The DCIT, Panchmahal Circle, Godhra V. Panchmahal Steel Ltd., Kalol

ITA 6/AHD/2010

• Counselvise Citation: 620514 RSA 2010
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 01-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA KUMAR
• Assessee Lawyers: J P SHAH SRAR
• Keywords: Gift; Depreciation; Rule of consistency; Additional depreciation; Source of fund; Revised return; Reason to believe; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 142(1); 37(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.5-14/AHD/2010 ASSESSMENT YEARS:1999-00 TO 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, PANCHMAHAL CIRCLE, GODHRA V/S . PANCHMAHAL STEEL LTD., GIDC ESTATE, KALOL, DIST. PANCHMAHAL PAN NO.AABCP2643Q (APPELLANT) .. (RESPONDENT) C.O NO.61-63/AHD/2010 (ARISING OUT ITA NO.07/AHD/2010, ITA NO.08/AHD/2010 & ITA NO.13/AHD/2010) ASSESSMENT YEARS:2000-01, 2001-02 & 2005-06 PANCHMAHAL STEEL LTD. GIDC ESTATE, KALOL PAN NO.AABCP2643Q V/S . DCIT, PANCHMAHAL CIRCLE, CIVIL LINES ROAD, GODHRA (APPELLANT) .. (RESPONDENT) /BY ASSESSEE SHRI J.P.SHAH, SR-AR /BY REVENUE SHRI RAVINDRA KUMAR, CIT-DR /DATE OF HEARING 29-05-2012 /DATE OF PRONOUNCEMENT 13-07-2012 O R D E R PER BENCH:- ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 2 THESE ARE 10 APPEALS FILED BY REVENUE AND ASSESSEE FILED 3 CROSS APPEALS (CO) ARE DIRECTED AGAINST DIFFERENT ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-VI, BARODA OF EVEN DATE I.E. 1 8-09-2009 FOR THE ASSESSMENT YEARS 1999-00 TO 2006-07. THESE ARE HEAR D TOGETHER AND DISPOSED OF BY A CONSOLIDATE ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP REVENUES APPEAL IN ITA NO.5/AHD/2 010 (A.Y. 99-00) . 2. THE REVENUE HAS RAISED SINGLE EFFECTIVE GROUND, SAME IS REPRODUCED AS UNDER:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE O F LOSS DUE TO CANCELLATION OF FORWARD CONTRACT AMOUNTING TO RS.34 ,88,834/- 1(II) THE LD. CIT(A) IN HIS ORDER FAILED TO ADDRESS THE ISSUE WHETHER FORWARD CONTRACT WOULD FALL UNDER SPECULATIVE TRANS ACTION OR CONSTITUTE REVENUE EXPENDITURE. 3. THE FACTS IN BRIEF ARE THAT ASSESSEE FILED ORIGI NAL RETURN ON 29-03-2001 DECLARING TOTAL LOSS OF RS.9,72,95,505/-. SUBSEQUEN TLY, A REVISED RETURN WAS FILED ON 30-03-2001 DECLARING LOSS OF RS.7,73,42,35 6/-. A NOTICE U/S. 148 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) WAS ISSUED AND SERVED UPON THE ASSESSEE IN RESPONSE THERETO THE AS SESSEE VIDE LETTER DATED 21-11-2003 REQUESTED TO CONSIDER REVISED RETURN FIL ED ON 30-03-2001 AS THE RETURN IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. T HEREAFTER, A NOTICE U/S 143(2) R.W.S. 142(1) OF THE ACT WAS ISSUED ALONG WITH QUES TIONNAIRE AND THE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT WAS F RAMED VIDE ORDER DATED 23- 09-2004. THE ASSESSING OFFICER DISALLOWED THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF CANCELLATION OF FORWARD CONTRACT BOOK ED FOR IMPORT OF MATERIAL. THE ASSESSEE FEELING AGGRIEVED BY THIS ORDER FILED APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND PERUSING THE RECORD DELETED THE ADDITION MADE ON ACCOUNT OF DISA LLOWANCE OF LOSS DUE TO CANCELLATION OF FORWARD CONTRACT. 4. AGAINST THIS ORDER, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 3 5. LD. CIT-DR VEHEMENTLY ARGUED THAT THE ORDER OF L D. CIT(A) IS NOT SUSTAINABLE AND HE HEAVILY RELIED UPON THE ORDER PA SSED BY ASSESSING OFFICER. ON THE CONTRARY, SHRI J.P. SHAH, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF H ONBLE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT V. FRIENDS AND FRIENDS SHIPPING PVT. LTD. TAX APPEAL NO.251 OF 2010 DATED 23-08-2011. 6. WE HAVE HEARD RIVAL SUBMISSIONS OF THE RESPECTIV E AUTHORIZED REPRESENTATIVE OF THE PARTIES PERUSED THE MATERIALS AVAILABLE ON RECORD AND JUDGMENT CITED. THE CONTENTION OF LD. A.R. IS THAT THE ISSUE IN DISPUTE AS RAISED IN THIS GROUND OF APPEAL IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. FR IENDS AND FRIENDS SHIPPING PVT. LTD IN TAX APPEAL NO. 251 OF 2010, IN THIS CAS E THE QUESTION BEFORE THE HONBLE HIGH COURT FOR CONSIDERATION WAS THAT WHETH ER THE APPELLATE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN REVERSING THE ORD ER PASSED BY LD. CIT(A) AND THEREBY DELETING THE DISALLOWANCE OF RS. 15,04,910/ - MADE ON ACCOUNT OF FOREIGN EXCHANGE DIFFERENCE. THE HONBLE JURISDIC TIONAL HIGH COURT FOLLOWED THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT AND THE HONBLE CULCUTTA HIGH COURT DISMISSED THE APPEAL OF REVENUE. IN CIT( A) VS. FRIENDS AND FRIENDS SHIPPING PVT. LIMITED (SUPRA), THE ASSESSEE WAS AN EXPORTER WHO HAD ENTERED INTO FORWARD CONTRACT WITH THE BANKERS TO HEDGE AGAINST ANY LOSS ARISING OUT OF THE FLUCTUATION IN FOREIGN CURRENCY. SINCE ON SOME OCCASIONS, THE ASSESSEE WAS REQUIRED TO GIVE INSTRUCTIONS FOR CANCELLATION OF FORWARD CONTRACT, THE ASSESSEE HAD TO PAY CHARGES TO THE BA NK. IN THIS PROCESS THE ASSESSEE SUFFERED LOSS OF RS. 15 LAC. THE ASSESSIN G OFFICER DISALLOWED THE LOSS HOLDING IT AS SPECULATIVE IN NATURE AND THEREF ORE COVERED UNDER SUB- SECTION 5 OF SECTION 43. IN FURTHER APPEAL CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER RELYING ON THE DECISIONS OF THE A NDHRA PRADESH HIGH COURT IN THE CASE OF M.G. BROTHERS V. CIT (1985) 154 ITR 195 (AP) AND ALSO IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JOSEPH JOHN, 67 ITR 74. HOWEVER, ON FURTHER APPEAL THE TRIBUNAL DELETED THE DISALLOW ANCE FOLLOWING THE DECISION ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 4 OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. BADRIDAS GAURIDA (P) LTD 261 ITR 251 (BOM). WE FIND THAT THE FACTS OF THE C ASE IN HAND ARE IDENTICAL WITH THE FACTS OF THE CASE OF THE FRIENDS AND FRIENDS SHIPPING PVT LTD (SUPRA), IN THE CASE PRESENT CASE ALSO THE ASSESSEE HAS CLAIMED BUSINESS LOSS OF RS. 34,88,834/- AS FOREIGN EXCHANGE RATIO D IFFERENCE ON ACCOUNT OF CANCELLATION OF FORWARD CONTRACT BOOKED FOR IMPORT OF MATERIAL. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF FRIENDS AND FRIENDS SHIPPING PVT LTD . (SUPRA), THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.6/AHD/201 0 (A.Y.99-00) 8. IN THE PRESENT APPEAL REVENUE HAS RAISED FOLLOWI NG GROUNDS OF APPEAL:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.10,17,6 96/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF. 1(II) THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE, AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYERS CONTRIBUTIO N HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CON TRIBUTION WHICH ARE GOVERNED BY SECTION36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. 9. THE FACTS IN THIS CASE ARE THAT ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT WAS PASSED BY THE ASSESSING OFFICER ON 23-09-20 04. SUBSEQUENTLY, IT CAME TO THE NOTICE OF THE ASSESSING OFFICER THAT WH ILE PASSING ORDER U/S. 143(3) OF THE ACT THE CLAIM MADE BY ASSESSEE ON ACC OUNT OF LONG TERM CAPITAL LOSS OF RS.4,39,548/- ARISING OUT OF SALE O F SECURITY WAS WRONGLY ALLOWED. THE ASSESSEE HAD ALSO CLAIMED DEDUCTION FO R PAYMENT OF PF AMOUNTING TO RS.10,17,696/- AND RS.4,58,777/- ALSO BEING THE EMPLOYEES CONTRIBUTION AND EMPLOYERS CONTRIBUTION RESPECTIVE LY. THEREFORE A NOTICE U/S. 154 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSES SEE. THE AO PASSED ORDER U/S. 154 OF THE ACT THEREBY MAKING ADDITION O N ACCOUNT OF LOSS ON SALE OF SECURITIES OF RS.4,39,548/- AND LATE PAYMENT OF PF OF RS.10,17,696/- AND ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 5 RS.4,58,777/-. THE TOTAL ADDITION WAS MADE OF RS.19 ,16,021/-. AGAINST THIS ORDER ASSESSEE FILED APPEAL BEFORE LD. CIT(A) WHO A FTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND FACTS OF THE CASE, PART LY ALLOWED THE APPEAL DELETING ADDITION MADE ON ACCOUNT OF PF CONTRIBUTIO N OF EMPLOYEE AND EMPLOYER OF RS.10,17,696/- AND RS 4,58,777/- RESPEC TIVELY. THE REVENUE BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) IS BEFOR E THIS TRIBUNAL BY WAY OF PRESENT APPEAL. 10. LD. CIT-DR SUBMITTED THAT THE ORDER OF LD. CIT( A) IS ERRONEOUS AND STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFI CER PASSED U/S. 154 OF THE ACT. ON THE CONTRARY, LD. AR FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE IS SQUARELY COVERED BY VARIOUS JUDICIAL PRONOUNCEMENTS IN FAVOUR OF ASSESSEE AND THIS ISSUE HAS ALREADY BEEN DECIDED BY HONBLE ITAT AHMEDABAD IN CO NO.181/AHD/2004 FOR A.Y. 1998-99 DATED 20-08-2010 I N ASSESSEES OWN CASE. 11. WE HAVE HEARD RIVAL SUBMISSIONS OF LD. AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE PERUSED THE MATERIAL AVAILABLE ON RECO RD AND THE DECISION CITED. IT IS RECORDED BY THE ASSESSING OFFICER THAT IN THI S CASE EMPLOYEES AND EMPLOYERS CONTRIBUTION HAS BEEN MADE WITHIN GRACE PERIOD AND NOT BEFORE DUE DATE. HOWEVER THE SAME WAS DEPOSITED BEFORE EX PIRY OF DUE DATE OF FILING OF RETURN. IT IS NOT CONTROVERTED BY THE LD. DEPART MENTAL REPRESENTATIVE THAT THE PF CONTRIBUTION OF EMPLOYER AND EMPLOYEE WAS DE POSITED WITHIN GRACE PERIOD AND WELL BEFORE FILING OF DUE DATE OF INCOME TAX RETURN. THE HONBLE CO- ORDINATE BENCH IN CO NO. 188/A/2004 FOR THE ASSESSM ENT YEAR 1988-89 ASSESSEES OWN CASE WHILE DECIDING THIS ISSUE IN F AVOUR OF THE ASSESSEE HAS HELD AS UNDER:- 5. GROUND NO.4 RELATES TO CONFIRMATION OF DISALLOW ANCE OF RS.5,65,278/- BEING THE DELAYED PROVIDENT FUND PAYMENT. AFTER CAR EFUL CONSIDERATION OF THE SUBMISSIONS MADE IN THE WRITTEN SUBMISSIONS AND AFTER HEARING THE LEARNED DR, WE FIND THAT THE ISSUE IS DULY COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL AHMEDABAD BENCH-D IN THE CASE OF M/S JMC PROJECTS (INDIA) LTD. V. DCIT [ITA NO.4175/AHD/2007] WHEREIN VIDE ORDER DATED 28-03-2008, THIS TRIBUNAL HAS HELD AS UNDER:- ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 6 MOREOVER, HONBLE ITAT A BENCH, AHMEDABAD IN THE IR ORDER DATED 10-08-2007 IN ITA NO.2262/AHD/07 IN THE CASE OF SAI CONSULTING ENGINEERS I(P) LTD. FOR ASSESSMENT YEAR 2004-05, RELYING UPON THE DECISION OF THE DELHI BENCH OF ITA T IN THE CASE OF ADDL CIT V. VESTAS RRB INDIA LT. (2005) 92 ITD 1 AND THE DECISION OF ITAT CHENNAI BENCH A (SPECIAL BENCH) IN THE CASE OF KWALAITY MILK FOODS LTD. 100 ITD 99 SB (CHENNAI), HELD THAT PAYMENT OF EMPLOYEES CONTRIBUTION HAVING BEEN MADE BY THE TAXPAYER BEING WITHIN THE DUE DATE OF FILING OF THE RETURN, DEDUCTION IS ALLOWABLE TO THE TAXPAYER. EVEN IN TER MS OF PROVISIONS OF SECTION 43B, AS IT STOOD PRIOR TO AME NDMENT W.E.F. 1- 4-2004, HONBLE SUPREME COURT IN THE CASE OF CIT V. VINAY CEMENT LTD. 213 CTR (SC) 268 HELD THAT THE TAXPAYER WAS ENTITLED TO CLAIM THE BENEFIT IN SEC. 43B FOR THAT PERIOD PARTICULARLY IN VIEW OF THE FACT THAT HE HAS CONTRIBUTED TO PROV IDENT FUND BEFORE FILING OF THE RETURN AND AFFIRMED THE DECISION OF H ONBLE GAUHATI HIGH COURT IN THE CASE OF CIT V. GEORGE WILLIAMSON (ASSAM) LTD. 284 ITR 619 (GAU). IN VIEW OF AMENDMENT OF PROVISIO NS OF SEC. 43 OF THE ACT, WITH THE OMISSION OF SECOND PROVISO TO THE SAID SECTION AND IN THE LIGHT OF AFORESAID DECISION OF HONBLE S UPREME COURT, THERE IS NO RELEVANCE IN CONSIDERING THE DECISIONS OF VARIOUS HIGH COURTS, RELIED UPON BY THE AO AND LD. DR. IN VIEW OF THE FOREGOING, WE HAVE NO HESITATION IN HOLDING THAT THE EMPLOYEES CONTRIBUTION TOWARDS PF, HAVING BEEN MAD E BY THE TAXPAYER WITHIN THE DUE DATE OF FILING OF THE RETUR N FOR THE YEAR UNDER CONSIDERATION, THERE IS NO GROUND FOR DISALLO WING THE SAME. THUS, GROUND NOS. 1 & 2 OF THE APPEAL ARE ALLOWED. ADMITTEDLY THE FACTS IN THE PRESENT CASE ARE SIMILA R TO THOSE AS IN THE CASE OF M/S. JMC PROJECTS (INDIA) LTD., (SUPRA), WE ALLOW THE CLAIM OF THE ASSESSEE. THUS, THIS GROUND STANDS ALLOWED. 12. WE FIND THAT THERE IS NO CHANGE IN THE FACTS AN D CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION. THEREFORE, RESPECTFULLY F OLLOWING THE DECISION OF HONBLE CO-ORDINATE BENCH IN CO NO. 181/A/2004 THIS GROUND OF REVENUES APPEAL IS HEREBY DISMISSED 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.7/AHD/201 0 (A.Y.01-02) 14. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 7 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,09,42 ,594/- ON ACCOUNT OF EXCISE DUTY NOT INCLUDED IN THE VALUATION OF CLOSIN G STOCK OF FINISHED GOODS. 1(II). THE LD. CIT(A) FAILED TO APPRECIATE THAT THE EXCISE DUTY ADOPTED AT THE RATE OF 16% WAS RIGHTLY INCLUDED BY THE AO IN T HE VALUE OF CLOSING STOCK OF FINISHED GOODS, AS MANDATED BY SECTION 145 A OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.22,95,488/- ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENSES TREATED AS CAPITAL EXPENDI TURE. 3(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,43,22 0/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AND ESI. 3(II). THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE , AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYERS CONTRIBUTIO N HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CON TRIBUTION WHICH ARE GOVERNED BY SECTION 36(1)(VA) R.W.S. 2(24)(X) OF TH E ACT. 15. FACTS IN BRIEF ARE THAT RETURN OF INCOME WAS DE CLARED LOSS OF RS.6,52,37,920/- WAS FILED BY ASSESSEE ON 21-11-200 0 SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER MA DE VARIOUS ADDITIONS AS UNDER:- 1. ADDITION ON A/C OF EXCISE DUTY ON FINISHED GOOD S RS.3,09,42,594 2. ADDITION ON A/C OF CAPITAL EXPENSE RS. 22, 95,488 3. OUT OF MISC. EXPENSES RS. 6,35,014 4. OUT OF STAFF WELFARE EXPENSES RS. 3,06,580 5. OUT OF VEHICLE EXPENSES RS. 3,24,742 6. OUT OF TRAVELING EXPENSES RS. 2,31,450 7. OUT OF TELEPHONE EXPENSES RS. 50,000 8. OUT OF PREVIOUS YEAR EXPENSES RS.3,30,27,38 8 9. ON ACCOUNT OF PF & ESIC RS. 1,43,220 10. OUT OF DISCOUNT, COMMISSION & CREDIT NOTES ON SALES RS. 18,29,655 ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 8 16. AGAINST THE ABOVE ADDITIONS, ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSE E PARTLY ALLOWED THE APPEAL THEREBY DELETED ADDITIONS OF 3,09,42,954 MAD E ON ACCOUNT OF EXCISE DUTY NOT INCLUDED IN THE STOCK OF FINISHED GOODS, A DDITION OF RS.22,95,488/- EXPENDITURE INCURRED ON REPAIRS AND MAINTENANCE TRE ATED AS CAPITAL EXPENDITURE AND DISALLOWANCE MADE ON ACCOUNT OF LAT E DEPOSITING OF PF AND ESIC. 17. AGAINST THE ORDER OF LD. CIT(A), REVENUE CAME I N APPEAL BEFORE THIS TRIBUNAL 18. THE FIRST GROUND OF APPEAL IS AGAINST THE DEL ETION OF RS. 3,09,42,954/- ON ACCOUNT OF EXCISE DUTY NOT INCLUDED IN VALUE OF CLO SING STOCK OF FINISHED GOODS. LD. CIT DR VEHEMENTLY ARGUED THAT THE ORDER PASSED BY LD. CIT(A) IS ERRONEOUS IN VIEW OF THE FACT THAT EXCISE DUTY IS L EVIED ON MANUFACTURE OF GOODS. IT IS SUBMITTED BY LD. CIT-DR THAT THE ASSE SSEE HAS NOT RECORDED IN BOOKS OF ACCOUNT THAT THE EXCISE DUTY IS PAYABLE ON REMOVAL OF THE GOODS. HE SUBMITTED THAT INCIDENCE OF EXCISE DUTY IS ON MANUF ACTURING WHICH IS EVIDENT FROM THE RELEVANT PROVISION OF THE CENTRAL EXCISE A CT. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE JUDGM ENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT V. NAMADA CHEMATUR PETROCHEMICALS LTD. (2010) 327 ITR 369 (GUJ) 19. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD AND JUDGMENTS CITED BY THE PARTIES. WE FI ND THAT HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT ACCORDING TO THE SETTLED LEGAL POSITION A ND ACCEPTED PRINCIPLES OF ACCOUNTING, CLOSING STOCK HAS TO BE VALUED, AT THE OPTION OF THE ASSESSEE, AT COST OR MARKET PRICE, WHICHEVER IS LOWER. DUTY OF C ENTRAL EXCISE IS LEVIED ON ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 9 THE GOODS MANUFACTURED, I.E. EXCISABLE GOODS MANUFA CTURED BY AN ASSESSEE. IT IS NOT A PART OF MANUFACTURING COST. IT CAN BE T ERMED A POST-MANUFACTURING COST. THEREFORE, UNLESS AND UNTIL IT IS ENTERED ON ONE SIDE, AS AN ITEM OF COST, IT CANNOT BE TAKEN AS A COMPONENT OF THE VALUE OF THE CLOSING STOCK ON THE OTHER SIDE. THE TRUE PURPOSE OF CREDITING THE VALUE OF UN SOLD STOCK IS TO BALANCE THE COST OF THOSE GOODS ENTERED ON THE OTHER SIDE OF TH E ACCOUNT. IT IS FURTHER HELD BY THE HONBLE JURISDICTIONAL HIGH COURT THAT MAKIN G OF ANY ENTRY OR ABSENCE OF AN ENTRY CANNOT DETERMINE THE RIGHTS AND LIABILITIE S OF PARTIES. IN OTHER WORDS, IF THE LAW DOES NOT LEAD TO INCURRING OF A LIABILITY, OR DOES NOT LEAD TO A CORRESPONDING RIGHT TO INSIST ON DISCHARGING SUCH A LIABILITY ANY ACCOUNTING PRACTICE (EVEN IF SUGGESTED BY THE INSTITUTE OF CHA RTERED ACCOUNTS OF INDIA) CANNOT LAY DOWN ANYTHING TO THE CONTRARY. IT IS HEL D BY THE HONBLE COURT THAT EXCISE DUTY IS ADMITTEDLY AN INDIRECT LEVY. THE MAN UFACTURER DOES NOT EFFECTIVELY PAY FROM HIS OWN POCKET. THE DUTY OF CE NTRAL EXCISE IS COLLECTED BY MANUFACTURER BY A MANUFACTURER FROM THE PURCHASER, WHETHER WHOLESALER OR RETAILER. HENCE, AT THE TIME OF REMOVAL OF EXCISABL E GOODS THE DUTY IS RECOVERED BY THE MANUFACTURER FROM THE PURCHASER AN D SIMULTANEOUSLY PAID TO THE REVENUE. THE POINT OF TIME OF REMOVAL OF EXCISA BLE GOODS IS THE POINT OF TIME WHEN THE LIABILITY TO PAY CENTRAL EXCISE DUTY IS INCURRED RESULTING IN CORRESPONDING RIGHT UNDER LAW IN THE EXCISE DEPARTM ENT TO TAKE STEPS TO EFFECT RECOVERY IF THE LIABILITY IS NOT DISCHARGED, TILL T HAT POINT OF TIME THE LIABILITY TO PAY DUTY OF CENTRAL EXCISE CANNOT BE STATED TO HAVE BEE N INCURRED IN LAW AS THE SAME IS NOT DUE AND PAYABLE. RELYING UPON VARIOUS J UDGMENTS, HONBLE HIGH COURT AFFIRMED THE DECISION OF THE TRIBUNAL OF EXCL UDING EXCISE DUTY AT THE TIME OF VALUATION OF CLOSING STOCK OF FINISHED GOODS AT THE END OF ACCOUNT PERIOD. RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA) THIS GROUND OF REVENUES APPEAL IS HEREBY REJECTED 20. NEXT GROUND RELATES TO DELETION OF DISALLOWANCE OF RS.22,95,488/- MADE ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENSES. LD. CIT-DR RELIED UPON THE ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 10 ORDER OF ASSESSING OFFICER AND SUBMITTED THAT ORDER OF LD. CIT(A) IS ERRONEOUS. ON THE CONTRARY, LD AR RELIED ON THE ORDER PASSED B Y LD. CIT(A) AND SUBMITTED THAT THERE WAS NO INFIRMITY IN THE ORDER OF LD. CIT(A). HE FURTHER SUBMITTED THAT THE EXPENDITURE WAS MERELY TOWARDS M AINTENANCE OF EXISTING PLANT AND MACHINERY AND DID NOT GIVE ANY ENDURING B ENEFIT. THEREFORE, THIS COULD NOT BE TERMED AS CAPITAL EXPENDITURE. IT IS S UBMITTED BY LD. AR THAT EXPENDITURE WAS ESSENTIALITY REVENUE IN NATURE AS T HE EXPENDITURE WAS MADE FOR PURCHASING SPARE FOR COOLING TOWER FOR FABRIC ATION WORK PERTAINING TO REPAIRS OF EXISTING PLANT AND MACHINERY FOR PAINTIN G WORK FOR STRUCTURAL STEEL CONSUMPTION FOR FABRICATION WORK PERTAINING TO REPA IRS OF EXISTING PLANT AND MACHINERY. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD AND CASE LAWS CITED BY THE PARTIES. WE FI ND THAT LD. CIT(A) HAS RETURNED A FINDING THAT EXPENDITURE INCURRED BY THE ASSESSEE WAS MERELY TOWARDS MAINTENANCE OF THE EXISTING PLANT AND MACHI NERY AND DID NOT GIVE ANY ENDURING BENEFIT. THE HONBLE SUPREME COURT IN THE MATTER OF CIT V. SARAVANA SPINNING MILLS P. LTD. (2007) 293 ITR 201 (SC) HAS HELD THAT BASIC TEST T O FIND OUT AS TO WHAT WOULD CONSTITUTE CURRENT REPAIRS AS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO PRESERVE AND MAINTAIN AN ALRE ADY EXISTING ASSET, AND THE EXPENDITURE MUST NOT BRING TO A NEW ASSET INTO EXISTENCE OR TO OBTAIN NEW ADVANTAGE AND WE FIND THAT LD. CIT(A) HAS GIVEN A F INDING OF FACT THAT THE EXPENDITURE WERE INCURRED ON ACCOUNT OF MAINTENANCE OF THE EXISTING PLANT AND MACHINERY. THE REVENUE HAS NOT PLACED ANYTHING CONT RARY ON RECORD SUGGESTING THAT SUCH EXPENDITURE WAS MADE FOR BRING ING INTO EXISTENCE OF A NEW ASSET ON FOR THE ENDURING BENEFIT TO THE EXISTI NG ASSET. IN THIS VIEW OF THE MATTER, THE GROUND OF REVENUES APPEAL IS DISMISSED . 22. NEXT GROUND RELATES TO DELETION OF ADD OF RS.1, 43,220/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION. THIS ISSU E WE HAVE ALREADY DECIDED IN REVENUES APPEAL IN ITA NO. 6/AHD/2010 EMBODIED IN PARA-10 & 11 OF THIS ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 11 ORDER THERE IS NO CHANGE INTO FACTS AS CIRCUMSTANCE IN THIS YEAR ALSO, THEREFORE FOLLOWING OUR DISCUSSION IN ITA NO.6/AHD/2010, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 23. IN THE RESULT, REVENUES APPEAL IS DISMISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.8/AHD/201 0 (A.Y.01-02) 24. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROU NDS OF APPEAL:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION U/S 4 0(A)(IA) OF RS.21,83,593/- ON ACCOUNT OF COMMISSION PAID TO FOR EIGN AGENTS IN FOREIGN CURRENCY WITHOUT DEDUCTION OF TAX AT SOU RCE. 1(II) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE CIRCULAR NO.786 DTD.07.02.2000, IN WHICH HE HAS RELIED UPON ON THE ABOVE ISSUES, HAS BEEN WITHDRAWN BY THE CBDT VIDE CIRCULAR NO.7 O F 2009 (F.NO.500/135/2007-FTD-1), DTD. 22.10.2009. FURTHE R, ON THE ISSUE OF DEDUCTION OF TDS ON PAYMENTS TO NON-RESIDE NTS, RECENTLY THE HON. KARNATAKA HIGH COURT IN ITS JUDGMENT IN TH E CASE OF CIT (INTERNATIONAL TAXATION) VS. SAMSUNG ELECTRONICS CO . LTD. REPORTED IN TIOL 2009-TIOL-629-HC-KAR-IT, RELYING U PON THE DECISION OF THE APEX COURT IN THE CASE OF TRANSMISS ION CORPORATION LIMITED VS. CIT. 2002 TIOL-471-SC-IT, H AS HELD THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTIO N 195 HAS NOTHING TO DO, WITH THE ACTUAL LIABILITY OF THE NON -RESIDENT TO TAX UNDER THE PROVISIONS OF THE ACT, INCLUDING THE QUAN TUM THEREOF. THE PAYER IN SUCH CIRCUMSTANCES SHOULD TAKE RECOURS E TO THE PROVISIONS OF SECTION 195(2) OF THE ACT IF HE IS OF THE VIEW THAT ONLY A PART OF THE PAYMENT MADE BY HIM OR NO PART THEREO F WOULD BEAR THE CHARACTER OF INCOME IN THE HANDS OF THE NON-RES IDENT. 25. THE FACTS, IN BRIEF, ARE THAT THE CASE WAS RE-O PENED AND A NOTICE U/S 148 WAS ISSUED. WHILE FRAMING ASSESSMENT U/S 143(3) RE AD WITH 147 OF THE INCOME TAX ACT, THE ASSESSING OFFICER MADE VARIOUS DISALLOWANCE INCLUDING THE DISALLOWANCE OF RS.21,83,593/- CLAIMED AS PAYME NT OF COMMISSION IN FOREIGN CURRENCY. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE PA RTLY ALLOWED THE APPEAL. LD. CIT(A), WHILE DISPOSING OF THE APPEAL, DELETED THE DISALLOWANCE OF ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 12 RS.21,83,593/-. AGAINST ORDER OF LD. CIT(A), THE P RESENT APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL. 26. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER PASSED BY LD. CIT(A) IS ERRONEOUS AS MUCH AS THAT THE LD. CIT(A) FAILED TO TAKE NOTE OF THE JUDGMENT OF HONBLE KARNATKA HIGH COURT IN THE CASE OF CIT (INTERNATIONAL TAXATION) V. SAMSUNG ELECTRONICS CO. LTD. REPORTED IN TIOL 2009-TIOL-629 HC-KAR-IT AND THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION LIMITED V. CIT , 2002-TIOL-471-SC-IT. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE SUBMITTED T HAT THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION (SUPRA) AND THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS (SUPRA) IS NOT APPLICABLE IN THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE. HE SUBMITTED THAT THIS ISSUE HAS ALR EADY BEEN DECIDED BY THE HONBLE ITAT AHMEDABAD BENCH IN ITA NO.1443-1444/AHD/2010 FOR THE A.YS 2002-03 AND 2007-08 IN ASSESSEES OWN CASE. THE HO NBLE TRIBUNAL IN ITA NO.1443 OF 2010 HAS HELD AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE SPECIFICALLY PLEA DED BEFORE THE LEARNED CIT(A) THAT TAX WAS NOT DEDUCTED BECAUSE IN COME TAX IS DEDUCTIBLE AT SOURCE ONLY FROM PAYMENTS WHICH ARE C HARGEABLE TO TAX UNDER INCOME TAX ACT. IT WAS SUBMITTED THAT TH E AMOUNT WAS PAID FOR COMMISSION IN FOREIGN CURRENCY WAS NOT CHA RGEABLE TO TAX IN INDIA BECAUSE THESE PAYMENTS REPRESENTED BUSINES S INCOME OF NON-RESIDENT AND THAT NONE OF THE PAYEES HAVE PERMA NENT ESTABLISHMENT OR BUSINESS CONNECTION IN INDIA WITHI N THE MEANING OF SECTION 9 OF THE I.T. ACT. IT WAS ALSO EXPLAINED THAT NON- RESIDENTS WERE NOT CHARGEABLE TO TAX IN INDIA DUE T O VARIOUS DOUBLE TAXATION AGREEMENTS. IT WAS ALSO EXPLAINED T HAT PAYMENTS WERE NOT FOR ROYALTY OR TECHNICAL KNOW-HOW AND THEREFORE, TAX WAS NOT LIABLE TO BE DEDUCTED. IT WA S ALSO SUBMITTED THAT THE ASSESSEE DID NOT DEDUCT TAX BECAUSE OF THE EXISTING CIRCULAR ISSUED BY CBDT. THEREFORE, NO DISALLOWANC E COULD BE MADE. THE LEARNED DR HOWEVER, SUBMITTED THAT EARLI ER BOARD CIRCULAR RELIED UPON BY THE ASSESSEE HAS BEEN WITHD RAWN WITH IMMEDIATE EFFECT VIDE SUBSEQUENT CIRCULAR DATED 23. 10.2009; THEREFORE, EARLIER CIRCULARS WOULD NO LONGER SURVIV E. HOWEVER, WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LEARNED DR BECAUSE ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 13 LATER CIRCULAR DATED 23.10.2009 WAS HAVING NO RETRO SPECTIVE EFFECT AND ALSO COULD NOT HAVE THE EFFECT TO THE ASSESSMEN T YEARS WHERE THE ASSESSEE FILED THE RETURN OF INCOME ON TIME IN ACCORDANCE WITH THE EXISTING BOARD CIRCULAR. THEREFORE, THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE NOT TO DEDUCT TDS IN SU CH CIRCUMSTANCES BASED UPON ITS OPINION ON THE CBDT CI RCULARS. THE JCIT, GODHRA RANGE IN THE CASE OF THE SAME ASSE SSEE FOR ASSESSMENT YEAR 2005-06 (COPY OF WHICH IS FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE) EXAMINED SIMILAR ISSUE AN D THE AO STATED IN THE REMAND REPORT THAT THE ASSESSEE COMPL IED WITH THE CONDITIONS OF THE EARLIER BOARD CIRCULAR NO.786 (SU PRA). IT WAS ALSO EXPLAINED THAT THE TRANSACTIONS OF THE ASSESSE E WOULD NOT COME WITHIN THE PURVIEW OF TDS PROVISIONS. SINCE T HE AO (JCIT, GODHRA) ACCEPTED THE CLAIM OF THE ASSESSEE IN THE E ARLIER YEAR IN HIS REMAND REPORT BEFORE THE LEARNED CIT(A), THEREF ORE, THE AO CANNOT DEVIATE FROM ITS EARLIER STAND TAKEN ON THE IDENTICAL MATTER AGAINST THE SAME ASSESSEE. THE BOARD CIRCULAR ON T HE BASIS OF WHICH THE AO GAVE THE REMAND REPORT AND THE ASSESSE E CLAIMED THAT THE TDS PROVISIONS ARE NOT APPLICABLE IN HIS C ASE, WERE ADMITTEDLY APPLICABLE IN THE ASSESSMENT YEARS UNDER APPEAL I.E. ASSESSMENT YEAR 2002-03 AND 2007-08 BECAUSE THE BOA RD CIRCULAR WAS WITHDRAWN LATER ON, ON 23.10.2009. HON BLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. SATI SH PANALAL SHAH [2001] 249 ITR 221 (SC) DEPRECATED THE PRACTIC E OF THE DEPARTMENT IN ACCEPTING THE CORRECTNESS OF THE JUDG MENTS IN PARTICULAR CASE AND IN CHALLENGING ITS CORRECTNESS IN ANOTHER CASE. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. VIKAS CHEMI GUM INDIA [2005] 276 ITR 32 HELD THAT SINCE THE SOURCES OF INCOME IN ANY EARLIER YEAR NOT CHALLENGE D, IT IS NOT OPEN TO THE REVENUE TO CHALLENGE THE SAME IN SUBSEQ UENT YEAR. HONBLE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG VS. CIT 193 ITR 321 HELD THAT CONSISTENCY IN THE APPROACH BY THE REVENUE DEPTT. SHOULD BE MAINTAINED . HONBLE PUPNJAB & HARYANA HIGH COURT IN THE CASE OF PRAKASH INDUSTRIES LTD. 324 ITR 391 HELD THAT WHEN THE ORDER FOR EARLIER YEAR HAS BECOME FINAL, THE RULE OF CONSISTENCY SHOU LD BE FOLLOWED. CONSIDERING THE ABOVE, IN THE LIGHT OF THE FINDING OF THE LEARNED CIT(A), WE ARE OF THE VIEW THAT SINCE T HE CLAIM OF THE ASSESSEE WAS BASED UPON THE CIRCULAR EXISTING AT TH E TIME OF ASSESSMENT YEAR UNDER APPEAL AND THE VIEW OF THE AS SESSEE HAS BEEN ACCEPTED BY THE AO IN ASSESSMENT YEAR 2005-06, THEREFORE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE AD DITIONS. WE, THEREFORE, DO NOT FIND ANY PERVERSITY IN THE APPROA CH OF THE LEARNED CIT(A). WE CONFIRMED HIS FINDINGS AND DISM ISS BOTH THE APPEALS OF THE REVENUE. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 14 27. IT IS NOTEWORTHY LD. CIT(A) HAS DECIDED THIS IS SUE IN PARA 7.3 OF HIS ORDER WHICH IS REPRODUCED AS UNDER:- I HAVE CONSIDERED SUBMISSION OF THE APPELLANT AS W ELL AS FACTS OF THE CASE. SIMILAR ISSUE WAS REMANDED BACK TO THE AO FO R A.Y.A 2005-06 AND AO THROUGH JT. CIT, PANCHMAHAL RANGE CONFIRMED THAT PAYMENT OF COMMISSION IN FOREIGN CURRENCY DOES NOT COME UNDER THE PURVIEW OF TDS AND THEREFORE NO TAX IS REQUIRED TO BE DEDUCTED . CONSIDERING SAID FACTS, CIRCULAR OF THE BOARD AND DECISIONS RELIED U PON BY THE APPELLANT, DISALLOWANCE OF RS.21,83,593/- IS DIRECTED TO BE DE LETED. 28. FROM THE ABOVE ORDER OF LD. CIT(A) IT IS EVIDEN T THAT HE HAS RELIED UPON THE ORDER PASSED IN THE CASE PERTAINING TO ASSESSME NT YEAR 2005-06 WHEREIN THE ASSESSING OFFICER HAD SUBMITTED THAT IN REMAND REPORT THAT PAYMENT OF COMMISSION IN FOREIGN CURRENCY DOES NOT COME UNDER THE PURVIEW OF TDS, THEREFORE, NO TAX IS REQUIRED TO BE DEDUCTED. ADMIT TEDLY, THERE IS NO CHANGE IN THE CIRCUMSTANCES EXCEPT THAT THE CONTENTION OF THE REVENUE THAT CIRCULAR NO.786 DATED 7.2.2000 HAS BEEN WITHDRAWN VIDE CIRCU LAR NO.7 OF 2009 DATED 23.10.2009. WE FIND THAT THIS TRIBUNAL IN ITA NO.1443/AHD/2010 HAD CONSIDERED THIS ARGUMENT OF THE REVENUE THAT CIRCUL AR NO.23 DATED 23.7.1969 AND CIRCULAR NO.786 DATED 7.2.2000 WERE WITHDRAWN VIDE CIRCULAR NO.7 OF 2009 DATED 23.10.2009. SO FAR THE CONTENTION OF TH E REVENUE THAT LD. CIT(A) HAS NOT APPRECIATED THE DECISION OF HONBLE KARNATA KA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS CO. LTD. (SUPRA) AND THE JUD GMENT OF HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATI ON LIMITED (SUPRA), WE FIND THAT THE DECISIONS AS RELIED BY THE REVENUE IN THE GROUND OF APPEAL WAS NEITHER APPRECIATED BY LD. CIT(A) NOR CONSIDERED BY HONBLE TRIBUNAL IN ITA NO.1443 & 1444/AHD/2010 HOWEVER, THE FACTS IN THE P RESENT CASE ARE DIFFERENT, AS IN THE PRESENT CASE, THE ASSESSEE DID NOT DEDUCT TAX AS IT WAS NOT DEDUCTIBLE IN TERMS OF CBDTS CIRCULAR NO. 756 DATE D 07/02/2000. THIS CIRCULAR NO. 786/2000 WAS SUBSEQUENTLY, WITHDRAWN V IDE CIRCULAR NO 7 OF DATED 23-06-2009 BUT SUBSEQUENT TO FILING OF RETURN BY THE ASSESSEE. IT IS NOT DISPUTED THAT IN RESPECT OF ASSESSMENT YEAR 2005-06 THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE REVENUE AND THERE IS N O CHANGE IN THE ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 15 CIRCUMSTANCE EXCEPT THE CONTENTION THAT THE CIRCULA R NO.786 DATED 7.2.2000 HAS BEEN WITHDRAWN VIDE CIRCULAR NO.7 OF 2009. THI S CONTENTION OF THE REVENUE WAS CONSIDERED AND DECIDED BY THE TRIBUNAL THAT SINCE THE CLAIM OF THE ASSESSEE WAS BASED UPON THE CIRCULAR EXISTING A T THE TIME OF ASSESSMENT YEAR, NO APPEAL, AND THE VIEW OF THE ASSESSEE HAD B EEN ACCEPTED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2005-06. THER EFORE, THE ORDER OF LD. CIT(A) NO INFIRMITY IS FOUND. SINCE THE JUDGMENTS AS FILED BY THE REVENUE WOULD NOT APPLY ON THE FACTS OF THE PRESENT CASE AS THE ISSUE OF CIRCULAR NO 7 OF 2009 WAS NOT BEFORE THE HOBBLE HIGH COURT. RESP ECTFULLY FOLLOWING THE DECISION OF THE HONBLE CO-ORDINATE BENCH IN ITA NO . 1443-1444/AHD/2010, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 29. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.9/AHD/201 0 (A.Y.01-02) 30. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS .10,34,262/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION O F PF. 1(II) THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE, AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYER S CONTRIBUTION HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CONTRIBUTION WHICH ARE GOVERNED BY SECTION 36(1)(VA ) R.W.S. 2(24)(X) OF THE ACT. 2(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS .47,729/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION T O ESI. 2(II) THE DECISION OF LD. CIT(A) IS NOT ACCEPTABL E, AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYER S CONTRIBUTION HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CONTRIBUTION WHICH ARE GOVERNED BY SECTION 36(1)(VA ) R.W.S. 2(24)(X) OF THE ACT. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 16 31. GROUND NOS. 1(I) AND 1(II) ARE AGAINST THE DELE TION OF THE ADDITION MADE ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTIO N OF PF. SIMILAR GROUND WAS RAISED IN ITA NO.6/AHD/2010 FOR THE A.Y 1999-20 00. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THIS ISSUE HAS ALREAD Y BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE IN C.O. NO. 181/AHD/2004. 32. WE FIND THAT THE FACTS ARE IDENTICAL AS IN ITA NO.6 OF 2010. SINCE THIS ISSUE WE HAVE ALREADY DECIDED IN FAVOUR OF THE ASSE SSEE IN ITA NO.6 OF 2010, THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. THE OTHER GROUND IS RELATED TO THE PAYMENT OF EMPLOYEES CONT RIBUTION TO THE ESI. THIS ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESS EE BY HONBLE ITAT IN ASSESSEES OWN CASE IN A.Y 1998-99 IN C.O. NO.181/AHD/2004 . LD. A.R. ALSO RELIED UPON THE JUDGMENT OF HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT V. NEXUS COMPUTER P. LTD. REPORTED IN (2009) 313 ITR 144 (MAD) WHEREIN HONBLE HIGH COURT HELD THAT IF THE CONTRIBUTION HA D BEEN PAID PRIOR TO FILING OF THE RETURN, THE ASSESSEE IS ENTITLED TO THE BENEFIT U/S 43B OF THE INCOME TAX ACT. LD. A.R. HAS ALSO PLACED RELIANCE ON THE JUDG MENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. ANZ INFORMATION TECHNOLOGY P. LTD . REPORTED IN [2009] 318 ITR 123 (KARN) WHEREIN THE HONBLE HI GH COURT, FOLLOWED THE DECISION IN ITA NO.107 & 108 OF 2007 AND THE JUDGME NT RENDERED IN THE CASE OF CIT V. SABARI ENTERPRISES REPORTED IN [2008] 298 ITR 141 (KARN). RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN CIT V. SABARI ENTERPRISES (SUPRA) AND HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. NEXUS COMPUTER P. LTD. (SUPRA) AND THE DECISION OF HONBLE ITAT IN C.O. NO . 181/AHD/2004, THIS GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 33. IN THE RESULT, REVENUES APPEAL IS DISMISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.10/AHD/20 10 (A.Y.02-03) 34. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 17 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS .37,15,954/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION T O PF. AND ADDITION OF RS.4,82,915/- ON ACCOUNT OF LATE PAYMEN T OF EMPLOYEES CONTRIBUTION TO ESI. 1(II) THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE , AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYER S CONTRIBUTION HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CONTRIBUTION WHICH ARE GOVERNED BY SECTION 36(1)(VA ) R.W.S. 2(24)(X) OF THE ACT. 35. WE FIND THAT THE FACTS AND THE GROUNDS IN THIS APPEAL ARE IDENTICAL WITH ITA NO.9/AHD/2010. SINCE THESE ISSUES WE HAVE ALREADY DECIDED IN ITA NO.9/AHD/2010 OF REVENUES APPEAL, FOLLOWING OUR DE CISION IN ITA NO.9/AHD/2010, THIS GROUND OF THE APPEAL OF THE REV ENUE IS ALSO REJECTED. 36. IN THE RESULT, REVENUES APPEAL IS DISMISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.11/AHD/20 10 (A.Y.03-04) 37. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION U/S 40(A)(IA) OF RS.49,48,283/- ON ACCOUNT OF COMMISSION PAID TO FOR EIGN AGENTS IN FOREIGN CURRENCY WITHOUT DEDUCTION OF TAX AT SOU RCE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN DELETING THE ADDITION U/S 40(A)(IA) OF RS.16,66,673/- ON ACCOUNT OF PROFESSIONAL FEES PAID IN FOREIGN CURRENCY WITHOUT DEDUCTION OF TAX AT SOURCE. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE CIR CULAR NO.786 DTD.07.02.2000, IN WHICH HE HAS RELIED UPON ON THE ABOVE ISSUES, HAS BEEN WITHDRAWN BY THE CBDT VIDE CIRCULAR NO.7 O F 2009 (F.NO.500/135/2007-FTD-1), DTD. 22.10.2009. FURTHE R, ON THE ISSUE OF DEDUCTION OF TDS ON PAYMENTS TO NON-RESIDE NTS, RECENTLY THE HON. KARNATAKA HIGH COURT IN ITS JUDGMENT IN TH E CASE OF CIT (INTERNATIONAL TAXATION) VS. SAMSUNG ELECTRONICS CO . LTD. REPORTED IN TIOL 2009-TIOL-629-HC-KAR-IT, RELYING U PON THE DECISION OF THE APEX COURT IN THE CASE OF TRANSMISS ION ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 18 CORPORATION LIMITED VS. CIT. 2002 TIOL-471-SC-IT, H AS HELD THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTIO N 195 HAS NOTHING TO DO, WITH THE ACTUAL LIABILITY OF THE NON -RESIDENT TO TAX UNDER THE PROVISIONS OF THE ACT, INCLUDING THE QUAN TUM THEREOF. THE PAYER IN SUCH CIRCUMSTANCES SHOULD TAKE RECOURS E TO THE PROVISIONS OF SECTION 195(2) OF THE ACT IF HE IS OF THE VIEW THAT ONLY A PART OF THE PAYMENT MADE BY HIM OR NO PART THEREO F WOULD BEAR THE CHARACTER OF INCOME IN THE HANDS OF THE NON-RES IDENT. 4(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.17,55,3 40/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AND ADDITION OF RS.1,67,882/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYE ES CONTRIBUTION TO ESI. 4(II) THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE , AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYER S CONTRIBUTION HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CONTRIBUTION WHICH ARE GOVERNED BY SECTION 36(1)(VA ) R.W.S. 2(24)(X) OF THE ACT. 38. THE FACTS OF THE PRESENT APPEAL IS IDENTICAL A S WERE IN ITA NO.8/AHD/2010. THIS IDENTICAL ISSUE, WE HAVE ALREAD Y DECIDED IN ITA NO.8/AHD/2010 OF REVENUES APPEAL, FOLLOWING OUR DE CISION IN ITA NO.8/AHD/2010, THIS GROUND OF REVENUES APPEAL IS D ISMISSED. 39. IN THE RESULT, REVENUES APPEAL IS DISMISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.12/AHD/20 10 (A.Y.04-05) 40. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF AP PEAL:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION U/S 40(A)(IA) OF RS. 4196,552/- ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENTS IN FOREIGN CUR RENCY WITHOUT DEDUCTION OF TAX AT SOURCE. 1(II). THE LD. CIT(A) FAILED TO APPRECIATE THAT TH E CIRCULAR NO. 786 DATED 7.02.2000, IN WHICH HE HAS RELIED UPON THE ABOVE IS SUES, HAS BEEN WITHDRAWN BY THE CBDT VIDE CIRCULAR NO. 7 OF 2009 ( F NO. 500/135.2007-FTD-1), DTD 22.10.2009. FURTHER, ON T HE ISSUE OF DEDUCTION OF TDS ON PAYMENTS TO NON-RESIDENTS, RECE NTLY THE HONBLE KARNATAKA HIGH COURT IN ITS JUDGMENT IN THE CASE OF CIT (INTERNATIONAL ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 19 TAXATION VS. SAMSUNG ELECTRONICS CO. LTD. REPORTED IN TIOL 2009-TIOL- 629-HC-KAR-IT, RELYING UPON THE DECISION OF APEX CO URT IN THE CASE OF TRANSMISSION CORPORATION LTD., VS. CIT-2002-TIOL-47 1-SC-IT, HAS HELD THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE U/S 195 HAS NOTHING TO DO, WITH THE ACTUAL LIABILITY OF THE NON-RESIDENT TO TA X UNDER THE PROVISION OF THE ACT, INCLUDING THE QUANTUM THEREOF. THE PAYER I N SUCH CIRCUMSTANCES SHOULD TAKE RESOURCE TO THE PROVISION OF SECTION 195(2) OF THE IT ACT, IF HE IS OF THE VIEW THAT ONLY A PART O F THE PAYMENT MADE BY HIM OR NO PART THEREOF WOULD BEAR THE CHARACTER OF INCOME IN THE HANDS OF THE NON-RESIDENT. 3(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,01,487/- ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO ESI. 3(II) THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE , AS THE PROVISIONS OF SECTION 43B WHICH APPLIES TO EMPLOYERS CONTRIBUTIO N HAVE NO ROLE IN DECIDING THE ISSUE OF ALLOWABILITY OF EMPLOYEES CON TRIBUTION WHICH ARE GOVERNED BY SECTION 36(1)(VA) R.W.S 2(24)(X) OF THE ACT. 41. THE FIRST EFFECTIVE GROUND IS AGAINST THE DELET ION OF ADDITION MADE ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENT IN FORE IGN CURRENCY WITHOUT DEDUCTION AT SOURCE. THE IDENTICAL GROUND WAS RAIS ED IN REVENUES APPEALS IN ITA NO. 8/AHD/2010 AS WELL AS IN ITA NO.11/AHD/2010 . 42. THE FACTS IN THE PRESENT APPEAL IS IDENTICAL A S IT WERE IN ITA NO. 8/AHD/2010 OF REVENUES APPEAL. THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES. HENCE, THIS GROUND OF THE REVENUE IS REJECTED IN TERMS OF OUR DECISION IN ITA NO. 8/AHD/2010. 43. NEST GROUND IS RAISED AGAINST THE DELETION OF A DDITION MADE ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AN D ESI THE IDENTICAL FACTS SAME ARE RAISED IN ITA NO.10/AHD/2010 FOR THE A.Y.2 002-03. THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES FOLLOWING OUR DECISION IN ITA NO. 10/AHD/2010 HENCE, THIS GROUND OF THE REVENUES APP EAL IS REJECTED. 44. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 20 NOW WE TAKE UP THE ITA NO. 13/AHD/2010 (A.Y.05-06) 45. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION U/S. 40(A)(IA ) OF RS.77,33,477/- ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENTS IN FOR EIGN CURRENCY WITHOUT DEDUCTION OF TAX AT SOURCE. 1(II) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE CIRCULAR NO. 786 DTD. 07.02.2000, IN WHICH HE HAS RELIED UPON, HAS BEEN W ITHDRAWN BY THE CBDT VIDE CIRCULAR NO. 7 OF 2009 (F NO.500/135/2007 -FTD-I), DTD. 22.10.2009. FURTHER, ON THE ISSUE OF DEDUCTION OF T DS ON PAYMENTS TO NON-RESIDENTS, RECENTLY THE HON. KARNATAKA HIGH COU RT IN ITS JUDGMENT IN THE CASE OF CIT (INTERNATIONAL TAXATION) VS. SAM SUNG ELECTRONICS CO. LTD. REPORTED IN TIOL 2009-TIOL-629-HIGH COURT-KAR- IT, RELYING UPON THE DECISION OF THE APEX COURT IN THE CASE OF TRANS MISSION CORPORATION LIMITED VS. CIT. 20002-TIOL-471-SUPREME COURT-IT, H AS HELD THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 19 5 HAS NOTHING TO DO, WITH THE ACTUAL LIABILITY OF THE NON-RESIDENT TO TA X UNDER THE PROVISIONS OF THE ACT, INCLUDING THE QUANTUM THEREOF. THE PAYER I N SUCH CIRCUMSTANCES SHOULD TAKE RECOURSE TO THE PROVISION S OF SECTION 195(2) OF THE ACT IF HE IS OF THE VIEW THAT ONLY A PART OF THE PAYMENT MADE BY HIM OR NO PART THEREOF WOULD BEAR THE CHARACTER OF INCOME IN THE HANDS OF THE NON-RESIDENT. 2(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXCESS PAYMENT OF INTEREST OF RS.35,27,425/- U/S. 40A(2)(B) OF THE ACT. 2(II) THE LD. CIT(A) FAILED TO ALLOW AN OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE ASSESSEES CLAIM THAT LIABILI TY TO PAY INTEREST PERTAINING TO PAST YEARS GOT CRYSTALLIZED IN THE A. Y. 2005-06, WHICH IS IN CONTRAVENTION TO RULE 46A OF THE I.T. RULES 1962. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN ALLOW ADDITIONAL DEPRECIATION AS CLAIMED B Y THE ASSESSEE IGNORING THE FACT THAT HE ASSESSEE HAS NOT MADE ANY CLAIM FOR ADDITIONAL DEPRECIATION IN THE ORIGINAL RETURN OF INCOME FOR A .Y. 2005-06. THE FIRST CLAIM OF THIS WAS MADE IN THE REVISED RETURN OF INC OME AND THE CLAIM WAS MADE AT A TIME WHEN THE LIMITATION FOR FILING R EVISED RETURN HAD LAPSED. 46. THE FIRST GROUND IS AGAINST THE DELETION OF ADD ITION U/S 40(A)(IA) OF THE ACT OF RS.77,33,477/- ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENTS IN FOREIGN CURRENCY WITHOUT DEDUCTION OF TAX AT SOURCE . ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 21 47. WE FIND THAT THIS IDENTICAL GROUND WAS RAISED B Y REVENUE IN ITA NO.8/AHD/2010 IN ASSESSEES OWN CASE IN RESPECT OF A.Y. 2001-02 AND NO CHANGE IN FACTS AND CIRCUMSTANCES IN POINTED OUT BY THE LD. CIT-DR IN ITA NO.8/AHD/2010. HENCE, THIS TRIBUNAL HAS DECIDED THI S ISSUE IN PARA-28 OF THIS ORDER, WHICH IS REPRODUCED HEREINBELOW:- 28. FROM THE ABOVE ORDER OF LD. CIT(A) IT IS EVIDEN T THAT HE HAS RELIED UPON THE ORDER PASSED IN THE CASE PERTAINING TO ASS ESSMENT YEAR 2005- 06 WHEREIN THE ASSESSING OFFICER HAD SUBMITTED THAT IN REMAND REPORT THAT PAYMENT OF COMMISSION IN FOREIGN CURRENCY DOES NOT COME UNDER THE PURVIEW OF TDS, THEREFORE, NO TAX IS REQUIRED T O BE DEDUCTED. ADMITTEDLY, THERE IS NO CHANGE IN THE CIRCUMSTANCES EXCEPT THAT THE CONTENTION OF THE REVENUE THAT CIRCULAR NO.786 DATE D 7.2.2000 HAS BEEN WITHDRAWN VIDE CIRCULAR NO.7 OF 2009 DATED 23. 10.2009. WE FIND THAT THIS TRIBUNAL IN ITA NO.1443/AHD/2010 HAD CONSIDERED THIS ARGUMENT OF THE REVENUE THAT CIRCULAR NO.23 DATED 2 3.7.1969 AND CIRCULAR NO.786 DATED 7.2.2000 WERE WITHDRAWN VIDE CIRCULAR NO.7 OF 2009 DATED 23.10.2009. SO FAR THE CONTENTION OF TH E REVENUE THAT LD. CIT(A) HAS NOT APPRECIATED THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS CO. LTD. ( SUPRA) AND THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TR ANSMISSION CORPORATION LIMITED (SUPRA), WE FIND THAT THE DECIS IONS AS RELIED BY THE REVENUE IN THE GROUND OF APPEAL WAS NEITHER APPRECI ATED BY LD. CIT(A) NOR CONSIDERED BY HONBLE TRIBUNAL IN ITA NO.1443 & 1444/AHD/2010 HOWEVER, THE FACTS IN THE PRESENT CASE ARE DIFFEREN T, AS IN THE PRESENT CASE, THE ASSESSEE DID NOT DEDUCT TAX AS IT WAS NOT DEDUCTIBLE IN TERMS OF CBDTS CIRCULAR NO. 756 DATED 07/02/2000. THIS CIRCULAR NO. 786/2000 WAS SUBSEQUENTLY, WITHDRAWN VIDE CIRCULAR NO 7 OF DATED 23- 06-2009 BUT SUBSEQUENT TO FILING OF RETURN BY THE A SSESSEE. IT IS NOT DISPUTED THAT IN RESPECT OF ASSESSMENT YEAR 2005-06 THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE REVENUE AND THERE IS N O CHANGE IN THE CIRCUMSTANCE EXCEPT THE CONTENTION THAT THE CIRCULA R NO.786 DATED 7.2.2000 HAS BEEN WITHDRAWN VIDE CIRCULAR NO.7 OF 2 009. THIS CONTENTION OF THE REVENUE WAS CONSIDERED AND DECIDE D BY THE TRIBUNAL THAT SINCE THE CLAIM OF THE ASSESSEE WAS BASED UPON THE CIRCULAR EXISTING AT THE TIME OF ASSESSMENT YEAR, NO APPEAL, AND THE VIEW OF THE ASSESSEE HAD BEEN ACCEPTED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2005-06. THEREFORE, THE ORDER OF LD. CIT(A) N O INFIRMITY IS FOUND. SINCE THE JUDGMENTS AS FILED BY THE REVENUE WOULD N OT APPLY ON THE FACTS OF THE PRESENT CASE AS THE ISSUE OF CIRCULAR NO 7 OF 2009 WAS NOT BEFORE THE HOBBLE HIGH COURT. RESPECTFULLY FOLLOWI NG THE DECISION OF THE HONBLE CO-ORDINATE BENCH IN ITA NO. 1443-1444/AHD/ 2010, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 22 FOLLOWING OUR DECISION IN ITA NO. 8/AHD/2010, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 48. NEXT GROUND IS RAISED AGAINST THE DELETION OF D ISALLOWANCE OF EXCESS PAYMENT OF INTEREST AMOUNTING TO RS.30,27,425/- U/S 40A(2)(B) OF THE ACT. LD. CIT-DR SUBMITTED THAT THE ORDER OF LD. CIT(A) IS ER RONEOUS AND SUBMITTED THAT LD. CIT(A) DID NOT GIVE ANY OPPORTUNITY TO ASSESSIN G OFFICER TO VERIFY THE ASSESSEES CLAIM THAT LIABILITY TO PAY INTEREST PER TAINING TO PAST YEARS GOT CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION, WHICH IS IN CONTRAVENTION TO RULE 46A OF THE I.T RULES, 1962. HE PLACED STAY RELIANCE ON THE ASSESSMENT ORDER. 49. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE APPROACH OF THE ASSESSING OFFICE R IS ALL THROUGH OUT REMAINED ERRONEOUS. HE SUBMITTED THAT PROPER WORKIN G OF RATE OF INTEREST IS 12% BUT NOT 21% AS WORKED OUT BY THE AO. HE RELIED ON THE ORDER OF LD. CIT(A). 50. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT ASSESSING OFFICER WHILE MAKING DISALLOWANCE AS OBSERVED AS UNDER:- G. DISALLOWANCE U/S. 40A(2)(B) THE DETAILS OF PAYMENTS COVERED U/S. 40A(2)(B) OF T HE ACT SHOW THAT THE ASSESSEE CO. HAS CLAIMED AN EXPENSE OF RS.1,13,57,4 25/- ON ACCOUNT OF INTEREST PAYMENTS TO M/S. HONEVICK ENTERPRISES P VT. LTD., ON UNSECURED LOAN OF RS.5,40,00,000/-. THE RATE OF INT EREST WORK OUT TO 21% PER ANNUM. (1,13,57,425 X 100/55,40,00,000). DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CO. WAS ASK ED TO GIVE REASONS FOR INTEREST PAYMENTS AT HIGHER RATES TO TH E PERSON COVERED U/S. 40A(2)(B) OF THE ACT. IN ITS REPLY DATED 26/11/2007 , THE ASSESSEE CO. AS UNDER:- THE PAYMENTS ARE MADE TO THE PERSON COVERED U/S. 4 0A(2)(B) ARE IN ORDINARY COURSE OF BUSINESS. THE FIRST PAYMENTS FOR INTEREST RATE @ 12% WHEREAS THE THEN RATE WAS @ 14.50% ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 23 ASSESSEES REPLY ON THE ISSUE HAS BEEN CONSIDERED C AREFULLY. THE PRIME LENDING RATE DURING THE YEAR UNDER CONSIDERATION WA S @ 14.5% PER ANNUM. THE ASSESSEE CO. IS PAYING INTEREST @ 14.5% TO THE BANK FOR AVAILING LOAN FACILITY. CONSIDERING THE FACTS, IT I S FOUND THAT THE ASSESSEE CO. HAS CLAIMED EXPENSES OF RS.1,13,57,425/- ON ACC OUNT OF INTEREST PAYMENTS TO M/S. HONEYVICK ENTERPRISES PVT. LTD. AT A VERY HIGHER RATE OF INTEREST I.E.@ 21% PENALTY ANNUM. THUS, I AM OF THE OPINION THAT THE CLAIM OF INTEREST EXPENSES TO M/S. HONEYVICK ENTERP RISES PVT. LTD. BY THE ASSESSEE CO. IS EXCESSIVE. THE RATE OF INTEREST IS RESTRICTED TO 14.5% PER ANNUM ON SUCH INTEREST PAYMENTS TO THE PERSON C OVERED U/S. 40A(2)(B) BY THE ASSESSEE CO. THE AMOUNT OF INTERE ST @ 14.5% PER ANNUM ON UNSECURED LOAN OF RS.5.40 CRORE WORKS OUT TO RS.78,30,00/-. THEREFORE, INVOKING PROVISIONS OF 40A(2)(B) OF THE ACT, THE EXCESSIVE INTEREST OF RS.35,27,425/- ( 1,13,57,425 78,30,00 0) IS DISALLOWED AND ACCORDINGLY AN ADDITION OF RS.35,27,425/- IS MADE T O THE INCOME RETURNED BY THE ASSESSEE CO. HOWEVER, LD. CIT(A) HAS DECIDED THIS ISSUE IN PARA- 8.2 OF HIS ORDER, WHICH IS REPRODUCED HEREINBELOW:- 8.2 IN APPEAL IT IS SUBMITTED THAT ORIGINALLY THE AMOUNT WAS ACCEPTED FROM PROMOTERS AS REQUIRED UNDER STRUCTURING SCHEME AND NOT AS UNSECURED LOAN. HOWEVER, LATER ON RESTRUCTURING SCH EME WAS NOT IMPLEMENTED AND SO APPELLANT WAS OBLIGED TO PAY INT EREST ON SAID ADVANCE AS UNSECURED LOAN TO THE COMPANY. FURTHER, THE INTEREST ON IT WAS REQUIRED TO BE PAID FROM THE DATE FROM WHICH TH E AMOUNT WAS ACTUALLY RECEIVED BY THE APPELLANT. SINCE THE LIABI LITY TO PAY THE INTEREST CRYSTALLIZED DURING THE RELEVANT PREVIOUS YEAR, APP ELLANT HAS PAID INTEREST FOR THE PERIOD FROM WHICH THE LOAN WAS TAK EN TILL THE DATE OF REPAYMENT I.E. FOR MORE THAN 12 MONTHS AT AN AGREED RATE OF 12% ONLY AND NOT @ 21% AS MENTIONED BY AO IN THE SAID ORDER. THE APPELLANT ALSO FURNISHED DETAILED WORKING FOR THE SAME AND IT IS VERIFIED THAT INTEREST IS ACTUALLY PAID AT 12% P.A. AND NOT AT 21 %. 51. THE CONTENTION OF THE LD. CIT-DR IS THAT THE AS SESSING OFFICER WAS NOT AFFORDED OPPORTUNITY TO VERIFY THE CLAIM OF THE ASS ESSEE THAT THE LIABILITY TO PAY INTEREST CRYSTALLIZED IN THE A.Y. 2005-06 WHICH IS IN CONTRAVENTION TO RULE 46A OF IT RULES, 1962. AFTER CONSIDERING THE SUBMISSION S OF THE RESPECTIVE PARTIES AND ALL ASPECTS OF THE MATTER IN THE INTEREST OF JU STICE, WE RESTORE BACK THE MATTER TO THE FILE OF AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE LIABILITY TO PAY INTEREST CRYSTALLIZED IN THE A.Y. 2005-06 AND A LSO WORKING OUT OF RATE OF ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 24 INTEREST. THEREFORE, THIS GROUND OF REVENUES APPEA L IS ALLOWED FOR STATISTICAL PURPOSES. 52. NEXT GROUND IS RAISED AGAINST THE ALLOWING ADDI TIONAL DEPRECIATION. LD. CIT-DR SUBMITTED THAT THE CLAIM OF ADDITIONAL DEPRE CIATION WAS MADE IN REVISED RETURN AND THE REVISED RETURN SUBMITTED WHE N THE LIMITATION OF FILING OF SUCH RETURN WAS EXPIRED. ON THE CONTRARY, LD. AR FO R THE ASSESSEE SUBMITTED THAT LD. CIT(A) HAS ALLOWED ADDITIONAL DEPRECIATION HAVING CALLED FOR REMAND REPORT OF THE ASSESSING OFFICER. 53. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE IN PARA-4.4 OF HIS ORDER, WHICH IS REPRODUCED HEREINBELOW:- 4.4 I HAVE CONSIDERED SUBMISSIONS OF THE APPELLANT , GONE THROUGH THE ORDER AND ALSO CONSIDERED THE REMAND REPORTS OF BOT H JT. CIT AND DCIT. I HAVE ALSO GONE THROUGH VARIOUS FACTS OF THE CASE PLACED BEFORE ME. THE AO IN ITS ORDER HAS DISALLOWED DEPRECIATION REGULAR AS WELL AS ADDITIONAL ON THE GROUND THAT SS WIRE DRAWING PLANT AND BILLET YARD BEING PAT OF SMS PROJECT WERE NEVER PUT TO USE IN A .Y. 2005-06 AND ACCORDINGLY THE QUESTION OF ALLOWING DEPRECIATION D OES NOT ARISE AT ALL. I AM THEREFORE INCLINED TO DECIDE FIRST WHETHER THE C LAIM OF THE ASSESSEE ABOUT PUTTING VARIOUS PLANTS OF SMS PROJECT TO USE OR NOT. IN THE APPEAL BEFORE ME TECHNICAL DETAILS OF SMS PROJECT WERE FUR NISHED AND IT WAS ALSO SUBMITTED THAT IT IS NOT NECESSARY THAT ENTIRE SMS PROJECT SHOULD BE STARTED SIMULTANEOUSLY. IT IS UP TO THE ASSESSEE TO START VARIOUS DOWN STREAM FACILITIES THOUGH PART OF SMS PROJECT EARLIE R AND THAT TOO WITHOUT COMMISSIONING ENTIRE SMS PROJECT. THE AO HAS HEAVIL Y RELIED ON THE ANNUAL REPORTS OF THE COMPANY FOR 2004-05, 205-06 A ND 2006-07 BUT NOT APPRECIATED THE FACTS PLACED ON RECORDS BY THE ASSESSEE. IT IS ALSO WORTHWHILE TO NOTE THAT ALL THE FACTS SUBMITTED IN APPEAL WERE ALSO PRESENT BEFORE THE AO WHILE PASSING THE ORDER AND A O WAS GENEROUS ENOUGH TO STATE THE SAME IN HIS ORDER. IN THE REMAN D REPORT BOTH THE JT. CIT AND DCIT AFTER DUE VERIFICATION CONFIRMED THAT BOTH THE PLANTS WERE PUT TO USE IN A.Y. 2005-06, BUT BASED ON PRODUCTION THE JCIT HAS OPINED THAT IN AS MUCH AS ADDITIONAL DEPRECIATION I S CONCERNED, IT IS ALLOWABLE IN THE A.Y. 2004-05. ON THE BASIS OF FACT S PLACED BEFORE ME, I DO NOT HAVE ANY REASON TO BELIEVE THAT THOSE PLANTS WERE NOT PUT TO USE. ACCORDINGLY, I DIFFER WITH THE REPORT OF THE JCIT, TO THE EXTENT THAT IF PRODUCTION AS PER THE EXCISE RECORDS HAS STARTED IN A PREVIOUS. A.Y THEN BOTH REGULAR AND ADDITIONAL DEPRECIATION SHOULD BE ALLOWABLE FIRST IN THE ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 25 A.Y. 2004-05, FOR THE SECOND HALF OF THE YEAR, AS N OTED IN THE EXCISE DUTY RECORD. HENCE, IT IS NOT ACCEPTABLE THAT THE S S WIRE DRAWING PLANT AND BILLET YARD WERE BOTH COMMISSIONED AND PUT TO U SE IN A.Y. 2005-06 AS CLAIMED BY THE ASSESSEE BECAUSE TRAIL RUN AND RE GULAR RUN WERE COMMISSIONED IN THE SECOND HALF OF THE PREVIOUS A.Y . 2004-05, EVEN THOUGH THESE ASSETS WERE CAPITALIZED IN BOOKS ON 01 -04-2004.. IT IS NOT A MATERIAL AS TO ON WHAT DATE THE PLANT AND MACHINE RY WAS PUT TO USE. ACCORDINGLY THE AO IS DIRECTED TO ALLOW DEPRECIATIO N AND ADDITIONAL DEPRECIATION FOR LATER HALF OF THE YEAR 2003-04, RE LEVANT FOR THE A.Y 2004- 05 ON SS WIRE DRAWING PLANT AND BILLET YARD AND BAS ED ON THE CLOSING WDV CONSIDER DEPRECIATION IN THIS A.Y, IF NECESSARY AFTER OBTAINING NECESSARY CLARIFICATIONS FROM THE APPELLANT. THUS, THIS GROUND OF APPEAL REGARDING DEPRECIATION AND ADDITIONAL DEPRECIATION IS DISPOSED OFF ACCORDINGLY. IT IS EVIDENT FROM THE FINDING OF LD. CIT(A) THAT F OR THE ADDITIONAL DEPRECIATION HAS BEEN ALLOWED AFTER RECEIVING REMAND REPORT. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A). THIS GROUND OF REVENUES APPEAL IS DISMISSED. 54. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. NOW WE TAKE UP REVENUES APPEAL IN ITA NO. 14/AHD/2 010 (A.Y.06-07) 55. THE REVENUES HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION U/S. 40(A)(IA ) OF RS.35,52,739/- ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENTS IN FO REIGN CURRENCY WITHOUT DEDUCTION OF TAX AT SOURCE. 1(II). THE LD. CIT(A) FAILED TO APPRECIATED THAT TH E CIRCULAR NO.786 DTD. 07.02.2000, IN WHICH HE HAS RELIED UPON HAS BEEN WI THDRAWN BY THE CBDT VIDE CIRCULAR NO. 7 OF 2009 (F NO.500/135/2007 -FTD-I), DTD. 22.10.2009. FURTHER, ON THE ISSUE OF DEDUCTION OF T DS ON PAYMENTS TO NON-RESIDENTS, RECENTLY THE HON. KARNATAKA HIGH COU RT IN ITS JUDGMENT IN THE CASE OF CIT (INTERNATIONAL TAXATION VS. SAMS UNG ELECTRONICS CO. LTD. REPORTED IN TIOL 2009-TIOL-629-HIGH COURT-KAR- IT, RELYING UPON THE DECISION OF THE APEX COURT IN THE CASE OF TRANS MISSION CORPORATION LIMITED VS. CIT 2002-TIOL-471,-SUPREME COURT-IT, H AS HELD THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 19 5 HAS NOTHING TO DO, WITH THE ACTUAL LIABILITY OF THE NON-RESIDENT TO TA X UNDER THE PROVISIONS OF THE ACT, INCLUDING THE QUANTUM THEREOF. THE PAYER I N SUCH ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 26 CIRCUMSTANCES SHOULD TAKE RECOURSE TO THE PROVISION S OF SECTION 195(2) OF THE ACT IF HE IS OF THE VIEW THAT ONLY A PART OF THE PAYMENT MADE BY HIM OR NO PART THEREOF WOULD BEAR THE CHARACTER OF INCOME IN THE HANDS OF THE NON-RESIDENT. 56. THE EFFECTIVE GROUND IN THIS APPEAL AGAINST THE DELETION OF ADDITION MADE UNDER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF CO MMISSION PAID TO FOREIGN AGENT WITHOUT DEDUCTION AT SOURCE. THE IDENTICAL G ROUND WAS RAISED IN ITA NO. 8/AHD/2010 FOLLOWING THERE IS CHANGE INTO THE FACTS AND CIRCUMSTANCES FOLLOWING OUR DECISION IN ITA NO. 8/AHD2010 THIS GR OUND OF THE REVENUE IS REJECTED. 57. IN THE RESULT, THIS APPEAL OF THE REVENUE IS DI SMISSED. NOW WE TAKE UP ASSESSEES CO NO.61/AHD/2010 (A.Y.00 -01) 58. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F C.O.:- 1.00 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) LD. CIT(A) IN SORT] ERRE D IN CONFIRMING THE FOLLOWING DISALLOWANCES: (I) DISALLOWANCE OF RS.6,35,014/- BEING 1/3 RD OUT OF MISCELLANEOUS EXPENDITURE; (II) DISALLOWANCE OF RS.3,06,580/- BEING 1/10 TH OUT OF STAFF WELFARE EXPENSES; (III) DISALLOWANCE OF RS.3,24,742/- BEING 1/10 TH OUT OF VEHICLE RUNNING EXPENSES AND RELATED DEPRECIATION THEREON (IV) DISALLOWANCE OF RS.2,31,450/- BEING 1/10 TH OUT OF TRAVELLING EXPENSES; (V) AD-HOC DISALLOWANCE OF RS.50,000/- OUT OF TELEP HONE EXPENSES; (VI) DISALLOWANCE OF RS.2,12,852/- BEING 1/10 TH OUT OF DISCOUNT ON SALES AND RS.1,16,803/- BEING 1/10 TH OUT OF COMMISSION ON SALES. 59. ALL THE GROUNDS OF CO HAVE BEEN DECIDED BY LD. CIT(A) TOGETHER THEREFORE THEY ARE BEING TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE DI SALLOWANCES IN RESPECT OF MISC. EXPENDITURE WERE RESTRICTED BY LD. CIT(A) TO 50,000/- VIDE ORDER DATED 18-05-2004 FOR A.Y. 1998-99 AND HONBLE ITAT AHMEDA BAD IN C.O. NO.181/AHD/2004 (ARISING OUT ITA NO.2252/AHD/2004) DELETED THE ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 27 DISALLOWANCES. ON THE CONTRARY, LD. CIT-DR RELIED U PON THE ORDER OF ASSESSING OFFICER. 60. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ORDER OF LD. CIT(A) IS CRYPTIC AND NO REASONING IS GIVEN AS TO WHY THE DISALLOWANCES ARE CONFIRMED. THE LD. CIT (A) HAS DECIDED IN PARA-5 AND 5.1 OF HIS ORDER, WHICH IS REPRODUCED HEREINBEL OW:- 5. GROUNDS NO3, 4 6 & 9 RELATE TO THE DISALLOWANCE OF VARIOUS EXPENSES. 5.1 I HAVE ALSO GONE THROUGH THE ORDER OF THE ASSES SING OFFICER. LOOKING TO THE NATURE OF DISALLOWANCES AND FOR WANT OF CHEC K, THE DISALLOWANCES THUS MADE ARE FAIR AND REASONABLE. THUS THESE GROUN DS ARE DISMISSED. THEREFORE ALL THE ISSUES ARE RESTORED BACK TO THE F ILE OF LD. CIT(A) TO DECIDE THESE ISSUES AFRESH AFTER PROVIDING REASONABLE OPPO RTUNITY OF BEING HEARD TO BOTH SIDES. 61. IN THE RESULT, ASSESSEES CO IS ALLOWED FOR STA TISTICAL PURPOSES. NOW COMING TO ASSESSEES CO NO.62/AHD/2010 (A.Y.01- 02) 62. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N ITS CO:- 1.00 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING EXPENS ES INCURRED ON PURCHASE OF GIFT ARTICLES AMOUNTING TO RS.1,12,715/ -. 1.01 THE DECISION OF LEARNED CIT(A) THAT THE APPELL ANT IS NOT ALE TO PROVE THE NECESSITY OF EXPENSES AND ACCORDINGLY IT CAN NOT BE ALLOWED AS INCURRED FOR THE PURPOSE OF BUSINESS IS NOT ACCEPTABLE, AS THE APPELLANT HAS INCURRED SUCH EXPENDITURE ON T HE OCCASION OF DIWALI TOWARDS PURCHASE OF GIFT VOUCHERS AND CARDS TO BE DISTRIBUTED TO VARIOUS PERSONS TO MAINTAIN BUSINESS RELATIONS. THE LEARNED CIT(A) WAS NOT ABLE TO PROVE PERSONAL ELEME NT INVOLVED IN INCURRING SUCH EXPENDITURE. 2.00 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING RS.51,000/- PAID TOWARDS CONTRIBUTION TO SHRI HINDU SMASHAN SAMITI. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 28 2.01 THE DECISION OF LEARNED CIT(A) THAT THE APPELL ANT IS NOT ABLE TO PROVE THE NECESSITY OF EXPENSES AND ACCORDINGLY IT CAN NOT BE ALLOWED AS INCURRED FOR THE PURPOSE OF BUSINESS IS NOT ACCE PTABLE, AS THE APPELLANT HAS INCURRED SUCH EXPENDITURE UNDERSTANDI NG ITS SOCIAL RESPONSIBILITY WHICH THE SOCIETY EXPECTS FROM EVERY RATIONAL BUSINESSMAN. THE LEARNED CIT(A) WAS NOT ABLE TO PRO VE PERSONAL ELEMENT INVOLVED IN INCURRING SUCH EXPENDITURE. 63. FIRST GROUND IS AGAINST THE PURCHASED OF GIFTS AMOUNTING TO RS.1,12,715/-. LD. AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT V. S.L.M. MANEKLAL INDUSTRIES LTD. (1997) 107 ITR 133 (GUJ) AND ASSESSEE HAS INCURRED THE EXPENSES FOR THE ENCOURAGE OF WORKING ABILITY T O ITS WORKERS. ON THE CONTRARY, LD. CIT-DR COULD NOT CONTROVERT THE SUBMI SSION OF LD. AR AS HE SIMPLY RELIED ON THE ORDER OF LD. CIT(A). 64. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE JUDGMENT CITED BY LD. AR I N THE CASE OF S.L.M. MANEKLAL INDUSTRIES LTD. (SUPRA) AND IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT WE ALLOW THE CLAIM OF ASS ESSEE. THIS GROUND OF ASSESSEES CO IS ALLOWED. 65. NEXT GROUND IS AGAINST PAYMENT TO SHRI HINDU SM ASHAN SAMITI AS CONTRIBUTION OF RS.51,000/-. LD. AR SUBMITTED THAT THE SAID CONTRIBUTION WAS PAID TO SAID SAMITI ON HUMANITARIAN GROUND AND HE H AS CITED A CASE LAW OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. NAVSARI COTTON & SILK MILLS LTD. (1982) 135 ITR 546 (GUJ). ON THE OTHER HAND, LD. C IT-DR SUPPORTED THE ORDER OF LD. CIT(A). 66. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT CASE LAW CITED BY LD. AR IS SI MILAR TO THE GROUND PRESSED BY ASSESSEE. HENCE, THIS GROUND OF ASSESSEES CO IS ALLOWED. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 29 67. IN THE RESULT, ASSESSEES CO IS ALLOWED. NOW WE TAKE UP ASSESSEES C.O. NO.63/AHD/2010 (A.Y. 05-06) 68. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN IT S CO:- 1.00 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) [LD. CIT(A) IN SHORT] ERR ED IN CONFIRMING THE DISALLOWANCE OF ADVANCE WRITTEN OFF AMOUNTING TO RS .10,00,000/- CLAIMED U/S. 37(1) OF THE ACT. 1.01 THE LD. CIT(A) FAILED TO APPRECIATE THE ALLOWA BILITY OF ADVANCE WRITTEN OFF U/S. 37(1) OF THE ACT ACCEPTING THE PRI NCIPLES OF COMMERCIAL PRACTICE AND BUSINESS EXIGENCIES. 2.00 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS.65,634/- ON ACCOUNT OF CAPITAL EXPENDITURE ON A WRONG PLEA THAT THE APPELLANT HAS NOT PRESSED FOR THE SAME DURING APPEA L PROCEEDINGS. 69. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE THE ADVANCE OF RS.10 LAKH AS CLAIMED U/S. 37(1) OF THE ACT. LD. AR SUBMITTED THAT THE ASSESSEE HAD GIVEN ADVANCES OF RS.10 LAKH TO M/S. S YLINE SALES & SERVICES PVT. LT. LONG BACK AND SINCE THE AMOUNT IS NOT RECE IVABLE, THE ASSESSEE HAS WRITTEN OFF THE SAME DURING THE RELEVANT PEVIOUS YE AR AND CLAIMED U/S. 37(1) OF THE ACT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD NEVER CLAIMED IT AS BAD DEBT U/S. 36(2) OF THE ACT. LD. DR SUPPORTED THE OR DER OF LD. CIT(A). 70. WE HAVE CONSIDERED RIVAL SUBMISSIONS. LD. CIT(A ) HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE COULD NOT ESTABLISH BUSIN ESS EXPEDIENCY FOR GIVING THE ADVANCE IN QUESTION. IN RESPECT OF THIS, NOTHIN G IS BROUGHT ON RECORD BEFORE US ALSO TO ESTABLISH BUSINESS EXPENDIENCY OR GIVING THE ADVANCE IN QUESTION. IN THE ABSENCE OF THIS, IT IS NOT ACCEPTABLE THAT T HIS IS A BUSINESS ADVANCE. HENCE, THE SAME IS NEITHER ALLOWABLE U/S. 37 OF THE ACT NOR U/S. 28/29 OF THE ACT AS BUSINESS LOSS. THIS GROUND IS OF ASSESSEES CO IS REJECTED. ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 30 71. NEXT GROUND IS THIS THAT LD. CIT(A) HAS WRONGLY STATED THAT THE ISSUE OF RS. 65,634/- WAS NOT PRESSED. 72. WE THEREFORE RESTORE THE MATTER BACK TO LD. CIT (A) TO DECIDE THIS ISSUE ON MERIT AFTER HEARING BOTH SIDES. 73. IN THE RESULT, ASSESSEES CO IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 73. IN COMBINED RESULT, REVENUES APPEALS IN ITA NO. 05/AHD/2010 TO 12/AHD/2010 AND ITA NO.14/AHD/2010 ARE REJECTED AND ITA NO.13/AHD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ASSESSE ES CO NO.61/AHD/2010 IS ALLOWED FOR STATISTICAL PURPOSES; CO NO.62/AHD/2 010 IS ALLOWED AND CO NO.63/AHD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP - 13/07/2012 '#$ % & ' ' ' ' ())*+, ())*+, ())*+, ())*+, '-+ '-+ '-+ '-+ / COPY OF ORDER FORWARDED TO:- 1. ',/* 01 / APPELLANT 2. (2301 / RESPONDENT 3. %)4 3 35 / CONCERNED CIT 4. 3 35- ',/* / CIT (A) 5. +8 9/3 ()))4, 3 ',/*/3 ')4, '#$ % / DR, ITAT, AHMEDABAD 6. 9 <= > ?* / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ @,/# 3 , / 3 ',/*/3 ')4, '#$ % & STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 6/06, ITA NO.5-14/AHD/2010 & CO 61-63/AHD/2010 A.YS. 99-00 TO 06-07 DCIT PNC CIR.GRD V. PANCHMAHAL STEEL LTD. PAGE 31 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO. 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 8/06 4) DATE OF CORRECTION 29/06, 2/07 5) DATE OF FURTHER CORRECTION 3/07, 04/07, 6/07, 10/07 6) DATE OF INITIAL SIGN BY MEMBERS 11/07 7) ORDER UPLOADED ON 13/07 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 13/07