AIG CAPITAL INDIA P. LTD, MUMBAI V. ITO RG 6(1)(4), MUMBAI

ITA 2940/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2237 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 26-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO. 2940/MUM/2011 (ASSESSMENT YEAR: 2007-08) PINEBRIDGE INVESTMENTS CAPITAL INDIA PRIVATE LIMITED (FORMERLY KNOWN AS AIG CAPITAL INDIA PRIVATE LIMITED) 1101, TOWERB, PENINSAULA BUSINESS PARK, G.K. MARG, LOWER PAREL, MUMBAI- 13 VS ITO, RANGE 6(1)(4) MUMBAI PAN : ASAFCA7262A (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NITESH JOSHI RESPONDENT BY SHRI GANESH BARE DATE OF HEARING : 14-07-2016 DATE OF PRONOUNCEMENT : 27 -07-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER C ALLED CIT(A)] DT 12- 01-2011 PASSED AGAINST THE ASSESSMENT ORDER OF THE AO U/S 143(3) DT 3- 12-2009 FOR A.Y. 2007-08 ON THE FOLLOWING GROUNDS: 2 I.T.A. NO.2940 /MUM/2011 THE FOLLOWING GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE AND INDEPENDENT OF THE OTHER. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, PINEBRI DGE INVESTMENTS CAPITAL INDIA PRIVATE LIMITED (FORMERLY KNOWN AS AIG CAPITAL INDI A PRIVATE LIMITED) [HEREINAFTER REFERRED TO AS THE APPELLANT] CRAVES TO PREFER AN A PPEAL AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) - 14, MUMB AI [HEREINAFTER REFERRED TO AS THE LEARNED CIT ( A )], UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 ( ACT) IN RESPECT OF THE ORDER PASSED BY THE INCOME-TAX OFFICER - 6(1)(4), M UMBAI (THE AO) UNDER SECTION 143(3) OF THE ACT, ON THE FOLLOWING GROUND: THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE AO IN DISALLOWING THE CONSULTANCY CHARGES PAID TO AMARCHAND & MANGALDAS & SURESH A SHROFF & CO (AMS) AMOUNTING TO RS 10,201,400. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI NITESH JOSH, ON BEHALF OF THE ASSESSEE AND BY SHRI GANESH BARE O N BEHALF OF THE REVENUE. 3. THE ONLY EFFECTIVE GROUND IN THIS CASE IS WITH REGA RD TO DISALLOWANCE OF A SUM OF RS.1,02,01,400 BEING THE CONSULTANCY CHARGES PAID TO THE LEGAL ADVISOR FIRM, M/S AMARCHAND MANGALDAS SURESH A SHROFF COMP ANY ON THE GROUND THAT THE SAID AMOUNT WAS NOT INCURRED FOR THE PURPOSE O F BUSINESS AS THE SAME WAS INCURRED PRIOR TO COMMENCEMENT OF BUSINESS OF THE A SSESSEE. 4. THE BRIEF FACTS AS CULLED OUT FROM THE ORDERS OF TH E LOWER AUTHORITIES ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED DURI NG THE YEAR UNDER CONSIDERATION ON 25-04-2006. THE ASSESSEE COMPANY IS AN INVESTMENT HOLDING COMPANY OF AIG GROUP AND IS REGISTERED WITH RESERVE BANK OF INDIA (RBI) AS NON BANKING FINANCIAL COMPANY (NBFC). THE PRINCIPA L BUSINESS OF THE ASSESSEE COMPANY WAS TO CARRY OUT BUSINESS OF ASSET MANAGEMENT, CONSUMER FINANCE, LEASING AND FINANCING AND IN TRUSTEESHIP O F MUTUAL FUNDS, OFFSHORE FUNDS, PENSION FUNDS, ETC. THE AO DISCUSSED THIS I SSUE AT PARA 4 ON PAGE 2 - 5 OF THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT, THE AO OBSERVED THAT DURING THE YEAR, THE ASSESSEE HAS REC EIVED ONLY INTEREST INCOME ON FIXED DEPOSITS PLACED WITH CITIBANK N.A, MUMBAI, AGAINST WHICH THE ASSESSEE HAS CLAIMED VARIOUS EXPENDITURE AGGREGATING TO RS.2 04,86,458/-, WHICH INCLUDES 3 I.T.A. NO.2940 /MUM/2011 AN AMOUNT OF RS.1,25,80,076/- PAID TOWARDS CONSULTA NCY CHARGES TO A LAW FIRM NAMELY M/S. AMARCHAND MANGALDAS & SURESH A. SHROFF & CO. DURING THE COURSE OF ASSESSMENT, THE AO ASKED THE ASSESSEE AS TO WHY SUC H CONSULTANCY CHARGES SHOULD NOT BE DISALLOWED SINCE CONSULTANCY CHARGES PAID HAVE NOT RESULTED INTO INTEREST INCOME. THE AO FURTHER ASKED THE ASSESSEE TO EXPLAIN THE NEXUS BETWEEN THE INTEREST INCOME AND THAT OF CONSULTANCY CHARGES PAID. IN RESPONSE TO THE SAME, THE ASSESSEE MADE ITS SUBMISSIONS. IT WAS CLARIFIED THAT AN AMOUNT OF RS. 1,25,80,078/- WAS PAID TO M/S, AMARCHAND MANGALDAS & SURESH A. SHROFF & CO. OUT OF WHICH THE ASSESSEE ITSELF HAS DISALLOWED AN AMOU NT OF RS.23,78,676/-, AS THESE EXPENDITURE HAS BEEN INCURRED PRIOR TO INCORP ORATION AND BALANCE AMOUNT OF RS.1,02,01,400/- ONLY HAS BEEN CLAIMED AS EXPEND ITURE. THE SUBMISSION OF THE ASSESSEE COMPANY COULD NOT SATISFY THE AO AND THERE FORE AO DISALLOWED THE CONSULTANCY CHARGES CLAIMED AS EXPENDITURE OF RS.1, 02,01 400. 5. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD. C IT(A) AND MADE DETAILED SUBMISSIONS. THE ARGUMENTS MADE BY THE AS SESSEE BEFORE THE LD. CIT(A) AS DISCUSSED BY LD.CIT(A) IN HIS ORDER ARE R EPRODUCED BELOW: IT HAS CLAIMED THAT THE APPELLANT IS A REGISTERED NBFC WITH RBI AND ITS ACTIVITY INCLUDES ASSET MANAGEMENT, CONSUMER FINANC E, LEASING AND FINANCING, TRUSTEESHIP FOR MUTUAL FUNDS, OFFSHORE F UND AND PENSION FUND, ETC. IT WAS CLAIMED THAT DURING THE COURSE OF SUCH NBFC ACTIVITY, IT HAS PLACED CERTAIN FIXED DEPOSIT WITH CITIBANK O N WHICH IT HAS RECEIVED INTEREST INCOME WHICH HAS BEEN OFFERED FOR TAX UNDE R THE HEAD 'BUSINESS INCOME'. IT HAS FURTHER SUBMITTED DETAILS OF LEGAL AND PROFESSIONAL FEES PAID AND SUBMITTED THAT THE ABOVE FEES HAVE BEEN PAID TO ADVOCATE FIRM M/S. AMARCHAND MANGALDAS & SURESH A. SHROFF & CO. (AMS) FOR DUE DILIGENCE CARRIED OUT FOR INVESTMENT PURPOSES. SINCE THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MAKING INVESTMENT, SUCH FEES PAID IS 'FOR THE PURPOSE OF B USINESS, THEREFORE, THE SAME NEEDS TO BE ALLOWED U/S 37(1) OF THE I.T. ACT, 1961. THE APPELLANT CLAIMED THAT AS PER PROVISIONS OF SECTION 37(1), SUCH 4 I.T.A. NO.2940 /MUM/2011 EXPENDITURE INCURRED IS ALLOWABLE AS THIS EXPENDITU RE IS NEITHER A CAPITAL EXPENDITURE NOR AN EXPENDITURE OF PERSONAL IN NATUR E. THE APPELLANT FURTHER CLAIMED THAT SUCH EXPENDITURE HAS BEEN INCU RRED WHOLLY AND EXCLUSIVELY 'FOR THE PURPOSE OF BUSINESS, THEREFOR E THE SAME NEEDS TO BE ALLOWED. THE APPELLANT HAS ALSO RELIED UPON THE FOLLOWING CASE LAWS: (A) DCIT VS. VENKATESWAR INVESTMENT & FINANCE P. LT D. 277 ITR 20 (CAL), ITAT. (B) CIT VS. AMALGAMATIONS PVT LTD (1997)226 ITR 188 (SC) (C) CIT VS. MALAYALAM PLANTATIONS LTD (1987)188 ITR 63 (SC) (D) CIT VS. JAGANNATH KISHONLAL 41 ITR 360 (SC). (E) CIT VS. PANIPAT WOOLEN & GENERAL MILLS 103 ITR 66. (F) MADHAVPRASAD JATIA VS. CIT 118 ITR 200 (SC), AND (G) S.A. BUILDERS LTD VS. CIT288 ITR 1(SC). 6. LD. CIT(A) CONSIDERED THE SUBMISSION OF THE ASSESSE E, BUT HE WAS NOT SATISFIED AND DID NOT FIND FORCE IN THE ARGUMENTS O F THE ASSESSEE. IT WAS HELD BY THE LD.CIT(A) THAT THE IMPUGNED EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE FOR MAKING INVESTMENT IN SHARES WHICH IS SHOWN AS INVESTMENT IN THE BALANCE SHEET, THEREFORE, SUCH EXPENDITURE INCURRED IS FOR MAKING INVESTMENT; HENCE, CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. IT WAS ALSO HELD BY THE LD.CIT|(A) THAT BUSINESS OF THE ASSESSEE COMPANY, AS AN NBFC I S TO PROMOTE, ACQUIRE OR INVEST BY WAY OF CAPITAL OR DEBT IN SECURITIES OF B ODY CORPORATE, TRUST OR SOCIETIES. IN THE PRESENT CASE, THE ASSESSEE HAS N OT MADE ANY INVESTMENT IN CAPITAL OR DEBT IN SECURITIES OF BODY CORPORATE, TR UST OR SOCIETIES, BUT RATHER, HAS PARKED ITS SURPLUS FUNDS AVAILABLE IN BANKS ON WHIC H IT HAS RECEIVED INTEREST INCOME. UNDER THESE CIRCUMSTANCES, IT WAS HELD THA T THE SAID EXPENSES CANNOT BE SAID TO BE INCURRED FOR THE PURPOSE OF BUSINESS AND, THEREFORE, DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS CONFIRMED. 6. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE T RIBUNAL. DURING THE COURSE OF HEARING LD. COUNSEL DREW OUR ATTENTION ON THE BALANCE-SHEET OF THE 5 I.T.A. NO.2940 /MUM/2011 ASSESSEE COMPANY FOR THE YEAR UNDER CONCERN SHOWING THAT ASSESSEE HAD SET- UP ITS BUSINESS DURING THE YEAR UNDER CONSIDERATIO N. LAW IN THIS REGARD IS WELL SETTLED THAT EXPENSES INCURRED IN CARRYING OUT THE BUSINESS ACTIVITIES AFTER THE BUSINESS IS SET-UP, ARE ALLOWABLE AS BUSINESS EXP ENDITURE. OUR ATTENTION WAS DRAWN ON THE NOTES TO THE COMPUTATION SHEET FILED A LONG WITH THE RETURN OF INCOME WHEREIN IT IS CLEARLY MENTIONED THAT ASSESSE E WAS READY TO COMMENCE ITS BUSINESS ON OCTOBER 11, 2006, BEING THE DATE ON WHICH ASSESSEE COMPANY RECEIVED NBFC REGISTRATION CERTIFICATE FROM RBI AND THEREFORE, ALL THE EXPENSES INCURRED PRIOR TO THIS DATE WERE VOLUNTARILY DISALL OWED AND ALL OTHER EXPENSES INCURRED SUBSEQUENT TO THIS DATE WERE CLAIMED AS BU SINESS EXPENSES. IT IS FURTHER SUBMITTED THAT THESE EXPENSES HAVE BEEN INC URRED IN THE NORMAL COURSE OF BUSINESS AND, THEREFORE, ALLOWABLE AS REVENUE EX PENSES. 7. PER CONTRA, THE LD. DR SUBMITTED THAT EXPENSES CAN BE INCURRED ONLY AFTER MAKING INVESTMENT AND NOT PRIOR TO THAT AND THEREFO RE, THESE WERE RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES. 8. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIE S AND SUBMISSIONS MADE BEFORE US BY BOTH THE SIDES. THE ADJUDICATION OF THE ISSUE INVOLVED BEFORE US INVOLVES FOLLOWING DIMENSIONS: (I) IN THE CASE OF A COMPANY, EXPENSES UNDER THE HEAD INCOME FROM BUSINESS CAN BE ALLOWED FROM WHICH STAGE? (II) WHEN THAT STAGE WAS ACHIEVED IN THE CASE OF ASSESSE E COMPANY? I.E. WHEN THE BUSINESS WAS COMMENCED AND WHEN IT WAS SET- UP? (III) WHAT KIND OF EXPENSES CAN BE ALLOWED AS REVENUE EXP ENSES IN THE CASE OF A FINANCIAL COMPANY IN THE COURSE OF ITS BU SINESS? AND (IV) WHETHER EXPENSES UNDER CONSIDERATION IN THE FORM OF LEGAL FEE 6 I.T.A. NO.2940 /MUM/2011 PAID TO A LAW FIRM NEEDS TO BE CAPITALISED OR ALLOW ED AS REVENUE EXPENSE, UNDER THE LAW? 9. WE HAVE PONDERED OVER ALL THESE ISSUES. AS FAR AS FIRST DIMENSION IS CONCERNED, I.E. FROM WHAT STAGE THE EXPENSE CAN BE TREATED AS ALLOWABLE IN THE CASE OF A COMPANY, WE SHALL MAKE FIRST OF ALL, REFERENCE TO SECTION 3 OF THE INCOME-TAX ACT, 1961, WHICH DEFINES PREVIOUS YEAR, AS UNDER: 3. FOR THE PURPOSES OF THIS ACT, PREVIOUS YEAR ME ANS THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR: PROVIDED THAT, IN THE CASE OF A BUSINESS OR PROFESSION NEWL Y SET UP, OR A SOURCE OF INCOME NEWLY COMING INTO EXISTENCE, IN TH E SAID FINANCIAL YEAR, THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WIT H THE DATE OF SETTING UP OF THE BUSINESS OR PROFESSION OR, AS THE CASE MAY BE, THE DATE ON WHICH THE SOURCE OF INCOME NEWLY COMES INTO EXISTENCE AND ENDING WITH THE SAID FINANCIAL YEAR. 10. IT MAY BE NOTED FROM THE PERUSAL OF THE PROVISO TO SECTION 3 THAT IN THE CASE OF NEWLY SET UP BUSINESS, THE PREVIOUS YEAR SHALL B E THE PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE BUSINESS OR, AS THE CASE MAY BE, THE DATE ON WHICH THE SOURCE OF INCOME NEWLY COMES INTO EXISTENCE AND END ING WITH THE SAID FINANCIAL YEAR. THUS, WE NEED TO FIND OUT WHEN THE BUSINESS OF THE ASSESSEE COMPANY CAN BE SAID TO BE SET-UP. THE BUSINESS MAY BE COMMENCED SUBSEQU ENTLY, BUT FOR THE PURPOSE OF ALLOWING THE EXPENSES, IT HAS TO BE SEEN THAT WHEN THE BUSINESS CAN BE SAID TO BE SET- UP. IT IS NOTED FROM THE NOTES TO THE COMPUTATIO N SHEET ATTACHED WITH THE RETURN OF INCOME THAT ASSESSEE HAD CLEARLY GIVEN ITS DATE OF SETTING UP OF BUSINESS AS 11 TH OCTOBER, 2006 BEING THE DATE ON WHICH THE ASSESSEE COMPANY RECEIVED NBFC REGISTRATION CERTIFICATE FROM RBI. WE AGREE WITH T HE ASSESSEE COMPANYS CONTENTION THAT ON THIS DATE, THE ASSESSEE WAS LEGALLY AND COM MERCIALLY COMPETENT TO DO ITS BUSINESS. IN OUR VIEW THE EXPRESSION 'SETTING UP' MEANS, AS DEFINED IN THE OXFORD 7 I.T.A. NO.2940 /MUM/2011 ENGLISH DICTIONARY, 'TO PLACE ON FOOT' OR 'TO ESTAB LISH', AND IN CONTRADISTINCTION TO 'COMMENCE'. THE DISTINCTION IS THIS THAT WHEN A BUS INESS IS ESTABLISHED AND IS READY TO BE COMMENCED THEN IT CAN BE SAID THAT BUSINESS I S SET UP. BUT BEFORE IT IS READY TO COMMENCE BUSINESS, IT IS NOT SET UP. IN OTHER WORDS , FOR SETTING UP OF BUSINESS, WHAT IS REQUIRED IS READINESS FOR COMMENCEMENT OF BUSINE SS AND ACTUAL COMMENCEMENT OF BUSINESS WOULD NOT BE NECESSARY. IN THIS REGARD, WE CAN ALSO TAKE FURTHER GUIDANCE FROM FOLLOWING JUDGEMENTS:- WESTERN INDIA VEGETABLE PRODUCTS LTD V CIT(A) (26 ITR 151)(BOM) CIT BOMBAY V RALLIWOLF LTD (121 ITR 262) (BOM) CIT(A) V SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LIMITED (91 ITR 170)(GUJ) 10.1. WE SHALL ALSO LIKE TO MAKE REFERENCE TO THE JUDGME NT OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DHL EXPRESS (I) LTD VS ACIT 154 TTJ 108 (MUM) WHEREIN IT WAS HELD THAT SETTING UP OF BUSINESS IS DISTINCT FR OM COMMENCEMENT OF BUSINESS. THE BUSINESS CAN BE SET-UP WHEN THE COMPANY IS READY TO DISCHARGE THE FUNCTION FOR WHICH IT IS INCORPORATED. IT WAS ALSO HELD THAT EX PENDITURE INCURRED AFTER THE SETTING UP OF BUSINESS IS DEDUCTIBLE AS REVENUE EXPENDITURE . IT IS ALSO BROUGHT TO OUR NOTICE THAT ONE OF THE OBJECTS FOR WHICH THE COMPANY WAS I NCORPORATED WAS TO MAKE INVESTMENT IN OTHER COMPANIES, AND THE ASSESSEE COM PANY HAD RECEIVED FUNDS IN THE FORM OF SHARE CAPITAL OR OTHER SOURCES BEFORE 11-10 -2006 AND IT HAD STARTED MAKING DUE DILIGENCE FOR POTENTIAL INVESTEE COMPANIES IMME DIATELY AFTER GETTING NBFC REGISTRATION CERTIFICATE ON 11-10-2006, THEN IT CAN BE SAID THAT ASSESSEE COMPANY WAS READY TO COMMENCE ITS BUSINESS AND THUS ITS BUSINES S WAS SET-UP ON 11-10-2006. THUS, WE FIND THAT IN PRINCIPLE, THE EXPENSES INCUR RED AFTER 11-10-2006 HAVING BEEN INCURRED AFTER SETTING UP OF BUSINESS ARE DEDUCTIBL E AS REVENUE EXPENDITURE. 11. THE NEXT ISSUE TO BE EXAMINED HERE IS ABOUT THE NAT URE OF EXPENSES UNDER QUESTION. IT IS NOTED THAT A SUM OF RS. 4,21,400 A ND RS.1,60,000 (AGGREGATING TO RS.2,01,400) WERE STATED TO HAVE BEEN INCURRED ON A CCOUNT OF REIMBURSEMENT OF 8 I.T.A. NO.2940 /MUM/2011 EXPENSES FOR PURCHASE OF STAMP PAPER. DURING THE C OURSE OF HEARING IT WAS STATED BY THE LD. COUNSEL THAT NO DETAILS ARE AVAILABLE ABOUT THE NATURE AND PURPOSES OF THESE EXPENSES. UNDER THESE CIRCUMSTANCES, WE FIND THAT THESE EXPENSES ARE NOT ALLOWABLE AND, THEREFORE, THESE ARE DISALLOWED. 11.1. WITH REGARD TO THE REMAINING EXPENSES OF RS. ONE C RORE, IT IS NOTED THAT THIS AMOUNT HAS BEEN PAID TO THE AFORESAID LAW FIRM ON A CCOUNT OF PROVISION FOR LEGAL AND PROFESSIONAL SERVICES RENDERED FOR THE PURPOSE OF D ILIGENCE OF THE INVESTMENTS TO BE MADE BY THE ASSESSEE COMPANY INTO THE SHARE CAPITAL OF OTHER COMPANIES. THE LOWER AUTHORITIES HAVE HELD THAT THESE EXPENSES ARE NOT I NCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND, THEREFORE, NOT ALLOWA BLE. IN THIS REGARD, WE DO NOT AGREE WITH THE REASONING GIVEN BY THE LD. CIT(A). THE ADMITTED FACTS ON RECORD, AS WAS NOTED BY THE LD. CIT(A) ARE THAT ASSESSEE COMPA NY IS A REGISTERED NBFC COMPANY WITH RBI AND ITS ACTIVITY INCLUDES WHOLE SPECTRUM O F ACTIVITIES PERTAINING TO ADVISORY, INVESTMENT AND FUNDING. UNDER THESE CIRCUMSTANCES, IT IS CLEAR THAT EXPENSES INCURRED ON ACCOUNT OF DUE DILIGENCE OF A PROPOSED INVESTMENT IS CLEARLY MADE AS PART OF THE BUSINESS ACTIVITIES OF THE ASSESSEE AND , THEREFORE, THE IMPUGNED EXPENSES ARE EXPENSES INCURRED IN THE ORDINARY COURSE OF ITS BUSINESS. THE OTHER REASONING GIVEN BY THE LD. CIT(A) WAS THAT NO INVESTMENT WAS MADE DURING THE YEAR UNDER CONSIDERATION AND FUNDS WERE PARKED IN THE BANK. O N THIS ASPECT ALSO, WE DIFFER WITH THE REASONING GIVEN BY THE LD. CIT(A). THOUGH, CLE AR FACTS ARE NOT BEFORE US WITH RESPECT TO THE MAKING OF INVESTMENT IN THIS YEAR OR NEXT YEAR, BUT EVEN IF INVESTMENTS WERE NOT MADE DURING THE YEAR UNDER CONSIDERATION, IT CANNOT BE SAID THAT THESE EXPENSES WERE NOT INCURRED FOR THE PURPOSE OF BUSIN ESS. IT IS WELL SETTLED LAW THAT RESULTS OF THE BUSINESS ACTIVITIES OR FRUITS OF EFF ORTS TO A BUSINESS ORGANISATION MAY YIELD IN THE CONCERNED YEAR OR IN SUBSEQUENT YEARS OR NEVER. BUT THAT WOULD NOT MEAN THAT THE EXPENSES INCURRED WOULD NOT BE EXPENS ES INCURRED DURING THE COURSE OF BUSINESS. THUS, WE FIND THAT APPROACH OF THE LO WER AUTHORITIES IN DISALLOWING THESE 9 I.T.A. NO.2940 /MUM/2011 EXPENSES WAS CONTRARY TO LAW AND FACTS. THUS, DISA LLOWANCE IS CONFIRMED TO THE EXTENT OF RAS.2,01,400 AND THE BALANCE DISALLOWANCE OF RS.1 CRORE IS HEREBY DELETED. THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOW ED. 12. AS A RESULT, THIS APPEAL MAY BE TREATED AS PARTLY A LLOWED. ORDER PRONOUNCED IN THE COURT ON THIS _27 TH ___ DAY OF JULY, 2016. SD/- SD/ - (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 27 JULY, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , A-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES