Section 37(1) – Business expenditure – Allowability of (Consultancy charges) – Assessee made payments to one ‘S’, a consultant, and claimed deduction of same as business expenditure – AO, on the basis of a statement of ‘S’ recorded during search operations, held that ‘S’ had not rendered any service to assessee so as to receive such payments and disallowed expenditure – Appellate Authorities allowed payments made to ‘S’ holding that there was sufficient evidence justifying payments made to ‘S’ and AO, other than relying upon statement of ‘S’ recorded in search, had no independent material to make disallowance – Allowance of payments made to ‘S’ was justified

7. CIT
vs. Reliance Industries Ltd.; [2019] 102 taxmann.com 372 (Bom): Date
of order: 30^th January, 2019

Section
37(1) – Business expenditure – Allowability of (Consultancy charges) – Assessee
made payments to one ‘S’, a consultant, and claimed deduction of same as
business expenditure – AO, on the basis of a statement of ‘S’ recorded during
search operations, held that ‘S’ had not rendered any service to assessee so as
to receive such payments and disallowed expenditure – Appellate Authorities
allowed payments made to ‘S’ holding that there was sufficient evidence
justifying payments made to ‘S’ and AO, other than relying upon statement of
‘S’ recorded in search, had no independent material to make disallowance –
Allowance of payments made to ‘S’ was justified

The
assessee made payments to one ‘S’, a consultant, and claimed deduction of same
as business expenditure. The Assessing Officer on the basis of a statement of
‘S’ recorded during search operations held that the said person had not
rendered any service to the assessee so as to receive such payments. He
accordingly disallowed the payments made to ‘S’.

The
Commissioner (Appeals) allowed the payments made to ‘S’ holding that ‘S’ had
retracted the statement recorded during search, the assessee had pointed out
the range of services provided by ‘S’, and the Assessing Officer had no other
material to disallow the expenditure. The Tribunal confirmed the view of the
Commissioner (Appeals). It held that ‘S’ retracted his statement within a short
time by filing an affidavit. Subsequently, his father’s statement was recorded
in which he also reiterated the stand taken in the affidavit.

On appeal
by the Revenue, the Bombay High Court upheld the decision of the Tribunal and
held as under:

“The
entire issue is based on the appreciation of materials on record. The
Commissioner (Appeals) and the Tribunal concurrently held that there was
sufficient evidence justifying the payments made to ‘S’, a consultant, and the
Assessing Officer other than relying upon the statement of ‘S’ recorded in
search had no independent material to make the disallowance. No question of law
arises.”