ACIT Circle-1, Faridabad V. Nuchem Ltd, Faridabad

ITA 2941/DEL/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7036 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 29-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 17-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: VIRENDRA TALWAR
• Keywords: Gift; Business expenditure; Bad and doubtful debts; Valuation report; Revised return
• Section: 37(1); 68; 15

Judgement Text

ITA NO.1060, 2941, 2419 & 2123/D/08 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.1060/DEL/2008 ASSTT. YEAR: 2000-01 ITA NO.2941/DEL/2008 ASSTT. YEAR: 2004-05 ITA NO.2419/DEL/2008 ASSTT. YEAR: 2001-02 DY. COMMISSIONER OF INCOME TAX, VS M/S NUCHEM LTD., CIRCLE-1, FARIDABAD. 20/6, MATHURA ROAD, FARIDABAD. (PAN NO. AACFN 4428 P/ACIT) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.K. CHAND, SR.DR RESPONDENT BY: SHRI VIRENDRA TALWAR ITA NO.2123/DEL/2008 ASSTT. YEAR: 2001-02 M/S NUCHEM LTD., VS ASSTT.COMMISSIONER OF INCOM E TAX, 20/6, MATHURA ROAD, RANGE-I, FARIDA BAD-121001 FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIRENDRA TALWAR RESPONDENT BY: SHRI N.K. CHAND, SR.DR ITA NO.1060, 2941, 2419 & 2123/D/08 2 O R D E R PER G.E. VEERABHADRAPPA, V.P. THESE APPEALS PREFERRED BY THE REVENUE PERTAIN TO ASSTT. YEAR 2000- 01, 2001-02, 2004-05 AND THE ASSESSEES APPEAL PERT AINS TO ASSTT. YEAR 2001- 02 AND ARISE OUT OF THE ORDER OF THE CIT(A) FOR THE RESPECTIVE YEARS. AS THE APPEALS INVOLVE IDENTICAL GROUNDS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 2. IN THE REVENUES APPEAL FOR ASSTT. YEAR 2000-01, THE FIRST DISPUTE RELATES TO DISALLOWANCE OF ` 4,15,153/- AND ` 16,000 IN RESPECT OF CAR AND PHONE EXPENSES ON THE GROUND THAT THESE WERE USED B Y THE DIRECTORS AND EXECUTIVES FOR PERSONAL PURPOSES. 3. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WHIL E FILING THE ORIGINAL RETURN, THE ASSESSEE COMPANY ADDED 1/8 TH OF THE MOTOR CAR EXPENSES BASED ON THE ITAT DECISION FOR THE AY 1986-87 BUT IN THE REV ISED COMPUTATION OF INCOME FILED ON 18.12.2001, SUCH EXPENSES WERE CLAI MED FULLY ALLOWABLE IN THE LIGHT OF THE DECISION OF ITAT D BENCH IN THE CASE OF DCIT VS HARYANA OXYGEN LTD. 76 ITD 32(DEL) AND IN ASSESSEES OWN CA SE FOR AY 1988-89 IN ITA NO. 7368/D/92. THE CIT(A), APART FROM RELYING UPON THE AFORESAID ITA NO.1060, 2941, 2419 & 2123/D/08 3 ORDER, WAS OF THE VIEW THAT THE COMPANY BEING A JUR ISTIC ENTITY, THE DISALLOWANCE, IF ANY, CANNOT BE MADE IN ITS HANDS. 3. THE ASSESSEE BEFORE US HAS RELIED UPON THE DECIS ION OF THE TRIBUNAL IN THE CASE OF HARYANA OXYGEN LTD.(SUPRA) AND ALSO THE DECISION IN THE CASE OF SAYAJI IRON & ENGG. CO.VS CIT 253 ITR 749(GUJ.). I N OUR VIEW, THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY INTERFERENCE. T HE ASSESSEE, AS CLEAR FROM THE RECORD, IS A JURISTIC ENTITY. THERE CAN BE NO QUESTION OF PERSONAL USER IN ITS HAND. IF THE DIRECTOR AND EXECUTIVES HAVE USED THE CAR AND PHONE FACILITY FOR PERSONAL USE, IT MAY RESULT IN BEING TREATED AS A PERQUISITE PROVIDED BY THE COMPANY BUT DISALLOWANCE ON THE GROUND THAT THERE H AS BEEN A PERSONAL USE BY THE COMPANY CANNOT BE SUSTAINED. 4. WE ARE GUIDED BY THE DECISION OF THE GUJARAT HIG H COURT AND THE DECISION OF THE TRIBUNAL IN THE CASE OF HARYANA OXY GEN LTD.(SUPRA) ON THE ISSUE. THE ORDER OF THE CIT(A) IS CONFIRMED. 5. THE SECOND ISSUE IN THE REVENUES APPEAL FOR THE AY 2001-01 RELATES TO DISALLOWANCE OF ` 4,70,050 FOR SALES PROMOTION EXPENSES IN RESPECT OF GIFT ITEMS ON ACCOUNT OF DIWALI/NEW YEAR. 6. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH TH E RECORDS. THE ASSESSEE RELIED UPON THE DECISION OF CIT VS BATA IN DIA LTD.(1993) 201 ITR 884. LD. DR DREW SUPPORT FROM THE ORDER OF THE AO. AS COULD BE SEEN FROM ITA NO.1060, 2941, 2419 & 2123/D/08 4 PARA 6.2 OF HIS ORDER, THE CIT(A) HAS DELETED THE DISALLOWANCE ON THE BASIS OF THE REASONING GIVEN IN THE EARLIER ORDERS. APAR T FROM THAT, THE CIT(A) WAS OF THE VIEW THAT IT WAS COMMON KNOWLEDGE THAT AS A CUSTOM IN INDIAN TRADITION, SUCH GIFTS ARE USUALLY GIVEN ON AUSPICIO US OCCASION FOR THE PROMOTION OF BUSINESS. EVEN THOUGH THIS MAY INVOLV E COSTLY GIFTS, THE SAME HAS TO BE TREATED AS HAVING BEEN INCURRED FOR THE P URPOSES OF BUSINESS. IN OUR VIEW, THE ORDER OF THE CIT(A) IS FAIR AND REASO NABLE AND DOES NOT CALL FOR ANY INTERFERENCE. THESE CUSTOMARY GIFTS ARE NORMAL LY PRESENTED ON FESTIVE OCCASIONS ONLY TO THOSE PERSONS CONNECTED WITH THE BUSINESS AND THE INTENTION BEHIND SUCH EXPENSES IS BUSINESS ONLY. T HE SCOPE OF WORDS FOR THE PURPOSE OF BUSINESS IN SECTION 37(1) IS WIDE E NOUGH TO ENCOMPASS SUCH TYPE OF EXPENDITURE. THE DISALLOWANCE HAS BEEN PRO PERLY DELETED AND WE DECLINE TO INTERFERE IN THE LIGHT OF THE DECISION O F CALCUTTA HIGH COURT IN THE CASE OF CIT VS BATA INDIA LTD. (SUPRA). 7. THE NEXT GROUND RELATES TO THE GUARANTEE COMMISS ION/COMMITMENT CHARGES OF ` 3,60,000 PAID TO NUCHEM INVESTMENT PVT. LTD. FOR PL EDGE OF THEIR LAND AS COLLATERAL SECURITY WITH CANBANK MUTU AL FUND. 8. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH TH E RECORD. THE ASSESSEE COMPANY WAS REQUIRED TO GIVE COLLATERAL SE CURITY SINCE THE LANDED PROPERTY OF THE COMPANY WAS MORTGAGED. THE COMPANY REQUESTED NUCHEM ITA NO.1060, 2941, 2419 & 2123/D/08 5 INVESTMENT PVT. LTD., ANOTHER SISTER CONCERN, TO PL EDGE THEIR LAND AS COLLATERAL SECURITY WITH CANBANK MUTUAL FUND AND ACCORDINGLY A LONG WITH CERTAIN SHARES, A PIECE OF LAND VALUED AT ` 1.25 CRORES AT THAT TIME BELONGING TO NUCHEM INVESTMENT PVT. LTD. WAS PLEDGED WITH CANBAN K MUTUAL FUND. THE ASSESSEE PAID A SUM OF ` 3,60,000 AS GUARANTEE COMMISSION @ ` 30,000 PER MONTH. THE RECORD SHOWS SIMILAR PAYMENTS WERE MADE IN THE YEARS AS DISCUSSED BY THE COMMISSIONER IN PARA 7.1. THE DIS ALLOWANCES WERE MADE BY THE AO AND THE SAME WERE DELETED BY THE CIT(A) R IGHT FROM THE AY 1994-95. AS COULD BE SEEN FROM THE RECORD, THE DIS ALLOWANCE HAS BEEN MADE PURELY ON BASIS OF HISTORICAL BACKGROUND WITHOUT BR INGING ANY NEW FACTS WARRANTING A DISALLOWANCE. THE LD. CIT(A) HAS CORR ECTLY FOLLOWED HIS PREDECESSORS ORDER IN DELETING THE DISALLOWANCE. WE DO NOT FIND ANY INFIRMITY THEREIN. MOREOVER, THE ITAT IN ITS CONSO LIDATED ORDER DATED 27.3.09 IN AY 1994-95 TO 1999-2000, HAS ALREADY CON FIRMED DELETION OF SUCH DISALLOWANCES BY THE CIT(A). IN THE LIGHT OF THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF L.H. SUGAR FACT ORIES & OIL MILK PVT. LTD. VS CIT (1982) 137 ITR 277(ALL.) AND ALSO THE D ECISION IN THE CASE OF CIT VS INDIAN ALUMINIUM CABLES LTD. (1990) 184 ITR 516(DEL), WE DECLINE TO INTERFERE ON THE ISSUE. ITA NO.1060, 2941, 2419 & 2123/D/08 6 9. THE NEXT DISALLOWANCE DISPUTED IN THEIR DEPARTME NTAL APPEAL RELATES TO LEGAL AND PROFESSIONAL EXPENSES OF ` 8,97,155/- IN CORPORATE DIVISION. 9.1 THE ASSESSEE COMPANY INCURRED A TOTAL EXPENDITU RE UNDER THE HEAD LEGAL AND PROFESSIONAL CHARGES TO THE EXTENT OF ` 25,16,168, WHICH, INTER ALIA, INCLUDED THE PAYMENT TO THE FOLLOWING PERSONS :- SR.NO. NAME OF THE PARTY AMOUNT 1. MR. ROHIT TANDON/ADVOCATE (I) STANDING COUNSEL-LEGAL ADVISOR FOR ALL MATTERS (1000X12) (II) FOR ARBITRATION PROCEEDING FILED AS CONSTITUTION FINANCE VS NUCHEM LTD. 12000 41500 -------- 53,500 2. MR. P.C. GURWARA RETAINER LEGAL PROFESSIONAL (10,000X12) CONVEYANCE CHARGES 1,20,000 1,69,655 3. MR. M.R. SHARMA ADVISOR-PUBLIC RELATION PROFESSIONAL CHARGES(22000X12) 2,64,000 4. MR. AJAY DHIMAN,FINANCIAL ADVISOR, (BUSINESS FINANCE) (30000X2 +35000X10) TOTAL 4,10,000 8,97,155 ----------------- 9.2 THE AO WAS NOT CLEAR AS TO FOR WHAT SERVICES TH ESE PAYMENTS WERE MADE AND SIMILAR PAYMENTS FOR THE ASSTT. YEAR 1999- 2000 WERE DISALLOWED BY HIM FOLLOWING THE SAME, DISALLOWANCE WAS MADE OF THE ABOVE SUMS WHICH WERE INCURRED IN CORPORATE DIVISION. THE CIT(A) DI SCUSSED THIS ISSUE ITA NO.1060, 2941, 2419 & 2123/D/08 7 ELABORATELY PAYMENT WISE IN PARA 7.1 OF THE IMPUGNE D ORDER. HE HAD THE BENEFIT OF HIS PREDECESSORS ORDERS FOR ASSTT. YEAR S 1993-94 TO 1999-2000 WHEREIN THEY HAVE DELETED ALL SIMILAR DISALLOWANCES . THE LD. DR STRONGLY SUPPORTED THE DISALLOWANCE ON THE BASIS OF REASONS GIVEN IN THE ASSESSMENT ORDER AND THE LD. COUNSEL FOR THE ASSESSEE FILED BE FORE US THE COPIES OF THE TRIBUNAL ORDERS FOR THE ASSTT. YEAR 1993-94 AS ALSO THE ORDER OF THE TRIBUNAL DATED 27.3.2009 FOR OTHER YEARS UPTO 1999-2000 WHER EIN THE TRIBUNAL HAS CONFIRMED THE ORDER DELETING THE DISALLOWANCE. THE AFORESAID ORDER OF THE TRIBUNAL IS ON RECORD. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS IN THE LIGHT OF THESE ORDERS AND TAKING A CONSISTENT STAND OVER THE SAME ISSUE, WE CONFIRM THE ORDER OF THE CIT(A) BY FOLLOWING OUR ORDERS ON THE ISSUE. 11. THE NEXT DISPUTE IN THE DEPARTMENTAL APPEAL FOR THE AY 2000-01 RELATES TO TECHNICAL AND PROFESSIONAL FEEL OF ` 90,000 PAID TO SHRI R.D.NANDA. IT WAS CLAIMED THAT SHRI R.D. NANDA IS A QUALIFIED AND EXPERIENCED MARKETING PERSONNEL HAVING ESTABLISHED POSITION IN PROCUREMENT OF BUSINESS IN MAHARASHTRA AND GUJARAT. HE WAS APP OINTED AS ADVISOR (COMM.) TO ASSIST THE MARKETING STAFF FOR PROCURING BUSINESS IN AND AROUND MUMBAI. HE WAS REQUIRED TO REPORT TO REGIONAL MANA GER (WEST) AND COORDINATE WITH AREA SALES MANAGER/TERRITORY MANAGE RS. SHRI R.D. NANDA ITA NO.1060, 2941, 2419 & 2123/D/08 8 IS NOT RELATED TO ANY DIRECTOR OF THE COMPANY. SHR I NANDA, ACCORDING TO THE ASSESSEE, HAS RENDERED SERVICES FOR THE BUSINESS AN D THE PAYMENT IS CLAIMED TO BE FOR BUSINESS PURPOSES. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE FOLLOWING THE DEPARTMENTAL STAND IN THE EA RLIER YEAR. THE CIT(A), HOWEVER, DELETED THE DISALLOWANCE BASED ON THE EARL IER ORDER OF THE CIT(A). THE ASSESSEE HAS FILED COPIES OF THE ORDER OF THE T RIBUNAL FOR THE ASSTT. YEAR 1993-94 AS ALSO 1994-95 TO 1995-2000 (CITED SUPRA) WHEREIN SIMILAR DISALLOWANCES DELETED BY THE CIT(A) HAVE BEEN CONFI RMED. 12. WE HAVE GONE THROUGH THE RELEVANT ORDERS AND FI ND THAT THE ISSUE IS FULLY COVERED AND THERE IS NO REASON FOR MAKING ANY DISALLOWANCE IN THE LIGHT OF OUR OWN EARLIER ORDERS ON THE ISSUE. THE DISALL OWANCE, IN OUR VIEW, HAS RIGHTLY BEEN DELETED BY THE CIT(A) AND WE DECLINE T O INTERFERE. 13. THE NEXT DISPUTE IN THE DEPARTMENTAL APPEAL FOR ASSTT. YEAR 2000-01 RELATES TO DISALLOWANCE OF INTEREST OF ` 1,23,900 IN RESPECT OF FDRS. THE AO IN THE ASSTT. YEAR 1996-97 MADE AN ADDITION OF ` 8,85,000 U/S 68 OF THE I.T.ACT, TREATING THE SOURCES OF FDRS TO THAT EXTEN T AS UNEXPLAINED. THE AO TAKING A CONSISTENT STAND MADE AN ADDITION TO THE S AME EXTENT IN THE YEAR UNDER CONSIDERATION. 14. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH T HE RECORDS. THE CIT(A) FOUND THAT IN THE AY 1996-97, WHEREIN ADDITI ON OF ` 8,85,000 WAS ITA NO.1060, 2941, 2419 & 2123/D/08 9 MADE U/S 68 WAS DELETED. THE ADDITION OF INTEREST WAS DELETED EVEN IN SUBSEQUENT YEAR BASED ON THAT REASONING. THE TRIBU NAL IN THE CONSOLIDATED ORDER DATED 27.3.2009 HAS ALREADY DELETED THE INTER EST. IT MAY BE MENTIONED THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL AGAINS T THE DELETION OF AN ADDITION OF ` 8,85,000 MADE IN THE ASSTT. YEAR 1996-97, WHEN THE CIT(A) DELETED THE SAID ADDITION U/S 68 OF THE ACT. HAVIN G REGARD TO ALL THESE FACTS, THE LD. CIT(A) HAD NO OTHER OPTION, IN THE LIGHT OF THE AFORESAID ORDER, THAN TO DELETE THE IMPUGNED ADDITION. WE CONFIRM HIS ACTIO N. 15. THE NEXT DISPUTE IN THE DEPARTMENTAL APPEAL REL ATES TO BAD DEBTS WRITTEN OFF AMOUNTING TO ` 6,74,862/- AND ` 26,500 RELATING TO OTHER WRITE OFFS. IN THE MDF DIVISION, AN AMOUNT OF ` 6,74,862/- WAS CLAIMED AS AMOUNT WRITTEN OFF IN RESPECT OF FOLLOWING SUB-DIVI SIONS:- MARKETING ` 6,66,575/- TOHANA 484/- DSP (CONTRACT) 7,803/- --------------------- ` 6,74,862/- --------------------- 15.1 THE AO HAS GIVEN THE DETAILS OF SUCH WRITE OFF S IN PAGES 8 AND 9. ACCORDING TO THE AO, THERE IS NO EVIDENCE FURNISHED BY THE ASSESSEE AS REGARDS THE ACTION TAKEN FOR REALIZATION OF THESE A MOUNTS FROM THE ABOVE PARTIES. THE CLAIM OF THE ASSESSEE WAS DISALLOWED ON THAT REASONING. THE CIT(A), HOWEVER, ACCEPTED THE ASSESSEES CONTENTION THAT THESE DEBTS AROSE ITA NO.1060, 2941, 2419 & 2123/D/08 10 IN THE COURSE OF BUSINESS AND WERE WRITTEN OFF WHEN THE ASSESSEE TRIED ITS BEST TO RECOVER THESE AMOUNTS BUT FAILED. THE LD. DR VE HEMENTLY OPPOSED THE DELETION OF THE DISALLOWANCE. ACCORDING TO HIM, TH E ASSESSEE HAS NOT PRODUCED FOOLPROOF EVIDENCE REGARDING THE STEPS TAK EN FOR REALIZING THE ABOVE AMOUNTS. THE LEARNED DR STRONGLY JUSTIFIED T HE ORDER OF THE AO. 15.2 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE POINTED OUT THAT THE ISSUE IN DISPUTE IS FULLY COVERED BY THE ORDER OF T HE TRIBUNAL DATED 27.3.2009 FOR THE ASSTT. YEAR 1994-95 TO 1999-2000 WHEREIN DE LETION OF IDENTICAL WRITE OFFS WERE UPHELD BY THE ITAT. 15.3 WE HAVE GONE THROUGH THE RECORDS. THERE APPEA RS TO BE NO DISPUTE FROM THE RECORD THAT THESE DEBTS AROSE IN THE ORDIN ARY COURSE OF BUSINESS AND THESE SUMS WERE NOT REALIZED BY THE ASSESSEE AND TH EREFORE WERE WRITTEN OFF TO THE PROFIT AND LOSS ACCOUNT. POST AMENDMENT IN THE PROVISION OF SECTION 36(1), IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT THE DEBTS HAVE BECOME BAD. IT IS SUFFICIENT IF THEY ARE WRITTEN O FF AND SUCH WRITE OFF IS BONAFIDE. THERE IS NOTHING IN THE RECORD TO SHOW T HAT THE WRITE OFF MADE BY THE ASSESSEE WAS NOT BONAFIDE. WE, THEREFORE, DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR DELETING THE DISALLOWAN CE. MOREOVER, THE ITAT HAS ALREADY UPHELD SIMILAR DELETIONS IN AY 1994-95 TO 1999-2000 (SUPRA). ITA NO.1060, 2941, 2419 & 2123/D/08 11 15.4 REGARDING DISALLOWANCE OF ` 26,500 IN RESPECT OF THE WRITE OFF OF ` 25,000 IN RESPECT OF M/S M. PRABHAKAR & CO., HYDER ABAD AND ` 1500 IN RESPECT OF MR. RAM SWAROOP, DRIVER, THE CLAIM OF TH E ASSESSEE IS THAT M/S PRABHAKAR & CO. WAS ENGAGED IN PREPARING VALUATION REPORT. ALTHOUGH THE PAYMENTS WERE MADE, IT DID NOT SUBMIT THE VALUATION REPORT OR REFUND THE AMOUNT. THE LEGAL DEPARTMENT HAS SERVED NOTICE ON 11.12.99 BUT THE PARTY HAS NOT TURNED UP NOR REFUNDED THE AMOUNT. THE COM PANY HAD NO OTHER OPTION BUT TO WRITE OFF THE AMOUNT AS THE REQUIRED CIVIL SUIT WOULD HAVE BEEN A COSTLY AFFAIR. THESE AMOUNTS WERE WRITTEN OFF A S THEY HAVE BECOME IRRECOVERABLE. THE OTHER AMOUNT OF ` 1500 REPRESENTS CASH LOSS ON TRANSIT BY THE DRIVER WHILE BRINGING CASH FROM PUNJAB NATIONAL BANK, RAJENDER NAGAR IN CONNECTION WITH BANKING TRANSACTIONS OF THE ASSE SSEE. SOME PERSONS OCCUPIED THE CAR FORCEFULLY AND AFTER SHOWING THE K NIFE TO THE DRIVER, THEY SNATCHED ` 1500 FROM HIM. ALTHOUGH THE AMOUNT WAS DEBITED TO THE DRIVERS ACCOUNT AND A POLICE COMPLAINT WAS ALSO LODGED, THE AMOUNT COULD NOT BE RECOVERED. THIS WRITE OFF, AS WE HAVE SEEN FROM TH E RECORD, IS CLEARLY A LOSS SUFFERED AS INCIDENTAL TO THE BUSINESS. THE WRITE OFF OF THESE LOSSES, IN OUR VIEW AND IN THE LIGHT OF FACTS DISCUSSED HEREIN, SH OULD BE TREATED AS A BUSINESS LOSS AND SHOULD BE ALLOWED AS DEDUCTION. ITA NO.1060, 2941, 2419 & 2123/D/08 12 16. THE NEXT DISPUTE IN THE DEPARTMENTAL APPEAL FOR THE ASSTT.YEAR 2000- 01 RELATES TO DISALLOWANCE OF EXCESS COMMISSION OF ` 6,45,215/- PAID IN RESPECT OF SALES OF ` 20,64,845/- 16.1 THE ASSESSEE CLAIMED PAYMENT OF ` 6,45,215/- AS COMMISSION ON SALES OF ` 20,64,845/- MADE BY CHEMICAL DIVISION. THE AO MADE THE DISALLOWANCE ON THE BASIS OF IDENTICAL DISALLOWANCE S MADE FOR THE ASSTT.YEARS 1993-94 TO 1999-2000. THE CIT(A) DELET ED THE DISALLOWANCE BASED ON HIS OWN ORDERS FOR THE ASTT. YEARS 1993-94 TO 1999-2000. 16.2 WE HAVE HEARD BOTH THE SIDES AND FIND THAT THE ISSUE IS ALREADY DECIDED BY THE TRIBUNAL ORDER DATED 22.2.2008 FOR AY 1993-9 4 AND BY CONSOLIDATED ORDER DATED 27.3.2009 FOR AY 1994-95 TO 1999-2000. IN THE LIGHT OF AFORESAID ORDER OF THE TRIBUNAL WHERE IDENTICAL ISS UE HAS BEEN DECIDED BY THE TRIBUNAL, RESPECTFULLY FOLLOWING THE EARLIER YEARS ORDER, THE DISALLOWANCE HAS BEEN CORRECTLY DELETED BY THE CIT(A). WE DECLI NE TO INTERFERE. MOREOVER, THE ISSUE IS FULLY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE SUPREME COURT IN THE CASE OF J.K. WOOLEN MAN UFACTURERS VS CIT (1969) 72 ITR 612(SC); CIT VS WALCHAND CO. PVT. L;T D. (1967) 65 ITR 381(SC) AND CIT VS PANIPAT WOOLLEN GENERAL MILLS LT D. (1976) 103 ITR 66(SC). ITA NO.1060, 2941, 2419 & 2123/D/08 13 17. THE NEXT DISPUTE IN THE DEPARTMENTAL APPEAL REL ATES TO THE DISALLOWANCE OF ` 3,31,012 MADE BY THE AO ON THE GROUND THAT THEY RE LATE TO FINES AND PENALTIES IMPOSED BY THE PF COMMISSIONER ESIC & SALES TAX AUTHORITIES WHICH ACCORDING TO HIM WAS FOR VIOLATIO N/INFRINGMENT OF LAW. THE CIT(A) ELABORATELY DISCUSSED THIS ISSUE WITH RE FERENCE TO EACH PENALTY IN REFERENCE TO PAGES 27, 28 AND 29 AND CAME TO A VIEW THAT THESE AMOUNTS ARE GENUINE BUSINESS EXPENSES AND THE SAME ARE ALLOWABL E AS DEDUCTION IN THE LIGHT OF FOLLOWING AUTHORITIES:- A) PRAKASH COTTON MILLS PVT. LTD. VS CIT (1993) 201 ITR 689(SC) B) CIT VS AHMEDABAD COTTON MRF. CO.LTD. (1993) 205 ITR 163 (SC) C) MALVA VANASPATI & CHEMICAL CO. VS CIT (1997) 225 ITR 383(SC) MOREOVER, HE HAS FOUND THAT IN THE ASSTT.YEAR 1998- 99 AND 1999-2000, SIMILAR DISALLOWANCES HAVE BEEN DELETED BY THE CIT( A). 17.1 WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE RECORDS INCLUDING THE DISCUSSIONS IN THE IMPUGNED ORDERS. IN OUR VIEW, T HE LD. CIT(A) HAS DISCUSSED THE ISSUE THREADBARE. MOREOVER, IDENTICA L ORDERS OF THE CIT(A) WHEREIN HE HAS DELETED THE DISALLOWANCE HAS ALREADY BEEN CONFIRMED BY OUR CONSOLIDATED ORDER DATED 27.3.2009 FOR AY 1994-95 T O 1999-2000. IN THE LIGHT OF THIS AND HAVING REGARD TO THE PRINCIPLE LA ID DOWN BY THE APEX COURT IN THE CASES (CITED SUPRA), WE DECLINE TO INTERFERE. ITA NO.1060, 2941, 2419 & 2123/D/08 14 18. THE NEXT DISPUTE RELATES TO THE DISALLOWANCE OF ` 1,17,528 IN RESPECT OF CERTAIN EXPENSES DEBITED TO PROFIT AND LOSS ACCO UNT FOR THE PERIOD FROM 1.4.2000 5O 31.3.2001. THE ASSESSEE COMPANY HAS CL AIMED THESE EXPENSES IN COMPUTATION OF INCOME FOR AY 2001-02. ACCORDING TO TAX AUDITORS, THESE AMOUNTS PERTAIN TO THE ASSTT. YEAR IN QUESTION. TH E ASSESSEE CLAIMED THESE EXPENSES BY FILING A REVISED RETURN FOR THE YEAR UN DER CONSIDERATION. 18.1 WE HAVE GONE THROUGH THE RECORDS AND DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR THE YEAR UNDER CONSIDERATIO N. SINCE THE EXPENSES ARE RELATING TO THE YEAR UNDER CONSIDERATION AND THE AS SESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IRRESPECTIVE OF THE YEAR IN WHICH ENTRIES HAVE BEEN PASSED, THE AMOUNTS ARE ALLOWABLE AS DEDU CTION AS RIGHTLY POINTED OUT BY THE CIT(A). THE DEPARTMENT IS FREE TO WITHD RAW THE DEDUCTION, IF ANY ALLOWED IN ANY SUBSEQUENT YEAR BASED ON THE AUDITED ACCOUNTS. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA NO.2419/D/08 FOR ASSTT.YEAR 2001-02 20. THE FIRST GROUND RELATES TO DISALLOWANCE OF ` 30,100/- MADE BY THE AO UNDER THE HEAD FINES AND PENALTIES. THIS ISSUE I S COVERED BY OUR DECISION IN PARA 17.1 IN ITA NO.1060/D/08 FOR AY 2000-01 AND, F OLLOWING THE SAME, THE ISSUE IS DISPOSED OF. ITA NO.1060, 2941, 2419 & 2123/D/08 15 21. THE SECOND GROUND RELATES TO DISALLOWANCE OF AM OUNT OF ` 49,250 AND ` 1,10,000 MADE BY THE AO AS THE AMOUNT DID NOT PERTA IN TO THE ASSTT. YEAR UNDER CONSIDERATION. THIS ISSUE IS COVERED BY OUR DISCUSSION IN PARA 18.1 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE S AME, THE ISSUE IS DISPOSED OF. 22. THE THIRD GROUND RELATES TO DISALLOWANCE OF ` 4,19,263 AND ` 16,000 MADE BY THE AO ON ACCOUNT OF PERSONAL USE OF VEHICL E/TELEPHONE EXPENSES BY THE DIRECTORS AND EXECUTIVES OF THE COMPANY. TH IS ISSUE IS COVERED BY OUR DISCUSSION IN PARA 3 & 4 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF. 23. GROUND NO. 4 RELATES TO DISALLOWANCE OF ` 4,14,743/- ON ACCOUNT OF DIWALI EXPENSES OUT OF SALES PROMOTION EXPENSES. T HIS GROUND STANDS COVERED BY OUR DISCUSSION IN PARA 6 IN ITA NO.1060/ D/08 FOR AY 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF. 24. GROUND NO. 5 RELATES TO DISALLOWANCE OF ` 3,60,000 ON ACCOUNT OF COMMITMENT CHARGES/GUARANTEE COMMISSION PAID TO SIS TER CONCERN M/S NUCHEM INVESTMENT (P) LTD. THIS ISSUE IS COVERED B Y OUR DISCUSSION IN PARA 8 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF. ITA NO.1060, 2941, 2419 & 2123/D/08 16 25. GROUND NO. 6 RELATES TO DISALLOWANCE OF ` 8,76,000 MADE BY THE AO ON ACCOUNT OF PROFESSIONAL CHARGES AND RETAINERSHIP CHARGES. THIS ISSUE STANDS COVERED BY OUR DISCUSSION IN PARA 9.2 & 10 I N ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DIS POSED OF. 26. GROUND NO. 7 RELATES TO DISALLOWANCE OF ` 67,500 MADE BY THE AO ON ACCOUNT OF TECHNICAL AND PROFESSIONAL FEE. THIS IS SUE IS COVERED BY OUR DISCUSSION IN PARA NO. 11 & 12 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF. 27. THE NEXT GROUND NO. 8 RELATES TO DISALLOWANCE O F INTEREST OF ` 1,23,900 IN RESPECT OF FDRS. THIS ISSUE IS COVERED BY OUR D ISCUSSION IN PARA 14 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE S AME, THE ISSUE IS DISPOSED OF. 28. GROUND NO. 9 RELATES TO DISALLOWANCE OF ` 12,67,094/- MADE BY THE AO AS BAD DEBTS WRITTEN OFF. THIS ISSUE IS COVERED BY OUR DISCUSSION IN PARA 15.3 & 15.4 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLO WING THE SAME, THE ISSUE IS DISPOSED OF. 29. GROUND NO.10 RELATES TO DISALLOWANCE OF COMMISS ION OF ` 2,87,024 ON ACCOUNT OF EXCESSIVE COMMISSION ON SALES OF ` 26,09,857/-. THIS ISSUE IS COVERED BY OUR DISCUSSION IN PARA 16.2 IN ITA NO.10 60/D/08 FOR AY 2000- 01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF . ITA NO.1060, 2941, 2419 & 2123/D/08 17 ITA NO.2941/D/08 FOR ASSTT.YEAR 2004-05 30. GROUNDS NO. 1 TO 6 RAISED BY THE REVENUE FOR AS STT. YEAR 2004-05 ARE COVERED BY SIMILAR GROUNDS DECIDED IN OUR ABOVE ORD ER IN ITA NO. 1060/D/08 FOR ASSTT. YEAR 2000-01 AND FOLLOWING THE SAME, THE ISSUES ARE DISPOSED OF. 31. GROUND NO. 7 RELATES TO DISALLOWANCE OF FINES A ND PENALTIES OF ` 10,830/-. THIS GROUND IS COVERED BY OUR DISCUSSION IN PARA NO. 17.1 IN ITA NO.1060/D/08 FOR AY 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF. 32. GROUND NO. 8 RELATING TO DISALLOWANCE OF ` 29,87,204 BEING BAD DEBTS WRITTEN OFF IS COVERED BY OUR DISCUSSION IN PARA 15 .3 & 15.4 IN ITA NO.1060/D/08 FOR ASSTT. YEAR 2000-01 AND FOLLOWING THE SAME, THE ISSUE IS DISPOSED OF. 33. GROUND NO. 9 RELATES TO DISALLOWANCE OF ADDITIO N OF ` 37,82,423 MADE BY THE AO ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI. IN THIS REGARD, THE TRIBUNAL HAS ALREADY DELE TED THE DISALLOWANCE IN AY 2000-01 IN ASSESSEES OWN CASE VIDE ORDER DATED 27. 3.2009. APART FROM IT, THE ISSUE IS ALSO COVERED BY THE DECISION OF HON'BL E SUPREME COURT IN CIT VS ALOM EXTRUSIONS LTD. (2009) 319 ITR 306(SC). THI S GROUND IS ACCORDINGLY DISMISSED. ITA NO.1060, 2941, 2419 & 2123/D/08 18 ITA NO. 2123/DEL/08 FOR ASTT.YEAR 2001-02 (ASSESSEE S APPEAL) 34. THE ONLY GROUND PREFERRED BY THE ASSESSEE IN HI S APPEAL RELATES TO DISALLOWANCES MADE BY THE AO ON ACCOUNT OF ` 44,22,097/- BEING EMPLOYEES CONTRIBUTION TO P.F. AND ESI WHICH REPRESENTS THE P AYMENT MADE BEYOND THE DUE DATE PRESCRIBED. 34.1 THERE IS NO DISPUTE THAT THESE AMOUNTS WERE NO T PAID ON THE DUE DATES BY THE ASSESSEE. THE ASSESSEE EXPLAINED THAT IT WA S MAINLY DUE TO FINANCIAL CRISIS THAT WAS FACED BY THE ASSESSEE COMPANY DURIN G THE ASSESSMENT YEAR IN QUESTION. THE CIT(A) HOWEVER DELETED THE DISALLOWA NCE ON THE GROUND THAT ALL SUMS IN QUESTION HAVE BEEN PAID BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. 34.2 WE HAVE HEARD BOTH THE SIDES AND FIND THAT THE TRIBUNAL HAS ALREADY DELETED THE DISALLOWANCE IN AY 2000-01 IN ASSESSEE S OWN CASE VIDE ORDER DATED 27.3.2009. APART FROM IT, THE ISSUE IS NOW C OVERED BY THE DECISION OF HON'BLE SUPREME COURT IN CIT VS ALOM EXTRUSIONS LTD . (2009) 319 ITR 306(SC). ACCORDINGLY, THE APPEAL OF THE ASSESSEE I S ALLOWED. 35. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A SSTT. YEAR 2001-02 IS ALLOWED AND ALL THE DEPARTMENTAL APPEALS ARE DISMIS SED. ITA NO.1060, 2941, 2419 & 2123/D/08 19 ORDER PRONOUNCED IN THE OPEN COURT ON 8.10.2010. SD/- SD/- ( I.P. BANSAL ) (G.E. VEERABHADRAPPA) JUDICIAL MEMBER VICE PRESIDENT DT. 8TH OCTOBER 2010 GS COPY FORWARDED TO: 1. ACIT CIRCLE (1), FARIDABAD. 2. M/S NUCHEM LTD., FARIDABAD. 3. CIT(A), FARIDABAD. 4. CIT 5. DR BY ORDER DY. REGISTRAR