DEVJI NENSHI PALANI, MUMBAI V. ITO WD 13(3)(3), MUMBAI

ITA 6519/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4131 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 21-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Opportunity of being heard; Capital expenditure
• Section: 143(3); 14A; 37(1)

Judgement Text

I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR(ACCOUNTANT MEMBER) AND SMT. ASHA VIJAYARAGHAVAN (JUDICIAL MEMBER) I.T.A NO. 6519/MUM/2009 ASSESSMENT YEAR: 2006-07 DEVJI NENSHI PALANI, .. APPELLANT 601, JEWEL MAHAL, J.P. ROAD, SEVEN BUNGLOW CIRCLE, ANDHERI(W), MUMBAI-400 061. PA NO.AAAPP 8974E VS. INCOME TAX OFFICER, WARD 13(3)(3) . RESPO NDENT, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. I.T.A NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, WARD 13(3)(3) . APPELL ANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS DEVJI NENSHI PALANI, .. RESPONDENT 601, JEWEL MAHAL, J.P. ROAD, SEVEN BUNGLOW CIRCLE, ANDHERI(W), MUMBAI-400 061. ASSESSEE BY: SHRI SANJAY R.PARIKH RESPONDENT BY : SHRI SHRAVAN KUMAR O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 24 TH NOVEMBER, 2009, PASSED BY THE CIT(A)-24, IN THE MATTER OF ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2006- 07. AS THESE APPEALS CALL INTO QUESTION SAME ORDER PASSED BY THE CIT(A) AND AS THE SE APPEALS WERE HEARD I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 2 TOGETHER, WE DEEM IT FIT AND PROPER TO DISPOSE OF B OTH THE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. WE WILL TAKE UP ASSESSEES APPE AL FIRST. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE IS A GGRIEVED AGAINST THE CIT(A)S UPHOLDING THE DISALLOWANCE OF RS. 8,44,613/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE APPELLANT-ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM CERTAIN PAYME NTS MADE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06 BUT SINCE T HE ASSESSEE HAD NOT PAID THE TAXES BY 31.3.2005, THE ASSESSING OFFICER DISALLOWE D THE PAYMENTS MADE AMOUNTING TO RS. 8,44,613 FOR THE ASSESSMENT YEAR 2005-06. I N ACCORDANCE WITH THE PROVISIONS OF LAW, AS IT IS STOOD AT THE RELEVANT P OINT OF TIME, THE ASSESSEE HAD CLAIMED DEDUCTION FOR THE YEAR, IN WHICH, THE PAYME NT WAS MADE I.E. THE YEAR BEFORE US. IN OTHER WORDS, PAYMENTS MADE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006-07, I.E. THE YEAR BEFORE US, W ERE TO BE ALLOWED AS DEDUCTION IN THE ASSESSMENT YEAR 2006-07 EVEN THOUGH THESE PA YMENTS PERTAINED TO THE PRECEDING YEAR. HOWEVER, IN THE MEANTIME, SECTION 4 0(A)(IA) WAS AMENDED AND, ACCORDINGLY, PAYMENTS MADE BEFORE THE DUE DATE WER E TAKEN INTO ACCOUNT OUT OF THE AMBIT OF DISALLOWANCE UNDER SECTION 40(A)(IA) O F THE ACT. AS A RESULT, EVEN IF PAYMENTS WERE NOT MADE IN THE RELEVANT PREVIOUS YEA R ITSELF, BUT WITHIN THE DUES DATES EVEN AFTER THE END OF THE PREVIOUS YEAR, THE PAYMENTS SO MADE WERE TO BE ALLOWED AS DEDUCTION. THAT IS THE LEGAL BACKDROP I N WHICH PRESENT CONTROVERSY ARISES, ABOUT ASSESSEES CLAIM OF DEDUCTION FOR RS 8,44,613 BEING PAYMENT RELATABLE TO EARLIER PREVIOUS YEAR, PAID IN THIS PREVIOUS YEA R WITHIN THE DUE DATE. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION OF RS. 8,44,613 BY OBSERVING THAT, THE CORRECT LEGAL POSITION IS THAT THE RELEVA NT DEDUCTION COULD BE CLAIMED FOR THE ASSESSMENT YEAR 2005-06. AGGRIEVED, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. THE CI T (A) WAS OF THE VIEW THAT THE DEDUCTION COULD ONLY BE CLAIMED IN THE ASSESSMENT Y EAR 2005-06 AND MERELY BECAUSE THE ASSESSEE HAS NOT CLAIMED THE CREDIT IN THE SAID ASSESSMENT YEAR, THE ASSESSEE CANNOT BE ALLOWED THE DEDUCTION IN THE PRE SENT ASSESSMENT YEAR. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 3 4. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT W HILE THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 HAS BECOME FINAL AND IN VIE W OF THE FACT AS IT IS STOOD AT THE RELEVANT POINT OF TIME, THE ASSESSEE HAS NOT BE EN ABLE TO CLAIM THE DEDUCTION IN THE SAID ASSESSMENT YEAR, THE DENIAL OF DEDUCTION T O THE ASSESSEE IN THE PRESENT ASSESSMENT YEAR WOULD RESULT IN AN UNDUE HARDSHIP T O THE ASSESSEE. IT IS THUS PRAYED THAT IN VIEW OF THE LEGAL POSITION AS IT IS STOOD AT THE RELEVANT POINT OF TIME, THE ASSESSING OFFICER SHOULD BE DIRECTED TO GRANT D EDUCTION IN THE CURRENT YEAR. HE, HOWEVER, SUBMITTED THAT AS LONG AS HE IS ALLOWED TH E DEDUCTION WHETHER IN THIS ASSESSMENT YEAR OR IN THE PRECEDING YEAR- HE IS CON TEND WITH THE SAME. HIS SUBMISSION IS THAT HE CANNOT BE DENIED THE SUBMISSI ON IN BOTH THE ASSESSMENT YEARS. 5. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITS THAT, A S THE ASSESSEE HIMSELF ADMITS, THE CLAIM IS ADMISSIBLE IN THE PRECEDING ASSESSMENT YEAR, BUT, AS THE ASSESSMENT HAS ALREADY REACHED FINALITY FOR THAT YEAR, THE SAM E CANNOT BE GRANTED AT THIS STAGE. AS FOR THE CURRENT ASSESSMENT YEAR, THE ASSESSEE CA NNOT BE ALLOWED THIS DEDUCTION. EVEN IF THERE BE ANY HARDSHIP TO THE ASSESSEE, NOTH ING CAN BE DONE ABOUT THE SAME. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS, P ERUSED THE MATERIAL ON RECORD AND TAKEN INTO ACCOUNT FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 7. WE HAVE NOTED THAT THE ASSESSEE HAS NOT BEEN GR ANTED DEDUCTION IN RESPECT OF THE AMOUNT OF RS. 8,44,613 IN ANY OF THE YEARS. WE HAVE ALSO NOTED THAT THE CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT THE CLAIM OF DEDUCTION IS ALLOWABLE IN THE ASSESSMENT YEAR 2005-06 AND FOR THIS REASON, THE CL AIM HAS NOT BEEN ALLOWED IN THE CURRENT YEAR. IN OTHER WORDS, THE CIT (A) HAS CATE GORICALLY OBSERVED THAT THE DENIAL OF DEDUCTION IN THE CURRENT YEAR IS ON ACCOUNT OF A DMISSIBILITY OF THE SAID DEDUCTION, IN VIEW OF THE LEGAL POSITION, AS IT IS STOOD NOW, IN THE IMMEDIATELY PRECEDING YEAR. LET US NOW TAKE A LOOK AT SECTION 1 53(3) WHICH PROVIDES THAT TIME LIMITS FOR ASSESSMENTS, REASSESSMENTS AND RECOMPUTA TIONS DO NOT APPLY, INTER ALIA, IN THE CASES WHERE SUCH ASSESSMENT, REASSESSMENT O R RECOMPUTATION IS MADE ON THE ASSESSEE OR ON ANY PERSON IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 4 DIRECTION CONTAINED IN AN ORDER UNDER SECTION 250.. ... THE EFFECT OF THIS PROVISION IS THAT NOTWITHSTANDING ANY TIME LIMITS CONTAINED IN S ECTION 153, ANY ORDERS TO GIVE EFFECT TO, OR IN CONSEQUENCE TO, FINDINGS OR DIRECT IONS CONTAINED IN AN ORDER PASSED BY THE CIT(A) CAN BE PASSED AT ANY TIME. AS TO WHAT IS THE NATURE OF FINDING OR DIRECTION UNDER SECTION 153(3), HONBLE SUPREME CO URTS FOLLOWING OBSERVATIONS IN THE CASE OF RAJINDER NATH V. CIT [1979] 120 ITR 14 (SC) PROVIDE GUIDANCE : A FINDING GIVEN IN AN APPEAL, REVISION OR REFERENC E MUST BE A FINDING NECESSARY FOR THE DISPOSAL OF THE CASE, THAT IS IN RESPECT OF A PARTICULAR ASSESSEE AND IN RESPECT OF A PARTICULAR ASSESSMENT YEAR. TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INVOLVED IN DISPOSAL OF A CASE. IT IS POSSIBLE THAT IN CERTAIN CASES, IN ORDER TO RENDER A FINDING ON A, A FINDING IN RESPECT OF B IS CALLED FOR..THE SAME PRINCIPLE SEEMS TO APPLY WHEN THE QUESTION UNDER INQUIRY IS WHETHER AN INCOME IS TAXABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR FOR A NY OTHER ASSESSMENT YEAR.... 8. IT IS THUS CLEAR THAT THE CIT(A)S FINDING THAT PAYMENT IS NOT ALLOWABLE IN THE ASSESSMENT YEAR 2006-07 BECAUSE THE SAME IS ALLOWAB LE IN THE ASSESSMENT YEAR 2005-06, TO WHICH THE PAYMENT ACTUALLY PERTAINS, IS THE KIND OF FINDING WHICH IS COVERED BY THE PROVISIONS OF SECTION 153(3) OF THE ACT. THE SCHEME OF THE ACT THUS PERMITS ANY ASSESSMENT, REASSESSMENTS AND RECOMPUTA TION ORDERS TO GIVE EFFECT TO, OR IN CONSEQUENCE OF, ANY FINDINGS OR DIRECTIONS NO T ONLY IN THE CIT(A)S ORDER BUT ALSO ORDERS OF THE TRIBUNAL, HONBLE HIGH COURTS, H ONBLE SUPREME COURT AS WELL AS OF ANY COURT IN A PROCEEDING OTHERWISE THAN IN AP PEAL. IN OTHER WORDS, WHERE THE ASSESSING OFFICER IS REQUIRED TO GIVE EFFECT TO ANY FINDING OR DIRECTION IN A APPELLATE ORDER GIVING SUCH EFFECT IS NOT COVERED B Y NORMAL TIME BOUND PROVISIONS. IN THE PRESENT CASE, THE CIT (A) HAS GIVEN A FINDIN G THAT THE AMOUNT WAS ALLOWABLE AS DEDUCTION IN THE ASSESSMENT YEAR 2005-06, AND, T HEREFORE THE SAME CANNOT BE ALLOWED AS A DEDUCTION IN THE PRESENT IN YEAR IN ACCORDANCE WITH THE SCHEME OF LAW AS IT STANDS NOW. 9. ON THESE FACTS, WHATEVER BE OUR SYMPATHIES WITH THE ASSESSEES PLIGHT, THE REMEDY OF ASSESSEES GRIEVANCE THUS LIES WITH THE ASSESSING OFFICER OR THE COMMISSIONER, BUT NOT WITH US. THE ASSESSEE MAY MO VE APPROPRIATE RECTIFICATION PETITION UNDER SECTION 154, IF SO ADVISED, TO THE A SSESSING OFFICER AS WAS THE I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 5 POSITION IN THE CASE OF SABNIT ASHOK ANANT VS JCIT (117 TTJ 96) , OR THE ASSESSEE MAY MOVE APPROPRIATE REVISION PETITION UNDER SECTIO N 263. THATS A CALL TO BE TAKEN BY THE ASSESSEE AND NOT BY US. WE MAY, HOWEVER, TH E FOLLOWING OBSERVATIONS MADE BY A CO ORDINATE BENCH IN THE CASE OF MARKWELL HOS E INDUSTRIES PVT LTD VS JCIT (95 ITD 271): 10. AT THE OUTSET, WE MAKE IT CLEAR THAT THIS TRIBU NAL DOES NOT HAVE ANY POWERS TO SPECIFICALLY GIVE ANY DIRECTIONS FOR THE YEAR WHICH IS NOT IN APPEAL BEFORE US. THE ONLY ISSUE BEFORE US IS WHETHER THE IMPUGNED DISALLOWANCE WAS RIGHTLY MADE BY THE ASSESSING OFFICER IN THIS YEAR OR NOT, AND, THEREFORE, IT IS NOT OPEN TO US TO GIVE SPECIFIC DIRECTION TO ASSESSING OFFICER TO ALLOW THAT DEDUCTION FOR THE NEXT YEAR. THAT IS NOT A GROUND OF APPEAL BEFORE US. WE MAY, IN THIS REGARD, REFER TO THE FOLLOWING OBSERVA TIONS OF HONBLE GAUHATI HIGH COURT IN THE CASE OF JEYPORE TIMBER & VENEER MILLS (P.) LTD. V. CIT [1982] 137 ITR 415 : THE PROVISION OF SECTION 254 OF THE ACT IS AN ENAB LING AS WELL AS DISABLING PROVISION. A PASSING GLANCE CREATES AN IMPRESSION THAT THE TRIBUNAL HAS BEEN ENDOWED WITH PLENARY POWER UNDER SECTION 254 OF THE ACT TO PASS ANY ORDER AS IT THIN KS FIT. HOWEVER, IT IS NOT SO, AS IT WILL APPEAR IN THE EXPRESSION SUCH ORDERS THEREON AS IT THINKS FI T, IN SECTION 254. THE WORD THEREON IN THE EXPRESSION IS A SERIOUS CONSTRICTION ON THE EXERCIS E OF POWER BY THE TRIBUNAL. IT CAN DECIDE ONLY THE POINTS OR GROUNDS RAISED BEFORE IT WHEREAS THE INCOME TAX AUTHORITIES CAN TRAVEL BEYOND THE GROUNDS AND CONSIDER THE ENTIRE ASSESSMENT. IN THIS VIEW OF THE MATTER, AS FAR AS THE QUESTION OF GIVING DIRECTIONS FOR THE NEXT YEAR ARE CONCERNED, WE ARE NOT INCLINED TO ACCEPT THE PLEA O F THE ASSESSEE. 11. THE REMEDY, HOWEVER, LIES ELSEWHERE. 12. SECTION 153(3) OF THE INCOME-TAX ACT, 1961 PROVIDE S THAT THE PROVISIONS OF SECTION 153(1) AND (2) (I.E. THE PROVISION LAYING DOWN THE TIME LI MIT WITHIN WHICH ASSESSMENTS, REASSESSMENT OR RECOMPUTATIONS CAN BE DONE) SHALL NOT APPLY TO, INTER ALIA, THE CLASSES OF ASSESSMENTS, REASSESSMENTS AND RECOMPUTATIONS WHICH MAY BE COMPL ETED AT ANY TIME WHERE THE ASSESS- MENT, REASSESSMENT OR RECOMPUTATION IS MADE ON THE ASSESSEE OR ANY PERSON IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY F INDING OR DIRECTION CONTAINED IN AN ORDER, UNDER SECTIONS 250, 254, 260, 262, 263 OR 264 OR IN AN ORDER OF ANY COURT IN A PROCEEDING OTHERWISE THAN BY WAY OF APPEAL OR REFERENCE UNDER THIS ACT. THEREFORE, TO THE EXTENT, AN ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS DONE T O GIVE EFFECT TO THE FINDING OR DIRECTION CONTAINED IN, INTER ALIA, THE TRIBUNAL ORDER, THE S AME CAN BE PASSED AT ANY TIME. IT IS ALSO SETTLED IN LAW THAT WHEN A STATUTORY AUTHORITY HAS THE POWERS TO DO SOMETHING, THEN IT HAS A CORRESPONDING DUTY TO EXERCISE SUCH POWERS WHENEVER CIRCUMSTANCES WARRANTING EXERCISE OF SUCH POWERS EXIST. NO DOUBT, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RAJINDER NATH V. CIT [1970] 120 ITR 14 , A FINDING GIVEN IN AN APPEAL, REVISION OR REFERE NCE ARISING OUT OF AN ASSESSMENT MUST BE A FINDING NECESSARY FOR TH E DISPOSAL OF THE PARTICULAR CASE, THAT IS TO SAY, IN RESPECT OF THE PARTICULAR ASSESSEE AND IN R ELATION TO THE PARTICULAR ASSESSMENT YEAR. TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INVOLVE D IN THE DISPOSAL OF THE CASE. THE CASE BEFORE US CLEARLY FULFILS THIS TEST BECAUSE THE ONL Y REASON THAT THE DISALLOWANCE HAS BEEN CONFIRMED THIS YEAR IS THAT IT IS ALLOWABLE IN THE YEAR IN WHICH PLOTS ARE FINALLY TRANSFERRED TO THE WORKERS - WHICH ADMITTEDLY IS NOT THE YEAR BEFORE U S, AND, FOR THAT REASON, ALLOWABILITY IN THE THAT YEAR WAS THE SOLE AND PROXIMATE REASON FOR DIS ALLOWABILITY IN THE CURRENT YEAR. THEREFORE, ON THE FACTS OF THE PRESENT CASE, WHERE THE TRIBUNA L HAS GIVEN A FINDING THAT THE DEDUCTION ON ACCOUNT OF EXPENDITURE ACQUIRED ON PLOT FOR USE BY WORKERS IS TO BE ALLOWED IN THE YEAR(S) IN WHICH THE PLOTS ARE FINALLY TRANSFERRED TO THE WORK ERS, THE ASSESSING OFFICER HAS THE POWER, AND I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 6 THEREFORE THE INHERENT CORRESPONDING DUTY, UNDER SE CTION 153(3) OF THE ACT TO RECOMPUTE THE INCOME OF THAT SUBSEQUENT YEAR TO GIVE EFFECT TO TR IBUNALS FINDING. IT IS OPEN TO THE ASSESSEE TO APPROACH THE ASSESSING OFFICER FOR THAT PURPOSE, OR, WE MAY FURTHER ADD AT THE COST OF STATING THE OBVIOUS, TO APPROACH THE COMMISSIONER, ALONG WITH THE REQUISITE PETITION FOR CONDONATION OF DELAY, FOR REVISION UNDER SECTION 26 4 OF THE ACT. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WHILE WE AGR EE WITH THE AUTHORITIES BELOW TO THE EXTENT THAT MERELY BECAUSE THE AMOUNT IS NOT ALLOWED AS DEDUCTION IN THE ASSESSMENT YEAR EVEN THOUGH IT WAS ADMISSIBLE, IT CANNOT BE ALLOWED AS DEDUCTION IN THE PRESENT YEAR, WE ARE ALSO OF THE V IEWS THAT THE ASSESSEE CANNOT BE DISALLOWED DEDUCTION IN BOTH THE YEARS. WITH THESE OBSERVATIONS AND HAVING NOTED THAT THE APPROPRIATE REMEDY IS INDEED AVAILABLE AT OTHER FORUMS AND THAT THE ASSESSEE IS AT LIBERTY TO APPROACH THESE FORUMS, WE DISMISS THE GRIEVANCE RAISED BY THE ASSESSEE BEFORE US. 11. SUBJECT TO THE OBSERVATIONS ABOVE, THE FIRST GR OUND OF APPEAL IS DISMISSED. 12. IN GROUND NO.2, THE GRIEVANCE OF THE ASSESSEE I S AGAINST DISALLOWANCE OF RS. 4,31,987 UNDER SECTION 14A OF THE INCOME TAX ACT, 1 961. 13. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE EARNED TAX FREE INCOME BUT DID NOT OFFER ANY AMOUNT FOR DISALLOWANC E UNDER SECTION 14A. THE ASSESSING OFFICER COMPUTED THE AMOUNT DISALLOWABLE AT RS.4,31,987 WHICH WAS SUSTAINED IN THE FIRST APPEAL. 14. BEFORE US, LEARNED REPRESENTATIVES AGREE THAT S O FAR AS THE QUESTION OF DISALLOWANCE U/S.14A IS CONCERNED, THE ISSUE IS NOW DECIDED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT DT.12.8.2010 OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF GODREJ& BOYCE LIMITED VS. ACIT(2010 TIOL 564) , HOLDING THAT THE PROVISIONS OF SECTION 14A ARE APPLICABLE IN SUCH CI RCUMSTANCES AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME REASONABLE BASIS. UNDER SUCH CIRCUMSTANCE, AND WITH THE CONSENT OF THE PARTIES, WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DE CIDING THE QUANTUM OF DISALLOWANCE AS PER THE AFORENOTED JUDGMENT, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 7 15. GROUND NO. 2 IS THUS ALLOWED FOR STATISTICAL PU RPOSES. 16. GROUND NO.3 IS AGAINST ADHOC DISALLOWANCE OF 10 % BEING RS. 4,10,789 ON ACCOUNT OF CONVEYANCE, TRAVELING EXPENSES, REPAIRS, STATIONARY, MISC. EXPENSES, OFFICE EXPENSES AND PRESENTATION EXPENSES. 17. BRIEFLY STATED THE FACTS ARE THAT DURING THE CO URSE OF ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS MADE EXPENSE IN CASH WHICH ARE NOT SUPPORTED BY THIRD PARTY VOUCHERS. IT WAS IN THIS BACKDROP, AND HAVING NOTED THAT THE EXPENSES ARE NOT SUPPORTED BY THIRD PARTY EVIDE NCE, THE AO DISALLOWED RS. 4,10,789/- BEING 10% OF TOTAL EXPENSES OF RS. 41,07 ,889/-. IN APPEAL, THE LEARNED CIT (A) CONFIRMED THE STAND OF THE ASSESSING OFFICE R. 18. HAVING HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD OF THE CASE, WE FIND THAT THE ONLY REASON OF IMPUGNED DISALLOWANCE IS THAT ALL THE EXPENSES ARE NOT SUPPORTED BY THIRD PARTY VOUCHERS, BUT THEN THAT IS HARDLY A REASONABLE GROUND FOR DISALLOWING THE EXPENSES. THE LACK OF THIRD PARTY V OUCHERS PER SE CANNOT BE REASON ENOUGH FOR DISALLOWANCE, BUT THAT IS PRECISELY THE GROUND ON WHICH THE CIT(A) HAS SUSTAINED THE DISALLOWANCE. WE, THEREFORE, DELETE T HE IMPUGNED DISALLOWANCE. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 19. GROUND NO. 3 IS THUS ALLOWED. 20. IN GROUND NO. 4, THE ASSESSEE IS AGGRIEVED AGAI NST CIT(A)S UPHOLDING THE DISALLOWANCE OF 1/10 TH ON ACCOUNT OF MOTOR CAR EXPENSES AND TELEPHONE EXP ENSES. 21. BEFORE US, NO SPECIFIC ARGUMENTS WERE RAISED IN REGARD TO THIS DISALLOWANCE, THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESSED. 22. GROUND NO. 4 IS THUS DISMISSED. I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 8 23. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 24. WE NOW TAKE UP THE APPEAL OF THE ASSESSING OFFI CER. 25. IN GROUND NO.1, THE REVENUE IS AGGRIEVED IN DEL ETING THE ADDITION OF RS. 42,87,133 MADE BY THE AO ON ACCOUNT OF COMMISSION. 26. THE REPRESENTATIVES AGREE THAT THE ISSUE IS COV ERED BY THE THIRD MEMBER DECISION OF THIS TRIBUNAL IN THE CASE OF SMT. VARSH A G.SALUNKE V DCIT, 98 ITD 147(MUMBAI) TM, COPY OF WHICH IS PLACED BEFORE US, EVEN AS LEARNED DEPARTMENTAL REPRESENTATIVE SIMPLY RELIED ON THE ORDER OF THE AS SESSING OFFICER. LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT DISPUTE THE ISS UE BEING COVERED BY THE AFORESAID THIRD MEMBER ORDER. 27. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND THA T THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN THE CASE OF SMT. VARSHA G. SALUNKE (SUPRA) AND, THEREFORE, WE SEE NO REASONS T O INTERFERE IN THE FINDINGS OF THE CIT (A) IN DELETING THE DISALLOWANCE OF RS. 42,87,7 33 . ACCORDINGLY, THIS GROUND IS DISMISSED. 28. GROUND NO. 1 IS THUS DISMISSED. 29. IN GROUND NO.2, THE REVENUE IS AGGRIEVED WITH T HE ORDER OF THE CIT (A) IN DELETING THE ADDITION OF RS. 2,42,202 ON ACCOUNT O F LOAN PROCESSING FEE. 30. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 2,42,202 AS LOAN PROCESSING CHARGES IN THE P&L ACC OUNT OF M/A. MAHARASHTRA TRADERS. THE AO NOTED THAT THE PROCESSING CHARGE I S PAID TO BANK OF MAHARASTHRA FOR THE LOAN TAKEN OF RS. 3 CRORES FOR PAYING THE L IABILITY OF M/S. JOY INTERNATIONAL LTD. THE AO DISALLOWED THE SAME OBSERVING THAT SUC H LOAN PROCESSING CHARGE BEING CAPITAL IN NATURE AND WAS NOT INCURRED FOR THE BUSI NESS PURPOSE OF THE ASSESSEE. IN APPEAL, THE CIT (A) FOLLOWING THE HONBLE SUPREME C OURT JUDGEMENTS IN THE CASE OF INDIA CEMENTS LTD V CIT, 60 ITR 52 (SC) ,DELETED TH E DISALLOWANCE MADE BY THE AO. I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 9 31. HAVING HEARD THE RIVAL CONTENTIONS, WE SEE NO R EASONS TO INTERFERE WITH THE ORDER OF THE CIT (A) SINCE THE CIT (A) HAS SIMPLY F OLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD (SUPRA) IN DELETING THE DISALLOWANCE. THE PROCESSING FEES IS IN THE NATURE OF INTEREST AND FOR USE OF FUNDS BORROWED FOR THE PURPOSES OF BUSINESS, AND, ACCORDI NGLY, IT HAS TO BE ALLOWED AS DEDUCTION UNDER SECTION 36(1)(III). THE LIMITATION UNDER SECTION 37(1) FOR DISALLOWABILITY OF CAPITAL EXPENDITURE THUS IS NOT RELEVANT IN THE PRESENT CONTEXT. IN THE ASSESSING OFFICER WAS CLEARLY IN ERROR IN DISAL LOWING THE SAME AS CAPITAL EXPENDITURE, WHICH WAS NOT EVEN IN THE NATURE OF C APITAL EXPENDITURE ANYWAY, AND THE CIT(A) RIGHTLY REVERSED THE ACTION OF THE ASSES SING OFFICER. WE UPHOLD THE ACTION OF THE CIT(A) AND DECLINE TO INTERFERE IN TH E MATTER. 32. GROUND NO. 2 IS ALSO DISMISSED 33. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. TO SUM UP, WHILE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, THE APPEA L FILED BY THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2010 SD/[- (ASHA VIJAYARAGHAVAN) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 29 TH OCTOBER , 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-24, MUMBAI 4. COMMISSIONER OF INCOME TAX, 13-, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO. 6519/MUM/2009 I.T.A NO. 932//MUM/ 2010 ASSESSMENT YEAR: 2006-07 10