ACIT, New Delhi V. Kelly Services India Pvt. Ltd., New Delhi

ITA 5435/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65831 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: AMIT PAH WA; HIMANSHU S SINHA
• Keywords: Business income; Bad and doubtful debts; Capital expenditure
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) SHRI U.B.S. BEDI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMEBR ITA NO.5435/DEL./2011 (ASSESSMENT YEAR : 2008-09) ACIT, CIRCLE 5 (1), VS. KELLY SERVICES INDIA PVT . LTD., NEW DELHI. 1 ST FLOOR, BUILDING NO.9, COMMUNITY CENTRE, SAKET, NEW DELHI 110 017. (PAN : AABCK6665K) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI HIMANSHU S. SINHA, & AMIT PAH WA, REVENUE BY : MS. Y. KAKKAR, DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-VIII, NEW DELHI DATED 16.09.2011. 2. THE RETURN OF INCOME WAS FILED ON 30.09.2008 DEC LARING A LOSS OF RS.1,67,49,862/-. IT WAS SUBSEQUENTLY REVISED AT T HE LOSS OF RS.6,05,32,284/-. THE ASSESSMENT WAS COMPLETED ON 16.12.2010. THE ASSESS ING OFFICER MADE CERTAIN ITA NO.5435/DEL/2011 2 DISALLOWANCES AGAINST WHICH THE ASSESSEE FILED AN A PPEAL BEFORE THE CIT (A). THE CIT (A) GRANTED THE RELIEF ON CERTAIN ISSUES AGAINS T WHICH THE REVENUE IS IN APPEAL BEFORE US. 3. THE APPELLATE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING STAFFING AND RECRUITMENT SERVICES. THE ASSESSEE COMPANY HAS ENT ERED INTO A LICENCE AGREEMENT WITH KELLY SERVICES INC., USA EFFECTIVE FROM 1 ST JANUARY, 2002 FOR AN INITIAL PERIOD OF FOUR YEARS. THIS AGREEMENT WAS AUTOMATICALLY RE NEWED FOR A SUCCESSIVE TERM OF ONE YEAR EACH UNLESS EITHER PARTY DESIRES TO TERMIN ATE THIS AGREEMENT. AS PER THIS AGREEMENT, THE ASSESSEE WAS GIVEN THE RIGHT TO UTIL IZE CERTAIN INTANGIBLES IN CARRYING ON ITS BUSINESS OPERATIONS. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONE OUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN DELETING DISALLOWING OF 25% OF TOTA L ROYALTY PAYMENT OF RS.26,34,296/- MADE BY THE AO TREATING IT AS AN INTANGIBLE ASSET AND THUS CAPITAL EXPENDITURE FOLLOWING DECISION OF SUPREME COURT IN THE CASE OF SOUTHERN SWITCHGEAR. 3. THE CIT(A) ERRED IN DELETING ADDITION OF RS.29,8 8.824/- MADE BY THE AO TOWARDS STALE CHEQUES ISSUED TO EX-EMPLOY EES REPRESENTING THE AMOUNT PAYABLE TO EX-EMPLOYEES DESPITE THE FACT THAT THOSE EX- EMPLOYEE HAVE NOT CLAIMED THE AMOUNT TILL THE PASSI NG OF THE ASSESSMENT ORDER. 4. THE CIT(A) ERRED IN DELETING DISALLOWANCE OF RS. 11,12,816/- SHOWN AS BUSINESS LOSS BY THE ASSESSEE, BUT IT IS A CTUALLY THE CLAIM OF CREDIT OF TDS WHICH THE ASSESSEE HAD TO FORGO DUE T O NON-AVAILABILITY OF TDS CERTIFICATES. ITA NO.5435/DEL/2011 3 5. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.7,49,074/- U/S 43B WITHOUT APPRECIATING THE FACT THAT PROFESSI ONAL TAX COLLECTED SHOULD FORM PART OF ITS TURNOVER AND DEDUCTION SHOU LD BE ALLOWED ONLY ON ACTUAL PAYMENT U/S 43B OF THE ACT. NOT SHOWING P ROFESSIONAL TAX IN RECEIPT AND NOT ALLOWING EXPENSES ON ACTUAL PAYMENT WOULD MAKE SECTION 43B REDUNDANT. 6. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF T HE HEARING. 4. GROUND NOS.1 & 6 ARE GENERAL IN NATURE AND DO NO T REQUIRE ANY ADJUDICATION AND THE SAME ARE DISMISSED. 5. GROUND NO.2 IS AGAINST DELETING THE ADDITION OF 25% OF ROYALTY PAYMENT OF RS.26,34,296/-. THE ASSESSING OFFICER TREATED IT A S INTANGIBLE ASSET AND BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN SWITCHGEARS LTD. VS. CIT, 232 ITR 359, 25% OF THE EXPENDITURE WAS TREATED AS CAPITAL IN NATURE BY HOLDING THAT ASSESSEE DERIVED ENDURING BENEFIT BY ACQUIRING THE RIGHTS UNDER THE AGREEMENT. AS PER TERMS OF THE LI CENCE AGREEMENT, THE ASSESSEE COMPANY WAS GRANTED NON-EXCLUSIVE AND NON-TRANSFERA BLE RIGHTS TO USE INTANGIBLES. THE ASSESSING OFFICER TREATED 25% OF THE EXPENDITUR E TOWARDS CAPITAL IN NATURE BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN SWITCHGEAR LIMITED, CITED SUPRA. THE CIT (A) GRANT ED THE RELIEF BY HOLDING AS UNDER:- 3.2.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RE CORDED BY THE LD. ITA NO.5435/DEL/2011 4 ASSESSING OFFICER. I HAVE ALSO CAREFULLY PERUSED TH E LICENSE AGREEMENT BETWEEN KELLY SERVICES INC. AND THE APPELLANT COMPA NY. ON CONSIDERATION, I FIND THAT THE APPELLANT COMPANY WA S GRANTED ONLY NON-EXCLUSIVE AND NON-TRANSFERABLE RIGHTS TO USE TH E INTANGIBLES OWNERSHIP OF WHICH WAS WITH THE LICENSOR AND CONTIN UED TO BE SO EVEN AFTER THE AGREEMENT WITH THE ASSESSEE COMPANY. I AL SO FIND THAT THE APPELLANT COMPANY WAS NOT ALLOWED TO DRAW ANY BENEF IT OF ENDURING NATURE BECAUSE THE AGREEMENT WAS FOR A LIMITED PERI OD. THE LD. COUNSELS HAVE RIGHTLY POINTED OUT THAT THE ASSESSEE COMPANY IS A SERVICE COMPANY AND ENGAGED IN THE BUSINESS OF PROV IDING STAFFING AND RECRUITMENT SERVICES ONLY, THEREFORE, THERE WAS NO ISSUE OF SETTING UP OF MANUFACTURING FACILITIES AND/OR FACTORY ETC. FURTHER, THE AMOUNT OF ROYALTY WAS DIRECTLY LINKED WITH THE TURNOVER/SA LES TO BE MADE BY THE APPELLANT COMPANY DURING THE RELEVANT FINANCIAL YEAR AND IF IN ANY OF THE YEAR THERE WERE NO SALES, NO ROYALTY WAS TO BE PAID. IN VIEW OF THE AFORESAID, I HAVE NO HESITATION IN HOLDING THAT THE PAYMENT OF ROYALTY WAS IN REVENUE FIELD AND THE AO HAS COMMITT ED AN ERROR OF JUDGMENT IN EQUATING THE FACTS OF THE PRESENT CASE WITH THE FACTS OF SOUTHERN SWITCHGEAR LTD. ACCORDINGLY, THE DISALLOWA NCE MADE BY THE LD. AO IS BEING DELETED. 6. WHILE PLEADING ON BEHALF OF THE REVENUE, THE LD. DR SUBMITTED THAT AS PER THE AGREEMENT, THE ASSESSEE WAS GRANTED NON-EXCLUSIVE A ND NON-TRANSFERABLE RIGHT FOR USING THE INTANGIBLES. SUCH RIGHTS PROVIDED IN THE AGREEMENT GAVE ASSESSEE AN ENDURING ADVANTAGE, THEREFORE, IN VIEW OF THE DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN SWITCHGEARS LTD., 25% OF THE A MOUNT HAS TO BE TREATED AS CAPITAL EXPENDITURE WHICH THE ASSESSING OFFICER HAS RIGHTLY DONE. THE CIT (A) IS NOT JUSTIFIED IN GRANTING THE RELIEF. 7. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDE R OF THE CIT (A) AND SUBMITTED THAT THE ASSESSEE DID NOT GET ANY OWNERSH IP OR PROPRIETARY RIGHTS IN THE ITA NO.5435/DEL/2011 5 INTANGIBLE IN TERMS OF THE AGREEMENT. THE AGREEMEN T WAS ONLY FOR FOUR YEARS STARTING FROM 01.01.2002. IT COULD BE RENEWED ONLY WITH THE CONSENT OF THE LESSOR. LD. AR SUBMITTED THAT IN THE ABSENCE OF TRANSFER OF ANY PROPRIETARY RIGHT, THERE CANNOT BE ANY PAYMENT OF ROYALTY WHICH COULD BE TER MED AS CAPITAL EXPENDITURE. LD. AR ALSO SUBMITTED THAT THERE WAS A KEY DIFFEREN CE BETWEEN THE NATURE OF BUSINESS OF SOUTHERN SWITCHGEAR LTD. AND THE ASSESS EE COMPANY. SOUTHERN SWITCHGEAR LTD. WAS ENGAGED IN THE BUSINESS OF MANU FACTURING OF LOW TENSION AND SWITCHGEAR, ETC. AND A RIGHT TO SELL SUCH PRODUCTS. WHILE THE ASSESSEE COMPANY IS A SERVICE COMPANY AND IS ENGAGED IN THE BUSINESS OF P ROVIDING STAFFING AND RECRUITMENT SERVICES. THUS, SOUTHERN SWITCHGEAR LT D. WAS SET UP TO ENGAGE IN THE MANUFACTURING BUSINESS WHILE ASSESSEE WAS ENGAGED I N THE SERVICE INDUSTRY. SECONDLY, THE PURPOSE OF COLLABORATION AGREEMENT IN THE CASE OF SOUTHERN SWITCHGEAR LTD. WAS TO PROVIDE TECHNICAL AID AND IN FORMATION OF MANUFACTURING SWITCHGEAR, EXCLUSIVE RIGHT TO MANUFACTURE AND SELL SUCH PRODUCTS, TO KEEP THE POSTED WITH THE LATEST DEVELOPMENTS IN THE FIELD OF MANUFACTURE OF SWITCHGEARS AND ALSO TO TRAIN THE PERSONNEL OF SOUTHERN SWITCHGEAR LTD. THUS, THE TECHNICAL ASSISTANCE CONTEMPLATED IN THE AGREEMENT COVERS THE ESTABLISHMENT OF THE FACTORY AND ITS OPERATIONS FOR THE MANUFACTURE OF THE PRODU CT. WHILE IN ASSESSEES CASE THE PURPOSE OF THE AGREEMENT WAS TO GRANT RIGHT TO USE CERTAIN INTANGIBLE IN ITS SERVICE BUSINESS OPERATION. THE LICENSED MARKS TRADE NAME S, BUSINESS NAMES, COMMON ITA NO.5435/DEL/2011 6 LAW TRADEMARKS, REGISTERED TRADEMARKS AND SERVICE M ARKS, KNOW-HOW, TRADE SERVICES, BEST PRACTICES, SERVICE DELIVERY PROCESSE D, TESTING AND TRAINING SOFTWARE AND KELLY QUALITY MANAGEMENT SYSTEM. THUS, THE AGR EEMENT ENTERED INTO BY SOUTHERN SWITCHGEAR LTD. WAS TO SET UP THE FACTORY FOR THE PURPOSE OF MANUFACTURE OF SWITCHGEAR WHEREAS THE AGREEMENT ENTERED INTO BY THE ASSESSEE COMPANY IS FOR AN EFFICIENT CONDUCT OF ITS BUSINESS OPERATIONS BY THE USE OF INTANGIBLES. THUS, THE FACTS OF THE SOUTHERN SWITCHGEAR LTD. ARE DISTINGUI SHABLE FROM THE FACTS OF ASSESSEES COMPANY. FURTHER, THE RIGHT OF THE ASSE SSEE IN THE CASE OF SOUTHERN SWITCHGEAR LTD. WAS GRANTED EXCLUSIVE LICENCE TO MA NUFACTURE, USE AND SELL THE SCHEDULED PRODUCTS WITHIN INDIA. WHILE IN ASSESSEE S CASE, THE ASSESSEE WAS GRANTED NON-TRANSFERABLE INTANGIBLES. THE ASSESSEE COMPANY DID NOT ACQUIRE ANY OWNERSHIP OR PROPRIETARY RIGHT IN THE INTANGIBLES. THUS, ON THIS POINT ALSO, THE FACTS ARE DISTINGUISHABLE FROM SOUTHERN SWITCHGEAR LTD.. ON THE ACCOUNT OF CONSIDERATION ALSO, THERE WAS A DISTINCTION IN THE FACTS. IN THE CASE OF SOUTHERN SWITCHGEAR LTD., THE PAYMENT TO THE FOREIGN COLLABORATOR WAS TO BE MADE AS LUMP-SUM AMOUNT OF 20,000 IN FIVE EQUAL INSTALMENTS AND ROYALTY ON P RODUCTS MANUFACTURED AND SOLD IN INDIA BASED UPON PERCENTAGE OF SALES. WHILE IN ASSESSEES CASE, THE PAYMENT WAS BASED ON THE NET SALES AND THERE WAS NO LUMP SU M PAYMENT. THUS, ON THESE FACTS ALSO, THE RATIO DECIDED BY HON'BLE SUPREME CO URT IN THE CASE OF SOUTHERN SWITCHGEAR LTD. IS NOT APPLICABLE TO THE FACTS OF T HE ASSESSEES CASE. ITA NO.5435/DEL/2011 7 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AFTE R HEARING WE HOLD THAT THE ASSESSEE COMPANY WAS GRANTED ONLY A NON-EXCLUSIVE A ND NON-TRANSFERABLE RIGHT TO USE THE INTANGIBLES. THE OWNERSHIP REMAINED WITH T HE LICENSOR AND ARE CONTINUED DURING THE CURRENCY OF THE AGREEMENT. THE BASIS FO R PAYMENT OF THE AMOUNT WAS OF NET SALES. NO LUMP-SUM PAYMENT WAS MADE FOR THE RI GHT TO USE THE INTANGIBLES. THE LICENCE ACQUIRED DURING THE AGREEMENT WAS NOT T O ESTABLISH MANUFACTURING BASE. ASSESSEE IS ENGAGED IN SERVICE INDUSTRY. IT WAS ONLY IN PROVIDING STAFFING AND RECRUITMENT SERVICES WHICH IS A SERVICE INDUSTR Y. IN OUR CONSIDERED VIEW, THE ASSESSEE HAD NOT ACQUIRED ANY ENDURING BENEFIT. TH E AGREEMENT WAS ALSO FOR A LIMITED PERIOD. IN VIEW OF THESE FACTS, WE FIND NO FAULT IN THE ORDER OF CIT (A) AND WE DISMISS THIS GROUND OF REVENUES APPEAL. 9. IN THE GROUND NO.3, THE ISSUE INVOLVED IS DELETI NG THE ADDITION OF RS.29,88,824/- MADE BY THE ASSESSING OFFICER TOWARD S STALE CHEQUES ISSUED TO THE EX-EMPLOYEES. AS PER THE ASSESSEE, THIS AMOUNT WAS TO BE PAID TO EX-EMPLOYEES. THESE EMPLOYEES HAVE NOT CLAIMED THE AMOUNT BY PRES ENTING THE CHEQUES IN THEIR BANK. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDIN G AS UNDER :- 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RECORDED BY THE LD. ASSESSING OFFICER. I HAVE ALSO GONE THROUGH THE STATEMENT OF STALE CHEQUES FILED BY THE LD. COUNSELS FOR THE APPELLANT COMPANY IN TH E COURSE OF APPELLATE PROCEEDINGS. ON CONSIDERATION, I FIND THA T THE ORIGINAL AMOUNT OF RS.3174343/-PERTAINS TO MAINLY THE FINANC IAL YEARS 2006-07 AND 2007-08 ONLY AND OUT OF THE AFORESAID SUM OF RS .3174343/-, A SUM ITA NO.5435/DEL/2011 8 OF RS.462883/- HAS ALREADY BEEN PAID AFTER THE CLOS E OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION. FURTHER, THE APPELLANT COMPANY IS SUBJECT TO STATUTORY AUDIT AND AUDIT IN TERMS OF COMPANY LAW. THEREFORE, IN CASE THE COMPANY REACHES A CONCLUSION THAT THE LIABILITY ON ACCOUNT OF STALE CHEQUES HAS COME TO AN END, THE NECESSARY RIGHT BACK WILL TAKE PLACE IN THE YEAR OF SUCH CONCLUSION. THE LD. AO HAS NOT BROUGHT ANY MATERIAL ON RECORD T O HOLD THAT THE LIABILITY ON ACCOUNT OF PAYMENTS TO BE MADE TO THE EX- EMPLOYEES/PROFESSIONALS HAS COME TO AN END AND THUS , THE CONCLUSION DRAWN BY THE AO IS WITHOUT ANY BASIS. IN VIEW OF TH E AFORESAID AND CONSIDERING THE AMOUNTS IN INDIVIDUAL CASES AND NUM BER OF EMPLOYEES, I DO NOT FIND MYSELF IN AGREEMENT WITH T HE LD. AO THAT THIS IS A FIT CASE FOR TREATING THE OUTSTANDING AMO UNT OF RS.2988824/- AS INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON. ACCORDINGLY, THE ADDITION IN QUESTION IS BEING DELETED. 10. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND ALSO PLEADED THAT THE ASSESSEE ISSUED CHEQUES OF RS.31,74,343/- TO TH E EX-EMPLOYEES WHICH WERE NOT ENCASHED. THUS, THESE CHEQUES WERE STALE CHEQUES. THE LIABILITY HAD BEEN SEIZED AND THERE IS NO LIABILITY EXISTED AGAINST THESE STA LE CHEQUES EXCEPT CHEQUES OF RS.1,85,519/- WERE REISSUED. THE BALANCE AMOUNT REM AINED UNCLAIMED IN THE ASSESSEES ACCOUNT. THUS, IT WAS INCOME IN TERMS O F SECTION 41(1) OF THE ACT. LD. DR SUBMITTED THAT THERE WAS NO LONGER LIABILITY OF THE ASSESSEE TO BE REPAID, THEREFORE, THE AMOUNT OF RS.29,88,824/- IS TO BE TR EATED AS INCOME OF THE ASSESSEE. 11. LD. AR RELIED ON THE ORDER OF CIT (A). 12. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ORIGINAL CHEQUES OF RS.31,74,343/- ISSUED TO THE EX-EMPLOYEES AND THE S AME WERE PERTAINING TO THE ITA NO.5435/DEL/2011 9 FINANCIAL YEAR 2006-07 AND 2007-08. OUT OF THESE, ONLY CHEQUES OF RS.1,85,519/- WERE ENCASHED. ALL OTHER CHEQUES BECAME OUTDATED O N ACCOUNT OF NOT CLAIMING THE SAME FROM THE BANK OF THE ASSESSEE. CIT (A) ENTERT AINED THE STATEMENT OF STALE CHEQUES FILED BEFORE HIM AND OBSERVED THAT RS.4,62, 883/- WERE ENCASHED AFTER THE CLOSE OF FINANCIAL YEAR. CIT (A) HAS ALSO GRANTED THE RELIEF RELYING ON THE AUDITED ACCOUNTS OF THE ASSESSEE. IN OUR CONSIDERED VIEW, SUCH APPROACH OF CIT (A) IS NOT AS PER LAW. THE CHEQUES ISSUED ARE BARRED BY LIMIT ATION AND BECAME NOT PAYABLE BY OPERATION OF LAW. CIT (A)S OBSERVATION THAT AS SO ON AS ASSESSEE REACHES IT CONCLUSION THAT THE LIABILITY OF STALE CHEQUES HAVE COME TO END THE NECESSARY RIGHT BACK TO TAKE PLACE IN THE YEAR OF SUCH CONCLUSION I S NOT BASED ON ANY EVIDENCE. ON WHAT BASIS THIS FINDING HAS BEEN RECORDED BY CIT (A ) IS NOT CLEAR. WHETHER ASSESSEE HAD DONE SO IN FUTURE YEAR. NOTHING IS ON RECORD. THESE CHEQUES WERE BELONGING TO FINANCIAL YEAR 2006-07 WHICH IS A FINA NCIAL YEAR ONE YEAR PRIOR TO FINANCIAL YEAR UNDER CONSIDERATION. HOW THESE CHEQ UES REMAINED UNCASHED FOR ALMOST TWO YEARS. IT WOULD BE APPROPRIATE TO DRAW AN ACCOUNT OF SUCH CLAIMS MADE SUBSEQUENTLY FOR REISSUING THE CHEQUES. NO SUCH FI NDINGS HAVE BEEN RECORDED. ASSESSEE HAD AT NO POINT OF TIME EVEN TRIED TO RECO NCILE THE OUTSTANDING BALANCE AND FOREGONE CLAIM OF EX-EMPLOYEES FOR NOT ENCASHIN G THE CHEQUES. ASSESSEE HAD ALSO NOT ESTABLISHED THAT ANY OF THESE PERSONS EVER TOOK ANY STEPS FOR RECOVERY OF THESE AMOUNTS. IN THE ABSENCE OF SUCH FINDINGS, WE FIND THAT CIT (A) WAS NOT ITA NO.5435/DEL/2011 10 JUSTIFIED IN GRANTING THE RELIEF TO THE ASSESSEE. TO ARRIVE AT THE CORRECT FACTS, WE FIND IT APPROPRIATE TO SET ASIDE THE ISSUE TO THE FILE O F THE ASSESSING OFFICER FOR DECIDING AFRESH AFTER CONSIDERING ALL RELEVANT ASPECTS ON TH IS ISSUE. 13. GROUND NO.4 IS AGAINST THE DELETING OF ADDITION OF RS.11,12,816/- SHOWN AS THE BUSINESS LOSS BY THE ASSESSEE WHICH IS ACTUALLY THE CLAIM OF TDS WHICH HAS TO FOREGO BY THE ASSESSEE FOR NON-AVAILABILITY OF THE TDS CERTIFICATES. 14. BRIEF FACTS OF THE CASE ARE THAT WHILE MAKING P AYMENT OF PROFESSIONAL CHARGES, THE TDS WAS BEING MADE BY THE CLIENTS AND THE AGGREGATE TDS RECEIVABLE BY THE COMPANY AT THE END OF THE FY RELEVANT TO THE AY UNDER CONSIDERATION WAS RS.11,12,816/-. HOWEVER, AS NECESSARY TDS CERTIFICA TES WERE NOT ISSUED BY THE DEDUCTORS/CLIENTS NOR ANY ACTUAL PAYMENT WAS MADE B Y THEM, THE APPELLANT COMPANY COULD NOT CLAIM CREDIT THEREOF AGAINST THE TAX LIABILITY. THEREFORE, WHEN THERE WAS NO POSSIBILITY OF TDS CERTIFICATES BEING RECEIVED FROM THE CLIENTS, THE APPELLANT COMPANY DECIDED TO WRITE OFF THE TDS RECE IVABLE OF RS.11,12,816/- AND DEBITED THE SAME TO THE P&L ACCOUNT FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION. IN THE COURSE OF SCRUTINY, THE LD. AO REQUIRED THE APPELLANT COMPANY TO EXPLAIN AS TO HOW THE TDS WRITTEN OFF IN THE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION WAS ALLOWABLE AS AN EXPENSE FOR THE A SSESSMENT YEAR UNDER CONSIDERATION. IN RESPONSE TO THE AFORESAID, IT WAS EXPLAINED ON BEHALF OF THE APPELLANT COMPANY THAT THE TDS OF RS.11,12,816/- WA S MADE OUT OF THE ITA NO.5435/DEL/2011 11 PROFESSIONAL RECEIPTS OFFERED TO TAX BY THE APPELLA NT COMPANY IN EARLIER YEARS AND, THEREFORE, WAS IN THE FORM OF OUTSTANDING DEBIT BAL ANCES. IT WAS SUBMITTED THAT THE APPELLANT COMPANY HAD IN PRIOR YEARS OFFERED THE FU LL GROSS AMOUNT AS INCOME IN ITS PROFIT AND LOSS ACCOUNT AND THE AMOUNT OF SHORTFALL REPRESENTING TDS/INCOME EARNED BUT NOT RECEIVED WAS TO BE ALLOWED AS DEDUCT ION AGAINST THE INCOME ALREADY OFFERED TO TAX. HOWEVER, THE AFORESAID ARGUMENT OF THE APPELLANT COMPANY DID NOT FIND FAVOUR WITH THE AO AND THE SAME WAS ACCORDINGL Y REJECTED. THE AO WAS OF THE VIEW THAT TDS IS ONE OF THE FORM AND PART OF PR EPAID TAXES AND TAX LIABILITY IS NOT AN ALLOWABLE EXPENSE IN THE HANDS OF TAXPAYER. ACCORDINGLY, THE LOSS ARISING OUT OF/ON ACCOUNT OF NON-RECEIPT OF TDS CERTIFICATE S WAS NOT AN ADMISSIBLE EXPENSE. IN VIEW OF THE AFORESAID, THE DISALLOWANC E OF RS.11,12,816/- HAS BEEN MADE. 15. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDING A S UNDER :- 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RECORDED BY THE LD. ASSESSING OFFICER. I HAVE ALSO CAREFULLY GONE THROUGH THE JUD GMENTS RELIED UPON BY THE LD. COUNSELS IN THE COURSE OF APPELLATE PROC EEDINGS. ON CONSIDERATION, I FIND THAT THE DISALLOWANCE IN QUES TION HAS BEEN MADE BY THE LD. AO ON ACCOUNT OF THE FACT THAT, IN HIS O PINION, ANY LOSS ARISING ON ACCOUNT OF TAX PAYABLE/TAX REFUNDABLE WA S NOT AN ADMISSIBLE DEDUCTION. THE AO HAS NOT DISPUTED THE F ACT THAT THE TDS OF RS.11,12,816/- WAS MADE OUT OF THE REVENUES OFFE RED TO TAX BY THE APPELLANT COMPANY IN EARLIER YEARS. THEREFORE, THE LIMITED ISSUE TO BE DECIDED IS WHETHER THE LOSS ARISING ON ACCOUNT OF N ON-AVAILABILITY OF TDS CERTIFICATES IS TO BE ALLOWED AS DEDUCTION IN T HE YEAR OF WRITE OFF OR NOT. IN THE CASE OF CIT VS SHREYANS INDUSTRIES L TD, FACTS WERE THAT ITA NO.5435/DEL/2011 12 THE APPELLANT COMPANY HAD OFFERED GROSS AMOUNT OF I NTEREST INCLUDING TDS OF RS.204259/- TO TAX IN THE ASSTT YEAR 1992-93 . HOWEVER, IN THE ABSENCE NECESSARY TDS CERTIFICATES, THE COMPANY WAS NOT ALLOWED CREDIT FOR THE AFORESAID TDS OF RS.204259/-. THE AP PELLANT COMPANY MADE ALL SINCERE EFFORTS TO OBTAIN THE TDS CERTIFIC ATES FROM THE CONCERNED PARTIES. HOWEVER, WHEN ALL THE EFFORTS FA ILED, THE ASSESSEE COM AN DECIDED TO WRITE OFF THE TDS RECEIVABLE AND MADE A CLAIM IN THE P&L ACCOUNT. IN THE ASSESSMENT, THE CLAIM OF TH E APPELLANT COMPANY WAS DISALLOWED BY THE LD. AO. HOWEVER, ON A PPEAL, THE CLAIM OF THE APPELLANT COMPANY WAS ALLOWED BY THE C IT(A) AND THE ITAT. ON FURTHER APPEAL BY THE REVENUE, THE HON'BLE COURT DECIDED THE MATTER IN FAVOUR OF THE APPELLANT COMPANY AND A GAINST THE REVENUE WITH THE FOLLOWING OBSERVATIONS:- '23. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY C ONSIDERED THE RIVAL SUBMISSIONS WITH REFERENCE TO FACTS, EVIDENCE AND MATERIAL ON RECORD. IT IS A FACT THAT (HE ASSESSEE HAD OFFERED GROSS AMOUNT OF INTEREST INCLUDING TDS OF RS.2,04,259 TO TAX IN THE ASSESSMENT YEAR 1992-93. IT IS ALSO A FACT THAT THE ASSESSEE WAS NO T ALLOWED CREDIT FOR THE TDS OF RS.2,04,259 FOR WANT OF TDS CERTIFICATES . IT IS ALSO A FACT THAT IN SPITE OF BEST EFFORTS, THE ASSESSEE COULD N OT OBTAIN TDS CERTIFICATES. THUS, IT WAS A CASE OF LOSS WHICH HAS ARISEN 10 THE ASSESSEE DURING THE COURSE OF ITS BUSINESS. IN THE CASE OF SUTLEJ COTTON MILLS LTD. V. CIT (SUPRA), HON'BLE SUPREME COURT HA S HELD THAT WHAT IS MATERIAL IS THE FACTORS OR THE CIRCUMSTANCES WHI CH CAUSE LOSS AND THE (ME NATURE AND CHARACTER OF LOSS. IF THE LOSS OCCUR RED DURING THE COURSE OF CARRYING ON THE BUSINESS, IT IS INCIDENTAL TO AN D, HENCE, ALLOWABLE. ADMITTEDLY, IN THIS CASE, THE ASSESSEE SUFFERED LOS S DURING THE COURSE OF CARRYING ON ITS BUSINESS. THEREFORE, SAME IS ALL OWABLE. JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD. V, CIT SUPPORTS THE CASE OF (HE ASSESSEE. WE DO NOT FIND A NY INFIRMITY IN (THE ORDER OF LD. CIT(A). SAME IS UPHELD AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED.' SIMILARLY, IN THE CASE OF ADDL.CIT VS. YAHOO WEB SE RVICES LID,-THE FACTS WERE THAT THE APPELLANT COMPANY HAD MADE A CL AIM OF DEDUCTION OF RS.11,15,137/- ON ACCOUNT OF SHORT PAYMENT OF RS .236545/- AND TDS RECEIVABLE OF RS.848592/-. IN THE COURSE OF ASS ESSMENT, THE APPELLANT COMPANY WAS REQUIRED TO SHOW-CAUSE AS TO WHY TDS WRITTEN OFF AMOUNTING TO RS.848592/- NOT BE DISALLOWED. IN RESPONSE TO WHICH IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT EIT HER THE TDS ITA NO.5435/DEL/2011 13 CERTIFICATES WERE NOT PROVIDED BY THE CLIENTS OR IF PROVIDED, THEY WERE PROVIDED AFTER THE ASSTT HAD BECOME TIME-BARRED. TH EREFORE, THE TDS OF RS.848592/- WAS NEITHER ALLOWED AS PREPAID TAXES NOR THE SAME WERE REFUNDED FOR WANT OF TDS CERTIFICATES. HOWEVER , THE AFORESAID ARGUMENT OF THE APPELLANT COMPANY WAS REJECTED BY T HE LD. AO AND IT WAS HELD THAT THE LOSS ARISING ON ACCOUNT OF TDS DO ES NOT REPRESENT BAD DEBTS AND, THEREFORE, COULD NOT BE HELD AS ADMI SSIBLE DEDUCTION U/S 36(1 )(VII) OF THE IT ACT, 1961. THEREAFTER, RELYIN G UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF NATIONAL AL UMINIUM COMPANY LTD VS. CIT, IT WAS HELD THAT THE TAX DEDUC TIBLE AT SOURCE WAS NOT TO BE CONSIDERED AS BAD DEBT AND THE CLAIM OF THE APPELLANT WAS DISALLOWED. ON APPEAL, THE CLAIM OF THE APPELLA NT COMPANY WAS ALLOWED BY THE CIT(A). ON FURTHER APPEAL BY THE REV ENUE, THE HON'BLE ITAT MUMBAI DECIDED THE ISSUE IN FAVOUR OF THE APPE LLANT AND UPHELD THE FINDINGS RECORDED BY THE LD. CIT(A) WITH THE FO LLOWING OBSERVATIONS:- '5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT IN NATIONAL ALUMINUM CO, LID'S CASE (SUPRA), HON'BLE SUPREME COURT WAS IN-SEISSN OF A SITUATION IN WHICH ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF DEMAND UNDER SECTION 201 R.W.S. 195 THAT THE ASSESSEE HAD TO PAY BECAUSE IT FAILED TO DISCHARGE THE TAX DEDUCTION OBLIGATIONS I MPOSED ON THE ASSESSEE. THEIR LORDSHIPS WERE OF THE CONSIDERED VI EW THAT THE PAYMENT MADE BY THE ASSESSEE ON ACCOUNT OF HIS NOT DISCHARGING THE TAX DEDUCTION OBLIGATIONS, AND, THE REFORE, THE SAME COULD NOT BE ALLOWED AS DEDUCTION ON BUSINESS INCOME. AS AGAINST THE POSITION THAT HON'BLE SUPREME COURT WER E DEALING WITH, WE ARE RIGHT NOW DEALING WITH A SITUATION IN WHICH NEITHER THE ASSESSEE GOT THE MONEY, LAWFULLY DUE TO HIM, AS IT WAS SAID TO HAVE BEEN RETAINED AS TAX DEDUCTION AT SOURCE, N OR DID THE ASSESSEE GET ANY TAX CREDIT IN COMPUTATION OF IT'S TAX LIABILITY. THE AMOUNTS REPRESENTED BY SUCH TAX DEDUCTIONS, WHI CH WERE UNAVAILABLE FOR TAX CREDITS, CLEARLY REPRESENTED LO SS INCURRED BY THE ASSESSEE IN THE COURSE OF BONAFIDE BUSINESS ACT IVITIES. ON THESE FACTS, AS HELD BY HON'BLE PUNJAB & HARYANA HI GH COURT IN ITA NO.5435/DEL/2011 14 THE CASE OF SHREYANS INDUSTRIES (SUPRA), THERE IS N O INFIRMITY IN ASSESSEE BEING ALLOWED DEDUCTION IN RESPECT OF THE LOSS SO INCURRED TO THE ASSESSEE. WE APPROVE THE CONCLUSION S ARRIVED AT BY THE CIT (A) AND DECLINE TO INTERFERE IN THE MATT ER.' 6.4 WHEN THE FACTS OF THE PRESENT CASE ARE ANALYZED IN THE LIGHT OF THE AFORESAID TWO JUDGMENTS, IT MAY BE SEEN THAT TH E RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT AND THE IT AT, MUMBAI SQUARELY COVERS THE FACT SITUATION OF THE PRESENT C ASE. AS STATED EARLIER, THERE IS NO DISPUTE THAT THE LOSS OF RS.11,12,816/- HAS BEEN SUFFERED BY THE APPELLANT COMPANY ON ACCOUNT OF NON-AVAILABILIT Y OF TDS CERTIFICATES FROM THE C1IENTS/DEDUCTORS. THEREFORE, NON-REALISATION OF SUM OF RS.11, 12,816/- REPRESENTED BY TDS RECEIVABL E IS LOSS SUSTAINED BY THE APPELLANT COMPANY IN NORMAL COURSE OF BUSINESS AND IS ADMISSIBLE U/S 36(1 )(VII) OF THE IT ACT, 1961. ACCORDINGLY, THE DISALLOWANCE MADE BY THE LD. AO IS BEING DELETED. 16. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHREYANS INDUSTRIES LI MITED, CITED SUPRA, HAS GRANTED THE RELIEF BY HOLDING AS UNDER :- '23. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY C ONSIDERED THE RIVAL SUBMISSIONS WITH REFERENCE TO FACTS, EVIDENCE AND MATERIAL ON RECORD. IT IS A FACT THAT THE ASSESSEE HAD OFFERED GROSS AMOUNT OF INTEREST INCLUDING TDS OF RS.2,04,259 TO TAX IN THE ASSESSMENT YEAR 1992-93. IT IS ALSO A FACT THAT THE ASSESSEE WAS NO T ALLOWED CREDIT FOR THE TDS OF RS.2,04,259 FOR WANT OF TDS CERTIFICATES . IT IS ALSO A FACT THAT IN SPITE OF BEST EFFORTS, THE ASSESSEE COULD N OT OBTAIN TDS CERTIFICATES. THUS, IT WAS A CASE OF LOSS WHICH HAS ARISEN TO THE ASSESSEE DURING THE COURSE OF ITS BUSINESS. IN THE CASE OF SUTLEJ COTTON MILLS LTD. V. CIT (SUPRA), HON'BLE SUPREME COURT HA S HELD THAT WHAT IS MATERIAL IS THE FACTORS OR THE CIRCUMSTANCES WHI CH CAUSE LOSS AND THE TRUE NATURE AND CHARACTER OF LOSS. IF THE LOSS OCCU RRED DURING THE COURSE OF CARRYING ON THE BUSINESS, IT IS INCIDENTAL TO IT AND, HENCE, ALLOWABLE. ADMITTEDLY, IN THIS CASE, THE ASSESSEE SUFFERED LOS S DURING THE COURSE OF CARRYING ON ITS BUSINESS. THEREFORE, SAME IS ALL OWABLE. JUDGMENT OF ITA NO.5435/DEL/2011 15 HON'BLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD. V. CIT SUPPORTS THE CASE OF THE ASSESSEE. WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF LD. CIT(A). SAME IS UPHELD AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED.' THE CIT (A) HAS ALSO CONSIDERED THE DECISION OF ITA T, G BENCH, MUMBAI IN THE CASE OF ADDL. CIT , RANGE 7 (3), MUMBAI VS. YAHOO W EB SERVICES P. LTD. IN ITA NO.20042/MUM/2010 DATED 28.01.2011 WHEREIN THE ITA T HAS DECIDED THE ISSUE BY HOLDING AS UNDER :- 6. WE FIND THAT IN NATIONAL ALUMINUM CO. LTD'S CAS E (SUPRA), HON'BLE SUPREME COURT WAS IN-SEISIN OF A SITUATION IN WHICH ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF DEMAND UNDER SE CTION 201 R.W.S. 195 THAT THE ASSESSEE HAD TO PAY BECAUSE IT FAILED TO DISCHARGE THE TAX DEDUCTION OBLIGATIONS IMPOSED ON THE ASSESSEE. THEI R LORDSHIPS WERE .OF THE CONSIDERED VIEW THAT THE PAYMENT MADE BY TH E ASSESSEE ON ACCOUNT OF HIS-NOT DISCHARGING THE TAX DEDUCTION O BLIGATIONS, AND, THEREFORE, THE SAME COULD NOT BE ALLOWED AS DEDUCTI ON ON BUSINESS INCOME. AS AGAINST THE POSITION THAT HON'BLE SUPREM E COURT WERE DEALING WITH, WE ARE RIGHT NOW DEALING WITH A SITUA TION IN WHICH NEITHER THE ASSESSEE GOT THE MONEY, LAWFULLY DUE TO HIM, AS IT WAS SAID TO HAVE BEEN RETAINED AS TAX DEDUCTION AT SOURCE, N OR DID THE ASSESSEE GET ANY TAX CREDIT IN COMPUTATION OF IT'S TAX LIABI LITY. THE AMOUNTS REPRESENTED BY SUCH TAX DEDUCTIONS, WHICH WERE UNAV AILABLE FOR TAX CREDITS, CLEARLY REPRESENTED LOSS INCURRED BY THE A SSESSEE IN THE COURSE OF BONAFIDE BUSINESS ACTIVITIES. ON THESE FACTS, AS HELD BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SHREYANS INDUSTRIES (SUPRA), THERE IS NO INFIRMITY IN ASSESSEE BEING AL LOWED DEDUCTION IN RESPECT OF THE LOSS SO INCURRED TO THE ASSESSEE. WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT (A) AND DECLINE T O INTERFERE IN THE MATTER. ITA NO.5435/DEL/2011 16 WE WOULD ALSO LIKE TO MENTION THAT IN THE CASE OF I NDIAN ALUMINIUM CO. LTD. VS. CIT 79 ITR 514 (SC), THE ISSUE UNDER CONSIDERATIO N WAS DIFFERENT THAN THE ISSUE BEFORE US IN THE PRESENT CASE. IN THAT CASE, THE P RINCIPLE BUSINESS OF THE ASSESSEE COMPANY WAS MANUFACTURING OF ALUMINIUM INGOTS, SHEE TS AND OTHER ALUMINIUM PRODUCTS. ASSESSEE ENTERED INTO AN AGREEMENT WITH THE COMPANY IN MONTREAL, CANADA AND AS PER THIS AGREEMENT, THERE WAS AN ANNU AL RETAINER-SHIP FEE TO BE PAID BUT THERE IS NO CONDITION OR STIPULATION THAT HOW T HE FEE WOULD BE PAYABLE BY THE ASSESSEE WITHOUT DEDUCTION OF TAX UNDER THE PROVISI ONS OF TAX APPLICABLE AT THE RELEVANT TIME. THE ASSESSEE PAID THE TOTAL FEE WIT HOUT DEDUCTING THE TAX AND THE ASSESSING OFFICER TREATED THE ASSESSEE AS BEING IN DEFAULT. THE ASSESSEE PAID THE SUM TOWARDS SUCH TAX AND ASKED FOR REIMBURSEMENT FR OM THE COMPANY BASED IN MONTREAL, CANADA. THE COMPANY BASED IN MONTREAL, C ANADA REFUSED TO REIMBURSE THE SAME ON THE GROUND THAT IT WAS NOT BOUND MORALL Y OR CONTRACTUALLY TO MEET THE OBLIGATION OF THE INDIAN TAX LIABILITY AND IN SUCH A SITUATION, THE ASSESSEE WROTE OFF THE AMOUNT DURING THE RELEVANT ACCOUNTING PERIOD. WHILE IN ASSESSEES CASE, THE ISSUE INVOLVED IS HAVING THE SIMILAR FACTS AS INVOL VED IN THE CASE OF CIT VS. SHREYANS INDUSTRIES LIMITED, CITED SUPRA. CONSIDER ING THESE FACTS, WE SUSTAIN THE ORDER OF THE CIT (A) ON THIS ISSUE. 17. GROUND NO.5 IS AGAINST THE DELETING OF ADDITION OF RS.7,49,074/- MADE BY THE ASSESSING OFFICER U/S 43B WHEREIN THE ASSESSING OFF ICER MADE A DISALLOWANCE OF ITA NO.5435/DEL/2011 17 PROFESSIONAL TAX WHICH WAS NOT PAID BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THE CIT (A) HAS GRANTED THE RELIEF BY HOLD ING AS UNDER :- 7.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RECORDED BY THE LD. AO. ON CONSIDERATION, I FIND THAT THE DISALLOWANCE MADE BY THE ID. AO IS NOT SUSTAINABLE IN LAW. THE PROVISIONS OF SECTION 438 O F THE IT ACT, 1961 DEAL WITH THE DEDUCTIONS OF CERTAIN SUMS/DUES TO BE ALLOWED ON ACTUAL PAYMENTS. HOWEVER, AS STATED EARLIER, THE AMOUNT OF PROFESSIONAL TAX HAS NOT BEEN CLAIMED BY THE APPELLANT COMPANY AS DE DUCTION EITHER IN THE PROFIT AND LOSS ACCOUNT OR IN THE COMPUTATION O F TOTAL INCOME. SO, THEREFORE, THERE WAS NO BASIS FOR THE LD. AO TO INV OKE THE PROVISIONS OF SECTION 438 OF THE IT ACT, 1961. IT HAS TO BE APPRE CIATED THAT THE RECEIPTS AND EXPENSES NOT ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT DO NOT IMPACT THE TAXABILITY OF A PARTICULAR A Y AS THEY REMAIN PART OF THE BALANCE SHEET ONLY AT THE YEAR END. IN VIEW OF THE AFORESAID, THE DISALLOWANCE MADE BY THE LD. AO IS NOT IN ACCORDANC E WITH THE PROVISIONS OF SECTION 438 OF THE IT ACT, 1961 AND I S ACCORDINGLY, DELETED. 18. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. AFT ER HEARING BOTH THE SIDES ON THE ISSUE, WE FIND THAT CERTAIN FACTS ARE NOT CLEAR WHICH ARE NECESSARY TO DECIDE THE ISSUE. THE ASSESSEE HAS DEDUCTED THE PROFESSIONAL TAX FROM THE SALARY PAID TO THE EMPLOYEES. WHAT IS THE SALARY DEBITED BY THE ASSES SEE IN THE PROFIT & LOSS ACCOUNT WHETHER IT WAS NET OF PROFESSIONAL TAX OR IT WAS TH E GROSS AMOUNT INCLUDING THE PROFESSIONAL TAX. THIS FACT HAS NOT BEEN BROUGHT ON RECORD. IN ABSENCE OF THIS, IT CANNOT BE SAID THAT THE AMOUNT OF PROFESSIONAL TAX HAS NOT BEEN DEBITED IN PROFIT & LOSS ACCOUNT WHILE COMPUTING THE TOTAL INCOME OF TH E ASSESSEE. SECONDLY, UNDER THE PROFESSIONAL TAX ACT, WHETHER THE ASSESSEE WAS LIABLE TO DEDUCT THE TAX FROM ITA NO.5435/DEL/2011 18 THE SALARY OR IT WAS DEDUCTED ON THE INSTRUCTION OF THE EMPLOYEES TO MEET THEIR OBLIGATION. THIS ASPECT ALSO REQUIRES EXAMINATION TO DECIDE THE REAL CHARACTER OF THE PROFESSIONAL TAX WHETHER IT IS COVERED U/S 43B OF THE INCOME-TAX ACT, 1961 OR NOT. THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO BRING CORRECT FACTS ON RECORD AND DECIDE THE ISSUE AFRESH . 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2012. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 31 ST DAY OF OCTOBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT NEW DELHI