M/s. Daisy Motors Pvt. Ltd., Hisar V. ACIT, Hisar

ITA 2575/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69295 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-03-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRISH BEDI
• Keywords: Commercial expediency
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: 'B' NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 2575/DEL./2010 (ASSESSMENT YEAR: 2006-07) M/S DAISY MOTORS PVT. LTD., VS. ACIT, RANGE, 23,24,25, RED SQUARE MARKET, HISAR. HISAR (PAN/GIR NO.AACCD0401F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAUTAM JAIN, AR REVENUE BY : AMRISH BEDI, SR.DR ORDER PER U.B.S. BEDI, JM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE C1T(A), ROHTAK, DATED 29.04.2010, RELEVANT TO ASSES SMENT YEAR 2006-07, WHEREBY ASSESSEE HAS RAISED IN ALL 5 GROUND, GROUND NO. 1 & 5 ARE GENERAL WHICH NEED NO ADJUDICATION AND REMAINING GROUND NOS .2 & 3 RELATES TO CONFIRMATION OF DISALLOWANCE OF RS.8, 77 ,970/- MAD E U/S 36(L)(III) OF THE I.T. ACT, 1961 AND DISALLOWANCE MADE OF RS.2,73,391/- RE PRESENTING EXPENDITURE INCURRED IN THE SHAPE OF INCENTIVE PAID TO M/S VEER U PRABHU MARKETING LTD. RESPECTIVELY WHEREAS GROUND NO.4 RELATES TO UPHOLDI NG OF LEVY OF INTEREST U/S 234B OF THE I.T. ACT, 1961. 2. FACTS INDICATE THAT ON 30.11.2006, RETURN OF IN COME WAS FILED BY THE ASSESSEE DECLARING AN INCOME OF RS.37,51,L09/- DULY SUPPORTED BY AUDITED BALANCE SHEET AND, PROFIT AND LOSS ACCOUNT FOR THE ASSESSMENT YEAR UNDER I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 2 CONSIDERATION. ASSESSING OFFICER, THE ADDL. COMMISS IONER OF INCOME TAX, HISAR RANGE, HISAR FRAMED AN ORDER OF ASSESSMENT U/ S 143(3) OF THE ACT VIDE AN ORDER OF ASSESSMENT DATED 29.12.2008 COMPUTING T HE TOTAL INCOME OF THE ASSESSEE COMPANY AT RS.50,52,470/-- AND IN HIS ORDE R OF ASSESSMENT, HAS MADE FOLLOWING TWO DISALLOWANCES: (I) DISALLOWANCE OF INTEREST U/S 36(1 )(III) RS.9,7 7,970/- (II)DISALLOWANCE OF THE INCENTIVE PAID 3. BEING AGGRIEVED AGAINST THE AFORESAID ORDER OF THE ASSESSMENT, THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE COMMISS IONER OF INCOME TAX (APPEALS) ROHTAK AND CONTESTED SUCH DISALLOWANCES M ADE BUT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE DIS ALLOWANCES MADE BY THE LEARNED ASSESSING OFFICER AND DISMISSED THE APP EAL FILED BY THE ASSESSEE COMPANY. 4. STILL AGGRIEVED, ASSESSEE HAS COME UP IN FURTHER APPEAL AND WITH REGARD TO DISALLOWANCE OF INTEREST U/S 36(1)(III} OF RS.9,77, 970, IT WAS SUBMITTED THAT WHILE MAKING THE AFORESAID DISALLOWANCE, ASSESSING OFFICER HAS HELD THAT SINCE ASSESSEE HAS ADVANCED INTEREST FREE LOANS OUT OF ITS OWN FUNDS TO THE RELATED PARTIES AND AT THE SAME TIME ASSESSEE HAS T AKEN INTEREST BEARING LOANS. THEREFORE, HAD THE ASSESSEE NOT ADVANCED THE INTERE ST FREE LOAN TO THE RELATED PARTIES, TO THAT EXTENT, THE INTEREST COULD NOT HAV E BEEN SAVED AND AS SUCH THE DISALLOWANCE WAS MADE TO THE EXTENT OF RS.9,77,970/ -. 4.1 AT THE OUTSET, IT IS SUBMITTED THAT FROM THE B ARE READING OF THE AFORESAID FINDINGS OF THE LEARNED ASSESSING OFFICER , IT IS EVIDENT THAT LEARNED ASSESSING OFFICER HAS NOT DISPUTED THAT INTEREST FR EE LOANS HAVE BEEN ADVANCED OUT OF THE OWN FUNDS, HOWEVER, HE DISALLOW ED THE INTEREST BY INVOKING SECTION 36(1}(III} OF THE ACT ON THE GROUN D THAT HAD THE ASSESSEE NOT ADVANCED THE INTEREST FREE LOANS TO THE RELATED PERSONS, INTEREST TO THAT I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 3 EXTENT COULD HAVE BEEN SAVED AND FURTHER, IT COULD ALSO HAVE BEEN USED TO PAY BACK OTHER LOANS RAISED ON WHICH INTEREST IS BEING PAID. IT CAN THEREFORE BE HELD THAT BORROWING OF FUNDS BY THE COMPANY TO THAT EXTENT WAS NOT FOR THE PURPOSE OF THE BUSINESS. AS SUCH, IT IS AN ADMITTED FACT THAT LOANS TO THE RELATED PERSONS HAD BEEN ADVANCED OUT OF THE OWN FU NDS AND NOT OUT OF THE BORROWED FUNDS. 4.2 IT WAS FURTHER SUBMITTED THAT, THE AFORESAID A D HOC DISALLOWANCE OUT OF INTEREST EXPENDED BY THE APPELLANT COMPANY FOR THE PURPOSE OF THE BUSINESS IS BASED ON FACTUAL MISCONCEPTION AND, MISINTERPRET ATION OF THE STATUTORY PROVISIONS CONTAINED IN SECTION 36(1)(III) OF THE A CT AND AS SUCH SAME IS UNSUSTAINABLE AND LIABLE TO BE DELETED. 4.3 IT WAS NEXT SUBMITTED THAT, THE APPELLANT COMP ANY HAS SATISFIED ALL THE CONDITIONS REQUIRED TO BE SATISFIED IN ORDER TO ENA BLE THE ASSESSEE TO CLAIM DEDUCTION IN RESPECT OF THE INTEREST UNDER SECTION 36(1)(III) OF THE ACT NAMELY THAT, THE MONIES HAS BEEN BORROWED BY THE ASSESSEE; SECONDLY, IT HAS BEEN BORROWED FOR THE PURPOSE OF BUSINESS, AND, THIRDLY, THE ASSESSEE HAS PAID INTEREST ON THE SAID AMOUNT AND CLAIMED IT AS A DED UCTION. IT IS SUBMITTED THAT, IT IS NOT THE REQUIREMENT OF THE LAW THAT THE ASSESSEE MUST FURTHER SHOW THAT THE BORROWING OF THE CAPITAL WAS NECESSARY FOR THE BUSINESS, SO THAT, IF AT THE TIME OF BORROWING THE ASSESSEE HAD SUFFICIENT A MOUNT OF ITS OWN, THE DEDUCTION COULD NOT BE ALLOWED, AS HELD BY THE MADR AS HIGH COURT IN AMNA BAI HAJEE ISSA V. CIT REPORTED AT 51 ITR 835 AND, T HE HON'BLE DELHI HIGH COURT IN THE CASE OF REGAL THEATRE V CIT REPORTED A T 225 ITR 205. 