LOKHANDWALA INFRASTRUCTURE P.LTD, MUMBAI V. ACIT CEN CIR 46, MUMBAI

ITA 794/MUM/2012

• Counselvise Citation: 79419914 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRITAM SINGH
• Assessee Lawyers: BHUMIKA VORA
• Keywords: Business income; Depreciation; Search and seizure; Accommodation entries; Revised return; Revenue expenditure; Capital expenditure
• Section: 153A; 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND N.K.BILLAIYA (AM ) . . , . . , ./I.T.A.NO.794/MUM/2012 ( / ASSESSMENT YEAR: 2007-08) M/S LOKHANDWALA INFRASTRUCTURE PVT.LTD., 72, GANDHI NAGAR, DAINIK SHIVNER ROAD, WORLI, MUMBAI-400018. / VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 46, MUMBAI. ./ ./PAN/GIR NO. : AABCL4859L ( ' / APPELLANT) .. ( ( ' / RESPONDENT) ' / APPELLANT BY : MS.BHUMIKA VORA ( ' * /RESPONDENT BY : SHR I PRITAM SINGH * - / DATE OF HEARING : 1.1.2014 * - /DATE OF PRONOUNCEMENT : 15.1.2014 / O R D E R PER B.R.MITTAL, JM THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2007-08 AGAINST ORDER OF LD. CIT(A) DATED 30.11.2011 ON FOLLOWING GROUND S: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE LD. AOS ACTION OF D ISALLOWING A SUM OF RS.35,07,500/- ON ACCOUNT OF PROFESSIONAL FEES; 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.5,50,000/- OUT OF THE DISALLOWANCE OF RS.15,00,497/- MADE BY THE LD. AO OUT OF ADVERTISEMENT EXPENSES. SUBSEQUENT TO THE ABOVE GROUNDS, THE ASSESSEE HAS A LSO TAKEN AN ADDITIONAL GROUND OF APPEAL AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5,31,213/- MADE BY THE LD. AO ON ACCOUNT OF MISCELLANEOUS OFFICE EXPENSES AND TRE ATING THE SAME AS CAPITAL EXPENDITURE. I.T.A.NO.794/MUM/2012 2 IN RESPECT OF GROUND NO.1 OF THE APPEAL, THE RELEVA NT FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF PROPERT IES AND BUILDING RESIDENTIAL PROJECTS. THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF PERCE NTAGE COMPLETION METHOD FOR REVENUE RECOGNITION FOR ITS PROJECTS. 2. THERE WAS A SEARCH AND SEIZURE ACTION U/S 132(4) OF THE INCOME TAX ACT, 1961(THE ACT) IN THE CASE OF LOKHANDWALA GROUP OF COMPANIES ON 23.12.2008 AND SUBSEQUENT DATES. THE ASSESSEE IS COVERED UNDER TH E SEARCH ACTION U/S 132(1) OF THE ACT ON THE LOKHANDWALA GROUP COMPANIES. PURSUANT THERETO NOTICE UNDER SECTION 153A OF THE ACT ISSUED AND THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.6,12,66,572/- AS AGAINST ORIGINALLY R ETURNED INCOME WHICH WAS FILED ON 2.11.2007 U/S 139(1) AT RS.5,95,12,822/-. DURING T HE COURSE OF ENQUIRIES BY DY.DICT (INV), UNIT-VIII(1), MUMBAI, IT WAS ESTABLISHED THA T M/S NISCHAL CORPORATE SERVICES PVT LTD. (HEREINAFTER REFERRED TO AS NCSPL) HAS ISSUE D ACCOMMODATED BILLS/ENTRIES ON ACCOUNT OF PROFESSIONAL FEES TO VARIOUS PERSONS. AO HAS STATED THAT THE ASSESSEE ALSO HAS TAKEN ACCOMMODATION BILLS FROM SAID COMPANY VIZ . NCSPL AT RS.17,53,750/-. THE AO HAS STATED THAT THE ASSESSEE COMPANY DEBITED AN EXPENSES OF RS.17,53,550/- TWICE ON 1.11.2006 AND 4.11.2006 AGGREGATING TO TOTAL EXP ENSES OF RS.35,07,500/- UNDER THE HEAD PROFESSIONAL FEES PAID TO NCSPL. AO H AS STATED THAT THE ASSESSEE CONTENDED THAT THE TRANSACTION WITH NSCPL ARE GENU INE VIDE ITS LETTER DATED 14.12.2010. AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT SHRI SANDEEP SITANI, DIRECTOR OF NSCPL, IN HIS STATEMENT RECOR DED U/S 132(4) ADMITTED THAT HE WAS NOT DOING ANY REAL BUSINESS IN ANY OF HIS CONCERN A ND WAS PROVIDING ACCOMMODATION ENTRIES TO THE VARIOUS PERSONS/CONCERNS AGAINST TH E COMMISSION. THEREFORE, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE AN ADDITION OF RS.35,07,500/- ON THE GROUND THAT THE ASSESSEE COMPANY OBTAINED ACCO MMODATION BILLS ON ACCOUNT OF PROFESSIONAL FEES FROM NSCPL. BEING AGGRIEVED, A SSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE HAS STATED THAT THE ONUS LIES ON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE WAS LAID OUT OR EXPENDED WHOLLY FOR THE PURPOSE OF BUSINESS. HOWEVER, AS PER EVIDENCE GATHERED BY DEPARTMENT THERE IS A FAILURE TO FURNISH REQUISIT E EVIDENCE AND TO ESTABLISH THAT EXPENDITURE CLAIMED WAS LAID OUT FOR THE PURPOSE OF EARNING BUSINESS INCOME. THE LD. CIT(A) CONFIRMED THE ACTION OF AO TO MAKE DISALLOW ANCE OF RS.35,07,500/-. HENCE, THIS APPEAL BY THE ASSESSEE. I.T.A.NO.794/MUM/2012 3 4. AT THE TIME OF HEARING, LD. AR SUBMITTED THAT THE ASSESSEE IN THE RETURN OF INCOME FILED PURSUANT TO THE NOTICE ISSUED U/S 153A ITSELF MADE DISALLOWANCE OF RS.17,53,750/- IN RESPECT OF THE CLAIM OF COMMISS ION TO NSCPL AND REFERRED PAGES 37 TO 39 OF THE PAPER BOOK WHICH IS A COPY OF THE RETU RN FILED BY THE ASSESSEE. LD. AR SUBMITTED THAT THE ASSESSEE FILED REVISED RETURN OF INCOME SHOWING INCOME OF RS.6,12,66,572/- AS AGAINST ORIGINAL RETURN OF INCO ME FILED U/S 139(1) OF THE ACT AT RS.5,95,12,822/- BECAUSE OF THE ADDITION OF RS.17, 53,500/-. LD. AR SUBMITTED THAT THE SAID AMOUNT HAS BEEN DISALLOWED TWICE BY THE AO. T HE LD. AR FURTHER SUBMITTED THAT ONLY ONE PAYMENT OF RS.17,53,750/- WAS MADE TO NSC PL, WHICH THE ASSESSEE ITSELF DISALLOWED AND WHEREAS THE OTHER PAYMENT OF RS.17, 53,750/- WAS MADE TO NIRJAY SECURITIES PVT.LTD (HEREINAFTER REFERRED TO AS NSP L) ON 1.11.2006 AND REFERRED PAGES 29 TO 31 OF THE PAPER BOOK. LD. AR SUBMITTED THAT TH E AO WAS CONFUSED THAT BOTH PAYMENTS WERE MADE TO THE SAME PARTY VIZ. NSCPL BU T IGNORED THE FACT THE OTHER PAYMENT OF RS.17,53,750/- WAS MADE TO NSPL. LD. A R SUBMITTED THAT THE SAID DISALLOWANCE OF RS.35,07,500/- MADE BY THE AUTHORIT IES BELOW IS NOT JUSTIFIED IN VIEW OF THE ABOVE FACTS. IN REPLY, TO A QUERY, THE LD. AR A DMITTED THAT THE PAYMENT OF RS.17,53,750/- TO NSCPL WAS ADMITTED BY ASSESSEE T O BE NOT GENUINE AND HENCE THE SAID DISALLOWANCE WAS MADE BY THE ASSESSEE ITSELF I N THE RETURN FILED U/S 153A OF THE ACT. 5. ON THE OTHER HAND, LD. DR ADMITTED THE FACT THAT THE ASSESSEE MADE DISALLOWANCE OF RS.17,53,750/- IN THE RETURN FILED U/S 153A OF THE ACT BUT SUBMITTED THAT BOTH THE PAYMENTS OF RS.17,53,750/- EACH WERE ONLY TO ONE PARTY I.E. NSCPL AND HENCE FURTHER DISALLOWANCE OF RS.17,53,750/- IS TO BE MADE AS AGA INST RS.35,07,500/- BY AUTHORITIES BELOW. THE LD. DR FURTHER SUBMITTED THAT THE MATTE R MAY BE RESTORED TO THE FILE OF THE AO FOR HIS VERIFICATION. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW. W E HAVE ALSO PERUSED THE RELEVANT PAGES OF THE PAPER BOOK AT PAGES 1 TO 33. 7. WE OBSERVE THAT THAT THE AO HAS STATED THAT TH E ASSESSEE MADE PAYMENT OF RS.17,53,550/- TWICE ON 1.11.2006 AND 4.11.2006 TOTALING TO RS.35,07,500/- TO NSCPL AND IT WAS PROVIDING BOGUS ENTRIES TO VARIOUS PER SONS AND /OR ENTITIES. WE OBSERVE THAT THE ASSESSEE WHILE FILING THE RETURN PURSUANT TO NOTICE ISSUED U/S 153A HAS MADE DISALLOWANCE OF RS.17,53,750/- UNDER THE HEAD COMM ISSION PAID AS IS EVIDENT FROM THE COPY OF THE STATEMENT OF TOTAL INCOME PLACED A T PAGES 38 AND 39 OF THE PAPER BOOK VIZ COMPUTATION U/S 153A OF THE ACT. THEREFORE, ASS ESSEE FILED RETURN OF INCOME DISCLOSING INCOME OF RS.6,12,66,572/- AS AGAINST O RIGINALLY RETURNED INCOME FILE U/S I.T.A.NO.794/MUM/2012 4 139(1) AT RS.5,95,12,822/-. THUS, THE ASSESSEE AD MITTEDLY MADE DISALLOWANCE OF RS.17,53,750/- IN RESPECT OF COMMISSION PAID. WE O BSERVE THAT THE AO STATED THAT THE ASSESSEE MADE TWO PAYMENTS OF RS.17,53,750/- ON 1. 11.2006 AND 4.11.2006 TO NSCPL. HOWEVER, ON PERUSAL OF THE COPIES OF THE BILLS, AND COPIES OF LEDGER CONFIRMATION AND ALSO COPY OF THE TDS CERTIFICATE ISSUED TO NSPL, COP Y PLACED AT PAGE 31 OF THE PAPER BOOK, IT IS OBSERVED THAT THE ASSESSEE MADE A PAYME NT OF RS.17,53,750/- ON 1.11.2006 TO NSPL AND ANOTHER PAYMENT OF RS.17,53,750/- ON 4. 11.2006 TO NSCPL. HENCE, BOTH THE PAYMENTS OF RS.17,54,750/-, IT APPEARS HAVE NO T BEEN MADE TO THE SAME PARTY BUT TO TWO DIFFERENT PARTIES. THE ASSESSEE IN THE PAP ER BOOK HAS GIVEN A CERTIFICATE THAT ALL THE DOCUMENTS PLACED IN THE PAPER BOOK WERE A LSO FILED BEFORE THE AO BUT WERE NOT PLACED BEFORE THE LD. CIT(A). IT IS OBSERVED THAT THE AO HAS NOT IN THE ASSESSMENT ORDER DISCUSSED ABOUT THE PAYMENT TO NSPL WHICH W AS MADE ON 1.11.2006 AND ALSO TDS CERTIFICATE PLACED AT PAGE 31 OF THE PAPER BOO K. AT THE TIME OF HEARING, THE ATTENTION OF LD. DR WAS DRAWN TO THE ABOVE PAGE O F THE PAPER BOOK BUT THE LD. DR STATED THAT AT PAGES 32 TO 33, THE ACKNOWLEDGEME NT OF RETURN FILED BY NSPL IS PLACED, AND SAID PAYEE HAD NOT CLAIMED TDS WHI CH WAS STATED TO BE DEDUCTED BY THE ASSESSEE AS PER CERTIFICATE PLACED AT PAGE 31 O F THE PAPER BOOK. IN VIEW OF ABOVE, THE LD. DR STATED THAT GENUINENESS OF THE PAYMENT T O NSPL OF RS.17,53,750/- ON 1.11.2006 CANNOT BE ESTABLISHED. WE DO NOT AGREE W ITH THE CONTENTION OF THE LD. DR THAT MERELY BECAUSE NSPL WHILE FILING THE RETURN HA D NOT CLAIMED TDS BENEFIT WHICH WAS DEDUCTED BY ASSESSEE, THE GENUINENESS OF PAYME NT BE REJECTED/DOUBTED. EVEN OTHERWISE AS PER BILLS AND LEDGER CONFIRMATION PL ACED AT PAGES 1 AND 2 OF THE PAPER BOOK, THERE IS ONLY ONE PAYMENT OF RS.17,53,750/- MADE TO NSCPL ON 4.11.2006 AND NSCPL WAS INDULGED IN HAWALA TRANSACTION AND/OR P ROVIDING BOGUS ACCOMMODATION ENTRIES TO VARIOUS ENTITIES/PERSONS AND THE ASSESSE E ALSO OBTAINED THE BENEFIT OF SAID ACCOMMODATION ENTRIES. THERE IS NO EVIDENCE ON REC ORD THAT NSPL ALSO WAS INDULGED IN PROVIDING ACCOMMODATION AND /OR BOGUS ENTRIES TO TH E PARTIES AND ASSESSEE MADE SAID PAYMENT OF RS.17,54,750/- ON 1.11.2006 TO NSPL AGAI NST BOGUS BILL/ACCOMMODATION ENTRIES. WE OBSERVE THAT THE PERMANENT ACCOUNT NUMB ER OF NSPL IS ALSO GIVEN IN THE CONFIRMATION LETTER PLACED AT PAGE 33 AND ALSO TDS WAS DEDUCTED AS PER CERTIFICATE PLACED AT PAGE 31 OF THE PAPER BOOK. CONSIDERING T HE SAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT PAYMENT OF NSPL CANNOT BE DIS ALLOWED. SINCE ASSESSEE ITSELF DISALLOWED RS.17,53,750/- OF PAYMENT MADE TO NSCPL , IN THE RETURN FILED HENCE TO DISALLOW THE SAID AMOUNT BY AO, AMOUNTS TO DISALLOW ANCE TWICE. THEREFORE WE DELETE THE DISALLOWANCE MADE BY AO AND SUSTAINED BY LD CIT(A ) OF RS.35,07,500/- BY ALLOWING GROUND NO.1 OF THE APPEAL. I.T.A.NO.794/MUM/2012 5 8. IN RESPECT OF GROUND NO 2 OF THE APPEAL , THE R ELEVANT FACTS ARE THAT THE AO HAS STATED THAT THE ASSESSEE CLAIMED EXPENSES ON ACCOUN T OF PAYMENT TO VARIOUS GANESH UTTSAV MANDALS, NAVRATA MANDALS, ETC WITHOUT DEDU CTING TDS IGNORING THE PROVISIONS OF SECTION 194C OF THE ACT. AO HAS SATED THAT THE ASSESSEE MADE PAYMENT TO THE MANDALS FOR ADVERTISEMENT WITHOUT DEDUCTING THE TDS . AO HAS ENCLOSED DETAILS OF THE PAYMENT MADE TO VARIOUS MANDALS/UTTSAV MANDALS AS A NNEXURE-A TO THE ASSESSMENT ORDER AND THE TOTAL COMES TO RS. 15,00,497/-. AO HAS STATED THAT SOME OF THE EXPENSES ARE NOT SUPPORTED BY VOUCHERS. IN VIEW OF ABOVE, THE AO DISALLOWED THE ENTIRE AMOUNT OF RS.15,00,497/- AND ADDED TO THE I NCOME OF THE ASSESSEE. THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE A UTHORITY. 9. ON BEHALF OF THE ASSESSEE, IT WAS CONTENDED THAT THE ASSESSEE MADE PAYMENTS TOWARDS FESTIVAL SEASONS TO PROMOTE ITS ONGOING PROJECTS TO VARIOUS GANESH UTTSAV MANDALS, NAVRATA MANDALS, ETC. THE SAID MANDALS AR E TRUSTS AND DID NOT OPERATE FOR BUSINESS PURPOSE OR PROFITS. IT WAS FURTHER CONTEN DED THAT THOSE MANDALS ARE NOT ADVERTISEMENT AGENCIES OR DO NOT OPERATE WITH A MOT IVE TO MAKE PROFITS OUT OF ADVERTISEMENT. THAT THESE MANDALS BLOCK DIFFERENT PLACES OF THE PUBLIC / PRIVATE ON PAYMENT OF RENT. THAT OUT OF THE SAME THESE MANDAL S LET OUT SOME PLACES TO INDIVIDUALS/COMPANIES TO PUT THEIR BANNERS/HOARD INGS AND THE PAYMENT IS MADE AS RENT. THE ASSESSEE ALSO PLACED RELIANCE ON CBDT C IRCULAR NO.715 DATED 8.8.1995, THAT IF A PARTICULAR SPACE HAS BEEN TAKEN ON RENT BY A PERS ON WHO SUBSEQUENTLY SUB-LET IT FOR PUTTING UP A HOARDING, THE TDS LIABILITY IS NOT UN DER SECTION 194C OF THE ACT BUT UNDER SECTION 194I OF THE ACT. THE ASSESSEE CONTENDED THAT THE PROVISION OF SECTION 194C ARE NOT ATTRACTED AS THE SAID PAYMENTS WERE IN THE NATURE OF RENT AND ATTRACT THE PROVISIONS OF SECTION 194I OF THE ACT. IT WAS CO NTENDED THAT NONE OF THE PAYMENTS MADE BY ASSESSEE EXCEEDED RS.1,20,000/- AND HENCE THE PAYMENTS WERE MADE WITHOUT DEDUCTING TDS. 10. LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE AS SESSEE VIDE PARA 6.2 OF THE IMPUGNED ORDER AND STATED THAT THE AO HAD DISALLOW ED THE ENTIRE EXPENDITURE AGGREGATING TO RS. 15,00,497/- INVOLVING A TOTAL O F 109 PAYMENTS RANGING FROM 2,000/- TO RS.1,00,000/-. THE LD. CIT(A) HAS STATED THAT THE EXPENDITURE WAS INCURRED BY ASSESSEE WITH A MAIN INTENT OF PROMOTING ITS BU SINESS AND THEREFORE, THE EXPENDITURE IS IN THE NATURE OF ADVERTISING EXPENDITURE . THA T THE PAYMENTS ARE MADE UNDER A CONTRACTUAL OBLIGATION FOR THE PURPOSE OF ENABLING THE ASSESSEE TO GAIN BETTER VISIBILITY IN RESPECT OF ITS ON-GOING PROJECTS. THEREFORE, T HE PAYMENTS ARE COVERED BY TDS PROVISION U/S 194C OF THE ACT. THE LD. CIT(A) HAS STATED THAT IN THE LIST OF 109 PAYMENTS IDENTIFIED BY AO A LARGE NUMBER OF PAYME NTS NOT EXCEEDING RS.20,000/- I.T.A.NO.794/MUM/2012 6 EACH ARE SEEN. HE HAS STATED THAT CONSIDERING THE QUANTUM OF PAYMENT IN EACH OF THESE INSTANCES, AO IS HEREBY DIRECTED TO ACCEPT THE SELF MADE VOUCHERS WHEREIN THERE IS ALSO NO REQUIREMENT OF COMPLYING WITH THE TDS P ROVISIONS U/S 194C OF THE ACT. HOWEVER, IN RESPECT OF THE PAYMENT MADE IN EACH CA SE EXCEEDING RS.20,000/- OR IN CASES WHEREIN THE AGGREGATE PAYMENTS EXCEEDED RS. 20,000/-, THE ASSESSEE HAD TO NECESSARILY COMPLY WITH TDS PROVISION U/S 194C OF T HE ACT. THE LD. CIT(A) HAS STATED THAT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSE SSEE TO DEDUCT TDS IN RESPECT OF PAYMENT EXCEEDING RS.20,000/-, THE DISALLOWANCE U/ S 40(A)(IA) OF THE ACT IS ATTRACTED. THEREFORE, THE LD. CIT(A) HAS RESTRICTED THE DISAL LOWANCE OF RS.5,50,000/- AFTER DELETING THE BALANCE AMOUNT OF RS.9,50,497/- OUT OF TOTAL DISALLOWANCE OF RS.15,00,497/- MADE BY AO. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 11. DURING THE COURSE OF HEARING, LD. AR REITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW. IT WAS FURTHER CONTENDED THAT THE SAID MANDALS, NAVRATA MANDALS HAD TAKEN THE SPACE ON RENT AND SUB LET TO THE ASSESSEE TO ENABLE TO PUT ITS BANNER. THAT THE ASSESSEE PAID CONSOLIDATED AMOUN T AT THE END OF THE MONTH AT THE FIXED RATE IRRESPECTIVE OF THE PERIOD FOR WHICH THE HOARDING WAS PUT. HENCE, THE SAID MANDALS, NAVRATA MANDALS, HAD SUB-LET THE SPACES TO THE ASSESSEE FOR PUTTING ITS BANNER. IT WAS CONTENDED THAT THE PAYMENT WAS IN THE NATURE OF RENT AND THEREFORE, THE ASSESSEE DID NOT DEDUCT TDS U/S 194C OF THE A CT ON THE PAYMENT MADE TO THESE MANDALS, AS THE TDS WAS DEDUCTIBLE U/S 194I OF TH E ACT. IT WAS CONTENDED THAT NONE OF THE PAYMENTS IS EXCEEDING RS.1,20,000/- TO AN IN DIVIDUAL AND THEREFORE, NO TDS WAS REQUIRED TO BE DEDUCTED. HENCE THE DISALLOWANCE AS SUSTAINED BY LD. CIT(A)L U/S 40(A)(IA) OF THE ACT IS NOT JUSTIFIED. 12. ON THE OTHER HAND, THE LD. DR SUPPORTED THE O RDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE SAID PAYMENT WAS MADE BY ASSESSE E FOR THE PURPOSE OF ITS ADVERTISEMENT. HENCE, TDS WAS REQUIRED TO BE DEDU CTED AS PER SECTION 194C OF THE ACT. HE SUBMITTED THAT THE ORDER OF LD. CIT(A) BE CONFIRMED. 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE DETAILS OF THE PAYMENTS AS ENCLOSED AS ANNEXURE-A TO THE ASSE SSMENT ORDER AND ALSO THE DISALLOWANCE RESTRICTED BY LD CIT(A) DETAILS GIVEN AT PAGES 15-16 OF THE IMPUGNED ORDER. THE ONLY ISSUE BEFORE US IS AS TO WHETHER T HE SAID PAYMENT MADE BY ASSESSEE TO VARIOUS MANDALS FOR THE PURPOSES OF PUTTING ITS BAN NER AND HOARDING AT THE SPACE HIRED BY THE SAID MANDALS ARE IN THE NATURE OF ADVERTIS EMENT EXPENSES OR THE ASSESSEE MADE THE RENTAL PAYMENT FOR THE SAID SPACE ON WHICH THE ASSESSEE PUT ITS BANNERS AND I.T.A.NO.794/MUM/2012 7 HOARDINGS. THERE IS NO DISPUTE TO THE FACT THAT T HE CBDT HAS CLARIFIED VIDE ITS CIRCULAR NO.715 DATED 8.8.1995, COPY PLACED AT PAGES 40 TO 44 OF THE PAPER BOOK, THAT WHEN THERE IS A CONTRACT FOR PUTTING UP HOARDINGS IN THE NATURE OF ADVERTISING CONTRACT, PROVISIONS OF SECTION 194C OF THE ACT WOULD BE APP LICABLE. HOWEVER, IF PERSON HAS TAKEN PARTICULAR SPACE ON RENT AND THEREAFTER SUB-L ET THE SPACE FULLY OR IN PART FOR PUTTING UP HOARDING, HE WOULD BE LIABLE TO DEDUCT TDS U/S 194I AND NOT U/S 194C OF THE ACT. THERE IS NO DISPUTE TO THE FACT THAT THE SAID MAND ALS ARE REGISTERED AS TRUST. WE OBSERVE THAT THE SAID MANDALS HAVE RESERVED CERTA IN SPACE FOR THE PURPOSE OF PUTTING THE BANNER AND HOARDINGS INTER ALIA BY ASSESSEE AT THE SPACE HIRED BY THEM AND AGAINST WHICH THE ASSESSEE MADE PAYMENT TO THESE MANDALS T HE ASSESSEE HAS STATED THAT IT HAS TAKEN SAID SPACE ON RENT FOR A PARTICULAR PERIO D AND THEREFORE, THE SAID PAYMENT IS IN THE FORM OF RENT. WHEREAS THE DEPARTMENTS CONTENTI ON IS THAT IT IS JUST A LUMP SUM PAYMENT TO THOSE MANDALS AND THE SAID MANDALS HAVE ALLOWED THE ASSESSEE TO PUT ITS HOARDINGS AND BANNERS FOR THE PURPOSE OF ADVERTISE MENT ONLY. WE OBSERVE THAT THE LD. CIT(A) HAS MENTIONED IN THE IMPUGNED ORDER THA T THE ASSESSEE HAS MADE THE SAID PAYMENT UNDER A CONTRACTUAL OBLIGATION FOR THE PUR POSE OF ENABLING THE ASSESSEE TO PUT ITS HOARDING IN RESPECT OF ITS ON GOING PROJECTS AN D ACCORDINGLY, THE LD. CIT(A) HAS CONCLUDED THAT THE SAID PAYMENTS ARE SUBJECT TO PR OVISIONS OF SECTION 194C OF THE ACT. WE ARE OF THE CONSIDERED VIEW THAT EVEN IF A SPACE IS TAKEN ON RENT AND THE BANNERS ARE PUT ON THE SAID SPACE, SO HIRED, THEY ARE FOR THE PURPOSE OF GAINING PUBLICITY. HENCE MERE PUBLICITY COULD NOT BE A CRITERIA TO DECIDE WHETHER THE SAID PAYMENTS IS SUBJECT TO PROVISIONS OF SECTION 194C OF THE ACT OR SEC.194 I OF THE ACT. WE OBSERVE THAT CIT(A) HAS STATED THAT ASSESSEE HAS MADE PAYMENTS TO THE MANDALS ETC UNDER A CONTRACTUAL OBLIGATION. IT IS A FACT THAT DURING T HE UTSAV/FESTIVALS SEASONS THE ORGANIZERS PROVIDE SPACE TO VARIOUS PERSONS TO PUT ITS BANNERS AND CHARGE FEE FROM THEM, NOT ONLY THAT THE PURPOSE TO ADVERTISE THEIR PRODUCTS BUT FOR PROVIDING SPACE TO THEM. WE ARE OF THE CONSIDERED VIEW ON THE FACTS BEFORE US THAT THE ASSESSEE HIRED SPACE AND MADE PAYMENTS TO THOSE MANDALS TO PUT I TS BANNERS/HOARDINGS DURING THE SAID FESTIVE PERIOD. HENCE THE SAID PAYMENT TO THE MANDALS COULD BE TREATED TOWARDS RENT FOR THE SPACE PROVIDED BY THEM TO THE ASSESSEE FOR PUTTING ITS HOARDING AND BANNERS. THEREFORE, WE ARE O F THE CONSIDERED VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TDS WAS REQUIRED TO BE DEDUCTED U/S 194I OF THE ACT. SINCE ADMITTEDLY NONE OF THE PAYMENT IS EXCEEDING TO A PERSON OF RS.1,20,000/-, WE ARE OF THE CONSIDERED VIEW TH AT THE DISALLOWANCE U/S 40(A)(IA) ON ACCOUNT OF NON DEDUCTION OF TDS IS NOT JUSTIFI ED. HENCE GROUND NO.2 OF THE APPEAL I.T.A.NO.794/MUM/2012 8 OF ASSESSEE IS ALLOWED BY DELETING THE DISALLOWANCE OF RS.5,50,000/- SUSTAINED BY LD. CIT(A). 14. IN RESPECT OF ADDITIONAL GROUND OF APPEAL, THE RELEVANT FACTS ARE THAT THE AO HAS GIVEN DETAILS OF THE EXPENSES CLAIMED BY THE ASSESS EE FOR PURCHASE OF CHAIRS AND MOBILES ETC AS ANNEXURE-B TO THE ASSESSMENT ORDER, AGGREGATING TO RS.5,31,213/-. AO HAS STATED THAT THE SAID EXPENDITURE IS IN THE FO RM OF CAPITAL EXPENDITURE AND ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE. LD. CIT(A) VIDE PARA 7.2 OF THE IMPUGNED ORDER HAS CONFIRMED THE ACTION OF THE AO W HICH READS AS UNDER : 7.2 THE FACTS OF THE CASE, THE STAND TAKEN BY THE AO IN THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT DURING THE APPEAL HEARING PROCEEDINGS HAVE BEEN CAREFULLY CONSIDERED. AO IN THE ANNEXURE TO ASSESSMENT ORDER HAS CLEARLY IDENTIFIED THE ITEMS OF FURNITURE , MOBILE PHONES LCD TV ETC WHOSE COST IS AGGREGATED TO RS.5,31,213/-. IT IS A PPARENT THAT THE EXPENDITURE INVOLVED IS CAPITAL IN NATURE AND THE ASSETS PURCHA SED OUGHT TO HAVE BEEN INCORPORATED INTO THE BLOCK OF ASSETS AND THE DEPRE CIATION AT THE APPLICABLE RATES OUGHT TO HAVE BEEN CLAIMED. BASED ON A POLICY OF A COMPANY WHICH IS CONSISTENTLY FOLLOWED, EXPENDITURE LAID OUT FOR PUR CHASE OF ITEMS NOT EXCEEDING CERTAIN THRESHOLD LIMIT, SAY RS.5,000/- MAY BE TRE ATED AS ITEMS OF REVENUE NATURE. IN THE INSTANT CASE, THE APPELLANT COMPANY HAS NOT PLACED ON RECORD ANY SUCH ACCOUNTING POLICY CONSISTENTLY FOLLOWED WH ICH DOES NOT INTERFERE WITH THE CONCEPT OF BLOCK OF ASSETS AND THE METHODOLOGY OF DEPRECIATION REQUIRED TO BE ADHERED TO UNDER THE INCOME TAX ACT. FURTHER I T IS NOTICED THAT PURCHASE PRICE OF SHARP LCD IS SHOWN AS RS.75,990/- AND M OBILE PHONE PURCHASES INCLUDE BLACK BERRY, MOTOROLA , NOKIA WHICH ARE EX PENSIVE ITEMS. CONSIDERING THE LARGE NUMBER OF MOBILE PHONES SHOWN AS PURCHASE D DURING THE RELEVANT PREVIOUS YEAR, IT WAS REQUIRED THAT THE COST OF THE ENTIRE PURCHASES OF FURNITURE, MOBILE PHONES, TV WERE TAKEN INTO ACCOUNT IN THE AP PROPRIATE BLOCK OF ASSETS AND DEPRECIATION WAS CLAIMED. THEREFORE, THE CLAIM OF THE APPELLANT THAT THE ENTIRE COST OF RS.5,31,213/- OUGHT TO HAVE BEEN A LLOWED AS REVENUE EXPENDITURE IS NO ADMISSIBLE. AO IS HEREBY DIRECTED TO ALLOW D EPRECIATION AT THE APPLICABLE RATES, ON THE APPELLANT SUBMITTING THE REQUISITE DE TAILS OF THE DEPRECIATION WORKING HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 15. AT THE TIME OF HEARING, LD. AR REITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW THAT THE SAID EXPENDITURE HAS BEE N INCURRED BY ASSESSEE FOR PURCHASE OF MOBILES PHONES, PURCHASE OF CHAIRS FOR ITS SITE FOR THE PURPOSE OF BUSINESS AND THEREFORE, THE SAID EXPENDITURE IS REVENUE IN NATUR E. 16. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 17. WE HAVE PERUSED THE DETAILS OF EXPENDITURE, DET AILS GIVEN AS IN ANNEXURE-B TO THE ASSESSMENT ORDER. WE OBSERVE THAT THE SAID EX PENDITURE HAS BEEN INCURRED BY ASSESSEE MAINLY FOR PURCHASE OF MOBILES PHONES WHIC H INCLUDES BLACKBERRY MOBILE, NOKIA I.T.A.NO.794/MUM/2012 9 AND THE SAME ARE EXPENSIVE ONE. HOWEVER, IT IS A LSO OBSERVED THAT THE ASSESSEE ALSO PURCHASED LCD COSTING RS.75,990/-. THEREFORE, CON SIDERING THE DETAILS OF THE SAID EXPENDITURE AND THE PRICE THEREOF, WE AGREE WITH T HE LD. CIT(A) THAT THE SAID MOBILES PHONES ETC. COULD NOT SAID TO HAVE BEEN PURCHASED BY ASSESSEE FOR ITS SITE OFFICE FOR ITS STAFF BUT THE SAID EXPENDITURE INCURRED IS CAPITAL IN NATURE AND IT FORMS PART OF BLOCK OF ASSETS OF THE ASSESSEE. THEREFORE, WE AGREE WITH THE LD. CIT(A) THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AS PER THE PROVISIO NS OF ACT. HENCE, WE CONFIRM THE ORDER OF LD. CIT(A) AND REJECT ADDITION OF APPEAL TAKEN BY ASSESSEE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH DAY O F JANUARY, 2014 * 1 2 15TH DAY OF JANUARY, 2014 * SD SD ( . . /N.K.BILLAIYA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. ( ' / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5. ? (A , - A , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - A , /ITAT, MUMBAI