Maruti Udyog Ltd., V. Addl. CIT, Range-6,

ITA 300/DEL/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 6874 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-05-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 27-01-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VEENU AGGRAWAL CAS; S GANESH SR SHRI SUMANT CHADHA
• Keywords: Depreciation; Business expenditure; Double taxation relief; Speculation loss; Bad and doubtful debts; Capital expenditure; Capital Gains
• Section: 43B; 14A; 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI K.D. RANJAN, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 300/DEL/2006 ASSESSMENT YEAR : 2001-02 M/S MARUTI UDYOG LIMITED, 11 TH FLOOR, JEEVAN PRAKASH BLDG., K.G. MARG, NEW DELHI. PAN: AAACM0829Q VS. ADDL. CIT, RANGE-6, NEW DELHI. ITA NO,.204/DEL/2006 ASSESSMENT YEAR : 2001-02 DY. COMMISSIONER OF INCOME TAX, CIRCLE 6 (1), NEW DELHI. VS. M/S MARUTI UDYOG LIMITED, 11 TH FLOOR, JEEVAN PRAKASH BLDG., K.G. MARG, NEW DELHI. PAN: AAACM0829Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. GANESH, SR. ADVOCATE, SHRI SUMANT CHADHA & SHRI VEENU AGGRAWAL, CAS RESPONDENT BY : SMT. KAVITA BHATNAGAR, CIT, DR O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER: ITA NO.300/DEL/06 IS AN APPEAL FILED BY THE ASSESS EE AND ITA NO.204/DEL/06 IS AN APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF THE CIT (A)- IX, NEW DELHI, IN APPEAL NO.98/2004-05 DATED 25.10. 2005 FOR THE ASSESSMENT YEAR 2001-02. SHRI S. GANESH, SR. ADVOCATE ASSIST ED BY SHRI SUMANT CHADHA AND SHRI VEENU AGGARWAL, CAS REPRESENTED ON BEHALF OF THE ASSESSEE AND SMT. KAVITA BHATNAGAR, LD. DR REPRESENTED ON BEHALF OF T HE REVENUE. ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 2 2. IN THE ASSESSEES APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS), HAS ERRED IN NOT DELETING, AN AGGREGATE CLAIM OF DE DUCTIONS OF RS.128,21,65,627/- MADE U/S 43B OF THE INCOME TAX A CT. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) WAS NEITHER CORRECT NOR WAS JUSTIFIED EITHER ON FACTS O R IN LAW IN SUSTAINING THE DISALLOWANCE OF RS. 125,43,38,014/-, OUT OF THE AFORESAID ALLEGED DISALLOWANCE MADE AND REPRESENTIN G THE AMOUNT OF EXCISE DUTY ACTUALLY PAID ON PURCHASE OF COMPONE NTS OF FINISHED PRODUCTS, WHICH HAS EITHER BEEN CONSUMED OR REMAINE D PART OF CLOSING STOCK. 1.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT THE AFORESAID PAYMENTS MA DE WERE AN ALLOWABLE DEDUCTION U/S 43 B OF THE INCOME TAX ACT, IN THE YEAR OF PAYMENT IRRESPECTIVE OF THE FACT THAT GOODS HAD BEE N MANUFACTURED OR NOT AND, THUS OUGHT TO HAVE BEEN ALLOWED AS SUCH , WHILE COMPUTING THE TOTAL INCOME. 1.3 THAT SIMILARLY THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN SUS TAINING A DISALLOWANCE OF RS. 2,57,34,337/-, BEING THE AMOUNT OF SALES TAX PAID ACTUALLY PAID IN RESPECT OF THE COMPONENTS PUR CHASED BY THE ASSESSEE COMPANY, WHICH HAS EITHER BEEN CONSUMED OR REMAINED PART OF CLOSING STOCK. 1.4 THAT FURTHER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE OF RS. 20,93,276/- REPRESENTING THE EXPENDITURE INCURR ED AND PAID BY THE ASSESSEE AS SALES TAX, DESPITE THE FACT THE AMO UNT OF SALES TAX COLLECTED, OF A SUM AGGREGATING TO RS. 19,93,910/- ON SALES SO MADE HAD BEEN OFFERED TO TAX AND HAD ALSO BEEN SO T AXED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE OF RS. 3,54,28,659/- BEING THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY ON COMPUTER SOFTWARE AND ALLEGEDLY HELD TO BE CAPITAL EXPENDITURE. THE EXPENDITURE INCURRED COULD NOT HAVE BEEN HELD TO BE CAPITAL PRIOR TO THE INSERTION OF THE AF ORESAID HEAD OF EXPENDITURE IN THE DEPRECIATION TABLE, EFFECTIVE FR OM 1 ST APRIL, 2002. 2.1 THAT WHILE CONFIRMING THE AFORESAID DISALLOWANC E, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE PURPOSE AND OBJ ECTIVE OF EXPENDITURE INCURRED AND, ARBITRARILY AND MECHANICA LLY APPLIED THE ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 3 DECISIONS OF THE HONBLE TRIBUNAL FOR A.Y. 99-00 AN D, A.Y. 00-01. HE HAS FAILED TO APPRECIATE THAT THE EXPENDITURE WA S BUSINESS EXPENDITURE AND BY NO LOGIC OR JUSTIFICATION COULD BE HELD TO BE CAPITAL EXPENDITURE. 2.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FURTHER PROCEEDED ON SUBJECTIVE CONSIDERATIONS IN A S MUCH AS THERE WAS NO BASIS OR MATERIAL WHATSOEVER TO HOLD THAT TH E SOFTWARE PURCHASED BY THE ASSESSEE RESULTED IN ENDURING BENE FIT TO THE ASSESSEE. IN ANY CASE, EVEN OTHERWISE, IT IS HELD T HAT THE APPELLANT COMPANY DERIVED SOME ENDURING BENEFIT; THE TEST OF ENDURING BENEFIT IS NOT THE SOLE TEST TO HOLD THAT THE EXPEN DITURE INCURRED WAS CAPITAL EXPENDITURE, AS HAS BEEN HELD BY THE APEX C OURT IN THE CASE OF EMPIRE JUTE COMPANY LIMITED VS. CIT REPORTED AT 124 ITR 1. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FURTHER ERRED BOTH IN LAW AND, ON FACTS IN UPHOLDIN G THE DISALLOWANCE OF CLAIM OF BAD-DEBTS OF RS. 19,34,615/- U/S 36(L)( VII) READ WITH 36(2) OF THE ACT. 3.1 THAT WHILE CONFIRMING THE AFORESAID DISALLOWANC E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN H OLDING THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY DOCUMENTS IN THE COURSE OF HEARING THAT THE SUM OF RS. 19,34,615/- WAS OFFE RED TO TAX IN EARLIER YEARS. 3.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT THE SUM CLAIMED BY THE AP PELLANT WAS AN ALLOWABLE DEDUCTION, SINCE IT UNDISPUTEDLY REPRESEN TED THE UNRECOVERABLE AMOUNTS FROM CUSTOMERS TO WHOM SALES HAD BEEN MADE IN EARLIER YEARS AND, THEREFORE, IN SUCH A SIT UATION, NEITHER IN LAW AND, NOR ON FACT, IT COULD BE HELD THAT THE AMO UNT HAD NOT BEEN ASSESSED AS INCOME IN EARLIER YEARS. 3.3 THAT THE DISALLOWANCE SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BASED ON MISAPPRECIATION OF THE RELEVANT PROVISIONS OF LAW AND THE FACTUAL SUBSTRAT UM OF THE CASE. 3.4 THAT IN ANY CASE AND WITHOUT PREJUDICE THE AMOU NT WAS AN ALLOWABLE BUSINESS LOSS FOR THE INSTANT ASSESSMENT YEAR. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FURTHER ERRED IN DIRECTING THE AO TO ADD TO THE WDV OF ASSETS A SUM OF RS. 1,06,90,002/- INSTEAD OF RS. 4,27,60,007/- O N ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN RESPECT OF FIXED AS SETS. IT IS THEREFORE PRAYED THAT THE VARIOUS DISALLOWANC ES SUSTAINED BY ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 4 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE DIRECTED TO BE DELETED AND, THE APPEAL OF THE APPELLANT COMPANY BE ALLOWED. THE APPELLANT PRAYS LEAVE TO ADD, AMEND, ALTER, DEL ETE OR FOREGO ANY OF THE GROUNDS EITHER BEFORE OR DURING THE COUR SE OF HEARING. IN THE REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING CUST OM DUTY PAID ON GOODS IMPORTED FOR EXPORT PURPOSE AT RS.24,92,33,44 6/- WHEN THE ASSESSEE IS ENTITLED FOR DUTY DRAWBACK ON ACCRUAL B ASIS WHICH WILL MAKE THE CLAIM OF ASSESSEE REVENUE NEUTRAL. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN ALLOWING EXCISE DUTY PAID ON INPUTS IN CLOSING STOCK MODVAT CREDIT) AT RS.8 ,02,15,155 (1,33,45,53,169 1,25,43,38,014) WHEN SECTION 145A REQUIRES THAT EXCISE DUTY COMPONENT HAS TO BE LOADED IN PURCHASE, SALE, OPENING STOCK AND CLOSING STOCK. 3. WHETHER. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE. THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN ALLOWING CUSTOM DUTY PAID ON CLOSING INVENTORY WITH VENDORS AT RS.RS1,48 ,86,451/- WHEN ASSESSEE HAS ALREADY RECEIVED DEDUCTION SINCE THESE ARE DEBITED TO P & L A/C ALREADY AND CORRESPONDINGLY, INCLUDED IN THE CLOSING STOCK. 4. WHETHER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING CUSTOM DUTY ON THE CLOSING STOCK AT RS. 119,39,68,760/- WHEN ASSES SEE HAS ALREADY RECEIVED DEDUCTIONS SINCE THESE ARE DEBITED TO P & L A/C ALREADY AND CORRESPONDINGLY. INCLUDED IN THE CLOSIN G STOCK. 5. WHETHER. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN ALLOWING CST PAID UNDER PROTEST AT RS.33.95365/- WHEN ASSESSEE IS CONTESTIN G THESE LIABILITIES AND THERE IS NO FINALITY REGARDIN G LIABILITY AND THESE ARE NOT DEBITED TO THE P & L A/C. 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN ALLOWING LST PAID UNDER PROTEST AT RS. 23,10,995/- WHEN ASSESSEE IS CONTEST ING THESE LIABILITIES AND THERE IS NO FINALITY REGARDING LIAB ILITY AND MOREOVER, THESE ARE NOT DEBITED TO THE P & L A/C, ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 5 7. WHETHER. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE. THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING EXCISE DUTY PAID UNDER PROTEST AT RS. 13,29.810/- WHEN ASSESSEE IS CONTESTING THESE LIABILITIES AND THERE IS NO FINALI TY REGARDING LIABILITIES AND THESE ARE NOT DEBITED TO THE P & L A/C. 8. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING EXCESS CLAIM OF CONSUMPTION OF STOCK AT RS.33,39,91,012 WHEN MAINTENANCE OF ADEQUATE STOCK RECORDS. FREQUENT VER IFICATION OF PHYSICAL STOCK BALANCE AT THE END OF THE YEAR WITH THE BALANCE OBTAINING FROM THE STOCK RECORDS WERE MISSING IN AS SESSEES CASE. 9. WHETHER ON THE FACTS AND III THE CIRCUMSTANC ES OF THE CASE THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN ALLOWING MODVAT ON INPUT DIFFERENCE AT RS.46,00,00.000/- ON ACCOUNT OF EXCESSIVE UNEXPLAINED CONSUMPTION OF MATERIAL AND WHEN PAYMEN T PARTAKES THE CHARACTER OF PENALTY. 10. WHETHER, ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN ALLOWING LOSS ON A/C OF FOREIGN EXCHANGE FLUCTUATION AT RS.2,08,10,944/- IN VIEW OF DECISION IN THE CASE OF INDIAN OVERSEAS BANK VS. CIT 151 ITR 446 & TENA AGENCIES VS CIT 180 ITR 102 . 11. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING CLAIM OF RS.36,09,047 OUT OF RS.75,19,975/- ON ACCOUNT OF DE PRECIATION ON ENHANCED LIABILITY WHEN THE LIABILITY ARISES WHEN A SSESSEE AGREES TO PAY THE DUTY. 12) WHETHER ON THE FACTS AND HI THE CIRCUMSTANCES O F THE CASE. THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN DE LETING ADDITION U/S 14A AT RS. 2,06,71,581/- WHEN THE A.O. APPLIED REASONABLE METHOD FOR APPORTIONING INTEREST EXPENSES IN THE RA TIO OF TOTAL FUNDS AVAILABLE WITH THE ASSESSEE AND NOT BORROWED FUNDS. 13) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING LEGAL EXPENSES AT RS.3,06,000/- WHEN EXPENSES WERE SPENT ON PURSUI NG CRIMINAL CASES WHICH CANNOT BE TERMED AS AN EXPENDITURE FOR THE PURPOSES OF BUSINESS. 14. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE. THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING DISALLOWANCE U/S 40A(I) AT RS.4,19,09,113/- IN VIEW OF DECISION IN THE CASE OF CHEMLOOR DRUGS LTD VS ITO (2001) 70 TTJ 936. ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 6 15). WHETHER, ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING LOSS ON SALE OF SHARES TREATED AS LTC LOSS AT RS.11, 75,21,368/- W HEN THE CASE OF THE ASSESSEE WAS COVERED BY WAY OF EXPLANATION T O SEC.73. 16. WHETHER, ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, THE IEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING DEPRECIATION ON FOREIGN EXCHANGE FLUCTUATION AT RS1,06,90,002/- IN VIEW OF CBDT COMMUNICATION F.NO.228/31/91 ITA- II DT..5.5.9 3 AND DECISION OF ITAT, DELHI BENCH. IN THE CASE OF SHREE RAM HONDA POWER EQUIPMENT LTD FOR 1990-91 & 1991-92 IN ITA NO .5544 AND 5545/DEL/96 DATED 2.4.2002. 17. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING MEMBERSHIP FEES AT RS 16,16,829/- WHEN THE EXPENSES HAVE BEEN INCURRED BY THE DIRECTORS AND SENIOR OFFICIALS OF THE COMPANY & ARE IN THE NATURE OF PERSONAL EXPENSES. 18. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER . O R AMEND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF HEARI NG. 3. AT THE TIME OF HEARING, LEARNED SR. COUNSEL FILE D A CHART FOR BOTH THE ASSESSEES APPEAL AS ALSO THE REVENUES APPEAL EXPL AINING THE VARIOUS CONTENTIONS IN THE TWO APPEALS. ON THE BASIS OF TH E CHART FILED, THE GROUNDS ARE BEING DISPOSED OF. ASSESSEES APPEAL 4. GROUND NO.1 IS IN REGARD TO DISALLOWANCE OF THE CLAIM MADE U/S 43B. THIS GROUND HAS GOT THREE SUB-DIVISIONS. GROUND NO.1.1 AND 1.2 IS AGAINST THE DISALLOWANCE OF THE CLAIM U/S 43B IN REGARD TO THE EXCISE DUTY PAID. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WAS SQUARE LY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF TH IS TRIBUNAL IN THE CASE OF GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. REPORTED IN 107 ITD (SB) 343 (SB) (CHD) AND THE CORRESPONDING ITR CITATION IS 299 ITR (AT) 1 WHEREIN IT HAS BEEN HELD THAT THE UNUTILIZED MODVAT CREDIT IS NOT AN A LLOWABLE DEDUCTION SINCE SUCH CREDIT DOES NOT AMOUNT TO PAYMENT OF DUTY. IT WAS FAIRLY, THUS, AGREED BY BOTH THE ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 7 SIDES THAT THIS ISSUE WOULD BE HELD AGAINST THE ASS ESSEE IN VIEW OF THE DECISION OF HONBLE SPECIAL BENCH REFERRED TO, SUPRA. 5. WE HAVE CONSIDERED THE SUBMISSIONS. IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD REFERRED TO, SUPRA, THE GROUND NO.1. 1 AND 1.2 OF ASSESSEES APPEAL STANDS DISMISSED. 6. IN GROUND NO.1.3 THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE U/S 43B IN REGARD TO SALES-TAX PAID. IT WAS FAIRLY AGREED B Y BOTH THE SIDES THAT THIS ISSUE HAS BEEN HELD AGAINST THE ASSESSEE IN THE CASE OF T HE ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 1999-2000 IN ITA NO.1240/DEL/2003 W HICH IS ALSO REPORTED IN 92 ITD 119 WHEREIN IT HAS BEEN HELD THAT THE SUM PA ID FOR THE PURCHASE OF INPUTS WOULD BE ALLOWABLE IN THE YEAR WHEN THE ADJUSTMENTS IS MADE ON THE SALE OF THE FINISHED STOCK. RESPECTFULLY FOLLOWING THE DECIS ION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 1999-2000 THE GROUND NO.1.3 OF THE ASSESSEES APPEAL STANDS DISM ISSED. 7. GROUND NO.1.4 IS AGAINST THE DISALLOWANCE U/S 43 B ON ACCOUNT OF SALES-TAX RECOVERABLE. IT WAS FAIRLY AGREED BY BOTH THE SIDE S THAT THE SITUATION WAS SIMILAR IN REGARD TO GROUND NO.1.3 AND THE DECISION IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999-2000 WOULD BE SQUARELY APPLICA BLE. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 1999-2000 THIS ISSUE IS HELD AGAINST THE ASSESSEE. 8. IN THE CIRCUMSTANCES GROUND NOS.1, 1.1, 1.2, 1.3 AND 1.4 OF THE ASSESSEES APPEAL STANDS DISMISSED. 9. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF THE SOFTWARE EXPENSES. IT WAS AGREED BY BOTH SIDES THA T THE ISSUE OF SOFTWARE EXPENSES WAS SQUARELY COVERED BY THE DECISION OF T HE SPECIAL BENCH OF THIS ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 8 TRIBUNAL IN THE CASE OF AMWAY INDIA ENTERPRISES REP ORTED IN 111 ITD 112 AND THE CORRESPONDING CITATION IN 301 ITR 1. 10. WE HAVE CONSIDERED THE SUBMISSIONS. IT IS NOTI CED THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL SQUARELY COVERS THE ISSUE OF THE SOFTWARE EXPENSES IN THE CASE OF THE ASSESSEE. HOWEVER, THE DETAILED VERIFICATION HAS TO BE DONE IN LINE WITH THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AMWAY INDIA ENTERPRISES REFERRED TO SUPRA, AND, FOR THIS PURPOSE THIS ISSUE IS RESTORED TO THE FILE OF AO FOR RE-CONSIDERATION IN LINE WITH THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AMWAY INDIA ENTERPRISES REFERRED TO, SUPRA, AND AFTER GIVING THE ASSESSEE ADEQUATE OPPOR TUNITY TO SUBSTANTIATE ITS CLAIM. IN THE CIRCUMSTANCES, GROUND NO.2 OF THE AS SESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 11. IN GROUND NO.3 TO 3.4 THE ASSESSEE HAS CHALLENG ED THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS U/S 36(1)(VII) READ WITH SEC TION 36(2) OF THE ACT. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY BOTH THE SI DES THAT THE ISSUE IN THESE APPEALS WAS SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF AUTOMETERS LTD. REPOR TED IN 292 ITR 345 AND IN THE CASE OF MORGAN SECURITIES AND CREDITS PVT. LTD. RE PORTED IN 292 ITR 339 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT IF THE ASSESSE E HAS WRITTEN OFF THE BAD DEBTS IN ITS ACCOUNTS, IT IS ENTITLED TO THE CLAIM U/S 36 (1)(VII). 12. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AUTOMETERS LTD. AND IN THE CASE OF M ORGAN SECURITIES AND CREDITS PVT. LTD. REFERRED TO SUPRA THE AO IS DIRECTED TO GRANT THE ASSESSEE THE BENEFIT OF DEDUCTION OF BAD DEBT AS CLAIMED. IN THE CIRCUMSTA NCES, GROUND NO.3 TO 3.4 OF THE ASSESSEES APPEAL STANDS ALLOWED. 13. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CIT (A) IN DIRECTING THE AO TO ADD TO THE WDV OF THE ASSETS A SUM OF RS.1,06,90,002/- INSTEAD OF RS.4.27.60,007/- ON ACCOUNT OF FOREIGN E XCHANGE FLUCTUATION IN RESPECT OF THE FIXED ASSETS. AT THE TIME OF HEARING IT WAS SUBMITTED THAT THE ASSESSEE ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 9 DOES NOT WISH TO PRESS THE SAID GROUND. CONSEQUENT LY, GROUND NO.4 OF THE ASSESSEES APPEAL IS DISMISSED AS NOT PRESSED. REVENUES APPEAL 14. IT WAS FAIRLY AGREED IN REGARD TO GROUND NO.1 W HICH WAS AGAINST THE DISALLOWANCE OF THE CLAIM U/S 43B ON ACCOUNT OF THE CUSTOMS DUTY ON IMPORT FOR WHICH EXPORT HAS BEEN MADE BY THE END OF THE YEAR, THAT THE ISSUE WAS COVERED BY THE DECISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.993/DEL/07 FOR THE ASSESSMENT YEAR 1999-2000. RESPECTFULLY FO LLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 1999-2000 THE GROUND NO.1 OF THE REVENUES APP EAL STANDS DISMISSED. 15. IN REGARD TO GROUND NO.2 WHICH WAS AGAINST THE EXCISE DUTY ON INPUTS, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH O F THIS TRIBUNAL IN THE CASE OF GLAXO SMITHKLINE CONSUMER HEALTH CARE LTD. REFERRED TO SUPRA WHEREIN IT HAS BEEN HELD THAT THE UNUTILIZED MODVAT CREDIT IS NOT AN ALLOWABLE DEDUCTION SINCE SUCH CREDIT DOES NOT AMOUNT TO PAYMENT OF DUTY. R ESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN T HE CASE OF GLAXO SMITHKLINE CONSUMER HEALTH CARE LTD., GROUND NO.2 OF THE REVEN UES APPEAL STANDS ALLOWED. 16. IN REGARD TO GROUND NO.3 WHICH IS AGAINST THE C USTOMS DUTY ON CLOSING INVENTORY WITH VENDORS, IT WAS FAIRLY AGREED THAT T HIS ISSUE IS FAIRLY COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1240/DEL/03 FOR THE ASSESSMENT YEAR 1999-2000 WHEREIN THIS TRIBUNAL HAS HELD THAT SINCE THE DUTY IS PAID DEDUCTION CAN BE CLAIMED U/S 43-B AND IS ALLO WABLE. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL, THE FINDINGS OF THE CIT (A) ON THIS ISSUE STANDS CONFIR MED. CONSEQUENTLY, GROUND NO.3 OF THE REVENUES APPEAL STANDS DISMISSED. ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 10 17. IN REGARD TO GROUND NO.4 WHICH IS AGAINST THE D ELETION OF CUSTOMS DUTY INCLUDED IN CLOSING STOCK, IT WAS FAIRLY AGREED THA T THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEAR 1999-2000 WHEREIN THIS TRIBUNAL HAS HELD THAT SINCE THE DUTY HAS BEEN PAID, DEDUCTION IS LIABLE TO BE ALLOWED U/ S 43B. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999-2000, THE REVENUES APPEAL ON THIS ISSUE STANDS DISMISSED. 18. IN REGARD TO GROUND NO.5, WHICH IS AGAINST THE ALLOWANCE OF CENTRAL SALES TAX PAID UNDER PROTEST, IT WAS FAIRLY AGREED BY BOT H THE SIDES THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL I N THE ASSESSEES OWN CASE IN ITA NO. 678/DEL/04 FOR THE ASSESSMENT YEAR 2000-01. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 THE REVENUES APPEAL ST ANDS DISMISSED. 19. IN REGARD TO GROUND NO.6 WHICH IS AGAINST THE L OCAL SALES-TAX PAID UNDER PROTEST, IT WAS FAIRLY AGREED THAT THIS ISSUE WAS S QUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE AS SESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 REFERRED TO SUPRA WHEREIN I T HAS BEEN HELD THAT SINCE THE SALES-TAX HAS BEEN PAID THE SUM IS ALLOWABLE U/ S 43B OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 THIS GROUND OF THE REVENUES APPEAL STANDS DISMISSED. 20. IN REGARD TO GROUND NO.7 WHICH IS AGAINST THE A LLOWANCE OF EXCISE DUTY PAID, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT T HIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 WHEREIN IT HAS BEE N HELD THAT SINCE THE PAYMENT OF EXCISE DUTY HAS BEEN PAID THE SAME IS AL LOWABLE U/S 43-B OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH IN THE ASSESSEES ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 11 CASE FOR ASSESSMENT YEAR 2000-01 THE FINDINGS OF TH E CIT (A) ON THIS ISSUE HAS BEEN UPHELD AND THE REVENUES APPEAL ON THIS ISSUE STANDS DISMISSED. 21. IN REGARD TO GROUND NO.8, WHICH IS AGAINST THE DELETION OF THE ALLEGED EXCESS CONSUMPTION OF COMPONENTS AND INPUTS, IT WAS FAIRLY AGREED THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 REFERRED TO SUPRA AS ALSO THE DECISION IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 IN ITA NO.2696/DEL/2007 WHEREIN THIS TRIBUNAL HAS, FOLLOWING THE ORDER OF T HE EXCISE TRIBUNAL WHEREIN THE EXCISE TRIBUNAL HAS HELD THAT NO DEMAND COULD BE RA ISED AGAINST THE ASSESSEE AS THE DIFFERENCE IN CONSUMPTION WAS WITHIN THE TOL ERABLE LIMIT HAD UPHELD THE DECISION. RESPECTFULLY FOLLOWING THE DECISION OF T HE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 AND 2004-05 REFERRED TO SUPRA, THE FINDINGS OF THE CIT (A) ON THIS ISSUE ST ANDS CONFIRMED AND THE REVENUES APPEAL ON THIS ISSUE STANDS DISMISSED. 22. IN REGARD TO GROUND NO.9 WHICH IS AGAINST THE A CTION OF THE CIT (A) IN DELETING THE DISALLOWANCE OF THE EXCISE DUTY PAID B Y THE ASSESSEE REPRESENTING THE REVERSAL OF THE EXCISE MODVAT AVAILED IN INPUTS ON CLEARANCE OF FINISHED GOODS, IT WAS FAIRLY CONCEDED BY BOTH THE SIDES THA T THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 IN ITA NO.678/DEL/2004. RE SPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01, THE FINDINGS OF THE CIT (A ) ON THIS ISSUE STANDS CONFIRMED. 23. IT IS ALSO NOTICED THAT THIS EXCISE DUTY IS PAI D AGAINST THE ORDER OF THE SETTLEMENT COMMISSION AND IS IN THE NATURE OF REVER SAL OF MODVAT AVAILED ON THE INPUTS AND NOT IN THE NATURE OF PENALTY OR FINE S. IN THE CIRCUMSTANCES THE GROUND OF APPEAL AS RAISED BY THE REVENUE ON THIS I SSUE STANDS DISMISSED. 24. IN REGARD TO GROUND NO.10 WHICH WAS AGAINST THE EXCHANGE RATE VARIATIONS ON REVENUE ACCOUNT, IT WAS FAIRLY AGREED BY BOTH TH E SIDES THAT THIS ISSUE WAS ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 12 SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999-2000 I N ITA NO.2414/DEL/03 AS ALSO DECISION OF THE HONBLE JURISDICTIONAL HIGH CO URT OF DELHI IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. REPORTED IN 162 T AXMAN 60. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT AS ALSO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, THE ISSUE RAISED IN THE REVENUES APPEAL STANDS DISMISSED. 25. IN REGARD TO GROUND NO.11, WHICH IS AGAINST TH E ACTION OF THE CIT (A) IN DELETING THE DISALLOWANCE OF DEPRECIATION OF CUSTOM S DUTY PAID AND CAPITALIZED ON THE PLANT AND MACHINERY, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDI NATE BENCH IN WHICH THE TRIBUNAL IN THE CASE OF ASSESSEE FOR ASSESSMENT YEA R 1999-2000 IN ITA NO.1240/DEL/03 FOR THE ASSESSMENT YEAR 1998-99 IN I TA NO.973/DEL/99 WHEREIN THE TRIBUNAL HAS DELETED THE DISALLOWANCE. RESPECT FULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSES SEES OWN CASE FOR ASSESSMENT YEAR 1999-2000 AND 1998-99, THE FINDINGS OF THE CIT (A) ON THIS ISSUE STANDS CONFIRMED AND THE GROUND AS RAISED BY THE REVENUE STANDS DISMISSED. 26. IN REGARD TO GROUND NO.12 WHICH IS AGAINST THE DELETION OF DISALLOWANCE OF INTEREST PAID BY INVOKING THE PROVISIONS OF SECTION 14A, IT WAS CLEARLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WOULD HAVE TO BE RES TORED TO THE FILE OF AO FOR RE- ADJUDICATING THE SAME IN LINE WITH THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT . LTD. REPORTED IN 312 ITR (AT) 1. IT WAS THE SUBMISSION BY THE LD. AR THAT T HE DETAILS FOR THE SAME HAD ALREADY BEEN FILED BEFORE THE CIT (A) AND THE DISAL LOWANCE HAD BEEN DELETED. 27. WE HAVE CONSIDERED THE SUBMISSIONS. WHEN THE A PPEAL WAS DECIDED BY THE CIT (A) AND BY THE AO, THE DECISION OF THE SPEC IAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. REFER RED TO SUPRA WAS NOT AVAILABLE. AS PER THE DECISION OF THE SPECIAL BENC H IN THE CASE OF DAGA CAPITAL ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 13 MANAGEMENT PVT. LTD. THE QUANTIFICATION OF THE DISA LLOWANCE U/S 14A IS TO BE MADE READ WITH RULE 8-D OF THE IT RULES. IN THE C IRCUMSTANCES, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS TO BE RESTORED TO THE FI LE OF AO FOR RE-ADJUDICATION IN LINE WITH THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. REFERRED TO SUPRA AND WE DO SO. IN THE CIRCUMSTANCES, GROUND NO.12 OF THE REVENUES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 28. IN REGARD TO GROUND NO.13, WHICH WAS AGAINST TH E ACTION OF THE CIT (A) IN DELETING THE DISALLOWANCE OF THE LEGAL EXPENSES, IT WAS FAIRLY AGREED THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE C O-ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999-2000 IN ITA NO.1240/DEL/03. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECIS ION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999-2000 R EFERRED TO SUPRA, THE FINDINGS OF THE CIT (A) ON THIS ISSUE STANDS CONFIR MED AND THE GROUND AS RAISED BY THE REVENUE ON THIS ISSUE STANDS DISMISSED. 29. IN REGARD TO GROUND NO.14, WHICH WAS AGAINST TH E DELETION OF DISALLOWANCE OF THE PAYMENT MADE OUTSIDE INDIA BY INVOKING THE P ROVISIONS OF SECTION 40(A)(I) IT WAS SUBMITTED THAT THE ASSESSEE HAD INCURRED THE EXPENDITURE ON ACCOUNT OF THE COMMISSION PAID TO AGENTS OUTSIDE INDIA FOR MAK ING SALE OF VEHICLES AND RE- IMBURSEMENT OF ADVERTISEMENT EXPENSES INCURRED OUTS IDE INDIA. IT WAS THE SUBMISSION THAT THE COMMISSION AS PAID DID NOT CONS TITUTE OR GIVE RISE TO ANY INCOME CHARGEABLE IN INDIA BOTH UNDER THE PROVISION S OF THE ACT OR THE PROVISIONS CONTAINED IN DTAA AND, THEREFORE, NO TAX WAS DEDUCT IBLE IN RESPECT THEREOF U/S 195 OF THE ACT AND CONSEQUENTLY NO DISALLOWANCE COU LD BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. LD. AR ALSO RELIED UPON THE CIRCULAR NO.786 DATED 07.02.2000 AND CIRCULAR NO.23 DATED 23 .07.69 WHEREIN IT HAS BEEN HELD THAT THE COMMISSION PAID TO NON-RESIDENT FOR S ERVICES RENDERED OUTSIDE INDIA ARE NOT CHARGEABLE TO TAX IN INDIA. IN REPLY, THE LD. DR SUBMITTED THAT THE ASSESSEE WAS DUTY BOUND TO MAKE THE NECESSARY CLAIM U/S 195 BEFORE THE AO ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 14 AND OBTAINED THE NECESSARY CERTIFICATE FOR NIL DEDU CTION AND THIS HAVING NOT BEING DONE, THE PROVISIONS OF SECTION 40(A) (I) OF THE AC T APPLY. 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE PROVISIONS OF SECTION 195 CLEARLY SHOWS THAT THE DEDUCTION OF TAX IS LIABLE TO BE MADE BY A PERSON RESPONSIBLE FOR PAYING TO THE NON-RESIDENT A NY SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. THE WORDS CHARGEABLE UNDE R THE PROVISIONS OF THIS ACT CLEARLY SHOWS THAT THE PAYMENT WHICH IS MADE BY THE ASSESSEE TO THE NON- RESIDENT IS LIABLE TO BE TAXED IN INDIA IN THE HAND S OF THE NON-RESIDENT. HERE IT IS NOTICED THAT THE COMMISSION HAS BEEN PAID TO THE AG ENTS FOR THE SALE OF THE VEHICLES AND RE-IMBURSEMENT OF ADVERTISEMENT EXPENS ES INCURRED OUTSIDE INDIA. OBVIOUSLY, THESE EXPENDITURES INCURRED OUTSIDE INDI A DOES NOT MAKE THEM TAXABLE IN INDIA UNDER THE ACT AND THE NON-RESIDENT ITSELF IS NOT TAXABLE IN INDIA. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE P ROVISIONS OF SECTION 195 WILL NOT BE ATTRACTED IN THE CASE OF THESE PAYMENTS AND THE CIT (A) WAS RIGHT IN DELETING THE DISALLOWANCES MADE. IN THE CIRCUMSTAN CES, GROUND NO.14 OF THE REVENUES APPEAL STANDS DISMISSED AND THE FINDINGS OF THE CIT (A) STANDS UPHELD. 31. IN REGARD TO GROUND NO.15, WHICH WAS AGAINST TH E DELETION OF THE DISALLOWANCE OF THE LONG-TERM CAPITAL LOSS HELD AS SPECULATIVE LOSS WITHIN THE MEANING OF EXPLANATION TO SECTION 73 OF THE ACT, IT WAS SUBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE JURISDI CTIONAL HIGH COURT OF DELHI IN THE CASE OF SAHARA INDIA FINANCIAL CORPORATION REPO RTED IN 206 ITR 258. IT WAS THE SUBMISSION THAT THE SHARES HAVE BEEN HELD AS IN VESTMENT AND THE APPELLANT HAS NOT PURCHASED OR SOLD SHARES OF ANY COMPANY OTH ER THAN THE TRADE INVESTMENTS. IN REPLY, THE LD. DR VEHEMENTLY SUPPO RTED THE ORDER OF THE ASSESSING OFFICER. 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S NOTICED THAT THE ASSESSEE HAS INCURRED THE CAPITAL GAINS LOSS ON ACCOUNT OF T HE REDEMPTION OF THE PREFERENCE SHARE OF THE ICICI AND THE LOSS IS DUE T O THE EFFECT OF INDEXATION ON ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 15 THE COST OF PURCHASE AS THE REDEMPTION WAS AT PAR. OBVIOUSLY, THE REDEMPTION OF THE PREFERENCE SHARES CANNOT BE TREATED AS A SAL E OF THE SHARES. IT IS ALSO NOTICED THAT DURING THE YEAR THE ASSESSEE HAS NOT P URCHASED OR SOLD ANY SHARES OF ANY COMPANY OTHER THAN THE TRADE INVESTMENTS. I N THE CIRCUMSTANCES, IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE REPORTED IN 32 CTR 268, THE REDEMPTION OF THE PREFERENCE SHARES CANNOT BE HELD TO BE THE SALE OF THE SHARES AND AS THERE IS NO SALE OF THE SHARES, T HERE IS NO QUESTION OF THIS BEING TREATED A SPECULATIVE LOSS ON THE SALE. IT I S FURTHER NOTICED THAT THE REVENUE HAS NOT RAISED ANY SPECIFIC GROUND THAT SUCH SHARES WERE NOT HELD AS STOCK-IN- TRADE AND IT IS NOTICED THAT THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS LOS S ON THE REDEMPTION OF THE PREFERENCE SHARES CANNOT BE TREATED AS SPECULATIVE LOSS. OUR VIEW IS ALSO SUPPORTED BY THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT OF DELHI IN THE CASE OF SAHARA INDIA FINANCIAL CORPORATION REPORTED IN 206 CTR 258. IN THE CIRCUMSTANCES, GROUND NO.15 OF THE REVENUES APPEAL STANDS DISMISSED. 33. IN REGARD TO GROUND NO.16, WHICH WAS AGAINST TH E ACTION OF THE CIT (A) IN DELETING THE DISALLOWANCE OF DEPRECIATION OF EXCHAN GE RATE VARIATION PAID AND CAPITALIZED, IT WAS FAIRLY AGREED THAT THIS ISSUE W AS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. REPORTED IN 162 TAXMAN 60 AS ALSO THE DECISION OF THIS TRIBUNAL IN THE REVENUES APPEAL IN THE ASSESEES O WN CASE IN ITA NO.2414/DEL/03 FOR THE ASSESSMENT YEAR 1999-2000 WH EREIN ALSO SIMILAR GROUND HAS BEEN DISMISSED. RESPECTFULLY FOLLOWING THE DEC ISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AS ALSO THE DECISION OF JURI SDICTIONAL HIGH COURT OF DELHI IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. REFER RED TO SUPRA, THE FINDINGS OF THE CIT (A) ON THIS ISSUE STANDS CONFIRMED. 34. IN REGARD TO THE ISSUE OF THE EXPENDITURE ON C LUB MEMBERSHIP, WHICH IS GROUND NO.17 IN THE REVENUES APPEAL, IT WAS SUBMIT TED BY THE LD. AR THAT THE MEMBERSHIP OF THE CLUB HAD BEEN TAKEN FOR BUSINESS REASONS SO AS TO DEVELOP RELATIONSHIP WITH PROSPECTIVE CUSTOMERS AND FOR HOL DING BUSINESS DEALS. IT WAS ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 16 ALSO SUBMITTED THAT THE ASSESSEE BEING JURIDICAL PE RSON COULD ACT ONLY THROUGH ITS REPRESENTATIVE I.E., THE DIRECTORS AND THE SENIOR O FFICIALS AND THE EXPENSES HAD BEEN INCURRED BY THE DIRECTORS AND THE SENIOR OFFIC IALS. IT WAS THE SUBMISSION THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF OTIS ELEVATORS REPORTED IN 195 ITR 682 AS ALSO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF AME RICAN EXPRESS INTERNATIONAL BANKING CORPORATION 258 ITR 601 WHEREIN IT HAS BEEN HELD THAT THE PAYMENT OF THE CLUB FEES WAS A BUSINESS EXPENDITURE NOT FALLIN G UNDER THE PROVISIONS OF SECTION 40(A)(V). IN REPLY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING AUTHORITY. 35. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT IT IS UNDISPUTED BY THE AS SESSING AUTHORITY THAT AMOUNTS OF THE EXPENSES HAVE BEEN INCURRED BY THE DIRECTORS AND SENIOR OFFICIALS OF THE COMPANY. THE ONLY REASON FOR DISALLOWING THE SAME BY THE ASSESSING AUTHORITY IS THAT IT IS IN THE NATURE OF PERSONAL EXPENSES. IT IS NOTICED THAT THE ASSESSEE IS A COMPANY AND THE COMPANY HAS TO ACT THROUGH ITS DIRE CTORS. IT IS ALSO NOTICED THE COMPANY CANNOT HAVE A PERSONAL EXPENDITURE. IT IS FURTHER NOTICED THAT THE HONBLE BOMBAY HIGH COURT HAS CATEGORICALLY HELD TH AT THE EXPENSES INCURRED FOR CLUB MEMBERSHIP FEES OF THE EMPLOYEES CANNOT BE DIS ALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(V). IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF OTIS ELEVATORS REFERRED TO SUPRA AND AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION REFERRED TO SUPRA THE FINDINGS OF THE CIT (A) ON THIS ISSUE STA NDS UPHELD. CONSEQUENTLY, THE APPEAL OF THE REVENUE ON THIS ISSUE STANDS DISMISSE D. 36. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.300/DEL/2006 ITA NO.204/DEL/2006 17 37. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. 38. THE ORDER PRONOUNCED IN THE OPEN COURT ON _____ __.2009. [K.D. RANJAN] [GEORGE MATHAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, , 2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES