Sh. Karun Carpets (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 187/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0215 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Keywords: Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU: JUDICIAL MEMBER ITA NO. 187/DEL/2013 ASSTT. YR: 2009-10 KARUN CARPETS (P) LTD., VS. DCIT, CIRCLE 5(1), N-75, CONNAUGHT PLACE, NEW DELHI. NEW DELHI. PAN: AAACK 2331 D ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI G.S. GREWAL FCA & MS. HARSIMRAN GREWAL CA RESPONDENT BY : SHRI GAURAV DUDEJA SR. DR DATE OF HEARING : 25/06/2015. DATE OF ORDER : 22/07/2015. O R D E R PER S.V. MEHROTRA, A.M: THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIREC TED AGAINST CIT(A)S ORDER DATED 31-10-2012 RELATING TO A.Y. 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF PRO VIDING SERVICES FOR PROCUREMENT OF MAIZE WHICH WAS USED IN STARCH MANUF ACTURING COMPANIES. THE ASSESSEE HAD FILED RETURN DECLARING TOTAL INCO ME OF RS. 1,25,52,516/-. 2 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF R S. 1,72,71,163/- AFTER MAKING FOLLOWING ADDITIONS: ADDITION U/S 14A RS. 20,68,647/- ADDITION ON A/C OF DISALLOWANCE OF PLANE HIRE CHARGES RS. 26,50,000. 3. THE ASSESSEES APPEAL WAS DISMISSED BY LD. CIT(A ) ON BOTH COUNTS AFTER DETAILED DISCUSSION. BEING AGGRIEVED, THE ASS ESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. LD. CIT(APPEALS) HAS ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER OF R S. 23,70,597/- UNDER SECTION 14A OF THE INCOME TAX ACT , 1961 AGAINST RS. 3,02,310/- VOLUNTARILY DISALLOWED BY TH E APPELLANT. 2. LD. CIT(APPEALS) HAS ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER OF R S 26,50,000/- INCURRED AS TRAVELLING AND CONVEYANCE E XPENSES FOR HIRING OF CHARTER PLANE FOR THE CHAIRMAN OF THE COM PANY. 4. BRIEF FACTS, APROPOS GROUND NO. 1, ARE THAT FROM THE BALANCE SHEET OF THE ASSESSEE THE AO NOTICED THAT THE ASSESSEE HAD M ADE INVESTMENT IN QUOTED AND UNQUOTED EQUITY SHARES AND MUTUAL FUNDS. THE TO TAL INVESTMENT AS ON 31.03.2009 WAS RS. 49,94,11,372/- AND AS ON 31.03.2 008 WAS RS.44,89,71 448/-. THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS .1,68,68,500/- UNDER THE HEAD OTHER INCOME FROM THESE INVESTMENTS, WHICH WAS CLAIMED AS EXEMPT U/S 10 OF THE IT ACT. THE AO FURTHER NOTICED FROM T HE COMPUTATION OF INCOME THAT THE ASSESSEE HAD DISALLOWED A SUM OF RS .3,02,310/- AND ADDED IT U/S 14A WHILE COMPUTING THE TAXABLE INCOME FOR THE YEAR UNDER 3 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT CONSIDERATION. HE REQUIRED THE ASSESSEE TO FURNISH THE WORKING ON THE BASIS OF WHICH THE FIGURE OF RS.3,02,310/- HAD BEEN ARRI VED AT. THE AO FURTHER SHOW CAUSED THE ASSESSEE AS TO WHY DISALLOWANCE IN RESPECT OF EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME MAY NOT BE CA LCULATED AS PER RULE 8D OF THE IT RULES. THE ASSESSEE VIDE ITS REPLY DA TED 04.11.2011 SUBMITTED AS UNDER:- 'YOU HAVE ASKED TO SHOW CAUSE WHY DISALLOWANCE BE N OT MADE AS PER THE METHOD PRESCRIBED UNDER RULE 80 OF THE I NCOME TAX RULES. IN THIS REGARD WE WOULD LIKE TO SUBMIT THAT THE BUSINESS OF THE ASSESSEE CONSISTS OF TWO DIVISIONS, NAMELY O PERATION DIVISION AND INVESTMENT DIVISION FOR WHICH SEPARAT E BOOKS OF ACCOUNTS ARE MAINTAINED BY THE ASSESSEE. WE ARE ENC LOSING HEREWITH THE DIVISION WISE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, WHERE IT CAN BE SEEN THAT THE FOR INVESTM ENT DIVISION, THE ASSESSEE HAD CLAIMED TOTAL EXPENSE OF RS.3,02,3 10/- WHICH HAVE BEEN VOLUNTARY DISALLOWED BY THE ASSESSEE U/S 14A OF THE ACT. HENCE NO FURTHER DISALLOWANCE IS CALLED FOR MA DE U/S 14A OF THE ACT. THE EXPENSES OF RS. 3,02, 310/- ARE CLEARLY INDENTI FIED AND EXPLAINED THROUGH THE BOOKS OF ACCOUNTS OF THE ASSE SSEE WHICH IS ALSO PRODUCED FOR YOUR VERIFICATION. THUS THE AS SESSEE HAD VOLUNTARILY MADE THE FULL AND COMPLETE DISALLOWANCE U/S 14A OF THE ACT AND HENCE NO FURTHER DISALLOWED SHALL BE MA DE U/S 14A OF THE ACT. 5. THE AO DID NOT ACCEPT THE REPLY FOR THE FOLLOWIN G REASONS: THE ASSESSEE EXPLAINED THAT ITS BUSINESS HAS TWO DI VISIONS NAMELY OPERATION DIVISION AND INVESTMENT DIVISIO N, WAS NOT ACCEPTED BECAUSE IN THE AUDITED PROFIT AND LOSS ACC OUNT AS FILED WITH THE RETURN OF INCOME THERE WERE NO SEPARATE DI VISIONS. ANNEXURE III FILED WITH THE REPLY ON PLAIN PAPER, F URNISHING THE DETAILS OF INVESTMENT DIVISION AND OPERATION DIVISI ON, WAS 4 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT NEITHER SIGNED BY ANY OF THE DIRECTOR OR BY THE AUD ITORS TO SHOW THAT IT HAS TWO DIVISIONS. ANNEXURE 3 WAS NEVER THE PART OF THE AUDITED ACCOUN T OF THE ASSESSEE. IN VIEW OF ABOVE AD HOC DISALLOWANCE MADE BY THE ASSESSEE WAS NOT ACCEPTABLE AND DISALLOWANCE WAS TO BE CALCULATED STRICTLY IN TERMS OF THE PROVISIONS OF R ULE 8D. 6. THE AO ACCORDINGLY WORKED OUT THE DISALLOWANCE A S PER RULE 8D AT RS. 23,70,957/- BEING .5% OF AVERAGE INVESTMENT OF RS. 47,41,91,410/-. HE, ACCORDINGLY, MADE ADDITION OF RS. 20,68,647/-. 7. BEFORE LD. CIT(A) THE ASSESSEE HAD, INTER ALIA, SUBMITTED THAT IT HAD EXPLAINED THE BASIS OF DETERMINATION OF DISALLOWAN CE U/S 14A OF THE ACT AND HAD PRODUCED THE EVIDENCES FOR EXAMINATION BY THE A O. AO DID NOT FIND ANY DISCREPANCY OR SHORT COMING IN THE BOOKS OF A/C AND DID NOT EXPRESS SATISFACTION TO THE EFFECT THAT THE CLAIM OF THE AS SESSEE WAS INCORRECT AND WAS NOT IN ORDER AFTER EXAMINING THE BOOKS OF A/C AND R ECORDS. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE COMPANY BELONGE D TO THAPAR GROUP AND WAS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES F OR PROCUREMENT OF MAIZE WHICH IS USED FOR STARCH MANUFACTURING COMPANIES, B ESIDES, HAVING MADE INVESTMENT IN GROUP COMPANIES FOR CONTROL PURPOSES, WHICH HAS BEEN CLEARLY SHOWN IN SCHEDULE 5 & 11 OF THE FINANCIAL STATEMENT . IT WAS FURTHER EXPLAINED THAT SINCE THE ASSESSEE DID NOT TRADE IN SHARES AND HAD JUST HELD THEM FOR CONTROL, IT WAS NOT A SEPARATE BUSINESS LINE OF ASS ESSEE. THEREFORE, THE ASSESSEE DID NOT FILE SEPARATE P&L A/C THOUGH IT MA INTAINS THE RECORDS SEPARATELY FOR ITS OWN CONVENIENCE. THE SHARES COMI NG INTO THE COMPANY 5 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT UNDER CONSIDERATION WERE HELD NOT FOR THE PURPOSE O F TRADING BUT FOR THE PURPOSES OF MANAGEMENT CONTROL. THE MAIN THRUST OF THE ASSESSEES ARGUMENT THAT IN VIEW OF THE DECISION OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF MAXOP INVESTMENTS LTD. VS. CIT 203 TAXMAN 364 (D EL.), THE AO SHOULD HAVE RECORDED HIS SATISFACTION IN TERMS OF SECTION 14A(2) AND (3) OF THE ACT AS TO THE (IN) CORRECTNESS OF THE ASSESSEES CLAIM OF HAVING INCURRED/ NOT INCURRED EXPENDITURE IN RELATION TO EARNING OF EXEM PT INCOME. THE AO IS REQUIRE TO ASSIGN COGENT REASONS FOR ARRIVING AT SU CH SATISFACTION. ASSESSEE FURTHER SUBMITTED THAT THE TWO TERMS SATISFACTION AND HAVING REGARD TO ACCOUNTS USED IN SECTION 14A(2) OF THE ACT ARE INT ER RELATED AND, THEREFORE, AO SHOULD EXAMINE THE BOOKS OF A/C AND ON THE BASIS OF HIS EXAMINATION OF BOOKS OF A/C ARRIVED AT A SATISFACTION THAT CLAIM O F THE ASSESSEE IS NOT CORRECT AND ON BEING SATISFIED, HE MUST STATE SO GIVING COG ENT REASONS FOR ARRIVING AT SATISFACTION OF INCORRECT CLAIM. THE ASSESSEE FURTH ER REITERATED THAT SINCE ASSESSEE HELD SHARES FOR CONTROL PURPOSE ONLY AND N OT TRADING PURPOSE, THEREFORE, IN THE AUDITED P&L A/C SEPARATE DIVISION S HAD NOT BEEN SHOWN BECAUSE THIS WAS NOT A SEPARATE BUSINESS LINE OF AS SESSEE. 8. AS REGARDS THE AOS FINDINGS THAT ANNEXURE 3 EN CLOSED WITH THE WRITTEN SUBMISSION WAS NOT PART OF THE AUDITED P&L A/C AND NOT SIGNED, THE ASSESSEE SUBMITTED AS UNDER: WE WOULD LIKE TO STATE THAT THE ASSESSEE DOES NOT MAINTAIN SEPARATE BOOKS AND THEREFORE IT WAS NOT PA RT OF THE FINANCIAL STATEMENT. MOREOVER, THE NUMBER SPECI FIES THE ANNEXURE TO THE SUBMISSION AND NOT TO THE FINAN CIAL STATEMENT. WE WOULD ALSO LIKE TO COUNTER THE SECOND ALLEGATION THAT THE ANNEXURE WAS NOT SIGNED. IT IS HEREBY 6 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT SUBMITTED THAT OUR COVERING LETTER WAS DULY SIGNED AND IT STATES THAT THE ANNEXURE IS ENCLOSED. THEREFORE, TH ERE WAS NO NEED TO SIGN THE ANNEXURE SEPARATELY. 9. LD. CIT(A) DID NOT ACCEPT THE ASSESSEES CONTENT ION, INTER ALIA, OBSERVING THAT THE INVESTMENT HAD NOT BEEN MADE FRO M THE COMMON POOL OF FUNDS AND, THEREFORE, THE CONTENTION OF THE ASSESSEE THAT NO INTEREST EXPENDITURE HAD BEEN INCURRED, DOES NOT HO LD GOOD. HE, ACCORDINGLY, CONFIRMED THE COMPUTATION OF DISALLOWA NCE UNDER RULE 8D FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT 3 28 ITR 81 (BOM) AND THE DECISION OF ITAT DELHI SPECIAL BENCH IN THE CASE OF CHEMINVEST LTD. VS. IKTO (2009) 121 ITD 318 (DELHI) (SB). HE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS PVT. LTD. (2010) TIOL-47-SC-IT. 10. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE LOWER REVENUE AUTHORITIES AND SUBMITTED THAT AO WAS PROCEEDING WITH PRECONCEIVED NOTION THAT DISALLOWAN CE HAS TO BE MADE UNDER RULE 8D. THE AO DID NOT POINT OUT ANY DI SCREPANCY IN THE BOOKS OF A/C OR COMPUTATION AS SUBMITTED BY ASSESSE E. HE SUBMITTED THAT SINCE THE INVESTMENTS WERE MADE IN ORDER TO HA VE CONTROL OVER THE COMPANIES, THEREFORE, THIS COULD NOT BE CONSIDERED AS A SEPARATE LINE OF BUSINESS, REQUIRING SEGMENTAL REPORTING. HE SUBMITT ED THAT AO WITHOUT RECORDING HIS SATISFACTION, AS CONTEMPLATED U/S 40A(2) & (3) 7 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT RESORTED TO COMPUTE THE DISALLOWANCE UNDER RULE 8D. THE ASSESSEE HAD GIVEN COMPLETE DETAILS ALONG WITH HIS REPLY FOR COMPUTING DISALLOWANCE U/S 14A. LD. COUNSEL HAS RELIED ON THE FOLLOWING CASE LAWS: - MAXOPP INVESTMENT LTD. VS. CIT 247 CTR 162 (DEL.); - CIT V. HERO MANAGEMENT SERVICES LTD. 360 ITR 68 (DE L.); - ACIT V. BHARTI TELETECH LTD. 150 ITD 185 (DELHI ITA T); - PRIYA EXHIBITORS (P) LTD. V. ACIT 54 SOT 356 (DELHI ITAT); - RAJ SHIPPING AGENCIES LTD. V. ACIT 146 ITD 277 (MUM BAI ITAT); - ACIT V. SIL INVESTMENT LTD. 54 SOT 54 (DELHI ITAT); - DCIT V. JINDAL PHOTO LTD. (ITA NO. 814/DEL/2011) (D EL. ITAT); AND - DCIT VS. DBH INTERNATIONAL (P) LTD. [2015)] 55 TAXM ANN.COM 424 (DELHI-TRIB.). 11. LD. DR REFERRED TO THE ASSESSMENT ORDER AND SUB MITTED THAT AO HAD RECORDED HIS SATISFACTION INASMUCH AS HE HAD CL EARLY OBSERVED THAT THE AUDITED P&L A/C, AS FILED ALONG WITH THE RETUR N OF INCOME, DID NOT CONTAIN THE DETAILS OF EXPENSES PERTAINING TO SEPAR ATE DIVISIONS AS CLAIMED BY ASSESSEE. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE RECORD OF THE CASE. THE ISSUE THAT BEFORE RESORTING TO RUL E 8D, THE AO IS REQUIRED TO RECORD HIS SATISFACTION REGARDING INCORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE, IS NO MORE RES INTEGRA, AS HELD BY THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) . IN THE PRESENT CASE WE FIND THAT AO MERELY REJECTED THE ASSESSES CLAIM ON THE GROUND THAT ASSESSEE HAD NOT GIVEN THE SEGMENTAL DETAILS IN THE AUDITED P&L A/C THOUGH INCOME 8 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT HAD BEEN SHOWN UNDER TWO HEADS, NAMELY, COMMISSION RECEIVED AND OTHER INCOME. THE AO DID NOT ACCEPT THE ASSESSEES DETAIL ED EXPLANATION, AS REPRODUCED ABOVE, ALONG WITH WHICH THE ASSESSEE HAD ENCLOSED DIVISION-WISE P&L A/C OF THE ASSESSEE AND HAD CLEARLY GIVEN BASIS OF ITS CLAIM REGARDING TOTAL EXPENSES OF RS. 3,02,302/- BEING INCURRED FOR EARNING THE EXEMPT INCOME. THE AO DID NOT CONSIDER THIS REPLY OBSERVIN G THAT THIS WAS NOT PART OF THE AUDITED ACCOUNT OF THE ASSESSEE AND WAS ALS O NOT SIGNED BY ANY OF THE DIRECTOR OR BY THE AUDITORS TO SHOW THAT IT HAD TWO DIVISIONS. 12.1. SECTION 14A(2) CLEARLY MANDATES THAT THE AO S HOULD HAVE REGARD TO THE ACCOUNTS OF THE ASSESSEE AND IF FROM THE ACCOU NTS OF THE ASSESSEE HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM, TH EN ONLY HE CAN RESORT TO RULE 8D. IF THE ASSESSEE HAS FURNISHED ITS EXPLANATION BASED ON ITS ACCOUNTS, THEN THE EXPLANATION CANNOT BE REJECTED MERELY BECAUSE I N THE AUDITED FINANCIAL STATEMENT THOSE DETAILS ARE NOT SEPARATELY INDICATE D. SEGMENTAL REPORTING IS REQUIRED WHERE ASSESSEE IS CARRYING ON DIFFERENT LI NES OF SPECIFIC ACTIVITIES. HOWEVER, WHERE THE INVESTMENT HAS BEEN MADE SOLELY FOR THE PURPOSE OF HAVING CONTROL OVER THE GROUP COMPANIES, THEN THIS CANNOT BE CONSIDERED AS A SEPARATE LINE OF BUSINESS. THEREFORE, WE ARE IN AGR EEMENT WITH THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO HAS NOT RECORDED THE R EQUISITE SATISFACTION AS MANDATED U/S 14A(2) AND (3) OF THE ACT. BEFORE LD. CIT(A) DETAILED SUBMISSIONS WERE MADE ON THIS COUNT BUT WE FIND THA T LD. CIT(A) HAS NOT EVEN CONSIDERED THEM AND MERELY STATED THAT INVES TMENT HAD BEEN MADE FROM THE COMMON POOL OF FUNDS AND, THEREFORE, THE C ONTENTION OF THE ASSESSEE THAT NO INTEREST EXPENDITURE HAD BEEN INCU RRED, DOES NOT HOLD GOOD. 9 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT 12.2. WE FAIL TO UNDERSTAND AS TO FROM WHERE THIS F INDING HAS BEEN RECORDED BY LD. CIT(A), PARTICULARLY WHEN AO ITSELF HAD NOT MADE ANY DISALLOWANCE ON THE GROUND OF ALLOCATION OF INTEREST EXPENDITURE . THIS CLEARLY SHOWS COMPLETE NON-APPLICATION OF MIND BY LD. CIT(A) TO THE DETAILED SUBMISSIONS MADE BEFORE HIM BY THE ASSESSEE. THE AO HAD MERELY MADE DISALLOWANCE UNDER RULE 8D(2)(III) AND NOT UNDER CLAUSE (I) AND (II) OF RULE 8D IN REGARD TO INTEREST EXPENDITURE. 12.3. IN VIEW OF ABOVE DISCUSSION, WE DELETE THE AD DITION MADE BY THE AO AND SUSTAINED BY LD. CIT(A) ON THE ISSUE IN QUESTI ON. GROUND IS ALLOWED. 13. BRIEF FACTS APROPOS GROUND NO. 2 ARE THAT AO NO TICED FROM THE P&L A/C THAT ASSESSEE HAD DEBITED A SUM OF RS. 30,35,47 7/- ON ACCOUNT OF TRAVEL AND CONVEYANCE EXPENSES, WHICH, INTER ALIA, INCLUDE D A SUM OF RS. 26,50,000/- PAID TO SPAIN AIR LTD. FOR CHARTER PLAN E FOR CHAIRMAN VISIT TO DEL-TRV-MUM-PUN-MUM FROM 21-10-2008 TO 24.10.2008. THE AO REQUIRED THE ASSESSEE TO JUSTIFY THIS EXPENDITURE. THE ASSES SEE HAS FILED ITS REPLY DATED 4-11-2011 WHICH IS REPRODUCED HEREUNDER: 'YOU HAVE ASKED FOR THE JUSTIFICATION OF AN AMOUNT OF RS. 26, 50, 000/- PAID TO SPAIN AIR LTD FOR THE HIRING OF C HARTER PLANE FOR CHAIRMAN VISIT. IN THIS REGARDS WE WOULD LIKE T O STATE THAT THE ASSESSEE COMPANY IS PROMOTING COMPANY OF THE OPERAT ING COMPANIES UNDER CONTROL OF MR KARAN THAPAR. THIS CO MPANY HAS ITS MAJOR INVESTMENT IN GREAVES CATION LTD. & E NGLISH INDIAN CLAYS LTD MR. KARAN THAPAR AS GROUP CHAIRMAN VISITS THE FACTORIES & OFFICES TO REVIEW THE OPERATIONS/PERFOR MANCE OF THE COMPANIES FOR WHICH THEY SAID EXPENDITURE ON HIRING THE 10 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT CHARTER PLANE WAS INCURRED. THUS THE SAID EXPENDITU RE RELATES TO THE BUSINESS PURPOSE. HENCE IT SHALL BE BUSINESS EX PENDITURE ALLOWABLE UNDER THE PROVISION OF THE INCOME TAX ACT , 1961.' 14. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION , INTER ALIA, OBSERVING THAT SINCE THE EXPENDITURE HAS BEEN INCURRED FOR RE VIEW THE OPERATIONS/ PERFORMANCE OF THE GROUP COMPANIES, THE SAME COULD NOT BE ALLOWED AS DEDUCTION FROM THE INCOME OF THE ASSESSEE COMPANY, AS IT WAS NOT INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE COM PANY. HE FURTHER POINTED OUT THAT GROUP COMPANIES ARE SEPARATE ENTITIES AND ANY EXPENDITURE INCURRED TO REVIEW THE OPERATION/ PERFORMANCE OF THOSE COMPA NIES WAS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE AND SHOULD HAVE BEEN INCURRED BY THE SAID GROUP COMPANIES. 15. LD. CIT(A) CONFIRMED THE ADDITION, INTER ALIA, OBSERVING THAT ASSESSEE HAD NOT BROUGHT OUT ANY FACTS TO SHOW THAT THE EXPE NDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSI NESS OF THE ASSESSEE. ON THE CONTRARY THE AO HAS SPECIFICALLY BROUGHT ON REC ORD THE FACT THAT THE EXPENDITURE WAS NOT INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. SINCE THE EXPENDITURE HAD BEEN INCURRED TO REVIEW T HE PERFORMANCE OF THE GROUP COMPANIES, WHICH WERE SEPARATE ENTITIES. 16. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE CONSIDERED THE RECORD OF THE CASE. LD. COUNSEL FOR THE ASSESSEE HAS FILED BEFORE US A REPORT FROM THE TIMES OF INDIA DATED 18-4-2015 TO DEMONSTRATE THAT GAUTAM THAPAR LD AVANTHA GROUP HAD SECURITY TH REAT AND, THEREFORE, THE 11 ITA NO. 187/DEL/2013 KARUN CARPETS P. LTD. VS. DCIT CHAIRMAN CHARTERED THE PLANE FOR HIS VISIT. LD. COU NSEL HAS FURTHER SUBMITTED THAT MR. KARAN THAPAR, CHAIRMAN HAD SUBSTANTIAL INT EREST IN GROUP COMPANIES AND, THEREFORE, HE HAD GONE TO REVIEW THE OPERATIONS OF GREAVES COTTON LTD AND ENGLISH INDIAN CLAYS LTD. WE ARE N OT INCLINED TO ACCEPT THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE FOR THE SIMPLE REASON THAT, IN ANY VIEW OF THE MATTER, THE EXPENDITURE WAS NOT AT ALL RELATABLE TO ASSESSEE COMPANY BUT TO GREAVES COTTON LTD AND ENGLISH IND IAN CLAYS LTD. AND, AS RIGHTLY OBSERVED BY AO, THE SAME COULD BE DEBITED O NLY IN THE ACCOUNTS OF THE SAID COMPANIES AND NOT IN THE ACCOUNTS OF THE A SSESSEE COMPANY. ACCORDINGLY, WE UPHOLD THE ORDER OF AUTHORITIES BEL OW ON THIS COUNT. GROUND IS REJECTED. 17. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 22, 07,2015. SD/- SD/- (H.S. SIDHU) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22-07-2015. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT(A) 4. CIT 5. DR (ITAT)