ACIT, V. M/s Faridabad Entertainment (P) Ltd,

ITA 313/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2371 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-11-2009
• Assessment Year: misc
• Appeal Filed On: 28-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: O P SAPRA
• Keywords: TDS
• Section: 143(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.C.SHARMA, AM ITA NO.313/DEL/2009 ASSESSMENT YEAR : 2004-05 ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-1, FARIDABAD. VS. M/S FARIDABAD ENTERTAINMENT (P) LTD., SCF-44-45, 2 ND FLOOR, MAIN MARKET, SECTOR-15, FARIDABAD. PAN NO.AAACF7647P. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH GUPTA, DR. RESPONDENT BY : SHRI O.P.SAPRA, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 26.11.2008 FOR THE AY 2004-05, WHEREIN FOLLOWING GR OUNDS HAVE BEEN TAKEN BY THE REVENUE :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.13,88,866/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF OPERATION RECEIPTS/EXPENSES DISREGARDING THE FACTS THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF OPERATIO NAL EXPENSES DURING THE YEAR AND THE CORRECT PROFIT OR LOSS FROM BUSINESS CANNOT BE ASCERTAINED FROM THE RECEIPTS AND EXPENSES SHOWN DU RING THE YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.32,444/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF VEHICLE MAINTENANCE EXPENSES EVEN THOUGH THE ASSESSEE HAS F AILED TO PRODUCE ANY EVIDENCE TO THE EFFECT THAT THESE EXPEN SES WERE INCURRED WHOLLY FOR THE PURPOSE OF BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF ITA-313/DEL/2009 2 RS.11,097/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF BUSINESS PROMOTION EXPENSES EVEN THOUGH NO EVIDENCE OR SUPPO RTING DOCUMENTS WERE PRODUCED TO PROVE THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.2,73,680/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF REBATE AND DISCOUNT EVEN THOUGH THE GENUINENESS OF THESE E XPENSES HAS NOT BEEN ESTABLISHED. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN TH E DISTRIBUTION OF CABLE TV SIGNALS TO THE CABLE OPERATORS IN THE AREA OF FARID ABAD THROUGH CABLE WIRE ON BEHALF OF THE SITI CABLE NETWORK LIMITED WHICH RAISES THE BILLS AND THE ASSESSEE ACTS AS A COLLECTION AGENT AND GETS MANAGEMENT CHARGES FROM S ITI CABLE NETWORK LIMITED. DURING THE YEAR UNDER CONSIDERATION, IT FILED ITS R ETURN OF INCOME ON 1.11.2004 DECLARING LOSS OF RS.29,81,221/-, WHICH WAS DULY PR OCESSED U/S 143(1) ON 3.12.2004 AT THE RETURNED LOSS. THEREAFTER, CASE W AS TAKEN UNDER SCRUTINY AND WHILE FRAMING ASSESSMENT U/S 143(3), THE AO DISALLO WED EXPENDITURE OF RS.13,88,866/- ON ACCOUNT OF OPERATIONAL EXPENSES. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE DISALLOWANCE AFTER HAVING THE FO LLOWING OBSERVATION:- 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD.AR AND PERUSED THE ORDER OF ASSESSMENT. THE PLAIN READING OF THE ASSESSMENT ORDER MAKES IT QUITE EVIDENT THAT THE AO HAS RESORTED TO THE PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT ONLY ON PRESUMPTION/OR SUSPICION WITHOUT BRINGING ANY MATER IAL ON RECORD TO JUSTIFY HIS ACTION. THE AO HIMSELF ADMITTED THAT T HE RECEIPTS SHOWN HAD BEEN MORE THAN THE PRECEDING YEAR I.E. RS.24,75 ,215/- AS AGAINST THE LAST YEARS RS.6,13,645/-. LAST YEAR, THE GP W AS 66%. THE LOSS DURING THE YEAR HAD BEEN LARGELY DUE TO THE OPERATI ONAL EXPENSES WHICH HAVE INCREASED FROM RS.2,05,578/- OF THE LAST YEAR TO THIS YEARS RS.26,26,474/-, THE DETAILS OF WHICH HAD BEE N FURNISHED IN SCHEDULE K OF THE P & L ACCOUNT. ALSO, MARGINALL Y RESPONSIBLE FOR THE LOSS HAVE BEEN THE PERSONNEL EXPENSES AS PER SC HEDULE-L WHICH HAVE INCREASED FROM RS.12,68,633/- OF THE LAST YEAR TO THIS YEARS RS.16,36,648.95, AND THIS FACT HAS NOT BEEN CONSIDE RED BY THE AO, ITA-313/DEL/2009 3 WHILE HE HAS REFERRED TO ADMINISTRATIVE EXPENSES, S ELLING EXPENSES WHICH HAVE BEEN LESS THIS YEAR RATHER FROM RS.4,05, 339.55/- TO RS.3,98,636.50/-, ETC. THUS THE AO HAS FOCUSED HIS ENQUIRIES ON THE INCREASE INTO THE OPERATIONAL EXPENSES, AND WHILE H E WAS EVEN SO SATISFIED WITH THE OTHER EXPENSES IN THE SCHEDULE K, HE WAS NOT CONVINCED WITH THE JUSTIFICATION GIVEN BY THE APPEL LANT COMPANY DURING THE COURSE OF REGULAR PROCEEDINGS REGARDING THE INCREASE IN THE PAY CHANNEL EXPENSES. 10. THE APPELLANT HAD EXPLAINED THE ENTIRE ISSUE VI DE ITS LETTER DATED 28.11.2006 ENCLOSED IN THE PAPER BOOK WHICH H AS BEEN DULY STUDIED BY ME. BY THIS LETTER, THE APPELLANT HAD E XPLAINED THE INCREASE IN THE OPERATIONAL EXPENSES AS PER CLAUSE NO.2.4-2.2(II) OF THE AGREEMENT WITH THE SITI CABLE NETWORK LTD. AND INCOME AS PER CLAUSE NO.2.4-2.2(I). WHILE THE AO SEEMS TO HAVE A CCEPTED THE EXPLANATIONS OF THE APPELLANT REGARDING THE MANAGEM ENT CHARGES OF RS.23,68,503/- ARRIVED AT THE BASIS OF TOTAL BILLIN G RAISED TO THE CABLE OPERATORS FOR RS.1,57,90,022/-, THE DETAILED ANNEXU RE OF BILLING RAISED AT MANAGEMENT CHARGES OF WHICH HAS BEEN EXAMINED BY ME, THE AO HAS NOT ACCEPTED THE APPELLANTS EXPLANATIONS REGAR DING THE TAKEOVER OF PAY CHANNEL AS PER CLAUSE NO.2.4-2.2(II), WHEREI N THE DETAILS OF 50% PAY CHANNELS TRANSFERRED TO SITI CABLE NETWORK LTD. ON THE BASIS OF THE TOTAL BILLING OF RS.1,57,90,022/- I.E. RS.78,95,011/- WERE ALSO ATTACHED AND WHICH HAVE BEEN ALSO EXAMINED BY ME. I HAVE AGAIN EXAMINED ALL THESE DOCUMENTS AS WELL AS THE M ONTHWISE DETAILS OF OPERATIONAL EXPENSES WITH RESPECT TO THE AGREEME NT BETWEEN SITI CABLE NETWORK LIMITED AND THE APPELLANT COMPANY FIL ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 23.11.2006 AND WHICH HAS ALSO NOW BEEN SUBMITTED DURING THE COURSE OF APPELLANT PROCEEDINGS I.E. DISTRIBUTION CUM MANAGEMENT AGREEM ENT BETWEEN SITI CABLE NETWORK LTD., AND THE APPELLANT COMPANY DATED 27.05.2002 AND THE ADDENDUM TO DCM AGREEMENT DATED 03.04.2003 WHICH HAVE ALSO BEEN PERUSED BY ME. I FIND THAT AL L THE OPERATIONAL EXPENSES HAVE BEEN GENUINELY AND ACCURATELY ARRIVED AT AS PER THESE AGREEMENT DEEDS, ESP-CLAUSE 2.4 OF THE DCM AGREEMEN T. THE AO HAS NOT POINTED OUT ANY DISCREPANCY OR CONTRADICTIO N IN THE OPERATIONAL CHARGES ARRIVED AT BY THE APPELLANT COM PANY AS PER THE ABOVE AGREEMENTS. NEITHER HE HAS POINTED OUT ANY D EFECT OR DEFICIENCY IN THE REGULAR BOOKS OF ACCOUNT MAINTAIN ED BY THE APPELLANT COMPANY NOR ANY DEFECT IN THE BILLS AND V OUCHERS FOR SUCH EXPENSES MAINTAINED BY IT DURING THE COURSE OF NORM AL BUSINESS. AS TO THE METHOD OF ACCOUNTING, THE RECEIPTS OF MANAGE MENT CHARGES AS ADMITTED BY THE AO ARE ON THE BASIS OF REALIZATION I.E. THEY ARE CRYSTALLIZED IN THIS YEAR AND THUS THEY ARE TO BE A CCOUNTED FOR ONLY ITA-313/DEL/2009 4 DURING THE YEAR UNDER CONSIDERATION AND HENCE THE M ERCANTILE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT COMPANY AS P ER NOTE 1 OF SCHEDULE-P OF THE AUDIT REPORT DATED 24.08.2004 IS IN NO WAY IN VARIATION OR CONTRADICTION WITH THE FACTS AND CIRCU MSTANCES OF THE CASE. THE APPELLANT COMPANY HAS GOT ITS ACCOUNTS D ULY AUDITED BY THE C.A.S, M/S SUBHASH C.GUPTA AND CO. AND VIDE TH EIR REPORT DATED 24.08.2004, IT IS DECLARED BY THEM THAT THE PROPER BOOKS OF ACCOUNT AS REQUIRED BY LAW HAD BEEN KEPT BY THE COMPANY AND THE P & L ACCOUNT AND ITS BALANCE SHEET ARE IN CONSONANCE WIT H THE BOOKS OF ACCOUNT WHICH GIVE A TRUE AND FAIR VIEW OF THE COMP ANYS AFFAIRS. THE AO HAS NOT FOUND OUT OR POINTED OUT ANY ADVERSE FINDING REGARDING THE AUDITED VERSION OF THE BOOKS OF ACCOU NT NOR IN THE MERCANTILE SYSTEM OF ACCOUNT FOLLOWED BY THE COMPAN Y GENERALLY, DEBITING EXPENSES ON ACCRUAL BASIS. THUS THE COMPL ETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT COMPANY ARE IN NO WAY IN DISPUTE OR DOUBT BY THE AO AND HENCE THE PROVISIONS OF SECTION 145 HAVE BEEN INCORRECTLY AND INDISCREETLY APPLIED BY THE AO ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. THEREFORE, IN VIEW THE RATIO HELD BY THE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS. OM OVERSEASE SHIV SAGAR (SUPRA) & THAT OF GAUHATI HIGH COURT IN THE CASE OF M/S MADNANI CONST RUCTION CORPORATION PVT.LTD. (SUPRA), THE AO WAS NOT JUSTIF IED IN INVOKING THE PROVISIONS OF SECTION 145 WHEN THE DULY AUDITED BOOK VERSION WAS NOT CHALLENGED BY THE AO OR ANY COURT, AND THE AUDITED PARTICULARS/DETAILS WERE NOT AT ALL DISPUTED AS TO THERE BEING DEFECTS WHATSOEVER IN THEM. A SIMILAR VIEW IS TAKEN BY THE JURISDICTIONAL TRIBUNAL IN THE CASE OF DIRECTOR OF INCOME-TAX INTL . TAXATION CIRCLE (I), DELHI V. BUMI HIWAY (M) SDN, BHD, (2008) 21 SO T 311 (DEL). 11. AS TO THE BOOKS OF ACCOUNTS AND VOUCHERS MAINTA INED, THEY THEREFORE REFLECT A TRUE PICTURE OF THE ACCOUNTS OF THE APPELLANT COMPANY. HENCE THE BUSINESS RESULTS DECLARED BY TH E APPELLANT COMPANY NEED NOT HAVE BEEN INTERFERED BY THE AO IN ESTIMATING ITS PROFITS BY APPLYING AN ARBITRARY RATE OF GP OF 50%. MERELY BECAUSE THE PROFITS ARE LOW COMPARED TO THE EARLIER YEAR IS NOT A CIRCUMSTANCE OR MATERIAL TO JUSTIFY AN ESTIMATE IN THE CIRCUMSTA NCES AND FACTS OF THE CASE, AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF PANDIT BROS. VS. CIT 26 ITR 156 (P&H). SIMILARLY, THE BOOKS OF ACCOUNT CAN BE REJECTED UNDER SECTION 145 ONLY WHER E EITHER NO METHOD OF ACCOUNT WAS EMPLOYED OR THE METHOD EMPLOY ED WAS SUCH THAT IT DID NOT DISCLOSE THE TRUE PROFITS, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. K. S.BHATIA 269 ITR 257 (P&H). IN THE INSTANT CASE, NEITHER OF THE TWO ABOVE PREMISES ITA-313/DEL/2009 5 ARE APPLICABLE. THUS, THE ADDITION OF RS.13,88,866 /- BOTH ON FACTS AND LAW IS MERITLESS AND HENCE STANDS DELETED. AGGRIEVED BY THE SAME, THE REVENUE IS IN FURTHER AP PEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT THE AO IN PARA 1 OF HIS ASSESSMENT ORDER PROCEEDED TO ENQUIRE INTO THE OPERATIONAL EXPENSES DEBITED AT RS.26,26,474/-, THE DETAILS OF WHICH AS PER SCHEDULE-K OF P & L ACCOUNT HAS BEEN REPRODUCED BY THE AO IN THE ASSE SSMENT ORDER. THE AO FOUND THAT ASSESSEE COMPANY HAD SHOWN THE MANAGEMENT CHAR GES RECEIPTS OF RS.23,68,503/- DURING THE YEAR WHILE THE EXPENSES C LAIMED UNDER THE HEAD OPERATIONAL EXPENSES AS ABOVE ARE AT RS.26,26,474 /- AS AGAINST THE ADMINISTRATION EXPENSES AT RS.7,40,656/- (SCHEDULE-M), SELLING EXP ENSES AT RS.3,98,636/- (SCHEDULE-N) AND FINANCE EXPENSES ETC. THE AO ENQU IRED INTO THE OPERATIONAL EXPENSES WHILE ACCEPTING THE OTHER EXPENSES. ASSES SEE VIDE LETTER DATED 28.11.2006 HAS EXPLAINED THAT AGAINST THE TOTAL BIL LING RAISED TO THE CABLE OPERATORS AT RS.1,57,90,022/-, THE DETAILS OF MANAGEMENT CHAR GES/RECEIPTS OF RS.23,68,503/- HAD BEEN ARRIVED AND THE OPERATIONAL COSTS WERE EXP LAINED AS PER CLAUSE 2.4-2.2(II) OF THE AGREEMENT WITH SITI CABLE NETWORK LTD. DATED 27.05.2002 AND THE ADDENDUM OF AGREEMENT DATED 03.04.2003. ALL THE DE TAILS OF SUCH EXPLANATION HAS BEEN REPRODUCED BY THE AO IN PARA 1 OF HIS ASSESSME NT ORDER. HOWEVER, THE AO WAS NOT CONVINCED WITH THE PAY CHANNEL EXPENSES AS PER THE DETAILS MENTIONED IN THE OPERATIONAL EXPENSES. IT WAS EXPLAINED BY THE ASSESSEE THAT THE PAY CHANNEL EXPENSES WERE NOT ENTERING INTO THE AGREEMENTS WITH THE PARTIES AND THAT THE CASE WAS PENDING WITH TDSAT. THE AO REQUIRED THE ASSESS EE TO FURNISH JUSTIFICATION WITH BASIS FOR THE CLAIM OF PAY CHANNEL EXPENSES AN D HE WAS NOT SATISFIED WITH THE ASSESSEES STATEMENT THAT THE PAYMENTS TO PAY CHANN ELS HAD BEEN MADE BY THE ASSESSEE COMPANY WHICH WERE APPEARING IN THE BANK S TATEMENTS. SINCE THE PAY CHANNEL EXPENSES HAD BEEN CLAIMED BY THE ASSESSEE F OR THE FIRST TIME DURING THE YEAR AS AGAINST THE PRECEDING YEAR, THE AO EXAMINED THE DETAILS OF THE PAY CHANNEL ITA-313/DEL/2009 6 EXPENSES AS PER THE ASSESSEES SHARE OF THE PERCENT AGES IN RESPECT OF TOTAL AMOUNT INCURRED AND THE ASSESSEES SHARE IN THE LISTED PAY CHANNELS, AND DECLARED THAT THE ASSESSEE COULD NOT FURNISH ANY JUSTIFICATION OR CRI TERIA ADOPTED FOR PAY CHANNEL EXPENSES DURING THE YEAR. HE ALSO OBSERVED THAT TH E ASSESSEE HAD SHOWN RECEIPTS OR MANAGEMENT CHARGES ON RECEIPTS BASIS OR REALI ZATION BASIS INSTEAD OF MERCANTILE BASIS WHILE NO JUSTIFICATION OR BASIS TO CLAIM THE OPERATIONAL EXPENSES HAD BEEN FURNISHED. THEREFORE, HE REJECTED THE BOO K RESULTS SHOWN BY THE ASSESSEE COMPANY U/S 145 OF THE INCOME TAX ACT, 1961. HE CA LCULATED THE GP OF THIS YEAR AT RS.12,37,607/- WHILE THE GP SHOWN BY THE APPELLA NT WAS RS.1,51,259/- (RS.24,75,215/- - RS.26,26,475/-) AND THUS HE WORKE D OUT THE DIFFERENCE AT RS.13,88,866/- AND ADDED IT TO THE INCOME OF THE AP PELLANT COMPANY. THE CIT(A) AFTER CONSIDERING EACH AND EVERY HEAD OF EXPENDITUR E, RECORDED A DETAILED FINDING AT PARA 9, 10 & 11 AND OBSERVED THAT ASSESSEE HAS G ENUINELY INCURRED THE EXPENDITURE. NO DEFECT WAS FOUND IN THE BOOKS OF A CCOUNT WITH REGARD TO CLAIM OF VARIOUS EXPENDITURE ON ACCOUNT OF OPERATIONAL EXPEN SES, ADMINISTRATIVE EXPENSES, SELLING EXPENSES. DUE REASONS FOR INCREASE IN OPER ATIONAL EXPENSES, WHICH WAS DUE TO INCREASE IN OPERATIONAL INCOME OF THE ASSESSEE F ROM RS.6.13 LAKHS IN THE LAST YEAR TO RS.24.75 LAKHS DURING THE YEAR UNDER CONSID ERATION WERE GIVEN. THE CIT(A) HAS ALSO EXAMINED THE MONTH-WISE DETAILS OF OPERATIONAL EXPENSES WITH RESPECT TO THE AGREEMENT BETWEEN SITI CABLE NETWORK LIMITED AND THE ASSESSEE COMPANY, AND FOUND THAT OPERATIONAL EXPENSES HAVE B EEN GENUINELY AND ACCURATELY ARRIVED AT AS PER VARIOUS CLAUSES OF THE AGREEMENT DISCUSSED BY HIM IN THE APPELLATE ORDER. SINCE NO DEFECT IN THE REGULAR BOOKS OF ACC OUNT WAS POINTED OUT BY THE AO, NOR ANY DISCREPANCY IN THE OPERATIONAL CHARGES ARRI VED AT BY THE ASSESSEE COMPANY, IN TERMS OF THESE AGREEMENTS WERE POINTED OUT, THE CIT(A) DELETED THE DISALLOWANCE OF RS.13,88,866/- MADE BY THE AO. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR THE SAME, INSOFAR AS DETAIL ED FINDING RECORDED BY HIM AT PARA 9, 10 & 11 HAS NOT BEEN CONTROVERTED BY THE LE ARNED DR DURING THE COURSE OF HEARING BEFORE US. ITA-313/DEL/2009 7 4. WITH REGARD TO DELETING DISALLOWANCE OF VEHICLE MAINTENANCE EXPENDITURE OF RS.32,444/-, OUT OF TOTAL EXPENDITURE OF RS.1,60,86 6/-, WE FOUND THAT WITHOUT PIN- POINTING ANY EXPENDITURE HAVING NOT BEEN INCURRED F OR BUSINESS PURPOSE, THE AO HAS MADE DISALLOWANCE. HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGINEERING CO.LTD. 121 TAXMAN 43 HAS HELD THAT N O DISALLOWANCE OUT OF EXPENSES ON ACCOUNT OF INVOLVEMENT OF PERSONAL ELEM ENT CAN BE MADE IN THE CASE OF AN ASSESSEE BEING A CORPORATE ENTITY. RESPECTFU LLY FOLLOWING THE SAME, WE DO NOT FIND ANY JUSTIFICATION FOR MAKING ANY DISALLOWA NCE ON ACCOUNT OF VEHICLE MAINTENANCE EXPENDITURE. 5. WITH REGARD TO DISALLOWANCE OF BUSINESS PROMOTIO N EXPENSES OF RS.11,097/-, OUT OF ASSESSEES CLAIM AT RS.55,484/- , WE FOUND THAT AO HAS MADE A DISALLOWANCE WITHOUT POINTING OUT THE EXPENDITURE I NCURRED FOR NON-BUSINESS PURPOSE. IT WAS AN AD-HOC DISALLOWANCE OF 1/5 TH OF THE EXPENDITURE. THE CIT(A) HAS DELETED THE SAME BY OBSERVING THAT AO HAS NOT P OINTED OUT ANY DEFECT OR DEFAULT IN THE EVIDENCES/VOUCHERS PRODUCED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, NO INTERFERENCE IS REQUIRED IN THE ORD ER OF CIT(A). 6. AN EXPENDITURE OF RS.2,73,680/- WAS CLAIMED BY T HE ASSESSEE ON ACCOUNT OF DISCOUNT AND REBATE. BY OBSERVING THAT ASSESSEE HA S NOT FURNISHED ANY BASIS FOR SUCH CLAIM, THE AO DECLINED CLAIM OF DEDUCTION. TH E CIT(A) DELETED THE SAME AFTER HAVING THE FOLLOWING OBSERVATION:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD.AR AND PERUSED THE ORDER OF ASSESSMENT. FROM THE ASSESSME NT ORDER, IT IS QUITE EVIDENT THAT THE AO HAS PROCEEDED ON SOME MIS UNDERSTANDING OF THE NATURE OF SUBSCRIPTION CHARGES AS PER THE AG REEMENT ENTERED BY THE APPELLANT COMPANY WITH M/S SITI CABLE NETWORK L IMITED. THESE EXPENSES AS DETAILED AS PER SCHEDULE-N OF THE AUDIT ED ACCOUNTS HAVE BEEN DULY EXAMINED BY ME VIS--VIS THE METHOD EMBED DED IN CLAUSE NO.2.4 OF THE ADDENDUM TO DCM AGREEMENT DATED 03.04 .2003. IT HAS BEEN FOUND THAT 50% DISTRIBUTION CHARGES ARE PA ID TO THE DISTRIBUTORS FROM THE REALIZATION OF THE SERVICE CH ARGES FROM THE BILLS ITA-313/DEL/2009 8 RAISED WHICH AMOUNT TO RS.1,57,90,022/- ON BEHLAF O F SITI CABLE NETWORK LIMITED. HOWEVER, DURING THE YEAR UNDER CO NSIDERATION, CERTAIN CREDIT NOTES WERE ISSUED BY THE SITI CABLE TO THE CLIENTS/CUSTOMERS AGAINST WHOM THE BILLING WAS RAIS ED BY THE APPELLANT COMPANY AND THESE CREDIT NOTES ARE EXACTL Y THE REBATE AND DISCOUNT EXPENDITURE BEING INCURRED FOR THE APPELLA NT COMPANY WHICH AMOUNT TO RS.2,73,680/-. AS EVERYTHING IS TR ANSPARENT IN THE ACCOUNT MAINTAINED IN A SEPARATE HEADS OF REBATE AN D DISCOUNT, AS AGAINST THAT OF THE SUBSCRIPTION CHARGES, AND SINCE THE AO HAS NOT POINTED OUT ANY DEFECT OR DEFICIENCY IN THE REBATE AND DISCOUNT ACCOUNT, NO ADVERSE INFERENCE CAN BE DRAWN AS TO TH E GENUINENESS OF THESE EXPENSES CLAIMED AT RS.2,73,680/- UNDER THE H EAD REBATE AND DISCOUNT. THEREFORE, THE DISALLOWANCE OF RS.2,73, 680/- IS TOO DELETED. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT ASSESSEES CLAIM ON ACCOUNT OF DISCOUNT AND REBATE PERTAINS TO BILLS RAISED ON BEHALF OF SITI CABLE NETWORK LIMITED. DURING THE YEAR, CERTAIN CREDIT N OTES WERE ISSUED BY SITI CABLE TO THE ASSESSEES CUSTOMERS AGAINST WHOM BILLING WA S RAISED BY THE ASSESSEE COMPANY. ACCORDINGLY, THESE AMOUNTS WERE RECEIVED LESS BY THE ASSESSEE COMPANY. THIS WAS IN THE NATURE OF REBATE AND DISC OUNT CLAIMED BY THE ASSESSEE. FULL DETAILS OF SUCH REBATE WERE MENTIONED IN THE B OOKS OF ACCOUNT AND AO HAS NOT POINTED OUT ANY DEFECT OR DEFICIENCY IN THE ACCOUNT S, ACCORDINGLY NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THESE EXPENSES CLAIM ED UNDER THE HEAD REBATE AND DISCOUNT. THE FINDING OF CIT(A) REMAINED UNCONTROV ERTED, WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE IN THE SAME. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER, 2009. SD/- SD/- (R.P.TOLANI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :31.12.2009. VK. ITA-313/DEL/2009 9 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR