Sailent Business Solutions Ltd., New Delhi V. DCIT, New Delhi

ITA 6297/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3087 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 ( A Y 200 7 - 08 ) 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE, SHRI H. S. SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6297/ DEL/2013 (ASSESSMENT YEAR: 2008 - 09 ) SALIENT BUSINESS SOLUTIONS LTD THAPAR HOUSE 124, JAN PATH , NEW DELHI 1 PAN AAJC3356B THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7 (1) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PC YADAV , ADVOCATE REVENUE BY: SRI N K BANSAL SENIOR DEPARTMENTAL REPRESENTATIVE DATE OF HEARING 11 TH MAY 2017 DATE OF PRONOUNCEMENT 1 9 / 0 5 / 2 0 1 7 O R D E R PER PRASHANT MAHARISHI, A. M. 01 THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) X, NEW DELHI DATED 09/09/2013 CONFIRMING THE DISALLOWANCE CONSULTATION FEES OF RS. 5507987/ MADE BY THE DEPUTY COMMI SSIONER OF INCOME TAX, CIRCLE 7 (1), NEW DELHI IN ASSESSMENT ORDER PASSE D ON 25/11/2010 UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961. 02 ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AND ON FACTS 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS WRONG IN SUSTAINING THE DISALLOWANCE OF RS. 5 507987/ IS MADE BY THE ASSESSING OFFICER ON THE ALLEGED GROUND THAT THE EXPENSES INCURRED BY THE ASSESSEE IN ITS 2 ND YEAR OF ITS OPERATION WERE NOT FOR THE PURPOSES OF THE BUSINESS. 3. THAT THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) WAS WRONG IN HOLDING THAT THE EXPENSES INCURRED BY THE ASSESSEE IS NOT FOR THE DEVELOPMENT OF THE ASSESSEES BUSINESS. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO FAILED TO APPRECIATE THAT IMMEDIATE BENEFIT FOR EXPENS ES INCURRED DURING THE COURSE OF BUSINESS, IS NOT NECESSARY FOR THE PURPOSE OF ALLOWABILITY OF SUCH EXPENSES. 5. THAT THE LD. COMMISSIONER OF INCOME TAX, (APPEALS) HAS FURTHER ERRED IN OBSERVING THAT PARTIES TO WHOM THE PAYMENTS WERE MADE WERE NOT SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 2 POSSESSING ANY COURT COMPETENCE OF SPECIALISATION FOR RENDERING THE SERVICES IN THE FIELD OF BUSINESS DEVELOPMENT. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN OBSERVING THAT THE PAYMENT OF CONSULTANCY FEE BY THIS ASSESSEE WAS MADE WITHOUT A NY BASIS. 7. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED THE APPELLATE ORDER ON THE BASIS OF DISTORTED FACTS IN RELATION TO SERVICES RENDERED AND THE AGREEMENTS ENTERED INTO WITH THE PARTIES AS APPEARING ON PAGE NO. 2 OF THE APPELLATE ORDER. 8. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN HOLDING THAT NO EVIDENCE IN RELATION TO ACTUAL RENDERING OF SERVICES WAS FILED BY THE ASSESSEE. 9. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 10. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, ADD OR FOREGO ANY OF THE ABOVE GROUNDS. 03 IN ALL ASSESSEE HAS RAISED 10 GROUNDS OF APPEAL, HOWEVER , ALL THOSE GROUNDS ARE RELATED TO THE DISALLOWANCE OF RS. 550 7987/ OUT OF CONSULTATION FEES. THE BRIEF FACTS OF THE CASE IS TH AT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY ENABLED SERVICES WHO FILED ITS RETURN OF INCOME ON 29/09/2 008 DECLARING LOSS OF RS. 3049 7885/ . DURING THE COURSE OF SCRUTINY PROCEEDINGS IT WAS NOTED BY THE LD. ASSESSING OFFICER T HAT ASSE SSEE HAS DEBITED A SUM OF RS. 5 507987/ IN PROFIT AND LOSS ACCOUNT BY CONSULTANT FEES. THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF SUCH PAYMENT AND ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY HA S ENGAGED SERVICES FOR CONSULTANTS FOR BUSINESS DEVELOPMENT OUTSIDE INDIA AND THEY HAVE BEEN PAID THE FEES. ASSESSEE SUPPORTED ITS CONTENTION BY SUBMITTING THE DETAILS OF THE AMOUNT PAID AND COPY OF THE AGREEMENT. ACCORDING TO THE ASSESSING OFFICER ASSESSE E IS OFFERING ITS ENTIRE SERVICES TO THE FOREIGN SHAREHOLDER AND ITS ASSOCIATES SINCE ASSESSMENT YEAR 2008 09, ACCORDING TO HIM TURNOVER OF THE ASSESSEE AS COMPARED TO THE TURNOVER OF EARLIER YEARS HAS INCREASED INSIGNIFICANTLY THOUGH ASSESSEE HAS SPENT RS . 55 LAKHS FOR CONSULTANT. THEREFORE , ACCORDING TO THE ASSESSING OFFICER, THE ABOVE SUM PAID BY THE ASSESSEE IS UNREASONABLE AND HENCE, SAME WAS DISALLOWED. CONSEQUENTLY, ASSESSMENT ORDER UNDER SECTION 143 (3) OF THE INCOME TAX ACT WAS PASSED ON 25/11/2010 DETERMINING TH E TOTAL INCOME AT LOSS OF RS. 2496 2292/ AGAINST THE RETURNED LOSS OF RS. 3049 7885/ - . ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFICER HAS PREFERRED AN APPEAL BEFORE THE LD. CIT (A) CONTESTING THE ABOUT DISALLOWANCE. THE LD. CI T(A ) CONFIRMED THE ABOVE DISALLOWANCE ON THE ISSUE THAT THERE IS NO INCREASE IN THE TURNOVER DURING THE YEAR, SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 3 ATTRIBUTABLE TO THE SERVICES RENDERED BY THESE PARTIES AND FURTHER, THOUGH IN EARLIER YEARS SUM WAS DISALLOWED AS CAPITAL EXPENDITURE BUT IN THIS YEAR SAME IS NOT THE CASE. THE LD. CIT FURTHER NOTED THAT THERE IS NO EVIDENCE PLACED ON RECORD THAT THESE FOUR PARTIES WERE HAVING ANY SPECIALISATION OR CORE COMPETENCE IN BUSINESS DEVELOPMENT. ACCORDING TO THE LD. CIT APPEAL ALL THESE AGREEMENTS THE LANG UAGE OF THE AGREEMENT WAS SUCH THAT A FIXED FEE WAS PAYABLE TO THESE PARTIES AND ON EXAMINATION OF THESE AGREEMENTS ACCORDING TO HIM THERE WAS AN ADEQUATE INDICATION THAT THESE PAYMENTS WERE ONLY MADE FOR THE PURPOSE OF MAKING PAYMENT TO THESE PARTIES AND THERE WAS NO EVIDENCE OF ACTUAL SERVICES PROVIDED BY THEM DURING THE FINANCIAL YEAR. ASSESSEE AGGRIEVED BY THE ORDER OF THE LD. CIT APPEAL HAS PREFERRED AN APPEAL BEFORE US. 04 THE LD. AUTHORISED REPRESENTATIVE HAS CONTESTED THE DISALLOWANCE RAISING SEVERAL I SSUES WHICH ARE AS UNDER: - MAY IT PLEASE YOUR HONOUR, 1. THE AFORESAID APPEAL FILED BY THE ASSESSEE ARISES FROM THE ORDER OF .THE CIT(A) DATED 09.09.2013. THE ASSESSEE HAS PREPARED THESE SYNOPSIS IN ORDER TO ASSIST THE HON'BLE BENCH AND CRAVES TO SUBMIT AS UNDER: - 2. ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY ENABLED SERVICES, FILED ITS ROI ELECTRONICALLY ON 29.09.2008 AND THE PAPER RETURN ON 14.10.2008. THE SAM E WAS SELECTED, FOR SCRUTINY AND ASSESSMENT UNDER SECTION 143(3) WAS FRAMED.( SEE FACTS BEFORE THE CIT(A)) 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO, DISALLOWED CERTAIN EXPENSES PERTAINING TO CONSULTANT FEES, PAID ABROAD, TO SOME TECHNICAL CO NSULTANT AND ALSO DISALLOWED DEPRECIATION ON UPS. ACTION OF THE AO HAS BEEN AFFIRMED BY THE CIT (A) AND NOW ASSESSEE IS IN APPEAL BEFORE THIS HON'BLE BENCH. FINDINGS OF AO AT PAGE NO - 2 AND 3 AND FINDINGS OF THE CIT(A) ARE AT PAGE NO - 4 OF THE APPELLATE ORDE R. 4. THE 1ST ISSUE EMERGING IN GROUND NUMBER 2 - 8 WHICH REQUIRES CONSIDERATION OF THIS HON'BLE BENCH IS AS UNDER - WHETHER REVENUE AUTHORITIES ARE CORRECT IN DISALLOWING THE EXPENSES PERTAINING TO CONSULTATION CHARGES PAID ABOARD BY THE ASSESSEE FOR THE P URPOSE OF ITS BUSINESS PARTICULARLY WHEN SAME ARE GENUINE AND INCURRED FOR THE PURPOSE OF BUSINESS AND THE SAME ARE ALLOWED IN IMMEDIATELY PRECEDING AND SUCCEEDING YEAR TO THE SAME PARTIES AND THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE. 5. IT IS SUBMITTED THAT THE AO WHILE FRAMING THE ASSESSMENT ORDER HAS NEITHER DISPUTED THE PURPOSE OF THESE EXPENSES NOR DISPUTED THE GENUINENESS( SEE THE FINDINGS OF THE AO AT PAGE NO 2 - PARA - 1) ; THE AO IS OF THE VIEW THAT THESE EXPENSES WERE UNREASONABLE. SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 4 6. SECTION 37(1) REQUIREMENTS: - !T IS SUBMITTED THAT THESE OBSERVATIONS OF THE AO ARE ONLY SURMISES IN AS MUCH AS THE PROVISIONS OF SECTION 37(1) REQUIRES ONLY TWO THINGS I) THE EXPENSES SHOULD BE GENUINE AND II) THE EXPENSES SHOULD HAVE BEEN INCURRED F OR THE PURPOSE OF BUSINESS AND THERE IS NO SCOPE OF ANY REASONABLENESS AND UN REASONABLENESS. IT IS SUBMITTED THAT HON'BLE APEX COURT IN THE CASE OF S.A. BUILDERS 288 ITR 1(SC) HAS HELD THAT REVENUE AUTHORITIES CANNOT COMMENT ON THE REASONABLENESS OF AN EX PENSES, IT IS THE ASSESSEE WHO HAS PRIVILEGE TO CONDUCT HIS BUSINESS AND REVENUE AUTHORITIES CANNOT SIT IN THE ARM CHAIR OF THE ASSESSEE. 7. AUDITED BOOKS: - THE AO AND THE CIT(A) HAVE FAILED TO APPRECIATE THAT THE BOOKS OF THE ASSESSEE ARE AUDITED AND PRO DUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO DEFECT HAS BEEN POINTED OUT EITHER BY THE AUDITORS OR BY THE AO IN THOSE BOOKS. 8. BENEFIT OBTAINED FROM THESE EXPENSES: - ON THE CONTRARY THE REMARKS MENTIONED IN THE NOTES OF ACCOUNTS PROVE BEYOND DOUBT THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF THE BUSINESS - SEE PAGE NO 30 AND 33 OF THE PB. 9. COMPARISON OF OTHER EXPENSES: - THE AO HAS ALLEGED THAT THERE IS SUBSTANTIAL INCREASE IN THESE EXPENSES AND THE INCOME OF THE COMPANY HAS NOT BE IN CREASED IN THE SAME PROPORTION, IN THIS REGARD THE ASSESSEE WISH TO DRAW THE ATTENTION OF YOUR LORDSHIPS TO PAGE NO 46 OF THE PB. A PERUSAL OF THIS PAGE WOULD SHOW THAT A. ELECTRICITY EXPENSES INCREASED THREE TIMES AND ACCEPTED BY THE AO B. PRINTING AND STATIONERY ARE DOUBLE AS COMPARE TO PREVIOUS YEAR AND THE SAME ARE ACCEPTED BY THE AO . . C. LEGAL AND PROFESSIONAL CHARGES ARE ALSO DOUBLE ACCEPTED BY THE AO. D. TELEPHONE CHARGES ARE ALSO DOUBLE. E. IT IS INTERESTING TO NOTE DOWN THAT INTERNET AND COMMUNICATION CHARGES ARE REDUCED AS COMPARE TO PREVIOUS YEAR BECAUSE THE CONSULTANT ARE PROVIDING ADEQUATE INFORMATION AND THE RESEARCH WORK WHICH THE ASSESSEE WAS DOING WITH INTERNET GOT REDUCED. 10. THIS ABOVE COMPARISON WOULD SHOW TH AT, PRESUMPTION OF THE AO THAT EXPENSES INCURRED ON SALE CONSULTATION ARE NOT IN CONSONANCE WITH THE TURNOVER IS INCORRECT AND BASED ON SURMISES. THE AO HAS IGNORED THAT OTHER EXPENSES ARE ALSO INCREASED SUBSTANTIALLY AND THE EXPENSES IMPUGNED ARE NOT RESP ONSIBLE FOR THE LESSOR INCOME. ON THE CONTRARY THE COMPARISON OF INTERNET AND COMMUNICATION CHARGES WOULD SHOW THAT ASSESSEE COMPANY HAS GOT BENEFIT FROM THESE EXPENSES AS A RESULT OF WHICH THE CHARGES OF INTERNET WERE REDUCED. 11. FURTHER THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT FACTUAL THINGS MENTIONED IN DIRECTORS REPORTS VIS - A - VIS EARNING OF FOREIGN EXCHANGE AND INCURRING OF CONSULTANCY CHARGES IS INCORRECT. 12. IT IS SUBMITTED THAT THE LD CIT (A) HAS EXCEEDED HIS JURISDICTION BY TO UCHING THOSE ISSUES WHICH WERE NOT TOUCHED BY THE AO AND THAT TOO WITHOUT ISSUING ANY SPECIFIC SHOW CAUSE NOTICE. SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 5 13. WITHOUT PREJUDICE TO THE ABOVE IT IS SUBMITTED THAT THE OBSERVATIONS MADE BY THE CIT(A) THAT THE AGREEMENTS DOES NOT ESTABLISH THE CORE C OMPETENCY OF THE CONSULTANT ARE BASELESS SINCE IT IS SETTLED POSITION OF LAW THAT CIT(A) IS NOT AN EXPERT OF TECHNICAL MATTERS. RELIANCE CAN BE PLACED ON THE FOLLOWING JUDGMENTS. 14. THE OBSERVATIONS OF THE CIT(A) THAT NO BREAK UP IS PROVIDED BY THE APPEL LANT IS ALSO NOT RELEVANT IN AS MUCH HE FAILED TO APPRECIATE THAT THE BOOKS OF THE ASSESSEE ARE AUDITED AND PRODUCED BEFORE THE AO AND THE AO HAS EXAMINED THOSE BOOKS. FURTHER NEITHER THE AUDITORS NOR THE AO HAS MADE ANY COMMENT VIS - A - VIS THE BREAKUP OF TH ESE EXPENSES THEREFORE THE CIT (A) IS NOT JUSTIFIED IN MAKING THESE OBSERVATIONS. FURTHER A PERUSAL OF THE AGREEMENTS WOULD SHOW THAT BREAK OF THE EXPENSES INCURRED IS ALREADY GIVEN IN THE AGREEMENT ITSELF FOR EXAMPLE PLEASE SEE PAGE NO - 125 BREAKUP OF SPAR K, PAGE NO - 131 BREAKUP OFJ.D. 15. SIMILARLY THE OBSERVATIONS OF THE CIT(A) THAT THESE AGREEMENTS WERE MADE ONLY FOR THREE MONTHS IS ALSO NOT RELEVANT FOR THE SIMPLE REASONS THAT THE PAYMENTS WERE MADE VIA BANKING CHANNEL AND WITH THE DUE PERMISSION OF RBI AND THE SAME ARE MADE IN SUBSEQUENT YEAR ALSO, THEREFORE, THESE OBSERVATIONS ARE USELESS. PARTICULARLY WHEN IN THE EARLIER YEAR THE CIT (A) HAD SPECIFICALLY GIVEN DIRECTIONS FOR VERIFICATION OF THE AGREEMENTS AND THE AO WHILE GIVING EFFECT TO THE APPELLAT E ORDER HAS DONE SO. CONSISTENCY 16. IT IS SUBMITTED THAT IN THE IMMEDIATELY PRECEDING YEAR, I.E. IN A.Y 2007 - 08 ALSO THE AO HAS DISALLOWED AN AMOUNT OF RS13,60,659/ - , UNDER THE SAME HEAD AND ON THE GROUND THAT THESE EXPENSES ARE IN CAPITAL IN NATURE. HOW EVER, THE CIT (A) VIDE ITS ORDER DATED 06.05.2013 HAS ALLOWED THE APPEAL OF THE ASSESSEE. AND THERE IS NO APPEAL OF THE REVENUE. CIT(A) ORDER FOR PREVIOUS YEAR IS ANNEXED AT PAGE NO - 75 OF THE PB AND RELEVANT PAGE IS 17. IT IS PERTINENT TO MENTION HERE THA T THE SAME CIT (A) HAS PASSED THE ORDER OF THE IMPUGNED YEAR ON 09.09.2013 AND HAS SUSTAINED THE DISALLOWANCE, MEANS WITHIN FOUR MONTH OF HIS PREVIOUS ORDER; THE CIT (A) HAS TAKEN A SUMMERSAULT AND HELD THAT EXPENSES INCURRED ARE NOT FOR THE PURPOSE OF BUS INESS. 18. BE THAT AS IT MAY BE IT IS SUBMITTED THAT IN THE IMMEDIATELY NEXT ASSESSMENT YEAR THE DEPARTMENT HAS ACCEPTED THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. HOWEVER, DISALLOWED THE SAME ON THE GROUND THAT ASSESSEE FAILED TO DEDUCT IDS UNDER SECTION 195 AND HENCE THE EXPENSES ARE NOT ALLOWABLE IN THE LIGHT OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT - THE CIT(A) AFTER APPRECIATING THE ENTIRE LAW ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT PROVISIONS OF SECTION 195 ARE NOT APPLICABLE SINCE THE INCOME OF THE RECIPIENTS IS NOT TAXABLE IN INDIA AND HENCE THERE IS NO QUESTION OF INVOKING OF SECTION 40(A)(IA). SEE PAGE NO - 120 - 123 OF PB FOR CIT(A) ORDER FOR AY 2009 - 10 19. THEREFORE IN VIEW OF THE ABOVE ADMITTED FACTS WHEN THE REVENUE HAS ITSELF ADMITTED IN PRECEDING AND SUCCEEDING YEAR THAT EXPENSES WERE INCURRED FOR THE PYRPOSE OF BUSINESS THEN DISALLOWANCE IN THE IMPUGNED YEAR IS ILLEGAL AND SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 6 AGAINST THE PRINCIPLE OF CONSI STENCY. IT IS SUBMITTED THAT THIS PRINCIPLE HAS BEEN RECENTLY APPRECIATED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF GRAIN U.K 359 ITR 268(DEL) AND EXCELL INDUSTRIES 358 ITR 295(SC). IN YET ANOTHER CASE HON'BLE PUNJAB AND HARAYANA HIGH COURT IN THE CAS E OF REITA. BISCUTS REPORTED IN 309 ITR 154(P&H) HAS HELD THAT ONCE A_CLAIM IS ACCEPTED IN SUBSEQUENT YEAR THEN NO DISALLOWANCE IS PERMISSIBLE IN IMPUGNED YEAR IF THERE IS NO CHANGE IN FACTS. 20. THE RELEVANT OBSERVATION OF THE HON'BLE HIGH COURT IN GRAIN U.K (SUPRA) IS AS UNDER: - 'THE DECISION OF AAR IN THE PRESENT CASE DATED 1ST AUGUST, 2011, TAKING A DIAMETRICALLY REVERSE VIEW HAS BROUGHT ABOUT AN UNCERTAINTY IN UNDERSTANDING THE IMPACT AND THE EFFECT OF THE PROVISO TO SECTION 112{1). CERTAINTY IS INTEG RAL TO RULE OF LAW. CERTAINTY AND STABILITY FORM THE BASIS FOUNDATION OF ANY FISCAL LAWS. HIGHLIGHTING THIS FACT IN .VODAFONE INTERNATIONAL HOLDING B.V. VS. UNION OF INDIA, (2012) 341 ITR 0001, THE SUPREME COURT HAS OBSERVED THAT FOREIGN DIRECT INVESTMENT FLOWS TOWARDS A LOCATION WITH A STRONG GOVERNANCE INFRASTRUCTURE WHICH INCLUDES ENFORCEMENT OF LAWS AND HOW WELL THE LEGAL SYSTEM WORK. THERE SHOULD BE CONSISTENCVAND UNIFORMITY IN INTERPRETATION OF JIROVISJONS __A_S UNCERTAINTIES CAN DISABLE AND HARM. GO VERNANCE OF TAX LAWSAUTHONTY SHOULD FOLLOW JHEIR EARLIER YJGW, UNLESS THERE ARE STRONG GROUNDS ANDLREASONS TO TAKE A CONTRARY VIEW, BUT IN THE PRESENT CASE THERE ISJIO COMPELLING JUSTIFICATIOJI AND REASON TO OVERRIDE ANDI DISTURB>_THE EARLIER VIEW.' 21. SIMILARLY HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF REITA BISCUTS(SUPRA) HAS HELD AS UNDER - WHILE DECIDING IT REF. NO. 35 OF 1991 CIT VS. RIETA BISCUITS CO. (P) LTD. ARISING OUT OF ORDERS PASSED BY THE TRIBUNAL FOR THE ASST. YR. 1983 - 84 ON THE I SSUE OF ENTITLEMENT TO DEDUCTIONS UNDER S. 32A OF THE ACT, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. KEEPING IN VIEW THE PRINCIPLES OF CONSISTENCY ONCE THE ISSUE ON THE MENTS HAS BEEN DECIDED AGAINST THE REVENUE ON THE SAM E ISSUE DURING THE SUBSEQUENT ASSESSMENT YEARS, WE DO NOT DEEM IT APPROPRIATE TO LAKE A DIFFERENT VIEW ON A TECHNICAL REASON. ACCORDINGLY, WITHOUT SPECIFICALLY OPINING ON THE ISSUE ON THE MERITS, THE REFERENCE IS DECIDED AGAINST THE REVENUE' 22. IT IS NEX T SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS MADE THESE PAYMENTS IN PURSUANCE TO BUSINESS AGREEMENTS ENTERED WITH VARIOUS PARTIES AND HENCE THE NATURE OF THE PAYMENT IS ALLOWABLE AS BUSINESS EXPENSES. THEREFORE, KEEPING IN VIEW OF THE FACT S THAT THE PAYMENTS WERE MADE AND ALLOWED IN PRECEDING AND SUCCEEDING YEARS AND THE AGREEMENTS ARE SAME VIS - A - VIS THEIR LANGUAGE AND STIPULATIONS THE CLAIM OF THE ASSESSEE IS WRONGLY DISALLOWED. 23. LT IS - SUBMITTED THAT THE SAME C!T (A) WHO HAS PASSED THE ORDER OF THE IMPUGNED YEAR HAS ALSO PASSED THE ORDER OF THE IMMEDIATELY PRECEDING YEAR SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 7 ON 06,05.2013, WHEREIN HE HAD HELD THAT EXPENSES INCURRED BY THE ASSESSEE ARE FOR THE PURPOSE OF BUSINESS HOWEVER THE AO IS DIRECTED TO VERIFY THE GENUINENESS OF THESE E XPENSES - SEE PAGE NO 75 OF THE PB AND FINDINGS ARE ON PAGE NO - 78 - 79. 24. IN OTHER WORDS THE LD CIT(A) IGNORING HIS OWN FINDINGS, GIVEN IN AY 2007 - 08, VIDE HIS ORDER DATED 6.05.2013,AND WITHOUT THE SUPPORT OF ANY MATERIAL DECIDED THE ISSUE AGAINST THE ASSE SSEE. 25. IT IS SUBMITTED THAT SO FAR AS THE DEPRECIATION ON UPS IS CONCERNED THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF BSES. 05 THE LD. DEPARTMENT REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND CONTESTED THE SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE. HE REITERATED ALL THE POINTS FOR WHICH THE DISALLOWANCE IS MADE BY THE LD. ASSESSING OFFICER AND CONFIRMATION OF THAT DISALLOWANCE MADE BY THE LD. CIT APPEALS. 06 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE ADJUDICATING OFFICER AND THE 1 ST APPELLATE AUTHORITY. IT IS AN ESTABLISHED FACT THAT ASSESSEE HAS PAID CONSULTATION FEES TO 4 PARTIES WHICH ARE MENTIONED AT PAGE NO. 2 OF THE ASSESSMENT ORDER. THESE PAYMENTS ARE BASED ON THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THEM. THE COPIES OF THE AGREEMENTS ARE PLACED AT SERIAL NO. 13 TO 17 OF THE PAPER BOOK AT PAGE NO. 124 150. AS A PROOF OF SERVICES RENDERED THE DETAILS ARE PLACED AT SERIAL NO. 18 OF THE PAPER BOOK AT PAGE NO. 151 170. ON VERIFICATION OF THE AGREEMENTS AS WELL AS THE EVIDENCE PLACED FOR THE RENDITION OF THE SERVICES , IT IS APPARENT THAT THOSE CONSULTANTS HAVE MADE EFFOR TS FOR THE BUSINESS DEVELOPMENT OF THE ASSESSEE. THE REMUNERATION TO BE PAYABLE TO THESE PARTIES ARE PARTLY FIXED AND PARTLY VARIABLE WHICH WAS BASED ON VALUE OF THE CONTRACT WON BY THESE PARTIES. THOSE PARTIES WERE EXCLUSIVELY WORKING FOR THE ASSESSEE AND WERE ALSO NOT ENGAGED IN ANY OTHER BUSINESS TILL THE CONTINUATION OF THE AGREEMENT. THE NATURE OF SERVICES TO BE RENDERED BY THESE PARTIES WERE TO CREATE AND EXECUTE A SALES STRATEGY TO CONTACT AND CONVERT INDUSTRY DECISION MAKERS WITH THE GOAL OF OBTAINI NG FACE - TO - FACE PRESENTATION TO SHOW THE BENEFIT OF OUTSOURCING OF VARIOUS OPERATIONS. EFFORTS WERE TO BE MADE BY IDENTIFYING PROSPECTS, DETERMINED AND CONTRACTING DECISION MAKERS, DETERMINING PROCESSES, AND DOING A NEED ANALYSIS TO IDENTIFY OUTSOURCING OP PORTUNITIES THAT WILL PROVIDE IMMENSE COST SAVINGS. PRESENTATION MATERIAL WOULD FURTHER BE CREATED FOR SCHEDULED MEETINGS. PROGRAM WOULD FURTHER BE DEVELOPED TO KEEP KEY RELATIONS AND DEVELOP THEM WITH NON - PROSPECT INDUSTRY LEADERS AMONG THE INVESTOR COMMU NITY AND RATING AGENCIES. THE SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 8 ASSESSEE HAS FURTHER SUBMITTED THE DETAILS OF SERVICES RENDERED BY THESE PARTIES IN THE FORM OF VARIOUS DETAILS OF CLIENTS AND THEIR CONNECTIVITY AND SHOWING THE VARIOUS COMMENTS AND ACTIONS TAKEN BY THEM. THE ASSESSEE HAS FUR THER, GIVEN THE DETAILS OF THE SERVICES PROVIDED BY THE CONSULTANTS WITH RESPECT TO VARIOUS PRESENTATION AND CLIENT DEVELOPMENT MADE WITH SALESFORCE.COM. IN VIEW OF THIS, IT IS APPARENT THAT ASSESSEE HAS ENTERED INTO SERVICE CONTRACTS WITH THOSE PARTIES WH O HAVE RENDERED THOSE SERVICES AND WHO HAVE ALSO BEEN REMUNERATED IN TERMS OF THE AGREEMENT ENTERED INTO. THE REASONS GIVEN BY THE LD. ASSESSING OFFICER FOR DISALLOWING THE ABOVE SUM IS THAT INCREASE IN THE TURNOVER OF THE ASSESSEE DESPITE PAYING SUCH SUM WAS INSIGNIFICANT. IT IS APPARENT THAT THE BUSINESS DEVELOPMENT ACTIVITIES DO NOT CONVERT IMMEDIATELY INTO THE REVENUE MODEL AND IT MAY TAKE TIME. IN ANY CASE, REVENUE CANNOT JUDGE THE COMPENSATION THAT ASSESSEE HAS PAID FOR THOSE SERVICES WITH RESPECT TO THE BENEFIT DERIVED BY THE ASSESSEE. THE EXPENSES MAY BE INCURRED FOR DERIVING BENEFIT IN FUTURE WHICH MAY ALWAYS NOT BE IMMEDIATELY CONVERTED INTO MONETARY TERMS. THE LD. ASSESSING OFFICER SHOULD HAVE MERELY EXAMINE D WHETHER THE ASSESSEE HAS INCURRED THOS E EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR NOT. AS IT IS NOT BEEN NEGATED BY THE LD. ASSESSING OFFICER THAT EXPENSES ARE INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS BUT THE RESULTANT INCREA SE IN THE TURNOVER IS INSIGNIFICANT , WE DO NOT SEE ANY SUCH PROVISION IN THE INCOME TAX ACT APPLYING THIS LOGIC FOR MAKING DISALLOWANCE . FURTHERMORE , THE LD . 1 ST APPELLATE AUTHORITY HAS QUESTIONED THE RENDITION OF THE SERVICES BY THOSE PARTIES WHICH HAVE BEEN PROVED BY THE ASSESSEE BY PLACING COGENT MATERIAL. THE ASSESSEE HAS ENTERED INTO CONTRACT WITH THESE PARTIES TO REMUNERATE THEM BY PAYING CERTAIN AMOUNT A S AFFIXED REMUNERATION AND CERTAIN AMOUNT IS A VARIABLE REMUNERATION. JUST BECAUSE OF THE R EASON THAT IN THIS YEAR THEY ARE SUPPOSED TO BE PAID AT THE FIXED RATE DUE TO N OMINAL INCREASE IN THE BUSINESS, IT CANNOT BE SAID THAT POLICY OF REMUNERATING A CONSULTANT IS INCORRECT. IT IS IMPORTANT TO NOTE THAT THE ASSESSEE IS PAYING COMMISSION TO THESE PARTIES IN PAST YEARS AS WELL AS IN SUBSEQUENT YEARS. THE REVENUE HAS NOT QUESTIONED ALLOWANCE OF THESE EXPENDITURE ON THE BASIS OF INCREASE OR DECREASE IN TURNOVER OR ON RENDITION OF SERVICES. IN NUTSHELL FOR ASSESSMENT YEAR 2007 - 08, THE ABOVE SUM WAS DI SALLOWED TO THE EXTENT OF 25% HOLDING THAT ASSESSEE IS DERIVING BENEFIT OF ENDURING NATURE. THE ABOVE DISALLOWANCE IN THE PAST WAS DELETED BY THE 1 ST APPELLATE AUTHORITY AND WHICH SAILENT BUSINESS SOLUTIONS LIMITED V DCIT CIRCLE 7(1) NEW DELHI ITA NO 6297/DEL/2013 A Y 200 7 - 08 9 WAS NOT FURTHER CONTESTED BY REVENUE. FOR ASSESSMENT YEAR 2009 - 10, THE ABOVE EXPENDITURE WAS DISALLOWED ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE, WHICH WAS ALSO DELETED BY THE LD. 1 ST APPELLATE AUTHORITY HOLDING THAT THE INCOME IS NOT CHARGEABLE TO TAX IN INDIA. THE RESPECTIVE APPELLATE ORDERS ARE PLACED IN THE PAPER BOOK AT P AGE NO. 75 - 80 AND 89 - 119 TO DEMONSTRATE THE ABOVE FACTS. IN VIEW OF THIS, IT IS APPARENT THAT ASSESSEE IS PAYING CONSULTATION FEES/COMMISSION TO THESE PARTIES IN PAST YEARS AS WELL AS IN SUBSEQUENT YEARS AND IN NONE OF THE YEAR THE ALLOWANCE OF THESE EXPEN DITURES HAVE BEEN QUESTIONED ON TH ESE REASONS. NONETHELESS , DURING THE YEAR ASSESSEE HAS SHOWN THAT EXPENDITURE IS BACKED BY PROPER AGREEMENTS AS WELL AS PROOF OF RENDITION OF THE SERVICES, THEREFORE, WE DO NOT FIND ANY REASON THAT THESE EXPENDITURE SHOULD BE DISALLOWED. IN THE RESULT, REVERSING THE ORDER OF THE LD. LOWER AUTHORITIES, WE DIRECT THE LD. ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS. 5 507987/ AND DELETE THE DISALLOWANCE. 07 IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 1 9 / 0 5 / 2 0 1 7 - S D / - - S D / - ( H.S. SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 9 / 0 5 / 2 0 1 7 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI