Rithwik Swathi Joint Venture, Hyd, Hyderabad V. DCIT, Circle-3(1), Hyderabad, Hyderabad

ITA 293/HYD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4595 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-07-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Business expenditure; Opportunity of being heard; Question of law; Assessment record; Revenue expenditure
• Section: 143(3)

Judgement Text

ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.293/HYD/2016 (ASSESSMENT YEAR: 2007-08) M/S. RITHWIK SWATHI JOINT VENTURE HYDERABAD PAN:AAAAR3284K VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO FOR REVENUE : SHRI M. SITARAM, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT (A)-3, HYDERABAD, DATED 17/12/2015 CONFIRMI NG CERTAIN DISALLOWANCES MADE BY THE AO U/S 143(3) R.W.S. 254 OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, E NGAGED IN BUSINESS OF CIVIL CONSTRUCTION, HAD FILED ITS RETUR N OF INCOME FOR THE A.Y 2007-08 ON 31-10-2007 DECLARING INCOME OF RS.79,49,005. IN THE ASSESSMENT ORDER PASSED U/S 14 3(3) OF THE ACT, THE AO ASSESSED THE TOTAL INCOME AT RS.1,69,17 ,558 AND THE CIT (A) CONFIRMED THE SAME IN THE APPEAL FILED BY T HE ASSESSEE. THE ASSESSEE PREFERRED FURTHER APPEAL TO ITAT, WHIC H SET ASIDE THE SAME TO THE AO WITH CERTAIN DIRECTIONS. CONSEQUENT THERETO, THE DATE OF HEARING: 03. 07. 201 8 DATE OF PRONOUNCEMENT: 09.08.2018 ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 2 OF 11 AO HAS PASSED THE ASSESSMENT ORDER DATED 18.03.2014 AGAIN MAKING THE FOLLOWING DISALLOWANCES: I) BANK GUARANTEE COMMISSION OF RS.56,51,347/- II) LEGAL CHARGES OF RS.4,04,000 U/S 40(A)(IA) III) EXPENSES OF RS.15,00,000 ON ADHOC BASIS. 3. THE ASSESSEE PREFERRED ITS APPEAL TO CIT (A), WH O ALLOWED IT IN PART I.E. DIRECTED THE AO TO ALLOW TH E EXPENDITURE OF RS.4,04,000 IF IT WAS ALREADY PAID, BY FOLLOWING TH E DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRA NSPORT REPORTED IN (136 ITD 23) (SB). HOWEVER, THE CIT (A ) CONFIRMED THE OTHER TWO ADDITIONS ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH THE EVIDENCE IN SUPPORT OF ITS CONTENTIONS AND AS DIRECTED BY THE ITAT. THE ASSESSEE IS THUS IN APPEAL BEFORE US IN THE SECOND ROUND OF LITIGATION BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT-(A), HYDERABAD ERRED BOTH IN LAW AN D ON FACTS WHILE ALLOWING THE APPEAL IN PART. 2. THE LD. CIT-(A) ERRED IN SUSTAINING THE DISALLOW ANCE MADE BY THE AO FOR AN AMOUNT OF RS.58,61,347/- TOWA RDS BANK GUARANTEE COMMISSION. 3. THE LD. CIT-(A) OUGHT TO HAVE APPRECIATED THAT T HE BANK GUARANTEES HAVE BEEN ISSUED BY THE PRINCIPLE CONTRA CTOR ON BEHALF OF THE APPELLANT AND THAT THE EXPENSES IN RESPECT OF THE SAME ARE INCURRED BY THE APPELLANT FOR SMOOT H FUNCTIONING OF THE BUSINESS. 