Maldeep Catalysts Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(3), Surat

ITA 3071/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5954 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 28-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI LAXMI
• Assessee Lawyers: DENNIS CHOKSI
• Keywords: Opportunity of being heard; Additional evidence; Bad and doubtful debts; Capital expenditure; TDS
• Section: 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD, CAMP AT SURAT. BEFORE: SHRI T.K. SHARMA, JUDICIAL MEMBER , AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER. ITA NO.3071/AHD/2008 (ASSESSMENT YEAR 2004-2005) MALDEEP CATALYSTS PVT. LTD. 3, HARIKUNJ, UDHNA INDUSTRIAL ESTATE, S.V.P. ROAD NO.3, UDHNA, SURAT 394 210. VERSUS INCOME TAX OFFICER, WARD 1(3), SURAT. (APPELLANT) (RESPONDENT) PAN:AABCM 6306 M ITA NO.3075/AHD/2008 (ASSESSMENT YEAR 2004-2005) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VERSUS MALDEEP CATALYSTS PVT. LTD. 3, HARIKUNJ, UDHNA INDUSTRIAL ESTATE, S.V.P. ROAD NO.3, UDHNA, SURAT 394 210. (APPELLANT) (RESPONDENT) PAN:AABCM 6306 M FOR THE ASSESSEE: SHRI. DENNIS CHOKSI, AR FOR THE REVENUE: SMT. JYOTI LAXMI, SR. DR ORDER PER SHRI. D C AGRAWAL (ACCOUNTANT MEMBER): THESE ARE THE TWO CROSS APPEALS, ONE FILED BY THE ASSESSEE AND THE OTHER FI LED BY THE REVENUE FOR THE AY 2004-2005 AGAINST THE ORDER OF LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) DATED 26-06-2008. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS AND PAINT DRYERS. DURIN G THE COURSE OF 2 ITA NO.620/AHD/2007 AND ORS. ASSESSMENT PROCEEDINGS, ASSESSING OFFICER MADE ADDI TION IN THE TOTAL INCOME IN RESPECT OF BAD DEBTS, COMMISSION EXPENSES AND CAPITAL EXPENDITURE. THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ADDITION IN RESPECT OF BAD DEBTS, HE PARTLY ALLOWED THE ADDITION IN RESPECT OF COMMISSION PAYMENT, BUT DISM ISSED THE ASSESSEES APPEAL IN RESPECT OF GROUND RELATING TO CAPITAL EXP ENDITURE. THUS, ASSESSEE IS IN APPEAL IN RESPECT OF THREE ADDITIONS , ONE PARTLY CONFIRMED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS), WHERE AS, REVENUE IS IN APPEAL AGAINST THE PART RELIEF GIVEN IN RESPECT OF COMMISSION. 3. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF B AD DEBTS AMOUNTING TO RS.5,72,219/-, AS MADE BY THE ASSESSIN G OFFICER, WHICH IS ABSOLUTELY INCORRECT AND BAD-IN-L AW, REQUIRING OUTRIGHT DELETION. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF COMMISSION EXPENSES AMOUNTING TO RS.2,68,413/- AS M ADE BY THE AO, WHICH IS ABSOLUTELY INCORRECT AND BAD-IN-LA W, REQUIRING OUTRIGHT DELETION. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF R EVENUE EXPENDITURE BY TREATING IT AS CAPITAL EXPENDITURE, AMOUNTING TO RS.1,75,219/- AS MADE BY THE ASSESSING OFFICER, WHICH IS ABSOLUTELY INCORRECT AND BAD-IN-LAW, REQUIRING OUTR IGHT DELETION. 4. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, SUBST ITUTE, AND MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL, IF N ECESSARY, 3 ITA NO.620/AHD/2007 AND ORS. ON THE BASIS OF SUBMISSION TO BE MADE AT THE TIME O F PERSONAL HEARING. 4. ISSUE REGARDING BAD DEBT: ASSESSEE CLAIMED BED DEBT OF RS. 5,72,219/- IN RESPECT OF ITS TRANSACTION WITH PHENO CHEM INDUSTRIES WHICH WAS DONE SEVERAL YEARS AGO AS CLAIMED BY THE ASSESS EE. THE ASSESSEE HAD CREDITED THE ACCOUNT OF ABOVE PARTY ON 31-03-2004, BEING THE AMOUNT CLAIMED TO HAVE NOT BEEN RECEIVED FROM THE ABOVE PA RTY. THE ASSESSING OFFICER CARRIED OUT INQUIRES UNDER SECTION 133(6) A ND FOUND THAT THERE IS NO ENTRY OF THIS AMOUNT IN THE BOOKS OF ACCOUNTS OF PHENOCHEM INDUSTRIES. THAT PARTY HAD NOT DEBITED THE ACCOUNT OF ASSESSEE ON ACCOUNT OF BAD DEBTS NOR IT HAS ISSUED ANY DEBIT NOTE IN TH IS REGARD. AS PER BOOKS OF THAT PARTS THE ASSESSEE HAD SOLD GOODS FOR RS.38 ,08,062/- AND RECEIVED PAYMENTS AGAINST THE SALES, LEAVING OUTSTANDING BAL ANCE OF RS.3,72,030/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO RECO NCILE THE DIFFERENCE IN THE COPY OF ACCOUNTS RECEIVED FROM M/S. PHENOCHEM I NDUSTRIES AND THE ACCOUNTS AS FOUND IN THE BOOKS OF THE ASSESSEE IN R ESPECT OF THE ABOVE TRANSACTIONS, BUT ASSESSEE FAILED TO FURNISH ANY RE CONCILIATION AND ACCORDINGLY ASSESSING OFFICER DID NOT ALLOW THE CLA IM OF BAD DEBT. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIR MED THE DISALLOWANCE BY OBSERVING AS UNDER: 2.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND OBSERVATION OF THE ASSESSING OFFICER. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE APPELLANT HAS MISERABLY FAILED IN GIVING THE RECONCILIATION AS TO WHY THE APPELLANT HAS BEEN SHO WING THE DEBT SINCE 1995-96 BUT PHENO CHEM INDUSTRIES HAS NOT BEE N SHOWING THE ASSESSEE AS CREDITOR. IF THE DEBT IS IN RESPEC T OF A PARTY WITH WHICH THE APPELLANT IS HAVING TRANSACTION IT CANNOT BE BED DEBT. IT CAN BE A CASE OF SHORT RECOVERIES FOR WHICH SOME EVIDENCE OF DEBIT NOTE/CREDIT NOTE ETC. HAS TO BE THERE. THE A PPELLANT HAS ALSO 4 ITA NO.620/AHD/2007 AND ORS. FAILED TO EXPLAIN AS TO HOW THE DEBT IS IRRECOVERAB LE OR HAD BAD WHEN IT IS HAVING CONTINUOUS AND REGULAR TRANSACTIO N WITH PHENO CHEM INDUSTRIES THE DEBT CANNOT BE CALLED BED UNLES S THE APPELLANT BRINGS SOME MATERIAL ON RECORD TO SHOW TH AT THIS AMOUNT IS IRRECOVERABLE. THE DECISION OF THE HONB LE GUJARAT HIGH COURT RELIED UPON BY THE APPELLANT IS NOT APPL ICABLE AS THE DEBT ITSELF IS NOT PROVED. THEREFORE, THE CLAIM OF BAD DEBT IS NOT PROVED AND HENCE THE DISALLOWANCE IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. 5. BEFORE US LEARNED AR FOR THE ASSESSEE SUBMITTED THAT OPENING BALANCE RECEIVABLE FROM PHENOCHEM INDUSTRIES AS ON 01-04-2003 WAS RS.14,29,890/- WHEREAS, AS PER BOOKS OF M/S. PHENOC HEM INDUSTRIES, THE AMOUNT PAYABLE TO THE ASSESSEE AS ON 01-04-2003 WAS RS.8,57,091/- CREATING A DIFFERENCE OF RS. 5,72,799/-. THE ASSES SEE HAS SUBMITTED COPIES OF THE SALE INVOICES FOR THE TOTAL SUM OF 5, 86,720/- PERTAINING TO THE PERIOD FROM DECEMBER 1998 TO MARCH 1999AND FINANCIA L YEAR 1995-1996 WHICH RESULTED IN DEBTS NOT RECOVERABLE. THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) SENT THESE BILLS TO ASSESSING OFFICER FOR HIS COMMENTS, BUT THE ASSESSING OFFICER IN THE REMAND R EPORT DATED 05-05- 2008 DID NOT COMMENT EITHER ON THE AFORESAID DETAIL S OR ON THE COPY OF THE SALE INVOICES SUBMITTED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD INCORRECTLY CONFIRMED THE CLAIM BY HO LDING THAT ASSESSEE HAS NOT PROVED HOW THE DEBT HAD BECOME BAD. LEARNE D AR FURTHER SUBMITTED THAT IT IS NO LONGER REQUIRED FOR THE ASS ESSEE TO PROVE THAT DEBT HAS BECOME BAD. IF IT IS WRITTEN OFF IN THE BOOKS OF ACCOUNT, THEN IT IS SUFFICIENT FOR ALLOWING THE CLAIM. HE REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN TRF LIMITED VS. CIT (2010) 230 CTR (SC) 14, WHEREIN, HONBLE APEX COURT HAS OBSERVED AS UNDER: 5 ITA NO.620/AHD/2007 AND ORS. .. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRR ECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. 6. LD. AR FURTHER SUBMITTED THAT ABOVE SUM HAS BEEN OFFERED AS INCOME AS SALE RECEIPTS AND THEREFORE CONDITION LAI D DOWN UNDER SECTION 36(2) AND 36(1)(VII) ARE SATISFIED. THE DEBT HAS B EEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS IT WAS MORE THEN 7 YEARS OLD. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE ISSUE OF BA D DEBT IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TRF LIMITED VS. CIT(SUPRA). IT IS NO LONGE R REQUIRED FOR THE ASSESSEE TO PROVE THAT A DEBT HAS BECOME BAD BEFORE IT IS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IF THE AMOUNT OF DEBT IS TAKEN INTO CONSIDERATION WHILE COMPUTING TOTAL INCOME OF THE ASSESSEE IN THIS YEAR OR IN ANY EARLIER YEAR, AND IT IS SUBSEQUENTLY WRITTEN OFF IN BOOKS OF ACCO UNTS, AS NOT RECOVERABLE, THEN DEBT SHOULD BE TREATED AS BAD AND ON BEING WRI TTEN OFF, THE CLAIM SHOULD BE ALLOWED. 8. AS A RESULT, WE ALLOW THE CLAIM OF THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 9. GROUND NO.2 IN ASSESSEES APPEAL AND GROUND NO.1 IN REVENUES APPEAL RELATES TO COMMISSION PAYMENT. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND THAT THE ASSES SEE HAS MADE A CLAIM OF COMMISSION PAYMENT TO 4 PARTIES AS UNDER FOR SAL ES SUPPOSEDLY MADE THROUGH THEM: NAME OF THE PARTY PARTICULARS AMT.(RS.) PHENO CHEM INDUSTRIES, NEW DELHI FOR SALE OF MATERIAL 2,50,512 6 ITA NO.620/AHD/2007 AND ORS. M/S KAPADIA ENTERPRISES -DO- 3,95,451 M/S CAMPLEX MARKETING CORPN. -DO- 4,80,518 SCORPION ENTERPRISES -DO- 17,901 TOTAL 11,44,282 10. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FUR NISH EVIDENCE ON RECORD ABOUT EXACT NATURE AND QUANTUM OF SERVICES R ENDERED BY THESE PARTIES AND JUSTIFICATION OF THE PAYMENTS, BUT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO SHOW THAT SALES HAD BEEN AFFECTED T HROUGH THESE PARTIES. MORE SUBMISSION OF THE BILLS OF SALES MADE ON VARIO US DATES WAS NOT TREATED AS ENOUGH OF THE EVIDENCE TO PROVE THE PAYM ENT OF COMMISSION. THE ASSESSING OFFICER FURTHER NOTICED THAT THE NAME S OF THE COMMISSION AGENT HAS BEEN SUBSEQUENTLY INTERPOLATED ON THESE I NVOICES AS WRITING OF THESE NAMES WAS CLEARLY DISTINGUISHABLE FROM OTHER CONTENTS WRITTEN ON THESE INVOICES. SOME OF THE INVOICES ARE COMPUTER PRINTOUTS, BUT THE NAME OF THE COMMISSION AGENTS HAVE BEEN WRITTEN WIT H HAND. THIS SHOWN THAT NAME OF THE COMMISSION AGENT HAVE BEEN SUBSEQU ENTLY SUPERIMPOSED ON THE SALE INVOICES. ON THIS BASIS HE HELD THAT P AYMENT OF COMMISSION IS NOT GENUINE. THE ASSESSING OFFICER RELIED ON THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF LAXMINARAYAN MADANLAL 86 ITR 418, WHEREIN, IT WAS HELD THAT, MERE EXISTENCE OF AGREEM ENT BETWEEN ASSESSEE AND ITS SALE AGENT OR PAYMENT OF COMMISSION DOES NO T TIE DOWN THE ITO TO HOLD THAT PAYMENT WAS NOT MADE EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED THE CL AIM. 11. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FO UND THAT M/S. KAPADIA ENTERPRISES AND CAMPLEX MARKETING CORPORATI ON, M/S. ASIAN PAINTS LIMITED AND BERGER PAINTS INDIA LIMITED HAVE CONFIRMED THAT THEY ARE THE AGENTS THROUGH WHOM THEY HAVE MADE PURCHASE S FROM THE ASSESSEE COMPANY. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) THEREFORE 7 ITA NO.620/AHD/2007 AND ORS. ACCEPTED THE CLAIM OF COMMISSION PAYMENT IN RESPECT OF THESE TWO PARTIES ON THE BASIS OF THAT THEY HAVE CONFIRMED THAT THEY HAVE ACTED AS COMMISSION AGENTS. HOWEVER, NO EVIDENCE WAS FOUND TO SHOW THAT PHENOCHEM INDUSTRIES OR SCORPION ENTERPRISES WERE A GENTS AT ALL AS ASSESSING OFFICER HAS FOUND THAT INVOICES IN RESPEC T OF THEM ARE TEMPERED. IN VIEW OF THIS LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE DISALLOWANCE IN RESPECT OF THESE TWO PERSONS. 12. BEFORE US, LD. AR FOR THE ASSESSEE SUBMITTED TH AT IT HAS FURNISHED THE FOLLOWING DETAILS IN RESPECT OF THESE AGENTS. (A) NAME, ADDRESS AND PAN OF THE AGENT, (B) COPY OF LEDGER ACCOUNT OF THE COMMISSION AGENT SHOW ING BILL NO., AND AMOUNT OF SALES MADE THROUGH THESE AG ENTS, (C) THE RATE AND AMOUNT OF COMMISSION PAID TO THEM, (D) THE DETAIL OF TDS ON COMMISSION PAYMENTS AND PAYMEN T MADE BY ACCOUNT PAYEE CHEQUE, (E) SALES INVOICES ON SAMPLE BASIS. 13. IN ADDITION TO THIS, FOLLOWING DOCUMENTARY EVID ENCES WERE FURNISHED IN RESPECT OF SERVICES RENDERED BY THESE AGENTS. (A) CONFIRMATION FROM TWO MAJOR BUYERS I.E. ASIAN P AINTS LTD. AND BERGER PAINTS LTD. AS PROOF THAT BUSINESS HAVE BEEN TRANSACTED WITH THEM BY THE ASSESSEE THROUGH THE AG ENTS. (B) AGENCY AGREEMENTS IN FORCE SINCE 1991 AND RENEW ED THEREAFTER, (C) COPY OF TRADE MAGAZINE WHEREIN THE ASSESSEE HAS DECLARED THE NAME OF HIS COMMISSION AGENTS IN DIFFERENT PART S OF THE COUNTRY. 8 ITA NO.620/AHD/2007 AND ORS. 14. FURTHER LEARNED AUTHORISED REPRESENTATIVE SUBMI TTED THAT IN RESPONSE TO SUMMONS ISSUED UNDER SECTION 131, FOUR AGENTS HAVE SUBMITTED THEIR REPLIES GIVING FOLLOWING DETAILS: (A) DETAIL OF NATURE OF TRANSACTION WITH THE ASSESS EE. (B) COPY OF ACCOUNT OF THE ASSESSEE FROM ITS BOOKS OF ACCOUNTS. (C) MODE OF PAYMENT AS RECEIVED FROM THE ASSESSEE. (D) COPY OF THEIR BANK STATEMENT SHOWING THE PAYME NT RECEIVED FROM THE ASSESSEE BY ACCOUNT PAYEE CHEQUE. (E) COPY OF ACKNOWLEDGEMENT OF RETURN, COMPUTATION OF INCOME, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE Y EAR UNDER CONSIDERATION I.E. A.Y. 2004-05 FULLY REFLECTING TH E TRANSACTIONS WITH THE ASSESSEE. 15. HE SUBMITTED THAT IN SPITE OF ABOVE DETAILS, TH E CLAIM HAS BEEN DISALLOWED BY ASSESSING OFFICER AND PARTIALLY CONFI RMED BY LD. COMMISSIONER OF INCOME TAX(APPEALS). IN ADDITION T O THIS ASIAN PAINTS LTD. HAS CONFIRMED THAT IT HAS MADE PURCHASES FROM ASSESSEE THROUGH M/S. KAPADIA ENTERPRISES AND SIMILARLY BERGER PAINTS LIM ITED HAD ALSO CONFIRMED THAT IT HAD MADE PURCHASES FROM THE ASSES SEE THROUGH M/S. CAMPLEX MARKETING CORPORATION. WHEN COMPLETE DOCUM ENTARY EVIDENCE TO PROVE THE COMMISSION EXPENSES AND THE SERVICES R ENDERED BY THE AGENTS HAS BEEN FURNISHED, TDS HAS BEEN MADE FROM THEIR PA YMENTS, PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUE, LIST OF BUYE RS WHO HAVE PURCHASED THROUGH THE AGENTS HAVE BEEN GIVEN, THERE ARE AGENCY AGREEMENTS, A COPY OF TRADE MAGAZINE SHOWING NAMES OF THE AGENTS HAVE BEEN FURNISHED, THEN CLAIM SHOULD BE ALLOWED. 16. AGAINST THIS LEARNED DR SUBMITTED THAT NO PROOF OF EXACT SERVICES RENDERED HAS BEEN FURNISHED. THERE IS TEMPERING ON THE SALE INVOICES. FURTHER ADDITIONAL EVIDENCE HAS BEEN FURNISHED BEFO RE THE LD. 9 ITA NO.620/AHD/2007 AND ORS. COMMISSIONER OF INCOME TAX(APPEALS) AND NO PARTICUL ARS WERE GIVEN TO THE ASSESSING OFFICER TO EXAMINE THE DOCUMENTS AND FIND OUT WHETHER THEY INDICATE EXACT NATURE OF SERVICES RENDERED. I N VIEW OF THIS, CLAIM COULD NOT HAVE BEEN ALLOWED. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW MATTER IS REQUIR ED TO HAVE A RELOOK BY THE ASSESSING OFFICER AS FRESH EVIDENCE HAS BEEN FU RNISHED BEFORE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) AS POINTED OUT BY LEARNED AUTHORISED REPRESENTATIVE IN THE DOCUMENTS BEFORE U S. EVEN THOUGH THERE IS TEMPERING ON THE INVOICES BUT IF BUYERS HA VE ACTUALLY PURCHASED THE GOODS FROM THE ASSESSEE DURING THE AGENTS THEN TEMPERING SHOULD NOT COME IN THE WAY TO ALLOW THE CLAIM. HOWEVER, IT IS TO BE SEEN AS TO WHAT EXACTLY THE AGENTS HAVE DONE FOR THE ASSESSEE. COP Y OF THE CORRESPONDENCE BY THE ASSESSEE WITH THE AGENTS AND BY THE AGENTS WITH THE BUYERS SHOULD BE PRODUCED. COPY OF THE AGENCY AGRE EMENT SHOULD BE EXAMINED SO AS TO FIND OUT THE NATURE OF SERVICES T O BE RENDERED BY THE AGENTS TO THE ASSESSEE AND WHETHER SUCH SERVICES HA VE ACTUALLY BEEN RENDERED TO THE ASSESSEE. IF THE EVIDENCE INDICATE D THAT WHAT IS RECORDED IN THE AGREEMENT ABOUT THE NATURE OF THE SERVICES I S ACTUALLY PERFORMED BY THE AGENTS, THEN PAYMENT OF COMMISSION SHOULD BE AL LOWED. CONFIRMATION BY THE BUYERS THAT THEY HAVE MADE PURC HASES THROUGH THE AGENTS IS ONE EVIDENCE AND CAN BE TREATED AS ONE OF THE SERVICES RENDERED BY THE AGENTS TO THE ASSESSEE. BUT, IT ALL DEPENDS UPON THE TERMS MENTIONED IN THE AGENCY AGREEMENT. TO THE EXTENT S ERVICES MENTIONED IN THE AGENCY AGREEMENT ARE PERFORMED BY THE AGENTS, P AYMENT OF COMMISSION SHOULD BE ALLOWED. THEREFORE, FOR CONSI DERING THE ISSUE AFRESH WE RESTORE THE MATTER TO THE FILE OF THE ASS ESSING OFFICER. THE ASSESSEE WILL EXTEND FULL COOPERATION TO THE ASSESS ING OFFICER WHO WILL PROVIDE HIM REASONABLE OPPORTUNITY OF BEING HEARD. AS A RESULT THIS 10 ITA NO.620/AHD/2007 AND ORS. GROUND IN ASSESSEES APPEAL AND IN REVENUES APPEAL ARE ALLOWED, BUT FOR STATISTICAL PURPOSES. 18. THE LAST GROUND IN ASSESSEES APPEAL IS ABOUT T REATING SUM OF RS.1,75,218/- AS CAPITAL EXPENDITURE. THE ASSESSEE HAD CLAIMED ELECTRICAL REPAIR EXPENSES OF RS.1,96,524/- OUT OF WHICH AN AM OUNT OF RS.1,75,219/- WAS PAID TO BHAVNA ELECTRICAL AND MACHINERY STORES TOWARDS PURCHASES OF MISC. ITEMS LIKE COPPER CABLES, MOTOR STARTER, REAC TOR LAMP, CABLE, TUBE LIGHT FITTINGS ETC. THE ASSESSING OFFICER HELD THA T NATURE OF EXPENDITURE INDICATES THAT THE SAME HAVE BEEN INCURRED FOR A LA RGE SCALE RENOVATION WORK CARRIED OUT DURING THE YEAR. IT HAS PURCHASED ONE ELECTRICAL GENERATOR SET FOR ITS PREMISES IN ADDITION TO ELECT RICAL ACCESSORIES PURCHASED FROM M/S. BHAVNA ELECTRICAL AND MACHINERY STORES LD. COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE D ISALLOWANCE OF EXPENDITURE AS CAPITAL EXPENDITURE ON THE GROUND TH AT EXPENDITURE INCURRED IS OF ENDURING NATURE. 19. LEARNED AUTHORISED REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT ALL THESE PURCHASES ARE OF REVENUE NATURE AND ARE REPLACEMENTS AND NOT INSTALLATION OF ANY NEW ASSET GIVING ANY ENDURI NG BENEFIT. HE SUBMITTED THAT MERELY BECAUSE REPLACEMENTS GIVE SOM E ENDURING BENEFIT, IT WILL NOT CHANGE THE CHARACTER OF EXPENDITURE. 20. AGAINST THIS, LEARNED DR RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE CLAIM IS CL EARLY ALLOWABLE. ADMITTEDLY, EXPENDITURE IS INCURRED ON REPLACEMENTS OF ELECTRICAL PARTS AND NO NEW ASSET OF ENDURING NATURE HAS BEEN ACQUIR ED. MERELY BECAUSE REPLACEMENTS PROVIDE BENEFIT FOR SOME LONGER PERIOD DOES NOT MAKE THE 11 ITA NO.620/AHD/2007 AND ORS. EXPENDITURE AS CAPITAL. BOTH THE CONDITIONS SHOULD BE SATISFIED TOGETHER. THERE SHOULD BE ACQUISITION OF AN ASSET AND SUCH AS SET SHOULD PROVIDE ENDURING BENEFIT ONLY THE REPLACEMENT OF MAJOR PART OF PLANT AND MACHINERY WOULD ALSO FALL IN THE CATEGORY OF CAPITA L EXPENDITURE. DAY TO DAY OR ROUTINE REPLACEMENTS WILL FALL IN THE CATEGO RY OF CURRENT REPAIRS. ACCORDINGLY, THE CLAIM OF THE ASSESSEE IS ALLOWED. 22. AS A RESULT APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED AND PARTLY ALLOWED FOR THE STATISTICAL PURPOSES, WHEREAS, APPE AL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 11 TH JUNE, 2010. SD/- SD/- (T.K. SHARMA) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUN TANT MEMBER AHMEDABAD; DATED: 11/06/2010 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.