DCIT CIR 3(1), MUMBAI V. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD, MUMBAI

ITA 5403/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5569 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S VENKATRAMA N
• Keywords: Capital asset; Depreciation; Additional evidence; Capital expenditure
• Section: 43B; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5403/M/2014 ASSESSMENT YEAR: 2006-07 DCIT, CIRCLE 3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 VS. M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD., 5 TH FLOOR, NIRMAL BUILDING, NARIMAN POINT, MUMBAI 21 PAN: AAACE 0296K (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI S. VENKATRAMAN, A.R. REVENUE BY : SHRI RAJESH DAMOR, D.R. DATE OF HEARING : 27.06.2018 DATE OF PRONOUNCEMENT : 31.07.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 12.05.2014 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2006-07. 2. THE VARIOUS GROUNDS RAISED BY THE REVENUE ARE AS UNDER: '1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 27, 24,26,000/- TO THE TOTAL INCOME BEING RECOVERIES FROM ABROAD DURING THE RELEVANT PR EVIOUS YEAR WITHOUT APPRECIATING THAT ASSESSEE HAD ALREADY CLAIMED EXPE NDITURE RELATING TO SUCH RECEIPT IN EARLIER YEARS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 20, 00,00,000/- BEING THE ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 2 AMOUNT ARISING CONSEQUENT TO CHANGE IN THE METHOD O F ESTIMATION OF RECOVERIES OF CLAIMS PAID. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.6,57 ,00,000/- BEING LIABILITY ON ACCOUNT OF REVISION IN THE PAY-SCALES OF THE EMPLOY EES HAVING GOT ACCRUED IN THE HANDS OF THE ASSESSEE. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LA W THE LD CIT(A) ERRED IN DELETING THE ISO CERTIFICATION EXPENSES OF RS. 16,2 9,923/- BY NOT TREATING IT AS CAPITAL EXPENDITURE. 5. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE D ELETION OF ADDITION OF RS.27,24,26,000/- BY THE LD. CIT(A) AS MA DE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOU NT OF RECOVERIES FROM ABROAD FOR WHICH THE ASSESSEE HAS A LREADY CLAIMED EXPENDITURE IN THE EARLIER YEARS. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF INSURING EXPORT CREDIT RISK OF EXPORTER S AND BANKS IN INDIA. THE ASSESSEE ISSUES INSURANCE POLICIES TO EXPORTERS AND BANKS IN RESPECT OF TRANSACTIONS ABROAD OR EXP ORTS AND WHEN AN EXPORTER/BANK IS UNABLE TO REALIZE EXPORT P ROCEEDS AND IT LODGES A CLAIM WITH THE ASSESSEE AND THEN I T IS SETTLED UP TO 90% OF THE GROSS INVOICE VALUE. IN THE CASE OF LATIN AMERICAN/AFRICAN COUNTRIES, THE AMOUNTS TO BE REMITT ED BY THE IMPORTERS TOWARDS DUES ARE NORMALLY BLOCKED BY THE CENTRAL BANKS OF SUCH COUNTRIES DUE TO INADEQUATE FOREIGN E XCHANGES. AS AND WHEN THESE AMOUNTS ARE RECEIVED FROM CENTRAL BANKS, THE REMITTANCES ARE NOT ACCOMPANIED WITH THE DETAI LS AS TO L MA N PR ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 3 WHICH EXPORTERS OR TO WHOM THE AMOUNTS PERTAIN AS WELL AS THE SHARE OF EACH EXPORTER AND THEREFORE THE SUM SO RECEIVED FROM THE CENTRAL BANKS ARE HELD IN A FIDUCIARY CAPA CITY BY THE COMPANY IN UNDER CURRENT LIABILITIES. AFTER IDENTI FICATION OF EXPORTERS AND THE ASCERTAINMENT OF THEIR RESPECTIVE SHARES THE NECESSARY ADJUSTMENTS ARE MADE. DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE REFLECTS SUCH AMOUNTS IN THE BALANCE SHEET UNDER THE HEAD CURRENT LIABILITIES AS UNAPPORTIONED CLAIM RECOVERY IN THE FINANCIAL YEA R ENDED BEFORE THE 01.03.2007. THE ASSESSEE IDENTIFIED THE EXPORTERS TO WHOM THE AMOUNTS PERTAINED IN THE NEXT YEAR AND REMITTED RS.4,60,00,000/- TO THEM WHILE THE REMAINING AMOUNT OF RS.22,64,26,000/- BEING THE SHARE OF THE COMPANY IN THE REALIZATION, WAS TAKEN TO THE INCOME AND OFFERED TO TAX ACCORDINGLY AS PER THE REGULAR PRACTICE FOLLOWED BY THE ASSESSEE. THE NOT ACCEPTING SUCH ACCOUNTING TREATME NT ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. THE LD. CIT(A), AFTER FOLLOWING THE EARLIER YEAR O RDERS BY HIS PREDECESSOR, ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE AMOUNT OF RS.22,64,26,000/- WAS HELD BY THE ASSESSEE IN FIDUCIARY CAPACITY FOR EXPORTERS AND BA NKS AND THUS DELETED THE ADDITION. 6. THE LD. A.R. SUBMITTED BEFORE US THAT THE CASE O F THE ASSESSEE IS FULLY COVERED BY THE DECISION OF THE CO -ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1971/M/2011 FOR A.Y. 2007-08 AND IN ITA NO.6495/M /2013 FOR A.Y. 2008-09 WHEREIN THE SIMILAR ADDITION WAS DE LETED. ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 4 THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT IN VIEW O F THE SAID DECISIONS THE GROUND RAISED BY THE REVENUE DES ERVES TO BE DISMISSED. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE GROU NDS OF APPEAL AND ORDER OF THE AO. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISION CITED BY THE LD. A. R., WE OBSERVE THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO.1971/M/2011 A.Y. 2007-08 (SUPRA) BY HOLDING AS UN DER: 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER, IT IS AN UNDISPUTED FA CT THAT THE ASSESSEE BEING A GENERAL INSURANCE COMPANY, ITS INCOME IS LIABLE TO BE COMPUTED STRICTLY U/S 44 R.W. READ WITH FIRST SCHEDULE, WHICH PROVIDES FOR A SPEC IAL PROVISION GOVERNING COMPUTATION OF TAXABLE INCOME EARNED FROM BUSINESS OF INSURANCE AND HAS AN OVERRIDING EFFECT OVER OTHER PROVISIONS CONTAINED I N THE INCOME-TAX ACT . SECTION 44 MANDATES THAT THE ASSESSING AUTHORITY HAS TO COMPUT E THE TAXABLE INCOME FROM THE BUSINESS OF INSURANCE STRICTLY IN ACCORDANCE WITH T HE PROVISIONS OF FIRST SCHEDULE. RULE 5 OF THE FIRST SCHEDULE MANDATES THAT THE PROF ITS AND GAINS OF ANY BUSINESS OF INSURANCE SHALL BE TAKEN TO BE THE PROFITS DISCLOSE D IN THE ANNUAL ACCOUNTS. SUCH PROFITS ARE ONLY SUBJECT TO ANY EXPENDITURE THAT AR E DISALLOWABLE UNDER SECTIONS 32 TO 43B . THUS, THE AO IS BOUND TO ACCEPT THE PROFITS AS SH OWN IN THE AUDITED ACCOUNTS AND SUCH PROFIT CAN ONLY BE ADJUSTED IN RE SPECT OF EXPENDITURE ALLOWANCES THAT QUALIFIES FOR DISALLOWANCE UNDER SECTIONS 32 TO 43B . HERE IN THIS CASE, THE AMOUNT OF RS.5.04 CRORES WAS RECEIVED BY THE ASSESS EE FROM THE FOREIGN CENTRAL BANKS AND WAS CLASSIFIED IN THE BALANCE SHEET AS A 'LIABILITY' WHICH WAS AS IN ACCORDANCE WITH THE ACCEPTED ACCOUNTING PRACTICE FO LLOWED BY THE ASSESSEE RIGHT FROM THE EARLIER YEARS. THE ASSESSEE HAS HELD THE A MOUNT AS A 'TRUST' THAT IS IN FIDUCIARY CAPACITY ON BEHALF OF THE EXPORTERS. CONS EQUENTLY, SUCH AMOUNT HAD NOT BEEN ROUTED THROUGH PROFIT AND LOSS ACCOUNT BY THE ASSESSEE, AS PER THE ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE. HENCE, IN ACCORDAN CE WITH THE PROVISIONS CONTAINED IN SECTION 44 READ WITH FIRST SCHEDULE, SUCH AN ADJUSTMENT BY TH E AO FOR TAXING THE INCOME IN THIS YEAR IS WHOLLY UNTENABLE. APART FROM THAT, THE LD. CIT(A) HAS CATEGORICALLY NOTED THE FACT THAT DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10, THE ASSESSEE AFTER IDENTIF YING THE EXPORTERS HAS PAID BACK THE SUBSTANTIAL AMOUNT WHICH WERE COLLECTED ON THEI R BEHALF AND WHATEVER AMOUNT COULD NOT BE IDENTIFIED, THE SAME HAS BEEN OFFERED AS AN INCOME IN THAT YEAR. THUS, THE WHOLE OF THE AMOUNT HAS NOW BEEN ACCOUNTED FOR AND INCOME HAS ALSO BEEN OFFERED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2009 -10. ON THESE FACTS, WE DO NOT ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 5 FIND ANY REASONS TO DEVIATE FROM THE FINDING AND TH E DIRECTION GIVEN BY THE CIT(A). ACCORDINGLY, THE GROUND RAISED BY THE DEPARTMENT ON THIS SCORE STANDS DISMISSED. 9. SINCE THE FACTS OF THE CASE BEFORE US ARE IDENT ICAL WITH THAT OF THE EARLIER YEARS, WE THEREFORE FOLLOWING TH E DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, DISMISS THE GROUND RAISED BY THE REVENUE. 10. THE ISSUE RAISED IN SECOND GROUND OF APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.20 CRORES BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF CHANGES IN THE METHOD OF ESTIM ATION OF RECOVERIES OF CLAIM PAID. 11. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS FOL LOWING THE PRACTICE OF ESTIMATING THE AMOUNTS OF RECOVERY EXPE CTED OUT OF CLAIMS PAID/PAYABLE BASED ON ASSESSMENT OF EACH IND IVIDUAL CASE. WHERE THE RECOVERY EXCEEDED 3 YEARS AS ON 31 ST MARCH 2006, THE COMPANY, IN VIEW OF THE CHANCES OF RECOVERY OF SUCH CLAIMS BEING REMOTE, CHANGED THE ACCOUNTING PRACTICE IN THE CURRENT YEAR AND RECOGNIZED RS.100/- AS THE AMOUNT L IKELY TO BE RECOVERED IN RESPECT OF EACH SUCH CLAIM. THE SAI D CHANGE IN THE ACCOUNTING TREATMENT HAD THE EFFECT OF NOT R ECOGNIZING THE ESTIMATED RECOVERIES IN RESPECT OF CLAIMS PAID AND OUTSTANDING BEYOND 3 YEARS AS ON 31.03.2006 TO THE EX TENT OF RS.20 CRORES. ACCORDING TO THE AO, THE ASSESSEE HAS REDUCED ITS PROFIT BY WRITING BACK THE PROVISION OF RECOVER Y OF RS.20 CRORES AND SAME IS REQUIRED TO BE ADDED BACK AND IN FACT ADDED THE SAME TO THE INCOME OF THE ASSESSEE BY THE AO. 12. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AL LOWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE CONTEN TIONS AND ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 6 SUBMISSIONS OF THE ASSESSEE BY OBSERVING AND HOLDIN G AS UNDER: 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE, THE R EASONING GIVEN BY THE AO AND SUBMISSIONS MADE BY THE APPELLANT. THE APPELLAN T IS A PUBLIC SECTOR COMPANY AND IS ENGAGED IN THE BUSINESS OF EXPORT CR EDIT INSURANCE. ITS ENTIRE CAPITAL IS HELD BY THE PRESIDENT OF INDIA. THE AP PELLANT IS ALSO REGISTERED AS AN EXPORT INSURANCE COMPANY WITH THE INSURANCE REGU LATORY AND DEVELOPMENT AUTHORITY (IRDA) UNDER THE INSURANCE RE GULATORY AND DEVELOPMENT AUTHORITY ACT OF 1999. BEING REGISTERED WITH THE IR DA, IT HAS TO DRAW UP ITS ACCOUNTS IN ACCORDANCE WITH THE IRDA (PREPARATION O F FINANCIAL STATEMENTS AND AUDITOR'S REPORT OF INSURANCE COMPANIES) REGULA TIONS, 2002. THE APPELLANT, BEING A GOVERNMENT OF INDIA COMPANY, ITS ACCOUNTS ARE SUBJECTED TO AUDIT BY AUDITORS APPOINTED BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA AND IN ADDITION THE ACCOUNTS ARE ALSO SUBJECTED TO A SUPPL EMENTARY AUDIT BY THE OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SEC. 619 OF THE COMPANIES ACT, 1956. THE FINANCIAL STATEMENTS HAVE ALSO BEEN FILED BEFORE THE IRDA BEING THE REGULATOR FOR ALL THE INSURANCE COMPANIES INCLUDING THE APPELLANT COMPANY. 6.4 SINCE THE APPELLANT IS AN INSURANCE COMPANY, IT S INCOME IS TO BE COMPUTED IN ACCORDANCE WITH SEC. 44 OF THE I.T. ACT , 1961, READ WITH FIRST SCHEDULE. RULE 5 OF THE FIRST SCHEDULE THAT DEALS W ITH THE COMPUTATION OF PROFITS AND GAINS OF OTHER INSURANCE BUSINESS (OTHER THAN L IFE INSURANCE) BEGINS AS FOLLOWS: 'THE PROFITS AND GAINS OF ANTI BUSINESS OF INSURANC E, OTHER THAN LIFE INSURANCE, SHALL BE TAKEN TO BE THE PROFIT BEFORE TAX AND APPROPRIATIONS AS DISCLOSED IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE INSURANCE ACT, 1938 (4 OF 1938) OR THE RULES MADE THERE UNDER OR THE PROVI SIONS OF THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORIAL ACT, 1999 (4 OF 1999) OR THE REGULATIONS MADE THERE UNDER, SUBJECT TO THE FO LLOWING ADJUSTMENTS.. 6.5 THE HON'BLE SUPREME COURT IN THE CASE OF CIT V S. CALCUTTA HOSPITAL AND NURSING HOME BENEFITS ASSOCIATION LTD (57 ITR WHILE DEALING WITH THE ASSESSMENT OF AN INSURANCE COMPANY HAVE HELD THAT IN VIEW OF T HE FIRST SCHEDULE OF THE ACT, THE AO IS BOUND TO ACCEPT THE PROFITS DISCLOSED IN THE ANNUAL ACCOUNTS THAT ARE FILED BEFORE THE REGULATOR, SUBJECT TO ADJUSTMENTS AS PRESCRIBED IN CLAUSES (A), (B) AND (C) OF RULE 5 TO THE FIRST SCHEDULE. 6.6 CLAUSE (A) OF RULE 5 TO THE FIRST SCHEDULE READ S AS FOLLOWS: 'SUBJECT TO THE OTHER PROVISIONS OF THIS RULE, ANY EXPENDITURE OR ALLOWANCE INCLUDING ANY AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT EITHER BY WAY OF A PROVISION FOR ANY TAX, DIVIDEND, RESERVE OR AN Y OTHER PROVISION AS MAY BE PRESCRIBED WHICH IS NOT ADMISSIBLE UNDER THE PRO VISIONS OF SECTIONS 30 TO 43B IN COMPUTING THE PROFITS AND GAINS OF A BUSI NESS SHALL BE ADDED ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 7 BACK.' 6.7 THE HON'BLE SUPREME COURT IN THE CASE OF GENERA L INSURANCE CORPORATION VS. CIT (240 ITR 139) HAS ALSO INTERPRETED THE ABOV E CLAUSE AS PERMITTING AN ADJUSTMENT TO AN EXPENDITURE OR ALLOWANCE WHICH IS NOT ADMISSIBLE UNDER SEC.30 TO 43B OF THE ACT. 6.8 THE PROVISION FOR ESTIMATION IN THE RECOVERY O F CLAIMS PAID IS NOT AN EXPENDITURE WHICH IS INADMISSIBLE UNDER THE PROVISI ONS OF SEC. 30 TO 43B OF THE IT. ACT, 1961. RATHER IS AN ITEM OF INCOME SIDE REDUCED BY THE APPELLANT, ON ESTIMATE BASIS. HENCE, THE ADDITION MADE IN THE REASSESSMENT ORDER CANNOT SURVIVE. BESIDES, THE APEX COURT HAS ALSO HELD THAT THE BALA NCE OF PROFITS DISCLOSED IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF IRDA IS TO BE ACCEPTED. THE AO IS, THEREFORE, BOUND BY THE FIG URE OF THE PRO IT BEFORE TAX AND APPROPRIATIONS AS APPEARING IN THE PROFIT AND L OSS ACCOUNT FILED BY THE APPELLANT BEFORE THE IRDA. CONSEQUENTLY, THE ADDITI ON OF RS.20,00,00,000/- MADE BY THE AO IN THE REASSESSMENT ORDER ON ACCOUNT OF C HANGE IN THE ESTIMATION OF THE PROVISION FOR RECOVERY OF CLAIMS CANNOT BE SUST AINED AND IS HENCE DELETED. 13. THE LD. D.R. WHILE RELYING ON THE GROUNDS OF APP EAL AND ORDER OF AO SUBMITTED BEFORE THE BENCH THAT THE CHA NGE IN THE METHOD OF ACCOUNTING BY NOT RECOGNIZING THE ESTIMAT ED RECOVERIES IN RESPECT OF CLAIM PAID AND PAYABLE BEY OND THREE YEARS HAS RESULTED INTO REDUCTION OF PROFIT TO THE TUNE OF RS.20 CRORES AND THEREFORE THE AO HAS RIGHTLY MADE THE AD DITION ON THAT ACCOUNT. THUS THE LD. D.R. PRAYED BEFORE THE B ENCH THAT SINCE THE CHANGE IN THE ACCOUNTING TREATMENT OF SUC H RECOVERIES IS UNDERSTATED THE PROFITS OF THE ASSESS EE, THEREFORE THE ORDER OF LD. CIT(A) IS WRONG AND SHOULD BE REVER SED. 14. ON THE OTHER HAND, THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT THE FIRST APPELLATE AUTHORITY HAS CORREC TLY PASSED THE ORDER AFTER CONSIDERING THE PROVISIONS OF SECTI ON 44 AND RULE 5 OF FIRST SCHEDULE WHICH ARE SPECIAL PROVISIO NS TO COMPUTE THE PROFIT OF INSURANCE OTHER THAN LIFE INSURANCE. THE LD. A.R. SUBMITTED THAT SECTION 44 OF THE ACT BEGINS WITH NO N OBSTANTE CLAUSE AND HENCE OVERWRITES THE OTHER SECTIONS RELA TING TO ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 8 COMPUTATION OF INCOME UNDER THE ACT. THE LD. A.R. FU RTHER ARGUED THAT RULE 5 OF THE FIRST SCHEDULE MANDATES T HAT PROFITS AND GAINS OF NET BUSINESS OF INSURANCE OTHER THAN L IFE INSURANCE SHALL BE TAKEN TO BE PROFIT DISCLOSED IN THE ANNUAL ACCOUNTS. THE LD. A.R. THEREFORE SUBMITTED THAT THE AO HAS TO ACCEPT THE PROFIT AS DISCLOSED BY THE ASSESSEE AS I T IS ENGAGED IN THE BUSINESS OF INSURANCE OTHER THAN LIFE INSURA NCE. THE LD. A.R. SUBMITTED THAT NO ADJUSTMENT CAN, THEREFORE, BE M ADE TO THE INCOME SHOWN IN THE P & L ACCOUNT OF THE ASSESS EE IN IN VIEW OF THE PROVISIONS IN SECTION 44 OF THE ACT REA D WITH FIRST SCHEDULE. THE LD. A.R. RELIED ON A COUPLE OF DECISION S IN DEFENSE OF HIS ARGUMENTS NAMELY; CIT VS. CALCUTTA HO SPITAL AND NURSING HOME BENEFITS ASSOCIATION LTD. 57 ITR 31 3 (SC) & GENERAL INSURANCE CORPORATION OF INDIA VS. CIT 240 ITR 139 (SC). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISIONS CITED BY THE LD. A.R. WE OBSERVE THAT LD. CIT(A) HAS COMPREHENSIVELY CONSIDERED THE PROVISIONS OF SECTIO N 44 OF THE ACT AND FIRST SCHEDULE WHICH DEAL WITH AND PROVIDE FOR THE COMPUTATION OF PROFIT OF THE BUSINESS OF INSURANCE OTHER THAN LIFE INSURANCE. THE LD. CIT(A) DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE AFTER FOLLOWING THE DECISIONS OF THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA HOSPI TAL AND NURSING HOME BENEFITS ASSOCIATION LTD. (SUPRA) AND GENERAL INSURANCE CORPORATION OF INDIA VS. CIT (SUPRA),. SI NCE THE ASSESSEE IS REGISTERED AS AN EXPORT INSURANCE COMPA NY WITH INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRD A) ACT ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 9 OF 1999 AND THEREFORE IT HAS TO DRAW UP ITS ACCOUNT S IN ACCORDANCE WITH IRDA (PREPARATION OF FINANCIAL STAT EMENTS AND AUDITOR'S REPORT OF INSURANCE COMPANIES) REGULA TIONS, 2002. SINCE THE ASSESSEE IS A GOVERNMENT COMPANY W HOSE ACCOUNTS ARE SUBJECTED TO AUDIT BY THE AUDITORS APP OINTED BY COMPTROLLER AND AUDITOR GENERAL OF INDIA, BESIDES, T HE AUDIT BY THE STAFF OF COMPTROLLER AND AUDITOR GENERAL OF IND IA. THEREFORE, WHATEVER PROFIT IS DISCLOSED IN THE P & L ACCOUNT HAS TO BE ACCEPTED BY THE AO UNLESS THE EXPENDITURE IS INADMISSIBLE UNDER THE PROVISIONS OF SECTION 30 TO 43B OF THE ACT. THE CASE OF THE ASSESSEE IS ALSO FIND SUPPORT FROM THE DECISION OF THE APEX COURT NAMELY CIT VS. CALCUTTA H OSPITAL AND NURSING HOME BENEFITS ASSOCIATION LTD. (SUPRA) W HEREIN IT HAS BEEN HELD THAT AO IS BOUND TO ACCEPT THE PROFIT AS DISCLOSED IN THE ANNUAL ACCOUNTS THAT ARE FILED BEF ORE THE REGULATORY BODY SUBJECT TO ADJUSTMENTS AS PRESCRIBE D IN CLAUSES (A), (B) AND (C) OF RULE 5 TO THE FIRST SCH EDULE. THE HONBLE SUPREME COURT IN THE CASE OF GENERAL INSURA NCE CORPORATION OF INDIA VS. CIT (SUPRA) HAS ALSO HELD T HAT ADJUSTMENT IS PERMISSIBLE QUA AN EXPENDITURE OR ALL OWANCE WHICH IS NOT PERMISSIBLE UNDER SECTION 30 TO 43B OF THE ACT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDING OF THE LD. CIT(A) AND WE AR E, THEREFORE, INCLINED TO UPHOLD THE SAME BY DISMISSI NG THE GROUND RAISED BY THE REVENUE. 16. THE ISSUE RAISED IN 3 RD GROUND OF APPEAL IS AGAINST THE DELETION OF RS.6,57,00,000/- BY THE LD. CIT(A) AS MADE B Y THE AO ON ACCOUNT OF REVISION IN THE PAY-SCALES OF THE EMPLOYEES ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 10 HAVING ACCRUED IN THE HANDS OF THE ASSESSEE IN THE CURRENT YEAR. 17. THE FACTS IN BRIEF ARE THAT THE PAY SCALES OF T HE OFFICERS AND EMPLOYEES OF THE ASSESSEE WERE DUE FROM 01.08.20 02. SUCH REVISION IN THE PAY SCALE REQUIRES THE FORMAL APPROVAL OF THE NODAL MINISTRY WHICH IS IN THE PRESENT CASE IS MINISTRY OF COMMERCE, GOVT. OF INDIA. SINCE THE ASSESSEE IS AN I NSURANCE COMPANY, THE REVISION OF PAY SCALE IS BASED UPON THE SIMILAR REVISION IN THE PAY SCALE OF LIC EMPLOYEES. THE MI NISTRY OF FINANCE HAD APPROVED THE REVISION OF PAY SCALE OF L IC EMPLOYEES IN AUGUST/SEPTEMBER 2005. SINCE THE LIC HAS BEEN GIVEN APPROVAL TO REVISE THE SCALE, IT WAS A ME RE FORMALITY TO OBTAIN THE APPROVAL OF MINISTRY OF COM MERCE WHICH WAS ULTIMATELY OBTAINED VIDE LETTER DATED 26.0 8.2006 AND WAS ON THE SAME LINES AS IN THE CASE OF LIC. TH E ASSESSEE RECOGNISED THE REVENUE AS PER ACT AND PURSUANT TO A CCOUNTING STANDARD-4 DEALING WITH THE EVENTS OCCURRING AFTER THE BALANCE SHEET DATE WHICH EXISTED OR PREVAILED ON THE BALAN CE SHEET DATE ON THE GROUND THAT PROPOSAL FOR APPROVAL TO MI NISTRY WAS FORWARDED IN DECEMBER 2005 ITSELF WAS ACTUALLY GRA NTED IN AUGUST 2006 WHICH MEANS THAT IT WAS A CONDITION PRE VAILING ON THE BALANCE SHEET DATE BUT THE SUBSEQUENT APPROVAL OF THE MINISTRY IN AUGUST 2006 WAS AN EVENT AFTER THE BALA NCE SHEET DATE. THUS THE ASSESSEE RECOGNISED THE LIABILITY OF RS.6,57,00,000/- AT THE YEAR END 31.03.2006. THE AO DISALLOWED THE CLAIMS OF THE ASSESSEE ON THE GROUND THAT PROPOSAL FOR REVISION OF PAY SCALE WAS FORWARDED TO THE GOVERNMENT OF INDIA IN DECEMBER 2005 WHICH WAS APPR OVED ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 11 ON 26.08.2006 AND THEREFORE THE PAY REVISION IN THI S CASE CANNOT BE SAID TO BE AN EVENT OCCURRING AFTER THE D ATE OF BALANCE SHEET IN ORDER TO RECOGNIZE THE LIABILITY A T THE YEAR END. ACCORDING TO THE AO, SINCE THE APPROVAL WAS GRA NTED IN THE MONTH OF AUGUST 2006 THE LIABILITY CRYSTALLIZED IN THE FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08 AND NOT IN THE CURRENT YEAR AND ACCORDINGLY THE SAM E WAS ADDED TO THE INCOME OF THE ASSESSEE. 18. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AL LOWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE DETAIL ED SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE BY OBSE RVING AND HOLDING AS UNDER: 7.3 I HAVE CONSIDERED THE FACTS OF THE CASE, THE R EASONING GIVEN BY THE AO AND THE SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT BEING A COMPANY IS REQUIRED TO DRAW UP ITS ACCOUNTS UNDER THE ACCRUAL BASIS OF ACCOUNTING BY FOLLOWING THE ACCOUNTING STA NDARDS PRESCRIBED UNDER SEC.209(3) OF THE COMPANIES ACT, 1956, R/W SECTION 211(3C) OF THE SAID ACT. THE ACCOUNTING STANDARD (AS4) THAT DE ALS WITH EVENTS OCCURRING AFTER THE BALANCE SHEET DATE IN PARA 13 R EQUIRE ADJUSTMENTS TO BE MADE TO LIABILITIES FOR EVENTS THAT OCCUR AFTER THE BALANCE SHEET DATE WHICH PROVIDE ADDITIONAL EVIDENCE TO ASSIST THE EST IMATION OF AMOUNTS RELATING TO CONDITIONS EXISTING ON THE BALANCE SHEE T DATE. IT IS ALSO A FACT THAT THE APPELLANT HAD FORWARDED THE PROPOSAL FOR R EVISION OF THE PAY- SCALES OF ITS EMPLOYEES TO THE NODAL MINISTRY IN TH E MONTH OF DECEMBER 2005 (I.E. IN THE CURRENT FINANCIAL YEAR), WHICH WAS BASED ON A SIMILAR REVISION IN THE PAY-SCALES OF THE OFFICERS AND EMPLOYEES OF LIC THAT HAD BEEN APPROVED BY THE GOVERNMENT OF INDIA IN SEP TEMBER 2005. THEREFORE, ON THE BALANCE SHEET DATE, VIZ. 31 MARCH 2006, THE PROPOSAL OF THE APPELLANT HAD ALREADY BEEN FORWARDED TO THE NOD AL MINISTRY AND WAS PENDING APPROVAL. IN PRINCIPLE, IT HAD TO GET APPRO VED ON THE BASIS OF THE APPROVAL ALREADY GRANTED BY THE GOVERNMENT OF INDIA IN THE CASE OF LIC. THE SUBSEQUENT APPROVAL IN AUGUST 2006 BY THE GOVERNMENT OF INDIA TO THE PROPOSAL SENT BY THE APPELLANT WAS AN EVENT THA T OCCURRED AFTER THE BALANCE SHEET DATE THAT REQUIRED ADJUSTMENT OF THE LIABILITY IN THE ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2006 AS IT PRO VIDED ADDITIONAL EVIDENCE INSOFAR AS THE ESTIMATION OF THE LIABILITY PAYABLE TO THE EMPLOYEES AND OFFICERS OF THE APPELLANT WAS CONCERN ED. 7.4 AS OBSERVED BY THE APEX COURT IN BHARAT EARTH M OVERS LTD. VS. CIT ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 12 (245 ITR 426) AT PAGE 431: 'THE LAW IS SETTLED - IF A BUSINESS LIABILITY HAS D EFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWE D, ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIAB ILITY........ 7.5 ON IDENTICAL FACTS, THE JURISDICTIONAL HIGH COU RT IN CIT VS. UNITED MOTORS (INDIA) LTD (181 ITR 347) HAS ALLOWED DEDUCT ION IN RESPECT OF A LIABILITY FOR WHICH PROVISION WAS MADE ON ACCOUNT O F CHANGE IN SERVICE CONDITIONS OF THE WORKMEN. IN THE SAID CASE, NEGOTI ATIONS WITH THE TRADE UNIONS RESULTED IN SETTLEMENTS IN MAY 1972/ OCTOBER 1972. THE COMPANY PAID AMOUNTS IN MAY AND JUNE 1972, WHICH WERE CLAIM ED AS A DEDUCTION BY THE COMPANY IN THE AY 1972-73 RELEVANT TO THE YEAR ENDED 31 DECEMBER 1971. THEIR LORDSHIPS AT PAGE 350, WHILE A LLOWING THE DEDUCTION OBSERVED AS FOLLOWS: 'THE ASSESSEE'S BOARD OF DIRECTORS TOOK NOTE OF THI S AND MADE A PROVISION OF A SUM OF RS. 1,00,000 IN RESPECT OF TH E IMPENDING LIABILITY THAT AROSE, PURSUANT TO THE TERMINATION, ON ACCOUNT OF THE REVISION, IN THE SERVICE CONDITIONS OF THE WORKMEN,. THIS WAS DONE IN THE MANNER OF A P RUDENT BUSINESSMAN WHO KNEW THAT THE SERVICE CONDITIONS WOULD HAVE TO BE BETTERED. THE LIABILITY WAS RIGHTLY RECOGNIZED AS HAVING ACCRUED AND IT WAS PROVIDED FO R.' 7.6 IN THE CIRCUMSTANCES, FOLLOWING THE DECISIONS O F THE HON'BLE SUPREME COURT IN BHARAT EARTH MOVERS LTD. VS. CIT ( SUPRA) AND THAT OF THE HON'BLE BOMBAY HIGH COURT IN CIT VS. UNITED MOTORS (INDIA) LTD. (SUPRA), THE LIABILITY ON ACCOUNT OF THE REVISION IN PAY- SC ALES OF EMPLOYEES HAVING GOT ACCRUED IN THE HANDS OF THE APPELLANT, THE ADDI TION OF RS.6,57,00,000/- IS HEREBY DELETED. 7.7 GROUND OF APPEAL NO. 8 IS ALLOWED. 19. THE LD. D.R. WHILE RELYING ON THE ORDER OF AO AND THE GROUNDS RAISED, SUBMITTED THAT THOUGH THE PROPOSAL WAS MOVED IN DECEMBER 2005 BUT ACTUALLY THE SAME WAS SANCTIONED BY THE GOVERNMENT OF INDIA IN AUGUST 200 6 MEANING THEREBY THAT THE LIABILITY HAS CRYSTALLIZED IN THE F.Y. 2006-07 AND NOT IN THE CURRENT YEAR AS HAS BEEN CLA IMED BY THE ASSESSEE. THE LD. D.R. SUBMITTED THAT THE WRONG APPRECIATION OF FACTS AND ERRONEOUS INTERPRETATION AND APPLICATION OF AS-4 HAD RESULTED INTO UNDERSTATEMEN T OF PROFIT ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 13 OF THE ASSESSEE AND THUS JUSTIFIED THE ADDITION MAD E BY THE AO. 20. THE LD. A.R., ON THE OTHER HAND, PRAYED BEFORE THE BENCH THAT A SUM OF RS.6,57,00,000/- WAS ARREARS OF SALAR Y AND WAGES ON THE BASIS OF PROPOSAL MOVED TO THE GOVERN MENT OF INDIA IN DECEMBER 2005 WHICH WAS FINALLY APPROVED I N AUGUST 2006. THEREFORE, FOLLOWING THE AS-4, THE LIABILITY WAS RECOGNISED IN RESPECT OF AN EVENT AFTER THE DATE OF BALANCE SHEET QUA WHICH THE CONDITIONS WERE PREVAILING AS O N THE DATE OF BALANCE SHEET. THE LD. A.R. RELIED HEAVILY ON THE ORDER OF LD. CIT(A) AND RELIED ON A SERIES OF DECISIONS NAMEL Y CIT VS. UNITED MOTORS INDIA LTD. 180 ITR 347 (BOM. HC), BH ARAT EARTH MOVERS LTD. VS. CIT (245 ITR 426) (DELHI- HC) AND HE SUBMITTED THAT THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY RELYING ON THE ABOVE DECISIONS. FINALL Y, THE LD. A.R. SUBMITTED THAT SINCE THE LIABILITY WAS ASCERTAIN ED LIABILITY AND THEREFORE SAME WAS RECOGNISED AS ACCRUED LIABIL ITY IN THE YEAR ENDED 31.03.2006 AND IN VIEW THE SAID REASONING THE ORDER OF CIT(A) SHOULD BE AFFIRMED ON THIS GROUND. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS PROVIDED FOR THE LIABILITY IN RESPECT OF REVISION IN THE PAY SCALE OF OFFICERS AND EMPLOYEES ON THE BASIS OF A PROPOSAL MOVED TO THE MINISTRY IN DECEMB ER 2005 FOR REVISION OF PAY SCALES WHICH WERE BASED UPON TH E APPROVAL OF REVISION OF PAY SCALE OF LIC EMPLOYEES IN AUGUST /SEPTEMBER 2005. IN THE CASE OF THE ASSESSEE THE PROPOSAL WAS FINALLY ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 14 APPROVED BY THE CONCERNED MINISTRY IN AUGUST 2006. THE ASSESSEE PROVIDED FOR THIS LIABILITY IN THE ACCOU NTS FOR THE YEAR ENDED 31.03.2006 ON THE GROUND THAT THE SAME WAS ASCERTAINED LIABILITY AND WAS CORRECTLY RECOGNIZED AS ACCRUED LIABILITY IN THE YEAR ENDED 31.03.2006. ACCORDING TO AS-4, THE ASSESSEE HAS TO RECOGNIZE THE LIABILITY IN RESPECT OF AN EVENT AFTER THE BALANCE SHEET DATE IF IT RELATES TO THE C ONDITION PREVAILING ON THE DATE OF BALANCE SHEET. THEREFORE, IN THE PRESENT CASE, THE REVISION OF PAY SCALE WAS PROPOSE D IN DECEMBER 2005 ON THE LINES OF REVISION OF PAY SCALE S OF LIC BY THE GOVT. OF INDIA AND THUS FINALLY WAS APPROVED IN AUGUST 2006 BY THE MINISTRY OF COMMERCE, GOVT. OF INDIA. IN OUR OPINION, THE LD. CIT(A) HAS FULLY AND COMPREHENSIVEL Y CONSIDERED THE FACTS OF THE CASE AND PASSED A VERY DETAILED AND REASONED ORDER BY HOLDING THAT THE LIABILITY PR OVIDED WAS ASCERTAINED ONE AND WAS CORRECTLY PROVIDED FOR DURI NG THE YEAR. THE CASE OF THE ASSESSEE IS ALSO SUPPORTED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. UNITED MOTORS INDIA LTD. (SUPRA) AND BHARAT EAR TH MOVERS LTD. VS. CIT (SUPRA) WHEREIN THE SIMILAR ISSUE HAS B EEN DECIDED IN FAVOUR OF THE ASSESSEE. THEREFORE, THERE IS NO REASON TO DEVIATE FROM THE FINDING OF THE LD. CIT(A) WHICH APPEARS TO BE CORRECT AS PER THE RATIO LAID DOWN IN THE ABOVE TWO DECISIONS. WE ARE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE BY DISMISSING THE GR OUND RAISED BY THE REVENUE. 22. THE ISSUE RAISED IN GROUND NO.4 IS AGAINST THE DELETION OF ADDITION OF RS.16,29,923/- BY LD. CIT(A) AS MADE BY T HE AO ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 15 ON ACCOUNT OF ISO CERTIFICATION EXPENSES BY NOT TRE ATING IT AS CAPITAL EXPENDITURE IN NATURE. 23. THE FACTS IN BRIEF ARE THAT ASSESSEE INCURRED E XPENDITURE OF RS.16,29,923/- TO OBTAIN ISO CERTIFICATION TO THE EFFECT THAT INTERNATIONAL DOCUMENTATION AND PROCESSING ARE IN L INE WITH THE TECHNICAL STANDARDS PREVAILING IN THE INDUSTRY. ACCORDING TO THE AO BY INCURRING THE EXPENDITURE ON ISO CERTI FICATION, THE ASSESSEE HAS BEEN DERIVING THE BENEFIT OF ENDUR ING NATURE AND THEREFORE HAS TO BE ALLOWED OVER A PERIOD OF TI ME AND ACCORDINGLY THE SAME WERE DISALLOWED AND ADDED TO T HE INCOME OF THE ASSESSEE. HOWEVER, DEPRECIATION WAS ALLOWED @ 25% ON THE SAID EXPENDITURE. 24. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESS EE AFTER CONSIDERING THE VARIOUS CONTENTIONS AND ARGUMENTS I N THE APPELLATE PROCEEDINGS BY OBSERVING AND HOLDING AS U NDER: 12.3 1 HAVE CONSIDERED THE ABOVE SUBMISSIONS AND T HE ARGUMENTS OF THE APPELLANT. THE ISO CERTIFICATION PROVIDES AN AF FIRMATION THAT THE INTERNAL PROCESSES THAT ARE FOLLOWED BY THE APPELLA NT ARE RELIABLE AND EFFICIENT. IN THE CIRCUMSTANCES, THE EXPENDITUR E INCURRED ON OBTAINING SUCH CERTIFICATION REPRESENTS EXPENDITURE INCURRED TOWARDS RUNNING THE BUSINESS AND IS OF REVENUE NATURE. NO C APITAL ASSET OR ANY ADVANTAGE OF AN ENDURING NATURE IN THE CAPITAL FIELD IS ACQUIRED BY THE APPELLANT. THE EXPENDITURE INCURRED IS THEREFOR E ALLOWABLE AND THE ADDITION IS DELETED. 25. THE LD. D.R. SUBMITTED BEFORE THE BENCH THAT TH E LD. CIT(A) HAS FAILED TO APPRECIATE THE CORRECT NATURE OF THE EXPENSES WHICH WERE INCURRED BY THE ASSESSEE ON PAY MENT OF FEE TO ISO CERTIFICATION, THE BENEFIT OF WHICH WOUL D ACCRUING AND FLOWING TO THE ASSESSEE OVER A PERIOD OF TIME A ND THUS THE EXPENDITURE WAS OF ENDURING NATURE. THE LD. D.R. FURTH ER CONTENDED THAT CONSIDERING ALL THESE FACTS, THE AO T REATED THE ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 16 SAME AS CAPITAL IN NATURE AND ALLOWED THE DEPRECIAT ION THEREON WHICH WAS A REASONABLE AND PLAUSIBLE TREATMENT AS A GAINST THE TREATMENT GIVEN BY THE ASSESSEE BY WRITING OFF AND CHARGING THE WHOLE AMOUNT IN THE CURRENT YEAR. THE LD. D.R. FUR THER SUBMITTED THAT THE LD. CIT(A) HAS FAILED TO APPRECI ATE THE FACTS IN PROPER PERSPECTIVE AND WRONGLY ALLOWED THE APPEA L OF THE ASSESSEE ON THIS ISSUE. THE LD. D.R. PRAYED BEFORE T HE BENCH THAT ORDER OF AO BE RESTORED ON THIS ISSUE. 26. THE LD. A.R., ON THE OTHER HAND, SUBMITTED THAT IS O CERTIFICATION FEE IS SIMILAR TO AUDIT FEE WHO ISSUE S CERTIFICATE BASED ON THE FINANCIAL STATEMENTS AND RECORDS OF TH E COMPANY. SIMILARLY WHEN A THIRD PARTY EVALUATES THE INTERNAL PROCESSING AND PROCEDURES QUA CLAIMS AND CERTIFIES IN THE INSURANCE INDUSTRY, IT PROVIDES AN AFFIRMATION TO T HE WORLD AT LARGE THAT INTERNAL PROCESSES AND PROCEDURES ARE RE LEVANT, EFFICIENT AND EFFECTIVE. IN VIEW OF THESE FACTS, THE LD. A.R. ARGUED THAT THERE IS NO CAPITAL ASSET WHICH HAS BEE N ACQUIRED OR CREATED BY INCURRING THESE EXPENSES BUT REVENUE IN NATURE AS IT ENABLES THE ASSESSEE TO CONDUCT ITS OPERATION IN MORE SEAMLESS, SMOOTH AND EFFICIENT MANNER. THE LD. A.R. WHILE RELYING HEAVILY ON THE ORDER OF LD. CIT(A) WHICH IN TURN RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF EMPIRE JUTE CO. LTD. VS. CIT 124 ITR 1 (S.C). FINALLY , THE LD. A.R. PRAYED BEFORE THE BENCH THAT LD. CIT(A)S ORDER M AY KINDLY BE AFFIRMED ON THIS ISSUE IN VIEW OF THE FAC TS OF THE CASE AND RATIO LAID DOWN BY THE APEX COURT. ITA NO.5403/M/2014 M/S. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA L TD. 17 27. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. A PERUSAL OF TH E LD. CIT(A)S ORDER REVEALS THAT THE SAME IS VERY WELL R EASONED ORDER PASSED AFTER TAKING INTO ACCOUNT ALL THE F ACTS AND LEGAL ASPECTS OF THE CASE. WE CONCUR WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR ISO CERTIFICATION IN CONNECTION WITH THE CERTIF ICATION OF PROCESSING AND PROCEDURES ADOPTED BY THE ASSESSEE T O BE IN ACCORDANCE WITH THE PREVAILING STANDARDS IN THE IND USTRY AS A WHOLE HAS NOT RESULTED INTO CREATION OF ASSETS OR ACQUIRING ANY FIXED ASSETS. WE, THEREFORE, UPHOLD THE ORDER OF LD. C IT(A) BY DISMISSING THE GROUND RAISED BY THE REVENUE. 28. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.07.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.