4.4 IT WAS ALSO SUBMITTED THAT, SINCE IT HAS NOT B EEN DISPUTED THAT INTEREST BEARING FUNDS HAS NOT BEEN ADVANCED TO THE RELATED PERSONS, THE DISALLOWANCE MADE IS UNSUSTAINABLE. IT IS SUBMITTED THAT, THE AS SESSEE HAD NOT BORROWED I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 4 ANY AMOUNT, FOR THE PURPOSES OF MAKING INTEREST FRE E ADVANCES INSTEAD THE AMOUNT HAD BEEN ADVANCED OUT OF THE SURPLUS FUNDS ( INTEREST FREE) AND, AS SUCH THERE COULD HAVE BEEN NO JUSTIFICATION EITHER ON FACTS OR IN LAW TO HAVE SUSTAINED THE DISALLOWANCE. IT IS SUBMITTED THAT, A PPELLANT COMPANY HAD INTEREST FREE FUNDS OF RS.3,34,25,569/-, DETAILS TH EREOF AS WOULD BE EVIDENT FROM THE AUDITED BALANCE-SHEET FOR THE INSTANT YEAR , COPY OF WHICH HAVE BEEN ENCLOSED AND ARE AS UNDER: 4.5 FURTHER FROM THE PERUSAL OF THE PAGE 11 OF THE PAPER BOOK, IT WOULD BE SEEN THAT INTEREST FREE ADVANCES MADE TO THE RELATE D PARTIES ARE AS UNDER: S.NO. PRTICULARS PAGES OF PAPER BOOK AS ON 31.3.2006 (RS.) AS ON 31.3.2005 (RS.) 1 NATIONAL BULK CARRIERS 20-23 1,07,93,649/- 85,83,649/- 2 NATIONAL GAS SERVICE 26-28 55,93,157/- 82,99,157/- 3 NATIONAL ASSOCIATES 24 12,60,000/- 7,80,000/- 4 NATIONAL TRANSPORT CO. 31 3,10,000/- 5 NATIONAL LOGISTICS 29-30 16,90,000/- 4,30,000/- TOTAL 1,96,49,806/- 1,80,92,806/- SR. NO. PARTICULARS AS ON 31.3.2006 (RS.) AS ON 31.3.2005 (RS.) DIFFERENCE 1 SHARE CAPITAL 2,00,00,000 (PAGE 5 OF PAPER BOOK) 1,20,00,000 (PAGE 5 OF PAPER BOOK) 80,000 3 PROFIT & LOSS A/C 62,41,569/- (PAGE 5 OF PAPER BOOK) 42,97,215/- (PAGE 5 OF PAPER BOOK) 19,44,355 2 ADVANCE FROM CUSTOMERS 71,83,9809/- (PAGE 9 OF PAPER BOOK) 13,88,177/- (PAGE 9 OF PAPER BOOK) 57,95,803/- TOTAL 3,34,25,569/- 2,02,73,569/- 1,57,40,158/- I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 5 4.6 IT WAS THUS SUBMITTED THAT IN RESPECT OF SUNIL BANSAL AND NATIONAL FURNITURE HOUSE NO ADVANCES WERE OUTSTANDING AT THE END OF THE ASSESSMENT YEAR. IT IS SUBMITTED THAT INTEREST FREE FUNDS AVAI LABLE TO THE ASSESSEE AS IS REFLECTED IN THE AUDITED BOOKS OF ACCOUNT WAS RS.3, 34,25,569/- WHEREAS INTEREST FREE ADVANCES DURING THE YEAR WAS ONLY RS. 1,96,49,806/- AND AS SUCH, IT IS EVIDENT THAT INTEREST FREE ADVANCES HAS BEEN GIVEN OUT OF OWN FUNDS. IN FACT, THE LEARNED ASSESSING OFFICER HAS FAILED TO A PPRECIATE THAT ENTIRE BORROWINGS OF RS.9,50,52,994/- STOOD INVESTED IN TH E FOLLOWING ASSETS: S.NO. PARTICULARS AMOUNT RS. 1 CLOSING STOCK (PAGE 11 OF PAPER BOOK) 5,44,19,017/- 2 DEBTORS (PAGE 10 OF PAPER BOOK) 3,28,14,705/- 3 FIXED ASSETS (PAGE 5 OF PAPER BOOK) 1,68,17,156/- TOTAL 10,.40,50,878/- MOUNT (RS.) 5,44,19,017/-3,28,14,7051-1,68,17-156/- 10,40,50,878/- 4.7 APART THERE FROM THERE WERE FOLLOWING SUMS WER E ALSO INVESTED IN THE BUSINESS: SR. NO. PARTICULARS (PAGE 11 OF PAPER BOOK) AMOUNT (RS.) 1 ADVANCES 26,16,268/- 2 CASH AND BANK CHARGES 49,62,714/- 3 OTHER ADVANCES 7,35,000 /- TOTAL 83,13,982/- I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 6 4.8 IT IS FURTHER SUBMITTED THAT, EVEN OTHERWISE, OPENING BALANCE OF THE INTEREST FREE ADVANCES WAS RS.1,80,92,806/- AND NO INTEREST HAS BEEN DISALLOWED IN ASSESSMENT YEAR 2005-2006 WHEN THESE ADVANCES WERE MADE, WHEREAS ASSESSMENT HAS BEEN FRAMED UNDER SECTION 14 3(3} OF THE ACT, AS SUCH NO PROPORTIONATE DISALLOWANCE CAN BE MADE IN R ESPECT OF THE SUM ADVANCED IN THE EARLIER YEAR. RELIANCE WAS PLACED O N THE JUDGMENT OF THE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. SRID EV ENTERPRISES REPORTED IN 192 ITR 165: 4.9 IT WAS NEXT SUBMITTED THAT THE AFORESAID JUDGM ENT OF THE HIGH COURT HAS BEEN FOLLOWED BY THE HON'BLE HIGH COURT OF DELH I IN THE CASE OF CLT VS. GIVO LTD. (ITA NO. 941/2010 DATED 27.07 .2010). 4.10 IT IS SUBMITTED THAT FROM THE PERUSAL OF THE TABLES SUBMITTED, IT IS EVIDENT THAT FRESH LOANS ADVANCED TO THE RELATED PA RTIES WHICH WERE OUTSTANDING AT THE END OF THE ASSESSMENT YEAR WAS, ONLY TO THE EXTENT OF RS. 15,54,000/- AND INTEREST FREE FUNDS GENERATED OUT O F OWN SOURCES DURING THE YEAR WAS TO THE EXTENT OF RS. 1,57,40,158/- WHICH I S FAR EXCESS THAN THE INTEREST FREE ADVANCES TO THE RELATED PARTIES. IT I S SUBMITTED THAT ONCE IT IS AN ADMITTED FACT THAT ADVANCES HAS BEEN MADE OUT OF OW N FUNDS ON WHICH NO INTEREST HAS BEEN PAID, NO DISALLOWANCE CAN BE MADE BY INVOKING SECTION 36(1)(III) OF THE ACT. RELIANCE WAS ALSO PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (A) CIT VS. JET AIR PVT. LTD. IN ITA NO.1231 WITH CM NO.16759/2009 DATED 02.12.2009. (B) 260 ITR 637 (DEL. CLT VS. TIN BOX CO. (C) 177 TAXMAN 300 (DEL.), CIT VS. DCM LTD. (D) 184 TAXMAN 352 (DEL.) CIT VS. H.B. STOCK HOLDIN GS LTD. (E) 313 ITR 340 (BOM.) CIT VS. RELIANCE UTILITIES A ND POWER LTD. (F) 29 SOT 531 (MUM.) METRO EXPORTS LTD. VS. ITO (G) 20 SOT 47 (MUM.) TATA FINANCE LTD. VS. ACIT (H) 194 CTR 451 (ALL.) CIT VS. RADICO KHAITAN LTD. I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 7 4.11 IT WAS FURTHER SUBMITTED WHAT WHILE MAKING THE AFORESAID DISALLOWANCE, ASSESSING OFFICER HAS PLACED RELIANCE ON THE JUDGME NT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., REPORTED IN 286 ITR 1 . 4.12 BY PLACING FURTHER RELIANCE, IT WAS SUBMITTED THAT THE AFORESAID JUDGMENT OF THE HON'BLE HIGH COURT IS NOT A GOOD LA W IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF MUNJAL SA LES CORPN. VS. CIT REPORTED IN 298 ITR 298 IN WHICH AFORESAID JUDGMENT WAS CONSIDERED AND PLACING FURTHER RELIANCE OF THE JUDGMENT OF THE HON 'BLE HIGH COURT OF PUNJAB & HARYANA HIGH COURT, THE APEX COURT CONSIDERED THE JUDGMENT OF CIT VS. ABHISHEK INDUSTRIES LTD. DATED 4.8.2006 HAS LIKEWIS E HELD THAT IF THE INTEREST FREE ADVANCES HAS BEEN MADE OUT OF OWN FUNDS, NO DI SALLOWANCE U/S 36(1)(III) IS WARRANTED. SO, IT WAS PLEADED FOR DEL ETION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). 4.13 LD. DR HAS STRONGLY RELIED UPON THE ORDER OF CIT(A) AND PLEADED FOR ITS CONFIRMATION. IT WAS FURTHER SUBMITTED THAT ASS ESSING OFFICER HAS CONSIDERED APPROPRIATE ADDITION WHICH HAS ALREADY B EEN CONFIRMED BY THE CIT(A) WHOSE ACTION NEED FURTHER CONFIRMATION. THER EFORE, ADDITION MAD BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) M AY FURTHER BE CONFIRMED. 4.14 WE HAVE HEARD BOTH HE SIDES, CONSIDERED THE M ATERIAL ON RECORD AS WELL AS CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSESSEE AND FIND THAT ASSESSEE HAD BEEN ABLE TO ESTABLISH THAT HE HAD MIS PLACED EXISTED FUNDS OUT OF WHICH THE ADVANCES WERE MADE. SO, THESE ADVANCES WERE MADE OUT OF OWN FUNDS. AS SUCH ADDITION IS NOT CALLED FOR. THER EFORE, WHILE ACCEPTING THIS GROUND OF THE APPEAL OF THE ASSESSEE, WE DIRECTED T O DELETE THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRME D BY THE CIT(A). I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 8 4.15 AS REGARDS DISALLOWANCE OF THE INCENTIVE PAID OF RS.2,73,391/- IS CONCERNED, IT WAS SUBMITTED THAT ASSESSEE IS A DEAL ER OF TATA AND BPCL. IT IS SUBMITTED DURING THE COURSE OF ITS BUSINESS, ORD ERS ARE PLACED BY THE CUSTOMERS AND SOME TIME IT HAPPENS THAT THOSE VEHIC LES AS DESIRED BY THE CUSTOMERS ARE NOT WITH THE ASSESSEE, HOWEVER TO ENS URE THE DELIVERY OF THAT VEHICLE, IT HAS TO ARRANGE SUCH VEHICLE, AND IN THE INSTANT CASE, ASSESSEE HAS ARRANGED SUCH VEHICLE FROM MS. VEER PRABHU MARKETIN G PVT. LTD. IT IS SUBMITTED THAT IN RESPECT OF SUCH VEHICLES, PAYMENT IS RECEIVED BY THE ASSESSEE FROM CUSTOMERS ALONGWITH THE INCENTIVE TO ARRANGE SUCH VEHICLE AND IN TURN ASSESSEE HAS MADE THE PAYMENT TO MS VEER PR ABHU MARKETING PVT. LTD. IT WAS FURTHER SUBMITTED THAT OUT OF THE INCEN TIVE RECEIVED FROM THE CUSTOMERS AND TAT A MOTORS (IN RESPECT OF THE VEHIC LES ARRANGED BY MS. VEER PRABHU MARKETING PVT. LTD.) OF RS.2,91,166/-, AN AMOUNT OF RS.2,73,3911- WERE PAID TO MS. VEER PRABHU MARKETIN G PVT. LTD. BY REFERRING TO DETAILS GIVEN IN PAPER BOOK, IT WAS SU BMITTED THAT THIS EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN TH E INTEREST OF ITS BUSINESS AND ON ACCOUNT OF COMMERCIAL EXPEDIENCY. 4.16 IT IS SUBMITTED THAT LEARNED ASSESSING OFFICER DISALLOWED THE INCENTIVE OF RS.2,73,3911- PAID TO MS. VEER PRABHU MARKETING PVT . LTD. THE LEARNED ASSESSING OFFICER HAS HELD IN THIS REGARD AS UNDER: 'A PERUSAL OF ACCOUNT SHOWS THAT THE ASSESSEE COMPA NY HAS RECEIVED RS. 1,04,051.51/- FROM TATA MOTOR SPARES AND RS. 1, 87,115 FROM NINE OTHER PERSONS. THE SUBMISSIONS OF THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AS TO WHY INCENTIVE RECEIVED FROM TATA MOTORS SPARES HAS BEEN PAID TO VEER PRABHU MARKETING PVT. LTD.. FURTH ER, NO DOCUMENTARY EVIDENCE HAS BEEN GIVEN AS TO WHY INCEN TIVE RECEIVED FROM NINE OTHER PERSONS HAS BEEN PAID BY THE ASSESS EE COMPANY. AS PER THE COPY OF ACCOUNT WITH VEER PRABHU MARKETING PVT. LTD. FILED BY ASSESSEE, THE PAYMENT FOR THE VEHICLES PURCHASED HA S BEEN MADE TO THE COMPANY. HOWEVER NO JUSTIFICATION FOR PAYING THE IN CENTIVE HAS BEEN I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 9 PLACED ON RECORD NOR ANY DOCUMENTARY EVIDENCE IN SU PPORT OF THE SAME HAS BEEN FILED. 4.17 IT IS SUBMITTED THAT FROM THE READING OF THE AFORESAID, IT IS EVIDENT THAT IT IS NOT IN DISPUTE THAT ASSESSEE HAS MADE THE ARR ANGEMENT OF THE VEHICLES THROUGH MS. VEER PRABHU MARKETING PVT. LTD. AND PAY MENT RECEIVED BY IT FROM THE CUSTOMERS IN RESPECT OF THE VEHICLE HAS BE EN PAID TO MIS VEER PRABHU MARKETING PVT. LTD. IT IS ALSO NOT IN DISPUT E THAT INCENTIVE HAS BEEN RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS IN RESP ECT OF THE VEHICLES ARRANGED BY MIS VEER PRABHU MARKETING PVT. LTD. IT IS ALSO NOT IN DISPUTE THAT PAYMENT OF RS.2,73,3911- HAS BEEN MADE BY THE ASSESSEE APPELLANT TO MS. VEER PRABHU MARKETING PVT. LTD. AS SUCH, INCURR ING OF EXPENDITURE IS NOT IN DISPUTE. 4.18 IT IS MOST RESPECTFULLY SUBMITTED THAT ASSESSE E HAS NOT PAID THE INCENTIVE TO MS. VEER PRABHU MARKETING PVT. LTD IN RESPECT OF THE VEHICLES SOLD BY IT. IT IS SUBMITTED THAT INCENTIVE RECEIVED BY THE ASSE SSEE FROM TATA MOTORS IN RESPECT OF THE VEHICLES SOLD BY IT WAS OF RS. 43, 7 3,2461- AND NO PART OF IT WAS PAID TO MS. VEER PRABHU MARKETING PVT. LTD. WHA T HAS BEEN PAID TO MS VEER PRABHU MARKETING PVT. LTD AS INCENTIVE WAS ONL Y IN RESPECT OF THE VEHICLES ARRANGED BY HIM FOR THE CUSTOMERS OF THE A SSESSEE AS IS EVIDENT FROM DETAILS SUBMITTED IN THE PAPER BOOK. 4.19 IT WAS THUS SUBMITTED THAT DISALLOWANCE HAS BE EN MADE ONLY ON THE GROUND THAT NO JUSTIFICATION FOR PAYING THE INCENTI VE HAS BEEN PLACED ON RECORD NOR ANY DOCUMENTARY EVIDENCE IN SUPPORT OF T HE SAME HAS BEEN FILED. 4.20 IT IS SUBMITTED THAT AFORESAID GROUND OF DISAL LOWANCE IS ALSO NOT TENABLE AS FACTUM OF RENDERING OF SERVICES HAS ALSO BEEN AC CEPTED BY THE LEARNED ASSESSING OFFICER WHEN HE ADMITS THE PAYMENT FOR TH E VEHICLES TO MS. VEER PRABHU MARKETING PVT. LTD., WHICH HAS BEEN RECEIVED FROM THE CUSTOMERS. IN I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 10 SUCH, CIRCUMSTANCES, DISALLOWANCE MADE BY THE LEARN ED ASSESSING OFFICER AND UPHELD BY THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS UNSUSTAINABLE IN LAW AND LIABLE TO BE DELETED. 4.21 LASTLY, IF THE LEARNED A.O. CONSIDERED THE SUB MISSIONS OF THE ASSESSEE INSUFFICIENT, THEN BEFORE DISALLOWING THE PAYMENT O F INCENTIVE TO MS. VEER PRABHU MARKETING PVT. LTD., HE OUGHT TO HAVE CONDUC TED FURTHER ENQUIRIES FRO MS. VEER PRABHU MARKETING PVT. LTD. DIRECTLY AND ON LY THEREFORE, IF HE WAS NOT SATISFIED, OUT HT TO HAVE DENIED CLAIM OF DEDUC TION BUT HE SIMPLY DENIED THE CLAIM OF DEDUCING ONLY ON THE GROUND OF SURMISE S, CONJECTURES AND SUSPICION WHICH CANNOT BE A BASIS TO DENY CLAIM OF DEDUCTION. 5. IN VIEW OF THE AFORESAID SUBMISSIONS, IT WAS MOS T SUBMITTED THAT DISALLOWANCE MADE BY THE LD. A.O. AND UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE DELETED AND THE APPEAL OF THE ASSESSEE BE ALLOWED. 5.1 LEARNED DR WHILE RELYING UPON THE ORDER OF AUTH ORITIES BELOW HAS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER IN T HIS REGARD. IT WAS FURTHER SUBMITTED THAT ASSESSING OFFICER HAS RIGHTLY MADE T HE ADDITION AND CIT(A) IS FULLY JUSTIFIED IN CONFIRMING SUCH ADDITION AS MADE BY THE ASSESSING OFFICER. THEREFORE, IT WAS PLEADED FOR CONFIRMATION OF THE I MPUGNED ORDER. 5.2 WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MA TERIAL ON RECORD AND FIND THAT ASSESSEE IN THIS CASE IS STATED TO HAVE A RRANGED FOR PARTICULAR SPECIFIC VEHICLES WHICH WERE NOT AVAILABLE WITH IT AND FOR WHICH IT HAS CHARGED THE CUSTOMERS AND OUT OF WHICH SUCH CHARGES ASSESSEE HAS PAID THE AMOUNT TO M/S. VEERU PRABHU MARKETING LTD. WHO WAS ACTUALLY INSTRUMENTAL IN ARRANGING FOR THE VEHICLES WHICH WERE NOT READIL Y AVAILABLE AND ASSESSEE HAS BEEN ABLE TO ESTABLISH BY PROVIDING NECESSARY D ETAILS THAT INCENTIVES RECEIVED BY THE ASSESSEE WERE MORE THAN THE AMOUNTS PAID BY THE ASSESSEE TO I.T.A. NO. 2575/DEL/2010 (ASSESSMENT YEAR 2006-07) 11 THE SAID CONCERN, AND A.O. IS FOUND NOT TO HAVE BEE N ABLE TO ESTABLISH THAT EITHER INCENTIVE RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS WAS IN EXCESS OF AMOUNT PAID TO M/S. VEERU PRABHU MARKETING LTD. OR THE AMOUNT WAS THE PART OF INCENTIVE RECEIVED BY THE ASSESSEE FROM TAT A MOTORS IN RESPECT OF VEHICLES SOLD BY IT. THEREFORE, IN OUR CONSIDERED VIEW, DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY LD. CIT(A ) IS NOT JUSTIFIED. AS SUCH, WHILE ACCEPTING THE APPEAL OF THE ASSESSEE IN THIS REGARD, WE DIRECT TO DELETE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A). 6. SO FAR AS THE ISSUE RELATABLE TO CHARGING OF INT EREST U/S 234B IS CONCERNED, THE SAME IS CONSEQUENTIAL. THEREFORE, I T IS DIRECTED THAT AFTER GIVING APPEAL EFFECT TO THE ORDER, INTEREST U/S 234 B IF LEVIABLE, BE LEVIED. 7. AS A RESULT, APPEAL GETS ACCEPTED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEP., 2013. SD./- SD./- (T.S. KAP00R) (U.B.S.BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH SEP., 2013 SKB/SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A), ROHTAK, 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI DEPUTY REGISTRAR (ITAT, NEW DELHI)