DCIT, Circle-4(2), Ahmedabad V. M/s. Deloitte Haskins and Sells , Ahmedabad

ITA 1984/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9347 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 01-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K DEV
• Keywords: Diversion of income; Commercial expediency
• Section: 201

Judgement Text

ITA 1983 & 1984/AHD/2017 AY: 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1983/AHD/2017 AY: 2013-14 ITA NO. 1984/AHD/2017 AY: 2014-15 DCIT, CIR.4(2), A/209, A WING, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, NR. POLITECHNIC PANCJARARAPOLE, AMBAWADI, AHMEDABAD-380 015 VS DELOITTEE HASKINS & SELLS, 3 RD FLOOR, HERITAGE, NR. GUJARAT VIDYAPITH, OFF ASHRAM ROAD, USMANPURA, AHMEDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PERCY PARDIWALA, NIRA J SHETH, ARS RESPONDENT BY: SHRI S.K. DEV, SR. DR DATE OF HEARING : 2 8.06.2019 DATE OF PRONOUNCEMENT: 01.10.2 019 ORDER PER SUDHANSHU SRIVASTAVA, J.M.: BOTH THE APPEALS ARE PREFERRED BY THE REVENUE AND INVOLVE IDENTICAL ISSUES. THEY WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA 1983 & 1984/AHD/2017 AY: 2013-14 2 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PROFESSIONAL FIRM CARRYING OUT THE PROFESSION OF CH ARTERED ACCOUNTANCY. THE RETURN OF INCOME FOR ASSESSMENT YE AR 201314 WAS FILED DECLARING A TOTAL INCOME OF RS. 3,82,44,8 00/-. INITIALLY, THE RETURN WAS PROCESSED UNDER SECTION 143 (1) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). SUBSEQUEN TLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS GUIDELINES. TH E ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 6,85,91,667/- AFT ER MAKING THE FOLLOWING DISALLOWANCES/ADDITIONS (I) DISALLOWANCE OF INTEREST EXPENDITURE RS. 2,19 ,85,395/- (II) DISALLOWANCE OUT OF SUBSCRIPTION PAYMENTS RS . 79,37,189/- (III) DISALLOWANCE OF INTEREST ON SERVICE TAX RS. 4 ,24,283/-. 2.1 THE ASSESSEE APPROACHED THE LD. FIRST APPELLAT E AUTHORITY AGAINST THE SAID DISALLOWANCES. THE LD. C OMMISSIONER OF INCOME TAX (APPEALS) GAVE RELIEF TO THE ASSESSEE IN RESPECT OF ALL THE THREE DISALLOWANCES AND DELETED THE ADDITIO NS. NOW, THE DEPARTMENT IS BEFORE THE TRIBUNAL AND HAS CHALLENGE D THE ACTION OF THE LD. FIRST APPELLATE AUTHORITY IN DELETING TH E DISALLOWANCES MADE BY THE ASSESSING OFFICER. 2.2 IN ASSESSMENT YEAR 201415, THE RETURN OF INCO ME WAS FILED DECLARING AN INCOME OF RS. 6,60,19,600/-. THE ASSESSEES ITA 1983 & 1984/AHD/2017 AY: 2013-14 3 RETURN WAS INITIALLY PROCESSED UNDER SECTION 143 (1 ) OF THE ACT AND THE CASE WAS SUBSEQUENTLY SELECTED FOR SCRUTINY UNDER THE CASS GUIDELINES. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 10,96,56,092/- AFTER, INTER ALIA , MAKING THE FOLLOWING DISALLOWANCES (I) DISALLOWANCE OF INTEREST EXPENSES RS. 2,27,87 ,141/- (IDENTICAL TO ASSESSMENT YEAR 2013-14) (II) DISALLOWANCE OUT OF SUBSCRIPTION PAYMENTS - RS . 80,22,170/- (IDENTICAL TO ASSESSMENT YEAR 2013-14) (III) ADDITION IN RESPECT OF PAYMENTS MADE TO RETIR ED PARTNERS DEDUCTED FROM PROFESSIONAL RECEIPTS RS. 1,28,27,1 81/- (NEW ISSUE IN THIS ASSESSMENT YEAR) 2.3 THE ASSESSEES APPEAL BEFORE THE LD. FIRST APP ELLATE AUTHORITY WAS SUCCESSFUL IN THIS ASSESSMENT YEAR AL SO IN AS MUCH AS THE LD. FIRST APPELLATE AUTHORITY ALLOWED RELIEF TO THE ASSESSEE ON ALL THE THREE ISSUES UNDER DISPUTE BY DELETING T HE AFORESAID DISALLOWANCES. NOW, THE DEPARTMENT HAS APPROACHED T HE TRIBUNAL AND HAS CHALLENGED THE DELETION OF THE DIS ALLOWANCES BY THE LD. FIRST APPELLATE AUTHORITY. 3.0 THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT THE BACKGROUND RELATING TO THE DISALLOWANCE OF INTEREST BY ITA 1983 & 1984/AHD/2017 AY: 2013-14 4 THE ASSESSING OFFICER WAS THAT DURING ASSESSMENT YE AR 201314, THE ASSESSEE FIRM HAD CLAIMED INTEREST AND FINANCE CHARGES OF RS. 2,99,95,830/- AND ON THE OTHER HAND HAD GIVEN INTER EST FREE LOANS AND ADVANCES OF RS. 18,32,11,606/- TO ITS ASS OCIATE CONCERN M/S DELOITTE TOUCHE TOHMATSU INDIA PVT. LTD (DTTIPL). IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD ISSUED SHOW CAUSE NOTICE REQUIRING THE ASSESSEE TO JUSTIFY AS TO WHY PROPORT IONATE EXPENSES WITH RESPECT TO THE EXPENDITURE ON INTEREST SHOULD NOT BE DISALLOWED. THEREAFTER, AFTER DULY CONSIDERING THE REPLY OF THE ASSESSEE THE ASSESSING OFFICER PROCEEDED TO DISALLO W A SUM OF RS. 2,19,85,392/- BY APPLYING 12% INTEREST RATE ON ADVA NCES OF RS. 18.32 CRORES TO DTTIPL. IT WAS FURTHER SUBMITTED TH AT A SIMILAR DISALLOWANCE WAS MADE IN ASSESSMENT YEAR 201415 BY THE ASSESSING OFFICER. THE LD. SENIOR DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THIS INTEREST HAD BEEN RIGHTLY DISAL LOWED BY THE ASSESSING OFFICER BUT THE LD. CIT (APPEALS) HAD INC ORRECTLY DELETED THE DISALLOWANCE. THE LD. SENIOR DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE LD. FIRST APPELLATE AUTHORITY HA D FAILED TO APPRECIATE THE FACT THAT INTEREST WAS ALSO BEING PA ID ON PARTNERS CAPITAL WHICH WAS BEING CLAIMED AS A DEDUCTION. IT WAS SUBMITTED ITA 1983 & 1984/AHD/2017 AY: 2013-14 5 THAT IT WAS A WRONG OBSERVATION ON THE PART OF THE LD. FIRST APPELLATE AUTHORITY THAT PARTNERS CAPITAL IS NOT B ORROWED CAPITAL. IT WAS SUBMITTED BY THE LD. SENIOR DEPARTMENTAL REP RESENTATIVE THAT PROVISIONS OF SECTION 36 (III) OF THE ACT WOUL D ALSO APPLY TO INTEREST ON CAPITAL. THE LD. SENIOR DEPARTMENTAL RE PRESENTATIVE FURTHER HIGHLIGHTED THE OBSERVATION OF THE ASSESSIN G OFFICER THAT IT COULD NOT BE DEMONSTRATED BY THE ASSESSEE THAT THE TRANSACTION WITH DTTIPL WAS IN THE NATURE OF A BUSINESS TRANSAC TION. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WOULD NOT ESTABLIS H THE COMMERCIAL EXPEDIENCY IN GIVING INTEREST FREE LOANS TO ITS ASSOCIATED CONCERN. 3.1 WITH RESPECT TO THE SECOND ISSUE IN DISPUTE BE FORE US WHICH IS REGARDING THE DELETION OF DISALLOWANCE OUT OF SUBSCRIPTION EXPENSES, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE COULD NO T GIVE ANY SPECIFIC DETAILS REGARDING THE SERVICES RECEIVED FR OM THE PARTIES TO WHOM THE SUBSCRIPTION FEE HAD BEEN PAID. IT WAS SUB MITTED THAT IN ABSENCE OF CLEAR DESCRIPTION OF THE SERVICES REC EIVED, THE ASSESSING OFFICER HAD NO OPTION BUT TO MAKE A DISAL LOWANCE. IT WAS SUBMITTED THAT IT COULD NOT BE ESTABLISHED THAT THESE EXPENSES HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY F OR THE ITA 1983 & 1984/AHD/2017 AY: 2013-14 6 PURPOSES OF BUSINESS. IT WAS SUBMITTED THAT 25% DIS ALLOWANCE OUT OF SUBSCRIPTION EXPENSES IN BOTH THE ASSESSMENT YEARS WAS A REASONABLE DISALLOWANCE GIVEN THE FACTS AND CIRCUMS TANCES OF THE CASE. 3.2 WITH RESPECT TO THE THIRD ISSUE IN DISPUTE IN ASSESSMENT YEAR 2013 14 BEING DISALLOWANCE OF INT EREST ON SERVICE TAX, THE LD. SENIOR DEPARTMENTAL REPRESENTA TIVE PLACED RELIANCE ON THE FINDINGS AND OBSERVATIONS OF THE AS SESSING OFFICER. 3.3 THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT IN ASSESSMENT YEAR 2014 15 TWO ISSUES WERE I DENTICAL TO THE TWO ISSUES IN ASSESSMENT YEAR 2013 14 VIZ. DI SALLOWANCE OUT OF INTEREST EXPENDITURE AND DISALLOWANCE OUT OF SUBSCRIPTION AND FOR THE SAKE OF BREVITY THE ARGUMENTS WERE NOT BEING REPEATED. 3.4 IT WAS FURTHER SUBMITTED THAT IN ASSESSMENT YE AR 2014 15 ANOTHER ISSUE BEING CHALLENGED BY THE DEPARTME NT WAS THE DELETION OF DISALLOWANCE OF RS. 1,28,27,816/- BEING PAYMENT MADE TO THE RETIRED PARTNERS AND DEDUCTED OUT OF TH E PROFESSIONAL FEES. IT WAS SUBMITTED THAT THE FACTS LEADING TO TH E DISALLOWANCE OF THIS AMOUNT WAS THAT DURING THE YEAR UNDER CONSI DERATION THE ASSESSEE HAD MADE THE PAYMENT OF RS. 1,28,27,186/- TO RETIRED ITA 1983 & 1984/AHD/2017 AY: 2013-14 7 PARTNERS. IT WAS SUBMITTED THAT THIS PAYMENT WAS IN THE NATURE OF CAPITAL OUTGO AND THE PAYMENTS TO THE RETIRED PARTN ER ARE TO BE MADE ONLY OUT OF THE CAPITAL BALANCE OF THE PARTNER S. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE FIRM HAD DEDUCT ED THE PAYMENT FROM THE CURRENT INCOME OF THE PARTNERSHIP FIRM WHICH WAS NOT PERMISSIBLE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THIS PAYMENT AS DEDUCTION BECAUSE NO PAYMENTS TO THE PARTNERS CAN BE MADE WHICH ARE OVER AND ABOVE THE REMUNERATION AND INTEREST AS PRESCRIBED IN THE PARTNERSHIP DEED. 4.0 IN RESPONSE, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT AS FAR AS THE ISSUE OF DISALLOWANCE OF INTEREST WAS CONCERNED, IT WAS PERTINENT TO NOTE THAT THAT BOTH THE PARTIES WERE PAYING INCOME TAX AT THE SAME RATE AND, THUS, THERE WAS NO LOSS OF REVENUE TO THE EXCHEQUER. IT WAS FURTHER SU BMITTED THAT THE ADVANCE PAID BY THE ASSESSEE HAS BEEN ADJUSTED AGAINST THE SERVICES RECEIVED SUBSEQUENTLY AS WAS EVIDENT FROM THE OBSERVATIONS AND FINDINGS OF THE LD. FIRST APPELLAT E AUTHORITY IN THIS REGARD. IT WAS FURTHER SUBMITTED THAT IT IS NO T THE DEPARTMENTS CASE THAT THE FUNDS HAVE BEEN DIVERTED FOR ANY PERSONAL BENEFIT OF THE DIRECTORS. THE LD. AUTHORIS ED ITA 1983 & 1984/AHD/2017 AY: 2013-14 8 REPRESENTATIVE PLACED RELIANCE ON THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF SA BUILDERS REPORTED IN 2 88 ITR 1 (SC) AS WELL AS ON ANOTHER JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF HERO CYCLES FOR THE PROPOSITION THAT BUSINE SS EXPEDIENCY HAS TO BE JUDGED FROM THE VIEW POINT OF THE BUSINES SMAN. IT WAS FURTHER EMPHASISED THAT NO SIMILAR DISALLOWANCE HAD BEEN MADE IN EARLIER ASSESSMENT YEARS. IT WAS SUBMITTED THAT THE LD. FIRST APPELLATE AUTHORITY HAD RIGHTLY DELETED THE DISALLO WANCE IN BOTH THE ASSESSMENT YEARS. 4.1 WITH RESPECT TO THE SECOND ISSUE IN DISPUTE, I .E. THE DISALLOWANCE PERTAINING TO SUBSCRIPTION PAYMENTS, I T WAS SUBMITTED BY THE LD. AUTHORISED REPRESENTATIVE THAT EVIDENTLY THIS DISALLOWANCE WAS IN THE NATURE OF AN AD HOC DISALLOWANCE. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE IT AT BENCHES OF KOLKATA AND DELHI HAVE DELETED SIMILAR DISALLOWANCE S IN ASSESSEES GROUP CONCERNS. IT WAS FURTHER SUBMITTED THAT IN ASSESSMENT YEAR 2010 11 ALSO A SIMILAR DISALLOWAN CE HAD BEEN MADE WHICH HAD BEEN DELETED BY THE LD. FIRST APPELL ATE AUTHORITY AND THE DEPARTMENT HAD NOT PREFERRED FURTHER APPEAL AGAINST THIS DELETION BY THE LD. CIT (APPEALS) AND, THUS, IT WAS APPARENT THAT THE DEPARTMENT HAD ACCEPTED THIS POSITION. ITA 1983 & 1984/AHD/2017 AY: 2013-14 9 4.2 WITH RESPECT TO THE ISSUE REGARDING INTEREST O N DELAYED PAYMENT OF SERVICE TAX IT WAS ADMITTED THAT THE NAT URE OF INTEREST WAS COMPENSATORY IN NATURE AND IN THIS REGARD RELIA NCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF KAYPEE MECHANICAL INDIA (P) LTD REPORTED IN (2104) 45 TAXMANN.COM 363. 4.3 WITH RESPECT TO THE REVENUES CHALLENGE REGARD ING THE PAYMENT MADE TO THE RETIRED PARTNERS, IT WAS SUBMIT TED THAT THE CONFIRMATIONS OF THE RETIRED PARTNERS ARE ON RECORD STATING THAT THEY HAVE OFFERED THIS INCOME TO TAX IN THEIR RESPE CTIVE RETURNS. RELIANCE WAS ALSO PLACED ON THE ORDER OF ITAT MUMBA I BENCH IN THE CASE OF C.C. CHOKSHI & CO. WHEREIN AN IDENTICAL PAYMENT MADE TO THE RETIRED PARTNERS WAS HELD TO BE ALLOWAB LE. IT WAS SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT HAD DI SMISSED THE DEPARTMENTS APPEAL IN THIS CASE AND, THEREFORE , THE SAME WAS A BINDING PRECEDENT. RELIANCE WAS ALSO PLACED O N ANOTHER JUDGEMENT OF THE CHENNAI BENCH PERTAINING TO A RELA TED CONCERN OF THE ASSESSEE WHERE AN IDENTICAL DISALLOWANCE WAS HELD TO BE ALLOWABLE. RELIANCE WAS ALSO PLACED ON ANOTHER ORDE R OF THE ITAT MUMBAI BENCH IN THE CASE OF MULLA & MULLA & CRAIGIE WHEREIN AN IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESS EE. ITA 1983 & 1984/AHD/2017 AY: 2013-14 10 4.4 THE LD. AUTHORISED REPRESENTATIVE PLEADED THAT THE LD. FIRST APPELLATE AUTHORITY HAD RIGHTLY DELETED ALL T HE DISALLOWANCES AND THE DEPARTMENTS APPEALS DESERVED TO BE DISMISS ED. 5.0 WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. WE NOW TAKE UP THE ISSUES ONE BY ONE FOR ADJUDICATION. 5.1 THE FIRST ISSUE FOR OUR CONSIDERATION, WHICH I S COMMON IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION, I S THE DISPUTE REGARDING PROPORTIONATE DISALLOWANCE OF INTEREST ON ADVANCES TO ASSESSEES RELATED CONCERN DTTIPL. THE ASSESSING OF FICER HAD DISALLOWED THE INTEREST MAINLY ON THE GROUND THAT T HE ASSESSEE FIRM HAD USED INTEREST-BEARING FUNDS FOR THE PURPOS E OF PROVIDING INTEREST FREE ADVANCES. THE AO HAS ALSO OBSERVED TH AT THE ASSESSEE HAS NOT PROVIDED EVIDENCES WHICH COULD PRO VE THAT THE TRANSACTION WITH DTTIPL WERE IN THE NATURE OF A BUS INESS TRANSACTION AND FURTHER THE COMMERCIAL EXPEDIENCY W AS ALSO NOT ESTABLISHED WITH RESPECT TO INTEREST FREE ADVANCES. THE LD. CIT (APPEALS), WHILE DELETING THE DISALLOWANCE HAS NOTE D THAT THE ASSESSEE FIRM AND DTTIPL ARE MEMBERS OF GLOBAL NETW ORK OF PROFESSIONAL FIRMS CARRYING ON SIMILAR PROFESSION A ND THAT THE OBJECTIVE OF THE GLOBAL NETWORK WAS TO ENSURE COOPE RATION ITA 1983 & 1984/AHD/2017 AY: 2013-14 11 AMONGST MEMBERS AND THEREBY ENHANCE THEIR RESPECTIV E CAPABILITY TO CARRY ON PROFESSIONAL PRACTICE. IT HA S BEEN NOTED BY THE LD. FIRST APPELLATE AUTHORITY THAT THE ASSESSEE HAS DEMONSTRATED THAT SUBSEQUENTLY DTTIPL HAS RAISED DE BIT NOTES ON THE ASSESSEE FOR SERVICES RENDERED AND, THUS, IT HAS BEEN AMPLY DEMONSTRATED THAT DTTIPL AND HAS PROVIDED SER VICES OF ITS RESOURCES AGAINST WHICH THE ADVANCES MADE BY THE AS SESSEE WERE ADJUSTED. IT HAS ALSO BEEN OBSERVED BY THE LD. FIRS T APPELLATE AUTHORITY THAT THERE WAS COMMERCIAL EXPEDIENCY IN G IVING ADVANCE TO DTTIPL AS BOTH THE ASSESSEE FIRM AND DTT IPL WERE IN THE SAME LINE OF PROFESSION. THE LD. FIRST APPELLAT E AUTHORITY HAS REACHED A CONCLUSION THAT THERE WAS A BUSINESS RELA TIONSHIP BETWEEN THE ASSESSEE AND DTTIPL AND, THEREFORE, THE ADVANCES GIVEN BY THE ASSESSEE FIRM COULD NOT BE SAID TO BE NOT HAVING ANY LINK WITH THE ASSESSEE BUSINESS AND, THEREFORE, PRO PORTIONATE DISALLOWANCE OF INTEREST WAS NOT WARRANTED. FURTHER THE LD. FIRST APPELLATE AUTHORITY HAS ALSO NOTED THAT IT CANNOT B E SAID THAT THE ASSESSEE DOES NOT HAVE A CONTINUOUS BUSINESS RELATI ONSHIP WITH DTTIPL. THE LD. CIT (APPEALS), WHILE DELETING THE D ISALLOWANCE, HAS ALSO PLACED RELIANCE ON THE RATIO OF JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF SA BUILDERS (SUPRA) WHERE IN THE ITA 1983 & 1984/AHD/2017 AY: 2013-14 12 HONBLE APEX COURT HAD HELD THAT THE EXPRESSION CO MMERCIAL EXPEDIENCY IS AN EXPRESSION OF WIDE IMPORT AND INC LUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. IN THIS CASE, THE HONBLE APEX COURT WENT ON TO HOLD THAT ONCE IT IS ESTABLISHED THAT THERE IS NEXUS BET WEEN THE EXPENDITURE AND THE PURPOSE OF BUSINESS, THE REVENU E CANNOT ASSUME THE ROLE TO DECIDE AS TO HOW MUCH IS REASONA BLE EXPENDITURE. APART FROM THIS, THE LD. FIRST APPELLA TE AUTHORITY HAS ALSO NOTED THAT THE ASSESSEE FIRM HAD ITS OWN FUNDS WHICH WERE MORE THAN THE AMOUNT OF ADVANCES GIVEN TO DTTIPL AN D, THEREFORE, THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO MAKE DISALLOWANCE ON ACCOUNT OF INTEREST. WHILE DELETING THE DISALLOWANCE, IT HAS ALSO BEEN NOTED BY THE LD. FIR ST APPELLATE AUTHORITY THAT BOTH THE CONCERNS PAY TAX AT THE SAM E RATES AND, THEREFORE, THERE WAS NO LOSS OF REVENUE. WE ARE IN FULL AGREEMENT WITH THESE OBSERVATIONS AND FINDINGS OF THE LD. FIR ST APPELLATE AUTHORITY IN THIS REGARD. IN THE PROCEEDINGS BEFORE US, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT IF THERE WAS ANY PERVERSITY IN THESE FACTUAL FINDINGS RECORD ED BY THE LD. FIRST APPELLATE AUTHORITY. THEREFORE, IN OUR CONSID ERED OPINION, THE DISALLOWANCE WITH RESPECT TO INTEREST IN BOTH THE Y EARS UNDER ITA 1983 & 1984/AHD/2017 AY: 2013-14 13 CONSIDERATION HAS BEEN RIGHTLY DELETED BY THE LD. F IRST APPELLATE AUTHORITY AND WE FIND NO REASON TO INTERFERE ON THI S ISSUE. ACCORDINGLY, WE DISMISS THE GROUNDS RELATING TO DIS ALLOWANCE OF INTEREST IN BOTH THE YEARS UNDER APPEAL. 5.2 COMING TO THE SECOND ISSUE IN DISPUTE BEFORE U S I.E. DELETION OF THE DISALLOWANCE OF 25% OF THE TOTAL SU BSCRIPTION EXPENSES, IT IS SEEN THAT THE REASON FOR THE ASSESS ING OFFICER FOR MAKING THE DISALLOWANCE WAS THAT THE SAME WERE, IN HIS OPINION, EXCESSIVE AND NOT WHOLLY AND EXCLUSIVELY INCURRED F OR THE PURPOSE OF THE PROFESSIONAL ACTIVITIES OF THE ASSESSEE. THE ASSESSING OFFICER HAS NOTED THAT SPECIFIC DETAILS REGARDING THE SERVI CES RECEIVED WERE NOT AVAILABLE. HOWEVER, THE LD. FIRST APPELLAT E AUTHORITY, WHILE DELETING THE DISALLOWANCE, HAS NOTED THAT THE ASSESSEE FIRM CONTRIBUTES BY WAY OF SUBSCRIPTION FEES TO DELOITTE GLOBAL SERVICES HOLDING LTD AND DELOITTE SHARED SERVICES I NDIA (PVT.) LTD WHICH IS A GLOBAL NETWORK OF INTERNATIONAL ASSOCIAT ION OF FIRMS AND COMPANIES RENDERING PROFESSIONAL SERVICES. THE LD. CIT (APPEALS) HAD ACCEPTED THE ASSESSEES CONTENTION TH AT THE ASSESSEES FIRM BEING A MEMBER OF THIS GLOBAL NETWO RK AND HAVING DELOITTE IN ITS NAME BRINGS IN PROFESSIONAL WORK IN THE FORM OF REFERENCE BY OTHER MEMBER FIRMS. THE LD. CIT (APPEA LS) HAS ALSO ITA 1983 & 1984/AHD/2017 AY: 2013-14 14 NOTED THAT A SIMILAR DISALLOWANCE HAD BEEN MADE IN ASSESSMENT YEAR 2010 11 WHICH HAD BEEN DELETED BY THE LD. FI RST APPELLATE AUTHORITY. WE ALSO NOTE THAT THE DEPARTMENT DID NOT FILE ANY FURTHER APPEAL AGAINST THIS DELETION MADE BY THE LD . CIT (APPEALS) IN ASSESSMENT YEAR 2010 11. WE ALSO NOTE THAT AN IDENTICAL ISSUE HAD COME UP BEFORE ITAT DELHI BENCH IN ASSESS MENT YEAR 2009 10 AND VIDE ORDER DATED 23/10/2018 IN THE CA SE OF ASSESSEES RELATED CONCERN, ITAT DELHI BENCH, IN TH E CASE OF DELOITTE HASKIN & SELLS VS. ACIT IN ITA NO. 2927/DE L/2013 HAD DELETED AN IDENTICAL DISALLOWANCE AFTER DULY CONSID ERING SIMILAR FAVOURABLE DECISION OF KOLKATA BENCH IN ASSESSEES RELATED CONCERN IN THE CASE OF DELOITTE HASKINS & SELLS IN ITA NOS. 587 & 588/KOL/2016 FOR AY 2010-11 AND 2011-12 VIDE ORDER DATED 11/07/2018. ALTHOUGH THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE HAS ARGUED VEHEMENTLY AGAINST THE DE LETION OF THE SAID DISALLOWANCE BY THE LD. CIT (APPEALS), HE COUL D NOT BRING TO OUR NOTICE ANY CONTRARY JUDGEMENT IN THIS REGARD. W E ALSO NOTE THAT THE DISALLOWANCE IN THIS RESPECT IS AN AD HOC DISALLOWANCE AND, THEREFORE, ON IDENTICAL FACTS AND RESPECTFULLY FOLLOWING THE ORDERS OF THE CO-ORDINATE BENCHES AS AFORESAID, WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF THE LD. CIT (A PPEALS) ON THIS ITA 1983 & 1984/AHD/2017 AY: 2013-14 15 ISSUE ALSO. ACCORDINGLY, WE DISMISS THE GROUNDS RAI SED BY THE REVENUE ON THIS ISSUE UNDER BOTH THE YEARS UNDER CO NSIDERATION. 5.3 THE NEXT ISSUE FOR ADJUDICATION IN ASSESSMENT YEAR 2013 14 PERTAINS TO INTEREST ON DELAYED PAYMENT O F SERVICE TAX. IN THIS REGARD IT IS SEEN THAT THE LD. FIRST APPELL ATE AUTHORITY, WHILE DELETING THE DISALLOWANCE, HAS PLACED RELIANC E ON CERTAIN JUDICIAL PRECEDENTS VIZ. THE HONBLE APEX COURT IN THE CASE OF MAHA LAKSHMI SUGAR MILLS COMPANY VERSUS CIT REPORTE D IN 123 ITR 429, PRAKASH COTTON MILLS VERSUS CIT REPORTED I N 201 ITR 684 AND HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VERSUS KAYPEE MECHANICAL INDIA (PRIVATE) LIMITED REPORTED IN (2014) 45 TAXMAN.COM 363. THE LD. CIT (APPEALS) HAS RELIED ON THE AFORESAID JUDGEMENTS TO REACH THE CONCLUSION THAT T HE EXPENDITURE ON ACCOUNT OF INTEREST ON SERVICE TAX H AS THE SAME CHARACTER AS SERVICE TAX. THE LD. CIT (APPEALS) HAS NOTED THAT THAT THE ASSESSEES CLAIM IS COVERED BY THE AFORESA ID JUDICIAL PRECEDENTS AND WE ARE IN COMPLETE AGREEMENT WITH TH E OBSERVATIONS AND FINDINGS OF THE LD. FIRST APPELLAT E AUTHORITY IN THIS REGARD. THE LD. SENIOR DEPARTMENTAL REPRESENTA TIVE HAS ALSO NOT BROUGHT ANY JUDGEMENT TO THE CONTRARY IN THIS R EGARD. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE ITA 1983 & 1984/AHD/2017 AY: 2013-14 16 LD. FIRST APPELLATE AUTHORITY ON THIS ISSUE WHO HAS FOLLOWED THE SETTLED JUDICIAL PRECEDENTS AS STATED ABOVE. WE, AC CORDINGLY, DISMISS THE GROUND RAISED BY THE DEPARTMENT. 5.4 THE ONLY ISSUE REMAINING FOR ADJUDICATION NOW IS THE DISPUTE REGARDING PAYMENT MADE TO THE RETIRED PARTN ERS AND THIS ISSUE IS IN DISPUTE BEFORE US IN ASSESSMENT YEAR 20 14 15. THE LD. AUTHORISED REPRESENTATIVE HAS PLACED RELIANCE O N A NUMBER OF JUDICIAL PRECEDENTS ON THE ISSUE WHEREIN IT HAS BEE N HELD THAT PAYMENTS MADE TO RETIRED PARTNERS ARE AN ALLOWABLE EXPENDITURE. WE FIND THAT AN IDENTICAL ISSUE HAD COME UP BEFORE ITAT CHENNAI BENCH IN THE CASE OF A RELATED CONCERN OF THE ASSES SEE IN ASSESSMENT YEAR 2011 12 AND THE ITAT CHENNAI BENC H IN ITA NO. 2077/MDS/2016, VIDE ORDER DATED 25/11/2018, AFT ER RELYING ON AN ORDER OF ITAT MUMBAI BENCH IN THE CASE OF CC CHOKSHI & CO. FOR ASSESSMENT YEARS 2000 01 AND 2001 02 HA D HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE HONBLE HIGH C OURT OF BOMBAY IN THE CASE OF DCIT VERSUS WADIA GHANDY & CO MPANY, VIDE JUDGEMENT DATED 12/02/2019, ALSO UPHELD AN IDE NTICAL ORDER OF ITAT MUMBAI AND NOTED THAT PAYMENT TO THE PARTNER WOULD AMOUNT TO DIVERSION OF INCOME AT SOURCE BY OV ERRIDING TITLE. THE COURT WENT ON TO OBSERVE THAT IT WAS NOT NECESS ARY TO REFER TO ITA 1983 & 1984/AHD/2017 AY: 2013-14 17 LONG LINE OF DECISIONS WHERE A SIMILAR VIEW IN SIMI LAR CIRCUMSTANCES HAD BEEN TAKEN. THE UNDISPUTED FACTS ARE THAT THE PARTNERSHIP FIRM ENVISAGED PAYMENT TO A OUTGOING PA RTNER ON THE BASIS THAT THE PARTNER WOULD HAVE RENDERED SERVICE DURING HIS TENURE AS A PARTNER OF THE FIRM BUT COULD NOT ENJOY THE FRUITS THEREOF ON ACCOUNT OF THE FACT THAT THE WORK HAVING REMAINED INCOMPLETE, THE CONCERNED CLIENT HAD NOT BEEN BILLE D FOR THE WORK ALREADY DONE. THE HONBLE BOMBAY HIGH COURT HELD TH AT IN SIMILAR CIRCUMSTANCES, THE COURTS HAVE HELD THAT PA YMENT TO THE PARTNER WOULD AMOUNT TO DIVERSION OF INCOME AT SOUR CE BY OVERRIDING TITLE. THE LD. SENIOR DEPARTMENTAL REPRE SENTATIVE COULD NOT POINT OUT ANY JUDGEMENT TO THE CONTRARY ON THIS ISSUE AS WELL AND, THEREFORE, IN VIEW OF THE RATIO OF THE DECISIO NS AS AFORESAID AND AS RELIED UPON BY THE LD. AUTHORISED REPRESENTA TIVE, ON IDENTICAL FACTS, WE FIND NO HESITATION IN AGREEING WITH THE FINDINGS RECORDED BY THE LD. FIRST APPELLATE AUTHORITY. ACCO RDINGLY, THE GROUND RAISED BY THE DEPARTMENT DOES NOT SUCCEED 6.0 IN THE FINAL RESULT BOTH THE APPEALS FILED BY THE DEPARTMENT STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.10.2019 SD/- SD/- (AMARJIT SINGH) (SUDHANSHU SRIVAST AVA) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER ITA 1983 & 1984/AHD/2017 AY: 2013-14 18 DATED: 01 ST OCTOBER, 2019 *DRAGON* *DRAGON* *DRAGON* *DRAGON* COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER ASSTT. REGISTRAR ITAT, NEW DELHI