DCIT, Circle - 4, Kolkata, Kolkata V. M/s. M.K. Jokai India Ltd., Kolkata

ITA 125/KOL/2011

• Counselvise Citation: 12523514 RSA 2011
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 19-01-2011
• Court: TRIBUNAL
• Department Lawyers: L K S DEHIYA
• Assessee Lawyers: S JHAJHARIA
• Keywords: Retrospective amendment; Question of law; Fair market value; Corroborative evidences
• Section: 43B; 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 106/KOL/2011 ITA NO.125/KOL/2011 ITA NO.370/KOL/2011 %& '(/ ASSESSMENT YEARS : 2006-07, 2005-06 & 2004-05 (*+ / APPELLANT ) D.C.I.T., CIRCLE-4, KOLKATA (,-*+/ RESPONDENT ) M/S.M.K.JOKAI INDIA LTD., KOLKATA (PAN:AABCR 4231 N) *+ . / '/ FOR THE APPELLANT: SHRI L.K.S.DEHIYA ,-*+ . / '/ FOR THE RESPONDENT: SHRI S.JHAJHARIA 0%1 . !# /DATE OF HEARING : 08.05.2012. 2' . !# /DATE OF PRONOUNCEMENT : 23.05.2012. '3 / ORDER . .. . ! ! ! !. .. . , '# PER SHRI C.D.RAO, AM THE ABOVE THREE APPEALS ARE FILED BY THE REVENUE AG AINST ORDERS DATED 29.01.2010 OF THE LD. CIT-(A)-IV, KOLKATA PERTAINI NG TO A.YRS. 2004-05, 2005-06 AND.2006-07 RESPECTIVELY. 2. THERE IS A DELAY OF 88 DAYS IN FILING OF THE APPEAL BY THE REVENUE IN ITA NO.106/KOL/2011 FOR A.YR.2006-07, 93 DAYS OF DELAY IN RESPECT OF ITA NO.125/KOL2011 FOR A.YR.2005-06 AND 137 DAYS OF DEL AY IN RESPECT OF ITA NO.370/KOL/2011 FOR A.YR.2004-05 FOR WHICH THE REVE NUE HAS FILED A CONDONATION 2 PETITION EXPLAINING THE REASONS FOR SUCH DELAY. KEE PING IN VIE OF THE FACT THAT THE LD. COUNSEL FOR ASSESSEE HAS NOT RAISED ANY OBJECTION F OR CONDONATION OF DELAY. AFTER CONSIDERING THE SUBMISSIONS BY THE REVENUE THE DELA Y IS CONDONED. ITA NO.106/KOL/2011 (A.YR.2006-07): 3. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS :- 1.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A), KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.85,79,438.61 ULS .36(L)(VA). SINCE HIS DECISION CONTRADICTS WITH THE INTERPRETATION OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A), KOLKATA HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS.80,30,308/- TOWA RDS CESS ON GREEN LEAF WITHOUT. APPRECIATING THE FACTS THAT CESS IS CHARGED ON PROD UCTION OF GREEN LEAF ONLY BEING 100% AGRICULTURAL OPERATION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A), KOLKATA HAS ERRED IN LAW IN ALLOWING THE ASSESSEES CLAIM AS TO TREATMENT OF RS.60,39,038/- BEING INTEREST INCOME, AS INCOME FROM PROFIT & GAINS OF BUSINESS OR PROFES SION WITHOUT APPRECIATING THE FACTS THAT INTEREST INCOME NEVER FALLS WITHIN THE PURVIEW OF RULE 8. .. . ITA NO.125/KOL/2011 (A.YR.2005-06): 4. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS :- 1.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION RS.1,23,668/- WITHOUT CONSIDERING THE MAIN ASPECT AS TO PAYMENT OF EMPLOYEES CONTRIBUTION AND EMPLOYERS C ONTRIBUTION TOWARDS PROVIDENT FUND IN THE ACCOUNTS OF THE EMPLOYEES MAINTAINED WI TH P.F.BOARD WITHIN THE DUE DATE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.92,77,709/- U/S. 35DDA WITHOUT CONSIDERING THE ESSENCE OF SECTION 35DDA. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A), KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2,89,83,182/- WITHOU T CONSIDERING THE PROSPECTS FOR WHICH THE AO HAD MADE THE ADDITION IN QUESTION. ITA NO.370/KOL/2011 (A.YR.2004-05): 5. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LI CIT(A)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2,38,65,926/- WI THOUT CONSIDERING THE MAIN ASPECT AS TO PAYMENT OF EMPLOYEES CONTRIBUTION AND EMPLOYER S CONTRIBUTION TOWARDS PROVIDENT FUND IN THE ACCOUNTS OF THE EMPLOYEES MAINTAINED WI TH P.F.BOARD WITHIN THE DUE DATE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.4L,80,154/- U/S. 35DDA WITHOUT CONSIDERING THE ESSENCE OF SECTION 35DDA. 3 6. THE FIRST GROUND IN ALL THE THREE ASSESSMENT YEA RS IS RELATING TO DELETION OF ADDITION ON ACCOUNT OF P.F. 7. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DOI NG THE SCRUTINY ASSESSMENT THE AO DISALLOWED AN AMOUNT OF RS.85,79,438.61 U/S 36(1)( VA) OF THE IT ACT FOR A.YR. 2006- 07, RS.1,23,668/- FOR A.YR.2005-06 AND RS. 2,38,65, 926/- FOR A.YR.2004-05 BY OBSERVING AS UNDER :- A.YR.2006-07 FROM THE DETAILS OF ACCOUNTS IT IS SEEN THAT CONTRI BUTION TO EMPLOYEES PART OF PF WERE NOT DEPOSITED WITHIN THE DUE DATE IN THE CASE OF TEA ES TATES AND H.O. SL. NAME GROSS AMOUNT 1. BOKEL T.E. 8,22,127.34 2. DAISAJAN 9,56,783.11 3. MUTUCK 16,60,950.36 4. SINGLIJAN 1,79,066.70 5. NALANI 22,00,177.29 6. PANITOLA 9,01,308.74 7. HATTIALI 13,05,018.69 8. JCW 1,10,890.19 9. JCH 86,980.19 10. H.O. 3,56,136.00 TOTAL 85,79,438.61 IN THE SCHEDULE ANNEXED TO AUDIT REPORT THE ADJUSTM ENT COLUMN HAS BEEN INCORPORATED SHOWING ADVANCE/RECOVERY ETC. HOWEVER, THE EMPLOYER S CONTRIBUTION PART HAS NOT BEEN SHOWN IN THE AUDIT REPORT. THEREFORE IT CANNOT BE ASCERTAINED AS TO WHAT PART OF RECOVERY/ADVANCE BELONGS TO EMPLOYERS OR EMPLOYEES PORTION. SINCE THE RELEVANT PROVISION OF SECTION 36(1)(VA) SPEAKS ONLY ABOUT TH E CONTRIBUTION OF EMPLOYEES PF ONLY AND SINCE IT COULD NOT BE CLEARLY DEMARCATED ABOUT THE EMPLOYEES/EMPLOYERS PF RATIO THE CONTRIBUTION PART IGNORING THE ADVANCE/ADJUSTMENT I S CONSIDERED IN THE ABOVE . IN VIEW OF PROVISION OF SECTION 2(24)(X) THE ABOVE AMOUNT IS A DDED BACK WITH TOTAL INCOME. A.YR.2005-06 ON SCRUTINY OF TAX AUDIT REPORT SUBMITTED ALONG WI TH RETURN OF INCOME IT IS REVEALED THAT THERE WAS DELAY IN DEPOSIT OF EMPLOYERS AND E MPLOYEES CONTRIBUTION AMOUNTING TO RS.42004/- FOR THE MONTH OF JULY, 2004 AS IS EVIDEN T FROM EXHIBIT NO.4A OF THE TAX AUDIT REPORT. MOREOVER, A SUM OF RS.40842/- EACH BEING PF OUTSTANDING FOR THE MONTH OF NOVEMBER, 2004 & JANUARY, 2005 RESPECTIVELY WERE NO T PAID. THE AR COULD NOT PRODUCE ANY SUPPORTING EVIDENCE TO SHOW THAT THE SA ID SUM OF RS.40842/- FOR THE MONTH OF NOVEMBER, 2004 AND JANUARY, 2005 HAVE BEEN PAID. A.YR.2004-05 CONTRIBUTION TO ASSAM TEA PLANTATERS PF-ALLOWABILI TY OF CLAIM U/S 43B OF THE I.T.ACT. ALONG WITH THE RETURN OF INCOME THE ASSESSEE HAD FU RNISHED INTERALIA A DETAILED CALCULATION OF CONTRIBUTION TO ASSAM TEA PLANTERS P .F.( A1PPF) AS EXHIBIT NO.4, CLAUSE -16(B) % 2L(I)(B) TO THE TAX AUDIT REPORT. FROM SUC H CALCULATION IT IS GATHERED THAT THE EMPLOYEES AND EMPLOYERS CONTRIBUTION ARE RS.2,22,8 9,685/- EACH TOTALING 4 RS.4,45,79.370/-. OUT OF THIS AS PER COI.9 OF SUCH SHEET OF CALCULATION IT IS FOUND THAT THE ASSESSEE HAS PAID ONLY AN AMOUNT OT RS2,07.13,4 44/- AS AMOUNT PAID TO BOARD. THE BALANCE AMOUNT OF RS2,38,65,926/- HAS NOT BEEN TO T HE ASSAM TEA PLANTERS P.F. ACCOUNT AS PER SAID ANNEXURE TO THE TAX AUDIT REPORT. THIS IS AN INDIRECT CONTRIBUTION TO THE PROVISION OF SECTION 36(VA) AND SECTION 43 B OF THE IT. ACT. SUCH AMOUNT IS NEITHER ADDED BACK IN THE COMPUTATION OF TOTAL INCOME FURNI SHED ALONG WITH THE RETURN. THEREFORE AN AMOUNT OF RS.2,38,65,926/- IS ADDED BA CK TO THE TOTAL INCOME OF THE ASSESSEE. 7.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE ADDIT ION OF RS.85,79,439/- FOR A.YR.2006-07 ON ACCOUNT OF CONTRIBUTION TOWARDS PF MAINLY BY OBSERVING THAT 2. GROUNDS 2 TO 4 RELATE TO THE ADDITION OF RS. 85 ,79,439 BY INVOKING SECTION 36(VA) READ WITH SECTION 2(24)(X) AND SECTION 43B OF THE I NCOME TAX ACT, 1961. ACCORDING TO THE AO THE AMENDMENT TO SECTION 43B ARE APPLICABLE ONLY TO THE EMPLOYERS CONTRIBUTION AND NOT TO THE EMPLOYEES CONTRIBUTION . IT IS A FACT ON RECORD THAT BOTH THE CONTRIBUTIONS OF EMPLOYER AND EMPLOYEES HAVE BEEN P AID BY THE APPELLANT BEFORE THE DUE DATE OF SUBMISSION OF RETURN OF INCOME UNDER SECTIO N 139(1). THE TR AS VOUCHED FOR THIS. THEREFORE, THE QUESTON WHETHER THERE WERE AN Y DUES OF PF ON THE DUE DATE OF FURNISHING OF RETURN OF INCOME U/S. 139(1) OR NOT IS ANSWERED IN AFFIRMATION. ]ETAT, KOLKATA IN THE CASE OF DCIT VS. THE EMPIRE JUTE CO. LIMITED IN I. T. A. NO. 1218 / KOL. / 2008 IN RESPECT OF ASSESSMENT YEAR 2004- 05 HAVE HOLD THAT WHEN PF DUES BOTH EMPLOYERS AND EMPLOYEES CONTRIBUTION WHEN PAID B EFORE THE DUE DATE OF FURNISHING OF RETURN OF INCOME WILL NOT ATTRACT THE PROVISIONS OF SECTION 36(VA) READ WITH SECTION 2(24)(X) AND SECTION 43B. FURTHER MORE, THE DECISIO NS OF ALLIED MOTORS (P) LTD. VS. CIT (1997) 139 CTR (SC) 364 (1997) 224 ITR 677 (SC) AND COMMISSIONER OF INCOME TAX VS. SABARI ENTERPRISES [2001] 298 ITR 141 : 213 CTR 269 WHOLLY SUPPORT THE PAYMENTS OF PF DUES BEFORE THE DUE DATE OF FURNISHING OF RET URN OF INCOME BY THE APPELLANT COMPANY. A VERY RECENT JUDGEMENT OF THE SUPREME COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ALOM EXTRUSIONS LIMITED [2009] 31 9 ITR 306 HAS SETTLED THE ISSUE OF PF DUES PERMANENTLY BY HOLDING THAT THE OMISSION OF THE SECOND PROVISO TO SECTION 438 OF THE INCOME TAX ACT, 1961, BY THE FINANCE ACT, 20 03, IS TO BE READ AS HAVING RETROSPECTIVE EFFECT FROM APRIL 1, 1988. IN VIEW OF THE FACTS OF THE CASE AND IN VIEW OF THE DECISIONS OF THE APEX COURT REPORTED IN 319 ITR 306 (SUPRA) AND IN 224 ITR 677 (SUPRA) READ WITH THE RATIO PRONOUNCED BY THE KARNA TAKA HIGH COURT REPORTED IN 298 ITR 141 (SUPRA) AS ALSO THE RATIO PRONOUNCED IN THE JURISDICTIONAL ITAT KOLKATA IN I. T. A. NO. 1218 / KOL. / 2008 (SUPRA), THE SAID ADDITIO N OF RS.85,79,439 IS DELETED. SIMILARLY THE LD. CIT(A) DELETED THE ADDITION OF RS .1,23,668/- FOR A.YR.2005-06 AND RS.2,38,65,926/- FOR A.YR.2004-05. 7.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING BEFORE US, THE LD.DR APPE ARING ON BEHALF OF THE REVENUE HAS CONTENDED THAT THE PF IN THE CASE OF ALL THESE COMPANIES IS COVERED BY P.F.ACT AND THE CASE RELIED ON BY THE LD. CIT(A) IS EMPLOYEES P F AND GPF ETC. FURTHER HE REFERRED 5 TO DIFFERENT CLAUSES OF PF RELATING TO ASSESSEE FIR M AND CONTENDED THAT THE ABOVE DECISIONS RELIED ON BY LD. CIT(A) IS NOT APPLICABLE TO THE FACTS OF THE CASE. THEREFORE HE REQUESTED TO SET ASIDE THE ORDER OF LD. CIT(A) A ND RESTORE THAT OF AO. 9. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE SUBMITTED THAT THOUGH ASSESSEE IS UNDER DIFFERENT SET OF PF R ULES THE MAIN AIM OF THE SCHEME U/S 43B OF THE IT ACT IS COMMON FOR ALL THE PF. IT HAS NOT SPECIFIED ANY PARTICULAR PF, BUT THE PROVISIONS ARE GENERAL IN NATURE. THEREFORE IN THIS CASE SINCE THE ASSESSEE HAS PAID ALL THE DUES OF PF WITHIN THE DUE DATE OF THE FILIN G OF RETURN THE LD. CIT(A) HAS RIGHTLY DELETED THE SAME. THEREFORE HE REQUESTED TO UPHELD THE SAME. 10. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT THE THE LD. CIT(A) OBSERVED THAT THE PAYMENTS TOWARDS EMPLOYEES CONTRIBUTION TO P.F . WAS MADE WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME BY THE ASSESSEE COMPANY . WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S .VIJAY SHREE LIMITED VIDE ITAT NO.245 OF 2011 IN GA NO.2607 OF 201 DATED 7 TH SEPTEMBER, 2011 HAS HELD AS UNDER :- AFTER HEARING MR. SINHA,LEARNED ADVOCATE, APPEARIN G ON BEHALF OF THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COU RT IN THE CASE OF COMNISSIONER OF INCOME TAX VS ALOM EXTRUSION LTD., WE FIND THAT THE SUPREME COURT IN THE AFORESAID CASE HAS HELD THAT THE AMENDMENT TO THE SECOND PROV ISO TO DIE SEC. 43(B) OF THE INCOME TAX ACT, AS INTRODUCED BY FINANCE ACT, 2003, WAS CURATIVE IN NATURE AND IS REQUIRED TO BE APPLIED RETROSPECTIVELY WITH EFFECT FROM 1 APRIL, 1988. SUCH BEING THE POSITION, THE DELETION OF THE AMOUNT PAID BY THE EMPLOYEES CONTRIBUTION BEYOND DUE DATE WAS DEDUCTIBLE BY INVO KING THE AFORESAID AMENDED PROVISIONS OF SECTION 43(B) OF THE ACT. WE, THEREFORE, FIND THAT NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL AND CONSEQUENTLY, WE DISMISS THIS APPEAL. 10.1. THOUGH THE LD. DR ARGUED THAT THE PF COVERED BY THE ASSESSEE COMPANY IS DIFFERENT AND THE CASE LAWS RELIED ON BY THE LD. CI T(A) ARE NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE, WE ARE OF THE VIEW THAT THIS CON TENTION OF THE LD. DR IS NOT ACCEPTABLE. SINCE THE PROVISION OF SECTION 43B OF T HE IT ACT HAS NOT SPECIFIED ANY PARTICULAR PF AND WHEN ONCE THE REVENUE HAS APPLIED THE PROVISION OF SECTION 43B OF THE IT ACT THIS IS APPLICABLE TO ALL THE PROVIDENT FUNDS AND SINCE IN THIS PRESENT CASE 6 FROM THE PAPER BOOK THE LD. COUNSEL FOR ASSESSEE HA S ESTABLISHED THE FACT THAT ALL THE PF DUES ARE PAID BEFORE FILING OF THE RETURN U/S 13 9(1) OF THE ACT. THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) TO BE INTERFER ED WITH. WE CONFIRM THE SAME AND DISMISS GROUND NO.1 IN ALL THE THREE APPEALS. 11. GROUND NO.2 RAISED BY THE REVENUE IN THIS APPEA L IS RELATING TO DELETING OF DISALLOWANCE OF RS.80,30,308/- TOWARDS CESS ON GREE N LEAF. 12. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO D ISALLOWED AN AMOUNT OF RS.80,30,308/- TOWARDS CESS ON GREEN LEAF BY OBSERV ING AS UNDER :- THE ASSESSEE HAS SHOWN PAYMENT TOWARDS CESS ON GRE EN LEAF FOR RS.80,30,308/-. THE NATURE OF EXPENSES IS RELATED TO 100% AGRICULTURAL OPERATION AND THEREFORE, IS NOT ALLOWABLE FOR DEDUCTION FROM COMPOSITE INCOME. IN T HIS REGARD IT WAS SUBMITTED THAT IN VIEW OF DECISION IN THE CASE OF AFT INDUSTRIES THE HONBLE CALCUTTA HIGH COURT THE SAME IS ALLOWABLE EXPENDITURE FROM COMPOSITE INCOME . SINCE SLP IS PENDING BEFORE THE HONBLE SUPREME COURT ON THIS ISSUE IN ORDER TO MAI NTAIN JUDICIAL CONSISTENCY THE SAME IS DISALLOWED AND ADDED BACK. 12.1. ON APPEAL THE LD. CIT(A) DELETED THE SAME. 13. AT THE TIME OF HEARING BEFORE US THE LD. DR APP EARING ON BEHALF OF THE REVENUE RELIED ON THE ORDER OF AO AND FURTHER RELIED ON THE . ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE RELIED ON THE ORDER OF LD. CIT(A) AND FURTHER CONTENDED THAT THE CASE LAWS REFERRED BY THE LD. DR IS NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE. 14. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT THE ISSUE IS CONCLUDED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS AFT INDUSTRIES LTD. 270 ITR 167 (CAL) WHERE THE AMOUNT PAID AS CESS WAS HEL D AS ELIGIBLE FOR DEDUCTION IN COMPUTING THE COMPOSITE INCOME UNDER RULE 8 OF I.T. RULES. THIS ISSUE IS, THEREFORE, DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY UPHOLDING THE ORDER OF THE C.I.T.(A) WHO HAS ALLOWED THE DEDUCTION OF PAYMENT OF CESS ON GREEN LEAVES IN COMPUTING THE COMPOSITE INCOME FROM TEA BUSINESS OF THE ASSESSEE UNDER RULE 8 OF THE I.T. RULES. 7 14.1. THE FACT THAT THE SLP IS PENDING BEFORE THE HONBLE SUPREME COURT AGAINST THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN RESPECT OF AFT INDUSTRIES LTD. VS CIT (270 ITR 167) WILL NOT HAVE ANY EFFECT SINCE TH E HONBLE APEX COURT HAS NEITHER SET ASIDE THE ORDERS OF THE CALCUTTA HIGH COURT NOR GRANTED ANY STAY. 15. IN THE RESULT GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 16. GROUND NO.3 RAISED BY THE REVENUE IS RELATING T O THE INTEREST INCOME TREATED BY THE AO AS INCOME FROM OTHER SOURCES INSTEAD OF BUSI NESS INCOME. 16.1. THE RELEVANT FINDINGS OF AO ON THIS ISSUE ARE AS UNDER :- THE NATURE OF BUSINESS OF THE ASSESSEE IS GROWING AND MANUFACTURING OF TEA. THE ASSESSEE HAS CREDITED INTEREST INCOME OF RS.60,39,0 38/- IN THE PROFIT AND LOSS ACCOUNT. IN THE COMPUTATION OF INCOME IT HAD NOT TREATED THE INTEREST INCOME SEPARATELY. SINCE INTEREST INCOME IS NOT COVERED BY RULE 8 NOT BEING INCOME FROM TEA GROWN AND MANUFACTURED, THE SAME IS TREATED SEPARATELY AS IN COME FROM OTHER SOURCES. 16.2. ON APPEAL THE LD.CIT(A) HAS CONSIDERED THE IN TEREST INCOME OF RS.60,39,038/- UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROF ESSION AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES BY OBSERVING AS UNDER :- THE APPELLANT COMPANY PRODUCED BEFORE ME THE AUDIT ED FINANCIAL STATEMENTS FOR THE YEAR 2005-2006. THE FOLLOWING ARE THE FIGURES APPEA RING IN THE SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNTS. AS PER SCHEDULE IX: INTEREST INCOME: RS. 60,39,03 8 AS PER SCHEDULE XIII: INTEREST PAYMENT: RS.1,53,6 3,803 THE BREAK-UP OF INTEREST INCOME SUGGESTS THAT THE I NTEREST INCOME HAS BEEN EARNED OUT OF LOANS ADVANCED TO EMPLOYEES AND OTHER INTEREST. THE APPELLANT COMPANY HAD TO PAY INTEREST FOR FUNDS REQUIRED FOR ITS OPERATION. THE COMPANY WOULD HAVE TO PAY LESS AMOUNT OF INTEREST PROVIDED THERE WERE NO ADVANCES TO EMPLOYEES ETC. THE FACTS AS EMANATE FROM THE AUDITED FINANCIAL STATEMENTS THAT THE APPELLANT COMPANY EARNED INTEREST INCOME OF RS.60,39,038 AND AT THE SAME TIM E PAID INTEREST OF RS.1,53,63,803. THOUGH FOR THE PURPOSES OF ACCOUNTANCY, THERE APPEA R TO BE TWO INDEPENDENT TRANSACTIONS, BUT IN REALITY THERE WAS ONE TRANSACT ION AND, THEREFORE, ONLY THE DIFFERENCE BETWEEN THE INTEREST RECEIVED AND THE INTEREST PAID REPRESENTED THE INCOME OF THE APPELLANT COMPANY. SINCE IN THIS CASE THE INTEREST EXPENDITURE IS MORE THAN THE INTEREST INCOME, THE NET EXPENDITURE IS TO BE CONSIDERED AS EXPENDITURE OF THE BUSINESS. BESIDES, THE INTEREST HAS NOT BEEN EARNED OUT OF ANY SURPLUS MONEY, NOT REQUIRED FOR BUSINESS OF THE APPELLANT COMPANY. IT IS ALSO NOT THE CASE OF I NVESTMENT OF IDLE SURPLUS FUNDS. IN VIEW OF THIS FINDING THE INTEREST INCOME OF RS.60,3 9,038 CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. IN VIEW OF THE EXPLANATIONS OFFERED BY THE APPELLAN T COMPANY AND CONSIDERING THE FACTS OF THE CASE, I AM OF THE OPINION THAT THE INTEREST INCOME OF RS.60,39,038 SHOULD BE 8 CONSIDERED UNDER THE HEAD PROFIT AND GAINS OF BUSI NESS OR PROFESSION AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES.' 17. AFTER HEARING THE RIVAL SUBMISSIONS AN ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THE BREAK-UP OF INTE REST INCOME SUGGESTS THAT THE INTEREST INCOME HAS BEEN EARNED OUT OF LOANS ADVANCED TO EMP LOYEES AND OTHER INTEREST. THE ASSESSEE COMPANY HAD TO PAY INTEREST FOR FUNDS REQU IRED FOR ITS OPERATION. THE FACT AS EMANATED FROM THE AUDITED FINANCIAL STATEMENTS THAT THE ASSESSEE COMPANY EARNED INTEREST INCOME OF RS.60,39,038 AND AT THE SAME TIM E PAID INTEREST OF RS.1,53,63,803. THOUGH FOR THE PURPOSES OF ACCOUNTANCY, THERE APPEA R TO BE TWO INDEPENDENT TRANSACTIONS, BUT IN REALITY THERE WAS ONE TRANSACT ION AND, THEREFORE, ONLY THE DIFFERENCE BETWEEN THE INTEREST RECEIVED AND THE INTEREST PAID REPRESENTED THE INCOME OF THE APPELLANT COMPANY. IN VIEW OF THE ABOVE FINDINGS, W E FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) TO BE INTERFERED WITH. THEREFORE WE CONFIRM THE SAME AND DISMISS THE APPEAL OF THE REVENUE ON THIS ISSUE. 18. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO.106/KOL/2011 IS DISMISSED. 19. THE SECOND ISSUE RAISED BY THE REVENUE IN ITA N O.125/KOL/2011 AND ITA NO.370/KOL/2011 IS RELATING TO THE DISALLOWANCE U/S 35DDA OF THE IT ACT. 20. THE BRIEF FACTS OF THIS ISSUE ARE THAT AO WHILE DOING THE SCRUTINY ASSESSMENT DISALLOWED AN AMOUNT OF RS.91,77,709/- U/S 35DDA OF THE IT ACT IN A.YR. 2005-06 BY OBSERVING AS UNDER:- DURING THE COURSE OF HEARING THE AR FILED ONE LETT ER DT.27.11.2007 SUPPORTING INTERALIA. THE CLAIM OF DEDUCTION U/S 35DDA ON ACCRUED EXPENSE S BASIS. SUCH CONTENTION IS REBUTTED IN THE FOLLOWING DISCUSSION. THE EXPRESSION EXPENDITURE IN ANY PREVIOUS YEAR BY WAY OF PAYMENT INDICATES A FEW THINGS JUSTIFY THE CLAIM IS. AGAINST AN EXPENDITURE INCURRED BUT WHICH IS ONLY BY WAY OF PAYMENT OF A SUM THAT IS TO BE. BROUGHT UNDER CONSI DERATION: FOR: CLAIM OF DEDUCTION U/S 35DDA. INCURRING OF EXPENSES FOR CONSIDERATION OF S UCH CLAIM HAS BEEN LIMITED TO THE EXTENT OF PAYMENT OF ANY SUM MADE DURING A PREVIOUS YEAR. THE INCLUSION OF THE TERM BY WAY OF PAYMENTS CLARIFIED THE FACT THAT DEDUCTION U S/ 35DDA IS NOT MERELY RELATED TO THE INCURRING OF EXPENSES ONLY. . THE INCLUSION OF THE WORDS IN CONNECTION WITH HIS VOLUNTARY RETIREMENT IN PLACE OF AT THE TIME OF HIS VOLUNTARY RETIREMENT W.E.F. 01-04-2 004 ACTUALLY INDICATES THAT PAYMENT OR 9 INCURRING OF SUCH EXPENSES AT THE TIME OF HIS VOLU NTARY RETIREMENT IS NOT TO BE CONSIDERED. PAYMENT IN CONNECTION WITH HIS VOLUNTA RY RETIREMENT IS TO BE CONSIDERED FOR CALCULATION OF DEDUCTION U/S 35DDA WHETHER OR N OT IT IS INCURRED /PAID AT THE TIME OR VOLUNTARY RETIREMENT. THE NATURAL TIME TOT CONSIDER ATION OF DEDUCTION HAS EFFECTIVELY BEEN CHANGED FROM THE TIME OF HIS VOLUNTARY RETIRE MENT TO EXPENDITURE IN ANY PREVIOUS YEAR BY WAY OF PAYMENT IN CONNECTION WITH HIS VOLUN TARY RETIREMENT. BASED ON THE ABOVE DISCUSSION THE ARS CLAIM OF DED UCTION U/S 35DDA IS NOT ACCEPTED. THE AR WAS FURTHER REQUESTED TO SUBMIT A STATEMENT OF YEAR WISE PAYMENT OF VOLUNTARY RETIREMENT BENEFIT AND DEDUCTION TO BE AL LOWABLE U/S 35DDA ALLOWABLE IN THIS ASSESSMENT YEAR IS LIMITED TO RS.91,77,709/-. SIMILARLY HE DISALLOWED AN AMOUNT OF RS.41,80,154/- U/S 35DDA OF THE IT ACT FOR A.YR.2004-05. 20.1. ON APPEAL THE LD. CIT(A) DELETED THE ADDITION OF RS.91,77,709/- FOR A.YR. 2005-06 BY OBSERVING AS UNDER :- THE ADDITION OF RS.91,77,709/- ON THE BASIS OF AN OPINION OF AO THAT THE PAY,MENT UNDER THE SCHEME OF ALLOWANCE U/S 35DDA SHOULD BE S TRICTLY ON CASH BASIS AND NOT ACCRUAL BASIS. THE FIRST YEAR BEING ASSESSMENT YE AR :2001-02 WHEN THE VOLUNTARY RETIREMENT SCHEME WAS APPROVED, THE CLAIM WAS EXAMI NED BY THE THEN ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTI ON 143(3) OF THE SAID ACT AND WAS ALLOWED IN FULL TO THE APPELLANT COMPANY. SUBSEQUEN TLY IN THE ASSESSMENT YEARS 2002-03 AND 2003-04 THE SAID CLAIM WAS ALLOWED. HOWEVER THE AO WHILE MAKING THE ASSESSMENT U/S 143(3) FOR ASSESSMENT YEAR 2004-05 FORMED AN OP INION THAT THE PAYMENT UNDER THE SCHEME SHOULD BE STRICTLY ON CASH BASIS AND NOT A CCRUAL BASIS AND AS SUCH ONLY ALLOWED THE CLAIM BASED ON ACTUAL PAYMENT. THE SAME VIEW WAS AGAIN FOLLOWED IN THE ASSESSMENT YEAR 2005-06 AND ACCORDINGLY DISALLOWED THE CLAIM TO THE TUNE OF RS.91,77,709. THE INTENTION OF THE LEGISLATION IS A MPLY CLEAR AND TO AVOID ANY AMBIGUITY THE CONSTRUCTION OF THE SECTION HAS BEEN CHANGED TO SUBSTITUTE THE WORDS AT THE TIME OF HIS VOLUNTARY RETIREMENT WITH THE WORDS IN CONNECT ION WITH HIS VOLUNTARY RETIREMENT BY THE FINANCE ACT, 2005 WITH RETROSPECTIVE EFFECT. TH E SCHEME OF SECTION 35DDA PERMITS THE ASSESSEE TO CLAIM OF EXPENDITURE ON APPROVED VR S IN FIVE EQUAL INSTALLMENTS. THE SECTION DOES NOT SPECIFY THAT IT HAVE TO BE ON ACT UAL PAYMENT BASIS AS CATEGORICALLY STATED IN SECTION 43B OF THE ACT. ONCE THE SCHEME I S APPROVED AND THE GROSS LIABILITY HAS BEEN DECIDED, THE PAYMENT PATTERN CAN FOLLOW AS PER THE SCHEME. MERELY, THE PAYMENTS HAVE BEEN SPREAD OVER A FEW ACCOUNTING YEARS, THE B ENEFITS OF SECTION 35DDA CANNOT BE DENIED TO THE APPELLANT COMPANY. THEREFORE, THE SAI D ADDITION OF RS.91,77,709 MADE BY THE AO ON ACCOUNT OF SECTION 35DDA IS DELETED. SIMILARLY THE LD. CIT(A) DELETED THE ADDITION OF RS .41,80,154/- U/S 35DDA OF THE IT ACT FOR A.YR.2004-05. 21. AT THE TIME OF HEARING BEFORE US THE LD. DR APP EARING ON BEHALF OF THE REVENUE RELIED ON THE ORDER OF AO AND ON THE OTHER HAND, TH E LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE RELIED ON THE ORDER OF LD. CIT(A). 10 22. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE OBSERVATIONS MADE BY AO AS WELL AS LD. CIT(A) AND AFTER CONSIDER ING THE PROVISION OF SECTION 35DDA OF THE I.T.ACT, WE ARE OF THE VIEW THAT THE R EASONING GIVEN BY THE LD. CIT(A) THAT THE INTENTION OF THE LEGISLATION IS AMPLY CLEA R AND TO AVOID ANY AMBIGUITY THE CONSTRUCTION OF THE SECTION HAS BEEN CHANGED TO SUB STITUTE THE WORDS AT THE TIME OF HIS VOLUNTARY RETIREMENT WITH THE WORDS IN CONNECTION WITH HIS VOLUNTARY RETIREMENT BY THE FINANCE ACT, 2005 WITH RETROSPECTIVE EFFECT. TH E SCHEME OF SECTION 35DDA PERMITS THE ASSESSEE TO CLAIM OF EXPENDITURE ON APP ROVED VRS IN FIVE EQUAL INSTALLMENTS. THE SECTION DOES NOT SPECIFY THAT IT HAVE TO BE ON ACTUAL PAYMENT BASIS AS CATEGORICALLY STATED IN SECTION 43B OF THE ACT. ONCE THE SCHEME IS APPROVED AND THE GROSS LIABILITY HAS BEEN DECIDED, THE PAYMENT PATTE RN CAN FOLLOW AS PER THE SCHEME. MERELY, THE PAYMENTS HAVE BEEN SPREAD OVER A FEW AC COUNTING YEARS, THE BENEFITS OF SECTION 35DDA CANNOT BE DENIED TO THE ASSESSEE COMP ANY. WE ARE OF THE VIEW THAT THE REASONING GIVEN BY THE LD. CIT(A) WILL BE JUSTIFIED AND LD. CIT(A) HAS CLEARLY ANALYSED THE CLAIM OF SECTION 35DDA WHILE GIVING RELIEF TO A SSESSEE. THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) TO BE INTERFER ED WITH. WE CONFIRM THE SAME AND DISMISS THIS GROUND OF THE APPEAL FOR BOTH THE ASSE SSMENT YEARS. 23. IN THE RESULT THE REVENUES APPEAL IN ITA NO.3 70/KOL/2011 IS DISMISSED. 24. THE 3 RD GROUND RAISED BY THE REVENUE IN ITA NO.125/KOL./20 11 IS RELATING TO DELETION OF ADDITION OF RS.2,89,83,182/-. 25. THE BRIEF FACTS OF THIS ISSUE ARE THAT AO HAS ADDED AN AMOUNT OF RS.2,89,83,182/- BY OBSERVING AS UNDER :- COMMON COST FOR MANAGEMENT SERVICE RENDERED AS PER SCHEDULE 10 OF EXPENSES ALONG WITH THE PRO FIT AND LOSS A/C THE EXPENDITURE OF RS.22,46,.23,530/- ON ACCOUNT OF SAL ARY, WAGES, BONUS ETC. INCLUDING COMMON COST ALLOCATION FROM HINDUSTAN LEVER LTD. OF RS.2,89,83,182/-. THE AR WAS REQUESTED TO EXPLAIN HOW SUCH CALCULATION HAS BEEN ARRIVED AT AND HOW IT IS BEING PAID BY THE A. IN RESPONSE A CO. FURNISHED A COPY OF EXHIBIT NO. 5 . G1AUSE 18 PROVIDING DETAILS OF PAYMENTS TO PERSONS SPECIFIED U/S 40A(2 )(B) WHICH IS AS FOLLOWS:- 11 1. HINDUSTAN LEVER LTD. RS.4328271/- INTEREST PAID/ PAYABLE DURING THE YEAR 2. HINDUSTAN LEVER LTD. RS.28983182/- COMMON COST FOR MANAGEMENT SERVICES RECEIVED THE ABOVE STATEMENT FORMS PART OF THE TAX AUDIT REP ORT TILED ALONG WITH THE RETURN INCOME. THE AR FILES IN LETTER DATED 24-12-2 007 STATING THAT SUCH AMOUNT WAS THE APPORTIONMENT OF SALARY AS BORNE BY THE ASSESSEE.. THE ALLEGED EXPENDITURE OF RS.28983182/- IS DISALLOWABLE IN THE HANDS OF THE A SSESSEE ON ACCOUNT OF OF TWO SEPARATE INDEPENDENT REASONS AS BELOW- FIRSTLY, IT IS EVIDENT FROM THE ABOVE THAT THE ABOV E EXPENDITURE IS BY WAY OF A MANAGEMENT SERVICE RENDERED BY HINDUSTAN LEVER LTD. HOWEVER, THE DETAILS OF RENDERING OF SERVICE, THE NATURE OF SERVICE AS WEL L AS THE VALUE OF SERVICE RENDERED IS NOT PROVIDED BY THE AR DURING THE COURSE OF HEARING. TO BE ELIGIBLE TO THE CLAIM OF SUCH EXPENSES IT WAS THE ONUS OF THE ASSESSEE CO. TO PRO VE THAT 1) COMMENSURATE AMOUNT OF GOODS/SERVICE HAVE BEEN R ECEIVED IN LIEU OF SUCH PAYMENT AND 2) THE PAYMENT IS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE VALUE SO CALLED MANAGEMENT SERVICES RECEIVED BY THE ASSESSEE IS NOT PROVED BEYOND REASONABLE DOUBT. PARTICULARLY WHEN THE TRAN SACTION FALLS WITHIN THE MISCHIEF OF SECTION 40A(2)(B). IN ABSENCE AT ANY EVIDENCE PRODU CED BY THE AR THAT COMMENSURATE AMOUNT OF SERVICE WAS RECEIVED AND THE PAYMENT WAS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THAT THE EXPENDITURE IS NOT EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICE RECE IVED BY THE ASSESSEE CO.. THE EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT ACCEPTAB LE. WITHOUT PREJUDICE TO THE ABOVE, EVEN IF IT IS ASSUM ED (BUT NOT ADMITTED) THAT SUCH VALUE OF SERVICES RENDERED TO THE ASSESSEE JUSTIFIE S SUCH PAYMENT OF AROUND RS.2.90 CRORES, YET IT IS TO BE LOOKED INTO WHETHER OTHER C ONDITIONS OF THE ACT ARE FULFILLED OR NOT. THE ASSESSEES ALLEGED PAYMENT IS IN LIEU OF MANAGE MENT SERVICE RENDERED AND ON THIS COUNT AN EXPENDITURE OF RS.2.90 CRORES WAS INCURRED AGAINST HINDUSTAN LEVER LTD. SECTION 194J PROVIDES IN DETAILS THE PROVISIONS OF DEDUCTION OF TAX AT SOURCE TO BE MADE FROM SUCH PAYMENT AGAINST SERVICE RENDERED BY THE P AYER I.E. IN THIS CASE THE ASSESSEE CO.. DID NOT DEDUCT ANY TAX AT SOURCE, 17HERETORE! ASSESSEE CO. HAS COMMITTED A DEFAULT AS SPECIFIED IN SEC.40A(IA) OF THE IT ACT AND HENCE , AMOUNT OF RS.2,89,83,182/- CANNOT BE ALLOWED AS DEDUCTION WHILE CALCULATING THE TOTAL INCOME OF THE ASSESSEE CO. 25.1. . ON APPEAL THE LD. CIT(A) AFTER TAKING INTO CONSIDERATION OF VARIOUS SUBMISSIONS HAS DELETED THE SAME BY OBSERVING AS UN DER :- IT SEEMS THAT AO HAS MADE THE ADDITIONS ONLY BY GO ING THROUGH THE NOMENCLATURE OF MANAGEMENT SERVICES MENTIONED AT CLAUSE 18 OF FOR M NO.3CD OF THE TAX AUDIT REPORT WITHOUT LOOKING INTO THE REAL NATURE OF EXPENSES. B ESIDES, THE SAME TAX AUDIT REPORT AT CLAUSE 17(F) OF FORM 3CD HAS NOT REPORTED OF ANY VI OLATION OF SECTION 40(A)(IA), MEANING THEREBY THE SHARING OF SALARY COST CANNOT BE TERMED AS MANAGEMENT SERVICE. THE AO CANNOT PICK AND CHOOSE ITEMS FROM THE TAR, I T HAS TO BE READ IN TOTALITY. IT IS ALSO NOT A NEW ITEM OF EXPENDITURE APPEARING IN THE PROFIT AND LOSS ACCOUNT FOR THE FIRST TIME. THERE HAS BEEN A PRECEDENT OF THIS EXPENDITUR E IN THE EARLIER YEAR. THE ACCOUNTS FOR THE FINANCIAL YEARS 2002-03 AND 2003-04 SHOW SUCH SHARING OF SALARY, WHICH IS EVIDENT FROM SCHEDULE 16 OF THE AUDITED PROFIT AND LOSS ACC OUNT FOR THESE YEARS. THE INCOME TAX DEPARTMENT HAS ACCEPTED THE APPELLANTS CLAIM O F SALARY COST SHARING IN THE PAST. 12 HINDUSTAN LEVER LIMITED IS A PROFIT MAKING ASSESSEE AND THE APPELLANT IS A LOSS MAKING ENTITY. SUCH SHARING OF COST DOES NOT SHOW AN TAX P LANNING THEREFORE, CONSIDERING THE PRECEDENT, THE FACTS OF VRS, THE MANAGERIAL AND OPE RATIONAL NEED OF THE ORGANIZATION OF THE APPELLANT COMPANYS SIZE, THE ACT OF SHARING OF SALARY COST CANNOT BE HELD AS OUT OF PROPORTION OR UNREASONABLE OR EXTRANEOUS TO THE NEE D OF THE BUSINESS OF THE APPELLANT. FURTHER, ON THE SAME COUNT IT CANNOT BE SAID THAT T HIS COST WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE APPELLANTS BUSI NESS, IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION THE ADDITION OF RS.2,89,83,182 IS DE LETED. THERE IS NO APPLICABILITY OF SECTION 40(A)(IA) IN THIS CASE AS THIS IS A SHARING OF SALARY COST AND NOT PAYMENT FOR SERVICES BY THE APPELLANT TO HINDUSTAN LEVER LIMITE D. 25.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEA L BEFORE US. 26. AT THE TIME OF HEARING BEFORE US, THE LD. DR AP PEARING ON BEHALF OF REVENUE HAS CONTENDED THAT THE DETAILS CALLED FOR BY AO LIKE SA LARY, WAGES, BONUS ETC. INCLUDING THE COMMON COST ALLOCATION FROM HINDUSTAN LEVER AMOUNTI NG TO RS.2,89,83,182/- ARE NOT GIVEN TO THE AO. THE SUBMISSIONS OF ASSESSEE IS ONL Y THAT SUCH AN AMOUNT WAS AN APPORTIONMENT OF SALARY AS BORNE BY ASSESEE AS CONT ENDED BY AO. HE FURTHER SUBMITTED THAT THE ARGUMENTS MADE BEFORE THE LD. CI T(A) WHICH ARE INCORPORATED AT PAGES 11 AND 12 ARE NOT BEFORE THE AO. THEREFORE HE REQUESTED TO SET ASIDE THE MATTER TO THE FILE OF AO FOR RE-CONSIDERATION OF THE ISSUE AS PER LAW. 27. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE HAS SUBMITTED THAT THIS IS A CONTINUOUS PROCESS OF USIN G THE EMPLOYEES OF THE HOLDING COMPANY AND AO HIMSELF HAS ALLOWED U/S 143(3) OF TH E IT ACT FOR A.YR.2002-03. THE LD. AO HAS MENTIONED THAT THE LD. AR FILED LETTER D ATED 24.12.2007 STATING THAT SUCH AMOUNT WAS THE APPORTIONMENT OF SALARY AS BORNE BY ASSESSEE IS NOT FACTUALLY CORRECT. THE DETAILED SUBMISSIONS WHICH WERE PLACED BEFORE A O IN THE LETTER DATED 2.412.2007 ON THIS ISSUE ARE PLACED AT PAGE 86 OF THE PAPER BO OK. HE FURTHER SUBMITTED THAT THE SUBMISSIONS MADE BEFORE LD. CIT(A) ARE NOT FRESH SU BMISSIONS BUT TO COUNTER THE OBSERVATIONS MADE BY THE LD. AO. THEREFORE, HE REQU ESTED TO UPHELD THE ACTION OF LD. CIT(A). 28. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, WE CONSIDER IT FIT TO ABSTRACT THE SUBMISSIONS MADE BY ASSESSEE BEFORE THE LD. CIT(A) TO COUNTER THE ARGUMENTS OF L D. AO WHICH ARE AS UNDER :- 13 FIRSTLY, PAYMENT OF RS. 2,89,83,182 WAS MADE TOWA RDS SHARING OF COMMON EXPENSE OF SALARY BY THE APPELLANT COMPANY. THE EMPLOYEES OF H INDUSTAN LEVER LIMITED (HOLDING COMPANY) WERE WORKING UNDER THE SUBSIDIARY I.E. THE APPELLANT COMPANY ON A TIME- SHARING BASIS. THE APPELLANT COMPANY HAD NOT UTILIZ ED ANY PROFESSIONAL SERVICE THROUGH THIS AGREEMENT. MERELY USING THE EMPLOYEES OF HOLDI NG COMPANY ON A TIME SHARING BASIS CANNOT LEAD TO THE CONCLUSION THAT PAYMENT MADE IS IN THE NATURE OF PROFESSIONAL SERVICES COVERED BY SECTION 194J. HENCE THE AFORESAID PAYMEN T CAN IN NO CASE BE TREATED AS PAYMENT TOWARDS PROFESSIONAL SERVICE. SECONDLY, IT IS NOW A WELL SETTLED FACT THAT THE AB OVE THE PAYMENT OF RS.2,89,83,182 IS TOWARDS SALARY AND NOT IN NATURE OF PROFESSIONAL SE RVICES COVERED BY SECTION 194J.. TAX IS TO BE DEDUCTED AT SOURCE U/S. 192 WHEN PAYMENT I S MADE FOR SALARY. MOREOVER, SECTION 40(A)(/A) IS NOT ATTRACTED FOR PAYMENTS U/S 192. HE NCE, NO ADDITION OF RS. 2,89,83,182 SHOULD BE MADE. THIRDLY, CONCLUDING THAT EXPENSE OF RS.2,89,83, 182 WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT AND WAS EX CESSIVE OR UNREASONABLE, THE AO ACTED ON ASSUMPTION, CONJECTURE AND SURMISE AND ON ARBITRARY HYPOTHESIS AS NO PERTINENT EVIDENCE WAS ESTABLISHED TO PROVE THE AFORESAID CLA IM OF AO. LASTLY, THE APPELLANT IS A LOSS MAKING COMPANY AND IS NOT REQUIRED TO CLAIM FAKE EXPENSES TO CURB TAXES PAYABLE. MOREOVER, HLL IS A PROFIT MAKING HOLDING COMPANY. IF THE APPELLANT WOULD HAVE WANTED TO MAKE ANY MAL ADJ USTMENTS THEN IT WOULD NOT HAVE PAID SALARY TO THE EMPLOYEES. IN THE MEAN TIME, HLL WOULD HAVE REDUCED ITS TOTAL INCOME BY PAYING SALARY OF RS. 2,89,83,182 WHICH WA S SUPPOSED TO BE PAID BY THE APPELLANT COMPANY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AP PELLANT COMPANY FURNISHED MONTH- WISE BREAK-UP OF SALARY, WHICH WAS APPORTIONED BETW EEN THE HOLDING COMPANY AND THE APPELLANT COMPANY. MONTH AMOUNT (RS.) APRIL 2004 54,45,710.00 MAY 2004 28,70,216.00 JUNE 2004 28,41,539.00 JULY 2004 33,46,987.00 AUGUST 2004 28,76,412.87 SEPTEMBER 2004 28,04,063.00 OCTOBER 2004 32,04,928.00 NOVEMBER 2004 28,30,722.00 DECEMBER 2004 JANUARY 2005 27,62,604.00 FEBRUARY 2005 MARCH 2005 TOTAL 2,89,83,181.87 28.1. THE SUBMISSIONS MADE BEFORE AO IN LETTER DATE D 24.12.2007 WHICH ARE PLACED AT PAGE 86 OF THE PAPER BOOK ARE AS UNDER :- 4. COST SHARING OF RS.2,89183,182 BETWEEN HINDUSTA N LEVER LIMITED AND THE ASSESSEE COMPANY: IT IS SUBMITTED THAT HINDUSTAN LEVER LIMITED WAS A HOLDING COMPANY OF ROSSELL INDUSTRIES LIMITED. IN FACT, DUR ING THE FINANCIAL YEAR UNDER REFERENCE THE WHOLE ADMINISTRATIVE SET UP WAS HOUSED IN THE P REMISES BELONGING TO HINDUSTAN LEVER LIMITED. FURTHER, AFTER THE PROCESS OF VRS RO LLED ON IN ROSSELL INDUSTRIES LIMITED, 14 THE MORE AND MORE DUTIES AND THE EMPLOYEES OF HLL D ID FUNCTIONS OF MANAGEMENT AND ADMINISTRATION. IN ORDER TO RECORD THE CORRECT FINA NCIAL OUTLAY BY THE HOLDING COMPANY, THE PROPORTIONATE SHARE OF COST FOR PAYMENTS MADE T O HLLS PERSONNEL, WHICH WERE ATTRIBUTABLE TO ROSSELL INDUSTRIES LIMITED, THE HOL DING COMPANY ASKED THE ROSSELL INDUSTRIES LIMITED TO REIMBURSE THE SAID COST. THIS COST SHARING IN FACT HAS CORRECTLY DEPICTED THE FINANCIAL POSITIONS OF BOTH THE HOLDIN G COMPANY AS WELL AS THE SUBSIDIARY COMPANY, WHICH OTHERWISE COULD HAVE BENEFITED THE H LL IN TERMS OF TAXES PAID BY IT AND WITHOUT ANY VISIBLE AND IMMEDIATE ADVANTAGE ON ACCOUNT OF THE SAVING TO THE ASSESSEE COMPANY. 28.2. KEEPING IN VIEW OF THE ABOVE SUBMISSIONS AND THE FINDINGS OF LD. CIT(A) THAT AO HIMSELF HAS ALLOWED SIMILAR EXPENDITURE IN THE I MMEDIATELY TWO ASSESSMENT YEARS U/S 143(3) AND FURTHER OBSERVED THAT SUCH SHARING O F THE COST DOES NOT SHOW ANY TAX PLANNING. THEREFORE WE FIND NO INFIRMITY IN THE ORD ERS OF LD.CIT(A) TO BE INTERFERED WITH. WE CONFIRM THE SAME AND DISMISS THIS ISSUE OF THE REVENUE. 29. IN THE RESULT ITA NO.125/KOL/2011 OF THE REVENU E IS DISMISSED. 30. IN THE RESULT ALL THE THREE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 23.05.2012. SD/- SD/- , ,, , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 23.05.2012. R.G.(P.S.) '3 . ,4 5'4'6- COPY OF THE ORDER FORWARDED TO: 1. M/S.M.K.JOKAI INDIA LTD., 2/2, JUSTICE DWARAKANATH ROAD, KOLKATA-700020. 2 D.C.I.T., CIRCLE-4, KOLKATA. 3. THE C.I.T. 4. CIT(A)-IV, KOLKATA. 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA -4 ,/ TRUE COPY, '3%0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 15