UPL Environmental Engineers Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 1419/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9802 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business expenditure; Maximum Marginal Rate; Earning of tax free income; Wrong claim; Bad and doubtful debts; Agreed addition
• Section: 143(3); 14A; 37(1)

Judgement Text

I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND MAHAVIR PRASAD , JM ] I.T.A. NO S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEAR S : 2008 - 09, 2008 - 09 & 2009 - 10 RESPECTIVELY UPL ENVIRONMENTAL ENGINEERS LIMITED ..... ...... . ... . . APPELLANT NEAR BANCO PRODUCTS LIMITED, VILLAGE: BILL, DISTRICT: BARODA 391 410. [ PAN: AADCA 4427 H ] VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 4, BARODA ... ............... . RESPONDENT APPEA RANCES BY: S.N. SOPARKAR FOR THE A PPELLANT SANJAY AGRAWAL FOR THE RE SPONDENT DATE OF CONCLUDING THE HEARING : 08 .0 9 .2016 DATE OF PRONOUNC ING THE ORDER : 07 . 1 2 .2016 O R D E R PER PRAMOD KUMAR , AM : 1. THESE THREE APPEALS PERTAIN TO THE SAME ASSESSEE, I NVOLVE SOME INTERCONNECTED ISSUES AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, THEREFORE, ALL THE THREE APPEALS ARE BEING DISPOSED OF BY WAY OF THI S CONSOLIDATED ORDER. ITA NO.108/AHD/2012 ASSESSMENT YEAR 2008 - 09 2. THIS APPEAL, FILED BY THE ASS ESSEE, IS DIRECTED AGAINST LEARNED CIT(A) S ORDER DATED 14.10.2011 FOR THE ASSESSMENT YEAR 2008 - 09. I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 2 OF 11 3. IN GROUND NO.1, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: - 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING EXCESSIVE DISALLOWANCE BY A O OF RS.10,553/ - U/S 14A OF THE ACT IGNORING THE FACT THAT APPELLANT SUO MOTO DISALLOWED APPROPRIATE EXPENSES FOR EARNING TAX FREE INCOME . LD. CIT(A) OUGHT TO HAVE ACCEPTED THE WORKING OF APPELLANT AND DELETED EXCESSIVE DISALLOWANCE. IT BE SO HELD NOW. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EARNED A TAX EXEMPT INCOME OF RS.50,000/ - ON INVESTMENTS AMOUNTING TO RS.2,50,000/ - . THE ASSESSEE OFFERED A SUO MOTU DISALLOWANCE OF RS.5,000/ - UNDER SECTION 14A. THE ASSESSING OFFICER , HOWEVER, PROCEEDED TO FURTHER DISALLOW RS.10,553/ - BY ALLOCATING A PART OF INTEREST (RS.14,303/ - ) AND 0.5% AVERAGE VALUE OF INVESTMENT (RS.1,250/ - ). AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SU CCESS. NOT SATISFIED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT IT IS AN UND ISPUTED POSITION THAT NO DIRECT EXPENSES ARE INCURRED BY THE ASSESSEE IN EARNING THE DIVIDEND INCOME, AND THAT THE ASSESSEE DID HAVE INTEREST FREE FUNDS FOR IN EXCESS OF A SMALL AMOUNT OF RS.1,250/ - , BEING % OF INVESTMENT, THE ASSESSEE HAD ALREADY OFFERED RS.5,000/ - SUO MOTU. UNDER THESE CIRCUMSTANCES , THE LEARNED CIT(A) WAS INDEED IN ERROR IN CONFIRMING THE IMPUGNED DISALLOWANCE. WE DELETE THE SAME. 7. GROUND NO.1 IS THUS ALLOWED. I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 3 OF 11 8. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : - 2. LD CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE BY AO OF RS.6,68,720/ - OUT OF OTHER SITE EXPENSES BY TREATING IT AS PENAL IN NATURE. LD . CIT(A) OUGHT TO HAVE DELETED DISALLOWANCE COMPRISING OF LIQUIDATED DAMAGES AND FEES FOR LATE FILING OF ROC RETURNS BEING EXPENDITURE INCURRED DURING THE COURSE OF BUSINESS. IT BE SO HELD NOW. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.6,68,720/ - DEBITED UNDER THE HEAD SITE EXPENSES ON THE GROUND THAT NARRATION STATES IT TO BE PENALTY . IN APPEAL, IT WAS EXPLAINED BY THE ASSESSEE THAT BARING AN AMOUNT OF RS.2,000/ - , WHICH IS IN THE NATURE OF PENALTY FOR DELAYED FILING OF DOCUMENTS BEFORE THE REGISTRAR OF COMPANIES , THE REMAINING AMOUNT REPRESENTS LIQUIDATED DAMAGES PAID FOR NOT COMPLETING THE PROJECT IN TIME. YET, LEARNED C I T(A) CONFIRMED THE DISALLOWANCE. AGGRIEVED BY WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 10. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY C ONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 11. WE FIND, ON A PERUSAL OF DETAILS FILED BEFORE US . THAT BARRING AN AMOUNT OF RS.2,000/ - PAID ON 29.12.2007 TOWARDS DELAY IN FILING FORM NO.25, THE REMAINING AMOUNT REPRESENTS D EDUCTIONS SUFFERED BY THE ASSESSEE ON ACCOUNT OF DAMAGES ETC. AND THESE AMOUNTS DO NOT HIT PROVISIONS OF EXPLANATION TO SECTION 37(1). WE, THEREFORE, DELETE THIS DISALLOWANCE AS WELL. 12. GROUND NO.2 IS THUS ALSO ALLOWED. 13. IN GROUND NOS.3 & 4, WHICH WE WILL TAKE UP TOGETHER, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES : - 3. LD. CITA ERRED IN LAW AND ON FACTS IN ENHANCING THE DISALLOWANCE MADE BY AO @ 25% TO 100% OF RS.1,25,00,000/ - CONSULTANCY CHARGES PAID TO SEARCH I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 4 OF 11 ENVIRO LIMITED. LD. CIT ( A ) OUG HT TO HAVE DELETED DISALLOWANCE OF CHARGES PAID TOWARDS INFRASTRUCTURE FACILITY, MANPOWER, MARKETING LIAISON, OFFICE SPACE ETC. OF ASSOCIATE CONCERN UTILISED AT MUMBAI. 4. LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT DELETING CONSULTANCY CHARGES DISALLOWED BY AO APPRECIATING THE FACT THAT BOTH THE CONCERNS PAYING TAX AT MAXIMUM MARGINAL RATE (MMR) REVENUE NEVER SUFFERED ANY LOSS SINCE THERE WAS NO QUESTION OF TAX EVASION. 14. SO FAR AS THIS DISALLOWANCE IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE T HIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING O FFICER HAS PAID CONSULTANCY SERVICES AMOUNTING TO RS.1,25,00,050/ - TO A RELATED PARTY UNDER SECTION 40A(2)(B) BY THE NAME OF SEARCH ENVIRO LIMITED. THE ASSESSING O FFICER DISALLOWED 25% OF THIS EXPENDITURE AS EXCESSIVE AND UNREASONABLE UNDER SECTION 40A(2). AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) . IN APPEAL, LEARNED C I T ( A ) ENHANCED THE DISALLOWANCE TO 100% OF PAYMENT MADE TO SEARCH ENVIR O LIMITED . W HIL E DOING SO, HE OB SERVED AS FOLLOWS : - PARA 4.3.11 4.3.11 BASED UPON ABOVE DISCUSSIONS, THE PAYMENT MADE BY THE APPELLANT TO HOLDING COMPANY IS HELD NOT TO HAVE BEEN LAID OUT OR EXTENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOS E S OF THE BUSINESS OF THE APP ELLANT. IT IS ALSO HELD T HAT THE ENTIRE PAYMENT IS TO BE DISALLOWED AS PER THE PROVISIONS OF SECTION 40(A) (2) AND NOT MERELY 25% OF THE PAYMENTS AS DISALLOWED BY THE AO. ACCORDINGLY THE AO IS DIRECTED TO DISALLOW THE ENTIRE PAYMENT OF RS.1,25,00,000 MADE TO THE HOLDING COMPANY BY THE APPELLANT. THE ASSESSMENT IS ENHANCED ACCORDINGLY. SINCE THE APPELLANT HAS MADE THE CLAIM OF THIS EXPENDITURE WITHOUT ANY BASIS OR JUSTIFICATION, HENCE IT HAS FILED INACCURATE PARTICULARS OF INCOME. HENCE PENALTY PROCEEDIN GS U/S 271(1)(C) OF THE IT ACT 1961 IS BEING INITIATED SEPARATELY IN RESPECT OF THE ENHANCEMENT MADE IN THIS ORDER. 15. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 16. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 5 OF 11 17. WE FIND THAT HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PWS ENGINEERS LIMITED VS. DCIT (TAX APPEAL NO.209 OF 2015) HAS, INTER ALIA, OBSERVED AS FOLLOWS : - 6. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. THE QUESTION OF APPLICABILITY OF SECTION40A(2) OF THE ACT TO THE RESTRICTED DISALLOWANCE OF RS.47,90,178 / - - IS ALREADY CONCLUDED BY THIS COURT BY THE SAID ORDER DATED 31.3.2015. WE MAY THEREFORE, PROCEED ON THAT BASIS . DESPITE THIS, THE QUESTION THAT STILL SURVIVES IS WHETHER THE REVENUE CAN TAX THE SAME INCOME IN THE HANDS OF THE COMPANY ON WHICH THE DIRECTORS HAD ALREADY PAID THE TAX AT THE SAME RATE AT WHICH THE COMPANY WOULD HAVE BEEN LIABLE TO BE ASSESSED. IN THIS CONTEXT, WE MAY RECALL THAT CONSISTENTLY BEFORE ASSESSING OFFICER, CIT(APPEALS) AND TRIBUNAL, THE ASSESSEE HAD CANVASSED THAT ALL THE FOUR DIRECTORS WHO HAD RECEIVED SUCH REMUNERATION, WERE TAXED IN THE HIGHEST BRACKET OF 30%; AT THE SAME RATE AT WHICH TH E ASSESSEE COMPANY AT THE RELEVANT TIME WAS ASSESSED. IN FACT, THE ASSESSEE HAD DEMONSTRATED BEFORE CIT(APPEALS) THAT THE TAX LIABILITY OF THE COMPANY ON SUCH DISPUTED REMUNERATION AMOUNT WAS EXACTLY THE SAME AS THE TAX THE FOUR DIRECTORS HAD PAID TO THE R EVENUE. TO THESE FACTUAL ASPECTS, EVEN THE REVENUE HAS, AT NO STAGE RAISED ANY DISPUTE. WE MAY THEREFORE, PROCEED ON THE BASIS THAT THE ELEMENT OF EXCESSIVE REMUNERATION REPRESENTS THAT INCOME OF THE COMPANY WHICH WAS EVENTUALLY TAXED IN THE HANDS OF THE D IRECTORS AT THE SAME RATE AT WHICH; HAD IT NOT BEEN SO DISTRIBUTED; WOULD HAVE BEEN TAXED IN THE HANDS OF THE COMPANY. IN THAT VIEW OF THE MATTER, THE QUESTION OF REVENUE NEUTRALITY WOULD IMMEDIATELY ARISE. A CERTAIN INCOME HAS ALREADY BEEN TAXED IN THE HA NDS OF THE DIRECTORS. PERMITTING THE REVENUE TO TAX THE SAME INCOME AGAIN AT THE SAME RATE IN THE HANDS OF THE PRINCIPAL PAYER WOULD AMOUNT TO DOUBLE TAXATION. ONLY ON THIS COUNT, WE ANSWER QUESTION IN FAVOUR OF THE APPELLANT - ASSESSEE AND AGAINST REVENUE, ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE TRIBUNAL. THE TAX APPEA L IS DISPOSED OF ACCORDINGLY. 18. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE AMOUNT HAS ALREADY BEEN BROUGHT TO TAX, IN THE HANDS OF THE RECIPIENT, THE SAME RATE OF TAX AS APPL ICABLE ON THIS ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT EVEN DISPUTED THIS FUNDAMENTAL FACTUAL ASPECT. IN THIS VIEW OF THE MATTER, AND IN THE LIGHT OF THE LAW LAID DOWN BY HON BLE JURISDICTIONAL HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS.1,25,00,050/ - . 19. GROUND NO.3 & 4 ARE THUS ALLOWED. 20 . IN GROUND NO.5, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : - I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 6 OF 11 5. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE BY A O OF RS.19,19,852/ - MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. LD. CIT(A) OUGHT TO HAVE DELETED DISALLOWANCE OF EXPENSES CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION. IT BE SO HELD NOW. 2 1 . SO FAR AS THIS DISALLOWANCE IS CONCERNED, IT HAS BEEN MADE FOR THE REASON THAT AS ASSESSEE IS FOLLOWING MERCANTILE METHOD OF ACCOUNTING, DEDUCTION CANNOT BE ALLOWED IN RESPECT OF EXPENSES INCURRED IN EARLIER YEARS. IN APPEAL, IT WAS HELD THAT SINCE IT WAS AN AGREED ADDITION AT ASSESSMENT STAGE, THE ASSESSEE CANNOT RAISE THE GRIEVAN CE AGAIN. THE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 22 . WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 2 3 . WE FIND THAT EVEN IN THE COURSE OF PROCEEDINGS BEFORE US, THE ASSESSEE HAS NOT FILED SPECIFIC DETAILS OF PRIOR PERIOD EXPENSES AND AS TO HOW THESE EXPENSES CRYSTALLISED DURING THE RELEVANT PREVIOUS YEAR. IN THIS VIEW OF THE MATTER, WE CONFIRM THE ACTION OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. 2 4 . GROUND NO.5 IS THUS DISMISSED. 2 5 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ITA NO.1419/AHD/2012 ASSESSMENT YEAR 2008 - 09 26. THIS APPEAL IS DIRECTED AGAINST LEARNED CIT(A) S ORD ER DATED 24 TH APRIL, 2012, IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008 - 09. 27. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS : - 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE A PPELLANT FILED INACCURATE PARTICULARS OF INCOME BY MAKING CLAIM OF EXPENDITURE WITHOUT ANY BASIS OF JUSTIFICATION AND THUS EXIGIBLE TO PENALTY U/S 271(1)(C) OF THE ACT ON THE ENHANCED INCOME OF RS.93,75,038/ - . LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT DISALLOWANCE OF PAYMENT U/S 40(A)(2)(B) OF THE ACT IN ABSENCE OF I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 7 OF 11 COMPARATIVE ANALYSIS IS NOT EXIGIBLE TO PENALTY SIMPLY BECAUSE CLAIM OF EXPENSES WAS HELD TO BE INADMISSIBLE. LD. CIT( A ) OUGHT TO HAVE DELETED PENALTY LEVIED WITHOUT ANY MERITS AND JUS TIFICATION. 2. LD. CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN HOLDING THE ASSESSEE RESPONSIBLE FOR FURNISHING INACCURATE PARTICULARS OF INCOME DESPITE DETAILED SUBMISSIONS WITH EVIDENCE PLACED ON RECORD TO SUBSTANTIATE THE CLAIM. THIS ACTION OF LD . CIT ( A ) TREATING CLAIM OF LEGITIMATE BUSINESS EXPENSES AS BOGUS CLAIM AND DEEMED CONCEALMENT BY HOLDING THE SAME TO BE COVERED BY EXPLANATION 1 TO SECTION 271(1 ) (C) OF THE ACT IS TOTALLY ERRONEOUS. 28. VIDE OUR ORDER ABOVE, ON THE QUANTUM APPEAL, THE RELATED QUANTUM ADDITION HAS BEEN DELETED. THE PENALTY, THEREFORE, HAS NO LEGALLY SUSTAINABLE BASIS. W E , ACCORDINGLY, DELETE THE SAME. 29. IN THE RESULT, ITA NO.1419/AHD/2012 IS ALLOWED. ITA NO. 2339 /AHD/2012 ASSESSMENT YEAR 200 9 - 10 30. THIS APPE A L IS ALSO FIL ED BY THE ASSESSEE AND DIRECTED AGAINST THE ORDER DATED 9 TH JULY, 2012, PASSED BY THE LEARNED C I T(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. 31. ON THE FIRST GROUND OF APPEAL, THE ASSES SEE HAS RAISED THE FOLLOWING GRIEVANCE: 1. LD. C I T(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY A O OF RS.1,69,91,458/ - PAYMENT FOR THE SERVICES RENDERED AND EXPENSES INCURRED BY HOLDING COMPANY ON BEHALF OF THE APPELLANT. LD. CIT( A) F AILED TO APPRECIATE THAT THE PAYMENT AUTHORISED BY BOARD RESOLUTION WAS INCURRED FOR FURTHERANCE OF BUSINESS OF THE APPELLANT. LD. CIT(A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE INSTEAD OF CONFIRMING THE VIEW OF A O THAT IT WAS DIVIDEND PAYMENT IN G R AB OF REIMBURSEMENT OF EXPENSES. 32. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING O FFICER NOTED THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS.1,69,91,458/ - BEING REIMBURSEMENT OF EXPENSES TO TATVA GLOBAL ENVIRONMENTAL LIMITED (FORMERLY KNOWN AS SEARC H ENVIRO LIMITED) A COMPANY WHICH HELD 79.95% SHARES IN THE ASSESSEE COMPANY. THIS I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 8 OF 11 AMOUNT WAS PAID FOR SHARING HELICOPTER TRAVEL COSTS AND PROMOTIONAL WORK. THE BOARD RESOLUTION SHOWING THESE ARRANGEMENTS WERE ALSO FILED. THE ASSESSING O FFICER, HOWEVE R, PROCEEDED TO DISALLOW THESE PAYMENTS UNDER SECTION 40A(2)(B) . IT WAS FURTHER STATED THAT THERE WAS NOTHING TO ESTABLISH THAT THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE LEARNED C I T(A ) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. 33. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POS ITION. 34. WE HAVE NOTED THAT SO FAR AS THE 40A(2)(B) DISALLOWANCE IS CONCERNED, THE ISSUE IS COVERED BY HON BLE JURISDICTIONAL HIGH COURT S JUDGEMENT IN THE CASE OF PWS ENGINEERS LIMITED (SUPRA) WHICH HAS BEEN DISCUSSED IN DETAIL IN PARAGRAPH NOS. 17 AND 18 OF THIS ORDER. THERE IS NO REASON TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 AS THE PAYMENT IS ALSO MADE TO THE SAME ENTITY, THOUGH THERE IS A CHANGE IN THE NAME OF THE COMPANY IN THIS YEAR. AS REGARDS THE GENUINENESS OF THE EXPENDITURE, WE FIND THAT THERE IS AN ARRANGEMENT ON RECORD THAT HELICOPTER CHARGES ARE TO BE BORNE EQUALLY BETWEEN THE ASSESSEE AND TATVA GLOBAL ENV IRONMENTAL LIMITED, AND THAT RELATED PAYMENTS ARE ACTUALLY M ADE TO INDO PACIFIC AVIATION LIMITED. THE DEBIT NOTE AND PAYMENT DETAILS ARE PLACED BEFORE US. THE EXP ENDITURE , THEREFORE , CANNOT BE SAID TO BE BOGUS OR FICTITIOUS. THE ONLY ISSUE IS APPORTIONMENT OF EXPENSES BETWEEN THE ASSESSEE AND TATVA GLOBAL ENVIRO NMENTAL LIMITED BUT THEN THAT ISSUE, IN THE LIGHT OF HON BLE JURISDICTIONAL HIGH COURT S JUDGEMENT IN THE CASE OF PWS ENGINEERS (SUPRA) AND ON THE GIVEN FACTS IS ACADEMIC. AS FOR THE MARKETING AND PROMOTIONAL EXPENSES , WE HAVE NOTED THAT ALL I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 9 OF 11 ALONG SIMILAR PAYMENTS HAVE BEEN ALLOWED AS DEDUCTION IN PART AND NO DISALLOWANCE UNDER SECTION 37(1) IS RESORTED TO. IN ANY CASE, THERE WAS NO SPECIFIC REQUISITION ABOUT DETAILS WHICH HAS NOT BEEN COMPLIED WITH AND THE OBSERVATIONS MADE BY THE AUTHORITIES BELOW PROCE ED ON VAGUE GENERALITIES. IT HAS ALSO BEEN STATED THAT SINCE THE ASSESSEE HAS MADE PROFITS, SUCH PAYMENTS MAY BE CAMOUFLAGE TO MAKE PAYMENTS OF DEFACTO DIVIDEND WITHOUT PAYMENT OF DIVIDEND DISTRIBUTION TAX. SUCH A SPECULATION IS ALSO DEVOID OF ANY BASIS, AND, AS HELD BY A CO - ORDINATE BENCH IN THE CASE OF ARIHANTAM INFRAPROJECTS PVT. LTD. VS. JCIT [(2016) 156 ITD 425 (PUNE)], THIS KIND OF A SPECULATION OR DOUBT CANNOT BE REASON ENOUGH TO DISALLOW THE EXPENDITURE INVOLVING PAYMENT TO HOLDING COMPANY. IN VI EW OF THESE DISCUSSIONS, WE DELETE THIS DISALLOWANCE AS WELL. 35. GROUND NO.1 IS THUS ALLOWED. 3 6 . ON THE SECOND GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS.11,07,852/ - BEING PROVISION FOR BAD AND DOUBTFUL DEBTS WRITTEN BAC K IGNORING THE SUBMISSIONS OF T H E APPELLANT. LD. CIT( A ) OUGHT TO HAVE DELETED SUCH DISALLOWANCE MADE BY AO. 3 7. SO FAR AS THIS ADDITION IS CONCERNED, IT IS NOT IN DISPUTE THAT IN THE CURRENT YEAR A PROVISION OF RS.11,07,852/ - WAS WRITTEN BACK AND TAKEN TO INCOME FROM OTHER SOURCES. HOWEVER, SINCE IT WAS NOT ALLOWED AS DEDUCTION IN THE ASSESSMENT YEAR 2006 - 07 WHEN PROVISION WAS CREATED, THE PROVISION BEING MADE AS ALSO PROVISION BEING WRITTEN BACK HAS TO BE TAX NEUTRAL. HOWEVER, THE ASSESSING O FFICER DISALLOWED THE DEDUCTION, TO NEUTRALISE THE WRITE BACK, ON THE GROUND THAT INCOME OF RS.11,07,852/ - WAS WRITTEN BACK. IN APPEAL, THE LEARNED C I T(A) HAS CONFIRMED THE SAME. AGGRIEV ED, THE ASSESSEE IS IN APPEAL BEFORE US. I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 10 OF 11 38. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 39. WE FIND THAT AS LONG AS ASSESSEE CAN DEMONSTRATE THA T CREATION OF THIS PROVISION IN 2006 - 07 WAS TAX NEUTRAL, THERE CANNOT BE ANY JUSTIFICATION IN BRINGING IT TO TAX IN THIS ASSESSMENT YEAR. EFFECTIVELY, THEREFORE, DEDUCTION IS TO BE ALLOWED IN THE CURRENT YEAR, TO NEUTRALISE PROVISION WRITTEN BACK BEING AD DED TO THE INCOME, SUBJECT TO VERIFICATION OF PROVISION BEING TAX NEUTRAL IN 2006 - 07. IF THE PROVISION WAS DISALLOWED IN COMPUTATION OR ASSESSMENT OF INCOME, IN ASSESSMENT YEAR 2006 - 07, THE ASSESSEE MUST SUCCEED IN THIS YEAR. HOWEVER, AS RELEVANT FACTS R EMAIN TO BE VERIFIED, WE REMIT THE MATTER FOR LIMITED VERIFICATION AS ABOVE. 40. I N THE RESULT, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES AS ABOVE. 41. ON THE THIRD GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 3. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING EXCESSIVE DISALLOWANCE MADE BY AO OF RS.99,533/ - INVOKING PROVISIONS OF SECTION 14A OF THE ACT IGNORING THE FACT THAT THE APPELLANT SUO MOTO DISALLOWED APPROPRIATE EXPENSES FOR EARNING DIVIDEND INCOME. LD. CIT(A) OU GHT TO HAVE ACCEPTED THE WORKING OF THE APPELLANT AND DELETED EXCESSIVE DISALLOWANCE AS WORKED OUT BY AO. 42 . AS REGARDS THIS ISSUE, WHILE DECIDING GROUND NO.1 IN ITA NO.108/AHD/2012 FOR ASSESSMENT YEAR 2008 - 09, WE HAVE DEALT WITH THE SAME ISSUE VIDE PA RAGRAPH NOS . 3 TO 7 ABOVE. IN THIS CASE ALSO, THE DISALLOWANCE OFFERED SUO MOTU IS MORE THAN % OF AVERAGE INVESTMENT AND NO PART OF INTEREST IS ATTRIBUTABLE TO INVESTMENT IN SHARE YIELDING TAX EXEMPT INCOME . FOLLOWING THE S TAND TAKEN BY US IN ASSESSMENT YEAR 2008 - 09, W E HOLD THA T THE L D . CIT (A) WAS INDEED IN ERROR IN CONFIRMING TH E IMPUGNED DISALLOWANCE. WE DELETE THE SAME. I.T.A. N O S . 108, 1419 & 2339 /AHD/201 2 ASSESSMENT YEA RS : 2008 - 09, 2008 - 09 & 2009 - 10 PAGE 11 OF 11 43 . GROUND NO.3 IS THUS ALLOWED. 4 4 . IN THE RESULT, ITA NO.2339/AHD/2012 IS PARTLY ALLOWED . 4 5 . TO SUM UP, ITA NO.108/AHD/2012 IS P ARTLY ALLOWED, ITA NO.1419/AHD/2012 IS ALLOWED AND ITA NO.2339/AHD/2012 IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 7 TH DAY OF DECEMBER , 2016. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCO UNTANT MEMBER) DATED: 7 TH DAY OF DECEMBER , 2016. COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRI BUNAL AHMEDABAD BENCHES, AHMEDABAD