Skanska Cementation International Ltd., Baroda V. The ADIT.,(Intl.Taxn.), Ahmedabad

CO 142/AHD/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4793 (ITAT-AHMEDABAD)
• Duration Of Justice: 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2002-2003
• Appeal Filed On: 08-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A K TIWARI
• Keywords: Business expenditure; Residential status; Search and seizure; Deemed to accrue or arise in india; Permanent establishment

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM THE ADIT (INTL.TAXN), 4 TH FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD. VS. SKANSKA CEMENTATION INTERNATIONAL LTD. C/O C.C. CHOKSHI & CO. 31 NUTAN BHARAT SOCIETY, ALKAPURI BARODA- 390007. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI A. K. TIWARI, DR REVENUE BY:- SHRI SANJAY R. SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUND:- (1) THE LD. CIT(A)-GANDHINAGAR HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ADDITION RS.7.00 LACS, HOLDING THAT TH E EXPENSES LIKE TRAVELING EXPENSES CAR HIRE CHARGES AND SUNDRY EXPENSES MAY NOT BE PERSONAL IN COMPANY CASES WITHOUT ACTUAL LY VERIFYING THE CLAIM OF THE ASSESSEE COMPANY. WHEREAS THE ASSESSEE HAS RAISED THE FOLLOWING GROUN DS IN ITS CROSS OBJECTION :- ITA NO.852/AHD/2010 ALONG WITH C.O. NO.142/AHD/2010 ASST. YEAR :2002-03 2 (1) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOW ANCE OF PROFESSIONAL AND CONSULTANCY CHARGES AMOUNTING TO RS.37,10,892/- U/S 40(A)(I) OF THE ACT. (2) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOW ANCE OF RS.1,37,24,677/- BEING THE AMOUNT OF FOREIGN EXCHA NGE LOSS CLAIMED ON ACCOUNT OF AMOUNTS PAYABLE TO M/S KVAERN ER CEMENTATION INTERNATIONAL LTD., THE SUB-CONTRACTOR OF THE DAHEJ PROJECT OF THE APPELLANT IN RESPECT OF ADDITIONAL C LAIM ON COLLAPSE OF STEEL PIPES. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS INCORPORATED UNDER THE LAWS OF UNITED KINGDOM AND IS MAINLY IN T HE LINE OF CIVIL CONSTRUCTION. IT WAS AWARDED A CONTRACT IN NOVEMBER , 1997 FOR CONSTRUCTION OF LIQUID CHEMICAL HANDLING JETTY AT D AHEJ BY GUJARAT CHEMICAL PORT TERMINAL COMPANY LTD. IT WAS KNOWN AS DAHEJ PROJECT. RETURN OF INCOME WAS FILED ON A LOSS OF RS.15,95,46 ,566/- AND A SHORT- TERM CAPITAL LOSS OF RS.26,63,045/- WAS ALSO DECLAR ED. THE AO HAD MADE FOLLOWING ADDITIONS :- A. DISALLOWANCE U/S 40(A)(I) OF PROFESSIONAL AND CONSU LTANCY CHARGES AMOUNTING TO RS.37,10,892/-. B. DISALLOWANCE OF FOREIGN EXCHANGE LOSS OF RS.1,37,24,677/- CLAIMED ON ACCOUNT OF THE AMOUNTS PAYABLE TO THE SUB-CONTRACTOR THE DAHEJ PROJECT OF THE APPELLANT IN RESPECT OF THE ADDITIONAL CLAIM ON COL LAPSE OF STEEL PILES. C. AD-HOC DISALLOWANCE OF RS.7 LACS INCURRED UNDER THE HEAD TRAVELING, CAR HIRE AND SUNDRY CHARGES. 3. THE FIRST TWO ADDITIONS CONFIRMED IN FIRST APPEA L ARE CHALLENGED BY THE ASSESSEE IN THE CROSS OBJECTION AND THE THIRD A DDITION DELETED BY LD. CIT(A) VIDE HIS ORDER DATED 31.12.2009 IS CHALLENGE D BY THE REVENUE. 3 ADDITION OF RS.7 LACS : 4. THE AO MADE AN AD HOC DISALLOWANCE OF RS. 7 LACS UNDER THE HEAD TRAVELING, CAR HIRE CHARGES AND SUNDRY CHARGES OUT OF THE TOTAL CLAIM AS UNDER :- 1. TRAVELLING RS.2,49,81,950/- 2. CAR HIRE CHARGES RS.36,64,156/- 3. SUNDRY EXPENSES RS.1,54,74,470/- THE AO DID NOT FIND ALL THE EXPENDITURE INCURRED FO R THE BUSINESS PURPOSES AND, THEREFORE, MADE DISALLOWANCE OF RS.7 LACS OUT OF THESE EXPENSES. THE LD. CIT(A) DELETED THE ADDITION BY OB SERVING AS UNDER :- 4.3 IN MY VIEW, THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE. NOT ONLY HE HAS FAILED TO SPECIFICALLY POINT OUT THE DE FICIENCIES IN CONTEXT OF EVEN THE VOUCHERS HE TEST CHECKED, HE HAS ALSO NOT GIVEN ANY BASIS FOR MAKING THE ADDITION. IN CASE OF A COMPANY, THERE GE NERALLY CANNOT BE A CASE OF PERSONAL EXPENSES AND FOR ARGUING NON-BUSIN ESS EXPENSES, THE DEFECTS AND THE QUANTUM NEEDED TO BE SPECIFICALLY B ROUGHT OUT. ALL THESE INGREDIENTS ARE MISSING IN THE CONTEXT. 5. WE HAVE HEARD THE LD. DR AND THE LD. AR. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF L D. CIT(A). THE REASONS ARE THAT AO DID NOT POINT OUT A SINGLE VOUCHER OUT OF VOLUMINOUS VOUCHERS PRODUCED BEFORE HIM WHICH COULD INDICATE N ON-BUSINESS EXPENDITURE OR ANY EXPENDITURE WHICH WAS NOT SUPPOR TED BY VOUCHER. ACCORDINGLY THE ADDITION SO DELETED BY LD. CIT(A) I S CONFIRMED. THE APPEAL FILED BY THE REVENUE IS DISMISSED. CROSS OBJECTION : 6. ADDITION OF RS.37,10,892/- BEING DISALLOWANCE U/ S 40(A)(I) OUT OF PROFESSIONAL AND CONSULTANCY CHARGES. 4 7. THE AO HAD DISALLOWED THE CLAIM OF EXPENDITURE O N THE GROUND THAT TAXES HAVE NOT BEEN DEDUCTED OUT OF SUCH PAYMENT. T HE STAND OF THE ASSESSEE WAS THAT PAYMENT HAS BEEN MADE TO A NON-RE SIDENT OUTSIDE INDIA AND, THEREFORE, AMOUNT WAS NOT TAXABLE IN THE HANDS OF RECIPIENT AND ACCORDINGLY TAX WAS NOT DEDUCTED. THE LD. CIT(A) CO NFIRMED THE ADDITION BY OBSERVING AS UNDER :- 2.4 THE MATTER HAS BEEN CONSIDERED. TO START WITH, IT SEEMS THAT CONCEPT OF REIMBURSEMENT HAS BEEN DISTORTED WITHOUT MAKING REFERENCE TO THE ACCOUNTING OR LEGAL CONTEXT. THE COURTS/TRIBUNA LS HAVE HELD THE REIMBURSEMENT AS NOT BEING SUBJECT TO PROVISION OF TDS IN CONTEXT WHERE THE PAYMENTS WERE MADE BY AN ASSESSEE TO A DISTINCT FOREIGN PARTY FOR TRANSACTIONS WHICH WERE NOT TO BE ASSESSEES EXPENS ES. HOWEVER, IN THE PRESENT CASE THE APPELLANT IS EXTENDING THE CONCEPT OF REIMBURSEMENT EVEN WITHIN ITS BRANCH/PROJECT OFFICE I.E. THE MONE Y TRANSFERRED BY THE INDIAN OFFICE TO THE BRITISH OFFICE (OR HEAD QUARTE RS). OBVIOUSLY THIS TRANSFER OF MONEY CANNOT BE A REIMBURSEMENT IN THE MANNER THAT IT TAKES THE EXPENSES OUT OF THE PURVIEW OF CHAPTER XVIIB FO R TDS PURPOSES. WHETHER THE REIMBURSEMENTS ARE SUBJECT TO TDS OR NO T AND IN WHAT CIRCUMSTANCES, SHALL BE A LEGAL ISSUE ONLY IN CASE ANY AMOUNT IS A REIMBURSEMENT TO START WITH. THE APPELLANTS THINKI NG APPEARS TO BE THAT THE APPELLANTS OFFICE LOCATED IN INDIA WHICH IT CA LLS AS A PROJECT OFFICE IS A DIFFERENT ENTITY FROM THE COMPANY NAMELY M/S SKAN SKA CEMENTATION INTERNATIONAL LTD. AND THEREFORE IF ANY PAYMENT OF THE ACTIVITY UNDERTAKEN IN INDIA IS MADE FROM U.K. AND THERE IS SUBSEQUENT INTERNAL TRANSFER FROM INDIAN OFFICE I.E PROJECT OFFICE TO U.K. OFFICE, IT IS A REIMBURSEMENT AS FAR AS THE ASSESSEE IS CONCERNED. OBVIOUSLY THIS IS A FALLACIOUS VIEW INDIAN PROJECT OFFICE HAS NO LEGAL OR CORPORATE I DENTITY, IT IS AN OFFICE OF M/S SKANSKA CEMENTATION INTERNATIONAL LTD. WHICH IS OPERATING IN INDIA AND INCOME ACCRUING, IF ANY, FROM THE OPERATI ONS IN INDIA IS TO BE TAXABLE IN THE HANDS OF M/S SKANSKA CEMENTATION INT ERNATIONAL LTD. AND NOT THE INDIAN PROJECT OFFICE. ANY TRANSFER OF FU NDS WITHIN AN ORGANIZATION, EVEN IF IT IS INTER BRANCH OR EVEN IF IT IS ACROSS THE TERRITORIAL BOUNDARIES, CANNOT BE CLASSIFIED AS REIMBURSEMENT. CLEARLY, THE EXPENSES OF RS.37,10,894/- WERE INCURRED BY THE APPELLANT-CO MPANY, BE IT FROM U.K. BUT NO TAX WAS DEDUCTED IN THE PROCESS, WHICH IT SHOULD HAVE. SINCE IT IS A CLEAR CASE OF TDS HAVING NOT BEEN DEDUCTED, PROVISIONS OF SECTION 40(A) SHALL BE APPLICABLE. HENCE THE ADDITION OF RS .37,10,892/- IS SUSTAINED. 5 8. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT SIMIL AR ISSUE HAD ARISEN BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE TRIBUNAL HAS HELD IN FAVOUR OF THE ASSESSEE THAT TA X WAS NOT REQUIRED TO BE DEDUCTED OUT OF THE PAYMENT TO NON-RESIDENT ON ACCO UNT OF CONSULTANCY SERVICE CHARGES. HE REFERRED TO THE DECISION OF THE TRIBUNAL FOR ASST. YEAR 1998-99 TO 2000-01 IN THE CASE OF THE ASSESSEE. HE SUBMITTED THAT VIDE PARA 38 THE TRIBUNAL HAS DELETED SIMILAR ADDITION B Y OBSERVING AS UNDER :- 38. THE ASSESSEE PLEADED BEFORE THE AUTHORITIES BE LOW THAT ALL THE PAYMENTS WERE MADE TO SEVERAL PARTIES OUTSIDE INDIA FOR REIMBURSEMENT OF EXPENSES INCURRED BY THE THEN KCIL (UK) (SUB-CON TRACTOR) FOR THE PURPOSE OF DAHEJ PROJECT SO THERE WAS NO ELEMENT OF INCOME. THE ASSESSEE ALSO CLAIMED THAT DUE TO THE ABOVE FACT, T HERE WAS NO OBLIGATION OF THE ASSESSEE TO DEDUCT TAX AT SOURCE U/S 195 WHI LE MAKING PAYMENTS TO NON-RESIDENTS. A O HAS NOT BROUGHT ANY EVIDENCE OR MATERIAL ON RECORD THAT THE RECIPIENTS WHO GOT PAYMENTS THROUGH SUB CO NTRACTOR WERE LIABLE TO TAX IN INDIA. A O HAS ALSO NOT BROUGHT ABOUT THE IR STATUS FOR RECEIVING THE PAYMENTS. NO EFFORTS HAVE BEEN MADE TO PROVE AS TO HOW THE PAYMENT IN QUESTION WAS LIABLE TO TAX UNDER THE PROVISIONS OF INCOME TAX ACT. UNLESS THE INCOME WAS CHARGEABLE TO TAX, THERE WOUL D BE NO TAX LIABILITIES TO DEDUCT TAX AS PER PROVISIONS OF SECTION 195 (1) OF THE IT ACT. THE A O HAS ALSO NOT PROPERLY EXAMINED THE PROVISIONS OF DT A AGREEMENT WITH UK FOR THE PURPOSE OF APPRECIATING THE ISSUE. ACCOR DING TO THE ASSESSEE THE AMOUNT IS PAID BY THE UK PAYER TO UK PAYEES, TH EREFORE, THERE WAS NO REASON TO DEDUCT TDS. THE REIMBURSEMENT OF THE EXPE NSES TO THE SUB CONTRACTOR FOR FURTHER PAYMENT TO OTHERS WAS NOT AP PRECIATED IN THE LIGHT OF THE RELEVANT PROVISIONS AND HOW THESE EXPENSES W ERE CONSIDERED AS FEES FOR TECHNICAL SERVICES IS ALSO NOT CONSIDERED BY THE A O. AS REGARDS THE REIMBURSEMENT OF THE EXPENSES TO T HE SUB CONTR ACTOR, A O DISALLOWED CERTAIN EXPENSES TREATING THE SAME TO BE LIABILITY OF THE SUB CONTRACTOR ON OTHER ISSUES WHICH HAVE ALREADY BEEN DECIDED IN FAV OUR OF THE ASSESSEE. THE A O HAS NOT SPECIFICALLY CONSIDERED THIS ISSUE FROM THE POINT OF VIEW THAT IF THE AMOUNTS ARE REIMBURSED TO THE SUB CONTR ACTOR FOR AND ON BEHALF OF THE ASSESSEE AND ARE TAKEN INTO CONSIDERATION BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT, THE SAME WOULD SHOW THAT THE SE EXPENDITURES WERE SPENT BY THE ASSESSEE FOR ITSELF FOR THE PURPOSES O F ITS BUSINESS. THE A O HAS ALSO NOT BROUGHT ANY EVIDENCE ON RECORD THAT TH E PAYEES HAVE ANY 6 PERMANENT ESTABLISHMENTS OR BUSINESS CONNECTION IN INDIA. IN THE CASE OF MAHABIR COMMERCIAL COMPANY LTD. VS C I T 86 ITR 417 (SC), THE APPELLATE TRIBUNAL HELD THAT THE SALES TOOK PLACE I N PAKISTAN AND THE INCOME THEREFROM ACCRUED TO THE APPELLANT THERE. ON A REFERENCE THE HIGH COURT HELD THAT, HAVING REGARD TO CLAUSES (7 A ND (9) OF THE CONTRACT WHICH PROVIDED RESPECTIVELY FOR NON-ACCEPTANCE OF T HE DOCUMENTS AND CLAIM BY THE BUYER IN RESPECT OF QUALITY OR EXCESS MOISTURE AND GAVE AN OPTION TO THE BUYER TO ACCEPT THE GOODS WITH ALLOWA NCES OR CANCEL THE CONTRACT IN RESPECT OF THE WHOLE OR PART OF THE SHI PMENT, UNCONDITIONAL APPROPRIATION OF THE GOODS TOOK PLACE IN INDIA, NOT WITHSTANDING THE C.I.F TERMS, AND THE PROFITS FROM THE SALES ACCRUED IN IN DIA. ON APPEAL TO THE SUPREME COURT: HELD, REVERSING THE DECISION OF THE HIGH COURT, THAT THE SALES TOOK PLACE IN PAKISTAN AND THEREFORE THE PROF ITS DERIVED THEREFROM AROSE OUTSIDE INDIA. THERE WAS NOTHING IN THE AGREE MENT WHICH ENVISAGED THE PROPERTY IN GOODS BEING IN THE APPELLANT EVEN A FTER THE VALUE OF THE INVOICE HAD BEEN PAID BY THE BANK UNDER THE LETTER OF CREDIT IN PAKISTAN. THE CONDITION IN CLAUSE (7) WAS A CONDITION WHERE T HE BUYERS FAILED OR REFUSED TO PERFORM THE CONTRACT ALTOGETHER BY NOT A CCEPTING THE DOCUMENTS OR IN NOT PAYING AGAINST THE DOCUMENTS. E VEN UNDER CLAUSE (9) THE CONDITION WAS NOT A CONDITION OF THE TRANSFER O F PROPERTY. UNDER THE C. I. F. CONTRACT PRIMA FACIE THE PROPER TY IN THE GOODS PASSES ONCE THE DOCUMENTS ARE TENDERED BY THE SELLE R TO THE BUYER OR HIS AGENT AS REQUIRED UNDER THE CONTRACT. BUT, WHERE TH E SELLER RETAINS CONTROL OVER THE GOODS BY OBTAINING A BILL OF LADING IN HIS NAME OR TO HIS ORDER, THE PROPERTY IN THE GOODS DOES NOT PASS TO THE BUYE R UNTIL HE ENDORSES THE BILL TO THE BUYER AND DELIVERS THE DOCUMENTS TO HIM . IF HOWEVER THE SELLERS DEALING WITH THE BILL OF LADING IS ONLY TO SECURE THE CONTRACT PRICE NOT WITH THE INTENTION OF WITHDRAWING THE GOODS FRO M THE CONTRACT, AND HE DOES NOTHING INCONSISTENT WITH AN INTENTION TO PASS THE PROPERTY, THE PROPERTY MAY PASS EITHER FORTHWITH SUBJECT TO THE S ELLERS LIEN OR CONDITIONAL ON PERFORMANCE BY THE BUYER OF HIS PART OF THE CONTRACT. EVEN THOUGH THE PROPERTY IN THE GOODS MAY PASS TO THE BUYER WHEN THE DOCUMENTS ARE HANDED OVER, THE BUYER MAY YET RE TAIN THE RIGHT TO EXAMINE AND REPUDIATE THE GOODS BUT THIS RIGHT GENE RALLY WHICH A BUYER HAS IN A C. I. F. CONTRACT DOES NOT BY ITSELF INDIC ATE THAT THE PROPERTY IN THE GOODS HAS NOT PASSED TO HIM. IN THE CASE OF C I T VS GULF OIL (GREAT BRITAIN) L TD. 108 ITR 874 (BOM) THE HON'BLE BOMBAY HIGH COURT HELD, ON THE F ACTS THAT THE CONTRACTS WERE MADE IN U. K. AS THE INDENTS PLACED BY THE INDIAN 7 COMPANY WERE ACCEPTED IN U. K. THE CONTRACTS WERE A LSO EXECUTED OUTSIDE INDIA BECAUSE ONCE THE GOODS WERE PUT ON SH IP THERE WAS NO RESERVATION OF RIGHT OF DISPOSAL IN THE GOODS BY TH E NON-RESIDENT. PURSUANT TO THE INDENTS THE PRODUCTS WERE NOT MERELY SUPPLIE D BY THE NON-RESIDENT COMPANY BUT ACTUALLY SOLD TO THE INDIAN SUBSIDIARY AT C. I. F. PRICES. THE INDIAN COMPANY EFFECTED SALES OF THE PRODUCTS ON IT S OWN ACCOUNT IN INDIA AND WAS TAXED ON THE PROFITS SO MADE BY IT ON ITS T URNOVER IN INDIA. IT WAS, THEREFORE, CLEAR THAT THE TRANSACTIONS BETWEEN THE NON-RESIDENT COMPANY AND THE INDIAN SUBSIDIARY WERE ON A PRINCIPAL TO PR INCIPAL BASIS AND THE INDIAN SUBSIDIARY COULD NOT BE REGARDED AS THE AGEN T OF THE NON-RESIDENT COMPANY SO AS TO ATTRACT THE PROVISIONS OF SECTION 42(3). THE ASSESSEE- COMPANY DID NOT DERIVE ANY INCOME FROM BUSINESS CON NECTION IN INDIA CHARGEABLE TO TAX UNDER SECTION 42. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF C I T VS FRIED KRUPP INDUSTRIES 128 ITR 27 (MAD.) HELD THAT THE RE WERE NO OPERATION IN INDIA WHICH WEE ATTRIBUTABLE TO THE FOREIGN COMP ANY WHICH COULD GIVE RISE TO ANY PROFITS BEING EARNED IN INDIA. THE TERM S OF AGREEMENT MADE IT CLEAR THAT NONE OF THE THREE TYPES OF ACTIVITIES OF THE FOREIGN COMPANY RESULTED IN BUSINESS CONNECTION IN INDIA: (I) THE SUPPLY OF MACHINERY WAS TO BE ON F.O.B. TE RMS. THE PART PLAYED BY THE FOREIGN COMPANY ENDED WITH PUTTING TH E MACHINERY ON BOARD AND THERE WAS NO OPERATION BY THAT COMPANY IN INDIA SO AS TO ENVISAGE A BUSINESS CONNECTION; (II) THE SUPPLY OF SPARE PARTS WAS ALSO TO BE ON F .O.B. TERMS, AND, AS IN INDIA TO CONSTITUTE BUSINESS CONNECTION; AND (III) SO FAR AS THE DEPUTATION OF THE FOREIGN PERSO NNEL FOR ERECTION MACHINERY IS CONCERNED, SUCH PERSONNEL BECAME EMPLO YEES OF TH4E INDIAN COMPANY AND THE FOREIGN COMPANY WAS NOT RESPONSIBLE OR THE ERECTION OF THE MACHINERY AS SUCH. IT WAS NOT LIKE A TURNKEY PR OJECT WHERE THE RESPONSIBILITY OF TH4E FOREIGN COMPANY WOULD CONTIN UE TILL THE MACHINERY IS ACTUALLY RUN AND PROVES ITS PERFORMANCE. THUS, THERE WAS ABSOLUTELY NO OPERATION IN INDIA W HICH WOULD GIVE RISE TO A TAX LIABILITY IN INDIA AS FAR AS THE FORE IGN COMPANY WAS CONNECTED AND TRIBUNAL WAS, THEREFORE, RIGHT IN ITS CONCLUSION. LEARNED C I T(A) RELIED UPON THE DECISION IN THE CASE OF WA LLACE PHARMACEUTICAL PVT. LTD. (SUPRA) IN WHICH APPLICANT WAS A INDIAN C OMPANY AND TAX 8 RESIDENT OF INDIA. PENSER IS TAX RESIDENT OF USA BU T OPERATING INTERNATIONALLY. IT WAS FOUND FROM FACTS THAT PENSE R HAS RENDERED CONSULTANCY SERVICES IN INDIA, THEREFORE, CONSULTAN CY FEES WAS HELD TO BE DEEMED INCOME OF PENSER IN INDIA. THE FACTS OF THIS CASE ARE THEREFORE, CLEARLY DISTINGUISHABLE FROM THE FACTS OF THIS CASE . CONSIDERING THE FACTS ON THIS ISSUE AND IN THE ABSENCE OF SPECIFIC FINDIN G AND MATERIAL BROUGHT ON RECORD BY THE A O, WE DO NOT FIND ANY JUSTIFICAT ION TO SUSTAIN THE FINDINGS OF AUTHORITIES BELOW. WE ACCORDINGLY SET A SIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ENTIRE DISALLOWANC E. AS A RESULT, GROUND NO.7 IN THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. WE HAVE HEARD THE LD. DR ALSO. SINCE THE FACTS A ND CIRCUMSTANCES OF THE CASE ARE THE SAME AS IN EARLIER YEARS, RESPE CTFULLY, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, AS ABOVE, WE DELETE THE ADDITION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 10. GROUND NO.3 THE ISSUE IS REGARDING FOREIGN EX CHANGE LOSS OF RS.1,37,24,677/-. THE ASSESSEE HAD INCURRED FOREIGN EXCHANGE LOSS OF RS.1,37,24,677/- ON ACCOUNT OF AMOUNTS PAYABLE TO K VAERNER CEMENTATION INTERNATIONAL LTD., THE SUB-CONTRACTOR OF THE DAHEJ PROJECT OF THE ASSESSEE IN RESPECT OF THE ADDITIONAL CLAIM ON COLLAPSE OF STEEL PILES. THE AO IN THIS REGARD OBSERVED THAT IN ASST. YEAR 2 001-02 ALSO SIMILAR CLAIM OF ADDITIONAL EXPENDITURE WAS CLAIMED WHICH W AS NOT ALLOWED. THEREFORE, CONSEQUENTLY LOSS FOR ASST. YEAR 2002-03 ON ACCOUNT OF FLUCTUATION IN THE FOREIGN EXCHANGE RATE ALSO CANNO T BE ALLOWED. THE ASSESSEE MADE AN ALTERNATIVE CLAIM FOR ALLOWANCE OF PROPORTIONATE LOSS BUT THE SAME WAS ALSO DISALLOWED BY THE AO, ON THE GROU ND THAT RELATED AMOUNT HAS NOT BEEN INCLUDED IN THE AMOUNT OUTSTAND ING AS PAYABLE TO KVAERNER CEMENTATION INTERNATIONAL LTD. IN THIS REG ARD WE REFER TO THE FOLLOWING OBSERVATIONS OF THE AO. THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED AND IT IS DIFFICULT TO CORRELATE THE AMOUNT OF RS.9,13,58,997/- WHICH HAS BEEN ALLOWED AS A 9 LOSS IN THE ASST. YEAR 2001-02 WITH THE AMOUNT OUTS TANDING AND SHOWN AS PAYABLE TO KVAERNER CEMENTATION INTERNATIONAL LTD. THE AMOUNT OF LOSS OF RS.9,13,58,997/- IS IN RESPECT OF THE COLLAPSE O F STEEL PILES WHILE THE AMOUNT PAYABLE TO KVAERNER CEMENTATION INTERNATIONA L LTD. IS IN RESPECT OF ADDITIONAL CLAIM OF LOSS OF RS.34,25,18, 121/-. SINCE THIS AMOUNT OF RS.9,13,58,997/- IS NOT BEEN INCLUDED IN THE AMOUNT OUTSTANDING AS PAYABLE TO KVAERNER CEMENTATION INTERNATIONAL LTD., THE PROPORTIONATE FOREIGN EXCHANGE LOSS ON ACCOUNT OF FLUCTUATION IN FOREIGN EXCHANGE RATE CANNOT BE ALLOWED. THEREFORE, THE WHOLE AMOUNT OF F OREIGN EXCHANGE LOSS OF RS.1,37,24,677/- IS DISALLOWED. 11. THE LD. CIT(A) CONFIRMED THE ADDITION ON THE BA SIS OF DECISION OF THE TRIBUNAL AS UNDER :- 3.3 THE MATTER HAS BEEN CONSIDERED AND I AM AFRAID THE APPELLANTS STAND CANNOT BE ACCEPTED. THE ISSUE OF ALLOWABILITY OF LOSS INCURRED DUE TO THE COLLAPSE OF STEEL PILES STANDS ADJUDICATED B Y ITAT VIDE ITS ORDER IN ITA NOS.2924 AND 2925/AHD/2002 AND ITA NOS.1224 AND 3462/AHD/2004 DATED 25/08/2005. THE SAID ORDER IN PARA 26 CONCLUD ES THE ISSUE AS FOLLOWS: FROM THE TOTALITY OF THE ABOVE FACTS, WE ARE OF TH E CONSIDERED OPINION THAT THE LOSS SUFFERED OR EXTRA EXPENDITURE INCURRED DUE TO COLLAPSE OF STEEL PIPES WAS THE RESPONSIBILITY OF T HE SUB-CONTRACTOR I.E. K.C. INDIA AND THE ASSESSEE WAS NOT REQUIRED T O MAKE ANY PAYMENT THEREFORE. IF THE ASSESSEE HAS MADE VOLUNTA RY PAYMENT THEREFORE, THE SAME CANNOT BE ALLOWED AS EXPENDITUR E IN THE HANDS OF THE ASSESSEE BECAUSE THE SAME CANNOT BE HELD TO BE BUSINESS EXPENDITURE OF THE ASSESSEE. 3.4 THEREFORE, THE GROUND ON WHICH THE CLAIM HAS BE EN DISALLOWED IS THAT THE EXPENSES ARE NOT BUSINESS IN NATURE. THERE FORE, IN SUCH CIRCUMSTANCES TO GIVE A DIFFERENT TREATMENT TO FORE IGN EXCHANGE LOSS DUE TO CURRENCY FLUCTUATIONS SHALL BE A CONTRADICTORY I N TERMS. 12. WE HAVE HEARD THE PARTIES. THE LD. AR FAIRLY CO NCEDED THAT THE ISSUE IS COVERED AGAINST HIM BY THE DECISION OF THE TRIBUNAL AS REFERRED TO BY LD. CIT(A) AND SINCE THE ASSESSEE HAS MOVED HON. GUJARAT HIGH COURT 10 AGAINST THAT ORDER, IT MAY PREFER AN APPEAL FOR THI S YEAR ALSO AND, THEREFORE, IN ANY CASE AT THIS STAGE THE TRIBUNAL HAS TO FOLLO W THE DECISION OF THE PREVIOUS YEAR. 13. WE NOTICE THAT THE TRIBUNAL HAD DISALLOWED THE CLAIM OF LOSS IN ASST. YEAR 1998-99 & 1999-2000 VIDE ITS ORDER IN IT A NOS.2924 AND 2925/AHD/AHD/2002 PRONOUNCED ON 25.8.2005 VIDE PARA 20,21,22,23,24 & 25 HOLDING THAT SUCH LOSS ON ACCOUNT OF COLLAPSE OF STEEL PILES WAS THE RESPONSIBILITY OF THE SUB-CONTRACTOR. EVEN THE INSU RANCE CLAIM WOULD BE COVERED IN THE CASE OF SUB-CONTRACTOR NOT IN THE CA SE OF THE ASSESSEE. THEREFORE, ONCE MAIN LOSS, IN RESPECT OF WHICH FURT HER LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION HAS BEEN CLAIMED, IS N OT ALLOWABLE IN THE CASE OF ASSESSEE THEN FURTHER LOSS ON ACCOUNT OF FO REIGN EXCHANGE FLUCTUATION ON THE EARLIER AMOUNT OF LOSS, CANNOT B E ALLOWED. THUS THIS GROUND OF ASSESSEES CROSS OBJECTION IS DISMISSED. 14. ACCORDINGLY, THE CROSS OBJECTION IS PARTLY ALLO WED. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 02/07/2010 SD/- SD/- (MAHAVIR SINGH) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 02/07/2010 MAHATA/- 11 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD