GENERAL MILLS INDIA P.LTD, MUMBAI V. ADDL CIT 10(2), MUMBAI

ITA 2582/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8218 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-07-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 01-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: J D MISTRI
• Keywords: Depreciation; Transfer pricing; Additional evidence; Valuation report
• Section: 43B; 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 2582/MUM/2011 ASSESSMENT YEAR: 2003-04 GENERAL MILLS INDIA PRIVATE LIMITED 902, VENTURA HIRANANDANI BUSINESS PARK HIRANANDANI GARDENS, POWAI MUMBAI- 400 076 PAN:AAACG 1773 B VS. ADDL, CIT - 10(2) 4 TH FLOOR AAYAKAR BHAVAN, M.K. MARG MUMBAI- 400 020 (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI J.D MISTRI REVE NUE BY : SHRI PAVAN KUMAR BEERLA DATE OF HEARING : 1 4 . 10 . 2014 DATE OF PRONOUNCEMENT : 31 . 10 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 03.01.2011 PASSED BY THE LD.CIT(A)-21, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y. 2003-0 4 MAINLY ON FOLLOWING GROUNDS OF APPEAL. GROUND NO. 1:- THE LEARNED CIT(A) HAS ERRED IN UPH OLDING THE DISALLOWANCE OF MANAGEMENT CONSULTANCY FEES OF RS.3,31,77,130/- PAID TO GENERAL MILLS MARKETING IN C. ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 2 GROUND NO.:2 THE LEARNED CIT(A) HAS ERRED IN UPHOLD ING THE DISALLOWANCE OF LOSS ON SALE OF ASSETS OF RS.36,37, 746/-. GROUND NO.-3 THE LEARNED CIT(A) HAS ERRED IN UPHOLD ING THE DISALLOWANCE OF DEPRECIATION OF RS.49,27,407/- BEIN G DEPRECIATION CLAIMED ON PLANT AND MACHINERY LYING AT THE PREMISE S ON THE APPELLANTS CO-PACKERS M/S. SITASHREE FOOD PRODUCTS PRIVATE LIMITED AND M/S. AHAAR INTERNATIONAL LIMITED. GROUND NO.-4 THE LEARNED CIT(A) HAS ERRED IN UPHOLD ING THE DISALLOWANCE OF CONVERSION CHARGES OF RS.11,46,827/ - PAID BY THE APPELLANT TO ITS CO-PACKER M/S. SITASHREE FOOD PROD UCTS PVT. LTD. GROUND NO. 5- THE LEARNED CIT(A) HAS ERRED IN UPHOL DING THE DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT OF R S.7,84,269/-. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRODUCTION, MARKETING, SALES AND DISTRIBUTION OF FOOD PRODUCTS. IN FIRST GROUND THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF MANAGEM ENT CONSULTANCY FEES OF RS.3,31,77,130/- PAID TO GENERAL MILLS MARK ETING INC. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT UNDER THE HEAD OPERATING EXPENSES, THE ASSESSEE HAS DEBITED A SUM OF RS.3,31,77,130/- AS MANAGEMENT SERVICE FEES. IN RES PONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED DETAILS OF INVOICE S AND AMOUNT OF MONEY PAID. ON FURTHER NOTICE, THE ASSESSEE SUBMITTED THA T THE PAYMENT WAS MADE IN PURSUANCE OF AGREEMENT WITH M/S. GENERAL M ILLS MARKETING INC. USA (GMM) WHICH WAS ENTERED ON 24.04.2003 AS MANAG EMENT SERVICE AGREEMENT. THE COPY OF THE AGREEMENT WAS ALSO FIL ED UNDER THE TERMS OF THE SAID AGREEMENT, GMM WOULD PROVIDE CERTAIN FI NANCIAL, HUMAN RESOURCES, INFORMATION, LEGAL SERVICES TO THE ASSES SEE COMPANY AND IN LIEU OF THAT ASSESSEE WAS REQUIRED TO MAKE THE PAYM ENT TO GMM FOR THE ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 3 SERVICES RENDERED. IT HAS SUBMITTED THAT IN PURSUAN CE OF THE SAID AGREEMENT THE ASSESSEE HAD PAID RS.3,31,77,130/- AN D TDS OF RS.23,56,283/- WAS DEDUCTED IN RESPECT OF THE AMOUN T OF RS.1,57,08,556/-. ASSESSING OFFICER AGAIN REQUESTED THE ASSESSEE TO CLARIFY AND EXPLAIN THE ALLOWABILITY OF THE AMOUNT PAID, WHEN THE TDS WAS DEDUCTED ONLY ON SUM OF RS.1,57,08,556/- THE FU RTHER NOTED THAT AGREEMENT WAS ENTERED ON 24.04.2003 AND WAS SHOWN E FFECTIVE FROM 01.11.2001. IN RESPONSE AS PER THE AO, THE ASSESSEE JUSTIFIED ITS CLAIM AND ALSO NON DEDUCTION OF TDS ON THE ENTIRE PROCEED S, HOWEVER ASSESSEE COULD NOT JUSTIFY THE BUSINESS EXPEDIENCY. THE ASSESSING OFFICER AFTER DETAILED REASONING HELD THAT THE AMOUNT OF RS .3,31,77,130/- CLAIMED BY THE ASSESSEE AS MANAGEMENT CONSULTANCY F EES IS AN INADMISSIBLE EXPENDITURE FOR WHICH COMMERCIAL EXPED IENCY COULD NOT BE PROVED BY THE ASSESSEE. ACCORDINGLY HE ADDED THE SA ID SAME THE TOTAL INCOME OF THE ASSESSEE. 3. EVEN THE LD.CIT(A) CONFIRMED THE SAID ADDITION ON THE GROUND THAT MERE EXISTENCE OF THE AGREEMENT WAS NOT SUFFIC IENT TO JUSTIFY THE CLAIM OF THE PAYMENT, THAT IT WAS MADE WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS. FURTHER THE AGREEMENT WAS MADE EFFECTIVE RETROSPECTIVELY FOR WHICH THE ASSESSEE COULD NOT BE GIVEN PROPER EXPLANATION. 4. BEFORE US THE LEARNED SENIOR COUNSEL, SHRI J.D. MISTRI SUBMITTED THAT THE AGREEMENT WITH THE GMM CLEARLY PROVIDED TH AT IT WOULD BE PROVIDING VARIOUS KINDS OF SERVICES TO THE ASSESSEE FOR WHICH THE PAYMENT WAS TO BE MADE BY THE ASSESSEE. IT WAS IN P URSUANCE OF THE SAID AGREEMENT PAYMENT WAS MADE. THE PAYMENT IS ALS O SUPPORTED BY INVOICES RAISED THAT THE GMM. ONCE THE PAYMENT HAS BEEN MADE FOR ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 4 GETTING THE SERVICES FOR THE BUSINESS PURPOSE THEN THE SAME CANNOT BE DISALLOWED, ON THE GROUND THAT AGREEMENT HAVE BEEN MADE EFFECTIVE FROM RETROSPECTIVE DATE. IN ANY CASE HE SUBMITTED T HAT THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES IN SUPPORT OF THE PAYMEN T AND ALSO FOR THE RENDERING OF THE ACTUAL SERVICES BY GMM TO THE ASSE SSEE. HE FURTHER POINTED OUT THAT IN THE TRANSFER PRICING STUDY REPO RT OF GMM, THE NATURE OF SERVICES RENDERED HAVE BEEN FULLY HIGHLIGHTED. T HESE EVIDENCES GO TO THE ROOT OF THE ISSUE, THEREFORE, THE SAME SHOULD B E ADMITTED AND MATTER CAN BE EXAMINED BY THE AO. 5. ON THE OTHER HAND LD. DR SUBMITTED THAT DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS AS WELL AS BEFORE THE FIRST APPELLATE PROCEEDINGS, NO EVIDENCES OF SERVICES AND BUSINESS EXPEDIENCY WAS PROVED BY THE ASSESSEE. HOW THE ASSESSEE HAS DEDUCT ED THE TDS ON PART OF THE PAYMENT HAS ALSO NOT BEEN MADE CLEAR, T HEREFORE, ORDER OF THE LD.CIT(A) SHOULD BE CONFIRMED. IN ANY CASE IF T HE ADDITIONAL EVIDENCES ARE TO BE ADMITTED THEN THE MATTER SHOULD BE RESTORED TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ALSO ON THE PERUSAL OF THE RECORD, IT IS SEEN THAT ASSESSEE HAS MADE THE P AYMENT TO GMM, IN PURSUANCE OF MANAGEMENT SERVICE AGREEMENT DATED 24. 04.2003, IN TERMS OF WHICH THE GMM WOULD BE PROVIDING SERVICES LIKE FINANCIAL, HUMAN RESOURCES, INFORMATION, LEGAL SERVICES ETC. T O THE ASSESSEE COMPANY. THE INVOICES HAVE ALSO BEEN RAISED WHICH H AS BEEN PLACED IN THE PAPER BOOK. THE PAYMENT IS NOT IN DISPUTE. ONLY CASE OF THE DEPARTMENT IS THAT THE ASSESSEE COULD NOT PROVE THE RENDERING OF SERVICES AND THE BUSINESS EXPEDIENCY. NOW AT THIS S TAGE THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES IN SUPPORT THE SERVI CES RENDERED RAISED BY ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 5 THE GMM TO THE ASSESSEE. THESE EVIDENCES GO TO THE ROOT OF THE ISSUE, THEREFORE WE ARE ADMITTING THE SAME AND THE ENTIRE MATTER IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMIN E THESE EVIDENCES AND DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH THE PROVISION OF LAW. THUS GROUND NO. 1 RAISED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7. IN GROUND NO. 2 THE ASSESSEE HAS CHALLENGED DISA LLOWANCE OF LOSS ON SALE OF ASSETS OF RS.36,37,746/-. THE ASSESSING OFFICER NOTED THAT, ASSESSEE HAS INCLUDED AN AMOUNT OF RS.36,37,746/- A S LOSS ON SALE OF R & D ASSETS, WHICH STANDS DISALLOWED IN THE EARLIER YEARS UP TO THE STAGE OF THE LD.CIT(A). ON THIS GROUND ALONE, THE LD.CIT( A) TOO HAS CONFIRMED THE SAID ADDITION. 8. BEFORE US LEARNED SENIOR COUNSEL, SHRI J.D. MIST RI SUBMITTED THAT FROM THE PERUSAL OF COMPUTATION OF TAXABLE INCOME F ILED ALONG WITH RETURN OF INCOME, IT CAN BE SEEN THAT THE ASSESSEE HAS NOT CLAIMED ANY SUCH AMOUNT. HE DREW OUR ATTENTION TO COMPUTATION O F TAXABLE INCOME GIVEN AT PAGE 274 OF THE PAPER BOOK, FROM WHERE HE POINTED THAT THE LOSS ON SALE OF R&D ASSETS WAS ADDED TWICE AND THEN IT WAS DEDUCTED ONCE. THUS IN EFFECT THE ASSESSEE HAS NOT CLAIMED T HE LOSS AND THEREFORE, NO DISALLOWANCE IS CALLED FOR. THE LD. D R ADMITTED THAT THIS MATTER CAN BE VERIFIED BY THE AO AND IF NO CLAIM HA S BEEN MADE THEN NO DOUBLE DISALLOWANCE SHOULD BE MADE. 9. AFTER CONSIDERING THE MATERIAL PLACED ON RECORD , WE FIND THAT IN THE STATEMENT SHOWING COMPUTATION OF TAXABLE INCOME FOR A.Y. 2003-04 FILED ALONG WITH RETURN OF INCOME, THE ASSESSEE HAD STARTED THE COMPUTATION FROM NET LOSS AS PER P&L ACCOUNT AND TH EREAFTER HAS ADDED THE LOSS ON SALE OF R&D ASSETS OF RS.36,30,476/- TW ICE. THUS THE ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 6 ASSESSEE HAS ADDED BACK THE LOSS AMOUNT AT RS.72,6 0,952/-. OUT OF THE SAID AMOUNT, THE ASSESSEE HAS DEDUCTED ONLY RS.36,3 0,476/-, WHICH INTER ALIA MEANS THAT FINALLY NO DEDUCTION ON ACCOU NT OF LOSS ON R&D ASSETS HAVE BEEN MADE. ACCORDINGLY THE CONTENTION O F THE LEARNED COUNSEL APPEARS TO BE PRIMA FACIE CORRECT THAT THE ASSESSEE HAS NOT CLAIMED ANY LOSS ON SALE OF R&D ASSETS IN THE COMPU TATION OF INCOME. HENCE THERE IS NO QUESTION OF DISALLOWANCE. HOWEVER , ASSESSING OFFICER WILL VERIFY THE COMPUTATION OF INCOME AND GIVE APPR OPRIATE RELIEF. IN RESULT GROUND NO. 2 IS TREATED AS ALLOWED AS INDICA TED ABOVE . 10. IN GROUND NO. 3&4 THE ASSESSEE HAS CHALLENGED T HE DISALLOWANCE OF DEPRECIATION OF RS.49,27,407/-, BEING DEPRECIATI ON CLAIM ON PLANT AND MACHINERY GIVEN TO THE CO-PACKERS AND DISALLOWANCE OF CONVERSION CHARGES OF RS.11,46,827/- PAID BY THE ASSESSEE TO O NE OF THE CO-PACKER. THE BRIEF FACTS QUA THE ISSUES INVOLVED ARE THAT, T HE ASSESSEE HAD APPOINTED CO-PACKERS FOR THE WORK OF PROCESSING/PAC KING OF ITS PRODUCT. AS PER THE AGREEMENT WITH THEM THE ASSESSEE HAS BEE N PROVIDING CO- PACKERS EITHER FINANCES OR PLANT AND MACHINERIES EQ UIPMENT ETC TO BE USED BY THEM FOR THE DOING THE TASK GIVEN BY THE AS SESSEE COMPANY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPA NY HAD TERMINATED ITS AGREEMENT WITH THE TWO CO-PACKERS NAMELY, M/S. SITASHREE FOOD PRODUCTS PRIVATE LIMITED AND M/S. AHAAR INTERNATION AL LIMITED PRIOR TO A.Y. 2003-04. STILL THE ASSESSEE WAS CLAIMING DEPRE CIATION AND PROCESSING CHARGES PAID TO THESE TWO PARTIES IN PRE VIOUS YEAR UNDER CONSIDERATION. IN RESPONSE TO THE SHOW CAUSE NOTICE , THE ASSESSEE SUBMITTED THAT MACHINERY LYING WITH THE CO-PACKERS WERE OWNED BY THE ASSESSEE AND READY FOR USE, HENCE ASSESSEE WAS ELIG IBLE FOR CLAIM OF DEPRECIATION. SUCH A CLAIM ON PLANT AND MACHINERY L YING WITH THE CO- ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 7 PACKERS AGGREGATED TO RS.49,27,407/-. FURTHER THE A SSESSEE HAD PAID CONVERSION/ PROCESS CHARGES OF RS.11,46,827/- TO M/ S. SITASHREE FOOD PROUDUCT FOR THE WORK DONE EARLIER. THE ASSESSING O FFICER REJECTED THE ASSESSEES CLAIM ON THE GROUND THAT THE AGREEMENT W AS TERMINATED WAY BACK IN THE YEAR 2002 AND IN THE YEAR 1999, HENCE T HE PLANT AND MACHINERY WAS NOT USED FOR THE BUSINESS PURPOSES IN THIS YEAR AND THERE IS NO BUSINESS RELATION WITH THE SAID TWO PARTIES. ACCORDINGLY HE DISALLOWED OF RS.49,27,407/- AND ALSO THE CONVERSI ON CHARGES PAID TO M/S. SITASHREE FOOD OF RS.11,46,897/-. 11. BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED T HAT, THERE AROSE A DISPUTE BETWEEN THE ASSESSEE AND CO-PACKERS AND ARB ITRATION PROCEEDINGS HAD BEEN INITIATED. ONCE THE ASSET HAS BEEN PUT TO USE FOR PURPOSE OF BUSINESS IN THE EARLIER YEARS AND IS REA DY FOR USE, THEN ASSESSEE WAS ENTITLED FOR DEPRECIATION. SIMILARLY T HE CONVERSION CHARGES WERE PAID IN TERMS OF EARLIER AGREEMENT AND WORK DO NE THAT IS BEFORE THE TERMINATION OF THE AGREEMENT THEREFORE THE PAYM ENT MADE IS AN ALLOWABLE EXPENSE. THE LD.CIT(A) REJECTED THE ASSES SEES EXPLANATION AND CONFIRMED THE SAID DISALLOWANCE ON THE SIMILAR GROUND THAT THE TERMINATION OF THE AGREEMENT WAS DONE IN THE EARLIE R YEARS AND NO BUSINESS WAS CARRIED OUT IN THIS YEAR WITH THE SAID PARTIES, THEREFORE, DEPRECIATION CANNOT BE ALLOWED. SIMILARLY THE ASSES SEE HAS FAILED TO EXPLAIN THAT THE PROCESSING CHARGES PAID IN THIS YE AR WERE FOR THE BUSINESS CARRIED ON PRIOR TO THE TERMINATION OF AGR EEMENT. THUS THE ADDITIONS WERE CONFIRMED. 12. BEFORE US THE LEARNED SENIOR COUNSEL, SHRI J.D. MISTRI SUBMITTED THAT, PLANT AND MACHINERIES WERE OWNED BY THE ASSES SEE AND WERE ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 8 ENTERED INTO BLOCK OF ASSETS. THE SAID PLANT AND MA CHINERY WERE GIVEN TO THE CO-PACKERS FOR THE PURPOSE OF ASSESSES BUSINES S ONLY. LATER ON WHEN THE DISPUTE AROSE BETWEEN THE ASSESSEE AND THE PACKERS, THE PLANT AND MACHINERY WERE STILL LYING WITH THE PACKE RS, PENDING ARBITRATION PROCEEDINGS. THUS, ONCE THE PLANT AND MACHINERY WER E USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE AND WERE ALSO READ Y FOR USE, THEN DEPRECIATION HAS TO BE ALLOWED. IN SUPPORT OF HIS C ONTENTION, HE RELIED UPON THE DECISIONS OF BOMBAY HIGH COURT IN THE CASE S OF HITTLE ANDERSON LTD. VS. CIT REPORTED IN (1971) 79 ITR 613, CIT VS. G.N. AGARWAL REPORTED IN (1996) 217 ITR 250, AND CIT VS. G.R. SH IPPING LTD. IN THESE JUDGMENTS THE HONBLE HIGH COURT HAVE HELD THAT THE WORD USE IN THE SECTION 32 SHOULD BE UNDERSTOOD IN A WIDE SENSE SO AS TO INCLUDE PASSIVE AS WELL AS ACTIVE USER. IF THE ASSETS HAS B EEN USED EARLIER AND CONTINUED TO BE THE ASSET OF THE ASSESSEE WHICH IS READY FOR USE, THEN DEPRECIATION HAS TO BE ALLOWED. REGARDING PROCESSIN G/CONVERSION CHARGES, HE SUBMITTED THAT THE ASSESSEE HAD BUSINES S DEALING WITH THESE PARTIES AND THE SAID PAYMENT MADE TO ONE OF THE CO- PACKERS WAS IN RELATION TO THE WORK DONE PRIOR TO THE TERMINATION OF THE AGREEMENT. THERE IS NO DISPUTE THAT THE PAYMENT HAS BEEN MADE TO THE CO-PACKERS FOR THE PROCESSING /CONVERSION CHARGES. THE ONLY DI SPUTE IS THAT DURING THE YEAR THE AGREEMENT STOOD TERMINATED, WHICH CANN OT BE THE REASON FOR DISALLOWANCE WHEN AMOUNT WAS PAYABLE IN THE TER MS OF THE AGREEMENT PRIOR TO THE DATE OF TERMINATION. 13. ON THE OTHER HAND THE LD. DR STRONGLY RELIED UP ON THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT, ONCE THE AGREEMENT AL READY STANDS TERMINATED THEN THERE IS NO BUSINESS DEALING WITH T HE SAID PARTIES AND ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 9 THEREFORE IT CANNOT BE HELD THAT IT WAS FOR USE OF BUSINESS OR FOR BUSINESS PURPOSE. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER. THE ASSESSEE HAD PROVIDED PLANT AND MACHINERY, EQUIPMENT ETC TO CO-PACKERS FOR THE WORK OF PROCESS/PACKING OF FLOUR AND OTHER FOOD PRODUCTS. T HESE PLANT AND MACHINERIES BELONG TO THE ASSESSEE AND WERE PART OF THE BLOCK OF ASSETS OF THE ASSESSEE. LATER ON DUE TO SOME DISPUTE BETWE EN ASSESSEE AND CO-PACKERS, THE BUSINESS DEALING WAS STOPPED AND TH E AGREEMENT BETWEEN THE TWO PARTIES STOOD TERMINATED IN THE EAR LIER YEAR/S. THE ONLY REASON FOR DISALLOWANCE OF DEPRECIATION BY THE DEPA RTMENT IS THAT, THE USE OF ASSETS FOR THE PURPOSE OF ASSESSEES BUSINES S WAS NOT PROVED EVEN THOUGH OWNERSHIP OF THE ASSET LYING WITH THOS E PARTIES WERE NOT IN DISPUTE. IN THE PRESENT CASE THERE IS NO DISPUTE TH AT THE ASSESSEE HAD ALREADY USED THE ASSET FOR THE PURPOSE OF ITS BUSIN ESS AND SUCH ASSET WERE FORMING PART OF THE BLOCK OF ASSETS. ONCE THE PLANT AND MACHINERY HAS BEEN USED FOR THE BUSINESS PURPOSE AND IS READY FOR USE ANY TIME, THEN EVEN IF IT HAS NOT BEEN USED FOR A PARTICULAR PERIOD, IT CANNOT LEAD TO ANY INFERENCE THAT, THERE HAS BEEN NO USER OF PL ANT AND MACHINERY. THIS PROPOSITION IS WELL SUPPORTED BY THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT AS REFERRED THE LEARNED S ENIOR COUNSEL. THUS THE ASSESSEES CLAIM FOR DEPRECIATION ON SUCH PLANT AND MACHINERY LYING WITH THE PACKERS IS ELIGIBLE FOR DEPRECIATION AND T HE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) IS DELETED. 15. SO FAR AS CLAIM FOR CONVERSION/PROCESSING CHARG ES OF RS.11,46,827/- PAID TO CO-PACKERS M/S. SITASHREE FO OD PRODUCTS PVT. LTD. WE FIND THAT THE AGREEMENT WAS TERMINATED IN THE M ONTH OF MAY 2002. ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 10 BEFORE THAT THE ASSESSEE HAD REGULAR BUSINESS DEALI NG, WITH THE SAID PARTY. IF THE AMOUNT HAS BEEN PAID IN PURSUANCE OF THE EARLIER BUSINESS DEALING PRIOR TO THE DATE OF TERMINATION THEN EVEN THOUGH PAYMENT HAS BEEN MADE IN THIS YEAR, IT CANNOT BE HELD THAT SAME IS NOT FOR THE BUSINESS PURPOSE. WE DO NOT AGREE WITH THE REASONIN G OF THE AO AS WELL AS THE LD.CIT(A) THAT THAT ANY PAYMENT AFTER THE TE RMINATION OF AGREEMENT IS NOT FOR THE PURPOSE OF BUSINESS. WHEN THE PAYMENT HAS BEEN MADE IN ACCORDANCE WITH THE AGREEMENT BETWEEN THE PARTIES EXISTING EARLIER THE SAME HAS TO BE ALLOWED AS BUSI NESS EXPENDITURE. THUS WE HOLD THAT NO DISALLOWANCE IS CALLED FOR AND ACCORDINGLY THE ADDITION STANDS DELETED. IN THE RESULT GROUND NO. 3 & 4 IS TREATED AS ALLOWED . 16. IN GROUND NO. 5 THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT OF RS.7,84,269/-. TH E ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED AN AMOUNT OF RS.7,8 4,269/- ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT AND SUCH A CLAIM HAS BEEN REJECTED BY HIM ON THE GROUND THAT ACTUARIAL VALUATION REPORT H AS NOT BEEN FILED IN SUPPORT OF THE CLAIM FOR PROVISION. THIS HAS BEEN C ONFIRMED BY THE LD.CIT(A) ON SANE GROUND. 17. BEFORE US LEARNED SENIOR COUNSEL SUBMITTED THAT THE ASSESSEE HAD DULY POINTED OUT BEFORE THE AUTHORITIES BELOW THAT LEAVE ENCASHMENT BENEFITS HAVE BEEN PROVIDED ON THE BASIS OF 15 DAYS SALARY FOR EACH EMPLOYEE AT CURRENT ENCASHABLE BASIC SALARY. THIS H AS BEEN GIVEN IN THE NOTES TO THE FINANCIAL ACCOUNTS FOR THE YEAR ENDING 31 ST MARCH 2003. ON THE OTHER HAND LD. DR SUBMITTED THAT THERE IS NO AC TUAL PAYMENT AND IT WAS UN- ASCERTAIN LIABILITY AND THEREFORE IT HAS RI GHTLY BEEN DISALLOWED. ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 11 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RECORD, WE FIND THAT THE ONLY REASON FOR DISALLOWAN CE IS THAT, ASSESSEE HAS NOT GIVEN ANY ACTUARIAL VALUATION. AS POINTED O UT BY THE LEARNED SENIOR COUNSEL, THE ASSESSEE HAS PROVIDED THE BASIS FOR THE PROVISION IN THE NOTES TO THE FINANCIAL ACCOUNTS IN THE FOLLOWIN G MANNER, LEAVE ENCASHMENT BENEFITS ARE PROVIDED FOR AT 15 DAYS SAL ARY FOR EACH EMPLOYEE, AT CURRENT ENCASHABLE BASIC SALARY. THIS ASPECT HAS NOT BEEN EXAMINED OR VERIFIED EITHER BY THE AO OR BY THE LD. CIT(A). THEREFORE WE FEEL THAT THIS MATTER SHOULD BE RESTORED BACK TO TH E FILE OF THE AO TO CONSIDER THE BASIS FOR THE PROVISION MADE FOR THE L EAVE ENCASHMENT AS IN SUCH A SITUATION IT MAY NOT BE NECESSARY THAT ACTUA RIAL VALUATION REPORT FOR LEAVE ENCASHMENT HAS TO BE SUBMITTED, WHEN THE BASIS FOR LEAVE ENCASHMENT HAS BEEN CLEARLY GIVEN AND THERE IS NO A MBIGUITY ABOUT IT. WHILE EXAMING THIS MATTER, THE AO MAY ALSO EXAMINE ABOUT APPLICABILITY OF SEC. 43B IN RESPECT OF THIS CLAIM. THUS GROUND NO. 5 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (B.R. BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.10.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH // TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO. 2582/MUM/2011 GENERAL MILLS INDIA PRIVATE LIMITED ASSESSMENT YEAR: 2003-04 12