The DCIT, Bharuch Circle, Bharuch V. M/s. Gujarat Borosil Ltd., Bharuch

ITA 2317/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60331 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-03-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 30-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B K S PANDYA
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Capital asset; Depreciation; Business expenditure; Bad and doubtful debts; Notional interest; Revised return
• Section: 43B; 40A(3); 143(3); 37(1); 154

Judgement Text

ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AH MEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO. 2317/AHD/2009 (ASSESSMENT YEAR: 1996-97) THE DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH. (APPELLANT) VS. GUJARAT BOROSIL LTD., VILLAGE GOVALI, TALUKA JHAGADIA, DIST. BHARUCH. (RESPONDENT) I.T.A. NO. 2352/AHD/2009 (ASSESSMENT YEAR: 1996-97) GUJARAT BOROSIL LTD., VILLAGE GOVALI, TALUKA JHAGADIA, DIST. BHARUCH. (APPELLANT) VS. THE DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH. (RESPONDENT) PAN: AAACG 8440M APPELLANT BY : SHRI B.K.S.PANDYA. RESPONDENT BY : SHRI SUNIL H. TALATI. ( )/ ORDER DATE OF HEARING : 27-3-2012 DATE OF PRONOUNCEMENT : 11-5-2012 PER: SHRI ANIL CHATURVEDI,A.M. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 2 THESE ARE TWO CROSS APPEALS, ONE FILED BY THE REVEN UE AND THE OTHER FILED BY THE ASSESSEE. BOTH THESE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER OF LD. CIT (A)-VI, BARODA DATED 18 -5-2009, FOR THE ASSESSMENT YEAR 1996-97. 2. ITA NO.2317/AHD/2009 THE RETURN OF INCOME WAS FILED ON 30-11-1996 DECL ARING TOTAL LOSS OF RS.6,93,28,108/-. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S. 143(3) O F THE ACT. IN THE ASSESSMENT PROCEEDINGS THE AO MADE VARIOUS DISALLOW ANCES AND AFTER ADJUSTING THE BROUGHT FORWARD LOSSES THE TOTA L INCOME WAS DETERMINED AT RS. NIL. 3. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF A O, PREFERRED APPEAL BEFORE CIT(A). CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE. THE ASSESSEE AND THE REVENUE BOTH BEING AGGRIEVED BY TH E ORDER OF CIT(A), ARE IN APPEAL BEFORE US. THE FIRST GROUND OF APPEAL BY THE REVENUE IS AGAINS T THE DISALLOWANCE OF RS.7,63,666/- ON ACCOUNT OF EARLIER YEARS EXPENSES. 4. ACCORDING TO THE TAX AUDIT REPORT, EARLIER YEAR S EXPENSES WERE RS.29,07,666/-. THE ASSESSEE WHILE COMPUTING THE TO TAL INCOME ADDED RS.21,44,000/-. THE A.O. THEREFORE ADDED THE BALANC E AMOUNT OF RS. 7,63,666/- (29,07,666 21,44,000). ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 3 5. AGGRIEVED BY THE ORDER OF A.O. THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BEFORE CIT(A), ASS ESSEE CONTENDED THAT REVISED RETURN WAS FILED BY IT ON 27-11-1997 A ND THE EXPENSES RELATING TO ASSESSMENT YEAR 1995-96 WAS ADDED BACK. SIMILARLY, INCOME OF RS.7,64,190/- WHICH PERTAINED TO A.Y. 199 5-96 AND WHICH WAS ALREADY TAXED IN A.Y. 1996-97 WAS EXCLUDED. CIT (A) AGREED WITH THE CONTENTIONS OF ASSESSEE AND DELETED THE ADDITIO N. NOW THE REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US, LD. A.R. REITERATED THE CONTENTIONS M ADE BEFORE CIT(A). HE ALSO PLACED ON RECORD THE REVISED RETURN FILED BY THE ASSESSEE ON 27-11-1997 WHEREIN IT SUO-MOTO ADDED BA CK THE EXPENSES OF RS.21,44,000/- PERTAINING TO ASSESSMENT YEAR 1995-96. HE THEREFORE CONTENDED THAT ONCE THE EXPENSES WERE DIS ALLOWED WHILE COMPUTING THE TOTAL INCOME, THE A.O. WAS NOT JUSTIF IED IN NOT ALLOWING THE EXCLUSION OF INCOME OF ASSESSMENT YEAR 1995-96. ON THE OTHER HAND LD. D.R. RELIED ON THE ORDER OF THE A.O. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE DOCU MENTS PLACED ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESS EE HAS FILED REVISED RETURN ON 27-11-1997 WHEREIN IT HAS SUO-MOTO ADDED BACK THE EXPENSES OF RS.21,44,000/- PERTAINING TO ASSESSMENT YEAR 1995-96. WE ARE OF THE VIEW THAT ONCE THE ASSESSEE HAS DISAL LOWED THE EXPENSES, WHILE COMPUTING THE TOTAL INCOME, THE A.O . IS NOT JUSTIFIED IN NOT ALLOWING THE EXCLUSION OF INCOME OF ASSESSME NT YEAR 1995-96. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 4 8. WE THEREFORE, FIND NO FAULT IN THE ACTION OF CIT (A)S DIRECTING THE DISALLOWANCE AND ACCORDINGLY DISMISS GROUND NO.1 OF THE REVENUE. 9. SECOND GROUND PERTAINS TO ALLOWANCE OF INTEREST OF RS.8,51,76,446/- PAID TO FINANCIAL INSTITUTION. 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O . OBSERVED THAT ASSESSEE HAS CLAIMED INTEREST TO FINANCIAL INS TITUTION OF EARLIER YEARS AS UNDER:- 1994-95 2,91,23,005/- 1995-96 5,60,53,441/- ----------------- 8,51,76,446/- 11. ACCORDING TO A.O., SINCE THE BUSINESS OF THE AS SESSEE STARTED ON 1-8-1994 RELEVANT TO ASSESSMENT YEAR 1995-96, THE I NTEREST OF RS.2,91,23,005/- PERTAINED TO THE PERIOD PRIOR TO S TART OF COMMERCIAL PRODUCTION AND WAS THEREFORE OF CAPITAL NATURE AND THEREFORE COULD NOT BE ALLOWED AS REVENUE EXPENSE. WITH RESPECT TO CLAIM OF INTEREST OF RS.5,60,53,441/- SINCE THE ASSESSEE COULD NOT PR ODUCE THE CERTIFICATE FROM FINANCIAL INSTITUTION TO PROVE THE PAYMENT, IT WAS DISALLOWED U/S. 43B. 12 . AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), ASSESSEE SUBMITTED THAT A.O. ERRED IN INFERRING THAT RS.2,91,23,025/- PERTAINED TO PERIOD PRIOR TO COMMENCEMENT OF BUSINESS. ASSESSEE CLARIFIED THAT I NTEREST OF ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 5 RS.9.05 LACS WHICH PERTAINED TO PERIOD PRIOR TO COM MENCEMENT OF COMMERCIAL PRODUCTION HAS ALREADY BEEN CAPITALIZED. THE INTEREST OUTSTANDING TO THE EXTENT OF RS.3,21,06,779/- WAS S UO-MOTO DISALLOWED BY ASSESSEE IN THE REVISED RETURN. OUT OF THE AFORE SAID SUO-MOTO DISALLOWANCE OF RS.3,21,06,779/- ASSESSEE CLAIMED E XPENSES OF RS.2,91,23,005/- ON PAYMENT BASIS. WITH REFERENCE T O CLAIM OF RS.5,60,53,441/-, ASSESSEE FURNISHED BEFORE CIT(A) CERTIFICATE FROM IFCI, IDBI AND ICICI OF RS. 4,24,51,241/-. CIT(A) D IRECTED THE AO TO VERIFY THE CERTIFICATES AND DETAILS FURNISHED BY AS SESSEE AND FURTHER DIRECTED HIM TO DELETE THE ADDITION ONLY IN RESPECT OF PAYMENTS WHICH ARE FULLY VERIFIABLE AND SUPPORTED BY DOCUMENTS. 13 . AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN NOW IN APPEAL BEFORE US. THE LD. D.R. RELIED ON THE ORDER OF AO. IT WAS FURTHER CONTENDED THAT CIT(A) DOES NOT HAVE POWER TO SET AS IDE. ON THE OTHER HAND THE LD. A.R. CONTENDED THAT THE ASSESSEE HAD S UO MOTO DISALLOWED THE INTEREST PROVISION OF RS 3,21,06,779 /- IN THE PAST. OUT OF THE AFORESAID AMOUNT THE ASSESSEE HAS CLAIMED RS 2, 91,23,005/- U/S 43B AS THE SAME WAS ACTUALLY PAID. CIT (A) HAD ONLY DIRECTED TO VERIFY THE ACTUAL PAYMENTS AND AFTER VERIFICATION THE SAME WAS DIRECTED TO BE ALLOWED. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE DOCUMENTS. WHILE ADJUDICATING THE ISSUE, CIT (A) HAS OBSERVED AS UNDER:- ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 6 6.3.2. THE A.O. MAY VERIFY THE DOCUMENTS OF HAVING PAID THE AFORESAID AMOUNT OF RS.4,24,51,241/- AND ALSO THE D OCUMENTS RELATING TO PAYMENT OF INTEREST OF RS.2,91,23,005/- .THE INTEREST DISALLOWANCE WILL STAND DELETED ONLY IN RESPECT OF PAYMENTS WHICH ARE FULLY VERIFIABLE AND SUPPORTED BY DOCUMEN TS. THE GROUND IS PARTLY ALLOWED SUBJECT TO VERIFICATION BY THE A.O. AS DIRECTED ABOVE. 15. FROM THE OBSERVATION OF CIT (A) WE ARE OF THE V IEW THAT CIT(A) HAS ALLOWED THE DEDUCTION SUBJECT TO THE VERIFICATI ON OF DOCUMENTS, IF FOUND TO BE IN ORDER. ON THESE FACTS IT CANNOT BE S AID THAT THE CIT(A) HAS SET ASIDE THE MATTER. CIT (A) HAS ONLY DIRECTED THE VERIFICATION OF DOCUMENT AND TO ALLOW THE DEDUCTION IF THE SAME ARE FOUND TO BE IN ORDER. IN THESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). WE THEREFORE, UPHOLD THE ORDER OF CIT(A) AN D DISMISS THIS GROUND OF THE REVENUE. 16. GROUND NO.3 IS REGARDING DELETION OF ADDITION O F RS.1,30,000/- BEING BAD DEBTS. 17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A. O. NOTED THAT ASSESSEE HAS WRITTEN OFF ADVANCE OF RS.25,000/- PAI D FOR MAKING OF FURNITURE AND INTERIOR DECORATION, ADVANCE OF RS.95 ,000/- PAID TO ARCHITECT FOR MAKING HOUSING COLONY AND RS.10,000/- PAID FOR DRILLING OF TUBEWELL IN FACTORY. A.O. WAS OF THE VIEW THAT A S PER SEC. 36(2)(I) DEDUCTION CAN BE ALLOWED ONLY IF DEBTS HAD BEEN TAK EN INTO ACCOUNT ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 7 FOR COMPUTING THE INCOME IN PREVIOUS YEARS. AS THE BAD DEBTS OF RS.1,30,000/- CLAIMED DURING THE YEAR WAS NOT CONSI DERED AS INCOME OF PREVIOUS YEAR OR EARLIER YEARS AND THE CLAIM REL ATES TO ADVANCE FOR CAPITAL GOODS AND NOT FOR TRADING LIABILITY, IT WAS NOT ALLOWABLE AND HE ACCORDINGLY DISALLOWED RS.1,30,000/-. 18. AGGRIEVED BY THE ABOVE DISALLOWANCE, THE ASSESS EE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A) AN ALTERNATIVE PLEA WAS RAISED THAT DEPRECIATION BE ALLOWED ON CAPITAL ASSETS. CIT (A) UPHELD THE DISALLOWANCE OF BAD DEBTS MADE BY A.O. WITH REFEREN CE TO ALTERNATE PLEA, HE WAS OF THE VIEW THAT BEFORE ALLOWING DEPRE CIATION, IT HAS FIRST TO BE ESTABLISHED THAT EXPENSES WERE INDEED INCURRE D FOR BUSINESS PURPOSES. CIT(A) THEREFORE, DIRECTED THE ASSESSEE T O PROVIDE ALL DETAILS TO A.O. AND IF IT IS SHOWN THAT EXPENDITURE WAS FOR BUSINESS PURPOSES, THE DEPRECIATION WOULD BE ALLOWABLE. 19. BEING AGGRIEVED BY THE ORDER OF CIT(A), THE REV ENUE IS IN APPEAL BEFORE US. ON BEHALF OF REVENUE, LD. D.R. CONTENDED THAT THE AO WAS RIGHT IS DISALLOWING THE AMOUNT THAT WAS WRITTEN OF F WAS IN THE NATURE OF ADVANCE FOR PURCHASE OF CAPITAL ASSETS AND WERE NOT IN THE NATURE OF DEBTS AS CONTEMPLATED U/S 36(2) OF THE I.T.ACT. ON THE OTHER HAND, THE LD. A.R. REITERATED THE CONTENTIONS MADE BEFORE CIT(A). IT FURTHER RELIED ON THE DECISION OF MOHAN MEAKIN LTD. VS. CIT (2011) 11 TAXMANN.COM 141 (DEL). ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 8 20. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E DOCUMENTS PLACED ON RECORD. IT IS AN UNDISPUTED FACT THE AMOU NTS WRITTEN OFF WERE IN THE NATURE OF ADVANCE PAYMENTS MADE FOR THE CAPI TAL ASSETS. IT IS ALSO AN UNDISPUTED FACT THAT THE SAME WERE NOT CONS IDERED AS INCOME IN EARLIER YEARS. THE CASE OF MOHAN MEAKIN (SUPRA) WHICH HAVE BEEN RELIED UPON BY THE ASSESSEE, IS DISTINGUISHABLE ON FACTS FOR THE REASON THAT IN CASE OF MOHAN MEAKIN (SUPRA) THE ADV ANCE WAS GRANTED TO A BOOT HOUSE, WHO IN TURN WAS ITS SUPPLIER FOR G OODS. ASSESSEE HAD ENTERED INTO AGREEMENT WITH BOOT HOUSE TO MAINTAIN CONTINUITY OF SUPPLY OF GOODS NEEDED FOR EXPORT. THE ADVANCE GRAN TED TO BOOT HOUSE COULD NOT BE RECOVERED AND THEREFORE, IT WAS WRITTEN OFF. IN MOHAN MEAKINS CASE THE ADVANCE WAS GRANTED DURING THE COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS. HOWEVER, IN ASSESSEES CASE THE FACT THAT THE ADVANCE HAS BEEN GRANTED FOR THE PURPOSE OF BUSINESS IS NOT ESTABLISHED. THE FACTS OF ASSESSEE ARE THEREFORE ENTIRELY DIFFERENT THAN THAT OF MOHAN MEAKIN AND TH EREFORE WE ARE OF THE VIEW THAT THE RATIO OF DECISION OF HONBLE DELH I HIGH COURT IS NOT APPLICABLE TO THE FACTS OF THIS CASE. WE ARE THEREF ORE OF THE CONSIDERED OPINION THAT THIS GROUND OF THE REVENUE NEEDS TO BE UPHELD AND THE ORDER OF CIT(A) ON THIS GROUND NEEDS TO BE SET ASID E. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALLOWED. 21. GROUND NO.4 IS REGARDING ALLOWING DEPRECIATION ON EXCHANGE RATE DIFFERENCE. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 9 22. THE FACTS ARE THAT THE ASSESSEE HAD AVAILED FOREIGN CURRENCY LOAN FOR PURCHASE OF PLANT AND MACHINERY. IN ITS BO OKS OF ACCOUNTS THE ASSESSEE ENHANCED THE LOAN LIABILITY ON 31-3-19 96 ON THE BASIS OF EXCHANGE RATE OF FOREIGN CURRENCY PREVAILING ON THA T DATE. THE INCREASE IN LIABILITY ON ACCOUNT OF EXCHANGE DIFFER ENCE WAS TO THE TUNE OF RS.69.12 LACS. THIS INCREASE IN FOREIGN EXCHANGE LIABILITY WAS ADDED TO THE COST OF PLANT AND MACHINERY. ACCORDING TO A. O. SINCE THE INCREASE IN EXCHANGE LIABILITY WAS AN UNASCERTAINED LIABILITY, IT COULD NOT BE ADDED TO COST OF PLANT AND MACHINERY. ACCORD INGLY, HE DISALLOWED THE CLAIM OF DEPRECIATION AGGREGATING TO RS.69.12 LACS ON ACCOUNT OF ADDITION OF FOREIGN EXCHANGE. 23. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE CIT(A). CIT(A) ALLOWED THE CLAIM OF ASSESSEE AS ACCORDING TO HIM ASSESSEE HAD TO BE ALLOWED THE BENEFIT IN VIEW OF CLEAR PROVISION OF SECTION 43A AND ALSO FOR THE REA SON THAT THE SAME WAS ALLOWED BY HIS PREDECESSOR FOR ASSESSMENT YEAR 1998-99 TO 2000-01. 24. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE N OW IS IN APPEAL BEFORE US. 25. THE LD. D.R. RELIED ON THE ORDERS OF THE A.O. O N THE OTHER HAND THE LD. A.R. STATED THAT THE INCREASE IN THE FIXED ASSETS HAS BEEN DONE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43A AN D ACCORDINGLY HE RELIED ON THE ORDER OF CIT (A). ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 10 26. WE HAVE HEARD THE PARTIES AND PERUSED THE DOCUM ENTS ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD TAKEN LOAN FOR THE ACQUISITION OF CAPITAL ASSETS. IT IS ALSO AN UN DISPUTED FACT THAT ON THE IDENTICAL FACTS CIT(A) HAD ALLOWED THE CLAIM OF ASSESSEE. THE FACT OF INCREASE IN FOREIGN EXCHANGE LIABILITY AS ON 31- 3-1996 IS ALSO UNDISPUTED. THE HONBLE SUPREME COURT IN THE CASE O F CIT VS WOODWARD GOVERNOR INDIA (P) LTD (2009) 312 ITR 254 (SC) HAS HELD THAT INCREASE OR DECREASE IN LIABILITY FOR REPAYMEN T OF FOREIGN LOAN IN RESPECT OF ACQUISITION OF AN ASSET HAS TO BE TAKEN ITO ACCOUNT TO MODIFY THE FIGURE OF ACTUAL COST IN THE YEAR IN WHI CH THE INCREASE OR DECREASE IN LIABILITY ARISES ON ACCOUNT OF FLUCTUAT ION IN RATE OF EXCHANGE. 27. AS THE FACTS IN THE CASE ARE IDENTICAL TO THAT OF THE CASE OF WOODWORD GOVERNOR (SUPRA), WE RESPECTFULLY FOLLOWIN G THE DECISION OF HONBLE SUPREME COURT ARE OF THE VIEW THAT NO INTER FERENCE IS CALLED FOR IN THE ORDER OF CIT(A) ON THIS GROUND. WE ACCOR DINGLY DISMISS THIS GROUND OF THE REVENUE. 28. GROUND NO.5 IS REGARDING DELETION OF MODVAT CRE DIT ON CAPITAL GOODS AND ALLOWANCE OF DEPRECIATION ON THE SAME. 29. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. OBSERVED THAT ASSESSEE HAD PURCHASED PLANT AND MACHINERY ON WHICH IT RECEIVED MODVAT OF RS.8,18,672/-. A.O. WAS OF THE V IEW THAT AS PER ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 11 PROVISIONS OF ACT, ASSESSEE SHOULD DEDUCT THE MODVA T CLAIM FROM PLANT AND MACHINERY. HE THEREFORE, DISALLOWED THE E XCESS DEPRECIATION OF RS.2,04,668/-ON THE AMOUNT OF MODVA T CREDIT. 30. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A) AND CONTENDED THAT T HE ASSESSEE HAD ALREADY REDUCED THE MODVAT FROM COST OF PLANT & MAC HINERY AND THE DISALLOWANCE OF DEPRECIATION AS MADE BY A.O. AMOUNT S TO DOUBLE ADDITION. CIT(A) AGREED WITH THE CONTENTION OF ASSE SSEE AND ACCORDINGLY DIRECTED THE A.O. TO DELETE THE SAME AF TER VERIFICATION. 31. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORDS. IT IS A FACT THAT THE ASSESSEE HAD RECEIVE D MODVAT CREDIT AND THE SAME WAS REDUCED FROM THE COST OF PLANT AND MAC HINERY. REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVER T THIS FACT. WE AGREE WITH THE CONTENTIONS OF THE LD. A.R. THAT ONC E THE ASSESSEE HAS ALREADY REDUCED THE AMOUNT OF MODVAT CREDIT AND THE N AGAIN DISALLOWING THE DEPRECIATION WOULD AMOUNT TO DOUBLE DISALLOWANCE. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINI ON THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) A ND ACCORDINGLY DISMISS THIS GROUND OF REVENUE. 32. GROUND NO.6 IS REGARDING DELETION OF ADDITION O F RS.2,80,140/- BEING SALES PROMOTION EXPENSES. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 12 33. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. OBSERVED THAT ASSESSEE HAS INCURRED EXPENSES ON MEETING AND CONFERENCE, STAFF WELFARE WHICH INCLUDED CANTEEN EXPENSES AND P URCHASE OF SWEETS ETC., PAYMENT OF HOTEL BILLS ETC. IN THE ABS ENCE OF SEPARATE RECORDS OF EXPENSES ON HOSPITALITY PROVIDED TO VISI TORS, GUESTS, CUSTOMERS AND TO EMPLOYEES, A.O. CONSIDERED 50% OF IT TO BE OF ENTERTAINMENT NATURE AND DISALLOWED RS.2,80,140/- U /S. 37(1) OF THE ACT. 34. CIT(A) AFTER TAKING INTO CONSIDERATION THAT THE PAYMENTS WERE VOUCHER BASED AND CONSIDERING THE NATURE OF EXPENSE S NAMELY ENTERTAINMENT EXPENSES, STAFF WELFARE, SALES PROMOT ION AND SELLING EXPENSES AGGREGATING TO RS.6,92,708/-, RESTRICTED T HE DISALLOWANCE TO 10% OF 6,92,708 I.E. OF RS.69,271/-. 35. REVENUE BEING AGGRIEVED BY THE ORDER OF CIT(A) IS NOW IN APPEAL BEFORE US. BEFORE US THE LD. D.R. RELIED ON ORDER O F A.O. THE LD. A.R. ON THE OTHER HAND CONTENDED THAT THE AO HAS MADE TH E DISALLOWANCE ONLY ON ASSUMPTION WITHOUT POINTING OUT ANY SPECIFI C INSTANCE. 36. WE HAVE HEARD RIVAL CONTENTIONS PERUSED THE MAT ERIAL ON RECORD. CONSIDERING THE NATURE OF EXPENSES, WE FIND NO INFI RMITY IN THE ORDER OF CIT (A) AND THEREFORE, THE SAME IS UPHELD AND AC CORDINGLY THE GROUND OF THE REVENUE IS DISMISSED. ITA NO.2352/AHD/2009. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 13 37. THE ASSESSEES FIRST GROUND OF APPEAL IS THAT T HE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.1,08,372/- BEING REIM BURSEMENT TO EMPLOYEES AGAINST TRAVELING AND FOR ADVERTISEMENT E XPENSES U/S. 40A(3) OF THE ACT. 38. THE FACTS ARE THAT AS PER TAX AUDIT REPORT, ASS ESSEE HAS INCURRED CASH EXPENSES ABOVE RS.10,000/- AMOUNTING TO RS.2,4 6,46,182/-. ACCORDING TO THE ASSESSEE, MOST OF THE ABOVE EXPENS ES ARE INCURRED ON PAYMENT TO TRANSPORTERS WHO DID NOT ACCEPT CHEQU E. PERUSAL OF THE DETAILS OF EXPENSES ABOVE RS.10,000/- REVEALED THAT IT INCLUDED SUM OF RS.1,08,372/- WHICH DOES NOT RELATE TO PAYMENT TO T RANSPORTERS. IT RELATED TO REIMBURSEMENT GIVEN TO EMPLOYEES OF THE COMPANY AGAINST TRAVELING EXPENSES AND THE PAYMENT MADE FOR ADVERTI SEMENT. THE DETAILS OF ABOVE WERE SUBMITTED TO THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. THE AO WAS OF THE VIEW THAT THOUGH THE EXPENDITURE WAS INCURRED FOR TRAVELING BY THE EMPLO YEES AND FOR ADVERTISEMENT EXPENSES, THE ASSESSEE FAILED TO PROV E THE UNAVOIDABLE CIRCUMSTANCES UNDER WHICH PAYMENT IN CASH ABOVE RS. 10,000/- WAS MADE AND ACCORDINGLY THE A.O. DISALLOWED A SUM OF R S 1,08,0372/- U/S. 40A (3) OF THE ACT. 39. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). CIT(A) CONFIRME D THE DISALLOWANCE BY OBSERVING AS UNDER:- ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 14 7.3. I HAVE CAREFULLY CONSIDERED SUBMISSIONS OF T HE ASSESSEE AND THE ASSESSMENT ORDER. THE PROVISIONS OF SECTION 40A(3) ARE MANDATORY IN NATURE AND THE PLAIN READING OF THE SE CTION COMMANDS THE TAXING AUTHORITY TO DISALLOW ALL EXPEN DITURE EVEN IF IT IS OTHERWISE ADMISSIBLE. IN THE INSTANCE CASE , THE ASSESSEE HAS NOT BEEN ABLE TO INDICATE AND PROVE THE UNAVOID ABLE CIRCUMSTANCES FOR MAKING SUCH CASH PAYMENTS. ACCORD INGLY, THE DISALLOWANCE OF RS.1,08,372/- IS JUSTIFIED AND IS CONFIRMED. 40. BEFORE US THE LD. A.R. CONTENDED THAT OUT OF RS 1,08,372/- RS 80,822/- RELATED TO REIMBURSEMENT OF TRAVELLING EXP ENSES INCURRED BY THE EMPLOYEES AND IT WAS NOT PRACTICABLE TO MAKE PA YMENT TO EMPLOYEES BY WAY OF CROSSED CHEQUE OR DEMAND DRAFT AS THE EMPLOYEES CLAIM ADVANCES APART FROM TRAVELLING EXPE NSES. RS 27,550/- WAS INCURRED IN CONNECTION WITH ADVERTISEMENT EXPEN SES AND WAS WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. HE FU RTHER CONTENDED THAT THE REIMBURSEMENT TO EMPLOYEES WAS NOT COVERED U/S 40A(3) AND FOR WHICH HE RELIED ON THE DECISION OF RATHI ISPAT LTD VS DCIT (1993) 45 ITD 540 (DEL). HE FURTHER CONTENDED THAT BY VIRT UE OF AMENDMENT TO SECTION 40A(3) W.E.F 1.4.2006, THE DISALLOWANCE SHO ULD BE RESTRICTED TO 20%. 41. ON THE OTHER HAND THE LD. D.R. RELIED ON THE OR DERS OF THE LOWER AUTHORITIES. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 15 42. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SEC 40A(3) FOR THE RELEVANT ASSESSMENT YEAR READS AS UNDER: 40A(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING L ATER THAN THE 31 ST DAY OF MARCH,1969) AS MAY BE SPECIFIED IN THIS BEH ALF BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE, IN A SUM EXCEEDING [TEN THOUSAND] RUPEES OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, TWENTY PER CENT OF SUCH EXPENDITURE SHALL NOT BE A LLOWED AS A DEDUCTION PROVIDED THAT WHERE AN ALLOWANCE HAS BEEN MADE IN T HE ASSESSMENT FOR ANY YEAR NOT BEING AN ASSESSMENT YEA R COMMENCING PRIOR TO THE LST DAY OF APRIL, 1969, IN RESPECT OF ANY LIABILITY INCURRED BY THE ASSESSEE FOR ANY EXPENDIT URE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE MAKES ANY PAYMENT IN RESPECT THEREOF IN A SUM EXCEEDING [TWO THOUSAND FIVE HUNDRED] RUPEES OTHERWISE THAN BY A CROSSED CH EQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, THE ALLOWANCE ORIGINALLY MADE SHALL BE DEEMED TO HAVE BEEN WRONGLY MADE AND THE INCOME TAX OFFICER MAY RECOMPUTED THE TOTAL INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR IN WHICH SUCH LIABIL ITY WAS INCURRED AND MAKE THE NECESSARY AMENDMENT, AND THE PROVISIONS OF SECTION 154 SHALL, SO FAR AS MAY BE, APPLY THERETO, THE PERIOD OF FOUR YEARS SPECIFIED IN SUB-SECTION ( 7) OF THAT SECTION BEING RECKONED FROM THE END OF THE ASSESSME NT YEAR NEXT FOLLOWING THE PREVIOUS YEAR IN WHICH THE PAYME NT WAS SO MADE: PROVIDED FURTHER THAT NO DISALLOWANCE UNDER THIS SU B-SECTION SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING [ TWO THOUSAND FIVE HUNDRED] RUPEES IS MADE OTHERWISE THA N BY CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSS BANK D RAFT, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, SEE RULE 6DD FOR CASES AND CIRCUMSTANCE S IN WHICH PAYMENT IN A SUM EXCEEDING RS.10,000/- MAY BE MADE OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CR OSSED BANK ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 16 DRAFT, HAVING REGARD TO THE NATURE AND EXTENT OF BA NKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AN D OTHER RELEVANT FACTORS. 43. CIRCULAR NO. 717 EXPLAINING THE SUBSTANCE OF TH E PROVISIONS OF FINANCE ACT,1995, AS PASSED BY THE PARLIAMENT WA S ENACTED AS ACT NO 22 OF 1995, CLARIFIES THE POSITION WITH RESPECT TO SECTION 40A(2) AS UNDER: AMENDMENT OF SECTION 40A(3) OF THE INCOME-TAX ACT TO PROVIDE FOR DISALLOWANCE OF 20 PER CENT OF CASH EXPENDITURE 27.1 SECTION 40A(3) PROVIDES FOR DISALLOWANCE OF AN EXPENDITURE INCURRED FOR BUSINESS OR PROFESSION IN RESPECT OF W HICH PAYMENT EXCEEDING RS. 10,000 IS MADE OTHERWISE THAN BY A CR OSSED CHEQUE OR A CROSSED BANK DRAFT. CERTAIN CASH PAYMEN TS HAVE, HOWEVER, BEEN EXCLUDED UNDER RULE 6DD FROM THE PROH IBITION CONTAINED IN THIS SECTION. SUB-RULE(J) OF RULE 6DD PRESCRIBES THE MITIGATING CIRCUMSTANCES WITH A VIEW TO RELAX THE R IGOURS OF SECTION 40A(3) IN GENUINE AND BONAFIDE CASES. SUB-R ULE (J) WAS INTRODUCED AT A TIME WHEN BANKING FACILITIES HAD YE T TO TAKE ROOTS IN RURAL AREAS. NOW THAT BANKS HAVE ESTABLISHED THE MSELVES IN RURAL AREAS AND A VAST BRANCH NETWORK IS AVAILABLE IT IS FELT THAT SUB-RULE (J) HAS OUTLIVED ITS UTILITY. 27.2 THESE PROVISIONS HAVE ALSO GIVEN RISE TO SUBST ANTIAL LITIGATION ARISING OUT OF THE INTERPRETATION AND SC OPE OF SECTION 40A (3) READ WITH RULE 6DD (J). ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 17 27.3 SECTION 40A(3) HAS BEEN AMENDED TO PROVIDE THA T IN CASE ANY PAYMENT IS MADE IN CONTRAVENTION OF SECTION 40A (3) THEN 20 PER CENT OF SUCH EXPENDITURE WOULD BE DISALLOWED AN D TAKEN INTO ACCOUNT FOR COMPUTATION OF INCOME. NECESSARY AMENDM ENTS IN THE INCOME-TAX RULES WILL CONSEQUENTLY BE MADE SO A S TO DELETE CLAUSE (J) OF RULE 6DD. 27.4 THE AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 1996, AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 19 96-97 AND SUBSEQUENT YEARS. 44. AS CAN BE SEEN FROM THE AMENDMENT MADE TO SECTI ON 40A(3), THE PAYMENT MADE IN CONTRAVENTION OF SECTION 40A(3) CAL LS FOR DISALLOWANCE AT 20% OF SUCH EXPENDITURE. WE ARE THE REFORE OF THE VIEW THAT IN THE PRESENT CASE, THE PAYMENT OF RS 1,08,37 2/- IS IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) AND T HEREFORE 20% OF THE SAME NEEDS TO BE DISALLOWED INSTEAD OF THE ENTI RE SUM OF RS 1,08,372/- BEING DISALLOWED BY THE AO. WE DIRECT AC CORDINGLY. THE ASSESSEES GROUND IS THEREFORE PARTLY ALLOWED. 45. THE NEXT GROUND OF APPEAL IS REGARDING CONFIRMI NG OF NOTIONAL INTEREST ON ADVANCES TO SUBSIDIARY COMPANIES OF RS. 1,59,000/-. 46. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAD MADE ADVANCES TO SUBSIDIARY C OMPANY AND FOR WHICH IT WAS CHARGING THE SUBSIDIARY COMPANY INTERE ST @ 12% WHEREAS, THE ASSESSEE WAS PAYING INTEREST ON LOAN T O BANK AND ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 18 FINANCIAL INSTITUTIONS AS WELL AS TO OTHER PARTIES @ 18% AND IN THIS WAY THE APPELLANT HAS CLAIMED EXCESS INTEREST ON BORROW ED FUNDS. THE A.O. HAS MENTIONED THAT THE ASSESSEE HAS FAILED TO PROVE THAT ADVANCES AT THE LOWER RATE TO THE SUBSIDIARY COMPAN Y WERE NOT MADE OUT OF HIGHER INTEREST BEARING BORROWED FUNDS. THER EFORE, THE DIFFERENCE OF INTEREST OF 6% ON BORROWED FUNDS AMOU NTING TO RS.1,59,000/- WAS DISALLOWED. 47. ON APPEAL, IT WAS SUBMITTED THAT THE APPELLANT HAS CHARGED INTEREST @ 12% IN EARLIER YEARS AND THAT APPELLANT HAS SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL. T HUS, A.O. WAS NOT JUSTIFIED IN CALCULATING THE NOTIONAL INTEREST @ 18 %. MORE SO, THE A.O. HAS NOT PROVED THE INTEREST BEARING FUNDS HAVE BEEN DIVERTED TOWARDS NON-INTEREST BEARING ADVANCES. 48. AFTER CONSIDERING THE SUBMISSIONS OF THE A.R. T HE LD. CIT(A) UPHELD THE ORDER OF AO BY HOLDING AS UNDER:- 9.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE SUBMISSIONS OF THE APPELLANT. IT IS OBSERVED THAT O N THE SAME ISSUE IN APPELLANTS OWN CASE, FROM A.Y,. 1998-99 T O 2001-02, THE HONBLE ITAT HAS CONFIRMED THE DISALLOWANCE. RESPEC TFULLY FOLLOWING THE DECISION OF HONBLE ITAT THE DISALLOW ANCE OF RS.1,59,000/- IS CONFIRMED. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 19 49. BEFORE US, THE LD. A.R. FAIRLY CONCEDED THAT TH E ISSUE IS COVERED AGAINST IT BY EARLIER YEARS HONBLE ITATS ORDER F OR AY 1998-99 TO 2001-02. THE LD. D.R. ON THE OTHER HAND RELIED ON T HE ORDER OF THE LOWER AUTHORITIES. 50. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECO RDS. WE FIND THAT ON IDENTICAL ISSUE THE CO-ORDINATE BENCH HAS D ISALLOWED THE CLAIM OF THE ASSESSEE IN AY 1998-99 TO 2001-02 BY H OLDING AS UNDER: 4.1. BEFORE US, BOTH THE PARTIES AGREED THAT ISSUE IS SQUARELY COVERED BY THE AFORESAID DECISION OF THE ITAT FOR T HE PRECEDING YEAR. 4.2. IN VIEW OF THE FOREGOING, WHEN NO NEW PLEA HAS BEEN TAKEN BEFORE US BY THE LD. A.R. WHILE FACTS REMAIN THE SA ME AS IN THE PRECEDING YEAR, FOLLOWING THE AFORESAID DECISION OF THE ITAT IN TAXPAYERS OWN CASE FOR THE PRECEDING YEAR, WE REVE RSE THE ORDER OF LD. CIT(A) AND ALLOW THIS GROUND OF APPEAL. 51. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DE CISION, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE TO THE ORDER OF THE CIT(A) IS CALLED FOR AND ACCORDINGLY DISMISS THIS GROUND O F THE ASSESSEE. 52. ASSESSEES NEXT GROUND OF APPEAL IS REGARDING C ONFIRMING OF DISALLOWANCE OF TRAVELING EXPENSES OF RS.49,570/-. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 20 53. THE A.O. HAS INDICATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD MET THE TRAVELING EXPENSES OF SHRI L.M . PURI, WHO WAS AN EMPLOYEE OF WINDOW GLASS LTD., AND THE SAME WAS TREATED AS FOR NON-BUSINESS PURPOSES AND DISALLOWED BY THE A.O. 54. THEREAFTER, ON APPEAL, BEFORE THE CIT(A), CIT(A ) UPHELD THE ORDER OF THE AO BY HOLDING AS UNDER:- 11.3. I HAVE CAREFULLY GONE THROUGH THE SUBMISSI ONS OF THE APPELLANT AND THE ASSESSMENT ORDER. THOUGH THE APPE LLANT HAD PRODUCED THE DETAILS OF EXPENDITURE INCURRED FOR SH RI L. M. PURI BUT IT COULD NOT BE SHOWN THAT THE EXPENDITURE WAS FOR THE BUSINESS PURPOSES OF THE APPELLANT. ACCORDINGLY, TH E DISALLOWANCE OF RS.49,570/- APPEARS TO BE JUSTIFIED AND IS CONFIRMED. 55. BEFORE US, THE LD. A.R. REITERATED THE SUBMISSI ONS MADE BEFORE CIT(A) AND STATED THAT THE EXPENSES INCURRED BY MR. PURI WERE FOR THE PURPOSES OF BUSINESS AND THEREFORE THE SAME SHOULD BE ALLOWED. ON THE OTHER HAND THE LD. D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 56. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US THE LD. A.R. COULD NOT FURNISH AN Y TANGIBLE EVIDENCE TO PROVE ITS CONTENTIONS. IN VIEW OF THE FOREGOING, WE ARE OF THE ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 21 CONSIDERED OPINION THAT NO INTERFERENCE TO THE ORDE R OF THE CIT(A) IS CALLED FOR AND ACCORDINGLY DISMISS THIS GROUND OF T HE ASSESSEE. 57. THE NEXT GROUND RELATES TO THE CONFIRMING OF DI SALLOWANCE OF REPAIRS TO FACTORY BUILDING AMOUNTING TO RS.32,048/ -. 58. BEFORE AO, ASSESSEE HAS CLAIMED EXPENDITURE OF RS.1.74 LACS ON ACCOUNT OF REPAIRS TO THE FACTORY BUILDING. PERUSAL OF THE ABOVE EXPENSES REVEALED THAT IT INCLUDED PURCHASE OF SINT EX TANK OF RS.32,048/- AS PER VOUCHER DATED 31.3.1996. THE AO WAS OF THE VIEW THAT AS THE SINTEX TANK IS A CAPITAL ASSET THE SAME WAS DISALLOWED. HOWEVER HE ALLOWED THE DEPRECIATION OF RS 4006/- ON THE SAME AND ACCORDINGLY HE DISALLOWED RS.28,042/- (RS 32048-RS. 4006). 59. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE A.R. UPHELD THE DISALLOWANCE BY OBSERVING AS UNDER:- 12.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION S OF THE APPELLANT AND THE ASSESSMENT ORDER. THE EXPENDITURE ON PURCHASE OF SINTEX TANK IS CLEARLY A CAPITAL EXPEND ITURE AS IT BRINGS INTO EXISTENCE NEW ASSET PROVIDING ENDURING BENEFIT TO THE APPELLANT. THE DISALLOWANCE OF RS.28,042/- IS T HUS CONFIRMED. BEFORE US THE LD. A.R. CONTENDED THAT THE EXPENDITU RE OF SINTEX TANK SHOULD BE ALLOWED AS REVENUE EXPENSES AS IT IS PERI SHABLE IN NATURE. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 22 60. ON THE OTHER HAND THE LD. D.R. RELIED ON THE OR DERS OF THE LOWER AUTHORITIES. 61. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US THE LD. A.R. COULD NOT FURNISH AN Y TANGIBLE EVIDENCE TO PROVE ITS CONTENTIONS. IN VIEW OF THE FOREGOING, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE TO THE ORDE R OF THE CIT(A) IS CALLED FOR AND ACCORDINGLY DISMISS THIS GROUND OF T HE ASSESSEE. 62. THE NEXT GROUND RELATES TO THE CONFIRMING OF DI SALLOWANCE OF ADVERTISEMENT EXPENSES OF RS.13,000/-. 63. AO OBSERVED THAT SCRUTINY OF THE ADVERTISEMENT EXPENSES REVEAL THAT IT INCLUDED RS 13,000/- PAID TO COLLEGE OF BUS INESS STUDIES FOR SPONSORING MANAGEMENT EDUCATION. THE AO WAS OF THE VIEW THAT IT WAS NON BUSINESS EXPENDITURE AND THEREFORE DISALLOW ED IT.. 64. CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF TH E A.R. UPHELD THE DISALLOWANCE BY OBSERVING AS UNDER:- 20.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF T HE CASE AND SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE A DVERTISEMENT EXPENSES OF RS 13,000/- WERE IN RELATION TO COLLEGE OF BUSINESS STUDIES FOR SUPPORTING MANAGEMENT EDUCATION WHICH I S NOT AT ALL RELATED TO THE BUSINESS OF THE APPELLANT. ACCORDING LY, THE ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 23 DISALLOWANCE OF RS.13,000/- IS CONFIRMED BEING NOT INCURRED FULLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSE. 65. BEFORE US THE LD. A.R. CONTENDED THAT THE EXPEN DITURE OF ADVERTISEMENT SHOULD BE ALLOWED AS REVENUE EXPENSES AS IT IS FOR THE PURPOSE OF BUSINESS. ON THE OTHER HAND THE LD. D.R . RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 66. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US THE LD. A.R. COULD NOT FURNISH AN Y TANGIBLE EVIDENCE TO PROVE ITS CONTENTIONS. IN VIEW OF THE FOREGOING, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE TO THE ORDE R OF THE CIT(A) IS CALLED FOR AND ACCORDINGLY DISMISS THIS GROUND OF T HE ASSESSEE. 67. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11-5 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.2 317 & 2352/AHD/2009 ASSESSME NT YEAR 1996- 97. . 24 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) VI, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 27 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 11 / 4 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 8 - 5 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 11 - 5 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 11 - 5 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 4 - 5 -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..