ACIT 8(1), MUMBAI V. CELETRONIX INDIA P. LTD, MUMBAI

ITA 5433/MUM/2009

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3692 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-03-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 30-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHA K NARANG
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3); 142(1); 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO. 5433 /MUM / 20 09 ( / ASSESSMENT YEAR : 20 03 - 04 ) ASSTT. COMMISSIONER OF INCOME TAX - 8(1), ROOM NO.210, 2ND FLOOR, AAYAKER BHAVAN, M K ROAD, MUMBAI - 400020 / VS. CELETRONIX INDIA PVT LTD, C/O JABIL CIRCUIT ( I) PVT.LTD., ARENA HOUSE, 3RD FLOOR, PLOT NO.103, ROAD NO.12, OPP TUNGA PARADISE, MAROL, MIDC, ANDHERI (E), MUMBAI - 400093 ./ PAN : AAACT7548K ( / APPELLANT ) .. ( / RESPONDENT ) CROSS - OBJECTION NO.81/MUM /2010 ARISING OUT OF I.T.A. NO. 5433 /MUM / 20 09 ( / ASSESSMENT YEAR : 20 03 - 04 ) CELETRONIX INDIA PVT LTD, / VS. ASSTT.COMMISSIONER OF INCOME TAX 8(1), MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS.RADHA K NARANG / RESPONDENT BY : S/SHRI SANJIV SHAH, SHAILESH MONANI, CHANDRESH BHANANI / DATE OF HEARING : 4.1 2016 / DATE OF PRONOUNCEME NT : 4. 2016 / O R D E R . PER RAJESH KUMAR, AM : THE APPEAL BY THE REVENUE AND CROSS - OBJECTION THERETO BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 22.7.2009 BY THE L D. CIT(A) - XIX, MUMBAI ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 2 AND RELATE TO THE ASSESSMENT YEAR 2003 - 04. SINCE ISSUE INVOLVED IN THESE CASES IS COMMON AND THEREFORE, THESE APPEALS ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE AS UNDER: ' 1. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN L A W, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - ERRED IN ALLOWING EXEMPTION U/S 10 A TO THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING EXCESS DEPRECIATION ON MOTOR CARS TO THE TUNE OF RS.23,3 7, 650/ - WITHOUT APPRECIATING THE FACTS OF THE CASE' 3. THE APPELLANT PRAYS THAT T HE ORDER OF THE C I T(A) ON THE ABOVE GROUND TO BE SET ASIDE AND THAT OF THE I T O/AC I T/DC I T BE RESTORED' 3. THE GROUND RAISED BY THE ASSESSEE IN CROSS - OBJECTION IS AS UNDER: '1. THE ID. C I T(A) HAS ERRED IN LAW AND ON THE FACTS IN UPHOLDING THE ACTION OF THE AO OF DISALLOWING A SUM OF RS.2 , 18 9, 340/ - PAID AS CONSULTANCY CHARGES TO MR. SANDEEP TONDON. 4. THE FACT OF THE CASE IN BRIEF ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE MANUFACTURING OF HEAD STACK ASSEMBLIES, HEAD GIMBLE ASSEMBLIES, MEMORY MODULES, VOICE COIL ASSEMBLY, SAMRT COIL AND FLEX CABLE ASSEMBLY. THE ASSESSE E STARTED ITS OPERATION IN JUNE, 2000 WITH CCD (CELETRON CIRCUIT DIVISION) HAVING THREE STANDARD DESIGN FACTORIES(SDF). THEREAFTER DUE TO HUGE SCOPE OF EXPORTS, THE ASSESSEE INFUSED FRESH CAPITAL INTO THE COMPANY BY ISSUING EQUITY SHARES TO CELETRONIX MAUR ITIUS LTD THEREBY THE SHARE HOLDING PATTERN OF THE ASSESSEE WAS SUBSTANTIALLY CHANGED BY MORE THAN 51 % AND THE MONEY SO INFUSED WAS USED IN SUBSTANTIAL EXPANSION OF THE CCD. THE ASSESSEE ADDED SEVEN ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 3 NEW SDF UNITS DURING THE PERIOD OF APRIL,2001 TO JUNE,2002 THEREBY INCREASING THE ANNUAL INSTALLED CAPACITY TO 25,50,000 UNITS FROM 1,20,000 UNITS. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE INSTANT YEAR ON 28.11.2003 DECLARING A LOSS OF RS.18,88,16,100 AFTER CLAIMING DEDUCTION U/S 10 A OF THE ACT OF RS. 4,10,50,367/ - IN RESPECT OF PROFIT OF CCD. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOU ND THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10A OF THE INCOME TAX ACT, 1961 OF RS .4, 10,50,367/ - IN RESPECT OF CELETRON CIRCUITS DIVISION AND VIDE QUESTIONNAIRE DATED 29.08.2005 AND 24.10.2005, THE ASSESSEE WAS ASKED TO FURNISH THE SUPPORTING DOCUMENTS I N RESPECT OF THE SAID CLAIM. THE ASSESSEE VIDE LETTER DATED 14.11.2005 SUBMITTED THAT IN THE ASSESSMENT YEAR 2002 - 03, THERE WAS A CHANGE IN THE SHAREHOLDING OF THE COMPANY BY MORE THAN 51 % . THE ASSESSEE STATED THEREIN THAT IT WAS ENTITLED TO THE BENEFIT OF SECTION 10 A IN VIEW OF RETROSPECTIVE DELETION OF PROVISIONS OF SECTION 10A(9) BY THE FINANCE ACT, 2003. THE AO REJECTED THE CLAIM OF DEDUCTION U/S 10A FOR TWO REASONS WHICH ARE INDEPENDENT OF EACH OTHER. FIRSTLY ON THE GROUND THAT THERE WAS A CHANGE IN SH AREHOLDING PATTERN OF THE COMPANY DURING THE ASSESSMENT YEAR 2002 - 03 OF MORE THAN 51 % OF THE ASSESSEE COMPANY TO THE NEW INVESTOR WHICH IS IN VIOLATION OF PROVISIONS OF SECTION 10A(9) OF THE ACT AND SECONDLY THAT IT HAS NOT ESTABLISHED ANY NEW UNIT BUT RE - STRUCTURED THE EXITING BUSINESS OF THE ASSESSEE BY REJECTING THE CONTENTION OF THE ASSESSEE THAT DURING THE YEAR THE ASSESSEE UNDERTOOK SUBSTANTIAL EXPANSION OF THE SAID UNIT. THE AO FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT AT AN AMOUNT OF RS.13,80,36,567/ - BY MAKING VARIOUS DISALLOWANCES INCLUDING REJECTION OF CLAIM U/S 10 A OF THE ACT. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 4 PREFERRED AN APPEAL BEFORE THE LD . C I T(A) WHO DELETED THE ADDITION MADE BY THE AO U/S 10 A BY OBSERVING AS UNDER: '6.1 I HAVE EXAMINED THE SUBMISSIONS AND THE ARGUMENTS PUT FORTH BY THE APPELLANT 6.1.1 DELETION OF SUB - SECTION 9 TO SECTION 10 A OF THE ACT IS RETROSPECTIVE IN NATURE. THE APPELLANT HAS ARGUED THAT DELETION OF SUB - SECTION 9 TO SECTION 10 A OF THE ACT BY FINANCE ACT 2003 WITH EFFECT FROM AY 2004 - 05 IS TO BE TREATED AS RETROSPECTIVE IN NATURE AND CONSEQUENTLY THE AFORESAID SUB - SECTION WAS NOT ON THE STATUTE FOR THE YEAR UNDER CONSIDERATION AND THEREFORE CCD WAS NEVER D ISENTITLED TO CLAIM DEDUCTION UNDER SECTION 10A OF THE ACT FOR AY 2003 - 04. I AGREE WITH THE CONTENTION OF THE APPELLANT THAT ONCE A PROVISION IS OMITTED FROM THE STATUTE/ IT SHOULD BE CONSIDERED AS IF SUCH PROVISION NEVER EXISTED THIS CONTENTION IS ALSO ACCEPTED BY THE HON'BLE SUPREME COURT IN THE DECISIONS RENDERED IN THE CASES OF KOLHAPUR CANESUGAR WORKS LTD. AND ANOTHER, APPELLANTS V. UNION OF INDIA AND OTHERS (2 SCC 536) AND GENERAL FINANCE CO AND ANOTHER V /S ACIT(257 ITR 338) I HAVE ALSO CONSIDERED THE DECISION OF HON'B L E BANGALORE TRIBUNAL IN THE CASE OF GE THERMOMETRICS INDIA P LTD (ITA 257 AND 258JBANGJ08) CITED BY THE APPELLANT IN SUPPORT OF ITS ABOVE ARGUMENT. I FIND THAT THE CASE OF THE APPELLANT IS COVERED BY THE AFORESAID BANGALORE TRIBUNAL DECISION SINCE THE PROVISION OF SUB- SECTION 9 TO SECTION 10B AND SUB - SECTION 9 TO SECTION 10A ARE IDENTICAL. IN VIEW OF THE ABOVE DISCUSSIONS , IT IS HELD THAT DELETION OF SUB- SECTION 9 TO SECTION L 10A OF THE ACT BY FINANCE ACT 2003 WITH EFFECT FROM AY 2004 - 05 IS TO BE TREATED AS RETROSPECTIVE IN NATURE. CONSEQUENTLY THE AFORESAID SUB - SECTION CANNOT BE SAID TO HAVE EXISTED ON THE STATUTE FOR THE YEAR UNDER CONSIDERATION AND THEREFORE DISENTITLED TO CLAIM DEDUCTION UNDER SECTION 10A OF THE ACT FOR A Y - 2 003 - 04' 5. AGGRIEVED BY THE DECISION OF THE LD.CIT(A) , THE REVENUE IS IN APPEAL BEFORE US. THE L D. DR WHILE RELYING UPON THE ORDER OF AO VEHEMENTLY ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 5 SUBMITTED BEFORE US THAT THE PROVISIONS OF SECTION 10 A SUB - SECTION 9 OF THE ACT WERE OMITTED FR OM THE STATUTE BOOK WITH EFFECT FROM 1.4.2004 BY THE FINANCE ACT, 2003 AND THEREFORE WAS NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. AY 2003 - 04 AS THE SAID DELETION WAS NOT RETROSPECTIVE BUT IT WAS PROSPECTIVE IN NATURE. EVEN ON MERITS T HE LD . DR ARGUED THAT THE ASSESSEE WAS NOT OTHERWISE ELIGIBLE TO CLAIM DEDUCTION U / S 10A OF THE ACT AS NO NEW INDUSTRIAL UNIT CAME INTO EXISTENCE AND IT WAS ONLY RECONSTRUCTION OF THE OLD UNIT. THE LD . DR ULTIMATELY PRAYED THAT THE ORDER OF THE A O BE UPHEL D BY SETTING ASIDE THE ORDER OF THE L D.CIT(A). 6. ON THE CONTRARY, THE L D.AR SUBMITTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U / S 10A(9) OF THE ACT IN THE RETURN OF INCOME WHICH WAS ACCOMPANIED BY THE AUDITOR REPORT IN FORM NO.56F GIVING DETAILS AND CO MPUTATION OF DEDUCTION U /S 10A AND ALSO APPENDED A NOTE TO THE EFFECT THAT THE ASSESSEE HAD EMBARKED UPON THE SUBSTANTIAL EXPANSIONS IN CELETRON CIRCUITS DIVISION DURING THE PERIOD FROM JULY 2001 TO JUNE 2002 BY INVESTING RS.1304.63 LACS IN THE ADDITIONAL PLANT AND MACHINERY IN CCD BY ADDING 7 NEW STANDARD DESIGN FACTORIES(SDF) AND FOR THE SAID EXPANSION A NEW (MODIFIED) LETTER OF PERMISSION DATED 4.12.2002 WAS OBTAINED FROM THE DEVELOPMENT COMMISSIONER, SANTACRUZ ELECTRONICS EXPORTS PROCESSING ZONE (SEEPZ) , MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA. THE ID.AR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 10A(9) WERE OMITTED WITH EFFECT FROM 1.4.2004 WITH EFFECT FROM THE ASSESSMENT YEAR 2004 - 05. IT WAS ARGUED BEFORE US THAT THE SAID OMISSION WAS RETROSPECTIVE IN NATURE AND NOT PROSPECTIVE AS IF THE SAID HARSH PROVISIONS NEVER EXISTED IN THE STATUTE BOOK. IN SUPPORT OF HIS CONTENTION, THE L D. AR DREW OUR ATTENTION TO THE SPEECH OF HON'BLE FINANCE MINISTER AND MEMORANDUM EXPLAINING THE PROVIS IONS OF FINANCE BILL 2003 FOR PROPER UNDERSTANDING OF THE INTENTION OF THE LEGISLATURE BEHIND THE ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 6 DELETION OF THE PROVISIONS OF SECOND 10A(9) OF THE ACT. THE L D. AR ALSO DREW OUR ATTENTION TO CBDT CIRCULAR NO.7/2003 DATED 5.9.2003 WHICH PR OVIDES FOR ALLOWING DEDUCTION UNDER SECTIONS 10A AND 10B TO THE RESULTING ENTITY IN THE CASE OF AMALGAMATION OR DEMERGER. THE L D. AR SUBMITTED BEFORE US THE PURPOSE BEHIND THE OMISSION OF SECTION 10A(9) WHICH IS DIFFERENT FROM THE REPEALING OF SECTION FROM THE STATUTE. THUS THE SAID SECTION 10A(9) HAS BEEN OMITTED BY THE FINANCE ACT 2003 WITHOUT ANY SAVING CLAUSE AND IT IS NOT A CASE OF REPEAL. THE L D. COUNSEL FURTHER SUBMITTED THAT THE CASE OF REPEAL HAS BEEN DEALT WITH IN SECTION 6 OF GENERAL PROVISION OF ACT, 1987 AND THUS THE OMISSION OF SECTION 10A(9) HAD RETROSPECTIVE APPLICATION. IN SUPPORT OF HIS ARGUMENTS THE L D. COUNSEL REFERRED AND RELIED UPON THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF C IT V / S M / S GE THERMOMETRICS IND IA P LTD IN ITA NO. 876 OF 200 8 C/W ITA NO. 877 OF 200 8 DATED 25.11.2014, WHEREIN IT HAS BEEN HELD BY THE HON'BLE COURTS THAT WHILE OMITTING THE SECTION 10B(9) WHICH IS SIMILAR TO SECTION 10 A. THERE IS NO SAVING CLAUSE AND PROVISIONS INTRODUCED BY WAY OF AME NDMENT, AND THEREFORE, ONCE THE SAID SECTION IS OMITTED FROM THE STATUTE BOOK THE RESULT IS THAT IT NEVER EXISTED ON THE STATUTE AND THEREFORE THE A O WAS NOT JUSTIFIED IN TAKING NOTE OF THE PROVISIONS WHICH ARE NOT IN STATUTE AND DENYING THE BENEFIT TO THE ASSESSEE. THE COURT FURTHER HELD THAT THE PURPOSE OF OMISSIONS IS TO EXTEND THE BENEFIT U / S 10 B OF THE ACT IRRESPECTIVE OF THE FACTS WHETHER DURING THE PERIOD TO WHICH THEY ARE ENTITLED TO BENEFIT, THE OWNERSHIP WITH THE ORIGINAL ASSESSEE OR TO THE TRANSF EREE OR TO THE OTHER PERSONS. THE L D. COUNSEL REFERRED SERIES OF THE JUDGMENTS IN SUPPORT OF HIS ARGUMENT NAMELY M / S RAYALA CORPORATION (P) LTD. & ORS V / S DIRECTOR OF ENFORCEMENT, (1969)(SC2)GJX - 533 - SC) (SC), IN THE CASE OF KOLHAPUR CANESUGAR WORKS LTD. A ND ANOTHER V. UNION OF INDIA AND OTHERS (2 SCC 536) AND GENERAL FINANCE CO . AND ANOTHER V /S ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 7 ACIT (257 ITR 338)(SC), K P VARGHESE VIS ITO (131 ITR 597) (SC), ALLIED MOTORS (P) LTD VIS CIT (224 ITR 677)(SC), CIT V / S PODAR CEMENT PVT.LTD AND OTHERS (226 ITR 625)(SC), CIT V / S ALOM EXTRUSIONS LTD (319 ITR 306) (SC), TEXTILE MACHINER CORPORATION LTD VIS CIT (107 ITR 195 (SC), CIT V / S INDIAN ALUMINUM CO.LTD. (108 ITR 367) (SC) AND ITO V / S DCM SOFT (P) LTD (115 TTJ 469) (CHENNAI TRIBUNAL). 7. WE HAVE CONSI DERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL PLACED BEFORE US AND ALSO VARIOUS CASE LAWS REFERRED TO BY BOTH THE PARTIES. IN THE CASE OF ASSESSEE THE UNDISPUTED FACTS ARE THAT THE ASSESSEE ISSUED A 29952000 EQUITY SHARES TO CELETRONIX MAUR ITIUS LTD RESULTING INTO A CHANGE IN THE SHAREHOLDING PATTERN OF THE ASSESSEE BY MORE THAN 51 % WITHIN THE MEANING OF EXPLANATION 1 TO SECTION 10A(9) OF THE ACT. PRIOR TO THAT THE APPELLANT WAS HAVING PAID UP CAPITAL OF RS.2000 / - DIVIDED INTO 200 SHARES OF R S .10 EACH WHICH WERE HELD BY MR. M L TONDON AND HIS FAMILY MEMBERS. THE CCD HAVING THREE SDF BRIEF DESCRIPTION AND IT WAS IN FREE TRADE ZONE WITHIN THE SECTION 10A(2) OF THE ACT. NOW, THE ISSUE BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION U / 10A OF THE ACT DESPITE THE FACT THAT A CHANGE OF MORE THAN 50% OF THE SHAREHOLDING HAD TAKEN PLACE IN THE AY - 2002 - 03. EVEN ON MERIT THE ASSESSEE'S AR ARGUED THAT THE APPELLANT UNDERTOOK SUBSTANTIAL EXPANSION BY ADDING OF SDF BY SPENDING RS.1307/ - LAKHS O N THE ADDITIONAL PLANT AND MACHINERY THEREBY INCREASING THE INSTALLED CAPACITY TO 25,50,000 UNITS FROM 1,20,000 AND ALSO NEW PRODUCTS WERE INTRODUCED . SO, FIRST WE WILL DEAL WITH THE LEGAL ISSUE AS RAISED BY THE L D. AR THAT THE PROVISIONS OF SECTION 10A(9) AS DELETED BY THE FINANCE ACT, 2003 IS RETROSPECTIVE IN NATURE EFFECTED FROM 2001 - 02 WHEN THE SAID PROVISION OF SECTION 10A(9) WAS INSERTED IN THE ACT. THE SUB - CLAUSE (9) TO SECTION 10 A PROVIDES THAT IN CASE OF OWNERSHIP OR BENEFIT INTEREST IN THE UNDERTAKING IS TRANSFERRED BY ANY MEANS, THE DEDUCTION U / S (1) SHALL NOT ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 8 BE ALLOWED TO THE ASSESSEE FOR THE AY 2001 - 02 RELEVANT TO SUCH PREVIOUS YEAR AND THE SUBSEQUENT YEARS. THE PURPOSES AND INTENTION FO R WHICH THE SECTION WAS BROUGHT ON THE STATUTE HAS BEEN CLARIFIED BY CBDT IN ITS CIRCULAR NO.8/2000 DATED 27.8.2002 WHICH IS AS UNDER: - '19.6 SUB - SECTION (9) OF SECTION 10A AND SUB - SECTION (9) OF SECTION 10B PROVIDE THAT NO DEDUCTION UNDER THOSE SECTION S SHALL BE AVAILABLE WHERE DURING ANY PREVIOUS YEAR THE OWNERSHIP OR THE BENEFICIAL INTEREST IN THE UNDERTAKING IS TRANSFERRED BY ANY MEANS. 19.7 THE ABOVE PROVISION WAS INTRODUCED BY THE FINANCE ACT 2000 TO PREVENT TRADING IN INCENTIVES BY SHELL COMPA NIES FORMED ONLY FOR THAT PURPOSE. HOWEVER , THE ABOVE PROVISION WAS NOT INTENDED TO BRING WITHIN ITS PURVIEW CASES OF GENUINE BUSINESS REORGANIZATION WHILE MAINTAINING THE MAJOR PORTION OF OWNERSHIP OR BENEFICIAL INTEREST WITH THE SAME PERSONS WHO WERE THE OWNERS OF THE BUSINESS BEFORE SUCH REORGANIZATION . ' THUS, THE ABOVE CIRCULAR CLEARLY BRINGS OUT THE PURPOSE OF SUB - SECTION 9 TO SECTION 10A , WHICH WAS TO CURB THE TRADING OF INCENTIVES BY SHELL COMPANIES, FORMED ONLY FOR THAT PURPOSE. THE OBJECT WAS T O DISCOURAGE UNSCRUPULOUS SHOPPING OF EOUS AND STPS AND NOT TO DISCOURAGE GENUINE BUSINESS RE - ORGANIZATIONS , AMALGAMATION, MERGER ETC. IN THE PRESENT CASE, BEFORE US THERE WAS A CHANGE IN THE SHAREHOLDING PATTERN OF THE ASSESSEE UNDER WHICH MORE THAN 51 PE RCENT OF THE SHARES WERE ACQUIRED BY A NEW INVESTOR NAMELY CELETRONIX MAURITIUS LTD (CML) IN THE FINANCIAL YEAR 2001 - 02 RELEVANT TO THE ASSESSMENT YEAR 2002 - 03 AND THE SAID NEW INVESTOR BECAME THE MAJORITY SHARE HOLDER IN THE ASSESSEE. SUCH A CHANGE WAS BR OUGHT ABOUT IN ORDER TO. BRING IN MORE FUNDS SO THAT THE EXPANSION OF THE ASSESSEE'S BUSINESS COULD BE FINANCED AND THUS CONSTITUTED A GENUINE BUSINESS REORGANIZATION RESULTING FROM CHANGE IN THE PATTERN OF SHAREHOLDER SOLELY UNDERTAKING FOR THE PUR POSE OF BUSINESS EXPANSIONS OF THE ASSESSEE AND NOT AS BROUGHT OUT IN THE CIRCULAR NO.8/2000 DATED 27.8.2002 AND THUS, WAS CONTRARY TO THE CB D T ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 9 CIRCULAR STATED ABOVE HAS BEEN OMITTED FROM THE STATUTE BY THE FINANCE ACT, 2003 W.E.F. L.4.2004 IN OR DER TO UNDERSTAND THE INTENTION AND PURPOSE BEHIND THE OMISSION AND DELETION OF THE SAID SUB - SECTION 9 IT IS NECESSARY TO REFER TO THE BUDGET SPEECH OF THE FINANCE MINISTER AND MEMORANDUM EXPLAINING THE PROVISIONS OF THE ACT. WHILE OMITTING THE SUB - SECTION 9 OF SECTION 10 A, THE FINANCE MINISTER AT THE TIME OF HER SPEECH PROPOSED THAT THE SAID PROVISION WAS ILLOGICAL AND IRRELEVANT THE RELEVANT SPEECH OF THE FINANCE MINISTER IS REPRODUCED BELOW: ''INFORMATION TECHNOLOGY (IT) 102. IT IS INDIA'S SHOWPIECE SUCCESS STORY. WE HAVE TO NOT JUST MAINTAIN ITS MOMENTUM OF GROWTH/ BUT CONTINUOUSLY ENCOURAGE IT. THEREFORE , IT IS PROPOSED THAT THE CONCESSIONS EXTENDED TO I. T. UNDER SECTION 10A AND 10B OF THE INCOME - TAX ACT WILL CONTINUE AS ORIGINALLY ENVISAGED AS PER LAW, SUCH COMPANIES , AS ARE CURRENTLY COVERED BY THESE TAX EXEMPTION LOSE THE BENEFITS UPON CHANGE IN THEIR OWNERSHIP OR SHAREHOLDING. THIS IS NOT LOGICAL. I AM , THEREFORE , REMOVING THESE RESTRICTIONS ; THE BENEFIT OF SUCH TAX EXEMPTIONS WILL REMAIN EVEN IN THE CASE OF AMALGAMATION OR DE - MERGER. ' THUS, IT IS CLEAR FROM THE ABOVE THAT THE RESTRICTION PROVIDED IN SUB- SECTION 9 OF SECTION 10 A WERE REMOVED SO THAT THE BENEFIT OF TAX EXEMPT U / S 10A COULD BE EXTENDED EVEN IN THE CASE OF AMALGAMATION OR DEMERGE R. BESIDES, IT IS ESTABLISHED AND SETTLED PRINCIPLE NOW THAT WHILE INTERPRETING THE STATUTORY PROVISIONS AND THE OBJECTS AND PURPOSES OF THE LEGISLATION FOR WHICH ANY PROVISIONS HAVE BEEN ENACTED, SPEECH MADE BY THE FINANCE MINISTER AND MEMORANDUM EXPLAINI NG THE SAID PROVISIONS FOR INTERPRETATIONS OF THE BILL CAN CERTAINLY BE REFERRED TO AND RELIED UPON. THIS PRINCIPLE HAS BEEN REAFFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF K P VARGHESE VIS IT O AND OTHERS (1981) 131 ITR 597 (SC) AND BY KERALA HIGH C OURT IN KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION L TD V / S CIT (2003) 259 ITR 51 (KER), IN THE LIGHT OF THE OMISSION OF SUBSECTION 9 OF SECTION 10A IN THIS YEAR, THE OMISSION IS HELD TO BE ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 10 RETROSPECTIVE IN EFFECT TO THE EXTENT OF CHANGE IN THE OWNERSHIP IN THE ASSESSMENT YEAR 2002 - 03 WHEN SUCH PROVISION WAS MADE APPLICABLE WITH EFFECT FROM AY 2004 - 05. SUB - SECTION 9 OF SECTION 10A HAS BEEN OMITTED WITHOUT HAVING ANY SAVING CLAUSE AND IT IS NOT A CASE OF REPEAL WHICH IS DIFFERENT FRO M OMISSION AND THE EFFECT OF REPEAL HAS BEEN DEALT IN THE SECTION 6 OF GENERAL PROVISIONS OF THE ACT IN THE FOLLOWING MANNER: ''SECTION 6 IN THE GENERAL CLAUSES ACT; 1897 6 EFFECT OF REPEAL. - WHERE THIS AC T OR ANY 1 [CENTRAL A CT] OR REGULATION MADE AFTE R THE COMMENCEMENT OF THIS ACT REPEALS ANY ENACTMENT HITHERTO MADE OR HEREAFTER TO BE MADE, THEN, UNLESS A DIFFERENT INTENTION APPEARS, THE REPEAL SHALL NOT - A ) REVIVE ANYTHING NOT IN FORCE OR EXISTING AT THE TIME AT WHICH THE REPEAL TAKES EFFECT; OR B ) A FFECT THE PREVIOUS OPERATION OF ANY ENA CTM ENT SO REPEALED OR ANYTHING DULY DONE OR SUFFERED THERE UNDER; OR (F) AFFECT ANY RIGH T PRIVILEGE, OBLIGATION OR LIABILITY ACQUIRED, ACCRUED OR INCURRED UNDER ANY ENACTMENT SO REPEALED,' OR ( C ) AFFECT ANY PENALT Y, FORFEITURE OR PUNISHMENT INCURRED IN RESPECT OF ANY OFFENCE COMMITTED AGAINST ANY ENACTMENT SO REPEALED,' OR D) AFFECT ANY INVESTIGATION, LEGAL PROCEEDING OR REMEDY IN RESPECT OF ANY SUCH RIGH T PRIVILEGE, OBLIGATION, LIABILITY, PENALTY, FORFEITURE O R PUNISHMENT AS AFORESAID, AND ANY SUCH INVESTIGATION, LEGAL PROCEEDING OR REMEDY MAY BE INSTITUTED, CONTINUED OR ENFORCED, AND ANY SUCH PENALTY, FORFEITURE OR PUNISHMENT MAY BE IMPOSED AS IF THE REPEALING ACT OR REGULATION HAD NOT BEEN PASSED. THE REST RICTIVE CONDITION AS GIVEN IN SECTION 6 (SUPRA) DO NOT APPLY TO THE CASE OF OMISSION OR DELETION OF A PROVISION FROM THE STATUTE WHICH HAS BEEN EXPLAINED BY THE HON'BLE SUPREME COURT IN THE CASE OF M / S RAYALA ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 11 CORPORATION (P) LTD.(SUPRA) AND IN THE CASE OF M R PRATAP V / S DIRECTOR OF ENFORCEMENT, NEW DELHI (1969) (2) SCC 412, WHEREIN IT HAS BEEN HELD THAT SECTION 6 OF GENERAL CLAUSES ACT, 1897, APPLIED TO 'REPEALS' AND NOT TO THE 'OMISSION'. IT FURTHER REITERATED BY THE HON'BLE SUPREME COURT IN THE CASE OF KO LHAPUR CANE SUGAR WORKS LTD VIS UNION OF INDIA (2002) 2 SCC 536. THESE JUDGEMENTS OF THE CONSTITUTIONAL BENCH HAS BEEN FOLLOWED BY THE HON'BLE SUPREME COURT IN GENERAL FINANCE CO.LTD V / S ACIT (2002) 257 ITR 338 (SE). FROM THE ABOVE PROPOSITION OF LAW, IT I S CLEAR THAT IF A PROVISION IN A STATUE IS UNCONDITIONALLY OMITTED WITHOUT ANY SAVING CLAUSE IN FAVOUR OF THE PENDING PROCEEDINGS THEN ALL THE PENDING ACTION ON THE DATE OF OMISSION WILL COME TO AN END. THUS, ONCE THE PROVISIONS OF SUB - SECTION 9 OF SECTION 10 A HAVE BEEN OMITTED, THEN IT CAN BE SAFELY INFERRED THAT SUCH AN OMISSION WILL BE APPLICABLE WHENEVER OMITTED SECTION COMES INTO PLAY. THE BANGALORE BENCH OF THE TRIBUNAL IN M / S GE THERMO MATRIX INDIA P L (ITA NO.S257 & 258/BANG/2008 (AY - 2003 - 04 - 2004 - 0 5) DT.30.5.2008 AFTER RELYING ON THE AFORESAID JUDGMENT OF CONSTITUTIONAL BENCH OF THE HON'BLE SUPREME COURT, HAS HELD THAT SUB- SECTION 9 OF THE SECTION 10B (WHICH IS A SIMILAR TO SECTION 10A ), SHOULD BE READ AS THOUGH IT NEVER HAD SUB - SECTION 9 IN ALL TH E PROCEEDINGS UNDER THE ACT. THE RELEVANT PARA 11 OF THE SAID DECISION IS REPRODUCED BELOW: '11. THEREFORE, EVEN THOUGH THE FINANCE ACT, 2003 MENTIONS THAT THE AFORESAID SUB - SECTION (9) IS OMITTED WITH EFFECT FROM 1 - 4 - 2004; IN VIEW OF THE FACT THAT THE S AID OMISSION IS DIFFERENT FROM REPEAL, THE SAVING CLAUSE PROVIDED IN SECTION 6; OF THE GENERAL CLAUSES, ACT IS NOT APPLICABLE. THEREFORE, L D.CIT(A) IS NOT, JUSTIFIED IN NOT APPRECIATING THE FACT THAT SECTION 10B SHOULD BE READ AS THOUGH IT NEVER HAD THE SA ID SUB - SECTION (9) IN IT IN ALL PROCEEDINGS UNDER THE ACT. AS THE APPELLATE PROCEEDINGS ARE THE CONTINUATION OF THE ASSESSMENT PROCEEDINGS, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD (187 ITR 688) EVEN FOR ASSESSMENT YEAR 2003 - 04 THE AFORESAID SECTION 10 B HAS TO BE READ WITHOUT THE IMPUGNED SUB - SECTION 10 B HAS TO BE READ WITHOUT THE ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 12 IMPUGNED SUB - SECTION (9). THEREFORE, WE FIND MUCH FORCE IN THE STAND TAKEN BY THE ASSESSEE IN VIEW OF THE DECISION OF THE SUPREME COURT. E VEN ON THIS ISSUE, THE ASSESSEE IS BOUND TO SUCCEED. IT IS ORDERED ACCORDINGLY' IN THE CASE OF ALLIED MOTORS (P) LTD (SUPRA), IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT RULE OF REASONABLE CONSTRUCTION MUST BE APPLIED WHILE CONSTRUING THE STATUTE . THE PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISIONS WORKABLE, A PROVISO WHICH SUPPLIED AN OBVIOUS OMISSION IN THE SECTION AND IS REQUIRE TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETATION, R EQUIRED TO BE TREATED AS RETROSPECTIVE IN OPERATION, SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTION AS A WHOLE. IN THE CASE OF A LOM EXTRUSIONS LTD (SUPRA), THE SUPREME COURT HAS HELD THAT WHEN THE PROVISO IN SECTION HAS BEEN INSERTED TO RE MEDY UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WORKABLE, THE PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION THEREIN IS REQUIRED TO BE READ RETROSPECTIVELY IN OPERATION, PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. IN THE BACKGROUND OF THE ABOVE PROVISIONS OF LAW AND IN THE LIGHT OF THE DECISIONS OF THE HON'BLE SUPREME COURT, WE ARE OF THE CONSIDERED VIEW THAT THE OMISSION OF SUB- SECTION 9 OF SECTION 10A OF THE ACT SHALL HAVE RETROSPECTIVE EFFECT DESPITE THE FACT THAT IN THE LANGUAGE USED AT THE TIME OF DELETING THE SAID SUB- SECTION IT IS EXPRESSLY PROVIDED THAT THE SAME IS APPLICABLE FROM 1.4.2004 RELEVANT TO THE ASSESSMENT YEAR 2004 - 05 AND THE ASSESSEE IS ENTITLED TO BENEFIT UNDER SECTION 10A EVEN WHEN THE CHANGE IN SHARE HOLDING PATTERN OF TH E ASSESSEE HAD TAKEN PLACE IN THE YEAR 2002 - 03 OF MORE THAN 51 % . THUS, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE ON LEGAL ISSUE. 7.1. SO FAR AS THE MERIT OF THE CASE IS CONCERNED, WE FIND THAT THE ASSESSEE HAS GONE INTO SUBSTANTIAL EXPANSION OF T HE CCD UNIT DURING THE ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 13 YEAR. THE ASSESSEE HAD SUBMITTED APPLICATION FOR NEW INDUSTRIAL UNDERTAKING AT SEEPZ TO DEVELOPMENT COMMISSIONER OF SEEPZ AND THE DEVELOPMENT COMMISSIONER VIDE LETTER OF PERMISSION DATED 21.6.2000 TO CELETRON CIRCUITS DIVISION FOR MA NUFACTURE OF AN ITEM SPECIFIED IN LETTER OF PERMISSION (LOP). THE ID AR SUBMITTED THAT CELETRON CIRCUITS DIVISION HAS FOLLOWING DISTINCTIVE FEATURES AND CHARACTERISTICS IN ORDER TO BE QUALIFY AND ELIGIBLE AS NEW INDUSTRIAL UNDERTAKING: '1. OPERATED UNDER THE SEPARATE LOP ISSUED BY THE DEVELOPMENT COMMISSIONER, SEEPZ; 2. OPERATED FROM SEPARATE AND DEDICATED STANDARD DESIGN FACTORY UNITS (SDF) 3. MANUFACTURE OF MEMORY MODULES, A COMPLETELY DIFFERENT PRODUCT THAN THE EXISTING HAS; 4. HAS SEPARATE BAN K ACCOUNT; 5. HAS SEPARATE SALES TAX REGISTRATION NUMBER 6. HAD SUBMITTED SEPARATE LETTER OF UNDERTAKING (LEGAL AGREEMENT) TO DEVELOPMENT COMMISSIONER FOR DUE PERFORMANCE OF ITS OBLIGATION UNDER EXIM POLICY; 7. HAD GIVEN IS OWN B - 17 BOND TO CUSTOMS AUTHORITIES FOR DUE PERFORMANCE OF ITS OBLIGATIONS UNDER CUSTOMS ACT; 8. OWN WORK FORCE, PROVIDED BY CONTRACTORS ENGAGED BY IT'. 7.2. THE FACT OF THE SUBSTANTIAL EXPANSION OF THE UNIT OF THE ASSESSEE IS ALSO APPARENT FROM THE FACT THAT IN JUNE 2000 ( CCD) HAD COMMENCED OPERATION WITH STANDARD DECISION UNIT (SDF) WHICH WERE GONE UP TO 10 BY ADDING 7 NEW SDF UNIT FROM 1.4.2001 TO JUNE 2002. THE PRODUCT LINE ALSO CHANGED BECAUSE THE ASSESSEE STARTED MANUFACTURE OF SET UP BOX OF AUDIO AMPLIFIER AND THE MEM ORY MODULES FOR WHICH THE ASSESSEE INSTALLED ADDITIONAL PLANT AND MACHINERY WORTH RS.1304.63 LAKHS DURING THE ABOVE ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 14 PERIOD THEREBY INCREASING THE INSTALLED CAPACITY TO 25,50,000/ - FROM ORIGINAL 120000 UNITS. BESIDES SEVERAL MAJOR CHANGES IN THE MANUFACTURI NG PROCESS WERE EFFECTED. IN THIS BACKGROUND WE FIND NO INFIRMITY IN THE ORDER OF ID. C!T(A) THAT THE SUBSTANTIAL EXPANSION IN THE BUSINESS OF THE ASSESSEE ACCOUNT TO ESTABLISHMENT OF NEW UNDERTAKING. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BY THE DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD (SUPRA), WHEREIN IT HAS BEEN HELD THAT NEW ACTIVITY HAS BEEN LAUNCHED BY THE ASSESSEE BY ESTABLISHING A NEW PLANT AND MACHINERY BY INVESTING SUBSTANTIAL FUNDS MAY PRODUCE THE SAME COMMODITIES OF THE OLD BUSINESS OR IT MAY PRODUCE SOME OTHER DISTINCT MARKETABLE PRODUCTS, EVEN COMMODITIES WHICH MAY FEED THE OLD BUSINESS. THUS, IN VIEW OF THIS FACT, THE ASSESSEE HAVING GONE INTO THE SUBSTANTIAL EXPANSION BY ADDING 7 MORE SDF U NITS EMPLOYING DIFFERENT MANUFACTURING PROCESS AND PRODUCING DIFFERENT ARTICLES IS CERTAINLY A NEW INDUSTRIAL UNIT WHICH QUALIFY FOR DEDUCTION U/S 10 A. WE, THEREFORE UPHOLD THE ORDER OF ID. C!T(A) ON THIS ISSUE ALSO BY DISMISSING THE GROUND RAISED IN THE A PPEAL OF THE REVENUE. 8. IN THE RESULT, THE REVENUE'S APPEAL IS DISMISSED. 9. THE ISSUE RAISED IN THE SECOND GROUND BY THE REVENUE RELATES TO ALLOWING EXCESS DEPRECIATION ON MOTOR CARS TO THE TUNE OF RS.23,37,650/- ON WRITTEN DOWN VALUE BY THE ID. C! T(A). 10. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEPRECIATION AT THE RATE OF 50% OF THE MOTOR ON WDV OF RS.77,92,167/ - . THE AO DURING THE SCRUTINY PROCEEDINGS OBSERVED THAT THE ASSESSEE WAS NOT ENTITLED FOR DEPRECIATION AT THE RATE OF 50 % , AND THEREFORE, ADDED BACK EXCESS DEPRECIATION BY REJECTING THE CONTENTION OF THE ASSESSEE THAT THE 50% ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 15 DEPRECIATION IS ALLOWABLE ON THE COMMERCIAL VEHICLE ACQUIRED OR PURCHASED ON OR AFTER 1.4.2001 AND BUT BEFORE 1.4.2002. 11. THE LD . AR OF THE ASSESS EE PLACED BEFORE US A COPY OF DECISION RENDERED BY CO - ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.1560/MUM/2006 (AY - 2002 - 03) DATED 24.12.2012 AND SUBMITTED THAT THE PRESENT ISSUE OF THE ASSESSEE'S IS COVERED BY THE SAID DECISION OF THE TRIBUNAL. THUS HE SUBMITTED THAT IN VIEW OF THE ABOVE DECISION, THIS ISSUE ALSO BE DECIDED IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE ON THIS ISSUE. 12. THE LD . DR REASONABLY AND FAIRLY APPEARED TO BE AGREED WITH THE SUBMIS SIONS OF THE LD .AR. 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03 (SUPR A). THE RELEVANT PARAGRAPH 26 IS REPRODUCED BELOW : 26. AT THE OUTSET IT WAS FAIRLY ADMITTED THAT THIS ISSUE WAS DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MR. SHAH RUKH KHAN IN ITXA NO.1206 OF 2010 DATED ITA NOS.1284 AND 15 60 OF 2006 CELETRONIX INDIA PVT LTD MUMBAI 29.08.2011. CONSIDERING THE EXTRACTS OF MOTOR VEHICLES ACT 1988 AND ITS DEFINITION AND RATES OF DEPRECIATION AS PER ENTRY NO.(III)D OF SUB ITEM NO.2 OF ITEM NO.(III) ASSESSEE IS ENTITLED FOR 50% OF THE DEPRECIATIO N ON THE MOTOR CARS PURCHASED DURING THE RELEVANT PERIOD. ACCORDINGLY THE ORDER OF THE CIT (A) IS UPHELD. REVENUE GROUND IS REJECTED. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL RENDERED IN ASSESSEE'S OWN CASE DISMISS THE GROUND OF APPEAL TAKEN BY THE REVENUE. ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 16 CROSS - OBJECTION NO 81/MUM/2010 14. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE CROSS - OBJECTION IS RESPECT TO CONFIRMATION OF DISALLOWANCE RS.21,89,340 / - PAID AS CONSULTA NCY CHARGES TO MR. SANDEE P TONDON WHO HAPPENS TO BE A SON OF SHRI MANOHARLAL TANDON, THE DIRECTOR OF THE COMPANY. 15. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF S CRUTINY PROCEEDINGS THE A O NOTICED THAT THE ASSESSEE HAD PAID A SU M OF RS.21,89,340 / - TO SON OF A D IRECTOR AS CONSULTANCY CHARGES WHICH TH E ASSESSEE FAILED TO SUBSTANTIATE WHETHER THE SAID EXPENDITURE WAS INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AS THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF SERVICES PROVIDED TO THE ASSESSEE AND ON LY PRODUCED COPIES OF INVOICES RAISING VARIOUS BILLS VIDE ITS LETTER DATED 21.10.2005. THE A O REJECTED THE SUBMISSIONS OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 16. THE LD . CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSEE B Y UPHOLDING THE ORDER OF THE A O ON THIS ISSUE BY HOLDING THAT THE ASSESSEE FAILED TO PROVE THE ADMISSIBILITY OF THE SAID CONSULTANCY FEE AND MERE DEBITING THE SAME TO THE ACCOUNT OF ASSESSEE IS NOT SUFFICIENT TO SUPPORT THE CLAIM OF THE EXPENDITURE. THE L D . C I T(A) FURTHER HELD THAT GENUINENESS OF THE EXPENSES AND NEXUS WITH THE BUSINESS NEEDS, HAVE TO BE ESTABLISHED WHICH THE ASSESSEE HAS FAILED TO DO. NO PROOF WAS BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THAT THAT THE ASSESSEE HAS ACTUALLY RECEIVED SERVI CES FROM THE SON OF DIRECTOR MR.TONDAN IN EXCHANGE OF CONSULTANCY CHARGES SO PAID. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 17 ON RECORD. WE FIND THAT THE ASSESSEE - COMPANY HAS PAID A SUM OF RS.21,89,340/ TO MR. S ANDEEP TONDON W HO IS THE SON OF DIRECTOR OF THE COMPANY CLAIMED TO BE PAID FOR VARIOUS SERVICES RENDERED BY MR. SANDEE P TONDON WHO IS A QUALIFIED ENGINEER FROM AN UNIVERSITY IN USA. IT A ALSO NOTED THAT MR. SANDEEP TONDON 'EXPLORED' DEVELOPMENT OF THE NE W PRODUCTS FOREIG N MARKET AND WAS PAID BY THE ASSESSEE FOR THE SAI D SERVICES AFTER DEDUCTION OF TDS U/S 194J OF THE ACT. IN OUR CONSIDERED VIEW THE AO HAS FAILED TO BRING ON RECORD ANY MATERIAL WHICH GOES AGAI NST THE ASSESSEE AS IN THE PRESENT CASE THE PAYMENT IS MADE AFTE R DEDUCTION OF TDS AND BILLS ISSUED BY THE RECIPIENT WERE ALSO PLACED ON RECORD IS SUFFICIENT TO PROVE THAT THE EXPENDITURES INCURRED FOR THE PURPO SES OF BUSINESS. THE AO HAS NOT FURTHER INVESTIGATED THE MATTER IN ORDER TO C OME TO A CONCLUSION THAT THE PAY MENT TO THE RELATED PARTIES WERE EXCESSIVE OR UNREASONABLY PAID U/S 40A(2)(B) OF THE ACT. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED TO BE ALLOWED THE SAID EXPENSES. ACCORDINGLY, WE ALLOW THE CROSS OBJECTION OF THE ASSESSEE. . 18. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH APRIL, 2016 29 TH APRIL, 2016 SD SD ( AMIT SHUKLA ) ( RAJESH KUMAR ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 29TH /04 /2016 . . ./ SRL , SR. PS ITA NO. 5 433/ MUM/20 09 CO NO.81/M/20 10 18 / COPY OF TH E ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI