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30-10-2019, Forbes Technosys, Section 40(a)(ia), 194J, Tribunal Mumbai

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1 week 4 days ago #11273 by amit
Section - 40(a)(ia), 194J, 194A
Order Date - 30-10.2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - DCIT
Respondent - Forbes Technosys Ltd
Citation - 1119Taxpundit14
Appeal No. - ITA no.6374 /Mum./2017
Asstt. Year - 2013–14



This is an appeal by the Revenue against the order dated 04.08.2017 of learned Commissioner of Income Tax Appeals–2, Mumbai for the Assessment Year 2013–14. In ground no. 1 Revenue has challenged the deletion of disallowance of `. 27,50,000/– representing advances to employees towards travelling expenses.

2. Briefly the facts are, the assessee, a resident company, is engaged in the business of providing Information Technologies Enabled Services (ITES), trading and manufacturing of business automation machines etc. For the assessment year under consieration assessee filed its return of income 30.09.2013 declaring nil income after set off of brought forward losses. In course of assessment proceedings the Assessing Officer called upon the assessee to furnish details of various expenses debited to the profit & loss account. While verifying the details submitted by the assessee, he noticed that an amount of `. 27,50,000/– being provision made for travelling and conveyance expenses has been debited to profit & loss account on lump sum basis. Holding that provision made by the assessee is contingent in nature, the Assessing Officer disallowed the amount of `. 27,50,000/–. Assessee challenged the disallowance before learned Commissioner (Appeals). Ld. Being satisfied with the claim of assessee that the expenditure representing the provision made has crystallized during the year, learned Commissioner (Appeals) allowed assessee’s claim.

3. We have considered rival submissions and perused the material on record. Undisputedly, the Assessing Officer has disallowed the amount of `. 27,50,000/– on the reasoning that the expenditure has not crystallized during the year and the provision made is of contingent nature. Before learned Commissioner (Appeals), it was submitted by the assessee that the amount represents the advances availed by the employees towards travel and conveyance expenses during the year. However, the employees did not furnish the claim before the end of the year. It was submitted, as per the practice followed, the employees submit their claim with regard to travel and conveyance expenses within a period of 3 to 4 months of travel and settled their advances or claim reimbursement towards additional expenditure incurred by them. From the aforesaid facts, it appears that the amount in dispute was actually paid to the employees during
the year, though, the claims of the employees in respect of such expenditure were not received. However, that by itself does not make the provision for expenditure contingent in nature. The factual aspect of the issue was verified by ld. Commissioner (Appeals) and he has concluded that the expenditure has crystallized during the year. The Revenue has also not brought any material on record to show that any part of the aforesaid expenditure was claimed by the assessee in the succeeding assessment year. In view of the aforesaid, we do not find any infirmity in the decision of ld. Commissioner (Appeals) on the issue. Ground raised is dismissed.

4. In ground no. 2 to 6 the Revenue has challenged deletion of various disallowances made under section 40(a)(ia) in respect of the following expenditures debited to profit & loss account.

i. Payment of rent `. 68,71,902/–
ii. Payment of interest `. 15,00,000/–
iii. Payment of contract labour charges `. 1,97,34,88/–
iv. Payment for freight and forwarding charges `. 28,95,203/–
v. Payment of sales commission `. ……….

5. Briefly the facts are, during assessment proceedings the Assessing Officer called upon the assessee to furnish the details of various expenditure as well as tax deducted at source while making payment for such expenditure. After verifying the details furnished by the assessee he found that while making payment towards the aforesaid expenditures, the assessee has either not deducted tax at the appropriate ate or has not at all deducted tax at source. Alleging that the assessee could not furnish any valid explanation for short deduction/non deduction of tax at source, he disallowed the aforesaid payments by invoking the provision of section 40(a)(ia) of the Act. The assessee challenged the disallowances before learned Commissioner (Appeals). As regards disallowance of expenditure incurred towards payment of rent, learned Commissioner (Appeals) found that in respect of OPC Assets Solution Private Ltd., and Rent Works India Pvt. Ltd.,. The assessee has deducted tax at source at a lower rate on the

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