DLF Estate Developers Ltd., New Delhi V. ACIT, New Delhi

ITA 401/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7521 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Business expenditure; Notional interest; Revenue expenditure
• Section: 37

Judgement Text

ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES B NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 401/DEL/2013 ASSTT.YEAR: 2008-09 DLF ESTATE DEVELOPERS LTD., VS ASSTT.COMMISSIO NER OF INCOME TAX, DLF CENTRE, 9 TH FLOOR, CIRCLE-10(1), NEW DELH I. SANSAD MARG, NEW DELHI. (PAN:AACCD0038J) ITA NO. 756/DEL/2013 ASSTT.YEAR: 2008-09 DCIT, CIRCLE-10(1), VS DLF ES TATE DEVELOPERS LTD., NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/ SHRI R.S. SINGHVI, CA, SATYAJEET GOEL, CA RESPONDENT BY: SMT. PARWINDER KAU R, SR. DR O R D E R PER CHANDRAMOHAN GARG, J.M. THESE APPEALS HAVE BEEN FILED BY THE REVENUE AND T HE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-XIII, NEW DELHI DATED 29.11.201 2 IN APPEAL NO. 62/12-13 FOR AY 2008-09. 2. BRIEFLY STATED, THE FACTS GIVING RISE TO THESE A PPEALS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SER VICES RELATING TO ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 2 MAINTENANCE AND MANAGEMENT OF IMMOVABLE PROPERTIES AND OTHER BUSINESS AUXILIARY SERVICES IN PLOTTED AREA IN VARIOUS PHASE S OF DLF CITY GURGAON. IN THE ASSESSMENT ORDER PASSED FOR THE YEAR UNDER CONSIDER ATION, THE AO HAS MADE VARIOUS ADDITIONS AMOUNTING TO RS.1,12,61,231/- PER TAINING TO INTEREST CHARGED ON REIMBURSEMENT ACCOUNT OF DLF LTD., ADDITION ON ACCOUNT OF CHANNEL PLACEMENT INCOME AND EXPENDITURE, ADDITION RELATED TO DISALLOWANCE OF PF, ESI EXPENSES, ADDITION ON ACCOUNT OF PROVISION OF EXPEN SES BUT THE CIT(A) PARTLY DISALLOWED THE APPEAL OF THE ASSESSEE IN REGARD TO DISALLOWANCE OF RS.20,08,375/- ON ACCOUNT OF PAY CHANNEL EXPENSES. NOW, THE ASSESSEE AS WELL AS THE REVENUE IS BEFORE THIS TRIBUNAL IN THESE APP EALS. ITA NO. 401/DEL/2013 ASSESSEES APPEAL 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL:- 1. THAT THE IMPUGNED ORDER DATED 29.11.2012 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) XIII, NEW DELHI IS BAD IN LAW AND WRONG ON FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-XIII,NE W DELHI ERRED IN LAW IN UPHOLDING THE ORDER OF THE ASSESSIN G OFFICER IN MAKING THE ADDITION/DISALLOWANCE OF RS. 20,08,375/- ON ACCOUNT OF PAY CHANNEL EXPENSES. 2.1 THAT ON THE FACTS OF THE APPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) XIII, NEW DELH I, ERRED IN CONFIRMING THE ADDITION OF RS.20,08,375/- WITHOUT A PPRECIATING THE SUBMISSIONS MADE. 4. APROPOS AFOREMENTIONED GROUNDS OF THE ASSESSEE, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED T HE RELEVANT MATERIAL PLACED ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 3 ON RECORD BEFORE US, INTER ALIA ASSESSMENT ORDER, I MPUGNED ORDER AND PAPER BOOK FILED BY THE ASSESSEE CONSISTING OF 80 PAGES. LD. AR SUBMITTED THAT THE IMPUGNED ORDER OF THE CIT(A) IS NOT ONLY BAD IN LAW BUT ALSO WRONG ON FACTS AND CIRCUMSTANCES OF THE CASE. THE AR FURTHER CONTENDE D THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS UPHOLDING THE ORDER OF THE AO I N MAKING DISALLOWANCE AND ADDITION OF RS.20,08,375/- ON ACCOUNT OF PAY CHANN EL EXPENSES AND CONFIRMING THE SAME WITHOUT APPRECIATING RATHER IGNORING THE S TATEMENTS OF THE ASSESSEE MADE IN THIS REGARD. LD. AR SUBMITTED THAT WHILE T HE ASSESSEE HAD PAID PAY CHANNEL FEE FOR AUGUST 2007 AS BUSINESS EXPENDITURE , THEN THE SAME CANNOT BE DISALLOWED. 5. REPLYING TO THE ABOVE, LD. DR SUPPORTED THE ORDE R OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN THE REPLIES AND EXPLANATION F ILED BY THE ASSESSEE, THE ASSESSEE ITSELF HAD EXPLAINED THAT THE CABLE BUSINE SS WAS TRANSFERRED FROM 1.8.2007, THEN THE PAY CHANNEL FEE/EXPENSES FOR AUG UST 2007 CANNOT BE ALLOWED. THE DR FURTHER CONTENDED THAT THE ASSESSEE DID NOT FILE BIFURCATION AND CALCULATION OF THE AMOUNT OF PAY CHANNEL FEE PAID F OR THE MONTH OF AUGUST 2007 AND HENCE IN ABSENCE OF THE SAME, THE PROPORTIONATE DISALLOWANCE MADE BY THE AO WAS QUITE JUSTIFIED. THE DR ALSO CONTENDED THAT THE CIT(A) ALSO CONSIDERED SUBMISSIONS AND EXPLANATION OF THE ASSESSEE AND FOU ND THAT THE PAY CHANNEL EXPENSES FOR THE MONTH OF AUGUST 2007 CANNOT BE ALL OWED AS EXPENDITURE IN THE ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 4 HANDS OF ASSESSEE AS THE INCOME PERTAINING TO THIS PERIOD WAS SHOWN IN THE HANDS OF REGENT COMMUNICATION. 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D BARE READING OF THE IMPUGNED ORDER, WE OBSERVE THAT THE CIT(A) HAS UPHE LD THE DISALLOWANCE AND ADDITION WITH FOLLOWING OBSERVATIONS AND CONCLUSION :- AS REGARDS DISALLOWANCE OF PAY CHANNEL EXPENSES OF RS.20,08,375/-, IT IS SEEN THAT APPELLANT HAS CLAIM ED AN EXPENDITURE OF RS.1,00,41,877/- FOR THE PERIOD 01.0 4.2007 TO 31.08.2007. THE APPELLANT HAS SOLD HIS BUSINESS TO SH. NAVNEET SETHI FOR A CONSIDERATION OF RS.3.5 CRORES W.E.F. 0 1.08.2007 FOR WHICH AGREEMENT WAS EXECUTED IN THE MONTH OF 31ST M ARCH 2008. SINCE BUSINESS WAS SOLD OUT W.E.F 01.08.2007 BY THE APPELLANT, THEREFORE, THE PAY CHANNEL EXPENSES FOR THE MONTH OF AUGUST CANNOT BE ALLOWED IN THE HANDS OF THE APPELL ANT AS INCOME PERTAINING TO THIS PERIOD WAS SHOWN IN THE H ANDS OF REGENT COMMUNICATIONS. THEREFORE, THE EXPENSES FOR THE MONTH OF AUGUST CANNOT BE ALLOWED IN THE HANDS OF T HE APPELLANT. ACCORDINGLY, DISALLOWANCE OF L/5TH EXPEN SES WHICH COMES TO RS. 20,08,375/- OUT OF RS. 1,00,41,877/- W AS JUSTIFIED AND SAME IS CONFIRMED. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS AND PERUSAL OF THE RELEVANT PART OF THE IMPUGNED ORDER ON THE ISSUE, W E OBSERVE THAT AS PER EXPLANATION AND SUBMISSIONS MADE BY THE ASSESSEE, T HE ASSESSEE HAD SOLD HIS BUSINESS TO SHRI NAVNEET SETHI, THE OWNER OF REGENT COMMUNICATION FOR A CONSIDERATION OF RS. 3.5 CRORE WE.F. 1.8.2007 FOR W HICH AN AGREEMENT WAS EXECUTED ON 31.3.2008, THIS FACT HAS ALSO NOT BEEN DISPUTED BY THE REVENUE THAT THE ASSESSEE SOLD HIS BUSINESS AS PER AGREEMENT DAT ED 31.3.2008 W.E.F. 1.8.2007. THE LD. AR PLACING RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 5 CASE OF CIT VS EXCEL INDUSTRIES LTD. & OTHERS (2013 ) 258 ITR 295 (SC) SUBMITTED THAT AS A BUSINESSMAN THE ASSESSEE IS THE BEST DECISION MAKER INASMUCH AS IN THE SITUATION OF SLUMP SALE OF BUSIN ESS WHICH EXPENDITURE AND UPTO WHICH PERIOD ARE TO BE BORNE BY THE SELLER/ASS ESSEE AND IT IS NOT OPEN FOR THE AO TO MAKE ASSESSMENT ON HYPOTHETICAL INCOME. LD. AR FURTHER CONTENDED THAT THE QUANTUM OF THE EXPENDITURE INCURRED BY THE ASSE SSEE ON PAY CHANNEL HAS NOT BEEN DISPUTED BY THE REVENUE, HENCE, PART OF EXPEND ITURE CANNOT BE DISALLOWED ON ESTIMATION BASIS WITHOUT BRINGING OUT ANY ADVERS E FACT OR MATERIAL AGAINST THE STAND OF THE ASSESSEE. LD. DR REPLIED THAT WHEN BU SINESS HAS BEEN SOLD W.E.F. 1.8.2007, THEN THE ASSESSEE CANNOT CLAIM EXPENDITUR E OF AUGUST, 2007. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND S UBMITTED THAT WHEN ASSESSEE IS NOT OFFERING INCOME FOR TAX AFTER 1.8.2007, THEN EXPENDITURE INCURRED ON PAY CHANNEL EXPENSES CAN NOT BE ALLOWED FOR THE ASSESSE E. 8. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E NOTE THAT THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THE ASSES SEE INCURRED RS.1,00,41,877 DURING FINANCIAL YEAR 2007-08 AND THE SAME WAS INCU RRED FOR THE BUSINESS OF THE ASSESSEE. THE DISPUTE AROSE WHEN THE AO NOTICED TH AT THE ASSESSEE HAD SOLD ITS BUSINESS W.E.F. 1.8.2007 AND THE AO DISALLOWED PROP ORTIONATE AMOUNT I.E. 1/5 TH OF ACTUAL EXPENDITURE ESTIMATE RELATED TO AUGUST 20 07 WITHOUT BRINGING OUT ANY OTHER ADVERSE FACT OR MATERIAL. IN THE PRESENT CAS E, UNDISPUTEDLY DURING FY 2007-08, THE SALE OF BUSINESS OF THE ASSESSEE WAS I N PROCESS AND THERE CANNOT BE ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 6 A CUT OFF DATE OF EXPENDITURE, IF EXPENDITURE HAS B EEN INCURRED FOR THE PURPOSE OF BUSINESS AND THE SAME CANNOT BE RECOVERED FROM THE PURCHASER OF THE BUSINESS, THEN THE CLAIM OF THE ASSESSEE CANNOT BE DISALLOWED ON PROPORTIONATE AND ESTIMATE BASIS AND THE SAME IS ALLOWABLE U/S 37 OF THE ACT. HENCE, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING PART D ISALLOWANCE IN THIS REGARD AND THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE S AME. ACCORDINGLY, GROUND NO. 1, 2.1 AND 2.2 OF THE ASSESSEE ARE ALLOWED AND THE AO IS DIRECTED TO DELETE THE SAME DISALLOWANCE AND ADDITION. REVENUES APPEAL IN ITA NO. 756/DEL/2013 9. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- I) WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 25,76,282/ - ON ACCOUNT OF INTE REST ON ADVANCE GIVEN TO M/ S DLF LIMITED MADE BY THE AO? II) WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 24,68,372 ON ACCOUNT OF CHANNEL PLACEMENT INCOME? III) WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 17,00,000/- MADE BY THE AO ON A CCOUNT OF DISALLOWANCE OF PROVISION FOR EXPENSES? GROUND NO.1 10. APROPOS GROUND NO.1, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RECORD. LD. DR SUBMITTED THA T THE AO NOTED THAT IF ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 7 AVERAGE OF OPENING AND CLOSING LOANS AND ADVANCES DUE FROM DLF LTD. IS TAKEN, THEN THE AVERAGE COMES TO RS.3,22,03,535 AND THE AO ALSO NOTICED THAT DLF LTD. HAS CHARGED INTEREST OF 10% TO 13% PER ANNUM UPTO 2 7.07.2007 AND THEREAFTER @6.5% PER ANNUM, THEREFORE, THE AO IN ORDER TO HAVE A REASONABLENESS IN THE CHARGEABLE RATE OF INTEREST ALLOWED 8% PER ANNUM ON THE AVERAGE OF LOANS AND ADVANCES WHICH CAME TO RS.25,76,282/- AND ACCORDING LY THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE WHICH HAS NOT BEEN CHARG ED BY THE ASSESSEE COMPANY FROM M/S DLF LIMITED. THE DR SUPPORTED THE IMPUGNE D ORDER ON THE ISSUE. 11. REPLYING TO THE ABOVE, LD. AR SUPPORTED THE IMP UGNED ORDER AND SUBMITTED THAT THE ASSESSEE DID NOT ADVANCE RS.604, 13,577/- TO DLF LTD. OUT OF INTEREST BEARING FUNDS BUT THE SAME WAS PERTAINING TO THE SERVICES RENDERED BY THE ASSESSEE TO DLF LTD. AND SUCH AMOUNT HAS BEEN P AID BY THE DLF LIMITED TO THE ASSESSEE COMPANY IN REGULAR INTERVALS AND, THER EFORE, NO NOTIONAL INTEREST CAN BE CHARGED ON SUCH AMOUNT. THE AR VEHEMENTLY CONTE NDED THAT THE AO HAS NOT BROUGHT OUT ANY ADVERSE MATERIAL TO THE FACT THAT T HERE WAS NO NEXUS BETWEEN THE LOAN TAKEN BY THE ASSESSEE FROM DLF LIMITED FOR EXP ANSION OF ITS BUSINESS AND THE AMOUNT DUE TO THE DLF LTD. OUT OF SERVICES REND ERED. 12. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND PERUSAL OF THE PAPER SUBMITTED BY THE ASSESSEE ON PAPER BOOK FROM PAGE N O. 11 TO 56, WE OBSERVE THAT THE DETAIL OF UNSECURED LOAN ACCOUNT OF DLF LIMITED IN THE BOOKS OF ASSESSEE SHOWS THAT DLF LTD. HAS GIVEN UNSECURED LOAN FOR EX PANSION OF BUSINESS OF THE ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 8 ASSESSEE. AT THE SAME TIME, WE ALSO OBSERVE FROM P AGE NO. 40 TO 42 OF THE PAPER BOOK THAT THE ASSESSEE COMPANY RENDERED SERVICES TO DLF LIMITED AND AMOUNT WAS DEBITED TO DLF LTD. IN A SEPARATE SERVICE ACCOU NT AND DLF LTD. ON THIS CURRENT AMOUNT REGULARLY PAYING ACCOUNT IN REGULAR INTERVALS. IN THIS SITUATION, THE CIT(A) RIGHTLY HELD THAT NO NOTIONAL INTEREST C AN BE CHARGED ON SUCH AMOUNT WITHOUT BRINGING OUT ANY NEXUS BETWEEN THE AMOUNT O F UNSECURED LOAN GIVEN BY DLF LTD. TO THE ASSESSEE FOR EXPANSION OF BUSINESS AND AMOUNT DUE TO THE DLF LIMITED IN SEPARATE SERVICE ACCOUNT OUT OF SERVICES RENDERED BY THE ASSESSEE COMPANY. 13. ON THIS ISSUE, WE RESPECTFULLY CONSIDER THE RAT IO OF THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS EXCEL I NDUSTRIES LTD. (2013) 258 ITR 295 (SC) AND DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF HIGHWAY CONSTRUCTION CO. PVT. LTD. VS CIT (1993) 19 9 ITR 702 (GUJARAT) WHEREIN IT HAS BEEN HELD THAT WHEN THERE IS NO FIND ING OF FACT TO EFFECT THAT ACTUALLY THE LOAN HAS BEEN GRANTED ON INTEREST OR T HAT THE INTEREST HAD BEEN ACTUALLY COLLECTED BUT THE COLLECTION OF INTEREST W AS NOT RECORDED OR REFLECTED IN THE BOOKS OF ACCOUNTS, THEN THERE IS NO PROVISION I N THE ACT EMPOWERING THE AO TO INCLUDE THE NOTIONAL INTEREST INCOME WHICH WAS N OT COLLECTED OR DUE. IN THE CASE OF EXCEL INDUSTRIES (SUPRA) RELYING UPON ITS O WN EARLIER DECISIONS IN THE CASE OF CIT VS SHORJI VALLABHDAS & CO. (1962) 46 ITR 144 (S C) AND MORVI ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 9 INDUSTRIES LTD. VS CIT (CENTRAL) (1971) 82 ITR 835 (SC) THE HONBLE APEX COURT HELD THUS:- APPLYING THE THREE TESTS LAID DOWN BY VARIOUS DECI SIONS OF THIS COURT, NAMELY, WHETHER THE INCOME ACCRUED T O THE ASSESSEE IS REAL OR HYPOTHETICAL; WHETHER THERE IS A CORRESPONDING LIABILITY OF THE OTHER PARTY TO PASS ON THE BENEFITS OF DUTY FREE IMPORT TO THE ASSESSEE EVEN W ITHOUT ANY IMPORTS HAVING BEEN MADE; AND THE PROBABILITY OR IMPROBABILITY OF REALISATION OF THE BENEFITS BY THE ASSESSEE CONSIDERED FROM A REALISTIC AND PRACTICAL POINT OF VIEW (THE ASSESSEE MAY NOT HAVE MADE IMPORTS), IT IS QUITE CL EAR THAT IN FACT NO REAL INCOME BUT ONLY HYPOTHETICAL INCOME HA D ACCRUED TO THE ASSESSEE AND SECTION 28(IV) OF THE ACT WOULD BE INAPPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. ESSENTIALLY, THE ASSESSING OFFICER IS REQUIRED TO B E PRAGMATIC AND NOT PEDANTIC. 14. IN THE EXTANT CASE, THE REVENUE HAS NOT BROUGHT OUT ANY FACT OR ADVERSE MATERIAL OR EVIDENCE THAT THE BALANCE DEBIT AMOUNT DUE TO DLF LTD. WAS ACTUALLY A LOAN WHICH WAS GRANTED ON INTEREST OR INTEREST HA D ACTUALLY BEEN COLLECTED BUT THE SAME WAS NOT RECORDED OR REFLECTED IN THE ACCOU NTS OF THE ASSESSEE AND IN THIS SITUATION, IT CANNOT BE PRESUMED THAT THE ASSESSEE EARNED INTEREST INCOME WHICH WAS ACTUALLY RECEIVED OR DUE OUT OF BOOKS OF ACCOUN TS OF THE ASSESSEE. AS WE HAVE ALREADY NOTICED THAT THE AMOUNT PICKED UP BY T HE AO WAS ACTUALLY THE AMOUNT DUE ON CURRENT SERVICE PROVIDED TO DLF LTD. BY THE ASSESSEE AND THE ASSESSEE RECEIVED SUBSTANTIAL AMOUNTS THEREIN IN RE GULAR INTERVALS (PAPER BOOK PAGE NO. 40 TO 42 OF THE ASSESSEE). 15. IN VIEW OF ABOVE DISCUSSION, WE ARE OF THE CONS IDERED VIEW THAT THE AO MADE ADDITION BY TAKING A HYPOTHETICAL APPROACH AND WITHOUT ANY BASIS WHICH ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 10 WAS RIGHTLY DELETED BY THE CIT(A) ON THE BASIS OF C ONCLUSION ARRIVED AFTER LOGICAL ANALYSIS OF THE DETAILS, EVIDENCE AND SUBMISSIONS O F THE ASSESSEE. THE PROBABILITY OR IMPROBABILITY OF REALISATION HAS TO BE SEEN AND CONSIDERED IN A REALISTIC MANNER AND NO ADDITION CAN BE MADE IN THI S REGARD WITHOUT BRINGING OUT THE FACT THAT THE INTEREST REALLY ACCRUED TO THE AS SESSEE. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE UNABLE TO SEE ANY REASON TO I NTERFERE WITH THE IMPUGNED ORDER IN THIS REGARD AND WE UPHOLD THE SAME. ACCOR DINGLY, GROUND NO. 1 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. GROUND NO. 2 OF THE REVENUE 16. APROPOS GROUND NO.2, LD. DR SUBMITTED THAT THE AO NOTED THAT THE ASSESSEE HAS NOT SHOWN CHANNEL PLACEMENT INCOME FOR THE PERIOD FROM 1.4.2007 TO 31.7.2007 AND THE AO KEEPING IN VIEW THE INCOME EARNED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR ADDED THE PROPORTIONATE AMOUNT FOR THE FOUR MONTHS WHICH WAS CALCULATED AT RS.24,68,37 2 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE, BEING THE INCOME FROM CHANN EL PLACEMENT WHICH WAS NOT DISCLOSED BY THE ASSESSEE COMPANY. THE DR SUPP ORTED THE IMPUGNED ORDER AND FURTHER SUBMITTED THAT THE CIT(A) DELETED THE A DDITION WITHOUT ANY BASIS AND COGENT REASON AND, THEREFORE, IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 17. REPLYING TO THE ABOVE, LD. AR HAS DRAWN OUR ATT ENTION TOWARDS PAGE 16 OF THE IMPUGNED ORDER AND SUBMITTED THAT THE ASSESSEE HAS SHOWN INCOME FROM ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 11 SUBSCRIPTION AND ADVERTISEMENT BUT HAS NOT RECEIVED ANY INCOME ON ACCOUNT OF CHANNEL PLACEMENT SERVICES DURING THE YEAR, THEREFO RE, THE SAME WAS NOT SHOWN BY THE ASSESSEE DURING THE YEAR AND IN THIS SITUATI ON, ESTIMATION OF INCOME WAS NOT JUSTIFIED. 18. LD. DR PLACED A REJOINDER AND SUBMITTED THAT WH EN THE ASSESSEE COMPANY IS RECEIVING SUBSCRIPTION AND ADVERTISEMENT INCOME FOR THE PERIOD 1.4.2007 TO 31.7.2007 AND ALSO CLAIMING EXPENSES OF PAY CHANNEL EXPENSES AMOUNTING TO RS.1,00,41,877/- FOR THE PERIOD OF 1.4.2007 TO 31.7 .2007, THEN IT CANNOT BE PRESUMED THAT THE ASSESSEE COMPANY HAD NOT RECEIVED ANY INCOME ON ACCOUNT OF CHANNEL PLACEMENT SERVICES. SUPPORTING THE ACTION OF THE AO, LD. DR VEHEMENTLY CONTENDED THAT THE CIT(A) DELETED THE AD DITION WITHOUT ANY BASIS, THEREFORE, IMPUGNED ORDER MAY BE SET ASIDE BY RESTO RING THE ADDITION MADE BY THE AO. 19. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT UNDISPUTEDLY, THE ASSESSEE RECEIVED SUBSC RIPTION INCOME OF RS.1,01,93,537 AND ADVERTISING INCOME OF RS.9,96,70 1 FOR THE PERIOD OF 1.4.2007 TO 31.7.2007 AND AT THE SAME TIME, IT IS ALSO NOT I N DISPUTE THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.1,00,41,877 ON PAY CHANN EL EXPENSES FOR THE PERIOD 1.4.2007 TO 31.7.2007. AT THE SAME TIME, IT IS ALS O NOT IN DISPUTE THAT THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM CHANNEL PLAC EMENT WHICH WAS RS.74,05,117/- DURING THE IMMEDIATELY PRECEDING YEA R AND WHICH WAS ALSO ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 12 SHOWN BY THE ASSESSEE IN THE STATEMENT OF ACCOUNTS FILED ALONG WITH THE RETURN OF INCOME OF PRECEDING ASSESSMENT YEAR. ON THIS ISSUE , THE ASSESSEE COMPANY EXPLAINED THAT THE COMPANY WAS IN THE PROCESS OF SE LLING BUSINESS, THEREFORE, THE BUSINESS WAS SLOWED DOWN AND THERE WAS NO INCOME UN DER THE HEAD OF CHANNEL PLACEMENT. LD. AR HAS PLACED RELIANCE ON THE RECEN T DECISION OF HONBLE SUPREME COURT IN THE CASE OF EXCEL INDUSTRIES LTD. (SUPRA) AND SUBMITTED THAT THE ADDITION OF INCOME CAN NOT BE MADE ON THE BASIS OF CONJECTURES AND SURMISES WITHOUT BRINGING OUT ANY FACT TO THE EFFECT THAT TH E ASSESSEE ACTUALLY RECEIVED IMPUGNED AMOUNT FROM CHANNEL PLACEMENT. LD. AR CON TENDED THAT THE AO IS NOT ALLOWED TO MAKE ESTIMATION OF INCOME WITHOUT RE JECTING RESULTS OF BOOKS OF ACCOUNTS OF THE ASSESSEE AND WITHOUT DISCOVERING AN Y ADVERSE FACT TO ESTABLISH THAT THE ASSESSEE ACTUALLY RECEIVED INCOME DURING T HE YEAR FROM CHANNEL PLACEMENT WHICH WAS NOT RECORDED IN THE BOOKS OF AC COUNTS OR WHICH WAS RECEIVED OUT OF BOOKS OF ACCOUNTS. 20. LD. DR REITERATED ITS ARGUMENTS AND SUBMITTED T HAT WHEN ASSESSEE IS EARNING SUBSTANTIAL AMOUNT FROM ADVERTISEMENT AND S UBSCRIPTION, THEN IT CANNOT BE ACCEPTED THAT THE ASSESSEE DID NOT RECEIVE ANY I NCOME FROM CHANNEL PLACEMENT. LD. DR PRAYED THAT THE IMPUGNED ORDER M AY BE SET ASIDE BY RESTORING THAT OF THE AO AS THE AO WAS JUSTIFIED IN ESTIMATING AND MAKING ADDITION BY ESTIMATING INCOME FROM CHANNEL PLACEMEN T ON THE BASIS OF EARLIER YEAR INCOME ON THIS HEAD AS SHOWN BY THE ASSESSEE. ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 13 21. ON CAREFUL CONSIDERATION OF ABOVE, AT THE OUTSE T, WE NOTE THAT THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THE BUSIN ESS OF THE ASSESSEE WAS UNDER PROCESS OF SALE DURING THE YEAR UNDER CONSIDERATION AND IT WAS SOLD W.E.F. 1.8.2007 AND HENCE, IN THIS SITUATION IF ASSESSEE I S EXPLAINING THAT IT HAS NOT RECEIVED ANY AMOUNT ON THE HEAD OF CHANNEL PLACEMEN T, THEN IT IS OPEN FOR THE REVENUE AUTHORITIES TO DISPROVE THIS STATEMENT AND STAND OF THE ASSESSEE BY FURTHER EXAMINATION AND VERIFICATION AND BY BRINGIN G OUT ANY ADVERSE FACT TO SUPPORT THE ACTION OF THE AO THAT THE ASSESSEE ACTU ALLY EARNED IMPUGNED AMOUNT FROM CHANNEL PLACEMENT. WE FURTHER HOLD THAT ANY A DDITION ON THE BASIS OF SURMISES AND CONJECTURES PURELY BASED ON ERRONEOUS INTERPRETATION OF FACT AND WITHOUT ANY BASIS IS NOT SUSTAINABLE. THUS, RESPEC TFULLY FOLLOWING THE RATIO OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF EXCEL INDUSTRIES LTD. (SUPRA), WE HOLD THAT INCOME TAX CANNOT BE LEVIED ON HYPOTHETIC AL INCOME. AS PER TAXATION JURISPRUDENCE, INCOME ACCRUES WHEN IT BECOMES DUE B UT ALSO BE SUPPORTED BY A CORRESPONDING LIABILITY OF THE OTHER PARTY (S) TO P AY THE AMOUNT, ONLY THEN FOR THE PURPOSE OF TAXABILITY IT CAN BE SAID THAT INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUED TO THE ASSESSEE. IN THE PRESENT CAS E, THE REVENUE AUTHORITIES BELOW MISERABLY FAILED TO SUBSTANTIATE THIS FACT THAT THE ASSESSEE ACTUALLY EARNED INCOME FROM CHANNEL PLACEMENT AND THE SAME WAS ACCRUED TO THE ASSESSEE COMPANY DURING FINANCIAL YEAR UNDER CONSIDERATION. ACCORDI NGLY, WE ARE INCLINED TO HOLD THAT THE AO MADE ADDITION WITHOUT ANY BASIS WHICH W AS RIGHTLY DELETED BY THE ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 14 CIT(A). WE ARE UNABLE TO SEE ANY VALID REASON TO I NTERFERE WITH THE IMPUGNED ORDER ON THIS ISSUE. THEREFORE, GROUND NO. 2 OF TH E REVENUE IS DISMISSED. GROUND NO.3 22. APROPOS GROUND NO. 3 OF THE REVENUE, LD. DR SUB MITTED THAT THE AO RIGHTLY OBSERVED AND CONCLUDED THAT THE PROVISION O F RS.17 LAKH TOWARDS PROVISION FOR EXPENSES OF MARCH 2008 WAS NOT AN ASC ERTAINED LIABILITY AND ASSESSEE HAD NOT GIVEN ANY JUSTIFICATION FOR ALLOWI NG THIS EXPENDITURE AS REVENUE EXPENDITURE, THEREFORE, IN ABSENCE OF ANY JUSTIFIED EXPLANATION, THE PROVISION MADE OF RS. 17 LAKH CANNOT BE ALLOWED AS DEDUCTION BEING UNASCERTAINED LIABILITY. THE DR FURTHER CONTENDED THAT THE AO WA S RIGHT IN DISALLOWING THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSE SSEE. THE DR FURTHER POINTED OUT THAT THE CIT(A) DELETED THE ADDITION WI THOUT ANY BASIS, THEREFORE, THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT O F THE AO. REPLYING TO THE ABOVE, LD. AR SUBMITTED THAT THE ASSESSEE FILED COP Y OF THE PROVISION MADE AND THE PAYMENT OF DETAILS OF ACTUAL SALARY PAYMENT MAD E TO THE STAFF WHICH WAS AMOUNTING TO RS.17,03,030 AND THE STAFF SALARY WAS AN ASCERTAINED LIABILITY AND PROVISION SO MADE FOR THE SAME WAS AN ALLOWABLE REV ENUE EXPENDITURE. THE AR HAS DRAWN OUR ATTENTION TOWARDS PAGES 75-80 OF THE PAPER BOOK AND SUBMITTED THAT THE AMOUNT OF PROVISION WAS PROPERLY UTILIZED FOR THE AMOUNT PAID ON ACCOUNT OF SALARY TO THE STAFF FROM 30.06.2008 TO 3 0.09.2008 (PAPER BOOK PAGE NO.79). ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 15 23. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS F ROM THE IMPUGNED ORDER, WE OBSERVE THAT THE CIT(A) HAS DELETED THE IMPUGNED ADDITION ON THE FOLLOWING OBSERVATIONS AND CONCLUSION:- 7.2 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT A ND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN TH AT IN SCHEDULE-9 UNDER THE HEAD 'CURRENT LIABILITIES' THE APPELLANT HAS SHOWN EXPENSES PAYABLE AT RS.L,49,05,634/-. THE APPELLANT HAS GIVEN THE DETAILS OUTSTANDING LIABILITIES OF RS.L,23,17,9 54/-. THE APPELLANT IN THE ASSESSMENT PROCEEDINGS HAS GIVEN D ETAILS OF THE PAYMENT ALONGWITH THE DATE. IN THE ASSESSMENT ORDE R THE ASSESSING OFFICER DISALLOWED THE PROVISION MADE FOR RS.17,00,000/- FOR THE SALARY OF STAFF. IT IS SEEN THAT AS ON 31.03.2008 THE PROVISION FOR STAFF SALARY WAS MADE FOR RS.17,00,0001-WHICH WAS PAID BY THE APPELLANT ON DI FFERENT DATES FROM 30.06.2008 TO 30.09.2008. THE APPELLANT HAS FILED COPY OF THE PROVISION MADE AND PAYMENT OF THE SAME WHICH IS FILED AT PAGE 40 OF THE PAPER BOOK. THE ACTUAL PAYM ENT OF SALARY WAS RS.17,03,030/-. THE STAFF SALARY WAS AN ASCERTA INED LIABILITY AND PROVISION MADE FOR THE SAME IS AN ALLOWABLE EXP ENDITURE. THE APPELLANT HAS ALSO FILED COPY OF THE LEDGER AC COUNT FOR THE PERIOD 01.04.2008 TO 31.03.2008 WHEREIN THIS PAYMEN T OF SALARY IS REFLECTED. THE ASSESSING OFFICER HAS MISREAD THE ACCOUNTING ENTRIES. IN COLUMN-I THE PARTICULARS OF SALARIES AR E MENTIONED, IN COLUMN-2 THE AMOUNT PAYABLE AS ON 31.03.2008 IS SHO WN AND IN COLUMN-3 THE ACTUAL AMOUNT PAID AFTER 315T MARCH 20 08 IS SHOWN. THE COLUMN-4 SHOWS THE DATE OF THE PAYMENT M ADE. THERE IS NO AMBIGUITY IN THE ACCOUNTING ENTRIES AND RS.17,00,000/- WAS PERTAINING TO THE PROVISION MADE FOR SALARY OF STAFF FOR THE MONTH OF MARCH 2008. THE SAME WAS ASCERTAINED LIABILITY AND FULLY ALLOWABLE. THEREFOR E, ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 24. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND PERUSAL OF THE OPERATIVE PART OF THE ORDER, WE OBSERVE THAT THE AO MISINTERPRETED THE ACCOUNTING DETAILS OF PAYMENT OF SALARY MADE BY THE ASSESSEE COMPANY TO ITS ITA NO.401 & 756/D/2013 ASSTT.YEAR: 2008-09 16 STAFF. THE ASSESSEE COMPANY MADE PROVISION OF RS.1 7 LAKH WHICH WAS UTILIZED FOR MAKING PAYMENT TO THE STAFF AND THE AMOUNT OF P AYMENT MADE BY THE ASSESSEE FROM 30.06.2008 TO 30.09.2008 WAS RS.17,03 ,030/- AND THE SAME FACT HAS NOT BEEN DISPUTED BY THE DR. ACCORDINGLY, THE CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE AND ADDITION MADE ON THIS ISSUE AN D WE ARE INCLINED TO HOLD THAT THERE IS NO AMBIGUITY OR PERVERSITY IN THE IMPUGNED ORDER AND WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO. 3 OF THE REVENUE IS DISMISSED. 25. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 .12.2014. SD/- SD/- (J.S. REDDY) (CHANDRAMOHA N GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 11 TH DECEMBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER AS STT. REGISTRAR