M/S RAJASTHAN PATRIKA PVT. LTD., Jaipur V. ADD.CIT, Jaipur

ITA 519/JPR/2012

• Counselvise Citation: 51923114 RSA 2012
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 30-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH SR DR DHK
• Assessee Lawyers: JAVED IQBAL
• Keywords: Gift; Depreciation; Business expenditure; Charitable institution; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Rule of consistency; Additional depreciation; Additional evidence; Corroborative evidences; Commercial expediency; Onus to prove
• Section: 80IB; 37(1); 6

Judgement Text

ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK ] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NOS. 519, 520 & 521/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06, 2006-07 & 2008-09 M/S. RAJASTHAN PATRIKA (P) LTD. , JLN MARG, JAIPUR CUKE VS. THE ADDL. CIT RANGE-5 & ACIT, CIRCLE- 5 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACR 7856 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NOS. 573 & 574/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 & 2008-09 THE ACIT CIRCLE- 5 JAIPUR CUKE VS. M/S. RAJASTHAN PATRIKA (P) LTD. , JLN MARG, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACR 7856 G IZR;FKHZ@ RESPONDENT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI O.P. AGARWAL ,CA SHRI MANISH AGARWAL, CA & SHRI JAVED IQBAL, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SMT. NEENA JEPH, SR. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/04/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 15/06/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM:- THIS IS A SET OF 3 APPEALS BY THE ASSESSEE FOR AYS 2005-06, 2006-07 & 2008- 09 AND 2 APPEALS BY THE REVENUE FOR AYS 2006-07 & 2 008-09 AGAINST THE RESPECTIVE ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 2 ORDERS OF THE LD. CIT(A). GROUNDS RAISED IN RESPECT IVE APPEALS ARE SUMMED UP AS UNDER:- ASSESSEES APPEALS: AY 2005-06 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCES MADE OUT OF FOLLOWING EXPENSES ARBITRARILY WITHOUT APPRECIATING THE NATUR E OF EXPENSES INCURRED VIS--VIS EXPEDIENCY, THUS THE DISALLOWANC ES SO CONFIRMED DESERVES TO BE DELETED. S.NO. NATURE OF EXPENSES AMOUNT CLAIMED AMOUNT DISALLOWED I) SALES PROMOTION EXP. 7,67,50,154 13,90,047 II) TELEPHONE EXP. 1,27,11,214 5,00,000 III) DEEPAWALI EXP. 20,65,215 4,13,043 IV) TRAVELLING EXP. 96,58,750 9,65,875 V) BUSINESS EXP. 11,23,657 2,24,731 VI) OTHER EXPENSES 2,49,05,438 5,00,000 VII) VEHICLE RUNNING EXP. 21,15,770 2,11,577 VIII) EVENT MANAGEMENT EXP. 1,09,41,330 5,00,000 IX) MANAGEMENT / STAFF TRAINING EXP. 7,03,176 3,51,588 X) FOUNDATION DAY EXPENSES 40,54,240 2,02,712 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN PARTLY CONFIRMING THE DISALLOWANCE OF MARK ETING AND SURVEY EXPENSES UPHOLD THE DISALLOWANCE @ 20% AS AGAINST 5 % BY LD. AO) ON THE REMAINING EXPENSES OF RS. 69,50,238/- RESULT ING INTO CONFIRM ACTION OF DISALLOWANCE OF RS. 13,90,047/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF MAR KETING AND SURVEY EXPENSES LEGITIMATELY CLAIMED AT RS. 60,01,635/- BY THE ASSESSEE ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 3 COMPANY WITHOUT APPRECIATING THE NATURE OF EXPENSES AND THE BUSINESS MODULE OF THE ASSESSEE COMPANY, THUS THE EXPENSES A S CLAIMED DESERVE TO BE ALLOWED. AY 2006- 07: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCES MADE OUT OF FOLLOWING EXPENSES ARBITRARILY WITHOUT APPRECIATING THE NATUR E OF EXPENSES INCURRED VIS--VIS EXPEDIENCY, THUS THE DISALLOWANC ES SO CONFIRMED DESERVES TO BE DELETED. S. NO. NATURE OF EXPENSES AMOUNT CLAIMED AMOUNT DISALLOWED I SALES PROMOTION EXP. 6,10,01,834.00 8,74,863.00 II TELEPHONE EXP. 1,53,68,283.00 5,00,000.00 III DEEPAWALI EXP. 17,27,146.00 3,45,429.00 IV TRAVELLING EXP. 80,25,173.00 8,02,517.00 V BUSINESS EXP. 3,22,370.00 67,474.00 VI OTHER EXPENSES 1,95,28,932.00 5,00,000.00 VII VEHICLE RUNNING EXP. 23,02,020.00 2,30,202.00 VIII EVENT MANAGEMENT EXP. 3,26,77,152.00 5,00,000.00 IX FOUNDATION DAY EXP. 21,70,492.00 1,08,524.00 1.1 LD. CIT(A) ERRED IN IGNORING THE CRUCIAL FACTS THA T SEVEN HEADS OF EXPENSES (S.NO. 1 TO 8) MENTIONED IN GROUND NO. 1 H AVE SUFFERED THE FRINGE BENEFIT TAX (FBT) THEREON, WHICH STANDS PAID BY ASSESSEE. THE FBT PAID BY ASSESSEE COMPANY ON THESE EXPENSES IS M ORE THAN THE TAX THAT IS PAYABLE ON THE AMOUNT OF EXPENSES DISAL LOWED. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 4 2. LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 64,88,084/- OUT OF MARKETING AND SURVEY EXPENSES LEGITIMATELY I NCURRED BY THE ASSESSE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS. AY 2008-09: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE AD HOC DISALLOWANCE S OF RS. 5,00,000/- OUT OF GENERAL / OTHER EXPENSES INCURRED BY THE ASS ESSEE WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS. 2. LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF RS. 43,36,835/- OUT OF MARKETING AND SURVEY EXPENSES INCURRED WHOLLY AND E XCLUSIVELY FOR ITS BY THE ASSESSE. REVENUES GROUNDS OF APPEALS: ITA NO. 573/JP/2012 FOR A Y 2006-07:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) DELETING ADDITION OF RS. 2,42,454/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OUT OF DEPRECIATION ON VEHICLE FOR PER SONAL / NON- BUSINESS USE DESPITE CONFIRMING DISALLOWANCE OUT OF VEHICLE RUNNING EXPENSES FOR PERSONAL / NON-BUSINESS USE. (II) ALLOWING ADDITIONAL DEPRECIATION OF RS. 26,70, 913/- WITHOUT APPRECIATING THE FACT THAT PRINTING OF PAPER CANNOT BE CONSIDERED AS PRODUCING A NEW ARTICLE OR THING. ITA NO. 574/JP/2012 FOR A Y 2008-09:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) ALLOWING ADDITIONAL DEPRECIATION OF RS.35,31,48 0/- WITHOUT APPRECIATING THE FACT THAT PRINTING OF PAPER CANNOT BE CONSIDERED AS PRODUCING A NEW ARTICLE OR THING. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 5 2.1 BRIEF FACTS ARE-ASSESSEE IS A PRIVATE LIMITED C OMPANY ENGAGED IN THE BUSINESS OF PRINTING & PUBLISHING OF NEWSPAPER & PE RIODICALS, PRODUCTION OF TV SERIALS & DOCUMENTARIES AND EVENT MANAGEMENT. IT PU BLISHES A WIDELY READ NEWSPAPER RAJASTHAN PATRIKA IN RAJASTHAN. REGULAR BOOKS OF ACCOUNTS ARE MAINTAINED WHICH ARE SUPPORTED BY VOUCHERS AND RECO RD AND ARE DULY AUDITED. RETURNS OF INCOME WERE FILED BASED THEREON. DURING THE COURSE OF IMPUGNED ASSESSMENT PROCEEDINGS LD. AO ASKED ABOUT THE GENUI NENESS AND BUSINESS EXPEDIENCY OF VARIOUS EXPENSES INCURRED, ASSESSE CL AIMS TO HAVE FILED ALL THE RELEVANT DETAILS AND EXPLANATION IN THIS BEHALF. NA TURE, GENUINENESS, BUSINESS EXPEDIENCY, AND REGULAR INCURRENCE OF THESE EXPENSE S IS CLAIMED TO BE DEMONSTRATED BY THE ASSESSE. LD. AO HOWEVER DID NOT AGREE WITH THE SUBMISSIONS MADE HUGE DISALLOWANCES OUT OF VARIOUS HEADS OF EXP ENDITURE IN ALL THESE YEARS. AGGRIEVED ASSESSEE PREFERRED FIRST APPEALS CONTENDI NG THAT MULTIPLE DISALLOWANCES WERE MADE BY AO PURELY ON THE BASIS OF ADHOCISM, SU SPICION, ASSUMPTIONS, AND WITHOUT ASSIGNING SPECIFIC REASONS. 2.2 LD. CIT(A) ALLOWED PART RELIEF BY REDUCING THE ESTIMATES. AGGRIEVED ASSESSEE IS BEFORE US IN THESE YEARS. 2.3 THE RELEVANT YEAR WISE CHARTS OF DISALLOWANCE M ADE BY AO, PART RELIEF GIVEN BY THE CIT(A) AND REMAINING DISALLOWANCES ARE AS UN DER:- AY: 2005-06 ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 6 S. NO. NAME AMOUNT CLAIMED AMOUNT DISALLOWED BY AO ADDITION SUSTAINED BY CIT(A) RELIEF GRANTED BY CIT(A) 1. SALES PROMOTION & PUBLICITY EXP. 7,67,50,154 38,37,508 13,90,047 24,47,461 2. TELEPHONE EXP. 1,27,11,214 5,00,000 5,00,000 NIL 3. DEEPAWALI EXP. 20,65,215 4,13,043 4,13,043 NIL 4. TRAVELLING EXP. 96,58,750 9,65,875 9,65,875 NIL 5. BUSINESS EXP. 11,23,657 2,24,731 2,24,731 NIL 6. OTHER EXP. 2,49,05,438 5,00,000 5,00,000 NIL 7. RATES & TAXES 2,87,205 2,87,205 NIL 2,87,205 VEHICLE RUNNING EXP. 21,15,770 2,11,577 2,11,577 NIL 8. DEPRECIATION ON CARS 28,89,739 2,88,974 NIL 2,88,974 9. EVENT MANAGEMENT EXPENSES 1,09,41,330 5,00,000 5,00,000 NIL 10. PATRIKA JUNCTION EXP. 1,07,452 99,393 NIL 99,393 11. MGT. / STAFF TRAINING EXP. 7,03,176 3,51,588 3,51,588 NIL 12. MARKETING & SURVEY EXP. 2,35,12,583 60,01,635 60,01,635 NIL 13. FOUNDATION DAY CEREMONY EXP. 40,54,240 4,05,424 2,02,712 2,02,712 TOTAL 17,18,25,923 1,45,86,953 1,12,61,208 33,25,745 A Y 2006-07 S. N O. NAME AMOUNT CLAIMED PERCENTAGE /AD-HOC DISALLOWAN CE AMOUNT DISALLOWED DELETIONS MADE/RELI EF ALLOWED BY LD. CIT(A) ADDITIONS SUSTAINED BY LD. CIT(A) (IN RS.) 1. SALES PROMOTION & PUBLICITY EXP. 6,10,01,834 5% 30,50,092 21,75,229 8,74,863 2. TELEPHONE EXP. 1,53,68,283 LUMP SUM 5,00,000 - 5,00,000 ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 7 3. DEEPAWALI EXP. 17,27,146 20% 3,45,429 - 3,45,429 4. TRAVELLING EXP. 80,25,173 10% 8,02,517 - 8,02,517 5. BUSINESS EXP. 3,22,370 20% 64,474 - 64,474 6. OTHER EXP. 1,95,28,932 LUMP SUM 5,00,000 - 5,00,000 7. VEHICLE RUNNING EXP. 23,02,020 10% 2,30,202 - 2,30,202 DEPRECIATION ON CARS 24,24,544 10% 2,42,454 2,42,454 NIL 8. EVENT MANAGEMENT EXPENSES 3,26,77,152 LUMP SUM 5,00,000 - 5,00,000 9. MARKETING & SURVEY EXP. 3,08,87,002 - 64,88,084 - 64,88,084 10 . FOUNDATION DAY CEREMONY EXP. 21,70,492 10% 2,17,049 - 1,08,525 11 . ADDITIONAL DEPRECIATION EXP. 26,70,913 - 26,70,913 26,70,913 NIL TOTAL 17,91,05,86 1 1,56,11,214 50,88,596 1,04,14,09 4 2008-09 S. N O. NAME AMOUNT CLAIMED PERCENTAGE /AD-HOC DISALLOWAN CE AMOUNT DISALLOWED ADDITIONS SUSTAINED BY LD. CIT(A) 1. SALES PROMOTION & PUBLICITY EXP. 3,86,63,77 0 5% 19,33,189 NIL 2. TELEPHONE EXP. 1,76,64,81 5 LUMP SUM 5,00,000 NIL 3. FESTIVAL CELEBRATION EXP. 22,46,220 20% 4,49,244 NIL 4. TRAVELLING EXP. 1,89,30,07 4 10% 18,93,007 NIL 5. HOSPITALITY/BUSINESS EXP. 19,94,915 20% 3,98,983 NIL 6. GENERAL/OTHER EXP. 3,82,68,78 4 LUMP SUM 5,00,000 NIL ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 8 7. VEHICLE RUNNING EXP. 26,04,198 10% 1,30,210 5,00,000 8. MARKETING & SURVEY EXP. 4,83,31,69 3 10% 43,36,835 43,36,835 9. FOUNDATION DAY CEREMONY EXP. 17,88,930 LUMP SUM 1,78,893 NIL 10 . ADDITIONAL DEPRECIATION EXP. 35,31,480 - 35,31,480 NIL 2.4 APROPOS SALE PROMOTION AND PUBLICITY EXPENSES L D. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE BREAK-UP OF THE EXPENSES IN AY 20 05-06 IS UNDER, FACTS IN RESPECT OF OTHER YEARS ARE BY AND LARGE SAME:- PARTICULARS AMOUNT (RS.) SCHEME GIFTS 5,68,91,082 OTHER GIFTS 4,09,038 FOOD & REFRESHMENT 9,24,928 FRIGATE & CORTEGE 9,84,814 TRAVELLING 2,90,934 HOTEL BOOKING 70,510 PUBLICITY EXPENSES 1,29,08,833 EVENTS & FAIRS 21,95,508 OTHERS 20,74,503 TOTAL 7,67,50,153 2.5 LD. COUNSEL SHRI O P AGRAWAL, FCA CONTENDS THAT ALL THE EXPENDITURE RAISED IN THESE APPEALS HAVE BEEN ALLOWED IN ALL THE YEARS TILL 2004-05. ASSESSEE DULY COMPLIED WITH. ALL THE QUARRIES RAISED BY LD. AO, T HERE IS NO ALLEGATION OF ANY NONCOOPERATION. WITHOUT FINDING ANY SPECIFIC DEFECT IN THE COMPLIANCE OR BOOKS OF ACCOUNTS, LD. AO MERELY ON SUSPICIONS AND BY SUMMAR Y OBSERVATIONS DISALLOWED 5% OF ENTIRE EXPENDITURE AMOUNTING TO RS. 38,37,508 /-, WHICH IS PURELY BASED ON ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 9 SWEEPING AND VAGUE OBSERVATIONS WHICH ARE COMMON FO R ALL AYS AND ARE REPRODUCED BELOW: A.Y. 2005-06 - AO PAGE 4 THE ASSESSEE'S SUBMISSION IS THOROUGHLY EXAMINED. THE REPLY OF THE ASSESSEE CARIES SOME WEIGHT BUT CANNOT BE ACCEPTED IN TOTALITY. SINCE THESE EXPENSES ARE PRIMARILY IN THE NATURE OF ENTERTAINME NT AND AS SUCH THESE EXPENSES CANNOT BE SAID TO HAVE BEEN INCURRED WHOLL Y AND EXCLUSIVELY FOR BUSINESS PURPOSE. FURTHER THE EXPENDITURE INCURRED UNDER THESE HEADS, FOR NON-BUSINESS CAN NEITHER BE DENIED NOR RULED OUT AS EVIDENT FROM THE NATURE OF EXPENSES NOTED IN THE SUBMISSION ABOVE LIKE FOOD AND REFRESHMENTS, TRAVELING AND CONVEYANCE, HOTEL BOOKING. EVENT & FA IR AND OTHERS ETC. EVEN THE EVIDENCES FOR DISTRIBUTING THE GIFTS ALSO REMAI NS UNVERIFIED. THEREFORE, FOR WANT OF VERIFICATION AND ELEMENT OF NON-BUSINES S USE INVOLVED IN THEM 5% OF THESE EXPENSES ARE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, DISALLOWANCE @ 5% I.E. RS. 38,37,508 IS MADE AND SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSES SEE . AO PAGE 5 - A.Y. 2006-07 THE ASSESSEE'S SUBMISSION IS THOROUGHLY EXAMINED. THE REPLY OF THE ASSESSEE CARIES SOME WEIGHT BUT CANNOT BE ACCEPTED IN TOTALITY. SINCE THESE EXPENSES ARE PRIMARILY IN THE NATURE OF ENTERTAINME NT AND AS SUCH THESE EXPENSES CANNOT BE SAID TO HAVE BEEN INCURRED WHOLL Y AND EXCLUSIVELY FOR BUSINESS PURPOSE. FURTHER THE EXPENDITURE INCURRED UNDER THESE HEADS, FOR NON-BUSINESS CAN NEITHER BE DENIED NOR RULED OUT AS EVIDENT FROM THE NATURE OF EXPENSES NOTED IN THE SUBMISSION ABOVE LIKE FOOD AND REFRESHMENTS, TRAVELING AND CONVEYANCE, HOTEL BOOKING. EVENT & FA IR AND OTHERS ETC. EVEN THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCES IN SUP PORT OF ITS CONTENTION THAT THE GIFTS WERE GIVEN TO VARIOUS CUSTOMERS UNDER THE SCHEMES TO HAWKERS, SELLING AGENTS ETC. SO THE SAME ALSO REMAINS UNVERI FIED. THEREFORE, FOR WANT OF VERIFICATION AND ELEMENT OF NON-BUSINESS USE INV OLVED IN THEM 5% OF THESE EXPENSES ARE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, DISALLOWANCE @ 5% I.E. RS. 30,50,092/- I S MADE AND SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AO PAGE 4 - A.Y. 2008-09 ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 10 THE ASSESSEE'S SUBMISSION IS THOROUGHLY EXAMINED. WITH DUE REGARDS, THE JUDICIAL PRONOUNCEMENTS AS RELIED BY THE ASSESSEE A RE NOT FULLY APPLICABLE IN THE CASE OF THE ASSESSEE. THE REPLY OF THE ASSESSEE CARRIES SOME WEIGHT BUT CANNOT BE ACCEPTED IN TOTALITY. SINCE THESE EXPENSES ARE PRIMARILY IN THE NATURE O F ENTERTAINMENT AND AS SUCH THESE EXPENSES CANNOT BE SAID TO HAVE BEEN INC URRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. FURTHER THE EXPEN DITURE INCURRED FOR NON- BUSINESS CAN NEITHER BE DENIED NOR RULED OUT AS EVI DENT FROM THE NATURE OF EXPENSES NOTED IN THE SUBMISSION ABOVE LIKE FOOD AN D REFRESHMENTS, TRAVELING AND CONVEYANCE, HOTEL BOOKING, EVENT & FAIR AND OTH ERS ETC. EVEN THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCES IN SUPPORT OF ITS CONTENTION THAT THE GIFTS WERE GIVEN TO VARIOUS CUSTOMERS UNDER THE SCH EMES TO HAWKERS, SELLING AGENTS ETC. SO THE SAME ALSO REMAINS UNVERIFIED. TH E ASSESSEE HAS ALSO NOT FURNISHED ANY SUBSTANTIAL EVIDENCE AS TO THE PERSON S TO WHOM SUCH BENEFITS/ FACILITY ETC. PROVIDED WERE ACTUALLY FRUITFUL TOWAR DS PROMOTING THE SALES OF THE ASSESSEE COMPANY. THEREFORE, FOR WANT OF VERIFI CATION AND ELEMENT OF NON-BUSINESS USE INVOLVED IN THEM 5% OF THESE EXPEN SES ARE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE REFORE, DISALLOWANCE @ 5% I.E. RS. 19,33,189/- IS MADE AND SAME IS ADDED B ACK TO THE TOTAL INCOME OF THE ASSESSEE. RELIANCE IS PLACED ON THE FOLLOWING JUDGEMENT. MEANING OF WHOLLY AND EXCLUSIVELY THE ADVERB WH OLLY IN THE PHRASE LAID OUT OR EXPENDED FOR BUSINESS REFERS TO THE QUA NTUM OF EXPENDITURE. THE ADVERB EXCLUSIVELY HAS REFERENCE TO THE OBJECT OR MOTIVE OF THE ACT BEHIND GUEST HOUSE EXPENSES EXPENDITURE. UNLESS SUC H MOTIVE IS SOLELY FOR PROMOTING THE BUSINESS, THE EXPENDITURE WILL NOT QU ALIFY FOR DEDUCTION. C.J. PATEL & CO. VS. CIT 158 ITR 486 (HON'BLE GUJARAT HI GH COURT IN THE CASE OF.) VS. ITO CONNECTION BETWEEN EXPENDITURE AND OBJECT MUST BE R EAL AND NOT REMOTE OR ILLUSORY DIT VS. HEALTH & CO. (CALCUTTA) (P) LTD. 14 ITR 605 (CAL.) IT IS WELL SETTLED BY NOW THAT ALL EXPENDITURE INCU RRED BY THE ASSESSEE THOUGH VOLUNTARY I.E. NOT OBLIGATORY, WHICH IS ULTI MATELY DESIGNED TO FURTHER THE OBJECTS AND PURPOSES OF THE ASSESSEE CAN BE TRE ATED AS BUSINESS EXPENDITURE SO LONG AS THE CONNECTION BETWEEN THE E XPENDITURE INCURRED AND THE OBJECTS IS REAL AND NOT REMOTE AND ILLUSORY. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 11 2.6 AGGRIEVED ASSESSEE PREFERRED 1 ST APPEALS CONTENDING THAT DETAILED SUBMISSIONS AND EVIDENCE WAS FILED BEFORE LD. AO, N ATURE OF BUSINESS OPERATIONS HAD WIDENED AND TURNOVER HAD INCREASED. ADHOC DISAL LOWANCE OF 5% OUT OF SALES PROMOTION AND PUBLICITY EXPENSES MADE BY AO WAS BAS ED PURELY ON SUSPICIONS AND SUMMARY ASSUMPTIONS, IT SHOULD BE DELETED. LD. CIT( A) THOUGH FOUND MERIT IN ASSESSEES CONTENTIONS, INSTEAD OF DELETING THE ENT IRE ADDITIONS REDUCED IT TO RS. 13,90,047/- BY FOLLOWING OBSERVING THAT IN OTHER EX PENDITURES VIZ. TELEPHONE, FESTIVAL CELEBRATIONS, TRAVELLING, HOSPITAL, VEHICL E RUNNING, OTHER MISCELLANEOUS THERE MAY BE POSSIBILITY OF PERSONAL ELEMENT THEREI N. THUS WITHOUT SPECIFYING EVEN A SINGLE ITEM OF PERSONAL USE PARTIAL DISALLOWANCE HAS BEEN RETAINED IN AD HOC MANNER. FURTHER BY A SURPRISING ACTION LD. CIT(A) Q UA THE EXPENDITURE OF RS. 69,50,238/- INCURRED ON SCHEME GIFTS AND PUBLICITY EXPENSES DURING THE COURSE OF ITS BUSINESS, WITHOUT ISSUING ANY ENHANCEMENT NOTIC E OR PROVIDING A HEARING HEARING ENHANCED THE 5% DISALLOWANCE MADE BY AO TO 20% AMOUNTING TO RS. 13,90,047/-. THE IMPUGNED ENHANCEMENT WAS CARRIED O UT BY LD. CIT(A) ON MERE VAGUE AND SWEEPING OBSERVATIONS THAT - THE ASSESSEE FAILED TO PROVE THAT AMOUNT WAS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PU RPOSES; IT WAS NOT SUBJECT TO VERIFICATION; PERSONAL ELEMENT MAY BE INVOLVED AND TO PLUG ANY POSSIBLE LEAKAGE OF REVENUE. LD. AO VERIFIED AND HELD 5% AS ADHOC DISAL LOWABLE, MOST OF WHICH IS ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 12 DELETED BY LD. CIT(A); WITHOUT OBSERVING ANY AGGRAV ATING ADVERSE FACT THE ENHANCEMENT IS CARRIED OUT WHICH IS HIGHLY UNJUSTIF IED AND ARBITRARY. 2.7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE PRODUCED ALL THE BILLS AND VOUCHERS ALONG WITH THE BOOKS OF ACCOUNTS BEFORE THE LD. AO, WHICH IS ALSO OBSERVED LD. CIT(A) IN HIS ORDER. BESIDES, THE NATURE OF THE EXPENSES, NECESSARY DETAILSAND INCURRING THEREOF DURING THE C OURSE OF BUSINESS WAS DULY EXPLAINED VIDE SUBMISSION DATED 27.12.2007&14.03.11 , REPRODUCED AT PAGE 2 TO 3 OF THE ASSESSMENT ORDER. A PERUSAL THEREOF CLEARLY SPELLS OUT THAT ASSESSE REASONABLY DISCHARGED ITS ONUS IN DEMONSTRATING THAT SAME WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. 2.8. THESE DISALLOWANCES HAVE A HISTORY AS ALL OF T HEM HAVE BEEN ALLOWED IN FAVOR OF THE ASSESSEE IN A.YS. 1992-93 TO 1997-98, 2000- 01 AND 2001-02 BY THE ITAT, A COMPILATION OF THE ORDERS OF THE ITAT IN THIS BEHA LF ALONG WITH CHART OF THE YEAR- WISE ADDITIONS AND RELIEF AWARDED BY ITAT IS TABULA TED AT PB 47-50 . 2.9. ADVERTING TO ITAT ORDER FOR AY 2004-05, IT IS CONTENDED THAT ORIGINALLY ALL OTHER DISALLOWANCES (EXCEPT 5% OUT OF SALE PROMOTIO N& SCHEME GIFTS) WERE DELETED BY LD. CIT(A) WHICH WAS ACCEPTED BY THE DEPARTMENT. ASSESSEE CHALLENGED THE REMAINING 5% ADDITIONS OUT OF SALES PROMOTION, ITAT SET ASIDE THE ISSUE FOR FRESH CONSIDERATION. LD. AO REPEATED THE ADDITIONS BY ORD ER DTD 29-12-10, IN FIRST APPEAL LD. CIT(A) VIDE ORDER DTD. 16-1-14 DELETED THESE DI SALLOWANCE WHICH HAS BECOME ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 13 FINAL AS IT IS NOT CHALLENGED BY THE DEPARTMENT. IT IS VEHEMENTLY CONTENDED THAT NO DEFECTS IN BOOKS OF ACCOUNTS ARE ALLEGED IN THESE Y EARS AND IN VIEW OF THIS DEMONSTRATIVE HISTORY THE ISSUES ABOUT THESE EXPENS ES BEING WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS ARE CONSISTENTENT LY ALLOWED.IT IS TRAVESTY OF JUSTICE AND INCONSISTENCY ON THE PART OF DEPARTMENT TO ADOPT A FLIP FLOP ATTITUDE AND GO ON INDISCRIMINATELY MAKING DISALLOWANCES EVERY Y EAR BY RESORTING TO ARBITRARY AND AD HOC DISALLOWANCES AND SERIOUSLY VIOLATE THE OF PRINCIPLE OF CONSISTENCY. HONBLE SUPREME COURT IN THE CASE OF RADH SWAMI SATS ANG 193 ITR 321 HAS SQUARELY HELD THAT PRINCIPLE OF CONSISTENCY BEING S QUARELY APPLICABLE TO INCOME TAX PROCEEDINGS. 2.10. ADVERTING TO THE MERITS OF EXPENDITURE, IT IS CONTENDED THAT THE AUTHORITIES BELOW TREATED THE ENTIRE EXPENSES AS ENTERTAINMENT EXPENSES WITHOUT APPRECIATING THE TRUE NATURE THEREOF. ASSESSEE AS PER REGULAR PR ACTICE INCURRED EXPENDITURE ON SCHEME GIFTS, FREIGHT AND CARTAGE, TRAVELLING, PUBL ICITY EXPENSES, EVENT AND FAIR EXPENSES ETC. OUT OF THE TOTAL EXPENSES OF RS. 7,67 ,50,153/- ONLY A SUM OF RS. 9,95,438/- WAS INCURRED TOWARDS - FOOD & REFRESHMEN T RS. 924928/- + HOTEL BOOKING RS. 70,510/-. THIS ALSO WAS INCURRED ON THE MEETINGS OF THE ADVERTISEMENT AND SELLING AGENTS BY THE ASSESSE ORGANIZED FOR BUS INESS CONSIDERATION TO GET PROPER FIELD FEEDBACK AND APPRISE THEM OF PERIODICAL COMME RCIAL TARGETS. THESE EXPENDITURE ON FOOD / REFRESHMENT DURING SUCH STAY IN CONFERENCES OF ADVERTISING ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 14 AGENTS CONSTITUTES ESSENTIAL TOOLS OF ASSESSEES BU SINESS AND IS UNDENIABLY INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. THESE ARE INCURRED AS A REGULAR FEATURE FOR DEALERS AS A BUSINESS POLICY WITH THE M OTIVE TO BOOST ITS SALES. OUT OF TOTAL RECEIPTS OF RS. 143.16 CRORES - RECEIPTS FROM SALE OF NEWSPAPER CONSTITUTE RS. 58.21 CRORES ADVERTISEMENT RECEIPT ARE TO THE TUN E OF RS. 84.71 CRORES AS TABULATED AT PB 213 . WITHOUT ANY JUSTIFIABLE REASON AND MERELY ON SUSP ICIONS UNJUSTIFIED DISALLOWANCES OF RS. 13,90,047/- IS SUSTAINED BY LD . CIT(A). 2.11. LOWER AUTHORITIES HAVE FAILED TO APPRECIATE T HESE CRUCIAL ASPECTS THAT ADVERTISEMENT RECEIPTS ARE THE BACKBONE OF MEDIA BU SINESS COULD NOT BE ACHIEVED WITHOUT THE PARTICIPATION OF ADVERTISEMENT AGENCIES . THE ADVERTISEMENT RECEIPTS INCREASED TO RS. 84.71 CRORES FROM RS. 73.72 CRORES IN AY 2005-06 AND INCREASE IS THERE IN OTHER YEARS; THESE FACTS FULLY JUSTIFY THE BUSINESS NATURE OF EXPENDITURE IN THIS BEHALF.IT IS CONTENDED THAT THE AMOUNT SPENT O N FOOD / REFRESHMENT AND STAY OF THE ADVERTISING AGENTS IS WHOLLY AND EXCLUSIVELY FO R BUSINESS PURPOSE AND BY NO STRETCH OF IMAGINATION CAN BE HELD AS ENTERTAINMENT IN NATURE. 2.12. RELIANCE IS PLACED ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MODERN BAKERIES INDIA LTD. REPO RTED IN 249 ITR 465 IN THIS CASE ASSESSEE INCURRED EXPENSES ON ACCOUNT OF LUNCH AND DINNERS SERVED TO THE GUESTS FROM VARIOUS BRANCHES WHICH STOOD DISALLOWED . IN APPEAL, HONBLE DELHI HIGH COURT, OBSERVED THAT THE EXPENDITURE INCURRED FOR EXTENDING CUSTOMARY ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 15 COURTESY TO PERSONS CONNECTED WITH THE ASSESSEES B USINESS IS IN FACT INCURRED FOR THE PURPOSE OF ITS BUSINESS, THEY ARE NOT COVER UND ER THE WORD ENTERTAINMENT AND THEREFORE, THE SAME IS AN ALLOWABLE EXPENDITURE BEC AUSE IT WAS NECESSARY FOR ITS EFFICIENT CONDUCT OF BUSINESS. 2.13 SINCE THE FACTS OF THE CASE FOR YEAR UNDER APP EALS ARE SAME THE PRINCIPLE OF CONSISTENCY AS ENUNCIATED BY HONBLE SUPREME COURT IN RADHA SOAMI SATSANG (SUPRA) IS SQUARELY APPLICABLE. REVENUE CANNOT FLIP FLOP EVERY YEAR AND SUBJECT THE ASSESSE TO REPETITIVE LITIGATION. 2.14 UNDER THE MISCELLANEOUS EXPENSES HEAD, RS. 7,6 7,50,153/- WAS CLAIMED. ASSESSEE SUBMITTED ALL THE SUPPORTING EVIDENCE. RS. 20,74,506/- WAS INCURRED ON CASH PETTY EXPENSES BY FIELD OPERATIVES FOR BUSINES S PURPOSES; THIS CONSTITUTES ONLY 2.7% OF THE TOTAL EXPENDITURE. CONSIDERING THE IMPE RATIVE FACT THAT LOT OF SERVICES AND MATERIAL IS TO BE PROCURED FROM UNORGANIZED SEC TOR WHICH INSIST FOR CASH PAYMENTS, THIS NEGLIGIBLE AMOUNT SUPPORTED BY SELF- MADE VOUCHERS CONSTITUTE ADMISSIBLE EVIDENCE. BOOKS OF ACCOUNTS HAVE NOT BEE N REJECTED OR QUESTIONED; THE EXPENDITURE IS DEBITED IN BOOKS ON DAY TO BASIS IN REGULAR COURSE OF ACCOUNTING. THUS LOOKING AT THE VOLUME OF BUSINESS ACTIVITIES, NECESSITIES OF PETTY EXPENDITURE THE NEGLIGIBLE 2.7% EXPENDITURE SUPPORTED BY SELF-M ADE VOUCHERS CANNOT BE DISALLOWED. RELIANCE IS PLACED ON: ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 16 CIT VS. AVERY INDUSTRIES LTD. - 206 CTR 347 ( P&H) - WHEREIN IT HAS BEEN HELD THAT THE GIFT ITEMS TO DEALERS AND SELLING AGE NTS ARE FULLY ALLOWABLE AS BUSINESS EXPENDITURE. SIMILLAR RATIO HAS BEEN LAID DOWN IN F OLLOWING JUDICIAL PRONOUNCEMENTSALSO: HERO HONDA MOTORS LTD. VS. JCIT 103 ITD 157 (DEL.) CIT VS. BHAGWAN DAS SHOBHALAL JAIN 60 ITD 118 (JABA LPUR) CIT VS. VARINDER AGRO CHEMICALS LTD. 205 CTR 324 (P &H) EMPIRE JUTE CO. LTD. VS. CIT 124 ITR 1(SC) AT IS AN OUTGOING OF CAPITAL AND WHAT IS AN OUTGOIN G ON ACCOUNT OF REVENUE DEPENDS ON WHAT THE EXPENDITURE IS CALCULATED TO EF FECT FROM A PRACTICAL AND BUSINESS POINT OF VIEW RATHER THAN UPON THE JURISTI C CLASSIFICATION OF THE LEGAL RIGHTS, IF ANY, SECURED, EMPLOYED OR EXHAUSTED IN T HE PROCESS. THE QUESTION MUST BE VIEWED IN THE LARGER CONTEXT OF BUSINESS NE CESSITY OR EXPEDIENCY . S.A. BUILDERS VS. CIT 158 TAXMAN 74 (SC) SECTION 37(1) OF THE INCOME TAX ACT, 1961 BUSINES S EXPENDITURE ALLOWABILITY OF ASSESSMENT YEARS 1990-91 AND 1991 -92 WHETHER EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LE GAL OBLIGATION, YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS INCUR RED ON GROUNDS OF COMMERCIAL EXPEDIENCY HELD, YES. 2.15 APROPOS EXPENSES OTHER THAN SALES PROMOTION AN D PUBLICITY EXPENSES DISALLOWED AT RS. 38,69,526 OUT OF THE TOTAL EXPEN SES OF RS. 6,82,78,790/- UNDER VARIOUS HEADS; LD. CIT(A) FAILED TO QUOTE A SINGLE SPECIFIC EXAMPLE BEING FOR NON BUSINESS PURPOSE.BESIDESIT IS TRITE LAW THAT THE LD . AO COULD STEP INTO THE SHOES OF A BUSINESSMAN TO DECIDE HOW & WHY A PARTICULAR EXPE NSE SHOULD BE INCURRED. 2.16 ADVERTING TO OTHER PARTIALLY SUSTAINED EXPENSE S FOLLOWING CONTENTIONS ARE RAISED BY THE ASSESSE. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 17 TELEPHONE EXPENSES: 2.17 IT IS SUBMITTED THAT THE ASSESSEES BUSINESS O F MASS MEDIA INCLUDING PUBLICATION OF NEWSPAPERS ADD EVENT MANAGEMENT REQU IRES EXTENSIVE USE OF TELEPHONES AND COMMUNICATION DEVICES. THESE ARE ESS ENTIAL TOOLS OF BUSINESS BESIDES THE NEED OF LARGE SET-UP SPREAD OVER ACROSS INDIA, THE TELEPHONE EXPENSES INCURRED AT VARIOUS BRANCHES IS WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF THE BUSINESS. DIWALI EXPENSES: 2.18 LIKEWISE, THE DIWALI EXPENSES HAVE BEEN INCURR ED DURING THE PERIOD OF DIWALI FESTIVAL, SPECIFICALLY TOWARDS THE ARTICLES / GIFTS GIVEN BY THE ASSESSEE COMPANY TO ITS BUSINESS ASSOCIATES AND OTHER CONNEC TED PERSONS TO MAINTAIN HEALTHY BUSINESS RELATIONSHIP WHICH IS NECESSARY FOR THE AD VANCEMENT OF THE BUSINESS OBJECTIVES OF THE ASSESSEE COMPANY. IN THIS REGARD RELIANCE IS PLACE ON REVENUES OWN INSTRUCTIONS ISSUED BY CBDT [13/A/20/68 DATED 0 3.10.1968] EMPHASIZING THAT THE DIWALI AND MUHURAT EXPENSES COULD NOT BE HELD A S DISALLOWABLE WHILE EXAMINING THE GENUINENESS OF THE EXPENSES CLAIMED B Y THE ASSESSEE. THERE IS NO FINDING BY LOWER AUTHORITIES THAT THESE EXPENSES WE RE NOT GENUINE TRAVELLING EXPENSES: 2.19 A SUM OF RS. 9,65,875/- BEING 10% WAS DISALLOW ED BY ALLEGING THAT THESE WERE INCURRED FOR NON-BUSINESS PURPOSES. IT IS SUBM ITTED THAT THEY WERE INCURRED ON THE LOCAL AND FOREIGN TRAVELLING OF THE DIRECTORS A ND STAFF OF THE ASSESSEE COMPANY ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 18 AND THE NECESSARY DETAILS CONTAINING THE DETAILS OF PERSON TRAVELLED, PLACE OF TRAVEL AND PURPOSE OF THE SAME WERE SUBMITTED BEFORE THE L D. AO WHO WITHOUT EXAMINING THEIR NATURE AND THE PURPOSE OF THE VISIT WITH THE BUSINESS ACTIVITY AND NECESSITY HAS MADE A LUMP SUM DISALLOWANCE OF 10% B Y MAKING GENERAL OBSERVATIONS. WHILE MAKING THESE ADDITIONS THE LD. AO COMPLETELY LOST SIGHT OF THE NATURE OF BUSINESS IN WHICH ASSESSEE COMPANY IS ENGAGED, WHEREIN, TRAVELLING BY STAFF PERSONS AS WELL AS EXECUTIVES OF THE COMPA NY IS A NECESSARY FACTOR FOR THE PURPOSE OF COLLECTING INFORMATION / NEWS ITEMS / IN TERVIEWS ETC. AND OTHER PURPOSES. FURTHER THE TRAVELLING UNDERTAKEN BY DIRECTORS OUTS IDE INDIA IN RELATION TO THE PROCUREMENT OF MACHINES WAS DULY CAPITALIZED DETAIL S OF WHICH WERE ALSO SUBMITTED THUS THE REMAINING TRAVELING UNDERTAKEN B Y DIRECTORS WERE FOR THE PURPOSE OF BUSINESS SPECIALLY WHEN ONE OF THE RELAT IVES OF THE DIRECTORS OR THE STAFF TRAVELED STAYS IN THE COUNTRIES TRAVELED. THE TRAVE LLING UNDER TAKEN BY STAFF CANNOT BE HELD AS INCURRED FOR PERSONAL PURPOSES AS THE SA ME WAS INCURRED IN RELATION TO PROVIDE INCENTIVE TO THEM AND IS PART OF THE BUSINE SS. THIS CRYSTAL CLEAR FACT WAS IGNORED BY LD. CIT(A) AS WELL, THEREFORE, THE DISAL LOWANCE MADE ON ACCOUNT OF TRAVELLING EXPENSES DESERVES TO BE DELETED. BUSINESS EXPENSES: 2.20 A SUM OF RS. 2,24,731/- BEING 20% OF TOTAL EXP ENSES CLAIMED UNDER THIS HEAD WAS DISALLOWED WHICH INCLUDES THE EXPENSES INC URRED ON THE VISITS OF ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 19 REPRESENTATIVES, SUPPLIERS AND NEWS LINE DIGNITARIE S WHO VISITED THE OFFICE OF THE ASSESSEE COMPANY AND ITS BRANCHES RESULTING INTO PU BLICITY AND MEDIA COVERAGE BOTH PRINT AS WELL AS ELECTRONIC MEDIA. LD. AO COMP LETELY IGNORED THE ASSESSEES EXPLANATION DATED 27.12.2007. OTHER EXPENSES 2.21 A SUM OF RS. 5,00,000/- WAS DISALLOWED OUT OF OTHER EXPENSES CLAIMED IN PROFIT & LOSS ACCOUNT. THE OTHER EXPENSES CLAIMED I NCLUDES THE EXPENSES LIKE WASHING CHARGES, GENERAL EXPENSES, PAYMENT TO VARIO US EMPLOYEES AGAINST THEIR CLAIMS OF TRANSPORT CIRCULATION, RECOVERY WORK, REM UNERATION OF TEMPORARY EMPLOYEES ETC. THESE EXPENSES WERE PETTY IN NATURE AND MERELY DISALLOWED FOR THE REASON THAT THEY HAVE BEEN INCURRED IN CASH, THEY H AVE BEEN DOUBTED BY GROSSLY IGNORING THE NECESSITY AND THE PURPOSE OF THE EXPEN SES INCURRED. FURTHER THE BRANCH-WISE DETAILS OF THE EXPENSES INCURRED ALONG WITH THE COPIES OF THE RESPECTIVE ACCOUNTS WERE SUBMITTED BEFORE THE AO WHO FAILED TO POINT OUT A SINGLE EXPENSE INCURRED FOR NON BUSINESS PURPOSE AND HAS MADE THE LUMP SUM DISALLOWANCE OUT OF THE SAME. VEHICLE RUNNING EXPENSES: 2.22 A SUM OF RS. 2,11,577/- WAS DISALLOWED OUT OF TOTAL EXPENSES CLAIMED AT RS. 21,15,770/-; ASSESSEE COMPANY IS MANAGED BY THE IND EPENDENT PROFESSIONALS AND DIRECTORS. THE ASSESSEE IS A SEPARATE JURISTIC LEGA L ENTITY AND THE NECESSARY PERQUISITE VALUE OF THE FACILITY OF VEHICLE USED BY THE DIRECTORS AND EMPLOYEES HAVE ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 20 SEPARATELY BEEN SHOWN IN THEIR INDIVIDUAL TAX RETUR NS THEREFORE FURTHER DISALLOWANCE OF THE SAME OUT OF THE EXPENSES CLAIMED BY THE ASSE SSEE COMPANY IS NOT JUSTIFIABLE. AS THE COMPANY IS SEPARATE LEGAL ENTITY AND THUS QU ESTION OF ANY PERSONAL USER DOES NOT ARISE. EVENT MANAGEMENT EXPENSES: 2.23 A SUM OF RS. 5,00,000/- WAS DISALLOWED OUT OF TOTAL EXPENSES CLAIMED AT RS. 1,09,41,337/-. IN THIS REGARD, IT IS SUBMITTED THAT OUT OF THE TOTAL RECEIPT FROM EVENT MANAGEMENT ACTIVITY AT RS. 2,28,16,642/- (PB 213) A SUM OF RS. 1,09,41,337/- WAS CLAIMED UNDER VARIOUS HEADS AND A NET SURPLUS OF RS . 1,18,75,305/- WAS DECLARED AS INCOME FROM ORGANIZING VARIOUS FATES AND EVENTS AT VARIOUS PLACES WHICH AMOUNT OTHER BENEFITS HELP IMPROVE THE ADVERTISEMENT AND PUBLICITY. THESE EXPENSES ARE DULY SUPPORTED BY NECESSARY BILLS AND VOUCHERS AND IN CASE OF PETTY EXPENSES, BY SELF MADE VOUCHERS DULY AUTHENTICATED AND VERIFIED BY THE PAYEE AND ENDORSED BY OFFICIAL OF THE ASSESSEE COMPANY. THE NECESSITY AND RELATION WITH THE BUSINESS OPERATIONS OF EVENT MANAGEMENT CANNOT BE DOUBTED. T HESE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES DESERV E TO BE ALLOWED. MANAGEMENT & STAFF TRAINING EXPENSES: 2.24 A SUM OF RS. 7,03,176/- WAS CLAIMED OUT OF WHI CH RS. 3,51,588/- WAS DISALLOWED BY OBSERVING THAT THE SAME PERTAINED TO SUBSEQUENT ASSESSMENT YEAR. IN THIS REGARD, IT WAS THE FEE PAID BY THE ASSESSEE CO MPANY ON THE COURSES UNDERTAKEN AND COMPLETED BY SHRI NIHAR KOTHARI, MANAGING DIREC TOR OF THE ASSESSEE COMPANY. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 21 THOUGH A PART OF THE COURSE PERTAINED TO THE SUCCEE DING ASSESSMENT YEAR HOWEVER, SINCE THE FEE WAS PAID IN THE YEAR UNDER CONSIDERAT ION AND WAS NON-REFUNDABLE, THEREFORE THE SAME WAS CLAIMED FOR THE YEAR UNDER A PPEAL. LD. AO AS WELL AS LD. CIT(A) DID NOT DOUBT THE CLAIM BUT UNJUSTIFIABLY AS SUMED THAT THE COURSE WAS CONDUCTED IN THE PERIOD PERTAINING TO SUCCEEDING AS SESSMENT YEARS, DISALLOWANCE WAS MADE WHICH WAS CLAIMED BY ASSESSEE ON PAYMENT B ASIS. SINCE THE EXPENDITURE IS NEITHER DOUBTED NOR QUESTIONED, THE ASSESSE FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING IS ELIGIBLE FOR THIS CLAIM AS IT WAS IRR EVOCABLY INCURRED DURING THE YEAR IN QUESTION. FOUNDATION DAY CEREMONY EXPENSES: 2.25 A SUM OF RS. 4,05,424/- WAS DISALLOWED OUT OF TOTAL EXPENSES CLAIMED RS. 40,54,240/- @ 10% WHICH STOOD REDUCED TO 5% BY LD. CIT(A). IN THIS REGARD, IT IS SUBMITTED THAT THE CEREMONY WAS SOLEMNIZED WITH THE OBJECT OF ACHIEVING DEVELOPMENT IN PERSONAL AND DIRECT INTERACTION BETW EEN THE SELLING AND ADVERTISING AGENCIES AND THE EMPLOYEES OF THE ASSESSEE COMPA NY. ANOTHER KEY PURPOSE OF THIS CEREMONY WAS TO HONOR AND APPRECIATE THE SERVI CES OF ADVERTISING AGENTS WHO ARE THE BACKBONE OF THE ASSESSEE COMPANY. THE CEREM ONY IS ORGANIZED EVERY YEAR SINCE THE INCEPTION OF COMPANY AND THESE EXPENSES W ERE NEVER DISALLOWED. IT IS CONTENDED THAT THIS CONSISTENT BUSINESS EXPENDITURE CANNOT BE DISALLOWED. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 22 3.1 FOR AY 2006-07, IT IS VEHEMENTLY CONTENDED THAT THE DISALLOWANCE HAS BEEN MADE DESPITE THE FACT THAT ASSESSEE HAD ALREADY PAI D FRINGE BENEFIT TAX (FBT) ON MOST OF THE A EXPENSES. LD. AO ASSESSED THE SAME U/ S 115WE(3) VIDE ORDERS DATED 30.12.2008; VALUE OF FRINGE BENEFIT AS DECLARED BY ASSESSEE AT RS. 1,76,54,330/- IS ACCEPTED. THIS DOUBLE TAXATION DEMONSTRATES THE PER FUNCTORY ATTITUDE OF THE DEPARTMENT. 3.2 IT IS ALSO SUBMITTED THAT THE IMPUGNED DISALLOW ANCES HAVE BEEN MADE ONLY ON THE BASIS OF SOME VAGUE AND GENERAL OBSERVATIONS WITHOUT IN ANY MANNER SPECIFICALLY POINTING OUT AS TO WHY THE EXPENSES AS CLAIMED BY ASSESSEE ARE NOT BEING ALLOWED. THE BOOKS OF ACCOUNTS OF ASSESSEE CO MPANY ARE DULY AUDITED AS PER THE PROVISIONS OF SECTION 44AB WERE NOWHERE DOUBTED BY THE LD. AO AND THE TRADING RESULTS AS DECLARED BY ASSESSEE HAS BEEN AC CEPTED BY HIM, THEREFORE, NO DISALLOWANCE OF EXPENSES COULD HAVE BEEN MADE ON AD -HOC BASIS WHEN THE CORRESPONDING RECEIPTS ARE ACCEPTED. 3.3 LD. COUNSEL AFTER ADVERTING TO FOREGOING SUBMIS SIONS ABOUT EACH SPECIFIC EXPENDITURE, ITS GENUINENESS, BUSINESS EXPEDIENCY O N THE EXPENDITURE FURTHER CONTENDS THAT THE APPELLANT BEING A COMPANY AN INAN IMATE ASSESSABLE ENTITY NO PERSONAL USE OF EXPENDITURE CAN BE ATTRIBUTED TO IT . RELIANCE IS PLACED ON HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF SAYAJI I RON AND ENG. CO. LTD. 253 ITR 749 HOLDING THAT A LTD. COMPANY BEING AN INANIMATE ENTITY THERE CANNOT BE ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 23 ANYTHING PERSONAL ABOUT IT AND EXPENSES CANNOT BE D ISALLOWED AS PERSONAL EXPENSES. HONBLE GUJRAT HIGH COURT OBSERVED AS UND ER IN THIS BEHALF: 9.1. THERE IS ONE MORE ASPECT OF THE MATTER WHICH R EQUIRES TO BE CONSIDERED. THE ASSESSEE WHICH IS A PRIVATE LIMITED COMPANY IS A DI STINCT ASSESSABLE ENTITY AS PER DEFINITION OF 'PERSON' UNDER S. 2(31) OF THE ACT. THEREFORE, IT CANNOT BE STATED THAT WHEN THE VEHICLES ARE USED BY THE DIRECTORS, 'EVEN IF THEY ARE PERSONALLY USED BY THE DIRECTORS' THE VEHICLES ARE PERSONALLY USED BY THE COMPANY, BECAUSE A LIMITED C OMPANY BY ITS VERY NATURE CANNOT HAVE ANY 'PERSONAL USE. THE LIMITED COMPANY IS AN INANIMATE PERSON AND THERE CANNOT BE ANYTHING PERSO NAL ABOUT SUCH AN ENTITY. THE VIEW THAT WE ARE ADOPTING IS SUPPORTED BY THE PROVISION OF S. 40(C) AND S. 40A(5) OF THE ACT. SINCE THE DISALLOWANCES OF SIMILAR NATURE WERE DELE TED BY THE HONBLE ITAT FROM YEAR TO YEAR AS MENTIONED IN CHART PLACED AT PB 47-50 KEEPING THE SETTLED LAW ABOUT THE PRINCIPLE OF CONSISTENCY, ALL THESE DISALLOWANC ES IN THE ASSESSMENT YEARS 2005- 06, 06-07 AND 08-09 UNDER APPEALS, DESERVE TO BE DE LETED. 3.4 LD. DR. RELIED ON THE ORDERS OF LD. CIT(A) ON THESE ISSUES. 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FACTS ABOUT ASSESSEES REGULAR MAINTENANCE OF ACCOUNTS, THEIR NON-REJECTION, DIVERSE BUSINESS ACTIVITIES, CONTENTIONS, APPLICABL E CASE LAWS AND PAST LITIGATION HISTORY IS NARRATED IN DETAILS ABOVE AND NEEDS NO R EPETITION. WE ARE INCLINED TO ALLOW GROUNDS RAISED BY ASSESSEE RELATING TO RETEN TION OF DISALLOWANCES BY LD. CIT(A) IN ALL THESE YEARS ON FOLLOWING CONSIDERATIO NS. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 24 I. ALL DISALLOWANCES HAVE BEEN ALLOWED IN FAVOR OF THE ASSESSE BY ITAT IN A.YS. 1992-93 TO 1997-98, 2000-01 AND 2001-02 A GIST OF THE ORDERS OF THE ITAT ORDERS IN THIS BEHALF FINDS PLACE ON PB 47-50 . SERIES OF ORDERS OF THIS BENCH IN ASSESSEES OWN CASE ARE TO BE RESPECTFULLY FOLLOWED. II. IN ADDITION TO ABOVE, FOR AY 2004-05 ALSO THE OTHER ADDITIONS/DISALLOWANCES STOOD ALLOWED TO ASSESSE AN D ISSUE OF 5% DISALLOWANCE OUT OF SALES PROMOTION WAS SET ASIDE B Y ITAT FOR FRESH CONSIDERATION. LD. CIT(A) IN 2 ND ROUND OF PROCEEDINGS ALLOWED THESE EXPENSES BY LATEST ORDER DTD 29-1-14 IN FRESH PROCE EDINGS. REVENUE HAS ACCEPTED THIS ORDER AND HAS BECOME FINAL. III. ASSESSEES BOOKS OF ACCOUNTS ARE MAINTAINED REGULAR LY ON DAY TO DAY BASIS AND ARE DULY AUDITED; THERE IS NO QUALIFICATI ON OR ANY MATERIAL ADVERSE REMARK BY THE CHARTERED ACCOUNTS. IV. ASSESSEES BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED MUCH LESS EVEN DOUBTED. V. IN VIEW OF A SERIES OF FAVORABLE ORDERS IN ASSESSEE S OWN CASES ON THESE ISSUES WE ARE OF THE VIEW THATTHEY ARE NO MOR E RES INTEGRA. VI. PRINCIPLE OF CONSISTENCY AS ENUNCIATED BY HONBLE SUPREME COURT IN RADHASOAMI SATSANG (SUPRA) IS FULLY APPLICABLE T O THE ASSESSEES CASE WHICH HAS BEEN RECONFIRMED BY HONBLE SUPREME COURT IN CIT V EXCEL INDUSTRIES LTD. 358 ITR 295 HOLDING AS UNDER: SECONDLY, AS NOTED BY THE TRIBUNAL, A CONSISTENT V IEW HAD BEEN TAKEN IN FAVOUR OF THE ASSESSEE, STARTING WITH THE AY 199 2-93, THAT THE BENEFITS UNDER THE ADVANCE LICENCES OR UNDER THE DU TY ENTITLEMENT PASS BOOK DO NOT REPRESENT THE REAL INCOME OF THE ASSESS EE. CONSEQUENTLY, THERE WAS NO REASON TO TAKE A DIFFERENT VIEW UNLESS THERE ARE VERY ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 25 CONVINCING REASONS, NONE OF WHICH HAD BEEN POINTED OUT BY THE REVENUE. IN RADHASOAMI SATSANG SAOMI BAGH V. COMMIS SIONER OF INCOME TAX, [1992] 193 ITR 321 (SC) COURT DID NOT T HINK IT APPROPRIATE TO ALLOW THE RECONSIDERATION OF AN ISSU E FOR A SUBSEQUENT AY IF THE SAME 'FUNDAMENTAL ASPECT' PERMEATES IN DI FFERENT AYS. IT APPEARS FROM THE RECORD THAT IN SEVERAL AYS, THE RE VENUE ACCEPTED THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND DID NOT PURSUE THE MATTER ANY FURTHER BUT IN RESPECT OF SOME AYS THE M ATTER WAS TAKEN UP IN APPEAL BEFORE THE HIGH COURT BUT WITHOUT ANY SUC CESS. THAT BEING SO, THE REVENUE COULD NOT BE ALLOWED TO FLIP-FLOP O N THE ISSUE FURTHER. (PARA 28, 29 & 31) 3.6 IN OUR CONSIDERED VIEW THESE JUDGMENTS ARE FULL Y APPLICABLE TO ASSESSEES GROUNDS RELATING TO DISALLOWANCE IN ALL THESE YEARS . RESPECTFULLY FOLLOWING THEM THE DEPARTMENT CANNOT BE JUSTIFIED IN ADOPTING A FLIP F LOP ATTITUDE AND REPEATEDLY GO ON DISALLOWING THE SAME TYPE OF EXPENDITURE YEAR AFTER YEAR. VII. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJ I IRON AND ENG. CO. (SUPRA) IS APPLICABLE TO DISALLOWANCE RETAINED ALLEGING PERSONAL USER BY THE COMPANY. RESPECTFULLY FOLLOWING IT WE H OLD THAT IN THE CASE OF ASSESSE BEING A LIMITED COMPANY WHICH IS AN INAN IMATE PERSON, THERE CAN BE NO PERSONAL EXPENDITURE. CONSEQUENTLY THE DISALLOWANCES ATTRIBUTED TO BE PERSONAL USER CANNOT BE JUSTIFIED AND ARE DELETED. VIII. FOR AY 2006-07 QUA THE SAME DISALLOWANCES ASSESSE H AS PAID MORE FRINGE BENEFIT TAX (FBT). AS OVER FBT AND IT PROVIS IONS IF ANY EXPENDITURE IS TAXABLE UNDER FBT IT CANNOT BE DISAL LOWED AGAIN IN INCOME TAX PROVISIONS. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 26 3.7 CONSIDERING THE ENTIRETY OF ABOVE OBSERVATIONS WE HAVE NO HESITATION IN DELETING THE DISALLOWANCES/ADDITIONS RETAINED BY LD . CIT(A) OUT OF VARIOUS EXPENSES MENTIONED IN RESPECTIVE GROUNDS FOR AY 200 5-06, 2006-07 & 2008-09 WHICH ARE DELETED. GROUNDS RAISED BY ASSESSE IN THI S BEHALF IN ALL THESE YEARS ARE ALLOWED. 4.1 ADVERTING TO ASSESSEES REMAINING GROUNDS ABOUT FOLLOWING DISALLOWANCE OF MARKETING AND SURVEY EXPENSES IN ALL THESE YEARS: AY DISALLOWED EXP OUT OF TOTAL EXPS. AY 2005-06 RS. 60,01,635/- RS. 2,35,12,583/- AY 2006-07 RS. 64,88,084/- RS. 3,08,87,002/- AY 2008-09 RS. 43,36,835/- RS. 4,83,31,693/ - 4.2 LD COUNSEL FOR THE ASSESSE CONTENDS THAT AS ALR EADY MENTIONED THE ASSESSEE COMPANY IS ENGAGED IN PUBLISHING OF THE DAILY NEWSP APER RAJASTHAN PATRIKA HINDI DAILY. THE RAJASTHAN PATRIKA HINDI DAILY WITH HIGHEST READER BASE IN RAJASTHAN. IN ORDER TO MAINTAIN ITS BUSINESS STANDI NG, PROSPECTS AND DEVELOPMENT I.E. IMPROVE READER BASE, MEET WITH THE LOCAL COMPE TITION PARTICULARLY FROM ANOTHER NEWSPAPER DAINIKBHASKAR IN THE STATE OF RAJASTHAN A ND FOR OTHER COMMERCIAL REASONS, IT WAS FELT AS A BUSINESS NECESSITY TO UND ERTAKE AGGRESSIVE MARKETING AND SURVEY OPERATIONS ON REGULAR BASIS. ACCORDINGLY SER VICE OF VARIOUS INDEPENDENT AGENCIES WAS HIRED FOR CONDUCTING DOOR TO DOOR SURV EY ABOUT NEWS QUALITY, SUGGESTIONS FOR IMPROVEMENT OF COVERAGE AND COMPILA TION OF INFORMATION FROM THE ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 27 READERS ABOUT PREFERENCE BETWEEN THE COMPETING NEWS PAPERS OF RAJASTHAN AREA. THIS EXERCISE OF CONDUCTING SURVEY PROVIDED FOLLOWI NG BUSINESS ADVANTAGES TO THE ASSESSEE COMPANY: 1. THIS SURVEY GIVE AREA SPECIFIC INFORMATION OF THE R EADERS BASE AND READERS BASE OF OTHER NEWSPAPERS SO AS TO CONVERT THE NEWSP APER PUBLISHED BY THE ASSESSEE COMPANY. 2. HAVING DETAILED INFORMATION AND PROFILE OF THE READ ERS WHICH IS BENEFICIAL FOR MARKETING TEAM TO INCREASE THE ADVERTISEMENT REVENU E. 3. IDENTIFICATION OF THOSE AREAS WHERE VIGOROUS MARKET ING AND PROMOTION ACTIVITIES ARE NEEDED TO INCREASE THE SALES AND REA DERSHIP OF THE NEWSPAPER. 4. BY SUCH DOOR TO DOOR SURVEY, THE COMPANY HAS INFORM ATION ABOUT THE READERS THEIR LIKING OF CONTENTS AND SUBJECTS WHICH THEY PR EFERRED IN A NEWSPAPER. 4.3 A BARE PERUSAL OF RESPECTIVE SCHEDULES PERTAINI NG TO SALES & ADVERTISEMENT RECEIPTS FORMING PART OF THE AUDIT R EPORT REFLECT THAT THE REVENUE HAS INCREASED FROM YEAR TO YEAR. ASSESSEES TURNOVER PROGRESSIVELY INCREASED FROM ABOUT RS. 124.15 CRORES IN AY 2004-05 TO RS. 1 45.98 CRS IN AY 2005-06; RS.1.80CRS IN AY 2006-07 AND RS. 2.51 CRS FOR AY 20 08-09. AS COMPARED WITH TO THE EXPENDITURE ON MARKETING AND SURVEY CONSTITUTES MEAGER % OF SUCH INCREASE IN TURNOVER I.E. DIFFERENTIAL TURNOVER. IT MAKES IT AB UNDANTLY CLEAR THAT THE EXPENSES INCURRED FOR MARKETING AND SURVEY ARE VERY REASONAB LE AS COMPARED TO THE COMMERCIAL BENEFITS ACHIEVED. FOR CONDUCTING SUCH S URVEYS, ASSESSEE APPOINTED FOLLOWING INDEPENDENT PARTIES IN RESPECTIVE YEARS N AMELY: ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 28 I. M/S PERFECT N MARKETING, JAIPUR II. M/S ANEU MARKETING JAIPUR III. M/S A ONE MARKETING THEY RENDERED THE REQUISITE SERVICES BY CONDUCTING DOOR TO DOOR SURVEYS IN DIFFERENT AREAS ON DIFFERENT DAYS THROUGH THEIR SEL F HIRED TEAM OF SURVEYORS AND COLLECTED FOLLOWING TYPE OF INFORMATION:- 1. NUMBER OF HOUSES WHERE THE NEWSPAPER PUBLISHED B Y THE ASSESSEE COMPANY IS READ. 2. NUMBER OF HOUSES WHERE ANY OTHER NEWSPAPER IS RE AD. 3. NUMBER OF HOUSES WHERE THE NEWSPAPERS PUBLISHED BY THE ASSESSEE COMPANY AND OTHER BOTH ARE READ. 4. NUMBER OF HOUSES WHERE NO NEWSPAPER IS READ. THESE AGENCIES SUPPLIED THE COLLECTED INFORMATION O N THESE DOMAINS TO ASSESSEE, ON THE BASIS THEREOF COMPANY REPRESENTATIVES ALONG WIT H THE SURVEYING PERSON VISITED THE HOUSES/ESTABLISHMENT WHERE ITS NEWSPAPER WAS NO T READ FOR PERSUASION TO READ ITS NEWSPAPER BY OFFERING INCENTIVES LIKE SUPPLY OF FREE COPIES. LD. AO NEITHER DOUBTED THE OTHER EXPENDITURE IN THIS HEAD NOR THE RESULTANT FREE DISTRIBUTION OF THE NEWSPAPERS. 4.4 THE DETAILS OF SERVICES RENDERED BY THESE INDEP ENDENT PARTIES AND THEIR SURVEY REPORTS WERE FILED DURING THE COURSE OF ASSE SSMENT PROCEEDINGS VIDE LETTER DATED 31.12.2007 FOR AY 2005-06 COPY THEREOF IS FIL ED WITH PB 62-74 AND ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 29 SUBSEQUENTLY FOR AYS 2006-07 AND 08-09 WITH AN ABST RACT BASED ON SUCH SURVEY REPORTS. LD. AO HAS NOT GIVEN ANY ADVERSE COMMENT O N THE INFORMATION CONTAINED THEREIN 4.5 THE PAYMENTS MADE TO THESE AGENCIES ARE DULY VO UCHED AND SUPPORTED WITH NECESSARY EVIDENCE LIKE INVOICES WHICH WERE DULY AU THENTICATED BY THE SURVEY SUPERVISING STAFF AND ON VERIFICATION DULY CLEARED AT LEVEL OF DIRECTORS FOR ALLOWING SUCH PAYMENTS. 4.6 LD. AO HOWEVER DISALLOWED THE ENTIRE EXPENDITUR E ON FOLLOWING ADVERSE INFERENCES: A) THE PARTIES COULD NOT BE PRODUCED FOR VERIFICATI ON B) INSPECTION REPORT THAT NO CONCERN EXIST ON THE A DDRESS MENTIONED IN THE BILL. C) STATEMENT OF THE PERSON RESIDING AT SUCH ADDRESS DENY ABOUT THE EXISTENCE OF ANY FIRM. D) PHOTOGRAPH OF THE PLACE WHICH HAS BEEN MADE PART OF THE ASSESSMENT ORDER. LD. AO RELIED ON SOME ALLEGED INSPECTION REPORT FOR WHICH NO OPPORTUNITY OF CROSS EXAMINATION OF THE PERSONS DENYING THE EXISTENCE OF AGENCIES WAS ALLOWED. CONSEQUENTLY THE ADVERSE INFERENCE DRAWN IN THIS BE HALF IS IN VIOLATION OF FUNDAMENTAL PRINCIPLES OF NATURAL JUSTICE. BESIDES LD. AO FAILED TO APPRECIATE THE FOLLOWING CRUCIAL FACTS: 1) ASSESSEE PRODUCED THE PROPRIETOR OF PERFECT N MA RKETING SHRI HANUMAN SINGH BEFORE THE AO ON 27.12.2007 I.E. THE NEXT DAT E OF HEARING BEFORE LD. AO. HIS STATEMENT WAS NOT RECORDED BY AO CLAIMING P RE-OCCUPATION THUS ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 30 THIS EVIDENCED WAS WILLFULLY NOT ALLOWED TO BE BROU GHT ON RECORD. THESE FACTS WERE DULY COMMUNICATED TO THE AO VIDE LETTER DATED 28.12.2007 (PB 79-82); SENT BY POST AS LD. AO REFUSED TO TAKE THIS REPLY O N RECORD. IT WAS COMMUNICATED TO THE AO THAT IF THE CONCERNED PARTY COULD NOT APPEAR ON NEXT DATE, ASSESSEE SHALL NOT BE HELD RESPONSIBLE F OR NON-APPEARANCE AS ITS ONUS STANDS DISCHARGED. SINCE LD. AO OPTED NOT TO R ECORD HIS STATEMENTS, THE ALLEGATION OF LD. AO IS NOT TENABLE. 2) COPY OF RETURNS OF INCOME FILED BY THESE AGENCIE S WERE SUBMITTED WITH AO VIDE LETTER DATED 27.12.2007 PB 13-18 WHEREIN PAN AND OTHER RELEVANT DETAILS WERE DULY MENTIONED. 3) ABSTRACTS OF MONTHLY SURVEY REPORTS WERE SUBMITT ED BEFORE THE AO VIDE LETTER DATED 31.12.2007 PB 62-74 . 4) OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE S TATEMENTS WERE RECORDED BY THE INSPECTOR WAS ASKED FOR WHICH WAS NEVER PROV IDED DESPITE ASSESSEES REQUEST PB-62 . LD. AO DISALLOWED THE ENTIRE EXPENDITURE IN ALL THE SE YEARS. AGGRIEVED ASSESSEE RAISED THESE GROUNDS IN FIRST APPEAL. LD. CIT(A) HO WEVER CONFIRMED THE ORDER OF LD. AO RELYING MAINLY ON FOLLOWING SUMMARY OF OBSERVATI ONS: I. INITIAL ONUS TO PROVE GAMINESS OF THE EXPENDITURE A ND PARTIES WAS NOT DISCHARGED BY THE ASSESSEE AS THESE PARTIES, THEIR BILLS/VOUCHER AND COPY OF INCOME TAX RETURN WERE NOT FILED. II. INSPECTOR WAS DEPUTED WHO FOUND THAT SOME OTHER PER SONS WERE RESIDING AT THESE ADDRESS AND NOT THE PARTIES WHO A RE CLAIMED TO HAVE RENDERED SERVICES. III. THE DAILY SURVEY REPORTS WERE PREPARED IN HURRY BY SOME LAYMAN OR TEMPORARY EMPLOYEES OF THE ASSESSEE. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 31 IV. THE BANK INQUIRIES REVEALED THAT AMOUNTS PAID BY AS SESSEE WERE BY TRANSFER ENTRIES AND THE AMOUNTS WERE WITHDRAWN ON THE SAME DAY LEAVING BALANCE A SMALL AMOUNT. THIS ALL INDICATED THAT THE ALLEGED MARKETING AND SURVEY EXPENSES WERE ACCOMMODATION EN TRIES. V. SHRI BHANWARLALS STATEMENT WAS RECORDED BY INSPECT OR ON 26-12-07; ASSESSEE AS LATE AS 17-11-2009 PRODUCED A LETTER FR OM HIM ALLEGING THAT HIS STATEMENT WAS RECORDED UNDER PRESSURE WAS AN AFTERTHOUGHT. VI. NO PRIMARY RECORD OF DOOR TO DOOR SURVEY INDICATING THE DATE OF VISIT, NAME AND ADDRESS OF SURVEYED HOUSE HOLDER AND WORKI NG SHEET WITH THE SIGNATURE OF ASSESSEES REPRESENTATIVE AND SURV EY WAS FILED. VII. THE TAX LIABILITY FOR AY 2006-07 WERE MEAGER IN THE CASES OF - SHRI PUSHPENDRA SINGH PROP. ANUE MARKETI NG ONLY RS. 16,275/1 AND SHRI HANUMAN SINGH PROP. M/S PERFECT M ARKETING RS. 22,632/- AND SMT. SHAKUNTALA SINGH PROP. A ONE MARK ETING ALSO PAID SMALL TAX. 4.7 LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE MONTHLY SURVEY REPORTS PROVIDED BY THESE AGENCIES WERE DULY SUBMITTED BEFO RE THE LD. CIT(A) ON 25.11.2008 TO BE ADMITTED AS ADDITIONAL EVIDENCES. A REMAND REPORT WAS CALLED, FOLLOWING DOCUMENTS WERE SUBMITTED BEFORE THE LD. A O ALONG WITH THE LETTER DATED 17.11.2009 & 08.03.2011IN THE REMAND PROCEEDINGS, WHICH ARE PLAC ED ON THE PAPER BOOK: A) BANK STATEMENT OF BOTH THE CONCERNS FOR THE PERI OD FROM 01.04.2004 TO 31.03.2005. B) INCOME TAX RETURN, COMPUTATION AND BALANCE SHEET FOR A.Y. 2005-06. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 32 C) LETTER DATED 17.11.2009 FROM M/S PERFECT N MARK ETING CONFIRMING THAT THE STATEMENTS RECORDED BY THE INSPECTOR WERE UNDER PRESSURE AND THE WITNESS GANESH KUMAR WAS MADE TO SIGN THE STATEMENTS WITHOU T THE KNOWLEDGE ABOUT THE CONTENTS THEEOF. D) COPY OF INSURANCE POLICY ISSUED BY LIC ON 28.05. 2000 IN THE NAME OF PROPRIETOR AT THE SAME ADDRESS TO CORROBORATE THE E XISTENCE OF THE CONCERN. E) STATEMENTS OF TWO INDEPENDENT RESIDENTS NEAR PRE MISE NO. 119/504, MANSAROVAR CONFIRMING CONCERNS WORKING AND EXISTENC E 4.8 IN REMAND PROCEEDINGS, PROPRIETORS OF THESE CO NCERNS APPEARED BEFORE LD. AO AND THEIR STATEMENTS WERE RECORDED WHICH IS ADMI TTED IN THE REMAND REPORT. LD. AO CHANGED STAND AND DOUBTED THE RENDERING OF SERVI CE ON VAGUE REASON THAT THEY WERE PERSONS OF SMALL MEANS. A DETAILED REJOINDER O N THE REMAND REPORT WAS SUBMITTED BEFORE LD. CIT(A) WHICH ALSO REMAINS UNCO NTROVERTED. 4.9 THUS LD. AO FAILED TO RECORD THE STATEMENT OF T HE PARTY PRODUCED BY THE ASSESSEE AND MADE THE ADDITIONS ON SURMISES, OVERLO OKING THE VITAL EVIDENCE AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. IT WAS S UBMITTED BEFORE LD. CIT(A) THAT THE SERVICES RENDERED AND EXPENDITURE INCURRED IN THIS BEHALF CANNOT BE DOUBTED. THE ENTIRE BUSINESS EXPENDITURE HAS BEEN INCURRED THROU GH ACCOUNT PAYEE CHEQUES AND CLEARED THROUGH BANKS. THE TRANSACTIONS IN QUESTION WERE WHOLLY AND EXCLUSIVELY IN THE NORMAL COURSE OF BUSINESS; REQUISITE TDS ON THE SE PAYMENTS WAS MADE AND DEPOSITED IN GOVT. TREASURY. THE EXPENDITURE OF SIM ILAR NATURE WAS ALSO CLAIMED IN ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 33 THE PRECEDING ASSESSMENT YEARS WHICH HAVE BEEN ALLO WED AS BUSINESS EXPENDITURE BY ORDERS PASSED U/S 143(3). FACTS AND CIRCUMSTANCE S IN THE PRECEDING YEARS ARE IDENTICAL TO THE YEARS UNDER APPEAL, ON PRINCIPAL O F CONSISTENCY THE AO SHOULD NOT BE FLIP FLOP FROM THE POSITION WHICH IS ACCEPTED IN THE PRECEDING ASSESSMENT YEARS. THE CREDIBILITY OF INSPECTORS REPORT WAS CHALLENGE D BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. J. K. CHARITABLE TRUST REPORTED IN 308 ITR 161 AND KISHINCHANDCHELLARAMVS CIT 125 ITR 713 (SC ) WHERE IT WAS HELD THAT ANY EVIDENCE WHICH HAS NEVER SEEN THE LIG HT OF THE DAY, COULD NOT BE TAKEN INTO CONSIDERATION SO AS TO WARRANT AN ADDITION. 4.10 THE PARTIES IN QUESTION WERE NOT RELATED TO AN Y DIRECTOR AND THEIR INCOME IN THIS BEHALF WAS DISCLOSED AND ASSESSED BY THEIR RES PECTIVE RETURNS. ASSESSMENTS FOR A.Y. 2006-07 WERE COMPLETED U/S 143(3), WITHOUT MAK ING ANY ADVERSE REMARKS ON THESE RECEIPTS, COPIES OF THEIR ORDERS WERE SUBMITT ED BEFORE LD. CIT(A). SINCE DEPARTMENT ITSELF HAS ACCEPTED THEIR IDENTITY, GENU INENESS OF EXISTENCE AND ACCEPTED THEIR INCOME FOR RENDERING THESE SERVICES, THERE WA S NO QUESTION OF DISBELIEVING THEIR SERVICES IN ASSESSEES HANDS. 4.11 IT IS HELD IN THE CASE OF INDIAN MOLASSES CO. P. LTD. V. CIT 37 ITR 66 (SC) THAT IN ORDER TO CLAIM DEDUCTION OF EXPENDITURE U/S 37(1) FOLLOWING CONDITIONS SHOULD BE SATISFIED: ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 34 (I) THE EXPENDITURE IN QUESTION SHOULD NOT BE OF THE NA TURE DESCRIBED UNDER THE SPECIFIC PROVISIONS OF SECTIONS 30 TO 36; (II) THE EXPENDITURE SHOULD NOT BE OF THE NATURE OF CAP ITAL EXPENDITURE; (III) IT SHOULD NOT BE A PERSONAL EXPENDITURE; AND (IV) THE EXPENDITURE SHOULD HAVE BEEN LAID OUT OR EXPENDED WHOLLY AND EX CLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. THE CASE OF THE ASSESSEE FULFILLS ALL THE CONDITION S LAID DOWN THEREFORE THE EXPENDITURE AS CLAIMED IS ALLOWABLE IN TERMS OF THE PROVISIONS OF SECTION 37(1) OF THE INCOME TAX ACT, 1961. IT IS SETTLED LAW THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES. RELIA NCE FOR THIS PROPOSITION IS PLACED ON 37 ITR 271 (SC) UMA CHARAN SHAW & BROS. CO.VS. C IT. IT HAS BEEN FURTHER HELD IN THE FOLLOWING CASES THAT SUSPICION HOWSOEVE R STRONG CANNOT TAKE THE PLACE OF PROOF: 1. 37 ITR 151 OMAR SALAY MOHAMMAD SAITVS. CIT 2. 26 ITR 736 DHIRAJLALGIRDHARILALVS. CIT 3. 26 ITR 775 DHAKESHWARI COTTON MILLSLTD. VS. CIT 4. 37 ITR 288 LAL CHAND BHAGATAMBICA RAM VS. CIT 5. 91 ITR 8 CIT VS. CALCUTTA DISCOUNT COMPANY LTD. 4.12 IT IS FURTHER SUBMITTED THAT THE EXPENDITURE B EING INCURRED IN THE DAY TO DAY BUSINESS ACTIVITY AND IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS FOR WHICH THE AO CANNOT STEP INTO THE SHOE OF THE BUSIN ESSMAN TO VERIFY THE NECESSITY OR THE BUSINESS EXPEDIENCY. IN THIS REGARD FURTHER RELIANCE IS PLACED ON THE FOLLOWING DECISIONS. EMPIRE JUTE CO. LTD. VS. CIT 124 ITR 1(SC) ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 35 S.A. BUILDERS VS. CIT 158 TAXMAN 74 (SC) 4.13 IN THE CIRCUMSTANCES IT IS PLEADED THAT THE AS SESSEE HAVING DISCHARGED ITS ONUS TO PROVE THE RENDERING OF SERVICES AND INCURRI NG OF EXPENDITURE DURING THE COURSE OF ITS BUSINESS THE ENTIRE EXPENDITURE IN RE SPECT OF MARKETING & SURVEY MAY KINDLY BE DELETED AND ENTIRE EXPENDITURE MAY BE ALL OWED U/S 37(1). 4.14 LD. SR. DR SUPPORTED THE ORDERS OF LOWER AUTHO RITIES AND VEHEMENTLY ARGUES THAT THE ONUS OF PROVING THE GENUINENESS OF EXPENDI TURE HAS NOT BEEN PROPERLY DISCHARGED BY THE ASSESSEE. THE EXPLANATION FURNISH ED BY ASSESSEE IS FULL OF LATCHES, IFS AND BUTS. THE ALLEGED SURVEY REPORTS DO NOT INS PIRE ANY CONFIDENCE AND ARE HUSH DOCUMENTS TO ANY HOW SUPPORT THAT SURVEY WAS CONDUC TED. THEY FAIL TO INVOKE ANY CONVICTION THAT A METICULOUS SURVEY JOB CAN BE COMP LETED IN SUCH A SHODDY MANNER SO AS TO COMMAND SUCH HUGE EXPENDITURE. 4.15 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE THE MATERIAL AVAILABLE ON RECORD. AS THE FACTS EMERGE THE RECORD AND EVIDENCE IN THIS BEHALF HAS SURFACED IN PIECE MEAL AND FROM TIME TO TIME AS THE ASSESSEE AT TEMPTED TO FILL IN THE GAPS ABOUT INFERENCES DRAWN BY THE AUTHORITIES FROM TIME TO TI ME. CONSEQUENTLY A COHESIVE VERIFICATION OF MATERIAL APPEARS TO BE NOT MADE. AS SESSEE HAS PRODUCED THE INCOME TAX RECORD OF THE SURVEY AGENCIES WHICH IN SUPPORT OF ITS VERSION; THERE EXIST NO REASONING AS TO WHY THEY ARE BEING IGNORED BY LD. A O & CIT(A). THERE EXIST CONFLICTING CLAIMS ABOUT THE EXISTENCE OF SUCH SURV EY AGENCIES COUPLED WITH NON ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 36 SUPPLY OF INSPECTORS REPORT AND NON-ALLOWING THE CU STOMARY RIGHT OF CROSS EXAMINING THE DENYING WITNESSES. THUS ASSESSEE HAS MADE OUT A CASE FOR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IN THE ENTIRETY O F FACTS AND CIRCUMSTANCES WE ARE INCLINED TO SET ASIDE THE ISSUES RELATING TO MARKET ING AND SURVEY EXPENSES BACK TO THE FILE OF AO TO DECIDE AFRESH AFTER CONSIDERING T HE ENTIRE EVIDENCE AND GIVING THE ASSESSEE AN ADEQUATE OPPORTUNITY OF BEING HEARD. R EVENUE APPEALS FOR AYS 2006-07 AND 2008-09 5.1 LD. CIT(DR) RELIED ON THE ORDER OF LD. AO AND C ONTENDS THAT: I) IN AY 2006-07 SINCE THE EXPENDITURE FOR PERSONAL USE OF VEHICLES WAS DISALLOWED, CONSEQUENT DEPRECIATION HAS BEEN RIGHTL Y DISALLOWED BY AO. II)THE ACTIVITY CARRIED OUT BY ASSESSEE I.E. PRINTI NG AND PUBLISHING NEWSPAPER DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION WITHIN THE MEANING OF SECTION 32(1)(IIA)OF THE INCOME TAX ACT,1961. SINCE THE CON DITIONS SET OUT IN SECTION 32(1)(IIA)ARE NOT FULFILLED, THEREFORE, AO WAS JUST IFIED IN DENYING THE ADDITIONAL DEPRECIATION IN AY 2006-07 AND 2008-09. 5.2 LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT SEC 32(1)(IIA) READS AS UNDER: IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER T HAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AF TER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PERCENT (20%) OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II) : PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF A) ANY MACHINERY OR PLANT WHICH, BEFORE INSTALLATIO N BY THE ASSESSEE WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHE R PERSON, OR ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 37 B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE P REMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF GUEST-HOUSE, OR C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES , OR D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS DEDUCTION (WHETHER BY WAY OF DEPRECIATIO N OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OF AN Y ONE PREVIOUS YEAR. 5.3 TERM MANUFACTURE HAS NOT BEEN DEFINED IN SECT ION 32(1)(IIA) OF THE INCOME TAX ACT, 1961; THE DEFINITION OF THE WORD PRODUCTI ON AS RENDERED IN SECTION 2(29BA) SHOULD BE REFERRED TO WHICH READS AS UNDER: (29BA) 'MANUFACTURE', WITH ITS GRAMMATICAL VARIATIO NS, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR ARTICLE OR THING, (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR AR TICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT O BJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTE GRAL STRUCTURE; 5.4 A PERUSAL OF THE ABOVE DEFINITION REVEALS THAT IN ORDER TO TERM A PARTICULAR ACTIVITY AS MANUFACTURE, FOLLOWING CIRCUMSTANCES ARE REQUIRED TO EXIST: 1. THERE MUST BE A CHANGE IN A NON LIVING PHYSICAL OBJECT/ARTICLE/THING 2. THAT CHANGE MUST RESULT INTO TRANSFORMATION OF THE OBJECT INTO A DISTINCT / NEW OBJECT . 3. THE NEW OBJECT IS SUPPOSED TO HAVE A DIFFERENT NAME , CHARACTER AND USE. OR, ALTERNATIVELY 4. THAT CHANGE MUST BRING INTO EXISTENCE A NEW / DISTI NCT OBJECT WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 38 5.5 PRINTING AND PUBLISHING OF NEWSPAPER AND PERIOD ICALS WHICH ARE THE FINAL PRODUCTS EMANATING OUT OF THE ACTIVITY CARRIED ON B Y THE ASSESSEE. NEWSPAPERS AND PERIODICALS ARE CLEARLY IDENTIFIABLE AS A PRODUCT , WHICH IS DISTINCT FROM ITS INGREDIENTS I.E. PAPER AND INK. SINCE A NEW COMMERC IAL PRODUCT IS BROUGHT INTO EXISTENCE, THEREFORE, THE PROCESS INVOLVED IS PRODU CTION WHICH AMOUNTS TO MANUFACTURE AS DESCRIBED IN SECTION 2(29BA) OF TH E INCOME TAX ACT, 1961. 5.6 THE FOLLOWING ACTIVITY CARRIED ON BY ASSESSEE O F PRINTING AND PUBLICATION OF NEWSPAPER FULFILLS ALL THE ABOVE MENTIONED CONDITIO NS OF SEC 2(29BA) WHICH IS ELABORATED AS UNDER: 1. THAT, THE INITIAL OBJECT (INPUT) IS MERELY A ROLL O F PAPER WHICH IS TRIMMED INTO EQUAL SIZE OF SHEETS AND THEN NEWS ITEMS / ARTICLES AND OTHER THINGS ARE PRINTED ON IT. THEREFORE, THE PAPER USED IN PUBLICA TION OF NEWSPAPER UNDERGOES A WHOLE SOME CHANGE. 2. SECONDLY, THE CHANGE IN THE OBJECT AS MENTIONED ABO VE RESULTS INTO A CLEAR TRANSFORMATION OF THAT OBJECT IN AS MUCH AS THE BLA NK AND RAW ROLL OF PAPER IS CONVERTED INTO NEWSPAPER WHICH IS NEW/DISTINCT OBJE CT AS COMPARED TO THE RAW PAPER. 3. FURTHER, IT IS APPARENT AND OSTENSIBLE THAT A NEWSP APER HAS A DIFFERENT NAME, IDENTITY, CHARACTER AND USE AS COMPARED TO THE RAW PAPER AND INK AND OTHER CHEMICALS ETC. UTILIZED. ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 39 RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD. REPORTED IN (2013) 355 ITR 14 (DELHI). ON A SIMILAR ISSUE IT HAS BEEN HELD THAT: THE RAW MATERIALS USED WERE PAPER, INK AND OTHER C ONSUMABLES WHICH WERE COMPLETELY DISTINCT FROM THE PRINTED PAPER THAT RES ULTED FROM THE ACTIVITIES CARRIED ON IN THE SECOND AND THIRD UNITS. THE PRINT ING DID ALTER THE CHARACTER OF THE PAPER USED AND THERE WAS A DISTINCTION BETWE EN THE RAW PAPER AND THE RESULTANT PRODUCT. THE PURPOSE AND USAGE OF A BLANK PAPER WAS COMPLETELY DIFFERENT FROM THE USE AND PURPOSE OF A PRINTED MAG AZINE OR PERIODICAL. ONCE THE BLANK PAPER UNDERWENT THE PROCESS OF PRINT ING, THE CHARACTER OF BLANK PAPER CHANGED COMPLETELY AND THE CONTENT OF T HE PRINTED MATERIAL BECAME THE IDENTITY OF A PRINTED PAPER. BLANK PAPER AND THE PRINTED ARTICLE ARE NOT ONE AND THE SAME AND IT CANNOT BE SAID THAT PRINTING CARRIED OUT IN AN INDUSTRIAL UNDERTAKING WOULD NOT AMOUNT TO MANUF ACTURING. A PRINTED MAGAZINE OR PERIODICAL EVEN IF IT IS NOT BOUND HAS A DEFINITE IDENTITY AND ITS USAGE IS COMPLETELY DIFFERENT FROM THE BLANK PAPER ON WHICH IT IS PRINTED. THE EXPRESSION USED IN SECTION 80-1(2)(III) IS MAN UFACTURE OR PRODUCE ANY ARTICLE OR THING. THE WORD PRODUCE IS SIMILAR TO THE WORD PRODUCTION AND WHILE EVERY MANUFACTURE CAN BE CHARACTERIZED AS PRODUCTION, EVERY PRODUCTION NEED NOT AMOUNT TO MANUFACTURE. THERE WA S NO REASON TO EXCLUDE THE PRINTED PAPER PRODUCED BY THE ASSESSEE IN ITS S ECOND AND THIRD UNITS FROM THE AMBIT OF THE EXPRESSION ARTICLE OR THING. T HE LANGUAGE OF SECTION 80-I(2)(III) THUS CLEARLY INDICATES THAT THE SECOND AND THIRD UNITS DID MANUFACTURE OR PRODUCE AN ARTICLE OR THING. THUS, EVEN IF THE PRINTED MATERIAL, AS PRODUCED BY THE SECOND AND THIRD UNITS , WAS TAKEN AS AN INTERMEDIATE PRODUCT WHICH REQUIRED TO BE FURTHER B OUND FOR MAKING IT MARKETABLE, THE WORD PRODUCE, OCCURRING IN SECTIO N 80-I(2)(III), WOULD INCLUDE IT WITHIN ITS AMBIT. IN THE ABOVEMENTIONED CASE, IT HAS CLEARLY BEEN HEL D THAT PRINTING AMOUNTS TO MANUFACTURE / PRODUCTION AND THEREFORE IT WAS HEL D THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80I(1)(III). THIS JUDGMENT WAS FO LLOWED BY THE COCHIN BENCH OF HONBLE ITAT IN THE CASE OF DCIT VS. M/S. MATHRUBHUMI PRINTING AND ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 40 PUBLISHING CO. LTD WHEREIN IT WAS HELD THAT THE PRINTING AND PUBLICAT ION OF NEWSPAPER AMOUNTS TO MANUFACTURE CONSEQUENTLY, AS SESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION U/S 32(1)(IIA). 5.7 FURTHER AS REGARD TO NON CLAIMING THE ADDITIONA L DEPRECIATION IN EARLIER YEARS, IT IS SUBMITTED THAT THE PROVISION FOR CLAIMING ADD ITIONAL DEPRECIATION UNDER SECTION 32(1) (IIA) OF THE I.T. ACT,1961 WAS FIRSTLY INTROD UCED BY FINANCE ACT 1980 W.E.F. 01-04-1981 WHICH WAS OMITTED BY TAXATION LAW (AMEND MENT & MISCELLANEOUS PROVISIONS) ACT 1986 W.E.F. 01-01-1988 BUT AGAIN RE INTRODUCED BY FINANCE ACT 2002 W.E.F. 01.04.2003 WHICH WAS AMENDED BY FINANCE ACT 2004 W.E.F. 01-04-2005 AND FINALLY AMENDED BY FINANCE ACT 2005 W.E.F. 01- 04-2006, IT IS SUBMITTED THAT THE ADDITIONAL DEPRECIATION IS AVAILABLE ONLY ON NEW PLANT OR MACHINERY . IN THESE YEARS ASSESSEE PURCHASED NEW MACHINES WHICH WERE IN STALLED AT VARIOUS BRANCHES, THEREFORE IT IS ENTITLED TO CLAIM THE ADDITIONAL DE PRECIATION IN THE YEARS UNDER CONSIDERATION. 5.8 LD. CIT(A) IN BEHALF OF ALLOWING THE SAME HAS O BSERVED AS UNDER: 13.1 I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELL ANT . DURING THE YEAR UNDER REFERENCE, THE APPELLANT HAD CLAIMED ADDITIONAL DEPRECIATION OF RS. 35,31,480/- ON THE NEW PLANT & MACHINERY INSTALLED IN ITS BRANCHES. THE AO WAS OF THE OPINION THAT THE AP PELLANT WAS NOT ENGAGED IN ANY MANUFACTURING ACTIVITIES OR PRODUCTI ON OF ANY ARTICLE OR THING. THE AO HELD THAT PRINTING ON PAPER DID NOT T ANTAMOUNT TO ANY MANUFACTURING ACTIVITY AS NO NEW COMMODITY HAD COME INTO EXISTENCE. THE AO WAS AGGRIEVED WITH THE FACT THAT NO SUCH ADDITIO NAL DEPRECIATION WAS CLAIMED IN THE EARLIER YEARS THOUGH IT WAS ADMISSIB LE. THEREFORE THE AO ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 41 DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION OF RS 35,31,480/- ON CAREFUL CONSIDERATION OF FACTS, I AM INCLINED TO AC CEPT THE ARGUMENTS OF THE APPELLANT. DURING THE YEAR UNDER REFERENCE, NEW PRI NTING THE ROLL OF PAPER WITH THE HELP OF MACHINERY AND THEREFORE IT WAS PRO DUCING A NEW ARTICLE AND THING. IT WAS ENGAGED IN THE PRODUCTION OF NEWS PAPERS AND PERIODICALS. ALL THE CONDITIONS AS STIPULATED IN SE CTION 32(1) (IIA) WERE SATISFIED BY THE APPELLANT AND EVEN THE ASSESSEE EN GAGED IN THE PRODUCTION OF AN ARTICLE OR THING WAS ALSO ENTITLED TO THE ADD ITIONAL DEPRECIATION. SINCE NO NEW PRINTING MACHINES WERE PURCHASED IN TH E EARLIER YEAR THEREFORE NO SUCH CLAIM OF ADDITIONAL DEPRECIATION WAS MADE. SINCE THE WORD PRODUCTION WAS NOT DEFINED IN THE INCOME TAX ACT THEREFORE IT WAS IMPERATIVE TO CONSTRUE ITS GENERAL MEANING. THE WOR D PRODUCTION REFERS TO APPLYING HUMAN ENDEAVOR ON SOME EXISTING RAW MAT ERIAL. THEREFORE EVER MANUFACTURE COULD BE CHARACTERIZED AS PRODUCTI ON, BUT EVERY PRODUCTION DID NOT AMOUNT TO MANUFACTURE. THE HONB LE RAJASTHAN HIGH COURT IN THE CASES OF ITO VS ARIHANT TILES & MARBLE PVT. LTD. (295 ITR 148) HAS HELD THAT SAWING OF MARBLE BLOCKS INTO SLA BS AND TILES AMOUNTED TO PRODUCTION AND THEREFORE THE ASSESSEE WAS ENTITL ED TO DEDUCTION U/S 80IB OF THE IT ACT, THIS DECISION IS FULLY APPLICABLE TO THE FACTS OF THE PRESENT CASES. I THEREFORE DIRECT THE AO THE ALLOW THE CLAI M OF ADDITIONAL DEPRECIATION OF RS 35,31,480/- TO THE APPELLANT. TH IS GROUND OF APPEAL IS ALLOWED. IT IS THUS SUBMITTED THAT LD. CIT(A)S DECISION BEI NG IN CONFORMITY OF SEC. 32(1)(IIA) AND THE JUDICIAL PRECEDENTS CITED ABOVE, SAME DESER VES TO BE UPHELD. 5.9 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD REGARDING THE ISSUE OF ADDITIONAL DEPREC IATION. IN OUR CONSIDERED VIEW NEWS PAPERS AND PERIODICALS ARE DISTINCT COMMODITY THAN THE PAPER, PRINTING INK AND OTHER INGREDIENTS USED THEREIN. SINCE A NEW COM MERCIAL PRODUCT COMES INTO EXISTENCE, THE PROCESS INVOLVED FOR SUCH TRANSFORM ATION AMOUNTS TO PRODUCTION AND MANUFACTURE. OUR VIEW IS FORTIFIED BY HONBLE DELHI HIGH COURT AND ITAT BENCHES ITA NO. 519/JP/2012 M/S. RAJASTHAN PATRIKA (P) LTD. VS. ADDL. CIT, RANGE-5, JAIPUR 42 OF COCHIN AND AHMEDABAD. RESPECTFULLY FOLLOWING THE M WE UPHOLD THE ORDERS OF LD. CIT(A) ON THIS ISSUE OF ADDITIONAL DEPRECIATION . APROPOS AY 2006-07, SINCE RELYING ON SAYAJI IRON AND ENGG. CASE (SUPRA), WE H AVE ALREADY HELD THAT, THERE CAN BE NO ATTRIBUTION OF PERSONAL USER IN CASE OF A LIM ITED COMPANY, THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF DEPRECIATION IN THIS BEHALF IS UPHELD. REVENUE APPEALS ARE THUS DISMISSED. 6.0. IN THE RESULT ASSESSEES 3 APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND 2 REVENUE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06/2015 SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15 TH JUNE, 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. RAJASTHAN PATRIKA (P) LTD. , JA IPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ADDL. CIT , RANGE-5, JAIPUR / ACIT, CIRCLE-5, JAIPUR . 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT (A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 519/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR