DCIT, Bangalore V. M/s Millennium Beer Industries Ltd., Bangalore

ITA 931/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95337 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R REDDY CIT DRI
• Assessee Lawyers: D ANAND
• Keywords: Depreciation; Maximum Marginal Rate; Commercial expediency; Condonation of delay
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.931(B)/2014 (ASSESSMENT YEAR : 2009-10) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-12(5), RASTHROTHANA BHAVAN, BANGALORE APPELLANT VS M/S MILLENNIUM BEER INDUSTRIES LTD., (SINCE AMALGAMATED WITH UNITED BREWERIES LTD., NO.24, UB TOWER, UB CITY, VITTAL MALLYA ROAD, BANGALORE-560 001 PAN NO.AAACI12816F RESPONDENT REVENUE BY : SHRI G.R.REDDY, CIT, DR-I ASSESSEE BY : SHRI D. ANAND, ADVOCATE DATE OF HEARING : 16-09-2015 DATE OF PRONOUNCEMENT : 04-11-2015 O R D E R PER SHRI JASON P BOAZ, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IX NEW DELHI DATED 10-02-2014 FOR THE ASSESS MENT YEAR 2009-10. 2. ORDER ON PETITION FOR CONDONATION OF DELAY IN FI LING APPEAL; ITA NO.931(B)14 2 2.1 ALONG WITH THE APPEAL, REVENUE HAS FILED AN APP LICATION FOR CONDONATION OF DELAY IN FILING THIS APPEAL BEFORE T HE TRIBUNAL. IT IS SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A)-IX, NEW DELHI DATED 10-02- 2014, WAS RECEIVED IN THE OFFICE OF THE JURISDICTIO NAL CIT-II, NEW DELHI ON 11-03-2014 AND THEREFORE, THE APPEAL OUGHT TO HAVE BEEN FILED ON OR BEFORE 10-05-2014 BUT WAS FILED ON 26-06-2014, THEREBY LEA DING TO A DELAY OF 44 DAYS IN FILING THE APPEAL. IN THE PETITION, REVEN UE SUBMITS THAT THE DELAY WAS NOT ATTRIBUTABLE TO THE DEPARTMENT DUE TO THE F ACT THAT THE CASE ON HAND WAS TRANSFERRED FROM DELHI TO BANGALORE AND TH E CIT-II, NEW DELHI FORWARDED THE ORDER OF THE LEARNED CIT(A) TO THE BA NGALORE OFFICE ON 02-05- 2014 AND THE SAME WAS RECEIVED IN THE OFFICE OF CIT , BANGALORE-III ON 19- 05-2014 ONLY. IT IS PRAYED THAT DELAY IN FILING TH E APPEAL BE CONDONED AS IT WAS NEITHER WILLFUL NOR INTENTIONAL AND WAS ONLY DU E TO THE FACTUAL CIRCUMSTANCES, LAID OUT ABOVE SURROUNDING THE TRANS FER OF THIS CASE FROM NEW DELHI TO BANGALORE. 2.2 THE LEARNED AR FOR THE ASSESSEE HAD NO OBJECTIO N, IF THE DELAY IN FILING THE APPEAL WAS CONDONED. 2.3 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CARE FULLY CONSIDERED REVENUES PETITION FOR CONDONATION OF TH E DELAY IN FILING THIS APPEAL. AFTER DUE CONSIDERATION OF THE REASONS ADD UCED FOR THE DELAY IN FILING THE APPEAL AND THE ATTENDANT FACTUAL CIRCUMS TANCES, WE ARE OF THE VIEW, THAT THIS IS A FIT CASE FOR CONDONATION OF DE LAY IN FILING THIS APPEAL ITA NO.931(B)14 3 BEFORE THE TRIBUNAL. WE THEREFORE, CONDONE THE DEL AY AND ADMIT THE APPEAL FOR HEARING AND ADJUDICATION. 3. THE FACTS F THE CASE, BRIEFLY, ARE AS UNDER; 3.1 THE ASSESSEE, A COMPANY ENGAGED IN THE MANUFAC TURE AND SALE OF BEER, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 25-09- 2009 DECLARING LOSS OF RS.10,57,50,801/-. THE RETU RN WAS PROCESSED U/S 143(1) OF THE IT ACT, 1961 (IN SHORT THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT AS CONCLUDED U/S 143(3) OF THE ACT VIDE ORDER DATED 30-12-2011 WHERE IN THE ASSESSEES INCOME/LOSS WAS DETERMINED AT (-) RS.41,54,088/- IN VIEW OF THE FOLLOWING ADDITIONS/DISALLOWANCES TO THE RETURNED LOSS OF RS. 10,57,50,801/-. I) ON ACCOUNT OF CAPITALIZATION OF GOOD WILL RS. 10,12,955 II) ON ACCOUNT OF CASH PAYMENTS U/R 6DD RS. 5,83,758 III) DISALLOWANCE U/S 40A(2) RS.10,00,00.000 3.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 30- 12-2011 FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-IX, NEW DELHI. THE LEARNED CIT(A), DISPOSED THE APPEAL VIDE ORDER DATED 10-02-2014 ALLOWING THE ASSESSEE PARTIAL RELI EF. ITA NO.931(B)14 4 4. REVENUE BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-IX, NEW DELHI DATED 10-02-2014 FOR ASSESSMENT YEAR 2009-10, HAS P REFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS; 1. THE ORDER OF THE LD.CIT(A) IS OPPOSED TO LAW A ND FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE DISALLOWANCE OF DEPRECIATION ON GOODWILL WITHOUT AP PRECIATING THE FACT THAT THE SAME IS NOT ADMISSIBLE AS PER THE PROVISIONS OF SECTION 32(1), AS GOODWILL IS NOT DEFINED AS AN INTANGIBLE ASSET. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LEAR NED CIT(A) ERRED IN ALLOWING THE CASH PAYMENTS IN EXCES S OF RS.20,000 WHICH IS ABSOLUTELY CONTRARY TO THE PROVI SIONS OF SECTION 40A(3) R.W.R.6DD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT(A)A ERRED IN ALLOWING THE PAYMENT OF R S.10 CRORES MADE BY THE ASSESSEE TO THE HOLDING COMPANY M/ UNITED BREWERIES LTD. DESPITE BINGING ON RECORD THE CLINCHING FINDINGS OF THE AO IN PARA-7.1 OF HIS ORDER WHEREIN THE AO HAS RIGHTLY CONCLUDED THAT THE PAYMENT TO THE HOLDI NG COMPANY IS EXCESSIVE AND UNREASONABLE IN VIEW OF TH E SANCTIONED SCHEME BY THE BIFR AND THE RESPONSIBILIT Y OF THE HOLDING COMPANY TO REVIVE THE LOSS MAKING SUBSIDIAR Y COMPANY. ITA NO.931(B)14 5 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN ALLOWING THE PAYMENT OF RS. 10 CRORES MADE BY THE ASSESSEE TO THE HOLDING COMPANY M/S UNI TED BREWERIES LTD. BY WRONGLY PLACING RELIANCE ON THE O RDER OF APEX COURT IN THE CASE OF M/S GLAXO SMITH KLINE ASI A P.LTD. WHEREIN THE FACTS ARE DIFFERENT THAN THE INSTANT CA SE. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVER SED AND THAT OF THE AO MAY BE RESTORED. 7. THE APPELLATE CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 5. THE GROUNDS AT SL.NO.1,6 & 7 ARE GENERAL IN NATURE AND THEREFORE, NO ADJUDICATION IS CALLED FOR THEREON. 6. GROUND NO.2 DEPRECIATION ON GOODWILL 6.1 IN THIS GROUND THE REVENUE ASSAILS THE IMPUGNED ORDER OF THE LEARNED CIT(A), IN DELETING THE DISALLOWANCE OF DEPRECIATIO N ON GOODWILL WITHOUT APPRECIATING THE FACT THAT THE SAME IS NOT ADMISSIB LE AS PER THE PROVISIONS OF SECTION 32(1) OF THE ACT, AS GOODWILL IS NOT DEFINE D AS AN INTANGIBLE ASSET. THE LEARNED DR WAS HEARD IN SUPPORT OF THE GROUNDS. ITA NO.931(B)14 6 6.2 PER CONTRA, THE LEARNED AR FOR THE ASSESSEE SUP PORTED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIATION ON GOODWILL MADE BY THE AO. THE LEARNED AR SUBMITTED THAT REVE NUES APPEAL ON THIS ISSUE IS LIABLE TO BE DISMISSED, AS THE SAME ISSUE HAS BEEN HELD IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE ITAT, DELHI BE NCHES IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06 IN ITA NOS.2889,2890(DEL.)/2009 DATED 02-11-2012 AND FOR A SSESSMENT YEARS 2002- 03, 2006-07 AND 2007-08 IN ITA NOS.1968 TO 1970/DEL /2012 DATED 23-12- 2013. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH P ARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, IN CLUDING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON BY TH E ASSESSEE. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE ITAT DELHI BENCH IN THE ASSESSEES OWN CASE FOR ASSESSME NT YEARS 2002-03, 2006- 07 AND 2007-08 IN ITA NOS.1968 TO 1970/DEL/2012 DAT ED 23-12-2013, WHEREIN AT PARA 3 & 4 THEREOF THE TRIBUNAL HAS HELD AS UNDER; 3. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MAT ERIAL PLACED BEFORE US. WE FIND THIS ISSUE TO BE COVERE D N FAVOUR OF THE ASSESSEE B THE DECISION OF ITAT IN ASSESSEE S OWN CASE FOR AY: 2004-05 & 2005-06 VIDE ITA NO.2889 & 2890/DEL/2009 WHEREIN THE ITAT HELD AS UNDER; ITA NO.931(B)14 7 7. IN THE LIGHT OF VIEW TAKEN BY THE HONBLE APEX COURT THAT GOODWILL IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT, WE HAVE NO HESITATION IN VACATING THE FINDINGS OF THE LEARNED CIT(A) AND ACCORDINGLY , DI RECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON GOODWILL IN T ERMS OF AFORESAID DECISION OF THE HONBLE APEX COURT. CONS EQUENTLY, GROUND NO.3 AND 4 IN THE APPEAL FOR THE AY: 2004-05 AND GROUND NO.S.2 TO 4 IN THE APPEAL FOR THE AY: 2005-0 6 ARE ALLOWED. SINCE WE HAVE ALLOWED THE CLAIM OF THE AS SESSEE ON MERITS IN THE AY: 2004-05, GROUND NOS.1 & 2 RELA TING TO VALIDITY OF REOPENING OF THE ASSESSMENT BECOME ACAD EMIC IN NATURE AND ARE, THEREFORE, TREATED AS INFRUCTUOUS. 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON GOODWILL. ACCORDINGLY, THE ASSESS EES APPEALS ARE ALLOWED. 6.3.2. FOLLOWING THE DECISION OF THE ITAT-DELHI BE NCH IN THE ASSESSEES OWN CASE FOR AY: 2002-03, 2006-07 AND 20 07-08 IN ITA NOS.1968 TO 1970/DEL/2012 DATED 23-08-2013, WE UPHO LD THE FINDING OF THE LEARNED CIT(A) IN DIRECTING THE AO TO ALLOW THE ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL. CONSEQUENTLY, GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 7. GROUND NO.3 DISALLOWANCE U/S 40A(3) R.W. RULE 6DD ITA NO.931(B)14 8 7.1 IN THIS GROUND REVENUE ASSAILS THE ORDER OF T HE LEARNED CIT(A) IN ALLOWING THE ASSESSEES CLAIM AS BEING CONTRARY TO THE PROVISIONS OF SEC.40A(3) R.W. RULE 6DD IN RESPECT OF CASH PAYMENT S IN EXCESS OF RS.20,000/-. IT IS CONTENDED BY THE LEARNED DR, T HAT THE AO HAD RIGHTLY MADE THE DISALLOWANCE U/S 40A(3) OF THE ACT, AS THE ASSESSEE COULD OFFER NO PLAUSIBLE JUSTIFICATION FOR MAKING CASH PAYMENTS AS FREIGHT TO TRUCK DRIVERS WHO BROUGHT RAW MATERIAL TO THE BREWERY AT ODD HOURS I.E LATE NIGHT OR EARLY MORNINGS. THE LEARNED DR SUBMITTED T HAT IN THE ABOVE FACTUAL CIRCUMSTANCES, THE FINDING OF THE LEARNED C IT(A) ON THIS ISSUE BE REVERSED AND THAT OF THE AO BE RESTORED. 