Mark Exhaust Systems Ltd., New Delhi V. DCIT, Circle- 16(1), New Delhi

ITA 3095/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3770 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 02-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAURAV PUNDIR
• Keywords: Depreciation; Double taxation relief; Principle of natural justice; Earning of tax free income; TDS; Rule 8D
• Section: 43B; 143(3); 14A; 195; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI E BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.3095/DEL/2018 ASSESSMENT YEAR : 2012-13 M/S MARK EXHAUST SYSTEMS LTD. 606, VISHAL BHAWAN, 95 NEHRU PLACE, NEW DELHI-110019 VS DCIT, CIRCLE-16(1), NEW DELHI PAN-AAACM1497Q APPELLANT RESPONDENT APPELLANT BY SH. SANJAY SOOD, CA RESPONDENT BY SH. GAURAV PUNDIR, SR. DR DATE OF HEARING 13.09 .2021 DATE OF PRONOUNCEMENT 11 . 1 0.2021 ORDER PER KUL BHARAT, JM : THIS APPEAL FILED BY THE ASSESSEE PERTAINING TO ASS ESSMENT YEAR 2012- 13 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-33, NEW DELHI DATED 28.02.2018. THE ASSESSEE HAS RAISED FOLLOWING GR OUNDS OF APPEAL:- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF A.O. WHO HAD ERRED IN MAKING DISALLOWANCE U/S 14A OF RS. 42,645/-. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST, M ADE BY AO, OF RS. 1,29,63,747/-. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D WITHOUT PREJUDICE TO THE ORDER OF AO IN CONFIRMING THE DISALLOWANCE OF I NTEREST OF RS. 1,29,63,747/- , THE LEARNED CIT(A) ERRED IN NOT ALL OWING THE STATUTORY DEDUCTION OF DEPRECIATION ON INTEREST OF RS. 1,29,6 3,747/- HELD TO BE CAPITALIZED BY THE A.O. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE , MADE BY AO, OUT OF SUBSCRIPTION AND MEMBERSHIP EXPENSES OF RS. 3,62,992/-. ITA NO. 3095/DEL/2018 2 | P A GE 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AME ND OR DROP ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING. 2. FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 26.09.2012 THROUGH ELECTRONIC M ODE DECLARING INCOME OF RS.8,05,23,960/- AFTER CLAIMING THE DEDUCTION OF RS.63,70,888/- UNDER CHAPTER VI-A. THE CASE WAS SELECTED FOR SCRUTINY AN D THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961(T HE ACT) VIDE ORDER DATED 17.03.2015. BY FRAMING THE ASSESSMENT, THE A SSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED LOSS ON EXCHA NGE FLUCTUATION OF RS.97,91,000/-. THE ASSESSEE WAS ASKED AS TO WHY TH E CLAIM SHOULD NOT BE DISALLOWED. IN RESPONSE THERETO, THE ASSESSEE FILED ITS REPLY HOWEVER, THE REPLY OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE, THE REFORE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON EXC HANGE FLUCTUATION OF RS.97,91,000/-. FURTHER, THE AO DISALLOWED TH E EXPENSES RELATED TO CLUB SUBSCRIPTION OF RS.3,62,992/-, DISALLOWANCE U/ S 14A OF RS.42,645/-, DISALLOWANCE OF INTEREST ON LOAN FOR CAPITAL EXPANS ION OF RS.1,29,63,747/- AND MADE AD-HOC DISALLOWANCE OF RS.93,562/- ON TRAV ELLING AND CONVEYANCE OF THE DIRECTORS. 3. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED A PPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS AND MA TERIAL ON RECORD, SUSTAINED THE ADDITION OF RS.1,29,63,747/- MADE O N ACCOUNT OF DISALLOWANCE OF INTEREST ON CAPITAL EXPENSE S, DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT O F RS.42,645/-, AND ITA NO. 3095/DEL/2018 3 | P A GE DELETED THE AD-HOC DISALLOWANCE MADE BY AO AND THE ADDITION MADE ON ACCOUNT OF CLAIM OF LOSS ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE. 4. AGGRIEVED AGAINST THIS, THE ASSESSEE IS IN FURTH ER APPEAL BEFORE THIS TRIBUNAL. 5. GROUND NO.1 IS AGAINST THE SUSTAINING THE ADDITI ON OF RS.42,645/- MADE ON ACCOUNT OF DISALLOWANCE U//S 14A OF THE ACT . 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE MADE DISALLOWANCE AND SUSTAINED THE SAME IN ME CHANICAL FASHION WITHOUT APPRECIATING THE FACT IN THE RIGHT PERSPECT IVE. HE SUBMITTED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING THE EXEMPT INC OME. HE SUBMITTED THAT THE PRIMARY FACT WHICH NEEDED TO BE ASCERTAIN ED WAS THAT WHETHER ANY EXPENDITURE HAD BEEN INCURRED IN RELATION TO EARNIN G OF EXEMPT INCOME. HE CONTENDED THAT THERE HAS TO BE SOME NEXUS BETWEEN T HE EARNING OF INCOME AND THE EXPENDITURE SO DISALLOWED. IN THE ABSENCE OF ANY RELATION OF THE EXPENDITURE QUA THE EXEMPT INCOME, NO DISALLOWANCE COULD BE MADE. HE SUBMITTED THAT THE ASSESSING OFFICER CONSIDERED THE ENTIRE FINANCE COST IN MAKING ADDITION, WITHOUT APPRECIATING THAT THE SAME CONSISTS OF BANK CHARGES, AS WELL AS INTEREST COST RELATED TO SPECIF IC LOANS. HE FURTHER CONTENDED THAT IN THE LAST PARA OF THE ASSESSMENT O RDER, THE ASSESSING OFFICER HAD HIMSELF DISALLOWED RS.1,29,63,747/- OUT OF THIS INTEREST, BEING TOWARDS SPECIFIC LOANS. 7. PER CONTRA, LD.SR.DR OPPOSED THESE SUBMISSIONS A ND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 3095/DEL/2018 4 | P A GE 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. LD.CIT(A) IN PARA 7 HAD DECIDED THE ISSUE BY OBSERV ING AS UNDER:- 7. DECISION I HAVE CONSIDERED THE FACTS OF THE ISSUE, BASIS O F ADDITIONS MADE BY THE ASSESSING OFFICER AND THE SUBMISSIONS O F THE APPELLANT. FROM THE PERUSAL OF PROFIT AND LOSS ACCOUNT, I FIND THAT THE ASSESSEE HAS DECLARED OTHER INCOME AMOUNTING TO RS.46.22 LAK HS WHICH CONSISTS OF INTEREST FROM BANK DEPOSITS AMOUNTING TO RS.41.1 9 LAKHS AND DIVIDEND INCOME FROM LONG TERM INVESTMENTS AT RS1.1 6 LAKHS BESIDES PROFIT ON SALE OF FIXED ASSETS AT RS.3.87 LAKHS. T HUS, IT MAY BE SEEN THAT THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAIN , ELIGIBLE FOR DEDUCTION U/S 10(38) OF THE ACT. THE ASSESSING OFF ICER HAS RIGHTLY WORKED OUT DISALLOWABLE EXPENSES AS PER THE PROVISI ONS U/S 14A R.W.RULE 8D OF I.T.RULES, 1962. THEREFORE, THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. THE ASSESSING OFFICER HAS APPORTIONED INTEREST EXPENDITURE FOR THE INVESTMENT S IN THE SHARES. THE GROUND OF APPEAL IS DISMISSED. 9. WE FIND THAT THE LD.CIT(A) HAS MECHANICALLY CONF IRMED THE FINDINGS OF THE ASSESSING OFFICER, WITHOUT ADVERTING TO THE SUB MISSIONS OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR EARNING OF EXE MPT INCOME WHEN IT WAS CATEGORICALLY CONTENDED ON BEHALF OF THE ASSESSEE T HAT NO EXPENDITURE WAS INCURRED ON EARNING OF EXEMPT INCOME. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD SUBSCRIBED TO SHARE S OF ITS BANKERS IN AN EARLIER ASSESSMENT YEAR A LONG TIME BACK. IT WAS F URTHER STATED THAT INVESTMENT HAD BEEN CONTINUING AS THE INITIAL AMOUN T OF INVESTMENT WAS RS.9,49,000/- SINCE THESE EQUITY SHARES WERE HELD I N DEMAT ACCOUNT AND ITA NO. 3095/DEL/2018 5 | P A GE THEREFORE, DIVIDEND OF RS.1,16,000/- WAS ALSO CREDI TED TO ASSESSEES BANK ACCOUNT. IT IS FURTHER STATED THAT THE ASSESSING O FFICER ERRONEOUSLY CONSIDERED THE ENTIRE FINANCE COST, BANK CHARGES AS WELL AS INTEREST COST RELATED TO SPECIFIC LOANS. UNDISPUTEDLY, THE ASSES SEE HAD INVESTED A SUM OF RS.9,44,000/- IN THE SHARES OF TWO BANKS NAMELY COR PORATION BANK OF RS.2,48,000/- AND STATE BANK OF TRAVANCORE OF RS.6, 96,000/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED D IVIDEND INCOME OF RS.1,16,000/- ON THIS INVESTMENT WHICH IS AN EXEMPT INCOME. UNDISPUTEDLY, SECTION 14A OF THE ACT EMPOWERS THE A SSESSING OFFICER TO DISALLOW THE EXPENDITURE INCURRED IN RELATION TO EA RNING OF EXEMPT INCOME. IT IS CONTENTION OF THE ASSESSEE SO FAR INTEREST EX PENDITURE CLAIMED BY THE ASSESSEE IS CONCERNED THAT RELATED TO SPECIFIC LOAN S AND DID NOT RELATE TO THE INVESTMENT OUT OF WHICH THE ASSESSEE HAD EARNED DIV IDEND INCOME. IT IS WELL SETTLED LAW THAT FOR MAKING DISALLOWANCE U/S 1 4A OF THE ACT, THERE HAS TO BE AN EXPENDITURE RELATED TO THE EXEMPT INCOME WHICH HAS BEEN CHARGED IN P & L ACCOUNT BY THE ASSESSEE. IN THE PRESENT CASE, IT IS THE CONTENTION OF THE ASSESSEE THAT SO FAR INTEREST EXPENDITURE IS CONCERNED, FIRSTLY, IT RELATED TO SPECIFIC LOANS AND WERE NOT RELATED TO E XEMPT INCOME AND SECONDLY, THE INVESTMENT WAS MADE WAY BACK IN THE SHARE OF B ANKERS OF THE ASSESSEE, SUCH SHARES WERE KEPT IN DEMAT ACCOUN T. SO FAR, THE ADMINISTRATIVE EXPENSES I.E. ARE CONCERNED, THERE I S NO DISPUTE WITH REGARD TO THE FACT THAT RULE 8D OF THE INCOME TAX RULES, 1 962 IS IN OPERATION FOR ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, LO OKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT THE DISALLOW ANCE TO THE EXTENT OF THE ADMINISTRATIVE EXPENSES ONE-HALF PERCENT OF THE AVE RAGE OF THE VALUE OF ITA NO. 3095/DEL/2018 6 | P A GE INVESTMENT AS ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR I.E. RS.9,44,000/- I.E. 4,720/-. THUS, GROUND NO.1 RAIS ED BY THE ASSESSEE IS PARTLY ALLOWED. 10. GROUND NOS.2 & 3 ARE INTER-RELATED AND ARE AGAI NST THE DISALLOWANCE OF INTEREST OF RS.1,29,63,747/- AND NOT ALLOWING TH E DEPRECIATION THEREON WHICH WAS TREATED BY THE ASSESSING OFFICER BEING IN CURRED ON CAPITAL EXPANSION. 11. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE BEFORE THE AUTHORITIES BELOW. IT WAS CONTENDED TH AT THE ASSESSING OFFICER MIS-DIRECTED HIMSELF BY NOT APPRECIATING THE FACTS CORRECTLY. HE SUBMITTED THAT THE ASSESSING OFFICER STATED IN THE ASSESSMENT ORDER THAT LOAN WHICH WAS TAKEN FROM MIZUHO CORPORATE BANK LTD. WAS PAYA BLE IN HALF YEARLY INSTALLMENT AS PER THEIR AMORTIZATION SCHEDULE STAR TING FROM 31.10.2013 TO 30.04.2016. IT WAS FURTHER CONTENDED THAT THE ASSE SSING OFFICER THEN PROCEEDED TO MAKE DISALLOWANCE OF RS.1,29,63,747/- BEING THE INTEREST ON SUCH LOAN ON THE BASIS THAT LOAN WAS UNSECURED FRO M MIZUHO CORPORATION BANK LTD. AND THE INTEREST EXPENDITURE DID NOT RELA TE TO FINANCIAL YEAR UNDER CONSIDERATION AND THE AMOUNT OF LOAN HAD BEEN EXPENDED FOR CAPITAL EXPANSION. THUS, AS PER ASSESSING OFFICER, THE INT EREST EXPENDED WAS NEEDED TO BE CAPITALIZED. LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE DETAILS OF INTEREST WERE FURNISHED BEFORE THE AUTHO RITIES BELOW. A PERUSAL OF THE DETAILS INDICATE THAT INTEREST WAS ON TWO DIFFE RENT LOANS FROM MIZUHO CORPORATE BANK. ONE LOAN WAS TAKEN IN THE YEAR ENDE D 31.03.2006 AND OTHER OF RS.17,79,60,000/- WAS OBTAINED DURING THE YEAR UNDER ITA NO. 3095/DEL/2018 7 | P A GE CONSIDERATION. THE INTEREST OF RS.1,29,63,747/- INC LUDED THE INTEREST ON THE OLDER LOAN OF RS.9,73,060/- WHICH WAS FOR CAPITAL E XPANSION AND THE INTEREST OF RS.1,19,90,687/- ON THE NEW LOAN WHICH WAS TAKEN DURING THE YEAR UNDER CONSIDERATION AND THE SAME WAS ONLY FOR THE NEEDS OF ITS DAY TO DAY OPERATIONS. THE FIRST LOAN IN FOREIGN CURRENCY WAS OBTAINED IN MARCH, 2006 FROM MIZUHO CORPORATE BANK EQUIVALENT TO USD 3 MILLION. THE PRINCIPAL AMOUNT OF THE LOAN WAS REPAID IN TWO INST ALLMENTS VIZ 4 TH /5 TH YEAR, AFTER THE RECEIPT OF THE LOAN. SUCH LOAN WAS REPAID AS ON 31.03.2012. HE SUBMITTED THAT THE LOAN WAS USED TO INCUR CAPITA L EXPENSES. THE ASSETS ETC. INSTALLED USING SUCH FUNDS, WERE PUT TOO USE SOON THEREAFTER AND DEPRECIATION ETC. WAS ALLOWED BY DEPARTMENT. THE I NTEREST ON THE LOAN HAS ALSO BEEN ALLOWED IN THE PAST AS REVENUE EXPENDITUR E. NO DISALLOWANCE ON ACCOUNT OF INTEREST WAS MADE IN THE EARLIER ASSESSM ENT YEARS. THE SECOND LOAN IN FOREIGN CURRENCY WAS OBTAINED IN MAY, 2011 FROM MIZUHO CORPORATE BANK EQUIVALENT TO USD 4 MILLION AND INTE REST WAS 9.96% PER ANNUM. THIS LOAN WAS DUE AND OUTSTANDING AS ON 31. 03.2012 AND STOOD AT RS.17,79,60,000/-. THE INTEREST ON SUCH LOAN WAS C LAIMED AS EXPENDITURE BY THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE TIMING OF THE REPAYMENT OF THE PRINCIPAL AMOUNT OF THE LOAN HAS NO RELATION SHIP WITH THE INTEREST ACCRUED ON THE LOAN. THE ASSESSING OFFICER CONCLUD ED THAT THE INTEREST WAS NOT TO BE CONSIDERED IN THIS FINANCIAL YEAR UNDER C ONSIDERATION. IT WAS CONTENDED THAT THE INTEREST WOULD ACCRUE OVER THE P ERIOD OF THE LOAN AND INTEREST UPTO 31.03.2012 WOULD ACCRUE AS AN EXPENDI TURE FOR THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER TRE ATED THE LOAN AS OBTAINED FOR CAPITAL EXPANSION WHICH IS FACTUALLY I NCORRECT, IT WAS ONLY THE ITA NO. 3095/DEL/2018 8 | P A GE FIRST LOAN WHICH WAS TAKEN FOR CAPITAL EXPANSION. HE SUBMITTED THAT THE ASSESSING OFFICER DID NOT BRING ANY EVIDENCE DEMONS TRATING THAT THE LOAN WAS UTILIZED FOR CAPITAL EXPANSION. 12. LD.SR.DR OPPOSED THESE SUBMISSIONS AND SUPPORTE D THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. LD.CIT(A) HAS CONFIRMED THE ADDITION BY OBSERVING A S UNDER:- 11.2. WHEREAS THE DCIT HAS GIVEN A FINDING THAT NO TE 5 OF THE BALANCE SHEET STATES THAT THE ASSESSEE HAS TAKEN UN SECURED LOAN FROM MIZUHO CORPORATION BANK WHICH IS PAYABLE IN HALF YE ARLY INSTALLMENT AS PER THEIR AMORTIZATION SCHEDULE WHICH IS GOING T O START FROM 31.10.2013. AS THE EXPENDITURE DOES NOT RELATE TO T HE PERIOD UNDER CONSIDERATION I.E. 01.04.2011 TO 31.03.2012, THE SA ME IS NOT ALLOWABLE FOR THE PERIOD UNDER CONSIDERATION. 11.3. THUS, IT IS EVIDENT THE ASSESSEE HAS MADE A P ROVISION OF INTEREST ON LOANS TAKEN FROM MIZUHO CORPORATION BANK, JAPAN FOR THE ASSESSMENT YEAR 2012-13 AND THAT THE SAID INTEREST WAS NOT PAID TO THE SAID BANK. IT HAS ALSO BEEN NOTED THAT THE SAID FOREIGN BANK HAS BRANCHES IN INDIA AND IS DULY ON THE LIST OF RESERV E BANK OF INDIA. THUS, THE INTEREST ON LOAN IS ALSO SUBJECTED TO THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT. BUT THE INTEREST IS PAYA BLE IN FOREIGN EXCHANGE SUBJECT TO THE PROVISIONS OF DT AA WHICH S AYS THAT SUCH INTEREST MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH IT ARISES, AND ACCORDING TO THE LAWS OF THAT CONTRACTING STATE . BUT IF THE RECIPIENT IS THE BENEFICIAL OWNER OF THE INTEREST, THE TAX MA Y BE CHARGED (A) @ 10 PER CENT OF THE GROSS AMOUNT OF THE INTEREST IF THE BENEFICIAL OWNER IS A ITA NO. 3095/DEL/2018 9 | P A GE BANK AND (B) @ 15 PER CENT OF THE GROSS AMOUNT OF T HE INTEREST IN ALL OTHER CASES. 11.4. IN THIS MANNER THE ASSESSEE HAS NOT FOLLOWED THE PROVISIONS OF SECTION 195 READ WITH DTAA BY NOT DEDUCTING TDS @ 1 0% OF THE AMOUNT PAYABLE AND SECTION 43B OF THE INCOME TAX AC T. THEREFORE, I HOLD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM INT EREST EXPENSE OF RS.L,29,63,747/- FOR THE ASSESSMENT YEAR 2012-13 AN D THE DISALLOWANCE, THEREFORE, IS HEREBY CONFIRMED. 14. FROM THE ABOVE, IT IS CLEAR THAT LD.CIT(A) CONF IRMED THE DISALLOWANCE ALTOGETHER ON THE DIFFERENT BASIS WITHOUT PUTTING T HE ASSESSEE ON NOTICE. THE GROUND TAKEN FOR ALLOWANCE OF DEPRECIATION ON C APITALIZATION OF INTEREST WAS REJECTED ON THE BASIS THAT BEFORE THE ASSESSING OFFICER, SUCH GROUND COULD NOT HAVE BEEN TAKEN WITHOUT CLAIMING IT IN TH E RETURN OF INCOME. IN SUPPORT OF THIS, LD.CIT(A) HAS PLACED RELIANCE ON T HE JUDGEMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF GOETZE INDIA LTD. VS CIT REPORTED IN [2006] 204 CTR 0182. LD.CIT(A) HAS MIS-DIRECTED HIMSELF AS THE JUDGEME NT OF THE HONBLE SUPREME COURT DOES NOT PUT FETTERS ON THE POWER OF THE APPELLATE AUTHORITY BELOW FOR ENTERTAINING SUCH CLA IM. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND MATERIAL PLACED BEFORE US, WE DEEM IT PROPER AND IN THE PRINCIPLE OF NATURAL JUSTICE T O RESTORE THIS GROUND TO THE FILE OF LD.CIT(A) TO DECIDE THE ISSUE AFRESH AFTER PROVIDING A REASONABLE OPPORTUNITY TO THE ASSESSEE. THUS, GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 15. GROUND NO.4 IS AGAINST THE CONFIRMING THE ADDIT ION MADE ON ACCOUNT OF DISALLOWANCE OF SUBSCRIPTION AND MEMBERSHIP EXPE NSES OF RS.3,62,992/-. ITA NO. 3095/DEL/2018 10 | P A GE 16. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE BEFORE LD.CIT(A). IT WAS CONTENDED ON BEHALF OF TH E ASSESSEE THAT THE SUBSCRIPTION FEES FOR DLF GOLF CLUB AND PANCHSHILA CLUB. SUCH FACILITIES ARE PROVIDED TO THE SENIOR MANAGERIAL PERSONNEL TO MEET SENIOR EXECUTIVES OF THE ASSESSEE AND CUSTOMERS ETC. IN A RELAXED SET TINGS. IT WAS FURTHER CONTENDED THAT SUCH MEETINGS DEVELOP RELATIONS WHIC H ARE USEFUL FOR THE RUNNING OF BUSINESS SMOOTHLY. IT WAS FURTHER CONTE NTED THAT THE AMOUNT WAS EXPENDED IN FURTHERANCE OF THE COMPANYS BUSINE SS HENCE, NO DISALLOWANCE OUGHT TO HAVE BEEN MADE. IT WAS FURTH ER CONTENDED THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS EXPEDIENCY. 17. ON THE CONTRARY, LD. SR. DR SUBMITTED THAT BEFO RE THE AUTHORITIES BELOW, THE ASSESSEE FAILED TO DISCHARGE ITS ONUS RE GARDING THE EXPENDITURE BEING INCURRED FOR BUSINESS EXPEDIENCY. LD. SR. DR FURTHER SUBMITTED THAT ONLY SUCH EXPENDITURE WHICH WAS INCURRED FOR THE BU SINESS AND FOR FURTHERANCE OF THE BUSINESS, WAS ALLOWABLE. THE AS SESSEE DID NOT PROVE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS. 18. WE HAVE HEARD THE RIVAL CONTENTIONS. THE CONTE NTIONS OF THE ASSESSEE ARE, FIRSTLY, THE EXPENDITURE WAS INCURRED FOR BUSI NESS EXPEDIENCY AND SECONDLY, THE DISALLOWANCE IS HIGHLY EXCESSIVE. WE FIND THAT THE EXPENDITURE IS RELATED TO SUBSCRIPTION OR MEMBERSHI P FEE AND EXPENDITURE INCURRED FOR BUSINESS MEETINGS. IT IS THE CONTENTI ON OF THE ASSESSEE THAT THE FACILITY WAS PROVIDED TO SENIOR MANAGERIAL PERS ONNEL OF THE COMPANY UNDER THE TERMS OF EMPLOYMENT FOR HAVING MEETINGS W ITH SENIOR EXECUTIVES ITA NO. 3095/DEL/2018 11 | P A GE AND PROBABLE CUSTOMERS. WE FIND MERIT IN THIS CONT ENTION OF THE ASSESSEE THAT SUCH MEMBERSHIP IS USED FOR FURTHERING SOCIAL RELATIONSHIP AND ALSO DEVELOP BUSINESS COMMUNICATION. THEREFORE, THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. HENCE, SAME IS HEREBY DELETED. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ABOVE DECISION WAS PRONOUNCED ON CONCLUSION OF VIRT UAL HEARING IN THE PRESENCE OF BOTH THE PARTIES ON 11 TH OCTOBER, 2021. SD/- SD/- (R.K.PANDA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIA L MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI