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TMI Blog2021 (8) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit of the Govt of India in time. The Assessee has failed to pay his statutory dues in time and therefore, there is an interest liability. Therefore, such expenditure is not at all allowable to the Assessee as deduction u/s 37(1) Even otherwise this deduction is not allowable in any of the section u/s 30 to 36 of the Act. AO has correctly applied decision of the Hon ble Madras High Court in CIT Vs. Chennai Properties [ 1998 (4) TMI 89 - MADRAS HIGH COURT] in making the disallowance. CIT(A) also correctly confirmed the same. Accordingly, ground No. 2 of the appeal is dismissed. Disallowance of consultancy charges - HELD THAT:- Liability to pay commission to this party arises on account of the assessee only at the time of receipt of the payment for equipment from the customers. Assessee received orders from Usha Martin Ltd for supply of the goods in the month of August and November 2010. Supplies were made from month of November 2010 to September 2012. Payments were received from 19 October 2010 till 20th of August 2014. Thus payments were also last received on 20 August 2014. Therefore on the date of the payment received by the assessee the liability to pay consulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of claim of the appellant for ₹ 15 lakhs. 5. That the last date for filing of appeal being a holiday, the appeal filed is within limitation. 3. Brief facts of the case shows that the Assessee is a company engaged in the business of manufacturing and sale of machines, erection and commission of effluent treatment plant. It filed its return of income on 29.09.2014 declaring loss of ₹ 18,80,93,277/- which was assessed u/s 143(3) of the Act at a total loss of ₹ 18,34,44,617/- wherein, the ld AO made an disallowance of ₹ 1,06,660/- being interest on delayed payment of TDS as well as disallowance of particular period expenditure of ₹ 45,42,000/-. On appeal before the ld CIT(A), both the disallowance were confirmed and therefore, the Assessee is in appeal before us. 4. Despite notice none appeared on behalf o the Assessee. On earlier occasion on 30.12.2020 none appeared so the notice was sent by RPAD for next date of hearing on 09.03.2021. On that date none appeared on behalf of the Assessee. On this date also none appeared on behalf of the Assessee therefore, the issue is decided on the merits of the case. 5. The ld DR supported the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld CIT(A) also correctly confirmed the same. Accordingly, ground No. 2 of the appeal is dismissed. 8. Ground No. 3 and 4 are with respect to the confirmation of disallowance of ₹ 45,42,000/-. 9. The brief facts of the case are mentioned in para NO. 6 to 11 of the order as ld CIT(A) as under:- 4.3. Ground nos. 3 4 : Ground 3 is with respect to disallowance of consultancy charges of ₹ 45,42,000/- and Ground 4 is with respect to rejection of the claim of the appellant for ₹ 15 lakhs already disallowed by the assessing officer in A.Y. 2012-13 in respect of the consultancy charges, now claimed to be allowable during assessment year 2014-15. 4.3.1. The appellant has submitted that: 4.2 It its computation of income for assessment year 2014-15 appellant claimed ₹ 45,42,000/- as deduction towards the marketing consultancy charges paid to M/s Predominant Engineers Contractors Pvt. Ltd. in terms of consultancy agreement dated 28th June, 2010 (Paper Book pages 32-33), wherein they were appointed as marketing consultant for supply of sponge iron plant equipment. The remuneration payable to them was 3% of ex-works value of orders procured th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 15 lakhs was not allowed. Bill for the entire amount of commission pursuant to agreement dated 28th June, 2010 has been raised by Predominant Engineers and Contractors Pvt. Ltd. on 31st March, 2014, copy of which is enclosed for your ready reference. In view of this, liability crystallized during the year under consideration and is allowable as deduction during this year. Since ₹ 15 lakhs was not allowed in assessment year 2012-13 on which IDS has also been deducted and paid during the year under consideration entire amount of ₹ 60,42,000/- plus service tax thereon aggregating to ₹ 67,88,791/- is allowable as deduction during the year under consideration. Copy of order placed on Predominant Engineers and Contractors Pvt. Ltd. dated 2 h June, 2010, details of date wise supplies made by the assessee and date wise payments received against the same are enclosed for your ready reference. It is, therefore, submitted that instead of ₹ 45,42,000/- claimed in the computation of income ₹ 60,42,000/- may please be allowed as deduction during the year. 4.6 Assessing Officer, however, disallowed the expenditure of ₹ 45,42,000/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its submission during assessment proceedings the expenditure of ₹ 15,00,000/- which pertains to AY 2012-13, however the same has not been claimed either hi the Income Tax Return or in the computation of income. 4.7 However, the Assessing Officer rejected the additional claim of ₹ 15 lakhs disallowed in assessment year 2012-13 and also the claim for ₹ 45,42,000/- summarily with the observations that the assessee is following mercantile system of accounting, prior period expenses are not allowable. In case of any ascertained liability assessee is allowed to make provision for the same in its Books of Accounts and if the same has not been incurred, the same is disallowed while computing the tax. The expenses claimed in the computation of income pertain to assessment year 2012-13 and therefore, they are not allowable during the assessment year under consideration. 4.8 Appellant beg to submit that as per consultancy agreement, consultancy charges are payable on receipt of the payment against the supplies of equipments from the prospective customers. Details of the material supplied and the payment details dearly show that the supplies has been contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- and I find no valid reason to interfere with the AO's order on this issue. As regards the expenditure of ₹ 15,00,000/- which the Appellant submitted during assessment proceedings before the AO. It is seen that the said deduction was claimed in AY 2012-13 and it pertains to A.Y. 2012-12 and the same was disallowed in AY 2012-13 as no TDS was deducted on the same. In AY 2014-15, the same has not been claimed either in the Income Tax Return or in the computation of income. During assessment proceedings, this claim was made. The Appellant has claimed the same expenses of ₹ 15,00,000/- in AY 2012-13 and has again claimed the same ₹ 15,00,000/- in AY 2014-15. I observe that the AO has correctly not entertained the amount of ₹ 15,00,000/- and I find no valid reason to interfere with the same. Hence Ground nos. 3 4 are dismissed. 4.4. Ground nos. 5 6 ; are consequential, hence do not require separate adjudication. 10. We have carefully considered contention is of the learned departmental representative and also perused the orders of the lower authorities. The fact clearly shows that there was an agreement dated 28th of June 2010 for paym ..... 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