Paswara Impex Ltd, Meerut V. ACIT, Meerut

ITA 3513/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53494 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: O P SAPRA
• Keywords: Business expenditure; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 3513/DEL/2009 ASSTT. YR. 2005-06 PASWARA IMPEX LTD., VS. ACIT CIR. 2, PASWARA HOUSE, BAGHPAT ROAD, MEERUT. MEERUT. PAN/GIR NO. AADCP0113F (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI O.P. SAPRA ADV. RESPONDENT BY : SMT. PRATIMA KAUSHIK SR. DR O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER DA TED 16-6-2009 RELATING TO A.Y. 2005-06. FOLLOWING EFFECTIVE GROUN DS ARE RAISED: 1. THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW A ND FACTS OF THE CASE IN INVOKING THE PROVISIONS OF SECTION 40A( 2)(A) OF THE INCOME TAX ACT, 1961, IN THE CASE OF THE ASSESSEE/ APPELLANT. 2. THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW AN D FACTS OF THE CASE IN MAKING AN ADDITION OF RS. 22,43,334/- I N THE INCOME OF THE ASSESSEE/ APPELLANT BY DISALLOWING LOSS U/S 40A(2)(A) AND AHS ALSO ERRED IN CALCULATING THE AMOUNT OF ADDITIO N OF RS. 22,43,334/- INSTEAD OF THE AMOUNT OF RS. 12,23,373/ -. 3. THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW AN D FACTS OF THE CASE IN MAKING AN ADDITION OF RS. 5,28,783/- IN THE INCOME OF THE ASSESSEE/ APPELLANT BY DISALLOWING LOSS ON A CCOUNT OF PORT CHARGES. 2. BRIEF FACTS ARE : THE ASSESSEE PASWARA IMPEX LT D. (PIL IN SHORT), ENTERED INTO AN AGREEMENT DATED 5-2-2000 WITH MODER N CHEMICALS FOR ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 2 PROVIDING L/C FACILITIES TO ASSESSEE FOR IMPORT OF CONDENSATE. IT WAS AGREED THAT: (I) MODERN CHEMICALS WOULD PLACE ORDERS FOR IMPORT OF C ONDENSATE WITH FOREIGN SUPPLIERS; (II) THE LETTER OF CREDIT WAS TO BE PROVIDED BY MODERN C HEMICALS AND NOT THE ASSESSEE. (III) MODERN CHEMICALS WILL CHARGE 1.5% FINANCIAL CHARES FROM THE ASSESSEE SINCE THE LETTER OF CREDIT WAS TO BE PROVIDED BY MO DERN CHEMICALS, BILLS OF LADING WERE ISSUED IN ITS NAME AS WELL AS THE ASSES SEE AS PER THE TERMS OF THE AFOREMENTIONED AGREEMENT. THIS WAS A GENUINE BUSINE SS ARRANGEMENT AND THE ASSESSEE PAID THESE CHARGES AGAINST THE SERVICE ACTUALLY AMOUNTING TO RS. 12,23,373/-, WHICH HAVE BEEN ERRONEOUSLY TAKEN BY A O AT RS. 22,43,334/-. AO HELD THAT THERE WAS NO BUSINESS NECESSITY FOR SU CH EXPENDITURE AND APPLIED THE PROVISIONS OF SEC. 40A(2)(A) AND DISALL OWED THE ABOVE CHARGES. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH ERE FOLLOWING WAS SUBMITTED: (I) THE AO HAS NOT POINTED OUT ANY UNDER ADVANTAGE GIVEN TO MODERN CHEMICALS BY THE APPELLANT WHILE PURCHASING THE MATERIAL; AND (II) HAS NOT CHALLENGED OR PROVED THE TRANSACTION A S SHAM ONE AND ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 3 (III) THE DEFICIT TO THE APPELLANT WAS ON ACCOUNT O F SHORT REALIZATION FROM SALES MADE TO THE OUTSIDE PARTIES SO INVOKING OF PROVISIONS OF SECTION 40A(2)(A)(2) ON THE DEFICIT O F SALES AND PRESUMING IT AS AN EXCESS EXPENDITURE BY THE AO IS AGAINST THE LAW AND (IV) THE FINANCE CHARGES PAID ON PURCHASES ON HIGH SEAS BASIS AND REALIZED ON SALES ON HIGH SEAS BASIS ARE PART A ND PARCEL OF THE PURCHASES AND SALES BUT THE AO HAS TAKEN THE C OST OF PURCHASES INCLUDING THE FINANCE CHARGE OF RS. 8,65, 948/- AT RS. 5,32,41,388/- AND TAKEN THE SALES EXCLUDING THE FIN ANCE CHARES OF RS. 10,19,961/- AT RS. 5,09,98,054/- AND THUS TH E AO HAS TAKEN THE FIGURE OF SALES OF RS. 5,09,98,054/- INST EAD OF RS. 5,20,18,015/- AND THUS THERE IS A CALCULATION MISTA KE OF RS. 10,19,961/-. 2.2. AO HAS NOT GIVEN ANY COMPARATIVE FIGURE OF MA RKET RATES FOR SUCH SERVICES TO HOLD THE ASSESSEES BUSINESS ARRANGEMEN T AS UNREASONABLE. CIT(A), ON ASSUMPTIONS HELD THAT THIS EXPENDITURE W AS EXCESSIVE AND UNREASONABLE, WITHOUT ANY LEGITIMATE NEEDS OF THE BUSINESS, HAVING REGARD TO FAIR MARKET VALUE OF GOODS, PAYMENTS WERE MADE TO THE ASSOCIATE CONCERN AND UPHELD THE APPLICABILITY OF SEC. 40A(2)(A) AND DISALLOWANCE. 2.3. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE LOWER AUTHORITIES HAVE NOT QUESTIONED THE VALIDITY OF THE AGREEMENT B ETWEEN THE ASSESSEE AND MODERN CHEMICALS; THE IMPORT AND SUBSEQUENT HIGH SE A SALE TRANSACTIONS IN ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 4 QUESTION HAVE BEEN ACCEPTED; NO COMPARATIVE MARKET FIGURES HAVE BEEN GIVEN TO ENDORSE THE FINDING THAT THE CHARGES PAID BY ASSESSEE TO SISTER CONCERN WERE EXCESSIVE OR REASONABLE IN NATURE. THU S, THE ONLY OBJECTION PUT BY THE LOWER AUTHORITIES IS TO THE EFFECT THAT THIS ARRANGEMENT WAS NOT FOR LEGITIMATE NEEDS OF THE ASSESSEES BUSINESS. 2.4. IT IS TRITE LAW THAT IN BUSINESS TRANSACTIONS, REVENUE AUTHORITIES CANNOT STEP INTO THE SHOES OF THE ASSESSEE AS TO HOW THE C ONDUCT THE BUSINESS. WHEN THE SERVICES ARE NOT DENIED AND THE IMPUGNED AGREEM ENT IS NOT HELD TO BE SHAM, THERE IS NO JUSTIFICATION IN ASSUMING THAT TH E ARRANGEMENT IN QUESTION WAS NOT FOR THE LEGITIMATE BUSINESS NEEDS OF THE A SSESSEE. THE BUSINESS EXPEDIENCY AND JUSTIFICATION IS EXPLICIT FROM THE F OLLOWING FACTS:- FOREIGN SUPPLIER IS CRUDE ENERGY LLC, DUBAI, UAI WHO SUPPLIED CONDENSATE PER VESSEL MT ARGOAT AND ISSUED THREE INVOICES AS UNDER ( COPIES PLACED ON PAPER BOOK). INV. NO. CE-MC/MT/15/2004 DATED 7-4-2004. 3300 MT @ US$ 240 PMT US$ 7,92,000.00 INV. NO. CE-MC/017/2004 DATED 18-4-2004 1171 MT @ US$ 240 PMT US$ 2,81,040.00 INV. NO. CE-MC/MT-078/2004 DATED 18-4-2004 750 MT @ 240 PMT US$ 12,53,040.00 TOTAL= 5221MT US$ 12,53,040.00 THE FOREIGN SUPPLIER ISSUED ABOVE THREE INVOICES FO R DISPATCH OF 5221 MP CONDENSATE AND BILL OF LADING WERE ALSO ISS UED FOR 5221 MT CONDENSATE, BUT AFTER DISCHARGE OF CARGO FR OM VESSEL AT SHORE TANK I.E. AT THE PORT, A SHORTAGE OF 498.9 58 MT (SAY 500 MT) WAS NOTICED & THE FOREIGN SUPPLIER I.E. CRU DE ENERGY ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 5 LLC PROVIDED CREDIT NOTES FOR 485 MT SHORT SUPPLIED QUANTITY ONLY INSTEAD OF 498.958 MT TO MODERN CHEMICALS AND MODERN CHEMICALS PASSED ON THE SAME BY ISSUING CREDIT NOTE S FOR 485 MT SHORT SUPPLIED GOODS OF THE VALUE OF RS. 53,54,4 00/- TO PASWARA IMPEX LTD. COPIES OF CREDIT NOTES RECEIVED ARE ALSO PLACED ON PAPER BOOK. THE SHORTAGE/ LOSS OF REMAINI NG QUANTITY OF 13.958 MT (498.958 485.000 = 13.958 MT) OF THE VALUE OF RS. 1,54,096.32 (13.958 X US$ 240 PMT = US$ 3349.92 X RS. 46= RS. 1,54,096.32) WAS BORNE BY PAWARA IMPEX LTD. COPIES OF ALL BILL OF LADINGS BEARING SR. NO. 153/01 TO 15 3/012 FOR 5211 MT CONDENSATE CARRYING THE NAME OF IMPORTER/ APPELL ANT PASWARA IMPEX LTD. ARE ALSO PLACED ON PAPER BOOK . 2.5. MODERN CHEMICALS FOR SERVICE RENDERED ISSUED D EBIT NOTE ON ASSESSEE WHICH INCLUDES ALL THE DETAILS FOR PAYMENT OF FINAN CIAL CHARGES @ 1.5% BASED ON THE PRICE OF THE MATERIAL, THE INVOICES AN D DEBIT NOTES HAVE NOT BEEN DISPUTED. 2.6. PASWARA IMPEX LTD. PAID RS. 5,32,41,388/- TO M ODERN CHEMICALS FOR 4736 MT QUANTITY OF CONDENSATE WHILE PASWARA IMPEX LTD. RECEIVED ONLY 4722.042 MT QUANTITY RESULTING INTO LOSS ON ACCOUNT OF SHORTAGE OF 13.958 MT OF THE VALUE OF RS. 1,54,096.32 WHICH WAS BORNE BY PASWARA IMPEX LTD. THE ASSESSEE PASWARA IMPEX LTD. SOLD 4722.042 MT CO NDENSATE ON HIGH SEAS SALE BASIS TO SEVERAL BUYERS/ CUSTOMERS ON HIG H SEAS SALE BASIS FOR WHICH AGREEMENTS WERE SIGNED BETWEEN PASWARA IMPEX LTD. & THE RESPECTIVE BUYERS. ASSESSEE THUS RECEIVED RS. 5,20, 18,015/- AS TOTAL SALE PROCEEDS FOR 4722.042 MT CONDENSATE WHICH WERE SOLD TO SEVERAL BUYERS AND INCURRED RS. 12,23,373/- AS BUSINESS LOSS (RS. 5,32,41,388 RS. ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 6 5,20,18,015) IN THESE DEALS, WHICH INCLUDES LOSS O F SHORT RECEIPT OF QUANTITY OF 13.958 MT OF THE VALUE OF RS. 1,54,096/-. COPIES OF HIGH SEAS SALE INVOICES ISSUED BY ASSESSEE ON ITS BUYERS TOTALING TO 4722.042 MT CONDENSATE ALONG WITH LIST OF BUYERS WHO PURCHASED THE MATERIAL ON HIGH SEAS SALE BASIS ARE PLACED AT PAGE NO. 23 TO 34 OF PAPER BOOK. 2.7. ASSESSEE FURTHER INCURRED A LOSS OF RS. 5,28,7 83/- ON ACCOUNT OF LESS PORT CHARGES/ DECRIMINALIZATION CHARGES COLLECTED F ROM THE BUYERS WHO PURCHASED GOODS ON HIGH SEAS SALE BASIS. THE TOTAL PORT CHARGES WERE RS. 21,00,983/- WHILE ONLY RS. 15,72,200/- WERE RECOVER ED FROM THE BUYERS DUE TO ABNORMAL SITUATION WHICH AROSE BECAUSE OF DETENT ION OF THE GOODS BY CUSTOMS AUTHORITIES AND THE LIFTING OF GOODS WAS ST OPPED BY THE CUSTOMS AND GOODS WERE STORED FOR LONGER PERIOD ON WHICH EX TRA PORT CHARGE WERE ACCUMULATED. THE BUYERS DID NOT PAY EXTRA PORT CHAR GES/ SHORTAGE CHARGES WHICH WERE ULTIMATELY BORNE BY PASWARA IMPEX LTD. C OPY OF DETENTION MEMO DATED 11.05.2004 ISSUED BY CUSTOM DEPARTMENT D ETAINING THE CARGO IS PLACED ON PAPER BOOK. 2.8. APROPOS GROUND NO. 3 IN RESPECT OF PORT CHARGE S, IT IS CONTENDED THAT THE ASSESSEE FACED ABNORMAL SITUATION DUE TO DETENT ION OF GOODS BY THE CUSTOM DEPARTMENT. THESE CHARGES IN FORM OF DEMURRA GE WERE TO BE BORNE BY THE ASSESSEE. THERE WAS A CLEAR AGREEMENT BETWEE N THE EXPORTER AND THE ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 7 ASSESSEE AND CLAUSE 16 I.E. FORCE MAJURE OF HIGH SE AS SALE AGREEMENT DATED 12-4-2004 & 17-4-2004 BETWEEN EXPORT AND THE ASSESS EE CLEARLY SAYS THAT IN CASE OF ANY FORCE MAJURE SITUATION DUE TO ANY GOVER NMENT ACT, THE DATE OF FULFILLMENT OF ANY ENGAGEMENT WOULD BE POSTPONED TI LL SUCH CIRCUMSTANCES OPERATE. CONSEQUENTLY, THE PAYMENT OF MORE CHARGES WAS GIVEN BY THIS FORCE MAJURE CLAUSE AND ASSESSEE HAD TO PAY THE PORT CHAR GES DUE TO DETENTION OF GOODS. THE PAYMENT IN QUESTION HAS NOT BEEN DISPUTE D BUT ON ASSUMPTIONS IT HAS BEEN HELD THAT THE LOSS OCCASIONED BY THIS PAYM ENT OF PORT CHARGES WAS TO SUPPRESS TRUE AND CORRECT INCOME OF THE ASSESSEE , THEREFORE, THE LOSS WAS DISALLOWED AO HIMSELF HAS ACCEPTED THE GENUINENESS OF THE MUDRA PORT TRUST BILLS AS MENTIONED IN THE ASSESSMENT ORDER AT PAGE NO. 2 AND PAGE NO. 3 2.9. IN HIGH SEAS IT IS VERY CLEAR THAT THE SELLER HAS TO ENSURE THE DELIVERY AS THE SHIP LANDED AT THE PORT BUT IN THIS CASE THE SH IP GOODS ARE DETAILED BY THE PORT AUTHORITIES AND THE SELLER WAS NOT IN A POSIT ION TO ENSURE THE DELIVERY AND THE GOODS ARE DETAILED FOR MONTHS. THE VESSEL DETENTION CHARGES AS CHARGED BY THE GOVERNMENT/ PORT AUTHORITIES ARE CL EARLY A BUSINESS EXPENDITURE AND DESERVES TO BE ALLOWED IN FULL. 2.10. THE LD. AR HAS FURTHER ARGUED THAT IT IS THE PAYMENT TO THE PORT AUTHORITIES FOR DEMURRAGE FOR THE LATE UPLIFTMENT O F THE MATERIAL AND THE APPELLANT COULD ONLY REALIZE RS. 15,72,700/- FROM C USTOMERS OUT OF RS. ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 8 21,00,983/- PAID TO PORT TRUST AND THE APPELLANT HA D TRIED TO REALIZE AS MUCH AS POSSIBLE FROM THE CUSTOMERS AND ON ACCOUNT OF TH E ABNORMAL DELAY IN UPLIFTMENT, THE APPELLANT HAD TO SUFFER THIS LOSS O F RS. 5,28,783/- WHICH IS A GENUINE BUSINESS EXPENDITURE AND, THEREFORE, DESERV ES TO BE ALLOWED IN FULL. 2.11. CIT(A) UPHELD THE ADDITION BY FOLLOWING OBSER VATIONS: 3.4. I HAVE GONE THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE LD. AR. IN VIEW OF THE FACT THAT CLAUSE 11 O F THE TERMS AND CONDITIONS OF THE AGREEMENT CLEARLY MENTIONS THAT O NLY THE PURCHASER HAD TO BEAR ALL SORTS OF DEMURRAGES ETC. AND AS SUCH THE ASSESSEE WAS NOT UNDER ANY OBLIGATION TO BEAR P ORT DECRIMINALIZATION CHARGES, AND AS SUCH THE ADDITION MADE IS CONFIRMED. 3. IT IS PLEADED THAT THE ASSESSEE HAVING ACTUALLY PAID THIS AMOUNT, NOT RECOVERED FROM THE CUSTOMERS, CLEARLY INDICATES THA T THE LIABILITY OF PORT CHARGES WAS FASTENED ON THE ASSESSEE. THE LOWER AUT HORITIES IGNORING ALL THESE FACT HELD THAT THAT THE LOSS WAS INCURRED TO SUPPRESS THE PROFITS AS ON ASSUMPTIONS. 3.1. LEARNED COUNSEL CONTENDS THAT: (A) ASSESSEE ITSELF IMPORTED ABOVE CARGO ON ITS OWN. MO DERN CHEMICALS SERVICES WERE UTILIZED BY WAY OF PROVIDING L/C FACI LITIES ON AGREED FINANCIAL CHARGES OF 1.5% AS PER THE TERMS OF AGREE MENT BY BINDING AGREEMENT DATED 5-2-2004. (B) THE ALLEGATION OF MAKING PAYMENT IN EXCESS OF MARKE T VALUE TO SISTER CONCERN DOES NOT ARISE AND IS NOT SUBSTANTIATED. PR OVIDING OF L/C FACILITIES IN MARKET COST NORMALLY; THE FINANCIAL C HARGES AROUND 1.5%. ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 9 FOR L/C AVAILING FACILITIES BANKS CHARGE THE SIMILA R OR MORE AMOUNT. IT HAS NOT BEEN DISPUTED THAT L/C FACILITIES WERE P ROVIDED BY MODERN CHEMICALS. (C) LOSS DID NOT OCCUR DUE TO ANY PURCHASE/SALE TRANSA CTION BETWEEN ASSESSEE AND SISTER CONCERN. THE ENTIRE TRANSACTION S WHICH OCCASIONED LOSSES WERE CARRIED OUT WITH THIRD PARTIES. THE ASS ESSEE PURCHASED GOODS FROM DUBAI BASED PARTY WHICH IS NOT RELATED C ONCERN AND SOLD THEM TO DIFFERENT UNCONNECTED BUYERS ON HIGH SEAS S ALE BASIS. IN THESE BUSINESS TRANSACTIONS ASSESSEE IN EFFECT INCURRED A LOSS OF RS. 12,23,373/-ON ACCOUNT OF INFERIOR QUALITY OF GOODS; DUE TO DETENTION OF GOODS AT PORT; THE PORT CHARGES WERE ACTUALLY PA ID BY THE ASSESSEE. (D) IGNORING THESE VITAL AND CRUCIAL FACTS, LOWER AUTHO RITIES HAVE UNJUSTIFIABLY INVOKED SEC. 40A(2)(A). THE ADDITION BE DELETED. 3.2. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA DISCOUNT CO. 91 ITR 8, HOL DING THAT IT WAS A WELL ACCEPTED PRINCIPLE OF LAW THAT AN ASSESSEE CAN SO A RRANGE ITS AFFAIRS IN A MANNER TO MINIMIZE ITS TAX BURDEN. IT IS NOT PERMIS SIBLE FOR AO TO ADD BACK ANY FICTIONAL INCOME. 4. LEARNED DR, ON THE OTHER HAND, SUPPORTS THE ORDE R OF LOWER AUTHORITIES AND CONTENDS THAT IT IS A SURPRISING SITUATION THAT THE ASSESSEE ENTERED INTO IMPORTS TO INCUR LOSS. IT IS ALLEGED THAT THERE WER E QUANTITATIVE AND QUALITATIVE DEFECTS IN THE CONSIGNMENT, THE QUANTITY HAS NOT BE EN COMPENSATED AND THE ISSUE OF QUALITY REMAINED QUESTIONABLE. THE UNDUE B ENEFIT HAS THUS BEEN ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 10 PASSED ON TO ASSOCIATED CONCERNS. BUSINESS EXIGENCI ES FOR SUCH TRANSACTIONS HAVE BEEN EXPLAINED BY THE ASSESSEE. THEREFORE, THE AMOUNT PAID AS FINANCE CHARGES BECOMES UNREASONABLE, THEREFORE, RIGHTLY TH E PROVISION OF SEC. 40A(2)(A) HAS BEEN INVOKED FOR PORT CHARGES. RELIAN CE IS PLACED ON THE ORDER OF LOWER AUTHORITIES. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, IN REJOIND ER, CONTENDS THAT THERE IS NO ALLEGATION THAT ASSESSEE INDULGED IN ANY TAX AVOIDING ARRANGEMENT. ONLY THE BUSINESS NECESSITY OF FINANCE CHARGES HAS BEEN QUESTIONED, WITHOUT APPRECIATING THAT L/C CHARGES OF 1.5% ARE REASONAB LE, WHY THE ASSESSEE ENJOYED THIS FACILITY IN ITS REGULAR COURSE OF BUSI NESS IS BEYOND THE DOMAIN OF REVENUE AUTHORITIES. SIMILARLY, WHY THE ASSESSEE PA ID PORT CHARGES IS NOT QUESTIONABLE BY REVENUE AS THE FACT REMAINS THAT AS SESSEE HAS PAID THESE CHARGES. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. FROM THE PAPER BOOK FILED BY T HE ASSESSEE IT CLEARLY EMERGES THAT: (1) THE ARRANGEMENT BETWEEN ASSESSEE AND MODERN CHEMICA LS WAS ONLY FOR THE PURPOSE OF OBTAINING L/C FACILITIES @ 1.5%. NO COMPARATIVE INSTANCE HAS BEEN GIVEN BY LOWER AUTHORITIES TO COM E TO THE CONCLUSION THAT THE L/C CHARGES WERE EXCESSIVE. ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 11 (2) THE BUSINESS DECISION TO AVAIL L/C CHARGES FROM AN ASSOCIATED CONCERN CANNOT BE CALLED IN QUESTION AS TO WHY ASSE SSEE MADE THIS ARRANGEMENT. IN OUR VIEW THE ASSESSEE IS FREE TO TR ANSACT ITS BUSINESS AS PER ITS BUSINESS ACUMEN AND THE AO CANNOT STEP INTO HIS SHOES. (3) IT HAS NOT BEEN DEMONSTRATED BY LOWER AUTHORITIES T HAT THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND MODERN CHEMIC ALS WAS A SHAM TRANSACTION. ONLY ITS BUSINESS NECESSITY IS IN QUES TION. (4) FROM THE COPIES OF INVOICES ISSUED BY FOREIGN SUPPL IERS; BILLS OF LADING; COPIES OF DEBIT NOTES ISSUED BY MODERN CHEM ICALS; COPY OF LIST OF BUYERS WITH HIGH SEAS SALES INVOICES ISSUED BY THE ASSESSEE AND THE HIGH SEAS SALE AGREEMENT BETWEEN THESE BUYERS C LEARLY DEMONSTRATE THAT THE ASSESSEE CARRIED OUT GENUINE T RANSACTION OF IMPORT AND ITS SALE ON HIGH SEAS SALE BASIS. IN OUR VIEW THE ADDITION OF DISALLOWANCE IS TOTALLY UNJUSTIFIED AND UNCALLED FO R, FOR THE REASONS GIVEN ABOVE. 6.1. IN VIEW THEREOF, WE ALLOW THESE GROUNDS OF THE ASSESSEE AND DELETE THE ADDITION ON ACCOUNT OF FINANCE CHARGES PAID TO MODE RN CHEMICALS. 7. COMING TO PORT CHARGES ALSO THE COPY OF DETENTIO N MEMO DATED 11-5- 2004 IS ISSUED BY CUSTOM DEPARTMENT AND THE FACT TH AT THE ASSESSEE BORE THE CHARGES CLEARLY INDICATE THAT THE ASSESSEE IN THESE ABNORMAL SITUATIONS WAS COMPELLED TO PAY THE PORT CHARGES FOR DELAYED RELEA SE OF THE GOODS. IN THESE CIRCUMSTANCES, THIS AMOUNT CANNOT BE DISALLOWED ON ASSUMPTION THAT THE ASSESSEE SHOULD HAVE REALIZED FROM THE CUSTOMERS. T HIS AGAIN BECOMES AN ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 12 ISSUE FOR THE BUSINESS ACUMEN OF THE ASSESSEE. BESI DES THE FORCE MAJURE CLAUSE GOVERNING THIS TRANSACTION SUPPORTS THE CONT ENTION OF THE ASSESSEE THAT IT WAS LIABLE TO BEAR THE PORT CHARGES. IN VIEW THE REOF, WE DELETE THIS ADDITION ALSO. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 16-12-2011. SD/- SD/- ( K.D. RANJAN ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16-12-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 3513/DEL/09 PASWARA IMPEX LTD. VS. ACIT 13