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TMI Blog2023 (10) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... ultancy charges and commission - HELD THAT:- CIT(A) has passed a speaking and reasoned order giving substantive findings as to how the disallowance is not called for. We note that ld CIT(A) has analysed each and every item of expense and came to a conclusion that provisions of tax deduction at source are not applicable in some cases whereas in some instances in view of the decision of the apex court in the case of Hindustan Coca Cola Beverages P. Ltd. [ 2007 (8) TMI 12 - SUPREME COURT] the provisions of section 40(a)(ia) are not applicable as the payees have returned the said payments in their return of income and paid due taxes. Consequently, we do not find any reason to disturb the findings of the ld. CIT(A) and accordingly Ground No. 2 of the revenue is dismissed. Addition on payments made in cash in violation to provisions of Section 40A(3) - HELD THAT:- CIT(A) observed that in a single day, where the payment exceeded Rs. 20,000/-, the same was made by way of account payee cheque or account payee demand draft. CIT(A) observed that the said Section applies to payments made to a single party on a single day. The ld. CIT(A) have recorded a finding of fact that the single da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to uphold the order of the ld. CIT(A) Bogus and non-genuine commission payments - AO observed from the evidences furnished by the assessee in the form of agreements with these agents to whom commission was paid that assessee has failed to substantiate as to how these persons were rendering their services to the assessee - CIT(A) deleted addition - HELD THAT:- We observe that the assessee is engaged in manufacturing and supplying goods to Indian Railways. We note that the assessee has hired services of commission agents for keeping track of the tenders, applying for the tenders, and after the tenders are successfully obtained, the obtaining of supply orders , supply of goods and finally pursuing and receiving payments. We have perused the order of the ld. CIT(A) and observed that the services of these agents are indispensable to do business with Indian Railways. The ld CIT(A) has gone into the commercial angle of these expenses and held that these were incurred for the purpose of business wholly and exclusively. The mere fact that these expenses were outstanding at the year end would not colour them with taint that these expenses are non genuine and bogus. The ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it rate of Dehradun unit was found unnaturally at very high level . In A.Y. 2009-10 2010-11 the claim u/s 80IC was restricted to 50% after observing that the net profit rate was 34.05% of this unit whereas the overall net profit rate of the company is 8.74% as per Form No. 3CD. The AO restricted the claim to 50% of the total profit on the ground that details of expenses were not available and could not be verified. On the same analogy the AO restricted the claim u/s 80IC to 50% in the current Assessment Year. The assessee challenged the action of the AO before the ld. CIT(A). 4. In the appellate proceedings, the ld. CIT(A) allowed the claim of the assessee by following the appellate order passed by the predecessor ld. CIT(A) for AY 2009-10 and A.Y. 2010-11 and also by the Co-ordinate Bench, wherein the claim of the assessee was allowed and thus, allowed the appeal of the assessee. 5. After hearing rival contentions and perusing the material on record, we find that assessee s case is squarely covered in its favour in own cases in ITA No. 48/Kol/2015 AY 2009-10 and in ITA no. 1247/Kol/2014 A.Y. 2010- 11 by the decisions of the coordinate benches wherein similar issue has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Hindustan Coca Cola Beverages P. Ltd., the AO is directed to delete the addition of Rs. 3,08,000/-. Consultancy expenses of Rs. 1,52,815/- made to Md. Muslim In respect of this payment, the appellant has submitted that he is the staff of the company and amount of Rs. 1,52,815/-represented salary due for the year and this was wrongly debited to consultancy charge through inadvertence- Salary paid is below taxable limit of Rs. 1,60,000/-. Upon perusal of details, the claim of the appellant appears to be correct. Accordingly, the AO is directed to delete the addition of Rs. 1,52,815/-. Consultancy charges of Rs. 1,01,984/- made to Anil Kumar In respect of this payment, the appellant has submitted that he is the staff of the company and amount represented salary due for the year and this was wrongly debited to consultancy charge through inadvertence. Salary paid is below taxable limit as prescribed under the Act. Upon perusal of details, the claim of the appellant appears to be correct. Accordingly, the AO is directed to delete the addition of Rs. 1,01,984/-. Consultancy charges of Rs. 1,25,000/- In respect of this payment, the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s disallowance. Accordingly, the addition of Rs. 1,17,000/- is directed to be deleted. Commission of Rs. 17,550/- In respect of this payment, the appellant has submitted that in view of the 2no proviso to section 40(a)(ia), it is prayed that assessee should not be treated as assessee in default. We place our reliance to the judgement of Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., ITA No. 160 161 of 2015. On perusal of details furnished by the appellant, it is seen that the recipient of commission from the assessee company had shown commission receipts in her return for the relevant assessment year paid due taxes thereon. The Hon'ble Supreme Court in the landmark judgment in the case of Hindustan Coca Cola Beverages P. Ltd. Vs CIT 293 ITR 226 (SC) held that where deductee, recipient of income, has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating deductor to be assessee-in-default for shortfall in its amount of tax deducted at source. Considering the facts of the case and decision of the Hon'ble Apex Court in the case of Hindustan Coca Cola Bevera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments made in cash in violation to provisions of Section 40A(3) of the Act. 10. During the assessment proceedings, the AO noticed that the assessee has made certain payments exceeding Rs. 20,000/- in cash violating provisions of Section 40A(3) of the Act. The details of the said payments are given in para 3.1. of the assessment order. The AO disallowed the same and added the income of the assessee on the ground that the said payments are in violation of section 40A(3) of the Act. 11. The ld. CIT(A) allowed the appeal after taking into consideration the submissions made by the assessee in the appellate proceedings. The ld. CIT(A) observed that none of the payments exceeded Rs. 20,000/- in fact. The ld CIT(A) observed that in a single day, where the payment exceeded Rs. 20,000/-, the same was made by way of account payee cheque or account payee demand draft. The ld. CIT(A) observed that the said Section applies to payments made to a single party on a single day. The ld. CIT(A) have recorded a finding of fact that the single day payments to single individual, never exceeded Rs. 20,000/- by way of cash and, therefore, provisions of Section 40A(3) of the Act cannot be applied and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had made statutory payments on or before the due date of filing of return of income. Considering the facts of the case and appellant's submissions, I am inclined to agree with the appellant's claim. Section 43B is reproduced hereunder for the sake of clarity:- 43B. Certain deductions to be only on actual payment.- Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his appellate order. Consequently ground no. 4 is dismissed. 16. Ground No. 5 is against the direction of the ld. CIT(A) to allow the claim of deduction u/s 80G of the Act in respect of donations made to three trusts, namely, Sidhvinaya Yatras, Shree Giri Raj Seva Trust and Bodhayan amounting to Rs. 70,089/-. 17. We observe that the Assessing Officer in the assessment proceedings noted that the assessee has made donation of Rs. 4,22,828/- for which assessee has not offered any explanation and accordingly the same was disallowed by the Assessing Officer. The ld. CIT(A) in the appellate proceedings observed that these donations were made to the trust/institutions which are eligible for deduction u/s 80G of the Act and accordingly restored the issue to the file of the Assessing Officer and directed the Assessing Officer to allow the statutory deduction as per statutory limit prescribed u/s 80G of the Act. We do not find any reason to interfere with this finding of the ld. CIT(A) and accordingly uphold the order of ld CIT(A) on this issue. Hence, Ground No. 5 is dismissed. 18. The issue raised in Ground No. 6 is against the deletion of disallowance of Rs. 15,60,000/- by the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to them cannot be said to be excessive or unreasonable. Moreover, these persons are separately assessed to tax and duly declared consultancy charges received from the appellant company and paid due taxes thereon. Hence, there is no loss of revenue. Under these facts and circumstances, I find no justifiable reason to sustain the addition of Rs. 15,60,000/- . Accordingly, the AO is directed to delete the addition of Rs. 15,60,000/-. The ground no. 7 raised by the appellant regarding this issue is allowed. 21. We have heard rival contentions and perused the facts on records. We have also noted the findings of the ld. CIT(A) that these payments were made to the directors for rendering services to the assessee company who were qualified in their respective fields. The ld. CIT(A) also noted that while making the payment, the TDS was duly deducted from consultancy charges and these directors were assessed to tax in their personal capacities also. The ld. CIT(A) specifically noted that this is not the case of the assessee that the payments made to the directors is excessive and unreasonable. Besides we note that these directors are separately assessed to tax and have duly declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that there was no need for mediation for applying to the tenders/bids floated by Indian Railway and thus, the assessee has failed to prove that the expenditure was wholly and exclusively incurred for the purpose of business. 25. The ld. CIT(A) recorded a finding of fact that all the evidences were filed before the Assessing Officer as well as in the appellate proceedings which proved the business expediency and genuineness of these expenses. The ld. CIT(A) while allowing the appeal noted that the assessee is a manufacturer of solid cushion tyres, rubber, P.U. moulded goods etc. and it was not possible for the assessee to recruit its own personnel for carrying out services/activities which were outsourced to these agents. The ld. CIT(A) observed that the assessee has proved the services provided by these agents by furnishing copies of agreements with them and these commission agents were hired not only for procuring the orders but also for providing pre post supply services. The ld. CIT(A) also referred to the provisions of Section 40A(2)(b) of the Act and noted that there was no violation of this Section also. Finally, the ld. CIT(A) following various case-laws, at para 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The ld CIT(A) has gone into the commercial angle of these expenses and held that these were incurred for the purpose of business wholly and exclusively. The mere fact that these expenses were outstanding at the year end would not colour them with taint that these expenses are non genuine and bogus. The ld. CIT(A) has taken into account all these aspects while allowing the appeal and passed a very detailed and reasoned order explaining each and every aspect of the issue by noting that similar commission has been paid in the preceding assessment years and was allowed. The ld CIT(A) has noted that these agents are experts in their field and that the assessee has duly explained the services rendered by these agents to the assessee. The ld CIT(A) relied on a series of decisions to justify his conclusion. In para 10.3 of the appellate order the ld. CIT(A) relied on the decision of coordinate bench in the case of Dresser Valve India (Pvt) Ltd Vs ACIT (2009)30SOT 495(Mumbai) wherein the facts are quite similar. In that case the assessee paid commission to commission agent P for obtaining orders from NTPC and UPSEB. The AO disallowed the commission paid @10% on the ground that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent period and thus doubted the genuineness of these expenses and added the same to the income of the assessee by passing a very cryptic order. 35. In the appellate proceedings, the ld. CIT(A) partly allowed the appeal of the assessee after taking into consideration the submissions made by the assessee. The ld. CIT(A) noted that on the basis of Profit and loss account and Form 10CCB that out of the total commission of Rs. 6,60,32,650/-, commission amounting to Rs. 2,21,47,981/- relates to Dehradun Unit which is eligible for claim u/s 80IC of the Act and the remaining commission of Rs. 3,78,84,669/- relates to units which were not eligible for deduction u/s 80IC of the Act. The ld. CIT(A) also noted that the Tribunal in the assessee s own case for Assessment Year 2010-11 had not commented on the genuineness of the commission payments but only held that these commission payments even if disallowed would enhance the claim u/s 80IC of the Act and will not have any impact on the tax liability of the assessee. The ld. CIT(A) noted that the payment of commission if disallowed in respect Dehradun Unit would only enhance the claim u/s 80IC of the Act and not in respect of other units wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions and perused the material available on record. 38. The ld DR on the other hand relied on the order of authorities below though candidly admitting that the no such disallowance was ever made in the preceding assessments by bifurcating the commission between eligible and non eligible units. 39. We have heard the rival submissions and perused the material available on record. We note that this issue is similar to ones as decided by us in ITA No. 238/Kol/2022 AY 2011-12 (supra) where the appeal of the revenue was dismissed by us upholding the order of ld CIT(A) in which the commission payments were similar in nature and were allowed. The facts are same and have been discussed in that appeal above with the difference in amount of commission paid during the year only and therefore are not being reiterated. Needless to state that assessee is engaged in manufacturing and supplying goods to Indian Railways and has hired services of commission agents for keeping track of the tenders, applying for the tenders, and after the tenders are successfully obtained, the obtaining of supply orders , supply of goods and finally pursuing and receiving payments. We have also noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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