Deputy Commissioner of Income-tax, V. Associated Dairy Fab Pvt. Ltd., Jalgaon

ITA 211/PUN/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9336 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-01-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Capital asset; Depreciation; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 17 7 /P U N/20 14 / ASSESSMENT YEAR : 20 0 9 - 1 0 ASSOCIATED DAIRY FAB PVT. LTD., B - 5/1, MIDC AREA, AJANTHA ROAD, JALGAON 425003 . / APPELLANT PAN: AAECA3963F VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE 2, JALGAON . / RESPONDENT . / ITA NO. 211 /P U N/20 14 / ASSESSMENT YEAR : 20 0 9 - 1 0 THE JT. COMMISSIONER OF INCOME TAX, RANGE 2, JALGAON . / APPELLANT VS. ASSOCIATED DAIRY FAB PVT. LTD., B - 5/1, MIDC AREA, AJANTHA ROAD, JALGAON 425003 . / RESPONDENT PAN: AAECA3963F ASSESSEE BY : S HRI NIKHIL PATHAK REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 1 8 . 0 1 .201 8 / DATE OF PRONOUNCEMENT: 09 . 0 2 .201 8 2 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 / ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE ARE AGAINST ORDER OF CIT(A) - 2 , NASHIK , DATED 2 5 . 11 .20 13 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 AGAINST ORDER PASSED UNDER SECTION 143(3) (II) OF INCOME TAX ACT 1961 (IN SHORT THE ACT). 2 . THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 177 /PUN/20 14 HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PROFESSIONAL FEES PAID IN RELATION TO FACTORY REPAIRS WERE CAPITAL EXPENSES AND HENCE, THE SAME COULD NOT BE ALLOWED AS A REVENUE EXPENDITURE. 1.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED ON FACTORY REPAIRS WAS A REVENUE EXPENDITURE AND HENCE, THE PROFESSIONAL FEE PAID BY THE APPELLANT IN RELATION TO THE FACTORY REPAIRS WAS ALSO A REVENUE EXPENDITURE. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE EXPENDITURE INCURRED OF RS.22,02,002/ - ON FACTORY REPAIRS WAS A CAPITAL EXPENDITURE AND HENCE, COULD NOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE INCOME OF THE APPELLANT. 2.1] TH E LEARNED CIT(A) FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED ON FACTORY REPAIRS DID NOT RESULT IN ACQUISITION OF ANY NEW ASSET AND THE SAID EXPENDITURE OUGHT TO HAVE BEEN ALLOWED AS A REVENUE EXPENDITURE. 3] THE LEARNED CIT(A) ERRED IN CONFIRMING T HE DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE OF RS.4,18,225/ - ON THE GROUND THAT THE SAID EXPENDITURE WAS INCURRED FOR PERSONAL PURPOSES. 3.1] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE EXPENDITURE INCURRED ON FOREIGN TRAVEL TO HONGKONG AND TH AILAND WAS FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT AND ACCORDINGLY, THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND 3 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 THEREFORE, THE SAME SHOULD HAVE BEEN ALLOWED WHILE COMPUTING THE INCOME OF THE APPELLANT. 4] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE O F DEPRECIATION IN RESPECT OF THE VEHICLES ON THE GROUND THAT THE VEHICLES PURCHASED BY THE APPELLANT WERE REGISTERED IN THE NAME OF THE DIRECTORS AND HENCE, THE APPELLANT COMPANY WAS NOT ENTITLE D TO CLAIM THE DEPRECIATION. 4.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT EVEN THOUGH THE VEHICLES WERE REGISTERED IN THE NAME OF THE DIRECTORS, THE SAID VEHICLES WERE ACQUIRED FROM THE FUNDS OF THE APPELLANT COMPANY AND ALSO WERE USED FOR APPELLANT' S BUSINESS AND THUS, THE APPELLANT WAS THE BENEFICIAL OWNER OF THE SAID VEHICLES AND ACCORDINGLY, DEPRECIATION WAS ALLOWABLE THEREON. 5] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF REMUNERATION PAID TO THE DIRECTORS OF RS.22,88,741/ - . 5.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT COMPANY HAVE PAID COMMISSION TO THE DIRECTORS @ 7 % ON SALES AND THE COMMISSION PAID IN THIS YEAR WAS REASONABLE AND HENCE, THERE WAS NO REASON TO MAKE ANY DISALLOWANCE. 5.2] THE LEARNED CIT(A) ER RED IN HOLDING THAT THE COMMISSION PAID TO THE DIRECTORS ON SALES TO GROUP COMPANY WAS NOT ALLOWABLE WITHOUT APPRECIATING THAT THE TOTAL AMOUNT PAID DURING THE YEAR TO THE DIRECTORS WAS REASONABLE CONSIDERING THE VARIOUS SERVICES RENDERED BY THE DIRECTORS AND ACCORDINGLY, NO DISALLOWANCE WAS WARRANTED. 6] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.32,533/ - ON THE GROUND THAT THE INTEREST PAID @ 18 % ON THE LOANS TAKEN FROM THE DIRECTORS WAS EXCESSIVE. 6.1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INTEREST PAID @ 18 % TO THE DIRECTORS WAS EXCESSIVE WITHOUT APPRECIATING THAT RATE OF INTEREST WAS REASONABLE AND HENCE, NO DISALLOWANCE WAS WARRANTED. 7] THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.46,000/ - U/S 40A(3) WITHOUT APPRECIATING THAT THE DISALLOWANCE WAS NOT WARRANTED ON THE FACTS OF THE CASE. 4. THE REVENUE IN ITA NO. 211 /PUN/20 14 HAS FILED MODIFIED GROUNDS OF APPEAL , WHICH READ AS UNDER : - 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT - A E RRED IN DELETING THE AMOUNT OF RS.10,81,490/ - CLAIMED AS PROFESSIONAL CHARGES, WITHOUT APPRECIATING THE FACT THAT THE PROFESSIONAL CHARGES WERE PAID FOR THE WORK DONE FOR THE ANOTHER CONCERN, NAMELY, KHAMBETE KOTHARI CANS AND ALLIED PRODUCTS P LTD AND NOT FOR THE ASSESSEE. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT - A ERRED IN ALLOWING THE DEPRECIATION ON THE BUILDING OF THE CHINCHOLI PLANT AS THE BUILDING AND LAND ARE REGISTERED IN THE NAMES OF THE DIRECTORS AND THE ASSET HAS NOT BEEN PUT TO USE IN THE YEAR UNDER CONSIDERATION, 4 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 3. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT - A ERRED IN DELETING THE DISALLOWANCE OF RS.16,05,570/ - CLAIMED AS SERVICE AND COMMISSION CHARGES, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT FURNI SH ANY EVIDENCE FOR THE SERVICES RENDERED BY THREE PERSONS. 4. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT - A ERRED IN DELETING THE DISALLOWANCE OF RS.1,27,784/ - CLAIMED AS FOREIGN TRIP EXPENSES TOWARDS TOUR TO CHINA, AS THE ASSESSEE HAS NOT PRO VED ANY BUSINESS NEXUS IN THIS TRIP. 5. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT - A ERRED IN DELETING THE DISALLOWANCE U/S 40A(3) OF THE INCOME TAX ACT, 1961 OF RS.11,62,631/ - AS THE EXPENDITURE HAVE BEEN INCURRED IN EXCESS OF RS.20,000/ - IN A SINGLE DAY. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT - A ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF THE BENEFIT GIVEN TO SISTER CONCERN M/S KHAMBETE KOTHARI CANS AND ALLIED PRODUCTS, OF RS.54,90,657/ - . 7. THE APPELLANT CRA VES LEAVE TO ADD, ALTER, MODIFY, DELETE, AMEND ANY OF THE GROUNDS WITH THE PRIOR PERMISSION OF LD. PR. CIT - 2, AS PER THE CIRCUMSTANCES OF THE CASE. 8. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONAL EVIDENCE, WITH THE PERMISSION OF LD. PR.CIT, APPROPRIA TE TO THE GROUNDS TAKEN IN APPEAL. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT OUT OF GROUNDS OF APPEAL NO.1 TO 7 RAISED BY THE ASSESSEE, ONLY GROUNDS OF APPEAL NO.4 AND 5 ARE PRESSED. HENCE, GROUNDS OF APPEAL NO.1 TO 3 AND 6 AND 7 ARE DISMISSED AS NOT PRESSED. 6. THE ISSUE RAISED IN GROUND OF APPEAL NO.4 IS AGAINST THE CLAIM OF DEPRECIATION IN RESPECT OF VEHICLES WHICH WERE REGISTERED IN THE NAME OF DIRECTORS OF THE ASSESSEE COMPANY. THE CLAIM OF ASSESSEE WA S THAT THE VEHICLES WERE ACQUIRED FROM THE FUNDS OF ASSESSEE AND WERE ALSO USED FOR ASSESSEES BUSINESS AND THUS, THE ASSESSEE BEING BENEFICIAL OWNER OF SAID VEHICLES WAS ENTITLED TO CLAIM OF DEPRECIATION ON THE SAID VEHICLES, WAS DENIED TO THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED VIDE GROUND OF APPEAL NO.4 IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN MANRAJ MOTORS 5 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 PVT. LTD. VS. DCIT IN ITA NO.2002/PN/2013, RELATING TO ASSESSMENT YEAR 2010 - 11, ORDER DATED 30.04.2015. HE FURTHER POINTED OUT THAT THE CIT(A) HAD DENIED THE CLAIM ON THE BASIS OF DECISION OF MUMBAI BENCH OF TRIBUNAL IN EDWISE CONSULTANTS PVT. LTD. VS. ADDL.CIT , ORDER DATED 19.04.2013. HOWEVER, IN THE SUCCEEDING YEAR IN THE CASE OF EDWISE CONSULTANTS PVT. LTD. VS. DCIT (2017) 83 AXMANN.COM 27 (MUMBAI - TRIB), THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS A PRIVATE LIMITED COMPANY AND WAS ENGAGED IN THE BUSINESS OF TRADING OF STAINLESS CANS, ITEMS AND ITS ACCE SSORIES. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON VEHICLES I.E. CARS WHICH WERE REGISTERED IN THE NAME OF ITS DIRECTORS. THE ASSESSING OFFICER DENIED THE VEHICLES EXPENSES INCLUDING DEPRECIATION OF RS.4,66,533/ - . THE CIT(A) UPHELD THE DISALLOWANCE OF DEPRECIATION ON CARS SINCE THE CARS WERE REGISTERED IN THE NAME OF DIRECTORS. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF EDWISE CONSULTANTS PVT. LTD. VS. ADDL. CIT (SUPRA). HOWEVER, WE FIND THAT THE MUMBAI BENCH OF TRIBUNAL IN EDWISE CONSULTANTS PVT. LTD. VS. DCIT (SUPRA) HAS IN THE APPEALS RELATING TO ASSESSMENT YEARS 2008 - 09 TO 2010 - 11 HAD ALLOWED THE CLAIM OF ASSE SSEE SINCE THE VEHICLES WERE USED FOR THE PURPOSE OF BUSINESS OF ASSESSEE COMPANY. THE TRIBUNAL ALSO OBSERVED THAT FUNDS FOR PURCHASE OF VEHICLES WERE PROVIDED BY THE ASSESSEE AND WERE ALSO 6 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 SHOWN AS ASSETS OF THE COMPANY AND HENCE, THE ASSESSEE COMPANY WA S HELD TO BE THE OWNER OF SAID CARS . 9. WE FURTHER FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN MANRAJ MOTORS PVT. LTD. VS. DCIT (SUPRA) AND ON SIMILAR CLAIM OF DEPRECIATION ON VEHICLES WHICH WERE REGISTERED IN THE NAME OF ONE OF THE DIRECTORS, IT WAS HELD AS UNDER: - 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD CLAIMED DEPRECIATION ON VEHICLES WHICH WERE REGISTERED IN THE NAME OF ONE OF ITS DIRECTORS. THE COST OF THE SAID VEHICL ES WERE ADMITTEDLY BORNE BY THE ASSESSEE COMPANY OUT OF ITS OWN FUNDS AND THE SAID VEHICLES WERE REFLECTED AS ASSETS OF THE ASSESSEE COMPANY IN THE LIST OF FIXED ASSETS AS ON THE END OF THE YEAR. THE EXPENDITURE OF RUNNING AND REPAIRS OF THE SAID VEHICLES HAS BEEN BORNE BY THE ASSESSEE COMPANY. THE SAID VEHICLES WERE BEING USED BY THE ASSESSEE COMPANY FOR ITS BUSINESS, THE EXPLANATION OF THE ASSESSEE FOR REGISTERING THE SAME IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY WAS THAT THERE WAS SAVING IN T HE REGISTRATION COST. BUT MERELY BECAUSE THE VEHICLES WERE REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY DOES NOT ESTABLISH THE CASE OF THE REVENUE FOR NOT ALLOWING DEPRECIATION ON SUCH ASSETS. THE CONCEPT OF FINANCIAL OWNERSHIP HAS BEEN LAID DOWN BY THE HONBLE SUPREME COURT IN MYSORE MINERALS LTD. VS. CIT, (1999) 239 775 (SC) AND HENCE FOLLOWED IN SERIES OF DECISIONS ADMITTEDLY WHERE THE FUNDS OF THE ASSESSEE COMPANY HAVE BEEN UTILIZED FOR THE PURCHASE OF VEHICLES, EVEN THOUGH THE VEHICL ES ARE NOT REGISTERED IN THE NAME OF THE ASSESSEE COMPANY, DOES NOT ESTABLISH THE CASE OF THE REVENUE ESPECIALLY WHERE THE DOMAIN/CONTROL OF THE SAID ASSETS WAS WITH THE COMPANY ITSELF AND THE VEHICLES WERE BEING UTILIZED FOR THE PURPOSE OF CARRYING ON BUS INESS OF THE ASSESSEE COMPANY. WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION ON SUCH VEHICLES WHICH WERE OWNED BY IT AND WAS BEING USED FOR ITS BUSINESS THOUGH IT WAS REGISTERED IN THE NAME OF THE DIRECTORS. IN THIS REGARD, WE FIND SUP PORT FROM THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN ACIT VS. TALERA MOTORS PVT. LTD. IN ITA NO.1208/PN/2009 RELATING TO ASSESSMENT YEAR 2006 - 07 ORDER DATED 11.05.2011, WHEREIN RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY ANOTHER DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN ROHAN BUILDERS AND DEVELOPERS PVT. LTD. VS. ACIT IN ITA NO.942/PN/2006 RELATING TO ASSESSMENT YEAR 2004 - 05, ORDER DATED 29.08.2008 AND IT WAS HELD AS UNDER : - 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ROHAN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE DEPRECIATION WAS ALLOWABLE TO BE ASSESSEE IN RESPECT OF THE MOTOR CARS PURCHASED BY IT AND USED FOR THE PURPOSE OF ITS BUSINESS, THOUGH REGISTERED IN THE NAME OF THE MANAGING DIRECTOR. IN THE PRESENT CASE, THE ASSESSEE PURCHASED THE VEHICLES CALLED DEMO CARS IN THE NAME OF THE DIRECTORS THOUGH OWNERSHIP THEREOF DID NOT LIE WITH THE ASSESSEE. THE FACTS OF THE PRESENT CASE ARE IN PARI MATERIA WITH THOSE IN THE CASE OF ROHAN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA). SO, RESPECTFULLY FO LLOWING THE SAID DECISION OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN 7 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE. WE UPHOLD THE SAME. 10. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN ITO VS. SHREE PA NCHGANGA AGRO IMPEX PVT. LTD. (SUPRA). THE CIT(A) HAD DENIED THE CLAIM OF DEPRECIATION ON VEHICLES, IN TURN, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN EDWISE CONSULTANTS PVT. LTD. VS. ADDL.CIT (SUPRA). WE FIND NO MER IT IN THE SAID RELIANCE PLACED UPON BY THE CIT(A) ESPECIALLY IN CIRCUMSTANCES WHERE SIMILAR ISSUE OF ALLOWANCE OF DEPRECIATION ON VEHICLES WHICH WERE REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY AND CLAIM OF DEPRECIATION IN THE HANDS OF THE COMPANY ITSELF, THE MUMBAI BENCH OF THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE MUMBAI BENCH IN M/S ORBIT MARKETING PVT. LTD. VS. ITO (SUPRA) AND NAVJEEVAN SYNTHETICS PVT. LTD. VS. ACIT (SUPRA). IN VIEW OF THE ISSUE BEING SETTLED IN FAVOUR OF THE ASSESSEE BY SERIES OF DECISIONS OF PUNE BENCH OF THE TRIBUNAL AND MUMBAI BENCH OF THE TRIBUNAL, WE REVERSE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE ASSESSEES C LAIM OF DEPRECIATION OF RS.7,04,516/ - ON VEHICLES OWNED BY THE ASSESSEE COMPANY, WHICH WERE REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 10. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM OF DEPRECIATION ON CARS WHICH ARE REGISTERED IN THE NAME OF DIRECTORS , WHERE THE FUNDS FOR PURCHASE OF THE SAID VEHICLES HAS BEEN PAID BY THE ASSESSEE COMPANY AND THE SAME HAVE BEEN SHOWN AS ASSET OF THE ASSESSEE COMPANY A ND ALSO THE VEHICLES WERE USED BY THE ASSESSEE COMPANY. IN VIEW THEREOF, WE ALLOW THE CLAIM OF DEPRECIATION IN THE HANDS OF ASSESSEE. 11. BEFORE PARTING, WE MAY ALSO REFER TO THE OBSERVATIONS OF THE CIT(A) VIDE PARAS 4.13 TO 4.14 AT PAGES 3 2 TO 50 OF THE APPELLATE ORDER , WHEREIN THE CIT(A) HAS THOUGH REFERRED TO THE DECISION OF THE PUNE BENCH OF TRIBUNAL IN ITO VS. SHREE PANCHGANGA AGRO IMPEX PVT. LTD. IN ITA NO.956/PN/2009 RELATING TO ASSESSMENT YEAR 2005 - 06 , ORDER DATED 31.05.2011 , WHEREIN THE CLAIM OF DEPRECIATION ON VEHICLES REGISTERED IN THE NAME OF DIRECTORS OF THE COMPANY WAS ALLOWED. REFERENCE WAS ALSO MADE TO THE DECISION IN THE CASE OF ROHAN BUILDERS AND DEVELOPERS PVT. LTD. VS. ACIT IN ITA NO.942/PN/2006 RELATING TO ASSESSMENT YEAR 2004 - 05, ORD ER DATED 29.08.2008 . H OWEVER, THE CIT(A) HAS FAILED TO FOLLOW 8 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 THE JUDICIAL DISCIPLINE WHEREIN THE DECISION OF THE HIGHER FORUM , WHICH IS THE JURISDICTIONAL TRIBUNAL , IS TO BE FOLLOWED AND SHOULD BE APPLIED IN CASE THE FACTUAL ASPECTS AND THE ISSUE ARE SAM E. THE ORDER OF CIT(A) IN APPLYING THE RATIO LAID DOWN BY THE MUMBAI BENCH OF TRIBUNAL IN EDWISE CONSULTANTS PVT. LTD. VS. ADDL.CIT (SUPRA) WHICH IS NOT THE JURISDICTIONAL TRIBUNAL FOR THE CIT(A) FUNCTIONING IN PUNE IS INCORRECT AND IS AGAINST THE JUDICIA L PROPRIETY. IN ANY CASE, THE MUMBAI BENCH OF TRIBUNAL IN THE SAID CASE HAS ITSELF I.E. EDWISE CONSULTANTS PVT. LTD. VS. DCIT (SUPRA) IN SUCCEEDING YEARS ALLOWED SIMILAR CLAIM IN THE HANDS OF ASSESSEE COMPANY THEREIN. THE GROUNDS OF APPEAL NO.4 AND 4.1 A RE THUS, ALLOWED. 12. THE NEXT ISSUE RAISED BY WAY OF GROUNDS OF APPEAL NO.5 TO 5.2 IS AGAINST DISALLOWANCE OF REMUNERATION PAID TO THE DIRECTORS. 13. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD PAID FIXED REMUNERATION OF 1,20,000/ - EACH TO ITS TWO DIRECTORS PLUS PERFORMANCE SALES COMMISSION OF 67,10,810/ - AS PERCENTAGE ON SALES I.E. AGGREGATING 1,36,61,620/ - . THE CASE OF ASSESSEE WAS THAT ITS TOTAL TURNOVER WAS INCREASED BY 14.13 CRORES I.E. ALMOST 286% AS COMPARED TO THE EAR LIER YEAR AND THE INCREASE IN TURNOVER WAS DUE TO THE EFFORTS TAKEN BY THE KEY DIRECTORS AND HENCE, THE DIRECTORS WERE ELIGIBLE FOR OVERALL COMMISSION @ 7% OF TOTAL TURNOVER ACHIEVED DURING THE YEAR. THE ASSESSEE ALSO POINTED OUT THAT THE PAYMENT WAS APPR OVED BY THE BOARD OF DIRECTORS AND SINCE BOTH THE DIRECTORS WERE ASSESSED TO TAX PAYING TAXES AT THE SAME RATES AS APPLICABLE TO THE ASSESSEE COMPANY, THE SAID EXPENDITURE IS TO BE ALLOWED IN THE HANDS OF ASSESSEE. HOWEVER, THE ASSESSING OFFICER APPLYING THE PROVISIONS OF SECTION 40 A(2)(B) OF THE ACT DISALLOWED 1,00,61,620/ - ON THE GROUND THAT THE SALARY PAID WAS HIGHER WHEN COMPARED TO THE SALARY PAID TO THE OTHER EMPLOYEES. THE ASSESSEE BEFORE THE CIT(A) POINTED OUT THAT THE ISSUE OF 9 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 PAYMENT OF REMUNE RATION TO THE DIRECTORS IS TO BE ALLOWED IN THE HANDS OF ASSESSEE IN VIEW OF THE FACTUAL ASPECTS OF THE CASE, WHEREIN THE INCREASE IN SALARY WAS BECAUSE OF INCREASE IN TURNOVER OF THE ASSESSEE COMPANY, WHICH IN TURN, WAS BECAUSE OF EFFORTS OF THE DIRECTORS . FURTHER, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (2009) 310 ITR 306 (BOM) FOR THE PROPOSITION THAT WHERE THE TAX RATES PAID BY THE ASSESSEE COMPANY AND DIRECTORS WERE HIGHER AND THERE WAS NO LOSS TO THE REVENUE, THEN THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT COULD NOT BE INVOKED. 14. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER PARTIALLY , AGAINST WHICH THE ASSESSEE IS IN APPEAL. THE CIT(A) ALLOWED PARTIAL R ELIEF TO THE ASSESSEE, AGAINST WHICH REVENUE IS NOT IN APPEAL . 15. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT REMUNERATION PAID TO THE DIRECTORS AT 1.36 CRORES IS TO BE ALLOWED IN ENTIRETY. HE REFERRED TO THE ORDER OF CIT(A ) AND POINTED OUT THAT THE CIT(A) ACCEPTS THE REMUNERATION TO BE REASONABLE BUT DISALLOWED THE REMUNERATION ON SALES TO SISTER CONCERN OF 3.26 CRORES. HE WAS OF THE VIEW THAT NO COMMISSION IS TO BE PAID ON SUCH SALES TO SISTER CONCERN. THE LEARNED AUTH ORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE REVENUE IS NOT IN APPEAL AGAINST THE DIRECTIONS OF CIT(A), THOUGH SEVERAL GROUNDS OF APPEAL HAVE BEEN RAISED BY THE REVENUE IN ITS APPEAL. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE ISSUE WHICH ARISES VIDE GROUND OF APPEAL NO.5 IS AGAINST THE CLAIM OF ASSESSEE IN RESPECT OF REMUNERATION PAID TO THE DIRECTORS @ 7% OF SALES. THE CASE OF 10 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 ASSESSEE BEFORE US IS THAT THE SALES OF THE CONCERN HAD INCREASED BY 286% DURIN G THE YEAR WHEN COMPARED TO EARLIER YEAR. THE BASIS FOR INCREASE IN THE TURNOVER WAS ATTRIBUTED TO THE EFFORTS OF DIRECTORS, UNDER WHICH THE ASSESSEE COULD ACHIEVE THE SAID TURNOVER. THE ASSESSEE FURTHER POINTED OUT THAT THE REMUNERATION TO THE DIRECTORS WAS APPROVED BY THE BOARD OF DIRECTORS. THE ASSESSING OFFICER HAD DISALLOWED THE TOTAL CLAIM IN THE HANDS OF ASSESSEE BEING EXCESSIVE. THE CIT(A) HOWEVER, HELD THE REMUNERATION PAID TO BE REASONABLE, AGAINST WHICH THE REVENUE IS NOT IN APPEAL. HOWEVER, THE CIT(A) WAS OF THE VIEW THAT NO COMMISSION IS TO BE PAID ON THE SALES MADE BY THE ASSESSEE TO ITS SISTER CONCERN NAMELY K.K. CANS & ALLIED PRODUCTS PVT. LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS POINTED OUT THAT THE CONCERN K.K. CANS & ALLIED PRODUCTS PVT. LTD. IS LEADER IN THE BUSINESS WHICH IS PARTLY BEING DONE BY THE ASSESSEE ALSO AND IN VIEW OF THE ABOVE SAID, WE FIND NO MERIT IN THE ORDER OF CIT(A) IN RESTRICTING THE CLAIM OF REMUNERATION PAID TO THE DIRECTORS AND DISALLOWING THE SAME WHICH IS RELATABLE TO SALES TO THE SISTER CONCERN. IN ANY CASE, THE DIRECTORS ARE ASSESSED AT HIGHEST RATES OF TAX AND APPLYING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA), WE HOLD THAT NO DISALLOWANCE IS TO BE MADE OUT OF REMUNERATION PAID TO DIRECTORS UNDER SECTION 40A(2)(B) OF THE ACT . THE ASSESSEE HAS FILED THE COPY OF COMPUTATION OF INCOME OF DIRECTOR S SHRI ADARSH KOTHARI AT PAGES 165 TO 168 OF THE PAPER BOOK AND SHRI AMIT KOTHARI AT PAGES 169 TO 171 OF THE PAPER BOOK AND WE FIND THAT THE SAID DIRECTORS ARE PAYING TAXES AT THE HIGHEST RATE OF TAXE S. APPLYING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA), WE HOLD THAT NO DISALLOWANCE IS MERITED UNDER SECTION 40A(2)(B) OF THE ACT IN THE HANDS OF ASSESSEE ON ACCOUNT OF REMUNERATION PAID TO THE DIRECTORS. THE GROUNDS OF APPEAL NO.5 TO 5.2 ARE THUS, PARTLY ALLOWED. 11 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 17. COMING TO THE APPEAL FILED BY THE REVENUE, WHEREIN SEVERAL GROUNDS OF APPEAL HAVE BEEN RAISED. BOTH THE LEARNED AUTHORIZED REPRESENTATIVES WERE HEARD ON EACH OF THE GROUN DS OF APPEAL AND WE PROCEED TO DECIDE THE SAME. 18. THE FIRST ISSUE RAISED VIDE GROUND OF APPEAL NO.1 IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL CHARGES OF 10,81,490/ - . 19. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD PAID PROFESSIONAL CHARGES OF 14,25,325/ - TO VARIOUS PERSONS. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE OBSERVING THAT THE SUPPORTS FILED BY THE ASSESSEE I.E. E - MAIL COMMUNICATION IN THE NAME OF K.K. CANS & ALLIED PRODUCTS P VT. LTD. , WERE NOT RELATING TO THE ASSESSEE. THE ASSESSING OFFICER DISALLOWED SUM OF 13,56,325/ - . THE CIT(A) HELD THAT THE DISALLOWANCE TO THE EXTENT OF 10,81,490/ - WAS NOT JUSTIFIED AND THE SAME WAS DELETED ; HOWEVER, HE HELD THAT AN EXPENDITURE OF 2,74,835/ - WAS CAPITAL IN NATURE AND THE SAME WAS DISALLOWED. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRING TO THE OBSERVATIONS OF ASSESSING OFFICER AT PAGES 6 TO 9 POINTED OUT THAT THE WORK UNDERTAKEN DID NOT RELATE TO THE ASSESS EE AND HENCE, THE EXPENDITURE WAS NOT ALLOWABLE. 21. THE CASE OF ASSESSEE ON THE OTHER HAND, WAS THAT THE EXPENSES AMOUNTING TO 10,81,490/ - WERE INCURRED RELATING TO THE BUSINESS OF ASSESSEE COMPANY AND SIMPLY BECAUSE E - MAILS WERE SENT TO K.K. CANS & ALLIED PRODUCTS PVT. LTD., WOULD NOT MEAN THE EXPENDITURE DID NOT PERTAIN TO THE ASSESSEE. THE 12 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 CASE OF ASSESSEE IS THAT K.K. CANS & ALLIED PRODUCTS PVT. LTD. WAS THE MAIN ENTITY OF THE GROUP AND E - MAIL WAS IN ITS NAME FOR EASE OF REFERENCE. WE FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD. THE ASSESSING OFFICER CANNOT SIT IN THE JUDGMENT WITH THE DECISION OF ASSESSEE TO PAY PROFESSIONAL CHARGES TO VARIOUS PERSONS AGAINST WHICH NECESSARY EVIDENCE HAS BEEN FILED BOTH BEFORE THE ASSESSING OFFICER AND CI T(A), EVEN BEFORE US. MERELY BECAUSE THE SAID COMMUNICATION IS SENT TO K.K. CANS & ALLIED PRODUCTS PVT. LD., WHO WAS THE MAIN ENTITY OF THE GROUP DOES NOT JUSTIFY THE DISALLOWANCE IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE FIND NO MERIT IN THE GROUND OF A PPEAL NO.1 RAISED BY THE REVENUE IN THIS REGARD AND THE SAME IS DISMISSED. 22. THE SECOND ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE OF DEPRECIATION ON BUILDING. 23. BRIEF FACTS RELATING TO THE ISSUE ARE THAT TWO DIRECTORS OF THE ASSESSEE COMPANY HAD PURCHASED THE OLD FACTORY BUILDING SITUATED AT GAT NO.88/1, VILLAGE CHINCHOLI, TAL. JALGAON IN THE YEAR ENDING ON 31.03.2008 FOR 62 LAKHS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY SPENT 22,02,002/ - ON ACCOUNT OF REPAIRS A ND MAINTENANCE OF THE SAID BUILDING. THE CLAIM OF ASSESSEE WAS THAT SINCE IT WAS ENGAGED IN THE BUSINESS OF ASSEMBLING OF BULK MILK COOLERS, WHICH REQUIRE LARGE SPACE FOR STORAGE OF SPARES / BULK COOLERS, THEN SOME MODIFICATION / REPAIRS WERE CARRIED OUT BY THE ASSESSEE AT TOTAL COST OF 22,02,002/ - AND THE SAME WAS CLAIMED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER OBSERVED THAT THE CONSTRUCTION WORK WAS CARRIED OUT THROUGHOUT THE YEAR AND EVEN IN THE NEXT YEAR. THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE PREVIOUS OWNER HAD DEMOLISHED CERTAIN PART OF BUILDING , FLOORING AND WALLS AND CONSTRUCTION WORK WAS CARRIED OUT BY THE ASSESSEE WAS OF A CAPITAL NATURE. 13 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 FURTHER, SINCE THE PREMISES WAS NOT USED FOR BUSINESS PURPOSE DURING THE YEAR UNDER C ONSIDERATION, THE EXPENDITURE COULD NOT BE ALLOWED AS REVENUE AND ALSO NO DEPRECIATION WAS ALLOWABLE. FURTHER, THE ASSESSING OFFICER ALSO HELD THAT THE ASSE T S DID NOT BELONG TO THE ASSESSEE COMPANY BUT TO ITS DIRECTORS AND HENCE DEPRECIATION ON THE SAME WAS ALSO NOT ALLOWABLE. 24. THE PLEA OF ASSESSEE BEFORE THE CIT(A) WAS THAT NO BENEFIT OF ENDURING NATURE WAS OBTAINED NOR ANY NEW ASSET CAME INTO EXISTENCE , HENCE THE EXPENDITURE IS TO BE ALLOWED AS REVENUE IN NATURE. IT WAS ALSO ADMITTED BY THE ASSESSEE THAT THE SAID PREMISES WAS OWNED BY TWO DIRECTORS AND NO WRITTEN AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND ITS DIRECTORS IN THIS REGARD. THE CIT(A) HELD THAT EXPENDITURE IS CAPITAL IN NATURE. HOWEVER, HE HELD THE ASSESSEE TO BE ENTITLED TO CLAIM OF DEPRECIATION IN RESPECT OF SAID EXPENDITURE UNDER SECTION 32(1) OF THE ACT. 25. THE REVENUE IS IN APPEAL AGAINST THE SAME AND THE LEARNED DEP ARTMENTAL REPRESENTATIVE FOR THE REVENUE IN THIS REGARD HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN M.M. FISHERIES (P.) LTD. VS. CIT (2006) 152 TAXMAN 247 (DEL) FOR THE PROPOSITION THAT WHERE THE OWNERSHIP OF ASSET WAS WITH THE DIRECTOR OF THE COMPANY IN THE PERSONAL CAPACITY, THEN THE ASSESSEE WOULD NOT BE ENTITLED TO CLAIM DEPRECIATION UNDER SECTION 32 OF THE ACT. 26. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HOWEVER, POINTED OUT THAT THE REPAIRS WERE TO THE BUILDING BY THE ASSESSEE COMPANY TO MAKE IT HABITABLE AND THE CIT(A) HELD IT TO BE CAPITAL ASSET AND HENCE, AN ASSET , ON WHICH DEPRECIATION IS TO BE ALLOWED. 14 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH IS RAISED BY WAY OF GROUND OF APPEAL NO.2 BY THE REVENUE IS IN RESPECT OF DEPRECIATION ON EXPENDITURE INCURRED OF A FACTORY BUILDING BY THE ASSESSEE WHICH IS NOT OWNED BY IT. ADM ITTEDLY, THE DIRECTORS OF THE ASSESSEE COMPANY HAD BOUGHT THE SAID BUILDING IN THE PRECEDING YEAR BUT THE BUILDING WA S NOT BEING USED BY THE ASSESSEE COMPANY FOR ITS BUSINESS . T HE EXPENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE ON REPAIRS TO THE SAID BUILDING HAS NOT BEEN ALLOWED AS REVENUE EXPENDITURE BY THE AUTHORITIES BELOW, AGAINST WHICH THE ASSESSEE IS NOT IN APPEAL. HOWEVER, THE CIT(A) HAS HELD THE SAME TO BE CAPITAL EXPENDITURE AND DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION, AGAINST W HICH THE REVENUE IS IN APPEAL. THERE ARE TWO ASPECTS TO THE ISSUE; THE FIRST IS THAT EXPENDITURE HAS INCURRED BY THE ASSESSEE ON AN ASSET WHICH IS NOT OWNED BY IT, SO THE FIRST QUESTION IS WHETHER THE SAME CAN BE HELD TO BE CAPITAL EXPENDITURE OF THE ASSE SSEE AND WHETHER THE DEPRECIATION CAN BE ALLOWED. THE SECOND ASPECT IS THAT THE ASSE T IS STILL UNDER REPAIR AND HAS NOT BEEN PUT TO USE AND HENCE, ALLOWABILITY OF DEPRECIATION ON THE SAME WAS PREMATURE. WE FIND MERIT IN THE PLEA OF REVENUE ON BOTH REGARDS, WHERE FIRST OF ALL, THE LAND AND BUILDING BELONGS TO THE DIRECTORS WHICH HAS BEEN GIVEN ON RENT FREE BASIS TO THE ASSESSEE COMPANY BUT THE REPAIRS UNDERTAKEN BY THE ASSESSEE ARE HELD TO BE CAPITAL REPAIRS. IN CASE, THEY ARE HELD T O BE CAPITAL IN NATURE, THEN DEPRECIATION IS NOT ALLOWABLE AS THE ASSESSEE COMPANY DO NOT OWN THE BUILDING ON WHICH REPAIRS ARE UNDERTAKEN. IT DOES NOT FALL WITHIN THE DEFINITION OF SECTION 32(1) OF THE ACT. SECONDLY, THE SAID ASSET HAS NOT BEEN PUT TO U SE IN THE YEAR UNDER CONSIDERATION AND ON THIS GROUND ALSO, THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEPRECIATION. ACCORDINGLY, WE REVERSE THE ORDER OF CIT(A) IN THIS REGARD AND HOLD THAT THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEPRECIATION ON SU CH IMPROVEMENTS TO THE LAND AND BUILDING. 15 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 28. THE NEXT ISSUE RAISED BY WAY OF GROUND OF APPEAL NO.3 IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF SALES AND COMMISSION CHARGES OF 16,05,570/ - . THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PAI D SALES COMMISSION TO THE PARTIES. THE CLAIM OF ASSESSEE WAS THAT ITS TURNOVER HAD INCREASED FROM 5.33 CRORES TO 20.03 CRORES AND HENCE, THE COMMISSION. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAID TO TWO OUT OF THREE PARTIES I.E. M/ S. CEEPEE REFRIGERATION AND SHALIBHADRA V MEHTA. 29. THE CIT(A) HOWEVER, IN VIEW OF THE FACT THAT TWO PARTIES CARRIED OUT THE SAID WORK DELETED THE SAID ADDITION. 30. THE REVENUE IS AGGRIEVED BY THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF 16,05,570/ - . IN THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A), THE ASSESSEE HAS EXPLAINED THE ACTIVITIES UNDERTAKEN BY THE AGENTS WHICH ARE AT PAGES 24 TO 27 OF THE APPELLATE ORDER. THE CIT(A) AFTER CONSIDERING THE SAME HAS HELD AS UNDER: - 4.10 THE APPELLANT COMP ANY WAS A NEW ENTRANT IN THE BUSINESS OF BULK MILK COOLER AND ITS NATURE OF BUSINESS REQUIRED THE SERVICES OF AGENTS AT PRE AND POST SALES STAGE. THE FACT THAT COMMISSION IS PAID AND TAX IS ALSO DEDUCTED AT SOURCE IS NOT DISPUTED. ALSO, NONE OF THE CONCE RNED PARTIES IS A RELATIVE WITHIN THE MEANING OF SECTION 40A(2)(A) OF THE ACT. THE A.O. HAS DISALLOWED PART OF COMMISSION PAID VIZ 16,05,570/ - WITHOUT BRINGING ON RECORD ANY MATERIAL TO JUSTIFY THE SAME. IT IS ALSO SEEN THAT THERE IS A SUBSTANTIAL IN CREASE IN THE TURNOVER BY AN AMOUNT 275% OVER THE PRECEDING YEAR. THE A.O. HAS DISALLOWED THE SAID SUM WHICH WAS PAID TO TWO OF THE THREE PARTIES ONLY ON THE GROUND THAT NO DOCUMENTARY PROOF WITH RESPECT TO SERVICE RENDERED BY THESE TWO PARTIES. IT IS CO NTENDED BY A/R THAT WITH THE INCREASING USE OF TECHNOLOGY / MOBILE PHONES ETC OFFICE WORKING IS BECOMING MORE AND MORE PAPERLESS. THIS APART, IT WAS ALSO ARGUED THAT ALL AVAILABLE EVIDENCES WITH RESPECT TO SERVICES RENDERED BY THE SAID PARTIES WERE FILED. THIS IS CONFIRMED BY A.O. IN PARA 8 ON PAGE 13 OF HIS ORDER. HOWEVER, THE A.O. HAS IGNORED THE SAME ON THE GROUND THAT THE PROOF FILED RELATED TO EARLIER YEAR/S. THERE IS A FORCE IN THE ARGUMENTS PUT FORWARD BY THE A/R. IT IS NOT NECESSARY THAT EV ERY SERVICES RENDERED MUST RESULT INTO BUSINESS IN THE SAME YEAR. THE APPELLANT IS DEALING IN ITEMS FOR WHICH EFFORTS MAY BE MADE IN ONE YEAR AND SALE MAY BE EFFECTED IN LATER YEAR. 16 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 FURTHER, THE A.OS VIEW THAT THERE WAS NO ROLE FOR SECOND PARTY SHALIB HADRA MEHTA IN GUJARAT WHEN MR. BHAVESH KOTHARI WAS ALREADY LOOKING AFTER THAT AREA HAS NO MERIT. BUSINESS DECISIONS ARE TO BE TAKEN BY THE ASSESSEE AND NO ONE ELSE. CONSIDERING THE SUBMISSIONS AND THE FACTS OF THE CASE AND THE A.OS REMAND REPORT, I A M OF THE OPINION THAT THE DISALLOWANCE OF 16,05,570/ - BEING THE SERVICE CHARGES / COMMISSION PAID TO M/S. CEEPEE REFRIGERATION ( 7, 51,275) AND SHALIBHADRA MEHTA ( 8,54,295) IS UNCALLED FOR. THE SAME IS CANCELLED. 31. THE LEARNED DEPARTMENTAL REPRESE NTATIVE FOR THE REVENUE IN THIS REGARD POINTED OUT THAT IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN SCHNEIDER ELECTRIC INDIA LTD. VS. CIT (2008) 171 TAXMAN 177 (DEL), THE ORDER OF CIT(A) BE REVERSED. HOWEVER, WE FIND NO MERIT IN T HE PLEA OF LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN VIEW OF THE EVIDENCES FILED BEFORE THE ASSESSING OFFICER AND THE CIT(A). THE CIT(A) HAS GIVEN A FINDING THAT THE AVAILABLE EVIDENCES WITH RESPECT TO SERVICES RENDERED BY SUCH PARTIES WERE F ILED BEFORE THE ASSESSING OFFICER, WHO IN TURN, HAS IGNORED THE SAME ON THE GROUND THAT THE PROOF FILED RELATED TO EARLIER YEARS . F INDING OF CIT(A) IS THAT NOT NECESSARILY EVERY SERVICES RENDERED MUST RESULT INTO BUSINESS IN THE SAME YEAR SINCE THE ASSESS EE WAS DEALING IN ITEMS FOR WHICH PERSISTENT EFFORTS WERE REQUIRED. WE FIND MERIT IN THE REASONING OF CIT(A) IN THIS REGARD AND ACCORDINGLY, UPH O LD THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF SERVICE COMMISSION TOTALING 16,05,570/ - . RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN SCHNEIDER ELECTRIC INDIA LTD. VS. CIT (SUPRA) IS FACTUALLY DISTINGUISHABLE. THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS THUS, DISMISSED. 32. THE NEXT GROUND OF APPEAL NO.4 RAISED BY THE REVENUE IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF FOREIGN TRIP EXPENSES OF 1,27,784/ - . 17 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 33. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD INCURRED FOREIGN TRAVEL EXPEND ITURE OF 6,39,009/ - . THE ASSESSING OFFICER ALLOWED 93,000/ - AND DISALLOWED BALANCE EXPENDITURE RELATED TO VISIT OF HONG KONG AND THAILAND BY ONE OF THE DIRECTORS AND HIS FAMILY MEMBERS, WHICH WAS UPHELD BY THE CIT(A), AGAINST WHICH THE ASSESSEE IS NOT IN APPEAL. ANOTHER VISIT WAS BY THE DIRECTORS OF THE ASSESSEE COMPANY TO CHINA AND THE CIT(A) ALLOWED THE SAID CLAIM. THE REVENUE IS IN APPEAL AGAINST THE SAME. WE FIND NO MERIT IN THE PLEA OF REVENUE, WHEREIN THE FOREIGN TRIP WAS UNDERTAKEN BY THE DIR ECTORS TO CHINE FOR THEIR BUSINESS NEEDS AS REFERRED BY THE CIT(A). ACCORDINGLY, UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUND OF APPEAL NO.4 RAISED BY THE REVENUE. 34. THE NEXT GROUND OF APPEAL NO.5 RAISED BY REVENUE IS AGAINST THE ORDER OF CIT(A) IN DELETING DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT AT 11,62,631/ - . 35. BRIEF FACTS RELATING TO THE ISSUE ARE THAT FOR THE YEAR UNDER CONSIDERATION, T HE ASSESSEE CLAIMED THAT IT HAD PAID TRANSPORT AND FREIGHT CHARGES FOR AND ON BEHALF OF CUSTOMERS AND HAD RECOVERED MOST OF THE SAME THROUGH SALE INVOICES. IN TOTAL SUM OF 33,08,973/ - , INCLUDING CASH PAYMENT OF 29,79,121/ - WAS PAID BY THE ASSESSEE. A GAINST THE SAME, ASSESSEE RECOVERED SUM OF 30,17,611/ - THROUGH SALE INVOICES AND THE BALANCE OF 2,91,362/ - WAS CLAIMED AS DEDUCTION IN PROFIT AND LOSS ACCOUNT. THE ASSESSEE EXPLAINED THAT OUT OF SAID SUM OF 2,91,362/ - ONLY TWO PAYMENTS OF 2 3,000/ - EACH WERE MADE IN CASH TO A SINGLE PARTY IN A DAY. THE ASSESSEE THUS, PLEADED IN ITS WRITTEN SUBMISSIONS THAT IF AT ALL ONLY 46,000/ - WAS HIT BY PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSEE FURTHER CLAIMED THAT DEDUCTION ON ACCOUNT OF TRANSPORT AND FREIGHT CHARGES WAS 18 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 CLAIMED ONLY IN RESPECT OF 2,91,362/ - , OF WHICH ADMITTEDLY 46,000/ - WAS INADMISSIBLE. THE ASSESSING OFFICER HOWEVER, REJECTING THE PLEA OF ASSESSEE DISALLOWED SUM OF 11,62,631/ - OUT OF AGGREGATE CASH PAYMENTS. THE ASSESSING OFFICER REJECTING THE SAME HELD THE ASSESSEE TO HAVE VIOLATED PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED SUM OF 11,62,631/ - . 36. THE CIT(A) NOTED THAT THOUGH THE ASSESSEE HAD MADE CASH PAYMENT OF 33,08,973/ - , IT HAD RECOVERED 30,17,611/ - FROM CUSTOMERS ON WHOSE BEHALF THE PAYMENT WAS MADE. NO DEDUCTION WAS CLAIMED IN RESPECT OF SAID AMOUNT, IT WAS ONLY THE BALANCE SUM OF 2,91,362/ - WAS CLAIMED AS DEDUCTION, OUT OF WHICH TWO PAYMENTS I.E. TOTALING 46,000/ - EXCEEDED THE SP ECIFIED LIMIT OF 20,000/ - UNDER SECTION 40A(3) OF THE ACT. THEREFORE, CIT(A) RESTRICTED DISALLOWANCE TO 46,000/ - AND DELETED ADDITION MADE BY THE ASSESSING OFFICER AT 11,62,631/ - . 37. REVENUE IS IN APPEAL AGAINST THE SAME. 38. THE LEARNED DEP ARTMENTAL REPRESENTATIVE FOR REVENUE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 39. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD SUBMITTED THAT WHERE THE AMOUNTS HAVE BEEN PAID ON BEHALF OF CUSTOMERS THOUGH IN CASH, BUT WE RE RECOVERED FROM THE CUSTOMERS AND SINCE THE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT ON THE SAID ACCOUNT, THEN THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER IN HOLDING THE SAME TO BE HIT BY PROVISIONS OF SECTION 40A(3 ) OF THE ACT. 19 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 40. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT ISSUE RAISED BEFORE US, THE ASSESSEE HAD PAID 34,84,068/ - TO VARIOUS TRANSPORTERS ON BEHALF OF ITS CUSTOMERS AND ALSO FOR OWN BUSINESS. OUT OF TH E SAID AMOUNT, SUM OF 29,79,121/ - WAS PAID IN CASH. THE ASSESSEE AGAINST PAYMENT OF 33,08,973/ - HAD RECOVERED 30,17,611/ - FROM ITS CUSTOMERS THROUGH SALE INVOICES, THE BALANCE SUM OF 2,91,362/ - WAS DEBITED TO PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAD MADE TWO PAYMENTS TOTALING 46,000/ - WHICH WERE IN EXCESS OF 20,000/ - IN CASH IN A DAY. THE CIT(A) HAS DISALLOWED THE SAME. THE ASSESSING OFFICER ON THE OTHER HAND, HAD MADE DISALLOWANCE OF 11,62,631/ - AFTER NOTING FACTUAL ASPECT OF RECOVERY OF 30,17,611/ - OUT OF EXPENSES INCURRED ON TRANSPORT AT 33,08,973/ - . WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER WHERE ASSESSEE HAD BOOKED EXPENSES ONLY TO THE EXTENT OF AMOUNT NOT RECOVERED FROM ITS CUSTOMERS I.E. 2,91,362/ - . THE ASSESSEE HAS EXPLAINED THAT THE CASH EXPENDITURE MADE ON BEHALF OF CUSTOMERS HAS BEEN RECOVERED FROM THE CUSTOMERS THROUGH SALE INVOICES, ETC. ACCORDINGLY, WHERE THE ASSESSEE HAD NOT CLAIMED THE AFORESAID EXPENDITURE MADE IN CASH AS DEDUCTION, IN THE PROFIT AND LOSS ACCOUNT, THEN THE SAME IS NOT HIT BY PROVISIONS OF SECTION 40A(3) OF THE ACT. HENCE, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUND OF APPEAL NO.5 RAISED BY REVENUE. 41. THE LAST ISSUE RAISED VIDE GROUND OF APPEAL NO.6 IS AGAINST DELETION OF ADDITI ON OF 54,90,657/ - . THE SAID ISSUE IS RAISED BY INVOKING PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 42. IN THE FACTS RELATING TO THE ISSUE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD SOLD CERTAIN BULK MILK COOLERS AND RELATED ITEMS TO ITS SISTER CONCERN K.K. CANS & ALLIED PRODUCTS PVT. LTD. THE SAID PRODUCTS WERE SOLD BY 20 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 SISTER CONCERN TO THE THIRD PARTY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD DIVERTED ITS PROFITS TO SISTER CONCERN AND CONSEQUENTLY BENEFIT HAD ARISEN TO THE ASSESSEE. IN VIEW OF THE SAID DIVERSION OF PROFITS, THE ASSESSING OFFICER MADE DISALLOWANCE OF 54,90,657/ - . 43. THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT ADDITION MADE BY THE ASSESSING OFFICER WAS ON HYPOTHETICAL BASIS AND WHERE NO EXPENDITUR E WAS INCURRED, THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT WERE NOT ATTRACTED. THE CIT(A) ALSO NOTED THAT BOTH THE CONCERNS WERE PAYING TAXES AT HIGHEST RATES. 44. REVENUE IS IN APPEAL AGAINST THE SAME. 45. BOTH THE LEARNED AUTHORIZED REPRESENTATIVE S HAVE PUT FORWARD THEIR CONTENTIONS. 46. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSING OFFICER HAD APPLIED PROVISIONS OF SECTION 40A(2)(B) OF THE ACT ON THE GROUND THAT THE ITEMS WHICH WERE SOLD BY ASSESSEE TO ITS SISTER CONC ERN WERE IN TURN, SOLD BY THE SAID SISTER CONCERN TO THIRD PARTY AND HENCE, IT WAS ALLEGED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD DIVERTED PROFITS TO ITS SISTER CONCERN. THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT ARE ATTRACTED WHERE THE ASSESS EE INCURS EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE TO A PERSON REFERRED TO IN CLAUSE (B). THE ASSESSEE IN THE PRESENT CASE HAS NOT INCURRED ANY EXPENDITURE NOR CLAIMED THE SAME BUT HAS SHOWN SALE OF ITS PRODUCTS TO ITS SISTER CONCERN . H ENCE THE ORDER OF ASSESSING OFFICER IN INVOKING PROVISIONS OF SECTION 40A(2)(A) OF THE ACT IS MISPLACED ; EVEN THOUGH THE ASSESSEE HAD SALE TRANSACTIONS WITH ITS SISTER CONCERN. THUS, UPHOLDING THE ORDER OF CIT(A), WE 21 ITA NO. 177 /PUN/20 14 ITA NO. 211 /PUN/20 14 DISMISS THE GROUND OF APPEAL NO.6 RAISED BY REVENUE. THE GROUNDS OF APPEAL RAISED BY REVENUE ARE THUS, DISMISSED. 4 7. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED AND APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 9 TH DAY OF FEBR UARY , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 9 TH FEBRU ARY , 201 8 . G G C C V V S S R R / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 2 , NASHIK ; 4. THE CIT - 2 , NASHIK ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE