Assistant Commissioner of Income-tax, V. Messung Systems Private Ltd., Pune

ITA 2280/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9468 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: P D KUDWA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE ! ' $!%& ! ' BEFORE SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWAST HY, JM / ITA NO. 2208/PUN/2014 &( ) *) / ASSESSMENT YEAR : 2009-10 M/S.MESSUNG SYSTEMS PRIVATE LTD., 501, LUNKAD SKYVISTA, S.NO.230/A/3/2, VIMAN NAGAR, PUNE 411 014. PAN: AABCM1832E .. APPELLANT VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-9, PUNE. .. RESPONDENT ASSESSEE BY : SHRI P.D.KUDWA DEPARTMENT BY : SHRI S.P.WALIMBE / ITA NO. 2279/PUN/2014 &( ) *) / ASSESSMENT YEAR : 2009-10 ASST. COMMISSIONER OF INCOME TAX, CIRCLE14, 2 ND FLOOR, PMT COMMERCIAL COMPLEX, SWARGATE, PUNE-411 037 .. APPELLANT VS. M/S.MESSUNG SYSTEMS PVT LTD, EL-2, BLOCK MIDC, BHOSARI, PUNE 411 026. PAN: AABCM1832E .. RESPONDENT 2 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. ASSESSEE BY : SHRI P.D.KUDWA DEPARTMENT BY : SHRI S.P.WALIMBE / ITA NO. 2289/PUN/2014 &( ) *) / ASSESSMENT YEAR : 2010-11 ASST. COMMISSIONER OF INCOME TAX, CIRCLE14, 2 ND FLOOR, PMT COMMERCIAL COMPLEX, SWARGATE, PUNE-411 037 .. APPELLANT VS. M/S.MESSUNG SYSTEMS PVT LTD, EL-2, BLOCK MIDC, BHOSARI, PUNE 411 026. PAN: AABCM1832E .. RESPONDENT ASSESSEE BY : SHRI P.D.KUDWA DEPARTMENT BY : SHRI S.P.WALIMBE DATE OF HEARING : 17-05-2017 DATE OF PRONOUNCEMENT : 19-05-2017 + / ORDER PER D.KARAUNAKARA RAO, AM : THERE ARE THREE(3) APPEALS UNDER CONSIDERATION INVOLVING TWO(2) ASSESSMENT YEARS THAT IS ASSESSMENT YEAR 2009-10 & 2 010-11. APPEALS FOR THE ASSESSMENT YEAR 2009-10 ARE CROSS APPEALS AND TH E APPEAL FOR 2010-11 IS FILED BY THE REVENUE. WE SHALL NOW TAKE UP THE CROSS APPEALS FIRST. 3 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. 2. 2208/PUN/2014 AY 2009-10 BY ASSESSEE 2279/PUN/2014 AY 2009-10 BY REVENUE THESE CROSS APPEALS ARE FILED FOR THE ASSESSMENT YEAR 2 009-10 AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS) D ATED 02/09/2014. GROUNDS RAISED BY THE ASSESSEE READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO ERRE D IN TREATING SALES PROMOTION EXPENSES OF RS.13,18,930 AS CAPITAL IN NATURE AND AFTER ALLOWING DEPRECIATION THEREON OF RS.1,31,893, DISALLOWING THE CLAIM TO THE EXTENT OF RS.1,87,037.THE AP PELLANT PLEADS THAT THE EXPENSES ARE REVENUE IN NATURE AND IN CURRED WHOLLY AND EXCLUSIVELY BUSINESS PURPOSE AND OUGHT TO BE ALLOWED IN FULL. 3. SIMILARLY, REVENUE RAISED FIVE(5) GROUNDS IN THEIR APPEAL AND THE GROUND 1 TO 3 RELATES TO THE AGENCY COMMISSION OF RS.33 ,73,787/- PAID TO M/S.MICRO LOG SYSTEMS. GROUND NO.4 & 5 RELATES TO COURI ER EXPENSES OF RS.17,64,112/- PAID TO M/S.SKY AIR. WE SHALL NOW TAKE UP RE VENUE APPEAL FIRST. ITA NO.2279/PUN/2014 BY REVENUE 4. RELEVANT FACTS RELATING TO THE GROUND 1 TO 3 RAISED B Y THE REVENUE I.E. ALLOWABILITY OF AGENCY COMMISSION INCLUDE THAT THE ASSESSEE I S A DISTRIBUTOR FOR PROGRAMMABLE LOGIC CONTROLLERS (PLCS) AND PARTS THEREOF. ASSESSEE CLAIMED PAYMENT OF COMMISSION IN RESPECT OF SALES TO TOP 10 0 CUSTOMERS OF THE ASSESSEE. ONE SUCH CUSTOMER, NAMELY M/S.MANUGRAP H INDIA PRIVATE LTD., REGISTERED HUGE SALES IN THE YEAR UNDER CONSIDERATIO N. RELEVANT AGENT FOR THIS CUSTOMER IS M/S.MICROLOG SYSTEMS, KOLHAPUR. THE A MOUNT OF 4 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. COMMISSION PAID BY THE ASSESSEE TO MICRO LOG SYSTEMS WO RKS OUT TO 33,73,757/- I.E. EQUALENT OF THE RATE OF 7.5% OF THE SALE OF TH E YEAR MADE BY THE ASSESSEE TO M/S.MANUGRAPH INDIA PRIVATE LIMITED. TH E PAYMENTS ARE MADE BY WAY OF CHEQUE / DDS AND THAT RELEVANT TDS D EDUCTED AS PER THE PROVISIONS OF THE ACT. IN RESPONSE TO THE AOS PROPOSA L OF DISALLOWANCE OF THE SAID AGENCY COMMISSION PAYMENTS, THE ASSESSEE REPLIED STA TING THAT THE SAID COMMISSION AGENT HAS BEEN RENDERING SERVICES CONSTA NTLY OVER THE YEARS AND THE SIMILAR CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE REVENUE IN THE PAST. HOWEVER, THE ASSESSING OFFICER IS OF THE VIEW TH AT THE ASSESSEE IS A SOLE DISTRIBUTOR OF MANUFACTURERS OF THE SAID CONTROLLERS (PLCS). ASSESSING OFFICER IS OF THE OPINION THAT THERE IS NO NEED FO R COMMISSION PAYMENT CONSIDERING THE DEMAND FOR THE PRODUCT. IN PAR A 3.6 AND 3.7 OF THE ORDER OF THE ASSESSING OFFICER, HE OPINED THAT THE PAY MENT OF COMMISSION IS UNWARRANTED. ASSESSING OFFICER INFERRED THAT T HE SAME WAS DONE WITH A VIEW TO DRAIN OUT THE PROFITS OF THE ASSESSE E WITH A VIEW TO REDUCE THE TAX. ACCORDINGLY, HE DISALLOWED THE ENTIRE CLAIM OF THE ASSESSEE ADDED TO THE TOTAL INCOME OF ASSESSE. 5. DURING THE FIRST APPELLATE PROCEEDINGS, ON THE ABOVE SAID ADDITIONS ASSESSEE MADE VARIOUS WRITTEN SUBMISSIONS. THE CONTENTS OF THE REPLY OF THE ASSESSEE ARE EXTRACTED IN PARA 9 OF IMPUGNED ORDER . AFTER CONSIDERING SAME AND ALSO THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE, IN PARA 10, THE COMMISSIONER OF INCOME TAX(APPEALS) DISCUSSE D THE ISSUE AT LENGTH AND MADE OUT THAT THE MICRO LOG SYSTEMS WAS INV OLVED IN ARRANGING THE TRANSACTIONS, SERVICE AND THE SUPPORT TO THE CUSTO MER NAMED 5 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. MANUGRAPH INDIA LTD. HE ALSO OBSERVED THE ASSESSING O FFICERS CONCLUSION THAT ASSESSEE CONTROLS THIS PRODUCT AS A MONOPOLY AND EVENTUALLY CONCLUDED THAT THE PAYMENT OF COMMISSION IS NECESSARY IN THE INDUSTRY. HE ALSO COMMENTED THAT IT IS NOT THE CASE OF THE REVENU E THAT THE MICRO LOG SYSTEMS AS RETURNED THE MONEY/CASH TO THE ASSES SEE AT ANY TIME. CONSIDERING THE TOTALITY OF THE FACTS, THE COMMISSIONER OF IN COME TAX(APPEALS) DELETED THE ENTIRE ADDITION ON THIS ACCOUNT OF COMMISSION PAYMENT TO MICRO LOG SYSTEMS. AGGRIEVED WITH THE ABOV E DELETION THE REVENUE IS IN APPEAL BEFORE US. LD.DR FOR THE REVENUE RELI ED HEAVILY ON THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 6. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS) IS FAIR AND REASONABLE. HE HIGHLIGHTED TO FACT THAT THE PAYMENTS TO MICRO LOG SYSTE MS WAS DONE THROUGH THE BANKING CHANNELS AND THE TDS WAS EFFECTED ON THE SAID PAYMENT IN ACCORDANCE WITH THE TDS PROVISIONS OF THE INCOME TAX ACT. THE CONCERNED RECIPIENTS OF THE COMMISSION PAID THE TAXES ON THE SAID COMMISSION BY FILING THEIR INCOME TAX RETURNS. NO CASH WAS RETURNED BY THE AGENT TO THE ASSESSEE. THE RENDERING OF SERVICES B Y MICRO LOG SYSTEMS TO THE ASSESSEE AS WELL AS TO THE CUSTOMER AND ALSO AC CEPTED BY THE REVENUE. IN THESE CIRCUMSTANCES, THE ORDER OF THE CO MMISSIONER OF INCOME TAX(APPEALS) SHOULD BE DECLARED AS FAIR AND REASONABLE ONE . ON HEARING BOTH THE PARTIES AND ALSO GOING THROUGH THE CONTENTS O F PARA 12, WE FIND IT IS APPROPRIATE TO INSERT THE SAID PARAGRAPH AS UNDER:- 6 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. 12. ANOTHER GROUND ON WHICH THE ASSESSING OFFICER HAS DISALLOWED THE COMMISSION PAYMENT IS THAT THE APPELLANT GROUP W AS ENJOYING MONOPOLY POSITION IN PLC MARKET AND THERE WAS NO NEE D TO PAY COMMISSION FOR ITS SALES. THIS OBSERVATION OF THE ASS ESSING OFFICER IS MADE WITHOUT APPRECIATING THE REALITIES IN BUSINESS. THESE DAYS MARKETS HAVE BECOME QUITE VOLATILE AND MAINTAINING D OMINANT POSITION REQUIRES LOT OF EFFORTS OTHERWISE SLIPPING FROM THE DOMINANT POSITION DOES NOT TAKE MUCH TIME. IT ALSO BE APPRECIATED THAT T HE PARTY IN QUESTION IS NOT RELATED TO THE APPELLANT. IT IS ALSO NOT A CASE WHERE COMMISSION PAYMENT HAS COME BACK TO THE APPELLANT IN ANY MANNER. THEREFORE, ON TOTALITY OF FACTS, IT IS HELD THAT THE AS SESSING OFFICER WASNOT JUSTIFIED IN DISALLOWING THE COMMISSION OF RS.3 3,73,787/-. ACCORDINGLY, HE IS DIRECTED TO DELETE THE SAME. THUS, THE GROUND IS ALLOWED. 7. THE ABOVE EXTRACTED PARA SUGGESTS THAT THE ASSESS ING OFFICER HAS NOT BROUGHT ANY INCRIMINATING EVIDENCE TO SUPPORT HIS CONCLUS ION AND AGAINST THE ASSESSEE. IN OUR VIEW, THE ASSESSING OFFICER HAS NOT DISCHARGED HIS ONUS COMPLETELY. THEREFORE, MAKING ADDITION BY DISALLOWING T HE COMMISSION PAID TO M/S.MICROLOG SYSTEMS IS NOT PROPER. FO R THESE REASONS ALSO, IN OUR VIEW, THE ADDITION IS UNWARRANTED. ACCORDINGLY, THE CONCLUSIONS DRAWN BY THE COMMISSIONER OF INCOME TAX(APPEA LS) ARE CONFIRMED. RELEVANT GROUNDS RAISED BY THE REVENUE IN GRO UND NO.1 TO 3 ARE DISMISSED. 8. GROUND NO.4 TO 5 OF THE REVENUES APPEAL RELATES TO THE ALLOWABILIT Y OF COURIER EXPENSES OF RS.17,64,112/-. ASSESSEE PAID THE SA ID EXPENSES TO M/S.SKY AIR, PUNE. RELEVANT FACTS ON THIS ISSUE INCLUDE THAT , APART FROM MAKING PAYMENTS TO COURIERS LIKE GATI & BLUEDART, ENGAGE D THE SAID SKY AIR COURIER FOR COURIER SERVICES OWNED BY SHRI MANISH VIJAY SAKPAL. 7 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. ASSESSING OFFICER NOTICED CERTAIN DISCREPANCIES WHICH ARE EN LISTED CERTAIN DISCREPANCIES SUCH AS M/S.SKY AIR IS NOT AN ESTABLISHED C OURIER, RENDERED SERVICES ONLY TO THE ASSESSEE, IT HAS NO SUFFICIENT MANPOW ER, THE BILLS ARE NOT MADE, THE RATES ARE COMPETENT ETC,. THUS, ASSESSING OFFICER CAME TO THE CONCLUSION THE FACILITIES AND ESTABLISHMENT OF THE COURIER IS NOT COMMENSURATE WITH THE AMOUNT PAID BY THE ASSESSEE. THER EFORE, ASSESSING OFFICER DISALLOWED 18% OF THE ENTIRE PAYMENT OF 22,05,141/-. D URING THE FIRST APPELLATE PROCEEDINGS ASSESSEE MADE ELABORATE SUBMIS SIONS MEETING THE ABOVE REFERRED ALLEGATIONS OF THE ASSESSING OFFICER AND REQUESTED FOR ALLOWING THE CLAIM OF THE ASSESSEE. COMMISSIONER OF INCOME T AX(APPEALS) CONSIDERED THE SAME AND EXAMINED THE RELEVANT DOCUMENT S AND HELD THE SKY AIR BEING, A LOCAL COURIER SERVICE PROVIDER CANNOT BE C OMPARED WITH THE ESTABLISHED COURIERS LIKE GATI & BLUEDART. HE ALSO OBSERV ED THAT MR.SAKPAL IS UNRELATED BIOLOGICALLY TO THE OWNER OR DIRECTOR S OF THE COMPANY. THUS, COMMISSIONER OF INCOME TAX(APPEALS) CAME T O THE CONCLUSION THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE AND T HEREFORE, ALLOWED THE GROUND RAISED BY THE ASSESSEE ON HIS ISSUE. 9. ON HEARING BOTH THE PARTIES WHO ESSENTIALLY RELIED ON THE RELEVANT ORDERS OF THE ASSESSING OFFICER AND THE COMMISSIONER OF INC OME TAX(APPEALS) WE ARE OF THE OPINION, DISCUSSION GIVEN BY THE C OMMISSIONER OF INCOME TAX(APPEALS) IN PARA 16 OF THE IMPUGNED ORDER IS PROPER AND REASONABLE. WE FIND THE ASSESSING OFFICER HAS NOT BROUGHT ANY INCRIMINATING INFORMATION AGAINST THE ASSESSEE. HE MERELY ANALYSED THE 8 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. DOCUMENTS FURNISHED BY THE ASSESSEE AND DECIDED TO MAK E ADDITION ON THE BASIS OF SURMISES AND SUSPICION. CONSIDERING THE SAME THE GROUNDS RAISED BY THE REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ASSESSEES APPEAL 2208/PUN/2014 BY THE ASSESSEE FOR THE A.Y.2009-10 11. THE SOLITARY ISSUE RELATES TO THE ALLOWABILITY OF SALES PR OMOTION EXPENSES AMOUNTING OF RS.13,18,930/-. THE RELEVANT EFFECTS IN THIS REGARD OR THAT THE ASSESSEE INCURRED ABOVE EXPENSES IN CREAT ION OF CERTAIN STRUCTURES AT THE PREMISES OF MKF TECHNOLOGIES, AN AGENT OF THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED T HE SAID EXPENDITURE INCURRED IN UPGRADATION AND RENOVATION. THE PREMISES OF AN AGENT WHO IS A PRINCIPLE SYSTEM HOUSE OF THE ASSESSEE A T MUMBAI. IT IS THE REQUIREMENT OF THE BUSINESS THAT PROPER PREMISES SHOULD BE PROV IDED TO THE IMPORTANT AGENT. HE ALSO SUBMITTED THROUGH THAT SALES OF RS.1.25 CRORES WAS BROUGHT BY THE SAID AGENT TO THE ASSESSEE DURING THE YEAR. THE EFFECT OF NOT DISPUTING THE GENUINENESS OF THE EXPENDITURE WAS A LSO HIGHLIGHTED BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS). ON HEARING THE SAME, THE COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT SUCH EX PENDITURE WAS TO AVAIL LONG TERM BUSINESS BENEFIT WHICH FALLS IN THE CAPITAL FIE LD. THEREFORE, THE COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ASSESSEE IS IN APPEAL BEFORE US. 9 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. 12. DURING THE PROCEEDINGS THE ASSESSEES COUNSEL EXPLA INED THE ABOVE FACTS AND RELIED HEAVILY ON THE SUBMISSIONS MADE BY THE A SSESSEE BEFORE THE ASSESSING OFFICER SALES THE COMMISSIONER OF INCOME TAX(A PPEALS). LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE EX PENDITURE IS REQUIRED FOR THE BUSINESS PURPOSES AND THEREFORE, IT IS A N ALLOWABLE EXPENDITURE. AFTER HEARING BOTH THE PARTIES, WE FIND THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) IS REASONABLE. THE R EASONS INCLUDE THAT THERE ARE NO SPECIFIC DETAILS WITH REFERENCE TO THE E XACT NATURE OF EXPENDITURE ON RECORD. HOWEVER, IT IS AN UNDISPUTED FACT THAT EXPENDITURE IS FOR THE EXTENDING THE STRUCTURES REQUIRED FOR BUSINESS PURPOSE AND IT HAS LONG TERM BENEFIT TO THE ASSESSEE THROUGH THE SAID AGEN T. THEREFORE, WE ALSO FIND THE COMMISSIONER OF INCOME TAX(APPEALS) AFTER TREA TING THE SAME ON CAPITAL DEPRECIABLE ASSET, HAS RIGHTLY GRANTED THE DE PRECIATION ON THE SAID EXPENDITURE ALLOWED CAPITALIZATION. THEREFORE, THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) IS FAIR AND REASONABLE A ND IT DOES NOT CALL FOR ANY INFERENCES. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 14. TO SUM UP BOTH THE CROSS APPEALS FOR THE ASSESSMEN T YEAR 2009-10 ARE DISMISSED. 10 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. 2280/PUN/2014 FOR ASSESSMENT YEAR 2010-11 FILED BY THE REVENUE 15. AT THE OUTSET, BOTH THE COUNSELS BROUGHT OUR INFORMA TION TO THE GROUNDS RAISED BY THE REVENUE AND SUBMITTED GROUND NO .1 TO 4 RELATES TO THE ISSUES RELATING THE COMMISSION PAYMENT MADE TO MICRO LOG SYSTEMS (RS.16,02,127/-) AND PAYMENT MADE TO COURIER SKY AIR (RS.27,7 6,534/-). THESE TWO(2) ISSUES ARE IDENTICAL TO THE ONUS RAISED AND ADJUDICATED BY THE REVENUE IN THE REVENUES APPEAL FOR THE ASSESSMENT YEA R 2009-10. AFTER HEARING BOTH THE PARTIES, WE FIND THE FACTS ARE SIMILAR TO T HAT OF THE SIMILAR ISSUES RAISED IN THE ASSESSMENT YEAR 2009-10. IN THAT APPEAL, WE HAVE DECIDED TO CONFIRM THE CONCLUSIONS OF THE COMMISSIONER OF IN COME TAX(APPEALS) AS EVIDENT FROM THE PROCEEDINGS PARAGRAPHS OF THIS ORDER. CONSIDERING SAME OUR DECISIONS ARE APPLICABLE EQUALLY TO TH ESE GROUNDS 1 TO 4. 16. ACCORDINGLY, GROUND NO.1 TO 4 ARE OF THE REVENUES APPEAL ARE DISMISSED. 17. RELATING TO GROUND NO.5, THE REVENUE IS AGGRIEVED AGA INST THE RELIEF GRANTED BY THE COMMISSIONER OF INCOME TAX(APPEALS) IN MATT ERS RELATING TO THE CLAIM TRAVELLING EXPENSES. RELEVANT FACTS IN THIS REGARD ARE THAT THE ASSESSEE CLAIMED TRAVELLING EXPENSES AMOUNT TO RS.1,00,96,54 1/-). DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER EXAMINED CER TAIN BILLS ON RANDOM BASIS AND NOTICED THAT CERTAIN EXPENDITURE INCURRED ON THE TRAVEL OF 11 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. MRS.RUHI MERCHANT (WIFE OF SHRI AZEEM FARUT MERCHANT) ARE INCLUDED AND CLAIMED AS AN ALLOWABLE EXPENDITURE. CONSIDERING THE ABOVE D ISCREPANCY THE ASSESSING OFFICER PROCEEDED TO MAKE A DISALLOWANCE ON ADHOC BASIS APPLYING THE FLAT RATE OF 15% OF THE ENTIRE CLAIM. THAT IT AMOUNTS TO 15,14,481/-. DURING THE FIRST APPEAL PROCEEDINGS THE COM MISSIONER OF INCOME TAX(APPEALS) NOTICE THAT SUCH DISALLOWANCE IS ON HIGH SIDE. HE, ACCORDINGLY, RESTRICTED THE DISALLOWANCE TO RS.1,00,000/-. 18. AFTER HEARING BOTH THE PARTIES ON THIS ISSUE WE PERUS E THE CONTENTS OF PARA 17 TO 20 OF THE COMMISSIONER OF INCOME TAX(APPEALS) O RDER AND FIND PARA 20 CONSTITUTES AN OPERATIONAL PARAGRAPHS AND THE SAME READS AS UNDER:- 20. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS WELL AS REPLY OF THE APPELLANT. THE CLAIM OF EXPENDITURE PERTAININ G TO THE FAMILY OF ONE OF THE DIRECTORS SON CAN BE ACCEPTED TO BE BUS INESS EXPENDITURE ONLY WHEN THE SAME IS SUPPORTED WITH DOCUMENTARY EVID ENCE LIKE POSTING OF SHRI. AZEEM FAROOK MERCHANT TO GURGAON OF FICE AND THEREAFTER TRANSFER BACK TO PUNE. THE APPELLANT HAS NOT SUBMITTED ANY EVIDENCE IN THIS REGARD. THIS BEING SO, CONSIDERING THE TOTALITY OF FACTS, IT IS HELD THAT ENDS OF JUSTICE WILL MEET IF THE DISALLO WANCE IS RESTRICTED TO RS.1 LAC. ACCORDINGLY, THE ASSESSING OFFICER IS DIR ECTED TO DELETE THE ADDITION OF RS.14,14,481/- I.E. 15,14,481 -1,00,000). THUS, THE GROUN D IS PARTLY ALLOWED. 19. FROM THE ABOVE, IT IS EVIDENT THAT COMMISSIONER OF INCO ME TAX(APPEALS) AS RIGHTLY DISCOURAGED THE MANNER OF MAKING U NFAIR ADHOC DISALLOWANCE APPLYING 15% OF THE ENTIRE CLAIM OF EXPENDITURE. HE CONSIDERED THE ACTUAL EXPENDITURE INCURRED BY THE ASSES SEE IN CONNECTION WITH THE DOMESTIC TRAVEL BY MRS.RUHI MERCHANT IS LESS THAN RS.40,000/-. 12 ITA NOS.2208/PUN/2014 & OTHERS FOR AY'S: 2009- 10 & 2010-11 OF M/S.MESSUNG SYSTEMS PRIVATE LTD. COMMISSIONER OF INCOME TAX(APPEALS) OPINED THE DISALLOWANCE O F RS.15.14 LAKSH AGAINST THE DISCREPANCY OF RS.40,000/- ON HIGH SIDE. THERE, THE COMMISSIONER OF INCOME TAX(APPEALS) RESTRICTED THE DISALLOWAN CE TO RS.1 LAKH. THE SAME CONSTITUTES FAIR AND REASONABLE. AS SUCH, THE ASSESSEE HAS NO GRIEVANCE OF THIS ISSUE. THEREFORE, WE A RE OF THE VIEW THAT THE FINDING OF THE COMMISSIONER OF INCOME TAX(APPEALS) FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INFERENCE. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 19 TH DAY OF MAY, 2017. SD/- SD/- ,$!% /VIKAS AWASTHY) , /D.KARUNAKARA RAO) & !- JUDICIAL MEMBER !- ACCOUNTANT MEMBER / PUNE; / DATED : 19 TH MAY, 2017 S S G G R R +./&01$2$*0 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)-V, PUNE. 4. / THE CIT-V, PUNE 5. , ! , ' '#$ , / DR, ITAT, B BENCH, PUNE. 6. %& '( / GUARD FILE. ) * / BY ORDER, / / TRUE COPY / / *+ , / ASSISTANT REGISTRAR, ! , / ITAT, PUNE