DCIT, Chandigarh V. M/s Khandelia Oil & General Mills Pvt. Ltd., Chandigarh

ITA 562/CHANDI/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4921 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Proportionate interest; Commercial expediency
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 562 /CHD/2015 (ASSESSMENT YEARS: 2011-12) THE DCIT VS. M/S KHANDELIA OIL & GENERAL MILLS CIRCLE-1(1) PVT. LTD.,PLOT NO. -23, CHANDIGARH INDUSTRIAL AREA-II CHANDIGARH PAN: AAACK6655N ITA NO. 548 /CHD/2015 (ASSESSMENT YEARS: 2011-12) M/S KHANDELIA OIL & GENERAL MILLS VS. THE ADDL. CI T PVT. LTD.,PLOT NO. -23, R-1, CHANDIGARH INDUSTRIAL AREA-II CHANDIGARH (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. ANIL KHANNA DEPARTMENT BY : SHRI. MANJIT SINGH DATE OF HEARING : 05/04/2018 DATE OF PRONOUNCEMENT : 04/06/2018 O R D E R PER DR.B.R.R.KUMAR, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AN D CROSS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) , CHANDIGARH DT. 05/03/2015. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A)IS ERRONEOUS & CO NTRARY TO FACTS & LAW. 2. THE LD. CIT(A) HAS ERRED IN REDUCING THE DISALLOWAN CE MADE U/S 14-A BY HOLDING THAT THE INTEREST EXPENDITURE INCURRED ON SPECIFIC HEADS IS TO BE EXCLUDED FOR THE PURPOSES OF RULE 8D, WHEN THE FORM ULA LAID DOWN THEREIN IS INTENDED TO ARRIVE AT AN ESTIMATION OF THE INDIRECT EXPENDITURE RELATABLE TO AN INVESTMENT AND WHEN THE BORROWING ON THE SAID SPECI FIC HEAD CAN BE SAID TO ARISE DUE TO UTILIZATION OF THE AVAILABLE FUNDS FOR THE SAID INVESTMENT. 2 3. THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 1,21,628/- MADE BY THE AO ON ACCOUNT OF INTEREST PAID IN EXCESS OF BANK RA TE U/S 40A(2)(B) OF THE ACT BY UNDULY EMPHASIZING ON THE IMPUTED COSTS OF BANK LOANS AND WITHOUT APPRECIATING THE FACT THAT THE INTEREST PAYMENT WAS MADE TO RELATED-PARTIES. 4. THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 19,84,563/- MADE BY THE AO ON ACCOUNT OF DIVERSION OF FUNDS BY THE ASSE SSEE TO ITS SISTER CONCERN WHICH WAS NOT RELATED TO ITS BUSINESS ACTIVITIES. 5. THE ID. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 10 LACS MADE ON ACCOUNT OF ABNORMAL INCREASE OF FREIGHT AND ADVERTI SEMENT EXPENSES, BY HOLDING THAT THE AO HAS NOT GIVEN A SINGLE INSTANCE OF EXPENDITURE, WHICH WAS NOT INCURRED FOR BUSINESS PURPOSES WITHOUT APPRECIA TING THE APPROACH OF THE AO IN DETECTING THE UNREASONABLE INCREASE IN EXPENDITU RE, WHEREBY THE ONUS FELL ON THE ASSESSEE TO FULLY JUSTIFY THE EXPENDITURE INCUR RED ON THESE HEADS. 6. THE ID. CIT(A) HAS ERRED IN DIRECTING THE AO NOT TO MAKE AN ADDITION ON ACCOUNT OF SUBSIDIES RECEIVED IN EARLIER YEARS AMOU NTING TO RS. 45,56,500/- WITHOUT APPRECIATING THE FACT THAT THE UNUTILIZED R ESIDUAL AMOUNTS OF SUBSIDIES REPRESENTED ACCUMULATED INELIGIBLE DEPRECIATION WHI CH THE AO HAD RIGHTLY ADDED BACK TO THE INCOME OF THE ASSESSEE. 7. THE ID. CIT(A) HAS ERRED IN DIRECTING THE AO NOT TO MAKE AN ADDITION ON ACCOUNT OF SUBSIDIES RECEIVED IN EARLIER YEARS AMOU NTING TO RS.45,56,500/-WITHOUT APPRECIATING THAT BY DISALLOWING THE UNUTILIZED SUB SIDY AMOUNT, THE AO HAS ACTUALLY CORRECTED THE EXCESS CLAIM OF DEPRECIATION MADE IN THE EARLIER YEARS. 8. THE ID. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF PROPORTIONATE INTEREST ATTRIBUTABLE TO ADVANCES MADE TO CERTAIN INDIVIDUAL S AMOUNTING TO RS.5,88,977/- BY SIMPLY ACCEPTING THE ASSESSEE'S STORY THAT THE A DVANCE GIVEN WAS FOR A BUSINESS USE, WHICH NEVER MATERIALIZED, AND WITHOUT APPRECIATING THAT SUCH CONTENTION WAS NOT VERIFIABLE AND NO BUSINESS USE C OULD EVER BE PROVED. 9. THE ID. CIT(A) HAS ERRED IN DIRECTING THE AO TO VER IFY WHETHER THE DISALLOWANCE MADE AMOUNTING TO RS.51,000/- WAS ACTU ALLY AN ADVANCE GIVEN WITHOUT APPRECIATING THAT THE ASSESSEE COULD NOT PR OVE THE BUSINESS USE OF SUCH PAYMENT AND COULD ALSO NOT ESTABLISH, IF THIS AMOUN T WAS NOT DEBITED TO THE P & L ACCOUNT. 10. THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 22,35,446/- MADE BY THE AO ON ACCOUNT OF SUPPRESSION OF SALES AS THE AS SESSEE HAD MADE SALES TO ITS SISTER/ASSOCIATED CONCERNS AT LOWER RATES AS COMPAR ED TO THE SALES MADE TO INDEPENDENT PARTIES. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. AS PER THE FACTS AND CIRCUMSTANCE OF THE CASE AN D AS PER THE PROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN PARTLY UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 14A. THE DISALLOWANCE MADE BE DELETED. 2. AS PER FACTS AND CIRCUMSTANCES OF THE CASE AND P ROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN UPHOLDING DISALLOWANCE OF RS. 3,66,536/- OUT OF THE COMMISSIO N EXPENSES U/S 37(1). THE DISALLOWANCE BE DELETED. 3. AS PER FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISIONS OF LAW, THE LEARNED COMMISSIONER OF TAX (APPEALS) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.2,49,613/- BEING THE TRAVELLING EXPENSES. THE DISALLOWANCE BE DELETED. 3 4. AS PER FACTS AND CIRCUMSTANCES OF THE CASE AND P ROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX-{AP,PEALS) HAS E RRED IN UPHOLDING DISALLOWANCE OF RS. 17,46,331 OUT OF THE STAFF WELF ARE EXPENSES BEING EXPENSES INCURRED ON SCHOOL BUILDING ON THE CONTENT ION THAT THESE EXPENSES ARE NOT INCURRED FOR THE PURPOSES OF THE BUSINESS O F THE ASSESSEE. THE DISALLOWANCE BE DELETED. 5. AS PER FACTS AND CIRCUMSTANCES OF THE CASE AND P ROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN UPHOLDING DISALLOWANCE OF INTEREST U/S 36(1)(III) ON ADVANCE OF HARYANA STATE AGRICULTURE MARKETING BOARD FOR PURCHASE OF SHOP. T HE DISALLOWANCE BE DELETED. 4. GROUND NO.2 OF THE REVENUES APPEAL AND GROUND NO. 1 OF ASSESSEES APPEAL RELATE TO DISALLOWANCE UNDER SECTION 14A: 4.1 BRIEF FACTS OF THE ISSUE ARE THAT AS PER BALANC E SHEET AS ON 31.03.2010, THE ASSESSEE WAS HAVING INVESTMENTS IN EQUITY SHARES OF VARIOUS COMPANIES AND CONCERNS, FROM WHERE IT WAS TO EARN EXEMPT INCOME. THE ASSESSING OFFICER ASKED THE ASSESSEE REGARDING DISALLOWANCE OF PROPOR TIONATE INTEREST AND ADMINISTRATIVE EXPENSES U/S 14A OF THE ACT. 4.2 IT WAS SUBMITTED THAT BESIDES OTHER INVESTMENTS , THE COMPANY HAD INVESTED ONLY RS. 2,30,000/- AS INITIAL INVESTMENT IN KHANDELIA MERCANTILE LLP AND REST OF THE AMOUNT WAS DUE TO PROFITS OF THIS CONCE RN. THE INVESTMENT WAS MADE IN EARLIER YEARS AND THERE WERE SUFFICIENT PROFITS TO FUND THE INVESTMENT AND THERE WAS NO RELATED DIRECT EXPENDITURE. SINCE THE INVEST MENTS HAVE BEEN MADE FROM OWN FUNDS AND SO NO DISALLOWANCE WAS WARRANTED. 4.3. NOT SATISFIED WITH THE EXPLANATION OF THE ASSE SSEE AND DISALLOWED AN AMOUNT OF RS. 3,54,665/- U/S 14A READ WITH SECTION 8D OF THE INCOME TAX RULES, 1962. 4.4 DURING THE HEARING BEFORE US, THE LD. AR SUBMIT TED THAT THE COMPANY HAS RESERVES OF RS. 20.71 CRORES AND THE CASH PROFITS F OR THE YEAR IS RS. 2.49 CRORES AND HENCE NO DISALLOWANCE IS CALLED FOR. 4.5 THE ASSESSEE HAS ALSO SUBMITTED THAT THE BREAKU P OF THE TOTAL INTEREST EXPENDITURE WHICH IS AS UNDER AND ARGUED THAT NO DI SALLOWANCE IS CALLED FOR. (A) RS. 3,92,733/- ON VEHICLE LOAN. (B) RS. 6,20,518/- ON PLEDGE ACCOUNT OF HDFC BANK LTD A GAINST STORAGE OF RAW MATERIAL UNDER APPROVED WAREHOUSE. (C) RS. 14,59,562/- ON DEPOSITS. 4 (D) RS. 82,12,641 /- ON OVERDRAFT ACCOUNT OF HDFC LTD. (E) RS. 1,29,84,248/- TO PUNJAB NATIONAL BANK ON CASH CREDIT ACCOUNT AGAINST DRAWING POWERS MADE AGAINST STOCKS AND DEBTORS. 4.6 WE HAVE GONE THROUGH THE FACTS ON RECORD. WE FI ND THAT THE ASSESSEE HAS EARNED DIVIDEND OF RS. 29,018/-. IN ANY CASE BASED ON THE SETTLED POSITION OF LAW, THE DISALLOWANCE CANNOT EXCEED THE DIVIDEND EARNED. THE ASSESSEE HAS FAIRLY SUBMITTED BEFORE THE A.O. THAT AT BEST 0.5% OF THE AVERAGE INVESTMENT MAY BE CONSIDERED IN RELATION TO INDIRECT EXPENDITURE. KEE PING IN VIEW THE FACTS SPECIFIC TO THE INSTANT CASE AND ACTION OF THE ASSESSING OFF ICER WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS. 29,000/ -. 4.7 AS A RESULT THE APPEAL OF THE REVENUE ON THIS G ROUND IS DISMISSED AND THAT OF THE ASSESEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO. 3 OF THE REVENUES APPEAL RELATES TO DISALLOW ANCE UNDER SECTION 40A(2)(B): 5.1 BRIEF FACTS OF THE ISSUE ARE THAT OUT OF TOTAL INTEREST ON LOAN, THE ASSESSEE HAD PAID INTEREST OF RS. 12,60,531/- ON UNSECURED L OANS TO PERSONS COVERED U/S 40A(2)(B). THE RATE OF INTEREST PAID WAS @ 12% PER ANNUM. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE REASONABLENESS OF INTEREST PAYMENT @ 12%, BUT WAS NOT SATISFIED WITH THE EXPLANATION OF THE A SSESSEE IN THIS REGARD. THE ASSESSING OFFICER HAS REFERRED TO THE ASSESSMENT OR DER OF THE PRECEDING YEAR AND OBSERVED THAT THE MAXIMUM RATE OF INTEREST ON UNSEC URED LOANS SHOULD NOT BE MORE THAN 11% AND SO HE RESTRICTED THE CLAIM OF INT EREST TO 11%. DISALLOWANCE OF RS. 1,21,628/- WAS MADE ON THIS ACCOUNT. 5.2 THE LD. CIT(A) HAVING CONSIDERED THE FACTS OF T HE ISSUE AND HELD THAT SOME OF THE PERSONS, IN RESPECT OF WHOM INTEREST HAS BEE N RESTRICTED, ARE NOT COVERED BY SECTION 40A(2)(B) AN D THE RATE AT WHICH INTEREST WAS PAID CANNOT BE CONSIDERED EXCESSIVE IF ONE TAKES INTO ACCOUNT 5 THE CONDITIONS OF BORROWING AS THE BORROWINGS ARE O BTAINED WITHOUT ANY COLLATERAL SECURITIES UNLIKE BANKS. 5.3 BEFORE US, THE LD. AR RELIED ON THE ORDER OF TH E LD. CIT(A) AND THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 5.4 THE DISALLOWANCE OF 1% ON ACCOUNT OF INTEREST P AID THE OUTSIDE PARTIES WHICH THE ASSESSEE CATEGORICALLY EXPLAINS TO BE NOT RELATED AS PER THE SECTION 40A(2)(B) IS AGAINST THE PROVISIONS OF THE ACT. EVE N SO KEEPING IN VIEW THE MARKET CONDITION SINCE THE MONIES HAVE TO BE RAISED AT A F ASTER PACE, PAYMENT OF 1% EXCESS INTEREST CANNOT BE SAID TO BE UNREASONABLE A ND HENCE THE ADDITION MADE IS HEREBY DELETED. 5.5 AS A RESULT, APPEAL OF THE REVENUE ON THIS GROU ND IS DISMISSED. 6. GROUND NO. 4 OF THE REVENUES APPEAL RELATES TO DISALL OWANCE OF INTEREST ON ACCOUNT OF DIVERSION OF FUNDS TO THE SISTER CONCERN. 6.1 BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER NOTICED THAT DEBIT BALANCE WAS OUTSTANDING IN THE NAME OF M / S KHANDE LIA MERCANTILE LLP, A SISTER CONCERN OF THE ASSESSEE. THE ASSESSING OFFICER QUES TIONED THE ASSESSEE REGARDING DISALLOWANCE OF INTEREST ON DIVERSION OF FUNDS TO SISTER CONCERN AND THE ASSESSEE HAD SUBMITTED THAT IT HAS THE SAME STA ND ON THE ISSUE AS IN THE A.Y. 2010-11. THE ASSESSING OFFICER HAS REPRODUCED THE R ELEVANT PORTION OF THE ASSESSMENT ORDER OF A.Y. 2010-11 AND HAS DISALLOWED AN AMOUNT OF RS. 19,84,563/- U/S 36(L)(III) OF THE ACT. 6.2 THE LD. CIT(A) BASED ON THE DECISION OF THE HON 'BLE ITAT, CHANDIGARH IN A.Y. 2006-07 IN ITA NO. 937/CHD/2009 DATED 30.04.20 11 DELETED THE ADDITION. 6.3 ON PERUSAL OF THE FACT ON RECORD WE FIND THAT T HERE IS NO EVIDENCE ON RECORD EXCEPT A PRESUMPTION THAT INTEREST BEARING F UNDS WERE USED FOR GIVING 6 LOAN TO THE SISTER CONCERNS. THE SIMILAR ISSUE HAS BEEN ADJUDICATED IN THE CASE OF THE ASSESSEE FOR THE A.YS 2006-07, 2008-09, 2009-1 0 AND 2010-11 ON SIMILAR FACTS. WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT(A) AND DELETING THE DISALLOWANCE. 7. GROUND NO. 5 OF THE REVENUES APPEAL RELATES TO DISALLO WANCE OF RS. 10,00,000/- ON ADHOC LUMP SUM BASIS: 7.1 THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 10,00,000/- VIDE PARA 6 OF HIS ORDER AS UNDER: '6. ON THE PERUSAL OF PROFIT AND LOSS ACCOUNT IT WA S SEEN THAT EXPENSES UNDER THE FOLLOWING HEADS HAS GONE UP DESPITE THE DECREASE IN NET PROFIT BY ABOUT 45% AS COMPARED TO LAST YEAR. THE DETAILS OF EXPENSES ARE AS UNDER: HEAD/ PARTICULARS A.Y. 2010-11 A.Y. 2011-12 FREIGHT OUTWARD RS. 89,47,796/- RS. 1,89,09,981/- ADVERTISEMENT EXPENSES RS. 39,00,726/- RS. 40,74,136/- 6.1 THE ABOVE CHART SHOWS THAT THERE IS INCREASE IN EXPENSES UNDER THESE HEADS. THE APPELLANT WAS ASKED TO EXPLAIN THE REASON FOR THE S AME. THE RELATIVE BILLS/ VOUCHERS WERE PRODUCED. IT WAS SEEN THAT IN CERTAIN VOUCHERS THE DETAILS OF EXPENSES WERE NOT ON ACCOUNT OF BUSINESS PURPOSE IN ENTIRETY. THEREFORE, LUMPSUM ADHOC ADDITION AMOUNTING TO RS. 10 LACS IS BEING MADE TO COVER THE LEAKAGE O F REVENUE LOSS.' 7.2 THE LD. CIT(A) DELETED THE ADDITION. 7.3 BEFORE US LD. DR RELIED ON THE ASSESSMENT ORDER . 7.4 LD. DR ARGUED THAT THE RATIO OF FREIGHT OUTWARD TO SALES EXPENSES HAS INCREASED FROM 0.63% TO 0.96% BECAUSE OF THE INCREA SE IN DIESEL RATES AND ADVERTISEMENT TO SALES RATIO HAS DECREASED FROM 0.2 7% TO 0.21%. ACCORDING TO THE ASSESSEE, ALL THE EXPENSES WERE INCURRED FOR TH E PURPOSES OF BUSINESS. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE ON THE GROUND THAT EXPENSES HAVE INCREASED DESPITE DECREASE IN ITS PROFIT AND CERTAI N VOUCHERS WERE NOT FOR BUSINESS PURPOSES IN ENTIRETY, BUT THE ASSESSING OF FICER HAS NOT GIVEN A SINGLE INSTANCE OF EXPENDITURE, WHICH WAS NOT INCURRED FOR BUSINESS PURPOSES. 7.5 IT WAS ARGUED THAT LUMP SUM DISALLOWANCE WITHOU T GIVING ANY COGENT REASON FOR MAKING DISALLOWANCE AND WITHOUT POINTING OUT THAT ANY CLAIM OF EXPENDITURE OUT OF THESE EXPENSES WAS NOT GENUINE. 7 7.6 HAVING GONE THROUGH THE ISSUE AND THE ASSESSMEN T ORDER WE FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORD PRIMARILY TO DISALLOW THE EXPENDITURE. KEEPING IN VIEW THE ASSESSEES ARGUMEN T THAT THE RISE IN EXPENDITURE IS DUE TO RISE IN DIESEL PRICES AND THE FACT THAT ADVERTISEMENT EXPENSES HAVE COME DOWN WITH RELATION TO THE OVERAL L SALES, WE FIND NO REASON TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IN THE ABSENCE OF ANY COGENT MATERIAL BROUGHT ON RECORD BY THE ASSESS ING OFFICER. 8. GROUND NO 6 & 7 OF THE REVENUES APPEAL RELATE TO ADDITI ON ON ACCOUNT OF SUBSIDY : 8.1 BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD RECEIVED SUBSIDY OF RS. 1,06,81,500/- IN THE PRECEDING YEARS AS UNDER: YEAR AMOUNT 1987-88 300000.00 1988-89 10000.00 1993-94 1500000.00 1994-95 2000000.00 2005-06 - 1125000.00 2006-07 746500.00 2008-09 2500000.00 2009-10 2500000.00 TOTAL 10681500.00 8.2 THE ASSESSING OFFICER PROPOSED THE ASSESSEE TO ADD BACK THE AFORESAID SUBSIDY AMOUNT AS PER EXPLANATION-10 BELOW SECTION 43(1) AS PER JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S SAHARANPUR ELECTRIC SUPPLY CO LTD (194 ITR 294) AND THE ASSESSEE HAD. SUBMITTED THAT AMOUNTS RECEIVED IN F.YS. 2005-06, 2008-09 AND 2009-10 OF RS. 11.25 LACS, RS. 25 LACS AND RS. 25 LACS RESPECTIVELY WERE REDUCED FROM THE ASSETS WHILE CLA IMING DEPRECIATION. THE ASSESSEE HAD NOT FILED ANY SUCH EVIDENCE REGARDING REST OF THE AMOUNT OF SUBSIDY OF RS. 45,56,500/- (1,06,81,500 - 61,25,000 ). THE ASSESSING OFFICER DISALLOWED THIS AMOUNT WITH THE FOLLOWING OBSERVATI ONS: 'SINCE NO DOCUMENTARY EVIDENCE WAS NOT PROVIDED BY THE APPELLANT AT THE TIME OF ASSESSMENT PROCEEDINGS IT IS NOT CLEAR WHET HER THE BALANCE AMOUNT OF.RS. 45,56,500/- HAS BEEN ADJUSTED AGAINST FIXED ASSETS OR NOT. FROM THE DEPRECIATION CHART IT HAS SEEN THAT APPELLANT HAS C LAIMED DEPRECIATION FROM ITS BLOCK OF ASSETS MUCH MORE THAN THE AMOUNT OF SU BSIDY RECEIVED FROM THE GOVERNMENT. THE EXCESS DEPRECIATION AS SHOWN ABOVE MAY ALSO BE DUE TO THE REASONS THAT ADDITIONS TO THE FIXED ASSETS MIGH T HAVE BEEN MADE DURING THE PERIOD AFTER REPORT OF SUBSIDY AND DEPRECIATION CLAIMED. THE APPELLANT WAS REQUIRED TO ADJUST THE SUBSIDY AGAINST THE BLOC K OF ASSETS AND CLAIM LESS DEPRECIATION, WHICH DID NOT HAPPEN WITH THE APPELLA NT TO THE EXTENT OF RS. 8 45,56,500/-. IN VIEW OF THIS FACT AS WELL AS THE RA TIO LAY DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S SAHARANPUR ELECTRI C SUPPLY CO. LTD. VS. CIT [1992] 194 ITR 294, THE BALANCE AMOUNT OF SUBSIDY A MOUNTING TO RS. 45,56,500/- RECEIVED BY THE APPELLANT IS ADDED TO THE RETURNED INCOME OF THE APPELLANT.' 8.3 THE LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUNDS THAT THE SUBSIDY WAS RECEIVED IN F.YS. 1987-88 TO 2009-10 - THE TOTAL AMOUNT BEING RS. 1,06,81,500/-. OUT OF THIS SUBSIDY, THE ASSESSING O FFICER HAS MADE ADDITION OF SUBSIDY OF RS. 45,56,500/- ON THE GROUND THAT THE RELEVANT DOC UMENTS WERE NOT PRODUCED TO PROVE THAT THE AMOUNT OF SUBSIDY HAD BEEN ADJUSTED AGAINS T VALUE OF FIXED ASSETS. 8.4 THE LD. CIT(A) FURTHER HELD THAT THE ASSESSMENT OF THE COMPANY HAS GENERALLY BEEN DONE UNDER SCRUTINY IN THE EARLIER Y EARS AND THERE IS LITTLE CHANCE THAT ASSESSING OFFICER FAILED TO CONSIDER SUBSIDY A S PER RELEVANT PROVISIONS OF LAW AND SINCE THE ASSESSING OFFICER MUST HAVE CERTAINLY SATISFIED HIMSELF IN THE RESPECTIVE ASSESSMENT YEARS THAT THE SUBSIDY WAS TR EATED AS PER THE LAW, PREVALENT IN THE RESPECTIVE YEAR(S). FOR THE SAME R EASON, THERE IS NO SUBSTANCE IN THE OBSERVATION OF THE ASSESSING OFFICER THAT THE D EPRECIATION CLAIMED WAS MORE THAN THE AMOUNT OF SUBSIDY. 8.5 THE ASSESSING OFFICER MADE ADDITION AS DOCUMENT S HAS NOT BEEN SUBMITTED REGARDING THE RECEIPT OF THE SUBSIDY. 8.6 THE LD. CIT(A) HAS ALSO DELETED THE ADDITION ON ASSUMPTION THAT THE EARLIER ASSESSING OFFICERS MUST HAVE SATISFIED THEMSELVES A BOUT THE CORRECTNESS OF THE CLAIM. 8.7 WE HEREBY DIRECT THE ASSESSEE TO PRODUCE THE DO CUMENTS PERTAINING TO RECEIPT OF SUBSIDY AND ALSO CALCULATION OF DEPRECIA TION. THE ASSESSING OFFICER IS HEREBY DIRECTED TO GO THROUGH THE DOCUMENTS SUBMITT ED, SATISFY HIMSELF AND ALLOW AS PER THE RULES IN FORCE AND IN ACCORDANCE W ITH THE PROVISIONS OF THE INCOME TAX ACT,1961. 8.8 AS A RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. 9. GROUND NO. 8 OF THE REVENUES APPEAL AND GROUND NO. 5 OF THE ASSES SEES APPEAL RELATE TO DISALLOWANCE OF RS. 5,88,977/-U/S 37(L)/36(L)( III) OF THE ACT : 9 9.1 BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD GIVEN FOLLOWING INTEREST FREE ADVANCES: HARYANA STATE AGRICULTURE MARKET BOARD RS. 29 ,78,100/- SH. NIKHIL GUPTA RS. 40,00,000/- SH. GANGARAM RS. 1,50,000/- 9.2 THE ASSESSEE HAD DEBITED INTEREST OF MORE THAN RS. 2.35 CRORES TO THE PROFIT & LOSS ACCOUNT. THE ASSESSEE EXPLAINED THAT ADVANCE TO HARYANA STATE AGRICULTURE BOARD WAS FOR PURCHASE OF SHOP AND TO S H. NIKHIL GUPTA WAS FOR CONSTRUCTION OF PREFABRICATED SHED IN THE END OF FE BRUARY, 2011, WHICH DID NOT MATERIALIZE, SINCE THE COMPANY DECIDED TO INSTALL S ILOS AND SO THE AMOUNT WAS RETURNED BY HIM IN MAY, 2011. IT WAS ALSO SUBMITTED THAT ADVANCE TO SH. GANGA RAM WAS A SUNDRY ADVANCE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THESE ADVANCES WERE NOT FOR BUSINESS PURPOSES AND THE ASS ET (FABRICATED SHED) HAD ALSO NOT BEEN PUT TO USE DURING THE YEAR'UNDER CONS IDERATION. HE ACCORDINGLY DISALLOWED PROPORTIONATE INTEREST OF RS. 5,88,977/- U/S 36(L)(III) OF THE ACT ON THESE ADVANCES. 9.3 THE LD. CIT(A) DELETED THE ADDITION ON THE GROU NDS THAT THE (I) ADVANCE TO HARYANA STATE AGRICULTURE MARKET BOA RD WAS FOR PURCHASE OF SHOP, WHICH IS TO BE USED FOR THE PURPOSE OF BUS INESS OF THE COMPANY. (II) ADVANCE TO SH. NIKHIL GUPTA WAS MADE FOR CONST RUCTION OF PREFABRICATED SHED IN THE END OF FEBRUARY, 2011 FOR STORAGE, WHICH DID NOT MATERIALIZE, SINCE THE COMPANY DECIDED TO INSTA LL SILOS AND SO THE MONEY WAS RETURNED BY HIM IN THE MONTH OF MAY, 2011 . SH. NIKHIL GUPTA IS NOT A RELATED PARTY. (III) SH. GANGA RAM IS A CONTRACTOR. THE AMOUNT GIV EN IS ADVANCE AND HIS BILLS ARE CREDITED IN THE STATEMENT OF ACCOUNT AND THERE IS ALWAYS CREDIT BALANCE IN THE OPERATIONAL ACCOUNT. (IV) THE COMPANY HAD NOT BORROWED ANY FUND FOR THE ABOVE ADVANCES. (VI) THE INTEREST HAS BEEN CALCULATED FOR THE WHOLE YEAR WHEREAS THESE REMAINED WITH THE PARTIES ONLY FOR THE PART PERIOD. HOWEVER, WHILE DELETING THE DISALLOWANCE OF EXPENSE S PERTAINING TO NIKHIL GUPTA AND GANGA RAM, THE LD. CIT(A) DIRECTED THE AO TO RE STRICT THE DISALLOWANCE AND TO RE-COMPUTE THE SAME FOR THE PERIOD FOR WHICH IT REMAINED WITH HARYANA STATE AGRICULTURE MARKET BOARD. 10 9.4 WE HAVE GONE THROUGH THE FACTS ON RECORD, PLACI NG RELIANCE IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS. CIT 381 ITR 107 -WHERIN HONBLE P&H HIGH COURT HAS OBSERVED THAT IF THE INTEREST FREE FUNDS ARE AV AILABLE A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF INTEREST FREE FUNDS. THE COMMERCIAL EXPEDIENCY IS NOT IN DOUBT AS THE ADVANCE WAS GIVEN FOR PURCHASE OF SHOP FOR THE BUSINESS OF THE COMPANY IN THE MANDI AREA TO BE SET UP BY THE BOARD. 10. GROUND NO. 9 OF THE REVENUES APPEAL RELATES TO DISALLO WANCE OF INTEREST OF RS. 51,000/- 10.1 BRIEF FACTS ARE THAT THE ASSESSEE HAD SHOWN AN AMOUNT OF RS. 51,000/- AS ADVANCE TO ROTARY CLUB, CHANDIGARH MID TOWN. THE AS SESSING OFFICER HAS DISALLOWED THIS AMOUNT. 10.2 THE LD. CIT(A) HELD THAT THE ASSESSEE HAS SUBM ITTED THAT THIS AMOUNT WAS NOT CLAIMED AS AN EXPENDITURE AND IT IS SHOWN AS AD VANCE ONLY. AN EXPENDITURE CANNOT BE DISALLOWED IF IT HAS NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO VER IFY AS TO WHETHER THE ASSESSEE HAS CLAIMED THIS AMOUNT AND IF THE ASSESSEE HAS NOT CLAIMED THIS AMOUNT, THEN NOT TO MAKE THE DISALLOWANCE. 10.3 THE REVENUE SHOULDNT HAVE COME TO HIGHER FOR UMS ON SUCH CLEAR FINDING BY THE LD.CIT(A) WHICH IS PURELY A MATTER OF FACTUA L VERIFICATION. HENCE WE DECLINE TO INTERFERE IN THE ORDER OF THE LD.CIT(A). 10.4 AS A RESULT, THIS GROUND OF APPEAL OF THE REVE NUE IS DISMISSED. 11. GROUND NO. 10 RELATES TO ADDITION ON ACCOUNT OF SUPPRESS ION OF SALES TO SISTER CONCERN:: 11.1 BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER NOTICED THAT AS PER 'NOTES ON ACCOUNTS' ATTACHED WITH THE BALANC E SHEET, THE ASSESSEE HAD MADE HUGE SALES TO RELATED PARTIES/ASSOCIATED CONCE RNS. THE ASSESSING OFFICER NOTICED THAT THE SALES TO THE SISTER/ASSOCIATED CON CERN HAD BEEN MADE AT A LOWER RATE AS COMPARED TO SALES MADE TO INDEPENDENT PARTIES. THE ASSESSING OFFICER IDENTIFIED A FEW INSTANCES AND QUESTIONED T HE ASSESSEE ON THE ISSUE. THE 11 ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION OF THE ASSESSEE AND WORKED OUT THE SUPPRESSION IN SALE AT RS. 22,35,446 /- AND ADDED THIS AMOUNT. 11.2 LD. CIT(A) WHILE DELETING THE ADDITION HELD TH AT AN ASSESSEE CANNOT BE EXPECTED, MUCH LESS BE COMPELLED, TO MAKE PROFIT IN EVERY TRANSACTION OF SALE HE MAKES. HOWEVER, IF THE TRANSACTION IS WITH A REL ATED PARTY AND THE TRANSACTION RESULTS IN A LOSS, THE ONUS WILL BE ON THE ASSESSEE TO ESTABLISH THAT IT WAS A BONAFIDE TRANSACTION AND WAS NOT ENTERED INTO WITH THE MOTIVE OF BENEFITTING THE RELATED PARTY. IN THE ABSENCE OF SUCH EVIDENCE BEING LED BY THE ASSESSEE, THE REVENUE WILL BE ENTITLED TO DISALLOW/IGNORE THE LOSS WHILE COMPUTING THE TAXABLE INCOME. HOWEVER, IF THE SALES TO THE RELATE D PARTY RESULT IN A PROFIT TO THE ASSESSEE, EVEN THOUGH THE SALES ARE MADE AT A RATE, LOWER THAN AT WHICH THE SALES ARE MADE TO OTHER PARTIES, THE REVENUE CANNOT BRING TO TAX THE NOTIONAL PROFIT WHICH THE ASSESSEE WOULD OR COULD HAVE EARNE D, HAD THE SALES BEEN MADE AT THE RATES CHARGED FROM UNRELATED PARTIES. 11.3 BEFORE US LD. AR BROUGHT TO OUR NOTICE THAT TH E MATTER STANDS COVERED BY THE EARLIER ORDERS OF THE ITAT, CHANDIGARH BENCH IN ITA NO. 37/CHD/2014, IN ITA NO. 1144/CHD/2012 FOR A.Y. 2009-10 AND IN ITA NO. 7 75/CHD/2012 FOR A.Y. 2008- 09 AND ALSO IN ITA NO. 1068/CHD/2013 FOR A.Y. 2011- 12. 11.4 LD. DR RELIED ON THE ASSESSMENT ORDER. 11.5 HAVING PERUSED THE MATTER ON RECORD AND HISTOR Y OF THE CASE WE ARE IN TOTAL AGREEMENT WITH THE OBSERVATION OF THE LD. CIT (A) THAT, THE ASSESSEE HAS CITED MANY COGENT REASONS LIKE HUGE VOLUME OF SALES TO THESE CONCERNS ETC. TO JUSTIFY THE SALES TO THE SISTER CONCERNS AT LOWER R ATES. IT MAY BE CLARIFIED THAT WHILE THE ADDITION FOR INFLATED PURCHASES IN RESPEC T OF PURCHASES MADE FROM SISTER CONCERNS COULD BE MADE U/S 40A(2)(A), BUT TH ERE IS NO CORRESPONDING PROVISION IN RESPECT OF SALES MADE TO SISTER CONCER NS. THE DEPARTMENT CANNOT COMPEL A PERSON TO MAKE PROFIT OUT OF EVERY TRANS ACTION SINCE THE DEPARTMENT DOES NOT HAVE ANY AUTHORITY TO, ASK A PERSON TO MAX IMIZE ITS PROFITS. IF THE ASSESSEE CHOOSES TO GIVE DISCOUNT TO SOMEONE, HE IS FREE TO DO IT. THE ONLY CRITERIA/CONDITION IS THAT THE TRANSACTION (SALE) SHOULD NOT RESULT IN LOSS. 11.6 THIS PRINCIPLE WAS ENUMERATED BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S CALCUTTA DISCOUNT COMPANY LTD. (91 ITR 8) IN WHICH THEIR LORDSHIPS HAVE HELD THAT WHEN A TRADER TRANSFERS HIS GOODS TO ANOT HER TRADER AT A PRICE WHICH IS LESS THAN THE MARKET PRICE, SO LONG AS THE TRANSACT ION IS BONAFIDE, THE REVENUE 12 AUTHORITIES CANNOT CONSIDER THE MARKET PRICE IGNORI NG THE REAL PRICE FETCHED TO COMPUTE PROFITS FROM THE TRANSACTION. IT WAS ALSO H ELD BY THE APEX COURT IN THIS CASE THAT AN ASSESSEE WAS AT LIBERTY TO ARRANGE HIS AFFAIRS SO AS TO MINIMIZE HIS TAX BURDEN. IN THE INSTANT CASE, THE PERSONS TO WHO M SALES ARE MADE AT LOWER RATES ARE TAX PAYERS IN THE HIGHEST MARGINAL TAX BR ACKET AND SO IT CAN NOT EVEN BE VIEWED AS A SCHEME FOR TAX REDUCTION. IN VIEW OF THIS DISCUSSION, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING A DDITION OF RS.-22,35,446/- ON ACCOUNT OF SALES MADE TO ASSOCIATED CONCERNS AT LOW ER RATE AND THE SAME IS DELETED. 11.7 AS A RESULT THIS GROUND OF APPEAL OF THE REVEN UE IS DISMISSED. 12. GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE RELATES TO DI SALLOWANCE OF COMMISSION : 12.1 BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD PAID COMMISSION TO THE FOLLOWING PERSONS: (I) MANOJJOSHI RS. 41,840/- (II) BABU RAM SINGHAL RS. 2,888/- (III) DINESH RASTOGI RS. 2,53,661/- (IV) KOLKATTA UNIT (CASH PAYMENTS) RS. 68,207/- TOTAL RS. 3.66,536/- 12.2 AS PER ASSESSMENT ORDER, THE ASSESSEE HAD NOT FURNISHED ANY DETAILS OF THE SERVICES RENDERED AND CONFIRMATIONS FROM THESE PERS ONS WHICH WERE SPECIFICALLY ASKED FOR IN THE ASSESSMENT PROCEEDINGS. THE ASSESS ING OFFICER HAS ALSO NOTICED THAT ALL THE PAYMENTS OF BROKERAGE HAVE BEEN MADE I N CASH IN KOLKATTA UNIT. THE ASSESSING OFFICER FINALLY DISALLOWED THE ENTIRE AMOUNT OF COMMISSION PAID OF RS. 3,66,536/-. 12.3 LD. CIT(A) CONFIRMED THE ADDITION HOLDING THAT THE ASSESSEE HAS MERELY SUBMITTED THAT THE CONFIRMATION CAN BE ASKED FOR FR OM THE RESPECTIVE PARTIES! IT IS NOTEWORTHY THAT THE ASSESSING OFFICER HAD DULY O BSERVED THAT THE AMOUNT WAS BEING DISALLOWED BECAUSE THE ASSESSEE HAD NOT FILED DETAILS OF SERVICES RENDERED AND THE CONFIRMATIONS AND SO THE ASSESSEE SHOULD HAVE FILED CONFIRMATIONS AND DETAILS OF SERVICES RENDERED IF I T WANTED THE COMMISSION PAID 13 TO BE ALLOWED IN APPEAL. IN THE ABSENCE OF THE DETA ILS OF SERVICES RENDERED AND THE CONFIRMATIONS, THE COMMISSION PAYMENT IS NOT VERIFIABLE. 12.4 WE FIND THAT THE COMMISSION PAYMENTS HAVE BEE N REGULARLY DEBITED BY THE ASSESSEE TO THE P&L ACCOUNT FROM 2008-09 ONWARD S. WE THEREFORE CONSIDER IT FIT IN THE INTEREST OF JUSTICE TO RESTORE THE MATTE R BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTIONS TO THE ASSESSEE TO PRODUCE RELEVANT DOCUMENTS AND EVIDENCES BEFORE THE ASSESSING OFFICER SO AS TO MAK E HIM ELIGIBLE FOR ALLOWANCE OF THIS EXPENDITURE. 12.5 AS A RESULT, THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE RELATES TO THE DISALLOWANC E OF TRAVELLING EXPENSES: 13.1 BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS. 2,49,613/- ON ACCOUNT OF FOREIGN TRAVELLING. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVIDE DETAILS REGARDING FOREIGN VISIT S AND THE ASSESSEE HAD SUBMITTED THAT THIS EXPENDITURE WAS INCURRED FOR VI SIT TO USA TOWARDS STAY AND TICKET TO EXPLORE POSSIBILITY OF EXPORT OF DOC AND IMPORT OF SOYABEAN OIL AND TO EXPLORE THE POSSIBILITY OF EFFICIENCIES OF PROCESS AND PROCESS IMPROVEMENTS. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION OF THE ASSESSEE AND DISALLOWED THE ENTIRE AMOUNT WITH THE FOLLOWING OBS ERVATIONS: ' THE ABOVE REPLY OF THE APPELLANT IS NOT ACCEPTABLE. EXCEPT THIS SUBMISSION, APPELLANT HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE REGARDIN G THE BUSINESS PURPOSE OF THE APPELLANT FOR TAKING THE FOREIGN VISIT. THE APPELLA NT HAS NOT FILED ANY COPY OF PASSPORT/ VISA AND DETAIL REGARDING DATE OF JOURNEY ETC. MORE OVER, ALL THE SALES AND PURCHASES HAVE BEEN EFFECTED IN INDIA. FURTHER, NO DETAILS OF PERSONS CONTACTED IN USA WAS PROVIDED TO SHOW THAT THIS VISIT WAS FOR A BUSINESS PURPOSE. SINCE THE APPELLANT FAILED TO PROVIDE THE NEXUS BETWEEN THE FOREIGN VISIT AND BUS INESS PURPOSE, AN AMOUNT OFRS. 2,49,613/- SPENT ON FOREIGN VISIT IS REQUIRED TO BE ADDED BACK TO THE INCOME OF THE APPELLANT U/S 37(1).' 13.2 LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE AS T HE ASSESSEE HAS NOT FILED ANY SUCH PARTICULARS BEFORE THE LD. CIT(A) OR BEFOR E THE A.O. 13.3 WE HAVE HEARD THE ARGUMENT OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, AND CONSIDER IT FIT IN THE INTEREST OF JUSTICE TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER WITH DIRECTIONS TO THE 14 ASSESSEE TO PRODUCE RELEVANT DOCUMENTS AND EVIDENCE S BEFORE THE ASSESSING OFFICER SO AS TO MAKE HIM ELIGIBLE FOR ALLOWANCE OF THIS EXPENDITURE. 13.4 AS A RESULT, THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE RELATES TO DISALLOWANCE OF STAFF WELFARE EXPENSES : 14.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY CONSTRUCTED A SCHOOL BUILDING BY SPENDING RS. 17,46,331/- IN THE VICINITY OF ITS FACTORY IN SRI GANGANAGAR AND HAD CLAIMED THIS AMOUNT UNDER THE HE AD 'STAFF AND LABOUR EXPENSES'. THE ASSESSING OFFICER DISALLOWED THIS EX PENDITURE ON THE GROUND THAT IT WAS NOT FOR THE PURPOSES OF BUSINESS OF THE ASSESSE E COMPANY. 14.2 LD. CIT(A) AFTER GOING THROUGH THE CORRESPONDE NCE BETWEEN THE ASSESSEE AND THE ADDITIONAL DIRECTOR (ADMINISTRATION), ELEME NTARY EDUCATION, GOVERNMENT OF RAJASTHAN, BIKANER, FOUND THAT THE AS SESSEE HAD AGREED FOR GETTING CONSTRUCTED A SCHOOL IN THE NAME OF 'GAURI SHANKER RAJKIYA PRATHMIK VIDYALAYA' IN UDYOG VIHAR, SRI GANGANAGER. AS PER T HIS ORDER, THIS BUILDING WAS DONATED TO THE SCHOOL BY THE ASSESSEE. ACCORDING TO THE ASSESSEE, THE SCHOOL WAS BEING USED BY THE EMPLOYEES OF THE COMPANY. 14.3 LD. CIT(A) UPHELD THE ADDITION HOLDING THAT AS PER THE PROVISIONS OF SECTION 37(1) OF THE ACT, THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS CAN ONLY BE ALLOWED WHEREAS THE IMPUGNED E XPENSES CANNOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS. 14.4 BEFORE US, THE LD. AR ARGUED THAT THE COMPANY HAD CONTRIBUTED FOR THE GOVERNMENT SCHOOL AS PER THE DIRECTION OF THE STATE AUTHORITIES FOR THE CONSTRUCTION OF THE GOVERNMENT SCHOOL IN THE VICINI TY OF THE FACTORY OF THE COMPANY IN SRI GANGANAGAR. (THE MINUTES OF THE MEET ING AND THE DIRECTIONS ARE ENCLOSED) IT WAS ARGUED THAT THE ASSESSEE INCURRED THIS EXPEN DITURE FOR THE PURPOSES OF FACILITATING A SCHOOL WITH THE HELP OF THE STATE GO VERNMENT WHICH WAS USED BY THE EMPLOYEES OF THE COMPANY AND THIS BEING WELFARE EXPENSES OF THE WORKERS AND WAS FOR THE PURPOSES OF THE BUSINESS OF THE COM PANY IS ALLOWABLE AS BUSINESS EXPENDITURE U/S 37. IN SUPPORT IT WAS HELD THAT: 15 PAYMENT MADE TO A TRUST FOR OPENING A SCHOOL IN THE ASSESSEE COMPANY'S PREMISES WILL BE ALLOWABLE AS DEDUCTION SINCE THE A MOUNT WAS PAID WITH THE OBJECT OF PROVIDING EDUCATION TO THE CHILDREN OF EM PLOYEES OF ASSESSEE COMPANY WITHIN THE COMPANY PREMISES ITSELF AND WAS NECESSITATED FOR BUSINESS PURPOSE. (CHAMBAL FERTILISERS & CHEMICALS LTD. VS. ACIT TAX WORLD. DECEMBER VOL. XLW. PART 6. P. 195). 14.5 WE HAVE GONE THROUGH THE ARGUMENTS OF THE ASSE SSEE AND ALSO OF THE LD. DR WHO RELIED ON THE ORDERS OF THE LOWER AUTHORITIE S. WE FIND THAT THE EXPENDITURE IS INVOLVED AS A PART OF THE STAFF WELF ARE WHEREIN THE WARDS OF THE EMPLOYEES ARE BENEFITED BY STUDYING IN THE SCHOOL W HICH WAS CONSTRUCTED IN THE REMOTE AREA WITH THE COLLABORATION OF THE STATE EDU CATION DEPARTMENT. HENCE, THIS CAN BE TREATED AS STAFF WELFARE EXPENSES AND H ENCE THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DIRECTED TO BE DELE TED. 14.6 APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOW ED. 15. IN THE RESULT, APPEAL OF THE REVENUE AND THE CR OSS APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 04/06/2018 AG COPY TO: 1.THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT, 5. THE DR