AMADA (INDIA ) P. LTD, MUMBAI V. ASST CIT 8(1), MUMBAI

ITA 7217/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88060 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 29-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2010
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN; VIDUSHI MAHESWARI
• Keywords: Wholly owned subsidiary; Commercial expediency; Revenue expenditure
• Section: 234B

Judgement Text

A IN THE INCO ME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 7217/M/2010 (AY:2007 - 2008) ./I.T.A. NO. 5534/M/2013 (AY:2007 - 2008) ./I.T.A. NO. 5535/M/2013 (AY:2010 - 2011) AMADA (INDIA) P. LTD., D/115 - 116 FLORAL DECK PLAZA, MIDC OPP. SEEPZ, ANDHERI (E), MUMBAI 400 093. VS. ASST. CIT 8(1), AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI 400 020. ./ PAN : AACCA6596N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ROHIT JAIN & VIDUSHI MAHESWARI / RESPONDENT BY : SHRI V.K. BORA / DATE OF HEARING : 29.12.2014 / DATE OF PRONOUNCEMENT : 14 .1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE THREE APPEALS UNDER CONSIDERATION INVOLVING ASSESSMENT YEARS 2007 - 2008 AND 2010 - 2011. OUT OF THE THREE APPEALS, TWO APPEALS (FOR AY 2007 - 08) ARE FILED BY THE ASSESSEE AND THE REVENUE FILED ONE APPEAL FOR THE AY 2010 - 11. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE CONNECTED , THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.7217/M/2010, WHICH IS FILED BY THE ASSESSEE ON 21.10.2010 AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 2 12.8. 2010 FOR THE AY 2007 - 2008. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UND ER: 1. DISALLOWANCE OF EXHIBITION EXPENSES RS. 58,61,727/ - . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN ARBITRARILY DISALLOWING THE ENTIRE EXHIBITION EXPENDITURE OF RS. 58,61,727/ - FAILING TO APPRECIATE THE FACTS AND THE SUBMISSIONS OF THE APPELLANT IN RIGHT PERSPECTIVE, PARTICULARLY THE BASIC FACT THAT THE SAID EXPENDITURE WAS BEYOND DOUBT THE APPELLANTS RESPONSIBILITY AND / OR INCURRED OUT OF COMMERCIAL EXPEDIE NCY AND HENCE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE APPELLANTS BUSINESS DESERVING COMPLETE DEDUCTION. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE OF EXHIBITION EXPENDITURE OF RS. 58,61,727/ - BE DELETED AND THE ENTIRE EXHIBITION EXPENDITURE BE AL LOWED AS THE APPELLANTS BUSINESS EXPENSE. 2. DISALLOWANCE OF EXHIBITION EXPENSES RS. 6,65,141/ - AS EXCESSIVE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN REJECTING THE APPELLANTS GROUND RELATING TO TREATMENT OF RS. 6,65,141/ - OUT OF EXHIBITION EXPENSES AS EXCESSIVE BY THE ASSESSING OFFICER BY OBSERVING THAT SINCE HE HAS UPHELD THE DISALLOWANCE OF THE ENTIRE EXHIBITION EXPENDITURE OF RS. 58,61,727/ - THIS GROUND IS REJECTED AS NO CAUSE OF GRIEVANCE ARISES. WITHOU T PREJUDICE TO THE RELIEF PRAYED FOR IN GROUND OF APPEAL NO.1, THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.6,65,141/ - OUT OF EXHIBITION EXPENSES BE DELETED. 3. OTHER / CONSEQUENTIAL RELIEFS. ON THE FACTS AND IN THE C IRCUM STANCES OF THE CASE AND IN LAW AND IN VIEW OF THE RELIEFS PRAYED FOR HEREINABOVE, THE APPELLANT PRAYS YOUR HONOUR TO GRANT SUCH OTHER AND / OR FURTHER AND / OR CONSEQUENTIAL RELIEFS, INCLUDING PARTICULARLY DELETION / REDUCTION OF THE INTEREST CHARGED UNDER VARIOUS PROVISIONS AS MAY BE DEEMED FIT AND AS PER LAW. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS 100% SUBSIDIARY OF AMADA COMPANY LIMITED, JAPAN AND IS ENGAGED IN COMMISSION BUSINESS, AFTER SALES SERVICES AND SALES OF SPARES AND TOOLS. IT IS AN EXCLUSIVE COMMISSION AGENT FOR ITS PARENT COMPANY FOR SALE OF CNC MACHINES, LASER PUNCHING & BENDING MACHINES ETC. DURING THE ASSESSMENT YE AR, ASSESSEE FOR THE FIRST TIME CLAIMED EXHIBITION EXPENSES OF RS. 58,61,727/ - . ASSESSI NG OFFICER CALLED FOR RELEVANT DETAILS. IN REPLY, ASSESSEE SUBMITTED THAT EXHIBITION WAS CONDUCTED DURING THE YEAR AND INCURRED TOTAL EXPENDITURE AMOUNTING TO RS. 1,03,93,173/ - . IN COMPLIANCE OF AGREEMENT BETWEEN THE ASSESSEE AND ITS PARENT COMPANY AT JA PAN, ASSESSEE RECEIVED AN AMOUNT OF RS. 45,31,446/ - , WHICH IS EQUIVALENT OF 50% OF THE EXPENSES. AS PER THE PARENT COMPANY, THE SAID AMOUNT CONSTITUTES 50% OF THE ALLOWABLE EXPENDITURE. ASSESSEE DEBITED THE BALANCE OF EXPENDITURE (RS. 1,03,93,173 RS. 4 5,31,446/ - ). THE ASSESSEE SUBMITTED THAT THE SAID EXPENSES WERE INCURRED ON EXHIBITION HELD AT INTERNATIONAL EXHIBITION CENTRE , BANGALORE BECAUSE OF WHICH THE 3 SALES OF THE ASSESSEE WENT UP SUBSTANTIALLY . IN THIS REGARD, ASSESSEE SUBMITTED VARIOUS DOCUMENT S TO SUBSTANTIATE THE CLAIM. HOWEVER, ASSESSING OFFICER DID NOT ACCEPT THE CLAIM STATING THAT THE ASSESSEE BEING A COMMISSION AGENT AND 100% SUBSIDIARY OF THE AMADA COMPANY LIMITED, JAPAN, THE PARENT COMPANY SHOULD BEAR ALL THE EXPENDITURE INCURRED ON THE IMPUGNED EXHIBITION . HE ALSO MENTIONED THAT THIS KIND OF EXPENDITURE WAS RECORDED FOR THE FIRST TIME AND THE RELEVANT AGREEMENTS IN SUPPORT OF THE IMPUGNED PAYMENTS WERE FOUND TO BE UNREGISTERED WITH THE RESERVE BANK OF INDIA (RBI) WHICH IS A NODAL AGENC Y FOR PAYMENT AND RECEIPT OF THE MONEY IN FOREIGN EXCHANGE. ASSESSING OFFICER ALSO FOUND SOME DEFECTS IN THE IMPUGNED AGREEMENTS AND SUSPECTED THE AUTHENTICITY OF THE SAME. ACCORDINGLY, ASSESSING OFFICER DISALLOWED THE ENTIRE CLAIM OF RS. 58,61,727/ - AND MADE ADDITION. WITHOUT PREJUDICE, THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 6,65,141/ - MENTIONING THAT 50% OF THE GROSS CLAIM OF RS. 1,03,93,173/ - WORKS OUT TO RS. 51,96,586/ - ONLY AND CERTAINLY NOT RS. 58,61,727/ - WHICH IS ACTUALLY DEBITED TO THE P& L ACCOUNT. 4. DURING THE FIRST APPELLATE PROCEEDINGS, THE SAID ADDITIONS WERE QUESTIONED BY THE ASSESSEE AND MADE ELABORATE SUBMISSIONS EXPLAINING THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE. IN THE SUBMISSIONS, ASSESSEE HEAVILY RELIED ON THE AGREEMENT DATED 1.4.200 0 AND ARGUED THAT THE ASSESSEE IS UNDER OBLIGATION TO MAKE DILIGENT EFFORTS TO PROMOTE, STIMULATE INTEREST IN AND SOLICIT ORDERS IN THE AGREED TERRITORY OF JAPANESE PARENT COMPANY. HE ALSO MENTIONED THE PERFORMANCE OF THE COMPANY TO THE IMPUGN ED EXHIBITION CALLED IMTEX, 200 7 HELD AT BANGALORE IN JANUARY 2007. FROM PARA 2.2.1 ONWARDS OF THE IMPUGNED ORDER, THE ASSESSEE MENTIONED THAT THE CLAIM OF THIS KIND IS NOT MADE FOR THE FIRST TIME AS ALLEGED BY THE ASSESSING OFFICER AND THE ASSESSEE IS AN EXCLUSIVE COMMISSION AGENT FOR THE PARENT COMPANY. HE ALSO EXPLAINED THAT THE WHOLE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND THE CONCEPT OF COMMERCIAL EXPEDIENCY ASSUMES SIGNIFICANCE. IN THIS REGARD, HE RELIED ON THE JUDG MENT OF THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS VS. CIT [2007] 288 ITR 1 (SUPREME COURT). ASSESSEE FURTHER RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MICROMATIC MACHINE TOOLS (P) LTD (330 ITR 47) WHICH WAS DELIVERED IN THE CONTEXT OF EXHIBITION EXPENSES INCURRED BY THE ASSESSEE IN THE CONTEXT OF IMTEX, 1998. HE PARALLELED THE FACTS OF 4 THE PRESENT CASE WITH THAT OF THE CASE DECIDED BY THE DELHI HIGH COURT (SUPRA) AND MENTIONED THAT THE CLAIM OF THE ASSESSEE IS ALLOWAB LE. CIT (A) CONSIDERED THE ABOVE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ADDITIONS OF RS. 58,61,727/ - . PARA 3.3 IS RELEVANT IN THIS REGARD. IN THE PROCESS, THE CIT (A) EXPLAINED THE ARTICLE 6.2; ARTICLE 7; ARTICLE 10 OF THE AGREEMENT AND ACCEPTED THE FACT THAT THE ASSESSEE IS UNDER OBLIGATION TO UNDERTAKE, PROMOTE AND SOLICIT ORDERS FOR THE PARENT COMPANY AT JAPAN. HOWEVER, CIT (A) IS CRITICAL OF THE IMPUGNED AGREEMENT DATED 1.4.2000 AND MENTIONED THAT THE SAID AGREEMENT IS NOT REGISTERED WITH RBI . CIT (A) IS OF THE OPINION THAT INFLOW OF THE FOREIGN EXCHANGE IS THE SUBJECT MATTER OF APPROVAL OF RBI AND THEREFORE, THE IMPUGNED AGREEMENT IS REQUIRED TO BE REGISTERED WITH RBI WHICH WAS ADMITTEDLY NOT DONE. REGARDING THE JUDGMENT OF THE HONBLE DELH I HIGH COURT IN THE CASE OF MICROMATIC MACHINE TOOLS (P) LTD (SUPRA), THE CIT (A) IS OF THE OPINION THAT THE ASSESSEE IS NOT A SOLE AGENT FOR THE PARENT COMPANY UNLIKE THE MICROMATIC MACHINE TOOLS (P) LTD. HOWEVER, THERE IS NO OBVIOUS FINDING OF THE FACT ABOUT THE GENUINENESS OF THE EXPENDITURE. CIT (A) ALSO MENTIONED THAT THE ADDITION OF RS. 6,65,141/ - STANDS CONFIRMED CONSIDERING HIS CONCLUSIONS ON THE ADDITION OF RS. 5 8,61,727/ - . AGGRIEVED WITH THE ABOVE CONCLUSIONS OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE US. BOTH THE GROSS ADDITION OF RS. 58,61,727/ - AND THE ADDITION WITHOUT PREJUDICE AMOUNTING TO RS. 6,65,141/ - . 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE EXPLA INED THE FACTS OF THE CASE AND SUBMITTED THAT THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE FACTS OF THE CASE. BRINGING OUR ATTENTION TO PAGE 32 OF THE PAPER BOOK I.E., SALES AGENCY AND SERVICES AGREEMENT, WHICH IS EFFECTI VE FROM 1.4.2000, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT ARTICLE 3.1 CONFIRMS THAT THE ASSESSEE IS AN EXCLUSIVE AGENT OF THE PARENT COMPANY AT JAPAN AND THEREFORE, IT IS INCORRECT IN STATING THAT THE ASSESSEE IS NOT A SOLE AGENT OF THE SAID PRODUCTS. BRINGING OUR ATTENTION TO ARTICLE 4.1 OF THE AGREEMENT, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE RESPONSIBILITY OF PROMOTING AND BRINING ORDERS FOR THE PARENT COMPANY LIES ON THE SHOULDERS OF THE ASSESSEE. HE ALSO BROUGHT OUR ATTENTION TO ARTICLE 7 RELATING TO COMPENSATION. REFERRING TO PAGES 54 AND 55 OF THE PAPER BOOK DEALING WITH THE MINUTES OF THE BOARD MEETING, LD COUNSEL READ OUT PARA 4 DEALING WITH THE PARTICIPATION IN IMTEX 2007 EXHIBITION AT BANGALORE. HE MENTIONED THAT THE 5 COMPANY HAS D ECIDED TO MAKE A REQUEST TO PARENT COMPANY FOR BEARING THE SHARE OF 50% OF THE EXPENSES LIKELY TO BE INCURRED ON THE EXHIBITION. REFERRING TO PAGE 56 OF THE PAPER BOOK LD COUNSEL READ OUT THE FINAL AGREEMENT BY JAPAN AMADA COMPANY TO REIMBURSE ONLY 50% OF THE TOTAL EXHIBITION EXPENDITURE. HE ALSO BROUGHT OUR ATTENTION TO PAGE 59 OF THE PAPER BOOK PROVIDING THE DETAILS OF THE TOTAL EXPENDITURE OF RS. 1,07,30,742/ - . IT ALSO PROVIDES THE BREAKUP TO THE DEBIT OF RS. 58,61,727/ - . ASSESSEE ALSO FILED EVIDENCES IN SUPPORT OF THE SAID EXHIBITION EXPENSES. FURTHER, LD COUNSEL FOR THE ASSESSEE FILED THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF MICROMATIC MACHINE TOOLS (P) LTD (SUPRA) AND EXPLAINED THE COMPARABLE FACTS OF THE CASE AND APPLICABILITY OF THE RA TIO OF THE SAID JUDGMENT TO THE FACTS OF THE PRESENT CASE. 6. ON THE OTHER HAND, LD DR FOR THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. FURTHER, HE BROUGHT OUR ATTENTION TO THE AGREEMENT DATED 1.4.2000 AND EXPLAINED THE SAID AGREEM ENT IS MERELY A DRAFT AND THE SAME IS NOT IN T HE SHAPE OF STANDARD AGREEMENT. HE ALSO MENTIONED THAT THE ASSESSEE BEING A COMMISSION AGENT IS NOT REQUIRED TO BEAR THE AMOUNT OF EXHIBITION EXPENSES AND ITS THE RESPONSIBILITY OF THE PARENT COMPANY TO INCUR THE SAME. HE MENTIONED THAT THE SAID AGREEMENT SHOULD BE IGNORED AS THE SAME IS NOT REGISTERED WITH THE RBI WHICH IS A NODAL AGENCY FOR INFLOW OF THE FOREIGN EXCHANGE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES A S WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. IT IS THE CASE OF THE ASSESSING OFFICER THAT WHEN THE AGREEMENT DATED 1.4.2000 IS NOT PROPER AND WHEN THE SAME IS NOT REGISTERED WITH THE RBI, WHICH MONITORS THE INFLOW OF FOREIGN EXCHANGE, THE CLAIM OF TH E ASSESSEE CANNOT BE ALLOWED MERELY RELYING ON SUCH UNREGISTERED DOCUMENTS. WITH REGARD TO THE SAID AGREEMENT, THE REVENUE ALLEGES THAT THE SAME IS NOT PROPERLY MADE AND THEY ARE NOT CREDIBLE. PER CONTRA , THE REVENUE DOES NOT HAVE ANY INCRIMINATING MATER IAL ABOUT ITS GENUINENESS OF THE SAID DOCUMENTS OR THAT THE SIGNATURES DO NOT MATCH WITH THAT OF THE STANDARD SIGNATORIES. MERE ABSENCE OF SIGNATURES ON EACH AND EVERY PAGE OF THE AGREEMENT, OF COURSE, IT IS EXPECTED THAT WAY, DOES NOT MAKE THE AGREEMENT NOT BINDING ON THE PARTICIPATING PARTIES / SIGNATORIES. IT IS NOT THE CASE OF THE REVENUE THAT THEY HAVE REFERRED THE DOCUMENT TO THE FORENSIC EXPERTS AND OBTAINED ANY INCRIMINATING REPORT 6 AGAINST THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION, IMPUGNED AGREEMENT HOLDS RELEVANT AND IS CREDIBLE . NEXT, WE SHALL DEAL WITH THE APPLICABILITY OF THE DELHI HIGH COURT JUDGMENT IN THE CASE OF MICROMATIC MACHINE TOOLS (P) LTD (SUPRA) QUA THE SOLE AGENT RELATED FACTS. ASSESSING OFFICER IS ALSO OF THE OPINION THAT THE ASSESSEE IS NOT A SOLE AGENT FOR THE PRODUCTS MANUFACTURED BY JAPAN, THE PARENT COMPANY. ASSESSING OFFICER/CIT (A) ARE ALSO OF THE OPINION THAT THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MICROMATIC MACHINE TOOLS (P) LTD (SUPRA) IS NOT APPLICABLE AS THE SAID RATIO WAS DECIDED IN THE CONTEXT OF SOLE AGENCY TO THEIR PARENT COMPANY ABROAD. CIT (A) IS ALSO OF THE OPINION THAT THE REQUIREMENT OF REGISTRATION OF SUCH AG REEMENT WITH THE RBI WAS FLOATED BY THE ASSESSEE. OTHERWISE, THERE IS NO OBJECTION SO FAR AS THE GENUINENESS OF THE EXPENDITURE AND COMMERCIAL EXPEDIENCY RELATED ISSUES. PER CONTRA , THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE IS A SOLE AGENT FOR SPECIF IED PRODUCTS MANUFACTURED BY THE JAPAN PARENT COMPANY AND THEREFORE, THE CITED DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MICROMATIC MACHINE TOOLS (P) LTD (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. FURTHER, IT IS THE CAS E OF THE ASSESSEE THAT SUCH EXHIBITION EXPENSES WERE INCURRED EARLIER ALSO WHICH WERE ACCEPTED BY THE REVENUE. FURTHER, ASSESSEE IS OF THE FIRM OPINION THAT THE REQUIREMENT OF REGISTRATION OF SUCH AN AGENCY AGREEMENT WITH THE RBI DOES NOT EXIST UNDER ANY PROVISION OF RBI. IN THIS REGARD, IT IS THE FAILURE OF THE REVENUE AUTHORITIES TO MENTION RELEVANT PROVISIONS IN THE IMPUGNED ORDERS. ASSESSEE RELIES HEAVILY ON THE MINUTES OF THE BOARD MEETINGS FOR SEEKING REIMBURSEMENT OF 50% OF THE EXHIBITION EXPENSES FROM THE PARENT COMPANY AS WELL AS THE PAGE 56 OF THE PAPER BOOK WHICH CONTAINS THE ACCEPTANCE BY THE JAPAN PARENT COMPANY TO REIMBURSE THE 50% OF THE EXHIBITION EXPENSES. IT IS THE CLAIM OF THE ASSESSEE THAT THE GENUINENESS OF THE EXPENSES IS UNDOUBTED AND THE COMMERCIAL EXPEDIENCY OF THE SAME IS ALSO NOT SUSPECTED. THE REVENUE AUTHORITIES CANNOT MAKE ADDITION MERELY BASED ON UNSUSTAINABLE ASSUMPTIONS REGARDING THE REQUIREMENT OF REGISTERING WITH THE RBI . FURTHER, WE HAVE ALSO PERUSED THE COPIES OF THE AGREEMENT AND THE RELEVANT ARTICLES REFERRED BY THE PARTIES AT THE TIME OF HEARING. WE FIND THAT THE ARTICLE 3.1 READS THAT AMADA HEREBY APPOINTS AMADA INDIA AS ITS EXCLUSIVE SALES AGENT FOR THE COVERED PRODUCTS IN THE TERRITORY... FURTHER, IT IS NOTICED FROM ARTICLE 4.1 THAT THE OBLIGATION IS ON THE ASSESSEE TO 7 DILIGENTLY WORK TO PROMOTE, STIMULATE INTEREST IN AND SOLICIT ORDERS FOR THE COVERED PRODUCTS IN THE TERRITORY ON BEHALF OF THE AMADA. THE COMPENSATION PACKAGE WAS ALSO PROVIDED IN ARTIC LE 7 OF THE AGREEMENT. FURTHER, THE MINUTES OF THE BOARD DATED 1.5.2006 PLACED AT PAGES 54 AND 55 OF THE PAPER BOOK SPECIFIES IN PARA 4 TO MAKE A REQUEST TO JAPAN PARENT COMPANY PROPOSED THAT A REQUEST BE MADE TO AMADA CO. LTD, JAPAN, TO SUPPORT THE COMP ANY AND SHARE AT LEAST 50% OF THE EXPENSES LIKELY TO BE INCURRED BY THE COMPANY ON THE EXHIBITION . FURTHER, IN REPLY TO THE SAID BOARDS RESOLUTION, THE AMADA CO LTD., JAPAN AGREED TO SHARE THE EXHIBITION EXPENSES AND THE RELEVANT PARA FROM 56 OF THE PAP ER BOOK READS AS FOLLOWS. SINCE, AMADA INDIA IS THE EXCLUSIVE AGENT OF AMADA JAPAN , AMADA INDIA GETS THE BENEFIT OF ENTERING INTO SERVICE AND ANNUAL MAINTENANCE CONTRACTS AND SALE OF SPARE PARTS WITH RESPECT TO ALL THE MACHINES WHICH ARE EXPORTED TO INDIA . ENTIRE EXPENSE OF THE EXHIBITION SHOULD BE BORNE BY AMADA INDIA AS THE FUTURE BENEFITS WILL FLOW TO IT. BUT AFTER OUR SUBSEQUENT DISCUSSIONS, IT IS FINALLY AGREED THAT AMADA JAPAN WILL REIMBURSE TO AMADA INDIA ONLY 50% OF THE TOTAL COST OF EXHIBITION T O SUPPORT AMADA INDIA FINANCIALLY SO THAT IT GROWS THROUGH BOUNDARIES. 8. FURTHER, WE FIND THAT THE IMPUGNED EXPENDITURE AND THEIR GENUINENESS WAS NOT DOUBTED OR AT LEAST NOTHING ADVERSE HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT THE SAID EXPENDITURE IS BOGUS AND T H E C L A I M I S UNSUSTAINABLE IN LAW. CONSIDERING THE OVERALL FACTS OF THE PRESEN T CASE, WE FIND SO FAR AS THE SALE OF COVERED PRODUCTS AS DEFINED IN THE AGREEMENT, THE ASSESSEE IS AN EXCLUSIVE AGENT AND THERE IS NO REFERENCE IN THE ORDERS THAT THE IMPUGNED AGREEMENT IS REQUIRED TO BE REGISTERED WITH THE RBI. ASSESSING OFFICER AND THE CIT (A) ARE UNDER FALSE ASSUMPTION WHEN THEY CONCLUDED THAT THE ASSESSEE IS NOT A SOLE SALES AGENT FOR CERTAIN PRODUCTS. THEREFORE, IN OUR OPINION, THE JUDGMENT OF THE HONBLE DELHI HIGH COURT MICROMATIC MACHINE TOOLS (P) LTD (SUPRA) HELPS THE ASSESSEE O N THE ALLOWABILITY OF EXHIBITION EXPENSES AS CLAIMED BY THE ASSESSEE IS AN ALLOWABLE REVENUE EXPENDITURE. ACCORDINGLY, GROUND NOS.1 AND 2 RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED. APROPOS GROUND NO.3, CONSIDERING THE CONSEQUENTIAL NATURE OF THIS GRO UND TO THAT OF THE GROUND NOS. 1 AND 2, THE SAME IS ALSO TREATED AS ALLOWED. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 8 ITA NO.5534/M/2013 (AY 2007 - 2008 ) (BY ASSESSEE) 10. THIS APPEAL FILED BY THE ASSESSEE ON 22.8.2013 IS AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 27.5.2013 FOR THE AY 2007 - 08. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER U/S 271(1)(C) OF THE ACT PASSED BY THE ASSESSING OFFICER IS BAD IN LAW AND WITHOUT JURISDICTION. 2. PENALTY OF RS. 19,73,060/ - U/S 271(1)(C) OF THE ACT. A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN CO NFIRMING THE LEVY OF PENALTY OF RS. 19,73,060/ - U/S 271(1)(C) OF THE ACT. B. THE CIT (A) ERRED IN HOLDING THAT CLAIM OF THE APPELLANT THAT THE EXPENDITURE ON EXHIBITION OF RS. 58,61, 727/ - IS ALLOWABLE AS AN EXPENDITURE TO THE APPELLANT IS PATENTLY INCORREC T AND, HENCE, CANNOT BE SAID TO BE A BONA FIDE CLAIM. C. THE CIT (A) ERRED IN NOT CONSIDERING THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS 322 ITR 158 (SUPREME COURT). D. THE CIT (A) OUGHT TO HAVE HELD THAT SECTION 271(1 )(C) IS NOT APPLICABLE IN THE PRESENT CASE AND HENCE, NO PENALTY CAN BE LEVIED ON THE APPELLANT. 11. BRIEFLY STATED, ASSESSING OFFICER LEVIED PENALTY OF RS. 19,73,060/ - U/S 271(1)(C) OF THE ACT IN CONNECTION WITH THE AFORESAID ADDITION OF RS. 58,61,727/ - ON ACCOUNT OF EXHIBITION EXPENSES, WHICH IS THE SUBJECT MATTER OF APPEAL ITA NO. 7217/M/2010 (AY 2007 - 2008). WHILE ADJUDICATING THE SAID APPEAL ON QUANTUM ADDITIONS, WE HAVE DECIDED THAT THE ADDITION IS NOT SUSTAINABLE AND THEREFORE DELETED THE SAME AS P ER THE DISCUSSION GIVEN IN THE ABOVE PARAGRAPHS OF THIS ORDER. CONSIDERING THE SAME, THE PENALTY IS NOT SUSTAINABLE AND THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.5535/M/2013 (AY 2010 - 2011) (BY ASSESSEE) 13. THIS APPEAL FILED BY THE ASSESSEE ON 22.8.2013 IS AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 12.6.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. DISALLOWANCE OF EXPENSES OF RS. 1,23,10,159/ - : A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF ENTIRE EXHIBITION EXPENSES OF RS. 1,23,10,159/ - INCURRED BY THE APPELLANT. B. T HE CIT (A) ERRED N NOT CONSIDERING THE FACTS AND THE AGREEMENTS SUBMITTED BEFORE HIM AND PROCEEDED ON THE ERRONEOUS ASSUMPTION OF FACT AND LAW. 9 C. THE CIT (A) OUGHT TO HAVE HELD THAT THE EXPENDITURE ON EXHIBITION EXPENSES IS WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF APPELLANTS BUSINESS AND HENCE, ALLOWABLE AS A DEDUCTION. 2. LEVY OF INTEREST U/S 234B & 234C OF THE ACT. THE ASSESSING OFFICER ERRED IN LEVYING INTEREST AMOUNTING TO RS. 16,20,795/ - AND RS. 1,66,408/ - U/S 234B AND 234C OF THE ACT. THE APPELLANT DE NIES ITS LIABILITY TOWARDS THE SAME. 14. IN THIS APPEAL, ASSESSEE RAISED THE SIMILAR GROUNDS TO THAT OF THE GROUNDS RAISED IN AY 2007 - 2008. SINCE, THE GROUNDS RAISED BY THE ASSESSEE ARE IDENTICAL, THEREFORE, THE DECISION GIVEN BY US WHILE DEALING WITH THE APPEAL ITA NO.7217/M/2010 (AY 2007 - 2008) IN THE ABOVE PARAGRAPHS OF THIS ORDER SQUARELY APPLIES TO THE PRESENT APPEAL TOO. CONSIDERING THE SAME, GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 1 4 T H JANUARY, 2015. S D / - S D / - (D. MANMOHAN ) (D. KARUNAKARA RAO ) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 14/1/2015 . . ./ OKK , 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI