Narration of professional fee bill is not at all material in rejecting professional fee expense u/s 37(1) of Income Tax: ITAT
Deepak Gupta | May 31, 2022 |
Narration of professional fee bill is not at all material in rejecting professional fee expense u/s 37(1) of Income Tax: ITAT
The Income Tax Appellate Tribunal (ITAT) has said that the narration of the professional fee bill by the payee is not at all material in rejecting the professional fee bill. A professional fee bill is based upon the understanding between the assessee and the professional service provider. It is the assessee who is to be satisfied by the professional services and not the Assessing Officer.
The Assessee M/s Road Builders (M) SDN BHD has filed an appeal with the ITAT challenging the order of the Assessing Officer dated 15.11.2017 pertaining to Assessment Year 2013-14, wherein the addition of the sum of Rs. 35,05,892/- was made by CIT(A) representing expenditure incurred on consultancy charges and claimed by the appellant company by invoking Explanation 1 to section 37(1) of the Act.
The Assessing Officer was not satisfied with the justification of the payment of Rs.35,05,892/- to Mr. Pramodh Engineers. He disallowed the same by observing that a perusal of the same shows that the invoices are raised against the travelling, food, accommodation and other incidental charges for visiting arbitrator’s place on various dates. The invoices are not supported with any primary vouchers of the expenses incurred. It shows that the invoices of huge amount were raised without any specific services rendered on specific dates/period. All the invoices having the same narration. From the above, as opined that the expenses have been shown to be incurred without any professional or technical services received as there was no business activity during the year under consideration. Hence, the Assessing Officer disallowed the said expenditure u/s 37(1) of the Act. The Same was confirmed by CIT(A).
The Bench of Mr. N.K.Choudhry and Mr. Shamim Yahya deleted the Disallowance of Rs. 25,78,263 opining that there is no dispute that the TDS on the same has been deducted. As held by us above, the same is for the purpose of business wherein the said firm was pursuing arbitration proceedings which as mentioned in the note of account has resulted in Rs.15.84 crores being awarded in favor of the assessee.
The rest disallowance (Rs. 35,05,892-25,78,263) is to be upheld because no bills were submitted.
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