OIL FIELD INSTRUMENTATION (INDIA) PVT. LTD., MUMBAI V. ADDL. CIT RG. 1(2) & CIT (OSD), MUMBAI

ITA 6661/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6997 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 21-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Assessee Lawyers: DR K SHIVRAM; RAHUL K HAKANI
• Keywords: Depreciation; Business expenditure; Additional depreciation; Set aside
• Section: 32(1)(iia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH M UMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEM BER ITA NO.6661/MUM/2017 ( ASSESSMENT YEAR :2012-13 ) M/S. OIL FIELD INSTRUMENTATION (INDIA) PVT.LTD. 3 RD FLOOR, LIBERTY BUILDING SIR VITHALDAS THACKERSEY MARG NEW MARINE LINES MUMBAI-400 020 VS. ADD.CIT RG.1(2) & CIT(OSD) 5 TH FLOOR, AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AAACO4870H APPELLANT ) .. RESPONDENT ) ASSESSEE BY DR. K.SHIVRAM & RAHUL K.HAKANI REVENUE BY ABI RAMA KARTIKEYAN DATE OF HEARING 2 4 / 07 /201 9 DATE OF PRONOUNCEMENT 31 / 0 7 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX APPEALS6, MUMBAI DATED 27/09/2017 AND IT PERTAINS TO THE ASSESSMENT YEAR 2 012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- GROUND NO.1 DISALLOWANCE OF ADDITIONAL DEPRECIATION-RS. 12,01,1 65/- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED ERRED IN CONFIRMING THAT THE APPELLANT WAS NOT ENGA GED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ARTICLES OR THINGS, TH EREBY CONFIRMING DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED U/S . 32(1)(IIA) OF RS. 12,01, 165/-, WITHOUT APPRECIATING THE FACT THAT TH E APPELLANT IS A MANUFACTURER ENGAGED IN THE BUSINESS OF MANUFACTURI NG MUD-LOGGING ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 2 UNITS WHICH WAS A TANGIBLE ARTICLE/ THING, AND HENC E, IS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) FAILED TO APPRECIATE TRIAL THE ACTIVITY OF DATA PROCESSING TH ROUGH THE USE OF COMPUTERS ALSO AMOUNTS TO 'MANUFACTURE', AND HENCE, THE APPELLANT IS A MANUFACTURER ENTITLED TO ADDITIONAL DEPRECIATION. GROUND NO. 2 : DISALLOWANCE OF OUT OF LEGAL AND PROFESSIONAL FEES- RS.34,27,976/- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 34,27,976/- OUT OF LEGAL AND PROFESSIONAL FEES INCURRED ON THE GROUND THAT, THERE WAS NO BUSINESS EXPEDIENCY IN INCURRING THE SAID EXPENSES AND THE SAME WERE NOT FOR THE PURPOSES OF THE APPELLANT COMPANY, BUT RELATING TO THE JOINT VENTURES, SUBSIDIARY COMPANY AND STEP DOWN SUBSIDIA RY, WITHOUT APPRECIATING THE FACT THAT THESE EXPENSES WERE NECE SSARY AND INCURRED IN THE ORDINARY COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS OF THE APPELLANT 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF MUD-LOGG ING UNITS (MLUS), DATA ACQUISITION SYSTEMS, SUPPLY OF EQUIPM ENT AND RENDERING SERVICES, MAINLY FOR GEOLOGICAL OPERATIO NS FOR OIL, GAS AND MINERAL EXPLORATIONS, FILED ITS RETURN OF INCOME FO R AY 2012-13, DECLARING TOTAL INCOME OF RS. 26,51,75,374/-. THE C ASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 1 43(3) OF THE I.T.ACT, 1961, ON 04/03/2015 DETERMINING THE TOTAL INCOME AT RS. 27,14,42,710/-, BY MAKING VARIOUS ADDITIONS INCLUDI NG DISALLOWANCES OF ADDITIONAL DEPRECIATION CLAIMED ON PLANT AND MAC HINERY PURCHASED DURING THE YEAR U/S 32(1)(IIA) OF THE I.T.ACT, 1961 , AND DISALLOWANCE OF LEGAL AND PROFESSIONAL CHARGES. THE ASSESSEE CAR RIED THE MATTER ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 3 IN APPEAL BEFORE THE LD.CIT(A), BUT COULD NOT SUCCE ED. THE LD.CIT(A) FOR DETAILED REASONS RECORDED IN HIS APPELLATE ORD ER, DATED 27/09/2017 CONFIRMED ADDITIONS MADE BY THE AO TOWAR DS DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED ON PLANT AND MACHINERY, ON THE GROUND THAT THE ASSESSE WAS NOT E NGAGED IN ANY MANUFACTURING OR PRODUCTION OF ARTICLE OR THINGS AN D SO CALLED PRODUCT MANUFACTURED BY THE ASSESSEE I.E MLU IS NOTHING BUT A DATA, WHICH CANNOT BE CONSIDERED AS PRODUCTION OF ARTICLES OR T HINGS TO CLAIM DEPRECATION. SIMILARLY, THE LD.CIT(A) HAS CONFIRMED ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF LEGAL AND PROFES SIONAL CHARGES, ON THE GROUND THAT ON PERUSAL OF DETAILS FILED BY T HE ASSESSEE, IT IS CLEARLY EVIDENT THAT PROFESSIONAL CHARGES INCURRED ARE FOR EITHER THE SUBSIDIARY COMPANY OR A STEP DOWN SUBSIDIARY AND HE NCE, THE SAME CANNOT BE ALLOWED AS DEDUCTION AS BUSINESS EXPENSES OF THE ASSESSEE. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASS ESSEE IS IN APPEAL BEFORE US. 3. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.1 OF THE ASSESSEE APPEAL IS DISALLOWANCE OF ADDI TIONAL DEPRECIATION CLAIM ON PLANT AND MACHINERY. THE LD.A O DISALLOWED ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY, ON THE GROUND THAT THE CLAIM OF ASSESSEE IS THAT IT IS A MANUFACTURE O F MLUS AND ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 4 EQUIPMENTS AND SOFTWARE RELATED TO THE BUSINESS OF MUD-LOGGING SERVICES IS FACTUALLY INCORRECT. THE LD.AO FURTHER, OBSERVED THAT ON PERUSAL OF WEBSITE OF THE ASSESSEE, IT IS NOTICED T HAT PREDOMINANTLY, THE ASSESSEE IS IN THE BUSINESS OF PROVIDING SERVIC ES TO OIL AND GAS EXPLORATION INDUSTRIES IN THE NATURE OF MUD-LOGGING ,-- INSTRUMENTATION AND OTHER SERVICES AND IT HAS NOT MANUFACTURED ANY PRODUCT FOR THE YEAR UNDER CONSIDERATION. 4. THE LD.AR FOR THE ASSESSEE, AT THE TIME OF HEARI NG, SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2011 -12 IN ITA NO. 2233/MUM/2016, WHERE UNDER IDENTICAL SET OF FACTS A LLOWED DEPRECIATION CLAIMED ON PLANT AND MACHINERY. THE LD . AR, FURTHER SUBMITTED THAT IT IS NOT A CASE OF THE AO THAT THE ASSESSEE IS NOT MANUFACTURING ANY GOODS, IT IS EVIDENT FROM THE FAC T THAT THE AO HAS ALLOWED NORMAL DEPRECATION ON PLAN AND MACHINERY, BUT DISPUTED ADDITIONAL DEPRECIATION FOR REASONS BEST KNOWN TO H IM. ONCE, IT HAS BEEN ACCEPTED THAT ASSESSEE IS INTO THE MANUFACTURI NG ACTIVITY, THEN QUESTION OF DISALLOWANCE OF ADDITIONAL DEPRECIATION DOES NOT ARISE 5. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE AO, AS WELL AS LD.CIT(A) SUBMITTED THAT THE ACT IVITY UNDERTAKEN ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 5 BY THE ASSESSEE IS AT BEST COULD BE TREATED AS SERV ICE PROVIDER TO OIL, GAS AND MINERAL EXPLORATION INDUSTRY, BECAUSE MUD-LOGGING SERVICE CANNOT BE CONSIDERED AS A PRODUCT FOR THE PURPOSE OF CLAIMING DEPRECIATION. THE LD.CIT(A) HAS RIGHTLY AP PRAISED FACTS TO CONFIRM THE ADDITIONS MADE TOWARDS DISALLOWANCE OF DEPRECIATION AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CON SIDERED BY THE CO-ORDINATE BENCH, IN ASSESSEES OWN CASE FOR AY 20 11-12 IN ITA.NO. 2233/MUM/2016, WHERE IT HAS RECORDED CATEGO RICAL FINDINGS, IN LIGHT OF VARIOUS JUDICIAL PRECEDENTS THAT THE AS SESSEE IS INVOLVED IN THE ACTIVITY OF MANUFACTURING MLUS AND FOR THIS PU RPOSE, IT HAS SET UP A MANUFACTURING FACILITIES, THEREFORE DEPRECIATI ON HAS BEEN RIGHTLY CLAIMED ON PLANT AND MACHINERY. THE RELEVANT FINDIN GS OF THE TRIBUNAL ARE AS UNDER: 8. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT L ENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE AO HAS DIS ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT ASSESSEE IS NOT A MANUFACTURER OR PRODUCTION OF ANY ARTICLE OR THING AND THE MUD L OGGING UNITS MANUFACTURED BY THE ASSESSEE ARE FOR CAPTIVE USE AN D NOT FOR SALE IN THE OPEN MARKET. WE HAVE ALSO GONE THROUGH THE LEGAL PROPOSITION IN THE CASE OF CIT VRS. HLS INDIA LTD. (2011) 335 ITR 292 (DELHI) WHER EIN ON IDENTICAL FACTS, IT WAS HELD THAT THE PRODUCTION OF MUD LOGGING REPO RTS AND ANALYSIS GIVEN ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 6 THE PROCESS INVOLVED TANTAMOUNT TO 'MANUFACTURE OR PRODUCTION OF ARTICLE OR THING' AS HELD BY THE HIGH COURT OF DELHI OBSERV ED AS UNDER:- HAVING ANALYZED THE SUBMISSIONS OF/EARNED COUNSEL O F BOTH THE PARTIES AND THE MATERIAL AVAILABLE FOR OUR PERUSAL AND THE CITED CASE LAW, WE FIND FORCE IN THE SUBMISSIONS OF MR. VOHRA, LEAR NED COUNSEL FOR THE ASSESSEE. NO DOUBT, THE RAW MATERIAL I.E., THE PRIM ARY INPUT IN THE IMPUGNED ACTIVITY IS THE 'INFORMATION' BUT CAN WE E QUATE THIS 'INFORMATION' WITH SOMETHING WHICH IS BEING COPIED FROM THERE IN TOW. WHETHER THE CHARACTERISTICS REGARDING WHICH THE INFORMATION IS BEING SENT BACK TO COMPUTERS ON SURFACE FROM LOGGING TOOLS WORKING INS IDE THE DOWN HOLE CAN HE COMPARED TO A CHARACTERISTIC WHICH IS AVAILA BLE AND READABLE WITHOUT CONDUCTING HIGHLY TECHNICAL SCIENTIFIC TEST S AND CALCULATIONS CLOWN INSIDE THE BOREHOLE. EVEN AFTER THE GEOPHYSICAL AND PETRO-CHEMICAL PROPERTIES OF THE ROCKS HAVE BEEN MEASURED, FURTHER SCIENTIFIC PROCESSING IS REQUIRED TO BE DONE BY DEDICATED SOFTWARE ON THE COMPUTERS. IT IS ONLY AFTER THE ABOVE SAID PROCESS, THE READABLE AND USAB LE DATA IN THE FORM OF LOGS IS PROVIDED TO TECHNICAL EXPERTS TO DETERMINE THE POTENTIALITY AND OTHER TECHNICAL AND COMMERCIAL CHARACTERISTICS OF T HE OIL WELL IN WE SAY. WHEN CI LATENT PHYSICAL PROPERTY OF THE ROCKS, WHIC H WAS OTHERWISE UNREADABLE AND THUS UNUSABLE, HAS BEEN CHANGED BY W AY OF SOPHISTICATED SCIENTIFIC TESTS AND CALCULATIONS INT O SCIENTIFIC DATA WHICH SUBSEQUENTLY HAS BEEN FURTHER CHANGED INTO LOGS P/I N/ED ON THE PAPERS OR RECORDED ON THE MAGNETIC TAPES, THAT THE CHARACTER ANDIDENTITY OF END PRODUCT AND FINAL PRODUCT IS NOT DISTINCT. WE ARE U NABLE TO UPHOLD SUCH A PROPOSITION. IT IS A CLEAR CASE WHERE THE LEGAL PRO POSITION THAT 'IF AN OPERATION/PROCESS RENDERS A COMMODITY OR ARTICLE FI T FOR USE FOR WHICH IT IS OTHERWISE NOT FIT, THE OPERATION/PROCESS FALLS WITH IN THE MEANING OF THE WORD 'MANUFACTURE' APPLIES.' 'EVEN FROM ANOTHER PER SPECTIVE, WHICH FORMS THE SECOND LIMB OF THE ASSESSEE 'S ARGUMENT, THE CASE TILTS IN THE FAVOUR OF ASSESSEE. MR. VOHRA HAS TRIED TO DRAW AN ANALOGY BETWEEN THE PRODUCTION OF LOGS BY USING WIRELINE LOGGING EQUIPM ENTS ON THE ONE HAND AND THE PRODUCTION OFX-RAY AND ULTRASOUND REPORT SH EETS USING X-RAY AND ULTRASOUND MACHINES ON THE OTHER HAND WHICH HAV E BEEN HELD TO BE ELIGIBLE FOR INVESTMENT ALLOWANCE UNDER SECTION 32A IN VARIOUS JUDICIAL PRONOUNCEMENTS. VARIOUS HIGH COURTS OFINDIA HAVE HE LD THAT X-RAY MACHINE IS QUALIFIED FOR INVESTMENT ALLOWANCE UNDER SECTION THE HON'BLE DELHI HIGH COURT RELIED UPON THE CASE OF CIT V. DR. S. SURENDER REDDY [2000] 243 ITR 110 (AP)(HC),GAUHATI HIGH COURT IN U T V. DOWN TOWN HOSPITAL (P.) LTD. [2004] 267 ITR 439 AND KERALA HI GH COURT IN CIT V. UPASANA HOSPITAL [19971 225 ITR 845. CONSIDERING TH ESE JUDGEMENTS, THE HON'BLE COURT HELD THAT 'THE ISSUE, WHICH WE AR E CONCERNED WITH, IS A FISCAL ISSUE WHICH IS CONCERNED WITH A CENTRAL STAT UTE. IT IS DESIRABLE THAT IN SUCH A MATTER THERE SHOULD BE UNIFORMITY OF THE JU DICIAL OPINION. EVEN ON MERITS, THE ANALOGY HAS SOME SUBSTANCE. WE, THEREFO RE, IN THE LIGHT OF AFORESTATED, DECIDE THIS ISSUE IN THE FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 9. ON THE ABOVE PROPOSITION, WE HAVE ALSO CONSIDERE D THE ORDERS PASSED BY THE COORDINATE DELHI BENCH OF HONBLE ITAT IN TH E CASE OF TRIVENI SPERRY SUN LTD. VRS. ACIT WHEREIN IT HAS BEEN HELD THAT THE ACTIVITY OF THE ASSESSEE NAMELY, PRODUCTION OF THE MUD- LOGGING REP ORTS, AFTER ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 7 PROCESSING OF THE DATA COLLECTED BY THE MUD LOGGING UNITS, CONSTITUTED ARTICLE OR THING AS PER THE STATUTORY REQUIREMENT F OR GRANT OF DEDUCTION U/S 80-I. 10. WE HAVE ALSO CONSIDERED THE JUDGMENT CITED BY L D. DR IN THE CASE OF SHIVA CARGO MOVERS LTD. VRS. DCIT (2012) 82 DTR 246 (CHENNAI TRIB) AND CLOVER DEVELOPERS PVT. LTD. VRS. ACIT (ITA NO. 6422/MUM/2011) (ITAT MUMBAI). HOWEVER, THE FACTS CONTAINED IN BOTH THE JUDGMENTS ARE DIFFERENT FROM THE FACTS CONTAINED IN THE PRESENT C ASE. IN THE CASE OF SHIVA CARGO MOVERS LTD, WHEREIN THE ASSESSEE WAS EN GAGED IN THE BUSINESS OF TRANSPORT OF SPIRIT AND MOLASSES AND IT ACQUIRED A NEW WINDMILL IN THE YEAR AND HAD CLAIMED ADDITIONAL DEP RECIATION. SO FAR AS THE CASE CLOVER DEVELOPERS PVT. LTD IS CO NCERNED, WHEREIN, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONSTRUCTIO N. HENCE, IN BOTH CASE, ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF M ANUFACTURE OR PRODUCTION AND HAD SET A NEW LINES OF MANUFACTURING /PRODUCTION. HOWEVER, IN THE PRESENT CASE, ASSESSEE WAS ALREADY IN THE LINE OF PRODUCING MUD LOGGING FOR THE PURPOSE OF OIL EXPLOR ATION. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE, DISCUSSIONS AS WELL AS JUDGMENTS CITED ABOVE, WE HO LD THAT THE ACTIVITIES OF THE ASSESSEE IS MAINLY PRODUCTION OF MUD LOGGING REPORTS AFTER PROCESSING OF THE DATA COLLECTED BY THE MUD LOGGING UNITS AND THUS CONSTITUTES AN ARTICLE OR THING AS PER THE STATUT ORY REQUIREMENT FOR GRANT OF DEDUCTION U/S 80-I OF THE I.T. ACT. AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS PROCESSED THE DATA COLLECTED AND THE REPORT PREPARED BY THE T ECHNICAL PERSONNEL AMOUNTS TO PRODUCTION OF AN ARTICLE OR THING. WE FO RTIFY OUR CONCLUSION ON THE BASIS OF DECISION RENDERED BY THE COORDINATE DE LHI BENCH OF HONBLE TRIBUNAL IN THE CASE OF CIT VRS. HLS INDIA LTD. (20 11) 335 ITR 292 (DELHI), WHEREIN ON IDENTICAL FACTS, THE SIMILAR FI NDINGS HAVE BEEN RECORDED BY THE TRIBUNAL. HENCE WE DIRECT THE AO TO ALLOW ADDITIONAL DEPRECIATION TO THE ASSESSEE. RESULTANTLY, THESE GR OUND RAISED BY THE ASSESSEE STANDS ALLOWED. 7. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH V IEW TAKEN BY THE CO-ORDINATE BENCH, WE DIRECT THE AO TO ALLOW ADDITI ONAL DEPRECATION ON PLANT AND MACHINERY AS CLAIMED BY THE ASSESSEE. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM GROUND NO.2 OF ASSESSEE APPEAL IS DISALLOWANCE OF LEGAL A ND PROFESSIONAL CHARGES. THE AO DISALLOWED LEGAL AND PROFESSIONAL C HARGES, IN RESPECT OF FEES PAID TO LYNCH, CHAPPEL AND ALSUP I N MATTER OF ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 8 SHEREDIAN B.V, A SUBSIDIARY COMPANY OF THE ASSESSEE AND ALSO LEGAL FEES PAID TO P. NAIDU ADVOCATES & SOLICITORS,SINGAP ORE FOR JOINT VENTURE AND SHAREHOLDERS AGREEMENT FOR MCPHAR INTER NATIONAL SERVICES PVT.LTD., SINGAPORE AND ALSO CONSULTATION CHARGES PAID TO BHARUCH & PARTNERS ON LEGAL MATTER REGARDING BLACK VIPER ( STEP DOWN SUBSIDIARY), ON THE GROUND THAT THE SERVICES R ENDERED BY PROFESSIONALS ARE IN CONNECTION WITH SUBSIDIARY COM PANY AND STEP DOWN SUBSIDIARY COMPANY AND THEREFORE, THE SAME CAN NOT BE CONSIDERED AS EXPENDITURE, INCURRED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 9. THE LD. AR FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS INCURRED LEGAL AND PROFESSIONAL CHARGES IN CONNECTI ON WITH DRAFTING SHAREHOLDERS AGREEMENTS AND OTHER RELATED MATTER IN CONNECTION WITH RESTRUCTURING OF THE BUSINESS OF ITS SUBSIDIAR Y BECAUSE, IT HAS DIRECT RELATIONSHIP WITH SUBSIDIARY AND STEP DOWN S UBSIDIARY COMPANIES. THEREFORE, PROFESSIONAL CHARGES PAID FOR PROFESSIONALS FOR SUCH SERVICES IS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE LD. AR, FURTHER, S UBMITTED THAT IT HAS APPOINTED LYNCH, CHAPPEL AND ALSUP TO ADVISE ON RESTRUCTURING BUSINESS BY PURCHASING FURTHER UNITS OR TO SELL THE INVESTMENTS. ALTHOUGH, THE TRANSACTIONS HAS NOT BEEN MATERIALIZE D, BUT FACT REMAINS THAT TO PROTECT INTEREST OF ITS INVESTMENTS IT HAS TAKEN ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 9 PROFESSIONAL SERVICES FROM VARIOUS PARTIES. THEREFO RE, THE SAME IS RIGHTLY CLAIMED AS BUSINESS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE. IN THIS REGARD, HE RELIED UPON THE DECISION OF ITAT, MUMBAI IN THE CASE OF AKER POWER GAS PVT.LTD. ACIT [2016, 70 TAXMANN.COM 11 ( BOM.TRIB.)]. THE ASSESEE HAS ALSO RELIED UPON THE DECISION OF H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS BUSH BOAKE ALLEN (INDIA LTD.) [1982 135 ITR 306]. 10. THE LD. DR, ON THE OTHER HAND, REFERRING TO PAP ER BOOK FILED BY THE ASSESEE SUBMITTED THAT ALTHOUGH, THE PROFESSION AL HAVE RAISED BILL IN THE NAME OF THE ASSESEE FOR VARIOUS PROFESS IONAL SERVICES, BUT ON PERUSAL OF DESCRIPTION OF SERVICES RENDERED BY THE PROFESSIONALS, IT IS VERY MUCH CLEAR THAT PREDOMINANTLY, THE SERVI CES ARE RENDERED TO SUBSIDIARY COMPANY AND STEP DOWN SUBSIDIARY COMPANY , WHICH IS EVIDENT FROM THE FACT THAT MOST OF THE TIME HAS BEE N USED FOR DRAFTING AGREEMENTS BETWEEN THE SUBSIDIARY COMPANY AND THIRD PARTIES. THE LD. DR, FURTHER SUBMITTED THAT THE AO NEVER DISPUTE D THE FACT THAT, THE ASSESSEE HAS INVESTED IN SUBSIDIARY AND STEP DO WN SUBSIDIARY. BUT, THE AO HAS QUESTIONED RELEVANCE OF PROFESSIONA L CHARGES INCURRED IN CONNECTION WITH TRANSACTIONS BETWEEN SU BSIDIARY AND THIRD PARTIES. THEREFORE, THE AO WAS RIGHT IN DISAL LOWANCES OF EXPENDITURE INCURRED TOWARDS LEGAL AND PROFESSIONAL CHARGES AND ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 10 ACCORDINGLY, HIS ORDER SHOULD BE UPHELD. HOWEVER, I N ORDER TO VERIFY, THE CLAIM OF THE ASSESSEE THAT SERVICES HAS BEEN RE NDERED TO THE ASSESSEE, THE MATTER MAY BE SET ASIDE TO THE FILE O F THE AO TO VERIFY THE CLAIM WITH REFERENCE TO BILLS SUBMITTED BY THE PROFESSIONALS. 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSE E HAS PAID PROFESSIONAL CHARGES TO LYNCH, CHAPPEL AND ALSUP A PROFESSIONAL CORPORATION AND ALSO LEGAL FEES TO P. NAIDU ADVOCAT ES & SOLICITORS, SINGAPORE AND BARUCH & PARTNERS. IT IS ALSO NOT IN DISPUTE THAT SAID LEGAL FEES HAS BEEN PAID IN CONNECTION WITH JOINT V ENTURE AGREEMENTS WITH SUBSIDIARY AND STEP DOWN SUBSIDIARY. THE ONLY DISPUTE IS WITH REGARD TO SERVICES RENDERED BY PROFESSIONALS TO THE ASSESSEE. ALTHOUGH, THE ASSESSEE CLAIMS TO HAVE AVAILED SERVI CES OF THREE PROFESSIONALS DISPUTED BY THE AO, BUT ON PERUSAL OF BILL SUBMITTED BY THE PROFESSIONALS, IT IS NOTICED THAT PREDOMINANTLY PAYMENT HAS BEEN MADE IN CONNECTION WITH PROFESSIONAL SERVICES RENDE RED TO SHEREDIAN B.V, A SUBSIDIARY OF ASSESSEE COMPANY WIT H THIRD PARTIES, IN CONNECTION WITH DRAFTING AND OTHER SERVICES. NO DOUBT, THE PROFESSIONALS HAVE RENDERED SOME SERVICES TO THE AS SESSEE, WHICH IS CLEAR FROM DESCRIPTION OF SERVICES ATTACHED WITH BILLS SUBMITTED BY THE PROFESSIONAL. BUT, FACTS ARE NOT CLEAR, WHETHER PROFESSIONAL ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 11 SERVICES RENDERED BY THREE PROFESSIONAL IS ENTIREL Y FOR THE ASSESSEE OR ANY PART OF SERVICES IS RELATED TO SUBSIDIARY AN D STEP DOWN SUBSIDIARY. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT THE ISSUE NEEDS TO BE RE-EXAMINED BY THE AO IN LIGHT OF CLAI M OF THE ASSESSEE THAT IT HAS AVAILED SERVICES OF PROFESSIONAL TO PR OTECT INVESTMENTS AND INTEREST OF THE COMPANY AND ALSO AS A COMMERCIA L EXPEDIENCY WITH REFERENCE TO BILLS SUBMITTED BY LYNCH, CHAPPEL AND ALSUP AND ALSO P. NAIDU ADVOCATES & SOLICITORS, SINGAPORE AND BHARUCH AND PARTNERS. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF AO AND DIRECT HIM TO CAUSE NECESSARY ENQUIRES IN LIGHT OF EVIDENC E OF THE FILED BY THE ASSESSEE, INCLUDING BILLS SUBMITTED BY THE PROF ESSIONS. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31/07/2 019 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31/07/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT ITA NO.6661/MUM/2017 M/S. OIL FIELD INSTRUMENTATION(INDIA) PVT.LTD. 12 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//