DCIT, New Delhi V. M/s Goetze (India) Ltd., New Delhi

ITA 1375/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74160 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-01-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 17-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K KAPOOR
• Assessee Lawyers: SATPAL SINGH
• Keywords: Revision of order; Depreciation; Unabsorbed depreciation; Revenue expenditure
• Section: 143(3); 32; 263

Judgement Text

ITA NOS. 1375 & 1011/D EL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEM BER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A .NO. 1375 /DEL/2011(AY-2003-04) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-15, NEW DELHI (APPELLANT) VS M/S GOETZE(INDIA) LTD. A-26/3, MOHAN CO-OPERATIVE IND. ESTATE, MAIN MATHURA ROAD, NEW DELHI-110044. (RESPONDENT) ( I.T.A .NO.-1011/DEL/2011 A.Y 2003-04) APPELLANT BY SH. PRADEEP DINODIA, C.A & R. K. KAPOOR, CA RESPONDENT BY SH. SATPAL SINGH, SR. DR ORDER PER CHANDRA MOHAN GARG, JM THESE APPEALS HAVE BEEN PREFERRED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-III, DELHI VIDE DATED 16/12/20 10 IN APPEAL NO. 121/2007- 08 FOR THE ASSESSMENT YEAR 2003-04. SINCE BOTH THE APPEALS BY THE ASSESSEE AS WELL AS BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ONE ORDER OF CIT (A), THEREFORE, FOR THE SAKE OF CONVENIENCE AND CLARITY IN THE FINDINGS THESE APPEALS ARE BEING CLUBBED AND WE ARE DECIDING THEM BOTH TOGETHE R BY THIS CONSOLIDATED ORDER. GROUNDS OF THE REVENUE IN ITA NO. 1375/DEL/2011 M/S GOETZE(INDIA) LTD. A-26/3, MOHAN CO-OPERATIVE IND. ESTATE, MAIN MATHURA ROAD, NEW DELHI-110044. (APPELLANT) VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-15, NEW DELHI (RESPONDENT) ITA NOS. 1375 & 1011/D EL/2011 2 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATION ON ASSETS OF THE VEG ETABLE OIL DIVISION BY IGNORING THE FACT THAT THIS BUSINESS W AS NOT CONDUCTED DURING THE YEAR AND THE BASIC CONDITION O F SECTION 32 THAT ASSETS MUST BE USED FOR THE PURPOSE OF BUSINES S IS NOT SATISFIED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS ERRED IN DELETING THE ADDITION OF PRIOR PERIOD EXPE NSE OF RS.1,36,51,602/- IN LAW AND ON MERITS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS ERRED IN TREATING THE EXPENDITURE OF RS.92.50 LAKHS INCURRED ON PROCESSING FEES PAID TO BANKS AND FINANCIAL INSTITU TIONS AS REVENUE EXPENDITURE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS DELETED THE ADDITION OF RS.1,02,75,000/-. ON ACCOU NT OF COMMISSION PAID FOR PROCESSING LOANS FROM BANKS/FIN ANCIAL INSTITUTIONS WITHOUT APPRECIATING THE FACT THAT THE RE IS NO EVIDENCE ON RECORD THAT RECIPIENT OF THE COMMISSION ACTUALLY LIAISONED WITH BANKS/FINANCIAL INSTITUTIONS TO ARRANGE THE FINANCE FOR THE ASSESSEE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS ERRED IN NOT REMANDING THE ADDITION ON ACCOUNT OF E XCHANGE RATE FLUCTUATION BACK TO THE AO AND IN GIVING DIRECTIONS TO THE AO IN VIOLATION OF SECTION 251. 6.(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT REMANDING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF BROUGHT FORWARD LOSSES AND DEPRECIA TION TO THE AO WHEN THE MATTER HAS NOT BEEN VERIFIED BY THE CIT(A) HIMSELF. (B) THE CIT(A) HAS ERRED IN NOT CONSIDERING THE ENT IRE FACTS OF THE CASE AS WELL ON THE APPLICABILITY OF SECTION 79 & 8 0 IN AS MUCH AS THE LOSS RETURN FILED WAS BELATED. 7.(A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLATE CRAVES LEAVE TO ADD, ALTER OR AMEND A NY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. GROUND NO. 1 OF THE REVENUE. ITA NOS. 1375 & 1011/D EL/2011 3 3. APROPOS GROUND NO.1, THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE CIT (A) HAS ERRED IN ALLOWING DEPRECIATION ON A SSETS OF VEGETABLE OIL DIVISION BY IGNORING THE FACT THAT THIS BUSINESS WAS NOT CON DUCTED DURING THE YEAR AND THE BASIC CONDITION OF SECTION 32 OF THE INCOME TAX ACT 1961(FOR SHORT THE ACT), IS THAT THE ASSET MUST BE USED FOR THE PURPOSE OF BUSINESS WHICH IS NOT SATISFIED BY THE ASSESSEE TO SUPPORT HIS CLAIM OF DEPRECIATION. REP LYING TO ABOVE, THE LD. ASSESSEES REPRESENTATIVE DRAWN OUR ATTENTION TOWAR DS PAGE NO. 5 PARA IV OF THE IMPUGNED ORDER AND SUBMITTED THAT THIS ISSUE CAME T O BE EXAMINED FALL OF US TIME BEFORE ITAT IN ASSESSEES OWN CASE IN ASSESSMENT YE AR 2000-01 IN ITA NO. 2590/DEL/2004 AND ALSO SUBSEQUENTLY IN ITA NO. 410/ DEL/2007 AND ITA NO. 1032/DEL/2007 AND THE ITAT HAS ALLOWED THE CLAIM OF DEPRECIATION AFTER EXAMINATION OF VARIOUS ASPECTS. THE AR FURTHER SUB MITTED THAT THE CIT(A) HAS FOLLOWED ITATS ORDERS AND ALLOWED THE RELIEF FOR T HE ASSESSEE. 4. AFTER CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS , WE HOLD THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ORDERS OF THIS TRIBUNAL IN ASSESSEES OWN CASES. SINCE, WE HAVE PERUSED ITATS ORDERS AV AILABLE FROM PAGE NO. 79 TO PAGE NO. 105 OF THE PAPER BOOK WHEREIN IT HAS BEEN HELD THAT ONCE AN ASSET FORMS A PART OF BLOCK OF ASSETS AND THE BUSINESS HAVING BEE N CARRIED ON, THE DEPRECIATION IS ALLOWABLE ON THE WRITTEN DOWN VALUE (WDV) COMPRISIN G OF BLOCK OF ASSETS SOLE ON AS THE BUSINESS IS BEING CARRIED ON BY THE ASSESSEE THEN THE CONDITION OF USER OF A PARTICULAR ASSET IS NOT APPLICABLE UNDER THE CONCEP T OF ALLOWING DEPRECIATION ON BLOCK OF ASSETS AS ONCE THE ASSET FORMS A PART OF B LOCK OF ASSETS IT LOSES ITS INDIVIDUAL WDV OR IDENTITY. ACCORDINGLY, WE HOLD T HAT THE CIT(A) RIGHTLY ALLOWED RELIEF FOR THE ASSESSEE AND ORDERS OF THE ITAT HAVE NOT BEEN SET ASIDE OR MODIFIED BY ANY HIGH FORUM. WE, THEREFORE, OF THE FIRM OPIN ION THAT WE ARE UNABLE TO SEE ANY AMBIGUITY OR ANY OTHER VALID REASON TO INTERFER E WITH THE FINDINGS OF THE ITA NOS. 1375 & 1011/D EL/2011 4 CIT(A) IN THIS REGARD. THEREFORE, UNDER THESE CIRC UMSTANCES, GROUND NO.1 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. GROUND NO. 2 OF THE REVENUE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF PRIOR PERIOD EXPENSES OF R S.1,36,51,602/- IN LAW AND ON MERITS. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHE R SUBMITTED THAT THE ASSESSEES CLAIM OF RS.1,06,16,692/- ON ACCOUNT OF RENT AND CO MMON SHARING EXPENDITURE PAID TO ESCORTS LTD WHICH WAS CLAIMED TO BE IN DISP UTE, THEREFORE, THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE. THE LD. DEPARTMENTAL R EPRESENTATIVE FURTHER SUBMITTED THAT THE EXPENSES HAS TO BE CHARGED IN TH E YEAR IN WHICH IT WAS INCURRED IN A MERCANTILE SYSTEM OF ACCOUNTING THE EXPENSES C LAIMED BY THE ASSESSEE WERE INCURRED IN EARLIER YEARS AND CANNOT BE ALLOWED IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE AO RIGHTLY MADE ADDITION WHICH WAS D ELETED BY THE CIT(A) ON WRONG PREMISE. 6. REPLYING TO THE ABOVE, THE LD. AR DRAWN OUR ATTE NTION TOWARDS PAGE NO. 104 TO 106 OF THE PAPER BOOK OF THE ASSESSEE WHEREI N IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 IN ITA NO. 1032/DEL/200 7 FILED BY THE DEPARTMENT, THE ITAT C BENCH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE BILL OF THE CONTRACTOR WAS RAISED DURING THE RE LEVANT ASSESSMENT YEAR, THEREFORE, THE EXPENSES RELATED TO CURRENT YEAR WAS ALLOWABLE. DURING THE COURSE OF HEARING, NOTHING HAS BEEN BROUGHT ON RECORD TO SUBS TANTIATE THE CONTENTION OF THE REVENUE THAT THE SAID EXPENDITURE WAS NOT CRYSTALLI ZED IN THE YEAR UNDER CONSIDERATION. IN ABSENCE OF ANY SUCH MATERIAL, WE ARE UNABLE TO SEE ANY INFIRMITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMP UGNED ORDER IN THIS REGARD DELETING THE ADDITION. ITA NOS. 1375 & 1011/D EL/2011 5 7. WE PERUSED DETAILS OF 1.36 CRORES AS WELL AS LAT ER FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS (PAPER BOOK PAGE NO. 106 TO 111). THE AR HAS DRAWN OUR ATTENTION TOWARDS SETTLEMENT DEED BETWEEN ESCOR TS LTD AND THE ASSESSEE (PAGE BOOK PAGE NO. 117 & 118) DATED 07/10/2002 WHEREIN E SCORTS LTD AND ASSESSEE AGREED FOR RENT SHARING FROM 1 ST APRIL 1998. WE ALSO PERUSED COPY OF THE ELECTRICITY BILLS OF FACTORY WHICH WAS ALSO SETTLED IN THE YEAR 2002 (PAPER BOOK PAGE NO. 115 & 116). THE LD. AR PLACED RELIANCE ON THE VARIOUS DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI INCLUDIN G DECISIONS IN THE CASE OF CIT VS. MODIPON LTD, 334 ITR 102, CIT VS. EXXON MOBIL L UBRICANTS PVT.LTD 328 ITR 17, CIT VS. JAGATJIT INDUSTRIES LTD 194 TAXMAN 158 AND DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. REALEST BUILDE RS & SERVICES LTD 307 ITR 202 (SC) AND CIT VS. GALAXO SMITHKLINE ASIA PVT. LT D 195 TAXMAN 35 (SC). THE AR SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE EXPENSES HOLDING THE SAME OF THE NATURE OF PRIOR PERIOD EXPENSES, THE SAME WE RE HELD TO BE NOT PROPER AND HELD TO BE ALLOWED IN THE YEAR IN WHICH SUCH EXPENS ES HAVE BEEN INCURRED AND CRYSTALLIZED. THE AR DRAWN OUR ATTENTION TOWARDS O RDER OF COMMISSIONER OF INCOME TAX, DELHI-IV DATED 22/12/2004 (PAPER BOOK P AGE NO. 121 TO 123) AND SUBMITTED THAT IN VIEW OF CATEGORICAL FINDINGS OF T HE ADMINISTRATIVE CIT(A) IN THE ORDER PASSED U/S 263 OF THE ACT. IT HAS BEEN ACCEP TED THAT AS PER REGULAR SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE THE DISPUTED EX PENSES ARE ALWAYS CLAIMED IN THE YEAR IN WHICH THE SAME ARE QUANTIFIED IN VIEW O F ABOVE WE INCLINED TO HOLD THAT SINCE THE LIABILITY IN RESPECT OF ENTIRE EXPENDITUR E AROSE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE SAME CANNOT BE DISAL LOWED BY HOLDING THEM TO BE PRIOR PERIOD EXPENDITURE. HENCE, THE CIT(A) RIGHTL Y GRANTED RELIEF FOR THE ASSESSEE AND WE DECLINE TO INTERFERE WITH THE IMPUGNED ORDER IN THIS REGARD. ON THE BASIS OF AFOREMENTIONED DISCUSSIONS, GROUND NO. 2 OF THE REV ENUE BEING DEVOID OF MERITS IS DISMISSED. ITA NOS. 1375 & 1011/D EL/2011 6 GROUND NO. 3 OF THE REVENUE. 8. APROPOS GROUND NO. 3 THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE CIT(A) HAS ERRED IN TREATING THE EXPENDITURE OF RS.92.50 LAKHS INCURRED OF PROCESSING FEES PAID TO BANKS AND FINANCIAL INSTITU TIONS AS REVENUE EXPENDITURE. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITT ED THAT THE PROCESSING FEES EXPENSES ONE TO BE CAPITALIZED AND THE AO RIGHTLY M ADE ADDITION IN THIS REGARD. THE AR VEHEMENTLY CONTENDED THAT THIS ISSUE HAS BEE N COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT VS. SHRI MEENAKSHI MILLS LTD 290 ITR 107 (MADRAS) AND SUBMITTED THAT THE PROCESSING FEE PAID TO BANKS AND FINANCIAL INSTITUTIONS FOR OB TAINING LOAN TO AS A REVENUE EXPENDITURE AND IT SHOULD HAVE BEEN ALLOWED U/S 37( 1) /36(1)(III) OF THE ACT. THE AR FURTHER SUBMITTED THAT THE HONBLE JURISDICTIONA L HIGH COURT OF DELHI IN THE CASE OF CIT VS. JAI PARABOLICS SPRINGS LTD 172 TAXM AN 258(DELHI) HAS HELD THAT THE DEFERRED REVENUE EXPENDITURE IS AN ACCOUNTING C ONCEPT AND IT DOES NOT COME IN THE WAY OF ALLOWING EXPENSES OF REVENUE NATURE. 9. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS AND CONTENTIONS AND FROM IMPUGNED ORDER WE OBSERVE THAT THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE DELETING THE ADDITION ON THE FOLLOW ING OBSERVATIONS AND FINDINGS. I HAVE CAREFULLY CONSIDERED THE AOS ORDER, APPEL LANTS SUBMISSIONS AND THE REMAND REPORT OF THE AO ON THIS ISSUE. THE INCURRING OF EXPENDITURE WHOLLY AND EXCLUSIVELY FOR PURPOSES OF BUSINESS IS NOT IN DISPUTE. THIS UPFRONT PAYMENT OF FEES HAS BEEN MAD E TO BANKS AND FINANCIAL INSTITUTIONS AS PER AN AGREEMENT. THE BA NKS CHARGE THESE FEES MORE IN THE NATURE OF PROCESSING CHARGES ETC WHENEV ER THEY HAVE LOANS TO THE BORROWERS. THE DEFINITION OF INTEREST U/S 2( 28A) OF THE ACT ALSO INCLUDES THEREIN ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF MONIES BORROWED OR DEBIT INCURRED OR IN RESPECT OF ANY CRE DIT FACILITY WHICH HAS NOT BEEN UTILIZED. THEREFORE, IT IS CLEAR THAT TH IS EXPENDITURE IS AKIN TO INTEREST. IN FACT, FOR THE PURPOSE OF INCOME TAX A CT, IT IS INTEREST. INTEREST ITA NOS. 1375 & 1011/D EL/2011 7 UNDER THE INCOME TAX ACT IS ALLOWED U/S 36(1) (III) WHOLE OF THIS INTEREST WAS ALLOWABLE AS LONG AS IT WAS PAID IN RESPECT OF BUSINESS OR PROFESSION. A PROVISO WAS ADDED BY FINANCE ACT (2003) WITH EFFE CT FROM 1/4/2004 RELEVANT TO ASSESSMENT YEAR 2004-05 WHICH IS NOT AP PLICABLE TO THE YEAR UNDER CONSIDERATION. THEREFORE, IN MY OPINION, ONC E THE FACTS ARE NOT IN DISPUTE THAT THIS UPFRONT FEE WAS PAID FOR OBTAININ G A LOAN FOR THE PURPOSE OF BUSINESS, THEN IT COULD NOT BE DISALLOWED U/S 36 (1)(III) OF THE ACT. 10. IN VIEW OF ABOVE, WE OBSERVE THAT WHEN THE PROC ESSING FEE WAS PAID FOR OBTAINING A LOAN FOR THE PURPOSE OF BUSINESS THEN I T IS A REVENUE EXPENDITURE AND THE SAME COULD NOT BE DISALLOWED HENCE THE CIT (A) RIGH TLY DELETED THE ADDITION IN THIS REGARD. WE ARE UNABLE TO SEE ANY AMBIGUITY OR PERV ERSITY IN THE IMPUGNED ORDER THUS GROUND NO. 3 OF THE REVENUE BEING DEVOID OF ME RITS IS DISMISSED. GROUND NO. 4 OF THE REVENUE. 11. APROPOS GROUND NO.4 THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT CIT(A) HAS DELETED THE ADDITION OF RS.1,02,75,000/- ON ACCOUNT OF COMMISSION PAID FOR PROCESSING LOANS FROM BANKS/FINANCIAL INST ITUTIONS WITHOUT APPRECIATING THE FACT THAT THERE WAS NO EVIDENCE ON RECORD THAT THE RECIPIENT OF THE COMMISSION ACTUALLY LISIONED WITH BANKS/FINANCIAL INSTITUTIONS TO ARRANGE THE FINANCE FOR THE ASSESSEE. THE DR FURTHER SUBMITTED THAT THE AO RIG HTLY HELD THAT THESE AGENTS WERE NOT REQUIRED AND ON ENQUIRIES MADE FROM BANKS IT WAS DENIED BY THE BANKERS THAT ANY PERSON OTHER THAN EMPLOYEES OF THE ASSESSE E COMPANY WAS INVOLVED IN SYNDICATING THE BANK LOANS. THE DR ALSO CONTENDED THAT THE AO RIGHTLY CONCLUDED THAT NO SERVICES WERE RENDERED BY THESE AGENTS. TH E DR VEHEMENTLY CONTENDED THAT THE CIT(A) WRONGLY HOLD THAT THE PAYMENT OF BR OKERAGE WAS GENUINE AND NEEDS TO BE ALLOWED. 12. REPLYING TO THE ABOVE, THE LD. AR SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT THE CIT(A) HAS GIVEN A FACTUAL FINDI NG THAT THE BROKERS HAD RENDERED SERVICES AND THESE ARE THE PARTIES WHICH HAVE THEIR PERMANENT ACCOUNT NOS. (PAN) AND OTHER TAX PARTICULARS. THE AR FURTHER CONTENDE D THAT THESE FACTUAL FINDINGS ARE ITA NOS. 1375 & 1011/D EL/2011 8 ACCEPTABLE UNLESS THE SAME ARE PROVED TO BE FALSE A ND AWAY FROM TRUTH. THE AR ALSO CONTENDED THAT THE TDS HAS BEEN DEDUCTED FROM THE PAYMENT OF BROKERAGE AND OF PAYMENTS HAVE BEEN MADE THROUGH ACCOUNTS PAYEE C HEQUES TO THE BROKERS AND THE BROKERS ARE TAX PAYING ENTITIES HAVING THEIR PA N NO. THE AR DRAWN OUR ATTENTION TOWARDS PAGE NO. 62 OF THE PAPER BOOK AND SUBMITTED THAT THE PAYMENT OF BROKERAGE WAS BASED ON SUCCESS OF LOANS INDICATION AND ONLY AN UPON SANCTION/RECEIVED OF LOAN, THE BROKERAGE WAS PAID, THEREFORE, THE CORRESPONDENCE BETWEEN THE ASSESSEE AND THE BROKERS ESTABLISH REND ERING OF SERVICES TO PROCURE LOANS. WE ALSO OBSERVE THAT THE AO HAS NOT DISPUTE D A FACT THAT THE ASSESSEE ACTUAL AVAILED HEAVY AMOUNTS OF LOANS DURING THE YEAR. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE ARE OF THE VIEW THAT WHEN ONCE THE ASSESSSEE HAS ESTABLISHED THAT THE PARTIES ARE GENUINE AND SERVICES HAVE BEEN REND ERED TO THE ASSESSEE THEN HOW THE SERVICES ARE TO BE UTILIZED IS A PREROGATIVE OF THE BUSINESSMAN AND THE DEPARTMENT CANNOT SIT IN THE CHAIR OF THE BUSINESSM AN TO DECIDE HOW TO CONDUCT BUSINESS. IN THIS REGARD, WE RESPECTFULLY FOLLOW T HE DECISIONS OF HONBLE SUPREME COURT INCLUDING DECISION IN THE CASE OF S.A BUILDER S LTD VS. CIT 288 ITR 1 (SC) AND SESSION. J. DAVID & CO. VS. CIT 118 ITR 261 (S C). 13. FROM THE IMPUGNED ORDER, WE ALSO OBSERVE THAT T HE ASSESSEE HAS SUBMITTED DETAILS OF BROKERAGE AS WELL AS AMOUNT OF LOAN RECE IVED AND THE NAME OF THE BANK OF FINANCIAL INSTITUTION FROM WHERE THE LOANS WERE OBTAINED. THUS, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) RIGHT HOLD THAT THE RESPECTIVE PROGRESS RENDERED SERVICES TO THE ASSESSEE FOR OBTAINING HUGE AMOUNTS OF LOANS FROM BANKS AND FINANCIAL INSTITUTIONS. THEREFORE, THE BROKERAGE E XPENSES INCURRED IN THIS REGARD HAS TO BE ALLOWED AS REVENUE EXPENDITURE AND THE CIT(A) RIGHTLY ALLOW THE SAME BY DELETING THE IMPUGNED ADDITION. UNDER THESE CIRCUM STANCES, WE HOLD THAT GROUND NO. 4 OF THE REVENUE IS NOT SUSTAINABLE AND THE SAM E IS DISALLOWED BEING WITHOUT HAVING SUBSTANCE. ITA NOS. 1375 & 1011/D EL/2011 9 GROUND NO. 5 OF THE REVENUE. 14. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE CIT(A) HAS ERRED IN REMANDING THE ADDITION ON ACCOUNT OF EXCHANGE RATE FLUCTUATION BACK TO THE AO AND GIVEN DIRECTIONS TO THE AO WHICH ARE VIOLATIVE OF S ECTION 251 OF THE ACT. THE DR HAS DRAWN OUR ATTENTION TOWARDS PROVISIONS OF SECTI ON 251 OF THE ACT AND SUBMITTED THAT THE CIT(A) IS NOT EMPOWERED TO REMAN D OR RESTORE THE ISSUE TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS. REPLYING T O THE ABOVE, THE LD. AR SUBMITTED THAT THE POINT OF THE REVENUE IS NOT CLEA R WHETHER THE DEPARTMENT IS AGGRIEVED OVER THE REMANDING OF THIS MATTER TO THE AO OR WANTED THE MATTER TO BE REFERRED BACK. THE AR FURTHER SUBMITTED THAT THE A SSESSEE HAS DISALLOWED A SUM OF RS.64 LAKHS IN THE ASSESSMENT YEAR 2002-03 ON ACCOU NT OF EXCHANGE RATE FLUCTUATION AND HAD CLAIMED THIS AMOUNT AS DEDUCTIO N IN THE ASSESSMENT YEAR 2003-04 ON PAYMENT BASIS. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSION WE OBSERVE THAT THE CIT(A) HAS DISCUSSED THIS ISSUE AT PAGE NO. 11 IN PARA VIII WHEREIN THE CIT(A) HAS DIRECTED TO ALLOW THIS AMOUNT AFTER VERIFICATION OF FACTS. THE AR SUBMITTED THAT THE POWER TO CONFIRM AND UPHELD ALSO INCLUDES VERIFICATION OF CERTAIN FACTS AT THE END OF AO. 15. FROM COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2002-03 WHICH IS AVAILABLE AT PAGE 191 TO 192 OF THE PAPER BOOK, WE CLEARLY OBSERVE THAT THE ASSESSEE HAS ADDED BACK A SUM OF RS. 64 LAKHS IN TH E COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2002-03. FURTHER FROM PAGE 189 TO 190 OF THE PAPER BOOK, WE OBSERVE THAT DEDUCTION OF RS.64 LAKHS HAS BEEN C LAIMED ON PAYMENT BASIS DURING THE A.Y 2003-04. THUS, THE ACTION OF THE CI T(A) ON THIS ISSUE IS JUSTIFIED WHICH IS BASED ON PROPER ANALYSIS OF FACTS. UNDER THESES CIRCUMSTANCES, THE CIT(A) DIRECTED THE AO TO ALLOW THE RELIEF SUBJECT TO SOME VERIFICATION OF CERTAIN FACTS AND THE WE ARE UNABLE TO SEE ANY PERVERSITY, AMBIGUITY OR ANY OTHER VALID ITA NOS. 1375 & 1011/D EL/2011 10 REASON TO INTERFERE WITH THE SAME. ACCORDINGLY, GR OUND NO.5 OF THE REVENUE IS ALSO DISMISSED. GROUND NO. 6 (A) AND 6(B) OF THE REVENUE . 16. APROPOS THESE GROUNDS, THE LD. DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE CIT(A) HAS ERRED IN NOT CONSIDERING THE ENTIRE FACTS OF THE CASE AS WELL AS APPLICABILITY OF SECTION 79 & 80 OF THE ACT AS MUCH AS THE LOSS RETURN FILED BY BELATED. THE DR FURTHER CONTENDED THAT THE CIT(A) SHOULD HAVE REMAND THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF BROUGHT FORWARD LOSES AND DEPRECIATION TO THE FILE OF AO WHEN THE MATTER HAS NOT BEEN VERIFIED BY THE CIT(A) HIMSELF. THE AR REPLIED THAT THE DEPARTMENT CANNOT MADE A NEW CASE WHICH WAS NOT DISPUTED BY THE AO DURING THE ASSESSMENT PROCEE DINGS. THE AR SUBMITTED A COPY OF THE ORDER OF EFFECT GIVING TO THE APPEAL OR DER DATED 27/2/2012 PASSED U/S 250 READ WITH 143(3) OF THE ACT WHEREIN SET OFF OF BROUGHT FORWARD LOSES AND UNABSORBED DEPRECIATION HAS BEEN ALLOWED FOR THE AS SESSEE. THE AR FURTHER SUBMITTED THAT THE ISSUE OF ALLOWABILITY OF BROUGHT FORWARD LOSSES AND DEPRECIATION HAS NOT BEEN AGITATED OR DISPUTED BY THE ASSESSING OFFICER NEITHER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS NOR DURING THE AFFE CT GIVING ASSESSMENT ORDER, THEREFORE, THE REVENUE CANNOT RAISE THIS GROUND IN THIS APPEAL. 17. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND CONTENTIONS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS NOT RAISED OR DISPUTED THE ISSUE OF BROUGHT FORWARD LOSES AND UNABSORBED DEPRECIATIO N AND THE REVENUE IS NOT ALLOWED TO CREATE OR RE-OPEN THE ISSUE WHICH WAS NO T AN ISSUE OF DISPUTE BEFORE THE AUTHORITIES BELOW. THEREFORE, GROUND NO. 6 (A)AND 6(B) OF THE REVENUE ARE ALSO DISMISSED. GROUND NO. 7 (A) AND 7(B) OF THE REVENUE. 18. THESE GROUNDS OF THE REVENUE ARE OF GENERAL IN NATURE WHICH NEED NO ADJUDICATION AND WE ALSO DISMISS THE SAME. ITA NOS. 1375 & 1011/D EL/2011 11 ITA NO. 1011/DEL/2011 OF THE ASSESSEE . 19. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE AS SESSEE DO NOT WANT TO PRESS GROUND NO. 1, 1.1 AND 2. ACCORDINGLY, GROUND NO. 1 , 1.1 AND 2 ARE DISMISSED AS NOT PRESSED. GROUND NO. 4 OF THE ASSESSEE IS OF GE NERAL IN NATURE WHICH NEEDS NO ADJUDICATION. WE ALSO DISMISS THE SAME. THE REMAI NING GROUND NO. 3, 3.1, 3.2 AND 3.3 ARE RELATED TO THE ONE ISSUE WHICH READ AS UNDER:- .3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW A ND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE IN CONFIRMING THE ADDITION OF RS.1,56,85,383/- ON ACCOUNT OF PROVISIONS MADE BY THE APPELLANT TOWA RDS VARIOUS ROUTINE EXPENSES AT THE END OF THE YEAR. 3.1 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN HOLDING THAT THE PROVISIONS REPRESENTED CONTINGENT LIABILI TY. 3.2 THAT THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE PROVISIONS MADE AT THE YEAR END TOWARDS VARIOUS EXPENSES ARE LIAB ILITIES WHICH HAVE ACTUALLY ACCRUED TO THE APPELLANT AND PERTAINED TO T HE YEAR UNDER CONSIDERATION AND WERE LEGALLY AND PROPERLY ALLOWABLE UNDE R THE LAW. 3.3 THAT THE LD. CIT(A) HAS GROSS ERRED IN LAW IN CON FIRMING THE ADDITION INSPITE OF THE FACT THAT MOST OF SUCH PROVISIONS HA VE BEEN PAID IMMEDIATELY AFTER THE CLOSES OF THE YEAR, FOR WHICH NECESSARY EVIDENCES WERE FILED BEFORE THE AO/CIT(A). 20. APROPOS GROUND NO. 3, THE LD. AR SUBMITTED THAT THE CIT(A) HAS GROSSLY ERRED IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ADDITION OF RS.1,56,85,383/- ON ACCOUNT OF PROVISIONS MADE BY T HE ASSESSSEE TOWARDS VARIOUS ROUTINE EXPENSES AT THE END OF THE YEAR. THE AR FU RTHER CONTENDED THAT THE CIT (A) WRONGLY HOLD THAT THE PROVISIONS REPRESENTED CONTIN GENT LIABILITY. THE AR FURTHER CONTENDED THAT THE CIT(A) OUGHT TO HAVE HELD THAT T HE PROVISIONS MADE AT THE END OF YEAR TOWARDS VARIOUS EXPENSES ARE LIABILITIES WH ICH HAVE ACTUALLY BEING OCCURRED TO THE ASSESSEE AND PERTAIN TO THE YEAR UNDER CONSI DERATION AND WERE LEGALLY AND PROPERLY ALLOWABLE AS PER FACTS AND LAW. THE AR ALS O CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION IN SPI TE OF THE FACT THAT THE MOST OF SUCH ITA NOS. 1375 & 1011/D EL/2011 12 PROVISIONS HAVE BEEN PAID IMMEDIATELY AFTER THE CLO SE OF YEAR FOR WHICH NECESSARY EVIDENCES WERE FILED BEFORE BOTH AUTHORITIES BELOW. 21. REPLYING TO THE ADDITION THE LD. DR SUBMITTED T HAT WHEN THE PROVISIONS FOR EXPENSES MADE BY THE ASSESSEE WERE MADE ON AN ESTIM ATED BASIS THEN THE AO RIGHTLY DISALLOWED THESE EXPENSES BY HOLDING THE SA ME THAT THE PROVISIONS REPRESENTED CONTINGENT LIABILITY AND THEREFORE NOT ALLOWABLE, THE DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE CIT(A) RIGHTLY UPHELD THE DISALLOWANCE ON ACCOUNTS OF PROVISIONS. THE DR FUR THER CONTENDED THAT WHERE THE LIABILITY HAS CRYSTALLIZED THE PROVISIONS MADE FOR SUCH CRYSTALLIZED/ACCRUED LIABILITIES IS JUSTIFIED BUT IN THE CASES OF CONTIN GENT LIABILITY THE PROVISIONS IS NOT ALLOWABLE. THE DR FINALLY CONTENDED THAT THE ASSES SEE HAD NOT EXPLAINED THE NATURE OF LIABILITY, THEREFORE, IT WAS NOT ASCERTAI NABLE AS TO WHETHER THE PROVISIONS HAVE BEEN MADE FOR A CRYSTALLIZED OR CONTINGENT LIA BILITY. 22. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND CONTENTIONS AT THE OUTSET WE OBSERVE THAT THE CIT(A) HAS OBSERVED THAT THE AS SESSEE HAS NOT EXPLAINED THE NATURE OF THE LIABILITY. THEREFORE, IT WAS NOT ASC ERTAINABLE AS TO WHETHER THE PROVISIONS HAS BEEN MADE FOR A CRYSTALLIZED OR CONT INGENT LIABILITY. UNDER THESE CIRCUMSTANCES, WHEN THE ALLOWBILITY ABILITY OF CLAI M OF THE ASSESSEE HAS BEEN DECIDED IN EARLIER AND SUBSEQUENT YEARS BY AFFORDIN G DUE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE NATURE OF LIABILITY THEN DU RING THE YEAR UNDER CONSIDERATION THE ISSUE REQUIRES DETAIL EXAMINATION AND VERIFICAT ION AT THE END OF AO. ACCORDINGLY, WE ARE OF THE OPINION, THAT THE ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR PROPER EXAMINATION AND VERIFI CATION IN THE LIGHT OF EARLIER AND SUBSEQUENT ASSESSMENTS OF THE ASSESSEE. NEEDLESS T O SAY THAT THE AO SHALL PROVIDE DUE TO OPPORTUNITY OF HEARING FOR THE ASSESSEE DURI NG THE FRESH ADJUDICATION OF THE ISSUE. THE ASSESSING OFFICER IS FURTHER DIRECTED T O CONSIDER THE EXPLANATION, EVIDENCE AND DOCUMENTS OF THE ASSESSEE IN THE LIGHT OF EARLIER AND SUBSEQUENT ITA NOS. 1375 & 1011/D EL/2011 13 ASSESSMENT ORDERS OF THE ASSESSEE COMPANY IN THIS R EGARD. ACCORDINGLY, THESE GROUNDS OF THE ASSESSEE ARE DISPOSED OF WITH THE DI RECTIONS TO THE AO AS INDICATED ABOVE AND DEEM TO BE ALLOWED FOR THE STATISTICAL PU RPOSES. 23. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND APPEAL OF THE ASSESSEE FOR LIMITED ISSUE IS DEEM TO BE ALLOWED FO R THE STATISTICAL PURPOSES BY RESTORING THE ISSUE TO THE FILE OF AO IN THE MANNER AS INDICATED ABOVE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY 2014. SD/- SD/- (S.V.MEHROTRA) (C. M. GARG) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: 31 /01/2014 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI