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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Salem, dated 28.08.2014 and pertains to assessment year 2007-08.
The first issue arises for consideration is with regard to disallowance of `26,069/-.
Shri N.K. Srinivas Bharath, the Ld. representative for the assessee, submitted that the Assessing Officer made addition of `26,069/- which was paid as advance written off. The Ld. representative submitted that the assessee paid advance to various persons for supply of material / rendering service. Since the parties did not fulfil the requirement, the advance paid to the extent of `26,069/- was written off in the books of account. On a query from the Bench, who are the persons who received advance from the assessee and what were the materials supposed to be delivered by them? The Ld. representative submitted that he has no details.
We have heard Shri Shiva Srinivas, the Ld. Departmental Representative also. The Assessing Officer disallowed `26,069/- on the ground that the assessee could not produce any details with regard to advance paid. In the absence of any material evidence, the CIT(Appeals) also confirmed the order of the Assessing Officer.
Even before this Tribunal, the assessee could not produce any material with regard to details of the persons who received advance from the assessee and also nature of the service / goods to be supplied. In the absence of material, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
The next ground of appeal is with regard to disallowance of `2,50,000/- under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act').
6. Shri N.K. Srinivas Bharath, the Ld. representative for the assessee, submitted that the assessee paid a sum of `2,50,000/- towards legal fees to one Shri M.S. Krishnamurthy. However, no tax was deducted. Therefore, according to the Ld. representative, the Assessing Officer disallowed the entire amount of `2,50,000/-.
According to the Ld. representative, out of the payment of `2,50,000/-, `1,50,000- was incurred towards reimbursement of expenses. According to the Ld. representative, with regard to reimbursement of expenses, there cannot be any disallowance. With regard to a sum of `1,00,000/-, according to the Ld. representative, the addition made by the Assessing Officer is not justified.
We have heard Shri Shiva Srinivas, the Ld. Departmental Representative also. Admittedly, the assessee has paid a sum of `2,50,000/- to Shri M.S. Krishnamurthy towards legal fees without deducting any tax at source. The assessee claimed that out of the payment of `2,50,000/-, a sum of `1,50,000/- was paid towards reimbursement of expenditure. The CIT(Appeals), after going through the books of account, which was extracted at page 7 of the impugned order of the CIT(Appeals), found that the entire amount was paid to Shri M.S. Krishnamurthy directly. When the assessee paid the amount into the account of Shri M.S. Krishnamurthy directly, it cannot be said that what was paid to Shri M.S.
Krishnamurthy is only a reimbursement of expenditure. This Tribunal is of the considered opinion that the payment made to Shri M.S. Krishnamurthy is towards legal fees. Therefore, the assessee ought to have deducted tax either at the time of payment or giving credit into the books of account. Since such an exercise was not done by the assessee, the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
The next ground of appeal is with regard to setting off sale proceeds amounting to `7,20,119/- against the ECB loan repayable for which approval was said to be received from Reserve Bank of India.
9. Shri N.K. Srinivas Bharath, the Ld. representative for the assessee, submitted that the assessee claimed set off of `7,20,119/- against the ECB loan outside India. The Assessing Officer disallowed the claim of the assessee on the ground that the approval of RBI is awaited. According to the Ld. representative, now the RBI approval was obtained, therefore, the Ld. representative submitted that the matter may be remitted back for reconsideration.
We have heard Shri Shiva Srinivas, the Ld. Departmental Representative also. The Assessing Officer disallowed the claim of the assessee for approval of RBI which was awaited. In Form 56G filed before the Assessing Officer, it was stated that the amount was outstanding. Therefore, the CIT(Appeals) confirmed the order of the Assessing Officer. Now the assessee claims that the approval of RBI was obtained and the assessee also realized the amount subsequently. In view of the latest development, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the authorities below are set aside and the issue of adjustment of `7,20,119/- against ECB loan is remitted back to the Assessing Officer. The Assessing Officer shall reconsider the matter in the light of the material that may be produced by the assessee and thereafter decide the issue in accordance with law after giving a reasonable opportunity to the assessee.
The assessee has raised an additional ground with regard to addition of `3,84,699/-.
Shri N.K. Srinivas Bharath, the Ld. representative for the assessee, submitted that the Assessing Officer made an addition of `3,84,699/- on the ground that the same was not brought to India in convertible foreign exchange within a period of six months.
According to the Ld. representative, now the assessee has received back the money. Therefore, according to the Ld. representative, it has to be treated as turnover.
We have heard Shri Shiva Srinivas, the Ld. Departmental Representative also. The Ld. D.R. submitted that the actual receipt of money may be verified by the Assessing Officer.
We have considered the submissions on either side and perused the relevant material available on record. The Assessing Officer disallowed the claim of the assessee to the extent of `3,84,699/- on the ground that the same was not brought to India in convertible foreign exchange within a period of six months. Now the assessee claims that it has received the amount. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the authorities below are set aside and the addition of `3,84,699/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the matter in the light of the material that may be produced by the assessee and thereafter decide the issue in accordance with law after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced on 15th September, 2016 at Chennai.