Deputy Commissioner of Income-tax, V. ThyssenKrupp Electrical Steel India Pvt. ltd., Nashik

ITA 2005/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9619 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: F V IRANI
• Keywords: Transfer pricing; International transaction; Revenue expenditure
• Section: 143(3); 37(1); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.2005/PUN/2014 [ [ / ASSESSMENT YEAR : 2005-06 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK . / APPELLANT VS. THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD., GONDE VILLAGE, WADIVARHE, TALUKA IGATPURI, DIST NASHIK 422403 . / RESPONDENT PAN:AAACE7791B / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : SHRI F.V. IRANI / DATE OF HEARING : 07.03.2017 / DATE OF PRONOUNCEMENT: 06.04.2017 / ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-I, NASHIK, DATED 12.09.2014 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1 . WHETHER I N THE FACTS AND IN T HE C I RCUMSTANCES OF THE CASE T HE LD . CIT(A)-I, NASHIK WAS JUSTIF I ED I N DELET I NG THE ADJUSTMENT OF RS.4,37,30,383/- MADE BY THE TRANSFER P RI CING OFFICER(TPO) TO THE INTERNATIONAL TRANSACTIONS RE L ATING TO EXPORT SA L ES AND RE CE IPT OF SALES COMMISSION? ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 2 2. WH ETHE R I N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) - I, NASHIK WAS JUSTIFIED AND CORRECT IN HOLD I NG THAT EXCESS PAYMEN T S MADE ON ACCOUNT O F FOREIGN EXCHANGE FLUCTUATION AS REVENUE IN NATURE AND DELETING THE ADDITION OF RS.1,27,31,000/- MADE ON ACCOUNT OF TREATING SUCH PAYMENT AS CAPITAL IN NATURE? 3 . WHETHER I N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED AND CORRECT IN HOLDING THAT THE LEASE RENTAL EXPENSES WERE REVENUE IN NATURE AND DELETING THE ADDITION OF RS.30,21,129/- MADE ON ACCOUNT OF TREATING SUCH EXPENSES AS CAPITAL I N NATURE? 4. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 5. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANT I ATE H I S CASE . 3. THE FIRST ISSUE RAISED BY THE REVENUE VIDE GROUND OF APPEAL NO.1 IS AGAINST DELETION OF TRANSFER PRICING ADJUSTMENT OF RS.4,37,30,383/-. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.43,68,70,518/-. SINCE THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES, THE ASSESSING OFFICER HAD MADE REFERENCE FOR DETERMINATION OF ARM'S LENGTH PRICE WITH REFERENCE TO THE TRANSACTIONS REPORTED BY THE ASSESSEE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PRODUCING THE ENTIRE RANGE OF NON AGEING, ENERGY CONSERVING POWER CORE ELECTRICAL STEEL PRODUCTS NAMELY COLD ROLLED NON GRAIN ORIENTED (CRNGO) IN FULLY AND SEMI PROCESSED VARIETIES. THE ASSESSEE ALSO PRODUCED SPECIAL QUALITY CARBON STEEL PRODUCTS OF AUTOMOTIVE, WHITE GOODS AND ENGINEERING APPLICATIONS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS:- SR. NO. DESCRIPTION OF TRANSACTION AMOUNT (RS.) METHOD ADOPTED 1 PURCHASE OF VARIOUS GOODS OF HOT ROLLED COILS MS & NGO 1,93,03,22,350/- COST PLUS 2 EXPORT SALE OF COLD ROLLED ELECTRICAL STEEL IN COILS. 12,95,67,447/- COST PLUS 3 COMMISSION ON SALES 1,66,36,970/- CUP 4 INTEREST ON ECB 5,93,58,193/- CUP 5 INTEREST ON DELAYED PAYMENT 1,60,90,164/- CUP 6 REIMBURSEMENT OF COMMON CORPORATE EXPENSES 75,21,800/- NA ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 3 5. THE TPO WAS OF THE VIEW THAT THE BENCHMARKING DONE BY THE ASSESSEE WAS NOT CORRECT AND CONSEQUENTLY, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE IN RESPECT OF TWO SEGMENTS I.E. EXPORT SALE OF ROLLED ELECTRICAL STEEL IN COILS AND RECEIPT OF SALES COMMISSION FROM ASSOCIATE ENTERPRISES. THE ASSESSEE HAD FOLLOWED CPM METHOD AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE TRANSACTION OF EXPORTS TO ASSOCIATE ENTERPRISES. THE TPO WAS OF THE VIEW THAT CUP METHOD IS TO BE APPLIED TO BENCHMARK THE INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE IN THE SEGMENT OF EXPORT TO ASSOCIATE ENTERPRISES. IN RESPECT OF RECEIPT OF COMMISSION FROM ASSOCIATE ENTERPRISES, THE ASSESSEE HAD FOLLOWED CUP METHOD, WHEREAS THE TPO APPLIED INTERNAL RATE OF RETURN IN ORDER TO BENCHMARK INTERNATIONAL TRANSACTION. THE SAID EXERCISE UNDERTAKEN BY THE TPO RESULTED IN AN ADDITION OF RS.4,37,30,383/-. 6. AGAINST THE ORDER OF ASSESSING OFFICER IN ENHANCING INCOME BY THE SAID ADDITION, THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY ACCEPTING THE CONSISTENCY APPROACH. THE CIT(A) NOTED THAT IN THE SUBSEQUENT YEARS I.E. ASSESSMENT YEARS 2006-07 TO 2010-11, THE TPO HAD NOT DISTURBED THE ARM'S LENGTH PRICE OF THE TRANSACTIONS REPORTED BY THE ASSESSEE, WHEREIN HE HAD APPLIED CUP METHOD FOR THE SEGMENT RECEIPT OF COMMISSION FROM ASSOCIATE ENTERPRISES. FURTHER, THE PUNE BENCH OF TRIBUNAL IN THE CASE OF HOGANAS INDIA PVT. LTD. VS. DCIT IN ITA NO.1463/PN/2010 ON SIMILAR ISSUE HAD DELETED THE TRANSFER PRICING ADDITION ON THE TRANSACTION OF RECEIPT OF COMMISSION. AS REGARDS THE EXPORT SALES, THE TPO HAD REJECTED THE CPM METHOD APPLIED BY THE ASSESSEE AND HAD APPLIED CUP METHOD BY CONSIDERING SALE OF SMALL QUANTITIES OF LEFT OVER STOCK WHICH WAS NOWHERE COMPARABLE TO VERY MUCH QUANTITIES SOLD BY THE ASSESSEE TO ITS ASSOCIATE ENTERPRISES IN FOREIGN CURRENCY. THE TRANSACTION CONSIDERED IN CUP METHOD BY THE TPO WAS NOT IN LINE WITH ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 4 PROVISIONS OF RULE 10B AND 10C OF THE INCOME TAX RULES, 1962, WAS THE FINDING OF THE CIT(A). HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER / TPO ON TP ADJUSTMENT ON ACCOUNT OF COMMISSION AND EXPORT SALES WAS DELETED. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ASSESSEE WAS ENGAGED IN THE EXPORT OF STEEL TO ITS ASSOCIATE ENTERPRISES IN ITALY, FOR WHICH THE TPO APPLIED THE CUP METHOD TO BENCHMARK THE ARM'S LENGTH PRICE OF SAID INTERNATIONAL TRANSACTIONS. IN RESPECT OF COMMISSION RECEIPTS FROM ASSOCIATE ENTERPRISES IN GERMANY FOR MARKETING OF PRODUCTS, THE TPO / ASSESSING OFFICER APPLIED INTERNAL RATE OF RETURN. HE PLACED RELIANCE ON THE ORDERS OF ASSESSING OFFICER / TPO. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE OTHER HAND, POINTED OUT THAT THE LIMITED ISSUE WHICH ARISES IN THE PRESENT APPEAL IS THE METHODOLOGY FOLLOWED BY THE ASSESSEE AND METHODOLOGY APPLIED BY THE TPO. HE POINTED OUT THAT WHERE THE ASSESSEE HAD APPLIED CPM METHOD, THE TPO APPLIED CUP METHOD I.E. IN THE INTERNATIONAL TRANSACTIONS OF EXPORTS TO ASSOCIATE ENTERPRISES. IN RESPECT OF COMMISSION RECEIPTS FROM ASSOCIATE ENTERPRISES, THE METHOD APPLIED BY THE ASSESSEE WAS CUP, WHERE THE TPO APPLIED INTERNAL RATE OF RETURN. HOWEVER, IN SUCCEEDING YEARS, THERE IS NO DISPUTE I.E. WHERE THE ASSESSEE HAD APPLIED CPM METHOD, THE TPO HAD ALSO APPLIED CPM METHOD. OUR ATTENTION WAS DRAWN TO THE ASSESSMENT ORDER PASSED BY THE TPO RELATING TO ASSESSMENT YEAR 2009-10 WHICH IS AT PAGES 240 AND 241 OF THE PAPER BOOK, WHEREIN THE INTERNATIONAL TRANSACTION OF EXPORT TO ASSOCIATE ENTERPRISES IS BENCHMARKED BY APPLYING CPM METHOD AND COMMISSION RECEIPTS FROM ASSOCIATE ENTERPRISES BY CUP METHOD. SIMILARLY, IN ASSESSMENT YEAR 2010-11, ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 5 THE TPO HAS ALSO PASSED THE ORDER WHICH IS PLACED AT PAGES 242 AND 243 OF THE PAPER BOOK AND SIMILAR TRANSACTION HAS BEEN SIMILARLY BENCHMARKED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRING TO THE ORDER OF TPO POINTED OUT THAT THERE WAS NO CHANGE IN FACTS AND ALSO IN THE NATURE OF CLASS OF INTERNATIONAL TRANSACTIONS WHICH REMAINS THE SAME; THE COMMISSION HAS BEEN RECEIVED FROM THE SAME PARTIES AS IN THE SUCCEEDING YEAR. HE FURTHER POINTED OUT THAT SINCE THERE IS NO CHANGE IN FACTUAL ASPECTS, THERE IS NO SANCTION IN THE INCOME TAX ACT OR THE RULES TO ENABLE THE TPO TO DEVIATE. HE FURTHER POINTED OUT THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE PUNE BENCH OF TRIBUNAL IN THE CASE OF HOGANAS INDIA PVT. LTD. VS. DCIT (SUPRA). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED BY WAY OF GROUND OF APPEAL NO.1 BY THE REVENUE IS AGAINST TRANSFER PRICING ADJUSTMENT MADE BY THE TPO. THE LIMITED ISSUE WHICH ARISES FOR ADJUDICATION IS THE METHODOLOGY TO BE ADOPTED WHILE BENCHMARKING THE INTERNATIONAL TRANSACTION OF THE ASSESSEE. THE ASSESSEE HAD ENTERED INTO TWO SEPARATE TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES; ONE WAS THE EXPORT OF MANUFACTURED STEEL ITEMS TO ASSOCIATE ENTERPRISES AND THE SECOND WAS RECEIPT OF COMMISSION FROM THE ASSOCIATE ENTERPRISES. THE ASSESSEE IN THE TP STUDY REPORT WHILE BENCHMARKING THE TRANSACTION OF EXPORT TO ASSOCIATE ENTERPRISES HAD APPLIED THE CPM METHOD FOR THE YEAR UNDER CONSIDERATION AND ALSO FOR ASSESSMENT YEARS 2008-09 TO 2010-11. THE TPO WAS OF THE VIEW THAT CUP METHOD WAS MOST APPROPRIATE METHOD TO BE APPLIED. HIS FINDING WAS ON THE BASIS OF SMALL SALES MADE BY THE ASSESSEE OF SIMILAR COMPONENTS. HOWEVER, THE TRANSACTION PICKED UP FOR COMPARISON WAS VERY NEGLIGIBLE AND HENCE, THE CIT(A) HELD THAT THERE IS NO MERIT IN APPLYING THE CUP METHOD. FURTHER, THE METHODOLOGY ADOPTED BY THE ASSESSEE IN APPLYING THE CPM METHOD HAD BEEN ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 6 ACCEPTED FROM ASSESSMENT YEARS 2008-09 TO 2010-11 BY THE TPO HIMSELF AND NO ADJUSTMENT HAS BEEN MADE IN THE HANDS OF ASSESSEE. THE ASSESSEE HAS FILED ON RECORD THE ASSESSMENT ORDERS RELATING TO ASSESSMENT YEARS 2009-10 AND 2010-11 WHICH CLEARLY REVEAL THE TRANSACTION OF EXPORT TO ASSOCIATE ENTERPRISES BEING ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE ORDER OF TPO IN APPLYING THE CUP METHOD TO BENCHMARK THE INTERNATIONAL TRANSACTION OF EXPORT TO ASSOCIATE ENTERPRISES IN THE HANDS OF ASSESSEE. UPHOLDING THE ORDER OF CIT(A), WE DISMISS THIS PART OF GROUND OF APPEAL NO.1 RAISED BY THE REVENUE. 11. NOW, COMING TO THE SECOND PART OF GROUND OF APPEAL NO.1 RAISED BY THE REVENUE AGAINST THE TRANSFER PRICING ADJUSTMENT MADE IN THE SECOND SEGMENT OF RECEIPT OF COMMISSION FROM THE ASSOCIATE ENTERPRISES. THE ASSESSEE IN THE TP REPORT HAD APPLIED THE CUP METHOD FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES. THE ASSESSEE HAD ALSO APPLIED CUP METHOD IN ALL THE YEARS STARTING FROM 2006-07 TO 2010-11. IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE HAS RECEIVED COMMISSION ON DIFFERENT ACCOUNTS IN DIFFERENT YEARS. THE ASSESSEE HAS BEEN CONSISTENTLY RECEIVING THE COMMISSION FROM ITS ASSOCIATE ENTERPRISES IN ALL THE YEARS. FOR THE YEAR UNDER CONSIDERATION, THE TPO HAD APPLIED INTERNAL RATE OF RETURN AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING INTERNATIONAL TRANSACTIONS. HOWEVER, IN THE SUCCEEDING YEARS STARTING FROM ASSESSMENT YEARS 2006-07 TO 2010-11, THE TPO HAD APPLIED CUP METHOD. THE ASSESSEE HAS REFERRED TO THE ASSESSMENT ORDERS RELATING TO ASSESSMENT YEARS 2009-10 AND 2010-11, WHERE SIMILAR TRANSACTION OF COMMISSION RECEIPTS FROM ASSOCIATE ENTERPRISES ARE REPORTED AS INTERNATIONAL TRANSACTION AND HAS BEEN BENCHMARKED BY APPLYING CUP METHOD ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 7 AND NO ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEE. IN VIEW THEREOF, WE FIND NO MERIT IN THE METHODOLOGY ADOPTED BY THE TPO IN REJECTING THE METHOD APPLIED BY THE ASSESSEE. ACCORDINGLY, UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE SECOND PART OF GROUND OF APPEAL NO.1 RAISED BY THE REVENUE. CONSEQUENTLY, GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS DISMISSED. 12. NOW, COMING TO THE ISSUE RAISED IN GROUND OF APPEAL NO.2 RAISED BY THE REVENUE, WHICH IS AGAINST DELETION OF RS.1,27,31,000/- BY TREATING FOREIGN FLUCTUATIONS AS CAPITAL IN NATURE. 13. BRIEFLY, THE FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED LOSS SUFFERED BY IT ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS AS ON THE DATE OF BALANCE SHEET, AS DEDUCTION UNDER SECTION 37(1) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID AMOUNT OF LOAN HAS BEEN UTILIZED AS CIRCULATING CAPITAL IN BUSINESS AND THE LOSS RECOGNIZED ON THE CLOSE OF THE YEAR BY FOLLOWING THE ACCOUNTING PRINCIPLES IS ALLOWABLE AS EXPENDITURE. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM AS CAPITAL. 14. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE AND HELD IT TO BE REVENUE IN NATURE AS SIMILAR CLAIM WAS ALLOWED IN EARLIER YEARS AS REVENUE EXPENDITURE. 15. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD. 16. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE STANDS COVERED BY THE ORDER OF HONBLE SUPREME COURT IN CIT VS. WOODWARD GOVERNOR INDIA (P.) LTD. (2009) 312 ITR 254 (SC). 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 8 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE HONBLE SUPREME COURT IN CIT VS. WOODWARD GOVERNOR INDIA (P.) LTD. (SUPRA) HAD HELD THAT THE LOSSES SUFFERED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE DIFFERENCE AS ON THE DATE OF BALANCE SHEET WAS AN ITEM OF EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT. IN THE FACTS BEFORE THE HONBLE SUPREME COURT, THE ENTERPRISE HAD REPORTED OUTSTANDING LIABILITY RELATING TO IMPORT OF RAW MATERIAL USING CLOSING RATE OF FOREIGN EXCHANGE AND THE DIFFERENCE I.E. LOSS OR GAIN, ARISING ON CONVERSION OF SAID LIABILITY AT CLOSING DATE WAS RECOGNIZED IN THE PROFIT & LOSS ACCOUNT AND THE HONBLE SUPREME COURT UPHELD THE SAME. THE ASSESSEE BEFORE US HAS ALSO BORROWED LOAN IN FOREIGN EXCHANGE AND ON THE CLOSE OF EACH OF THE YEAR WAS REPORTING THE OUTSTANDING LIABILITY FOLLOWING THE ACCOUNTING METHOD PRESCRIBED IN THIS REGARD. THE ASSESSEE CLAIMS THAT IN ASSESSMENT YEARS 2003-04 AND 2004-05, THE GAIN ARISING ON VALUATION OF FOREIGN EXCHANGE AT THE CLOSE OF THE YEAR WAS OFFERED TO TAX; THE ASSESSEE IN ASSESSMENT YEAR 2003-04 HAD OFFERED RS.6.58 CRORES AND IN ASSESSMENT YEAR 2004-05, HAD OFFERED RS.18.88 CRORES AS INCOME. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED LOSS ON THE SAID ACCOUNT OF FOREIGN EXCHANGE I.E. VALUATION OF LOAN OUTSTANDING AS ON DATE OF CLOSE OF THE YEAR BORROWED IN FOREIGN EXCHANGE, AT RS.1.27 CRORES. THE SAID LOSS IS TO BE ALLOWED AS DEDUCTION IN THE HANDS OF ASSESSEE, FOLLOWING THE SAME METHOD AS IN THE EARLIER YEAR WHEN GAIN ARISING AT THE CLOSE OF THE YEAR HAS BEEN ADDED AS INCOME OF THE ASSESSEE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD AND DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE. 19. NOW, COMING TO THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE WHICH IS AGAINST DELETION OF ADDITION OF RS.30,21,129/- WHICH WAS MADE ON ACCOUNT OF LEASE RENTAL EXPENSES. ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 9 20. IN THE FACTS RELATING TO THE ISSUE, THE ASSESSEE HAD CLAIMED LEASE PAYMENTS ON ACCOUNT OF LEASE OF VEHICLES. THE ASSESSEE CLAIMED THAT THE VEHICLES WERE FOR THE USE OF ASSESSEE FOR THE CONTRACTED PERIOD, WHEREIN THE NORMAL REPAIRS AND MAINTENANCE WAS TO THE ACCOUNT OF LESSOR. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH LESSOR IN THIS REGARD. THE ASSESSING OFFICER ON PERUSAL OF THE AGREEMENT HELD THE EXPENDITURE TO BE NON-ALLOWABLE ON THE PREMISE THAT THE LEASE WAS NON-CANCELABLE. 21. THE CIT(A) NOTED THAT NO DISALLOWANCE WAS MADE IN THE EARLIER AND SUBSEQUENT YEARS AND HE ALSO FOUND THAT THE PAYMENTS UNDER THE OPERATIONAL LEASE AGREEMENT WERE FOR THE USE OF VEHICLES ON MONTHLY BASIS, WHEREIN THE NORMAL REPAIRS AND MAINTENANCE WAS TO THE ACCOUNT OF LESSOR. THE AGREEMENT WAS FOR LIMITED PERIOD AND NOWHERE IT WAS MENTIONED THAT THE SAME WAS NON- CANCELABLE. IN VIEW THEREOF, EXPENDITURE CLAIMED BY THE ASSESSEE WAS ALLOWED AS DEDUCTION. 22. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 23. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF CIT(A) IN THIS REGARD. 24. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF TRIBUNAL WITH LEAD ORDER IN M/S. GODREJ CONSUMER PRODUCTS LTD. VS. THE ADDL. CIT IN ITA NO.4103/M/2010, RELATING TO ASSESSMENT YEAR 2006-07, ORDER DATED 20.11.2013. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE ASSESSEE HAS ENTERED INTO A CONTRACTUAL AGREEMENT FOR LEASE OF VEHICLES WHICH WERE USED BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS ITA NO.2005/PUN/2014 THYSSENKRUPP ELECTRICAL STEEL INDIA PVT. LTD. 10 AND WHERE THE LEASE WAS CANCELABLE AND WHERE THE NORMAL REPAIRS AND MAINTENANCE HAD TO BE UNDERTAKEN BY THE LESSOR, EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE IN NATURE AND HENCE, MERITS TO BE ALLOWED IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE HOLD SO. THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS THUS, DISMISSED. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 6 TH DAY OF APRIL, 2017. SD/- SD/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 6 TH APRIL, 2017 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. () / THE CIT(A)-I, NASHIK; 4. / THE CIT-I, NASHIK; 5. , , / DR A, ITAT, PUNE; 6. [ / GUARD FILE. / BY ORDER , // TRUE COPY // / ASSISTANT REGISTRAR, , / ITAT, PUNE