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TMI Blog2020 (2) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee. Disallowance of payment to related party u/s. 40A(2)(b) - HELD THAT:- This aspect that the said party is not related party u/s. 40A(2)(b) was never submitted by the assessee before the Assessing Officer. In fact when the Assessing Officer issued a questionnaire in this regard, the assessee has only explained the business exigency of expenditure. It had never explained that the said party is not falling under section 40A(2)(b). CIT(A) s factual finding that the assessee was not holding specific stake in the said party and hence it was not falling u/s. 40A(2)(b) has not been examined by the Assessing Officer - remit this issue to the file of the Assessing Officer for factual verification. Accordingly the issue stands remitted. Disallowance of bonus u/s. 43B - HELD THAT:- CIT(A) has given factual finding that impugned payment have been done before the due date. This has not been disputed by the Revenue. CIT(A) is correct in holding that the Assessing Officer is not justified in sitting in the shoes of businessman and deciding whether the assessee s employees are deserving bonus or not. In our considered opinion there is no infirmity in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and loss account showed income from service for a very negligible amount hence, the Assessing Officer held the same is a colorable device. The assessee responded as under :- The company was granted the Certificate of Registration (COR) on March 26, 2010 by the Reserve Bank of India (RBI). One of the conditions imposed by RBI was that the company should commence the business of credit information within six months. In compliance with the above, the company commenced the business of credit information on Sep 2, 2010. After receiving COR from RBI in March 26, 2010, the company started the process to enroll lenders (banks/financial institutions) as our members who contribute such credit information to the database. The Company commenced the business of credit information (i. e. Sep 2, 2010), it had 27 such members who were providing credit information to its and had nearly 18 million records in our credit information database. It is pertinent here to mention about the nature of our business i.e. credit information business. The company collects credit information (information about credit worthiness which includes nature and amount of borrowings by individual wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration is required to be satisfied by inspection of records or books of such company or otherwise that minimum capital requirement condition is met. further, the entity (being the appellant here) seeking registration with the RBI is required to make an application in prescribed form which inter alia requires disclosure about the details of infrastructure (such as technology, security, facilities for hosting the data centre, etc) and particulars of directors/key management people who have the necessary experience to carry on the business. The business of DMAS and credit information are interconnected and interlaced and hence since the business of DMAS was setup on 1 April 2010, the expenditure for the interlaced business i.e. credit information services is also allowable expenditure for the year under consideration. 7. Against the above order the Revenue is in appeal before us. 8. We have heard both the counsel and perused the records. Learned Departmental Representative relied upon the order of the Assessing Officer. 9. Per contra, learned Counsel of the assessee submitted that the assessee has duly commenced the business. He submitted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the assessee has adopted colorable device. 13. In our considered opinion there is no infirmity in the order of learned CIT(A), hence, we uphold the same. 14. Another common issue raised is that learned CIT(A) erred in deleting the disallowance of payment to related party u/s. 40A(2)(b) of the Act. 15. The Assessing Officer has made disallowance u/s. 40A(2)(b) of the Act for the payments made to M/s. Equifax Software Systems Pvt. Ltd. These payments were with regard to hardware and software maintenance, hosting charges and professional fees. The Assessing Officer has disallowed the same finding them to be excessive and unreasonable. 16. Upon assessee s appeal in this regard, learned CIT(A) referred to the provisions of section u/s. 40A(2)(b) of the Act. He found that the said provisions are not attracted as in the impugned assessment year as the said party was not falling under the provisions of section 40A(2)(b) of the Act. Learned CIT(A) has held as under :- It is seen that the related parties for the Company inter a/z'acover the following: ...... a company, firm, association of persons or Hindu undivided family having a substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of justice will be served in this aspect if we remit this issue to the file of the Assessing Officer for factual verification. Accordingly the issue stands remitted. 20. Another issue raised is that learned CIT(A) erred in disallowance of bonus. 21. After disallowing business loss the Assessing Officer without prejudice has also held that bonus is shown to be payable under the head sundry credit . That the assessee has not submitted audited report that the payment has been made before the due date of filing the return. Hence, he disallowed bonus payment u/s. 43B of the Act. He also held that there is no justification for the payment of bonus in addition to hefty salary paid to the employees. 22. Upon assessee s appeal learned CIT(A) noted that the tax audit was not conducted as the assessee s turnover was not requiring tax audit. He also noted the extract of bank statement evidencing that the payment of bonus of ₹ 1,72,33,694/- was made before the due date of filing the return of income. Furthermore, learned CIT(A) also held that the assessee was justified in paying bonus as the assessee was operating in a very competitive field. That when govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore he found that the assessee s contention that it needs specific notice from the department for them to require information does not hold in merit. He held that it is assessee s onus to prove the identity of person, creditworthiness of person and genuineness of transaction. He also found that the address of the said party was in Mauritius. The Assessing Officer drew adverse inference that assessee is not giving financials and share capital is routed through Mauritius. Accordingly, entire amount of ₹ 12.25 crores was considered as unexplained cash credit. 27. Upon assessee s appeal learned CIT(A) found that the assessee has rightly requested the Assessing Officer to give notice for the financials of the party and the Assessing Officer has not issued any notice. He also found that the RBI had granted approval which itself proved the creditworthiness of the share capital. He also noted that the RBI s authorization is also needed. Furthermore, he also referred to the decision of Hon'ble Apex Court in CIT Vs. Steller Investments Ltd. (251 ITR 263) and Lovely Experts (172 Taxman 44) and held that the identity of the shareholder alone is required to be prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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