TATA STEEL LTD, MUMBAI V. ASST CIT 2(3), MUMBAI

ITA 5616/MUM/2012

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5084 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 25-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JASMIN AMALSADWALA ARS
• Keywords: Business income; Depreciation; Business expenditure; Earning of tax free income; Question of law; Revenue expenditure; Capital expenditure; Rule 8D
• Section: 143(3); 14A; 133(6); 251; 64

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SRI M BALAGANESH, AM AND SRI RAVISH SOOD , JM AND ./ ITA NO. 561 6 /MUM/ 2012 ( / ASSESSMENT YEAR S 2005 - 06 ) ./ ITA NO. 4043 /MUM/2012 ( / ASSESSMENT YEARS 2006 - 07 ) TATA STEEL LIMITED BOMBAY HOUSE, 24 HOMI BODY STREET, FORT, MUMBAI - 400 001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX - 2(3), DY. COMMISSIONER OF INCOME TAX - 2(3) AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 400 020 ( / APPELLANT) ( / RESPONDENT) . / PAN NO. AAACT2803M ./ ITA NO. 5573/MUM/2012 ( / ASSESSMENT YEARS 2005 - 06 ) ASSISTANT COMMISSIONER OF INCOME TAX - 2(3), DY. COMMISSIONER OF INCOME TAX - 2(3) AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 400 020 / VS. TATA STEEL LIMITED BOMBAY HOUSE, 24 HOMI BODY STREET, FORT, MUMBAI - 400 001 ( / APPELLANT) ( / RESPONDE NT) / APPELLANT BY : SHRI NISHANT THAKKAR & MS. JASMIN AMALSADWALA, ARS / RESPONDENT BY : SHRI R. MANJUNATHA SWAMY, CIT DR ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 2 / DATE OF HEARING: 12.09 .2019 / DATE OF PRONOUNCEMENT : 06 . 1 1 .2019 / O R D E R , / PER M BALAGANESH , A M : THESE THREE APPEALS OF REVENUE AND ASSESSEE ARE ARISING OUT OF THE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS)] - 6 , MUMBAI , [ IN SHORT CIT( A) ] , IN ITA NO S . CIT(A) - 6/IT - 129 ,244 / 2009 - 10, 2010 - 11 DATED 22.06.2012 . THE ASSESSMENT S WERE FRAMED BY THE ASST. COMMISSIONER OF INCOME TAX 2 (2 ) , MUMBAI (IN SHORT ACIT / ITO/ AO) FOR THE A.Y S . 2005 - 06, 2006 - 07 VIDE ORDER S DATED 26.12.2008 , 29.12.2009 UNDER SE CTION 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER THE ACT). ITA NO. 5616/MUM/2012 FOR AY 2005 - 06 ASSESSEE APPEAL 2 . THE GROUND NO S . 1 TO 1.1 RAISED BY ASSESSEE WERE STATED TO BE NOT PRESSED BY THE LEA RNED AR AT THE TIME OF HEARING. T HE SAME IS RECKO NED AS STATEMENT MADE FROM THE BAR AND ACCORDINGLY, THE GROUND NOS. 1 AND 1.1 ARE DISMISSED AS NOT PRESSED. 3 . THE GROUND NO S . 2 TO 2.5 RAISED BY THE ASSESSEE ARE WITH REGARD TO ACTION OF THE LEARNED CIT(A) UPHOLDING THE DISALLOWANCE OF EXPENDITURE INCURRED O N FEASIBILITY STUDY. ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 3 4 . WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE IS A RECURRING ISSUE IN THE CASE OF ASSESSEE FROM AY 1986 - 87 ONWARDS. THE ASSESSEE SUBMITTED THAT IT HAS INCURRED EXPENDITURE ON FEASI BILITY STUDY ON A RECURRING BASIS YEAR ON YEAR AND DURING THE YEAR UNDER CONSIDERATION , THE EXPENDITURE INCURRED THEREON WAS 5,04, 60,373/ - WHICH WAS CLAIMED AS REVENUE EXPENDITURE. THE LEARNED AO TREATED THE SAME AS CAPITAL EXPENDITURE AND GRANTED DEPRECI ATION AT 25% WHILE COMPLETING THE ASSESSMENT. THE ASSESSEE SUBMITTED THAT THE SAID PAYMENT FOR FEASIBILITY STUDY WAS INCURRED IN CONNECTION WITH ITS MANUFACTURING ACTIVITY. THE SAID EXPENSES WERE INCURRED FOR THE PURPOSE OF EXCAVATION OF RAW MATERIALS , I.E . W ATER, POWER, MINERALS, ETC. FOR PRODUCTION OF STEEL. THESE EXPENSES ARE RECURRING IN NATURE AND DOES NOT RESULT IN ACQUIRING ANY ENDURING BENEFIT IN THE CAPITAL FIELD . THE LEARNED AR HAS VEHEMENTLY PLEADED THAT THE LEARNED AO ERRED IN OBSERVING THAT SAI D EXPENDITURE PERTAINS TO IMPORT OF TECHNICAL KNOWHOW IN RELATION TO A SPECIFIC PLANT COMMISSION ED AT JAMSHEDPUR. HE ARGUED THAT THIS STATEMENT MADE BY THE LEARNED AO IS FACTUALLY INCORRECT. THE LEARNED AR SUBMITTED THAT THE SAID EXPENDITURE HAS BEEN INCUR RED FOR TITANIA PROJECT IN TAMIL NADU. THE LEARNED AR FURTHER ELABORATED THAT A MEMORANDUM OF UNDERSTANDING (MOU) WAS ENTERED INTO WITH GOVERNMENT OF TAMIL NADU ON 27.06.2002 IN CONNECTION WITH THIS TITANIA PROJECT WHICH IN VOLVES MINING, MINERAL SEPARATION AND VALUE ADDITION I.E. PIGMENTS PRODUCTION IN PHASE S SUBJECT TO TECHNO - ECONOMIC VIABILITY. THE FEASIBILITY STUDY WAS CONDUCTED ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 4 WITH THE HELP OF CONSORTIUM PARTNERS COMPRISING OF OUTOKUMPU FINLAND S PHYSICAL SEPARAT ION DIVISION BASED IN USA, AUTOKUMPU - LUR GI, GERMANY, P INCOCK - ALLEN AND HOLT , USA, A RESOURCE AND MINERAL CONSULTING COMPANY AND L&T. ALL THESE FACTS WERE ALSO DULY SUBMITTED BY THE ASSESSEE BEFORE THE LEARNED AO . 5 . WE FIND THAT THE LEARNED CIT(A) HAD OBSERVED THAT THIS EXPENDITURE WAS INCURRED FOR A NEW PROJECT WHICH HA D POSSIBLY NOT STARTED AND IS NOT IN THE NATURE OF REVENUE EXPENDITURE. THE LEARNED CIT(A) HAD FURTHER OBSERVED THAT SINCE THE PROJECT HAD NOT STARTED, THE ASSESSEE WOULD NOT BE ELIGIBLE EVEN FOR DEPRECIATION ON THE SAME. 6 . WE FIN D THAT THE ASSESSEE HAD SUBMITTED THAT THE FEASIBILITY STUDIES WERE CONDUCTED IN CONNECTION WITH THE PROSPECT FOR VARIOUS MINERALS , WHICH WOULD PROVIDE THE INSIGHT TO THE MANAGEMENT OF THE ASSESSEE FOR DECISION MAKING PROCESS. IT IS MERELY IDENTIFICATION O F MINERALS , WHICH MAY BE TAKEN UP FOR THE DEVELOPMENT OF STEEL BUSINESS OF THE ASSESSEE AND DOES NOT AMOUNT TO INITIATION OF NEW BUSINESS BUT, ON THE OTHER HAND, IT FORMS PART OF THE DEVELOPMENT ACTIVITIES OF THE ASSESSEES EXISTING BUSINESS. WE FIND THAT THE LD AR HAD FURTHER STATED THAT THE FEASIBILITY STUDY WAS UNDERTAKEN AS PART OF THE VISION AND STRATEGIC GROWTH PLANS IN THE MATERIALS SECTOR . THE LEARNED AR PLEADED THAT THE ASSESSEE EXAMINED VARIOUS BUSINESS OPPORTUNITIES APART FROM ITS PRIMARY FOCUS ON STEEL BUSINESS. HE ARGUED THAT THE PRELIMINARY ANALYSIS INDICATED THAT ASSESSEE CAN BE ONE OF THE LOWEST COST PRODUCER S IN THE WORLD IN ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 5 HEAVY MINERAL SANDS BUSINESS . HENCE, IT WAS PROPOSED IN THE PRESENT MINERAL BUSINESS TO DEVELOP AND PROCESS THE MINE RALS SUCH AS ZIRCON, L I MENITE, ETC. FOR PRODUC ING THE TITANIUM METAL. THE PROPOSED STUDY WOULD INVOLVE MINERAL AND SEPARATION OF L I MENITE AND OTHER VALUABLE MINERALS FROM INLAND HEAVY MINERAL SAND DEPOSIT S IN THE DISTRICTS OF TUTICORIN AND TIRUNELVELI IN T HE STATE OF TAMIL NADU AND ITS UPGRADATION TO SYNTHETIC RUTILE LATER TO TITANIUM DI - OXIDE AND ULTIMATELY TO TITANIUM METAL. T H IS ENTIRE MODUS OPERANDI OF THE AFORESAID PROCESS HAD BEEN DULY EXPLAINED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. HENCE, IT CAN BE SAFELY CONCLUDED THAT THE FEASIBILITY STUDY WAS CONDUCTED FOR PROSPECTING VARIOUS MINERALS WHICH WILL CATER TO THE CURRENT STEEL AND MINERAL BUSINESS. WE ALSO FIND THAT THE ASSESSEE HAS SUBMITTED BEFORE THE LOWER AUTHORITIES THAT IT HAD UNDERTAKEN T HE ENTIRE PROCESS FOR PRODUCTION OF TITANIUM METAL IN DIFFERENT PHASES AND HENCE, IT WOULD NOT BE CORRECT TO STATE THAT THE COMPANY HAD STARTED MINING FOR TITANIUM , WHICH IS USED IN PAINT INDUSTRY, SUNS C R E EN , COLORING ETC. , AND NOT FOR THE PURPOSE OF EXCAV ATION OF WATER, POWER, MINERAL ETC. FOR PRODUCTION OF STEEL. THE LEARNED AR ALSO DREW OUR ATTENTION TO THE OBJECTS CLAUSE PROVIDED IN THE MEMORANDUM O F ASSOCIATION AND ARGUED THAT THE STUDY WAS UNDERTAKEN TO ANALYZE THE MINERALS FOR DETERMINING THE VIABILI TY WITH REGARD TO PRODUCTION OF TITANIUM METAL WHICH ALSO INVOLVED INTER SE PRODUCTION OF TITANIUM DI - OXIDE . THE MAIN OBJECT OF THE ASSESSEE COMPANY WAS TO MANUFACTURE TITANIUM METAL HAVING ITS UTILITY IN STEEL BUSINESS OF THE ASSESSEE COMPANY. ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 6 7 . WE FIND THA T THE LEARNED AR ARGUED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FROM AY 1986 - 87 ONWARDS AND PLACED THE ORDERS ON RECORD. HE ALSO STATED THAT THE REVENUE HAD NOT PREFERRED ANY APPEAL AGAINST THE ORDERS PASSED BY THIS TRIBUNAL IN EARLIER YEARS ON THIS ISSUE BEFORE HONBLE BOMBAY HIGH C OURT EXCEPT FOR AY 1985 - 86, WHICH WAS ALSO DISMISSED BY HONBLE BOMBAY HIGH C OURT. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT INCURRENCE OF EXPENDITURE ON FEASIBILITY STUDY WAS F OR A DIFFERENT PROJECT IN EARLIER YEARS AND HENCE, THE DECISION RENDERED THEREON BY THIS TRIBUNAL CANNOT BE MADE APPLICA BLE FOR THE YEAR UNDER CONSIDERATION. WE FIND THAT WHAT IS RELEVANT IS UNDERTAKING OF FEASIBILITY STUDY FOR VISUALIZING OR INITIATING A FRESH PROJECT WHICH WOULD IMPROVE THE EXISTING LINE OF BUSINESS OF THE ASSESSEE. WE FIND THAT IN EARLIER YEARS , THIS TRIBUNAL HAD HELD THAT EXPENDITURE INCURRED ON FEASIBILITY STUDY PAID TO VARIOUS PROJECT CONSULTANTS TO BE REVENUE IN NATURE. WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 3964 AND 3981/MUM/2003 FOR AY 1986 - 87 ON 19.02.2014 HAD HELD AS UNDER: - 16. NEXT GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES, AMOUNTING TO RS.13.14 LAKHS. DURING THE ASSESSMENT PROCEEDINGS AO HELD THAT THE EXPENDITURE WAS INCURRED IN CONNECTION WITH THE EXPANSION OF THE INDUSTRIAL UNDERTAKING, ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 7 THAT IT WAS A CAPITAL EXPENDITURE, THAT THE EXPENDITURE INCURRED ON PREPARATION OF FEASIBILITY/PROJECT REPORT IN CON NECTION WITH THE EXPANSION OF INDUSTRIAL UNDERTAKING OR IN CONNECTION WITH THE SETTING UP OF A NEW UNIT WAS AN ADMISSIBLE DEDUCTION U/S.35D OF THE ACT. 16.1.IN APPELLATE PROCEEDINGS FAA HELD THAT RS.5 LAKHS WERE PAID TO M.N.DASTUR & CO.FOR CONDUCT - ING TECH NO ECONOMIC FEASIBILITY REPORT FOR PRODUCING COLD ROLLED STRIPS, THAT THE STEEL WHICH WAS PRODUCED IN ASSESSEES WORKS WOULD BECOMES THE RAW MATERIAL FOR THE MANUFACTURE OF COLD ROLLED STRIPS IN THE AHMEDABAD ADVANCE MILLS LTD, THAT THE MANAGEMENT OF THAT COMPANY WAS TAKEN OVER BY THE ASSESSEE, THAT THE STUDY CONDUCTED BY THE CONSULTANT WAS IN RESPECT OF A NEW PRODUCT AND IT WAS A NEW LINE OF ACTIVITY AND NOT WITH REFERENCE TO THE EXISTING BUSINESS OPERATIONS, THAT IT RESULTED IN ENDURING BENEFIT, THAT PAMY MENT OF RS.5 LAKHS MADE TO M.N.DASTUR & CO. FOR CONDUCTING FEASIBILITY STUDIES ON PRODUCTION OF STAINLESS STEEL SLABS, THAT IT WAS A NEW PRODUCT LINE, THAT THE ASSESSEE ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 8 GOT THE EVALUATION OF LOCATION, CAPACITY, PROCESS AND INPUTS AVAILABILITY FOR MANUFACTU RE OF STAINLESS STEEL SLABS, THAT EXPENDITURE WAS INCURRED IN CONNECTION WITH THE ESTABLISHMENT OF A NEW PRODUCT LINE, THAT THE ASSESSEE DERIVED ENDURING BENEFIT, THAT FEES/HOTEL AND TRAVEL EXPENSES PAID FOR TECHNO ECONOMIC FEASIBILITY REPORT BY HOLTEC ENG INEERS PVT.LTD. FOR SLAG CEMENT PROJECT WAS INCURRED FOR A NEW PRODUCT AND A NEW PROJECT, THAT IT WAS NOT RELATED TO THE EXISTING TRADING OPERA - TIONS, THAT THE WASTE PRODUCED BY THE ASSESSEE BECAME THE RAW MATERIAL FOR THE SLAG CEMENT PROJECT, THAT THE AO HAD RIGHTLY TREATED A SUM OF RS. 2,75,107/ - AS CAPITAL EXPENDITURE, THAT A SUM OF RS. 1,40,000/ - WAS PAID FOR TECHNO ECONOMIC FEASIBILITY REPORT FOR SLAKED LIME AND WATER ADDITION FACILITIES AT SINTER PLANT, THAT THE SINTER PLANT WAS A PART OF THE ASSESSE ES WORKS FOR SIZING AND SINTERING OF IRON ORE, THAT THE STUDY WAS UNDERTAKEN TO IMPROVE THE EFFICIENCY IN THE EXISTING TRADING OPERATIONS, THAT THE EXPENDITURE WAS INCURRED IN CONNECTION WITH THE EXISTING ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 9 TRADING OPERATIONS AND THE EXPENDITURE INCURRED IS IN THE REVENUE FIELD, THAT FEE OF RS. 17,500/ - WAS PAID TO TATA CONSULTANCY SERVICES FOR CONDUCTING A FEASIBILITY STUDY ON ELEVATOR INDUSTRY WAS CONDUCTED, THAT THE STUDY HAD NO RELATIONSHIP WITH THE EXISTING BUSINESS AND THE ASSESSEE INTENDED TO START A N EW PRODUCT LINE, THAT THE EXPENDITURE INCURRED WAS IN THE CAPITAL FIELD, THAT RS. 22,180/ - WAS PAID TO TATA CONSULTING ENGINEERS FOR CONDUCTING A FEASIBILITY STUDY OF PVC PLANT BASED ON CALCIUM CARBONATE ROUTE, THAT THE PVC WAS A NEW PRODUCT AND HAD NOTHIN G TO DO WITH THE EXISTING PRODUCT LINE OF THE ASSESSEE, THAT THE EXPENDITURE INCURRED WAS IN THE CAPITAL FIELD. 16.2. BEFORE US, AR SUBMITTED THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE PRECEDING AY. DR DID NOT CONTROVERT THE FACT. WE F IND THAT IN THE AY.1985 - 86 ASSESSEE HAD PAID FEES FOR FEASIBILITY STUDY TO THE SAME CONSULTANT TO WHOM FESS WAS PAID DURING THE YEAR ALSO. WHILE DECIDING THE APPEAL, TRIBUNAL AT PARAGRAPH 38 HAS HELD AS UNDER: ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 10 WE HAVE PERUSED THE DETAILS OF THE EXPENSES. A SUM OF RS.10 LAKHS WAS PAID FOR MODERNIZATION PROJECT PHASE - I.A SUM OF RS.2 LAKHS AND RS.3 LAKHS WAS PAID FOR PROJECT REPORT FOR FEASIBILITY OF PLASTIC LINES AND COATED PIPES AND REVAMPING THE ERW MILL RESPECTIVELY. IN AY.1968 - 69 IN I.T.A. NO.2068/BOM/74 - 75 THE HONBLE ITAT IN ASSESSEES OWN CASE CONSIDERED EXPENDITURE ON REPORT FOR INCREASING PRODUCTION CAPACITY AND FUTURE DEVELOPMENT. AFTER ELABORATE DISCUSSION, THE TRIBUNAL CAME TO THE CONCLUSION THAT EXPENDITURE WAS NOT A CAPITAL EXPENDITURE AND ALLOWE D DEDUCTION OF SAME AS A REVENUE EXPENDITURE. FACTS AND CIRCUMSTANCES BEING IDENTICAL IN THIS YEAR, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT THE EXPENDITURE IN QUESTION HAS TO BE ALLOWED AS A DEDUCTION BEING A REVENUE EXPENDITURE. GROUND NO. 12 IS ALLOWED. ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 11 FOLLOWING THE ABOVE, WE DECIDE GROUND NO.16, BEFORE US, IN FAVOUR OF THE ASSESSEE. 8 . WE FIND THAT THE HONBLE J URISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR AY 1985 - 86 IN INCOME TAX APPEAL NO. 3176/2010 DATED 26.04.2012 HAD A DDRESSED THE ISSUE AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE AFORESAID OBSERVATIONS, RESPECTFULLY FOLLOWING THE AFORESAID JURISDICTIONAL PRECEDEN TS IN ASSESSEES OWN CASE AND IN VIEW OF THE FACT THAT NO APPEAL WA S PREFERRED BY THE REVE NUE FOR AY S 1986 - 87 TO 2004 - 05 ON THE SIMILAR ISSUE OF INCURRENCE OF E XPENDITURE FOR FEASIBILITY STUDY FOR PROJECT CONSULTANCY, WE H O LD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION OF 5,04,60,373/ - AS REVENUE EXPENDITURE . ACCORDINGLY, THE GROUND N O S . 2 TO 2.5 ARE ALLOWED. 9 . THE GROUND N O S . 3 TO 3.1 WERE STATED TO BE NOT PRESSED BY THE LEARNED AR AT THE TIME OF HEARING AND THE SAME IS RECKONED AS STATEMENT MADE FROM BAR AND ACCORDINGLY, THE SAID GROUNDS ARE DISMISSED AS NOT PRESSED. 10 . GROUND N O S . 4 TO 4.3 RAISE D BY THE ASSESSEE ARE WITH REGARD TO THE CHALLENGING THE ACTION OF THE LEARNED CIT(A) UPHOLDING THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF EDUCATION CESS. 11 . WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND TH AT THIS ISSUE IS ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 12 SQUARELY COVERED BY THE D ECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILISERS AND CHEMICALS LTD. & ANR. VS. JCIT REPORTED IN 102 C CH 0202 (RAJASTHAN HIGH COURT) DATED 31.07.2018, WHEREIN THE QUESTION RAISED BEFORE THE HIGH COURT AS UNDER : - Q.3 IN ITA NO 52/2018 WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ITAT HAS NOT ERRED IN HOLDING THAT THE EDUCATION CESS IS DISALLOWABLE EXPENDITURE UNDER SECTION 40(A)(II) OF THE ACT? 12 . WE FIND THAT THE HONBL E RAJASTHAN HIGH COURT TOOK NOTE OF THE CBDT CIRCULAR NO. 91.58/66 - ITJ (19) DT. 18.05.1967 AND HELD AS UNDER : - INTERPRETATION OF PROVISION OF S.40(A)( II ) OF IT ACT, 1961 - CLARIFICATION REGARDING 18/05/1967 BUSINESS EXPENDITURE SECTION 40(A)(II), RECENTLY A CASE HAS COME TO THE NOTICE OF THE BOARD WHERE THE ITO HAS DISALLOWED THE 'CESS' PAID BY THE ASSESSEE ON THE GROUND THAT THERE HAS BEEN NO MATERIAL CHANGE IN THE PROVISIONS ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 13 OF S.10(4) OF THE OLD ACT AND S.40(A)(II) OF THE NEW ACT. 2. THE VIEW OF THE ITO I S NOT CORRECT. CLAUSE 40(A)(II) OF THE IT BILL, 1961 AS INTRODUCED IN THE PARLIAMENT STOOD AS UNDER: '(II) ANY SUM PAID ON ACCOUNT OF ANY CESS, RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHE RWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS'. WHEN THE MATTER CAME UP BEFORE THE SELECT COMMITTEE, IT WAS DECIDED TO OMIT THE WORD 'CESS FROM THE CLAUSE. THE EFFECT OF THE OMISSION OF THE WORD 'CESS' IS THAT ONLY TAXES PAID ARE TO BE DISALLOWED IN THE ASSESSMENTS FOR THE YEAR 1962 - 63 AND ONWARDS. 3. THE BOARD DESIRE THAT THE CHANGED POSITION MAY PLEASE BE BROUGHT TO THE NOTICE OF ALL THE ITOS SO THAT FURTHER LITIGATION ON THIS ACCOUNT MAY BE AVOIDED. 13 . SIMILAR VIEW WAS ALSO TAKEN BY CO - ORDINATE BENCH DE CISION OF KOLKATA TRIBUNAL IN THE CASE OF ITC LTD VS. DCIT IN ITA NO. ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 14 685/KOL/2014 FOR AY 2009 - 10 DATED 27.11.2018 AND BY PUNE TRIBUNAL IN THE CASE OF DCIT VS. BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LTD. IN ITA NOS. 1111 & 1112/PUN/2017 AND CO NOS. 23 & 2 4/PUN/2019 DATED 25.07.2019 . RESPECTFULLY FOLLOWING THE AFORESAID DECISION S , WE DIRECT THE LEARNED AO TO GRANT DEDUCTION ON ACCOUNT OF EDUCATION CESS. ACCORDINGLY, THE GROUNDS 4 TO 4.3 RAISED BY THE ASSESSEE ARE ALLOWED. 14 . GROUNDS NOS. 5 TO 5.1 RAISED BY THE ASSESSEE ARE WITH REGARD TO DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. 15 . WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS EARNED DIVIDEND OF ` 111,39,52,672/ - AND CLAIMED THE SAME A S EXEMPT IN THE RETURN OF INCOME. THE ASSESSEE SUBMITTED THAT IT DID NOT INCURR ANY EXPENDITURE FOR THE PURPOSE OF EARNING EXEMPT INCOME AND HENCE, NO DISALLOWANCE UNDER SECTION 14A OF THE ACT NEED TO BE MADE THEREON. THE LEARNED AO, HOWEVER DID NOT AGREE TO THE SAID CLAIM OF THE ASSESSEE AND PROCEEDED TO APPLY THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES AND MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT AS UNDER : - UNDER RULE 8D(2)(II) ` 29.32 CRORES UNDER RULE 8D(2)(III) ` 11.18 CRORES T OTAL ` 4 0 . 50 CRORES . ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 15 16 . WE FIND THAT THE LEARNED CIT(A) HAD DIRECTED THE AO TO DISALLOW THE INTEREST UNDER RULE 8D(2)(II) BY APPLYING THE FORMULA FOLLOWED BY HIM IN AY 2007 - 08 VIDE ASSESSMENT ORDER DATED 28.10.2011. THE LEARNED CIT(A), HOWEVER, UPHELD THE DIS ALLOWANCE MADE IN SUM OF 11.18 CRORES UNDER RULE 8D(2)(III) OF THE RULES. 17 . WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT REPORTED IN [2018] 402 ITR 640 (SC) AND GODREJ & BOYCE MANUFACTURING COMPANY LTD VS. DCIT REPO RTED IN [2017] 394 ITR 449 (SC) HAD OBSERV ED THAT THE COMPUTATION MECHANISM PROVIDED IN RULE 8D (2) OF THE RULES COULD BE MADE APPLICABLE ONLY FROM AY 2008 - 09 ONWARDS. HENCE, THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT BY APPLYING THE COM PUTATION MAXIMUM PROVIDED IN RULE 8D OF THE RULES FOR THE YEAR UNDER CONSIDERATION. WE FIND FROM THE PERUSAL OF THE BALANCE SHEET THAT THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS IN ITS KITTY AND HENCE, THERE CANNOT BE ANY DISALLOWANCE OF INTEREST EVEN IF IT IS TO BE TREATED AS DIRECT EXPENDITURE OF THE PURPOSE OF EARNING EXEMPT INCOME. WITH REGARD TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES, WE FIND THAT HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. R . R . SEN AND BROTHERS (P) LTD. REPORTED IN GA NO. 301 9 OF 2012 AND ITAT NO. 243 OF 2012 DATED 04.01.2013 HAD HELD AS UNDER : - THE COURT: - THE ASSESSEE DID NOT SHOW ANY EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF EARNING THE MONEY WHICH IS ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 16 EXEMPTED UNDER THE INCOME TAX. THE TRIBUNAL HAS COMPUTED EXPENDITU RE AT 1 PER CENT OF SUCH DIVIDEND INCOME WHICH, ACCORDING TO THEM, IS THE THUMB RULE APPLIED CONSISTENTLY. WE FIND NO REASON TO INTERFERENCE. THE APPEAL IS DISMISSED. 18 . RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE DIRECT THE AO TO DISALLOW ONLY TO 1% O F TOTAL EXEMPT INCOME UNDER SECTION 14A OF THE ACT. ACCORDINGLY, THE GROUND NO. 5 AND 5.1 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 19 . GROUND NO. 6 RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF COMMISSION PAID TO SELLING AGENTS IN THE SUM OF 2,33,28,385/ - FOR E FFECTING SALE TO G OVERNMENT PARTIES. 20 . BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE WAS ASKED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO FURNISH THE DETAILS OF COMMISSION PAID. THE ASSESSEE RESPONDED THAT THE SAID COMMISSI ON WERE PA ID TO SELLING AGENTS FOR E FFECTING SALES TO G OVERNMENT PARTIES IN NORTHERN INDIA , EASTERN INDIA AND WESTERN INDIA, THE DETAILS OF WHICH ARE AS UNDER: - A. NORTHERN REGION (IN RS.) COMBIN ED MARKETING SERVICES 18,09,819. 39 UNITED STEEL INDUSTRIES 8,43,340.81 M&M INTERNATIONAL 29,04,098.13 (A) 55,57,258.33 ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 17 B. EASTERN INDIA ISRAFIL MIDDYA 11,33,921.00 KARNATAKA AGENCIES 120,95,224.25 KALINGA AGENCIES 1,66,708.00 BENGAL IRON & STEEL CORPORATION 1,28,747.00 INDUSTRY & COMMERCE ENTERPRISES PVT. LTD . 6,27,692.00 RUNGTA AGENCIES PVT. LTD 3,28,809.00 GREENFIELD ASSOCIATED 7,93,356,03 (B) 1,52,74,457.28 C. WESTERN REGION M/S NAYAN ENTERPRISES 19,05,097.00 M/S NAYAN TRADERS 1,22,495.00 M/S JUNEE MKTG. CO. 4,02,715.00 M/S INDUSTRIAL STEEL 1,02,491.00 ( C) 25,32,798.00 A+B+C 233 , 64 , 513.61 21 . TH E LEARNED AO ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO ALL THE G OVERNMENT PARTIES TO VERIFY THE CLAIM OF THE ASSESSEE. THE REPLY GIVEN BY THE G OVERNMENT PARTIES F E LL IN TWO CATEGORIES (I) WHERE THE G OVERNMENT PARTIES HAVE EITHER DEALT WITH ASSESSEE ON PERSON TO PERSON BASIS OR DIRECTLY; (II) WHERE THE G OVERNMENT PART IES HA D ACCEPTED THAT IT HAS D EALT THROUGH A COMMISSION AGENT. SOME OF THE G OVERNMENT PARTIES DID NOT RESPOND TO THE NOTICE UNDER SECTION 133(6) OF THE ACT ISSUED BY THE LEARNED AO. NOTICE UNDER SECTION 133(6) OF THE ACT ISSUED BY THE LEARNED AO TO SOME OF THE PARTIES HAVE BEEN RETURN ED UNSERVED. THE LEARNED AO ON PERUSAL OF THE VARIOUS REPLIES ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 18 RECEIVED IN RESPONSE TO NOTICE UNDER SECTION 133(6) OF T HE ACT FROM THE GOVERNMENT PARTIES CONCLUDED THAT ONLY ONE PARTY I.E. DEPARTMENT OF SUND E RBAN AFFAIRS HAD CONFIRMED THAT IT DEALT WITH THE ASSESSEE THROUGH THE AGENT I.E. MR ISRAFEL MIDDY. IN THESE CIRCUMSTANCES, THE LEARNED AO SHOW CAUSE D THE ASSESSEE AS TO WHY THE REMAINING COMMISSION OF RS. 2,33,28,385/ - SHOULD NOT BE DISALLOWED. THE ASSESSEE VIDE LETTER DATED 18.12.2008 HAD SUBMITTED THAT THE AGENTS ARE BASICALLY LIA I SON AGENTS AND THE FUNCTION S CARRIED OUT BY THEM ARE AS UNDER: - (I) PROCUREMENT OF O RDERS FROM THE PARTIES; (II) COLLECTION OF PAYMENT. (III) COLLECTION OF SALE TAX DECLARATION FORMS. (IV) TIMELY BALANCE OF ALL STATUTORY FORMALITIES. 22 . THE ASSESSEE PLEADED THAT THE AGENTS HAD ACTED ON ITS BEHALF AND NOT ON BEHALF OF GOV ERNMENT PARTIES AS THERE IS NO CONTRACTUAL AGREEMENT BETWEEN THE AGENTS AND THE G OVERNMENT PARTIES. HENCE, THE G OVERNMENT PARTIES HAD CONFIRMED THAT THEY HAD NOT DEAL T WITH ASSESSEE COMPANY THROUGH AGENTS. THE LEARNED AO HOWEVER, DISREGARDED THE EXPLANATION GIVEN BY THE ASSE SSEE AND OBSERVED THAT IN RESPECT OF G OVERNMENT PARTIES , WHERE NOTICES UNDER SECTION 133(6) OF THE ACT HAD RETURNED UNSERVED, THE ASSESSEE HAD FAILED TO PRODUCE THOSE PARTIES AND ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 19 NO CONFIRMATION FROM THE SAID PARTIES WERE FURNISHED BY THE ASSESSEE AND ACCO RDINGLY, THE LEARNED AO TOOK THE REPLIES GIVEN BY THE G OVERNMENT PARTIES AS SACROSANCT AND DISALLOW ED THE ENTIRE COMMISSION PAYMENT MADE IN THE SUM OF ` 2,33,28,385/ - AS NOT INCURRED FOR THE PURPOSE OF BUSINESS. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMIT TED THAT THE COMMISSION AGENTS APPOINTED BY THE ASSESSEE ARE NOT BY THE G OVERNMENT PARTIES. HENCE, THERE WOULD NOT BE ANY CONTRACTUAL OBLIGATION BETWEEN THE SAID COMMISSION AGENTS AND THE G OVERNMENT PARTIES. THE COMMISSION AGENTS HAVE RENDERED LIAISON SERV ICES TO THE ASSESSEE AND HAD ACTED ON BEHALF OF THE ASSESSEE BY RENDERING VARIOUS SERVICES AS DETAILED HEREINABOVE. THE ASSESSEE FURTHER SUBMITTED THAT THE TOTAL COMMISSION PAID TO VARIOUS PARTIES IN THE RESPECTIVE REGION TOGETHER WITH THE TOTAL SALES DERI VED FROM THE RESPECTIVE REGIONS IN THE FORM OF FOLLOWING TABLE: - REGION COMMISSION SALES % OF SALES NORTHERN 5557258 480471655 1% EASTERN 15274457 1142410989 1% WESTERN 2532798 121464436 2% 23 . THE LEARNED CIT(A) DISPOSED OFF THIS ISSUE RAISED BEFORE HIM BY OBSERVING AS UNDER: - 9.3 I HAVE GONE THROUGH THE ORDER OF THE AO AND SUBMISSIONS OF THE APPELLANT. IT IS SEEN FROM PAGE 22 TO 23 OF THE ASSESSMENT ORDER THAT ALL THE GOVERNMENT ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 20 DEPARTMENTS FROM SR. NO. 1 TO 31 HAS STATED THAT THERE WAS DIRECT PERSON TO PERSON DEALING AND IN CASE OF CPWD (SR. NO. 24) AND PWD (SR. NO.25) THE NOTICE UNDER SECTION 133(6) OF AO WERE RETURNED BACK. SUNDERBAN DEVELOPED IN II)1 I.E. IN THE MIDDLE PART OF THE ASSESSMENT ORDER STATED THAT THE SALE WAS THROUGH AGENT AND IN PAR T III, PAGE 23 & 24, THE AO HAS LISTED 29 COMPANIES MOSTLY GOVERNMENT COMPANIES/ AGENCIES LIKE RAILWAY BOARD, BSNL, NTPC, IRRIGATION & WATERWAYS, METRO RAILWAY, SARDAR SAROVAR NAGAR NIGAM LTD., ETC NO REPLIES WERE RECEIVED BY THE ASSESSING OFFICER. THE PAY MENTS HAVE BEEN MADE BY THE APPELLANT THROUGH BANK TO ALL PARTIES IS NOT A MATTER OF DISPUTE. VARIOUS KINDS OF ACTIVITIES ARE REQUIRED TO BE TAKEN FOR MAKING SALES TO VARIOUS GOVERNMENT AGENCIES AND DESPITE VARIOUS INSTRUCTIONS TO PUBLIC SECTOR COMPANIES A ND GOERNMENT AGENCIES, NOT TO DEAL THROUGH MIDDLE MAN OR COMMISSION AGENTS, THE FACT OF THE MATER IS THAT THE ACTIVITY OF MA K ING SALES, RECEIVING PAYMENT ETC. DO REQUIRE SERVICES OF COMMISSION AGENTS. ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 21 THE APPELLANT SHALL PRODUCE THE CONFIRMATION OF THE COM MISSION AGENTS BEFORE AO AND THE AO AFTER BEING SATISFIED THAT THE COMMISSION AGENTS HAVE RENDERED SERVICES, SHALL ALLOW DEDUCTION ACCORDINGLY. 24 . PURSUANT TO THIS DIRECTION OF THE LEARNED CIT(A), THE ASSESSEE APPEAR ED BEFORE THE AO AND FILED CONFIRMATIONS FROM VARIOUS COMMISSION AGENTS WHICH ARE ENCLOSED IN PAGES 251 ONWARDS TOGETHER WITH COPY OF INVOICES. THE ASSESSEE FURTHER PLEADED THAT NO ADVERSE COMMENTS WERE MADE IN F ORM NO. 3CD WITH REGARD TO THE SAID ISSUE ON VARIOUS STATUTORY COMPLIANCES BY THE TAX AUDITOR. THE ASSESSEE ALSO FURNISHED CERTAIN INVOICES RAISED BY THE COMMISSION AGENTS ON THE ASSESSEE MENTIONING THE FACT OF RENDERING OF SERVICES BY THE COMMISSION AGENTS FOR EFFECTING SALES TO G OVERNMENT AUTHORITIES ON BEHALF OF THE ASSESSEE. THE ASSESS EE ALSO FURNISH ED CERTAIN CONFIRMATIONS FROM AGENTS, WHEREIN THEY HAVE CLEARLY SAID THAT THEY HAD RENDERED SERVICES TO THE ASSESSEE FOR E FFECTING SALES TO VARIOUS G OVERNMENT AUTHORITIES AND THE LIST OF THOSE PARTIES , I.E. G OVERNMENT AGENCIES , WERE ALSO INC LUDED IN THE CONFIRMATION CERTIFICATE GIVEN BY THEM. 25 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD. WE FIND THAT THE PRIMARY BASIS FOR DISALLOWANCE OF COMMISSION IN THE INSTANT CASE IS THAT THE ASSESSEE HAD NOT PROVED THE RENDERIN G OF SERVICES OF VARIOUS ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 22 COMMISSION AGENTS TO THE ASSESSEE. WE FIND FROM THE VARIOUS CONFIRMATIONS FILED FROM AGENTS WHICH ARE ENCLOSED IN PAGE S 251 TO 270 OF THE PAPER BOOK COMPRISING OF CONFORMATION FROM AGENTS TO WHOM MAJORITY OF THE AMOUNTS WERE PAID T OGETHER WITH COPY OF INVOICES RAISED BY COMMISSION AGENTS ON THE ISSUE CLEARLY MENTIONING (A) THE FACT OF RENDERING OF SERVICES TO THE ASSESSEE ; (B) LIAISON SERVICES RENDERED BY THOSE COMMISSION AGENTS TO THE RESPECTIVE G OVERNMENT PARTIES CLEARLY MENTIONI NG THE NAME OF THE G OVERNMENT PARTIES ALSO ; (C) THE QUANTITIES SOLD BY ASSESSEE TO THOSE RESPECTIVE G OVERNMENT PARTIES ; (D) THE RATE OF COMMISSION AS AGREED TO BE PAID TO EACH OF THE COMMISSION AGENT FOR EFFECTING SALES TO VARIOUS G OVERNMENT PARTIES. WE ALSO FIND FROM THE SAID INVOICES THAT THE SAID COMMISSION BILL S RAISED BY THE AGENTS ON THE ASSESSEE WERE DULY SUBJECT ED TO LEVY OF SERVICE TAX AND TD S COMPLIANCE THERE O N HAVE BEEN DULY MADE BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAD PAID COMMISSION T O THE VERY SAME PARTIES IN SUBSEQUENT YEARS ALSO AND THE LEARNED AO HAD ALLOWED THE SAME IN AY 2006 - 07. THE DETAILS OF THE SAME ARE AS UNDER: 3. TREND OF COMMISSION IN NEXT YEARS. NORTHERN AY 2005 - 06 AY 2006 - 07 COMBINED MARKETING SERVICE 18,09,819.00 2, 24,322.00 UNITED STEEL INDUSTRIES 8,43,341.00 21.57,025.00 M & M INTERNATIONAL 29,04,098.00 1,47,488.65 EASTERN ISRAFIL MIDDYA 11,33,921.00 16,50,356.00 KARNATAKA AGENCIES 1,20,95,224.00 1,66,40,425.99 KALINGA AGENCIES 1,66,708.00 1,99,376.64 BE NGAL IRON & STEEL CORPN 1,28,747.00 - INDUSTRY & COMMERCE ENT P. LTD 6,27,692.00 5,52,837.73 ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 23 RUNGTA AGENCIES 3,28,809.00 27,909.72 GEENFIELD ASSOCIATES 7,93,356.00 WESTERN NAYAN ENTERPRISES 19,05,097.00 3,02,011.00 NAYAN TRADERS 1,22,495.00 - JU NE MAKG CO 4,02,715.00 - INDUSTRIAL STEEL 1,02,491.00 - 26 . WE ALSO FIND FROM THE CHART PRODUCED BY THE ASSESSEE THAT SIMILAR PAYMENTS OF COMMISSION WERE MADE TO VARIOUS SELLING AGENTS IN THE PAST BY THE ASSESSEE AND THE SAME WERE ALLOWED AS DEDUCTION BY THE REVENUE. THE DETAILS OF COMMISSION PAYMENTS IN EARLIER YEARS ARE AS UNDER : - FY 2000 - 01 2001 - 02 2002 - 03 2003 - 04 AY 2001 - 02 2002 - 03 2003 - 04 2004 - 05 TOTAL COMMISSION 21.10 24.83 34.60 37.34 GROSS SALES 7759.44 7607.48 9793.27 11920.96 NET SALES - - 872 1.32 10702.39 % OF GROSS SALES 0 .27% 0 .33% 0 .35% 0 .31% % OF NET SALES - - 0 .40% 0 .35% THE TOTAL GROSS SALES AND NET SALES FOR THE YEAR UNDER CONSIDERATION IS ` 15876.87 AND ` 14498.95 RESPECTIVELY. 27 . THE TOTAL COMMISSION PAID TO SELLING AGENTS DURING THE YEAR IS 49.65 CRORES WHICH WORKS OUT TO 0 .31% OF GROSS SALES AND 0 .34% OF NET SALES, WHICH IS EXACTLY IDENTICAL TO THAT IN THE EARLIER YEARS AS TABULATED ABOVE. IT IS NOT IN DISPUTE THAT THE ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 24 SUM OF DISPUTED COMMISSION I.E. ` 2.33 CRORES IS INCLUDED IN THE TOTAL C OMMISSION PAYMENT OF ` 49.65 CRORES. IN THE INSTANT CASE, WE FIND THAT THE LEARNED CIT(A) HAD CATEGORICALLY OBSERVED THAT THE COMMISSION AGENTS HAD INDEED RENDERED LIAISON SERVICES TO THE ASSESSEE IN CONNECTION WITH E FFECTING SALES TO VARIOUS G OVERNMENT AU THORITIES. IT IS ALSO NOT IN DISPUTE THAT THESE COMMISSION AGENTS HAD ACTED ON BEHALF OF THE ASSESSEE TO LIAISON WITH THE G OVERNMENT PARTIES AND THEY ARE APPOINTED AS AGENTS ONLY BY THE ASSESSEE AND NOT BY THE G OVERNMENT PARTIES. HENCE, THE G OVERNMENT PART IES IN RESPON SE TO NOTICE UNDER SECTION 133(6 ) OF THE ACT HAD REPLIED, WHEREVER APPLICABLE, THAT THEY HAD DEALT WITH THE ASSESSEE DIRECTLY AND NOT THROUGH THE AGENT. WE ALSO FIND THAT THE MAJORITY OF THE COMMISSION AGENTS HAD INDEED FURNISH ED THE CONFIRMAT IONS DULY SPECIFYING THE REQUISITE DETAILS BEFORE THE LEARNED AO WHICH ARE ALREADY ON RECORD BUT WE FIND THAT THERE IS NO FACTUAL FINDING RECORDED BY THE LOWER AUTHORITIES WITH REGARD TO VERACITY OF THE SAID CONFIRMATION S . HENCE, AS VEHEMENTLY ARGUED BY TH E LEARNED DR, WE DEEM IT APPROPRIATE TO REMAND THIS ISSUE TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH LAW. 28 . IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR AY 2005 - 06 IN ITA NO. 5616/MUM/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 25 ITA NO. 5573/MUM/2012 FOR AY 2005 - 06 - REVENUES APPEAL 29 . THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL OF REVENUE IS AS TO WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF CONTRIBUTION MADE TO INSTITUTION AT JAMSHEDPUR AND C OLLERIES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 30 . WE HAVE HEARD THE RIVAL SUBMISSIONS. BOTH THE PARTIES MUTUALLY AGREE THAT THIS ISSUE IS SQUARELY COVERED IN ASSESSEES OWN CASE FOR AY 1985 - 86 ONWARDS BY ORDER OF THIS TRIBUNAL. THE LEARNED AR ALSO PLACE D ON RECORD THE COPY OF THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR AY 1985 - 86 IN INCOME TAX APPEAL NO. 3176/2010 DATED 26.04.2012, WHERE IN THE QUESTION RAISED BY THE HONBLE HIGH COURT IS AS UNDER: - F. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN ALLOWING CONTRIBUTIONS TO VARIOUS INSTITUTIONS WITH WHOM THE ASSESSEE HAD NO BUSINESS NEXUS; THE HONBLE HIGH COURT HELD AS UNDER: - 7. AS REGARDS QUESTION F, IT IS COMMON GRO UND BETWEEN THE LEARNED COUNSEL THAT THE SAME REASONING THAT HAS GOVERNED QUESTION B WOULD GOVERN QUESTION F. THE ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 26 TRIBUNAL HAS NOTED IN PARAGRAPH 43 OF ITS DECISION THAT THE EXPENSES WERE INCURRED KEEPING IN MIND BUSINESS EXPEDIENCY IN ORDER TO HAVE A MOTI VATED WORK FORCE. HENCE, NO SUBSTANTIAL QUESTION OF LAW WOULD ARISE. 31 . RESPECTFULLY FOLLOWING THE SAID DECISION, THE GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 32 . GROUND NO. 2 RAISED BY THE REVENUE IS ALREADY ADDRESSED ABOVE IN GROUND NO. 5 OF THE ASSESS EE. THE DECISION RENDERED THEREIN WOULD APPLY WITH EQUAL FORCE FOR REVENUES APPEAL ALSO ON THIS ISSUE OF DISALLOWANCE OF SECTION 14A. 33 . IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2005 - 06 IS DISMISSED. ITA NO. 4043/MUM/2012 FOR AY 2006 - 07 ASSESSEE A PPEAL 34 . GROUNDS NO. 1 AND 3 RAISED BY THE ASSESSEE FOR AY 2006 - 07 WERE STATED TO BE NOT PRESSED AT THE TIME OF HEARING BEFORE US BY THE LEARNED AR AND THE SAME IS RECKONED AS A STATEMENT MADE FROM THE BAR. ACCORDINGLY, THE GROUNDS NO. 1 AND 3 RAISED BY THE A SSESSEE ARE DISMISSED AS NOT PRESSED. 35 . THE GROUND NO S . 2 AND 2.1 RAISED BY THE ASSESSEE WITH REGARD TO DISALLOWANCE OF EXPENDITURE INCURRED ON FEASIBILITY STUDY ARE S IMILAR TO THE GROUND NO S . 2 . 2 TO 2.5 RAISED BY THE ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 27 ASSESSEE FOR AY 2005 - 06 AND HENCE, THE D ECISION RENDERED THERE O N WOULD APPLY WITH EQUAL FORCE FOR THIS ASSESSMENT YEAR ALSO EXCEPT WITH VARIAN CE IN FIGURES. 36 . THE GROUND NO S. 4 AND 4.1 RAISED BY THE ASSESSEE FOR AY 2006 - 07 ARE SIMILAR TO GROUND NOS. 4 TO 4.3 OF ASST YEAR 2005 - 06 AND THE DECISION R ENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR THIS ASSESSMENT YEAR ALSO EXCEPT VARIAN CE IN FIGURES. 37 . THE GROUND NOS. 5 AND 5.1 RAISED BY THE ASSESSEE FOR AY 2006 - 07 ARE SIMILAR TO GROUND NOS. 5 AND 5.1 OF ASST YEAR 2005 - 06 AND THE DECISION RENDERED THER EON WOULD APPLY WITH EQUAL FORCE FOR THIS ASSESSMENT YEAR ALSO EXCEPT VARIANCE IN FIGURES. 38 . THE ASSESSEE HAD RAISED ADDITIONAL GROUND BEFORE US WITH REGARD TO CLAIM OF DEPRECIATION ON GOPALPUR PROJECT ASSETS. WE FIND THAT THE LEARNED AR STATED THAT THIS GRO UND ARISES OUT OF THE DECISION TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997 - 98, WHEREIN THE ORDER PASSED BY THIS TRIBUNAL WAS ACCEPTED BY THE REVENUE BY NOT PREFER RING ANY FURTHER APPEAL TO HONBLE HIGH COURT. SINCE, THIS GROUND WAS OMITTED TO BE RAISED BY THE ASSESSEE, THE LEARNED AR PRAYED FOR ADMISSION OF THE SAME AND FAIRLY ACCEPTED THAT THIS ISSUE MAY BE VERIFIED BY THE LEARNED AO. THE LEARNED DR SUBMITTED THAT THIS ISSUE IS NOT COVERED BY THE ORDERS PASSED BY THIS TRIBUNAL FOR EARLIER YEA RS AS THE SAME IS INCURRED FOR ISP PROJECT AT BARE I LI. WE FIND THAT THE BASIC FACTS PERTAINING TO THIS ISSUE ARE NOT AVAILABLE FOR OUR RECORDS FROM THE ORDERS OF THE LOWER AUTHORITIES. AT THE SAME ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 28 TIME, IF THIS IS CONSEQUENTIAL ISSUE ARISING FROM AY 1997 - 9 8 ONWARDS IN THE FORM OF GRANT OF DEPRECIATION, THE SAME SHOULD NOT BE DENIED TO THE ASSESSEE. HENCE, WE DEEM IT FIT APPROPRIATE , TO ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE AND REMAND THE ENTIRE ADDITIONAL GROUND TO THE FILE OF THE AO FOR DE NOV O ADJUDICATION IN ACCORDANCE WITH LAW. ALL THE ARGUMENTS OF BOTH THE PARTIES WITH REGARD TO THE SAID ISSUE ARE LEFT UPON AND NO OPINION IS RENDERED HEREIN ON THE SAME. ACCORDINGLY, THE ADDITIONAL GROUND NO. 6 RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 39 . IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR AY 2006 - 07 IN ITA NO. 404 3 /MUM/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 40 . TO SUM UP, ITA NO. AY APPEAL BY DECISION 5616/MUM/201 1 2005 - 06 ASSESSEES APPEAL PARTLY ALLOWED FOR STATISTICAL PURPO SES 4043/MUM/2012 2006 - 07 - DO - - DO - 5573/MUM/2012 2005 - 06 REVENUES APPEAL DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 06 . 1 1 .2019 SD/ - SD/ SD/ - - ( / RAVISH SOOD ) ( / M BALAGANESH ) ( / JUDICIAL MEMBER) ( / ACCOUNTANT MEMBER) , / MUMBAI, DATED: 06 .1 1 .2019 , . / SUDIP SARKAR, SR.PS ITA NOS.5616/MUM/201 2 , 4043, 5573/MUM/2012 TATA STEEL LIMITED PAGE | 29 / COPY OF THE 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// / (ASSTT. REGISTRAR) , / ITAT, MUMBAI