DCIT CIRCLE-1, NASHIK, Nashik V. Metaforge Engineering (I) Pvt Ltd., Nashik

ITA 161/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9721 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Keywords: Business income; Business expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 161/PN/2011 (ASSESSMENT YEAR 2006-07) DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK .. APPELLANT VS. METAFORGE ENGINEERING (I) PVT. LTD., GAJPATH SOCIETY, DINDORI ROAD, NASHIK. .. RESPON DENT PAN NO.AADCM 4876C ASSESSEE BY : SRI NIKHIL PATHAK DEPARTMENT BY : SRI ALOK MISHRA DATE OF HEARING : 27-07-2012 DATE OF PRONOUNCEMENT : 28-08-2012 ORDER PER R.K. PANDA, AM : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29-11- 2010 OF THE CIT(A)-I, NASHIK RELATING TO ASSESSMENT YEAR 2006-07. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT(A)-I, NASIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF PROF ESSIONAL FEES OF RS. 2,25,000/-? 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE PARTS, SHEE T METAL COMPONENTS AND ENGINEERING GOODS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE COMPANY HAS DEBITED RS. 2.25 LAKHS AS PROF ESSIONAL FEES PAID TO SANDEEP PAHADE & ASSOCIATES. ON BEING QUESTIONED BY THE AO IT WAS EXPLAINED THAT THE PROFESSIONAL FEES HAS BEEN PAID TO SANDEEP PAHADE & ASSOCIATES ON ACCOUNT OF PROCESSING OF LOAN FROM SARASWAT COOPERATIVE BANK L TD. NASIK BRANCH. THE AO HOWEVER NOTED THAT NO LOAN HAS BEEN TAKEN BY THE AS SESSEE COMPANY DURING THE YEAR FROM SARASWAT COOPERATIVE BANK LTD. NASIK. IT WAS EXPLAINED BY THE ASSESSEE 2 THAT BECAUSE OF THE TERMS AND CONDITIONS OF LOAN TH E ASSESSEE COMPANY HAS NOT AVAILED THE LOAN. REJECTING THE VARIOUS EXPLANATIO NS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE TERMS AND CONDITIONS FOR AVAILIN G THE LOAN ARE UNDERSTOOD BEFORE GOING TO THE BANK AND THEN ONLY AN AGENT IS EMPLOYE D AND SINCE NO LOAN HAS BEEN AVAILED BY THE ASSESSEE COMPANY THE AO DISALLOWED T HE PROFESSIONAL FEES OF RS. 2.25 LAKHS. 3.1 IN APPEAL THE LEARNED CIT(A) DELETED THE DISALL OWANCE MADE BY THE AO BY HOLDING AS UNDER : 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE RIVAL SUBMISSIONS ON THE ISSUE. AS MAY BE SEEN THE AO HA S MADE THE IMPUGNED DISALLOWANCE PRIMARILY ON THE GROUND THAT THERE WER E NO SERVICES RENDERED BY SANDEEP PAHADE AND ASSOCIATES DESPITE THE FACT T HAT THE APPELLANT HAS INFORMED THE AO THAT THE LOAN FROM SARASWAT CO-OP B ANK LTD. WAS SANCTIONED BUT NOT AVAILED. IT IS UNDISPUTED THAT SANDEEP PAHADE AND ASSOCIATES WERE ENGAGED BY THE APPELLANT FOR PROCES SING OF LOAN FROM SARASWAT CO-OP BANK LTD. AND THE LOAN WAS SANCTIONE D. THUS IT CAN BE SAID THAT THE SAID SANDEEP PAHADE AND ASSOCIATES DID OFF ER SERVICES IN PROCESSING AND GETTING THE LOAN SANCTIONED FROM SARASWAT CO-OP BANK LTD. THEREFORE THERE IS NO JUSTIFICATION IN THE AOS CONTENTION TH AT NO SERVICES WERE RENDERED. THE APPELLANT DID NOT AVAIL THE LOAN FRO M SARASWAR CO-OP BANK LTD. AS THEIR TERMS AND CONDITIONS AT THE TIME OF D ISBURSAL OF THE LOAN WERE NOT SUITABLE. THIS IS PURELY A COMMERCIAL DECISION OF THE APPELLANT AND CANNOT BE INTERFERED WITH BY THE REVENUE. FOR THE PURPOSE OF ALLOWING DEDUCTION U/S.37(1) ALL THAT IS REQUIRED IS TO EXAM INE WHETHER SERVICES WERE RENDERED FOR WHICH THE FEES WAS PAID FOR THE PURPOS E OF LOAN. IT IS UNDISPUTED THAT THE SERVICES WERE RENDERED AND THE BANK SANCTIONED THE LOAN. ON THESE FACTS IT IS NOT JUSTIFIED TO DISALL OW THE PROFESSIONAL FEES. THE EXPENDITURE IS IN CONNECTION WITH THE BUSINESS AND THE SERVICES RENDERED FOUND ESTABLISHED AND THERE IS NO JUSTIFICATION FOR MAKING ANY DISALLOWANCE ON THIS ACCOUNT. CONSEQUENTLY, DISALLOWANCE OF RS. 2,25,000/- MADE BY THE AO IS HELD TO BE UNJUSTIFIED AND THE SAME IS DELETE D. THIS GROUND OF APPEAL IS ALLOWED. 3.2. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO DISALLOWED THE PROFESSION AL FEES ON THE GROUND THAT M/S. SANDEEP PAHADE & ASSOCIATES DID NOT RENDER ANY SERV ICE TO THE ASSESSEE SINCE THE 3 ASSESSEE HAS NOT AVAILED ANY LOAN FROM THE BANK FOR WHICH THE PROFESSIONAL FEES HAS BEEN PAID. IN OUR OPINION THE AO IS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. ONCE THE ASSESSEE HAS ENGAGED SANDEEP PA HADE ASSOCIATES FOR PROCESSING OF THE LOAN FROM SARASWAT COOPERATIVE BA NK LTD AND AFTER THE LOAN WAS SANCTIONED BY SARASWAT COOPERATIVE BANK LTD. DUE TO THE SERVICES OF PAHADE & ASSOCIATES, THEIR JOB IS OVER AND THE ASSESSEE IS L IABLE TO PAY THE FEES AS AGREED UPON. IT IS FOR THE ASSESSEE TO OBTAIN THE LOAN OR NOT AFTER THE SAME WAS SANCTIONED BY THE BANK. THE WORK OF SANDEEP PAHADE & ASSOCIAT ES CEASES ONCE THE LOAN WAS SANCTIONED BY THE BANK. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) WHILE DELETING THE DISALLOWANCE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY T HE LEARNED DR WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A) ON THIS ISS UE. ACCORDINGLY THE SAME IS UPHELD. THE GROUND RAISED BY THE REVENUE IS DISMIS SED. 5. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I, NASIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF INTEREST OF RS. 8,03,253/- PAID TO M/S. METAFORGE ? 6. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED FROM THE DETAILS OF SUNDRY CREDITORS THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS AT RS. 77,33,200/- IN THE NA ME OF M/S. METAFORGE. HE FURTHER NOTED THAT INTEREST OF RS. 8,03,253/- HAS B EEN DEBITED UNDER THE HEAD INTEREST AND FINANCIAL CHARGES TO M/S. METAFORGE. ACCORDING TO THE AO THE ASSESSEE COMPANY HAS NOT PROVED THE NEXUS OF PAYMEN T OF INTEREST TO M/S. METAFORGE. FURTHER, HE NOTED THAT THE ASSESSEE COM PANY HAS TAKEN OVER THE ASSETS AND LIABILITIES OF M/S. METAFORGE, THEREFORE, THE I NTEREST DEBITED TO THE P&L ACCOUNT AT RS. 8,03,253/- TO M/S. METAFORGE HAS NO RELEVANCE WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY. REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE 4 AND HOLDING THAT THE INTEREST PAYMENT MADE TO M/S. METAFORGE IS UNREASONABLE AND UNCONNECTED TO THE BUSINESS OF THE ASSESSEE THE AO DISALLOWED THE INTEREST EXPENDITURE AMOUNTING TO RS. 8,03,253/-. 7. IN APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE BY HOLDING AS UNDER : 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE RIVAL SUBMISSION. AS MAY BE SEEN THE LEARNED AO HAS EXAM INED THE LIST OF SUNDRY CREDITORS AND FOUND THAT THE APPELLANT HAS DEBITED INTEREST OF RS. 8,03,253/- IN RESPECT OF M/S. METAFORGE, A PARTNERSHIP FIRM. IN THIS CONNECTION IT IS SEEN THAT THE APPELLANT HAD TAKEN OVER THE ENTIRE B USINESS INCLUDING PLANT AND MACHINERY, STOCK OF MATERIAL AND FINISHED GOODS FROM M/S. METAFORGE FOR A CONSIDERATION OF RS. 52,15,337/- AS UNDER : PLANT AND MACHINERY - RS. 16,86,500/- MATERIAL - RS. 35,27,837/- -------------------------- RS. 52,15,337/- --------------------------- THE APPELLANT HOWEVER, COULD NOT PAY THE SAID AMOUN T AND THE SAME REMAINS OUTSTANDING AS ON THE YEAR END. THEREFORE AS PER T HE TERMS AND CONDITIONS BETWEEN THE APPELLANT AND THE SAID M/S. METAFORGE T HE APPELLANT WAS REQUIRED TO PAY INTEREST @ 11% P.A. ON THE OUTSTAND ING AMOUNT. THE IMPUGNED AMOUNT OF RS.8,03,253/- IS THEREFORE INTER EST COMPONENT SO WORKED OUT ON THE OUTSTANDING PAYABLE OF RS. 52,15, 337/- THAT WAS PAID AND TAX AT SOURCE (TDS) WAS DEDUCTED. THEREFORE THE AO S CONTENTION THAT THERE IS NO NEXUS FOR THE PAYMENT OF INTEREST TO M/S. MET AFORGE IS NOT FACTUALLY CORRECT. IT HAS ALSO BEEN PLACED ON RECORD BY THE APPELLANT BEFORE THE AO AND BEFORE ME THAT THE PLANT AND MACHINERY AND THE STOCK PURCHASED FROM THE SAID METAFORGE FOR A CONSIDERATION OF RS. 52,15 ,337/- WERE PUT TO USE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE THE NEXUS BETWEEN OUTSTANDING PAYABLE AMO UNT OF RS. 52,15,337/- AND THE INTEREST OF RS. 8,03,253/- IS ESTABLISHED A ND THE SAME IS FOUND TO BE FOR THE PURPOSE OF BUSINESS. CONSEQUENTLY, IT IS H ELD THAT THE AO WAS NOT JUSTIFIED IN QUESTIONING THE REASONABLENESS OF THE IMPUGNED AMOUNT. THE IMPUGNED DISALLOWANCE OF RS. 8,03,253/- IS THEREFOR E UNWARRANTED AND THE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APP EAL IS ALLOWED. 7.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE FINDING OF THE LEARNED CIT(A) THAT A S PER THE TERMS AND CONDITIONS BETWEEN THE ASSESSEE AND M/S. METAFORGE THE ASSESSE E WAS REQUIRED TO PAY INTEREST 5 @ 11% PER ANNUM ON THE OUTSTANDING AMOUNT COULD NOT BE CONTROVERTED BY THE LEARNED DR. FURTHER THE FINDING GIVEN BY THE LEARN ED CIT(A) THAT THE PLANT AND MACHINERY AND THE STOCK PURCHASED FROM M/S. METAFOR GE FOR CONSIDERATION OF RS. 52,12,337/- WERE PUT TO USE DURING THE PREVIOUS YEA R RELEVANT TO THE IMPUGNED ASSESSMENT YEAR ALSO COULD NOT BE CONTROVERTED BY T HE LEARNED DR. WE, THEREFORE, FIND MERIT IN THE OBSERVATION OF THE LEARNED CIT(A) THAT THE NEXUS BETWEEN THE OUTSTANDING PAYABLE AMOUNT OF RS. 52,15,337/- AND T HE INTEREST OF RS. 8,03,253/- IS ESTABLISHED. IN THIS VIEW OF THE MATTER AND IN VIE W OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) WE FIND NO INFIRMITY IN THE SAME. A CCORDINGLY THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 9. GROUND OF APPEAL NO. 3 BY THE REVENUE READS AS U NDER : 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I, NASIK WAS JUSTIFIED IS DELETING THE DISALLOWANCE OF FOREIGN TOUR EXPENSES OF RS.89,937/-? 10. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE HAS DEBITED AN AMOUNT OF RS. 2,65,050/- AS FOREIGN TOUR EXPENSES. ON VERIFICATI ON OF THE DETAILS THE AO FOUND THAT SRI PRAJAKT MEHTA VISITED GERMANY IN ADDITION TO CHINA AND TAIWAN. IN ABSENCE OF ANY BUSINESS RELEVANCE OF THE TOUR CONDU CTED TO GERMANY THE AO DISALLOWED AN AMOUNT OF RS. 89,937/- BEING EXPENDIT URE INCURRED TOWARDS THE TOUR TO GERMANY AS NON-BUSINESS INCOME. 10.1 IN APPEAL THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER : 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE RIVAL SUBMISSIONS. AS MAY BE SEEN FROM THE RECORDS, SHRI PRAJAKT MEHTA WHO VISITED GERMANY, CHINA AND TAIWAN IS A DIRECTOR OF THE APPELLANT COMPANY. HE HAS VISITED GERMANY TO PARTICIPATE IN AN EXHIBIT ION. THE LEARNED AO HOWEVER HAS MISSED THE IMPORTANT FACT THAT THE PERS ON WHO VISITED GERMANY WAS THE DIRECTOR OF THE APPELLANT COMPANY. IT HAS BEEN DEMONSTRATED BY THE APPELLANT THAT THE DIRECTOR VISITED GERMANY IN CONN ECTION WITH THE BUSINESS TOUR AND ATTENDED THE TRADE EXHIBITION OVER THERE. THERE IS MERIT IN THE CONTENTION OF THE LEARNED A.R. THAT THE LEARNED AO HAS NOT PROPERLY APPRECIATED THE FACTS OF THE CASE IN SO FAR AS IT I S NOT CONSIDERED THAT THE 6 PERSON WHO TRAVELLED ABROAD WAS A DIRECTOR AND IN T HE SUBSEQUENT YEAR THERE WERE EXPORT ORDERS OF CONTRACTS OF RS. 23 LAK HS RECEIVED AS A RESULT OF THAT FOREIGN BUSINESS TOUR. THE APPELLANTS CASE I S THEREFORE SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTION AL TRIBUNAL IN ITA NO. 46/PN/05 DATED 31-12-2007 IN THE CASE OF AUTO COOP INDIA PVT LTD. V. ADDL. CIT NASHIK. IN VIEW OF THESE FACTS AND THE CIRCUMS TANCES OF THE CASE IT IS HELD THAT THE IMPUGNED EXPENSES WERE INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ON THE FOREIGN BUSINESS TOU R AND THE PERSON WAS A DIRECTOR WHO IS ACTIVELY ENGAGED IN THE AFFAIRS OF THE COMPANY. THE EXPENDITURE SO INCURRED ON THIS TRIP CANNOT BE TREA TED AS NON BUSINESS EXPENDITURE. THEREFORE, THE IMPUGNED DISALLOWANCE OF RS. 89,937/- IS UNCALLED FOR. THIS VIEW IS SUPPORTED BY FOLLOWING JUDGMENTS. DELHI CLOTH AND GENERAL MILLS CO. LTD. V. CIT 158 ITR 64 (DEL.) , ITO V. KRISHONICS LTD. 120 TTJ 650 (AHD.). CONSEQUENTLY, THE IMPUGNED DIS ALLOWANCE OF RS. 89,937/- IS DELETED. THIS GROUND OF APPEAL IS ALLO WED. 10.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 11. AFTER HEARING BOTH THE SIDES WE FIND NO INFIRMI TY IN THE ORDER OF THE LEARNED CIT(A). THE FACTUAL FINDING GIVEN BY THE LEARNED C IT(A) THAT MR. PRAJAKT MEHTA, DIRECTOR OF THE COMPANY HAD VISITED GERMANY IN CONN ECTION WITH THE BUSINESS TOUR AND ATTENDED THE TRADE EXHIBITION OVER THERE COULD NOT BE CONTROVERTED BY THE LEARNED DR. FURTHER, THE FINDING OF THE LEARNED CI T(A) THAT IN THE SUBSEQUENT YEAR THERE WERE EXPORT ORDERS OF CONTRACTS OF RS. 23 LAK HS AS A RESULT OF TOUR TO GERMANY ALSO COULD NOT BE CONTROVERTED BY THE LEARNED DR. IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) ON THIS ISSUE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LEARNED DR WE FIND NO INFIRMITY IN THE SAME. GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISS ED. 12. GROUND OF APPEAL NO. 4 BY THE REVENUE READS AS UNDER : 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I, NASIK WAS JUSTIFIED IN PARTIALLY DELETING THE DISAL LOWANCE OF LABOUR CHARGES OF RS. 1,05,836/-? 13. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE HAS DEBITED AN AMOUNT OF RS. 71,17,852/- AS LABOUR CHARGES. THE AO FOUND THAT A N AMOUNT OF RS. 10,58,368/- HAS BEEN PAID TO M/S/. HELPING HAND, GAJAPANTH HOUS ING SOCIETY, MHASRUL, NASHIK 7 WHICH IS A PROPRIETARY CONCERN OF SRI AMOD RATANCHA ND MEHTA WHO IS FATHER OF DIRECTOR MR.PRAJAKT MEHTA. HE FURTHER NOTED THAT T HE SAID CONCERN HAS BEEN SHOWN WORKING ONLY FOR THE ASSESSEE COMPANY. ACCORDING T O THE AO THE ABOVE PAYMENT TO M/S. HELPING HAND IS NOT REASONABLE AS PER THE MARKET RATES. HE THEREFORE DISALLOWED AN AMOUNT OF RS. 1,05,836/- BEING 10% OF THE PAYMENT AS EXCESSIVE AND UNREASONABLE. 14. IN APPEAL THE LEARNED CIT(A) DELETED THE DISALL OWANCE BY HOLDING AS UNDER : 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE RIVAL SUBMISSIONS. THE AO HAS EXAMINED THE MANUFACTURING EXPENSES INCLUDING LABOUR CHARGES PAID AT RS. 71,17,852/- WHICH INCLUD ES A PAYMENT OF RS. 10,58,368/- TO M/S. HELPING HAND, NASHIK THE CONCER N OWNED BY SRI AMOD RATAN WHO IS THE FATHER OF ONE OF THE DIRECTORS OF THE APPELLANT COMPANY VIZ. PRAJAKT MEHTA. THE AO HAS OBSERVED THAT THE PAYMEN T OF RS. 10,58,368/- IS NOT PROVED TO BE REASONABLE AS PER THE MARKET RATES HE ACCORDINGLY MADE AN ESTIMATED DISALLOWANCE OF 10%. THE APPELLANT HAS C ONTENDED THAT IT GIVES THE JOB WORK TO THE SAID CONCERN VIZ. HELPING HAND WHO IN TURN GETS THE SAME JOB DONE BY GIVING SUB-CONTRACTS TO DIFFERENT OTHER PERSONS AND SUBMITTED THAT THE LABOUR CHARGES PAID TO THE SAID CONCERN ARE AS PER THE MARKET RATES. IT WAS ALSO POINTED OUT BY THE LEARN ED A.R. THAT THE AO HAS NOT GIVEN ANY MARKET RATES BEFORE ARRIVING AT THE C ONCLUSION THAT THE AMOUNT PAID WAS EXCESSIVE OR UNREASONABLE. THIS CONTENTIO N OF THE LEARNED A.R. IS FOUND TO BE CORRECT THAT THE LEARNED AO WHILE DEALI NG WITH THE ISSUE HAS NOT GIVEN THE BASIS BEFORE ARRIVING AT THE FINDING THAT THE AMOUNT PAID WAS EXCESSIVE OR UNREASONABLE AS PER THE MARKET RATES. IT IS EQUALLY TRUE FACT THAT THE APPELLANT HAS NOT BROUGHT ANY EVIDENCE ON RECORD THE MARKET RATES TO JUSTIFY THE IMPUGNED PAYMENT TO THE SAID CONCERN . AS MAY BE SEEN THE APPELLANT GIVES CONTRACT OF JOB WORK TO THE SAID CO NCERN, WHO IN TURN PASSES TO IT SMALL AND PETTY CONTRACTORS FOR CARRYING OUT THE JOB FOR THE APPELLANT. IN THIS PROCESS THERE IS AN ELEMENT OF UNREASONABLE NESS IN THE PAYMENT AS THE JOB FOR THE APPELLANT IS NOT DIRECTLY UNDERTAKEN BY THE SAID CONCERN M/S. HELPING HAND. IN VIEW OF THESE FACTS AN ESTIMATED DISALLOWANCE OF RS. 25,000/- WOULD MEET THE ENDS OF JUSTICE TO COVER TH E ELEMENT OF UNREASONABLENESS IN THE SAID PAYMENT. CONSEQUENTLY , THE IMPUGNED DISALLOWANCE OF RS. 1,05,836/- IS REDUCED TO RS. 25 ,000/-. THE APPELLANT GETS RELIEF OF RS. 80,836/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 14.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO WHILE DISALLOWING 10% OF THE EXPENSES AS EXCESSIVE AND 8 UNREASONABLE HAS NOT GIVEN ANY COMPARATIVE CASE. TH EREFORE, THE ORDER OF THE CIT(A) RESTRICTING SUCH DISALLOWANCE TO RS. 25,000/ - ON ADHOC BASIS IN OUR OPINION APPEARS TO BE REASONABLE. IN THIS VIEW OF THE MATT ER AND IN VIEW OF THE DETAILED ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY THE GROUND RAISED BY THE REVENUE IS DIS MISSED. 16. GROUND OF APPEAL NO. 5 BY THE REVENUE READS AS UNDER : 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I, NASIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF TECHNICAL FEES PAID TO SHRI AMOD R MEHTA AT RS. 2,40,000/- ? 17. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS PAID TECHNI CAL FEE OF RS. 2,40,000/- TO SRI AMOD RATANCHAND MEHTA, FATHER OF DIRECTOR OF THE AS SESSEE COMPANY MR. PRAJAKT MEHTA. ON BEING QUESTIONED BY THE AO IT WAS SUBMIT TED THAT THE ASSESSEE SUBMITTED THE DETAILS OF SERVICE RENDERED BY SRI ME HTA. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E AND HELD THAT THE ASSESSEE HAS NOT PROVED THE REASONABLENESS OF THE AMOUNT PAID AN D THE NATURE OF SERVICES RENDERED BY MR. MEHTA. THE AO THEREFORE, DISALLOWED THE TECHNICAL FEE OF RS. 2,40,000/- PAID TO SRI AMOD RATANCHAND MEHTA. 18. IN APPEAL THE LEARNED CIT(A) DELETED THE DISALL OWANCE BY HOLDING AS UNDER : 8.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE RIVAL SUBMISSIONS. THE APPELLANT HAS PAID TECHNICAL FEES OF RS. 2,40,000/- TO SHRI AMOD MEHTA WHO IS THE FATHER OF ONE OF THE DIRECTOR S VIZ. SHRI PRAJAKT MEHTA. IT HAS BEEN ARGUED ON BEHALF OF THE APPELLA NT THAT SHRI AMOD MEHTA IS A TECHNICALLY QUALIFIED PERSON HAVING 40 YEARS O F EXPERIENCE IN THE FIELD OF COLD FORGING AND HE IS AN EXPERT IN THIS INDUSTRY. IT HAS BEEN ARGUED BY THE LEARNED A.R. THAT THE APPELLANT HAD SUBMITTED TO TH E AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE SAID SHRI AMOD MEHT A HAS RENDERED SERVICES SUCH AS DIE DESIGNING, PROVIDING ASSISTANC E FOR THE INSTALLATION OF NEW MACHINERY, UNDERTAKING TRAINING PROGRAMME FOR T HE EMPLOYEES AND ASSISTING IN THE SELECTION OF NEW MACHINERIES AND L OCATING THEIR SOURCES THEREOF. THE LEARNED A.R. HAS ALSO BROUGHT TO MY N OTICE DECISION OF THE HONBLE KARNATAK HIGH COURT IN THE CASE OF RECON MA CHINE TOOLS V. CIT 9 (2006), 286 TAXXMAN 637 (KAR.) IN SUPPORT OF THE CO NTENTION THAT THERE CANNOT BE ANY YARDSTICK OF ANY PROFESSIONAL OR TECH NICAL SERVICES. AS MAY BE SEEN FROM THE IMPUGNED ASSESSMENT ORDER THE LEARNED AO HAS OBSERVED THAT THE SERVICES RENDERED BY SHRI AMOD MEHTA OF THE COM PANY HAVE NOT BEEN PROVED CONCLUSIVELY FOR THE BENEFIT OF HEALTH OF THE ASSESSEE COMPANY. HE HAS ALSO QUESTIONED THE REASONABLENESS OF THE PAYME NT. IN THIS CONTEXT THE APPELLANT HAS DEMONSTRATED THAT THE SAID GENTLEMAN HAS RENDERED SERVICES NOT ONLY POSSESSED BY SHRI AMOD MEHTA WAS APPRECIAT ED AND VALUED BY THE APPELLANT COMPANY AND HIS SERVICES WERE BENEFICIAL FOR THE BUSINESS. IN MY CONSIDERED VIEWS IT IS NOT OPEN FOR THE ASSESSING O FFICER TO QUESTION THE PROFESSIONAL EXPERTISE OF A TECHNICAL PERSON WHOM T HE APPELLANT COMPANY HAS ENGAGED TO FURTHER THE CAUSE OF ITS BUSINESS. IT IS NOT THE CASE OF THE AO THAT THE PAYMENT TO THE SAID INDIVIDUAL WAS NOT MAD E. IT HAS BEEN DEMONSTRATED THAT THE SAID PERSON HAS RENDERED TECH NICAL AND PROFESSIONAL SERVICES AND AS HELD BY THE HONBLE KARNATAK HIGH C OURT IN THE CASE OF RECON MACHINERY (SUPRA), THERE CANNOT BE ANY YARDST ICK IN THE MATTER OF PROFESSIONAL AND TECHNICAL SERVICES AS IT WOULD DEP END UPON THE FACTS OF EACH CASE. IN THE PRESENT CASE THE APPELLANT HAS P AID RS. 2,40,000/- TO THE SAID PERSON WHICH CANNOT BE CALLED ARBITRARY OR UNR EASONABLE, MORE SO IN VIEW OF ANY COMPARATIVE DATA IN THIS RESPECT BROUGH T ON RECORD BY THE ASSESSING OFFICER. IN VIEW OF THESE FACTS AND THE CIRCUMSTANCES OF THE CASE THE IMPUGNED DISALLOWANCE OF RS. 2,40,000/- IS FOUN D TO BE BASELESS AND IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS A LLOWED. 18.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 19. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO DISALLOWED THE TECHNICAL FEES PAID TO SRI AMOD RATANCHAND MEHTA ON THE GROUND THAT HE IS FATHER OF ONE OF THE DIRECTOR OF THE ASSESSEE COMPANY AND THE ASSESSEE HAS NOT PROVED CO NCLUSIVELY THAT THE SERVICES RENDERED BY MR. MEHTA WAS FOR THE BENEFIT AND HEAL TH OF THE ASSESSEE COMPANY. WE FIND THE ASSESSEE HAS STATED BEFORE THE AO THAT MR. MEHTA IS A TECHNOCRAT AND HAS 40 YEARS OF EXPERIENCE IN THE FIELD OF COLD STO RAGE AND HAS RENDERED VARIOUS SERVICES TO THE COMPANY AS PER THE DETAILS GIVEN BE FORE THE AO. WE FIND THE AO HAS NOT BROUGHT ON RECORD ANY COMPARATIVE CASE TO J USTIFY THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE. FURTHER, THE SUBMISSION OF THE ASSESSEE COMPANY THAT BECAUSE OF THE CONSULTANCY THE BUSINESS HAS GROWN U P HAS NOT BEEN DISPROVED BY THE AO. MERELY BECAUSE THE PAYEE IS A SPECIFIED PE RSON U/S.40A(2)(B), THE 10 TECHNICAL FEES PAID TO HIM IN OUR OPINION CANNOT BE DISALLOWED ENTIRELY WITHOUT GIVING ANY COMPARABLE CASE. IN THIS VIEW OF THE MA TTER AND IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) ON THIS ISSUE WHIL E DELETING THE DISALLOWANCE WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY THE SAM E IS UPHELD. GROUND RAISED BY THE REVENUE IS DISMISSED. 20. THE OTHER GROUNDS BEING GENERAL IN NATURE ARE D ISMISSED. 21. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF AUGUST 2012 SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 28 TH AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, NASHIK 4. ACIT, RANGE-1 NASHIK, 5. DCIT CIRCLE-1, NASHIK 6. THE D.R, B PUNE BENCH 7. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE 11