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TMI Blog2019 (10) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... explanations. 1.2. In case the difference between the gross receipts as per Form 26AS and the receipts in respect of which TDS credit has been claimed in ITR has been considered a discrepancy, the learned CIT(A) has failed to take account of the fact that all the gross receipts reflected in statement 26AS are duly reflected in the accounts on the basis of which the income as per ITR was computed. The amount of TDS credit as per Form 26AS matches with the credit claimed in the revised ITR reference to which the attention of the AO as well as CIT (A) was drawn. The AO having been satisfied allowed credit for total amount of TDS claimed by the assessee in the revised ITR. The learned CIT failed to take note of the fact that the receipts as per ITR stand at much higher figure than the receipts reflected in the statement 26AS. 1.3. The learned CIT failed to appreciate that the difference between the gross receipts and the taxable income does not represent suppressed receipts as total income is computed after deducting from the gross receipts the allowable expenses incidental to business. 1.4. The learned CIT has gone wrong in basing his decision on the alleged absence of a formal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that repair and maintenance expenses of a capital assets are expenses incidental to business allowable u/s 37 of the Act. 3.1. The learned CIT was totally unjustified in law in taking the view that capital assets are entitled to depreciation only and no other allowance including allowance for expenditure incurred in keeping the asset in working condition. 3.2. The disallowance being totally against law, deserves to be deleted. Ground 4 - Disallowance of Bad Debts 4.0. The learned CIT was not justified in confirming the disallowance of Rs. 32,68,120 without considering the assesses submissions, evidence produced before the AO, the contention made in the remand report and the assesses submissions made in response to the remand report. 4.1. The AO in his remand report mentioned the ingredients of Section 36(2) laying down the conditions for allowance of bad debt without mentioning any condition which is not fulfilled. The fact of its having been written off 1 that it was a business debt, that it was taken into account in the computation of business income of the A.Y 2008-09 were substantiated by submitting copies of account from the audited and published accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvisory, institutional broking and distribution, retail broking and distribution and mutual fund advisory services and distribution. The assessee filed its return of income for Assessment Year 2012-13 on 21st September 2012 declaring total income of Rs. 38 crore approximately. The assessment was completed under section 143(3) on 22nd of January 2015 determining total income at Rs. 58.89 crore by making the following additions/disallowances. 1. Suppression of sale Rs. 16,09,6 3,742 2. Disallowance out of major expenditure Rs. 3,60,00,000 3.Disallowance of computer maintenance expenses Rs. 57,4 9,537 4. Disallowance of bad debts written off Rs. 32,68,920 5. Disallowance of expenses under section14A Rs. 1,29,668 6. Disallowance of depreciation Rs. 6,10,301 7.Disallowance of loss on error of trade Rs. 1,00,000 Total Rs. 20,85,22,168 3. Aggrieved by the additions/disallowances the assessee carried the matter in appeal before the ld. Commissioner (Appeals). The ld. Commissioner (Appeals) confirmed the action of Assessing Officer in making various additions/disallowances. Thus, aggrieved further the assessee has filed present appeal before us. 4. We have heard the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered in arriving at the total revenue receipt in the profit and loss account but the addition has been made by merely considering the income of the assessee. Therefore, the learned AR for assessee submits that such addition is clearly bad in law and liable to be deleted. 6. In other alternative submission the learned some AR submits that the allegation of Assessing Officer that TDS disclosed in ITR is only Rs. 3.03 crore, whereas total TDS as per Form 26-AS is Rs. 5.18 crore and hence, there is an undisclosed TDS of Rs. 2.15 Crore is only factually wrong. The learned AR submits that in the original return, the assessee had claimed TDS of Rs. 3.03 crore but, in revised return filed by the assessee on 5th November 2013, TDS claimed by assessee is Rs. 6.53 crore. Therefore, the learned AR of the assessee submits that Assessing Officer erred in not considering the revised return which was filed within prescribed period provided under the Act. The ld. AR submits that the addition of Rs. 16.09 crore made by Assessing Officer is liable to be deleted. 7. On the other hand, the ld. DR for the revenue supported the order of lower authorities. The ld. DR submits that no reconciliation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as included sample bills for such expenses. The ld. AR of the assessee further submits that the Assessing Officer has not found any fault with the details submitted or with any of the invoices / sample bills given to the Assessing Officer. No further quarry was raised by the assessing officer. The Assessing Officer has made general observations that some expenses have been claimed on account of self made vouchers. The ld. AR of the assessee submits that, that, by itself, does not justify any disallowance as small and petty expenses are incurred in the course of the business, for which no bills are received; for example, taxi fare, etc. and hence, the same are claimed by way of the self-made vouchers. Therefore, the Appellant submits that the disallowance of such expenses was unjustified. 10. The allegation of the Assessing Officer that the assessee has not maintained log books for use of expenses for business as well as for non-business purpose is absurd as the Appellant being a Company; all expenses are made for the purpose of business of the assessee. There is no non-business use of any expense and, therefore, there is no question of maintaining a log book / record for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that expenses were incurred on account of opening forms, the payment of which is made through banks only. In respect of rate and taxes, out of Rs. 16 lakhs the assessee contended that they have offered Rs. 4 lakhs for the purpose of Wealth tax payable for assessment year 2012-13 as per the return filed. The assessee specifically stated that all expenses were incurred for the purpose of business and no personal expenditure has been debited. The documents and the statement furnished substantiate the nature of expenses. The reply of assessee was not accepted by assessing officer the assessing officer concluded that the reasons furnish by assessee is general and casual nature and not supported by cogent evidence or a strong nexus with the business of the assessee. The assessing officer further concluded that on verification of various details that certain expenses are not supported by proper bills/vouchers and certain expenses are incurred through self made vouchers in case. The assessing officer on his view disallowed 25% of the expenses on ad hoc basis. We have noted that the assessing officer is not a specified any particular infirmity in any of the evidence furnish by assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified. The ld. AR of the assessee has further submitted that the software charges have not been debited to the expense account by the Appellant in the profit and loss account and, therefore, the question of disallowing the same does not arise. Without prejudice, and in any case, the issue as to whether expenditure on purchase of software is a revenue or capital expenditure is concluded by jurisdictional High Court in the case of CIT v. Raychem RPG Ltd. 346 ITR 138 wherein the jurisdictional High Court has held that even if the expenditure is incurred for acquisition of a software, the same is allowable as revenue expenditure. Therefore, the Appellant submits that the lower authority was not justified in disallowing such expenses. 14. On the other hand, the ld. DR for the revenue supported the order of lower authorities. The assessee has not furnished the copy of Annual Maintenance Contract. 15. We have considered the rival submission of both the parties and have perused the material available on record. During the assessment the assessing officer noted that the assessee has claimed software expenses of Rs. 1.43 crore in the profit and loss account. The assessee was issued show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant cannot be allowed as deduction. The ld. AR before the ld. Commissioner (Appeals) filed complete details of the nature of bad debt, inter alia, stating that the bad debt is on account of receivables from one client "GNRC Ltd." The Appellant had, in fact, initiated proceedings against GNRC Ltd. for the recovery of the amount which was receivable by the assessee and which was offered to tax in earlier years. Pursuant to the settlement with GNRC Ltd., the assessee was able to recover only Rs. 20 Lakhs and the balance amount of Rs. 32.68 Lakhs was accordingly claimed as bad debt. The assessee had even filed a copy of the consent terms with GNRC Ltd. before the ld. Commissioner (Appeals), ledger accounts of GNRC Ltd. and other details like. Ledger, etc. which are at pages 38-54 of paper-book. The ld. Commissioner (Appeals) even after recording the fact that the amount of Rs. 32.68 Lakhs was actually offered as income in Financial Year 2008-09, confirmed the addition made by the Assessing Officer. The ld. AR for the assessee submits that only reason given by the Assessing Officer for making disallowance was that the assessee has not been able to establish that the bad debt was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee in earlier years or not. Before ld. Commissioner (Appeals) the assessee furnished details written submission. The ld. Commissioner (Appeals) recorded/extracted the contents of submission of assessee in para 8.2 of his order. The assessee specifically stated that on similar ground the disallowance of bed debts for A-Y 2010-11 was deleted by ld. Commissioner (Appeals). On the submission of assessee the learned Commissioner (Appeals) called the remand report of assessing officer. The assessing officer filed his remand report dated 8th September 2016 on 21st September 2016. In the remand report the assessing officer repeated his stand, which he had taken during assessment. The assessee also filed its rejoinder the remand report furnished by assessee. In the rejoinder reply the assessee stated that the essential conditions for claiming for allowance of bad debt are duly satisfied. The claim in respect of investment banking operation of the assessee which is part of normal business activities of the assessee. The income was duly accounted in assessment year 2008-09, when a debit entry to the account of the client with the corresponding credit entry in the income account was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of Assessing Officer. The ld. AR of the assessee further submits that the assessee has pointed out that the depreciation has been claimed on assets like air-conditioners, refrigerators, water heaters, communication equipment etc. which are correctly classified under the head 'plant and machinery' and not 'office equipment' and, therefore, depreciation on the same would be allowable at the rate of 15% which is the rate applicable for plant and machinery. The ld. AR of the assessee further submits that the assets already formed part of 'plant and machinery block' and, therefore, there is no basis for the Assessing Officer to change the same in the relevant year, the assessee submits that once an assets forms part of any block of the asset, the same cannot be interfered with in any subsequent years. Hence, the assessee submits that the impugned order is bad in law and liable to be quashed and set aside. 21. On the other hand, the ld. DR for the revenue supported the order of lower authorities. The ld. DR further submits that the assessee entitled for depreciation @ 10% only. 22. We have considered the rival submission of both the parties and have peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR of the assessee submits that the Assessing Officer disallowed the said amount on the ground that the assessee is engaged in the business of purchase and sale of shares of other companies and as per Explanation to Section 73 of the Act, the assessee is engaged in the purchase and sale of shares of other companies shall be deemed to be carried on speculation business and hence, Rs. 1 Lakh is treated as speculation loss and cannot be allowed to be set off against regular business Income. The ld. Commissioner (Appeals), after accepting that the judicial pronouncements have held that loss on error trade by a stock-broker is allowed, still confirmed the addition by holding that the assessee has not been able to demonstrate that error has been occurred by the assessee. The ld. AR of the assessee further submits that the Assessing Officer has disallowed the loss on a legal issue by treating the same as being covered under Explanation to Section 73 of the Act. The Assessing Officer has not disputed that the loss was on account of error trade i.e. the mistake committed by the assessee's employees while carrying on the trade on behalf of clients. Therefore, the Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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