DCIT, CIR-2, JALPAIGURI, JALPAIGURI vs. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK, COOCHBIHAR

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 ITA No.707/Kol/2015 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 ITA No.994(Kol) 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.”

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.

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

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.

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

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. 15. 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

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.

We have heard Ld. AR for the assessee and perused the material available on record. In the instant case, disallowances were made by AO treating the expenses incurred by assessee under the head lawyer’s fees as personal in nature. However, on perusal of the facts of the case, we find that these expenses were incurred by assessee in connection its business activities and therefore these expenses are eligible for deduction u/s 37(1) of the Act. In the light of above reasoning, we hold that the order of the Ld. CIT is correct and in accordance with law and no interference is called for. Consequently, Revenue’s ground is dismissed. 19. Last issue raised by Revenue in this appeal is that Ld. CIT(A) erred in giving direction to the AO to allow deduction u/s.36(1)(vii) for bad debt as well as u/s. 36(1)(viia) for the provision of bad debt after necessary verification. 20. At the outset, it was observed that above issue has already been decided by this Tribunal in Revenue’s appeal in ITA No.576/Kol/2015 for A.Y. 2010-11 wherein this matter was remitted back to the file of AO in terms of our