Assistant Commissioner of Income-tax, V. M/s. Kirloskar Brothers Pvt. Ltd., Pune

ITA 2202/PUN/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6973 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-11-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Rule of consistency; Revenue expenditure
• Section: 143(3); 133A; 14A; 37(1); 131; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE , , , BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 2168 /P U N/201 3 / ASSESSMENT YEAR : 20 08 - 09 KIRLOSKAR BROTHERS LIMITED, UDYOG BHAVAN, TILAK ROAD, PUNE 411002 PAN : AAACK7300E ....... / APPELLANT / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE 11(1), PUNE / RESPONDENT . / ITA NO . 2202/PUN/2013 / ASSESSMENT YEAR : 2008 - 09 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE ....... / APPELLANT / V/S. M/S. KIRLOSKAR BROTHERS PVT. LTD. YAMUNA, S. NO. 97 - 3, BANER, PUNE 411045 PAN : AAACK7300E / RESPONDENT ASSESSEE BY : S HRI SHARAD SHAH REVENUE BY : S /S HRI RAJIV KUMAR & AJAY MODI / DATE OF HEARING : 29 - 11 - 2017 / DATE OF PRONOUNCEMENT : 15 - 1 2 - 2017 2 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 / ORDER PER VIKAS AWASTHY, JM : TH ESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - I, PUNE DATED 30 - 09 - 2013 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND SALE OF PUMPS, VALVES, EXECUTION OF TURNKEY PROJECTS FOR WATER SUPPLY, WATER RESOURCE MANAGEMENT, POWER OIL & GAS ETC. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29 - 09 - 2008 DECLARING TOTAL INCOME OF RS. 1,05,12,89,266/ - . THE ASSES SEE FURTHER DECLARED TOTAL VALUE OF FRINGE BENEFITS AS RS.4,30,69,310/ - . DURING THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFICER INTER ALIA MADE FOLLOWING ADDITIONS/DISALLOWANCES : I . DISALLOWANCE OF DEDUCTION U/S. 80IA CLAIMED IN RESPECT OF INFRASTRU CTURE FACILITY DEVELOPED FOR SARDAR SAROVAR PROJECT RS.21,98,82,046/ - . II . DISALLOWANCE U/S. 40(A)(IA) RS.63,70,000/ - . III . DISALLOWANCE U/S. 14A R.W. RULE 8D RS.2,40, 31,932/ - . IV . EXPENDITURE ON REPAIRS & MAINTENANCE CLAIMED AS REVENUE TREATED AS CAPITAL IN NATURE RS. 46,21,003/ - . V . DISALLOWANCE OF INTEREST U/S. 36(1)(III) RS.97,110/ - . VI . DISALLOWANCE OF COMMISSION PAID TO M/S. REX POLY EXTRUSION LTD., SANGLI RS.3,48,03,510/ - . APART FROM ABOVE ADDITIONS/DISALLOWANCES , THE ASSESSING OFFICER COMPUTED FRINGE BENEFIT TAX (FBT) RS.26,93,118/ - ON MEDICAL AND HOSPITALIZATION EXPENSES REIMBURSED TO THE EMPLOYEES. 3 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 AGGRIEVED BY THE ASSESSMENT ORDER DATED 23 - 12 - 2010 PASSED U/S. 143(3) R.W.S. 115WE(3) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) , THE ASSESSEE FIL ED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY ACCEPTED ASSESSEES PLEA ONLY IN RESPECT OF DISALLOWANCE U/S. 40(A)(IA) ON COMMISSION PAID TO NON - EXECUTIVE DIRECTORS WITHOUT DEDUCTION OF TAX AT SOURCE AND CONFIRMED THE REMAINING ADDITIONS/DISALLOWANCES MADE BY ASSESSING OFFICER. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), BOTH THE SIDES I.E. ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. 3. THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDI NGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON FOLLOWING SIX GROUNDS : 1 . DISALLOWANCE OF CLAIM U/S. 80IA IN RESPECT OF INFRASTRUCTURE FACILITY DEVELOPED FOR SARDAR SAROVAR NARMADA NIGAM LIMITED RS.21,98,82,046/ - . 2 . DISALLOWANCE U/S. 14A RS.2,40,31,932/ - . 3 . DISAL LOWANCE OF EXPENDITURE TOWARDS REPAIRS & MAINTENANCE RS.46,21,003/ - . 4 . DISALLOWANCE OF INTEREST U/S. 36(1)(III) RS.97,110/ - . 5 . DISALLOWANCE OF COMMISSION PAID TO M/S. REX POLY EXTRUSION LTD., SANGLI RS.3,48,03,510/ - . 6 . FRINGE BENEFIT TAX ON ACCOUNT OF REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEE S RS.26,93,118/ - . 4. THE DEPARTMENT IN ITS APPEAL HAS RAISED 5 GROUNDS. ALL THE GROUNDS RELATE TO SINGLE ISSUE OF DISALLOWANCE OF COMMISSION PAYMENT TO NON - EXECUTIVE DIREC TORS WITHOUT DEDUCTION OF TAX AT SOURCE RS.63,70,000/ - , DELETED BY THE COMMISSIONER OF INCOME TAX (APPEALS). 4 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 5. SHRI SHARAD SHAH APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE FIRST GROUND RAISED IN APPEAL RELAT ES TO DEDUCTION CLAIMED U/S. 80IA ON ACCOUNT OF DEVELOPMENT OF INFRASTRUCTURE FACILITY FOR SARDAR SAROVAR NARMADA NIGAM LIMITED. SIMILAR DISALLOWANCE WAS MADE BY ASSESSING OFFICER IN ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. THE TRIBUNAL IN ASSESSMENT YEAR 2006 - 07 HELD THAT THE INFRASTRUCTURE FACILITY DEVELOPED BY ASSESSEE FOR SARDAR SAROVAR NARMADA NIGAM LIMITED QUALIFIES TO BE AN INFRASTRUCTURE FACILITY AND ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80IA OF THE ACT. THE TRIBUNAL IN ASSESSMENT YEAR 2007 - 08 FOLLOWE D ITS OWN DECISION AND ALLOWED THE CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. THE LD. AR PLACED ON RECORD A COPY OF THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07 REPORTED AS 167 TTJ 102 AND COPY OF ORDER OF TRIBUNAL IN ITA NO. 20 3 1 /PN/2012 FOR ASSESSMENT YEAR 2007 - 08 DECIDED ON 10 - 10 - 2014. 5.1 IN RESPECT OF GROUND NO. 2 THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.2,40,31,932/ - U/S. 14A R.W. RULE 8D WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE IS HAV ING OWN INTEREST FREE FUNDS MUCH MORE THAN THE INVESTMENT MADE. THE LD. AR REFERRED TO BALANCE S HEET OF ASSESSEE COMPANY AS ON 31 - 03 - 2008 AT PAGE 58 OF THE PAPER BOOK. THE LD. AR POINTED THAT OWN FUNDS OF ASSESSEE INCLUDING S HARE C APITAL AND RESERVES AND S URPLUS ARE TO THE TUNE OF RS.662 CRORES , AS AGAINST INVESTMENT OF RS.347 CRORES. THUS, IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HDFC BANK LTD. REPORTED AS 366 ITR 505 NO DISALLOWANCE IS W ARRANTED UNDER RULE 8D(2)(II). IN RESPECT OF DISALLOWANCE UNDER RULE 8D(2)(III) THE LD. AR SUBMITTED THAT FOR THE PURPOSE OF COMPUTING AVERAGE INVESTMENT ONLY THOSE 5 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 INVESTMENTS ON WHICH THE ASSESSEE HAS EARNED TAX FREE INCOME SHOULD BE CONSIDERED. THE ISSUE CAN BE REMITTED BACK TO ASSESSING OFFICER FOR EXCLUDING INVESTMENTS ON WHICH THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME AND RECOMPUTE DISALLOWANCE U/S. 14A R.W. RULE 8D (2)(III). 5.2 IN RESPECT OF GROUND NO. 3 THE LD. AR POINTED THAT THE ASSES SEE HAS INCURRED EXPENDITURE ON REPAIRS AND MAINTENANCE OF BUILDING AND HAS CLAIMED THE SAME TO BE REVENUE IN NATURE. HOWEVER, THE ASSESSING OFFICER WITHOUT APPRECIATING THE NATURE OF EXPENDITURE AND THE WELL SETTLED LAW LAID DOWN BY THE HONBLE APEX COUR T HAS TREATED THE EXPENDITURE AS CAPITAL IN NATURE . THE LD. AR REFERRED TO THE TABLE OF EXPENDITURE IN PARA 12 AT PAGE 26 OF THE ASSESSMENT ORDER. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE FINDINGS OF ASSESSING OFFICER ON THE PREMISE THAT NEW STRUCTURES HAVE BEEN CONSTRUCTE D AND IT IS NOT A CASE OF ROUTINE REPAIRS TO THE EXISTING BUILDING. 5.3 IN RESPECT OF GROUND NO. 4 THE LD. AR SUBMITTED THAT THE ASSESSEE HAS ADVANCED INTEREST FREE TEMPORARY LOAN OF RS.11,82,450/ - TO M/S. KIRLOSKAR BROTHERS LTD. , ONE OF ITS SISTER CONC ERN. THE ASSESSEE WAS HAVING SUFFICIENT OWN INTEREST FREE FUNDS TO COVER THE TEMPORARY LOANS ADVANCED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT IN VIEW OF RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RE LIANCE UTILITIES & POWER LTD. REPORTED AS 313 ITR 340 , NO DISALLOWANCE U/S. 36(1)(III) IS REQUIRED TO BE MADE. 5.4 IN RESPECT OF GROUND NO. 5 THE LD. AR SUBMITTED THAT THE ASSESSEE HAD PAID COMMISSION TO TUNE OF RS. 20.66 CRORES TO VARIOUS PARTIES. THE ASSESSING OFFICER DISALLOWED COMMISSION PAID TO M/S. REX POLY EXTRUSION 6 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 LIMITED RS.3.48 CRORES. THE ASSESSEE HAD FURNISHED VARIOUS DOCUMENTS BEFORE THE AUTHORITIES BELOW INCLUDING THE LETTER OF APPOINTMENT AS CONSULTANT IN THE FORM OF MOU WITH M/S. REX PO LY EXTRUSION LIMITED AND THE CONFIRMATION FROM M/S. REX POLY EXTRUSION LIMITED. HOWEVER, THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) DISBELIEVED THE SAME. THE LD. AR FURTHER REFERRED TO THE ORDER OF COMMISSIONER OF INCOME TAX (APPE ALS) PARA 9.2 AT PAGES 67 AND 68 WHEREIN THE STATEMENT OF SHRI SANJAY B. DANDEKAR, MANAGING DIRECTOR OF M/S. REX POLY EXTRUSION LIMITED HAS BEEN REPRODUCED. THE LD. AR POINTED THAT IN REPLY TO Q. NO. 13 , HE HAS ADMITTED THE FACT THAT THE COMPANY HAS RECEI VED COMMISSION FROM THE ASSESSEE FOR RENDERING VARIOUS SERVICES AS PER LETTER OF APPOINTMENT DATED 01 - 05 - 2007. THE LD. AR FURTHER CONTENDED THAT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2009 - 10 , THE ASSESSING OFFICER ALLOWED THE PAYMENT OF C OMMISSION TO M/S. REX POLY EXTRUSION LIMITED. THE LD. AR ASSERTED THAT THE SERVICES RENDERED BY THE AFORESAID COMPANY IN THE ASSESSMENT YEAR UNDER APPEAL , AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR ARE OF SIMILAR NATURE AND THERE HAS BEEN NO CHANGE IN T HE FACTS AND CIRCUMSTANCES. 5.5 IN RESPECT OF LAST GROUND NO. 6 RELATING TO FRINGE BENEFIT TAX ON REIMBURSEMENT OF MEDICAL EXPENDITURE TO EMPLOYEES, THE LD. AR FAIRLY ADMITTED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSE SSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08. 6. ON THE OTHER HAND SHRI RAJIV KUMAR REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). 7 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 6.1 THE LD. DR SUBMITTED THAT THE ISSUE RAISED IN GROUND NO. 1 OF THE APPEAL BY ASSESSEE HAS BEEN ADJUDICATED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN IMMEDIATELY PRECEDING ASSESSMENT YEARS. 6.2 IN RESPECT OF GROUND NO. 2 THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY COMPUTED DISA LLOWANCE U/S. 14A WITH RESPECT TO AVERAGE INVESTMENT UNDER RULE 8D(2)(III). THE ASSESSING OFFICER WHILE COMPUTING AVERAGE INVESTMENT AT THE END OF YEAR HAS EXCLUDED INVESTMENT S MADE BY ASSESSEE IN FOREIGN COMPANIES AND WHERE NO TAX FREE INCOME HAS BEEN EARNED. THEREFORE, AS AGAINST INVESTMENT OF RS.347 CRORES, THE ASSESSING OFFICER HAS TAKEN VALUE OF INVESTMENT AS RS.151 CRORES. NO USEFUL PURPOSE WOULD BE SERVED FOR REMITTING THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER. 6.3 IN RESPECT OF GROUND NO. 3 THE LD. DR CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER EXAMINING THE DOCUMENTS ON RECORD HAS GIVEN A CATEGORIC FINDING THAT THE EXPENDITURE IS NOT IN THE NATURE OF CURRENT REPAIRS. THE ASSESSEE HAS CONSTRUCTED NEW STRUCTURES BY EX TENDING THE EXISTING ONE S AND HAS COMPLETELY RENOVATED THE OLD BUILDING. THESE REPAIRS AND RENOVATION UNDERTAKEN BY THE ASSESSEE ARE THUS NOT IN THE NATURE OF REVENUE EXPENDITURE. THE ASSESSING OFFICER HAS RIGHTLY HELD THE EXPENDITURE TO BE CAPITAL IN NA TURE AND HAS BEEN VERY FAIR IN ALLOWING DEPRECIATION ON SAME. 6.4 IN RESPECT OF GROUND NO. 5 THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH DETAILS OF SERVICES RENDERED BY M/S. REX POLY EXTRUSION LIMITED. THE ASSESSEE HAS FURTHER NOT BEEN ABLE TO EXPLAIN THE 8 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 LOGIC AND RATIONAL FOR PAYMENT OF SUCH HUGE COMMISSION. MERELY FOR THE REASON THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH M/S. REX POLY EXTRUSION LIMITED THE PAYMENT OF COMMISSION CANNOT BE ALLOWED , U NLESS THE ASSESSEE IS ABL E TO SHOW FROM COGENT EVIDENCE THE SERVICES RENDERED BY THE AFORESAID COMPANY. THE LD. DR IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PRECISION ELECTRONICS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX REPORTED AS 164 TAXMAN 67. 7. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE GROUND NO. 1 RAISED IN APPEAL RELATES TO CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. WE FIND THAT IN ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. THE MATTER TRAVELLED UP TO THE TRIBUNAL. THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSMENT YEAR 2006 - 07 GRANTED RELIEF TO THE ASSESSEE BY HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S. 80IA IN RESPECT OF PROFITS DERIVED FROM DEVELOPMENT OF INFRASTRUCTURE FACILITY FOR SARDAR SAROVAR NARMADA NIGAM LIMITED. IN ASSESSMENT YEAR 2007 - 08 THE TRIBUNAL FOLLOWED THE ORDER OF CO - ORDINATE BE NCH AND GRANTED THE BENEFIT OF DEDUCTION U/S. 80IA. BOTH SIDES IN PRESENT APPEAL ARE UNANIMOUS IN ADMITTING THAT THE FACTS IN ASSESSMENT YEAR UNDER APPEAL ARE IDENTICAL. THEREFORE, WE FIND NO REASON TO TAKE A DIFFERENT VIEW. FOLLOWING THE ORDER OF CO - OR DINATE BENCH IN EARLIER ASSESSMENT YEARS, WE ALLOW ASSESSEES CLAIM OF DEDUCTION AMOUNTING TO RS.21,98,82,046/ - U/S. 80IA OF THE ACT. ACCORDINGLY, GROUND NO. 1 RAISED IN THE APPEAL BY ASSESSEE IS ALLOWED. 9 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 8. THE NEXT ISSUE IN APPEAL BY THE ASSESSEE IS WITH RESPECT TO DISALLOWANCE U/S. 14A. THE ASSESSEE HAS RECEIVED TAX FREE DIVIDEND INCOME TO THE TUNE OF RS.16.87 CRORES. ADMITTEDLY, THE ASSESSEE HAS NOT MADE ANY SUO - MOTO DISALLOWANCE TO EARN AFORESAID TAX FREE INCOME. THE ASSESSING OFFICER HAS COMPUT ED DISALLOWANCE U/S. 14A IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D(2)(II) AND 8D(2)(III). IN SO FAR AS DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) IS CONCERNED , A PERUSAL OF BALANCE S HEET AS ON 31 - 03 - 2008 (AT PAGE 58 OF PAPER B OOK ) SHOWS THAT THE ASSESSEE HAS OWN INTEREST FREE FUNDS INCLUDING SHARE C APITAL AND R ESERVES AND S URPLUS TO THE TUNE OF RS.662 CRORES , AS AGAINST THE INVESTMENT OF RS.347 CRORES. IT IS A WELL ACCEPTED PROPOSITION THAT WHERE THE ASSESSEE IS HAVING OWN FUN DS , AS WELL AS BORROWED FUNDS IT SHALL BE PRESUMED THAT THE ASSESSEE HAS MADE INVESTMENTS FROM OWN FUNDS. IN THE INSTANT CASE WE FIND THAT OWN FUNDS OF THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENTS MADE . RULE 8D(2)(II) SEEKS TO MAKE DISALLOWANCE, WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST, SINCE, OWN FUNDS OF THE ASSESSEE ARE SUFFICIENT TO COVER THE INVESTMENTS, NO DISALLOWANCE UNDER RULE 8D(2)(II) IS WARRANTED. AS REGARDS DISALLOWANCE UNDER RULE 8D(2)(III) I.E. AN AMOUNT EQUAL T O 1/2% OF THE AVERAGE VALUE OF INVESTMENT IS CONCERNED , WE FIND THAT AS AGAINST CLOSING BALANCE OF INVESTMENT OF RS.347 CRORES THE ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION RS.151 CRORES AFTER EXCLUDING THE INVESTMENTS ON WHICH THE ASSESSEE HAS NOT EA RNED ANY TAX FREE INCOME. THE LD. AR CONTENDED THAT WHILE COMPUTING THE FIGURE OF RS. 151 CRORES , THE ASSESSING OFFICER HAS INCLUDED SOME INVESTMENT ON WHICH THE ASSESSEE HAS NOT EARNED ANY TAX FREE INCOME. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE WE ARE OF CONSIDERED VIEW THAT THE ISSUE CAN BE REMITTED TO ASSESSING OFFICER FOR LIMITED PURPOSE OF VERIFICATION WHETHER ANY INVESTMENT 10 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 ON WHICH TAX FREE INCOME HAS NOT BEEN RECEIVED HAS BEEN INCLUDED WHILE COMPUTING THE CLOSING BALANCE OF INVESTMENT AT RS.1,51,66,97,307/ - . IF THERE IS ANY SUCH INVESTMENT, THE SAME MAY BE EXCLUDED WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III). WE HOLD AND DIRECT, ACCORDINGLY. THE GROUND NO. 2 RAISED IN APPEAL BY ASSESSEE IS PARTLY ALLOWED IN THE AFORESAID TERMS. 9. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENDITURE RS.46,21,003/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS TABULATED THE EXPENDITURE THAT HAS BEEN TREATED AS CAPITAL . FOR THE SAKE OF CONVE NIENCE THE SAME IS REPRODUCED HERE - IN - BELOW : SR. NO. NATURE OF WORK AMOUNT ( R S.) I CHANGING OF FLOORING & PAINTING ETC. IN TIFFIN PARK OF AREA 48,255/ - II CHANGING OF FLOORING & PAINTING ETC. IN TIFFIN PARK OF AREA 1,64,979/ - III CHANGING OF FLOORING & PAINTING ETC. IN TIFFIN PARK OF AREA 17,51,77/ - IV DEMOLISHING OF OLD DAMAGED TOILETS IN THE ACCOUNTS DEPARTMENT & REPLACEMENT OF WC & URINALS & PAINTING 3,40,285/ - V DEMOLISHING OF OLD DAMAGED TOILETS IN THE ACCOUNTS DEPARTMENT & REPLACEMENT OF WC & URINALS & PAINTING 5,35,775/ - VI DEMOLISHING OF OLD DAMAGED TOILETS IN BUSINESS OFFICE & REPLACEMENT OF WC & URINALS & PAINTING 1,79,585/ - VII DEMOLISHING OF OLD DAMAGED TOILETS FOR STAFF IN SMALL PUMPS DIVISION & REPLACEMENT OF WC & URINALS & PAINTING 3 ,03,894/ - VIII DAMAGED FLOORING IN SYSTEM STORAGE DIVISION OF STOCK DEPARTMENT TRIMEX BY REPLACING CERTAIN TITLES & SOLEING 6,29,317/ - IX SOLEING, FLOORING, PLASTERING & PAINTING WORK IN DYDROLIC RESEARCH CENTRE BUILDING 6,11,732/ - X STRENGTHENING OF STRUCTURAL SHADE IN LARGE PUMPS DIVISION BY USING BINDER, RUNNER & TRUSS 7,35,775/ - XI CIVIL WORK OF FACTORY BUILDING 2,00,000/ - XII ROOFING, REPLACEMENT OF FACTORY SHED 3,52,280/ - TOTAL 46,21,003/ - 11 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESSEE COMPANY HAS INCURRED EXPENDITURE TO THE TUNE OF RS.10.11 CRORES ON REPAIRS TO MACHINERY AND RS.3.94 CRORES IN RESPECT OF REPAIRS TO BUILDING. AFTER DETAILED VERIFICATION OF THE EXPENDITURE FURNISHED BY THE ASSESSEE , THE ASSESSING OFFICER DISALLOW ED EXPENDITURE AGGREGATING TO RS.46,21,000/ - HOLDING IT TO BE CAPITAL IN NATURE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT THE EXPENDITURE HAS BEEN INCURRED FOR RENOVATION OF BUILDING, CONSTRUCTION OF EXTENSION TO HRC AND SUMP WELL ETC., THEREFORE, THESE EXPENDITURES CANNOT BE CATEGORIZED AS CURRENT REPAIRS. THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SARAVANA SPINNING MILLS (P) LTD. REPORTED AS 293 ITR 201 HAS LAID DOWN THE BASIC TEST TO DETERMINE WHETHER THE EXPENDITURE IS IN THE NATURE OF CURRENT REPAIRS AND IS ALLOWABLE UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT. THE HONBLE COURT HELD : THE BASIC TEST TO FIND OUT AS TO WHAT WOULD CONSTITUTE CURRENT REPAIRS IS THAT THE EXPENDITURE MUST HA VE BEEN INCURRED TO 'PRESERVE AND MAINTAIN' AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. THE FIRST APPELLATE AUTHORITY AFTER CONSIDERING THE DOCUMENTS ON RECORD AND THE AFORESAID DECISION OF HONBLE APEX COURT CONCLUDED THAT THE EXPENDITURE TO THE TUNE OF RS.46,21,000/ - INCURRED BY ASSESSEE FOR RENOVATION OF BUILDING IS CAPITAL IN NATURE, AS IT PROVIDES NEW ADVANTAGE/BENEFIT TO THE ASSESSE E FOR YEARS TO COME. THE LD. AR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. AR HAS ALSO FAILED TO SUBSTANTIATE THAT THE EXPENDITURE HELD TO BE CAPITAL IS IN FACT REVENUE IN NATURE. WE DO NOT FIND ANY INF IRMITY 12 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL BY ASSESSEE IS REJECTED. 10. IN GROUND NO. 4 OF THE APPEAL THE ASSESSEE HAS ASSAILED DISALLOWANCE OF INTEREST EXPENDITURE RS.9 7,110/ - U/S. 36(1)(III) OF THE ACT. THE ASSESSEE HAS ADVANCED INTEREST FREE TEMPORARY LOAN OF RS.11,82,450/ - TO ITS ONE OF THE SISTER CONCERN. THE CONTENTION OF THE ASSESSEE IS THAT THE LOAN HAS BEEN ADVANCED FROM OWN FUNDS AND NOT FROM INTEREST BEARING BORROWED FUNDS. A PERUSAL OF BALANCE SHEET AS ON 31 - 03 - 2008 (AT PAGE 58 OF THE PAPER BOOK) SHOWS THAT THE ASSESSEE HAS SUFFICIENT OWN FUNDS TO COVER THE LOAN ADVANCED. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE U TILITIES & POWER LTD. (SUPRA) HAS HELD THAT WHERE BOTH INTEREST FREE FUNDS AND INTEREST BEARING FUNDS ARE AVAILABLE AND THE INTEREST FREE FUNDS ARE MORE THAN THE INVESTMENT MA DE, THE PRESUMPTION IS THAT THE INVESTMENTS ARE MADE OUT OF INTEREST FREE FUNDS A VAILABLE WITH THE ASSESSEE. THUS, IN VIEW OF UNDISPUTED FACT THAT OWN FUNDS OF ASSESSEE ARE SUFFICIENT TO COVER THE LOAN ADVANCE D TO SISTER CONCERN , NO DISALLOWANCE U/S. 36(1)(III) IS CALLED FOR. ACCORDINGLY, GROUND NO. 4 RAISED IN THE APPEAL BY ASSESSEE IS ALLOWED. 11. IN GROUND NO. 5 OF THE APPEAL THE ASSESSEE IS ASSAILED PAYMENT OF COMMISSION TO M/S. REX POLY EXTRUSION LIMITED. THE AUTHORITIES BELOW HAVE DISALLOWED PAYMENT OF COMMISSION PRIMARILY FOR THE FOLLOWING REASONS : A . THE APPELLANT HAS NOT PR OVED THE EXACT NATURE OF SERVICES RENDERED BY REX POLY EXTRUSION LTD. B . REX POLY EXTRUSION LTD. IS BASED AT SANGLI AND GETTING ORDERS FOR KIRLOSKAR BROTHERS LIMITED FROM PLACES SPREAD OUT OVER VAST 13 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 GEOGRAPHICAL AREA LIKE SATLUJ JAL VIDUT NIGAM LIMITED, RELIA NCE INFRASTRUCTURE, PAHARPUR COOLING, ETC. APPEARS INCREDIBLE. C . THE REPLY OF REX POLY EXTRUSION LTD. IS VERY GENERAL AND REX POLY EXTRUSION LTD. IS ALSO NOT ABLE TO SUBSTANTIATE THE PAYMENT OF COMMISSION. D . THERE IS NO MATCH IN THE NATURE OF BUSINESS OF ASSE SSEE AND REX POLY EXTRUSION LTD. E . THERE IS NO CONSISTENCY IN THE REASON OR LOGIC IN DECIDING THE PERCENTAGE OF COMMISSION. 12. THE ASSESSEE HAS FURNISHED A COPY OF LETTER OF APPOINTMENT DATED 01 - 05 - 2007 VIDE WHICH THE SERVICES OF M/S. REX POLY EXTRUSION LIMITED WERE ENGAGED. THE CONTENTION OF THE ASSESSEE IS THAT M/S. REX POLY EXTRUSION LIMITED IS INSTRUMENTAL IN PROCURING CONTRACTS FROM VARIOUS ORGANIZATIONS WHICH INCLUDE SATLUJ JAL VIDUT NIGAM LIMITED, RELIANCE INFRASTRUCTURE, PAHARPUR COOLIN G, ETC. THE ASSESSEE HAS ALSO FILED A COPY OF CONFIRMATION FROM M/S. REX POLY EXTRUSION LIMITED ADMITTING RECEIPT OF COMMISSION FROM THE ASSESSEE. ON PERUSAL OF IMPUGNED ORDER WE OBSERVE THAT IN THE IMMEDIATELY SUBSEQUENT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2009 - 10 , COMMISSION PAID TO M/S. REX POLY EXTRUSION LIMITED AMOUNTING TO RS.3.64 CRORES HAS BEEN ACCEPTED AS DEDUCTIBLE EXPENDITURE BY THE ASSESSING OFFICER . THERE IS NO QUARREL ON THE ISSUE THAT PRINCIPLE OF RES - JUDICATA DOES NOT APPLY UNDER THE PRO VISIONS OF INCOME TAX ACT, AT THE SAME TIME PRINCIPLE OF CONSISTENCY AS HAS BEEN EXPOUNDED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GOPAL PUROHIT (336 ITR 287) CANNOT BE IGNORED. IF A PARTICULAR EXPENDITURE HAS BEEN DIS ALLOWED IN ONE ASSESSMENT YEAR AND THE SAME EXPENDITURE UNDER SAME SET OF FACTS IS ALLOWED IN ANOTHER ASSESSMENT YEAR , IT WOULD 14 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 RESULT IN ABSURDITY. THE ASSESSEE HAS GIVEN THE DETAILS OF SERVICES RENDERED BY VARIOUS PARTIES INCLUDING M/S. REX POLY EXTRUSION LIMITED AT PAGES 390 AND 391 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO FURNISHED CONFIRMATION FROM M/S. REX POLY EXTRUSION LIMITED REGARDING THE RECEIPT OF PAYMENTS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS REFERRED TO THE STATEMENT OF SHRI SANJAY B. DANDEKAR, MANAGING DIRECTOR OF M/S. REX POLY EXTRUSION LIMITED RECORDED U/S. 131 DURING THE COURSE OF SURVEY ACTION U/S. 133A ON 09 - 01 - 2013 IN THE CASE OF M/S. REX POLY EXTRUSION LIMITED. IN REPLY TO Q. NO. 13 SHRI SANJAY B. DANDEKAR ADMITTED T HAT THE COMPANY HAS RECEIVED COMMISSION DURING THE FINANCIAL YEAR 2007 - 08 (RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL), 2009 - 10 AND 2011 - 12 FOR RENDERING VARIOUS SERVICES TO THE ASSESSEE COMPANY. HE HAS ALSO REFERRED TO THE TERMS AND CONDITIONS OF THE L ETTER OF APPOINTMENT DATED 01 - 05 - 2007 VIDE WHICH THE SERVICES WERE ENGAGED BY THE ASSESSEE. ON CONJOINT READING OF THE LETTER OF APPOINTMENT ISSUED BY ASSESSEE FOR ENGAGING THE SERVICES BY M/S. REX POLY EXTRUSION LIMITED (AT PAGE 39 OF THE PAPER BOOK) AND THE DETAILS OF SERVICES RECEIVED, IT APPEARS THAT M/S. REX POLY EXTRUSION LIMITED WAS INSTRUMENTALLY IN SECURING CONTRACTS FROM VARIOUS COMPANIES FOR THE ASSESSEE AND HAD CHARGED COMMISSION FOR THE SAME. IT IS NOT THE CASE OF REVENUE THAT M/S. REX POLY E XTRUSION LIMITED IS IN ANY WAY CONNECTED OR IS HAVING ANY INTEREST IN THE ASSESSEE COMPANY OR VICE - VERSA. 12.1 THE LD. DR HAS PLACED RELIANCE ON THE DECISION OF PRECISION ELECTRONICS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA) TO CONTEND THAT BY MERELY FURNISHING LETTER OF APPOINTMENT ONUS IS NOT DISCHARGED BY THE ASSESSEE TO PROVE THAT M/S. REX POLY EXTRUSION LIMITED HAS RENDERED SAME SERVICES TO THE ASSESSEE AND IS ELIGIBLE TO RECEIVE COMMISSION FOR SAME. THE ASSESSEE IS ALSO UNDER OBLIGATION TO SHOW THE 15 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 NATURE OF SERVICES RENDERED. IN THE CASE OF PRECISION ELECTRONICS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA) THE ASSESSEE COMPANY WAS ENGAGED IN MANUFACTURING OF PCB BOARD FOR TELECOM PURPOSE. THE PRECISION ELECTRONICS LTD. CLAIMED TO HAVE ENGAGED SERVICES OF M/S. SLF INDUSTRIES LTD. FOR PROCURING ORDER FROM DOT AND MTNL AGAINST THE PAYMENT OF COMMISSION @ 6.5% ON THE NET ORDER VALUE PROCURED FROM DOT AND MTNL. HOWEVER, DURING THE ASSESSMENT PROCE EDINGS, THE PRECISION ELECTRONICS LTD. FAILED TO FURNISH ANY WRITTEN AGREEMENT OR ANY CORRESPONDENCE BETWEEN M/S. SLF INDUSTRIES LTD. TO ESTABLISH THE NATURE OF LIAISONING SERVICES RENDERED. HOWEVER, M/S. SLF INDUSTRIES LTD. FILED CONFIRMATION REGARDING R ECEIPT OF COMMISSION. THE ASSESSING OFFICER RAISED DOUBT OVER THE TRANSACTION AND HELD THAT PAYMENT OF COMMISSION WAS MERELY AN ADJUSTMENT ENTRY. FURTHER, THE ASSESSEE FAILED TO FURNISH CORRECT ADDRESS OF M/S. SLF INDUSTRIES LTD. TO THE ASSESSING OFFICER . IN THE ABSENCE OF COGENT EVIDENCE THE ASSESSING OFFICER DISALLOWED THE CLAIM OF PAYMENT OF COMMISSION. THE MATTER TRAVELLED TO THE TRIBUNAL. THE TRIBUNAL CONFIRM ED THE ADDITION H OLDING THAT THE ASSESSEE HA S FAILED TO PROVE ACTUAL RENDERING OF SERVICES BY M/S. SLF INDUSTRIES LTD. THERE IS NO CORRESPONDENCE OR DOCUMENT TO SHOW THAT ANY SERVICES WERE RENDE RED BY M/S. SLF INDUSTRIES LTD. THE MATTER FURTHER TRAVELLED TO THE HONBLE DELHI HIGH COURT. THE HONBLE HIGH COURT CONCURRED WITH THE FINDINGS OF T RIBUNAL AND DISMISSED THE APPEAL OF ASSESSEE. WE FIND THAT THE FACTS OF THE AFORESAID CASE ARE DISTINGUISHABLE FROM THE FACTS IN THE CASE IN HAND. IN THE INSTANT CASE NOT ONLY THAT THE ASSESSEE HAS PLACED COPY OF LETTER OF APPOINTMENT WHICH IS IN THE F ORM OF MOU FOR ENGAGING THE SERVICES OF M/S. REX POLY EXTRUSION LIMITED AS CONSULTANT BUT HAS ALSO GIVEN THE DETAILS OF CONTRACTS SECURED THROUGH M/S. REX POLY EXTRUSION LIMITED. THE ASSESSEE HAS ALSO FILED CONFIRMATION FROM M/S. REX POLY EXTRUSION LIMITE D 16 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 INDICATING THAT THE COMMISSION HAS BEEN RECEIVED THROUGH BANKING CHANNELS AFTER DEDUCTION OF TDS. THE DEPARTMENT HAS NOT DISPUTED THAT THE ASSESSEE HAS NOT RECEIVED CONTRACTS OF THE COMPANIES/ORGANIZATIONS WHICH ARE PURPORTEDLY SECURED THROUGH M/S. REX POLY EXTRUSION LIMITED. IT IS ALSO AN UNDISPUTED FACT THAT IN THE SUBSEQUENT ASSESSMENT YEAR THE ASSESSING OFFICER HAS ALLOWED PAYMENT OF COMMISSION TO M/S. REX POLY EXTRUSION LIMITED. THUS, IN VIEW OF THE DISTINGUISHABLE FACTS , WE ARE OF CONSIDERED VIEW THAT THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF PRECISION ELECTRONICS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA) DOES NOT SUPPORT THE CASE OF R EVENUE. IN VIEW OF THE FACTS OF THE PRESENT CASE WE ARE OF CONSIDERED VIEW THAT T HE ASSESSEE HAS BEEN ABLE TO ESTABLISH THAT THE SERVICES WERE RENDERED BY THE M/S. REX POLY EXTRUSION LIMITED AND THUS, THE PAYMENT OF COMMISSION IS JUSTIFIED. ACCORDINGLY, GROUND NO. 5 RAISED IN THE APPEAL BY ASSESSEE IS ACCEPTED. 13. IN GROUND NO. 6 O F THE APPEAL , THE ASSESSEE HAS ASSAILED REIMBURSEMENT OF MEDICAL EXPENSES TO THE EMPLOYEES LIABLE FOR FRINGE BENEFIT TAX. THE LD. AR OF ASSESSEE HAS FAIRLY ADMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND HAS DECIDED AGAINST THE ASSESSEE. WE FIND THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN APPEAL FOR ASSESSMENT YEAR 2007 - 08 AFTER CONSIDERING CBDT CIRCULAR NO. 8 OF 2005 HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL READ AS UNDER : 10.1 AS DISCUSSED ABOVE, THE HONBLE SUPREME COURT HAD OCCASION TO CONSIDER THE BINDING NATURE OF THE CIRCULAR ISSUED BY THE CBDT ON THE TAXABILITY OF VARIOUS FRINGE BENEFITS IN A RECENT CASE REPORTED IN 301 ITR 289. SINCE THE CBDT HAS ISSUED CLARIFICATION T HAT REIMBURSEMENT OF MEDICAL EXPENSES UP TO RS.15,000/ - IS TAXABLE AS A FRINGE BENEFIT IN THE HANDS OF THE EMPLOYER, THE ASSESSING OFFICER FOLLOWING THE CIRCULAR HAS RIGHTLY TREATED THE 17 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEES AND NON - WORKING DIRECTO RS OF THE COMPANY AS A FRINGE BENEFIT UNDER SECTION 115 WB(2)(E) OF THE ACT. ACCORDINGLY, THE ACTION OF THE ASSESSING OFFICER ON THIS GROUND IS UPHELD. THUS, IN VIEW OF DECISION OF CO - ORDINATE BENCH AND FAIR ADMISSION BY LD. AR , THE GROUND NO. 6 RAISED I N THE APPEAL BY ASSESSEE IS DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE AFORESAID TERMS. ITA NO. 2202/PUN/2013 15. THE LD. AR SUBMITTED THAT SOLITARY ISSUE RAISED BY THE DEPARTMENT IN APPEAL RELATING TO DISALLOW ANCE OF PAYMENT OF COMMISSION WITHOUT DEDUCTION OF TAX AT SOURCE TO NON - EXECUTIVE DIRECTORS HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08 . THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD. AR RE FERRED TO PARA 8 OF THE ORDER OF TRIBUNAL IN ITA NO. 2031/PN/2012 (SUPRA) . 16. THE LD. DR FAIRLY ADMITTED THAT THE ISSUE RAISED BY THE DEPARTMENT IN APPEAL HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09. 17. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY REPRESENTATIVES OF BOTH THE SIDES. THE DEPARTMENT IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE U/S. 40(A)(IA) IN RESPECT OF PAYMENT OF COMMISSION RS.63,70,000/ - TO NON - EXECUTIVE DIRECTORS WITHOUT DEDUCTION OF TAX AT SOURCE. WE FIND THAT SIMILAR ISSUE WAS RAISED BEFORE THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08 . THE TRIBUNAL BY PLACING RELIANCE ON THE 18 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 DECISION OF BHARAT FORGE LTD. VS. ADDL. CIT IN ITA NOS. 1326, 1327, 1357 & 1358/PN/2010 FOR THE ASSESSMENT YEARS 2007 - 08 & 2008 - 09 DECIDED ON 31 - 01 - 2013 HELD AS UNDER : 8. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE U/S.40(A)(IA) OF THE ACT AMOUNTING TO RS.80,00,000/ - . THE ASSESSING OFFICER HAS DISALLOWED THE SAID AMOUNT ON THE GROUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON PAYMENT OF COMMISSION TO THE NON - EXECUTIVE DIRECTORS, WHICH WAS CONFIRMED BY THE CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINT ED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT, PUNE BENCH IN THE CASE OF BHARAT FORGE LTD. VS. ADDL.CIT IN ITA NOS.1326, 1327, 1357 & 1358/PN/2010 VIDE ORDER DATED 31.01.2013 FOR A.YS. 2007 - 08 & 2008 - 09, WHEREIN THE TRIBU NAL HAS HELD AS UNDER: AS PER THE EXPLANATION TO PROVISIONS OF SECTION 194J PROFESSIONAL SERVICE MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD. THUS THE SITTING FEES PAID TO THE DIRECTORS DOES NOT AMOUNT TO FEES PAID FOR ANY PROFESSIONAL SERVICES AS HAS BEEN MENTIONED IN THE EXPLANATIO N TO SECTION 194J(1). THE PROVISIONS OF SECTION 194J(1)(BA) SPEAKS OF ANY REMUNERATION OR FEES OR COMMISSION BY WHATEVER NAME CALLED OTHER THAN THOSE ON WHICH TAX IS DEDUCTIBLE U/S.192 TO A DIRECTOR OF A COMPANY ON WHICH TAX HAS TO BE DEDUCTED AT THE APPLI CABLE RATE AND THE PROVISION HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F., 01 - 07 - 2012. THUS NO TAX WAS REQUIRED TO BE DEDUCTED U/S.194J OUT OF SUCH DIRECTOR'S SITTING FEES FOR THE A.Y. 2007 - 08. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT(A) IS SE T - ASIDE AND THE GROUND RAISED BY THE ASSESSEE ON THE ISSUE OF TDS ON SITTING FEES PAID TO DIRECTORS IS ALLOWED. SITTING FEES PAID TO THE NON - EXECUTIVE RESIDENT DIRECTORS FOR THE A.Y. 2007 - 08 DOES NOT AMOUNT TO FEE PAID FOR ANY PROFESSIONAL SERVICES U/S 19 4J. 8.1 THE CASE RELIED BY THE LEARNED AUTHORIZED REPRESENTATIVE DOES NOT TOUCH THE ISSUE BEFORE US. THE ISSUE BEFORE US IS WITH REGARD TO COMMISSION PAID TO DIRECTOR. THE ISSUE HAS TO BE LOOKED INTO ITS FACTS AND CIRCUMSTANCES WHICH NEEDS DEEP PROBE I NTO THE MATTER. SO, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 19 ITA NO S. 2168 & 2202/PUN/2013, A.Y. 2008 - 09 SINCE, THE FACTS IN ASSESSMENT YEAR UNDER APPEAL ARE SIMILAR , WE FIND NO REASON TO TAKE A DIFFERENT VIEW. FOLLOWING THE DECISION OF CO - ORDINATE BENCH IN ASSESSEES OWN CASE , THE GROUNDS RAISED BY THE DEPARTMENT IN APPEAL ARE DISMISSED. ACCORDINGLY, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 1 8 . TO SUM UP, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 15 TH DAY OF DECEMBER, 2017 . SD/ - SD/ - ( / ANIL CHATURVEDI) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 15 TH DECEMBER, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1, PUNE 4. / THE CIT - 1, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE