M/s Liberty Footwear Company, Karnal V. ACIT, Karnal

ITA 734/DEL/2011

• Counselvise Citation: 73420114 RSA 2011
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 07-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMANA SEN
• Assessee Lawyers: S K GOEL
• Keywords: Business income; Depreciation; Competent authority
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI D BENC H BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM ITA NOS.734 TO 737/DEL/2011 AYS: 2004-05 TO 2007-08 LIBERTY FOOTWEAR COMPANY, RAILWAY ROAD, KARNAL V/S . ACIT,KARNAL CIRCLE, KARNAL [PAN : AAAFL 5270 H ] ITA NOS.741 TO 743/DEL/2011 AYS: 2004-05, 2006-08 & 2007-08 LIBERTY GROUP MARKETING DIVISION, RAILWAY ROAD, KARNAL V/S . ACIT,KARNAL CIRCLE, KARNAL [PAN : AAAFL 5273 E ] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S.K. GOEL, AR REVENUE BY SHRI SUMANA SEN, DR DATE OF HEARING 15-10-2012 DATE OF PRONOUNCEMENT 31-10-2012 O R D E R A.N.PAHUJA:- THESE TEN APPEALS FILED BY THE RESPECTIVE ASSESSEES ON 7 TH FEBRUARY, 2011 AGAINST SEPARATE ORDERS DATED 2 ND DECEMBER, 2010 FOR THE AYS 2004-05 TO 2007-08 IN THE CASE OF LIBERTY FOOTWEAR COMPANY; LIBERTY ITA NOS.738 TO 740/DEL/2011 AYS: 2004-05, 2006-07 & 2007-08 LIBERTY ENTERPRISES, RAILWAY ROAD, KARNAL V/S . ACIT,KARNAL CIRCLE, KARNAL [PAN : AAAFL 5275 E ] I.T.A. NOS.734 TO 743/DEL./2011 2 ENTERPRISES AND LIBERTY GROUP MARKETING DIVISION, K ARNAL ,RAISE THE FOLLOWING GROUNDS:- LIBERTY FOOTWEAR COMPANY I.T.A. NO.734/DEL./2011[AY 2004-05] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING THAT B USINESS INCOME DERIVED BY THE APPELLANT FROM TRADE MARK LICENCE F EE WHICH WAS DIRECTLY CONNECTED WITH EXPLOITATION OF BUSINESS AS SET IS INCOME FROM OTHER SOURCES IS ALTOGETHER ARBITRARY, ILLEGAL AND VOID AND UNCALLED FOR. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING DISALL OWANCE OF ` `2,50,000/- OUT OF ADVERTISEMENT AND SALES PROMOTIO N EXPENSES IS ALTOGETHER ARBITRARY, ILLEGAL AND UNCALLED FOR. 4. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN CON FIRMING DISALLOWANCES OF ` `15,334/- IN RESPECT OF WRITTEN OF ASSETS AND ` `19,254/- IN RESPECT OF RECEIVABLES WHICH IS ARBITR ARY AND UNCALLED FOR. 5 THAT THE ORDER OF THE LEARNED CIT IN CONFIRMING DISALLOWANCE OF 1/4 TH CAR EXPENSES AND DEPRECIATION AT ` ` 21,055/- IS ARBITRARY AND UNCALLED FOR. I.T.A. NO.735/DEL./2011[AY 2005-06] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISAL LOWANCE OF ` `2.01.648/- OUT OF ADVERTISEMENT EXPENSES IS ALTOGE THER ARBITRARY, ILLEGAL AND VOID AND UNCALLED FOR. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM, THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWANCE BUSINESS PROMOTION EXPENSES OF ` ` 11,61,401/- WHICH WERE INCURRED IN CONNECTION WITH GOLDEN JUBLEE CELEBRATION OF BRA ND LIBERTY IS ALTOGETHER ARBITRARY, ILLEGAL AND UNCALLED FOR. I.T.A. NOS.734 TO 743/DEL./2011 3 4. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPH OLDING DISALLOWANCES OF DEPRECIATION IN RESPECT OF CENTRAL HOUSE AND SAHARANPUR OFFICE AT ` ` 38,946/- WHICH IS ARBITRARY AND UNCALLED FOR. I.T.A. NO.736/D/2011[AY 2006-07] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISAL LOWANCE OF DEPRECIATION ON CAR AMOUNTING TO ` 5,40,244/- AS ALSO CAR EXPENSES AMOUNTING TO ` 3,265/- IS ALTOGETHER ARBITRARY., ILLEGAL, VOID & UNCALLED FOR. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING DISALL OWANCE OF ADVERTISEMENT EXPENSES OF ` 44,770/-`IS ALTOGETHER ARBITRARY, ILLEGAL AND UNCALLED FOR. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISAL LOWANCES OF LEGAL EXPENSES AMOUNTING TO ` 3,00,844/- PAID TO M/S ANAND & ANAND ADVOCATE,NEW DELHI FOR RENEWAL OF TRADE MARK LIBER TY IS HIGHLY ILLEGAL, VOID AND UNCALLED FOR. I.T.A. NO.737/DEL./2011[AY 2007-08] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION ON CAR AMOUNTING TO ` `459150/- AS ALSO CAR EXPENSES AMOUNTING TO ` `1,28,655/- IS ALTOGETHER ARBITRARY, ILLEGAL AND VO ID AND UNCALLED FOR. 3. THAT THE ORDER OF LEARNED CIT(A) IN CONFIRMING D ISALLOWANCE OF PROPERTY TAX PAID AT ` ` 69,995/- IS ARBITRARY AND UNCALLED FOR. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF LEGAL EXPENSES AMOUNTING TO ` ` 3,17,500/- PAID TO M/S ANAND & ANAND ADVOCATE, NEW DELHI FOR RENEWAL OF TRADE MARK LIBE RTY IS HIGHLY, ILLEGAL, VOID AND UNCALLED FOR. I.T.A. NOS.734 TO 743/DEL./2011 4 5. THAT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMI NG DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENSES OF ` ` 62,924/- IS ALTOGETHER ARBITRARY AND UNCALLED FOR. 6. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN CON FIRMING DISALLOWANCES OF ` ` 75,000/- SUFFERED IN RESPECT OF SALE OF VEHICLES IS ILLEGAL AND UNCALLED FOR. LIBERTY ENTERPRISES I.T.A. NO.738/DEL./2011 [AY 2004-05] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF ADVERTISEMENT EXPENSES AMOUNTING TO ` `3,39,547/- IS ALTOGETHER ARBITRARY, ILLEGAL AND VOID AND UNCALLED FOR. 3. THAT THE ORDER OF THE LEARNED CIT(A) IN UPHOLDI NG DISALLOWANCE OF 1/4 TH CAR EXPENSES AND DEPRECIATION IS ARBITRARY AND UNC ALLED FOR. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF CLAIM OF ACTUAL BONUS EXPENSES PAID AT ` ` 1,72,951/- IS ALTOGETHER ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. 5 THAT THE LEARNED CIT (A) HAS FURTHER ERRED IN CO NFIRMING DISALLOWANCE OF ` ` 18,330/- IN RESPECT OF WRITTEN OFF ASSETS WHICH IS ARBITRARY AND UNCALLED FOR. I.T.A. NO.739/DEL./2011[AY 2006-07] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINS T LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION ON CAR AMOUNTING TO ` ` 309943/- IS ALTOGETHER ARBITRARY, ILLEGAL AND VOID AND UNCALLED FOR. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE APPEL LANT THE ORDER OF LEARNED CIT(A) IN CONFIRMING DISALLOWANCE OF DEPREC IATION OF ` `3,50,152/- IN RESPECT OF BUILDING ADDITION IS ALTO GETHER, ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. I.T.A. NOS.734 TO 743/DEL./2011 5 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING DISALLOWAN CE OF ACTUAL PASSENGER TAX PAID AT ` `2,21,110/- IN RESPECT OF BUSINESS GIVEN ON FRANCHISE IS HIGHLY ARBITRARY, ILLEGAL, VOID AND UN CALLED FOR. 5. THAT LEARNED CIT(A) HAS GROSSLY ERRED IN UPHO LDING DISALLOWANCE OF BUILDING REPAIRS EXPENSES OF ` ` 70,546/- IS ARBITRARY, ILLEGAL AND UNCALLED FOR. 6. THAT THE ORDER OF LEARNED CIT(A) IN CONFIRMIN G DISALLOWANCE LOSS OF ` `3,331/- IN RESPECT OF DUTY ENTITLEMENT TRANSFER IS ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. I .T.A. NO.740/DEL./2011[AY 2007-08] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION ON CAR AMOUNTING TO ` `5.73.395/- IS ALTOGETHER ARBITRARY, ILLEGAL AND VOID AND UNCALLED FOR. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION OF ` ` 4,22,220/- IN RESPECT OF BUILDING ADDITION IS ALTOGETHER ARBITRARY, ILLEGAL AND UNCALLED FOR. 4. THAT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMI NG DISALLOWANCE OF LEGAL EXPENSES OF ` `2,54,646/- FOR ARBITRATION CASE IS ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. LIBERTY GROUP MARKETING DIVISION I.T.A. NO.741/DEL./2011{AY 2004-05] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWANCE OF CAR EXPENSES AND DEPRECIATION AT 1/4 TH OF EXPENSES AT ` ` 2,74,000/- IS ALTOGETHER ARBITRARY, ILLEGAL AND VOID AND UNCAL LED FOR. 3. THAT THE ORDER OF THE LEARNED CIT(A) IN CONFIRM ING DISALLOWANCE OF ` ` 1,83,178/- OUT OF ADVERTISEMENT AND PUBLICITY EXPEN SES IS ARBITRARY, ILLEGAL AND UNCALLED FOR. I.T.A. NOS.734 TO 743/DEL./2011 6 4. THAT THE LEARNED CIT(A) HAS FURTHER ERRED IN UPH OLDING DISALLOWANCES OF ` ` 67,790/- OUT OF BUSINESS PROMOTION EXPENSES WHICH IS ARBITRARY AND UNCALLED FOR. 5 THAT THE ORDER OF THE LEARNED CIT(A) IN UPHOLDIN G DISALLOWANCE IN RESPECT OF WRITTEN OFF UNREALIZED SECURITIES AMOUNT ING TO ` ` 34,740/- IS ALTOGETHER, ARBITRARY, ILLEGAL AND UNCALLED FOR. I.T.A. NN.742/DEL./2011 [AY 2006-07] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION ON CAR AMOUNTING TO ` `60,054/- IS HIGHLY ARBITRARY, ILLEGAL AND VOID AND UNCALLED FOR. 3. THAT THE ORDER OF LEARNED CIT(A) IN CONFIRMING DISALLOWANCE OF CAR EXPENSES AMOUNTING TO ` ` 12,626/- IS ALTOGETHER, ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. 4. THAT LEARNED CIT(A) HAS FURTHER ERRED IN CONFIR MING DISALLOWANCE OF ` `13,000/- OUT OF BUSINESS PROMOTION EXPENSES WHICH IS ARBITRARY AND CALLED FOR. 5. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION OF ` `77,084/- IN RESPECT OF BUILDING ADDITIONS IS ARBITRARY, ILLEGAL AND UNCALLED FOR. 6. THAT THE LEARNED CIT(A) HAS FURTHER ERRED IN CON FIRMING DISALLOWANCE OF DEPRECIATION OF ` ` 71,078/- ON FURNITURE AND FIXTURE ADDITIONS IS ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. I.T.A. NO.743/DEL./2011 [AY 2007-08] 1. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF DEPRECIATION ON CAR AMOUNTING TO ` ` 4,59,207/- IS HIGHLY ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. I.T.A. NOS.734 TO 743/DEL./2011 7 3. THAT THE ORDER OF THE LEARNED CIT(A) IN CONFIRM ING DISALLOWANCE OF CAR EXPENSES AMOUNTING TO ` `13,366/- IS ALTOGETHER ARBITRARY AND UNCALLED FOR. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF LEGAL EXPENSES AMOUNTING TO ` `82,000/- PAID TO M/S ANAND AND ANAND ADVOCATES FOR RENEWAL OF REGISTRATION OF TRADE MARK IS ALTOGETHER ARBITRARY AND UNCALLED FOR. 5 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING DISALLOWA NCE OF ESTABLISHMENT EXPENSES OF ` ` 4,22,025/- IS ALTOGETHER ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. 2. SINCE CONNECTED ISSUES ARE INVOLVED, THESE APP EALS WERE HEARD SIMULTANEOUSLY FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER.. 3. ADVERTING FIRST TO GROUND NO.2 IN THE APPEAL I N THE CASE OF LIBERTY FOOTWEAR COMPANY[LFC] FOR THE AYS 2004-05 , FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN WAS FILED DECLARING AN INCOM E OF ` `2,60,40,244/- FILED ON 29.10.2004 BY THE ASSESSEE, AFTER BEING PROCESSED O N 31.3.2005 U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT), WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 10.5.2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE FIRM, HITHERTO ENG AGED IN THE BUSINESS OF FOOTWEAR AND OTHER GOODS, ENTERED INTO A TRADEMARK LICENSE AGREEMENT DATED 31.3.2003 WITH M/S LIBERTY SHOES LTD., KARNAL [LSL] ,MAKING AVAILABLE LIBERTY BRAND EXCLUSIVELY TO LSL W.E.F 1.4.2003. AND THE PR EVIOUS AGREEMENT IN OPERATION W.E.F. 1.4.2001 WAS CANCELLED. THIS AGRE EMENT FURTHER MENTIONED THAT LSL HAD BEEN USING THE BRAND SINCE 1986 AND SHALL C ONTINUE TO USE IT TILL PERPETUITY IRRESPECTIVE OF THIS AGREEMENT. THE AG REEMENT DATED 31.3.2003, STATED TO BE VALID FOR A PERIOD OF 7 YEARS, GRANTED EXCLUSIVE LICENCE FOR A PERIOD OF 7 YEARS TO USE THE TRADEMARK GLOBALLY ON AND IN CON NECTION WITH THE GOODS I.T.A. NOS.734 TO 743/DEL./2011 8 MANUFACTURED OR SOLD BY OR FOR THE L.S.L. IN ACCORD ANCE WITH THE LFCS MINIMUM QUALITY STANDARD AND MANUFACTURING SPECIFICATIONS. IN LIEU OF GRANTING THE EXCLUSIVE LICENCE, LSL. DURING THE TERM OF THIS AG REEMENT AGREED TO PAY LICENCE FEES AS PER TERMS REFERRED TO IN CLAUSE 4 OF THE AG REEMENT AND EXTRACTED BY THE AO AS UNDER:- THE LSL SHALL, DURING THE TERM OF THIS AGREEMENT, MAKE PAYMENT TO LFC AS LICENCE FEES @1.5% OF THE TOTAL ANNUAL SALES OF THE L.S.L. OR ` ` 300 LACS PER ANNUM WHICHEVER IS HIGHER. THE AMOUNT OF ` `300 LACS PER ANNUM WHICHEVER IS HIGHER. THE AMOUNT OF ` `300 LACS SHALL BE CONSIDERED AS MINIMUM ANNUAL GUARANTEE AMO UNT. FURTHER AS PER CLAUSE 3(F) OF THE AGREEMENT DATED 31.3.2003, IT HAS BEEN AGREED THAT THE LFC SHALL HAVE THE RIGHT OF RE IMBURSEMENT FROM THE L.S.L. OF ALL REASONABLE EXPENSES INCURRED BY THE LFC ON BEHALF OF THE LSL DURING THE TERM OF THIS AGREEMENT OR ANY RENEWAL THEREOF IN CONNECTION WITH THE MAINTENANCE OF THE T RADE MARK IN THE TERRITORY AND THE RECORDAL, IF NECESSARY, OF THIS L ICENSE IN THE TERRITORY. 3.1 THE AO ALSO NOTICED ON PERUSAL OF FORM NO.3CD THAT THE BUSINESS OF THE ASSESSEE WAS STATED TO BE PROVIDING OF SERV ICES FOR MANUFACTURING AND SALE OF FOOTWEAR, AND OTHER GOODS ON FRANCHISE BASI S. DUE TO DEATH OF A PARTNER, SHRI P.D. GUPTA ON 7.9.2003 THE FIRM WAS RECONSTITU TED W.E.F. 8 TH SEPTEMBER, 2003. HOWEVER, A CONSOLIDATED PROFIT AND LOSS ACCO UNT OF THE ASSESSEE FIRM WAS PREPARED & THE FOLLOWING INCOME WAS SHOWN UNDER DI FFERENT HEADS:- [IN ` ] INTEREST RECEIVED ` 3,327/- MISC. INCOME ` 2,40,000/- BUILDING RENT INCOME ` 8,19,000/- PROFIT ON SALE OF CAPITAL GOODS ` 3,634/- ROYALTY RECEIVED A/C `2,98,80,395/- TOTAL: `3,09,46,356/- I.T.A. NOS.734 TO 743/DEL./2011 9 3.2 WHILE POINTING OUT THAT RENTAL INCOME HAS TO B E ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND INTEREST, MIS C. INCOME AND PROFIT ON SALE OF CAPITAL GOODS UNDER THE HEAD INCOME FROM OTHER SOURCES AND ROYALTY INCOME HITHERTO HAVING BEEN ASSESSED & ACCEPTED BY THE ASS ESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES, THE AO, KEEPING IN VIE W PAST HISTORY, ASSESSED ROYALTY INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES. 3.3 SIMILARLY, IN THE AYS 2005-06 TO 2007-08 , THE AO OBSERVED THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS IN THIS YEAR AND EARNED ONLY ROYALTY INCOME FROM USE OF TRADE MARK BY THE LIBERTY SHOES LTD..HOWEVER, NO SPECIFIC GROUND OR ISSUE WAS TAKEN BEFORE THE LD. CIT(A) ON THESE OBSERVATIONS. 4. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS O F THE AO IN THE AY 2004-05 IN THE FOLLOWING TERMS:- 1.05 THE ISSUE IS CONSIDERED. IT IS NOTED THAT TH E SAME IS COVERED BY THE CONSOLIDATED ORDER DATED 03.09.2010 OF THIS OFFICE IN THE CASE OF THE APPELLANT FOR THE ASSTT. YEARS 2001-02, 2002-03 & 2003- 04 THE RELEVANT PARA 4.03 AND 4.04 FROM THAT ORDER IS REPRODUCED BELOW:- 'THE ISSUE IS EXAMINED. THE AO HELD THAT THE ROYALT Y RECEIVED IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES'. TH E APPELLANT CHALLENGED THE FINDINGS OF THE AO ON THE BASIS OF T HE ORDER OF THE CIT(A)-I, LUDHIANA IN ITS CASE FOR THE A. Y.2000-01. THE ORDE R RELIED UPON BY THE APPELLANT IS REFERRED TO. IT IS NOTED THAT THE CIT( A) DECIDED THE ISSUE IN FAVOUR OF THE DEPARTMENT AND HELD ROYALTY INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES'. RELEVANT EXTRA CTS THERE FROM IS EXTRACTED BELOW:- 'THE NEXT GROUND OF APPEAL IS REGARDING ROYALTY INCOME FOR TRADE BRAND. THE LEARNED COUNSEL HAS SUBMITTED THAT THE INCOME WAS GENERATED DURING THE COURSE OF BUSINESS ONLY AND HENCE BE ALLOWED. THE ASSESSING OFFICER HAS, HOWEVER, NOTED IN THE ASSESSMENT ORDER THAT THIS INCOME AS TREATED AS I.T.A. NOS.734 TO 743/DEL./2011 10 INCOME FROM OTHER SOURCES' IN THE EARLIER YEARS. THEREFORE, THERE WAS NO REASON TO DEVIATE FROM THAT STAND. I HAVE EXAMINED THIS MATTER CAREFULLY. SINCE THE INCOME WAS BEING SHOWN AS INCOME FROM OTHER SOURCES IN THE EARLIER YEARS,THEREFORE,I SEE NO REASON TO DEPART FROM THAT ACCEPTED STAND.THIS ACTIONOF THE ASSESSING OFFICER IS, THEREFORE, CONFIRMED. IN VIEW OF THE FACTS DISCUSSED ABOVE, ACTION OF THE AO IS CONFIRMED AND GROUND OF APPEAL NO.4 IS REJECTED. 1.06 THE APPELLANT TRIED TO DISTINGUISH THE FACTS , ON THE GROUND THAT IN THE YEAR UNDER CONSIDERATION EXCLUSI VE RIGHT OF USE OF BRAND 'LIBERTY' WAS ALLOWED TO LIBERTY SHOES LTD. W HEREAS' IN THE EARLIER YEARS EXCLUSIVE RIGHT OF USE OF BRAND 'LIBE RTY' WAS NOT ALLOWED. IT IS DIFFICULT TO APPRECIATE THAT HOW THI S FACT CAN CHANGE THE NATURE OF INCOME. THE PLEA OF THE APPELLANT IS, THE REFORE, NOT TENABLE AND HENCE IS REJECTED. FOLLOWING THE PAST H ISTORY OF THE CASE AND ORDER OF THIS OFFICE AS DISCUSSED ABOVE, I T IS HELD THAT FEES RECEIVED IN LIEU OF ALLOWING THE USE OF BRAND 'LIBE RTY' IS TO BE ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' . THE ACTION OF THE A O. IS, THEREFORE, CONFIRMED. GROUND OF APP EAL NO. 2 IS AS SUCH REJECTED. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE LD. CIT(A) CONTENDED THAT IN THE PRECEDING YEAR INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM OTH ER SOURCES. SINCE THE AMOUNT WAS SMALL, DECISION OF THE LD. CIT(A) WAS AC CEPTED. IN THE YEAR UNDER CONSIDERATION, AMOUNT WAS ` ` 298,80,395.SINCE THE ASSESSEE EARNED INCOME FROM EXPLOITATION OF ITS BUSINESS ASSET THE INCOME SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME. TO A QUERY BY THE BENCH, T HE LD. AR DID NOT REFER US TO ANY MATERIAL SUGGESTING THAT INCOME WAS EARNED FROM EXPLOITATION OF ANY BUSINESS ASSET AND INSTEAD SUBMITTED THAT THOUGH TH E ASSESSEE HAD DISPUTED I.T.A. NOS.734 TO 743/DEL./2011 11 FINDINGS OF THE AO BEFORE THE LD. CIT(A) IN THE AYS 2001-02 TO 2003-04,THE LD. CIT(A) HAVING UPHELD THE FINDINGS OF THE AO, THE AS SESSEE DID NOT CHALLENGE THOSE FINDINGS IN THE FURTHER APPEAL. INTER ALIA, T HE LD. AR RELIED UPON THE DECISION IN CIT VS. RIETA BISCUITS COMPANY P. LTD.,309 ITR 1 54(P&H). 6. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE FI NDINGS OF THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON BY THE LD. AR . INDISPUTABLY, THE INCOME FROM ROYALTY IN RESPECT OF LIBERTY BRAND EARLIER US ED BY THE OTHER GROUP ENTITIES HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES' AND THE DECISION OF THE AO/LD. CIT(A) HAS BEEN ACCEPTED BY THE ASSESSEE. THE AFORESAID AGREEMENT DATED 31.12.2003 FURTHER MENTIONED THAT L SL HAD BEEN USING LIBERTY BRAND SINCE 1986 AND SHALL CONTINUE TO USE IT TILL PERPETUITY IRRESPECTIVE OF THE SAID AGREEMENT. THOUGH THE ASSESSEE TRIED TO DISTINGUISH THE FACTS ON THE GROUND THAT IN THE YEAR UNDER CONSIDERATION EXCLUSIVE RIGH T OF USE OF BRAND 'LIBERTY' WAS ALLOWED TO LIBERTY SHOES LTD., THE ASSESSEE DID NOT EXPLAIN AS TO HOW THIS FACT CAN CHANGE THE NATURE OF INCOME. ACCORDINGLY, FOLLO WING THE PAST HISTORY OF THE CASE AND ORDERS OF HIS PREDECESSORS, THE LD. CIT(A) HELD THAT FEES RECEIVED IN LIEU OF ALLOWING THE USE OF BRAND 'LIBERTY' IS TO B E ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IN NUTSHELL RIGHT SINC E 1986 , THE INCOME FROM LIBERTY BRAND HAS BEEN ASSESSED UNDER THE HEAD IN COME FROM OTHER SOURCES. THE PLEA OF THE LD. AR THAT INCOME ON ACCOUNT OF RO YALTY HAS BEEN ASSESSED BY THE AO IN SUBSEQUENT YEARS UNDER THE HEAD BUSINESS IS NOT ESTABLISHED BECAUSE IN THE AY 2005-06, THE AO SPECIFICALLY RECORDED THE FINDINGS THAT SINCE THE ASSESSEE HAS GIVEN ALL THE RIGHTS TO LIBERTY SHOES LTD., THE ASSESSEE DID NOT CARRY ON ANY BUSINESS IN THE PERIOD RELEVANT TO AY 2005-06 AND ACCORDINGLY, DISALLOWED VARIOUS EXPENSES. SIMILAR IS THE SITUATI ON IN SUBSEQUENT TWO YEARS. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE DID NOT QUESTION OF THE FINDINGS OF THE AO THAT IT DID NOT CARRY ON ANY BUSINESS DURING THE YEAR. APPARENTLY, THE I.T.A. NOS.734 TO 743/DEL./2011 12 ASSESSEE ACCEPTED THE SAID FINDINGS OF THE AO. EVE N OTHERWISE, DESPITE REQUEST MADE BY US, THE LD. AR DID NOT DEMONSTRATE AS TO HO W TRADE MARK WAS BUSINESS ASSET FOR THE ASSESSEE, ESPECIALLY WHEN ALL ALONG ROYALTY INCOME HAS BEEN ASSESSED UNDER HEAD INCOME FROM OTHER SOURCES WHI LE IN THE YEAR UNDER CONSIDERATION, ALL THE ASSETS OF THE ASSESSE HAVE B EEN TRANSFERRED TO LIBERTY SHOES LTD.. AS IS APPARENT FROM CLAUSE 4(B) OF THE AGREEMENT ,LSL HAS AGREED TO PAY LICENSE FEES @ 1.5% OF TOTAL ANNUAL SALES O F LSL OR ` 300 LACS PA, WHICHEVER IS HIGHER. THE LD. AR ON BEHALF OF THE AS SESSEE DID NOT PLACE ANY MATERIAL BEFORE US, ESTABLISHING THAT THE INCOME R ECEIVED BY THE ASSESSEE IN THE FORM OF MINIMUM GUARANTEE OF LICENSE FEES COULD BE ASSESSED AS INCOME FROM BUSINESS, ESPECIALLY WHEN THE ASSESSEE FIRM STOPPED BUSINESS OF MANUFACTURING AND SELLING OF FOOTWEAR AND HIRED OUT ITS ASSETS TO LIBERTY SHOES LTD. IT WAS CLEARLY INCOME FROM ' OTHER SOURCES'. 7.1 IN THE DECISION RELIED UPON BY THE LD. AR IN R IETA BISCUITS COMPANY P. LTD.,(SUPRA), THE ASSESSEE LEASED OUT ITS LAND, BU ILDING AND PLANT AND MACHINERY TO M/S. BAKEMANS HOME PRODUCTS, A PARTNERSHIP FIRM AND THE LEASE INCOME WAS WRONGLY ASSESSED AS BUSINESS INCOME AND THEREFORE, THE LD. CIT WAS OF THE OPINION THAT THE INVESTMENT ALLOWANCE OF ` 7,23,723, OTHER EXPENSES AMOUNTING TO ` 50,111 AND EXTRA SHIFT ALLOWANCE ON PLANT AND MACH INERY AMOUNTING TO RS. 1,15,865 WERE WRONGLY ALLOWED BY THE INSPECTING ASS ISTANT COMMISSIONER (ASSTT.). ACCORDINGLY, PROCEEDINGS U/S 263 OF THE A CT WERE INITIATED BY THE CIT AND IAC(ASSTT.) WAS DIRECTED TO FRAME A FRESH ASSESSMEN T ACCORDING TO LAW AFTER AFFORDING PROPER OPPORTUNITY OF HEARING TO THE ASSE SSEE. ON APPEAL, THE TRIBUNAL ACCEPTED THE APPEAL AND SET ASIDE THE ORDER OF THE CIT, HOLDING IT TO BE WITHOUT JURISDICTION. THE HONBLE HIGH COURT NOTICED THAT WHILE DECIDING I.T.R. NO. 35 OF 1991 IN CIT V. RIETA BISCUITS CO. PVT. LTD. ARISING OUT OF ORDERS PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 1983-84 ON THE ISS UE OF ENTITLEMENT TO DEDUCTIONS UNDER SECTION 32A OF THE ACT, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, KEEP ING IN VIEW THE PRINCIPLES OF CONSISTENCY ONCE THE ISSUE ON THE MERITS HAS BEE N DECIDED AGAINST THE I.T.A. NOS.734 TO 743/DEL./2011 13 REVENUE ON THE SAME ISSUE DURING THE SUBSEQUENT ASS ESSMENT YEARS, HONBLE HIGH COURT DID NOT TAKE A DIFFERENT VIEW ON A TECHN ICAL REASON. THIS DECISION RATHER SUPPORTS THE CASE OF REVENUE, THE ASSESSEE H AVING ALL ALONG ACCEPTED THAT INCOME FROM ROYALTY FOR USE OF LIBERTY BRAND BY LSL SINCE 1986 IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. AR DID NOT PLACE BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABL E US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THERE FORE, GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IN LIBERTY FOOTWEAR COMPANY FOR TH E AY 2004-05 IS DISMISSED. 8.. GROUND NO.3 IN THE APPEAL IN THE CASE OF LIBER TY FOOTWEAR COMPANY FOR THE AYS 2004-05 & GROUND NOS.2 & 3 IN T HEIR APPEAL FOR THE AY 2005-06 AS ALSO GROUND NO. 3 IN THEIR APPEAL FOR TH E AY 2006-07 RELATES TO DISALLOWANCE OUT OF ADVERTISEMENT AND BUSINESS PROM OTION EXPENSES. THE AO NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE AY 2004-05 THAT THE ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES INCLU DED AN AMOUNT OF ` 20,23,478/-[17,14,800+3,08,678] IN CONNECTION WITH GOLDEN JUBILEE CELEBRATIONS. TO A QUERY BY THE AO, THE ASSESSEE REPLIED THAT TH E EXPENDITURE RELATED TO LIBERTY BRAND AND IS ALLOWABLE. HOWEVER, THE ASSESS EE DID NOT FURNISH DETAILS OF THESE EXPENSES. ACCORDINGLY, THE AO MADE AN ADHOC DISALLOWANCE OF ` ` 2,50,000/- OUT OF THE EXPENDITURE IN THE AY 2004-05 . 8.1 LIKEWISE, IN THE AY 2005-06 IN THE CASE OF LIB ERTY FOOTWEAR COMPANY, THE AO DISALLOWED ENTIRE BUSINESS PROMOTION EXPENSE S OF ` 11,61,401/-, THE ASSESSEE HAVING NOT CARRIED ON ANY BUSINESS IN THE YEAR AND ALL THE RIGHTS HAVING BEEN TRANSFERRED TO LIBERTY SHOES LTD., BESIDES DIS ALLOWANCE OF ` 2,01,648/- OUT OF ADVERTISEMENT EXPENSES. 8.2 IN THE AY 2006-07 ALSO IN THE CASE OF LIBER TY FOOTWEAR COMPANY, THE AO DISALLOWED EXPENSES OF ` 44,770/- IN THE ABSENCE OF ANY EVIDENCE THESE RELAT ED I.T.A. NOS.734 TO 743/DEL./2011 14 TO THE BUSINESS OF THE ASSESSEE, ALL THE BUSINESS A CTIVITIES HAVING ALREADY BEEN TRANSFERRED TO LIBERTY SHOES LTD. ALONG WITH VARIOU S ASSETS. 8.3 GROUND NO.2 IN THE APPEAL FOR THE AY 2004-05 IN THE CASE OF LIBERTY ENTERPRISES RELATES TO DISALLOWANCE OF ADVERTISEMEN T EXPENSES OF ` 3,39,547/.THE AO DISALLOWED THE ADVERTISEMENT EXPENSES IN VIEW O F CLAUSE 6(VI) OF THE AGREEMENT, ENVISAGING, INTER ALIA, THAT EXPENSES LI KE ADMINISTRATIVE AND SELLING EXPENSES INCLUDING ADVERTISEMENT AND SALES PROMOTIO N, DISCOUNTS, CLAIMS, COMMISSION AND BRANCH OVERHEADS ARE TO BE MET BY LI BERTY SHOES LTD. 8.4 GROUND NOS. 3 & 4 IN THE APPEAL FOR THE AY 20 04-05 IN THE CASE OF LIBERTY GROUP MARKETING DIVISION RELATES TO DISALLO WANCE OF ADVERTISEMENT EXPENSES OF 1,83,178/-.BESIDES DISALLOWANCE OF ` 67790 OUT OF BUSINESS PROMOTION EXPENSES .THE AO DISALLOWED THESE EXPEN SES SINCE THESE WERE TO BE MET BY LIBERTY SHOES LTD. AND THIS FACT WAS NOT REBUTTED BY THE ASSESSEE. 8.5 GROUND NO.4 IN THE APPEAL FOR THE AY 2006-07 I N LIBERTY GROUP MARKETING DIVISION RELATES TO DISALLOWANCE OF BUSINESS PROMO TION EXPENSES. THE AO DISALLOWED THE AMOUNT IN THE ABSENCE OF ANY EVIDENC E THAT THESE RELATED TO THE BUSINESS OF THE ASSESSEE, ALL THE BUSINESS ACTIVITI ES HAVING ALREADY BEEN TRANSFERRED TO LIBERTY SHOES LTD. 9. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS O F THE AO IN THE CASE OF LIBERTY FOOTWEAR COMPANY IN THE AY 2004-05 IN T HE FOLLOWING TERMS:- 4.02 RELEVANT EXTRACTS FROM THE WRITTEN SUBMISSI ONS FILED BY THE APPELLANT ARE EXTRACTED BELOW:- A.O. HAS PROCEEDED TO DISALLOW SOME OF ` .2,50,000/- ON AD HOC BASIS OUT OF ADVERTISEMENT FROM BUSINESS PROMOTION EXPENDITURE INCURRED DURING THE YEAR. THE EXPENDITURE WAS FOR CELEBRATION OF GOLDEN JUBLIEE F OR PROMOTION OF BRAND HELD EXCLUSIVELY FOR PROPAGATION OF I.T.A. NOS.734 TO 743/DEL./2011 15 BRAND PUBLICITY AND REJOICING OF EVENT AND EXPENDIT URE INCURRED WAS ALLOWABLE FULLY AND A. O. HAD NO REASO N OR BASE TO MAKE IT AN ADHOC DISALLOWANCE. YOUR HONOUR WILL KINDLY APPRECIATE THAT WITHOUT ANY REAS ON OF ASSIGNING ADHOC DISALLOWANCE AS HAS BEEN DONE BY A.O. ON THE BASIS OF PAST HISTORY OF THE ASSESSEE NEVER DISALLOWANCE WAS EVER MADE OUT OF ADVERTISEMENT AND PUBLICITY IN SUCH A MANNER. ' 4.03 THE APPELLANT VIDE PARA (III) OF THIS OFFICE LETTER DATED 18.10.2010 WAS ASKED TO PRODUCE THE FOLLOWING :- THAT THE AO MADE AN ADHOC DISALLOWANCE OF RS.2.5 L ACS OUT OF CLAIM OF ADVERTISEMENT EXPENSES AMOUNTING TO RS.18,07,023/ - ON THE GROUND THAT NO DETAILS OF TH ESE EXPENSES WERE FURNISHED TO JUSTIFY THE CLAIM MADE. YOU ARE REQUESTED TO FURNISH THE DETAILS AND TO PRODUCE THE RELEVANT VOUCHERS/ BILLS IN SUPPORT OF YOUR CLAIM T HAT THE ENTIRE EXPENSES WERE INCURRED FOR BUSINESS ONLY SPE CIFICALLY IN VIEW OF THE FACT THAT MAIN INCOME OF THE FIRM IS FROM ROYALTY RECEIVED. 4.04 THE RELEVANT EXTRACTS FROM THE LETTER DATED 09.11.2010 OF THE APPELLANT IS REPRODUCED BELOW:- THAT APPELLANT'S CLAIM BEFORE YOUR HONOUR IS AGAINST ADHOC DISALLOWANCE MADE BY AD. DETAILS OF EXPENSES WITH VOUCHERS AND A CERTIFICATE FROM M/ S LIBERTY SHOES LTD. IS ATTACHED IN EVIDENCE TO THE GENUINENESS OF THE EXPENDITURE CLAIMED. THE APPELLANT PRAYETH CONSIDERATION OF SUBMISSIONS ALREADY MADE NOW DULY SUPPORTED BY VOUCHERS. 4.05 THE ISSUE IS CONSIDERED. AT THE OUTSET, IT I S NOTED THAT NO CERTIFICATE FROM M/S LIBERTY SHOES LTD. IS ENCLO SED BY THE APPELLANT AS STATED IN THE REPLY. IN ANY CASE, IT I S NOTED THAT THE A.O. MADE ADHOC DISALLOWANCE OUT OF ADVERTISEMENT AND BU SINESS PROMOTION EXPENSES CLAIMED AT RS. 20,23,478/- FOR T HE REASON THAT NO DETAILS OF THESE EXPENSES WERE FILED TO JUSTIFY THE CLAIM. THIS FACT WAS STATED IN THE LETTER OF THIS OFFICE AND HENCE T HE APPELLANT WAS I.T.A. NOS.734 TO 743/DEL./2011 16 ASKED TO PRODUCE THE RELEVANT VOUCHERS AND BILLS IN SUPPORT OF ITS CLAIM THAT THE ENTIRE EXPENSES INCURRED FOR BUSINES S ONLY. IN SPITE OF THIS FACT, THE APPELLANT DID NOT PRODUCE THE FOLLOW ING BILLS.:- DATE PARTICULARS AMOUNT[IN] 31.3.2004 50 YEARS GOLDEN JUBLIEE CELEBRATION CASH PAID TO STC TOWARD DUPTTA WITH TASHUL FOR GOLDEN JUBLIEE PROGRAMMES FUNCTION 2970 31.3.2004 TEMPO CHARGES FROM OFFICE TO GRAND HOTEL VIDE GR. NO. 1489 950 31.3.2004 TO EXPENSES REIMBURSED FOR GOLDEN JUBLIEE FUNCTION 1450 31.3.2004 TO MISC. EXPENSES REIMBURSED TO MR. JAI SINGH 50 YEARS CELEBRATION PARTY. 2250 31.3.2004 TO TAXI CHARGES PAID DURING GOLDEN JUBLIEE FUNCTION 1100 31.3.2004 TO CH. NO.4 76360 TO GRAND HYATT HOTEL, DELHI FOR GOLDEN JUBILEE FUNCTION. 521813.65 31.3.2004 TO BILL NO.186 OF EXPOMATRIX AND CO. FOR LMAGE FASHION SHOW11-14FBY,2004, RS.329259.00(-) D/NOTE 40000. 289259 31.3.2004 T O AMOUNT PAID TO ADAYAR HOTEL LTD. CHENNAI & TAJ KRISHAN, HYDEABAD THRO. 18959.96 I.T.A. NOS.734 TO 743/DEL./2011 17 ANUPAM BANSAL. 4.06 IT IS FURTHER NOTED THAT, THE FOLLOWING BILLS ARE IN THE NAME OF LIBERTY SHOES LTD., KARNAL IN STEAD OF APPELLANT, I .E., LIBERTY FOOTWEAR CO.:- DATE PARTICULARS A MOUNT 19.2.2004 TO BILL NO.10686 OF LACHHMAN DASS CO., DELHI; C/O 502 PCS. MEDAL GOLD PLATED. 15180.48 31.3.2004 TO BILL NO.17128 OF LUXMI STUDIO & COLOR LAB; 9579.60 31.3.2004 ANUPAM BANSAL C/O LIBERTY SHOES LTD. 215000 31.3.2004 TO BILL OF AADI MEDIA SERVICES, NEW DELHI 13824 31.3.2004 TO BILL NO.2591/01-03 EXPENSES FOR FASHION SHOW AT THE GRAND VASANT KUNJ IN THE NAME OF LIBERTY GROUP 24940 4.07 IN VIEW OF THE FACTS DISCUSSED ABOVE, IT IS HELD THAT APPELLANT HAS NOT BEEN ABLE TO ESTABLISH WITH THE H ELP OF THE RELEVANT DOCUMENTS THAT THE ENTIRE EXPENSES WERE IN CURRED FOR THE PURPOSE OF ITS BUSINESS AND HENCE ADHOC DISALLOWANC E OUT OF THESE EXPENSES MADE BY THE A.O. IS CONFIRMED. 9.1 IN THE CASE OF LIBERTY FOOTWEAR COMPANY IN TH E AY 2005-06, THE LD. CIT(A) UPHELD DISALLOWANCE OF ADVERTISEMENT EXPENSES SINCE THE EXPENDITURE OF ` ` 1,25,000/- CLAIMED THROUGH INTERNAL VOUCHER RELATED TO PAYMENTS TO SHRI RAJINDRA JAIN, MUMBAI ON ACCOUNT OF FEE FOR GOLDEN JUBILEE DEVOTIONAL PROGRAMME, WITHOUT PRODUCING THE RELEVANT BILL WHI LE BILL DATED 11.6.2004 FOR AN AMOUNT OF ` ` 50,000/- OF SHRI SUNIL BABBAR OF CHANDIGARH DID NOT CONTAIN ANY BILL NUMBER OR NAME OF THE CLIENT. DESCRIPTION IN THIS B ILL WAS MENTIONED AS PART PAYMENT OF PRODUCTION OF DOCUMENTARY FILM OF KARNAL NAMELY KARNA BHOOMI I.T.A. NOS.734 TO 743/DEL./2011 18 KARMA BHOMI. SINCE THE ASSESSEE FAILED TO ESTABLIS H THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS ,IF ANY, OF TH E ASSESSEE, THE LD. CIT(A) UPHELD THE DISALLOWANCE.. 9.11 LIKEWISE, THE LD. CIT(A) UPHELD THE FINDIN GS OF THE AO ,DISALLOWING EXPENSES OF ` 11,61,401/- IN THE AY 2005-06 IN THE FOLLOWING TER MS: 4.03 THE ISSUE IS CONSIDERED, THE APPELLANT ENCLO SED COPY OF ACCOUNT OF BUSINESS PROMOTION EXPENSES WHICH IS AS UNDER:- DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 31.05.04 CR SERIF COMMUNICATION P. LTD., NEW DELHI BY BILL NO.213/03-04/68 JOURNAL 66 3859.00 29.06.04 CR NEW COLOR SCREEN P. LTD. DELHI BY BILL NO.PR/30795 DT.21.6.04 JOURNAL 94 573 750 06.08.04 CR MODERN STAE SERCICE DELHI BY C.NOTE NO.001/31/DT.4.8.04 JOURNAL 173 25000 26.08.04 CR BHARAT PLYWOOD CO. N. DELHI BY BILL NO.3311 DT. 13.8.04 JOURNAL 190 18792 14.10.04 CR GULSHAN CHAWLA BY BILL NO.801 DT. 28.0.04 JOURNAL 246 40000 28.10.04 CR GUPTA JEE TENT SERCICE DELHI BYU BILL NO.2004-05/87 DT.30.8.04 JOURNAL 251 550000 DR GUPTA JEE TENT SERCICE DELHI BY BILL NO.2004-05/87 DT.30.8.04 JOURNAL 252 50000 GUPTA JEE TENT SERVICE DELHI BY D.NOTE NO.001 DT.8.10.04 AG. BY BILL NO.2004-05/87 OF M/S GUPTA JEE TENT SERCVICE NEW DELHI JOURNAL 4.04. FROM THE DETAILS AS PER COPY OF ACCOUNT REPR ODUCED ABOVE, IT IS NOTED THAT NATURE OF EXPENSES COULD NO T BE MADE OUT THERE FROM. FURTHER NO BILLS OF THESE EXPENSES HAS BEEN FILED BESIDES THE FACT THAT NO SUBMISSION HAS BEEN MADE O N MERITS IN SUPPORT OF ITS CLAIM THAT THESE EXPENSES WERE INCUR RED FOR BUSINESS, SPECIFICALLY IN VIEW OF THE FACT THAT THE APPELLANT HAS NOT CARRIED OUT ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THESE I.T.A. NOS.734 TO 743/DEL./2011 19 FACTS, IT IS HELD THAT THE APPELLANT HAS NOT BEEN A BLE TO ESTABLISH THAT THESE EXPENSES WERE INCURRED FOR BUSINESS AND HENCE DISALLOWANCE THEREOF MADE BY THE ASSESSING OFFICER, IS HEREBY CO NFIRMED. 9.2 IN THE AY 2006-07 IN THE CASE OF LIBERTY FOO TWERA COMPANY, THE LD. CIT(A) CONCLUDED AS UNDER: 3.03 THE ISSUE IS CONSIDERED. THE APPELLANT ENCLOSE D THE COPY OF RELEVANT BILLS WHICH ARE IN THE NAME OF LIBERTY SHOES LTD..THE APPELLANT FURTHER ENCLOSED A COPY OF ITS LETTER DAT ED 24.3.2008 FILED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS, WHEREIN NATURE OF EXPENSES SPECIFIED AS;EXPENDITURE RELATE S TO COST OF LIBERTY FOLDED, LEAFLETS WITH ENVELOPS. 3.04 AS DISCUSSED ABOVE, THAT THE APPELLANT HAS GRA NTED THE EXCLUSIVE USE OF BRAND LIBERTY TO ITS SISTER CONC ERN, W.E.F 1.4.2003 AND HENCE COST OF LIBERTY FOLDED LEAFLETS AND ENVELOPS ETC. CANNOT BE SAID FOR THE BUSINESS OF THE APPELLA NT AND HENCE DISALLOWANCE THEREOF MADE BY THE AO IS HEREBY CONFI RMED. 9.3 IN THE CASE OF LIBERTY ENTERPRISES IN TH E AY 2004-05 , THE LD. CIT(A) FOUND THAT NONE OF THE BILLS REFERRED TO IN PARA 3. 09 OF THE IMPUGNED ORDER RELATED TO THE ASSESSEE FIRM NOR THE ASSESSEE ADDRESSED OR REBUTTED THE FINDINGS OF THE AO THAT AS PER CLAUSE 6(VI) OF THE AGREEMENT, ALL THE EXPENSES VIZ. ADMINISTRATIVE AND SELLING EXPENSES INCLUDING ADVER TISEMENT AND SALES PROMOTION, DISCOUNTS, CLAIMS, COMMISSION AND BRANCH OVERHEADS WERE TO BE MET BY LIBERTY SHOES LTD.. ACCORDINGLY, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO. 9.4 LIKEWISE IN THE CASE LIBERTY GROUP MARKETING D IVISION IN THE AYS 2004- 05 THE LD. CITA) FOUND THAT THESE EXPENSES WERE TO BE MET BY LIBERTY SHOES LTD. AND THIS FACT WAS NOT REBUTTED BY THE ASSESSEE. MOR EOVER , ALL THE EXPENSES RELATED TO THE FY 2002-03.SINCE THE ASSESSEE DID NO T EVEN ESTABLISH THAT THESE WERE LIABILITY OF THE YEAR UNDER CONSIDERATION, THE LD. CIT(A) UPHELD THE DISALLOWANCE OUT OF ADVERTISEMENT & PUBLICITY AS A LSO BUSINESS PROMOTION EXPENSES. I.T.A. NOS.734 TO 743/DEL./2011 20 9.5 SIMILARLY, THE LD. CIT(A) UPHELD THE DISALLOWAN CE IN THE AY 2006-07, THE ASSESSEE ,LIBERTY GROUP MARKETING DIVISION, HAVING NOT EXPLAINED EVEN THE NATURE OF LIABILITY NOR AS TO HOW IT RELATED TO T HE BUSINESS OF THE ASSESSEE. 10. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF O F THE ASSESSEE VEHEMENTLY ARGUED THAT ALL THE RELEVANT DETAILS WERE SUBMITTED BEFORE THE AO AND THE LD. CIT(A), WHICH ARE AVAILABLE ON PAGES 25 TO 41 OF TH E PB FOR THE AY 2004-05 AND PAGE7 TO 50 OF THE PB FOR THE AY 2005-06 IN THE CAS E OF LIBERTY FOOTWEAR COMPANY..KEEPING IN VIEW THE TURN OVER OF THE ASSES SEE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE, THE LD. AR ADDED. ON THE OTHER HAND, THE LD. DR WHILE CARRYING US THROUGH THE IMPUGNED ORDER FOR THE AY 2004-05 CONTENDED THAT THE LD. CIT(A) SPECIFICALLY ASKED TH E ASSESSEE TO FURNISH THE RELEVANT BILLS AND VOUCHERS ALONG WITH RELEVANT DET AILS OF EXPENDITURE. ON PERUSAL OF THE SAME, THE LD. CIT(A) POINTED OUT IN PARA 4.0 5 OF THE IMPUGNED ORDER, THE BILLS WHICH WERE NOT PRODUCED BEFORE HIM WHILE IN P ARA 4.06 BILLS RELATED TO LIBERTY SHOES LIMITED AND NOT THE ASSESSEE. THUS, THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE. LIKEWISE, THE LD. DR SU PPORTED THE FINDINGS OF THE LD. CIT(A) IN THE AYS 2005-06 & 2006-07 WHILE RELYING UPON THE DECISION IN RARE GARMENTS (P) LTD. VS. ACIT, 25 TAXMAN.COM 257( DELH I). 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS IN T HE CASE OF LIBERTY FOOTWEAR COMPANY IN THE AY 2004-05, THE AO MADE AN ADHOC DIS ALLOWANCE WHILE THE LD. CIT(A) CALLED FOR THE RELEVANT BILLS AND VOUCHERS. SINCE THE ASSESSEE FAILED TO PRODUCE CERTAIN BILLS REFERRED TO IN PARA 4.05 OF T HE IMPUGNED ORDER FOR THE AY 2004-05 WHILE BILLS MENTIONED IN PARA 4.06 OF THE SAID ORDER WERE IN THE NAME OF LIBERTY SHOES LTD., THE LD. CIT(A) UPHELD THE DISAL LOWANCE. THE LD. AR ,THOUGH REFERRED US TO THE DETAILS PLACED IN THE PAPER BOOK , DID NOT EXPLAIN AS TO WHY THE RELEVANT BILLS AND VOUCHERS WERE NOT PLACED BEFORE THE LOWER AUTHORITIES. EVEN BEFORE US SITUATION IS NO BETTER. IN THE ABSENCE OF RELEVANT BILLS , WE ARE NOT I.T.A. NOS.734 TO 743/DEL./2011 21 INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) IN THE AY 2004-05.IN THE AY 2005-06 , THE ASSESSEE DID NOT DISPUTE THE FINDI NGS OF THE AO THAT SINCE THE ASSESSEE HAS GIVEN ALL THE RIGHTS TO LIBERTY SHOES LTD., IT DID NOT CARRY ON ANY BUSINESS IN THE PERIOD RELEVANT TO AY 2005-06, BEFO RE THE LD. CIT(A) AND EVEN BEFORE US. EVEN BILLS FOR THESE EXPENSES WERE NOT P LACED BEFORE THE LD. CIT(A) NOR NATURE OF THESE EXPENSES IS KNOWN AND NOR EVEN IT IS ESTABLISHED AS TO HOW THESE EXPENSES RELATE TO THE BUSINESS, IF ANY, OF T HE ASSESSEE IN THE YEAR UNDER CONSIDERATION. SIMILAR IS THE POSITION IN THE AY 20 06-07.IN THESE CIRCUMSTANCES, IN THE ABSENCE OF ANY MATERIAL SO AS TO ENABLE US T O TAKE A DIFFERENT VIEW IN THE MATTER, WE HAVE NO HESITATION IN UPHOLDING THE DISA LLOWANCE CONFIRMED BY THE LD. CIT(A) TO THE EXTENT OF ` ` 11,61,401/- OUT OF GOLDEN JUBLIEE CELEBRATION EXPEN SES & ` 2,01,648/- OUT OF ADVERTISEMENT EXPENSES IN THE AY 2005-06 & ` 44,770/- IN THE AY 2006-07. THIS VIEW OF OURS IS SUPPORTED BY T HE DECISION IN RARE GARMENTS (P) LTD.(SUPRA) WHERE IN IT WAS HELD THAT SINCE NO MATERIAL WAS BROUGHT ON RECORD THAT THE ASSESSEE INDEED CARRIED ON BUSINESS ACTIV ITIES, CLAIM FOR DEDUCTION COULD NOT BE ALLOWED. IN VIEW OF THE FOREGOING , GR OUND NO.3 IN THE APPEALS IN THE CASE OF LIBERTY FOOTWEAR COMPANY FOR THE AYS 2004-0 5 & 2006-07 AS ALSO GROUND NOS.2 & 3 IN THEIR APPEAL FOR THE AY 2005-06 , ARE DISMISSED. 11.1 AS ALREADY POINTED OUT ,IN THE CASE OF LIBERTY ENTERPRISES IN THE AY 2004-05 , THE LD. CIT(A) FOUND THAT NONE OF THE BIL LS REFERRED TO IN PARA 3.09 OF THE IMPUGNED ORDER RELATED TO THE ASSESSEE FIRM NOR TH E ASSESSEE ADDRESSED OR REBUTTED THE FINDINGS OF THE AO THAT AS PER CLAUSE 6(VI) OF THE AGREEMENT, ALL THE EXPENSES VIZ. ADMINISTRATIVE AND SELLING EXPENSES I NCLUDING ADVERTISEMENT AND SALES PROMOTION, DISCOUNTS, CLAIMS, COMMISSION AND BRANCH OVERHEADS WERE TO BE MET BY LIBERTY SHOES LTD.. ACCORDINGLY, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO. THE LD. AR ON BEHALF OF THE ASSESSEE DID NO T PLACE BEFORE US ANY MATERIAL , CONTROVERTING THESE FINDINGS OF FACTS RE CORDED BY THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER . THEREFORE, GROUND NO. 2 IN THE APPEAL FOR THE AY 2004-05 IN LIBERTY ENTERPRISES IS DISMISSED. I.T.A. NOS.734 TO 743/DEL./2011 22 11.2 SIMILARLY IN THE CASE LIBERTY GROUP MARKETI NG DIVISION IN THE AY 2004-05 THE LD. CITA) FOUND THAT THESE EXPENSES WERE TO BE MET BY LIBERTY SHOES LTD. AND THIS FACT WAS NOT REBUTTED BY THE ASSESSEE. MOR EOVER , ALL THE EXPENSES RELATED TO THE FY 2002-03.SINCE THE ASSESSEE DID NO T EVEN ESTABLISH THAT THESE WERE LIABILITY OF THE YEAR UNDER CONSIDERATION, THE LD. CIT(A) UPHELD THE DISALLOWANCE OUT OF ADVERTISEMENT & PUBLICITY AS A LSO BUSINESS PROMOTION EXPENSES. IN THE AY 2006-07 ALSO, THE ASSESSEE LIB ERTY GROUP MARKETING DIVISION, DID NOT EXPLAIN EVEN THE NATURE OF LIABIL ITY NOR AS TO HOW IT RELATED TO THE BUSINESS OF THE ASSESSEE. THE LD. AR ON BEHALF OF T HE ASSESSEE DID NOT PLACE BEFORE US ANY MATERIAL , CONTROVERTING THESE FINDIN GS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER. T HEREFORE, GROUND NOS. 3 & 4 IN THE APPEAL FOR THE AY 2004-05 AS ALSO GROUND N.4 I N THE APPEAL FOR THE AY 2006- 07 IN THE CASE OF LIBERTY GROUP MARKETING DIVISIO N ARE DISMISSED. 12.. GROUND NO.4 IN THE APPEAL FOR THE AY 2004-05 IN LIBERTY FOOTWEAR COMPANY RELATES TO DISALLOWANCE OF ` ` 15,334/- IN RESPECT OF WRITTEN OF ASSETS AND ` ` 19,254/- IN RESPECT OF RECEIVABLES. THE AO DISALLOW ED THESE AMOUNTS IN THE ABSENCE OF ANY PROOF RELATING TO THESE AMOUNTS. 13. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWA NCE IN THE FOLLOWING MANNER:- 5.00 GROUND OF APPEAL NO.6 IS AS UNDER:- THAT ADDITION OF ` .34,588/- FOR ASSETS WRITTEN OFF AND RECEIVABLE WRI TTEN OFF IS UNCALLED FOR. 5.01 RELEVANT PARA 6 FROM THE ORDER OF A.O. IS REP RODUCED AS UNDER:- THE ASSESSEE FIRM HAS CLAIMED ASSETS WRITTEN OFF AT ` .15334/- AND RECEIVABLE WRITTEN OFF AT ` .19254/-. THESE ARE NOT ALLOWED AS NO PROOF IN REGA RD TO THE CLAIM HAS BEEN FURNISHED BY THE ASSESSEE'. I.T.A. NOS.734 TO 743/DEL./2011 23 5.02 THE RELEVANT EXTRACTS FROM THE WRITTEN SUBMIS SIONS OF THE APPELLANT IS REPRODUCED BELOW:- 'IN THE MAGNITUDE OF ASSESSEE'S BUSINESS SMALL AMOU NT WRITTEN OFF IN A SUM OF ` .15334/ - AND ` 19254/- WAS SO MEAGER AMOUNT WHERE DISALLOWANCES MA DE BY THE A. O. WAS UNFAIR AND UNCALLED FOR. APPELLANT PR AYETH FOR ITS DELETION. 5.03 THE ISSUE IS CONSIDERED. THE APPELLANT HAS NO T MADE SUBMISSIONS ON MERITS' TO JUSTIFY THE ALLOWABILITY OF ITS CLAIM AND HENCE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS HEREB Y CONFIRMED. 14. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR MERELY REITER ATED THEIR SUBMISSIONS BEFORE THE LD CIT(A) WITHOUT GIVING ANY JUSTIFICATION FO R WRITE OFF WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 15. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. SINCE THE ASSESSEE DID NOT FURNISH ANY DETAI LS & EVIDENCE REGARDING THE ASSETS WRITTEN OFF AND RECEIVABLES EITHER BEFORE T HE AO OR THE LD. CIT(A) AND NOR EVEN BEFORE US, IN THE ABSENCE OF ANY BASIS, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.4 IN THE APPEAL FOR THE AY 200 4-05 IN LIBERTY FOOTWEAR COMPANY IS DISMISSED. 16. GROUND NO.5 IN THE APPEAL FOR THE AY 2004-05 I N LIBERTY FOOTWEAR COMPANY RELATES TO DISALLOWANCE OF 1/4 TH CAR EXPENSES AND DEPRECIATION ON CAR, TOTALING TO ` `21,055/- FOR PERSONAL USE OF CAR WHILE GROUND NO. 2 IN THEIR APPEALS FOR THE AY 2006-07 & AY 2007-08 RELATES TO DISALLO WANCE OF CAR EXPENSES OF ` 3263 & ` 1,28,655/- AND DEPRECIATION OF ` 5,40,244/- & ` 4,59,150/- RESPECTIVELY ON THE GROUND THAT THE ASSESSEE DID NOT CARRY ON AN Y BUSINESS IN THESE YEARS. 16.1 SIMILARLY, AS PER GROUND NO.2 IN THE APPEAL FOR THE AY 2004-05 IN THE CASE OF LIBERTY GROUP MARKETING DIVISION, THE A O DISALLOWED 1/4 TH CAR EXPENSES AND DEPRECIATION AMOUNTING TO ` ` 2,74,000/- ; FOR PERSONAL USE OF CAR I.T.A. NOS.734 TO 743/DEL./2011 24 WHILE AS PER GROUND NOS. 2 & 3 IN THE RESPECTIVE AP PEALS, AN AMOUNT OF ` 60,054 + ` 12,626/-IN THE AY 2006-07 & ` ` 4,59,207/- + ` 13,366/- IN THE AY 2007-08 WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS IN THESE YEARS. . 16.2 LIKEWISE AS PER GROUND NO.3 IN THE AY 2004 -05 IN THE CASE OF LIBERTY ENTERPRISES, THE AO DISALLOWED 1/4 TH CAR EXPENSES AND DEPRECIATION AMOUNTING TO ` `7,70,075/- FOR PERSONAL USE OF CAR WHILE AS PER G ROUND NO. 2 IN THE RESPECTIVE APPEALS, ` 3,09,943 ON ACCOUNT OF DEPRECIATION ON CAR IN THE A Y 2006-07 & ` ` 5,73,395/- IN THE AY 2007-08 WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS IN THESE YEARS. 17. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWA NCE IN THE AY 2004- 05 IN THE CASE OF LIBERTY FOOTWEAR COMPANY, SINCE N O BUSINESS WAS CARRIED ON BY THE ASSESSEE AS ADMITTED BY THE ASSESSEE IN PARA 2(I) OF THEIR LETTER DATED 9 TH NOVEMBER, 2010 . 17.01 SIMILARLY IN THE CASE OF LIBERTY FOOTWEAR CO MPANY IN THE AY 2006- 07, THE LD. CIT(A) UPHELD THE DISALLOWANCE IN THE F OLLOWING TERMS:- 2.03 THE ISSUE IS CONSIDERED. THE FACTS AS DISCU SSED ABOVE ARE THAT THE APPELLANT HIRED OUT ITS ENTIRE B USINESS TO M/S LIBERTY SHOES LTD. WITH THE STIPULATION THAT DURING THE TERM OF AGREEMENT, NO BUSINESS WOULD BE CARRIED OUT BY THE APPELLATE FIRM. IT IS, THEREFORE, DIFFICULT TO APPRECIATE THE JUSTI FICATION OF PURCHASE OF A CAR OF `36,01,627/- FOR BUSINESS PURPOSES. NOTHI NG HAS BEEN BROUGHT ON RECORD SUCH AS LOG BOOK ETC. TO ESTABLIS H THAT THE CAR WAS USED FOR THE PURPOSES OF BUSINESS, SPECIFICALLY IN VIEW OF THE FACT THAT THE ENTIRE BUSINESS WAS LET OUT. DISALLO WANCE OF DEPRECIATION MADE BY THE ASSESSING OFFICER IS, THER EFORE, CONFIRMED. 17.02 LIKEWISE IN AY 2007-08 IN THE CASE OF LIBER TY FOOTWEAR COMPANY, THE LD. CIT(A) UPHELD THE DISALLOWANCE, FOLLOWING H IS FINDINGS IN THE AY 2006-07. I.T.A. NOS.734 TO 743/DEL./2011 25 17.1 IN THE CASE OF LIBERTY ENTERPRISES IN THE AY 2004-05, THE LD. CIT(A) CONCLUDED AS UNDER:- 3.12 THE ISSUE IS CONSIDERED. THE PLEA OF THE AP PELLANT IS NOT TENABLE SINCE FACTS IN THE YEAR UNDER CONSIDERA TION ARE DIFFERENT WITH THE FACTS OF THE CASE IN THE EARLIER YEARS IN AS FAR AS THAT THE APPELLANT HIRED OUT THE ENTIRE BUSINESS AS A GOING CONCERN TO M/S LIBERTY SHOES LIMITED W.E.F. 1.4.2003 INCLUDING THE VEHICLES COSTING ` `1,03,18,941/- WHEREAS THE SAME WAS RUN BY IT IN TH E EARLIER YEARS. FURTHER THE APPELLANT HAS NOT BROUGHT ON RECORD ANY RECORD TO ESTABLISH THAT THE VEHICLES WERE USED FOR BUSINESS ONLY. IN VIEW OF THESE FACTS, DISALLOWANCE OUT OF CAR EXPENSES INCLU DING DEPRECIATION, MADE BY THE ASSESSING OFFICER IS HERE BY CONFIRMED. 17. 11 SIMILARLY IN THE AY 2006-07 IN LIBERTY ENTERPR ISES, THE LD. CIT(A) HELD AS UNDER: 2.03 . THE ISSUE IS CONSIDERED. THE FACTS AS DISC USSED ABOVE ARE THAT THE APPELLANT HIRED OUT ITS ENTIRE BUSINESS TO M/S LIBE RTY SHOES LIMITED WITH THE STIPULATION THAT DURING THE TERM OF AGREEMENT, NO B USINESS WOULD BE CARRIED OUT BY THE APPELLANT FIRM. IT IS, THEREFORE, DIFFICULT TO APPRECIATE THE JUSTIFICATION FOR PURCHASE OF CAR OF ` ` 41,32,579/- FOR BUSINESS PURPOSES. NOTHING HAS BEEN BROUGHT ON RECORD SUCH AS LOG BOOK ETC. TO ESTABLIS H THAT CAR WAS USED FOR PURPOSES OF BUSINESS ,SPECIFICALLY IN VIEW OF FACT THAT THE ENTIRE BUSINESS WAS LET OUT. DISALLOWANCE OF DEPRECIATION MADE BY THE AO IS , THEREFORE, CONFIRMED. 17.12 LIKEWISE IN THE AY 2007-08 IN LIBERTY ENTER PRISES , FOLLOWING HIS FINDINGS IN THE AY 2006-07 ,THE LD. CIT(A) UPHELD THE DISALL OWANCE. 17.2 IN THE CASE OF LIBERTY GROUP MARKETING DIVI SION IN THE AY 2004-05, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO ,FOLLOWING HIS DECISION IN THE CASE OF LIBERTY ENTERPRISES FOR THE AY 2004-05 17.21 IN THE AY 2006-07 IN LIBERTY GROUP MARKETI NG DIVISION ,THE LD. CIT(A) CONCLUDED AS UNDER: I.T.A. NOS.734 TO 743/DEL./2011 26 3.04 THE ISSUE IS CONSIDERED. THE APPELLANT PER P ARA 6 OF ITS LETTER DATED 17.3.2008 FILED BEFORE THE ASSESSI NG OFFICER DURING ASSESSMENT PROCEEDINGS SUBMITTED AS UNDER:- THAT ALL THE CARS OF THE FIRM ARE BEING USED BY TH E DIRECTORS OF LIBERTY SHOES LTD. AND ALSO BY PARTNERS IN THE COU RSE OF THEIR REGULAR OBLIGATION TO CARRY OUT ADMINISTRATIVE, MAN UFACTURING AND SALES ACTIVITIES, FOR WHICH FRANCHISE IS PAID TO TH E FIRM. 3.05 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF CAR EXPENSES AND OF CAR DEPRECIATION ON THE GROUND THAT ENTIRE BUSINESS HAS BEEN HIRED OUT TO LIBERTY SHOES LIMITED AND HENCE PURCHASE AND USE OF CAR WAS HELD NOT TO B E FOR BUSINESS PURPOSES OF THE APPELLANT. THE APPELLANT IN THE WRITTEN SUBMISSIONS SUBMITTED THAT ALL CARS WERE US ED BY THE DIRECTORS OF THE LIBERTY SHOES LTD. AND ALSO BY ITS PARTNERS TO CARRY OUT ADMINISTRATIVE, MANUFACTURING AND SALES A CTIVITIES. THE APPELLANT HAS, HOWEVER, NOT BROUGHT ON RECORD A NY EVIDENCE SUCH AS LOG BOOK ETC. IN SUPPORT ITS CLAIM OF USE OF CARS FOR ITS BUSINESS PURPOSES. OTHERWISE ALSO, PL EA OF THE APPELLANT IS DIFFICULT TO APPRECIATE IN VIEW OF THE FACT THAT ENTIRE BUSINESS WAS LET OUT AS A GOING CONCERN TO L IBERTY SHOES LTD. WITH THE STIPULATION THAT THE APPELLANT FIRM WILL NOT ENGAGE ITSELF IN THE BUSINESS (CLAUSE 4(A) OF THE A GREEMENT). IN VIEW OF THESE FACTS, PLEA OF THE APPELLANT IS NO T TENABLE. THE DEPRECIATION ON CAR DISALLOWED BY THE ASSESSING OFFICER IS, THEREFORE, CONFIRMED. 3.06 AS FAR AS CLAIM OF CAR EXPENSES IS CONCERNED, THE APPELLANT SUBMITTED THAT THE SAME WAS ON ACCOUN T OF SHORT RECEIPT OF INSURANCE CLAIM AGAINST DAMAGE OF CAR. IN VIEW OF THE FACT THAT CAR ITSELF WAS HELD NOT FOR B USINESS, EXPENSES INCURRED THEREON CANNOT BE ALLOWED. DISAL LOWANCE THEREOF MADE BY THE ASSESSING OFFICER IS, THEREFORE , CONFIRMED.GROUND OF APPEAL NO.2 AND 3 IS AS SUCH RE JECTED. 17.22 IN THE AY 2007-08, THE LD. CIT(A), FOLLOWIN G HIS DECISION IN THE CASE OF THE ASSESSEE AND LIBERTY ENTERPRISES FOR THE AY 2006-07 ,UPHELD THE DISALLOWANCE. 18. THESE THREE ASSESSEES ARE NOW IN APPEAL BEFO RE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A) IN THE RESPECTIVE YEARS. THE LD. AR ON BEHALF OF THE ASSESSEE CONTENDED THAT AS IN THE PRECEDING YEARS, THE DISALLOWANCE BE I.T.A. NOS.734 TO 743/DEL./2011 27 RESTRICTED TO ONLY 1/10 TH OF THE CAR EXPENSES INCLUDING DEPRECIATION. ON THE OTHER HAND, LEARNED DR SUPPORTED THE FINDINGS OF THE LEA RNED CIT(A),THE FACTS IN THE YEARS UNDER CONSIDERATION BEING NOT PARALLEL TO THE FACTS IN THE PRECEDING YEARS. 19. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. CIT(A) I N THE AY 2004-05 IN THE CASE OF LIBERTY FOOTWEAR COMPANY THAT IN PARA 2(I) OF THEI R LETTER DATED 9 TH NOVEMBER, 2010, ASSESSEE ADMITTED THAT NO BUSINESS WAS CARRIE D ON BY THEM. SIMILAR IS THE SITUATION IN LIBERTY ENTERPRISES & LIBERTY GROUP MA RKETING DIVISION IN THE AY 2004-05.IN THE AYS 2006-07 & 2007-08 IN LIBERTY FOO TWEAR COMPANY, IN LIBERTY ENTERPRISES & LIBERTY GROUP MARKETING DIVISION, THE LD. CIT(A) UPHELD THE DISALLOWANCE ON THE GROUND THAT NOTHING HAS BEEN BR OUGHT ON RECORD SUCH AS LOG BOOK ETC. TO ESTABLISH THAT THE CAR WAS USED FOR TH E PURPOSES OF BUSINESS OF THESE ASSESSEES, ESPECIALLY IN VIEW OF THE FACT THAT ALL THE ASSETS WERE HANDED OVER TO LIBERTY SHOES LTD. IN TERMS OF THE AGREEMENT. IN TH E AY 2006-07 IN LIBERTY GROUP MARKETING DIVISION ,THE LD. CIT(A) WHILE QUOTING TH E SUBMISSIONS OF THE ASSESSEE THAT ALL CARS WERE USED BY THE DIRECTORS OF THE LIBERTY SHOES LTD. AND ALSO BY ITS PARTNERS TO CARRY OUT ADMINISTRATIVE, MANUFACTURING AND SALES ACTIVITIES AND THE ASSESSEE HAVING NOT PRODUCED ANY EVIDENCE SUCH AS L OG BOOK ETC. WHILE THE ENTIRE BUSINESS WAS LET OUT AS A GOING CONCERN TO L IBERTY SHOES LTD. WITH THE STIPULATION THAT THE ASSESSEE FIRM WILL NOT ENGAGE ITSELF IN THE BUSINESS (CLAUSE 4(A) OF THE AGREEMENT), THE LD. CIT(A) UPHELD THE D ISALLOWANCE . SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT PLACE BEFORE US A NY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABL E US TO TAKE A DIFFERENT VIEW IN THE MATTER, ACCORDINGLY, THE AFORESAID GROUNDS RELA TING TO DISALLOWANCE OF CAR EXPENSES AND DEPRECIATION ON CAR, ARE DISMISSED. 20. GROUND NO.4 IN THE APPEAL IN LIBERTY FOOTWEA R COMPANY FOR THE AY 2005- 06 RELATES TO THE DISALLOWANCE OF DEPRECIATION OF ` 38,946/- IN RESPECT OF CENTRAL HOUSE AND SAHARANPUR OFFICE .THE AO DISALLOWED THE DEPRECIATION, THE ASSESSEE HAVING TRANSFERRED ALL ITS ASSETS TO LIBER TY SHOES LTD. I.T.A. NOS.734 TO 743/DEL./2011 28 21. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE A O IN THE FOLLOWING TERMS:- 5.01 THE AO DISALLOWED CLAIM OF DEPRECIATION AMOUNTING TO ` ` 38,946/- OF CENTRAL HOUSE AND SAHARANPUR OFFICE. THE APPELLANT IN THE WRITTEN SUBMISSIONS RELIED ON THE SUBMISSIONS MADE FOR THE ASSESSMENT YEAR 2004-05. THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT IN THE LAST YEAR HAS BEEN PERUSED AND IT IS NOTED THAT THERE WAS NO SUCH ISSU E UNDER CONSIDERATION IN THE LAST YEAR. IN VIEW OF T HESE FACTS, NO INTERFERENCE IS CALLED FOR IN THE ORDER O F THE ASSESSING OFFICER IN THIS REGARD AND DEPRECIATION DISALLOWED BY HIM IS HEREBY CONFIRMED. 22. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPUGNED ORDER OF THE LD. CIT(A). 23. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE CLAIMED DEPRECIATION ON CENTRAL HOUSE AND SAHARANPUR OFFICE IN THE LIGHT OF THEIR SUBMISSION S FOR THE AY 2004-05. HOWEVER, IN THE PRECEDING YEAR, NO SUCH DISALLOWANCE WAS MAD E. SINCE THE ASSESSEE ITSELF IN TERMS OF THE AGREEMENT LEASED OUT ALL ITS ASSETS TO LIBERTY SHOES LTD. WHILE NO MATERIAL HAS BEEN PLACED BEFORE US IN ORDE R TO CONTROVERT THE FINDINGS OF THE LD. CIT(A) NOR ANY EVIDENCE ,REFLECTING USE OF THE AFORESAID PREMISES BY THE ASSESSEE ,SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, GROUND NO.5 IN THE APPEAL FOR THE AY 2005-06 IN CASE OF LIBERTY FOOTWEAR COMPANY IS DISMISSED. I.T.A. NOS.734 TO 743/DEL./2011 29 24. GROUND NO.4 IN THE APPEAL FOR THE AY 2006-07 I N THE CASE OF M/S LIBERTY FOOTWEAR COMPANY RELATED TO DISALLOWANCE OF LEGAL E XPENSES OF ` 3,00,844/- PAID TO M/S ANAND & ANAND, ADVOCATES, FOR RENEWAL OF REG ISTRATION OF LIBERTY BRAND. SINCE THE ASSESSEE TRANSFERRED ALL THE RIGHTS TO US E THE TRADE MARK TO LIBERTY SHOES LTD., THE AO DISALLOWED THE CLAIM. 24.1 SIMILARLY AS PER GROUND NO.4 IN THE APPEAL FO R THE AY 2007-08 IN THE CASE OF LIBERTY FOOTWEAR COMPANY, LEGAL EXPENSES OF ` 3,17,500/- PAID TO M/S ANAND & ANAND, ADVOCATES, FOR RENEWAL OF REGISTRATION OF LIBERTY BRAND WERE DISALLOWED BY THE AO 24.2 LIKEWISE IN THE CASE OF LIBERTY GROUP MARKET ING DIVISION IN THEIR APPEAL FOR THE AY 2007-08, THE AO DISALLOWED THE CLAIM OF ` 82,000/- PAID TO ANAND & ANAND FOR RENEWAL OF REGISTRATION OF LIBERTY BRAND. SIN CE THE ASSESSEE TRANSFERRED ALL THE RIGHTS TO USE THE TRADE MARK TO LIBERTY SHOES L TD., THE AO DISALLOWED THE CLAIM. 25. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWAN CE IN THE AY 2006-07 IN THE CASE OF LIBERTY FOOTWEAR COMPANY IN THE FOLLOWING TERMS 5.04 THE ISSUE IS CONSIDERED. THE APPELLANT CLAIM ED THAT THE PAYMENT OF 3,00,844/- WAS MADE TO ANAND & ANAND, ADVOCATES, NE W DELHI FOR RENEWAL OF REGISTRATION OF LIBERTY. NO EVIDENCE IN SUPPORT O F THIS CLAIM INTER ALIA, BILLS OF LAW FIRM ,M/S ANAND & ANAND, ADVOCATES, NEW DELHI AND CORRESPONDENCE ,IF ANY CARRIED OUT WITH THE COMPETENT AUTHORITY ETC. I N THIS REGARD HAS BEEN BROUGHT ON RECORD. IT IS ALSO DIFFICULT TO APPRECIATE THAT TRADEMARK/PATENT IS REQUIRED TO BE RENEWED EVERY YEAR. FURTHER CLAUSE4(F) OF THE AGREE MENT READS AS UNDER; REIMBURSEMENT OF EXPENSES: THE LFC SHALL HAVE THE RIGHT OF REIMBURSEMENT FROM THE LSL OF ALL REASONABLE EXPENSES INCURRED BY THE LFC ON BEHALF OF LSL DURING THE TER MS OF THIS AGREEMENT OF ANY RENEWAL THEREOF IN CONNECTION WITH THE MAINTENANCE OF THE T RADE MARK IN THE TERRITORY AND THE RECORDS,IF NECESSARY, OF THIS LICENSE IN THE TERRIT ORY. 5.05. AS PER CLAUE 4(F) OF THE AGREEMENT, THE EXPEN SES SHOULD HAVE BEEN REIMBURSED BY LIBERTY SHOES LTD., AS HAS ALSO BEEN NOTED BY THE AO IN THE ORDER. IN VIEW OF THESE FACTS, DISALLOWANCE MADE BY THE AO IS HEREBY CONFIRMED. I.T.A. NOS.734 TO 743/DEL./2011 30 25.1 FOLLOWING HIS AFORESAID FINDINGS, THE LD. C IT(A) UPHELD THE DISALLOWANCE IN THE AY 2007-08. 25.2 SIMILARLY IN THE APPEAL IN THE CASE OF LIBERT Y GROUP MARKETING DIVISION IN THE AY 2007-08, THE LD. CIT(A) CONCLUDED AS UNDER: 4.07 THE ISSUE IS CONSIDERED. IT IS NOTED IN THE CASE OF M/S LIBERTY FOOTWEAR THAT THE BRAND 'LIBERTY' WAS CLAIMED TO BE OWNED BY M/S LIBERTY FOOTWEAR WHO ALLOWED THE USE THEREOF FROM 1.4.2003 TO LIBERTY SH OES LIMITED IN LIEU OF FRANCHISE FEE OF 1.5% OF THE TURNOVER. IN THE CASE UNDER CONSIDERATION, IT IS, HOWEVER, CLAIMED THAT FEES OF RS.82,000/- WAS PAID TO M/S ANAND AND ANAND, ADVOCATES FOR RENEWAL OF REGISTRATION OF TRADE MARK 'LIBERTY'. IT IS DIFFICULT TO APPRECIATE THAT HOW A TRADE MARK CAN BE OWNED BY TW O FIRMS. FURTHER COPY OF RELEVANT BILLS OF THE ADVOCATE HAS NOT BEEN FILED T O ASCERTAIN THE EXACT NATURE OF SERVICES FOR WHICH FEE WAS PAID, RENDERED. IN VIEW OF THESE FACTS, THE CLAIM OF THE APPELLANT THAT FEES OF RS.82,000/- PAID TO M/S ANAN D AND ANAND, ADVOCATES WAS FOR BUSINESS PURPOSES IS NOT VERIFIABLE AND HENCE I S REJECTED. GROUND OF APPEAL NO.4 IS AS SUCH REJECTED. 26. THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 27. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. CIT(A) N O EVIDENCE IN SUPPORT OF THE AFORESAID CLAIM OR THE BILLS OF LAW FIRM ,M/S AN AND & ANAND, ADVOCATES, NEW DELHI AND CORRESPONDENCE ,IF ANY CARRIED OUT WITH THE COMPETENT AUTHORITY WAS PLACED BEFORE THE LOWER AUTHORITIES AND NOR EVEN BE FORE US. MOREOVER CLAUSE 4(F) OF THE AGREEMENT BETWEEN THE ASSESSEE ,LIBERTY FOO TWEAR COMPANY AND LIBERTY SHOES LTD. ENTITLES THE ASSESSEE TO REIMBURSEMENT O F THESE EXPENSES FROM LSL. IN THE CASE OF LIBERTY GROUP MARKETING DIVISION, TH E LD. CIT(A) OBSERVED THAT IT IS DIFFICULT TO APPRECIATE AS TO HOW A TRADE MARK CAN BE OWNED BY TWO FIRMS NOR THE ASSESSEE FURNISHED A COPY OF RELEVANT BILLS OF THE ADVOCATE IN ORDER TO ASCERTAIN THE EXACT NATURE OF SERVICES RENDERED BY THE SAID A DVOCATE. ACCORDINGLY, THE LD. CIT(A) UPHELD THE DISALLOWANCE. SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID I.T.A. NOS.734 TO 743/DEL./2011 31 NOT PLACE BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE . ACCORDINGLY, GROUND NO.4 IN THE AP PEALS IN THE CASE OF LIBERTY FOOTWEAR COMPANY FOR THE AYS 2006-07 & 2007-08 AS ALSO GROUND NO.4 IN THE APPEAL FOR THE AY 2007-08 IN THE CASE OF LIBERTY GR OUP MARKETING DIVISION ARE DISMISSED. 28. NEXT GROUND NO.3 IN THE APPEAL IN THE CASE LIB ERTY FOOTWEAR COMPANY FOR THE AY 2007-08 RELATES TO DISALLOWANCE OF PROPERTY TAX OF ` 69,995/-.THE AO DISALLOWED THE AMOUNT SINCE PROPERTY WAS USED BY LI BERTY SHOES LTD. 29. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANCE IN THE FOLLOWING TERMS THE ISSUE IS CONSIDERED. THE APPELLANT CLAIMED TO HAVE PAID PROPERTY TAX TO THE MC DELHI FOR THE BUILDINGS SITUIATED AT 4/42 & 11/51,PUNJABI BAGH, NEW DELHI.THE APPELLANT AS PER LETTER DATED 2 9.10.2010 /9.11.2010 FILED DURING APPEAL PROCEEDINGS FOR THE AY 2004-05 SUBMITTED THAT IT STOPPED MANUFACTURING & SELLING F OOTWEAR AND HIRED OUT ITS ASSETS AS COMMERCIAL ASSETS TO LIBERTY SHOE S LTD.. NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE PROPER TIES SITUATED AT 4/42 & 11/51,PUNJABI BAGH, NEW DELHI WERE NOT HIRED OUT TO M/S LIBERTY SHOES LTD., BUT USED FOR ITS BUSINESS. THE CLAIM OF THE APPELLANT CAN, THEREFOR, NOT BE ALLOWED AND HENCE DISALLOWANCE THE REOF MADE BY THE AO IS HEREBY CONFIRMED. 30. . THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 31. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. CIT(A), NO EVIDENCE WAS FILED BEFORE THE AO OR THE LD. CIT(A) THAT THE AFORESAID PROPERT IES WERE USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE.THERE IS NO MATERIA L BEFORE US THAT THE ASSESSEE I.T.A. NOS.734 TO 743/DEL./2011 32 IS OWNER OF THE SAID PROPERTIES NOR ANY SUCH CLAIM WAS MADE BEFORE US NOR APPEARS TO HAVE BEEN MADE BEFORE THE LOWER AUTHORIT IES. SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT DISPUTE THE AFORESA ID FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) NOR PLACED BEFORE US ANY MATERIAL, C ONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) OR SUGGESTING THAT PAYM ENT OF PROPERTY TAX WAS LIABILITY OF THE ASSESSEE, SO AS TO ENABLE US TO TAKE DIFFERE NT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE . ACCORDINGLY, GROUND N O.3 IN THE APPEAL IN THE CASE LIBERTY FOOTWEAR COMPANY FOR THE AY 2007-08 IS D ISMISSED. 32. GROUND NOS. 5 & 6 IN THE APPEAL IN THE CASE LIBERTY FOOTWEAR COMPANY FOR THE AY 2007-08 RELATING TO DISALLOWANCE AN AMO UNT OF ` 62,924 ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES AND ` 75,000 ON ACCOUNT OF LOSS SUFFERED ON SALE OF VEHICLES ,WERE NOT PRESSED BEFORE US BY THE LD. AR ON BEHALF OF THE ASSESSEE. ACCORDINGLY, THESE TWO GROUNDS ARE DISMIS SED. 33. NEXT GROUND NO.4 IN THE APPEAL IN THE CASE OF LIBERTY ENTERPRISES FOR THE AY 2004-05 RELATES TO DISALLOWANCE OF BONUS EXPENSES O F 1,72,951/-.THE AO DISALLOWED THE CLAIM ON THE GROUND THAT CLAUSE 6(II I) OF THE AGREEMENT PROVIDED FOR REIMBURSEMENT OF EMPLOYEE COST ,INCLUDING WAGES AND OTHER STATUTORY DUES BY LSL. 34. ON APPEAL, THE ASSESSEE,INTER ALIA, CONTENDED T HAT THE AO HIMSELF ALLOWED EXGRATIA FOR THE SAME STAFF ,HE DID NOT ALLOW BONUS . HOWEVER, THE LD. CIT(A) WHILE DETAILING THE BONUS ACCOUNT GIVEN IN PARA 3.14 OF T HE IMPUGNED ORDER, REJECTED THE CLAIM FOR DEDUCTION ON THE GROUND THAT THE AMOU NT INCLUDED ` 27,000/- ON ACCOUNT OF BONUS PAYABLE AND THUS, THE CLAIM THAT T HE AMOUNT WAS CLAIMED ON PAYMENT BASIS WAS NOT CORRECT. SINCE THE ASSESSEE D ID NOT FURNISH ANY EVIDENCE THAT THE AMOUNT WAS CLAIMED ON PAYMENT BASIS WHILE ` 24,000/- WAS CLAIMED BY SPECIFYING THE SALARY OF THE LAST YEAR, THE LD. CIT (A) UPHELD THE FINDINGS OF THE AO I.T.A. NOS.734 TO 743/DEL./2011 33 35. . THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 36. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. CIT(A), THE ASSESSEE DID NOT FURNISH ANY EVIDENCE BEFORE THE LOWER AUTHORITIES THAT THE AMOUNT WAS CLAIMED ON PAYMENT BASIS. THE LD. AR CLAIMED THAT EXGRATIA PAI D TO SAME STAFF HAD BEEN ALLOWED BY THE AO BUT NOT THE BONUS. CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THE CASE, ESPECIALLY WHEN THE AO DID NOT RECORD ANY FINDINGS AS TO WHETHER OR NOT THE AMOUNT WAS CLAIMED ON PAYMENT BASIS, WE CON SIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A ) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ALLOW ANOTHER OPPORTUNITY TO THE ASSESSEE TO ESTABLISH ITS CLAIM OF BONUS ON PAYMENT BASIS ,BRIN GING OUT CLEARLY AS TO WHETHER OR NOT THE BONUS RELATED TO EMPLOYEES OF THE ASSES SEE FOR THE YEAR UNDER CONSIDERATION AND THEREAFTER, PASS APPROPRIATE ORDE RS IN ACCORDANCE WITH LAW. WITH THESE OBSERVATIONS, GROUND NO 4 IN THE APPEA L IN THE APPEAL IN THE CASE OF LIBERTY ENTERPRISES FOR THE AY 2004-05 IS DISPOSED OF. 37. GROUND NO.5 IN THE APPEAL IN THE CASE OF LIBERT Y ENTERPRISES FOR THE AY 2004- 05 RELATES TO DISALLOWANCE OF ASSETS OF ` 18,330/- WRITTEN OFF. THE AO DISALLOWED THE CLAIM IN THE ABSENCE OF DETAILS AND REASONS FOR WRITING OFF. 38. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS O F THE AO FOR WANT OF DETAILS AND JUSTIFICATION OF WRITING OFF. SINCE ASSETS WRIT TEN OFF WERE DEPRECIABLE, REFERRING TO PROVISIONS OF SEC. 50 OF THE ACT, THE LD. CIT(A) REJECTED THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE. 39. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E MERELY REITERATED THEIR I.T.A. NOS.734 TO 743/DEL./2011 34 SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 40. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. SINCE THE ASSESSEE DID NOT FURNISH ANY DETAI LS & EVIDENCE REGARDING THE ASSETS WRITTEN OF EITHER BEFORE THE AO OR THE LD. CIT(A) AND NOR EVEN BEFORE US, IN THE ABSENCE OF ANY BASIS, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.5 IN THE APPEAL FOR THE AY 2004-05 IN LIBERTY EN TERPRISES IS DISMISSED.. 41. GROUND NO.3 IN THE APPEAL FOR THE AY 2006-07 I N LIBERTY ENTERPRISES RELATES TO DISALLOWANCE OF DEPRECIATION OF ` 3,50,152 ON BUILDING. THE AO DISALLOWED THE CLAIM OF DEPRECIATION ON ADDITION TO BUILDING IN TH E ABSENCE OF ANY EVIDENCE IN RESPECT OF USE OF BUILDING FOR THE PURPOSE OF BUSIN ESS OF THE ASSESSEE AND THE LATTER HAVING TRANSFERRED ALL ITS ASSETS TO LIBERTY SHOES LTD.. 41.1 LIKEWISE, AS PER GROUND NO.3 IN THE APPEAL F OR THE AY 2007-08 IN THE CASE OF LIBERTY ENTERPRISES , THE AO DISALLOWED THE CLAI M FOR DEPRECIATION ON ADDITIONS TO THE BUILDING, HAVING NOT BEEN USED FOR THE PURPO SE OF BUSINESS OF THE ASSESSEE. 41.2 IN GROUND NO.5 IN THE APPEAL FOR THE AY 2006-0 7 IN LIBERTY GROUP MARKETING DIVISION, THE ISSUE RELATES TO DISALLOWANCE OF DEPR ECIATION OF ` 77,084 ON ADDITIONS TO BUILDING. THE AO DISALLOWED THE CLAIM, THE BUIL DING. HAVING NOT BEEN USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 42. ON APPEAL, THE ASSESSEE LIBERTY ENTERPRISES, INTER ALI A, CONTENDED IN THE AY 2006-07 THAT BUILDING I.E. ADMINISTRATIVE BLOCK AT GHARAUNDA WAS USED BY A PUBLIC LIMITED COMPANY I.E. LIBERTY SHOES LTD..IN T HE LIGHT OF SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) UPHELD THE FINDINGS OF TH E AO IN THE FOLLOWING TERMS:- I.T.A. NOS.734 TO 743/DEL./2011 35 THE ISSUE IS CONSIDERED. THE APPELLANT CLAIMED TO H AVE CONSTRUCTED THE NEW BUILDING COSTING RS.25,58,690/ - AND FURTHER FOR RS.21,41,660/- DURING THE YEAR UNDER CONSIDERATION AND CLAIMED DEPRECIATION THEREON. THE AO DISALLOWED THE CLAIM OF DEPRECIATION ON THE ADDITIO N OF NEW BUILDING CLAIMED TO BE MADE DURING THE YEAR ON THE GROUND THAT THE SAME WAS NOT SAID TO BE USED FOR PU RPOSE OF BUSINESS OF THE APPELLANT BESIDES THE FACT OF NO INCREASE IN THE FRANCHISE FEE. IN THE WRITTEN SUBMI SSIONS THE APPELLANT REFERRED TO ITS LETTER DATED 24.3.200 8WHICH WAS FILED ON 26.3.2008. THE SAME IS PERUSED AND IT IS NOTED THAT NO JUSTIFICATION HAS BEEN GIVEN FOR CONSTRUCTING THE NEW BUILDING/ MAKING ADDITIONS TO THE EXISTING BUILDINGS. THERE IS NO SUCH CLAUSE IN THE AGREEMENT PUTTING AN OBLIGATION ON THE APPELLANT FO R CONSTRUCTING ANY NEW BUDDING FOR THE LESSEE. IN VIE W OF THESE FACTS IT IS DIFFICULT TO APPRECIATE THAT HOW CONSTRUCTION OF NEW BUILDING COULD BE SAID FOR THE PURPOSES OF BUSINESS OF THE APPELLANT AND HENCE DISALLOWANCE OF DEPRECIATION ON THAT BUILDING MADE BY THE AO IS HEREBY CONFIRMED. 42.1 FOLLOWING HIS AFORESAID ORDER, THE LD. CIT(A) UPHELD THE DISALLOWANCE OF DEPRECIATION IN THE AY 2007-08 ALSO IN LIBERTY ENTERPRISES. 42.2 I N APPEAL IN THE CASE OF LIBERTY GROUP MARKET ING DIVISION IN THE AY 2006- 07, THE LD. CIT(A),FOLLOWED HIS AFORESAID FINDINGS IN THE CASE OF LIBERTY ENTERPRISES IN THE AY 2006-07 AND UPHELD THE DISALL OWANCE. 43.. THE ASSESSES ARE NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR REITERATED THEIR SUBMISSI ONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPU GNED ORDER OF THE LD. CIT(A). 44. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY. ADMINISTRATIVE BLOCK CONSTRUCTED AT GHARAUNDA WAS USED BY A PUBLIC LIMITED COMPANY I.E. LIBERTY SHOES LTD. TO W HOM THE ASSESSEE LEASED ITS I.T.A. NOS.734 TO 743/DEL./2011 36 ASSETS. THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO IN THE AY 2006-07 IN THE CASE OF LIBERTY ENTERPRISES ON THE GROUND THAT NO J USTIFICATION WAS GIVEN FOR CONSTRUCTING THE NEW BUILDING/ MAKING ADDITIONS TO THE EXISTING BUILDINGS NOT WAS THERE ANY SUCH CLAUSE IN THE AGREEMENT PUTTING AN O BLIGATION ON THE ASSESSEE FOR CONSTRUCTING ANY NEW BUDDING FOR THE LESSEE. SINCE THE NEW BUILDING WAS NOT USED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE, THE LD. CIT(A) REJECTED THE SUBMISSIONS OF THE ASSESSEE.. SIMILAR IS THE POSITI ON IN THE AY 2007-08 IN LIBERTY ENTERPRISES AND IN THE AY 2006-07 IN THE CASE OF LI BERTY GROUP MARKETING DIVISION. SINCE THE LD. AR ON BEHALF OF THE ASSESSE E DID NOT DISPUTE THESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) NOR PL ACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CI T(A), SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE . ACCORDINGLY, .GROUND NO.3 IN THE APPEAL IN THE CASE LIBERTY ENTERPRISES FOR THE AYS 2006-07 & 2007- 08 AS ALSO GROUND NO.5 IN THE APPEAL FOR THE AY 2 006-07 IN LIBERTY GROUP MARKETING DIVISION, ARE DISMISSED. 45. GROUND NO.4 IN THE APPEAL IN THE CASE LIBERTY ENTERPRISES FOR THE AY 2006-07 RELATES TO CLAIM OF PASSENGER TAX OF ` 2,21,110/-.THE AO DISALLOWED THE CLAIM, THE ASSESSEE HAVING TRANSFERRED ITS BUSINESS ACTIVITIES TO M/S LIBERTY SHOES LTD. WHILE BUS WAS TRANSPORTING THE EMPLOYEES OF THE SAID COMPANY AND NO EXPENSES ON A/C OF DIESEL/PETROL OR DRIVERS SAL ARY HAD BEEN CLAIMED. IN NUTSHELL, THE AO CONCLUDED THAT THE LIABILITY WAS O F THE SAID COMPANY. 46. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS O F THE AO IN THE FOLLOWING TERMS: 4.02 RELEVANT EXTRACTS FROM THE WRITTEN SUBMISSI ONS FILED BY THE APPELLANT ARE AS UNDER:- THE APPELLANT ENCLOSES HEREWITH A COPY OF HIS REPL Y DT.18.3.2008 FILED IN ASSTT. PROCEEDINGS AS ALSO DE TAILS OF PASSENGER TAX PAID ACCOUNT (REF PARA 3 OF OUR LETTE R). KINDLY TREAT THE SAME AS OUR SUBMISSIONS IN THIS GROUND OF APPEAL I.T.A. NOS.734 TO 743/DEL./2011 37 WHILE APPRECIATING THE FACTS, FRANCHISE AGREEMENT A ND MOREOVER NO INTENTION OF REDUCING TAX BURDEN EXCEPT MEETING THE STATUTORY LIABILITY BEING THE OWNER OF VEHICLES 4.03 THE ISSUE IS CONSIDERED. THE PLEA OF THE APPE LLANT IS NOT TENABLE IN VIEW OF THE FACT THAT ENTIRE BUSINESS HA S BEEN LET OUT INCLUDING THE PERSONNEL AND HENCE ALL THE EXPENSES RELATING TO MANUFACTURING AND CARRYING OF BUSINESS WERE TO BE M ET BY THE LESSEE. FURTHER AS PER CLAUSE 6(I) & (III) OF THE A GREEMENT, REIMBURSEMENT OF EMPLOYEE COSTS WHICH INCLUDES WAGE S AND OTHER STATUTORY PAYMENTS WOULD BE MADE BY THE LSL. RELIANCE IS PLACED ON CLAUSE 4(4) AND 4(I) IS OF NO HELP SIN CE THE SAME DOES NOT COVER PAYMENT OF PASSENGER TAX ON THE BUSE S. IN VIEW OF THESE FACTS DISALLOWANCE OUT OF FEES AND TAXES M ADE BY THE AO IS HEREBY CONFIRMED. 47.. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR REITERATED THEIR SUBMISSI ONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPU GNED ORDER OF THE LD. CIT(A). 48 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY. THE ENTIRE BUSINESS ACTIVITIES OF T HE ASSESSEE HAVE BEEN TRANSFERRED TO M/S LIBERTY SHOES LTD. TO WHOM THE ASSESSEE LEASED ITS ASSETS, INCLUDING THE PERSONNEL AND ALL THE EXPENSES RELATI NG TO MANUFACTURING AND CARRYING OF BUSINESS ARE TO BE MET BY THE LESSEE. T HE LD. CIT(A) OBSERVED THAT AS PER CLAUSE 6(I) & (III) OF THE AGREEMENT, REIMBURSE MENT OF EMPLOYEE COSTS INCLUDED WAGES AND OTHER STATUTORY PAYMENTS BY THE LSL WHILE RELIANCE PLACED ON CLAUSE 4(4) AND 4(I) WAS OF NO HELP SINCE THE SA ME DID NOT COVER PAYMENT OF PASSENGER TAX ON THE BUSES. MOREOVER , EXPENSES ON DIESEL, PETROL OR DRIVERS SALARY WERE NOT CLAIMED BY THE ASSESSEE. SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT DISPUTE THE AFORESAID FINDINGS O F FACTS RECORDED BY THE LD. CIT(A) NOR PLACED BEFORE US ANY MATERIAL, CONTROVER TING THE AFORESAID FINDINGS OF THE LD. CIT(A), SO AS TO ENABLE US TO TAKE DIFFERE NT VIEW IN THE MATTER, WE ARE NOT I.T.A. NOS.734 TO 743/DEL./2011 38 INCLINED TO INTERFERE . ACCORDINGLY, .GROUND NO.4 IN THE APPEAL IN LIBERTY ENTERPRISES FOR THE AY 2006-07 IS DISMISSED. 49. GROUND NO.5 IN THE APPEAL IN THE CASE OF LIBE RTY ENTERPRISES FOR THE AY 2006-07 RELATES TO BUILDING REPAIRS OF ` 70,546/- . THE AO DISALLOWED THE CLAIM, THE ASSESSEE HAVING TRANSFERRED ITS BUSINESS ACTIVI TIES TO M/S LIBERTY SHOES LTD. AND THE LIABILITY WAS OF THE SAID COMPANY. 50. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO, THE ASSESSEE HAVING NOT JUSTIFIED THE CLAIM IN VIEW OF LETTING O UT OF .ITS ENTIRE BUSINESS AS A GOING CONCERN AND EXPENSES WERE NOW REQUIRED TO BE MET BY THE LESSEE. 51... THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR REITERATED THEIR SUBMISSI ONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPU GNED ORDER OF THE LD. CIT(A). 52. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY. THE ENTIRE BUSINESS ACTIVITIES OF T HE ASSESSEE HAVE BEEN TRANSFERRED TO M/S LIBERTY SHOES LTD., TO WHOM THE ASSESSEE LEASED OUT ITS ENTIRE ASSETS, INCLUDING THE BUILDING . SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NO T DISPUTE THE AFORESAID FINDINGS OF FACTS RECORDED B Y THE LD. CIT(A) NOR PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAI D FINDINGS OF THE LD. CIT(A), SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTE R, WE ARE NOT INCLINED TO INTERFERE . ACCORDINGLY, .GROUND NO.5 IN THE APPEA L IN LIBERTY ENTERPRISES FOR THE AY 2006-07, IS DISMISSED. 53. GROUND NO. 6 IN THE APPEAL IN LIBERTY ENTERPRIS ES FOR THE AY 2006-07 RELATES TO LOSS OF ` 3331/- IN RESPECT OF TRANSFER OF DUTY ENTITLEMENT. THE AO DISALLOWED THE CLAIM, LIABILITY BEING NOT OF THE YE AR UNDER CONSIDERATION. I.T.A. NOS.734 TO 743/DEL./2011 39 54. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWAN CE, THE ASSESSEE HAVING NOT REBUTTED THE FINDINGS OF THE AO THAT THE LIABILITY DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. 55... THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR REITERATED THEIR SUBMISSI ONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPU GNED ORDER OF THE LD. CIT(A). 56..WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY. THE ASSESSEE DID NOT REBUT THE FIND INGS OF THE AO THAT THE LIABILITY DID NOT RELATE TO THE YEAR UNDER CONSIDERATION BEF ORE THE LD. CIT(A) AND NOR EVEN BEFORE US. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT PLACE BEFORE US ANY MATERIAL, CO NTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A), SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE . ACCORDINGLY, .GR OUND NO.6 IN THE APPEAL IN LIBERTY ENTERPRISES FOR THE AY 2006-07, IS DISM ISSED. 57. GROUND NO.4 IN THE APPEAL IN THE CASE OF LIBERT Y ENTERPRISES FOR THE AY 2007- 08 RELATES TO DISALLOWANCE OF LEGAL EXPENSES. THE AO DISALLOWED THE CLAIM, IN THE ABSENCE OF ANY JUSTIFICATION FOR PAYMENT OF ` 55,000/- TO SHRI RAJIV DUTTA, ` 1,57,400 TO SWAROOP & ASSOCIATES & ` 42,246/- TO AL BAHRI. 58. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS O F THE AO AS UNDER: 12.04 THE AO. ALLOWED THE FEES PAID TO ADVOCATES O N ACCOUNT OF SALES TAX, INCOME TAX, LABOUR AND TO INTELLECTUA L LAW OFFICE BUT DISALLOWED THE FEES PAID FOR ARBITRATIONAL CASE S, VIZ, RS.55,000/- TO SH. RAJIV DUTTA, RS.1,57,400/- TO SW AROOP & ASSOCIATES AND RS.42,246/- TO SH. A.L. BAHRI, FOR W ANT OF ANY JUSTIFICATION THEREOF. IN THE WRITTEN SUBMISSIONS, APPELLANT SUBMITTED THAT LEGAL CHARGES WAS PAID AGAINST CHALL ENGING PERFORMANCE OF THE BUSINESS AGREEMENT IN THE COURT. NO I.T.A. NOS.734 TO 743/DEL./2011 40 DOCUMENTS/ EVIDENCE IN SUPPORT OF THIS CLAIM WAS, H OWEVER, FILED TO VERIFY THE ALLOWABILITY OF THESE EXPENSES. THE DISALLOWANCE OUT OF LEGAL & PROFESSIONAL CHARGES MA DE BY THE AO. IS, THEREFORE, CONFIRMED. 59... THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPUGNED ORDER OF THE LD. CIT(A). 60. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE ASSESSE E DID NOT ADDUCE ANY JUSTIFICATION FOR THESE EXPENSES BEFORE THE AO WHIL E BEFORE THE LD. CIT(A) IT WAS CLAIMED THAT LEGAL CHARGES WERE PAID AGAINST CHALLE NGING PERFORMANCE OF THE BUSINESS AGREEMENT IN THE COURT. HOWEVER, NO DOC UMENTS/EVIDENCE IN SUPPORT OF THIS CLAIM WERE PLACED BEFORE THE LD. CIT(A). TH E SITUATION IS NO BETTER BEFORE US. THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT REFER US TO ANY SUCH DOCUMENT, EVIDENCING THAT SERVICES WERE RENDERED BY THE AFORESAID THREE PERSONS IN RELATION TO PERFORMANCE OF THE BUSINESS AGREEMENT NOR AS TO HOW THIS AGREEMENT RELATES TO THE ASSESSEE. IN THESE CIRCUMS TANCES, ESPECIALLY WHEN THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT PLACE BE FORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CI T(A), SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE . ACCORDINGLY, .GROUND NO.4 IN THE APPEAL IN LIBERTY ENTERPRISES FOR THE AY 2007-08 IS DISMISSED. 61. NEXT GROUND NO.5 IN THE APPEAL IN THE CASE OF LIBERTY GROUP MARKETING DIVISION FOR THE AY 2004-05 RELATES TO AN AMOUNT O F ` 34,740 ON ACCOUNT OF UNREALIZED SECURITIES WRITTEN OFF. THE AO DISALLOWE D THE CLAIM IN THE ABSENCE OF ANY DETAILS. I.T.A. NOS.734 TO 743/DEL./2011 41 62. ON APPEAL, THE ASSESSEE SUBMITTED MERELY A COPY OF ACCOUNT OF UNREALIZED SECURITY WRITTEN OFF ,WITHOUT EVEN ADDUCING ANY REA SON OR DETAILS FOR SUCH WRITING OFF. IN THESE CIRCUMSTANCES, THE LD. CIT(A) UPHELD THE DISALLOWANCE. 63... THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSE E MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPUGNED ORDER OF THE LD. CIT(A). 64. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE ASSE SSEE DID NOT ADDUCE ANY JUSTIFICATION FOR WRITING OFF THE AMOUNT EITHER BE FORE THE AO OR THE LD. CIT(A). NO MATERIAL HAS EVEN BEEN PLACED BEFORE US NOR THE LD . AR ON BEHALF OF THE ASSESSEE EXPLAINED THE REASONS FOR WRITING OFF THE AMOUNT . IN THE ABSENCE OF ANY BASIS , WE ARE NOT INCLINED TO INTERFERE . ACCORDI NGLY, .GROUND NO.5 IN THE APPEAL IN LIBERTY GROUP MARKETING DIVISION FOR THE AY 200 4-05, IS DISMISSED. 65. GROUND NO.6 IN THE APPEAL IN LIBERTY GROUP MA RKETING DIVISION FOR THE AY 2006-07 RELATES TO DISALLOWANCE OF DEPRECIATION ON FURNITURE AND FIXTURE. THE AO DISALLOWED THE CLAIM FOR DEPRECIATION ON ADDITIO NS TO FURNITURE AND FIXTURE AMOUNTING TO ` 7,10,783/- SUPPLIED BY THE ASSESSEE TO LIBERTY SHOE S LTD. ON THE GROUND THAT FURNITURE AND FIXTURE WAS NOT USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 66. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO AS UNDER: 3.18 RELEVANT EXTRACTS FROM THE WRITTEN SUBMISSIO NS FILED BY THE APPELLANT DURING APPEAL PROCEEDINGS ARE EXTRACT ED BELOW:- 'THAT NO REASON WITH AO TO DISALLOW CLAIM OF DEPRECIATION ON ADDITION TO FIXED ASSETS AND THE SA ME BEING UNDER, USED BY FOR BUSINESS OF LIBERTY SHOES LIMITED. ' I.T.A. NOS.734 TO 743/DEL./2011 42 3.19. THE FACTS ARE SAME AS WAS IN THE CASE OF ADDI TION TO BUILDING AND HENCE FOLLOWING THE SAME, DISALLOWANCE OF DEPRECIATION ON THE ADDITION TO FURNITURE MADE BY T HE AO IS HEREBY CONFIRMED 67.. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR MERELY REITERATED THEIR S UBMISSIONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPUGNED ORDER OF THE LD. CIT(A). 68.. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY, THE FURNITURE AND FIXTURE PURCHASED B Y THE ASSESSEE WAS USED BY LIBERTY SHOES LTD. AND NOT FOR THE BUSINESS PURPOSE S OF THE ASSESSEE. SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT DISPUTE T HESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) NOR PLACED BEFORE US ANY MATERIAL , CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A), SO AS TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.6 IN THE APPEAL IN THE CASE OF LIBERTY GROUP MARKETING DIVISION FOR THE AY 200 6-07 IS DISMISSED 69. NEXT GROUND NO. 5 IN THE APPEAL IN THE CASE O F LIBERTY GROUP MARKETING DIVISION FOR THE AY 2007-08 RELATES TO DISALLOWANC E OF ` 4,22,025 ON ACCOUNT OF ESTABLISHMENT EXPENSES. THE AO DISALLOWED THE ESTAB LISHMENT EXPENSES OF ` 4,22,025 OUT OF ` 1,53,11,599; REMAINING AMOUNT OF ` 1,48,89,517 HAVING BEEN CLAIMED FROM LIBERTY SHOES LTD., IN THE ABSENCE OF ANY JUSTIFICATION. 70. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO, AS UNDER: 4.10 RELEVANT EXTRACTS FROM THE WRITTEN SUBM ISSIONS OF THE APPELLANT ARE EXTRACTED BELOW: THE ESTABLISHMENT STAFF IS BEING MAINTAINED & SER VING FOR LAST MANY YEARS. NEVER IN PAST ANY DISALLOWANCE WAS MADE. A CHART IS BEING ATTACHED FOR PAST HISTORY ALONG WITH THE DETAIL OF THEIR SALARIES FOR THE YEAR UNDER APPEAL. THE APPELLANT COULDN'T DISPUTED WITH THE SERVICES OF TH IS MINIMUM STAFF KEPT WITH I.T.A. NOS.734 TO 743/DEL./2011 43 THE APPELLANT ON THESE SERVICES ARE ESSENTIALLY REQ UIRED BY THE APPELLANT. FURTHER IT IS NO BODY'S CASE THAT THIS EXPENSES ARE BORNE BY APPELLANT TO REDUCE INCIDENCE OF TAXATION BECAUSE M/ S. LIBERTY SHOES LTD. (A PUBLIC LTD.) IS BEING ASSESSED IN HIGHEST BRACKET OF TAX. THE AS SESSEE FIRM AS ALSO THE GROUP HAS TO ADHERE TO NORMS OF ACCOUNTANCY, TAX LA WS AND ALSO THE RESPECTIVE RESPONSIBILITIES. THE DISALLOWANCE MADE IS ABSOLUTELY OUT OF MARK AND UNCALLED FOR. 4.11 THE ISSUE IS CONSIDERED. THE APPELLANT ENCLO SED A COPY OF PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDING ON 31.03.2007. ON EXA MINATION THEREOF, IT IS NOTED THAT THE AMOUNT OF RS.4,36,943/- HAS BEEN DEB ITED BY SPECIFYING 'IDLE WORKER SALARY'. IT IS DIFFICULT TO APPRECIATE THAT HOW THE SALARY PAID TO IDLE WORKERS CAN BE SAID FOR PURPOSES OF BUSINESS. HOWEV ER, TAKING IN VIEW THE SUBMISSIONS OF THE APPELLANT THAT SALARY TO THE STA FF WAS PAID FOR LOOKING AFTER INCOME TAX, SALES TAX MATTERS, & OF ACCOUNTS, 50% OF THE ESTABLISHMENT EXPENSES IS ALLOWED. 71. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR MERELY REITERATED THEIR S UBMISSIONS BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR SUPPORTED THE FINDINGS IN THE IMPUGNED ORDER OF THE LD. CIT(A). 72. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE DISALLOWANCE OF SALARY HAS NEVER BEEN MADE IN THE PRECEDING YEARS NOR THE GENUINENESS OF AMOUNT HAS BEEN DOUBTE D . THE AO DISALLOWED THE CLAIM FOR WANT OF JUSTIFICATION WHILE THE LD. CIT(A ) REDUCED THE DISALLOWANCE BY 50%. THERE IS NO APPARENT BASIS FOR RESTRICTING THE DISALLOWANCE TO 50%, ESPECIALLY WHEN THE LD. CIT(A) DID NOT DISPUTE THE SUBMISSIONS OF THE ASSESSEE THAT SERVICES OF THE MINIMUM STAFF KEPT WITH ASSESS EE WERE ESSENTIAL. IN THE ABSENCE OF ANY COGENT BASIS FOR RESTRICTING THE DIS ALLOWANCE TO 50%, WE REVERSE THE FINDINGS OF THE LD. CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. THEREFORE, GROUND NO.5 IN THE APPEAL IN THE CASE OF LIBERTY G ROUP MARKETING DIVISION FOR THE AY 2007-08 IS ALLOWED. I.T.A. NOS.734 TO 743/DEL./2011 44 73. GROUND NO.1 IN ALL THESE APPEALS BEING GENER AL IN NATURE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US BY THE LD. A R ON THESE GROUNDS, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFOR E, DISMISSED. 74. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 75. IN THE RESULT, ALL THE AFORESAID APPEALS OF THE ASSESSEE ARE DISMISSED EXCEPT IN THE CASE OF LIBERTY ENTERPRISES FOR THE A Y 2004-05 ,WHICH IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHILE APPEAL FOR T HE AY 2007-08 IN THE CASE OF LIBERTY GROUP MARKETING DIVISION, IS PARTLY ALLOWE D. SD/- SD/- (RAJPAL. YADAV) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. ACIT KARNAL 3. CIT CONCERNED 4. CIT (A)- KARNAL 5. DR, ITAT,D BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT