ACIT 10(1), MUMBAI V. NAGASE INDIA P.LTD, MUMBAI

ITA 7866/MUM/2011

• Counselvise Citation: 786619914 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJA PRADHAN
• Assessee Lawyers: GIRISH DAVE; MADAV KHANDEWAL
• Keywords: Revenue expenditure
• Section: 10; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . . , , , BEFORE SHRI P.M. JAGTAP, AM AND SHRI AMIT SHUKLA , JM ITA NO. 7866 /MUM/201 1 ASSE S SMENT YEAR - 2008 - 09 ASST. COMMISSIONER OF INCOME - TAX - 10(1), 455, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI - 400020 / VS. NAGASE INDIA PRIVATE LIMITED 404, VAIBHAV CHAMBERS, BANDRA KURLA COMPLEX, BANDRA (EAST) MUMBAI - 400051 ./ PAN : AAC CN4051B ( / REVENUE ) .. ( / RESPONDENT ) ITA NO.8022 /MUM/201 1 ASSESSMENT YEAR - 2008 - 09 NAGASE INDIA PRIVATE LIMITED 404, VAIBHAV CHAMBERS, BANDRA KURLA COMPLEX, BANDRA (EAST) MUMBAI - 400051 / VS. ASST. COMMISSIONER OF INCOME - TAX - 10(1) , 455, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI - 400020 ./ PAN : AACCN4051B ( / APPELLANT ) .. ( / REVENUE ) / ASSESSEE BY : SHRI GIRISH DAVE & SHRI MADAV KHANDEWAL / REVENUE BY : SHRI NEERAJA PRADHAN / DATE OF HEARING : 26/02/2014 / DATE OF PRONOUNCEMENT : 05 /0 3 /2014 / ORDER , / PER AMIT SHUKLA , J.M. THE AFORES AID CROSS APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST IMPUGNED ORDER DATED 03/08/2011 PASSED 2 BY CIT(A) - 21, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) , FOR THE ASSESSMENT YEAR 2008 - 09. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL . 1. DISALLOWANCE OF REIMBURSEMENT OF SALARY AMOUNTING TO RS 3,653,755 A. THE LEARNED CIT(A) ERRED AS PER THE FACTS AND UNDER THE LAW IN CONFIRMING THE DISALLOWANCE OF RS. 3,653,755 BEING REIMBURSEMENT OF SALARY EXPENSES PAID T O NAGASE & CO LIMITED, JAPAN. B. HE ERRED IN NOT APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT COMPANY IN THE CORRECT PERSPECTIVE INCLUDING THE FACT THAT THE TAX ON THE SALARY HAD BEEN DEDUCTED AND PAID. C. HE ERRED IN OBSERVIN G THAT THE LEARNED ASSESSING OFFICER WAS JUSTIFIED IN INVOKING PROVISIONS OF SECTION 40(A) (III) OF THE ACT. 2. DISALLOWANCE OF FOREIGN TR AVELLING EXPENSES AMOUNTING TO R S 3,340,906 A. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS. 3,340,906 BEING EXPENSES INCURRED IN RESPECT OF FOREIGN TRAVEL. B. HE ERRED IN NOT APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT COMPANY IN THE CORRECT PERSPECTIVE THAT THE FOREIGN TRAVELLING EXPENSES WERE INCURRED WHOLLY AND E XCLUSIVELY FOR THE BUSINESS AND THEREOF SHOULD BE FULLY ALLOWABLE AS DEDUCTION. 3. DISALLOWANCE OF EXPENSES UNDER SECTION 40(A)(I) OF THE ACT AMOUNTING RS . 65,000 A. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES AMOUNTI NG TO RS. 65,000 UNDER SECTION 40(A)(I) OF THE ACT. B. HE ERRED IN NOT APPRECIATING IN THE CORRECT PERSPECTIVE THE SUBMISSIONS MADE BY THE APPELLANT COMPANY WITH REGARD TO THE AFORESAID DISALLOWANCES/ADDITION. C. HE ERRED IN OBSERVING THAT T HE APPELLANT HAS INTENTIONALLY NOT FILED A COPY OF TAX AUDIT REPORT DURING THE APPELLATE PROCEEDINGS. 2. BRIEF FACTS OF THE CASE, QUA THE ISSUE RAISED IN GROUND NO.1 ARE THAT T HE ASSESSEE COMPANY I.E. M/S NAGASE INDIA PRIVATE LIMITED I S AN INDIAN SUBSID IA RY OF M/S NAGASE AND COMPANY L TD. JAPAN. THE JAPANESE COMPANY HAD DEPUTED TWO OF ITS EMPLOYEES NAMELY , MR. H. ISHIGAKI AS A DIRECTOR AND MR. A. ISHII AS A GENERAL MANAGER TO THE INDIAN COMPANY VIDE DEPUTATION AGREEMENT DATED 02/07/2007. UNDER THE TERMS O F THE 3 AGREEMENT, BOTH THE EMPLOYEES WERE REQUIRED TO WORK UNDER THE CONTROL AND SUPERVISION OF THE ASSESSEE. AS PER THE AGREEMENT, THEIR ALLOWANCES SUCH AS SALARY, BONUS AND BENEFITS SHALL BE BORNE BY THE ASSESSEE. HOWEVER, PART OF THE SALARY OF THESE TW O EMPLOYEES FOR THE ALLOWANCES IN JAPAN , SHALL BE PAID BY THE JAPANESE COMPANY , WHICH SHALL BE REIMBURSED BY THE ASSESSEE COMPANY. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE REIMBURSED SUM OF RS.69,32,708/ - TO THE JAPANESE COMPANY TOWARDS SALARY EXPENS ES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO GIVE THE DETAILS OF PAYMENTS MADE TO THE PERSONS SPECIFIED U/S 40 A(2)(B) AND THE DETAILS OF THE TDS. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMIT TED THAT THE LIABILITY TO PAY SALARY OF THESE TWO DEPUTED EMPLOYEES WERE THAT OF THE ASSESSEE AND THE PAYMENTS MADE TO THE JAPANESE COMPANY IN THE FORM OF REIMBURSEMENT OF EXPENSES WAS ON THE BASIS OF ACTUALLY INCURRED AND NO INCOME HAS ACCRUED OR RECEIVE D IN INDIA OR IS DEEMED TO BE ACCRUED IN INDIA. ACCORDINGLY, NO TAX WAS REQUIRED TO BE WITHHELD U/S 195 ON THE SAID PAYMENTS. THE ASSESSING OFFICER , HOWEVER, REJECTED THE ASSESSEES CONTENTION AND HELD THAT ON THE REIMBURSEMENT OF THE EXPENSES IN THE FOR M OF SALARY , TDS WAS REQUIRED TO BE DEDUCTED AS PER THE PROVISIONS OF THE ACT. IN THIS CASE, ORDER U/S 195 WAS VALID ONLY UP TO MARCH 2007 AND NOT FOR THE CURRENT FINANCIAL YEAR. ON THIS BASIS, HE MADE THE DISALLOWANCE OF RS.36,53,755/ - U/S 40(A)(I) . 3 . IT IS VERY PERTINENT TO NOTE HERE AS TO HOW THE QUANTUM OF RS.36,53,755/ - HAS BEEN WORKED OUT BY THE ASSESSING OFFICER FOR THE PURPOSE OF DISALLOWANCE, WHEN THE TOTAL REIMBURSEMENT MADE TO THE JAPANESE COMPANY ON THE SALARY WAS AT RS.69,32,708/ - IS NOT C LEAR . FROM THE DETAILS AS ARE AVAIL ABLE ON RECORD, RS.36,53,755/ - PERTAIN TO MR. A. ISHII ONLY. THIS INTER ALIA, LEADS TO AN INFERENCE THAT THE PART OF SALARY PAID TO OTHER EMPLOYEES , THE A.O. WAS CORRECT IN ALLOWING THE SAME AS BUSINESS 4 EXPENSE . THUS, THE RE IS INHERENT CONTRADICTION IN THE FINDING OF THE ASSESSING OFFICER. 4 . BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT APART FROM THE FACT THAT THE PAYMENTS MADE TO NAGASE COMPANY , JAPAN , WERE SIMPLY IN THE NATURE OF REIMBURSEMENT OF SALARY EXPE NSES AND NO INCOME HAD EITHER ACCRUED OR RECEIVED BY THE ASSESSEE IN INDIA BUT THERE IS AN OTHER IMPORTANT ASPECT THAT THE ASSESSEE HAD ALREADY DEDUCTED TAX U/S 192 ON THE ENTIRE SALAR Y OF THE DEPUTED EMPLOYEE S , WHICH IS EVIDENT FROM THE FORM NO.16 IN CASE OF BOTH THE EMPLOYEE S . THUS, THE TAX HAS BEEN WITHHELD ON THE ENTIRE SALARY PAID TO THESE EMPLOYEES AND THIS WAS SPECIFICALLY SUBMITTED BEFORE THE AO , VIDE LETTER DATED 17/09/210. ONCE THE ASSESSEE HAS ALREADY DEDUCTED THE TAX EVEN ON THE REIMBURSEMENT OF SALARY WHICH WAS PAID BY THE JAPANESE COMPANY THEN THERE WAS NO REQUIREMENT OF WITHHOLDING TAX AGAIN ON THE SAME AMOUNT TWICE U/S 195 . THE LD. CIT(A) THOUGH HAS NOTED THIS IMPORTANT ARGUMENT OF THE ASSESSEE , HOWEVER, HELD THAT AS PER THE AGREEMENT, 50 % OF THE EXPENSES PERTAINING TO SALARY OF THESE TWO EMPLOYEES BORNE BY THE JAPANESE COMPANY HAS BEEN REIMBURSED BY THE ASSESSEE ON WHICH TDS WAS REQUIRED TO BE DEDUCTED. HE HELD THAT THE PROVISIONS OF SECTION 192 R.W.S. 40(A)(III) IS APPLICABLE IN THIS CA SE AND ASSESSEE SHOULD HAVE DEDUCTED TDS. REGARDING THE FILING OF FORM NO.16, WHEREIN, THE TDS HAS BEEN DEDUC TED ON THE ENTIRE SALARY I . E ., BORNE BY THE ASSESSEE AS WELL AS JAPANESE COMPANY, THE LD. CIT(A) OBSERVED AND HELD AS UNDER: - I HAVE CAREFULLY C ONSIDERED THE APPELLANTS SUBMISSIONS. DURING APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED COPIES OF FORM NO. 16, IN RESPECT OF M.H. ISHIGAKI, DIRECTOR OF APPELLANT AND MR. AKIHISA ISHII, GENERAL MANAGER. THESE FORM NO. 16, SHOWS THAT TAXES WERE DEDUCT ED ON SALARY AND EMOLUMENTS PAID TO THESE TWO EMPLOYEES. HOWEVER, THE REIMBURSEMENT OF SALARY TO NAGASE & CO. LTD. JAPAN, WAS IN ADDITION TO THE SALARY AND EMOLUMENTS SHOWN IN THE FORM NO.16 ISSUED BY THE APPELLANT TO THESE TWO PERSONS. FOR EXAMPLE, IN I TS LETTER DATED 17/02/2010, THE APPELLANT GAVE DETAILS OF SALARY OF 5 MR. H.ISHIGAK(DIRECTOR) AT RS.1,16,12664/ - . HOWEVER, THE FORM NO.16, SHOWS THAT THE GROSS SALARY INCLUDING VALUE OF PERQUISITES ETC. PAID TO SHRI H. ISHIGAKI WERE AT RS.83,19,640/ - ONLY. THIS SHOWS THAT THE FORM NO. 16 ISSUED BY APPELLANT TO THE EMPLOYEES DID NOT INCLUDE THE PORTION OF SALARY AND EMOLUMENTS REIMBURSED BY THE APPELLANT TO THE JAPANESE COMPANY. IN THE FACTS AND CIRCUMSTANCES, APPELLANTS ARGUMENT IS DEVOID OF ANY FORCE TH AT THE DUE TAXES WERE WITHHOLD BY APPELLANT ON SUCH PAYMENT REIMBURSED TO THE JAPANESE COMPANY. IN VIEW OF THE ABOVE DISCUSSION IT IS HELD THAT THE PROVISIONS OF SECTION 192 R.W.S. 40(A)(III) OF THE ACT WERE APPLICABLE IN RESPECT OF PART OF SALARY AND R EMUNERATIONS OF THE DEPUTED EMPLOYEES REIMBURSED BY APPELLANT TO THE JAPANESE COMPANY. THIS REIMBURSEMENT WAS NOT ACTUALLY REIMBURSEMENT OF EXPENSES BUT PAYMENT OF PART OF SALARY AND EMOLUMENTS TO DEPUTED PERSONS OUTSIDE INDIA THROUGH ITS JAPANESE HOLDING COMPANY. SINCE THE TAX WAS NOT WITHHELD ON SUCH PAYMENTS, THE AO WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SEC.40(A)(III) OF THE ACT THOUGH HE INADVERTENTLY MENTIONED THE SECTION AS 40(A)(IA) OF THE ACT. THE DISALLOWANCE MADE BY AO IS, THEREFORE, UPHE LD. THIS GROUND OF APPEAL IS DISMISSED . 5 . BEFORE US, THE LD. COUNSEL , SHRI GIRISH DAVE SUBMITTED THAT THE BASIS ON WHICH THE AO HAS DISALLOWED PART OF THE REIMBURSEMENT OF EXPENSES IS NOT CLEAR , AS TO HOW HE HAS WORKED OUT THE DISALLOWANCE. BEFORE, THE CIT(A), THE ASSESSEE HAS FILED NOT ONLY FORM NO.16 WHICH GIVES THE ENTIRE DETAILS OF SALARY PAID BY THE ASSESSEE AS WELL AS BY THE JAPANESE COMPANY , BUT ALSO THE WORKING OF THE AMOUNT ON WHICH THE ASSESSEE HAS DEDUCTED TDS AND DEPOSIT ED THE SAME IN TH E GOVT. TREASURY . THE LD. CIT(A) DESPITE NOTING THIS FACT HAS CONFIRMED THE AOS FINDINGS , WITHOUT ANY PROPER REASONING OR ANALYSIS , AS TO HOW THERE WAS A REQUIREMENT OF DOUBLE DE D CUTION OF TDS, ONE AT THE TIME OF PAYMENT OF SALARY AND OTHER AT THE TIME O F REIMBURSEMENT OF THE SALARY EXPENSES. HE ALSO DREW OUR ATTENTION TO FORM NO. 16 OF BOTH THE EMPLOYEE AS GIVEN AT PAGE 105 TO 107 AND PAGE 109 TO 112 OF THE PAPER BOOK . FROM THIS FORM NO. 16, HE SUBMITTED THAT THE ASSESSEE HAS DEDUCTED TDS ON THE ENTIR E SALARY AND HAS ALSO PROVIDED THE DETAILS WHICH WERE ANNEXED ALONG WITH THE FORM NO. 16 ITSELF. HE ALSO DREW OU R ATTENTION TO PAGE 96 OF THE PAPER BOOK , WHEREIN THE DETAILS AND 6 BREAK UP OF THE SALARY PAID AND TDS DEDUCTED HAS BEEN GIVEN AND FROM THIS DET AIL HE POINTED OUT THAT THE SALARY WHICH WERE SUBJECTED TO TDS U/S 192 IN INDIA ALSO INCLUDE D THE SALARY PAID BY THE JAPANESE COMPANY TO THESE EMPLOYEES. ONCE THE TDS HAS BEEN DEDUCTED ON THE ENTIRE SALARY , THEN THERE WAS NO REQUIREMENT IN LAW IN HOLDING THAT PART OF THE SALARY WHICH WAS BORNE BY THE JAPANESE COMPANY AND REIMBURSE D BY THE ASSESSEE, TDS WAS REQUIRED TO BE DEDUCTED AGAIN . EVEN THE DEPARTMENTS STAND IS NOT CLEAR AS TO WHY ONLY IN CASE OF ONE EMPLOYEE , T HE DISALLOWANCE HAS BEEN MADE , WHEREAS NO SUCH DISALLOWANCE HAS BEEN MADE IN THE CASE OF THE CASE OF OTHER EMPLOYEE . T HE DETAILS OF REIMBURSEMENT OF SALARY EXPENSES AS AVAILABLE ON RECORD WERE AS UNDER: - ( FIGURES IN RUPEES ) H.ISHIGAKI A.ISHII TOTAL AS PER TAX AUDIT REPORT 32,78,95 3/ - 36,53,755/ - 69,32,708/ - ACTUAL 33,09,989/ - 36,22,719/ - 69,32,708/ - DIFFERENCE IS ON A CCOUNT OF MEDICAL ALLOWANCE OF R S.31,036/ - OF MR. H. ISHIGAKI INCLUDED IN MR. A. ISHII , TAX AUDIT REPORT HE ALSO SUBMITTED BEFORE US THE RECONCILIATION OF SALARY AS PER ANNEXURE OF THE AUDIT REPORT T O DEMONSTRATE THE WORKING OF THE SALARY AS MENTIONED IN FORM NO. 16. BASED ON THESE DOCUMENTS, HE SUBMITTED THAT , FIRSTLY , THE ASSESSEE HAS ALREADY DEDUCTED THE TAX U/S 192 ON THE ENTIRE SALARY PAID, INCLUDING THE SALAR Y REIMBURSE D TO JAPANESE COMPANY TO BOTH THE EMPLOYEES AND , THEREFORE , NO ADDITION WAS WARRANTED U/S 40(A)(III); S ECONDLY, NO CIRCUMSTANTIAL DIFFERENCE HAS BEEN POINTED OUT EITHER BY THE AO OR BY THE CIT(A) BETWEEN THE SALARY PAID TO MR. A. ISHII (WHICH IS THE ACTUAL AMOUNT IN DISPUTE) AND THE THE SALARY PAID TO MR. H. ISHIGAKI ; AND L ASTLY , THE REIMBURSEMENT OF SALARY DOES NOT INCLUDE ANY ELEMENT OF INCOME EITHER FROM OR TO NAGASE COMPANY JAPAN. THEREFORE , THERE WAS NO LIAB ILITY TO DEDUCT TDS U/S 195. 7 6 . ON THE OTHER HAND, THE LD. DR SUBMITTED THAT AS PER THE AGREEMENT, 50% OF THE S A LARY PAID TO THE DEPUTED EMPLOYEE WAS TO BE BOR NE BY THE JAPANESE COMPANY AND OTHER 50% HAS TO BE BORNE BY INDIAN COMPANY. WHILE, REIMBURSING THE SALARY EXPENSES TO THE JAPA NESE COMPANY, THE ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S 195 AS IT AMOUNT S TO RENDERING OF SERVICES BY THESE TWO EMPLOYEES IN INDIA. FURTHER, SHE STRONGLY RELIED UPON THE REASONING AND CONCLUSION GIVEN BY THE CIT(A). 7 . WE HAVE HEARD THE RIVAL SUBMISSION AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE JAPANESE COMPANY HAD DEPUTED TWO OF ITS EMPLOYEES ONE DIRECTOR AND OTHER GENERAL MANAGER TO WORK FOR THE INDIAN COMPANY UNDER THE TERMS OF DEPUTATION AGREEMENT WHICH PROVIDED THAT THEY HAVE TO WORK UNDER THE CONTROL AND SUPERVISION OF THE ASSESSEE - COMPANY. THE PART OF THE SALARY OF THE SE EMPLOYEE S FOR RENDERING THE SERVICES IN INDIA FOR THE INDIAN COMPANY WAS TO BE PAID BY THE JAPANESE COMPANY, WHICH WAS TO BE REIMBURSED BY THE INDIAN COMPANY. DURING THE UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS REIMBURSED A SUM OF RS.69,32,708/ - TO THE JAPANESE COMPANY AS PER THE DETAILS INCORPORATED ABOVE. THE ASSESSING OFFICER , WITHOUT ANY BASIS OR ANALYSIS HAS DISALLOWED A PART OF THE SUM OF RS. 36,53 ,755/ - PERTAINING TO ONE OF THE EMPLOYEE I.E., MR. A. ISHII AND HAS NOT MADE ANY COMMENT OR ANY DISALLOWANCE ON THE PART OF THE REIMBURSEMENT MADE IN THE CASE OF MR. H. ISHIGAKI. EVEN THE CIT(A) ALSO HAS NOT POINTED OUT AS T O WHY SUCH A DIVERGENT APPROACH , HAS BEEN ADOPTED. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS FILED FORM NO. 16 , BEFORE THE AO AS WELL AS BEFORE THE CIT(A) AND HAS ALSO CATEGORICALLY POINTED OUT THAT THE ENTIRE SALARY PAID TO THESE EMPLOYEES THAT IS , PARTLY PAID BY THE INDIAN COM PANY AND PARTLY PAID BY THE JAPANESE COMPANY HAS BEEN INCLUDED IN FORM NO. 16 ON WHICH TDS HAS BEEN DEDUCTED. FROM THE 8 PERUSAL OF THE FORM NO. 16 OF MR. H. ISHIGAKI, DIRECTOR, IT IS SEEN THAT GROSS SALARY SHOWN IS INCLUSIVE OF VARIOUS PERQUISITE S AND ALL OWANCE S FOR THE ASSESSMENT YEAR 2008 - 09 WAS AT RS.83,19,640/ - AND IN THE CASE OF MR. A. ISHII, THE GROSS SALARY WA S RS. 71,43,608/ - . THE BREAK UP OF TH E QUANTUM OF SALARY PAID BY THE JAPANESE COMPANY AND BY THE ASSESSEE IN BOTH THE CASES ARE AS UNDER: - TO TAL SALARY PAID AND TDS DEDUCTED ( FIGURES IN RUPEES ) PARTICULARS H. ISHIGAKI A. ISHII INDIAN SALARY 953,374 443,398 HOME SALARY (JAPAN) 2,438,256 2,678,065 BONUS (JAPAN) 840,697 925,292 TAX GROSSED UP 2,091,781 1,996,226 PERQUISITE: MEDI CAL ALLOWANCE 31,036 19,362 LESS: EXEMPT (15,000) (15,000) 4,362 LESS: TRAVEL ALLOWANCE 16,036 44,000 SCHOOL FEES 456,952 ELECTRICITY 419,200 124,019 HOUSING ACCOMMODATION 93,240 1,995,532 928,247 1,100,628 TOTAL SALARY AS PER FOR M 16 1,010,104 8,319,640 7,143,608 9 TOTAL SALARY PAID BY NAGASE & CO., JAPAN ( FIGURES IN RUPEES ) HOME SALARY (JAPAN) H. ISHIGAKI A. ISHII TOTAL BONUS (JAPAN) 2,438,256 2,678,065 5,116,321 MEDICAL ALLOWANCE (JAPAN) 840,697 925,292 1,765,988 TOTAL 31, 036 19, 362 50,398 AMOUNT AS PER TAX AUDIT REPORT 3,309,989 3,622,719 6,932,708 DIFFERENCE AS PER TAX AUDIT REPORT 3,278,953 3,653,755 6,932,708 DIFFERENCE ON ACCOUNT OF MEDICAL ALLOWANCE OF MR. ISHIGAKI WRONGLY INCLUDED IN MR. ISHII AS PER TAX AUDIT REP ORT 31,036 (31,036) 8 . FROM THE ABOVE CHART, IT IS CLEAR THAT THE SALARY OF 83,19,640/ - AND RS. 71 ,43,608/ - INCLUDES THE SALARY PAID BY THE JAPANESE COMPANY ALSO. DESPITE THIS VITAL INFORMATION PLACED BEFORE THE AO AS WELL AS THE CIT(A), BOTH HAVE FAIL ED TO APPRECIATE THAT FIRSTLY , THE ASSESSEE HAS ALREADY DEDUCTED TAX U/S 192 , ON THE ENTIRE SALARY INCLUDING SALARY REIMBURSE D BY THE ASSESSEE COMPANY AND HENCE THERE WAS NO REQUIREMENT OF MA KING A N Y DISALLOWANCE U/S 40(A)(III) ON THE GROUND THAT NO TDS HA S BEEN DEDUCTED AND, SECONDLY, IT HAS NOT BEEN BROUGHT ON THE RECORD AS TO HOW THE REIMBURSEMENT OF SALARY M AD E BY THE ASSESSEE COMPANY AMOUNTS TO PAYMENT TO THE JAPANESE COMPANY ON ACCOUNT OF RENDERING OF SERVICES , WHICH CAN LEAD TO AN INFERENCE THAT THER E IS AN ELEMENT OF INCOME FOR WHICH THERE WAS AN OBLIGATION TO WITHHOLD TAX U/S 195. THUS, WE HOLD THAT NO DISALLOWANCE EITHER U/S 40(A)(I) OR 40(A)(III) IS CALLED FOR AS THE ASSESSEE HAS DULY DEDUCTED TAX ON THE ENTIRE SALARY U/S 192. 10 9 . NOW COMING TO THE CIT(A) S OBSERVATION AS INCORPORATED ABOVE THAT IN THE CASE OF H. ISHIGAKI , THE SALARY PAID IS RS.1,16,12,664/ - WHEREAS IN FO R M NO. 16 , THE AMOUNT OF RS.83,19,640/ - HAS BEEN SHOWN. BEFORE US, THE LD. COUNSEL SHRI GIRISH DAVE HAS FILE D RECONCILIATION CH ART WHICH IS AS UNDER: - MR. HARUKAZU ISHIGAKI PARTICULARS AMOUNT (RS) AMOUNT (RS) REMARKS SALARY AS PER TAX AUDIT REPORT 1,16,12,664 ADD: TAXABLE ITEMS / PERQUISITE VALUE AS PER INCOME TAX RULES 1962 SPECIAL ALLOWANCE 20,91,781 ACTUAL GROSS UP VAL UE OF TAXABLE SALARY AND PERQUISITES COMPUTED AS PER PROVISIONS OF THE ACT MEDICAL ALLOWANCE 16,036 THE DIFFERENCE BETWEEN ACTUAL MEDICAL ALLOWANCE AND TAXABLE IS ON ACCOUNT OF EXEMPT VALUE TO THE EXTENT OF ` 15,000/ ELECTRICITY 93,240 PERQUISITE VALU E OF ELECTRICITY BILL ON ESTIMATED BASIS HOUSE RENTAL ACCOMMODATION 10,10,104 PERQUISITE VALUE OF HOUSE RENT ACCOMMODATION MEMBERSHIP FEES THE COMPANY HAS PAID FRINGE BENEFIT TAX ON THE SAME. ACCORDINGLY, THE SAME IS NOT TAXABLE IN THE HANDS OF MR. I SHIGAKI CAR PERQUISITE SUB TOTAL 32,11,161 11 LESS: AMOUNT AS PER FINANCIAL STATEMENT SPECIAL ALLOWANCE 28,09,373 ESTIMATED GROSS UP VALUE OF TAXABLE SALARY AND PERQUISITE ON THE BASIS OF ACTUAL VALUE OF BENEFITS PROVIDED MEDICAL ALLOWANCE 31, 036 ACTUAL MEDICAL ALLOWANCE ELECTRICITY 1,09,206 ACTUAL ELECTRICITY EXPENSES INCURRED HOUSE RENTAL ACCOMMODATION 27,00,000 ACTUAL RENT PAID MEMBERSHIP FEES 92,622 ACTUAL MEMBERSHIP FEES PAID CAR PERQUISITE 7,61,894 ACTUAL CAR RUNNING AND MAINTENA NCE EXPENSES SUB TOTAL 65,04,185 SALARY AS PER FORM 16 83,19,640 10 . FROM THE AFORESAID RECONCILIATION, IT IS APPARENT THAT THE TOTAL TAXABLE SALARY AS PER THE A CT IS RS. 83,19,640/ - ONLY , WHICH HAS BEEN INCLUDED IN FROM NO.16. THUS, SUCH AN OBSERV ATION OF THE CIT(A) TO CONFIRM THE FINDINGS AND ADDITION MADE BY THE ASSESSING OFFICER IS COMPLETELY VITIATED ON FACTS AND HENCE, CANNOT BE SUSTAINED. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS SET ASIDE AND TH E ADDITION IS DELETED. THUS, GROUND NO. 1 A S RAISED BY THE ASSESSEE IS ALLOWED. 11 . IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS.33,40,906/ - . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO GI VE THE DETAILS OF TRAVELLING EXPENSES AND 12 ALSO THE BIFURCATION OF EXPENSES INCURRED ON DOMESTIC TRAVEL AS WELL AS FOREIGN TRAVEL. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE HOLDING COMPANY OF THE ASSESSEE IS SITUATED IN JAPAN AND FURTHER, THE COMMISSION ON INDENT BUSINESS EARNED BY THE ASSESSEE IS MOSTLY ON THE SALE OF GOODS DEALT BY THE PARENT COMPANY. THEREFORE, THE EMPLOYEES OF THE INDIAN COMPANY ARE REQUIRED TO VISIT JAPAN AND VARIOUS FOREIGN COUNTRIES IN CONNECTION WITH SALES AND IN ORDER TO UNDERST AND THE PRODUCT AND ALSO VARIOUS UPDATES ON SUCH PRODUCTS. THE TRAVELLING ALSO INCLUDED VARIOUS BUSINESS DISCUSSION HELD WITH THE HEAD OFFICE. THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION AND HELD THAT ASSESSEE IS EARNING INDENT COMMISSION ON THE SALE OF GOODS DEALT ONLY BY THE PARENT COMPANY AND THERE IS NO REASON FOR EMPLOYEES OF THE ASSESSEE COMPANY GO ABROAD. AS FA R AS THE ASSESSEE IS CONCERN ED , THERE WAS NO REQUIREMENT TO INCUR FOREIGN TRAVEL EXPENSES AND IN FACT THE EXPENSES INCURRED BY THE ASSESSEE , IS ACTUALLY THE EXPENSES INCURRED ON BEHALF OF THE PARENT COMPANY. THE LD. CIT(A) ALSO UPHELD THE AOS CONTENTION AND CONFIRM ED THE SAID DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO EXPLAIN AS TO HOW THE INCURRING OF THE FOREIG N TRAVEL EXPENSES GIVE S ADVANTAGE TO THE ASSESSEE BUSINESS AND HENCE SUCH A FOREIGN TRAVELLING IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 1 2 . BEFORE US, THE LD. COUNSEL , SHRI GIRISH DAVE , SUBMITTED THAT THE ENTIRE DETAILS OF EXPENS ES WERE GIVEN BEFOR E THE ASSESSING OFFICER WHICH ARE APPEARING AT PAGES 115 TO 140 OF THE PAPER BOOK. ALONG WITH SUCH DETAILS , THE ACTUAL EXPENSES OF TRAVELING BY THE EMPLOYEES WERE ALSO FILED WHI CH ARE APPEARING IN PAPER BOOK O N PAGES 141 ONWARDS. THE AS SESSEE , APART FROM THE INDENTING COMMISSION BUSINESS IS ALSO ENGAGED IN IMPORT AND EXPORT OF GOODS AND FOR BOTH THE BUSINESSES , THE ASSESSEES EMPLOYEES HA VE TO UNDERTAKE FOREIGN TRAVEL TO VARIOUS COU NTRIES AND ALSO THE HEAD OFFICE, WHICH IS IN JAPAN. ONC E, THERE IS NO PERSONAL ELEMENT AND ALL THE 13 EXPENSES INCURRED ON ACCOUNT OF FOREIGN TRAVELING BY THE EMPLOYEES ARE FOR THE BUSINESS PURPOSES , THE DEPARTMENT CANNOT QUESTION AS TO WHY SUCH EXPENSES WERE INCURRED. 13 . ON THE OTHER HAND, THE LD. DR STRONGLY RELIED UPON THE FINDINGS OF THE CIT(A). 1 4 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL PLACED ON RECORD. THE ONLY CASE OF THE DEPARTMENT IS THAT THE ASSESSEE WAS NOT REQUIRED TO INCUR EXPENSES ON FOREIGN TRAVELING AS THE SAME SHOUL D HAVE BEEN BORNE BY THE PARENT COMPANY , BECAUSE THE ASSESSEE IS ONLY S EL LING THE PRODUCTS OF THE PARENT COMPANY AND S UCH AN EXPENSES HAS BEEN INCURRED MAINLY ON BEHALF OF THE PARENT COMPANY , THEREFORE , THE SAME IS NOT ALLOWABLE. SUCH A VIEW CANNOT BE SUS TAINED , FIRSTLY , FOR THE REASON THAT ONCE, THE ASSESSEE HAS SHOWN THAT ITS EMPLOYEES HAVE UNDERTAKEN FOREIGN TRAVELLING FOR THE PURPOSE OF INDENTING BUSINESS ON WHICH IT HAS EARNED COMMISSION INCOME AND ALSO ON THE BUSINESS OF IMPORT AND EXPORT OF GOODS , T HEN SAME CANNOT BE DOUBTED UNTIL AND UNLESS IT HAS BEEN FO UN D THAT THESE EXPENSES ARE EITHER PERSONAL IN NATURE OR IT WAS NOT FOR THE BUSINESS PURPOSE AT ALL ; SECONDLY, THE REVENUE CANNOT DECIDE WHO SHOULD BEAR THE EXPENSES AND WHY THE ASSESSEE WAS REQUIRE D TO INCUR SUCH EXPENSES. THE DECISION TO INCUR EXPENSES IS UPON THE ASSESSEE, SO LONG AS IT IS FOR THE PURPOSE OF BUSINESS. IN THIS CASE, T HE ASSESSEE HAS FILED EXHAUSTI VE DETAILS OF THE FOREIGN TRAVELING EXPENSES ALONGWITH THE EVIDENCE S ON WHICH NO INFIR MITY OR DISCREPANCY HAS BEEN FOUND EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT(A) . ONCE, THE ASSESSEE HAS INCURRED THESE EXPENSES , WHICH ARE FULLY VERIFIABLE AND HAVE SHOWN TO BE FOR THE BUSINESS PURPOSE , THEN ADVERSE PRESUMPTION CANNOT BE DRAWN THAT SUCH EXPENSES WERE GENUINE OR WERE NOT REQUIRED TO BE INCURRED BY EH ASSESSEE. THUS, THE VIEW TAKEN BY THE LD. CIT(A) FOR CONFIRMING THE 14 DISALLOWANCE CANNOT BE SUSTAINED AND AS SUCH STANDS DELETED. IN THE RESULT, GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED. 1 5 . IN G ROUND NO.3, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS.65,000/ - MADE U/S 40(A)(I). THE ASSESSING OFFICER NOTED THAT AN AMOUNT OF TDS DEDUCTED OF RS.1320 / - WAS DUE TO BE DEPOSITED ON 07/ 09/2007 WHEREAS THE SAME HAS DEPOSITED ON 0 2/05/2008. HENCE, THE EXPENSES PERTAINING TO THIS DEPOSIT OF TDS OF RS. 1320 WAS ESTIMATED AT RS.65,000/ - AND WAS ADDED U/S 40(A)(I). EVEN T HE LD. CIT(A) HAS CONFIRMED THIS ADDITION. BEFORE THE CIT(A), IT WAS SUBMITTED THAT DURING THE YEAR, THE ASSESSEE H AD PAID AN AMOUNT OF RS.12,809/ - TO BHARTI CORPORATE SER VICES, TOWARDS PROFESSIONAL FEE FOR PROVIDING RECRUITMENT SERVICES TO THE PARENT COMPANY, ON WHICH TDS WAS REQUIRED TO BE DEDUCTED AT THE RATE OF 10.3% , WHICH AMOUNTED TO RS. 1320/ . THEREFORE, THE RE WA S ABSOLUTELY NO JUSTIFICATION FOR THE AO TO ESTIMATE THE DISALLOWANCE AT RS.65,000/ - . THE LD. CIT(A) HAS UPHELD TH E FINDINGS OF THE A.O. ON THE GROUND THAT THIS DISALLOWANCE WAS MADE ON ACCOUNT REMARK IN TAX AUDIT REPORT , RELATING TO THE PAYMENT OF TDS AT RS.1320/ - . THE REVERSE CALCULATION OF THE AO WHICH IS BASED ON ESTIMATE BASIS IS CORRECT , AS THE ASSESSEE COULD NOT EXPLAIN AS TO WHY THE AUDITORS HAVE TAKEN NOTE OF TDS AMOUNT NOT DEPOSITED IN TIME. 16 . BEFORE US, THE LD. COUNSEL SUBMITTED THAT FIRST OF ALL , THE AMOUNT OF TDS OF RS.1320/ - PERTAIN S TO A N AMOUNT OF RS.12,809/ - ONLY AND S ECONDLY, THE ASSESSEE HAS DULY DEDUCTED THE TAX AND DEPOSITED THE SAME MUCH BEFORE THE FILING OF RETURN OF INCOME WHICH W AS FILED ON 29/09/2008. THEREFORE, NO DISALLOWA NCE BE MADE AND U/S 40(A)(I) R/W PROVISO THERETO. 17 . THE LD. DR RELIED UPON THE FINDINGS OF THE CIT(A). 1 8 . AFTER CAREFULLY CONSIDERING THE RELEVANT RECORD AND ON THE PERUSAL OF THE BILL RAISED WHICH IS PLACED IN THE PAPER BOOK, IT IS SEEN THAT THE DEDU CTION OF TDS AMOUNT OF RS.1320, PERTAIN S TO PAYMENT OF P ROFESSIONAL 15 FEES OF RS.12809 TO BHARTI CORPORATE SERVICES FOR PROVIDING RECRUITMENT SERVICES FOR THE PARENT COMPANY. THE AMOUNT OF TDS WHICH WAS DEDUCTED , HAS BEEN DEPOSITED IN THE GOVERNMENT ACCOUNT ON 02/05/2008 I.E. MUCH PRIOR TO THE DATE OF FILING OF RETURN OF INCOME WHICH WAS ON 29/09/2008 FILED U/S 139(1). THUS, NOT ONLY THE ESTIMATED DISALLOWANCE OF RS.65,000/ - IS UNWARRANTED BUT ALSO THE SAME IS UNCALLED FOR BOTH ON FACTS AND IN LAW. ACCORD INGLY, G ROUND NO.3 AS RAISED BY THE ASSESSEE IS ALLOWED. 1 9 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 20 . IN DEPARTMENTS APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED. I . ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN D ELETING THE DISALLOWANCE OF RS. 99,393/ - U/S. 40(A)(IA), BEING REIMBURSEMENT OF EXPENSES. II . ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF 50% OF COMMISSION AND BROKERAGE EXPENSES OF RS. 9,79,927/ - PAID FOR RENEWAL OF LEAVE & LICENSE AGREEMENT. III . THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.. 21 . THE BRIEF FACTS RELATING TO GROUND NO.1 IS THAT T HE ASSESS ING OFFICER HAS DISALLOWED A SUM OF RS.99,393/ - WHICH WERE SHOWN AS REIMBURSEMENT OF EXPENSES , ON THE GROUND THAT ASSESSEE HAS NOT DEDUCTED TDS. BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT IT HAD MADE THE PAYMENT TO THE PARENT COMPANY, NAGASE AND C OMPA NY L TD. AND OTHER ASSOCIATES TOWARDS REIMBURSEMENT OF FOLLOWING EXPENSES, WHICH WERE INCURRED ON BEHALF OF THE ASSESSEE. SAMPLE CHARGES RS. 6,290+6,189+1,582 MEETING EXPENSES RS. 13,408 HOTEL EXPENSES RS. 71,924 RS. 99,393 16 IT WAS SUBMITTED THAT THESE EXPENSES WERE REIMBURSED WHICH WERE ACTUALLY INCURRED BY THE PARENT COMPANY AND ASSOCIATE COMPANY AND THERE IS NO PROFIT ELEMENT, THEREFORE, NO TDS IS REQUIRED TO BE DEDUCTED. 22 . THE LD. CIT(A) DELETED THE SAID ADDITION AFTER OBSERVING AND H O LD ING AS UNDER: - I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLANT REIMBURSED THE EXPENSES TO PARENT COMPANY FOR SAMPLE CHARGES, MEETING EXPENSES AND HOTEL EXPENSES. THESE EXPENSES REIMBURSED BY THE APPELLANT TO JAPANESE PARENT COMPANY WERE NOT COVERED BY THE PROVISIONS OF SEC. 192 TO 194 LA OF THE ACT. THESE PROVISION DEALS WITH WITHHOLDING OF TAX ON DIFFERENT TYPE OF PAYMENTS. IN THE FACTS AND CIRCUMSTANCES, RESIDUARY SECTION 195 OF THE ACT COULD HAVE SOME APPLICATION ON THESE PAYMENTS. HOWEVER, PROV ISIONS OF SEC.195 PERTAIN TO PAYMENTS MADE TO NON - RESIDENT COMPANY OR TO A FOREIGN COMPANY IN RESPECT OF PAYMENTS OF ANY INTEREST OR OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. HOWEVER, CONSIDERING THE NATURE OF EXPENSES FOR WHICH THE APPELLANT HAS MADE REIMBURSEMENT, THE SAME WERE NOT CHARGEABLE UNDER THE PROVISIONS OF THIS ACT IN THE HANDS OF THE FOREIGN COMPANY. IN THE FACTS AND CIRCUMSTANCES, THERE WAS NO REQUIREMENT OF WITHHOLDING THE TAX ON SUCH PAYMENTS. THE DISALLOWANCE MADE BY AO IS TH EREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED . 2 3 . THE LD. DR REL Y I NG UPON THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT THE ONUS WAS UPON THE ASSESSEE TO SHOW THAT THERE IS NO INCOME ELEMENT ON SUCH REIMBURSEMENT OF EXPENSE S . ON THE OTHER HAND, THE LD. AR STRONGLY RELIED UPON THE FINDINGS OF THE CIT(A) AND SUBMITTED THAT THESE ARE MISC. EXPENSES , WHICH IS EVIDENT FROM THE VERY NATURE OF THE EXPENSES INCURRED. IT DOES NOT CONTAIN ANY ELEMENT OF INCOME. 2 4 . AFTER CAREFULLY CONSIDERING THE RI VAL SUBMISSION S AND THE FINDINGS OF THE CIT(A), W E FIND THAT THE LD. CIT(A) HA S HELD THAT THE EXPE NSES RELATING TO SAMPLE CHARGES, MEETING EXPENSES AND HOTEL EXPENSES ARE NOT COVERED 17 UNDER ANY OF THE PROVISIONS OF SECTION 192 TO 194 LA. THERE IS NO REQUI REMENT OF WITHHOLDING THE TAX UNDER ANY PROVISIONS OF THE ACT INCLUDING S ECTION 195. HENCE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS RECORDED BY THE CIT(A) AND ACCORDINGLY THE SAME IS CONFIRMED. IN THE RESULT, THE GROUND NO.1 RAISED BY THE DEPARTMENT IS DISMISSED. 25 . THE FACTS REGARDING GROUND NO.2 ARE THAT THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS PAID A SUM OF RS 18,53,934/ - AS COMMISSION AND BROKERAGE ON THE RENEWAL OF LEAVE & LICENSE AGREEMENT. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THESE EXPENSES WE RE INCURRED IN ORDER TO AVAIL THE SERVICES OF BROKER WITH A VIEW TO ACQUIRE THE PREMISES ON RENT AND IT HAS NO NEXUS BETWEEN THE AFORESAID EXPENSE INCURRED AND THE PERIOD OF LEAVE & LICENSE AGREEMENT. THE ASSES SING OFFICER HELD THAT THE ASSESSEE IS HIRING THE PREMISES ON LEAVE & LICENSE AGREEMENT FOR THE PERIOD OF TWO YEARS AND , THEREFORE , COMMISSION AND BROKERAGE SHOULD ALSO BE DIVIDED FOR TWO YEARS. ACCORDINGLY, HE DISALLOWED 50% OF THE SAID AMOUNT WHICH COME S TO RS.9,26,967/ - . BEFORE THE LD CIT(A), THE SAME SUBMISSION WERE REITERATED AND WAS SUBMITTED THAT SUCH AN EXPENSES DO NOT LEAD TO ANY ACQUISITION OF ANY NEW ASSET OR ADVANTAGE OF ENDURING BENEFIT. T HE EXPENDITURE INCURRED IS PURELY REVENUE IN NATURE, WH ICH WAS MADE TO THE BROKER FOR RENEWAL OF LEAVE & LICENSE AGREE MENT IN THIS YEAR. 26 . THE LD. CIT(A) DULY APPRECIATED THE ASSESSEES CONTENTION AND DELE TED THE SAID DISALLOWANCE AFTER OBSERVING AND HOLDING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLANT PAID SUM OF RS.18,53,934/ AS COMMISSION AND BROKERAGE, ON THE RENEWAL OF LEAVE AND LICENSE AGREEMENT FOR THE PROPERTIES. THE AO HIMSELF ADMITTED THAT SUCH EXPENDITURE WAS ALLOWABLE TO THE APPELLANT AS DEDUCTION, HOWEVER NOT IN ONE YEA R BUT IN TWO YEARS. I AM OF THE CONSIDERED OPINION THAT SUCH EXPENDITURE INCURRED AS COMMISSION AND BROKERAGE 18 FOR RENEWAL OF LEAVE AND LICENSE AGREEMENT WAS ALLOWABLE AS REVENUE EXPENSES. INCIDENTALLY, THE PERIOD OF LEAVE AND LICENSE WAS TWO YEARS. HOWE VER, HAD THE PERIOD BEEN FOR ONE YEAR, THE SAME AMOUNT OF SUCH EXPENDITURE WERE REQUIRED TO BE SPENT BY THE APPELLANT. THEREFORE, SUCH EXPENDITURE WAS ALLOWABLE TO THE APPELLANT AS REVENUE EXPENDITURE IN THE YEAR OF INCURRING OF EXPENSES. THE DISALLOWANC E MADE BY THE AO IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 2 7 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT IT IS NOT DISPUTED THAT THE PAYMENT OF BROKERAGE COMMISSION WAS PAID FOR THE PURPOSE OF RENEWAL OF LEAVE & LICENSE AGREEMENT OF THE RENTED PROPERTIES. THE ASSESSING OFFICER HIMSELF H AS ADMITTED THAT SUCH EXPENDITURE IS ALLOWABLE , HOWEVER , T HE SAME IS ALLOWABLE FOR THE PERIOD FOR TWO YEARS. WE DO NOT FIND ANY REASON FOR SUCH ALLOCATION OF THE REVENUE EXPENSE TO BE ALLOWED FOR THE PERIOD OF TWO YEARS AS THE BROKERAGE IS PAID IN THIS YEAR AND IS TO BE ALLOWED IN THIS YEAR ONLY, BECAUSE THE SAME IS ON ACCOUNT OF RENEWAL OF LEAVE & LICENSE AGREEMENT. THUS THE FINDING GIVEN BY THE LD. CIT(A) IS HEREBY UPHELD AND THE GROUND RAISED BY THE DEPARTMEN T IS DISMISSED. 2 8 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 /03/2014 . 05 /03/2014 , SD/ SD/ P.M.JAGTAP AMIT SHUKLA A CCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI , DATED: 5 TH MARCH 2014 SHEKHAR , P.S. /PRADEEP, SR. P.S. 19 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI