The DCIT(OSD), Range-1, Ahmedabad V. M/s. Bosch Rexroth (India) Ltd., Ahmedabad

ITA 462/AHD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6041 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 02-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Rule of consistency; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH (BEFORE SHRI R. P. TOLANI, VICE PRESIDE NT & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) IT(TP)A. NO: 462/AHD/2016 (ASSESSMENT YEAR: 2009-10) ITO, WARD-1(1)(3), AHMEDABAD V/S M/S. BOSCH REXROTH (INDIA) LTD. 206/2, 207, 214/P SANAND, VIRAMGAM HIGHWAY, MOUJE LYAYA TALUKA SANAND, AHMEDABAD-382170 (APPELLANT) (RESPONDENT) PAN: AAACM9898F APPELLANT BY : SHRI DILEEP KUMAR, SR. D. R. RESPONDENT BY : SHRI SANJAY R. SHAH, C.A. ( )/ ORDER DATE OF HEARING : 02 -05-201 7 DATE OF PRONOUNCEMENT : 08 -05-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A)-10, AHMEDABAD DATED 02.12.2015 PERTAINING TO A.Y. 2009-10, THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS FOR CONSIDERAT ION. IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 2 2. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT GRIEVANCE RAISED VIDE GROUND NOS. 1 & 3 OF THE PRESENT APPEAL HAVE BEEN DECIDED BY THE BENCH IN ASSESSEES OWN CASE IN EARLIER ASSESSM ENT YEARS. COPY OF THE ORDER OF THE TRIBUNAL WAS BROUGHT ON RECORD. THE LD . D.R. FAIRLY CONCEDED TO THIS CONTENTION OF THE ASSESSEE. 3. WE HAVE CAREFULLY PERUSED THE GRIEVANCE OF THE REVE NUE QUA THE FACTS IN ISSUES QUA THE ORDER OF THE CO-ORDINATE BENCH IN IT A NO. 2479 & 2463/AHD/2013. WE FIND FORCE IN THE CONTENTION OF T HE LD. COUNSEL. GRIEVANCE RAISED VIDE GROUND NO. 1 OF THE PRESENT A PPEAL IS IDENTICAL TO THE GRIEVANCE RAISED IN GROUND NO. 2 IN ITA NO. 2463/AH D/2013. THE RELEVANT FINDING OF THE CO-ORDINATE BENCH READS AS UNDER:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ISSUE IN THE PRESENT IS WHETHER THE SOFTWARE EXPENSES ARE ALLOWA BLE ARE REVENUE EXPENSES. WE FIND THAT THE LD.CIT(A) WHILE DECIDING THE ISSUE HAS NOTED THAT IDENTICAL FACTS AROSE IN ASSESSEES OWN CASE IN AY 2007-08. HE THE REAFTER FOLLOWING THE DECISION OF HIS PREDECESSOR, DECIDED THE ISSUE AGAINST THE A SSESSEE. WE FIND THAT AGAINST THE ORDER OF LD.CIT(A) FOR AY 07-08 THE MATTER WAS CARRIED BEFORE THE COORDINATE BENCH OF TRIBUNAL (ITAT B BENCH AHMEDABAD). THE COORDINATE BENCH OF TRIBUNAL VIDE ORDER DATED 02/05/2016 DECIDED THE IS SUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER:- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN TREATING THE EXPENDITUR E OF RS.35,30,328/- TOWARDS PURCHASING AND UPGRADING SOFTWARE AS CAPITA L EXPENDITURE WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS REVENUE EXPENDI TURE IN ITS RETURN OF IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 3 INCOME. THE ITEMIZE BREAK-UP OF THE IMPUGNED EXPEND ITURE OF RS.35,30,328/- IS AS UNDER:- SR. NO. PARTICULARS AMOUNT (RS.) 1. SOFTWARE LICENSE 16,07,497 2. AUTO CAD LT - 2007 59,280 3. AUTO CAD SOFTWARE 118,560 4. AUTO DESK SOFTWARE 1,274,624 5. SOFTWARE SUBSCT SER 306,400 6. SPC SOFTWARE 55,120 7. SOFTWARE CHARGES 93,847 8. SOFTWARE INSTALLED 15,0000 TOTAL 35,30,328 THE ABOVE REFERRED EXPENDITURE OF RS.35,30,328/- AR E MAINLY RELATING TO THE PURCHASE OF APPLICATION SOFTWARE AND UPGRADATIO N OF EXISTING SOFTWARE. THE LD. ASSESSING OFFICER HAS TREATED TH E IMPUGNED EXPENDITURE OF RS.35,30,328/- AS CAPITAL EXPENDITURE ON THE ONL Y FOOTING THAT THE ASSESSEE WILL RECEIVE THE BENEFIT FOR MORE THAN A Y EAR AND HAS ALSO ALLOWED 60% DEPRECIATION ON THIS EXPENDITURE OF RS. 35,30,328/- AND A DISALLOWANCE OF RS.14,21,131/- HAS BEEN MADE. HOWE VER, FROM GOING THROUGH THE SUBMISSIONS OF THE LD. AUTHORIZED REPRE SENTATIVE, WE ARE ABLE TO UNDERSTAND THAT THE IMPUGNED EXPENDITURE OF RS.3 5,30,328/- HAS NOT BEEN INCURRED TO PURCHASE ANY NEW SOFTWARE BUT THEY ARE EITHER APPLICATION SOFTWARE TO RUN THE EXISTING SOFTWARE I NSTALLED IN THE COMPUTERS AND ALSO THE EXPENDITURE HAS BEEN INCURRE D TOWARDS UPGRADATION OF THE EXISTING APPLICATION SOFTWARE, B ECAUSE IN THE FAST CHANGING TECHNOLOGY WORLD, THE SOFTWARE, WHICH WAS PURCHASED BY THE ASSESSEE IN THE PREVIOUS YEARS, NEEDS TO BE UPGRADE D OR UPDATED SO AS TO BE SUITABLE WITH THE CURRENT TECHNOLOGIES BROUGHT I N BY VARIOUS COMPETITORS AS WELL AS REQUIRED FOR INCREASING THE OPERATIONAL EFFICIENCY OF THE ORIGINAL SOFTWARE. 9. WE ALSO FIND THAT THE CO-ORDINATE BENCH HAS DEAL T WITH THE SIMILAR ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 20 06-07 IN ITA NOS. IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 4 1328 & 1310/AHD/2011, DATED 29.04.2014, DEALING WIT H THE SOFTWARE EXPENDITURE OF RS.8,73,485/- AS TO WHETHER IT IS A CAPITAL OR REVENUE EXPENDITURE, ALLOWED THE ASSESSEES APPEAL BY OBSER VING AS UNDER:- 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT ASS ESSEE HAD INCURRED RS 8,73,485/- ON SOFTWARE EXPENSES AND WAS CLAIMED AS REVENUE EXPENSES. IT IS THE SUBMISSION OF THE ASSE SSEE THAT THE EXPENSES WERE FOR THE PURCHASE OF SOFTWARE APPLICAT ION HAVING A SHORT LIFE SPAN. AO HAS CONSIDERED THE EXPENSES AS CAPITAL EXPENDITURE AND ELIGIBLE FOR DEPRECIATION @60% AND GRANTED DEPRECIATION OF RS 5,24,091/- AND THEREBY MADE A DI SALLOWANCE OF RS 3,49,384/-. IN THE PRESENT CASE, THE INCURRING O F EXPENSES HAS NOT BEEN DISPUTED BY THE REVENUE. IT IS ALSO A FACT THAT THE MATTER PERTAINS TO AY 2006-07 AND IF THE IMPUGNED EXPENSES IS CONSIDERED TO BE CAPITAL EXPENDITURE, THE ASSESSEE WILL HAVE T O BE GRANTED DEPRECIATION @ 60% ON WDV BASIS IN A.Y. 06-07 AND A LSO IN SUBSEQUENT YEARS. THE DEPRECIATION OF WDV FOR SUBSE QUENT YEARS WILL WORK OUT TO RS. 2,09,630/- (FOR A.Y.07-08), RS . 83,854 (FOR A.Y. 08-09), RS. 33,542(FOR A.Y. 09-10) AND SO ON. CONSI DERING THE TOTALITY OF THE FACTS, THE TOTAL TAXABLE INCOME OF RS 35.85 CRORE AS DETERMINED BY THE AO, THE CHANGES THAT WOULD BE REQ UIRED TO BE MADE IN SUBSEQUENT ASSESSMENTS ORDERS IF THE DEPREC IATION IS TO BE ALLOWED IN ALL SUBSEQUENT YEARS AND THE PECULIAR FA CTS OF THE CASE, WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE B E ALLOWED IN THE PRESENT CASE. WE MAY HOWEVER ADD THAT THE ALLOWANCE OF THE EXPENDITURE IN THE PRESENT CASE SHOULD NOT BE CONSI DERED AS A PRECEDENCE FOR ALLOWANCE OF THE EXPENDITURE. THUS T HESE GROUNDS OF THE ASSESSEE ARE ALLOWED. IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 5 10. WE FURTHER OBSERVE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASAHI INDIA SAFETY GLASS LTD (SUPRA) HAS ALSO DEALT WITH THE SIMILAR ISSUE, WHEREIN THE ASSESSEE INCURRED REVENU E EXPENDITURE TOWARDS APPLICATION SOFTWARE TO BE RUN ON ORACLE APPLICAT ION AND THE DECISION WAS GIVEN IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- THE TEST OF ENDURING BENEFIT IS NOT A CERTAIN OR A CONCLUSIVE TEST WHICH THE COURTS CAN APPLY ALMOST BY ROTE. WHAT IS REQUIRED TO BE SEEN IS THE REAL INTENT AND PURPOSE OF THE EXPENDIT URE AND WHETHER THE EXPENDITURE RESULTS IN CREATION AFFIXED CAPITAL FOR THE ASSESSEE. IT IS IMPORTANT TO BEAR IN MIND THAT WHAT IS REQUIR ED TO BE SEEN IS NOT WHETHER THE ADVANTAGE OBTAINED LASTS FOREVER BU T WHETHER THE EXPENSE INCURRED DOES AWAY WITH A RECURRING EXPENSE (S) DEFRAYED TOWARDS RUNNING A BUSINESS AS AGAINST AN EXPENSE UN DERTAKEN FOR THE BENEFIT OF THE BUSINESS AS A WHOLE. IN OTHER WO RDS, THE EXPENDITURE WHICH IS INCURRED, WHICH ENABLES THE PR OFIT MAKING STRUCTURE TO WORK MORE EFFICIENTLY LEAVING THE SOUR CE OF THE PROFIT MAKING STRUCTURE UNTOUCHED, WOULD BE AN EXPENSE IN THE NATURE OF REVENUE EXPENDITURE. FINE TUNING BUSINESS OPERATION S TO ENABLE THE MANAGEMENT TO RUN ITS BUSINESS EFFECTIVELY, EFF ICIENTLY AND PROFITABLY, LEAVING THE FIXED ASSETS UNTOUCHED, WOU LD BE AN EXPENDITURE IN THE NATURE OF REVENUE EXPENDITURE EV EN THOUGH THE ADVANTAGE MAY LAST FOR AN INDEFINITE PERIOD. TEST O F ENDURING BENEFIT OR ADVANTAGE WOULD, THUS, COLLAPSE IN SUCH LIKE CASES. IT WOULD BE ONLY TRUER IN CASES WHICH DEAL WITH TECHNO LOGY AND SOFTWARE APPLICATION, WHICH DO NOT IN ANY MANNER SU PPLANT THE SOURCE OF INCOME OR ADDED TO THE FIXED CAPITAL OF T HE ASSESSEE. [PARA 9] THIS IS THE APPROACH WHICH THE SUPREME COURT HAS AP PLIED EVEN IN CASES WHERE THERE IS A ONCE FOR ALL OR A LUMP SUM P AYMENT. WHAT IS TO BE SEEN IN THE FACTS OF THE INSTANT CASE, IS THAT THE ASSESSING OFFICER, AS A MATTER OF FACT, HAS RETURNED A FINDIN G THAT THE EXPENDITURE UNDERTAKEN WAS FOR OVERHAULING THE ACCO UNTANCY OF THE ASSESSEE AND TO EFFICIENTLY TRAIN THE ACCOUNTIN G STAFF OF THE ASSESSEE. THE TRIBUNAL, WHICH IS DECIDEDLY THE FINA L FACT FINDING AUTHORITY, HAS AFTER NOTICING THE MATERIAL ON RECOR D OBSERVED THAT THE EXPENDITURE WAS INCURRED UNDER VARIOUS SUB-HEAD S, WHICH INCLUDED LICENCE FEE, ANNUAL TECHNICAL SUPPORT FEE, PROFESSIONAL CHARGES, DATA ENTRY OPERATOR CHARGES, TRAINING CHAR GES AND TRAVELLING EXPENSES. THE FINAL FIGURE WAS A CONSOLI DATION OF EXPENSES INCURRED UNDER THESE SUB-HEADS. THE TRIBUN AL RIGHTLY CAME TO THE CONCLUSION THAT NONE OF THESE RESULTED IN EITHER CREATION OF A NEW ASSET OR BROUGHT FORTH A NEW SOUR CE OF INCOME FOR THE ASSESSEE. THE TRIBUNAL CLASSIFIED THE SAID EXPENSES AS BEING IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 6 RECURRING IN NATURE TO UPGRADE AND/OR TO RUN THE SY STEM. [PARA 9.1] IN THE BACKGROUND OF THE AFOREMENTIONED FINDINGS, I T CANNOT BE SAID THAT THE EXPENSES BROUGHT ABOUT IN AN ENDURING BENEFIT TO THE ASSESSEE. THE ASSESSING OFFICER WAS PERHAPS SWAYED BY THE FACT THAT IN THE SUCCEEDING FINANCIAL YEAR, I.E., 1997-9 8 (ASSESSMENT YEAR 1998-99), THE AMOUNT SPENT WAS LARGE. FIRST OF ALL, THE EXTENT OF THE EXPENDITURE CANNOT BE A DECISIVE FACTOR IN D ETERMINING ITS NATURE. AS OBSERVED BY THE TRIBUNAL, THE ASSESSEE I N THE RELEVANT ASSESSMENT YEAR HAD A TURNOVER OF RS 150 CRORES AND THAT EVEN WITHOUT THIS EXPENDITURE IT WOULD HAVE CONTINUED TO ACHIEVE THE SAID TURNOVER, THOUGH THE EXPENDITURE IN ISSUE WOUL D HAVE ENABLED IT TO RUN ITS BUSINESS MORE EFFICIENTLY. THEREFORE, THE RATIONALE SUPPLIED BY THE ASSESSING OFFICER IN SUPPORT OF ITS ORDER IS FLAWED AND, HENCE, IT WOULD HAVE TO BE REJECTED. [PARA 10] SECONDLY, THE MERE FACT THAT THE ASSESSING OFFICER RECORDS THAT THE EXPENDITURE, IN FINANCIAL YEAR 1997-98 (ASSESSMENT YEAR 1998-99), WAS INCURRED TOWARDS WHAT HE TERMS AS AN 'ON-GOING PROJECT' WOULD NOT IPSO FACTO GIVE IT A COLOUR OF CAPITAL EX PENDITURE. A CAREFUL READING OF THE TRIBUNAL'S JUDGMENT SHOWS TH AT AFTER NOTICING THE SUBMISSION OF THE ASSESSEE THAT THE EX PENDITURE INCURRED IN THE SAID ASSESSMENT YEAR WAS FOR REMOVI NG DEFICIENCIES WHICH WERE FOUND IN THE SOFTWARE INSTALLED IN THE E ARLIER ASSESSMENT YEAR, AND THAT OUT OF A SUM OF RS. 1.71 CRORES, A SUM OF RS. 49 LAKHS WAS INCURRED TO MODIFY, CUSTOMIZE A ND UPGRADE THE SOFTWARE INSTALLED, WHILE THE BALANCE EXPENDITURE W AS USED FOR DEVELOPMENT AND IMPLEMENTATION, IT RETURNED A FINDI NG THAT THE EXPENSES WERE INCURRED TO UPGRADE AND RUN THE SYSTE M. IN VIEW OF THESE FINDINGS, THE ASSESSING OFFICER DISCOVERED AN ERRONEOUS PRINCIPLE ON THE BASIS OF WHICH HE DENIED THE EXEMP TION TO THE ASSESSEE. [PARA 10.1] SOFTWARE IS NOTHING BUI ANOTHER WORD FOR COMPUTER P ROGRAMMES, I.E., INSTRUCTIONS, THAT MAKE THE HARDWARE WORK. SO FTWARE IS BROADLY OF TWO TYPES, I.E., THE SYSTEMS SOFTWARE, W HICH IS ALSO KNOWN AS THE OPERATING SYSTEM WHICH CONTROLS THE WO RKING OF THE COMPUTER: WHILE THE OTHER BEING APPLICATIONS SUCH A S WORD PROCESSING PROGRAMS, SPREAD SHEETS AND DATABASE WHI CH PERFORM THE TASKS FOR WHICH PEOPLE USE COMPUTERS. BESIDES T HESE, THERE ARE TWO OTHER CATEGORIES OF SOFTWARE, THESE BEING: NETW ORK SOFTWARE AND LANGUAGE SOFTWARE. THE NETWORK SOFTWARE ENABLES GROUPS OF COMPUTERS TO COMMUNICATE WITH EACH OTHER, WHILE LAN GUAGE IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 7 SOFTWARE PROVIDES WITH TOOLS REQUIRED TO WRITE PROG RAMMES. [PARA 11] THE AFORESAID WOULD SHOW THAT WHAT THE ASSESSEE ACQ UIRED THROUGH A WAS AN APPLICATION SOFTWARE WHICH ENABLED IT TO EXECUTE TASKS IN THE FIELD OF ACCOUNTING, PURCHASES AND INVENTORY MAINTENANCE. THE FACT THAT THE APPLICATION SOFTWARE WOULD HAVE TO BE UPDATED FROM TIME TO TIME BASED ON THE REQUIR EMENTS OF THE ASSESSEE IN THE CONTEXT OF THE ADVANCEMENT OF ITS B USINESS AND/OR ITS DIVERSIFICATION, IF ANY; THE CHANGES BROUGHT AB OUT DUE TO STATUTORY AMENDMENTS BY LAW OR BY PROFESSIONAL BODI ES LIKE THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, WHICH ARE GIVEN THE RESPONSIBILITY OF CONCEIVING AND FORMULATING THE AC COUNTING STANDARDS FROM TIME TO TIME, AND PERHAPS ALSO, BY R EASON OF THE FACT THAT EXPENSES MAY HAVE TO BE INCURRED ON ACCOU NT OF CORRUPTION OF THE SOFTWARE DUE TO UNINTENDED OR INT ENDED INGRESS INTO THE SYSTEM - OUGHT NOT GIVE A COLOUR TO THE EX PENDITURE INCURRED AS ONE EXPENDED ON CAPITAL ACCOUNT. GIVEN THE FACT THAT THERE ARE MYRIAD FACTORS WHICH MAY CALL FOR EXPENSE S TO BE INCURRED IN THE FIELD OF SOFTWARE I APPLICATIONS, I T CANNOT BE SAID THAT EITHER THE EXTENT OF THE EXPENSE OR THE EXPENS E BEING INCURRED IN CLOSE PROXIMITY, IN THE SUBSEQUENT YEARS, WOUL D BE CONCLUSIVELY DETERMINATIVE OF ITS NATURE. THE ASSESSING OFFICER HAS ERRED PRECISELY FOR THESE VERY REASONS. [PARA 12] THE CONTENTION OF THE REVENUE THAT IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAD NOT WRITTEN OFF THE EXPENSE IN ISSUE, WHILE IN THE SUCCEEDING ASSESSMENT YEAR ONLY A PART OF THE EXPEN SE HAD BEEN WRITTEN OFF AND, THEREFORE, THE ASSESSEE'S OWN UNDE RSTANDING OF THE NATURE OF THE EXPENSE INVOLVED WAS THAT IT WAS EXPENDED ON CAPITAL ACCOUNT IS BE REJECTED. THE REASON BEING: T HAT THE TREATMENT OF A PARTICULAR EXPENSE OR A PROVISION IN THE BOOKS OF ACCOUNT CAN NEVER BE CONCLUSIVELY DETERMINATIVE OF THE NATURE OF THE EXPENSE. AN ASSESSEE CANNOT BE DENIED A CLAIM F OR DEDUCTION WHICH IS OTHERWISE TENABLE IN LAW ON THE GROUND THA T THE ASSESSEE HAD TREATED IT DIFFERENTLY IN ITS BOOKS. [PARA 13 & 13.1] THEREFORE, THE AFORESAID CONTENTION IS OF NO AVAIL TO THE REVENUE. [PARA 13.2] THEREFORE, THE TRIBUNAL WAS CORRECT IN LAW IN HOLDI NG THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF SOFTWARE AND PROFESSIONAL EXPENSES WAS A REVENUE EXPENDITURE. [P ARA 14] IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 8 11. APPLYING THE RATIO OF ABOVE DECISION OF HONBLE DELHI HIGH COURT AS WELL AS DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE, WE ARE OF THE VIEW THAT THE IMPUGNED EXPENDITURE OF RS.35,30, 328/- INCURRED BY THE ASSESSEE IS REVENUE EXPENDITURE, BECAUSE THE SAME H AS BEEN INCURRED TOWARDS THE PURCHASE OF APPLICATION SOFTWARE AND UP GRADATION CHARGES WHICH WERE REQUIRED TO RUN EFFICIENTLY THE EXISTING SOFTWARE AS WELL AS LICENSE CHARGES FOR USING THE EXISTING SOFTWARE UNI NTERRUPTLY SO AS TO RUN THE BUSINESS EFFICIENTLY. WE ARE, THEREFORE, OF THE VIEW THAT THE LD. CIT(A) WAS NOT CORRECT IN CONFIRMING THE DISALLOWANCE OF R S.14,21,131/- AND WE ACCORDINGLY DELETE THIS DISALLOWANCE. THUS, THE ASS ESSEES APPEAL IS ALLOWED. 4. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT ON R ECORD, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). G ROUND NO. 1 IS ACCORDINGLY DISMISSED. 5. GRIEVANCE RAISED VIDE GROUND NO. 3 OF THE PRESENT A PPEAL IS SIMILAR TO THE GRIEVANCE RAISED VIDE GROUND NO. 1 IN ITA NO. 2479/ AHD/2013 AND THE RELEVANT FINDING OF THE CO-ORDINATE BENCH READS AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ISSUE IN THE PRESENT IS WITH RESPECT TO DISALLOWANCE OF EXPENSES WHICH WERE CONSIDERED TO BE CAPITAL IN NATURE BY THE AO. WE FIND THAT THE LD.C IT(A) WHILE DECIDING THE ISSUE HAS GIVEN A FINDING THAT CONSIDERING THE NATURE OF ACTIVITIES UNDERTAKEN BY ASSESSEE, THERE IS LOT OF WEAR AND TEAR TO THE BUIL DING WHICH NECESSITATES INCURRING OF EXPENDITURE AND THE EXPENSES WERE NORMAL REPAIR EXPENDITURE. HE HAS FURTHER NOTED THAT GOING BY THE NATURE OF EXPENSES INCURRE D IT CANNOT BE STATED THAT ANY NEW ASSET HAS COME INTO EXISTENCE AND THAT SIMILAR EXPENSES WERE INCURRED BY THE ASSESSEE IN EARLIER YEARS AND HAVE BEEN ALLOWED BY THE REVENUE IN SCRUTINY IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 9 ASSESSMENTS AND THAT AO HAS NOT BROUGHT ANY MATERI AL WHICH COULD PROVE OF BRINGING ANY NEW ASSET INTO EXISTENCE OR THAT THE EXPENDITURE WAS TOWARDS REPLACEMENT OF EXISTING ASSETS. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO POINT OUT ANY FALLACY IN THE FINDING O F LD.CIT(A). IN VIEW OF THE AFORESAID FACTS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 6. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT ON R ECORD BEFORE US, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH (SUPRA), WE DECLINE TO INTERFERE. GROUND NO. 3 IS DISMISSED. 7. COMING TO THE GRIEVANCE RAISED VIDE GROUND NO. 2 OF THE APPEAL, WE FIND THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED EXPENSES OF RS. 17,11,387/ - AS CLEARING AND FORWARDING CHARGES ON EXPORT. THE A.O. NOTICED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THESE PAYMENTS. THE ASSES SEE WAS ASKED TO SHOW CAUSE WHY THE PAYMENTS MADE TO CLEARING & FORW ARDING CHARGES AGENTS SHOULD NOT BE DISALLOWED U/S. 40(A)(IA) OF T HE ACT. ASSESSEE CHALLENGED THE PROPOSED DISALLOWANCE BY THE A.O. ON THE GROUND THAT THE PAYMENTS ARE NOTHING BUT REIMBURSEMENT CHARGES AND, THEREFORE, NOT LIABLE FOR ANY DEDUCTION OF TAX AT SOURCE. THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO PROCEEDED BY PLAC ING RELIANCE ON THE CBDT CIRCULAR NO. 715 AND MADE THE ADDITION OF RS. 17,11,387/-. 8. THE ASSESSEE STRONGLY OBJECTED TO THIS ADDITION MAD E BY THE A.O. BEFORE THE LD. CIT(A). IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 10 9. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) WAS CONVINCED THAT THE ASSESSEE HAS REIMBURSED AN AMOUN T OF RS. 17,11,387/- TO ITS CUSTOMS HOUSE AGENT. THE LD. CIT(A) FURTHER OBSERVED THAT A SIMILAR DISALLOWANCE WAS MADE IN THE EARLIER ASSESSMENT YEA R A.Y. 2008-09 AND IN THE SIMILAR CIRCUMSTANCES ON SIMILAR FACTS HIS PRED ECESSOR IN OFFICE HAS DELETED THE DISALLOWANCE. FOLLOWING THE FINDINGS OF HIS PREDECESSOR, THE LD. CIT(A) DELETED THE DISALLOWANCE FOR THE YEAR UNDER CONSIDERATION ALSO. 10. WE FIND THAT THE ORDER OF THE FIRST APPELLATE AUTHO RITY IN A.Y. 2008-09 WAS CHALLENGED BEFORE THE TRIBUNAL BUT THIS RELIEF GIVE N BY THE FIRST APPELLATE AUTHORITY WAS NEVER QUESTIONED BEFORE THE TRIBUNAL. THIS MEANS THAT THE ISSUE HAS ATTAINED FINALITY. SINCE IN EARLIER ASSES SMENT YEAR, THE DELETION OF THE DISALLOWANCE WAS NOT CHALLENGED BEFORE THE TRIB UNAL, WE DO NOT FIND ANY REASON WHY ON SIMILAR SET OF FACTS, SUCH ISSUE BE RAISED BEFORE THE TRIBUNAL. WE DO NOT FIND ANY MERIT IN THIS GRIEVANC E OF THE REVENUE. GROUND NO. 2 IS DISMISSED. 11. GROUND NO. 4 RELATES TO THE DELETION OF THE TRANSFE R PRICING ADJUSTMENT OF RS. 23,51,667/-. 12. BRIEFLY STATED THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE HAS BORROWED RS. 70 CRORES FROM ITS ASSOCIATED ENTERPRISE M/S. ROBER T BOSCH GMBH HAS PROVIDED GUARANTEE ON BEHALF OF THE ASSESSEE IN RES PECT OF THE BORROWINGS OF RS. 70 CRORES ON WHICH THE ASSESSEE HAS PAID GUA RANTEE FEE @ 0.75% PER IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 11 ANNUM AND ACCORDINGLY PAID GUARANTEE COMMISSION OF RS. 23,51,667/- TO ROBERT BOSCH GMBH WHICH ALSO HAPPENS TO BE AN ASSOC IATE ENTERPRISE. 13. IT WAS EXPLAINED TO THE TPO THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND, THEREFORE, IT HAD TO OPERATE IN ITS SHAREHOLDE RS INTEREST WHEREIN A COLLATERAL GUARANTEE WAS ESSENTIAL TO SAFEGUARD THE IR INTEREST. THIS CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE TPO WHO WAS OF THE OPINION THAT THE FINANCIAL POSITION OF THE A SSESSEE COMPANY IS VERY GOOD SINCE IT IS A DEBT FREE COMPANY, THEREFORE, TH ERE WAS NO NECESSITY OF SOME GERMAN COMPANY GIVING GUARANTEE. THE TPO FORME D A BELIEF THAT THE LOAN HAS BEEN TAKEN FROM A RELATED PARTY. THE GUARA NTEE HAS ALSO BEEN SUPPLIED BY A RELATED PARTY AND THERE IS NO EVIDENC E TO THIRD PARTIES ALSO INSISTING ON GUARANTEE FOR GIVING LOAN TO THE ASSES SEE. AS THE ASSESSEE HAD SUFFICIENT RESERVES AS WELL AS ASSETS TO SUPPORT TH E LOAN AND COLLATERAL GUARANTEE WAS NEITHER NEEDED NOR DEMANDED. THE A.O. ACCORDINGLY PROPOSED A DOWNWARD ADJUSTMENT IN THE PAYMENT OF GU ARANTEE TO THE EXTENT OF RS. 23,51,667/-. TAKING A LEAF OUT OF THE FINDINGS OF THE TPO, THE A.O. MADE THE DISALLOWANCE OF RS. 23,51,667/-. 14. ASSESSEE ASSAILED THE FINDINGS OF THE A.O. BEFORE T HE LD. CIT(A). 15. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT IN THE EARLIER ASSESSMENT YEAR ALSO SIMILAR TR ANSACTION WAS THERE WITH THE AE AND WAS PART OF TRANSFER PRICING RECORDS WHI CH HAS NOT BEEN CONTROVERTED BY THE A.O./TPO AND SINCE ON SIMILAR F ACTS, NO ADJUSTMENT WAS IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 12 MADE IN THE EARLIER ASSESSMENT YEAR, FOLLOWING THE RULE OF CONSISTENCY, SUCH ADJUSTMENT CANNOT BE MADE IN THE CURRENT ASSESSMENT YEAR ALSO. 16. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE A.O./TPO. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 17. THERE IS NO DISPUTE THAT ALL THE THREE ENTITIES THA T IS THE ASSESSEE COMPANY, THE LENDER COMPANY AND THE GUARANTOR COMPANY ARE AS SOCIATED ENTERPRISES. THERE IS ALSO NO DISPUTE THAT THE ASSE SSEE HAS BORROWED THE MONEY ON INTEREST OF 12.25% PER ANNUM AS AGAINST IN TEREST OF 15% QUOTED BY THE BANK. CONSIDERING THE GUARANTEE COMMISSION O F 0.75% PAID BY THE ASSESSEE, THE TOTAL COST OF BORROWING COMES TO 13% WHICH IS STILL LOWER THAN THE RATE OF 15% QUOTED BY THE BANK. THIS IN ITSELF JUSTIFIES THE PAYMENT OF GUARANTEE COMMISSION. FURTHER, THE FIRST APPELLATE AUTHORITY HAS GIVEN A CATEGORICAL FINDING IN RELATION TO SIMILAR TRANSACT IONS IN EARLIER ASSESSMENT YEAR, WHERE NO ADJUSTMENT WAS MADE BY THE AO/TPO. A NOTHER UNDISPUTED FACT IS THAT THE OPERATING MARGIN OF THE ASSESSEE C OMPANY IS AT 18.21% WHICH IS MUCH BETTER AS COMPARED TO THE AVERAGE MAR GIN OF 10.36% OF THE OTHER COMPARABLES. ON THIS ACCOUNT ALSO, THE PAYMEN T OF GUARANTEE COMMISSION IS JUSTIFIABLE. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE PREVIOUS HISTORY OF THE ASSESSEE, WE DO NOT FIND AN Y REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 4 I S ACCORDINGLY DISMISSED. IT(TP)A NO. 462/AHD/2016 . A.Y. 2009-1 0 13 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08 - 05- 2017 SD/- SD/- (R. P. TOLANI) (N. K. BILLAIYA) VICE PRESIDENT TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 08 /05/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD