Mcdowell & Co. Ltd., Bangalore V. ACIT, Bangalore

ITA 187/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63708 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-10-2012
• Assessment Year: 1994-1995
• Appeal Filed On: 24-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIIIDR
• Assessee Lawyers: K R PRADEEP
• Keywords: Question of law
• Section: 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NOS.187 TO 190/BANG/2011 ASSESSMENT YEARS : 1994-95, 1995-96, 2002-03 & 20 03-04 MCDOWELL & CO. LTD., (NOW KNOWN AS UNITED SPIRITS LTD., UB TOWERS, 24, VITTAL MALLYA ROAD BANGALORE 560 001. PAN : AACCN 8043J VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.R. PRADEEP, C.A. RESPONDENT BY : SHRI ETWA MUNDA, CIT-III(DR) DATE OF HEARING : 04.10.2012 DATE OF PRONOUNCEMENT : 12.10.2012 O R D E R PER BENCH THESE ARE APPEALS BY THE ASSESSEE AGAINST FOUR O RDERS ALL DATED 30.12.2010 OF THE CIT(APPEALS)-VI, BANGALORE RELATI NG TO ASSESSMENT YEARS 1994-95, 1995-96, 2002-03 & 2003-04. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH ALL THES E APPEALS ARISE ARE IDENTICAL. THE ONLY ISSUE THAT ARISES FOR CONSIDER ATION IN ALL THESE APPEALS IS ITA NOS.187 TO 190/BANG/11 PAGE 2 OF 19 AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIE D IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF AIRCRAFT EXPENSES, WHILE DETERMINING TOTAL INCOME OF THE ASSESSEE. 3. WE WILL FIRST DEAL WITH THE APPEAL RELATING TO A .Y. 1994-95. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINE SS OF SALE OF INDIAN MADE FOREIGN LIQUOR (IMFL). FOR THE A.Y. 1994-95, THE ASSESSEE WHILE COMPUTING TOTAL INCOME, CLAIMED AS DEDUCTION EXPEND ITURE OF Q 1,02,15,390 UNDER THE HEAD AIRCRAFT EXPENDITURE. THE AO CAL LED FOR THE LOG BOOK AND OTHER DETAILS OF THE AIRCRAFT EXPENDITURE. ACCORDI NG TO THE AO, THE ASSESSEE DID NOT PRODUCE THE DETAILS. THE AO WANTED A LIST OF PASSENGERS WHO TRAVELLED IN THE AIRCRAFT. ACCORDING TO THE ASSESS EE, THE AIRCRAFT WAS OWNED BY THE ASSESSEE AND USED FOR ITS BUSINESS PURPOSES AND THEREFORE THERE IS NO REQUIREMENT OF MAINTAINING LIST OF PASSENGERS AS PER THE DIRECTIVES ISSUED BY THE DIRECTOR GENERAL OF CIVIL AVIATION (D GCA). 4. THE AO AFTER MAKING A REFERENCE TO THE DISALLO WANCE MADE OF SIMILAR EXPENSES IN THE EARLIER ASSESSMENT YEARS, H ELD THAT 75% OF THE EXPENSES CLAIMED WERE BEING DISALLOWED AS ACCORDING TO THE AO, THE ASSESSEE WAS UNABLE TO PRODUCE THE LIST OF PASSENGE RS TO PROVE THAT THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE ORIGINAL ASSESSMENT U/S. 143(3) OF T HE ACT WAS PASSED ON 31.03.1997. THE DISALLOWANCE MADE BY THE AO WAS CO NFIRMED BY THE CIT(A) VIDE HIS ORDER DATED 23.03.1998. HOWEVER TH E ITAT ALLOWED THE APPEAL OF THE ASSESSEE IN ITA NO.373(BANG)/98 AS PE R ORDER DATED 22.12.1998 BY OBSERVING IN PARAGRAPH 22 AND 23 AS U NDER :- ITA NOS.187 TO 190/BANG/11 PAGE 3 OF 19 22. THE NEXT ISSUE RELATES TO THE CLAIM OF EXPENSE S INCURRED ON AIRCRAFT WHICH WAS ALLOWED PARTLY BY THE AUTHORITIE S. THE AO HAD PARTLY ALLOWED THE CLAIM TO THE EXTENT OF 75% BECAU SE ACCORDING TO HIM, THE ASSESSEE DID NOT PRODUCE THE LIST OF PA SSENGERS. THE CIT(A) WAS OF THE VIEW THAT THOUGH THE ASSESSEE DID MAINTAIN LOG BOOKS ETC., DID NOT MAINTAIN THE REGISTER OF PERSON S WHO TRAVELLED, CAME TO THE CONCLUSION THAT 25% USE OF THE AIRCRAFT WAS FOR NON- BUSINESS PURPOSES. 23. THE RIVAL CONTENTIONS IN REGARD TO THE ABOVE HA VE BEEN VERY CAREFULLY CONSIDERED. TO HOLD THAT ANY OF THE ASSET S IS USED FOR NON-BUSINESS PURPOSES, THERE MUST BE SOME EVIDENCE. IN THE CASE OF A PRIVATE CONCERN, OWNING AN AIRCRAFT AND USING THE AIRCRAFT ONLY FOR ITS BUSINESS PURPOSES AND NOT FOR COMMERCI AL PURPOSES, LIST OF PASSENGERS WHO TRAVELED IN VARIOUS TRIPS IS UNNECESSARY . WE ARE ACCORDINGLY OF THE VIEW THAT RESTRICTION OF THE EXPENSES TO 75% IS UNCALLED FOR AND ACCORDINGLY, WE DIRECT THE ENTIRE EXPENDITURE TO BE ALLOWED. 5. THE ABOVE ORDER OF THE ITAT WAS NOT ACCEPTED BY THE DEPARTMENT AND AN APPEAL UNDER SECTION 260A OF INCOME-TAX ACT WAS FILED BEFORE THE HONBLE KARNATAKA HIGH COURT ON THE FOLLOWING QUEST ION OF LAW :- WHETHER THE TRIBUNAL WAS RIGHT IN CANCELLING THE D ISALLOWANCE OF EXPENDITURE INCURRED ON MAINTENANCE OF AIRCRAFT WHE N THE ASSESSEE HAD NOT DISCHARGED ITS PRIMARY BURDEN OF P ROOF? 6. THE HONBLE KARNATAKA HIGH COURT IN THE DECISION DELIVERED ON 15.09.2006 IN INCOME TAX APPEAL NO.12 OF 1999 FOR T HE ASSESSMENT YEAR 1994-95 IN PARAGRAPH 9 HELD AS UNDER :- THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CL AIMED AN EXPENDITURE OF RS 1,02,15,390/-. THE ASSESSING OFFI CER REFERS TO VARIOUS MATERIAL FACTS AND THEREAFTER HE NOTICES TH AT THE ASSESSEE HAS NOT PLACED ANY ACCEPTABLE MATERIAL WITH REGARD TO THE ACCEPTANCE OF HIS CLAIM. THE ASSESSING OFFICER IN THE ABSENCE OF ANY MATERIAL ON RECORD HAS CHOSEN TO ALLOW THE CLAI M TO THE EXTENT OF 75%. ON APPEAL, THE APPELLATE AUTHORITY DID NOT CONSIDER THE CLAIM IN DETAIL. HE ALLOWED 25% OF THE AMOUNT AS BU SINESS ITA NOS.187 TO 190/BANG/11 PAGE 4 OF 19 EXPENDITURE. IN APPEAL THE TRIBUNAL ALLOWED THE ENT IRE CLAIM IN THE LIGHT OF THE QUESTION OF LAW FRAMED. WE HAVE SEEN T HE FINDINGS OF THE TRIBUNAL. THE ASSESSING OFFICER AND THE COMMISS IONER HAVE CHOSEN NOT TO CONSIDER THE ENTIRE EXPENSES. THE TRI BUNAL WITHOUT DISCUSSING THE MATERIAL ALREADY AVAILABLE ON RECORD HAS CHOSEN TO ALLOW THE ENTIRE CLAIM BY HOLDING THAT THE LIST OF PASSENGERS IN VARIOUS TRIPS IS UNNECESSARY. THE TRIBUNAL IN OUR V IEW HAS NOT CHOSEN TO BESTOW ITS ATTENTION TO THE MATERIAL FACT S IN GRANTING RELIEF TO THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT A FURTHER FACT FINDING IS NECESSARY FOR ANSWER ING THIS QUESTION OF LAW. IN THESE CIRCUMSTANCES, WE DEEM IT PROPER T O SET ASIDE THE FINDING ON THIS ISSUE AND REMIT THE MATTER FOR RE-D ECISION TO THE TRIBUNAL AND IN THE LIGHT OF THE MATERIAL ALREADY A VAILABLE ON RECORD. 7. THE HONBLE HIGH COURT ACCORDINGLY ORDERED AS FO LLOWS:- THE MATTER IS REMITTED BACK FOR RECONSIDERATION TO THE TRIBUNAL. PARTIES ARE DIRECTED TO APPEAR BEFORE THE TRIBUNAL ON 29.9.2006 WITHOUT WAITING FOR ANY NOTICE FROM THE TRIBUNAL. L IBERTY IS RESERVED TO THE ASSESSEE TO FILE ADDITIONAL DOCUMEN TS IF ANY BEFORE THE TRIBUNAL. THE TRIBUNAL IS DIRECTED TO CONSIDER THE MATERIAL ALREADY AVAILABLE ON RECORD AND THE ADDITIONAL MATE RIAL IF ANY AND THEREAFTER PROCEED TO PASS ORDERS IN ACCORDANCE WIT H LAW, WITHOUT IN ANY WAY BEING INFLUENCED BY THE EARLIER ORDER OR BY THIS ORDER. ALL CONTENTIONS ARE LEFT OPEN. THE TRIBUNAL IS DIRE CTED TO COMPLETE THE PROCEEDINGS WITHIN SIX MONTHS FROM THE DATE OF RECEIPT OF A COPY OF THIS ORDER. 8. AFTER THE ORDER OF THE HONBLE HIGH COURT, THE I SSUE WAS AGAIN CONSIDERED BY THE HONBLE ITAT. THE ITAT AS PER IT S ORDER DATED 8.6.2007 IN ITA NO.386/BANG/98 RESTORED THE ISSUE TO THE FIL E OF THE ASSESSING OFFICER AS PER PARAGRAPH 5 OF THE ORDER WHICH IS RE PRODUCED BELOW:- AFTER HEARING BOTH THE SIDES, WE FIND THAT THE DET AILS OF EXPENDITURE WERE FURNISHED BY THE ASSESSEE AND NO D EFECT WAS POINTED OUT BY THE ASSESSING OFFICER IN THE SAID EX PENDITURE INCURRED BY THE ASSESSEE FOR MAINTAINING AIRCRAFT. SINCE THE LIST OF PASSENGERS WERE NOT FURNISHED, HENCE, THE ASSESSING OFFICER WAS OF THE VIEW THAT PART OF EXPENDITURE MIGHT NOT HAVE INCURRED FOR ITA NOS.187 TO 190/BANG/11 PAGE 5 OF 19 THE PURPOSE OF BUSINESS ACCORDING TO THE LEARNED CO UNSEL FOR THE ASSESSEE, LIST OF PASSENGERS IS MAINTAINED BY THE A IRPORT AUTHORITY AND THE ASSESSING OFFICER DID NOT TAKE ANY STEP TO PROCURE THE LIST FROM THE AUTHORITY. FURTHER, WE FIND THAT IN THE CA SE OF UNITED BREWERIES LTD., FOR THE ASSESSMENT YEAR 1997-98, DE PRECIATION WAS DISALLOWED IN RESPECT OF AIRCRAFT FOR THE SAME REASON THAT LIST OF PASSENGERS WERE NOT MAINTAINED. THAT MATTER ALSO RESTORED BY THE HONBLE HIGH COURT TO THE TRIBUNAL AND THE TRIB UNAL VIDE ITS ORDER IN ITA NO.321/BANG/2002 DATED 30TH MARCH 2007 SENT BACK THE MATTER TO THE ASSESSING OFFICER. IN VIEW O F THE CIRCUMSTANCES ABOVE, WE ARE INCLINED TO RESTORE THI S ISSUE REGARDING EXPENDITURE BY THE ASSESSEE ON AIRCRAFT M AINTENANCE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 9. THE ASSESSING OFFICER IN THE SET ASIDE PROCEEDIN GS, AS PER NOTICE DATED 29.10.2008 ASKED THE ASSESSEE TO FURNISH THE LIST OF PASSENGERS/EXECUTIVES WHO CLAIMED TO HAVE TRAVELED IN THE AIRCRAFTS WITH THE PURPOSE OF THE JOURNEY. THE ASSESSEE IN ITS REP LY DATED 14.11.2008 SUBMITTED BEFORE THE ASSESSING OFFICER THAT THERE W AS NO REQUIREMENT BY THE DGCA TO MAINTAIN ANY LIST AND THEREFORE THE NAM ES OF THE PERSONS TRAVELLED IN THE AIRCRAFT WAS NOT MAINTAINED. THE A SSESSING OFFICER POINTED OUT IN THE ASSESSMENT ORDER THAT BEFORE THE ITAT, I T IS SUBMITTED THAT THE LIST OF PASSENGERS IS MAINTAINED BY THE DGCA, HOWEVER BE FORE HIM A CONTRADICTORY STAND IS TAKEN THAT THERE IS NO REQUI REMENT OF MAINTAINING ANY DETAILS. THE ASSESSING OFFICER IN PARAGRAPH 10 CONC LUDED AS UNDER:- THE ASSESSEE BEING ASSESSED TO TAX FOR A LONG TIME PRIOR TO THE PERIOD RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSI DERATION, WAS AWARE OF ITS PRIMARY DUTIES OF MAINTAINING DOCUMENT S/EVIDENCE IN SUPPORT OF VARIOUS CLAIMS FOR INCOME TAX PURPOSES, THE ASSESSEE HAS NOT PROVED THAT THE EXPENDITURE CLAIMED RELATES TO ITS BUSINESS ACTIVITIES, AS REQUIRED UNDER THE PROVISIONS OF SEC TION 37. HOWEVER KEEPING IN VIEW THE VOLUME OF THE SALES AND THE PLACES WHERE FACTORIES/OFFICES OF THE ASSESSEE ARE SITUATE D WITHIN THE COUNTRY, IT WOULD BE REASONABLE TO CONCLUDE THAT SO ME EXPENDITURE WOULD HAVE BEEN INCURRED FOR MAINTENANC E OF AIRCRAFT ITA NOS.187 TO 190/BANG/11 PAGE 6 OF 19 HENCE 25% OF THE CLAIM OF THE ASSESSEE FOR AIRCRAFT MAINTENANCE EXPENDITURE IS ALLOWED AND AN AMOUNT OF RS 1,02,15, 390/- BEING 75% OF THE EXPENSES CLAIMED IS DISALLOWED. 10. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APP EALS) AND SUBMITTED THAT THE ASSESSEE FILED ALL NECESSARY DET AILS OF EXPENSES. THE ASSESSEE ALSO POINTED OUT THAT THE AIRCRAFT HAD BEE N GIVEN ON HIRE FOR USE BY OTHERS AND THE INCOME DERIVED THEREFROM WAS ALSO OFFERED TO TAX. THE ASSESSEE ALSO POINTED OUT THAT WHEN AN AIRCRAFT IS MAINTAINED, THERE ARE CERTAIN FIXED EXPENSES WHICH ARE REQUIRED TO BE INC URRED IRRESPECTIVE OF THE ACTUAL USE OF THE AIRCRAFT. THE ASSESSEE ALSO SUBM ITTED THAT THE LIST OF PASSENGERS WHO TRAVELLED COULD HAVE BEEN OBTAINED B Y THE AO FROM THE AIRPORT AUTHORITY AS THE ASSESSEE DID NOT HAVE THOS E DETAILS. IT WAS POINTED OUT THAT HE PLACES VISITED HAD SOME RELATIONSHIP WI TH THE BUSINESS OF THE ASSESSEE. 11. THE CIT(APPEALS) AFTER REFERRING TO THE PROCEED INGS BEFORE THE ITAT AND THE HONBLE HIGH COURT, WAS OF THE VIEW THAT RE MAND REPORT SHOULD BE CALLED FOR FROM THE AO ON THE QUESTION OF OBTAINING LIST OF PASSENGERS WHO TRAVELED. THE AO REPORTED THAT SUCH LIST WAS NOT B EING MAINTAINED BY THE ATC. THE CIT(A) WAS THEREFORE OF THE VIEW THAT THE PLEA OF THE ASSESSEE THAT LIST OF PASSENGERS WAS MAINTAINED BY THE AIRPO RT AUTHORITY WAS NOT CORRECT. HE ALSO OBSERVED THAT THE HONBLE KARNATA KA HIGH COURT WHEN IT REMANDED THE MATTER INTENDED THAT THE ASSESSEE SHOU LD PRODUCE EVIDENCE IN THE FORM OF NAMES OF PERSONS WHO UNDERTOOK THE T RAVEL SO THAT VERIFICATION ABOUT THE TRUE NATURE OF EXPENSES COUL D BE MADE. THE CIT(A) THEREAFTER REFERRED TO JUDICIAL PRONOUNCEMENTS FOR THE PROPOSITION THAT ONUS ITA NOS.187 TO 190/BANG/11 PAGE 7 OF 19 WAS ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE C LAIMED AS DEDUCTION WHILE COMPUTING INCOME WAS WHOLLY AND EXCLUSIVELY I NCURRED FOR THE PURPOSE OF BUSINESS WAS ON THE ASSESSEE. THE CIT(A ) LAID MUCH EMPHASIS ON THE FAILURE OF THE ASSESSEE TO PRODUCE THE LIST OF PASSENGERS WHO HAVE TRAVELED AND THAT THE ASSESSEE INTENTIONAL LY AVOIDED TO GIVE THOSE DETAILS. THE CIT(A) WAS THEREFORE OF THE VIE W THAT DISALLOWANCE OF 75% OF THE EXPENSES CLAIMED WAS JUSTIFIED. 12. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS PREFERRED THE APPEAL IN ITA NO.187/BANG/2011 FOR THE A.Y. 199 4-95. 13. AS FAR AS THE A.Y. 1995-96 IS CONCERNED, THE FA CTS ARE IDENTICAL AND THE MATTER REACHED THE HONBLE HIGH COURT AND WAS A GAIN REMANDED BY THE TRIBUNAL TO THE AO. IN AYS 2002-03 AND 2003-04, TH E FACTS ARE IDENTICAL, THE ONLY DIFFERENCE BEING THAT THE MATTER DID NOT T RAVEL TO THE HIGH COURT AND WAS REMANDED BY THE TRIBUNAL TO THE AO FOR FRESH CO NSIDERATION. 14. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESSEE S UBMITTED BEFORE US THAT THE HONBLE HIGH COURT DID NOT LAY ANY EMPHASIS OR GIVE ANY DIRECTION REGARDING PRODUCTION OF THE LIST OF PASSENGERS WHO TRAVELLED. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING OBSERVATIONS OF THE HONBLE HIGH COURT:- 9. .. THE TRIBUNAL WITHOUT DISCUSSING THE MATERI AL ALREADY AVAILABLE ON RECORD HAS CHOSEN TO ALLOW THE ENTIRE CLAIM BY HOLDING THAT THE LIST OF PASSENGERS IN VARIOUS TRIP S IS UNNECESSARY. THE TRIBUNAL IN OUR VIEW HAS NOT CHOSEN TO BESTOW I TS ATTENTION TO THE MATERIAL FACTS IN GRANTING RELIEF TO THE ASSESS EE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT A FURTHER FA CT FINDING IS NECESSARY FOR ANSWERING THIS QUESTION OF LAW. IN TH ESE CIRCUMSTANCES, WE DEEM IT PROPER TO SET ASIDE THE F INDING ON THIS ITA NOS.187 TO 190/BANG/11 PAGE 8 OF 19 ISSUE AND REMIT THE MATTER FOR. RE-DECISION TO THE TRIBUNAL AND IN THE LIGHT OF THE MATERIAL ALREADY AVAILABLE ON RECO RD. 15. POINTING OUT TO THE ABOVE, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HONBLE HIGH COURT ONLY DIRECTED EXAMINATI ON OF THE MATERIAL FACTS. IT WAS SUBMITTED BY HIM THAT THE REVENUE AUTHORITIE S HAVE ACCEPTED THE FACT THAT AIRCRAFT WAS USED FOR THE PURPOSE OF THE BUSIN ESS OF THE ASSESSEE AND HAVE CHOSEN TO ALLOW 25% OF THE AIRCRAFT EXPENSES. THE REVENUE AUTHORITIES HAVE ALSO TAXED THE INCOME GENERATED BY HIRING THE AIRCRAFT. HE THEREAFTER BROUGHT TO OUR NOTICE THAT EXPENDITURE I NCURRED ON AIRCRAFT HAD A FIXED COMPONENT AND A VARIABLE COMPONENT. IT WAS H IS SUBMISSION THAT AS FAR AS FIXED COMPONENT IS CONCERNED, THE SAME HAD T O BE INCURRED BY THE ASSESSEE WHETHER THE AIRCRAFT IS FLOWN OR NOT. IT WAS HIS SUBMISSION THAT IT IS ONLY IN RESPECT OF VARIABLE EXPENSES THAT THE DI SALLOWANCE COULD BE MADE. THE LD. COUNSEL FOR THE ASSESSEE FILED BEFOR E US A CHART FOR ALL THE ASSESSMENT YEARS GIVING THE BREAK UP OF THE TAX AND VARIABLE EXPENSES. THE SAME IS ANNEXED AS ANNEXURES I TO VII TO THIS ORDER. IT WAS HIS SUBMISSION THAT THE ENTIRE EXPENSES SHOULD BE ALLOW ED AS DEDUCTION AND IN ANY EVENT ONLY A REASONABLE PART OF THE VARIABLE EX PENSES CAN BE CONSIDERED FOR DISALLOWANCE. 16. THE LD. DR, HOWEVER, SUBMITTED THAT THE HONBLE HIGH COURT HAD CONSIDERED THE FURNISHING OF LIST OF PASSENGERS WHO TRAVELLED BY THE AIRCRAFT AS NECESSARY FOR THE PURPOSE OF ESTABLISHING THE CL AIM OF THE ASSESSEE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. IT WAS HIS SUBMISSION TH AT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS. THE LD. DR ALSO DREW OUR ATTEN TION TO THE ORDER OF THE ITA NOS.187 TO 190/BANG/11 PAGE 9 OF 19 ASSESSING OFFICER PASSED SUBSEQUENT TO THE ORDER OF REMAND BY THE HONBLE HIGH COURT AND THE TRIBUNAL, AND SUBMITTED THAT EVEN IN THOSE PROCEEDINGS THE ASSESSEE DID NOT CHOOSE TO GIVE ANY PARTICULARS. IT WAS HIS FURTHER SUBMISSION THAT THE BREAK UP OF THE EXPENSE S NOW SOUGHT TO BE FILED BY THE ASSESSEE BEFORE THE TRIBUNAL WAS NEITHER FIL ED BEFORE THE AO IN THE SET ASIDE PROCEEDINGS NOR BEFORE THE CIT(A). IT WA S HIS SUBMISSION THAT THE FIGURES GIVEN IN THE CHART WILL NEED VERIFICATION B Y THE ASSESSING OFFICER AND THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED AT FAC E VALUE. IT WAS HIS SUBMISSION THAT THE CIT(A) HAS RIGHTLY CONSIDERED T HE LEGAL POSITION ON THE ISSUE AND AFTER CONSIDERATION OF THE FACTS AND CIRC UMSTANCES, HAS RIGHTLY DISALLOWED 75% OF THE EXPENSES. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE A LSO PERUSED THE BREAK UP OF THE EXPENSES GIVEN BY THE ASSESSEE BEFO RE THE TRIBUNAL. AT THE OUTSET, WE ARE OF THE VIEW THAT THE HONBLE KAR NATAKA HIGH COURT IN ITS ORDER DATED 15.09.2006 IN ITA NO.12/1999 IN THE ASS ESSEES OWN CASE FOR THE A.Y. 1994-95 HAS NOT LAID ANY EMPHASIS ON THE L IST OF PASSENGERS. THE HONBLE HIGH COURT HAS ONLY REMANDED THE MATTER TO THE AO FOR CONSIDERING THE MATERIAL ALREADY AVAILABLE ON RECORD. IN FACT IN THE APPEAL FOR THE A.Y. 1995-96, THE HONBLE HIGH COURT IN ITS ORDER DATED 15.09.2006 IN ITA NO.46/2001 HAD IN PARA 5 WHILE ANSWERING THE QUESTI ON (C) HAD CLEARLY GIVEN LIBERTY TO THE ASSESSEE TO FILE ADDITIONAL DO CUMENTS AND HAS ALSO OBSERVED THAT ALL CONTENTIONS ARE LEFT OPEN. IT IS THEREFORE NOT CORRECT TO LAY EMPHASIS ON THE LIST OF PASSENGERS WHO TRAVELED AND DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE FOR NON-PRODUCTION O F THE LIST OF PASSENGERS. ITA NOS.187 TO 190/BANG/11 PAGE 10 OF 19 18. WE HAVE ALSO PERUSED THE ORDER OF THE ASSESSING OFFICER IN THE SET ASIDE PROCEEDINGS AND WE FIND THAT IN SUCH PROCEEDI NGS, THE ASSESSEE HAS HARPED ON THE POINT THAT INCOME FROM HIRING THE AIR CRAFT TO OTHERS WAS ALSO OFFERED TO TAX AS INCOME BY THE ASSESSEE. THERE AP PEARS TO BE NO FRESH MATERIAL PLACED ON RECORD. WE ALSO FIND THAT THE US E OF THE AIRCRAFT BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS HAS NOT BE EN DENIED BY THE REVENUE AUTHORITIES. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FIXED EXPENSES WHICH ARE NECESSARY FOR MAINTAINING THE AI RCRAFT CANNOT BE DISALLOWED AS THEY ARE NECESSARILY TO BE INCURRED W HETHER THE AIRCRAFT IS USED OR NOT. AS FAR AS VARIABLE EXPENSES ARE CONCE RNED, THEY WILL VARY DEPENDING UPON THE USAGE OF THE AIRCRAFT. IT IS ON LY IN RESPECT OF THE VARIABLE EXPENSES THAT PERSONAL USE OF THE AIRCRAFT OR USE OF THE AIRCRAFT OTHER THAN FOR THE BUSINESS OF THE ASSESSEE CAN BE SAID TO HAVE TAKEN PLACE. WITH THIS APPROACH, WE WILL NOT LOOK INTO T HE FIXED AND VARIABLE EXPENSES PRODUCED BY THE ASSESSEE BEFORE US. 19. IN THE A.Y. 1994-95, THE TOTAL FIXED EXPENSES I S AT A SUM OF Q 1,48,63,498. OUT OF THIS, WE FIND THAT AIRCRAFT REP AIRS AND MAINTENANCE EXPENSES OF Q 1,09,17,181, LICENCE RENEWAL FEES OF Q 39,085, RENT OF Q 42,000 AND SECURITY EXPENSES OF Q 24,900. THESE EXPENSES WILL HAVE TO BE ALLOWED AS A DEDUCTION IRRESPECTIVE OF THE ACTUA L USAGE OF THE AIRCRAFT, AS THESE EXPENSES ARE NECESSARY WHETHER THE AIRCRAFT I S USED OR NOT. AS FAR AS THE OTHER EXPENSES ARE CONCERNED, IT COMPRISES O F SALARIES & WAGES, PRINTING & STATIONERY, TELEPHONE TELEX, VEHICLE REP AIRS ETC. AS TO WHETHER THESE EXPENSES OF SALARIES & WAGES AND OTHER EXPENS ES WERE IN RELATION TO ITA NOS.187 TO 190/BANG/11 PAGE 11 OF 19 THE AIRCRAFT OR NOT IS NOT CLEAR. WE ARE THEREFORE OF THE VIEW THAT THE OTHER FIXED EXPENSES SHOULD BE ALLOWED AT 60% OF THE EXPE NSES. 20. AS FAR AS THE VARIABLE EXPENSES ARE CONCERNED, WE ARE OF THE VIEW THAT IN THE LIGHT OF THE FAILURE OF THE ASSESSEE TO PRODUCE SATISFACTORY EVIDENCE, 40% OF THE VARIABLE EXPENSES SHOULD BE AL LOWED AS A DEDUCTION. WE ARE ADOPTING THIS APPROACH TO GIVE FINALITY TO T HE LITIGATION. 21. AS FAR AS A.Y. 1995-96 IS CONCERNED, THE FIXED EXPENSES CONSISTING OF REPAIRS & MAINTENANCE EXPENSES OF Q 1,18,13,945, ENGG. SERVICE CHARGES OF Q 2,27,522, STORES CONSUMED OF Q 39,240, RENT OF Q 49,500, LICENCE FEE RENEWAL OF Q 15,010, SECURITY & OTHER SERVICE CHARGES OF Q 2,36,543. THESE ARE EXPENSES WHICH HAVE TO BE INCU RRED IRRESPECTIVE OF THE USE OF THE AIRCRAFT. THE ASSESSING OFFICER HAS TO ALLOW THESE EXPENSES IN FULL AFTER VERIFICATION. AS FAR AS THE OTHER FI XED EXPENSES ARE CONCERNED, THE AO IS DIRECTED TO ALLOW 60% OF THE SAME. AS FA R AS VARIABLE EXPENSES ARE CONCERNED, 40% OF THE VARIABLE EXPENSES ARE DIR ECTED TO BE ALLOWED. 22. IN THE A.Y. 2002-03, FIXED EXPENSES BEING THE A IRCRAFT MAINTENANCE OF Q 1,83,90,954, LICENCE RENEWAL FEE OF Q 4,750 AND INSURANCE OF Q 21,18,705 HAVE TO BE ALLOWED IN FULL AFTER VERIFICA TION BY THE AO, BECAUSE THESE EXPENSES WOULD BE NECESSARY IRRESPECTIVE OF T HE USAGE OF THE AIRCRAFT. AS FAR AS THE OTHER FIXED EXPENSES ARE C ONCERNED, THE ASSESSING OFFICER IS DIRECTED TO ALLOW 60% OF THE SAME. AS R EGARDS VARIABLE EXPENSES, THE AO IS DIRECTED TO ALLOW 40% OF THE SA ME. ITA NOS.187 TO 190/BANG/11 PAGE 12 OF 19 23. FOR THE A.Y. 2003-04, THE FIXED EXPENSES CONSIS TING OF AIRCRAFT REPAIRS & MAINTENANCE EXPENSES OF Q 1,95,85,525 AND LICENCE RENEWAL FEES OF Q 3,785 HAVE TO BE ALLOWED IN FULL AS THESE EXPENSES HAVE TO BE NECESSARILY INCURRED IRRESPECTIVE OF THE USAGE OF T HE AIRCRAFT. THE AO WILL VERIFY THESE EXPENSES AND ALLOW THE SAME. AS FAR A S OTHER FIXED EXPENSES ARE CONCERNED, 60% OF THE SAME IS DIRECTED TO BE AL LOWED. AS FAR AS VARIABLE EXPENSES ARE CONCERNED, THE AO IS DIRECTED TO ALLOW 40% OF THE VARIABLE EXPENSES. 24. THE APPEALS OF THE ASSESSEE ARE THUS PARTLY ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF OCTOBER, 2012. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 12 TH OCTOBER , 2012. ENCLOSURES: ANNEXURES I TO VII. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE. ITA NOS.187 TO 190/BANG/11 PAGE 13 OF 19 ANNEXURE-I MCDOWELL & COMPANY LTD. SUMMARY OF FIXED AND VARIABLE EXPENSES OF AVIATION DIVISION ITA NOS.187 TO 190/BANG/11 PAGE 14 OF 19 ANNEXURE-II ITA NOS.187 TO 190/BANG/11 PAGE 15 OF 19 ANNEXURE-III ITA NOS.187 TO 190/BANG/11 PAGE 16 OF 19 ANNEXURE-IV ITA NOS.187 TO 190/BANG/11 PAGE 17 OF 19 ANNEXURE-V ITA NOS.187 TO 190/BANG/11 PAGE 18 OF 19 ANNEXURE-VI ITA NOS.187 TO 190/BANG/11 PAGE 19 OF 19 ANNEXURE-VII