The ACIT, Circle-4(1)(1), Ahmedabad V. Zodiac Mediquip Ltd, Ahmedabad

ITA 583/AHD/2020

AI Insights

The case involves two appeals by the Revenue against Zodiac Mediquip Ltd. concerning the assessment years 2010-11 and 2011-12. The primary issues revolved around the disallowance of advertisement expenses, depreciation on various assets, and interest payments to a sister concern. The Assessing Officer had disallowed these expenses and deductions, citing lack of business necessity and non-compliance with statutory provisions. However, the CIT(A) reversed these decisions, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision favored the assessee, emphasizing the business necessity and compliance with legal provisions in the expenses and deductions claimed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135810 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-08-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 13-12-2020
• Other Referred Cases: CIT vs. Khambhata Family Trust, CIT vs. Chandulal Keshavlal & Co., CIT vs. Malayalam Plantations Ltd., CIT vs. Birla Cotton Spg. And Wvg. Mills Ltd., CIT vs. S.A. Builders Ltd., CIT vs. Tupperware India (P.) Ltd., CIT vs. Punjab Stainless Steel Ind.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORDEPARTMENTTO; FORTHEASSESSEETODECIDEWHETHERANY; FORTHEASSESSEETOSPENDSOMUCHOFTHEMONEYONTHE; FORTHEASSESSEETOCREATEAWARENESSINTHEMARKETSOTHATTHEPATIENTS; FORASSESSEEASSESSEE; FORASSESSEEANDITWASINASSESSEESBUSINESSINTERESTSTHATALLTAXLIABILITIESOF; FORTHEREVENUETODECIDE.FURTHER; EXPRESSIONWHOLLYAND
• Assessee Lawyers: SHRIASEEML.THAKKAR; ITANOS.AHD; CONFIRMINGCIT A SORDEROFTHATYEARBY; MAKINGRELIANCEONTHEORDEROFITAT; AHMEDABADINCASEOF; THEDECISIONOFTHEHONBLEHIGHCOURTOF
• Keywords: Depreciation

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’B’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं ./ITANos.583-584/AHD/2020 धििाधरणवरध / Asstt.Years:2010-2011&2011-12 A.C.I.T, Circle-4(1)(1), Ahmedabad. Vs. ZodiacMediquipLtd., 804,KaivannaComplex, Nr.Panchvati, FiveRoad, Ahmedabad-380009. PAN:AAACZ1118R (Applicant)(Respondent) Revenueby:MsSaumyaPandeyJain,Sr.DR Assesseeby:ShriAseemL.Thakkar,A.R सुिवाईकीतारीख /DateofHearing:23/08/2023 घोरणाकीतारीख/DateofPronouncement:27/09/2023 आदेश/ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedtwoappealshavebeenfiledattheinstanceoftheRevenue againsttheseparateordersoftheLearnedCommissionerofIncomeTax (Appeals)-6,Ahmedabad,(inshort“Ld.CIT(A)”)arisinginthematterof assessmentorderpassedunders.143(3)oftheIncomeTaxAct1961(here-in- ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 2 afterreferredtoas"theAct")relevanttotheAssessmentYears2010-2011& 2011-12. First,wetakeupITANo.583/AHD/2020forAY2010-11,anappealby theRevenue. 2.TheRevenuehasraisedthefollowinggroundsofappeal: I.TheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceofRs. 3,32,00,000/-onaccountofadvertisementexpenditurewithoutappreciatingthatthe assesseehadfailedtoestablishanybusinessexigencypertainstothatadvertisements. II.TheLd.ClT(A)haserredinlawandonfactsindeletingthedisallowanceofRs. 3,32,00,000/-onaccountofadvertisementexpenseswithoutappreciatingthefactthatall advertisementsmentiononlytwowords'XeonDevices'anddonotmentioneventhe addressoftheassesseeortheproductoftheassessee.Theseadvertisementscannotin anywaybeconstruedtoservebusinesspurposeoftheassessee. III.TheLd.ClT(A)haserredinlawandonfactsindeletingthedisallowanceofRg. 3,45,576/-onrejectionofhigherdepreciationoncertainvehicles. IV.TheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceof depreciationamountingtoRs.1,01,88,712/-onbuildingandRs.2,946/-onfurnitureand fixtures. V.TheLd.CIT(A)haserredinlawandonfactsindeletingdisallowanceofinterest expenditureofRs.68,20,411/-paidtoM/s.SigmaWelmessPvtLtd. VI.TheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceof deductionofRs.6,01,593/-onaccountofbuildingrepairsandmaintenance. VII.Onthefactsandcircumstancesofthecase,LdC1T(A)oughttohaveupheldthe orderoftheAssessingOfficer. VIII.Itis,therefore,prayedthattheorderofLdCIT(A)maybesetasideandthatof theAssessingOfficerberestored. 3.ThefirstissueraisedbytheRevenueingroundNo.1and2isthattheLd. CIT(A)erredindeletingtheadditionmadebytheAOforRs.3.32croreson accountofadvertisingexpenses. 4.Thebriefstatedfactsarethattheassesseeinthepresentcase,alimited company,isengagedinthemanufacturingbusinessofsurgicalitems.The assesseeownsandrunsoneDivisioninthenameof“Xeondevices”whichhas ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 3 incurredadvertisementexpensesamountingtoRs.3.32croresinthelocal newspaperi.e.“Sakshi”basedinHyderabad,whichwerepaidtoM/sJagati PublicationHouse.Itwassubmittedbytheassesseethatithasbeensupplying surgicalitemsmainlytoonecompanyi.e.ShelbyLimited,whichwasgoingtostart anewHospitalinthecityofHyderabad.Thus,tocreateanawarenessaboutits product,theassesseehasincurredadvertisingexpenses.Thepurposeofsuch expenseswastocapturenewGeographicalareasandtoretainexistingbuyer beingShelbyLimited.Theassesseeinsupportofadvertisementexpensehasfiled ledgercopy,billsandnewspapercutting.Thus,itwascontendedbytheassessee thatsuchexpenditurehasbeenincurredpurelyforthepurposeofbusinessand thereforethesameshouldbeallowedasdeductionu/s37(1)oftheAct. 5.However,theAOnoticedthattheassesseeissupplyingitssurgicalitemto onepartynamelyShelbyLtd.whichisevidentfromthedataoftheprecedingand succeedingyears.TheShelbyLimitedhasitsownsignificance/influenceinthe surgicalmanufacturingbusinessoftheassesseeandthereforetheyarerelated parties.AspertheAO,if100%saleistobemadetothelimitedparty,therewas noneedtoincuranyadvertisementexpense.TheAOalsoobservedthatthename oftheassesseewasnowhereappearingintheadvertisementbutonlycontained thenameofitsdivisioni.e.“Xeondevices”.TheAOalsofoundthattheassessee hasincurredadvertisementexpensesintheprecedingyearofRs.2,12,672.00 undertheheadsellinganddistributionexpenseswhichhasescalatedintheyear underconsiderationtoRs.3,36,81,475/-only.Basedontheabove,theAOwasof theviewthattherewasnobusinessexpediencyforincurringsuchexpensesand thereforehedisallowedthesamebyaddingtothetotalincomeoftheassessee. 6.Aggrieved,assesseepreferredanappealtotheLd.CIT(A). 7.TheassesseebeforetheLd.CIT(A),submittedthattherewasnoinfluence ofitintheShelbyLimitedandthereforethereisnoquestionofapplyingthe provisionofsection40A(2)(b)oftheAct.Itwasalsosubmittedthatthe ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 4 advertisementexpenseswerecarriedoutinmajorcitieswhichwerenotlimitedto anyarea.Theassesseefurnishedthelistofthecitiesandtheamountof expenditureincurredinthosecitiesfortheadvertisement.Aspertheassessee,its turnoverafterincurringadvertisementexpense,hasincreasedmanifoldwhichalso justifiescommercialexpediency.Thesurgicalitemsmanufacturedbytheassessee wereusedforthepatientwhoaretakingtreatmentfromShelbyHospital.Assuch thepatientwilloptthesurgicalitemmanufacturedbytheassesseeonlyiftheyare awareofthesurgicalitems.Aspertheassessee,theexpenseswereincurredfor creatingawarenessinthepublicatlarge.Thus,suchexpensesshouldbeallowed asdeduction. 8.TheLd.CIT(A),afterconsideringthesubmissionoftheassesseedeleted theadditionmadebytheAObyobservingasunder: 6.7Thecopyofenquiryreportreceivedbyundersignedwasforwardtoappellantand appellanthasfiledhisrejoinderwhereinitwasmainlycontendedthatinresponseto summonsissuedtoJagatiPublication,directorofsaidcompanyhassubmittedrelevant informationwhereinitwasstatedthatadvertisementswerepublishedinmasterhead positioninthemainpaperofnewspaperwhichiscarriedoutinalleditions.Thesaid companyhasalsosubmittedcopiesofbillsraisedandcopiesofnewspapersinwhich advertisementwaspublished.Theappellanthasclaimedthataspublisherhasalso respondedtosummonsissuedbyDDIT(Inv),suppliedrelevantinformationcalledupon andthereisnothinginsuchreport-whichcanprovethatappellanthasincurredbogus expenditure,disallowancemadeinassessmentorderdeservestobedeleted. 6.8Onperusalofrelevantfactsonrecordalongwithinquiryreportreceivedfrom DDIT(Inv),itisobservedthatduringtheyearunderconsideration,appellanthasmade advertisementpaymentofRs3,32,00,000/-toJagatiPublicationLimited.The appellanthassubmittedcopyofledgeraccountofsuchpartyalongwithbillsraisedby suchpartyandrelevantadvertisementcuttingofnewspaperswhereinsuchadvertisement ispublished.TheAOhasnotdisputedthefactthatpaymentwasmadethrough accountpayeechequesandthereisnothingonrecordwhichcanprovethatappellant hasreceivedcashagainstsuchchequepayment.TheAOhasevennotdisputedthefact thatadvertisementofappellantcompanywaspublished.innewspaper.called"Sakshi" publishedbyJagatiPublicationinrelevantperiodinalltheireditions.TheAOhasdoubted genuinenessofsuchexpendituremainlyonthegroundthattherewasnoneed"for incurringofsuchexpenditurewhenmajoritysalesweremadetoShalbylimited.Itis undisputedfactthatappellantisengagedinbusinessofmanufacturingofsurgicalitems andtradingofimplantsandsurgicalitemsandaspointedoutbyAOinassessmentorder, almost99%salesofappellantcompanyistoShalbyLimited.Itisundisputedfactthat advertisementwasforthepurposeofthedevicesandimplantsinwhichtheassessee- companyistrader.TheAOhasfailedtoappreciatethefactthatasShalbylimitedwas carryingoutsubstantialadvertisementcampaigninSouthIndiatocatermorepatients fromsuchregion,appellantcompanyhasalsomadesimilarcampaigninSouthIndia.The AOoughttohaveappreciatedthefactthatasentirebusinessoftheappellant-company dependeduponthepurchaseordersinrespectofsurgicalequipmentsandkneeimplants ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 5 receivedfromShalbyLimited,itwasentirelyintheinterestofassessee'sbusinessthat ShalbyLimitedisabletogetgreaternumberofpatientsrequiringtheseimplantsandby carryingoutsuchadvertisementcampaignappellanthighlightedsuchaspectsandif, Shalbylimitedwasabletoobtainhigherpatientsfromsuchregion,businessofappellant itselfwouldincreasesignificantlyhenceappellantcompanyhasalsomadesuch advertisementintwoyearswhichwereinlinewithShalbylimited.Merelybecause appellant'smajoritysalesaretoShalbylimited,AOcannotdisallowsuchexpenditureon thegroundthattherewasnoneedonpartofappellanttoincursuchexpenditure.Itis matteroffactthatoncebusinessofShalbylimitedisincreased,businessofappellant wouldautomaticallyincreaseandbymakingsuchadvertisement,ifsomebenefitsarealso receivedbyothercompany,expenditureincurredbyappellantcannotbedisallowmerely onpresumptionthattherewasnonecessitytoincursuchexpenditure.Theratioof decisionofHon'bleGujaratHighCourtinthecaseofCITV/sKhambhataFamily Trust,215Taxman602,squarelyappliestofactsofthecasewhereincourthasheldas under: "Section37(1)oftheIncome-taxAct,1961-Businessexpenditure-Allowabilityof [Advertisingexpenses]-Whetheronceitisfoundthatexpenditurehasbeen incurredbyassesseeforpublicityoradvertisement,itisnotfordepartmentto considerwhatcommercialexpediencyjustifysuchexpenditure;merefactthat onaccountofexpenditureincurredbyassesseewhollyandexclusivelyforits ownbusiness,incidentallysomethirdpartyisalsobenefitedisnogroundto disallowanypartofsuchexpenditure-Held,yes-Assesseeprocuredusagerights forbrand"Rasna"foravaluableconsiderationandincurredadvertisementexpensesin respectofproductsmanufacturedbyitundersuchbrandname-AssessingOfficernoted thatbyadvertisingsaidbrand,otherpartieswerealsobenefitedandanintangibleasset wascreated,whichwasnotevenownedbyassesseeand,therefore,expensesrelatable theretowerenotforbusinesspurposeofassesseebutwerecapitalinnature-He disallowedsaidclaim-Whetnersincesaidexpenditurewasexpendedexclusivelyfor assessee'sbusiness,merelybecausebyvirtueofsuchadvertisementsbrandvalueof Rasnawasenhancedandothermanufacturersofbrandwerealsoindirectlybenefited,it couldnotbesaidthatexpenditureincurredbyassesseewasnotwhollyandexclusivelyfor itsownbusiness-Held,yes-Whether,therefore,disallowancewastobedeleted-Held, yes[Para9][Infavourofassessee]"[1951]20ITR1,CITv.ChandulalKeshavlalandCo. [1960]38ITR601. 6.9TheAOobservedthatappellantismakingsubstantialsalestorelatedconcernor enterpriseinfluencebykeymanagementpersonalhencetherewasnoneedtoincur advertisementexpenditure.Ifsaleswouldhavebeenmadetothirdpartyorunrelated party,AOstatedthathewouldhaveacceptedcontentionofappellantregardingneedof advertisementexpenditure.ThiscontentionofAOcannotbeacceptedforthereasonthat evenifsalesismadetorelatedconcern,thereisnoobservationinassessmentorderof appellantcompanyorShalbylimitedthatthereisdiversionofanyexpenditureorsalesare notmadeatfairmarketrate.Merelymakingmajoritysalestorelatedconcerndoesnot makeexpenditureincurredbyassesseetobenon-genuineunlessthereisother corroborativeevidencesthatexpenditurewasnotactuallyincurred.Theappellanthas alreadyexplainedthereasonforincurringofsuchadvertisementexpenditureincurrent yearandsuchcontentionisalreadyfoundtenableinprecedingparashencedisallowance ofadvertisementexpenditureonfallaciousgroundcannotbeupheld. 6.10ItisobservedthatAOhasdisallowedadvertisementexpenditurepaymentmadeto JagtiPublicationonthegroundthattherewasnonecessitytoincursuchexpenditure.Itis pertinenttorefertodecisionofGujaratHighcourtinthecaseofCommissionerof Income-taxv.M/sGujaratNarmadaValleyFertilizerandChemicalsLtd.R/Tax AppealNo.146of2019dated16/06/2019hasexplainedthemeaningof"whollyand ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 6 exclusivelyforthepurposeofearningtheincomefromthebusinessorprofession"inthe contextofsection37asunder: "8.Weareoftheviewthataslongastheexpensesareincurredwhollyandexclusivelyfor thepurposeofearningtheincomefromthebusinessorprofession,merelybecausesome oftheseexpensesareincurredvoluntarily,i;e.withouttherebeinganylegalorcontractual ooligaticntoincurthesame,thoseexpensesdonotceasetobedeductibleinnature.In otherwords,itisnotnecessarythatthebusinessmanalonewouldincurany furtheranceofhisbusinesspursuits.Wefindguidancefromapassagefromthe judgmentoftheHouseofLordsinthecaseofAtheronv.BritishInsulatedS.Helsbey CablesLtd.[1925]10TaxCases155(HL),referredtowithapprovalbytheSupremeCourt inthecaseofCITv.ChandulalKeshavlalStCo.[1960]38ITR601,whichreadsasfollows: "ItwasmadeclearintheabovecitedcasesofUsher'sWilshireBreweryv.Bruce(supra) andSmithv.IncorporatedCouncilofLawReporting[1914]6TaxCases477thatasumof moneyexpendednotwithanecessityandwithaviewtodirectimmediatebenefittothe trade,butvoluntarilyandonthegroundsofcommercialexpediencyandinorderto indirectlyfacilitate,carryingonofbusinessmayyettobeexpendedwhollyandexclusively forthepurposeoftrade;anditappearstomethatthefindingsoftheCITinthepresent case,bringthepaymentinquestionwithinthatdescription.Theyfound(inwordswhichI havealreadyquoted)thatpaymentwasmadeforthesoundcommercialpurposeof enablingthecompanytoretaintheexistingandfuturemembersofstaffandforincreasing theefficiencyofthestaff;andafterreferringtothecontentionoftheCrownthatthesum ofSterlingPound31,784wasnotmoneywhollyandexclusivelylaidoutforthepurposeof thetradeundertheruleabovereferredto,theyfounddeductionwasadmissiblethusin effect,thoughnotinterms,negativingtheCrownscontentions,Ithinkthattherewas amplematerialtosupportthefindingsoftheCIT,andaccordinglyholdthatthisprohibition doesnotapply." 8.1Thus,theaforesaidmakesitclearthatevenifanexpenseisincurred voluntarilyitmaystillbeconstruedas"whollyandexclusively".Explainingthis principle,theHon'bleSupremeCourthas,inthecaseofSassoonJDavid&Co.(P)Ltd.vs. CIT[(1979)118ITR261(SC)]interaliaobservedthat: "Ithastobeobservedherethattheexpression"whollyandexclusively"usedins. 10(2)(xv)oftheActdoesnotmean"necessarily".Ordinarily,itisfortheassesseeto decidewhetheranyexpenditureshouldbeincurredinthecourseofhisoritsbusiness. Suchexpendituremaybeincurredvoluntarilyandwithoutanynecessityandifitis incurredforpromotingthebusinessandtoearnprofits,theassesseecanclaimdeduction unders.10(2)(xv)oftheActeventhoughtherewasnocompellingnecessitytoincursuch expenditure.ItisI.T.A.N0.99/BLPR/2012Assessmentyear:2008-09relevanttoreferat thisstagetothelegislativehistoryofs.37oftheITAct,1961,whichcorrespondstos. 10(2)(xv)oftheAct.AnattemptwasmadeintheITBillof1961tolaydownthe "necessity"oftheexpenditureasaconditionforclaimingdeductionunders.37.Sec.37(1) intheBillread"anyexpenditure..laidoutorexpendedwholly,necessarilyandexclusively forthepurposesofthebusinessorprofessionshallbe•allowed."Theintroductionofthe word"necessarily"irrtheabovesectionresultedinpublicprotest.Consequently,whens. 37wasfinallyenactedintolaw,theword"necessarily"cametobedropped.Thefactthat somebodyotherthantheassesseeisalsobenefitedbytheexpenditureshouldnotcomein thewayofanexpenditurebeingallowedbywayofdeductionunders.10(2)(xv)oftheAct ifitsatisfiesotherwisethetestslaiddownbylaw." 8.2ThewordsusedinSection37(1)oftheActare"whollyandexclusivelyfor thepurposeofbusiness".Innormallegalparlancetheword"wholly"would meanentirelyandtheword"exclusively"wouldmeansolely.Thus,itgivesan impressionoritcouldbearguedthatanyelementofexpenditurenotlaidout entirelyandsolelyforthepurposeofprofessionorbusinesswouldnotbe ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 7 coveredbySection37(1)oftheAct.Oneneedstoexaminethisfromthe perspectiveoftheassesseewhodoesmaketheexpenditure.However,as explainedbytheSupremeCourttheexpression"whollyandexclusively"does notmean"necessarily".Itisfortheassesseetodecidewhetherany expenditureshouldbeincurredinthecourseofitsbusiness. 8.3WehavenoticedthatSection57(iii)oftheActcontainssimilarphrases"whollyand exclusivelyforthepurpose".Section57oftheActiswithregardtothedeductions.Section 57(iii)readsasunder: "Section57(iii):-anyotherexpenditure(notbeinginthenatureofcapitalexpenditure) laidoutorexpendedwhollyandexclusivelyforthepurposeofmakingorearningsuch income." 8.4Section37talksabouttheexpenditurewhollyandexclusivelyforthepurposesof thebusinesswhereas,Section57(iii)talksabouttheexpenditure-whollyandexclusively forthepurposeofmakingorearningsuchincome. 8.5InCITv.MalayalamPlantationsLtd,[1964]53ITR140,theSupremeCourt observedthat"theexpression'forthepurposeforthebusiness'iswiderinscopethan theexpression'forthepurposeofearningprofits'".Similarobservationhasalsobeen madeinCITv.BirlaCottornSpg.AndWvg.MillsLtd.[1971]82ITR166,wherethe SupremeCourtexpressedtheviewthattheexpression'forthepurposeofthebusiness' isessentiallywiderthantheexpression"forthepurposeofearningprofits".The decisioninMalayalamPlantationshasbeenfreelydrawnuponbycourtsforlayingdown thattheprovisionsofs.37(1)andsimilarprovisionsofs.10(2)(xv)ofthe1922Actin whichtheexpression"forthepurposesofthebusiness"isused,havewiderimplication thantheprovisionsofs.10(2)ofthe1922Actwhichusedthewords"forthepurpose of.......earningsuch....profits"andtheprovisionsofs. 57(iii)inwhichtheexpression"forthepurposeofmakingorearningsuchincome"isused. (Seeforexample,PadmavatiJaykrishna'scase[1975]101ITR153).Thatthisviewis justifiedisamplyborneoutbythedifferentapproachesadoptedintwodecisionsofthe SupremeCourtinrelationtoaclaimfordeductioninrespectofthesameitemof expenditure.InT.S.Krishnav.CIT[1973187ITR429(SC),aclaimfordeductionin respectofwealth-taxpaidonsnaresneldbytneassesseewasheldtooenotapermissible deductionunders.57(iii)evenapartfromorirrespectivesoftheprovisionsofs.58(1A). Asagainstthis,wehavethedecisioninIndianAluminiumCo.Ltd.v.CIT[1972]84ITR 735,whereinwealth-taxpaidbytheassessee,whichwasatradingcompany,onassets heldbyitforthepurposeofitsbusiness,washeldtobedeductibleasabusinessexpense unders.10(2)(xv).Thesetwodecisionsillustratethatdifferentapproachesarenecessary whenthesameitemofexpenditurehastobejudgedfromthestandpointofs.37(1)on theonehandands.57(iii)ontheotherandthatthescopeoftheprovisionsisnotthe same,Referencemayalsobemadeinthisconnectiontothedecisionofthiscourtin CommissionerofExpenditure-taxV/s.Mrs.ManoramaSarabhai[1966]59ITR262.Inthat case,itwaspointedoutthatthewords"forthepurposeof"wereusedins.5(a)ofthe ExpendituretaxAct,1957,inconnectionwiththewords"thebusiness,profession, vocationoroccupation"andalsoinconjunctionwiththewords"earningincomefromany othersource"anditwasobservedthat(p.266): "Thelegislaturehasthusprovideddisjunctivelyfordifferentcategoriesofexpenditureand itisnotrightthattheconceptunderlyingonecategoryshouldbeimportedintotheother." Theseobservations,thoughtheyaremadeinadifferentcontext,areappositeinjudging therelativescopeofss.37(1}and57(iii).Evenapartfromauthority,onacomparisonof thelanguageofs.37(1)ands.•57(iii),itbecomesclearthatthescopeoftheformer sectionisessentiallywiderthanthatofthelatter.Theword"business"usedins.37(1)in associationwiththeexpression"forthepurposesof"isawordofwideconnotation.As ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 8 observedbytheSupremeCourtinNarainSwadeshiWeavingMillsv.CEPT[1954]26ITR 765atp.773: "Theword'business'connotessomerealsubstantialandsystematicororganisedcourseof activityorconductwithassetpurpose." 8.6Inthecontextofataxingstatute,theword"business"wouldsignifyan organisedandcontinuouscourseofcommercialactivity,whichiscarriedon withtheendinviewofmakingorearningprofits.Unders.37(1),therefore,the connectionhastobeestablishedbetweentheexpenditureincurredandthe activityundertakenbytheassesseewithsuchobject." Similarly,theviewtakenbytheBombayHighCourtinPhaltanSugarWorksLtd.v. CIT[1995]215ITR377thatonceitisestablishedthattherewasnexusbetweenthe expenditureandthepurposeofthebusiness(whichneednotnecessarilybethe businessoftheassesseeitself),theRevenuecannotjustifiablyclaimtoputitselfinthe arm-chairofthebusinessorinthepositionoftheboardofdirectorsandassumetherole todecidehowmuchisreasonableexpenditurehavingregardtothecircumstancesofthe case.Nobusinessmancanbecompelledtomaximizehisprofit.TheIncome-taxauthorities mustputthemselvesintheshoesoftheassesseeandseehowaprudentbusinessman wouldact.Theauthoritiesmustnotlookatthematterfromtheirownviewpointbutthat ofaprudentbusinessman.TheappellanthasalsoreliedupondecisionofAthertonv, BritishInsulatedandHelsbyCablesLtd.[1925]10TC155,itwasheldbytheHouseof Lordsthatinordertoclaimadeduction,itisenoughtoshowthatthemoneyis expended,notofnecessityandwithaviewtodirectandimmediatebenefit,but voluntarilyandongroundsofcommercialexpediencyandinordertoindirectly tofacilitatethecarryingonthebusiness.TheabovetestinAtherton'scase [1925]10TC155(HL)hasbeenapprovedbythiscourtinseveraldecisions,e.g.. EasternInvestmentsLtd.v.Ld.CIT(A). 6.11TheratioofvariousdecisionsdiscussedhereinaboveclearlyApplytothefactsofthe caseinasmuchas,theAOisnotempoweredtodecidethebusinessnecessityof expenditure.Onceassesseecompanyhasincurredexpenditure,submittedsupported evidences,evenpayeehasadmittedtohavereceivedconsiderationandother corroborativeevidencessupporttheclaimofassesseethatactualexpenditurewasincurred, disallowanceofexpenditurecannotbemadeonthegroundthatthereisnoimmediate benefitthathasaccruedtoassesseeortherewasnorequirementtoincursuch expenditureasmadeinpresentcase. 6.12Itisobservedthatduringthecourseofappellateproceedings,mypredecessorCIT(A) hasdirectedAOtomakenecessaryenquiresofsuchpublisherandDDIT(Inv),Hyderabad hasmadenecessaryenquiriesandsubmittedhisreporton06/12/2018.Onperusalofsuch report,itisapparentthatdirectorofpublishercompanyhascompliedwithdetailscalledby AOwhichincludescopyofbillstatement, c °Pyj£;-bjllsraisedforadvertisementtoappellant andcopiesofnewspapersinwhichsuchadvertisementispublished.Thedirectorofsaid publisherhascategoricallystatedthatadvertisementarepublishedintheMasterHead Positionofbusinesspageinthemainnewspaperwhichiscarriedoutinalltheeditionsand thesefactsclearlyprovethatactualadvertisementhashappenedandsupportthe contentionofappellantthatitwaspublishedonfirstpage.Oncetheadvertisementis publishedonfirstpageaswellasappearinginMasterhead,itclearlyattract^theusers andratesofsuchadvertisementareusuallyonhigherside.Thedirector"oTsaidpublisher hascategoricallystatedthatadvertisementgivenbyappellantwasatpremiumratesasit involvesbrandvalueofcompanyandgenerallyadvertisementinthisspacewasnot normallyprovidedbypublishershencetherewasnocomparablerates.Thesefactsarenot rebuttedbyDDIT(Inv)inhisreportnorAOhasbroughtanyotherevidenceshence contentionofAOthatadvertisementpublishedinnewspaperwassmallinsizewhereas ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 9 ratechargesbypublisherwasonhighersidecannotbeaccepted.Eveninentire assessmentorder,thereisnowhispertothefactthatrateschargedbyother advertisementagenciesin"SouthIndia"chargelowerratethanrateschargesbypublisher. ItismatteroffactthatJagatiPublicationisnotarelatedconcernu/s40A(2)(b)and directorofsaidcompanyhasadmittedthefactthattheyhavereceivedadvertisementfrom appellantcompanyandhavechargedpremiumrateshencecontentionofAOthat advertisementexpenditureincurredbyappellantwasnotgenuinecannotbeaccepted. 6.13Itisobservedthatappellanthasgivencompletedetailsofexpenditurealongwith supportingevidences,AOhasmadenecessaryenquiresofpublishersbasedupon directiongivenbymypredecessorCIT(A),andnoconcreteevidencesarebroughton recordthatsuchexpenditurewasnongenuine,itisfoundthatdisallowancemadebyAOis onpresumptionhencecannotbesustained.Theappellanthasrightlyreliedupondecision ofHon'bleDelhiHighcourtinthecaseofPCIT-7v/sRambaghPalaceHotels(P) Ltd98taxrnan.Com167(2018)whereinithasbeenheldthat: "Section37(1)oftheIncome-taxAct,1961-Businessexpenditure-Allowabilityof(Repair andmaintenancecharges)-Assessmentyear2005-06-Assessee-company,runninga hotel,claimedexpenditureonaccountofrepairandmaintainancechargespaidbyit- AssessingOfficerallowedrepairandmaintenancechargedpaidtofourparties,whohad appearedbeforehimandwhosestatementswererecordedonoath-However,balance repairandmaintenancechargeswasdisallowedtoextentof50percent,ongroundof absenceofsupportingdocuments-Commissioner(Appeals)observedtnatassesseehad filed'parawisedetailsofpartlydisallowedrepairandmaintenanceexpensewithnames, PANnumberofvendorsandamountpaidtothem- Assesseshadalsofurnisheddetailsofforeignsuppliers,withcopiesofbillsofladingetc.- However,assesseewasnotabletofurnishconfirmationfromone,GCtowhompaymentof certainamountwasmade-AccordinglyCommissioner(Appeals)observedthattherewas nojustificationtomakedisallowanceof50percentbuthedisallowedexpenditureto extentof5percentonaccountofGC-Further,Tribunalhadrecordedthatassessee hadproduceddetailsofallvendors,includingtheirPANnumbers,invoices raisedbythem,etc.;therefore,Commissioner(Appeals)wasnotrightin makingdisallowanceof5percentongroundofmeresuspicion-Whether Tribunalwasjustified-Held,yes[Para7][Infavourofassessee]" 6.14ItisobservedthatAOhasmadedisallowanceofadvertisementexpendituremerely onpresumptionandnoconcreteevidenceswerebroughtonrecordtoprovehiscontention thatexpenditureincurredbyappellantwasbogus.Theappellanthasalready'""provided businessexpediencyofsuchpayment.Consideringthefactsdiscussedhereinabove,and relyingupondecisionsreferredsupra,disallowancemadebyAOforRs3,32,00,000/-is deleted.Thisgroundofappealisallowed.. 9.Beingaggrievedbytheorderoftheld.CIT-A,theRevenueisinappeal beforeus. 10.Boththeld.DRandtheLd.ARbeforeusreliedontheorderpassedthe authoritiesbelowasfavourabletothem. ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 10 11.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe assesseehasincurredadvertisementexpensesamountingtoRs.3.32croreswhich waspublishedinthelocalnewspapersmajorlyinSouthIndia.Theassesseehas madethepaymenttothepublicationhousenamelyJagatiPublicationLtd.The assesseemanufacturesthesurgicalitems,anditwasthecontentionofthe assesseethattheadvertisementwaspublishedinthelocalnewspaperstocreate theawarenessofthesurgicalitemsmanufacturedbytheassessee.Itisalso undisputedthattheassesseeismainlysupplyingitssurgicalitemstoasingle party,namelyShelbyLimited.Thus,itwasallegedbytheAOthatsincetherewas asinglepartybeingthebuyerofthesurgicalitemsmanufacturedbytheassessee, therewasnoneedfortheassesseetospendsomuchofthemoneyonthe advertisementofitssurgicalitems.First,itistobenotedthatwhatexpenditureis tobeincurredforthepurposeofthebusinessispurelyacallordecisiontobe takenbythemanagement.Assuch,theAOcannotenteroroccupythearmchair oftheassesseetodecidewhatisnecessaryforcarryingoutitsbusiness.Assuch itisthesoleresponsibilityoftheassesseetocarryoutthebusinessinthemost effectivemanneraccordingtoitsbestunderstanding.Nobodycanquestiononthe businessexpediencyofexpenditureincurredbytheassesseeforrunningits businessuntilandunlesssomeadversematerialsarebroughtonrecord.Inthe presentcase,thegenuinenessoftheexpenseshasnowherebeendoubted.Onlyit wastheallegationoftheAOthat,therewasnoneedforincurringsomuchofthe expenditureontheadvertisementbecausetherewassinglebuyerofthesurgical itemsmanufacturedbytheassessee.ItseemstousthattheAOhasnotcorrectly understoodtheunderlyingreasonsforincurringtheexpenseontheadvertisement ofitsproduct.Inthepresentcase,theassessee’smainbuyeri.e.ShelbyLtdwas goingtostartoroperateitshospitalactivityinSouthIndia.Theassesseetocreate anawarenessofitssurgicalitemstobeusedbyShelbyLtd.hasundertakenan awarenesscampaignbywayofadvertisement.Indeed,thepatientstakingthe treatmentfromthehospitalnamelyShelbylimitedrequiresurgicalitems.The ShelbyLimitedshallrecommendthenameofthesurgicalitemsmanufacturedby ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 11 theassessee.Admittedly,theShelbyLtdisthesolebuyerofthesurgicalitems manufacturedbytheassessee.Thus,thepatientscomingforthetreatmenttothe Shelbyhospitalwillprefertousethesurgicalequipmentmanufacturedbythe assesseeonlyinasituationwhentheyareawareoftheproduct.Thus,itbecomes necessaryfortheassesseetocreateawarenessinthemarketsothatthepatients whiletakingthetreatmentfromShelbyhospitalpreferthesurgicalitems manufacturedbytheassessee.Admittedly,theturnoveroftheassesseeafterthe advertisementhasincreasedmanifold.Thus,insuchfactsandcircumstances,we areoftheviewthattheassesseeafterincurringsuchhugeadvertisement expenseswasabletofetchbettersaleofitsproductsinthemarket.Accordingly, weholdthattheadvertisingexpenseswereincurredbytheassesseeforits commercialpurposes.Hence,wedonotfindanymeritinthegroundfiledbythe revenueandaccordinglywedismissthesame.Hencethegroundofappealfiled bytherevenueisherebydismissed. 12.ThenextissueraisedbytheRevenueingroundNo.3isthattheLd.CIT(A) erredindeletingtheexcessdepreciationdisallowedbytheAOonthevehicles. 13.TheAOduringtheassessmentproceedingsfoundthattheassesseehas claimeddepreciationonthevehiclepurchasedbyitintheyearunder considerationat50%aftermakingrelianceonthenotificationissuedbytheCBDT bearingNo.10/19dated19/01/2009.AspertheAO,thevehicleswereeligiblefor depreciationattherateof15%whereastheassesseehasclaimeddepreciationat acceleratedratei.e.50%.Thus,theAOworkedouttheexcessdepreciationatRs. 34,576/-andaddedtothetotalincomeoftheassessee. 14.AggrievedassesseepreferredanappealtotheLd.CIT(A)andsubmitted thatthenewcommercialvehiclegoeswithinthemeaningofLightMotorVehicle asdefinedundersection2oftheMotorVehicleAct.Therefore,thesameis depreciatedattherateof50%.TheLd.CIT(A),afterconsideringthesubmission oftheassesseeallowedtheappealoftheassesseebyobservingasunder: ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 12 7.4Oncarefulconsiderationofentirefacts,itisobservedthatAOhasdeniedhigher depreciationonvehiclespurchasedduringtheyearonlyonthegroundthatitisavailable tocommercialvehiclesonlyandassetspurchasedbyappellantisnotregisteredas commercialvehicleinRTO.ItisobservedthatHon'bleAhmedabadITATinthecaseof NabrosTransportP.Ltd.inITANo311/Ahd/2019dated04/12/2019allowed higherdepreciationandheldasunder: "5.Wehaveconsideredrivalsubmissionsandgonethroughtherecordcarefully.Issue beforeusiswithregardtotheallowabilityofenhanceddepreciationonnewvehicles acquiredbytheassesseeduring01.01.2009to01.10.2009.Nowaspertheamended CBDTCircularNo.10of2009,newcommercialvehiclewhichisacquiredonorafterthe1st dayofJanuary,2009butbeforethe1stdayofApril,2009andisputtousebeforethe1st dayofApril,2009forthepurposesofbusinessorprofession,theassesseeisentitledfor deprecationat50%onsuchvehicles.ThisaspecthasbeenconsideredbytheITATinthe assesseeowncaseinITANo.2847/Ahd/2017andheldthatITANo.345/Ahd/2018 enhancedrateisapplicabletothesubsequentyearalso.TherelevantportionoftheITAT's orderreadsasunder: "8.Wehavecarefullyconsideredtherivalsubmissions.Theeligibilityofdepreciationat acceleratedrateonnewcommercialvehiclesacquiredbetween01.01.2009to01.10.2009 isincontroversy.Asnotedextensivelyinearlierparas.NotificationNo.'10/2009issuedby theCBDTdated19.01.2009alongwithsubsequentmodificationtherein(towardsperiodof acquisitionofasset),theassesseeisentitledtodepreciation@50%onallnewcommercial vehiclesarnuirpdwithinthestipulatedtimeframe.TheTabletoNewAppendix-I prescribingtheratesatwhichdepreciationisadmissiblehasalsobeensimultaneously amendedbytheCBDTinexciseofpowersconferredtoitbySec.295oftheIncomeTax Act,1961,Therefore,applyinglowerrateofdepreciationinvariancewiththespecialrate ofdepreciationallowancedonotresonatewiththeamendedpositionoflaw.Wethus,find considerablemeritinthepleatakenonbehalfoftheassesseeasnotedinpreceding paragraph.TheactionofRevenuetorestrictthehigherdepreciationtoonlyfirstyear whereassetswereacquiredisdevoidofsoundbasisandcontrarytothenotification. Consequently,wesetasidetheorderoftheCIT(A)anddirecttheAOtorestoretheclaim ofdepreciationallowanceoncommercialvehiclesatacceleratedpercentage." 6.InviewoftheabovedecisionoftheCoordinateBenchoftheTribunalinassessee'sown caseforA.Y.2011-12,followingthesame,weallowtheclaimoftheassesseeforthe enhanceddepreciationattherateof50%,andallowgroundofappealoftheassesseein boththeyears. 7.Intheresult,bothappealsoftheassesseeareallowed. Further,relianceisplacedondecisionofHon'bleAhmedabadITATinthecaseof UdaykumarC.PatelIn1TANo1735&2300/Ahd/2016dated06/02/2019has heldasunder: "16.Wehaveheardtherivalcontentionsandperusedthematerialsavailableonrecord.At theoutset,wenotethattheITATinidenticalfactsandcircumstancesintheowncaseof theassesseeinITANo.3109/Ahd/2013pertainingtotheA.Y.2010-11videorderdated 29.09.2016hasdecidedtheissueinfavoroftheassessee.Therelevantextractofthe orderisreproducedasunder: "9.Duringcourseofproceedingsbeforeus,Id.D.R.reliedontheorderofA.O.,onthe otherhand,Id.A.R.reliedontheorderofCIT(A)andfurnishedthecopyofITAT, AhmedabadCo-ordinateBenchinassessee'sowncaseforA.Y.2009-10,whereinITAThas decidedtheissueinfavourofassesseebyconfirmingCIT(A)'sorderofthatyearby observingasunder: ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 13 10.1,TheassesseehasclaimedexcessdepreciationofRs.3,69,604/-onthenew commercialvehiclepurchased.TheAO'sobjectionwasthatthosevehicleswerenot registeredbytheRTO"CommercialVehicle",thereforetheassesseewasnotentitledfor additionaldepreciationclaimed@50%onthosevehiclesacquiredduringtheyear,When thematterwascarriedbeforethefirstappellateauthority,Id.CIT(A)hasexaminedthe provisionsofMotorVehicleActandallowedtheclaimasfollows:- Ihavecarefullyperusedtheassessmentorderandthesubmissionsgivenbytheappellant. TheA.o.hasdisallowedtheclaimofdepreciationathigherrateasithasbeenheldbyhim thatthevehiclewasnotacommercialvehicle.TheA.O.hastakenthemeaningof commercialvehicleincommonparlanceandhasheldthatcommercialvehicleisdistinct anddifferentfromprivatevehicleandthevehicleusedbytheappellantisaprivatevehicle, TheappellanthassubmittedthatasperNoteNo.5totheRulesinAppendix-I,theword commercialvehiclehasbeendefinedtoincludeLightMotorVehicleasdefinedbvMotor VehicleAct,1988.Further,section2(21)oftheMotorVehicleActdefinethewordLight Motorvehicleas- "LightMotorVehiclemeanstransportvehicleoramnibus.Thegrossvehicleweightof eitherofwhichoraMotorCaroraTractororroadroller,theunladenweightofanyof whichdoesnotexceed7500Kg." TheappellanthasfurthersubmittedthataspertheRCBook,thevehicleisLMVandthe weightofthecaris2074Kg.andtheunladenweightis1454Kg.whichwaslessthan 7500Kg.Therefore,theappellanthasclaimedthatthecarpurchasedwasacornmercial vehicleandappellantwasentitledtodepreciationathigherrate. Afterconsideringthesubmissionoftheappellantandthefacts,Iaminclinedtoacceptthe submissionmadebytheappellant.TheClauseVI-AoftheAppendixi.e.thetableofrates ofwhichdepreciationisadmissibleprescribesthedepreciation@50%fornewcommercial vehiclewhichisacquiredonorafter01/01/2009butbefore01/04/2009andisputtouse before01/04/2009forthepurposeofbusinessorprofession.Furtherparagraph6ofthe notebelowthetabledefinescommercialvehicleswhichincludesLightMotorVehiclesas pertheMotorVehicleActs,thespecificationsforwhicharereproducedinthepreceding paragraph.Therefore,itisclearthattheappellantisentitledfordepreciation@50% whichwasgivenasanincentiveforashortperiodbetween01/01/2009to01/04/2009but theperiodwaslateronextendedupto01/10/2009.Thevehiclepurchasedbytheappellant fulfillsalltheconditionsprescribedintheIncomeTaxActandtherelatedMotorVehicle ActandfallswithinthedefinitionofCommercialVehicle.TheActhasnowhereprescribed thatacommercialvehicleshouldbeavehiclewhichisusedforthepurposeofhire.Itonly prescribesthatthevehicleshouldbeusedforthepurposeofbusinessorprofession.The appellantis,therefore,entitledforthedepreciation@50%.Thegroundofappealis accordinglyallowed." 11.Onhearingboththesides,weareoftheconsideredviewthatId.CIT(A)hasrightly interpretedtherelevantprovisionsofMotorVehicleAct,whereintheword"Commercial Vehicle"hasbeendefined.OncetherelevantActhasgivenaspecificationinrespectofa particulartypeofvehicle,thenthereisnoscopelefttointerpretthecommercialvehicleas percommonparlanceorcommonunderstanding.ThefindinginthisregardofId.CIT(A)is herebyconfirmed.ThisgroundoftheRevenueisdismissed. 10.Wehaveheardboththesidesandperusedthematerialonrecord.Wefindthatin viewofabovestatedfactsandlegalfindingstheId.CIT(A)hascorrectlydecidedtheissue infavourofassesseebymakingrelianceontheorderofITAT,Ahmedabadincaseof ACITvs.M/s.VoltampTransformersLtd.(supra). 11.Intheresult,theappealfiledbyRevenueisdismissed."16.1Asthefactsinthecase onhandareidenticaltothefactsasdiscussedintheabovecase,thereforerespectfully ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 14 followingthesamewedonotwishtodeviatefromtheviewtakenbytheLd.CIT(A).Hence, thegroundofappealoftheRevenueisdismissed." 7.5ItisobservedthatsimilarclaimofdepreciationmadebyAOisalreadyallowedby AOwhilepassingtheassessmentorderofA.Y.2011-12.ConsideringbindingofHon’ble AhmedabadITAT,disallowanceofdepreciationmadebyAOforRs.3,45,576/-isdeleted. Thisgroundofappealisallowed. 15.BeingaggrievedbytheorderoftheLd.CIT(A),theRevenueisinappeal beforeus. 16.Boththeld.DRandtheLd.ARbeforeusreliedontheorderpassedthe authoritiesbelowasfavourabletothem. 17.Wehaveheardtherivalcontentionofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wefindthatthisissueissquarely coveredinfavouroftheassesseebythedecisionoftheHon'bleHighCourtof BombayinthecaseofCITv.BirlaGlobalAssetFinanceCo.Ltd.[2012]76DTR 342,wheretheHon'bleHighCourthasdefinedtheterm'commercialvehicles'in lightofMotorVehiclesActandheldthatcommercialvehicleincludeslightmotor vehicles.TheHon'bleBombayHighCourtinthecaseofCITv.ShahRukhKhan [ITAppealNo.1206of2010,dated29-8-2011]hadconsideredaverysimilar issueandheldthatcommercialvehicleincludeslightmotorvehiclealso.Inthis case,thereisnodisputewithregardtofactthathigherdepreciationclaimedon thevehiclesislightmotorvehicleswhichwereacquiredonorafterspecifieddate. Therefore,weareoftheconsideredviewthattheassesseeisentitledforhigher depreciation@50%onmotorvehiclesandthus,wedirecttheAssessingOfficer todeleteadditionsmadetowardsexcessdepreciationonmotorvehicles.Hence, thegroundofappealoftheRevenueisherebydismissed. 18.ThenextissueraisedbytherevenueisthattheLd.CIT(A),erredin deletingthedisallowancemadebytheAOforthedepreciationon building/furnitureandfixture.Likewise,theRevenueingroundNo.4also ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 15 challengedthedeletionoftherepairandmaintenanceexpensesonsuchbuildings atMumbaiandBunglowatAhmedabad. 19.TheAOduringtheassessmentproceedingsfoundthatthereweretwo propertiesoftheassesseewhichwereusedbytheShelbyLimited.Intheproperty atMumbai,oneOPDclinicofShelbywasbeingoperatedforthefollow-uppatient. Likewise,propertyinAhmedabadwasusedbyShelbyLimitedasaguesthousefor thepatientwhohavetakentreatmentfromtheShelbyHospital.AspertheAO, thedepreciationcanbeallowediftheassetisusedforthepurposeofbusiness.In thepresentcase,thebuildingswereownedbytheassesseebutthesamewere notuseforitsbusinesspurposes.Therefore,theAOdisallowedtheclaimofthe assesseeforthedepreciationonbuildingsforRs.1,01,91,658/-andthe depreciationonfurnitureandfixtureofMumbaibuildingofRs.2,946only. 20.Likewise,theAOalsoaddedtheexpensesincurredbytheassesseeunder theheadrepairandmaintenanceamountingtoRs.6,01,593/-whichwere incurredinconnectionwiththepropertiesdiscussedaboveusedbytheShelby Limited. 21.Onappeal,theassesseebeforetheLd.CT(A)submittedthatwhatever surgicalitemsweremanufacturedbyitweresuppliedonlytoShelbyLimited.M/s Shelbylimitedinturnusesthesesurgicalitemsonthepatientwhoapproachedit forthepurposeofsurgeries.Thus,thebuildingswereprovidedtoShelbyLimited togeneratethebusinessbytheassessee.Accordingly,therewasadirect commercialexpediencyingivingbuildingtoShelbyLimitedforthepurposeofthe business.TheLd.CIT(A),afterconsideringsubmissionoftheassesseedeletedthe additionmadebytheAObyobservingasunder: 8.2Ihavecarefullyconsideredtheassessmentorderandthesubmissionfiledbythe appellant.TheAOhasobservedthatappellanthadclaimeddepreciationonofficebuilding (Mumbai)andofficepremises(Parth18and22)ofRs1,01,88,712/-andfurniture&fixture forRs2946..AsAOwasoftheviewthatappellanthasnotcarriedoutanybusiness activity,heissuedshowcausenoticetoappellantandreplyofappellantisreproducedat pageno6oftheassessmentorder.TheAOhasobservedthatownershipofassetiswith appellantcompanybutasperprovisionsofsection32oftheAct,assetmustbeusedfor ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 16 thepurposeofappellant'sbusinessandthisconditionisnotsatisfiedbyappellantas appellanthasstatedbeforeAOthatsuchpremiseswereusedbyShalbylimitedonbehalf ofit.Duringthecourseofassessmentproceedings,AOhascarriedoutinspectionof bungalowNo185.22throughinspectorandhisreportisproducedatpageNo8&9of assessmentorderwhereinhefoundthatitwasusedasguesthouseofShalbylimitedand nobusinessactivityofappellantiscarriedout.TheAOhasalsoissuedcommissionu/s 131(l}(d)forMumoaipremisesanyDDIT(Inv),Unit4(1),Mumbaihassubmittedhisreport alongwithstatementonoathofDrSarnvednaPrakashwhereinitwasfoundthatShalby cliniciscarryingoutOPDfromsuchaddressforconsultingandfollowupforpatients"Knee replacement".TheAOobservedthatappellanthasnotreceivedrentfromsuchpremises fromShalbyLimitedandrelatedpartyisusingsuchpremiseswithoutanyconsideration. ThoughappellanthasclaimedthatithasMODwithShalbylimitedforproviding infrastructureandpremisesbutnosuchunderstandingwasproduced.Itwasthe contentionofappellantthatasitwasengagedinthebusinessoftradingofimplantsand surgicalitemsandmostofthepurchasesarefromAhmedabad,appellanthasnot explainedbusinessuseservedbygivingsuchpremiseswithoutanycosttorelatedparty. Onthisbasis,AOdeniedclaimofdepreciationonbuildingandfurnitureaggregatingtoRs 1,01,91,658/-. 8.3Duringthecourseofappellatehearing,appellanthascontendedthatalmosttheentire salesofitaretoShalbyLimitedand,therefore,itwasentirelyintheinterestofthe appellant-companythatthebusinessofsaleofimplantsshouldincrease.Thebestthing wastopromoteandhelpthebusinessofShalbyHospitaltogrow,astherewasdirect NEXUSbetweenthebusinessofShalbyLimitedwiththatofbusinessofassessee-company. Therefore,withamutualunderstandingandasdesiredbyShalbyLimitedthesepremises weremadeavailabletoShalbyLimitedforbusinessusealsotoenabletheassessee- companytoincreaseitsbusiness.Theappellanthasclaimedthatboththepremiseswere usedbyShalbylimitedforconsultationofpatientsandfollowupaftertheimplant operationsandsucharrangementwasmadejusttoboostsalesofappellantcompany.The appellanthasalsoreferredtodecisionofHon'bleSupremecourtinthecaseofS.A. BuildersLimited(supra)whereinitwasstatedthatexpenditureincurredoutofcommercial expediencyisallowablebusinessexpenditure,SofarascontentionofAOthatappellant hasgivenpremisestorelatedpartyandnorenthasbeenchanged,appellanthasclaimed thatpremiseswereusedbythemoutofcommercialexpediencyasreferredsupraand benefitderivedbyShalbylimitedwasincidentalhencedepreciationcannotbedisallowed. Itwasalsocontendedbyappellantthatbusinessmodelofitonlyestablishesreasonfor providingpremisestoShalbylimitedhencetherewasnoneedtoproduceMODtoAO.The appellanthasalternativelyclaimedthatasboththecompaniesarepayingtaxesat maximummarginalrent,thereisnoevasionoftaxesforwhichreliancewasplacedon decisionofCITVsGlaxoSmithklineAsia(supra).Onthisbasis,appellanthasclaimedthat depreciationneedtobeallowed. 8.4Oncarefulconsiderationofentirefacts,itisobservedthatAOhasdisallowed depreciationonassetsatMumbaiandAhmedabadonlyonthegroundthatsuchassetsare usedbyShalbyLimitedandnotusedbyappellant.Asdiscussedwhileadjudicatingthe issueofdisallowanceofadvertisementexpensesinprecedingpara,itwasfoundthat appellantisengagedinmanufacturingofsurgicalitemsandtradingofimplantsand surgicalitemsandmajoritysatesofappellantcompanyaretoShalbylimitedassuchitems areusedbysaidcompanyfor"Knee"replacement".Duringthecourseofbusinessandto boostupthesales,appellanthasclaimedthatithasmutuallyagreedwithShalbylimited thatsuchcompanywilluseboththepremisesofappellantforpost-operativephysical therapyorincidentalcareofpatientswhohasactuallyusedappellantcompany's devices/implantsinsurgery.TheAOhasdeputedinspectorforverificationofAhmedabad premisesandcommissionu/s131(l)(d)oftheActforMumbaipremisesandhefoundthat boththepremisesareusedbyShalbyLimitedforsuchpurpose.Evenstatementof ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 17 DrSamvedanaPrakashwasalsorecordedbyDDIT(Inv)Unit1(4),Mumbaiwhereinhehas admittedthatsuchpremisesareusedforrunningOPDfortheconsultingandfollowupfor thepatientsof"Kneereplacement"Theappellanthasclaimedthatalargenumberof patientscamefromMumbaiforkneeimplantinShalbylimitedandthereforeanOPDat Mumbaiforconsultationandfollow-upisabsolutelynecessaryforthesatisfactionofthe patientsandforprocuringmoreandmorebusiness,itwasnecessarytoopenconsultation roomatMumbai.Thus,thereisforceinthecontentionofappellantthattopromote businessentirelyintheinterestoftheassesseeandincreasesales,thesepremiseswere madeavailabletoShalbyHospital.Thefactsdiscussedhereinaboveclearlyprovethat suchpremisesareusedbyShalbylimitedwhichisdirectlyconnectedwithbusinessactivity ofappellantandpartofbusinessstrategyasdiscussedhereinabove. 8.5Sofarasobservationofthatappellanthasgivenpremisestorelatedpartyand businessofappellantisnotsuchwhichwarrantthatpropertyneedstobegivenonrent,it isobservedthatpurposeofgivingsuchpremisesbeingbusinessexigenciesarealready discussedhereinabove.Eventhetransactionsofsalesofimplantsandsurgicalitemsby appellanttoshalbylimitedisatarmslengthpriceasnoadverseobservationsismade regardingsuchtransactionsbyAOofeitherpartiesandassessmentorderofShalbylimited wasalsopassedu/s143(3)oftheAct.Thus,aboveobservationcannotleadtoconclusion thatappellantisnotentitledtodepreciationonassetsownedbyit. 8.6SofarasobservationofAOthatnorentorconsiderationhasbeenchargedfromthe relatedparty,itisobservedthatpremisesweregiventoShalbyLimitedforcommercial expediencyandnotletoutasrentedproperty.Itisobservedthatduringthecourseof appellant'sbusinessandtoincreasedemand,suchpremisesweremadeavailabletoother partytopromotebusinessjointly.Itisacontributionbyappellantcompanyfor developmentofbusinesswhichultimatelybenefitsappellantcompanyinsubstantial manner.Hon'bleDelhiHighCourtincaseofTupperwareIndia(P.)Ltd.vsCIT [2015]60taxmann.com350hasheldasunder: "Section37(1)oftheIncome-taxAct,1961-Businessexpenditure-Allowabilityof(Taxes) -Assessmentyear2007-08-Assesseeenteredintocontractmanufacturingagreements withtwocompaniesformanufactureofTupperwarePlasticproducts-Assessee'sparent companyprovidedrequisitemouldstosaidcontractmanufacturersona'freeof costbasis',whichwerethenusedbysaidentitiesformanufacturingprocess- Excisedepartmentleviedexcisedutyandinterestthereontocontract manufacturers-Exciseauthoritiesalsolevieddutyonnotionalmouldvalue- Additionalexcisedutyliabilitywasbornebyassesseeasitwasinrespectof liabilitythataroseoncontractgoodsmanufacturedforassessee-Assessee claimeddeductionforadditionalexcisedutyundersection37(1)-Revenue authoritiesrejectedassessee'sclaimtakingaviewthatpaymentwasmadebyassesseeon behalfofcontractmanufacturersasapartofacollusiveattempttoevadetax-Whether sincecontractmanufacturerswerecarryingoutmanufacturingactivityfor assesseeanditwasinassessee'sbusinessintereststhatalltaxliabilitiesof manufacturersweredulysatisfied,byassessee,paymentinquestionwastobe regardedasbusinessexpenditure,andthus,allowableundersection37(1)- Held,yes[ParasISand21][Infavourofassessee] 8.7Theratioofabovedecisionsquarelyappliestoappellant'scaseinasmuchasinabove case,itwasfoundthat"Wherecontractmanufacturerswerecarryingoutmanufacturing activityforassesseeanditwasinassessee'sbusinessintereststhatalltaxliabilitiesof manufacturersweredulysatisfied,paymenttowardstaxliabilitiesofcontract manufacturerswastoberegardedas'businessexpenditure"'andinpresentcase, asappellant'smajoritysalesweredependedonShalbyLimited,appellanthasallowedsuch otherpartytouseitspremiseswhichhashelpedappellantinitsbusiness.TheHon'ble ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 18 DelhiHighcourtinthecaseofPunjabStainlessSteelIndVCIT324ITR396has elaboratedthatcommercialexpediency,intheirview,wouldincludesuchpurposeasis expectedbytheassesseetoadvanceitsbusinessinterestandmayincludemeasurestaken forpreservation,protectionoradvancementofitsbusinessinterests.Thebusinessinterest oftheassesseehastobedistinguishedfromthepersonalinterestofitsdirectorsor partners,asthecasemaybe.Itisobservedthatappellanthasallowedotherpartytouse theirpremisesonlyoutofcommercialexpediencywhichisforadvancementofbusiness interest. 8.8ItisobservedthatprovisionondepreciationintheActreadsthattheassetmustbe "owned,whollyorpartly,bytheassesseeandusedforthepurposesofthebusiness.The AOhasacceptedthefactthatboththepremisesareownedbyappellant.Sofarasword "forthepurposeofbusiness"asusedinsection32oftheActisanalogoustosimilarword usedinsection36(l)(iii)and37(1)oftheAct.TheHon'bleSupremecourtinthecaseof S.A.Builders288ITR1atpara22hasobservedthat"Inouropinion,medecisionsrelating tosection37oftheActwillalsobeapplicabletosection36(l)(iii)becauseinsection37 alsotheexpressionusedis"forthepurposeofbusiness".Ithasbeenconsistently heldindecisionsrelatingtosection37thattheexpression"forthepurposeof business"includesexpenditurevoluntarilyincurredforcommercialexpediency, anditisimmaterialifathirdpartyalsobenefitsthereby."Whileadjudicatingthe issueofallowabilityofadvertisementexpenses,theissueof"forthepurposeofbusiness" waselaboratelydiscussedinprecedingparasanddecisionsrelieduponthereinalso squarelyapplytothefactsofthecase.TheHon'bleDelhiHighcourtinthecaseofv. TupperwareIndia(P.)Ltd.[2015]229Taxman318/53taxmann.com232has alsoheldasunder: 'Forthepurposeofbusiness'isawordofwideimportandincludesexpenditurewhich abusinessmanincursforbusinessandcommercialexpediency.Thequestionof reasonablenessisnotfortherevenuetodecide.Further,expression'whollyand exclusively'asobservedbytheSupremeCourtinSassonJ.DavidandCo.(P)Ltd.v.CIT [1979]118ITR261(SC)],doesnotmean'necessarily'.Evenexpenditureincurred voluntaryandwithoutanynecessity,butforpromotingbusinessandearning profitisallowable." 8.9ItismatteroffactthatHon'bleSupremecourtinthecaseofICD5Limited29 Taxman.com129atpara15oforderhasobservedthat"Wewouldliketodisposeofthe secondcontentionbeforeconsideringthefirst.Revenuearguedthatsincethelesseeswere actuallyusingthevehicles,theyweretheonesentitledtoclaimdepreciation,andnotthe assessee.Wearenotpersuadedtoagreewiththeargument.TheSectionrequiresthat theassesseemustusetheassetforthe"purposesofbusiness".Itdoesnot mandateusageoftheassetbytheassesseeitself.Aslongastheassetis utilizedforthepurposeofbusinessoftheassessee,therequirementofSection 32willstandsatisfied,notwithstandingnon-usageoftheassetitselfbythe assessee."TheobservationmadebyHon'blsSupremecourtsquarelyappliestothefacts ofappellant'scaseasassetsareownedbyappellantandusedforthepurposeof appellant'sbusinessaselaboratelyexplainedhereinabove. 8.10ItispertinenttorefertodecisionofHon'bleKolkataITATinthecaseofDCITVs NALCOWATERINDIALTDinITANo2111/Kol/2013dated05/04/2017wherein itwasheldasunder: "9.Wehavegivenaverycarefulconsiderationtotherivalsubmissions.Thedetailsofthe additiontofixedassetswhichwereinstalledinthecustomer'spremisesisgivenatpages 20to26oftheassessee'spaperbook.Theassesseehasalsobroughttoournoticeby filingsamplecopiesofsomeoftheagreementswherebytheassesseehadagreedthat ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 19 monitoringequipmentandpumpswouldbeinstalledattheclientspremises.Thusit becomesclearthattheinstallationofequipmentintheclient'spremisesof assessee'sequipmentwasnecessaryandpartandparcelofnatureofbusiness carriedonbytheassessee.Itcannotthereforebesaidthattheequipmentin questionhadnotbeenusedforthepurposeofthebusinessoftheassessee.The factthattheequipmentwereusedinthebusinesspremisesoftheclients cannotbethebasistodisallowtheclaimoftheassesseefordeductionon accountofdepreciation.ThedecisionoftheHon'bleSupremeCourtinthecase ofICDSLtd.vsCITclearlysupportstheclaimoftheassesseeinthisregard.Itis clearfromtheperusaloftheorderofAOthattheAO'sobjectionwasthatsincethe equipmentinquestionhadnotbeeninstalledattheassessee'sfactorypremises,itcannot besaidthattheequipmentwereusedforthepurposeofassessee'sbusiness.Thisreason givenbytheAOfordisallowingtheclaimoftheassesseefordepredationcannotbe sustainedinviewofthefactualandlegalpositiondiscussedasabove.Wethereforeareof theviewthatCIT(A)wasfullyjustifiedindeletingtheadditionmadebytheAOinthis regard.OrderofCIT(A)doesnotcallforanyinterference." 8.11Theratioofabovedecisionalsoappliestofactsofthecaseinasmuchasinabove cases,assetsareinstalledatfactorpremisesofclientandsuchassetswereusedbythem andnotassesseebutasassetswereinstalledforthepurposeofappellant'sbusiness, depreciationwasallowedbyHon'bleITAT. 8.12Consideringthefactsdiscussedhereinaboveandrelyingupondecisionsreferred supraitisheldthatAOwasnotjustifiedindenyingdepreciationofRs.1,01,91,658/- (1,01,88,712+2,946)toappellant.TheadditionmadebyAOisthusdeletedandthis groundofappealisallowed. 22.BeingaggrievedbytheorderoftheLd.CIT(A),theRevenueisinappeal beforeus. 23.Boththeld.DRandtheLd.ARbeforeusreliedontheorderpassedthe authoritiesbelowasfavourabletothem. 24.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Theassesseeintheyearunderconsiderationhas acquiredpropertiesinMumbaiandAhmedabad.Thesepropertiesweregivenby theassesseetoShelbyLimitedfortheiractivities.ShelbyLimited,runningmulti- specialtyhospitalchain,wasusingthepremises-basedinMumbaiasOPDclinic facilitatingforconsultationwithpatientandthefollow-upofpatientswhohave beenoperatedbythem.Likewise,thepropertiesoftheassesseebasedatParth Bungalow-AhmedabadwerebeingusedbyShelbyLimitedasguesthouseforthe patientswhowerecomingfortreatment,follow-up,observationofthepatients andphysicalexercisefacilitywasalsoextendedtothem.However,theassessee ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 20 wasnotcharginganyrentfromShelbyLimitedagainsttheuseofsuchproperties. AspertheassesseetheentirebusinesswasdependentuponShelbyLimited.In otherwords,whateversurgicalinstrumentsorimplantsmanufacturedbyitwere, tothetuneofalmosthundredpercent,weresuppliedtoShelbyLimited.Thus,the growthofthebusinessoftheassesseewasdependinguponthegrowthofShelby Limitedwhichwasimplantingthesurgicalinstrumentspurchasedfromthe assessee.Thus,thebuildingsweregiventoShelbyLimitedwithoutchargingany rentwhowasbuyingallthemanufacturedgoods.Thus,itcanbeconcludedthat thebuildingsweregivenfreeofrenforthepurposeofcommercialexpediencyof theassessee. 24.1Thereisnodisputeasfarastheownershipofthebuildingsisconcerned buttheuseofthebuildingwasbythehospitali.e.ShelbyLimited.The2 nd requirementisthisthatthebuildingshouldbeusedforthepurposeofthe business.Inthecaseonhandwhatwefindisthattheassesseehasgiventhe buildingtotheShelbyhospitalwhichwillbeusedforitsbusinessactivitiesand eventually,consequentlytheprofitoftheassesseewillalsorise.Thus,inthegiven factsandcircumstancesitcannotbesaidthatthebuildingwasusedbytheShelby hospitalandownedbytheassessee.Inotherwords,itcannotbesaidthatitwas notusedforthepurposeofthebusinessoftheassessee,keepinginview commercialexpediency.Inviewoftheabove,wedonotfindanyinfirmityinthe orderofthelearnedCIT(A).Hencethegroundofappealoftherevenueishereby dismissed. 24.2Onsimilarlogic,therepairandmaintenanceexpenseincurredonBombay buildingandParthBungalowbuildingatAhmedabadwillalsobeallowable. Therefore,wedonotfindanyinfirmityintheorderofthelearnedCIT(A).Hence, thegroundofappealoftherevenueregardingtheallowanceofrepairand maintenanceexpensesisalsoherebydismissed. ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 21 25.TheissueraisedbytheRevenueisthattheLd.CIT(A)erredindeletingthe additionmadebytheAOforRs.68,20,411.00representinginterestpaidtothe sisterconcern. 26.TheAOduringtheassessmentproceedingsfoundthattheassesseehas borrowedmoneyfromitssisterconcernnamelySigmaWindPowerPvtLtd(Now SigmaWellnessPvtLtd.)onwhichincurredinterestcostofRs.68,20,411/-only. TheAOfurtherfoundthatSigmaWellnesswasshowingnegligibleamountof incomeinincometaxreturn.Therefore,theAOwasoftheviewthattheentire transactionofborrowingmoneyoninterestwasanarrangementforreducingthe taxliabilityoftheassessee.Therefore,theAOdisallowedthesameandaddedto thetotalincomeoftheassessee. 27.OntheappealbeforethelearnedCIT(A),thelearnedCIT(A)waspleased todeletetheadditionmadebytheAObyobservingasunder: 9.3Duringthecourseofappellatehearing,appellanthascontendedthatithas borrowedfundsfromSWPLandfundswereusedforitsbusinesspurposehencesuch interestcannotbedisallowed.Theappellanthasalsocontendedithaspaidinterest@ 10%whichisasperprevailingmarketrate.Theappellanthasalsoarguedthatifborrowed fundstakenbySWPLwouldhavebeendirectlytakenbyappellant,AOwouldhaveallowed interest.Theappellanthasarguedthatthoughinterestispaidtorelatedconcern,interest canbedisallowedu/s40A(2)(b)onlytotheextentthatitisnotreasonableandinpresent case,interestispaidasperfairmarketrate,nodisallowancecanbemade.Theappellant hasalsoarguedthatasperprovisionsofsection 36(l)(iii),asfundsareusedforthepurposeofbusiness,nodisallowanceofinterest expenditureisrequiredtobemade. 9.4Oncarefulconsiderationofentirefacts,itisobservedthatappellant-hairtaken borrowedfundsfromsisterconcernSWPLandonsuchborrowedfunds,ithaspaidinterest @10%.Itisrelevanttoconsiderprovisionsofsection36(l)(iii)whichreadsasunder: "..theamountoftheinterestpaidinrespectofcapitalborrowedforthepurposesofthe businessorprofession: Providedthatanyamountoftheinterestpaid,inrespectofcapitalborrowedfor acquisitionofanasset(whethercapitalisedinthebooksofaccountornot);foranyperiod beginningfromthedateonwhichthecapitalwasborrowedforacquisitionoftheassettill thedateonwhichsuchassetwasfirstputtouse,shallnotbeallowedasdeduction.]" 9.5ItisobservedthatAOhasnotdisputedthefactthatborrowedfundsareusedforthe purposeofbusinesshenceasperprovisionsofsection36(l)(iii)referredsupraclearly proveAOwasnotjustifiedinmakingdisallowanceofinterestexpenditurepaidtoSWPLIt isobservedthatAOhasevennotdoubtedthatinterestrateisasperprevailingmarket ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 22 rateanditisnotthecontentionofAOthatinterestpaymentmadetorelativeconcernwas athigherratehenceevenprovisionsofsection40A(2)(b)cannotbemadeapplicable. 9.6ItisobservedthatAOhasdisallowedentireinterestexpenditureonlyontheground thatSWPLisshowingmeagerincomeandhasonlyonesourceofincomei.einterest incomereceivedfromappellantcompany.ItisobservedthatSWPLisseparatelegalentity andassessedtotax.Thesaidcompanyborrowedfundsfromthirdpartiesandsuchfunds areadvancedtoappellantonwhichithasreceivedinterestincome.Merelybecausesuch companyhasearnedmeagernetincomeorpassthroughentityinopinionof.AO,interest cannothedisallowedin.presentcasebecause,borrowedfundsareusedforthepurpose ofbusiness.Itispertinenttonotethathadborrowedfundsweredirectlytakenby appellantratherthanborrowedfundstakenbySWPLandadvancingtoappellant,AOhad noissueforallowabilityofinterestexpenditureandsuchfactclearlysupportthe contentionofappellantthatinterestexpenditureisincurredforthebusinesspurposeand disallowanceofsuchinterestcannotbeupheld.ItisobservedthatAOwasincorrectin holdingthatifsuchinterestwouldhavebeenpaidtooutsideparties,suchinterestwould havebeenallowedtoappellantasthirdpartywouldhavepaidtaxesonsuchinterest income.WhetherthirdpartyorSWPLhaspaidtaxesonreturnedincomeornotisnot criteriafordecidingallowabilityofinterestexpenditureinthehandsofappellantunlessitis provedthatthereisdiversionofinterestexpenditurefromSWPLtoappellantcompanyto reduceitstaxliability.TheAOinpresentcasehasnotbroughtanythingonrecordtoprove thatsuchfundsarenotrequiredbyappellantorexpenditureofSWPLisclaimedby appellant,interestdisallowancemadebyAOcannotbeupheld.Consideringthesefacts, disallowanceofinterestexpenditureforRs68,20,411/-merelyonpresumptionisdeleted. Thisgroundofappealisallowed. 28.BeingaggrievedbytheorderofthelearnedCIT(A)therevenueisinappeal beforeus. 29.BoththelearnedDRandthelearnedARbeforeusvehementlysupported theorderoftheauthoritiesbelowasfavourabletothem. 30.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thethrustoftherevenuewasthatthesiterconcern whohasgivenloantotheassesseeoninterestwasshowingmeagreamountof incomeandthereforetherewassomecolourabledeviceadoptedbytheassessee toreduceitstaxableincome.Insimplewordstheassesseehasarrangeditsaffairs withthesisterconcerninsuchawaytoreduceitstaxliability.AspertheAO,the assesseeisclaimingexpensesinthenameofinterestexpensesandontheother handsisterconcernwasalsonotpaying/notshowinganytaxableincomeinits incometaxreturn. ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 23 30.1FromthefindingofthelearnedCIT(A),wenotethatsisterconcernbeing SigmaWellnesshasborrowedmoneyoninterestfromthirdpartywhichwasgiven totheassessee.Itmeansthemoneygivenbythesisterconcerntotheassessee didnotbelongtothesisterconcernrathertheownershipofthemoneywaslying withsomeotherthirdparty.Inasituationwheretheassesseecouldhave borrowedmoneyfromthe3 rd partyoninterestbasisthenthesamecouldnot havebeenquestionbytheAO.Thus,ifthesamemoneyhasroutedthroughthe sisterconcern,thentheinterestcostonthesamecannotbedisallowedmerelyon thereasoningthatsisterconcernisdeclaringmeagreamountofincomeinthe incometaxreturn.Itisquitenaturalthatsisterconcernhasborrowedmoney whichhasbeenadvancedtotheassesseeagainoninterestbasis,thenthenet resultontheinterestcostincurredbythesisterconcernandtheinterestearned onthemoneyadvancedtotheassesseewillbethedifferenceoftheinterestcost andinterestincomewhichiscertainlygoingtobeanegligibleamountofincome. Thus,insuchasituationweareoftheviewthatthebasisofmakingthe disallowanceofinterestexpensesbytheAOisbasedonwrongassumptionof facts.Hence,wedonotfindanyinfirmityintheorderoflearnedCIT(A)and accordinglyweupholdthesame.Hencethegroundofappealoftherevenueis herebydismissed. 31.Intheresult,theappealfiledbytherevenueisdismissed. ComingtoITANo.584/Ahd/2020,anappealbytheRevenueforAY 2011-12 32.TheRevenuehasraisedfollowinggroundsofappeal: I.TheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceofRs. 1,50,17,230/-onaccountofadvertisementexpenditurewithoutappreciatingthatthe assesseehadfailedtoestablishanybusinessexigencypertainstothatadvertisements. II.TheLd.ClT(A)haserredinlawandonfactsindeletingthedisallowanceofRs. 1,50,17,230/-onaccountofadvertisementexpenseswithoutappreciatingthefactthatall advertisementsmentiononlytwowords'XeonDevices'anddonotmentioneventhe ITAnos.583-584/AHD/2020 Asstt.Yeasr2010-11&2011-12 24 addressoftheassesseeortheproductoftheassessee.Theseadvertisementscannotin anywaybeconstruedtoservebusinesspurposeoftheassessee. III.TheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceof depreciationamountingtoRs.94,71,303/-onbuildingandRs.1,43,054/-onfurnitureand fixtures. IV.Onthefactsandcircumstancesofthecase,LdC1T(A)oughttohaveupheldthe orderoftheAssessingOfficer. V.Itis,therefore,prayedthattheorderofLdCIT(A)maybesetasideandthatofthe AssessingOfficerberestored. 33.Attheoutset,wenotethattheissuesraisedbytheRevenueinitsgrounds ofappealfortheA.Y2011-12areidenticaltotheissuesraisedbytheRevenuein ITANo.583/AHD/2020fortheassessmentyear2010-11.Therefore,thefindings giveninITANo.583/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2011-12.TheappealoftheRevenuefortheassessment 2011-12hasbeendecidedinfavouroftheassesseeandagainstRevenue.The learnedDRandtheARalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2010-11shallalsobeappliedfortheyearunderconsiderationi.e. A.Y2011-12.Hence,thegroundsofappealfiledbytheRevenuearehereby dismissed. 34.Intheresult,theappealoftheRevenueisherebydismissed. 35.Inthecombinedresult,boththeappealsoftheRevenuearehereby dismissed. OrderpronouncedintheCourton27/09/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated27/09/2023 Manish