PRIVI LIFE SCIENCES P.LTD, NAVI MUMBAI V. CIT 24, MUMBAI

ITA 5399/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9031 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 11-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 20-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MILIND RAJGURU
• Keywords: Unexplained cash credit; Onus to prove; Bonafide mistake; Revenue expenditure; Capital expenditure
• Section: 143(3); 37; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 5399/MUM/2015 (ASSESSMENT YEAR: 2011-12) M/S. PRIVI LIFE SCIENCES P. LTD. VS. DEPTY COMMISSIONER OF PRIVI HOUSE, THANE BELAPUR RD. NEAR KOPAR KHAIRANE STATION KOPAR KHAIRANE NAVI MUMBAI 400709 INCOME TAX 10(3) MUMBAI PAN AAFCP3232K APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI MILIND RAJGURU DATE OF HEARING: 11.01.2017 DATE OF PRONOUNCEMENT: 13.01.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 24, MUMBAI DATED 24.08.2015 FOR A.Y. 2011-12. 2. THE FACTS OF THE CASE, BRIEFLY STATED, ARE AS UNDER : - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN BUSINESS AS SERVICE PROVIDER (MARKETING) FILED ITS RETURN OF INCOME FOR A.Y. 20 11-12 ON 13.09.2011 DECLARING LOSS OF ` 39,81,872/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE A CT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 28.02.20 14 WHEREIN THE ASSESSEES LOSS WAS DETERMINED AT (-) ` 18,96,775/- IN VIEW OF THE FOLLOWING DISALLOWANCES/ADDITIONS: - (I) UNSECURED LOAN FROM ISR PRASAD U/S. 68 ` 12,00,000/- (II) REGISTRATION AND DOCUMENTATION CHARGES ` 3,01,455/- (III) TRAVELLING EXPENSES U/S. 40(A)(IA) ` 4,59,239/- (IV) DISALLOWANCE U/S. 36(1)(VA) ` 1,24,403/- ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 2 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR A.Y. 2 011-12 DATED 13.09.2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-24, MUMBAI. THE LEARNED CIT(A) DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DATED 24.08.2015 ALLOWING THE ASSESSEE PARTIA L RELIEF; I.E. THE DISALLOWANCES AT (III) AND (IV) (SUPRA) WERE DELETE D; THE DISALLOWANCE AT (II) (SUPRA) WAS PARTLY UPHELD AND THE ADDITION AT (I) A BOVE WAS CONFIRMED. 3. AGGRIEVED BY THE ORDER OF THE CIT(A)-24, MUMBAI DAT ED 24.08.2015 FOR A.Y. 2011-12, THE ASSESSEE HAS PREFERRED THIS A PPEAL, RAISING THE FOLLOWING GROUNDS: - I ADDITION UNDER SECTION 68 OF THE ACT: RS. 12,00, 000/- 1.1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD DITION UNDER SECTION 68 OF THE ACT ON THE GROUND OF IT BEING UNEXPLAINED LOAN. 1.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAS DISCHARGED THE BURDEN OF PROOF BY GIVING ALL THE DE TAILS AND EXPLANATIONS WITH RESPECT TO THE AFORESAID LOAN AND HENCE THE ADDITION WAS NOT SUSTAINABLE. 1.3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER DID NOT CONSIDER ITS SUBMISSIONS FILED ON 28 FEBRUA RY 2014 AND FURTHER ERRED IN UPHOLDING THE REASONS FOR NON CONS IDERATION OF THE SAME. 1.4. THE LEARNED CIT(A) ERRED IN NOT GIVING ANY OP PORTUNITY TO SHOW CAUSE THE NON-PAYMENT OF INTEREST AND FURTHER ERRED IN CONFIRMING THE ADDITION ON THE SAID BASIS. II DISALLOWANCE OF REVENUE EXPENDITURE ON ACCOUNT OF STAMP DUTY AND REGISTRATION OF TECHNOLOGY AGREEMENT: RS. 1,90,000/- 2.1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DIS ALLOWANCE OF RS. 1,90,000/- BEING EXPENDITURE INCURRED FOR STAMPING AND REGISTRATION OF TECHNOLOGY AGREEMENT ON THE GROUND THAT SAME CONSTITUTES CAPITAL EXPENDITURE. 2.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT F RANKING IS A MODE OF MAKING STAMP DUTY PAYMENT AND FURTHER ERRED IN TREA TING THE SAME AS CAPITAL EXPENDITURE SOLELY ON THE GROUND THAT IT WI LL ENDURING BENEFIT. 2.3. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT TES T OF ENDURING BENEFIT FAILS IF THE EXPENDITURE IS REVENUE FIELD A ND THEREFORE OUGHT TO HAVE ALLOWED THE SAME AS REVENUE EXPENDITURE. ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 3 III DISALLOWANCE OF TRAVELLING EXPENSES : RS. 78,0 00/- 3.1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE TR AVELLING EXPENDITURE INCURRED FOR BUSINESS PURPOSE ON THE GROUND THAT TH E APPELLANT HAS FAILED TO PROVE BY DOCUMENTARY EVIDENCE THAT SAME WERE FOR BUSINESS PURPOSE. 3.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE NAME AND DESIGNATION OF PERSON TRAVELLING AND THE PU RPOSE OF THE VISIT WAS FILED AN D HENCE THE APPELLANT HAD PROVED ITS CLAIM AND NO FUR THER DETAILS WERE SOUGHT ON THE SAID ISSUE. 33. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT B ASIS OF DISALLOWANCE BY THE AO WAS ONLY WRONG CLASSIFICATION OF HEAD AND THEREFORE THE DETAILS WERE NOT CALLED FOR BY THE AO AND THE APPELLANT DID NOT FILE THE SAME ALTHOUGH ALL THE BASIC DETAILS WERE FILED. 4. THIS APPEAL WAS FIXED FOR HEARING ON NUMBER OF TIME S, HOWEVER ON THOSE DAYS NONE WAS PRESENT FOR THE ASSESSEE, NOR W AS ANY ADJOURNMENT OF HEARING SOUGHT ON ITS BEHALF. EVEN ISSUE OF NOTICE BY RPAD DID NOT ELICIT ANY COMPLIANCE FROM THE ASSESSEE. IN THESE CIRCUMST ANCES, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING THIS APPEAL SERIOUSLY. ON 11.01.2017 ALSO, WHEN THE CASE WAS CA LLED FOR HEARING, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE, BUT THE LEAR NED D.R. FOR REVENUE WAS PRESENT AND READY TO ARGUE THE CASE. IN THESE C IRCUMSTANCES, WE PROCEED TO DISPOSE OFF THIS APPEAL EX-PARTE WITH TH E ASSISTANCE OF THE LEARNED D.R. FOR REVENUE AND THE MATERIAL AVAILABLE ON RECORD. 5. GROUND NO. 1 (1.1 TO 1.4) ADDITION UNDER SECTION 68 OF THE ACT ` `` ` 12,00,000/- 5.1 IN THESE GROUNDS THE ASSESSEE ASSAILS THE ACTIO N OF THE LEARNED CIT(A) FOR CONFIRMING THE ADDITION UNDER SECTION 68 OF THE ACT ON THE GROUND THAT THE LOAN IS UNEXPLAINED; WITHOUT APPRECIATING THAT THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROOF BY GIVING ALL THE DE TAILS AND EXPLANATION WITH RESPECT TO AFORESAID LOAN AND IGNORING THE SUB MISSIONS PUT FORTH BY THE ASSESSEE. 5.2 THE LEARNED D.R. FOR REVENUE PLACED STRONG RELI ANCE ON THE ELABORATE FINDINGS RENDERED BY THE LEARNED CIT(A) AT (I) TO ( IV) OF PARA 4.2 OF THE IMPUGNED ORDER. IT WAS CONTENDED THAT NO MATERIAL H AS BEEN BROUGHT ON RECORD TO CONTROVERT THE FINDINGS OF THE LEARNED CI T(A) THAT THE UNSECURED ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 4 LOAN OF ` 12 LAKHS IS TO BE TREATED AS UNEXPLAINED CASH CREDI T UNDER SECTION 68 OF THE ACT. 5.3.1 WE HAVE HEARD THE LEARNED D.R. FOR REVENUE AN D PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE LE ARNED CIT(A) HAS DEALT IN DETAIL WITH THE ISSUE OF THE UNSECURED LOAN OF ` 12 LAKHS ALLEGEDLY TAKEN BY THE ASSESSEE FROM SHRI I. SHIVAM PRASAD AT PARAS 4 TO 4.2 OF THE IMPUGNED ORDER AS UNDER: - 4. IT WAS ASCERTAINED BY THE ASSESSING OFFICER DUR ING THE COURSES OF ASSESSMENT PROCEEDINGS THAT THE APPELLANT WAS IN RECEIPT OF UNSECURED LOANS TO THE TUNE OF ` 12,00,000/- FROM SHRI I. SHIVAM PRASAD. WHILE EXAMINING THE IDENTITY, CREDITWORTHIN ESS AND THE GENUINENESS OF THE TRANSACTION OF THE LOAN CREDITOR , IT WAS REVEALED THAT SHRI PRASAD, A RETIRED EMPLOYEE FROM BSNL, WAS IN RECEIPT OF INCOME OF ` 4,61,606/- IN AY 2011-12 WHICH COMPRISED ONLY SALAR Y INCOME. THE AO OBSERVED THAT NEITHER THE NATURE OF SHRI PRASAD'S RELATIONSHIP WITH THE APPELLANT WAS BROUGHT ON RECO RD NOR HIS CAPACITY TO ADVANCE A LOAN TO THE TUNE OF ` 12,00,000/- WITHOUT CHARGING INTEREST ESTABLISHED BY THE APPELLANT. CONSEQUENTLY, THE AO TREATED THE SUM OF ` 12,00,000/- AS AN UNEXPLAINED CASH CREDIT U/S 68. 4.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT CLAIMED THAT IT HAD BORROWED A SUM OF ` 12,00,000- FROM MS. JAYA LAKSHMI INTURI BY DD NO. 068894 DT.25-02-2011 OF ST ATE BANK OF INDIA. IT WAS CONTENDED THAT THE LENDER, MS. JAYA L AKSHMI INTURI RECEIVED FUNDS ON HER RETIREMENT WHICH SHE LENT TO THE APPELLANT COMPANY THROUGH HER BROTHER, SHRI SHIVAM PRASAD INT URI, TO EARN SOME INCOME. A CONFIRMATION LETTER DT.20-07-2015 OF MS. JAYA LAKSHMI INTURI WAS ENCLOSED STATING THAT SHE WAS A RETIRED SCHOOL TEACHER WHO HAD INVESTED A SUM OF ` 12,00,000/- OUT OF HER SAVINGS IN THE APPELLANT COMPANY IN ORDER TO EARN INTEREST. A COPY OF THE BANK EXTRACT FURNISHED BY THE APPELLANT IN STATE BANK OF INDIA, KOPAR KHAIRANE BRANCH (A/C NO 31647525161) INDICATED A CR EDIT ENTRY OF ` 12,00,000/- ON 28-02-2011 AS 'OWN CHQ XFER DP'. THE APPELLANT FURTHER CLAIMED THAT MS JAYA LAKSHMI INTURI'S BROTH ER, SHRI SHIVAM PRASAD INTURI, FORWARDED THE SAID DD TO THE APPELLA NT WHICH WAS DULY RECORDED IN ITS BOOKS OF ACCOUNT AS A LOAN RECEIVED FROM SHRI SHIVAM PRASAD INTURI INSTEAD OF MS. JAYA LAKSHMI INTURI. T HE APPELLANT FINALLY CONTENDED THAT SHRI D.B. RAO, MANAGING DIRE CTOR OF THE COMPANY AND MS. JAYA LAKSHMI INTURI'S BROTHER, SHRI SHIVAM PRASAD INTURI WERE FAMILY FRIENDS AS THEY HAILED FROM THE SAME PLACE AND IT WAS DUE TO THIS ASSOCIATION THAT MS. JAYA LAKSHMI I NTURI ADVANCED AN AMOUNT OF ` 12,00,000/- TO THE APPELLANT COMPANY. IT WAS REITERATED THAT THE AO DID NOT TAKE ON RECORD ITS F INAL SUBMISSIONS FILED ON 28-02-2014 ALONG WITH THE DOCUMENTARY EVID ENCE ON THE GROUND THAT HE HAD ALREADY COMPLETED THE ASSESSMENT PROCEEDINGS. ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 5 4.2 ON A CAREFUL CONSIDERATION OF THE APPELLANT'S SUBMISSIONS AND THE DOCUMENTARY EVIDENCE FURNISHED AS WELL AS AN IN -DEPTH ANALYSIS OF THE AO'S REASONING, I AM INCLINED TO UPHOLD THE AO'S ACTION IN TREATING THE UNSECURED LOAN OF ` 12,00,000/- AS AN UNEXPLAINED CASH CREDIT U/S 68 ON THE FOLLOWING GROUNDS:- (I) IT IS ABUNDANTLY CLEAR FROM THE FACTS THAT THE ARGUMENTS OF THE APPELLANT ARE MIRED IN CONTRADICTIONS. IN THE FIRST INSTANCE, IT HAS TRIED TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITOR IN WHOSE NAME THE CREDIT APPEARS IN THE BOOKS OF THE A PPELLANT. TO THIS END, IT HAS PRESENTED THE BACKGROUND OF THE CREDITOR, HIS EMPLOYMENT DETAILS AND THE COPIES OF HIS RETURNS OF INCOME. THEREAFTER, AN ATTEMPT HAS BEEN MADE TO ALTER THE S TORY ALTOGETHER BY ARGUING THAT THE CREDITOR WAS NOT THE PERSON ORIGINALLY CLAIMED BUT HIS SISTER! IF SHRI SHIVAM P RASAD INTURI WAS NOT, IN FACT, THE CREDITOR, WHERE WAS THE NEED FOR THE APPELLANT TO TRY AND ESTABLISH HIS GENUINENESS OR CREDITWORTHINESS? IF, IN FACT, THE ACTUAL CREDITOR WAS HIS SISTER, THE APPELLANT SHOULD HAVE PROVIDED EVIDENCE TO SUPP ORT THE GENUINENESS AND CREDITWORTHINESS OF THE SAID LADY. THIS, THE APPELLANT HAS FAILED TO DO. ASIDE FROM THE CLAIM TH AT THE LADY WAS A SCHOOL TEACHER WHO INVESTED THE MONEY IN THE APPELLANT COMPANY, NO EVIDENCE HAS BEEN PRODUCED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION OR THE CREDITWORTHIN ESS OF THE INDIVIDUAL. NO EVIDENCE HAS BEEN PRODUCED OF HER EA RNINGS, EXPENDITURES, HER ABILITY TO SAVE SUCH A SIGNIFICAN T SUM OF MONEY AND THEN THE MOTIVATION TO INVEST IT IN THE A PPELLANT COMPANY EITHER. THE CLAIM HAS BEEN MADE THAT THE IN VESTMENT WAS MADE BY THE SAID LADY FOR THE PURPOSE OF EARNIN G INTEREST. HOWEVER, NO EVIDENCE WAS PRODUCED TO SHOW THAT ANY INTEREST WAS PAID OR ACCRUED. IT IS CLEARLY BEYOND THE REALM OF REASONABLE POSSIBILITY THAT A SCHOOL TEACHER (IF IN DEED SHE WAS ONE) WOULD BE ABLE TO ACCUMULATE SUCH SAVINGS AND T HEN WOULD CHOOSE TO INVEST SUCH A LARGE SUM IN THE APPELLANT COMPANY WITHOUT, THEREAFTER, EARNING ANYTHING FROM THE INVE STMENT. THE ENTIRE CLAIM, WHICH THE APPELLANT IS TRYING TO PASS OFF AS EVIDENCE, IS ABSURD, ILLOGICAL AND MEANINGLESS. (II) AS FOR THE BANK EXTRACT WHICH IS ALLEGED TO ESTABLI SH BEYOND A SHADOW OF DOUBT THAT A DD WAS INDEED RECEIVED FROM MS JAYALAKSHMI INTURI BUT THAT THE APPELLANT COMMITTED A BONAFIDE MISTAKE OF RECORDING IN ITS BOOKS THAT IT WAS RECEI VED FROM SHRI SHIVAM PRASAD INSTEAD, THE DESCRIPTION IN THE COPY OF THE APPELLANT'S BANK EXTRACT IN ITS SBI A/C CLEARLY IND ICATES 'OWN CHQ XFER DP' AGAINST THE CREDIT ENTRY OF ` 12,00,000/- ON 28-02- 2011 WHICH BY NO STRETCH OF IMAGINATION SUBSTANTIAT ES THE APPELLANT'S CLAIM. (III) AS REGARDS THE IDENTITY OF THE LOAN CREDITOR, THE C ONFIRMATORY LETTER NOW FURNISHED BY THE APPELLANT FROM MS JAYAL AKSHMI INTURI IS, IN MY VIEW, MERELY A SELF-SERVING DOCUME NT WITHOUT ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 6 ANY EVIDENTIARY VALUE PARTICULARLY IN THE LIGHT OF THE FACTS HIGHLIGHTED IN THE PARAS ABOVE. (IV) AS REGARDS THE ARGUMENT OF THE APPELLANT THAT ITS F INAL SUBMISSION DATED 2802-2014 WAS NOT CONSIDERED BY TH E AO, IT IS OF RELEVANCE TO NOTE THAT THE ASSESSMENT PROCEED INGS HAD BEEN IN PROGRESS FOR SIX MONTHS BEFORE THE FINAL AS SESSMENT ORDER WAS PASSED AND THE APPELLANT HAD AMPLE OPPORT UNITY TO PRESENT ANY ARGUMENTS/ EVIDENCE THAT IT WISHED TO, TO THE AO. IN ANY CASE, I DO BELIEVE THAT I HAVE CONSIDERED AL L OF THE APPELLANT'S ARGUMENTS AND SUBMISSIONS WHILE PASSING THIS ORDER. IN VIEW OF THE FOREGOING ANALYSIS, I HAVE NO HESITA TION IN UPHOLDING THE ADDITION OF ` 12,00,000/- MADE BY THE AO U/S 68. 5.3.2 FROM A PERUSAL OF THE FINDINGS RENDERED BY TH E LEARNED CIT(A) IN THE IMPUGNED ORDER (SUPRA) AND THE MATERIAL ON RECORD, IT IS SEEN THAT THE FINDING OF FACT HAS BEEN RENDERED JUDICIOUSLY, AFTE R CONSIDERING THE SUBMISSIONS PUT FORTH BY THE ASSESSEE AND THE VIEWS OF THE AO IN THE MATTER. IN OUR VIEW, THE ASSESSEE HAS FAILED TO BRI NG ON RECORD ANY MATERIAL EVIDENCE TO CONTROVERT THE FINDING RECORDED BY THE LEARNED CIT(A) AND THEREFORE UPHOLD THE ADDITION OF ` 12,00,000/- MADE UNDER SECTION 68 OF THE ACT. CONSEQUENTLY, GROUND NO. I OF THE ASSESSEE S APPEAL IS DISMISSED. 6(A) GROUND II (2.1 TO 2.3 DISALLOWANCE OF REGISTRATIO N AND DOCUMENTATION CHARGES AS CAPITAL EXPENDITURE ` `` ` 1,90,000/- 6(B) GROUND III (3.1 TO 3.3) DISALLOWANCE OF TRAVELLIN G EXPENSES ` `` ` 78,000/- 6.1 IN THESE GROUNDS THE ASSESSEE ASSAILS THE ACTIO N OF THE LEARNED CIT(A) IN UPHOLDING THE DISALLOWANCE OF ` 1,90,000/- OF EXPENDITURE INCURRED FOR STAMPING AND REGISTRATION OF TECHNOLOGY AGREEMENT F OR THE REASON THAT THE SAME CONSTITUTES CAPITAL EXPENDITURE. IT IS ARGUED THAT SINCE THE SAID EXPENDITURE HAS NO ENDURING BENEFIT, THE SAME OUGHT TO HAVE BEEN ALLOWED AS REVENUE EXPENDITURE. IT IS ALSO CONTENDED IN GROUND NO. III (SUPRA) THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ALL THE EV IDENCES TO ESTABLISH TRAVELLING EXPENSES OF ` 78,000/- SUCH AS NAME AND DESIGNATION OF PERSON UND ERTAKING THE TRAVEL AND PURPOSE THEREOF WERE FILED TO PROVE THE CLAIM OF THE ASSESSEE. 6.2 THE LEARNED D.R. FOR REVENUE PLACED STRONG RELI ANCE ON THE FINDING RENDERED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDE R. ACCORDING TO THE ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 7 LEARNED D.R., IN THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO NOTICED THAT THE ASSESSEE HAD DEBITED ` 3,01,455/- TO THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF REGISTRATION AND DOCUMENTATION CHARGES. ON EXAMINATION THEREOF, THE AO CAME TO THE VIEW THAT THOUGH THE EN TIRE EXPENDITURE WAS DEBITED AS REGISTRATION AND DOCUMENTATION CHARGES L EDGER EXTRACTS SHOWED ONLY A SUM OF ` 1,11,455/- WAS FOR THAT PURPOSE. SINCE THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM WITH DOCUMENTARY EVIDENCE, DISALLOWED THE ENTIRE AMOUNT CLAIMED. ON APPEAL, THE LEARNED C IT(A) IN THE IMPUGNED ORDER UPHELD THE AFORESAID DISALLOWANCE OF ` 3,01,455/- TO THE EXTENT OF ` 2,68,000/- AND ALLOWED THE ASSESSEE RELIEF OF ` 33,455/- WHICH WAS FOUND TO BE EXPENDED FOR BUSINESS PURPOSES. IT IS CONTEND ED THAT SINCE THE ASSESSEE HAS FAILED TO PLACE ON RECORD EVIDENCE TO CONTROVERT THE FINDINGS OF THE LEARNED CIT(A), THE DISALLOWANCE CONFIRMED TO T HE EXTENT OF ` 2,68,000/- BE UPHELD. 6.3.1 WE HAVE HEARD THE LEARNED D.R. FOR REVENUE AN D PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE LE ARNED CIT(A) HAS DEALT WITH THIS ISSUE OF THE TREATMENT OF REGISTRATION AN D DOCUMENTATION CHARGES BEING TREATED AS CAPITAL EXPENDITURE AT PARAS 5 TO 5.2 OF THE IMPUGNED ORDER AS UNDER: - 5. A PERUSAL OF THE P&L A/C REVEALED THAT THE APPE LLANT HAD DEBITED A SUM OF ` 3,01,455/- BY WAY OF REGISTRATION AND DOCUMENTATION CHARGES. THE AO WAS OF THE OPINION THAT EXPENSES TO THE TUNE OF ` 1,11,455/- INCURRED TOWARDS REGISTRATION & FILING E XPENSES WERE A ONE-TIME EXPENDITURE IN CONNECTION WITH THE FORMATI ON OF THE COMPANY AND WAS REQUIRED TO BE TREATED AS CAPITAL EXPENDITU RE. THE AO ALSO NOTICED THAT EXPENSES OF ` 60,000/- AND ` 18,000/- WERE SHOWN TO HAVE BEEN INCURRED TOWARDS REGISTRATION FEE FOR A C ONFERENCE IN CHINA AND EXPENSES INCURRED FOR THE CHINA TRIP BY CERTAIN PERSONS WHO WERE NEITHER DIRECTORS NOR EMPLOYEES OF THE COMPANY. THE AO DISALLOWED THE ENTIRE AMOUNT OF ` 3,01,455/- ON ACCOUNT OF THE APPELLANT'S FAILURE TO PROVE IN WHAT CAPACITY AND HOW THE SAID EXPENSES QUALIFIED AS REGISTRATION AND FILING FEES AND FOR THE REASON THA T THE APPELLANT HAD FAILED TO DISCHARGE ITS ONUS TO SUBSTANTIATE ITS CL AIM WITH DOCUMENTARY EVIDENCE. THE AO ALSO POINTED OUT THAT THOUGH THE SUM OF ` 3,01,455/- WAS DEBITED AS REGISTRATION AND DOCUMENT ATION CHARGES, THE LEDGER EXTRACT FURNISHED INDICATED AN EXPENSES OF ONLY ` 1,11,455/-. CONSEQUENTLY, THE ENTIRE SUM OF ` ,01,455/- WAS CONSIDERED AS CAPITAL EXPENDITURE OWING TO ITS ENDU RING BENEFIT AND DISALLOWED U/S 37(1). ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 8 5.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT CONTENDED THAT THE ABOVE EXPENDITURE OF ` 3,01,455/- WAS THE AGGREGATE OF THE FOLLOWING TWO AMOUNTS: (I) FRANKING CHARGES ` 1,90,000/- (II) REGISTRATION & FILING FEES ` 1,11,455/- IT WAS CLAIMED THAT THE PAYMENT OF ` 1,90,000/- WAS ON ACCOUNT OF FRANKING CHARGES OF ` 1,84,500/- AND THE BALANCE AMOUNT OF ` 5,500/- ON ACCOUNT OF REGISTRATION AND NOTARIZING CHARGES F OR THE TECHNOLOGY AGREEMENT EXECUTED ON 14-06-2015 BETWEEN THE APPELL ANT COMPANY AND THE FOREIGN JV, ULTIMA INTERNATIONAL SARL OF LU XEMBOURG. IT WAS POINTED OUT THAT THE APPELLANT COMPANY WAS A SUBSID IARY OF PRIVI PHARMA PVT. LTD. AND THAT THE HOLDING COMPANY WAS E NGAGED IN THE BUSINESS OF MANUFACTURING OF AGRO NUTRIENTS AT THEI R FACTORY AT ROHA IN RAIGAD DISTRICT. IT APPEARS THAT THE APPELLANT COMP ANY HAD ENTERED INTO A TECHNOLOGY AGREEMENT ON 14-06-2010 WITH AN OVERSE AS COMPANY, ULTIMA INTERNATIONAL. UNDER THIS AGREEMENT, ULTIMA AGREED TO PROVIDE TECHNOLOGY & KNOWHOW AS WELL AS TECHNICAL ASSISTANC E FOR THE PURPOSE OF DEVELOPING & MANUFACTURING OF THE PRODUC TS TO BE USED ON VARIOUS CROPS, INCLUDING HORTICULTURE AND PLANTATIO N CROPS AND TO COMMERCIALLY EXPLOIT, PROMOTE, MARKET, SELL & DISTR IBUTE THE PRODUCTS IN THE TERRITORY. IT WAS FURTHER CONTENDED THAT AS THE APPELLANT COMPANY HAD NO MANUFACTURING FACILITIES OF ITS OWN AND THE HOLDING COMPANY I.E. PRIVI PHARMA PVT. LTD. HAD SPARE CAPACITY FOR MANUF ACTURING, THE APPELLANT COMPANY ENTERED INTO A SEPARATE MARKETING REPRESENTATION AGREEMENT DT. 10-06-2010 WITH ITS HOLDING COMPANY F OR MANUFACTURING OF SILIXOL ON BEHALF OF THE APPELLANT AS PER TECHNI CAL KNOW-HOW PROVIDED BY ULTIMA INTERNATIONAL SARL FOR WHICH THE HOLDING COMPANY WOULD PAY A SUM OF ` 15,00,000/- P.M. TO ITS SUBSIDIARY, I.E THE APPELLA NT, FOR RENDERING MARKETING SERVICES AND TO COVER EXPENSES INCURRED ON MARKETING & PROMOTION OF ITS PRODUCTS. THOUGH THE A GREEMENT DOES NOT CLEARLY LAY DOWN THE SHARE-HOLDING PATTERN, IT WAS CLAIMED THAT THE OVERSEAS COMPANY I.E. ULTIMA INTERNATIONAL SARL ALS O TOOK A MINORITY STAKE (I.E 20%) IN THE EQUITY CAPITAL OF THE APPELL ANT COMPANY. THE DETAILS OF SHARE-HOLDING PATTERN OF THE APPELLANT C OMPANY AS ON 31 ST MARCH, 2011 WAS FURNISHED AS UNDER:- TABLE-1 SL.NO. NAME AND ADDRESS OF SHAREHOLDER PAN NO. OF SHARES HELD AND PERCENTAGE SHARES HELD SINCE 1 PRIVI PHARMA LTD. AAACP2657F 79.95 2009 2 ULTIMA INTERNATIONAL ASRI NA (FOREIGN NATIONAL) 20.04 2010 3 ANOOP P. BABANI AFLPB1551R 0.01 2009 THE STAMP DUTY OF ` 1,84,500/- AND REGISTRATION AND NOTARY CHARGES OF ` 5,500/- WERE PAID BY THE APPELLANT COMPANY ON THE A BOVE REFERRED TECHNOLOGY AGREEMENT. HENCE, THE APPELLANT CONTENDED THAT ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 9 THE TOTAL AMOUNT OF ` 1,90,000/- WAS REVENUE EXPENDITURE IN ACCORDANCE WITH THE PROVISIONS OF SEC. 37 AND WAS C ORRECTLY CLAIMED BY THE APPELLANT COMPANY. HOWEVER, I AM UNABLE TO A CCEPT THE APPELLANT'S ARGUMENT THAT MERELY BECAUSE A SUM OF ` 1,90,000/- WAS PAID TOWARDS STAMP DUTY AND NOTARY CHARGES INCURRED FOR REGISTRATION OF THE TECHNOLOGY AGREEMENT DT. 14- 06 -2010, IT CONSTITUTES REVENUE EXPENDITURE. CLEARLY, AS OBSERV ED BY THE AO, EXPENDITURE INCURRED IN CONNECTION WITH REGISTRATIO N OF THE TECHNOLOGY AGREEMENT WITH ITS JV PARTNER ULTIMA INTERNATIONAL SARL LUXEMBOURG FOR PROVIDING TECHNOLOGY & KNOWHOW AS WELL AS TECHN ICAL ASSISTANCE FOR THE PURPOSE OF DEVELOPING & MANUFACTURING OF TH E PRODUCTS TO BE USED ON VARIOUS CROPS, INCLUDING HORTICULTURE AND P LANTATION CROPS AND TO COMMERCIALLY EXPLOIT, PROMOTE, MARKET, SELL & DI STRIBUTE THE PRODUCTS IN THE TERRITORY CAN ONLY BE SAID TO CONST ITUTE A ONETIME EXPENDITURE BRINGING INTO EXISTENCE AN ADVANTAGE OF ENDURING NATURE. STRANGELY, IN THE BREAK-UP PROVIDED BY THE APPELLAN T, THE AMOUNT HAS BEEN DESCRIBED AS 'FRANKING CHARGES' IN A DESPERATE ATTEMPT TO GIVE IT A DIFFERENT NOMENCLATURE ESPECIALLY WHEN THE COP Y OF THE RECEIPT PROVIDED BY THE APPELLANT ON PAGE 15 OF ITS PAPER BOOK (EXHIBIT 'D') CLEARLY DESCRIBES THE EXPENDITURE AS INCURRED TOWAR DS STAMP DUTY. IN VIEW OF THE ABOVE FACTUAL SCENARIO, I HAVE NO HESIT ATION IN SUSTAINING THE ADDITION TO THE TUNE OF ` 19,00,000/- TOWARDS REGISTRATION CHARGES HOLDING THE SAME AS CAPITAL EXPENDITURE. 5.2. AS FOR THE BALANCE SUM OF ` 1,11,455/-, THE APPELLANT CLAIMED THAT IT HAD DEBITED AN AMOUNT OF ` 1,11,455/- UNDER THE HEAD REGISTRATION & FILING FEES IN ITS P & L A/C FOR THE AY 2012-13. A COPY OF SAID LEDGER A/C 'REGISTRATION & FILING FEES' WAS SUBMITTED VIDE ITS PAPER BOOK (EXHIBIT 'E'). ON A PERUSAL OF THIS A/C, IT WAS NOTICED THAT VARIOUS AMOUNTS AGGREGATING TO ` 33,455/- DEBITED WERE TOWARDS PAYMENT FOR FILING OF ROC DOCUMENTS, REGISTRATION FEES FOR SHOP AND ESTABLISH MENT LICENSE, PF & PROFESSIONAL TAX CONSULTANCY CHARGES, ETC. THE REMA INING AMOUNT OF ` 78,000/- ( ` 60,000/- AND ` 18,000/-) DEBITED UNDER 'REGISTRATION & FILING FEES' DESCRIBED AS 'REGISTRATION FEES FOR CHINA CON FERENCE/PAYMENT FOR CHINA TRIP' WHICH THE APPELLANT CONTENDED WERE EXPE NSES INCURRED BY MR. KALLASH BHARGAVA (A PROFESSIONAL CONSULTANT) AN D MR. SANDIP KUMAR SINGH (AN EMPLOYEE) ALLEGEDLY FOR THE PURPOSE OF TR AVELLING TO CHINA FOR ATTENDING A CONFERENCE. HOWEVER, THE APPELLANT POIN TED OUT THAT THESE EXPENSES HAD BEEN WRONGLY DEBITED UNDER THE HEAD 'R EGISTRATION AND FILING FEES' A/C INSTEAD OF 'TRAVELLING EXPENSES' A ND SUBMITTED THAT THOUGH IT WAS CLASSIFIED UNDER THE WRONG HEAD OF AC COUNT, THE EXPENSES BEING IN THE NATURE OF REVENUE WERE ALLOWABLE EXPEN SES U/S 37 . THE APPELLANT CLARIFIED THAT MERE CLASSIFICATION OF EXP ENSES UNDER A DIFFERENT HEAD OF ACCOUNT DOES NOT AFFECT PROFIT/LOSS FOR THE ABOVE AY AND THAT THEREFORE, THE AO'S STAND IN DISALLOWING THE ABOVE EXPENSES OF ` 1,11,455/- ON THE GROUND THAT NONE OF THE ABOVE MEN TIONED PERSONS WERE DIRECTORS OR EMPLOYEES OF THE COMPANY WAS ERRO NEOUS. HOWEVER, AS POINTED OUT BY THE AO, THE APPELLANT HAS CLEARLY FA ILED TO DISCHARGE ITS ONUS OF SUBSTANTIATING ITS CLAIM WITH ANY CORROBORA TIVE EVIDENCE. EVEN DURING APPELLATE PROCEEDINGS, NO INCONTROVERTIBLE E VIDENCE WAS BROUGHT ITA NO. 5399/MUM/2015 M/S. PRIVI LIFE SCIENCES P. LTD. 10 ON RECORD TO PROVE MR. KAILASH BHARGAVA, MR. SANDIP KUMAR SINGH AND MR. TALLURI JOHN GABRIEL WERE WHO THEY WERE CLAIMED TO BE. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TO ESTABLISH TH AT THE PERSONS CONCERNED WERE INDEED EMPLOYEES/ CONSULTANTS OR THA T THE EXPENSES INCURRED TOWARDS THE CHINA TRIP WERE FOR BUSINESS P URPOSES BY FURNISHING COPIES OF THE CONCERNED INVOICES, I HAVE NO OTHER ALTERNATIVE BUT TO UPHOLD THE DISALLOWANCE OF EXPENSES TO THE TUNE OF ` 78,000/- ( ` 60,000/- + ` 18,000/-) OUT OF THE TOTAL SUM OF ` 1,11,455/- DEBITED UNDER THE HEAD 'REGISTRATION AND FILING FEES' AND DELETE THE BALANCE DISALLOWANCE TO THE TUNE OF ` 33,455/- DEBITED UNDER THE SAME HEAD HAVING BEEN INCURRED FOR BUSINESS PURPOSES. TO SUM UP, OUT OF THE TOTAL DISALLOWANCE OF ` 3,01,455/-, DISALLOWANCE TO THE TUNE OF ` 2,68,000/- IS UPHELD WHILE THE BALANCE DISALLOWANCE OF ` 33,455/- IS DELETED. 6.3.2 FROM A PERUSAL OF THE FINDINGS OF THE LEARNED CIT(A) (SUPRA) AND AN APPRECIATION OF THE MATERIAL ON RECORD, WE FIND THA T THE LEARNED CIT(A) HAS RENDERED HIS FINDING JUDICIOUSLY, AFTER CONSIDERING THE SUBMISSION PUT FORTH BY THE ASSESSEE AND THE VIEW OF THE AO IN THE MATTE R. IN OUR VIEW, THE ASSESSEE HAS FILED TO BRING ON RECORD ANY MATERIAL EVIDENCE TO CONTROVERT THE FINDINGS RECORDED BY THE LEARNED CIT(A) AND THE REFORE UPHOLD THE DISALLOWANCE OF EXPENDITURE OF ` 2,68,000/- AS CAPITAL IN NATURE. CONSEQUENTLY, GROUND NO. II (2.1 TO 2.3) AND GROUND NO. III (3.1 TO 3.3 RAISED BY THE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2011- 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2017. SD/ - SD/ - (SAKTIJIT DEY) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13 TH JANUARY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -24, MUMBAI 4. THE CIT - 6, MUMBAI 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.