JCIT, Range-2, Kolhapur V. Sonali Engineering Pvt. Ltd., Kolhapur

ITA 2157/PUN/2012

• Counselvise Citation: 215724514 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation; Diversion of income; Additional evidence; Fair market value
• Section: 43B; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.1078/PN/2012 (ASSESSMENT YEAR 2008-09) ACIT, CIRCLE-2, KOLHAPUR .. APPELLANT VS. SONAI ENGINEERING PVT. LTD., PLOT NO.21, MIDC, SHIROLI, KOLHAPUR .. RESPONDENT PAN NO.AAECS1923P ITA.NO.2157/PN/2012 (ASSESSMENT YEAR 2009-10) DY.CIT, CIRCLE-2, KOLHAPUR .. APPELLANT VS. SONAI ENGINEERING PVT. LTD., PLOT NO.21, MIDC, SHIROLI, KOLHAPUR .. RESPONDENT PAN NO.AAECS1923P ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 08-08-2014 DATE OF PRONOUNCEMENT : 27-08-2014 ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE SEPARATE ORDERS DATED 01-03-2012 AND 27-08-2012 OF THE CIT(A), KOLHAPUR RELATING TO A.YRS. 2008-09 AND 2009-10 RES PECTIVELY. FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO.1078/PN/2012 (A.Y. 2008-09) : 2. GROUNDS OF APPEAL NO. 1 AND 2 BY THE REVENUE REA D AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) KOLHAPUR ERRED IN DIRECTING TO RE-CONSIDER THE ADDIT ION OF RS.16,81,042/-, MADE ON ACCOUNT OF DEPRECIATION OF W INDMILLS, WHEN THE SAME WAS CORRECTLY MADE BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, A ND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE FOUND ATION OF WINDMILL IS ESSENTIALLY A CIVIL CONSTRUCTION WORK, CONSISTING OF M ORTAR, CEMENT AND BRICKS, AND THEREFORE QUALIFIES FOR DEPRECIATION AT THE RATE OF 10%. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @80% ON THE WINDMILLS INSTALLE D BY IT AT VILLAGE RANJANGAON (BRAHMANVEL), TALUK SHIRUR, DIST .DHULE IN MAHARSHTRA). THE ASSESSING OFFICER ASKED THE ASSES SEE TO JUSTIFY THE CLAIM OF DEPRECIATION AT 80% ON THE WINDMILLS PURCH ASED BY IT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE THE ASSESSING OFFICER ALLOWED DEPRECIATION @10% AS AGAI NST 80% CLAIMED BY THE ASSESSEE AND MADE A DISALLOWANCE OF RS.16,81,042/-. 3. IN APPEAL THE LD.CIT(A) FOLLOWING VARIOUS DECISI ONS DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE DEPRECIATIO N IN THE FOLLOWING MANNER : 54. THE APPELLANT HAS PROVIDED THE COSTS OF VARIOUS C OMPONENTS WHICH HAVE BEEN INCLUDED BY IT IN THE COST OF WINDMI LL AS DETAILED BELOW: SRL.NO. PARTICULARS AMOUNT (RS.) AMOUNT (RS.) 1 COST OF WIND TURBINE GENERATOR 4,14,00,000/- 2 A) COST OF COMPONENT-SUZLON BLADES 65,00,000/- 3 B) ELECTRICAL ITEMS HT ELECTRICAL YARD WITH VCB, CT/PT, HT TRANSMISSION LINE, HT METERING 31,00,980/- 3. COST OF WORK INCLUDING FOUNDATION WORK 32,04,346/- 4. LABOUR RELATED COST 8,25,000/- A) TRANSPORTATION CHARGES 14,32,600/- B) INSTALLATION OF WINDMILL 1,12,240/- C) FINAL TESTING & COMMISSIONING 23,69,840/- 5. COMMON POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE FACILITY 37,50,000/- 6. MISCELLANEOUS A) MEDA APPLICATION FEES 3,750/- B) MEDA PROCESSING FEES 6,25,000/- TOTAL 6,09,53,916/- 55. IN SO FAR AS THE COST OF THE WIND TURBINE, CHARGE S FOR ERECTION, INSTALLATION TESTING AND COMMISSIONING OF WINDMILL AND TRANSMISSION LINE AND ELECTRICAL YARD ARE CONCERNED, THERE IS NO CONTROVERSY AND THE DEPRECIATION ON THE TURBINE WAS ALLOWED BY THE A SSESSING OFFICER @ 80% AS PROVIDED IN APPENDIX-I TO I.T. RULES AND AS C LAIMED BY THE APPELLANT. THIS ALLOWANCE IS ALSO IN CONSONANCE WITH TH E DECISION OF THE ITAT, PUNE IN THE CASE OF POONAWALLA FINVEST (I) PVT. LTD. (118TTJ 68). THE RELEVANT OBSERVATIONS OF THE HONBLE TRIBUN AL ARE REPRODUCED HEREUNDER:- 16. AS FAR AS THE QUESTION OF DEPRECIATION IN RESPECT OF 'T RANSFORMER UPTO DP STRUCTURE' IS CONCERNED, THE APPELLANT HAD PA ID A SUM OF RS. 7,00,000 FOR THE PURPOSE OF SUPPLYING OF ELECTRICAL I TEMS LIKE TRANSFORMER UPTO DP STRUCTURE, INTERNAL LINE UPTO MET ERING. THE SAID PAYMENT WAS MADE TO SUZLON DEVELOPERS (P.) LTD. THIS G ADGET IS FOR TRANSMISSION OF ELECTRICAL POWER GENERATED UPTO SUB-STAT ION OF MSEB AT SITE. IN OUR HUMBLE OPINION THE ELECTRICAL ENERGY SO PRODUCED BY THE WIND MILL IS A WASTE IF IT IS NOT TRANSMITTED TO MS EB SUB-STATION. THE FUNCTION OF SUCH UNIT IS THAT THE ELECTRICITY SO G ENERATED IS REQUIRED TO BE TRANSFERRED AND TRANSMITTED TO CABLE L INE UPTO SUB- STATION, WHERE THE ACTUAL UNITS SO GENERATED ARE STORED AND METERED. SINCE THIS IS THE FUNCTION OF TRANSFORMER UPTO DP STRUC TURE, HENCE OUGHT TO BE HELD AS AN INTEGRAL PART OF THE WINDMILL . THE OTHER REASONS SUCH AS THE PERIOD DURING WHICH A MACHINERY GETS DEPRE CIATED, AS DISCUSSED HEREINABOVE, DOES ALSO APPLY IN CASE OF THIS MAC HINERY. SINCE WE HAVE HELD SO, THEREFORE, THE APPELLANT IS C ONSEQUENTLY ENTITLED FOR HIGHER RATE OF DEPRECIATION AS PRESCRIBE D IN IT RULES. IN ANY CASE, THERE IS NO DISPUTE IN CASE OF THESE COMPON ENTS OF WINDMILL. THE ASSESSING OFFICER IS DIRECTED TO ALLOW DE PRECIATION ON HT ELECTRICAL UCB AND TRANSMISSION LINE FOR WINDMILL @ 80% AS WELL. 56. I FIND THAT THE APPELLANT HAS CLAIMED AN AMOUNT OF RS.37,50,000/- TOWARDS POWER EVACUATION FACILITY AND CREATION OF IN FRASTRUCTURE WHICH IS INCLUDED IN THE COST OF WTGS BY THE APPELLAN T. THE BREAKUP OF POWER EVACUATION COST AND INFRASTRUCTURE CREATION COST IS NOT GIVEN. SINCE THE INFRASTRUCTURE CREATION COST WOULD I NCLUDE THE COST OF MAKING OF ROADS PROVIDING FREE ACCESS AND KEEPING THE SURROUNDING AREA VACANT, THE SAME WOULD BE TREATED AS A BUILDING AND HENCE, 4 DEPRECIATION @ 10% WOULD BE APPLICABLE. SINCE NOTHI NG HAS BEEN PROVIDED BY THE APPELLANT, IT WOULD ONLY BE FAIR TO ASSUME THAT 60% OF THIS COST IS INCURRED TOWARDS THESE EXPENSES AND 40% TOWAR DS POWER EVACUATION FACILITY. THEREFORE, DEPRECIATION ALLOWA BLE ON CIVIL CONSTRUCTION WILL ONLY BE RS.22,50,000/-. THE ASSESSING O FFICER IS DIRECTED TO RECOMPUTE THE DEPRECIATION ACCORDINGLY IN RESPECT OF THE NEW WINDMILL. 57. THE APPELLANT HAS NOT GIVEN A BREAKUP OF THE COM PONENT WHERE THE COST OF CONSIDERATION FOR PROVIDING EASY AND FREE ACCESS AND KEEPING THE AREA VACANT SURROUNDING LAND AT GAT NO. 21/4 VILLAGE RANJANGAON WINDMILL PROJECT AT BRAMHANVEL, PAID TO SARJAN REALITIES LTD. HAS BEEN PARKED. IT IS CERTAIN THAT SEPARATE BIL L HAS BEEN RAISED FOR POWER EVACUATION FACILITIES AND CREATION OF INFR ASTRUCTURE FACILITY. IT IS ALSO CERTAIN THAT RS. 13,23,370/- HAS BEEN INCURR ED FOR FREE ACCESS AND KEEPING THE SURROUNDING AREAS VACANT. HENCE, DEPRECIATION @ 10% WOULD ALSO BE APPLICABLE TO THIS E XPENSE AND THE GROSS AMOUNT SHALL BE REDUCED FROM TOTAL COST OF WI NDMILL FOR APPLYING DIFFERENT RATES _OF DEPRECIATION. 58. IN RESPECT OF CLAIM MADE FOR MEDA CHARGES UNDER M ISCELLANEOUS EXPENSES, IT IS HELD THAT THESE EXPENSES ARE NECESSARILY IN CURRED FOR THE PURPOSE OF ERECTION OF WINDMILL AND HENCE ARE AL LOWABLE TO BE INCLUDED AS A PART OF THE COST OF WINDMILL BUT THESE EXPENSES WILL BE BIFURCATED ON PRORATA BASIS IN ACCORDANCE WITH THE RA TIO OF THE COST OF WINDMILL AND COST OF OTHER CIVIL WORK. 59. IN VIEW OF THE ABOVE DISCUSSION, I DIRECT THE ASSESSIN G OFFICER TO RE-COMPUTE THE DEPRECIATION ALLOWABLE ON NEW WINDMI LL ON THE BASIS OF THE FOLLOWING: I) COST OF NEW WINDMILL WILL BE INCLUSIVE OF ALL ITEMS MENTIONED AT 1 TO 4 ABOVE, II) COST OF POWER EVACUATION FACILITY AND INFRASTRU CTURE WILL BE APPORTIONED BETWEEN THE RATES APPLICABLE TO BUILDING /ROADS AND WINDMILL IN 60 : 40 RATIO (SEE PARAGRAPH 56). III) COST OF POWER EVACUATION FACILITY AS DISCUSSED IN PARAGRAPH 57 DEPRECIATION TO BE WORKED OUT @10%. IV) COST OF OTHER MISCELLANEOUS EXPENSES WILL BE APPO RTIONED ON PRORATE BASIS BETWEEN WINDMILL AND INFRASTRUCTURE FACI LITIES. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND IS PARTLY ALLOWED. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE FILED A COPY OF THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMINITY 5 DEVELOPERS AND BUILDERS VIDE ITA NO.1505/PN/2011 OR DER DATED 12-12-2012 FOR A.Y. 2008-09. THE LD. COUNSEL FOR T HE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA 4 OF THE OR DER OF THE TRIBUNAL WHICH READS AS UNDER : 4. IN THE PRESENT CASE, THE FUNCTIONAL TEST OF THE FOUNDATION HAS BEEN EXPLAINED BY THE LD CIT(A). THE LD CIT(A) HAS ALSO EXPLAINED, MORE PARTICULARLY, IN THE CASE OF M/S. CHAPHALKAR BRO THERS (SUPRA) HOW THE FOUNDATION IS THE INTEGRATED PART OF THE WIN D MILL AS THE SAME IS TO BE ERECTED HAVING TECHNICAL EXPERTISE TO SU STAIN THE LOAD OF THE TURBINE. IN THE CASE OF POONAWALA FINVEST & AGRO (P) LTD. (SUPRA), THE TRIBUNAL EMPHASIZED ON THE FUNCTIONAL TEST. SO FAR AS THE FOUNDATION IS CONCERNED, AS DISCUSSED BY THE LD CIT( A), THE FUNCTIONAL TEST IS FULFILLED. THERE SHOULD NOT BE QUA RREL THAT CIVIL WORK IS INVOLVED IN THE ERECTION OF THE FOUNDATION, BUT E VERY CIVIL WORK CANNOT BE TREATED AS CIVIL WORK AS REQUIRED FOR BRIN GING CONSTRUCTION. IN OUR OPINION, COST ON THE FOUNDATION OF THE WIND MILL IS ELIGIBLE FOR THE DEPRECIATION AT THE RATE 180% OR THE RATE WHICH IS APPLICABLE TO THE WIND MILL AS IT IS INTEGRAL PART OF COST OF WIND M ILL ERECTION. SAME WAY, THE COST FOR COMMISSION AND ERECTION CANNOT BE SAI D TO BE SEPARATE FROM THE WIND MILL AS IT IS DIRECTLY RELATED TO THE FUNCTIONING OF WIND MILL. THE LD CIT(A) HAS RIGHTLY ALLOWED THE DEPRECIATION ON THE PRO RATA BASIS ON THE COST OF FOUNDATION TO THE EX TENT OF THE CIVIL WORK. WE MAY REFER TO HERE THE DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF ACIT VS. PARRY ENGINEERING & ELE CTRONICS, ITA NO. 3317/AHD/2011 DATED 2 ND MARCH 2012, IN WHICH IT IS HELD THAT THE FOUNDATION IS A PART OF THE TURBINE AND IS ELI GIBLE FOR THE RATE OF DEPRECIATION WHICH IS APPLICABLE TO THE WIND MILL. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSU E. ACCORDINGLY, THE SAME IS CONFIRMED. 4.1 REFERRING TO THE ABOVE, HE SUBMITTED THAT THE O RDER OF THE CIT(A) IS IN CONSONANCE WITH THE DIRECTION OF THE T RIBUNAL IN THE CASE CITED (SUPRA). THEREFORE, THIS BEING A COVERE D MATTER, THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT TH E ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE DECISION OF THE TRIBUNAL. 6 4.2 IN VIEW OF THE ABOVE AND CONSIDERING THE FACT T HAT THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE DECISION OF TH E TRIBUNAL CITED (SUPRA), AND VARIOUS OTHER DECISIONS, WE FIND NO IN FIRMITY IN THE SAME. GROUNDS RAISED BY THE REVENUE ARE ACCORDINGL Y DISMISSED. 5. GROUNDS OF APPEAL NO. 3 TO 5 BY THE REVENUE READ S AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A)KOLHAPUR ERRED IN DELETING THE ADDITION MADE U/S 40A(2)(B) OF RS.57,82,634/-,WHEN THE ASSESSEE HAS FAILED TO JUSTIFY AND ESTABLISH THAT THE EXPENDITURE CLAIMED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE CIT(A)ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAS F AILED TO GIVE EFFECTIVE REBUTTAL ON THE FOLLOWING POINTS, FO RMING THE BASIS FOR THE AFORESAID ADDITION: I) DIRECTORS HAD NOT RENDERED ANY NEW SERVICES WHICH T HEY HAD NOT BEEN RENDERING, SINCE THE COMPANY CAME INTO EXISTENCE . II) THERE WAS NO BASIS FOR PAYMENT EXCEPT THE TURNOV ER MADE BY THE COMPANY III) THE PAYMENT OF COMMISSION WAS NOT LINKED TO THE S ERVICES RENDERED BY THE DIRECTORS. IV) THERE IS NO JUSTIFICATION FOR PAYMENT OF HUGE COM MISSION, WHICH HAS BEEN BROUGHT ON RECORDS. V) THOUGH THE COMMISSION IS PROVIDED ON 31.03.2008, R ELEVANT TO A.Y. 2008-09, THE SAME WAS ACTUALLY SHOWN TO BE PAID I N NOV.2008, CASTING A SERIOUS DOUBT ON THE GENUINENESS OF THE CLAIM OF THE ASSESSEE. VI) THE DIRECTORS HAVE NOT SHOWN RECEIPT OF THE SAID C OMMISSION THROUGH THEIR RESPECTIVE RETURNS FOR THE A.Y.2008-09. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, A ND IN LAW, THE CIT (A) ERRED IN RELYING ON THE DECISION OF THE HON. BOMBAY HIGH COURT, IN THE CASE OF INDO SAUDI SERVICES (TRAVEL)(PV T.)LTD. (310ITR 306), WHEN THE SAME IS DELIVERED ON A DIFFERENT SET OF CIRCUMSTANCES, IN AS MUCH AS THERE WAS NO LOSS OF REVENUE IS NOT APPLIC ABLE IN THE PRESENT CASE. 5.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.57,82,634/- ON ACCOUNT OF DIRECTORS 7 COMMISSION. THE ASSESSING OFFICER ASKED THE ASSES SEE TO FURNISH THE DETAILS OF THIS EXPENDITURE AND ASKED THE ASSES SEE TO ESTABLISH THE BASIS FOR THIS CLAIM. IT WAS EXPLAINED THAT THE CO MMISSION HAS BEEN PAID TO THE DIRECTORS ON THE BASIS OF A RESOLUTION PASSED AT THE EGM (EXTRAORDINARY GENERAL MEETING) OF THE MEMBERS OF T HE COMPANY. A COPY OF THE SAME WAS ALSO FILED BEFORE THE ASSESSIN G OFFICER. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT A PART FROM THIS RESOLUTION PASSED BY THE DIRECTORS OF THE COMPANY, THERE IS NO OTHER EVIDENCE REGARDING THE NECESSITY OF THE PAYMENT. T HERE IS NO SUCH JUSTIFICATION FOR SUCH HUGE PAYMENT TO THE DIRECTOR S IN THE CURRENT YEAR DUE TO THE FOLLOWING REASONS : I. THIS PAYMENT IS FOR THE FIRST TIME. II. THERE IS NO CHANGE IN THE TURNOVER OR PROFITABIL ITY OF THE COMPANY AS COMPARED TO EARLIER YEAR OPERATIONS. III. DIRECTORS HAVE NOT RENDERED ANY NEW SERVICES WHIC H THEY HAVE NOT BEEN RENDERING IN THE PAST YEARS SINCE THE CO MPANY CAME INTO EXISTENCE. IV. THERE IS NO BASIS FOR PAYMENT EXCEPT THE TURNOVER MADE BY THE COMPANY. V. THE PAYMENT OF COMMISSION IS NOT LINKED TO SERVICES R ENDERED BY THE DIRECTORS. VI. EVEN IT IS NOT CLEAR FROM THE RESOLUTION THAT WHY THE COMMISSION IS TO BE PAID TO THE DIRECTORS. VII THE DIVISION OF COMMISSION AMONGST DIRECTORS IS NOT CLEAR AND IS LEFT TO DISCRETION OF THE BOARD AND MOST IMPORTANTL Y IS NOT LINKED TO ANY EXTRA SERVICES RENDERED BY THE DIRECTOR S. VIII. THERE IS NO OTHER JUSTIFICATION FOR THIS HUGE PA YMENT OF COMMISSION WHICH HAS BEEN BROUGHT ON RECORD. 5.2 SINCE THE ASSESSEE COULD NOT FURNISH ANY JUSTIF ICATION TO HIS SATISFACTION FOR CLAIMING THE COMMISSION PAID TO TH E DIRECTORS, THE ASSESSING OFFICER HELD THAT THE ONLY PURPOSE FOR PA YMENT OF THIS COMMISSION AT THE END OF THE YEAR IS TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE COMPANY. HE ANALYSED THE PROVISIONS O F SECTION 8 40A(2)(A) AND NOTED THAT THE SAID PROVISION EXPRESS LY PROHIBITS SUCH PAYMENTS TO INTERESTED PERSONS. REJECTING THE VARI OUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER DISALLO WED THE PAYMENT OF COMMISSION OF RS.57,82,634/- U/S.40A(2)(A) OF TH E I.T. ACT. 6. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THERE IS NO FINDING BY THE ASSESSING OFFICER THAT THERE IS ANY ATTEMPT TO EVADE TAX. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING AS TO HOW AND IN WHAT MANNER THE PAYMENTS ARE EXCESSIVE AND UNREASONABLE . SIMILARLY, THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT TH E RECIPIENTS OF PAYMENTS ARE NOT LIABLE TO PAY TAX OR LIABLE TO PAY LESS TAX ON WHICH THE ASSESSEE PAYS THE TAX. IT WAS ARGUED THAT BOTH THE ENTITIES ARE TAX PAYERS IN THE SAME BRACKET. IT WAS FURTHER ARGUED THAT THE SISTER CONCERNS ARE NOT RELATED PERSONS AS PER CLAUSE (B) AND THEREFORE SECTION 40A(2)(A) IS NOT ATTRACTED AND THE ENTIRE E XERCISE IS REVENUE NEUTRAL. THE CBDT CIRCULAR NO.06-P, DATED 06-07- 1968 WAS BROUGHT TO THE NOTICE OF THE CIT(A). THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS : I. CIT VS. V.S. DEMPO & CO. LTD., (2011) 336 ITR 209 (BOM.) II. CIT VS. INDO SAUDI SERVICES (TRAVEL) P. LTD., (20 09) 3210 ITR 306 (BOM). III. CIT VS. GLAXO SMITHKLINE ASIA (P) LTD. (2010) 23 6 CTR (SC) 113 7. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND RELYING ON VARIOUS DECISIONS CITED BEFORE HIM THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 71. I HAVE GIVEN CAREFUL CONSIDERATION TO THE SUBMISSI ONS OF THE APPELLANT AND ALSO THE FACTS OF THE CASE. THE ISSUE BE FORE THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DEMPO & CO. PVT. LTD. (2011) 196 TAXMAN 193 WAS WHETHER A SUBSIDIARY COMPANY IS 9 RELATED PERSON WITHIN THE MEANING OF THE PROVISIONS OF SECTION 40A(2)(B) (II). IT WAS HELD THAT THE OBJECT OF SECTIO N 40A(2) IS TO PREVENT DIVERSION OF INCOME. SECTION 40A(2) WAS ADDED TO THE INCOME-TAX ACT BY WAY OF AN AMENDMENT MADE BY THE F INANCE ACT 1968. IT IS ONLY WHEN PAYMENT IS MADE BY THE ASSESSEE TO THE RELATED PERSON MENTIONED IN CLAUSE (B) OF SECTION 40A(2) THAT THE ASSESSING OFFICER GETS JURISDICTION TO DISALLOW THE EXPENDITURE OR A PART OF EXPENDITURE WHICH IS CONSIDERED TO BE EXCESSIVE OR UNRE ASONABLE. SINCE THE SUBSIDIARY COMPANY WAS NOT A MEMBER OF THE H OLDING COMPANY, DEMPO & CO. PVT. LTD., THE PROVISIONS OF CLA USE (D) OF SECTION 40A(2)(B) WERE NOT ATTRACTED. THUS THE HONBL E COURT DID NOT DECIDE ON THE ISSUE AT HAND, I.E., WHETHER THE PROVISI ONS OF SECTION 40A(2)(B) WILL BE ATTRACTED WHEN BOTH THE PAYER AND THE PAYEE FALL IN THE SAME TAX BRACKET. 72. IN THE CASE OF CIT & ANR.V. GLAXO SMITHKLINE ASIA (P) LTD. (2010) 236 CTR 113 (SC), THE HONBLE SUPREME COURT DECLINED TO INTERFERE WITH THE CONCURRENT FINDINGS OF THE AUTHORITY BELOW THAT APPELLANT GSKAL AND ITS SERVICE PROVIDER GSKCH ARE NOT RELATED COMPANIES FOR THE PURPOSE OF SECTION 40A(2) AND HENCE WHETHER ALLOC ATION OF CROSS- CHARGES SHOULD BE ALLOWED OR DISALLOWED? THE FACT THAT THE ENTIRE EXERCISE WAS REVENUE NEUTRAL ALSO LED TO THE DISMISSAL OF APPEAL. HOWEVER, THE JUDGMENT DOES NOT LAY DOWN THE PROPOSITI ON THAT MERELY BECAUSE THE PAYMENTS ARE REVENUE NEUTRAL THE SA ME WOULD BE OUTSIDE THE AMBIT OF THE PROVISIONS OF SECTION 40A(2 ). 73. IN THE CASE OF CIT V. INDO SAUDI SERVICES (TRAVEL) (PVT.) LTD. [20 09] 310 ITR 306, THE HONBLE COURT REFERRED TO CBDT CIRCULAR NO. 6-P DATED 06-07-1968 WHICH STATES THAT NO DISALLOWANCE IS R EQUIRED IN RESPECT OF PAYMENTS MADE TO RELATIVES AND SISTER CONCERN S WHERE THERE IS NO ATTEMPT TO EVADE TAX WHILE HOLDING THAT THE CIT(A) WAS WRONG IN DISALLOWING % COMMISSION PAID BY THE APPELL ANT TO A SISTER CONCERN ESPECIALLY WHEN THE APPELLANT HAD PROV ED THAT THERE WAS NO ATTEMPT TO EVADE TAX SINCE THE SISTER CONCERN WA S PAYING TAX AT A HIGHER RATE. 74. THUS, THE PRINCIPLES ENUNCIATED IN THE CASE OF CIT V/S INDO SAUDI SERVICES (TRAVEL) (PVT.) LTD. (SUPRA) BY THE HONOURABLE BOMBAY HIGH COURT THAT WHERE THERE IS NO LOSS TO REVENUE ON ACCOUN T OF ANY PAYMENTS MADE TO A RELATED PERSON, THE PROVISIONS OF SE CTION 40A(2)(B) WILL NOT ATTRACT ARE ALSO APPLICABLE IN TH E INSTANT CASE IN RESPECT OF PAYMENT OF COMMISSION TO DIRECTORS TO THE TU NE OF? 57, 82,634 /-. 75. IN VIEW OF THE FACT THE ISSUE IS COVERED BY A DECI SION OF JURISDICTIONAL HIGH COURT, THE ADDITION MADE IS DELET ED AND GROUND NO. 3 IS ALLOWED. 7.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 10 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE, DURING THE IMPUGNED ASSESSMENT YEAR, HAS CLAIMED PAYMENT OF COMMISSION OF RS.57,82,634/- TO THE DIRECTORS ON THE BASIS OF A RESOLUTION PASSED IN TH E EXTRAORDINARY GENERAL BODY MEETING. WE FIND THE ASSESSING OFFICE R DISALLOWED THE PAYMENT OF SUCH COMMISSION TO THE DIRECTORS U/S .40A(2)(A) OF THE I.T. ACT AND ON APPEAL, THE LD.CIT(A), FOLLOWIN G VARIOUS DECISIONS, DELETED THE ADDITION ON THE GROUND THAT THE PROVISIONS OF SECTION 40A(2) ARE NOT ATTRACTED WHEN BOTH PAYER AN D PAYEE FALL IN THE SAME TAX BRACKET. 8.1 IT IS THE CASE OF THE REVENUE THAT THE DIRECTOR S HAVE NOT SHOWN RECEIPT OF SAID COMMISSION THROUGH THEIR RESPECTIVE RETURNS FOR A.Y. 2008-09. FURTHER, IT IS ALSO THE CASE OF THE REVEN UE THAT THERE IS NO EVIDENCE AS TO THE NATURE OF SERVICES RENDERED BY T HE DIRECTORS JUSTIFYING SUCH HUGE COMMISSION PAYMENT. IT IS THE CASE OF THE ASSESSEE THAT THE DIRECTORS HAVE RENDERED SERVICES AND THE COMMISSION HAS BEEN PAID ON THE BASIS OF RESOLUTION PASSED AT THE EGM. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE AS WELL AS THE DIRECTORS FALL UND ER THE SAME TAX RATE AND THERE IS NO ATTEMPT TO EVADE TAX. FROM THE COP IES OF THE ASSESSMENT ORDERS PASSED U/S.143(3)/263 ON 19-12-20 12 IN CASE OF SHRI P.J. JADHAV AND ON 24-09-2013 IN CASE OF THE O THER DIRECTORS WE FIND THE ASSESSING OFFICER HAS BROUGHT TO TAX SUCH COMMISSION 11 INCOME IN THE HANDS OF THE RESPECTIVE DIRECTORS WHI CH WERE NOT DECLARED EARLIER BY THEM. FURTHER, THE COMPANY AS WELL AS THE DIRECTORS FALL IN THE SAME TAX SLAB. THEREFORE, TH E LD.CIT(A), IN OUR OPINION, IS JUSTIFIED IN DELETING THE ADDITION WHIC H IS IN CONSONANCE WITH THE VARIOUS JUDICIAL DECISIONS RELIED ON BY HI M. WE ACCORDINGLY UPHOLD THE SAME AND THE GROUNDS OF APPEAL NO.3 TO 5 BY THE REVENUE ARE DISMISSED. 9. GROUND OF APPEAL NO.6 BY THE REVENUE READS AS UN DER : 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CIT (A) KOLHAPUR ERRED IN DELETING THE ADDITION MADE U/ S40A(2)(A) OF RS.23,67,789/-,BY ADMITTING NEW EVIDENCES WITHOUT GIV ING ANY OPPORTUNITY TO THE AO TO EXAMINE AND REBUT THIS EVID ENCE, AS REQUIRED TO BE GIVEN UNDER SUB-RULE (3) OF RULE 46A. 9.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS MADE PURCHASES FROM THE SISTER CONCERN M/S. SAROJ C ASTINGS PVT. LTD. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE PAYMENT TO THE SISTER CONCERN VIS-A-VIS THE FAIR MARKET VALUE. ALTHOUGH THE ASSESSEE FILED THE DETAILS, HOWEVER, THE ASSESSEE, ACCORDING TO THE ASSESSING OFFICER, DID NOT FILE ANY JUSTIFICATION. FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICE R NOTED SOME RATE DIFFERENCE. IN ABSENCE OF ANY JUSTIFICATION TO SUB STANTIATE THE SAME, THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SE CTION 40A(2)(A) DISALLOWED AN AMOUNT OF RS.23,67,789/-. 10. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 12 76. IN RESPECT OF PURCHASES MADE FROM M/S SAROJ CASTING S PVT. LTD. THE APPELLANT SUBMITTED THAT IT HAD MADE CERTAI N SUPPLIES TO CUMMINS INDIA LTD. AND THE SUPPLIES ARE OF KP CYLINDER HEAD CASTINGS. THE KP CYLINDER HEAD CASTINGS ARE PROCURED FR OM M/S SAROJ CASTINGS PVT. LTD. AND M/S SAROJ IRON INDUSTRIES. THE CYLINDER HEADS ARE SUPPLIED TO CUMMINS INDIA LTD. AFTER MACHINI NG, FINISHING AND TESTING ETC. IT WAS EXPLAINED THAT DUE TO INCREASE IN PRICES OF RAW MATERIAL BY M/S SAROJ CASTINGS PVT. LTD. THE MATTER WA S FOLLOWED UP WITH CUMMINS INDIA LTD. FOR A RATE REVISION. THE APPE LLANT HAS PROVIDED EVIDENCES IN THE FORM OF LETTERS AND E-MAILS, WHICH DESCRIBE THE NEGOTIATION FOR PRICE INCREASE AGREED TO BY CUMM INS INDIA LTD. FOR SUPPLY OF KP CYLINDER HEADS. THE ENTIRE PROCESS TOO K ALMOST FIVE MONTHS FROM THE END OF MAY 2007 TILL MID SEPTEMBER 2 007 WHEN CUMMINS INDIA LTD. APPROVED THE HIKE IN COST OF KP CY LINDER HEADS. THE RATE DIFFERENCE AGREED UPON WAS PASSED ON TO THE SU PPLIERS OF CASTINGS. IT IS THUS PROVED THAT THE RATE DIFFERENCE IN VOICE RAISED BY M/S SAROJ CASTINGS PVT. LTD. AND PAID BY THE APPELLANT IS FOR COMPENSATING THE INCREASE IN RAW MATERIAL PRICES AND T HAT TOO AFTER CUMMINS INDIA LTD. HAD APPROVED OF THE SAME. HENCE, T HE APPELLANT HAS SUFFICIENTLY PROVED THAT PAYMENT TO M/S SAROJ CASTI NGS PVT. LTD. HAD INCURRED DURING THE COURSE OF COMMERCIAL DEALING S AND HENCE, IT IS NOT COVERED BY THE PROVISIONS OF SECTION 40A(2)(B) O F THE ACT. 77. IN VIEW OF THE ABOVE DISCUSSION I HOLD THAT T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE U NDER SECTION 40A(2)(B) OF RS.23,67,789/- AND THE SAME IS DELETED. G ROUND NO. 4 IS ALLOWED. 10.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE COPY OF THE ASSESSMENT ORDER WHICH SHOW THE BREAKUP OF RS.2 3,67,789/- RAISED BY M/S. SAROJ CASTINGS PVT. LTD., SISTER CON CERN OF THE ASSESSEE, WE FIND THE SAME INCLUDES PAYMENT OF EXCI SE DUTY RS.2,89,107/-, EDUCATION CESS RS.5,782/-, SECONDARY EDUCATION CESS RS.2,891/- AND VAT OF RS.2,63,087/- TOTALLING TO RS .5,60,868/- WHICH ARE PAID TO GOVT. DEPARTMENTS FURTHER, WE AR E OF THE CONSIDERED OPINION THAT IT IS HIGHLY IMPROBABLE TH AT ANY PERSON WILL 13 MAKE ANY TAX PLANNING TO CONVERT AN AMOUNT OF RS.23 LAKHS BY PAYING TAX AND VARIOUS OTHER DUTIES TO GOVT. AMOUNT ING TO MORE THAN RS.10 LAKHS. THEREFORE, EVASION OF TAX IN THE INST ANT CASE IS RULED OUT. FURTHER, THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT COUNTER THE REASONING GIVEN BY LD.CIT(A) WHICH IN OUR OPINI ON IS A REASONED ONE. THE GROUND RAISED BY THE REVENUE IS ACCORDING LY DISMISSED. 12. GROUNDS OF APPEAL NO.7 AND 8 BEING GENERAL IN N ATURE ARE DISMISSED. ITA NO.2157/PN/2012 (A.Y. 2009-10) : 13. GROUND OF APPEAL NO.1 & 2 BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT (A) KOLHAPUR ERRED IN DELETING THE ADDITION MADE U/S 40A (2)(B) OF RS.5782634/-, WHEN THE ASSESSEE HAD FAILED TO JUSTIFY AND ESTABLISH THAT THE EXPENDITURE CLAIMED WAS WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD FAILED TO REBUT THE AO'S OBSERVATION THAT DIRECTORS HAD NOT RENDERED ANY N EW SERVICES WHICH THEY HAD NOT BEEN RENDERING SINCE THE COMPANY CAME INTO EXISTENCE, THE PAYMENT OF COMMISSION WAS NOT LINKED TO THE SERVICES RENDERED BY THE DIRECTORS, AND THAT THE DIRECTORS HAV E NOT SHOWN RECEIPT OF THE SAID COMMISSION IN THEIR RESPECTIVE RETU RNS FOR THE A.Y.2009-10. 13.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUNDS ARE IDENTICAL TO GROUNDS OF APPEAL NOS. 3 TO 5 BY THE R EVENUE IS ITA NO.1078/PN/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED. 14 14. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS U NDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE FOUNDATIO N OF WINDMILL IS ESSENTIALLY A CIVIL CONSTRUCTION WORK, CONSISTING OF MOR TAR, CEMENT AND BRICKS, AND THEREFORE QUALIFIES FOR DEPRECIATION AT THE RATE OF 10%. 14.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUNDS ARE IDENTICAL TO GROUNDS OF APPEAL NOS. 1 & 2 BY THE RE VENUE IS ITA NO.1078/PN/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE ABOVE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 15. GROUND OF APPEAL NO.4 BY THE REVENUE READS AS U NDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE CIT(A) KOLHAPUR ERRED IN DELETING THE ADDITION MADE U/S 43B OF RS.13,00,408/- TOWARDS PAYMENT OF SALES TAX PAID FOR EA RLIER YEARS, BY ALLOWING ADDITIONAL GROUND WITHOUT GIVING ANY OP PORTUNITY TO THE AO TO EXAMINE AND REBUT THIS EVIDENCE, AS REQUIRED T O BE GIVEN UNDER SUB-RULE (3) OF RULE 46A. 15.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE, VIDE ITS LETTER DATED 16-08-2012 HAD REQUESTED THE ASSESSING OFFICE R TO ALLOW THE CLAIM OF RS.13,00,408/- BEING EARLIER YEAR'S SALES- TAX PAYMENT, WHICH WAS INADVERTENTLY NOT CLAIMED IN ITS ORIGINAL RETURN. HOWEVER, SINCE THE CLAIM WAS NOT MADE THROUGH A REVISED RETU RN AND ALSO AS THE TIME LIMIT PRESCRIBED UNDER SECTION 139(5) HAD LAPS ED, THE ASSESSING OFFICER TURNED DOWN THE REQUEST MADE. IN DOING SO H E RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) 15 LIMITED V/S COMMISSIONER OF INCOME TAX 284 ITR 323 (SC) AND ACCORDINGLY TAXED THE SUM OF RS.13,00,408/-. 16. BEFORE THE CIT(A) THE ASSESSEE POINTED OUT THAT SINCE SALES- TAX PAYMENT WAS NOT ACTUALLY MADE IN THE EARLIER YE AR, NO CLAIM WAS MADE UNDER SECTION 43B THEN. AS A RESULT, THIS AMOU NT WAS ALREADY SUBJECT TO TAX IN THE EARLIER YEAR AND HENCE, REJEC TION OF THE CLAIM MADE DURING THE YEAR UNDER APPEAL WOULD AMOUNT TO D OUBLE TAXATION. IT WAS CONTENDED THAT THE OMISSION IN THE ORIGINAL RETURN WAS AN INADVERTENT MISTAKE AND IT WAS LAWFULLY ENTITLED FO R THE CLAIM OF DEDUCTION U/S.43B. 17. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) ADMITTED THE ADDITIONAL EVIDENCE FILED BE FORE HIM BY OBSERVING AS UNDER: 20. VIDE THIS OFFICE LETTER DATED 16/08/2012, THE A SSESSING OFFICER WAS CALLED UPON TO COMMENT ON THE ADMISSIBILITY OR OTH ERWISE OF THE ADDITIONAL GROUND UNDER RULE 46A AND ALSO TO COMMENT ON THE MERITS OF THE SAID GROUND. 21. THE ASSESSING OFFICER HAS HOWEVER NOT REVERTED BACK ON THE DUE DATE AND HE HAS NOT SOUGHT AN EXTENSION OF TIME AS WELL . UNDER THE CIRCUMSTANCES, I PRESUME THAT THE ASSESSING OFFICER HAS NO OBJECTIONS IN ADMISSION OF ADDITIONAL GROUNDS OF APPEAL. EVEN OTH ERWISE, AS EXPLAINED IN THE CASE OF CIT, CENTRAL-I V. PRUTHUI BROKERS & SHAREHOLDERS (P.) LTD. [2012] 23 TAXMANN.COM 23 (BOM BAY), THE DECISION IN GOETZE (INDIA) LIMITED V/S COMMISSIONER OF INCOME TAX (SUPRA) IS NOT APPLICABLE ON APPELLATE AUTHORITIES. 22. THE HON'BLE BOMBAY HIGH COURT HAS LOOKED INTO TH E JUDGMENT GIVEN IN THE CASE OF GOETZE (INDIA) LIMITED V. COMMI SSIONER OF INCOME-TAX, [2006] 157 TAXMAN 1 (SC) IN CENTRAL-I V . PRUTHVI BROKERS & SHAREHOLDERS (P.) LTD. (SUPRA) AND EXPLAINE D THAT IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT HOL D ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFECT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OF FICER, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDI CTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NO T BEEN 16 NEGATED BY THE SUPREME COURT IN THIS JUDGMENT. IN FA CT, THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND THA T THE JUDGMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUN AL UNDER SECTION 254. [EMPHASIS SUPPLIED BY ME.] 23. THUS IT IS CLARIFIED THAT THE DECISION IN GOETZE INDIA (SUPRA) WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY TO E NTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY A REVISED RETUR N AND DID NOT IMPINGE ON THE POWERS OF THE APPELLATE AUTHORITI ES. I HAVE ALREADY REFERRED TO THE DECISIONS IN ADDITIONAL COMMI SSIONER OF INCOME-TAX V. GURJARGRAVURES P. LTD., 11978] 111 ITR 1 (SC), JUTE CORPORATION OF INDIA LIMITED V. CIT [1991] 187 ITR 688 (SC), AMALGAMATED ELECTRICITY COMPANY LIMITED V. COMMISSION ER OF INCOME-TAX, [1974] 97 ITR 334 (BOM)(FB), AND NATION AL THERMAL POWER COMPANY LIMITED V. CIT [1998] 229 ITR 383 (SC ) WHICH CLEARLY UPHOLD THE PRINCIPAL ENUNCIATED IN THE CASE OF CIT V. KANPUR COAL SYNDICATE[1964] 53 ITR 225 (SC), IN WHI CH THE HONBLE SUPREME COURT HELD AS UNDER 'IF AN APPEAL LIES, SECTION 31 OF THE ACT DESCRIBES T HE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. U NDER SECTION 31(3)(A) IN DISPOSING OF SUCH AN APPEAL THE AP PELLATE ASSISTANT COMMISSIONER MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMEN T; UNDER CLAUSE (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT A ND DIRECT THE INCOME TAX OFFICER TO MAKE A FRESH ASSESSMEN T. THE APPELLATE ASSISTANT COMMISSIONER HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS CO- TERMINUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOME- TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO.' [EMPHASIS SUPPLIED BY ME.] 24. IN VIEW OF THE ESTABLISHED POSITION IN LAW AS DISCUSSE D ABOVE, I ADMIT THE ADDITIONAL GROUND RAISED IN APPELLATE PROC EEDINGS IN RESPECT OF CLAIM OF DEDUCTION UNDER SECTION 43B. 25. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT W ITH REFERENCE TO THE FACTS OF THE CASE. I FIND THAT CLAIM OF APPELLANT IN RESPECT OF SALES-TAX PAYMENT IS GENUINE AND ALLOWABLE . A SUM OF RS.13,00,408/-WAS PAYABLE AS SALES TAX IN THE PREVIOUS Y EAR RELEVANT TO ASSESSMENT YEAR 2007-08. HOWEVER, SINCE IT WAS NOT PAI D WITHIN THE DUE DATE OR THE EXTENDED PERIOD ALLOWED UNDER SE CTION 43B, IT WAS NOT CLAIMED AS A DEDUCTION. IN THE RETURN FOR AY 2009-10, THIS AMOUNT WAS WRONGLY DISALLOWED BY APPELLANT ITSELF. THI S AMOUNT WAS PAID ON 21/06/2008 I.E. IN THE PREVIOUS YEAR RELEVAN T TO ASSESSMENT YEAR 2009-10 AND IS LIABLE TO BE CLAIMED AS A DEDUC TION U/S 43B IN THE YEAR OF PAYMENT. SINCE THE AFORESAID PAYMENT IS AN ALLOWABLE DEDUCTION, THE ASSESSING OFFICER IS DIRECTED TO ALLOW TH E SAME. THIS GROUND OF APPEAL IS ALLOWED. 18. FROM THE ABOVE, IT IS CLEAR THAT THE LD.CIT(A) HAS GIVEN AMPLE OPPORTUNITY TO THE AO TO COMMENT ON THE ADMISSIBILI TY OR OTHERWISE 17 OF THE ADDITIONAL GROUND BEFORE HIM. HOWEVER, THE AO HAD NOT AVAILED OF THAT OPPORTUNITY. THEREFORE, RAISING TH IS GROUND THAT AO WAS NOT GIVEN ANY OPPORTUNITY IS NOT JUSTIFIED. FU RTHER, THE LD.CIT(A) WHILE ALLOWING THE CLAIM OF DEDUCTION U/S .43B HAS ALSO DECIDED THE ISSUE ON MERIT AND THE REVENUE HAS NO G RIEVANCE ABOUT THE ALLOWABILITY OF THE SAME AS NO GROUND FOR THAT HAS BEEN TAKEN. THE GRIEVANCE WAS ONLY FOR ADMISSION OF THE ADDITIO NAL GROUND. IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) FOR ADMISSION OF THE ADDITIONAL GROUND AS WELL AS THE DECISION ON ME RIT, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 19. GROUNDS OF APPEAL NO.5 AND 6 BEING GENERAL IN N ATURE ARE DISMISSED. 20. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27-08-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, 27 TH AUGUST 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PUNE