ITO, New Delhi V. M/s. Media Satellite & Telecoms Ltd., New Delhi

ITA 1947/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6999 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNJA
• Keywords: Related party transaction; Gift; Maximum Marginal Rate; Fair market value; Tax effect; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.1947/DEL/2014 A.Y. : 2009-10 ITO, WARD 6(3), ROOM NO. 304, CR BUILDING, NEW DELHI VS. M/S MEDIA SATELLITE & TELECOMS LTD., B-86/1, MEDIA HOUSE, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI (PAN: AAACM0712D) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. P. DAM KANUNJNJA, SR. DR ASSESSEE BY : NONE DATE OF HEARING : 21-06-2016 DATE OF ORDER : 01-07-2016 ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E IMPUGNED ORDER DATED 21/1/2014 PASSED BY THE LD. ITA NO. 1947/DEL/2014 A.Y. 2009-10 2 COMMISSIONER OF INCOME TAX (APPEALS-IX), NEW DELHI ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CO NTRARY TO FACTS AND LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF RS. 4,21,394/- MADE BY THE AO ON ACCOUNT OF SALES PROMOTION EXPENSES AS THE ASSESSE FAILED TO ESTABLISH THE GENUINENESS OF THE EXPENDITURE, ENTIRELY RELYING ON THE SUBMISSION OF THE ASSESSEE, AS THE ONUS OF ESTABLISHING THE GENUINENESS OF ANY EXPENDITURE IS ON THE ASSESSEE WHICH THE ASSESSEE FAILED TO DISCHARGE? 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF RS. 1,07,87,411/-, MADE BY THE AO AS THE ASSESSEE FAILED TO JUSTIFY THE REBATES AND DISCOUN TS GIVEN TO ITS RELATED PARTY, ENTIRELY RELYING ON THE SUBMISSION OF THE ASSESSEE, AS THE ONUS OF ESTABLISHING THE GENUINENESS OF ANY EXPENDITURE IS ITA NO. 1947/DEL/2014 A.Y. 2009-10 3 ON THE ASSESEE WHICH THE ASSESSEE FAILED TO DISCHARGE? 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR TO FORGO ANY GROUNDS OF THE APPEAL EITHER BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF TRADING OF ELECTRONIC GO ODS. THE E- RETURN OF INCOME FOR THE AY 2009-10 WAS FILED ON 21 .9.2010 DECLARING AN INCOME OF RS. 19,74,830/-. THIS RETU RN WAS PROCESSED INITIALLY U/S. 143(1) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED AS THE ACT) AND SUBSEQUENTLY SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED ON 20.12. 2011 U/S. 143 OF THE ACT AT AN INCOME OF RS. 1,34,21,680 /- BY MAKING ADDITION OF RS. 1,86,397/- U/S. 14A, RS. 51, 650/- U/S. 40A(3), RS. 4,21,394/- AS SALES PROMOTION EXPENSES AND RS. 1,07,87,411/- U/S. 40A(2)(B) OF THE ACT. AGGRIEVED WITH THE AFORESAID ADDITIONS, ASSESSEE FILED THE APPEAL BEFO RE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER D ATED ITA NO. 1947/DEL/2014 A.Y. 2009-10 4 27.1.2012 HAS DELETED THE ADDITIONS IN DISPUTE BY P ARTLY ALLOWING THE APPEAL FILED BY THE ASSESSEE. 3. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING LD. DR RELIED UPON THE OR DER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REV ENUE IN THE GROUNDS OF APPEAL. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEV ER, NOTICE BY RPAD WAS ISSUED TO THE ASSESSEE FOR 21.6. 2016 AND IN RESPONSE TO THE SAME, NEITHER THE ASSESSEE NOR I TS AUTHORIZED REPRESENTATIVE/COUNSEL APPEARED AND NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW OF TH E FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VI EW THAT NO USEFUL PURPOSE WOULD BE SERVED TO ADJOURN THE CASE. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE DECID ING THE ISSUE IN DISPUTE EXPARTE ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 6. WE HAVE HEARD THE LD. DR AND PERUSED AND CONSIDE RED THE RELEVANT RECORDS AVAILABLE WITH US ESPECIALLY T HE ORDERS PASSED BY THE REVENUE AUTHORITIES. 6.1 APROPOS DELETION OF ADDITION OF RS. 4,21,394/- :- THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE INC URRED SALES ITA NO. 1947/DEL/2014 A.Y. 2009-10 5 PROMOTION EXPENSES OF RS.4,21,394/- WITHOUT PURCHAS E OF ANY GIFT ITEMS AS CAN BE SEEN FROM THE BANK BOOK. ON A QUERY BY THE AO THE ASSESSEE EXPLAINED THAT THESE EXPENSES A RE INCURRED AS PER BUSINESS AND MANAGEMENT DECISION TO INCREASE SALES. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND IN THE ABSENCE OF ANY EVIDENCE REGARDING GENUIN ENESS OF THE CLAIM, ADDED THE AMOUNT AS UNEXPLAINED EXPENSES . AGGRIEVED WITH THE AOS ACTION, ASSESSEE APPEALED B EFORE THE LD. CIT(A) AND SUBMITTED THAT THE AO HAS ERRED IN DISALLOWING RS.4,21,394/- INCURRED TOWARDS SALES PROMOTION EXPE NSES. COPY OF THE DEBIT NOTE DT.20.11.2008 FILED WITH THE AO WAS SUMMARILY REJECTED WITH THE REMARK THAT NO SUCH EXP ENDITURE WAS INCURRED IN THE IMMEDIATELY PRECEDING YEAR AND NO PURCHASE OF GIFT ITEMS WAS INCLUDED IN THE BANK BOO K. ASSESSEE SUBMITTED THAT KEEPING IN VIEW THE NATURE OF BUSINE SS OF THE ASSESSEE AND LARGE TURNOVER, BUSINESS PROMOTION EXP ENSE OF RS.4,21,394/- INCURRED DURING THE YEAR FOR COMPLEME NTARY ITEMS FOR POPULARIZING OF ITS NAME WITH THE RETAILE RS AND CUSTOMERS BE ALLOWED. THE ENTRY DID NOT PASS THROUG H THE BANK BOOK SINCE THESE ITEMS WERE PURCHASED THROUGH AN AS SOCIATED CONCERN AND WERE TRANSFERRED BY A DEBIT NOTE. UNDER THE CIRCUMSTANCES THERE IS NO REASON TO DISALLOW THE PU RCHASE OF COMPLIMENTARY GIFT ITEMS PURCHASED FOR THE PURPOSE OF BUSINESS PROMOTION. LD. CIT(A) HAS OBSERVED THAT THE AO HAS NOT BEEN ABLE TO BROUGHT ANY FACT CONTRARY TO WHAT IS CLAIME D BY THE ASSESSEE. LD. CIT(A) HAS RELIED UPON THE CASE LAW IN THE CASE ITA NO. 1947/DEL/2014 A.Y. 2009-10 6 OF UPPER INDIA PUBLISHING HOUSE VS. CIT (1979) 117 ITR 569 (SC) WHEREIN, IT HAS BEEN HELD THAT WHETHER PAYMENT IS EXCESSIVE OR REASONABLE IS A QUESTION OF FACT. SINC E THE TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, UNLESS THERE IS A FACT TO CONTRADICT SUCH TRANSACTIONS, DISALLOWANCES CANNOT BE MADE ON THE BASIS OF CERTAI N ASSUMPTIONS. IT IS A NORMAL PRACTICE IN BUSINESS TH AT EXPENSES ARE INCURRED AS INCENTIVE TO THE DEALERS AGAINST BU LK ORDERS TO PUSH SALES. SUCH ENDEAVOR OF THE ASSESSEE CAN BE SE EN AS SUCCESSFUL IN INCREASE OF THE TURNOVER. THE ACTION OF THE AO TO MAKE THE ADDITION JUST FOR THE SAKE OF THE ADDITION IGNORING ALL THE MATERIAL FACTS BROUGHT INTO THE ASSESSMENT PROC EEDINGS BY THE ASSESSEE IS NOT JUSTIFIED AND HENCE ADDITION MA DE WAS DELETED AND THIS GROUND OF APPEAL WAS ALLOWED. IN VIEW OF THE AFORESAID DISCUSSIONS AND PRECEDENT RELIED, WE ARE OF THE CONSIDERED VIEW THAT TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND UNLESS THERE IS A F ACT TO CONTRADICT SUCH TRANSACTIONS, THE DISALLOWANCE CANN OT BE MADE ON THE BASIS OF ASSUMPTIONS. MOREOVER, IT IS NOTED THAT IT IS A NORMAL PRACTICE IN THE BUSINESS THAT EXPENSES ARE I NCURRED AS INCENTIVE TO THE DEALERS AGAINST BULK ORDERS TO PU SH SALES WHICH CAN BE SEEN FROM THE INCREASE TURNOVER OF THE ASSESSEE. THEREFORE, THE LD. FIRST APPELLATE AUTHORITY HAS RI GHTLY DELETED THE ADDITION IN DISPUTE AND THERE IS NO NEED TO INT ERFERE IN THE WELL REASONED FINDING GIVEN BY THE LD. FIRST APPELL ATE AUTHORITY, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON TH E ISSUE IN ITA NO. 1947/DEL/2014 A.Y. 2009-10 7 DISPUTE AND DECIDE THE SAME IN FAVOUR OF THE ASSESS EE AND AGAINST THE REVENUE. 7. APROPOS DELETION OF ADDITION OF RS. 1,07,87,411 /- U/S. 40A(2)(B) OF THE I.T. ACT, 1961: THE AO NOTED THA T, IN THE TAX AUDIT REPORT, THE AUDITORS HAVE MENTIONED ABOUT PAY MENT OF RS.1,07,87,411/- AS REBATE AND DISCOUNT TO A SISTER CONCERN OF THE ASSESSEE NAMED M/S MEDIA INDUSTRIES LTD. IN RE SPONSE TO THE QUERY OF THE AO, THE ASSESSEE SUBMITTED THAT TH E EXPENSES ARE INCURRED AS PER COMMERCIAL EXPEDIENCY TO INCREA SE SALES. SIMILAR REBATE AND DISCOUNTS WERE OFFERED TO OTHER DEALERS OF THE BUSINESS AS WELL AS THE SISTER CONCERN MEDIA IN DUSTRIES LTD.. THE ASSESSEE ALSO SUBMITTED THAT THERE IS NO PARTICULAR ADVANTAGE IN TRANSFER OF PROFIT FROM ONE COMPANY TO OTHER COMPANY WHEN BOTH COMPANIES ARE EARNING PROFIT AND PAYING TAX AT THE SAME MAXIMUM MARGINAL RATE OF INCOME TAX . IN THE CASE OF M/S MEDIA INDUSTRIES LTD. (SUBSEQUENTLY KNO WN AS MVL TELECOMS LTD.) THE RELEVANT RETURN OF INCOME TAX IN DICATES TAXABLE INCOME OF RS.66,06,778/- AND NOT ANY LOSS T O GAIN UNDUE BENEFIT. THE AO DID NOT ACCEPT THE EXPLANATIO N OF THE ASSESSEE AND TREATED THE EXPENSE INCURRED AS DISALL OWABLE. AGGRIEVED WITH THE AFORESAID ACTION OF THE AO, ASSE SSEE ITA NO. 1947/DEL/2014 A.Y. 2009-10 8 APPEALED BEFORE THE LD. CIT(A) WHO HAS ADJUDICATED AND DECIDED THE ISSUE IN DISPUTE AS UNDER:- 8.3 THE REASONS GIVEN BY THE AO, THE SUBMISSIONS OF APPELLANT AND THE FACTS ON RECORD ARE CONSIDERED. THE JUDICIAL PRONOUNCEMENTS GIVEN BY THE AO ARE ALSO ANALYZED. IT IS SEEN THAT, THE APPELLANT HAS ALREADY EXPLAINED WITH THE DOCUMENTARY EVIDENCE THAT HOW MUCH IT WOULD HAVE COST TO THE ASSESSEE IF SAME SERVICES WERE TO BE AVAILED EITHER BY EMPLOYING WHOLE TIME EMPLOYEES ON ITS ROLE OR OBTAINING THE SERVICES OF THE INDEPENDENT CONSULTANTS ON THESE AREAS. THE COMPANY COULD NOT GIVE BETTER JUSTIFICATION THAN THIS. HOWEVER, THE AO HAS PROCEEDED ON ALTOGETHER DIFFERENT REASONING AND EVEN NOT ATTEMPTED TO SPECIFY BY TAKING AN INDEPENDENT VIEW OF THE MATTER AND HAS RATHER DISALLOWED THE AMOUNT. THERE IS NO DOUBT AS TO THE JUDICIAL PROPOSITION AS TO WHETHER THE PAYMENT IS EXCESSIVE OR ITA NO. 1947/DEL/2014 A.Y. 2009-10 9 REASONABLE IS A QUESTION OF FACT. HOW THE FACT OF EXCESSIVE OR REASONABLE IS REQUIRED TO BE ESTABLISHED IS ONLY BY KNOWING AS TO WHAT WOULD BE REASONABLE AMOUNT FOR THE SERVICES OBTAINED. THE ASSESSEE EXPLAINED AS TO HOW THE PAYMENT M DE WAS REASONABLE AND JUSTIFIED. IT WAS FOR THE AO TO DISPUTE THE CLAIM ON SOME COGENT EVIDENCE AND MATERIAL WHICH HAS NOT BEEN DONE BY HIM. HENCE, THE JUDICIAL DECISIONS CITED BY AO DOES NOT SUPPORT AO'S FINDINGS. THE JUDGMENTS MENTIONED BY THE AO IN HIS ORDER SIMPLY SUGGEST THE PRINCIPLES WHICH ARE LAID DOWN BY SECTION 40A(2)(A)/(B) OF THE ACT. 8.4 AS PER THE PROVISIONS OF SECTION 40A(2)(A) SOME JUSTIFICATION ON THE BASIS OF COMPARABLES AND BENCH MARKING IS REQUIRED TO PROVE THE EXISTENCE AND QUANTIFY THE UNREASONABLENESS OF THE EXPENSES TO BE CONSIDERED FOR DISALLOWANCES. THE AO DID NOT ASCERTAINED FAIR MARKET VALUE (F.M.V.) OF THE SERVICES AND OTHER ITA NO. 1947/DEL/2014 A.Y. 2009-10 10 CONNOTATIONS TO ESTABLISH THAT APPELLANT HAS PAID UNREASONABLE AMOUNT AND QUANTUM OF PAYMENT DOES NOT COMMENSURATE WITH THE SERVICES RENDERED. SINCE THE LEVEL OF DISCOUNT GIVEN IS SAME TO ALL DEALERS, THE FMV IS NOT VIOLATED. THE INTENTION BEHIND THE PROVISION OF SECTION 40A(2)(A) IS TO PREVENT THE INTENTIONAL REDUCTION IN TAX LIABILITY BY CERTAIN ASSESSEE'S BY DIVERTING BUSINESS PROFITS TO CLOSE RELATIVES AND CONCERNS IN THE FORM OF EXCESSIVE PAYMENTS FOR GOODS AND SERVICES RECEIVED. THE FACTS AND CIRCUMSTANCES OF THE CASE DOES NOT INDICATE ANY SUCH TAX EVASION PLAN. BOTH THE COMPANIES ARE THE TAX -PAYING ENTITIES AT THE SAME RATE OF TAX. SO LONG AS THE ARRANGEMENT IS GENUINE AND BONA FIDE AND THE INTENTION IS NOT TO EVADE TAXES, IT CANNOT BE DISREGARDED FOR THE PURPOSE OF DETERMINING THE TAXABILITY OF THE RESPECTIVE ENTITY. 8.5 THIS JUNCTURE, RELIANCE MAY BE PLACED ON THE DECISION OF HON'BLE HIGH COURT IN THE CASE OF CIT ITA NO. 1947/DEL/2014 A.Y. 2009-10 11 VS. MIS GAUTAM MOTOR (2010) 194 TAXMAN 21 (DELHI) ALSO 334 ITR 326 (DEL). WHEREIN IT IS HELD THAT, 'THERE IS NO CASE MADE OUT BY THE DEPARTMENT THAT ANY TAX AVOIDANCE HAS BEEN ATTEMPTED BY THESE ARRANGEMENTS. WE, THEREFORE, SEE NO JUSTIFICATION TO HOLD THE ADDITIONS MADE BY THE LD. AO AND SUSTAINED BY THE CIT(A), THE SAME IS DIRECTED TO BE DELETED AND THIS GROUND OF APPELLANT IS ALLOWED. IN THE CASE OF GLAXO SMITH KLINE ASIA PVT. LTD. (SLP CIVIL NO. 18121/2007), THE HON'BLE SUPREME COURT HAS HELD THAT IN THE CASE OF RELATED PARTY TRANSACTIONS THE AUTHORITIES MUST EXAMINE WHETHER THERE IS ANY LOSS OF REVENUE. AND, IF EXERCISE IS REVENUE NEUTRAL, THAN THE MATTER MAY BE DECIDED ACCORDINGLY. SO LONG AS THE ARRANGEMENT IS GENUINE AND PAYMENTS HAVE ACTUALLY BEEN MADE AND THERE IS NO TAX EVASION PLANNING INVOLVED, WHEN BOTH THE ENTITIES ARE PAYING TAX AT THE MAXIMUM MARGINAL RATE, THERE CANNOT BE ANY JUSTIFICATION IN DISALLOWING ANY ITA NO. 1947/DEL/2014 A.Y. 2009-10 12 AMOUNT ON ESTIMATED BASIS. SUCH REVENUE NEUTRAL ADDITION MADE BY AO UNNECESSARILY INCREASES IN THE CASE CIT VS. M/S EXCEL INDUSTRIES LTD. (ITATONLINE.ORG) IN APPEAL NO. 125 OF 2013 VIDE ORDER DATED 08.10.2013 THE HON'BLE SUPREME COURT HELD THAT THE AO IS REQUIRED TO BE PRAGMATIC AND NOT PEDANTIC. THE APEX COURT ALSO OBSERVED THAT REVENUE CANNOT BE ALLOWED TO FLIP-FLOP ON THE ISSUE AND IT OUGHT LET THE MATTER RAISED RATHER THAN SPEND THE TAX PAYERS MONEY IN PURSUING LITIGATION FOR THE SAKE OF IT. IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, THE APEX COURT OBSERVED THAT 'IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT A.Y. AS WELL AS IN THE SUBSEQUENT A.Y. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CONTINUE ITA NO. 1947/DEL/2014 A.Y. 2009-10 13 WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS.' RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE AND ALSO BECAUSE THE NATURE OF TRANSACTION IS GENUINE AND IN THE ABSENCE OF ANY REVENUE LOSS, THE DISALLOWANCE MADE BY AO IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 8. AFTER PERUSING THE AFORESAID FINDING OF THE LD. CIT(A), WE ARE OF THE VIEW THAT ASSESSEE HAS ALREADY EXPLAINED WITH THE DOCUMENTARY EVIDENCE THAT HOW MUCH IT WOULD HAVE CO ST TO THE ASSESSEE IF SAME SERVICES WERE TO BE AVAILED EITH ER BY EMPLOYING WHOLE TIME EMPLOYEES ON ITS ROLE OR OBTAI NING THE SERVICES OF THE INDEPENDENT CONSULTANTS ON THESE AR EAS. WE ALSO NOTE THAT THE AO DID NOT ASCERTAINED FAIR MARK ET VALUE (F.M.V.) OF THE SERVICES AND OTHER CONNOTATIONS TO ESTABLISH THAT ASSESSEE HAS PAID UNREASONABLE AMOUNT AND QUANTUM O F PAYMENT DOES NOT COMMENSURATE WITH THE SERVICES REN DERED. SINCE THE LEVEL OF DISCOUNT GIVEN IS SAME TO ALL DE ALERS, THE FMV ITA NO. 1947/DEL/2014 A.Y. 2009-10 14 HAS NOT BEEN VIOLATED. THE INTENTION BEHIND THE PR OVISION OF SECTION 40A(2)(A) IS TO PREVENT THE INTENTIONAL RED UCTION IN TAX LIABILITY BY CERTAIN ASSESSEE'S BY DIVERTING BUSINE SS PROFITS TO CLOSE RELATIVES AND CONCERNS IN THE FORM OF EXCESSI VE PAYMENTS FOR GOODS AND SERVICES RECEIVED. THE FACTS AND CIRC UMSTANCES OF THE CASE DOES NOT SHOWS ANY SUCH TAX EVASION PLAN. BOTH THE COMPANIES ARE THE TAX -PAYING ENTITIES AT THE SAME RATE OF TAX. SO LONG AS THE ARRANGEMENT IS GENUINE AND BONA FIDE AND THE INTENTION IS NOT TO EVADE TAXES, IT CANNOT BE DISRE GARDED FOR THE PURPOSE OF DETERMINING THE TAXABILITY OF THE RESPEC TIVE ENTITY. WE FURTHER NOTE THAT LD. CIT(A) RELIED UPON THE DEC ISION OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. M/S GAUTA M MOTOR (2010) 194 TAXMAN 21 (DELHI) ALSO 334 ITR 326 (DEL) WHEREIN IT WAS HELD THAT, 'THERE IS NO CASE MADE OUT BY THE DEPARTMENT THAT ANY TAX AVOIDANCE HAS BEEN ATTEMPTED BY THESE ARRANGEMENTS. WE, THEREFORE, SEE NO JUSTIFICATION T O HOLD THE ADDITIONS MADE BY THE LD. AO AND SUSTAINED BY THE C IT(A), THE SAME IS DIRECTED TO BE DELETED AND THIS GROUND OF A PPELLANT IS ALLOWED. 8.1 WE FURTHER FIND THAT LD. CIT(A) HAS ALSO RELIED UPON THE CASE OF GLAXO SMITH KLINE ASIA PVT. LTD. (SLP CIVIL NO. ITA NO. 1947/DEL/2014 A.Y. 2009-10 15 18121/2007), WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT IN THE CASE OF RELATED PARTY TRANSACTIONS THE AUTHORITIES MUST EXAMINE WHETHER THERE IS ANY LOSS OF REVENUE. AND, IF EXERCISE IS REVENUE NEUTRAL, THAN THE MATTER MAY BE DECIDED ACCORDINGLY. SO LONG AS THE ARRANGEMENT IS GENUINE AND PAYMENTS HAVE ACTUALLY BEEN MADE AND THERE IS NO TA X EVASION PLANNING INVOLVED, WHEN BOTH THE ENTITIES ARE PAYIN G TAX AT THE MAXIMUM MARGINAL RATE, THERE CANNOT BE ANY JUSTIFIC ATION IN DISALLOWING ANY AMOUNT ON ESTIMATED BASIS. SUCH REV ENUE NEUTRAL ADDITION MADE BY AO UNNECESSARILY INCREASES AVOIDABLE ACADEMIC EXERCISE. IN THE CASE CIT VS. M/S EXCEL IN DUSTRIES LTD. IN APPEAL NO. 125 OF 2013 VIDE ORDER DATED 08. 10.2013 THE HON'BLE SUPREME COURT HELD THAT THE AO IS REQUIRED TO BE PRAGMATIC AND NOT PEDANTIC. THE APEX COURT ALSO OBS ERVED THAT REVENUE CANNOT BE ALLOWED TO FLIP-FLOP ON THE ISSUE AND IT OUGHT LET THE MATTER RAISED RATHER THAN SPEND THE T AX PAYERS MONEY IN PURSUING LITIGATION FOR THE SAKE OF IT. IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, THE APEX COURT OBSERVED THAT 'IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT A.Y. AS WELL AS IN THE SUBSEQUENT A.Y. THER EFORE, LD. ITA NO. 1947/DEL/2014 A.Y. 2009-10 16 CIT(A) HAS RIGHTLY HELD THAT THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TA X EFFECT AND HELD THAT THERE WAS, THEREFORE, NO NEED FOR THE REV ENUE TO CONTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLE AR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS.' IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION, LD. CIT(A) HAS RI GHTLY RESPECTFULLY FOLLOWED THE JUDICIAL PRONOUNCEMENTS D ISCUSSED ABOVE AND ALSO BECAUSE THE NATURE OF TRANSACTION IS GENUINE AND IN THE ABSENCE OF ANY REVENUE LOSS, AND RIGHTLY DELETED THE DISALLOWANCE BY PASSING A W ELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME. ACCORDINGLY, THIS GROUND RAISED BY THE REVENUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/07/2016. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/07/2016 ITA NO. 1947/DEL/2014 A.Y. 2009-10 17 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES