The DCITAnand Circle, Anand V. Eimco Elecon (India) Ltd., Anand

ITA 36/AHD/2010

• Counselvise Citation: 3620514 RSA 2010
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B L YADAV
• Keywords: Business expenditure; Additional evidence; Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.3254 / AHD/2009 (ASSESSMENT YEAR 2006-07) EIMCO ELECON (INDIA) LTD., ANAND SOJITRA ROAD, VALLABH VIDYANAGAR, TAL. & DIST. ANAND VS. JCIT, ANAND CIRCLE, AHAND PAN/GIR NO. : AAACE4645C I.T.A.NOS. 36 & 37/AHD/2010 (ASSESSMENT YEARS 2005-06 & 2006-07) DCIT, ANAND CIRCLE, VS. EIMCO ELECON (INDIA) LTD., ANAND ANAND SOJITRA ROAD, VALLABH VIDYANAGAR, TAL. & DIST. ANAND (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI SUNIL TALATI, AR RESPONDENT BY: SHRI B L YADAV, SR. DR DATE OF HEARING: 07.05.2012 DATE OF PRONOUNCEMENT: 31.05.2012 O R D E R PER SHRI A. K. GARODIA, AM:- OUT OF THIS BUNCH OF THREE APPEALS, THERE IS ONE A PPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IN I.T.A.NO . 36/AHD/2010 WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) I V, BARODA DATED 30.10.2009 AND THE REMAINING TWO APPEALS ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) IV, BARODA DATE D 30.10.2009 FOR THE ASSESSM ENT YEAR 2006-07. I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 2 ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2005-06. THERE IS ONLY ONE EFFECTIVE GROUND RAISED BY THE REVENUE WHICH IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .48,61,158/- BEING DISALLOWANCE OF WARRANTY PROVISION DEBITED TO SPARES ACCOUNT, CONTRARY TO AUDITORS FINDING IN THE AUDIT REPORT THAT IT WAS IN THE NATURE OF CONTINGENT LIABILITY. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASER AND IN LAW, THE CIT(A) O UGHT TO HAVE UPHELD THE ORDER OF THE A.O. THE ORDER OF THE CIT( A) ON THE ISSUES RAISED IN THE AFORESAID GROUNDS BE SET ASIDE AND TH AT OF THE A.O. BE RESTORED. 2.1 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMEN T ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALS O SUBMITTED THAT LD. CIT(A) HAS FOLLOWED THE JUDGMENT OF HONBLE APEX CO URT RENDERED IN THE CASE OF ROTORK CONTROLS (INDIA) LTD. VS CIT AS REPORTED IN 314 ITR 52. HE SUBMITTED THAT IN THE FIRST ROUND, THE TRIB UNAL HAS RESTORED BACK THIS MATTER TO THE FILE OF LD. CIT(A) FOR A FIRST D ECISION IN I.T.A.NO. 1380/AHD/2009 DATED 17.07.2009. HE SUBMITTED A COP Y OF THIS TRIBUNAL DECISION. HE FURTHER POINTED OUT THAT IT WAS HELD BY THE TRIBUNAL IN THIS ORDER IN THE FIRST ROUND THAT THE DECISION OF HONB LE MADRAS HIGH COURT RENDERED IN THE CASE OF ROTORK CONTROLS (INDIA) LTD . (SUPRA) AND THE SUBSEQUENT DECISION OF HONBLE APEX COURT IN THE SA ME CASE AS REPORTED IN 23 CTR 425/314 ITR 62, WAS NOT AVAILABLE WHEN TH E MATTER WAS DECIDED BY LD. CIT(A). HENCE, THE MATTER WAS RESTO RED BACK TO THE FILE OF LD. CIT(A) TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THIS DECISION OF HONBLE APEX COURT. HE FURTHER SUBMITTED THAT IN T HE IMPUGNED ORDER, LD. CIT(A) HAD DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE BY FOLLOWINGS I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 3 THIS JUDGMENT OF HONBLE APEX COURT AFTER EXAMINING ALL THE DETAILS AND, THEREFORE, THE ORDER OF LD. CIT(A) SHOULD BE CONFIR MED. 2.2 HE ALSO SUBMITTED A CHART OF YEAR-WISE SALES, W ARRANTY PROVISION AND ACTUAL EXPENSES REGARDING WARRANTY. HE POINTED OUT THAT AS PER THESE DETAILS FOR THE PRESENT YEAR, THE SALE WAS OF RS.97 22.32 LACS AND THE PROVISIONS MADE FOR WARRANTY @ 0.5% WAS CALCULATED AT RS.48,61,159/-. HE FURTHER SUBMITTED THAT ACTUAL WARRANTY EXPENSES INCURRED BY THE ASSESSEE IN THE PRESENT YEAR WERE RS.177.17 LACS AN D IN ALL THE EARLIER YEARS AND IN THE PRECEDING YEAR ALSO, THE EXPENSES INCURRED IS MUCH HIGHER AND, THEREFORE, THE PROVISION MADE BY THE AS SESSEE FOR WARRANTY IS NOT EXCESSIVE AND UNREASONABLE. 2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASS ESSEE BY THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ROTORK C ONTROLS (INDIA) LTD. (SUPRA). THERE IS NO DISPUTE ON THIS ASPECT ALSO T HAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE FOR THIS YEAR RE GARDING MAKING PROVISION IN RESPECT OF WARRANTY EXPENSES IS CONSIS TENTLY FOLLOWED BY THE ASSESSEE IN THE SUBSEQUENT YEARS. REGARDING THE ES TIMATION OF WARRANTY PROVISIONS ALSO, IT IS SEEN THAT THE SAME IS NOT EX CESSIVE AS COMPARED TO THE ACTUAL EXPENDITURE ON THIS ACCOUNT. CONSIDERIN G ALL THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD . CIT(A). 2.4 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 3. NOW, WE TAKE UP THE APPEAL OF THE REVENUE FOR TH E ASSESSMENT YEAR 2006-07. IN THIS YEAR ALSO, ONLY ONE EFFECTIVE GRO UND HAS BEEN RAISED BY THE REVENUE WHICH IS AS UNDER: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 48,61, 158/- BEING DISALLOWANCE OF WARRANTY PROVISION DEBI TED TO SPARES I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 4 ACCOUNT , CONTRARY TO AUDITOR'S FINDING IN THE AUDI T REPORT THAT IT WAS IN THE NATURE OF CONTINGENT LIABILITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER. RELIEF CLAIMED IN APPEAL. THE ORDER OF THE CIT(A) ON THE ISSUES RAISED IN THE AFORESAID GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 3.1 IT WAS AGREED BY BOTH THE SIDES THAT THIS ISSUE IS IDENTICAL TO THE ISSUE RAISED BY THE REVENUE IN THE APPEAL FOR THE A SSESSMENT YEAR 2005-06 AND THE SAME CAN BE DECIDED ON SIMILAR LINES. 3.2 IN THAT YEAR, WE HAVE HELD AS PER PARA 2.3 ABOV E THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) AND ON THE SAME LINES, WE HOLD IN THE PRESENT YEAR ALSO THAT NO INTERFERENCE IS CALLE D FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. 3.3 IN THE RESULT, THE APPEAL OF THE REVENUE FOR TH IS YEAR ALSO IS DISMISSED. 4. NOW, WE TAKE UP THE ASSESSEES APPEAL FOR THE AS SESSMENT YEAR 2006-07 IN I.T.A.NO. 3254/AHD/2009. 4.1 GROUND NO.1 IS GENERAL. 4.2 GROUND NO.2 IS AS UNDER: 2. THE HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,54,2207- U/S 14A OF THE INCOME TAX ACT, 196 1 READ WITH RULE 8D OF THE RULES. IT IS SUBMITTED THAT THE DISA LLOWANCE IS UNCALLED FOR AND BE DIRECTED TO BE DELETED. 4.2.1 IT WAS SUBMITTED BY THE LD. A.R. THAT AS PER THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF G ODREJ & BOYCE MANUFACTURING PVT. LTD. VS DCIT AS REPORTED IN 328 ITR 81, RULE 8D IS PROSPECTIVE AND THE SAME CAN BE INVOKED IN ASSESSME NT YEAR 2008-09 AND AFTERWARDS. IT WAS FURTHER SUBMITTED THAT IN THE P RESENT CASE, THE A.O. HAS I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 5 INVOKED RULE 8D WHICH IS NOT JUSTIFIED. HE FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAD SUBSTANTIAL OWN FUNDS OF RS.83 .89 CRORES WHEREAS, INVESTMENT IN SHARES IS AMOUNTING ONLY TO THE TUNE OF RS.1.99 CRORES. HE FURTHER SUBMITTED THAT IN THE PRECEDING YEAR ALSO, THERE WAS SUBSTANTIAL INTEREST FREE FUND OF RS.77.45 CRORES WHEREAS, THE INVESTMENT IN THAT YEAR WAS RS.1.02 CRORES ONLY. HE FURTHER SUBMITTED THAT NEW SHARES PURCHASED DURING THE PRESENT YEAR HAVE BEEN ACQUIRED FROM INT ERNAL ACCRUAL BECAUSE THE PROFITS OF THE PRESENT YEAR IS OF RS.2.83 CRORE S AND RS.2.55 CRORES IN THE PRECEDING YEAR. HE SUBMITTED THAT IN THE LIGHT OF THESE FACTS, NO DISALLOWANCE CAN BE MADE IN RESPECT OF INTEREST EXP ENDITURE IN CONNECTION WITH MAKING INVESTMENT IN SHARES. HE SUBMITTED THA T THE A.O. HAS MADE DISALLOWANCE OF RS.3,51,407/- ON ACCOUNT OF INTERES TS DISALLOWANCE, WHICH SHOULD BE DELETED IN FULL. REGARDING THE DISALLOWA NCE MADE BY THE A.O. IN RESPECT OF ADMINISTRATIVE EXPENSES, IT WAS SUBMI TTED THAT AS PER THIS JUDGMENT OF HONBLE BOMBAY HIGH COURT, ONLY REASONA BLE DISALLOWANCE CAN BE MADE. 4.2.2 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4.2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY THE LD. A.R. CONSIDERING THE FA CTS OF THE PRESENT CASE, IT HAS TO BE ACCEPTED THAT NO INTEREST BEARIN G BORROWED FUNDS WERE USED FOR INVESTMENT IN SHARES AND, THEREFORE, NO DI SALLOWANCE IS CALLED FOR OUT OF THE INTEREST EXPENDITURE. AS PER THIS JUDGM ENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ & BOYCE M ANUFACTURING PVT. LTD. (SUPRA), RULE 8D IS NOT APPLICABLE IN THE PRES ENT CASE BECAUSE ASSESSMENT YEAR INVOLVED IS ASSESSMENT YEAR 2006-07 . STILL SOME DISALLOWANCE U/S 14A OUT OF THE ADMINISTRATIVE EXPE NSES IS CALLED FOR. NORMALLY WE RESTORE SUCH MATTERS TO THE FILE OF THE A.O. FOR A FRESH I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 6 DECISION BUT CONSIDERING SMALLNESS OF THE AMOUNT OF DISALLOWANCE MADE BY THE A.O. REGARDING ADMINISTRATIVE EXPENSES OF RS .1,02,484/- WE FEEL THAT AN ESTIMATED DISALLOWANCE COULD BE CONFIRMED O N REASONABLE BASIS AND NO EFFECTIVE PURPOSE WILL BE SERVED BY RESTORIN G THIS MATTER BACK TO THE FILE OF THE A.O. CONSIDERING THE FACTS OF THE PRESENT CASE,. WE FEEL THAT DISALLOWANCE OF RS.50,000/- OUT OF ADMINISTRAT IVE EXPENSES WILL MEET THE ENDS OF JUSTICE. WE HOLD ACCORDINGLY. THIS GR OUND IS PARTLY ALLOWED. 4.3 GROUND NO.3 IS AS UNDER: 3. THE HON'BLE CIT (A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.1,09,16,495/-BEING EXPORT COMMISSION PAID TO FOUR PARTIES. YOUR APPELLANT SUBMITS THAT THE SAME WAS PAID FOR S ECURING EXPORT ORDERS THROUGH AGENTS WHO ASSISTED IN BIDDING, TECH NICAL EVALUATION, PRICE NEGOTIATION, LIAISON WITH CUSTOME RS, COLLECTION OF OUTSTANDING ETC. COMMISSION PAID IS WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF, BUSINESS, BE DIRECTED TO BE ALLOWED AS CLAIMED. IT BE HELD SO NOW. 4.3.1 BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOT ED BY LD. CIT(A) IN PARA 4 OF HIS ORDER WHICH IS REPRODUCED BELOW: 4. THE NEXT GROUND OF APPEAL IS REGARDING DISALLOW ANCE OF EXPORT COMMISSION OF RS.1,09,16,495/-. DURING THE YEAR, AP PELLANT HAD DEBITED COMMISSION EXPENSES OF RS.1,09,16,495/- AS UNDER IN RESPECT OF EXPORTS TO BANGLADESH :- S. N O. NAME OF PERSON AMOUNT (RS.) 1 MARFATIA & CO 4416495 2 SOMA MUKHERJEE 500000 3 FATIMA S BROACHWALA 3000000 4 SAIFUDDIN F BROACHWALA 3000000 TOTAL 10916495 I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 7 ON BEING ASKED TO FURNISH DETAILS OF EXPORT TURNOVE R, ON WHICH THE SAID COMMISSION WAS CLAIMED TO HAVE BEEN PAID, APPE LLANT SUBMITTED THAT DURING THE YEAR, IT HAD MADE EXPORT SALE OF 13 RSL MACHINES WORTH RS.2,68,28,602/- AND SPARES WORTH RS .81,58,230/- TO M/S. NAMNAM/MHMP, DHAKA, BANGLADESH. ON THIS EXP ORT TURNOVER OF RS.3,91,76,103/-, APPELLANT HAD CLAIMED THAT EXPORT COMMISSION OF RS.1,09,16,495/- WAS PAID TO ABOVE ME NTIONED FOUR PERSONS. THE ASSESSING OFFICER NOTED THAT APPELLANT HAD CLAIMED COMMISSION PAYMENT OF ABOUT 30% OF THE TOTAL EXPORT TURNOVER AND THE SO CALLED COMMISSION WAS WITHOUT ANY WRITTEN CO NTRACT. IN RESPONSE TO AO'S PROPOSAL TO DISALLOW THE COMMISSIO N, BY REFERRING TO THE FACT THAT COMMISSION ON A SINGLE ORDER HAD B EEN PAID TO FOUR DIFFERENT PERSONS WITHOUT ANY BASIS AND THE APP ELLANT HAD FAILED TO FURNISH ANY DOCUMENTARY EVIDENC E, APPELLANT CONTENDED THAT EXPORT ORDERS WERE SECURED THROUGH C OMMISSION AGENTS, WHO ASSISTED IT IN BIDDING, TECHNICAL EVALU ATION, PRICE NEGOTIATION AND LIAISON WITH CUSTOMERS, SINCE IT DI D NOT HAVE ANY OFFICE IN BANGLADESH. APPELLANT CONTENDED THAT THE AGENTS HAD RELATIONSHIP WITH BANGLADESH CUSTOMERS AND HENCE T HEIR SERVICES WERE HELPFUL IN SECURING THE ORDER. AS PER APPELLAN T, THE AGENTS ALSO VISITED BANGLADESH ON ITS BEHALF AND IDS WAS DEDUCT ED BY THE APPELLANT FROM THE PAYMENTS MADE. DETAILS SUCH AS P AN NO., ADDRESS AND CONFIRMATION FROM THE AGENTS WERE FILED . APPELLANT CONTENDED THAT DUE TO ENGAGING THE COMMISSION AGENT S, IT COULD FETCH BETTER PRICE WITH MUCH HIGHER PROFITABILITY T HAN THAT REALIZED IN DOMESTIC SALES. THE ASSESSING OFFICER OBSERVED T HAT THE CONTENTION OF APPELLANT ABOUT AGENTS ASSISTIN G IT IN BIDDING, TECHNICAL EVALUATION, PRICE NEGOT IATIONS AND LIAISON WITH CUSTOMERS WAS UNSUBSTANTIATED AND IN SPITE OF ADEQUATE OPPORTUNITIES TO PUT FORTH DOCUMENTARY EVIDENCES IN SUPPORT OF THIS CONTENTION, NO EVIDENCES OTHER THAN COPY OF HANDWRI TTEN DEBIT NOTE OF M/S. MARFATIA & CO. COULD BE SUBMITTED. ASSESSIN G OFFICER FURTHER OBSERVED THAT THE CONTENTION ABOUT AGENT VISITING BANGLADESH ON ITS BEHALF ALSO REMAINED UNSUBSTANT IATED. ASSESSING OFFICER FURTHER OBSERVED THAT IN SPITE OF BEING SPECIFICALLY ASKED, APPELLANT FAILED TO GIVE ANY BA SIS FOR BIFURCATION OF THE COMMISSION ON A SINGLE ORDER BETWEEN FOUR DI FFERENT AGENTS AND NO DETAILS OF SPECIFIC SERVICES RENDERED BY EACH OF THESE AGENTS WERE FURNISHED. ALSO, NO DETAILS OF ANY QUALIFICATION OR PAST EXPERIENCE IN SIMILAR LINE FOR SOMA MUKHER JEE, FATIMA S. BROACHWALA AND SAIFUDDIN F. BROACHWALA WERE FURNISH ED. ASSESSING OFFICER ALSO OBSERVED THAT NON COLLECTION OF SERVICE TAX I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 8 FROM PAYMENTS MADE TO THREE PERSONS SHOWED THAT NO SERVICES WERE RENDERED BY THESE PERSONS AND THE PAYMENTS WERE IN THE NATURE OF GRATUITOUS PAYMENTS. ASSESSING OFFICE R ALSO OBSERVED THAT THE FACT THAT APPELLANT WAS ABLE TO CHARGE PRE MIUM OF 800 TO 900% OF THE DOMESTIC SALE VALUE OF SPARES INDICATED THAT THE PAYMENTS CALLED 'EXPORT COMMISSION' WERE ACTUALLY O F THE NATURE THAT ATTRACT PROVISIONS OF EXPLANATION TO SECTION 3 7(1). ASSESSING OFFICER DISALLOWED EXPORT COMMISSION OF RS.1,09,16, 495/-. 4.3.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 4.3.3 IN THE COURSE OF HEARING BEFORE US, IT WAS SU BMITTED BY THE LD. A.R. THAT THIS DISALLOWANCE WAS MADE BY THE A.O. AND CON FIRMED BY CIT(A) MAINLY ON THIS BASIS THAT THE ASSESSEE COULD NOT BR ING ON RECORD CORRESPONDENCE WITH THE PRINCIPAL OR THE CONCERNED AGENT OR ANY CONFIRMATION FROM PRINCIPAL / CUSTOMER REGARDING IN VOLVEMENT OF AGENT AND THE ASSESSEE COULD NOT PRODUCE ANY CORRESPONDEN CE WITH THE AGENT ALSO. HE SUBMITTED THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS AND DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE L D. CIT(A), THE CORRESPONDENCE OF THE ASSESSEE WITH THE AGENT COULD NOT BE BROUGHT ON RECORD BECAUSE THE SAME WERE LYING WITH THE MANAGIN G DIRECTOR AND HE WAS SICK AND ULTIMATELY EXPIRED BUT NOW, SOME OF TH ESE CORRESPONDENCE COULD BE LOCATED WHILE SEARCHING HIS CUPBOARDS ETC AND SINCE IT GOES TO THE ROOT OF THE MATTER, THE SAME COULD BE ADMITTED AS ADDITIONAL EVIDENCE. LD. D.R. DID NOT HAVE ANY SERIOUS OBJECTION AND SIN CE THESE ADDITIONAL EVIDENCES GO TO THE ROOT OF THE MATTER TO DECIDE AS TO WHETHER ANY SERVICES WERE RENDERED BY THE AGENT OR NOT, WE ADMIT THESE A DDITIONAL EVIDENCES. 4.3.4 IT WAS FURTHER SUBMITTED BY THE LD. A.R. THAT AS PER THESE CORRESPONDENCE OF THE ASSESSEE WITH THE AGENT M/S. MARFATIA & COL, IT CAN BE SEEN THAT THEY WERE ACTING AS THE AGENTS OF THE ASSESSEE COMPANY I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 9 FOR EXPORT TO BANGLADESH AND THE ORDERS WERE PROCUR ED BY THEM AND THEY WERE ALSO MONITORING, COMMISSIONING THE EQUIPMENT A T THE BUYERS END AND WERE TAKING UP THE MATTER WITH THE ASSESSEE FOR SOLVING OUT THE PROBLEMS OF THE BUYER. REGARDING THE SECOND OBJEC TION OF THE REVENUE THAT THE PAYMENTS WERE MADE TO FOUR DIFFERENT PERSO NS, IT WAS SUBMITTED THAT THE PAYMENTS WERE MADE TO DIFFERENT PERSONS AS PER THE INSTRUCTIONS OF THE AGENT M/S. MARFATIA & CO. AS PER LETTER DATE D 30.06.2005 AS PER WHICH, THEY HAVE REQUESTED FOR PAYMENT OF RS.46,78, 986/- TO THEM AND RS.5 LACS TO SOMA MUKHERJEE AND RS.30 LACS EACH TO FATIMA S BROACHWALA AND SAIFUDDIN F BROACHWALA. HE SUBMITTE D THAT ASSESSEE IS CONCERNED WITH THE SERVICES AND PAYMENT FOR THAT. THE SERVICES WERE RENDERED BY M/S. MARFATIA & CO AND IF HE IN TURN HA S TAKEN HELP FORM OTHERS AND INSTEAD OF MAKING PAYMENT DIRECTLY TO TH EM, HE ASKED THE ASSESSEE TO MAKE DIRECT PAYMENTS TO THOSE PERSONS I N PART, THEN NO ADVERSE INFERENCE SHOULD BE DRAWN AGAINST THE ASSES SEE ON THE BASIS OF SUCH DIRECT PAYMENTS TO OTHER PERSONS WHO HAD RENDE RED SERVICES TO THE ASSESSEE THROUGH M/S. MARFATIA & CO. (AGENT). IT I S SUBMITTED THAT THIS CAN BE EXPLAINED BY A HYPOTHETICAL EXAMPLE. SUPPOS E, A PERSON A GOES TO A RESTAURANT AND ORDER FOR SOME DRINKS, CHINESE DISHES, INDIAN DISHES AND SOME ICE CREAMS FROM THAT RESTAURANT. THIS RES TAURANT OFFERS INDIAN DISHES FROM OWN SOURCES AND OUT SOURCES THE BALANCE ITEMS AND FOR THE SAME THE RESTAURANT PRESENTS FOUR BILLS INCLUDING O NE BILL OF THE RESTAURANT AND THREE BILLS OF THE OUTSIDERS AND ASK A TO MAK E PAYMENT OF THE ENTIRE AMOUNT, THE SAME IS EQUIVALENT TO THE PRESENT CASE AND SINCE THOSE THINGS IN A RESTAURANT IS HAPPENING DAY IN AND DAY OUT, NO ADVERSE INFERENCE SHOULD BE DRAWN AGAINST THE US ON THIS ACCOUNT THAT PART PAYMENTS WERE MADE TO THREE DIFFERENT PERSONS. AS AGAINST THIS, IT WAS SUBMITTED BY THE I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 10 LD. D.R. THAT THE ASSESSEE COULD NOT ESTABLISH REND ERING OF SERVICES, THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE ORD ER OF LD. CIT(A). 4.3.5 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. REGARDING ADDITIONAL EVIDENCES SUBMITTED BY THE LD. A.R., IT WAS SUBMITTED BY HIM THAT THESE ARE SELF SERVING DOCUMENTS AND HENCE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. 4.3.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THERE IS NO DISPUTE REGARDING THIS ASPECT THAT FOR THE FIRST TIME IN THIS YEAR, ASSESSEE HAS MADE EXPORT WORTH RS.268.28 LACS TO BANGLADESH ON ACCOUNT OF SALE OF BRFL MACHINE AND ALSO EXPORTED S PARES WORTH RS.81.58 LACS TO BANGLADESH. IN THIS MANNER THERE IS EXPORT TURNOVER OF RS.391.76 LACS. AGAINST THIS EXPORT, THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF COMMISSION PAYMENT OF RS.1,09,16,495/ -. THIS CLAIM OF THE ASSESSEE WAS REJECTED BY THE A.O. MAINLY ON THI S BASIS THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE REGARDING A CTUAL RENDERING OF ANY SERVICES BY THE AGENT. THE 2 ND OBJECTION OF THE A.O. IS THAT THE ASSESSEE HAS FAILED TO GIVE ANY BASIS FOR THE BIFUR CATION OF THE COMMISSION OF A SINGLE ORDER BETWEEN FOUR DIFFERENT AGENTS. I N THE COURSE OF HEARING BEFORE US, LD. A.R. HAS SUBMITTED SOME ADDITIONAL E VIDENCES WHICH WERE ADMITTED BY US IN VIEW OF THIS FACT THAT THE SAME G O TO THE ROOT OF THE MATTER AND, THEREFORE, ADMITTED. AS PER THESE ADDI TIONAL EVIDENCES, IT IS SEEN THAT THESE ARE CORRESPONDENCE BETWEEN THE ASSE SSEE AND THE AGENT M/S. MARFATIA & CO. DURING JULY 2004 TO JUNE 2005. THE AGENT HAS INTIMATED THE ASSESSEE THAT THEY ARE HAVING VERY GO OD CONTACTS IN BANGLADESH AND THEY ARE AWARE OF THE WORK CONTRACT AWARDED FOR UNDERGROUND MINING PROJECT OF BANGLADESH TO A KOREA N COMPANY AND THIS COMPANY REQUIRES SOME MINING MACHINERY AND FOR THE SAME, THE AGENT HAS I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 11 INTIMATED THE ASSESSEE COMPANY THAT IF THE ASSESSEE IS INTERESTED, THEY CAN PROCURE ORDERS FOR THE ASSESSEE FROM KOREAN COMPANY . IN REPLY, THE ASSESSEE COMPANY SENT THE REQUIRED PRODUCT LITERATU RE AND OTHER DETAILS AND THEREAFTER, THIS AGENT INTIMATED THE ASSESSEE T HAT PRODUCT LITERATURE WAS FORWARDED BY THEM TO THE KOREAN COMPANY. THEY ALSO ASKED THE ASSESSEE COMPANY TO QUOTE THE PAYMENT TERMS AND DES PATCH SCHEDULE ETC. THERE ARE OTHER LETTERS IN THIS CONNECTION BETWEEN THE ASSESSEE AND THE AGENT AND AS PER LETTER DATED 30.06.2005, THE AGENT M/S. MARFATIA & CO. MADE A REQUEST TO THE ASSESSEE THAT SINCE THEY CANN OT ALONE HANDLE THE WHOLE PROJECT, THERE WERE SOME OTHER PERSONS ALSO I NVOLVED IN THE EXECUTION OF THIS CONTRACT AND, THEREFORE, THEY HAV E REQUESTED THE ASSESSEE COMPANY TO MAKE PAYMENT OF RS.65 LACS TO THREE DIFF ERENT PERSONS AND ONLY THE BALANCE AMOUNT OF RS.46,78,986/- WAS TO BE PAID TO M/S. MARFATIA & CO. THE ASSESSEE MADE THE PAYMENTS ACCO RDINGLY. CONSIDERING ALL THESE FACTS, WE ARE SATISFIED THAT THE ASSESSEE HAVE BROUGHT ON RECORD SUFFICIENT MATERIAL IN SUPPORT OF THIS CO NTENTION THAT SERVICES WERE RENDERED BY THE AGENT. REGARDING THIS ASPECT THAT ON WHAT BASIS THE PAYMENT WERE MADE TO FOUR DIFFERENT PERSONS IN CONN ECTION WITH SINGLE ORDER, WE ARE SATISFIED THAT FOR THIS ALSO, THE ASS ESSEE HAS FURNISHED A REASONABLE EXPLANATION THAT THE ENTIRE PROJECT COUL D NOT BE HANDLED BY M/S. MARFATIA & CO. AND THEY HAVE ENGAGED SERVICES OF THREE OTHER PERSONS AND AS PER THEIR TERMS BETWEEN THEMSELVES, THE PAYMENT WAS DISTRIBUTED BY THEM AMONG THEMSELVES. IT MAKES NO DIFFERENCE TO THE ASSESSEE AS TO WHETHER THE ENTIRE PAYMENT WAS MADE TO M/S. MARFATIA & CO. AND THEREAFTER, HE DISTRIBUTES THE AMOUNT TO TH REE DIFFERENT PERSONS OR WHETHER THE AGENT REQUEST THE ASSESSEE TO MAKE SEPA RATE PAYMENTS TO ALL THE FOUR PERSONS. IT HAS NO BEARING ON THE ALLOWAB ILITY OF THE COMMISSION EXPENSES, ONCE IT IS FOUND THAT THE SERVICES WERE R ENDERED AND I.T.A.NO.3254/AHD/2009 I.T.A.NO.36,37/AHD/2010 12 COMMISSIONS IS PAID, THE SAME SHOULD BE ALLOWED AS BUSINESS EXPENSES. THEREFORE, WE DELETE THIS DISALLOWANCE. THIS GROUN D OF THE ASSESSEE IS ALLOWED. 4.5 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 5. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE REVENUE IN I.T.A.NOS. 36 & 37/AHD/2010 ARE DISMISSED AND THE A PPEAL OF THE ASSESSEE IN I.T.A.NO. 3254/AHD/2009 IS PARTLY ALLOW ED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 24/5 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25/5.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 28/5 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31/05/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.31/5 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 04/06/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .