DCIT, New Delhi V. M/s. Capital Advertising Pvt. Ltd., Gurgaon

ITA 4774/DEL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7404 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-08-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 07-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; Difference of opinion; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B, NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO.4774, 4775/DEL/2012 (ASSESSMENT YEARS 2003-04, 2008-09) DCIT, CIRCLE 3(1), VS. CAPITAL ADVERTISING PVT. LTD ., NEW DELHI UGF, TOWER A, BLDG NO.8, DLF CYBER CITY, PHASE II, GURGAON GIR / PAN : AABCC5671P I.T.A.NO. 1892/DEL/2011 (ASSESSMENT YEAR 2007-08) DCIT, CIRCLE 3(1), VS. CAPITAL ADVERTISEMENT PVT. L TD., NEW DELHI UGF, TOWER A, BLDG NO.8, DLF CYBER CITY, PHASE II, GURGAON GIR / PAN : AABCC5671P C.O. NO.436/DEL/2012 IN I.T.A.NO. 4774/DEL/2012 (ASSESSMENT YEAR 2003-04) CAPITAL ADVERTISING PVT. LTD., VS. DCIT, CIRCLE 3(1 ), UGF, GOWER A, BLDG. NO.8, GURGAON DLF CYBER CITY, PHASE II, GURGAON GIR / PAN : AABCC5671P (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI ANIL KUMAR SHARMA, SR. DR RESPONDENT BY :SHRI ROHIT JAIN, ADV. MS. DEEPA SHREE RAO, CA 2 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 DATE OF HEARING: 09.08.2016 DATE OF PRONOUNCEMENT: 18.08.2016 ORDER PER BEENA A. PILLAI, JM: THESE ARE A GROUP OF APPEALS PREFERRED BY THE ASSESSEE AND REVENUE FOR ASSESSMENT YEAR 2003-04, 2 007- 08, 2008-09. WE SHALL TAKE UP THE APPEALS IN THE OR DER OF THE ASSESSMENT YEARS UNDER CONSIDERATION. ASSESSMENT YEAR 2003-04: THERE ARE CROSS APPEALS FILED BY BOTH ASSESSEE AS W ELL AS THE REVENUE AGAINST THE ORDER DATED 28/06/2012 PASS ED BY LD. CIT (A) VI, NEW DELHI FOR ASSESSMENT YEAR 20 03-04. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: 2.1 THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.11.2003 DECLARING TOTAL INCOME OF RS.3,01,41,268 /-. THE RETURN WAS PROCESSED UNDER SECTION 143 (1) AND THE SCRUTINY ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) ON 30.01.2006 ON AN INCOME OF RS.6,39,08,220/-. SUBSEQUENTLY, THE LD. AO OBSERVED THAT THE ASSESSEE HAD CLAIMED BUSINESS DEVELOPMENT EXPENSES TO AN EXTENT OF RS.40,03,000/-AS REVENUE EXPENSES. THE LD. AO ACCORDINGLY ISSUED NOTICE U/S.147 OF THE ACT ON 26.02.2010, FOR REOPENING THE ASSESSMENT AFTER RECO RDING REASONS AS UNDER: 3 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 REASONS FOR SREOPENIGN THE CASE U/S 148 IN THE CASE OF M/S. CAPITAL ADVERTISING PVT. LTD. FOR THE ASSESSMENT YEAR 2003-04: THE RETURN IN THIS CASE FOR THE ASSESSMENT YEAR 2003-04 WAS FILED ON 28.11.2003 DECLARING AN INCOME OF RS.30141268/- WHICH WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961 ON 25.03.2004. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSTT. WAS COMPLETED U/S 143(3) OF THE ACT ON 30.01.2006 ON AN INCOME OF RS.63908220/-. THE PERUSAL OF ASSTT. RECORDS FOR THE ASSESSMENT YEAR 2003-04 REVEALS THAT THE ASSESSEE HAD CLAIMED AND WAS ALLOWED A DEDUCING OF RS.4003000/- ON ACCOUNT OF BUSINESS DEVELOPMENT EXPENSES AS REVENUE EXPENSES. AS THE BUSINESS DEVELOPMENT EXPENSES GIVES AN ADVANTAGE OF ENDURING BENEFIT TO THE ASSESSEE, IT WAS REQUIRED TO BE CAPITALIZED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. AS PER SECTION 37 OF I.T. ACT, 1961 PROVIDES:- THAT ANY EXPENDITURE, NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE, LAID OUT WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, IS ALLOWABLE AS DEDUCTION IN COMPUTATION OF THE INCOME CHARGEABLE UNDER HT HEAD PROFIT AND GAINS OF BUSINESS OF PROFESSION. IN VIEW OF ABOVE FACTS OF THE CASE, I HAVE REASONS TO BELIEVE THAT THE INCOME TO THE TUNE OF RS.400300 0/- HAS ESCAPED ASSESSMENT OWING TO THE FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FA CTS NECESSARY FOR ASSTT. AND HENCE, NOTICE U/S 148 IS HEREBY ISSUED FOR REOPENING THE ASSTT. U/S 147 OF T HE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2003-04. 2.2 THE LD. AO MADE THE ADDITION OF RS.40,03,000/- TO THE INCOME OF THE ASSESSEE BY HOLDING THE BUSINESS DEVELOPMENT EXPENSES TO BE CAPITAL IN NATURE ON THE 4 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 GROUND THAT THE SAME HAS RESULTED IN ENDURING BENEF ITS TO THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A). 3.1 THE ASSESSEE HAD CONTESTED THE VALIDITY OF THE REOPENING OF THE ASSESSMENT ALONG WITH THE ADDITION MADE BY THE LD. AO. 3.2 AFTER PERUSAL OF VARIOUS MATERIALS AND SUBMISSI ONS PLACED ON RECORD BY THE ASSESSEE THE LD. CIT(A) DEL ETED THE ADDITION OF RS. 40,03,000/- MADE ON ACCOUNT OF BUSINESS DEVELOPMENT EXPENSES. HOWEVER, THE LD. CIT (A) HELD THE INITIATION OF REASSESSMENT PROCEEDINGS TO BE CORRECT. 3.3 AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE A SSESSEE AS WELL AS THE REVENUE IS IN APPEAL BEFORE US NOW. 4. AT THE OUTSET, THE LD. AR SUBMITTED THAT ASSESSE E HAD RAISED A PRELIMINARY ISSUE REGARDING THE VALIDI TY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE ACT FOR REASSESSMENT. ACCORDINGLY, WE ARE INCLINED TO TAKE UP THE CROSS OBJECTION BEFORE DEALING WITH THE APPEAL FILE D BY THE REVENUE. 4.1 THE LD. AR SUBMITTED THAT THE IMPUGNED REASSESSMENT ORDER PASSED UNDER SECTION 147 OF THE ACT, PURSUANT TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, HAS BEEN ISSUED ON EXPIRY OF 4 YEARS FROM THE END OF 5 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 THE RELEVANT ASSESSMENT YEAR, AND IS THEREFORE, BAR RED BY LIMITATION. THE LD. AO SUBMITTED THAT THE SAID REASSESSMENT ORDER NEEDS TO BE QUASHED. 4.2 HE SUBMITTED THAT IN THE ASSESSEES CASE THE RE ASONS RECORDED STATE, THAT INCOME HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN RELATION TO THE BUSINES S DEVELOPMENT EXPENDITURE. HE SUBMITTED THAT THIS IS IN TOTAL CONTRADICTION AS THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT HAD SPECIFICALLY CALLED FOR THE DETAILS IN RESPECT OF THE BUSINESS DEVELOPMENT EXPENSES INC URRED BY THE ASSESSEE FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. AR REF ERRED TO PAGE 80, 82, 83, 84 OF THE PAPER BOOK WHEREIN TH E ASSESSEE HAD SUBMITTED THE DETAILS IN RESPECT OF TH E BUSINESS DEVELOPMENT EXPENSES INCURRED BY THE ASSES SEE ON THE SPECIFIC QUERY RAISED BY THE LD. AO. LD. A.R . SUBMITTED THAT THE ASSESSEE HAD SUBMITTED DETAILS O F THE BUSINESS DEVELOPMENT EXPENSES AND THE SAME HAS BEEN CONSIDERED AT LENGTH BY THE LD. AO AT THE TIME OF O RIGINAL ASSESSMENT PROCEEDINGS. 4.3 ON MERITS THE LD. A R SUBMITTED THAT THE ASSESS EE HAD INCURRED AN AMOUNT OF RS. 40,03,000/- TOWARDS BUSINESS DEVELOPMENT EXPENDITURE, WHICH WAS CLAIMED AS REVENUE EXPENSES IN THE RETURN OF INCOME FOR THE RE LEVANT ASSESSMENT YEAR. HE STATED THAT THE SAID EXPENDITUR E WAS INCURRED MAINLY ON ACCOUNT OF PROSPECTING FOR NEW 6 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 BUSINESS ASSIGNMENT, WITH A VIEW TO PROMOTE THE BUS INESS ADVERTISEMENT CARRIED ON BY THE ASSESSEE AND CONSEQUENTLY, INCREASED THE TURNOVER/PROFITS OF THE COMPANY. HE SUBMITTED THAT THE SAID EXPENDITURE COMPRISES OF EXPENDITURE TOWARDS DEVELOPMENT OF PRESENTATION, ADVERTISEMENT, FILMS, IDEAS FOR MAKIN G REACH TO PROSPECTIVE CUSTOMER OR TO EXISTING CUSTOMERS, I N ORDER TO OBTAIN CONTRACT. BESIDES SUCH SEVERAL EXPENSES INCURRED ON ACCOUNT OF MARKETING COMMISSION CHARGES TO AGENTS FOR BRINGING NEW BUSINESS, DESIGNING MARKET RESEARCH, DATA ANALYSIS, TRAVELLING AND CLIENT MEET ING ETC., HE SUBMITTED THAT THESE EXPENSES WERE INCURRED IN O RDER TO INDUCE CUSTOMERS TO AVAIL SERVICES OF THE ASSESS EE AND CONSEQUENTIALLY INCREASE THE BUSINESS OF THE ASSESS EE. HE FURTHER SUBMITTED THAT THESE EXPENSES ARE NOT IN TH E NATURE OF ONE-TIME EXPENSES BUT THE SAME HAVE TO BE INCURRED YEAR AFTER YEAR BY THE ASSESSEE TO MAINTAI N AND INCREASE THE RECEIPTS OF THE ADVERTISEMENT BUSINESS CARRIED ON BY THE ASSESSEE. THE LD. AR SUBMITTED TH AT ASSESSEE HAS INCURRED SIMILAR EXPENDITURE IN THE PRECEDING AND SUCCEEDING ASSESSMENT YEARS, WHICH HA S BEEN ACCEPTED BY THE DEPARTMENT. IN THIS REGARD THE LD.AR HAS RELIED UPON THE ORDER OF THE LD. CIT (A) FOR ASSESSMENT YEAR 2007-08. 5. THE LD. DR RELIED ON THE ORDER OF THE LD. CIT (A ). 6. WE HAVE DEALT WITH THE ISSUE OF REOPENING AND OBSERVED THAT THE NOTICE ISSUED UNDER SECTION 148 I S 7 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 BEYOND A PERIOD OF 4 YEARS. IT HAS ALSO BEEN DEMONS TRATED BY THE LD. AR THAT THE ISSUE OF ALLOWABILITY OF BUS INESS DEVELOPMENT EXPENSES HAS BEEN DEALT WITH BY THE LD. AO AT THE TIME OF ORIGINAL ASSESSMENT AND SPECIFIC QUE RIES WERE RAISED IN RESPECT OF THE SAME, TO WHICH, THE A SSESSEE HAS SUBMITTED ALL THE DETAILS AND MATERIALS NECESSA RY FOR ASSESSMENT IN CONNECTION WITH THE ISSUE. IT HAS BEE N BROUGHT TO OUR NOTICE FROM THE AUDITED ACCOUNTS FIL ED BY THE ASSESSEE AT PAGES 39 TO 53 WITH SPECIFIC REFERE NCE TO PAGE 42 BEING THE P&L ACCOUNT, WHEREIN, UNDER THE H EAD OTHER OPERATING EXPENSES THE EXPENSES RELATING TO BUSINESS DEVELOPMENT HAVE BEEN INCLUDED IN SCHEDULE 16 AT PAGE 49 OF THE PAPER BOOK. 6.1 THE EXPRESSION ESCAPED ASSESSMENT USED IN SEC TION 147 OF THE ACT CLEARLY CONNOTES THAT THE INCOME FOR A PARTICULAR ASSESSMENT YEAR SHOULD BE UNNOTICED BY T HE ASSESSING OFFICER FOR IT TO HAVE ESCAPED ASSESSMENT . REVIEWING AN ASSESSMENT ORDER SUO-MOTO WITHOUT THER E BEING ANY FRESH MATERIAL TO JUSTIFY A CONCLUSION DI FFERENT FROM THE INFERENCE DRAWN DURING THE ORIGINAL ASSESS MENT PROCEEDINGS, CANNOT BE PERMITTED UNDER SECTION 147 OF THE ACT. IT HAS BEEN SETTLED BY VARIOUS DECISIONS OF H ONBLE SUPREME COURT AND VARIOUS HON'BLE HIGH COURTS THAT REASONS TO BELIEVE CAN NEVER BE OUTCOME OF A CHANGE OF OPINION. IT IS ESSENTIAL THAT BEFORE ANY ACTION IS TAKEN BY THE ASSESSING OFFICER, HE SHOULD SUBSTANTIATE HIS SATISFACTION. 8 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 6.2 IN THE PRESENT CASE, THE ORIGINAL ASSESSMENT OR DER UNDER SECTION 143 (3) OF THE ACT WAS COMPLETED AFTE R DUE APPLICATION OF MIND ON THE ISSUE OF ALLOWABILITY OF BUSINESS DEVELOPMENT EXPENDITURE. THE FACTS MATERIAL FOR VER IFYING THE ISSUE AND TO CONSIDER ITS ALLOWABILITY, WAS DUL Y DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT PROCEE DINGS. IT IS ONLY ON REAPPRAISAL OF THE SAME MATERIALS/FAC TS THAT THE REASSESSMENT NOTICE UNDER SECTION 148 HAS BEEN ISSUED IN THE CASE OF THE ASSESSEE BEFORE US NOW WI THOUT THERE BEING ANY NEW INFORMATION OR MATERIAL THAT MI GHT HAVE COME TO THE KNOWLEDGE OF THE LD. AO SUBSEQUENT TO THE COMPLETION OF THE ORIGINAL ASSESSMENT. 6.3 ON THE BASIS OF THE FACTUAL POSITION ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT T HE REASSESSMENT PROCEEDINGS INITIATED ON THE BASIS OF REAPPRAISAL OF THE SAME FACTS AMOUNTS TO MERE CHANG E OF OPINION. WE, THEREFORE, SET ASIDE THE ORDER PASSED UNDER SECTION 147 READ WITH 143 (3) OF THE ACT AND QUASH THE REASSESSMENT PROCEEDINGS IN THE CASE BEFORE US. 6.4 AS WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS , THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ASSESSMENT YEAR 2007-08 7. THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 15/02/2011 PASSED BY LD. CIT (A ) IV, NEW DELHI. FOR ASSESSMENT YEAR 2007-08 ON THE FOLLO WING GROUNDS OF APPEAL: 9 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 1. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.429861/- MADE ON ACCOUNT OF DISALLOWANCE MADE U/S 40(A)(IA) OF THE I.T.ACT IGNO RING THAT THE DISALLOWANCE HAS BEEN MADE ON THE BASIS OF THE REPORT OF THE AUDITOR. ALSO THERE IS NO DOCUMEN TARY EVIDENCE AVAILABLE ON RECORD REGARDING THE DEDUCTIO N OF TAX AND DEPOSITING THE SAME IN THE GOVERNMENT ACCOUNT. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.2069817/-ON ACCOUNT OF CAPITALIZATIO N OF BUSINESS DEVELOPMENT EXPENSES IGNORING THAT THE BENEFIT OF ENDURING NATURE WAS DRAWN BY THE ASSESSEE WHILE INCURRING SUCH AN EXPENDITURE. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT VS. COAL SHIPMENTS P. LTD.(L97 1) 82 ITR 902. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.27,00,000/- MADE ON ACCOUNT OF UNEXPLAINED DEPOSIT IGNORING THAT THE ASSESSEE FAIL ED TO PROVIDE THE DOCUMENTARY EVIDENCES AS CALLED FOR DURING THE ASSESSMENT PROCEEDINGS. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.21514/- ON ACCOUNT OF DISALLOWANCE O F EXTRA DEPRECIATION ON COMPUTER PERIPHERALS IGNORING THAT AS PER THE IT RULES 60% DEPRECIATION IS ALLOWA BLE ONLY ON COMPUTER AND COMPUTER SOFTWARE AND NOT ON COMPUTER PERIPHERALS AND ACCESSORIES. 7.1 BRIEF FACTS OF THE CASE ARE AS UNDER THE ASSESS EE FILED ITS RETURN OF INCOME ON 31/10/2007 DECLARING A TOTA L INCOME OF RS.54,61,581/-. SUBSEQUENTLY, ASSESSEE FI LED REVISED COMPUTATION OF INCOME DECLARING A TOTAL INC OME OF RS. 40,70,512/-. THE RETURN WAS PROCESSED UNDER SEC TION 143 (1) AND NOTICES UNDER 143 (2) WERE ISSUED. 10 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 7.2 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ADVERTISING AND DURING THE YEAR UNDER CONSIDERATION THE NET PROFIT RATIO OF THE COMPANY WAS 4.56% AS COMPAR ED TO 3.84% IN THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER MADE FOLLOWING ADDITION AND COMPLETED THE ASSESSMENT: TOTAL INCOME AS SHOWN BY THE ASSESSEE IN STI RS.40, 70,512/- ADD: BAD DEBTS WRITTEN OFF: RS.60,16,821/- REIMBURSEMENT OF FBT TO LG CDMA RS.14,14,829/- FOREIGN EXCHANGE FLUCTUATION GAIN RS.16,31,000/- DISALLOWANCE U/S 40(A)(IA) RS.4,29,861/- BUSINESS DEVELOPMENT EXPENSES RS.20,69,817/- OTHER OPERATIVE EXPENSES RS.38,63,870/- UNEXPLAINED DEPOSIT RS.27,00,000/- DEPRECIATION ON COMPUTER PERIPHERALS RS.21,514/- DELAYED PAYMENTS TOWARDS EPF & ESI DISALLOWED RS.1,50,800/- TOTAL ASSESSED INCOME RS.2,23,69,024/- ROUNDED OFF RS.2,23,69,020/- 7.3 AGGRIEVED BY THE ORDER OF THE LD. AO THE ASSESS EE PREFERRED AN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) DELETED THE ADDITIONS MADE BY THE LD. AO. 7.4 AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE R EVENUE IS IN APPEAL BEFORE US NOW. 11 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 8. GROUND NO. 1: THIS GROUND PERTAINS TO THE DELETION OF ADDITION MADE UNDER SECTION 40 (A) (IA) OF THE A CT TO THE TUNE OF RS.4,29,861/-. THE ASSESSEE HAD PAID THIS A MOUNT TO VARIOUS PARTIES FOR SERVICES RENDERED, ON WHICH TDS WAS DEDUCTED. THE LD. AO OBSERVED THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.4,29,861/-ON WHICH EITHER T AX WAS DEDUCTIBLE OR NOT DEDUCTED AT ALL, OR TAX WSAS DEDUCTED LATE OR THERE WAS SHORTFALL ON DEDUCTION. HE, THEREFORE, MADE AN ADDITION OF RS.4,29,861/-UNDER S ECTION 40 (A) (IA) OF THE ACT. 8.1 THE LD. DR RELIED UPON THE ORDER PASSED BY THE LD. AO. 8.2 ON THE CONTRARY THE LD.AR SUBMITTED THAT AN AMOUNT OF RS.79,861/- HAD BEEN ADDED BACK SUO-MOTO FOR NON-DEDUCTION OF TDS. INSOFAR AS THE BALANCE AMOUNT OF RS.3,50,000/- WAS CONCERNED THE LD. AR SUBMITTED TH AT THE SAID AMOUNT WAS PAID TO ONE MR. KABIR BEDI, ON 16/03/2006, AND TDS HAS BEEN DEDUCTED AND DEPOSITED . THE LD. AR HAS PRODUCED LEDGER ACCOUNT OF KABIR BED I AND THE TDS CERTIFICATE ISSUED TO HIM. 8.3 IT IS OBSERVED THAT THE LD. CIT (A) HAS VERIFIE D THE SAID DETAILS AND THEN HAS DELETED THE ADDITION. WE THEREFORE, DO NOT FIND ANY INFIRMITY WITH THE FINDI NGS OF THE LD. CIT (A). 8.4 ACCORDINGLY THIS GROUND RAISED BY THE REVENUE S TANDS DISMISSED. 12 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 9. GROUND NO. 2: THE REVENUE HAS RAISED THE GROUND DUE TO THE ADDITION BEING DELETED IN RESPECT OF THE BUSINESS DEVELOPMENT EXPENSES BEING ALLOWED AS REVE NUE IN NATURE. 9.1 THE LD. AO TREATED THE BUSINESS DEVELOPMENT EXPENSES TO BE IN THE NATURE OF AN ENDURING BENEFIT IN THE HANDS OF THE ASSESSEE AND HAD HELD IT TO BE CAPITAL IN NATURE. THE LD. DR PLACED RELIANCE ON THE ORDER PAS SED BY THE LD. AO. 9.2 ON THE CONTRARY THE LD. AR SUBMITTED THAT THESE EXPENSES WERE INCURRED BY THE ASSESSEE FOR CARRYING ON THE BUSINESS OF ADVERTISEMENT, GETTING NEW ASSIGNME NTS FOR THE COMPANY, MEETING EXPENSES, MARKETING EXPENS ES, CONSULTANCY EXPENSES ETC. THE LD. A.R. SUBMITTED TH AT THE ASSESSEE HAS NOT MADE ANY EXPENDITURE FOR INITIATIO N OF THE BUSINESS OR FOR EXTENSION OF THE BUSINESS. HE SUBMITTED THAT THESE EXPENSES ARE INCURRED IN THE P ROCESS OF RENDERING THE DAY-TO-DAY AFFAIRS OF THE BUSINESS ACTIVITY. 9.3 WE HAVE PERUSED THE DETAILS FILED BEFORE US AND THE ORDERS PASSED BY THE AUTHORITIES BELOW. ON PERUSAL OF THE BOOKS OF ACCOUNTS AND THE SUBMISSIONS MADE BY THE L D. AR, IT IS OBSERVED THAT THESE EXPENSES WERE INCURRE D BY THE ASSESSEE IN EVERY ASSESSMENT YEAR AND, THEREFOR E, THEY ARE RECURRING IN NATURE. WE ARE, THEREFORE, INCLINE D TO TREAT THESE EXPENSES AS REVENUE IN NATURE. WE ALSO DRAW SUPPORT FROM THE SUBMISSIONS MADE BY THE LD. A R, A ND 13 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 OUR FINDINGS TO THAT EFFECT, GIVEN WHILE DEALING WI TH THE SIMILAR ISSUE FOR ASSESSMENT YEAR 2003-04 HEREINABO VE. 9.4 ACCORDINGLY THIS GROUND RAISED BY THE REVENUE S TANDS DISMISSED. 10. GROUND NO. 3: THIS GROUND HAS BEEN RAISED BY THE REVENUE PERTAINING TO THE ADDITION BEING DELETED ON UNEXPLAINED DEPOSITS. 10.1 THE LD. AO DURING THE ASSESSMENT PROCEEDINGS, OBSERVED FROM THE BANK STATEMENTS OF THE ASSESSEE T HAT DEPOSIT OF RS.27LACS WAS RECEIVED FROM SH. H.V. SUBRAHMANYAM, DIRECTOR OF THE ASSESSEE COMPANY ON 11.07.2006. THE ASSESSEE SUBMITTED THAT MR. SUBRAMANIAM HAD PROVIDED AN UNSECURED LOAN TO THE COMPANY, WHICH WAS REPAID IN THE SAME YEAR. BANK STATEMENTS OF MR. SUBRAMANIAM WERE SUBMITTED AND FR OM THE SAME, THE SOURCE OF DEPOSITS IN THE ACCOUNT WAS EXPLAINED BY THE ASSESSEE. ON FURTHER QUERY, IT HAS BEEN OBSERVED THAT MR. SUBRAMANIAM HAD TAKEN THE SAID AMOUNT FROM HIS RELATIVE MR. KRISHNAN AND THAT WAS RETURNED BY HIM IMMEDIATELY IN THE YEAR UNDER CONSIDERATION. THE LD. AO MADE AN ADDITION OF RS. 27 LACS AS HE WAS OF THE BELIEF THAT THE ASSESSEE WAS NOT IN A POSITION TO PROVE THE IDENTITY OF THE DEPOSITOR, TH E GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHI NESS OF THE CREDITOR. ON APPEAL TO THE LD. CIT (A) THE S AID ADDITION WAS DELETED ON THE BASIS OF UNDISPUTED FAC T THAT 14 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 ASSESSEE HAD TAKEN A LOAN FROM ITS DIRECTOR WHO, IN TURN, HAD TAKEN MONEY FROM ONE SH. KRISHNA WHO WAS REPAID DURING THE YEAR. THE LD. CIT (A) DELETED THE ADDITI ON ON THE GROUND THAT ASSESSING OFFICER HAS NOT PROVED TH AT THE SAID AMOUNT BELONGED TO THE ASSESSEE. 10.2 BEFORE US, THE LD. D. R. CONTENDED THAT MERELY BECAUSE BANK STATEMENTS OF SRI. SUBRAHMANYAM HAS BE EN PRODUCED DOES NOT LEAD TO A CONCLUSION THAT THE MON EY ADVANCED BY MR. SUBRAMANIAM IS NOT THAT OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS NOT PROVIDED ANY DOCUMENTS RELATING TO SH. KRISHNAN TO PROVE THAT THE SAID MONEY HAS BEEN ADVANCED BY SRIKRISHNA TO SH. SUBRAMANIAN. 10.3 ON THE CONTRARY THE LD. AR SUBMITTED THAT THE MOMENT ASSESSEE SUBMITS THE BANK STATEMENT OF SH. SUBRAHMANYAM THE IDENTITY OF THE LENDER STANDS PROV ED, TO GO INTO THE NEXT LEVEL OF PROVING THE IDENTITY O F SHRI. KRISHNAN IS NOT REQUIRED AS THAT WOULD AMOUNT TO PR OVING THE IDENTITY OF SOURCE OF THE SOURCE, WHICH IS NOT MANDATORY UNDER LAW. 10.4 WE HAVE PERUSED ALL THE NECESSARY DETAILS PLAC ED ON RECORD AND THE ORDERS PASSED BY THE AUTHORITIES BEL OW. 10.5 IT IS AN ADMITTED FACT THAT A SHORT TERM LOAN WAS ADVANCED BY SH. SUBRAHMANYAM TO THE ASSESSEE, WHICH HAS BEEN ESTABLISHED FROM THE BANK STATEMENTS PLACE D AT PAGES 190 TO 195D OF THE PAPER BOOK. IT ALSO APPEAR S FROM 15 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 THESE BANK STATEMENTS THAT THE ASSESSEE HAS REPAID THE SAID AMOUNT TO SH. SUBRAHMANYAM, WITHIN THE YEAR UNDER CONSIDERATION. 10.6 WE ALSO FIND FORCE IN THE SUBMISSION OF THE LD . DR THAT THOUGH THE CREDITWORTHINESS AND IDENTITY OF SH . SUBRAMANIAM STOOD ESTABLISHED, CANNOT LEAD TO THE CONCLUSION THAT SH. SUBRAMANIAM HAS ADVANCED THE SA ID MONEY FROM HIS OWN FUNDS. EVEN OTHERWISE THE ASSESS EE HAS SUBMITTED BEFORE THE AUTHORITIES THAT SH. SUBRAMANIAM HAD OBTAINED THE SAID AMOUNT FROM SH. KRISHNAN WHO WAS HIS RELATIVE. IT IS NECESSARY AT T HIS JUNCTURE TO PROVE THAT THE SAID MONEY HAS BEEN DEPO SITED INTO THE ACCOUNT OF SH. SUBRAHMANYAM BY SRI. KRISHN A IN THE BANK ACCOUNTS FILED IN THE PAPER BOOK, WHICH NECESSARILY DOES NOT IMPLY PROVING IDENTITY OF SHRI KRISHNA. 10.7 WE THEREFORE, SET ASIDE THIS ISSUE BACK TO THE LD.AO TO VERIFY THE ABOVE FACT AFTER GIVING SUFFICIENT OP PORTUNITY TO THE ASSESSEE TO PROVIDE ALL NECESSARY DOCUMENTS. THE LD. AO IS DIRECTED TO VERIFY FROM THE BANK STATEMEN TS OF SRI. KRISHNA REGARDING THE DEPOSIT OF SAID MONEY TO THE ACCOUNT OF SH. SUBRAHMANYAM WITHOUT GOING INTO ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF S H. KRISHNAN. 10.8 ACCORDINGLY THIS GROUND RAISED BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 16 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 11. GROUND NO. 4: THIS GROUND HAS BEEN RAISED BY THE REVENUE AGAINST THE ADDITION BEING DELETED ON ACCOU NT OF RESTRICTION OF DEPRECIATION AT THE RATE OF 15%. 11.1 DURING THE COURSE OF THE ASSESSMENT PROCEEDING S THE LD. AO OBSERVED THAT ASSESSEE HAD MADE ADDITION TO THE FIXED ASSETS UNDER THE HEAD COMPUTER AND HAD CLAI MED DEPRECIATION @ 60%. THE LD. AO RESTRICTED THE DEPRECIATION @ 15% AS THE ASSESSEE HAD CLAIMED DEPRECIATION ON COMPUTER PERIPHERALS. ON AN APPEAL BEFORE THE LD. CIT (A), HE ALLOWED THE DEPRECIATION @ 60%. 11.2 THE LD. DR SUBMITTED THAT THE DEPRECIATION OF 60% ARE AVAILABLE TO THE ASSESSEE ONLY ON COMPUTERS AND COMPUTER SOFTWARE AND CANNOT BE EXTENDED TO COMPUTE R ACCESSORIES AND PERIPHERALS. HE RELIED UPON THE ORD ER PASSED BY THE LD. AO. 11.3 ON THE CONTRARY THE LD. DR SUBMITTED THAT COMP UTER ACCESSORIES ARE PURCHASED DURING THE YEAR UNDER CONSIDERATION INCLUDE PRINTERS, SCANNERS, MORE THAN AND UPS. HE SUBMITTED THAT THESE ACCESSORIES CANNOT BE USED WITHOUT THE COMPUTER BEING AN INTEGRAL PART OF THE TOTAL NETWORK SYSTEM. HE SUBMITTED THAT THESE HAVE NO UTI LITY IS NOT ATTACHED WITH THE COMPUTER SO THEY HAVE BEEN CLUBBED WITH THE COMPUTER AND DEPRECIATION AT THE R ATE OF 60% HAS BEEN CHARGED ON THE MAIN COMPUTER. 11.4 WE HAVE PERUSED THE RELEVANT FACTS AND THE ORD ERS PASSED BY THE AUTHORITIES BELOW. THE LD. CIT (A) A LLOWED 17 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 THE DEPRECIATION @ 60% BY RELYING UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. BSES RAJDHANI POWERS LTD IN ITA NO. 1266/2010. THE LD. CIT(A) HAS REPRODUCED THE RELEVANT PARAGRAPH OF THE AFORE- STATED DECISION AT PARAGRAPH 35 OF HIS ORDER. 12. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF LD. CIT(A) AND UPHOLD THE SAME. ACCORDINGLY, THIS GROU ND RAISED BY REVENUE STANDS DISMISSED. 13. ASSESSMENT YEAR 2008-09 THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 18/06/2012 PASSED BY THE LD. CI T (A) 6, NEW DELHI FOR ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED ON FACTS IN LAW TO ALLOW T HE BUSINESS DEVELOPMENT EXPENSES OF RSW.32,48,760/- BEING CAPITAL IN NATURE. 2. THE LD. CIT(A) ERRED ON FACTS IN LAW TO ALLOW TH E CLUB EXPENDITURE OFRS.7,51,885/- OF THE I.T. ACT. GROUND NO. 1: 13.1 IT APPEARS THAT THIS GROUND RELATES TO THE ALL OWANCE OF DEVELOPMENT EXPENDITURE TO AN EXTENT OF RS. 32 L ACKS 48,760/-. THE REVENUE HAS BEEN DISALLOWING THIS EXP ENSES EVERY YEAR FOR IT TO BE CONSIDERED AS CAPITAL IN NA TURE ON THE GROUND THAT THESE EXPENSES PROVIDE ENDURING BEN EFITS TO THE ASSESSEE. WE HAVE DEALT WITH THIS ISSUE AT L ENGTH AND HAS DISMISSED THIS ISSUE RAISED BY THE REVENUE IN THE 18 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 PRECEDING PARAGRAPHS FOR ASSESSMENT YEAR 2003-04 AN D 2007-08. THERE BEING NO CHANGE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION WE HOLD THESE EXPENSES TO BE RE VENUE IN NATURE AND DISMISS THIS GROUND RAISED BY THE REV ENUE. GROUND NO. 2 13.2 THIS GROUND RELATES TO THE CLUB EXPENDITURE IS ALLOWED BY THE LD. CIT (A). 13.2.1 ASSESSEE HAD TAKEN MEMBERSHIP OF DLF GOLF RESORT AMOUNTING TO RS.7,51,885/-BY WAY OF SUBSCRIP TION TO CLUBS FOR THE PURPOSES OF PROMOTING THE BUSINESS OF THE COMPANY. 13.2.2 THE LD. AO MADE ADDITION BY HOLDING THAT THE SE EXPENSES ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSES OF BUSINESS. LD. D R PLACES HIS RELIANCE U PON THE ORDER PASSED BY THE LD. ASSESSING OFFICER. 13.2.3 THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF ADVERTISEMENT AND HAS FOREIGN-BASED CLIENT, THEREFORE MEMBERSHIP IN SUCH CLUBS IS WARRA NTED TO ENTERTAIN THEIR CLIENTS AND CONSEQUENTLY TO EXPL OIT THE BUSINESS OPPORTUNITY. IT IS SUBMITTED THAT THE ASSE SSEE HAD INCURRED THE EXPENDITURE TO PROMOTE AND FOSTER ITS BUSINESS RELATIONSHIP. 13.2.4 AT THE OUTSET IT HAS BEEN SUBMITTED BY THE L D. AR THAT THIS ISSUE HAS BEEN DEALT WITH BY HONBLE B OMBAY HIGH COURT IN THE CASE OF OTIS ELEVATOR COMPANY (IN DIA) 19 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 LIMITED VS. CIT REPORTED IN (1992) 195 ITR 682. IT IS OBSERVED THAT THE LD. CIT (A) HAS GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE RATIO LAID DOWN BY HON'BL E HIGH COURT IN CASE OF OTIS ELEVATOR CO. (I) LTD. (SUPRA) . HON'BLE HIGH COURT OBSERVED AS UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE ID. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT THE AO HAS DISALLOWED THE MEMBERSHIP FEE TO DLF GOLF RESORT AMOUNTING TO RS.7,51,885/- TREATING THE SAME AS PERSONAL EXPENDITURE. IT IS FURTHER SEEN THAT THE IDENTICAL ISSUED WAS DECIDED IN THE FAVOUR OF APPELLANT COMPANY BY MY PREDECESSOR CIT(A)-VI FOR THE ASSESSMENT YEAR 2003-04. THE RELEVANT EXTRACTS OF THE ORDER OF MY PREDECESSOR DATED 30.03.2007 FOR TH E ASSESSMENT YEAR 2003-04 (IN APPEAL NO. 295/2005- 06) ARE REPRODUCED BELOW FOR REFERENCE:- '3.2 LD. AR ARGUED THAT THE COMPANY IS A LEGAL ENTI TY AND NO PERSONAL EXPENDITURE CAN BE INCURRED BY THE COMPANY. HENCE, THE MEMBERSHIP GEE AMOUNTING TO RS.1,20,000/- WAS REQUIRED TO BE ALLOWED AS BUSINESS EXPENDITURE. ACCORDING TO AR, THE CLUB MEMBERSHIP FEE PAID BY THE DIRECTOR HAS GOT DIRECT NEXUS WITH THE ADVERTISING BUSINESS OF THE ASSESSEE AND IS ALLOWABLE AS BUSINESS EXPENDITURE. IN SUPPOR T OF HIS CONTENTION, LEARNED AR HAS RELIED ON THE FOLLOWING CASE LAWS: CIT VS. CITI BANK N.A. 264 ITR 18 WILLARD INDIA LTD. VS. DCIT 87 TTJ 102 (DEL D) 3.3 CONSIDERING THE FACT OF THE CASE AND CASE LAWS AS RELIED UPON BY THE LEARNED AR, I FIND THAT THE CLUB MEMBERSHIP FEE IS AN ALLOWABLE. HENCE, THE DISALLOWANCE OF RS.1,20,000/- IS DELETED'. 6.4 RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF MY PREDECESSOR AND ON THE DECISIONS IN THE CASES OF 20 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 THE OTIS ELEVATOR CO. (INDIA) LTD. V. CIT [1992] 19 5 ITR 682 AND GUJARAT STATE EXPORT CORPORATION LTD. V. CI T [1994] 209 ITR 649, THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.7,51,885/- MADE ON ACCOUNT OF CLUB EXPENSES. 14. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS GI VEN BY THE LD. CIT (A). RESPECTFULLY FOLLOWING THE DECISIO N IN THE CASE OF OTIS ELEVATOR CO. (INDIA) LTD. VS. CIT (SUP RA), WE DISMISS THIS GROUND OF APPEAL RAISED BY THE REVENUE . 15. ACCORDINGLY APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH AUG., 2016. SD./- SD./- (R. S. SYAL) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:18.08.2016 SP. COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) 21 I.T.A.NOS.4774, 4775/DEL/2012 I.T.A.NO.1892/DEL/2011 C.O. NO.436/DEL/2012 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 18/8/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 18/8 SR. PS/PS 7 FILE SENT TO BENCH CLERK 22/8 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER