ITO (OSD), CHENNAI V. M/s. Richard Strauss Insurance Broking Pvt. Ltd., CHENNAI

ITA 1864/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58014 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A C JOSEPH JT
• Assessee Lawyers: R SIVARAMAN
• Keywords: Business expenditure; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER] I.T.A.NO.1864/MDS/2010 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER COMPANY CIRCLE V(4) CHENNAI VS M/S RICHARD STRAUSS INSURANCE BROKING PVT. LTD 157 GN CHETTY ROAD CHENNAI [PAN AABCR3352Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.C.JOSEPH, JT. CIT RESPONDENT BY : SHRI R. SIVARAMAN DATE OF HEARING : 07-03-2012 DATE OF PRONOUNCEMENT : 07-03-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENU E AGAINST THE ORDER DATED 13.08.2010 PASSED BY THE LD.CIT(A)-V, CHENNA I, AND RELATES TO ASSESSMENT YEAR 2007-08. 2. AT THE TIME OF HEARING, THE LD. A.R FOR THE ASS ESSEE FILED A COPY OF ORDER OF THE CHENNAI A BENCH OF THE TRIBU NAL IN ASSESSEES OWN CASE IN I.T.A.NO. 1258/MDS/2011 FOR ASSESSMENT YEAR 2008-09, DATED 23.12.2011 AND SUBMITTED THAT ALL THE ISSUES INVOLVED IN THE I.T.A.NO. 1864/MDS/10 :- 2 -: APPEAL OF THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID ORDER OF THE TRIBUNAL AND THEREFORE, THE APPEA L OF THE REVENUE, BY FOLLOWING THE SAID ORDER OF THE TRIBUNAL, SHOULD BE DISMISSED. 3. THE LD. DR ASKED FOR TIME TO GO THROUGH THE ORDER OF THE TRIBUNAL. THE LD. DR WAS GRANTED A DAYS TIME BY T HE BENCH. THE LD. DR, ON THE NEXT DAY OF HEARING SUBMITTED THAT THE I SSUES INVOLVED IN THE APPEAL ARE COVERED AGAINST THE REVENUE BY THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2008-09. 4. GROUND NOS. 2.1, 3.1, 4.1, 5.1 AND 7.1 OF THE REVEN UE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) IN DEL ETING THE DISALLOWANCE OF CONVEYANCE EXPENSES OF ` 2,45,060/-, ELECTRICITY EXPENSES OF ` 81,271/-, OFFICE EXPENSES OF ` 4,698/-, PRINTING AND STATIONERY EXPENSES OF ` 1,10,439/-, RENT, RATE AND TAXES OF ` 3,84,715/-, REPAIRS AND MAINTENANCE OF ` 1,65,386/-, TRAVELLING EXPENSES OF ` 4,68,818, BUSINESS PROMOTION EXPENSES OF ` 20,084/-,SECURITY CHARGES OF ` 14,000/-, TELEPHONE AND POSTAGE CHARGES OF ` 2,99,514/-, BUSINESS PROCESS OUTSOURCING EXPENDITURE OF ` 8,83,224/-, ADVERTISEMENT EXPENSES OF ` 3,45,303/-, PAYMENT OF ` 1,12,240/- MADE TO M/S ARCHIMAGE FOR CONSULTANCY FOR SITAPURA OFFIC E, AND STAFF WELFARE I.T.A.NO. 1864/MDS/10 :- 3 -: EXPENSES OF ` 78,866/-, WHICH WERE OVER AND ABOVE THE ASSESSE ES EXPENSES SHARE AGREEMENT WITH M/S STFC. 5. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE O F EXPENSES BY OBSERVING AS UNDER: CONVEYANCE: T HE ASSESSEE HAS AN AGREEMENT WITH STFC TOWARDS THE SHARING OF EXPENSES FOR ` 4,00,000/- FOR WHICH A DEBIT NOTE WAS RAISED ON 31.03.2007. THE ASSESSEE HAS CLAIMED A TOTAL AMOUNT OF ` 6,80,778/- UNDER WHICH ` I0842/- ONLY WAS INCURRED AT CHENNAI AND ` 24,876/- AS CAR HIRE CHARGES WAS INCURRED FOR THE DIRECTOR. THE BALANCE IS CLAIMS HA VE BEEN INCURRED IN WESTERN REGION. SINCE THERE EXISTS AN A GREEMENT ,AND THE DEBIT NOTE IS RAISED ONLY ON THE LAST DA TE OF THE FINANCIAL YEAR I.E., 31.03.2009, I DISALLOW THE CLA IM OF EXPENDITURE ` 2,45,060/- PERTAINING TO WESTERN REGION UNDER THIS HEAD. DISALLOWANCE UNDER THIS HEAD : ` 2,45,060/- ELECTRICITY CHARGES: THE TOTAL EXPENDITURE DEBITED IS AT ` 4,41,271/- OUT OF WHICH SHARING OF EXPENSES AS PER THE DEBIT NOTE UND ER THIS HEAD IS ` 3,60,000/-. THE ASSESSEE HAS CLAIMED ALLTHE EXPENSES INCURRED IN WESTERN REGION. FOR EXAMPLE, EB CHARGES TO KALEEM INTERNATIONAL JAIPUR FOR ` 20,200/-, EB PAID AT JALLANDAR FOR ` 9,470/-. (COPY OF VOUCHER ENCLOSED AS ANNEXURE II). I THEREFORE, DISALLOW THE CLAIM MADE OVER AND ABOVE THE AGREED VALUE 9I.E ` 81,271/-). DISALLOWANCE UNDER THIS HEAD : ` 81,271/- OFFICE EXPENSES (GENERAL EXPENSES): TOTAL DEBIT MADE UNDER THIS HEAD IS ` 4698/-. ALL THE EXPENSES INCURRED UNDER THIS HEAD BUT FOR ` 1127/- AND ` 300/- HAVE BEEN RAISED ONLY ON 31.03.2007 WHICH FO RM PART OF SUNDRY CREDITORS. THE ABOVE TWO EXPENSES HA VE ALSO I.T.A.NO. 1864/MDS/10 :- 4 -: BEEN INCURRED BY THE EMPLOYEES OF SHRIRAM OVERSEAS FINANCE LTD. HENCE I DISALLOW THE ENTIRE CLAIM OF G ENERAL EXPENSES AS NOT RELATED TO ASSESSEE'S BUSINESS. COP Y OF CLAIM IS APPENDED AS ANNEXURE ILL. DISALLOWANCE UNDER THIS HEAD : ` 4,698/- PRINTING AND STATIONERY: TOTAL AMOUNT DEBITED IN PROFIT AND LOSS ACCOURIT UN DER THIS HEAD IS ` 7,35,809/- THE ASSESSEE'S AGREEMENT WITH STFC UNDER THIS HEAD IS ` 6,00,000/-. THE EXPENSES INCURRED AT CHENNAI AMOUNTING TO ` 25,370/- IS ALLOWED AND THAT PERTAINING TO WESTERN REGION OVER AND ABOVE TH E AGREEMENT IS DISALLOWED. DISALLOWANCE UNDER THIS HEAD : ` 1,10,439/- RENT RATES AND TAXES: THE TOTAL AMOUNT DEBITED IN P&L IS ` 65,34,715/-. THE ASSESSEE'S SHARE UNDER THIS HEAD AS PER THE AGREEME NT IS ` 60,00,000/-. WITH REGARD TO WESTERN REGION, ONLY I N BHILWARA, THE ASSESSEE HAS ENTERED INTO RENTAL AGRE EMENT WITH SHRI DAYARAM AND HAS PAID ` 15,000/- AS ADVANCE. ON A PERUSAL OF THE BOOKS OF THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS NOT PAID ANY RENT FOR THAT PREMISES AP ART FROM THE ADVANCE PAID. IT IS ALSO PERTINENT TO MENTION THAT NONE OF THE RENTAL BILLS ARE RAISED IN THE NAME OF THE ASSESSEE COMPANY BUT THEY HAVE BEEN REIMBURSED BY THE ASSESSEE COMPANY BY CHEQUES THROU GH SOFL. COPY OF THE EXTRACT IS ENCLOSED AS ANNEXURE I LL. THE RENT PAID IN RESPECT OF CHENNAI OFFICE TO THE T UNE OF ` 90,000/- AND ` 60,000/- ALONE ARE ALLOWED AND THE BALANCE OVER AND ABOVE THE AGREEMENT IS DISALLOWED AND BROUGHT TO TAX AS DOUBLE CLAIM MADE. ( ` 65,34,715 - (60,00,000+ 90,000+60,000 = ` 3,84,715) DISALLOWANCE UNDER THIS HEAD : ` 3,84,715/- I.T.A.NO. 1864/MDS/10 :- 5 -: REPAIRS AND MAINTENANCE: TOTAL AMOUNT DEBITED IN P&L IS ` 6,54,116/-. THE ENTIRE EXPENSES CLAIMED BUT FOR THE PEST CONTROL EX PENSES AT CHENNAI OF ` 8730/- HAVE BEEN INCURRED IN THE WESTERN REGION AND ALL THE BILLS AND VOUCHERS ARE RAISED IN THE NAME OF SHRIRAM GROUP OF COMPANIES AND ITS SISTER CONCER NS. WHEN THE EXPENSES AGREEMENT FOR ` 4,80,000/- WITH STFC EXISTS UNDER THIS HEAD, THE REIMBURSEMENT OF THE AS SESSEE COMPANY TO SHRIRAM GROUP WHEN NO BILL IS RAISED IN ITS NAME TANTAMOUNT TO DOUBLE CLAIM AND I THEREFORE DIS ALLOW THE ADDITIONAL CLAIM MADE BY THE ASSESSEE COMPANY O VER AND ABOVE THE AGREEMENT. TOTAL CLAIM ` 6,54,116 LESS: AGREEMENT - ` 4,80,000/- PEST CONTROL- ` 8,730/- --------------- - ` 4,88,730 DISALLOWED ` 1,65,386 DISALLOWANCE UNDER THIS HEAD : ` 1,65,386/- SECURITY CHARGES: TOTAL CLAIM MADE UNDER THIS HEAD IS ` 14,000/-. THE BILL HAS BEEN RAISED ON SHRIRAM FINANCE, JAIPUR HENCE DISALLOWED (ANNEXURE V) DISALLOWANCE UNDER THIS HEAD : ` 14,000/- BUSINESS PROMOTION EXPENSES: THE ASSESSEE COMPANY HAS CLAIMED AN AMOUNT OF ` 3,20,084/- UNDER THE HEAD BUSINESS PROMOTION EXPENSES WHICH INCLUDES THE AGREED EXPENSE OF RS.3,00,0001- (AS PER DEBIT NOTE) WITH STFC. IT IS SEEN FROM THE RECORDS THAT THE EXPENDITURE CLAIMED OVER AND ABOVE THE BUSINESS PROMOTION AGREEMENT, HAS ACTUALLY BEEN INCURRED BY THE PEOPLE OF SHRIRAM GROUP OF COMPANIES WHICH HAS BEEN REIMBURSED BY THE ASSESSEE COMPANY. WHEN THERE EXISTS AN AGREEMENT WITH STFC FOR THE SHARING OF EXPENSES, I FIND NO REASON TO ALLOW THE CLAIM OF THE ASSESSEE OVER A ND ABOVE THE AGREEMENT VALUE. THE SUPPORTING VOUCHERS ARE ALSO RAISED IN THE NAME OF SHRIRAM GROUP OF I.T.A.NO. 1864/MDS/10 :- 6 -: COMPANIES AND RSIB HAS NO ROLE TO PLAY. THE DEBIT N OTE RAISED WAS ON THE LAST DATE OF THE FINANCIAL YEAR I .E., 31.03.2007 WHICH SHOULD HAVE INCLUDED ALL THE EXPEN SES INCURRED BY STFC ON BEHALF OF RSIB. I THEREFORE DIS ALLOW THE CLAIM OF THE ASSESSEE OVER AND ABOVE THE EXPEN SES CLAIMED AS PER AGREEMENT. DISALLOWANCE UNDER THIS HEAD: ` 20,084/- TELEPHONE AND POSTAGE CHARGES: TOTAL AMOUNT DEBITED UNDER THIS HEAD IN P&L IS ` 5,73,514/-. THE ASSESSEE'S AGREEMENT ON SHARING OF EXPENSES WITH STFC UNDER THIS HEAD IS FOR ` 2,64,000/-. THE EXPENSES INCURRED AT CHENNAI IS ` 5000/-. EXPENSES CLAIMED UPTO 30.03.2007 IS ` 61,772/- AND BOOKED AS SUNDRY CREDITORS ON 31.03.2007 IS TO THE TUNE OF ` 2,42,742/-. ALL THE VOUCHERS ARE ALSO IN THE NAME OF SHRIRAM GROUP OF COMPANIES AND ITS SISTER COMPANIES . THE ABOVE FACTS GO TO PROVE BEYOND DOUBT THAT THE ASSESSEE COMPANY HAS MERELY MADE ACCOMMODATION ENTRIES IN ITS BOOKS OF ACCOUNTS FOR EVASION OF TAX . I THEREFORE RESTRICT THE CLAIM TO THAT OF THE AGREEME NT FIGURE AND EXPENSES INCURRED AT CHENNAI FOR ` 5000/-- AND THE BALANCE IS DISALLOWED AS NOT PERTAINED TO THE ASSES SEE COMPANY. [ ` 5,73,514 - (264000+ 5000) = ` 2,99,514/-]. DISALLOWANCE UNDER THIS HEAD : ` 3,03,559/- TRAVELLING EXPENSES: THE ASSESSEE'S AGREEMENT WITH STFC UNDER THIS HEAD IS ` 8,00,000/- AND THE ASSESSEE HAS MADE A CLAIM OF ` 12,68,818/- IN P&:Y. THE VOUCHERS AND BILLS CLAIMED ARE NOT RAISED IN THE NAME OF RSIB AND HAVE BEEN INCURR ED IN WESTERN REGION FOR WHICH THE AGREEMENT EXISTS. I TH EREFORE DISALLOW THE DUPLICATION OF CLAIM MADE OVER AND ABO VE THE AGREEMENT TO THE TUNE OF ` 4,68,818/- DISALLOWANCE UNDER THIS HEAD : ` 4,68,818/- I.T.A.NO. 1864/MDS/10 :- 7 -: ADVERTISING: THE ASSESSEE COMPANY HAS CLAIMED AN AMOUNT OF ` 3,45,303/- UNDER THE HEAD ADVERTISING. ON A PERUSAL OF RECORDS, IT IS SEEN THAT THE ADVERTISEMENTS WERE AC TUALLY FOR RECRUITMENT FOR SHRIRAM GROUP OF COMPANIES AND NOT FOR RSIB. COPIES OF ADVERTISEMENT S VIZ., TO M/S.RR ADVERTISERS AND ARORA PUBLICITY AND COMPUTERS ARE PLACED AS ANNEXURE I, GO TO PROVE THAT THE RECRUITMENTS WERE MADE FOR SHRIRAM GROUP F OR COMPANIES AT VARIOUS PLACES. THE BILLS WERE ALSO RA ISED ONLY IN THE NAME OF SHRIRAM GROUP OF COMPANIES. I THEREFORE DISALLOW THE CLAIM MADE AS NOT RELATED TO THE ASSESSEE COMPANY. DISALLOWANCE UNDER THIS HEAD ` 3,45,303/- CONSULTANCY CHARGES (A) THE ASSESSEE COMPANY HAS CLAIMED AN AMOUNT OF ` 74,02,625/- AS CONSULTANCY CHARGES VIZ., BROKERAGE/ COMMISSION PAID TO VARIOUS PEOPLE MOST OF THEM BELONGING TO THE WESTERN REGION IE., JAIPUR. UNDER THIS HEAD, THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 75,000/- FOR INSTALLATION OF A/C AT SITAPURA OFFICE WHICH HAS NO SUPPORTING VOUCHER. THE ASSESSEE WHILE EXPLAINING THE NATURE OF WORK DONE BY ARCHIMAGE FOR THE PAYMENT MADE TO THEM TO THE TUNE OF ` 1,12,240/-, STATED THAT THIS WAS PAYMENT MADE FOR INTERIOR DESIGN CONSULTANCY AT SITAPUR BUT NO OFFICE COULD BE OPENE D AS THE PLACE WAS NOT SUITABLE FOR THEM. HOWEVER, IT IS ASCERTAINED THAT THERE EXISTS AN OFFICE OF SHRIRAM GROUP OF COMPANIES IN THE SAID PREMISE. WHEN NO OFFICE IS OPENED AT SITAPURA, WHY SHOULD PURCHASE O F A/C BE MADE? THE FIXED ASSETS OF THE ASSESSEE ALSO SHOW S NO MENTION OF AIR CONDITIONERS OTHER THAN AT CHENNA I. THE PAYMENT MADE TO ARCHIMAGE TO THE TUNE OF ` 1, 12,240/- FOR WHICH NO SATISFACTORY EXPLANATION COULD BE GIVEN BY THE ASSESSEE IS ALSO DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. DISALLOWANCE UNDER THIS HEAD: ` 1,12,240/-+ ` 75,000 = ` 1,87,240/- I.T.A.NO. 1864/MDS/10 :- 8 -: STAFF WELFARE THE ASSESSEE'S CLAIM OF ` 79,866/- UNDER THIS HEAD HAS NO SUPPORTING VOUCHERS IN ITS NAME. OUT OF THE ABOV E TOTAL CLAIM, ONLY ` 25,354/- WAS INCURRED UPTO 30.03.2007 AND THE BALANCE OF ` 54,512/- HAVE BEEN BOOKED ON 31.03.2007 AS SUNDRY CREDITORS .. IT IS NOTICED THA T THE MANY OF THE VOUCHERS ARE CASH VOUCHERS FOR WHICH EVIDENCE WAS NOT FURNISHED. THE ASSESSEE'S DY.MANAG ER ACCOUNTS EXPRESSED HIS INABILITY TO PRODUCE CASH VOUCHERS. THIS PROVES THE ACCOUNTS OF THE ASSESSEE ARE NOT IN ORDER AND THEREFORE, I DISALLOW THE ENTIRE E XPENSES UNDER THIS HEAD. DISALLOWANCE UNDER THIS HEAD : ` 79,866/- 6. ON APPEAL, THE LD.CIT(A) HAS DELETED THE DISALLO WANCE OF THE EXPENSES CLAIMED BY THE ASSESSEE BY OBSERVING AS U NDER: 11. DISALLOWANCE OF CONVEYANCE ` 2,45,060 (ITEM NO.V OF STATEMENT OF FACTS) : THE CONVEYANCE CHARGES WERE INCURRED BY THE APPELLA NT COMPANY ONLY FOR THE PURPOSE OF INDEPENDENT BUSINES S AS EXPLAINED ABOVE AND IT IS NOT INCURRED FOR THE WES TERN REGION ALONE. THE PAYMENTS WERE MADE BY CHEQUES ONLY AND CHEQUES WERE ISSUED BY THE APPELLANT COMPANY ONLY. THEREFORE, THE CONVEYANCE CHARGES OF ` 2,45,060 DISALLOWED BY THE LEARNED AO IS ALLOWABLE. 12. DISALLOWANCE OF ELECTRICITY CHARGES- ` 81271(ITEM NO.VI OF STATEMENT OF FACTS): THE ELECTRICITY CHARGES WERE INCURRED BY OUR COMPAN Y ONLY AND FOR THE PURPOSE OF BUSINESS OF OUR COMPANY AND IT IS NOT INCURRED FOR THE WESTERN REGION. THE PAYMENTS WERE MADE BY CHEQUES ONLY AND CHEQUES WERE ISSUED BY THE APPELLA NT COMPANY ONLY. THE EXPENSES OF ` 81,271 WAS INCURRED FOR THE BUSINESS DONE IN THE STATE OF RAJASTHAN INDEPE NDENT OF THE BUSINESS COVERED BY THE COST SHARING AGREEMENT AS EXPLAINED ALREADY. THESE EXPENSES WERE NOTHING TO DO WITH THE EXPENSES REIMBURSED TO STFC. THEREFORE, THE EL ECTRICITY I.T.A.NO. 1864/MDS/10 :- 9 -: CHARGES OF ` 81,271 DISALLOWED BY THE LEARNED AO IS ALLOWABLE. 13. DISALLOWANCE OF OFFICE EXPENSES(GENERAL)-RS.4,698(I TEM NO.VIII OF OF STATEMENT OF FACTS) : THE APPELLANT COMPANY MADE A _PROVISION OF ` 4,698/- ON THE BASIS OF THE STATEMENT RECEIVED FROM EMPLOYEES OF THE SHRIRAM OVERSEAS FINANCE LTD FOR THE EXPENSES INCUR RED BY THEM FOR THE PURPOSE OF BUSINESS OF THE APPELLAN T COMPANY AND THE PAYMENTS TO THE TUNE OF ` 3271 WAS PAID BY WAY OF CHEQUES OF THE APPELLANT COMPANY IN APRIL 2007. TH E BALANCE AMOUNT OF ` 1,427 WAS PAID IN THE MONTH OF FEB/MARCH 2007.AS THESE EXPENSES WERE INCURRED FOR THE BUSIN ESS OF APPELLANT COMPANY THE SAME WAS PAID AND ACCOUNTED. HENCE, THEY ARE ALLOWABLE. 14. DISALLOWANCE OF PRINTING &STATIONERY- ` 1,10,439(ITEM NO.X OF STATEMENT OF FACTS) :. THE EXPENSES OF ` 1,10,439 DISALLOWED UNDER THIS HEAD WERE INCURRED FOR PRINTING OF LETTER HEADS, VOUCHERS, V ISITING CARDS, RUBBER STAMPS, PURCHASE OF STATIONERY ITEMS OF THE COMPANY. THESE ARE ALL NORMAL EXPENSES WITHOUT WHIC H ANYBODY, MORE SO A COMPANY, CAN NOT DO BUSINESS. T HE PAYMENTS WERE MADE BY CHEQUES ONLY AND CHEQUES WER E ISSUED BY THE APPELLANT COMPANY FOR THE PURPOSE OF THEIR BUSINESS ONLY. 15. DISALLOWANCE OF RENT, RATES AND TAXES - ` 3,84,715 (ITEM NO. XI OF STATEMENT OF FACTS) : THE EXPENSES OF ` 3,84,715 DISALLOWED UNDER THIS HEAD REPRESENTS RENT PAID BY WAY OF CHEQUES OF THE APPE LLANT COMPANY DRAWN IN FAVOUR OF THE OWNER OF THE PREMISE S AT VARIOUS PLACES NOT COVERED BY REIMBURSEMENT AGREEME NT. THE EXPENSES WERE PAID BY CHEQUES TO THE OWNERS OF THE PROPERTIES, WHERE STAFF OF OTHER COMPANIES WHOSE SERVICES WERE UTILISED BY US. HENCE, THE BILLS ARE NOT IN TH E NAME OF THE COMPANY. THE PAYMENTS ARE BY CHEQUES AND PAYEES AR E VERIFIABLE INCLUDING JAIPUR, BANGALORE, HYDERABAD, JALANDAR , KANPUR, VARANASI ,ALLAHABAD, LUCKNOW AHMEDABAD, I.T.A.NO. 1864/MDS/10 :- 10 -: DEHRADUN ETC. FOR THEIR BUSINESS PURPOSES WHICH ARE COVERED BY THE BPO AGREEMENT WITH STFC AND THESE ARE DIFFER ENT FROM CORRESPONDING EXPENSES IN TO AGREEMENT WITH STFC. THEREFORE THE RENTAL CHARGES OF ` 3,84,715 DISALLOWED BY THE LEARNED AO IS ALLOWABLE. 16. DISALLOWANCE OF REPAIRS & MAINTENANCE ` 1,65,386 (ITEM NO.XII OF STATEMENT OF FACTS) : THE APPELLANT COMPANY INCURRED THE FOLLOWING TOWARD S REPAIRS & MAINTENANCE EXPENSES IN RESPECT OF VEHICLES, BUILDING, SECURITY CHARGES, COMPUTER MAINTENANCE, G ENSET HIRING CHARGES AND OTHER OFFICE MAINTENANCE LIKE W AGES FOR SERVANT MAID, CLEANING MATERIALS ETC. THIS HAS BEE N DISALLOWED ON THE GROUND THAT THE BILLS ARE NOT IN THE NAME OF THE APPELLANT AND IT TANTAMOUNT TO DOUBLE CLAIM WHE N CONSIDERING THE EXPENSE SHARING AGREEMENT WITH STFC . IT WAS SUBMITTED THAT THESE EXPENSES INCURRED BY THE APPEL LANT COMPANY FOR BUSINESS DONE INDEPENDENTLY FROM THE CO ST SHARING AGREEMENT AS ALREADY EXPLAINED AND IT HAS NOTHING TO DO WITH EXPENSE SHARING AGREEMENT WITH STFC. THE PA YMENTS WERE MADE BY CHEQUES ONLY AND CHEQUES WERE ISSUED B Y THE APPELLANT COMPANY FOR THE PURPOSE OF THEIR BUSINES S ONLY. THEREFORE, THESE EXPENSES ARE ALLOWABLE. 17. DISALLOWANCE OF TRAVELING EXPENSES ` 4,68,818 (ITEM NO. XVIII OF STATEMENT OF FACTS) : THE TRAVELING EXPENSES WERE INCURRED BY THE APPELLA NT COMPANY ONLY AND FOR THE PURPOSE OF BUSINESS OF THEIR COMPANY AT VARIOUS PLACES IN INDIA. THE PAYMENTS WE RE MADE BY CHEQUES ONLY AND CHEQUES WERE ISSUED BY THE APPELLANT COMPANY ONLY. THEREFORE, THE TRAVELING E XPENSES OF ` 2,45,060 DISALLOWED BY THE LEARNED AO IS ALLOWABLE . 18. DISALLOWANCE OF BUSINESS PROMOTION EXPENSES PAID TO OTHERS - ` 20,084 : THE PAYMENTS WERE MADE TO MR.GUJARAL ` 19,159 AND TO MR.IMMANWEL ` .925 TOWARDS TRAVELING AND MEETING EXPENSES UNDERTAKEN BY THEM FOR THE BUSINESS OF THE APPELLA NT COMPANY. THE PAYMENTS WERE MADE BY CHEQUES ONLY AND - I.T.A.NO. 1864/MDS/10 :- 11 -: CHEQUES WERE ISSUED 'BY THE APPELLANT COMPANY ONLY . THEREFORE, THE ABOVE EXPENSES ARE ALL ALLOWABLE AN D ADDITIONS MADE BY THE LEARNED AO ARE LIABLE TO BE DELETED. 19. DISALLOWANCE OF ADVERTISEMENT EXPENSES AS NOT RELATED TO THE APPELLANT COMPANY AND BILLS WERE ALSO RAISED IN THE NAME OF SHRIRAM GROUP OF COMPANIES- ` 3,45,303 : THE APPELLANT COMPANY ENTERED INTO THE BUSINESS OF INSURANCE BROKING JUST TWO YEARS BACK AND THEY WERE NOT FAMIL IAR WITH THE PUBLIC AND IF THE APPELLANT ISSUED ADVERTISEMENT F OR RECRUITING PEOPLE IN THEIR OWN NAME, IT WOULD NOT ATTRACT TALE NTED PEOPLE. AS THE APPELLANT IS BACKED BY SHRIRAM GROUP, WHICH GROUP IS VERY WELL KNOWN IN THE PUBLIC EYES, IT WAS THOUGHT THAT IT WILL ATTRACT THE BEST TALENT IN THE INDUSTRY, SO THAT TH EY CAN DO THE BUSINESS ON THEIR OWN IN FUTURE INSTEAD OF DEPENDIN G ON OTHERS. HENCE THE ADVERTISEMENTS WERE ISSUED IN THE NAME OF SHRIRAM GROUP COMPANIES. COPIES OF THE ADVERTISEMENTS WERE ALSO FILED WITH THE LEARNED AO WHICH SHE HAS ENCLOSED IT AS ANNEXURE I TO THE ASSESSMENT ORDER. THE COPIES OF T HE ADVERTISEMENTS ANNEXED TO THE ORDER BY THE AO HERSE LF SHOWS THAT THE ADVERTISEMENT IS ISSUED FOR THE SPECIFIC P URPOSE FOR RECRUITING PEOPLE FOR 'GENERAL INSURANCE' WHICH IS THE BUSINESS THE APPELLANT IS ENGAGED IN. THE PAYMENTS WERE MADE BY CHEQUES ONLY AND CHEQUES WERE ISSUED BY T HE APPELLANT COMPANY ONLY. HENCE THE ADVERTISEMENT EXP ENSES INCURRED BY THE APPELLANT COMPANY FOR ITS BUSINESS PURPOSES ARE ALLOWABLE AND NO PART OF IT IS DISALLOWABLE. 25. DISALLOWANCE OF SECURITY CHARGES ` 14,000 : THE LEARNED AO HAS DISALLOWED THE EXPENSES ON THE G ROUND THAT THE BILL IS IN THE NAME OF SHRIRAM FINANCE, JAIPUR. AS THE EXPENSES INCURRED FOR THE PURPOSES OF THE APPELLANT 'S COMPANY BUSINESS THEY MADE THE PAYMENT BY WAY OF THEIR CHEQ UE AND HENCE ALLOWABLE. 28. DISALLOWANCE UNDER THE HEAD TELEPHONE & POSTAGE CHARGES AS NOT PERTAINED TO THE APPELLANT COMPANY SINCE THE VOUCHERS ARE IN THE NAME OF SHRIRAM GROUP COMPA NIES- ` 2,99,514. I.T.A.NO. 1864/MDS/10 :- 12 -: THE APPELLANT COMPANY UTILIZED THE SERVICES OF THE SHRIRAM GROUP COMPANIES AND ITS SISTER COMPANIES TO MARKET THEIR SERVICES AND THEY HAD INCURRED THE EXPENSES VIZ TELEPHONE/CELL PHONE/POSTAGE AND COURIER INITIALLY AND GET THE SAME REIMBURSED FROM THE COMPANY AFTERWARDS. THE S UM OF ` 2,42,742/- REFERRED TO BY THE LEARNED AO REPRESENT S EXPENSES OF TELEPHONE/CELL PHONE/POSTAGE/COURIER RELATING TO MARCH 2007 AND CLAIMED BY THE THEM SUBSEQUENTLY ONLY. HEN CE THE APPELLANT MADE A PROVISION ON 31.03.2007 AS THE AC COUNTS ARE TO BE CLOSED ON 31 ST MARCH 2007 AND MADE THE PAYMENTS BY WAY OF THEIR OWN CHEQUES DURING APRIL 2007.AS THE A MOUNT; WERE INCURRED FOR THE PURPOSE OF BUSINESS OF THE C OMPANY THEY ARE ALLOWABLE. 29. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE DETAILED SUBMISSIONS MADE BY THE APPELLANT COMPANY . THE REASONS ADVOCATED BY THE LEARNED AO FOR THE MOST OF THE ADDITIONS MADE IN THE ASSESSMENT ARE: 1) EXCESS CLAIM OVER AND ABOVE THE AMOUNT AS PER AG REEMENT ENTERED INTO WITH SHRIRAM TRANSPORT FINANCE COMPANY LTD. 2) VOUCHERS/BILLS ARE IN THE NAME OF SHRIRAM GROUP COMPANIES AND ITS SISTER CONCERNS AND NOT IN THE N AME OF THE APPELLANT COMPANY. 3) AMOUNTS WERE INCURRED BY THE EMPLOYEES OF SHRIRA M GROUP COMPANIES AND CLAIMED IN THE HANDS OF THE APPELLANT COMPANY. 30. IN REPLY TO THE ABOVE OBSERVATIONS/ THE APPE LLANT COMPANY HAD MADE DETAILED SUBMISSIONS WHICH HAVE BEEN FURN ISHED IN THE EARLIER PART OF THIS ORDER. 31. THE MAIN POINT TO BE CONSIDERED IS WHETHER TH E EXPENSES ARE GENUINE AND INCURRED FOR THE BUSINESS OF THE A PPELLANT COMPANY. FROM THE DETAILS FURNISHED AND ACCEPTED B Y THE ASSESSING OFFICER IT IS SEEN THAT ALL THE EXPENSES ARE GENUINE AND HAVE BEEN MADE BY CHEQUES. THE MAJOR GROUND O N WHICH THE ASSESSING OFFICER HAS DISALLOWED THE PAYMENTS IS THAT THEY ARE IN ADDITION TO THE EXPENSES WHICH ARE COVERED BY THE EXPENSES RE-IMBURSEMENT AGREEMENT WITH STFC. AS POINTED BY THE APPELLANT'S REPRESENTATIVE THIS AGR EEMENT DOES I.T.A.NO. 1864/MDS/10 :- 13 -: NOT PROHIBIT THE APPELLANT DOING BUSINESS SEPARATEL Y BY ITSELF OR THROUGH OTHERS IN ADDITION :0 DOING BUSINESS THRO' STFC THE AGREEMENT COVERS ONLY RE-IMBURSEMENT OF EXPENSES R ELATING TO BUSINESS DONE THRO' STFC HOWEVER IT IS SEEN FROM T HE EVIDENCE ADDUCED THAT THE APPELLANT HAS DONE BUSINE SS THRO' OTHER SHRIRAM GROUP COMPANIES AND AGENCIES AND INDEPENDENTLY BY ITSELF ALSO. AS THE APPELLANT HAS EARNED INCOME FROM BUSINESS THRC' THESE SOURCES ALSO, IT C OULD NOT HAVE EARNED THE SAME WITHOUT INCURRING EXPENSES SEPARATE LY FROM THAT COVERED BY EXPENSES SHARING AGREEMENT WITH ST FC HENCE, SUCH EXPENSES CANNOT BE CONSIDERED AS DOUBLE CLAIM AS MENTIONED BY THE ASSESSING OFFICER. FURTHER ALL THESE PAYMENTS ARE BY CHEQUES AND THE ASSESSING OFFICER HAS NOWHERE DOUBTED THE GENUINENESS OF THE PAYMENTS. TH E ASSESSING OFFICER HAS ALSO NOT MADE ANY INDEPENDENT ENQUIRES TO BRING OUT THE CHARGE THAT IT IS A DOUBLE CLAIM. THE APPELLANT HAS MADE PROVISION FOR SUM OF THE EXPENSES RELATIN G TO MARCH 2007 ON 31 ST MARCH 2007 AND HAS PAID THEM IN APRIL 2007 THRO' CHEQUES. IN THESE CIRCUMSTANCES THERE IS NO MATERIA L TO SUSPECT THAT THE PAYMENTS HAVE NOT BEEN INCURRED FOR THE A PPELLANT'S BUSINESS OR TO SUSPECT THEIR GENUINENESS OR TO HOLD THAT THEY ARE DOUBLE CLAIMS. 32. I, THEREFORE, ACCEPT THE EXPLANATION OF THE AP PELLANTS REPRESENTATIVE AND DELETE THE ADDITIONS MADE UNDER THE FOLLOWING HEADS: CONVEYANCE (SL.NO.6 OF THE ASSESSMENT ORDER 2,45,06 0 ELECTRICITY CHARGES (SL NO.7 OF THE ASSESSMENT ORDER) 81,271 OFFICE EXPENSES (GENERAL) (SL.NO. 8 OF THE ASSESSMENT ORDER) 4,698 PRINTING & STATIONERY (SL NO.10 OF THE ASSESSMENT ORDER) 1,10,439 RENT, RATES AND TAXES (SL NO.11 OF THE ASSESSMENT ORDER) 3,84,715 REPAIRS & MAINTENANCE(SL NO.12 OF THE ASSESSMENT ORDER) 1,65,386 TRAVELLING EXPENSES (SL NO.18 OF THE ASSESSMENT ORDER) 4,68,818 BUSINESS PROMOTION EXPENSES (SL NO.3 OF THE ASSESSMENT ORDER) 20,084 ADVERTISING EXPENSES (SL NO.1 OF THE ASSESSMENT ORDER) 3,45,303 I.T.A.NO. 1864/MDS/10 :- 14 -: SECURITY CHARGES (SL NO.13 OF THE ASSESSMENT ORDER) 14,000 BUSINESS PROCESS OUTSOURCING (SL NO.3 OF THE ASSESSMENT ORDER) 8,83,224 33. ON PERUSAL OF THE ASSESSMENT ORDER IT IS SEEN T HAT THE LEARNED AO HAS CONCLUDED THAT AS SHRIRAM CITY UNIO N FINANCE LTD AND SHRIRAM FORTUNE SOLUTIONS LTD ARE SISTER CO MPANIES OF THE SHRIRAM GROUP AND THERE IS NO MENTION IN THE SW ORN STATEMENT ABOUT THESE TWO COMPANIES THE PAYMENTS AR E MERE ACCOMMODATION ENTRIES. NON-MENTIONING THE EXISTENC E OF AGREEMENT IN THE SWORN STATEMENT ALONE CANNOT BE A SUFFICIENT REASON TO COME TO THE CONCLUSION THAT THEY ARE NOT GENUINE EXPENSES OR ACCOMMODATION ENTRIES. THE ASSESSING O FFICER HAS NOT BROUGHT IN ANY OTHER MATERIAL TO SUPPORT HER CONCLUSION. FURTHER IT IS FOUND THAT THESE TWO COMPANIES ARE AS SESSED TO TAX AND HAVE FURNISHED CONFIRMATION LETTERS REGARDING P ROVIDING OF SERVICES BY THEM AND AMOUNT CHARGED BY THEM FOR THE IR SERVICES. THIS HAS BEEN ACCEPTED BY THE AO IN PAGE 5 OF THE ASSESSMENT ORDER. WHEN SUCH IS THE POSITION, THE L EARNED AOS CONCLUSION THAT THESE ARE MERE ACCOMMODATION ENTRIE S IS NOT BASED ON ANY MATERIAL EXCEPT SUSPICION. I, THEREFO RE, DELETE THIS ADDITION OF ` 8,83,224/-. 34.1 ITEM NO.4- INSTALLATION OF A/C- ` 75,000 AND PAYMENT TO ARCHIMAGE- ` 1,12,240: 34.2 WITH REGARD TO THIS ITEM OF PAYMENT OF ` 75,000 THE AR HAS NOT FURNISHED ANY CONVINCING REASON BEFORE THE UNDERSIGNED ALSO AND HENCE I CONFIRM THE ORDER OF THE LEARNED AO IN DISALLOWING THIS AMOUNT OF ` 75,000. 34.3 IN RESPECT OF THE OTHER ITEM OF ` 1,12,240/- I AGREE WITH THE CONTENTIONS OF THE AR THAT THIS IS AN ALLOWABLE EX PENDITURE AS THE SAME WAS INCURRED FOR THE LOCATION OF THE OFFIC E WHICH COULD NOT DONE ON ACCOUNT OF OTHER REASONS. I THEREFORE DELETE THE ADDITION OF ` 1,12,240. 37. DISALLOWANCE OF ENTIRE STAFF WELFARE EXPENSES A S NO CASH VOUCHERS WERE PRODUCED AND ` 54,512 OUT OF ` 79,866/- WAS BOOKED ON 31.3.2007 ` 79,866/-: I.T.A.NO. 1864/MDS/10 :- 15 -: THE LEARNED AR ARGUED THAT THESE EXPENSES RELATE TO TEA, COFFEE, LUNCH EXPENSES INCURRED FOR ITS STAFF AND OTHER PEOPLE WHO ARE ENGAGED IN ITS BUSINESS OF THE COMPANY. WIT H REGARD TO AO OBSERVATION THAT ` 54,512 WAS BOOKED ON 31 ST MARCH 2007 ONLY IT IS CONTENDED BY THE LEARNED AR IT REP RESENTS AMOUNTS INCURRED DURING THE MONTH OF MARCH 2007 FOR WHICH PAYMENTS WERE MADE IN APRIL 2007. WITH REGARD TO AO 'S OBSERVATION THAT NO EVIDENCE WAS FURNISHED FOR CASH VOUCHERS, I AGREE WITH APPELLANT'S REPRESENTATIVE ARGUMENTS THAT THESE ARE ALL SMALL PAYMENTS, FOR WHICH WE CAN'T EXPECT. EVIDENCES IN THE SHAPE OF BILLS. I AGREE WITH THE CONTENTIONS OF THE LEARNED AR AND ACCORDINGLY I DELETE THE ADDITION OF ` 79,866/- MADE BY THE LEARNED AO. 7. WE FIND THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE ASSESSEE ITSELF IN ASSESSMENT YEAR 2008-09, VIDE OR DER DATED 23.12.2011, IN I.T.A.NO. 1258/MDS/2011, THE TRIBUNA L CONFIRMED THE ORDER OF THE LD.CIT(A) BY DELETING THE DISALLOWANC E OF THE EXPENSES. WHILE DOING SO, THE TRIBUNAL HAS HELD AS UNDER: 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILA BLE ON RECORD, WE FIND THAT THE ONLY REASON FOR MAKING THE DISALLOWANCE BY THE ASSESSING OFFICER IS THAT THE E XPENSE VOUCHERS ARE NOT IN THE NAME OF THE ASSESSEE COMPAN Y AND THEREFORE, THEY ARE NOT INCURRED FOR THE BUSINESS O F THE ASSESSEE COMPANY. THE ASSESSEE HAS EXPLAINED THAT T HE SHRIRAM GROUP OF COMPANIES ARE A WELL KNOWN COMPANY IN THE MARKET AND THEREFORE, THE ADVERTISEMENT AND OTH ER EXPENSES WERE INCURRED IN THE NAME OF THE SAID COMP ANY SO AS TO ATTRACT GOOD TALENTS AND ALSO TO GET GOOD BUSINESS. THIS EXPLANATION OF THE ASSESSEE WAS NOT CONTROVERT ED BY I.T.A.NO. 1864/MDS/10 :- 16 -: THE REVENUE BY BRINGING ANY MATERIAL ON RECORD TO S HOW THAT THE EXPENSES WERE NOT INCURRED FOR THE PURPOSE S OF THE ASSESSEES BUSINESS. IN OUR CONSIDERED OPINION, THE MAINTAINING OR WRITING IN THE VOUCHERS IN A PARTICU LAR MANNER WILL NOT EMPOWER THE ASSESSING OFFICER TO DISALLOW GENUINE BUSINESS EXPENSES OF THE ASSESSEE. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE FINDINGS OF THE LD. CIT(A) THAT (I) FROM THE DETAILS FURNISH ED AND ACCEPTED BY THE ASSESSING OFFICER, IT IS SEEN THAT ALL THE EXPENSES ARE GENUINE AND WITH THE EVIDENCES ADDUCED BY THE ASSESSEE SHOWS THAT THE BUSINESS WAS DONE THROU GH SHRIRAM GROUP OF COMPANIES JOINTLY AND INDEPENDENTL Y BY IT ALSO; (II) AS THE ASSESSEE HAS EARNED INCOME FROM T HESE SERVICES ALSO, IT COULD NOT HAVE EARNED THE SAME WI THOUT INCURRING THE EXPENSES SEPARATELY AND (III) FURTHER , ALL THE PAYMENTS ARE MADE BY CHEQUES AND THE GENUINENESS OF THE EXPENDITURE IS NOWHERE DOUBTED BY THE ASSESSING OFFICER. IN THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO I NTERFERE WITH THE ORDER OF THE LD. CIT(A), WHICH IS CONFIRME D AND THE GROUNDS OF THE APPEAL OF THE REVENUE ARE DISMISSED. 8. RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE TRIBUNAL, WE CONFIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND NOS. 2.1, 3.1, 5.1 AND 7.1 OF APPEAL TAKEN BY THE REVE NUE. 9. HOWEVER, WE FIND THAT GROUND NO.4.1 OF THE APPEAL RELATES TO DISALLOWANCE OF PROCESS OUTSOURCING EXPENDITURE OF ` 8,83,224/-. WE FIND THAT THIS GROUND IS NOT COVERED BY THE ORDER O F THE TRIBUNAL CITED I.T.A.NO. 1864/MDS/10 :- 17 -: ABOVE. THE ISSUE INVOLVED IN THIS GROUND OF APPEAL RELATES TO THE PAYMENT OF PROCESS OUTSOURCING EXPENDITURE. THE A SSESSEE CLAIMED ` 2,08,83,224/- UNDER THE ABOVE HEAD OF EXPENDITURE. THE ASSESSING OFFICER FOUND THAT OUT OF THE SAID AMOUNT, ONLY ` 2 CRORE RELATES TO PAYMENT TO M/S SHRIRAM TRANSPORT FINANCE COMPANY LT D AND ` 8,83,224/- RELATES TO THE PAYMENTS MADE TO M/S SHRI RAM CITY UNION FINANCE LTD AND M/S SHRIRAM FORTUNE SOLUTIONS LTD. THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO AGREEMENT WITH M /S SHRIRAM TRANSPORT FINANCE COMPANY LTD AND M/S SHRIRAM CITY UNION FINANCE LTD AND EVEN IN THE SWORN STATEMENT RECORDED OF THE DIRECTORS OF THE ASSESSEE-COMPANY NO MENTION OF THE ABOVE PAYMENT WA S THERE. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT THE PA YMENTS IN QUESTION WERE MERE ACCOMMODATION ENTRY AND GENUINE SERVICES WERE NOT RECEIVED BY THE ASSESSEE-COMPANY. 10. ON APPEAL, THE LD.CIT(A) DELETED THE ABOVE DISALL OWANCE ON THE GROUND THAT MERE NON-MENTION OF THE ABOVE PAYMENT I N THE SWORN STATEMENT DOES NOT CONCLUSIVELY PROVE THAT IT WAS A MERE ACCOMMODATION ENTRY AND ACCORDING TO THE LD.CIT(A) , THE ASSESSING OFFICER HAS ACCEPTED THAT THESE TWO COMPANIES ARE A SSESSED TO TAX AND I.T.A.NO. 1864/MDS/10 :- 18 -: HAVE FURNISHED CONFIRMATION LETTERS REGARDING PROVI DING OF SERVICES BY THEM AND AMOUNT CHARGED BY THEM FOR THEIR SERVICES. 11. WE FIND THAT THE LD. DR HAS NOT SERIOUSLY DISPUTED THIS ISSUE BEFORE US AND SUBMITTED THAT THE SAME IS COVERED AG AINST THE DEPARTMENT BY THE ABOVE CITED ORDER OF THE TRIBUNAL . IN ABSENCE OF ANY SPECIFIC MATERIAL BROUGHT BEFORE US TO POINT OU T ANY ERROR IN THE ORDER OF THE LD.CIT(A), WE DO NOT FIND ANY GOOD RE ASON TO INTERFERE WITH THE SAME. IT IS CONFIRMED AND THEREFORE, GROU ND NO.4.1 OF THE APPEAL IS DISMISSED. 12. IN GROUND NOS.6 AND 8 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT TO ` 19,01,792/- AS AGAINST ` 48,64,586/-, HOLDING THAT THE NON-DEDUCTION OF TDS IN RESPECT OF CONSULT ANCY CHARGES IS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194J AND NOT U/S 194H. 13. THE ASSESSING OFFICER HAS DISALLOWED THE EXPENSES U NDER THE HEAD CONSULTANCY CHARGES BY OBSERVING AS UNDER: (IV) CONSULTANCY CHARGES: (A) . (B) ON A VERIFICATION OF THE EXPENSES CLAIMED UNDER THE HEAD CONSULTANCY IT IS NOTICED THAT THE ASSESSEE HA S PAID AMOUNTS EXCEEDING ` 2500/- TO VARIOUS PARTIES TO THE TUNE I.T.A.NO. 1864/MDS/10 :- 19 -: OF RS . 48,64,586/- WITHOUT DEDUCTING TAX U/S 194H AND CALL S FOR DISALLOWANCE U/S 40(A)(IA). THE PAYMENTS ARE ON LY IN THE NATURE OF COMMISSION OR BROKERAGE AS THE NOMENCLATURE IN THE VOUCHERS IS 'AGENT' . THERE IS NO PAYMENT WHICH IS TECHNICAL OR PROFESSIONAL IN NATUR E IN THE SAID PAYMENTS FALLING WITHIN THE PROVISIONS OF S.19 4J. WHEN THIS WAS PUT TO THE ASSESSEE'S REPRESENTATIVE HE HAS OBJECTED TO THE DISALLOWANCE AIN HIS LETTER DAT ED 29- 12-2009.STATING THAT THE PAYMENTS ARE COVERED U/S 1 94J READ WITH EXPLANATION TO CLAUSE (VII) OF SUB SECTIO N (1) OF SECTION 9. THE SAID EXPLANATION DOES NOT COVER THE CASE OF THE ASSESSEE AS THERE IS NO RENDERING OF ANY MANAGERIAL TECHNICAL OR CONSULTANCY SERVICES. THE ARGUMENT ALSO DOES NOT HOLD GOOD FOR THE REASON THAT THE SAID PAYMENTS ARE PAID TO AGENTS AND PAYMENTS T O AGENTS ARE NOTHING BUT COMMISSION AND CANNOT BE TER MED AS PROFESSIONAL FEES OR CONSULTANCY CHARGES. THE NOMENCLATURE OF EXPENSES DEBITED IN THE P&L ACCOUNT DOES NOT DETERMINE THE NATURE OF THE EXPENSE. HENCE , THE ASSESSEE HAVING DEBITED COMMISSION HAS CLAIMED THE SAME AS CONSULTANCY CHARGES. IT IS EVIDENT THAT THE PAYMENTS ARE TO 'AGENTS' FROM THE VOUCHERS AND PRINT OUTS FOR THE CLAIM OF EXPENSES. (SOME COPIES OF THE VOUCHERS/COMPUTER PRINT OUTS FOR THE CLAIM OF SUCH EXPENSES ARE ENCLOSED AS ANNEXURE V). IT IS ALSO NO TED THAT ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM S OME PAYMENTS ABOVE ` 20000/-. THOUGH THE ASSESSEE'S ARGUMENT DOES NOT HOLD GOOD FOR PAYMENTS ABOVE ` 2500/- THE ASSESSEE HAS NO JUSTIFICATION FOR PAYMEN TS ABOVE ` 20000/- WITHOUT DEDUCTING TAX AT SOURCE U/S 194J. HENCE I AM JUSTIFIED IN MAKING THE DISALLOWANCE U/S 40(A)(IA). (ANNEXURE FOR THE LIST OF PERSONS ABOVE ` 2500/- IS ENCLOSED). DISALLOWANCE UNDER THIS HEAD: ` 48,64,586 14. ON APPEAL, THE LD.CIT(A) HAS HELD AS UNDER: I.T.A.NO. 1864/MDS/10 :- 20 -: 34.4 ITEM NO.5-CONSULTANCY CHARGES- ` 48,64,586/- 34.5 AS INSURANCE IS A SPECIALIZED FIELD AND IS GOV ERNED BY A SEPARATE AUTHORITY CALLED INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA). THE FUNCTIONS OF THE APPELLANT COMPANY AND ITS ADVISORS ARE -- I. OBTAINING DETAILED INFORMATION OF THE CLIENT'S B USINESS AND RISK MANAGEMENT PHILOSOPHY; II. FAMILIARISING HIMSELF WITH THE CLIENT'S BUSINES S AND UNDERWRITING INFORMATION SO THAT THIS CAN BE EXPLA INED TO AN INSURER AND OTHERS; III. RENDERING ADVICE ON APPROPRIATE INSURANCE COV ER AND TERMS; IV. MAINTAINING DETAILED KNOWLEDGE OF AVAILABLE INS URANCE MARKETS, AS MAY BE APPLICABLE; V. SUBMITTING QUOTATION RECEIVED FROM INSURER/S FOR CONSIDERATION OF A CLIENT; VI. PROVIDING REQUISITE UNDERWRITING INFORMATION AS REQUIRED BY AN INSURER IN ASSESSING THE RISK TO DECIDE PRICING TERMS AND CONDITIONS FOR COVER; VII. ACTING PROMPTLY ON INSTRUCTIONS FROM A CLIENT AND PROVIDING HIM WRITTEN ACKNOWLEDGEMENTS AND PROGRESS REPORTS; VIII. ASSISTING CLIENTS IN PAYING PREMIUM UNDER SEC TION 64 VB OF INSURANCE ACT 1938 ( 4 OF 1938). IX. PROVIDING SERVICES RELATED TO INSURANCE CONSULT ANCY AND RISK MANAGEMENT; X. ASSISTING IN THE NEGOTIATION OF THE CLAIMS; AND XI. MAINTAINING PROPER RECORDS OF CLAIMS. I.T.A.NO. 1864/MDS/10 :- 21 -: 34.6 WHEN SO MANY SERVICES HAVE TO BE RENDERED, ESP ECIALLY ITEMS III, V, VI AND IX CAN BE CONSTRUED AS TECHNIC AL SERVICES ONLY AND, I AGREE WITH THE CONTENTIONS OF THE AR TH AT THESE PAYMENTS WOULD COME WITHIN THE PURVIEW OF TECHNICAL SERVICES ONLY WITHIN THE MEANING OF CLAUSE (B) OF THE EXPLANATION BELOW SEC.194J R.W. EXPLANATION 2 TO CL AUSE (VII) OF SUB SECTION 1 OF SECTION 9 AND ACCORDINGLY COVER ED BY THE PROVISIONS OF SEC.194 OF THE I T ACT AND NOT UNDER THE PROVISIONS OF SEC.194H OF THE IT ACT AS HELD BY THE LEARNED AO. HOWEVER AS THE APPELLANT COMPANY ITSELF ADMITTE D THAT IT HAD NOT DEDUCTED TDS IN ACCORDANCE PROVISIONS OF SE C.194J OF THE I.T ACT ON PAYMENTS TO THE EXTENT OF ` 19,01,792/-, I RESTRICT THE DISALLOWANCE UNDER THIS HEAD TO THAT E XTENT OF ` 19,01,792 AND DELETE THE ADDITION TO THE EXTENT OF ` 29,62,794. 15. WE FIND THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL HAS RESTORED THIS MATTER TO THE FILE O F THE ASSESSING OFFICER IN ASSESSMENT YEAR 2008-09 BY OBSERVING AS UNDER: 12. BOTH THE PARTIES, BEFORE US, AT THE TIME OF H EARING, AGREED THAT THE ISSUE SHOULD BE RESTORED BACK TO TH E FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE ISSUE AFRESH FOR FURTHER VERIFICATION AS UNDER. IF THE ASSESSEE IS A BLE TO PRODUCE EVIDENCE TO SHOW THAT THE PERSONS TO WHOM T HE CONSULTANCY CHARGES HAVE BEEN PAID ARE REGISTERED W ITH IRDA, THEN THEY ARE TO BE TREATED AS PAYMENTS MADE TOWARDS PROFESSIONAL CHARGES AS THOSE PERSONS ARE D OING PROFESSION AND WILL BE GOVERNED BY THE PROVISION OF SECTION 194J OF THE ACT AND TDS HAS TO BE DEDUCTED AS PER T HE PROVISIONS OF THAT SECTION. THIS IS ALSO BECAUSE UN DER THE INSURANCE REGULATORY AUTHORITY DIRECTIONS ONLY PERS ONS REGISTERED WITH IRDA AND WHO HAVE COMPLIED WITH THE IR I.T.A.NO. 1864/MDS/10 :- 22 -: TESTS CAN CANVAS INSURANCE BUSINESS. THIS IS A PROF ESSIONAL SERVICE. IN ANY OTHER CASE, WHERE PAYMENT IS MADE B Y WAY OF COMMISSION OR OTHERWISE FOR SOLICITING OR PROCUR ING INSURANCE BUSINESS BY PERSONS WHO ARE NO REGISTERED WITH IRDA, THEN THE SAME WILL BE GOVERNED BY THE PROVISI ON OF SECTION 194D OF THE ACT. THIS IS BECAUSE THE PROVIS IONS OF SECTION 194D ARE DIRECTLY CONNECTED WITH THE PAYMEN T OF COMMISSION FOR PROCURING INSURANCE BUSINESS. IF THE DEDUCTION OF TDS IS NOT MADE IN ACCORDANCE WITH THE ABOVE SECTIONS, THEN THE AMOUNTS SO PAID IS TO BE DISALLO WED WHILE COMPUTING THE INCOME OF THE ASSESSEE. THE PROVISION OF SECTION 194H WOULD HAVE NO APPLICABILITY AS THE BUS INESS OF THE ASSESSEE IS INSURANCE BROKING AND SECTION 194H SPECIFICALLY EXCLUDES INSURANCE COMMISSION. WE, TH EREFORE, SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND REMAN D THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R ADJUDICATING THE ISSUE AFRESH IN THE LIGHT OF THE D ISCUSSIONS AS MADE HEREINABOVE AFTER ALLOWING SUFFICIENT OPPOR TUNITY OF HEARING TO THE ASSESSEE. THUS, THIS GROUND OF APPEA L OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 16. RESPECTFULLY FOLLOWING THE ABOVE QUOTED ORDER OF TH E TRIBUNAL, WE REMAND THE MATTER BACK TO THE FILE OF THE ASSESS ING OFFICER TO RE- ADJUDICATE THE ISSUE AFRESH IN THE LIGHT OF THE DIR ECTIONS GIVEN BY THE TRIBUNAL IN ASSESSMENT YEAR 2008-09 AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSE. I.T.A.NO. 1864/MDS/10 :- 23 -: 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2012. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 7 TH MARCH, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR