ACIT, New Delhi V. M/s. Samtel Glass Ltd., New Delhi

ITA 2587/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5203 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P V GUPTA
• Assessee Lawyers: D K GARG
• Keywords: Capital asset; Depreciation; Non passing of speaking order; Notional interest; Commercial expediency; Capital expenditure; TDS
• Section: 195; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. R.K PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.2587/DEL/2015 ASSESSMENT YEAR: 2010-11 ACIT CIRCLE 22 (1) NEW DELHI VS M/S. SAMTEL GLASS LTD., 501, COPIA CORPORATE SUITES, DISTT. CENTRE JASOLA, NEW DELHI -110025 (APPELLANT) (RESPONDENT) APPELLANT BY SH. P. V. GUPTA, SR. DR RESPONDENT BY SH. D. K. GARG, C. A. DATE OF HEARING: 26/03/2019 DATE OF PRONOUNCEMENT: 29/05/2019 ORDER PER R.K. PANDA, AM: 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER DATED 17.02.2015 OF THE CIT(A)-8, NEW DELHI RELATIN G TO A. Y. 2010-11. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER :- THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWA NCES ON EXCESS DEPRECIATION CLAIMED BY ASSESSEE AS NO CAPITA L EXPENDITURE WAS INCURRED BY ASSESSEE ON FACTORY BUILDING. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE I S A COMPANY ENGAGED IN BUSINESS OF GLASS SHELL PART COMPRISING OF GLASS PANEL AND ITA NO.2587/DEL/2015 2 GLASS FUNNELS FOR BLACK AND WHITE TELEVISION PICTUR E TUBES, GLASS FUNNELS FOR COLOUR PICTURE TUBES ETC. IT FILED ITS RETURN OF INCOME ON 24.09.2012 DECLARING TOTAL INCOME OF RS.21,31,28,46 0/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS OBSERVED THAT WHILE COMPLETING THE ASSESSMENT PROCE EDINGS FOR A. Y. 2001-02 IT WAS NOTICED THAT THE ASSESSEE COMPANY HA S CLAIMED EXPENDITURE OF RS.7,09,96,652/-ON THE CONSTRUCTION / ADDITION OF ITS FACTORY BUILDING. THE ASSESSEE COMPANY FILED A VAL UATION REPORT REGARDING THE CONSTRUCTION OF FACTORY BUILDING, WHE REIN THE FACTORY BUILDING WAS VALUED AT RS.5,61,93,308/- AND IT WAS HELD THAT EXPENDITURE TO THE TUNE OF RS.1,48,03,344/- WERE NO T INCURRED FOR THE PURPOSE FOR THE SAID FACTORY BUILDING AND THUS THE SAME COULD NOT BE ALLOWED TO BE CAPITALIZED. IN THIS WAY THE ASSESSE E COMPANY CLAIMED EXCESS CAPITALIZATION BY 20.85% AND SIMILARLY CLAIM ED EXCESS DEPRECIATION BY 20.85%. DURING THE YEAR THE ASSESS EE COMPANY CLAIMED DEPRECIATION ON FACTORY BUILDING AMOUNTING TO RS.66,63,223/- . THE EXCESS DEPRECIATION @ 30.85% COMES TO RS.13,8 9.280/-. THE ASSESSING OFFICER ACCORDINGLY MADE AN ADDITION OF R S.13,89,280/- BEING EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE C OMPANY FOR THIS YEAR ALSO. 4. IN APPEAL THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2001-02 DELETED THE A DDITION MADE BY THE ASSESSING OFFICER. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.2587/DEL/2015 3 6. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESEE S OWN CASE FOR A. Y . 2001-02 AND 2002-03. WE FIND THE TRIBUNAL VIDE ITA NO.4919 AND 514 /DEL/2009 AND 2010 AND CO. NO. 54 AND 66/ DEL/2010 HAS DECIDE D THE ISSUE BY OBSERVING AS UNDER :- 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF DIFFE RENCE IN THE VALUE OF ADDITION IN FACTORY BUILDING AS PER BOOKS OF ACC OUNTS AND AS PER THE REPORT OF REGISTERED VALUER. THIS DIFFERENCE H AS BEEN PROPERLY EXPLAINED BY THE ASSESSEE BEING ON ACCOUNT OF PRE-O PERATIVE EXPENSES CAPITALIZED BY THE ASSESSEE TO THE EXTENT OF RS.161.05 LAKHS WHICH WAS NOT CONSIDERED BY THE REGISTERED VA LUER. UNDER THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) ON ACCOUNT OF DELETION OF ADDITION OF RS.148. 03 LAKHS. THE DISALLOWANCE OF DEPRECIATION AS CONSEQUENTIAL AND H ENCE, THE DELETION OF DISALLOWANCE OF DEPRECIATION IS ALSO JUS TIFIED. GROUND NO. 3 & 4 OF THE REVENUES APPEAL IN ASSESSMENT YEAR 20 01-02 ARE ALSO REJECTED. 7. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE CITED (SUPRA) AND IN ABSENCE OF ANY CONTRA RY MATERIAL BROUGHT TO OUR NOTICE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE DELETING THE ADDITION. ACCORD INGLY THE GROUND NO. 1 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 8. THE GROUND OF APPEAL NO.2 BY REVENUE READS AS UN DER : THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.2,32,26000/- MADE BY THE ASSESSING OFFICER ON IN TEREST EXPENSES, NOT INCURRED FOR THE PURPOSE OF BUSINESS, SINCE THE ITA NO.2587/DEL/2015 4 ASSESEE COMPANY HAS GIVEN INTEREST FREE LOAN ON ONE HAND AND CLAIMING PAYMENT OF INTEREST ON LOAN TAKEN ON THE OT HER HAND. 9. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS ING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE COMPANY HAS GIVEN INTEREST FREE ADVANCES/ LOAN TO I TS SUBSIDIARY COMPANY M/S. PALKA INVESTMENTS PVT. LTD. HE, THERE FORE, ASKED THE ASSESSEE TO JUSTIFY THE INTEREST FREE ADVANCES TO I TS SUBSIDIARY COMPANY AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST TO THE EXTENT OF INTEREST FREE ADVANCES SHOULD NOT BE DISALLOWED. REJECTING THE VARIOUS EXPLANATION GIVEN BY THE ASSE SSEE AND FOLLOWING HIS ORDER FOR A. Y. 2009-10 THE ASSESSING OFFICER D ISALLOWED AN AMOUNT OF RS.2,32,26,000/- BEING INTEREST @14% ON T HE AMOUNT ADVANCED TO THE SUBSIDIARY COMPANY. 10. IN APPEAL THE LD. CIT(A) DELETED THE ADDITION B Y OBSERVING AS UNDER :- 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER, WRITTEN SUBMISSION FILED BY THE LD. AR OF THE APPELLANT, I AGREE WITH THE ARGUMENT OF THE LD. AR OF THE APPELLANT. THE I NTEREST BEARING LOAN WAS CONVERTED INTO INTEREST FREE LOAN ON THE CONVERSION OF M/S. PALKA INVESTMENT PVT. LTD. INTO A SUBSIDIARY OF THE APPELLANT COMPANY. LOAN GRANTED TO COMPANY IS TO BE TREATED AS BUSINESS PURPOSES. HENCE, I AM OF THE V IEW THAT THE LD. AO HAS WRONGLY TAKEN THE VIEW THAT INTEREST FRE E ADVANCES WERE GRANTED TO THE SUBSIDIARY COMPANY FROM THE AMO UNT BORROWED ON INTEREST. HONBLE DELHI HIGH COURT OF THE CASE OF CIT VS. DALMIA CEMENT BHARAT LTD. 330 ITR 595 HELD THAT IN THE ABSENCE OF ANYTHING TO SHOW THAT THE INTEREST F REE LOAN ITA NO.2587/DEL/2015 5 GIVEN BY THE ASSESSEE COMPANY TO ITS SUBSIDIARY COM PANY WAS FOR PERSONAL BENEFIT OF ANY DIRECTOR OR FOR ANY OTH ER PERSONAL REASON, IT HAS TO BE HELD THAT THE LOAN WAS GIVEN F OR THE PURPOSE OF BUSINESS AND COMMERCIAL EXPEDIENCY, THER EFORE, NO PORTION OF THE INTEREST PAID BY THE ASSESSEE ON ITS BORROWED FUNDS CAN BE DISALLOWED ON THE GROUND THAT A PORT T HEREOF HAS BEEN DIVERTED TO THE SUBSIDIARY COMPANY. 11. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. W E FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. WE FIND THE TRIBUNAL VIDE ITA NO.534/DEL/2014 ORDER DATED 03.03.2017 FOR A. Y . 2009-10 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSE RVING AS UNDER :- 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), WRITTEN SYNOPSIS. WE FIND THAT THE ASSESSEE IS A PUBLIC LIM ITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALES OF GLASS SHELLS AND FUNNELS USED IN COLOR TELEVISION PICTURE TUBES. THIS APPEAL IS PREFERRED AGAINST CONFIRMATION BY THE CIT(A) OF THE ADDITION AMOUNTING TO RS. 1,60,95,995/- MADE BY THE ASSESSIN G OFFICER AS NOTIONAL INTEREST ON ACCOUNT OF INTEREST FREE LOAN GIVEN TO SUBSIDIARY. WE NOTE THAT THE ASSESSEE COMPANY ADVAN CED INTER ITA NO.2587/DEL/2015 6 CORPORATE DEPOSITS (ICD) TO M/S PALKA INVESTMENT PV T LTD. AND CHARGED AGREED INTEREST ON THE ICD. DETAILS OF THE SAME ARE GIVEN AS UNDER: DATE AMOUNT RS. RATE OF INTT INTEREST AMT RS TPS RS 23.06.2008 7,48,00,000/- ' 14% 3,15,594 58,511 24.06.2008 5,96,00,000/- 14% 2,28,602 46,498 7.1 WE FURTHER NOTE THAT DURING THE YEAR UNDER CONS IDERATION, M/S PALKA INVESTMENT PVT. LTD. BECAME SUBSIDIARY OF THE ASSESSEE COMPANY WHICH IS WIDEN! FROM THE FINANCIAL STATEMEN T OF THE APPELLANT (SCHEDULE - 5 INVESTMENTS' AND COPY OF 'R ESOLUTION' DATED 18-08-20()8). ON BECOMING OF ITS SUBSIDIARY O N 04-07-2008, FOR BUSINESS CONSIDERATIONS THE 'ASSESSEE COMPANY C ONVERTED ITS EXISTING LOAN OF RS, 13,44,00,000/- TO INTEREST FRE E LOAN AND GRANTED FURTHER INTEREST FREE LOAN AMOUNTING TO RS. 3,15,00,000/- TO M/S PALKA INVESTMENT PVT. LTD. THE LOANS GIVEN T O M/S PALKA INVESTMENT PVT LTD. WERE OUT OF INTERNAL ACCRUALS O F THE ASSESSEE COMPANY AND IN ACCORDANCE WITH THE COMMERCIAL EXPED IENCIES OF THE ASSESSEE ON 31-03-2009, NETWORTH (CAPITAL PLUS RESERVE) OF THE MY WAS AMOUNTING TO RS 79.82 CRORES AS AGAINST THE ICD GRANTED TO SUBSIDIARY AMOUNTING TO RS. 16.59CRORES. THE ASSESSING OFFICER . CIT(A) DID NOT APPRECIATE THE F ACT THAT THE ASESSEE IS DANK ACCOUNT WITH COMMON FUNDS IN WHICH ALL THE DEPOSITS IS WERE MADE. WE OBSERVE THAT THE ASSESSIN G OFFICER CALCULATED NOTIONAL INTEREST ON PRESUMPTIONS WITHOU T ESTABLISHING ANY THE FUNDS PROCURED AND GIVEN TO THE SUBSIDIARY COMPANY. THERE IS NO FINDING IN THE ASSESSMENT ORDER THAT TH E FUNDS HAVE BEEN USED D BENEFIT OF THE DIRECTORS. ITA NO.2587/DEL/2015 7 7.2 WE FURTHER FIND THAT IN ASSESSEES OWN CASE, IN THE NEXT ASSESSMENT YEAR I.E. IN A. Y 2010-11, THE CIT(A) HA S DELETED THE SAME ADDITION VIDE ORDER DATED 17.02.2015 BY HOLDIN G AS UNDER :- 4.2 I HAVE CONSIDER THE ASSESSMENT ORDER, WRITTEN SUBMISSION FILED BY THE LD. AR OF THE APPELLANT, I AGREE WITH THE ARGUMENT OF THE LD. AR OF THE APPELLANT. THE INTEREST BEARING LOAN WAS CONVERTED INTO INTEREST F REE LOAN ON THE CONVERSION OF M/S. PALKA INVESTMENT PVT . LTD. INTO A SUBSIDIARY OF THE APPELLANT COMPANY, LOAN GR ANTED TO SUBSIDIARY COMPANY IS TO BE TREATED AS BUSINESS PURPOSES. HENCE, I AM OF THE VIEW THAT THE LD. AO HAS WRONGLY TAKEN THE VIEW THAT INTEREST FREE ADVANCES WERE GRANTED TO THE SUBSIDIARY COMPANY FROM THE AMOUNT BORROWED ON INTEREST. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DALMIA CEMENT BHARAT LTD. 330 ITR 5 95 HELD THAT IN THE ABSENCE OF ANYTHING TO SHOW THAT THE INTEREST FREE LOAN GIVEN BY THE ASSESSEE COMPANY TO ITS SUBSIDIARY COMPANY WAS FOR PERSONAL BENEFIT OF ANY DIRECTOR OR FOR ANY OTHER PERSONAL REASONS, IT HAS TO BE HELD THAT THE LOAN WAS GIVEN FOR THE PURPOSES OF BU SINESS AND COMMERCIAL EXPEDIENCY AND, THEREFORE, NO PORTIO N OF THE INTEREST PAID BY THE ASSESSEE ON ITS BORROWED F UNDS CAN BE DISALLOWED ON THE GROUND THAT A PART THEREOF HAS BEEN DIVERTED TO THE SUBSIDIARY COMPANY. RESPECTFU LLY FOLLOWING THE ABOVE CASE LAW, THE ADDITION MADE BY THE AO IS HEREBY DELETED. GROUND NO.4 IS ALLOWED. 7.3 WE FURTHER NOTE THAT AGAIN IN ASSESSEE'S OWN CA SE, IN THE ITA NO.2587/DEL/2015 8 ASSESSMENT YEAR I.E IN AY 2012-13, THE CIT(A) HAS D ELETED THE SAME ADDITION VIDE ORDER DATED 20-07-2016 BY HOLDIN G AS UNDER:- 5. GROUND NO. 4 RELATES TO DISALLOWANCE OF INTE REST EXPENSES OF RS. 2, 32,26, 000/- MADE BY THE AO. I F IND THAT THIS ISSUE HAS ALSO BEEN DECIDED BY THE THEN C IT(A)-8 IN THE APPELLANTS OWN CASE FOR THE AY 2010- 11 IN THEIR FAVOUR. THEREFORE, FOR THIS YEAR ALSO, ON THE IDENT ICAL FACTS, HIS ORDER IS FOLLOWED. 7.4 AFTER PERUSING THE AFORESAID DECISIONS OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2010-11 AND 2012-13, WE FIND THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE EXACTLY SIMIL AR AND IDENTICAL TO THE ASSESSMENT YEARS 2010-11 & 2012-13 , HENCE, THE ADDITION IN DISPUTE NEEDS TO BE DELETED. WE ALSO FI ND THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DALMIA CEME NT BHARAT LTD. 330 ITR 595 HAS HELD THAT IN THE ABSENCE OF ANYTHI NG TO SHOW THAT THE INTEREST FREE LOAN GIVEN BY THE ASSESSEE C OMPANY TO ITS SUBSIDIARY COMPANY WAS FOR PERSONAL BENEFIT OF ANY DIRECTOR OR FOR ANY OTHER PERSONAL REASONS/IT HAS TO BE HELD THAT T HE LOAN WAS GIVEN FOR THE PURPOSES OF BUSINESS AND COMMERCIAL E XPEDIENCY AND, THEREFORE, NO PORTION OF THE INTEREST PAID BY THE ASSESSEE ON ITS BORROWED FUNDS CAP BE DISALLOWED ON THE GROUND THAT A PART THEREOF HAS BEEN DIVERTED TO THE SUBSIDIARY COMPANY . 7.5 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND ITA NO.2587/DEL/2015 9 RESPECTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID , THE ADDITION IN DISPUTE IS HEREBY DELETED AND ORDERS OF THE AUTHORI TIES BELOW ARE CANCELLED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.03.2017 . 13. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE AGAINST THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. THE GROUND OF APPEAL NO.2 FILED BY REVENUE IS ACCORDINGLY DISMISSED. 14. THE GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UNDER :- THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE A DDITION ON ACCOUNT OF CESSATION LIABILITY OF RS.78,17,820/- WHICH IS SQUARELY COVERED UNDER THE AMBIT OF SECTION 41 (1) OF I.T. ACT 15. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESS ING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE RE ARE STAGNANT CREDITORS AMOUNTING TO RS.78,17,820/-. THE ASSESSE E WAS REQUIRED TO JUSTIFY THE SAME. THE ASSESSEE VIDE LETTER DATED 2 9 TH JANUARY 2013 SUBMITTED THAT THE ASSESSEE COMPANY COULD NOT MAKE THE PAYMENT TO THE SUPPLIERS AND THE BALANCES ARE THE SAME IN BOTH THE YEARS. THE REPLY OF THE ASSESSEE COMPANY WAS REJECTED BY THE A SSESSING OFFICER ON THE GROUND THAT THE ASSESSEE COMPANY HAS NOT MAD E THE PAYMENT TO ITS CREDITORS AND IT HAS NOT BEEN ABLE TO FILE T HE CONFIRMATION OF ITA NO.2587/DEL/2015 10 BALANCES FROM ITS CREDITORS. THEREFORE, CASE OF TH E ASSESSEE FALLS WITHIN THE AMBIT OF SECTION 41 (1). ACCORDINGLY THE AMOUNT OF RS.78,17,820/- WAS DISALLOWED AND TREATED AS INCOME OF THE ASSESSEE BEING CESSATION OF LIABILITY U/S 41 (1). 16. IN APPEAL THE LD. CIT(A) DELETED THE ADDITION B Y OBSERVING AS UNDER :- 5.2 I HAVE CONSIDERED THE ISSUE AND ARGUMENT OF THE LD. AR OF THE APPELLANT AND FIND THAT LD. ASSESSING OFFICE R HAS NOT CONSIDERED THE FULL FACTS AND PASSED A NON-SPEAKING ORDER WITHOUT VERIFYING THE FACTS. FROM THE OBSERVATION OF THE BALANCE SHEET SCHEDULE III OF THE ANNEXURES IT IS C LEAR THAT THE AMOUNT OF RS.78.17.820/- IS APPEARING AGAINST THE S UPPLIERS CREDITED FOR CAPITAL GOODS. WITHOUT APPRECIATING THE FULL FACTS, IT APPEARS THAT LD. ASSESSING OFFICER HAS INVOKED T HE PROVISION U/S 41 (1) OF THE IT ACT. THE LIABILITY IS ALSO DIS PUTED BY THE CREDITORS IN THE COURT OF LAW. IT IS NOT FINAL. H ENCE I HOLD THAT LD. ASSESSING OFFICER HAS WRONGLY INVOKED THE PROVI SION OF SECTION 41 (1) OF THE IT ACT. THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.78,17,820/- IS HE REBY DELETED. GROUND NO.5 IS ALLOWED. 17. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 18. AFTER HEARING BOTH THE SIDES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE WE FIND THE OUTSTANDING A MOUNT IS DUE TO M/S. CUMINS INDIA LIMITED SINCE APRIL 2007 AGAINST SUPPLY OF ITA NO.2587/DEL/2015 11 GENERATOR SETS ON HIRE PURCHASE BASIS. DUE TO SOME TECHNICAL PROBLEMS IN THE GENERATOR SETS, DISPUTE AROSE BETWE EN THE ASSESSEE COMPANY AND THE SUPPLIER I.E. M/S. CUMINS INDIA LIM ITED PUNE. FROM THE COPY OF THE ACCOUNT FILED AT PAPER BOOK PA GE 45 TO 50 WE FIND M/S. CUMINS INDIA LIMITED HAS FILED SUIT AGAIN ST THE ASSESSEE COMPANY ON ACCOUNT OF BOUNCING OF CHEQUES WHICH WER E ISSUED TO THE SAID COMPANY IN ADVANCE. THEREFORE, WHEN THE LIABI LITY IS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT, THE ASSESSING OFFICER IN OUR OPINION COULD NOT HAVE MADE ADDITION U/S 41 (1). A CCORDINGLY, THE ORDER OF CIT(A) ON THIS ISSUE IS UPHELD AND THE GRO UND RAISED BY THE REVENUE IS DISMISSED. 19. THE GROUND OF APPEAL NO. 4 BY REVENUE READS AS UNDER :- THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE AD DITION MADE BY THE AO ON ACCOUNT OF DETENTION CHARGES OF RS.15,98,510/- AS THE EXPENDITURE INCURRED IS COVER ED UNDER EXPLANATION (1) TO SECTION 37 OF THE I. T. ACT. 20. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.15,98,510/- TOWARDS DET ENTION CHARGES. IN ABSENCE OF FURNISHING OF ANY SATISFACTORY REPLY AND CONSIDERING THE SAME AS PENAL IN NATURE, THE ASSESSING OFFICER DISA LLOWED THE ABOVE AMOUNT AND MADE ADDITION OF RS.15,98,510/- TO THE T OTAL INCOME OF THE ASSESSEE. 21. IN APPEAL THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER :- ITA NO.2587/DEL/2015 12 6.2. I HAVE CONSIDERED THE ISSUE AND I AGREE WITH T HE ARGUMENT OF THE LD. AR OF THE APPELLANT THAT DETENTION CHARG ES PAID TO THE CUSTOM DEPARTMENT OR TO THE DOCKYARD AND PORTS FOR GETTING DELAYED FOR CLEARING GOODS OR DELAYED DUE TO TRANSP ORTATION ATTRACTS DETENTION CHARGES BY THE VARIOUS AUTHORITI ES. THESE ARE COMPENSATORY IN NATURE TO THOSE AUTHORITIES. THIS AMOUNT CANNOT BE TREATED AS PENAL IN NATURE. HENCE, THE ADDITION / DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER IS NOT JUSTIFIED. HENCE, IT IS DELETED. GROUND NO.6 IS ALLOWED. 22. AGGRIEVED WITH SUCH ORDER OF THE CIT (A), THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 23. AFTER HEARING BOTH THE SIDES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER. IN OUR OPINION THE DETENTION CHARGES PAID TO THE CUSTOM DEPARTMENT OR TO THE DOCK YARD AND PORT/ FOR GETTIN G DELAYED FOR CLEARING GOODS ARE COMPENSATORY IN NATURE AND CANNO T BE TREATED AS PENAL IN NATURE. THEREFORE, THE ORDER OF THE CIT(A ) ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISM ISSED. 24. THE GROUND OF APPEAL NO.5 BY REVENUE READS AS U NDER :- THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,76,00,477/- ON ACCOUNT OF TECHNICAL FEE MADE B Y AO SINCE THE EXPENDITURE WAS OF CAPITAL NATURE AND THE TDS W AS ALSO NOT DEDUCTED ON SUCH EXPENDITURES. ITA NO.2587/DEL/2015 13 25. AFTER HEARING BOTH THE SIDES WE FIND THAT THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE HAD DEBITED A SUM OF RS.3,21,35,294/- TOWARDS LEGAL AND PROFESSIONAL CHARGES. THE ASSESSEE WAS REQUIRED TO JUSTIFY THE SAME AND FURNISH REASONS FOR INCREASE IN THE EXPENSES. VIDE LETTER D ATED 29.01.2013 THE ASSESSEE STATED THAT IN ADDITION TO NORMAL EXPENSES IT HAS INCURRED RS.176,00,477/- TOWARDS TECHNICAL FEE FOR DESIGN. ACCORDING TO THE ASSESSING OFFICER, THE AMOUNT OF RS.1,76,00,477/- S PENT FOR TECHNICAL FEE FOR DESIGN CANNOT BE CLAIMED AS REVENUE EXPENDI TURE AS THE SAME FALLS WITHIN THE PURVIEW OF CAPITAL EXPENDITURE INC URRED BY THE ASSESSEE. FURTHER, THE ASSESSEE FAILED TO FURNISH EVIDENCE OF TDS/ WITHHOLDING OF TAX U/S 195 ON THIS AMOUNT. IN VIEW OF THE FAILU RE ON THE PART OF THE ASSESSEE TO JUSTIFY ITS CLAIM, THE AMOUNT OF RS.1,7 6,00,477/- WAS DISALLOWED AND ADDED BACK TO THE TAXABLE INCOME OF THE ASSESSEE. 26. IN APPEAL THE LD. CIT(A) DELETED THE ADDITION B Y OBSERVING AS UNDER :- 7.2 I HAVE CONSIDERED THE ISSUE AND FIND THAT LD. ASSESSING OFFICER HAS PASSED A NON SPEAKING ORDER WITHOUT MEN TIONING THE FULL FACTS OF THE CASE. FROM THE WRITTEN SUBMISSIO N OF LD. AR OF THE APPELLANT IS APPEARS THAT AMOUNT WAS PAID TO A NON-RESIDENT COMPANY FOR NORMAL MAINTENANCE OF PLAINT AND IT IS CLAIMED AS A TECHNICAL FEE AND TDS WAS ALSO DEDUCTED. LD. AR OF THE APPELLANT FILED A COPY OF LEDGER SHOWING TDS PAYABLE. LD. AS SESSING OFFICER IS DIRECTED TO VERIFY THE TDS DEDUCTED AND PAID BY APPELLANT AND ACCORDINGLY ALLOW THE EXPENDITURE TREATING IT REVEN UE IN NATURE. SINCE THE TDS DETAILS WERE NOT FILED BEFORE THE LD. ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS, THE SAME MAY BE VERIFIED BY THE ASSESSING OFFICER AT THE TIME OF OR DER GIVING EFFECT TO ITA NO.2587/DEL/2015 14 THIS ORDER. THIS GROUND OF APPEAL IS TREATED AS PA RTLY ALLOWED SUBJECT TO THE DIRECTION GIVEN TO THE ASSESSING OFF ICER. THE GROUND IS PARTLY ALLOWED. 27. AGGRIEVED WITH SUCH ORDER CIT(A), THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 28. AFTER HEARING BOTH THE SIDES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY A SSESSING OFFICER. WE FIND MERIT IN THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE MANUFACTURING PROCESS OF THE ASSE SSEE COMPANY IS HIGHLY TECHNOLOGY DRIVEN. THE FEES PAID TO M/S. FU LLER GLAS TECHNOLOGY FOR REGULAR MAINTENANCE OF THE PLANT IN OUR OPINION IS IN NORMAL COURSE OF BUSINESS AND NO CAPITAL ASSET HAS BEEN CREATED BY PAYING THIS FEE. THEREFORE, THIS IN OUR OPINION IS PURELY REVENUE IN NATURE. FURTHER THE GENUINESS OF THE EXPENDITURE H AS NOT BEEN DOUBTED AND THE ISSUE RAISED BY THE ASSESSING OFFIC ER IS REGARDING CAPITAL IN NATURE. SINCE THE LD. CIT(A) HAS DELETE D THE DISALLOWANCE WITH A DIRECTION TO VERIFY THE TDS DEDUCTED AND PAI D BY THE ASSESSEE COMPANY THEREFORE, THE SAME IN OUR OPINION IS FULLY JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. WE ACCORDINGL Y UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED B Y THE REVENUE IS DISMISSED. 29. GROUND OF APPEAL NO.6 BEING GENERAL IN NATURE D ISMISSED. 30. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO.2587/DEL/2015 15 ORDER PRONOUNCED IN THE OPEN COURT ON 29.05.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K PANDA) JUDICIAL MEMBER ACCOUNTAN T MEMBER *NEHA* DATE:- 29.05.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 02.04.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 29.05.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER