ACIT CIR 6(1), MUMBAI V. BOOTS PIRAMAL HEALTH CARE LTD ( NOW KNOWN AS M.S, NICHOLAS PIRAMAL CONSUMER PRODUCTS P. LTD), MUMBAI

ITA 3213/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88431 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 03-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHHIDANAND DUBEY
• Assessee Lawyers: JAHANGIR D MISTRY M; MUM
• Keywords: Capital asset; Depreciation; Revised return; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI BEFORE S/SHRI N. K. BILLAIYA, (AM) AND AMIT SHUKL A, (JM) . . , , , ./I.T.A. NO.3213/MUM/2009 ( !' #! / ASSESSMENT YEAR 2005-06) ASSTT. COMMISSIONER OF INCOME TAX, CIR. 6(1), ROOM NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M K MARG, MUMBAI-400020 / VS. BOOTS PIRAMAL HEALTH CARE LTD (NOW KNOWN AS M/S NICHOLAS PIRAMAL CONSUMER PRODUCTS PVT.LTD) PENISULA CORPORATE PARK, NICHOLAS PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI-400013 ( $% / APPELLANT) .. ( &' $% / RESPONDENT) ./I.T.A. NO.2714/MUM/2009 ( !' #! / ASSESSMENT YEAR 2005-06) PIRAMAL HEALTH CARE LTD (SUCCESSOR IN THE BUSINESS OF BOOTS PIRAMAL HEALTHCARE PVT.LTD), NICHOLAS PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI-400013 / VS. THE ADDL. COMMISSIONER OF INCOME TAX, CIR. 6(1), MUMBAI. ( $% / APPELLANT) .. ( &' $% / RESPONDENT) ./I.T.A. NO.4129/MUM/2008 ( !' #! / ASSESSMENT YEAR 2004-05) BOOTS PIRAMAL HEALTH CARE LTD (NOW MERGED WITH PIRAMAL HEALTHCARE LTD., NICHOLAS PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI-400013 / VS. INCOME TAX OFFICER 6(1)(2), MUMBAI-400020 ( $% / APPELLANT) .. ( &' $% / RESPONDENT) $ ./ () ./PAN/GIR NO. :AAACB5803B $% * / REVENUE BY SHRI SACHHIDANAND DUBEY &' $% + * / ASSESSEE BY SHRI JAHANGIR D MISTRY 3213, 2714/M/2009 AND 4129/MUM/2008 2 + , / DATE OF HEARING : 3.2.2015 -.#' + , /DATE OF PRONOUNCEMENT : 18.2.2015 / O R D E R PER N. K. BILLAIYA (AM) THESE ARE THE CROSS-APPEALS BY THE REVENUE AND THE ASSESSEE AGAINST THE VERY SAME ORDER OF THE LD.CIT(A)-VI, MU MBAI DATED 27.2.2009 PERTAINING TO THE ASSESSMENT YEAR 2005-06 . THE APPEAL NO.4129/MUM/2008 IS THE APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. CIT(A)-V, MUMBAI DATED 17.1.2008. ALL THESE THREE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. I.T.A. NO.2714/MUM/2009 (BY ASSESSEE) 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUND S OF APPEAL WHICH RELATE TO THE DISALLOWANCE OF EXPENDITURE FOR PURCHASE OF LICENSE FOR WINDOWS OF RS.30,000/. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS CL AIMED REPAIRS AND MAINTENANCE. IT WAS ALSO FOUND THAT THE ASSESS EE ITSELF HAS DISALLOWED A SUM OF RS.201,800/- TREATING AS CAPITA L EXPENDITURE AND CLAIMED DEPRECIATION ON IT. IT WAS EXPLAINED THAT THESE EXPENDITURES WERE NOT INCURRED FOR THE PURCHASE OF ANY KIND CAPI TAL ASSETS AND SINCE NOT ASSET OF ENDURING BENEFIT HAS BEEN ACQUIR ED, THESE EXPENDITURES CANNOT BE CAPITALIZED AS CAPITAL ASSET S. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING O FFICER WHO 3213, 2714/M/2009 AND 4129/MUM/2008 3 TREATED A SUM OF RS.4,48,144/- AS CAPITAL EXPENDITU RE AND ALLOWED DEPRECIATION AS PER THE PROVISIONS OF LAW. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CI T(A) AND EXPLAINED THAT THE EXPENDITURES WERE INCURRED ON NE TWORKING WHICH ARE REVENUE IN NATURE. IT WAS FURTHER POINTED OUT T HAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE ON SOME OF THE PAYMENTS WHICH ITSELF SHOWS THAT THE EXPENDITURE ARE REVENUE IN NATURE. T HE LD.CIT(A) WAS CONVINCED BY THE SUBMISSIONS MADE BY THE ASSESSEE. HOWEVER, WHILE DELETING THE ADDITION MADE BY THE AO, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.30,000/- BEING THE LICENSE PURCH ASED FOR WINDOW. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. 4. WE HAVE CAREFULLY PERUSED THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE EXPENDITURE ARE INCURRED FOR THE PURC HASE OF APPLICATION SOFTWARE AND THEREFORE ARE REVENUE IN NATURE. WINDO WS BEING APPLICATION SOFTWARE CANNOT BE TREATED AS CAPITAL A SSETS AND THEREFORE ANY LICENSE FEE PAID FOR THE PURCHASE OF WINDOWS HA S TO BE ALLOWED AS REVENUE EXPENDITURE AS THE SOFT WARE HAS TO BE UPDATED EVERY YEAR. WE ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD.CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. GROUND NO.1 IS ALL OWED. 5. GROUND NO.2 OF THE APPEAL IS AGAINST THE DISALLO WANCE OF RS.2,66,59,853/- ON THE ALLEGED GROUND THAT SUCH EX PENDITURE PERTAINS TO PRIOR PERIOD EXPENSES. WHILE SCRUTINIZI NG THE RETURN OF 3213, 2714/M/2009 AND 4129/MUM/2008 4 INCOME, THE AO NOTICED THAT THE ASSESSEE HAS DEBITE D A SUM OF RS.2,66,59,853/- TO ITS PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. THE ASSESSEE FILED A DE TAILED REPLY EXPLAINING THAT DUE TO FINANCIAL IRREGULARITIES COM MITTED BY THE ERSTWHILE CHIEF FINANCE OFFICER AND AN EMPLOYEE FRO M THE ACCOUNT DEPARTMENT SOME FRAUD/ IRREGULARITIES WERE PERPETRA TED WHICH HAS RESULTED INTO FRAUD. THE COMPANY HAS FOUND AND DETE CTED THE FINANCIAL IRREGULARITIES DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFO RE THE AMOUNT OF RS.2,66,59,853/- HAS BEEN CLAIMED AS REVENUE EX PENDITURE/LOSS. THE AO CONSIDERED AND EXAMINED THE SUBMISSIONS MADE BY THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE HAS AL SO MADE A CLAIM OF RS.1,23,20,570/- IN THE IMMEDIATELY PRECED ING YEAR I.E ASSESSMENT YEAR 2004-05 WHICH HAS BEEN DEBITED ONC E AGAIN CLAIMED DURING THE YEAR UNDER CONSIDERATION I.E. AS SESSMENT YEAR 2005-06. THE AO WAS OF THE OPINION THAT THE ASSESSE E IS JUST TAKING A CHANCE AND CLAIMING DEDUCTION THOUGH HE IS ALSO AW ARE THAT IT CANNOT BE ALLOWED TREATING THE ENTIRE EXPENDITURE AS PRIOR PERIOD EXPENSES. THE AO DISALLOWED THE SAME. AGGRIEVED, THE ASSESSE E CARRIED THE MATTER BEFORE THE LD.CIT(A) AND REITERATED WHAT HAS BEEN STATED BEFORE THE AO. AFTER CONSIDERING THE FACTS AND TH E SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT AC CURATELY IDENTIFY THE INDIVIDUAL PARTY-WISE BALANCES AND ACCORDINGLY THE AMOUNT WERE 3213, 2714/M/2009 AND 4129/MUM/2008 5 REFLECTED ON AGGREGATE DEBITS IN FINANCIAL STATEMEN T. THE LD. CIT(A) FURTHER OBSERVED THAT SUCH EXPENDITURE PERTAINS TO PRIOR PERIOD EXPENDITURE AND CANNOT BE ALLOWED AS DEDUCTION IN T HIS YEAR AS THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AND TH ERE IS NO MENTION IN THE AUDIT REPORT THAT THERE IS ANY DISCREPANCY I N THE ACCOUNTING OF EXPENDITURE. THE LD.CIT(A) FINALLY CONCLUDED BY HOL DING THAT PRIOR PERIOD EXPENDITURE CANNOT BE ALLOWED IN THIS YEAR. THE LD. CIT(A) WAS CONVINCED THAT THE AO WAS JUSTIFIED IN DISALLOWING THE EXPENDITURE ON THE GROUND THAT THE ASSESSEE HAS NOT CLAIMED THE EX PENDITURE IN THE ORIGINAL RETURN NOR IN THE REVISED RETURN. AGGRIEVE D BY THIS THE ASSESSEE IS BEFORE US. 6. BEFORE US, THE LD.COUNSEL REITERATED WHAT HAS BE EN STATED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL BROU GHT TO OUR NOTICE THE NOTING APPENDED TO THE FINANCIAL STATEMENT AND POIN TED OUT THAT IN THE FINANCIAL STATEMENT ITSELF THE ASSESSEE HAS EXPLAIN ED HOW THE FINANCIAL IRREGULARITIES HAVE PERPETRATED BY THE C HIEF FINANCE OFFICER AND AN EMPLOYEE. THE SAID NOTE IS EXHIBITED AT PAG ES 34 AND 35 OF THE PAPER BOOK. THE LD. COUNSEL FURTHER BROUGHT TO OUR NOTICE EXS.178 TO 190 AND EXPLAINED THAT THE DETAILED EXPENDITURE OF EACH TRANSACTION WAS EXPLAINED TO THE AO DURING THE COUR SE OF ASSESSMENT PROCEEDINGS ITSELF. THE LD. COUNSEL FURTHER STATED THAT EVERY ITEM OF EXPENDITURE HAS BEEN EXPLAINED. WITHOUT VERIFYING THE DETAILS FILED BY THE ASSESSEE, THE AO HAS TREATED THE ENTIRE CLAIM AS PRIOR PERIOD 3213, 2714/M/2009 AND 4129/MUM/2008 6 EXPENDITURE WITHOUT REALIZING THAT FINANCIAL IRREGU LARITIES WERE DETECTED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE T HERE IS NO QUESTION OF TREATING THE AMOUNT AS PRIOR PERIOD EXP ENDITURE. 7. PER CONTRA, THE LD. DR STATED THAT THE ONUS WAS UPON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE WAS GEN UINE. THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SUBSTANTIATE ITS CLAIM AND THEREFORE, THERE IS NO ERROR IN THE FINDI NGS OF THE REVENUE AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY PERUSED THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO CONSI DERED THE RELEVANT DOCUMENTS REFERRED TO AND BROUGHT TO OUR NOTICE. I T IS UNDISPUTED FACT THAT CERTAIN ACCOUNTING AND FINANCIAL IRREGULARITIE S HAVE BEEN PERPETRATED BY THE CHIEF FINANCE OFFICER. IT WOULD BE PERTINENT TO FIRST UNDERSTAND THE NATURE OF FINANCIAL FRAUD WHIC H PRIMARILY COMPRISES : (I) ADVANCING MONIES TO VARIOUS PARTIES BY WAY OF INTER CORPORATE DEPOSITS AND DISCOUNTING OF BILLS OF EXCH ANGE WITHOUT ADEQUATE AUTHORIZATIONS AND CREDIT EVALUATION OF TH E BORROWERS; (II) WRONG CREDITS TO THE PARTIES AGAINST SHORT TER M LOANS TAKEN FROM OTHER BODIES CORPORATE AND CONSEQUENTLY NON- RECORDING OF THE LOANS TAKEN AND 3213, 2714/M/2009 AND 4129/MUM/2008 7 (III) PAYMENTS MADE TO ACQUIRE PERSONAL ASSETS, OR WITHDRAWALS OF A PERSONAL NATURE DEBITED TO WRONG ACCOUNT ETC; 9. ON NOTICE OF THESE FINANCIAL IRREGULARITIES, TH E ASSESSEE HAS ACCOUNTED FOR INTEREST ON LOANS TAKEN OF RS.3,33,4 2,922/- DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THIS INTERESTS INCLUDES INTEREST OF RS.2,66,59,853/- WHICH HAS BEEN TREATED AS PRIOR P ERIOD EXPENDITURE. AS A MATTER OF FACT, THIS AMOUNT OF RS.2,66,59,85 3/- WHICH RELATES TO THE FINANCIAL TRANSACTION HAVE BEEN DEBITED DURING THE YEAR UNDER CONSIDERATION HAS TO BE ALLOWED DURING THE YEAR WHE N IT IS DISCOVERED. THIS IS IN LINE WITH THE BOARD CIRCULAR NO.35D(XLV II- 20)(F.NO.10/48/65-IT(A-I) DATED 24.11.1965. THE H ONBLE SUPREME COURT IN THE CASE OF ASSOCIATED BANKING CORPORATION OF INDIA LIMITED. VS CIT REPORTED IN 56 ITR 1(SC) HAS HELD THAT THE LOSS BY EMBEZZLEMENT MUST BE DEEMED TO HAVE OCCURRED WHEN T HE ASSESSEE CAME TO KNOW ABOUT THE EMBEZZLEMENT AND REALIZED TH AT THE AMOUNT EMBEZZLED COULD NOT BE RECOVERED . IN ANOTHER DECISION, THE HONBLE SUPREME COURT IN THE CASE OF BADRIDAS DAGA V/S CI T REPORTED IN 34 ITR 10) (SC) HAS HELD THAT THE LOSSES WHICH HAVE BEEN SUFFERED BY THE ASSESSEE AS A RESULT OF MISAPPROPRIATION BY AN EMPLOYEE HAVE (1) WHICH WAS INCIDENTAL TO THE CARRYING ON THE BUS INESS AND SHOULD THEREFORE BE DEDUCTED IN COMPUTING THE PROFIT OF THE BUSINESS. 3213, 2714/M/2009 AND 4129/MUM/2008 8 10. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE T HAT A FIR HAS ALSO BEEN LODGED AGAINST THE CHIEF FINANCE OFFICER WH ICH WAS BROUGHT TO THE NOTICE OF THE AO WHICH CLEARLY SHOWS THAT THE DEFALCATION HAS TAKEN PLACE. 11. CONSIDERING ALL THESE FACTS IN TOTALITY IN THE LIGHT OF JUDICIAL DECISIONS MENTIONED HEREINABOVE. IN OUR CONSIDERED OPINION, SINCE FRAUD AND FINANCIAL IRREGULARITIES WERE DETECTED D URING THE YEAR UNDER CONSIDERATION. THE CLAIM OF SUCH FINANCIAL IRREGUL ARITIES HAS TO BE ALLOWED DURING THE YEAR UNDER CONSIDERATION ITSELF. WE FIND THAT THE COMPLETE DETAILS OF TRANSACTIONS WERE SUBMITTED BY THE ASSESSEE BEFORE THE AO. THE AO DID NOT CARE TO VERIFY THE SAME. THE ASSESSMENT ORDER PERTAINS TO ASSESSMENT YEAR 2005-0 6 AND WE ARE ENTERING IN THE ASSESSMENT YEAR 2015-16. TEN YEARS HAVE SINCE BEEN LAPSED, IT WOULD BE GROSS INJUSTICE TO THE ASS ESSEE, IF WE RESTORE THIS ISSUE TO THE FILE OF AO FOR VERIFICATION OF TH E DETAILS. CONSIDERING THE DETAILS AND JUDICIAL DECISIONS, WE SET ASIDE TH E FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. RS.2,66,59,853/-. GROUND NO.2 IS ALLOWED. 12. GROUND NO.3 RELATES TO DISALLOWANCE OF RS.1,43 ,000/- ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION TREATED I T AS CAPITAL LOSS. 13. THE AO FOUND THAT THE ASSESSEE HAS DEBITED RS. 1,43,000/- AS LOSS ON FOREIGN EXCHANGE VARIATION. . NECESSARY DET AILS WERE FILED BY 3213, 2714/M/2009 AND 4129/MUM/2008 9 THE ASSESSEE BEFORE THE AO, BUT THE AO WAS OF THE FIRM BELIEF THAT THIS IS A CONTINGENT LIABILITY AS THE ACTUAL LIABIL ITY ARISES ONLY AT THE TIME OF ACTUAL PAYMENT OF ITS LIABILITY. THE AO ACCORDI NGLY DISALLOWED RS.1,43,000/-. THE ASSESSEE CARRIED THE MATTER BEF ORE THE LD CIT(A) BUT WITHOUT ANY SUCCESS. WHILE DISALLOWING THIS GRO UND OF THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT THE ASSESSE E HAS OBTAINED A LOAN ON CAPITAL ACCOUNT. HENCE, THE VARIATION, ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION WOULD BE CAPITAL LOSS AND NOT REVENUE LOSS. 14. BEFORE US, THE LD. COUNSEL STATED THAT THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS IN THE RIGHT PERSPECTIVE. IT IS THE SAY OF THE LD.COUNSEL THAT FOREIGN EXCHANGE FLUCTUATION WAS NO T ON ACCOUNT OF LOAN TAKEN BY THE ASSESSEE BUT IT WAS ON ACCOUNT OF REVENUE EXPENDITURE AND THEREFORE, THE RATIO LAID DOWN BY T HE HONBLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD V/S CIT REPORTED IN 116 ITR 1)(SC) SQUARELY APPLY TO THIS I SSUE. 15. THE LD. DR RELIED UPON THE FINDINGS OF REVENUE AUTHORITIES. 16. ANNEXURE 16 AT PAGE 200 OF THE PAPER BOOK HAS C AREFULLY BEEN PERUSED BY US WHICH IS A DETAILS OF CLAIM OF FOREIG N EXCHANGE FLUCTUATION LOSS. A PERUSAL OF THE SAME SHOWS THAT THE FLUCTUATION ARE ON ACCOUNT OF REVENUE EXPENDITURE. THERE ARE ALSO GAIN WHICH HAVE BEEN NOTED WHILE CLAIMING LOSS OF RS.1,43,000/-. W E FIND FORCE IN THE CONTENTION OF THE LD.COUNSEL. THE RATIO LAID DOWN BY THE HONBLE 3213, 2714/M/2009 AND 4129/MUM/2008 10 SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD(SUPRA) SQUARELY APPLY ON THE FACTS OF THE PRESENT CASE, W HEREIN THE HONBLE SUPREME COURT HAS HELD THAT WHERE PROFIT OR LOSS ARISES TO AN ASSESSEE ON ACCOUNT OF APPRECIATION OR DEPRECIATION IN VALUE OF FOREIGN CURRENCY HELD BY HIM, ON CONVERSION INTO AN OTHER CURRENCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE TRADING PRO FIT OR LOSS IF FOREIGN CURRENCY IS HELD BY ASSESSEE ON REVENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIRCULATING CAPITAL EMBARKED IN BUSINESS. BUT, IF ON THE OTHER HAND, THE FOREIGN CURRENCY IS HELD AS A C APITAL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR LOSS WOULD BE OF CAPI TAL NATURE. 6.5 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF R ATIO LAID DOWN BY THE HONBLE SUPREME COURT, WE SET ASIDE THE FIN DING OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS.1,43,000/- GROUND NO.3 OF THE APPEAL IS ALLOWED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. I.T.A. NO.3213/MUM/2009 (BY REVENUE) THE REVENUE HAS TAKE FOUR SUBSTANTIVE GROUNDS IN T HIS APPEAL. 18. GROUND NO.1 RELATES TO DELETION OF RS.4,88,86,3 86/- ADDED BACK BY THE AO UNDER SECTION 40(A)(IA) OF THE ACT. 19. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS ASKED TO RECONCILE THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT WITH TDS DONE ON IT. THE ASSESSEE FILED REC ONCILED 3213, 2714/M/2009 AND 4129/MUM/2008 11 STATEMENT. THE AO NOTICED THAT THE TDS HAS NOT BEEN MADE FOR CERTAIN EXPENDITURES TOTALING TO RS.4,88,86,386/-.T HE AO PROCEEDED BY DISALLOWING THE SAME U/S 40(A)(IA) OF THE ACT. 20. BEFORE THE LD.CIT(A), THE ASSESSEE ONCE AGAIN F ILED A DETAILED CHART SHOWING THE REASONS WHY THE TDS WAS NOT MADE. THE LD.CIT(A) AFTER CAREFULLY PERUSING THE CHART FOUND THAT MOST OF THE EXPENSES WERE REIMBURSEMENT AND IN SOME OF THE CASES THE ASS ESSEE HAS OBTAINED NO DEDUCTION CERTIFICATE FROM THE RESPECT IVE AO AND WHEREVER THE TDS WAS APPLICABLE, THE ASSESSEE HAS D EDUCTED THE SAME. THE LD.CIT(A) ALSO VERIFIED THE CHALLANS. HA VING BEEN CONVINCED THE LD.CIT(A) DELETED THE ADDITION. 21. BEFORE US, THE LD. DR SUPPORTED THE FINDINGS OF THE AO. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SAME SUBMISS IONS WHAT HAS BEEN SUBMITTED BEFORE THE FIRST APPELLATE AUTHORIT Y. THE LD.COUNSEL ALSO BROUGHT TO OUR NOTICE THE DETAILED CHART WHICH WAS FILED BEFORE THE LOWER AUTHORITIES. THE SAME IS EXHIBITED AT PAG ES 61 TO 64 OF THE PAPER BOOK. 22. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT DOCUMENTARY EVIDENCE BROUGHT ON RECORD BEFORE US. IN OUR CONSIDERED OPINION, THE LD.CIT(A ) HAS VERY RIGHTLY APPRECIATED THE DOCUMENTARY EVIDENCE AND THE DETAIL S SUBMITTED BY THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DOCUMENT ARY EVIDENCE 3213, 2714/M/2009 AND 4129/MUM/2008 12 AND AFTER PERUSING THE DETAILS AS SUBMITTED BY THE PARTIES CONCERNED, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FIN DINGS OF THE LD. CIT(A). GROUND NO.1 IS THEREFORE DISMISSED. 23. GROUND NO.2 RELATES TO DELETION OF RS.4,18,144/ - ADDED BY THE AO AS CAPITAL EXPENDITURE. THE LD. CIT(A) HAS CONSI DERED THIS ISSUE AT PARA 3 OF HIS ORDER, WHEREIN HE HAS GIVEN CATEGO RICAL FINDINGS THAT THE ASSESSEE HAS INCURRED EXPENDITURE ON REPAIR AND MAINTENANCE AND NO NEW ASSETS HAS BEEN BROUGHT IN TO EXISTENCE. AS NO DISTINGUISHING FACTS HAVE BEEN BROUGHT ON RECORD BY THE LD.DR, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER O F LD.CIT(A). GROUND NO.2, IS THEREFORE, DISMISSED. 24. GROUND NO.3 RELATES TO DELETION OF ADDITION OF RS.1,19,42,804/- ADDED BACK BY THE AO ON ACCOUNT OF ADVERTISEMENT EX PENDITURE. THE AO NOTICED THAT AN AMOUNT OF RS.1,19,42,804/- HAS B EEN ALLOCATED TO THE ACCOUNT OF M/S NICHOLAS PIRAMAL INDIA LTD (NPI L) ON ACCOUNT OF ADVERTISEMENT EXPENSES FOR SARIDON BME. IT WAS EX PLAINED BY THE ASSESSEE THAT TDS IS DONE ON THESE EXPENSES BY NPIL AND THEREFORE THE ASSESSEE HAS NOT DONE TDS ON THESE CREDITS TO N PIL. THE AO WAS NOT CONVINCED WITH THIS REPLY OF THE ASSESSEE A ND DISALLOWED THE ENTIRE SUM OF RS.1,19,42,804/-. 25. BEFORE THE LD. CIT(A), THE ASSESSEE EXPLAINED T HAT NPIL INCURRED ADVERTISEMENT EXPENDITURE AND THE ASSESSEE REIMBURSED 3213, 2714/M/2009 AND 4129/MUM/2008 13 THE SAME AND HENCE NPIL HAS TO DEDUCT TAX AT SOURC E AND IF THE ASSESSEE IS REQUIRED TO MAKE TDS IT WOULD AMOUNT TO DOUBLE TAXATIONS SINCE, EXPENDITURE IS SUBJECT TO TDS BY NPIL. AFTER CONSIDERING THE ENTRIES OF THE STATEMENT, THE LD.CI T(A) FOUND THAT THE ASSESSEE HAS SIMPLY MADE REIMBURSEMENT AND THEREFOR E NOT REQUIRED TO MAKE FURTHER TDS. THE LD.CIT(A) DELETED THE ENT IRE ADDITION. 26. BEFORE US, THE LD. DR SUPPORTED THE ASSESSMENT ORDER, THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SAME FACTS W HAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS AN UNDI SPUTED FACT THAT THE ADVERTISEMENT EXPENSES HAVE BEEN INCURRED BY THE NP IL. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAS SIMPLY CRE DITED IT TO THE ACCOUNT OF NPIL AS REIMBURSEMENT OF THE EXPENDITUR E. IT IS FURTHER FOUND THAT NPIL HAS MADE TDS ON THE ADVERTISEMENT EXPENSES. ALL THAT BEING THE FACTS OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE LD CIT(A). THE GR OUND NO.3 IS ACCORDINGLY DISMISSED. 27. GROUND NO.4 RELATES TO DELETION OF RS.21,84,33 1/- ADDED BY THE AO BEING AN AMOUNT OF EXPENDITURES PAID TO VARIOUS VENDORS WITHOUT TDS. WHILE SCRUTINIZING THE RETURN, THE AO NOTICE D THAT THE ASSESSEE HAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AN AMOUN T OF RS.21,84,331/- ON ACCOUNT OF MISAPPROPRIATION OF AS SETS. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. IT WAS EXP LAINED BY THE ASSESSEE THAT ACCOUNT EXECUTIVE OF THE COMPANY DI D FRAUDULENT 3213, 2714/M/2009 AND 4129/MUM/2008 14 TRANSACTIONS BY ISSUING CHEQUES IN THE NAME OF M/S ANMOL MANAS AGENCY AND ACCOUNTED THE CHEQUES IN THE VENDOR ACC OUNTS. IT WAS POINTED OUT BY THE ASSESSEE THAT FIR HAS ALREADY B EEN LODGED. THE AO CONSIDERED THESE SUBMISSIONS MADE BY THE ASSESSE E. THE AO WAS OF THE OPINION THAT THE PAYMENT HAS BEEN MADE T O THE VENDOR FOR EXPENDITURE WITHOUT DEDUCTING TAX AT SOURCE. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY PROGRESS OR OUTCOME OF THE FIR FILED AND THE DETAILS OF ACTION TAKEN BY THE PO LICE AGAINST THE SAID EMPLOYEE OF THE ASSESSEE. THE AO DISALLOWED THE ENT IRE AMOUNT OF RS.21,84,331/-. 28. BEFORE THE LD. CIT(A), THE ASSESSEE ONCE AGAIN EXPLAINED THE NATURE OF TRANSACTION AND THE MISAPPROPRIATION DONE BY THE EMPLOYEE OF THE ASSESSEE. AFTER CONSIDERING THE FACTS AND T HE SUBMISSIONS, THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT LOSS IS REQU IRED TO BE ALLOWED IN THE YEAR IN WHICH IT WAS DETECTED. THE LD. CIT(A) DELETED THE ENTIRE ADDITION OF RS.21,84,331/-. THE LD. CIT(A) DREW S UPPORT FROM THE DECISION OF EH HONBLE SUPREME COURT IN THE CASE OF ASSOCIATED BANKING CORPORATION OF INDIA LIMITED (SUPRA) AND BA DRIDAS DAGA (SUPRA).AGGRIEVED BY THE DECISION OF THE LD. CIT(A ), THE REVENUE IS BEFORE US. 29. THE LD. DR SUPPORTED THE ORDER OF AO. THE LD.C OUNSEL FOR THE ASSESSEE REITERATED THE SAME FACTS WHAT HAS BEEN S UBMITTED BEFORE THE LOWER AUTHORITIES. 3213, 2714/M/2009 AND 4129/MUM/2008 15 30. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELO W. AN IDENTICAL ISSUE ON EMBEZZLEMENT AND MISAPPROPRIATION OF FUND S HAVE BEEN DECIDED BY US IN ASSESSEES APPEAL IN ITA NO.2714/ MUM/2009 QUA GROUND NO.2 OF THAT APPEAL, WHEREIN WE HAVE FOLLOWE D THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, WHICH HAS BEEN F OLLOWED BY THE LD. CIT(A) WHILE DELETING THE PRESENT ADDITION. W E, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF L D. CIT(A). GROUND NO.4 IS DISMISSED. 31. THE APPEAL FILED BY THE REVENUE IS, THEREFORE, DISMISSED. I .T.A. NO.4129/MUM/2008 (BY ASSESSEE) 32. SINCE WE HAVE DELETED THE ENTIRE ADDITION MADE IN ASSESSMENT YEAR 2005-06 AMOUNTING TO RS. 2,66,59,853/-, THE I SSUE RAISED BY THE ASSESSEE IN THIS APPEAL BECOME OTIOSE. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE DISMISSED AS INFRUCTUOUS. 33. IN THE RESULT, THE APPEAL BEARING ITA NO.2714/ MUM/2009 FILED BY THE ASSESSEE IS ALLOWED, APPEAL BEARING ITA NO.3 213/MUM/2009 FILED BY THE REVENUE IS DISMISSED AND THE APPEAL B Y THE ASSESSEE BEARING ITA NO.4129/MUM/2008 IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18TH FEB, 2015 . -.#' / 0 118TH FEB, 2015 . + 6 7 SD SD ( / AMIT SHUKLA ) ( . . , / N. K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI:18TH FEB,2015. 3213, 2714/M/2009 AND 4129/MUM/2008 16 . . ./ SRL , SR. PS ! '#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &' $% / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. :; 6 &< , , < ' , / DR, ITAT, MUMBAI CONCERNED 6. 6 =! > / GUARD FILE. / BY ORDER, TRUE COPY ? ( (ASSTT. REGISTRAR) , < ' , /ITAT, MUMBAI