ACIT, Nashik V. M/s Baphana Jewellers P.Ltd., Nashik

ITA 66/PUN/2013

• Counselvise Citation: 6624514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Business expenditure; Commercial expediency
• Section: 143(3); 133A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS.65 & 66/PN/2013 (ASSESSMENT YEARS : 2008-09 & 2009-10) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 1, NASHIK. . APPELLANT VS. M/S BAPHANA JEWELLERS PVT. LTD., SUYOJIT SANKUL, SHARANPUR ROAD, 430, TILAKPATH, NASHIK. PAN : AABCB9191P . RESPONDENT DEPARTMENT BY : SHRI S. P. WALIMBE ASSESSEE BY : SMT. DEEPA KHARE DATE OF HEARING : 12-05-2014 DATE OF PRONOUNCEMENT : 22-05-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED TWO APPEALS BY THE REVENUE ARE DIRECT ED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I , NASHIK DATED 16.10.2012 WHICH, IN TURN, HAS ARISEN FROM RESPECTI VE ORDERS DATED 24.11.2010 AND 30.11.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) & 115WE(3) AND SECTION 143 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) RESPECTIVELY, PERTAINING TO THE ASSESSMENT YEARS 2008-09 AND 2009 -10. 2. IN BOTH THE APPEALS CERTAIN ISSUES ARE COMMON, T HEREFORE, THE TWO APPEALS HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 3. FIRST, WE SHALL TAKE-UP THE APPEAL OF THE REVENU E PERTAINING TO ASSESSMENT YEAR 2008-09 WHEREIN THREE GROUNDS OF AP PEAL RAISED BY THE REVENUE READ AS UNDER :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A)-I, NASHIK IS JUSTIFIED IN DELETING THE A DDITION MADE ON ACCOUNT OF UNDERVALUATION OF STOCK OF GOLD AT RS.2,65,200/-. ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK IS JUSTIFIED IN DELETING THE A DDITION MADE ON ACCOUNT OF INVESTMENT NOT RECORDED IN THE BOOKS AT RS.2,75,000 /-. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK IS JUSTIFIED IN DELETING THE A DDITION MADE U/S 40A(2)(B) OF THE I.T. ACT, 1961 AT RS.7,09,881/-. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT-ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956 AND IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF RE-SELLI NG AND MANUFACTURING OF GOLD, SILVER, STONE & DIAMOND ORNAMENTS. DURING THE PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS A SU RVEY ACTION U/S 133A OF THE ACT CONDUCTED IN THE BUSINESS PREMISES OF THE A SSESSEE ON 01.11.2007. IN THE COURSE OF SURVEY, ASSESSEE DISCLOSED AN INCO ME OF RS.50,32,006/- AS ADDITIONAL INCOME FOR THE ASSESSMENT YEAR UNDER CON SIDERATION. SUBSEQUENTLY, ASSESSEE FILED A RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 29.09.2008 DECLARING AN INCOME OF RS.1,12,35,700 /- WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT. IN THE ASSESSMENT FINALIZED U /S 143(3) OF THE ACT DATED 24.12.2010, THE TOTAL INCOME WAS DETERMINED AT RS.1 ,28,36,380/- AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES WHICH WERE A SUBJEC T-MATTER OF APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED PARTIAL RELIEF, AGA INST WHICH THE REVENUE IS IN APPEAL BEFORE US IN TERMS OF THE ABOVESTATED GROUND S OF APPEAL. 5. BY WAY OF THE GROUND OF APPEAL NO.1, REVENUE IS AGGRIEVED WITH THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS. 2,65,200/- WHICH WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDERVALUATI ON OF STOCK OF GOLD. IN THIS CONTEXT, BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT IN THE COURSE OF SURVEY ASSESSEE HAD DECLARED AN ADDITIONAL INCOME O N THE BASIS OF EXCESS STOCK OF GOLD OF 5100 GRAMS, WHEREAS AS PER THE MAN UFACTURING, TRADING AND PROFIT & LOSS ACCOUNT MADE AS ON 31.10.2007 (I.E. U P TO THE DATE OF SURVEY) THE ASSESSEE TOOK INTO CONSIDERATION ONLY 5010 GRAM S OF GOLD. SECONDLY, THE ASSESSING OFFICER NOTED THAT IN THE PROFIT & LOSS A CCOUNT PREPARED TILL THE DATE OF SURVEY, ASSESSEE ADOPTED GROSS PROFIT RATE OF 10 % WHEREAS ASSESSEE WAS ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 ALLOWED THE BENEFIT OF 15% WHILE CALCULATING THE CO ST OF GOLD AT THE TIME OF SURVEY. CONSIDERING THIS DISCREPANCY, THE ASSESSIN G OFFICER REWORKED THE COST OF 5100 GRAMS OF GOLD AND COMPUTED IT AT RS.47,73,6 00/- AS AGAINST AN AMOUNT OF RS.45,08,400/- CONSIDERED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT PREPARED TILL THE DATE OF SURVEY. THE DIFF ERENCE OF RS.2,65,200/- WAS CONSIDERED AS UNDERVALUATION OF THE COST OF 5100 GR AMS OF GOLD WHICH WAS ADDED TO THE TOTAL INCOME. THE CIT(A) HAS DELETED THE ADDITION CONSIDERING THE FACT THAT THE ASSESSING OFFICER VALUED THE GOLD ORNAMENTS WITHOUT ALLOWING ANY DEDUCTION ON ACCOUNT OF IMPURITIES, ALLOY MIXIN G, SOLDERING JOINTS, ETC.. AFTER ALLOWING MARGIN FOR THE AFORESAID ITEMS, THE VALUATION OF EXCESS GOLD OF 5100 GRAMS AS DECLARED BY THE ASSESSEE WAS FOUND AC CEPTABLE AND ACCORDINGLY, THE CIT(A) DELETED THE ADDITION OF RS. 2,65,200/-. 6. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS REITERATED THE STAND OF THE ASSESSING OFFICER ON THIS ASPECT BY PO INTING OUT THAT THE VALUATION OF EXCESS GOLD STOCK DECLARED AT THE TIME OF SURVEY WAS INCORRECTLY COMPUTED BY THE ASSESSEE AND THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE IMPUGNED ADDITION ON ACCOUNT OF UNDERVALUATION OF T HE COST OF SUCH EXCESS GOLD DECLARED AT THE TIME OF SURVEY. 7. ON THE OTHER HAND, LEARNED REPRESENTATIVE FOR TH E RESPONDENT- ASSESSEE SUBMITTED THAT THE CIT(A) HAS APPRECIATED THAT THE PURITY OF THE GOLD USED IN THE ORNAMENTS WAS A RELEVANT FACTOR FOR THE PURPOSES OF VALUATION AND IN THE PRESENT CASE THE RATE ADOPTED BY THE ASSESSI NG OFFICER WAS RS.1040 PER GRAM WHICH WAS THE RATE OF PURE GOLD ON THE DAT E OF SURVEY. THE CIT(A) HAS RIGHTLY ALLOWED THE DEDUCTION ON ACCOUNT OF THE PURITY CONTENT, IMPURITIES, ETC. WHICH IS A NORMAL TRADE PRACTICE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN OUR CONSIDERED OPINION, NO INTERFERENCE IS REQUIRED IN THE ORDER O F THE CIT(A) BECAUSE HE HAS ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 ALLOWED RELIEF CONSIDERING THE TRADE PRACTICES, WHE REBY THE VALUE OF GOLD IN THE ORNAMENTS MANUFACTURED, HAS BEEN ADJUSTED ON ACCOUN T OF IMPURITIES, ALLOY MIXING, SOLDERING JOINTS, ETC., WHEREAS THE ASSESSI NG OFFICER HAD ADOPTED THE RATE OF PURE GOLD. NOTHING HAS BEEN BROUGHT ON REC ORD BY THE REVENUE TO ESTABLISH ANY ERROR IN THE APPROACH OF THE CIT(A) I N REDUCING THE VALUATION ON ACCOUNT OF IMPURITIES, ETC.. ACCORDINGLY, THE ACTI ON OF THE CIT(A) IS HEREBY AFFIRMED AND THE REVENUE FAILS IN ITS GROUND OF APP EAL NO.1. 9. THE SECOND GROUND OF APPEAL IS ON ACCOUNT OF AN ADDITION OF RS.2,75,000- MADE BY THE ASSESSING OFFICER ON ACCOU NT OF ERRORS AND OMISSIONS, AND MINOR STOCK DIFFERENCE IN SILVER & D IAMOND. THE ASSESSING OFFICER AND THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS JUSTIFIED THE ADDITION ON THE GROUND THAT SUCH AMOUNT WAS SURRENDERED AS A N ADDITIONAL INCOME BY THE ASSESSEE AT THE TIME OF SURVEY BUT THE SAME WAS NOT OFFERED IN THE RETURN OF INCOME FILED SUBSEQUENTLY. 10. WE FIND THAT THE CIT(A) HAS DELETED THE ADDITIO N ON THE GROUND THAT SUCH DISCLOSURE WAS MADE BY THE ASSESSEE WITHOUT RE FERENCE TO ANY DOCUMENT OR INVESTMENT OR EXPENDITURE IN PARTICULAR , AT THE TIME OF SURVEY. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT SUCH DISCLOS URE, THE CIT(A) FOUND NO ERROR ON THE PART OF THE ASSESSEE IN NOT OFFERING S UCH AMOUNT IN THE RETURN OF INCOME AND ACCORDINGLY ADDITION HAS BEEN DELETED. 11. ADMITTEDLY, THE AFORESAID AMOUNT WAS DECLARED A S ADDITIONAL INCOME AT THE TIME OF SURVEY ON AN AD-HOC BASIS, AND NOT WITH REFERENCE TO ANY CREDIBLE EVIDENCE OR MATERIAL TO SUPPORT THE AFORESAID AMOUN T. THEREFORE, IN OUR VIEW, THE CIT(A) MADE NO MISTAKE IN DELETING SUCH ADDITIO N ESPECIALLY FOR THE REASON THAT EVEN DURING THE ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER HAS NOT POINTED OUT ANY PARTICULAR INFIRMITY OR A DISCREPAN CY TO JUSTIFY THE SAID ADDITION. ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 ACCORDINGLY, THE ACTION OF THE CIT(A) IS HEREBY AFF IRMED AND THE REVENUE FAILS ON THIS GROUND ALSO. 12. THE THIRD GROUND IN THIS APPEAL IS WITH REGARD TO AN ADDITION OF RS.7,09,881/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF INTEREST EXPENDITURE BY INVOKING SECTION 40A(2)(B) OF THE AC T. 13. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSES SING OFFICER FOUND THAT ASSESSEE HAD BORROWED MONEYS FROM BANKS AS WELL AS FROM A CONCERN WHICH WAS COVERED WITHIN THE MEANING OF SPECIFIED PERSONS U/S 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER NOTED THAT SO FAR AS THE INTE REST PAID ON LOANS BORROWED FROM THE BANKS WAS CONCERNED, ASSESSEE INCURRED INT EREST @ 11% TO 12% WHEREAS FOR LOANS RAISED FROM M/S GAJARA FINANCE, A CONCERN COVERED U/S 40A(2)(B) OF THE ACT, THE INTEREST WAS PAID @ 15%. ACCORDING TO THE ASSESSING OFFICER, RATE OF INTEREST PAID TO AN INTE RESTED PARTY I.E. M/S GAJARA FINANCE WAS IN EXCESS OF WHAT WAS PAID TO THE INDEP ENDENT LENDERS, NAMELY, BANKS; AND, ACCORDINGLY HE DISALLOWED INTEREST PAID TO M/S GAJARA FINANCE IN EXCESS OF 13%. ACCORDINGLY, AN ADDITION OF RS.7,09 ,881/- WAS MADE. 14. THE CIT(A) HAS DELETED THE ADDITION BY MAKING T HE FOLLOWING DISCUSSION :- 8.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. ON PERUSAL IT IS SEEN THAT THE APPELLANT HAS BORROWED UNSECURED LOANS OF RS.3,43,58,170/- FROM GAJARA FINANCE WHICH IS COVERED U/S 40A(2)(B) AND H AS PAID INTEREST @ 15%. THE APPELLANT HAS CLAIMED DEDUCTION OF RS.53,24,110 /- ON ACCOUNT OF INTEREST PAID TO M/S GAJARA FINANCE @ 15%. AN AMOUNT OF RS. 46,14,229/- WAS ALLOWED BY THE AO AS DEDUCTION @ 13% AND RS.7,09,88 1/- WAS DISALLOWED BEING UNREASONABLE. THE AO'S ACTION IS PRIMARILY B ASED ON THE FACT THAT THE SAID PERSON IS COVERED U/S 40A(2)(B). HE HAS NOT C ONSIDERED THE RELEVANT FACTS THAT THIS WAS AN UNSECURED LOAN AND OBTAINED BY THE ASSESSEE TO MEET ITS BUSINESS NEEDS. SECTION 40A(2) HAS EMPOWERED T HE AO TO EXAMINE THE PAYMENTS INVOKING RELATIVES, DIRECTOR, PARTNER OR A NY OTHER PERSON HAVING SUBSTANTIAL INTEREST IN THE BUSINESS OF THE PAYER F ROM THE POINT OF VIEW OF REASONABLENESS. THEREFORE, IN CASE OF PAYMENTS THA T ARE COVERED UNDER 40A(2), THE ONUS IS ON THE DEPARTMENT TO PROVE THAT THE VALUE OF THE AMOUNT PAID FOR THE SERVICES OR GOODS, ETC. TO SUCH PERSON S IS EXCESSIVE OR ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 UNREASONABLE. IT IS SETTLED POSITION OF LAW THAT T HE LEGITIMATE BUSINESS NEEDS OF AN ASSESSEE TO MAKE SUCH PAYMENTS FOR THE GOODS OR SERVICES IS NOT TO BE JUDGED FROM THE POINT OF VIEW OF A REVENUE OFFICER BUT FORM THE POINT OF VIEW OF A BUSINESSMAN 129 ITR 105 (GUJ.). THEREFORE, IN JUDGING UN- REASONABLENESS OR EXCESSIVENESS OF A PARTICULAR PAY MENTS FOR THE PURPOSE OF SECTION 40A(2)(A) IT IS NECESSARY THAT ONE SHOULD K EEP IN MIND THE RELEVANT CONSIDERATION. IN THE PRESENT CASE, THE ASSESSEE H AS DEMONSTRATED THAT IT HAS OBTAINED THE UNSECURED LOAN FROM M/S GAJARA FINANCE @ 15% P.A. TO MEET ITS BUSINESS NEEDS. THERE IS NO MATERIAL BROUGHT ON RE CORD BY THE AO THAT THE PAYMENT OF INTEREST TO THIS PERSON U/S 40A(2) IS EX CESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET RATE OF INTEREST. THIS VIEW IS SUPPORTED BY THE JUDICIAL PRONOUNCEMENTS RELIED ON BY THE ASSESSEE ( SUPRA). THEREFORE, COMMERCIAL EXPEDIENCY ON THIS ISSUE IS ESTABLISHED. THIS IS NOT A CASE OF THE ASSESSING OFFICER THAT THERE WAS NO NEXUS BETWEEN T HE EXPENDITURE AND THE PURPOSE OF THE BUSINESS. 15. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTAT IVE HAS POINTED OUT THAT ASSESSEE PAID HIGHER RATE OF INTEREST TO M/S G AJARA FINANCE, WHICH WAS A RELATED PARTY AND COVERED BY THE PROVISIONS OF SECT ION 40A(2)(B) OF THE ACT. THEREFORE, ACCORDING TO HIM THE EXCESS INTEREST PAI D TO M/S GAJARA FINANCE ON LOANS BORROWED HAS BEEN RIGHTLY DISALLOWED BY THE A SSESSING OFFICER. 16. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE F OR THE RESPONDENT- ASSESSEE POINTED OUT THAT THE CIT(A) MADE NO MISTAK E IN DELETING THE ADDITION FOR THE REASON THAT THE DEPARTMENT HAD FAILED TO PR OVE THAT THE INTEREST PAID ON LOAN RAISED FROM M/S GAJARA FINANCE WAS IN EXCESS O F THE MARKET RATE, WHICH WAS A CONDITION PRECEDENT FOR INVOKING SECTION 40A( 2)(B) OF THE ACT. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THOUGH THE ASSESSING OFFICER WAS JUSTIFIED IN EXAMINING THE IN TEREST PAID TO M/S GAJARA FINANCE WITHIN THE PRESCRIPTION OF SECTION 40A(2) O F THE ACT, SO HOWEVER, FACTUALLY IT IS EVIDENT THAT THE ASSESSING OFFICER FAILED TO DEMONSTRATE AS TO HOW THE PAYMENT OF INTEREST TO M/S GAJARA FINANCE @ 15% WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE MARKET RATE OF IN TEREST, WHICH WAS A CONDITION PRECEDENT FOR MAKING A DISALLOWANCE IN TE RMS OF SECTION 40A(2)(A) OF THE ACT. IN THIS CASE, ASSESSEE POINTED OUT BEFORE THE CIT(A) THAT THE LOANS RAISED FROM M/S THANE JANTA SAHAKARI BANK LTD. AND ICICI BANK WERE ON ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 ACCOUNT OF A CASH CREDIT FACILITY AND FOR ACQUISITI ON OF CAR RESPECTIVELY. BOTH THE LOANS WERE SECURED AGAINST ASSETS AND ON THE CO NTRARY, BORROWING FROM M/S GAJARA FINANCE WAS UNSECURED AND THIS ASPECT CL EARLY SHOWED THAT THE TERMS AND CONDITIONS OF THE TWO BORROWINGS WERE NOT SIMILAR. IN-FACT, THIS ASPECT ALSO JUSTIFIES THE INTEREST PAID TO M/S GAJA RA FINANCE AT A RATE HIGHER THAN THAT PAID TO THE BANKS. THIS ASPECT OF THE MA TTER HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTA TIVE BEFORE US, AND CONTINUES TO HOLD THE FIELD. THEREFORE, CONSIDERIN G THE AFORESAID ASPECTS AND IN VIEW OF THE DISCUSSION OF THE CIT(A) WHICH WE HA VE EXTRACTED ABOVE, REVENUE HAS TO FAIL ON THIS GROUND. WE HOLD SO. 18. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 2008-09 IS DISMISSED. 19. IN APPEAL FOR ASSESSMENT YEAR 2009-10, THE FIRS T ISSUE IS WITH REGARD TO A DISALLOWANCE OUT OF INTEREST EXPENDITURE OF RS.20 ,03,823/- BY INVOKING SECTION 40A(2)(B) OF THE ACT. IT WAS COMMON POINT BETWEEN THE PARTIES THAT THE SAID ISSUE IS SIMILAR TO WHAT HAS BEEN CONSIDERED B Y US BY WAY OF GROUND OF APPEAL NO.3 IN REVENUES APPEAL FOR ASSESSMENT YEAR 2008-09 IN THE EARLIER PARAGRAPHS. OUR EARLIER DECISION SHALL APPLY MUTATIS-MUTANDIS IN ASSESSMENT YEAR 2009-10 ALSO. ACCORDINGLY, THE REVENUE FAILS ON THIS ASPECT. 20. THE SECOND GROUND IN THIS APPEAL IS WITH REGARD TO THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS.4,00,000/-. I N BRIEF, THE FACTS ARE THAT THE ASSESSEE HAD MADE A PAYMENT OF RS.4,00,000/- TO M/S JAIN INTERNATIONAL TRADE ORGANIZATION AS MEMBERSHIP FEE. ON BEING SHO W-CAUSED TO EXPLAIN THE JUSTIFICATION FOR THE DEDUCTIBILITY OF THE SAID EXP ENDITURE, ASSESSEE POINTED OUT THAT THE SAID CONCERN WAS ENGAGED IN PROMOTING THE ACTIVITIES OF BUSINESS INCLUDING THAT OF THE ASSESSEE BY CONDUCTING BUSINE SS TO BUSINESS MEETINGS, ETC.. THE ASSESSING OFFICER, HOWEVER, DISALLOWED T HE EXPENDITURE AS ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 ACCORDING TO HIM, ASSESSEE HAS FAILED TO PROVE THAT THE SAID EXPENDITURE WAS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE CIT(A) HAS SINCE DELETED THE SAID ADDITION BY MAKING THE FOLLO WING DISCUSSION :- 6.3.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT SUBSTANTIATED THE CLAIM OF EXPENDITURE BY FILING OBJECTIVES OF JITO, LEAFLET WHICH CONTAINS INFORMATION ABOUT JITO AND S OME MAGAZINE WHICH CONTAIN INFORMATION ON HOW TO FILL INFORMATION OF T HE BUSINESS AND PRODUCTS BY MEMBERS. SOME OF THE OBJECTIVES OF JITO ARE AS UND ER :- (I) GROWTH IN BUSINESS BY MUTUAL COOPERATION, AVOID ANCE OF CRITICISM AND OPPOSITION EKTA SE SAFALTA'. (II) PLATFORM FOR YOUNG ENTREPRENEURS FOR RIGHT BUS INESS CONTACTS AND EMPLOYMENT. (III) TO CHANNELIZE UNITED AND SYSTEMATIC EFFORTS T OWARDS CREATING A BRIGHT FUTURE FOR THE YOUTH AND ESTABLISH AN EMPLOYMENT EX CHANGE. (IV) TO PROVIDE A PLATFORM FOR YOUNG ENTREPRENEURS TO INTERACT AND GAIN PURPOSEFUL KNOWLEDGE FROM THE EXPERIENCED AND WELL ESTABLISHED BUSINESS LEADERS. 6.3.2 JAIN INTERNATIONAL TRADE ORGANIZATION (JITO) IS, THEREFORE, A PLATFORM TO UNITE INFLUENTIAL AND POWERFUL JAIN BUS INESSMEN AND INDUSTRIALISTS THROUGHT THE WORLD TO ENCOURAGE ENTREPRENEURSHIP AN D BUSINESS CONTACTS BY INTERACTING WITH BUSINESS LEADERS OF THE COUNTRY AN D ABROAD. THE ASSESSEE HAS PAID AN AMOUNT OF RS.4,00,000/- IN THE EXPECTAT ION THAT THE SAME WOULD DIRECTLY OR INDIRECTLY BENEFIT ITS BUSINESS AND FAC ILITATE ITS DEVELOPMENT. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TR ADING IN GOLD ORNAMENTS AND SEMI-PRECIOUS STONES WHICH HAS A CLIENTELE IN I NDIA AND ABROAD. IT IS A SETTLED POSITION OF LAW THAT THE BUSINESSMENS BUSI NESS MAY BE BENEFITED IN A NUMBER OF WAYS. ONE OF THEM MAY BE THE PROMOTING O F GOOD BUSINESS RELATIONS WITH WHOM HE HAS TO DEAL WITH IN THE COUR SE OF HIS BUSINESS. THE TEST, THEREFORE, IS WHETHER THE ASSESSEE HAS REASON ABLY IN THE INTEREST OF BUSINESS INCURRED THE EXPENDITURE IN QUESTION. THE REFORE, THIS PAYMENT HAS TO BE VIEWED IN THE LARGER CONTEXT OF BUSINESS INTERES T OR EXPEDIENCY. IT IS ALSO A RELEVANT FACTOR TO NOTE THAT THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY IS MANAGED BY PERSONS FROM THE JAIN SECT. THEREFORE, THE ASSESSEES MEMBERSHIP OF THE JITO, THEREFORE, HAS PROVIDED IT WITH A PLATFORM TO INTERACT WITH ENTREPRENEURS AND TO FURTHER ITS BUSINESS INTE REST. PAYMENT OF ENTRY FEE FOR BECOMING A MEMBER OF A SPORTS CLUB WAS HELD TO BE A BUSINESS EXPENDITURE AND ALLOWED IN THE CASE OF GUJARAT STAT E EXPORT CORPORATION LTD. VS. CIT, 209 ITR 649 (GUJARAT). 6.3.3 ON GOING THROUGH THE ABOVE FACTS AND CIRCUMS TANCES IT IS FOUND THAT THE APPELLANT HAS MADE THE CONTRIBUTION FOR TH E PURPOSE OF WHOLLY AND EXCLUSIVELY GROWTH OF ITS BUSINESS AND IT WAS ACTUA LLY INCURRED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND THE POSITION OF L AW, THE IMPUGNED EXPENDITURE OF RS.4,00,000/- IS ALLOWABLE AND THERE FORE ALLOWED U/S 37(1) OF THE I.T. ACT, 1961. THE IMPUGNED DISALLOWANCE IS, THEREFORE, DELETED. THE AO IS DIRECTED ACCORDINGLY. THIS GROUND OF APPEAL IS ALLOWED. 21. AGAINST THE AFORESAID DECISION, THE LEARNED DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) ERRED IN A LLOWING THE AFORESAID ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 EXPENDITURE BECAUSE ASSESSEE WAS UNABLE TO SUBSTANT IATE ITS CLAIM ON THE BASIS OF ANY DOCUMENTARY EVIDENCE THAT SUCH PAYMENT S HAVE HELPED THE BUSINESS OF THE ASSESSEE. 22. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE F OR THE RESPONDENT- ASSESSEE HAS SUPPORTED THE ORDER OF THE CIT(A) IN D ELETING THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE CIT(A) HAS BROUGHT OUT QUITE CLEARLY THE OBJECTIVES OF THE REC IPIENT ORGANIZATION TO WHOM ASSESSEE HAS MADE THE IMPUGNED PAYMENTS. IN PARA 6 .3.3 OF HIS ORDER THE CIT(A) HAS BROUGHT OUT THE INTENDED BENEFITS, WHICH THE ASSESSEE WAS LOOKING FOR, IN RETURN FOR INCURRING THE EXPENDITURE. IN O UR CONSIDERED OPINION, THE DECISION OF THE CIT(A) DOES NOT REQUIRE ANY INTERFE RENCE INASMUCH AS HE HAS FACTUALLY BROUGHT OUT THAT CONSIDERING THE LARGER C ONTEXT OF BUSINESS EXPEDIENCY, THE SAID EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED IN THE ABSENCE OF ANY COGENT MATERIAL AND REASONING WITH T HE REVENUE TO CONTROVERT THE SAME. THUS, ON THIS GROUND ALSO REVENUE FAILS. 24. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 2009-10 IS ALSO DISMISSED. 25. RESULTANTLY, BOTH THE APPEALS OF THE REVENUE AR E DISMISSED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MAY, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 22 ND MAY, 2014. SUJEET ITA NOS.65 & 66/PN/2013 A.YS. : 2008-09 & 2009-10 COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE