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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Aby.T Varkey & Shri Waseem Ahmed
आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- Both appeals filed by the Revenue are directed against the common order of Commissioner of Income Tax (Appeals)-Jalpaiguri dated 30.03.2015. Assessments were framed by DCIT, Circle-2,Jalpaiguri u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his orders dated 25.03.2014 & 30.09.2014 for assessment years 2011-12 & 2012-13 respectively. 2. It was noticed that none appeared on behalf of Revenue nor filed any adjournment application. Thus in the absence of any plausible reason we regret to adjourn and decided to dispose of the same on merit after hearing -708/Kol/2015 Assessment Years 2011-12 & 2012-13 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 2 the Ld. Authorized Representative appeared on behalf of assessee, Shri, S.K. Tulsiyan.
Since common grounds are involved in both the appeal of Revenue except figures, therefore they were heard together and are being disposed of by way of this common order for the sake of convenience. Revenue’s appeal in for A.Y. 2011-12 as lead case :
Grounds raised
by Revenue in its appeal are reproduced below:- “1. The Ld. CIT has erred in law and fact in directing the Assessing Officer to verify the payments made to recovery agents.
2. The Ld. CIT(A) has erred in law and facts in allowing payment of Rs.2,02,123/- of personal nature for the hotel expenses to the auditors mere on the point that payments to auditors as well as TA/DA and hotel expenses were made as per the guidelines of RBI. The guidelines of RBI cannot absolve the assessee from deduction of tax at source u/s 194J of the IT Act, 1961.
3. The Ld. CIT(A) has not rebutted the argument of the Assessing Officer regarding payment of Rs.3,63,228/- to layers. Payment made to layers for filing of IT Returns and representing before the Income Tax Authorities does not establish the financial position of the assessee and payments made to layers for appearing before the courts, on issues related with the grievance of the employees for non-promotion, increment, pension, appointment are not business related expenditure.
4. The Ld. CIT(A) has erred in law and fact in allowing deduction u/s.36(1)((vii) for bad debts and u/s. 36(1)(viia) for provision of bad debts, as those were not claimed in the specific way.
5. Reliance is placed on the ratio of the following judgments: a) Visara Trading Investment Pvt. Ltd Vs.ITO, Ward-9(2), Kolkata of 2009 A.Y 205-06 order dated 15.02.2012 “B” Bench, Kolkata b) CIT-II Vs. Jonsan Park Advertising & Marketing Pvt. Ltd. [2015] 56 taxman.com 286 (Delhi) c) Goetze (India) Ltd. Vs. CIT (2006) 204 CTR 182 (SC)
5. In view of the above facts, provision of law and ratio of judgements, substantial questions of law arises.
6. The appellant may please be allowed to add or alter the grounds of appeal, if any.” -708/Kol/2015 Assessment Years 2011-12 & 2012-13 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 3
5. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in giving direction to the Assessing Officer to verify the payments made to recovery agent.
6. Briefly, the facts of the case are that assessee is a regional rural bank and engaged business of banking. During the course of assessment proceedings, AO observed that assessee failed to deduct Tax at Source (for short TDS) on the amount of commission for ₹24,310/- u/s 194H of the Act. Therefore, the amount of commission expense of ₹24,310/- was disallowed and added to the total income of assessee.
7. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the commission was paid in small amount and it does not fall under the provision of Section 194H of the Act. Accordingly, LD. CIT(A) directed to the AO to verify the amount of commission by observing as under:- “… The assessee submitted that some of the TDS is not reflected in the TDS data of the department but have been paid by the assessee. The AO is directed to verify the contentions of the assessee regarding TDS and take action as per law.” The Revenue, being aggrieved, is in appeal before us.
8. Ld. AR before us submitted that the direction issued by Ld. CIT(A) is very specific and therefore it cannot be said that the matter has been restored back to the file of AO. He relied on the order of Ld. CIT(A).
We have heard the Ld. AR and perused the material available on record. At the outset we find that Ld. CIT(A) has given a very specific direction to check whether the amount of commission is subject to TDS under section 194H of the Act. Therefore, we conclude that the matter has not been restored back to the file of AO in contravention to the provision of Section 251 of the Assessment Years 2011-12 & 2012-13 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 4 Act as alleged by Revenue. Hence, this ground of Revenue’s appeal is dismissed.
Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by AO for ₹2,02,123/- on account of TA/DA and hotel expenses incurred by the auditor without deducting TDS u/s. 194-J of the Act.
The assessee in the year under consideration has claimed audit fees expense for an amount of ₹7,52,738/- only. Out of said amount, TDS was deducted on an amount of ₹5,50,675/- only. Thus, on rest of amount of ₹2,02,123/- was incurred without deducting the TDS.
11.1 Besides the violation of TDS provision the AO observed that assessee has incurred the expense of ₹2,02,123/- on the travelling as well as hotel expense for ₹1,04,393 & ₹97,730/- respectively. The AO was of the view that the above said expenses are in the nature of personal expenses and therefore it has no business connection of the assessee. Thus, AO disallowed the sum of ₹2,02,123/- and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that these expenses were incurred as per the guidelines of RBI for getting the account audited. All the expenses incurred by the assessee such as audit fees, TA/DA/Hotel expenses are incidental to the business. Ld. CIT(A) after hearing the contention of assessee deleted the addition made by the AO. The Revenue, being aggrieved, is in appeal before us.
We have heard rival Ld. AR and perused the material available on record. In the instant case the disallowance was made of the expenses incurred on TA/DA as well as hotel expense of the auditors. The AO was of the view that the expenses are personal in nature and therefore it has no Assessment Years 2011-12 & 2012-13 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 5 business nexus. However, Ld. CIT(A) held that these expenses were incurred as per the guidelines of RBI and accordingly, deleted the addition. There is no ambiguity that the assessee has to get its account audited compulsory by a qualified Chartered Accountant. Accordingly, assessee is liable to incur the cost by way of auditor’s fees, travelling expenses and hotel expenses of the said auditors as per the RBI guidelines. Therefore, we hold that these expenses have been incurred by the assessee in relation to its business. Therefore these expenses cannot be regarded as personal expenses of the auditors. Accordingly, we do not find any reason to interfere in the order of Ld. CIT(A). However, we note that the instant issue was raised before us for the disallowance on account of non-deduction of TDS. Therefore, same is not eligible for deduction as the assessee failed to deduct TDS. However, on perusal of record, we find that AO during the course of assessment proceedings has made the reference to the provision of TDS applicable on TA/DA and hotel expense incurred by assessee. But same was not disallowed on account of non-deduction of TDS but this was disallowed as impugned expenses are in nature of personal expenses. As the issue of non-deduction of TDS is not arising from the order of AO, therefore, we refrain ourselves from adjudicating the same. Hence, this ground of Revenue’s appeal is dismissed.
Next issue raised by Revenue is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for ₹3,63,228/- on account of payments to lawyers.
The assessee in the year under consideration has incurred the following expenses:- Sl.No. Name Address Amount 1 Mihir Banerjee Income tax return filing appearing 63,100 before IT Authorities 2 M/s Charu Sundar Basu Appearing before HC 1,76,235 3 Others 1,23,953 Assessment Years 2011-12 & 2012-13 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 6 The above expenses were treated by the AO as personal in nature. As per the AO the expenses incurred by the assessee were not related to the business of assessee. Accordingly, AO disallowed the same and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing that the payment was made to CA/Lawyers to safeguard the interest of assessee’s business as well as to ensure various compliance required under various Acts. Thus, these expenses cannot be regarded as personal in nature. The Revenue, being aggrieved, is in appeal before us.
Ld. AR for the assessee relied on the order of Ld. CIT(A) and he stated that the issue may be decided on merit.