The ACIT, 3(1), V. M/s Steel Tubes of India Ltd.,

ITA 38/IND/2004

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1392 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-11-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 13-01-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Assessee Lawyers: M C MEHTA
• Keywords: Gift; Cost of acquisition; Bad and doubtful debts
• Section: 251

Judgement Text

PAGE 1 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO.1069/IND/2003 A.Y. : 1998-99 M/S. STEEL TUBES OF INDIA LIMITED, JT. CIT, 13/1, NEW PALASIA, VS SPECIAL RANGE II, INDORE. INDORE. APPELLANT RESPONDENT I.T.A.NO.38/IND/2004 A.Y. : 1998-99 ACIT M/S. STEEL TUBES OF INDIA LIMITED, 3(1), VS 13/1, NEW PALASIA, INDORE INDORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI M. C.MEHTA, C. A. AND SHRI HITESH CHIMNANI, C.A. DEPARTMENT BY : SHRI K.K.SINGH, CIT DR DATE OF HEARING : 18/11/2009 O R D E R PER V.K. GUPTA, A.M. THESE CROSS APPEALS ARISE OUT OF THE ORDER OF THE CIT(A)-I, INDORE, DATED 21.10.2003, FOR THE ASSESSMENT YEAR 1998-99. PAGE 2 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I. T.A.NO. 1069/IND/2003. 4. GROUND NO. 1 READS AS UNDER :- THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWA NCE OF RS. 7,77,700/-BEING 50% OF TRAVELING EXPENSES OF OT HERS, WHEN THE SAID EXPENSES HAVING BEEN INCURRED ENTIREL Y FOR BUSINESS PURPOSES THE SAME ARE ALLOWABLE. 5. THE FACTS, IN BRIEF, ARE THAT THE A.O. DISALLOWED 50% OF TRAVELING EXPENDITURE INCURRED ON OTHERS FOR THE RE ASON THAT THE WHOLE OF SUCH EXPENDITURE COULD NOT BE CONSIDERED AS INCURRE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN APPEAL, THE ASSESSEE SUBMITTED THE BREAK UP OF EXPENSES AND STATED THAT THESE EXPE NSES HAD BEEN INCURRED ON TRAVELLING OF AUDITORS, BANKERS, FINANCIAL INSTI TUTIONS ADVOCATES, CONSULTANTS, SUPPLIERS ETC. THE DOCUMENTARY EVIDENC ES WERE ALSO FILED TO SUBSTANTIATE SUCH CLAIM. THE LD. CIT(A), HOWEVER, H ELD THAT FROM SUCH DETAILS, IT COULD NOT BE INFERRED THAT ALL THESE EX PENSES WERE INCURRED FOR BUSINESS PURPOSES AND NO ELEMENT OF PERSONAL EXPENS ES WAS INVOLVED. ACCORDINGLY, HE CONFIRMED THE ACTION OF THE A.O. AG GRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. PAGE 3 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 DAT ED 23 RD MAY, 2008, AND REFERRED TO PAGE 93 TO 99 OF THE COMPILATION. T HE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, PLACED STRONG RE LIANCE ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE LD. CIT(A) DISPOSED OF THIS AP PEAL ON 21.10.2003 AND TILL THAT DATE THE SAID ORDER OF THE TRIBUNAL HAD NOT BEEN PRONOUNCED. HAVING STATED SO, WE FIND THAT IN THAT YEAR ALSO, 50 % OF SIMILAR EXPENSES HAD BEEN DISALLOWED FOR THE SAME R EASON AND THE TRIBUNAL AFTER CONSIDERING THE DECISION OF THE SPEC IAL BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. ITC LIMITED AS REP ORTED IN 115 TTJ 45 ( SPECIAL BENCH) AND DECISION OF THE DIVISION BENCH O F THE TRIBUNAL IN THE CASE OF COCA COLA INDIA LIMITED IN 104 TTJ 254, HEL D THAT THE AMOUNT SO SPENT WAS TO BE CONSIDERED AS INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS. SINCE THE FACTS ARE IDENTICAL, HENCE, RESPECTFULLY FOLLOWING THE RATIO OF THIS DECISION, WE HOLD THAT NO SUCH DISALLOWANCE IS WARRANTED. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED. 9. GROUND NO. 2 READS AS UNDER :- PAGE 4 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWA NCE OF RS. 76,51,709/- U/S 43-B BY TREATING THE SAME AS DE FERMENT OF SALES TAX AS IS USUALLY ALLOWED BY THE SALES TA X DEPARTMENT, WITHOUT APPRECIATING THAT THE SAID DEFE RMENT OF ALES TAX WAS GRANTED BY M.P. URJA VIKAS NIGAM CONSE QUENT TO GENERATION OF POWER BY INSTALLING WIND MILLS. TH E SAID DISALLOWANCE HAVING BEEN MADE WITHOUT APPRECIATING THE NATURE OF THE SAID ITEM IS PATENTLY WRONG. THAT THE SAID DEDUCTION IS LEGALLY ALLOWABLE IN THIS VERY YEAR. 10. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OUT-SET, SUBMITTED THAT THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID ORDER OF THE TRIBUNAL AND REFERRED TO PAGE 103 TO 105 OF THE PAPER BOOK. 11. THE LD. DEPARTMENTAL REPRESENTATIVE, HOWEVER, PREFE RRED TO RELY ON THE ORDERS OF THE REVENUE AUTHORITIES. 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. WE FIND THAT IN THE ASSESSMENT YEAR 2000-01, THE LD . CIT(A) HAD DELETED THE ADDITION OF RS. 20,90,000/- ON ACCO UNT OF DEFERRED SALES TAX LIABILITY BY FOLLOWING THE DECISION OF THE TRIB UNAL IN THE CASE OF MAHESHWARI APPLIANCES PRIVATE LIMITED, AS REPORTED IN 32 ITC 96, WHICH PAGE 5 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED HAD BEEN CONFIRMED BY THE HON'BLE JURISDICTIONAL H IGH COURT BY DISMISSING THE S.L.P. FILED BY THE REVENUE. THUS, NOW THIS ISSUE HAS ATTAINED FINALITY AS PER THE FACTS ON RECORD. HENCE , RESPECTFULLY FOLLOWING THE ABOVE RATIO, WE ALLOW THIS GROUND OF THE ASSESS EE. 14. BEFORE PARTING, WE MAY MENTION THAT THE LD. CIT(A) CONFIRMED THIS ADDITION IN VIEW OF THE DECISION OF THE INDORE BENCH OF THE TRIBUNAL IN SOME OTHER CASE. HOWEVER, SINCE NOW THIS ISSUE H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE JURISDICTION AL HIGH COURT AS STATED EARLIER. HENCE, NO OTHER VIEWS ARE POSSIBLE. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. 16. NOW, WE SHALL TAKE UP REVENUES APPEAL IN I.T.A.NO. 38/IND/2004. 17. GROUND NO. 1(I) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 8, 01,405/- ON ACCOUNT OF FOREIGN TRAVELING ESPECIALLY WHEN THE ASSESSEE DID NOT FURNISH COMPLETE EVIDENCE OF PURPOSE OF FOR EIGN TRAVELING EITHER BEFORE THE A.O. OR BEFORE THE CIT( A). 18. THE ASSESSEE CLAIMED FOREIGN TAVELLING EXPENSES O F RS. 8,01,405/- ON THE TRAVEL. THE A.O. REQUIRED THE ASS ESSEE TO FILE THE DETAILS AND EVIDENCES REGARDING BUSINESS PURPOSE OF SUCH FO REIGN TOUR, PLACES PAGE 6 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED VISITED AND PERIOD OF STAY. THE ASSESSEE MERELY FIL ED COPY OF ACCOUNT OF FOREIGN TRAVELING. THE A.O. FURTHER FOUND THAT THER E WERE NO SUBSTANTIAL IMPORTS OR EXPORTS DURING THE YEAR, HENCE, HE DISAL LOWED THE ENTIRE EXPENDITURE AS INCURRED FOR NON-BUSINESS PURPOSE. I N APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED VARIOUS DETAILS AND EXPLANATIONS COMPRISING OF THE NAMES OF THE PERSONS AND PLACES V ISITED BY THEM AND CONTENDED THAT THESE PEOPLE WERE OFFICERS/EMPLOYEES OF THE ASSESSEE COMPANY, WHO HAD UNDERTAKEN THESE VISITS FOR THE PU RPOSE OF ASSESSEES BUSINESS, HENCE, ALLOWABLE. THE ASSESSEE ALSO RELIE D ON VARIOUS JUDICIAL DECISIONS AND CIRCULAR NO. 4 OF 1950 FOR THE PROPOS ITION THAT THERE WAS NO NECESSITY TO LINK THE ALLOWABILITY OF SUCH EXPENSES WITH EXPORTS OR IMPORTS AND SINCE THIS EXPENDITURE WERE OF REVENUE NATURE, HENCE, ALLOWABLE. THE LD. CIT(A) ALSO CALLED FOR REMAND REPORT FROM THE A .O., WHEREIN HE STATED THAT THE ASSESSEE MERELY SUBMITTED INTERNAL DOCUMENTS AND NO EXTERNAL EVIDENCE WAS SUBMITTED TO SUPPORT THE SAME . HENCE, HE JUSTIFIED DISALLOWANCE. THE LD. CIT(A), HOWEVER, HELD THAT TH E A.O. WAS NOT JUSTIFIED IN SITTING OVER THREE MONTHS WITHOUT MAKI NG ANY EXERCISE TO VERIFY THE CORRECTNESS OF THE CLAIMS MADE BY THE AS SESSEE BY MAKING NECESSARY ENQUIRIES. THE LD. CIT(A), THEREAFTER, HE LD THAT EXPENDITURE ON FOREIGN TRAVEL WAS MEANT TO PRESERVE THE BUSINESS I NTERESTS OF THE COMPANY, EXPLORING THE POSSIBILITY OF IMPROVING EXP ORT PROSPECTS AND PAGE 7 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED IMPORT OF RAW MATERIALS AT CHEAPER RATES. HENCE, EX PENSES INCURRED BY THE EMPLOYEES/CONTRACTORS OF THE ASSESSEE COMPANY COULD NOT BE TREATED AS OF PERSONAL NATURE. HE FURTHER PLACED RELIANCE ON HIS ORDER FOR ASSESSMENT YEAR 2000-01 FOR DELETING THE DISALLOWANCE SO MADE BY THE ASSESSING OFFICER. 19. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE F ACTS AND PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. HE ALSO SUBMITTED THAT ON THE ONE HAND, THE LD. CIT(A) HELD THAT THE A.O. HAD DISALLOWED THE ENTIRE CLAIM ON FLIMSY GROUND FOR THE REASON THAT THE EXPE NSES DID NOT BEAR ANY LINK WITH THE EXPORTS OR IMPORTS DURING THE YEAR IT SELF AND, ON THE OTHER HAND, HE ALSO JUSTIFIED THE INCURRENCE OF THESE EXP ENSES FOR EXPLORING POSSIBILITIES OF EXPORTS, HENCE, THE ORDER OF THE L D. CIT(A) WAS SELF- CONTRADICTORY. 20. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ASSESSMENT YEAR 2000-01, THE TRIBUNAL BY THE IMPUG NED ORDER DATED 23.5.2008 HAD DECIDED THIS ISSUE AGAINST THE ASSESS EE AND REFERRED TO PAGE 105 TO 108 OF THE PAPER BOOK. HE FURTHER CONTENDED THAT IN THAT YEAR, THE EXPENSES OF RS. 93,917/- WHICH WERE INCURRED ON FOR EIGN TOUR OF THE MANAGING DIRECTOR. HOWEVER, IN THE YEAR UNDER CONSI DERATION , THE SENIOR MANAGERS/EXECUTIVES OF THE ASSESSEE COMPANY HAD VIS ITED FOREIGN COUNTRIES, INCLUDING SINGAPORE, WHERE THE ASSESSEE WAS HAVING SUBSIDIARY PAGE 8 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED COMPANY, WHOSE SHARES WERE ALSO SOLD BY THE ASSESSE E IN THE YEAR UNDER CONSIDERATION. HE DREW OUR ATTENTION TO PARA 17 OF THE PAPER BOOK TO SUBSTANTIATE THESE CLAIMS. HE FURTHER CONTENDED THA T ANOTHER REASON FOR CONFIRMATION OF THIS DISALLOWANCE IN THAT YEAR WAS THAT THERE WERE NEGLIGIBLE EXPERTS OF RS. 10.07 LAKHS IN THAT YEAR AS COMPARED TO EXPORTS OF RS. 320.28 LAKHS IN THE IMMEDIATELY PRECEDING AS SESSMENT YEAR. ON THIS ASPECT, HE FURTHER CONTENDED THAT IN THE YEAR UNDER CONSIDERATION, THERE WERE SUBSTANTIAL IMPORTS AND EXPORTS. IN SUPP ORT OF SUCH CLAIMS, HE REFERRED TO INTERNAL PAGE 17 OF THE PAPER BOOK, WHE REIN IMPORTED RAW MATERIAL AND CONSUMABLE STORE IN THE YEAR UNDER CON SIDERATION, AMOUNTED TO APPROXIMATELY RS. 161.50 LAKHS. HE ALSO DREW OUR ATTENTION TO PAGE 18 TO SHOW THAT THE ASSESSEE HAD EARNED ALMOST RS. 217 .50 LAKHS BY WAY OF EXPORT OF ITS PRODUCTS AND SUBMITTED THAT, THUS, TH E FACTS OF THIS YEAR WERE SUBSTANTIALLY DIFFERENT FROM THE FACTS OF ASSESSMEN T YEAR 2000-01 AND, THEREFORE, THE ORDER OF THE TRIBUNAL WAS NOT REQUIR ED TO BE FOLLOWED. 21. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 22. IT IS NOTED THAT THE ASSESSEE IS EXPORTING AND IMPO RTING ONLY MINISCULE PORTION OF ITS PURCHASE/TOTAL SALES. THE ASSESSEE HAS ALSO CLAIMED TO HAVE COLLABORATIONS WITH FOREIGN COMPANI ES. AT PAGE 17, THE ASSESSEE HAS MERELY SUBMITTED THE DETAILS OF COUNTR IES VISITED AND THE PAGE 9 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/200 4 STEEL TUBES OF INDIA LIMITED NAMES OF THE PERSONS. FROM THE PERUSAL OF THESE DET AILS, IT IS NOTED THAT EVEN DESIGNATION OF THE PERSON AND PURPOSE OF VISIT HAS NOT BEEN MENTIONED. IT IS ALSO NOTED THAT OUT OF THE TOTAL E XPENDITURE OF RS. 8,01,405/- A SUM OF RS. 3,72,495/- + RS. 70,307/- HAS BEEN SPENT ON THE VISITS OF THE MANAGING DIRECTOR OF THE COMPANY SHRI K.N. GARG AS ADMITTED BY THE ASSESSEE ON A QUERY BY THE BENCH I N THIS REGARD. THE EXPENDITURE OF RS. 70,307/- IS RELATED TO HIS VISIT TO SINGAPORE AND OTHER EXPENDITURE IS RELATED TO HIS VISITS TO MUSCAT AND JAPAN AND EXCEPT THESE DETAILS, THE ASSESSEE HAS NOT FURNISHED ANY DOCUMEN TARY EVIDENCES TO SHOW THE PURPOSE OF THE VISIT OR DETAILS OF MEETING S WITH FOREIGN COLLABORATORS, SUPPLIERS/CUSTOMERS ETC. IT IS ALSO NOTED THAT IMPORTS AND EXPORTS ARE A REGULAR FEATURE AND NO MATERIAL HAS B EEN PLACED ON RECORD THAT SOME NEW CUSTOMERS WERE APPROACHED OR POSSIBIL ITY OF NEW COLLABORATION AGREEMENT WAS EXPLORED. HAVING STARTE D SO, WE, HOWEVER, FIND THAT IN THE YEAR UNDER CONSIDERATION, THE ASSE SSEE COMPANY HAS SOLD SHARES OF ITS SUBSIDIARY COMPANY SITUATED IN THE SI NGAPORE AND HAVING REGARD TO THE FACT THAT IT IS A COMPANY MANAGED PRO FESSIONALLY, THE EXPENDITURE INCURRED ON THE VISITS OF EMPLOYEES CA NNOT BE DISALLOWED FOR PERSONAL PURPOSES UNLESS SOME MATERIAL IS BROUGHT O N RECORD BY THE REVENUE AUTHORITIES. THUS, TAKING INTO CONSIDERATIO N THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE REMAND REPORT IN REGARD TO LACK OF PAGE 10 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED EVIDENCE AND OTHER ASPECTS AS ELABORATED HEREINABOV E, WE ARE OF THE VIEW THAT THE EXPENDITURE OF RS. 3,72,495/- INCURRED BY THE ASSESSEE ON THE VISIT OF SHRI K.N. GARG, M. D. TO MUSCAT AND JAPAN IS NOT ALLOWABLE. IN THIS REGARD, WE ALSO DRAW SUPPORT FROM THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 CIT ED SUPRA. THUS, THIS GROUND OF THE REVENUE STANDS PARTLY ALLOWED. 23. GROUND NO. 1(II) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF THE PAYMENT OF PROVIDENT FUND BEYOND DUE DATES. 24. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OUT-SET, SUBMITTED THAT THE IMPUGNED PAYMENTS HAD BEEN MADE WITHIN THE TIME AND THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFI CER MERELY FOR THE REASON THAT THE CHEQUES WERE REALIZED THEREAFTER. H E FURTHER CONTENDED THAT THIS ISSUE WAS ALSO COVERED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND REFERRED TO PAGES 110 AND 111 OF THE COMPILATIO N. THE LD. DEPARTMENTAL REPRESENTATIVE, HOWEVER, PREFERRED TO RELY ON THE ORDER OF THE A.O. 25. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. PAGE 11 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED 26. ON DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE ISSUE INVOLVED, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY D ELETED THIS ADDITION AS THE CHEQUES FOR THE IMPUGNED PAYMENTS HAVE BEEN DEP OSITED WITH THE CONCERNED AUTHORITIES WITHIN THE TIME ALLOWED IN TH E RESPECTIVE STATUTES. THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 27. GROUND NO. 1(III) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,00,0 00/- ON ACCOUNT OF PRESENTATION AND GIFTS INCLUDED IN SEMINAR/CONFERENCE EXPENSES AND SALES PROMOTION EXPENSES. 28. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE GAVE GIF TS IN THE COURSE OF SEMINAR AND CONFERENCES, WHICH WERE DISALLOWED B Y THE ASSESSING OFFICER AS EXPENDITURE OF THE NATURE OF ENTERTAINME NT. THE ASSESSEE, IN APPEAL, BEFORE THE CIT(A), PLEADED THAT THESE EXPEN SES WERE INCURRED IN THE COURSE OF BUSINESS AND PLACED RELIANCE ON THE V ARIOUS JUDICIAL DECISIONS FOR ALLOWANCE THEREOF. THE LD. CIT(A) FOU ND THAT THE A.O. DISALLOWED THE EXPENSES OUT OF SALES PROMOTION EXPE NSES ON AD HOC BASIS WITHOUT POINTING OUT ANY SPECIFIC EXPENSES, WHICH C OULD BE TERMED AS PERSONAL OR INCURRED FOR NON BUSINESS PURPOSES. THE LD. CIT(A), ACCORDINGLY, DELETED THE IMPUGNED ADDITION. PAGE 12 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED 29. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 30. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). BESIDES P LACING RELIANCE ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E AS REPORTED IN 258 ITR 575 AND DECISION OF THE TRIBUNAL IN THE CASE OF WIPRO INFORMATION TECHNOLOGIES LIMITED, AS REPORTED IN 88 TTJ 778. 31. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 32. IT IS NOTED THAT INCURRENCE OF EXPENSES IS NOT IN D ISPUTE AND NO SPECIFIC OBSERVATIONS HAVE BEEN GIVEN BY THE ASSESS ING OFFICER IN REGARD TO PERSONAL EXPENSES BEING CLAIMED AS BUSINESS EXPE NSES. HENCE, HAVING REGARD TO THE CUSTOMARY PRACTICES OF BUSINESS COMMU NITY OF GIVING GIFTS ON DIFFERENT OCCASIONS, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY DELETED THIS ADDITION. THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 33. GROUND NO. 1(IV) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 6,25,9 66/- ON ACCOUNT OF THE BAD DEBTS WRITTEN OFF, ESPECIALLY WH EN THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE OF BECOMING THESE DEBTS BAD. PAGE 13 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED 34. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD ACTUALLY WRITTEN OFF THESE BAD DEBTS I N THE BOOKS OF ACCOUNT AND THE LD. CIT(A) HAS DELETED THE DISALLOWANCE AFT ER TAKING INTO CONSIDERATION THIS FACT. HE FURTHER SUBMITTED THAT NOW THIS ISSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF OMAN INTERNATI ONAL BANK AS REPORTED IN 286 ITR 8 ( A.T. ). HE FURTHER CONTENDED THAT TH E HON'BLE M.P.HIGH COURT HAD ALSO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS. NAI DUNIA, AS REPORTED 295 ITR 346. 35. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 36. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF THESE BAD DEBTS IN THE BOOKS OF ACCOUNT IN THE YEAR UNDER CONSIDERATION NOR THERE IS ANY DISPUTE REGARDING THE NATURE OF SU CH BAD DEBTS. HENCE, IN VIEW OF THE DECISION OF THE HON'BLE M.P.HIGH COURT IN THE CASE OF NAI DUNIA (SUPRA) AND OF THE SPECIAL BENCH IN THE CASE OF OMAN INTERNATIONAL BANK (SUPRA), WE HOLD THAT THE LD. CIT(A) HAS RIGHT LY DELETED THESE DISALLOWANCES. 37. GROUND NO. 1(V) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW THE PRI OR PERIOD PAGE 14 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED EXPENSES OF RS. 69,40,363/- AFTER ASCERTAINING THE YEAR OF CRYSTALLIZATION OF EXPENSES ON THE BASIS OF RELEVAN T DETAILS TO BE OBTAINED FROM THE APPELLANT, ESPECIALLY WHEN THE CIT(A) HAS NO SUCH POWER TO SET-ASIDE THE MATTER U/S 251 O F THE INCOME-TAX ACT, 1961. 38. WE FIND THAT THE LD. CIT(A) IN RESPECT OF THIS GROU ND HAS DIRECTED THE A.O. TO ALLOW THE EXPENSES AFTER ASCER TAINING THE YEAR OF CRYSTALLIZATION OF THE EXPENSES AND, HENCE, IN OUR VIEW, THE ABOVE GROUND APPEARS TO BE MIS-CONCEIVED AND, THEREFORE, THE SAM E IS DISMISSED. 39. GROUND NO. 6 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN ALLOWING THE CAPITAL LOSS OF RS. 54 ,86,758/- ON ACCOUNT OF TRANSFER OF SHARES OF M/S. STEEL TUBE OF SINGAPORE (I) LIMITED AND DELETING THE INCOME OF RS . 3,36,87,668/- ON ACCOUNT OF FOREIGN EXCHANGE GAIN. 40. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE PURCHASE D 35,000 SHARES OF ITS SUBSIDIARY, NAMELY, STEEL TUBES OF SINGAPORE LIMITED IN ASSESSMENT YEARS 1982-83 TO 1989-90. IN THE FINANCIAL YEAR 199 3-94, 50 % REDUCTION IN SHARE CAPITAL OF THIS COMPANY TOOK PLACE. CONSEQ UENTLY, THE NUMBER OF SHARES WAS REDUCED TO 17,500. THE A.O., IN THE BACK GROUND OF THESE FACTS, PAGE 15 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED FORMED AN OPINION THAT COST OF 35,000 SHARES I.E. R S.1,74,49,664/- WAS TO BE CORRESPONDINGLY REDUCED BY 50 %. HE ALSO HELD TH AT THE ASSESSEE WAS ALSO NOT ENTITLED FOR INDEXATION AS THE ASSESSEE HA D RECEIVED THE CONSIDERATION IN DOLLARS AND NOT IN RUPEES. IN APPE AL BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT THE COST OF INV ESTMENT REMAINED THE SAME INSPITE OF THE DECREASE IN THE NUMBER OF SHARE S. HENCE, THE ACTION OF THE A.O. IN REDUCING THE COST BY 50% WAS NOT CORREC T. IT WAS ALSO CONTENDED THAT THERE WAS NO TRANSFER IN ASSESSMENT YEAR 1993-94, HENCE, PROVISIONS OF SECTION 45 WERE NOT ATTRACTED. IT WAS FURTHER CONTENDED THAT THE ASSESSEE WAS ENTITLED FOR BENEFIT OF INDEXATION AS PER THE SECOND PROVISO TO SECTION 40A(II)) AND FIRST PROVISO, WHI CH WAS APPLIED BY THE ASSESSING OFFICER WAS NOT APPLICABLE FOR THE REASON THAT SUCH PROVISO WAS APPLICABLE IN THE CASE OF NON-RESIDENT ASSESSEE HOL DING SHARES IN INDIAN COMPANY. THE LD. CIT(A) AFTER CONSIDERING THE SUBMI SSIONS ACCEPTED ALL THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE A DDITION OF RS. 3,36,87,668/- MADE BY THE ASSESSING OFFICER WAS NOT CORRECT IN LAW. HENCE, HE DELETED THE SAME. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 41. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). PAGE 16 OF 16 I.T.A.NOS. 1069/IND/2003 & 38/IND/20 04 STEEL TUBES OF INDIA LIMITED 42. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 43. IT IS NOTED THAT THE ASSESSEE HAS SOLD SHARES HELD BY IT IN ITS SUBSIDIARY IN THE YEAR UNDER CONSIDERATION FOR THE SALE CONSIDERATION OF RS. 4,24,12,500/-. THE ASSESSEE HAS TAKEN COST OF A CQUISITION OF SUCH SHARES AT RS.1,74,49,664/-, WHICH HAS BEEN INDEXED AND SUCH INDEXED COST HAS BEEN ARRIVED AT RS.4,78,99,258/-. THUS, A CAPIT AL LOSS OF RS. 54,86,758/- HAS BEEN SUFFERED BY THE ASSESSEE. IN O UR OPINION, THE A.O. HAS MISINTERPRETED THE PROVISIONS OF SECTION 48 AND HAS ALSO WRONGLY REDUCED THE COST OF ACQUISITION OF SHARES, BECAUSE DUE TO REDUCTION IN SHARE CAPITAL, THE ASSESSEES COST OF ACQUISITION D OES NOT GET REDUCED. IN THIS VIEW OF THE MATTER, WE CONFIRM THE FINDINGS OF THE LD. CIT(A). THUS, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 44. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAN DS PARTLY ALLOWED. 45. TO SUM UP, THE ASSESSEES APPEAL STANDS ALLOWED AND THE REVENUES APPEAL STANDS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2009. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :26 TH NOVEMBER, 2009. CPU* 1823D24