4. THE LD. CIT-(A) OUGHT TO HAVE APPRECIATED THAT T HE PRINCIPAL CONTRACTOR HAS PROVIDED BANK GUARANTEE FO R THE PURPOSE OF BUSINESS OF THE APPELLANT AND HENCE THE EXPENDITURE INCURRED IN CONNECTION WITH THE SAME IS REQUIRED TO BE ALLOWED AS BUSINESS EXPENDITURE IN T HE HANDS OF THE APPELLANT. 5. THE LD. CIT-(A) OUGHT TO HAVE APPRECIATED THAT T HE AO HAS NOT FOLLOWED THE DIRECTIONS GIVEN BY THE HON'BL E ITAT VIDE ITS ORDER IN ITA NO.797 JHYDJ2011 DATED 22-03- 2012 WITH REGARD TO THE ALLOWANCE OF BANK GUARANTEE COMMISSION PAID BY THE APPELLANT. ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 3 OF 11 6. THE LD. CIT(A) OUGHT TO HAVE DELETED THE DISALLO WANCE OF RS4,04,000/- MADE U/S 40 (A)(IA) OF THE ACT SINCE T HE APPELLANT HAD ALREADY PAID THE IMPUGNED LEGAL CHARG ES. 7. THE LD. CIT(A) GROSSLY ERRED IN PARTLY ALLOWING THE GROUND OF APPEAL WITH REGARD TO THE DISALLOWANCE U/ S 40(A)(IA) SUBJECT TO THE VERIFICATION BY THE ASSESS ING OFFICER THAT WHETHER THE AMOUNT IN QUESTION WAS ALREADY PAI D OR PAYABLE. 8. THE LD. CIT(A) GROSSLY ERRED IN APPRECIATING THE FACT THAT THE VERY CLAIM OF THE APPELLANT WITH REGARD TO THE DISALLOWANCE U/ S 40(A)(IA) BEFORE THE ASSESSING OF FICER AND THE APPELLATE AUTHORITIES WAS THAT THE LEGAL CH ARGES WERE ALREADY PAID BY THE APPELLANT BEFORE THE END O F THE FINANCIAL YEAR RELEVANT TO THE ASST. YEAR UNDER CONSIDERATION. 9. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E HON'BLE ITAT VIDE THEIR ORDER DATED 22-03-2012 HAS SET ASIDE THE ISSUE OF DISALLOWANCE U/S 40(A)(IA) OF TH E ACT TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE WHETHER EACH PAYMENT MADE BY THE APPELLANT WAS LESS THAN RS.20,000 J - OR NOT AND TO DECIDE THE ISSUE ACCORDINGLY. 10. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ASSESSING OFFICER VIDE HIS ORDER U/S 143(3) RWS 254 OF THE ACT DATED 18-03-2014 HAS IGNORED THE DIRECTIONS OF THE HON'BLE ITAT CONTAINED IN PARA NOS. 17 TO 19 OF THE IR ORDER AND MADE THE DISALLOWANCE U/S 40(A)(IA) RELYING ON THE DECISION OF KOLKATA HIGH COURT IN THE CASE OF CIT V S. CRESCENT EXPORTS SYNDICATE [2013] 33 TAXMANN.COM 25 0 (CA1.) AND GUJARAT HIGH COURT IN THE CASE OF CIT VS . SIKANDARKHAN N. TUNVAR [2013] 33 TAXMANN.COM 133 (GUJ.). 11. THE LD. CIT(A) ERRED IN CONFORMING THE DISALLOW ANCE OF EXPENDITURE FOR RS.15,00,000/-. 12. THE LD. CIT(A) WHILE CONFIRMING THE DISALLOWANC E OF RS.15,00,000/-OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE DIRECTION OF THE HON'BLE ITAT VIDE PARA NO.16 OF THEIR ORDER DATED 2 2-03- 2012 BEFORE MAKING THE DISALLOWANCE. 13. THE LD. CIT(A) WHILE, CONFIRMING THE DISALLOWAN CE OF RS.15,00,000/-HAS GROSSLY IGNORED THE OBSERVATION O F THE HON'BLE ITAT VIDE PARA NO.16 OF THEIR ORDER DATED 2 2-03- 2012 THAT CONSIDERING THE NATURE OF DISCREPANCY NOT ICED BY THE ASSESSING OFFICER, THEY WERE OF THE OPINION THAT AD- ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 4 OF 11 HOC DISALLOWANCE AT RS.15,00,000/- WAS ON HIGHER S IDE AND THAT IN THEIR OPINION, TO MEET THE ENDS OF JUST ICE, DISALLOWANCE OF 5% OF THE EXPENDITURE WOULD BE PROP ER. 14. THE LD. CIT(A) OUGHT TO HAVE RESTRICTED THE DISALLOWANCE TOWARDS UNVOUCHED EXPENDITURE TO THE EXTENT OF ONLY 5% OF CASH EXPENSES. 15. THE ASSESSEE MAY ADD, ALTER, OR MODIFY OR SUBST ITUTE ANY OTHER POINTS TO THE GROUNDS OF APPEAL AT ANY TI ME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 4. FURTHER, VIDE LETTER DATED 28.7.2017, THE ASSESS EE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: IN CONTINUATION TO THE EARLIER GROUNDS OF APPEAL F ILED FROM S.NO.1 TO 15 IN RESPECT OF THE ASSESSEE FOR THE A.Y 2007-08, ADDITIONAL GROUNDS OF APPEAL BEARING S.NOS.16 TO 21 ARE ENCLOSED HEREWITH. YOU ARE HEREBY REQUESTED TO KIND LY ADMIT THE ADDITIONAL GROUNDS OF APPEAL. THE ADDITIONAL GR OUNDS SO RAISED HEREUNDER ARE TAKEN FOR THE FIRST TIME BEFOR E THE HON'BLE ITAT AND RELATES TO THE QUESTION OF LAW ARI SING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PRO CEEDINGS AND THEREFORE, IN VIEW OF THE JUDGMENT OF THE HON'B LE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THER MAL POWER CO. LTD VS. CIT, 229 ITR 383, THE SAME MAY PL EASE BE ACCEPTED . 5. AS REGARDS GROUNDS 2 TO 5, BRIEF FACTS HAVE ALRE ADY BEEN ENUMERATED IN THE PARAS ABOVE. ON 23 RD NOVEMBER, 2017, THIS BENCH CALLED FOR A REMAND REPORT FROM THE AO B Y OBSERVING AS UNDER: ITA NO.293/HYD/2016 - M/S. RITHWIK SWATHI JOINT VENTURE HYDERABAD THIS CASE WAS HEARD AT LENGTH AND ONE OF THE ISSUE IN THIS APPEAL IS THE BANK GUARANTEE COMMISSION OF RS.58,61 ,347. THIS IS THE SECOND ROUND OF LITIGATION. IN THE EARL IER ROUND, THE ITAT VIDE ORDER DATED 22.3.2012, HAD REMITTED T HE ISSUE TO THE FILE OF THE AO FOR VERIFICATION AND ADJUDICA TION. IN COMPLIANCE WITH THE DIRECTIONS OF THE TRIBUNAL, THE AO ISSUED NOTICE AND REQUIRED THE ASSESSEE TO FURNISH CERTAIN INFORMATION. THE ASSESSEE FILED A LETTER DATED 10TH APRIL, 2007 OF M/S.PROGRESSIVE CONSTRUCTIONS LTD (M/S. PCL IN SHORT) MENTIONING THAT AN AMOUNT OF RS.59,33,240 IS ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 5 OF 11 DEBITED TO THE ACCOUNT OF THE ASSESSEE TOWARDS BANK GUARANTEES ISSUED BY IT IN FAVOUR OF M/S. THDC FOR OBTAINING MOBILIZATION ADVANCE, MACHINERY ADVANCE A ND PERFORMANCE GUARANTEE. OBSERVING THAT EXCEPT FOR FI LING OF THIS LETTER, THE ASSESSEE HAS NOT DEMONSTRATED BY W AY OF ANY CORROBORATORY EVIDENCE REGARDING FURNISHING OF BANK GUARANTEE BY M/ S. PROGRESSIVE CONSTRUCTIONS IN FAV OUR OF M/S. THDC ON BEHALF OF THE ASSESSEE, THE AO DISALLO WED THE SAME AND BROUGHT TO TAX AND THE CIT (A) HAS CON FIRMED THIS ADDITION. ON PERUSAL OF THE ORDER OF THE TRIBU NAL DATED 22.3.2012, WE FIND THAT THE TRIBUNAL HAS CONSIDERED THE FACT THAT M/ S. PCL, BEING THE PRINCIPAL CONTRACTOR , HAS ISSUED THE BANK GUARANTEE IN FAVOUR OF THDC ON BEHA LF OF THE ASSESSEE AND AFTER CONSIDERING THE JURISDICTION AL HIGH COURT DECISION IN THE CASE OF ACIT VS. AKKAMBA TEXT ILES LTD (117 ITR 294), TRIBUNAL HAS HELD THAT THE BANK GUAR ANTEE COMMISSION HAS TO BE TREATED AS BUSINESS EXPENDITUR E IF THE BANK GUARANTEE HAS BEEN GIVEN TO M/S THDC BY PCL ON BEHALF OF THE ASSESSEE. THE TRIBUNAL HAS THEREFORE, DIRECTED THE AO TO VERIFY IF THE BANK GUARANTEE HAS BEEN FUR NISHED BY M/S PCL ON BEHALF OF THE ASSESSEE. THE AO HOWEVE R, HAS EMBARKED ON A FRESH INQUIRY AS TO THE ALLOWABIL ITY OF THE EXPENDITURE WHICH IS NOT THE DIRECTION OF THE T RIBUNAL. THEREFORE, WE ISSUE THIS INTERIM DIRECTION TO THE A O TO FURNISH A REMAND REPORT WITH A COPY TO THE OTHER SI DE ON OR BEFORE 29.01.2018 AFTER VERIFYING THE DOCUMENTS FUR NISHED BY THE ASSESSEE WITH REGARD TO THE BANK GUARANTEE FURNISHED BY PCL TO THDC AND IF NECESSARY CALLING F OR CONFIRMATION FROM M/S PCL WITH REGARD TO THE ASSESS EE'S CLAIM THAT PCL HAS GIVEN BANK GUARANTEE ON BEHALF O F THE ASSESSEE AND HAS PAID THE SUB CONTRACT RECEIPT TO T HE ASSESSEE ONLY AFTER REDUCING THE BANK GUARANTEE COMMISSION PAID BY IT TO THE PUNJAB NATIONAL BANK. THE ASSESSEE SHALL COOPERATE WITH THE AO BY FURNISHING THE RELEVANT MATERIAL AND THE AO SHALL GIVE THE ASSESSE E A FAIR OPPORTUNITY OF BEING HEARD DURING THE REMAND PROCEE DINGS. IT IS ACCORDINGLY ORDERED. COPY OF THIS ORDER IS TO BE FURNISHED TO BOTH THE PARTIES. SD/- SD/- (AM) (JM) 23 RD NOVEMBER, 2017 6. IN COMPLIANCE THEREOF, THE AO REPLIED TO THE CIT (DR), AS UNDER: OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRC-LE-3(1), ROOM NO. 714, 7TH FLOOR, SIGNATURE 1L'OWERS, KONDAPU~ HYDERABAD 500084, PH: 040-23485434 ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 6 OF 11 F.NO. DCIT /C-3(1)/ AAAAR3284K/ITAT /2017-18 DT.13,3,2018 TO THE SR. AUTHORIZED REPRESENTATIVE-I, INCOME TAX APPELLATE TRIBUNAL, A-BENCH, HYDERABAD. MADAM, SUB: APPELLATE PROCEEDINGS IN THE CASE OF M/S. RITH WIK SWATHI JV- AAAAR3284K - AY 200'7-08 :ITA NO.293/HYD/2016 REG. REF: I. LETTER IN F.NO. ITA 293/H/2016 DATED 22.01.2018. II. THIS OFFICE LETTER IN F.NO. DC-3(1)/SECONP APPEAL/2017-1.8 DATED 25.01.2018. KINDLY REFER TO THE ABOVE. AS PER THE DIRECTIONS OF HON'BLE ITAT A-BENCH, HYDE RABAD VIDE ORDER DATED 23.11.2017 IN THE CASE OF M/S. RIT HWIK SWATHI JV IN ITA NO. 293/HYD/2016 FOR AY 2007-08, INFORMATION WAS CALLED FOR FROM ASSESSEE M/ S. RITH WIK SWATHI JV AS WELL AS FROM PRINCIPAL CONTRACTOR M/S. PROGRESS.VE CONSTRUCTIONS LTD VIDE LETTER DATED 14. 02.2018 IN RESPECT OF THE ASSESSEE'S CLAIM OF BANK GUARANTE E COMMISSION. THE ABOVE LETTER WERE DULY SERVED ON BO TH PARTIES THROUGH NOTICE SERVER ON 14.02.2018 & 15.02 .2014 AS WELL AS THROUGH EMAIL TORPLHYD@RITHWIKPROJECTS.C OM. NAVYA.KALLAM@PROGRESSIVE CONSTRUCTIONS.COM & [e-mail] ON 14.02.2018 AND THE DATE OF COMPLIANCE WAS FIXED FOR 23.02.2018. HO WEVER, NO COMPLIANCE HAS BEEN MADE BY ANY OF THE PARTIES T ILL DATE. 2. IN VIEW OF THE ABOVE, AS THERE WAS NO COMPLIANCE FROM ASSESSEE AS WELL AS FROM PRIME CONTRACTOR, IT IS RE QUESTED THAT THE HON'BLE ITAT MAY KINDLY BE REQUESTED THAT THE ISSUE OF CLAIM OF BANK GUARANTEE COMMISSION BY ASSE SSEE MAY KINDLY BE DECIDED ON MERITS AND INFORMATION AVA ILABLE ON- RECORD. ASSESSMENT RECORDS IN TWO VOLUMES ARE E NCLOSED HEREWITH FOR KIND REFERENCE. YOURS FAITHFULLY, (N.SRIKANTH) DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERA BAD ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 7 OF 11 7. THEREFORE, WE PROCEED TO DISPOSE OF THE APPEAL O N THE BASIS OF THE MATERIAL ON RECORD. WE FIND THAT THIS TRIBUNAL IN ITA NO.797/HYD/2011 DATED 22.03.2012 HAD CONSIDERED THI S ISSUE AND HAD DIRECTED AS UNDER: 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE CLAIM OF THE ASSESSEE IS THAT THE BANK GUARANTEE HAS BEEN GIVEN ON BEHALF OF THE ASSESSEE BY ITS PRINCIPAL M/ S. PCL IN FAVOUR OF M/S. THDC. ON THIS M/S. PCL INCURRED BANK GUARANTEE COMMISSION AT RS. 58,61,341 AND THE SAME WAS REIMBURSED BY THE ASSESSEE TO M/S. PCL AS THE BANK GUARANTEE IS GIVEN ON BEHALF OF THE ASSESSEE IN FAVOUR OF M/S. THDC. ACCORDING TO THE ASSESSEE THIS IS A B USINESS EXPENDITURE. IN OUR OPINION, IF THE BANK GUARANTEE HAS BEEN GIVEN TO M/S. THDC BY M/S. PCL ON BEHALF OF THE ASSESSEE THE N THE BANK GUARANTEE COMMISSION HAS TO BE TREATED AS BUSINESS EXPENDITURE IN VIEW OF THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. AKKAMBA TEXTILES LTD. (117 ITR 294) WHEREIN IT WAS HELD AS UNDER: 'THE QUESTION WHETHER A PARTICULAR EXPENDITURE IS R EVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINESS MUST BE VI EWED IN THE LARGER CONTEXT OF BUSINESS NECESSITY OR EXPEDIENCY. IF THE OUTGOING EXPENDITURE IS SO RELATED TO THE CARRYING ON OR THE CONDUCT OF BUSINESS, THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFIT-EARNING PROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER, THE POSSESSION OF WHICH IS A CONDITION TO THE CARRY ING ON OF BUSINESS, THE EXPENDITURE MAY BE REGARDED AS REVENUE EXPENDIT URE. THE TRANSACTION OF ACQUISITION OF ASSETS CAN BE SAI D TO BE CLOSELY RELATED TO THE COMMENCEMENT AND CARRYING ON OF BUSI NESS BY AN ASSESSEE. HENCE, ANY EXPENDITURE INCURRED BY THE AS SESSEE, WHICH IS A RUNNING CONCERN, FOR ENSURING USE OF MONEY FOR A CE RTAIN PERIOD OR ENABLING THE ASSESSEE TO MAKE DEFERRED PAYMENT OF C OST OF ASSETS ACQUIRED, CONSTITUTES REVENUE EXPENDITURE AND, THER EFORE, THE SAME IS ADMISSIBLE AS DEDUCTION FROM REVENUE INCOME. THEREF ORE, THE COMMISSION PAID BY THE ASSESSEE TO THE GUARANTOR FO R ENABLING IT (THE ASSESSEE) TO MAKE DEFERRED PAYMENT OF THE PURCHASE CONSIDERATION, CONSTITUTES REVENUE EXPENDITURE AND NOT CAPITAL EXP ENDITURE AND, THEREFORE, IS ADMISSIBLE AS DEDUCTION FROM THE INCO ME.' 8. THUS, AS OBSERVED BY US EARLIER IN OUR DOCKET OR DER DATED 23.11.2017, THE DIRECTION OF THE TRIBUNAL WAS TO VERIFY WHETHER PCL HAS GIVEN THE BANK GUARANTEE AND NOT TO RE- ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 8 OF 11 EXAMINE THE ENTIRE ISSUE AFRESH. AS REGARDS THE EVI DENCE AS TO WHETHER PCL HAS GIVEN BANK GUARANTEE AND AS TO WHET HER THE ASSESSEE WAS REQUIRED TO PAY THE GUARANTEE COMMISSI ON, THE ASSESSEE HAS FILED THE COPIES OF THE CONSTRUCTION A GREEMENT BETWEEN THDC & PCL DATED 14.11.2002 AND THE AGREEME NT BETWEEN PCL & M/S RITHWIK PROJECTS LTD AND M/S. SWA THI CONSTRUCTIONS DATED 21.12.2002. ON PERUSAL THEREOF, IT IS NOTICED THAT M/S. PCL INTRTECH LENHYDRO CONSORTIUM JV WAS A WARDED THE CONTRACT AND CONSTITUENT MEMBERS AGREED TO DEMARCAT E AND SHARE, FOR OPERATIONAL CONVENIENCE, THEIR RESPONSIB ILITIES IN RESPECT OF EXECUTION OF THE WORK. IT IS ALSO NOTICED THAT R SJV HAS TAKEN ON SUB-CONTRACT THE WORK OF PCL. AS PER THE SAID AGREE MENT, THE MARGIN MONEY AND BANK GUARANTEE COMMISSION IS PAYAB LE BY THE JV AS UNDER: 4. MARGIN MONEY AND BANK GUARANTEE COMMISSION: RSJV HAS AGREED TO PAY MARGIN MONEY/DEPOSIT TO PROGRESSIVE AND THE DETAILS OF WHICH ARE GIVEN HERE UNDER: A) AN INTEREST BEARING DEPOSIT TO 30% OF PERFORMANCE BANK GUARANTEE TOWARDS MARGIN MONEY FOR FURNISHING THE PERFORMANCE BANK GUARANTEE TO THE EMPLOYER AS PER THE ORIGINAL AGREEMENT. THE SAID DEPOSIT SHALL BE COME REFUNDABLE WITHIN 7 DAYS OF THE PERFORMANCE GUARANTEE BEING RETURNED BY THE EMPLOYER TO PROGRESSIVE. B) AN INTEREST BEARING DEPOSIT EQUIVALENT TO 30% OF TH E ADVANCE BANK GUARANTEE TOWARDS MARGIN MONEY FOR FURNISHING THE MOBILIZATION ADVANCE GUARANTEE TO TH E EMPLOYER AS PER THE ORIGINAL AGREEMENT. THE SAID DEPOSIT SHALL BECOME REFUNDABLE, IN PROPORTION TO T HE RETURN OF MOBILIZATION ADVANCE BANK GUARANTEE FURNISHED TO THE EMPLOYER, WITHIN 7 DAYS OF THE MOBILIZATION ADVANCE BANK GUARANTEE BEING AS AND WHEN RETURNED BY THE EMPLOYER. THE MOBILIZATION ADVANCE GIVEN SHALL BE SHARED EQUALLY I.E 50% EACH BY PCL AND RSJV. THE INTEREST ON MOBILIZATION ADVANCE LEVIED BY DEPARTMENT SHALL BE BORNE PROPORTIONATELY (I.E. 50% EACH) BY BOTH THE PARTIES. THE MARGIN MON IES AND BANK COMMISSIONS FOR THE BANK GUARANTEES SHALL BE BORNE PROPORTIONATELY (I.E. 50% EACH) BY BOTH TH E ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 9 OF 11 PARTIES. COMMISSIONS INCURRED OBTAINING THE MOBILIZATION ADVANCE BANK GUARANTEE INCLUDING THE COMMISSION TOWARDS EXTENSION OF MOBILIZATION ADVANC E BANK GUARANTEE.. C) ALL OTHER BANK GUARANTEES NECESSARY DURING THE EXECUTION OF WORK WILL BE PROVIDED BY EITHER BY RPL OR SWATHI INDIVIDUALLY ON BEHALF OF PCL INTEERTECH LENHYDRO CONSORTIUM JM TO THE EMPLOYER 10. THUS, IT CAN BE SEEN THAT RSJV WAS REQUIRED TO FURNISH THE BANK GUARANTEE ON BEHALF OF PCL INTERTECH LENHY DRO CONSORTIUM JV TO THE EMPLOYER. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED THE COPY OF THE BANK GUARAN TEE NO.4437ILG003706 ISSUED BY PUNJAB NATIONAL BANK TO THDC DATED 23.06.2006 FOR AN AMOUNT OF RS.45,00,000/-. T HUS, IT APPEARS TO HAVE BEEN GIVEN FOR THE FIRST TIME IN 20 06, I.E. AFTER THE EXECUTION OF CONTRACT AGREEMENT WITH RSJV, AND THER EFORE, AS PER THE TERMS OF THE AGREEMENT, RSJV IS REQUIRED TO PRO VIDE THE BANK GUARANTEE. THE BANK GUARANTEE GIVEN BY PNB DOES NOT SPECIFY AS TO ON WHOSE BEHALF THE GUARANTEE HAS BEEN GIVEN. FR OM THE LETTER DATED 2-1-2015 ISSUED BY PNB, THE BANK GUARANTEE NO.4437ILG000206 DATED 3.2.2006 ALSO IN FOR A SUM O F RS.45.00 LAKHS WHICH WAS EXTENDED UPTO 31.12.2015 AND IN THI S LETTER, THERE IS A REFERENCE TO M/S. PCL-INTERTECH LENHYDRO CONSORTIUM JOINT VENTURE. SINCE THE BANK GUARANTEE WAS GIVEN I N 2006, THE ASSESSEE HAS CLAIMED THE COMMISSION FROM A.Y 2007-0 8 ONWARDS. THE LETTER OF M/S PCL DATED 10.04.2007 REFERS TO TH E DEBIT OF BANK GUARANTEE CHARGES BEING RECOVERED FROM RA BILL AMOUNTS. THEREFORE, THERE APPEARS TO BE MANY MISSING LINKS I N THIS CASE. NO DOUBT, THE ONUS IS ON THE ASSESSEE TO PROVE ITS CLA IM AND THE TRIBUNAL HAD SET ASIDE THE ISSUE TO GIVE THE ASSESS EE, AN OPPORTUNITY TO SUBSTANTIATE ITS CLAIM. THE ASSESSEE HAS PRODUCED ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 10 OF 11 THE LETTER OF M/S. PCL AND THE BANK GUARANTEE OF PN B ONLY TO PROVE ITS CLAIM, BUT THESE ARE NOT CONCLUSIVE EVIDE NCE. THE LEARNED COUNSEL FOR THE ASSESSEE HAD SUBMITTED THAT M/S. PC L WAS NOT ABLE TO PROVIDE THE NECESSARY DETAILS TO THE ASSESS EE INSPITE OF REQUEST MADE BY IT. IN THESE CIRCUMSTANCES, WE ARE CONSTRAINED TO DECIDE THE ISSUE ON THE BASIS OF THE ENTRIES IN THE BOOKS OF THE ASSESSEE AND THE PREPONDERENCE OF PROBABILITIES. IT IS COMMON KNOWLEDGE THAT IN CIVIL CONTRACTS, BANK GUARANTEE H AS TO BE GIVEN AND FROM THE A/C OF THE ASSESSEE, IT IS SEEN THAT I T HAS NOT PROVIDED ANY FUNDS FOR THE BANK GUARANTEE BUT HAS C LAIMED ONLY THE BANK GUARANTEE COMMISSION. SINCE PCL-INTERTECH CONSORTIUM WAS THE MAIN CONTRACTOR, THE BANK GUARAN TEE WOULD HAVE TO BE PROVIDED IN ITS NAME. SINCE THE ASSESSEE HAS NOT REFLECTED THE BANK GUARANTEE IN ITS BOOKS, IT HAS T O BE PRESUMED THAT BANK GUARANTEE HAS BEEN GIVEN BY M/S. PCL AND THAT THE ASSESSEE IS LIABLE TO PAY THE GUARANTEE COMMISSION FOR AVAILING THE SAID SERVICE. IN THESE CIRCUMSTANCES, THE BANK GUAR ANTEE COMMISSION IS ALLOWABLE AS BUSINESS EXPENDITURE. TH US, GROUNDS 2 TO 5 ARE ALLOWED. 11. AS REGARDS GROUNDS 6 TO 10 AGAINST DISALLOWANCE U/S 40(A)(IA) OF THE ACT, WE FIND THAT THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL IN SUPPORT OF THESE GROUNDS. THE ADDITIONAL GROUNDS BEING LEGAL IN NATURE, THEY ARE ADMITTED AN D REMITTED TO THE FILE OF THE AO AND IT IS DIRECTED THAT IF IT IS FOUND THAT THE ASSESSEE HAS NOT BEEN TREATED AS AN ASSESSEE-IN-DE FAULT U/S 201(1), THEN NO DISALLOWANCE U/S 40(A)(IA) SHALL BE MADE. THUS, THE GROUNDS 6 TO 10 AND THE ADDITIONAL GROUNDS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO 293 OF 2016 RITHWIK SWATI JOINT VENTURE HYDERABAD. PAGE 11 OF 11 12. AS REGARDS GROUNDS 11 TO 14 ON THE ADHOC DISALLOWANCE OF RS.15,00,000/- FROM THE CLAIM OF EX PENSES, WE FIND THAT THE ITAT, IN THE EARLIER PROCEEDINGS, HAD DIRECTED THE AO TO DISALLOW ONLY 5% OF THE CASH EXPENSES UNVOUCHED BY PROPER BILLS AND RECEIPTS, IF IT IS NOT A STATUTORY PAYMEN T. THE AO AND THE CIT (A) HAVE MADE THE SAME DISALLOWANCE STATING THA T THE ASSESSEE HAS NOT SUBMITTED THE BILLS/VOUCHERS FOR V ERIFICATION. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS THESE GROUNDS OF APPEAL. ACCORDINGLY, THEY ARE REJECTED AS NOT PR ESSED. 13. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH AUGUST, 2018. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 9 TH AUGUST, 2018. VINODAN/SPS COPY TO: 1 P. MURALI & CO, CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2 DY.CIT, CIRCLE 3(1) HYDERABAD 3 CIT (A ) - 3, HYDERABAD 4 PR. CIT - 3, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER