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TMI Blog2018 (8) TMI 1903X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in making adhoc disallowance other than general observation that complete vouchers were not furnished, we hold that there should not be any disallowance on adhoc basis, thus we direct the Assessing Officer to delete the adhoc disallowance made towards staff welfare, miscellaneous expenses, seminar/conference and meetings expenses Disallowance interest paid on service tax observing that the same is penal in nature and not an allowable expenditure - HELD THAT:- On a perusal of the decisions relied on the assessee, we find that the Tribunal held that interest on service tax is compensatory in nature and not penal in nature and is therefore allowable expenditure. On a perusal of the Explanation to Section 37(1) of the Act which says that any expenditure incurred by an assessee for any purpose which is an offense or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or professions and no deduction or allowance shall be made in respect of such expenditure. Here the assessee made payment of interest for the delay in payment of service tax which in our considered view it is not an expenditure incurred for the purpose of any offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of the Act. Ld. Counsel for the assessee invited our attention to the order of this Tribunal for the Assessment Year 2009-10 in ITA.No. 1917/Mum/2013 dated 06.05.2016 which is reported as ACIT v. BSR Co. [70 taxmann.com 69] and submitted that the Tribunal held that, KPMG LLP, United Kingdom does not have permanent establishment in India and therefore assessee is not liable to deduct TDS on such payments and hence no disallowance u/s. 40(a)(i) is warranted. 4. Ld. DR fairly submitted that the issue has been decided in favour of the assessee. 5. On hearing the rival submissions and on a perusal of the Tribunal order in assessee s own case for the Assessment Year 2009-10, we find that identical issue came up before the Tribunal and the Tribunal in its order in Para No. 5 and Para No. 5.1 held as under: - 5. In the above background, we have carefully considered the rival submissions. Pertinently, the issue revolves around the payments made by the assessee to certain non-resident entities for professional services rendered by them outside India. It has been consistently explained by the assessee that the services of such entities were availed during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 6. As could be seen from the above the Tribunal considered the payment made to KPMG LLP, UK and KPMG USMCG Ltd. UK and the liability to deduct TDS on such payment and the Tribunal held that the said entities do not have permanent establishment in India and Ld.CIT(A) found that such entities are eligible for the benefit of Article-15 of the Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and therefore payments are not chargeable to tax in India so as to require the assessee to deduct TDS on the professional charges paid to the above entities. Facts being identical respectfully following the said decision we allow the Ground No.1 of the assessee. 7. In so far as the ground Nos. 2, 4 5 are concerned Ld. Counsel for the assessee submitted that an adhoc disallowance was made by the Assessing Officer on the expenses incurred by the assessee towards staff welfare, seminars/conferences and meetings expenses and miscellaneous expenses which was upheld by the Ld.CIT(A). 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral observation that complete details were not furnished. 11. In the case of PNC construction Co. Ltd., v. DCIT (supra) the Tribunal held that mere failure to file relevant vouchers as required by the Assessing Officer cannot be the basis for making disallowance unless it is found that the expenditure was not incurred wholly and exclusively for the purpose of business. 12. In the case of CIT v. Vallbh Glass Works Ltd., (supra) the Hon'ble Gujarat High Court held that no question of law arose for consideration on merits on the decision of the Tribunal wherein the Tribunal upheld the order of the Ld.CIT(A) who has held that when the audited accounts were available with regard to the expenses claimed by the assessee and in the absence of any adverse comments of the auditors no disallowance out of such expenses should be made. 13. In view of the above and in the absence of any specific defects pointed out by the Assessing Officer in making adhoc disallowance other than general observation that complete vouchers were not furnished, we hold that there should not be any disallowance on adhoc basis, thus we direct the Assessing Officer to delete the adho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the delay in payment of service tax which in our considered view it is not an expenditure incurred for the purpose of any offence or prohibited by law. Thus, respectfully following the said decision we direct the Assessing Officer to delete the disallowance made towards interest for delay in payment of service tax. Ground No. 3 is allowed. 17. Coming to the appeal of the Revenue the grounds are as under: - 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) Mumbai has erred in deleting the addition of ₹ 2,96,82,130/-and ₹ 1,30,98,983/- made on account of cash calls and professional indemnity insurance respectively. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) Mumbai has erred in depriving the AO to exercise his power under Rule 46A while accepting new evidence regarding Brokers confirmation. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) Mumbai has erred in coming to the conclusion that the services rendered by KPMG International Ltd. are not taxable under Indo-UK DTAA. 4. On the facts and in the circumstances of ..... 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