we confirm the order of Ld. CIT(A) and dismiss this ground of appeal of revenue. Addition of payment made to M/s. Todi Investors - allowable busniss expenses - Held that:- CIT(A) has allowed the claim of the assessee that the borrowed capital was used in its business either for the purchase or for day to day financial necessity. The genuinity of the borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d uphold the disallowance Addition invoking sec. 40(a)(ia) in respect to expenditure claimed by assessee on account of repair and maintenance - Held that:- Since the sums credited or paid or likely to be credited or paid to the account of the contractor did not exceed ₹ 50,000/- during the assessment year, the amount credited or paid was not liable for TDS u/s. 194C, CIT(A) has rightly deleted the disallowance made by the AO u/s. 40(a)(ia) of the Act - I.T.A. No. 303/Kol/2014, C.O. 52/Kol/2014 And I.T.A. No. 303/Kol/2014 - - - Dated:- 5-2-2018 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For The Appellant : Shri Saurabh Kumar, Addl. CIT, DR For The Respondent : Shri V. N. Purohit, FCA ORDER Per Shri A.T.Varkey, JM This appeal filed by the revenue and the Cross Objection filed by the assessee are against the order of Ld. CIT(A)-XII, Kolkata dated 06.11.2013 for AY 2009-10. Cross Objection is delayed by 37 days and no condonation petition has been filed. Since the appeal has been filed on time and the issues are correlated, in the interest of justice we condone the delay and the cross objection is also taken up for hearing. 2. Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proprietorship firm of Shri Om Prakash, who is presently a director of the assessee company. The proprietorship was converted into a private limited company and thus the assessee company became a dealer of Honda Scooters/bikes. It is also noted that the assessee is also providing service facilities of scooters and motor cycles and also in the business of sales and service of taxi meters. The assessee has shown to have incurred salary expenses of ₹ 13,41,079/-. The AO asked the assessee to produce the attendance register which was produced on 02.11.2011. Considering the attendance register and the submission of the assessee, the AO made the disallowance of ₹ 8,97,073/- by observing as under: However, even after issuance of such letter, the assessee submitted another adjournment petition on 21.09.2011 at 01.45 p.m. seeking time till second week of October, 2011. Books of accounts were produced on 12.10.2011, but Attendance Register was produced only on 02.11.2011 after mentioning about such non-production during hearing on 12.10.2011. It has been found from the Attendance Registers produced that staff varies from 20 to 29 during F.Y. 2008-09. The assessee claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above findings, claim of Salary, Bonus etc. is allowed only to the following extent applying the ratio of number of staff found in the Attendance Registers: Claim of ₹ 13,41,079/- X (24.5/74) = ₹ 4,44,006/-. The Ld. CIT(A) restricted the disallowance to the extent of ₹ 1,50,459/- and gave relief of ₹ 7,46,614/- to the assessee. We note that the one of main ground on which the AO made the disallowance was that the assessee failed to show that the assessee had registered with the PF/ESI authorities. It has been brought to our notice that in the FY 2012-13, the assessee company has itself got registered with the PF authorities retrospectively from FY 2007-08 onwards and that in the present FY i.e. 2008-09 the liability towards PF has been remitted and for the relevant assessment year under consideration the assessee has produced before us the list of 21 employees for whom the PF has been remitted. This particular fact though stated before the Ld. CIT(A) have not been verified by the Ld. CIT(A), therefore, we are of the considered view that this fact of the assessee getting the registration under the PF Authorities and the fact of remitting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account. The writing off of bad debts, without charging the same in the profit and loss account is not a write off at all - CIT v. Hotel Ambassador [2002] 121 Taxman 437 (Ker.). Though no particular form or manner of writing off a debt is prescribed, a debt may be written off as irrecoverable in the individual account of the debtor. It is not for the assessee to establish that the debt had become bad in the previous year. In other words, it is not obligatory for assessee to place demonstrative proof for establishing a debt as bad - Ajitkumar C. Kamdar v. CIT [2005] 1 SOT 183(Mum.). If it has been written off as irrecoverable in the accounts of the assessee for the previous year, it will suffice for claiming it as bad debt - T.R.F. Ltd. v. CIT [2010] 190 Taxman 391 (SC). It is for the assessee to decide whether the debt has become bad or not and the Assessing Officer can never insist on production of demonstrative and infallible proof that the debt had become bad - Newdeal Finance Investment Ltd. v. Deputy CIT [2000] 74 ITD, 469/69 TIJ(Chennai) 410. In the appellant's case, it is established that the appellant had written off the amount as irrecoverable. It is also establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,91,641/-. The assessee was unable to prove the utilization of payment for business purpose during the course of assessment. 4.1. This ground relates to deletion of addition of ₹ 1,91,641/- on account of interest payment. Briefly stated facts are that the AO found that the assessee has entered into several transactions with M/s. Todi Investors. It has been claimed by the assessee that it has paid interest of ₹ 1,91,641/- to the said party. The AO asked the assessee to furnish various details for transaction with M/s. Todi Investor. In response, the assessee filed documentary evidence i.e. loan confirmations etc. However the AO noted that in respect of utilization of funds it has only been stated by the assessee that funds were utilized for business purposes without furnishing any details. During the course of assessment proceedings, the assessee was asked to establish the transactions with the said party and to prove whether the fund was for the purpose of business or not. According to AO, the assessee submitted only copy of Bank Statement for the month of March, 2009 along with its submission dt. 25.11.2011. It was claimed by the assessee that all funds recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unlike section 37 (1) which expressly excludes an expense of a capital nature. Legislature has, therefore, made no distinction in section 36(1 )(iii) between 'capital borrowed for a revenue purpose and capital borrowed for a capital purpose and an assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective what may be result of using such borrowed capital. In the appellant's case, as explained by the appellant, there is no denying the fact that the borrowed capital was used in its business either in, the purchase or other day-to-day financial needs. It is not the case of the Assessing Officer that the borrowed capital was used for non-business purposes. Therefore, I am of the considered view that the Assessing Officer was not justified in making the disallowance. The addition of ₹ 1,91,641/- is, therefore, Aggrieved, revenue is in appeal before us. 4.2. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) has allowed the claim of the assessee that the borrowed capital was used in its business either for the purchase or for da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the same is dismissed as not pressed. 5.4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee company had engaged several sub-dealers through whom sales were made but the fact was that the bills were directly made in the name of the customers as per the policy of the principals in this case i.e. the Honda Motors which have been found to be correct by the Ld. CIT(A). The Ld. CIT(A) has relied on the decision of the Hon ble jurisdictional High Court in the case of Ravi Marketing (P) Ltd. Vs. CIT (2005) 147 Taxman 299 (Cal) wherein the Hon ble High court has held that promotion of sale is always expedient for the promotion of business and, therefore, in this competitive market, sales promoted by the assessee by granting incentive and discount has to be allowed. The Ld. CIT(A) has taken note of the fact that assessee has admitted to have not deducted TDS on an amount of ₹ 1,29,563/- incentive payment made to dealers and, therefore, he restricted the disallowance to ₹ 1,29,563/-. Since the assessee has not pressed the disallowance restricted by the Ld. CIT(A) the same is confirmed and the Ld. CIT(A) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers directly and also through sub-dealers/agents of the assessee company. According to the assessee, the customers who were purchasing the vehicles directly from the assessee s show room knew the assessee, but the customers who were brought by the agents are not known to it. The customers brought by the agents are mostly from the suburbs or rural areas who did not had proper address except their village name and, therefore, those customers could not recognize the assessee as they knew only the agents who had introduced them to the assessee company and who had booked the vehicles on their behalf. It was brought to the notice of the bench that many a times these agents only gave their addresses to the assessee in place of actual address of the buyers because of this modus operandi adopted by the agents, the assessee company could not furnish the full details of the customers before the AO. It was brought to the notice of the authorities below that the assessee company furnished full details of advances received with break-up of advance received in current year and the amount brought forward segregating the same into direct customers advance and individual dealer s advance break-up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has found that the assessee has placed evidence before the AO to establish that it followed the same method of accounting as in the preceding years and that none of the advances received against booking of vehicles could be treated as unexplained. The Ld. CIT(A) has clearly made a finding that the advances given to the assessee for purchase of vehicles is nothing but trade advances and not cash credits. The Ld. CIT(A) has found that for the advances given by the customers, the assessee has supplied the goods (vehicles) and, therefore, there is no justification for the AO to treat these cash advances as unexplained cash credits u/s. 68 of the Act and, therefore, the Ld. CIT(A) has rightly deleted the addition which does not require any interference from our side and, therefore, we confirm the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. 7. Ground no. 7 of revenue s appeal is as under: 7. That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the addition amounting to ₹ 4,46,518/- on the ground of registration expenses claimed by the assessee. The assessee was unable to prove the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) took note of the fact that the assessee company had employed one of its staff Shri Rabindra Nath Bhattacharya to get the registration of the vehicles sold to customers as a service to them from the Transport Department, Govt. of West Bengal. The assessee had filed an affidavit of the said employee confirming this fact. The Ld. CIT(A) took note of the fact that the assessee company has made payments through agents to get the motor cycles and scooters registered with the Transport Authority and the dealers like assessee are constrained to offer some incentive in the form of free registration to customers to boost the sale and since the assessee could not produce proper vouchers in respect to the payments made to the agents, the Ld. CIT(A) restricted the disallowance to 20% of the expenses which he worked out as ₹ 89,303/- and the assessee got a relief of ₹ 3,57,215/-. We note that the amount of ₹ 4,46,518/- has claimed to have been expended by the assessee company for touts/brokers who makes a quick buck by liaison work with the Transport department. The registration of a vehicle has to be done as per the procedure prescribed by the Motor Vehicles Act governing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted or paid or likely to be credited or paid to the account of, or to, the contractor did not exceed ₹ 50,000/- during the financial year in my view, the said credit or payment was not liable for TDS under sec. 194C of the Act. In this view of the matter, the Assessing Officer was not justified in making the disallowance of ₹ 59,920/- under sec. 40(a)(ia) of the Act. Therefore, the consequent addition of ₹ 59,920/- is hereby deleted. This ground of appeal is accordingly allowed. Aggrieved, revenue is in appeal before us. 8.2. We have heard rival submissions and gone through facts and circumstances of the case. We note that the Ld. CIT(A) has found that the assessee company had debited payment of ₹ 29,920/- only during the financial year relevant for the assessment year under consideration. The whole confusion according to the Ld. CIT(A) was because of the proforma invoice furnished by the assessee company which led to the disallowance by the AO. However, since the sums credited or paid or likely to be credited or paid to the account of the contractor did not exceed ₹ 50,000/- during the assessment year, the amount credited or paid was not liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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