NORTHPOINT CENTRE OF LEARNING, MUMBAI V. JCIT (OSD) 15(1), MUMBAI

ITA 5069/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3057 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2014
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: MRUGAKSHI K JOSHI
• Keywords: Earning of tax free income; Corroborative evidences; Commercial expediency
• Section: 143(3); 14A; 37(1); 2

Judgement Text

1 I.T.A. NO.5069/MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI C.N.PRASAD (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.5069/MUM/2014 (ASSESSMENT YEAR : 2009-10) M/S NORTHPOINT CENTRE OF LEARNING 15 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT, MUMBAI-21 VS JT. CIT (OSD)-15(1),MUMBAI PAN : AAAJN0298D (APPELLANT) (RESPONDENT) APPELLANT BY MR MRUGAKSHI K JOSHI RESPONDENT BY ARJU GARODIA DATE OF HEARING : 07-09-2016 DATE OF PRONOUNCEMENT : 21 -09-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)[HEREINAFTER CA LLED CIT(A)] DT 08-05-2014 PASSED AGAINST THE ASSESSMENT ORDER U/S 143(3) DT 2 8-12-2011 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW: 1. ADHOC DISALLOWANCE THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADHOC DI SALLOWANCE @ 5% OF THE TOTAL EXPENDITURE ALTHOUGH THE EXPENDITURE W AS INCURRED SOLELY FOR THE PURPOSE OF BUSINESS. 2 I.T.A. NO.5069/MUM/2014 2. DISALLOWANCE U/S. 14A - A.THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE U/S. 14A OF RS. 2,58,650/- MADE BY THE AO TOWARDS ESTIMA TED EXPENSES WHICH HAVE NOT BEEN INCURRED ON EARNING TAX FREE DI VIDEND INCOME. B. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S. 14A BY USING FORMULA SET OUT IN RULE 8D OF THE INCO ME TAX RULES BUT FAILING TO TAKE INTO CONSIDERATION THAT THE AO CANN OT IPSO FACTO APPLY RULE 8D BUT CAN DO SO ONLY WHERE HE RECORDS SATISFA CTION ON AN OBJECTIVE BASIS THAT THE APPELLANT IS UNABLE TO EST ABLISH THE CORRECTNESS OF ITS CLAIM. C. THE LEARNED CIT(A) FAILED TO ESTABLISH ANY NEXU S BETWEEN THE EXPENDITURE INCURRED AND THE EXEMPT INC OME EARNED AND FAILED TO TAKE INTO CONSIDERATION THE SUPREME C OURT DECISION IN THE CASE OF RAJASTHAN WAREHOUSING REPORTED IN 242 I TR 450 AND IN THE CASE OF CIT VS. HERO CYCLES (PUNJAB AND HARYANA HIG H COURT) WHICH HELD THAT NO EXPENSE CAN BE DISALLOWED IF THE NEXUS CANNOT BE ESTABLISHED FOR INCURRING EXPENDITURE FOR EARNING T AX FREE INCOME AND SECTION 14A CANNOT BE MERELY APPLIED ON PRESUMP TION. 3. DISALLOWANCE OF PROFESSIONAL FEE OF RS. 4,00,000 /- THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF THE PROFESSIONAL FEES PAID TO AN INTERIOR DESIGNING CONSULTANT, ON THE GROUND THAT IT WAS NOT INCURRED FOR THE RUNN ING OF THE BUSINESS, ALTHOUGH THE GENUINENESS OF THE TRANSACTI ON CAN BE EVIDENCED BY THE BILLS/ VOUCHERS AND TDS CERTIFICAT ES, WHICH WERE DULY SUBMITTED BEFORE ASSESSING OFFICER AND CIT(A). 