SAHAJANAND ENGINEERING WORKS P.LTD, MUMBAI V. ITO 7(2)(2), MUMBAI

ITA 4221/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4243 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 08-04-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 18-06-2012
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: RAJESH B GUPTE
• Keywords: Depreciation; Capital expenditure
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 1762 /MUM/ 2012 (ASSESSMENT YEAR 2008 - 09 ) I.T.A. NO. 2214/MUM/2013 (ASSESSMENT YEAR 2009 - 10) S.N. BHOBE & ASSOCIATES PVT. LTD. U NIT NO. 10 PLOT NO. 9&10 BANKING COMPLEX II SECTOR 19A, VASHI NAVI MUMBAI - 400705. VS. ACIT 10(3) RANGE 10 4 TH FLOOR AAYAKAR BHAVAN M.K.ROAD NEW MARINE LINES MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO. AAICS1085J ASSESSEE BY SHRI RAJESH B. G UPTE DEPARTMENT BY SHRI A.K. NAYAK DATE OF HEARING 4.4 . 201 6 DATE OF PRONOUNCEMENT 6. 4 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE ASSESSEE HAS FILED THESE APPEALS RELATING TO AY 2008 - 09 AND 2009 - 10 CHALLENGING THE ORDERS PASSED BY LD CIT(A ) - 22, MUMBAI. SINCE THE ISSUES URGED IN BOTH THESE APPEALS ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE APPEAL FILED FOR AY 2008 - 09 IS BARRED BY LIMITATION BY 14 8 DAYS. THE ASSESSEE HAS MOVED A PETITION REQUESTING THE BENCH TO CONDONE THE DELAY. WE HEARD THE PARTIES ON THIS PRELIMINARY ISSUE. HAVING REGARD TO THE REASONS GIVEN IN THE PETITION, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF ENGINEERING CONSULTANCY. THE AO COMPLETED THE ASSESSMENT OF BOTH THE YEARS BY MAKING VARIOUS ADDITIONS. S.N. BHOBE & ASSOCIATES PVT. LTD. 2 IN THE APPEALS FILED BEFORE LD CIT(A), THE ASSESSEE GOT PARTIAL RELIEF. STILL AGGRIEVED, THE ASSESSEE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 4. THE FIRST ISSUE URGED IN BOTH THE YEARS RELATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. AT THE TIME OF HEARING LEARNED AR PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWERS LTD.(313 ITR 340)(BOM) AND DCIT VS. HDFC BANK LTD. (366 ITR 505) AND SUBMITTED THAT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IS MORE THAN THE INVESTMENT MADE BY IT AND HENCE DISALLOWANCE OF INTEREST IS NOT CALLED FOR. WITH REGARD TO THE DISALLOWANCE MADE OUT OF EXPENSES, THE LD A.R SUBMITTED THAT THEY HAVE BEEN INCURRED FOR ITS REGULAR BUSINESS ONLY. 5. ON THE CONTRARY, THE LD D.R PLACED STRONG RELIANCE ON ORDER PASSED BY LD CIT(A). 6. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. A PERUSAL OF BALANCE SHEET AS AT 31 - 03 - 2008 SHOWS THAT THE ASSESSEE IS HAVING INTEREST FREE FUNDS OF RS.4.25 CRORES AND RS.5.81 CRORES AS ON 1.4.2007 AND 31.3.2008 RESPECTIVELY. THE INVESTMENTS HELD BY THE A SSESSEE STAND AT RS.2.11 CRORES AND RS.2.00 CRORES AS AT THE BEGINNING OF THE YEAR AND END OF THE YEAR RESPECTIVELY. THESE FACTS SHOW THAT THE OWN FUNDS AVAILABLE WITH THE ASSESSEE EXCEEDS THE AMOUNT OF INVESTMENTS AND HENCE THE RATIO OF THE DECISION REND ERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD.(SUPRA) SHALL APPLY TO THE INSTANT CASE. ACCORDINGLY, WE HOLD THAT THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE. 7. WE NOTICE THAT THE ASSESSE E HAS RECEIVED DIVIDEND INCOME OF RS.18,16,295/ - DURING THE YEAR RELEVANT TO AY 2008 - 09. THE LD A.R SUBMITTED THAT THE INVESTMENTS HAVE BEEN MADE MOSTLY IN MUTUAL FUNDS AND THE DIVIDENDS ARE CREDITED DIRECTLY TO THE BANK ACCOUNT OF THE ASSESSEE. S.N. BHOBE & ASSOCIATES PVT. LTD. 3 ACCORDIN GLY HE CONTENDED THAT THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES ALSO. HOWEVER, A PERUSAL OF THE PATTERN OF INVESTMENT IN MUTUAL FUNDS GIVEN IN PAGE 8 OF THE PAPER BOOK, WE NOTICE THAT THE ASSESSEE HAS MADE FRESH I NVESTMENT OF RS.2.11 CRORES AND REDEEMED INVESTMENT TO THE TUNE OF RS.1.23 CRORES. BESIDES THE ABOVE, THE ASSESSEE HAS ALSO RECEIVED DIVIDEND INCOME AND CAPITAL GAINS. ALL THESE FACTORS SHOW THAT THERE HAS BEEN SOME ACTIVITY WITH REGARD TO THE INVESTMENT PORTFOLIO AND HENCE WE ARE OF THE VIEW THAT A PORTION OF ADMINISTRATIVE EXPENSES IS REQUIRED TO BE DISALLOWED. SINCE THE FACTUAL DETAILS RELATING TO THE INVESTMENT ACTIVITY OF THE ASSESSEE ARE AVAILABLE, WE ARE OF THE VIEW THAT THERE IS NO REQUIREMENT TO ADOPT THE METHODOLOGY PROVIDED IN RULE 8D OF THE I.T RULES. CONSIDERING THE DETAILS OF INVESTMENT ACTIVITY, WE ARE OF THE VIEW THAT THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES TOWARDS THE ABOVE SAID INVESTMENT ACTIVITY MAY BE ESTIMATED AT 5% OF THE D IVIDEND INCOME. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) PASSED ON THIS ISSUE FOR AY 2008 - 09 AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A AT 5% OF THE DIVIDEND INCOME RECEIVED DURING THE YEAR UNDER CONSIDERATION. 8. IDENTICAL ISSUE IS BEING CONTESTED IN AY 2009 - 10 ALSO. THE LD A.R SUBMITTED THAT THE FACTS ARE IDENTICAL IN THAT YEAR ALSO. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS NOT FURNISHED THE BALANCE SHEET RELATING TO THE FINANCIAL YEAR RELEVANT TO AY 2009 - 10. ACCORDINGLY, WE SET ASIDE THE ISSUE RELATING TO DISALLOWANCE RELATING TO INTEREST EXPENDITURE TO THE FILE OF THE AO WITH THE DIRECTION TO FOLLOW OUR DECISION RENDERED FOR AY 2008 - 09, I.E., HE SHOULD NOT MAKE ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE, IF THE OWN FUNDS AVAIL ABLE WITH THE ASSESSEE IS MORE THAN THE AMOUNT OF INVESTMENTS. IF IT IS NOT THE CASE, THEN THE AO ADJUDICATE THIS MATTER IN ACCORDANCE WITH THE LAW, AFTER HEARING THE ASSESSEE. 9. WITH REGARD TO THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES, WE NOTI CE THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.2.25 LAKHS AND THE FRESH S.N. BHOBE & ASSOCIATES PVT. LTD. 4 INVESTMENT MADE WAS RS.48 LAKHS. THE ASSESSEE HAS REDEEMED INVESTMENT TO THE TUNE OF RS.41 LAKHS. THUS, WE NOTICE THAT THE LEVEL OF INVESTMENT ACTIVITY HAS REDUCED DURING TH E YEAR UNDER CONSIDERATION AND THE DIVIDEND INCOME HAS ALSO GONE DOWN CONSIDERABLY. CONSISTENT WITH THE VIEW TAKEN IN THE IMMEDIATELY PRECEDING YEAR, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TOWARDS ADMINISTRATIVE EXPENSES TO 5% OF THE DIVIDEND INCOM E. 9. THE NEXT ISSUE RELATES TO THE INCLUSION OF THE AMOUNT DISALLOWED U/S 14A OF THE ACT TO THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THE LD A.R CONTENDED THAT THE PROVISIONS OF SEC. 14A CANNOT BE EXTENDED TO THE COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT. HOWEVER, WE NOTICE THAT CLAUSE (F) OF EXPLANATION 1 GIVEN BELOW SEC. 115JB(2) PROVIDES THAT THE EXPENDITURE RELATABLE TO INCOME EXEMPT U/S 10 IS REQUIRED TO BE ADDED TO THE NET PROFIT FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT. ACCOR DINGLY, WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ADD THE AMOUNT OF DISALLOWANCE COMPUTED AS PER OUR ORDER DISCUSSED IN THE PRECEDING PARAGRAPHS U/S 14A OF THE ACT IN THE COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT IN BOTH THE YEARS UNDER CONSIDERATION. 10. THE NEXT ISSUE CONTESTED IN AY 2008 - 09 RELATES TO THE DISALLOWANCE OF REPAIR EXPENSES BY HOLDING THE SAME AS CAPITAL EXPENDITURE. IN THE YEAR RE LEVANT TO AY 2008 - 09, THE ASSESSEE SHIFTED ITS PREMISES. IN THE NEW PREMISES, THE ASSESSEE INCURRED CERTAIN EXPENSES ON RENOVATION SUCH AS TILING, PLUMBING, PLASTERING, ELECTRICAL WORK, PAINTING ETC. THE AO TOOK THE VIEW THAT THE EXPENDITURE INCURRED ON R ENOVATION WOULD GIVE BENEFIT OF ENDURING NATURE AND ACCORDINGLY DISALLOWED A SUM OF RS.14,32,435. AFTER ALLOWING DEPRECIATION OF RS.1,27,589/ - , THE AO MADE NET DISALLOWANCE OF RS.13,04,846/ - . THE LD CIT(A) ALSO CONFIRMED THE SAME. S.N. BHOBE & ASSOCIATES PVT. LTD. 5 11. WE HEARD THE P ARTIES ON THIS ISSUE. THOUGH THE CASE OF THE ASSESSING OFFICER IS THAT THESE EXPENSES HAVE ENHANCED THE VALUE OF BUILDING AND WOULD GIVE BENEFIT OF ENDURING NATURE, YET THE FACT REMAINS THAT THESE EXPENSES HAVE NOT BROUGHT INTO EXISTENCE ANY NEW ASSET. I T IS QUITE NORMAL FOR A BUSINESS MAN TO CARRY OUT RENOVATION EXPENSES IN NEW PREMISES IN ORDER TO SUIT HIS REQUIREMENT OF HAVING GOOD AMBIENCE AND CONVENIENCE. HENCE, THE PURPOSE OF INCURRING THE RENOVATION OF EXPENSES IS TO ENABLE THE ASSESSEE TO CARRY O N BUSINESS OPERATIONS SMOOTHLY. SINCE IT IS NOT SHOWN THAT THESE EXPENSES HAVE BROUGHT ANY NEW ASSET AND SINCE THE ASSESSEE HAS REPLACED OLD ITEMS WITH NEW ONES AND CARRIED OUT REPAIR/PAINTING WORKS, WE ARE OF THE VIEW THAT THESE EXPENSES CANNOT BE CONSID ERED TO BE CAPITAL IN NATURE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED DISALLOWANCE. 12. THE NEXT TWO ISSUES CONTESTED IN THE APPEALS FILED FOR AY 2008 - 09 RELATE TO THE ADDITION OF RS.7,3 0,000/ - RELATING TO ALLEGED SUPPRESSION OF SALE VALUE OF PROPERTY SOLD BY THE ASSESSEE AND THE RELATED BROKERAGE EXPENSES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD A PROPERTY FOR A SU M OF RS.38,69,000/ - . THE ASSESSEE HAD PAID BROKERAGE OF RS.91,980/ - AT 2% OF THE SALE CONSIDERATION. THE AO NOTICED THAT THE SALE CONSIDERATION BASED ON THE BROKERAGE AMOUNT OF 2% SHOULD HAVE BEEN RS.45,99,000/ - . HENCE, HE CONDUCTED ENQUIRIES WITH THE BROKER AND ALSO RECORDED A STATEMENT FROM HIM. THE BRO KER REPLIED THAT THE AMOUNT OF BROKERAGE RECEIVED BY HIM INCLUDES REIMBURSEMENT OF EXPENSES INCURRED BY HIM. THE AO DID NOT BELIEVE THE SAID EXPLANATIONS AS HE WAS OF THE VIEW THAT THE BROKER HAS GIVEN REPLIES AS PER THE INSTRUCTIONS OF THE ASSESSEE. ACC ORDINGLY, HE TOOK THE SALE CONSIDERATION AT RS.45,99,000/ - AND ACCORDINGLY HELD THAT THE ASSESSEE HAS SUPPRESSED SALE CONSIDERATION TO THE TUNE OF RS.7,30,000/ - . THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. WITH REGARD TO THE BROKERAGE PAID , THE AO HELD THAT THE SAID PAYMENT RELATED TO A BUILDING FALLING IN THE BLOCK OF ASSETS AND HENCE THE SAME IS REQUIRED TO BE ADJUSTED IN THE DEPRECIATION SCHEDULE. S.N. BHOBE & ASSOCIATES PVT. LTD. 6 ACCORDINGLY HE MADE NECESSARY ADJUSTMENT IN THE DEPRECIATION BY DISALLOWING THE CLAIM. TH E LD CIT(A) ALSO CONFIRMED THE SAME. 13. THE CONTENTION OF THE LD A.R IS THAT THE SALE CONSIDERATION SHOWN BY THE ASSESSEE IS MORE THAN THE READY RECKONER RATE AND THE BROKERAGE AMOUNT PAID INCLUDES REIMBURSEMENT OF EXPENSES. IT WAS FURTHER CONTENDE D THAT THE AO HAS MADE THIS ADDITION PURELY ON SURMISES, EVEN THOUGH THE BROKER HAS EXPLAINED THE FACTUAL ASPECTS AND FURTHER THE AO HAS NOT BROUGHT ANY MATERIAL TO SUPPORT HIS CONCLUSIONS. ON THE CONTRARY, THE LD D.R STRONGLY PLACED RELIANCE ON THE ORDER OF LD CIT(A). 14. HAVING HEARD RIVAL CONTENTIONS ON THIS ISSUE, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE. WE NOTICE THAT THE AO HAS DRAWN CONCLUSIONS WITHOUT BRINGING ANY MATERIAL TO SUPPORT HIS VIEW. EVEN THOUGH T HE REASONS FOR GIVING HIGHER AMOUNT OF BROKERAGE WERE EXPLAINED, YET THE AO REFUSED TO ACCEPT THE SAME ON THE SUSPICION THAT THE BROKER MIGHT HAVE BEEN TUTORED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE MARKET VALUE OF THE PROPERTY IS LESSER THAN THE SALE VALUE DISCLOSED BY THE ASSESSEE. WE FURTHER NOTICE THAT THE AO DID NOT CARRY OUT ANY ENQUIRIES EITHER FROM THE MARKET OR FROM THE BUYER. THUS, WE NOTICE THAT THE AO HAS ARRIVED AT THE CONCLUSION PURELY ON SURMISES. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.7,30,000/ - . ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THIS ADDITION. 15. WITH REGARD TO THE BROKERAGE AMOUNT, WE NOTICE THAT THE PROPERTY SOLD BY THE ASSESSEE IS A DEPRECIABLE ASSET FALLING IN THE BLOCK. HENCE, THE BROKERAGE PAID ON THE SALE OF THE SAID ASSET REQUIRES TO BE DEDUCTED FROM THE SALE VALUE OF THE ASSET. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AO WAS JUSTIFIED IN DISALLOWING THE BROKERAGE EXPENSES AND MAKING NECESSARY ADJUSTMENTS IN THE DEPRECIATION SCHEDULE. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. S.N. BHOBE & ASSOCIATES PVT. LTD. 7 16. THE NEXT ISSUE CONTESTED BY THE ASSESSEE IN AY 2008 - 09 RELATES TO THE ADDITION OF RS.50,000/ - RELATING TO BROKE RAGE EXPENSES. AT THE TIME OF HEARING, THE LD A.R DID NOT PRESS THIS GROUND AND ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 17. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF PROFESSIONAL FEE PAID TO THE CHARTERED ACCOUNTANT WHO IS ALSO ONE OF TH E DIRECTORS OF THE ASSESSEE COMPANY. THIS ISSUE IS COMMON IN BOTH THE YEARS UNDER CONSIDERATION. IN AY 2008 - 09, THE AO NOTICED THAT THE ASSESSEE HAS PAID A SUM OF RS.17,84,710/ - TO THE PROPRIETARY CONCERN OF A CHARTERED ACCOUNTANT NAMED SHRI G.D. RAJADHY AKSHA. THE SAID PERSON WAS ALSO ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. WHEN QUESTIONED ABOUT THE NATURE OF PAYMENT, THE ASSESSEE SUBMITTED THAT HE CARRIES OUT INTERNAL AUDIT OF THE CONCERN AND THE PAYMENT MADE INCLUDES REIMBURSEMENT OF OUT OF POCK ET EXPENSES. THE AO ASKED THE ASSESSEE TO FURNISH THE INTERNAL AUDIT REPORT GIVEN BY THE ABOVE SAID CHARTERED ACCOUNTANT. THE ASSESSEE REPLIED THAT THE DEFECTS NOTICED DURING THE COURSE OF AUDIT ARE DISCUSSED WITH THE DIRECTORS AND NO SEPARATE AUDIT REPO RT IS PREPARED. IT WAS FURTHER SUBMITTED THAT THE ABOVE SAID C.A ALSO LOOKS AFTER THE TAXATION MATTERS, SERVICE TAX/P.F/ESI MATTERS. IT WAS FURTHER SUBMITTED THAT THE C.A. IS ONLY AN INDEPENDENT DIRECTOR AND DOES NOT HOLD ANY SHARE IN THE SHARE CAPITAL O F THE COMPANY. THE AO NOTICED THAT THE BILL S ARE RAISED BY THE C.A WITH THE NARRATION RETAINERSHIP FEES. IT DID NOT DISCLOSE ANY DETAILS ABOUT THE NATURE OF WORK. SINCE THE DIRECTORS ARE COVERED BY SEC. 40A(2)(B), THE AO TOOK THE VIEW THAT THE AMOUNT PAID TO THE C.A, WHO IS A LSO A DIRECTOR OF THE COMPANY, I S EXCESSIVE OR UNREASONABLE IN TERMS OF SEC. 40A(2)(A) OF THE ACT. ACCORDINGLY HE RESTRICTED THE EXPENDITURE TO RS.2,40,000/ - AND ACCORDINGLY DISALLOWED A SUM OF RS.15,44,710/ - . THE LD CIT(A) ALSO CONFIRMED THE SAME. 18. WE HEARD THE PARTIES ON THIS ISSUE. THE LD A.R CONTENDED THAT THE C.A IS A SENIOR PROFESSIONAL WITH VAST EXPERIENCE AND HE IS LOOKING AFTER ALL THE S.N. BHOBE & ASSOCIATES PVT. LTD. 8 TAXATION AND COMPLIANCE WORKS. HE FURTHER SUBMITTED THAT THE FEES FOR SERVIC ES RENDERED BY A PROFESSIONAL WOULD DEPEND UPON THE EXPERIENCE AND KNOWLEDGE OF THE PROFESSIONAL AND HENCE THE AO WAS NOT JUSTIFIED IN HOLDING THE PAYMENT AS EXCESSIVE OR UNREASONABLE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS DEDUCTED TDS FROM THE PAYME NT AND THE C.A HAS DULY DISCLOSED THE SAME IN HIS RETURN OF INCOME. HE FURTHER SUBMITTED THAT THE C.A IS ONLY AN INDEPENDENT DIRECTOR WITHOUT HAVING ANY SHARE HOLDING AND THE ASSESSEE HAS RETAINED HIM TO UTILISE IS KNOWLEDGE AND EXPERIENCE. ACCORDINGLY H E SUBMITTED THAT THE DECISION TO PAY THE PROFESSIONAL FEE/RETAINER FEE IS A COMMERCIAL DECISION. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONDUCT ANY MARKET ENQUIRIES IN THIS REGARD AND HE HAS DISALLOWED THE SAME ON SUSPICION ONLY. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO SHOW THE NATURE OF SERVICES RENDERED BY THE C.A. ACCORDINGLY HE SUBMITTED THAT THE TAX AUTHORITIES ARE JUSTIFIED IN DISALLOWING PART OF EXPENDITURE. 19. WE NOTICE THAT THE C.A HAS BEEN PAID RETAINER FEE ON MONTHLY BASIS. IT IS QUITE COMMON IN TRADE CIRCLES TO ENGAGE A PROFESSIONAL AS A RETAINER ON THE PAYMENT OF MONTHLY RETAINER FEE. AS AGAINST THE MONTHLY PAYMENT OF RS.1.25 LAKHS, THE AO HAS RESTRICTED THE SAME TO RS.20,000/ - . THE A SSESSING OFFICER HAS DONE SO WITH THE OBSERVATION THAT THE PAYMENT IS IN EXCESS OF PREVAILING MARKET PRICE FOR THE SERVICES RENDERED BY THE C.A. HOWEVER, IT IS PERTINENT TO NOTE THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUPPORT HIS CONCLUSIONS . IT IS IN THE COMMON KNOWLEDGE OF EVERY ONE THAT THE FEE OF A PROFESSIONAL WOULD DEPEND UPON THE KNOWLEDGE AND EXPERIENCE OF THE PROFESSIONAL. FOR SIMILAR TYPE OF WORK, TWO PROFESSIONALS MAY CHARGE TWO DIFFERENT RATES. GENERALLY THE PUBLIC APPROACHES A PROFESSIONAL BY CONSIDERING VARIOUS CRITERIA SUCH AS KNOWLEDGE, EXPERIENCE, NAME & FAME IN THE MARKET, RELIABILITY, DEPENDABILITY ETC. HENCE A PROFESSIONAL IS CHOSEN DEPENDING UPON THE CHOICE OF A BUSINESS MAN AND AFTER AGREEING TO THE TERMS AND CONDITIO NS OF THE PROFESSIONAL, THE WORK IS ENTRUSTED TO HIM. IN THIS SCENARIO, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN QUESTIO NING THE REASONABLENESS OF S.N. BHOBE & ASSOCIATES PVT. LTD. 9 PAYMENT MADE TO THE C.A BY THE ASSESSEE , WHEN THE ASSESSEE HAS TAKEN A CONSCIOUS DECISION TO PAY THE SAME . IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE PROFESSIONAL FEE PAYMENT HAS BEEN INFLATED OR BEYOND MARKET RATES, EXCEPT MAKING AN OBSERVATION IN THAT REGARD. IT IS STATED THAT THE C.A IS CARRYING OUT ALL TYPES OF TAXATION AND COMPLIANCE WORK AND HE IS WELL EXPERIENCED AND KNOWLEDGEABLE. HENCE WE ARE OF THE VIEW THAT THE TAX AUTHORITIES CANNOT QUESTION THE CHOICE EXERCISED BY THE ASSESSEE WITHOUT BRINGING ANY MATERIAL ON RECORD. WE HAVE ALSO NOTICED THAT THE DISALLOWANCE HAS BEEN MADE WITHOUT BRINGING ANY MATERIAL ON RECORD. FOR THESE REASONS, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE U/S 40A(2)(A) IS NOT JUSTIFIED. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE. 20. IN AY 2009 - 10 ALSO IDENTICAL DISALLOWANCE WAS MADE OUT OF THE PROFESSIONAL FEE PAID TO THE C.A. FOR THE IDENTICAL REASONS DISCUSSED ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE. 21. THE LAST ISSUE CONTESTED IN AY 2009 - 10 RELATES TO THE DISALLOWANCE OF RS.10,032/ - RELATING TO INTEREST ON FBT. THE AO DISALLOWED THE SAME BY INVOKING THE PROVISIONS OF SEC. 40(A)(IC) OF THE ACT. THE LD CIT(A) ALSO C ONFIRMED THE SAME BY OBSERVING THAT NO ARGUMENT WAS ADVANCED AGAINST THE DISALLOWANCE. BEFORE US, THE ASSESSEE DID NOT SHOW AS TO HOW THE PROVISIONS OF 40(A)(IC) OF THE ACT ARE NOT APPLICABLE TO THE DISALLOWANCE OF RS.10,032/ - . ACCORDINGLY, WE CONFIRM TH E DECISION TAKEN BY LD CIT(A) ON THIS ISSUE. 22. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 6 .4 .2016 . SD/ - SD/ - (AMARJIT SINGH ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 4 /20 1 6 S.N. BHOBE & ASSOCIATES PVT. LTD. 10 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TR UE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS