Jubliant Securities Pvt. Ltd., Noida V. DCIT, New Delhi

ITA 1412/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73951 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 08-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAMEER SHARMA
• Keywords: Rule of consistency; Earning of tax free income; Revised return
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH D, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SHAMIM YAHIYA, ACCOUNTANT MEMBER ITA NO. 1245/DEL./2013 ASSTT. YEAR : 2009-10 D.C.I.T., CIRCLE 4(1), VS. M/S. JUBILANT SECURITI ES PVT. LTD., NEW DELHI. PLOT NO. 1A, SECTOR 16A, INSTITUTIONAL AREA, NOIDA. (PAN: AAACH 3072 J) ITA NO. 1412/DEL./2013 ASSTT. YEAR : 2009-10 M/S. JUBILANT SECURITIES PVT. LTD., VS. D.C.I.T., C IRCLE 4(1), PLOT NO. 1A, SECTOR 16A, NEW DELHI INSTITUTIONAL AREA, NOIDA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAMEER SHARMA, SR. D.R. ASSESSEE BY : SHRI AJAY VOHRA ADVOCATE, RASHI KH ANNA, SHRI GAURAV JAIN, ADV. DATE OF HEARING : 07.01.2014 DATE OF PRONOUNCEMENT OF ORDER : 09.01.2014 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE OR DER OF THE LD. CIT(A) VIII, NEW DELHI DATED 04.12.2012 FOR THE ASSESSMENT YEAR 2009-10. ITA NO.1245 & 1412/DEL./2013 2 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AV AILABLE ON RECORD. BOTH THE APPEALS ARE DECIDED AS UNDER : ITA NO. 1245/DEL./2013 (DEPARTMENTAL APPEAL): 3. THE REVENUE CHALLENGED THE ORDER OF THE LD. CIT( A) IN RESTRICTING THE DISALLOWANCE U/S. 14A TO RS.62,96,037/- FROM RS.1,0 2,40,671/- MADE BY THE AO. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE A O WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF RS.1,02,40,671/- MADE U/S. 14A OF T HE IT ACT. WHILE MAKING THE DISALLOWANCE, THE AO HAS OBSERVED THAT SINCE EXPEND ITURE HAS TO BE INCURRED FOR EARNING OF EXEMPT INCOME, THEREFORE, THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WERE APPLICABLE. THE AO ACCORDINGLY MADE DISALLOWAN CE U/S. 14A OF THE IT ACT. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT IN THE YEA R UNDER CONSIDERATION, THE ASSESSEE EARNED DIVIDEND INCOME AMOUNTING TO RS.2.80 CRORES. SUCH DIVIDEND INCOME WAS CLAIMED EXEMPT U/S. 10(34) OF THE IT ACT. THE ASSES SEE MADE INVESTMENT IN SHARES OF DIFFERENT COMPANIES WITH A VIEW TO EARNED DIVIDEND. THE ASSESSEE HAD ALREADY MADE DISALLOWANCE U/S. 14A IN A SUM OF RS.93,43,343/- IN THE RETURN OF INCOME, WHICH WAS RE-QUANTIFIED TO RS.62,95,150/- DURING THE COURSE O F ASSESSMENT PROCEEDINGS, BUT THE AO QUANTIFIED THE DISALLOWANCE AT RS.1,02,40,671/-. THE WORKING OF THE QUANTIFICATION AS PER ASSESSEE AND THE AO IS REPRODUCED AT PAGE 3 & 4 OF THE APPELLATE ORDER. THE ITA NO.1245 & 1412/DEL./2013 3 ASSESSEE JUSTIFIED THE REDUCTION OF DISALLOWANCE AN D IT WAS ALSO SUBMITTED THAT INTEREST EXPENDITURE OF RS.47,08,000/- WAS INCURRED EXCLUSIV ELY FOR EARNING TAXABLE INCOME. THE FACT THAT THIS INTEREST BEING EXCLUSIVELY INCUR RED FOR EARNING TAXABLE INCOME IS EMANATING FROM ASSESSMENT YEAR 2007-08 WHEREIN THE AO AFTER GOING THROUGH THE FACTS ACCEPTED THAT CERTAIN LOANS TAKEN BY THE ASSE SSEE HAVE BEEN EXCLUSIVELY USED FOR EARNING TAXABLE INCOME AND SO MUCH SO ALL THE INTER EST INCURRED ON THE LOANS RELATE EXCLUSIVELY FOR EARNING TAXABLE INCOME IS TO BE EXC LUDED FROM THE TOTAL INTEREST TO ARRIVE AT THE FIGURE OF INTEREST, I.E., LIABLE FOR APPORTIONMENT. THE SAME FACT CONTINUED IN ASSESSMENT YEAR 2008-09. HOWEVER, IN THE ASSESSM ENT ORDER U/S. 143(3), THE SAME CONTENTION WAS NOT ACCEPTED. HOWEVER, IN APPEAL, TH E CLAIM OF ASSESSEE WAS UPHELD. THE ASSESSEE ALSO EXPLAINED THE REASON OF REDUCTION IN THE INTEREST AND IT WAS ALSO CLARIFIED THAT THE ADMINISTRATIVE AND OTHER EXPENSE S HAVE BEEN DISALLOWED. THEREFORE, NO FURTHER DISALLOWANCE WAS CALLED FOR. IT WAS, THE REFORE, SUBMITTED THAT THE DISALLOWANCE MAY BE RESTRICTED TO RS.62,95,150/- AS AGAINST DISALLOWANCE SHOWN BY THE ASSESSEE AT RS.93,43,343/- AND COMPUTED BY THE AO AT RS.1,02,40,671/-. THE LD. CIT(A) ON PERUSAL OF THE RECORD FOUND THAT SIMILAR FACTS WERE CONSIDERED IN PRECEDING ASSESSMENT YEAR 2008-09 AND THE APPELLATE ORDER WAS REPRODUCED IN THE IMPUGNED ORDER. IT WAS ALSO FOUND THAT ITAT, DELHI BENCH VID E ORDER DATED 26.10.2012 IN ITA NO. 3225/DEL./2011 HAS UPHELD THE ORDER OF LD. CIT( A) FOR THE ASSESSMENT YEAR 2008- 09 BY HOLDING THAT THE REDUCTION IN THE DISALLOWANC E MADE BY THE LD. CIT(A) WAS LEGAL ITA NO.1245 & 1412/DEL./2013 4 AND BASED UPON THE FACTS. IT WAS ALSO HELD THAT THE INTEREST OF RS.47,08,000/- WAS INCURRED EXCLUSIVELY FOR EARNING TAXABLE INCOME AND WAS, THEREFORE, LIABLE TO BE EXCLUDED FROM THE TOTAL INTEREST. THE LD. CIT(A) FO UND THAT THE ASSESSEE HAS HIMSELF OFFERED FOR DISALLOWANCE THE ENTIRE ADMINISTRATIVE EXPENSES OF RS.6,58,275/-. THEREFORE, CONSIDERING THE ORDER OF THE PRECEDING A SSESSMENT YEAR AND THE ORDER OF THE TRIBUNAL, THE ADDITION IS TO BE RESTRICTED IN ALL I N A SUM OF RS.62,96,037/-. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY PARTLY ALLOWED. 4. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT THE REVISED COMPUTATION OF INTEREST WAS FILED AT ASSESSMENT STA GE. THEREFORE, IN THE ABSENCE OF REVISED RETURN, THE CLAIM OF ASSESSEE OF REDUCTION OF INTEREST SHOULD NOT HAVE BEEN ALLOWED. HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD., 284 ITR 323. THE LD. DR ALSO SUBM ITTED THAT THOUGH THE ISSUE HAVE BEEN DECIDED BY THE TRIBUNAL IN PRECEDING ASSESSMEN T YEAR 2008-09, BUT THE WORKING OF THE DISALLOWANCE NEEDS FURTHER CLARIFICATION. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE ORDER OF ITAT, DELHI BENCH IN THE CASE OF SAME ASSESSEE IN A.Y. 20 08-09 (SUPRA), IN WHICH THE TRIBUNAL UPHELD THE ORDER O THE LD. CIT(A) VIDE ORD ER DATED 26.10.2012. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD. HE HAS A LSO RELIED UPON THE ORDER OF THE ITA NO.1245 & 1412/DEL./2013 5 ITAT REPORTED IN 115 TTJ 752, IN WHICH THE THIRD ME MBER HAS HELD THAT IN SUCH CIRCUMSTANCES, THE REVISED COMPUTATION OF INCOME FI LED AT ASSESSMENT STAGE IS JUSTIFIED AND THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN RESTR ICTING THE DISALLOWANCE TO RS.62,96,037/-. IT IS ADMITTED FACT THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE LD. CIT(A) IN PRECEDING ASSESSMENT YEAR 2008-09 AND THE LD. CIT(A) ON THE SAME IDENTICAL MATTER IN ISSUE RESTRICTED THE DISALLOWAN CE PARTLY. THE LD.CIT(A) ALSO JUSTIFIED THE RECTIFIED COMPUTATION OF INCOME FILED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AT ASSESSMENT STAGE. THE TRIBUNAL ALSO CON FIRMED THE VIEW OF THE LD. CIT(A) IN CONSIDERING THE REVISED COMPUTATION OF INCOME FO R THE PURPOSE OF MAKING PART DISALLOWANCE U/S. 14A OF THE IT ACT. THEREFORE, ON THE IDENTICAL FACS WHEN IN THE CASE OF ASSESSEE, THE REVISED COMPUTATION OF DISALLOWANC E WAS ACCEPTED BY THE LD. CIT(A) AND THE TRIBUNAL, THEREFORE, ON THE SAME FACTS THE CLAIM OF THE ASSESSEE HAS BEEN RIGHTLY ENTERTAINED BY THE LD. CIT(A). MOREOVER, HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAI PARABOLIC SPRINGS LTD., 306 ITR 42, CONSIDERING THE DECISION IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT284 ITR 323, HELD AS UNDER : HELD, DISMISSING THE APPEAL, THAT THERE WAS NO PROHIBITIO N ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL G ROUND WHICH ACCORDING TO THE TRIBUNAL AROSE IN THE MATTER AND F OR THE JUST DECISION OF THE CASE. THERE WAS NO INFIRMITY IN THE ORDER OF TH E TRIBUNAL. ITA NO.1245 & 1412/DEL./2013 6 THE CONTENTION OF THE LD. DR IS, THEREFORE, NO SUST AINABLE AND IS REJECTED. FURTHER, THE COMPUTATION OF DISALLOWANCE AS MADE BY THE ASSESSEE WAS BASED UPON THE FINDING GIVEN IN EARLIER YEAR. THEREFORE, THERE IS NOTHING WRONG IN THE DISALLOWANCE RESTRICTED TO BY THE LD. CIT(A). THE LD. COUNSEL FOR THE ASSES SEE, THEREFORE, RIGHTLY CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT, DELHI BENCH IN THE CASE OF SAME ASSESSEE IN PRECEDING ASSESSMENT Y EAR 2008-09. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). WE CONFIRM THE SAME AND DISMISS THE DEPARTMENTAL APPEAL. IN THE RE SULT, THE DEPARTMENTAL APPEAL IS DISMISSED. ITA NO. 1412/DEL./2013 (ASSESSEES APPEAL): 6. IN THIS APPEAL, THE ASSESSEE CHALLENGED THE ORDE R OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.25,19,529/- OUT OF RS.95,84, 561/- PAID TOWARDS THE SERVICE CHARGES. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD PAID SERVICE CHARGES OF RS. 95,84,561/- TO A GROUP COMPANY M/S. JUBILANT EN PRO (P) LTD. THE ASSESSEE WAS ASKED BY THE A 0 TO SUBMIT THE DETAILS OF SERVICE CHARGES ALONG WITH BASIS OF APPORTIONMENT OF THE EXPENSES. AFTER CONSIDERING TH E BASIS OF APPORTIONMENT THE AO HAS HELD THAT THE APPORTIONMENT OF COMMON EXPENSES MADE BY THE ASSESSEE ON THE BASIS OF NUMBER OF RIGS WAS NOT CORRECT AND THE APP ORTIONMENT SHOULD HAVE BEEN MADE ITA NO.1245 & 1412/DEL./2013 7 ON THE BASIS OF REVENUE GENERATED BY THE RIGS. IN V IEW OF THE ABOVE FACTS THE AO APPORTIONED THE EXPENSES ON THE RIGS IN THE RATIO O F REVENUE GENERATION WHICH RESULTED IN A DISALLOWANCE OF SERVICE CHARGES PAID FOR THE R IGS OF RS. 25,19,529/-. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT IT HAD PAID A SERVICE CHARGE OF RS. 95,84,561/- TO M/S JUBILANT ENPRO PRIVATE LIMITED (JEPL). ASSESSEE WAS TO PROVIDE SUPPORT SERVICES TO A CUSTOMER IN RELATION TO THE CUSTOMER'S DRILLING/RIG OPERATION. THE SERVICES, TH ERE WERE TO BE PROVIDED WERE MAINLY ASSISTANCE OR SUPPORT SERVICES LIKE ASSISTAN CE IN RELATION TO OBTAINING WORK, SUBMISSIONS OF BIDS AND SUBSEQUENT NEGOTIATION, ADV ISING CURRENT DEVELOPMENTS, ADVISING REGARDING VISAS AND LABOUR PERMITS, ADVISE ON IMPORTATION AND EXPORTATIONS OF MATERIAL VESSELS EQUIPMENTS RIGS ETC, ASSISTING IN PREPARING AND COLLECTING CUSTOMER'S BILLING ETC. THE QUANTUM OF WORK INVOLVE D IN THE SERVICES WAS LARGELY DEPENDENT UPON THE NUMBER OF RIGS IN RELATION TO WH ICH SUPPORT SERVICES WERE TO BE GIVEN AND THE PERIOD FOR WHICH IT WAS TO BE GIVEN. FOR EXAMPLE QUANTUM OF ASSISTANCE FOR CUSTOMER'S BILLING AND COLLECTION THEREOF WOULD BE SAME IRRESPECTIVE OF THE SIZE OF THE RIGS. SIMILAR WOULD BE CASE OF QUANTUM OF WORK INVOLVED IN SUBMISSION OF A BID UNDER A TENDER FOR A RIG. IN TERM OF PROVIDING SUCH SERVICES BY THE ASSESSEE COM PANY, IT DERIVED REVENUE OF RS 3,34,28,387/-. SIMILAR SER VICES WERE ALSO BEING PROVIDED BY M/S JEPL TO THEIR CUSTOMERS. HENCE, TO ACHIEVE COST EFFECTIVENESS, ASSESSEE HAD ITA NO.1245 & 1412/DEL./2013 8 ENTERED INTO A COST SHARING ARRANGEMENT UNDER A MEM ORANDUM OF UNDERSTANDING (MOU) WITH JEPL TO PROVIDE THE SUPPORT SERVICES DIR ECTLY TO THE CUSTOMER OF ASSESSEE. AS PER THE MOU, JEPL SHALL PROVIDE SERVIC ES FROM ITS EXISTING COST CENTER AT MUMBAI. IN THE FIRST PLACE JEPL WAS TO INCUR THE COST OF PROVI DING THE SERVICES AND THE ASSESSEE WAS TO REIMBURSE TO JEPL HIS SHARE OF COST S. THE ASSESSEES SHARE OF COST WAS DETERMINED BY APPORTIONING THE TOTAL COST ON A RATIONAL METHOD BASED ON THE NATURE OF SERVICES. AS THE QUANTUM OF SERVICES WERE DEPENDENT ON THE NUMBER OF RIGS AND THE PERIOD FOR WHICH SUCH SERVICES WERE RENDERE D IN RELATION TO A RIG THE COST WAS SHARED BASED ON THE NUMBER OF RIGS AND THE PERIOD ( MONTHS) FOR WHICH THEY WERE SERVED DURING THE RELEVANT PREVIOUS YEAR. ASSESSEE COMPANY HAS PAID RS. 95,84,561/- TO MIS JEPL TOWARDS COSTS OF SERVICES PROVIDED. 8. IT HAS FURTHER BEEN SUBMITTED THAT THE AO DISAGR EED WITH THE METHOD OF APPORTIONMENT ASSUMING FACTS NOT BORNE OUT ON THE R ECORD OF THE CASE AND HELD THAT APPORTIONMENT SHOULD BE MADE BASED ON TURNOVER. 9. AS PER THE AO THE APPORTIONMENT SHOULD HAVE BEEN DONE IN PROPORTION TO REVENUE AND NOT RIG-MONTHS. THE WHOLE REASONING ADO PTED BY THE AO TO DISMISS THE APPORTIONMENT ALREADY MADE, AND HAVING BEEN MADE ON A REASONABLE AND SCIENTIFIC BASIS IS LIABLE TO BE QUASHED. IT IS SUBMITTED THAT THE COST, WHICH IS SUBJECT MATTER OF APPORTIONMENT, IS COST TOWARDS RENDERING OF SUPPORT SERVICES. SUCH COST HAS DIRECT ITA NO.1245 & 1412/DEL./2013 9 RELATION TO THE QUANTUM OF WORK TO BE DONE FOR THE CUSTOMER. THE QUANTUM OF WORK TO BE DONE I.E. TIME AND EFFORT INVOLVED IN TURN IS DE PENDENT UPON THE NUMBER OF RIGS AND THE PERIOD FOR WHICH THE SUPPORT SERVICES ARE T O BE RENDERED FOR EACH OF THE RIGS AS IS CLEAR FROM THE NATURE OF VARIOUS SERVICES TO BE PROVIDED. FOR EXAMPLE TO THE SERVICES TO ASSIST THE CUSTOMER IN OBTAINING WORK I S AN EFFORT THAT STARTS FROM THE DATE OF FLOATATION OF TENDERS BY THE OIL EXPLORATION AND PRODUCTION COMPANIES AND ENDS WITH REJECTION OR ACCEPTANCE OF BID OF THE ASSESSEE S CUSTOMERS. THE MAIN QUANTUM OF WORK I.E. TIME AND EFFORT INVOLVED LIKE ASSISTAN CE IN OBTAINING TENDER DOCUMENTS, ASSISTANCE IN SEEKING CLARIFICATION ON TENDER DOCUM ENTS, ASSISTANCE IN SUBMISSION OF BID, ASSISTANCE DURING PRE-AWARD STAGE AND POST AWA RD STAGE ALL RELATE TO A TENDER WHICH MAY BE DRILLING SERVICES FOR WHICH A SMALL RI G (LIKE JACK UP) MAY BE SUITABLE OR OTHERWISE IT MAY REQUIRE A BIG RIGS (LIKE DEEPWATER RIGS). SAME WOULD BE THE CASE FOR ASSISTANCE IN WORK OF IMPORTATION OR EXPORTATION OF DRILLING RIGS, EQUIPMENTS, MATERIALS OR OTHER SUPPLIES IN OR OUT OF INDIA, ASS ISTING IN PREPARING AND COLLECTING THE CUSTOMER'S BILLING FOR ANY WORK. QUANTUM OF WORK I. E. TIME AND EFFORT INVOLVED IN ASSISTANCE IN EXPORT OR IMPORT WOULD BE THE SAME FO R A BIG RIG OR A SMALL RIG. BILLINGS IN CASE OF BOTH BIG OR SMALL RIGS IS DONE ON A MONT HLY INTERVALS I.E. ONE BILL PER MONTH. THE TIME AND EFFORT OF ASSISTANCE REMAINS SAME FOR A RIG EITHER SMALL OR BIG. SIMILARLY, THE QUANTUM OF WORK I.E. TIME AND EFFORT INVOLVED I N ADVISING THE CUSTOMER ON PURCHASE IN INDIA OF EQUIPMENT, SUPPLIES, SERVICES, DRY-DOCKING, REPAIRS ETC. THAT MAY ITA NO.1245 & 1412/DEL./2013 10 BE REQUIRED BY THE CUSTOMER, IS SAME FOR ANY RIG UN DER A CONTRACT WHETHER BE IT A SMALL OR BIG UNDER THE CONTRACT. IN THE SAME MANNER QUANTUM OF WORK OR TIME AND EFFORT INVOLVED IN OTHER SUPPORT SERVICES LIKE ADVI SE REGARDING SECURING GOVERNMENT LICENSE, PERMITS CERTIFICATES AS MAYBE REQUIRED OR ADVISE REGARDING OBTAINING VISAS AND LABOUR PERMITS FOR ENTRY INTO AND DEPARTURE FROM IN DIA OF CUSTOMER'S PERSONNEL, IS PROXIMATELY EVEN FOR ALL CONTRACTS WHETHER THE CONT RACT IS FOR A SMALL RIG OR FOR A BIG RIG. IT IS SUBMITTED THAT, FOREGOING CLEARLY DEMONS TRATES THAT THE QUANTUM OF WORK I.E. TIME AND EFFORT INVOLVED FOR THE SUPPORT SERVICES P ROVIDED TO CUSTOMERS IS DEPENDENT UPON THE NUMBER OF RIGS AND THE EXTENT OF PERIOD FO R WHICH THE SERVICES ARE REQUIRED. THE COST IS A FUNCTION OF THE QUANTUM OF WORK REQUI RED TO BE DONE AND QUANTUM OF WORK IN TURN PROXIMATE TO NUMBER OF RIGS AND THE PE RIOD RELATION TO WHICH SUPPORT SERVICES IS REQUIRED. THUS WHEN THE COST ARE APPORT IONED, BASED ON THE NUMBER OF RIGS AND THE PERIOD FOR WHICH IT IS SERVED ('RIG MONTHS' ) SUCH APPORTIONMENT RESULTS IN ALLOCATION OF THAT PROPORTION OF COST THAT HAS DIRE CT RELATION TO QUANTUM OF WORK DONE I.E. BASED ON TIME AND EFFORT INVOLVED. IN OTHER WO RDS THE COST APPORTIONMENT METHOD IN CASE OF ASSESSEE IS APPROXIMATE TO USAGE. 10. IT HAS ALSO BEEN STATED THAT THE AO HAS ADOPTED TURNOVER METHOD WHICH RELATE TO THE REVENUES OF SERVICES. AS THE REVENUE OF SERVICE S IS RECEIVED AS % OF REVENUE GENERATED BY THE RIGS, THE HIGHER THE REVENUE GENER ATED BY THE RIG THE HIGHER IS THE ITA NO.1245 & 1412/DEL./2013 11 REVENUE FROM SERVICES AND VICE VERSA. FOR EXAMPLE T HE REVENUES OF A BIG RIG (SAY DEEPWATER RIGS) WOULD BE SUBSTANTIALLY HIGHER THAN A SMALL RIG (SAY JACKUP RIGS). THUS ADOPTION OF REVENUE AS BASIS WOULD RESULT IN ALLOCA TING HIGHER COSTS TO BIG RIGS WHILE LOWER TO SMALL RIGS. HOWEVER AS ALREADY SUBMITTED T HE NATURE OF SERVICES PROVIDED IS SUCH THAT THE QUANTUM OF SERVICES IS NOT DEPENDENT ON THE SIZE (BIG OR SMALL) BUT NUMBER AND THE PERIOD FOR WHICH THOSE RIGS ARE TO B E SERVED. RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF M/S. HUKUM CHAND MILLS LTD VS. CIT [1976] 103 ITR 548. IT HAS BEEN SUBMITTED THAT THE DISALLOWANC E MADE BY THE AO MAY BE DELETED. 11. THE LD. CIT(A), HOWEVER, CONFIRMED THE ADDITION . HIS FINDINGS AT PAGE 13 OF THE APPELLATE ORDER ARE REPRODUCED AS UN DER : I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT FINDINGS OF THE AO AND THE FACTS ON RECORD. PERUSAL OF THE FACTS ON RE CORD SHOW THAT THE APPELLANT HAD PAID SERVICE CHARGES OF RS. 95,84,561 /- TO MIS. JUBILANT ENPRO (P) LTD. WHICH WAS A GROUP COMPANY. AS PER TH E AGREEMENT WITH M/S. JEPL THE APPELLANT HAD ENTERED INTO A COST SHA RING ARRANGEMENT AS PER WHICH JEPL WOULD PROVIDE SERVICES TO THE CUSTOM ERS OF THE APPELLANT AND THE APPELLANT'S SHARE OF COST WAS TO BE PAID BY THE APPELLANT TO M/S. JEPL. THE APPELLANT HAD APPORTIONED THE SERVICE CHA RGES PAID TO M/S. JEPL ON THE BASIS OF THE NUMBER OF RIGS AND THE PER IOD FOR WHICH THEY WERE UTILIZED. THE ABOVE BASIS FOR APPORTIONMENT IS NOT CORRECT SINCE ALL THE RIGS ARE NOT SIMILAR IN NATURE. EVERY RIG IS DI FFERENT IN SIZE AND THEREFORE THE SERVICE CHARGES APPORTIONED ON THE SI ZE OF THE RIG WILL NOT SHOW A PROPER RESULT SINCE THE SERVICES RENDERED BY A SMALL RIG WILL BE MUCH LESS THAN THAT RENDERED BY A BIG RIG. THE AO H AS ADOPTED THE TURN OVER METHOD WHICH IS MORE APPROPRIATE CONSIDERING T HE NATURE OF SERVICES OFFERED BY DIFFERENT RIGS. THE APPORTIONME NT ON THE BASIS OF REVENUE GENERATED BY THE RIGS IS MORE APPROPRIATE S INCE HIGHER COST WILL ITA NO.1245 & 1412/DEL./2013 12 BE INCURRED ON BIG RIGS AS COMPARED TO SMALLER RIGS . VARIOUS JUDICIAL DECISIONS HAVE HELD THAT THOUGH THERE CANNOT BE ANY FIXED FORMULA THE ALLOCATION OF EXPENSES SHOULD BE CONSIDERED KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE INSTANT CASE, KEE PING IN VIEW THE SIZE OF THE RIGS AND THE WORK DONE BY DIFFERENT RIGS THE AL LOCATION OF EXPENSES ON THE BASIS OF REVENUE GENERATED BY THEM IS THE MOST APPROPRIATE FORMULA. IN VIEW OF THE FINDINGS ABOVE AND ALSO IN VIEW OF T HE FACT THAT THE SAME EXPENSES CANNOT BE ALLOCATED TO RIGS OF DIFFERENT S IZES THE DISALLOWANCE MADE BY THE AO OF SERVICE CHARGES OF RS. 25,19,529/- IS AS PER LAW. THIS GROUND OF APPEAL IS DISMISSED. 12. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND REFERRED TO THE LETTER FILED BEFORE THE AO (PB-36) SUPPORTED BY THE MOU ENTERED INTO BETWEEN THE ASSESSEE AND M/S. JEPL AND SUBMITTED THAT THE COST OF PROVIDING SERVICES AS PER MOU SHALL BE APPORTIONED BETWEEN JEPL AND JSPL (ASSESSEE) ON RATIONAL BASIS I.E., HAVING REGARD TO THE NATURE OF SERVICES AND SHALL BE REIMBURSED BY THE ASSESSEE TO JEPL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PAID THE SERVICE CHARGES AS PER MOU BU T THE AO WANTED TO APPORTION BY THE REVENUE GENERATED BY RIG WHICH IS NOT APPROPRIA TE METHOD. IT WAS ALSO HIGHLIGHTED THAT THE SERVICE TO BE PROVIDED AND ALSO ANALYSIS O F VARIOUS SUPPORT SERVICES PROVIDED TO THE CUSTOMER (PB-47) IN WHICH THE ASSESSEE EXPLA INED VARIOUS ACTIVITIES TO BE PERFORMED AND IT WAS CLARIFIED THAT THE SERVICES AR E NOT DEPENDENT OF THE CAPACITY OR SIZE OF RIGS. HE HAS SUBMITTED THAT OTHER COMPANY J SPL HAS ALSO REPORTED THE INCOME AND PAID THE TAX ON THE SAME, THEREFORE, THERE IS N O REVENUE LOSS AND IN EARLIER YEARS ITA NO.1245 & 1412/DEL./2013 13 2008-09, THE AO HAS ACCEPTED THE SIMILAR CLAIM OF A SSESSEE U/S. 143(3) OF THE IT ACT. THEREFORE, ON THE PRINCIPLE OF CONSISTENCY, THE AO SHOULD NOT HAVE TAKEN A DIFFERENT VIEW. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE APPORTIONMENT HAS BEEN RIGHTLY M ADE ON THE CASE BY THE REVENUE GENERATED BY BIG RIGS AND THAT ALL THE RIGS ARE NOT OF THE SIMILAR NATURE, THEREFORE, THE ADDITION IS FULLY JUSTIFIED. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS EXPLAINED THIS ISSUE BEFORE THE AO ON THE BASIS OF THE MOU ENTERED INTO BETWEEN THE ASSESSEE AND JEPL. IT IS SPECIFICA LLY PROVIDED IN THE MOU THAT THE COST OF PROVIDING SERVICES SHALL BE APPORTIONED BET WEEN THE ASSESSEE AND JEPL IN RATIONAL BASIS, I.E., HAVING REGARD TO THE NATURE O F SERVICES. THEREFORE, ACCORDING TO MOU, THE COST APPORTIONED METHOD HAS TO BE APPLIED IN THE CASE OF ASSESSEE. THE ASSESSEE ALSO EXPLAINED AT PAGE 47 OF THE PAPER BOO K THAT THE ACTIVITIES, WHICH ARE TO BE PERFORMED, ARE NOT DEPENDENT UPON THE CAPACITY OR S IZE OF THE RIGS. IT APPEARS THAT THE AUTHORITIES BELOW HAVE NOT APPLIED MIND TO THESE FA CTS AND EXPLANATION GIVEN BY THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESS EE HAS GENUINELY INCURRED THE EXPENSES UNDER THIS HEAD AND THE GENUINENESS OF THE EXPENSES INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS HAVE NOT BEEN DISPUTED BY THE A UTHORITIES BELOW. THE GENUINENESS OF THE EXECUTION OF MOU IN QUESTION HAS ALSO NOT BE EN DOUBTED BY THE AUTHORITIES ITA NO.1245 & 1412/DEL./2013 14 BELOW. HONBLE SUPREME COURT IN THE CASE OF WALCHAN D & CO. 65 ITR 381 AND SASON J. DAVID, 118 ITR 261 HELD THAT COMMERCIAL EXPEDIEN CY HAS TO BE CONSIDERED FROM THE POINT OF VIEW OF A BUSINESSMAN AND NOT OF THE REVEN UE, EVEN IF SOMEBODY IS GETTING BENEFIT OUT OF THAT EXPENSES. THUS, THE COST OF SHA RE SHOULD BE DETERMINED BY APPORTIONING THE TOTAL COST ON RATIONAL METHOD BASE D ON NATURE OF SERVICES. THE COST INCURRED BY THE ASSESSEE HAS DIRECT RELATION TO THE QUANTUM OF WORK TO BE DONE FOR THE CUSTOMER. THE ASSESSEE ALSO EXPLAINED THAT THE QUAN TUM OF WORK, I.E., TIME AND EFFORTS INVOLVED IN THE ASSISTANCE IN EXPORT AND IMPORT WOU LD BE THE SAME FOR A BIG RIG OR SMALL RIG. THEREFORE, THE FINDING OF THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION. FURTHER, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE IN PRECEDING ASSESSMENT YEAR 2008-09, WHEN THE AO HAS ACCEPTED S IMILAR CLAIM OF ASSESSEE WITHOUT MAKING ANY APPORTIONMENT OF REVENUE GENERATED BASIS , THE AO ON THE PRINCIPLE OF CONSISTENCY SHOULD HAVE ACCEPTED THE CLAIM OF ASSES SEE. WE RELY UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHA SWAMI SA TSANG VS. CIT, 193 ITR 321 AND CIT VS. EXCEL INDUSTRIES LTD. AND MAFAT LAL IND USTRIES PVT. LTD, 358 ITR 295. THEREFORE, THERE IS NO BASIS TO MAKE DISALLOWANCE A GAINST THE ASSESSEE OF SUCH NATURE OF THE EXPENSES. WE ACCORDINGLY, SET ASIDE THE ORDE RS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION OF RS.25,19,529/-. IN THE RESUL T, THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.1245 & 1412/DEL./2013 15 14. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/- SD/- (SHAMIM YAHIYA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, NEW DELHI 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY