M/s.Eastern Condiments P. Ltd, Idukki V. The ACIT, Cochin

ITA 137/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96778 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-02-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: R KRISHNAN
• Keywords: Capital asset; Depreciation; Earning of tax free income; Question of law; Commercial expediency; Revised return; Revenue expenditure; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO. 137/COCH/2015 ASSESSMENT YEAR : 2007-08 M/S. EASTERN CONDIMENTS (P) LTD., VI/91, EASTERN VALLEY, ADIMALI, IDUKKI DISTRICT. [PAN: VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI R. KRISHNAN, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 07/10/2015 DATE OF PRONOUNCEMENT 28/10/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE ARISES FROM THE OR DER OF THE LD. CIT(A)-II, KOCHI DATED 23/10/2014 FOR THE ASSESSMENT YEAR 2008 -09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN TREATING THE SOFTWARE EXPENSES OF RS.9,78,545/- AS CAPITAL E XPENDITURE AS AGAINST THE CLAIM OF REVENUE EXPENDITURE MADE BY THE APPELL ANT. 2) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN REJECTING THE PLEA OF THE APPELLANT THAT IT WAS A REPLACEMENT AND EXPENSES I.T.A. NO.137/COCH/2015 2 INCURRED ON UPDATING THE EXISTING SOFTWARE, SO MUCH SO EXPENDITURE IS REVENUE IN NATURE. 3) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN OVERLOOKING THE VARIOUS JUDGMENTS ON THE ISSUE THAT SOFTWARE EXPENDITURE IS REVENUE IN NATURE. 4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN SUSTAINING THE ADDITION OF RS.22,04,051/- MADE BY T HE ASSESSING OFFICER IN RESPECT OF ALLEGED DIVERSION OF FUNDS. SHE OUGH T TO HAVE NOTICED THAT THE ASSESSING OFFICER HAD ONLY CAST A DOUBT THAT DI VERSION OF FUNDS FROM FRESH LOANS CANNOT BE RULED OUT. INFACT, THERE WAS NO CATEGORICAL FINDING THAT BORROWED FUNDS HAVE BEEN DIVERTED. 5) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) WENT WRONG IN PUTTING HERSELF INTO THE SHOES OF THE APPELLANT AN IN CONCLUDING THAT HAD THE APPELLANT NOT MADE SUCH INVESTMENTS IN ITS SIST ER COMPANIES, FUNDS TO THAT EXTENT WOULD HAVE BEEN AVAILABLE WITH THE A PPELLANT AND LOAN REQUIREMENTS FOR HIS OWN BUSINESS WOULD HAVE BEEN R EDUCED TO THAT EXTENT AND ALSO THE CONSEQUENTIAL INTEREST PAYMENTS . THIS IS AGAINST THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CA SE OF SA BUILDERS 288 ITR 1 (SC). 6) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN HER CONCLUSION THAT THE ONUS IS ON THE APPELLANT TO EST ABLISH THAT THERE IS NO NEXUS BETWEEN THE BORROWED FUNDS AND FUNDS ALLEGED TO HAVE BEEN DIVERTED. IT IS SETTLED LAW THAT THE ONUS IS ON T HE DEPARTMENT TO PROVE THE NEXUS BETWEEN BORROWED FUNDS AND FUNDS ALLEGED TO HAVE BEEN DIVERTED. HAVING NOT DONE SO, THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) OUGHT TO HAVE ALLOWED THE CONTENTION O F THE APPELLANT. 7) THE DECISIONS QUOTED BY THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) ARE ON A DIFFERENT SET OF FACTS AND AR E NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CURRY POWDER AND OTHER CONDIMENTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30/09/2008 DECLA RING A TOTAL I.T.A. NO.137/COCH/2015 3 INCOME OF RS.103753671/- WHICH WAS SUBSEQUENTLY REV ISED TO TOTAL INCOME OF RS.104632346/- BY FILING A REVISED RETURN ON 05/10/2009. THE REVISED RETURN FILED WAS PROCESSED U/S. 143(1) ON 2 5/02/2010 AT RS.104632350/-. THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 143(2) OF THE ACT. THE ASS ESSMENT PROCEEDINGS CULMINATED INTO ORDER DATED 15/12/2010 PASSED BY TH E ASSESSING OFFICER. THE DISALLOWANCES WERE MADE BY THE ASSESSING OFFICE R AS STATED BELOW: 1) RS. 9,78,545/- ON ACCOUNT OF ERP EXPENSES IN THE NATURE OF SOFTWARE DEVELOPMENT. 2) RS.11,75,268/- ON ACCOUNT OF FREIGHT, FORWAR DING AND HANDLING EXPENSES. 3) RS.1,00,000/- ON ACCOUNT OF REPAIRS AND MAI NTENANCE OF VEHICLES. 4) RS.90,985/- ON ACCOUNT OF HIGHER RATE OF DE PRECIATION CLAIMED ON COMPUTER ACCESSORIES. 5) RS.22,04,051/- ON ACCOUNT OF PROPORTIONATE EXPENSES OUT OF INTEREST DEBITED IN THE SAID YEAR. 6) RS.42,926/- ON ACCOUNT OF DEPRECIATION ON LORRIES. 4. THE INCOME WAS ASSESSED BY THE ASSESSING OFFICE R AT RS.109226906/- VIDE THE AFORESAID ASSESSMENT ORDER. THE ASSESSEE CHALLENGED THE ADDITIONS BEFORE THE LD. CIT(A). I.T.A. NO.137/COCH/2015 4 5. HOWEVER, THE DISALLOWANCE WITH RESPECT TO EXP ENSES PERTAINING TO FREIGHT, FORWARDING AND HANDLING EXPENSES AND DISAL LOWANCE WITH RESPECT TO EXPENSES PERTAINING TO REPAIR AND MAINTENANCE OF VE HICLES WERE NOT CHALLENGED BEFORE THE LD. CIT(A). THE LD. CIT(A) VIDE HIS ORDER DATED 23/10/2014 PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. THE DISALLOWANCE OF ERP MAINTENANCE EXPENSES OF RS. 9,78,545/- AS SOFTWA RE DEVELOPMENT EXPENSES AND THE DISALLOWANCE OF RS.22,04,051/- ON ACCOUNT OF PROPORTIONATE DISALLOWANCE OUT OF INTEREST PAID TO THE SISTER CONCERNS WAS CONFIRMED BY THE LD. CIT(A). 6. IN THE PRESENT APPEAL BEFORE US, THE MAINLY TWO ISSUES HAVE BEEN CHALLENGED BEFORE US. WE SHALL FIRST TAKE UP GROUN D NOS. 1 TO 3 PERTAINING TO ADDITION OF RS.9,78,545/- AS CAPITAL EXPENDITURE AS AGAINST THE CLAIM OF REVENUE EXPENDITURE MADE BY THE ASSESSEE. THE CASE OF THE ASSESSEE IS THAT THE EXPENSES RELATED TO UPDATION OF THE SOFTWA RE SYSTEM IN THE ASSESSEE-COMPANY TO ORACLE 10G. THE SAME WAS REPLA CEMENT OF THE EXISTING SOFTWARE SYSTEM. ACCORDING TO THE ASSESS EE, IT WAS NOT A NEW SOFTWARE BUT EXPENSES ON UPDATING THE EXISTING SOFT WARE TO INCLUDE NEW FEATURES AND TO MAKE THEM COMPATIBLE TO THE NEW VER SION. THE LD. CIT(A) OBSERVED THAT THE SOFTWARE SYSTEM ORACLE 109G COULD BE UTILIZED FOR A COUPLE OF YEARS AND HENCE WOULD GIVE ENDURING BENEF IT TO THE ASSESSEE. I.T.A. NO.137/COCH/2015 5 ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS COUNT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO AND THE LD. CIT(A) HAVE NOT DENIED THE SUBMISSION MADE BY THE ASSESSEE THAT THE EXPENSES W ERE IN FACT MADE FOR SOFTWARE UPGRADATION WHEREIN THE PREVIOUS SOFTWARE OF ORACLE WAS REPLACED WITH ORACLE 10G SO AS TO MODERNIZE THE OPERATING SY STEM. WE DISAGREE WITH THE REASON GIVEN BY THE LD. CIT(A) THAT THE UP GRADATION OF THE SOFTWARE WOULD GIVE ENDURING BENEFIT TO THE ASSESSE E AND THEREFORE, IT HAS TO BE TREATED AS CAPITAL EXPENSE. THE EXPENDITURE WAS INCURRED IN THE PRESENT CASE IN THE ORDINARY COURSE OF BUSINESS. TH E EXPENDITURE INCURRED ON UPGRADATION, IMPROVEMENT, REMOVAL OF GLITCHES OF EXISTING SOFTWARE TO IMPROVE ITS EFFICIENCY IS TO BE TREATED AS REVENUE EXPENSE. THE CONCEPT OF ENDURING BENEFIT HAS BEEN EVOLVED BY VARIOUS JUDI CIAL PRONOUNCEMENTS. IN THIS CASE, EVEN IF THE NATURE OF EXPENSE IS ENDURIN G IN NATURE, IT HAS NOT RESULTED IN ACQUISITION OF CAPITAL ASSET AND IT HAS MERELY ENHANCED THE PRODUCTIVITY AND EFFICIENCY OF THE SYSTEM. 8. THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. M/S. SONATA SOFTWARE LTD. DATED 6 TH MARCH, 2012 (2012) 21 TAXMANN.COM.23 HAS HELD I.T.A. NO.137/COCH/2015 6 THAT THE EXPENDITURE FOR INDIGENIZATION OF SOFTWARE IS ALLOWABLE AS REVENUE EXPENDITURE. IT WAS HELD AS UNDER: IN SO FAR AS THE SIXTH QUESTION IS CONCERNED, THE TRIBUNAL HAS NOTED THAT THE ASSESSEE HAD UNDERTAKEN EXPENDITURE FOR INDIGEN IZATION OF SOFTWARE. THE TRIBUNAL NOTED THAT SOFTWARE IS A PRODUCT SUBJE CT TO HIGH OBSOLESCENCE. HAVING REGARD TO THE AFORESAID POSIT ION THE EXPENDITURE INCURRED ON INDIGENIZATION HAS CORRECTLY BEEN HELD TO BE ALLOWABLE AS REVENUE EXPENDITURE. HENCE NO SUBSTANTIAL QUESTION OF LAW WILL ARISE ON THIS FINDING. 9. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. M/S. ASAHI INDIA SAFETY GLASS LTD. IN I.T.A. NOS. 1110/2006 AN D 1111/2006 DATED 04/11/2011 HAS HELD AS UNDER: THE FACT THAT THE APPLICATION SOFTWARE WOULD HAVE TO BE UPDATED FROM TIME TO TIME BASED ON THE REQUIREMENTS OF THE ASSESSEE IN THE CONTEXT OF THE ADVANCEMENT OF ITS BUSINESS AND/OR I TS DIVERSIFICATION, IF ANY; THE CHANGES BROUGHT ABOUT DUE TO STATUTORY AMENDMENTS BY LAW OR BY PROFESSIONAL BODIES LIKE THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, WHICH ARE GIVEN THE RESPONSIB ILITY OF CONCEIVING AND FORMULATING THE ACCOUNTING STANDARDS FROM TIME TO TIME, AND PERHAPS ALSO, BY REASON OF THE FACT THAT EXPENSES M AY HAVE TO BE INCURRED ON ACCOUNT OF CORRUPTION OF THE SOFTWARE D UE TO UNINTENDED OR INTENDED INGRESS INTO THE SYSTEM OUGHT NOT GIV E A COLOUR TO THE EXPENDITURE INCURRED AS ONE EXPENDED ON CAPITAL ACC OUNT. GIVEN THE FACT THAT THERE ARE MYRIAD FACTORS WHICH MAY CALL F OR EXPENSES TO BE INCURRED IN THE FIELD OF SOFTWARE APPLICATIONS, IT CANNOT BE SAID THAT EITHER THE EXTENT OF THE EXPENSE OR THE EXPENSE BEI NG INCURRED IN CLOSE PROXIMITY, IN THE SUBSEQUENT YEARS, WOULD BE CONCLUSIVELY DETERMINATIVE OF ITS NATURE. THE AO HAS, IN OUR VI EW, ERRED PRECISELY FOR THESE VERY REASONS. I.T.A. NO.137/COCH/2015 7 10. IN VIEW OF THEREOF, GROUND NOS. 1 TO 3 RAISED B Y THE ASSESSEE ARE ALLOWED AND THE ADDITION OF RS.9,78,545/- ON ACCOUN T OF ERP EXPENSES IS DIRECTED TO BE DELETED. 11. GROUND NOS. 4 TO 7 IS WITH REGARD TO THE ADDITI ON OF RS.22,04,051/- IN RESPECT OF PROPORTIONATE DISALLOWANCE OF INTEREST P AID. IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE AVAILED FRESH LOANS F ROM BANKS TO THE TUNE OF RS.35.7 CRORES AND DEBITED RS.3.1 CRORES ON ACCOUN T OF INTEREST AND FINANCE CHARGES IN THE PROFIT AND LOSS ACCOUNT. ALSO, DURIN G THE YEAR, THE ASSESSEE MADE AN INVESTMENT OF RS.2.56 CRORES IN THE CONCERN S WHEREIN THE SAID ASSESSEE/DIRECTORS WERE SUBSTANTIALLY INTERESTED. A S AGAINST THE SAID INVESTMENTS, THE ASSESSEE EARNED DIVIDEND OF RS.500 0/- ONLY WHICH WAS CLAIMED AS EXEMPT INCOME. 12. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY RE LYING UPON THE PROVISIONS OF SECTION 36(1)(III) AND SECTION 14A OF THE I.T. ACT R.W. RULE 8D OF THE I.T. RULES. IT WAS FURTHER HELD THAT THE BU SINESS OF THE SISTER CONCERNS CANNOT BE CONSIDERED AS THE BUSINESS OF TH E ASSESSEE. THE ASSESSEE HAS SUBMITTED THAT THE INVESTMENT OF RS.2. 56 CRORES MADE BY IT WERE IN COMPANIES HAVING SIMILAR BUSINESS AS THAT O F THE ASSESSEE AND BY THE AFORESAID INVESTMENT, THE TURNOVER OF THE ASSES SEE INCREASED FROM RS.194.87 CRORES TO RS.274.77 CRORES, DURING THE YE AR. ACCORDING TO THE I.T.A. NO.137/COCH/2015 8 ASSESSEE, THE SAID INVESTMENT HAS FURTHER FACILITAT ED THE OVERSEAS BUSINESS OF THE ASSESSEE IN UAE. THE ASSESSEE RELIED UPON TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS ( 288 ITR 1). 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE DO NOT AGREE WITH THE SUB MISSIONS MADE BY THE ASSESSEE IN SUPPORT OF THE AFORESAID GROUNDS. THE INTEREST EXPENDITURE CAN BE ALLOWED ONLY IF THE SAME IS MADE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, AS PER SECTION 36(1)(III) OF THE ACT. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT THE ASSESSEE HAD ADVANCED INT EREST FREE LOANS TO ITS SISTER CONCERNS AND THE SAME WAS TO THE TUNE OF RS. 2.56 CRORES AND DURING THE SAME YEAR, THE ASSESSEE ALSO TOOK LOANS OF RS.3 5.7 CRORES ON WHICH INTEREST EXPENDITURE WAS CLAIMED. THE TEST IN THE PRESENT CASE WOULD BE WHETHER THE INTEREST FREE LOANS GIVEN TO SISTER CON CERNS WAS A MEASURE OF COMMERCIAL EXPEDIENCY. THE REASON GIVEN BY THE ASSE SSEE DOES NOT FULFIL THE AFORESAID TEST. THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE AS TO HOW BY THE INVESTMENT OF RS.2.56 CRORES, ITS BUSINE SS TURNOVER TOOK A BIG JUMP FROM RS.194.87 CRORES TO RS.274.77 CRORES. TH E ONUS IS ON THE ASSESSEE TO EXPLAIN THE AFORESAID POSITION. THE AS SESSEE HAS FAILED TO DEMONSTRATE THE LIVE BUSINESS LINK BETWEEN ITS COMP ANY AND ITS SISTER CONCERNS, AS TO HOW THE INVESTMENT IN ONE COMPANY I MPROVES THE BUSINESS OF OTHER COMPANY. THE REASONING GIVEN BY THE ASSES SEE IS BALD AND DOES I.T.A. NO.137/COCH/2015 9 NOT SATISFY THE TEST OF COMMERCIAL EXPEDIENCY. THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS (SUPRA) DOES NOT HELP THE ASSESSEE. THERE IS NO GENERAL PROPOSITION THAT INTE REST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE HAS ADVANCED INTE REST FREE LOANS TO ITS SISTER CONCERNS. THE COMMERCIAL EXPEDIENCY OF SUCH A DECISION HAS TO BE SEEN. IT IS APPOSITE TO REFER TO THE JUDGMENT OF T HE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S. RAHEJA DEVELOPMEN T CORPORATION IN I.T.A. NO. 661 OF 2007 DATED 18-08-2014 WHEREIN THE HONBL E HIGH COURT HAS HELD AS UNDER: THE EXPLANATION OFFERED BY THE ASSESSEE IS THAT, T HE INTEREST COULD NOT BE CHARGED DUE TO CERTAIN DISPUTES AMONG CERTAIN ME MBERS OF RAHEJA GROUP CONCERN. THE SAID EXPLANATION WAS NOT ACCEPTE D BY THE ASSESSING AUTHORITY AS WELL AS THE APPELLATE COMMIS SIONER. HOWEVER, THE TRIBUNAL WAS OF THE VIEW THAT THE JUDGMENT OF T HE APEX COURT IN S.A. BUILDERS CASE COMES TO THE RESCUE OF THE ASSES SEE. IN THE AFORESAID JUDGMENT, THE APEX COURT, HAS MADE IT CLE AR THAT IT IS NOT THEIR OPINION THAT IN EVERY CASE INTEREST ON BORROW ED LOAN HAS TO BE ALLOWED IF A ASSESSEE ADVANCES IT TO A SISTER CONCE RN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASES . IN THE SAID CASE, THE ASSESSEE RECEIVED PAYMENT FROM ITS CLIENTS AND IT DEPOSITED THE SAME IN THE ACCOUNT AND SUBSEQUENTLY, THE SAID AMOU NT WAS PAID TO THE SISTER CONCERN. NO INTEREST WAS CHARGED FOR TH E AMOUNTS SO ADVANCE TO THE SISTER CONCERN. IN THAT CONTEXT IT WAS HELD THAT THE ASSESSEE BORROWED THE FUND FROM THE BANK AND LENT I T TO THE SISTER CONCERN AS INTEREST FREE LOAN. THE TEST IN SUCH CA SE IS REALLY WHETHER THIS WAS DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY . IF THE INTEREST FREE LOAN WAS GIVEN TO THE SISTER COMPANY AS A COMM ERCIAL EXPEDIENCY, THEN SUCH INTEREST PAID ON SUCH CAPITAL COULD HAVE TO BE ALLOWED. AS THE AUTHORITIES AS WELL AS THE HIGH COURT HAS NOT C ONSIDERED FROM THE SAID ANGLE, THE APEX COURT REMANDED THE MATTER BACK TO THE TRIBUNAL TO CONSIDER THE CASE AFRESH. I.T.A. NO.137/COCH/2015 10 6. THEREFORE, IT IS CLEAR THAT INTEREST ON BORRO WED LOAN ADVANCED TO ITS SISTER CONCERN CANNOT BE CLAIMED AS DEDUCTION A UTOMATICALLY. IN THE INSTANT CASE, IT IS NOT THE CASE OF THE ASSESSEE TH AT THE AMOUNT WAS ADVANCED TO THE SISTER CONCERN FREE OF INTEREST. T HEIR SPECIFIC CASE IS THAT THEY DID NOT CHARGE INTEREST BECAUSE OF THE DI SPUTE THAT AROSE SUBSEQUENT TO THE LENDING. THE ASSESSEE WAS NOT A PARTY TO THE SAID DISPUTE. THE ASSESSEE WAS NOT THE PARTY TO THE SUIT AND ALSO TO THE ARBITRATION PROCEEDINGS IN WHICH AN AWARD WAS PASSE D . THE SISTER CONCERN HAS RETURNED A SUBSTANTIAL PORTION OF THE A MOUNT BORROWED. MERELY BECAUSE THEY GOT INTO LITIGATION AND SUFFERE D ARBITRATION AWARD IS NOT A JUSTIFICATION FOR NOT PAYING THE INTEREST FOR THE AMOUNT BORROWED. THE SISTER CONCERN GETTING INTO LITIGATIO N OR INVOLVING ITSELF IN A ARBITRATION PROCEEDINGS TO WHICH THE HOLDING COMP ANY IS NOWHERE RESPONSIBLE, CANNOT BE MADE A GROUND FOR ALLOWING D EDUCTION. THE UNDERSTANDING OF THE TRIBUNAL ON THE JUDGMENT OF TH E APEX COURT IS INCORRECT AND THE REASON ASSIGNED BY THE TRIBUNAL I S NOT SATISFACTORY. IT WAS NOT JUSTIFIED IN INTERFERING WITH THE WELL C ONSIDERED ORDER PASSED BY THE ASSESSING AUTHORITY AND THE APPELLATE AUTHOR ITY. THEREFORE, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 14. IN VIEW OF THE ABOVE, THE ADDITION OF RS.22 ,04,051/- MADE BY THE ASSESSING OFFICER HAS BEEN RIGHTLY CONFIRMED BY THE LD. CIT(A). THUS, GROUND NOS. 4 TO 7 RAISED BY THE ASSESSEE ARE DISMI SSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28-10-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 28TH OCTOBER, 2015 GJ COPY TO: I.T.A. NO.137/COCH/2015 11 1. M/S. EASTERN CONDIMENTS (P) LTD., VI/91, EASTERN VALLEY, ADIMALI, IDUKKI DISTRICT. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(2), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX,KOCHI. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN