DCIT 7(2), MUMBAI V. REDIFF. COM INDIA LTD, MUMBAI

ITA 5438/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3992 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 01-03-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 08-08-2013
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHA UHAN
• Keywords: Depreciation; Earning of tax free income; Retrospective amendment; Wholly owned subsidiary; Non-deduction of tax; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A

Judgement Text

, , L, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NOS.4661,4662,4663/MUM/2013 ASSESSMENT YEARS: 2007-08, 2008-09 & 2009-10 ACIT 7(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S. REDIFF.COM INDIA LTD., MAHALAXMI ENGG. ESTATE, 1 ST FLOOR, LADY JAMSHEDJI FIST CROSS ROAD, MAHIM(E), MUMBAI- 400016 (REVENUE) (ASSESSEE ) P.A. NO. AAACR2762F ITA NOS.5438,5439/MUM/2013 ASSESSMENT YEARS: 2002-03 & 2003-04 ACIT 7(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S. REDIFF.COM INDIA LTD., MAHALAXMI ENGG. ESTATE, 1 ST FLOOR, LADY JAMSHEDJI FIST CROSS ROAD, MAHIM(E), MUMBAI- 400016 (REVENUE) (ASSESSEE ) P.A. NO. AAACR2762F ITA NO.42/MUM/2014 ASSESSMENT YEAR: 2006-07 ACIT 7(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S. REDIFF.COM INDIA LTD., MAHALAXMI ENGG. ESTATE, 1 ST FLOOR, LADY JAMSHEDJI FIST CROSS ROAD, MAHIM(E), MUMBAI- 400016 (REVENUE) (ASSESSEE ) P.A. NO. AAACR2762F REDIFF.COM 2 ITA NO.4223/MUM/2013 ASSESSMENT YEAR: 2006-07 M/S. REDIFF.COM INDIA LTD., MAHALAXMI ENGG. ESTATE, 1 ST FLOOR, LADY JAMSHEDJI FIST CROSS ROAD, MAHIM(E), MUMBAI- 400016 / VS. A CIT 7 (2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AAACR 2762F / ASSESSEE BY SHRI JITENDRA JAIN (AR) / REVENUE BY SHRI JASBIR CHAUHAN , (DR) / DATE OF HEARING : 03/03/2016 / DATE OF ORDER: 13/04/2016 / O R D E R PER BENCH: THESE CROSS APPEALS HAVE BEEN FILED AGAINST SEPARAT E ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 13 {(IN SHORT CIT(A)}, FOR DIFFERENT YEARS PERTAI NING TO SAME ASSESSEE. SINCE IDENTICAL ISSUES ARE INVOLVED, THES E WERE HEARD TOGETHER AND BEING DISPOSED BY THIS COMMON ORDER FO R THE SAKE OF CONVENIENCE. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI JITENDRA JAIN, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI JASBIR CHAUHAN, DEPARTMENT AL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. REDIFF.COM 3 FIRST WE TAKE UP REVENUES APPEAL IN ITA NO. 4661/MUM/2013 FOR A.Y. 2007-08 3. THE REVENUE HAS FILED APPEAL AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI-13 {(I N SHORT CIT(A)}, ORDER DATED 25.03.2013 PASSED AGAINST AS SESSMENT ORDER U/S. 143(3) OF THE ACT, DATED 30.12.2013 FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS: I. THE LEARNED CIT (A) HAS ERRED ON FACTS AND LAW, IN DELETING THE DISALLOWANCE OF RS. 41,85,747/- UNDER SECTION 14A R.W. RULE 8D, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSE SSING OFFICER. II. THE LEARNED CIT(A) HAS ERRED ON FACTS AND LAW, IN DELETING THE DISALLOWANCE OF RS. 41,85,747/- UNDER SECTION 14A R.W. RULE 8D, IGNORING THE FACT THAT DISALLOWAN CE UNDER SECTION 14A AS PER RULE 8D IS JUSTIFIED AND ALSO RU LE 8D PROVIDES UNIFORM METHOD FOR COMPUTING DISALLOWANCE. III. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DELETING THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS. 5,77,19,942/- UNDER SECTION 40A(IA) OF THE INCOME-T AX ACT, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. IV. THE LD.CIT (A)'S ORDER IS CONTRARY IN LAW AND O N FACTS AND DESERVES TO BE SET ASIDE. V. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTO RED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. 4. GROUND NOS. 1 & 2: THESE GROUNDS DEAL WITH THE COMMON ISSUE I.E. DELETION OF DISALLOWANCE BY LD. C IT(A) MADE BY THE AO U/S 14A R.W. RULE 8D. THE FACTS OF THE CA SE, AS CULLED OUT FROM THE ORDERS, ARE THAT THE ASSESSEE W AS HAVING INVESTMENTS IN SHARES OF COMPANIES. THE AO NOTED TH AT THE REDIFF.COM 4 ASSESSEE HAD NOT MADE ANY DISALLOWANCE U/S 14A OF T HE ACT IN THE RETURN OF INCOME. THEREFORE, THE AO MADE DISALL OWANCE OF RS.41,85,747/- UNDER SECTION 14A OF THE ACT AS PER FORMULA PROVIDED IN RULE 8D AS UNDER:- I) DIRECT EXPENSES RS. NIL II) INDIRECT INTEREST EXPENSES RS. NIL III) MANAGERIAL EXPENSES BEING 0.5% OF AVERAGE INVESTMENTS RS.41,85,747/- TOTAL RS.41,85,747/- THUS THE AO MADE DISALLOWANCE OF MANAGERIAL EXPENSE S BEING 0.5% OF AVERAGE VALUE OF AVERAGE VALUE OF INVESTMEN TS. THE AO DID NOT MAKE ANY DISALLOWANCE OF DIRECT EXPENSES OR INDIRECT INTEREST EXPENSES. 4.1. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT(A) WHEREIN IT WAS INTER-ALIA SUBMITTED THAT RULE 8D WAS NOT APPLICABLE IN THE YEAR UNDER CONCERN. IT WA S FURTHER SUBMITTED THAT NO EXPENDITURE WAS INCURRED ON THE E XEMPT INCOME. IT WAS ALSO SUBMITTED THAT THE INVESTMENT C ONSIDERED BY THE AO FOR THE PURPOSE OF COMPUTING THE AMOUNT O F DISALLOWANCE, ALSO INCLUDES INVESTMENT IN THE SHARE S OF ITS WHOLLY OWNED SUBSIDIARY COMPANY OF THE ASSESSEE LOC ATED IN THE USA AND ANY INCOME EARNED BY THE ASSESSEE FROM FOREIGN INVESTMENT WOULD BE CHARGEABLE TO TAX IN INDIA. AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE LD. CIT (A) REDUCED THE DISALLOWANCE TO A SUM OF RS. 5,00,000/- WITH FOLLOWING OBSERVATIONS: 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE APPELLANT WAS HAVING INVESTMENT IN SHARES OF COMPAN Y. REDIFF.COM 5 THE AO HAS WORKED OUT THE DISALLOWANCE U/S 14A AS P ER FORMULA PROVIDED IN RULE 8D OF THE IT RULES. HOWEVE R, AS PER BOMBAY HIGH COURT DECISION IN THE CASE OF GODRE J & BOYCE MFG. CO. 234 CTR 1, THE PROVISIONS OF RULE 8D WERE APPLICABLE FROM A.Y. 2008-09 ON WORDS AND NOT FOR A .Y. UNDER CONSIDERATION. THEREFORE, THOUGH THE PROVISIO N OF 14A(1) WERE APPLICABLE DURING THE YEAR, BUT THE DISALLOWANCE WAS NOT REQUIRED TO BE WORKED OUT AS P ER FORMULA PROVIDED IN RULE 8D. THE APPELLANT HAS ALSO INVESTMENT IN FOREIGN SUBSID IARIES; THE INCOME THERE FROM WAS TAXABLE. CONSEQUENTLY, SU CH INVESTMENTS WERE NOT REQUIRED TO BE CONSIDERED FOR DISALLOWANCE U/S.14A. THE AO HAS HELD THAT NO DIRECT EXPENSES OR INDIRECT INTEREST EXPENSES WERE ATTRIBUTABLE TO INVESTMENT A CTIVITY. ONLY THE ADMINISTRATIVE AND MANAGERIAL EXPENSES WER E ATTRIBUTABLE TO THE MANAGEMENT OF SUCH INVESTMENTS. AS PER SCHEDULE IV OF BALANCE SHEET, THE APPELLANT HAD THE FOLLOWING INVESTMENTS IN INDIAN COMPANIES. NAME OF COMPANY 31.03.2007 31.03.2006 TAYON TECHNOLOGIES LTD. 2,57,00,000 NIL APNA LOAN.COM INDIA P. LTD 7,427 4,78,15,800 TRAVEL JINI.COM LTD 6,03,00,253 6,03,00,243 BILL JUNCTION PAYMENT LTD. 5,02,52,136 5,02,52,136 TOTAL 13,62,59,816 15,83,68,189 THE ABOVE DETAILS SHOWS THAT THERE WAS NEW INVESTME NT DURING THE YEAR OF RS.2.57 CRORES. THE INVESTMENTS IN SHARES OF APNA LOAN.COM WERE SOLD DURING THE YEAR. IN RESPECT OF OTHER TWO COMPANIES, THERE WAS NO MOVEME NT IN OPENING AND CLOSING BALANCE. THUS, THE MOVEMENT IN SHARES WAS IN RESPECT OF THE TWO COMPANIES. THIS MOVEMENT WAS NOT SIGNIFICANT TO ATTRACT THE MANAGEM ENT AND ADMINISTRATIVE EXPENSES TO THE EXTENT AS DETERM INED BY THE AO. CONSIDERING THE VERY SMALL MOVEMENT, THA T TOO IN THE SHARES OF ONLY TWO COMPANIES, THE MANAGERIAL AND ADMINISTRATIVE EXPENSES INCURRED FOR MANAGEMENT OF INVESTMENTS IN ESTIMATED AT RS.5,00,000/- ONLY. THE DISALLOWANCE MADE BY THE AO IS THEREFORE, REDUCED T O RS.5,00,000/- ONLY. REDIFF.COM 6 4.2. BEING AGGRIEVED THE REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL. 4.3. DURING THE COURSE OF HEARING BEFORE US, LD. DR RELI ED UPON THE ORDER OF THE AO. ON THE OTHER HAND, LD. CO UNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A ) AND FURTHER SUBMITTED THAT NO DIVIDEND INCOME WAS RECEI VED DURING THE YEAR, AND NO OTHER EXEMPT INCOME HAS BEE N ALSO RECEIVED. HE RELIED UPON THE JUDGMENT OF HONBLE DE LHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT DT 2.9 .2015 IN ITA NO749/2014 FOR THE PROPOSITION THAT IN ABSENCE OF A CTUAL RECEIPT OF EXEMPT INCOME, THERE COULD NOT HAVE BEEN ANY DISALLOWANCE U/S 14A. 4.4. WE HAVE GONE THROUGH THE ORDER OF THE LD. CIT(A), WE FIND THAT LD. CIT(A) HAS RECORDED THE FINDING CORRECTLY AS PER LAW AND FACTS. THE FACTS BROUGHT BEFORE US WERE THAT NO DIVIDEND INCOME OR ANY OTHER EXEMPT INCOME HAS BEEN RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONCERN. THIS FACTUA L POSITION HAS NOT BEEN DISPUTED BY THE LD. DR. UNDER THESE CIRCUMSTANCES, POSITION OF LAW IS NOW VERY CLEAR TH AT NO DISALLOWANCE U/S 14A CAN BE MADE IN ABSENCE OF ACTU AL RECEIPT OF ANY EXEMPT INCOME. WE DERIVE SUPPORT FOR OUR VIE W FROM THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA) IT IS FURTHER NOTED BY US T HAT IN ANY CASE LD. CIT(A) HAD SUSTAINED DISALLOWANCE OF RS.5, 00,000/- AGAINST WHICH THE ASSESSEE HAS NOT FILED ANY APPEAL . THUS, THE ORDER OF LD. CIT(A) IS IN ACCORDANCE WITH LAW AND F ACTS, AND NO REDIFF.COM 7 INTERFERENCE IS CALLED FOR THEREIN AND THEREFORE, S AME IS UPHELD. THUS, GROUND NOS. 1 & 2 OF REVENUES APPEAL ARE DIS MISSED. 5. GROUND NO.3: IN THIS GROUND, THE REVENUE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) IN DELETING THE DISALLOWAN CE OF EXPENDITURE FOR AN AGGREGATE AMOUNT OF RS.5,77,19,9 42/- UNDER SECTION 40A(IA) FOR ALLEGED FAILURE OF THE AS SESSEE IN DEDUCTION OF TAX AT SOURCE ON THE AMOUNT DEBITED IN THE P & L ACCOUNT UNDER THE HEAD SOFTWARE AND PROJECT DEVELOP MENT EXPENSES. 5.1. THE BRIEF FACTS ARE THAT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS IT WAS NOTED BY THE AO THAT CERTAIN PAY MENTS ARE MADE BY THE ASSESSEE TO THE FOREIGN PARTIES ON WHIC H TDS WAS NOT DEDUCTED AND THEREFORE HE MADE DISALLOWANCE U/S 40(A) (I) AS PER THE DETAILS GIVEN BELOW: (A) PRODUCT DEVELOPMENT EXPENSES RS. 25,17,796/- (B) LEGAL AND PROFESSIONAL FEE RS.53,17,642/- (C) BANDWIDTH CHARGES RS.2,84,95,861/- (D) OTHER PAYMENTS UNDER THE HEAD PROVISIONS OF RS.1,13,27,879/- (E) SOFTWARE PURCHASES OF RS.92,10,820/- TOTAL RS. 5,77,19,942/- 5.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN DETAILED SUBMISSIONS WERE MADE T O ARGUE THAT THESE PAYMENTS ARE NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE WITH ITS. THE LD. CIT(A) ACCEPTED THE SUBMIS SIONS OF THE ASSESSEE AND DELETED THE DISALLOWANCE TO ITS SUBSTA NTIAL EXTENT. REDIFF.COM 8 5.3. DURING THE COURSE OF HEARING BEFORE US LD. DR AT T HE VERY OUTSET STATED THAT IN THIS CASE PROPER ANALYSIS WER E NOT DONE SINCE COMPLETE INFORMATION, EVIDENCES AND SUBMISSIO NS WERE NOT PROVIDED AT THE ASSESSMENT STAGE WITH RESPECT T O DETERMINATION OF CHARGEABILITY OF TAX UPON THE INCO ME IN THE HANDS OF THE RECIPIENTS. BEFORE LD. CIT(A) ALSO ALT HOUGH DETAILED DISCUSSIONS WERE MADE BUT SINCE THEN THERE HAS BEEN A LOT OF THE DEVELOPMENT IN THE POSITION OF LAW. IT WAS SUBMITTED THAT IN ASSESSEES OWN CASE IN THE PRECED ING YEAR I.E. A.Y. 2005-06. THE LD. CIT(A) HAS GRANTED RELIE F ON THE SIMILAR PATTERN, AGAINST WHICH THE REVENUE HAD FILE D APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL DISPOSED THE APPE AL VIDE ITS ORDER DATES 5 TH SEPTEMBER, 2011 REPORTED IN 141 TTJ 679 WHEREIN THE TRIBUNAL SENT THE ISSUE BACK TO THE FIL E OF THE AO FOR DETERMINATION OF TAXABILITY OF PAYMENTS IN THE HANDS OF THE RECIPIENTS, ON MERITS. HE THEREFORE, REQUESTED THAT THIS YEAR ALSO THE ISSUE SHOULD BE SENT BACK TO THE FILE OF T HE AO FOR DE NOVO EXAMINATION IN THE LIGHT OF FRESH DECISION TO BE T AKEN BY THE LOWER AUTHORITIES FOR A.Y. 2005-06. IT IS SUBMI TTED THAT IT IS VERY ESSENTIAL TO AVOID ANY KIND OF ANY INCONSISTEN CY IN THE ORDERS OF TWO YEARS. 5.4. ON THE OTHER HAND, LD. COUNSEL SUBMITTED THAT COMP LETE DETAILS AND EVIDENCES WERE GIVEN TO THE LOWER AUTHO RITIES AND DETAILED DISCUSSION HAVE BEEN MADE BY THEM IN THEIR ORDERS, AND THEREFORE, THESE ISSUES CAN BE DECIDED HERE ITS ELF. HE FURTHER SUBMITTED THAT NOW THERE IS LOT OF LEGAL DE VELOPMENT FROM VARIOUS COURTS OF THE COUNTRY WHEREIN IT HAS B EEN HELD REDIFF.COM 9 THAT OBLIGATION TO DEDUCT TDS TAX AT SOURCE CANNOT BE CREATED ON THE BASIS OF RETROSPECTIVE LEGISLATION. RELIANCE WAS PLACED ON RECENT JUDGMENT OF HONBLE DELHI HIGH COURT IN T HE CASE OF DIT V. NEW SKIES SATELLITE BV ORDER DATED 08.02.201 6 IN ITA NO.473/2012. IT WAS FURTHER SUBMITTED BY HIM THAT I N SOME OF THESE EXPENSES, IT HAS BEEN HELD BY LD. CIT(A) THAT THESE ARE CAPITAL NATURE AND THEREFORE, ONLY CLAIM OF DEPRECI ATION SHALL BE ALLOWED TO THE ASSESSEE UPON SUCH EXPENSES, AND THE ASSESSEE WOULD BE ELIGIBLE TO CLAIM DEPRECIATION, W HICH IS STATUTORY DEDUCTION AND NOT AN OUTGOING EXPENDITURE , THEREFORE SECTION 40(A)(I) DOES NOT APPLY TO SUCH D EDUCTION, AND THEREFORE, AMOUNT PAID COULD NOT HAVE BEEN DISALLOW ED. IN SUPPORT OF HIS PROPOSITION, HE RELIED UPON THE JUDG MENT OF COORDINATE BENCH IN THE CASE OF SKOL BREWERIES LTD. VS ACIT [2013] 29 TAXMANN.COM 111 (BOM). 5.5. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND EVIDENCES SUBMITTED BEFORE US. IT IS NOTED THAT ISSUE OF DISALLOWANCE MADE U/S 40(A)(I) DUE TO NON-DEDUCTION OF TDS ON VARIOUS FOREIGN REMITTANCE OF SIMILAR NATURE REA CHED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-0 6. THE TRIBUNAL HAS SENT THIS ISSUE BACK TO THE FILE OF TH E AO TO EXAMINE THE TAXABILITY OF THE PAYMENTS IN THE HANDS OF THE RECIPIENTS. THE LD. COUNSEL HAS SUBMITTED THAT NOW THIS ISSUE CAN BE DECIDED BEFORE THE TRIBUNAL SINCE PROPER DIS CUSSION HAS BEEN MADE BY LD CIT(A) IN THIS YEAR. REDIFF.COM 10 5.6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUN SEL, BUT WE ARE NOT ABLE TO ACCEPT THE SAME FULLY AT THI S STAGE. WE SHALL LIKE TO REFRAIN FROM CREATING ANY CONSISTENCY IN THE DECISION OF SAME ISSUES ARISING IN DIFFERENT YEARS. MOREOVER, WE FIND THAT LOT OF LEGAL DEVELOPMENT HAS ALREADY TAKE N PLACE FOR DECIDING THESE ISSUES, AS HAS BEEN CONTENDED BY THE LD. COUNSEL ALSO. THEREFORE, FOR THE PURPOSE OF MAINTAI NING CONSISTENCY, WE FIND IT APPROPRIATE TO SEND THIS IS SUE BACK TO THE FILE OF THE AO FOR RE-EXAMINATION OF COMPLETE F ACTS AND DECIDING ALL THESE ISSUES AFRESH AFTER GIVING ADEQU ATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE AO SHAL L INTER-ALIA TAKE INTO ACCOUNT FOLLOWING SUBMISSIONS OF THE ASSE SSEE BEFORE DECIDING THIS ISSUE AS PER LAW AND FACTS: (1) THE LIABILITY OF THE ASSESSEE IN DEDUCTION OF TAX A T SOURCE CANNOT ARISES UNLESS THE AO HOLDS THAT INCOME IN TH E HANDS OF THE PAYEE IS CHARGEABLE TO TAX IN INDIA, ESPECIALLY IN VIEW OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P. LTD V/S. CIT AND ANOTHER (2010 ) 327 ITR 456 (SC). FURTHER, EVEN IF THE LIABILITY OF THE PAYEE IS DETERMINED ON THE BASIS OF RETROSPECTIVE AMENDMENTS MADE BY FINANCE ACT, 2010 OR FINANCE ACT, 2012, EVEN THEN, THE OBLIGATION TO DEDUCT TDS CANNOT BE CREATED THROUGH RETROSPECTIVE LEGISLATION IN VIEW OF DETAILED JUDGM ENT OF HONBLE DELHI HIGH COURT IN THE CASE OF NEW SKIES SATELLITE BV (SUPRA) AND JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. SIEMENS AKTIONGESELLSCHAFT (310 ITR 320) (BOM) AND VARIOUS OTHER JUDGMENTS DIRECTLY ON THIS ISSUE. REDIFF.COM 11 (2) IN THOSE CASES WHERE THE EXPENDITURE HAS BEEN CAPI TALIZED, THE CLAIM OF DEPRECIATION IF OTHERWISE ALLOWABLE UN DER THE LAW CANNOT BE DISALLOWED MERELY ON THE BASIS OF APPLICA TION OF SECTION 40(A)(I) FOR FAILURE TO DEDUCT TAX AT SOURC E. IN SUPPORT OF HIS PROPOSITION, LD. COUNSEL HAS RELIED UPON THE DE CISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SKOL BR EWERIES LTD. (SUPRA). THE LD. COUNSEL HAS ALSO ARGUED THAT THERE HAVE BEEN DUPLICATE DISALLOWANCES/ADDITIONS BY THE OFFIC ERS. ONE ITEM HAS BEEN DISALLOWED AT MORE THAN ONE PLACE. IT IS DIRECTED THAT THE AO SHALL TAKE INTO CONSIDER ATIONS THESE SUBMISSIONS AND SHALL NOT MAKE DUPLICATE DOUBLE DISALLOWANCE/ ADDITIONS OF ONE ITEM. IN ADDITION TO THE ABOVE, WE FURTHER CLARIFY THAT A SSESSEE IS FREE TO TAKE ALL THE FACTUAL AND LEGAL ISSUES BEFORE THE AO AS MAY BE CONSIDERED APPROPRIATE AS PER LAW, AND AO IS ALSO F REE TO ASK FOR FURTHER DETAILS AND EVIDENCES FROM THE ASSESSEE AS MAY BE CONSIDERED APPROPRIATE AS PER LAW AND FACTS AND MAY ALSO CONSIDER LATEST POSITION OF LAW AS MAY BE AVAILABLE AS ON THE DATE OF PASSING OF THE AFRESH ASSESSMENT ORDER, IN ADDITION TO THE JUDGMENTS THAT MAY BE RELIED UPON BY THE ASSESS EE. THUS, WITH THESE DIRECTIONS, THIS ISSUE IS SENT BACK TO T HE FILE OF THE AO. THUS, GROUND NO.3 MAY BE TREATED AS PARTLY ALLO WED FOR STATISTICAL PURPOSES. REDIFF.COM 12 6. GROUND NOS. 4 & 5: THESE GROUNDS ARE GENERAL AND DO NOT NEED ANY SPECIFIC ADJUDICATION, THEREFORE DISMISSED . WE SHALL TAKE UP REVENUES APPEAL IN ITA NO.4662/MUM/2013 FOR AY 2008-09: 7. GROUND NOS. 1 & 2: IT IS NOTED THAT LD. CIT(A) HAS FOLLOWED HIS ORDER FOR A.Y. 2007-08, AND, SINCE WE HAVE SEN T THE ISSUES RAISED BY THE REVENUE BACK TO THE FILE OF THE AO, T HEREFORE WE FIND IT APPROPRIATE TO SEND GROUND NOS.1 AND 2 ALSO BACK TO THE FILE OF THE AO WITH OUR SIMILAR DIRECTIONS AS W ERE GIVEN FOR A.Y. 2007-08. THUS, THESE GROUNDS MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.3: THIS GROUND DEALS WITH DISALLOWANCE U/S 14A MADE BY THE AO AT RS.42,49,997/- WHICH WAS REDUCED OF RS.5,00,000/- BY LD. CIT(A). IT IS NOTED THAT NO DE TAIL HAS BEEN FILED BY THE ASSESSEE. IT IS FURTHER NOTED THAT LD. CIT(A) HAS FOLLOWED HIS OWN ORDER OF A.Y. 2007-08. IN OUR VIEW , THE FACTS ARE IDENTICAL TO A.Y. 2007-08. IT IS INFORMED BY BO TH THE PARTIES NO DIVIDEND INCOME HAS BEEN RECEIVED DURING THE YEA R. THE OTHER FACTS ARE ALSO CLAIMED TO BE IDENTICAL. THUS, FOLLOWING OUR ORDER FOR A.Y. 2007-08, WE UPHOLD THE ORDER OF LD. CIT(A). THUS, THIS GROUND IS DISMISSED. 9. GROUND NO.4: THIS GROUND IS GENERAL AND DISMISSED. WE SHALL TAKE REVENUES APPEAL IN ITA NO.4663/MUM/2013 FOR A.Y. 2009-10 REDIFF.COM 13 10. GROUND NOS. 1 TO 3: THESE GROUNDS DEAL WITH DISALLOWANCE U/S 40(A)(I) ON ACCOUNT OF VARIOUS REM ITTANCES. IT IS NOTED THAT LD. CIT(A) HAS FOLLOWED HIS OWN ORDER FOR A.Y. 2007-08. SINCE WE HAVE SENT THESE ISSUES BACK TO TH E FILE OF THE AO FOR A.Y. 2007-08, THEREFORE IN THIS YEAR ALS O WE FIND IT APPROPRIATE TO SEND THESE ISSUES BACK TO THE FILE O F THE AO WITH THE DIRECTIONS AS WERE GIVEN FOR A.Y. 2007-08. THUS , THESE GROUNDS MAY BE TREATED AS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. 11. GROUND NO.4: THIS GROUND DEALS WITH THE GRIEVANCE OF THE REVENUE FOR THE ACTION OF LD. CIT(A) IN DELETING DI SALLOWANCE OF RS.6,32,79,350/- IN RESPECT OF PROVISIONS OF EXPENS ES, MADE BY THE AO U/S 40(A)(IA) OF THE ACT. 11.1. THE BRIEF FACTS ARE THAT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS IT WAS FOUND BY THE AO THAT THOUGH THE ASSESSEE HAS MADE A PROVISION OF VARIOUS EXPENSES FOR THE AF ORESAID AMOUNT BUT FAILED TO DEDUCT TAX AT SOURCE. IN RESPO NSE, IT WAS SUBMITTED THAT THESE WERE PURE ESTIMATE AND SINCE N O BILLS WERE RECEIVED, THE ACCOUNTS OF PARTIES WERE NOT CRE DITED AND THEREFORE, IT WAS NOT POSSIBLE TO DEDUCT TAX AT SOU RCE. BUT THE AO DID NOT ACCEPT SUBMISSIONS AND MADE DISALLOWANCE OF THE ENTIRE AMOUNT OF THE PROVISIONS. 11.2. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHEREIN DETAILED SUBMISSIONS WERE MADE. THE LD. REDIFF.COM 14 CIT(A) AGREED WITH THE SUBMISSIONS BY THE ASSESSEE AND HELD THAT TDS WAS NOT LIABLE TO BE DEDUCTED ON THE AMOUN T OF MERE PROVISIONS, IN ABSENCE OF THE AMOUNT PAYABLE HAVING BEEN QUANTIFIED AND PAYEE IDENTIFIED. HE, THEREFORE, DEL ETED THE DISALLOWANCE MADE BY THE AO. 11.3. BEING AGGRIEVED THE REVENUE HAS FILED BEFORE US. 11.4. DURING THE COURSE OF HEARING, LD. COUNSEL DREW OUR ATTENTION ON PAGE NO.60 OF THE PAPER BOOK WHEREIN I TEM WISE DETAILS OF THESE EXPENSES HAVE BEEN GIVEN, AND SUBM ITTED THAT THESE WERE MERE PROVISIONS AND NO TAX COULD HAVE BE EN DEDUCTED ON SUCH KIND OF PROVISION. 11.5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE AO. 11.6. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND FIND THAT LD. CIT(A) HAD MADE DETAILED ANALYSIS OF THE FACTS AND RECORDED COMPREHENSIVE FINDING TO DEAL WI TH THE ISSUE, BEFORE TAKING A DECISION THAT TDS WAS NOT RE QUIRED TO BE DEDUCTED ON THESE AMOUNTS OF PROVISIONS. RELEVANT P ART OF HIS FINDINGS IS REPRODUCED BELOW: 8.3. I HAVE CONSIDERED THE FACTS OF THE CASE. THE AO HAS DISALLOWED THE ABOVE AMOUNT HOLDING THAT THE PROVISIONS OF EXPENSES WAS ON ESTIMATE BASIS, FOR UNASCERTAINED LIABILITIES, HAD NOTHING TO DO WITH ACTUAL EXPENDITURE, EXPENSES WERE NOT DEBITED TO ACCOUNT OF A PARTICULAR PARTY AND NO TDS HAD BEEN REDIFF.COM 15 DEDUCTED THEREON. A.O'S FINDING AND APPELLANT'S SUBMISSIONS HAVE BEEN CONSIDERED. DURING ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS, THE APPELLANT HAS SATISFACTORILY EXPLAINED THAT THE PROVISIONS WERE MADE IN RESPECT OF EXPENSES ACTUALLY INCURRED DURING THE YE AR BUT THE BILLS/INVOICES OF WHICH REMAINED TO BE RECE IVED FROM THE PARTIES DURING THE YEAR. IN VIEW OF THIS POSITION, THE A.O'S FINDING DOES NOT APPEAR TO BE CORRECT THAT THE PROVISIONS WAS MADE ON ESTIMATE BASIS AND THE SAID PROVISIONS WERE NOT PERTAINING TO EXPENDITURE ACTUALLY INCURRED DURING THE YEAR. THE APPELLANT HAD SATISFACTORILY EXPLAINED TH AT THE EXPENSES WERE INCURRED DURING THE YEAR ITSELF. THE BILLS FOR ALL EXPENSES WERE NOT RECEIVE D DURING THE YEAR. SINCE, THE PURCHASES WERE MADE OR THE SERVICES WERE RECEIVED D URING THE YEAR ITSELF IN RESPECT OF SUCH EXPENSES, THEREFORE, THESE PROVISIO NS REPRESENT THE EXPENSES PERTAINING TO THE YEAR UNDER CONSIDERATION. THE LIABILITY FOR SUCH EXPENSE WAS CRYSTALISED DURING THE YEAR ITSELF, THOUGH SUCH LIA BILITY WAS NOT QUANTIFIABLE AT THE END OF THE YEAR. IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) AND VARIOUS OTHER DECISIONS OF HIGH COURTS, THE EXPENSES PERTAINING TO SUCH CRYSTALISED LIABILI TY WERE REQUIRED TO BE ALLOWED AS DEDUCTION. IN ABSENC E OF ACTUAL INVOICES, THE PROVISION WAS REQUIRED TO BE M ADE ON ESTIMATE BASIS ONLY, BUT SUCH ESTIMATION WAS BASED ON PAST PRACTICE/ EXPERIENCE CONSISTENTLY FOLLOWED BY THE APPELLANT IN EARLIER AND SUBSEQUENT YEARS. THUS, TH E PROVISIONS WERE NOT ON ADHOC BASIS. THE DETAILS OF SUCH EXPENSES WERE ALREADY FILED WITH THE AO. THE APPELL ANT HAS RECEIVED BILLS FOR SUCH PROVISION FOR EXPENSES IN SUBSEQUENT YEAR, THE DEDUCTION OF WHICH HAS NOT BEE N CLAIMED BY THE APPELLANT IN THE SUBSEQUENT YEAR. IN VIEW OF ABOVE DISCUSSION, IN MY CONSIDERED VIEW THE APPELLANT'S CLAIM FOR PROVISION OF EXPENSES WAS ALLOWABLE AS DEDUCTION SINCE THE PROVISION WAS PERTAINING TO THE LIABILITY CRYSTALISED DURING THE YEAR. THE AO HAS ALSO MADE DISALLOWANCE OF PROVISION OF EXPENSES HOLDING THAT THE APPELLANT HAD NOT DEDUCTE D REDIFF.COM 16 TDS ON SUCH PROVISIONS. SINCE, THE PROVISION WAS MA DE IN RESPECT OF EXPENSES PERTAINING TO THE YEAR UNDER CONSIDERATION, THE BILLS OF WHICH WERE NOT RECEIVED DURING THE YEAR, THEREFORE, THE AMOUNT OF SUCH PROV ISIONS COULD NOT HAVE BEEN DEBITED TO ACCOUNT OF A PARTICU LAR PARTY. THEREFORE, THERE WAS NO REQUIREMENT OF DEDUC TION OF TAX AT SOURCE ON SUCH PROVISION SINCE NEITHER THE A MOUNT WAS CREDITED IN PARTY ACCOUNT NOR COULD BE RELATED TO ANY PARTY. IN ANY CASE, WHEREVER, TDS WAS REQUIRED TO BE MADE, THE APPELLANT ITSELF HAD DEDUCTED TAX THEREON. ON THE PAYMENTS WHICH WERE SUBJECT TO TDS AND THE APPELLANT HAD NOT DEDUCTED TDS THEREON, THE APPELLANT HAD ALREADY OFFERED SUCH EXPENSES AS DISALLOWANCE AT RS. 1,86,38,108/-. IN THIS WAY, THE APPELLANT HAD CLAIMED ONLY EXPENSES OF RS.4,46,41,242/- AS PROVISION FOR EXPENSES. SINCE T HE APPELLANT HAD ALREADY DEDUCTED TAX WHEREVER APPLICABLE OR HAD ALREADY OFFERED DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TAX, THE ENTIRE PROVISI ON OF EXPENSES COULD NOT HAVE BEEN DISALLOWED U/S.40(A)(I A) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, THE DISALLOWANCE M ADE BY THE AO IS THEREFORE, DELETED. 11.7. WE HAVE CAREFULLY GONE THROUGH THE EVIDENCES SHOWN TO US. THIS FACTUAL POSITION THAT AS WHEN PAYMENTS WER E MADE TDS WAS DEDUCTED, HAS NOT BEEN DISPUTED BY THE REVE NUE. IT IS NOBODYS CASE THAT ANY PAYMENT HAS BEEN MADE SUBSEQUENTLY WITHOUT DEDUCTION OF TAX AT SOURCE. TH US, ADMITTED FACTS ON RECORD OR THAT IN THE SUBSEQUENT YEARS, EITHER THE TDS HAS BEEN DEDUCTED WHILE MAKING THE P AYMENT OR CREDITING THE AMOUNT IN THE ACCOUNT OF PAYEE OR THE EXCESS AMOUNT OF PROVISIONS HAS BEEN WRITTEN BACK. THUS, F ACTUALLY, THERE IS NO LOSS TO REVENUE. UNDER THESE CIRCUMSTAN CES WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A), AND THEREFORE, SAME IS UPHELD. THUS, GROUND NO.4 IS DIS MISSED. REDIFF.COM 17 12. GROUND NO.5 IS GENERAL AND THEREFORE DISMISSED. WE SHALL TAKE UP REVENUES APPEAL IN ITA NO. 5438/MUM/2013 FOR A.Y. 2002-03. 13. GROUND NOS. 1 TO 4: IN THESE GROUNDS, REVENUE HAS RAISED THE ISSUE OF DELETION OF DISALLOWANCE WHICH WAS MADE BY THE AO U/S 40(A)(I) ON ACCOUNT OF FAILURE IN DEDUCT ION OF TAX ON VARIOUS FOREIGN REMITTANCES. IT IS NOTED THAT LD. C IT(A) HAS FOLLOWED HIS OWN ORDER FOR A.Y. 2007-08 WHILE PASSI NG THE IMPUGNED ORDER. WE HAVE SENT THESE ISSUES BACK TO T HE FILE OF THE AO IN A.Y. 2007-08 AND THEREFORE, WE FIND IT AP PROPRIATE TO SEND THESE ISSUES BACK TO THE FILE OF THE AO WITH S IMILAR DIRECTIONS AS WERE GIVEN IN A.Y. 2007-08. THUS, THE SE GROUNDS MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 14. GROUND NOS.5 & 6 ARE GENERAL AND THEREFORE DISMISS ED. WE SHALL TAKE UP REVENUES APPEAL IN ITA NO. 5439/MUM/2013 FOR A.Y. 2003-04 15. GROUND NOS. 1 & 2: IN THESE GROUNDS THE REVENUE HAS RAISED THE ISSUE OF DISALLOWANCE U/S 40(A)(I). IT I S NOTED THAT LD. CIT(A) HAS FOLLOWED HIS OWN ORDER FOR A.Y. 2007 -08. IT IS FURTHER NOTED BY US THAT WE HAVE SENT THIS ISSUE BA CK TO THE FILE OF THE AO IN A.Y. 2007-08. THUS, FOLLOWING OUR ORDER, WE SEND THESE ISSUES ALSO BACK TO THE FILE OF THE AO W ITH OUR REDIFF.COM 18 SIMILAR DIRECTIONS. THUS, THESE GROUNDS MAY BE TREA TED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. GROUND NOS. 3 & 4: THESE GROUNDS ARE GENERAL, THERE FORE, DISMISSED. WE SHALL TAKE REVENUES APPEAL IN ITA NO.42/MUM/201 4 FOR A.Y. 2006-07 17. GROUND NOS. 1 & 2: IN THESE GROUNDS THE REVENUE HAS RAISED ISSUE OF DISALLOWANCE U/S 40(A)(I) ON VARIOU S FOREIGN REMITTANCES: THE LD. CIT(A) HAS FOLLOWED HIS OWN OR DERS FOR A.YS. 2007-08, 2008-09 & 2009-10. IN THESE YEARS WE HAVE SENT THESE ISSUES BACK TO THE FILE OF THE AO WITH C ERTAIN DIRECTIONS. THUS, IN THIS YEAR ALSO, WE FIND IT APP ROPRIATE TO SEND THESE ISSUES BACK TO THE FILE OF THE AO WITH T HE SIMILAR DIRECTIONS. THUS, THESE GROUNDS MAY BE TREATED AS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 18. GROUND NOS. 3 & 4 ARE GENERAL AND THEREFORE DISMIS SED. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO. 4223/MUM/2013 FOR AY 2006-07: 19. GROUND NO.1: IN THIS GROUND THAT ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN DISALLOWING THE CAPITAL WORK-IN- PROGRESS OF RS.8,16,67,747/- WRITTEN OFF BY THE ASS ESSEE DURING THE YEAR AS BUSINESS LOSS. REDIFF.COM 19 20. THE BRIEF FACTS IN THIS CASE ARE THAT DURING THE Y EAR ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PRO VIDING INTERNET ACCESS SERVICES TO CORPORATE CLIENTS AND V IEWERS OF ITS WEBSITE REDIFF.COM. 20.1 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WA S NOTED BY THE AO THAT ASSESSEE HAD REDUCED AFORESAID AMOUNT IN THE COMPUTATION OF INCOME FILED WITH THE RETURN ON ACCOUNT OF CAPITAL WORK-IN-PROGRESS WRITTEN OFF. THE AO GAV E SHOW CAUSE NOTICE TO THE ASSESSEE FOR DISALLOWING THE AB OVE SAID EXPENDITURE AS CAPITAL EXPENDITURE. THE ASSESSEE FU RNISHED DETAILED REPLY, WHEREIN IT WAS SUBMITTED THAT THE A SSESSEE COMPANY HAD INITIATED VARIOUS PROJECTS PERTAINING T O ITS WEBSITE REDIFF.COM AND FOR THIS PURPOSE THE ASSES SEE COMPANY HAD SPENT AMOUNTS ON THESE PROJECTS MEANT F OR IMPROVING ITS WEBSITE. HOWEVER, DUE TO VARIOUS CONS TRAINTS, THESE PROJECTS WERE NOT SUCCESSFUL AND COULD NOT BE TAKEN TO LOGICAL END AND THEREFORE, IT WAS DECIDED THAT THOS E PROJECTS WHICH ARE NOT VERY RELEVANT SHOULD BE ABANDONED, TH EREFORE EXPENDITURE ON SUCH PROJECTS WERE WRITTEN OFF. IT W AS FURTHER SUBMITTED THAT THESE EXPENSES WERE OF NATURE OF SAL ARY, PROFESSIONAL FEE ETC., WHICH WERE OTHERWISE REVENUE IN NATURE INCURRED IN THE NORMAL COURSE OF BUSINESS. IT WAS F URTHER SUBMITTED THAT THESE EXPENSES WERE INCURRED NOT FOR THE PURPOSE OF ESTABLISHING ANY NEW BUSINESS BUT WERE I NCURRED ON THE PROJECTS FOR IMPROVING EXISTING BUSINESS. IT WAS FURTHER SUBMITTED THAT THESE EXPENSES DO NOT BRING INTO EXI STENCE OF ANY NEW ASSET WHICH WOULD GIVE ANY BENEFIT ENDURING NATURE. REDIFF.COM 20 THE ASSESSEE ALSO RELIED UPON THE VARIOUS JUDGMENTS IN SUPPORT OF HIS PROPOSITION THAT SUCH EXPENSES ARE A LLOWABLE IN NATURE. THE AO WAS NOT SATISFIED WITH THE REPLY AND HE DISALLOWED THE EXPENSES AS CAPITAL IN NATURE. 20.2. BEING AGGRIEVED, THE ASSESSEE FILED THE APPEAL BEF ORE THE LD. CIT(A) AND REITERATED ITS SUBMISSIONS BEFORE HI M. BUT LD. CIT(A) DID NOT AGREE WITH THE SUBMISSIONS OF THE AS SESSEE AND RELYING UPON THE JUDGMENT OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. TATA ROBINS FRASER LTD 78 D TR 22 HELD THAT THE SAID THESE EXPENSES CANNOT BE ALLOWED TO T HE ASSESSEE. RELEVANT PARA OF HIS OBSERVATIONS IS REPR ODUCED BELOW: 10.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. IT WAS AN ADMITTED FACT THAT THE EXPENDITURE WAS PERTA INING TO ABANDONED PROJECTS. SUCH PROJECTS WERE TO BE CAP ITAL ASSETS IN THE HANDS OF THE APPELLANT. RECENTLY THE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. TATA RO BINS FRASER LTD. (2012) 78 DTR 22 HELD THAT THE EXPENDIT URE ON ABANDONED PROJECT CANNOT BE ALLOWED AS REVENUE EXPENDITURE. IN VIEW OF THE DISCUSSION MADE IN THE ASSESSMENT ORDER, I AM IN AGREEMENT WITH THE AO THA T THE EXPENDITURE WAS CAPITAL IN NATURE AND THEREFORE COU LD NOT BE ALLOWED AS REVENUE EXPENDITURE. THE DISALLOWANCE MADE BY THE AO IS THEREFORE UPHELD. 20.3. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSE L HAS SUBMITTED THAT LD. CIT(A) HAS GONE WRONG IN APPLYIN G THE DECISION OF TATA ROBINS FRASER LTD. (SUPRA). HE SUB MITTED THAT IN FACT, IN THIS DECISION, SUCH EXPENSES HAVE BEEN HELD TO BE ALLOWABLE. BUT LD. CIT(A) APPEARS TO HAVE WRONGLY R EAD THE SAID DECISION AND ADVERSELY HELD AGAINST THE ASSESS EE. HE REDIFF.COM 21 FURTHER SUBMITTED THAT ADMITTED FACTS ON RECORD ARE THAT EXPENSES INCURRED WERE ROUTINE EXPENSES IN THE FORM OF SALARY AND PROFESSIONAL FEE ETC. AND NO NEW ASSET HAD COME INTO EXISTENCES AND THESE EXPENSES WERE INCURRED FOR THE EXISTING BUSINESS OF THE ASSESSEE, AND THEREFORE, THESE COUL D NOT HAVE BEEN DISALLOWED. HE ALSO RELIED UPON RECENT JUDGMEN T OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANGANESE ORE INDIA LTD. DATED FEBRUARY 12, 2016. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE ORDER OF THE AO. 20.4. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES, FACTS BROUGHT BEFORE US AND COPIES OF JUDGMENTS PLACED BEFORE US. THE ADMITTED FACTS ARE THAT IMPUG NED EXPENSES WERE NOT FOUND TO BE INGENUINE OR BOGUS. T HE ONLY DISPUTE WAS THAT THESE EXPENSES ARE ALLEGEDLY CAPIT AL IN NATURE. WE DIFFER WITH THE VIEWS OF THE LOWER AUTHO RITIES. IT IS NOTED THAT EXPENSES WERE INCURRED IN CONNECTION WIT H THE EXISTING BUSINESS. ADMITTEDLY, THE EXPENSES INCURRE D WERE OF ROUTINE NATURE I.E. SALARY, PROFESSIONAL FEE ETC. T HESE EXPENDITURE ARE, OTHERWISE CLEARLY OF THE REVENUE I N NATURE. IT IS FURTHER NOTED THAT THE LD. CIT(A) APPEARS TO HAV E MISREAD THE JUDGMENT OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. TATA ROBINS FRASER LTD (SUPRA). IN THIS CA SE, HONBLE HIGH COURT HAS HELD THAT SUCH EXPENSES WERE ALLOWAB LE AS REVENUE EXPENSES. RELEVANT PARA OF THE ORDER OF HON BLE HIGH COURT IS REPRODUCED BELOW: REDIFF.COM 22 16.. SUBSTANTIALLY THIS IS ALSO A QUESTION OF FA CTS WHERE AN EXPENDITURE INCURRED BY THE ASSESSEE WAS O F THE REVENUE IN NATURE OR IT WAS CAPITAL EXPENDITURE. HO WEVER, IN VIEW OF THE FACT THAT QUESTION HAS BEEN FRAMED A ND WE HAVE NARRATED THE FACTS OF THE CASE INCLUDING THE B REAK-UP OF THE EXPENDITURE WHICH INCLUDES THE FEE OF RS.2,5 7,335/- PAID TO THE ARCHITECT AND SOME EXPENSES OF RS.46,37 9/- INCURRED ON OLD CAPITAL WORK IN PROGRESS WHICH WAS ABANDONED AND COST OF DAMAGED CABINETS AND THAT TOO , AMOUNTING TO RS.12,776/-, TOTAL EXPENDITURE INCLUDI NG ALL THREE OF THE HEAD IS RS.3,16,490/-. IT IS NOT IN DI SPUTE THAT THE PROJECT COULD NOT BE ACCOMPLISHED BECAUSE OF TH E REASON THAT THE PLACE WHERE IT WAS TO BE UNDERTAKEN HAD A POOR QUALITY OF SOIL AND ALL THE CONSTRUCTION ALREA DY DAMAGED. THE OTHER ARTICLES BOUGHT BY THE ASSESSEE ALSO GOT DAMAGED AND, THEREFORE, IN THAT FACT SITUATION, THE TRIBUNAL WAS FULLY JUSTIFIED IN HOLDING THAT SUCH EXPENDITURE WHICH MAY BE PRE-OPERATIONAL EXPENDITUR E FOR A PROJECT CAN BE TREATED TO BE A REVENUE EXPENDITUR E ACTUALLY AND NOT A CAPITAL EXPENDITURE. 20.5. IT IS FURTHER NOTED BY US THAT HONBLE BOMBAY HIGH COURT HAS RECENTLY DEALT WITH THIS ISSUE IN DETAIL IN ITS RECENT JUDGMENT DATED 11 TH FEBRUARY, 2016 IN THE CASE OF CIT V. MANGANESE ORE INDIA LTD, WHEREIN SIMILAR VIEW HAS B EEN TAKEN. THUS, KEEPING IN VIEW FACTS OF THIS CASE AND RESPECTFULLY FOLLOWING THESE JUDGMENTS, WE FIND THE ACTIONS OF L OWER AUTHORITIES AS CONTRARY TO LAW AND FACTS AND THEREF ORE WE DIRECT REDIFF.COM 23 THE AO TO DELETE THE DISALLOWANCE AND TREAT THESE E XPENSES AS REVENUE IN NATURE. THUS, THIS GROUND IS ALLOWED. 21. IN THE RESULT, APPEALS FILED BY THE ASSESSEE AND R EVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016. SD/- (C.N. PRASAD) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER MUMBAI; DATED : 13/ 04/2016 CTX? P.S/. .. # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI 5. ()* # !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI