DCIT, New Delhi V. M/s. Luminous Electronics Pvt. Ltd., New Delhi

ITA 874/DEL/2010

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3636 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AJAY KUMAR MATTA
• Keywords: Opportunity of being heard; Corroborative evidences; Royalty expenses; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI G.D.AGRAWAL , HON BLE PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 874 /DEL/201 0 AY: 20 05 - 06 & ITA NO. 875 /DEL/201 0 AY: 20 06 - 07 DCIT, CIRCLE 4(1) NEW DELHI VS . LUMINOUS ELECTRONICS PVT.LTD. C - 8 & 9, JANAKPURI COMMUNITY CENTRE BEHIND JANAK CINEMA NEW DELHI 110 058 PAN: AAACL2078R (APPELLANT) (RESPONDENT) APPELLAN T BY SH. AMIT JAIN, SR.DR RESPONDENT BY SH. AJAY KUMAR MATTA, C.A. DATE OF HEARING 18.01.2018 DATE OF PRONOUNCEMENT 30.01.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEALS HAVE BEEN FILED BY REVENUE AGAINST ORDER DATED 01/01/10 & 08/01/2010, PASSED BY LD.CIT(A) - 7, NEW DELHI FOR A SSESSMENT Y EAR 2005 - 06 & 2006 - 07 ON THE FOLLOWING GROUNDS OF APPEAL: ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 2 OF 20 ITA NO. 874/DEL/2010 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 47,73,561 / - MADE BY THE A.O. ON ACCOUNT OF SUPP RESSION OF SALES. 2.1. THE LD. CIT (A) IGNORED THE FACT THAT THE SALE IS MADE INCLUDING EXCISE DUTY AND NOT EXCLUDING EXCISE DUTY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 22,34,239/ - MADE BY THE A.O. BEING THE FREIGHT CHARGES FOR WHICH NO VOUCHER / EVIDENCE WERE PRODUCED. 3.1. THE LD. CIT (A) IGNORED THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY E VIDENCE IN SUPPORT OF ITS CLAIM DURING ASSESSMENT PROCEEDINGS DESPITE HAVING BEEN PROVIDED AMPLE OPPORTUNITIES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 23,01,171/ - MADE B Y THE A.O. ON ACCOUNT OF WARRANTY EXPENSES. 4.1. THE LD. CIT (A) IGNORED THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY E VIDENCE TO JUSTIFY ITS CLAIM OF WARRANTY EXPENSES DURING ASSESSMENT PROCEEDINGS FOR EXPENSES INCURRED FOR WARRANTY ASSIGNMENTS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 1 0,34,608 / - MADE BY THE A.O. ON ACCOUNT OF ROYALTY EXPENSES . 5.1. THE LD. CIT (A) IGNORED THE FACT THAT THE ASSESSEE PAID ROYALTY TO M / S SILICON SYSTEM PVT. LTD. FOR THE BRAND CREATED BY THE COMPAN Y ITSELF AND TRANSFERRED TO M / S SILICON SYSTEM PVT. LTD. WHICH DOES NOT FIT INTO LOGIC AND BUSINESS EXPEDIENCY. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING DEDUCTION U/S 80 I C AMOUNTING TO RS.L,15,42,121 / - . 6.1. THE LD. CIT (A) IGNORED THE DISCREPANCIES POINTED OUT BY THE AO DURING THE ASSESSMENT PROCEEDING. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APP EAL RAISED ABOVE AT THE TIME OF HEARING. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 3 OF 20 ITA NO. 875/ DEL/2010 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 62,96,790/ - MADE BY THE A.O. ON AC COUNT OF SUPPRESSION OF SALES. 2.1. THE LD. CIT (A) IGNORED THE FACT THAT THE SALE IS MADE INCLUDING EXCISE DUTY AND NOT EXCLUDING EXCISE DUTY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 15,00,346 / - MADE BY THE A.O. BEING THE FREIGHT CHARGES FOR WHICH NO VOUCHER / EVIDENCE WERE PRODUCED. 3.1. THE LD. CIT (A) IGNORE D THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY E VIDENCE IN SUPPORT OF ITS CLAIM DURING ASSESSMENT PROCEEDINGS DESPITE HAVING BEEN PROVIDED AMPLE OPPORTUNITIES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ER RED IN DELETING THE ADDITION OF RS. 2,72,326 / - MADE B Y THE A.O. BEING THE FREIGHT OUTWARD EXPENSES . 4.1. THE LD. CIT (A) IGNORED THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY E VIDENCE IN SUPPORT OF ITS CLAIM EITHER DURING ASSESSMENT OR DURING APPELLATE PR OCEEDINGS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 16,84,503/ - MADE BY THE A.O. ON ACCOUNT OF WARRANTY EXPENSES . 5.1. THE LD.CIT(A) IGNORED THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF ITS CLAIM DURING ASSESSMENT PROCEEDINGS FOR EXPENSES INCURRED FOR WARRANTY ASSIGNMENTS. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING ADDITION OF RS. 8,11,236 / - MADE BY THE A.O. ON ACCOUNT OF ROYALTY EXPENSES. 6.1. THE LD. CIT (A) IGNORED THE FACT THAT THE ASSESSEE PAID ROYALTY TO M / S SILICON SYSTEM PVT. LTD. FOR THE BRAND CREATED BY THE COMPANY IT SELF AND TRANSFERRED TO M / S SILICON SYSTEM PVT. LTD. WHICH DOES NOT FIT INTO LOGIC AND BUSINESS EXPEDIENCY. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 4 OF 20 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING DEDUCTION U/S 80 IC AMOUNTING TO RS.1,23,66,367/ - . 7. 1. THE LD. CIT (A) IGNORED THE DISCREPANCIES POINTED OUT BY THE AO DURING THE ASSESSMENT PROCEEDING. 8. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APP EAL RAISED ABOVE AT THE TIME OF HEA RING. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ITA NO. 874/DEL/2010 ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 30/10/ 20 05. THE LD.AO OBSERVED THAT ASSESSEE IS A P RIVATE L IMITED C OMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ELECTRONIC/ELECTRICAL GOODS LIKE INVERTERS, UPS AND BATTERIES ETC. DURING THE YEAR UNDER CONSIDERATION ASSESSEE WAS HAVING ITS MANUFACTURING UNIT AT DELHI, LUDHIANA AND BADDI. ASSESSEE CLAIMED 80 IC DEDUCTION OF RS.1,15,42,121/ - FOR THE YEAR UNDER CONSIDERATION AGAINST THE PROFITS OF BADDI UNIT. ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE A CT DETERMINING TOTAL INCOME AT RS.2,18,85,700/ - BY MAKING FOLLOWING ADDITIONS: A ) A DDITION ON ACCOUNT OF SUPPRESSION OF SALES - RS.47,73,561/ - B ) D ISALLOWANCE OF FR E IGHT EXPENSES - RS.22,34,239/ - C ) D ISALLOWANCE OF WARRANTY EXPENSES - RS.23,01,171/ - D ) D ISALLOWANCE OF ROYALTY EXPENSES - RS. 10,34,608/ - E ) C URTAILME NT OF DEDUCTION CLAIMED UNDER SECTION 80 IC - RS.1,15,42,121/ - ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 5 OF 20 ITA NO. 875/DEL/2010 ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.1,23,66,367/ - ON 29/11/ 20 06. THE LD.AO OBSERVED THAT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ELECTRONIC/ELECTRICAL GOODS LIKE INVERTERS, UPS AND BATTERIES ETC. DURING THE YEAR UNDER CONSIDERATION ASSESSEE WAS HAVING ITS MANUFACTURING UNIT AT DELHI, LUDHIANA AND B ADDI. ASSESSEE HAD CLAIMED 80 IC DEDUCTION OF RS.1,23,66,367/ - FOR THE YEAR UNDER CONSIDERATION AGAINST THE PROFITS OF BADDI UNIT. ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143 (3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.2,28,87,575/ - BY MAKING FOLLOWING ADDITIONS: A ) A DDITION ON ACCOUNT OF SUPPRESSION OF SALES - RS.6 2 ,96,790/ - B ) D ISALLOWANCE OF FRIGHT IN WORD EXPENSES - RS. 15, 00, 346/ - C ) D ISALLOWANCE OF FRIGHT OUTWARD EXPENSES - RS. 2, 72, 326/ - D ) D ISALLOWANCE OF WARRANTY EXPENSES - RS. 16, 84, 503/ - E ) D ISALLOWANCE OF ROYALTY EXPENSES - RS. 8, 11, 236/ - F ) C URTAILMENT OF DEDUCTION CLAIMED UNDER SECTION 80 IC - RS.1,23,66,367/ - 3. AGGRIEVED BY THE ORDER S OF LD.AO, ASSESSEE PREFERRED APPEAL S BEFORE LD.CIT(A) , WHO DELETED THE DISALLOWA NCES MADE BY ASSESSING OFFICER IN BOTH ASSESSMENT YEARS. 4. AGGRIEVED BY THE ORDER S OF LD.CIT(A) , REV ENUE IS IN APPEAL BEFORE US FOR BOTH ASSESSMENT YEARS. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 6 OF 20 5. AT THE OUTSET LD.AR SUBMITTED THAT ON IDENTICAL BACKGROUND AND FACTUAL CIRCUMSTANCES , THE GROUNDS RAISED BY REVENUE IN BOTH THE ASSESSMENT YEARS ARE SA ME AND HENCE CAN BE DISPOSED OF BY WAY OF A COMMON ORDER. LD.AR FURTHER SUBMITTED THAT GROUND NO. 2, 3 AND 6 HA VE BEEN DECIDED BY THIS TRIBUNAL FOR ASSESSMENT YE AR 2004 - 05 IN ITA NO. 561/DEL/2010 VIDE ORDER DATED 09/07/10. 5.1 . LD.AR TOOK US THROUGH THE RELEVANT OBSERVATIONS BY THIS T RIBUNAL FOR ASSESSMENT YEAR 2004 - 05 AS UNDER. GROUND NO. 2 FOR ASSESSMENT YEAR 2005 - 06 AND 2006 - 07: LD. AR SUBMITTED THAT THIS TRIBUNAL HAS SET ASIDE THIS ISSUE BACK TO LD. AO BY OBSERVING AS UNDER: 3.3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT WHILE MAKING THIS ADDITION OF RS.126,63,086/ - , THE A.O. HAS CONSIDERED THE DIFFERENCE IN PRICE FOR GOODS OF BADDI UNIT WITH THE GOODS OF DELHI UNIT AND FOR SUCH COMPARISON OF PRICES HE HAS CONSIDERED THE PRICE OF DELHI UNIT NET OF EXCISE DUTY REALIZED BY THE ASSESSEE FROM CUSTOMERS. IT IS ALSO THE SUBMISSION BEFORE US THAT THE CUSTOMER IS CONCERNED WITH THE GROSS PRICE INCLUSIVE OF EXCISE DUTY AND SALES TAX AND IF THIS IS CONSIDERED, THE PRICE OF DELHI UNIT IS NOT LOWER BUT IN FACT HIGHER. BUT BEFORE AGREEING TO THIS A SPECT THAT PRICE OF DELHI UNIT INCLUSIVE OF EXCISE DUTY SHOULD BE COMPARED WITH THE PRICE OF BADDI UNIT, THIS ASPECT HAS TO BE EXAMINED AS TO WHETHER THE CUSTOMERS ARE GETTING ANY MODVAT/CENVAT ON ACCOUNT OF EXCISE DUTY PAID BY THEM FOR B UYING THE GOODS OF DELHI UNIT OF THE ASSESSEE. IF THE CUSTOMERS ARE GETTING MODVAT / CENVAT CREDIT THEN THE ACTION TAKEN BY THE A.O. APPEARS TO BE CORRECT BECAUSE IN THIS SITUATION, THE CUSTOMERS GET SEPARATE CREDIT OF EXCISE DUTY BEING PAID BY THEM FOR BUYING THE GOODS OF DE LHI UNIT AND HENCE IT CANNOT BE ACCEPTED THAT WHEN THE ASSESSEE IS SELLING THE GOODS OF BADDI UNIT AT HIGHER PRICE, IT WILL SELL THE GOODS OF DELHI UNIT AT A LOWER PRICE TO THE SAME CUSTOMER. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 7 OF 20 BUT IF THE CUSTOMER IS NOT ELIGIBLE FOR MODVAT / CENVAT CREDIT TH EN EFFECTIVE PRICE OF DELHI UNIT HAS TO BE CONSIDERED AFTER INCLUDING THE EXCISE DUTY' ELEMENT AND IF THIS IS DONE, THE PRICE OF DELHI UNIT IS HIGHER AND HENCE IT CANNOT BE ALLEGED THAT THE SALE OF DELHI UNIT GOODS ARE SUPPRESSED. THIS ASPECT WAS NOT EXAM INED BY THE AUTHORITIES BELOW AND HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE A. O . FOR FRESH DECISION AFTER EXAMINING THIS ASPECT. THE BURDEN IS ON THE ASSESSEE TO PROVE BEFORE THE A.O. AS TO WH ETHER THE CUSTOMERS ARE GETTING MODVAT / CENVAT CREDIT OR NOT. IN THIS REGARD, THE ASSESSEE CAN OBTAIN OR FURNISH THE COPY OF R T - 12 RETURN BEING FIELD BY THOSE CUSTOMERS WITH THE EXCISE DEPARTMENT FOR THE RELEVANT PERIOD BECAUSE IN SUCH RETURNS COMPLETE AC COUNT HAS TO BE DISCLOSED REGARDING MODVAT / CENVAT CREDIT BEING AVAILED BY THOSE CUSTOMERS. IF THIS IS NOT FEASIBLE, OTHER SUITABLE EVIDENCE ACCEPTABLE TO THE A.O. CAN BE FURNISHED AND THEREAFTER, THE A.O. SHALL DECIDE THIS ASPECT AFRESH. IF IT IS FOUND THA T THE CUSTOMERS ARE NOT ELIGIBLE FOR ANY MODVAT / CENVAT CREDIT IN CONNECTION WITH THE GOODS OF DELHI UNI T OF THE ASSESSEE BEING PURCHASED BY THEM , THEN NO ADDITION CAN BE MADE BY ALLEGING THAT THE DELHI SALES ARE SUPPRESSED. THE A.O. SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5.2 . HE FURTHER SUBMITTED THAT LD. AO WHILE PASSING ORDER UNDER SECTION 254 READ WITH 143 (3) OF THE A CT HAS VERIFIED THE ISSUE AS PER THE DIRECTIONS OF THIS T RIBUNAL AND GRANTED RELIEF TO ASSESSEE. HE HAS PLACED BEFORE US THE ASSESSMENT ORDER DATED 26/12/11 PASSED SUBSEQUENT TO THE REMAND BY THIS T RIBUNAL , WHEREIN THE ISSUE HAS BEEN CONSIDERED BY LD.AO. THE LD.AR FURTHER SUBMITTED THAT THE PARTIES ARE SIMILAR/IDENTICAL DURING THE YEAR UNDER CONSIDERATION. 6. LD. DR DO NOT OBJECT TO THE ISSUE BEING SET ASIDE TO LD. AO FOR FRESH EXAMINATION OF THE ISSUE AS PER THE ABOVE DIRECTIONS. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 8 OF 20 7. WE ARE THEREFORE INC LINED TO SET ASIDE THIS ISSUE BACK TO FILE OF LD. AO FOR VERIFYING THE ISSUE WITH A DIRECTION TO VERIFY ON THE BASIS OF DETAILS FILED BY ASSESSEE REGARDING MODVAT/CENVAT CREDIT CLAIMED BY THE CUSTOMERS DURING THE YEAR IF ANY. 7.1 . ACCORDINGLY THIS GROUND RAISED BY REVENUE FOR BOTH THE ASSESSMENT YEARS STANDS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 3 FOR ASSESSMENT YEAR 2005 - 06 AND 2006 - 07 ALONG WITH GROUND 4 FOR ASSESSMENT YEAR 2006 - 07 8.1 . LD.AR SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2004 - 05 IN ITA NO. 561/DEL/2010 VIDE ORDER DATED 09/07/10. HE SUBMITTED THAT THIS ISSUE WAS SET ASIDE BY THIS TRIBUNAL TO THE FILE OF LD. AO BY OBSERVING AS UNDER: 3.4.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT DISALLOWANCE WAS MADE BY THE A.O. ON THE BASIS THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE REGARDING ACTUAL MOVEMENT OF GOODS BY DELIBERATELY WITHHOLDING INFORMATION REGARDING FREIGHT CHARGES PAID DURING THE YEAR. IT IS ALSO OBSERVED BY THE A.O. THAT NO DETAILS OF FRIGHT OUTWARD OF RS.L,47,08 5 / - WERE PROVIDED. IN THE COURSE OF REMAND PROCEEDINGS ALSO, AS PER THE REMAND REPORT, THE ASSESSEE HAS FURNISHED ONLY 3 BILLS OF FREIGHT CHARGES FOR THIS YEAR AS WELL AS FOR THE NEXT YEAR. THERE IS NO COMMENT OF LD. CIT(A) REGARDING THIS ALLEGATION OF THE A.O. THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVID ENCE REGARDING ACTUAL MOVEMENT OF GOODS BY DELIBERATELY WITHHOLDING INFORMATION REGARDING FREIGHT CHARGES PAID DURING THE YEAR AND WE FEEL THAT THE ORDER OF LD. CIT(A) ON THIS ISSUE CANNOT BE SUSTAINED AND WE FEEL THAT IN THE INTEREST OF JUSTICE, THIS MATT ER SHOULD GO BACK TO THE FILE THE A.O. FOR FRESH DECISION. WE, THEREFORE SET ASIDE THE ORDER OF LD .CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF LD.AO FOR FRESH DECISION. THE ASSESSEE SHALL FURNISH ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 9 OF 20 EVIDENCE REGARDING ACTUAL MOVEMENT OF GOODS FOR WHICH THESE FREIGHT CHARGES ARE BEING SAID TO HAVE BEEN INCURRED BY THE ASSESSEE. THE ASSESSEE SHALL ALSO FURNISH COMPLETE DETAILS OF THESE FREIGHT CHARGES ALONG WITH ALL BILLS AND THEREAFTER THE A.O. SHALL PASS NECESSARY ORDER AS PER LAW. NEEDLE SS TO MENTION THAT THE A.O. SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES . 8.2. LD. AR SUBMITTED THAT ASSESSING OFFICER WHILE GIVING ORDER EFFECT TO THE T RIBUNAL S OR DER HAS ALLOWED THE CLAIM OF ASSESSEE , WHEREIN HE HAS VERIFIED THE SALE INVOICES, EVIDENCES OF EXPENSES INCURRED AND COPY OF GR S EVIDENCING THE MOVEMENT OF GOODS. 8.3. LD. DR DO NOT OBJECT TO THE ISSUE BEING SET ASIDE TO LD. AO FOR FRESH EXAMINATION OF THE ISSUE AS PER THE ABOVE DIRECTIONS. 8.4 . WE ARE THEREFORE INCLINED TO SET ASIDE THIS ISSUE BACK TO THE FILE OF LD. AO FOR VERIFICATION OF THE NECESSARY EVIDENCES REGARDING ACTUAL MOVEMENT OF GOODS FOR WHICH THE FRIGHT CHARGES ARE SAID TO HAVE BEEN INCU RRED BY ASSESSEE. ASSESSEE IS DIRECTED TO PROVIDE ALL THE DETAILS AS CALLED FOR VERIFICATION BY LD.AO AS PER LAW. 8.5. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED FOR ASSESSMENT YEAR 2005 - 06 STATISTICAL PURPOSES. 9. GROUND NO. 4 THIS GROUND F OR ASSESSMENT YEAR 2006 - 07 PERTAINS TO FRIGHT OUTWARD EXPENSES. AS THE ISSUE OF FRIGHT IN WARD EXPENSES HAS BEEN SET ASIDE TO LD.AO FOR VERIFICATION, WE SET ASIDE THIS ISSUE REGARDING FRIGHT OUTWARD EXPENSES ALSO TO THE FILE OF LD. AO FOR PROPER VERIFIC ATION ON THE BASIS OF THE EVIDENCES FILED BY ASSESSEE. ASSESSEE IS DIRECTED TO FILE ALL NECESSARY DOCUMENTS IN RELATION TO THE SAME. 9.1 . ACCORDINGLY THIS GROUND RAISED BY THE REVENUE FOR ASSESSMENT YEAR 2006 - 07 STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 10 OF 20 10. GROUND 4 FOR ASSESSMENT YEAR 2005 - 06 AND GROUND 5 FOR ASSESSMENT YEAR 2006 - 07 10.1 . LD. DR PLACED RELIANCE UPON THE ORDER OF LD. AO. 10.2. LD.AR SUBMITTED THAT SALES REFLECTED BY ASSESSEE INCLUDES PRICE OF THE PARTS REPLACED FREE OF COST. HE SUBMITTED THAT NO SEPARATE ADDITION COULD BE MADE IN THE HANDS OF ASSESSEE WHEN THE SAME H AS ALREADY BEEN REFLECTED IN THE PROFITS OF ASSESSEE , IN THE SHAPE OF SALES. LD. AR SUBMITTED THAT A SSESSING O FFICER DISALLOWED 50% OF EXPENDITURE WITHOUT THERE BEING ANY RE ASONS ON AD HOC BASIS. HE SUBMITTED THAT IN THE ASSESSMENT ORDER THE ADDITION WAS MADE AS THE CATEGORIES/DETAILS OF RAW MATERIALS , ITS UTILISATION TRANSFERRED TO SERVICE CENTRE , WERE NOT PROVIDED. WHEREAS IN THE REMAND REPORT LD. AO HAS ESTIMATED THE DIS ALLOWANCE ON THE BASIS OF MARKET TREND AND THE COST INVOLVED. L D.AR SUBMITTED THAT ASSESSEE HAS PROVIDED ALL THE RELEVANT DETAILS THAT WAS REQUIRED TO ESTABLISH ITS CLAIM OF WARRANTY. 10.3. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES AND T HE LIGHT OF THE RECORDS PLACED BEFORE US. THE OBSERVATIONS OF LD. CIT (A) ON THIS ISSUE ARE VERY MUCH RELEVANT AND HAS BEEN REPRODUCED HEREUNDER: 7.2. I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISSION MADE ON BEHALF OF THE APPELLANT, THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND IN THE REMAND REPORT AND FACTS ON RECORD. FOR READY REFERENCE THE FINDINGS OF THE ASSESSING OFFICER ARE REPRODUCED BELOW. THE ASSESSEE WAS SPECIFICALLY REQUIRED TO FURNISH THE EXACT NATURE AND THE MANNER OF COMPUTATION OF WARRANTY EXPENSES CLAIMED OF ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 11 OF 20 RS.46,02,343/ - DURING THE YEAR. ON PERUSAL OF THE DETAILS FILED VIDE LETTER DATED 11.12.2007, IT WAS SEEN THAT SUCH EXPENSE' CONSISTED OF SALARIES , RENT AND TRANSFER OF CERTAIN MATERIAL TO SERVICE CENTRE ONLY. ON ONE HAND IT WAS ASSERTED THAT THE SAID EXPENSES PERTAINED TO COST INCURRED BY THE SERVICE CENTRE IN EXECUTION OF WARRANTY OBLIGATIONS WHEREAS ON THE OTHER HAND, IT WAS NOT UNDERSTOOD AS TO HOW AND IN WHAT MANNER THE RAW - MATERIAL WORTH RS.91 , 28 , 072 / - STO OD TRANSFERRED TO SUCH SERVICE CENTRE FOR THE FIRST TIME OUT OF WHICH CONSUMPTION OF SUCH RAW - MATERIAL W AS REFLECTED AT R S.43, 97,229 / - . NEITHER ANY EVIDENCE OF CATEGORIES OF RAW - MATERIAL TRANSFERRED TO SER VICE CENTRE , ITS UTILIZATION OR QUANTUM OF OBLIGAT IONS SERVED ETC. WERE PLACED ON RECORD. NO SCIENTIFIC BASIS OF ASCERTAINING SUCH WARRANTY OBLIGATIONS EXISTED. HOW AND IN WHAT MANNER SUCH OBLIGATIONS WERE FULFILLED IN THE EARLIER YEARS REMAINED UNANSWERED. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCE S, 50% OF SUCH EXPENDITURE AMOUNTING TO RS.23,01,171 / - IS HEREBY DISALLOWED AND ADDED BACK TO THE ASSESSABLE INCOME FOR THE RELEVANT PERIOD UNDER CONSIDERATION '. 7.3 IN THE REMAND REPORT THE COMMENTS OF THE ASSESSING OFFICER ARE AS UND E R: - ''AN ADDITIO N OF RS.23, 01,171/ - WAS MADE TO THE INCOME OF THE ASSESSEE DURING THE ASSESSMENT YEAR 2005 - 06 BY DISALLOWING THE SAME OUT OF WARRANTY EXPENSES. THE SAID DISALLOWANCE WAS MADE BY ACCEPTING 50% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. THE ASSUMPTION O F 50% WAS MADE ON THE BASIS OF THE MARKET RENT AND THE EXTENT OF COST INVOLVED IN THE EXECUTION OF WARRANTY. THUS, THE DISALLOWANCE WAS RIGHTLY AND REASONABLY MADE ON ESTIMATE BASIS. HERE ALSO, THE ASESSEE HAS NOT OFFERED ANY NE W EXPLANATION TO SUBSTANTIAT E ITS CLAIM.' 7.4 THE PERUSAL OF THE FINDINGS OF ASSESSING OFFICER IN THE ASSESSMENT ORDER AND HIS COMMENTS IN THE REMAND REPORT REVEALS THAT THE ASSESSING OFFICER HAS TAKEN A STAND IN HIS REMAND REPORT WHICH IS ENTIRELY DIFFERENT FROM THE STAND TAKEN IN THE ASSESSMENT ORDER. THIS GIVES A CLEAR INDICATION THAT THE ASSESSING OFFICER IS IN A CONFUSED STATE OF MIND. HE HAS NOT BEEN ABLE TO APPRECIATE THAT ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 12 OF 20 (A) THE REPLACEMENT OF PARTS IN PURSUANCE OF STIPULATION OF WARRANTY IS A PART OF THE ORIGINAL SALE PRICE FIXED AND CHARGED FROM THE CUSTOMERS; (B) THE SALE PRICE OF PARTS CONSUMED IN THE EXECUTION OF WARRANTY HAS ALREADY BEEN ACCOUNTED FOR BY THE ASSESSEE IN THE SHAPE OF SALE PRICE OF THE PRODUCT; (C) THE MATERIAL CONSUMED IN THE EXECUTION OF WORK WHICH IS N OT COVERED BY WARRANTY HAS BEEN CHARGED SEPARATELY AND THE SAID RECEIPTS ARE REDUCED FROM THE EXPENSES INCURRED AND ONLY NEXT EXPENSES HAVE BEEN CHARGED TO THE PROFIT & LOSS ACCOUNT, (D) THE WARRANTY EXPENSES INCLUDE THE SALARIES, RENT, ELECTRICITY EXPENSE S AND COST OF RAW - MATERIALS CONSUMED IN THE S ERVICE CENTRE. HAD THIS NOT BEEN SHOWN SEPARATELY, THIS WOULD HAVE BEEN PART OF THE EXPENSES AND RECEIPTS I INCOME OF THE RELEVANT HEAD OF ACCOUNT. THIS WOULD NOT HAVE AFFECTED THE NET FINANCIAL RESULTS DECLARED BY THE ASSESSEE. 7.5 THE LIABILITY TO PAY FOR WARRANTY CLAIMS ARI SES NO SOONER THE SALES ARE EFFECTED. THE APPELLANT HAS PROVIDED FOR LIABILITY ON THE BASIS OF SALES MADE DURING THE YEAR. VARIOUS HIGH COURTS HAVE HELD THAT THAT THE LIABILITY TOWARDS WARR ANTY IS INBUILT IN THE SALE PRICE ITSELF AND SO THE LIABILITY IS NOT CONTINGENT BUT AN ASCERTAINED ONE AND TO BE ALLOWED IN THE YEAR OF SALES AND THEREFORE THE LIABILITY IN RESPECT OF SUCH WARRANTY CLAIMS IS NOT A CONTINGENT LIABILITY BUT AN ACCRUED LIABIL ITY. RELIANCE IS PLACED UPON THE FOLLOWING CASE LAWS: - I) CIT V. BEEMA MFRS. (P.) LTD. [2003] 130 TAXMAN 400 (MAD.); II) CIT V. INDIAN TRANSFORMERS LTD. [2004] 270 ITR 259 (KER); III) CIT V. VINITEC CORPN. (P.) LTD. [2005] 278 ITR 337 (DELHI); IV) VOLTAS LTD. V. DY. CIT [1988] 64 ITO 232 (MUM.); V) IT O V. WANSON (INDIA) LTD. [1983] 5 ITD 102 (PUNE); VI) JAY BEE INDUSTRIES V. DY. CLT [19881 66 [TO 530 (ASR.);AND VII) IBM INDIA LTD.V.CIT [2007] 105 ITD 1 (BANG.) 7.6 IT IS ALSO OBSERVED THAT A .O. HAS NOT POINTED OUT ANY DEFECT IN THE CLAIM OF THE ASSESSEE IN REGARD TO THE WARRANTY EXPENSES. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE EXPENSES WERE BOGUS OR NON - GENUINE AND THEY HAVE NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS ES OF BUSINESS. THE A.O. HAS ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 13 OF 20 SIMPLY MADE THE ADDITION WITHOUT EXAMINING AND APPRECIATING THE SUBMISSIONS MADE AND THE SUPPORTING EVIDENCES PRODUCED ON BEHALF OF THE APPELLANT. ACCORDINGLY, IT IS HELD THAT THE ADDITION OF RS.23,01,171/ - ON ACCOUNT OF WARRAN TY EXPENSES CAN NOT BE SUSTAINED AND ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED. AS A RESULT , GROUND NO.4 RAISED BY THE APPELLANT IS ALLOWED. 10.4. FURTHER ON PERUSAL OF THE ASSESSMENT ORDER WE OBSERVE THAT ASSESSING OFFICER DO NOT CAST ANY DOUBT ON THE GENUINITY OF WARRANTY EXPENSES CLAIMED BY ASSESSEE. WE AGREE WITH LD. CIT (A) ON THIS COUNT THAT THE ADDITION HAS BEEN MADE WITHOUT EXAMINING THE PROPER DETAILS/EVIDENCES PROVIDED BY ASSESSEE. EVEN IN THE REMAND REPORT ASSESSING OFFICER HAS NOT BR OUGHT OUT ANY CONTRARY OBSERVATION ON THE DOCUMENTS SUBMITTED BEFORE LD. CIT (A) BY ASSESSEE. 10.5 . WE THEREFORE DO NOT FIND ANY INFIRMITY WITH THE OBSERVATIONS OF LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY THIS GROUND RAISED BY REVENUE FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 STANDS DISMISSED. 11. GROUND NO. 5 FOR ASSESSMENT YEAR 2005 - 06 AND G ROUND NO. 6 FOR ASSESSMENT YEAR 200 6 - 07 : 11.1 . T HIS GROUND HAS BEEN RAISED AGAINST THE ROYALTY EXPENSES BEING DELETED BY THE LD. CIT (A). 11.2 . LD. DR PLACED RELIANCE UPON THE ORDER OF LD. AO. 11.3. ON THE CONTRARY LD.AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSING OFFICER MADE ADDITION BY CONSIDERING THE COMMISSION PAID TO M/S.SAR SILICON SYSTEMS PVT. LTD., AS ROYALTY , DUE TO AN APPRE HENSION THAT THE BRAND WAS ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 14 OF 20 CREATED BY ASSESSEE. IT HAS BEEN SUBMITTED THAT ASSESSEE HAS INSTITUTED AN AGREEMENT FOR TRANSFER OF BRAND TO M/S.SAR SILICON SYSTEMS PVT. LTD., ON 14/01/04 AFTER GETTING THE SAME VALUED FROM M/S CORPORATE CATALYST INDIA PVT. LTD . IT HAS BEEN SUBMITTED THAT ASSESSEE RECEIVED A CONSOLIDATED AMOUNT OF RS.63 LACS IN CONSIDERATION OF THIS AGREEMENT, WHICH HAS BEEN MADE IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT. IT HAS BEEN SUBMITTED THAT THIS PAYMENT HAS BEEN MADE AS PER BUSINE SS EXPEDIENCY AND IS AN ALLOWABLE EXPENDITURE, WHICH HAS BEEN REFLECTED IN THE BOOKS OF ACCOUNT. LD. AR FURTHER SUBMITTED THAT M/S. SAR SILICON SYSTEMS PVT. LTD FOR THE YEAR UNDER CONSIDERATION HAS BEEN ASSESSED TO THE INCOME AND HAS PAID RELEVANT TAXES ON THE SAME. 11.4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 11.5. IT IS OBSERVED THAT ASSESSEE HAD FILED VARIOUS DETAILS REGARDING THE COMPUTATION OF COMMISSION EXPENSES PAID TO M/S. SAR SILI CON SYSTEMS PVT. LTD, COPY OF INTIMATION UNDER SECTION 143 (1) OF THE ACT OF M/S. SAR SILICON SYSTEMS PVT. LTD FOR ASSESSMENT YEAR 2005 - 06, COPY OF TDS CERTIFICATE ISSUED TO M/S. SAR SILICON SYSTEMS PVT. LTD AND COPY OF CHALLAN FOR DEPOSITING THE TDS BEFOR E LD. AO AS WELL AS LD. CIT (A). 11.6. IT IS FURTHER OBSERVED THAT LD. CIT (A) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER: 8.2 I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISSION MADE ON BEHALF OF THE APPELLANT, THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND IN THE REMAND REPORT AND FACTS ON RECORD. THE ASSESSING OFFICER ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 15 OF 20 DISALLOWED SUCH EXPENDITURE ON THE GROUND THAT THE BRAND WAS CREATED BY THE APPELLANT ITSELF. HOWEVER, HE FAILED TO APPRECIATE THAT THE APPELLANT HAD ALREADY SOLD ITS BRAND ON 14.01.2004 FOR A CONSOLIDATED AMOUNT OF RS. 6300000/ - AND THE AGREED ROYALTY WAS ONE OF THE TERMS OF SALE OF BRAND. THE AP PELLANT HAS ALREADY PAID INCOME - TAX ON THE RECEIPT OF ABOVE SAID AMOUNT ON AC COUNT OF SA L E OF BRAND. THE TERMS & CONDITIONS FOR THE SALE OF THE BRAND WERE VALUED BY A RENOWNED PROFESSIONAL NAMELY M / S CORPORATE CATALYST (INDIA) PVT. LTD AND EXPENSES HAVE B EEN INCURRED AS PER STIPULATION OF THE AGREEMENT AND AFTER COMPLYING WITH THE PROVISIONS OF TDS. THE PERUSAL OF THE COMPUTATION OF INCOME FILED BY THE APPELLANT ALONG WITH THE RETURN OF INCOME [OR THE ASSESSMENT YEAR 2004 - 05 REVEALS THAT THE APPELLANT HAD SOLD THE BRAND DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004 - 05 AND THE TOTAL SALE CONSIDERATION TO THE TUNE OF RS.63,00,000 / - (LESS EXPENSES OF RS .1,00,000/ - INCURRED ON BRAND VALUATION) HAS BEEN DECLARED AS CAPITAL GAINS AND DUE TAX HAS BEEN PAID THEREON. THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS IS EVIDENT FROM THE PERUSAL OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004 - 05. ALL THESE FACTS CONJOINTLY ESTABLISH THAT THE APPELLANT IS NOT THE OWNER OF THE BRAND DURING THE YEAR UNDER CONSIDERATION AND THE ROYALTY - CUM - COMMISSION PAID FOR THE USAGE OF BRAND IS THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE COW - SE OF ITS BUSINESS. IT IS WELL SETTLED THAT THE INCOME TAX AUTHORITIES CANNOT IGNORE THE ORDINARY PRINCIPLES OF COMMERCIAL EXPEDIENCY SIMPLY BECAUSE THEY ARE NOT PRESCRIBED OR CODIFIED ANYWHERE. THE HO N 'BLE APEX COURT IN ALUMINIUM CORPORATION OF INDIA LTDS CASE REPORTED IN(1972) 86 ITR 11 AND IN 1.K. WOOLLEN MANUFACTURERS' CASE REPORTED IN(1969) 72 ITR 612 HAS HELD THAT IN A PPLYING THE T EST OF COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS, THE REASONABLENESS OF THE EXPENDITURE HAS TO BE SEEN AND JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE REVENUE AUTHORITIES. IN THE INSTANT CASE NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A.O. BEFORE R EACHING THE CONCLUSION THAT SUCH PAYMENT WAS NOT JUSTIFIED. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 16 OF 20 8.3. ACCORDINGLY, IT IS HELD THAT THE ADDITION OF RS.10,34,608/ - ON ACCOUNT OF ROY ALTY EXPENSES CANNOT BE SUSTAINED AND ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED. AS A RESULT, GROUND NO.5 RAISED BY THE APPELLANT IS ALLOWED. 11.7 . IT IS OBSERVED THAT ASSESSEE HAD SOLD THE BRAND ON WHICH CAPITAL GAINS HAS BEEN DECLARED AND DUE TA XES HAS BEEN PAID THEREUPON WHICH HAS BEEN ACCEPTED BY LD.AO. THIS IS OBSERVED THAT ASSESSEE DURING THE YEAR SOLD ITS BRAND TO M/S. SAR SILICON SYSTEMS PVT. LTD AND SIMULTANEOUSLY E NTERED INTO AN AGREEMENT FOR US AGE OF TRADEMARK ON PAYMENT OF COMMISSION V IDE AGREEMENT DATED 14/01/04. ASSESSEE HAS ALSO PROVIDED RELEVANT EVIDENCES WHEREIN TDS HAS BEEN DEDUCTED ON THE COMMISSION PAID TO M/S. SAR SILICON SYSTEMS PVT. LTD. IT IS ALSO BEEN SUBSTANTIALLY PROVED BY ASSESSEE THAT ON SUCH RECEIPT M/S. SAR SILICON SY STEMS PVT. LTD HAS BEEN DECLARING THE INCOME IN ITS RETURNS. WE DO NOT SEE ANY REASON TO TAKE A DIVERGENT VIEW FROM THAT OF LD. CIT (A) AS THERE IS NO LOSS THAT HAS BEEN CAUSED TO THE REVENUE. 11.8 . WE ARE THEREFORE INCLINED TO UPHOLD THE SAME. ACCORDING LY GROUND NO. 5 FOR ASSESSMENT YEAR 2005 - 06 AND GROUND NO. 6 FOR ASSESSMENT YEAR 2006 - 07 RAISED BY STANDS DISMISSED. 12. GROUND NO. 6 FOR ASSESSMENT YEAR 2005 - 06 AND G ROUND NO. 7 FOR ASSESSMENT YEAR 2006 - 07 : 12.1. THIS GROUND HAS BEEN RAISED BY REVENUE AGAINST GRANTING OF DEDUCTION CLAIMED BY ASSES SEE UNDER SECTION 80 IC OF THE A CT . 12.2 . LD. DR PLACED RELIANCE UPON THE ORDER OF LD. AO. 12.3 . LD. AR ON THE CONTRARY SUBMITTED THAT THIS ISSUE HAS BEEN SET ASIDE BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2004 - 05 (SUPRA) BY OBSERVING AS UNDER: 3.5.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE MAIN OBJECTION OF ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 17 OF 20 THE A. O . IN THIS REGARD WAS THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE ASSESSEE WAS IN FACT PRODUCING GOODS AT BADDI UNIT. THE REASONS GIVEN BY HIM ARE THAT VERY SMALL AMOUNT OF ELECTRICITY CHARGES OF RS.44,186/ - WERE SAID TO BE INCURRED AT BADDI UNIT, WHICH IS NOT SUFFICIENT TO TAKE CARE OF SUCH A HUGE PRODUCTION OF RSA.55 CRORES. IT IS ALSO OBSERVED BY THE A.O. THAT NO DETAILS OF FREIGH T OUTWARD OF RS. 1. 47 LACS WERE PROVIDED AND THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE REGARDING ACTUAL MOVEMENT OF GOODS BY DELIBERATELY WITHHOLDING INFORMATION. IN SPITE OF THESE SPECIFIC OBJECTIONS OF THE A. O ., LD, CIT(A) HAS DECIDED THIS ISSUE WIT HOUT ADDRESSING T HESE SPECIFIC GRIEVANCES O F THE A.O. THE RELEVANT PARA OF THE ORDER OF LD.CIT(A) IS PARA :8.4. WHICH IS REPRODUCED BELOW: 8.4. AS WOULD BE EVIDENT FROM THE ABOVE, THESE ARE THE REQUIREMENTS FOR CLAIMING DEDUCTION U/S 80 IC OF THE ACT . IT IS NOT DISPUTED BY THE A. O . THAT THE ASSESSEE HAS NOT FULFILLED THE ABOVE CONDITIONS, WHICH ARE REQUIRED FOR CLAIMING DEDUCTION U/S 80 - IC OF THE ACT. THE CONTENTION OF T HE APPELLANT IS FOUND TO BE CORRECT THAT MERE NON REASONABLENESS OF EXPENSE A ND NON - PRODUCTION OF EVIDENCES IN SUPPORT OF THE EXPENSES CANNOT BE A GROUND FOR REJECTION OF THE ASSESSEE'S CLAIM FOR DEDUCTION U/S 80 - IC OF THE ACT. AFTER HAVING CONSIDERED THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS NOT UNFAIR TO CON CLUDE THAT ALL THE NECESSARY CONDITIONS REGARDING DEDUCTION U/S 80IC OF THE ACT STOOD FULFILLED BY THE APPELLANT. UNDER THE CIRCUMSTANCES, THE A.O. IS DIRECTED TO ALLOW DEDUCTION U/S 80 IC AFTER VERIFICATION OF THE FACT AS TO WHETHER ALL THE CONDITIONS REGARDING DEDUCTION UNDER SECTION 80 - IC HAVE DULY BEEN FULFILLED BY THE ASSESSEE OR NOT. SUBJECT TO THE ABOVE REMARKS, GROUND NO.6 IS ALLOWED.' 3.5.4 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT NO FINDING IS GIVEN BY LD. CIT(A) IN CONNECT ION WITH THESE OBJECTIONS OF THE A.O. THAT ELECTRICITY EXPENSES WERE NOT SUFFICIENT TO EFFECT THIS HUGE PRODUCTION OF RS.4.55 CRORES AND THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE REGARDING ACTUAL MOVEMENT OF GOODS ALTHOUGH IT IS CLAIMED BY THE ASSESSEE THAT SEMI FINISHED GOODS WERE TRANSFERRED FROM DELHI TO BADDI UNIT AND FINISHED GOODS WERE TRANSFERRED FROM BADDI TO DELHI F OR ACTUAL SALE. BEFORE US ALSO, NO ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 18 OF 20 DETAILS HAVE BEEN FURNISHED REGARDING THE NATURE OF SEMI FINISHED GOODS BEING TRANSFERRED FROM DELHI TO BADDI AND WHAT TYPE OF FINISHING HAS BEEN DONE BY BADDI UNIT AND WHETHER SUCH HUGE PRODUCTION IS POSSIBLE BY INCURRING ELECTRICITY EXPENDITURE OF RS.44,185/ - ONLY. NOTHING IS FURNISHED BEFORE US REGARDING EVIDENCE OF ACTUAL MOVEMENT OF GOODS ALSO . THIS ASPECT HAS ALREADY BEEN RESTORED BACK BY US TO THE FILE OF THE A.O. WHILE DECIDING GROUND NO .4 OF THE REVENUE'S APPEAL. ONE MORE ASPECT HAS BEEN RESTORED BACK BY US BEFORE THE A.O. WHILE DECIDING GROUND NO.3 OF THE REVENUE'S APPEAL IN CONNECTION WIT H ADDITION MADE BY THE A.O. OF RS. 126.63 LACS O N ACCOUNT OF ALLEGATION OF SUPPRESSION OF SALES OF DELHI UNIT. WE FEEL THAT THIS ISSUE IS ALSO INTERCONNECTED WITH THOSE TWO ISSUES AND HENCE ON THIS ISSUE ALSO, A F RESH DECISION IS REQUIRED SINCE THE ORDE R OF CIT(A) ON THIS ISSUE CANNOT BE SUSTAINED FOR WHICH NO FINDING IS GIVEN BY HIM WITH REGARD TO VARIOUS SPECIFIC OBJECTIONS RAISED BY THE A.O. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION. THE ASSESSEE HAS TO PROVIDE NECESSARY DETAILS REGARDING THE NATURE OF SEMI - FINISHED GOODS STATED TO HAVE BEEN TRANSFERRED FROM DELHI TO BADDI UNIT ALONG WITH EVIDENCE FOR THE ACTUAL MOVEMENT OF GOODS. THE ASSESSEE HAS ALSO TO FURNISH DETAILS OF THE ACTUAL PROCESSING DONE BY BADDI UNIT TO COVERT THOSE SEMI FINISHED GOODS INTO FINISHED GOODS AND THE ASSESSEE HAS TO SATISFY THAT SUCH A HUGE PRODUCTION OF RS .4.55 CR O RES AT BADDI UNIT IS POSSIBLE BY INCURRING ELECTRICITY AND PO WER EXPENDITURE OF RS.0.44 LACS ONLY. AFTER EXAMINING ALL THESE ASPECTS, THE A.O. SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 12.4. LD. DR DO NOT OBJECT TO THE ISSUE BEING SET ASIDE TO LD. AO FOR DUE VERIFICATION AS PER AFORETASTED DIRECTIONS. 12.5. WE ARE THEREFORE INCLINED TO SET ASIDE THIS ISSUE TO LD. AO TO VERIFY THE DETAILS REGARDING THE EXPENSES CLAIMED BY ASSESSEE AS PER LAW. ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 19 OF 20 12.6. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT BOTH APPEAL S FILED BY REVENUE STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 . 0 1 . 2 0 1 8 . S D / - S D / - ( G.D.AGRAWAL ) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DT. 3 0 . 0 1 . 2 0 1 8 CO PY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA 874 & 875/DEL/2010 A.Y. - 2005 - 06 AND 2006 - 07 DCIT, CIRCLE 4(1) VS. LUMINOUS ELECTRONICS (P) LTD., NEW DELHI PAGE 20 OF 20 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON 18.01.18 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 3 0 . 0 1 . 2 0 1 8 SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER