DCIT, Circle-1, Sangli V. M/s. B.G. Chitale, Sangli

ITA 24/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6728 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Business income; Depreciation; Non-deduction of tax
• Section: 143(3); 194C; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.21 TO 24/PN/2013 (ASSESSMENT YEAR : 2006-07 TO 2009-10) ACIT, CIRCLE-1, SANGLI .. APPELLANT VS. M/S. B.G. CHITALE, AT : BHILAWADI STATION, TAL : PULAS, DIST : SANGLI PAN NO.AABFB3828J .. RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 07-05-2014 DATE OF PRONOUNCEMENT : 08-05-2014 ORDER PER R.K. PANDA, AM : THE ABOVE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 11-10-2012 OF THE CIT(A), KOLHAP UR RELATING TO ASSESSMENT YEARS 206-07 TO 2009-10 RESPECTIVELY. S INCE COMMON GROUNDS ARE INVOLVED IN ALL THESE APPEALS, THEREFOR E, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. ITA NO.21/PN/2013 (A.Y. 2006-07) : 2. GROUNDS OF APPEAL NO. 1 TO 3 BY THE REVENUE READ S AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN R ELYING UPON THE DECISION OF THE ITAT ON THE ISSUE OF INCLUSION OF INTEREST INCOME IN BOOK PROFIT FOR THE PURPOSE OF COMPUTATION OF SA LARY TO PARTNERS, WHEN THE ITAT'S DECISION WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE I.T. ACT, 1961 AND PRECEDENTS LAI D DOWN IN FOLLOWING CASES : 2 (I) UNITED COMMERCIAL BANK LTD. VS. CIT (1957) 32 I TR 688 (SC) (II) TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD . VS. CIT (1997) 227 ITR 172 (SC) (III) SOUTH INDIA SHIPPING CORPORATION LTD. VS. CIT (1999) 240 ITR 24 (MAD) (IV) SHAMS TABREZ VANTI, IN RE (2005) 273 ITR 299 ( AAR). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN RE LYING UPON THE DECISION OF THE ITAT ON THE ISSUE OF INCLUSION OF INTEREST INCOME IN BOOK PROFIT FOR THE PURPOSE OF COMPUTATIO N OF SALARY TO PARTNERS, WHEREIN IT IS HELD THAT INTEREST INCOME I S NOT REQUIRED TO BE EXCLUDED FROM NET PROFIT DECLARED BY THE ASSESSE E FOR COMPUTING BOOK PROFIT TO DETERMINE THE ALLOWABLE DE DUCTION OF REMUNERATION PAYABLE TO THE PARTNERS U/S. 40(B) OF TH E I.T. ACT, 1961, WHEN THE SAID INTEREST INCOME DOES NOT COME WITH IN THE AMBIT OF SECTION 28 OF THE I.T. ACT, 1961 ? 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN F OLLOWING THE ITAT'S DECISION, WHICH IGNORES THE FACT THAT THE AS SESSEE FIRM'S INTEREST INCOME FROM FIXED DEPOSITS WITH BANKS, MSE B SECURITY DEPOSIT AND FROM OTHERS WAS ASSESSABLE ONLY UNDER C HAPTER IV-F OF THE INCOME TAX ACT I.E. UNDER THE HEAD 'INCOME FR OM OTHER SOURCES' IN ABSENCE OF ANY EVIDENCE LAID BY THE ASS ESSEE FIRM TO SUBSTANTIATE ITS CLAIM THAT THE SAID INTEREST INCOM E HAD SUFFICIENT NEXUS WITH BUSINESS OR PROFESSION CARRIED OUT BY IT FOR WHICH THE ONUS WAS ON THE ASSESSEE FIRM BY LAW ? 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE WHILE CLAIMING REMUNERATION TO PARTNERS INCLUDED INTEREST INCOME ON ACCOUNT OF FIXED DEPOSITS WITH BANKS, MSEB SECURITY DEPOSIT, I NTEREST FROM OTHER PARTIES AND INTEREST ON INCOME-TAX REFUND. HE TREA TED THE ABOVE INTEREST INCOME AS INCOME FROM OTHER SOURCES FOR WANT OF E VIDENCE TO PROVE THE EXPEDIENCY OF THE ABOVE ITEMS AND ACCORDINGLY REDUC ED THE ABOVE INTEREST INCOME FROM BOOK PROFIT WHILE WORKING OF REMUNERATI ON U/S.40(B)(V). 2.2 IN APPEAL THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO INCLUDE THE INTEREST INCOME IN BOOK PROFITS FOR CALCULATING PARTNERS REMUNERATION U/S.40(B) BY OBSERVING AS UNDER : 8. I HAVE PERUSED THE ABOVE ORDERS OF THE HONBLE IT AT, A BENCH, PUNE WHEREIN ON THE ABOVE ISSUE IT WAS HELD AS UNDER : 3 4. . . . . . . . .INTEREST INCOME OF RS.1,56,65,189/ - IS NOT TO BE EXCLUDED FROM THE NET PROFIT DECLARED BY THE ASSESSEE FOR COMPUTING BOOK PROFIT FOR THE PURPOSE OF DETERMINING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS U/S.40(B). THUS, THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED IN ITS FAVOUR. 9. RESPECTFULLY FOLLOWING THE DECISION GIVEN ABOVE IN THE APPELLANTS OWN CASE, I HOLD THAT INTEREST INCOME AS MENTIONED IN PARAGRAPH 5 SUPRA IS TO BE INCLUDED IN BOOK PROFIT FOR THE PURPOSES OF DET ERMINING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO PARTNERS U/S.40( B) FOR THE YEARS UNDER APPEAL. 2.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 3. AFTER HEARING BOTH THE SIDES, WE FIND THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR A.Y. 2002-03 VIDE ITA NO.473/PN/2009 ORDER DATED 01-09-2010 WHICH HAS BEEN FOLLOWED BY THE LD.CIT(A). FURTHER, WE FIND IN A.Y. 2005-06, THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE VIDE ITA NO.145/PN/2008 ORDER DT. 19-11-2010 BY OBSERVIN G AS UNDER : 3. HAVING GONE THROUGH THE SAID ORDER DT. 18.6.2010 OF THE TRIBUNAL IN THE CASE OF ASSESSEE, FOR THE A.YS. 2003-04 AND 2004-05 I N ITA NOS. 143 & 144/PN/2008, WE FIND THAT UNDER SIMILAR FACTS AND CIR CUMSTANCES, AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FA VOUR OF THE ASSESSEE. THE RELEVANT PARA NO. 4 OF THE SAID ORDER DT. 18.6. 2010 IS BEING REPRODUCED HERE-UNDER FOR READY REFERENCE :- 4. AFTER HAVING GONE THROUGH THE ORDER IMPUGNED, WE FIND THAT THE A.O AFTER EXAMINING THE ISSUE HAD ALLOWED INCLUSION OF IN TEREST RECEIPT FOR THE PURPOSE OF CALCULATING THE ALLOWABLE REMUNERATION T O THE PARTNERS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE ASSESSMENT F RAMED U/S 143(3) OF THE ACT. SUCH INTEREST RECEIPT WAS OF RS. 1 ,79,16,927/- IN A.Y. 2003-04 AND RS.1,51,91,939/- IN A.Y. 2004-05. THESE INTERESTS WERE EARNED ON THE FDS WITH VARIOUS BANKS, MSEB DEPOSITS, DEP OSITS WITH OTHER PARTIES AND ON INCOME-TAX REFUND. THE A.O ISSUED A SPE CIFIC LETTER CALLING FOR EXPLANATION TO EXCLUDE THE SAID INTEREST RECEIPTS FROM BOOK PROFIT TO CALCULATE REMUNERATION U/S 40(B) OF THE ACT. THE A. O WAS SATISFIED WITH THE REPLY OF THE ASSESSEE MADE IN THIS REGARD. THE LE ARNED CIT WAS HOWEVER OF THE VIEW THAT THERE IS NO DIRECT NEXUS BE TWEEN THE INTEREST INCOME EARNED BY THE ASSESSEE FIRM AND ITS BUSINESS AND, T HEREFORE, THIS INTEREST INCOME OUGHT TO HAVE BEEN TREATED AS INCOME FROM OTHER SOURCES AND THE SAME COULD HAVE NOT BEEN CONSIDERED FOR WORKI NG OF THE BOOK PROFIT. HE REMAINED OF THE VIEW THAT INTEREST INCOM E IS INCIDENTAL INCOME 4 OF THE ASSESSEE FIRM ASSESSABLE UNDER CHAPTER IV-F OF THE ACT. LEARNED CIT ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 263 AND HELD THE ASSESSMENT ORDERS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. HE ACCORDINGLY SET ASIDE THE ASSESSMENT ORDERS WITH A DIRECT ION TO THE A.O TO ASSESS THE INTERESTS RECEIPT AS INCOME FROM OTHER SOURCES A ND ALLOWED THE CLAIM OF REMUNERATION TO PARTNERS AFTER RE-WORKING T HE BOOK PROFIT AFTER EXCLUDING THE AFORESAID INTEREST RECEIPTS. ON GOING T HROUGH THE DECISION OF THE TRIBUNAL ON AN IDENTICAL ISSUE IN THE CASE OF ACI T VS. SHETH BROTHERS (SUPRA), WE FIND THAT THE TRIBUNAL THEREIN HAS HELD T HAT SECTION 40(B) ADOPTS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS AC COUNT OF THE FIRM AS THE BASIS FOR ALLOWING DEDUCTION ON ACCOUNT OF REMUNE RATION TO PARTNERS. THE TRIBUNAL THEREIN HAS MADE IT CLEAR THAT INCOME F ROM SOURCES OTHER THAN THE BUSINESS WHICH ARE ASSESSABLE UNDER OTHER HEADS AR E ALSO EMBEDDED IN SUCH NET PROFIT AS QUALIFYING WORDS COM PUTED IN THE MANNER LAID DOWN IN CHAPTER IV-D IN EXPLANATION 3 BELOW SECTION 40(B)(V) HAVE BEEN ADVISEDLY USED IN ORDER TO ENSURE T HAT INADMISSIBLE OR EXCESSIVE CLAIMS RELATING TO INCOME TO BE COMPUTED UN DER THE HEAD BUSINESS WHICH ARE EMBEDDED IN THE BOOK PROFIT ARE E XCLUDED FROM THE BASE FOR LIMITING REMUNERATION TO PARTNER. WITH THE SE OBSERVATIONS, THE TRIBUNAL REMAINED OF THE VIEW THAT PRIMA FACIE, THE LEGISLATURE HAS NOT AUTHORIZED EXCLUSION OF NON-BUSINESS RECEIPTS RECORDED I N THE P & L ACCOUNT. WHOLE INCOME OF THE FIRM UNDER DIFFERENT H EADS IS LIABLE TO BE ASSESSED IN THE HANDS OF THE FIRM AND REMUNERATION TO PA RTNERS DEBITED TO P & L ACCOUNT CANNOT BE BROKEN DOWN INTO DIFFERENT COMPONENTS, TO BE ALLOCATED TO THE INCOME COMPUTED UNDER DIFFERENT HE ADS. WE ARE THUS OF THE VIEW THAT WHEN THE ISSUE WAS DEBATABLE IN NATURE A ND ONE POSSIBLE VIEW ON THAT ISSUE HAS BEEN ACCEPTED BY THE A.O., THE LEARNED CIT WAS NOT JUSTIFIED IN ARRIVING AT A CONCLUSION TO INVOKE THE P ROVISIONS OF SECTION 263 OF THE ACT THAT THE OTHER POSSIBLE VIEW WAS CORRECT ON E AND THAT ADOPTED BY THE A.O WAS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE. IN THIS REGARD, WE FIND STRENGTH FROM THE DECISIONS OF THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CI T (SUPRA) AND CIT VS. MAX INDIA LTD.(SUPRA) RELIED UPON BY THE LEARNED AR. GROUND NO. 1 QUESTIONING THE VALIDITY OF ORDER PASSED U/S 263 ON THE BASIS THAT WHEN TWO VIEWS ARE POSSIBLE ON CERTAIN POINT AND A.O AFTER CALLING FOR REQUIRED INFORMATION HAS TAKEN A VIEW AS PER THE PROVISIONS OF T HE ACT RECOURSE CANNOT BE HAD TO THE PROVISIONS OF SECTION 263 OF THE ACT, IS THUS ALLOWED. IN VIEW OF ALLOWABILITY OF GROUND NO. 1 THERE IS NO NEED TO ADJUDICATE UPON ON THE ALTERNATIVE GROUNDS NO. 2 TO 4 OF THE APPEAL. 4. IN THE PRESENT ASSESSMENT YEAR ALSO, THE BOOK PROFIT ADOPTED FOR PURPOSE OF CALCULATING THE ALLOWABLE SALARY/REMUNERAT ION INCLUDED INTEREST INCOME OF RS.1,47,83,785/-. THIS AMOUNT CONSI STED OF INTEREST RECEIVED ON FDS WITH VARIOUS BANKS, MSEB DEPOSITS ON SD, ON OTHER PARTIES AND INCOME-TAX REFUND. BEFORE THE LD CIT, T HE ASSESSEE EXPLAINED THAT THE ABOVE DEPOSITS ON WHICH INTEREST HAS ACCRUED WERE MADE OUT OF BUSINESS COMPULSION AND EXPEDIENCY. THE LD CIT DID NOT AGREE WITH THIS EXPLANATION AND HELD THAT THERE IS NO DIRECT NEXUS B ETWEEN THE INTEREST INCOME EARNED BY THE FIRM AND THE BUSINESS OF ASSESSEE, TH EREFORE, THE INTEREST INCOME IN QUESTION OUGHT TO HAVE BEEN TREATE D AS INCOME FROM OTHER SOURCES AND SAME SHOULD NOT HAVE BEEN CONSIDERED F OR WORKING OF THE BOOK PROFIT. THE LD CIT, ACCORDINGLY, HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVE NUE WITH DIRECTION TO THE A.O TO MODIFY THE SAID ORDER ASSESSING INTEREST INCOM E AS INCOME FROM OTHER SOURCES AND EXCLUDING THE SAID INTEREST INCOME WH ILE ALLOWING CLAIM OF REMUNERATION TO PARTNERS. ON AN IDENTICAL ISSUE UND ER SIMILAR FACTS AS DISCUSSED ABOVE, THE TRIBUNAL FOLLOWING THE DECISIONS RE LIED UPON BY THE 5 LD. A.R HAS HELD THAT WHEN THE ISSUE WAS DEBATABLE IN N ATURE AND ONE POSSIBLE VIEW ON THAT ISSUE HAS BEEN ACCEPTED BY THE A.O , THE LD CIT WAS NOT JUSTIFIED IN ARRIVING AT A CONCLUSION, BUT INVOK ING THE PROVISIONS OF SEC. 263 OF THE ACT WITH THE OTHER POSSIBLE VIEW WAS CORRE CT ONE AND THAT ADOPTED BY THE A.O WAS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. THE GROUND RAISING AN IDENTICAL ISSUE IN THA T CASE HAS BEEN ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. FOLLOW ING THE DECISION TAKEN THEREIN ON IDENTICAL ISSUE, WE DECIDE THIS ISSUE R AISED IN GROUND NOS. 1 TO 4 IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT THE LD CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 263 ON TH E ISSUE HOLDING THE ASSESSMENT ORDER IN THIS REGARD AS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE. THE REVISIONAL ORDER IN QUESTION IS THUS SET ASIDE. THE GROUND NOS. 1 TO 4 ARE THUS ALLOWED. 3.1 THIS BEING SO AND IN ABSENCE OF ANY CONTRARY MA TERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDERS OF THE TRIBUNAL IN AS SESSEES OWN CASE WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) ALL OWING THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4. GROUNDS OF APPEAL NOS. 4 AND 5 BY THE REVENUE AR E AS UNDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), KO LHAPUR ERRED IN IGNORING THAT IN TERMS OF PROVISIONS OF SE CTION 80IA(5) THE QUANTUM OF DEDUCTION FOR THE ASSESSMENT YEAR UN DER CONSIDERATION WOULD BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WHERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DUR ING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH IN THE CONTEXT OF THE ASSESSEE WOULD MEAN THAT PROFITS EARNED FROM GENERATION AND SALE OF ELE CTRICITY FROM ALL THE UNITS WOULD HAVE TO BE CONSIDERED BEFORE COMPUT ING THE AVAILABLE PROFITS FOR ALLOWING DEDUCTIONS IN TERMS OF SECTION 70 OF THE I.T. ACT, 1961. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPU R ERRED IN RELYING UPON THE ITAT'S ORDER IN THE CASE OF M/S PR EETAM ENTERPRISES IN ITA NOS. 544, 545 AND 613/PN/2009 DT.29 .04.2011 WHEREIN THE ITAT HELD THAT LOSSES AND DEPRECIATION OF EARLIER YEARS ALREADY ABSORBED AGAINST PROFITS OF OTHER BUSINESSE S CANNOT BE INITIALLY BROUGHT FORWARD AND SET OFF AGAINST THE P ROFITS OF THE ELIGIBLE BUSINESS, AS THE SAME IS CONTRARY TO THE PR OVISIONS OF SECTION 80IA(5) OF THE I.T. ACT, 1961. 6 4.1 AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE GROUNDS BY THE DEPARTMENT FOR THE IM PUGNED ASSESSMENT YEAR ARE MISCONCEIVED AS THE ASSESSING OFFICER HAD ALLOWED THE DEDUCTION DURING ASSESSMENT PROCEEDINGS ITSELF AND THE ISSUE WAS NOT BEFORE THE LD.CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE COU LD NOT CONTROVERT THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE. IN VIEW OF THE ABOVE THE GROUNDS BY THE REVENUE ARE DISMISSED AS I NFRUCTUOUS. 5. GROUNDS OF APPEAL NOS. 6 AND 7 BY THE REVENUE AR E AS UNDER : 6. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ASSESSEE FIRM WAS OBLIGED TO DEDUCT TAX AT SOURCE ON A COMPONENT OF CONTRACT WHICH WAS COVERED UNDER PROVI SIONS OF TDS? 7. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING UPON THE ITAT'S ORDER IN THE ASSESSEE'S OWN CASE FOR A.Y. 2005-06 IN ITA NO. 145/PN/2008 WHEREIN THE ITAT HELD THAT TREATING THE HIRING OF T RUCK TO SUPPLY THE MILK IN ISOLATION AS WORK CONTRACT TO ATTRACT T HE PROVISIONS OF SEC. 194C OF THE ACT . 5.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD NOT DEDUCTED TDS ON PAYMENTS MADE TO M/S SACHIN MILK CE NTRE, PROP. MANOHAR RAMDAYAL VYAS, ON ACCOUNT OF TRUCK HIRE CHA RGES. HE REJECTED THE CONTENTION OF THE ASSESSEE THAT THESE PAYMENTS WERE REIMBURSEMENT OF EXPENSES INCURRED BY M/S SACHIN MILK CENTRE FOR COL LECTION OF MILK FROM VARIOUS SOURCES AND HENCE DID NOT ATTRACT THE PROVI SIONS OF SECTION 194C. OBSERVING THAT THE SALES ACCOUNT SUMMARY OF M/S SAC HIN MILK CENTRE DESCRIBED THE PAYMENTS MADE BY THE ASSESSEE AS TRUC K HIRE CHARGES, THE ASSESSING OFFICER HELD PROVISIONS OF SECTION 194C W ERE APPLICABLE IN RESPECT OF SUCH PAYMENTS. ACCORDINGLY, HE ADDED BAC K RS.41,84,442/- AND 7 RS.58,83,843/- TO THE ASSESSEE'S TOTAL INCOME FOR A SSESSMENT YEARS 2006-07 AND 2007-08, RESPECTIVELY. 5.2 IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06 DELETED THE DI SALLOWANCE BY OBSERVING AS UNDER : 24. I AGREE WITH THE CONTENTION OF THE APPELLANT. TH E HONOURABLE ITAT, A BENCH, PUNE, VIDE THEIR ORDER IN ITA NO. 145/P N/2008 IN THE APPELLANT'S OWN CASE FOR ASSESSMENT YEAR 2005-06 HAD HELD AS UNDER: 8. ........ WE ARE OF THE VIEW THAT PURCHASE OF MILK WAS PREDOMINANT FACTOR IN THE TRANSACTION AND NOT THE H IRING OF TRUCK TO TRANSPORT THE SAME TO THE ASSESSEE. SINCE THE PR EDOMINANT FACTOR IN THE CONTRACT WAS SALE OF MILK, THE CONTRA CT CANNOT BE TURNED AS FOR CARRYING OUT ANY WORK TO INVOKE THE P ROVISIONS OF SEC. 194C OF THE ACT. THE LD CIT, IN OUR VIEW WAS N OT JUSTIFIED IN TREATING THE HIRING OF TRUCK TO SUPPLY THE MILK IN ISOLATION AS WORK CONTRACT TO ATTRACT THE PROVISIONS OF SEC. 194C OF THE ACT WITHOUT APPRECIATING THAT PREDOMINANT FACT BEHIND WAS PURCH ASE/SALE OF MILK. ........ RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO NOURABLE ITAT, THE ADDITIONS MADE ON ACCOUNT OF TRUCK HIRE PAYMENTS ARE DELETED FOR ASSESSMENT YEARS 2006-07 AND 2007-08. 5.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRMI TY IN THE ORDER OF THE CIT(A) WHO HAS FOLLOWED THE DECISION OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR A.Y. 2005-06 ORDER DATED 19-11-2010. IN V IEW OF THE ABOVE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL THE ORDER OF THE CIT(A) ON THIS ISS UE IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL FOR A.Y. 2006-07 BY THE RE VENUE IS DISMISSED. 8 ITA NO.22, 23 AND 24/PN/2013 (A.YRS. 2007-08, 2008- 09 & 2009-10) : 8. GROUNDS OF APPEAL NOS. 1 TO 3 BY THE REVENUE IN THE ABOVE APPEALS RELATE TO INCLUSION OF INTEREST INCOME IN BOOK PROF IT FOR CALCULATING THE PARTNERS REMUNERATION U/S.40(B). 8.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS ARE IDENTICAL TO GROUNDS OF APPEAL NOS. 1 TO 3 IN ITA N O.21/PN/2013 FOR A.Y. 2006-07. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. FOLLOWING THE SAME RATI O, THE ABOVE GROUNDS IN ALL THE 3 APPEALS ARE DISMISSED. 9. GROUNDS OF APPEAL NOS. 4 AND 5 IN THE ABOVE 3 AP PEALS RELATE TO SETTING OF LOSSES PRIOR TO INITIAL ASSESSMENT YEAR FOR CALCULATING DEDUCTION U/S.80IA. 9.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80IA(IV)(A) IN RESPECT OF THE WIND MI LL INSTALLED AT SARATA. THE ASSESSING OFFICER, CONSIDERING THE WINDMILL BUS INESS AS THE ELIGIBLE BUSINESS, WORKED OUT THE POSITION OF UNABSORBED DEP RECIATION AND RECEIPTS OF WINDMILL IN THE ASSESSMENT ORDER. OBSERVING THA T THERE WAS NO SURPLUS INCOME AVAILABLE FROM ELIGIBLE BUSINESS FOR DEDUCTI ON AFTER SETTING OFF THE BROUGHT FORWARD DEPRECIATION, HE DISALLOWED THE CLA IMS MADE BY THE ASSESSEE AND BROUGHT TO TAX RS.31,09,578/- AND RS.2 9,41,894/- AND RS.7,54,097/- FOR ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10 RESPECTIVELY. 9 9.2 IN APPEAL THE LD.CIT(A) DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 28. I HAVE GIVEN CAREFUL CONSIDERATION TO THE CON TENTIONS OF THE APPELLANT. A SIMILAR ISSUE HAD COME UP IN APPEAL BE FORE ME IN THE CASE OF M/S PREETAM ENTERPRISES WHEREIN THE HONOURA BLE IT AT, PUNE BENCH 'A', PUNE IN ITA NO. 544, 545 AND 613/PN /2009 DATED 29/04/2011 IN ITS CASE FOR ASSESSMENT YEARS 2004-05 , 2005-06 AND 2006-07, HAD ALLOWED THE CLAIM OF DEDUCTION UND ER SECTION 80IA(4)(IV)(A). THE RELEVANT PORTION OF THE ITAT'S ORDER IS REPRODUCED BELOW : 2.1 WE ALSO FIND THAT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD., VS ACIT (2010) 231 CTR (MA D) 368 HONBLE MADRAS HIGH COURT HAS HELD THAT LOSSES AND DEPRECIAT ION OF THE YEARS EARLIER TO THE INITIAL ASSESSMENT YEAR WHICH HAVE ALREADY BEEN ABSORBED AGAINST THE PROFITS OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS FOR COMPUTING THE DEDUCTION UNDER SECTION 80- IA. FOLLOWING THIS JUDGMENT OF HON'BLE MADRAS HIGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THE ASS ESSEE IS ENTITLED TO CLAIM FOR DEDUCTION U /S 80IA(IV)(A) OF THE ACT. 29. THUS, IN VIEW OF THE IDENTICAL FACTS AND CIRCUMS TANCES, DECISION OF THE HONOURABLE ITAT REPRODUCED ABOVE IS APPLICAB LE TO THE INSTANT CASE ALSO. THE DISALLOWANCES MADE FOR THE ASSESSMENT YEARS UNDER APPEAL ARE THEREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED. 9.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVO UR OF THE ASSESSEE HAS FOLLOWED THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF M/S. PREETAM ENTERPRISES (SUPRA) AND THE DECISION O F HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS PVT. LTD. (SUPRA). NOTHING CONTRARY WAS BROUGHT TO OUR NOTIC E AGAINST THE ORDER OF THE TRIBUNAL AND THAT OF THE HONBLE MADRAS HIGH CO URT WHICH HAS BEEN FOLLOWED BY THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. WE ACCORDINGLY UPHOLD THE SAME AND THE G ROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10 11. GROUNDS OF APPEAL NO.6 AND 7 BY THE REVENUE FOR A.Y. 2007-08 ARE IDENTICAL TO GROUNDS OF APPEAL NOS. 6 AND 7 IN ITA NO.21/PN/2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAIS ED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE GROUNDS OF APPEAL NOS. 6 AND 7 IN ITA NO.22/PN/2013 ARE DISMISSED. 12. GROUND OF APPEAL NO. 6 IN ITA NO.23/PN/2014 BY THE REVENUE READS AS UNDER : 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A), KOLHAPUR ERRED IN DELETING THE ADDITION MADE U/S. 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TDS ON THE WHEELING CHA RGES PAID TO MSEB OF RS.2,49,179/- AND COMPUTER DEVELOPMENT AND COMPUTER MAINTENANCE CHARGES OF RS. 10,72,383/-. 12.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER IN THE ORDER FRAMED U/S.143(3) MADE DISALLOWANCE OF RS.2,49,179/ - U/S.40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF WHEELI NG UNITS/WHEELING CHARGES PAID TO MSEB. SIMILARLY, HE ALSO DISALLOWE D AN AMOUNT OF RS.5,62,031/- ON ACCOUNT OF COMPUTER DEVELOPMENT CH ARGES AND RS.5,62,031/- ON ACCOUNT OF COMPUTER MAINTENANCE CH ARGES BOTH TOTALLING TO RS.10,72,383/- FOR NON DEDUCTION OF TAX AT SOURC E U/S.40(A)(IA) OF THE I.T. ACT. 12.2 BEFORE THE CIT(A) THE ASSESSEE EXPLAINED THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO COMPUTER DEVELOPME NT CHARGES AND COMPUTER MAINTENANCE CHARGES FOR THE FOLLOWING REAS ONS : COMPUTER DEVELPMENT CHARGES : (I) MAJOR PAYMENT IN RESPECT OF COMPUTER DEVELOPMENT CHARGES WAS MADE TO YANTRA AUTOMATION PVT. LTD. (A.Y. 2008-09) AND J.A. SOLUTIONS FOR PURCHASE OF GRAPHIC DESIGN AND ERP BUSINESS SOLUTION (A .YRS.2008-09 AND 2009-10 RESPECTIVELY). 11 (II) TDS WAS DEDUCTED ON PAYMENT MADE TO YANTRA AUTO MATION PVT. LTD. (III) THE FACT THAT VAT WAS LEVIED, AS REFLECTED IN T HE SALE BILLS, CLEARLY INDICATE THAT PURCHASE OF GRAPHIC DESIGN AND ERP PACK AGE DID NOT INVOLVE ANY CONTRACTUAL OBLIGATION. (IV) OTHER PURCHASES DEBITED TO COMPUTER DEVELOPMENT CHARGES INCLUDED PURCHASE OF SOFTWARE, ANTIVIRUS SOFTWARE, INTE RNET MODEM. SINCE THESE WERE OUTRIGHT PURCHASES FROM THE DEALERS, PROVISIO NS OF SECTION 194J ARE NOT APPLICABLE AS NO PROFESSIONAL FEES ARE PAID. COMPUTER MAINTENANCE CHARGES : (I) THESE EXPENSES WERE INCURRED TOWARDS PURCHASE OF CON SUMABLE ITEMS SUCH AS COMPUTER CONSUMABLES, REPLACEMENT OF BATT ERIES, CABLES, REFILLING, REPAIRS REPLACEMENT OF PARTS, TONNER REFIL LING ETC. (II) THE TAX INVOICES INCLUDED VAT CHARGES LEVIED BY THE SELLER WHICH GOES TO INDICATE THAT APPELLANT HAD NOT OBTAINED ANY TECHNICAL CONSULTANCY SERVICE. (III) TAX WAS DEDUCTED AT SOURCE IN RESPECT OF PAYMENT S MADE TO CHITALE DIGITALS (A.Y. 2008-09) AND PRINTEX SALES AND SERVICE S. 12.3 SO FAR AS THE DISALLOWANCE OF PAYMENT TO MSEB U/S.40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE IS CONCERNED IT WAS EXPLAINED AS UNDER : THE QUESTION OF MAKING ANY PAYMENT TO MSEB DID NOT ARISE AT ALL AS THE APPELLANT FIRM HAD RECEIVED LESS CREDIT FOR THE UNITS GENERATED AND THEREFORE, THE FIRM HAD SUFFERED A LOSS. IN VIEW OF TH IS, THE PROVISIONS OF SECTION 40(A)(IA) WAS NOT APPLICABLE IN ITS CASE. ALTE RNATIVELY IT WAS EXPLAINED THAT I) THE CREDIT GIVEN BY MSEB IS BY WAY OF CREDIT I N ENERGY / POWER BILL OF THE APPELLANT FIRM. II) AS PER THE CONDITION LAID DOWN BY MSEB IN ITS L ETTER DATED 28/03/2003, THE CONSUMER WILL BE GIVEN 85% CREDIT OF TOTAL UNITS RECEIVED FOR WHEELING AND THE BALANCE 15% WILL BE ACCOUNTED FOR AFTER APPROVAL OF MERC FOR ENERGY UTILIZED AGAINST EWA. III) 93% CREDIT GIVEN TO THE APPELLANT WAS ACCOUNTE D FOR AND THE BALANCE 7% (COMPRISING OF 5% ON ACCOUNT OF TRANSMISSION LOSS AND 2% FOR WHEELING UNITS) COULD NOT BE CONSIDERED AS INCOME AS TH E SAME HAS BEEN DEDUCTED BY THE MSEB AND WAS NOT RECEIVED BY THE APP ELLANT. IV) WHEELING CHARGES COULD NOT BE SHOWN AS EXPENDITUR E AS THE FIRM WAS ENTITLED TO RECEIVE CREDIT FOR THE UNITS GENERATE D. V) SINCE THE APPELLANT PURCHASES ELECTRICITY FROM M SEB, PAYMENT IS MADE TOWARDS PURCHASE OF ELECTRIC POWER AND NOT TOWARDS ANY CONTRACT. (VI) EVEN IF THE FIRM HAD ACCOUTNED FOR 100% OF UNI TS GENERATED, IT WOULD HAVE CLAIMED 5% DEDUCTION FOR TRANSMISSION LOSSES AS PER THE RULES OF MSEB AND WOULD HAVE ACCOUNTED FOR 2% TOWARDS WHEE LING CHARGES AND 12 THESE WOULD HAVE BEEN CLAIMED AS DEDUCTIONS TOWARDS BU SINESS EXPENDITURE. THE DECISION OF CUTTAK BENCH OF THE TRIBUNAL IN THE CASE OF GRIDCO COMPANY LTD. VS. ACIT REPORTED IN 15 TAXMANN.COM 35 4 WAS ALSO BROUGHT TO THE NOTICE OF THE LD.CIT(A). 12.4 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) PARTLY ALLOWED THE DISALLOWANCE MADE U/S.40(A)(IA) ON ACCOUNT OF COMPUTER DEVELOPMENT CHARGES AND COMPUTER MAINTENAN CE EXPENSES BY OBSERVING AS UNDER : 14. I HAVE GIVEN CAREFUL CONSIDERATION TO THE CONTE NTIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS ON RECORD. IN RESPECT OF COMPUTER MAINTENANCE CHARGES (RS.5,10,352/- FOR ASSESSMENT YEAR 20 08-09) THE APPELLANT HAS SHOWN THAT THE COMPUTER MAINTENANCE EXP ENDITURE IS INCURRED TOWARDS PURCHASE OF CONSUMABLE ITEMS SUCH AS BAT TERIES, CABLE, SOFTWARE, REPAIRS AND REPLACEMENT OF PARTS, PAPER ETC. THE APPELLANT HAS ALSO PROVIDED COPIES OF BILLS IN RESPECT OF THE PAYMENT S WHICH HAVE BEEN MADE. IT IS SEEN FROM THE BILLS THAT THE APPELLANT HA S DEDUCTED TDS ON PAYMENTS MADE TO CHITALE DIGITALS AGGREGATING TO RS.2 ,50,000/- AS WELL AS PAYMENTS MADE TO PRINTEX SALES FOR RS.33,672/-. THERE FORE, DISALLOWANCES OF THESE AMOUNTS WERE INCORRECT. IN RESPECT THE PAYME NT OF BALANCE AMOUNT OF RS.5,62,031/- INCURRED ON COMPUTER DEVELOP MENT CHARGES, THE APPELLANT HAS SHOWN THAT IT HAS DEDUCTED TDS ON BILL F OR SERVICES OF YANTRA AUTOMATION PVT. LTD. FOR RS.3,75,339/-. THE APPELLA NT HAS ALSO SHOWN THAT AN AMOUNT OF RS.52,000/- WAS PAID TO JA SOLUTIONS FOR PURCHASE OF A GRAPHIC DESIGN. THIS WAS AN OUTRIGHT PURCHASE ON WHICH VAT WAS ALSO PAID BY THE APPELLANT. HENCE, TDS WAS NOT REQUIRED TO BE MADE ON THIS AMOUNT. THE BALANCE AMOUNTS HAVE BEEN PAID TO VARIO US PEOPLE LIKE PRINTCOM SERVICES ETC. AND THE REASON FOR INCURRING T HESE EXPENSES HAS NOT BEEN MADE EXPLICIT IN THE APPELLATE STAGES. THE BILLS HAVE ALSO NOT BEEN PRODUCED FOR VERIFICATION SO AS TO ENABLE ONE TO FIND OUT THE NATURE OF EXPENSES INCURRED. HENCE, THE DISALLOWANCE MADE IS SUSTA INED TO THE EXTENT OF RS.1,34,692/-. 12.5 SIMILARLY, THE DISALLOWANCE U/S.40(A)(IA) FOR NON DEDUCTION OF TAX FROM PAYMENTS MADE TO MSEB WAS ALSO DELETED BY HIM BY OBSERVING AS UNDER: 34. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELL ANT WITH REFERENCE TO THE FACTS OF THE CASE. FIRST AND FOREMOST IT REQUIRES TO BE STATED THAT THE APPELLANT'S RELIANCE ON THE CASE OF GRIDCO L TD. V/S ACIT, CIRCLE 2(19) /SUPRA IS INCORRECT BECAUSE THE FACTS AND CIRCUMST ANCES IN BOTH THE CASES ARE DIFFERENT. IN THE CASE OF GRIDCO LTD., CONSEQ UENT TO A GAZETTE 13 NOTIFICATION DATED 09/02/2005 AN INDEPENDENT COMPAN Y VIZ. ORISSA POWER TRANSMISSION CORPORATION LTD. (OPTCL) CAME INTO EXISTEN CE WHICH WAS ENGAGED IN TRANSMISSION AND WHEELING OF POWER. AS A RESU LT OF THE NEW COMPANY COMING INTO EXISTENCE, THE BULK SUPPLY AGREEM ENT ENTERED INTO BY GRIDCO LTD. WITH THE DISCOMS STOOD AUTOMATICALLY MOD IFIED WHEREBY GRIDCO LTD. HAD NO ROLE IN TRANSMISSION OF POWER TO TH E DISTRIBUTING COMPANIES. UNDER THESE CIRCUMSTANCES, IT WAS HELD BY THE HONOURABLE TRIBUNAL THAT THERE WAS A PRIVITY OF CONTRACT FOR PA YMENT OF TRANSMISSION CHARGES BETWEEN OPTCL AND THE D/SCOMS AND NOT BETWEE N GRIDCO LTD. AND DISCOMS. THE ESCROW ARRANGEMENT FOR PAYMENT WAS O NLY MADE TO SECURE THE PAYMENT AND UNDER THESE CIRCUMSTANCES GRIDC O LTD. WAS NOT LIABLE TO DEDUCT TDS IN RESPECT OF TRANSMISSION CHARGE S DEDUCTED BY D/SCOMS IN RESPECT OF PAYMENTS TO BE MADE TO OPTCL. 35. IN THE INSTANT CASE OF THE APPELLANT, DEDUCTION OF 7% ON ACCOUNT OF TRANSMISSION LOSS (5%) AND WHEELING CHARGES (2%) WAS MADE FROM THE TOTAL AMOUNT PAYABLE BY MSEB TO THE APPELLANT. THE ISSUE TH EREFORE, IS WHETHER THE WHEELING CHARGES PAID ARE IN THE NATURE OF ANY C ONTRACTUAL OR TECHNICAL FEE ON WHICH TDS IS LIABLE TO BE MADE. ALTHOUGH THE ASSESSING OFFICER HAS NOT MENTIONED THE SECTION UNDER WHICH TDS IS REQUIRED TO BE MADE, IN ALL PROBABILITIES, HE IS REFERRING TO SECTIONS 194C OR SECTI ON 194J. BOTH THE SECTIONS WILL NOT BE APPLICABLE IN THE INSTANT CASE. SE CTION 194J IS APPLICABLE ONLY WHEN THE TECHNOLOGY OR TECHNICAL KNOWLEDGE IS MADE AVAILABLE TO OTHERS AND NOT WHERE THE USE OF TECHNICAL SYSTEM SERVICE S IS PROVIDED TO OTHERS. RENDERING OF SERVICES BY ALLOWING THE USE OF TE CHNOLOGY IS DIFFERENT FROM CHARGING FEES FOR RENDERING TECHNICAL SERVICES. I N ANY CASE, THESE PAYMENTS ARE NOT BECAUSE OF THE USE OF ANY TECHNOLOGY OR TECHNICAL SERVICES BY THE APPELLANT EXCEPT TO THE EXTENT OF 2% I.E. ON ACCOUNT OF WHEELING CHARGES. THIS IS A CASE WHERE WHEELING CHARGES ARE PAID FOR THE USE OF A FACILITY PROVIDED BY MACHINERY AND OTHER EQUIPMENT WHEREBY THE CUSTOMERS AVAIL THE BENEFIT OF USAGE OF SUCH EQUIPMENTS AND THE SAME CANNOT MEAN TECHNICAL SERVICES PROVIDED TO A CUSTOMER FOR A FEE. THEREFORE, BECAUSE THE USAGE OF TRANSMISSION LINES FOR TRANSMITTING POWER HAS NOT RESULTED INTO ANY TECHNICAL SERVICES BEING RENDERED TO THE APPELLANT, THE PROVISIONS OF SECTION 194J WILL NOT BE APPLICABLE. SIM ILARLY, THE PROVISIONS OF SECTION 194C WILL ALSO NOT BE APPLICABLE IN THE INSTAN T CASE BECAUSE SECTION 194C CONTEMPLATES A LIABILITY TO DEDUCT TAX AT SOURCE IN RESPECT OF WORK CARRIED OUT IN PURSUANCE OF A CONTRACT BETWEEN THE C ONTRACTOR AND A SPECIFIED PERSON. ANY SERVICE CONTRACT WHICH DOES NOT INVOLVE CARRYING OUT OF ANY WORK WOULD BE OUTSIDE THE PURVIEW OF SECTION 1 94C. THE PAYMENT OF TRANSMISSION AND WHEELING CHARGES DOES NOT INVOLVE CARRY ING OUT OF ANY WORK AND HENCE WOULD BE OUTSIDE THE PURVIEW OF SECTIO N 194C. 36. DEDUCTION ON ACCOUNT OF TRANSMISSION LOSS TO THE EXT ENT OF 5% IS ALSO NOT THE RESULT OF ANY CONTRACT OR ANY TECHNICAL SERVICES R ENDERED BY THE MSEB. IN FACT, THIS IS A CHARGE ON REVENUE AND WOULD OTHERWISE HAVE TO BE ALLOWED AS A DEDUCTIBLE BUSINESS EXPENSE EVEN IF 100% OF THE UNITS GENERATED WERE ACCOUNTED FOR. TO SUM UP, I HOLD THAT EVEN IF THE ASSE SSEE HAD DISCLOSED 7% OF UNITS RETAINED BY MSEDCL AS ITS INCOME, 2% WOULD HA VE TO BE ALLOWED AS A DEDUCTION ON ACCOUNT OF WHEELING AND TRANSMISSION CH ARGES AND 5% BEING DISTRIBUTION LOSSES WOULD BE AN ALLOWABLE BUSINESS EXPENSE S AS A CHARGE ON THE APPELLANT SINCE THE SAME WAS RECOVERED FROM THEM. HENCE, NO DISALLOWANCE CAN BE MADE IN RESPECT OF DEDUCTIONS MADE ON ACCOUNT OF TRANSMISSION LOSSES AND WHEELING CHARGES. THE APPELLANT SUC CEEDS ON THIS GROUND. 14 12.6 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. SO FAR AS THE DISALLOWANCE OF COMPUTER DEVELOPMENT CHA RGES AND COMPUTER MAINTENANCE CHARGES U/S.40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE IS CONCERNED WE FIND THE LD.CIT(A) GAVE PART RELIEF TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS SHOWN THAT THE COMPUTE R MAINTENANCE EXPENSES WERE INCURRED TOWARDS PURCHASE OF CONSUMAB LE ITEMS. SIMILARLY OUT OF THE EXPENSES INCURRED TOWARDS COMPUTER DEVEL OPMENT CHARGES OF RS.5,62,031/- HE HAD GIVEN A FINDING THAT ASSESSEE HAS DEDUCTED TAX AT SOURCE ON AN AMOUNT OF RS.3,75,339/- PAID TO YANTRA AUTOMATION PVT. LTD. FOR THE SERVICES DONE BY THEM. SIMILARLY, HE HAD A LSO GIVEN A FINDING THAT AN AMOUNT OF RS.52,000/- WAS INCURRED TOWARDS JA SO LUTIONS FOR OUTRIGHT PURCHASE OF A GRAPHIC DESIGN ON WHICH VAT WAS ALSO PAID BY THE ASSESSEE AND THEREFORE NO TDS IS DEDUCTIBLE FROM THIS AMOUNT . THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT TH E ABOVE FACTUAL FINDINGS GIVEN BY THE LD.CIT(A). IN VIEW OF THE AB OVE FACTUAL FINDINGS BY THE LD.CIT(A) ON THIS ISSUE AND IN ABSENCE OF ANY C ONTRARY MATERIAL BROUGHT TO OUR NOTICE WE FIND NO INFIRMITY IN THE O RDER OF THE CIT(A) DELETING THE DISALLOWANCE OF RS.5,10,352/- ON ACCOU NT OF COMPUTER MAINTENANCE CHARGES AND RS.4,27,339/- OUT OF THE DI SALLOWANCE OF RS.5,62,031/- ON ACCOUNT OF COMPUTER DEVELOPMENT CH ARGES. THE ORDER OF THE CIT(A) ON THIS ISSUE IS ACCORDINGLY UPHELD. 13.1 SO FAR AS THE DISALLOWANCE ON ACCOUNT OF PAYME NT TO MSEB IS CONCERNED WE FIND THE LD.CIT(A) HAS GIVEN THE REASO NS AS TO WHY THE 15 PROVISIONS OF SECTION 194J/194C WILL NOT BE APPLICA BLE TO THE PAYMENTS MADE TO MSEB ON WHEELING CHARGES. WE AGREE WITH TH E FINDINGS GIVEN BY THE LD.CIT(A) THAT PROVISIONS OF SECTION 194J WI LL NOT BE APPLICABLE TO THE ASSESSEE COMPANY SINCE USAGE OF TRANSMISSION LI NES FOR TRANSMITTING POWER HAS NOT RESULTED INTO ANY TECHNICAL SERVICES BEING RENDERED TO THE ASSESSEE. SIMILARLY, WE ALSO AGREE WITH THE FINDIN GS GIVEN BY THE LD.CIT(A) THAT THE PROVISIONS OF SECTION 194C WILL ALSO BE NOT APPLICABLE IN THE INSTANT CASE SINCE THE PAYMENT ON TRANSMISSI ON AND WHEELING CHARGES DOES NOT INVOLVE CARRYING OUT OF ANY WORK A ND HENCE WOULD BE OUTSIDE THE PURVIEW OF SECTION 194C. IN VIEW OF TH E ABOVE THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF WHEELING CHARGES PAID TO MSEB AND COMPUTER EXPEN SES U/S.40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE IS UPHELD AND TH E GROUND RAISED BY THE REVENUE IS DISMISSED. 14. GROUND OF APPEAL NO.6 IN ITA NO.24/PN/2013 IS I DENTICAL TO GROUND OF APPEAL NO.6 IN ITA NO.23/PN/2013. WE HAV E ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE ABOVE GROUND RAISED B Y THE REVENUE IS DISMISSED. 15. IN THE RESULT, ALL THE 4 APPEALS FILED BY THE R EVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 08-05-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED 08 TH MAY , 2014 SATISH 16 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. DR A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE