Valsad Dist. Co.Op.Milk Producers Union Ltd, Dist. Navsari V. The Income tax Officer, Ward-3, Navsari

ITA 2296/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57131 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 31-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Keywords: Gross profit estimation

Judgement Text

ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, A HMEDABAD (BEFORE SHRI G.C. GUPTA,VICE PRESIDENT AND SHRI B. R. BASKARAN,AM) I.T.A. NO. 22 96 & 2297/AHD/2007 (ASSESSMENT YEAR: 2003-2004 AND 200 4-05) VALSAD DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD., N.H. NO.8, CHIKHLI, ALIPORE-396 409, DIST. NAVSARI. (APPELLANT) VS. INCOME TAX OFFICER, WARD 4, NAVSARI. (RESPONDENT) I.T.A. NO. 3109 & 3110/AHD/2007 (ASSESSMENT YEAR: 2003-2004 AND 200 4-05) DEPUTY COMMISSIONER OF INCOME TAX, NASVSARI CIRCLE, NAVSARI. (APPELLANT) VS. VALSAD DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD., N.H. NO.8, CHIKHLI, ALIPORE-396 409, DIST. NAVSARI. (RESPONDENT) PAN: AAAAV0542 R APPELLANT BY : SHRI HARDIKVORA. RESPONDENT BY : SHRI KARTAR SINGH, CIT (DR) ( )/ ORDER DATE OF HEARING : 17-1-2012 DATE OF PRONOUNCEMENT : 25-1-2012 PER: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER S OF LD CIT (A), VALSAD AND THEY RELATE TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. SINCE SOME OF THE ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 2 ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATU RE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2. THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGE D IN THE BUSINESS OF MILK PROCESSING, MFG. OF ICE CREAM, PRODUCTION OF CATTLE FEED ETC. THE AO COMPLETED THE ASSESSMENT OF THE YEARS UNDER CONSIDERATION BY MAKING VARIOUS ADDITIONS. IN THE APPEALS FILED BEFORE LD CIT (A), THE ASSESSEE G OT PARTIAL RELIEF. STILL SEEKING SFURTHER RELIEF, THE ASSESSEE IS IN APPEAL BEFORE U S. THE DEPARTMENT IS ASSAILING THE DECISION OF LD CIT (A) IN GRANTING RELIEF TO THE AS SESSEE. 3. WE SHALL TAKE UP THE APPEAL OF THE REVENUE FI RST. FOLLOWING TWO ISSUES ARE COMMON IN BOTH THE YEARS, WHICH WE PREFER TO DISPOS E OF FIRST. (A) ADDITION ON ACCOUNT OF LOW GP. (B) ADDITION OF SALES TAX SUBSIDY RECEIPTS. 3.1 THE FIRST ISSUE RELATES TO THE ADDITION MADE ON ACC OUNT OF REDUCTION IN THE GROSS PROFIT RATE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO COMPARED THE RATE OF GROSS PROFIT (GP) DECLARED BY THE ASSES SEE IN THESE TWO YEARS WITH THAT DECLARED IN THE EARLIER YEARS AND NOTICED THAT THER E WAS A DROP IN THE RATE OF GP IN THE INSTANT YEARS. THOUGH THE ASSESSEE FURNISHED D ETAILED EXPLANATIONS SUBSTANTIATING THE REDUCTION IN THE GP RATE, YET TH E AO WAS NOT CONVINCED WITH THE SAME AND ACCORDINGLY ADDED THE AMOUNT RELATING TO T HE GP RATE DIFFERENCE. THE SAID ADDITION WAS DELETED BY LD CIT(A) AND HENCE TH E REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND CAREFULLY PERUSED THE RECORD AND THE ORDER OF LD CIT(A). WE NOTICE THAT THE LD CIT(A) HAS CONSIDERED THIS ISSUE IN DETAIL AND HAS TAKEN A JUST VIEW OF THE MA TTER. FOR THE SAKE OF CONVENIENCE, ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 3 WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY LD CIT(A) IN HIS ORDER RELATING TO ASSESSMENT YEAR 2003-04: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS OBSERVATION OF THE AO IN THE REMAND REPORT AS WELL AS IN THE ASSESSMENT ORDER. THE APPELLANT, IN ITS DETAILED STATEMENT OF FACTS HAS CONTROVERTED EACH AND EVERY OBSERVATION OF THE AO IN THE ASSESSM ENT ORDER. ALONG WITH THE STATEMENT OF FACT, THE APPELLANT HAS ENCLO SED PIECES OF EVIDENCES ON WHICH IT HAS RELIED UPON. THE EVIDENC ES ENCLOSED INCLUDE COMPARATIVE TRADING RESULTS, COPY OF RELEVANT RESOL UTIONS, PRICE LIST OF VARIETY OF MILK PUBLISHED BY GCMMF, ABSTRACTS OF QU ANTITATIVE RECORDS, DETAILED WRITTEN SUBMISSIONS FILED BEFORE THE AO, A NALYSIS OF COMPARATIVE PRICES OF MILK, ANNUAL REPORT OF THE AP PELLANT, COPY OF BYE- LAWS, ETC. IN SUPPORT OF THE CONTENTIONS RAISED. TH E APPELLANT HAS CLEARLY BROUGHT OUT IN PARA-12 OF THE STATEMENT OF FACT, TH E REASONS FOR SHOWING LOSS IN THE MILK ACCOUNT RECONCILING THE MONETARY I MPACT OF RS.3,59,65,801/- IN THE TRADING RESULTS. THE AO HAS NEITHER REBUTTED NOR CONTROVERTED THE AFORESAID EXPLANATION OFFERED BY T HE APPELLANT. THERE IS A FORCE IN THE OBSERVATION OF THE AR THAT ACCOUNTS OF THE APPELLANT ARE AUDITED UNDER THE INCOME TAX ACT AS WELL AS UNDER T HE STATE CO- OPERATIVE LEGISLATION. LOOKING AT THE COMPARATIVE T RADING RESULTS OF LAST TWELVE YEARS, ONE CAN MAKE OUT THAT THE TREND OF GP RATIO IS HIGHLY FLUCTUATING. THERE IS A MERIT IN THE CONTENTION OF THE APPELLANT THAT IN THE REGULAR ASSESSMENT FRAMED IN ALMOST FIVE YEARS OUT OF LAST TWELVE YEARS, THE TRADING RESULTS OF THE APPELLANT ARE ACCEPTED. THERE IS ALSO A MERIT IN THE CONTENTION OF THE AR THAT THE AO COULD NOT FIND ANY GLARING DEFECT IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE AO HAS NOT DISPUTED THE FACT THAT THE APPELLANT FOLLOWED CONSISTENT METHOD OF AC COUNTING AND THE BOOKS OF ACCOUNTS ARE COMPLETE, THROUGH WHICH ANNUA L PROFIT CAN BE PROPERLY DEDUCED. THE APPELLANT HAS FURNISHED COGENT EXPLANATION FOR THE FALL IN GP RATE. IN THAT CASE, I AM OF THE VIEW THAT ADDITION TO DECLARED TRADING RESULTS, CAN NOT BE MADE EVEN IF B OOKS OF ACCOUNTS ARE NOT PROPERLY MAINTAINED, AS LONG AS THE TRADING RES ULTS DISCLOSED BY THE ASSESSEE ARE PROPERLY EXPLAINED WITH SUPPORTING EVI DENCE. IN THE REMAND REPORT, THERE ARE NO MATERIAL OBSERVATION EXCEPT TH E ONE THAT THE ASSESSEE SHOULD HAVE SUBMITTED QUANTITATIVE DETAILS OF EACH TYPE OF MILK. AS AGAINST THAT, THE FACT REMAINS THAT THE APPELLAN T DID FILE QUANTITATIVE RECORDS ALONG WITH THE TAX AUDIT REPORT IN FORM NO. 3CD BEFORE THE AO AND THE AO HAS NOT FOUND ANY DISCREPANCY IN THE SAM E . AFTER HAVING ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 4 CONSIDERED THE FACTS OF THE CASE AS WELL AS THE RIV AL SUBMISSIONS, I AM OF THE FIRM VIEW THAT IT IS NOT A CASE WHEREIN PROVISI ONS OF SECTION 145(3) FOR REJECTION OF BOOK RESULTS CAN BE VALIDLY INVOKE D. THE LD. CIT (A) HAS DEALT IN DETAIL FURTHER ON THIS ISSUE BY CONSIDERING THE CASE- LAWS RELIED ON BY THE ASSESSEE AND EXPLANATION GIVE N BY THE ASSESSEE. THE MOOT POINT ON THIS ISSUE, IN OUR OPINION, IS THAT THE AO DID NOT FIND ANY DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE NOR DID HE FIND FALSE WITH THE EXPLANATION FURNISHED BY THE ASSESSEE WITH REGARD T O THE DEDUCTION IN THE GROSS PROFIT. FURTHER, AS POINTED OUT BY LD CIT(A), THE AO HAS REACHED THE CONCLUSIONS WITHOUT TAKING INTO ACCOUNT THE QUANTITY DETAILS FU RNISHED BY THE ASSESSEE ALONG WITH THE TAX AUDIT REPORT. THERE CANNOT BE ANY DIS PUTE THAT THE BOOK RESULTS CAN BE REJECTED ONLY IF IT IS SHOWN THAT THE BOOKS MAINTAI NED BY THE ASSESSEE ARE NOT RELIABLE FOR DEDUCING CORRECT INCOME. IN THE INSTA NT CASES, THE AO HAS NOT GIVEN ANY SUCH FINDING. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT (A) IN DELETING THE IMPUGNED AD DITION IN BOTH THE YEARS. 3.2 THE NEXT COMMON ISSUE RELATES TO THE TAXABILITY OF SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE. THE SAID SUBSIDY HAS BEEN RECEIVE D FROM THE GOVERNMENT FOR EXPANSION OF RUNNING BUSINESS. THE ASSESSEE TREATE D IT AS CAPITAL SUBSIDY, WHERE AS THE AO CONSIDERED IT AS REVENUE SUBSIDY. THE LD CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE AND HENCE THE REVENUE IS IN APPEAL BEFORE US. IT WAS BROUGHT TO OUR NOTICE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY TH IS BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1223 & 1349/AHD/2006 ORDER DATED 11-09-2009, WHEREIN THE TRIBUNAL HAS ACCEPTED THE CONTENTIONS O F THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE TRIBUNAL ORDER CITED ABOVE:- ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 5 AFTER HEARING BOTH THE PARTIES AND PERUSED THE MAT ERIAL PLACED BEFORE US. WE FIND FROM THE RECORD THAT IT IS AN INCENTIVE GRANTED TO THE ASSESSEE UNDER 1993 PACKAGE SCHEME. THE INCENTIVE H AS BEEN PROVIDED FOR MAKING ADDITION FIXED CAPITAL INVESTME NT IN BUILDING AND PLANT AND MACHINERY OF RS.636.65 LAKHS AS DETAILED IN PARA-7 OF THE CERTIFICATE AT PLOT NO. M12, MIDC AREA, TARAPUR, BO ISAR, TAL. PALGHAR DIST. THANE FOR MANUFACTURING OF ICE-CRME 10,000/- HRS PER DAY INCLUSIVE OF CAPTIVE USE FOR MANUFACTURING 7500 00 CANDY STICKS. THEREFORE, THIS INCENTIVE HAS BEEN PROVIDED FOR ADD ITIONAL FIXED CAPITAL INVESTMENT IN BUILDING AND PLANT AND MACHINERY UNDE R THE 1993 PACKAGE SCHEME OF INCENTIVE IN INDUSTRIAL BACKWARD AREA. WE FIND THAT THE ASSESSEE PUT FORWARD HIS CLAIM AND WE FIND THAT FROM THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES (SUPRA), THE CLAIM OF THE ASSESSEE STAND S FULLY COVERED BY THIS DECISION. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE CIT (A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. ACCORDINGLY, GROUND NO.3 TAKEN BY THE REVENUE IS TH EREFORE DISMISSED. 4. THE LD A.R SUBMITTED THAT THERE IS NO CHANGE IN THE UNDER LYING FACTS CONCERNING THE IMPUGNED SUBSIDY RECEIPTS. ACCORDIN GLY, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL, REFERRED SUPRA, WE UPHOLD TH E ORDER OF LD CIT(A) ON THIS ISSUE. 5. NOW WE SHALL CONSIDER THE FOLLOWING FOUR ISSUES RAISED BY THE REVENUE IN ITS APPEAL RELATING TO ASSESSMENT YEAR 2003-04. (A) CO-OPERATIVE DEVELOPMENT EXP PAID ON BEHALF OF VASUHDHARA TRUST. RS. 16,17,977/- (B) PAYMENT MADE TO SABARMATI GAUSHALA RS.12,80,219/- (C) DISALLOWANCE OF LEGAL EXPENSES. RS.19,50,500/ - (D) INTEREST PAYABLE TO NDDB RS.28,06,502/- ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 6 5.1. THE FIRST ISSUE RELATES TO DISALLOWANCE OF AMO UNT PAID TO VASUNDHARA TRUST TO CARRY OUT RESEARCH AND DEVELOPMENT ACTIVITIES. THE LD CIT(A) NOTICED THAT THE ASSESSEE IS EMPOWERED TO CARRY OUT RESEARCH AND DEV ELOPMENT ACTIVITIES IN COLLABORATION WITH OTHER ORGANIZATIONS. HE ALSO NO TICED THAT THE IMPUGNED PAYMENT HAS BEEN MADE TO VASUNDHARA TRUST FOR CARRYING OUT THE RESEARCH ACTIVITIES. ACCORDINGLY, HE DELETED THE IMPUGNED ADDITION. IT WAS BROUGHT TO OUR NOTICE THAT THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN T HE ASSESSEES OWN CASE IN ITA NO.1349/AHD/2006 RELATING TO THE ASSESSMENT YEAR 20 02-03, WHEREIN THE TRIBUNAL HAS UPHELD THE DECISION OF LD. CIT (A) IN DELETING THE ADDITION. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL. 26. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RECORD, WE FIND THAT CLAUSE 18 OF SECTION 3 OF THE BYE-LAWS OF THE ASSESSEE SOCIETY DOES NOT EMPOWER THE ASSESSEE SOCIETY TO CARRY OUT ITS OBJECTIVE IN COLLABORATION WITH ANY OTHER ENTITY, INSTITUTION OR PERSONS. THE ASSESSEE HAS PLACED ON RECORD A COPY OF THE RELEVAN T RESOLUTIONS PASSED AT THE MEETINGS OF THE MANAGING COMMITTEE OF THE ASSESSEE SOCIETY RESOLVING COLLABORATION WITH VASUNDHARA RES EARCH AND DEVELOPMENT MANDAL AND DR. MANIBHAI DESAI TECHNOLOG Y TRANSFER CENTRE. FROM THE ABOVE SAID RESOLUTION AND COPIES OF MEMORANDUM IT CAN BE SEEN THAT THESE ARE MERELY EXTENSION OF THE ACTIVITY OF THE ASSESSEE SOCIETY AND THE COLLABORATION MADE BY THE ASSESSEE IS NOT ULTRA VIRES. CAN CO-ORDINATE AND UNDERTAKE ANY OF THE ACTIVITIES WHICH ARE CONNECTED WITH CARRYING OUT THE OBJECTS O F THE ASSESSEE SOCIETY. THE ASSESSEE HAS SUPPLIED A COPY OF RESOLU TION PASSED IN THE MEETING OF MANAGING COMMITTEE OF THE SOCIETY. THERE FORE, THE CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. SINCE TH E CIT (A) HAS PASSED DETAILED AND ELABORATE ORDER, THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE SAME. ACCORDINGLY, WE DISMISS TH E GROUND NO.1 TAKEN BY THE REVENUE. SINCE THE DECISION RENDERED BY LD CIT(A) ON THIS IS SUE IS CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL CITED SUPRA, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE SAME. ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 7 5.2. THE NEXT ISSUE RELATES TO DISALLOWANCE OF PAYM ENT MADE TO SABARMATI GAUSHALA FOR PURCHASE OF SEMEN DOSES. THE AO DISALL OWED THE SAID CLAIM ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE ANY BUSINE SS CONNECTION IN INCURRING THIS EXPENDITURE. HOWEVER, THE LD. CIT (A) NOTICED THAT THE SEMEN DOSE IS A VETERINARY ITEM AND THE SAME IS INJECTED TO MILK DAIRY ANIMALS TO GET BEST QUALITY OF BREED OF MILK BEARING CATTLE. ACCORDINGLY, HE DELETED THE IM PUGNED ADDITION WITH THE FOLLOWING OBSERVATIONS:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T AS WELL AS THE CONTENTIONS OF THE AO IN THE ASSESSMENT ORDER. FROM THE COPY OF THE BYE-LAWS FILED BEFORE ME, IT IS OBSERVED THAT S ECTION 3, CLAUSE 6 OF THE BYE-LAWS ENABLES THE APPELLANT TO PROVIDE THE F ACILITIES FOR ANIMAL HUSBANDRY AND BREEDING OF IMPROVED MILK BEARING ANI MALS. THE APPELLANT HAS INCURRED LEGITIMATE EXPENSE TOWARDS P URCHASE OF SEMEN DOSES, WHICH IS VETERINARY ITEM. THESE SEMEN IS IN JECTED TO GET THE BEST QUALITY OF BREED OF MILK BEARING CATTLE. THERE FORE, THE EXPENDITURE INCURRED HAS DIRECT NEXUS WITH THE OBJECTIVES OF TH E APPELLANT SOCIETY. THE OBSERVATION OF THE AO THAT THE APPELLANT COULD NOT LINK UP THE EXPENDITURE INCURRED ON SEMEN PURCHASE WITH ITS BUS INESS ACTIVITY IS WITHOUT ANY MERIT IN IT. THE APPELLANTS GROUND NO. 5 IS ALLOWED. WE NOTICE THAT THE LD CIT(A) HAS GIVEN A FINDING TH AT THERE IS A BUSINESS CONNECTION IN INCURRING THE IMPUGNED EXPENDITURE. BEFORE US, NO MATERIAL WAS PLACED BY THE DEPARTMENT TO CONTROVERT THE SAID FIN DING OF LD CIT(A). HENCE, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 5.3 THE NEXT ISSUE RELATES TO DISALLOWANCE OF L EGAL EXPENSES OF RS.19,50,000. THE AO DISALLOWED EXPENSES CLAIMED UNDER THE HEAD LEGAL EXPENSES AMOUNTING TO RS.24,50,000/-. HE ALSO DISALLOWED THE CONSULTA NCY CHARGES OF RS.19,50,000/- PAID TO M/S.CHIRYU CONSULTANCY, AS THE ASSESSEE COU LD NOT FILE CONFIRMATION LETTER AND ALSO THE BASIS FOR CHARGING SUCH A HIGH AMOUNT. BEFORE THE LD CIT(A), THE ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 8 ASSESSEE SUBMITTED THAT LEGAL EXPENSES OF RS.24,50, 000/- ALREADY INCLUDES THE AMOUNT OF RS.19,50,000/- PAID TO CHIRAYU CONSULTANC Y. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT, SINCE THE CLAIM OF RS.24.50 LAKHS P ERTAINING TO LEGAL EXPENSES WAS DISALLOWED, THE DISALLOWANCE OF RS.19.50 LAKHS HAS LED TO DOUBLE ADDITION WHICH IS NOT PERMISSIBLE UNDER THE ACT. THE LD. CIT (A) WAS CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND ACCORDINGLY DELETED ADDITION OF RS.19,50,000/-, AS IT HAS LED TO DOUBLE ADDITION OF THE SAME AMOUNT. THE LD. DR, HOWEVER, SUBMITTED THAT THE SAID CLAIM OF DOUBLE ADDITION NEEDS VERIFI CATION. ACCORDINGLY HE PLEADED THAT THE MATTER MAY BE SET ASIDE TO THE AO FOR VERI FICATION. WE FIND MERIT IN THE CONTENTION OF THE LD. DR. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF A O WITH A DIRECTION TO VERIFY THE CLAIM OF DOUBLE ADDITION AND TAKE APPROPRIATE DECIS ION. 5.4 THE LAST ISSUE PERTAINS TO DISALLOWANCE OF INTEREST PAID TO NDDB. THE LD. AR SUBMITTED THAT TRIBUNAL HAS CONSIDERED AN IDENTI CAL ISSUE IN THE ASSESSEES OWN CASE IN ITS APPEAL NO.ITA 1223 & 1349/ AHD/2006 REL ATING TO THE ASSESSMENT YEAR 2002-03 REFERRED SUPRA AND THE TRIBUNAL HAS SET ASI DE MATTER TO THE FILE OF THE AO FOR MAKING NECESSARY VERIFICATION OF THE CLAIM. AC CORDINGLY HE PLEADED THAT THIS ISSUE MAY ALSO BE SET ASIDE TO THE FILE OF THE AO F OR MAKING NECESSARY VERIFICATION. THE LD D.R DID NOT OBJECT TO THE REQUEST MADE BY TH E ASSESSEE. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH AFT ER AFFORDING NECESSARY OPPORTUNITY TO THE ASSESSEE. 6. NOW WE SHALL TAKE UP THE APPEALS FILED BY TH E ASSESSEE. IN BOTH THE APPEALS, THE ASSESSEE IS ASSAILING THE DECISION OF LD CIT(A) IN HOLDING THAT THE SUBSIDY ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 9 AMOUNT RECEIVED BY THE ASSESSEE SHOULD BE DEDUCTED FROM THE COST OF MACHINERIES. DURING THE COURSE OF HEARING, THE LD A.R SUBMITTED THAT HE IS NOT PRESSING THE GROUND RELATING TO THE ABOVE SAID ISSUE. ACCORDING LY, WE DISMISS THE SAID GROUND AS NOT PRESSED. 7. IN THE APPEAL FILED BY THE ASSESSEE FOR ASST . YEAR 2003-04, FOLLOWING TWO ISSUES ARE AGITATED. (A) DISALLOWANCE OF CONSULTANCY EXPENSES - RS. 19,50,000/- (B) DISALLOWANCE OF LEGAL EXPENSES - R S. 5,00,000/- ------------------- RS.24,50,000/- =========== THE AMOUNT OF RS.19.50 LAKHS WAS PAID TO M/S CHIRAY U CONSULTANCY AND RS.5.00 LAKHS WAS PAID TO SHRI MILIND G GUJARATI. THE AO D ISALLOWED THE ABOVE SAID CLAIM FOR THE REASON THAT THE ASSESSEE COULD NOT FILE CON FIRMATION LETTER FROM THE PAYEES AND ALSO THE BASIS OF THE FEE CHARGED BY M/S CHIRAY U CONSULTANCY. HOWEVER, THE LD CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE PAYMENT IS EXCESSIVE IN NATURE. BEFORE US, THE LD A.R FILED COPIES OF B ILL, CONFIRMATION LETTER, COPY OF PAYMENT VOUCHER AND COPY OF ACKNOWLEDGEMENT OF RETU RN FILED BY THEM. THE ASSESSEE CLAIMS THAT THE SAID PROFESSIONALS HAVE DI RECTLY SENT THESE DOCUMENTS TO THE ASSESSING OFFICER. HOWEVER, THE AO HAS MADE TH E IMPUGNED ADDITION FOR WANT OF CONFIRMATION LETTERS, WHICH MEANS THAT THE SAID DOCUMENTS MIGHT NOT HAVE REACHED THE AO IN TIME. WE DO NOT FIND ANY MERIT I N THE OBSERVATION OF THE LD CIT(A) THAT THE SAID PAYMENTS ARE EXCESSIVE IN NATU RE, AS NORMALLY THE AMOUNT PAYABLE TO THE PROFESSIONALS ARE FIXED ON THE BASIS OF SERVICES RENDERED BY THEM. WE NOTICE THAT THE LD CIT(A) HAS NOT JUDGED THE IMP UGNED PAYMENTS VIS--VIS THE SERVICES RENDERED BY THEM. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS TO ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 10 BE CONSIDERED AFRESH AT THE END OF THE AO. ACCORDI NGLY WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW . NEEDLESS TO MENTION, THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY OF BEIN G HEARD. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE APPEAL OF THE ASSESSEE RELATING TO THE ASSESSMENT YEAR 2003-04 ARE TREATED AS PARTL Y ALLOWED. THE APPEALS OF BOTH THE PARTIES RELATING TO ASSESSMENT YEAR 2004-05 ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 01 - 2012. SD/- SD/- (G. C. GUPTA) (B. R.BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)- VALSAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA.NO.2296, 2297,31 09 & 3110/07 ASSTT.YEARS 2003- 04 & 2004-05 11 1.DATE OF DICTATION 18 - 01 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 18 /01 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 19 - 01 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 01 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 -01 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25 -01 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..