ACIT, Alwar V. MEHRU ELECTRICAL & ENGG. PVT. LTD., BHIWADI

ITA 215/JPR/2009

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6501 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Question of law
• Section: 80IB; 37(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 215/JP/2009 ASSTT. YEAR- 2004-05 PAN NO. AABCM2145G THE A.C.I.T., M/S MEHRU ELECTRICAL & ENGG. CIRCLE-2, ALWAR. VRS. PVT. LTD., E-1247 RIICO IND . AREA, BHIWADI. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SHRI D.C. SHARMA. ASSESSEE BY :- SHRI P.C. PARWAL. DATE OF HEARING : 15/07/2014 DATE OF PRONOUNCEMENT : 18/07/2014 O R D E R. PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 30/12/2008 OF THE LEARNED C.I.T.(A), ALWAR FOR THE A. Y. 2004-05. THE EFFECTIVE GROUNDS OF APPEAR ARE AS UNDER:- 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL A S ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE DISALLOWANCE OF RS. 46,46,867/- MADE ON ACCOUNT OF PAYMENT OF COMMISSION TO M/S SADEM INDIA LTD. IGNOR ING THE FACTS & MATERIAL BROUGHT ON RECORD BY THE A.O. 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DIRECTING TH E A.O. TO ALLOW DEDUCTION U/S 801B ON INTEREST ON BANK FDRS AMOUNTING TO RS. 2,75,187/- WITHOUT APPRECIATING THE FACT THAT INTEREST INCOME CANNOT BE CONSIDERED AS DERIVE D FROM INDUSTRIAL ACTIVITY. 2 2. THE FIRST GROUND OF APPEAL IS AGAINST DELETING TH E DISALLOWANCE OF RS. 46,46,867/- MADE ON ACCOUNT OF PAYMENT OF COMMISSIO N TO M/S SADEM INDIA LTD.. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF CURRENT AND POTENTIAL TRANSFORMERS & ELECTRICAL CONTROL EQUIPME NTS FROM BHIWADI INDUSTRIAL AREA. DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE HAD PAID COMMISSION TO M/S SADEM INDIA LTD. AT RS. 46,46,867/-. THE LEAR NED ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF HEARING ON THIS ISSU E AND ASKED TO PROVE THE SERVICES RENDERED BY M/S SADEM INDIA LTD.. THE ASSES SEE FILED REPLY VIDE LETTER DATED 27/09/2007, WHICH HAS BEEN REPRODUCED BY THE L EARNED ASSESSING OFFICER ON PAGES 6,7, AND 8 OF THE ASSESSMENT ORDER . IT WAS SUBMITTED BY THE ASSESSEE THAT THE REASONS RECORDED FOR REOPENING TH E CASE U/S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WERE BASED ON THE ASSESSMENT OF M/S SADEM INDIA LTD.. THE ASSESSMENT OF THE LEARNED ASS ESSING OFFICER OF M/S SADEM INDIA LTD. CANNOT BE THE VALID BASE FOR REOPE NING OF A CASE FOR A.Y. 2004-05. FURTHER, IT WAS SUBMITTED THAT THE COMMISSI ON PAID TO M/S SADEM INDIA LTD. ON THE BASIS OF SERVICE RENDERED BY IT. THERE WAS AN AGREEMENT BETWEEN THE ASSESSEE AND M/S SADEM INDIA LTD. ON EVE RY TENDER/ORDER, WHICH WAS PROCURED WITH THE ASSISTANCE OF M/S SADEM INDIA L TD.. ONE OF THE DIRECTOR OF M/S SADEM INDIA LTD. NAMELY SHRI SATISH KUMAR DH ANDA WAS HAVING GOOD PUBLIC AND POLITICAL RELATION AND HAD BEEN THE CHAI RMAN OF THE ENGINEERING EXPORT COUNCIL OF INDIA FROM YEAR 2000. BESIDES THI S, HE WAS MEMBER OF BOARD OF TRADE CONSTITUTED BY THE MINISTRY OF COMMERCE, GO VT. OF INDIA FROM 1998. 3 THE CONTRACT HAD BEEN APPROVED BY THE BOARD OF DIREC TOR OF THE ASSESSEE COMPANY AND APPROVED BY THE SHARE HOLDER IN ANNUAL GENERAL MEETING. THE COMMISSION WAS CALCULATED ON THE BASIS OF SERVICES R ENDERED BY M/S SADEM INDIA LTD. ON TENDER WISE. ON WHICH, TDS HAS BEEN DEDU CTED AND DEPOSITED WITH THE CENTRAL GOVT. THE GENUINENESS OF THE PAYMENT IS NOT DOUBTED AS THE ASSESSEE WAS PAID THROUGH ACCOUNT PAYEE CHEQUES AFTE R DEDUCTING THE TDS ON IT. HE ALSO RELIED UPON IN CASE OF INDOCANE LTD. VS . ITI LTD. 1989 34 TTJ BOMBAY 89, WHICH WAS ON SECRET COMMISSION, PAID TO TH E EMPLOYEE, WHICH WAS ALLOWED BY THE HONBLE ITAT BOMBAY. THE LEARNED ASS ESSING OFFICER DID NOT ACCEPT THE ASSESSEES REPLY AS TENABLE ON THE G ROUND THAT THE ASSESSING OFFICER OF M/S SADEM INDIA LTD. GAVE THE DIFFERENT FINDING IN ITS ASSESSMENT FOR A.Y. 2004-05. THE ASSESSING OFFICER FURTHER HELD TH AT M/S SADEM INDIA LTD. DOES NOT HAVE ANY CAPABILITY TO PROVIDE OR PROCURE THE ORDERS TO ASSIST THE PROCUREMENT FROM THE ELECTRICITY BOARD. THE ASSESSEE WAS NOT IN POSITION TO EXPLAIN THE SERVICES RENDERED BY M/S SADEM INDIA LT D. WITH EVIDENCES. THE ASSESSEE HAD FAILED TO PROVE ANY INVOLVEMENT JUSTIF YING COMMISSION PAYMENT TO IT FOR PROCURING SUPPLY ORDER THROUGH TENDER. THE ASSESSING OFFICER ALSO EXAMINED THE COPY OF CORRESPONDENCE MADE BETWEEN THE ASSESSEE AND M/S SADEM INDIA LTD. AND CONCLUDED THAT NO SERVICE WAS R ENDERED BY M/S SADEM INDIA LTD.. THUS, HE MADE ADDITION OF RS. 46,46,867/ - IN THE INCOME OF THE ASSESSEE. 4 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A). TH E LEARNED CIT(A) OBSERVED AS UNDER:- 4.3 THE APPELLANT HAS RELIED ON THE RATIO OF THE CASES DECIDED BY THE LEARNED ITAT IN THE MATTER OF DCIT VS. VHANKETESHWAR WIRES PVT. LTD., VHANKETESHWAR WIRES PVT. LTD. VS. DCIT & ACIT VS. VHANKETESHWAR WIRES PVT. LTD. IN ITA NO. 901/JP/200 7, ITA NO. 692/JP/2008 & ITA NO. 996/JP/2008 DATED 30/09/2008. IT REVEALS FROM THE ORDER THAT M/S SADEM INDIA LTD. IS DOING BUSINESS FOR OTHER PEOPLE ALSO TO PROCURE ORDER FRO M BSNL. IT IS STATED THAT MR. SATISH KUMAR DHANDA IS HAVING GOOD POLITICAL AND PUBLIC RELATIONS AND HAS BEEN CHAIRMAN OF ENGINEERI NG EXPORT COUNCIL OF INDIA FROM THE YEAR 2000 AS WELL AS MEMB ER OF BOARD OF TRADE CONSTITUTED BY THE MINISTRY OF COMMERCE FRO M 1998. FURTHER IT IS STATED THAT AGREEMENT FOR EXPENSES IN CURRED HAVE BEEN APPROVED BY THE SHARE HOLDERS IN THE AGM OF TH E PAYER AND RECIPIENT COMPANIES. MOREOVER, TDS HAS BEEN DEDUCTE D AND DEPOSITED WITH THE CENTRAL GOVT.. THE APPELLANT HAS INFORMED IN HIS SUBMISSION THAT SERVICES AND GUIDANCE OF A LOC AL PARTY FOR UPDATING ABOUT ADVERTISEMENTS FOR PURCHASE OF TRANS FORMERS, FOR ACQUIRING APPLICATION FORMS, FOR PROPERLY AND ACCUR ATELY COMPLETING THEM AND SUBMITTING THEM IN TIME, FOR Q UOTING THE CORRECT RATE, FOR GETTING DRAWINGS APPROVED, FOR REC OVERY OF PAYMENTS AFTER DELIVERY OF GOODS ETC. WAS NEEDED BE CAUSE OF CUTTHROAT COMPETITION. IT IS STATED THAT ONLY AFTER INSPECTION BY THE CUSTOMERS REGARDING QUALITY SPECIFICATION DELIV ERY OF FINISHED GOODS IS DONE. FURTHER IT IS INFORMED THAT IF THE D ISPATCH/DELIVERY OF FINISHED GOODS DOES NOT TAKE PLACE IN TIME, IT C OULD LEAD TO PROBLEM OF STORAGE OF GOODS AND CONSEQUENTLY DELAY IN RECEIPT OF PAYMENTS AND BREAKING OF TURNOVER CYCLE. IT IS STAT ED THAT IT IS NOT IN THE CONTROL OF THE APPELLANT AS TO HOW MUCH EXPE NSES HAVE BEEN MADE BY THE PERSON RECEIVING COMMISSION. THE A PPELLANT IS CONCERNED ONLY WITH THE QUANTUM AND QUALITY OF SERVI CES RENDERED. IT IS CONTENDED THAT M/S SADEM INDIA LTD. IS THE AGENT OF THE APPELLANT AND DOES NOT WORK ON BEHALF OF THE CUSTOMER. ACCORDINGLY, THE NAME OF THE AGENT WOULD NOT FIGURE IN THE TENDER 5 ACCEPTANCE FORM. MOREOVER, IT IS STATED THAT NO PAY MENT HAS BEEN MADE IN CASH AND THAT ALL PAYMENT HAVE BEEN MA DE BY CHEQUE. IN SUCH A SITUATION THE APPELLANT HAS PLEAD ED FOR ALLOWANCE OF EXPENSES OF COMMISSION PAID. IN SUPPORT OF HIS CLAIM THAT WORK WAS UNDERTAKEN BY M/S SADEM INDIA L TD. THE APPELLANT HAS FURNISHED COPIES OF COMMUNICATION WITH M/S SADEM INDIA LTD. AND RRVPNL. AS IS STATED ABOVE, THE APPELLANT IS IN THE BUSINES S OF MANUFACTURING OF CURRENT AND POTENTIAL TRANSFORMERS & ELECTRICAL CONTROL EQUIPMENTS. THE EQUIPMENTS SPECIFIED BY THE APPELLANT ARE MANUFACTURE OF VERY SPECIFIC NATURE AS PER THE REQUIREMENTS OF THE CUSTOMERS. IT IS ALSO TRUE THAT PROCUREMENT OF ORDERS IS AN ACTIVITY THAT HAS TO BE GONE THROUGH BEFORE THE ACT UAL MANUFACTURING, TESTING AND FINALLY DELIVERY OF GOOD S IS MADE TO THE CUSTOMERS. IN THIS AGE OF FIERCE COMPETITION WH EN EVEN INTERNATIONAL PLAYERS ARE IN THE GAME, THE SUCCESSF UL BUSINESSMEN HAVE TO OBTAIN SERVICES OF COMPETENT AND KNOWLEDGEAB LE ADVISERS. VERY MANY TIMES, AS IT APPEARS IN THE PRE SENT CASE, SUCCESSFUL BUSINESSES CAN BE RUN ONLY WITH THE HELP OF OUTSOURCING OF WORK RELATING TO HAVING KNOWLEDGE OF T ENDERS, KNOWLEDGE OF CORRECT SPECIFICATIONS OF PRODUCTS, KNO WLEDGE OF COMPETITIVE RATES, HAVING SMARTNESS ON BEHALF OF TH E MANUFACTURER TO PUT THE WHOLE EXERCISE OF THE DESCRI BED BUSINESS ACTIVITIES THROUGH IN A SUCCESSFUL MANNER. IT IS NO T DENIED THAT THE APPELLANT HAS MADE CHEQUE PAYMENTS FOR SERVICES DES CRIBED IN HIS SUBMISSION. THE PROVISIONS OF SEC. 37(1) STATE AS FOLLOWS: ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DE SCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CA PITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION. THE ACTIVITIES DESCRIBED BY THE APPELL ANT AS HAVING BEEN UNDERTAKING DURING THE COURSE OF BUSINESS AND INTERACTION WITH M/S SADEM INDIA LTD. ARE OF SIMILAR NATURE AS A RE DESCRIBED IN THE ORDER OF HONBLE ITAT DATED 30/09/2008. THE A PPELLANTS CASE IS SUPPORTED BY THE RATIO OF THE CASES DECIDED BY THE HONBLE ITAT IN THE MATTER OF DCIT VS. VHANKETESHWAR WIRES PVT. 6 LTD., VHANKETESHWAR WIRES PVT. LTD. VS. DCIT & ACIT VS. VHANKETESHWAR WIRES PVT. LTD. IN ITA NO. 901/JP/200 7, ITA NO. 692/JP/2008 & ITA NO. 996/JP/2008 DATED 30/09/2008. IN VIEW OF THE FORGOING, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT AS PER THEIR ORDER DATED 30/09/2008 SPECIFIED A BOVE, THE ADDITION MADE AFTER DISALLOWANCE OF COMMISSION TO M /S SADEM INDIA LTD. AT RS. 4646867/- IS HEREBY DELETED. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. IN THIS CASE THE COORDINATE BENCH OF ITAT JAIPUR IN ITA NO. 215/JP/2009 A.Y. 2004-05 VIDE ORDER DATED 26/02/201 0 HAS ALLOWED THE REVENUES APPEAL EX PARTE BY OBSERVING THAT:- THE A.O. WHILE PASSING THE ORDER IN THE CASE OF M/S SADEM INDIA LTD. NOTICED THE MODUS OPERANDI TO EVADING THE TAX BY DIVERTING THE RECEIPT TO A LOSS COMPANY. IN THE CASE OF M/S S ADEM INDIA LTD., THE CONTENTION OF THE COMPANY WAS THAT THE COM MISSION WAS RECEIVED ON ACCOUNT OF SERVICES OF THE DIRECTOR. HO WEVER, THE ASSESSEE COMPANY IN THE INSTANT CASE IS TRYING TO S UBMIT THAT THE COMMISSION HAS BEEN PAID AS PER THE SERVICES RENDER ED, PREPARATION OF TENDERS AND OTHER SERVICES. IN THE A GREEMENT, IT IS MENTIONED THAT M/S SADEM INDIA LTD. IS TO PROVIDE A SSISTANCE IN PREPARATION OF TENDER DURING THE VALUATION PROCESS AND HAS ALSO TO PROVIDE ASSISTANCE DURING THE PERFORMANCE OF THE CO NTRACT. THERE IS NO MATERIAL ON RECORD THAT THE SERVICES AS MENTI ONED IN THE AGREEMENT HAVE BEEN PROVIDED BY M/S SADEM INDIA LTD .. THE ASSESSMENT COMPANY WAS MADE AWARE THAT M/S SADEM INDI A LTD. HAS MENTIONED THAT IT GOT COMMISSION ON ACCOUNT OF GOODWILL OF THE DIRECTOR SHRI SATISH DHANDA. NO EXPENSES FOR PR OVIDING SERVICES WERE THERE. THE COMPANY WHICH HAS PROVIDED SO CALLED SERVICES ADMITTED OF MAKING NO EXPENSES OR PROVIDIN G TECHNICAL SERVICES THEN ONUS WAS ON THE ASSESSEE COMPANY TO HA VE ADDUCED EVIDENCE. BRIEFLY ARGUING THAT RECIPIENT OF COMMISSION HAS PROVIDED SERVICES WERE NOT SUFFICIENT IN VIEW OF SUBMISSIONS OF RECIPIENT MADE IN THEIR OWN ASSESSMENT. THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT EXPENDITURE HAS BEEN MAD E FOR THE 7 PURPOSE OF BUSINESS. THE EXPENDITURE CANNOT BE ALLOWE D ONLY ON THE BASIS OF THE FACT THAT THE AMOUNT HAS BEEN PAID THROUGH CHEQUE OR THERE IS AN AGREEMENT FOR MAKING ANY SPEC IFIC PAYMENT. THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDE NCE AS TO RENDERING SERVICES BY M/S SADEM INDIA LTD.. HENCE WE FELL THAT THE A.O. WAS JUSTIFIED IN DISALLOWING THE COMMISSION AND THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE IS REVERSED. THU S GROUND NO. 1 OF THE REVENUE IS ALLOWED. THE ASSESSEE FILED APPEAL BEFORE THE HONBLE RAJASTH AN HIGH COURT. THE HONBLE HIGH COURT HAS SET ASIDE THE ORDER OF THE I TAT OB OBSERVING AS UNDER:- 9. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT TH E TRIBUNAL COMMITTED AN ILLEGALITY IN REJECTING THE APPLICATIO N FOR ADJOURNMENT AND IN DECIDING THE APPEAL, EX PARTE, WI THOUT HEARING THE LEARNED COUNSEL FOR ASSESSEE, IN THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE AND ORDER OF THE TRIBUNAL DESERVES TO BE SET ASIDE ON THIS GROUND ALONE AND S UBSTANTIAL QUESTION OF LAW, FORMULATED ABOVE, IS LIABLE TO BE A NSWERED AND IS HEREBY ANSWERED IN FAVOUR OF THE ASSESSEE. 10. CONSEQUENTLY, THE APPEAL IS ALLOWED. IMPUGNED OR DER OF THE TRIBUNAL DATED 26/02/2010 IS SET ASIDE AND THE CASE IS REMITTED BACK TO THE TRIBUNAL FOR DECISION ON MERITS, AFRESH. HOWEVER, COST OF RS. 21,000/- (RS. TWENTY ONE THOUSAND) IS IMPOSED ON THE ASSESSEE. IF THE AMOUNT OF COST IS DEPOSITED IN THE DEPARTMENT WITHIN A PERIOD OF FOUR WEEKS AND RECEIPT THEREOF IS FURNISHED IN THE TRIBUNAL, THEN THE TRIBUNAL WILL DECIDE THE MATTER AFRESH ON MERITS, AFTER HEARING BOTH THE PARTIES, OTHERWISE TH IS APPEAL WILL BE DEEMED TO HAVE BEEN DISMISSED AND NO FURTHER OPP ORTUNITY WILL BE GRANTED TO THE ASSESSEE. 11. PARTIES ARE DIRECTED TO APPEAR BEFORE THE INCOM E TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR ON 28/05/2012. NO FRESH NOTICE IN THIS REGARD WILL BE ISSUED TO THE PARTIES BY THE TRIBUNAL. THIS CASE AS PER DIRECTION OF THE HONBLE HIGH COURT WAS REFIXED AND HEARD. 8 5. THE LEARNED D.R. SUPPORTED THE ORDER OF THE ASSE SSING OFFICER AND ARGUED THAT THERE IS NO INVOLVEMENT DIRECTLY OR IND IRECTLY IN THE PROCUREMENT OF ORDER FROM THE ELECTRICITY BOARD, THE ELECTRICITY B OARD FLOAT THE TENDER PUBLIC AT LARGE AND IT IS OPEN TO EVERYBODY TO MAKE BID AS PE R THE TENDER. THE BUSINESS OF M/S SADEM INDIA LTD. IS ALSO IN DIFFERENT LINE O F BUSINESS. THERE IS NO EXPERIENCE OF ANY OF THE DIRECTOR OF THE COMPANY IN GETTING THE TENDER FROM THE ELECTRICITY BOARD. THE ASSESSEE GOT ORDERS DIREC TLY FROM THE ELECTRICITY BOARD. THE ASSESSEE HAD NOT DISCHARGED HIS BURDEN OF PROVING BY ANY MATERIAL, THUS HE REQUESTED TO CONFIRM THE ORDER OF THE LEARNED ASSESSING OFFICER. 6. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND ALSO DRAWN OUR ATTENTION ON D ECISION OF COORDINATE B BENCH OF THE ITAT, JAIPUR IN ITA NO. 901/JP/2007 FO R A.Y. 2004-05 ORDER DATED 30/09/2008, WHICH HAS BEEN CONSIDERED BY THE L EARNED CIT(A) BEFORE ALLOWING THE APPEAL IN FAVOUR OF THE ASSESSEE. THE FA CTS OF THE CASE IS ALSO IDENTICAL WHEREIN COMMISSION WAS CLAIMED AND ALLOWED B Y THE LEARNED CIT(A) AS WELL AS BY THE HONBLE ITAT. IT IS FURTHER ARGUED THAT M/S SADEM INDIA LTD. PERFORMING LIAISON WORK WITH ELECTRICITY BOARD, THE DIRECTOR OF THE COMPANY HAVE GOOD REPUTATION IN GOVERNMENT DEPARTMENT AND A LSO HAD ENGAGED IN THE VARIOUS COUNCILS/COMMISSIONS OF THE GOVT. OF INDIA AS WELL AS STATE GOVT. AS THEY HAVE POLITICAL RELATION AS WELL AS LIAISONING WI TH THE VARIOUS DEPARTMENTS. THE LEARNED A.R. ALSO DRAWN OUR ATTENTION ON PAPER B OOK FILED BEFORE US AND 9 SUBMITTED THAT THIS INCOME HAS BEEN ACCEPTED BY THE M/S SADEM INDIA LTD., THE APPELLANT HAD DEDUCTED TDS ON IT AND PAYMENTS WE RE MADE THROUGH ACCOUNT PAYEE CHEQUES. THERE WAS CORRESPONDENCE BETWEE N M/S SADEM INDIA LTD. AND THE ASSESSEE ON PAGE NOS. 39-194 OF THE PA PER BOOK. THE ASSESSEE MADE AN AGREEMENT WITH M/S SADEM INDIA LTD. (IN PAPE R BOOK PAGE NO. 202 TO 217) WHEREIN TERMS OF CONTRACT HAS BEEN DEFINED. AS PER PAGE NO. 205 OF PAPER BOOK, M/S SADEM INDIA LTD. AGREED TO PROVIDE SERVICES IN CONNECTION WITH TENDER FOR SUPPLY OF CURRENT AND POTENTIAL TRAN SFORMERS TO M/S HARYANA VIDYUT PRASAN NIGAM LTD.. THE COMMISSION WAS FIXED AT THE RATE 6% OF THE ORDER EX-WORK PRICE EXCLUSIVE OF ALL TAXES AND DUTIE S, FATE ETC. ON PAGE NO. 206. THIS AGREEMENT WAS EFFECTIVE FOR THE PERIOD OF F IVE YEARS. SIMILAR AGREEMENTS WERE MADE FOR SUPPLY MADE TO RAJASTHAN RA J VIDYUT PRASAR NIGAM LTD. AND UTTARANCHAL POWER CORPORATION, NORTH DELHI POWER LTD., THEREFORE, M/S SADEM INDIA LTD. RENDERED SERVICES. THE ASSESSEE BENEFITED THE ASSISTANT AND EXPERTISE OF M/S SADEM INDIA LTD. FOR PROCURING THE ORDERS THROUGH TENDERS. IT IS FURTHER ARGUED THAT ON INCREASE INCO ME BY NOT ALLOWING THE COMMISSION PAID TO M/S SADEM INDIA LTD., THE LEARNE D ASSESSING OFFICER HAD NOT ALLOWED 80IB DEDUCTION ON IT. AS PER LAW, THIS IN COME IS ALSO PART OF THE INCOME FROM THE INDUSTRIAL INCOME, WHICH HAS NOT BEE N ALLOWED BY THE ASSESSING OFFICER AT THE TIME OF ADDITION ON ACCOUN T OF COMMISSION PAYMENT. ALTERNATIVELY, HE ARGUED THAT THE ASSESSEE WAS GETTI NG BENEFIT U/S 80IB OF THE ACT ON 30% OF INCOME OF INDUSTRIAL INCOME. IT IS FU RTHER ARGUED THAT THE 10 ASSESSEE EVERY YEAR HAS BEEN PAYING COMMISSION FROM A.Y. 2002-03 TO A.Y. 2006-07. IT VARIES FROM YEAR TO YEAR ON SALES OF TH E APPELLANT CONSISTENTLY INCREASING. THUS, HE REQUESTED TO CONFIRM THE ORDER OF THE LEARNED CIT(A) THE LEARNED A.R. ALSO PLACED RELIANCE THE FOLLOWING CAS E LAWS:- I. MOBILE COMMUNICATION (INDIA) (P) LTD. VS. DCIT 125 ITD 309 (DEL.) (TRIB.) II. V.I.P. INDUSTRIES LTD. VS. IAC 36 ITD 70 (BOM)(TRIB) (TM). III. ANUPAM SYNTHETICS (P) LTD. VS. JCIT 104 TTJ 119 (DEL. (TRIB.) IV. CIT VS. ISHWAR PRAKASH & BROS. 159 ITR 843 (P&H) (HC). V. CIT VS. GAUTAM CREATIONS (P) LTD. 171 TAXMAN 271 (DEL .) (HC). VI. CIT VS. SHRIRAM PISTONS & RINGS LTD. (2012) 206 TAXMA N 41 (DEL.)(HC) (MAG.) VII. J.K. STEEL & INDUSTRIES LTD. VS. CIT 112 ITR 285 (CA L.) (HC). VIII. ITO VS. DESH RAKSHAK AUSTHALAYA (P) LTD. 7 ITD 531 (D EL.) (TRIB.). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS MANUFACTURING OF CURRENT AND POTENTIAL TRANSFORMERS & ELECTRICAL CONTROL EQUIPMENTS. THE A PPELLANT HAD BEEN ASSISTED BY M/S SADEM INDIA LTD., BHIWADI TO EXECUTE THE TEND ER OF VARIOUS ELECTRICITY BOARDS. THE GENUINENESS OF THE PAYMENTS IN FORM OF C OMMISSION HAS NOT BEEN DOUBTED BY THE REVENUE. THE TDS HAS BEEN DEDUCTED AND PAID TO THE GOVERNMENT EXCHEQUER. THE DOCUMENTS FILED BY THE APP ELLANT BEFORE THE LOWER AUTHORITY SUPPORTED THAT M/S SADEM INDIA LTD. HAS R ENDERED SERVICE TO THE APPELLANT BY PROVIDING INFORMATION OF TENDER, ATTEN DING THE TENDER ON BEHALF OF THE APPELLANT, LIAISONING WITH THE VARIOUS ELECTRICI TY BOARDS, HELPING IN RECOVERING THE PAYMENTS, PROVIDING NUMBER OF TENDER S, PROVIDING EXPERIENCE WITH THE GOVERNMENT DEPARTMENT ETC. THE APPELLANT HA D SUBMITTED ALL THE 11 DETAILS BEFORE THE ASSESSING OFFICER TO PROVE THE S ERVICES RENDERED BY M/S SADEM INDIA LTD., WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. THE CASE LAW CITED BY THE APPELLANT I.E. DCIT VS. VHANKETESHWAR WIRES PVT. LTD. HAS BEEN SUPPORTED THE ASSESSEES CLAIM. THE FINDING OF THE COORDINATE B BENCH OF ITAT, JAIPUR IN ITA NO. 901/JP/2007 IS REPRODUCED AS UNDER:- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. FROM THE REPLY OF THE STATE ELECTRICITY BOARD S, THE EXISTENCE OF COMMISSION AGENT IS NOT DISPROVED AS WELL AS NON- RENDERING OF SERVICES TO THE ASSESSEE HAS NOT BEEN DENIED. NO RE PLY BY BIHAR STATE ELECTRICITY BOARD HAS BEEN RECEIVED. MOREOVER , THIS IS AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE COMMISSION AGENT AND NOT THE COMMISSION AGENT AND THE ELECTRICITY BO ARDS. EVEN IF THE EXISTENCE OF THE COMMISSION AGENT IS DENIED BY THE ELECTRICITY BOARDS, THEN THE SERVICES RENDERED BY THE AGENT CAN NOT BE STRAIGHTWAY BE DENIED. THE OTHER CIRCUMSTANCES AND T HE FACTS AS TO THE SERVICES RENDERED HAVE TO BE LOOKED INTO. IN THE PRESENT CASE, THE AGENTS HAVE RENDERED THE SERVICES LIKE PR OCUREMENT OF ORDERS, ASCERTAINING THE QUALITY, TIMELY PAYMENT ET C. THE RECIPIENT HAS DECLARED THE COMMISSION IN HIS RETURN OF INCOME AND HAS CONFIRMED TO HAVE RENDERED THE SERVICES TO THE ASSESSEE. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY DELETED THE ADDITION MADE BY THE A.O. AND HAS RIGHTLY DIRECTED TO ENHANC E THE ALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT. THUS GRO UND NO. 2 OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION ON IDENTICAL IS SUE BY THE COORDINATE B BENCH OF ITAT, JAIPUR, WE CONFIRM THE ORDER OF THE LE ARNED CIT(A). 8. GROUND NO. 2 OF THE REVENUES APPEAL IS AGAINST NO ALLOWING DEDUCTION U/S 80IB OF THE ACT ON INTEREST ON BANK FDRS AMOUNT ING TO RS. 2,75,187/-. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE AS SESSEE HAD CLAIMED 80IB 12 DEDUCTION @ 30% ON BANK FDR INTEREST OF RS. 2,75,187 /- AT RS. 82,554/-. THE LEARNED ASSESSING OFFICER DID NOT FIND THIS INCOME FROM THE INDUSTRIAL UNDERTAKING, THUS, HE DISALLOWED 80IB DEDUCTION AT RS. 82,554/-. THE LEARNED CIT(A) HELD THAT THESE FDRS WERE TAKEN FOR BANK GUAR ANTEE IN FAVOUR OF THE ELECTRICITY BOARD AND OTHER CUSTOMERS. IT WAS STATED BY THE ASSESSEE THAT WITHOUT PROVIDING BANK GUARANTEE AS REQUIRED BY THE CUSTOMER, NO INCOME CAN BE EARNED FROM THE INDUSTRIAL INCOME. WHEN FDRS WERE MADE FOR THE PURPOSES OF BANK GUARANTEE, UTILIZED BY PLACING IT WITH THE ELECTRICITY BOARDS, IT DIRECTLY COMPUTED WITH THE INDUSTRIAL UNDERTAKING , THEREFORE, THE LEARNED CIT(A) DELETED THE ADDITION. 9. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFIC ER. 10. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSE E SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND IT WAS ARGUED THAT THE ASSESSI NG OFFICER HIMSELF HAD ADMITTED INTEREST INCOME UNDER THE HEAD BUSINESS AN D PROFESSION. THE FDRS ON WHICH THE INTEREST IS RECEIVED, HIS MADE FOR DERI VING THE INCOME FROM BUSINESS OF INDUSTRIAL UNDERTAKING AS WITHOUT PROVID ING SUCH FDRS. NO SALE COULD HAVE BEEN AFFECTED. THESE FDRS WERE MADE NOT OU T OF SURPLUS FUNDS BUT BY UTILIZING THE WORKING CAPITAL OF THE BUSINESS. IN TEREST PAID ON WORKING CAPITAL LOAN IS RS. 10,84,020/-AS AGAINST THE INTER EST RECEIVED OF RS. 2,75,187/- THUS IN FACT, THERE IS NO INTEREST INCOME. THE ASSES SEE HAD RIGHTLY CLAIMED 80IB DEDUCTION ON IT. 13 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE FDRS WERE MADE FOR PROVIDING BANK GUARANTEE TO THE ELECTRICITY BOARD. APPARENTLY, THE INTEREST ON FDRS DIRECTLY CONNECTED WITH THE INDUSTRIAL UNDERTAKING. EVEN THE ASSESSEES ARGUMEN T OF NETTING OF INTEREST INCOME IS ACCEPTED. IT AUTOMATICALLY INCREASED THE PROFIT OF THE ASSESSEE UNDERTAKING AND THE DEDUCTION U/S 80IB OF THE ACT I S ALSO INCREASES. WE FIND THAT FDRS WERE MADE FOR BUSINESS PURPOSES AND FOR GE TTING THE TENDER FROM THE ELECTRICITY BOARD AND INCOME FROM INTEREST INCO ME IS DIRECTLY CONNECTED WITH THE INDUSTRIAL UNDERTAKING. THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, WE DISMISS THE REVENUES APPEAL ON THIS GROUND. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/07/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 18 TH JULY, 2014 * RANJAN COPY FORWARDED TO :- 1. THE ACIT, CIRCLE-2, ALWAR. 2. M/S MEHRU ELECTRICAL & ENGG. PVT. LTD., BHIWADI. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 215/JP/2009) BY ORDER, AR ITAT JAIPUR.