Shroff Eye Centre, New Delhi V. ACIT, New Delhi

ITA 1560/DEL/2012

• Counselvise Citation: 156020114 RSA 2012
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHIDR
• Assessee Lawyers: S C MALHOTRAAR S
• Keywords: Reopening of assessment; Capital asset; Principle of natural justice; Diversion of income; Rule of consistency; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE HONBLE VICE PRESIDENT SHRI G.C. GUPTA AND HONBLE ACCOUNTANT MEMBER SHRI A.N. PAHUJA ITA NO.1560/DEL./2012 ASSESSMENT YEAR: 2005-06 SHROFF EYE CENTRE, A-9, KAILASH COLONY, NEW DELHI-48 VS. ASSISTANT CIT, CIRCLE-37(1), ROOM NO. 401,4 TH FLOOR, N BLOCK, VIKAS BHAWAN, NEW DELHI [PAN AABFS 6789 D ] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI P.C. YADAV & S.C. MALHOTRA,AR S REVENUE BY SMT. VEENA JOSHI,DR DATE OF HEARING 06-06-2012 DATE OF PRONOUNCEMENT 03-08-2012 O R D E R A.N. PAHUJA :- THIS APPEAL FILED ON 03.04.2012 BY THE ASSESSEE A GAINST AN ORDER DATED 01.03.2012 OF THE CIT(A)-XXVIII, NEW DE LHI, RAISES THE FOLLOWING GROUNDS:- 1) THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINS T FACTS AND LAW. 2) THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN CON FIRMING THE DISALLOWANCE OF ` `3 LACS BEING CHARGE ON RECEIPTS. 3) THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONF IRMING THE DISALLOWANCE OF ` `75,971/- OUT OF GENERAL REPAIRS & MAINTENANCE EXPENSES. 4) THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHO LDING THE ACTION OF ASSESSING OFFICER FOR RE-OPENING THE ASSESSMENT U/S 147/148 OF THE INCOME-TAX ACT, 1961. 5) THAT THE FURTHER GROUNDS SHALL BE SUBMITTED AT T HE TIME OF HEARING. ITA NO.1 560/DEL./2012 2 2. ADVERTING FIRST TO GROUND NO.2 IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME O F ` ` 1,19,38,802/- FILED ON 28.10.2005 BY THE ASSESSEE, A PARTNERSHIP FIRM CARR YING ON THE PROFESSION OF OPHTHALMOLOGY SURGEONS, WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). DURING THE CO URSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2007-08, THE ASSESSING OFFICER[AO IN SHO RT] NOTICED THAT MRS. MEHRU MINOO SHROFF W/O LATE DR. M.S. SHROFF , DECEASED PA RTNER OF THE FIRM, CONTINUED TO RECEIVE 2% OF THE GROSS RECEIPTS SUBJECT TO A MAXIM UM OF ` ` 3 LACS IN TERMS OF DEED OF PARTNERSHIP DATED 1.4.2003. ACCORDING TO TH E AO, THIS WAS MERELY AN ARRANGEMENT TO REDUCE THE TAX LIABILITY OF THE FIRM AND THEREFORE, THE AMOUNT OF ` `3 LACS PAID TO MS. MEHRU MINOO SHROFF WAS DISALLOW ED IN THE AY 2007-08. IN THE LIGHT OF HIS FINDINGS IN THE AY 2007-08, THE AO REOPENED THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION U/S 147 OF THE ACT, A FTER RECORDING REASONS IN WRITING, WITH THE SERVICE OF A NOTICE U/S 148 OF TH E ACT ISSUED ON 30.03.2010. IN RESPONSE, THE ASSESSEE SUBMITTED THAT RETURN FILED ON 28 TH OCTOBER, 2005 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO REFERRED TO CLAUS E 13 OF PARTNERSHIP DEED DATED 01.04.2003, STIPULATING THAT IN THE EVENT O F DEATH OF THE PARTNER WIFE OF THE PARTNER OR HIS LEGAL HEIRS IN THE EVENT WIFE I S NOT SURVIVING, SHALL BE ENTITLED TO RECEIVE 2% OF THE GROSS RECEIPTS EVERY YEAR FOR A PERIOD OF 10 YEARS FROM THE DATE OF DEATH SUBJECT TO A MAXIMUM OF ` 3 LACS IN CASE OF FIRST PARTNER VIZ. DR. M.S SHROFF AND ` 6 LACS IN THE CASE OF REMAINING TWO PARTNERS.. DR. M.S. SHROFF DIED ON 15.03.2004. CONSEQUENTLY, PARTNERSHIP WAS RECONSTIT UTED IN TERMS OF PARTNERSHIP DEED EXECUTED ON 15.3.2004 . THE CLAUSE 13 WAS ALSO MODIFIED. TO A QUERY BY THE AO DURING THE COURSE OF REASSESSMENT PROCEEDING S, THE ASSESSEE REPLIED THAT AMOUNT PAYABLE TO MRS. MEHRU MINOO SHROFF WAS A FIRST CHARGE ON THE RECEIPTS OF THE FIRM, BEING DIVERSION OF INCOME BY AN OVERRIDING TITLE. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED AN AMOUNT OF ` `3 LACS. ITA NO.1 560/DEL./2012 3 3. ON APPEAL, THE ASSESSEE CONTENDED THAT IN TERMS OF CLAUSE 13 OF PARTNERSHIP DEED DATED 01.04.2003, WIFE OF LATE DR. M.S. SHROFF BECAME ENTITLED TO AN AMOUNT OF ` 3 LACS IN THE YEAR UNDER CONSIDERATION AND ` 12,500/- IN THE AY 2004-05. IN THE AY2004-05 ,AMOUNT CLAIMED WAS ALLO WED AS SUCH. IN THE AY 2006-07 ALSO, THEIR CLAIM WAS ALSO ALLOWED IN ORDER DATED 28 TH NOVEMBER, 2008 U/S 143(3) OF THE ACT. RELYING UPON THE DECISIONS IN CIT VS. SITALADAS TIRATHDAS, (1961) 41 ITR 367, 374-5 (SC); MOTO LAL CHHADAMI LA L JAIN VS. CIT (1991) 190 ITR 1, 10-11 (SC); CIT VS. CRAWFORD BAYLEY & CO., 1 06 ITR 884 (BOM.); CIT VS. L. BANSI DHAR , 67 ITR 374(DEL.); L. HANS RAJ GUPTA AND ANOTHER VS. CIT, 73 ITR 765 (DELHI); RSM & CO. VS. ADDL. CIT (2010) 125 ITD 243 (MUM.); THE ASSESSEE CONTENDED THAT AMOUNT PAYABLE TO MRS. MEHRU MINOO S HROFF WAS A CHARGE ON THE RECEIPTS OF THE FIRM AND WAS THUS, ALLOWABLE . HOW EVER, THE LD. CIT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND RELYING ON DECISION IN K.C. BOSE & COMPANY VS. CIT, 156 ITR 701 (CAL.)(1985), UPHELD T HE FINDINGS OF THE AO, IN THE FOLLOWING TERMS:- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND WRITT EN SUBMISSION OF THE APPELLANT. THE ASSESSING OFFICER HAS CONTEND ED THAT THE PARTNERSHIP DEED DATED 15TH MARCH. 2004 CLAUSE 13 M ENTIONS THAT MRS. MEHRU MINOO SHROFF WIFE OF LATE DR. M.S. SHROF F EX-PARTNER OF THE FIRM WILL CONTINUE TO RECEIVE 2% OF THE GROSS R ECEIPTS SUBJECT TO A MAXIMUM OF RS.300000/- IN TERMS OF DEED OF PARTNE RSHIP DATED 01.04.2003. DR. M.S. SHROFF DIED ON 15.03.2004. VID E ORDER SHEET ENTRY DATED 19.10.2010, ASSESSEE WAS ASKED TO SHOW CAUSE WHY CHARGE ON RECEIPTS NOT BE DISALLOWED BEING PAYMENT MADE TO WIFE OF EX-PARTNER OF THE FIRM WHO HAS NO REASON TO BE P AID SINCE THE SAID CHARGE HAS BEEN DEBITED TO THE P & L A/C OF TH E FIRM. VIDE SUBMISSION DATED 20.11.2009; ASSESSEE SUBMITTE D THAT THE AMOUNT PAYABLE TO MRS. MEHRU MINOO SHROFF WAS A CHA RGE ON THE INCOME OF THE FIRM. IT WAS DIVERSION OF INCOME BY A N OVERRIDING TITLE WHICH WAS CREATED VIDE VALID AGREEMENT. IT IS SEEN THAT THE PARTNERSHIP FIRM WAS A FAMILY PARTNERSHIP COMPRISIN G OF LATE DR. M.S. SHROFF. THE CLAIM OF THE APPELLANT WOULD BE REJECTED ON THE FOLLOWING GROUNDS: - ITA NO.1 560/DEL./2012 4 (I) THE SAID CLAIM IS NOT 'EXPENDITURE' IN TRUE SE NSE. (II) THE WIFE OF THE DECEASED PARTNER HAS NO CLAIM ON THE FIRM'S NAME. THE GOODWILL I.E., THE NAME OF THE PARTNERSHI P FIRM WAS NOT THE PROPERTY OF ANYONE INDIVIDUAL. EVEN IF IT IS CO NSIDERED THAT THE FIRM HAS EARNED A NAME J GOODWILL OVER A PERIOD OF YEAR, THE SUSTAIN ABILITY OF THE FIRM'S NAME WOULD LARGELY DE PEND ON THE WORK DONE BY THE PRESENT PARTNERS. ANY NEW WORK, IN THE ABSENCE OF THE MAIN PARTNER, LATE DR. SHROFF, WILL COME TO THE FIR M NOT BASED ON GOODWILL BUT BASED ON THE PERFORMANCE OF THE FIRM W HICH MATTERS IN THE LONG RUN. (III) EVEN IF IT IS HYPOTHETICALLY ASSUMED FOR THE SAKE OF DISCUSSION THAT THE PAYMENT ON ACCOUNT OF GOODWILL IS TO BE MA DE AS PER THE PARTNERSHIP DEED, THAN THE BASIS FOR ARRIVING AT A FIGURE PER MONTH/ANNUM FROM THE FIRM FOR HER LIFETIME IS NOT P ROVIDED IN THE DEED. EVEN OTHERWISE, THE AMOUNT EARMARKED IS VERY UNREASONABLE. ALLOWING SUCH CLAIM DISTORTS THE TRUE PICTURE OF NET PROFIT OF THE FIRM AND SUCH CLAIMS ARE NOT PROVIDED IN THE STATUTES EITHER. (IV) RELIANCE IS PLACED ON THE FOLLOWING CASE LAW O F KC BOSE & CO. VS CIT 156 ITR 701 (CAL.) (1985) 'DIVERSION OF INCOME BY OVERRIDING TITLE' --- MEANI NG OF. IN DETERMINING WHETHER THERE HAS BEEN DIVERSION OF INCOME BY OVERRIDING TITLE, IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLI GED TO APPLY OUT OF THIS INCOME AND AN AMOUNT WHICH BY THE NATURE OF TH E OBLIGATION CANNOT BE SAID TO BE A PART OF THE INCOME OF THE ASSESSEE. WHERE BY AN OBLIGATION, INCOME IS DIVERTED BEFORE IT REACHED TH E ASSESSEE, IT IS DEDUCTIBLE; BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSE E, THE SAME CONSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIR ST KIND OF PAYMENT WHICH CAN TRULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER A PORTION OF ONE'S INC OME, WHICH HAS BEEN RECEIVED AND IS SINCE APPLIED. THE FIRST IS A CASE IN WHICH THE INCOME NEVER REACHES THE ASSESSEE, WHO EVEN IF HE WERE TO COLLEC T IT, DOES SO, NOT AS PART OF HIS INCOME, BUT FOR AND ON BEHALF OF THE PE RSON TO WHOM IT IS PAYABLE.' 'SECTION 4 OF THE IT ACT, 1961 - INCOME - DIVERSION OF AT SOURCE BY OVERRIDING TITLE - ASSESSMENT YEARS 1966-67 TO 1969 -70 - IN TERMS OF PARTNERSHIP DEED, ON DEATH OF PARTNER 'K' HIS SHARE OF GOOD-WILL WOULD ITA NO.1 560/DEL./2012 5 AUTOMATICALLY DEVOLVE ON REMAINING TWO PARTNERS, IN CONSIDERATION WHEREOF WIDOW OF DECEASED PARTNER WOULD BE CREDITED WITH A FIXED SUM PAYABLE IN MONTHLY INSTALLMENTS - ON DEATH OF 'K' S URVIVING PARTNERS WHILE CONTINUING PARTNERSHIP UNDER FRESH DEED, VOLUNTARIL Y PROVIDED FOR PAYMENT OF SAID AMOUNT TO WIDOW - ACCORDINGLY, CHAR GE WAS CREATED ON ALL ASSETS OF ASSESSEE-FIRM - WHETHER SAID PROVISIO N FOR PAYMENT OF FIXED AMOUNT IN MONTHLY INSTALLMENT WAS A DISPOSITION OF PROPERTY AFTER DEATH IN NATURE OF A CONDITIONAL BEQUEST AND COULD NOT BE HELD TO BE A TRANSACTION OF SALE SIMPLICITER - HELD, YES - WHETH ER MERELY BECAUSE SURVIVING PARTNERS AGREED TO APPLY A PART OF INCOME OF PARTNERSHIP FOR PURPOSE OF LIMITED OBLIGATION, IN COULD NOT BE HELD THAT INCOME OF SUBSEQUENT PARTNERSHIP DID NOT ACCRUE FULLY IN HAND S OF PARTNERSHIP OR ANY PART THEREOF WAS DIVERTED BY AN OVERRIDING TITLE OR THAT SAID PARTNERSHIP HAD BECOME ONLY A COLLECTOR OF SAID AMOUNTS FOR WID OW - HELD YES - WHETHER, THEREFORE, SAID AMOUNTS WERE NOT ALLOWABLE AS DEDUCTION FROM TOTAL INCOME OF ASSESSEE - HELD, YES.' IN VIEW OF THE REASONING [(I TO III) SUPRA], THE CL AIM OF RS.300000 J - AS (ANNUITY)' IS DISALLOWED. I HAVE PERUSED THE CASE LAWS CITED BY THE APPELLANT . THE FACTS OF THE PRESENT CASE ARE DIFFERENT AND DISTINGUISHABLE FROM THE CASE LAWS RELIED UPON BY THE APPELLANT. I HAVE DULY CONSIDERED THE CONTENTION OF THE ASSESS ING OFFICER AND ALSO PERUSED THE CASE LAW I.E. KC BOSE & CO. VS CIT 156 ITR 701 (CAL.) (1985). THE ASSESSING OFFICER HAS RIGHTLY DI SALLOWED THE CLAIM OF ` .300000/- PAID TO MRS. SHROFF. THE ORDER OF THE ASS ESSING OFFICER IS SUSTAINED. APPEAL ON THIS GROUND IS DISM ISSED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE WHILE CARRYING US THROUGH CLAUSE 13 IN THE PARTNERSHIP DEED DATED 1.4.2003 & 15 TH MARCH, 2004 MENTIONED THAT AMOUNT PAYABLE TO MRS. MEHRU MINOO SHROFF WIFE OF LATE DR. M.S. SHROFF WAS CHARGE ON THE RECEIPTS OF THE FIRM. WHILE REFERRING TO ASSESSMENT ORDER FOR THE AYS 2004-05 AND 2006-07, THE LD. AR CONTENDED THAT THEIR CLAIM WAS ALLOWABLE, FOLLOWING THE PRINCIPLE OF CONSISTENCY. SINCE THE AMOUNT PAYABLE TO MRS. MEHRU MINOO SHROFF WAS A CHARGE ON THE RECEIPTS OF THE FI RM, THE LD. AR WHILE REFERRING TO DECISIONS IN CIT VS. SITALADAS TIRATHDAS, (1961) 41 ITR 367, 374-5 (SC); CIT VS. SUBRAMANIAM BROTHERS,236 ITR 148(MAD.);CIT VS. SUNIL J KINARIWALA,259 ITR ITA NO.1 560/DEL./2012 6 10(SC) AND RSM & CO. VS. ADDL. CIT (2010) 125 ITD 2 43 (MUM.) VEHMENTLY ARGUED THAT THEIR CLAIM WAS ADMISSIBLE. ON THE OTHE R HAND, THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS RELIED UPON BY THE LD. AR. THE ISSUE BEFORE US IS AS TO WHETHER THE AMOUNT PAID BY THE ASSESSE E TO MRS. MEHRU MINOO SHROFF WIFE OF LATE DR. M.S. SHROFF ,IS FIRST CHARGE ON RE CEIPTS OF THE FIRM IN TERMS OF CLAUSE 13 OF THE PARTNERSHIP DEED EXECUTED ON 1.4.2 003. HERE WE MAY HAVE A LOOK AT THE RELEVANT CLAUSE 13 OF PARTNERSHIP DEED EXECUTED ON 1.4.2003,WHICH READS AS UNDER:- '13. THAT IN EVENT OF THE DEATH OF A PARTNER, HIS W IFE, IF SURVIVING, OR HIS LEGAL HEIRS IF HIS WIFE IS NOT SURVIVING WILL B E ENTITLED TO RECEIVE 2% OF THE GROSS RECEIPTS EVERY YEAR FOR A PERIOD OF 10 YEARS FROM THE DATE OF DEATH SUBJECT TO A MAXIMUM OF RS.3,00,0 00 J - PER YEAR IN THE CASE OF PARTY OF THE FIRST PART AND RS.6,00, 000/- PER ANNUM IN THE CASE OF THE PARTIES OF THE SECOND & THIRD PARTS RESPECTIVELY, FROM THE CONTINUING FIRM OR FROM THE PARTNER/S WHO CARRIES ON THE PROFESSION UNDER THE NAME AND STYLE OF SHROFF EYE C ENTRE. THIS AMOUNT WILL BE FIRST CHARGE ON THE RECEIPTS OF THE CONTINUING FIRM/PARTNER.' 5.1 THE PARTNERSHIP WAS RECONSTITUTED ON 15 TH MARCH, 2004 ON THE DEMISE OF DR. M.S. SHROFF AND THE CLAUSE 13 IN THE SAID PARTN ERSHIP DEED READ AS UNDER:- '13. THAT IN THE EVENT OF THE DEATH OF A PARTNER, H IS WIFE, IF SURVIVING, OR HIS LEGAL HEIRS IF HIS WIFE IS NOT SURVIVING WIL L BE ENTITLED TO RECEIVE 2% OF THE GROSS RECEIPTS EVERY YEAR FOR A PERIOD OF 10 YEARS FROM THE DATE OF DEATH SUBJECT TO A MAXIMUM OF RS.9,00,0 00/- PER ANNUM FROM THE CONTINUING FIRM OR FROM THE PARTNER WHO CA RRIES ON THE PROFESSION UNDER THE NAME AND STYLE OF SHROFF EYE C ENTRE. THIS AMOUNT WILL BE FIRST CHARGE ON THE RECEIPTS OF THE CONTINUING FIRM/PARTNER.' 5.2 THE PLEA OF THE ASSESSEE IS THAT THE AMOUNT PA YABLE TO MRS. MEHRU MINOO SHROFF WAS A FIRST CHARGE ON THE RECEIPTS OF THE FIRM IN TERMS OF AFORESAID ITA NO.1 560/DEL./2012 7 CLAUSE 13 OF THE PARTNERSHIP DEED DATED 1.4.2003 AN D WAS, THUS DIVERSION OF INCOME BY AN OVERRIDING TITLE, WHICH WAS CREATED UN DER A VALID AGREEMENT. THE LD. AR RELIED UPON THE NUMBER OF DECISIONS IN THIS CONNECTION .IN SITALADAS TIRATHDAS (SUPRA) ,HONBLE APEX COURT WHILE REFERRI NG TO DECISIONS IN RAJA BEJOY SINGH DUDHURIA'S CASE [1933] 1 ITR 135 (PC) AND IN P.C. MULLICK'S CASE [1938] 6 ITR 206 (PC) LAID DOWN A TEST TO DETERMINE AS TO W HETHER OR NOT INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE AND OBSERVE D AS UNDER:- 'IN OUR OPINION, THE TRUE TEST IS WHETHER THE AMOUN T SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACHED THE ASSESSEE AS HIS INCOME. OBLIGATIONS, NO DOUBT, THERE ARE IN EVERY CASE, BUT IT IS THE NATURE OF TH E OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMO UNT WHICH A PERSON IS OBLIGED TO APPLY OUT OF HIS INCOME AND AN AMOUNT WH ICH BY THE NATURE OF THE OBLIGATION CANNOT BE SAID TO BE A PART OF THE I NCOME OF THE ASSESSEE. WHERE BY THE OBLIGATION INCOME IS DIVERTED BEFORE I T REACHES THE ASSESSEE, IT IS DEDUCTIBLE; BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSE E, THE SAME CONSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIR ST KIND OF PAYMENT WHICH CAN TRULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER A PORTION OF ONE'S OWN IN COME, WHICH HAS BEEN RECEIVED AND IS SINCE APPLIED. THE FIRST IS A CASE IN WHICH THE INCOME NEVER REACHES THE ASSESSEE, WHO EVEN IF HE WERE TO COLLEC T IT, DOES SO, NOT AS PART OF HIS INCOME, BUT FOR AND ON BEHALF OF THE PERSON TO WHOM IT IS PAYABLE.' 5.3 FOLLOWING THE AFORESAID DECISION, HONBLE BOMB AY HIGH COURT IN THE CASE OF CRAWFORD BAYLEY & CO. (SUPRA), CONCLUDED AS UNDER:- 9. 'THE FIRST TWO CONTENTIONS OF MR. JOSHI CAN BE DISCUSSED TOGETHER, BECAUSE THEY ARE DIFFERENT PHASES OF THE SAME QUESTION. IN RESPECT OF THIS MATTER THE MATERIAL QUESTION TO BE CONSIDERED IS, IS THERE DIVERSION OF INCOME BY AN OVERRIDING TITLE OR WHETHER THERE IS AN APPLICATION OF INCOME AFTER IT ACCRUED TO THE AS SESSEE-FIRM. THE TRUE TEST IN DETERMINING THIS QUESTION IS LAID DOWN IN SITALDAS TIRATHDASS CASE (SUPRA). THE TRUE TEST FOR THE APP LICATION OF THE RULE OF DIVERSION OF INCOME BY AN OVERRIDING CHARGE, IS WHETHER THE AMOUNT SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACH ED THE ASSESSEE AS HIS INCOME. OBLIGATIONS, NO DOUBT, THER E ARE IN EVERY CASE, BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PER SON IS OBLIGED ITA NO.1 560/DEL./2012 8 TO APPLY OUT OF HIS INCOME AND AN AMOUNT WHICH BY T HE NATURE OF THE OBLIGATION CANNOT BE SAID TO BE A PART OF THE I NCOME OF THE ASSESSEE. WHERE BY THE OBLIGATION INCOME IS DIVERTE D BEFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE; BUT WHERE T HE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION A FTER SUCH INCOME REACHES THE ASSESSEE, THE SAME CONSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WHICH CAN T RULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBL IGATION TO PAY ANOTHER A PORTION OF ONES OWN INCOME, WHICH HAS BE EN RECEIVED AND IS SINCE APPLIED. IF REGARD BE HAD TO THE RELEVANT PROVISIONS OF THE PARTNERSHIP DEEDS, ANNEXS. A, B AND C, IT IS QUITE APPARE NT THAT THIS IS NOT A CASE OF APPLICATION OF INCOME AFTER IT ACCRUED DUE TO THE ASSESSEE, BUT IT IS CLEARLY A CASE OF DIVERSION OF INCOME BY AN OVERRIDING TITLE IN RESPECT OF PAYMENT. UNDER THESE PARTNERSHIP DEED S THE ASSESSEE-FIRM IS TO CONTINUE FOR AN INDEFINITE PERI OD AND IT IS NOT GOING TO BE DISSOLVED BY MERE DEATH OR RETIREMENT OF ANY PARTNER. THERE IS A CLEAR AND EXPLICIT PROVISION IN ALL THE PARTNERSHIP DEEDS THAT UPON AN ACTIVE PARTNER BECOMING A SLEEPING PAR TNER OR UPON THE DEATH OR RETIREMENT OF ANY ACTIVE PARTNER, THE SURVIVING OR CONTINUING ACTIVE PARTNER OR PARTNERS SHALL SUCCEED TO THE SHARE OF THE OUTGOING ACTIVE PARTNER IN THE PARTNERSHIP BUSI NESS AND THE PROPERTY AND GOODWILL THEREOF. THE SURVIVING OR CON TINUING ACTIVE PARTNERS ARE ALSO TO UNDERTAKE ALL THE DEBTS, LIABI LITIES AND OBLIGATIONS OF THE PARTNERSHIP. THUS, IT IS QUITE C LEAR HAVING REGARD TO THESE PROVISIONS THAT EVEN THOUGH A PARTNER MAY CEASE TO BE A PARTNER BY REASON OF HIS DEATH, HIS LEGAL REPRESENT ATIVE WILL NOT BE ENTITLED TO ANY SHARE IN THE GOODWILL OF THE FIRM O R COMPENSATION IN LIEU THEREOF. THE PAYMENT TO THE WIDOW OF A DECEASE D PARTNER UNDER THESE PARTNERSHIP DEEDS IS NOT DEPENDENT UPON THE ASSESSEE-FIRM INCURRING ANY PROFITS OR LOSSES. IT I S AN ABSOLUTE OBLIGATION AND EVEN THOUGH THERE MAY BE NO PROFITS IN A PARTICULAR YEAR MADE BY THE ASSESSEE-FIRM THE OBLIGATION TO PA Y TO THE WIDOW UNDER CL. 33 OF THE PARTNERSHIP DEED, ANNEX. A, A ND CLS. 8 AND 34 OF THE PARTNERSHIP DEED, ANNEX. B, IS ABSOLUTE. W HEN THE OBLIGATION TO PAY SUCH AMOUNT TO THE WIDOW OF A DEC EASED PARTNER IS ABSOLUTE, THERE CAN BE NO QUESTION OF APPLICATIO N OF INCOME BY THE ASSESSEE-FIRM AFTER IT ACCRUED TO IT. IN FACT, SUCH PAYMENT IS TO BE MADE EVEN THOUGH NO PROFITS WHATSOEVER MAY HAVE BEEN MADE. THIS PROVISION SHOWS THAT IT IS AN OBLIGATION IN TH E NATURE OF TRUST. ORDINARILY, IT IS TRUE THAT A PERSON WHO IS NOT A P ARTY TO THE CONTRACT CANNOT ENFORCE IT, BUT THERE ARE SEVERAL WELL RECOG NIZED EXCEPTIONS TO THIS RULE. ONE OF THE WELL RECOGNIZED EXCEPTIONS IS A CESTUI QUE TRUST. IN A CESTUI QUE TRUST EVEN THOUGH A PERSON M AY NOT BE A PARTY TO A CONTRACT HE CAN ENFORCE HIS RIGHT UNDER CONTRA CT BY ADOPTING ITA NO.1 560/DEL./2012 9 APPROPRIATE LEGAL PROCEEDINGS. SUCH IS THE CASE SO FAR AS THE RIGHTS OF A WIDOW OF A DECEASED PARTNER UNDER THESE PARTNE RSHIP DEEDS ARE CONCERNED. SUCH PAYMENTS HAVE TO BE MADE BY REA SON OF AN OVERRIDING TITLE AND THERE IS NO QUESTION OF INCOME BEING APPLIED BY THE ASSESSEE-FIRM AFTER IT ACCRUED TO IT. FURTHER I T SHOULD BE NOTED THAT NO QUESTION OF ALLOWING AN EXPENDITURE UNDER S . 10(2)(XV) OF THE INDIAN IT ACT, 1922, OR THE CORRESPONDING PROVISION S OF THE IT ACT, 1961, ARISE IN THE PRESENT CASE, BECAUSE DEDUCTION IS CLAIMED NOT AS AN EXPENDITURE UNDER THE EXCEPTION BUT IT IS CLA IMED BY WAY OF PAYMENT MADE IN RESPECT OF ITEMS WHICH ARE OBLIGATI ONS IN THE NATURE OF TRUST AND SUCH PAYMENTS ARE REQUIRED TO B E MADE BEFORE THE INCOME EVEN ACCRUED TO THE ASSESSEE....' 5.4 IN K. C. BOSE AND CO.'S CASE(SUPRA) ,FOLLOWED BY THE LD. CIT(A), A PERSONAL OBLIGATION WAS IMPOSED ON THE SURVIVING PA RTNERS AND ONLY IN DISCHARGE OF THE PERSONAL OBLIGATION OF THE SURVIVING PARTNER S, CERTAIN PAYMENTS WERE MADE . THE RELEVANT CLAUSE IN THE PARTNERSHIP DEED IN THI S DECISION READ AS UNDER: ' IN THE EVENT OF THE DEATH OF THE PARTY OF THE FIR ST PART OR THE PARTY OF THE THIRD PART DURING THE CONTINUANCE OF THE PARTNERSHIP, THEIR SH ARES IN THE GOODWILL OF THE FIRM WOULD AUTOMATICALLY PASS ON TO THE CONTINUING PARTN ERS AND AS A CONSIDERATION THEREFOR, IN THE CASE OF THE PARTY OF THE FIRST PAR T, HIS WIDOW WILL BE CREDITED WITH A SUM OF RS. 50,000 AND IN THE CASE OF THE PARTY OF T HE THIRD PART, HIS WIDOW WILL BE CREDITED WITH SUM OF BY RS. 16,000 DEBITING THE AMO UNTS TO THE GOODWILL ACCOUNT. THESE SUMS OF RS. 50,000 AND RS. 16,000 WILL BE REP AYABLE AT THE RATE OF RUPEES THREE HUNDRED ONLY PER MONTH TO THE WIDOW OF THE PA RTY OF THE FIRST PART OR TO HER NOMINEE IN CASE OF HER DEMISE PRIOR TO THE FULL REP AYMENT OF RS. 50,000 AND AT THE RATE OF RUPEES ONE HUNDRED ONLY PER MONTH TO THE WI DOW OF THE PARTY OF THE THIRD PART OR HER NOMINEE IN CASE OF HER DEMISE BEFORE TH E FULL PAYMENT OF RS. 16,000. THESE MONTHLY INSTALMENTS OF RS. 300 AND RS. 100 WI LL BE PAYABLE ON THE LAST WORKING DAY OF THE MONTH FOR WHICH THE INSTALMENTS ARE DUE. FOR THE DUE PAYMENT OF THESE AMOUNTS ALL ASSETS INCLUDING OUTSTANDING FEES , CASH AND BANK BALANCES WOULD REMAIN CHARGED. THIS WOULD, HOWEVER, NOT AFFECT THE SETTLEMENT OF ACCOUNT OF ANY RETIRING OR DECEASED PARTNER IN TERMS OF CLAUSES 17 OR 20 HEREOF.' 5.41 THE TRIBUNAL IN THE AFORESAID CASE,FOUND TH AT THE ASSESSEE HAD PURCHASED THE SHARE OF LATE K.C. BOSE IN THE GOODWILL OF THE FIRM ON THE DEATH OF THE LATTER AT A DEFINITE PRICE OF ` 50,000 AND THEREBY ACQUIRED A CAPITAL ASSET. IT WAS HELD THAT THE AMOUNT REPRESENTED A CAPITAL EXPENDITURE EVEN T HOUGH IT WAS TO BE PAID IN INSTALMENTS OVER A PERIOD. THE TRIBUNAL HELD FURTHE R THAT THOUGH THE ASSETS OF THE ASSESSEE INCLUDING FEES REMAINED CHARGED FOR THE PA YMENT OF THE SAID AMOUNT, IT WOULD NOT MAKE ANY DIFFERENCE IN THE NATURE OF THE EXPENDITURE AND, AS SUCH, THE ITA NO.1 560/DEL./2012 10 ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION OF THE SAID AMOUNTS ON THE GROUND THAT THE SAME WAS BEING PAID UNDER AN OVERRIDING TI TLE IN FAVOUR OF THE WIDOW. ON APPEAL BY THE ASSESSEE,HONBLE HIGH COURT FOUND T HAT THE AFORESAID PROVISION IN PARTNERSHIP DEED WAS A DISPOSITION OF PROPERTY A FTER DEATH IN THE NATURE OF A CONDITIONAL BEQUEST AND COULD NOT BE HELD TO BE, TR ANSACTION OF SALE SIMPLICITER. BY OPERATION OF THE AFORESAID PROVISION, ON THE DEA TH OF K. C. BOSE, THE SHARE OF K. C. BOSE IN THE GOODWILL OF THE FIRM DEVOLVED ON THE CONTINUING PARTNERS, D. BANERJEE AND T. G. MENON, WITH AN OBLIGATION ON THE IR PART TO PAY A LUMP SUM TO THE WIDOW OF K. C. BOSE. THIS OBLIGATION, IN OUR VI EW, WAS A PERSONAL OBLIGATION OF THE SURVIVING PARTNERS. IN ORDER TO DISCHARGE THE S AID OBLIGATION, THE SURVIVING PARTNERS, WHILE CONTINUING THE PARTNERSHIP UNDER A FRESH DEED, VOLUNTARILY PROVIDED FOR PAYMENT OF THE SAID LUMP SUM AMOUNT TO THE WIDOW. ACCORDINGLY, THE HONBLE HIGH COURT HELD THAT THE CHARGE CREATE D UNDER THE SUBSEQUENT DEED OF PARTNERSHIP CREATED VOLUNTARILY FOR A LIMITED PU RPOSE, NAMELY, FULFILLING A PERSONAL OBLIGATION OF THE PARTNERS. HAD THE CONDIT ION NOT BEEN FULFILLED, THE SURVIVING PARTNERS WOULD NOT HAVE BEEN ENTITLED TO ACQUIRE THE SHARE OF THE DECEASED PARTNER IN THE GOODWILL OF THE FIRM. IT WA S FURTHER HELD THAT THE CHARGE CREATED IN THE SUBSEQUENT PARTNERSHIP DEED CANNOT B E HELD TO HAVE CREATED AN OVERRIDING CHARGE NOR COULD IT BE HELD THAT AS A RE SULT OF SUCH A CHARGE THE INCOME OF THE SUBSEQUENT PARTNERSHIP HAS BEEN DIVER TED WITHIN THE MEANING OF THE PRINCIPLES LAID DOWN IN RAJA BEJOY SINGH DUDHUR IA [1933] 1 ITR 135 (PC).THE PAYMENTS TO BE MADE TO THE WIDOWS WERE NOT DEPENDEN T UPON THE PROFIT OR LOSS OF THE FIRM BUT WAS AN ABSOLUTE OBLIGATION IN THE N ATURE OF A TRUST WHICH THE WIDOWS COULD ENFORCE, HONBLE HIGH COURT CONCLUDED. BUT SUCH ARE NOT THE FACTS AND CIRCUMSTANCES IN THE APPEAL BEFORE US. IN THE I NSTANT CASE, IN TERMS OF CLAUSE 13 OF THE PARTNERSHIP DEED DATED 1.4.2003, ABSOLUTE OBLIGATION IS CAST ON THE CONTINUING FIRM OR THE PARTNER/S WHO CARRY ON THE PROFESSION UNDER THE NAME AND STYLE OF SHROFF EYE CENTRE. IN SUBRAMANIAM BROT HERS.(SUPRA) THE DEED OF PARTNERSHIP IMPOSED AN ABSOLUTE OBLIGATION ON TH E SURVIVING PARTNERS TO REALISE THE COMMISSION THAT ACCRUED UP TO THE DATE OF RETIR EMENT AND PAY THE SAME TO THE RETIRED PARTNERS. THIS OBLIGATION HAS TO BE DIS CHARGED IRRESPECTIVE OF THE FACT ITA NO.1 560/DEL./2012 11 WHETHER THE ASSESSEE-FIRM HAD MADE A PROFIT OR NOT AND, EQUALLY THE RETIRED PARTNERS HAD AN ENFORCEABLE RIGHT TO RECEIVE THE SA ID COMMISSION. THE OBLIGATION, ON THE PART OF THE ASSESSEE TO PAY TO THE RETIRED P ARTNERS AROSE UPON THE RECEIPT OF THE COMMISSION AND THE COMMISSION WAS EARNED FO R THE WORK DONE PRIOR TO THEIR RETIREMENT. THE SUBSTANCE OF THE ENTIRE TRANS ACTION WAS THAT THE ASSESSEE- FIRM WAS COLLECTING MONEY AS A TRUSTEE FOR AND ON B EHALF OF THE RETIRED PARTNERS. THE ASSESSEE, AS SOON AS THE AMOUNT WAS COLLECTED, HAD TO HAND OVER THE MONEY WITHOUT ANYTHING FURTHER TO BE DONE TO THE RE TIRED PARTNERS. ACCORDINGLY, HONBLE HIGH COURT HELD THAT THERE WAS AN ABSOLUTE OBLIGATION IMPOSED ON THE CONTINUING PARTNERS TO HAND OVER THE COMMISSION TO THE RETIRED PARTNERS AND THE INCOME WAS DIVERTED BY OVERRIDING TITLE. IN A SIMIL AR SITUATION, IN V. N. V. DEVARAJULU CHETTY AND CO. V. CIT [1950] 18 ITR 357, HONBLE MADRAS HIGH COURT HELD THAT THAT WHERE A NEW FIRM WHICH MERELY COLLEC TED THE MONEY ON BEHALF OF THE OLD FIRM AND BANK THE SAME TO THE NEW FIRM (SIC ), THE NEW FIRM COULD NOT BE ASSESSED. 5.5 IN CIT V. SUNIL J. KINARIWALA [2003] 259 IT R 10, HONBLE APEX COURT, AFTER REFERRING TO THE DECISIONS OF THE PRIVY COUNCIL IN THE CASES OF RAJA BEJOY SINGH DUDHURIA V. CIT [1933] 1 ITR 135 AND P.C MULLICK V. CIT [1938] 6 ITR 206 AND OF THE APEX COURT IN THE CASES OF CIT V. SITALDAS TIRA THDAS [1961] 41 ITR 367; K.A. RAMACHAR V. CIT [1961] 42 ITR 25; MOTI LAL CHHADAMI LAL JAIN V. CIT [1991] 190 ITR 1; CIT V. BAGYALAKSHMI AND CO. [1965] 55 ITR 66 0 (SC) AND MURLIDHAR HIMATSINGKA V. CIT [1966] 62 ITR 323 HAS HELD THAT IF A THIRD PERSON BECOMES ENTITLED TO RECEIVE AN AMOUNT UNDER AN OBLIGATION O F AN ASSESSEE EVEN BEFORE HE COULD LAY CLAIM TO RECEIVE IT AS HIS INCOME, THERE WOULD BE A DIVERSION OF INCOME BY OVERRIDING TITLE BUT WHEN AFTER RECEIPT OF THE I NCOME BY THE ASSESSEE, THE SAME IS PASSED ON TO A THIRD PERSON IN DISCHARGE OF THE OBLIGATION OF THE ASSESSEE, IT WILL BE A CASE OF APPLICATION OF INCOME BY THE ASSE SSEE AND NOT OF DIVERSION OF INCOME BY OVERRIDING TITLE. ITA NO.1 560/DEL./2012 12 5.6 IN RSM & CO(SUPRA) , IT WAS THE CONTRACTUAL OBLIGATION ON THE ASSESSEE -FIRM TO PAY THE RETIREMENT BENEFITS FOR THE PERIOD OF FI VE YEARS AND HE RETIRED PARTNER HAD NOTHING TO DO WITH THE PROFIT EARNED OR LOSSES SUFFERED BY THE ASSESSEE-FIRM, BUT THE QUANTUM OF THE RETIREMENT BENEFIT HAD BEEN FIXED. IN PURSUANCE OF PARTNERSHIP DEED, A CO-ORDINATE BENCH CONCLUDED THA T THERE WAS A CHARGE ON THE PROFITS OF THE ASSESSEE-FIRM AND, HENCE, THERE WAS A DIVERSION OF INCOME TO THE EXTENT OF THE RETIREMENT BENEFITS PAID BY THE ASSES SEE-FIRM TO THE RETIRED PARTNER. 5.7 IN U. P. BHUMI SUDHAR NIGAM VS. COMMISSIONER OF INCOME-TAX, 280ITR 197( ALL), HONBLE HIGH COURT OBSERVED THAT THE PRI NCIPLES RELATING TO DIVERSION OF INCOME BY OVERRIDING TITLE ARE (I) IF A THIRD PERSO N BECOMES ENTITLED TO RECEIVE AN AMOUNT UNDER AN OBLIGATION OF AN ASSESSEE EVEN BEFO RE HE COULD CLAIM TO RECEIVE IT AS HIS INCOME, THERE WOULD BE A DIVERSION OF INC OME BY OVERRIDING TITLE BUT WHEN AFTER RECEIPT OF THE INCOME BY THE ASSESSEE, THE SA ME IS PASSED ON TO A THIRD PERSON IN DISCHARGE OF THE OBLIGATION OF THE ASSESS EE, IT WILL BE A CASE OF APPLICATION OF INCOME BY THE ASSESSEE AND NOT OF DI VERSION OF INCOME BY OVERRIDING TITLE ; 6. IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS, THERE BEING AN ABSOLUTE CONTRACTUAL OBLIGATION IMPOSED ON THE CONTINUING FI RM/PARTNERS IN TERMS OF CLAUSE 13 OF THE PARTNERSHIP DEED EXECUTED ON 1.4.2003, T HE ASSESSEE FIRM IS REQUIRED TO PAY THE AMOUNT @ 2% OF THE GROSS RECEIPTS SUBJEC T TO MAXIMUM OF 3 LACS PA TO MRS. MEHRU MENOO SHROOF AND THIS AMOUNT BEING T HE FIRST CHARGE ON RECEIPTS OF THE CONTINUING FIRM/PARTNERS ,APPARENTLY, THERE WOULD BE A DIVERSION OF INCOME BY OVERRIDING TITLE. INDISPUTABLY, A SIMILAR CLAIM HAS ALREADY BEEN ACCEPTED BY THE AO IN THE AY 2004-05 & 2006-07. IN VIEW OF THE FORE GOING, WE HAVE NO ALTERNATIVE BUT TO ALLOW GROUND NO.2 IN THE APPEAL . 7. GROUND NO.3 IN THE APPEAL RELATES TO DISALLOWAN CE ON ACCOUNT OF REPAIRS. DURING THE COURSE OF ASSESSMENT PROCEEDING S , THE ASSESSEE SUBMITTED DETAILS OF EXPENSES EXCEEDING ` 20,000/- EACH, AMOUNTING TO ` 12,05,946/- ON ITA NO.1 560/DEL./2012 13 ACCOUNT OF REPAIRS & MAINTENANCE.THE AO DISALLOWED AN AMOUNT OF ` ` 75,971/- OUT OF GENERAL REPAIRS AND MAINTENANCE EXPENSES OF ` 35,46,971/- ON THE GROUND THAT THE EXPENSES TO THAT EXTENT WERE UNVOUCHED. 8. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS O F THE AO, FINDING NO REASON TO INTERFERE WITH THE ASSESSMENT ORDER. 9. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE WHILE RELYING DECISION DATED 9.4.2010 IN ACIT VS. TALBROS ENGINE ERING LTD. IN ITA NO. 4166/DEL./09 FOR THE AY 2004-05 AND SHANKER TRADI NG CO.(P) LTD. VS. ACIT, 152 TAXMAN 49(DELHI) CONTENDED THAT ADHOC DISALLOWA NCE COULD NOT BE MADE. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER O F THE LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. INDISPUTABLY, AN AMOUNT OF ` 75,971/- WAS DISALLOWED ONLY ON THE GROUND THAT THE EXPENSES WERE UNVOUCHED. TO A QUERY BY TH E BENCH, THE LD. AR OR DR DID NOT ADDUCE THE BASIS FOR WORKING OUT THE AMOUNT OF ` `75,971/-. ON PERUSAL OF DETAILS AT PAGE 60 TO 62 OF THE PAPER BOOK, WE FIND THAT THE ASSESSEE HAS MERELY SUBMITTED A COPY OF LEDGER ACCOUNT IN RESPECT OF E XPENDITURE EXCEEDING ABOVE ` ` 20,000/- EACH AMOUNTING TO ` `12,05,946/- WHILE THE DETAILS OF EXPENDITURE BELOW ` ` 20,000/- ARE NOT AVAILABLE . NEITHER THE LEARNED AR NOR THE LD. DR COULD EXPLAIN THE BASIS FOR DISALLOWING THE AMOUNT OF ` `75,971/- NOR THE IMPUGNED ORDER IS SPEAKING ONE. EVEN THE NATURE OF REPAIRS IS NOT BROUGHT OUT IN THE IMPUGNED ORDER NOR IT IS STATED THAT THESE REPAIRS WERE CURRENT OR OTHERWISE. THE LD. AR APPEARING BEFORE US DID NOT THROW ANY LIGHT ON THE NATURE OF REPAIRS.A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JU DICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS A REASONED ORDER, WHICH SH OULD REFLECT ITA NO.1 560/DEL./2012 14 APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO T HE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MA TERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHIL E DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION, THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS A ND COMMUNICATION THEREOF BY THE QUASI-JUDICIAL AUTHORI TIES HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PRO CEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RUL E OF LAW. IT INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF EXTR ANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINE SS IN THE DECISION-MAKING PROCESS. HONBLE JURISDICTIONAL HIG H COURT IN THEIR DECISION IN VODAFONE ESSAR LTD. VS. DRP,196 TAXMAN423(DELHI) HELD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS, IT IS OBLIGATORY ON IT S PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL O F THE MATTER AND FURTHER, THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER I S CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS . STATE OF PUNJAB,(1995)1SCC 760(SC)].AS ALREADY OBSERVED, THE IMPUGNED ORDER SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKING ORDER ON THE DISALLOWANCE OUT OF REPAIRS AND MAINTENANCE. I N VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) HAVE NOT PASSED A SPEAKING ORDER , WE CONSIDER IT FAIR AND APPROPRIA TE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO H IS FILE FOR DECIDING THE AFORESAID ISSUE, AFRESH IN ACCORDANCE WITH LAW , AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLES S TO SAY THAT WHILE REDECIDING THE APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISI ONS OF SEC. 250(6) OF THE ACT,BRINGING OUT CLEARLY THE NATURE OF REPAI RS ,WHETHER CURRENT ITA NO.1 560/DEL./2012 15 OR OTHERWISE. WITH THESE OBSERVATIONS, GROUND NO. 3 IN THE APPEAL IS DISPOSED OF. AS A COROLLARY, GROUND NO. 2 IN THE APPEAL DOES NOT SURVIVE FOR OUR ADJUDICATION AT THIS STAGE 11 GROUND NO.4 RELATING TO REOPENING OF ASSESSMENT WAS NOT PRESSED BEFORE US BY THE LD.AR ON BEHALF OF THE ASSESSEE AN D IS, THEREFORE, DISMISSED. 12. GROUND NO.1 IN THE APPEAL BEING GENERAL IN NAT URE DOES NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROU ND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.5 IN THE APPEAL , ACCORDINGLY, BOTH THESE GROUNDS ARE DISMISSED. 13.. IN RESULT, APPEAL IS ALLOWED BUT PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (G.C. GUPTA) (A.N. PAHUJA ) VICE PRESIDENT ACCOUNTANT MEMBER NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. ASSISTANT CIT, CIRCLE-37(1), ROOM NO. 401,4 TH FLOOR, N BLOCK, VIKAS BHAWAN,NEW DELHI 3. CIT(A) CONCERNED 4. CIT(A)-XXVIII, NEW DELHI 5. DR, ITAT,G BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI