Asst. CIT, Circle-7, Pune V. Pirangut Srings Ltd., Pune

ITA 741/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1454 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Related party transaction; Depreciation; Transfer pricing; Business expenditure; Question of law; Fair market value; Revenue expenditure; Capital expenditure
• Section: 37(1); 37; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 741/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE ....... / APPELLANT ' / V/S. PIRANGUT SPRINGS LTD., SR. NO. 1072, POST PIRANGUT, TAL-MULSHI, DISTT.-PUNE PAN : AAACT9025D / RESPONDENT *+& / CO NO. 15/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2007-08 MUBEA SUSPENSION INDIA LIMITED, (FORMERLY KNOWN AS PIRANGUT SPRINGS LIMITED) S. NO. 1072, POST-PIRANGUT, TAL.-MULSHI, PUNE 412111 PAN : AAACT9025D ....... / APPELLANT ' / V/S. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT 2 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 / ITA NOS. 1884 & 1885/PN/2013 %' ( ')( / ASSESSMENT YEARS : 2008-09 & 2009-10 DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE ....... / APPELLANT ' / V/S. MUBEA SUSPENSION (INDIA) LTD., (FORMERLY KNOWN AS TC SPRINGS LTD.), S. NO. 1072, POST-PIRANGUT, TAL.-MULSHI, PUNE 411121 PAN : AAACT9025D / RESPONDENT / ITA NO. 1828/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2008-09 MUBEA SUSPENSION INDIA LIMITED, S. NO. 1072, POST-PIRANGUT, TAL.-MULSHI, PUNE - 412111 PAN : AAACT9025D ....... / APPELLANT ' / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT 3 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 / ITA NO. 1829/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2009-10 MUBEA SUSPENSION INDIA LIMITED, S. NO. 1072, POST-PIRANGUT, TAL.-MULSHI, PUNE - 412111 PAN : AAACT9025D ....... / APPELLANT ' / V/S. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT ASSESSEE BY : SHRI VIPUL JOSHI REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 05-07-2016 / DATE OF PRONOUNCEMENT : 29-07-2016 , / ORDER PER VIKAS AWASTHY, JM : THESE SIX APPEALS HAVE BEEN FILED BY THE ASSESSEE AND T HE REVENUE FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-1 0. ITA NO. 741/PN/2013 HAS BEEN FILED BY THE REVENUE AGAINS T THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE D ATED 30-09-2011 FOR THE ASSESSMENT YEAR 2007-08. THE ASSE SSEE HAS FILED CROSS OBJECTIONS IN CO NO. 15/PN/2014 AGAINST THE SAME ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 4 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 THE ASSESSEE HAS FILED APPEAL IN ITA NO. 1828/PN/2013 AS SAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUN E DATED 20-01-2012 FOR THE ASSESSMENT YEAR 2008-09. THE REVE NUE HAS FILED CROSS APPEAL AGAINST THE SAME ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO. 1884/PN/2013. THE ASSESSEE HAS FILED APPEAL IN ITA NO. 1829/PN/2013 AG AINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUN E DATED 12-12-2012 FOR THE ASSESSMENT YEAR 2009-10. THE DEPA RTMENT HAS FILED CROSS APPEAL AGAINST THE SAID ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO. 1885/PN/2013. SINCE, THE ISSUES RAISED IN ALL THE AFORESAID APPEALS ARE SIM ILAR AND ARE ARISING FROM SAME SET OF FACTS, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE BEING DISPOSED OFF BY TH IS COMMON ORDER. 2. BEFORE WE PROCEED TO DECIDE THE APPEALS IT WOULD BE RELEVANT TO MENTION HERE THAT THE ASSESSEE COMPANY HAS CHANGED IT S NAME SEVERAL TIMES. THEREFORE, IN THE CAUSE TITLE DIFFERENT NAMES OF THE ASSESSEE COMPANY ARE MENTIONED FOR DIFFERENT ASSESSMENT YEARS. FO R THE SAKE OF CONVENIENCE, THE DETAILED HISTORY OF THE CHANGE OF NAME OF ASSESSEE COMPANY IS BRIEFLY NOTED HERE-IN-UNDER : THE ASSESSEE C OMPANY WAS ORIGINALLY INCORPORATED WITH THE NAME T C SPRINGS PRIVATE LIMITED ON 09-03-1999. THE NAME OF COMPANY WAS CHANGED TO T C SPRINGS L TD. ON 20-07-1999. THEREAFTER, THE NAME OF THE ASSESSEE COMPA NY WAS CHANGED TO PIRANGUT SPRINGS LTD. ON 22-10-2009, MUBEA S USPENSION INDIA LIMITED ON 24-03-2010, MUBEA SUSPENSION INDIA PRIVA TE LIMITED ON 19-09-2014 AND NOW THE NAME OF THE ASSESSEE COMPA NY IS MUBEA 5 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 AUTOMOTIVE COMPONENTS INDIA PVT. LIMITED SINCE 15-01-201 6. THE ASSESSEE HAS PLACED ON RECORD CERTIFICATE OF INCORPORATION UPON CHANGE OF NAME ISSUED BY THE REGISTRAR OF COMPANIES, PUNE FROM TIME TO TIME. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTU RE AND SALE OF AUTOMOTIVE COMPONENTS, VIZ. SUSPENSION PRODUCTS, VIZ. CO IL SPRINGS, TORSION BARS, STABILIZER BARS, ETC. THE ASSESSEE COMPAN Y IS A JOINT VENTURE BETWEEN CHUO SPRING COMPANY LTD., JAPAN, AND T ATA AUTOCOMP SYSTEMS LTD. (HEREINAFTER REFERRED TO AS THE TACO) WITH EQUAL SHARES. THE ASSESSEE ENTERED INTO ADMINISTRATIVE S UPPORT AGREEMENT WITH TACO ON 14-10-1999, FOR AVAILING VARIOUS S ERVICES IN THE START UP AND OPERATING PHASE. THE TACO CHARGED 0 .5% OF TURNOVER PLUS REIMBURSEMENT OF ACTUAL EXPENSES FOR RENDERING ADMIN ISTRATIVE SERVICES TO THE ASSESSEE. THE CHARGES WERE WITHOUT AN Y MARK UP THEREON. ON THE PAYMENTS OF AFORESAID ADMINISTRATIVE CHAR GES THE ASSESSEE DEDUCTED TAX AT SOURCE. DURING THE COURSE O F SCRUTINY ASSESSMENT PROCEEDINGS FOR THE IMPUGNED ASSESSMENT YEA RS, THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE TOWARDS THE ADMINISTRATIVE CHARGES PAID TO TACO ON THE GROUND THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE SERVICES AVAILED FROM TACO. TH E ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE U/S. 40A(2)(A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE ADMINISTRATIVE CHARGES DISALLOWED BY THE ASSESSING OFFICER IN THE THREE AS SESSMENT YEARS UNDER APPEAL ARE : SR. NO. ASSESSMENT YEAR DISALLOWED BY AO 1 2007 - 08 ` 23,86,346/ - 2 2008 - 09 ` 79,11,715/ - 3 2009 - 10 ` 96,53,402/ - 6 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 3.1 THE ASSESSING OFFICER FURTHER MADE DISALLOWANCE OF EXPEND ITURE INCURRED BY THE ASSESSEE TOWARDS TOOLS AND JIGS. THE A SSESSEE HAD DEBITED EXPENDITURE IN THE TRADING AND P & L A/C. TOWARD S TOOLS AND JIGS. THE ASSESSING OFFICER DISALLOWED THE SAME BY TREATING THE EXPENDITURE AS CAPITAL IN NATURE. THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS TOOLS AND JIGS IN THE ASSESSMENT YEAR UNDER APPEAL ARE AS UNDER : SR. NO. ASSESSMENT YEAR EXPENDITURE CLAIMED 1 2007 - 08 ` 50,88,467/ - 2 2008 - 09 ` 33,34,000/ - THE ASSESSING OFFICER ALLOWED DEPRECIATION ON THE AFORESAID EXPENDITURE @25% AND DISALLOWED THE REMAINING AMOUNT. AGGRIEVED BY THE ASSESSMENT ORDERS FOR THE RESPECTIVE ASSESSMENT YEARS, THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER PARTLY ACCEPTED THE APPEAL OF THE ASSES SEE WITH RESPECT TO DISALLOWANCE OF CHARGES PAID TO TACO. THE COMMISSIONER OF INCOME TAX (APPEALS) INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF T HE ACT AND RESTRICTED THE PAYMENTS MADE TO TACO TO 25% OF THE TO TAL EXPENDITURE CLAIMED BY THE ASSESSEE. IN RESPECT OF EXPENDITURE TOW ARDS TOOLS AND JIGS THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWED THE D ECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2003-04 AND 2004-05 AND ACCEPTED THE CLAIM OF THE ASSE SSEE IN TREATING THE EXPENDITURE TOWARDS TOOLS AND JIGS AS REVENUE IN NA TURE. IN THE ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER FUR THER MADE DISALLOWANCE OF ` 11,46,831/- ON ACCOUNT OF PROVISION FOR LEAVE 7 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 ENCASHMENT. IN RESPECT OF DISALLOWANCE TOWARDS PROVISION FOR LEAVE ENCASHMENT THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER. AGAINST THE FINDINGS OF COMMISSIONE R OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL AND THE A SSESSEE HAS FILED CROSS OBJECTIONS. 4. SHRI VIPUL JOSHI APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED AT THE OUTSET THAT THE GROUND NO. 1 RAISED IN THE APPEAL B Y THE DEPARTMENT IS SQUARELY COVERED BY THE DECISION OF CO-OR DINATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF TATA JOHNSON CONT ROLS AUTOMOTIVE LIMITED VS. THE DY. COMMISSIONER OF INCOME TAX IN ITA NO. 1450/PN/2011 FOR ASSESSMENT YEAR 2006-07 DECIDED ON 0 9-12-2015 AND IN THE CASE OF TATA TOYO RADIATOR PVT. LTD. VS. THE DY. COMMISSIONER OF INCOME TAX IN ITA NO. 1034/PN/2013 FOR AS SESSMENT YEAR 2006-07 DECIDED ON 18-03-2016. THE LD. AR FURTHER SUBMITTED THAT THE GROUND NO. 2 RAISED BY THE DEPARTMENT IN GROU NDS OF APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE T RIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 67 & 68/PN/2010 FOR AS SESSMENT YEARS 2003-04 AND 2004-05 DECIDED ON 13-05-2011. THE LD. AR CONTENDED THAT THE ORDER OF TRIBUNAL IN THE AFORESAID APP EALS WAS UPHELD BY THE HON'BLE BOMBAY HIGH COURT IN THE APPEALS FILE D BY THE DEPARTMENT AGAINST THE ORDER OF TRIBUNAL. THE LD. AR PLACE D ON RECORD A COPY OF THE ORDER OF HON'BLE JURISDICTIONAL HIGH COURT IN INCOME TAX APPEAL NO. 2484 OF 2011 DECIDED ON 22-04-2014 AND INCOM E TAX APPEAL NO. 2436 OF 2011 DECIDED ON 30-04-2014 CONFIRMING T HE ORDER OF TRIBUNAL IN TREATING THE EXPENDITURE TOWARDS TOOLS AND JIGS AS REVENUE EXPENDITURE. THE LD. AR SUBMITTED THAT IN CROSS OBJECTIONS THE GROUND NOS. 1 AND 2 ARE CORRESPONDING TO THE GROU ND NOS. 1 AND 2, 8 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 RESPECTIVELY RAISED IN THE APPEALS BY THE DEPARTMENT. THE GROU ND NO. 3 IN CROSS OBJECTIONS RELATES TO DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT ` 11,46,831/-. THE LD. AR STATED AT THE BAR THAT HE IS NOT PRESSING GROUND NO. 3 RAISED IN THE CROSS OBJECTIONS. 5. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE ORDER OF ASSESSIN G OFFICER IN DISALLOWING ADMINISTRATIVE CHARGES PAID TO TACO AND TREATING THE EXPENDITURE ON TOOLS AND JIGS AS CAPITAL EXPENDITURE. HO WEVER, WHEN CONFRONTED WITH THE DECISION OF CO-ORDINATE BENCH OF THE T RIBUNAL AND THE ORDER OF HON'BLE BOMBAY HIGH COURT, THE LD. DR FAIRLY ADMITTED THAT THE GROUND NO. 2 HAS ALREADY BEEN ADJUDICATED IN ASSESS EES OWN CASE IN THE EARLIER ASSESSMENT YEAR BY THE TRIBUNAL AND SAME HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT. 6. FOR THE SAKE OF CONVENIENCE WE ARE ADJUDICATING THES E APPEALS FOR THE RESPECTIVE ASSESSMENT YEARS IN SERIATIM. SINCE, IDENT ICAL GROUNDS HAVE BEEN RAISED BY THE DEPARTMENT IN ALL THE THREE ASS ESSMENT YEARS UNDER APPEAL, THE FINDINGS GIVEN BY US IN ASSESSMENT YEAR 2007-08 WOULD MUTATIS MUTANDIS APPLY TO THE ASSESSMENT YEARS 2 008-09 AND 2009-10. ITA NO. 741/PN/2013 & CO NO. 15/PN/2014 (A.Y. 2007-0 8) 7. THE GROUNDS RAISED BY THE DEPARTMENT IN ITS APPEAL FOR ASSESSMENT YEAR 2007-08 ARE AS UNDER : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS EARNED IN ALLOWING RELIEF THE ASSESSEE AS GROUND OF DISALLOWANCES OF ADMINISTRATIVE SERVICE CHARGES PAID TO TACO AMOUNTI NG TO ` 23,86,346/-. 9 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS EARNED IN ALLOWING RELIEF THE ASSESSEE ON GROUND OF DISALLOWANCES OF EXPENSES ON TOOLS AND JIGS OF ` 50,88,467/-. 8. THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECT IONS FOR ASSESSMENT YEAR 2007-08 ARE AS UNDER : 1. DISALLOWANCE OF ADMINISTRATIVE SUPPORT CHARGES PAI D TO TATA AUTOCOMP SYSTEMS LIMITED (TACO) - RS.17,89,759/- 1.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ADMINISTRATIVE SUPPORT CHARGES OF RS.17,89,759/- ( BEING 75% OF TO TAL CHARGES OF RS.23,86,346/-) PAID BY THE APPELLANT FOR SERVICES RENDERED BY TATA AUTOCOMP SYSTEMS LIMITED (TACO') IS EXCESSIVE IN NA TURE AND HENCE NOT ALLOWABLE AS DEDUCTION UNDER SECTION 40A(2)(B) OF THE ACT. 1.2 THE LEARNED CIT (A) ERRED IN NOT APPRECIATIN G THE FACT THAT THE AMOUNT PAID TO TACO WAS TOWARDS THE SERVICES RECEIVED BY T HE APPELLANT ON WHICH APPROPRIATE TAX HAVE BEEN DEDUCTED AT SOURCE AND THEREFORE OUGHT TO BE ALLOWED. 1.3 THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE EXPENSES INCURRED BY THE APPELLANT IS REVENUE NEUTR AL AND NO TAX ARBITRAGE IS SOUGHT TO BE ENJOYED BY EITHER PARTIES TO THE AGREEMENT AND THEREFORE NO DISALLOWANCE OUGHT TO BE MADE U/S 40A(2)(B) OF THE ACT. 2. EXPENDITURE ON TOOLS AND JIGS OF RS 50,88,467/- 2.1 THE EXPENDITURE ON TOOL AND JIGS, IF ITS HELD BY YOUR HONOURS TO BE IN THE NATURE OF CAPITAL EXPENDITURE, DEPRECIATION AS PER PROVISIONS OF THE ACT READ WITH THE INCOME-TAX RULES 1962 OUGHT T O BE ALLOWED. 2. DISALLOWANCE OF PROVISION OF LEAVE ENCASHMENT OF RS .11,46,831/- 3.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT PROVISION FOR LEAVE ENCASHMENT OF RS.11,46,831/- IS NOT ALLOWABLE AS DE DUCTION UNDER SECTION 43B(F) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, AM END AND / OR RESCIND ANY OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF 10 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 HEARING OF THE APPEAL. THE APPELLANT ALSO CRAVES TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDER ED NECESSARY AS PER LAW AT ANY TIME BEFORE OR AT THE TIME OF HEARIN G OF THE APPEAL. 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF T HE ASSESSEE HAS PLACED RELIANCE. THE GROUND NO. 1 RAISED IN THE APP EAL BY THE DEPARTMENT AND GROUND NO. 1 IN THE CROSS OBJECTIONS OF THE ASSESSE E IS AGAINST THE DISALLOWANCE OF ADMINISTRATIVE CHARGES PAID TO TACO. WE FIND THAT IDENTICAL ISSUE WAS RAISED IN THE CASE OF TATA J OHNSON CONTROLS AUTOMOTIVE LIMITED VS. THE DY. COMMISSIONER OF INC OME TAX (SUPRA). THE GROUND BEFORE THE TRIBUNAL FOR ADJUDICATION IN THE AFORESAID APPEAL WAS : 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF ADMINISTRATIVE SERVICE CHARGES PAID TO TATA AUTOCOM P SYSTEMS LTD. ('TACO') TO THE EXTENT OF RS.1,50,63,122 OUT O F RS.2,00,84,162 UNDER SECTION 40(A)(2)(B) OF THE INC OME-TAX ACT ON THE GROUNDS THAT THE SAME IS EXCESSIVE AND UNREASON ABLE HAVING REGARD TO SERVICES RENDERED BY TACO AND THE LEGITIM ATE BUSINESS NEEDS OF THE APPELLANT. 10. THE CO-ORDINATE BENCH DECIDED HE ISSUE IN FAVOUR OF T HE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO ALLOW THE ENTIRE EXPE NDITURE. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ON THIS ISSUE ARE AS UNDER : 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. IN THE FACTS OF THE PRESENT CASE AS REFERRED TO BY US IN THE PARAS HEREINABOVE, THE ASSESSEE WAS A JOINT VENTURE COMPA NY WITH 50:50 SHARE BETWEEN TACO AND JOHNSON CONTROL INC. AFTER FORMATION OF JOINT VENTURE COMPANY, IT WAS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES ON ACCOUNT OF AUTOMOBILE SECTOR I.E. SEATING SYSTEM S FOR MOTOR CARS. EQUAL CONTROL WAS BETWEEN TWO I.E. TACO AND JOHNSON CONTROL INC. AN AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE AND TACO FOR 11 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 PROVIDING ADMINISTRATIVE SERVICES BOTH ON ACCOUNT O F START-UP PHASE AND OPERATING PHASE. THE SAID AGREEMENT WAS IN PLACE F OR THE PAST SEVERAL YEARS AND AS PER THE TERMS AND CONDITIONS OF THE AG REEMENT, THE ASSESSEE WAS TO PAY REMUNERATION TO TACO @ 1% OF TU RNOVER IN ADDITION TO REIMBURSING ALL THE EXTERNAL COSTS INCURRED BY T ACO, IF ANY. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PA ID SUM OF RS.2,00,84,162/- TO TACO AND THE QUESTION OF ITS DE DUCTIBILITY HAS ARISEN BY WAY OF PRESENT GROUNDS OF APPEAL RAISED. THE AS SESSING OFFICER WAS OF THE VIEW THAT SINCE TACO WAS A RELATED PARTY, IN VIEW OF THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT, THE SAI D EXPENDITURE HAS TO BE LOOKED INTO ACCORDINGLY. THE ASSESSEE FURNISHED CE RTAIN INFORMATION BEFORE THE ASSESSING OFFICER. HOWEVER, THE ASSESSI NG OFFICER WAS OF THE VIEW THAT THERE WAS NO JUSTIFICATION IN THE CLAIM O F ASSESSEE SINCE THE ASSESSEE HAD ESTABLISHED ITS ADMINISTRATIVE SET UP AND WAS ALSO INCURRING EXPENDITURE ON PROFESSIONAL SERVICES AND OTHER EXPENSES AND THERE WAS NO MERIT IN THE CLAIM OF ASSESSEE VIS--V IS SAID EXPENDITURE BEING PAID TO TACO. THE CIT(A) ALSO REFERRED TO TH E PROVISIONS OF SECTION 40A(2)(A) OF THE ACT AND AFTER CONSIDERING THE VARI OUS EVIDENCES FILED BY THE ASSESSEE, WAS OF THE VIEW THAT CERTAIN SERVICES HAVE BEEN RENDERED BY TACO AND HE WAS OF THE VIEW THAT ONLY 25% OF THE EXPENDITURE HAS TO BE ALLOWED IN THE HANDS OF ASSESSEE. BOTH THE ASSE SSEE AND THE REVENUE ARE IN APPEAL AGAINST THE SAID ORDER OF CIT (A). 24. THE FIRST ISSUE TO BE ADDRESSED IN THIS REGARD IS WHETHER IN ORDER TO JUDGE COMMERCIAL EXIGENCY OF THE AGREEMENT AND T HE QUANTUM OF REMUNERATION PAID IN VIEW OF THE TERMS OF AGREEMENT ENTERED INTO BETWEEN TWO PARTIES, CAN THE REASONABLENESS OF EXPE NDITURE BE VIEWED BY THE AUTHORITIES OR REASONABLENESS HAS TO BE ESTA BLISHED FROM THE VIEW POINT OF BUSINESSMAN. THE FIRST ASPECT IN THIS REG ARD IS THAT WHERE THERE IS A JOINT VENTURE BETWEEN TWO CONCERNS TO THE EXTE NT OF 50:50 AND ADDITIONAL REMUNERATION IS BEING PAID BY JOINT VENT URE COMPANY FORMULATED BY THEM TO ONE OF THE CONCERNS, THEN THE ISSUE HAS TO BE SEEN FROM THE VIEW POINT OF OTHER CONCERN WHO IS PART OF JOINT VENTURE AND IS INCURRING 50% COST OF THE SAID REMUNERATION PAID. THERE IS A COMMERCIAL AGREEMENT BETWEEN THE ASSESSEE AND TACO, UNDER WHIC H CERTAIN SERVICES HAD TO BE PROVIDED BY TACO, FOR WHICH REMU NERATION WAS DUE TO THEM. THE LIST OF SERVICES ARE ENLISTED IN THE AGR EEMENT AND UNDOUBTEDLY, THE SAID AGREEMENT HAS BEEN IN FORCE F OR MORE THAN 7 YEARS AND THE AMOUNTS HAVE BEEN PAID AND ALLOWED AS EXPEN DITURE IN THE HANDS OF ASSESSEE FROM YEAR TO YEAR. IN THE ENTIRE TY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE OR DER OF ASSESSING 12 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 OFFICER IN HOLDING THAT THE ENTIRE EXPENDITURE MERI TS TO BE DISALLOWED IN THE HANDS OF THE ASSESSEE, SINCE THE QUANTUM OF REM UNERATION HAS BEEN FIXED AT PERCENTAGE OF TURNOVER. THE EXPLANATION O F THE ASSESSEE BEFORE US WAS THAT TACO WAS THE HOLDING COMPANY OF ALL JOI NT VENTURE COMPANIES AND IT WAS PROVIDING THE SAID SERVICES TO ALL THE JOINT VENTURES AND THE ASSESSEE WAS ONE SUCH JOINT VENTURE, TO WHI CH THE SAID SERVICES WERE PROVIDED. THE REMUNERATION PAID IN THIS REGAR D IS ALLOWABLE IN THE HANDS OF ASSESSEE AS THE SAME IS PAID ON ACCOUNT OF BUSINESS EXIGENCY. 25. NOW, COMING TO THE QUANTUM OF REMUNERATION WHIC H IS TO BE ALLOWED IN THE HANDS OF ASSESSEE. BOTH THE AUTHORI TIES BELOW HAVE CONSIDERED THE RELATED PARTY TRANSACTION AS REFERRE D TO IN SECTION 40A(2) OF THE ACT. THE SAID PROVISIONS OF THE ACT LAY DOW N THAT THE SERVICES TO A RELATED PARTY, AS ENVISAGED IN SECTION 40A(2)(B) OF THE ACT, SHALL NOT BE ALLOWED AS DEDUCTION UNDER SECTION 40A(2)(A) OF THE ACT, WHERE THE ASSESSING OFFICER IS OF THE OPINION THAT SUCH EXPEN DITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE MARKET VALUE OF T HE GOODS, SERVICES OR FACILITIES FOR WHICH PAYMENT IS MADE. HOWEVER, WHE RE THE EXPENDITURE IS INCURRED FOR THE LEGITIMATE NEEDS OF THE BUSINESS, THE SAME IS TO BE ALLOWED AS AN EXPENDITURE IN THE HANDS OF ASSESSEE. THOUGH, UNDER THE ACT, PART OF EXPENDITURE WHICH IS EXCESSIVE OR UNRE ASONABLE HAVING REGARD TO THE MARKET VALUE OF THE SERVICES, CAN BE DISALLOWED IN THE HANDS OF ASSESSEE, BUT IN ORDER TO INVOKE THE SAID PROVISIONS OF THE ACT, FIRST STEP IS TO FIND OUT FAIR MARKET VALUE OF THE SERVICES, FOR SUCH INVOKING OF THE POWERS, THE ASSESSING OFFICER IS NOT EMPOWER ED TO SIT IN THE SEAT OF BUSINESSMAN TO DECIDE THE MERITS OF QUANTUM OF CLAI M TO BE ALLOWED IN THE HANDS OF ASSESSEE. THE AUTHORITIES BELOW IN TH E PRESENT CASE HAVE NOT DISPUTED THE TERMS OF AGREEMENT, BUT WERE OF TH E VIEW THAT REMUNERATION PAID AT A PERCENTAGE OF TURNOVER, IN V IEW OF THE ASSESSEE HAVING ESTABLISHED ITS BUSINESS, WAS EXCESSIVE. TH E CONTENTION OF THE ASSESSEE ON THE OTHER HAND WAS THAT FOR SMOOTH RUNN ING OF ITS BUSINESS, SERVICES WERE PROVIDED BY TACO, WHICH WERE AS TERMS OF THE AGREEMENT. 26. WE FIND SIMILAR ISSUE OF ALLOWABILITY OF EXPEND ITURE PURSUANT TO AGREEMENT BETWEEN THE ASSESSEE AND THE THIRD PARTY, AROSE BEFORE COCHIN BENCH OF TRIBUNAL IN HARRISONS MALAYALAM LTD . VS. ACIT (SUPRA) AND THE FACTUAL ASPECTS OF THE CASE WERE AS UNDER:- 16. THE NEXT ISSUE IS IN RESPECT OF THE DISALLOWAN CE OF FEES PAID TO M/S. R.P.G. ENTERPRISES LTD. (RPGEL' FOR SHORT) AND THI S ISSUE ARISES IN ALL THE APPEALS BEFORE US. THE ID. CA SUBMITTED THAT THE AS SESSEE IS ENGAGED IN MULTIPLE BUSINESS ACTIVITIES LIKE TEA AND RUBBER CU LTIVATION BY TECHNOLOGY, 13 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 STRUCTURAL, CIVIL, MECHANICAL AND ELECTRICAL ENGINE ERING, TRADING IN TEA, COFFEE, SPICES AND EXPORT OF THE SAME ESTATE SUPPLI ES AND TRADING, CLEARING AND SHIPPING, AIR TRAVEL AND AIR CARGO. TH E ASSESSEE-COMPANY HAS ENTERED INTO AN AGREEMENT DATED 8-8-1994 WITH M /S. RPGEL TO ACQUIRE THE NON-EXCLUSIVE LICENCE TO USE 'RPG' LOGO OWNED BY RPGEL FOR THE PURPOSE OF ASSESSEE'S BUSINESS INCLUDING IN REL ATION TO OR UPON ITS PRODUCTS, LABEL, LETTER-HEAD, BROCHURE, PAMPHLETS A ND ADVERTISEMENT MATERIALS, ETC., THE ID. CA REFERRED TO THE COPY OF AGREEMENT WHICH IS PLACED AT PAGES 162 TO 167 OF THE PAPER BOOK. IT IS FURTHER ARGUED THAT THE SAID RPGEL HAS ITS OBJECTIVES, DEVELOPMENT OF C ODE OF CONDUCT AND CREATION OF GOODWILL WHICH COULD BE SUITABLY IDENTI FIED TO THE PUBLIC MIND AND THE LOGO 'RPG' IS HAVING A HIGH GOODWILL IN THE MARKET. IT IS FURTHER SUBMITTED, THAT DUE TO THE USE OF THE LOGO RPGEL PR OVIDES THE INFRASTRUCTURE FOR DEVELOPING CERTAIN CODE OF CONDU CT AND TO OPERATE AND RUN THE ORGANIZATION FOR PROMOTING AND MONITORING S TANDARD INDUSTRIAL, COMMERCIAL AND TRADE PRACTICES IN THE PURSUIT OF AT TAINMENT OF EXCELLENCE IN QUALITY OF THEIR PRODUCTS AND SERVICES. THE COST S OF RENDERING THE GROUP RESOURCES WERE SHARED BY THE LICENSEE COMPANIES AND THAT ENABLES THE LICENSEE COMPANY LIKE THE PRESENT ASSESSEE TO AVAIL THE BENEFITS OF THE GROUP RESOURCES WITHOUT INCURRING THE FULL COST OF SUCH FACILITIES. THE TOTAL ACTUAL EXPENSES OF THE CORPORATE CENTRE ARE SHARED BY LICENSEE COMPANY IN RELATION TO THEIR SIZE AND PROFITABILITY AND THE SAME ARE PAID BY THE COMPANIES LIKE THE ASSESSEE'S WHO ARE THE LICENSEES TO RPGEL AS A LICENSE FEE. AS PER THE AGREEMENT THE LICENSEES UTI LISED THE BENEFITS OF THE EXPERTISE DEVELOPED AS A GROUP RESOURCES BY RPGEL I N THE IMPORTANT FIELD LIKE HRD, STRATEGIC PLANNING, CORPORATE FINAN CE, MANAGEMENT INFORMATION, TAXATION, QUALITY MANAGEMENT, PROJECT DEVELOPMENT, INFORMATION TECHNOLOGY AND CORPORATE GOVERNANCE, ET C. THE SAID RPGEL WITH GROUP RESOURCES ARE HAVING TALENTED AND HIGHLY QUALIFIED EXPERTS IN DIVERSIFIED FIELDS AND ASSESSEE AND OTHER COMPANIES WHO ARE LICENSEES AVAILED, THE EXPERTISE IN THE REQUIRED FIELD FOR TH E EXCELLENCE IN THE CORPORATE MANAGEMENT AS WELL AS PROMOTING BUSINESS STANDARDS. HE FURTHER SUBMITTED THAT IF THE ASSESSEE HAS TO ACQUI RE THIS EXPERTISE, THE COST OF INFRASTRUCTURE WILL BE 10 TIMES MORE THAN T HE LICENSE FEE PAID AND CERTAINLY IT IS IN THE NATURE OF BUSINESS EXPEDIENC Y AND THE SAME IS ALLOWABLE. HE FURTHER ARGUED THAT THE CIT(A) HAS NO T DISPUTED THE NATURE OF THE EXPENSES AS CAPITAL OR REVENUE. THE ONLY RES ERVATION OF THE CIT(A) IS THAT IT IS NOT AN ALLOWABLE EXPENDITURE. THE ID. CA RELIED ON THE FOLLOWING PRECEDENTS :- (I) CIT VS. DELHI SAFE DEPOSIT CO. LTD. (1982) 133 ITR 750 (SC) (II) SASOON J. DAVID & CO. LTD. VS. CIT (1979) 118 ITR 2 61 (SC) (III) BOMBAY STEAM NAVIGATION CO. (1953) (P.) LTDD. VS. C IT (1965) 56 ITR 52 (SC) (IV) CIT VS. MALAYALAM PLANTATIONS LTD. (1964) 53 ITR 14 0 (SC) 14 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 17. 18. 19. 20. THE AUTHORITIES BELOW HAVE NOT DISPUTED THE TER MS OF THE AGREEMENT BUT IT APPEARS FROM THE REASONS GIVEN BY THE CIT(A) THAT THE SAID PAYMENT WAS NOT REQUIRED AT ALL. THE CONCEPT OF BUS INESS IS CHANGING DUE TO GLOBALIZATION. THE MARKET STRATEGIES OF THE CORPORATE ORGANIZATIONS ARE ALSO CHANGING FAST. IF ANY BUSINESS HOUSE IS RE QUIRED TO STAND IN THE MARKET, THEN IT HAS TO IMPROVE THE QUALITY OF THE P RODUCTS AND IMPROVEMENT OF THE QUALITY OF THE PRODUCTS AS WELL AS THE MARKET STRATEGIES WILL DEPEND ON LOT OF SUPPORTING INFRAST RUCTURE. THE CONTENTION OF THE ASSESSEE IS THAT RPGEL IS ONE OF THE LOGO HA VING GOODWILL IN THE MARKET AND USE OF GOODWILL GIVES AN INDICATION TO T HE BUYERS AND CONSUMERS THAT THE ASSESSEE COMPANY IS HAVING THE B ACK UP OF EXCELLENCE WITH CODE OF CONDUCT AND QUALITY. IN THE CHANGING SCENARIO OF GLOBALIZATION, ONE CANNOT GO WITH THE CONSERVATIVE CONCEPT OF THE EARLY FIFTIES. AS FAR AS HRD IS CONCERNED, IT HAS GAINED IMPORTANCE IN THE INDUSTRIAL AND BUSINESS WORLD. WE FIND FORCE IN THE ARGUMENT OF THE ID. CA THAT RPGEL IS HAVING THE INFRASTRUCTURE WHICH IS USED BY THE ASSESSEE-COMPANY FOR THE DEVELOPMENT OF ITS BUSINES S. WHETHER ANY PARTICULAR PAYMENT IS ON ACCOUNT OF BUSINESS EXPEDI ENCY OR NOT IS TO BE CONSIDERED FOR ALLOWING THE SAME UNDER SECTION 37 O F THE ACT. 21. ANOTHER ASPECT TO BE CONSIDERED HERE IS THAT SE CTION 37 PROVIDES THAT ANY EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS BUT IT DOES NOT MEAN THAT THE SAID EXPRESS ION CONTEMPLATES THAT THE SAID EXPENDITURE MUST BE INCURRED NECESSARILY F OR THE PURPOSE OF BUSINESS. 22. IN THE CASE OF SASOON J. DAVID & CO. (P.) LTD. (SUPRA), THE HON'BLE SUPREME COURT HAS HELD THAT THE EXPRESSION 'WHOLLY AND EXCLUSIVELY' USED IN SECTION 10(2)(XV) OF INDIAN INCOME-TAX ACT, 1922 DOES NOT MEAN 'NECESSARILY'. ORDINARILY IT IS FOR THE ASSESSEE TO DECIDE, WHETHER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF HIS OR ITS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY AND IF IT IS INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PROFIT THEN HE CAN CLAIM THE DEDUCTION EVEN THOUGH THERE WAS NO COMPEL LING NECESSITY TO INCUR SUCH EXPENDITURE (HEAD NOTES). THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT WHILE INTERPRETING SECTION 10 (2)(XV) OF THE 1922 ACT ARE SQUARELY APPLICABLE TO SECTION 37(1) OF 196 1 ACT. IN OUR OPINION, THE PAYMENTS MADE BY THE ASSESSEE TO RPGEL IS AN AL LOWABLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. WE, THE REFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE IN ALL THE ASSESS MENT YEARS BEFORE US AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDI TIONS. 15 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 27. IN THE FACTS OF THE CASE BEFORE COCHIN BENCH OF TRIBUNAL, THE REMUNERATION WAS ALSO FIXED AT PRESCRIBED RATE ON T URNOVER AS REFERRED TO IN PARA 16 OF THE DECISION. 28. XXXXXXXXXX 29. XXXXXXXXXX 30. XXXXXXXXXX 31. ANOTHER ASPECT OF THE ISSUE RAISED IS THE OBSER VATIONS OF REVENUE AUTHORITIES THAT NO SERVICES HAVE BEEN RENDERED BY ASSOCIATE ENTERPRISES AND IF ANY SERVICES HAVE BEEN RENDERED, THEY ARE NO T SUFFICIENT TO JUSTIFY THE PAYMENT. THE ASSESSEE BEFORE US HAS FILED COMP ILATION OF PAPERS INCLUDING THE COPIES OF REPORTS, E-MAILS AND OTHER DOCUMENTS EVIDENCING THE RENDERING OF SERVICES FROM DAY TO DAY. ALL THE SE DOCUMENTS WERE NOT CONSIDERED BY THE AUTHORITIES BELOW AND WE FIND NO MERIT IN THE ORDERS OF REVENUE AUTHORITIES IN BRUSHING ASIDE THOSE DOCUMEN TS IN A SUMMARY MANNER WITHOUT PROPERLY ANALYZING THE SAME. WE FIN D IN SIMILAR CIRCUMSTANCES, THE MUMBAI BENCH OF TRIBUNAL IN DRES SER-RAND INDIA (P.) LTD. VS. ADDL.CIT (SUPRA) HAD OBSERVED AS UNDER:- 8. WE FIND THAT THE BASIC REASON OF THE TRANSFER P RICING OFFICER'S DETERMINATION OF ALP OF THE SERVICES RECEIVED UNDER COST CONTRIBUTION ARRANGEMENT AS 'NIL' IS HIS PERCEPTION THAT THE ASS ESSEE DID NOT NEED THESE SERVICES AT ALL, AS THE ASSESSEE HAD SUFFICIE NT EXPERTS OF HIS OWN WHO WERE COMPETENT ENOUGH TO DO THIS WORK. FOR EXAM PLE, THE TRANSFER PRICING OFFICER HAD POINTED OUT THAT THE ASSESSEE H AS QUALIFIED ACCOUNTING STAFF WHICH COULD HAVE HANDLED THE AUDIT WORK AND IN ANY CASE THE ASSESSEE HAS PAID AUDIT FEES TO EXTERNAL F IRM. SIMILARLY, THE TRANSFER PRICING OFFICER WAS OF THE VIEW THAT THE A SSESSEE HAD MANAGEMENT EXPERTS ON ITS ROLLS, AND, THEREFORE, GL OBAL BUSINESS OVERSIGHT SERVICES WERE NOT NEEDED. IT IS DIFFICULT TO UNDERSTAND, MUCH LESS APPROVE, THIS LINE OF REASONING. IT IS ONLY EL EMENTARY THAT HOW AN ASSESSEE CONDUCTS HIS BUSINESS IS ENTIRELY HIS PRER OGATIVE AND IT IS NOT FOR THE REVENUE AUTHORITIES TO DECIDE WHAT IS NECES SARY FOR AN ASSESSEE AND WHAT IS NOT. AN ASSESSEE MAY HAVE ANY NUMBER OF QUALIFIED ACCOUNTANTS AND MANAGEMENT , EXPERTS ON HIS ROLLS, AND YET HE MAY DECIDE TO ENGAGE SERVICES OF OUTSIDE EXPERTS FOR AU DITING AND MANAGEMENT CONSULTANCY; IT IS NOT FOR THE REVENUE O FFICERS TO QUESTION ASSESSEE'S WISDOM IN DOING SO. THE TRANSFER PRICING OFFICER WAS NOT ONLY GOING MUCH BEYOND HIS POWERS IN QUESTIONING COMMERC IAL WISDOM OF ASSESSEE'S DECISION TO TAKE BENEFIT OF EXPERTISE OF DRESSER RAND US, BUT ALSO BEYOND THE POWERS OF THE ASSESSING OFFICER. WE DO NOT APPROVE THIS APPROACH OF THE REVENUE AUTHORITIES. WE HAVE FURTHE R NOTICED THAT THE TRANSFER PRICING OFFICER HAS MADE SEVERAL OBSERVATI ONS TO THE EFFECT THAT, 16 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 AS EVIDENT FROM THE ANALYSIS OF FINANCIAL PERFORMAN CE, THE ASSESSEE DID NOT BENEFIT, IN TERMS OF FINANCIAL RESULTS, FROM TH ESE SERVICES. THIS ANALYSIS IS ALSO COMPLETELY IRRELEVANT, BECAUSE WHE THER A PARTICULAR EXPENSE ON SERVICES RECEIVED ACTUALLY BENEFITS AN A SSESSEE IN MONETARY TERMS OR NOT EVEN A CONSIDERATION FOR ITS BEING ALL OWED AS A DEDUCTION IN COMPUTATION OF INCOME, AND, BY NO STRETCH OF LOGIC, IT CAN HAVE DETERMINING ARM'S LENGTH PRICE OF THAT SERVICE. WHE N EVALUATING THE ARM'S LENGTH PRICE OF A SERVICE, IT IS WHOLLY IRRELEVANT AS TO WHETHER THE ASSESSEE BENEFITS FROM IT OR NOT; THE REAL QUESTION WHICH IS TO BE DETERMINED IN SUCH CASES IS WHETHER THE PRICE OF TH IS SERVICE IS WHAT AN INDEPENDENT ENTERPRISE WOULD HAVE PAID FOR THE SAME . SIMILARLY, WHETHER THE AE GAVE THE SAME SERVICES TO THE ASSESSEE IN TH E PRECEDING YEARS WITHOUT ANY CONSIDERATION OR NOT IS ALSO IRRELEVANT . THE AE MAY HAVE GIVEN THE SAME SERVICE ON GRATUITOUS BASIS IN THE E ARLIER PERIOD, BUT THAT DOES NOT MEAN THAT ARM'S LENGTH PRICE OF THESE SERV ICES IS 'NIL'. THE AUTHORITIES BELOW HAVE BEEN SWAYED BY THE CONSIDERA TIONS WHICH ARE NOT AT ALL RELEVANT IN THE CONTEXT OF DETERMINING THE A RM'S LENGTH PRICE OF THE COSTS INCURRED BY THE ASSESSEE IN COST CONTRIBUTION ARRANGEMENT. WE HAVE ALSO NOTED THAT THE STAND OF THE REVENUE AUTHO RITIES IN THIS CASE IS THAT NO SERVICES WERE RENDERED BY THE AE AT ALL, AN D THAT SINCE THERE IS NO EVIDENCE OF SERVICES HAVING BEEN RENDERED AT ALL , THE ARM'S LENGTH PRICE OF THESE SERVICES IS 'NIL'. THE DISPUTE RESOL UTION PANEL HAS ALSO CONFIRMED THESE FINDINGS OF THE TRANSFER PRICING OF FICER AND THE ASSESSING OFFICER. HOWEVER, WE HAVE NOTED THAT VIDE LETTER DATED 25TH JANUARY 2010 (ACKNOWLEDGED TO HAVE BEEN RECEIVED IN DRP OFFICE ON 28 TH JANUARY 2010), THE ASSESSEE HAS FILED A HUGE COMPIL ATION OF PAPERS, RUNNING INTO ALMOST THREE HUNDRED PAGES, INCLUDING COPIES OF REPORTS, EMAILS AND OTHER DOCUMENTS EVIDENCING THE RENDERING OF SERVICES. YET, THE DRP SIMPLY BRUSHED ASIDE THESE DOCUMENTS BY SIM PLY OBSERVING THAT 'THE DRP HAS PERUSED THE SUBMISSIONS OF THE ASSESSE E AND THE DOCUMENTS. IN VIEW OF THE DRP, SUCH DOCUMENTS DO NO T PROVE THE RECEIPT OF SERVICES BY THE ASSESSEE ASCERTAINED (ASSERTED ? ) TO BE PROVIDED BY ITS AE, AND, ACCORDINGLY, THE ACTION OF THE AO IN TREAT ING THE COST OF SUCH SERVICES AT ZERO IS CONFIRMED'. ALL THESE EVIDENCES WERE BEFORE THE DRP, BUT THERE IS NOT EVEN A WHISPER ABOUT WHAT WAS THE NATURE OF THESE DOCUMENTS, WHY DOES THE DRP FIND THESE DOCUMENTS TO BE NOT SATISFACTORY, WHAT IS THE KIND OF EVIDENCE THAT WAS NECESSARY TO PROVE THE FACTUM OF SERVICES HAVING BEEN AVAILED, AND WHA T PRECISELY IS THE REASON THAT THESE DOCUMENTS CANNOT BE RELIED UPON. THE SOUL OF AN ORDER IS IN ITS REASONING, AND UNLESS THE REASONS FOR COM ING TO A CONCLUSION IN THE ORDER ARE NOT SET OUT, IT IS NOT POSSIBLE TO DO A MEANINGFUL SCRUTINY OF THE ORDER, BUT WE FIND NO REASONING AT ALL IN THE O RDER PASSED BY THE DRP. WE MAY IN THIS REGARD REFER TO THE OBSERVATION S MADE BY HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. MOHA NLAL CAPOOR AIR 17 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 1974 SC 87, WHEREIN THEIR LORDSHIPS HAVE, INTER ALI A, OBSERVED AS FOLLOWS: 'IF THE STATUTE REQUIRES RECORDING OF REASONS, THEN IT IS THE STATUTORY REQUIREMENT AND, THEREFORE, THERE IS NO S COPE FOR FURTHER INQUIRY. BUT EVEN WHEN THE STATUTE DOES NOT IMPOSE SUCH AN OBLIGATION IT IS NECESSARY FOR THE QUASI-JUDICIAL A UTHORITIES TO RECORD REASON AS IT IS ONLY VISIBLE SAFEGUARD AGAIN ST POSSIBLE INJUSTICE AND ARBITRARINESS AND AFFORDS PROTECTION TO THE PERSON ADVERSELY AFFECTED. REASONS ARE THE LINKS BETWEEN T HE MATERIAL ON WHICH CERTAIN CONCLUSIONS ARE BASED AND THE ACTU AL CONCLUSIONS. THEY DISCLOSE HOW THE MIND IS APPLIED TO THE SUBJECT- MATTER FOR A DECISION, WHETHER IT IS PURELY ADMINIS TRATIVE OR QUASI JUDICIAL. THEY SHOULD REVEAL RATIONAL NEXUS BETWEEN THE FACTS CONSIDERED AND THE CONCLUSION REACHED. ONLY IN THIS WAY CAN OPINIONS OR DECISIONS RECORDED BE SHOWN TO BE MANIF ESTLY JUST AND REASONABLE. ' 9. IN OUR CONSIDERED VIEW, IT IS NOT OPEN TO DISPUT E RESOLUTION PANEL TO REJECT THE OBJECTIONS OF THE ASSESSEE IN A SUMMARY MANNER WITHOUT PROPERLY ANALYZING THE OBJECTIONS OF THE ASSESSEE A ND DEALING WITH EVIDENCES FILED BY THE ASSESSEE. UNDER SECTION 144 C (6), THE DISPUTE RESOLUTION PANEL CAN ISSUE DIRECTIONS AFTER, INTER ALIA, CONSIDERING OBJECTIONS OF THE ASSESSEE AND EVIDENCES FILED BY T HE ASSESSEE. THAT EXERCISE IS CLEARLY NOT DONE. IN THE CASE OF VODAFO NE ESSAR LTD. V. DISPUTE RESOLUTION PANEL II [2011] 196 TAXMAN 423 / [20I0] 8 TAXMANN.COM 297, HON'BLE DELHI HIGH COURT HAS OBSERVED THAT, 'WHEN A QUASI JUDICIAL AUTHORITY (LIKE THE DRP) DEALS WITH A LIS, IT IS OB LIGATORY ON ITS PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS T HE HEART AND SOUL OF THE MATTER. AND FURTHER, THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER IS CALLED IN QUESTION BY THE SUPERIOR FORUM'. YET, MORE OFTEN THAN NOT, THE ORDERS PASSED BY THE DISPUTE RESOLUTION PA NELS, LIKE ONE BEFORE US, ARE NOT ONLY WANTING IN TERMS OF THEIR ANALYSIS OF FACTS AND LAW AND LACKING IN REASONS FOR ARRIVING AT CONCLUSIONS, THE SE ORDERS ALSO OFFER US NO ASSISTANCE IN ANY MANNER AT ALL. IN THIS VIEW OF THE MATTER, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF T HE ASSESSING OFFICER FOR FRESH ADJUDICATION ON THE QUESTION, OF SERVICES HAV ING BEEN ACTUALLY RENDERED, IN THE LIGHT OF EVIDENCES FILED BY THE AS SESSEE. 32. NOW, COMING TO THE CASE OF QUANTUM OF REMUNERAT ION TO BE ALLOWED IN THE HANDS OF ASSESSEE, WHERE THE CIT(A) HAS ALLO WED EXPENDITURE @ 25% OF TOTAL EXPENSES AND NO BASIS HAS BEEN GIVEN B Y THE CIT(A) TO ALLOW THE SAID EXPENDITURE @ 25% OF THE TOTAL. THERE IS NO BASIS FOR MEASURING SUCH SERVICES AND IN THE ABSENCE OF ANY EVIDENCE BR OUGHT ON RECORD TO ESTABLISH THAT THE EXPENDITURE INCURRED BY THE ASSE SSEE WAS EXCESSIVE 18 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 I.E. MORE THAN MARKET VALUE OF THE SAID SERVICES, W E FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN INVOKING PROVISIONS OF SECTION 40A(2)(A) OF THE ACT. ACCORDINGLY, WE MODIFY THE ORDER OF CIT(A ) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE IN TOTAL ITY IN THE HANDS OF THE ASSESSEE AS THE SAID EXPENDITURE HAS BEEN LAID DOWN IN TERMS OF THE AGREEMENT AGREED UPON BETWEEN THE PARTIES AND IS FO R CARRYING ON OF THE BUSINESS OF THE ASSESSEE MORE EFFICIENTLY AND IS AL LOWABLE AS BUSINESS EXPENDITURE. THE GROUNDS OF APPEAL NO.2 AND 3 RAISED BY THE AS SESSEE ARE ALLOWED AND GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IS DISMISSED. 11. SIMILAR ISSUE WAS RAISED BEFORE THE TRIBUNAL IN THE CASE OF DY. COMMISSIONER OF INCOME TAX VS. TATA TOYO RADIATOR PVT. LT D. (SUPRA). THE CO-ORDINATE BENCH ALLOWED THE PAYMENTS MADE TO TAC O IN TOTO BY FOLLOWING THE DECISION IN THE CASE OF TATA JOHNSON CONTROLS AUTOMOTIVE LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA). 12. SINCE, THE ISSUE RAISED IN GROUND NO. 1 IN THE APPEAL BY THE DEPARTMENT AND GROUND NO. 1 OF THE CROSS OBJECTIONS AR E IDENTICAL TO THE ISSUE ADJUDICATED BY THE CO-ORDINATE BENCH AND THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF TRIBUNAL, WE DO NO T FIND ANY REASON TO TAKE A CONTRARY VIEW. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH, WE HOLD THAT THE ENTIRE PAYMENT MADE BY ASSESSEE TO TACO TOWARDS ADMINISTRATIVE CHARGES IS ALLOWABLE EXPEND ITURE. ACCORDINGLY, THE GROUND NO. 1 RAISED IN THE APPEAL BY THE DEPARTME NT IS DISMISSED AND GROUND NO. 1 RAISED IN THE CROSS OBJECTIONS BY THE ASSESSEE IS ALLOWED. 13. IN GROUND NO. 2 OF THE APPEAL BY THE DEPARTMENT, THE DEPARTMEN T HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APP EALS) IN DELETING THE DISALLOWANCE OF EXPENDITURE ON TOOLS AND JIGS. THE 19 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 ASSESSEE HAS TAKEN CORRESPONDING GROUND IN GROUND NO. 2 OF THE CROSS OBJECTIONS. THE ASSESSEE HAS TREATED THE EXPENDITURE TOWARDS TOOLS AND JIGS AS REVENUE IN NATURE. WHEREAS, THE ASSESSING O FFICER HAS TREATED THE SAME AS CAPITAL EXPENDITURE. WE FIND THAT TH IS ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASS ESSMENT YEARS 2003-04 AND 2004-05. THE RELEVANT EXTRACT OF THE FINDING S OF TRIBUNAL ARE AS UNDER : 7. THE LONE EFFECTIVE GROUND OF THESE APPEALS IS WITH REGARD TO DISALLOWANCE OF EXPENSES RS.25,37,063/- INCURRED ON PURCHASE OF TOOLS AND JIGS TREATING THE SAME AS REVENUE EXPENDITURE. REVENUE IS OF THE OPINION, THEY ARE CAPITAL IN NATURE. THE CIT(A) HE LD THIS ISSUE IN PARA 4.6 OF HIS ORDER WHICH READS AS UNDER :- FROM THESE DETAILS FILED BY THE APPELLANT, IT IS C LEAR THAT THE APPELLANT HAS TO PURCHASE JIGS AND TOOLS EVERY YEAR . MOREOVER, WITH THE INCREASE OF THE TURNOVER, THE EXPENSES ON JIGS AND TOOLS ALSO INCREASE FROM YEAR TO YEAR. THESE FACTS, COUP LED WITH THE SUBMISSION OF THE APPELLANT THAT AVERAGE LIFE OF JI GS AND TOOLS IS OF THREE MONTHS ONLY, CLEARLY SHOW THAT THE JIGS AND T OOLS ARE IN THE NATURE CONSUMABLES AND THEREFORE, THE EXPENDITURE I NCURRED ON SUCH ITEMS HAS TO BE CONSIDERED AS REVENUE EXPENDIT URE. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW APPELLANT' S CLAIM OF EXPENDITURE OF RS.25,37,063/- AS REVENUE EXPENDITUR E. THIS ROUND OF APPEAL SUCCEEDS.' WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE CITATIONS RELIED ON. AFTER GOING THROUGH THE ORDER OF THE CIT (A), W E FIND THAT THE CIT (A) IS PERFECTLY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASS ESSEE AND NO INTERFERENCE IS CALLED FOR. THEREFORE, WE UPHOLD T HE FINDINGS OF THE CIT (A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 14. AGAINST THE AFORESAID FINDINGS OF THE TRIBUNAL, THE DEPAR TMENT FILED APPEAL BEFORE THE HON'BLE BOMBAY HIGH COURT TITLED COM MISSIONER OF INCOME TAX VS. PIRANGUT SPRINGS LTD. IN INCOME TAX AP PEAL NO. 2436 20 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 OF 2011 AND INCOME TAX APPEAL NO. 2484 OF 2011. THE HON'BLE BOMBAY HIGH COURT DISMISSED BOTH THE APPEALS OF THE DEPARTMENT BY HOLDING AS UNDER : 5. HOWEVER, THE ASSESSEE EXPLAINED THAT THESE JIGS AND TOOLS HAVE BEEN PURCHASED EVERY YEAR. SINCE THE TURN OVER INC REASED, THE EXPENSES ALSO INCREASE FROM YEAR TO YEAR. THE TRIBUNAL, THE REFORE, HELD THAT BEARING THIS FACT IN MIND AND AVERAGE LIFE OF THE J IGS AND TOOLS BEING THREE MONTHS ONLY, WOULD INDICATE THAT THE EXPENDITURE IN CURRED ON SUCH ITEMS HAS TO BE CONSIDERED AS REVENUE EXPENDITURE. THESE ARE IN THE NATURE OF CONSUMABLES. WE FIND THAT THE CONCURRENT FINDING O F FACT ON THIS POINT THEREFORE SUFFERS FROM NO ERROR OF LAW APPARENT ON THE FACE OF THE RECORD OR PERVERSITY. SUCH FINDINGS DO NOT RAISE ANY SUBS TANTIAL QUESTION OF LAW. THE APPEAL IS, THEREFORE, DISMISSED TO THE EXTENT O F QUESTION NOS.4(B) AND 4(C). 15. THE LD. DR HAS NOT PLACED ON RECORD ANY MATERIAL TO T HE CONTRARY. THUS, IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE, THE GROUND NO. 2 RAISED IN THE APP EAL BY THE DEPARTMENT IS DISMISSED AND THE GROUND NO. 2 RAISED IN TH E CROSS OBJECTIONS ARE DISMISSED AS HAVING BECOME INFRUCTUOUS. 16. THE ASSESSEE IN GROUND NO. 3 OF THE CROSS OBJECTIONS HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING THE PROVISION FOR LEAVE ENCASHMENT. THE LD. AR OF THE ASSESSEE STATED AT THE BAR THAT HE IS NOT PRESSING GR OUND NO. 3 RAISED IN THE CROSS OBJECTIONS. ACCORDINGLY, THE SAME IS DISMISSE D AS NOT PRESSED. 17. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSE D AND THE CROSS OBJECTIONS BY THE ASSESSEE ARE PARTLY ALLOWED. 21 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 ITA NOS. 1828 & 1884/PN/2013 (A.YS. 2008-09 & 2009-1 0) 18. THE GROUNDS RAISED BY THE ASSESSEE IN ASSESSMENT Y EAR 2008-09 ARE AS UNDER : 1. DISALLOWANCE OF ADMINISTRATIVE SUPPORT CHARGES PAI D TO TATA AUTOCOMP SYSTEMS LIMITED (TACO) - RS.59,33,787/- 1.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ADMINISTRATIVE SUPPORT CHARGES OF RS.59,33,787/- ( BEING 75% OF TO TAL CHARGES OF RS.79,11,715/-) PAID BY THE APPELLANT FOR SERVICES RENDERED BY TATA AUTOCOMP SYSTEMS LIMITED (TACO') IS EXCESSIVE IN NA TURE AND HENCE NOT ALLOWABLE AS DEDUCTION UNDER SECTION 40A(2)(B) OF THE ACT. 1.2 THE LEARNED CIT (A) ERRED IN NOT APPRECIATIN G THE FACT THAT THE AMOUNT PAID TO TACO WAS TOWARDS THE SERVICES RECEIVED BY T HE APPELLANT ON WHICH APPROPRIATE TAX HAVE BEEN DEDUCTED AT SOURCE AND THEREFORE OUGHT TO BE ALLOWED. 1.3 THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE EXPENSES INCURRED BY THE APPELLANT IS REVENUE NEUTR AL AND NO TAX ARBITRAGE IS SOUGHT TO BE ENJOYED BY EITHER PARTIES TO THE AGREEMENT AND THEREFORE NO DISALLOWANCE OUGHT TO BE MADE U/S 40A(2)(B) OF THE ACT. 2. EXPENDITURE ON MIGRATION TO OTHER SOFTWARE RS. 3,71,255/- 2.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE EX PENDITURE AMOUNTING TO RS.3,71,255/- INCURRED BY THE APPELLAN T ON MIGRATION TO OTHER SOFTWARE IS CAPITAL IN NATURE. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SO FTWARE GETS ABSOLETE IN THE SHORT PERIOD OF TIME AND THAT THE S OFTWARE EXPENDITURE IS A REVENUE IN NATUER ALLOWABLE UNDER SECTION 37 O F THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, AM END AND / OR RESCIND ANY OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THE APPELLANT ALSO CRAVES TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDER ED NECESSARY AS PER LAW AT ANY TIME BEFORE OR AT THE TIME OF HEARIN G OF THE APPEAL. 22 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 19. THE GROUNDS RAISED BY THE DEPARTMENT IN ASSESSMENT YEAR 2008-09 IN ITS APPEAL ARE AS UNDER : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS EARNED IN ALLOWING THE EXPENSES ON ACCOUNT OF ADMIN ISTRATIVE SERVICE CHARGES TO THE EXTENT OF 25% OF THE TOTAL EXPENDITU RE CLAIMED BY THE ASSESSEE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS EARNED IN GRANTING CONSEQUENTIAL RELIEF OF RS.29,17 ,250/- ON COST INCURRED BY THE APPELLANT TOWARDS PURCHASE OF TOOLS AND JIGS OF RS.33,34,000/-. 20. THE GROUND NO. 1 RAISED BY THE ASSESSEE IN ITS APPEA L AND THE CORRESPONDING GROUND NO. 1 RAISED BY THE DEPARTMENT IN ITS APPEAL IN RESPECT OF ADMINISTRATIVE CHARGES PAID TO TACO ARE IDENTIC AL TO THE ISSUE ALREADY ADJUDICATED IN THE APPEAL OF THE DEPARTMENT FOR ASSESSMENT YEAR 2007-08. FOR THE DETAILED REASONS GIVE N THEREIN, THE GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED AND THE GROUND NO. 1 IN THE APPEAL BY DEPARTMENT IS DISMISSED. 21. IN GROUND NO. 2 THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN TREATING THE EXPEND ITURE ON MIGRATION TO OTHER SOFTWARE AS CAPITAL IN NATURE. WE FIND T HAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD THE FINDINGS OF ASSESSING OFFICER IN HOLDING THE EXPENDITURE TOWARDS THE MIG RATION TO OTHER SOFTWARE BY FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AMWAY INDIA ENTERPRISE VS. DY. COMM ISSIONER OF INCOME TAX REPORTED AS 111 ITD 112 (DEL)(SB). THE RELE VANT EXTRACT OF THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) A RE AS UNDER : 23 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 AS COULD BE SEEN FROM THE ABOVE ANALYSIS, IN CASE OF MS EXCHANGE AND AD MIGRATION CROSS CHARGING SOFTWARE ACQUIRED BY TH E APPELLANT DURING THE YEAR, THE TESTS LAID DOWN BY THE ITAT, SPECIAL BENCH TO TREAT THE EXPENDITURE AS CAPITAL EXPENDITURE ARE POSITIVE. T HE EXPENDITURE WAS INCURRED FOR ACQUISITION OF NEW SOFTWARE AND MIGRAT ION TO NEW SOFTWARE AND NOT FOR UP GRADATION OR RENEWAL OF EXISTING SOF TWARE, WHICH PROVIDES AN ENDURING BENEFIT OR ADVANTAGE TO THE APPELLANT O VER A PERIOD OF TIME, SAY MORE THAN TWO YEARS. IT IS NOT A RECURRING OUTL AY AND THE BENEFIT ACCRUES TO THE APPELLANT FOR A MINIMUM PERIOD OF TH REE YEARS. IT IS SETTLED LEGAL POSITION THAT IF THE EXPENDITURE IS INCURRED FOR ACQUIRING OR BRINGING INTO EXISTENCE A NEW ASSET OR ADVANTAGE IN THE CAPI TAL FIELD FOR THE ENDURING BENEFIT OF THE BUSINESS, IT IS IN THE NATU RE OF CAPITAL 'EXPENDITURE AS PER THE PRINCIPLE LAID DOWN BY THE SPECIAL BENCH OF ITAT, DELHI IN THE CASE OF AMWAY INDIA ENTERPRISES V DCIT SUPRA. IN FA CT, WHILE CONSIDERING THE CHANGING SCENARIO IN THE WORLD OF COMPUTES, THE GOVERNMENT HAS ACKNOWLEDGED THE RAPID CHANGE AND PROVIDED HIGHER D EPRECIATION RATE ON COMPUTERS I.E. AT 60% AND THEREFORE, IT IS NOT C ORRECT TO CLAIM THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE ON SUCH ASSETS. 4.3.2 IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION , THE ASSESSING OFFICER IS FULLY JUSTIFIED IN TREATING THE IMPUGNED EXPENDI TURE AS CAPITAL EXPENDITURE. ACCORDINGLY, THE DISALLOWANCE OF RS.3 ,71,255/- MADE ON THIS GROUND IS UPHELD SUBJECT TO ALLOWANCE OF DEPRE CIATION AT THE RATE APPLICABLE TO SOFTWARE. NEEDLESS TO SAY THAT IF TH E SOFTWARE WAS PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS DURING THE Y EAR, THE DEPRECIATION TO BE ALLOWED SHALL BE RESTRICTED TO 50% OF THE ADM ISSIBLE DEPRECIATION. 22. THE LD. AR OF THE ASSESSEE HAS NOT BEEN ABLE TO CONT ROVERT THE WELL REASONED FINDINGS OF THE COMMISSIONER OF INCOME TAX (AP PEALS) ON THIS ISSUE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTE RFERE WITH THE SAME. THE GROUND NO. 2 RAISED BY THE ASSESSEE IN ITS AP PEAL IS ACCORDINGLY, DISMISSED. 23. THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 2008-0 9 HAS RAISED GROUND NO. 2 AGAINST THE TREATING OF EXPENDITURE ON TOOLS AND JIGS AS REVENUE IN NATURE. THIS ISSUE HAS ALREADY BEEN A DJUDICATED BY 24 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 US IN APPEAL OF THE DEPARTMENT IN ASSESSMENT YEAR 200 7-08. FOR THE DETAILED REASONS GIVEN THEREIN, THE GROUND NO. 2 RAISED IN THE APPEAL BY DEPARTMENT IS DISMISSED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AND THE APPEAL OF DEPARTMENT IS DISMISSED. ITA NOS. 1829 & 1885/PN/2013 (A.Y. 2009-10) 25. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2009-10 ARE AS UNDER : 1.0 DISALLOWANCE OF ADMINISTRATIVE SUPPORT CHARGES PAID TO TATA AUTOCOMP SYSTEMS LIMITED (TACO) - RS.72,40,052/- 1.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ADMINISTRATIVE SUPPORT CHARGES OF RS.72,40,052/- (BEING 75% OF TOT AL CHARGES OF RS.96,53,402/-) PAID BY THE APPELLANT FOR SERVICES RENDERED BY TATA AUTOCOMP SYSTEMS LIMITED (TACO') IS EXCESSIVE IN NA TURE AND HENCE NOT ALLOWABLE AS DEDUCTION UNDER SECTION 40A(2)(B) OF THE ACT. 1.2 THE LEARNED CIT (A) ERRED IN NOT APPRECIATIN G THE FACT THAT THE AMOUNT PAID TO TACO WAS TOWARDS THE SERVICES RECEIVED BY T HE APPELLANT ON WHICH APPROPRIATE TAX HAVE BEEN DEDUCTED AT SOURCE AND THEREFORE OUGHT TO BE ALLOWED. 1.3 THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE EXPENSES INCURRED BY THE APPELLANT IS REVENUE NEUTR AL AND NO TAX ARBITRAGE IS SOUGHT TO BE ENJOYED BY EITHER PARTIES TO THE AGREEMENT AND THEREFORE NO DISALLOWANCE OUGHT TO BE MADE U/S 40A(2)(B) OF THE ACT. 2. REIMBURSEMENT OF TACO EXPENSES DISALLOWED ON ACC OUNT OF NON- DEDUCTION OF TAX AT SOURCE RS.55,54,131/- 2.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT T HE REIMBURSEMENT MADE BY APPELLANT TO TACO IS SUBJECT TO WITHHOLDING TAX PROVISIONS UNDER THE ACT AND THEREFORE DISALLOWED U/S. 40(A)(I A) OF THE ACT. 25 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC T THAT REIMBURSEMENT TO TACO IS NOT IN THE NATURE OF INCOME AND THEREFORE, THE PROVISION OF TAX DEDUCTED AT SOURCE ARE NOT APPLICABLE. 3.0 DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.4, 19,144/- 3.1 THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING DEPRECIATION AMOUNTING TO RS.4,19,144/- ON THE ASSETS PUT TO USE BEFORE TH E END OF THE FINANCIAL YEAR AS PER THE PROVISIONS OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, AM END AND / OR RESCIND ANY OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THE APPELLANT ALSO CRAVES TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDER ED NECESSARY AS PER LAW AT ANY TIME BEFORE OR AT THE TIME OF HEARIN G OF THE APPEAL. 26. THE SOLITARY GROUND RAISED BY THE DEPARTMENT IN ITS A PPEAL FOR ASSESSMENT YEAR 2009-10 IS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS EARNED IN ALLOWING THE EXPENSES ON ACCOUNT OF A DMINISTRATIVE SERVICE CHARGES TO THE EXTENT OF 25% OF THE TOTAL E XPENDITURE CLAIMED BY THE ASSESSEE. 27. THE GROUND NO. 1 RAISED IN THE APPEAL BY THE ASSESSE E AND THE ONLY ISSUE RAISED BY THE DEPARTMENT IN ITS APPEAL RELATIN G TO ADMINISTRATIVE SERVICE CHARGES PAID TO TACO ARE IDENTICAL T O THE ISSUE ADJUDICATED IN THE APPEAL OF THE DEPARTMENT FOR ASSESSME NT YEAR 2007-08. FOR THE DETAILED REASONS GIVEN THEREIN, THE GRO UND NO. 1 RAISED IN THE APPEAL BY THE ASSESSEE IS ALLOWED AND THE S OLE GROUND RAISED BY THE DEPARTMENT IN APPEAL IS DISMISSED. 28. IN GROUND NO. 2 THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN REMITTING THE MATTE R BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESS EE IN RESPECT OF PAYMENTS MADE TO TACO, I.E. WHETHER THEY WERE SUBJECT TO TD S, IF SO, 26 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 THE TDS WAS DEDUCTED AND ALSO PAID TO THE GOVT. EX-CHE QUER BEFORE THE DUE DATE. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESSE E HAS FURNISHED DETAILS OF REIMBURSEMENT OF EXPENDITURE CLAIMED BY THE TACO, EXTRACT OF TDS RETURNS FOR DIFFERENT QUARTERS AND T DS CHALLANS FOR THE FIRST TIME DURING THE FIRST APPELLATE PROCEEDINGS. T HE ASSESSING OFFICER IN THE ABSENCE OF COMPLETE INFORMATION AND DETAILS MA DE DISALLOWANCE OF ` 55,54,131/- U/S. 40(A)(IA) R.W.S. 40A(2)(B) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) IN VIEW OF THE FACT THAT THE DETAILS WERE FURNISHED BY THE ASSESSEE DURING FIRST APPELLA TE STAGE REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FO R VERIFICATION WITH THE FOLLOWING DIRECTIONS : THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO V ERIFY THE CLAIM OF THE APPELLANT THAT THE IMPUGNED PAYMENTS MADE TO TACO W ERE SUBJECTED TO TDS AND THE TDS SO DEDUCTED WAS ALSO PAID TO THE GO VT.S A/C ON OR BEFORE THE STIPULATED DATE. ON DUE VERIFICATION, I F IT IS FOUND THAT THE PAYMENTS IN QUESTION WERE SUBJECTED TO TDS AND THE TDS SO MADE WAS ALSO REMITTED TO THE GOVT. A/C ON OR BEFORE THE SPE CIFIED DATE, THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS GROUND SHALL STAND DELETED OR IF THE PAYMENTS ARE SUBJECTED TO TDS PARTLY, THE ADDIT ION SHALL STAND DELETED TO THE EXTENT PAYMENTS ARE COVERED BY TDS A ND TDS SO MADE WAS ALSO REMITTED TO THE GOVT. A/C ON OR BEFORE THE SPECIFIED DATED. SUBJECT TO THESE VERIFICATIONS, THE GROUND APPEAL N O. 2 RAISED BY THE APPELLANT IS PARTLY ALLOWED. 29. WE ARE OF THE CONSIDERED VIEW THAT IN THE FACTS NARR ATED BY THE COMMISSIONER OF INCOME TAX (APPEALS), WHICH HAVE NOT BEEN CONTROVERTED BY THE LD. AR OF THE ASSESSEE, THE COMMISS IONER OF INCOME TAX (APPEALS) HAS RIGHTLY REMITTED THE MATTER BACK TO AS SESSING OFFICER FOR VERIFICATION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE. ACCORD INGLY, THE GROUND NO. 2 RAISED IN THE APPEAL BY THE ASSESSEE IS DISMISSED. 27 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 30. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN NOT ALLOWING DEPRECIAT ION ON CERTAIN ASSETS PUT TO USE BEFORE THE END OF THE FINANCIAL YEAR AND CLAIMED DEPRECIATION IN ACCORDANCE WITH THE PROVISIONS OF TH E INCOME TAX ACT. THE CLAIM OF THE ASSESSEE IS THAT THE ASSETS A CQUIRED DURING THE RELEVANT PREVIOUS YEAR WHICH INCLUDES 22 KV DISC INSULA TORS, CABLE, LIGHTENING ARRESTOR, FUSE SET, HT STAY SETS, POLE AND LABOU R CHARGES FOR INSTALLATION, LAYING AND FIXING THE SAID ELECTRICAL EQUIPMENTS AT EXPRESS FEEDER WERE PUT TO USE BEFORE 31-03-2009 TO GENERATE INCOME. THE ENTIRE COST OF THE SAID ASSETS WERE DISALLOWED BY THE AS SESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FURNISH RE LEVANT DETAILS TO PROVE THAT THE ASSET WAS ACTUALLY PUT TO USE ON OR B EFORE 31-03-2009. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDING S OF ASSESSING OFFICER IN DISALLOWING THE CLAIM AS THE ASSESSEE FILED TO FURNISH ANY COGENT EVIDENCE TO SHOW THAT THE AFORESAID A SSETS WERE PUT TO USE ON OR BEFORE 31-03-2009. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE CAN FURNISH EVIDENCE TO SHOW THAT EXPRESS FEEDER WAS PUT T O USE BEFORE 31- 03-2009. THE LD. AR MADE AN ALTERNATE PRAYER THAT THE ASSESSING OFFICER MAY BE DIRECTED TO INCREASE THE WRITTEN DOWN VALUE OF THE ASSETS IN THE NEXT ASSESSMENT YEAR. BOTH THE AUTHORITIES BELOW HAVE GIVEN CONCURRENT FINDING O F FACT THAT THE ASSESSEE HAS FAILED TO FURNISH ANY COGENT EVIDEN CE THAT THE AFOREMENTIONED ASSETS WERE ACTUALLY PUT TO USE ON OR B EFORE 31-03- 2009. IT IS AN UNDISPUTED FACT THAT THE ASSETS WERE AC QUIRED DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL. THE Q UESTION IS THEIR BEING PUT TO USE BEFORE 31-03-2009. WE DEEM IT APPROPR IATE TO REMIT 28 ITA NOS. 741, 1884, 1885, 1828 & 1829/PN/2013 AND CO NO. 15/PN/2014 THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR CONSIDERING THE FRESH EVIDENCE, IF ANY FURNISHED BY ASSESSEE TO SHOW THAT THE A SSETS WERE ACTUALLY PUT TO USE ON OR BEFORE 31-03-2009. THE ASSE SSING OFFICER AFTER CONSIDERING THE EVIDENCE FILED BY THE ASSESSEE IN THIS REGARD SHALL DECIDE THE ISSUE, IN ACCORDANCE WITH LAW. THE GROUND NO. 3 IN THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE, ACCORDINGLY. 31. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PART LY ALLOWED AND THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF JULY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 29 TH JULY, 2016 RK ,-*%./#0#). / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-IV, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE