Eimco Elecon (I) Ltd., V. The ACIT., Anand Circle, Anand

ITA 189/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1798 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 07-12-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 23-01-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWARI
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 43B; 80HHC; 37; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHMEDABAD. BEFORE: SHRI T K SHARMA, JUDICIAL MEMBER, AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) EIMCO ELECON (I) LTD. ANAND SOJITRA ROAD, VALLABH VIDHYA NAGAR, PIN-388120. VERSUS THE ACIT, ANAND CIRCLE, S P COMPLEX, MAY FAIR ROAD, ANAND- 388001. (APPELLANT) (RESPONDENT) PAN: AAACJ 4645 C FOR THE APPELLANT: SMT. SUNIL TALATI, AR FOR THE RESPONDENT VINOD TANWARI, SR. DR ORDER PER D C AGRAWAL (ACCOUNTANT MEMBER): THIS IS AN APPEAL FILED BY THE ASSESSEE, RAISING FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD I N LAW AND BE QUASHED. THE ADDITIONS/DISALLOWANCES SUSTAINED BY HIM ARE UNWARRANTED AND SAME BE DELETED. YOUR APPELLANT SU BMITS THAT RETURNED INCOME BE ACCEPTED NOW. 2. THE LEARNED CIT(A) HAS ERRED IN:- (A) CONFIRMING DISALLOWANCE OF RS. 1,96,849/- BEING 50% OF DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.3, 93,698/- OUT OF FOREIGN TRAVELLING EXPENSES. YOUR APPELLANT SUBMIT S THAT ADHOC DISALLOWANCE MADE IS UNWARRANTED AND UNJUST AND SAM E BE DELETED NOW. (B) CONFIRMING DISALLOWANCE OF RS.7,35,000 MADE BY THE ASSESSING OFFICER BEING 50% OF DIRECTORS FOREIGN TRAVELLING EXPENSES 2 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) INCURRED BY THE COMPANY. YOUR APPELLANT SUBMITS TH AT ADHOC DISALLOWANCES MADE IS UNWARRANTED AND SAME BE DELET ED NOW. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE MADE BY THE ASSESSING OFFICER OF RS. 11,87,682/- BE ING COMMISSION TO GSA COMMERCIAL P LTD. YOUR APPELLANT SUBMIT THAT DISALLOWANCE OF COMMISSION IS UNWARRANTED AND INCOR RECT AND SAME BE DELETED NOW. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE OF RS.5,75,172/- OUT OF DISALLOWANCE MADE BY THE ASSES SING OFFICER OF RS.6,39,079/- BEING CUSTOM CLEARANCE CHARGES. (RELI EF ALLOWED RS. 63,907 BEING %) IT IS SUBMITTED THAT DISALLOWANCE B Y MADE IS UNWARRANTED AND UNJUSTIFIED AND SAME BE DELETED IN TOTO. 5. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER OF TREATING RS. 1,47,140 BEING VE HICLE REGISTRATION CHARGES/RTO TAX IN THE NATURE OF CAPIT AL EXPENSES. IT IS SUBMITTED THAT EXPENSES BEING OF REVENUE NATURE BE ALLOWED NOW. 6. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE MADE BY THE ASSESSING OFFICER OF RS.73,852/- OUT OF RENT RATES AND TAXES. IT IS SUBMITTED THAT DISALLOWANCE MADE IS U NWARRANTED, UNJUST AND SAME BE DELETED NOW. 7. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE OF RS. 35,955 BEING AMOUNT PAID TO SALES TAX AUTHORITI ES CONSIDERING THE SAME OF PENAL IN NATURE. IT IS SUBMITTED THAT AMOUNT PAID IS AN ALLOWABLE EXPENDITURE U/S 37 OF THE ACT. IT BE HEL D SO NOW AND DISALLOWANCE MADE BE DELETED. 8. THE LEARNED CIT(A) HAS ERRED IN TREATING ARCHITE CT FEE OF RS.65,939 AND RS.1,20,000 AGGREGATING TO RS.1,85,93 9 IN THE NATURE OF CAPITAL EXPENDITURE. YOUR APPELLANT SUBM ITS THAT SAME 3 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) BEING OF REVENUE EXPENDITURE, BE ALLOWED AS CLAIMED AND ADDITION MADE IN THIS REGARD BE DELETED. 9. THE LEARNED CIT(A) HAS ERRED IN TREATING BAAN LI CENSE FEE PAID OF RS.4,20,000 IN THE NATURE OF CAPITAL EXPEND ITURE. YOUR APPELLANT SUBMITS THAT SAME BEING OF REVENUE EXPEND ITURE, BE ALLOWED AS CLAIMED. 10. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER OF REDUCING COMMISSION INCOME WHI LE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. IT IS SUBMITTED TH AT COMMISSION BEING EARNED IN THE ORDINARY COURSE OF BUSINESS, DE DUCTION U/S 80HHC BE ALLOWED AS CLAIMED. 11. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING AN A DDITION OF RS. 3,67,258 BEING PROVISION MADE FOR EXCISE DUTY P AYABLE ON THE VALUE OF CLOSING STOCK OF FINISHED GOODS. YOUR APP ELLANT SUBMITS THAT ADDITION MADE IS UNWARRANTED AND SAME BE DELET ED NOW AS PER PROVISIONS OF SECTION 43B OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THA T SAME EFFECT BE GIVEN TO OPENING STOCK OF FINISHED GOODS ACCORDINGL Y. 12. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE A CTION OF CHARGING INTEREST U/S 234D OF THE ACT. YOUR APPELL ANT SUBMITS THAT LEVY OF INTEREST U/S 234D IS INCORRECT. IT BE HELD SO NOW AND SAME BE DELETED. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF MINING MACHINERY FOR UNDERGROUND OPEN CAST AND M ETAL MINES. THE RETURN OF INCOME WAS FILED ON 25-10-2002 ON AN INCO ME OF RS. 9,05,97,700/-. VARIOUS ADDITIONS WERE MADE AS PER ASSESSMENT ORDER 4 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) WHICH WAS CHALLENGED IN APPEAL. LD. CIT(A) ALLOWED PARTIAL RELIEF. THE ASSESSEE HAS CHALLENGED THE ISSUES ON WHICH RELIEF WAS NOT GIVEN BY LD. CIT(A). WE HAVE HEARD LD. AR AND LD. DR AND CAREFU LLY PERUSED THE MATERIAL ON RECORD. 3. GROUND NO.1 IS GENERAL AND HENCE DOES NOT REQUIR E ANY SPECIFIC ADJUDICATION. 4. GROUND NO.2A RELATES TO DISALLOWANCE OF RS. 1,96 ,849/- BEING 50% OF FOREIGN TRAVEL EXPENSES. LD. ASSESSING OFFICER DISALLOWED PART OF THE EXPENSES ON THE GROUND THAT ASSESSEE DID NOT SUBMIT EVIDENCE LIKE AIR TICKET. THE LD. CIT(A) ALSO CONFIRMED THE SAME. H E NOTICED THAT THE ASSESSING OFFICER HAD CALLED THE DETAILS PERTAINING TO THE PURPOSE OF VISIT, A COPY OF BOARDS RESOLUTION GIVING APPROVAL, THE E XTENT OF BUSINESS EARNED AS A RESULT OF FOREIGN VISIT. BUT, THESE DET AILS WERE NOT SUBMITTED EXCEPT FURNISHING GENERAL REPLY. THE LD. CIT(A) AL SO OBSERVED THAT NEXUS OF VISIT WITH THE BUSINESS REQUIREMENT HAS TO BE ES TABLISHED. MERELY PRODUCING COPY OF THE BILLS FROM TRAVEL AGENT IS NO T SUFFICIENT TO SHOW THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS. NO EVIDENCE LIKE CORRESPONDENCE WITH THE FOREIGN COLLABORATORS ABOUT THE PURPOSE OF VISIT AND MEETING HELD ABROAD WERE PRODUCED. IN THE ABSENCE OF DOCUMENTARY EVIDENCE THE CLAIM OF COMMER CIAL EXPEDIENCY CANNOT BE ESTABLISHED. 5. LD. AR SUBMITTED THAT AS THE REVENUE HAS ACCEPTE D 50% OF THE EXPENSES ON FOREIGN TRAVEL, THE COMMERCIAL EXPEDIEN CY IS ESTABLISHED. THEREFORE, THERE IS NO QUESTION OF MAKING PARTIAL D ISALLOWANCE. GENUINENESS OF THE EXPENDITURE IS NOT DOUBTED. ON THE OTHER HAND THE LD. DR SUBMITTED THAT ASSESSEE HAS NOT SUBMITTED EVEN T HE COPY OF AIR TICKET 5 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) TO SHOW THAT EXPENDITURE WAS ACTUALLY INCURRED. TH ERE IS NO DETAILS OF BUSINESS DISCUSSED OR PROCURED. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE REST ORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO SEE WHETHER VI SITS ARE PROPERLY RECORDED IN THE PASS PORT AND WHETHER THE COUNTRIES TO WHICH VISITS ARE UNDERTAKING ARE ON BUSINESS MAP OF THE ASSESSEE, WH ETHER IT IS PURCHASING RAW MATERIAL, OR MAKING SALES OR PROCURING TECHNICA L EXPERTISE. IF, ASSESSEE IS UNABLE TO PRODUCE ANY EVIDENCE AS TO TH E BUSINESS PURPOSE OF THE TRIPS, THE DISALLOWANCE IS CALLED FOR. ACCORDI NGLY, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 7. GROUND NO. 2B ALSO RELATES TO FOREIGN TRAVEL EXP ENSES WHERE DISALLOWANCE OF RS. 7,35,000/- IS MADE. AFTER HEA RING THE PARTIES AND FOR THE REASONS MENTIONED IN RESPECT OF GROUND NO. 2A, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING T HE ISSUE BY COLLECTING MATERIAL AS MENTIONED BY US WHILE DISPOSING OF GROU ND NO.2A. 8. AS A RESULT THIS GROUND OF ASSESSEE IS ALLOWED, BUT FOR STATISTICAL PURPOSES. 9. GROUND NO.3 RELATES TO DISALLOWANCE OF RS. 11,87 ,682/- BEING THE COMMISSION PAID TO GSA COMMERCIAL PRIVATE LTD. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH A COPY OF THE AGRE EMENT ENTERED WITH THE SAID PARTY FOR RENDERING SERVICES TO THE ASSESSEE A ND FOR THE TERMS OF COMMISSION PAYMENT. NO SUCH BILATERAL AGREEMENT WI TH THAT PARTY WAS FURNISHED. IT WAS CONTENDED THAT ASSESSEE HAD AN A GREEMENT UPTO 31-03-2003. THIS WAS EXTENDED BY THE ASSESSEE THR OUGH A LETTER WRITTEN TO THAT PARTY. THERE WAS NO ACCEPTANCE BY GSA COMM ERCIAL PRIVATE LTD. 6 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) NO DOCUMENTARY EVIDENCE OF SERVICES HAVING BEEN REN DERED BY THAT PARTY WERE FURNISHED. ACCORDINGLY, LD. CIT(A) ALSO CONFI RMED THE DISALLOWANCE. LD. AR SUBMITTED THAT IN EARLIER YEA R THE COMMISSION PAYMENT TO THAT PARTY WAS ALLOWED AND TRIBUNAL CONF IRMED THE ALLOWANCE VIDE ORDER FOR THE A.Y. 2001-2002 AND HENCE THE ISS UE IS COVERED. ON THE OTHER HAND LD. DR SUBMITTED THAT THE FACT OF SERVIC ES HAVING BEEN RENDERED HAS TO BE INDEPENDENTLY ESTABLISHED EVERY YEAR AND THEREFORE EVEN IF CLAIM IS ALLOWED IN EARLIER YEAR, IT WOULD NOT BECOME A GUARANTEE THAT SERVICES ARE RENDERED EVERY YEAR SUBSEQUENT TH ERETO. ALLOWING A CLAIM OF COMMISSION PAYMENT IN ONE YEAR, DOES NOT G IVE A CERTIFICATE FOR ALLOWANCE OF THE COMMISSION EVERY YEAR IN PERPETUIT Y. THE ASSESSEE HAS TO PROVE THE CLAIM EVERY YEAR. 10. WE AGREE WITH LD. DR ON THIS ISSUE. THE ISSUE OF SERVICES HAVING BEEN RENDERED HAS TO BE ESTABLISHED EVERY YEAR AND CANNOT BE PRESUMED ON THE BASIS OF ALLOWANCE OF A CLAIM IN AN EARLIER YEAR. THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT ASSESSEE HAS F AILED TO PRODUCE ANY EVIDENCE THAT M/S. GSA COMMERCIAL HAS RENDERED ANY SERVICES TO THE ASSESSEE. THEREFORE, THE CLAIM OF EXPENDITURE CANN OT BE SAID FOR BUSINESS PURPOSES. ONUS IS ON THE ASSESSEE TO PROVE ITS CLA IM EVERY YEAR. ALLOWANCE OF THE CLAIM IN ONE YEAR MAY GO IN FAVOUR OF THE ASSESSEE ON POINT OF LAW, BUT SIMILARITY OF FACT MATRIX HAS TO BE ESTABLISHED EVERY YEAR. SINCE IT IS NOT DONE AND FINDING OF THE CIT(A) THAT THERE IS NO EVIDENCE OF SERVICES HAVING BEEN RENDERED HAS NOT BEEN CHALLENG ED AND NO EVIDENCE CONTRARY TO THAT FINDING HAS BEEN PRODUCE, WE CONFI RM THE ORDER OF LD. CIT(A) ON THIS GROUND. AS A RESULT, THIS GROUND OF THE ASSESSEE IS REJECTED. 7 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) 11. GROUND NO.4 RELATES TO DISALLOWANCE OF RS.5,75, 175/- BEING CUSTOM CLEARANCE CHARGES. THE ASSESSEE HAS SUBMITTED BILL S FOR CUSTOMERS CLEARANCE CHARGES BUT FAILED TO PRODUCE THE CONCERN ED PERSONS FOR VERIFICATION. THE ASSESSING OFFICER ACCORDINGLY M ADE THE ADDITION. THE LD. CIT(A) ALLOWED THE CLAIM TO THE EXTENT OF 10% O N THE GROUND THAT AGENTS MAY HAVE BEEN RENDERING SERVICES IN THE PRES ENT TYPE OF BUSINESS. BUT, AS THE ASSESSEE FAILED TO PRODUCE ANY OF THE 7 PARTIES TO WHOM SUCH CLEARANCE CHARGES WERE PAID, HE SUSTAINED ADDITION OF RS. 5,75,172/-. 12. BEFORE US, LD AR FOR THE ASSESSEE SUBMITTED THA T IT IS NOT ALWAYS POSSIBLE TO PRODUCE THE PARTIES TO WHOM THE MONEY I S PAID FOR GETTING WORK DONE. THE CONTACT WITH SOME OF THE PARTIES IS OVER THE MOMENT THE WORK OF THE ASSESSEE IS DONE. FURTHER, NO DISALLOW ANCE IS MADE IN EARLIER YEAR OUT OF SUCH CLAIM WHEN NATURE OF BUSINESS REMA INED THE SAME. THE BILLS FROM THOSE PARTIES WERE PRODUCED. THEY HAVE SHOWN THEIR PAN NUMBERS AND GIVEN THEIR ADDRESSES. SOME OF THEM HA VE ALSO GIVEN THEIR TELEPHONE NUMBERS. THE ASSESSING OFFICER COULD HAV E ISSUED SUMMONS TO CALL THEM AND VERIFY THEIR CREDENTIALS. LD. DR ON THE OTHER HAND SUBMITTED THAT THESE PAYMENTS ARE IN THE NATURE OF BRIBE AND SHOULD NOT BE ALLOWED. THE PARTIES ARE NONEXISTENT AND ASSESSEE HAS SUBMITTED SELF SERVING VOUCHERS. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE REST ORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO GET SOME MORE DETA ILS ABOUT THE IDENTITY OF THESE PARTIES, VERIFY THEIR CREDENTIALS AND GIVE A FINDING WHETHER THEY ARE GENUINE PARTIES WORKING AS CUSTOM CLEARING AGENTS. THEIR PAN, TELEPHONE NUMBERS AND ADDRESSES SHOULD BE VERIFIED, IF THEY ARE GENUINE EXISTING PARTIES RENDERING SERVICES TO THE ASSESSEE , THE CLAIM SHOULD BE ALLOWED. 8 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) 14. AS A RESULT THIS GROUND IS ALLOWED, BUT FOR STA TISTICAL PURPOSES. 15. GROUND NO.5 RELATES TO DISALLOWANCE OF RS. 1,47 ,140/- BEING VEHICLE REGISTRATION CHARGES. THE ASSESSING OFFICE R TREATED RTO REGISTRATION CHARGES AS CAPITAL EXPENDITURE AND ALL OWED DEPRECIATION THEREON. THE CLAIM OF THE ASSESSEE IS THAT PAYMENT IS MADE TO RTO AFTER PURCHASE OF VEHICLE AND HENCE IT IS NOT CAPITAL EXP ENDITURE. THE LD. CIT(A) CONFIRMED THE SAME. AFTER HEARING THE PARTI ES WE DECLINED TO INTERFERE IN THE DECISION OF THE LD. CIT(A). THE R EASONS ARE THAT THE PURCHASE OF VEHICLE IS NOT COMPLETE TILL IT IS REGI STERED WITH THE RTO AND BECOMES ROADWORTHY. REGISTRATION OF THE VEHICLE WI TH THE RTO IS AN INTEGRAL PART OF ACQUISITION OF ASSET. IT IS SIMIL AR TO PAYMENT OF STAMP DUTY ON REGISTRATION OF IMMOVABLE PROPERTY. THE STAMP D UTY IS CAPITALIZED AND BECOMES PART OF THE COST OF IMMOVABLE PROPERTY. TH E OWNERSHIP OF IMMOVABLE PROPERTY IS COMPLETE ONLY ON REGISTRATION WITH STAMP DUTY AUTHORITIES AFTER PAYMENT OF STAMP DUTY. SIMILARLY , OWNERSHIP OF VEHICLE IS COMPLETE ONLY WHEN IT IS REGISTERED WITH THE RTO . THEREFORE, PURCHASE OF VEHICLE AND REGISTRATION THEREOF CANNOT BE TREAT ED INDEPENDENTLY. THE EXPENDITURE IS ON ACQUIRING TITLE AND IS THEREFORE CAPITAL IN NATURE. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THIS GROUND OF THE ASSESSEE. 16. GROUND NO.6 RELATES TO DISALLOWANCE OF RS. 73,8 52/- OUT OF RENTS, RATES AND TAXES. IT WAS CLAIMED THAT THIS EXPENDIT URE WAS INCURRED BY BILASPUR AND MAHINDRAGADH BRANCHES AS ENTRY TAX. T HE ASSESSING OFFICER DID NOT FIND THE DETAILS OF THESE EXPENSES IN THE DOCUMENTS SUBMITTED BEFORE HIM. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE FOR WANT OF EVIDENCE OF HAVING INCURRED SUCH EXPENSES. 9 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) 17. BEFORE US LD. AR FOR THE ASSESSEE DREW OUR ATTE NTION TO PAGE 60 TO 65 OF PAPER BOOK SHOWING GENERAL VOUCHERS PREPARED BY THE ASSESSEE COMPANY AND COMPUTERIZED SHEETS OF ACCOUNTS SHOWING SUCH EXPENSES. LD. DR ON THE OTHER HAND SUBMITTED THAT THEY ARE TH E PAPERS PREPARED BY THE ASSESSEE AND ARE NOT INDEPENDENT EVIDENCE FROM ENTRY TAX DEPARTMENT. AFTER CONSIDERING THE RIVAL SUBMISSION S, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. LET A SSESSEE PRODUCE THE COPY OF THE CHALLANS FROM ENTRY TAX DEPARTMENT SHOWING P AYMENT OF THE TAX IF SUCH EVIDENCE IS PRODUCED, THE CLAIM MAY BE ALLOWED . AS A RESULT THIS GROUND IS ALLOWED, BUT FOR STATISTICAL PURPOSES. 18. GROUND NO.7 RELATES TO DISALLOWANCE OF RS.35,95 5/- BEING AMOUNT PAID TO SALES TAX AUTHORITIES WHICH WAS DISALLOWED ON THE GROUND THAT IT IS PENAL IN NATURE. IT WAS CLAIMED THAT IT IS ADDITIO NAL INTEREST AND NOT PENALTY. LD. AR DREW OUR ATTENTION TO PAGE 98 TO 1 01 IN SUPPORT OF HIS CLAIM. AFTER HEARING THE PARTIES, WE RESTORE THE M ATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE COPIES OF SALES TAX , CHALLAN. LET THE ASSESSEE PRODUCE ENGLISH VERSION OF THE CHALLANS AN D IF THE PAYMENTS ARE OF THE NATURE OF INTEREST, THE CLAIM SHOULD BE ALLO WED. IF THE PAYMENT IS OF PENALTY CLAIM SHOULD BE DISALLOWED. THIS GROUND IS ALLOWED, BUT FOR STATISTICAL PURPOSES. 19. GROUND NO.8 RELATES TO DISALLOWANCE OF RS.1,85, 939/- BEING ARCHITECT FEES CONSIDERED AS CAPITAL IN NATURE. TH E ASSESSEE HAD CARRIED OUT RENOVATION ON WHICH CERTAIN EXPENDITURE WAS INC URRED AND FEES TO ARCHITECT WAS ALSO PAID. THE ASSESSING OFFICER TRE ATED THIS FEES AS CAPITAL IN NATURE, BUT THERE IS NO DISCUSSION ABOUT ACTUAL EXPENDITURE INCURRED ON RENOVATION. NATURE OF THE CLAIM IN RESPECT OF FEES TO ARCHITECT WOULD BE THE SAME AS THAT OF EXPENDITURE FOR WHICH PROFESSIO NAL ADVICE WAS TAKEN 10 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) FROM THE ARCHITECT. SINCE THERE IS NO DISCUSSION A BOUT THE NATURE OF EXPENDITURE ON RENOVATION AS TO WHETHER IT IS REVEN UE OR CAPITAL, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER TO DECIDE IN ACCORDANCE WITH THE DECISION ON EXPENDITURE ON RENO VATION. IF EXPENDITURE ON RENOVATION IS TREATED AS REVENUE, TH E CLAIM FOR ARCHITECT FEES SHOULD ALSO BE TREATED AS REVENUE. ACCORDINGL Y, THIS GROUND IS ALLOWED, BUT FOR STATISTICAL PURPOSES. 20. GROUND NO.9 RELATES TO DISALLOWANCE OF RS. 4,20 ,000/- BEING BAAN LICENSE FEE WHICH IS CONSIDERED AS CAPITAL IN NATUR E. IT WAS EXPLAINED THAT LICENSE IS REQUIRED FROM THE SOFTWARE COMPANY TO USE ITS LICENSE AND FEES IS PAID ON YEARLY BASIS. EVEN THOUGH EXPENDIT URE IS ONE TIME, BUT IT IS ON YEARLY BASIS AND THERE IS NO ENDURING BENEFIT DERIVED BY THE ASSESSEE BY MAKING PAYMENT OR RS.4,20,000/-. SINCE THESE FAC TS ARE NOT CONTROVERTED, WE HOLD THAT EXPENDITURE IS REVENUE I N NATURE AND HENCE SHOULD BE ALLOWED. 21. THIS GROUND OF THE ASSESSEE IS ALLOWED. 22. GROUND NO.10 IS REGARDING REDUCING COMMISSION I NCOME WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC. THE ASSES SING OFFICER HAD CALCULATED DEDUCTION UNDER SECTION 80HHC AT RS. 6,3 9,543/- AS AGAINST CLAIM OF RS. 6,48,898/-. THE ASSESSING OFFICER IN CLUDED COMMISSION INCOME IN THE TOTAL TURNOVER, BUT DID NOT INCLUDE T HIS IN THE PROFIT AND HENCE IT HAS RESULTED IN REDUCTION IN CLAIM. THE L D. CIT(A) HELD THAT AS PER PROVISION OF SECTION 80HHC ALL SUCH COMMISSION, INTEREST INCOME, ETC. HAD TO BE INCLUDED IN THE TOTAL TURNOVER, BUT WHILE COMPUTING THE PROFIT OF THE INTEREST, SUCH COMPONENT HAS TO BE RE DUCED IN VIEW OF THE EXPLANATION BAA TO SECTION 80HHC. 11 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) 23. WE HAVE HEARD THE RIVAL SUBMISSIONS. ANY RECEI PT OF THE NATURE OF BROKERAGE, COMMISSION, INTEREST ETC. HAS TO BE EXCL UDED FROM THE TOTAL TURNOVER, BUT WHILE COMPUTING PROFITS OF THE BUSINE SS, 90% OF SUCH RECEIPTS ARE TO BE REDUCED. THE ASSESSING OFFICER WILL RECALCULATE THE DEDUCTION UNDER SECTION 80HHC IN ACCORDANCE WITH TH E EXPLANATION BAA. HOWEVER, THAT DEDUCTION WILL NOT BE LESS THEN WHAT IS CONFIRMED BY LD CIT(A). IT IS NOTICED THAT ASSESSING OFFICER HAS R EDUCED ONLY RS. 39,42,152/- FROM BUSINESS PROFIT WHEREAS 90% OF THE COMMISSION SHOULD HAVE BEEN REDUCED. AS A RESULT, THIS GROUND OF THE ASSESSEE IS ALLOWED, BUT FOR STATISTICAL PURPOSE. 24. GROUND NO.11 RELATES TO DISALLOWANCE OF RS.3,67 ,258/- BEING PROVISION MADE FOR EXCISE DUTY PAYABLE ON THE VALUE OF CLOSING STOCK OF FINISHED GOODS. THE DISALLOWANCE WAS MADE ON THE G ROUND THAT NO EVIDENCE IN THE FORM OF CHALLANS FOR PAYMENT MADE I N THE GOVERNMENT TREASURY OR BANK WAS PRODUCED. THEREFORE, THE CLAI M OF THE ASSESSEE THAT PAYMENT OF THE EXCISE DUTY WAS MADE BEFORE DUE DATE OF FILING OF THE RETURN WAS REJECTED BY THE LD. CIT(A). BEFORE US I T IS SUBMITTED THAT IF ADDITION IS TO BE MADE IN THE CLOSING STOCK, THEN S UCH ADJUSTMENT IS TO BE ALLOWED IN THE OPENING STOCK ALSO. AFTER HEARING T HE PARTIES, WE ACCEPT THIS PROPOSITION THAT IF ANY ADJUSTMENT IS MADE ON ACCOUNT OF PAYMENT OF EXCISE DUTY WHILE VALUE CLOSING STOCK, THEN ADJUSTM ENT WHILE VALUE OPENING STOCK SHOULD ALSO BE MADE IN RESPECT OF EXC ISE DUTY PAID ON FINISHED GOODS/RAW MATERIAL SHOWN IN THE OPENING ST OCK. AS A RESULT, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFI CER TO RECALCULATE THE DIFFERENCE IN ADJUSTMENT OF THE OPENING STOCK AS WE LL AS CLOSING STOCK. AS A RESULT THIS GROUND IS ALSO ALLOWED, BUT FOR STATI STICAL PURPOSES. 12 ITA NO.189/AHD/2006 (ASSESSMENT YEAR 2002-2003) 25. AS A RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED, AND PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 18 TH DECEMBER, 2009. SD/- SD/- (T K SHARMA) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD; DATED: 18/12/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.