The DCIT, Bharuch Circle, Bharuch V. M/s. Narmada Chematur Petrochemicals Ltd, Bharuch

ITA 2743/AHD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67572 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 06-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K C MATHEWS
• Keywords: Business income; Depreciation; Notional interest
• Section: 143(3)

Judgement Text

ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI J.M. & SHRI ANIL CHATURVEDI , A.M.) I.T. A. NO. 3871/AHD/2008 & 2743/AHD/2012 (ASSESSMENT YEAR: 2005-06) GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. P.O. NARMADANAGAR-392 015, DIST BHARUCH, GUJARAT (APPELLANT) VS. THE JOINT COMMISSIONER OF INCOME TAX, BHARUCH RANGE, BHARUCH (RESPONDENT) THE DCIT, BHARUCH CIRCLE, BHARUCH (APPELLANT) VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. P.O. NARMADANAGAR-392 015, DIST BHARUCH, GUJARAT (RESPONDENT) PAN: AAACN 6804 E APPELLANT BY : SHRI SANJAY R. SHAH A.R. RESPONDENT BY : SHRI K.C. MATHEWS SR. D.R. ( )/ ORDER DATE OF HEARING : 01-08-201 3 DATE OF PRONOUNCEMENT : 27 -08-2013 PER SHRI ANIL CHATURVEDI,A.M. ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 2 1. THESE TWO APPEALS ONE FILED BY THE ASSESSEE AND THE OTHER FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-VI, BARODA DATE D 9.09.2008 FOR ASSESSMENT YEAR 2005-06. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER: 3. ASSESSEE IS A SUBSIDIARY OF GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. (GNFC) WHICH HOLDS 56.4% OF EQUITY SHARES OF ASSESS EE COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE O F CHEMICALS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2005-0 6 DECLARING TOTAL INCOME AT RS. NIL UNDER NORMAL PROVISIONS OF THE AC T AFTER SETTING OFF OF UNABSORBED BUSINESS LOSSES AND DEPRECIATION. THE C ASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U NDER SECTION 143(3) VIDE ORDER DATED 31.12.2007 AND THE TOTAL INCOME WA S DETERMINED AT RS. 18,99,12,470/-. AGGRIEVED BY THE ORDER OF ASSESSIN G OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDE R DATED 9.09.2008 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. T HE GROUNDS RAISED BY ASSESSEE ARE AS UNDER:- 1. THE ORDER PASSED BY THE LD. CIT (APPEALS) IS ERRONE OUS & REQUIRES TO BE QUASHED AS VOID AB INITIO AS THE CIT(A) ERRED IN UPHOLDING THE ORDER PASSED IN THE NAME OF A COMPANY WHICH IS NO LONGER IN EXISTENCE. IT IS SU BMITTED THAT IT BE SO DONE NOW, 2. THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE DISALL OWANCE OF LEASE RENT PAID DURING THE YEAR AMOUNTING TO RS.7,68,99,864/-. IT I S SUBMITTED THAT IT BE SO HELD NOW. 3. THE LD. CIT (APPEALS) OUGHT NOT TO HAVE DIRECTED TH E AO TO VERIFY THE BANK DETAILS FOR ALLOWING RS.3,00,000/- BEING NOTIONAL INTEREST COMPUTED BY AO, IN RESPECT OF AMOUNT CONTRIBUTED TO THE CHIEF MINSITER'S RELIEF F UND PARTICULARLY WHEN CIT(A) HAS ALREADY HELD THAT THE SAID CONTRIBUTION WAS A B USINESS EXPENDITURE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 4. IN LAW AND IN THE FACTS OF THE CIRCUMSTANCE OF THE APPELLANT'S CASE, FOR GRANTING DEDUCTION OF RS. 39,27,405/- UNDER SECTION 40(A)(IA ) OF THE ACT, THE LD. CIT ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 3 (APPEALS) OUGHT NOT TO HAVE DIRECTED FOR VERIFICATI ON OF DETAILS REGARDING PAYMENT OF TAXES BY THE NON RESIDENT SHIPPING COMPANIES UND ER SECTION 172. IT IS SUBMITTED THAT IT BE SO HELD NOW. 5. IN LAW AND IN THE FACTS OF THE CIRCUMSTANCE OF THE APPELLANT'S CASE, THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE U NDER SECTION 40(A)(IA) OF EXPENSES AMOUNT OF RS.12,58,2917- REIMBURSED TO C&F AGENT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 5.1 THE LD. CIT(APPEALS) HAS ERRED IN NOT DELETING THE DISALLOWANCE OF AGENCY CHARGES OF RS. 1,42,845/- OUT OF THE AFORESAID AMOU NT OF RS. 12,58,291/- ON WHICH TDS IS ALREADY DEDUCTED AND PAID IN ACCORDANCE WITH CHAPTER XVII OF INCOME TAX ACT, 1961. IT IS SUBMITTED THAT IT BE SO HELD N OW. 6 . IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE UNDE R SECTION 40(A)(IA) OF EXPENSES AMOUNT OF RS. 40,40,269 REIMBURSED TO THE CONSIGNMENT AGENT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 1 ST GROUND IS GENERAL AND THEREFORE REQUIRES NO ADJUDI CATION. 2 ND GROUND IS WITH RESPECT TO DISALLOWANCE OF LEASE RE NT PAID DURING THE YEAR AMOUNTING TO RS. 7,68,99,864/- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER NOTICED THAT ASSESSEE HAS PAID LEASE RENT OF RS. 7,68,99,86 4/- TO ITS HOLDING COMPANY, GNFC LTD. IN RESPECT OF ASSETS TAKEN ON LE ASE. THE BREAK UP OF LEASE IS LEASE RENT FOR CPP RS. 5,95,95,456/- AND L EASE RENT FOR NOX/INCINERATOR RS. 1,73,04,408/-THE ASSESSEE WAS A SKED TO EXPLAIN THE INTEREST COMPONENT OF LEASE RENT. ASSESSING OFFICER RELYING ON THE DECISION FOR A.Y. 2000-01 WAS OF THE VIEW THAT THE ASSESSEE WAS THE OWNER OF THE ASSETS AND THEREFORE THE LEASE RENT CL AIMED TO HAVE BEEN PAID BY ASSESSEE WAS NOT ADMISSIBLE TO THE EXTENT OF CAP ITAL COMPONENT. HE WAS FURTHER OF THE VIEW THAT THE TRANSACTION OF PUR CHASE OF ASSETS OWNED BY THE ASSESSEE HAS ONLY BEEN FINANCED BY GNFC LTD. AND THEREFORE THE INTEREST COMPONENT OF LEASE RENT IS ADMISSIBLE IN T HE HANDS OF THE ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 4 ASSESSEE. FURTHER ON PERUSING THE LEASE AGREEMENT, HE NOTICED THAT THE TOTAL GROSS LEASE RENTALS TO BE RECEIVED OR THE ENT IRE LEASE PERIOD WAS RS. 47,42,58,600/-. IN THE ABSENCE OF ANY DETAILS WITH RESPECT TO THE INTEREST COMPONENT, HE WAS OF THE VIEW THAT IT WAS NOT POSSI BLE TO WORK OUT THE INTEREST COMPONENT. HE ACCORDINGLY DISALLOWED THE ENTIRE LEASE RENT PAYMENT OF RS. 7,68,99,864/- CLAIMED BY THE ASSESSE E. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 7 . I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION S. THE ISSUE HAS BEEN DECIDED AGAINST THE APPELLANT IN ITS OWN CASE FOR A.Y.2004- 05. THE FACTS REMAINING IDENTICAL AND RELYING ON MY ORDER FOR A.Y. 2004-05, THE A.O. WAS JUSTIFIED TREATING THE LEASE AS FINANCE LEASE. HOWEVER, I AM IN AGREEMENT WITH THE ALTERNATIVE PLEA THAT DEPRECIATION ON THE FIXED ASSETS BE ALLOWED TO THE APPELLANT AS ALSO THE INTEREST COMPONENT OF THE LEASE RENT. IN FACT FOR ASSESSMENT YEAR 2004-05 SUC H A DIRECTION WAS ALREADY GIVEN IN THE APPELLATE ORDER. THE A.O. IS AGAIN DIRECTED TO ALLOW THE DEPRECIATION ON THE FIXED ASSETS AND ALSO THE INTEREST COMPONENT ON THE LEASE RENT AFTER VERIFICATION OF THE FIGURES. GROUND NO.2 IS PARTLY ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS NO W IN APPEAL BEFORE US. BEFORE US, THE LEARNED A.R. AT THE OUTSET SUBMI TTED THAT ON IDENTICAL FACTS THE HON. TRIBUNAL HAS DECIDED THE CASE FOR A. Y. 2003-04 IN ITA NO. 1793/AHD/2007 ORDER DATED 30.04.2013 IN ITS FAVOUR. HE FURTHER SUBMITTED THAT SINCE THE FACTS IN THE PRESENT APPEA L ARE IDENTICAL TO THAT OF A.Y. 2006-07, THE ASSESSEE BE ALLOWED DEDUCTION. TH E LEARNED D.R. ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFF ICER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT FOR ASSESSMENT YEAR 2003-04 IN ITA NO. 1793/AHD/2007 ONE OF THE GROUND BEFORE THE CO-ORDINATE BENCH OF THE T RIBUNAL WAS WITH RESPECT TO LEASE RENT. THE CO-ORDINATE BENCH RELYI NG ON THE DECISION OF ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 5 HON. TRIBUNAL IN THE CASE OF ICDS VS. CIT 29 TAXMAN N. COM. 129 (SC) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLD ING AS UNDER: 13. 3 THE HON'BLE COURT HAS EXAMINED THE LEASE AGREEMEN T AND THEN NOTED THAT AS PER THE CLAUSE OF 'OWNERSHIP' THE STATUS WAS THAT, QUOT E 'THE ASSETS SHALL AT ALL TIMES REMAIN THE SOLE AND EXCLUSIVE PROPERTY OF THE LESSO R AND THE LESSEE SHALL HAVE NOT RIGHT, TITLE OR INTEREST TO MORTGAGE, HYPOTHECATE O R SELL THE SAME AS BAILEE' UNQUOTE. FURTHER, IT WAS NOTED THAT ON 'EXPIRATION OF LEASE' THE LESSEE WAS REQUIRED TO DELIVER TO THE LESSOR THE ASSETS. THE ARGUMENT OF THE REVEN UE DEPARTMENT WAS THAT AT THE END OF LEASE PERIOD, THE OWNERSHIP OF THE VEHICLE IS TR ANSFERRED TO THE LESSEE AT A NOMINAL VALUE NOT EXCEEDING 1 % OF THE ORIGINAL COST OF THE VEHICLE, MAKING THE ASSESSEE IN EFFECT A FINANCER. HOWEVER, THE HON'BLE COURT WAS N OT PERSUADED TO AGREE WITH THE SAID ARGUMENT OF THE REVENUE DEPARTMENT. ACCORDING TO THE COURT, AS LONG AS THE ASSESSEE HAS A RIGHT TO RETAIN THE LEGAL TITLE OF T HE VEHICLE AGAINST THE REST OF THE WORLD, IT WOULD BE THE OWNER OF THE VEHICLE IN THE EYES OF LAW. AT ONE POINT, THE HON'BLE COURT HAS NOTED AN OBSERVATION OF THE TRIBUNAL THAT THE GIST OF THE DECISION OF THE APEX COURT IN THE CASE OF SHAAN FINANCE (P) LTD. IS THAT WHERE THE BUSINESS OF THE ASSESSEE CONSISTS OF HIRING OUT MACHINERY AND/OR WH ERE THE INCOME DERIVED BY THE ASSESSEE FROM THE HIRING OF SUCH MACHINERY IS BUSIN ESS INCOME, THE ASSESSEE MUST BE CONSIDERED AS HAVING USED THE MACHINERY FOR THE PUR POSE OF BUSINESS. IN THE PRESENT CASE, IT IS WORTH TO MENTION THAT GNFC LTD. HAS SHO WN THE LEASE RENT AS INCOME IN ITS HAND UNDER THE HEAD 'BUSINESS INCOME'. THAT ASSESSM ENT IS REQUIRED TO BE CONSIDERED IN THE PRESENT CASE WHILE DECIDING THIS TECHNICAL I SSUE. WE HAVE NOTED THAT IN THE CASE OF THE LESSOR, I.E. GNFC LTD. THE ISSUE HAS BEEN CO NSISTENTLY DECIDED THAT THE ASSETS BEING UNDER THE OWNERSHIP OF GNFC LTD., HENCE ENTIT LED FOR CLAIM OF DEPRECIATION AND THAT THE LEASE RENT RECEIVED FROM THE ASSESSEE IS REQUIRED TO BE ASSESSED AS 'BUSINESS INCOME'. UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE THEREFORE HOLD THAT THE LEASE RENT PAID IS IN THE N ORMAL COURSE OF BUSINESS OF THE ASSESSEE ON THE LEASED ASSETS, HENCE REQUIRED TO BE ALLOWED AS DEDUCTION. GROUND NOS.5 & 6 ARE DECIDED IN ASSESSEE'S FAVOUR. 7. IT IS AN UNDISPUTED FACT THAT THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 2003-04. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH FOR A.Y. 03-04 HOLD THAT THE L EASE RENT PAID ON LEASE ASSETS IS TO BE ALLOWED AS DEDUCTION. 8. IN THE RESULT THIS GROUND OF ASSESSEE IS ALLOWED. ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 6 3 RD AND 4 TH GROUND NOT PRESSED AND THEREFORE NOT ADJUDICATED A ND THEREFORE DISMISSED. GROUND NO. 5 IS WITH RESPECT TO DISALLOWANCE UNDER 40(A)(IA). 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER NOTICED THAT ASSESSEE HAS INCURRED RS. 58,30,492/- WHICH IN CLUDED RS. 12,59,291/- ON ACCOUNT OF CHA CHARGES. ASSESSEE WA S ASKED TO FURNISH THE DETAILS OF PAYMENT OF CHA CHARGES ON WHICH TDS WAS DEDUCTED. IN THE ABSENCE OF ANY BIFURCATION MADE AVAILABLE BY TH E ASSESSEE, ASSESSING OFFICER WAS OF THE VIEW THAT IN VIEW OF CIRCULAR NO . 715 DATED 8.08.1995 ISSUED BY CBDT, ASSESSEE WAS REQUIRED TO DEDUCT TDS ON THE ENTIRE CHA CHARGES PAID. SINCE THE ASSESSEE HAD NOT DEDUC TED TDS, ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS. 12,5 9,291/- UNDER SECTION 40(A)(IA). AGGRIEVED BY THE ORDER OF ASSESSING OFFI CER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ORDER O F ASSESSING OFFICER BY HOLDING AS UNDER: 16 . I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER AS WELL AS CIRCULAR NO.715 DATED 8.8.1995. QU ESTION NO.6 OF THE CIRCULAR HAS CLEARLY MENTIONED THAT PAYMENTS MADE TO CLEARING AN D FORWARDING AGENT FOR CARRIAGE OF GOODS WOULD BE SUBJECT TO TDS. IT DOES NOT DISTI NGUISH BETWEEN THE PAYMENTS MADE TO SUCH AGENTS AS COMMISSION CHARGES OR AS REIMBURS EMENT OF TRANSPORTATION EXPENSES. QUESTION NO.7 ALSO CLEARLY STIPULATES THA T CLEARING AND FORWARDING AGENT ACT AS INDEPENDENT CONTRACTOR DISTINCT FROM TRAVEL AGENT AND ANY PAYMENT MADE TO THEM WOULD BE LIABLE FOR TDS. THE PLEA OF THE APPEL LANT THOUGH ATTRACTIVE IS THUS NOT ACCEPTABLE. THE DISALLOWANCE OF RS. 1259291/- IS TH US CONFIRMED. 10. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 7 11. BEFORE US, THE LEARNED A.R. SUBMITTED THAT THE ISSU E IS THE PRESENT GROUND IS COVERED IN ASSESSEES FAVOUR IN VIEW OF THE DEC ISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 827 & 1003/AHD/2010 ORDER DATED 14.09.2012. HE ALSO PLACED ON RECORD, THE COPY OF THE AFORESAID ORDER. HE THUS URGED THAT SINCE THE FACT S IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 2006-07 NO DIS ALLOWANCE UNDER SECTION 40(A)(IA) WAS CALLED FOR. THE LEARNED D.R. ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFFICER. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ON IDENTICAL FACTS , THE CO-ORDINATE B ENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 827 A& 1003/AHD/2010 HAS DELETED THE ADDITION BY HOLDING A S UNDER: 34 GROUND NO.6 IS AGAINST DELETING THE DISALLOWANCES U /S. (40)(A)(IA) ON ACCOUNT OF NON DEDUCTION OF IDS ON C HA- CHARGES PAID OF RS.6,93,372/- AND CONSIGNMENT EXPEN SES ON RS.76,00,509/-. THE ASSESSEE PAID CHA-CHARGES AND CONSIGNMENT AGENT OF RS. 6,93,372/- AND RS.76,00,50 9/- RESPECITVELY. AS PER ASSESSEE, THIS INCLUDES FREIGH T EXPENSES, LOADING AND UNLOADING CHARGES, GODOWN MAINTENANCE C HARGES AND OTHER CORPORATION EXPENSES ON BEHALF OF THE COM PANY WHICH WAS REIMBURSED TO THEM BASED ON DETAILS OF AC TUAL EXPENSES INCURRED BY SUCH AGENTS. SINCE, THIS PURE REIMBURSEMENT OF EXPENSES, NO TDS IS DEDUCTABLE. TH E APPELLANT HAD TAKEN CONFIRMATION FROM THE .CONSIGNM ENT AGENT THAT TDS WAS DEDUCTED FROM THE PAYMENT MADE BY THEM WHEREVER IT WAS APPLICABLE. SINCE TRANSACTION HAS A LREADY SUFFERED TAX ONCE IT CANNOT BE TAX AGAIN. THE ID. A .O. OBSERVED THAT NO DETAILS OF TDS WERE SUBMITTED BEFO RE HIM AND AS PER CIRCULAR NO. 715 DATED 08.08.1995. TDS I S TO BE DEDUCTED ON SUCH TYPE OF PAYMENTS. THUS, HE DISALLO WED THE EXPENSES OF RS.76,00,509/- & RS. 6,93,372/- U/S. (4 0)(A)(IA) OF THE IT ACT. ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 8 35 THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO H AD ALLOWED THE APPEAL ON THE BASIS OF NATURE OF PAYMEN T REIMBURSED I.E. EXPENDITURE INCURRED ON BEHALF OF T HE APPELLANT AND THERE IS NO ELEMENT OF PROFIT. THUS, ON REIMBURSEMENT, NO TDS IS REQUIRED TO BE DEDUCTED. 36 NOW THE REVENUE IS BEFORE US. THE ID. D.R. RELIED O N THE ORDER OF THE A.O. AND REQUESTED TO REVERSE THE ORDER OF C IT(A) WHEREAS FROM THE SIDE OF APPELLANT, THE ID. A.R. HA S ARGUED THAT THIS IS A REIMBURSEMENT OF ACTUAL EXPENSES. TH ESE EXPENSES WERE INCURRED BY THE AGENT ON BEHALF OF TH E APPELLANT FOR TRANSPORTATION AND OTHER CHARGES WHIC H HAD BEEN SPELT OUT IN THE BILL ITSELF INCLUDING COMMISS ION TO THE AGENT. THE C&F AGENT AND CONSIGNMENT AGENT HAD ALSO DEDUCTED TDS FOR PAYMENT MADE BY IT IN RESPECT OF T RANSPORT AND OTHER CHARGES ON BEHALF OF THE APPELLANT. THE I D. COUNSEL HAS ALSO DRAWN OUR ATTENTION ON PAGE NOS. 191 TO 19 3 OF PAPER BOOK WHICH SHOWS THAT TDS HAD BEEN DEDUCTED BY THE AGENTS ON THESE PAYMENTS WHICH HAS BEEN PAID BEFORE DUE DA TE OF RETURN FILED BY THEM. THE RELATION BETWEEN APPELLAN T AND THE AGENT IS PRINCIPLE AN AGENT. THE APPELLANT'S OBLIGA TION TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES WAS COMPLIED WITH BY IT'S AGENTS WHO HAD MADE PAYMENTS ON IT'S BEHALF. THEREFORE, THERE WAS NO QUESTION OF DEDUCTION TAX AT SOURCE WHEN THE PAYMEN T MADE BY THE AGENT IS REIMBURSED TO IT. THE CIRCULAR MENT IONED BY THE ID. A.O. IS APPLICABLE FOR PAYMENT MADE TO PRIN CIPAL TO PRINCIPAL. THUS, HE PRAYED TO CONFIRM THE ORDER OF THE CIT(A). 37 WE HAVE PERUSED THE ORDER OF THE AUTHORITIES BELOW AND HEARD THE ARGUMENTS BOTH THE SIDES. THE NATURE OF PAYMENT IS REIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY THE AG ENT WHICH NECESSARY EVIDENCE HAS BEEN FILED BEFORE US. THE AG ENT HAD DEDUCTED THE TDS ON THESE PAYMENTS AND PAID TO THE EXCHEQUER WITHIN PRESCRIBED TIME. THUS, WE DO NOT F IND ANY REASON TO INTERVENE IN THE ORDER OF CIT(A). ACCORDI NGLY, WE DISMISS THE APPEAL OF THE REVENUE. 13. SINCE THE FACTS IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF A.Y. 06-07. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH FOR A.Y. ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 9 06-07, WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO DISALLOWANCE UNDER SECTION 40(A)(IA) IS CALLED FOR. WE THEREFORE DELE TE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THUS THIS GROUND OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 2743/AHD/2012(A.Y. 2005-06) (REVENUES APPEAL) 15. WHILE FRAMING THE ASSESSMENT UNDER SECTION 143 ASSE SSING OFFICER MADE DISALLOWANCE ON ACCOUNT OF LEASE RENT OF RS. 7,68,9 9,864/- AND DISALLOWANCE UNDER SECTION 40(A)(IA) OF RS. 52,99,5 60/- TOTAL DISALLOWANCE AGGREGATING TO RS. 8,21,99,424/-. ON THE AFORESAID DISALLOWANCE MADE ASSESSING OFFICER VIDE ORDER DATE D 30.03.2010 LEVIED PENALTY OF RS. 3,78,830/- U/S 271(1)(C). AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFO RE CIT(A). CIT(A) DELETED THE PENALTY. AGGRIEVED BY THE AFORESAID ORD ER OF CIT(A) THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED T HE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN DELETING PENALTY OF RS. 2,81,39,583/- LEVIED U/S 271(1)(C) OF THE I.T. ACT ON ADDITION OF RWS. 7,68,99,864/- M ADE ON ACCOUNT OF LEASE RENT CLAIMED BY ASSESSEE AND AS SUSTAINED BY LD. CIT(A). 16. BEFORE US, THE LEARNED D.R. RELIED ON THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED A.R. SUBMITTED THAT THE IDENTICAL DISALLOWANCES MADE BY THE ASSESSING OFFICER IN EARL IER YEARS HAVE BEEN DELETED. HE THUS URGED THAT PENALTY BE LEVIED IN TH E PRESENT CASE. ITA NO 3871/A/2008 & 2743/A/2012 . A.Y. 2005- 06 10 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WHILE DECIDING THE APPEAL NO. 3871 HEREINABOVE THE ADDITION MADE IN THE QUANTUM PROCEEDINGS HAVE BEEN DIRECTED TO BE DE LETED. WE ARE OF THE VIEW THAT SINCE THE ADDITION BASED ON WHICH PENALTY WAS LEVIED HAS ITSELF BEEN DELETED, THE PENALTY ORDER EMANATING FROM IT T HEREFORE DOES NOT SURVIVE. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS CONFIRM HIS ORDER OF DELETING PENAL TY. THUS THIS GROUND OF REVENUE IS DISMISSED. 18. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALLO WED AND OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 27 - 08 - 2013. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD