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TMI Blog2022 (12) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of TDS 3. In the Facts & Circumstances of the case and in the law, the Learned A.O. erred in disallowing expenses of Rs.11,50,000/- due to non deduction of TDS. 4. In the Facts & Circumstances of the case and in the law, the Learned A.O, erred in disallowing Rs. l,13,226/-on account of cash payment. 5. In the Facts & Circumstances of the case and in the law, the Learned A.O. erred in disallowing Rs. 21,473/- on account of Travelling and Repair and Maintenance expense. 3. The first issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance made by the AO of the claim for bad debt of Rs. 79 Lakh. 4. The facts in brief are that the assessee is a public company and engaged in the business of entertainment industry being sale and purchase of movie rights and TV slots. The AO during the assessment proceeding found that the assessee made claim of deduction on account of bad debt of Rs. 79 lakh in the name of following parties: 1. Durga Udhyog Rs. 7 Lakh 2. B.B. Corporation Rs. 72 Lakh 4.1 The AO requires the assessee to explain the genuineness of claim of bad debt as required under the provision of 36(1)(iii) of the Act i.e. the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income of the assessee. 5. Aggrieved assessee preferred an appeal to the learned CIT(A). 6. The assessee before learned CIT(A) submitted that the it entered into an agreement with B.B. Corporation represented by one Shri Ramesh Kulkarni as coproducer in a movie. Shri Ramesh Kulkarni was in process of producing a movie starring Shri Rajesh Kahnna. As per the agreement, the assessee was to contribute in the production expenses of the movie on profit sharing basis in the ratio of contribution and production expenses. Accordingly, it made contribution of Rs. 1 crore by making payment to BB Corporation in the year 2007-08. However, due to health condition and eventually death of main star Shri Rajesh Khanna, the movie could not be completed but expenses were incurred by the producer. Accordingly, a settlement was arrived where BB Corporation agreed to compensate the assessee to the extent of Rs. 18 Lakh only. Hence, a total business loss of Rs. 82 lacs were incurred in the said project out of which Rs. 10 lacs were claimed in A.Y. 2012-13 as bad debts and remaining amount of Rs. 72 lacs were claimed in the year under consideration. The claim of Rs. 10 lacs in the AY 2012-13 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee at the fag end of the assessment and therefore there was no time available with the authorities below to verify the contents of the agreement. Accordingly, the learned DR prayed to restore the matter to the file of the AO for fresh adjudication as per the provisions of law and after considering the agreement filed by the assessee. 12. In rejoinder, the learned AR raised no objection if the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law and in the light of the documents available in the paper book. 13. We have heard the rival contentions of both the parties and perused the materials available on record. It is the trite law that the nomenclatural given by the assessee for making a claim is not a decisive factor. The claim of the assessee whether allowable or disallowable has to be seen in the light of the provisions of the Act. Thus, we are of the view that no disallowance can be made for the claim made by the assessee which was wrongly classified as bad debts. As such, it was the duty of the authorities below to verify the nature of the claim based on the documents whether such bad debts can be classified as business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been deducted or deducted but not deposited in the Government account. In its case, the tax has been deducted and same was duly deposited in the Government account. As such there no concept of short deduction under the provision of section 40(a)(ia) of the Act. The assessee in support of its contention placed reliance on the order of Hon'ble bench of ITAT Kolkata in case of ITO vs. Premier Medical Supplies & Stores reported in 25 taxmann.com 171. 18. The learned CIT(A) after considering the submission of the assessee and assessment order confirmed the disallowances made by the AO by observing as under: 5.2 I have considered the assessment order, facts at the case and the submissions made by the appellant. The AO made the impugned disallowance since it was noted by him that the appellant had debited amounts of Rs.3,04,188/- and Rs,l,64,051/- to Reliance Media Works Ltd. (RMWL]. However, tax deductible @ 10% u/s, 194J had not been deducted. There was short deduction of tax on the part of the appellant and accordingly the AO disallowed the amount of Rs.95,170/- u/s. 40(a)(ia) of the Act, The appellant's contention during the appellate proceedings has been that it was not awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remanded to the file of the AO for fresh verification on this count. In this regard we find that the coordinate bench of Hyderabad Tribunal in case of BBR Project (P.) Ltd vs. ITO reported in 118 taxmann.com 133, where the bench set aside the issue to file of the AO for fresh adjudication with a direction to verify whether the assessee is an assessee in default under the provision of section 201(1) of the Act or not. The relevant finding of the Tribunal reads as under: 8. With respect to the other ground raised by the assessee towards invoking provisions of section40(a)(ia) of the Act, the Ld. AR had submitted that the assessee has not been treated as an assessee in default U/s. 201(1) of the Act, further no proceedings have been initiated on this regard for the relevant AY, therefore, disallowance U/s. 40(a)(ia) of the Act is not warranted. On perusing the facts of the case, it is evident that the assessee has not deducted tax at source for the payment made towards interest for Rs. 4,94,956/-. Therefore, it is apparent that the provisions of section 40(a)(ia) of the Act will come into play. However, the second proviso to section 40(a)(ia) of the Act has come into effect from 1/4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount was pad against services and not against purchase of items as claimed by the assessee. Hence, the assessee was required to deduct tax as per the provision of section 194C of the Act. Likewise, the AO found that assesse is silent on issue on non-deduction of tax on legal expenses meaning thereby that the assessee has nothing to say against purposed disallowances. Thus, the AO disallowed the legal expenses of Rs. 5 lakh and studio renewal charges of Rs. 6.5 lakh under provision of section 40(a)(ia) of the Act and added to the total income of the assessee. 24. The aggrieved assessee preferred an appeal before the learned CIT(A). 24.1 The assessee before the learned CIT(A) submitted that during the year it appointed M/s Subh Marketing as consultant for obtaining loan and for that purpose made payment of Rs 1.5 lakh. The remaining amount of Rs. 3.5 paid to Subh Marketing represent reimbursement of loan processing fee and other bank charges. However, due to inadvertent mistake, the entire amount of Rs. 5 lakh was debited as legal expenses. Hence, it was requested to delete the disallowances of legal expenses to the extent of Rs. 3.5 lakh. 24.2 Likewise the assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as studio renewal charges- were reimbursement made to the contractor for material purchased by them. However, even in these casts, no evidences of any sort has been furnished by the appellant to corroborate its submissions. The agreements with these two parties nowhere mention this aspect of reimbursements of payments. In view of these facts, I am inclined to agree with the AO that the appellant did not deduct fax as pre the provisions of the Act and the disallowance of Rs. 11,50,000/- made by the Assessing Officer is confirmed. Ground of appeal No. 3 is dismissed. 26. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 27. The learned AR before us contended that the recipients of the amount paid by the assessee have suffered the tax in their respective return of income and therefore, the assessee should not be disallowed of the expenses claimed by it in the income tax return on account of non-deduction of TDS. The learned AR also requested the bench that the matter for the limited purpose of verification can be sent to the AO. 28. On the other hand, the learned DR did not raise any objection if the matter is set aside to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the taxes on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso". On perusing the facts of the case, we find that the Ld. AO has not verified that the assessee is treated as an assessee-in-default U/s. 201 of the Act or otherwise. Hence, We hereby remit this issue also back to the file of the Ld. AO to decide the matter in accordance with the provisos of section40(a)(ia) of the Act cited hereinabove. 29.1 In view of the above and in the interest of justice and fair play, we are inclined to restore the issue to the file of the AO for de novo assessment as per the provisions of law and in the light of the documents available on record. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. 30. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowances of cash payment for Rs. 1,13,226/- only. 31. The AO during the assessment proceeding found the assessee on four occasion has made cash payment in excess of Rs. 20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchase of the capital assets exceeding the threshold limit provided under section 40A(3) of the Act cannot be made subject to the disallowance in pursuance to the circular issued by the CBDT bearing number 34 [F. No. 13A/92/69/-IT(A-II)] dated 05-03- 1970. Thus the disallowance made on account of the depreciation for Rs. 23,836/- cannot be made subject matter of disallowance under the provisions of section 40A(3) of the Act. 35.1 The learned AR with respect to the revenue expenses submitted that out of the total revenue expenses of Rs.89,390/-, a sum of Rs.34,490/- represents the expenses incurred for day to day or routine office expenses that too in small quantity and such expenses were incurred by the accountant. However, the amount was reimbursed to accountant in the month of March, hence such transaction was recorded on lump sum basis in the books of accounts. As such, on verification of the individual transaction of the office expenses, it is discernible that the expenses were incurred below the threshold limit. Thus, the same cannot be made subject to the disallowance under the provisions of section 40A(3) of the Act. 35.2 The learned AR for the balance amount of revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved assessee preferred an appeal before the learned CIT(A) but the assessee did not press the ground appeal during the appellate proceeding. Hence, the learned CIT(A) dismissed the ground of appeal of the assessee. 43. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 44. The learned AR before us contended that there cannot be any disallowance on ad hoc basis. 45. On the other hand, the learned DR submitted that the assessee has conceded for the disallowance made by the revenue before the respective authorities. Therefore, the assessee is not expected to agitate the same issue before the higher forum. The learned DR vehemently supported the order of the authorities below. 46. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee before the learned CIT (A) has not pressed this ground of appeal which is evident from the finding of the learned CIT (A). However, the assessee against the finding of learned CIT (A) is in appeal before us and made the contentions that all the impugned expenses were incurred in the course of the business. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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