ACIT, New Delhi V. M/s Talbros Engineering Ltd,

ITA 534/DEL/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86597 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 14-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 12-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAK
• Assessee Lawyers: DR RAKESH GUPTA; ASHWANI TANEJA S; SH
• Keywords: Gift; Additional evidence; Non-deduction of tax; Capital receipt
• Section: 37(1); 194C; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SH. R.S. SYAL, AM & SH. A.T. VARKEY, JM ITA NO. 534/DEL/2009 ASSESSMENT YEAR:2005-06 ASSISTANT COMMISSIONER VS. M/S TALBROS ENGINEER ING LTD. OF INCOME TAX, CIRCLE-I, PLOT NO. 74-75, SECTOR-6 , FARIDABAD. FARIDABAD. (PAN:AABCT0247L) (APPELLANT) (RESPONDENT) C.O. NO. 25/DEL/2009 [ARISING OUT OF ITA NO. 534/DEL/2009] ASSESSMENT YEAR:2005-06 M/S TALBROS ENGINEERING LTD. VS. ASSISTANT COMMIS SIONER PLOT NO. 74-75, SECTOR-6, OF INCOME TAX, CIRCLE -I, FARIDABAD. FARIDABAD. (PAN:AABCT0247L) (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. J.P. CHANDRAK AR, SR. DR ASSESSEE BY : DR. RAKESH GUPTA AN D MR. ASHWANI TANEJA, ADVOCATES & SH. RAJESH TALWAR, M.D. ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY LEARNED CIT(A) ON 08.12.2008 IN RELATION TO THE ASSESSMENT YEAR 2005-06. 2. THE FIRST GROUND OF THE REVENUES APPEAL IS AGAI NST THE DELETION OF ADDITION OF RS. 1,19,93,081/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FALL IN ITA NO.534/DEL/2009 CO NO.25/DEL/2009 2 G.P. RATE FROM 18.52% IN THE PRECEDING YEAR TO 15.7 1% DURING THE YEAR IN QUESTION. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSES IS ENGAGED IN THE MANUFACTURE OF AUTOMOBILE PARTS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FINALIZED UNDER SECTION 144 OF THE INCO ME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT), THE ASSESSING OFFICER OBSER VED THAT THE G.P. RATE OF THE ASSESSEE HAD REDUCED FROM 18.52% FROM THE PRECEDING YEAR TO 15.71%. ON BEING CALLED UPON TO EXPLAIN THE REASONS FOR DECLINE IN T HE G.P. RATE, THE ASSESSEE STATED THAT THERE WAS AN INCREASE IN THE PRICES OF STEEL R OUND BAR DURING THE YEAR WHICH LED TO THE DECLINE IN THE GROSS PROFIT RATE. THE AS SESSING OFFICER OBSERVED THAT CERTAIN EXPENSES FORMING PART OF THE COMPUTATION OF THE GROSS PROFIT HAVE REDUCED AS A PERCENTAGE OF SALES IN COMPARISON WITH THE PRECEDING YEAR. HE, THEREFORE, REFUSED TO ACCEPT THE ASSESSEES EXPLANA TION FOR THE REDUCTION IN THE GROSS PROFIT RATE. REJECTING THE BOOKS OF ACCOUNT U NDER SECTION 145(3) OF THE ACT, THE ASSESSING OFFICER ADOPTED THE GROSS PROFIT RATE OF THE PRECEDING YEAR AT 18.52%. THIS RESULTED INTO THE MAKING OF A G.P. ADD ITION OF RS. 1.19 CRORE. THE LEARNED CIT(A) GOT CONVINCED WITH THE ASSESSEES SU BMISSIONS AND ORDERED FOR THE DELETION OF ADDITION. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEE FILED C ERTAIN ADDITIONAL EVIDENCE BEFORE THE LEARNED CIT(A), WHO CHOSE TO SEEK REMAND REPORT FROM THE ASSESSING ITA NO.534/DEL/2009 CO NO.25/DEL/2009 3 OFFICER, A COPY OF WHICH IS AVAILABLE ON PAGES 88 T O 92 OF THE DEPARTMENT PAPER BOOK. COMING BACK TO THE MERITS OF THIS GROUND, IT CAN BE SEEN THAT THE ASSESSING OFFICER HAS ASSIGNED NO REASON FOR REJECTING THE BO OKS OF ACCOUNT OTHER THAN A DECLINE IN THE GROSS PROFIT RATE. IT IS A MATTER OF RECORD THAT THE ASSESSEE IS ENGAGED IN A MANUFACTURING ACTIVITY AND HAS MAINTAI NED ALL THE STOCK REGISTERS REQUIRED FOR THE PURPOSES OF THE PAYMENT OF EXCISE DUTY. THE ASSESSING OFFICER HAS NOT CONTROVERTED THE QUANTITY OR VALUE OF THE C LOSING AND OPENING INVENTORY. THERE IS NO DEARTH OF JUDICIAL PRECEDENTS UNANIMOUS LY HOLDING THAT BOOKS OF ACCOUNT CANNOT BE REJECTED ON THE SOLITARY REASON O F DECLINE IN THE GROSS PROFIT RATE. SINCE THE ASSESSING OFFICER WAS SWAYED ONLY B Y THE DECLINE IN THE G.P. RATE TO REJECT THE BOOKS OF ACCOUNT WITHOUT ANYTHING ELS E, WE ARE OF THE CONSIDERED OPINION THAT SUCH AN ACTION OF THE ASSESSING OFFICE R HAS NO SANCTION OF LAW. THE ASSESSEE HAS PLACED ON RECORD A COPY OF CHART, WHIC H WAS ALSO FILED BEFORE THE ASSESSING OFFICER TO DEMONSTRATE THAT THERE HAS BEE N AN ALARMING INCREASE IN THE PRICES OF STEEL ROUND BAR. FOR EXAMPLE, THE RATE PE R MT. OF RAW MATERIAL PURCHASED FROM R.I.N.L. INCREASED FROM RS. 20,350/- IN THE PR ECEDING YEAR TO RS. 26,900 IN THE CURRENT YEAR, THEREBY REGISTERING AN INCREASE O F 32%. IN THE LIKE MANNER, THERE IS INCREASE IN THE RATE OF RAW MATERIAL FROM OTHER PARTIES RANGING BETWEEN 19% TO 36%. THIS CHART INDICATES THAT THE INPUT COS TS BECAME COSTLY IN THE INSTANT YEAR IN COMPARISON WITH THE RATES PREVAILIN G IN THE PRECEDING YEAR WHICH LED TO THE REDUCTION IN THE OVERALL PROFITABILITY. THE AO HAS NOT CONTRADICTED THE CONTENTS OF SUCH CHART. WHEN WE CONSIDER THIS FACTO R PUSHING DOWN THE GROSS ITA NO.534/DEL/2009 CO NO.25/DEL/2009 4 PROFIT RATE COUPLED WITH FACT THAT THE ASSESSING OF FICER HAS NOT POINTED OUT ANY MISTAKE IN THE QUANTITATIVE RECORDS MAINTAINED BY T HE ASSESSEE OR THE VALUE OF THE CLOSING STOCK, THE ONLY CONCLUSION WHICH IN OUR CON SIDERED OPINION CAN BE DRAWN IS THAT THE BOOKS OF ACCOUNT WERE PROPERLY MAINTAIN ED. WE, THEREFORE, HOLD THAT THE LEARNED CIT(A) WAS JUSTIFIED IN CANCELLING THE ACTION OF THE AO IN REJECTING THE BOOKS AND RESULTANTLY DELETING THE ADDITION OF RS. 1.19 CRORE ON THIS SCORE. 5. THE SECOND GROUND IS AGAINST THE DELETION OF AD DITION OF RS. 45,94,710/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF T HE ACT. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE RECEIVED FIXED DEPOSITS FROM NINE PERSONS FOR A TOTAL SUM OF RS. 54.75 LAC. THE ASSES SING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO NS OF RECEIPT OF FDRS FROM THESE PERSONS WITH NECESSARY EVIDENCE. THE ASSESSEE FILED SOME DETAILS AND ALSO PRODUCED ONE OF SUCH DEPOSITORS. IN THE ABSENCE OF THE ASSESSEE PRODUCING THE OTHER CREDITORS, THE ASSESSING OFFICER HELD THAT TH E DEPOSITS AMOUNTING TO RS. 44.00 LAC RECEIVED FROM THE FOLLOWING SIX PERSONS WERE BOGUS: S. NO. NAME OF THE PERSONS AMOUNT IN RS . 1. RAJESH TALWAR 1,50,000/- 2. GEETA TALWAR 10,00,000/- 3. RAJESH TALWAR HUF 1,50,000/- 4. RAGHAV GUPTA 10,00,000/- 5. SAMEER GUPTA 12,00,000/- 6. MEERA GUPTA 9,00,000/- 7. TUSHAR K. CHOPRA 10,00,000/- 8. TARUN TALWAR 35,000/- 9. SAMEENA TALWAR 40,000/- TOTAL 54,75,000/- ITA NO.534/DEL/2009 CO NO.25/DEL/2009 5 6. THE ASSESSEE HAD ALSO CLAIMED DEDUCTION IN RESPE CT OF INTEREST PAID ON SUCH FDRS TO ITS DEPOSITORS. THE ASSESSING OFFICER MADE A FURTHER ADDITION OF RS. 1,94,710/-, BEING THE AMOUNT OF INTEREST PAID I N RESPECT OF ABOUT THE SIX CREDITS. THIS LED TO THE MAKING OF A TOTAL ADDITION OF RS. 45.94 LACS. THE LEARNED CIT(A), AFTER CONSIDERING THE REMAND REPORT FROM TH E ASSESSING OFFICER, GOT CONVINCED WITH THE ASSESSEES SUBMISSIONS AND ORDER ED FOR THE DELETION OF ADDITION. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSING OFFICE R MADE ADDITION UNDER SECTION 68 OF THE ACT IN RESPECT OF THE ABOVE SIX DEPOSITOR S BY TREATING THEM AS BOGUS MAINLY DUE TO THE FAILURE OF THE ASSESSEE IN PRODUC ING THESE DEPOSITORS. AT THE OUTSET, WE EMPHASISE ON THE DUTY OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENTS OF THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. IF THE ASSESSING OFFICER DIRECTS THE ASSESSEE TO PR ODUCE THE CREDITORS, IT BECOMES THE DUTY OF THE ASSESSEE TO PRODUCE THE CREDITORS S O AS TO ESTABLISH THE GENUINENESS OF THE CREDITS TO THE SATISFACTION OF T HE AO. THIS RULE IS NOT INFALLIBLE. IF THE ASSESSEE, PURSUANT TO THE DIRECT ION OF THE ASSESSING OFFICER FOR PRODUCING CERTAIN CREDITORS, EXPRESSES ITS INABILIT Y TO PRODUCE THE PERSONS, BUT PLACES ON RECORD SUFFICIENT EVIDENCE TO PROVE THE G ENUINENESS OF THE DEPOSITS, THEN THE ADDITION CANNOT BE MADE UNDER SECTION 68 O F THE ACT WITHOUT THE AO DISCHARGING HIS DUTY TO SUMMON THE CREDITORS. PRESE NTLY, WE ARE DEALING WITH A SITUATION IN WHICH THE ASSESSEE INTIMATED THE AO TO CALL THESE CREDITORS AT HIS ITA NO.534/DEL/2009 CO NO.25/DEL/2009 6 OWN, WHICH HE DID NOT AND CHOSE TO MAKE ADDITION WI THOUT REBUTTING THE EVIDENCE FILED BY THE ASSESSEE. WE WILL DEAL WITH ALL THE SIX CREDITORS ONE BY ONE. 8. THE FIRST CREDITOR IS SH. RAJESH TALWAR, WHO DEP OSITED A SUM OF RS. 1.50 LAC WITH THE ASSESSEE COMPANY. PAGE NO. 401 OF THE PAPER BOOK IS HIS CONFIRMATION FOR HAVING DEPOSITED THE SAID SUM THRO UGH A CHEQUE DRAWN ON STANDARD CHARTERED BANK GIVING CHEQUE NUMBER AND DA TE. THIS CONFIRMATION ALSO GIVES PERMANENT ACCOUNT NUMBER OF THE DEPOSITO R. NOT ONLY HAS THIS DEPOSITOR FILED HIS RETURN OF INCOME INCLUDING THE INTEREST EARNED FROM THE ASSESSEE COMPANY ON THE ABOVE FDRS, THE ASSESSEE AL SO FURNISHED A COPY OF THE BANK ACCOUNT OF THIS DEPOSITOR. FROM THE PASS BOOK OF THIS DEPOSITOR, A COPY OF WHICH IS AVAILABLE AT PAGE 34 OF THE PAPER BOOK, IT CAN BE SEEN THAT THERE IS A WITHDRAWAL FOR A SUM OF RS. 1.50 LAC WITH THE NARRA TION GIVEN IN THE BANK STATEMENT MENTIONING THE NAME OF THE ASSESSEE AGAIN ST THE AMOUNT OF WITHDRAWAL. FROM THIS PASS BOOK, IT CAN BE SEEN THA T MOST OF THE ENTRIES OF DEPOSITS AND WITHDRAWALS ARE TRANSACTIONS THROUGH C HEQUES. THERE IS NOTHING OF THE SORT LIKE DEPOSIT OF AN EQUAL OR ROUND ABOUT SU M IN CASH IN THE BANK ACCOUNT OF THE DEPOSITOR BEFORE THE ISSUANCE OF CHEQUE TO T HE ASSESSEE COMPANY FOR THE AMOUNT OF LOAN. COPY OF RETURN OF THIS DEPOSITOR FO R THE YEAR UNDER CONSIDERATION IS ALSO AVAILABLE ON PAGE 435 OF THE PAPER BOOK. TH E DEPOSITOR ALSO FILED HIS TRIAL BALANCE ALONG WITH THE RETURN OF INCOME WHICH DIVUL GES THE AMOUNT OF FDR MADE WITH THE BANK. IT IS NOT THE CASE OF THE REVEN UE THAT SUCH DEPOSIT HAS BEEN ITA NO.534/DEL/2009 CO NO.25/DEL/2009 7 HELD AS NOT GENUINE IN HIS ASSESSMENT. IN VIEW OF T HE ABOVE OVERWHELMING EVIDENCE, SUPPORTING THE GENUINENESS OF TRANSACTION ALONG WITH THE IDENTITY AND CAPACITY OF THE DEPOSITOR, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS RIGHT IN DELETING THIS ADDITION. 9. NEXT DEPOSITOR IS MRS. GITA TALWAR, WHO DEPOSITE D A SUM OF RS. 10 LAC WITH THE ASSESSEE COMPANY. A COPY OF HER CONFIRMATI ON IS AVAILABLE ON PAGE 397 OF THE PAPER BOOK WHICH INDICATES THAT SHE DEPOSITE D THIS SUM OF RS. 10 LAC IN TWO PHASES, NAMELY, RS. 7 LAC VIDE CHEQUE DATED 06. 04.2014 AND RS. 3 LAC AGAIN VIDE CHEQUE DATED 14.07.2014. HER BANK STATEMENT IS AVAILABLE ON PAGES 454 AND 457 OF THE PAPER BOOK, FROM WHICH IT CAN BEEN SEEN THAT THERE ARE WITHDRAWALS FOR THE EQUAL AMOUNTS FAVOURING THE ASSESSEE COMPAN Y. HERE AGAIN, WE FIND THAT THE DEPOSITS IN HER BANK ACCOUNTS ARE MOSTLY THROUG H CHEQUES AND THERE IS NO CASH DEPOSIT IN HER BANKS ACCOUNTS IMMEDIATELY BEFO RE OR CLOSE TO THE DEPOSIT WITH THE ASSESSEE COMPANY. SHE HAS ALSO FILED HER R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, A COPY OF WHICH IS AVAILABLE O N PAGE 455 OF THE PAPER BOOK, INDICATING THE AMOUNT OF FDR WITH THE ASSESSEE COMP ANY. HER INCOME ALSO INCLUDES INTEREST INCOME EARNED FROM THE ASSESSEE I N RESPECT OF VARIOUS DEPOSITS KEPT BY HER WITH THE ASSESSEE COMPANY FROM TIME TO TIME. PAYMENT VOUCHERS TOWARDS INTEREST ARE AVAILABLE ON PAGES 458 TO 466 OF THE PAPER BOOK, WHICH EVIDENCE THE PAYMENT OF INTEREST AFTER DUE DEDUCTIO N OF TAX AND SOURCE. IN THE LIGHT OF THE ABOVE EVIDENCE WHICH WERE ALSO AVAILAB LE BEFORE THE ASSESSING OFFICER, WE ARE SATISFIED THAT THE ASSESSEE HAS PRO VED THE GENUINENESS OF THIS ITA NO.534/DEL/2009 CO NO.25/DEL/2009 8 CREDIT. THE IMPUGNED ORDER DELETING THIS ADDITION I S, THEREFORE, UPHELD ON THIS SCORE. 10. THE THIRD CREDITOR IS RAJESH TALWAR, HUF, WHO INVESTED A SUM OF RS. 1.50 LAC IN THE ASSESSEES FDRS. HIS CONFIRMATION IS AVA ILABLE ON PAGE 400 OF THE PAPER BOOK, WHICH GIVES DETAILS OF SUCH DEPOSITS MA DE THROUGH CHEQUE ON 14.07.2004. THE PERMANENT ACCOUNT NUMBER OF THIS D EPOSITOR ALONG WITH DETAILS OF RANGE WHERE IT IS ASSESSED, IS ALSO GIVE N. THIS AMOUNT WAS PAID THROUGH CHEQUE OF STANDARD CHARTERED BANK. A COPY O F PASS BOOK EVIDENCING WITHDRAWAL OF RS. 1.50 LAC IS ALSO AVAILABLE ON PAG E 445 OF THE PAPER BOOK. HERE AGAIN, WE FIND THAT MOST OF THE TRANSACTIONS IN THI S BANK ACCOUNT ARE THROUGH CHEQUES AND THERE IS NO CASH DEPOSIT IMMEDIATELY BE FORE OR CLOSE TO THE DATE OF ISSUANCE OF CHEQUE IN FAVOUR OF THE ASSESSEE. THIS DEPOSITOR HAS ALSO FILED ITS RETURN OF INCOME INDICATING THE AMOUNT INVESTED WIT H THE ASSESSEE COMPANY, WHOSE COPY IS AVAILABLE ON PAGE 446 OF THE PAPER BO OK. IN VIEW OF THE ABOVE EVIDENCE, IT IS CRYSTAL CLEAR THAT THE ABOVE DEPOSI T OF RS. 1.50 LAC MADE WITH THE ASSESSEE COMPANY IS GENUINE. WE, THEREFORE, UPHOLD THE DELETION OF THIS ADDITION BY THE LEARNED CIT(A). 11. THE NEXT DEPOSITOR IS SH. RAGHAV GUPTA, WHO DEP OSITED A SUM OF RS. 10 LAC WITH THE ASSESSEE COMPANY. HIS CONFIRMATION IS AVAILABLE ON PAGE 405 OF THE PAPER BOOK FROM WHICH IT CAN BE SEEN THAT HE DEPOSI TED THE SUM VIDE A CHEQUE DATED 13.12.2004 DRAWN ON CITI BANK. A PERUSAL OF T HE BANK STATEMENT OF THIS ITA NO.534/DEL/2009 CO NO.25/DEL/2009 9 DEPOSITOR AGAIN SHOWS THAT MOST OF THE TRANSACTIONS ARE THROUGH CHEQUES AND THERE IS NO CASH DEPOSIT IN HIS BANK ACCOUNT NEAR T HE ISSUANCE OF THE CHEQUE. THIS DEPOSITOR IS ALSO ASSESSED TO TAX INASMUCH AS A COP Y OF HIS RETURN IS AVAILABLE ON PAGE 404 OF THE PAPER BOOK. IN VIEW OF THE ABOVE EV IDENCE, WE ARE SATISFIED THAT THE GENUINENESS OF THE TRANSACTION OF THIS DEPOSIT ALONG WITH THE IDENTITY AND CAPACITY OF THE DEPOSITOR, STAND PROVED. WE, THEREF ORE, UPHOLD THE IMPUGNED ORDER DELETING THIS ADDITION. 12. THE NEXT DEPOSITOR IS SH. SAMEER GUPTA, WHOSE C ONFIRMATION IS AVAILABLE ON PAGE 402 OF THE PAPER BOOK. THIS DEPOSIT OF RS. 12 LAC WAS MADE BY HIM THROUGH CHEQUE DATED 13.12.2004. A COPY OF HIS PASS BOOK IS AVAILABLE ON PAGE 403 OF THE PAPER BOOK, FROM WHICH IT CAN BE SEEN TH AT A CHEQUE FOR RS. 12 LAC WAS ISSUED IN FAVOUR OF THE ASSESSEE. AGAIN MOST OF THE TRANSACTIONS IN HIS BANK ACCOUNT ARE MADE THROUGH CHEQUES AND THERE IS NO CA SH DEPOSIT IN HIS BANK ACCOUNT BEFORE MAKING OF THE DEPOSIT WITH THE ASSES SEE COMPANY. THESE FACTS PROVE THE GENUINENESS OF THE TRANSACTIONS. HE IS AL SO ASSESSED TO TAX HAVING FILED HIS RETURN OF INCOME FOR THE YEAR IN QUESTION INDIC ATING THE AMOUNT OF DEPOSIT WITH THE ASSESSEE COMPANY. IN OUR CONSIDERED OPINIO N, LEARNED CIT(A) WAS RIGHT IN DELETING THE ADDITION ON THIS COUNT. 13. THE LAST DEPOSITOR IS MRS. MEERA GUPTA, WHO DEP OSITED A SUM OF RS. 9 LAC WITH THE ASSESSEE COMPANY. HER CONFIRMATION IS AVAI LABLE ON PAGE 408 OF THE PAPER BOOK WHICH INDICATES THAT THE DEPOSIT OF RS. 9 LAC WAS MADE BY HER VIDE ITA NO.534/DEL/2009 CO NO.25/DEL/2009 10 CHEQUE DATED 10.01.2005 DRAWN AT STANDARD CHARTERED BANK. A COPY OF HER PASS BOOK INDICATES WITHDRAWAL OF THE SAME. AGAIN WE FIN D THAT MOST OF THE TRANSACTIONS IN HER BANK ACCOUNT ARE MADE THROUGH C HEQUES AND THERE IS NO CASH DEPOSIT IN HER PASS BOOK BEFORE THE TRANSACTION OF MAKING DEPOSIT WITH THE ASSESSEE COMPANY. A COPY OF HER RETURN ALONG WITH T DS CERTIFICATE TOWARDS INTEREST EARNED FROM THE ASSESSEE COMPANY ARE ALSO AVAILABLE IN THE PAPER BOOK. THE FACT OF INVESTMENT MADE WITH THE ASSESSEE-COMPA NY HAS BEEN DISCLOSED IN THE DOCUMENTS ACCOMPANY HER RETURN OF INCOME. THER E IS NOTHING TO INDICATE THAT SUCH DEPOSIT HAS BEEN QUESTIONED IN HER ASSESS MENT. IN VIEW OF THE ABOVE FACTS, WE ARE SATISFIED THAT THE ASSESSEE HAS PROVE D THE GENUINENESS OF THIS DEPOSIT. 14. ONCE THE RECEIPT OF DEPOSITS AMOUNTING TO RS. 4 4 LAC FROM THE ABOVE SIX DEPOSITORS IS HELD TO BE GENUINE, THE CONSEQUENT DI SALLOWANCE OF INTEREST AMOUNTING TO RS. 1,94,710/- MADE BY THE ASSESSING O FFICER WOULD AUTOMATICALLY STAND DELETED. WE, THEREFORE, UPHOLD THE IMPUGNED O RDER IN DELETING THE ADDITION OF RS. 45.94 LACS. 15. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINS T THE DELETION OF ADDITION OF RS. 21,68,938/- ON ACCOUNT OF CAPITAL SUBSIDY ON SA LES TAX. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE RECEIVED A SUBSIDY OF SALES TAX AMOUNTING TO RS. 21,68,938/-, WHICH WAS CLAIMED AS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THIS SUBSIDY BE NOT TREATED AS A REVENUE RECEIPT, THE ASSESSEE STATED THAT IT WAS GIVEN AS P ER THE SCHEME OF THE STATE ITA NO.534/DEL/2009 CO NO.25/DEL/2009 11 GOVERNMENT FOR ENCOURAGING THE INDUSTRIES TO SET UP THEIR UNITS IN RURAL AREAS AND FOR COMPENSATING FOR THE HARDSHIP IN SETTING UP SUC H INDUSTRIES IN REMOTE RURAL AREAS. THE ASSESSEE EXPLAINED THAT THIS SALES TAX S UBSIDY WAS CAPITAL IN NATURE AND HENCE NOT TAXABLE. REJECTING THE ASSESSEES CON TENTION, THE ASSESSING OFFICER TREATED THIS AMOUNT AS A REVENUE BY RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. VS. CIT, 228 ITR 253. THE LD. CIT(A) ORDERED FOR THE DELETION OF THIS ADDITION. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE RELEVANT FACTOR FOR DECISION AS TO WHET HER SUBSIDY IS A CAPITAL OR A REVENUE RECEIPT, IS ITS NATURE AND OBJECT. IF SOME SUBSIDY IS GIVEN FOR ENCOURAGING THE INDUSTRIES FOR SETTING UP UNITS IN THE REMOTE OR RURAL AREAS ETC., THEN SUCH SUBSIDY ASSUMES THE CHARACTER OF A CAPITA L RECEIPT. ON THE OTHER HAND, IF SUBSIDY IS GIVEN FOR ENABLING AN ASSESSEE TO RUN ITS BUSINESS MORE PROFITABLY, THEN IT WOULD AMOUNT TO AN OPERATIONAL SUBSIDY CHAR GEABLE TO TAX. IT IS CLEAR FROM THE ASSESSEES SUBMISSIONS REPRODUCED IN THE ASSESS MENT ORDER THAT THE SUBSIDY WAS GIVEN TO THE ASSESSEE AS A COMPENSATION FOR SET TING UP ITS UNIT IN REMOTE RURAL AREAS. THE NATURE OF SUCH SUBSIDY HAS NOT BEE N DISPUTED BY THE AO. AS THE NATURE OF SUBSIDY IN THE PRESENT FACTS AND CIRCUMST ANCES IS UNDISPUTED, BEING TOWARDS THE SETTING UP OF UNIT IN REMOTE AND RURAL AREAS, THE NATURAL CONCLUSION WHICH THEREFORE FOLLOWS IS THAT THIS SUBSIDY IS A C APITAL RECEIPT AND NOT CHARGEABLE TO TAX. THE LD. DR CONTENDED THAT THE N ATURE OF SUBSIDY HAS UNDERGONE CHANGE BECAUSE OF THE ASSESSEE ITSELF STA TING THAT IT OPTED FOR THE HALF ITA NO.534/DEL/2009 CO NO.25/DEL/2009 12 OF THE AMOUNT OF THE DEFERRED SALES TAX BY MAKING P AYMENT FOR THE REMAINING HALF OF THE AMOUNT OF THE DEFERRED TAX UPFRONT. IN OUR CONSIDERED OPINION, THE EXERCISE OF OPTION BY THE ASSESSEE IN PAYING HALF O F THE AMOUNT OF DEFERRED TAX UPFRONT THEREBY RETAINING THE REMAINING HALF AS SUB SIDY, CANNOT CONVERT THE OTHERWISE CAPITAL SUBSIDY INTO AN ITEM OF REVENUE. THE SPECIAL BENCH OF THE TRIBUNAL IN SULZER INDIA LTD. VS. DCIT, (2010) 134 TTJ (MUM.) ( SB) 385 HAS HELD THAT THE PAYMENT OF NET PRESENT VALUE AGAINST A DEFERRED SALES TAX LIABILITY CANNOT BE CONSIDERED AS INCOME UNDER SECTION 41(1) OF THE ACT. THIS VIEW OF THE SPECIAL BENCH HAS BEEN RECENTLY UPHELD BY THE HONB LE BOMBAY HIGH COURT VIDE ITS JUDGMENT DATED 5.12.2014, A COPY OF WHICH HAS BEEN MADE AVAILABLE BY THE LD. AR. IN VIEW OF THE ABOVE FORGOING DISCUSSIO NS, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS JUSTIFIED IN TR EATING SALES TAX SUBSIDY AS A CAPITAL RECEIPT. 17. GROUND NO. 4 OF THE APPEAL IS AGAINST THE DELET ION OF ADDITION OF RS. 1062270/-. FACTS OF THIS GROUND ARE THAT THE ASSESS EE VALUED ITS STOCK AT COST PRISE. ON PERUSAL OF SUCH VALUATION MADE BY THE ASS ESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT WHILE APPORTIONING THE EXPEN SES, THE ASSESSEE HAS TAKEN 72% OF THE POWER AND ELECTRICITY EXPENSES AS PERTAI NING TO THE FACTORY AND INCLUDED THE SAME IN THE DIRECT COST OF PRODUCTION WHILE REMAINING 28% WAS APPORTIONED TO THE ADMINISTRATIVE BLOCK, THEREBY E XCLUDING THE SAME FROM DIRECT EXPENSES. THE ASSESSING OFFICER HELD THAT 95% OF EL ECTRICITY EXPENSES WERE TO BE CONSIDERED AS ATTRIBUTABLE TO FACTORY. HE, THERE FORE, ADDED A SUM OF RS. ITA NO.534/DEL/2009 CO NO.25/DEL/2009 13 6,12,270/- TO THE VALUE OF CLOSING STOCK ON ACCOUNT OF THIS APPORTIONMENT OF ELECTRICITY EXPENSES. APART FROM THAT, HE ALSO HELD THAT 50% OF DIRECTORS REMUNERATION WAS ALSO TO BE CONSIDERED AS PART OF W AGES FOR THE PURPOSE OF INCLUSION IN THE VALUE OF CLOSING STOCK. AS AGAINST THE TOTAL REMUNERATION PAID TO THE DIRECTORS DURING THE YEAR AT RS. 9 LAC, THE A.O . FURTHER ATTRIBUTED A SUM OF RS. 4.5 LAC TO THE MANUFACTURING EXPENSES. THIS RES ULTED INTO AN ADDITION OF RS.10,62,270/-. THE LEARNED CIT(A) ORDERED FOR THE DELETION OF THIS ADDITION. 18. AFTER CONSIDERING THE RIVAL SUBMISSION AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEE WAS CON SISTENTLY APPORTIONING ELECTRICITY EXPENSES BETWEEN FACTORY PREMISES AND O FFICE BUILDING IN THE RATIO OF NUMBER OF EMPLOYEES IN THE WORKS AND IN ADMINISTRAT ION OFFICE. THIS PRACTICE ADOPTED BY THE ASSESSEE, HAS NOT BEEN DISTURBED BY THE REVENUE IN THE PAST. ONCE A PARTICULAR ACCOUNTING PRACTICE IS CONSISTENTLY FO LLOWED, THEN THERE IS NO RATIONALE IN DISTURBING THE SAME. THE FINDING OF TH E LEARNED CIT(A) IN THIS REGARD, HAS REMAINED CONTROVERTED BY THE LD. DR. T HE DIRECTORS REMUNERATION IS AN ITEM OF ADMINISTRATIVE EXPENSES AND CANNOT BE CO NSIDERED AS A PART OF TRADING ACCOUNT SO AS TO QUALIFY AS A DIRECT EXPENSE FOR TH E PRODUCTION OF EXPENSES. IT IS BUT NATURAL THAT ONLY THE EXPENSES IN THE TRADING A CCOUNT, WHICH ARE OTHERWISE DIRECT IN NATURE, CAN BE CONSIDERED IN VALUING THE CLOSING STOCK. NO EXPENSE OF THE ADMINISTRATION NATURE, WHICH FALLS IN THE PROFI T AND LOSS ACCOUNT CAN BE CONSIDERED FOR VALUING THE CLOSING STOCK. IN OUR CO NSIDERED OPINION, THERE IS NO INFIRMITY IN THE IMPUGNED ORDER DELETING THIS ADDIT ION. EVEN IF WE GO WITH THE ITA NO.534/DEL/2009 CO NO.25/DEL/2009 14 VIEWPOINT OF REVENUE THAT THE APPORTIONMENT OF THE ELECTRICITY EXPENSES SHOULD BE MADE IN THE RATIO OF 95:5 AND 50% OF DIRECTORS REMUNERATION BE CONSIDERED TOWARDS VALUATION OF CLOSING STOCK THEN THE OPENING STOCK WOULD ALSO CALL FOR REVALUATION ON THE SAME PATTERN. NOT ONLY THIS, EVE N THE PROFITABILITY OF THE SUCCEEDING YEAR WOULD ALSO BE AFFECTED BECAUSE THE VALUATION OF THE CLOSING STOCK FOR THIS YEAR WOULD BECOME THE VALUATION OF O PENING STOCK FOR THE SUCCEEDING YEAR. BE THAT AS IT MAY, SINCE THE ASSES SEE HAS CONSISTENTLY FOLLOWED THIS MANNER OF APPORTIONMENT OF EXPENSE FOR THE PUR POSES OF VALUING THE CLOSING STOCK IN THE PAST, WHICH HAS NOT BEEN DISPUTED BY T HE AO, WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER IN SUSTAINING THE CONSISTENT PRACTICE. THIS GROUND IS NOT ALLOWED. 19. GROUND NO.5 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.1,42,141/- MADE BY THE AO ON ACCOUNT OF VOLUNTAR Y RETIREMENT SCHEME (VRS) EXPENSES. THE ASSESSEE IN ITS CROSS OBJECTIO N IS AGGRIEVED AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.1,06,210/- OUT OF VRS EXPENSES. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE CLAIMED DE DUCTION FOR A SUM OF RS.7,66,108/- ON ACCOUNT OF VRS EXPENSES. THIS COM PRISED OF OF RS.4,24,838/- PERTAINING TO THE YEAR 2000-01 AND 1/ 5 OF RS.30,22,473/- AND RS.2,77,019/- PERTAINING TO THE YEARS 2001-02 AND 2 002-03. THE AO OBSERVED THAT THE DEDUCTION FOR THE YEAR 2000-01 WAS NOT AVA ILABLE SINCE SECTION 35DDA WAS INSERTED W.E.F. 1.4.2001. AS REGARDS THE REMAI NING AMOUNTS, THE AO PRINCIPALLY GRANTING DEDUCTION AT 1/5 TH , DID NOT FIND THE AMOUNT OF VR EXPENSE ITA NO.534/DEL/2009 CO NO.25/DEL/2009 15 MATCHING. HE, THEREFORE, MADE ADDITION FOR A SUM O F RS.2,48,351/- COMPRISING RS.1,06,210/- FOR THE YEAR 2000-01 AND A SUM OF RS. 1,42,141/- FOR THE YEARS 2001-02 AND 2002-03 BECAUSE OF DIFFERENCE IN THE AM OUNT OF VR EXPENSES. THE LD. CIT(A) CONCURRED WITH THE AO AS REGARDS THE NON -AVAILABILITY OF DEDUCTION FOR THE VR EXPENSES INCURRED FOR THE YEAR 2000-01 A GAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. AS REGARDS THE RE MAINING AMOUNT, THE LD. CIT(A) OBSERVED THAT THE AMOUNT OF VR WAS IMPROPERL Y TAKEN BY THE AO WHICH SHOULD HAVE BEEN AS CLAIMED BY THE ASSESSEE. HE, T HEREFORE, DELETED THE ADDITION OF RS.1,42,141/-, AGAINST WHICH THE REVENUE HAS COM E UP IN APPEAL. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE REMAND REPORT THAT THE AO HAS NOT DISPUTED THE AMOUNT OF VR EXPENSES FOR THE TWO YEARS IN RESPECT OF WHICH THE LD.CIT(A) GRANTED THE RELIEF. THE AO SIMPLY STOOD BY THE ACTI ON TAKEN BY HIM IN THE ASSESSMENT ORDER. TO VIEW OF THE LD. CIT(A) IN ALL OWING THE RELIEF IS, THEREFORE, UPHELD. AS REGARDS THE OTHER AMOUNT, WE FIND THAT S ECTION 35DDA CAME TO BE INSERTED BY THE FINANCE ACT, 2001 W.E.F. 1.4.2001 P ROVIDING DEDUCTION UNDER VRS @ 1/5 OF THE AMOUNT SO PAID IN FIVE EQUAL INSTA LLMENTS. THE CLAIM OF THE ASSESSEE FOR MAKING DEDUCTION FOR A SUM OF RS.1,06, 210/- IN RESPECT OF THE YEAR 2000-01 IS CLEARLY IMPERMISSIBLE IN VIEW OF SECTION 35DDA COMING INTO FORCE LATER ON. SUCH EXPENDITURE ASSUMING THE CHARACTER O F PRIOR PERIOD EXPENSES FOR THE YEAR IN QUESTION FOR WHICH THE LIABILITY GOT CR YSTALISED AND STOOD DISCHARGED IN THE EARLIER YEAR CANNOT BE ALLOWED AS DEDUCTION IN THE CURRENT YEAR. WE, ITA NO.534/DEL/2009 CO NO.25/DEL/2009 16 THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE. BOTH THE CROSS GROUNDS ARE DISMISSED. 21. GROUND NO.6 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.2,36,150/- ON ACCOUNT OF UNASCERTAINED LIABILITY IN THE FORM OF WARRANTY CLAIMED. THE ASSESSEE CLAIMED DEDUCTION FOR A SUM OF RS.2,36,150/- AS PROVISION FOR WARRANTY CLAIM. IN THE ABSENCE OF A NY DOCUMENTARY EVIDENCE FILED BEFORE THE AO, THE SAID AMOUNT WAS DISALLOWED . THE LD.CIT(A) DELETED THIS ADDITION BY OBSERVING IN PARA 35 OF THE IMPUGN ED ORDER THAT IT WAS NOT A PROVISION FOR WARRANTY, BUT, THE WARRANTY EXPENSES ACTUALLY INCURRED AS PER THE VOUCHERS AND BOOKS OF ACCOUNT. 22. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT PAGE 254 OF THE ASSESSEES PAPER BOOK IS A COPY OF WARRANTY CLAIM ACCOUNT. FROM THIS ACCOUNT, IT IS A PPARENT THAT THE LAST ITEM IS A DEBIT FOR A SUM OF RS.2,36,150/- AND, IN THE NARRAT ION COLUMN, IT HAS BEEN MENTIONED BEING THE PROVISION. IN VIEW OF THIS F ACTUAL SCENARIO, IT BECOMES ABUNDANTLY CLEAR THAT THE LD. CIT(A) ERRED IN DELET ING THIS ADDITION BY CONSIDERING THE AMOUNT OF RS.2.36 LAC AS WARRANTY E XPENSES ACTUALLY INCURRED AND NOT AS A PROVISION. THE VIEW TAKEN BY THE LD. CIT(A) IS, THEREFORE, NOT SUSTAINABLE. 23. IT IS RELEVANT TO MENTION THAT THE HONBLE SUPR EME COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. VS. CIT (2009) 314 ITR 62 (SC), HAS HELD THAT ITA NO.534/DEL/2009 CO NO.25/DEL/2009 17 THE PROVISION FOR WARRANTY CLAIMS IS DEDUCTIBLE IF SUCH PROVISION IS MADE ON A SCIENTIFIC BASIS. THERE IS NO MATERIAL AVAILABLE O N RECORD TO DEMONSTRATE AS TO HOW THIS PROVISION OF RS.2.36 LAC WAS CREATED. UND ER SUCH CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER T O THE FILE OF AO FOR GIVING AN OPPORTUNITY TO THE ASSESSEE FOR PLACING ON RECORD T HE BASIS ON WHICH THIS AMOUNT OF PROVISION FOR WARRANTY CLAIMS WAS CREATED. IF S UCH AMOUNT OF PROVISION IS FOUND TO BE BASED ON A SCIENTIFIC WAY, THEN, THE DE DUCTION SHOULD BE ALLOWED. IN THE OTHERWISE CASE, THE EXCESS AMOUNT OVER THE APPR OPRIATE AMOUNT OF PROVISION, SHOULD BE DISALLOWED. 24. GROUND NO.7 IS AGAINST THE DELETION OF ADDITION OF RS.3,70,335/-. THE ASSESSEE CLAIMED DEDUCTION FOR A SUM OF RS.4,93,777 /- UNDER THE HEAD INSURANCE EXPENSES. ON PERUSAL OF DETAILS OF INSURANCE EXPE NSES, IT WAS NOTICED THAT THE ASSESSEE PAID A SUM OF RS.4.93 LAC TO BAJAJ ALLIANC E AND GENERAL INSURANCE COMPANY LTD., FOR THE PERIOD 1.1.05 TO 31.12.05. B Y TREATING THE AMOUNT RELATABLE TO THE YEAR IN QUESTION FOR THE FIRST THR EE MONTHS AT RS.1,23,442/-, THE AO DISALLOWED THE REMAINING AMOUNT OF RS.3.70 LAC. THE LD. CIT(A) ACCEPTED THE ASSESSEES CLAIM THAT A SUM OF RS.4.93 LAC WAS NOT CLAIMED AS DEDUCTION BY THE ASSESSEE. HE, THEREFORE, DELETED THE ADDITION IN ENTIRETY. 25. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE ASSESSEE DID MAKE A CLAIM FOR DEDUCTION OF INSURANCE EXPENSES. NOT ONL Y THAT, THE ASSESSEE ALSO ITA NO.534/DEL/2009 CO NO.25/DEL/2009 18 SUBMITTED BEFORE THE AO, VIDE ITS REPLY DATED 23.2. 07 THAT THE AMOUNT WAS PAID TO BAJAJ ALLIANZ AND GENERAL INSURANCE COMPANY LTD. , FOR A STANDARD FIRE POLICY FOR THE CALENDAR YEAR 2005. WHEN THE FACTS ARE CRYSTAL CLEAR THAT THE ASSESSEE DID MAKE A CLAIM FOR DEDUCTION OF RS.4.93 LAC, THE VIEW POINT OF THE LD. CIT(A) CANNOT BE ACCEPTED UNLESS THE ASSESSEE SHOWS THAT NO DEDUCTION WAS CLAIMED FOR THE AMOUNT DISALLOWED. SINCE NECESSARY DETAILS WERE NOT INSTANTLY AVAILABLE WITH THE LD.AR, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE IN THE FITNESS OF THINGS IF THE IMPUGNED ORDER ON THIS ISS UE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO FOR A FRESH DETERMINATIO N. IF IT IS FOUND THAT THE ASSESSEE CLAIMED DEDUCTION FOR THE DISALLOWED PORTI ON OF INSURANCE EXPENSES THEN THE SAME REPRESENTING PRE-PAID EXPENSES CANNOT BE ALLOWED AS DEDUCTION IN THE INSTANT YEAR. 26. GROUND NO.8 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.30,09,023/- U/S 40(A)(IA) OF THE ACT. ON GOING THROUGH THE DETAILS OF FREIGHT AND FORWARDING EXPENSES, THE AO FOUND THAT NO DEDUC TION OF TAX AT SOURCE WAS MADE IN RESPECT OF THE PAYMENTS MADE TO THE FOLLOWI NG PARTIES:- M/S B&R TRANSPORT CORPORATION 62710 M/S BGFC MOVERS (I) P. LTD. 250214 M/S GOLDEN CARGO MOVERS 49100 M/S KERALA TRANSPORT CO. 170578 M/S NEW INDIA ROADWAYS 85552 M/S PANAL PINA WORLD TRANSPORT 28700 M/S PARMONI GOODS CARRIER 33920 ITA NO.534/DEL/2009 CO NO.25/DEL/2009 19 M/S SAAJAN TRANSPORT CO. 37261 M/S SACHDEVA ROADLINES PVT. LTD. 1270580 M/S SOUTHERN EASTERN ROADWAYS 72790 M/S SOUTHERN CARRYING CORPORATION 616335 M/S WESTERN ROADLINES P. LTD. 75277 2753023 27. APART FROM THAT, IT WAS ALSO NOTICED THAT THE A SSESSEE PAID A SUM OF RS.2.56 LAC TO M/S MILLENNIUM OFFSET WORKS FOR PRIN TING OF VARIOUS ITEMS. IT WAS OPINED THAT THE TAX WAS REQUIRED TO BE DEDUCTED FROM THIS AMOUNT AS IT WAS A PRINTING CONTRACT. THE LD. CIT(A) DELETED THE ADDI TION. 28. HAVING HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD ALONG WITH THE REMAND REPORT OF THE AO, IT CAN BE S EEN FROM PAGES 490 ONWARDS OF THE PAPER BOOK THAT THE ASSESSEE DEDUCTED TAX AT SOURCE FROM ALL THE PAYMENTS MADE BY IT TO THE ABOVE PARTIES ON ACCOUNT OF FREIG HT AND FORWARDING. ITEM-WISE DETAIL OF THE PARTIES TO WHOM FREIGHT WAS PAID ALON G WITH THE AMOUNT PAID, DATE ON WHICH THE AMOUNT WAS PAID/CREDITED, SECTION AND RATE AT WHICH THE AMOUNT OF TAX WAS DEDUCTED AND THE DATES ON WHICH SUCH TDS WA S DEPOSITED IN THE EXCHEQUER, ARE AVAILABLE. THESE ITEM-WISE DETAILS RUN FROM PAGE 492 UPTO 552 OF THE PAPER BOOK. PAGE 554 IS A CERTIFICATE ISSUED B Y THE ASSESSEE IN FORM NO.16A TO M/S BGFC MOVERS INDIA PVT. LTD., FOR DEDUCTION O F TAX AT SOURCE ON THE FREIGHT PAYMENTS MADE TO IT. PAGE 556 IS A CERTIFI CATE IN FORM NO.16A ISSUED TO M/S PARNAMI GOODS CARRIERS PVT. LTD. PAGE 558 IS A COPY OF CERTIFICATE IN FORM NO.16A ISSUED TO M/S NEW INDIA ROADWAYS. IN THE LI KE MANNER, TDS ITA NO.534/DEL/2009 CO NO.25/DEL/2009 20 CERTIFICATES HAVE BEEN ISSUED IN RESPECT OF THE PAR TIES FOR WHICH THE AO HAS MADE OUT A CASE THAT NO DEDUCTION OF TAX AT SOURCE WAS M ADE. WHEN ALL THESE DETAILS WERE FORWARDED TO THE AO IN REMAND PROCEEDINGS, HE CONSPICUOUSLY REMAINED SILENT. IN VIEW OF THE FACT THAT THE ASSESSEE DID DEDUCT TAX AT SOURCE ON THE FREIGHT PAYMENTS MADE TO THE ABOVE PARTIES AND SUCH TAX WAS DULY DEPOSITED IN THE EXCHEQUER, WE ARE OF THE CONSIDERED OPINION THA T THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT TRIGGERED. 29. AS REGARDS NON-DEDUCTION OF TAX AT SOURCE ON TH E AMOUNT OF PRINTING AND STATIONERY, WE FIND THAT THE DETAILS OF SUCH EXPENS ES ARE AVAILABLE ON PAGES 376 ONWARDS OF THE PAPER BOOK. FROM SUCH DETAILS, IT C AN BE SEEN THAT THESE ARE FOR PURCHASE OF PRINTING AND STATIONERY AND THERE IS NO THING LIKE ANY WORKS CONTRACT HAVING BEEN CARRIED OUT BY THE SUPPLIER. THESE ARE SMALL AMOUNTS COMPRISING OF PURCHASE OF PAPERS FOR BALANCE SHEET, MATERIAL DISP ATCH REGISTER, TAGS, EXCISE CHALLANS AND ENVELOPES, ETC. THE DEFINITION OF WO RKS UNDER SECTION 194C DOES NOT INCLUDE SUCH PRINTING AND STATIONERY EXPENSES. WE, THEREFORE, HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 30. GROUND NO.9 IS AGAINST THE DELETION OF ADDITION OF RS.23,889/- ON ACCOUNT OF CESSATION OF LIABILITY U/S 41 OF THE ACT. THE A SSESSEE HAD SHOWN SUNDRY CREDITORS AMOUNTING TO RS.3.99 CRORE. ON PERUSAL O F DETAILS OF SUCH CREDITORS, THE AO OBSERVED THAT THE AMOUNTS PAYABLE TO SEVEN PARTI ES TOTALING TO RS.23,889/- WERE MORE THAN THREE YEARS OLD. INVOKING THE PROVI SIONS OF SECTION 41, THE AO ITA NO.534/DEL/2009 CO NO.25/DEL/2009 21 CONSIDERED THIS AMOUNT AS CESSATION OF LIABILITY AN D MADE THE ADDITION. THE LD. CIT(A) ORDERED FOR THE DELETION OF THIS ADDITION. 31. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS NOTICED FROM THE DETAILS OF SUCH A MOUNTS THAT SOME OF THEM HAVE BEEN ACTUALLY WRITTEN BACK BY THE ASSESSEE IN THE S UCCEEDING YEAR AND THE OTHER AMOUNTS WERE EXISTING LIABILITIES NOT HAVING CEASED TO EXIST. MERELY BECAUSE THE CREDITOR GETS MORE THAN THREE YEARS OLD, DOES NOT IPSO FACTO OBLITERATE THE LIABILITY IN ITSELF. SO LONG AS THE LIABILITY IS PAYABLE, IT CANNOT BE CONSIDERED AS INCOME. TAKING INTO CONSIDERATION THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THIS ISSUE, WE ARE SATISFIED THAT THE LD. CIT(A) WAS RIGHT IN D ELETING THE ADDITION. 32. GROUND NO.10 IS AGAINST THE DELETION OF ADDITIO N OF RS.15,36,144/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. ON PERUSAL OF TOTAL TRAVELLING EXPENSES INCURRED BY THE ASSESSEE, THE AO OBSERVED THAT A SU M OF RS.15.36 LAC PERTAINED TO THE FOREIGN TRAVELLING EXPENSES INCURRED BY THE DIRECTORS. OUT OF THIS TOTAL, A SUM OF RS.3.22 LAC REPRESENTED AIR TICKETS AND RS.1 2.13 LAC PAYMENT OF HOTEL BILLS AND BOARDING AND LODGING EXPENSES. IN THE AB SENCE OF SUFFICIENT DETAILS PROVIDED BY THE ASSESSEE, THE AO MADE ADDITION OF R S.15.36 LAC. THE LD. CIT(A) DELETED SUCH ADDITION. 33. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE FOREIGN TRAVELLI NG EXPENSES WERE INCURRED BY THE DIRECTORS OF THE COMPANY WHO VISITED SEVERAL CO UNTRIES WHERE THE COMPANY ITA NO.534/DEL/2009 CO NO.25/DEL/2009 22 WAS MAKING EXPORTS FOR LAST COUPLE OF YEARS. IN SU PPORT OF THE DEDUCTION FOR EXPENSES, THE ASSESSEE ALSO FURNISHED COPIES OF E-M AILS EXCHANGED WITH THE CUSTOMERS ABROAD. THE AO IN THE REMAND REPORT CHOSE NOT TO ADVERSELY COMMENT ON THIS EVIDENCE. IN VIEW OF THESE FACTS, IT IS CL EAR THAT SUCH FOREIGN TRAVELLING EXPENSES WERE INCURRED FOR THE PURPOSE OF THE ASSES SEES BUSINESS AND THERE IS NO WARRANT FOR MAKING ANY DISALLOWANCE. THE IMPUGNED O RDER IS UPHELD ON THIS SCORE. 34. THE NEXT GROUND OF THE REVENUES APPEAL IS AGAI NST THE DELETION OF ADDITION OF RS.2,84,193/- OUT OF VEHICLE RUNNING AN D MAINTENANCE EXPENSES @ 20% FOR NON-BUSINESS PURPOSE. THE LD.CIT(A) ORDERE D FOR THE DELETION OF THE ADDITION. 35. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE DELHI BENCH OF THE TRIB UNAL IN DCIT VS. HARYANA OXYGEN LTD. (2001) 76 ITD 32 (DEL) , HAS HELD THAT THE COMPANY IS A SEPARATE LEGAL ENTITY DISTINCT FROM ITS DIRECTORS AND THE US E OF VEHICLES BY THE DIRECTORS CANNOT BE CHARACTERIZED AS USER FOR NON-BUSINESS PU RPOSE AND, HENCE, NO ADDITION CAN BE MADE. THE HONBLE GUJARAT HIGH COURT IN SAYAJI IRON AND ENGINEERING COMPANY VS. CIT (2002) 253 ITR 749 (GUJ), HAS HELD THAT THERE CANNOT BE ANY NON-BUSINESS USER IN SO FAR AS A COMPANY ASSESSEE I S CONCERNED. IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT THE LD. CIT(A) HAS T AKEN AN UNIMPEACHABLE VIEW IN DELETING DISALLOWANCE OF 20% OF VEHICLE RUNNING AND MAINTENANCE EXPENSES FOR NON-BUSINESS PURPOSE. THIS GROUND IS NOT ALLOW ED. ITA NO.534/DEL/2009 CO NO.25/DEL/2009 23 36. GROUND NO.12 IS AGAINST THE DELETION OF ADDITIO N OF RS.1,29,319/- MADE ON ACCOUNT OF TELEPHONE EXPENSES. THE AO DISALLOWED 2 0% OF TELEPHONE EXPENSES BY TREATING IT AS FOR NON-BUSINESS PURPOSE. THE LD . CIT(A) DELETED THE ADDITION. IN VIEW OF THE DISCUSSION MADE IN RESPECT OF THE IM MEDIATELY PRECEDING GROUND, WE ARE SATISFIED THAT NO INFIRMITY CAN BE FOUND IN THE LD. CIT(A)S ORDER IN DELETING THIS ADDITION. FOLLOWING THE PRECEDENTS N OTED ABOVE, WE UPHOLD THE IMPUGNED ORDER ON THIS SCORE. 37. GROUND NO.13 IS AGAINST THE DELETION OF ADDITIO N MADE BY THE AO AT THE RATE OF 20% OF ENTERTAINMENT EXPENSES. THE AO MADE THIS ADDITION BY NOTICING THAT THE TOTAL ENTERTAINMENT EXPENSES WERE INCURRED FOR MEALS IN HOTELS AND IT WAS NOT SHOWN THAT THERE WAS ANY BUSINESS PURPOSE IN IN CURRING SUCH EXPENSES. THE LD. CIT(A) DELETED THIS ADDITION. 38. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT PAGE NOS. 350-351 CONTAIN T HE DETAIL OF ENTERTAINMENT EXPENSES. ALL THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES AND THE ASSESSEE HAS MENTIONED THE NAME AND DESIGNATION OF THE CUSTO MER WHO WAS TAKEN FOR MEALS, ETC. IN OUR CONSIDERED OPINION, THERE CAN B E NO REASON FOR SUSTAINING THIS DISALLOWANCE. THIS GROUND IS NOT ALLOWED. 39. GROUND NO.14 IS AGAINST THE DELETION OF ADDITIO N OF RS.65,734/- ON ACCOUNT OF DEMURRAGE CHARGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE DEBITED THIS SUM AS D EMURRAGE CHARGES. BY ITA NO.534/DEL/2009 CO NO.25/DEL/2009 24 TREATING THIS AMOUNT AS PENAL IN NATURE, THE AO MAD E DISALLOWANCE FOR THE SAME. THE LD. CIT(A) DELETED THE DISALLOWANCE. 40. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS AMOUNT REPRESENTS EXCE SS FREIGHT CHARGED BY A CUSTOMER M/S MID WEST TRUCK AUTO PARTS, WHICH WAS I N TURN, RECOVERED BY BANK. COMPLETE EVIDENCE AND EXPLANATION IN THIS RE GARD WAS FILED BEFORE THE AO AS WELL, WHO DID NOT OFFER ANY ADVERSE COMMENT ON T HE SAME. AS THIS AMOUNT IS NOTHING, BUT, EXCESS FREIGHT CHARGES, IT CANNOT BE TREATED AS PENAL IN NATURE WARRANTING ANY DISALLOWANCE IN TERMS OF EXPLANATION 1 TO SECTION 37(1) OF THE ACT. THIS GROUND FAILS. 41. THE LAST GROUND OF THIS APPEAL IS AGAINST THE D ELETION OF ADDITION OF RS.1,29,300/- ON ACCOUNT OF SALES AND BUSINESS PROM OTION EXPENSES. THE AO NOTICED THAT THE SALES AND PROMOTION EXPENSES INCLU DED A SUM OF RS.1.95 LAC TOWARDS SALE PROMOTIONS, RS.8,855/- TOWARDS BUSINES S PROMOTION AND RS.82,227/- TOWARDS GIFTS AND ARTICLES. ON PERUSA L OF THE DETAILS FILED BY THE ASSESSEE IN THIS REGARD, THE AO NOTICED THAT THE FI RST AND SECOND ITEMS WERE IN THE NATURE OF GIFTS, LUNCH, DINNER AND ENTERTAINMENT IN CURRED MOSTLY IN CASH. ONE- FOURTH OF SUCH EXPENSES WAS DISALLOWED. AS REGARDS THE THIRD ITEM, HE TOOK IT AS REPRESENTING DONATIONS/KANYADANS TO THE TUNE OF RS. 32,654/- AND, A FURTHER SUM OF RS.45,450/- TOWARDS GIFT OF GOLD SET. THESE TWO AMOUNTS TOTALING TO ITA NO.534/DEL/2009 CO NO.25/DEL/2009 25 RS.78,104/- WERE ALSO ADDED. THIS RESULTED INTO A TOTAL ADDITION OF RS.1,29,300/-. THE LD. CIT(A) DELETED THIS ADDITION. 42. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND FROM PAGES 353A ONWARDS OF THE PAPE R BOOK THAT THE ASSESSEE FURNISHED DETAILS OF SUCH EXPENSES BEFORE THE AO VI DE ITS LETTER DATED 22.11.07. GOLD ITEMS WERE DISTRIBUTED ON THE OCCASION OF DIWA LI FESTIVAL TO ITS CUSTOMERS AND COMPLETE DETAILS ABOUT THE NAME AND DESIGNATION OF THE PERSONS TO WHOM SUCH GIFTS WERE GIVEN, HAS BEEN PROVIDED IN THE PAP ER BOOK. INVOICES FOR THE PURCHASE OF SUCH GOLD ITEMS ARE ALSO AVAILABLE ON R ECORD. IN SO FAR AS SHAGUNS ARE CONCERNED, THE ASSESSEE IS IN THE PRACTICE OF GIVING SHAGUNS ON THE OCCASION OF GIRL MARRIAGE IN THE FAMILY OF ITS EMPLOYEES. O N RANDOM BASIS, A RECEIPT FROM THE RECIPIENT ALONG WITH THE COPY OF THE WEDDING CA RD HAS ALSO BEEN MADE AVAILABLE. IN VIEW OF THESE DETAILS FILED BEFORE T HE AUTHORITIES BELOW, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS JUST IFIED IN DELETING THE ADDITION. 43. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES AND CO OF THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.01.201 5. SD/- SD/- [A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 19 TH JANUARY, 2015. DK ITA NO.534/DEL/2009 CO NO.25/DEL/2009 26 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.