PRITHVI PRAKASHAN P. LTD, MUMBAI V. DCIT CEN CIR 47, MUMBAI

ITA 6247/MUM/2009

• Counselvise Citation: 624719914 RSA 2009
• Duration Of Justice: 2 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ATIQ AHMAD
• Keywords: Business expenditure; Maximum Marginal Rate; Diversion of income; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1360, 6246/MUM./2009 (ASSESSMENT YEARS : 2005-06, 2006-07 ) M/S. PRITHVI PRAKASHAN (P) LTD. 413/414, BUSSA INDL. ESTATE CENTURY BAZAR LANE, PRABHADEVI MUMBAI 400 025 PAN AAACP5814A .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-47, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ITA NO. 2754, 6229/MUM./2009 (ASSESSMENT YEARS : 2005-06, 2006-07 ) DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-47, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S M/S. PRITHVI PRAKASHAN (P) LTD. 413/414, BUSSA INDL. ESTATE CENTURY BAZAR LANE, PRABHADEVI MUMBAI 400 025 PAN AAACP5814A .... RESPONDENT M/S. PRITHVI PRAKASHAN PVT. LTD. 2 ITA NO. 6247/MUM./2009 (ASSESSMENT YEAR : 2006-07 ) M/S. PRITHVI PRAKASHAN (P) LTD. 413/414, BUSSA INDL. ESTATE CENTURY BAZAR LANE, PRABHADEVI MUMBAI 400 025 PAN AAACP5814A .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-47, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : MR. S.C. TIWARI A/W MS. NATASHA MANGAT REVENUE BY : MR. ATIQ AHMAD DATE OF HEARING 23.02.2012 DATE OF ORDER 16.03.2012 O R D E R PER J. SUDHAKAR REDDY, A.M. THESE ARE CROSS APPEALS FOR ASSESSMENT YEARS 2005-0 6 AND 2006-07. APPEAL ITA NO.6247/MUM./2009, FOR ASSESSMENT YEAR 2 006-07, IS ON THE ISSUE OF FRINGE BENEFIT TAX. AS THE ISSUES ARISING IN ALL THESE APPEALS ARE COMMON, FOR THE SAKE OF CONVENIENCE, THEY ARE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. FACTS IN BRIEF :- 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED I N PUBLISHING OF DAILY NEWS PAPERS AND PERIODICALS UNDER THE BRAND N AME LOKMAT , LOKMAT TIMES , ETC. FOR ASSESSMENT YEAR 2005-06, IT FILED ITS RE TURN OF INCOME ON 30 TH OCTOBER 2005, DECLARING TOTAL INCOME OF ` 7,24,80,380. SIMILARLY, FOR ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS FILED A R ETURN OF INCOME OF ` 10,47,64,730. THE ASSESSING OFFICER PASSED AN ORDER U/S 143(3) OF THE M/S. PRITHVI PRAKASHAN PVT. LTD. 3 INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR ASSESSMENT YEAR 2004-05 AND ON 10 TH FEBRUARY 2008, FOR ASSESSMENT YEAR 2006-07. FOR BO TH THE ASSESSMENT YEARS, SOME OF THE ISSUES ARE COMMON. TH E COMMISSIONER (APPEALS), FOR BOTH THE ASSESSMENT YEARS, HAS GRANT ED RELIEF ON SOME OF THE ISSUES AND CONFIRMED CERTAIN OTHER ADDITIONS / DISA LLOWANCES MADE BY THE ASSESSING OFFICER. AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL. 3. WE FIRST TAKE UP ASSESSEES APPEAL FOR ASSESSMENT Y EAR 2005-06. THE GROUNDS RAISED ARE AS FOLLOWS:- 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CI T(A)] HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.22,97,211/- HEM AMOUNT PAID TO MIS. MEDIA WORLD ENTERPRISE FOR PURCHASE OF AR SHIKA CALENDARS ON THE GROUND THAT PAYMENT MADE BY THE ASSESSEE IS EXC ESSIVE AND UNREASONABLE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE MADE OUGHT TO BE DELETED. 2. LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWA NCE OF A SUM OF RS. 3,16,844/- OUT OF TOTAL SUM 217437/- PAID TO MI S DARDA PRINTOCRAFTS PVT. LTD TOWARDS CLEANING AND MAINTENA NCE CHARGES OF BUILDING, ON THE GROUND THAT PAYMENT MADE BY THE AS SESSEE IS EXCESSIVE AND UNREASONABLE. ON THE FACTS AND CIRCUM STANCES OF THE CASE THE DISALLOWANCE MADE OUGHT TO BE DELETED . 4. THE FACTS RELATING TO THE FIRST GROUND I.E., PURCHA SE OF KALDARSHIKA CALENDARS, ARE GIVEN IN PARA-4.2 OF THE COMMISSIONE R (APPEALS)S ORDER WHICH IS EXTRACTED FOR READY REFERENCE:- 4.2. THE AO NOTICED THAT M/S. MWE WAS A PARTNERSHIP FIRM HAVING THE FAMILY MEMBERS AS PARTNERS AND WAS ENGAGED IN TRADI NG AND PUBLICATION BUSINESS. THE AO NOTICED THAT MWE WAS N OT HAVING ANY PRINTING FACILITY OF ITS OWN AND THEREFORE, IT COUL D NOT BE SAID THAT THE FIRM WAS CAPABLE OF HANDLING THE JOB OF PRINTING TH E CALENDAR. THE AO FURTHER NOTICED THAT M/S. LOKMAT NEWSPAPER PVT. LTD COULD PRINT THE CALENDAR AND THEREFORE, THERE WAS NO NEED BY THE AP PELLANT COMPANY TO ASSIGN THE WORK OF PRINTING WHEN IT WAS HAVING P ROPER FACILITY OF PRINTING THE CALENDAR. IT WAS FURTHER SEEN BY THE A O THAT MWE HAD SOLD CALENDAR TO THE APPELLANT COMPANY @ RS.10/- EACH WH EREAS, THE MANUFACTURING COST PER PIECE CAME TO RS.5/- EACH ON LY. ACCORDINGLY, THE AC CONCLUDED THAT THE APPELLANT COMPANY COULD H AVE DIRECTLY GIVEN PRINTING CONTRACT TO M/S. LOKMAT NEWSPAPER P LTD. I NSTEAD OF GIVING IT TO MIS. MWE AND THEN IT WOULD HAVE SAVED RS.28,65,4 36/-. THE AC HELD THAT THE APPELLANT COMPANY HAD USED THIS TRANS ACTION AS A COLOURABLE DEVICE TO SUPPRESS ITS INCOME. ACCORDING LY, THE AC DISALLOWED A SUM OF RS.28,65,470/- U/S.40 A(2)(A) O F I T ACT. M/S. PRITHVI PRAKASHAN PVT. LTD. 4 5. IN APPEAL, THE ASSESSEE CONTENDED THAT THE PURCHASE S HAVE BEEN MADE REGULARLY FROM ASSESSMENT YEAR 2002-03 AND THAT THE CALENDARS CARRY THE TRADE MARK OF THE ASSESSEE LOKMAT AND HAVE TREMENDOUS ADVERTISEMENT AND RECALL VALUE TO THE ASSESSEE AND THE ASSESSING OFFICER MADE A DISALLOWANCE WITHOUT FACTORING THE ADVERTISEMENT VA LUE AND BY ONLY TAKING THE MANUFACTURING COST. IT WAS FURTHER CONTENDED TH AT THE CALENDARS HAVE INTRINSIC VALUE, WHICH WAS DEVELOPED OVER A NUMBER OF YEARS AND THAT THE MEDIA WORLD ENTERPRISES WAS SOLD TO THIRD PARTIES A T AN AVERAGE PRICE OF ` 7 TO ` 8 PER CALENDAR. CERTAIN OTHER CONTENTIONS WERE ALS O MADE. THE COMMISSIONER (APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT PRIMA-FACIE, THE PAYMENTS MADE TO MWE WERE EXC ESSIVE AND UNREASONABLE. HE HELD THAT THE OBSERVATIONS OF THE ASSESSING OFFICER THAT MWE WAS NOT HAVING A PRINTING FACILITIES OF ITS OWN , IS CORRECT. ON THE GROUND THAT THE COST OF THE CALENDAR WOULD BE MORE THAN ` 5 I.E., ` 6, AND AS IN THE COMMISSIONERS OPINION, THE ASSESSEE FAILED TO GIVE ANY SATISFACTORY EXPLANATION AS TO WHY THE PAYMENT WAS MADE AT A MUC H HIGHER PRICE @ ` 10 PER CALENDAR AS AGAINST ` 7 TO ` 8 PER CALENDAR TO THE OUTSIDERS, HE RESTRICTED THE DISALLOWANCE TO ` 4 PER CALENDAR. AGGRIEVED, THE ASSESSEE IS IN FURT HER APPEAL BEFORE THE TRIBUNAL. 6. BEFORE US, THE LEARNED COUNSEL, MR. S.C. TIWARI, RE PRESENTING ON BEHALF OF THE ASSESSEE, REITERATED THE SUBMISSIONS MADE BE FORE THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AUTHORITY. H IS CONTENTIONS ARE THAT THERE IS A DIFFERENCE BETWEEN A PUBLISHER AND A MERE PRINTER AND THAT THE MEDIA WORLD ENTERPRISES WERE THE PUBLISHERS AND NOT MERE PRINTER. THEY HAD PUBLISHING MATERIAL IN THE FORM OF A HINDU CALENDAR , WHICH REQUIRE STUDY, KNOWLEDGE, ACCURACY AND ALL APPLICATION AND THE CAL ENDARS WERE PUBLISHED ALONG WITH THE LOGO OF THE ASSESSEE. HE, THUS, SUBM ITTED THAT IT IS NOT A CASE OF JOB WORK GIVEN BY THE ASSESSEE TO MEDIA WORLD EN TERPRISES, BUT IT WAS A CASE WHERE MEDIA WORLD ENTERPRISES HAS PUBLISHED A HINDU CALENDAR AND THE ASSESSEE PURCHASED JUST 1/3 RD QUANTITY OF THOSE CALENDARS AT A PARTICULAR RATE. HE REFERRED TO PAGES-4 AND 5 OF THE ASSESSMEN T ORDER. HE POINTED OUT THAT OUT OF 16,85,640 CALENDARS SOLD BY MEDIA WORLD ENTERPRISES, ONLY 5,68,295 PIECES WERE PURCHASED BY THE ASSESSEE. HE EXPLAINED THAT CERTAIN ADDITIONAL AMOUNT WAS CHARGED TO THE ASSESSEE FOR T HE REASON THAT THE M/S. PRITHVI PRAKASHAN PVT. LTD. 5 ASSESSEE COMPANYS LOGO AND NAME WAS PRINTED IN ALL 16,85,640 PIECES OF CALENDARS AND THAT THIS HAS GIVEN GREAT MILEAGE AND ADVERTISEMENT VALUE TO THE ASSESSEE. HE ALSO DISPUTED THE FINDINGS OF COMM ISSIONER (APPEALS) THAT THE COST OF PUBLISHING KALDARSHIKA IS AROUND ` 6 PER CALENDAR AND POINTED OUT THAT THE VALUE OF THE CONTENTS IN THE CALENDAR WHICH IS A COST WAS NOT TAKEN INTO ACCOUNT. HE EXPLAINED THE INTRICATE DETA ILS OF A HINDU CALENDAR TO EMPHASIS THE POINT THAT THIS IS A SPECIALIST JOB AN D THAT A PUBLISHER NEED NOT OWN A PRINTING PRESS. 7. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. ATIQ AHMAD , REPRESENTING THE REVENUE, ON THE OTHER HAND, DISPUTED THE SAME A ND SUBMITTED THAT WHEN CALENDARS ARE SOLD TO A THIRD PARTY AT A PARTICULAR RATE I.E., ` 7 AND ` 8 PER CALENDAR, THERE IS NO REASON TO SELL THE SAME CALEN DAR TO THE ASSESSEE COMPANY @ ` 10 PER CALENDAR. ON A QUERY FROM THE BENCH, THE LE ARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT BOTH MED IA WORLD ENTERPRISES AS WELL AS THE ASSESSEE COMPANY ARE PAYING TAX AT A MAXIMUM MARGINAL RATE. HENCE, THERE IS NO LOSS TO THE REVENUE IN TER MS OF THAT. 8. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE CONS IDERED VIEW THAT THE DISALLOWANCE IN QUESTION IS NOT CORRECT FOR THE REA SON THAT THE ASSESSEES EXPLANATION IS SATISFACTORY. THE ASSESSEES NAME AN D LOGO IS PUBLISHED IN ALL THE 16,85,640 PIECES OF CALENDARS AND NO SEPARATE C HARGES ARE COLLECTED BY MEDIA WORLD ENTERPRISES FOR SUCH ADVERTISEMENT. OUT OF 16,85,640 PIECES OF CALENDARS, ONLY 5,68,295 PIECES OF CALENDARS ARE PU RCHASES BY THE ASSESSEE. THE BALANCE CALENDARS ARE SOLD TO OUTSIDERS WITH TH E LOGO AND NAME OF THE ASSESSEE. MEDIA WORLD ENTERPRISES, IS A PUBLISHER AND IT IS NOT A MERE PRINTER AS A HINDU CALENDAR, AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL REQUIRES MANY INPUTS, MATERIAL AND SPECIALISED KNOW LEDGE WHICH CAN BE DONE ONLY BY CERTAIN PERSONS HAVING THE EXPERTISE. THE C ALENDAR GIVES MUCH INFORMATION FOR USE OF HINDU PUBLIC. IT IS NOT THE CASE OF THE REVENUE THAT ALL THESE INFORMATION AND MATERIAL OF THE CALENDAR WERE FURNISHED BY THE ASSESSEE. PAYING ` 2 IN EXCESS PER CALENDAR, FOR GETTING ADVERTISEMEN T IN ABOUT MORE THAN 10,00,000 PIECES IS JUSTIFIABLE. IN ANY EVENT, WHEN BOTH, MEDIA WORLD ENTERPRISES AND THE ASSESSEE COMPANY AR E PAYING TAX AT THE VERY SAME MARGINAL RATE, THE QUESTION OF THE ASSESS EES DIVERTING THE PROFITS M/S. PRITHVI PRAKASHAN PVT. LTD. 6 DOES NOT ARISE. THERE IS NO LOSS TO REVENUE. HENCE, FOR ALL THESE REASONS, GROUND NO.1, RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06, IS ALLOWED. 9. COMING TO GROUND NO.2, THE FACTS ARE THAT THE ASSES SEE HAS PAID HIRING AND MAINTENANCE CHARGES FOR LEASED PROPERTY SITUATE D AT AURANGABAD TO DARDA PRINTCRAFTS PVT. LTD., WHICH IS A SISTER CONC ERN OF THE ASSESSEE. ALLEGATION IS THAT THE PROFITS ARE DIVERTED TO THE SISTER CONCERN, AS DARDA PRINTCRAFTS PVT. LTD. (DPRL) HAD OUTSOURCED THE WOR K TO SARITA AGENCY AND IN THE BARGAIN MADE A PROFIT OF ` 3,16,844. THIS AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEES CONTENTION I S THAT THE DECISION OF OUTSOURCING SERVICES LIKE CLEARING SECURITY, ETC. A RE BASED ON COMMERCIAL CONSIDERATION AND THAT THE AMOUNT PAID IS REASONABL E. ITS CONTENTION IS THAT DPPL WAS THE LANDLORD OF LOKMAT PREMISES WHICH WAS TAKEN ON LEASE BY THE ASSESSEE AND IT HAD, PRIOR TO TAKING ON LEASE, ENGAGED SARITA AGENCY FOR THESE SERVICES AND TO AVOID COMPETITION, ENTERED IN TO AN AGREEMENT WITH DPPL. THE ASSESSEES CASE IS THAT THOUGH THE WORK I S ULTIMATELY DONE BY SARITA AGENCY, THE SUPERVISION AND ACCOUNTABILITY A RE REQUIRED AND THIS WAS GIVEN BY DPPL. IT WAS ARGUED THAT IT WAS A DPPLS R ESPONSIBILITY TO KEEP CONTROL ON SUCH WORK AND ENSURE PROPER PERFORMANCE BY SARITA AGENCY, OR ANY OTHER PARTY. IT WAS ALSO POINTED OUT THAT IT IS NOT THE CASE OF REVENUE THAT NO SERVICES WERE RENDERED BY DPPL AND THAT SIM ILAR PAYMENTS WERE ALLOWED IN THE EARLIER AND SUBSEQUENT YEARS. LASTLY , IT WAS SUBMITTED THAT DPPL ALSO PAYS TAX AT THE SAME RATE AS IN THE CASE OF THE ASSESSEE. 10. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THIS IS A CASE OF CLEAR DIVERSION OF PROFIT OF THE COMPANY TO DPPL AN D THAT THIS IS A COLOURABLE DEVISE. RELIANCE WAS PLACED ON THE ORDERS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS). 11. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE E XPLANATION GIVEN BY THE ASSESSEE IS REASONABLE. MOREOVER, THERE CANNOT BE ANY ALLEGATION THAT THIS IS A CASE OF TAX AVOIDANCE FOR THE REASON THAT BOTH THE ASSESSEE AND DPPL ARE TAXED AT THE SAME RATE. DPPL WAS THE LANDL ORD AND IT HAD ALREADY GIVEN THE WORK TO SARITA AGENCY. THE ASSESSEE, FOR THE REASONS GIVEN I.E., FIXING RESPONSIBILITY, SUPERVISION, ACCOUNTABILITY PREFERRED TO GIVE A CONTRACT M/S. PRITHVI PRAKASHAN PVT. LTD. 7 TO THE LANDLORD INSTEAD OF DIVERTING TO SARITA AGEN CY. AT ANY RATE, THE TAX RATE PAID BY BOTH THE CONCERNS IS THE SAME. BOTH AR E TAXED AT THE MAXIMUM MARGINAL RATE. HENCE, THE QUESTION OF MAKING AN ADD ITION ON THE GROUND OF DIVERSION OF PROFITS DOES NOT ARISE. 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 13. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.2754/MUM. /2009, FOR ASSESSMENT YEAR 2005-06. GROUNDS RAISED BY THE REVE NUE, READ AS FOLLOWS:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS .157.82 LACS MADE U!S.40A(2)(A) OF THE L.T. ACT, ON ACCOUNT OF RECOVE RY COMMISSION PAID BY THE ASSESSEE TO M/S. MEDIA EXPERTS PVT. LTD. (AS SOCIATE CONCERN). (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.157 .82 LACS MADE U!S.40A(2)(A) OF THE L.T. ACT, ON ACCOUNT OF RECOVE RY COMMISSION, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THE GENUINENESS OF THE TRANSACT ION. 14. THE FACTS LEADING TO THE ABOVE GROUNDS ARE BROUGHT OUT AT PARA-3.2 OF THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPE ALS), WHICH ARE EXTRACTED BELOW FOR READY REFERENCE:- 3.2 THE APPELLANT IS ENGAGED IN PUBLISHING OF DAILY NEWSPAPERS AND PERIODICALS UNDER THE BRAND NAME LOKMAT, LOKMAT TIM ES, ETC. THE A.O. NOTICED THAT THE APPELLANT HAD PAID ` 157.82 LAKHS TO M/S. MEDIA EXPERTS PVT. LTD. A GROUP CONCERN AS RECOVERY COMMI SSION DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT EXPLAINED B EFORE THE A.O. THAT THE TASK OF RECOVERY OF ADVERTISING COMMISSION WAS ASSIGNED TO M/S. MEDIA EXPERTS PRIVATE LIMITED, BEING AN ENTITY CAPA BLE OF HANDLING THIS JOB. THE APPELLANT SUBMITTED FURTHER DETAILS OF REC OVERY COMMISSION PAID AND RELATED INFORMATION. THE AO EXAMINED THE D ETAILS AND FOUND SEVERAL INCONSISTENCIES E.G: (A) THE NATURE OF WORK WAS NOT CLEARLY SPELT OUT IN THE AGREEMENT BETWEEN THE APPELLANT COMPANY AND M/S. MEDIA EXPERT S PVT. LTD. (B) AS PER CLAUSE 17, THE APPELLANT COMPANY WAS TO PROVIDE INFRASTRUCTURE FACILITIES TO M/S. MEDIA EXPERTS PVT . LTD.; MEPL HAD NO FIXED ASSETS AND HAD NOT INCURRED ANY ADMINISTRATIV E COST. (C) MEPL HAD A LIMITED AUTHORITY IN RESPECT OF APPO INTMENT OF STAFF AS WELL AS SALARY PAID TO THE STAFF AND THUS THE FUNCT IONING OF MEPL WAS NOT FULLY INDEPENDENT; THE MANAGEMENT STRUCTURE AS WELL AS THE SALARY TO THE STAFF WAS DIRECTLY LINKED WITH THE ORGANIZAT IONAL SET UP OF THE ASSESSEE COMPANY; M/S. PRITHVI PRAKASHAN PVT. LTD. 8 (D) THE JOB OF ENTRY OF BILLS, RECOVERY OF BILLS WA S NOT SPECIALISED JOB. MEPL HAD NO VAST EXPERIENCE NOR WAS CARRYING OUT AN Y SUCH TYPE OF JOB FOR OTHER PUBLISHING COMPANIES. THEREFORE, PRIM A FACIE, IT APPEARED THAT M/S. MEDIA EXPERT PVT. LTD WAS SIMPLY CREATED FOR THE PURPOSES OF MAKING ARRANGEMENT BETWEEN THE APPELLANT COMPANY AN D MEPL. (E) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E APPELLANT COULD NOT SUBMIT ANY EVIDENCE INDICATING THAT M/S. MEPL H AD ACTUALLY RENDERED THE SERVICE OF RECOVERY. IT APPEARED THAT BASICALLY IT WAS A PAPER TRANSACTION AND PASSING OF APPELLANTS PROFIT S TO THE ASSOCIATE CONCERN WITH A VIEW TO LOWER ITS PROFITS. THE AO FURTHER HELD THAT THE RECOVERY COMMISSION WA S ALSO DISALLOWABLE U/S. 40A(2)(A) OF I T ACT. 15. ON APPEAL, THE FIRST APPELLATE AUTHORITY UPHELD THE CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE UNDER SE CTION 40A(2)(A) OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 16. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER AND SUBMITTED THAT THE NATURE OF WORK IS NOT CLEARLY SPELT OUT IN THE AGREEMENT WHICH IS A SELF SERVING DOCUMENT AND THAT THE ENTIRE INFRASTRUCTURE IS PROVIDED BY THE ASSESS EE AND MEPL AS NO FIXED ASSETS AND THAT IT HAD NOT INCURRED ANY ADMINISTRAT IVE COST AND THAT MEPL IS NOT WORKING AS AN INDEPENDENT ENTITY AND THAT MEPL HAS NO EXPERIENCE AND THAT MEPL HAS NOT PROVIDED SIMILAR SERVICES TO THIR D PARTY AND THAT THERE IS NO EVIDENCE OF SERVICES RENDERED AND IT IS JUST AN ARRANGEMENT TO AVOID TAX. 17. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT UND ER THE AGREEMENT, MEPL IS RESPONSIBLE FOR ADVERTISING, BILLING, ACCOU NTING, RECOVERY AND OTHER SERVICES AND MORE SPECIFICALLY DEFINED IN AGREEMENT AND THAT AS PER CLAUSE (VII) OF THE AGREEMENT, AS THE INFRASTRUCTURE IS PR OVIDED BY THE ASSESSEE AND DUE TO THIS FACTOR, THE RATE OF COMMISSION WAS FIXE D AT A PARTICULAR LOWER RATE. HE FURTHER SUBMITTED THAT MEPL IS WORKING AS AN INDEPENDENT ENTITY AND THE ASSESSEE COMPANYS RIGHT IS ONLY A LIMITED RIGHT I.E., ONLY TO REJECT APPOINTMENT OF ANY STAFF BY MEPL, IN CASE IT FEELS THAT THE PARTICULAR EMPLOYMENT WOULD BE AGAINST THE INTEREST OF THE ASS ESSEE. HE FURTHER SUBMITTED THAT CLAUSE (X) OF THE AGREEMENT PREVENTS MEPL FROM HAVING CONTRACTS WITH ANY OTHER NEWSPAPER AND, HENCE, IT I S ONLY WORKING WITH THE ASSESSEE. IT WAS VEHEMENTLY CONTENDED THAT THE NATU RE OF SERVICES PROVIDED BY MEPL WERE EXPLAINED AND THE AUDITED ACCOUNTS, RE TURN OF INCOME AND M/S. PRITHVI PRAKASHAN PVT. LTD. 9 OTHER DOCUMENTATION WAS PROVIDED BEFORE THE ASSESSI NG OFFICER. ON THE ALLEGATION OF TAX AVOIDANCE, IT WAS SUBMITTED THAT INCOME OF THE ASSESSEE AND THAT OF MEPL IS CHARGED TO TAX, AT THE SAME RAT E AND, THEREFORE, NO TAX ADVANTAGE WILL ACCRUE TO THE ASSESSEE BY DIVERSION OF INCOME. ON A QUERY FROM THE BENCH, THE LEARNED COUNSEL REFERRED TO PAG E-46 OF THE ASSESSEES PAPER BOOK, WHEREIN THE RATE OF TAXATION OF EACH OF THESE ENTERPRISES WAS GIVEN. 18. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE OPIN ION THAT THE ALLEGATION THAT THE TRANSACTIONS IS A COLOURABLE DE VISE, IS UNFOUNDED. FROM THE FIGURES GIVEN, IT CAN BE SEEN THAT THE RATE OF TAX IS SAME FOR BOTH MEPL AND THE ASSESSEE COMPANY. THUS, THERE IS NO ADVANTA GE THAT THE ASSESSEE WOULD DERIVE BY SHIFTING THE PROFITS FROM THE ASSES SEE TO MEPL. EVEN OTHERWISE, IN OUR VIEW, THE ASSESSING OFFICER HAS T OTALLY MISUNDERSTOOD THE SCOPE AND AMBIT OF THE AGREEMENT BETWEEN THE ASSESS EE AND MEPL. THE NATURE OF SERVICES IS ALSO NOT PROPERLY UNDERSTOOD. THE ASSESSEE AND MEPL HAVE THIS ARRANGEMENT OF RENDERING SERVICES FROM 1 ST JANUARY 1996, I.E., FOR MORE THAN TEN YEARS AND IN ALL THE PREVIOUS YEAR, T HE REVENUE HAS ACCEPTED THIS ARRANGEMENT AS GENUINE. WHILE SO IN THIS YEAR, A TOTALLY DIFFERENT VIEW IS TAKEN THOUGH THERE IS NO CHANGE IN THE FACTS. UNDER THESE CIRCUMSTANCES, WE UPHOLD THE FOLLOWING FINDINGS OF THE COMMISSIONER ( APPEALS) AT PARA-3.4 / PAGES-4 AND 5 OF HIS ORDER, WHICH IS EXTRACTED BELO W FOR READY REFERENCE:- 3. I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMI SSIONS. IT IS APPARENT THAT THE APPELLANT COMPANY HAD ENTERED INT O AN AGREEMENT WITH THE ASSOCIATE CONCERN, M/S. MEDIA EXPERT PVT. LTD. (MEPL) AND THE RECOVERY COMMISSION OF RS.157.82 LACS @ 9% OF AMOUN T COLLECTED ON ACCOUNT OF ADVERTISERENT CHARGES WAS PAID IN PURSUA NCE TO THE AGREEMENT. IT IS ALSO SEEN THAT THE COMMISSION STOO D PAID TO MEPL SINCE 1.1.1996 AND COMMISSION INCOME RECEIVED BY ME PL STOOD RETURNED AND ASSESSED BY THE DEPARTMENT IN THE HAND S OF MEPL AND FOR SOME ASSESSMENT YEARS, ASSESSMENT OF MEPL WAS F RAMED U/S.143(3). FROM PERUSAL OF THE COPY OF BALANCE SHE ET AND PROFIT AND LOSS ACCOUNT OF THE MEPL, IT IS APPARENT THAT EXPEN SES UNDER VARIOUS HEADS SUCH AS SALARY, TRAVELLING, CONVEYANCE, RENT, TELEPHONE, OFFICE, ETC STOOD INCURRED BY MEPL. CONSIDERING ALL THE REL EVANT FACTS, IT CANNOT BE DISPUTED THAT MEPL HAD ACTUALLY RENDERED SERVICES RELATING TO RECOVERY, MARKETING, BILLING, COLLECTION OF ADVE RTISEMENT. THERE WAS NO COGENT BASIS FOR THE ADS REMARK THAT MEPL HAD N OT RENDERED SERVICES TO THE APPELLANT COMPANY. (THE REASONS AS GIVEN BY THE AD FOR THE DISALLOWANCES THAT THE NATURE OF WORK WAS N OT CLEARLY SPELT OUT OR INFRASTRUCTURE WAS PROVIDED BY THE APPELLANT OR MEPL WAS LACKING INDEPENDENCE OR WAS NOT EXPERIENCED IN THAT LINE WE RE OF TRIVIAL NATURE M/S. PRITHVI PRAKASHAN PVT. LTD. 10 AND ON THE BASIS OF SUCH INSIGNIFICANT REASONS, EVE N IF THEY HAD SOME SUBSTANCE, IT CANNOT BE HELD THAT THE CLAIM OF PAYM ENT OF COMMISSION TO THE ASSOCIATED CONCERN WAS NOT GENUINE AND HENCE DISALLOWABLE. THE FACT THAT ASSOCIATE CONCERN NAMELY, MEPL WAS CR EATED WITH A VIEW TO DEAL EXCLUSIVELY WITH THE RECOVERY WORK OF THE A PPELLANT COMPANY PREPARING TO ADVERTISEMENT COULD NOT BE A VALID GRO UND FOR DISALLOWANCE SO LONG AS THE APPELLANT COMPANY WAS A BLE TO PROVE THAT SERVICES WERE ACTUALLY RENDERED BY MEPL AND PAYMENT S MADE WERE NOT UNREASONABLE. THE ARS RELIANCE ON THE JUDGMENT OF ITAT AHMEDABAD IN THE CASE OF POONJABHAI VANMALI & SONS 33 TTJ (AH D) 91 LEND SUPPORT TO THE APPELLANTS CLAIM. THE APEX COURT HE LD IN J K WOOLLEN MANUFACTURERS VS CIT (1969) 72 ITR 612 (SC) THAT WH ILE APPLYING THE TEST OF COMMERCIAL EXPEDIENCY, FOR DETERMINING WHET HER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF ASSESEES BUSINESS, REASONABLENESS OF THE EXPENDITU RE HAS TO BE JUDGED FROM THE POINT OF VIEW OF A BUSINESSMAN AND NOT OF I T DEPARTMENT. IT IS OF COURSE OPEN TO THE DEPARTMENT TO COME TO THE CONCLUSION EITHER THAT THE ALLEGED PAYMENT WAS NOT REAL OR THAT IT WAS NOT INCURRED BY THE ASSESSEE IN THE CHARACTER OF A TRADER OR IT IS NOT LAID OUT WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF T HE BUSINESS OF THE ASSESSEE AND TO DISALLOW IT. IN THE PRESENT CASE, I T CANNOT BE DISPUTED THAT THE APPELLANT COMPANY HAD MADE THE PAYMENT TO MEPL IN PURSUANCE TO THE AGREEMENT, THE SERVICE STOOD RENDERED BY MEPL FOR PURPOSE OF BUSINESS, THERE WAS NO EVIDENCE TO PROVE THAT THE PAYMENT MADE BY THE APPELLANT COMPAN Y TO MEPL WAS MERELY A PAPER TRANSACTION, THE FACT THAT THE PAYME NT OF COMMISSION TO MEPL UNDER IDENTICAL FACTS STOOD ALLOWED IN EARL IER ASSESSMENT YEARS ALSO HAD CONSIDERABLE WEIGHT IN FAVOUR OF THE APPEL LANT. THE A.O. HAD FAILED TO MAKE OUT A CASE THAT THE PAYMENT MADE BY THE APPELLANT COMPANY WAS EITHER EXCESSIVE OR UNREASONABLE. THERE FORE, THIS COULD NOT BE A CASE FIT FOR DISALLOWANCE U/S. 40A(2)(A) O F I T ACT. ACCORDINGLY, IN VIEW OF ABOVE DISCUSSION AND CASE L AW, I HOLD THAT THE AO WAS NOT JUSTIFIED TO DISALLOW THE PAYMENT OF REC OVERY COMMISSION AT RS.157.82 LCS. THUS THE DISALLOWANCE MADE BY TH E AO IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 19. IN VIEW OF THE ABOVE DISCUSSIONS, THE GROUNDS RAISE D BY THE REVENUE ARE DISMISSED. 20. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 21. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.6246/MUM ./2009, FOR ASSESSMENT YEAR 2006-07. 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CI T(A)1 HAS ERRED IN CONFIRMING DISALLOWANCE OF RS. 15,13,325/- OUT OF RS. 50,47,750/- PAID TO M/S MEDIA WORLD ENTERPRISES FOR PURCHASE OF KALDARSHIKA CALENDARS ON THE GROUND THAT PAYMENT MADE BY THE ASSESSEE IS EXCESSIVE AND UNREASONABLE. ON THE BASI S OF FACTS AND CIRCUMSTANCES OF THE CASE, THE SAID DISALLOWANCE MA DE OUGHT TO BE DELETED. M/S. PRITHVI PRAKASHAN PVT. LTD. 11 22. THE AFORESAID GROUND IS SIMILAR TO GROUND NO.1 FOR ASSESSMENT YEAR 2005-06 AND IT RELATES TO DISALLOWANCE UNDER SECTIO N 40A(2)(A) OF PAYMENTS MADE TO MEDIA WORLD ENTERPRISES FOR PURCHASE OF KALDARSHIKA CALENDARS. CONSISTENT WITH THE VIEW TAKEN BY US IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06, AS THE FACTS ARE IDENTICAL, WE ALLOW THIS GROUND RAISED BY THE ASSESSEE. 23. GROUND NO.2, READS AS FOLLOWS:- 2. LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOW ANCE OF A SUM OF RS.50,49,876/- BEING EDUCATION EXPENSES OF MR. RISH I DARDA, EXECUTIVE DIRECTOR OF THE COMPANY, IN A FOREIGN UNIVERSITY ON THE GROUND THAT THE EXPENSES INCURRED WERE PURELY PERSONAL IN NATURE, H ARDLY INCIDENTAL TO THE APPELLANTS BUSINESS. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE, THE SAID EXPENDITURE, BEING WHOLLY AND EX CLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, THE DISALLOWANCE MADE OUGHT TO BE DELETED. 24. THE FACTS, RELATING TO THE AFORESAID GROUND, ARE BR OUGHT OUT AT PARA-C / PAGES-6 & 7 OF THE ASSESSMENT ORDER, WHICH ARE EXTR ACTED BELOW:- [C] EXPENSES FOR STUDY OF EXECUTIVE DIRECTOR DURING THE YEAR THE ASSESSEE COMPANY HAS INCURRED E XPENDITURE OF RS.50,49,876/- ON U.S STUDY EXPENSES INCURRED FOR S HRI. RISHI R. DARDA. THE ASSESSEE EXPLAINED THAT - THE ASSESSEE COMPANY HAS APPOINTED MR. RISHI R. DAR DA AS EXECUTIVE DIRECTOR IN THE YEAR 1997. MR. RISHI DARDA IS A GRA DUATE IN COMMERCE AND HAVING VAST EXPERIENCE IN THE FIELD OF NEWS PAP ER BUSINESS. HE IS EMPLOYED FULL TIME BY THE COMPANY SINCE 1997. THE ASSESSEE BEING IN THE FIELD OF NEWSPAPER AND IN ORDER TO SURVIVE THE COMPETITIVE FIELD, IT WAS ESSENTIAL THAT THE EX ECUTIVE DIRECTOR OF THE COMPANY BE WELL VERSED WITH THE MODERN MANAGEMENT T ECHNIQUES OF THE COMPANY. DURING THE YEAR UNDER CONSIDERATION, THE MANAGEMENT OF THE COMPANY HAD THEREFORE DECIDED TO SEND MR. RISHI DARDA ABROA D FOR HIGHER EDUCATION. ACCORDINGLY, HE HAD JOINED CASE WESTERN RESERVE UNIVERSITY, CLEVELAND IN BUSINESS ADMINISTRATION & MANAGEMENT. THE DURATION OF THE COURSE WAS FROM AUGUST 2005 TO MAY 2007. THE EXPENSES INCURRED ABROAD BY MR. RISHI DARDA WERE BO RNE BY THE COMPANY AND CHARGED TO ITS PROFIT & LOSS A/C AS REV ENUE EXPENDITURE. THE EXPENSES ARE WHOLLY AND EXCLUSIVELY INCURRED FO R THE BENEFIT OF THE ASSESSEES BUSINESS. M/S. PRITHVI PRAKASHAN PVT. LTD. 12 RISHI R. DARDA IS HE JOINED AS DIRECTOR IN FAMILY O WNED COMPANY, IN WHICH HIS FATHER MR. RAJENDRA DARDA WAS MAIN DIRECT OR. THE EXPENDITURE INCURRED ON DIRECTORS U.S STUDY EXPENS ES CANNOT BE SAID TO BE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES SINCE IT IS PURELY IN THE NATURE OF PERSONAL EXPENDITURE. IN THE CASE OF M. SUBRAMANIAN BROS V/S CIT 250 ITR 769 (MADRAS), THE HONBLE COURT HAS HELD THAT WHERE IN A PARTNERS HIP FIRM COMPRISING FATHER AND HIS THREE CHILDREN AS PARTNERS, THE FATH ER SENT ONE OF THE SAID CHILDREN ABROAD FOR HIGHER STUDIES AND THE AGR EEMENT BETWEEN THE FIRM AND ITS PARTNERS PROVIDED THAT THE SAID SON SH OULD, ON HIS RETURN, JOIN THE FIRM AND SERVE IT FOR FIVE YEARS, THE EXPE NSES INCOME BY THE FIRM ON THE EDUCATION OF THE SON ABROAD IS NOT ALLO WABLE AS BUSINESS EXPENDITURE BEING PERSONAL IN NATURE. SAME VIEW WAS TAKEN EARLIER BY HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN HOSIERY INDUSTRIES (1994) 209 ITR 383 BORN) AND BY MADRAS HIGH COURT I N THE CASE OF CIT V/S R.K.K.R STEELS PVT. LTD 258 ITR 306. CONSIDERING THE FACTS AND CIRCUMSTANCES MENTIONED A BOVE, THE EXPENDITURE OF RS.50,49,876/- INCURRED ON U.S STUDY OF THE RISHI R. DARDA, MANAGING DIRECTOR OF THE COMPANY IS DISALLOW ED AS BEING THE NATURE OF PERSONAL EXPENDITURE . 25. THE FIRST APPELLATE AUTHORITY CONSIDERED THE ARGUME NTS OF THE ASSESSEE AND ON THE GROUND THAT THE ASSESSEE FAILED TO FURNI SH ADEQUATE DOCUMENTARY EVIDENCE AND AS THE EXPENDITURE OF THE WIFE OF THE ASSESSEE MRS. SHEETAL DARDA, WAS ALSO CLAIMED, HELD THAT IT IS A PERSONAL TOUR UNDERTAKEN BY THE ASSESSEE UNDER THE GRAB OF STUDY TOUR AND THE EXPEN DITURES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF DEDUCTION. HE CAME TO A CONCLUSION DEBITING OF ALL EXPENSES IN THE GRAB OF EDUCATION EXPENSES, THE ASSESSEE HAD PAID LOWER TAX AND THIS WAS A JOINT TR IP OF MR. RISHI DARDA AND MRS. SHEETAL DARDA. HE ALSO REJECTED THE CONTENTION THAT PAYMENT OF FBT ON THIS EXPENDITURE IS OF RELEVANCE, WHILE CONSIDERING THE GENUINENESS OF THE EXPENSES. HE CONFIRMED THE DISALLOWANCE. 26. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED A PAPER BOOK AND POINTED OUT THAT THE ASSESSEE HAS PRODUCED EVIDENCE OF TRAV EL INSURANCE PREMIUM PAID, AIR TICKETS, EVIDENCE OF REIMBURSEMENT OF COU RSE FEE, RENT AND SECURITY DEPOSIT. HE SUBMITTED THAT ONLY EVIDENCE OF LIVING AND OTHER EXPENSES COULD NOT BE PROVIDED, THIS DOES NOT MEAN THAT THE ENTIRE EXPENDITURE SHOULD BE DISALLOWED. HE SUBMITTED THAT THERE IS NO DISPUTE O F THE FACT THAT THE ASSESSEE HAS GONE FOR HIGHER EDUCATION TO USA AND T HAT HE HAS JOINED CASE WESTERN RESERVE UNIVERSITY, CLEVELAND, USA, FOR BUS INESS ADMINISTRATION AND M/S. PRITHVI PRAKASHAN PVT. LTD. 13 MANAGEMENT COURSE FROM AUGUST 2005 TO MAY 2007. HE SUBMITTED THAT BY TAKING THE WIFE ALONG, THE ASSESSEE HAS SAVED HUGE AMOUNT OF EXPENDITURE ON LIVING. IT IS HIS CASE THAT PER DAY EXPENDITURE ON BOARDING HAS COME DOWN CONSIDERABLY DUE TO THE PRESENCE OF THE WIFE. HE PO INTED OUT THAT PER MONTH EXPENDITURE FOR 21 MONTHS WAS AROUND 1.22 LAKHS, WH ICH ACCORDING TO HIM, IS HIGHLY REASONABLE CONSIDERING THE STANDARD OF LIVIN G IN USA. LEARNED COUNSEL RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT IN SAKAL PAPERS PVT. LTD. V/S CIT, [1978] 114 ITR 0256 (BOM.), AND POINTED OUT THAT THIS JUDGMENT IS APPLICABLE ON ALL FOURS TO THE FACTS OF THIS CASE. SIMILARLY, HE RELIED ON THE FOLLOWING CASE LAWS:- CIT V/S RAS INFORMATION TECHNOLOGIES P. LTD., [2011 ] 238 CTR (KAR.) 076; CIT V/S NATWARLAL TRIBHOVANDAS, [1973] 87 ITR 703 ( GUJ.); 27. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, VEHEMENTLY OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITT ED THAT THE ASSESSEE HAS SENT ONE OF ITS DIRECTORS TO A PLEASURE TRIP AL ONG WITH HIS WIFE AND THAT THE EXPENDITURE IS IN THE PERSONAL FIELD AND, HENCE , CANNOT BE ALLOWED. HE RELIED ON THE FOLLOWING CASE LAWS:- CIT V/S HINDUSTAN HOSIERY INDUSTRIES, [1994] 209 IT R 383 (BOM.); AND CIT V/S R.K.K.R. STEELS P. LTD. [2002] 258 ITR 0306 (MAD). 28. HE TOOK THIS BENCH TO PARAS-5.6, 5.7 AND 5.8 OF THE ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RELIED ON THE SAME. 29. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE FIND THAT THE COMMISSIONER (APPEALS), VIDE PARA-5.5 OF HIS ORDER, HAS ACKNOWLEDGED THAT T HE ASSESSEE HAS PROVIDED DOCUMENTARY EVIDENCE IN SUPPORT OF SOME OF THE EXPE NDITURES. ONLY IN THE CASE OF LIVING EXPENSES AND RENTS PAID, PROPER EVID ENCE WAS NOT PROVIDED. THE UNDISPUTED FACTS ARE THAT MR. RISHI R. DARDA, W AS AN EXECUTIVE DIRECTOR OF THE ASSESSEE COMPANY SINCE 1997 I.E., FOR ALMOST A PERIOD OF 8-10 YEARS M/S. PRITHVI PRAKASHAN PVT. LTD. 14 PRIOR TO BEING SENT BY THE COMPANY FOR HIGHER EDUCA TION. THE BOARD OF DIRECTORS DECIDED TO SEND MR. RISHI DARDA, FOR FURT HER STUDIES ABROAD ON THE CONDITION THAT HE WOULD SERVE THE ASSESSEE COMPANY FOR A MINIMUM PERIOD OF TEN YEARS AFTER COMPLETION OF HIS COURSE. MR. RI SHI DARDA, IS A GRADUATE IN JOURNALISM AND WAS SENT ABROAD TO DO A MANAGEMENT C OURSE. AFTER RETURN TO INDIA, MR. RISHI DARDA, WORKED FOR THE ASSESSEE COM PANY AS PER THE CONDITION IMPOSED AND IS CONTINUING TO DO THE WORK. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE FACTS BEFORE THE HON'BLE JURISDICT IONAL HIGH COURT AND THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN SAKAL PAPERS P VT. LTD. (SUPRA), WHEREIN IT IS HELD AS FOLLOWS:- _HELD, _ THAT MERELY BECAUSE THERE WAS NO COMMITMENT OR CO NTRACT OR BOND TAKEN FROM THE TRAINEE, THE EXPENDITURE WHICH WAS OTHERWISE PROPER, CANNOT BE DISALLOWED TO THE COMPANY, PARTIC ULARLY WHEN AS A RESULT OF THAT EXPENDITURE THE TRAINEE HAD SECURED BOTH A DEGREE AND TRAINING WHICH WOULD BE OF ASSISTANCE TO THE ASSESS EE-COMPANY AND SHE HAD IN FACT SERVED THE COMPANY ON HER RETURN TO INDIA. THE FACTUM OF RELATIONSHIP ITSELF WOULD BE AN ASSURANCE THAT A S FAR AS POSSIBLE, THE RESULT OF THE TRAINING WOULD BE UTILISED FOR THE BE NEFIT OF THE COMPANY. THEREFORE, THE EXPENDITURE INCURRED ON THE FOREIGN EDUCATION OF THE DAUGHTER WAS ALLOWABLE AS A DEDUCTION IN DETERMININ G THE BUSINESS PROFITS OF THE ASSESSEE-COMPANY FOR THE ASSESSMENT YEAR 1961-62. 30. IN THE FACTS OF THE AFORESAID CASE BEING SIMILAR TO THE FACTS OF THE PRESENT CASE, WE ARE BOUND BY THE JUDGMENT OF HON'B LE JURISDICTIONAL HIGH COURT AND ALLOWED THE GROUND RAISED BY THE ASSESSEE TO THE EXTENT OF EXPENDITURE INCURRED ON FOREIGN EDUCATION OF MR. RI SHI DARDA. 31. COMING TO THE ISSUE OF DOCUMENTARY EVIDENCE, THE ON LY EXPENDITURE THAT IS NOT PROPERLY SUPPORTED IS THE LIVING AND OT HER EXPENDITURES. THE EXPENDITURE ON THE WIFE OF MR. RISHI DARDA, IS TO B E DISALLOWED. IN OUR OPINION, ONLY THE EXPENDITURE INCURRED ON MR. RISHI DARDA, IS ALLOWABLE. AS SUFFICIENT DOCUMENTARY EVIDENCE UNDER THE FACTS AND CIRCUMSTANCES IS NOT AVAILABLE, THE BEST COURSE WOULD BE TO ESTIMATE THE APPROXIMATE LIVING EXPENDITURE THAT MR. RISHI DARDA, WOULD HAVE INCURR ED IN USA FOR THE PERIOD OF STAY AND RESTRICT THE ALLOWANCE TO THAT FIGURE. THE BALANCE EXPENDITURE ON LIVING SHOULD BE DISALLOWED. ALL OTHER EXPENDITURE I.E., OTHER THAN LIVING EXPENSES IS TO BE ALLOWED. WITH THESE OBSERVATIONS, WE SET ASIDE THE M/S. PRITHVI PRAKASHAN PVT. LTD. 15 IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION A FRESH. THE ASSESSING OFFICER SHALL GRANT ADEQUATE OPPORTUNITY TO SUPPORT HIS CLA IM OF LIVING AND OTHER EXPENSES. GROUND NO.2, IS THUS, PARTLY ALLOWED. 32. GROUND NO.3, READS AS FOLLOWS:- 3. LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWA NCE OF PROFESSIONAL CHARGES OF RS.85,000/- AND RS.3,30,000 /- PAID TO MRS. SHEETAL DARDA AND MRS. ASHOO DARDA RESPECTIVELY ON THE GROUND THAT NO DOCUMENTARY EVIDENCE IS FURNISHED IN SUPPORT OF SERVICES RENDERED. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE , THE SAID EXPENDITURE, BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE DISALLOWANCE MADE OUGHT TO BE DELETED . 33. THE ASSESSEE CLAIMED THAT MRS. SHEETAL DARDA AND MR S. ASHOO DARDA, HAD RENDERED SERVICES IN THE NATURE OF PUBLIC RELAT IONS TO THE ASSESSEE AND IT HAS PAID PROFESSIONAL FEES OF ` 85,000 TO MRS. SHEETAL DARDA AND ` 3.30 LAKHS TO MRS. ASHOO DARDA. THE AMOUNTS WERE DISALLO WED BY THE ASSESSING OFFICER ON THE GROUND THAT NO DOCUMENTARY OR SUPPOR TING EVIDENCES WERE FILED BY THE ASSESSEE AND THAT NO DETAILS OF PROFES SIONAL SERVICES RENDERED BY MRS. SHEETAL DARDA, FOR THE ASSESSEE COMPANY, HAS B EEN SUBMITTED. 34. ON APPEAL, THE FIRST APPELLATE AUTHORITY CONFIRMED THE SAME ON THE GROUND THAT NO DOCUMENTARY EVIDENCE WAS PRODUCED. 35. BEFORE US, THE ASSESSEES COUNSEL SUBMITTED THAT MR S. SHEETAL DARDA, COMPLETED HER COURSE OF MARKETING AND INTERNATIONAL BUSINESS FROM UNIVERSITY OF CALIFORNIA, BERKLEY, USA, IN THE YEAR 1999 AND SHE HAS BEEN APPOINTED AS BUSINESS DEVELOPMENT MANAGER FROM 2004 AND THAT THE AMOUNT PAID TO MRS. SHEETAL DARDA, IS TAXED @ 31.08 %. SIMILARLY, IN THE CASE OF MRS. ASHOO DARDA, IT WAS SUBMITTED THAT SHE IS A FOUNDER MEMBER OF EVENT GROUP OF THE ASSESSEE COMPANY NAMELY SAKSHI MANCH . LIST OF EVENTS ORGANISED BY THE GROUP FROM THE YEAR 2005-06, WERE SUBMITTED BEFORE THE COMMISSIONER (APPEALS). IT WAS ALSO SUBMITTED THAT MRS. ASHOO DARDA, WAS PAID HONORARIUM SINCE SEPTEMBER 2002. IT WAS FURTHE R SUBMITTED THAT NO DISALLOWANCE WAS MADE IN THE EARLIER YEARS AND THAT MRS. ASHOO DARDA, HAS M/S. PRITHVI PRAKASHAN PVT. LTD. 16 BEEN TAXED AT AN AVERAGE RATE OF 30.53% AND, HENCE, IT IS NOT A CASE OF TAX PLANNING. 36. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NO DOCUMENTARY EVIDENCE WAS PROVIDED. 37. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT BOTH MRS. ASHOO DARDA AND MRS. SHEETAL DARDA, ARE WELL EDUCATED AND EXPERIENC ED IN THE FIELD OF SERVICES THAT THEY ARE TO RENDER. BOTH OF THEM ARE PAYING TAX AT A MAXIMUM MARGINAL RATE, THOUGH THE INCOME FROM THE GROUP IS ONLY ` 85,000 AND ` 3.30 LAKHS RESPECTIVELY. EVIDENCE IN THE FORM OF PHOTOGR APHS OF EVENTS CONDUCTED HAVE BEEN PRODUCED BEFORE THE COMMISSIONER (APPEALS ), COPIES OF WHICH ARE PLACED AT PAGES-365 TO 387 OF THE PAPER BOOK. THE U NDISPUTED FACT IS THAT SIMILAR PAYMENTS MADE TO VERY SAME PARTY, HAVE BEEN ACCEPTED AS GENUINE BY THE REVENUE AUTHORITIES IN THE OTHER ASSESSMENT YEARS. THE DISALLOWANCE IS MADE IN THIS YEAR ONLY. THIS IS NOT A CASE OF TA X PLANNING. UNDER THESE CIRCUMSTANCES, WE ALLOW THE GROUND RAISED BY THE AS SESSEE. 38. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. 39. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.6229/MUM. /2009, FOR ASSESSMENT YEAR 2006-07. GROUNDS RAISED BY THE REVE NUE, READ AS FOLLOWS:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS .183.54 LACS MADE ON ACCOUNT OF THE DISALLOWANCE OF RECOVERY COMMISSI ON CLAIMED BY THE ASSESSEE AS PAID TO MIS MEDIA EXPERTS PRIVATE LIMIT ED (ASSOCIATE CONCERN) THOUGH DURING THE ASSESSMENT PROCEEDINGS A SSESSEE DID NOT PRODUCE ANY EVIDENCE THAT THE SAID PARTY HAD ACTUAL LY RENDERED ANY SERVICES FOR RECOVERY. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.183 .54 LACS MADE ON ACCOUNT OF DISALLOWANCE OF RECOVERY COMMISSION, WIT HOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THE GENUINENESS OF THE TRANSACTION . 40. THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS S IMILAR TO THE ISSUE RAISED BY THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 205-06 IN ITA NO.2754/MUM./2009. CONSISTENT WITH THE VIEW TAKEN B Y US IN THAT APPEAL, M/S. PRITHVI PRAKASHAN PVT. LTD. 17 WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORIT Y AND DISMISS THE APPEAL FILED BY THE REVENUE. 41. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 42. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.6247/MUM ./2009, FOR ASSESSMENT YEAR 2006-07. 43. THE GROUND RAISED BY THE ASSESSEE IS ON THE ISSUE O F FRINGE BENEFIT TAX LEVIED ON THE FOREIGN EDUCATIONAL EXPENSES OF THE E XECUTIVE DIRECTOR. WE FIND THAT THE ASSESSING OFFICER HAS ACCEPTED THE RETURN OF INCOME FILED BY THE ASSESSEE AND, HENCE, IN OUR VIEW, THERE CAN BE NO G RIEVANCE. IN ANY EVENT, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS APPEAL WILL BECOME INFRUCTUOUS IN CASE ASSESSEES GROUND FOR ALLOWANCE OF FOREIGN EDUCATIONAL EXPENSES INCURRED ON MR. RISHI DARDA, IS ALLOWED. I N OUR CONSIDERED VIEW, THIS APPEAL IS REQUIRED TO BE DISMISSED FOR THE REA SON THAT THE ASSESSEES INCOME IS SAME AS PER THE RETURN OF INCOME. 44. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH 2012 SD/- R.S. PADVEKAR JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH MARCH 2012 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, C BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI