ITO, Ward 8(2), New Delhi. Vs. Showtime Events India (P) Ltd., 52B, Okhla Industrial Estate, Phase-III, Okhla, New Delhi.
April, 10th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : G : NEW DELHI
BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM
Assessment Year : 2010-11
ITO, Vs. Showtime Events India (P) Ltd.,
Ward 8(2), 52B, Okhla Industrial Estate,
New Delhi. Phase-III, Okhla,
Assessment Year : 2010-11
Showtime Events India (P) Ltd., Vs. ITO,
52B, Okhla Industrial Estate, Ward 8(2),
Phase-III, Okhla, New Delhi.
Assessee By : Shri Sunil K. Sharma, FCA
Department By : Shri B.R.R. Kumar, Sr. DR
Date of Hearing : 08.04.2015
Date of Pronouncement : .04.2015
PER R.S. SYAL, AM:
This appeal by the Revenue and the Cross Objection by the
assessee arise out of the order passed by the CIT(A) on 17.7.2013 in
relation to the assessment year 2010-11.
2. The first ground of the Revenue's appeal and the only ground of
the assessee's Cross objection is in respect of disallowance on account
of Consultancy charge paid to the related persons made u/s 40A(2)(b) of
the Income-tax Act, 1961 (hereinafter also called `the Act').
3. The facts apropos this ground are that the assessee paid a sum of
Rs.18 lac (sic. Rs.25 lac) as consultancy charges to Ms. Jean Menezes,
wife of one of the directors. On being called upon to explain as to why
this amount be not disallowed u/s 40A(2)(b), the assessee submitted a
copy of agreement by which consultancy charges were fixed at
Rs.1,50,000/- per month payable to Ms. Jean Menezes. The AO did not
find the amount paid to Ms. Jean Menezes as reasonable and,
accordingly, disallowed a sum of Rs.13 lac. The ld. CIT(A) reduced the
disallowance to Rs.9 lac, thereby allowing relief of Rs.4 lac. Both the
sides are in appeal against the impugned order to the extent it is
prejudicial to their respective interests.
4. After considering the rival submissions and perusing the relevant
material on record, it is observed from para 7.3 of the impugned order
that the assessee had a fleet of 30 persons working in the company as
Consultants/retainers and a majority of them were paid less than Rs.5 lac
per annum. The ld. CIT(A) has held that the services rendered by Ms.
Jean Menezes were mainly for decoration and arranging of gift items.
These recordings have not been controverted by the either side.
Considering the totality of facts and circumstances of the instant case,
we are satisfied that the ld. CIT(A) was justified in restricting the
addition to Rs. 9 lac. No interference is, therefore, warranted in the
impugned order on this score. The grounds taken by the assessee as well
as the Revenue stand dismissed.
5. The second ground of the Revenue's appeal is against the deletion
of addition of Rs.21,60,144/- made by the AO on account of bad debts.
Briefly stated, the facts of this ground are that the assessee claimed
deduction for a sum of Rs.21,60,144/- as bad debt written off. The AO
made disallowance for the said sum on the ground that the assessee
could not produce any evidence or details about the efforts made for the
recovery the debts. The ld. CIT(A) overturned the assessment order on
6. We have heard the rival submissions and perused the relevant
material on record. There is no dispute on the fact that the assessee
wrote off the amount of bad debts in its books of account. The AO
disallowed the amount simply for the reason that the assessee could not
point out any efforts made for the recovery of the amount. The
otherwise deductibility of the amount of bad debt was not objected to.
The Hon'ble Supreme Court in the case of T.R.F. Ltd. Vs. CIT (2010)
323 ITR 397 (SC) has held that after 1.4.1989, the assessee is not
required to establish that the debt became bad in the previous year
relevant to the assessment year under consideration. A simple write off
of the bad debt is sufficient to grant deduction. In view of the direct
judgment of the Hon'ble Supreme Court on this issue, we are convinced
that the ld. CIT(A) was justified in deleting this addition. This ground
7. The last effective ground is against the deletion of disallowance of
Rs.9,58,407/- made by the AO on account of adjustment of brought
forward business losses. The assessee claimed adjustment of brought
forward business loss of Rs.9.58 lac. The AO, on a perusal of tax audit
report, observed that the auditors mentioned `Not applicable' against
column no. 25 of Form no. 3CD. He, therefore, did not allow the credit
for the brought forward loss. The ld. CIT(A) overturned the assessment
order on this issue.
8. After considering the rival submissions and perusing the relevant
material on record, we find that the assessee gave complete details of
brought forward loss in its income-tax return and also claimed
adjustment on account of such brought forward losses, etc. Simply on
the basis of a column of the tax audit report, not properly filled by the
auditor, the AO ought not to have rejected the claim when there was
sufficient material on record to indicate that there was, in fact, a brought
forward business loss to this extent. We, therefore, approve the
impugned order on this issue.
9. In the result, the appeal of the Revenue and the Cross Objection of
the assessee stand dismissed.
The order pronounced in the open court on 09.04.2015.
[C.M. GARG] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 09th April, 2015.
Copy forwarded to:
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.