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TMI Blog2024 (8) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... ny fund flow statement evidencing the use of own funds - HELD THAT:-The assessee was having sufficient 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 CIT(A) s decision to delete the disallowance u/s 14A on account of interest expenses. This ground number 2 of the Revenue s appeal is dismissed. Addition u/s. 14A on account of administrative expenses - 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 examine assessee s claim. We also note that the Ld.CIT(A) also has not recorded his reason while confirming the addition on account of administrative expenses. We are of the opinion that the CIT(A) and the AO both have failed in recording dissatisfaction before applying third component of rule 8D relating to administrative expenses. - Shri Siddhartha Nautiyal, Judicial Member And Shri Makarand V. Mahadeokar, Accountant Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the AO relying on the Circular of CBDT and guidelines of MCI disallowed Rs. 2,07,28,000/- u/s. 37(1) of the Act. 2.3. The AO also observed that the assessee-company has earned a dividend of Rs. 1,64,89,016/- and also claimed interest expense of Rs. 1,45,82,263/-. Therefore, AO in a notice u/s. 142(1) of the Act requested to show cause as to why provisions of section 14A r.w.r. 8D of the I.T. Rules, 1962 should not be invoked. In reply the assessee explained that it had, during the year under consideration, has acquired long term non-current investments of Rs. 5,77,44,695/- and current investments in Debt mutual funds of Rs. 53,64,13,406/- The assessee further stated that both current and non-current investments were made out of its own funds and in the year under consideration the company had received Rs. 68 crore as share capital including securities premium which was used for making investments. The assessee also contended that they have not made investments out of borrowed funds. The assessee further contented that the investments are routed through a separate investment account with HDFC Bank, and no direct or indirect cost was incurred for acquisition of such investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents with the doctors, doctors were imparting knowledge of assessee's products to general public and also helping in marketing of assessee's products, even though the doctors are prohibited from performing such activities by the MCI Guidelines issued by Indian Medical Council (Professional conduct, etiquettes and ethics) Regulation 2002. 1.3. 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 even though the assessee has not provided the documentary evidence of service provided by the doctors and the basis of calculation of fees paid to each of the doctors. 1.4. 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 even though admittedly, the medical practitioners and the paramedical staff for whose services the doctors were paid professional fees were not the employees of the assessee company. 1.5. 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 disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. - That, the Documentary evidence, such as agreements and confirmations from doctors, supported the claims. - That, the professional fees were aligned with business exigencies and aimed at promoting the company's pharmaceutical products. - That, the MCI guidelines (para 6.8(g)) permit doctors to work with pharmaceutical companies in an advisory capacity. - That, the CBDT Circular No. 5/2012 applies to gifts and hospitality, not to professional fees for services rendered. - That, the Tribunal concluded that the professional fees paid by the assessee did not violate the MCI guidelines or the CBDT Circular. 8.1. The Judicial Precedents considered by the tribunal supported the principle that genuine business expenses paid through proper channels should be allowed and also highlighted that expenses paid through banking channels with TDS deducted are not bogus. These decisions reinforced that sufficient evidence of services rendered justifies business expenditure and affirmed that genuine business expenses are allowable if supported by agreements and proper documentation. 8.2. In the present case, the AO has not doubted the genuineness of these payments. He stated that no document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the disallowance. 11. Relating to confirming disallowing an amount of Rs. 14,85,395/-, the Ld.AR argued that the Ld.CIT(A) has not dealt with the issue in detail and simply concluded that the assessee s contention is devoid of merit. 11. The Ld.AR placed reliance on the decision of Mumbai Bench of Tribunal in case of DCIT 3(2)(2), Mumbai Vs Pidilite Industries Ltd. [2019] 107 taxmann.com 91 and decision of Co-ordinate Bench in case of Lok Prakashan Ltd. (in ITA No. 131/Ahd/2018). The Ld.AR also placed reliance on the decision of Chandigarh Bench of Tribunal in case of Ludhiana Stock Exchange (in ITA No.15/Chd/2017). 12. We have heard the rival contentions and noted that the Revenue argued that the assessee-company did not provide any fund flow statement evidencing the use of own funds. We also noted that the AO had a predetermined thought of disallowance u/s. 14A, as evident from the show-cause notice and the Ld.AR also submitted bank statements and other documents proving that the investments were made from own funds and no exempt income was earned, which were already submitted to lower authorities. We also take into consideration decision of Pidilite Industries Ltd. (supra), w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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