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TMI Blog2020 (2) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... of the payment needs to be considered. The assessee s counsel had filed additional evidence in the form of copies of the orders of civil courts wherein assessee had filed civil suit against this party for recovery of advance paid along with interest to demonstrate that this party did exist. However, on going through the same, we find that the order of the civil court was ex-parte the said party and therefore, the decrees have been passed in favour of the assessee. Admittedly, both the AO and CIT(A) are not doubting the payment made to the said party. Since the assessee has not received the product, for which it has made payment, the assessee cannot be held liable. Since the authorities have not established that the assessee has received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO for verification AY 2013-14 - violation of provisions of section 40(a)(ia) and 195 - We find that out of 9 parties, one of the party is Indian party i.e. Hemendra of ₹ 33,32,920/- and, therefore, to such transaction, the provisions of section 40(a)(ia) are clearly applicable. Since all other parties are non-residents, the provisions of section 40(a(ia) would not apply. As regards the provisions of section 195 and genuineness of the advances, we have already set aside similar issue to the file of AO for AY 2012-13 (supra) and with similar directions, this issue is also set aside to the file of AO for re-adjudication in accordance with law after giving fair opportunity of hearing to the assessee. - ITA Nos. 1724/Hyd/2016 And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 51,05,623/- was paid on 28/03/2012 for supply chain management products with customisations and, therefore, he held that it is capital in nature and cannot be allowed as revenue expenditure. He, therefore, disallowed the same and added it to the returned income of the assessee. 2.1 Further, the AO also observed that the assessee had debited a sum of ₹ 62,56,414/- under the head bad and doubtful advances which was paid to 4 parties. The AO observed that though these amounts represented revenue expenditure, since the assessee has not deducted tax at source thereon, he disallowed the same and brought it to tax. 3. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of the AO and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or application of income and has been given a colour of software purchase and there is no evidence that it is a bad debt. Therefore, the CIT(A) has held that it cannot be allowed as business expenditure u/s 37 of the Act. The ld. DR, therefore, supported the order of CIT(A) and prayed for confirmation of the disallowance. 6. Having regard to the rival contentions and the material on record, we find that though the payment is not doubted by the AO and CIT(A), the AO has held it to be capital expenditure, while the CIT(A) has observed that it has been written off within a period of 3 days, and therefore cannot be considered as a bad debt. We agree with the findings of CIT(A) that within 3 days, the assessee could not have treated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to whom the payments have been made are foreign parties and as per the copies of the invoices filed before the AO CIT(A), they are for services to be rendered outside India. He submitted that since they are foreign parties, provisions of section 40(a)(ia) are not applicable and the provisions of section 195 are to be applied and that TDS is to be made only from the income portion of the payment and as the AO and CIT(A) have not brought on record that any part of the income is chargeable to tax in India, disallowance cannot be made u/s 195 as well. He submitted that the AO has not mentioned the section under which the disallowance has bene made, but, the CIT(A) in his order has held that the payments are in violation of section u/s 40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), we deem it fit and proper to remand the issue to the file of the AO for verification and direct the AO to adjudicate the issue in accordance with law after giving the assessee a fair opportunity of hearing. 10. In the result, assessee s appeal for AY 2012-13 is partly allowed for statistical purposes. 11. For AY 2013-14 also, the assessee had claimed a sum of ₹ 1,73,10,041/-, as bad and doubtful debts, it includes payments made to 9 parties who are foreign parties. AO observed that the payments were made in violation of provisions of section 4o(a)(ia) and 195 of the Act and also observed that genuineness of the transaction and the purpose of payments were not established. He accordingly disallowed the same u/s 40(a)(ia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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