7.2 PER CONTRA, THE EARNED AR FOR THE ASSESSEE SUP PORTED THE FINDING OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE U/S 40A(3) R.W.RULE 6DD IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LE ARNED AR REITERATED SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND CONT ENDED THAT EXCEPT FOR RAISING THIS GROUND, THE REVENUE HAS NOT BEEN A BLE TO CONTROVERT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE. 7.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE DI SALLOWANCE OF RS.5,83,758/-WAS MADE BY THE AO U/S 40A(3) R.W. RUL E 6DD AS HE WAS OF THE VIEW THAT THE ASSESSEE WAS UNABLE TO PUT FORTH PLAUSIBLE JUSTIFICATION FOR MAKING PAYMENTS IN CASH FOR FREIGHT TO TRUCK DR IVERS. ITA NO.931(B)14 9 7.3.2. BEFORE THE LEARNED CIT(A), THE ASSESSEE INT ER-ALIA SUBMITTED THAT THESE PAYMENTS WERE MADE AS FREIGHT TO TRUCK D RIVERS FOR DUTIES OF DELIVERY OF RAW MATERIALS TO THE BREWERY AT ODD HOU RS I.E. LATE NIGHT OR EARLY MORNING AND AS THEY WOULD NOT ACCEPT PAYMENTS THROUGH CHEQUE. AFTER CONSIDERING THE EXPLANATION PUT FORTH BY THE ASSESSEE WE AGREE WITH THE VIEW OF THE LEARNED CIT(A) THAT CONSIDERING THE NATURE OF THE ASSESSEES BUSINESS THE EXPLANATION PUT FORTH BY THE ASSESSEE THAT FREIGHT CHARGES ARE PAID IN CASH TO THE TRUCK DRIVERS FOR EXPENSES ON ROAD LIKE DIESEL, FOOD, MINOR REPAIR AND THE BALANCE TO TRUCK OPERATORS FOR FREIGHT SOMETIMES FOR MORE THAN ONE TRUCK, WHICH SOMETIMES IS IN EXCESS O F RS.20,000/- CANNOT BE HELD TO BE UNREASONABLE. WE OBSERVE THAT REVENU E, EXCEPT FOR RAISING THE GROUND, HAS FAILED TO BRING ON RECORD ANY MATER IAL EVIDENCE TO CONTROVERT THE FINDINGS OF THE LEARNED CIT(A) ON TH IS ISSUE AND IN THIS VIEW OF THE MATTER, WE UPHOLD THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE. CONSEQUENTLY, REVENUES GROUND AT SL.NO.3 IS DISMIS SED. 8. GROUNDS 4 & 5: DISALLOWANCE U/S 40A(2). 8.1 IN THESE GROUNDS REVENUE ASSAILS THE FINDING O F THE LEARNED CIT(A) IN THE IMPUGNED ORDER IN DELETING THE ADDITI ON/DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PAYMENT OF RS.10.00 CRORES BY THE ASSESSEE TO THE HOLDING COMPANY, M/S UNITED BREWERIES LTD., DES PITE THE AO, RIGHTLY RENDERING A FINDING THAT THIS PAYMENT IS EXCESSIVE AND UNREASONABLE IN VIEW OF THE SANCTIONED SCHEME BY THE BIFR BY WHICH IT WAS THE ITA NO.931(B)14 10 RESPONSIBILITY OF THE HOLDING COMPANY TO REVIVE THE ASSESSEE, WHICH WAS ITS LOSS MAKING SUBSIDIARY. IT IS ALSO CONTENDED THAT THE LEARNED CIT(A), IN ALLOWING THE SAID PAYMENT OF RS.10.00 CRORES BY THE ASSESSEE TO ITS HOLDING COMPANY M/S UNITED BREWERIES LTD. HAD WRONG LY PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE C ASE OF GLAXO SMITH KLINE ASIA PVT. LTD (SUPRA) (SLP CIVIL NO.18121/200 7) WHEREIN THE FACTS WERE DIFFERENT FROM THOSE OF THE CASE ON HAND. TH E LEARNED DR WAS HEARD IN THE MATTER AND HE PLACED STRONG RELIANCE ON THE FINDINGS IN THE ORDER OF THE AO. 8.2 PER CONTRA, THE LEARNED AR FOR THE ASSESSEE PLACED RELIANCE ON THE FINDING OF THE LEARNED CIT(A) IN THE IMPUGNED O RDER IN DELETING THE DISALLOWANCE OF RS.10.00 CRORES U/S 40A(2) OF THE A CT, AND SUBMITTED THAT NO INTERFERENCE WAS CALLED FOR. IN SUPPORT OF ITS CLAIM FOR THESE PAYMENT OF RS.10.00 CRORES TO M/S UNITED BREWERIES LTD. (UBL ) TO BE ALLOWED, THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE T HE LEARNED CIT(A) AND PLACED RELIANCE ON THE DECISION OF THE ITAT CHENNAI BENCH IN THE CASE OF M/S EMPEE BREWERIES LTD. IN ITA NO.1295/MDS/2012 DA TED 214-02-2013 WHEREIN ON SIMILAR FACTS PAYMENT OF RS.4.00 CRORES BY THE ASSESSEEE IN THAT CASE TO UBL, FOR PROVISIONS OF TECHNICAL AND M ANAGEMENT ADVICE AND CONSULTANCY BY WHICH IT HAD RECEIVED SERVICES AND I NTANGIBLE BENEFITS BY ASSOCIATION WITH UBL, WAS HELD TO BE ALLOWABLE. ITA NO.931(B)14 11 8.3.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD INCLUDI NG HE JUDICIAL DECISIONS CITED. AT THE OUTSET, WE OBSERVE THAT THE PAYMENT OF RS.10.00 CRORES BY THE ASSESSEE TO UBL HAS NOT BEEN DOUBTED. IT IS S EEN THAT THE ASSESSEE HAS PAID THIS AMOUNT OF RS.10.00 CRORES TO UBL IN PURSUANCE OF TECHNICAL AND MANAGEMENT ADVISORY AND CONSULTANCY A GREEMENT FOR WHICH THE ASSESSEE SUBMITS IT HAS RECEIVED SERVICES AND I NTANGIBLE BENEFITS THROUGH ITS ASSOCIATION WITH UBL SUCH AS, PURCHASE OF KEY MATERIALS, NEGOTIATION WITH BANKERS TO GET TERM LOANS AT COMP ETITIVE RATES, CO- ORDINATION WITH DISTRIBUTORS TO MEET THE DEMAND AND SUPPLY, DESIGNING OF PACKING MATERIAL, SUPPLY OF IMPORTED ITEMS LIKE HO PS/FOILS, CO-ORDINATION WITH ENGINEERS FOR OPTIMUM UTILIZATION OF PLANT AND MACHINERY AND ATTENDANT INTANGIBLE BENEFITS. ACCORDING TO THE AS SESSEE, THIS BUSINESS ARRANGEMENT HAS RESULTED IN SAVINGS IN PURCHASE OF VARIOUS ITEMS, PRICE HIKE FOR ITS PRODUCTS WITH ITS VOLUME OF SALES INCR EASING FROM 649,609 HL IN FY 2007-08 TO 823,596 HL IN FY 2008-09 AND THERE BY REDUCING ITS LOSSES. 8.3.2 THE CONTENTION OF THE AO AFTER MAKING VARIOU S OBSERVATIONS WAS THAT THE PAYMENT TO UBL WAS EXCESSIVE AND UNREA SONABLE AND NOT WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSE SSEE AND THEREFORE, INVOKED THE PROVISION OF SEC.40A(2) OF THE ACT TO D ISALLOW THE PAYMENT. THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURE AND TRADING OF BEER AND ITA NO.931(B)14 12 THERE IS NO DOUBT THAT UBL, ITS HOLDING COMPANY TO WHOM THE SAID PAYMENT WAS MADE FOR RENDERING OF TECHNICAL, MANAGE MENT ADVISORY AND CONSULTANCY SERVICES, WAS A MAJOR PLAYER IN THIS BU SINESS. IN THIS FACTUAL MATRIX, THE CLAIM OF THE ASSESSEE IS THAT IT HAS GO T TREMENDOUS BENEFITS ON ACCOUNT OF ITS ASSOCIATION WITH UBL, IN TERMS OF BO TH SERVICE AND INTANGIBLE BENEFITS. WE FIND THAT THE ASSESSEE HAD PRODUCED BEFORE BOTH THE AO AND THE LEARNED CIT(A) DETAILS OF SERVICES R ENDERED BY UBL WHICH REASONABLY DEMONSTRATES THE BUSINESS PURPOSE BEHIND ITS ASSOCIATION WITH UBL AND INDICATED THAT THERE IS COMMERCIAL EX PEDIENCY OF BUSINESS IN MAKING SUCH PAYMENT TO UBL. FURTHER, UBL HAS AC KNOWLEDGED RECEIPT OF THE AMOUNT OF RS.10.00 CRORES FOR TECHNICAL, MAN AGEMENT, ADVISORY AND CONSULTANCY SERVICES RENDERED TO THE ASSESSEE A ND PAYS TAXES THEREON AT THE MAXIMUM MARGINAL RATE. AS AGAINST THIS, TH E ASSESSEE IS A LOSS MAKING COMPANY, AND THEREFORE, WE FIND THAT THERE I S SUBSTANCE IN THE AVERMENTS OF THE LEARNED AR THAT IF THIS TRANSACTIO N HAD NOT GONE THROUGH, REVENUE WOULD HAVE BEEN AT A DISADVANTAGE. IN THIS REGARD, WE CONCUR WITH THE LEARNED CIT(A)S OBSERVATION THAT THIS TRA NSACTION BETWEEN THE ASSESSEE AND THE UBL, BEING TAX NEUTRAL, BOTH THE ASSESSEE AS WELL AS UBL DO NOT GET ANY TAX BENEFIT THEREFROM AND THEREF ORE, HOLD THAT THE AO HAS NOT BEEN ABLE TO ESTABLISH IN THE ORDER OF THE ASSESSMENT THAT THERE WAS ANY TAX AVOIDANCE PLAN INVOLVED IN THIS TRANSAC TION. THE FACTUAL MATRIX OF THE CASE INDICATE THAT THE ASSESSEE PAID THE SUM OF RS.10.00 CRORES TO UBL FOR TECHNICAL, MANAGEMENT AND CONSULT ANCY SERVICES ITA NO.931(B)14 13 RECEIVED AS PER THE AGREEMENT WITH UBL, THE RECEIPT OF WHICH UBL HAS ACKNOWLEDGED AS BEING FOR TECHNICAL, ADVISORY, MANA GEMENT AND CONSULTANCY SERVICES RENDERED BY IT TO THE ASSESSEE . IN RESPECT OF THE ISSUE OF COMMERCIAL EXPEDIENCY OF THE AFORESAID PAY MENT OF RS.10.00 CRORES TO UBL, WE ARE OF THE VIEW THAT THIS HAS BEE N CLEARLY ESTABLISHED IN THE FACTUAL MATRIX OF THE CASE BY THE VARIOUS BENEF ITS THE BUSINESS OF THE ASSESSEE RECEIVED (SUPRA)AS LAID OUT ABOVE. WE DO NOT FIND MERIT IN THE AOS CONTENTIONS TO THE CONTRARY THE VIEW OF THE OB SERVATIONS OF THE HONBLE APEX COURT IN THE CASE OF S.A.BUILDERS (288 ITR 1) (SC), WHEREIN IT HAS BEEN HELD THAT REVENUE COULD NOT SIT IN THE CHA IR OF A BUSINESSMAN AND DECIDE THAT HE IS TO CARRY OUT HIS BUSINESS IN A PARTICULAR MANNER. 8.3.3 THE AO HAD INVOKED THE PROVISIONS OF SEC.40 A(2) OF THE ACT, TO MAKE THE DISALLOWANCE OF THE SAID PAYMENT OF RS. 10.00 CRORES BY THE ASSESSEE TO UBL ON THE GROUNDS THAT THE SAID PAYMEN T WAS UNREASONABLE AND EXCESSIVE. AS PER THE PROVISIONS OF SEC.40A(2 ) OF THE ACT, FOR MAKING A DISALLOWANCE THERE UNDER, THE AO SHOULD HAVE SOME JUSTIFICATION FOR DOING SO BASED ON COMPARABLES AND BENCHMARKING TO E STABLISH THE EXISTENCE AND EXTENT OF THE EXCESSIVE AND UNREASONA BLENESS OF THE PAYMENTS. WE FIND FROM THE ORDER OF ASSESSMENT THA T THE AO HAS NOT BEEN ABLE TO PROVE THAT THE PAYMENT OF RS.10.00 CRO RES BY THE ASSESSEE TO UBL WAS EITHER UNREASONABLE OR THAT THE QUANTUM OF PAYMENT WAS EXCESSIVE AND NOT COMMENSURATE WITH THE SERVICES RE NDERED TO IT BY UBL. ITA NO.931(B)14 14 8.3.4. IN THE CONTEXT OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AS DISCUSSED ABOVE, WE HAVE HAD OCCASION TO PERUSE THE ORDER OF THE ITAT CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S EM PEE BREWERIES LTD. IN ITA NO.1295/MDS/2012DATED 14-02-2013 CITED BY TH E ASSESSEE, AND FIND THAT A SIMILAR ISSUE ON SIMILAR FACTS OF PAYME NT OF RS.4.00 CRORES BY THAT ASSESSEE TO UBL AS FEES FOR TECHNICAL, ADVISO RY AND MANAGEMENT SERVICES RENDERED AS PER AGREEMENT BETWEEN THE PART IES, BEING DISALLOWED BY THE AO AS NOT BEING FOR BUSINESS PURPOSES WAS CO NSIDERED AND HELD IN FAVOUR OF THE ASSESSEE AT PARA-18 AND 19 THEREOF AS UNDER; 18. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVA L SUBMISSIONS. IN THE FIRST PLACE, WHAT WE NOTICE IS THAT THE PAYMENT ITSELF WAS NOT DOUBTED. ASSESSEE INDEED PA ID A SUM OF RS.4.00 CRORES TO M/S UBL . AS PER ASSESEE, IT HAD RECEIVED SERVICES AND INTANGIBLE BENEFITS THROUGH I TS ASSOCIATION WITH M/S UBL. ARGUMENT OF THE LEARNED D R IS THAT THE PAYMENT MADE WAS NOT WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ADMIT TEDLY, ASSESSEE WAS IN THE BUSI9NESS OF MANUFACTURING AND TRADING OF LIQUOR. THERE CAN BE NO DOUBT THAT M/S UBL, TO WHOM THE PAYMENT WAS MADE, WAS ALSO A MAJOR PLAYER IN THIS BUSINESS. IN FACT, HOLDING COMPANY NAMELY M/S MILLENNIUM ALCOBEV PVT. LTD. (MAPL) WAS ITSELF CO-O WNED BY M/S UBL ALONG WITH CERTAIN OTHER PERSONS. THEREFO RE, CLAIM OF THE ASSESSEE THAT IT HAD TREMENDOUS BENEFI TS ON ACCOUNT OF ITS ASSOCIATION WITH M/S UBL CANNOT BE B RUSHED ASIDE. NO DOUBT, ASSESSEE HAD PRODUCED SOME E-MA IL ITA NO.931(B)14 15 COMMUNICATION AND AN AGREEMENT ENTERED WITH M/S IOC FOR PURCHASE OF FURNACE OIL FOR JUSTIFYING THE BENE FITS IT HAD RECEIVED THROUGH ITS ASSOCIATION WITH M/S UBL, BEFO RE THE CIT(A). HOWEVER, IN OUR OPINION, THESE WERE AT BES T CORROBORATIVE EVIDENCE AND WERE NOT STAND ALONE EVI DENCE. ASSESSEE HAD DURING THE COURSE OF ASSESSMENT PROCEE DING PRODUCED BEFORE THE AO DETAILS OF THE SERVICES REND ERED BY M/S UBL. IN OUR OPINION, EVEN DEHORS THE RECORDS PRODUCED BY THE ASSESSEE BEFORE THE LEARNED CIT(A), IT COULD REASONABLY DEMONSTRATE THE BUSINESS PURPOSE BEHIND ITS ASSOCIATION WITH M/S UBL. ASSESSEE MIG HT NOT HAVE BEEN ABLE TO PRODUCE BEFORE THE AO SPECIFIC EV IDENCE, BUT NEVERTHELESS M/S UBL HAS ACKNOWLEDGED THAT RS.4 .00 CRORES WAS RECEIVED BY IT FOR SERVICES RENDERED. NEVERTHELESS, IT HAD FURNISHED A WORKOUT OF ITS SAV INGS DUE TO HELP OF M/S UBL WHICH WAS ALSO DISBELIEVED BY TH E AO. THERE MIGHT HAVE BEEN LINGERING DOUBT IN THE MIND O F THE AO AS TO WHY SUCH AMOUNTS WERE PAID TO M/S UBL, BUT IN OUR OPINION, A MERE SUSPICION WITHOUT FURTHER EVIDE NCE WOULD NOT BE A GROUND FOR DISALLOWING A CLAIM WHERE ACTUAL PAYMENTS WERE INDEED EFFECTED. FURTHER, LEARNED CI T(A) HAS GIVEN A CLEAR FINDING THAT THE TRANSACTION WAS REVENUE NEUTRAL. M/S UBL HAD A RETURNED INTEREST INCOME OF RS.80,19,22,970/- ON WHICH IT HAD PAID TAX AT MAXIM UM MARGINAL RATE, AS NOTED BY THE CIT(A). IF THE SUM OF RS.4.00 CRORES WAS NOT RECEIVED BY IT, TAX PAYABLE BY THE SAID COMPANY WOULD HAVE ONLY GONE DOWN. AS AGAINST THIS, ASSESSEE HAD RETURNED LOSS OF RS.1.08 CRORES AND THEREFORE, THERE IS MUCH STRENGTH IN THE ARGUMENT O F LEARNED AR THAT IF THE TRANSACTION HAD NOT GONE THR OUGH, ITA NO.931(B)14 16 REVENUE WOULD ONLY HAVE BEEN AT A DISADVANTAGE. WE CANNOT SAY THAT THE REPLY GIVEN BY THE ASSESSEE TO THE QUERIES MADE BY THE AO WHICH HAS BEEN PRODUCED AT P ARA- 11 ABOVE WERE SUCH THAT, IT CALLED FOR A DISALLOWAN CE OF THE AMOUNT. FACT OF THE MATTER IS THAT ASSESSEE PAID THE SUM AS PER THE AGREEMENT AND RECEIPT THEREOF WAS ACKNOWLEDGED BY M/S UBL. SUCH PAYMENTS WERE ALSO ACKNOWLEDGED BY THE RECIPIENT AS RECEIVED FOR THE TECHNICAL, ADVISORY AND MANAGEMENT FEES RENDERED BY THEM. HONBLE APEX COURT IN THE CASE OF S.A.BUILDE RS L:TD (SUPRA) HAS HELD THAT REVENUE COULD NOT BY ITSELF S IT IN THE CHAIR OF A BUSINESSMAN AND COULD NOT INSIST THAT 3E VERY BUSINESSMAN SHOULD DO HIS BUSINESS IN SUCH A MANNER TO EARN MAXIMUM RATE OF PROFITS. AS FOR THE RELIANCE PLACED BY THE LEARNED DR ON THE DECISION OF THE HONBLE CALCU TTA HIGH COURT IN JAYSHREE TEA & INDUSTRIES LTD (SUPRA), IN THE SAID CASE THE QUESTION WAS ALLOWABILITY OF RETRENCHMENT COMPENSATION IN ONE OF THE 21 UNITS RUN BY THE ASSE SSEE, WHICH WAS CLOSED. TRIBUNAL HELD IT TO BE NOT ALLOW ABLE. ON ASSESSEES APPEAL, THEIR LORDSHIP HELD IT BE ALLOWA BLE, SINCE EXPENDITURE INCURRED WAS FOR MAKING THE BUSIN ESS WHICH CONTINUED AFTER CLOSURE OF AN UNIT, VIABLE. IN OUR OPINION, THIS CASE WILL ONLY SUPPORT THE CASE OF TH E ASSESSEE HERE. WE ARE THEREFORE OF THE OPINION THAT LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. NO INTERFERENCE IS CALLED FOR. ITA NO.931(B)14 17 19. GROUND NO.3 OF THE REVENUE IS DISMISSED. 8.3.5 WE FIND FROM A PERUSAL OF THE AFORESAID DECI SION OF THE CHENNAI BENCH OF THE ITAT IN THE CASE OF M/S EMPEE BREWERIES LTD. (SUPRA) THAT THE FACTS OF THAT CASE AND THE ISSUE I NVOLVED ARE SIMILAR TO THE FACTS OF THE CASE ON HAND AND THE FINDING THEREIN I N-PRINCIPLE IS EQUALLY APPLICABLE TO THE FACTS OF THE CASE ON HAND. THERE FORE, TAKING INTO CONSIDERATION THE FACTS AND LEGAL CIRCUMSTANCES OF THE CASE ON THIS ISSUE AS DISCUSSED FROM PARA 8 TO 8.3.4 OF THIS ORDER (S UPRA) AND FOLLOWING THE AFORESAID DECISION OF THE ITAT CHENNAI BENCH IN THE CASE OF M/S EMPEE BREWERIES LTD. (SUPRA), WE UPHOLD THE DECISION OF T HE LEARNED CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. CONSEQUE NTLY, REVENUES GROUNDS AT SL.NOS.4 & 5 ARE DISMISSED. 9. IN THE RESULT, REVENUES APPEAL FOR ASSESSMENT YEAR 2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH NOVEMBER, 2015. SD/- SD/- (VIJAY PAL RAO) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER D A T E D : 04-11-2015 PLACE: BANGALORE AM* ITA NO.931(B)14 18 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE