THE DYCIT CIR6(2), V. M/S. KPMG INDIA P. LTD,

ITA 8786/MUM/2004

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9440 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 29-10-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 03-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL LALA
• Keywords: Business expenditure; Double taxation relief; Permanent establishment; Fair market value; Corroborative evidences; Onus to prove
• Section: 43B; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 8823 /MUM/2004 (ASSESSMENT YEAR : 1999-2000) KPMG INDIA PRIVATE LIMITED LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAXMI, MUMBAI 400 011 PAN NO. AAACK 2138 A VS. ASSISTANT COMMISSIONER OF INCOME TAX, (OSD), CIRCLE 6(3) MUMBAI (APPELLANT) (RESPONDENT) ITA NO. 8786/MUM/2004 (ASSESSMENT YEAR : 1999-2000) DY. COMMISSIONER OF INCOME TAX, CIRCLE 6(3) MUMBAI KPMG INDIA PRIVATE LIMITED LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAXMI, MUMBAI 400 011 (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. SUNIL LALA REVENUE BY : MS. NEERAJA PRADHAN DATE OF HEARING: 30.10.2012 DATE OF PRONOUNCEMENT: 05.12.2012 O R D E R PER P.M. JAGTAP, AM: THIS TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 8823/MUM/2004 AND THE OTHER FILED BY THE REVENUE BEING ITA NO. 8786/MUM/2004, ARE CROSS APPEALS WHICH ARE DIRECTED AGA INST THE ORDER OF LD.CIT(A) 30, MUMBAI DATED 27.09.2004. ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 2 2. GROUND NO. 1 OF THE REVENUES APPEAL AS WELL AS THAT OF THE APPEAL OF THE ASSESSEE INVOLVE COMMON ISSUE RELATING TO D ISALLOWANCE OF RS.41,27,104 MADE BY THE AO U/S 40(1)(I) OF THE ACT, ON ACC OUNT OF AMOUNT PAID TO VARIOUS NON-RESIDENTS TOWARDS PROFESSIONA L FEES AND REIMBURSEMENT OF EXPENSES WHICH HAS BEEN SUSTAINED BY T HE LD.CIT(A) TO THE EXTENT OF RS.43,546. 3. DURING THE YEAR UNDER CONSIDERATION, THE FOLLOWING PAYME NTS WERE MADE BY THE ASSESSEE TO THE NON-RESIDENTS TOWAR DS PROFESSIONAL CHARGES FOR SERVICES RENDERED AND REIMBURSEMENT OF EXPENSES. 4. ACCORDING TO THE AO, THE ABOVE PAYMENTS MADE BY TH E ASSESSEE TO THE NON-RESIDENTS, WERE IN THE NATURE OF ROYALTIES U/S 9(1)(VI) OF THE ACT, AS WELL AS UNDER THE RELEVANT ARTICLES DEALING WITH THE ROYALTIES UNDER THE RESPECTIVE TREATIES TAXABLE IN INDIA AND SINCE THE ASSESSEE HAD FAILED TO DEDUCT TAX FROM THE SAID AMOUNTS, THE SAM E WERE LIABLE TO BE DISALLOWED U/S 40(A)(I). ACCORDINGLY, DISALLOWANCE OF RS.41,27,104 WAS MADE BY THE AO U/S 40(A)(I). A) KPMG FIDES, ZURICH PROFESSIONAL FEES AND REIMBURSEMENT OF EXPENSES RS.17,16,508 B) KPMG UK, PROFESSIONAL FEES AND REIMBURSEMENT OF EXPENSES RS.11,07,171 C) KPMG, LLP, USA PROFESSIONAL FEES RS.2,55,794 D) KPMG MANAGEMENT CONSULTING, N.V. THE NETHERLANDS PROFESSIONAL FEES AND REIMBURSEMENT OF EXPENSES RS.3,08,417 E) PEAT MARWICK SUTHEE LTD. THAILAND -REIMBURSEMENT OF EXPENSES RS.72,068 F) KPMG INTERNATIONAL, THE NETHERLANDS -REIMBURSEMENT OF EXPENSES RS.6,23,600 G) KPMG PEAT MARWICK MANAGEMENT CONSULTANTS PTE. LTD., SINGAPORE -REIMBURSEMENT OF EXPENSES RS.43,546 ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 3 5. THE DISALLOWANCE MADE BY THE AO WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD.CIT(A) AND AFTER CO NSIDERING THE SUBMISSION MADE ON BEHALF OF ASSESSEE AS WELL AS THE M ATERIAL ON RECORD, THE LD.CIT(A) RECORDED HIS FINDINGS IN RESPECT OF AM OUNT PAID TO EACH NON-RESIDENT PARTIES IN ITS IMPUGNED ORDER AS UNDER : PAYMENT MADE TO KPMG FIDES, ZURICH THE APPELLANT HAS PLACED ON RECORD COPY OF THE INVO ICE, NOTE ON SERVICES AND A DECLARATION DATED 03 SEPTEMBER, 20 04 GIVEN BY KPMG FIDES. THE APPELLANT HAS STATED THAT THE PAYMENT WAS MADE TOWARDS FEES FOR ADVISORY SERVICES AMOUNTING TO SWI SS FRANCS 42,832.50 AND REIMBURSEMENT OF EXPENSES IN THE NATURE OF TRAVEL EXPENSES (AIRWAY BIL ETC.) OF SWISS FRANCS 12,076.50 AS PER INVOICE IN THE FIELD OF WORLDWIDE FUNDS MANAGEMENT AN D IN THE METHODOLOGY PROMETRIS FOR DEVELOPING STRATEGIES. TWO P ERSONNEL FROM KPMG FIDES WERE ALSO INVOLVED FOR WORKSHOPS WITH THE BOARD OF DIRECTORS OF UNIT TRUST OF INDIA. KPMG FIDE S IS A PARTNERSHIP FIRM. THE SCOPE OF ENGAGEMENT WAS FOR RENDERING PROFESSI ONAL SERVICES. KPMG FIDES DOES NOT HAVE A FIXED BASE/ PER MANENT ESTABLISHMENT IN INDIA. PURSUANT TO THE PROVISIONS OF ARTICLE 7 OF THE DTAA BETWEEN INDIA AND THE SWISS CONFEDERATION, THE INCOME FROM THE SERVICES IS NOT TAXABLE IN INDIA. ACCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE FROM THE REMITTANC E. PAYMENTS MADE TO KPMG UK THE APPELLANT HAS PLACED ON RECORD THREE INVOICES RA ISED BY KPMG UK, CORRESPONDENCE BETWEEN THE APPELLANT AND KPM G UK AND A DECLARATION DATED 03 SEPTEMBER 2004 GIVEN BY KPMG UK. THE PAYMENTS HAVE BEEN MADE FOR THE SERVICES (UKP 9 ,500) AND ALSO TOWARDS REIMBURSEMENT OF EXPENSES OF UKP 6,7 60.40 IN THE NATURE OF HOTELS, MEALS, TAXIS, ETC. AS PER INVOICE. K PMG UK IS A PARTNERSHIP REGISTERED IN THE UNITED KINGDOM. THE SCOPE OF ENGAGEMENT WAS FOR RENDERING PROFESSI ONAL SERVICES FOR ICICI ASSIGNMENT AND BHARAT FORGE ASSI GNMENT. KPMG UK DID NOT HAVE A FIXED BASE/ PERMANENT ESTABL ISHMENT IN INDIA. PURSUANT TO THE PROVISIONS OF ARTICLE 7 OF THE INDO-U DTAA, THE INCOME FROM THE SERVICE IS NOT TAXABLE IN INDIA. A CCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE FROM THE REMITTANCE. ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 4 THE APPELLANT HAS ARGUED THAT REIMBURSEMENT OF EXPEN SES IS NOT CHARGEABLE TO TAX. THE APPELLANT HAS RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM. A) ROLLS ROYCE INDIA LTD. VS ITO [1988] 25 ITD 136 (TM). B) ASSISTANT COMMISSIONER OF INCOME TAX VS HINDUSTAN M ARKETING AND ADVERTISING CO, LTD. [1994] 49 TTJ96. C) CIT WEST BENGAL VS DUNPOL RUBBER CO. LTD. [1983] 142 IT R 493 (CAL) D) RAYMOND LTD. VS DEPUTY COMMISSIONER OF INCOME TAX [2 003] 86 ITD 791. ACCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCT ION AT SOURCE FROM THE REMITTANCE. PAYMENTS MADE TO KPMG LLP, UAS THE APPELLANT HAS PLACED ON RECORD TWO INVOICES RAIS ED BY KPMG LLP, USA, NOTE ON SERVICES RENDERED AND TWO DECL ARATIONS DATED 12 MARCH 1999 AND 14 JULY 1999 GIVEN BY KPMG LLP, USA. THE SERVICES WERE RENDERED OUTSIDE INDIA. KPMG LLP, U SA IS A FIRM OF INDIVIDUALS. THE SCOPE OF ENGAGEMENT WAS RENDERING PROFESSIONAL SERVICES IN CONNECTION WITH IPO OF HCL TECHNOLOGIES L TD. PURSUANT TO THE PROVISIONS OF ARTICLE 15 OF THE INDO-US DTAA, T HE INCOME FROM THE SERVICES IS NOT TAXABLE IN INDIA. ACCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE FROM THE REMITTANC E. PAYMENTS MADE TO KPMG MANAGEMENT CONSULTANTS N.V., NETHERLANDS THE APPELLANT HAS PLACED ON RECORD THE INVOICE RAIS ED BY KPMG NETHERLANDS AND A NOTE ON SERVICES. THE PAYMENTS HAVE BEEN MADE FOR THE SERVICES (USD 4 ,000) AND ALSO TOWARDS REIMBURSEMENT OF EXPENSES IN THE NAT URE IF HOTEL COSTS AND TICKET COSTS OF USD 3,294.63 AS PER INVOICE . KPMG NETHERLANDS IS A COMPANY REGISTERED IN THE NETHERLAND S. THE SCOPE OF ENGAGEMENT WAS FOR RENDERING PROFESSI ONAL SERVICES IN CONNECTION WITH MOC TRAINING. KPMG NETHER LANDS DID NOT HAVE A FIXED BASE/ PERMANENT ESTABLISHMENT IN I NDIA. PURSUANT TO THE PROVISIONS OF ARTICLE 7 OF THE INDO-N ETHERLANDS DTAA, THE INCOME FROM THE SERVICES IS NOT TAXABLE IN I NDIA. ACCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCTI ON AT SOURCE FROM THE REMITTANCE. THE APPELLANT HAS ARGUED THAT REIMBURSEMENT OF EXPEN SES IS NOT CHARGEABLE TO TAX. IN SUPPORT OF THIS ARGUMENT IT HAS RELIED ON THE DECISIONS MENTIONED UNDER THE HEAD PAYMENTS MADE TO KPMG UK. ACCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE FROM THE REMITTANCE. ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 5 PAYMENTS MADE TO PEAT MARWICK SUTHEE LTD., THAILAND THE APPELLANT HAS PLACED ON RECORD THE INVOICE RAIS ED BY PEAT MARWICK SUTHEE LTD. THAILAND AND CORRESPONDENC E DATED 21 MAY 1998 AND 19 MAY 1998. THE APPELLANT HAS AGREED THAT THE PAYMENT WAS TOWAR DS REIMBURSEMENT OF COST OF REPORT ON SANITARY WERE IND USTRY IN THAILAND PURCHASED BY PEAT MARWRICK SUTHEE LTD. FROM INDUSTRIAL MANAGEMENT CO. LTD., THAILAND AND RELATED COURIER AND ADMINISTRATION COST. THE APPELLANT HAS ARGUED THAT REIMBURSEMENT OF EXPEN SES IS NOT CHARGEABLE TO TAX. IN SUPPORT OF THIS ARGUMENT IT HAS RELIED ON THE DECISIONS MENTIONED UNDER THE HEAD PAYMENTS MADE TO KPMG UK. ACCORDINGLY THERE WAS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE FROM THE REMITTANCE. PAYMENT MADE TO KPMG INTERNATIONAL, THE NETHERLANDS. THE APPELLANT HAS PLACED ON RECORD THE INVOICED RAIS ED BY KPMG INTERNATIONAL. THE PAYMENT MADE BY THE APPELLANT IS TOWARDS REIMBURSEMENT OF EXPENSES. THE APPELLANT HAS ARGUED THAT REIMBURSEMENT OF EXPEN SES IN THE NATURE OF CASH CALLS IS NOT CHARGEABLE TO TAX. IN SUPPORT OF THIS ARGUMENT IT HAS RELIED ON THE DECISIONS MENTIONE D UNDER THE HEAD PAYMENTS MADE TO KPMG UK. THE APPELLANT HAS ALSO ARGUED THAT WITHOUT PREJUDICE TO THE ABOVE IT HAS RECOVERED THE SAID AMOUNT FROM KPMG, A PARTNERSHIP FIRM REGISTERED IN INDIA IN THE SAME YEAR AND HAS C REDITED THE AMOUNT TO PROFESSIONAL INCOME. THE APPELLANT HAS PLACE D ON RECORD A CONFIRMATION FROM KPMG THAT IT HAS MADE THE SAID PAYMENT TO THE APPELLANT. THE APPELLANT HAS ARGUED THAT THIS AMOUNT HAS APPEA RED BOTH ON THE DEBIT AND CREDIT SIDE OF ITS PROFIT AND LOSS ACCOUNT AND HENCE, NO DEDUCTION HAS BEEN CLAIMED BY IT. CONSEQUENTLY TH E QUESTION OF DEDUCTION OF TAX AT SOURCE AND DISALLOWANC E U/S 40(A)(I) OF THE ACT DOES NOT ARISE. PAYMENT MADE TO KPMG PEAT MARWICK MANAGEMENT CONSUL TANTS PTE. LTD., SINGAPORE. THE APPELLANT HAS ARGUED THAT THIS PAYMENT IS TOWAR DS MISCELLANEOUS EXPENSES AND IS NOT IN THE NATURE OF INCOM E. THE APPELLANT HAS NOT PLACED ON RECORD EVIDENCE IN SUPPORT OF ITS CLAIM. IN THE ABSENCE OF ADEQUATE EVI DENCE, THE DISALLOWANCE IN UPHELD. TO SUM UP, THE FOLLOWING PAYMENTS TOTALLING TO RS.40,83,558 SWISS FRANCS 54,909.20 (RS.17,16,508) MADE TO KPMG FIDES. ZURICH; ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 6 UKP 16,260.40 (RS.11,07,171) MADE TO KPMG UK; USD 6,050 (RS.2,55,794) MADE TO KPMG LLP, USA; USD 7,294.63 (RS.3,08,417) MADE TO KPMG MANAGEMENT CONSULTANTS N.V., THE NETHERLANDS; BAHT 62,700 (RS.72,068) MADE TO PEAT MARWICK SUTHEE LTD ., THAILAND AND USD 15,589 (RS.6,23,600) MADE TO KPMG INTERNATIONAL, THE NETHERLANDS ARE NOT IN THE NATURE OF ROYALTIES EITHER UNDER SEC TION 9(1)(VI) OF THE ACT OR UNDER THE RESPECTIVE DTAAS. THERE WAS NO OBLI GATION TO DEDUCT TAX U/S 195 OF THE ACT. THEREFORE, THE SUBJECT AMOUNT S ARE NOT DISALLOWABLE U/S 40(A)(I) OF THE ACT. THE BALANCE AMOUN T OF RS.43,546 BEING PAYMENT TO PAYMENT MADE TO KPMG PEAT MARWICK MANAGEMENT CONSULTANTS PTE. LTD., SINGAPORE IS DISALLOWA BLE U/S 40(A)(I) OF THE ACT 6. ON THE BASIS OF ABOVE FINDINGS, THE LD.CIT(A) HELD THAT T HE AMOUNTS PAID BY THE ASSESSEE TO THE NON-RESIDENTS WER E NOT IN THE NATURE OF ROYALTIES EITHER U/S 9(1)(VI)OF THE ACT, OR EVEN U NDER THE RESPECTIVE DTAAS AND THERE WAS NO OBLIGATION ON THE ASS ESSEE TO DEDUCT TAX FROM THE SAID AMOUNT. HE HOWEVER, HELD THAT T HE CLAIM OF THE ASSESSEE OF HAVING PAID THE SUM OF RS.47,546 TO KPMG PEAT MARWICK MANAGEMENT CONSULTANTS PTE. LTD., SINGAPORE, TOWAR DS THE REIMBURSEMENT OF EXPENSES WAS NOT SUPPORTED BY ANY EV IDENCE. ACCORDINGLY, THE DISALLOWANCE OF RS.41,27,104 MADE BY THE A O U/S 40(A)(I) WAS SUSTAINED BY HIM ONLY TO THE EXTENT OF RS.43,546 . AGGRIEVED BY THE SAME, THE ASSESSEE AND REVENUE BOTH HAVE RAISED THIS ISSUE IN THEIR RESPECTIVE APPEALS. 7. WE HAVE HEARD ARGUMENT OF BOTH THE SIDES AND ALSO P ERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. REPRESENTATIVE OF BOT H THE SIDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVERED IN FAVO R OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR 2001-02 RENDERED VIDE ITS ORDER DATE D 8 TH JUNE, 2012. A COPY OF THE SAID ORDER IS ALSO PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOR OF THE ASSESSEE FOR THE FOLLOWING REASO NS GIVEN IN PARA 18 & 18.1 OF ITS ORDER. ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 7 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND ALSO GONE THROUGH THE FINDINGS GIVEN BY THE ASS ESSING OFFICER AS WELL AS THE CIT(A). THE RELEVANT FACTS A RE THAT THE ASSESSEE COMPANY WAS ENGAGED AS A CONSULTANT BY ESSAR OIL LIMITED TO PROVIDE CONSULTANCY SERVICES I N CONNECTION WITH SALE OF ITS ENERGY BUSINESS. SUCH A SALE WAS EXPECTED TO REQUIRE APPLICATION OF HIGH LEVEL O FFICE SKILLS BESIDES TECHNICAL AND INDUSTRY KNOWLEDGE. FO R RENDERING SUCH CONSULTANCY A SIGNIFICANT NUMBER OF SUCH OVERSEAS COMPANIES ARE BASED IN USA. THE ASSESSEE ENGAGED THE SERVICES OF KPMG DALLAS, WHICH IS A FIR M OF INDIVIDUAL AND RESIDENT OF USA, WHICH HAD THE SKILL AND TECHNICAL KNOWLEDGE RELATING TO ENERGY DIVISION BAS ED INDUSTRY AND TECHNICAL PARAMETERS IN GIVING SUCH CONSULTATIONS AND CONDUCT NEGOTIATIONS WITH THE POT ENTIAL PARTIES. IT WAS IN LIEU OF THIS, THAT A PROFESSIONA L FEE OF USD 46,248 WHICH IN TERMS OF INR COME TO `.20,89,906/-, WAS PAID. THE SECOND PAYMENT WAS MADE TO KPMG CONSULTIN G LP CANADA FOR RENDERING PROFESSIONAL SERVICES FOR T HE ESSAR OIL LIMITED FOR RETAIL OIL MARKETING AND OTHE R RELATED SERVICES. THE PAYMENT TOWARDS FEE WAS MADE AT USD 30,678/- WHICH IN TERMS OF INR IS `.13,37,229/-, WH ICH ALSO INCLUDED REIMBURSEMENT OF EXPENSES IN THE NATU RE OF TRANSPORTATION, LODGING, MEALS AND OTHER EXPENSES. THE ASSESSING OFFICER HAS GIVEN CATEGORICALLY FINDING T HAT SO FAR AS THE ARTICLE 15 OF DTAA IS CONCERNED, THE SAM E DOES NOT APPLY TO KPMG USA AS IT DOES NOT HAVE ANY PE OR BUSINESS BASED IN INDIA AND THE SERVICES WERE NOT RENDERED FOR A PERIOD EXCEEDING 90 DAYS WITHIN THE PERIOD OF 12 MONTHS. HIS ONLY CASE IS THAT THE PROFESSIONA L FEES PAID TO KPMG USA ARE IN THE NATURE OF ROYALTIES WIT HIN THE MEANINGS OF EXPLANATION TO SECTION 9(1)(VI) AND I S TAXABLE UNDER ARTICLE 12 OF INDO-US DTAA. THE ROYALTIES AND FEES FOR INCLUDED SERVICES IS TAXABLE AS PER ARTICLE 12 IN CLAUSE 3, READS AS UNDER :- 3. THE TERM ROYALTIES AS USED IN THIS ARTICLE ME ANS : (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF OR THE RIGHT TO USE ANY COPYRIGHT OR A LITER ARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR W ORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONN ECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 8 CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY U SE OR DISPOSITION THEREOF: AND 18.1 LOOKING TO THE NATURE OF PROFESSIONAL SERVICES RENDERED TO THE KPMG USA, IT IS EVIDENT THAT IT DOE S NOT FALL IN ANY OF THE TERMS OF DEFINITION GIVEN FOR RO YALTY UNDER ARTICLE 12 OF INDO US DTAA. IT WAS PURELY A PROFESS IONAL SERVICE FOR CONSULTANCY WHICH WERE RENDERED OUTSIDE INDIA AND NOR FOR SUPPLY OF SCIENTIFIC, TECHNICAL, INDUST RIAL OR COMMERCIAL KNOWLEDGE OR INFORMATION. THUS, NATURE O F PAYMENT DO NOT FALL WITHIN THE MEANING OF ARTICLE 1 2 AND, THEREFORE, THERE WAS NO LIABILITY TO DEDUCT TDS AND CONSEQUENTLY DISALLOWANCE MADE UNDER SECTION 49(IA) IS UNCALLED FOR. SIMILARLY, IN THE CASE OF PAYMENT MAD E TO KPMG, CANADA WERE ALSO PURELY FOR PROFESSIONAL SERV ICES AND REIMBURSEMENT OF EXPENSES, WHICH IN ANY MANNER DOES NOT FALL UNDER ARTICLE 12. THUS, ON SUCH PAYME NT ALSO THERE WAS NO LIABILITY TO DEDUCT TDS AND CONSEQUENT LY SECTION 40(IA) WILL NOT BE APPLICABLE. THE FINDING OF THE CIT(A) IS, THUS, UPHELD. ACCORDINGLY, GROUND NO.1 A S RAISED BY THE DEPARTMENT IS DISMISSED. 8. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT O F ASSESSMENT YEAR 2001-02, WE RESPECTIVELY FOLLOW THE DECISION OF COORDIN ATE BENCH OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR ASSE SSMENT YEAR 2001-02 AND, UPHOLD THE IMPUGNED ORDER OF THE CIT(A) DELE TING THE DISALLOWANCE MADE BY AO U/S 40(A)(I) TO THE EXTENT OF RS.40,83,558. 9. AS REGARDS THE REMAINING DISALLOWANCE OF RS.43,546 IN RES PECT OF PAYMENT MADE TO KPMG PEAT MARWICK MANAGEMENT CONSULTA NTS PTE. LTD., SINGAPORE, IT IS OBSERVED THAT THE SAME WAS CONFIRME D BY THE LD.CIT(A) ON THE GROUND THAT THE CLAIM OF THE ASSESSEE OF HAVING MADE THE SAID PAYMENTS TOWARDS REIMBURSEMENT OF EXPENSES WA S NOT SUPPORTED BY ANY EVIDENCE. SINCE NOTHING HAS BEEN BROUG HT ON RECORD ON BEHALF OF ASSESSEE TO REBUT OR CONTROVERT THIS FINDING OF THE LD.CIT(A), WE FIND NO JUSTIFIABLE REASONS TO INTERFERE WITH THE IMPUGNED ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 9 ORDER OF THE LD.CIT(A) ON THIS ISSUE. GROUND NO. 1 OF THE AS SESSEES APPEAL AS WELL AS THAT OF THE REVENUES APPEAL IS ACCORDIN GLY DISMISSED. 10. GROUND NO.2 OF THE REVENUES APPEAL AND GROUND NO.4 OF THE ASSESSEES APPEAL INVOLVE A COMMON ISSUE RELATING TO DISALL OWANCES OF RS.7,48,267 MADE BY THE AO ON ACCOUNT OF REPAIRS AND MAIN TENANCE EXPENSES WHICH HAS BEEN SUSTAINED BY THE LD.CIT(A) TO TH E EXTENT OF RS.75,000/- 11. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD CLAIMED REPAIRS AND MAINTENANCE EXPENSES OF RS.7,48,267, WHICH WERE STATED TO BE PAID TO THE OFFICE ATTENDANTS FOR THEIR SERVICES UT ILIZED FROM TIME TO TIME TO CLEAN AND MAINTAIN OFFICE PREMISES AT MUMBAI, DELHI, KOLKATA, BANGALORE AND CHENNAI. THE SAID EXPENSES WERE DIS ALLOWED BY THE AO CITING DIFFICULTY IN VERIFICATION OF AUTHENTICITY OF TH E SAID EXPENSES. ON APPEAL, THE LD.CIT(A) HELD THAT FOR THE DIFFICULTY IN VERIFICATION, THE ENTIRE EXPENSES CLAIMED TO BE INCURRED ON REPAIRS AND MAINTENANCE COULD NOT BE DISALLOWED. ACCORDING TO HIM, A DISALLOWANCE TO THE EXTENT OF RS.75,000, BEING ABOUT 10% OF THE TOTAL E XPENSES WOULD BE FAIR AND REASONABLE CONSIDERING THE NATURE OF TH E EXPENSES INCURRED. ACCORDINGLY, HE SUSTAINED DISALLOWANCE MADE BY TH E AO ON THIS ISSUE TO THE EXTENT OF RS.75,000. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AN D ALSO PERUSED RELEVANT MATERIAL FACTS ON RECORD. KEEPING IN VIEW THE NATURE OF THE EXPENSES CLAIM TO BE INCURRED ON REPAIRS A ND MAINTENANCE AND EXPLANATION OFFERED IN RESPECT OF THE SAME , WE FIND OURSELVES IN AGREEMENT WITH THE LD.CIT(A) THAT THE ENTIRE EXPENSES CLAIMED BY THE ASSESSEE COULD NOT BE DISALLOWED ON ACCOUN T OF DIFFICULTY IN VERIFICATION AND IT WOULD BE FAIR AND REASONABLE TO MAKE THE DISALLOWANCE AT AROUND 10% FOR WANT OF VERIFICATION. WE, T HEREFORE, ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 10 UPHOLD THE IMPUGNED ORDER OF THE LD.CIT(A) ON THIS ISSUE A ND DISMISS GROUND NO. 2 OF THE REVENUES APPEAL AND GROUND NO. 4 O F THE ASSESSEES APPEAL. 13. GROUND NO. 3 OF THE REVENUES APPEAL AND GROUND NO . 5 OF THE ASSESSEES APPEAL INVOLVE A COMMON ISSUE RELATING TO DIS ALLOWANCE OF RS.1,02,28,800 MADE BY THE AO U/S 40A(2)(B) ON ACCOUNT OF PA YMENTS MADE BY THE ASSESSEE TO KPMG WHICH HAS BEEN SUSTAINED BY THE LD.CIT(A) TO THE EXTENT OF RS.24,02,400. 14. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD MADE A TOTAL PAYMENT OF RS.5,11,44,000 TO KPMG ON ACCOUNT OF REIMBURSEMENT OF COSTS AMOUNTING TO RS.2,71,20,000 AND FOR RENDERING OF SERVICES AMOUNTING TO RS.2,40,24,000. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT FURNISH THE PARTICULARS ABOUT THE EXACT NATURE OF SERVICE RENDERED BY KPMG AND THE AMOUNT OF CHARGES COLLECTED BY IT FROM THE CLIENTS COR RESPONDING TO THE SAID SERVICES SO AS TO ENABLE THE AO TO DETERMINE T HE REASONABLENESS OF THE AMOUNT PAID TO KPMG WHO WAS A RE LATED PARTY. THE AO THEREFORE, INVOKED THE PROVISIONS OF SECTION 40A(2)(B) AND MADE A DISALLOWANCE OF RS.1,02,28,800 BEING 20% OF THE TOTAL AMOUNT PAID BY THE ASSESSEE TO KPMG. 15. THE MATTER WAS CARRIED BEFORE THE LD.CIT(A) AND DOC UMENTARY EVIDENCE SHOWING BASIS OF LEVYING THE CHARGES OF KPMG AS W ELL AS CONFIRMATION FROM KPMG THAT THE SAME RATES WERE CHARGED TO NON- RELATED PARTY WAS FILED BY THE ASSESSEE BEFORE THE LD.CI T(A). TAKING INTO CONSIDERATION THE SAID DOCUMENTS FILED BY THE ASSESSE E AS WELL AS OTHER SUBMISSIONS MADE ON THIS ISSUE, THE LD.CIT(A) HELD TH AT THE PROVISIONS OF SECTION 40A(2)(B) COULD NOT BE APPLIED TO THE A MOUNT OF REIMBURSEMENT OF COST OF RS.2,71,20,000. AS REGARDS THE AMO UNT OF RS.2,40,24,000 PAID BY THE ASSESSEE TO KPMG FOR SERVICES R ENDERED, ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 11 THE LD.CIT(A) HELD RELYING ON HIS APPELLATE ORDER FOR ASSES SMENT YEAR 2001-02 THAT THE SAME ONLY TO THE EXTENT OF 10% COULD BE CONSIDERED AS UNREASONABLE AND EXCESSIVE FOR THE PURPOSES OF DISALLOW ANCE U/S 40A(2)(B). ACCORDINGLY, HE DIRECTED THE AO TO RESTRICT DISALLO WANCE OF 20% U/S 40A(2)(B) OF RS.2,40,24,000 AND ALLOWED PART RELIEF TO T HE ASSESSEE ON THIS ISSUE. 16. WE HAVE CONSIDERED THE RIVAL ISSUE AND ALSO PERUSED T HE MATERIAL ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE HAS BEEN SET ASIDE BY THE TRIBUNAL TO THE AO IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2001- 02 AND 2003-04 VIDE ITS ORDER ON 8 TH JUNE, 2012 (SUPRA) FOR THE FOLLOWING REASONS GIVEN IN PARA NO. 11 OF ITS ORDER. 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE RIVAL PARTIES AND THE FINDINGS GIVEN BY THE CIT(A) AS WELL T HE ASSESSING OFFICER. SECTION 40A (2)(B) PROVIDES THAT :- (2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERS ON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTION, AND THE [ASSESSI NG] OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREA SONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICE S OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEF IT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHA LL NOT BE ALLOWED AS A DEDUCTION. FROM THE PLAIN READING OF ABOVE, IT IS AMPLY CLEAR THAT THE PAYMENTS WHICH ARE MADE TO PERSONS SPECIFIED IN SUB -CLAUSE B OF SUB SECTION 2 OF SECTION 40A, IF IN THE OPINION OF AS SESSING OFFICER, IS EXCESSIVE AND UNREASONABLE; FIRSTLY, HAVING REGARD TO THE FAIR MARKET VALUE OF TH E GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE; SECONDLY, LOOKING TO THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE; OR THIRDLY, THE BENEFIT DERIVED BY OR ACCRUING TO HIM THERE FROM; THEN SUCH AN EXPENDITURE AS IS CONSIDERED BY THE ASS ESSING OFFICER TO BE EXCESSIVE OR UNREASONABLE, SHALL BE DISALLO WED. IN A GIVEN CASE, THE QUESTION WHETHER THE EXPENDITURE IS EXCESSIVE OR ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 12 UNREASONABLE HAS TO BE EXAMINED KEEPING IN MIND THE GOODS, SERVICES OR FACILITIES PROVIDED BY THE RELATIVE PERS ONS FOR WHICH PAYMENT IS MADE. IN SUCH A PROCESS, THE LEGITIMATE NEED S OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEF IT DERIVED BY OR ACCRUING TO THE ASSESSEE FROM SUCH SERVICES HAS ALSO TO BE KEPT IN MIND. AFTER APPLYING THIS TEST, IF IT IS FOUND THAT THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE, THEN EXCESS OR UNREASONABLE PORTION OF THE EXPENDITURE IS TO BE DISALLOWED. THE INITIAL ONUS TO PROVE THAT THE PAYMENT MADE TO SPECIFIED PERSONS IS EXCESSIVE OR UNREASONABLE RESTS UPON THE ASSESSEE, WHO HAS TO SHO W THAT SUCH PAYMENTS ARE IN CONSONANCE WITH THE MARKET RATE OR THE PAYMENT MADE TO ANY RELATIVE PARTIES ARE FOR LEGITIMA TE NEEDS OF THE BUSINESS OR PROFESSION. IT IS THEN THE ASSESSING OFFICER HAS TO PROVE FROM THE MATERIAL PLACED ON RECORD THAT SUCH A PAYMENT ON WHICH EXPENDITURE IS INCURRED IS EXCESSIVE OR UNREAS ONABLE AND IS NOT FOR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFES SION, OR ANY KIND OF BENEFIT IS DERIVED TO THE ASSESSEE. HERE IN THIS CASE, THE ASSESSING OFFICER HAS NEITHER ENQUIRED NOR BROUGHT ANYTHING ON RECORD TO SHOW THAT THE PAYMENT IS EXCESSIVE AS COM PARED TO UNRELATED PARTIES OR IT WAS NOT FOR THE LEGITIMATE N EEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE. THE SAME DOE S NOT SEEM TO HAVE BEEN DOUBTED. IT IS ALSO NOT BORNE OUT FROM T HE FINDING OF THE ASSESSING OFFICER AS WELL AS THE CIT(A), AS TO WHAT WAS THE BASIS FOR DISALLOWANCE OF 10%, WHETHER THERE WAS ANY SOME KIND OF MATERIAL OR SOME COMPARABLE PAYMENTS TO OTHER PARTI ES. IN ABSENCE OF SUCH MATERIAL ON RECORD, WE ARE UNABLE TO S USTAIN THE VIEW TAKEN BY THE ASSESSING OFFICER AS WELL AS THE CI T(A) THAT DISALLOWANCE OF 10% SHOULD BE MADE ON AD HOC BASIS. UND ER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND T HAT IT WOULD BE PROPER THAT MATTER IS RESTORED BACK TO THE ASSES SING OFFICER, WHO WILL EXAMINE WHETHER THE SIMILAR PAYMENTS TO OTHER UN RELATED PARTIES HAVE BEEN MADE IN THE SAME PROPORTION OR ON SIMILAR RATES OR WHETHER THERE WAS ANY LEGITIMATE NEED FOR ITS BUSIN ESS. THUS, THIS MATTER IS RESTORED BACK TO THE FILE OF THE ASSE SSING OFFICER FOR VERIFICATION FROM THE END OF THE ASSESSING OFFICER TO EXAMINE SIMILAR NATURE OF PAYMENTS MADE TO UNRELATED PARTIES ARE IN CONSONANCE OR ARE ON SIMILAR RATE AND THEN DECIDE TH IS MATTER. IF IT IS FOUND THAT PAYMENTS MADE TO RELATED PARTIES ARE IN CONSONANCE WITH THE PAYMENTS MADE TO UNRELATED PARTIES OR IT IS FOR LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION, NO ADDITION OR D ISALLOWANCE SHOULD BE MADE. IN THE RESULT, THIS GROUND IS ALLOWED FO R STATISTICAL PURPOSE. 17. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERE TO ARE SIMILAR TO THAT OF AS SESSMENT YEARS 2001-02 TO 2003-04, WE RESPECTIVELY FOLLOW THE ORD ER OF THE ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 13 COORDINATE BENCH IN ASSESSEES CASE FOR THE SAID YEARS AND RESTORE THIS ISSUE TO THE FILE OF AO FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN IN ASSESSMENT YEARS 2001-02 TO 2003-04. 18. GROUND NO. 3 OF THE REVENUES APPEAL AND GROUND NO . 5 OF THE ASSESSEES APPEAL ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 19. THE ISSUE RAISED IN GROUND NO.2 OF THE ASSESSEES AP PEAL RELATES TO THE DISALLOWANCE OF RS.34,84,686 MADE BY THE AO AND CON FIRMED BY THE LD.CIT(A) ON ACCOUNT OF BAD-DEBTS. 20. IN THE BOOKS OF ACCOUNT MAINTAINED FOR THE YEAR UND ER CONSIDERATION, THE ASSESSEE HAD WRITTEN OFF A SUM OF RS.37, 84,686 ON ACCOUNT OF BAD-DEBTS IN RESPECT OF 48 PARTIES, COMPLETE LIS T OF THE SAID PARTIES ALONG WITH INVOICE NO. AND OTHER DETAILS WAS FURNISH ED BY THE ASSESSEE. ACCORDING TO THE AO, THE ASSESSEE HOWEVER, CO ULD NOT ESTABLISH THAT THE SAID DEBTS HAVE ACTUALLY BECOME BAD IN THE YEAR UNDER CONSIDERATION WHICH, ACCORDINGLY TO HIM, WAS A BASIC CONDITION FOR CLAIMING DEDUCTION U/S 36(1)(VII). HE THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR BAD-DEBTS WRITTEN OFF, WHICH WAS CONFIR MED BY THE LD.CIT(A) ON THE GROUND THAT THE ASSESSEE COULD NOT BRIN G ON RECORD ANY SUPPORTING EVIDENCE TO SHOW THAT ITS CLAIM FOR BAD-DE BTS WAS BONAFIDE. 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING TH E RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT A SIMILAR ISSUE HAS B EEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSES SMENT YEARS 2001-02 TO 2002-03 VIDE ITS COMMON ORDER DATED 8 TH JUNE, 2012 (SUPRA) WHEREIN, IT WAS HELD RELYING ON THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF TRF LTD. 323 ITR 397 THAT AFTER THE AMENDMENT MADE IN SECTION 36(1)(VII) WITH EFFECT FROM 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE CONCE RNED DEBTS IN FACT ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 14 HAVE BECOME IRRECOVERABLE AND IT IS SUFFICIENT IF THE SAID DEB TS ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF ASSESSEE. R ESPECTFULLY FOLLOWING THE SAID JUDICIAL PRONOUNCEMENT, WE DELETE THE DISALLO WANCE MADE BY THE AO AND CONFIRMED THE LD.CIT(A) ON ACCOUNT O F BAD-DEBTS AND ALLOW GROUND NO.2 OF THE ASSESSEES APPEAL. 22. THE ISSUE INVOLVED IN GROUND NO. 3 OF THE ASSESSEES APPEAL RELATES TO THE DISALLOWANCE OF RS.13,750 MADE BY THE AO AN D CONFIRMED BY THE LD.CIT(A) ON ACCOUNT OF CLUB MEMBERSHIP FEES. 23. DURING THE YEAR UNDER CONSIDERATION, A SUM OF RS.13,75 0 PAID BY THE ASSESSEE COMPANY TO OBEROI GRAND, KOLKATA FOR THE MEMBERS HIP OF SHRI NARESH MALHOTRA, ITS EMPLOYEE WAS CLAIM AS EXPENDITU RE. ACCORDING TO THE AO, THE SAID EXPENDITURE WAS THE PERSO NAL EXPENDITURE OF SHRI NARESH MALHOTRA AND IT WAS NOT ALLOWA BLE AS DEDUCTION. HE THEREFORE, DISALLOWED THE SAME WHICH WAS CON FIRMED BY THE LD.CIT(A). 24. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE COPY OF THE JUDGMENT RECENTLY DELIVERED BY THE HONBLE SUPREME COURT ON 12 TH SEPTEMBER, 2012 IN THE CASE OF CIT(A) VS. UNITED GLASS MGF. CO. LTD (CIVIL APPEAL NO. 6447 TO 2012) WHER EIN THE QUESTION RAISED BEFORE THE HONBLE SUPREME COURT WAS TH AT WHETHER CLUB MEMBERSHIP FEES FOR EMPLOYEES INCURRED BY THE ASSES SEE IS A BUSINESS EXPENSES LIABLE TO BE DEDUCTED U/S 37 OF THE AC T, AND THE SAME WAS ANSWERED BY THE HONBLE APEX COURT IN FAVOUR OF THE ASSESSEE HOLDING THAT IT WAS PURE BUSINESS EXPENDITURE. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE APEX COURT ON THE SIMILA R ISSUE, WE DELETE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED B Y THE LD.CIT(A) ON ACCOUNT OF CLUB MEMBERSHIP FEES AND ALLOW GRO UND 3 OF THE ASSESSEES APPEAL. ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 15 25. IN GROUND NO. 6 & 7, THE ASSESSEE HAS CHALLENGED TH E ACTION OF THE LD.CIT(A) IN NOT ADMITTING ADDITIONAL GROUND FILED TO CLAIM RELIEF IN RESPECT OF DISALLOWANCE U/S 43B VOLUNTARILY MADE BY THE A SSESSEE ON ACCOUNT OF PROVIDENT FUND IN RESPECT OF EMPLOYERS AND E MPLOYEES CONTRIBUTION PAID BEYOND THE DUE DATE. 26. AFTER CONSIDERED RIVAL SUBMISSIONS AND PERUSING THE RE LEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT A SIMILAR ISSUE INVO LVED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 8 TH JUNE, 2012 (SUPRA) IN PARA NO. 12 & 13 AS UNDER : 12. IN GROUNDS NO.3 & 4, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF RS.1,12,404/- MADE UNDER SECTION 43B IN R ESPECT OF THE ASSESSEES CONTRIBUTION TO THE EMPLOYEES PROVI DENT FUND. THE ASSESSEE HAS RAISED ADDITIONAL GROUND BEFORE THE CIT(A) FOR ALLOWING THE PAYMENTS OF PROVIDENT FUND CONTRIBUTION BY THE EMPLOYER ON THE GROUND THAT THE SAME SHOULD BE ALLOWED IN VIEW OF THE SECOND PROVISO TO SECTION 43B. THE LEARNED CIT(A) DISM ISSED THE ADDITIONAL GROUND AS NOT ADMITTED ON THE FOLLOWING REASO NS :- (1) THE APPELLANT HAD SUO MOTTO MADE THE DISALLOWANCE A S PER THE THEN PROVISION OF THE SECOND PROVISO TO SECTION 43B AND TOTAL INCOME CANNOT BE REDUCED BELOW THE RETURNED INCOME A T THIS STAGE. (2) THE AMENDMENT OMITTING THE SECOND PROVISO TO SECT ION 43B WAS MADE BY THE FINANCE ACT, 2003 W.E.F. 01-04-2004 I.E. AFTER THE APPELLANT HAD FILED ITS RETURN OF INCOME. (3) THE AFORESAID DECISIONS HAVING BEEN DELIVERED RE CENTLY DO NOT APPLY TO THE CONCLUDED ASSESSMENT BECAUSE THIS DOES NOT GIVE RISE TO THE CAUSE OF ACTION FOR RAISING THE ADDITIONAL GRO UND. THE RETURN OF INCOME FILED AFTER MAKING PAYMENT OF SELF ASSESSM ENT TAX BECOMES A CONCLUDED ASSESSMENT IF THE RETURNED INCOM E IS ACCEPTED U/S. 143(1) OR U/S 143(3). 13. BOTH THE PARTIES FAIRLY AGREED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD., REPORTED IN (2009) 319 ITR 306, WHEREI N THE HONBLE SUPREME COURT CONCLUDED THAT THE OMISSION OF S ECOND PROVISO TO SECTION 43B AND THE AMENDMENT OF FIRST P ROVISO BY THE FINANCE ACT, 2003, BRINGING ABOUT UNIFORMITY IN PAYMEN T OF TAX DUTY, CESS AND FEE ON ONE HAND AND CONTRIBUTION TO E MPLOYEES ITA NO. 8823 & 8786/MUM/2004 KPMG INDIA PRIVATE LIMITED 16 WELFARE FUNDS ON THE OTHER ARE CURATIVE IN NATURE A ND THUS, IS EFFECTIVE RETROSPECTIVELY FROM 1ST APRIL, 1988 I.E. THE DATE OF INSERTION OF PROVISO. IT IS ALSO NOT DISPUTED THAT P AYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILING OF A RETURN . THUS, THE DISALLOWANCE OF RS.1,12,404/- IS DELETED AND THE SAME IS TO BE ALLOWED AS DEDUCTION UNDER SECTION 43B. THUS, GROUNDS NO.3 & 4 ARE ALLOWED. 27. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACT THERE TO ARE SIMILAR TO THAT OF ASSES SMENT YEAR 2001-02, WE RESPECTFULLY FOLLOW THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES CASE FOR ASSESSMENT YEAR 200 1-02 (SUPRA) AND ALLOW GROUNDS NO. 6 & 7 OF THE ASSESSEES APPEAL. 28. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL OF THE ASSE SSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 05/12/2012. SD/- ( VIJAY PAL RAO ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUTANT MEMBER MUMBAI, DATE : 05/12/2012 RASIKA* COPY TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A)- XXX , MUMBAI. 4. THE D.R. L BENCH, MUMBAI. 5. COPY TO GUARD FILE. BY ORDER ASSTT. REGISTRAR I.T.A.T., MUMBAI