9911796707
TMI Blog2022 (6) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 1 to section 37(1) of the Act. 2.1 That the learned Commissioner of Income Tax (Appeals) has overlooked relevant evidence placed on record and, drawn factually incorrect and legally unsustainable inferences based on irrelevant and extraneous consideration and thus, disallowance upheld d is wholly unwarranted and not in accordance with law. 3 That various adverse findings recorded by the learned Commissioner of Income Tax (Appeals) and learned Assessing Officer are contrary to record and law and thus unsustainable. 3. Brief facts of the case as culled out from the draft assessment order are that the assessee company is incorporated under the laws of Malaysia which is engaged in the business of road construction. Only a maiden contract was awarded to the company by Public Works Department (PWD), Kerala State Transport Project (KSTP), Govt. of Kerala towards upgrading the sections of highway, namely Palakkad - Shornur (Km 0+000 - Km 45+300) and Thirssur - Kuttipuram (Km19+600 - Km 52+680) in the state of Kerala vide Contract Agreement No. Nil dated 07.11.2002. However, during the year under assessment, the assessee has not engaged in any project work except the winding up a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown to be incurred without any professional or technical services received as there was no business activity during the year under consideration. Hence, the Assessing Officer disallowed the said expenditure u/s. 37(1) of the Act. 6. Against the above order, the assessee appealed before the Ld. CIT(A). As regards the issue of disallowance of Rs. 5,15,000/- as arbitrator fee for lack of deduction of TDS, the Ld. CIT(A) confirmed the same by observing as under:- "6.3 The appellant also filed copy of the ledger account. On perusal of this ledger account it is seen that expenses of Rs. 20,000/- paid for getting legal opinion and all other expenses are either for secretarial and clerical expenses in connection with arbitration expenses, or arbitration expenses for sitting on a particular date which are paid to Sh. Kurien Methew or Sh. Roy J Vellanikkarn or Sh. Addul Kharder. As mentioned by the AO, the appellant has submitted a chart of details of IDS deducted and re-conciliation. As per the said chart the appellant has itself described payments made to S/Sh. Kurien Methew and Roy J Vellanikkarn and Addul Kharder as, "legal, professional and consultancy". The details of TDS deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us. 10. We have heard both the counsel and perused the records. We find that the disallowance in these facts has been done out of legal and professional expenses booked by the assessee. The total expenditure booked were Rs. 64,12,272/-. A sum of Rs. 5,15,000/- was disallowed for lack of deduction of TDS. These sums were paid to arbitrator as fee and clerical expenses and no reasonable explanation was given as to why TDS was not deducted thereupon. The assessee's plea that provisions of section 194J are not attracted has rightly been rejected by the Revenue authorities. Moreover, as noted by the Revenue authorities, the assessee itself in its ledger entry has mentioned that the payment is net of TDS to the arbitrator. Hence, assessee is aware that TDS was to be deducted failure to do so would certainly result in disallowance. Hence, we do not find any infirmity in the addition of Rs. 5,15,000/-. 11. Another addition is regarding payment of Rs. 35,05,892/- paid as professional fee to Pramodh Engineers. As noted above, the assessee in this case is a company incorporated under the laws of Malaysia which is engaged in the business of road construction. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or payment of Rs. 13.92 cores in favour of the Project Office. PWD, Govt. Of Kerala, has filed an appeal before the Hon'ble District Court, Trivandrum against his order, which is yet to be settled. In view of this appeal, cognizance of the award has not been taken in the accounts. Vide order dated 4.7.2013, the Hon'ble Tribunal has given further award in favour of the Project Office of Rs. 15.84 Crores. The cognizance of this award has not been taken in the accounts. The following balances receivable from the customer (PWD, Govt. of Kerala) are subjected to reconciliation and adjustments, if any, will be given effect after final settlement of the claims: Outstanding on account of (as on 31.3.2013 Amount (Rs.) Receivable on construction job 97260799.54 (Dr.) Retention money 56917349.00 (Dr) Interest claimed 4952418.35 (Dr) Mobilisation advance including advance machinery 23657546.00 (Cr) Net receivable 135473020.89 13. From the above, it is noted that the assessee was pursuing before the Arbitral Tribunal and in fact on 04.07.2013, a further award in favour of the assessee of Rs. 15.84 Crores was awarded. It is another matter that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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