M/s Swastik Pipes Ltd., New Delhi V. ACIT, New Delhi

CO 31/DEL/2014

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3707 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 20-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 22-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: ASISH CHADHA ADVOC; CROSSOBJECTOR SHRI VED JAIN
• Keywords: Capital asset; Depreciation; Business expenditure; Rule of consistency; Bonafide belief; Cost of acquisition; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 194C; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA.NOS.4638, 4639 & 4640/DEL./2013 ASSESSMENT YEARS 2007-2008, 2008-2009 & 2009-2010 THE ACIT, CENTRAL CIRCLE-13, ROOM NO.332, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI. VS M/S. SWASTIK PIPES LTD., 4, CENTRAL MARKET, WEST AVENUE, WEST PUNJABI BAGH, NEW DELHI. PAN AAACS0322C (APPELLANT) (RESPONDENT) CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 ARISING OUT OF ITA.NOS.4638, 4639 & 4640/DEL./2013 ASSESSMENT YEARS 2007-2008, 2008-2009 & 2009-2010 M/S. SWASTIK PIPES LTD., 4, CENTRAL MARKET, WEST AVENUE, WEST PUNJABI BAGH, NEW DELHI. PAN AAACS0322C VS THE ACIT, CENTRAL CIRCLE-13, ROOM NO.332, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI. (CROSS-OBJECTOR) (RESPONDENT) FOR REVENUE : SHRI S.S. RANA, CIT - D.R. FOR CROSS-OBJECTOR : SHRI VED JAIN, AND SHRI ASISH CHADHA, ADVOCATES DATE OF HEARING : 27.03.2018 DATE OF PRONOUNCEMENT : 18.04.2018 2 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ORDER PER BHAVNESH SAINI, J.M. THIS ORDER SHALL DISPOSE-OFF ALL THE ABOVE DEPARTMENTAL APPEALS AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ON IDENTICAL ISSUES. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE APPEALS ARE DECIDED ISSUE-WISE AS UNDER. ITA.NO.4638/DEL./2013 REVENUE APPEAL & C.O.NO.30/DEL./2014 ASSESSEE (A.Y. 2007-2008) 3. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECT ION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE L D. CIT(A)-1, NEW DELHI, DATED 27 TH MAY, 2013, FOR THE A.Y. 2007-2008. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROU ND NOS. 1 TO 5 OF THE CROSS OBJECTION, THE SAME ARE DISMISSED AS NOT PRESSED. GROUND NO.1 IN DEPARTMENTAL APPEAL IS GENE RAL AND NEED NO ADJUDICATION. 3 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ISSUE NO.1 : 4. ON GROUND NO.2, THE REVENUE CHALLENGED THE ORDE R OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.29,03 ,991/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF INLAND HA ULAGE FOR EXPORT CONSIGNMENT, ON WHICH, TDS WAS NOT DEDUCTED. THE ASSESSEE ON GROUND NO.6 OF THE CROSS-OBJECTION CHAL LENGED THE SUSTAINING OF ADDITION OF RS.3,22,666/- ON THE SAME ISSUE. 4.1. THE A.O. MADE THE ADDITION OF RS.32,26,657/- ON ACCOUNT OF INLAND HAULAGE ON EXPORT CONSIGNMENT BEC AUSE THE ASSESSEE HAS NOT DEDUCTED TDS ON THE SAME PAYMENT A S PER SECTION 194C OF THE I.T. ACT. 4.2. THE ASSESSEE CHALLENGED THE ADDITION BEFORE L D. CIT(A). THE SUBMISSION OF THE ASSESSEE IS REPRODUCE D IN THE APPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLA INED THAT ALL THESE INLAND HAULAGE CHARGES ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES PAID TO THE CLEARING AND FORWARDING AGENTS ON BEHALF OF ASSESSEE TO THE SHIPPING COMPAN Y AND 4 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. THUS, INLAND HAULAGE CHARGES ARE NOT LIABLE TO TDS. THE A.O. DISALLOWED THE SAME BY STATING THAT THESE PAYMENTS ARE MADE AGAINST THE BILLS OF CLEARING AND FORWARDING AGENTS TOWARDS INLAND HAULAGE AND WAS OF OPINION THAT THESE EXPENS ES ARE NOT MERE REIMBURSEMENT OF EXPENSES. THE A.O. HAS IGNORE D THE FACT THAT ASSESSEE IS IN THE BUSINESS OF EXPORT OF VARIO US ITEMS OF IRON AND STEEL. THE SERVICES OF CARRYING AND FORWAR DING AGENTS ARE IMPORTANT IN THE BUSINESS OF EXPORT SO AS TO MA KE THE GOODS WHICH IN THE INSTANT CASE IS H.R. COILS AVAILABLE T O THE BUYERS IN A SHORT SPAN OF TIME AS THESE AGENTS POSSESS THE RE QUIRED EXPERTISE IN SHIPPING THE CONSIGNMENT TO FAR REACHE D PLACES. THESE AGENTS UTILISED THE SERVICES OF VARIOUS SHIPP ING COMPANIES AND OTHER FACILITATORS TO WHOM THE PAYMEN TS ARE MADE FOR RESPECTIVE SERVICES RENDERED BY THEM. ALL THESE EXPENSES INCURRED BY SUCH AGENTS ARE TAKEN FROM THE ASSESSEE IN THE FORM OF REIMBURSEMENT OF EXPENSES AND THUS, HAULAGE CHARGES PAID ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES MADE BY CLEARING AND FORWARDING AGENTS ON BEHALF OF THE 5 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ASSESSEE TO THE SHIPPING COMPANIES. SINCE, THESE AR E REIMBURSEMENT AND NO PAYMENTS HAVE BEEN DIRECTLY MA DE BY ASSESSEE TO SHIPPING COMPANIES, THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS. THE LIABILITY IS UPON THE CLEARING AND FORWARDING AGENTS AND NOT UPON THE ASSESSEE. THE ASSESSEE HAD DRAWN ATTENTION TO THE BILLS RECEIVED FROM VARIOUS PARTIE S TO WHOM INLAND HAULAGE CHARGES HAS BEEN PAID WHICH IS SPECI FICALLY MENTIONED IN THE BILLS AND CHARGED SEPARATELY. IT I S NOT THE CASE THAT THE SAID AMOUNT HAS BEEN CLUBBED TO THE TOTAL CHARGES OF THE SHIPPING AGENT. THE LD. CIT(A) NOTED THAT ASSES SEE HAS PAID RS.32,26,657/- TO ITS C & F AGENT FOR TRANSPORTATIO N OF THE STEEL PIPES BY FREIGHT TRAINS FROM ICD TUGLAKABAD TO SEA PORT AT MUMBAI FOR ONWARD EXPORT BY SHIP TO DIFFERENT COUNT RIES. THE GOODS WERE TRANSPORTED IN CONTAINERS OWNED BY THE C ONTAINER CORPORATION OF INDIA LTD., OR CONCORD. THE ASSESSEE SUBMITTED THAT BOTH THESE CHARGES WERE CONTAINED IN THE BILLS RAISED BY C & F AGENTS AND IT WOULD NOT BE POSSIBLE TO ASCERTAIN THE EXACT BREAK-UP AS IT WAS CONFIDENTIAL FINANCIAL INFORMATION 6 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. THAT THE C & F AGENTS WOULD NOT LIKE TO PART WITH, BUT, BULK OF THE PAYMENTS ARE REIMBURSED BY THE ASSESSEE TO C & F AGENTS. THE LD. CIT(A) NOTED THAT ASSESSEE DID THE SAME ON BONAFIDE BELIEF THAT SUCH PAYMENTS ARE NOT COVERED BY THE PR OVISIONS OF SECTION 194C OF THE I.T. ACT. THE ASSESSEE USED DIF FERENT C & F AGENTS AND IN SUBSEQUENT YEAR, ASSESSEE STARTED DED UCTING TDS. PAYMENTS TO C & F AGENTS ARE MADE WHO HAVE MAD E FURTHER PAYMENTS TO SHIPPING AGENTS. THE LD. CIT(A) ALSO HELD THAT RAIL FREIGHT CHARGES ARE NOT EXIGIBLE TO TDS A S PER NOTIFICATION OF CONCORD. THEREFORE, LD. CIT(A) DELE TED THE ADDITION BY RESTRICTING THE ADDITION TO 10%. THE AD DITION WAS, THEREFORE, RESTRICTED TO RS.3,22,666/- AND ASSESSEE WAS GRANTED RELIEF OF RS.29,03,991/-. BOTH PARTIES ARE IN APPEA L AND CROSS OBJECTION. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT ENTIRE ADDITION IS LIABLE TO BE DELETED. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE THE AUTHORITIES BELOW. HE HAS SUBMITTED THAT EXPENSES A RE IN THE 7 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. NATURE OF REIMBURSEMENT, THEREFORE, ASSESSEE IS NOT LIABLE TO DEDUCT TDS. HE HAS RELIED UPON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT NARMADA V ALLEY FERTILIZERS CO. LTD., (2014) 361 ITR 192 (GUJ.) IN WHICH IT WAS HELD THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) R ELATED TO REIMBURSEMENT OF EXPENSES TO C & F AGENTS CAN BE MA DE. HE HAS SUBMITTED THAT SLP OF THE DEPARTMENT HAS BEEN D ISMISSED VIDE ORDER DATED 14 TH JANUARY, 2014. COPIES OF THE SAME ARE FILED ON RECORD. HE HAS SUBMITTED THAT SAME VIEW HA VE BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. ONS CREATIONS PVT. LTD., IN ITA.NO.1279/2011 VIDE O RDER DATED 14.12.2011, ORDER OF ITAT, DELHI BENCH IN THE CASE OF SURINDER KUMAR VS. ACIT DATED 16 TH JUNE, 2015, ORDER OF ITAT, MUMBAI BENCH IN THE CASE OF ACIT VS. PARAMOUNT FORGE DATED 24 TH FEBRUARY, 2015 AND ORDER OF ITAT, AHMEDABAD BENCH I N THE CASE OF PRAYAS ENGINEERING LTD., VS. ADDL. CIT DATE D 29 TH APRIL, 2014. COPIES OF THE SAME ARE FILED ON RECORD. LEARN ED COUNSEL 8 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. FOR THE ASSESSEE ALSO SUBMITTED THAT CIT(A) DISALLO WED 10% OF SUCH EXPENSES MERELY ON PRESUMPTION. 6. THE LD. D.R. ON THE OTHER HAND RELIED UPON THE ORDERS OF THE A.O. AND SUBMITTED THAT SINCE NO TDS WAS DED UCTED, THEREFORE, ADDITION SHOULD BE MAINTAINED. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSIONS OF THE PARTIES AND CASE LAW CITED BY LE ARNED COUNSEL FOR THE ASSESSEE, WE ARE OF THE VIEW THAT T HE ENTIRE ADDITION IS LIABLE TO BE DEDUCTED. IT IS A FACT THA T ASSESSEE PAID THE ENTIRE AMOUNT TO ITS C & F AGENTS FOR TRANSPORT ATION OF GOODS FOR ONWARD EXPORT BY SHIPPING TO DIFFERENT COUNTRIE S. THE GOODS WERE TRANSPORTED THROUGH CONTAINER CORPORATION OF I NDIA LTD., OR CONCORD. THE ASSESSEE MADE PAYMENTS TO THE C & F AGENTS WHO HAVE MADE FURTHER PAYMENTS TO THE SHIPPING COMP ANIES. ALL THESE EXPENSES WERE INCURRED BY THE AGENTS WHO HAVE THEN TAKEN IT FROM THE ASSESSEE IN THE FORM OF REIMBURSE MENT OF EXPENSES. SINCE, THESE PAYMENTS ARE IN THE FORM OF REIMBURSEMENT AND NO PAYMENTS HAVE BEEN MADE DIRECT LY BY 9 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. THE ASSESSEE TO SHIPPING COMPANIES, THEREFORE, ASSE SSEE IS NOT LIABLE TO DEDUCT TDS. THE ASSESSEE PRODUCED DOCUMEN TARY EVIDENCES IN SUPPORT OF THE SAME CONTENTION WHICH H AVE NOT BEEN REBUTTED BY THE AUTHORITIES BELOW. SINCE THE A MOUNT IN QUESTION WERE TOWARDS THE REIMBURSEMENT OF THE EXAC T AMOUNT WHICH HAVE BEEN PAID TO THE SHIPPING COMPANIES AND OTHERS, THEREFORE, ASSESSEE IS NOT LIABLE TO DEDUCT TDS. TH E ISSUE IS COVERED BY THE JUDGMENTS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. THEREFORE, LD. CIT(A) WAS NOT JUS TIFIED IN MAKING ADHOC ADDITION OF 10% MERELY ON PRESUMPTIONS . THE ENTIRE ADDITION IS LIABLE TO BE DELETED. WE, ACCORD INGLY, CONFIRM THE ORDER OF THE LD. CIT(A) IN DELETING THE SUBSTAN TIAL ADDITION. FURTHER, ORDER OF LD. CIT(A) IS ALSO SET ASIDE TO D ELETE THE ADDITION OF RS.3,22,666/-. THE DEPARTMENTAL APPEAL FAILS AND CROSS OBJECTION OF ASSESSEE IS ALLOWED. ISSUE NO.1 DECIDED IN FAVOUR OF ASSESSEE. 10 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ISSUE NO.2 : 8. ON GROUND NO.3 OF THE DEPARTMENTAL APPEAL, REVE NUE CHALLENGED THE DELETION OF ADDITION OF RS.21,05,632 /- MADE BY A.O. ON ACCOUNT OF DISALLOWANCE OF FREIGHT PAYMENTS TO CONSIGNMENT AGENTS WITHOUT DEDUCTION OF TDS. 8.1. THE A.O. MADE THE ADDITION OF THE ABOVE AMOUN T ON ACCOUNT OF FREIGHT REIMBURSEMENT TO CONSIGNMENT AGE NTS. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT (A) AND WRITTEN SUBMISSIONS OF THE ASSESSEE WERE REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLA INED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF STEEL PIPES, TUBES AND TRADING OF H.R. COILS ETC., THE TR ADING OF H.R. COILS AND VARIOUS OTHER ITEMS IS DONE MAJORLY BY WA Y OF EXPORTS. CONSIDERING THE QUANTUM OF EXPORT SALES MADE DURING THE YEAR UNDER CONSIDERATION, SERVICES OF VARIOUS CONSIGNMEN T AGENTS ARE UNDERTAKEN. IN CONSIGNMENT, THE AGENT INCURS AL L THE EXPENDITURE IN CONNECTION WITH SALES WHICH WERE THE N EITHER REIMBURSED TO THEM OR DEDUCTED FROM THE GROSS AMOUN T OF SALES. 11 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. IN THE INSTANT CASE, THE MATERIAL FOR SALE IS SUPPL IED TO THESE AGENTS. IT IS THE DUTY OF THE CONSIGNMENT AGENT TO INCUR ALL EXPENSES AS AND WHEN REQUIRED TO MAKE THE SALES LIK E FREIGHT EXPENSES, INSURANCE CHARGES ETC., AND AFTER DEDUCTI NG VARIOUS EXPENSES INCURRED ON ITS OWN, THE REMAINING AMOUNTS IS REMITTED BACK TO THE ASSESSEE. THE ACTUAL PAYMENT O F FREIGHT HAD BEEN MADE BY THE CONSIGNMENT AGENTS AND NOT BY THE ASSESSEE. THE ASSESSEE PRODUCED SUFFICIENT EVIDENCE BEFORE THE AUTHORITIES BELOW TO INDICATE THE SALE PROCEEDS NET OF FREIGHT PAYMENT MADE BY AGENT ON BEHALF OF THE ASSESSEE. IT WOULD SHOW THAT ASSESSEE SIMPLY INTERESTED WITH THE NET A MOUNT THAT HAVE BEEN RECEIVED FOR THE SALE MADE BY CONSIGNMENT AGENTS. THERE IS NO CONTROL OF ASSESSEE ON THE EXPENDITURE INCURRED BY THE SAID CONSIGNMENT AGENTS. ON THE BASIS OF THE IN VOICES RAISED BY THE AGENTS TOWARDS FREIGHT PAYMENT, THE A MOUNT WOULD BE PAID TO THE CONSIGNMENT AGENTS. THEREFORE, ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON PAYMENTS MADE BY CON SIGNMENT AGENTS TO VARIOUS PARTIES. THE BILLS SPECIFICALLY H IGHLIGHT THE 12 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. QUANTUM OF EXPENSES INCURRED BY THE AGENTS ON BEHAL F OF THE ASSESSEE. THE DOCUMENTARY EVIDENCES HAVE NOT BEEN D ISPUTED BY THE AUTHORITIES BELOW. 8.2. THE LD. CIT(A) NOTED THAT ASSESSEE U SED THE SERVICES OF CONSIGNMENT AGENTS TO SELL ITS BULK PRODUCTS ABR OAD. THE ASSESSEE RAISES BILLS ON THE CONSIGNMENT AGENTS AND IN TURN, THE CONSIGNMENT AGENTS RAISES SALE INVOICES SHOWING TOTAL SALE PROCEEDS AND ITS OTHER EXPENSES INCLUDED FREIGHT AN D REMIT TO THE ASSESSEES SALE PROCEEDS NET OF ITS EXPENSES. T HE CASE OF THE REVENUE IS BASED ON THE FACT THAT THE EXPENSES CHAR GED BY THE CONSIGNMENT AGENTS HAVE AN ELEMENT OF FREIGHT/SHIPP ING CHARGES AND THE FACT THAT ASSESSEE WAS NOT IN POSSE SSION OF DOCUMENTS TO SUPPORT THESE PAYMENTS. THE CASE OF TH E ASSESSEE HAS BEEN THAT IT HAS NO CONTROL OVER THE REIMBURSAB LE EXPENSES INCURRED BY THE CONSIGNMENT AGENTS. THE LD. CIT(A), THEREFORE, HELD THAT PAYMENT OF THE FREIGHT ARE MADE BY THE CO NSIGNMENT AGENTS AND NOT BY ASSESSEE. THE ASSESSEE EVEN DOES NOT KNOW THE TRANSPORTER OR THE SHIPPING AGENT. IT IS ARRANG ED BY THE 13 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. CONSIGNMENT AGENT ONLY. THERE IS NO CONTACT BETWEEN THE ASSESSEE AND DIFFERENT TRANSPORTERS/SHIPPING AGENTS . THE LD. CIT(A), THEREFORE, HELD THAT ASSESSEE NEED NOT TO D EDUCT TDS. ADDITION WAS ACCORDINGLY, DELETED. 8.3. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE LD. D.R. SUBMITTED THAT ASSESSEE HAS INCURRED THE EXPEN SES AND DOCUMENTS HAVE NOT BEEN CONSIDERED BY THE LD. CIT(A ). IT IS OBLIGATION OF THE ASSESSEE TO DEDUCT TDS ON FREIGHT PAYMENT. 8.4. ON THE OTHER HAND, LEARNED COUNSEL FOR THE AS SESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT IT WAS AN OBLIGATION ON THE CONS IGNMENT AGENT TO PAY THE FREIGHT CHARGES, THEREFORE, ASSESS EE IS NOT LIABLE TO DEDUCT TDS. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSIONS OF THE PARTIES AND MATERIAL ON RECORD, IT IS CLEAR THAT THESE PAYMENTS ARE FREIGHT PAYMENTS TO CONSIGN MENT AGENTS. THE SERVICES OF VARIOUS CONSIGNMENT AGENTS ARE UNDERTAKEN BY ASSESSEE WHO INCURRED THE EXPENSES IN 14 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. CONNECTION WITH SALES WHICH ARE THEN REIMBURSED TO THEM OR DEDUCTED FROM THE GROSS AMOUNT OF SALES. THE ACTUAL PAYMENT OF FREIGHT CHARGES ARE MADE BY THE CONSIGNMENT AGEN TS. THE ASSESSEE WOULD GET THE SALE PROCEEDS NET OF THESE E XPENSES. THE LD. CIT(A) WAS, THEREFORE, JUSTIFIED IN HOLDING THA T FREIGHT PAYMENTS ARE MADE BY THE CONSIGNMENT AGENTS ONLY AN D EVEN THE ASSESSEE MAY NOT AWARE OF DIFFERENT TRANSPORTER S, SHIPPING AGENTS, THEREFORE, IT WOULD IMPOSSIBLE FOR ASSESSEE TO DEDUCT TDS ON SUCH PAYMENTS. LD. CIT(A), THEREFORE, CORREC TLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF REVENUE FAIL S AND IS DISMISSED. ISSUE NO.3 : 9. ON GROUND NO.4, REVENUE CHALLENGED THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.8,54,521/ - ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENDITURE CLAIMED AS R EVENUE EXPENDITURE BY THE ASSESSEE. 9.1. THE A.O. MADE THE ABOVE ADDITION HOLDING THE EXPENDITURE TO BE CAPITAL IN NATURE. THE ASSESSEE S UBMITTED 15 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. BEFORE THE LD. CIT(A) THAT AMOUNTS WERE PAID TO THR EE PARTIES, DETAILS OF WHICH ARE NOTED IN PARA 8.1 OF THE APPEL LATE ORDER. THE PACKING EXPENSES WERE PAID TO WOOD GROUP INDUSTRY, ERP MAINTENANCE EXPENSES ARE PAID TO M/S. TRIDENT INFOR MATION SYSTEM AND M/S. TULIP INFORMATION SYSTEM AND COMPUT ER REPAIRS AND EXPENSES ARE PAID TO M/S. TRIDENT INFOR MATION SYSTEM. 9.2. THE ASSESSEE HAS PURCHASED D.G. SET FOR COST OF RS.56 LAKHS. THESE GENERATOR SETS WERE IMPORTED FRO M THE COMPANY SITUATED IN FRANCE. THESE GENERATOR SETS BE ING OF SPECIAL NATURE AND OF HIGH VALUE ITEMS REQUIRED SPE CIALIZED PACKING. THE COST OF THESE SPECIALIZED PACKING WAS NOT PART AND PARCEL OF GENERATOR SET. THE A.O. DISALLOWED PACKAG ING CHARGES HOLDING THE SAME TO BE CAPITAL EXPENDITURE, THOUGH, NO CAPITAL HAVE BEEN GENERATED. THE ASSESSEE MADE FURTHER PAYM ENTS BECAUSE THE ASSESSEE HAS INSTALLED ERP SYSTEM ON WH ICH, COMPLETE BUSINESS PROCESS IS DONE. IT INTEGRATES AL L DATA AND PROCESSES OF AN ORGANISATION INTO ONE SINGLE AND CE NTRALIZED 16 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. SYSTEM. IT WAS INSTALLED IN F.Y. 2004-2005 WHEN IT WAS INITIALLY PURCHASED. THEREAFTER, AS AND WHEN NUMBER OF USER I NCREASES, THE FRESH LICENSES/ACCESS ARE BROUGHT. THIS SYSTEM ALSO REQUIRES REGULAR MAINTENANCE. IN THIS ERA OF MODERNIZATION, WHERE THERE ARE REGULAR INNOVATIONS IN TECHNOLOGY, REGULAR KEEP -UP AND UPGRADATION OF TECHNOLOGY IS ESSENTIAL. THE A.O. DI SALLOWED LICENSE-FEES PAID FOR UPGRADATION OF THE SYSTEM. IT WAS SUBMITTED THAT THESE ARE REVENUE EXPENDITURE. FURTH ER, PAYMENTS WERE MADE FOR INTERNET CONNECTIVITY FOR LI NKING PUNE OFFICE WITH HEAD OFFICE. THE A.O. FAILED TO UNDERST AND THAT INSTALLATION OF 32 KBPS CONNECTIVITY HAS NOT RESULT ED IN THE EXISTENCE/ACQUISITION OF ANY ASSET OR EQUIPMENT. TH ESE ARE NOT CAPITAL EXPENDITURE. THE LD. CIT(A), CONSIDERING TH E MATERIAL ON RECORD HELD THAT EXPENDITURE OF PACKAGING AND TRANS PORTATION CANNOT BE CONSIDERED AS COST OF ACQUISITION OF CAPI TAL ASSET AND ARE ALLOWABLE AS REVENUE EXPENDITURE. FURTHER, EXPE NSES WERE INCURRED FOR ACQUISITION OF SOFTWARE OR INSTALLATIO N CHARGES FOR LEASED LINE CONNECTIVITY ETC., FOR THE PURPOSE OF U PGRADING THE 17 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. EXISTING ERP SOLUTION AND, IN VIEW OF HIGH ATTRITIO N AND OBSOLESCENCE OF THE TECHNOLOGY, THE SAME ARE ALLOWA BLE AS REVENUE EXPENDITURE. THE LD. CIT(A), ACCORDINGLY, D ELETED THE ADDITION. 9.3. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O . AND SUBMITTED THAT ERP IS CAPITAL EXPENDITURE. SO, THE EXPENSES WERE CAPITAL IN NATURE. 10. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT THERE IS ONLY IMPROVEMENT IN THE YEAR. SOFTWARE EXPENSES ARE ALLOWABLE EXPENDITURE. IN CAS E THE EXPENSES INCURRED ON DG SET ARE DISALLOWED, DEPRECI ATION MAY BE GRANTED TO ASSESSEE. HE HAS SUBMITTED THAT SOFTW ARE EXPENSES ARE REVENUE EXPENDITURE AND RELIED UPON DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASA HI INDIA SAFETY GLASS LTD., (2012) 346 ITR 329 AND CIT VS. A MWAY ENTERPRISES (2012) 346 ITR 341. 18 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATT ER. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION O F THE HONBLE DELHI HIGH COURT ABOVE IN WHICH IT WAS HELD THAT EX PENSES INCURRED BY ASSESSEE ON ACCOUNT OF SOFTWARE AND PRO FESSIONAL EXPENSES ARE REVENUE EXPENDITURE IN NATURE. THE ASS ESSEE FURTHER EXPLAINED THAT ASSESSEE PURCHASED D.G. SET COSTING RS.56 LAKHS WHICH WAS IMPORTED FROM FRANCE. SINCE, GENERATOR SETS WERE SPECIAL IN NATURE AND OF HIGH VALUE ITEMS , REQUIRED SPECIALIZED PACKING, THE COST OF THE PACKING WAS TH US NOT PART AND PARCEL OF THE GENERATOR SET. THE EXPLANATION OF ASSESSEE HAVE NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. SI NCE THE COST OF THE PACKING WAS NOT INCLUDED IN THE COST OF D.G. SET AND IT WAS SPENT FOR BRINGING THE GENERATOR SET TO THE PRE MISES OF THE ASSESSEE, IT WAS INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS. THEREFORE, IT WAS RIGHTLY HELD TO BE R EVENUE IN NATURE. FURTHER, OUT OF PACKING NO ASSETS HAVE BEEN CREATED IN FAVOUR OF THE ASSESSEE. THE OTHER AMOUNT WAS INCURR ED BY 19 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ASSESSEE FOR UPGRADATION OF SOFTWARE OR INSTALLATIO N CHARGES OR BETTER INTERNET CONNECTIVITY FOR BUSINESS PURPOSES. THEREFORE, SAME ARE REVENUE IN NATURE. THE LD. CIT(A) ON PROPE R APPRECIATION OF FACTS AND MATERIAL ON RECORD, CORRE CTLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF REVENUE IS F AILS AND ACCORDINGLY DISMISSED. ISSUE NO.4 : 12. ON GROUND NO.5, THE REVENUE CHALLENGED THE ORD ER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.7,63, 248/- ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES. T HE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT IT IS MAINTAIN ING ITS ACCOUNTS ON THE PRINCIPAL ON GOING CONCERN. LIABILITIES/EXPENSES ARE RECORDED AS AND WHEN SAME GETS CRYSTALIZED I.E., WHEN THE BILLS ARE FINALLY RECEIV ED. IN CERTAIN CASES, THE CLEARANCE OF BILLS TAKES TIME DUE TO SOM E CORRECTIONS, DISPUTES, CLARIFICATIONS AND ADDITIONAL SERVICES ET C. THE SAME ARE CLEARED ONLY AFTER THE PENDING ISSUE IS FINALLY DECIDED AND ARE RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS BEEN 20 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. FOLLOWING THE SAME SYSTEM WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. THE LIABILITIES OF THE BILLS CRYSTALIZE D IN ASSESSMENT YEAR UNDER APPEAL, THE DETAILS OF SAME IS REPRODUCE D AT PAGE-24 OF THE APPELLATE ORDER. THE LD. CIT(A) ACCEPTED THE EXPLANATION OF ASSESSEE THAT MANY TIMES DISPUTE ARISE BETWEEN T HE PARTIES AS TO THEIR RESPECTIVE RIGHTS AND ARE LIABILITIES A ND THE COST RELATING THERE TO. THE EXPENSES ARE BOOKED ON CRYST ALLIZATION OF LIABILITY/WHEN DISPUTES ARE SETTLED. IN EARLIER YEA R, SAME METHOD HAVE BEEN ACCEPTED BY THE DEPARTMENT. THE LD. CIT(A ) ACCORDINGLY DELETED THE ADDITION. 13. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT THE EXPENSES PERTAIN TO F.Y. 2005-20 06 WHICH HAVE BEEN RIGHTLY DISALLOWED BY THE A.O. 14. LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. HE HAS SUBMITTED THAT LIABILITY HAS ACTUALLY CRYSTA LIZED DURING ASSESSMENT YEAR UNDER APPEAL. RATE OF TAX IS SAME. THEREFORE, IT IS A MERE TAX NEUTRAL EXERCISE AND RELIED UPON D ECISION OF THE 21 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIN ESH KUMAR GOEL (2011) 331 ITR 10. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE ASSE SSEE HAS GIVEN DETAILS OF ENTIRE EXPENSES WHICH IS REPRODUCE D IN THE APPELLATE ORDER WHICH SHOWS THAT THE BILLS HAVE BEE N RECEIVED IN ASSESSMENT YEAR UNDER APPEAL AND SETTLED. THE LIABI LITIES TO PAY THESE EXPENSES HAVE, THEREFORE, CRYSTALIZED DURING ASSESSMENT YEAR UNDER APPEAL. SAME PRACTICE HAS BEEN FOLLOWED IN EARLIER YEAR, ON WHICH, EXPENSES HAVE BEEN ALLOWED BY THE D EPARTMENT. THEREFORE, RULE OF CONSISTENCY ALSO APPLIES AGAINST THE REVENUE. FURTHER, WHETHER EXPENSES ARE ALLOWED IN THIS YEAR OR IN EARLIER YEAR, IT IS NOT REPORTED AS TO IF REVENUE HAS BEEN DEPRIVED OF ANY TAX. THEREFORE, IT IS A MERE TAX NEUTRAL EXERCISE A ND SUCH EXPENDITURE ARE ALLOWABLE IN ASSESSMENT YEAR UNDER APPEAL. WE, RELY UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NAGRI MILLS CO. LTD., (1958) 33 ITR 681. GROUND NO.5 OF APPEAL OF REVENUE IS ACCORDINGLY DISMISSED. 22 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ISSUE NO.5 : 16. ON GROUND NO.6, REVENUE CHALLENGED THE ADDITIO N OF RS.14,64,445/- MADE ON ACCOUNT OF DISALLOWANCE OF G ENERAL REPAIR AND MAINTENANCE EXPENSES. THE ASSESSEE EXPLA INED BEFORE LD. CIT(A) THAT IT HAS INCURRED EXPENSES FOR VARIOUS TYPES OF ELECTRICAL, MECHANICAL AND ENGINEERING TYPE OF A CTIVITIES WHICH WERE GOT DONE FROM LABOUR ON REGULAR BASIS. LOCAL/C ASUAL LABOUR IS HIRED ON REGULAR BASIS FOR EXECUTION OF VARIOUS TYPES OF ELECTRICAL, MECHANICAL AND ENGINEERING WORKS. THEY ARE BEING PAID SMALL AMOUNTS FOR CARRYING OUT THESE ACTIVITIE S. THE DETAILS OF THE SAME ARE MAINTAINED AND ASSESSEE HAD PRODUCE D THE PAYMENT SHEET. THE LD. CIT(A) ACCEPTED THE CONTENTI ON OF ASSESSEE ON THE BASIS OF DOCUMENTS PRODUCED BEFORE HIM WHICH ARE WAGE ROLLS FOR THE WAGES PAID BY THE ASSESSEE I N ASSESSMENT YEAR. THE SERVICES WERE HIRED ON RATE CONTRACT BASI S AND PAYMENTS ARE RELATING THERETO. THE QUANTUM OF EXPEN DITURE POINTED OUT BY THE REVENUE IS ALSO NOT IN ANY CONSE QUENCE KEEPING IN VIEW THE FACT THAT ASSESSEE RUNS SEVERAL STEEL AND COIL 23 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. MANUFACTURING UNITS AND SUCH EXPENSES ON REPAIRS AN D MAINTENANCE OF THE FACTORY PREMISES ARE NATURALLY R UNNING INTO LAKHS OF RUPEES. LD. CIT(A) ACCEPTED THE EXPLANATIO N OF ASSESSEE AND DELETED THE ADDITION. 17. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT NO SUPPORTING DOCUMENTS HAVE BEEN FI LED. 18. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF REVENUE. THE LD. C IT(A) CORRECTLY APPRECIATED THE FACT THAT FOR REPAIR AND MAINTENANCE, ASSESSEE HAS TO ENGAGE LABOUR FOR WHICH DETAILS ARE MAINTAINED. LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT TO VAR IOUS DOCUMENTS IN THE PAPER BOOK TO SHOW THAT SAME ARE P ROPERLY VOUCHED. SINCE THE EXPENDITURE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THEREFORE, THE SAME WERE CORRECTLY ALLOWED AS DEDUCTION. GROUND NO.6 OF APPEAL OF REVENUE IS DISMISSED. 24 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ISSUE NO.6 : 20. THE REVENUE ON GROUND NO.7 CHALLENGED THE DELE TION OF ADDITION OF RS.1 LAKH ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT A .O. HAD DISALLOWED A SUM OF RS.1 LAKHS ON ACCOUNT OF BAD DE BTS WRITTEN OFF WHICH WERE RECEIVABLE FROM MR. SATYANARAYANA GU PTA. IT WAS SUBMITTED THAT THE AMOUNT WAS WRITTEN OFF IN THE BO OKS OF ACCOUNT AS SAME WERE OUTSTANDING FOR MORE THAN 4-5 YEARS AND HENCE, WERE IRRECOVERABLE. COPIES OF THE ACCOUNTS F OR THIS YEAR AND EARLIER YEARS WERE FILED IN SUPPORT OF THE CONT ENTION. LD. CIT(A), HOWEVER, NOTED THAT THE AMOUNT DOES NOT QUA LIFY AS BAD DEBT BECAUSE IT WAS ADVANCE PAID FOR ACQUISITION OF CAPITAL ASSET. HOWEVER, THE AMOUNT IS ONLY LOSS TO THE ASSE SSEE AND WOULD BE AN ALLOWABLE EXPENDITURE UNDER SECTION 37 OF THE I.T. ACT. THIS GROUND WAS ALLOWED AND ADDITION WAS DELET ED. 21. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW. 25 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 22. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NT FIND ANY MERIT IN THIS GROUND OF APPEAL OF REVENUE. IT I S CLAIMED THAT ASSESSEE HAS GIVEN ADVANCE OF RS.1 LAKHS TO SHRI SA TYANARAYANA GUPTA IN THE COURSE OF BUSINESS. HE DID NOT CARRY O UT HIS OBLIGATION AND ASSESSEE COULD NOT RECOVER THE AMOUN T IN QUESTION. THEREFORE, IT WERE WRITTEN OFF IN ASSESSM ENT YEAR UNDER APPEAL. THIS AMOUNT WAS PAID EARLIER DURING THE COU RSE OF BUSINESS, THEREFORE, IT IS ALLOWABLE AS BUSINESS LO SS. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION O F HONBLE SUPREME COURT IN THE CASES OF BADRIDAS DAGA VS. CIT (1958) 34 ITR 10 (SC) AND CIT VS. NAINITAL BANK LTD., (1965) 55 ITR 707 (SC) IN WHICH IT WAS HELD THAT AS A RESULT OF MISAP PROPRIATION OR LOSS OF CASH BY DACOITY IS AN ADMISSIBLE DEDUCTION. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF DECISIONS CIT ED ABOVE, IT IS CLEAR THAT THE LOSS IS INCIDENTAL TO THE BUSINESS O F THE ASSESSEE WHICH WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT AS I RRECOVERABLE. THEREFORE, IT WAS CORRECTLY ALLOWED AS BUSINESS LOS S BY THE LD. CIT(A). GROUND NO.7 OF THE APPEAL OF REVENUE IS DIS MISSED. 26 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ISSUE NO.7 : 23. ON GROUND NO.8, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.21,50,000/- ON ACCOUNT OF UNEXPLAINE D, UNSECURED LOANS/TRADE DEPOSITS RECEIVED BY ASSESSEE AND DISALLOWANCE OF INTEREST RELATING THERETO AMOUNTING TO RS.7,78,344/-. THE A.O. MADE ADDITION OF THE ABOVE AMOUNT ON ACCOUNT OF UNSECURED LOANS CREDITORS/TRADE DEPOSITS TREATING THE SAME AS UNEXPLAINED AND DISALLOWED INTEREST OF RS.7,78,343/-. THE ASSESSEE SUBMITTED BEFORE THE LD . CIT(A) THAT ADDITION HAS BEEN MADE IN RESPECT OF FOLLOWING LOANS/TRADE DEPOSITS. SL.NO. PARTY AMOUNT 1. GRA WA L STEEL & HOLDING ( P ) LTD., RS. 7,00,000 2. LEE ROY SECURITIES PVT. LTD., RS. 4,00,000 3. M/S. NIRMAL PIPES RS. 2,00,000 4. M/S. MANGLA ENTERPRISES RS. 2,00,000 5. M/S. MADAN L AL GO YA L & SONS RS. 4,50,000 6. M/S. BIYANI TRADERS PVT. LTD., RS. 2,00,000 TOTAL RS.21,50,000 27 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 23.1. THE A.O. MADE THE ADDITION BECAUSE INCOME OF THESE PARTIES WERE VERY LESS AND ASSESSEE HAS FAILED TO E STABLISH THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE EXPLAI NED EACH AND EVERY FACT WITH REGARD ALL THESE PARTIES AND SU BMITTED THAT IN CASE OF CREDITORS, THE ASSESSEE FILED CONFIRMATI ONS, BANK STATEMENTS, INCOME TAX RETURN AND BALANCE SHEET. TH E BALANCE SHEET OF THESE CREDITORS SHOW THEY ARE HAVING SUFFI CIENT FUNDS TO MAKE INVESTMENT IN ASSESSEE COMPANY. IF A.O. WAS NO T SATISFIED WITH THE EXPLANATION OF ASSESSEE, HE COULD HAVE VER IFIED THE FACTS DIRECTLY FROM THE PARTIES OR ASK THE ASSESSEE TO PR ODUCE THEM BEFORE A.O. FOR EXAMINATION. HOWEVER, NOTHING HAVE BEEN DONE. ALL THE LOANS HAVE BEEN TAKEN THROUGH BANKING CHANN EL. THE CREDITORS HAVE REGULAR CREDIT ENTRIES IN THE FORM O F CASH AND CHEQUE. THE AMOUNTS GIVEN TO THE ASSESSEE HAVE NOT BEEN FUNDED BY CASH TRANSACTION ONLY. IN RESPECT OF THRE E CREDITORS M/S. BIYANI TRADERS PVT. LTD., M/S. NIRMAL PIPES AN D M/S. MANGLA ENTERPRISES, IT WAS ALSO EXPLAINED THAT THEY ARE TRADE CREDITORS AND ASSESSEE MADE SUBSTANTIAL SALES TO TH EM AND 28 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. THESE ARE THE AMOUNTS RECEIVED AS SECURITY FOR ALLO WING CREDIT AGAINST SALE TO THESE PARTIES. THE DETAILS OF THE S AME ARE ALSO NOTED IN THE APPELLATE ORDER. IT WAS, THEREFORE, EX PLAINED THAT ASSESSEE PROVED IDENTITY OF THE CREDITORS, THEIR CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. 24. THE LD. CIT(A) NOTED THAT SIMILAR GROUND HAVE BEEN DECIDED BY HIM IN FAVOUR OF THE ASSESSEE FOR A.YS. 2003-2004 TO 2006-2007. FOLLOWING HIS ORDER FOR THESE YEARS, HE HAS DELETED THE ADDITION. 25. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. 26. LEARNED COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F ILED COPIES OF THE APPELLATE ORDERS OF LD. CIT(A) FOR A.YS. 200 3-2004 TO 2006-2007 AND SUBMITTED THAT TO HIS KNOWLEDGE THESE ARE NOT CHALLENGED BY THE DEPARTMENT. 29 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 27. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. ASSESSEE EXPLAINED BEFORE LD. CIT(A) THAT IN CASE OF THE CRE DITORS, IT HAS FILED CONFIRMATIONS, BANK STATEMENTS, COPY OF THE I NCOME TAX RETURN AND BALANCE SHEET. THE A.O. DID NOT MAKE FUR THER ENQUIRY ON THESE DOCUMENTARY EVIDENCES AND IN CASE HE WAS HAVING ANY DOUBT ON THE SAME, HE COULD HAVE MADE AN ENQUIRY FROM THE CREDITORS. HOWEVER, NO STEPS HAVE BEEN TAK EN BY HIM IN THIS REGARD. IN THE CASE OF THREE CREDITORS, THE ASSESSEE EXPLAINED THAT THESE ARE TRADE CREDITORS FROM WHOM ASSESSEE HAS RECEIVED SECURITY FOR ALLOWING CREDIT AGAINST S ALES. THE DETAILS OF SAME ARE ALSO FILED ON RECORD. THESE WOU LD CLEARLY SUPPORT THE EXPLANATION OF ASSESSEE THAT ASSESSEE P ROVED IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS A ND GENUINENESS OF THE TRANSACTION IN THE MATTER. IN PRECEDING A.YS . 2003-2004 TO 2006-2007, THE LD. CIT(A) ON IDENTICAL ISSUE DEL ETED THE ADDITION. WE FIND THAT OUT OF THESE SIX CREDITORS, TWO ARE COMMON IN THE PRECEDING ASSESSMENT YEARS, IN WHICH, LD. 30 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. CIT(A), DELETED THE ADDITION. IT IS NOT REPORTED IF THE ORDER OF THE LD. CIT(A) FOR EARLIER YEAR HAVE BEEN REVERSED. THE A.O. MERELY DID NOT ACCEPT THE EXPLANATION OF ASSESSEE BECAUSE OF THE INCOME OF THE PARTIES ARE VERY LESS. HOWEVER, THE A .O. HAS FORGOT TO NOTE THAT SOME OF THE PARTIES ARE TRADE CREDITOR S FROM WHOM SECURITY HAVE BEEN TAKEN FOR MAKING SALES TO THEM A ND IN OTHER CASES, THE ASSESSEE HAS SPECIFICALLY PLEADED THAT T HEY HAVE SUFFICIENT AMOUNT IN THEIR BOOKS OF ACCOUNT AND BAN K TO MAKE INVESTMENT IN ASSESSEE-COMPANY. THEREFORE, THE LD. CIT(A), ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD , CORRECTLY DELETED THE ADDITION BECAUSE ASSESSEE HAS PROVED TH E IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTION IN THE MATTER. THEREFORE, GROUND NO.8 O F APPEAL OF THE REVENUE IS DISMISSED. ISSUE NO.8 : 28. ON GROUND NO.9, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.17,99,822/- MADE BY THE A.O. ON ACCO UNT OF DISALLOWANCE OF EXPENSES INCURRED THROUGH CREDIT CA RDS. 31 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 29. THE A.O. DISALLOWED EXPENSES INCURRED THROUGH CREDIT CARDS. THE A.O. NOTICED THAT THE DIRECTORS O F THE COMPANY HAVE INCURRED THESE EXPENSES ON THEIR CREDIT CARDS. THE ASSESSEE EXPLAINED THAT THE CREDIT CARD FACILITY HA VE BEEN PROVIDED BY THE COMPANY TO THE DIRECTORS TO FACILIT ATE PAYMENT OF EXPENSES TO BE MADE AND INCURRED FOR AND ON BEHA LF OF COMPANY. DETAILS OF THE SAME WERE FILED. THE A.O. H OWEVER, DID NOT ACCEPT THE EXPLANATION OF ASSESSEE AND TREATED THE SAME FOR NON-BUSINESS PURPOSES AND DISALLOWED THE SAME. THE LD. CIT(A) NOTED THAT HE HAS DELETED SIMILAR ADDITION IN A.Y. 2003-2004 TO 2006-2007. ADDITION WAS ACCORDINGLY DELETED. 30. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. 31. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT EXPENSES WERE INCURRED FOR AND O N BEHALF OF THE ASSESSEE-COMPANY AND ORDER OF THE LD. CIT(A) FO R EARLIER YEARS HAVE NOT BEEN REVERSED. 32 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 32. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE ASSESSEE EXPLAINED THAT CREDIT CARD FACILITIES WERE PROVIDED TO THE DIRECTORS ONLY FACILITATING PAYMENT OF EXPENSES TO BE MADE ON BEHALF OF THE COMPANY. THE DETAILS OF SAME WERE FILED, WHICH HAVE NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. TH E EXPENSES ARE, THEREFORE, INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE-COMPANY. COPY OF THE LEDGER ACCOUNT IS ALSO FILED IN THE PAPER BOOK TO SUPPORT THE FINDINGS OF THE LD . CIT(A). IN EARLIER YEAR, THE LD. CIT(A), DELETED THE SIMILAR A DDITION ON WHICH NOTHING IS BROUGHT TO OUR NOTICE IF THE FINDI NGS OF THE LD. CIT(A) IN EARLIER YEAR HAVE BEEN REVERSED. THIS GRO UND OF APPEAL OF REVENUE IS ACCORDINGLY DISMISSED. ISSUE NO. 10 : 33. THE ASSESSEE ON GROUND NO.7 OF THE CROSS-OBJEC TION CHALLENGED THE DISALLOWANCE OF RS.2,29,669/- ON ACC OUNT OF INTEREST ON BANK HELD SAME TO BE CAPITAL IN NATURE. 33 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 34. THE ASSESSEE EXPLAINED BEFORE LD. CIT(A) THAT ASSESSEE IS IN BUSINESS OF MANUFACTURING OF HEAVY G OODS LIKE PIPE, C.R. STRIPS AND COILS. IN A.Y. UNDER APPEAL A SSESSEE HAS UNDERTAKEN MAJOR EXTENSION/CAPITAL WORK IN PROGRESS AND INCURRED A SUM OF RS.2,29,669/- TOWARDS INTEREST AN D FINANCIAL CHARGES. CONSIDERING THE QUANTUM OF BUSINESS, LARGE NUMBER OF FUND IS REQUIRED TO MANAGE HIS BUSINESS ACTIVITIES. THE REQUIREMENT OF FUND IS FULFILLED THROUGH CASH CREDI TS AND TERM LOANS. AS THE ASSESSEE HAS UNDERTAKEN MAJOR EXPANSI ON DURING THE YEAR UNDER CONSIDERATION, LARGE NUMBER OF FUNDS WERE REQUIRED AND TO FULFILL THE NEED OF FUNDS, MONIES R ECEIVED BY WAY OF TERM LOAN AND CASH CREDITS WERE UTILISED. THE IN TEREST IS CHARGED BY THE BANKS FROM THE DATE WHEN THE MONEY I S DISBURSED. THE ASSESSEE HAS GOT LOAN SANCTIONED FRO M BANK OF RAJASTHAN LIMITED FOR PURCHASE OF D.G. SETS. THE LO AN WAS SANCTIONED FOR A SUM OF RS.1.70 CRORES. BUT, JUST A SUM OF RS.56 LAKHS WAS UTILISED FROM THE SAME FOR PURCHASE OF D. G. SETS. THE SAME WERE USED AS AND WHEN THE REQUIREMENT AROSE. T HE 34 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. INTEREST PAID ON THESE LOANS WAS PART OF REGULAR BU SINESS ACTIVITY OF THE ASSESSEE AND WAS THUS CHARGED TO P & L A/C. IN THE CASE OF ASSESSEE, FOR SUCH TRANSACTION, SINCE THE FUNDS ARE REGULARLY SANCTIONED AND DISBURSED, IT IS A PRACTICE TO CHARG E THE INTEREST PAID TO P & L A/C. THE DOCUMENTS WERE FILED IN SUPP ORT OF THE CONTENTION. IT WAS FURTHER SUBMITTED THAT A.O. HAS CONSIDERED THE INTEREST AS CAPITAL NATURE BUT FAILED TO PROVID E DEPRECIATION. THE LD. CIT(A) NOTED THAT ASSESSEE DOES NOT DISTING UISH BETWEEN SOURCE FOR THE FUNDS FOR DIFFERENT PURPOSES AND THE ENTIRE LIABILITY ON BORROWED FUNDS IS CHARGED TO REVENUE A CCOUNT. THE CASE OF THE REVENUE IS THAT THIS INTEREST WAS INCUR RED TOWARDS FUNDS BORROWED FOR SPECIFIED CAPITAL ASSET WHICH WE RE CLEARLY IDENTIFIABLE AND HENCE, INTEREST SHOULD BE CAPITALI ZED AND SHOULD NOT BE CHARGED TO REVENUE ACCOUNT. THE LD. C IT(A) ACCORDINGLY DISMISSED THIS GROUND OF APPEAL OF ASSE SSEE. HOWEVER, THE A.O. HAS DIRECTED TO ALLOW DEPRECIATIO N ON THE SAME. 35 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 35. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE BEIN G INTEREST PAID ON BANK LOAN ON THE GROUND THAT SAME HAS BEEN UTILISED FOR THE PURPOSE OF GENERATOR SET. DISALLOWANCE IS U NJUSTIFIED AS THE INTEREST EXPENDITURE HAS BEEN INCURRED FOR THE MONEY BORROWED FOR THE PURPOSE OF BUSINESS. THERE IS NO D ISPUTE TO THE FACT THAT SAME HAVE BEEN DISALLOWED ON THE GROUND T HAT EXPENDITURE IS CAPITAL NATURE BY APPLYING PROVISO T O SECTION 36(I)(III) OF THE I.T. ACT. HOWEVER, THIS PROVISO I S APPLICABLE ONLY WHEN INTEREST PAID IN RESPECT OF CAPITAL BORROWED F OR ACQUISITION OF ASSET FOR EXTENSION OF EXISTING BUSINESS. THE GE NERATOR WAS FOR RUNNING THE EXISTING BUSINESS MORE EFFICIENTLY. THUS, THIS PROVISO COMES INTO PLAY ONLY WHEN THERE IS AN EXTEN SION OF EXISTING BUSINESS AND NOT WHEN CAPITAL ASSET IS ACQ UIRED DURING THE COURSE OF EXISTING BUSINESS WHEREBY NO EXTENSIO N HAS TAKEN PLACE. IN THE CASE OF ASSESSEE, GENERATOR SET IS ME ANT FOR EXISTING BUSINESS AND IT WAS NOT AN EXTENSION. HENCE, DISALL OWANCE IS 36 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. UNJUSTIFIED. HE HAS ALSO SUBMITTED THAT THE PROVISO TO SECTION 36(I)(III) HAVE BEEN AMENDED W.E.F. 01.04.2016 WHIC H WOULD BE APPLICABLE TO A.Y. 2016-2017 AND SUBSEQUENT YEAR AN D REFERRED TO CIRCULAR NO.19/2015 DATED 27 TH NOVEMBER, 2015. 36. ON THE OTHER HAND, LD. D.R. RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 37. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE ADDITION. SEC TION 36(I)(III) AS APPLICABLE TO ASSESSMENT YEAR UNDER APPEAL PROVIDES THE DEDUCTION OF THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE PROVISO PROVIDES THAT ANY AMOUNT OF THE INTEREST PAID, IN R ESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EX TENSION OF EXISTING BUSINESS OR PROFESSION (WHETHER CAPITALIZE D IN THE BOOKS OF ACCOUNT OR NOT) FOR ANY PERIOD BEGINNING F ROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION O F ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION. IT IS NOT IN DISPUTE THAT ASS ESSEE OBTAINED 37 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. LOAN FROM THE BANK FOR PURCHASE OF D.G. SET FOR A S UM OF RS.1.70 CRORES BUT ONLY RS.56 LAKHS HAVE BEEN USED. THE ASS ESSEE PAID INTEREST THEREON. THE PROVISO TO SECTION 36(1)(III) IS APPLICABLE ONLY TO INTEREST PAID IN RESPECT OF CAPITAL BORROWE D FOR ACQUISITION OF ASSET FOR EXTENSION OF EXISTING BUSI NESS. THE GENERATOR BY NATURE ITSELF IS ALWAYS READY FOR FUNC TIONING. THEREFORE, LEARNED COUNSEL FOR THE ASSESSEE, RIGHTL Y CONTENDED THAT GENERATOR WAS FOR RUNNING THE EXISTING BUSINES S MORE EFFICIENTLY. THUS, GENERATOR CANNOT BE FOR THE EXTE NSION OF THE BUSINESS. THEREFORE, DISALLOWANCE WAS WHOLLY UNJUST IFIED. THE ASSESSEE, THUS, PAID INTEREST ON BANK LOAN FOR CAPI TAL BORROWED FOR BUSINESS PURPOSE. THEREFORE, THE SAME WAS AN AL LOWABLE DEDUCTION. WE, THEREFORE, SET ASIDE THE ORDERS OF T HE AUTHORITIES BELOW AND DIRECT THE A.O. TO ALLOW DEDUCTION OF THE INTEREST UNDER SECTION 36(1)(III) OF THE I.T. ACT TO THE ASS ESSEE. GROUND NO.7 OF THE CROSS-OBJECTION OF THE ASSESSEE IS ALLO WED. NO OTHER ISSUE IS ARGUED. 38 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 38. IN THE RESULT, ITA.NO.4638/DEL./2013 OF THE DEPARTMENT IS DISMISSED AND C.O.NO.03/DEL./2014 OF THE ASSESSEE IS PARTLY ALLOWED. ITA.NO.4639/DEL./2013 REVENUE APPEAL & C.O.NO.31/DEL./2014 ASSESSEE A.Y. 2008-2009 39. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJEC TION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE L D. CIT(A)-1, NEW DELHI, DATED 27 TH MAY, 2013, FOR THE A.Y. 2008-2009. 40. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT P RESS GROUND NOS. 1 TO 6, 9 AND 10 OF THE CROSS OBJECTION . THE SAME ARE DISMISSED AS NOT PRESSED. 41. GROUND NO.1 OF DEPARTMENTAL APPEAL IS GENERAL AND NEED NO ADJUDICATION. THE REVENUE ON GROUND NO.2 CH ALLENGED THE DELETION OF ADDITION OF RS.15,26,417/- ON ACCOU NT OF DISALLOWANCE OF INLAND HAULAGE FOR EXPORT CONSIGNME NT, ON WHICH, NO TDS WAS DEDUCTED. ON THE SAME ISSUE, ASSE SSEE RAISED GROUND NO.7 IN THE CROSS OBJECTION, CHALLENG ING THE 39 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. SUSTAINING OF PART ADDITION OF RS.1,69,602/- ON ACC OUNT OF INLAND HAULAGE OF EXPORT CONSIGNMENT. 42. ON GROUND NO.3, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.49,01,524/- ON ACCOUNT OF DISALLOWAN CE OF FREIGHT PAYMENT TO CONSIGNMENT AGENTS WITHOUT DEDUCTING TDS . ON GROUND NO.4, REVENUE CHALLENGED THE DELETION OF ADD ITION OF RS.5,63,796/- ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENSES CLAIMED AS REVENUE EXPENDITURE BY ASSESSEE. HOWEVER , A.O. TREATED THE SAME AS CAPITAL EXPENDITURE. ON GROUND NO.5, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.4 0,301/- ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENDITURE . ON GROUND NO.8, REVENUE CHALLENGED THE DELETION OF ADDITION O F RS.12 LAKHS ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN/TRADE DEPO SITS. ON GROUND NO.10, REVENUE CHALLENGED THE DELETION OF AD DITION OF RS.21,05,518/- ON ACCOUNT OF DISALLOWANCE OF EXPENS ES INCURRED THROUGH CREDIT CARDS. 43. LEARNED REPRESENTATIVE OF BOTH THE PARTIES SUB MITTED THAT ALL THESE GROUNDS IN DEPARTMENTAL APPEAL AND C ROSS 40 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. OBJECTION BY ASSESSEE ARE SAME AS HAVE BEEN CONSIDE RED IN A.Y. 2007-2008. WE FIND CONTENTION OF LEARNED REPRESENTA TIVES OF BOTH THE PARTIES TO BE CORRECT THAT THESE ISSUES AR E SAME AS HAVE BEEN CONSIDERED IN A.Y. 2007-2008. FOLLOWING THE RE ASONS FOR DECISION FOR A.Y. 2007-2008 (SUPRA) ON THESE GROUND S, THE DEPARTMENTAL APPEAL IS DISMISSED ON GROUND NOS. 2, 3, 4, 5, 8, AND 10. GROUND NO.7 OF THE CROSS OBJECTION OF THE A SSESSEE IS HOWEVER ALLOWED. 44. ON GROUND NO.8 OF THE CROSS OBJECTION, AS SESSEE CHALLENGED THE CONFIRMING OF THE DISALLOWANCE OF AM OUNT OF RS.12,67,000/- ON ACCOUNT OF INTEREST ON BANK HOLDI NG, THE SAME TO BE CAPITAL IN NATURE. 45. LEARNED REPRESENTATIVES OF BOTH THE PARTIES SUBMITTED THAT THIS GROUND IS SAME AS HAVE BEEN CON SIDERED ON GROUND NO.7 OF THE CROSS OBJECTION FOR A.Y. 2007-20 08. FOLLOWING THE REASONS FOR DECISION FOR A.Y. 2007-20 08 ON THIS GROUND, A.O. IS DIRECTED TO FOLLOW THE ORDER FOR A. Y. 2007-2008 41 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. AND DELETE THE ADDITION ACCORDINGLY. GROUND NO.8 OF THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 46. THE OTHER GROUNDS OF DEPARTMENTAL APPEALS ARE DECIDED AS UNDER. ISSUE NO.1 : 47. ON GROUND NO.6, THE REVENUE CHALLENGED THE ORD ER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.8, 25,000/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF EXPENDITU RE BOOKED ON ACCOUNT OF WRITING-OFF OF SECURITY DEPOSIT PAID TO HARYANA STATE ELECTRICITY BOARD (HSEB). IT WAS SUBMITTED BEFORE LD. CIT(A) THAT AMOUNT IN QUESTION PAID TO HSEB TOWARDS ENHANCEMENT OF LOAD AS SERVICE CONNECTION CHARGES. THE SAME WERE DULY TAKEN TO THE ASSET SIDE OF THE BALANCE SH EET BY SHOWING UNDER THE HEAD SECURITY DEPOSIT TO HSEB. DURING THE YEAR UNDER CONSIDERATION IT CAME TO THE KNOWLED GE OF THE ASSESSEE THAT THE SAID AMOUNT WAS PENDING SINCE LON G AND THUS, A REQUEST WAS MADE TO HSEB FOR REVERSAL OF THE SAME . IT WAS 42 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. INFORMED BY HSEB THAT THE SAID AMOUNT WAS NON-REFUN DABLE AND THUS THE SAME WERE TAKEN TO THE P & L A/C AND M ARKED AS EXPENDITURE. COPIES OF THE RELEVANT DOCUMENTS WERE FILED ON RECORD. IT WAS SUBMITTED THAT A.O. FAILED TO APPRE CIATE THAT SAME IS BUSINESS EXPENDITURE. DURING THE ASSESSMENT YEAR UNDER APPEAL, SPECIFIC EXERCISE WAS CARRIED OUT BY THE ASSESSEE WHEREIN IT CONTACTED HSEB AND ASKED FOR REFUND OF T HE SAME. SINCE THE BOARD HAS INTIMATED ASSESSEE THAT IT IS N ON- REFUNDABLE, THEREFORE, IT WAS CHARGED TO P & L A/C. SINCE THE AMOUNT IS NOT RECOVERED FROM THE ELECTRICITY BOARD, THEREFORE, IT WAS CLAIMED AS DEDUCTION. THE LD. CIT(A) NOTED THAT WHILE ADJUSTING A PORTION OF THE DEPOSIT TO BILL RAISED B Y HSEB WAS NET OF THE AMOUNT DEDUCTED/ADJUSTED. THUS, ELECTRICITY CHARGES PAID BY THE ASSESSEE TO HSEB OVER A PERIOD OF TIME WAS NET OF THE ADJUSTED AMOUNT. APPARENTLY, ASSESSEE WAS UNWAR E OF THIS ADJUSTMENTS AND REQUESTED FOR REFUND, WHEREUPON, IT WAS INFORMED TO THE ASSESSEE THAT AMOUNT WAS NON-REFUND ABLE AND HAD ALREADY BEEN ADJUSTED IN THE ELECTRICITY BILLS OF THE ASSESSEE. 43 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. THE ASSESSEE, ON RECEIPT OF THIS INFORMATION, MADE ENTRIES IN THE BOOKS OF ACCOUNT AND CHARGED TO P & L A/C. THE LD. CIT(A), THEREFORE, NOTED THAT IN VIEW OF THIS FACTUAL POSIT ION, THERE WERE NO REASON FOR THE ITEM TO CONTINUE AS AN ASSET ON T HE BALANCE- SHEET AS THE AMOUNT HAD ALREADY BEEN ADJUSTED AND N O MORE OUTSTANDING AS PAYABLE TO THE ASSESSEE. FURTHER, TH E AMOUNT IS ALLOWABLE AS REVENUE EXPENDITURE AS IT WAS ADJUSTED AGAINST ELECTRICITY BILLS PAID BY THE ASSESSEE WHICH WAS IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AD DITION WAS ACCORDINGLY DELETED. 48. THE LD. D.R. SUBMITTED THAT NO SUPPORTING EVID ENCE WERE FILED. IT WAS PAID FOR ENHANCEMENT OF THE ELEC TRICITY LOAD. NO DETAILS WERE FILED WHEN AMOUNT WAS ADJUSTED. 49. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT PAYMENT IN QUESTION IS NOT IN DI SPUTE AND THE ENTRIES MADE IN THE BOOKS OF ACCOUNT HAVE NOT B EEN DOUBTED. THEREFORE, LD. CIT(A) CORRECTLY DELETED TH E ADDITION. 44 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 50. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF REVENUE. ELECTRICITY EXPENSES ARE CHARGED TO P & L A/C BECAUSE THE SAME ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BECAUSE ELECTRICITY WAS CONSUMED FOR MANUFACTURING AND OTHER ACTIVITIES. IN THE CASE OF ASSESSEE, THE AMOUNT IN QUESTION WAS DEPOSITED FOR ENHANCEMENT OF THE LOAD. HOWEVER, IT WAS ADJUSTED AGAINST THE ELECTRICITY PAYMENT. IT CAME TO THE KNO WLEDGE OF THE ASSESSEE IN THIS YEAR THAT AMOUNT IS STILL PENDING WITH THE ELECTRICITY BOARD BUT ELECTRICITY BOARD INFORMED TH E ASSESSEE THAT THIS AMOUNT HAS ALREADY BEEN ADJUSTED AGAINST THE ELECTRICITY BILL. THEREFORE, WHEN THE AMOUNT IS ADJ USTED AGAINST THE ELECTRICITY BILL, IT WAS CLEARLY REVENUE IN NAT URE. SINCE THE ELECTRICITY BOARD INTIMATED TO ASSESSEE OF THE ADJU STMENT IN THIS ASSESSMENT YEAR UNDER APPEAL, THEREFORE, THE EXPEND ITURE IS CRYSTALIZED IN ASSESSMENT YEAR UNDER APPEAL. THEREF ORE, IT WAS CORRECTLY TREATED AS REVENUE EXPENDITURE BY MAKING RELEVANT BOOK ENTRIES IN THE BOOKS OF ACCOUNT. THE LD. CIT(A ), THEREFORE, 45 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. CORRECTLY DELETED THE ADDITION. GROUND NO.6 OF APPE AL OF REVENUE IS DISMISSED. ISSUE NO.2 : 51. ON GROUND NO.7, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.12,48,750/- ON ACCOUNT OF DISALLO WANCE OF EXCESS DEPRECIATION. THE A.O. DISALLOWED RS.12,70,0 00/- BEING EXCESS DEPRECIATION CLAIMED. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT THERE IS A MISTAKE IN CALCULATION BECAU SE A.O. HAS ADDED UP RS.12,70,000/- AS AGAINST RS.4,39,803/-. A S REGARDS THE BALANCE AMOUNT OF RS.4,39,803/-, THE LD. CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.21,250/-. FOR THE REMAINING AMOUNT, ASSESSEE EXPLAINED THAT IT HAD INSTALLED TH E S.S. PLANT DURING THE F.Y. 2007-2008 AND CAPITALIZED THE SAME ON 29 TH FEBRUARY, 2008. THE SAID PLANT WAS PUT TO USE IMMED IATELY AND S.S. COILS TOTALING TO 8.60 MT VALUING RS.10.77 LAK HS WERE PURCHASED VIDE BILL NO.647 DATED 15 TH MARCH, 2008 AND WERE ISSUED FOR VARIOUS PROCESSES. THIS CAN BE VERIFIED FROM THE EXCISE RECORDS. ASSESSEE, THEREFORE, SUBMITTED THAT SINCE ASSET 46 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. HAS BEEN OWNED BY ASSESSEE AND PUT TO USE FOR BUSIN ESS PURPOSE, THEREFORE, ASSESSEE IS ENTITLED FOR DEPREC IATION. 52. LD. CIT(A) ACCEPTED THE EXPLANATION OF ASSESSE E AND NOTED THAT THERE WAS A MISTAKE IN CALCULATION AND A S REGARDS THE DISALLOWANCE OF RS.4,18,557/- BEING DEPRECIATIO N CLAIMED ON SS PIPE PLANT, IT WAS NOTED THAT THE ASSESSEE IN STALLED THE SAME IN ASSESSMENT YEAR UNDER APPEAL AND PUT TO USE FOR PRODUCTION BY INSTALLING THE MACHINERY ON 29.02.200 8. THEREFORE, ADDITION WAS DELETED. 53. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE ASSESSEE POINTED OUT TO THE LD. CIT(A) THAT THERE I S A MISTAKE IN CALCULATION OF DISALLOWANCE WHICH WAS ACCEPTED BY T HE LD. CIT(A) AFTER VERIFYING THE FACTS. NO MATERIAL IS PR ODUCED BEFORE US TO SHOW ANY INFIRMITY IN THE FINDING OF THE LD. CIT(A) TO THAT EXTENT. 47 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 54. AS REGARDS THE DEPRECIATION CLAIMED ON SS PIPE PLANT, ASSESSEE PLEADED THAT IT WAS INSTALLED ON 29.02.200 8 AND WAS PUT TO USE AND SAME FACTS COULD BE VERIFIED FROM EX CISE RECORD. NO MATERIAL IS PRODUCED BEFORE US TO REBUT THE FIND ING OF FACT RECORDED BY LD. CIT(A). THEREFORE, THIS GROUND NO.7 HAS NO MERIT AND THE SAME IS ACCORDINGLY DISMISSED. ISSUE NO. 3 : 55. ON GROUND NO.9, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.3,88,785/- ON ACCOUNT OF DISALLOWANC E OF FOREIGN TRAVEL EXPENSES. 56. THE LD. CIT(A) FOUND THIS ISSUE IS SAME AS HAV E BEEN DECIDED BY HIM IN A.YS. 2003-2004 TO 2006-2007. NOT HING IS BROUGHT TO OUR NOTICE IF THE FINDING RECORDED BY LD . CIT(A) IN EARLIER YEAR HAVE BEEN REVERSED BY THE APPELLATE AU THORITIES. GROUND NO.9 OF APPEAL OF REVENUE HAS NO MERIT AND T HE SAME IS ACCORDINGLY DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. 48 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 57. IN THE RESULT, ITA.NO.4639/DEL./2013 OF THE DEPARTMENT IS DISMISSED AND C.O.NO.31/DEL./2014 OF THE ASSESSEE IS PARTLY ALLOWED. ITA.NO.4640/DEL./2013 REVENUE APPEAL & C.O.NO.32/DEL./2014 ASSESSEE A.Y. 2009-2010 58. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJE CTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE L D. CIT(A), NEW DELHI, DATED 27 TH MAY, 2013, FOR THE A.Y. 2009-2010. 59. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO.1, 2 AND 5 OF THE CROSS OBJECTION. THE SA ME ARE DISMISSED AS NOT PRESSED. GROUND NO.1 OF THE DEPART MENTAL APPEAL IS GENERAL AND NEED NO ADJUDICATION. 60. ON GROUND NO.2, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.1,46,700/- ON ACCOUNT OF DISALLOWANC E OF INLAND HAULAGE EXPENSES FOR EXPORT CONSIGNMENT. THE ASSESS EE ON GROUND NO.3 OF CROSS OBJECTION, CHALLENGED THE ADDI TION OF 49 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. RS.16,300/- ON THE SAME ISSUE. ON GROUND NO.3, REVE NUE CHALLENGED THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF RS.45,60,744/- ON ACCOUNT OF DISALLOWANCE OF FREIGH T PAYMENT TO CONSIGNMENT AGENT. ON GROUND NO.4, REVENUE CHALL ENGED DELETION OF ADDITION OF RS.5,49,002/- ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED AS REVENUE EXPENDITURE. ON GROU ND NO.6, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.6 2,50,000/- ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS/TRADE DEP OSITS AND DISALLOWANCE OF INTEREST ON THE SAME AMOUNTING TO RS.19,13,073/-. ON GROUND NO.7, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.1,20,861/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. ON GROUND NO.8, REVENUE CHALLENGED THE DE LETION OF ADDITION OF RS.7,77,260/- ON ACCOUNT OF DISALLOWANC E OF EXPENSES INCURRED THROUGH CREDIT CARDS. 61. LEARNED REPRESENTATIVES OF BOTH THE PARTIES SUBMITTED THAT GROUND NOS.2, 3, 4, 6 AND 8 OF THE D EPARTMENTAL APPEAL AND GROUND NO.3 OF THE CROSS OBJECTION ARE S AME AS HAVE BEEN CONSIDERED IN A.YS. 2007-2008 AND 2008-2009. T HEY HAVE 50 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. ALSO SUBMITTED THAT GROUND NO.7 OF THE DEPARTMENTAL APPEAL IS SAME AS HAVE BEEN CONSIDERED IN A.Y. 2008-2009. LEA RNED REPRESENTATIVES OF BOTH THE PARTIES, THEREFORE, SUB MITTED THAT ORDER FOR THESE YEARS MAY BE FOLLOWED IN THIS YEAR. FOLLOWING THE ORDERS FOR A.YS. 2007-2008 AND 2008-2009 (SUPRA), T HESE GROUNDS OF DEPARTMENTAL APPEAL (2, 3, 4, 6, 7 AND 8 ) ARE DISMISSED AND GROUND NO.3 OF THE CROSS OBJECTION OF ASSESSEE IS ALLOWED. THE REMAINING ISSUES ARE DECIDED AS UNDER. ISSUE NO. 1 : 62. ON GROUND NO.5, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.1,17,32,766/- MADE BY A.O. ON ACCOUN T OF SALES TAX INCENTIVE RECEIVABLE DURING ASSESSMENT YEAR UND ER APPEAL. THE A.O. MADE THE ABOVE ADDITION ON ACCOUNT OF SALE S TAX INCENTIVE. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT KOSI UNIT OF ASSESSEE-COMPANY ENJOYS A CONCESSIONAL RATE OF SALES TAX. THE ASSESSEE WAS ENTITLED TO CLAIM AND DEPOSIT SALES TAX ON SPECIAL RATES I.E., AROUND 50% OF THE NORMAL TAX ES. DURING THE YEAR I.E., ON 01.01.2008, PROVISIONS OF VALUE A DDED TAX 51 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. (VAT) WERE APPLICABLE ON THE ASSESSEE COMPANY. AS PER THE NEW SCHEME, ASSESSEE WERE DIRECTED TO COLLECT AND D EPOSIT FULL AMOUNT OF TAX AND WAS ELIGIBLE TO CLAIM THE EXCESS AMOUNT PAID AS REFUND. IN THIS RESPECT, LETTER DATED 10.11.2008 WAS RECEIVED FROM SALES TAX AUTHORITIES THROUGH WHICH, IT WAS MA DE ELIGIBLE TO CLAIM REFUND. THE ASSESSEE FILED A CLAIM IN THIS RESPECT ON 21.09.2009 BEFORE THE SALES TAX AUTHORITIES. SINCE THE DATE OF BALANCE SHEET I.E., ON 31 ST MARCH, 2009 NO ASSET/LIABILITY CRYSTALISED IN THE BOOKS OF ACCOUNT OF ASSESSEE, TH E SAME WAS NOT CONSIDERED IN ASSESSMENT YEAR UNDER APPEAL. THE AMOUNT HAVE BEEN OFFERED AS INCOME IN NEXT F.Y. I.E., 2009 -2010 (A.Y. 2010-2011). THUS THE SAID INCOME HAS BEEN OFFERED F OR TAXATION WHEN THE RECEIPT OF THE SAME CRYSTALISED. THE A.O, HOWEVER, ADDED AMOUNT TO THE INCOME OF ASSESSEE STATING THAT SAME ACCRUED TO THE ASSESSEE BECAUSE OF THE CERTIFICATE OF ENTITLEMENT DATED 10.11.2008. IT WAS SUBMITTED THAT IT IS NOT A CASE THAT ASSESSEE HAS NOT BOOKED THE SAID AMOUNT TO ITS INCO ME. THE SAME WAS OFFERED FOR TAXATION NEXT YEAR. THE A.O. F AILED TO 52 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. APPRECIATE THAT MERELY THE AMOUNT BECOME DUE TO THE ASSESSEE, DOES NOT ACCRUE TO ITS INCOME. THERE ARE VARIOUS CA LCULATIONS LIKE REBATE/INTEREST ETC., WHICH MAY CHANGE THE QUA NTUM OF THE AMOUNT FINALLY RECEIVED. THUS THE ASSESSEE HAS RECO RDED THE SAME IN THE INCOME WHEN THE ACTUAL AMOUNT WAS RECEI VED. THE A.O. ASSESSED THE SAME INCOME IN A.Y. 2010-2011 IN THE ORDER UNDER SECTION 143(3) OF THE I.T. ACT. THEREFORE, SA ME AMOUNT SHOULD NOT BE ADDED IN TWO ASSESSMENT YEARS. THE LD . CIT(A) ACCEPTED THE EXPLANATION OF ASSESSEE BECAUSE ENTITL EMENT ALONE DOES NOT RESULT IN ANY GAIN. THE ASSESSEE MADE A CL AIM OF REFUND ON 21.09.2009 AND WAS RECEIVED THEREAFTER. THEREFOR E, IT WAS CORRECTLY OFFERED FOR TAXATION IN SUBSEQUENT A.Y. 2 010-2011. THE LD. CIT(A), ACCORDINGLY, DELETED THE ADDITION. 63. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT ASSESSEE RECEIVED LETTER ON 10.11.20 08 FROM SALES TAX AUTHORITIES. THEREFORE, IT SHOULD BE ADDE D IN THE SAME YEAR. 53 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 64. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. 65. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF REVENUE. THE ASSESSEE EXPLAINED THAT DUE TO APPLICABILITY OF VAT ACT, THE ASSESSEE WAS DIRECTED TO COLLECT AND DEPOSIT FULL AMOUNT OF TAX AND THEN WAS ELIGIBLE TO CLAIM THE EXCESS AMOUNT PAID AS REFUND. THE ASSESSEE RECEIVED LETTER FROM SALES TAX AUTHORITIES ON 10.11 .2008 INTIMATING THE ASSESSEE THAT HE WAS ENTITLED FOR RE FUND. THE ASSESSEE, THEREAFTER, MADE A CLAIM OF REFUND ON 21. 09.2009 AND ACCORDING TO THE EXPLANATION OF ASSESSEE, THE AMOUN T OF REFUND DEPENDS UPON VARIOUS CALCULATIONS LIKE REBATE/INTER EST ETC., WHICH MAY CHANGE THE QUANTUM OF REFUND. THEREFORE, ASSESSEE WOULD BE KNOWING OF THE EXACT AMOUNT OF REFUND DUE TO ASSESSEE ONLY ON ACTUAL CALCULATION MADE IN THIS BEHALF. THE REFORE, THE REFUND WOULD DEPEND UPON THE CLAIM MADE BY THE ASSE SSEE WHICH WAS MADE IN SUBSEQUENT A.Y. 2010-2011. THE RE CEIPT OF THE AMOUNT IN QUESTION IS FINALLY CRYSTALIZED IN A. Y. 2010-2011 54 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. WHICH HAVE BEEN CORRECTLY OFFERED FOR TAX IN A.Y. 2 010-2011 WHICH HAVE BEEN ASSESSED BY THE A.O. ALSO IN THE OR DER UNDER SECTION 143(3) OF THE I.T. ACT. THEREFORE, NO DOUBL E ADDITION SHOULD BE MADE AGAINST THE ASSESSEE. GROUND NO.5 OF APPEAL OF REVENUE HAS NO MERIT AND THE SAME IS ACCORDINGLY DI SMISSED. ISSUE NO.2 : 66. ON GROUND NO.9, THE REVENUE CHALLENGED THE ORD ER OF LD. CIT(A) IN DELETING ADDITION OF RS.1,20,71,504/- ON ACCOUNT OF DISALLOWANCE/DISCOUNT ALLOWED TO FOREIGN BUYER. 67. THE A.O. DISALLOWED THE ABOVE AMOUNT ON ACCOUN T OF DISCOUNT ALLOWED TO THE FOREIGN BUYER M/S. TITAN ST EEL FZA. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT QUANTITY OF 1120.88 MT OF GI PIPES WAS SUPPLIED TO M/S. TITAN STEEL FZA VIDE NO.9 NUMBERS OF CONSIGNMENT THROUGH VARIOUS B/LS (BILL O F LOADING) WHICH WERE PRESENTED THROUGH BANK OF RAJASTHAN TO T HE PARTIES BANKER SOCIETIES AT NEW YORK. THE SAID DOCUMENT WER E HONORED ON PRESENTATION AND WERE RETURNED FOR NUMBER OF DIS CREPANCIES, SOME OF WHICH WERE NOT EVEN JUSTIFIED. ALL THESE RE TURNING ADVISE 55 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. WERE PRODUCED FOR PERUSAL. SINCE THE MATERIAL WAS N OT GOT RELEASED, IT WAS ATTRACTING HEAVY DEMURRAGES. THE C OMPANY ALSO DID NOT HAVE ANY OTHER OPTION BUT TO REMOVE ALL DIS CREPANCIES AND AGREE TO FORBEAR DEMURRAGES, IF ANY, REMAINS AF TER WAIVER. ACCORDINGLY, IT ADVISED TO THE BUYER THROUGH THE BA NKER ON 01.01.2009 TO ACCEPT THE REVISED DUE DATE AS 31.01. 2009 AND TO DEDUCT US $ 50,000 ON ACCOUNT OF DEMURRAGES. HOWEVE R, THE PARTY STILL DID NOT RESPOND FAVOURABLY AND REQUESTE D FOR DISCOUNT AND EXTENSION IN DUE DATE. FINALLY, THE PA RTY AGREED TO HONOR THE DOCUMENTS BY ASKING FOR DISCOUNT OF US $ 150 PER MT AND US $ 75,000 TOWARDS DEMURRAGE CHARGES WHICH WAS AGREED BY THE ASSESSEE. IT IS ONLY AFTER THE ACCEPT ANCE OF THE ABOVE OFFER, THE PARTY HAS MADE THE PAYMENT. THE AS SESSEE FILED THE CONFIRMATION OF DOCUMENTS IN SUPPORT OF THE CON TENTION. THE A.O. MADE THE ABOVE ADDITION BECAUSE NO FORMAL AGRE EMENT WAS PRODUCED. THE A.O. HOWEVER, IGNORED ALL THE RELEVAN T MATERIAL ON RECORD. THEREFORE, THE ADDITION IS NOT JUSTIFIED . THE DISCOUNT 56 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. WAS GIVEN UNDER ABOVE COMPULSION BECAUSE PARTY WAS OUT OF INDIA. IT WAS CLAIMED AS BUSINESS LOSS. 68. THE LD. CIT(A) ACCEPTED THE CONTENTION OF A SSESSEE AND HELD THAT IT WAS A GENUINE TRANSACTION. NO DISA LLOWANCE CAN BE MADE BECAUSE OF NON-PRODUCTION OF FORMER MOU. TH ERE IS NO MATERIAL TO PROVE OR INDICATE THAT TRANSACTION WAS COLLUSIVE IN NATURE. THE TRANSACTION HAS BEEN PUT THROUGH BANKER S OF TWO SIDES, THEREFORE, IT WAS HELD AS GENUINE TRANSACTIO N AND ADDITION WAS DELETED. 69. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT NO FORMAL AGREEMENT WAS PRODUCED TO OFFER DISCOUNT. 70. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT ALL THE RELEVANT DOCUMENTS WERE FILED IN SUPPORT OF THE EXPLANATION, THEREFORE, ADDITION WAS CORRECTLY DELETED BY THE LD. CIT(A). 57 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 71. AFTER CONSIDERING THE RIVAL SUBMISSIONS, W E DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF REVENUE. THE ASSESSEE EXPLAINED THE REASONS AND THE CIRCUMSTANCES UNDER W HICH THE ASSESSEE HAS TO PAY FOR DEMURRAGES CHARGES AND TO G IVE DISCOUNT TO THE PARTY. M/S. TITAN STEEL FEZ RAISED NUMBER OF DISCREPANCIES BEFORE ACCEPTING THE GOODS ON SALE AN D SINCE PARTY WAS SITUATED OUTSIDE INDIA AND BECAUSE OF NON -DELIVERY OF GOODS UNDER SALE, HEAVY DEMURRAGES WERE BEING CHARG ED FROM THE ASSESSEE, THEREFORE, UNDER THESE COMPELLING REA SONS, ASSESSEE AGREED TO GIVE DISCOUNT AND TO PAY DEMURRA GES CHARGES TO THE PURCHASER. ONLY AFTER MAKING THE ABOVE CONCE SSION, THE PARTY ACCEPTED THE GOODS AND MADE THE PAYMENT. BOTH THE PARTIES CONDUCTED THE TRANSACTION THROUGH THEIR RES PECTIVE BANKERS AND THE GENUINENESS OF THE TRANSACTION HAVE NOT BEEN DOUBTED. THE ASSESSEE PRODUCED CONFIRMATION FROM TH E PARTY AS WELL AS OTHER MATERIAL ON RECORD TO SUPPORT THE TRA NSACTION THAT BECAUSE OF THE DISCOUNT OFFERED, THE ASSESSEE WAS A BLE TO SELL THE GOODS AND TO RECEIVE THE PAYMENT. THEREFORE, TH ERE WERE 58 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. NOTHING UNUSUAL IN THE TRANSACTION. NO EVIDENCE OF ANY COLLUSIVE TRANSACTION HAVE BEEN BROUGHT ON RECORD. MERELY BEC AUSE NO FORMAL AGREEMENT OR MOU TO OFFER DISCOUNT HAS BEEN FILED, WOULD NOT DISENTITLE THE ASSESSEE TO CLAIM THE DISC OUNT. CONSIDERING THE ABOVE DISCUSSION, WE DO NOT FIND AN Y MERIT IN THIS GROUND NO.9 OF APPEAL OF REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. ISSUE NO.3 : 72. THE ASSESSEE ON GROUND NO.4 OF THE CROSS OBJEC TION HAS CHALLENGED THE ORDERS OF THE AUTHORITIES BELOW IN DISALLOWING RS.33,784/- OUT OF LABOUR AND STAFF WELFARE EXPENSE S HOLDING IT TO BE CAPITAL IN NATURE. THE A.O. NOTED THAT ASSESS EE HAS MADE PAYMENT TO HINDUSTAN REFRIGERATION FOR PURCHASE OF WATER COOLER FOR A SUM OF RS.33,784/- WHICH WERE DEBITED TO LABOUR AND STAFF WELFARE EXPENSES, WHICH WAS CONSIDERED AS CAPITAL IN NATURE AND ACCORDINGLY DISALLOWED. THE ASSESSEE SUB MITTED BEFORE LD. CIT(A) THAT WATER COOLER WAS PURCHASED F OR FACTORY WORKERS AND PLACED IN THE WORK AREA SINCE THE SAME HAS BEEN 59 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. INSTALLED FOR WELFARE OF LABOUR, THEREFORE, IT WAS CLAIMED AS REVENUE EXPENDITURE. THE LD. CIT(A) NOTED THAT WATE R COOLER WILL BE TREATED AS OFFICE EQUIPMENT AND EXPENDITURE CLAI MED SHALL BE EXCLUDED FROM BUSINESS EXPENDITURE BUT DEPRECIATION WAS ALLOWED ON THE SAME. 73. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF CROSS OBJECTION OF THE ASSESSEE. THE PURCHASE OF WATER COOLER IS OFFICE EQUIPMENT AN D WAS CORRECTLY TREATED AS CAPITAL IN NATURE. THE ASSESSE E HAS NOT EXPLAINED AS TO HOW THE PURCHASE OF WATER COOLER WO ULD BE CONSIDERED AS BUSINESS EXPENDITURE. THE ASSESSEE FA ILED TO EXPLAIN THAT IT WAS A BUSINESS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, GROUND NO.4 OF THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED . 74. IN THE RESULT, ITA.NO.4640/DEL./2013 OF THE DEPARTMENT IS DISMISSED AND C.O.NO.32/DEL./2014 OF THE ASSESSEE IS PARTLY ALLOWED. 60 ITA.NOS.4638, 4639 & 4640/DEL./2013 & CROSS OBJECTION NOS.30, 31 & 32/DEL./2014 M/S. SWASTIK PIPES LTD., NEW DELHI. 75. IN THE RESULT, ALL THE DEPARTMENTAL APPEALS AR E DISMISSED AND ALL THE CROSS OBJECTIONS OF THE ASSES SEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (LP SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 18 TH APRIL, 2018 VBP/- COPY TO 1. THE APP ELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT G BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.