DCIT CIR 6(1), MUMBAI V. ABC BEARING LTD, MUMBAI

ITA 638/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8986 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN SHENOY
• Keywords: Capital asset; Double taxation relief; Bonafide belief; Earning of tax free income; Deemed to accrue or arise in india; Notional interest; Revised return; Revenue expenditure
• Section: 143(3); 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.638/MUM/2014 (ASSESSMENT YEAR 2009-10) THE DCIT, CIR.6(1), ROOM NO.506, 5 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... A PPELLANT VS. M/S.ABC BEARING LTD. 402-B, POONAM CHAMBERS, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400018 PAN: AAACT 5018Q .... RESPOND ENT ITA NO.780/MUM/2014 (ASSESSMENT YEAR 2009-10) M/S.ABC BEARING LTD. 402-B, POONAM CHAMBERS, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400018 PAN: AAACT 5018Q .... APPELLANT VS. THE ACIT, CIR.6(1), ROOM NO.511, 5 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ASSESSEE BY : MS. AARTI VISSANJI REVENUE BY : SHRI ARUN SHENOY DATE OF HEARING : 08/09/2016 DATE OF PRONOUNCEMENT : 11/01/2017 2 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) ORDER PER G.S.PANNU,A.M: THESE ARE CROSS-APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER OF CIT(A)-14, MUMBAI DATED 26/11/2013, PE RTAINING TO THE ASSESSMENT YEAR 2009-10, WHICH IN TURN, HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 29/12/2011 UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. GROUNDS OF APPEALS APPEAL RAISED BY REVENUE AS W ELL AS ASSESSEE READ AS UNDER:- REVENUES GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF RS.32,19,155/- MADE BY THE A.O. U/S. 36(1)(III) OF THE I.T. ACT BY HOLDING THAT NO LOAN WAS TAKEN BY THE ASSESSEE DURING THE YEAR DESPITE THE FACT THAT THE WORKING CAPITAL LOAN HAS INCREASED FROM RS.17.48 CRORES LAST YEAR TO RS.44.19 CRORES THIS YEAR. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF RS.32,19,155/- MADE BY THE A.O. U/S. 36(1)(III) OF THE I.T. ACT WITHOUT APPRECIATIN G THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE IN COURSE OF ASSESSMENT PROCEEDINGS THAT A MOUNT BORROWED ON WHICH DEDUCTION FOR INTEREST IS CLAIMED HAS BEEN UTILIZED FOR BUSINESS OF ASSESSEE (WORK-IN- PROGRESS). 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS MADE BY THE A.O ON ACCOUNT OF PRIOR PERIOD EXPENSES OF RS.3,66,034/- HOLDING THAT THE SAME HAS ALREADY BEEN CAPITALIZED IN EARLIER YEAR WITHOUT ANY EVIDENCE BEING AVAILABLE O N RECORD. IF ANY EVIDENCE WAS BROUGHT DURING THE APPELLATE STAGE THEN FRESH EVIDE NCE WAS ACCEPTED FOR THE FIRST TIME WITHOUT GIVING OPPORTUNITY OF EXAMINING THE SA ME TO THE A.O IN CONTRAVENTION OF RULE 46A OF I.T RULES. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN GIVING RELIEF OF RS.18,21,489/- OUT OF DISALLOWANCE OF REPAIR AND MAINTENANCE EXPENSES BY HOLDING THAT THE AMOUNT OF RS.18,21,489/- INCURRED BY THE ASSESSEE HAS ALREADY BEEN CAPITALIZED WITHOUT ANY E VIDENCE BEING AVAILABLE ON RECORD. IF ANY EVIDENCE WAS BROUGHT BY ASSESSEE AT THE APPELLATE STAGE FOR THE FIRST 3 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) TIME THEN IT IS IN VIOLATION OF RULE 46A OF I.T.RUL ES AS NO OPPORTUNITY OF EXAMINING THE SAME WAS GIVEN TO THE A.O. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN GIVING RELIEF OF RS.43,17,791/- OUT OF DISALLOWANCE OF REPAIR AND MAINTENANCE EXPENSES BY HOLDING THAT THE SUM OF RS. 43,17,791/- SPENT BY THE ASSESSEE IS A REVENUE EXPENDITURE WITHOUT ANY EVIDE NCE BEING AVAILABLE ON RECORD. IF ANY EVIDENCE WAS BROUGHT BY ASSESSEE AT THE APPELLA TE STAGE FOR THE FIRST TIME THEN IT IS IN VIOLATION OF RULE 46A OF I.T.RULES AS NO OPPO RTUNITY OF EXAMINING THE SAME WAS GIVEN TO THE A.O. 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, LD. CLT(A) HAS ERRED IN DIRECTING THE AO TO REWORK THE ADJUSTM ENT U/S.145A WITHOUT THERE BEING ANY CLAIM IN THIS EFFECT BY THE ASSESSEE IN ITS RET URN OF INCOME IN CONTRAVENTION TO THE JUDGEMENT OF THE HON'BLE SUPREME COURT'S DECISION I N THE CASE OF GOETZE (INDIA) LTD. (284 ITR 323). 7. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, BY ADMITTING A NEW CLAIM OF THE ASSESSEE, THE LD.CLT(A) EXCEEDED ITS POWERS SINCE THE POWER OF AN APPELLATE AUTHORITY, AS HELD BY SUPREME COURT IN TH E CASE OF JUTE CORPORATION OF INDIA LTD, 187 ITR 688, IS ONLY COTERMINOUS WITH THE POWE RS OF THE ORIGINAL AUTHORITY? ASSESSEES GROUNDS OF APPEAL:- 1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE DISALLOWANCE OUT OF SALES PROMOTION EXPENSES AND TR AVELLING EXPENSES & RESTRICTING IT TO 10% OF THE EXPENDITURE INCURRED. YOUR APPELLANTS SUBMIT THAT THE SALES PROMOTION EXPENSES AND FOREIGN TRAVELLING EXPENSES OUGHT TO H AVE BEEN ALLOWED IN FULL AS CLAIMED BY YOUR APPELLANTS. 2) THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING TH E DISALLOWANCE TO THE EXTENT OF RS.26,95,219/- OUT OF INTEREST U/S. 14A READ WITH R ULE 8D OF THE INCOME TAX ACT, 1961. YOUR APPELLANTS SUBMIT THAT NO DISALLOWANCE I S CALLED FOR OUT OF INTEREST AND INTEREST EXPENDITURE AS CLAIMED OUGHT TO HAVE BEEN ALLOWED. WITHOUT PREJUDICE TO THE ABOVE OUR APPELLANTS SUBMIT THAT THE CIT (APPEALS) ERRED IN TAKING THE FIGURE OF INTEREST FOR CALCULATING DISALLOWANCE AT RS. 4,06,2 4,243/- INSTEAD OF RS. 2,00,60,521/- AS ACCEPTED BY THE CIT{APPEALS) IN PARA 4.3.7 AT PA GE NO.11 OF THE APPELLATE ORDER PASSED BY HER. 3) THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.6,30,407/- ON ACCOUNT OF EXPENSES U/S. 14A READ WITH RULE 8D OF T HE INCOME TAX ACT,1961. YOUR APPELLANTS SUBMIT THAT THE DISALLOWANCE IS NOT WARR ANTED AND OUGHT TO BE DELETED. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANTS SUB MIT THAT THE DISALLOWANCE MADE ON ACCOUNT OF EXPENSES IS EXCESSIVE AND DISALLOWANC E IF ANY, OUGHT TO BE RESTRICTED TO RS.10,000/-. 4 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) 4) THE LEARNED CIT{A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.13,55,948/- UNDER SECTION 40A(IA) OF THE INCOME TAX ACT, 1961. YOUR A PPELLANTS SUBMIT THAT THE SAID DISALLOWANCE IS NOT CALLED FOR AND THIS ADDITION BE DELETED. YOUR APPELLANTS SUBMIT THAT THE TAX WAS NOT REQUIRED TO BE DEDUCTED FROM T HE PAYMENTS MADE TO MR. TARCISCIO LUCCHETTA AND MR.TAZO TOTSUA BASED ON CER TIFICATE OF CHARTERED ACCOUNTANTS AND UNDER BONAFIDE BELIEF THAT NO TAX W AS REQUIRED TO BE DEDUCTED. UNDER THE CIRCUMSTANCES, YOUR APPELLANTS SUBMIT THA T THE DEDUCTION OUGHT TO BE ALLOWED FROM AMOUNTS PAID TO MR. TARCISCIO LUCCHETT A AND MR. TAZO TOTSUA. 5) THE LEARNED CIT (A) FAILED TO APPRECIATE THAT IN THE FACTS AND CIRCUMSTANCES YOUR APPELLANT'S CASE AND IN LAW, INTEREST UNDER SECTION 234B OF THE INCOME TAX ACT, 1961 IS NOT CHARGEABLE AT ALL AND OUGHT TO HAVE BEEN DIR ECTED THAT THE INTEREST UNDER SECTION 234B BE DELETED. 6) YOUR APPELLANTS FURTHER RESERVE THE RIGHTS TO A DD, AMEND OR ALTER THE AFORESAID GROUNDS OF APPEAL AS THEY MAY THINK FIT BY THEMSELV ES OR BY THEIR REPRESENTATIVES. 3. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E, WHEREIN THE FIRST ISSUE RELATES TO THE ACTION OF THE CIT(A) IN CONFIRMING T HE DISALLOWANCE OUT OF SALE PROMOTION EXPENSES AND TRAVELLING EXPENSES @10% OF THE TOTAL EXPENDITURE IN AN ADHOC MANNER. 3.1 IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT AS SESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER- ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURE OF BA LL, THRUST AND ROLLER BEARINGS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSES SING OFFICER NOTICED THAT AS PER THE AIR INFORMATION RECEIVED, MOST OF THE EXPEN SES INCURRED BY THE ASSESSEE TOWARDS TRAVELLING EXPENSES AND SALES PROM OTION WERE THROUGH CREDIT CARDS. ACCORDINGLY, THE ASSESSING OFFICER C ALLED FOR THE DETAILS AND AS PER THE DISCUSSION CONTAINED IN PARA-4 OF THE ASSES SMENT ORDER, HE HAS DISALLOWED 1/4 TH OF THE TOTAL EXPENSES OF RS.13,82,042/- AS BEING I NCURRED FOR NON-BUSINESS PURPOSES. AS A CONSEQUENCE, THE DISAL LOWANCE OF RS.3,45,512/- WAS WORKED OUT. 5 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) 3.2 BEFORE CIT(A), APART FROM OTHER GROUNDS, ASSESS EE CONTENDED THAT THE EXPENSES WERE INCURRED PURELY FOR THE PURPOSES OF BUSINESS AND THAT EVEN THE FOREIGN TRAVEL EXPENSES RELATED TO SHORT TERM S VISITS BY THE DIRECTORS AND EMPLOYEES OF THE ASSESSEE COMPANY FOR MEETING CUSTO MERS AND SUPPLIERS. IT WAS ALSO POINTED OUT THAT THE FOREIGN TRAVEL EXPENS ES ALSO INCLUDED EXPENSES RELATING TO THE TRAVEL UNDERTAKEN BY THE TWO OF THE FOREIGN CONSULTANTS HIRED BY THE ASSESSEE. THE CIT(A) OBSERVED THAT THE INCURRE NCE OF SALES PROMOTION AND FOREIGN TRAVEL EXPENSES IN THE COURSE BUSINESS HAS NOT BEEN DOUBTED BUT THE ONLY DISPUTE PERTAINED TO THE QUANTIFICATION OF SU CH EXPENSES INCURRED FOR THE PURPOSES OF BUSINESS. THE CIT(A), FURTHER OBSERVED THAT IT IS A MATTER OF COMMON KNOWLEDGE THAT FOR ANY SUCH EXPENDITURE, TH ERE ARE CERTAIN EXPENSES WHICH ARE NOT FULLY VERIFIABLE AND THEREFORE, HE ESTIMATED THE DISALLOWANCE AT 10% OF THE EXPENDITURE AS AGAINST 25% MADE BY THE A SSESSING OFFICER. 3.3 IT IS QUITE CLEAR FROM THE MANNER IN WHICH THE DISALLOWANCE WAS INITIALLY MADE BY THE ASSESSING OFFICER AND, THEREAFTER PARTL Y CONFIRMED BY THE CIT(A), THAT THE SAME IS BASED ON MERE SURMISES WITHOUT BRI NGING OUT ANY SPECIFIC INSTANCES OF EXPENDITURE HAVING BEEN INCURRED FOR N ON-BUSINESS PURPOSES, INSPITE OF THE FACT THAT THE COMPLETE DETAILS WERE MADE AVAILABLE BY THE ASSESSEE IN THE COURSE OF THE PROCEEDINGS. IN THIS VIEW OF THE MATTER, WE DEEM IT FIT AND PROPER TO SET-ASIDE THE ACTION OF THE CI T(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOWANCE SINCE THE DECISION OF THE CIT(A) IS BASED ON SOME CONJECTURES AND SURMISES. THUS, ON T HIS GROUND ASSESSEE SUCCEEDS. 4. IN SO FAR AS, GROUNDS OF APPEAL NO. 2 & 3 ARE CO NCERNED, THE SAME RELATE TO DISALLOWANCE OF RS.33,25,626/- MADE BY THE ASSES SING OFFICER BY INVOKING 6 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) THE PROVISIONS OF SECTION 14A OF THE ACT BASED ON T HE FORMULA CONTAINED IN RULE 8D(2)OF THE INCOME TAX RULES, 1962 ( IN SHORT THE RULES). GROUND OF APPEAL NO.2 RELATES TO A DISALLOWANCE OF RS.26,95,219/ MA DE OUT OF INTEREST EXPENDITURE BY APPLYING RULE 8D(2)(II) OF THE RULES AND GROUND OF APPEAL NO.3 RELATE TO DISALLOWANCE OF RS.6,30,407/- OUT OF OTH ER EXPENSES COMPUTED BY APPLYING RULE 8D(2)(III) OF THE RULES. 4.1 THE RELEVANT FACTS ARE THAT DURING THE YEAR UND ER CONSIDERATION, ASSESSEE WAS FOUND TO HAVE EARNED DIVIDEND INCOME OF RS.4,43 ,882/- AND INTEREST INCOME OF RS.42,623/-, WHICH WAS CLAIMED AS EXEMPT. THE ASSESSING OFFICER NOTED THAT INSPITE OF EXISTENCE OF EXEMPT INCOME, A SSESSEE HAD NOT DISALLOWED ANY EXPENDITURE RELATABLE TO SUCH INCOME, AS REQUIR ED UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. THE ASSESSING OFFICER NOTE D THAT ASSESSEE HAD PAID INTEREST OF RS.4,83,83,904/- ON VARIOUS LOANS AND A FTER REDUCING A SUM OF RS.1,62,36,376/- REPRESENTING INTEREST ON SECURED LOANS TAKEN FOR PURCHASE OF FIXED ASSETS, THE BALANCE OF RS.3,21,47,528/- WAS C ONSIDERED AS INTEREST FOR THE PURPOSES OF APPLYING THE FORMULA CONTAINED IN RULE D 8D(2)(II) OF THE RULES. ON THIS BASIS, THE DISALLOWANCE OF INTEREST WAS WORKED OUT TO RS.26,95,219/-. 4.2 BEFORE CIT(A), ASSESSEE HAS RAISED VARIOUS SUBM ISSIONS ASSAILING THE DISALLOWANCE. THE ONLY PLEA ACCEPTED BY THE CIT(A) WAS THAT THE AMOUNT OF INTEREST CONSIDERED FOR THE PURPOSES OF APPLYING TH E FORMULA OF RULE 8D(2)(II) OF THE RULES BE REDUCED BY A SUM OF RS.77,59,661/-, WHICH REPRESENTED THE INTEREST RECEIVED BY THE ASSESSEE DURING THE YEAR. APART THEREFROM, THE ACTION OF THE ASSESSING OFFICER HAS BEEN AFFIRMED. 4.3 BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE HAS VEHEMENTLY POINTED OUT THAT DURING THE YEAR UNDER CONSIDERATIO N, NO FRESH INVESTMENTS 7 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) HAVE BEEN MADE. IT IS POINTED OUT THAT THE ONLY IN VESTMENT DURING THE YEAR ARE IN RELATION TO THE NSC CERTIFICATE - RS.10,000 , EQUITY SHARES OF NSK-ABC BONDS JOINT VENTURE RS.12,50,00,000/-AND REDEEMAB LE PREFERENCE SHARES AND EQUITY SHARES OF MIPCO RS.1,89,00,000/- AND R S.95,86,025/- RESPECTIVELY; THE AFORESAID INVESTMENTS HAVE BEEN CULLED OUT BY THE ASSESSING OFFICER IN PARA 5.1 OF THE ASSESSMENT ORDER BASED ON THE WRITTEN SUBMISSIONS OF THE ASSESSEE. BEFORE THE LOWER AUTHORITIES AS W ELL AS BEFORE US, ONE OF THE PERTINENT POINTS RAISED BY THE ASSESSEE IS THAT THE AMOUNT OF SHARE CAPITAL AND FREE RESERVES AVAILABLE WITH THE ASSESSEE ARE SUBST ANTIALLY MORE AS COMPARED TO THE TOTAL INVESTMENTS AS ON 31/3/2009 AND, THERE FORE, FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CIT V. RELIANCE UTILITIES & POWER LTD.,313 ITR 340(BOM), IT HAS TO BE PRESUMED THAT THE SAID INVESTMENTS HAVE BEEN MADE OUT OF INTEREST FREE FUN DS. IT IS ALSO POINTED OUT BY THE ASSESSEE THAT THE INTEREST EXPENDITURE OF RS .4,83,83,904/- HAS BEEN INCURRED ON SPECIFIC LOANS RAISED, DETAILS OF WHIC H HAVE ALSO BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ON THIS BASIS, IT IS ALSO SOUGHT TO BE EMPHASIZED THAT NO COMPONENT OF INTERE ST EXPENDITURE CAN BE SAID TO BE RELATABLE TO THE INVESTMENTS IN QUESTION AND RATHER THE INTEREST EXPENDITURE IS RELATABLE TO THE BUSINESS ACTIVITIES AND NOT TO THE INVESTMENTS IN QUESTION. 4.4 FACTUALLY SPEAKING, WE FIND THAT THE AFORESAID ASSERTIONS OF THE ASSESSEE ARE BORNE OUT OF RECORD AND INFACT, WRITTEN SUBMISS IONS OF THE ASSESSEE DATED 27/12/2011, WHICH HAS BEEN REPRODUCED BY THE ASSESS ING OFFICER IN PARA-5.1 OF HIS ORDER BRINGS OUT SUCH DETAILS. THE AFORESAID FACT-SITUATION HAS NOT BEEN REPUDIATED BY THE REVENUE AT ANY STAGE AND, THEREFO RE, FOLLOWING THE RATIO OF 8 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) THE JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT IN T HE CASES OF CIT VS. HDFC BANK LTD., 366 ITR 505(BOM) AND HDFC BANK LTD. V S. DCIT,383 ITR 529 (BOM), WHEREIN THE PRINCIPLE LAID DOWN IN THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD .(SUPRA) HAS BEEN APPLIED IN THE CONTEXT OF SECTION 14A OF THE ACT ALSO, THE IMP UGNED DISALLOWANCE IS NOT MAINTAINABLE. THUS, NOTICING THAT THE INTEREST-FRE E FUNDS AVAILABLE WITH THE ASSESSEE IN THE SHAPE OF SHARE CAPITAL AND FREE RES ERVES BEING MORE THAN INVESTMENTS IN QUESTION, A PRESUMPTION CAN BE DRAWN THAT SUCH INVESTMENTS HAVE BEEN MADE OUT OF SUCH INTEREST FREE FUNDS, AND ACCORDINGLY NO DISALLOWANCE UNDER SECTION 14A OF THE ACT IS MERITE D OUT OF THE INTEREST EXPENDITURE. AS A CONSEQUENCE, THE DISALLOWANCE OF RS.26,95,219/- MADE UNDER SECTION 14A BY APPLYING RULE 8D(2)(II) OF THE RULES IS HEREBY DELETED. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 4.5 IN SO FAR AS, THE DISALLOWANCE OF RS.6,30,407/ - ON ACCOUNT OF EXPENSES IS CONCERNED, THE ASSESSING OFFICER HAS COMPUTED THE S AME IN TERMS OF RULE 8D(2)(III) OF THE RULES . THE CIT(A) HAS ALSO AFFIR MED THE SAID DISALLOWANCE. 4.6 BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT THE DISALLOWANCE IS NOT WARRANTED AND THAT IN ANY CASE THE DISALLOWANCE WAS EXCESSIVE. IN THIS CONTEXT, IT IS NOTICED THAT THE DISALLOWANCE COMPUTED BY THE ASSESSING OFFICER IS QUITE EXCESSIVE INASMUCH AS TH E EXEMPT INCOME IS MERELY TO THE EXTENT OF RS.4,86,505/-, WHEREAS THE DISALLO WANCE OUT OF EXPENSES HAS BEEN MADE TO THE TUNE OF RS.6,30,407/-. CONSIDERIN G THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE DEEM IT FIT AND PROPER TO RETAIN THE DISALLOWANCE TO THE EXTENT OF THE EXEMPT INCOME AND BALANCE OF THE DISA LLOWANCE IS DIRECTED TO BE DELETED. 9 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) 4.7 IN THE RESULT, GROUND OF APPEAL NO.2 IS ALLOW ED, WHEREAS GROUND OF APPEAL NO.3 IS PARTLY ALLOWED. 5. BY WAY OF GROUND OF APPEAL NO.4, ASSESSEE HAS A SSAILED THE ACTION OF THE INCOME-TAX AUTHORITIES IN DISALLOWING AN EXPEND ITURE OF RS.13,55,948/- REPRESENTING REMUNERATION PAID TO CONSULTANTS BY IN VOKING SECTION 40(A)(I) OF THE ACT ON THE GROUND THAT ASSESSEE HAS NOT DEDUCTE D THE REQUISITE TAX AT SOURCE UNDER SECTION 195(1) OF THE ACT. 5. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE HAD PAID A SUM OF RS.5,71,154/- TO MR. TARCISCIO LUCCHETTA, A RESIDEN T OF ITALY AND RS.7,84,794/- TO MR. TAZO TOTSUA, A RESIDENT OF JAPAN AS REMUNERA TION FOR ENGAGING THEIR SERVICES. IN TERMS OF THEIR OF CONTRACTS, COPIES O F WHICH ARE PLACED AT PAGES 114 TO 127 OF THE PAPER BOOK, IT IS SEEN THAT THE TWO I NDIVIDUALS WERE ENGAGED TO PROVIDE ENGINEERING SERVICES AT BARUCH PLANT OF THE ASSESSEE COMPANY. AS PER THE CONTRACT WITH MR. TARCISCIO LUCCHETTA DATED 22/2/2008, THE SCOPE OF WORK IS STATED TO BE MAINTENANCE OF MACHINES, REDUCING B REAKDOWN TIME, TO ENHANCE PRODUCTIVITY OF MACHINES AND QUALITY OF PR ODUCTS AND ALSO TO TRAIN ENGINEERS ON MAINTENANCE AND OTHER ASPECTS OF MACHI NES. THE PERIOD OF CONTRACT HAVE BEEN STATED TO BE SIX MONTHS. SIMILA RLY, WITH RESPECT TO THE CONTRACT WITH MR. TAZO TOTSUA DATED 20/09/2008, T HE SERVICES HAVE BEEN HIRED FOR ASSISTING THE MANUFACTURING TEAM IN REDUC ING THE SET-UP TIME, REDUCTION OF CYCLE TIME, REDUCTION OF IN-PROCESS RE JECTIONS, TO IMPROVE THE CP/CPK VALUES AND ENHANCING THE QUALITY LEVEL OF PR ODUCTS APART FROM TRAINING THE QUALITY TEAM IN IMPROVING THE QUALITY SYSTEMS AND PROCESS OPTIMIZATION. FURTHER, IT IS PRESCRIBED THAT THE PERIOD OF CONTRA CT SHALL BE OF 17 DAYS I.E. 21/09/2008 TO 07/10/2008. SIMILARLY, OTHER CONTRAC TS HAVE ALSO BEEN ENTERED 10 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) WITH MR. TAZO PROVIDING FOR VARYING PERIODS OF ENGA GEMENT. IT IS POINTED OUT THAT THE TOTAL PERIOD OF ENGAGEMENT FOR BOTH THE CO NSULTANTS DOES NOT EXCEED 183 DAYS. THE STAND OF THE ASSESSEE HAS BEEN THAT THE PAYMENTS MADE TO THE TWO PROFESSIONALS ARE FOR THE WORK DONE BY THEM FRO M TIME TO TIME IN INDIA FOR A PERIOD OF LESS THAN 183 DAYS; AND THAT THEY ARE PROVIDING INDEPENDENT PERSONAL SERVICES, THUS, NOT LIABLE TO BE TAXED IN INDIA HAVING REGARD TO THE RESPECTIVE DOUBLE TAXATION AVOIDANCE AGREEMENT BETW EEN INDIA-ITALY AND INDIA-JAPAN. THE ASSESSING OFFICER AND ALSO THE CI T(A) HAVE DISAGREED WITH THE ASSESSEE THAT THE TWO INDIVIDUALS HAVE RENDERED IND EPENDENT PERSONAL SERVICES, AS CLAIMED BY THE ASSESSEE. AS PER THE I NCOME-TAX AUTHORITIES, THE TWO INDIVIDUALS ARE TO BE TAKEN AS CONTRACT EMPLOYE ES AND FOR THAT MATTER, THE CIT(A) HAS REFERRED TO THE FACT THAT THE TRAVEL EX PENDITURE OF THE TWO INDIVIDUALS HAS BEEN DEBITED IN THE TRAVEL EXPENSES ACCOUNT. SECONDLY, AS PER THE LOWER AUTHORITIES, THE AMOUNT PAID IS IN THE NA TURE OF TECHNICAL SERVICE AND HENCE, IT IS AN INCOME DEEMED TO ACCRUE OR ARISE IN INDIA IN TERMS OF SECTION 9(1)(VII) OF THE ACT. FOR THE ABOVE REASONS, IT HAS BEEN HELD THAT SUCH PAYMENTS ATTRACT THE PROVISIONS OF SECTION 195(1) OF THE ACT FOR DEDUCTING REQUISITE TAX AT SOURCE IN INDIA, AND IN THE ABSEN CE OF THE REQUISITE TAX HAVING BEEN DEDUCTED AT SOURCE THE CORRESPONDING EXPENDI TURE OF RS.15,55,948/- HAS BEEN DISALLOWED UNDER SECTION 40(A)(I) OF THE A CT 5.1 BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT THE STAND OF THE CIT(A) TO THE EFFECT THAT THE TWO INDIVIDUALS ARE TO BE UNDERSTOOD AS EMPLOYEES OF THE ASSESSEE IS COMPLETE LY MISDIRECTED. IT WAS POINTED OUT THAT THOUGH THE TRAVEL EXPENSE OF THE TWO INDIVIDUALS HAS BEEN DEBITED TO THE FOREIGN TRAVEL EXPENSES ACCOUNT BUT THE TWO HAVE NOT BEEN 11 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) TREATED AS EMPLOYEES AND FOR THAT MATTER REFERRED TO THE FRINGE BENEFIT TAX (FBT) CALCULATIONS. IT HAS BEEN POINTED OUT THAT B OTH THE INDIVIDUALS HAVE BEEN HIRED FOR RENDERING THEIR PROFESSIONAL SERVICES BY WAY OF INDIVIDUAL CONTRACTS AND THERE IS NO DISPUTE TO THE FACT THAT THE TOTAL PERIOD FOR WHICH THEY HAVE RENDERED SERVICES IN INDIA DURING THE PREVIOUS YEA R UNDER CONSIDERATION IS LESS THAN 183 DAYS. IN THIS CONTEXT, REFERENCE HAS BEEN MADE TO ARTICLE -15 OF THE INDIA ITALY DTAA TO POINT OUT THAT INCOME DERIVED BY RECIPIENTS OF A CONTRACTING STATE IN RESPECT OF PROFESSIONAL SERVIC ES OR OTHER INDEPENDENT ACTIVITIES CAN BE TAXED IN THE OTHER STATE ONLY I F SUCH PERSON STAYS IN OTHER STATE FOR A PERIOD OR PERIODS EXCEEDING 183 DAYS OR IN THE RELEVANT YEAR HE HAS A FIXED BASE REGULARLY AVAILABLE TO HIM IN THE OT HER STATE FOR THE PURPOSE OF PERFORMING HIS ACTIVITIES BUT ONLY SO MUCH OF THE I NCOME AS IS ATTRIBUTABLE TO THAT FIXED BASE. IN THIS CONTEXT, LD. REPRESENTATI VE FOR THE ASSESSEE POINTED OUT THAT THE PERIOD OF STAY OF MR. LUCCHETTA IS LES S THAN 183 DAYS IN INDIA AND HE HAS NO FIXED BASE AVAILABLE IN INDIA AND THERE FORE, THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. SIMILARLY, IN THE CONTEXT OF PAYMENT MADE TO MR. TAZO IS CONCERNED, RELIANCE HAS BEEN PL ACED ON ARTICLE -14 OF INDIA-JAPAN DTAA, WHEREIN SIMILAR PROVISIONS ARE E XISTING. BY REFERRING TO VARIOUS INDIVIDUAL CONTRACTS WITH MR. TAZO, COPIES OF WHICH HAS BEEN PLACED IN THE PAPER BOOK, IT HAS BEEN POINTED OUT THAT THE SAID INDIVIDUAL HAS NOT STAYED IN INDIA FOR A PERIOD AGGREGATING 183 DAYS IN THE INSTANT YEAR AND NOR DOES HE HAS ANY FIXED BASE IN INDIA. IT IS POINTE D OUT THAT THE TWO INDIVIDUALS ARE BASICALLY ENGINEERS AND HAVE PROVIDED SERVICES TO THE ASSESSEE IN THEIR INDEPENDENT CAPACITY AS PROFESSIONAL SERVICES. 12 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) 5.2 ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE HAS PRIMARILY REITERATED THE STAND OF THE LOWER AUTHORITIES, WHIC H WE HAVE ALREADY NOTED IN THE EARLIER PARAS AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE RELEVANT CONTRACTS WITH THE INDIVIDUALS BRING OUT THAT THE SERVICES HAVE RENDERED BY THEM IN THE FIELD OF THEIR PROFESSION. BOTH THE RE CIPIENT INDIVIDUALS ARE ENGINEERS/CONSULTANTS AND IN-FACT, THE CONTRACTS W ITH THEM SPECIFICALLY SAY THAT THEIR SERVICES HAVE BEEN ENGAGED AS ADVISORS/C ONSULTANTS. THEY HAVE RENDERED SERVICES IN THEIR PROFESSIONAL CAPACITY. THOUGH THE SERVICES RENDERED BY THEM MAY INVOLVE TECHNICAL ABILITIES, BUT NO T ECHNICAL KNOW-HOW HAS BEEN PASSED ON. MOREOVER, THE RELEVANT CLAUSES OF THE DTAA BETWEEN INDIA-ITALY AND INDIA-JAPAN CLEARLY SUGGEST THAT WHERE THE PAYM ENTS FALL WITHIN THE PURVIEW OF INDEPENDENT PERSONAL SERVICES THEN, EVEN IF, THEY ARE TREATED AS FEES FOR TECHNICAL FEE OR FEES FOR INCLUDED SERV ICES, SUCH INCOME OF THE NON- RESIDENT SHALL BE LIABLE TO BE TAXED UNDER ARTICL E GOVERNING INDEPENDENT PERSONAL SERVICES AND NOT AS FEE FOR TECHNICAL SER VICES. UNDER THESE CIRCUMSTANCES, WE FIND NO REASON TO DISAGREE WITH T HE STAND OF THE ASSESSEE THAT THE PAYMENTS IN QUESTION ARE LIABLE TO BE TAXE D UNDER THE RESPECTIVE ARTICLES OF INDO-JAPAN & INDO-ITALY DTAA GOVERN ING INDEPENDENT PERSONAL SERVICES. ONCE IT IS HELD THAT THE PAYMENTS FALL U NDER THE ARTICLE GOVERNING INDEPENDENT PERSONNEL SERVICES, THE SAME CAN BE TAX ED IN INDIA ONLY, IF THE TWO INDIVIDUALS HAVE STAYED IN INDIA FOR MORE THAN 183 DAYS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN SO FAR AS THE DURATION OF STAY IS CONCERNED, THERE IS NO DISP UTE THAT THE TWO INDIVIDUALS HAVE STAYED IN INDIA FOR A PERIOD OF LESS THAN 183 DAYS DURING THE PREVIOUS YEAR 13 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . THUS, SUCH PAYMENTS ARE NOT LIABLE TO BE TAXED IN INDIA AND THERE IS N O FAULT ON THE PART OF THE ASSESSEE IN NOT DEDUCTING TAX AT SOURCE ON SUCH PAY MENTS. 5.4 THEREFORE, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN INVOKING SECTION 40(A)(I) OF THE ACT T O DISALLOW THE IMPUGNED EXPENDITURE. AS A CONSEQUENCE, THE ORDER OF THE CI T(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N OF RS.13,55,948/-. 5.5 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.638/MUM/2014, DEPARTMENTAL APPEAL: 6. IN SO FAR AS GROUND OF APPEAL NO.1 & 2 OF THE RE VENUES APPEAL ARE CONCERNED, THEY RELATE TO A SINGLE ISSUE RELATING T O DISALLOWANCE OF INTEREST OF RS.32,19,155/- MADE BY THE ASSESSING OFFICER BY INV OKING THE PROVISO TO SECTION 36(1)(III) OF THE ACT . 6.1 IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT TH E ASSESSING OFFICER NOTED THAT ASSESSEE COMPANY HAD CAPITAL WORK-IN-PROGRESS OF RS.2,68,26,292/-. IT WAS ALSO NOTED THAT ASSESSEE HAD INCURRED EXPENDI TURE ON INTEREST ON MONEYS BORROWED. IN THIS LIGHT, THE ASSESSING OFFICER REF ERRED TO THE PROVISO TO SECTION 36(1)(III) OF THE ACT WHEREIN, IT IS PROVIDED THAT INTEREST PAID TO ACQUIRE ASSET TILL THE DATE IT IS PUT TO USE SHALL NOT BE ALLOWED AS D EDUCTION. FOR THE SAID REASON, THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS T O WHY THE INTEREST PAID ON THE AMOUNT USED IN THE CAPITAL WORK-IN-PROGRESS SHO ULD NOT BE DISALLOWED. IN PARA 7.1 OF THE ASSESSMENT ORDER, THE ASSESSING OFF ICER HAS FURTHER NOTICED THAT THE DETAILS OF THE CAPITAL WORK-IN-PROGRESS OF RS.2 ,68,26,298/- REVEAL THAT NO INTEREST HAS BEEN CAPITALIZED. FOR THE SAID REASON S, THE ASSESSING OFFICER 14 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) WORKED OUT THE INTEREST PROPORTIONATE TO THE AMOUN T OF CAPITAL WORK-IN- PROGRESS AT RS.32,19,155/- AND DISALLOWED THE SAME IN TERMS OF THE PROVISO TO SECTION 36(1)(III) OF THE ACT. 6.2 BEFORE THE CIT(A), ASSESSEE SUBMITTED THAT THER E ARE NO NEW LOANS AVAILED DURING THE YEAR FOR ACQUIRING ANY FIXED A SSET AND THE LOANS REFERRED TO BY THE ASSESSING OFFICER WERE PAST LOANS. IT WAS, THEREFORE, CONTENDED THAT THE ASSESSING OFFICER WAS WRONG IN ATTRIBUTING AN Y NOTIONAL INTEREST TO THE BALANCE OF CAPITAL WORK-IN-PROGRESS . IT WAS ALSO POINTED OUT, BASED ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. THAT THERE WAS NO EXTENSION OF EXISTING BUSINESS SO AS TO ATTRACT THE PROVISO TO SECTION 36 (1)(III) OF THE ACT . THE CIT(A) HAS CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE ASS ESSEE AND OBSERVED THAT NO DISALLOWANCE WAS MERITED IN TERMS OF SECTION 36( 1)(III) HAVING REGARD TO THE FACTS OF THE CASE. 6.3. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE CIT(A) WAS WRONG IN INFERRING THAT NO NEW LOANS WE RE RAISED BY THE ASSESSEE AS DURING THE YEAR UNDER CONSIDERATION THE AMOUNT OF W ORKING CAPITAL LOAN HAS SINCE INCREASED THAN THE LAST YEAR. IT HAS ALSO BE EN POINTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS NOT A BLE TO PROVE THAT THE INTEREST EXPENDITURE CLAIMED HAS BEEN USED FOR THE PURPOSES OF BUSINESS OR NOT. 6.4 ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE A SSESSEE CONTENDED THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS NO FR ESH TERM LOANS FOR THE PURPOSES OF ACQUIRING ANY CAPITAL ASSET AND RATHER THE ASSESSEE HAD ONLY AVAILED-OFF INCREASED WORKING CAPITAL LOANS AS PER THE CHART PLACED AT PAGE24 15 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) OF THE PAPER BOOK. APART THERE FROM, IT HAS BEEN P OINTED OUT THAT ASSESSEE HAD RAISED SPECIFIC LOANS FOR THE PURPOSES OF ACQUI RING PLANT AND MACHINERY, WHICH WAS IN THE EARLIER YEARS. IT HAS BEEN POINTE D OUT THAT SO FAR AS THE PROVISO TO SECTION 36(1)(III) OF THE ACT IS CONCERN ED, THE SAME IS NOT APPLICABLE AS THERE HAS BEEN NO EXTENSION OF THE EXISTING BUSI NESS. IN SUM AND SUBSTANCE, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS SUPPORT ED THE ORDER OF THE CIT(A) ON THIS ASPECT. 6.5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. SECTION 36 (1)(III) OF THE ACT PERMITS DEDUCTION FOR THE AMOUNT OF INTERES T PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF BUSINESS. THE PROVISO TO SECTION 36(1)(III), AS IT STOOD FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, PRESCRIBED THAT WHERE ANY AMOUNT OF INTEREST IS PAID IN RESPECT OF BORROWING S MADE FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS, THE SAM E SHALL NOT BE ALLOWED AS DEDUCTION FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH SUCH AMOUNT WAS BORROWED TILL THE DATE ON WHICH SUCH ASSET WAS PU T TO USE. ON THE STRENGTH OF THE SAID PROVISO, THE ASSESSING OFFICER HAS INFE RRED THAT INTEREST RELATABLE TO THE CAPITAL WORK-IN-PROGRESS DESERVES TO BE DISALLO WED. FOR THAT MATTER, THE ASSESSING OFFICER HAS MADE A NOTIONAL ESTIMATION OF SUCH INTEREST @12%. NOTABLY, IN SO FAR AS THE STAND OF THE ASSESSING OF FICER IN PRINCIPLE IS CONCERNED, THERE CANNOT BE ANY DISPUTE. SO HOWEVER, IN ORDER TO INVOKE THE PROVISO TO SECTION 36(1)(III) OF THE ACT, THE ASSESSING OFFICE R IS REQUIRED TO ESTABLISH INTEREST HAS BEEN PAID IN RESPECT OF THE CAPITAL B ORROWED FOR ACQUISITION OF AN ASSET. FURTHER, IT IS ALSO REQUIRED TO BE ESTABLIS HED THAT THE ACQUISITION OF SUCH ASSET WAS FOR EXTENSION OF EXISTING BUSINESS. QUIT E CLEARLY, THE AFORESAID ASPECTS OF THE MATTER ARE NEITHER EMERGING FROM THE ASSESSMENT ORDER AND 16 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) NOR IT IS BROUGHT OUT BEFORE US. IT IS RELEVANT TO NOTE HERE THAT BEFORE THE CIT(A) IT HAS BEEN SPECIFICALLY PLEADED BY THE ASSE SSEE, AND WHICH HAS BEEN REPRODUCED BY THE CIT(A) IN PARA 6.2 OF HER ORDER, THAT THERE IS NO EXTENSION OF BUSINESS DURING THE YEAR AND EVEN IF THE LOAN IS TA KEN FOR ACQUIRING THE PURPOSE OF ACQUIRING CAPITAL ASSETS UNLESS THEY ARE USED FO R EXPANSION OF EXISTING BUSINESS, INTEREST EXPENSES SHOULD BE ALLOWED. THE AFORESAID STAND OF THE ASSESSEE IS SUPPORTED BY THE PHRASEOLOGY OF SECTI ON 36(1)(III) OF THE ACT, AS IT STOOD FOR THE ASSESSMENT YEAR UNDER CONSIDERATION A ND IN THE ABSENCE OF ANY FACTUAL REPUDIATION TO THE SAME, WE FIND NO REASON TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE A DDITION. AS A CONSEQUENCE, WE AFFIRM THE ORDER OF THE CIT(A) AND REVENUE FAILS IN GROUND OF APPEAL NO.1 & 2. 7. IN SO FAR AS, GROUND OF APPEAL NO.3 IS CONCERNED , THE SAME RELATES TO A DISALLOWANCE OF RS.3,66,034/- MADE BY THE ASSESSI NG OFFICER ON THE GROUND THAT THEY ARE PRIOR PERIOD EXPENSES. IN THE ASSESS MENT ORDER, THE ASSESSING OFFICER NOTES THAT THE DETAILS OF FOREIGN TRAVEL EX PENSES SUBMITTED BY THE ASSESSEE REVEALED THAT EXPENSES TOTALLING TO RS.3 ,66,334/- PERTAINED TO PRIOR PERIOD AND HE DISALLOWED THE SAME. BEFORE CIT(A), ASSESSEE ASSERTED THAT SUCH EXPENSES WERE IN-FACT RELATABLE TO THE PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND IN THE DET AILS SUBMITTED TO THE ASSESSING OFFICER IT WAS ERRONEOUSLY TYPED AS 21/08 /2008, WHEREAS THE RELEVANT DATE WAS 21/3/2009, CORRESPONDING TO THE A SSESSMENT YEAR UNDER CONSIDERATION. SECONDLY, ASSESSEE ALSO POINTED OU T THAT ACTUALLY NO DEDUCTION WAS CLAIMED, AS SUCH EXPENSES WERE DULY CAPITALIZED . THE CIT(A) NOTED THE 17 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) SUBMISSIONS AND DELETED THE ADDITION ON THE GROUND THAT NO DEDUCTION WAS CLAIMED TO THE P&L ACCOUNT AS THE EXPENSES WERE CA PITALIZED. 7.1 BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE HAS NOT REFERRED TO ANY COGENT EVIDENCE OR MATERIAL, WHICH WOULD REQUIRE US TO INTERFERE WITH THE FINDING OF THE CIT (A), WHICH IS HEREBY AFFIRMED. AS A CONSEQUENCE, GROUND OF APPEAL NO.3 RAISED BY T HE REVENUE IS DISMISSED. 8. IN SO FAR AS, GROUND OF APPEAL NO.4 IS CONCERNED , THE SAME RELATES TO AN ADDITION OF RS.18,21,489/- DELETED BY THE CIT(A) OU T OF THE REPAIR AND MAINTENANCE EXPENSES. GROUND OF APPEAL NO.5 IS ALS O RELATING TO THE DISALLOWANCE OF REPAIR AND MAINTENANCE EXPENSES, WH EREIN REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING T HE DISALLOWANCE OF RS.43,17,791/- 8.1 IN THE CONTEXT OF GROUNDS OF APPEAL NO.4 & 5, THE RELEVANT FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD DEBIT ED A TOTAL EXPENDITURE OF RS.181.31 LACS UNDER THE HEAD REPAIR AND MAINTENAN CE. ON THE BASIS OF THE DETAILS SUBMITTED BY THE ASSESSEE, THE ASSESSING OF FICER HAS OBSERVED THAT A SUM OF RS.61,36,278/- WAS CLAIMED TO BE INCURRED F OR RENOVATION OF BUILDING, ETC. THE RELEVANT DETAILS IN THIS REGARD HAVE BEEN TABULATED BY THE ASSESSING OFFICER IN PARA 11 OF THE ASSESSMENT ORDER, WHEREBY IT IS CULLED OUT THAT EXPENSES INCURRED ON PLANT AND MACHINERY REPAIR R S.18,07407/-; BUILDING REPAIRS RS.1,07,759/-; OTHERS - RS.1,25,087/-; AND WIND MILL - RS.96,025/-, TOTALLING TO RS.61,36,278/- ARE CAPITAL IN NATURE. THE ITEM WISE DETAILS OF SUCH EXPENDITURE HAS ALSO BEEN CULLED OUT BY THE ASSESSI NG OFFICER IN PARA 11 OF THE 18 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) ASSESSMENT ORDER. AS PER THE ASSESSING OFFICER ASS ESSEE HAS UNDERTAKEN EXTENSIVE REPAIRS OF THE STRUCTURE OF THE BUILDING AND PLANT & MACHINERY AND, THEREFORE, SUCH AMOUNT IS LIABLE TO BE TAKEN AS A C APITAL EXPENDITURE. IN APPEAL BEFORE THE CIT(A), ASSESSEE CONTENDED THAT OUT OF T HE TOTAL EXPENSE OF RS.61,36,278/-, DISALLOWED BY THE ASSESSING OFFICER , A SUM OF RS.18,21,489/- WAS ALREADY CONSIDERED TO BE OF CAPITAL NATURE AND WAS SUO-MOTO CAPITALIZED AND THUS, SUCH SUM OF RS.18,21,489/- COULD NOT BE DISALLOWED TWICE. REGARDING THE BALANCE OF RS.43,17,791/- IT WAS CLAI MED TO BE OF REVENUE IN NATURE. THE ASSESSEE POINTED OUT BEFORE THE CIT(A ) THAT THERE WAS NO CIVIL WORK UNDERTAKEN BUT ROUTINE MAINTENANCE EXPENSES WE RE INCURRED. THE ASSESSEE ALSO JUSTIFIED THE LEVEL OF EXPENDITURE BY POINTING OUT THAT THE REPAIR EXPENSES OF RS.43.14 LACS WERE QUITE INSIGNIFICANT CONSIDERING THE FIXED ASSETS TO THE TUNE OF RS.39.66 CRORES. THE CIT(A) HAS ACC EPTED BOTH THE PLEAS OF THE ASSESSEE AND DELETED THE ENTIRE ADDITION OF RS.61,3 6,278/-. 8.2 BEFORE US, THERE IS NO MATERIAL TO CONTROVERT T HE FINDING OF THE CIT(A) THAT AN AMOUNT OF RS.18,24,489/- ALREADY STANDS CAP ITALIZED BY THE ASSESSEE. THEREFORE, THE CIT(A) JUSTIFIABLY DELETED THE SAID ADDITION AS OTHERWISE IT WOULD HAVE AMOUNTED TO DOUBLE DISALLOWANCE. NOW, SO FAR AS THE BALANCE ADDITION OF RS. 43,17,791/- IS CONCERNED, THE FINDING OF THE CIT(A) IS THAT THE SAME HAS BEEN INCURRED ON REPAIRS. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE REFERRED TO PAGE 30 OF THE PAPER BOOK TO POINT OUT THE NATURE OF THE EXPENDITURE. AT PAGES 42 TO 45 OF THE PAPER BOOK I S PLACED DETAILS OF THE EXPENDITURE INCURRED ON REPAIRS TO PLANT & MACHINE RY, WHICH CLEARLY SHOW THAT NO NEW ASSET HAS BEEN ACQUIRED AND THAT THE EXPENSE S ARE ON REPAIRS OF THE EXISTING ASSETS. SIMILARLY, EVEN THE DETAILS OF TH E REPAIRS TO BUILDINGS, COPIES OF 19 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) WHICH HAVE BEEN PLACED AT PAGES 70 TO 72 OF THE PA PER BOOK, REVEAL THAT THE SAME HAVE BEEN INCURRED ON REPAIRS AND MAINTENANCE OF EXISTING ASSETS, FOR INSTANCE REPLACEMENT OF FENCING, REPAIR OF TILE WO RK IN THE ADMINISTRATIVE BLOCK, WHITEWASH AND PARTITION, DISMANTLING OF OLD DAMAGED WALL, ETC. NONE OF THE ITEMS OF EXPENSES HAVE BEEN SHOWN TO RESULT IN ACQUISITION OF ANY NEW ASSET. CONSIDERED IN THE LIGHT OF THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN HOLDING THAT THE EXPENSES ARE I N THE NATURE OF ROUTINE REPAIRS AND NOT IN THE NATURE OF CAPITAL. THUS, THE AFORESAID STAND OF THE CIT(A) IS ALSO AFFIRMED. RESULTANTLY, GROUNDS OF APPEAL N O.4 & 5 RAISED BY THE REVENUE ARE DISMISSED. 9. IN SO FAR AS, GROUNDS OF APPEAL NO.6 & 7 ARE CON CERNED, THE SAME RELATES TO THE DIRECTION OF THE CIT(A) REQUIRING THE ASSES SING OFFICER TO REWORK THE ADJUSTMENT U/S. 145A OF THE ACT. 9.1 IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT IN THE EARLIER ASSESSMENT YEARS OF 2005-06, 2006-07 AND ALSO FOR 2008-09, THE ASSE SSING OFFICER HAD MADE ADDITIONS ON ACCOUNT OF ADJUSTMENT PRESCRIBED IN SE CTION 145A OF THE ACT. BEFORE CIT(A), ASSESSEE PLEADED THAT SINCE SUCH ADD ITIONS HAVE BEEN CONFIRMED IN THE APPELLATE PROCEEDINGS, FOLLOWING THE SAME ME THOD IN THE INSTANT ASSESSMENT YEAR, ASSESSEE IS ENTITLED TO GET A RELI EF OF RS.3, 63,10,937/-. THE CIT(A) CONSIDERED THE PLEA OF THE ASSESSEE AND FOUN D IT QUITE JUSTIFIED AND, THEREFORE, SHE DIRECTED THE ASSESSING OFFICER TO RE WORK THE ADJUSTMENT PRESCRIBED UNDER SECTION 145A OF THE ACT AND ALLOW APPROPRIATE RELIEF. AGAINST SUCH A DECISION, REVENUE IS IN APPEAL BEFORE US. 20 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) 9.2 BEFORE US, THE ONLY PLEA OF THE REVENUE IS THA T THE INSTANT IS A FRESH CLAIM MADE AFTER FILING THE RETURN OF INCOME, A ND IT COULD BE MADE ONLY BY FILING A REVISED RETURN OF INCOME FOLLOWING THE RA TIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ (INDIA) LTD.(SUPRA). 9.3 ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE A SSESSEE DEFENDED THE FINDING OF THE CIT(A) AS ACCORDING TO HER THE SAME IS CONSEQUENT TO THE STAND OF THE ASSESSING OFFICER IN OTHER ASSESSMENT YEARS. 9.4 HAVING CONSIDERED THE RIVAL STAND, IN OUR VIEW THE GROUNDS RAISED BY THE REVENUE ARE TOTALLY MISCONCEIVED. QUITE CLEARLY, T HE ASSESSEE COULD NOT HAVE FORESEEN AT THE TIME OF FILING OF THE RETURN OF INC OME THE IMPACT OF THE ADJUSTMENT UNDER SECTION 145A OF THE ACT, BECAUSE T HE SAME WAS MADE BY THE ASSESSING AUTHORITIES IN THE ASSESSMENT FOR ASSESS MENT YEARS 2005-06, 2006- 07 AND 2008-09. IT IS ONLY AFTER THE APPELLATE AU THORITIES UPHELD THE STAND OF THE ASSESSING OFFICER FOR THE SAID ASSESSMENT YEARS THAT THE CONSEQUENTIAL CLAIM OF THE ASSESSEE WOULD SPRING UP. THEREFORE, UNDER THESE CIRCUMSTANCES, IT WAS QUITE GERMANE FOR THE ASSESSEE TO HAVE RAISE D SUCH A PLEA BEFORE THE CIT(A), WHO JUSTIFIABLY ADMITTED THE SAME. IN OUR CONSIDERED OPINION, THE CIT(A) HAS MADE NO MISTAKE IN DIRECTING THE ASSESSI NG OFFICER TO CONSIDER THE PLEA OF THE ASSESSEE AND REWORK THE ADJUSTMENT UNDE R SECTION 145A AS PER LAW. THUS, ON THIS ASPECT, WE HEREBY AFFIRM THE ACTION O F THE CIT(A) AND REVENUE FAILS ON THIS GROUND. 21 ITA NO.638 & 780/MUM/2014 (ASSESSMENT YEAR 2009-10) 9.5 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 10. TO SUM-UP, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/01/2017 SD/- SD/- ( RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 11/01/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI