The ACIT, Gandhidham Circle, GANDHIDHAM V. M/s Overseas Trading and Shipping Co.Pvt. Ltd., GANDHIDHAM

ITA 140/RJT/2008

• Counselvise Citation: 14024914 RSA 2008
• Duration Of Justice: 5 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG; AVINASH KUMAR
• Assessee Lawyers: VIMAL DESAI; S R SHAH
• Keywords: Transfer pricing; Business expenditure; Commercial expediency; Capital expenditure
• Section: 37; 37(1); 12A

Judgement Text

R Y : % : IN THE INCOME TAX APPELLATE TRIBU N AL : RAJKOT BENCH : RAJKOT % .. WR%..% BEFORE SHRI T. K. SHARM A JM AND SHRI D. K. SRIVASTAVA AM ITA NO . 1 40 /RJ T/2008 'H H/ ASSESSMENT YEAR 200 4 - 05 AC IT V. M/S OVERSEA S TRADING AND SHIPPING GANDHIDHAM CIRCLE CO. PVT. LTD. GANDHIDHAM. DBZ - S - 140,WARD 12A OPP:BOB GANDHIDHAM PAN: A A ACO4310N DATE OF HEARING: 0 7 . 0 2 .2013 DATE O F PRONOUNCEMENT: 11 . 0 4 .2013 FOR THE REVENUE : S/SHRI A NKUR GARG , CIT - DR AND AVINASH KUMAR, DR FOR THE ASSESSEE: S/SHRI S R SHAH AND VIMAL DESAI, FCA / ORDER ..% / D. K. SRIVASTAVA : THE A PPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 10 - 1 2 - 2007 , O N THE FOLLOWING GROUNDS: - 1. THE LEARNED CIT(A) HAS ERRED IN L AW AND ON FACTS IN DELETING THE ADDITION OF RS. 28,37,500 / - MADE BY THE A . O . ON ACCOUNT OF COMMISSION EXPENSES TREATING IT AS BOGUS. 2. THE LEA RNED CIT(A) HAS ERRED IN L AW AND ON FACTS IN DELETING THE ADDITION OF RS .1,65,172 / - MADE BY THE A . O . ON ACCOUNT OF DISALLOWANCE OF BUSINESS PROMOTION EXPENSES TREATING IT AS BOGUS. 3. ON THE FACTS OF THE CASE, T HE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET - ASIDE AND THAT OF THE A SSESSING O FFICE BE RESTORED . 2. THE ASSESSEE IS A PRIVATE LIMITED C O MPANY. IT IS ENGAGED IN THE BUSINESS OF EXPORT AND IMPORT. IT F ILED ITS RETURN OF INCOME ON 2 8 - 10 - 200 4 RETURNING TOTAL INCOME AT RS.5 1,46,060/ - . AFTER PROCESSING, THE RETURN WAS SELECTED FOR SCRUTINY AS A RESULT OF WHICH THE CLAIM OF THE ASSESSEE FOR DEDUCTION AMOUNTING TO RS.28,37,500/ - CLAIMED AS COMMISSION ON PURCH ASES WAS DISALLOWED IN ADDITION TO DISALLOWANCE OF RS.1,65,172/ - BEING BUSINESS PROMOTION EXPENSES . 3. FACTS OF THE CASE ARE THAT T HE ASSESSEE HAD ENTERED INTO A CONTRACT WITH M/S. SWISS SINGAPORE OVERSEAS ENTERPRISES PVT. LTD. OF UAE (SSOE) ON 13 - 06 - 2006 FOR IMPORT OF 12500 MT PLUS/MINUS 10% OF FUEL OIL 180 CST IN BULK . B Y A LETTER DATED 2 ITA 1 40 /20 08 14 - 06 - 2003, THE SUPPLIER, NAMELY, M/S. SWISS SINGAPORE OVERSEAS ENTERPRISES PVT. LTD. , COMMUNICATED THAT IN CASE OF DEFAULT IN FULFILLING THE SALE - PURCHASE CONTRACT AS AFORESAID , THE DEFAULTING PARTY WILL PAY THE OTHER PARTY A SUM EQUAL TO 5% OF THE CONTRACT VALUE AS DAMAGES . ACQUISITION, STORAGE AND SALE OF SOLVENTS WITHOUT LICENCE WERE PROHIBITED BY THE SOLVENT, RAFFINATE AND SLOP (ACQUISITION, SALE, STORAGE AND PREVEN TION OF USE IN AUTOMOBILES) ORDER 2000 NOTIFIED BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 3 OF THE ESSENTIAL COMMODITIES ACT 1955. T HE ASSESSEE DID NOT POSSESS THE REQUISITE LICENCE AND THEREFORE WAS NOT LEGALLY COMPETENT TO IMPORT FURNACE OIL AT THE TIME WHEN IT ENTERED INTO CONTRACT FOR ITS IMPORT WITH THE RESULT THAT IT REQUESTED ITS SISTER CONCERN, NAMELY, M/S. BGH EXIM LTD. , TO UNDERTAKE AND PERFORM CONTRACTUAL OBLIGATION S ARISING FROM THE CONTRACT BETWEEN THE ASSESSEE AN D SSOE IN LIEU OF PAYMENT OF THE IMPUGNED SUM DESCRIBED AS COMMISSION ON PURCHASE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE . THE CASE OF THE ASSESSEE BEFORE THE AO WAS THAT IT HAD TO PAY COMMISSION TO M/S. BGH EXIM LTD. IN ORDER TO AVOID GREATER LIABILITY ON ACCOUNT OF PAYMENT OF DAMAGES @ 5% OF THE CONTRACT VALUE TO THE SUPPLIER, AS STIPULATED IN THE SUPPL IERS LETTER DATE D 14 - 06 - 2003 REFERRED TO EARLIER. THE ASSESSING OFFICE HOWEVER REJECTED THE CLAIM OF THE ASSESSEE FOR THREE PRINCIP AL REASONS : ONE, M/S. B GH EXIM LTD. HAS NOT RENDERED ANY SERVICE TO THE ASSESSEE IN LIEU OF PAYMENT OF COMMISSION BY THE ASSESSEE AND THEREFORE THE IMPUGNED PAYMENT OF COMMISSION WAS LIABLE TO BE DISALLOWED ; TWO, N O EVIDENCE HAS BEEN PLACE D ON RECORD TO SHOW THAT THE ASSESSEE OR SSOE HAD ACTUALLY TRANSFERRED THE SALE PURCHASE CONTRACT IN FAVOUR OF M/S. BGH EXIM LTD. ; AND, THREE THE IMPUGNED PAYMENT OF COMMISSION WAS NOTHING BUT AN ATTEMPT TO AVOID TAX LIABILITY. 4. ON APPEAL, THE LD. CIT(A) HAS ALLOWED THE IMPUGNED EXPENDITURE A S BUSINESS EXPENDITURE. 5. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE AO. 6 . IN REPLY, THE LD. AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE CIT(A). HE HAS ALSO FILED WRITTEN SUBMISSIONS TWICE. FIRST WRITTEN SUBMISSIONS FILED BY THE LD. AR READ AS UNDER: A. DURING THE YEAR UNDER APPEAL, THE APPELLANT ENTERED INTO A CONTRAC T WITH SWISS SINGAPORE OVERSEAS ENTERPRISE PVT. LTD. (SSOE) FOR PURCHASE OF FURNACE OIL OF SPECIFIED QUANTITY. B. AS PER THE CONTRACT, THE APPELLANT HAD TO PAY A SUM EQUAL TO 5% OF THE CONTRACT VALUE IF IT FAILS IN PERFORMING THE CONTRACT. 3 ITA 1 40 /20 08 C. AS PER THE PREVAILING LAW, THE APPELLANT REQUIRED LICENSE FOR IMPORT OF FURNACE OIL. THE APPELLANT APPLIED FOR THE LICENSE BUT THE SAME WAS NOT RECEIVED FROM THE CONCERNED AUTHORITY. IN THE ABSENCE OF LICENSE OF LICENSE, IT WAS NOT POSSIBLE FOR THE APPELLANT TO PERFO RM THE CONTRACT OF IMPORT OF FURNACE OIL. OTHERWISE, THE GOODS WOULD HAVE BEEN SEIZED. D. THE APPELLANT THEREFORE APPROACHED ITS SISTER CONCERN M/S. BGH EXIM LTD. WHO HAD REQUISITE LICENSE AND ALSO HAD A CONTRACT WITH SSOE FOR FURNACE OIL WITH A PROPOSAL TO TRANSFER THE CONTRACTUAL OBLIGATION IN THEIR FAVOUR IN LIEU OF COMMISSION. E. UPON THE CONSENT GIVEN BY THE BGH EXIM LTD., THE APPELLANT REQUEST SSOE TO TRANSFER THE CONTRACT IN THE NAME OF BGH EXIM LTD. WHICH REQUEST WAS ACCEDED TO ON THE CONDITION TH AT APPELLANT UNDERTAKE RESPONSIBILITY OF PAYMENT AND MATERIAL. F. THIS WAS A COMMERCIALLY EXPEDIENT BUSINESS OPPORTUNITY BY THE APPELLANT IN THE COMPELLING CIRCUMSTANCES AS THE AMOUNT OF COMMISSION WAS MUCH LOWER THAN THE AMOUNT OF NON PERFORMING CHARGES. G. BGH EXIM LTD. PERFORMED THE CONTRACT AND APPELLANT PAID COMMISSION TO THEM. THE REQUISITE EVIDENCES WERE PLACED ON RECORD IN THIS REGARD. H. THE A.O. DISBELIEVED THE TRANSACTION ON VAGUE REASONS. THE A.O. ALSO FAILED TO APPRECIATE THAT THE TRANSACTIO N WAS AT ARMS LENGTH AND IF THE CONTRACT WAS TRANSFERRED IN FAVOUR OF ANY OTHER PERSON, HE WOULD HAVE ALSO DEMANDED FOR SOME CONSIDERATION FOR TAKING APPELLANTS CONTRACTUAL OBLIGATION. I. BOTH, THE APPELLANT AND M/S. BGH EXIM LTD., WERE PAYING TAX AT THE SAME RATE WITHOUT ANY BENEFIT IN THE FORM OF DEDUCTION OR SET OFF OF LOSSES. THUS, THERE WAS NO LOSS TO GOVERNMENT EXCHEQUER BY THE TRANSACTION. AS TAX IS PAID BY BGH EXIM LTD. ON COMMISSION RECEIVED, THE CONTENTION OF THE A.O. REGARDING BOGUS EXPENSE HAS NOT LOGICAL STAND. J. THE COMMISSION WAS FOR TRANSFER OF CONTRACTUAL OBLIGATION AND THE A.O. WAS NOT CORRECT IN OBSERVING THAT IT WAS FOR PURCHASE MADE BY THE APPELLANT FROM BGH EXIM LTD. K. BEFORE THE LD. CIT(A), THE APPELLANT REITERATED THE FACTS WITH EVIDENCES AND EXPLAINED THE COMMERCIAL EXPEDIENCY OF THE WHOLE TRANSACTION. L. ON THE QUERY RAISED BY THE LD. CIT(A) WITH REGARD TO TRANSFER OF BUSINESS AND PROFITS TO M/S. BGH EXIM LTD., IT WAS EXPLAINED THAT THE LINE OF FURNACE OIL IS VERY COMPETITIVE AND IT IS NOT NECESSARY THAT ONE WILL ALWAYS MAKE PROFIT AFTER DEPLOYING FUNDS, MAN POWER AND MANAGEMENT. THE 4 ITA 1 40 /20 08 APPELLANT OBTAINED DETAILS FROM M/S. BGH EXIM LTD. REGARDING TRADING RESULT IN RESPECT OF CONTRACT WITH SSOE. THERE WAS A LOSS INCURRED BY BGH EXI M LTD. M. THE SUBMISSIONS BEFORE THE CIT(A) WERE SENT TO THE A.O. FOR HIS COMMENTS. THE A.O. SENT HIS COMMENTS VIDE REPORT DATED 21.03.2007 AND 22.11.2007. IN THE COMMENTS, THE A.O. MORE OR LESS REPEATED THE CONTENTIONS OF THE ASSESSMENT ORDER WITHOUT OFF ERING ANY COMMENTS ON THE SUBMISSIONS OF THE APPELLANT. N. THAT AT THE APPELLATE STAGE ALSO, THE A.O. FAILED TO APPRECIATE THE FOLLOWING ASPECT. I. THE COMMISSION WAS NOT FOR PURCHASE OR RENDITION OF SERVICES. IT WAS FOR TRANSFER OF CONTRACTUAL OBLIGATIO N. II. THERE WERE COMPELLING CIRCUMSTANCES UNDER WHICH A PRUDENT BUSINESS DECISION OF MITIGATING THE BUSINESS LOSS (AS COMMISSION WAS LOW AS COMPARED TO NON PERFORMANCE CHARGES) WAS TAKEN. O. THE LD. CIT(A) APPRECIATED THE TRUE NATURE OF PAYMENT, COMPELL ING CIRCUMSTANCES AND A COMMERCIALLY EXPEDIENT BUSINESS DECISION TAKEN BY THE APPELLANT. HE ALLOWED THE CLAIM OF THE APPELLANT AFTER DEALING WITH EVERY CONTENTION OF THE A.O. 7. AT THE TIME OF HEARING, IT WAS CONTENDED THAT THE IMPUGNED PAYMENT WAS NOT IN THE NATURE OF COMMISSION BUT IN THE NATURE OF BUSINESS EXPENDITURE AND HENCE IT HAS BEEN RIGHTLY ALLOWED AS SUCH BY THE CIT(A). SINCE THE ASSESSEE CLAIMED IT TO BE BUSINESS EXPENDITURE, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS CALLED UPON TO SUBSTANTIATE THE DEDUCTIBILITY OF THE IMPUGNED EXPENSES IN THE LIGHT OF THE PROVISIONS OF EXPLANATION TO SECTION 37(1) . IN REPLY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED SECOND WRITTEN SUBMISSIONS, WHICH READ AS UNDER: THIS IS IN CONTINUATION OF WRITTEN SUBMISSIONS PLACED ON RECORDS IN PA P ER BOOK ALREADY FILED. THE ASSESSEE FURTHER SUBMITS IN RESPECT OF QUERY OF YOUR HONOURS THAT WHY RS.28,37,500 SHOULD NOT BE DISALLOWED IN VIEW F THE EXPLANATION TO SECTION 37 (1) OF THE ACT. IN THIS REGARD THE ASSESSEEE SUBMITS AS UNDER: THE EXPLANATION TO SEC 37 (1) IS REPRODUCED HEREWITH. EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE 5 ITA 1 40 /20 08 PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCES SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. THE EXPLANATION PROVIDES THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE ALLOWED AS EXPENDITURE. IN THE PRESENT CASE COMMISSION OR COMPENSATION PAID BY THE ASSESSEE IS NOT FOR ANY PURPOSE WHICH IS AN OFFENCE OR PROHIBITED BY LAW. TO IMPORT THE GOODS WITH OUT LICENSE IS PROHIBITED BY THE LAW. HOWEVER, PAYING THE CONSIDERATION TO AVOID THE ILLEGAL IMPORT SHOULD NOT BE TREATED AS INCURRED FOR PURPOSE WHICH IS PROHIBITED BY LAW. THE ASSESSEE HAS NOT CONTRAVENED THE ANY LAW. TO MAKE CONTRACT IN ANTICIPATION OF GETTING THE LICENSE IS NOT PROHIBITED UNDER ANY LAW BUT TO PERFORM THE CONTRACT WITHOUT GETTING LICENSE IS CONTRAVENTION THE LAW. THE WORD OFFENCE IS NOT DEFINED IN THE INCOME TAX ACT. HOWEVER, IT IS DEFINED IN SECTION 3 (38) OF THE GENERAL CLAUSES AC T, 1887 AS FOLLOWS: OFFENCE SHALL MEAN ANY ACT OR OMISSION MADE PUNISHABLE BY ANY LAW FOR THE TIME BEING IN FORCE.. THE EXPRESSION PROHIBITED BY LAW, TOO, IS NOT DEFINED IN THE INCOME TAX ACT. IT MAY BE VIEWED EITHER AS AN ACT ARISING FROM A CONTRACT WHICH IS EXPRESSLY OR IMPLIEDLY PROHIBITED BY STATUTE, OR CONTRACTS ENTERED INTO WITH THE OBJECT OF COMMITTING AN ILLEGAL ACT. TO MAKE THE CONTRACT FOR IMPORTING THE GOODS AND PAY THE COMPENSATION FOR EXECUTING CONTRACT LEGALLY IS NOT PUNISHABLE IN ANY LAW FOR THE TIME BEING IN FORCE OR IT IS ALSO NOT EXPRESSLY OR IMPLIEDLY PROHIBITED BY STATUTE OR IT WAS NOT OBJECT OF THE CONTRACT TO COMMIT AN ILLEGAL ACT. SO, IT IS NEITHER THE OFFENCE NOR PROHIBITED BY LAW. THEREFORE, EXPLANATION TO SECTION 37 (1) WOUL D NOT APPLY TO PRESENT CASE. EVEN SUPREME COURT IN CASE OF PRAKASH COTTON MILLS PVT. LTD. V CIT (CENTRAL) BOMBAY 201 ITR 864 HELD THAT WHENEVER ANY STATUTORY IMPOST PAID BY AN ASSESSEE BY WAY OF DAMAGES OR PENALTY OR INTEREST, IS CLAIMED AS AN ALLOWABLE EXPENDITURE UNDER SECTION 37(1) OF THE I.T. ACT, THE ASSESSING AUTHORITY IS REQUIRED TO EXAMINE THE SCHEME OF THE PROVISIONS OF THE RELEVANT STATUTE PROVIDING FOR PAYMENT OF SUCH IMPOST NOTWITHSTANDING THE NOMENCLATURE OF THE IMPOST AS GIVEN BY THE STATUTE , TO FIND WHETHER IT IS COMPENSATORY OR PENAL, IN NATURE. THE AUTHORITY HAS TO ALLOW DEDUCTION UNDER SECTION 37(1) OF THE I.T. ACT, WHERE EVER SUCH EXAMINATION REVEALS THE CONCERNED IMPOST TO BE PURELY COMPENSATORY IN NATURE. THE HONBLE MADHYA PRADESH H IGH COURT IN CASE OF COMMISSIONER OF INCOME - TAX, JABALPUR V. KHEMCHAND MOTILAL JAIN, TOBACCO PRODUCTS (P.) LTD. 13 TAXMANN.COM 27 HELD THAT 6 ITA 1 40 /20 08 SECTION 364A OF THE INDIAN PENAL CODE, 1860, PROVIDES THAT KIDNAPPING A PERSON FOR RANSOM IS AN OFFENCE AND ANY PE RSON DOING SO OR COMPELLING TO PAY IS LIABLE FOR THE PUNISHMENT AS PROVIDED IN THE SECTION, BUT NOWHERE IT IS PROVIDED THAT TO SAVE A LIFE OF THE PERSON IF A RANSOM IS PAID, IT WILL AMOUNT TO AN OFFENCE. THERE IS NO PROVISION THAT PAYMENT OF RANSOM IS PROH IBITED BY ANY LAW. IN ABSENCE OF IT, THE EXPLANATION TO SUB - SECTION (1) OF SECTION 37 WILL NOT BE APPLICABLE IN THE INSTANT CASE. SIMILARLY, IN THE PRESENT CASE, TO IMPORT THE GOOD WITHOUT LICENSE WAS PROHIBITED BY LAW BUT TO PAY CONSIDERATION FOR ACCEPT ING THE TRANSFER OF CONTRACT TO AVOID ILLEGAL PERFORMANCE OF CONTRACT IS NOT PROHIBITED BY LAW. EVEN UNDER THE THE SOLVENT RAFFINATE AND SLOP (ACQUISITION, SALE, STORAGE AND PREVENTION OF USE IN AUTOMOBILE) ORDER, 200 (NOW ONWARD CALLED AS ORDER) THERE A RE NO PROVISIONS FOR IMPOSING PENALTY FOR IMPORTING THE GOODS WITHOUT LICENSE BUT MAXIMUM CAN SEIZE THE GOODS. THE COPY OF ORDER IS ATTACHED HEREWITH FOR YOUR READY REFERENCE. THEREFORE, WHEN THERE ARE NO PROVISIONS UNDER THE ORDER FOR ANY PENALTY, EXPENDI TURE INCURRED CANNOT BE DISALLOWED BY INVOKING THE EXPLANATION TO SECTION 37(1) OF THE ACT. WITHOUT PREJUDICE TO ABOVE, THE ASSESSEE SUBMITS THAT THE QUESTION WHETHER THERE IS AN INFRACTION OF LAW, OR WHETHER THE EXPENDITURE IS INCURRED FOR ANY PURPOSE W HICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW IS TO BE DECIDED BY THE AUTHORITY OR THE COURT EMPOWERED TO DO SO UNDER THE RESPECTIVE LAW AND NOT BY THE INCOME TAX AUTHORITIES OR THE TRIBUNAL FUNCTIONING UNDER THIS ACT. RELIANCE HAS BEEN PLACED ON THE DECISION OF SUPREME COURT IN CASE OF ASSISTANT COMMISSIONER OF INCOME TAX V. A.K. MENON 202 ITR 774 IN WHICH IT IS HELD THAT.. IT IS CLEAR FROM SECTION 11 THAT THE SPECIAL COURT HAS NO POWER TO SIT IN APPEAL OVER OR OVERRULE THE ORDERS OF THE TAX AUTHORI TIES, THE TRIBUNAL OR THE COURTS IN REGARD TO THE TAX LIABILITIES OF NOTIFIED PERSONS. THE ONLY POWER OF THE SPECIAL COURT IS TO DETERMINE THE PRIORITIES IN WHICH CLAIMS UPON THE PROPERTY IN ATTACHMENT SHALL BE PAID. THE CLAIMS RELATING TO THE TAX LIABILIT IES OF A NOTIFIED PERSON ARE, ALONG WITH REVENUES, CESSES AND RATES ENTITLED TO BE PAID FIRST IN THE ORDER OF PRIORITY AND IN FULL AS FAR AS MAY BE. IN RELATION TO A CLAIM FOR PAYMENT OF THE TAX LIABILITY OF A NOTIFIED PERSON, THE SPECIAL COURT HAS, THEREF ORE, ONLY THE LIMITED POWER TO DETERMINE WHAT, HAVING REGARD TO THE FUNDS AVAILABLE, COULD BE PAID THAT IS TO SAY, WHETHER THE CLAIM COULD BE SATISFIED IN FULL OR ONLY IN PART. IF A PARTICULAR TAX CLAIM AT ANY TIME COULD NOT BE PAID IN FULL, PROVISIONS WOU LD HAVE TO BE MADE FOR THE BALANCE, SO FAR AS MAY BE, SO THAT IT IS NOT JEOPARDIZED. THUS, THE SPECIAL COURT HAS NO JURISDICTION TO 7 ITA 1 40 /20 08 SIT IN APPEAL OVER THE ASSESSMENT OF THE TAX LIABILITY OF A NOTIFIED PERSON BY THE AUTHORITY OR TRIBUNAL OR COURT AUTHORIZED TO PERFORM THAT FUNCTION BY THE STATUTE UNDER WHICH THE TAX IS LEVIED. THE SPECIAL COURT HAS, THEREFORE, NO JURISDICTION TO DETERMINE WHETHER OR NOT ANY ASSESSMENT OF THE TAX LIABILITY OF A NOTIFIED PERSON BY THE APPROPRIATE AUTHORITY IS BONA FIDE OR REAS ONABLE OR JUSTIFIED OR ENFORCEABLE. ALSO RELIES ON THE DECISION OF KERALA HIGH COURT IN CASE OF K.N. NARAYANA IYER V. COMMISSIONER OF INCOME TAX 202 ITR 774. IN VIEW OF ABOVE, THE ASSESSEE REQUESTS TO YOUR HONOURS THAT EXPENDITURE IS NOT DISALLOWABLE I N VIEW OF THE EXPLANATION TO SEC. 37(1) OF THE ACT. 8. WE HAVE HEARD BOTH THE PARTIES. ACCORDING TO SEC TION 37(1) OF THE INCOME - TAX ACT, ANY EXPENDITURE (NOT BEING THE EXPENDITURE OF THE NATURE D ESCRIBED IN SEC TIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION. FOR THE REMOVAL OF DOUBTS, IT IS FURTHER DECLARED IN EXPLANATION TO SEC TION 37 (1) THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PU RPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. 9. THE ASSESSEE HAS RECORDED THE IMPUGNED EXPENDITURE IN ITS BOOKS AS COMMISSION ON PURCHASE. COMMISSION IS PAID TO A PERSON FOR TRANSACTING A PIE CE OF BUSINESS OR PERFORMING A SERVICE FOR THE PAYER. IN THE PRESENT CASE, THE ASSESSEE HAS CONSCIOUSLY RECORDED THE IMPUGNED EXPENDITURE AS COMMISSION ON PURCHASES IN ITS BOOKS AND THEREFORE THE BURDEN WAS ON THE ASSESSEE TO SHOW THE SERVICES ACTUALLY REN DERED/PERFORMED BY THE PAYEE IN LIEU OF COMMISSION PAYMENTS. SINCE THE PAYEE DID NOT RENDER ANY SERVICE TO THE ASSESSEE IN MAKING THE IMPUGNED PURCHASES, THE AO PROCEEDED TO MAKE FURTHER INQUIRIES UPON WHICH IT TRANSPIRED THAT THE IMPUGNED EXPENDITURE WAS NOT IN THE NATURE OF COMMISSION FOR ANY SERVICE RENDERED BY THE PAYEE TO THE ASSESSEE. IT WAS EXPLAINED BEFORE THE AO (PARA 4.2 OF THE ASSESSMENT ORDER) THAT THE IMPUGNED SUM WAS PAID IN CONNECTION WITH TRANSFER OF CONTRACTUAL LIABILITIES OF OVERSEAS TRAD ING & SHIPPING CO. PTE. LTD. TO BGH EXIM LTD. AFTER EXAMINING THE MATERIALS ON RECORD, THE ASSESSING OFFICER NOTED (PARA 4.5 OF THE ASSESSMENT ORDER) THAT THE ASSESSEE HAS NO COGENT EVIDENCE TO SHOW THAT THE SALE - PURCHASE CONTRACT IN QUESTION IS ACTUALLY TRANSFERRED IN FAVOUR OF M/S BGH EXIM LTD.. FOR THE REASONS GIVEN IN THE ASSESSMENT ORDER, THE AO HAS DISALLOWED THE IMPUGNED EXPENDITURE AS COMMISSION. ON THE BASIS OF MATERIALS AVAILABLE ON RECORD, ITS QUITE EVIDENT THAT THE IMPUGNED EXPENDITURE IS NO T IN THE NATURE OF COMMISSION AND THEREFORE IS NOT ADMISSIBLE FOR DEDUCTION AS COMMISSION EXPENSES. BESIDES, THE PARTIES INVOLVED IN THE IMPUGNED TRANSACTION ARE COMPANIES WITH 8 ITA 1 40 /20 08 LIMITED LIABILITY. THEY ARE ARTIFICIAL PERSONS. THEREFORE, ANY AGREEMENT BETWEE N THEM HAS TO BE IN WRITING FOR THERE IS NO OTHER WAY THAT THEY CAN CREATE A BINDING OBLIGATION BETWEEN THEMSELVES. THE FINDING OF THE AO THAT THE ASSESSEE HAS NOT ESTABLISHED THAT ITS SALE - PURCHASE CONTRACT WITH SSOE WAS TRANSFERRED IN FAVOUR OF M/S. BGH EXIM LTD. BY ITS SUPPLIER, NAMELY, M/S. SWISS SINGAPORE OVERSEAS ENTERPRISE PVT. LTD. HAS NOT BEEN REBUTTED BY THE ASSESSEE WITH EVIDENCE. THE ORDER OF THE AO THEREFORE STANDS. 10. BEFORE THE CIT(A), THE ASSESSEE CLAIMED THE IMPUGNED EXPENDITURE AS BUSINE SS EXPENDITURE INCURRED ON ACCOUNT OF COMMERCIAL EXPEDIENCY . IT WAS EXPLAINED BEFORE THE CIT(A) THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO PURCHASE FURNACE OIL AS THE ASSESSEE HAD NO LICENCE TO ACQUIRE, STORE AND SELL IT AND, THAT BEING THE POSITION, THE ASSESSEE WOULD HAVE INCURRED LIABILITY TOWARDS DAMAGES TO BE PAID TO THE SUPPLIER, I.E., SSOE. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE, IN ORDER TO AVOID HUGE DAMAGES, PREFERRED TO PAY THE IMPUGNED SUM TO BGH FOR THE LATTER AGREEING TO PURCHASE THE FUR NACE OIL FROM SSOE. THE LD. CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE. 9. THE GOVERNMENT OF INDIA IN THE MINISTRY OF PETROLEUM AND NATURAL GAS ISSUED AN ORDER , IN EXERCISE OF THE POWERS CONFERRED BY SECTION 3 OF THE ESSENTIAL COMMODITIES ACT 1955, CALLED THE SOLVENT, RAFFINATE AND SLOP (ACQUISITION, SALE, STORAGE AND PREVENTION OF USE IN AUTOMOBILE) ORDER, 2000 PUBLISHED IN THE OFFICIAL GAZETTE ON 5 TH JUNE 2000 BY WHICH A CQUISITION, S TORAGE OR S ALE OF SOLVENTS, RAFFINATE AND SLOPS WAS PROHIBITED WITHOUT PO SSESSING A LICENCE IN THAT BEHALF . RULE 3 OF THE AFORESAID ORDER PROVIDES, INTER ALIA , THAT NO PERSON SHALL EITHER ACQUIRE, STORE OR SELL SOLVENTS, REFFINATE S AND SLOPS OR THEIR EQUIVALENT AND OTHER PRODUCT, WITHOUT A LICENSE , ISSUED BY THE STATE GOVERNMEN T OR THE DISTRICT MAGISTRATE OR ANY OTHER OFFICER AUTHORIZED BY THE CENTRAL OR THE STATE GOVERNMENT. THE AFORESAID ORDER HAS BEEN PASSED BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SEC TION 3 OF THE ESSENTIAL COMMODITIES ACT, 1955. CONT RAVENTION OF ANY ORDER ISSUED U/S 3 OF THE SAID ACT IS PUNISHABLE UNDER SECTION 7 THEREOF. IT IS THE CASE OF THE ASSESSEE THAT IT HAD MADE AN APPLICATION TO THE DISTRICT MAGISTRATE ON 01 - 01 - 200 2, I.E., AFTER THE AFORESAID ORDER HAD COME INTO FORCE, SEEKING LICENSE FOR A CQUISITION, S TORAGE AND S ALE OF FURNACE OIL , WHICH WAS NEVER GRANTED TO THE ASSESSEE. IN SPITE OF THE FACT THAT THE ASSESSEE DID NOT HAVE ANY LICENSE FOR ACQUISITION, STORAGE AND SALE OF SOLVENT S AS REQUIRED BY THE SAID O RDER, THE ASSESSEE NE VERTHELESS ENTERED INTO A CONTRACT WITH M/S. SWISS SINGAPORE OVERSEAS ENTERPRISE PVT. LTD. FOR PURCHASE OF FURNACE OIL AND THUS VENTURED OUT TO DO SOMETHING WHICH WAS PROHIBITED BY LAW . 1 0 . THE SOLVENT, RAFFINATE AND SLOP (ACQUISITION, SALE, STORAGE AN D PREVENTION OF USE IN AUTOMOBILE) ORDER, 2000 HAS PLACED A BLANKET BAN ON A CQUISITION, S TORAGE AND SALE OF S OLVENT S WITHOUT POSSESSING A VALID LICENSE . ADMITTEDLY, THE ASSESSEE 9 ITA 1 40 /20 08 DID NOT POSSESS THE LICENSE FOR A CQUISITION, S TORAGE AND S ALE OF S OLVENTS. THE ACTION OF THE ASSESSEE IN SEEKING TO ACQUIRE/ IMPORT FURNACE OIL WITHOUT HAVING LICENCE TO DO SO WAS CLEARLY PROHIBITED BY LAW. THE ASSESSEE WOULD NOT HAVE INCURRED THE IMPUGNED LIABILITY /EXPENDITURE IF IT HAD NOT VENTURED OUT TO ENTER INTO CONTRACT FOR AC QUISITION OF FURNACE OIL WITHOUT HAVING LICENCE IN THIS BEHALF. THE IMPUGNED EXPENDITURE IS THEREFORE DIRECTLY REFERABLE TO A PURPOSE PROHIBITED BY LAW, I.E., ACQUISITION OF SOLVENT WITHOUT LICENCE. 11. THE SUBMISSION OF THE ASSESSEE THAT THE PAYMENT OF THE IMPUGNED SUM IN LIEU OF TRANSFER OF CONTRACTUAL LIABILITIES TOWARDS OVERSEAS TRADING & SHIPPING CO. PTE. LTD. TO BGH EXIM LTD. IS NOT BY ITSELF PUNISHABLE BY LAW AND THEREFORE SUCH EXPENDITURE IS NOT HIT BY EXPLANATION TO SECTION 37(1) OF THE I - T ACT D OES NOT CARRY ANY FORCE. EXPLANATION TO SECTION 37(1) COVERS ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS PROHIBITED BY LAW. THEREFORE THE ULTIMATE PURPOSE FOR WHICH EXPENDITURE IS INCURRED NEEDS TO BE SEEN. THE GENESIS OF THE IMPUGNED EXPENDITURE IS DIRECTLY TRACEABLE TO THE ACTION OF THE ASSESSEE IN ENTERING INTO A CONTRACT FOR IMPORT OF FURNACE OIL WITHOUT HAVING REQUISITE LICENCE IN THIS BEHALF. SUCH CONTRACT WAS VOID AB - INITIO AS IT PURPORTED TO DO SOMETHING, I.E., ACQUISITION OF FU RNACE OIL WITHOUT HAVING LICENCE, WHICH WAS PROHIBITED BY LAW. THE IMPUGNED EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF AVOIDING LOSS FLOWING FROM CONTRACT TO ACQUIRE FURNACE OIL, WHICH WAS PROHIBITED BY LAW AND THEREFORE HIT BY EXPLANATION TO SECTION 37(1). 13. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS PLACED RELIANCE ON FEW JUDGMENTS ONE OF WHICH IS PRAKASH COTTON MILLS V. CIT, 201 ITR 684 (SC). THE AFORESAID JUDGMENT DOES NOT AT ALL DIRECTLY OR INDIRECTLY DEAL WITH THE ISSUE UNDER APP EAL, I.E., THE APPLICABILITY OF EXPLANATION TO SECTION 37(1). IN FACT, EXPLANATION TO SECTION 37(1) WAS INSERTED IN THE INCOME - TAX ACT BY FINANCE (NO.2) ACT 1998 WHEREAS THE AFORESAID JUDGMENT WAS DELIVERED BY THE HONBLE SUPREME COURT ON 6 TH APRIL 1993 . S ECONDLY, THE IMPUGNED EXPENDITURE HAS BEEN INCURRED FOR A PURPOSE PROHIBITED BY LAW AND IS THEREFORE HIT BY EXPLANATION TO SECTION 37(1) AND NOT SAVED BY THE AFORESAID JUDGMENT . ANOTHER JUDGMENT RELIED UPON BY THE ASSESSEE IS CIT V. KEMCHAND MOTILAL JAIN, 13 TAXMANN.COM 27. IN THAT CASE, RANSOM WAS PAID FOR SAVING THE LIFE OF THE KIDNAPPED PERSON, WHICH WAS NOT PROHIBITED BY LAW WHEREAS, IN THE CASE BEFORE US, THE IMPUGNED SUM HAS BEEN PAID FOR A PURPOSE PROHIBITED BY LAW. JUDGMENTS IN CIT V. A K MENON, 202 ITR 774 (SC) AND K N NARAYANA IYER V. CIT, 202 ITR 774 (KER.) RELIED UPON BY THE ASSESSEE ARE HARDLY RELEVANT IN THE CONTEXT OF ISSUE BEFORE US. 1 3 . IN VIEW OF THE AFORESAID, THE ORDER OF THE LD. CIT(A) IN THIS BEHALF IS REVERSED AND THAT OF THE AO IS RESTORED. GROUND NO.1 IS ALLOWED. 1 4 . APROPOS G ROUND NO.2, THE ASSESSEE CLAIMED DEDUCTION OF EXPENDITURE AMOUNTING TO RS.1,65,172/ - FOR SENDING MANGOES TO ONE NARAYAN V. THOSAR THROUGH 10 ITA 1 40 /20 08 A IR W INGS. IT IS STATED IN THE ASSESSMENT ORDER (PAGE 8) THAT T HE ASS ESSEE HAD CLAIMED BEFORE THE AO THAT IT HAD NOT MADE A NY TRANSACTIONS W ITH SAID ASSOCIATE ENTERPRISES DURING THE YEAR. THE AO THEREFORE DISALLOWED THE IMPUGNED EXPENDITURE WITH THE FOLLOWING OBSERVATIONS: - 6.3 THE ASSESSEES EXPLANATION ON THE ISSUE IS UNTENABLE AND NOT ACCEPTABLE ONE BECAUSE IF THE FACT THAT THE ASSESSEE WAS A SUBSIDIARY COMPANY OF M/S. SINGAPORE OVERSEAS ENTERPRISE PVT. LTD. TILL A.Y. 2003 - 04. HOWEVER, THE ASSESSEE HAS NOT SHOWN IT AS ASSOCIATE E NTERPRISES FOR THE YEAR UNDER SCRUTINY. THUS THE ASSESSEE HAS PURCHASED AND SENT THE MANGOES TO ITS ASSOCIATE ENTERPRISES FOR THE PERSONAL USE OF MANAGEMENT OF M/S. SINGAPORE OVERSEAS ENTERPRISE PVT. LTD. ONLY. FOR ALLOWABILITY OF EXPENDITURE U/S 37(1), THERE MUST BE A NEXUS BETWEEN EXPENDITURE AND BUSINESS OF THE M/S. SINGAPORE OVERSEAS ENTERPRISE PVT. LTD.. HOWEVER, THE ASSESSEE HAS FAILED TO PROVE THE NEXUS. IT IS WORTHWHILE TO MENTION THAT WHEN THE ASSESSEE WAS ASKED VIDE POINT NO.4 OF THE QUESTIONNAIRE DATED 29.06.2006 TO FURNISH DETAILED W ORKING OF ARMS LENGTH PRICE FOR EACH TRANSACTION MADE WITH THE ASSOCIATE ENTERPRISES, THE ASSESSEE HAS SUBMITTED VIDE ITS SUBMISSION DATED 21.07.2006 THAT IT HAD NOT MADE ANY TRANSACTIONS WITH THE SAID ASSOCIATE ENTERPRISES DURING THE YEAR. THEREBY, IT IS PROVED THAT THE EXPENSES SO CLAIMED BY THE ASSESSEE IS NOT NECESSITATED OR JUSTIFIED BY COMMERCIAL EXPEDIENCY OF ITS BUSINESS. IT IS NECESSARY TO MENTION HERE THAT EXPENSE CLAIMED IS NOT DIRECTLY AND INTIMATELY CONNECTED WITH THE ASSESSEES BUSINESS AND N OT DIRECT AND INTIMATE CONNECTION BETWEEN THE BUSINESS AND THE EXPENDITURE. 6.4 IN VIEW OF THE ABOVE FACTS, IT IS CRYSTAL CLEAR THAT THE ASSESSEE HAS INCURRED BUSINESS PROMOTION EXPENSES OF RS.1,65,172/ - BEING PURCHASE OF MANGOES FOR THE PERSONAL USE OF M ANAGEMENT ITS ASSOCIATED ENTERPRISES. THEREFORE, SAME IS TREATED AS PERSONAL EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 1 5 . ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE, WITH THE FOLLOWING OBSERVATIONS: - 8. I HAVE DULY CONSI DERED THE ABOVE. THE APPELLANT HAS EXPLAINED THAT THE IMPUGNED EXPENSES WERE INCURRED FOR BUSINESS PROMOTION AS THEY WERE INCURRED FOR SENDING MANGOES TO THE MANAGEMENT OF ITS SUPPLIER COMPANY TO MAINTAIN GOOD BUSINESS RELATIONS. HOSPITALITY AND PRIVILEGES OFFERED TO THE CUSTOMERS AND SUPPLIERS ARE BUSINESS EXPENSES AS BY THAT, GOOD BUSINESS RELATIONS CAN BE MAINTAINED WHICH HELPS IN SMOOTH RUNNING AND DEVELOPMENT OF THE BUSINESS. I AM THEREFORE INCLINED TO ACCEPT THE SUBMISSIONS OF THE APPELLANT. IT IS WEL L KNOWN THAT INDIAN MANGOES ARE FAMOUS ALL AROUND THE WORLD. THEREFORE, THE MANAGEMENT OF THE APPELLANT COMPANY SENT MANGOES 11 ITA 1 40 /20 08 TO THE SUPPLIERS COMPANY AT DUBAI. THE BUSINESS RELATION WITH THE SWISS SINGAPORE COMPANY IS NOT UNDER QUESTION AND THE SAME HAS BE EN OBSERVED WHILE DECIDING THE ISSUE OF DISALLOWANCE OF COMMISSION IN GROUND NO.2 SUPR A . SUCH HOSPITALITY EXPENSES INCURRED FOR SMOOTH RUNNING AND BETTERMENT OF BUSINESS CAN BE CONSIDERED AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSIN ESS. IT IS ALSO TRUE THAT THE APPELLANT AS WELL AS SWISS SINGAPORE COMPANY, BEING COMPANIES, ARE NOT LIVING ENTITIES. IT IS AN ARTIFICIAL PERSON CREATED UND E R THE LAW. THEREFORE, IT CANNOT HAVE ANY PERSONAL USE IN ANY EXPENSES. THE JURISDICTIONAL HIGH COUR T HAS ALSO LAID DOWN THE SAME PRINCIPLE IN THE CASE OF SAYAJI IRON (253 ITR 749) RELIED UPON BY THE APPELLANT. IN VIEW OF THIS, I HOLD THAT THE IMPUGNED EXPENSES HAVE DIRECT NEXUS WITH THE BUSINESS OF THE APPELLANT AND THEREFORE DISALLOWANCE THEREOF IS NOT JUSTIFIED. THE DISALLOWANCE OF RS.1,65,172/ - IS HEREBY DELETED. 1 6 . IN SUPPORT OF APPEAL, THE LD. DR SUPPORTED THE ORDER PASSED BY THE AO. 1 7 . IN REPLY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE CIT(A) . HE HAS ALSO FILED WRITTEN SUBMISSIONS, WHICH READ AS UNDER: 2. RE: DISALLOWANCE OF PROMOTIONAL EXPENSES OF RS.1,65,172/ - : A. THE APPELLANT INCURRED THE IMPUGNED EXPENSES FOR PRESENTING MANGOES TO M/S. SWISS SINGAPORE ENTERPRISE PVT. LTD. (SSOE) TO MAINTAIN GOOD BUSINESS RELATIONS WITH THEM. B. THE SSOE WAS ONE OF THE MAJOR SUPPLIERS OF GOODS OF THE APPELLANT. THE MANGOES WERE SENT DURING THE MANGO SEASONS TO FACILITATE SMOOTH BUSINESS RELATIONS WITH THEM. C. THE BUSINESS TRANSACTIONS WITH SSOE WERE EVIDENT FROM THE FURNACE OIL CONTRACT AS DISCUSSED IN ISSUE NO.1 ABOVE. THUS, THE SAID EXPENSE HAS HAD DIRECT NEXUS WITH THE BUSINESS OF THE APPELLANT. D. THE APPELLANT IS A PRIMATE LIMITED COMPANY AND THEREFORE IT CANNOT HAVE ANY PERSONAL ELEMENT IN ANY OF ITS EXPENSES. REL IANCE IS PLACE ON GUJARAT HC DECISION IN CASE OF SAYAJI IRON & ENGG. CO. VS. CIT 253 ITR 749. 1 8 . WE HAVE HEARD BOTH THE PARTIES. DETAILS GIVEN AT PAGE - 7 OF THE ASSESSMENT ORDER ARE QUITE INTERESTING. THE ASSESSEE CLAIMS EXPENDITURE OF RS.1,220/ - ON 04 - 04 - 2003 TOWARDS MANGOES . THE ASSESSEE CLAIMS FURTHER EXPENDITURE AMOUNTING TO RS.77,25 0 / - ON 12 - 05 - 2003 TOWAR DS MANGOES . THE ASSESSEE CLAIMS COURIER CHARGES AMOUNTING TO RS.86,702/ - ON 05 - 06 - 2003 FOR SENDING MANGOES. THERE IS NO MATERIAL ON RECORD TO SHOW AS TO HOW SUCH A LARGE QUANTITY OF MANGOES COULD BE CONSUMED ON ONE DAY OR OVER FEW DAYS ; MANGOES BEING PERISHABLE IN NATURE . NO MATERIAL HAS 12 ITA 1 40 /20 08 BEEN PLACED ON RECORD AS TO WHAT BUSINESS PURPOSE WAS ACHIEVED BY GIVING SUCH LARGE QUANTITIES OF MANGOES TO ONE NARAYAN V. THOSAR. THE SITUATION COULD HAVE BEEN DIFFERENT IF THE MANGOES PURCHASED FOR MORE THAN RS. 78 THOUSAND HAD BEEN SENT TO A LARGE NUMBER OF PARTIES AND NOT TO ONE PERSON , I.E. , NARANYAN V. THOSAR. THERE IS NO MATERIAL ON RECORD TO ESTABLISH BUSINE SS EXPEDIENCY . THEREFORE, THE ORDER OF THE AO DISALLOWING THE IMPUGNED SUM IS RESTORED. GROUND NO.2 IS ALLOWED. 1 9 . GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. 20 . IN VIEW OF THE FOREGOING, APPEAL FILED BY THE DEP ARTMENT IS ALLOWED. A 11 . 0 4 .201 3 A ORDER PRONOUNCED ON 11. 0 4 - 2013 SD/ - SD/ - ( R.. H / T. K. SHARMA) ( .. TA / D. K. SRIVASTAVA) %' A / JUDICIAL MEMBER / ACCOUNTANT MEMBER /RAJKOT : 11 - 0 4 - 2013 NVA/ - 1 RJO' O / COPY OF ORDER FORWARDED TO: - 1.D /APPELLANT - THE ASSISTANT COMMISSIONER OF INCOME - TAX , GANDHIDHAM CIR CLE , GANDHIDHAM 2 VD / RESPONDENT - M/S.OVERSEAS TRADING & SHIPPING CO. PVT. LTD. , GANDHIDHAM 3. Y U / CONCERNED CIT - I, RAJKOT 4. U - / CIT(A) - II, RAJKOT 5. V''Y, R Y, / DR, ITAT, RAJKOT 6. H / GUARD FILE / BY ORDER TRUE COPY SENIOR PRIV ATE SECRETARY, ITAT, RAJKOT