9911796707
TMI Blog2024 (8) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of Rs. 47,17,20,900/-. The assessee invalidated previous return and filed its return of income on 07-11-2017. The case was selected for scrutiny under CASS and the assessee were sent notices under sections 143(2) and 142(1) of the Act. In response to which, the assessee filed its reply and the AO observed that the company has claimed professional fees to the doctors amounting to Rs. 5,43,98,834/-. 2.1. The AO sent show-cause notice to the assessee as to why these fees paid to doctors should not be disallowed. The assessee submitted its reply and submitted the details that this amount is bifurcated into two parts Rs. 2,07,28,000/- towards payment to scientific consultants and Rs. 3,36,70,833/- was towards payment to consultants, advisors and professional service providers. The assessee contented that the expenditure was incurred wholly and exclusively for the purpose of business. The assessee-company also stated that such expenditure is essential for a pharmaceutical company having scientific and research-based orientation. 2.2. The assessee also placed reliance on some decisions of Tribunal and contented that the reference to Circular No. 5 of 2012 issued by CBDT an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Ld.CIT(A) against the order of AO passed u/s. 143(3) of the Act. The Ld.CIT(A) partly allowed the appeal of the assessee. While doing so, the Ld.CIT(A) deleted the disallowance of Rs. 207,28,000/- relying on the order of ITAT in assessee's own case for the A.Y. 2011-12 to A.Y. 2014-15. The Ld.CIT(A) restricted disallowance u/s. 14A read with Rule 8D to Rs. 14,85,395/- on account of administrative expenses. The Ld.CIT(A) deleted the disallowance of Rs. 8,27,091/- u/s. 36(1) of the Act relating to delayed payment of employees' contribution to PF, ESIC, etc. While doing so, the Ld.CIT(A) concluded that the payment was made before due date of 20-08-2015 including grace days allowed. 4. Aggrieved by the order of the Ld.CIT(A), now the Revenue is in appeal before us with following grounds: "1. Whether the CIT(A) has erred in law and on the fact in deleting the additions of Rs. 2,07,28,000 made on account of disallowance of professional fees paid to the doctors u/s. 37(1) of the Act without properly appreciating the facts of the case and material brought on record. 1.1. The CIT(A) has erred in law and on the fact in deleting the additions of Rs. 2,07,28,000/- made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds: "1. In law and in facts and circumstances of the Respondent's case, the impugned order u/s 143(3) of the Income tax Act,1961; is bad in law and needs to be quashed. 2. In law and in the facts and circumstances of the Respondent's case, the Id. CIT(A) has erred in upholding the disallowance of administrative expenditure of Rs. 14,85,395/- of section 14 A of the Act when no such addition is called for. 3. The Respondent's craves to add to, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal." On the Ground No. 1 of the Revenue 6. This ground is relating to disallowance of Rs. 2,07,28,000/- u/s. 37(1) of the Act on account of the payment of professional fees paid to doctors. The Ld.Departmental Representative (DR) stated that the AO has dealt with this issue in detail in his assessment order and, hence, placed reliance on order of the AO. 7. The Ld.Authorised Representative (Ld.AR) of the assessee, stated that this issue is covered by the decision of Co-ordinate Bench in assessee's own case for the A.Y. 2011-12 to A.Y. 2014-15 in ITA Nos. 2380/Ahd/2015, 3327/Ahd/2016, 1811/Ahd/2017 and 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. These grounds deal with disallowance u/s. 14A read with rule 8D of the I.T. Rules, 1962. The Revenue in appeal against the deletion of addition made u/s 14A of Rs. 36,30,382/- on account of interest expenditure and the assessee has filed cross objection against the confirmation of disallowance of Rs. 14,85,395/- on account of administrative expenses. 10. The Ld.DR while relying on the order of AO stated that the assessee-company has not provided any fund flow statement evidencing that the assessee has used its own funds. On the other hand, the Ld.AR contended that the AO acted with predetermined thought of disallowance u/s. 14A as he issued show cause notice in notice u/s. 142(1) of the Act itself. The Ld.AR further contended that the assessee had informed that the investments were made out of own funds received from issuance of share capital at premium. The Ld.AR also stated that the assessee had submitted the copy of bank statement where proceeds of issuance of share were received and investment in mutual fund was made by way of Annexure 4A. The Ld.AR further submitted that the assessee has not earned any Long Term Capital Gain (LTCG) on these mutual funds which is claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds in hand on the date of investment, as it is evident from the bank statement where proceeds of issuance of share capital were deposited and investments in mutual funds was made, we are in agreement with the decision of the Ld.CIT(A)'s decision to delete the disallowance of Rs. 36,30,382/- u/s 14A on account of interest expenses. This ground number 2 of the Revenue's appeal is dismissed. 13. So far as assessee's ground relating to cross objection i.e. the Ld.CIT(A)'s decision to confirm addition of Rs. 14,85,395/- u/s. 14A on account of administrative expenses is concerned, we have considered the contention of the Ld.AR that they have not incurred any administrative expenses to earn such income. We also note that the AO has not recorded his dissatisfaction about assessee's claim that they have not incurred any administrative expenses, especially when all the investments are routed through one single bank account through one broker. Therefore, AO's adoption of Rule 8D proves mechanical. Most of the judicial precedents, including those relied on by the assessee, underscore the importance of procedural fairness and due diligence by AO and also held that the AO has to objectively ..... X X X X Extracts X X X X X X X X Extracts X X X X
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