ISS FACILITY SERVICES INDIA PVT LTD (MERGED ENTITY ERSTWHILE ISS INTEGRATED SERVICES PVT LTD),MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 10(2), MUMBAI

During the course of assessment, the assessing officer noticed that assessee has shown dividend income of Rs. 4,81,371/- claimed as exempt. However, the assessee has not disallowed any expenditure incurred for earning the said exempt income. On query, the assessee submitted working of disallowance u/s 14A r.w.r. 8D to Rs. 8,36,491/-. Disagreeing with the assessee’s working, the assessing officer has computed expenditure of Rs. 31,23,656/- as per Rule 8D of the I.T. Rules 1962.

In appeal, the ld. CIT(A) has dismissed the ground of appeal filed by the assessee.

Before us, the ld. Counsel filed paper book comprising copies of document and detail submitted before the lower authorities. The ld. Counsel submitted that assessee has not excluded the exempt income from the taxable income as per the statement of computation of income and the same was included as part of taxable income. He referred copies of P & L A/c placed in the paper book as per which the Iss Facility Services India Pvt. Ltd. (Merged entity erstwhile Iss Integrated Services Pvt. Ltd.) A.Y. 2010-11 assessee has included the amount of dividend income of Rs. 4,81,371/- in the other income. He also referred copy of computation of income showing that assessee has not claimed dividend income as exempt income. We consider that assessee has not claimed the amount of dividend as exempt income as discussed, therefore, we find no justification in the finding of ld. CIT(A) in sustaining the impugned disallowance. Accordingly, this ground of appeal of assessee is allowed.

During the course of assessment, the assessing officer observed that assessee has debited total amount of Rs. 112,74,887/- on account of bad debt written off and assessee has not submitted supporting details in respect of bad debt written off and also not provided details of efforts made to recover the outstanding amount from the parties therefore deduction of Rs. 112,74,887/- claimed as bad debt was disallowed and added to the total income of the assessee.

In the appeal, the ld. CIT(A) has sustained the disallowance made by the assessing officer.

During the course of appellate proceedings before us, the ld. Counsel submitted that during the course of assessment proceedings, the assessee has submitted the complete details of bad debt written off during the year i.e. bad debt offered for tax in previous years, summary of year-wise and customer-wise bad debt offered for tax, details of bad debts against invoice raised etc. along with Financial Year in which the amount was offered for tax with name of the Iss Facility Services India Pvt. Ltd. (Merged entity erstwhile Iss Integrated Services Pvt. Ltd.) A.Y. 2010-11 customer and the amount outstanding. He particularly referred this detail placed in the paper book no. 1 from page no. 32 to 46. He also referred schedule of sundry debtor showing provision for doubtful along with detail of debtors.

Heard both the sides and perused the material on record. We find that the assessee company is engaged in the business of facility management services in the area of house-keeping, security services maintenance and management of buildings, gardening and landscaping, pest control services, garbage disposal and catering and transport services etc. to the number of corporate clients showing turnover of Rs. 1,34,67,11,175/-. After perusal of material on record it is evident that assessee has submitted the various details of bad debt vide submission dated 21.11.2013 for further verification before the assessing officer however, the assessing officer has neither controverted the detail filed of various transactions claimed as bad debt written off nor brought any material on record to prove that claim of bad debt made by the assessee was not genuine. In view of the above facts and considering the nature of services and large number of clients covered by the assessee supported with relevant details of default in making the due payment by some of the clients against the services rendered by the assessee, we find that ld. CIT(A) is not justified in sustaining the disallowance of bad debt made by the assessing officer, therefore, this ground of appeal of the assessee is allowed.

This ground of appeal was not discussed before us therefore, the same stand dismissed.

During the course of assessment, the assessing officer noticed that assessee-company has received interest income of Rs. 74,09,078/- credited to profit and loss account however in the computation of income it has reduced such interest income with reason that the same has been considered under the other head of income. The AO observed that said interest income has not been offered to tax by the assessee therefore, the AO has added the same to the total income of the assessee as interest of Rs. 74,09,078/- received by the assessee during the year under consideration.

The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) directed the assessing officer to verify the nature of income in accordance with law.

During the course of appellate proceedings before us, the ld. Counsel submitted that in the return of income filed in Form No. ITR-6 the assessee has shown Rs. 74,09,078/- as deduction under schedule BP as income. He further submitted that said amount was in the nature of gain on sale of tangible asset and the same was to be assessed under the head capital gain in ITR-6, therefore, the same was removed from schedule BP and was declared under Schedule CG in ITR-6 but the assessing officer had treated the same as interest income without looking to the facts submitted during the assessment that the same has already been reflected in the computation of total income submitted to the AO during the assessment proceeding.

At the time of assessment proceeding, the assessing officer noticed that in the audit report the auditor reported that assessee has made payment to relative of a director towards salary aggregating to Rs. 36,59,249/- during F.Y. 2009-10 relevant to the year under consideration and the assessee has not obtained prior approval from the Central Government as required u/s IB of section 349 of the Company Act for making payment of an amount higher than limit prescribed. Therefore, the assessing officer treated the same as excess salary of Rs. 36,59,249/- paid to the relative of the director and disallowed the same.

In the appeal, the ld. CIT(A) has dismissed this ground of appeal reiterating the fact stated by the assessing officer.

Heard both the sides and perused the material on record. In respect of payment of salary of Rs. 36,59,249/- to the relative of the director the assessee has filed copy of approval from Ministry of Corporate Affairs vide e-mail received from Ministry of Corporate Affairs dated 23.06.2011 which the assessee stated that was also filed before the lower authorities. We find that all these facts and relevant supporting material has not been verified by the assessing officer before declining the claim of deduction of payment of salary to the two employees as mentioned at page 91 of the paper book. In view of the above facts and circumstances, we restore this issue to the file of assessing officer for deciding afresh as per law on the basis of supporting documents submitted by the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes.

The assessing officer has disallowed 20% of trevelling expenses for want of supporting documentary evidences. In appeal, the ld. CIT(A) has restricted the disallowance to the extent of 10% of the travelling expenses claimed by the assessee.

Before us, the ld. Counsel submitted that the travelling expenses were incurred mainly on the travelling / local conveyance of its Iss Facility Services India Pvt. Ltd. (Merged entity erstwhile Iss Integrated Services Pvt. Ltd.) A.Y. 2010-11 employees and managerial person during the year under consideration. The assessee has submitted comparative analysis of travelling expenses vide submission dated 25.11.2013 and 07.10.2013 during the course of assessment. He submitted that the AO has not raised any further query and also not issued any show cause notice for making disallowance of such expenses on adhoc basis. The ld. Counsel has also referred the detail of branch-wise travelling and conveyance expenses submitted before the assessing officer during the course of assessment proceeding. On the other hand, ld. DR supported the order of lower authority.

Heard both the sides and perused the material on record. The assessee company is in the business of providing management services including cleaning house keeping and technical services etc. As a result travelling and conveyance expenses are incurred to travel the places of the client by the staff personnel of different branches of assesse company. Even before the ld. CIT(A), the assessee has particularly submitted copies of statement vide letter dated 23.02.2021 showing that travelling and conveyance expenses have been incurred on year to year basis and also submitted the ledger account of travelling and conveyance expenses along with name of the client / branch / side of visit etc. Because of nature of services rendered by the assessee to a large number of clients it was having more than 12900 employees across India under its payroll during A.Y. 2010-11. The services were rendered to the clients of the assessee by its own payroll staff. After considering the above facts and circumstances we find that assessing officer has neither issued any specific show cause notice to the assessee nor brought any material on record to demonstrate that the claim of the travelling expenses of the Iss Facility Services India Pvt. Ltd. (Merged entity erstwhile Iss Integrated Services Pvt. Ltd.) A.Y. 2010-11 assessee company was not supported with relevant documentary evidences. Therefore, we find that decision of ld. CIT(A) in sustaining such disallowance on adhoc basis is not justified and this ground of appeal of the assessee is allowed.