4. DISALLOWANCE OF CONDUCTING FEE / COMMISSION FEE OF RS.15,78,624/- A. THE LEARNED CIT(A) ERRED IN DISALLOWING THE COMMISSION FEE PAID TO M/S NORTHPOINT TRAINING & RESEARCH PVT. LTD., ON THE GROUND OF MISAPPROPRIATI ON OF PROFIT WITH INTENTION TO DIVERT INCOME. B. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE O RDER OF THE HONBLE ITAT, IN ITS OWN CASE, FOR ASSESSMEN T YEAR 2007-08, HAVING IDENTICAL FACTS AND CIRCUMSTANCES, WHEREIN THE ADDITION MADE WAS DELETED, ON THE GROUND THAT IN TH E CURRENT YEAR THERE IS A PROFIT AND NO ISSUE OF BROUGHT FORWARD L OSS AND THESE FACTS WERE DIFFERENT IN THE PREVIOUS YEAR. . C. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AP PELLANT HAS NOT SUBSTANTIATED THAT THE EXPENSE WAS INCURRED WHOLLY FOR THE PURPOSE OF BUSINESS, ALTHOUGH THE SAME EXPLANATION WAS GIVEN D URING 3 I.T.A. NO.5069/MUM/2014 THE ASSESSMENT PROCEEDINGS AS THAT, WHICH WAS GIVEN BEFORE THE HON'BLE ITAT, WHO AFTER SATISFACTION DELETED THE AD DITION IN ASSESSMENT YEAR 2007-08. 2. GROUND 1: IN THIS GROUND, THE ASSESSEE CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE @5% OF THE TOTAL EXP ENDITURE. 3. THE BRIEF BACKGROUND IS THAT THE ASSESSING OFFICER HAD MADE AN ADHOC DISALLOWANCE OF RS.1,75,267 BEING 10% OF THE TOTAL EXPENDITURE AS PERSONAL EXPENDITURE ON THE GROUND THAT THE EXPENSES WERE MA DE WITHOUT SUPPORTING EVIDENCES. THE ASSESSEE CONTENDED BEFORE THE CIT(A ) THAT EXPENSES WERE INCURRED SOLELY FOR THE PURPOSE OF BUSINESS, AND TH ERE WAS NO PERSONAL USE INVOLVED. THE LD. CIT(A) REDUCED THE DISALLOWANCE TO 5%. 4. BEFORE US, THE LD. COUNSEL DREW OUR ATTENTION ON TH E DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11 IN ITA NO. 347/MUM/2015 DT 11-06-2015. WE HAVE GONE THROUGH THE ORDERS OF LOW ER AUTHORITIES AND DECISION OF THE TRIBUNAL. IT IS NOTED THAT IN A.Y. 2010-11, THE TRIBUNAL HAS FURTHER REDUCED THE DISALLOWANCE FROM 5% TO 2% WITH THE FOLLOWING OBSERVATIONS:- 2.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A TRAINING INSTITUTE IN ADVERTISING FOR POST GRADUATE RESIDENTIAL STUDENTS, DECLARED INCOME OF RS.1890/- IN ITS RETURN FILED ON 07/10/2010. THE ASSESSEE CLAIMED RS.10,49,800/- TO HAVE BEEN INCURR ED FOR PRINTING AND STATIONARY, TELEPHONE AND TRAVELLING EXPENSES F OR BUSINESS PURPOSES. THE ASSESSING OFFICER SUSPECTED THE GENUI NENESS OF THESE EXPENDITURE BY HOLDING THAT THERE WAS ELEMENT OF PE RSONAL USE, THUS, HE MADE DISALLOWANCE AT THE RATE OF 10% OF SUCH EXP ENDITURE. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX ( APPEALS), THE DISALLOWANCE WAS RESTRICTED TO 5% OF THE CLAIMED EX PENSES INCURRED UNDER VARIOUS HEADS, THUS, PART RELIEF WAS GRANTED TO THE ASSESSEE AGAINST WHICH, THE AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4 I.T.A. NO.5069/MUM/2014 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MAD E BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND AN ALYZED, I FIND THAT AD-HOC DISALLOWANCE WAS MADE BY THE ASSESSING OFFIC ER BY SUSPECTING THAT THERE IS A ELEMENT OF PERSONAL USE. HOWEVER, T HE LD. ASSESSING OFFICER HAS NOT PINPOINTED THAT WHICH EXPENSES ARE OF PERSONAL IN NATURE. THE ASSESSEE ALSO PRODUCED THE COPY OF THE STATEMENT OF ACCOUNT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE GENUINENESS OF THE EXPENSES WAS ALSO NOT PROVED. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND ALSO BEFORE THIS TRIBUNAL, THE ASSESSEE PRODUCED THE COPY OF THE LEDGER ACCOUNT OF VARIOUS HEADS OF EXPENSES BY CLAIMING THAT SUCH EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. ALL THE EXPENSES WERE INCURRED AGAINST BILLS AND FOR COMMERCIAL EXPEDIENCY; THUS, NO DISAL LOWANCE IS EXPECTED TO BE MADE U/S 37(1) OF THE ACT. THE ASSES SEE IS A INSTITUTION, THUS, NO AD-HOC ADDITION IS PERMITTED UNLESS AND UNTIL IT IS PROVED OTHERWISE. THERE IS NO RECORDING OF SATISFAC TION BY THE ASSESSING OFFICER THAT THE ASSESSEE MADE A BOGUS CL AIM. THERE ARE NO BORROWED FUNDS ALSO, THUS, TO PUT AN END TO LITIGAT ION, THE DISALLOWANCE IS RESTRICTED TO 2% AGAINST 5% SUSTAIN ED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IT IS MADE CL EAR THAT THE OBSERVATION MADE BY THE BENCH IS PECULIAR TO THE FA CTS AVAILABLE TO THE IMPUGNED ASSESSMENT YEAR AND MAY NOT BE QUOTED FOR FURTHER REFERENCE. THIS GROUND OF THE ASSESSEE IS PARTLY AL LOWED. 5. DURING THE COURSE OF HEARING BEFORE US, BOTH THE PA RTIES FAIRLY AGREED THAT THE DECISION TAKEN BY THE TRIBUNAL FOR A.Y. 20 10-11 CAN BE APPLIED IN THIS YEAR. UNDER THESE CIRCUMSTANCES, THE DISALLOWANCE I S RESTRICTED TO 2% AGAINST 5% SUSTAINED BY THE LD. CIT(A). THUS, ASSESSEE GET S PART RELIEF ACCORDINGLY. 6. GROUND 2: THIS GROUND IS REGARDING DISALLOWANCE U/S 14A. IT HAS BEEN CONTENDED DURING THE COURSE OF HEARING THAT FOR A.Y . 2010-11, THE TRIBUNAL HAS REDUCED THE DISALLOWANCE TO RS.1 LAKH IN PLACE OF R S.3,41,763 AS WAS SUSTAINED BY THE LD.CIT(A) IN THE SAID ORDER. BOTH THE PARTI ES FAIRLY AGREED THAT THE ORDER OF THE TRIBUNAL MAY BE FOLLOWED IN THIS YEAR ALSO. IT IS NOTED THAT THE TRIBUNAL HAD MADE FOLLOWING OBSERVATIONS: 5 I.T.A. NO.5069/MUM/2014 3.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE OBSERVATION MA DE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE T OTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AV AILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNS EL, IF KEPT IN JUXTAPOSITION AND ANALYZED, I AM OF THE VIEW THAT R ULE-8D OF THE RULES CAN BE APPLIED, IF THE ASSESSING OFFICER IS N OT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE WITH RESPE CT TO THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. EVEN IF, THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED IN RESPECT TO EXEMPT INCOME, THE ASSESSING OFFICER IS SUPPOSED TO FOLLOW THE MANDATE OF RULE-8D. SECTION 14A IS CALLED FOR WHEN THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSE SSEE HAVING INCURRED NO EXPENDITURE OR SOME AMOUNT EXPENDITURE IN RELATI ON TO EXEMPT INCOME. THEREFORE, FOLLOWING THE DECISION OF JURISD ICTIONAL HIGH COURT IN GODREJ & BOYCE, 328 ITR 81 (BOM), WHEREIN, IT WA S HELD THAT THE DISALLOWANCE HAS TO BE ON REASONABLE BASIS, THEREFO RE, TO PUT AN END TO THE LITIGATION, I DIRECT THE LD. ASSESSING OFFIC ER TO REDUCE THE DISALLOWANCE TO RS.1 LAKH IN PLACE OF RS.3,41,763/- SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THUS, THI S GROUND IS PARTLY ALLOWED. 7. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FO R THE EARLIER YEAR, THE DISALLOWANCE IN THIS YEAR ALSO REDUCED TO RS.1 LAKH AND THE REMAINING DISALLOWANCE IS DIRECTED TO BE DELETED. 8. GROUND 3: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE AC TION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF PROFESSION AL FEE PAID TO AN INTERIOR DESIGNING CONSULTANT OF RS.4 LAKHS ON THE GROUND TH AT IT WAS NOT INCURRED FOR THE RUNNING OF THE BUSINESS. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY THE LD. COUNSEL THAT THE PAYMENT WAS MADE FOR AVAIL ING CONSULTANCY TO DO REFURBISHING OF THE OFFICE BUILDING BUT DUE TO CERT AIN REASONS, THE CONSULTANCY RECEIVED COULD NOT BE IMPLEMENTED. THE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE AGAINST WHICH TDS WAS DEDUCTED. THE PAYMENT HAS NOT BEEN DOUBTED BY THE LOWER AUTHORITIES. 6 I.T.A. NO.5069/MUM/2014 9. PER CONTRA, THE LD. DR SUBMITTED THAT SINCE NO BENE FIT HAS BEEN RECEIVED BY THE ASSESSEE, THEREFORE, THE DISALLOWANCE HAS BE EN RIGHTLY MADE BY THE LOWER AUTHORITIES. 10. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHOR ITIES. IT IS UNDISPUTED FACT THAT THE PAYMENT HAS BEEN MADE BY C HEQUE ON WHICH TDS WAS DEDUCTED. IT IS ALSO NOT DISPUTED THAT SERVICES WE RE RENDERED BY MR. ROSHAN BAHAR, A PROFESSIONAL INTERIOR DESIGNING CONSULTANT FOR PROVIDING SUGGESTIONS ON REFURBISHING OF ROOMS. UNDER THESE CIRCUMSTANCES, UNDISPUTEDLY, SERVICES WERE RENDERED BY THE CONSULTANT. THUS, MERELY BECAUSE T HE ASSESSEE COULD NOT GET THE REAL BENEFIT OUT OF IT, IT CANNOT BE SAID THAT THE EXPENSES WERE NOT INCURRED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. REND ERING OF SERVICES AND RECEIPT OF ACTUAL BENEFIT ARE TWO DIFFERENT ENDS. WHAT IS IMPORTANT FOR ALLOWABILITY OF AN EXPENSE AS BUSINESS EXPENSE IS THAT THE ASSESSEE MUST RECEIVE SERVICE FROM THE SERVICE PROVIDER AND IT SHOULD BE MEANT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. BOTH OF THESE CONDITIONS ARE UNDISPUTEDL Y FULFILLED HERE. THUS, IN OUR VIEW, THE DISALLOWANCE HAS BEEN WRONGLY MADE BY THE ASSESSING OFFICER AND THE SAME IS, THEREFORE, DIRECTED TO BE DELETED. 11. GROUND 4: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACT ION OF LOWER AUTHORITIES IN DISALLOWING COMMISSION FEE PAID TO M /S NORTHPOINT TRAINING & RESEARCH PVT LTD. 12. DURING THE COURSE OF HEARING, THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE TRIBUNAL HAD IN ASSESSEES OWN CASE FOR A.Y. 2007-0 8 ALLOWED THE COMMISSION PAID TO THE SAME PARTY. THE LD. DR DID NOT BRING A NY DISTINCTION IN FACTS OR LAW, IN THE PRESENT YEAR AND A.Y. 2007-08. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE ORDER OF THE TRIBU NAL FOR A.Y.| 2007-08 DT 07- 12-2012 IN ITA NO.1206/MUM/2012. THE OBSERVATIONS OF THE TRIBUNAL ARE REPRODUCED HEREUNDER:- 7 I.T.A. NO.5069/MUM/2014 3. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN PAYMENT OF COMMISSION A T THE RATE OF RS.3% OF GROSS RECEIPT TO A RELATED COMPANY NAMELY, M/S NORTH POINT TRAINING & RESEARCH PVT. LTD.. HE OBSERVED THAT NO EVIDENCE OF ANY KIND FOR WORK DONE BY THE RELATED COMPANY HAS BEEN PRODUCED. THE ASSESSING OFFICER ALSO NOTED THAT THE THREE PERSONS , WHO ARE DIRECTORS OF THE SAID COMPANY, ARE ALSO MEMBER OF THE AOP OF THE ASSESSEE COMPANY. ACCORDINGLY, THE ASSESSING OFFICER OBSERVE D THAT WITHOUT RENDERING ANY SERVICES, COMMISSION FEES PAID, WAS N OT JUSTIFIED. ACCORDINGLY, HE DISALLOWED. 4. IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE ASSE SSEE AOP CONSISTS OF TWELVE (12) LINTAS EMPLOYEES WELFARE TRUST, WHIC H IS RUNNING A TRAINING CENTRE AT KHANDALA. THERE ARE 750 MEMBERS OF THIS TRUST. SINCE THE ASSESSEE AOP WAS UNABLE TO RUN THE INSTIT UTION ALONE, THEY HIRED THE ASSISTANCE OF M/S NORTH POINT TRAINING AN D RESEARCH PVT. LTD., WHICH WAS INCORPORATED FOR THE PURPOSE OF MAN AGEMENT OF THE TRAINING AND RESEARCH ACTIVITIES OF THE ASSESSEE AO P. IT WAS FURTHER SUBMITTED THAT THE DIRECTORS OF THE SAID COMPANY AR E PROMINENT MANAGEMENT PERSONNEL HAVING EXPERIENCE IN THE FIELD OF FINANCE AND ACCOUNTS AND FOR THEIR ASSISTANCE THE SAID COMMISSI ON EQUIVALENT FEE OF 3% OF THE GROSS TURNOVER WAS PAID. IT WAS ALSO S UBMITTED THAT THE SAID COMPANY HAS OFFERED THE COMMISSION AS INCOME A ND IT PAID ON THAT. THEREFORE, THE COMMISSION AMOUNT PAID BY THE ASSESSEE IS ALLOWABLE OTHERWISE IT AMOUNTS TO DOUBLE TAXATION. HOWEVER, THE LEARNED CIT(A) WAS NOT SATISFIED WITH THE CONTENTIO N OF THE LEARNED AR AS NO EVIDENCE WAS PRODUCED ON ACCOUNT OF RENDERING OF SERVICES. NOW, THE ASSESS IS IN APPEAL HERE BEFORE THE TRIBUN AL. 5. THE CONTENTION RAISED BEFORE THE LOWER AUTHORITI ES ARE REITERATED HERE BEFORE THE TRIBUNAL. THE ATTENTION OF THE BENC H WAS DRAWN ON THE LIST OF THE BENEFICIARIES OF 12 TRUSTS, WHICH I S 750 NUMBERS, PLACED IN PAPER BOOK AT PAGES 60 TO 63. IT WAS FURTHER EXP LAINED THAT IN FACT THE ASSESSEE HAD ACQUIRED CERTAIN PROPERTIES IN KHA NDALA FOR THE COMMON OBJECTIVE OF DEVELOPING AND CONDUCTING A TRA INING AND RESEARCH CENTRE. THE ASSESSEE AOP HAS CONSTRUCTED 1 2 BUILDINGS FULLY FURNISHED WITH AIR-CONDITIONERS, FURNITURE, FIXTURE S, AUDIO-VISUAL, CONFERENCES ROOMS, SPORT FACILITIES, CLUB HOUSE AND OTHER EQUIPMENTS. THE SAID PREMISES WERE CONSTRUCTED FOR THE PURPOSES OF RUNNING A TRAINING AND RESEARCH CENTRE. HOWEVER, AS THE MEMBE RS OF THE AOP WERE UNABLE TO OBTAIN THE CLIENTS AND RUN THE ENTIR E INSTITUTION, THEY HIRED THE SERVICES OF M/S NORTH POINT TRAINING AND RESEARCH PVT. LTD. 8 I.T.A. NO.5069/MUM/2014 AS PER TERMS OF THE CONDUCTING AGREEMENT ENTERED BE TWEEN THE PARTIES. AN AGREEMENT WAS ENTERED ON 15-6-2004, COP Y OF THE AGREEMENT IS PLACED IN THE PAPER BOOK AT PAGES 49 T O 57. IT WAS ALSO EXPLAINED THAT THE ASSESSEE AOP HAS PAID SIMILAR CO MMISSION FOR EARLIER TWO YEARS AND ASSESSMENT HAD BEEN COMPLETED UNDER SECTION 143(3). NO SUCH DISALLOWANCE WAS MADE FOR THOSE TWO YEARS. ACCORDINGLY, IT WAS SUBMITTED THAT IN VIEW OF THE C ONSISTENCY ALSO, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, WHICH I S CONFIRMED BY THE CIT(A), IS NOT JUSTIFIED. 6. ON THE OTHER HAND, LEARNED DR STRONGLY PLACED RE LIANCE ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE CIT(A ). 7. AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW, I FOUND THAT THE ASSESSEE DESERVES TO SUCCEED IN ITS APPEAL. I N OTED THAT THE AGREEMENT ENTERED ON 15-6-2004 PERTAINS TO ASSESSME NT YEAR 2005- 06. IN THAT YEAR ALSO THE ASSESSEE PAID A COMMISSIO N FEE OF RS.10,39,800/-. THE CONDUCTOR I.E. M/S NORTH POINT TRAINING AND RESEARCH PVT. LTD. HAS SHOWN ITS RECEIPTS IN ITS PR OFIT AND LOSS ACCOUNT. THE FEE HAS BEEN OFFERED FOR TAXATION BY FILING REG ULAR RETURN UNDER SECTION 139(1) OF THE ACT. COPY OF THE SAME IS PLAC ED ON RECORD. ACCORDINGLY, THE COMMISSION FEE WAS PAID FOR SUBSEQ UENT YEAR I.E. ASSESSMENT YEAR 2006-07 AT RS.14,49,940/-. THE SAME WAS ALSO OFFERED FOR TAXATION. THE RETURN WAS FILED. COPY OF THE SAME IS ALSO PLACED ON RECORD. IT IS FURTHER SEEN THAT THE ASSES SEE AOP FILED ITS RETURN DECLARING HUGE LOSSES. THE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3). COPIES OF THE SAME ARE PLACED ON RE CORD FOR ASSESSMENT YEAR 2005-06, THAT DECLARED LOSS OF RS.2 ,16,96,919/- WAS ACCEPTED BY THE AO. SIMILARLY FOR 2006-07, DECLARED LOSS OF RS.1,79,54,391/- WAS ACCEPTED. COPY OF THE ASSESSME NT ORDER IS PLACED ON RECORD. IN SIMILAR MANNER, THE ASSESSEE P AID COMMISSION FEE TO THE CONDUCTOR FOR SAME SERVICES. HOWEVER, IN THI S YEAR, THE AO DISALLOWED ON THE GROUND THAT THE ASSESSEE COULD NO T FILE ANY PROOF OF RENDERING SERVICES AND CIT(A) ALSO CONFIRMED THE AC TION OF THE AO. THE ASSESSEE HAS EXPLAINED THAT THE SAME SERVICES WERE RENDERED BY THE CONDUCTOR, HOWEVER, THE SAME WAS NOT ACCEPTED. I NO TED THAT A CERTIFICATE FROM THE CONDUCTOR M/S NORTH POINT TRAI NING AND RESEARCH PVT. LTD. IS PLACED ON RECORD, BY WHICH IT HAS BEEN STATED THAT THEY HAVE BEEN APPOINTED FOR THE FOLLOWING SERVICES :- 1. TO OBTAIN CLIENTS AND BUSINESS FOR NORTHPOINT C ENTRE OF LEARNING WHEN CENTRE IS NOT IN USE BY LINTAS INDIA PRIVATE LIMITED. 2. TO MANAGE THE PROPERTIES AND FACILITIES OF TRAIN ING AND RESEARCH OF 9 I.T.A. NO.5069/MUM/2014 THE CENTRE. 3. TO MANAGE TRAINING AND RESEARCH ACTIVITIES FOR D EVELOPMENT OF KNOWLEDGE AND SKILLS THROUGH TRAINING & RESEARC H. 4. TO OBTAIN LICENSES/PERMISSIONS FOR DAY TO DAY MA NAGEMENT OF THE CENTRE AND ITS ACTIVITIES. 5. TO CONDUCT THE ACTIVITIES OF CENTRE AT ITS OPTIM UM UTILITY AND IN A PROFESSIONAL MANNER. THESE SERVICES ARE AS PER AGREEMENT DATED 15-6-2004 . FOR THE EARLIER TWO YEARS, THE CLAIM OF THE ASSESSEE HAS BEEN ACCEP TED. COPY OF THE RETURN FILED BY THE CONDUCTOR FOR ALL THE YEARS ARE ALSO PLACED ON RECORD AND THEY HAVE OFFERED THE RECEIPTS IN THEIR PROFIT AND LOSS ACCOUNT AND DUE TAX HAS BEEN PAID. THEREFORE, I FEE L THAT DISALLOWANCE MADE BY THE AO, WHICH IS CONFIRMED BY THE CIT(A), I S NOT JUSTIFIED. THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASS ESSEE FOR IMMEDIATELY TWO YEARS. THE SAME SERVICES ARE RENDER ED, THEREFORE, FOR THIS REASON ALSO, DISALLOWANCE IS NOT JUSTIFIED. 8. IT IS ALSO A MATTER OF FACT THAT THERE IS HUGE L OSS SHOWN BY THE ASSESSEE IN EARLIER TWO YEARS, WHICH HAS BEEN ACCEP TED BY THE DEPARTMENT ALSO. IF THOSE LOSSES ARE BROUGHT FORWAR D THEN DURING THE YEAR UNDER CONSIDERATION ALSO, THERE IS A LOSS. IT SHOWS THAT THE ASSESSEE IS NOT SHOWING ANY EXPENSES ON ACCOUNT OF COMMISSION FEE FOR REDUCING THE TAX LIABILITY. 9. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, I DELETE THE DISALLOWANCE. 13. IN THE YEAR BEFORE US, THE LD. CIT(A) REFUSED TO FO LLOW THE ORDER OF THE TRIBUNAL FOR A.Y. 2007-08 ON THE GROUND THAT THE TR IBUNAL HAD ALLOWED RELIEF ON THE GROUND THAT HUGE LOSS WAS SHOWN BY THE ASSESSEE IN EARLIER TWO YEARS AND, THEREFORE, THERE WAS NO MOTIVE TO EVADE TAXES AND T HAT IS HOW THE TRIBUNAL WAS PLEASED TO ALLOW THE RELIEF. WE FIND THAT THE CIT(A ) HAS NOT READ THE ORDER OF THE TRIBUNAL COMPLETELY. THE TRIBUNAL HAD ANALYSE D THE COMPLETE FACTS AND IT WAS FOUND THAT THE PAYEE HAD RENDERED SERVICES AGAI NST WHICH PAYMENT HAS BEEN MADE. IT WAS ALSO FOUND THAT THE EXPENSES HAV E BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THUS, THE DEC ISION WAS TAKEN BY THE TRIBUNAL KEEPING IN VIEW ALL THE FACTORS AND INCURR ING OF LOSS WAS MERELY ONE OF 10 I.T.A. NO.5069/MUM/2014 THEM. IT IS FURTHER NOTED BY US THAT IN THE YEAR B EFORE US ALSO, THE FACTUM OF PAYMENT HAS NOT BEEN DISPUTED. IT IS BROUGHT TO OU R NOTICE THAT COMPLETE DOCUMENTARY EVIDENCES HAVE BEEN BROUGHT ON RECORD B Y THE ASSESSEE EVIDENCING THE PAYMENT AND AVAILMENT OF SERVICES RE NDERED BY THE PAYEE. IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY ALLOWED THE CLAI M OF THE ASSESSEE. NO DIFFERENT DECISION CAN BE TAKEN IN THE YEAR BEFORE US. THE PAYEE REMAINS THE SAME; ALL THE FACTS AND CIRCUMSTANCES ALSO REMAIN T HE SAME. THUS, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FOR A.Y. 2007-0 8, WE ALLOW THE PAYMENT OF COMMISSION OF RS.15,78,624 PAID TO M/S NORTHPOINT T RAINING & RESEARCH PVT LTD. THE GROUND IS ALLOWED. 14. AS A RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON THIS 21 ST DAY OF SEPTEMBER,2016. SD/- SD/- (C.N. PRASAD) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 21 ST SEPTEMBER, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , J-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES