Dhara Vegetable Oil Foods Company Ltd., New Delhi V. ACIT, New Delhi

ITA 1022/DEL/2011

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6098 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Revenue expenditure; Reassessment proceedings; Capital expenditure; TDS
• Section: 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. LALIET KUMAR, JUDICIAL MEMBER ITA NO.1113 & 505/DEL/2011 ASSESSMENT YEAR: 2005-06 & 2006-07 ACIT CIRCLE 5(1), NEW DELHI VS DHARA VEGETABLE OIL & FOODS CO. LTD. (NOW MERGED WITH MOTHER DAIRY FRUIT & VEGETABEL LTD) SAFDARJUNG ENCLAVE OPP. KAMAL CINEMA, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO.1021 & 1022/DEL/2011 ASSESSMENT YEAR: 2004-05 & 2005-06 DHARA VEGETABLE OIL & FOODS CO. LTD. (NOW MERGED WITH MOTHER DAIRY FRUIT & VEGETABEL LTD) PARPARGANJ, NEW DELHI VS ACIT CIRCLE 5(1), NEW DELHI (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.58/DEL/2011 (IN ITA NO.505/DEL/2011) ASSESSMENT YEAR: 2006-07 DHARA VEGETABLE OIL & FOODS CO. LTD. (NOW MERGED WITH MOTHER DAIRY FRUIT & VEGETABEL LTD) SAFDARJUNG ENCLAVE OPP. KAMAL CINEMA, NEW DELHI PAN NO. AABCD3060H VS ACIT CIRCLE 5(1), ROOM NO.409 A, C. R. BUILDING I. P. ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) 2 APPELLANT BY SH. S. D. KAPILA, ADVOCATE SH. R. R. MAURYA, ADVOCATE SH. PARVESH SHARMA, ADVOCATE SH. BHUVAN MAHAJAN, ADVOCATE RESPONDENT BY MS. ASHIMA NEB, SR. DR DATE OF HEARING: 25/07/2019 DATE OF PRONOUNCEMENT: 06/08/2019 ORDER PER N. K. BILLAIYA, AM: ITA NO.1021/DEL/2011 IS THE APPEAL BY THE ASSESSEE FOR A.Y. 2004-05, ITA NO.1022/DEL/2011 AND ITA NO.1113/ DEL/2011 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE P REFERRED AGAINST THE ORDER OF THE CIT(A)-8, NEW DELHI DATED 20.12.2010 BY WHICH THE CIT(A) HAS DISPOSED THE APPEALS FOR A. Y. 2004-05 AND A. Y.2005-06 BY A CONSOLIDATED ORDER. ITA NO.505/D EL/2011 AND CO.58/DEL/2011 ARE APPEAL AND CROSS OBJECTION BY TH E ASSESSEE PREFERRED AGAINST THE ORDER OF THE CIT(A)-8, NEW DE LHI DATED 22.11.2010 PERTAINING TO A. Y. 2006-07. 2. THIS BUNCH OF APPEALS WERE HEARD TOGETHER AND DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AS COMMON ISSUES ARE INVOLVED IN ALL THE YEARS. 3 3. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE SI DES ON THE FACTS FOR A. Y.2004-05. 4. FIRST WE TAKE UP ASSESEES APPEAL. GROUND NO.1 IS OF GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 5. GROUND NO.2 RELATES TO THE ADDITION OF RS.414982 4/- BEING WRITE BACK OF PROVISION AND SUNDRY BALANCES OF RS.3 786505/-. 6. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS WRI TTEN BACK EXCESS PROVISION OF RS.4149824/- AND SUNDRY CREDIT BALANCES OF RS.3786505/-. THE ASSESSING OFFICER NOTICED THAT T HE ASSESSEE HAS NOT ADDED THE SAME U/S.41(1) FOR THE PURPOSE OF COMPUTATION OF ITS TOTAL INCOME. THE ASSESSEE WAS ASKED TO SHO W CAUSE AS TO WHY THE SAME SHOULD NOT BE ADDED U/S. 41(1) OF THE ACT. IN ITS REPLY THE ASSESSEE STATED THAT THESE BALANCES WERE TRANSFERRED BY NDDB AS PART OF TRANSFER AGREEMENT BETWEEN THE ASSE SSEE AND NDDB. IT WAS BROUGHT TO THE NOTICE OF THE ASSESSIN G OFFICER THAT THE INCOME OF NDDB WAS NOT TAXABLE UNDER THE INCOME TAX ACT, THEREFORE, THE QUESTION OF ALLOWING DEDUCTION TO TH EM DOES NOT ARISE AND THEREFORE, PROVISIONS OF SECTION 41 (1) O F THE ACT DO NOT APPLY TO THE FACTS OF THE CASE. THE CONTENTION OF THE ASSESSEE WAS DISMISSED BY THE ASSESSING OFFICER WHO WAS OF THE O PINION THAT EVEN IF THE INCOME OF NDDB WAS NOT TAXABLE STILL TH E SUNDRY CREDITORS AND PROVISIONS ARE CLAIMED AS DEDUCTION. THE ASSESSING OFFICER ADDED THE AMOUNT OF RS.7936329/-. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 7. BEFORE US THE COUNSEL FOR THE ASSESSEE REFERRED TO THE NATIONAL DELHI DEVELOPMENT BOARD ACT 1987 AND POINT ED OUT THAT 4 AS PER SECTION 44 OF THE ACT NDDB WAS NOT LIABLE TO PAY INCOME TAX. IT IS THE SAY OF THE COUNSEL THAT SINCE THERE WAS NO LIABILITY TO PAY INCOME TAX THERE WAS NO QUESTION OF ANY ALLOWAN CES OF DEDUCTION IN THE HANDS OF NDDB. THE COUNSEL FURTHE R STATED THAT SINCE NO ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT OF NDDB WRITE BACK OF THE SAME CANNOT BE TREATED AS INCOME TAX U/S. 41 (1) OF THE ACT. 8. PER CONTRA THE DR STRONGLY SUPPORTED THE FINDING S OF THE ASSESSING OFFICER. 9. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND HAVE GONE THROUGH THE NDDB ACT 1987 EXHIB ITED AT PAGES 513-537 OF THE PAPER BOOK. SECTION 44 OF THE SAID ACT READS AS UNDER :- NOT WITHSTANDING ANYTHING CONTENDED IN THE INCOME TAX ACT, 1961 OR ANY OTHER ENACTMENT FOR THE TIME BEING ENFORCE RELATING TO TAX ON INCOME TAX, PROFITS OR G AINS, THE NATIONAL DELHI DEVELOPMENT BOARD WAS NOT LIABLE TO PAY INCOME TAX OR ANY OTHER TAX IN RESPECT OF ITS INCOM E PROFITS OR GAINS DERIVED. 10. SECTION 41 (1) OF THE IT ACT READS AS UNDER :- 41. 8 [ 9 (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE FOR ANY YEAR IN RESPECT OF LOSS, EXPEND ITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREIN AFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) QUENTLY DURING ANY PREVIOUS YEAR - THE FIRST-MENTIONED PERSON HAS OBTAINED 10 , WHETHER IN CASH 5 OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RE SPECT OF SUCH EXPENDITURE OR SOME BENEFIT IN RESPECT OF S UCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEER PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY ABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DE HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED 10 , WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH EXPENDITURE WAS INCURRED BY THE FI RST- MENTIONED PERSON OR BENEFIT IN RESPECT OF THE TRAD ING LIABILITY REFERRED TO IN CLAUSE (A) BY WAY OF REMIS SION OR CESSATION THEREOF, THE AMOUNT OBTAINED SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING TO THE SU CCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PERVIOUS YEAR. 11. A PERUSAL OF THE AFOREMENTIONED SECTION SHOWS T HAT THE AMOUNT IS ADDED TO THE INCOME OF THE ASSESSEE ONLY WHEN AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSM ENT FOR ANY YEAR. AS MENTIONED ELSEWHERE THE INCOME OF NDDB WA S NOT LIABLE TO TAX AS INCOME TAX ACT WAS NOT APPLICABLE TO NDDB . IN OUR CONSIDERED OPINION WHEN NO ALLOWANCE OR DEDUCTION H AS BEEN ALLOWED TO THE PREDECESSOR THERE IS NO QUESTION OF ADDING THE 6 SAME WHEN THE AMOUNTS ARE WRITTEN BACK BY THE ASSES SEE. GROUND NO. 2 IS ALLOWED 12. GROUND NO.3 RELATES TO THE ADDITION OF RS.11483 4/- BEING THE AMOUNT OF TAX BORNE BY THE ASSESSEE IN RESPECT OF TAX PAYMENT OF INTEREST ON SUPPLY CREDIT. 13. WHILE SCRUTINISING THE RETURN OF INCOME THE ASS ESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED RS.114834/- A S AN EXPENDITURE THOUGH THE SAME REPRESENTS THE TDS IN R ESPECT OF INTEREST ON FOREIGN SUPPLIERS CREDIT. AS THE PAYMEN T OF TAX LIABILITY IS NOT ALLOWABLE AS EXPENDITURE, THE ASSESSING OFFI CER MADE THE ADDITION OF RS.114834/- WHICH WAS CONFIRMED BY THE CIT(A). 14. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE ASSESSEE HAS DISCHARGED THE TAX LIABILITY OF THE PA YMENT OF TDS OF THE SUPPLIERS AND, THEREFORE, THE SAME SHOULD BE AL LOWED AS EXPENDITURE U/S. 37 OF THE ACT. IN SUPPORT THE COU NSEL RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF DASHMESH TRANSPORT COMPANY 93 ITR 275. 15. THE DR VEHEMENTLY STATED THAT THE INCOME TAX LI ABILITY DISCHARGED BY THE ASSESSEE CAN NEVER BE CLAIMED AS LEGITIMATE BUSINESS EXPENDITURE U/S. 37 OF THE ACT. 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND FAILED TO UNDERSTAND THE LOGIC GIVEN BY THE COUNSEL. THER E IS NO DISPUTE THAT THE ASSESSEE HAS PAID TAX ON BEHALF OF ITS FOR EIGN SUPPLIERS BEING AN INCOME TAX LIABILITY. BY ANY STRETCH OF IM AGINATION THE SAME CANNOT BE ALLOWED AS EXPENDITURE U/S. 37 OF TH E ACT. THE RELIANCE WAS PLACED ON THE DECISION OF HONBLE PUNJ AB & HARYANA HIGH COURT IS MISPLACED IN AS MUCH AS IN THAT CASE THE ASSESSEE 7 COMPANY TOOK OVER THE ASSETS AND LIABILITIES OF ANO THER COMPANY AND WHILE DISCHARGING THE LIABILITIES OF THAT COMPA NY CERTAIN EXPENDITURE WERE INCURRED WHICH WERE CLAIMED AS LEG ITIMATE BUSINESS EXPENDITURE. 17. FACTS OF THE CASE IN HAND ARE TOTALLY DIFFERENT , THEREFORE, THE ADDITION OF RS.114834/- IS SUSTAINED. GROUND NO.3 I S DISMISSED. 18. GROUND NO.4 RELATES TO THE DISALLOWANCE OF RS.1 734553/- U/S.14A OF THE ACT. 19. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AS SHOWN RS.17345527/- ON ACCOUNT OF INTEREST ON TAX FREE BO NDS AS EXEMPT INCOME. THE ASSESSEE WAS ASKED TO EXPLAIN WH Y THE INTEREST AND OTHER EXPENSES RELATING TO EARNING OF THIS EXEMPT INCOME SHOULD NOT BE DISALLOWED U/S. 14A OF THE ACT . IN ITS REPLY THE ASSESSEE STATED THAT THE INVESTMENTS COME FROM NDDB AND THE ADDITIONAL INVESTMENT MADE DURING THE YEAR WERE MADE OUT OF OWN FUNDS AND INTEREST NO HAS BEEN PAID AND THE ASS ESSEE HAS NOT INCURRED NIL EXPENDITURE FOR EARNING THE EXEMPT INCOME, THEREFORE, NO DISALLOWANCE SHOULD BE MADE U/S.14A O F THE ACT. THE REPLY OF THE ASSESSEE DID NOT FIND ANY FAVOUR W ITH THE ASSESSING OFFICER WHO PROCEEDED BY DISALLOWING 10% OF THE TOTAL EXEMPT INCOME AS A REASONABLE EXPENDITURE FOR EARNI NG THE EXEMPT INCOME AND MADE THE ADDITION OF RS.1734553/- WHICH WAS CONFIRMED BY THE CIT(A). 20. BEFORE US THE COUNSEL FOR THE ASSESSEE STATED T HAT THE INVESTMENTS ARE COMING FROM NDDB WITH A SPECIFIC DI RECTION THAT THESE FUNDS SHALL ONLY BE UTILISED ON RESEARCH AND DEVELOPMENT. IT IS THE SAY OF THE COUNSEL THAT THE ASSESSEE HAS ONLY PAID 8 DIRECTORS MEETING FEES AND NO OTHER EXPENDITURE HAV E BEEN INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INC OME. 21. PER CONTRA THE DR STRONGLY SUPPORTED THE FINDIN GS OF THE ASSESSING OFFICER. 22. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT DURING THE YEAR TH E ASSESSEE HAS EARNED AN EXEMPT INCOME ON ACCOUNT OF INTEREST ON T AX FREE BONDS. IT IS ALSO NOT IN DISPUTE THAT ALL THE INVES TMENTS ARE COMING FROM NDDB. THE ONLY EXPENDITURE WHICH HAS BE EN INCURRED BY THE ASSESSEE IS TOWARDS THE BOARD MEETI NG FEES. IN OUR CONSIDERED OPINION 100% OF SUCH BOARD MEETING F EE EXPENSE NEED TO BE DISALLOWED. WE ACCORDINGLY DIRECT THE AS SESSING OFFICER TO DISALLOW THE ENTIRE EXPENDITURE INCURRED ON BOAR D MEETING FEES TOWARDS EARNING OF EXEMPT INCOME. IN ADDITION FURTH ER DISALLOWANCES OF RS.1,00,000/- TOWARDS THE ADMINIST RATIVE EXPENSES SHOULD MEET THE ENDS OF JUSTICE. WE DIREC T ACCORDINGLY. GROUND NO.4 IS PARTLY ALLOWED. 23. GROUND NO.5 RELATES TO THE ADDITION OF RS.18315 6/- INCURRED BY THE ASSESSEE ON PURCHASE OF SOFTWARE TREATING TH E SAME AS CAPITAL EXPENDITURE. WHILE SCRUTINISING THE RETURN OF INCOME THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS INC URRED CERTAIN EXPENDITURE IN RESPECT OF SOFTWARE EXPENSES BEING I BM SOFTWARE E-TDS SOFTWARE, MS OFFICE 2003, APPLICATION SOFTWAR E, GET SOFTWARE. THE ASSESSING OFFICER WAS OF THE OPINION THAT BY INCURRING THESE EXPENSES THE ASSESSEE HAS ACQUIRED ENDURING BENEFIT AND, THEREFORE, THESE ARE OF CAPITAL IN NAT URE. THE ASSESSING OFFICER ACCORDINGLY TREATED THE SAME AS C APITAL 9 EXPENDITURE AND ALLOWED DEPRECIATION AS PER ELIGIBL E RATE. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT W ITHOUT ANY SUCCESS. 24. BEFORE US THE COUNSEL STATED THAT THESE ARE ROU TINE SOFTWARE EXPENDITURE WHICH NEEDS TO BE INCURRED EVERY YEAR I N THE UP-GRADATION OF THE SOFTWARE ARE OF REVENUE IN NATU RE AND SHOULD BE ALLOWED AS SUCH. RELIANCE WAS PLACED ON THE DEC ISION OF AMWAYS 346 ITR 341 AND ASHAI INDIA SAFETY GLASS IND IA LTD 346 ITR 329. 25. PER CONTRA THE DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 26. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. LOOKING TO THE NATURE OF SOFTWARE WE ARE OF THE CONSIDERED OPINION THAT THESE ARE ROUTINE SOFTWARE WHICH NEED UP GRADATION YEAR AFTER YEAR AND, THEREFORE, IT CAN BE SAFELY CO NCLUDED THAT NO ENDURING BENEFIT IS DERIVED BY THE ASSESSEE. THE H ONBLE HIGH COURT OF DELHI IN THE CASE OF AMWAY INDIA (SUPRA) H AS HELD THAT THE ISSUE WITH REGARD TO THE EXPENDITURE ON SOFTWAR E APPLICATION WAS TO BE HELD IN FAVOUR OF THE ASSESSEE. A SIMILAR VIEW WAS TAKEN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF A SHAHI INDIA (SUPRA) WHEREIN THE HONBLE HIGH COURT HELD AS UNDE R :- HELD, DISMISSING THE APPEALS, THAT THE TRIBUNAL OBSERVED THAT THE EXPENDITURE WAS INCURRED UNDER VARIOUS SUB - HEADS, WHICH INCLUDED LICENCE FEE, ANNUAL TECHNICAL SUPPORT FEE, PROFESSIONAL CHARGES, DATA ENTRY OPERA TOR CHARGES, TRAINING CHARGES AND TRAVELLING EXPENSES. THE 10 FINAL FIGURE WAS A CONSOLIDATION OF EXPENSES INCURR ED UNDER THESE SUB-HEADS. THE TRIBUNAL RIGHTLY CAME TO THE CONCLUSION THAT NONE OF THESE RESULTED IN EITHER CR EATION OF A NEW ASSET OR BROUGHT FORTH A NEW SOURCE OF INCOME FOR THE ASSESSEE. THE TRIBUNAL CLASSIFIED THE EXPENSES AS BEING RECURRING IN NATURE TO UPGRADE OR TO RUN THE SYSTEM. THEREFORE, IT COULD NOT BE SAID THAT THE EXPENSES B ROUGHT ABOUT IN AN ENDURING BENEFIT TO THE ASSESSEE. THE E XTENT OF THE EXPENDITURE COULD NOT BE A DECISIVE FACTOR IN DETERMINING ITS NATURE. THE EXPENDITURE, IN THE FIN ANCIAL YEAR 1997-98 WAS FOR REMOVING DEFICIENCIES WHICH WE RE FOUND IN THE SOFTWARE INSTALLED IN THE EARLIER ASSE SSMENT YEAR, AND OUT OF A SUM OF RS. 1.71 CRORES A SUM OF RS. 49 LAKHS WAS INCURRED TO MODIFY, CUSTOMIZE AND UPGRADE THE SOFTWARE INSTALLED, WHILE THE BALANCE EXPENDITURE W AS USED FOR DEVELOPMENT AND IMPLEMENTATION. THE TREATM ENT OF A PARTICULAR EXPENSE OR A PROVISION IN THE BOOKS OF ACCOUNT COULD NEVER BE CONCLUSIVELY DETERMINATIVE O F THE NATURE OF THE EXPENSE. AN ASSESSEE COULD NOT BE DEN IED A CLAIM FOR DEDUCTION WHICH WAS OTHERWISE TENABLE IN LAW ON THE GROUND THAT THE ASSESSEE HAD TREATED IT DIFFERE NTLY IN ITS BOOKS. 27. RESPECTIVELY FOLLOWING THE DECISIONS OF THE HON BLE JURISDICTIONAL HIGH COURT (SUPRA) WE DIRECT THE ASS ESSING OFFICER TO DELETE THE DISALLOWANCE IN RESPECT OF THE SOFTWA RE EXPENDITURE. SINCE THE ENTIRE EXPENDITURE HAS BEEN ALLOWED THE A SSESSING 11 OFFICER SHALL ADD BACK THE DEPRECATION ALLOWED ON S UCH EXPENDITURE. GROUND NO.5 IS ALLOWED. 28. GROUND NO.6 RELATES TO THE DISALLOWANCE OF EXPE NDITURE ON ACCOUNT OF SHIFTING OF MACHINES BY TREATING THE SAM E AS CAPITAL EXPENDITURE. THE ASSESSING OFFICER NOTICED THAT TH E ASSESSEE HAS INCURRED EXPENDITURE OF RS.395649/- ON SHIFTING ITS PLANT AND MACHINERY LYING AT OPS CHALTHAN WHICH WERE SHIFTED TO OPS PALANPUR. THE ASSESSEE EXPLAINED THAT SINCE THE PLA NT AND MACHINERY WERE SHIFTED DISMANTLING WAS REQUIRED ALO NGWITH LOADING TRANSPORTATION AND UN-LOADING OF MACHINES A ND, THEREFORE, THE EXPENDITURE INCURRED ON SUCH ACTIVIT Y SHOULD BE ALLOWED AS REVENUE EXPENDITURE. THE ASSESSING OFFI CER WAS OF THE OPINION THAT SUCH EXPENDITURE ARE CAPITAL IN NATURE SINCE THE ASSESSEE WOULD DERIVE ENDURING BENEFIT AND TREATED THE SAME AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION. SUCH ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY THE CIT(A). 29. BEFORE US THE COUNSEL FOR THE ASSESSEE STATED T HAT SINCE THE ASSESSEE HAS DECIDED TO SHIFT ITS MACHINES FROM OPS CHALTHAN TO OPS PALANPUR, THE PLANT AND MACHINERY AT CHALTHAN H AD TO BE DISMANTLED AND TRANSPORTED TO THE NEW WORK PLACE. IT IS THE SAY OF THE COUNSEL THAT SUCH EXPENDITURE ARE REVENUE IN NATURE AND SHOULD BE ALLOWED AS SUCH. 30. THE DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 31. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT PLANT AND MACHINER Y AT OPS CHALTHAN WERE SHIFTED TO OPS PALANPUR. THESE PLANT AND MACHINERIES HAD TO BE DISMANTLED AND TRANSPORTED AN D AGAIN 12 INSTALLED AT PALANPUR. IN OUR CONSIDERED OPINION SU CH EXPENDITURE DO NOT GIVEN ENDURING BENEFIT TO THE ASSESSEE ON TH E CONTRARY SUCH EXPENDITURE ARE INCURRED TO FACILITATE THE BUS INESS OF THE ASSESSEE AND HAVE TO BE ALLOWED AS REVENUE EXPENDIT URE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE AND WITHDRAW THE DEPRECIATION ALLOWED. GROUND NO.6 IS ALLOWED. 32. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1022/DEL/2011 (ASSESSEES APPEAL FOR A. Y.2 005-06) 33. GROUND NO.1 IS OF GENERAL IN NATURE AND NEEDS N O SEPARATE ADJUDICATION. 34. GROUND NO.2, 3, 4, 5 AND 6 ARE IDENTICAL TO GRO UND NO. 2,3,4,5, AND 6 IN ITA NO.1021/DEL/2011 (SUPRA) THOU GH THE QUANTUM MAY DIFFER. FOR A DETAILED REASON GIVEN THE REIN ALL THESE GROUNDS ARE ACCORDINGLY DISPOSED OF. ITA NO.1113/DEL/2011 (REVENUES APPEAL FOR A. Y.200 5-06) 35. GROUND NO.1 RELATES TO THE DELETION OF THE ADDI TION OF RS.18,38,598/- MADE ON ACCOUNT OF LEASE RENT. 36. DURING THE COURSE OF SCRUTINY OF ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED LEASE HOLD LAND EXPENSES OF RS.18,54,739/-. THE ASSESSEE WAS ASKED TO SPECIFY THE PERIOD OF LEASE, ITS NATURE AND JUST IFICATION FOR CLAIMING THIS EXPENSE. IN ITS REPLY THE ASSESSEE S TATED THAT IT HAS TAKEN LAND ON LEASE AT KANDLA FOR THE LEASE PERIOD OF 30 YEARS AND 13 AT KOLKATA FOR LEASE PERIOD OF 30 YEARS. IT WAS FUR THER EXPLAINED THAT IN F. Y.2002-03 THE ASSESSEE HAS ACQUIRED LAND AT VADODARA ON 99 YEARS LEASE ON WHICH A YEARLY GROUND RENT OF RS.2200/-IS REQUIRED TO BE PAID. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF THAT THE LEASE HOLD EXPENSES HAS TO BE DISALLOWED A S CAPITAL EXPENDITURE AND ACCORDINGLY MADE THE ADDITION OF RS.18,54,739/-. THE ASSESSEE CARRIED THE MATTER BE FORE THE CIT(A). AFTER CONSIDERING THE FACTS THE CIT(A) FOU ND THAT SIMILAR DISALLOWANCE WAS MADE IN A.Y.2002-03 AND THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBU NAL AND THEREFORE, DELETED THE ADDITION. 37. BEFORE US THE DR STRONGLY SUPPORTED THE FINDING S OF THE ASSESSING OFFICER. 38. PER CONTRA THE COUNSEL FOR THE ASSESSEE REITER ATED THAT THE SIMILAR DISALLOWANCE HAVE DELETED BY THE TRIBUNAL I N A.Y.2002-03. 39. A PERUSAL OF THE ASSESSMENT ORDER SHOW THAT THE ASSESSING OFFICER HIMSELF HAS FOLLOWED THE ASSESSMENT ORDER F OR A. Y.2002-03 AND SINCE IN THAT YEAR THE TRIBUNAL HA S DELETED THE ADDITIONS. WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE FINDING OF THE CIT(A). GROUND NO.2 IS DISMISSED. 40. GROUND NO.3 RELATES TO THE DELETION OF THE ADDI TION OF RS.43690/-. 41. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS INCURRED CLUB MEMBERSHIP FEE ON BEHALF OF ITS EMPLOYEES OF B OHO CLUB, ANAND. THE ASSESSING OFFICER WAS NOT CONVINCED WIT H THE CLAIM OF THIS EXPENDITURE AND MADE THE ADDITIONS. 42. THE CIT(A) FOUND THAT THE ASSESSING OFFICER HAS NOT BROUGHT 14 ANY MATERIAL TO SUGGEST THAT THE EXPENDITURE IN QUE STION WAS NOT LAID DOWN IN CONNECTION WITH THE RECREATION FACILIT IES PROVIDED TO THE EMPLOYEES. THE CIT(A) DELETED THE SAME. 43. THE DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 44. THE COUNSEL RELIED UPON THE FINDINGS OF THE CIT (A). 45. WE HAVE CAREFULLY CONSIDERED THE ISSUE. WE FIND THAT THE ASSESSING OFFICER IS DISALLOWED THE EXPENDITURE ON THE GROUND THAT SUCH EXPENDITURE IS NOT CONNECTED AT ALL AND N OTHING TO DO WITH THE BUSINESS OF ASSESSEE COMPANY. IN OUR CONS IDERED VIEW SUCH OBSERVATIONS OF THE ASSESSING OFFICER DO NOT H AVE ANY FORCE. THE EXPENDITURE HAS BEEN INCURRED AS SEVERAL EMPLOY EES OF THE ASSESSEE WHO ARE MEMBERS OF THE BOHO CLUB WHICH HAS BEEN ESTABLISHED FOR THE RE-CREATION AND WELFARE OF THE EMPLOYEES. IN OUR CONSIDERED VIEW SUCH EXPENDITURE IS ELIGIBLE FO R DEDUCTION U/S. 37 (1) OF THE ACT. FOR THIS PROPOSITION OF LA W WE DRAW SUPPORT THE DECISION OF THE HONBLE HIGH COURT OF G UJARAT IN THE CASE OF GUJARAT STATE EXPORT CORPORATION REPORTED I N 209 ITR 649. WE DECLINE TO INTERFERE WITH THE FINDINGS OF T HE CIT(A). GROUND NO.3 IS DISMISSED. 46. GROUND NO.4 RELATES TO THE DELETION OF THE ADDI TION OF RS.13877311/- MADE BY DISALLOWING RESEARCH AND DEVE LOPMENT EXPENSES. THE ASSESSING OFFICERS FINDINGS ARE GIV EN AT PAGES 9 TO 14 OF THE ASSESSMENT ORDER. THE CIT(A) DELETED THE DISALLOWANCE AND THE FINDING OF THE CIT(A) ARE AT PARA 5.6 OF HI S ORDER. 47. WE HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLATE AUTHORITY. THIS ISSUE HAS BEEN CONSIDERED AT LENGTH BY THE TRIBUNAL IN ASSESSEES OWN CASE IN IT A 15 NO.2875/DEL/2013. THE RELEVANT FINDING OF THE COOR DINATE BENCH READ AS UNDER : 26. THE BONE OF CONTENTION IS THE CLAIM OF DEDUCTION U/S 35(1) (I),(II) & (IV) OF THE ACT. THE FIRST REASON FOR DISALLOWING THE CLAIM OF DEDUCTION IS THAT RESEARCH WORK WAS CARR IED OUT BY MOTHER DIARY FOODS PROCESSING LTD, DELHI AND NOT B Y ASSESSEE AND LATER ON, PART OF COSTS WERE RECOVERED F ROM THE ASSESSEE COMPANY. THE REVENUE ALLEGES THAT THE ASSE SSEE ITSELF HAD NOT CARRIED OUT R & D ACTIVITIES. THUS THE CORRELATION OF EXPENSES INCURRED WITH THE BUSINESS OF THE ASSESSEE COULD NOT BE ESTABLISHED WHICH IS PRIMARILY REQUIRED FOR ALLOWANCE OF DEDUCTION U/S 35(1 )(I) OF THE ACT. 27. WE FIND THE ANSWER TO THIS QUARREL IS IN THE DECISI ON OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF NAT IONAL RAYON CORPORATION LIMITED 140 ITR 143 WHEREIN THE HO N'BLE HIGH COURT HAS HELD THAT FOR CLAIMING THE DEDUCTION U /S 35(1)(I) OF THE ACT, RESEARCH MUST HAVE BEEN CARRIE D ON BY THE ASSESSEE ITSELF IS NOT BORNE OUT BY PHRASEOLOGY OF THE STATUTORY PROVISION. THE ASSESSEE CAN CLAIM THE DEDUC TION EVEN IF THE RESEARCH IS CARRIED ON BY SOME OTHER PER SON ON 16 BEHALF OF THE ASSESSEE. 28. SECOND QUARREL IS IN RESPECT OF CONTRIBUTION MADE BY THE ASSESSEE TO DELHI UNIVERSITY AND NAGPUR UNIVERSI TY. 29. THE ASSESSING OFFICER WAS OF THE OPINION THAT U/S 35(1) (II) OF THE ACT, THE DEDUCTION OF ANY SUM PAID TO SCIENTIFIC RESEARCH ASSOCIATION IS ALLOWABLE IF SUC H ASSOCIATIONS OBJECT IS UNDERTAKING OF SCIENTIFIC R ESEARCH OR TO A UNIVERSITY, COLLEGE OR OTHER INSTITUTION TO BE US ED FOR SCIENTIFIC RESEARCH SUBJECT TO FULFILMENT OF CERTAI N CONDITIONS. 30. THE ASSESSING OFFICER WAS OF THE OPINION THAT THOU GH THE ASSESSEE HAS FURNISHED PROOF OF APPROVAL UNDER T HE I.T. ACT, 1922, BUT HAS FAILED TO PRODUCE ANY EVIDENCE UN DER THE PROVISIONS OF ITAT RULES, 1962. * 31. WE FIND THAT A SIMILAR DISPUTE WAS CO9NSIDERED BY THE THE THEN HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF THE APPELLANT IN THE CASE OF SPECIAL CIVIL APPLICATION NO. 9876 OF 2009 IN ORDER DATED 10.07.2012 AND AT PARA 17 OF ITS ORDER 17 THE HON'BLE HIGH COURT HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. 32. MOREOVER, IDENTICAL ISSUES WERE THE BONE OF CONTENT ION IN A.YS 2004-05 TO 2007-08 WHERE DISALLOWANCES MADE BY THE ASSESSING OFFICER WERE DELETED. THIS FACT IS ALSO EVIDENT FROM THE FINDINGS OF THE FIRST APPELLATE AUTHORITY, WHO, AT PAGES 10 TO 12 OF HIS ORDER HAS EXTRACTED THE FINDINGS GIVEN IN A.Y 2007-08. 3. CONSIDERING THE DISALLOWANCE FROM ALL POSSIBLE ANGLE S, WE DO NOT FINDING ANY MERIT IN SUCH DISALLOWANCE AN D, THEREFORE, THE FINDINGS OF THE CIT(A) CANNOT BE FAU LTED WITH. THE FINDINGS OF THE FIRST APPELLATE AUTHORITY ARE, A CCORDINGLY, UPHELD ON THIS COUNT. 48. REVENUE PREFERRED AN APPEAL BEFORE THE HONBLE HIGH COURT OF DELHI AND THE HONBLE HIGH COURT VIDE ORDER DATE D 24.07.2019 IN ITA NO.454/2019 DISMISSED THE REVENUES APPEAL. THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READ AS UNDER :- 4. THE SECOND ISSUE URGED IS WHETHER THE ITAT WAS JUSTIFIE D IN DELETING THE ADDITION, MADE ON ACCOUNT OF DISALLOWANCE OR DEDUCTIONS CLAIMED BY THE ASSESSEE UNDER SECTION 35(1 )(II) OF THE 18 ACT? 5. THE BRIEF FACTS AS FAR AS THIS ISSUE IS CONCERNED A RE THAT ACCORDING TO THE REVENUE THE ACTUAL RESEARCH EXPENS ES HAVE BEEN INCURRED BY THE MOTHER DAIRY FRUITS AND VEGETABLES LTD. WHOSE SUBSIDIARY IS THE PRESENT ASSESSEE. THE ASSESSEE AP PARENTLY REIMBURSED THE EXPENSES INCURRED ON SCIENTIFIC RESE ARCH FOR MOTHER DAIRY FRUITS AND VEGETABLES LTD. THE ASSESSEE HAS B EEN ASSESSED IN GUJARAT PRIOR TO THE AY IN QUESTION AND FOR AN E ARLIER AY 2002- 03 WHERE AGAIN IN REASSESSMENT PROCEEDINGS SUCH EXPENS ES WERE SOUGHT TO BE DISALLOWED, THE HIGH COURT OF GUJARAT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY ITS ORDER DATED 10 JULY 2012 IN SPECIAL CIVIL APPLICATION NO. 9826 OF 2009 (DHARA VEGETABLE OIL AND FOODS CO. LTD. V. THE DEPUTY COMMISSIONER OF INCOME TAX). 6. THE SAID DECISION APPEARS TO HAVE BEEN ACCEPTED BY THE REVENUE. IN THAT VIEW OF THE MATTER THIS C OURT IS NOT INCLINED TO FRAME ANY QUESTION ON THIS ISSUE AS WELL. 49. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH AND THE HONBLE HIGH COURT WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE CIT(A) APPEAL FILED BY THE REVENUE ACCORDINGLY DISMISSED. ITA NO.505/DEL/2011 (REVENUES APPEAL FOR A. Y. 200 6-07) 50. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 35 (I) (II) AND U/S . 35 (1) (I) (IV) OF THE ACT. A SIMILAR ADDITION HAS BEEN DELETED BY US IN ITA 19 NO.1113/DEL/2011 (SUPRA). FOR OUR DETAIL DISCUSSION THEREIN WE DECLINE TO INTERFERE. 51. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. CROSS OBJECTION NO.58/DEL/2011 (CROSS OBJECTION BY THE ASSESSEE FOR A. Y.2006-07) 52. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO T HE ADDITION OF RS.568968/- BEING EXPENDITURE INCURRED ON SHIFTING OF MACHINES. AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY US IN ITA NO.1021/DEL/2011 VIDE GROUND NO. 6 OF THAT APPEAL. FOR OUR DETAIL DISCUSSION THEREIN, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. 53. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.08.2019. SD/- SD/- (LALIET KUMAR) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNT ANT MEMBER *NEHA* DATE:- 06.08.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI 20 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 06.08.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER