DCIT, CHENNAI V. Mahindra Holidays & Resorts India Ltd., CHENNAI

ITA 1227/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68744 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNEEL VERMA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Depreciation; Rule of consistency; Retrospective amendment; Permanent establishment; Revised return; Revenue expenditure; Capital expenditure
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1339/MDS/2013 (ASSESSMENT YEAR : 2009-10) M/S MAHINDRA HOLIDAYS & RESORTS INDIA LTD., MAHINDRA TOWERS, 2 ND FLOOR, 17-18, PATULLOS ROAD, CHENNAI - 600 002. PAN : AAACM 6469 L (APPELLANT) V. THE JOINT COMMISSIONER OF INCOME TAX (LTU), CHENNAI - 600 101. (RESPONDENT) I.T.A. NO. 1227/MDS/2013 (ASSESSMENT YEAR : 2009-10) THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI - 600 101. (APPELLANT) V. M/S MAHINDRA HOLIDAYS & RESORTS INDIA LTD., MAHINDRA TOWERS, 2 ND FLOOR, 17-18, PATULLOS ROAD, CHENNAI - 600 002. (RESPONDENT) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE REVENUE BY : SHRI SUNEEL VERMA, CIT DATE OF HEARING : 04.09.2013 DATE OF PRONOUNCEMENT : 26.09.2013 I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 2 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RESPECTIVELY, DIRECTED AGAINST AN ORDER DATED 22.2. 2013 OF COMMISSIONER OF INCOME TAX (APPEALS), LARGE TAXPAYE R UNIT, CHENNAI. 2. APPEAL OF THE ASSESSEE IS TAKEN UP FOR DISPOSAL, FIRST. 3. ALTOGETHER SIX GROUNDS HAVE BEEN RAISED BY THE A SSESSEE, OUT OF WHICH, GROUNDS 1 AND 6 ARE GENERAL NEEDING NO AD JUDICATION. 4. VIDE ITS GROUND NO.2, GRIEVANCE RAISED BY THE AS SESSEE IS THAT CIT(APPEALS) CONFIRMED THE EXPENDITURE ON CIVIL, EL ECTRICAL, CARPENTARY AND PLUMBING WORK DONE IN A LEASE HOLD BUILDINGS, A S A CAPITAL EXPENDITURE. AS PER THE ASSESSEE, CIT(APPEALS) DIR ECTED THE ASSESSING OFFICER TO VERIFY THE EXPENDITURE AND BIF URCATE IT UNDER REVENUE AND CAPITAL HEADS. 5. FACTS APROPOS ARE THAT ASSESSEE HAD CLAIMED A SU M OF ` 3,79,71,535/- IN ITS PROFIT & LOSS ACCOUNT AGAINST REPAIRS DONE ON ITS I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 3 RESORTS. AS PER THE ASSESSEE, THESE WERE SPENT FOR IMPROVEMENT AND DEVELOPMENT OF LEASE HOLD PREMISES. ASSESSING OFFI CER, RELYING ON HIS OWN ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008-0 9, DISALLOWED THE CLAIM. ACCORDING TO HIM, SUCH EXPENDITURE COUL D BE TREATED ONLY AS CAPITAL OUTGO. ASSESSING OFFICER ALSO NOTED THA T IT INCLUDED AMOUNTS SPENT FOR PURCHASING GENERATOR, CONSTRUCTIO N OF TEA ROOM, PURCHASING SMOKE DETECTORS, ETC. 6. AGAINST THIS, ASSESSEE MOVED IN APPEAL BEFORE CI T(APPEALS). CLAIM OF THE ASSESSEE WAS THAT ITS BUSINESS WAS TO PROVIDE HOLIDAY FACILITIES TO ITS MEMBERS FOR THE TENURE OF THE CON TRACTS ENTERED WITH SUCH MEMBERS. FOR GIVING THE FACILITY TO THE MEMBE RS, IT WAS LEASING PROPERTIES AT HOLIDAY DESTINATIONS. AS PER ASSESSE E, EXPENDITURE HAD TO BE INCURRED FOR BRINGING STANDARD OF THE FACILIT IES OFFERED AT PAR WITH WHAT WAS REQUIRED. THE EXPENDITURE IN THE NATURE O F PLUMBING, PAINTING, CHANGING OF CURTAINS/UPHOLSTERS, CHANGING TILES IN BOTHROOM, ETC., COULD ONLY BE CONSIDERED AS REVENUE OUTGO. 7. CIT(APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD THAT THE EXPENDITURE ON REVENUE ACCO UNT WERE TO BE ALLOWED, WHEREAS, THOSE INCURRED FOR CIVIL, ELECTR ICAL, CARPENTARY, PLUMBING, FURNITURE, ETC. HAD TO BE TREATED AS CAPI TAL OUTGO. FOR I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 4 COMING TO THIS CONCLUSION, CIT(APPEALS) HAD FOLLOWE D DECISION OF HER PREDECESSOR IN ASSESSEES OWN APPEAL FOR ASSESSMENT YEAR 2008-09. SHE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO V ERIFY THE DETAILS OF THE EXPENDITURE OF ` 3,29,73,439/- AND BIFURCATE IT UNDER THE REVENUE AND CAPITAL FIELD. THE AMOUNT UNDER THE CAPITAL HE AD WAS TO BE DISALLOWED, WHEREAS, THAT UNDER THE REVENUE WAS TO BE ALLOWED. 8. NOW BEFORE US, ADV. SHRI R. VIJAYARAGHAVAN, APPE ARING FOR THE ASSESSEE, FAIRLY ADMITTED THAT THIS ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2 008-09. PLACING A COPY OF THE ORDER DATED 17 TH OCTOBER, 2012 OF THIS TRIBUNAL IN I.T.A. NO. 1616/MDS/2011, LEARNED A.R. SUBMITTED THAT THOU GH THIS TRIBUNAL HAD HELD IN FAVOUR OF REVENUE, THE ISSUE STILL REQU IRED A RE- CONSIDERATION. 9. PER CONTRA, SHRI SUNEEL VERMA, APPEARING FOR THE REVENUE, STRONGLY SUPPORTED THE ORDER OF CIT(APPEALS). 10. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ASSESSING OFFICER HAD FOLLOWED HIS OWN ORDER FO R ASSESSMENT YEAR 2008-09. CIT(APPEALS) HAD ALSO FOLLOWED HER O WN ORDER FOR ASSESSMENT YEAR 2008-09, WHERE SHE DIRECTED THE ASS ESSING OFFICER I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 5 TO BIFURCATE THE OUTGO INTO CAPITAL AND REVENUE FIE LD. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN A SSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09, WHERE THE TRIBUNAL VID E ITS ORDER (SUPRA) AT PARA 7, IT WAS HELD AS UNDER:- 7. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT T HE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THAT EXPENDITURE ON CIVIL, ELECTRICAL, PLUMBING ON EXTENSION OF THE IMPROVEMENTS TO THE LEASEHOLD BUILDING IS CAPITAL I N NATURE, REJECTING THE CONTENTION OF THE ASSESSEE THAT THOSE EXPENSES WERE REVENUE IN NATURE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THIS ISSUE IN A DETAILED M ANNER IN PARAGRAPHS 9, 9.1, 9.2, 9.2.1 AND 9.2.2 IN HIS ORDE R. THE EXPENSES RELATING TO TRANSPORT, FREIGHT, GENERAL EXPENSES AN D UPHOLSTERY HAVE BEEN ALLOWED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS REVENUE EXPENDITURE. ONLY THOSE ITEMS WHICH ARE CAPITAL IN NATURE WERE DISALLOWED BY THE COMMISSIONER OF INCOM E TAX (APPEALS). IN THAT CASE DEPRECIATION HAS BEEN ALLO WED. THEREFORE, WE FIND NO REASON TO INTERFERE IN THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS POINT. THIS GROUND IS DISMISSED. 11. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THA T THE CIT(APPEALS) WAS JUSTIFIED IN DIRECTING THE A.O. TO ALLOW THE EXPENDITURE, WHICH WAS IN THE REVENUE FIELD AND DIS ALLOW THE CLAIM OF EXPENDITURE, WHICH WAS IN THE CAPITAL FIELD. THOUG H ASSESSEE HAS RELIED ON THE DECISION OF HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF THIRU AROORAN SUGARS LTD. REPORTED IN 350 ITR 32 4 IN THE GROUNDS I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 6 OF APPEAL, WE FIND THAT FACTS IN THE SAID DECISION WERE ENTIRELY DIFFERENT. 12. GROUND NO.2 OF THE ASSESSEE IS DISMISSED. 13. VIDE ITS GROUND NO.3, GRIEVANCE OF THE ASSESSEE IS THAT CIT(APPEALS) CONFIRMED A DISALLOWANCE OF WEBSITE DE VELOPMENT CHARGES OF ` 2,10,32,191/-. 14. FACTS APROPOS ARE THAT ASSESSEE HAD CHARGED IN ITS PROFIT & LOSS ACCOUNT A SUM OF ` 2,10,32,191/- UNDER THE HEAD WEBSITE DEVELOPMENT CHARGES. WHEN EXPLANATION WAS SOUGHT, ASSESSEE REPLIED THAT SUCH SPENDINGS WERE NOT FOR ANY NEW WE BSITE, BUT INCURRED ONLY FOR UPGRADING THE EXISTING WEBSITE. AS PER ASSESSEE, THERE WAS AN ADDITIONAL PRODUCT LINE CALLED MAHIND RA HOMESTAYS INTRODUCED DURING THE RELEVANT PREVIOUS YEAR AND TH EREFORE, THE WEBSITE HAD TO BE UPGRADED TO INCLUDE THIS PRODUCT ALSO. HOWEVER, THE A.O. WAS NOT IMPRESSED. ACCORDING TO HIM, ASSE SSEE DERIVED AN ENDURING BENEFIT BY ADDING A NEW FEATURE TO THE EXI STING SITE. THEREFORE, HE TREATED THE OUTGO AS CAPITAL EXPENDIT URE. 15. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE EXPENDITURE INCURRED WAS PRIMARILY REV ENUE IN NATURE. I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 7 THERE WAS NO NEW WEBSITE ACQUIRED OR CREATED BY THE ASSESSEE. THEREFORE, ACCORDING TO IT, THE CLAIM HAD TO BE ALL OWED. THE CIT(APPEALS) HOWEVER WAS NOT IMPRESSED. ACCORDING T O HER, THE EXPENDITURE INCURRED FOR WEBSITE DEVELOPMENT WAS AM ORTIZED BY THE ASSESSEE IN ITS ACCOUNTS OVER A THREE-YEAR PERIOD. THUS, AS PER THE LD. CIT(APPEALS), ASSESSEE ITSELF HAD NOT TREATED I T AS REVENUE OUTGO. RELYING ON THE DECISION OF DELHI BENCH OF THIS TRIB UNAL IN THE CASE OF MAKEMYTRIP (INDIA) (P) LTD. V. CIT (2012) 51 SOT 19 , LD. CIT(APPEALS) HELD THAT WEBSITE DEVELOPMENT COST HAD RESULTED IN CREATION OF AN INTANGIBLE ASSET AND HENCE, WAS ONLY A CAPITAL OUTG O. SHE THEREFORE CONFIRMED THE ORDER OF THE A.O., BUT, DIRECTED TO A LLOW DEPRECIATION OF 25% TO THE ASSESSEE. 16. NOW BEFORE US, LEARNED A.R. SUBMITTED THAT IN T HE CASE OF MAKEMYTRIP (INDIA) (P) LTD. (SUPRA), DISALLOWANCE W AS MADE FOR A REASON THAT THE CLAIM WAS AGAINST DEVELOPMENT OF A NEW WEBSITE. DEVELOPMENT OF A NEW WEBSITE COULD NOT BE CONSIDERE D AT PAR WITH UPGRADATION OF AN EXISTING WEBSITE. ACCORDING TO H IM, WHEN THE NATURE OF PRODUCT CHANGES OR THERE WAS ANY CHANGE I N THE FEATURE OF VARIOUS PRODUCTS, IT WAS NECESSARY TO MAKE CHANGES IN THE WEBSITE. SUCH CHANGES DID NOT GIVE RISE TO ANY ENDURING BENE FIT. ACCORDING TO I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 8 HIM, THE WEBSITE COULD BE CONSIDERED ONLY AS A SUBS TITUTE OF PRINTED PAMPHLET. EXPENDITURE INCURRED ON A PRINTED PAMPHL ET GIVING DETAILS OF THE PRODUCTS WOULD ALWAYS BE ALLOWABLE AS REVENU E OUTGO. HENCE, ACCORDING TO HIM, TO TREAT THE WEBSITE UPGRADATION EXPENDITURE AS CAPITAL OUTGO WAS INCORRECT. 17. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. 18. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. CLAIM OF THE ASSESSEE IS THAT THE EXPENDITURE WAS I NCURRED ON A UPGRADATION OF AN EXISTING WEBSITE DUE TO A NEW PRO DUCT LINE BEING ADDED. ACCORDING TO ASSESSEE, ITS CASE WAS DIFFERE NT FROM THE ONE CONSIDERED BY THE DELHI BENCH IN THE CASE OF MAKEMY TRIP (INDIA) (P) LTD. (SUPRA). THE DELHI BENCH OF THIS TRIBUNAL HAD HELD AS UNDER ON WEBSITE DEVELOPMENT EXPENDITURE:- IT IS A FACT THAT THE ASSESSEE IN THE BOOKS OF ACCO UNT HAS TREATED THE WEBSITE DEVELOPMENT COST AS SEPARATE BL OCK OF ASSETS ON WHICH DEPRECIATION AT THE RATE OF 25 PER CENT HAS BEEN CLAIMED FROM ASSESSMENT YEARS 2001-02 TO 2003-04. THE REVENUE HAS TREATED THE WEBSITE DEVELOPMENT COST AS BUSINESS ASSET AND HAD ALLOWED DEPRECIATION FOR ASSESSMENT Y EARS 2001-02 TO 2003-04. DURING THE YEAR UNDER CONSIDERATION TH E REVENUE HAS TAKEN A CONTRARY VIEW THAT WEBSITE IS NOT A DEP RECIABLE ASSET AND HAS DISALLOWED DEPRECIATION CLAIMED BY THE ASSE SSEE AT ` I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 9 24,00,777. THE COMMISSIONER (APPEALS) FOLLOWING TH E PRINCIPLE OF CONSISTENCY HAS ALLOWED DEPRECIATION AT THE RATE OF 25 PER CENT. THE ASSESSEE IS IN THE BUSINESS OF TOUR AND TRAVEL AND FOR THE PURPOSE OF ITS BUSINESS, HAS DEVELOPED A WEBSITE ON WHICH INFORMATION ABOUT THE ASSESSEE IS AVAILABLE. THE A SSESSEE IS ALSO DOING BUSINESS THROUGH ITS WEBSITE AND, THEREFORE, THE WEBSITE DEVELOPMENT COST REPRESENTS BUSINESS ASSET FALLING UNDER THE BLOCK OF INTANGIBLE ASSETS. THEREFORE, THE COMMISS IONER (APPEALS), HAS RIGHTLY ALLOWED DEPRECIATION AT THE RATE OF 25 PER CENT TREATING THE WEBSITE AS BUSINESS ASSET. ACCOR DINGLY, THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE COMMISSI ONER (APPEALS) ALLOWING THE RELIEF TO THE ASSESSEE. 19. WE FIND CONSIDERABLE STRENGTH IN TH ARGUMENT OF THE LEARNED A.R. THAT UPGRADATION OF A WEBSITE COULD NOT BE TRE ATED ON PAR WITH DEVELOPMENT OF A NEW WEBSITE. A WEBSITE CREATED BY A COMMERCIAL ENTITY IS NOT A STATIC ONE. IT REQUIRES DYNAMIC CH ANGES ACCORDING TO IMPROVEMENT IN PRODUCTS AND ADDITION OF NEW FEATURE S OR SERVICES. EVERY CHANGE IN THE PRODUCT OF A COMMERCIAL ENTITY WOULD REQUIRE AN UPGRADATION OF ITS WEBSITE. OTHERWISE, ITS WEBSITE WILL BECOME OBSOLETE AND UNUSEFUL TO ITS CUSTOMERS. ORIGINAL D EVELOPMENT OF A WEBSITE WOULD ENTAIL CONSIDERABLE COST AND AS HELD BY DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF MAKEMYTRIP (INDIA) (P) LTD. (SUPRA), IT CAN ONLY BE CONSIDERED AS CAPITAL OUTGO RESULTING IN CR EATION OF AN INTANGIBLE ASSET. HOWEVER, EXPENSES INCURRED FOR T HE UPGRADATION OF AN EXISTING WEBSITE, IN OUR OPINION, WILL BE EQUIVA LENT TO THE MAINTENANCE OF AN EXISTING ASSET. SUCH EXPENDITURE WHICH IS I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 10 INCURRED PERIODICALLY, CANNOT BE TREATED AT PAR WIT H THE CREATION OF A NEW WEBSITE AS SUCH. SUCH MAINTENANCE EXPENDITURE, IN OUR OPINION, CAN ONLY BE DEEMED AS A REVENUE OUTGO. HOWEVER, I N THE CASE BEFORE US, NONE OF THE AUTHORITIES HAVE VERIFIED TH E CLAIM OF THE ASSESSEE WHETHER THE EXPENDITURE OF ` 2,10,32,191/- INCURRED BY IT WAS FOR DEVELOPMENT OF A NEW WEBSITE OR ONLY FOR IM PROVEMENT OF AN EXISTING WEBSITE, BY ADDING NEW FEATURES TO IT. IF IT IS FORMER, IT IS NOT ALLOWABLE, BUT, IF IT IS LATTER, IT IS ALLOWABLE AS REVENUE EXPENDITURE. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE REGARDING CLAIM OF ` 2,10,32,191/- OF THE ASSESSEE FOR WEBSITE DEVELOPMENT, BACK TO THE FILE OF THE A.O. FOR CONSI DERATION AFRESH, IN ACCORDANCE WITH LAW. 20. GROUND NO.3 OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 21. VIDE ITS GROUND NO.4, GRIEVANCE RAISED BY THE A SSESSEE IS THAT CIT(APPEALS) CONFIRMED DISALLOWANCE OF ` 69,79,479/- INCURRED ON PROJECT DESIGN COST. 22. FACTS APROPOS ARE THAT ASSESSEE HAD CLAIMED ` 69,79,479/- AS PROJECT DESIGN COST. SUBMISSION OF THE ASSESSEE BE FORE A.O. WAS THAT IT HAD EXPANDED ITS HOMESTAY BUSINESS INTO UK MARKET DURING I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 11 THE RELEVANT PREVIOUS YEAR. AS PER THE ASSESSEE, T HE EXPENDITURE INCURRED WAS FOR MARKETING AND PROMOTION OF SUCH PR ODUCTS IN UK MARKET. THIS, AS PER ASSESSEE, NECESSITATED CHANGE S IN ITS WEBSITE. THEREFORE, ACCORDING TO ASSESSEE, IT WAS A REVENUE OUTGO ONLY. HOWEVER, THE A.O. DID NOT ACCEPT THIS CONTENTION. ACCORDING TO HIM, EXPENDITURE ON PRODUCT DESIGN WAS PRIMA FACIE CAPIT AL EXPENDITURE RESULTING IN ENDURING BENEFIT. HE, THEREFORE, DISA LLOWED THE CLAIM. 23. IN ITS APPEAL BEFORE THE CIT(APPEALS), ASSESSEE REITERATED THE SAME CONTENTIONS TAKEN BEFORE THE A.O. LD. CIT(APP EALS) RELYING ON THE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF MAKEMYTRIP (INDIA) (P) LTD. (SUPRA), UPHELD THE DISALLOWANCE. 24. NOW BEFORE US, LEARNED A.R., ASSAILING THE ORDE RS OF AUTHORITIES BELOW, MADE SIMILAR SUBMISSIONS AS HE HAD MADE IN S UPPORT OF ITS GROUND NO.3. 25. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. 26. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE CIT(APPEALS) HAD CONFIRMED THE DISALLOWANCE OF EXPENDITURE INCURRED ON PROJECT DESIGN ALSO RELYING ON THE DECI SION OF CO-ORDINATE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 12 BENCH OF THIS TRIBUNAL IN THE CASE OF MAKEMYTRIP (I NDIA) (P) LTD. (SUPRA). THERE IS NO ANALYSIS MADE BY ANY OF THE A UTHORITIES BELOW AS TO WHAT WAS THE NATURE OF EXPENDITURE INCURRED IN R ELATION TO THE MARKETING AND PROMOTION OF HOMESTAY BUSINESS IN UK MARKET. WHETHER THE WHOLE OF THE AMOUNT WAS INCURRED FOR UP GRADING THE WEBSITE, IS ALSO NOT CLEAR FROM THE ORDERS OF THE L OWER AUTHORITIES. AS HELD BY US AT PARA 19 ABOVE, IF THE EXPENDITURE WAS INCURRED ONLY FOR UPGRADING AND IMPROVEMENT OF EXISTING WEBSITE, IT C ANNOT BE CONSIDERED AS CAPITAL OUTGO. NEVERTHELESS, SINCE T HE DETAILS OF THE EXPENDITURE ARE NOT AVAILABLE, WE DEEM IT FIT TO SE T ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THIS ISSUE ALSO BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRESH. 27. GROUND NO.4 OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 28. VIDE ITS GROUND NO.5, GRIEVANCE OF THE ASSESSEE IS THAT CIT(APPEALS) HAD NOT ADMITTED AND ADJUDICATED AN AD DITIONAL GROUND RAISED BY IT, REGARDING EXCLUSION OF FOREIGN EXCHAN GE FLUCTUATION ` 2,50,11,482/- OFFERED BY IT AS INCOME DURING THE RE LEVANT ASSESSMENT YEAR. I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 13 29. FACTS APROPOS ARE THAT ASSESSEE HAD, DURING THE RELEVANT PREVIOUS YEAR, SHOWN FOREIGN EXCHANGE FLUCTUATION G AIN OF ` 2,50,11,482/- AS PART OF ITS INCOME. ASSESSMENT WA S COMPLETED ACCEPTING THIS. HOWEVER, ASSESSEE IN ITS APPEAL BE FORE CIT(APPEALS) RAISED AN ADDITIONAL GROUND, WHEREIN IT MENTIONED T HAT FOR ASSESSMENT YEAR 2008-09, A CLAIM OF LOSS ARISING OUT OF FOREIG N EXCHANGE FLUCTUATION, WAS DISALLOWED BY THE A.O. AS PER ASS ESSEE, SUCH DISALLOWANCE WAS CONFIRMED BY BOTH THE CIT(APPEALS) AND THE TRIBUNAL. CONSEQUENTLY, AS PER THE ASSESSEE, WHEN THE INCOME OFFERED IN THE CURRENT YEAR ON ACCOUNT OF FOREIGN E XCHANGE FLUCTUATION GAIN WAS CONSIDERED, IT WAS NECESSARY THAT THE LOSS ARISING OUT OF SIMILAR TRANSACTIONS DISALLOWED IN THE PRECEDING AS SESSMENT YEAR, WAS SET OFF. AS PER THE ASSESSEE, IF THIS WAS NOT DONE, IT WOULD BE MISCARRIAGE OF JUSTICE. 30. HOWEVER, THE CIT(APPEALS) REFUSED TO CONSIDER T HE ISSUE. ACCORDING TO HIM, NO SUCH CLAIM WAS RAISED BY THE A SSESSEE BEFORE ASSESSING OFFICER. AS PER LD. CIT(APPEALS), ASSESS EE COULD NOT BE ALLOWED TO USE THE FIRST APPELLATE AUTHORITY AS A F ORUM TO RECTIFY THE ERRORS COMMITTED IN RETURN OF INCOME. AS PER CIT(A PPEALS), ASSESSEE COULD NOT BE AGGRIEVED BY THE ORDER OF ASSESSING OF FICER AT ALL. ONLY I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 14 WHEN THE ASSESSING OFFICER HAD COMMITTED AN ERROR I N THE ASSESSMENT ORDER, A FRESH GROUND WOULD BE ADMITTED. EXCLUSION OF FOREIGN EXCHANGE FLUCTUATION GAIN WAS RAISED BY THE ASSESSEE FIRST TIME BEFORE THE CIT(APPEALS). AS PER LD. CIT(APPEA LS), IT WAS NOT AN ENTIRELY LEGAL ISSUE BUT ONE REQUIRING ASCERTAINMEN T OF FACTS INCLUDING BREAK-UP OF FOREIGN EXCHANGE. SHE HELD THAT THE GR OUND RAISED BY THE ASSESSEE INVOLVED MIXED QUESTION OF FACT AND LAW AN D COULD NOT BE ADMITTED. WITHOUT GOING INTO THE MERITS OF THE ISS UE, SHE DISMISSED THE GROUNDS RAISED IN THIS REGARD. 31. NOW BEFORE US, LEARNED A.R. STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT ON ASSESSEES APPEAL F OR ASSESSMENT YEAR 2008-09, THIS TRIBUNAL IN I.T.A. NO. 1616/MDS/ 2011, HAD HELD THAT NOTIONAL FOREIGN EXCHANGE LOSS ARISING OUT OF RESTATEMENT OF LOAN AND INTEREST ON THE BALANCE SHEET DATE COULD NOT BE ALLOWED, BUT, COULD BE CONSIDERED ONLY AT THE TIME OF ACTUAL SETT LEMENT OF ACCOUNT. ACCORDING TO LEARNED A.R., THE LOSS OF EARLIER YEAR HAVING BEEN DISALLOWED, SIMILAR INCOME ARISING OUT OF RESTATEME NT OF FOREIGN EXCHANGE LOANS, COULD NOT ALSO BE CONSIDERED. CITI NG AN EXAMPLE, LEARNED A.R. SUBMITTED THAT IF THE LOAN AMOUNT WAS ORIGINALLY EQUAL TO ` 100 AND ON RESTATEMENT BECAME ` 105, ASSESSEE WOULD NOT BE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 15 ELIGIBLE FOR CLAIMING LOSS OF ` 5/-, BASED ON THE DECISION OF THE TRIBUNAL MENTIONED SUPRA. HOWEVER, IN THE VERY NEXT YEAR, I F ON RESTATEMENT, THE AMOUNT WENT DOWN TO ` 95/-, THE INCOME OF THE ASSESSEE COULD NOT BE TAKEN AT ` 10/-. THE INCOME OF THE ASSESSEE AT THE BEST BE TAKEN AS ` 5/- ONLY. ACCORDING TO LEARNED A.R., WHEN THE LOS S OUGHT NOT TO BE CONSIDERED, THEN PROFIT SHOULD ALSO BE CO NSIDERED ONLY AT THE TIME OF ACTUAL SETTLEMENT. 32. PER CONTRA, LEARNED D.R., STRONGLY SUPPORTING T HE ORDER OF CIT(APPEALS), SUBMITTED THAT CIT(APPEALS) HAD CONSI DERED THE DECISION OF HON'BLE APEX COURT IN THE CASE OF NATIO NAL THERMAL POWER CO. LTD. V. CIT (229 ITR 383) BEFORE COMING T O A CONCLUSION THAT A CLAIM WHICH INVOLVED VERIFICATION OF FACTS C OULD NOT BE ADMITTED. ACCORDING TO HIM, ASSESSEE ITSELF HAD RETURNED THE AMOUNT AS PART OF ITS INCOME. THERE WAS NO CLAIM EVER MADE BEFORE TH E ASSESSING OFFICER. HENCE, CIT(APPEALS) WAS JUSTIFIED IN NOT ADJUDICATING A FRESH CLAIM RAISED BY THE ASSESSEE. 33. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT FOREIGN EXCHANGE FLUCTUATI ON GAIN OF ` 2,50,11,482/- WAS A PART OF INCOME OFFERED BY THE A SSESSEE FOR IMPUGNED ASSESSMENT YEAR. THE CLAIM OF ASSESSEE BE FORE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 16 CIT(APPEALS) WAS THAT THE LOSS ARISING OUT OF RESTA TEMENT OF ACCOUNTS IN THE PRECEDING ASSESSMENT YEAR, WHICH WAS NOT ALL OWED BY THE AUTHORITIES BELOW, OUGHT HAVE BEEN DEDUCTED BEFORE WORKING OUT THE GAINS OF THE IMPUGNED ASSESSMENT YEAR. THAT THERE WAS A CLAIM OF LOSS ARISING OUT OF RESTATEMENT OF LOAN AND INTERES T ON THE BALANCE SHEET DATE IN THE PRECEDING ASSESSMENT YEAR HAS NOT BEEN DISPUTED. THE MATTER HAD REACHED THIS TRIBUNAL ON ASSESSEES APPEAL AND IN I.T.A. NO. 1616/MDS/2011 DATED 17 TH OCTOBER, 2012, IT WAS HELD BY THIS TRIBUNAL AT PARA 4.3 OF ITS ORDER, AS UNDER:- 4.3 ON GOING THROUGH THE FACTS OF THE CASE, WE ARE INCLINED TO AGREE WITH THE FINDING OF THE LOWER AUTHORITIES. T HE RESTATEMENT OF LOAN AND INTEREST ON THE BALANCE SHEET DATE IN T HE PRESENT CASE IS TO ADHERE TO THE REPORTING NORMS FOLLOWED B Y THE ASSESSEE COMPANY. THE AMOUNT DID NOT RELATE TO ANY OPERATING ACCOUNT OF ANY BUSINESS. THEREFORE, AS RIGHTLY POI NTED OUT BY THE ASSESSING OFFICER, AS FAR AS THE INCOME-TAX ACT IS CONCERNED, THE RESTATED FOREIGN EXCHANGE LOSS WAS NOTIONAL AS WELL AS CAPITAL IN NATURE. IF AT ALL SUCH DEDUCTION IS NECESSARY, THAT WOULD BE AVAILABLE ONLY AT THE TIME OF ACTUAL SETTLEMENT OF THE ACCOUNT. THEREFORE, THE DISALLOWANCE OF ` 1,83,10,529/- IS CONFIRMED. THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ONCE NOTIONAL EXCHANGE LOSS IS NOT ACCEPTED AS ACLA IM THAT IS ALLOWABLE UNDER THE ACT, IT IS ONLY LOGICAL THAT NO TIONAL EXCHANGE PROFITS ARE ALSO EXCLUDED. AS ON DATE WHEN THE CIT (APPEALS) PASSED HIS ORDER, VIZ. 22.2.2013, THE ORDER OF THIS TRIBUN AL IN ASSESSEES I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 17 APPEAL FOR ASSESSMENT YEAR 2008-09 WAS ALREADY AVAI LABLE ON RECORD. IN OUR OPINION, THE CIT(APPEALS) WENT HIGHLY TECHNI CAL IN NOT CONSIDERING A LEGITIMATE CLAIM OF THE ASSESSEE. IF THE FOREIGN EXCHANGE LOSS ACCOUNT BY THE ASSESSEE ARISING OUT O F RESTATEMENT OF A LOAN, WHICH WAS IN THE CAPITAL FIELD, WAS NOT ALL OWED, THEN SIMILAR GAINS ALSO COULD NOT HAVE BEEN TAXED. AN ASSESSING OFFICER IS DUTY BOUND TO GIVE AN ASSESSEE ALL THE LEGITIMATE DEDUCT IONS AND CLAIMS ALLOWABLE TO IT UNDER THE ACT, EVEN WHEN THIS WAS O MITTED TO BE CLAIMED BY THE ASSESSEE. HON'BLE APEX COURT, WHILE ADJUDICATING ON THE ISSUE AS TO WHETHER A FRESH CLAIM COULD BE CONS IDERED BY THE ASSESSING OFFICER WITHOUT A REVISED RETURN, HAD UNE QUIVOCALLY HELD IN THE CASE OF GOETZE (INDIA) LTD. V. CIT (284 ITR 323 ) THAT THE POWERS OF THE APPELLATE AUTHORITIES IN CONSIDERING A FRESH CLAIM WAS NOT DILUTED. WE ARE, THEREFORE, OF THE OPINION THAT CI T(APPEALS) FELL IN ERROR IN NOT ADJUDICATING THE ISSUE. NEVERTHELESS, THE CLAIM OF THE ASSESSEE WHETHER FOREIGN EXCHANGE DOES REQUIRE VERI FICATION WITH REGARD TO ITS CONTENTION THAT GAINS FLUCTUATION GAI N AROSE OUT OF RESTATEMENT OF LOANS IN A CAPITAL FIELD OR REVENUE FIELD. IF IT IS IN THE CAPITAL FIELD, OF COURSE, AS HELD BY THE TRIBUNAL I N THE EARLIER YEAR, COULD BE CONSIDERED ONLY AT THE TIME OF SETTLEMENT OF SUCH LOAN. IN THE FITNESS OF THE THINGS, WE ARE OF THE OPINION TH AT IT WILL BE BETTER IF I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 18 THE MATTER GOES BACK TO THE FILE OF THE A.O. WE, T HEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE MATTE R REGARDING CLAIM OF THE ASSESSEE FOR SET OFF OF PRECEDING YEAR FOREIGN EXCHANGE LOSS, FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 34. GROUND NO.5 OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 35. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 36. NOW WE TAKE UP THE APPEAL OF THE REVENUE. 37. REVENUE HAS ALSO TAKEN SIX GROUNDS OF WHICH, GR OUNDS 1 AND 6 ARE GENERAL NEEDING NO ADJUDICATION. 38. VIDE GROUND NO.2, REVENUE IS AGGRIEVED THAT CIT (APPEALS) DELETED AN ADDITION MADE TOWARDS ADVANCE MEMBERSHIP FEES. 39. WE FIND THAT ON THE ISSUE OF ADVANCE MEMBERSHIP FEE, LD. CIT(APPEALS) HAD FOLLOWED THE DECISION OF SPECIAL B ENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR S 1998-99 TO 2003-04 IN ACIT V. MAHINDRA HOLIDAYS & RESORTS (IND IA) LTD. (2010) 131 TTJ 1. IN THE SAID DECISION, SPECIAL BENCH HEL D THAT THE ENTIRE MEMBERSHIP COULD NOT BE TAKEN AS AN INCOME. AS PER SPECIAL BENCH, I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 19 IT WAS NECESSARY TO SPREAD OVER A PART OF THE INCOM E. THIS TRIBUNAL IN REVENUES APPEAL IN ASSESSEE'S OWN CASE FOR ASSESSM ENT YEAR 2006- 07 AND 2007-08 IN I.T.A. NO. 1762 & 1763/MDS/2011 D ATED 17 TH OCTOBER, 2012, HAD HELD AT PARAS 3.16 TO 4 OF ITS O RDER, AS UNDER:- 3.16. ONE OF THE BASIC POSTULATES OF ACCOUNTANCY I S THE GOING CONCERN CONCEPT. THE INCOME AND EXPENDITUR E OF AN ASSESSEE IS ASCERTAINED ON THE PRESUMPTION THAT THE ASSESSEE WILL CARRY ON THE BUSINESS FOR A LONG TIME. IF THIS GO ING CONCERN CONCEPT IS APPLIED IN ASSESSEES CASE, IT IS EASY T O FIND THAT THE NOMINAL EXPENDITURE THAT MAY BE REQUIRED FOR THE AS SESSEE TO MEET THE EXPENDITURE ON MEMBERS FOR THE SUBSEQUENT YEARS OF ADMISSION IS WELL COMPENSATED BY THE COLLECTION MAD E IN THOSE SUBSEQUENT YEARS OF ADMISSION. IN THAT MANNER, TH E EXPENSES APPREHENDED BY THE ASSESSEE TO BE INCURRED IN FUTUR E FOR THE EXISTING MEMBERS ARE COMPENSATED BY THE CONTRIBUTIO NS MADE BY THE INCOMING MEMBERS YEAR AFTER YEAR. THEREFORE, I T IS COMPENSATING AND, PRACTICALLY SPEAKING, THERE IS NO NEED TO PRESERVE ANY PORTION OF THE MEMBERSHIP FEES TO MEET FUTURE LIABILITIES. 3.17. THIS IS MAINLY FOR THE REASON THAT, AS ALREA DY STATED ABOVE, THE LIABILITY OF THE ASSESSEE IS TO MAINTAIN THE ASSETS AND PROPERTIES AS A WHOLE FOR CARRYING ON ITS BUSINESS AND NOT FOR A PARTICULAR MEMBER. THE ASSESSEE IS APPORTIONING TH E MEMBERSHIP FEES BETWEEN 60% AND 40% ON THE PRINCIPLE OF INDIVI DUAL LIABILITY EXISTING BETWEEN THE ASSESSEE AND ITS MEMBERS. THE CONCEPT OF INDIVIDUAL LIABILITY IS HYPERTECHNICAL. 3.18. THEREFORE, IT IS VERY DIFFICULT TO AGREE WIT H THE CONTENTION OF THE ASSESSEE COMPANY THAT THE REVENUE MODEL OF APPORTIONING THE MEMBERSHIP COLLECTION BETWEEN 60% AND 40% IS JUSTIFIED. WE FIND THAT THE REVENUE MODEL ADOPTED BY THE ASSESSEE IS BASED ON HYPOTHESIS AND NOT ON FACTS. ON THE OTHER HAND, THE REVENUE MODEL OF TREATING THE ENTIRE MEMB ERSHIP FEE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 20 COLLECTION AS INCOME OF THE YEAR OF COLLECTION PROP OSED BY THE ASSESSING OFFICER IS MORE JUSTIFIED. 3.19. IT MAY BE IN THE ABOVE CONTEXT THAT ANOTHER BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL, CHENNAI HAS H ELD IN THE CASE OF STERLING HOLIDAY RESORTS (INDIA) LTD. VS. ACIT, 295 ITR (AT) 162 THAT THE CONCEPT OF DEFERRED INCOME IS ALIEN TO THE INCOME- TAX ACT. INCOME ON ITS COMING INTO EXISTENCE ATTRA CTS TAX. THE OBLIGATION TO USE THE INCOME IN A PARTICULAR MANNER DOES NOT REMOVE IT FROM THE CATEGORY OF INCOME EVEN IF THE O BLIGATION IS PART OF THE ORIGINAL CONTRACT GIVING RISE TO THE IN COME. THE INCOME THAT IS RECEIVED OR DEEMED TO BE RECEIVED IN THE PR EVIOUS YEAR IS EXIGIBLE TO TAX. 4. BUT, INSPITE OF THE VIEWS EXPRESSED ABOVE, WE F IND THAT WE ARE BOUND TO FOLLOW THE JUDGMENT OF THE INC OME-TAX APPELLATE TRIBUNAL, CHENNAI B SPECIAL BENCH RENDE RED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1998-9 9 TO 2002- 03. IN THE SAID DECISION RENDERED IN THE CASE OF A CIT VS. MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD., 131 TTJ ( CHENNAI) (SB) 1, THE SPECIAL BENCH HAS HELD THAT 40% OF DEFERMENT OF MEMBERSHIP FEE RESORTED TO BY THE ASSESSEE IS JUSTI FIED. THE SAID DECISION OF THE SPECIAL BENCH IS RENDERED IN ASSESS EES OWN CASE IN EXACTLY SIMILAR CIRCUMSTANCES. THEREFORE, THE RULE OF PRECEDENCE DEMANDS THAT THE DECISION OF THE SPECIAL BENCH MUST PREVAIL. LD. CIT(APPEALS) HAVING FOLLOWED THE SPECIAL BENCH ORDER IN ASSESSEE'S OWN CASE, WHICH WAS IN TURN RELIED ON BY THIS TRIBUNAL ON REVENUES APPEAL FOR ASSESSMENT YEAR 2006-07 AND 20 07-08, WE DO NOT FIND ANY REASON TO INTERFERE. 40. GROUND NO.2 OF THE REVENUE STANDS DISMISSED. I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 21 41. VIDE ITS GROUND NO.3, GRIEVANCE RAISED BY THE R EVENUE IS THAT CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO VERI FY THE EXPENDITURE CLAIMED BY THE ASSESSEE TO HAVE BEEN INCURRED FOR C ONSTRUCTION AND ALLOW THOSE CLAIMS, WHICH WERE IN THE NATURE OF SAL ARY, RENT, INTEREST, REPAIRS AND FURNITURE. 42. FACTS APROPOS ARE THAT ASSESSEE HAD CLAIMED ` 8,58,82,863/- AS EXPENDITURE RELATED TO CONSTRUCTION. THOUGH THE AMOUNT WAS CAPITALIZED IN ITS ACCOUNT, ASSESSEE CLAIMED IT AS A REVENUE OUTGO WHILE COMPUTING INCOME UNDER THE ACT. A.O. WAS OF THE OPINION THAT ASSESSEE HAD DEVIATED FROM THE BOOK RESULTS WITHOUT PROPER REASON DESPITE THE EXPENDITURE BEING CAPITAL IN NATURE. R ELYING ON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008-09, A.O. DISALLOWED THE CLAIM. 43. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT IT HAD TO DEVELOP NEW RESORTS ON LEASEHOLD PROPERTIES AND SUCH DEVELOPMENT WAS NOTHING BUT EXPANSION OF SAME LINE OF BUSINESS. AS PER THE ASSESSEE, EXPENDITURE INCURRE D WAS FOR MEETING THE OVERHEADS OF A PROJECT TEAM, WHICH WAS CENTRALL Y LOCATED AT CHENNAI. THE PROJECT TEAM WAS MANAGING NEW CONSTRU CTION, ACQUISITION OF NEW PROPERTY PROCUREMENT, EXPANSION AND RENOVATION I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 22 OF RESORTS. THE EXPENDITURE, ACCORDING TO ASSESSEE , WAS IN THE NATURE OF SALARY, TRAVEL, RENT, PRINTING AND STATIO NERY, STAFF WELFARE, COMMUNICATION EXPENDITURE AND CONSULTATION FEES. A SSESSEE ALSO GAVE A BREAK-UP OF THE CLAIM OF SUCH EXPENDITURE. THE BREAK-UP FURNISHED BY THE ASSESSEE ARE AS UNDER:- SA LARIES, WAGES & BONUS 24,810,303 STAFF WELFARE EXPENSES 1,060,738 POWER & FUEL 12,041,390 RENT 342,120 RATES & TAXES 1,419,200 REPAIRS - OTHERS 1,907,819 TRAVELLING 15,313,756 COMMUNICATION 1,591,604 PRINTING & STATIONERY 709,425 INSURANCE 9,802 CONSULTANCY CHARGES 20,723,308 FREIGHT 1,572,364 MISCELLANEOUS 3,107,671 TOTAL 85,882,863 44. CIT(APPEALS) WAS APPRECIATIVE OF CONTENTIONS OF THE ASSESSEE. ACCORDING TO HIM, SIMILAR ISSUE WAS CONSIDERED BY H ER PREDECESSOR IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09. ASS ESSING OFFICER WAS DIRECTED TO VERIFY THE NATURE OF THE EXPENDITUR E AND ALLOW THE SAME TO THE EXTENT IT WAS INCURRED FOR SALARY, RENT , INTEREST, REPAIRS I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 23 AND FURNITURE. SIMILAR DIRECTIONS WERE GIVEN BY HE R FOR THE IMPUGNED ASSESSMENT YEAR ALSO. 45. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THE AMOUNT WAS NOT INC URRED FOR AN EXISTING BUSINESS. ACCORDING TO HIM, THE EXPENDITU RE INCURRED WAS FOR STARTING NEW RESORTS AT NEW PLACES AND THEREFORE, C OULD BE CONSIDERED ONLY AS CAPITAL OUTGO. 46. PER CONTRA, LEARNED A.R. SUBMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES APPEAL FOR AS SESSMENT YEAR 2008-09 IN I.T.A. NO. 1616/MDS/2011. ACCORDING TO HIM, THIS TRIBUNAL HAD HELD THAT EXPENDITURE RELATING TO TRANSPORT, FR EIGHT, GENERAL EXPENSES AND UPHOLSTERY HAD TO BE ALLOWED. THEREFO RE, ACCORDING TO LEARNED A.R., DIRECTIONS GIVEN BY THE CIT(APPEALS) WERE JUSTIFIED. 47. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE BREAK-UP OF EXPENDITURE GIVEN AT PARA 43 ABOVE CLEARLY SHOWS THAT THE CLAIM WAS FOR SALARY, STAFF WELFARE, RENT, FREIGHT, RATES AND TAXES, REPAIRS, ETC. WE CANNOT SAY THAT ANY SUCH E XPENDITURE RESULTED IN CREATION OF A CAPITAL ASSET WHICH GAVE ENDURING BENEFIT TO THE ASSESSEE. ASSESSEE WAS ALREADY IN THE BUSINESS OF TIME SHARE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 24 AND ESTABLISHMENT OF NEW RESORTS WAS ONLY AN EXPANS ION OF SAME LINE OF BUSINESS. DISALLOWANCE WAS MADE SOLELY ON THE B ASIS OF SIMILAR DISALLOWANCE MADE FOR ASSESSMENT YEAR 2008-09. WHE N THE MATTER REACHED THIS TRIBUNAL ON ASSESSEES APPEAL IN I.T.A . NO. 1616/MDS/2011, THIS TRIBUNAL VIDE ITS ORDER DATED 1 7 TH OCTOBER, 2012 AT PARAS 7 AND 8, HELD AS UNDER:- 7. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT T HE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THAT EXPENDITURE ON CIVIL, ELECTRICAL, PLUMBING ON EXTENSION OF THE IMPROVEMENTS TO THE LEASEHOLD BUILDING IS CAPITAL I N NATURE, REJECTING THE CONTENTION OF THE ASSESSEE THAT THOSE EXPENSES WERE REVENUE IN NATURE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THIS ISSUE IN A DETAILED M ANNER IN PARAGRAPHS 9, 9.1, 9.2, 9.2.1 AND 9.2.2 IN HIS ORDE R. THE EXPENSES RELATING TO TRANSPORT, FREIGHT, GENERAL EXPENSES AN D UPHOLSTERY HAVE BEEN ALLOWED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS REVENUE EXPENDITURE. ONLY THOSE ITEMS WHICH ARE CAPITAL IN NATURE WERE DISALLOWED BY THE COMMISSIONER OF INCOM E TAX (APPEALS). IN THAT CASE DEPRECIATION HAS BEEN ALLO WED. THEREFORE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS POINT. THIS GROUND IS DISMISSED. 8. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D IRECTING THE ASSESSING OFFICER TO VERIFY THE EXPENDITURE OF ` 2,07,14,756/- AND ALLOW IT IF THE SAME WAS INCURRED ON SALARIES, RENT, INTEREST, REPAIRS AND FURNITURE. THIS GROUND IS DISMISSED IN VIEW OF OUR DECISION TAKEN IN THE ASSESSEES APPEAL FOR THE ASS ESSMENT YEAR 2006-07 THROUGH OUR COMMON ORDER OF EVEN DATE. I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 25 WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF CIT(APPEALS) TO VERIFY THE CLAIM AND ALLOW IT TO THE EXTENT INCU RRED FOR SALARY, RENT, INTEREST, REPAIRS, FURNITURE, ETC. 48. GROUND NO.3 OF THE REVENUE STANDS DISMISSED. 49. VIDE ITS GROUND NO.4, GRIEVANCE RAISED BY THE R EVENUE IS THAT OVERSEAS COMMISSION PAYMENT OF ` 57,12,534/- WAS ALLOWED BY THE CIT(APPEALS). 50. FACTS APROPOS ARE THAT ASSESSING OFFICER, DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT THE AMOUNTS DECL ARED BY THE ASSESSEE IN ITS TDS RETURNS DID NOT TALLY WITH THE AMOUNTS CHARGED UNDER VARIOUS HEADS IN THE PROFIT & LOSS ACCOUNT ON WHICH TAX WAS DEDUCTIBLE AT SOURCE. THE AMOUNT OF COMMISSION PAY MENT CLAIMED BY THE ASSESSEE IN ITS LEDGER WAS ` 32,14,36,612/-. BUT, THE AMOUNT ON WHICH TAX WAS DEDUCTED AT SOURCE WAS ONLY ` 17,83,65,796/-. ASSESSEE PRODUCED A RECONCILIATION, WHICH READ AS U NDER:- (1) INCENTIVES TO CONTRACT PERSONNEL (DEDUCTED U/S 194C) ` 5,51,38,708 (2) DUBAI BRANCH COMMISSION (FRANCHISEE AT DUBAI) ` 57,12,534 (3) PROVISION FOR COMMISSION ` 8,22,19,575 ` 14,30,70,816/ - I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 26 NO TAX WAS DEDUCTED AT SOURCE ON THE PAYMENT MADE T O THE FRANCHISEE AT DUBAI. ON ` 5,51,38,708/- PAID TO CONTRACT PERSONNEL FOR SERVICES PROVIDED, ASSESSEE HAD DEDUCTED TAX AS REQUIRED UNDER SECTION 194C OF THE ACT. FOR THE PROVISION OF ` 8,22,19,575/- SUBMISSION OF THE ASSESSEE WAS THAT IT WAS A CRYSTA LLIZED LIABILITY PAYABLE TO FRANCHISEE ABROAD AND NOT LIABLE FOR DED UCTION OF TAX AT SOURCE. ASSESSING OFFICER HOWEVER WAS OF THE OPINI ON THAT ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE ON THESE AMOUNTS AND MADE A DISALLOWANCE OF THE CLAIM UNDER SECTION 40(A)(I) AC CORDINGLY. 51. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE SUM OF ` 57,12,534/- PAID TO DUBAI FRANCHISEE AS COMMISSION, WAS NOT LIABLE FOR DEDUCTION OF TAX. A CCORDING TO ASSESSEE, ENTIRE PAYMENT WAS MADE TO NON-RESIDENT A GENTS FOR SERVICES RENDERED BY THEM ABROAD. INSOFAR AS DISAL LOWANCE OF COMMISSION OF ` 5,51,38,708/- TO SERVICE PROVIDERS WAS CONCERNED, ARGUMENT OF THE ASSESSEE WAS THAT TAX WAS INDEED DE DUCTED AT SOURCE UNDER SECTION 194C OF THE ACT, BUT, STILL A DISALLOWANCE WAS MADE. AS FOR THE PROVISION FOR ` 8,22,19,575/- MADE, ARGUMENT OF THE ASSESSEE WAS THAT THIS WAS A CRYSTALLIZED LIABILITY WORKED OUT ON THE BASIS OF SERVICE RENDERED BY THE FRANCHISEES ABROAD FOR INDUCTING NEW I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 27 MEMBERS. ACCORDING TO THE ASSESSEE, THE PROVISION WAS MADE BASED ON THE AVERAGE RATE OF COMMISSION PAID TO THE FRANC HISEES. FURTHER, AS PER THE ASSESSEE, THESE WERE PAYMENTS IN THE NAT URE OF COMMISSION TO NON-RESIDENT AGENTS, FOR SERVICES REN DERED BY THEM OUTSIDE INDIA. 52. LD. CIT(APPEALS), AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, HELD THAT INSOFAR AS PAYMENT OF ` 57,12,534/- TO DUBAI FRANCHISEE WAS CONCERNED, ASSESSEES CASE WAS COVER ED BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF PRAKASH IMPEX V. ACIT IN I.T.A. NO. 08/MDS/2012 DATED 30.3. 2012. INSOFAR AS PAYMENT OF ` 5,51,38,708/- PAID TO CONTRACTORS, WAS CONCERNED, CIT(APPEALS) WAS OF THE OPINION THAT ASSESSEE HAD D EDUCTED TAX AT SOURCE UNDER SECTION 194C OF THE ACT AND THEREFORE, NO DISALLOWANCE UNDER SECTION 40(A)(I) COULD BE MADE. INSOFAR AS D ISALLOWANCE OF PROVISION OF ` 8,22,19,575/- FOR COMMISSION WAS CONCERNED, CIT(APPEALS) REMITTED THE ISSUE BACK TO THE FILE OF THE A.O. FOR CONSIDERATION WHETHER ASSESSEE HAD ACTUALLY DEDUCTE D TAX AT SOURCE AND REMITTED SUCH TAX WITHIN THE DUE DATE OF FILING OF RETURN, ON SUCH AMOUNT. 53. NOW BEFORE US, LEARNED D.R. SUBMITTED THAT THE PAYMENT OF COMMISSION TO FRANCHISEE AT DUBAI FELL WITHIN THE D EFINITION OF I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 28 TECHNICAL SERVICES GIVEN IN EXPLANATION 2 TO SECT ION 9(1)(VII) OF THE ACT. ACCORDING TO HIM, TECHNICAL SERVICES INCLUD ED RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. THE FRANCHISEE AT DUBAI AND OTHER PLACES ABROAD WERE RENDERING CONSUL TANCY AND MANAGERIAL SERVICES TO THE ASSESSEE, WHEN THEY WERE CANVASSING CLIENTS FOR THE TIME SHARES MARKETED BY THE ASSESSE E. AS PER LEARNED D.R., SUCH SERVICES FELL WITHIN THE DEFINITION OF TECHNICAL SERVICES. IN VIEW OF EXPLANATION TO SECTION 9(2) OF THE ACT, ADD ED WITH RETROSPECTIVE EFFECT FROM 1.6.1976 BY FINANCE ACT, 2010, IT WAS NOT NECESSARY FOR THE NON-RESIDENT TO HAVE A RESIDENCE OR A PLACE OF BUSINESS OR A BUSINESS CONNECTION IN INDIA. IT WAS ALSO NOT NECESSARY FOR A NON-RESIDENT TO HAVE RENDERED SERVICE IN INDI A. FURTHER, AS PER LEARNED D.R., DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF PRAKASH IMPEX (SUPRA) WAS NOT ACCEPTED BY T HE DEPARTMENT AND THE DEPARTMENT HAD MOVED IN APPEAL BEFORE HON'B LE JURISDICTIONAL HIGH COURT. 54. PER CONTRA, LEARNED A.R., STRONGLY SUPPORTING T HE ORDER OF CIT(APPEALS), SUBMITTED THAT THE PAYMENT OF COMMISS ION FELL WITHIN THE SCOPE OF CIRCULAR NO. 786, DATED FEBRUARY 7, 20 00 . THEREFORE, ASSESSEE WAS NOT OBLIGED TO DEDUCT TAX ON SUCH PAYM ENT. AS PER I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 29 LEARNED A.R., SUCH CIRCULAR WAS WITHDRAWN ONLY ON 2 2 ND OCTOBER, 2009 LATER DATE AND THEREFORE, ASSESSEE COULD TAKE REFUG E UNDER THE EARLIER CIRCULAR. ASSESSEE COULD NOT BE SADDLED WITH A DEF AULT FOR NON- DEDUCTION OF TAX, WHEN IT WAS NOT OBLIGED TO DEDUCT TAX AT SOURCE. 55. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE HAVE BEEN TWO DISALLOWANCES MADE BY THE ASSES SING OFFICER WHICH, ON APPEAL OF THE ASSESSEE, WERE ALLOWED BY T HE CIT(APPEALS), ON WHICH REVENUE IS AGGRIEVED. ONE IS ` 57,12,534/- AND THE OTHER IS ` 8,22,19,575/-. THE FORMER STOOD ALREADY PAID, WHE REAS, THE LATTER WAS ONLY A PROVISION. BOTH WERE ADMITTEDLY COMMISS ION TO FRANCHISEE AGENTS OF THE ASSESSEE ABROAD. THERE IS NO DISPUTE THAT SUCH FRANCHISEE AGENCIES WERE CANVASSING CLIENTS FOR ASS ESSEE FOR ITS TIME SHARE UNITS. THERE IS ALSO NO DISPUTE THAT THE AGE NTS WERE NON- RESIDENTS ABROAD. AS PER ASSESSEE, THESE WERE NOTH ING BUT SALES COMMISSION PAID TO THE FRANCHISEE AND SQUARELY FELL WITHIN THE SCOPE OF CIRCULAR NO.786 DATED 7 TH FEBRUARY, 2000 OF CBDT. AS AGAINST THIS, CLAIM OF THE REVENUE IS THAT THIS WAS NOTHING BUT TECHNICAL SERVICES ON WHICH ASSESSEE WAS OBLIGED TO DEDUCT T AX AT SOURCE. FURTHER, AS PER THE REVENUE, CIRCULAR NO.786 STOOD WITHDRAWN BY CIRCULAR NO.7 OF 2009 DATED 22 ND OCTOBER, 2009. THERE CAN BE NO I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 30 DOUBT THAT IF THE PAYMENT WAS A FEE FOR TECHNICAL S ERVICES, THEN NO MATTER WHETHER THE NON-RESIDENT WAS HAVING A RESIDE NCE OR A PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA, IT WOULD BE CHARGEABLE TO TAX IN INDIA BY VIRTUE OF SECTION 9(1)(VII) READ AL ONG WITH EXPLANATION 2 TO SECTION 9(2) OF THE ACT. HOWEVER, AS PER ASSESS EE, CANVASSING OF TIME SHARES DONE BY THE FRANCHISEE WERE NOT IN THE NATURE OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES, AND HENCE WOULD NOT FALL WITHIN THE DEFINITION OF FEE FOR TECHNICAL SE RVICES GIVEN IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. EVE N IF WE CONSIDER THAT SERVICES RENDERED BY THE FRANCHISEE DID FALL WITHIN THE DEFINITION OF FEE FOR TECHNICAL SERVICES, WE ARE STILL OF THE O PINION THAT CLAUSE (B) OF SECTION 9(1)(VII) WILL SAVE THE ASSESSEE. SECTI ON 9(1)(VII) IS REPRODUCED HEREUNDER:- (VII) INCOME BY WAY OF TECHNICAL SERVICES PAYABLE B Y ( A ) THE GOVERNMENT ; OR ( B ) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM A NY SOURCE OUTSIDE INDIA ; OR ( C ) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEES AR E PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PR OFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPO SES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN IND IA : I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 31 INCOME BY WAY OF FEES FOR TECHNICAL SERVICES WOULD NOT BE CONSIDERED SO, IF SUCH FEES WERE PAYABLE IN RESPECT OF SERVICE S UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSONS O UTSIDE INDIA, OR FOR THE PURPOSE OF EARNING INCOME FROM ANY SOURCE O UTSIDE INDIA. WHEN ASSESSEE IS MARKETING ITS TIME SHARE UNIT ABRO AD, WITHOUT DOUBT, THE BUSINESS IS BEING CARRIED ON OUTSIDE IND IA IN RESPECT OF SUCH TIME SHARE UNITS AND THE INCOME EARNED IS ALSO FROM A SOURCE OUTSIDE INDIA. FRANCHISEES ARE ALSO EARNING THEIR INCOME BY VIRTUE OF MARKETING THE TIME SHARE UNITS OF THE ASSESSEE ABRO AD. THE FRANCHISEES WERE ALSO THEREFORE, EARNING INCOME IN THE COURSE OF THEIR BUSINESS OR PROFESSION CARRIED ABROAD. THUS, WHETH ER WE CONSIDER SUCH PERSONS TO BE THE NON-RESIDENT ENTITY OR TO BE THE ASSESSEE IN INDIA, IT MEANS THAT AS LONG AS THE FEES WERE FOR S ERVICE UTILIZED IN A BUSINESS OR PROFESSION, CARRIED OUTSIDE INDIA, IT C OULD NOT BE TREATED AS INCOME CHARGEABLE TO TAX. WE ARE THEREFORE OF TH E VIEW THAT THE CIT(APPEALS) WAS JUSTIFIED IN CONSIDERING THE AMOUN TS TO BE NOT TAXABLE IN INDIA. REVENUE HAS NOT TAKEN ANY GROUND ASSAILING THE CORRECTNESS OF THE WORK OUT OF PROVISION OF ` 8,22,19,575/-. IT IS ONLY AGGRIEVED THAT CIT(A) ALLOWED SUCH CLAIM DESPITE NO N-DEDUCTION OF TAX AT SOURCE. WE HAVE ALREADY HELD THAT ASSESSEE IS NOT OBLIGED TO I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 32 DEDUCT TAX ON COMMISSION PAYMENT. WE THEREFORE HAV E NO REASON TO INTERFERE WITH THE ORDER OF CIT(APPEALS). 56. GROUND NO.4 OF THE REVENUE STANDS DISMISSED. 57. VIDE ITS GROUND NO.5, GRIEVANCE OF THE REVENUE IS THAT PROFESSIONAL CHARGES OF ` 92.58 LAKHS DISALLOWED BY THE A.O. RELYING ON SECTION 40(A)(I) OF THE ACT, WAS ALLOWED BY THE CIT(APPEALS). 58. FACTS APROPOS ARE THAT ASSESSEE HAD PAID A SUM OF ` 92,58,638/- TO A DUBAI ENTITY FOR CERTAIN PROFESSIO NAL SERVICES. ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON SUCH PAY MENTS. A.O. WAS OF THE OPINION THAT ASSESSEE, IF IT WAS NOT SUR E ABOUT THE NECESSITY TO WITHHOLD TAX, OUGHT HAVE OBTAINED CERT IFICATE UNDER SECTION 195(2) OF THE ACT. THEREFORE, ACCORDING TO HIM, ASSESSEE FAILED TO DEDUCT TAX AT SOURCE AS REQUIRED UNDER TH E ACT. A DISALLOWANCE OF ` 92,58,638/- WAS MADE. 59. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE PAYMENTS WERE MADE TO DUBAI ENTITY FOR SERVICES RENDERED BY THEM OUTSIDE INDIA. RELIANCE WAS ONCE AGAIN PLACED ON CIRCULAR NO. 786 DATED 7 TH FEBRUARY, 2000 OF CBDT AND ALSO ON THE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 33 DECISION OF A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT V. VENKAT SHOES PVT. LTD. 60. CIT(APPEALS) WAS APPRECIATIVE OF THE CONTENTION OF THE ASSESSEE. ACCORDING TO HER, THE RECIPIENT DID NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE WHICH COULD BE INDEPENDENTLY AP PLIED BY THE ASSESSEE. ENTIRE SERVICES WERE RENDERED OUTSIDE IN DIA. AS PER LD. CIT(APPEALS), THE RECIPIENT WAS NOT HAVING PERMANEN T ESTABLISHMENT IN INDIA. ASSESSEE WAS, THEREFORE, NOT LIABLE TO D EDUCT TAX ON THE PAYMENTS EFFECTED TO SUCH NON-RESIDENT. SHE HELD T HAT THE DISALLOWANCE TO BE NOT WARRANTED AND DELETED IT. 61. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT NO VERIFICATION WAS DO NE BY THE LD. CIT(APPEALS) AS TO THE NATURE OF SERVICE RENDERED. AS PER LEARNED D.R., CIT(APPEALS) CAME TO A CONCLUSION THAT THERE WAS NO TECHNOLOGY OR SKILL MADE AVAILABLE TO THE ASSESSEE. FURTHER, AS PER LEARNED D.R., THE CIT(APPEALS) HAD ALSO NOT VERIFIE D WITH DOUBLE TAXATION AGREEMENT BETWEEN INDIA AND DUBAI BEFORE C OMING TO A CONCLUSION THAT IT WAS NOT NECESSARY TO DEDUCT TAX AT SOURCE. FURTHER, AS PER LEARNED D.R., IN VIEW OF THE EXPLANATION TO SECTION 9(2) OF THE I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 34 ACT, IT WAS NOT NECESSARY FOR A NON-RESIDENT TO HAV E A PERMANENT ESTABLISHMENT OR PLACE OF BUSINESS OR BUSINESS CONN ECTION IN INDIA. 62. PER CONTRA, LEARNED A.R. SUBMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES APPEAL FOR AS SESSMENT YEAR 2008-09. LEARNED A.R. SUBMITTED THAT THIS TRIBUNAL HAD HELD AT PARA 14 OF ITS ORDER DATED 17 TH OCTOBER, 2012, AS UNDER:- 14. THE NEXT GROUND RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE DISALLOWANCE UNDER SECTION 40(A)(I) IN RESPECT OF C ONSULTANCY CHARGES PAID TO VARIOUS PERSONS OUTSIDE INDIA. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY OBSERVED THAT T HE DISALLOWANCE UNDER SECTION 40(A)(I) CAN BE MADE ONL Y IF TAXES ARE NOT WITHHELD ON INCOME CHARGEABLE TO TAX IN INDIA. IN THE PRESENT CASE THERE IS NO ACQUISITION OF TECHNICAL K NOWLEDGE WHICH COULD BE INDEPENDENTLY APPLIED BY THE ASSESSEE. TH EREFORE, THE PAYMENT COULD NOT BE CONSTRUED AS IF FOR TECHNICAL SERVICES. THE ENTIRE SERVICES WERE RENDERED OUTSIDE INDIA. THERE IS NO PERMANENT ESTABLISHMENT FOR THE NON RESIDENT IN IND IA. IN THESE CIRCUMSTANCES THE COMMISSIONER OF INCOME TAX (APPEA LS) HAS RIGHTLY DELETED THE DISALLOWANCE OF ` 18,99,269/-. THIS GROUND OF THE REVENUE IS DISMISSED. 63. WE FIND THAT THE TRIBUNAL HAD GIVEN THE ABOVE F INDING ON SIMILAR PAYMENT EFFECTED BY THE ASSESSEE FOR ASSESSMENT YEA R 2008-09. SAID DECISION WAS GIVEN BY THE TRIBUNAL WHEN EXPLAN ATION TO SECTION 9(2) WAS ALREADY THERE IN THE STATUTE. IT IS, THER EFORE, NOT POSSIBLE FOR US TO COME TO A CONCLUSION THAT THE SAID EXPLANATIO N WAS NOT I.T.A. NO. 1339/MDS/13 I.T.A. NO. 1227/MDS/13 35 CONSIDERED BY THE TRIBUNAL. SIMILARLY, WE CANNOT A LSO SAY THAT THE TRIBUNAL WAS NOT AWARE ABOUT THE EXISTENCE OF ANY D OUBLE TAXATION AGREEMENT BETWEEN INDIA AND DUBAI. WE ARE THEREFOR E INCLINED TO FOLLOW THE ORDER OF THE TRIBUNAL MENTIONED ABOVE. 64. GROUND NO.5 OF THE REVENUE IS DISMISSED. 65. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 66. TO SUMMARIZE THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, WHEREAS, APPEAL O F THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 26 TH OF SEPTEMBER, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH SEPTEMBER, 2013. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-LTU, CHE NNAI/ CIT, LTU, CHENNAI/D.R./GUARD FILE