ACIT, Patiala V. M/s Groz Beckert Asia Pvt. Ltd., Chandigarh

ITA 718/CHANDI/2012

• Counselvise Citation: 71821514 RSA 2012
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Notional interest; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 718/CHD/2012 ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE, V M/S GROZ BECKERT ASIA PATIALA. PVT. LTD., 133-135, INDL. AREA, CHANDIGARH. PAN: AAACG-5236F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT : NONE. DATE OF HEARING : 30.08.2012 DATE OF PRONOUNCEMENT : 12.9.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 11.05.2012 PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE , LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS.L0,03,106/ ON ACCOUNT OF CORPORATE MEMBERSHIP FEE/ANNUAL SUBSCRIPTION PAID TO CHANDIGARH GOLF CLU B AS A CAPITAL EXPENDITURE, PARTICULARLY WHEN THE DEPARTMENT IS AL READY IN APPEAL ON THE ISSUE BEFORE HON'BLE HIGH COURT IN ASSESSEE'S OWN C ASE FOR EARLIER YEARS. 2. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS.L1,65,285/- MADE U/S 36(L)(III) ON ACCOUNT OF LENDING LOAN OUT OF BUSINESS FUNDS AT A LOWER RATE OF INTEREST TO THE PRESIDENT, VICE PRESIDENT AND EMPLOYEES, WHI LE THE ASSESSEE HAD BORROWED FUNDS AT A HIGHER RATE, PARTICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPEAL ON THE ISSUE BEFORE HON'BLE HIGH COURT IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. 2 3. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS.27,40,618/- ON ACCOUN T OF THE TRAVELLING EXPENSES WHEN THE ASSESSEE FAILED TO PROVE THAT THE EXPENDITURE IN QUESTION WAS IN FACT LAID OUT WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS CARRIED OUT BY IT, PARTICULARLY WHEN THE D EPARTMENT IS ALREADY IN APPEAL ON THE ISSUE BEFORE HON'BLE HIGH COURT IN AS SESSEE'S OWN CASE FOR EARLIER YEARS. 4. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS. 10,77,919/- ON A CCOUNT OF LEGAL & PROFESSIONAL EXPENSES AS A CAPITAL EXPENDITURE, PAR TICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPEAL ON THE ISSUE BEFORE HON'BLE HIGH COURT IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. 5. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS.64,49,989/- ON AC COUNT OF INFORMATION & TECHNOLOGY EXPENSES AS A CAPITAL EXPENDITURE, PAR TICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPEAL ON THE ISSUE BEFORE HON'BLE HIGH COURT IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. 6. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS.L,85,26,070/- ON ACCOUNT OF SCRAP SALES, PARTICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPE AL ON THE ISSUE BEFORE HON'BLE HIGH COURT IN ASSESSEE'S OWN CASE FO R EARLIER YEARS. 7. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 8. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY G ROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OF. 3. NONE ATTENDED ON BEHALF OF THE ASSESSEE. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' WAS FAIR ENOUGH TO STATE THAT ALL THE GROUNDS OF AP PEAL ARE COVERED AGAINST THE REVENUE, IN ASSESSEE'S OWN CASE AS RECORDED IN THE ORDER PASSED BY LD. CIT(A) U/S 250( 6) OF THE INCOME-TAX ACT, DATED 11.05.2012. 5. WE HAVE PERUSED THE GROUNDS OF APPEAL, RAISED BY THE REVENUE AND FINDINGS RECORDED BY THE CIT(A), AGAINS T EACH OF THE GROUND OF APPEAL AND FOUND THAT THE SAME ARE CO VERED AGAINST THE REVENUE IN ASSESSEE'S OWN CASE, AS IS E VIDENT FROM THE ENSUING DISCUSSIONS. 6. IN GROUND NO.1, THE AO NOTICED THAT A SUM OF RS.10,03,106/- HAS BEEN CHARGED TO PROFIT & LOSS AC COUNT ON 3 ACCOUNT OF CORPORATE MEMBERSHIP FEE TO GOLF CLUB, CHANDIGARH. THE AO, TREATED SUCH EXPENSES AS PERSO NAL IN NATURE AND ALSO HELD THE SAME AS CAPITAL IN NATURE. CONSEQUENTLY, AN ADDITION OF RS.10,03,106/- WAS MAD E BY THE AO. LD. CIT(A), ON APPRECIATION OF THE CASE LAWS C ITED BY THE APPELLANT BEFORE HIM AND ALSO REFERRING TO THE ORDE RS OF THE HON'BLE TRIBUNAL IN ASSESSEE'S OWN CASE, ADJUDICATE D THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF TH E APPELLATE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER : 04. AS REGARDS THE FIRST GROUND OF APPEAL IS CONCER NED THE A.O. HAS DISCUSSED THIS IN PARA 3 OF THE ASSESSMENT ORDER. O N PERUSAL ON AUDITOR REPORT IN FROM 3CD AT SERIAL NO. I7(D), IT HAS BEEN NOTICED T HAT THE SUM OF RS. 10,O3,106/- HAS BEEN DEBITED P&L A/C ON ACCOUNT OF CORPORATE MEMBERSHIP FEE TO GOLF CLUB, CHANDIGARH. THE A.O. CONSIDERED THESE EXPENSES AS PERSONAL EXPENSES OF THE MANAGING DIRECTOR AND OTHER EMPLOYE ES OF THE ASSESSEE COMPANY AND ALSO HELD THAT THESE EXPENSES HAS NOT BEEN INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASS ESSEE. THE A.O. ALSO HELD THE EXPENDITURE AS CAPITAL IN NATURE. HE THEREFORE DISALLOWED THE ENTIRE EXPENSES OF RS.10,O3106/-. 4.1 THE APPELLANT SUBMITTED THAT THE ASSESSEE COM PANY IS AN INDIAN SUBSIDIARY OF A GERMAN COMPANY AND RECEIVES VISITOR S FROM GERMANY ROUND THE YEAR. IT IS CUSTOMARY TO HOLD STAFF GETTOGETHER WHE NEVER IMPORTANT BUSINESS ASSOCIATES VISIT FROM GERMANY OR OTHER FOREIGN COUN TRIES. IN ORDER TO MEET THESE BUSINESS COMPULSION AND TO BE COST EFFECTIVE THE AP PELLANT COMPANY TOOK A DECISION TO OBTAIN CORPORATE MEMBERSHIP OF GOLF CLU B CHANDIGARH. THE APPELLANT COMPANY RELIED.ON THE FOLLOWING JUDGEMENT S : OTIS ELEVATOR CO. VS CIT 195 ITR 682 (BOM), GUJRAT STATE CORPORATION LTD. VS CIT 209 ITR 649 (GUJ), CITV SUNDRAM INDUSTR IES LTD. 240 ITR 335 (MAD). ECHJAY INDUSTRIES (P) LTD. VS II ITO 26 ITD 259 (BOM), PRITAM HOTEL PVT. LTD. VS ITO 17 TTJ 550 (BOM) GOYAL GASES PVT. LTD. DCIT 42 ITD 135 (DEL), GOBIND GLASS & INDUSTRIES PVT. LTD. VS ACIT 56 TTJ 430 (AHD.), GUJRAT PETRO SYNTHESIS LTD. VS DCIT 76 ITD 257 (AHD.) THE APPELLANT FURTHER SUBMITTED THAT SIMILAR ADDITI ON IN A.Y. 2006-07 HAS BEEN DELETED BY THE CIT(A) & SUBMITTED COPY OF HON' BLE ITAT'S ORDER IN ITA NO. 336/CHD/11 FOR THE A.Y. 2006-07, WHEREIN THE ACTION OF CIT(A) HAS BEEN UPHELD. 4.2 IN THE COUNTER COMMENTS OF THE A.O. IT HAS BEEN SUB MITTED THAT ADDITION ON THIS ACCOUNT WAS DELETED BY THE CIT(A) IN THE ASSESSEE'S CASE FOR EARLIER YEARS. IT IS SEEN THAT SIMILAR DISALLOWANCE MADE BY THE A.O. IN A.Y. 2006- 07 WAS DELETED BY MY PREDECESSOR VIDE ORDER DATED 1 0.02.2011 IN APPEAL NO. 336 IT/CIT(A)/PTA/09-10 AND IT WAS NOTED THAT SIMILAR D ISALLOWANCE WAS DELETED BY CIT(A) IN A.Y. 2001-02 AND THAT SIMILAR DISALLOW ANCE MADE BY THE LD. A.O. IN THE ASSESSMENT YEARS 2003-04, 2004-05 & 2005-2006 W AS DELETED BY CIT(A) VIDE ORDERS DT. 15.11.2006 IN A. NO. 23/06-07, DT. 11.07.2007 IN A. NO. 163/06-07 & DT. 30.06.2009 IN A. NO. 138/08-09 RESPECTIVELY A ND THAT THE SAID ORDERS HAVE BEEN UPHELD BY THE HON'BLE ITAT, CHANDIGARH VIDE OR DERS DATED 24.08.2007, 26.11.2007, 27.03.2008 & 21.12.2009 IN A. NO.S !75/ CHANDI/2006, 942/CHANDI/ 2006, 782/CHANDI/2OO7 & 885/CHANDI/2009 RESPECTIVEL Y. 4.3 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE MADE BY THE A.O. CANNOT BE SUSTAINED AND THE SAME I S DIRECTED TO BE DELETED. 4.4 GROUND NO. 1 IS THEREFORE ALLOWED. 7. AS THE ISSUE, IN QUESTION, IS COVERED BY THE DEC ISION OF THE TRIBUNALS ORDER, IN ASSESSEE'S OWN CASE AS REC ORDED BY THE CIT(A), THE FINDINGS OF THE CIT(A) ARE UPHELD A ND GROUND OF APPEAL IS DISMISSED. 8. IN GROUND NO. 2, REVENUE CONTENDED THAT CIT(A) E RRED IN NOT SUSTAINING THE ADDITION OF RS.11,65,285/-, MADE U/S 36(1)(III) ON ACCOUNT OF ADVANCES MADE AT A LOWER R ATE OF INTEREST TO THE PRESIDENT, VICE PRESIDENT AND EMPLO YEES, AGAINST WHICH THE DEPARTMENT HAD BEEN IN APPEAL BEF ORE THE HON'BLE HIGH COURT IN EARLIER YEARS. 9. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD. THE ISSUE HAS BE EN DECIDED BY THE CIT(A) AGAINST THE REVENUE, FOLLOWING THE DE CISION OF THE HON'BLE TRIBUNAL IN ASSESSEE'S OWN CASE. THE R ELEVANT FINDINGS OF THE CIT(A) ARE REPRODUCED : 5.1 BEFORE ME THE APPELLANT SUBMITTED THAT THE ASS ESSEE COMPANY HAS VARIOUS LOAN SCHEMES AS A STAFF WELFARE MEASURE AND ARE GIVEN AT CONCESSIONAL/ NIL INTEREST FOR VARIOUS PURPOSES FOR EG. WEDDING, PURCHASE/CONSTRUCTION OF HOUSE, PURCHASE OF VEHICLE S, MEDICAL TREATMENT ETC. IT WAS ALSO SUBMITTED THAT FOR ALL PRACTICAL PURPOS ES THE LOANS GIVEN BY THE APPELLANT COMPANY TO ITS EMPLOYEES AT CONCESSIONAL/ NIL RATE OF INTEREST ARE 5 TAXABLE AS PERQUISITES IN THE HANDS OF THE EMPLOYEE S ALONE U/S 17(2) (VI) OF THE IT ACT,1961 READ WITH THE RULE 3(7X1) OF THE IT RUL E 62. THE APPELLANT ALSO REFERRED TO THE JUDGMENTS IN THE CASE OF DALMIA CEM ENT (BHARAT) LTD. VS THEIR WORKMEN AIR 967 (SC) 209, PUNJAB WOOL COMBER LTD. ( ITA NO. 1058 OF 1996 DATED 14.01.2003) HON'BLE ITAT, CHANDIGARH AND MALW A COTTON SPINING MILLS LTD. VS ACIT 89 ITD 65 ETC. IT HAS BEEN FURTHER SUB MITTED THAT SIMILAR DISALLOWANCE MADE IN THE A.Y. 2001-02, 2003-04, 200 4-05, 2005-06 AND 2006-07 WAS SET ASIDE BY THE ID. CIT(A). THE APPELL ANT ALSO SUBMITTED THE COPY OF HON'BLE ITAT'S ORDER IN ITA NO. 336/CHD/IL FOR THE A.Y. 2006-07, WHEREIN THE ACTION OF CIT(A) HAS BEEN UPHELD. 5.2 THE A.O. IN HIS COUNTER COMMENTS HAS SUBMITTED THAT ADDITION ON THIS ACCOUNT WAS DELETED BY THE CIT(A) IN THE ASSES SEE'S CASE FOR THE A.Y. 2001- 02, 2002-03, 2004-05, 2005-06 AND 2006-07. 5.3 I HAVE GONE THROUGH THE SUBMISSIONS. IT IS SEEN THAT MY PREDECESSOR HAS DELETED SUCH ADDITION VIDE HIS ORDE R DATED 10.02.2011 IN APPEAL NO. 336 IT/CIT(A)/PTA/09-10 AND NOTED THAT SIMILAR DISALLOWANCE WAS DELETED BY CIT(A) IN A.Y. 2001-02 AND THAT SIMILAR DISALLOW ANCE MADE BY THE A.O. IN THE A.Y.'S 2003-04, 2004-2005 & 2005-2006 WAS DELETED B Y CIT(A) IN APPEAL NO'S 23/IT/CIT(A)/PTA/O6-07, I63/IT/CIT(A)/PTA/06-O7 & 138/IT/CIT(A)/PTA/ 08-09, VIDE ORDERS DT. 15.11.2006, 11.07.2007 & 3 0.06.2009 RESPECTIVELY AND THAT THE SAID ORDERS HAVE BEEN UPHELD BY THE HON'BL E ITAT, CHANDIGARH IN ITA NO'S 175/CHANDI/20O6, 942/CHANDI/2O06, 782/CHANDI/' 2007 & 885/CHANDI/2009 DATED 24.08.2007, 26.11.2007, 27.03 .2008 &21.12.2009 RESPECTIVELY. 5.4 IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE DI SALLOWANCES OF SUCH NOTIONAL INTEREST OUT OF INTEREST DEBITED T O THE P&L A/C CANNOT BE SUSTAINED AND IS DIRECTED TO BE DELETED. 10. AS THE ISSUE RAISED BY THE REVENUE IN THE PRESE NT GROUND OF APPEAL IS COVERED BY THE DECISION OF THE HON'BLE TRIBUNAL, IN ASSESSEE'S OWN CASE, RESPECTFULLY FOLL OWING THE SAME, FINDINGS OF THE LD. CIT(A) ARE UPHELD AND GRO UND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 11. IN GROUND NO.3, REVENUE CONTENDED THAT CIT(A) E RRED IN NOT SUSTAINING THE ADDITION OF RS.27,40,618/- ON AC COUNT OF THE TRAVELING EXPENSES, WHEN THE ASSESSEE FAILED TO PROVE THAT 6 THE EXPENDITURE IN QUESTION WAS, IN FACT, LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CARRIED OUT BY IT, PARTICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPE AL. IN APPEAL, ON THE ISSUE BEFORE THE HIGH COURT, IN ASSE SSEE'S OWN CASE, FOR EARLIER YEARS. THE AO, HELD THAT SUCH EX PENSES WERE VERIFIED AND ON SCRUTINY OF VOUCHERS AND DETAILS, I T WAS FOUND THAT MOST OF THE EXPENDITURE, RELATED TO STAY IN HO TEL BY THE DIRECTORS AND OTHER EXECUTIVES IN INDIA AND ABROAD. AS THE ASSESSEE FAILED TO SUBSTANTIATE, WHETHER SUCH EXPEN SES WERE FOR THE PURPOSE OF BUSINESS EXCLUSIVELY, THE AO ADD ED 1/3 RD OF SUCH EXPENSES CLAIMED. THE CIT(A), FOLLOWING THE D ECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE, DELETED THE IM PUGNED ADDITION. THE RELEVANT PART OF THE FINDING IS REPR ODUCED HEREUNDER : 6.3 I HAVE GONE THROUGH THE SUBMISSIONS. IT IS SEE N THAT ID.CIT(A)DELETED THE ENTIRE DISALLOWANCE IN A.Y. 2006-07 VIDE HIS OR DER DATED 10.02.2011 IN APPEAL NO. 336 IT/CIT(A)/PTA/OG-IO AND NOTED THAT S IMILAR DISALLOWANCE WAS DELETED BY CIT(A) IN A.Y. 2001-02 & 2005-06 HOW EVER DISALLOWANCE MADE BY THE A.O. IN THE A.Y.'S 2003-04 & 2004-05 WAS UPH ELD BY CIT(A) TO THE EXTENT OF 25% OF THE TOTAL DISALLOWANCE BUT THE HON'BLE IT AT, CHANDIGARH DELETED THE ENTIRE DISALLOWANCE MADE BY THE A.O. IN THE A.Y.'S 2001-02, 2003-04, 2004-05 & 2005-2006 IN ITA NOS. I75/CHANDI/2OO6, 942/CHANDI/2 OO6, 782/CHANDI/'2007 & 885/CHANDI/2009 VIDE ORDER DATED 24.08.2007, 26.1 1.2007, 27.03.2008 & 21.12.2009 RESPECTIVELY. 6.4 IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE C ASE DISALLOWANCE ON ACCOUNT OF TRAVELING EXPENSES OF RS. 27,4O,618/- DE BITED TO P&L A/C CANNOT NOT BE SUSTAINED AND IS DIRECTED TO BE DELETED. 6.5 GROUND NO. 3 IS THEREFORE ALLOW ED. 12. RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE TRIBUNAL, IN ASSESSEE'S OWN CASE, FINDINGS OF THE C IT(A) ARE UPHELD AND GROUND OF APPEAL RAISED BY THE REVENUE I S 7 DISMISSED. 13. IN GROUND NO.4, THE REVENUE CONTENDED THAT CIT( A) ERRED IN NOT SUSTAINING THE ADDITION OF RS.10,77,919/-, O N ACCOUNT OF LEGAL AND PROFESSIONAL EXPENSES AS CAPITAL EXPEN DITURE, PARTICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPE AL, ON THE ISSUE BEFORE THE HON'BLE HIGH COURT, IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. THE AO, HELD THAT SUCH EXPENDIT URE CLAIMED UNDER THIS HEAD, ARE IN THE NATURE OF CAPITAL EXPEN DITURE AND THEREFORE, ADDED RS.10,77,919/- UNDER THIS HEAD. LD . CIT(A), ON APPRECIATION OF THE FACTUAL MATRIX OF THE CASE A ND SUBMISSION FILED BEFORE HIM, INCLUDING THE CASE-LAW S CITED, ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE, FO LLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE. T HE RELEVANT PART OF THE FINDINGS OF THE CIT(A) IS REPRODUCED HE REUNDER : THE APPELLANT THEREFORE SUBMITTED THAT SUCH EXPENS ES ARE IN THE NATURE OF REVENUE EXPENSES. IT IS FURTHER SUBMITTED THAT DISA LLOWANCE MADE BY THE A.O. IN THE A.Y. 2003-04, 2004-05, 2005-06 AND 2006-07 ON SIMILAR GROUNDS WERE SET ASIDE THE CIT(A) AND UPHELD BY HON'BLE ITA T. 7.2 IN THE COUNTER COMMENTS THE A.O. HAS SUBMITTED THAT ID. CIT(A) AS DELETED THE ADDITIONS IN THE ASSESSEE'S CASE FOR A. Y. 2001-02, 2002-03, 2003-04, 2004-05 AND 2005-06 AND THE HON'BLE ITAT AS UPHELD THE ACTION OF THE CIT(A). 7.3 I HAVE GONE THROUGH THE SUBMISSIONS. IT IS SEEN THA T SIMILAR DISALLOWANCE MADE BY THE A.O. IN THE A.Y. 2 006-07 HAS ALSO BEEN DELETED BY MY PREDECESSOR VIDE HIS ORDER DATED 10.0 2.2011 IN APPEAL NO. 336 IT/CIT(A)/PTA/ 09-10 AND IT WAS NOTED THAT DISALLOW ANCE MADE BY THE A.O. IN THE A.Y.'S 2003- 04, 2004-05 & 2005-06 WAS DELETED BY CIT(A) VIDE ORDER DATED 15.11.2006, 11.07.07 & 30.06.2009 RESPECTIVEL Y AND THAT THE SAID ORDER HAVE BEEN UPHELD BY THE HON'BLE ITAT, CHANDIGARH IN ITA NOS. 942/CHANDI/2O06, 782/CHANDI/2OO7 & 885/CHANDI/20O9 VIDE ORDERS DATED 26.11.2007, 27.03.2008 & 21.12.2009 RESPECTIVELY. 7.4 IN VIEW OF THE SAME, DISALLOWANCE ON ACCOUNT OF LEG AL AND PROFESSIONAL EXPENSES TO THE TUNE OF RS. 10,77,919/ - CANNOT BE SUSTAINED AND IS DIRECTED TO BE DELETED. 7.5 GROUND NO. 4 IS THEREFORE ALLOWED. 14. WE HAVE PERUSED THE FINDINGS OF THE CIT(A) AND THE SUBMISSION MADE BY THE APPELLANT BEFORE CIT(A). TH E ISSUE 8 IS SQUARELY COVERED AGAINST THE REVENUE, IN ASSESSE E'S OWN CASE BY THE TRIBUNAL, AS RECORDED BY THE CIT(A). R ESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 15. IN GROUND NO.5, REVENUE CONTENDED THAT CIT(A) E RRED IN NOT SUSTAINING ADDITION OF RS.64,49,981/- ON ACCOUN T OF INFORMATION &TECHNOLOGY EXPENSES AS CAPITAL EXPENSE S, PARTICULARLY WHEN THE DEPARTMENT IS ALREADY IN APPE AL ON THE ISSUE BEFORE THE HON'BLE HIGH COURT, FOR EARLIER YE ARS. 16. THE AO, FOUND THAT ASSESSEE HAD CLAIMED INFORMA TION & TECHNOLOGY, AMOUNTING TO RS.64,49,981/-. THE AO, H ELD THAT OUT OF TOTAL EXPENSES OF RS.64,49,989/-, AN AMOUNT OF RS.49,43,254/-, REPRESENTS ANNUAL MAINTENANCE CHARG ES AND RS.2,81,862/- REPRESENTS PURCHASES OF CONSUMABLE LA SER TONER, INKJET CARTRIDGES AND RS.12,24,873/- AS SOF TWARE EXPENSES , CONNECTIVITY ETC. THE AO, DISALLOWED RS.2,81,862/- CONTENDING THAT EXPENSES OF SIMILAR N ATURE CANNOT BE BOOKED UNDER TWO SEPARATE HEADS, AS REGAR DS REMAINING AMOUNT OF RS.61,68,127/-, SUCH EXPENSES W ERE TREATED AS CAPITAL IN NATURE. LD. CIT(A), ON APPRE CIATION OF THE SUBMISSION BEFORE HIM AND CONSIDERING THE CASE- LAWS CITED BY THE APPELLANT, ADJUDICATED THE ISSUE IN FA VOUR OF THE REVENUE. THE CIT(A), HAS ALSO OBSERVED THAT THE IS SUE IS COVERED AGAINST THE REVENUE IN ASSESSEE'S OWN CASE, IN TRIBUNALS ORDER, MENTIONED IN PARA 8.3 OF THE ORDE R. THE RELEVANT PART OF THE FINDINGS OF THE CIT(A) AR E REPRODUCED 9 HEREUNDER : 8.3 I HAVE GONE THROUGH THE SUBMISSIONS MADE BEFOR E ME. IT IS NOTED THAT SIMILAR DISALLOWANCE ON ACCOUNT OF INFORMATION TECHNOLOGY EXPENSES DEBITED P&L A/C WAS DELETED BY THE CIT(A) FOR A.Y. 2006-07 IN THE ORDER VIDE DATED 10.02.2011 IN APPEAL NO. 336 IT/CIT(A)/PTA/09 -10 AND IT WAS NOTED THAT SIMILAR DISALLOWANCE IN A.Y. 2001-02 WAS DELETED BY CIT(A) AND THE HON'BLE ITAT, CHANDIGARH DELETED THE ENTIRE DISALLOWANCE MA DE BY THE A.O. IN THE A.Y.'S 2001-02, 2003-04, 2004-05 & 2005-2006 IN IT A NOS. !75/CHANDI/2O06, 942/CHANDI/2O06, 782/CHANDI/2OO7 & 885/CHANDI/2OO9 VIDE ORDER DATED 24.08.2007, 26.11.2007, 27.03.2008 & 21.12.2009 RES PECTIVELY. 8.4 IN VIEW OF THE ABOVE DISALLOWANCE ON ACCOUNT OF INF ORMATION TECHNOLOGY AMOUNTED TO RS. 64,49,989/- DEBITED TO P &L A/C CANNOT BE SUSTAINED AND IS DIRECTED TO BE DELETED. 8.5 GROUND NO. 5 IS THEREFORE ALLOWED. 17. AS THE ISSUE IS SQUARELY COVERED BY THE DECISIO N OF THE TRIBUNAL IN ASSESSEE'S OWN CASE, AS OBSERVED BY THE CIT(A), THE FINDINGS OF THE CIT(A) ARE UPHELD AND GROUND OF APPEAL, RAISED BY THE REVENUE IS DISMISSED. 18. IN GROUND NO.6, REVENUE CONTENDED THAT CIT(A) E RRED IN NOT SUSTAINING ADDITION OF RS.1,85,26,070/- ON ACCO UNT OF SCRAP SALES, PARTICULARLY WHEN THE DEPARTMENT IS AL READY IN APPEAL, ON THE ISSUE BEFORE THE HON'BLE HIGH COURT, IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. THE AO, FOU ND THAT THE IMPUGNED SUM WAS WRITTEN-OFF IN THE LIST OF STORES AND REPAIRS DUE TO OBSOLESCENCE WHICH HAS NOT BEEN ACCOUNTED FO R IN THE SCRAP ACCOUNT. IN THE ABSENCE OF SATISFACTORY EXPL ANATION, AO MADE AN ADDITION OF 50% OF THE USEFUL ITEMS, AMOUNT ING TO RS.1,41,17,080/-. THE AO, ALSO OBSERVED THAT THE A SSESSEE FAILED TO FILE THE DETAILS OF SCRAP GENERATED FROM PRODUCTION. THE AO, FURTHER, CONTENDED THAT BY CONSIDERING MODE RN 10 TECHNOLOGY METHODS, OLD MACHINERY CAN BE WORN OUT A ND THEREFORE, 0.5% OF THE VALUE OF THE RAW MATERIAL IS CONSIDERED AS SCRAP, WHICH COMES TO RS.11,44,542/-. SIMILARLY , OUT OF STORES AND SPARES, CONSUMED BY THE ASSESSEE, ESTIMA TED SCRAP VALUE IS TAKEN AT 2%, WHICH WORKED OUT TO RS.41,34, 801/-. THE AO, FURTHER OBSERVED THAT SCRAP GENERATED OUT O F REPAIRS IN BUILDING AND PLANT AND TRAVELING IS ESTIMATED AT 2%, WHICH WORKED OUT TO RS.2,59,086/-. THUS, TOTAL OF ALL SC RAP, GENERATED COMES OUT TO RS.1,96,56,419/- AFTER EXCLU DING THE SALE OF SCRAP, SHOWN BY THE ASSESSEE AT RS.11,30,34 9/-. THE BALANCE AMOUNT OF RS.1,85,26,070/- WAS ADDED BACK T O THE INCOME OF THE ASSESSEE BY THE AO. 19. THE CIT(A), ON APPRECIATION OF THE SUBMISSIONS FILED BEFORE HIM AND CASE LAWS CITED BY THE APPELLANT, AD JUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE CIT(A), H AS ALSO FOLLOWED DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE. RELEVANT FINDINGS, AS CONTAINED IN PARA 09 TO 9.5 A RE REPRODUCED HEREUNDER : 09. AS REGARDS THE SIXTH GROUND OF APPEAL, THE SAME IS DISCUSSED IN PARA 8 OF THE ASSESSMENT ORDER. THE A.O. NOTED T HAT THE SUM OF RS. 2,82,34,159/-WAS WRITTEN OFF IN THE LIST OF STORES AND REPAIRS DUE TO OBSOLENCE WHICH HAS NOT BEEN ACCOUNTED FOR IN THE S CRAP ACCOUNT. IN THE ABSENCE OF SATISFACTORY EXPLANATION FROM THE APPELL ANT HE MADE AN ADDITION OF 50% OF THE USABLE ITEMS AMOUNTING TO RS. I,41,17 ,080/-. HE ALSO NOTED THAT THE ASSESSEE FAILED TO PROVIDE THE DETAILS OF SCRAP GENERATED FROM PRODUCTION. THE A.O. FURTHER CONTENDED THAT BY CONS IDERING MODERN TECHNOLOGY METHODS OLD MACHINERY GET WORN OUT AND T HEREFORE 0.5% OF THE VALUE OF THE RAW MATERIAL IS CONSIDERED AS SCRAP WH ICH COMES TO RS. 11,44,452/-. SIMILARLY OUT OF THE STORES AND SPARES CONSUMED BY THE ASSESSEE THE ESTIMATED SCRAP VALUE IS TAKEN AT 2% WHICH COME S TO RS. 41,34,801/- FURTHER THE SCRAP GENERATED OUT OF REPAIRS IN BUILD ING AND PLANT AND 11 MACHINERY WAS ESTIMATED AT 2% WHICH COMES TO RS. 2, 59,086/-. THUS A TOTAL OF ALL THE SCRAP GENERATED COMES TO RS. 1,96,56,419 /-. AFTER EXCLUDING SALE OF SCRAP SHOWN BY THE ASSESSEE AT RS. 11,3O,349/- THE BALANCE AMOUNT OF RS. 1,85,26,O7O/- WAS ADDED BACK TO THE INCOME OF THE A SSESSEE. 9.1 BEFORE ME THE APPELLANT SUBMITTED THAT THE APPELLANT COMPANY MAINTAINED CATEGORY WISE COMPLETE RECORD OF SCRAP GENERATED FROM PRODUCTION OR OTHERWISE AND ITS SALE. IT IS FU RTHER CONTENDED THAT RELEVANT REGISTERS WERE PRODUCED FOR VERIFICATION D URING THE PERSONAL HEARING AND THEREFORE THE ALLEGATIONS BY THE ID. A. O. THAT THE ASSESSEE FAILED TO PROVIDE THE DETAILS OF SCRAP GENERATED IS TOTALL Y WRONG. A PERUSAL OF THE ASSESSMENT PROCEEDINGS ON RECORD WITH THE ID. A.O. WOULD REVEAL THAT EACH AND EVERY INFORMATION SOUGHT BY HIM WAS PROVIDED. T HE APPELLANT FURTHER SUBMITTED THAT IN ITS OWN CASE SUCH ADDITION MADE B Y THE A.O. IN A.Y. 2003-04, 2004-05, 2005-06, 2006-07 WERE DELETED BY THE CIT(A), THE APPELLANT ALSO SUBMITTED THE COPY OF HON'BLE ITAT'S ORDER IN ITA NO. 336/CHD/N FOR THE A.Y. 2006-07, WHEREIN THE ACTION OF CIT(A) HAS BEEN UPHELD. THE APPELLANT FURTHER RELIED ON FOLLOWING JUDGMENTS : - ACIT V RAM SAHAI WOOL COMBER (P) LTD. - (2002) 120 TAXMAN 84 (CHD) - DCITV PUNJAB SCOOTER LTD.- (2002) 123 TAXMAN 184 (C HD) (SMC) - SHANKAR SSK LTD. VS DCIT (1999) 63 TTJ PUNE (158) 9.2 IN THE COUNTER COMMENTS THE A.O. SUBMITTED THAT SIM ILAR ADDITION WERE DELETED BY CIT(A) BY FOLLOWING THE ORDERS OF H ON'BLE ITAT FOR THE A.Y. 2003-04, 2005-06 AND 2006-07. 9.3 I HAVE GONE THROUGH THE SUBMISSIONS MADE BEFORE ME. IT IS ALSO NOTED THAT MY PREDECESSOR HAS DELETED A SIMILAR ADD ITION IN THE A.Y. 2006-07, VIDE HIS ORDER DATED 10.02.2011 IN APPEAL NO. 336/I T/CIT(A)/PTA/O9-10 AND IT WAS NOTED THAT SIMILAR DISALLOWANCE MADE BY THE A.O . IN THE A.Y. 2004-05 WAS CONFIRMED BY CIT(A) TO THE EXTENT OF 50% WHILE IN A .Y.S 2003-04 & 2005-06 THE ENTIRE ADDITION WAS DELETED. IT IS FURTHER NOTED TH AT THE SAID ORDERS HAVE BEEN UPHELD BY HON'BLE ITAT, CHANDIGARH IN I TA NOS. 175/CHANDI/2O06, 942/CHANDI/2006, 782/CHANDI/2007 & 885/CHANDI/2OO9 VIDE ORDER DATED 26.11.2007, 27.03.2008 & 21.12.2009 RESPECTIVELY. 9.4 IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE TH E ADDITION OF RS. 1,85,26,070/- MADE ON ACCOUNT OF TREATMENT OF SCRAP CANNOT BE SUSTAINED AND IS DIRECTED TO BE DELETED. 9.5 GROUND NO. 6 IS THEREFORE ALLOWED. 20. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND FOUND THAT THE ISSUE IS SQUARELY COVER ED BY THE 12 DECISION OF THE TRIBUNAL, AS RECORDED BY THE CIT(A) IN ASSESSEE'S OWN CASE. CONSEQUENTLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 21. GROUND NOS. 7 & 8 ARE GENERAL IN NATURE AND NEE D NO SEPARATE ADJUDICATION. ACCORDINGLY, SAME ARE DISMI SSED. 22. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12 TH SEPT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH