TBZ NIRMAL ZAVERI PRIVATE LIMITED ,MUMBAI vs. ADDL/JCIT (A) BHUBANESHWAR, MUMBAI

The Ld. AO during the assessment proceeding found that the assessee had claimed this expenses as professional fees and tax was deducted at the rate of 10%. The professional fees paid to Mrs. Shalini Zaveri for promoting the business and to Mrs. Meera Zaveri, Gemologist for conceptualization of design for business of the company. The assessee confirm before the revenue authorities that the TBZ Nirmal Zaveri Private Limited payment was made through banking channel and the TDS was duly deducted on payment. But the Ld. AO had not considered the assessee’s submission & confirmed the addition amount to Rs.12,50,000/- with the total income of the assessee. Being aggrieved the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the impugned assessment order. Being aggrieved assessee filed an appeal before us.

The Ld. AR submitted a paper book comprising pages 1 to 110, which was taken on record. The Ld. AR contended that the impugned amounts were paid during the relevant assessment year to professionals for the purpose of promoting the business of the assessee-company—namely, to Mrs. Shalini Zaveri and to Mrs. Meera Zaveri, a gemologist, for conceptualization and design development in connection with the company’s business. Accordingly, these payments were treated as professional fees in the books of account of the assessee-company. Tax was duly deducted at source at the rate of 10% on such professional fees. The Ld. AR further submitted that the Ld. AO had raised an objection that the said amounts were not claimed under the head “business promotion,” to which a detailed explanation had already been furnished before the Ld. AO on 05.08.2016. During the assessment as well as appellate proceedings, the relevant bills, bank statements, and TDS certificates were duly submitted, copies of which are enclosed at APB pages 69 to 110. On this basis, the Ld. AR contended that the impugned addition was arbitrary and bad in law.

The Ld. DR argued that the assessee had incurred the expenditure for “business promotion,” whereas the impugned amounts were claimed separately

We have heard the rival submissions and perused the material available on record. During the assessment proceedings, the Ld. AO made an addition in respect of professional fees paid to Mrs. Shalini Zaveri amounting to Rs. 8,00,000/- and to Mrs. Meera Zaveri amounting to Rs. 4,50,000/-, allegedly for promoting the business of the assessee-company. Before both the revenue authorities, the assessee furnished complete details of the bills, bank statements evidencing the payments, TDS certificates showing deduction of tax at the rate of 10%, and explanations regarding the professional activities undertaken for further development of the business. At no stage during the assessment or appellate proceedings did the revenue authorities reject the documentary evidence filed by the assessee in support of its claim. The sole objection of the Ld. AO appears to be that, although the assessee maintained a separate head for “business promotion,” the impugned expenditure was claimed under the head “professional fees.” We find that the assessee is engaged in the business of goldsmithing, silversmithing, and jewellery, and the services of a gemologist are intrinsically connected with and necessary for the promotion and further development of such business. Merely because the expenditure was classified under the head “professional fees” instead of “business promotion” cannot be a valid ground for disallowance, particularly when the nature and purpose of the expenditure are not in dispute. In these circumstances, we find no justification for the TBZ Nirmal Zaveri Private Limited disallowance of the expenditure amounting to Rs. 12,50,000/-. Accordingly, the impugned appellate order is set aside, and the addition of Rs. 12,50,000/- is deleted.