JK Paper Ltd., New Delhi V. The Asstt. Commissioner of Income Tax, Circle-1(1)(2), Surat

ITA 1610/AHD/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3434 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 16-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Business expenditure; Earning of tax free income; Services rendered outside India; Permanent establishment; Question of law; Non-deduction of tax; Bad and doubtful debts; Corroborative evidences; TDS; Set aside
• Section: 14A; 115JB; 205; 195; 80IA; 13; 22

Judgement Text

, , THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR.ARJUN LAL SAINI, ACCOUNTANT MEMBER (HEARING IN VIRTUAL COURT) . . ./I.T.A NO.1100/AHD/2014, /ASSESSMENT YEAR: 2010-11 . . ./I.T.A NO.2905/AHD/2014, /ASSESSMENT YEAR: 2011-12 . . ./I.T.A NO.1963/AHD/2016, /ASSESSMENT YEAR: 2012-13 DY. COMMISSIONER OF INCOME TAX CIRCLE-1, ROOM NO.108, 1 ST FLOOR, AAYAKAR BHAWAN, MAJURAGATE, SURAT -395001 VS. J.K. PAPER LTD, P.O. CENTRAL PULP MILLS FORT SONGADH, SURAT-394660 [PAN: AAACT6305N] / APPELLANT /RESPONDENT . . ./I.T.A NO.1610/AHD/2016 /ASSESSMENT YEAR: 2012-13 J.K. PAPER LTD, P.O. CENTRAL PULP MILLS, FORT SONGADH, SURAT-394660 [PAN: AAACT6305N] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2), SURAT -395001 / APPELLANT /RESPONDENT /ASSESSEE BY SHRI SAURABH SUPARKAR - SR. ADVOCATE WITH MISS URVASHI SODHAN - ADVOCATE /REVENUE BY SH. REETESH MISHRA - CIT-DR MISS ANUPAMA SINGLA SR.DR / DATE OF HEARING: 26.10.2020 /PRONOUNCEMENT ON: 04.11.2020 J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 2 /O R D E R PER PAWAN SINGH, JUDICAL MEMEBR: 1. THIS GROUP OF FOUR APPEALS ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-1 (CIT-A), SURAT FOR ASSESSMENT YEAR (AY) 2010- 11 TO 2012- 13, OUT OF WHICH CROSS APPEALS BY REVENUE AND ASSESSEE FOR AY 2012-13 AND REMAINING TWO APPEALS BY REVENUE FOR AY 2010-11& 2011- 12. IN ALL APPEALS THE REVENUE HAS RAISED CERTAIN COMMON GROUNDS OF APPEAL, FACTS IN ALL YEARS ARE STATED TO BE ALMOST SIMILAR, THEREFORE, ALL THE APPEALS WERE CLUBBED TOGETHER HEARD AND ARE DECIDED BY CONSOLIDATED ORDER. WITH THE CONSENT OF PARTIES, THE APPEAL FOR ASSESSMENT YEAR 2010- 11 WAS TREATED AS LEAD CASE. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND A LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF SOCIAL FORESTRY EXPENSES 8799425/- AND AMORTIZATION OF SOCIAL FORESTRY EXPENSES 487257/-IN SPITE OF THE FACT THAT THE ACTIVITIES CLASSIFIED AS SOCIAL FORESTRY WERE AGRICULTURAL OPERATIONS AT THE SAME WAS NOT AVAILABLE UNDER SECTION 10(1) OF THE IT ACT AND THE ASSESSEE FAILED TO PROVE OTHERWISE. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF 5,15,000/-MADE ON ACCOUNT OF UNEXPLAINED CREDITORS AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF TRANSACTION WITH THE CREDITORS. (3) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) IS RIGHT IN DELETING THE ADDITION ON ACCOUNT OF EXCESS PROCESS STOCK OF RS.11,90,980 /-. (4) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) IS RIGHT AND THE DIRECTING THE AO TO EXCLUDE THE EXPENSES OF ORISHA UNIT WHEN THE AO MADE COMPARISON OF EXPENSES ON THE BASIS OF TURNOVER OF THE WHOLE J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 3 COMPANY AND TG-3 UNIT FOR WHICH ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA. (5) --------( NO SUCH NUMBER IS MENTIONED IN THE GROUNDS OF APPEAL) (6) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) IS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF THIS ALLOWANCES OF EXPENSES CLAIMED AS COMMISSION PAID TO DIRECTORS OF 5,25,600/-, AS THE ASSESSEE HAS NOT PROVIDED ANY DOCUMENTARY EVIDENCES REGARDING SERVICE PROVIDED BY THEM. (7) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) IS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF THIS ALLOWANCE OF EXPENSES CLAIMED AS COMMISSION PAID TO AGENTS ON SALES OF RS. 6,74,300/-, WHEN THE ASSESSEE HAS NOT PROVIDED ANY DOCUMENTARY EVIDENCES REGARDING SERVICES RENDERED BY THEM. (8) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) IS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF THIS ALLOWANCE OF 5% OF VARIOUS EXPENSES AMOUNTING TO 1,29,65,250/- ESPECIALLY WHEN THE ASSESSEE WAS UNABLE TO PROVE THE EXPENSES CLAIMED WAS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSE AND WAS REVENUE IN NATURE. (9) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) IS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF THIS ALLOWANCE OF 5% OF EXPENSES CLAIMED AS EMPLOYEE WELFARE AND OTHER BENEFITS OF 62,31,600/- KEEPING IN VIEW THAT THE ASSESSEE WAS UNABLE TO PROVE THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CARRIED OUT BY IT. (10) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT A IS RIGHT IN DELETING THE THIS ALLOWANCES MADE BY THE AO OF 1,28,77,984/-ON ACCOUNT OF ADJUSTMENT OF MAT CREDIT ENTITLEMENT WHILE COMPUTING BOOK PROFIT UNDER SECTION 115 JB. (11) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT A IS RIGHT IN DELETING THE THIS ALLOWANCES MADE BY AO OF 4,87,257/- AND 3,98,053/- BEING EXPENDITURE INCURRED FOR THE PURPOSE OF EXEMPT INCOME WHILE COMPUTING BOOK PROFIT UNDER SECTION 115 JB OF THE ACT. (12) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF ASSESSING OFFICER J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 4 (13) IT IS THEREFORE PRAYED THAT THE ORDER OF CIT (A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT . 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN MANUFACTURE OF PAPER, PULP AND GENERATION AND DISTRIBUTION OF POWER. THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 29 TH SEPTEMBER 2011 DECLARING TOTAL INCOME AT 32,42,11,133/- AND BOOK PROFIT UNDER SECTION 115 JB OF 132,48,05,932/-. THE RETURN WAS SELECTED FOR THE SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) ON 21 ST DECEMBER 2012. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE VARIOUS ADDITION/ DISALLOWANCES AS RECORDED ON PAGE 35 OF THE ASSESSMENT ORDER : ADDITIONS/ DISALLOWANCES AMOUNTS (RS.) 1 THE SLUMS OF EXPENSES CLAIMED ON ACCOUNT OF SOCIAL FORESTRY EXPENSES AND APPRECIATION ON ASSETS USED FOR SOCIAL FORESTRY 87,99,425/- 2 DISALLOWANCE OF CLAIM OF EXPENSES AGAINST LIABILITY WRITTEN BACK 2,10,538/- 3 ADDITION ON ACCOUNT OF ADJUSTMENT UNDER SECTION 145A 23,49,858/- 4 ADDITION ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS 5,15,500/- 5 ADDITION ON ACCOUNT OF EXCESS PROCESS STOCK. 11,90,980/- 6 DISALLOWANCE UNDER SECTION 14A 3,98,053/- 7 DISALLOWANCES ON ACCOUNT OF BAD DEBTS 33,15,084/- 8 DISALLOWANCES OF EXPENSES CLAIMED IN COMPANYS PROFIT AND LOSS ACCOUNT IN RESPECT TO ON POWER GENERATION UNIT TG-3, SITUATED AT CENTRAL PULP MILL SURAT 3,28,28,034/- J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 5 9 ON ACCOUNT OF EXCESS DEPRECIATION CLAIMED (AS PER PARA - 12) 2,62,262/- 10 ON ACCOUNT OF EXCESS DEPRECIATION CLAIMED (AS PER PARA-13) 11,96,731/- 11 DISALLOWANCES ON ACCOUNT OF COMMISSION PAID TO DIRECTORS 5,25,600/- 12 DISALLOWANCES ON ACCOUNT OF COMMISSION ON SALES 6,74,300/- 13 DISALLOWANCES ON ACCOUNT OF VARIOUS EXPENSES 1,29,65,250/- 14 DISALLOWANCE ON ACCOUNT OF STAFF WELFARE EXPENSES 62,31,600/- 3. ON APPEAL BEFORE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE WAS GRANTED PARTIAL RELIEF IN RESPECT OF ADDITIONS/DISALLOWANCES MADE AT SERIAL NO. 1 & 8, HOWEVER, THE ADDITIONS WERE DELETED IN RESPECT OF SERIAL NUMBER 4, 5, 7, 9 TO 13 AND OTHER REMAINING ADDITIONS MENTIONED AT SERIAL NO. 2, 3, 6 AND 14 WERE UPHELD. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER (APPEALS) THE REVENUE HAS FILED PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE SUBMISSIONS OF LEARNED CIT-DR AND SR DR (DEPARTMENT OF REPRESENTATIVE) FOR THE REVENUE AND SH. SAURABH SUPARKAR LEARNED SENIOR ADVOCATE/ AUTHORIZED REPRESENTATIVE (LD. AR) FOR ASSESSEE AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AT THE OUTSET OF HEARING THE LD AR FOR THE ASSESSEE SUBMITS THAT HE HAD ALREADY FILED A CHART SHOWING THAT THE GROUND NO. 1,2,3 &11 OF APPEAL RAISED BY THE REVENUE ARE COVERED BY THE DECISIONS OF TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS AND ON OTHER GROUNDS THE LD CIT(A) GRANTED RELIEF BY PASSING WELL REASONED ORDER. THE J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 6 LD. DR FOR THE REVENUE SUBMITS THAT THIS APPEAL IS FILED BY THE REVENUE AND HE MAY BE ALLOWED TO BEGIN HIS SUBMISSIONS FIRST. THE PRAYER OF LD. DR FOR THE REVENUE WAS ALLOWED AND HE WAS ALLOWED TO PROCEED WITH. 5. GROUND NO.1 RELATES TO DELETING THE ADDITION MADE ON ACCOUNT OF SOCIAL FORESTRY EXPENSES. THE LD. DR FOR THE REVENUE SUBMITS THAT THIS ISSUE AROSE FOR THE FIRST TIME IN AY 2002-03 AND SIMILAR ADDITIONS WERE MADE BY ASSESSING OFFICER IN SUBSEQUENT YEARS TILL 2009-10. ON APPEALS BEFORE FIRST APPELLATE AUTHORITY THE ADDITIONS WERE SUSTAINED TILL 2009-10. HOWEVER, ON APPEAL BEFORE TRIBUNAL FOR AY 2002-03 TO 2004-05, THE ASSESSEE WAS ALLOWED RELIEF VIDE ORDER DATED 04.09.2009. BY FOLLOWING THE ORDER FOR AY 2002-03 TO 2004-05, THE ASSESSEE WAS FURTHER ALLOWED RELIEF BY TRIBUNAL IN AY 2009-10 VIDE ORDER DATED 31.07.2013. IN THE YEAR UNDER CONSIDERATION THE LD. CIT (A) GRANTING RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF TRIBUNAL IN AY 2009-10. THE LD. DR FOR THE REVENUE SUBMITS THAT THOUGH THIS GROUND OF APPEAL IS COVERED BY THE DECISION OF TRIBUNAL IN EARLIER YEARS, YET, HE IS SUPPORTING THE ORDER OF THE ASSESSING OFFICER AS THE REVENUE HAS ALREADY FILED APPEAL BEFORE GUJARAT HIGH COURT AND CHALLENGED THE ORDERS OF TRIBUNAL. THE LD. DR FOR THE REVENUE PRAYS TO RESTORE THE ADDITIONS MADE BY ASSESSING OFFICER. J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 7 6. ON THE OTHER HAND THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALES OF PAPER AND BOARD. BAMBOO AND HARDWOOD ARE THE MAJOR RAW MATERIALS REQUIRED FOR THE MANUFACTURING THESE PRODUCT. IN ORDER TO ENSURE REGULAR SUPPLY OF RAW MATERIAL, THE ASSESSEE TOOK VARIOUS STEPS TO ENSURE ADEQUATE SUPPLY OF RAW MATERIAL. THE ASSESSEE PROVIDED SEEDS TO THE FARMER, SUPPLY OF HIGH-QUALITY SAPLING DEVELOPED AND GROWN BY ASSESSEE ON THE BASIS OF IN-HOUSE RESEARCH AND DEVELOPMENT ACTIVITIES, TECHNICAL ASSISTANT TO THE FARMERS IN GROWING TREES, ARRANGING FINANCIAL ASSISTANCE. THERE WERE TWO WAYS IN WHICH SAPLING WERE DEVELOPED BY THE ASSESSEE. THE ASSESSEE PURCHASED SEEDS FOR THE PLANTATION OF BAMBOO TREES AND GROWS THEM IN ITS NURSERIES WHICH PROVIDE FOR ENVIRONMENT SUITABLE FOR THE BETTER HEALTH OF SUCH PLANTS LIKE PROPER SOIL, PROPER WATER, AND IRRIGATION FACILITIES, PROPER AND SUFFICIENT SUNLIGHT ETC. THE ASSESSEE ENTERED INTO AGREEMENT WITH THE FARMERS AT THE TIME OF SALE OF SAPLINGS FOR PROCUREMENT OF FULLY GROWN TREES AFTER A CERTAIN PERIOD OF TIME. THE PROCUREMENT OF SEEDS, CUTTING FROM OTHERS PLANT, DEVELOPMENT OF SAPLING, RESEARCH AND DEVELOPMENT ACTIVITIES, TECHNICAL ASSISTANCE TO FARMERS, ENTAILS EXPENDITURE IN THE HAND OF ASSESSEE. THE ASSESSEE IS NOT ENGAGED IN THE AGRICULTURAL ACTIVITIES. THE ASSESSEE INCURRED EXPENSES WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS FOR ENSURING REGULAR J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 8 SUPPLY OF RAW MATERIAL. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT ON SIMILAR SET OF FACT IN EARLIER YEARS THE ASSESSING OFFICER MADE ADDITIONS, WHICH WERE AFFIRMED BY LEARNED CIT(A). HOWEVER, ON FURTHER APPEAL BEFORE TRIBUNAL THE CONTENTION OF ASSESSEE WAS ACCEPTED AND THE ASSESSEE WAS ALLOWED RELIEF VIDE CONSOLIDATED ORDER DATED 4 TH SEPTEMBER 2009 FOR ASSESSMENT YEAR 2002-03 TO 2004-05. THE SAME ORDER WAS FOLLOWED BY TRIBUNAL IN APPEAL FOR ASSESSMENT YEAR 2009-10. THE LEARNED CIT (A) WHILE FOLLOWING THE ORDER OF TRIBUNAL IN EARLIER YEARS GRANTED RELIEF TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THE LEARNED AR OF THE ASSESSEE ACCORDINGLY SUBMITS THAT THE COPIES OF THE ORDERS OF TRIBUNAL IN EARLIER YEARS ARE PLACED ON RECORD. IN THIS BACK GROUND THE GROUND OF APPEAL RAISED BY REVENUE IS FULLY COVERED. 7. WE HAVE CONSIDERED THE RIVAL CONTENTION ABOUT THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT SIMILAR ADDITIONS WERE MADE AGAINST THE ASSESSEE IN ASSESSMENT YEAR 2002-03, 2003- 04 AND IN 2004-05. THE ADDITIONS WERE UPHELD BY LEARNED CIT(A), HOWEVER ON APPEAL BEFORE TRIBUNAL THE ASSESSEE WAS GRANTED RELIEF VIDE ORDER DATED 4 SEPTEMBER 2009. BY FOLLOWING THE DECISION FOR EARLIER YEARS THE COORDINATE BENCH IN APPEAL FOR ASSESSMENT YEAR 2009-10 IN ITA NO.511& J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 9 634/AHD/2013, ORDER DATED 31.07.2013, GRANTED SIMILAR RELIEF TO THE ASSESSEE BY PASSING THE FOLLOWING ORDER; 2. THE FACTS OF THE CASE AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDERS PASSED U/S. 143(3), DATED 23.12.2011 WERE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PULP AND BOARD. THE COMPANY HAS TWO PAPER MILLS. IN RESPECT OF GROUND NO.1, IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE ON SOCIAL FORESTRY AT RS.85,43,140/-. THE ASSESSEE HAS CLAIMED THE DEDUCTION OF THE SAID EXPENDITURE. THE EXPLANATION OF THE ASSESSEE WAS THAT SINCE THE ASSESSEE IS MANUFACTURING PULP & BOARD, THEREFORE, THE BAMBOO AND THE HARDWOOD ARE THE MAJOR RAW MATERIAL REQUIRED FOR THE MANUFACTURING. HOWEVER, THE AO WAS NOT CONVINCED AND FOLLOWING THE PAST HISTORY OF THE CASE, THE SAID EXPENDITURE WAS DISALLOWED. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(A) HAS FOLLOWED AN ORDER OF THE TRIBUNAL AND THEREAFTER DIRECTED THE AO TO REWORK THE DISALLOWANCE IN ACCORDANCE WITH THE DIRECTIONS LAID DOWN BY THE TRIBUNAL. WITH THESE BRIEF BACKGROUND, WE HAVE BEEN INFORMED THAT ON IDENTICAL FACTS ITAT 'C' BENCH AHMEDABAD FOR A.Y. 2008-09 IN AN APPEAL OF THE ASSESSEE BEARING ITA NO.2262/AHD/2011 AND CROSS APPEAL BEARING ITA NO.2505/AHD/2011 VIDE AN ORDER DATED 24TH OF MAY, 2012 HAS HELD VIDE PARAGRAPH NO.31 AT PAGE 9 THAT THE GROUND IN REQUIRED TO BE DECIDED AGAINST THE ASSESSEE. EVEN THE LEARNED CIT(A) HAS FOLLOWED AN EARLIER ORDER OF THE TRIBUNAL DATED 4.9.2009, WHEREIN THE QUANTIFICATION WAS MADE AS UNDER: 'FOLLOWING OUT ORDER FOR THE ASSESSMENT YEAR 2002-03 ONLY THE EXPENSES TO THE EXTENT OF RS.15.15 LACS WOULD BE CONSIDERED AS AGRICULTURAL EXPENSES OUT OF TOTAL CLAIM OF EXPENSE AT RS.80.95 LACS AND WOULD NOT BE ALLOWED. AGAINST THIS THE ASSESSEE HAS SHOWN SALE OF AGRICULTURAL PRODUCE (RELATABLE TO GROWING OF SAPLINGS THROUGH LAND) AT RS. 5.72 LACS AND SALE OF SAPLINGS NOT RELATABLE TO AGRICULTURAL OPERATIONS AT RS. 1.42 LACS. THEREFORE, AGRICULTURAL LOSS WOULD BE ONLY RS.15.15 - 5.72 = 9.43 LACS. THE SALE OF SAPLINGS AT RS.1.42 LACS WOULD BE NON- AGRICULTURAL RECEIPTS AND THEREFORE CANNOT BE ALLOWED TO BE ADJUSTED AGAINST AGRICULTURAL EXPENSES. SO FAR AS THE DEPRECIATION OF RS.4.32 LACS IS CONCERNED THE SAME HAS BEEN CLAIMED ON MIST CHAMBERS OTHER ASSETS USED IN J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 10 GROWING SAPLINGS THROUGH CLONAL ROUTES WHICH HAS BEEN TREATED AS NON-AGRICULTURAL OPERATION IN OUR DISCUSSION MADE IN ASSESSMENT YEAR 2002-03 WHILE DISPOSING OF SIMILAR GROUND. THUS, THE DISALLOWANCE IS RESTRICTED TO RS. 9.43 LACS AND ACCORDINGLY ASSESSEE GETS RELIEF OF RS. 78.13 - 9.43) = RS.68.70 LACS.' 2.1 IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE NOW STOOD COVERED BY SEVERAL DECISIONS OF THE TRIBUNAL PRONOUNCED IN THE PAST AND LEARNED CIT(A) HAS SIMPLY FOLLOWED ONE OF THE SAID DECISION, HENCE, THERE WAS NO FALLACY IN THE JUDGMENT OF LEARNED CIT(A), THUS REQUIRED TO BE AFFIRMED. RESULTANTLY, WE FIND NO FORCE IN THIS GROUND OF THE ASSESSEE. HENCE DISMISSED. 8. CONSIDERING THE CONSISTENT DECISION OF TRIBUNAL ON SIMILAR SET OF FACT, WE ARE IN AGREEMENT WITH THE SUBMISSION OF LEARNED AR OF THE ASSESSEE THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN EARLIER YEARS. HENCE, WE AFFIRM THE ORDER OF LD. CIT (A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE THE OTHER VIEW. RESPECTFULLY FOLLOWING THE SAME, THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 9. GROUND NO.2 RELATES TO DELETING THE ADDITION OF 5,15,000/- ON ACCOUNT OF SUNDRY CREDITORS. THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LEARNED DR FOR THE REVENUE FURTHER SUBMITS THAT DURING THE ASSESSMENT THE ASSESSEE WAS ASKED TO FURNISH THE CONFIRMATION IN RESPECT OF VARIOUS CREDITORS. THE ASSESSEE FAILED TO FILE THE CONFIRMATION FOR VERIFICATION AND THE GENUINENESS OF TRANSACTION. SINCE THE ASSESSEE FAILED TO J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 11 EXPLAIN THE CREDITORS OF STANDING FOR MORE THAN 3 YEARS WITH SUPPORTING EVIDENCE THE ASSESSING OFFICER ADDED THE SAME TO THE INCOME OF ASSESSEE. 10. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL FOR ASSESSMENT YEAR 2009-10. THE LEARNED AR SUBMITS THAT DECISION OF TRIBUNAL FOR ASSESSMENT YEAR 2009-10 DATED 31 ST JULY AND FOR ASSESSMENT YEAR 2005-06 DATED 4 TH FEBRUARY 2011 IS PLACED ON RECORD. IN BOTH THE YEARS THE ASSESSING OFFICER MADE ADDITION BY TAKING SIMILAR VIEW THAT OUTSTANDING BALANCE WAS FOR MORE THAN 3 YEARS AND THAT THE ASSESSEE FAILED TO FURNISH ANY CONFIRMATION. THE LEARNED CIT (A) THE DELETED ADDITIONS BY FOLLOWING THE ORDER OF EARLIER YEAR AND TAKING VIEW THAT CREDITORS ARE OLD IN RESPECT OF WHICH THE PURCHASES WERE MADE IN THE EARLIER YEARS. THERE IS NO MUCH VARIATION IN FACTS FOR THE YEAR UNDER CONSIDERATION. 11. WE HAVE HEARD THE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. WE HAVE NOTED THAT ON ALMOST SIMILAR FACT ON SIMILAR GROUND OF APPEAL IN APPEAL FOR ASSESSMENT YEAR 2009- 10, THE COORDINATE BENCH OF TRIBUNAL PASSED THE FOLLOWING ORDER; 10. GROUND NO.2 IS REPRODUCED BELOW: 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE OF RS.5,14,850/- ON J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 12 ACCOUNT OF UNEXPLAINED CREDITORS AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS WITH THE CREDITORS.' 10.2 AT THE OUTSET, WE HAVE BEEN INFORMED THAT ON IDENTICAL FACTS, THE TRIBUNAL IN A.Y.2008-09 (SUPRA) HAD HELD THAT THERE WAS NO CHANGE IN THE FACTS OF THE CASE ALREADY CONSIDERED IN THE PAST FOR A.Y. 2006-07 AND 2007-08 BY THE TRIBUNAL. ON THE SAME LINES FOR A.Y. 2008-09, THE ITA NO.511 & 634/AHD/2013 J.K. PAPER LTD. VS ITO A.Y. 2009-10 TRIBUNAL HAS DECIDED THE ISSUES IN FAVOUR OF THE ASSESSEE, RELEVANT PORTION IS REPRODUCED BELOW: '2.4 GROUND NO.4 IS AS UNDER: '(4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.4,95,000/- MADE ON ACCOUNT OF UNEXPLAINED CREDITORS WITHOUT APPRECIATING THE FACT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON IT TO PROVE THE GENUINENESS OF THE CREDITORS.' 2.4.1 REGARDING THIS ISSUE, IT WAS AGREED BY BOTH THE SIDE THAT SIMILAR ISSUE WAS RAISED BY THE REVENUE IN EARLIER TWO YEARS I.E. ASSESSMENT YEAR 2006-07 AND 2007-08 AS PER GROUND L(D) AND L(C) RESPECTIVELY AND THEREFORE, IN THE PRESENT YEAR ALSO, THIS ISSUE MAY BE DECIDED ON SIMILAR LINE. IN THOSE TWO YEARS, THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF ASSESSEE AS PER PARA 15.2 OF THE TRIBUNAL ORDER OF EARLIER TWO YEARS WHICH IS REPRODUCED BELOW: '15.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW.. WE FIND THAT THIS IS AN ADMITTED FACT IN BOTH THESE YEARS THAT IN THE BOOKS OF THE ASSESSEE, THE AMOUNT IN QUESTION IS SHOWN AS LIABILITY AND IT WAS NOT WRITTEN BACK BY THE ASSESSEE BY WAY OF CREDIT TO THE P & L ACCOUNT. IN THE LIGHT OF THESE FACTS, WHEN WE EXAMINE THE PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT, 1961, WE FIND THAT AS PER EXPLANATION (1) INSERTED IN SECTION 41(1) BY THE FINANCE (NO.2) ACT 1996 W.E.F. 01.04.1997, IF THE ASSESSEE HAS WRITTEN BACK THE LIABILITY THEN IT WILL AMOUNT TO REMISSION OR CESSATION OF LIABILITY FOR THE PURPOSE OF INVOKING SECTION 41(1) . AS PER THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS AS REPORTED IN 236 ITR 518 (S.C.) AND IN THE CASE OF KESARIA TEA CO. LTD. REPORTED IN 254 ITR 434 (S.C.), EVEN A UNILATERAL ENTRY PASSED BY THE ASSESSEE BY WRITING BACK THE LIABILITY WILL NOT AMOUNT TO CESSATION OF LIABILITY. HOWEVER, AFTER THE AMENDMENT OF SECTION 41(1) BY WAY OF INSERTION OF EXPLANATION TO THIS EXTENT, THESE TWO JUDGMENTS OF HON'BLE APEX COURT WILL NOT BE APPLICABLE WHERE THE ASSESSEE HAS WRITTEN BACK THE LIABILITY BUT WHERE ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY IN THE BOOKS, SECTION 41(1) CANNOT BE INVOKED AS PER THOSE JUDGMENT OF HON'BLE APEX COURT EVEN AFTER THE INSERTION OF EXPLANATION (1) IN SECTION 41(1) . THESE TWO JUDGMENTS OF HON'BLE APEX COURT WILL NOT BE APPLICABLE WHERE THE ASSESSEE HAS WRITTEN BACK THE LIABILITY BUT WHERE ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY IN THE J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 13 BOOKS SECTION 41(1) CANNOT BE INVOKED AS PER THESE TWO JUDGMENTS OF HANDLE APEX COURT EVEN AFTER THE INSERTION OF EXPLANATION (1) TO SECTION 41(1) OF THE ACT. SINCE IN THE PRESENT CASE, ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY IN QUESTION, PROVISIONS OF SECTION 41(1) CANNOT BE INVOKED AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.1(D) OF THE ASSESSMENT YEAR 2006-07 AND GROUND NO.1(C) FOR ASSESSMENT YEAR 2007-08 ARE REJECTED.' 2.4.2 SINCE NO DIFFERENCE IN THE FACT COULD BE POINTED OUT BY THE LD. DR. IN THE PRESENT YEAR ALSO, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE BY RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER IN EARLIER TWO YEARS AS PER THE RELEVANT PARA REPRODUCED ABOVE. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALSO REJECTED.' 12. CONSIDERING THE CONSISTENT DECISION OF TRIBUNAL ON SIMILAR SET OF FACT, WE ARE IN AGREEMENT WITH THE SUBMISSION OF LEARNED AR OF THE ASSESSEE THAT THIS GROUND OF APPEAL IS COVERED BY THE DECISION OF TRIBUNAL IN EARLIER YEARS. HENCE, WE AFFIRMS THE ORDER OF LD CIT(A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE THE OTHER VIEW. RESPECTFULLY FOLLOWING THE SAME, THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 13. GROUND NO.3 RELATES TO DELETING THE ADDITION OF EXCESS PROCESS STOCK. THE LD. DR FOR THE REVENUE SUPPORTED ADDITIONS MADE BY ASSESSING OFFICER. THE LD. DR FOR THE REVENUE FURTHER SUBMITS THAT DURING THE ASSESSMENT PRECEDING THE ASSESSEE WAS ASKED TO PRODUCE THE STOCK STATEMENTS ALONG WITH THE BANK AND STOCK AVAILABLE AS PER BOOKS OF ACCOUNTS AS ON 31 MARCH 2010. THE ASSESSEE PRODUCED THE STATEMENT WHICH SHOW A DIFFERENCE OF RS.11,90,980 /- AND STATED THAT FOR BANK STATEMENT, PROCESS STOCK VALUATION IS BASED ON J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 14 IMMEDIATELY PRECEDING MONTHS, WHEREAS VALUATION IN THE BOOKS AS ON 31 ST MARCH 2010 WAS DONE ON ACTUAL COST WHICH WAS WORKED OUT AFTER SUBMISSION OF A STATEMENT TO THE BANKS. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE STOCK OF VALUE FURNISHED TO THE BANK INDICATES THAT THERE WAS MATERIAL DIFFERENCE BETWEEN THE ASSESSEE AS REPORTED STOCK TO THE BANK AND ITS REPORT PRODUCED TO THE ASSESSING OFFICER, THE DIFFERENCE IS ORDINARY PROPOSED TO BE TREATED AS UNDISCLOSED INCOME, WHERE THE STOCK WAS CLOSE TO THE BANK IS IN EXCESS OF THE BOOK VALUE. THERE WAS NO REASON FOR DISBELIEVING THE BANK STATEMENT. THEREFORE THE ASSESSING OFFICER WAS IN MAKING ADDITION. THE LEARNED DR FOR REVENUE PRAYED FOR RESTORING THE ORDER OF ASSESSING OFFICER BY REVERSING THE ORDER PASSED BY LEARNED CIT(A). 14. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL FOR ASSESSMENT YEAR 2005-05. THE LEARNED AR SUBMITS THAT DECISION OF TRIBUNAL FOR ASSESSMENT YEAR 2004-06 DATED 4 TH SEPTEMBER 2009 IS PLACED ON RECORD. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THAT THERE IS NO DISPUTE THAT ASSESSEE IS MAINTAINING BOOKS OF ACCOUNT ON DAY TO DAY PRODUCTION BASES. THE ASSESSEE HAS TAKEN ACTUAL PHYSICAL STOCK FOR THE PURPOSE OF DECLARING CLOSING STOCK IN THE BOOKS OF ACCOUNT. THE PURCHASE J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 15 AND SALES ARE SUPPORTED BY VOUCHERS AND THERE IS NO POINT WHATSOEVER OF ANY SUPPRESSION OF SALES OR PURCHASES. THE VALUATION OF STOCK TO THE BANK IS ABSOLUTELY ON ESTIMATED BASES WITHOUT ANY ACTUAL PHYSICAL VERIFICATION AND THE SAME WAS NOT SUPPORTED BY BOOKS OF ACCOUNT AND THE DETERMINING THE VALUE OF A STOCK ALSO THE AVERAGE COST OF THE PRECEDING MONTH IS CONSIDERED. THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY APPRECIATING THE FACT IN PROPER PERSPECTIVE. 15. WE HAVE HEARD THE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. WE HAVE NOTED THAT ON ALMOST SIMILAR FACT ON SIMILAR GROUND OF APPEAL IN APPEAL FOR ASSESSMENT YEAR 2005- 06, IN ORDER DATED 04.09.2009, THE COORDINATE BENCH OF TRIBUNAL PASSED THE FOLLOWING ORDER; 31.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PRODUCE THE MATERIAL ON RECORD. IT IS NOT KNOWN WHAT BASIS THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAS GIVEN THE FUNDING THAT THERE IS A DIFFERENCE IN TERMS OF QUANTITY IN A STOCK A STATEMENT SUBMITTED TO THE BANK AND WHAT IS RECORDED IN THE BOOKS. WE HOWEVER, RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER TO VERIFY THE STATEMENTSJ-1,J-4&J-7 AND ANY OTHER STATEMENT WHICH IS IN THE POSSESSION OF AO POINTING OUT THE DIFFERENCE IN A STOCK IN TERMS OF QUANTITY. IF THERE IS NO SUCH STATEMENT DEPICTING DIFFERENCE IN TERMS OF QUANTITIES, NO ADDITION IS CALLED FOR BUT WHERE THERE IS ANY DOCUMENT IN POSSESSION OF AO SHOWING STOCK IN QUANTITY ON A PARTICULAR DATE AND ON COMPARISON WITH THE BOOKS IT RESULT IN UNFAVORABLE DIFFERENCE AGAINST THE ASSESSEE, THE SAME WILL BE SHOWN TO THE ASSESSEE AND AFTER CONFRONTING HIM THE DIFFERENCE IN QUANTITIES WILL BE WORKED OUT. STOCK IN TERMS OF QUANTITY WILL BE COMPARED AS ON THE SAME DATE. THEREAFTER, THE DIFFERENCE IF ANY WILL BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LOW AS PER ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE FOR J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 16 VALUATION OF STOCK. WITH THESE REMARKS WE SET ASIDE THIS GROUND TO THE FILE OF AO . 16. WE HAVE FURTHER NOTED THAT THE ASSESSING OFFICER, WHILE GIVING EFFECT TO THE ORDER OF LEARNED CIT(A), IN HIS ORDER DATED 11 TH APRIL 2014, DELETED THE ENTIRE ADDITION. CONSIDERING THE CONSISTENT DECISIONS OF TRIBUNAL ON SIMILAR SET OF FACT IN EARLIER YEARS, WE ARE IN AGREEMENT WITH THE SUBMISSION OF LEARNED AR OF THE ASSESSEE THAT THIS GROUND OF APPEAL IS COVERED BY THE DECISION OF TRIBUNAL IN EARLIER YEARS. HENCE, WE AFFIRMS THE ORDER OF LD CIT(A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE THE OTHER VIEW. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 17. GROUND NO.4 RELATES TO EXCLUSION OF EXPENSES OF ORISHA UNIT ON THE BASIS OF TURNOVER OF THE WHOLE COMPANY AND TG-3 UNIT FOR WHICH ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA. THE LD. DR FOR THE REVENUE SUBMITS THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA OF 18,91,35,828/- BEING FIRST YEAR OF THE CLAIM IN RESPECT OF POWER GENERATION UNIT TG-3. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF EXPENSES REGARDING ELECTRICITY GENERATION UNIT. IN RESPONSE TO THE SHOW CAUSE THE ASSESSEE SUBMITTED INCOME AND EXPENDITURE ACCOUNT, BALANCE SHEET AND OTHER DETAILS IN RESPECT OF POWER GENERATION UNIT J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 17 TG-3 AS A PART AND PARCEL OF ITS AUDIT REPORT. ON PERUSAL OF INCOME AND EXPENDITURE ACCOUNT, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT BIFURCATED EXPENSE IN RESPECT OF THE POWER GENERATION UNIT AND THE PAPER AND BOARD MANUFACTURING UNIT. IT WAS FURTHER NOTED THAT EXPENSES CLAIMED IN POWER PLANT UNIT IN ITS HEAD OF EMPLOYEE AND OTHER EXPENSES WERE NOT JUSTIFIABLE. THE ASSESSING OFFICER FURTHER ASKED THE ASSESSEE TO CLARIFY WHETHER EXPENSES CLAIMED IN THESE TWO HEADS WERE DIVIDED INTO SAME RATIO BETWEEN THE POWER PLANT UNIT AND THE OTHER UNITS OR NOT. THE ASSESSING OFFICER BY TAKING VIEW THAT POWER GENERATION DOES NOT REQUIRE MUCH MANPOWER AND THAT ASSESSEE HAS NOT MAINTAINED PROPER RECORD REGARDING THE EMPLOYEE DEPUTED ON POWER PRODUCTION UNIT. THE ASSESSING OFFICER MADE DISALLOWANCE OF 2.87% OF EMPLOYEE AND OTHER COST TO THE COST OF POWER GENERATION UNIT. THE LEARNED CIT(A) DIRECTED TO EXCLUDE THE EXPENSES OF PAPER UNIT DESPITE THE FACT THAT ASSESSEE ADMITTED THAT THERE WAS NO PROPER RECORD OF ACTUAL EXPENSES. THE LEARNED DR PRAYED FOR REVERSING THE ORDER OF LEARNED CIT (A) AND TO RESTORE THE ORDER OF ASSESSING OFFICER. 18. ON THE OTHER HAND THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER HAS CONSIDERED THE EXPENSES OF PAPER MANUFACTURING UNIT LOCATED AT ORISHA, WHICH HAS NO CONNECTION WITH THE GENERATION OF POWER AT TG- 3 UNIT IN SURAT. IT WAS FURTHER SUBMITTED THAT IF THE EXPENSES OF ORISHA UNIT IS J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 18 EXCLUDED FOR ALLOCATION PURPOSE WHICH IS RS. 82.29 CRORE, THE COMMON COST FOR THE PURPOSE OF ALLOCATION WOULD BE 54.98 CRORE AS AGAINST RS. 137.27 CRORE CONSIDERED BY THE ASSESSING OFFICER. THE LEARNED AR FURTHER SUBMITTED BY APPLYING THE FORMULA THE ASSESSEE CALCULATED THE COMMON COST TO BE ALLOCATED TO TG-3 AT 1.58 CRORE PLUS DEPRECIATION OF 0.15 CRORE I.E. TOTAL OF 1.73 CRORE. THE LEARNED CIT(A) APPRECIATED THE FACTS AND ACCEPTED THE CONTENTION OF ASSESSEE AND DIRECTED TO REALLOCATE THE EXPENSES BY EXCLUDING THE EXPENSES OF ORISHA UNIT AND TO COMPUTE THE DISALLOWANCE @ 2.87%. 19. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE NOTED THAT THE ASSESSING OFFICER WHILE ALLOCATING THE EXPENSES FOR POWER GENERATION UNIT CONSIDERED THE OVERALL COST OF EMPLOYEE AND OTHER EXPENSES, WHICH CONSIST OF EMPLOYEE COST AND OTHER EXPENSES OF ORISHA UNIT. THE LEARNED CIT (A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE THAT THE ORISHA UNIT HAS NO CONNECTION WITH THE GENERATION OF POWER BY TG-3 UNIT, DIRECTED THE ASSESSING OFFICER TO REALLOCATE THE EXPENSES BY EXCLUDING THE EXPENSES OF ORISHA UNIT. NO CONTRARY FACT OR EVIDENCE IS BROUGHT TO OUR NOTICE THAT THE EXPENSES INCURRED IN ODIS ARE UNIT HAVE ANY CASUAL CONNECTION WITH THE COST INCURRED IN POWER PRODUCTION IN TG-3 UNIT, THEREFORE, WE DO NOT FIND ANY J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 19 JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A) THUS, WE AFFIRM THE SAME. IN THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 20. GROUND NO. 5 RELATES TO DELETING THE DISALLOWANCE OF 5,25,600/- BEING COMMISSION PAID TO DIRECTORS. THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LEARNED DR FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS DEBITED 52,56,000/- UNDER THE HEAD DIRECTORS COMMISSION. THE ASSESSEE WAS ASKED TO PROVIDE DETAILS REGARDING THE SERVICE PROVIDED BY THE DIRECTORS, GENUINENESS OF THE SERVICES PROVIDED THEM, HOW IT WAS BENEFICIAL TO THE ASSESSEE, THE RATE AT WHICH SUCH COMMISSION WAS PAID AND THE LIST OF PARTIES WITH COMPLETE POSTAL ADDRESS FROM OWN PURCHASES/SALES MADE THROUGH THESE DIRECTORS. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT COMMISSION IS GIVEN AFTER PASSING A RESOLUTION IN THE BOARDS MEETING. THE COMMISSION WAS PAID AT THE MAXIMUM RATE OF 1% OF PROFIT. THE REPLY OF ASSESSEE WAS NOT FIND FAVORABLE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS OF THE VIEW THAT PASSING OF RESOLUTION BY BOARD IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE COMMISSION PAID TO THE DIRECTORS OTHER THAN THE MANAGING OR WHOLE TIME DIRECTORS OF THE ASSESSEE. SINCE THE ASSESSEE FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO PROVE THAT COMMISSION WAS PAID TO THE DIRECTORS OTHER THAN MANAGING DIRECTOR OR J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 20 WHOLE TIME DIRECTORS WAS ESSENTIAL FOR THE PURPOSE OF BUSINESS, THE ASSESSING OFFICER REASONABLY DISALLOWED 10% OF THE TOTAL COMMISSION. THE LEARNED DR FOR THE REVENUE PRAYED FOR RESTORING THE ORDER OF ASSESSING OFFICER BY REVERSING THE ORDER OF CIT(A). 21. ON THE OTHER HAND THE LEARNED OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT (A). THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITTED THAT ASSESSING OFFICER MADE AD-HOCK DISALLOWANCE WITHOUT ANY BASIS. THE SIMILAR COMMISSION EXPENSES WERE CLAIMED IN EARLIER YEARS AND NO SUCH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT THE RATIO OF TURNOVER AND THE COMMISSION EXPENSES FOR THE LAST THREE YEARS INDICATE THERE WERE IS NO ABNORMAL RISE IN THE COMMISSION EXPENSES AS COMPARED TO ITS TURNOVER IN THE YEAR UNDER CONSIDERATION. THE AD-HOCK DISALLOWANCE IS NOT AT ALL SUSTAINABLE IN THE EYES OF LAW. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT THE ASSESSING OFFICER MADE AD-HOCK DISALLOWANCES ON THE DOUBT OF GENUINENESS OF THE COMMISSION EXPENSES. THE ASSESSING OFFICER NOT ACCEPTED THE CONTENTION OF THE ASSESSEE. THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY TAKING VIEW THAT EXPENSES WERE INCURRED IN ACCORDANCE WITH THE PROVISIONS OF J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 21 COMPANIES ACT. THE COMMISSION EXPENSES WERE PAID BY PASSING THE BOARDS RESOLUTION. AND IN EARLIER YEARS SUCH COMMISSION EXPENSES WERE CLAIMED AND ALLOW TO THE ASSESSEE. THE ASSESSING OFFICER MADE DISALLOWANCE ON AD- DOCK BASIS WHICH IS NOT SUSTAINABLE. BEFORE US, NO CONTRARY FACT OR LAW IS BROUGHT TO OUR NOTICE, THEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A), WHICH WE AFFIRM. IN THE RESULT THIS GROUND OF APPEAL IS ALSO DISMISSED. 23. GROUND NO. 7 RELATES TO DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAID TO THE AGENTS. THE LEARNED DR FOR THE REVENUE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PRECEDING THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED COMMISSION ON SALES OF 67.43 LAKHS. THE ASSESSEE WAS ASKED TO PROVIDE THE COPY OF AGREEMENT, THE SERVICES PROVIDED BY SUCH PERSONS, THE NECESSITY AND GENUINENESS OF THE COMMISSION PAID AND HOW THE SALES WERE AFFECTED THROUGH THESE COMMISSION AGENTS AND THE RATE AT WHICH THE COMMISSION WAS PAID. THE ASSESSEE SUBMITTED ITS REPLY WHICH WAS NOT FIND FAVORABLE BY THE ASSESSING OFFICER. THE ASSESSEE FAILED TO PRODUCE COPY OF ANY AGREEMENT WITH THE COMMISSION AGENT TO WHOM THE COMMISSION WAS PAID AND THE NATURE OF SERVICES RENDERED BY THEM. THE ASSESSEE ONLY PRODUCED THE LIST OF PARTIES TO WHOM COMMISSION WAS PAID AND TDS WAS DEDUCTED. THE ASSESSEE GIVEN J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 22 COMMISSION ON ORAL UNDERSTANDING. THE ASSESSING OFFICER REASONABLY DISALLOWED 10% OF SUCH COMMISSION. THE LEARNED DR FOR THE REVENUE PRAYED FOR RESTORING THE ORDER OF ASSESSING OFFICER AND TO REVERSE THE ORDER OF CIT(A). 24. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). THE LEARNED AR FURTHER SUBMITS THAT THE ASSESSING OFFICER WRONGLY DISALLOWED THE EXPENSES WITHOUT APPRECIATING THE NATURE OF BUSINESS AND QUANTUM OF COMMISSION AS COMPARED TO SALES. IT WAS SUBMITTED THAT DUE TO HIGH COMPETITION IN THE MARKET, IN ORDER TO ACHIEVE THE SALE TARGET THE ASSESSEE WAS REQUIRED TO PAY HIGHER INCENTIVE TO ITS DEALER. THE SIMILAR COMMISSION WAS PAID AND CLAIMED IN EARLIER YEARS, WHEREIN NO SUCH DISALLOWANCE WAS MADE BY ASSESSING OFFICER. THE LD. AR PRAYED FOR DISMISSAL OF THE GROUND. 25. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT THE ASSESSING OFFICER MADE AD-HOCK DISALLOWANCE. THE CONTENTION OF ASSESSEE THAT SIMILAR COMMISSION EXPENSES WERE ALLOWED IN EARLIER YEARS WAS NOT EXAMINED OR DISCARDED BY THE ASSESSING OFFICER. THE ASSESSEE PROVIDED THE COMPLETE DETAILS REGARDING SALE AND THE COMMISSION PAID TO THE DEALERS AS RECORDED BY J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 23 LEARNED CIT(A) IN PARA 12.2 OF HIS ORDER. THE GENUINENESS OF THE EXPENSES WAS NOT DOUBTED BY THE ASSESSING OFFICER. CONSIDERING THE FACT THAT GENUINE BUSINESS EXPENSES ARE ALLOWABLE, AND THE LEARNED CIT(A) AFTER CONSIDERING THE FACT THAT IN EARLIER YEARS SIMILAR COMMISSION EXPENSES WERE ALLOWED, ALLOWED RELIEF TO THE ASSESSEE. BEFORE US NO CONTRARY FACT OR EVIDENCE IS BROUGHT TO TAKE OTHER VIEW. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LEARNED CIT(A), WHICH WE AFFIRM. IN THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 26. GROUND NO. 8 RELATES TO DELETING THE DISALLOWANCE OF 5% OF VARIOUS EXPENSES OF 1.29 CRORE. THE LEARNED DR FOR THE REVENUE SUBMITS THAT THE ASSESSEE DEBITED 2593.05 LAKHS UNDER THE HEADS BANK CHARGES, TRANSPORT, CLEARING AND FORWARDING CHARGES, TRAVELLING AND OTHER MISCELLANEOUS EXPENSES. THE ASSESSEE WAS ASKED TO PROVIDE LEDGER ACCOUNTS OF THESE EXPENSES AND VOUCHERS RELATING TO TRAVELLING AND OTHER MISCELLANEOUS EXPENSES. THE ASSESSEE CLAIMED THAT EXPENSES ARE REVENUE IN NATURE AND PERTAIN TO THE BUSINESS OPERATION OF THE ASSESSEE. THE ASSESSEE COULD NOT PROVE THE ENTIRE EXPENSES BEING WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER REASONABLY DISALLOWED ONLY 5% OF THE TOTAL EXPENSES TREATING SAME AS NON-BUSINESS EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY, THE LEARNED DR PRAYED THAT J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 24 DISALLOWANCE WAS MADE ON REASONABLE BASIS AND ARE REQUIRED TO BE UPHELD BY REVERSING THE ORDER OF LEARNED CIT(A) AND BY RESTORING THE ORDER OF ASSESSING OFFICER. 27. ON THE OTHER HAND THE LEARNED AR FOR THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). THE LEARNED AR FURTHER SUBMITS THAT ALL EXPENSES ARE REVENUE IN NATURE AND PERTAINS TO THE BUSINESS OPERATION OF THE ASSESSEE. THE ASSESSEE CLAIMED SIMILAR EXPENSES IN EARLIER YEARS AND NO SUCH DISALLOWANCE WAS MADE. THE GENUINENESS OF THE EXPENSES WAS NOT DOUBTED BY ASSESSING OFFICER. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AD-HOCK DISALLOWANCE @ 5% OF THE TOTAL EXPENSES. 28. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES PERUSE THE ORDER OF LOWER AUTHORITIES. WE HAVE NOTED THAT THE ASSESSING OFFICER IS NOT EXAMINED THE GENUINENESS OF THE EXPENSES. THE ASSESSING OFFICER HAS NOT BROUGHT ANY ADVERSE EVIDENCE AGAINST THE EXPENSES INCURRED BY THE ASSESSEE. THE ASSESSING OFFICER HAS NOT DOUBTED THAT THE EXPENSES ARE NOT GENUINE. AND WITHOUT SPECIFYING ANY REASON MADE DISALLOWANCE @ 5% OF THE TOTAL EXPENSES. THE ASSESSING OFFICER SIMPLY CONCLUDED THAT THE ARGUMENTS OF THE ASSESSEE COMPANY ARE CONSIDERED IN BUT THE SAME ARE NOT ACCEPTABLE WITHOUT SPECIFYING ANY REASON. THE LEARNED CIT(A) WHILE GRANTING RELIEF TO THE J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 25 ASSESSEE NOTED THAT ASSESSING OFFICER HAS NOT EVEN TRY TO DEAL WITH THE EXPENSES UNDER DIFFERENT HEAD AND MERELY MADE AD-HOCK DISALLOWANCE WHICH IS NOT SUSTAINABLE. WE HAVE NOTED THAT LIKE OTHER AD-HOCK DISALLOWANCES WHICH WERE ULTIMATELY DELETED BY LEARNED CIT(A), NO CONTRARY FACT OR EVIDENCE IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. THEREFORE WE AFFIRM THE ORDER OF LEARNED CIT (A). IN THE RESULT THIS GROUND OF APPEAL IS ALSO FAILED. 29. GROUND NO. 9 RELATES TO DELETING THE DISALLOWANCE OF 5% OF EMPLOYEE WELFARE EXPENSES AND OTHER BENEFITS. THE LEARNED DR FOR THE REVENUE LIKE OTHER GROUNDS OF APPEAL RELIED ON THE ORDER OF ASSESSING OFFICER. IT WAS ARGUED THAT DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED 1246.32 LAKHS UNDER THE HEAD EXPENSES CLAIMED AS EMPLOYEE WELFARE AND OTHER BENEFITS. THE ASSESSEE WAS ASKED TO PROVIDE BIFURCATIONS OF THE EXPENSES AND JUSTIFICATION OF THE SAME. THE ASSESSING FILED ITS REPLY. THE REPLY FURNISHED BY ASSESSEE WAS NOT FIND FAVORABLE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER HELD THAT ASSESSEE COMPANY FAILED TO PROVE THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER REASONABLY DISALLOWED 5% OF THE EXPENSES AMOUNTING TO 62,31,600/- OUT OF TOTAL EXPENSES OF RS.1246.32 LAKHS. THE ASSESSEE FAILED TO DISCHARGE ITS ONUS RELATING TO THE EXPENSES THAT THE SAME J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 26 WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LEARNED CIT (A) DELETED THE DISALLOWANCE BY TAKING VIEW THAT ASSESSING OFFICER FAILED TO BRING ON RECORD AND ADVERSE EVIDENCE AND SPECIFIED REASON WHILE THE DISALLOWANCES WAS MADE. THE ASSESSEE FAILED TO DISCHARGE HIS ONUS, MOREOVER THE DISALLOWANCE WAS MADE ONLY REASONABLE BASIS. 30. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). THE LEARNED AR SUBMITS THAT ALL THE EXPENSES ARE EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER HAS NOT FIND ANY THE FAULT IN THE DETAILS MAINTAINED BY THE ASSESSEE. THE ASSESSING OFFICER MADE DISALLOWANCE WITHOUT ANY BASIS. THERE IS NO JUSTIFICATION IN MAKING DISALLOWANCE ON AD-HOCK BASIS TO THE EXPENSES INCURRED ON EMPLOYEE WELFARE AND OTHER BENEFITS. 31. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND PERUSED THE RECORD CAREFULLY. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE DETAILS FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER HSS NOT FIND ANY DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY ASSESSEE. THE ASSESSING OFFICER HAS NOT SPECIFIED EVEN A SINGLE DISCREPANCY EITHER IN THE DOCUMENTS OR IN THE REPLY FURNISHED BY ASSESSEE. THE LEARNED CIT(A) WHILE GRANTING RELIEF TO THE ASSESSEE RECORDED THAT THE ASSESSING OFFICER HAS NOT DOUBTED THAT J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 27 THESE EXPENSES WERE NOT GENUINE. EVEN BEFORE US NO CONTRARY FACT OR LAW IS SHOWN TO TAKE OTHER VIEW EXCEPT TO RAISE THE PLEA THAT THE DISALLOWANCES WERE MADE ON REASONABLE BASIS. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LEARNED CIT(A), WHICH WE AFFIRM. IN THE RESULT THIS GROUND OF APPEAL IS ALSO FAILED. 32. GROUND NO. 10 RELATES TO DELETING THE DISALLOWANCES OF RS.12,28,77,984/- MADE ON ACCOUNT OF ADJUSTMENT OF MAT CREDIT ENTITLEMENT WHILE COMPUTING BOOK PROFIT. THE LD DR FOR THE REVENUE SUBMITS THAT LD CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF TRIBUNAL FOR AY 200-03 TO 2004- 05. THE DECISION OF THE TRIBUNAL HAS BEEN CHALLENGED BY THE DEPARTMENT BEFORE GUJARAT HIGH COURT AND THE FINAL OUTCOME IS PENDING. 33. ON THE OTHER HAND THE LD AR FOR THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). THE LD AR FURTHER SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2002-03 TO 2004-05 DATED 04 TH SEPTEMBER 2009 AND AY 2006-07 DATED 18.10.2016. 34. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDER OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER MADE ADJUSTMENT BY TAKING VIEW THAT THERE IS NO PROVISION FOR ANY ADJUSTMENT IN RESPECT OF MAT CREDIT TO THE PROFIT AND LOSS ACCOUNTS AND THE SAME IS REQUIRED TO BE REDUCED J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 28 FROM THE NET PROFIT FOR COMPUTING BOOK PROFIT AND ACCORDINGLY ADDED TO THE BOOK PROFIT. THE LD CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF TRIBUNAL FOR AY FOR AY 2002-03 TO 2004-05 DATED 04 TH SEPTEMBER 2009. THE TRIBUNAL IN APPEAL FOR AY 2002-03 TO 2004-05 IN ITS ORDER DATED 04 TH SEPTEMBER 2009 CLEARLY HELD THAT NO DISALLOWANCE CAN BE MADE BEYOND THE ADJUSTMENT PROVIDED UNDER SECTION 115JB. FURTHER WE HAVE NOTED THAT SIMILAR ADJUSTMENT WHILE COMPUTING BOOK PROFIT WAS MADE IN AY 2006-07 AND 2008-09, HOWEVER, ON APPEAL BEFORE TRIBUNAL THE SAME WAS DELETED. BEFORE US NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE EXCEPT MAKING SUBMISSIONS THAT DECISION OF THE TRIBUNAL HAS BEEN CHALLENGED BY THE DEPARTMENT BEFORE GUJARAT HIGH COURT AND THE FINAL OUTCOME IS PENDING. THEREFORE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF LD CIT(A), WHICH WE AFFIRMS. IN THE RESULT THIS GROUND OF APPEAL IS ALSO DISMISSED. 35. GROUND NO. 10 RELATES TO DELETING THE DISALLOWANCE OF RS. 4,87,257/- AND RS. 3,98,053/- BEING EXPENSES INCURRED FOR THE PURPOSE OF EXEMPT INCOME WHILE COMPUTING BOOK PROFIT. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 29 36. ON THE OTHER HAND THE LD. AR FURTHER SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED BY THE DECISION OF CIT(A) IN ASSESSEES OWN CASE FOR AY 2009-10. THE REVENUE AHS NOT CHALLENGED THE ORDER FOR AY 2009-10 BEFORE TRIBUNAL AND ACCEPTED THE SAME. 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDER OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER MADE ADJUSTMENT BY TAKING VIEW THAT THERE IS NO PROVISION FOR ANY ADJUSTMENT IN RESPECT OF MAT CREDIT TO THE PROFIT AND LOSS ACCOUNTS AND THE SAME IS REQUIRED TO BE REDUCED FROM THE NET PROFIT FOR COMPUTING BOOK PROFIT AND ACCORDINGLY ADDED TO THE BOOK PROFIT. THE LD CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECESSOR FOR AY 2009-10. 38. THE SPECIAL BENCH OF DELHI TRIBUNAL IN ACIT SS VIREET INVESTMENT [2017] 82 TAXMANN.COM 417 (DELHI- TRIBUNAL SB) HELD THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED UNDER SECTION 14A. CONSIDERING THE AFORESAID DISCUSSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IN THE RESULT THIS GROUND OF APPEAL IS ALSO DISMISSED. 39. IN THE RESULT THE APPEAL OF THE REVENUE FOR AY 2010-11 IS DISMISSED. J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 30 ITA NO. 2905/AHD/2014 FOR AY 2011-12 BY REVENUE AND 40. AS RECORDED IN PARA -1 OF THIS ORDER THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL IN AY 2011-12 AS RAISED IN APPEAL FOR AY 2010-11, EXCEPT VARIATION OF FIGURES OF ADDITION/ DISALLOWANCE. THE BRIEF GROUNDS OF APPEAL RAISED IN AY 2010-11 AND 2011-12 ARE MENTIONED IN A CHART BELOW: SR. NO. BRIEF NATURE OF GROUNDS OF APPEAL AY 2010-11 AY-2011-12 1 SOCIAL FORESTRY EXPENSES 1 1 2 UN-EXPLAINED CREDITORS 2 2 3 PROCESS STOCK DECLARED TO BANK 3 3 4 DEDUCTION U/S 80IA- ALLOCATION OF EXPENSES 4 -- 5 DIRECTORS COMMISSION AD-HOCK DISALLOWANCE 6 4 6 SALES COMMISSION AD-HOCK DISALLOWANCE 7 5 7 MISC EXPENSES AD-HOCK DISALLOWANCE 8 6 8 EMPLOYEE EXPENSES AND WELFARE AD-HOCK DISALLOWANCES 9 7 9 MAT CREDIT TO P&L ACCOUNT 10 -- 10 AMORTIZATION OF EXPENSES 11 -- 11 SECTION 14A DISALLOWANCE ADDED TO BOOK PROFIT U/S 115JB 11 8 41. CONSIDERING THE FACTS THAT WE HAVE ALREADY DISMISSED IDENTICAL GROUNDS OF APPEAL IN AY 2010-11AND AFFIRMED THE ORDER OF LD CIT(A), THEREFORE, FOLLOWING THE PRINCIPAL OF CONSISTENCY ALL THE GROUNDS OF APPEAL RAISED BY REVENUE IN AY 2011-12 ARE DISMISSED WITH SIMILAR OBSERVATIONS. 42. IN THE RESULT THE APPEAL OF REVENUE FOR AY 2011-12 IS DISMISSED. J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 31 ITA NO. 1963/AHD/2016 FOR AY 2012-13 BY REVENUE AND ITA NO. 1610/AHD/2016 FOR AY 2012-13 BY ASSESSEE 43. AS RECORDED IN PARA-1 SUPRA, THE REVENUE HAS RAISED CERTAIN COMMON GROUNDS OF APPEAL IN ALL ASSESSMENT YEARS, EXCEPT VARIATION OF FIGURE. WE HAVE FURTHER NOTED THAT IN THIS YEAR GROUND NO. 1, 2, 3 & 5 ARE IDENTICAL AS RAISED IN APPEAL FOR AY 2011-12, WHICH WE HAVE ALREADY DISMISSED BY AFFIRMING THE ORDER OF CIT(A) ON THE BASIS OF EARLIER YEAR (AY 2010-11), THEREFORE, FOLLOWING THE PRINCIPAL OF CONSISTENCY ALL THESE GROUNDS OF APPEAL NO. 1,2,3 & 5 ARE DISMISSED WITH SIMILAR OBSERVATIONS. 44. GROUND NO. 4 RAISED BY REVENUE RELATES TO DELETING THE DISALLOWANCE ON ACCOUNT OF BAD DEBTS. THE LEARNED DR FOR THE REVENUE SUBMITS THAT ASSESSEE FAILED TO PROVE WHETHER BAD-DEBTS WRITTEN OFF WERE OFFERED AS INCOME IN THE PRECEDING YEARS OR NOT. THE LD CIT(A) IGNORED THE FACTS THAT NO DETAILS RELATING TO BED-DEBTS WERE FURNISHED. 45. ON THE OTHER HAND THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VERSUS TRF LTD (323 ITR 397 SC)AND THE FACT THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE BY HIS PREDECESSOR IN EARLIER ASSESSMENT YEARS. J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 32 46. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES. THE ASSESSING OFFICER MADE ADDITION BY TAKING THAT ASSESSEE FAILED TO PUNISH ANY EVIDENCE WHICH ESTABLISHED THAT THE DEBTS HAVE BECOME IRREVOCABLE. THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONOURABLE SUPREME COURT IN CIT VERSUS TRF LTD (SUPRA )WHEREIN IT HAS BEEN HELD THAT ASSESSEE IS NOT REQUIRED TO ESTABLISH THAT DEBTS S HAS BECOME IRREVOCABLE IN THAT PARTICULAR YEAR AND IT IS ENOUGH IF THE BAD DEBTS WRITTEN OFF AS IRREVOCABLE IN THE ACCOUNTS OF THE ASSESSEE. NO CONTRARY FACT OR LAW IS BROUGHT TO NOTICE TO TAKE ANY OTHER VIEW, THEREFORE WE AFFIRM THE ORDER OF LEARNED CIT. IN THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 47. GROUND NO. 6 RAISED BY REVENUE RELATES TO DELETING THE DISALLOWANCE MADE UNDER SECTION 40 (A)(I). THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER THE LEARNED AR FURTHER SUBMITS THAT THE NATURE OF PAYMENT IS AGENCY COMMISSION PAID TO A NON-RESIDENT, THE ASSESSEE WAS LIABLE TO DEDUCT TDS ON THE SAID PAYMENTS. 48. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). THE LD AR SUBMITS THAT LEARNED CIT(A) ALLOWED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONORABLE SUPREME COURT IN CASE OF J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 33 CIT VERSUS TOSHOKU LIMITED (125 ITR 525 SC). THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT THE RECIPIENT HAS NO BUSINESS CONNECTION IN INDIA AND NOT LIABLE TO TAX IN INDIA, THEREFORE THE ASSESSEE WAS NOT LIABLE TO MAKE TDS ON SUCH COMMISSION PAYMENT. 49. WE HAVE CONSIDERED THE RIVAL CONTENTION OF BOTH THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES. DURING THE ASSESSMENT OF THE ASSESSING OFFICER NOTED THAT ASSESSEE MADE FOREIGN REMITTANCE OF 7,100,00/- TO NON-RESIDENT ON ACCOUNT OF EXPORT COMMISSION, ON WHICH NO TAX WAS DEDUCTED AT SOURCE AS REQUIRED UNDER SECTION 195 OF THE ACT. THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE AS TO WHY A DISALLOWANCE UNDER SECTION 40 A (I) SHOULD NOT BE MADE. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSION OF ASSESSEE MADE DISALLOWANCE OF 71 LAKHS ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE. DURING THE APPELLATE PROCEEDING BEFORE LEARNED CIT(A) THE ASSESSEE CONTENDED THAT THE ISSUE REGARDING THE NON-WITHHOLDING TAX ON COMMISSION PAID TO NON-RESIDENT IS NOW SETTLED BY HONORABLE SUPREME COURT IN CASE OF CIT VERSUS TOSHOKU LIMITED (SUPRA), WHEREIN IT HAS BEEN HELD BY THE APEX COURT THAT COMMISSION AMOUNTS, WHICH WERE EARNED BY THE NON-RESIDENT FOR SERVICES RENDERED OUTSIDE INDIA CANNOT BE DEEMED TO BE INCOME WHICH HAS NEITHER ACCRUED NOR ARISE IN INDIA. THE NON-RESIDENT TO WHOM SUCH COMMISSIONS WERE PAID IN THE YEAR UNDER CONSIDERATION DOES NOT HAVE ANY J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 34 BUSINESS CONNECTION OR PERMANENT ESTABLISHMENT IN INDIA AND THEREFORE, NO INCOME ACCRUE OR ARISE OR DEEM TO ARISE IN INDIA IN TERMS OF SECTION 9(1)(I) OF THE ACT. SUCH INCOME IS NOT CHARGEABLE TO TAX INDIA AS PER SECTION 195 OF THE ACT. THE LEARNED CIT(A)FOLLOWING THE DECISION OF HONORABLE SUPREME COURT IN CIT VERSUS TOSHOKU LIMITED (SUPRA) DELETED THE ENTIRE DISALLOWANCE. NO CONTRARY FACT OR LAW IS BROUGHT TO NOTICE TO TAKE ANY OTHER VIEW, THUS WE AFFIRM THE ORDER OF LEARNED CIT(A). IN THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 50. GROUND NO. 7 RAISED BY REVENUE AND GROUND NO. 1 RAISED BY ASSESSEE RELATES TO DISALLOWANCE OF CLUB EXPENSES. THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LEARNED DR FURTHER SUBMITS THAT DURING THE ASSESSMENT THE ASSESSING OFFICER ALREADY REASONABLY ALLOWED 25% OF THE CLUB EXPENSES IN FAVOUR OF THE ASSESSEE WHICH IS QUITE JUSTIFIED. THE LEARNED CIT(A) GRANTED FURTHER RELIEF TO THE ASSESSEE DESPITE THE FACT THAT ASSESSEE HAS NOT PROVED THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LEARNED DR PRAYED FOR RESTORING THE ORDER OF ASSESSING OFFICER AND TO REVERSE THE ORDER OF CIT(A). 51. ON THE OTHER HAND THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE IS ENTITLED FOR ALLOWANCE OF ALL EXPENSES INCURRED TOWARDS THE PAYMENTS J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 35 MADE TO VARIOUS CLUBS AT DELHI GOLF CLUB, DLF GOLF RESORT IN FRIENDS ETC. THE CLUB EXPENSES REPRESENT MEMBERSHIP FEES TO VARIOUS CLUBS TAKEN BY THE ASSESSEE COMPANY FOR THE PURPOSE OF BUSINESS AND FACILITIES WAS USED FOR VARIOUS BUSINESS MEETINGS AND CONFERENCES OF TOP EXECUTIVE OF THE ASSESSEE COMPANY, THEREFORE, THE ENTIRE EXPENSES WAS FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER MADE DISALLOWANCE OF 12,63,976/- OUT OF TOTAL CLUB EXPENSES OF 16.85 LAKHS. THEREFORE, DISALLOWED 75% OF THE TOTAL EXPENSES. THE LEARNED CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE. THE ASSESSEE IS ENTITLED FOR FULL ALLOWANCE ON ACCOUNT OF EXPENSES INCURRED ON CLUB MEMBERSHIP FEES. IN SUPPORT OF HIS SUBMISSION THE LEARNED OF THE ASSESSEE RELIED UPON THE DECISION OF GUJARAT HIGH COURT IN GUJARAT STATE EXPORT VS CIT (209 ITR 649 GUJ ) AND TRIBUNAL IN ACIT VS EASTERN SILK MILK INDUSTRIES LTD (2019) 109 TAXMANN.COM 204 (KOLKATA TRIB). 52. WE HAVE CONSIDERED THE RIVAL SUBMISSION ABOUT THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES CAREFULLY. THE ASSESSEE CLAIMED CLUB EXPENSES OF 16.85 LAKHS. THE ASSESSING OFFICER ALLOWED 25% OF THE EXPENSES ON A TOP BASIS. THE LEARNED CIT SUSTAINED THE DISALLOWANCE OF RS.5 LAKHS BY TAKING VIEW THAT POSSIBILITY OF USING OF THESE FACILITIES BEING USED EXCLUSIVELY FOR PERSONAL PURPOSE OF DIRECTORS AND THEIR FRIENDS COULD NOT BE RULED OUT. J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 36 53. THE HON'BLE BOMBAY HIGH COURT IN OTIS ELEVATOR CO. LTD. (1992) 60 TAXMAN 216 WHILE CONSIDERING THE QUESTION OF LAW ABOUT THE ALLOWANCE OF CLUB FEES INCURRED/PAID TO EMPLOYEES, ALLOWED THE QUESTION IN FAVOUR OF ASSESSEE. FURTHER THE COORDINATE BENCH OF KOLKATA TRIBUNAL IN EASTERN SILK INDUSTRIES (SUPRA) HELD THAT IN ABSENCE OF ANY TENABLE OR COGENT MATERIAL TO REBUT OR CONTROVERT THAT THE EXPENSES WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS, DISALLOWANCE MADE BY ASSESSING OFFICER WAS NOT SUSTAINABLE . THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE BOMBAY HIGH COURT IN OTIS ELEVATOR CO. LTD. ( SUPRA) AND DECISION OF KOLKATA TRIBUNAL IN EASTERN SILK INDUSTRIES LTD(SUPRA) WE DIRECT THE ASSESSING OFFICER TO ALLOW ALL EXPENSES INCURRED ON ACCOUNT OF CLUB EXPENSES. IN THE RESULT THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED AND THE GROUND RAISED BY ASSESSEE IS ALLOWED. 54. GROUND NO. 2 RAISED BY ASSESSEE RELATES TO ADDITION ON ACCOUNT OF INCOME FROM FCCB FUNDS. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING THIS GROUND OF APPEAL. CONSIDERING THE SUBMISSION OF LEARNED AR OF THE ASSESSEE GROUND NO. 2 RAISED BY ASSESSEE IS DISMISSED. 55. GROUND NO 3 RELATES TO UPHOLDING THE DISALLOWANCE UNDER SECTION 40 A (I) OF 12 LAKHS BEING SEMINAR FEES PAID TO LONDON SCHOOL OF ECONOMICS. THE LD J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 37 AR FOR THE ASSESSEE SUBMITS THAT ASSESSEE PAID FEE OF RS. 12 LAKHS TO LONDON SCHOOL OF ECONOMICS FOR ATTENDING SEMINARS. THE RECIPIENT HAS NO BUSINESS CONNECTION IN INDIA, THUS NO INCOME ACCRUES OR ARISE TO THEM IN INDIA WITHIN THE MEANING OF SECTION 9(1)(I) OF INCOME TAX ACT. THE SERVICES FOR WHICH THE ASSESSEE MADE PAYMENT WERE RENDERED OUTSIDE INDIA. IN SUPPORT OF HIS SUBMISSIONS THE LD AR FOR THE ASSESSEE RELIED ON THE DECISION OF TRIBUNAL IN ITO VS VEEDA CLINICAL RESEARCH (P) LTD [2013] 35 TAXMANN.COM 557 / 156 TTJ115 (AHMEDABAD-TRIB) AND DDIT VS TETRA PACK INDIA LTD[2019]111TAXMANN.COM 205 (PUNE-TRIB). 56. ON THE CONTRARY THE LD DR SUPPORTED THE ORDER OF THE LD CIT(A). THE LD DR FURTHER SUBMITS THAT THE ASSESSEE WAS LIABLE TO MAKE TDS ON THE PAYMENTS MADE TO LONDON SCHOOL OF ECONOMICS. 57. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES CAREFULLY. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS MADE PAYMENT OF RS.12 LAKHS TO LONDON SCHOOL OF ECONOMICS, ON WHICH NO TAX WAS DEDUCTED AT SOURCE AS PER SECTION 195 OF THE ACT. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE AS TO WHY THE DISALLOWANCE UNDER SECTION 40A(I) BE MADE ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON THE PAYMENTS MADE TO J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 38 NONRESIDENT. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISALLOWED THE ENTIRE EXPENSES UNDER SECTION 40A(I). THE LD CIT(A) AFFIRMED THE ACTION OF ASSESSING OFFICER BY TAKING VIEW THAT NO DETAILS ABOUT THE PAYMENT WAS FURNISHED AND THUS VERACITY OF CLAIM CANNOT BE VERIFIED. THE LD CIT(A) ALSO CONCLUDED THAT RENDERING ANY TECHNICAL OR MANAGERIAL SERVICES ATTRACTS THE PROVISIONS OF SECTION 195 OF THE ACT. THE OTHER SUBMISSIONS OF THE ASSESSEE THAT THE RECIPIENT HAS NO BUSINESS CONNECTION IN INDIA WAS ALSO NOT ACCEPTED BY LD CIT(A) BY TAKING VIEW THAT WHETHER THERE IS BUSINESS CONNECTION OR NOT, ANY INCOME BY WAY OF FEE FOR TECHNICAL SERVICES (FTS) IS COVERED BY SECTION 9(1)(VII) OF THE ACT. 58. BEFORE US, THE LD. AR FOR THE ASSESSEE VEHEMENTLY RELIED ON THE DECISIONS OF TRIBUNAL IN ITO VS VEEDA CLINICAL RESEARCH (P) LTD (SUPRA) WHEREIN IT WAS HELD THAT THE LAW IS SETTLED SO FAR AS THE CONNOTATIONS OF 'MAKE AVAILABLE' CLAUSE IN THE DEFINITION OF FEES FOR TECHNICAL SERVICES IN THE CONTEMPORARY TAX TREATIES ARE CONCERNED. IT IS HELD TO BE A CONDITION PRECEDENT FOR INVOKING THIS CLAUSE THAT THE SERVICES SHOULD ENABLE THE PERSON ACQUIRING THE SERVICES TO APPLY TECHNOLOGY CONTAINED THEREIN. THERE ARE TWO NON-JURISDICTIONAL HIGH COURT DECISIONS, NAMELY DELHI HIGH COURT IN THE CASE OF DIT V. GUY CARPENTER & CO. LTD . [2012] 346 ITR 504/207 TAXMAN 121/20 TAXMANN.COM 807 AND KARNATAKA HIGH COURT IN THE CASE OF CIT V. DE BEERS J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 39 INDIA (P.) LTD. [2012] 346 ITR 467/208 TAXMAN 406/21 TAXMANN.COM 214 IN SUPPORT OF THIS PROPOSITION, AND THERE IS NO CONTRARY DECISION BY THE JURISDICTIONAL HIGH COURT OR BY THE SUPREME COURT. THEREFORE, UNLESS THERE IS A TRANSFER OF TECHNOLOGY INVOLVED IN TECHNICAL SERVICES EXTENDED BY THE UK BASED COMPANY, THE 'MAKE AVAILABLE' CLAUSE IS NOT SATISFIED AND, ACCORDINGLY, THE CONSIDERATION FOR SUCH SERVICES CANNOT BE TAXED. FURTHER PUNE TRIBUNAL IN DDIT VS TETRA PACK INDIA LTD (SUPRA) HELD THAT PAYMENTS MADE TO FOREIGN RESIDENTS WITH WHOM INDIA HAS TAX TREATY AND IN SUCH TAX TREATIES, THERE IS CLAUSE OF FTS, WITH CONDITION TO MAKE AVAILABLE OF ANY TECHNOLOGY AND IN ABSENCE OF TECHNOLOGY MADE AVAILABLE TO THE ASSESSEE, PAYMENT MADE TO RECIPIENT IS NOT EXIGIBLE TO TAX DEDUCTION AT SOURCE. 59. CONSIDERING THE AFORESAID DECISIONS OF COORDINATE BENCHES OF TRIBUNAL, WE ARE IN AGREEMENT WITH THE SUBMISSIONS OF THE LD AR FOR THE ASSESSEE THAT IN ABSENCE BUSINESS CONNECTION IN INDIA, NO INCOME ACCRUES OR ARISE TO THEM IN INDIA WITHIN THE MEANING OF SECTION 9(1)(I) OF INCOME TAX ACT. THEREFORE, ON THE SERVICES FOR WHICH THE ASSESSEE MADE PAYMENT WERE RENDERED OUTSIDE INDIA, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE. HOWEVER, THE LD CIT(A) HAS CATEGORICALLY HELD THAT NO THAT NO DETAILS ABOUT THE PAYMENT WAS MADE TO LONDON SCHOOL OF ECONOMICS WAS FURNISHED THE VERACITY OF CLAIM COULD NOT BE VERIFIABLE. HENCE, WE DIRECT THE ASSESSING OFFICER TO J.K. PAPER LTD, (A.Y: 2010-11 TO 2012-13) 40 VERIFY THE DETAILS OF THE EXPENSES AND GRANT THE RELIEF TO THE ASSESSEE. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 60. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 4 TH NOVEMBER 2020 AS PER RULE 34 OF INCOME TAX (APPELLATE TRIBUNAL) RULES. SD/- SD/- (ARJUN LAL SAINI) (PAWAN SINGH) ( / ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 4 TH NOVEMBER, 2020 COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT