DONGWOO SURFACETECH INDIA LTD., CHENNAI V. DCIT,CENTRAL CIRCLE-2(2), CHENNAI

ITA 940/CHNY/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3130 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 19-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T VASUDEVAN; K VENKATARAMAN
• Keywords: Reopening of assessment; Transfer pricing; Non-deduction of tax; Difference of opinion; Corroborative evidences; Assessment record; Commercial expediency; Reason to believe; Change of opinion; Reassessment proceedings; TDS; Set aside
• Section: 13; 22; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , . , $ BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.1560 & 1920/CHNY/2019 ( / ASSESSMENT YEAR: 2014-15 & 2015-16) ASSISTANT COMMISSIONER OF INCOME TAX (OSD), CORPORATE RANGE-1, CHENNAI-600 034. VS M/S. DONG WOO SURFACE TECH INDIA PVT.LTD. 126, MAPPEDU VILLAGE, THIRUVALLUR,CHENNAI-631 402. PAN: AACCD 3315L ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.939 & 940/CHNY/2020 ( / ASSESSMENT YEAR: 2011-12 & 2013-14) M/S. DONG WOO SURFACE TECH INDIA PVT.LTD. 126, SAMATHUVAPURAM MAPPEDU VILLAGE, THIRUVALLUR, CHENNAI-631 402. VS ASSISTANT COMMISSIONER OF INCOME TAX (OSD), CORPORATE RANGE-1, CHENNAI-600 034. PAN: AACCD 3315L ( /APPELLANT) ( /RESPONDENT) / REVENUE BY : MR. AR.V.SREENIVASAN, ADDL.CIT / ASSESSEE BY : MR.T.VASUDEVAN, ADVOCATE & MR.K.VENKATARAMAN, CA /DATE OF HEARING : 06.10.2021 /DATE OF PRONOUNCEMENT : 22.10.2021 / O R D E R PER G.MANJUNATHA, AM: THIS BUNCH OF FOUR APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DIRECTED AGAINST SEPARATE, BUT IDEN TICAL ORDERS OF THE LEARNED CIT(A)-1, CHENNAI ALL EVEN DATED 23. 09.2020, 23.09.2020, 07.03.2019 & 29.03.2019 AND PERTAIN TO ASSESSMENT YEARS 2011-12, 2013-14, 2014-15 & 2015-1 6. 2 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMO N, FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE HEARD TOGETH ER AND ARE BEING DISPOSED OFF, BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR ASSESSMENT YEARS 2011-12 AND 2013-14, THEREFORE, FOR THE SAKE OF BREVITY, GROUNDS OF APPE AL FILED FOR ASSESSMENT YEAR 2011-12 IN ITA NO.939/CHNY/2020 ARE REPRODUCED AS UNDER:- 1. THE ORDER OF THE CIT(A) DISMISSING THE APPEAL A ND CONFIRMING THE DISALLOWANCE OF SUPERVISORY CHARGES PAID BY ASSESSEE IS CONTRARY TO LAW, ERRONEOUS AND UNSUSTAI NABLE ON THE FACTS OF THE CASE. REOPENING OF ASSESSMENT 2. THE CIT(A) OUGHT TO HAVE SEEN THAT THE REOPENING OF ASSESSMENT UNDER SEC.147 BY NOTICE ISSUED U/S148 DA TED 28.3.2018 IS WITHOUT JURISDICTION AND UNTENABLE IN LAW. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE FI RST PROVISO TO SEC.147 WOULD APPLY AS THE ASSESSMENT WAS COMPLETED U/S.L43(3) VIDE ORDER DATED 26.3.2014 AND THAT THER E WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS WARRANTING THE REOPENING OF ASSESSMENT BEYOND THE P ERIOD OF FOUR YEARS AND HENCE IS UNSUSTAINABLE IN LAW. 4. THE CIT(A) ALSO OUGHT TO HAVE APPRECIATED THAT T HERE WAS NO REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T AND IN THE ABSENCE OF ANY FRESH MATERIAL POINTING TO FAILU RE ON THE PART OF ASSESSEE TO DISCLOSE PARTICULARS OF INCOME, THE REOPENING IS NOT IN ACCORDANCE WITH LAW AND NEEDS TO BE ANNULLED . 5. THE CIT(A), IN ANY EVENT, OUGHT TO HAVE SEEN FRO M THE ASSESSMENT RECORDS THAT THE REOPENING IS ONLY BASED ON MATERIAL ALREADY AVAILABLE ON RECORD AND CONSTITUTE S A MERE CHANGE OF OPINION WHICH DOES NOT CLOTHE THE OFFICER TO INITIATE 3 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 REASSESSMENT PROCEEDINGS BY ISSUE OF NOTICE U/S.148 OF THE ACT. MERITS :- 6. THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESSE E HAD MADE A CLAIM FOR DEDUCTION U/S.40(A)(I) OF THE SUPERVIS ORY CHARGES PAID TO THE PARENT COMPANY OF RS.3,13,07,498 AND WA S NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE. 7. THE CIT(A) FAILED TO APPRECIATE THAT SUSTAINING THE DISALLOWANCE OF THE SUPERVISORY CHARGES TO THE EX TENT OF RS.1,31,30,658/- IS WHOLLY ARBITRARY, UNJUST AND UN SUSTAINABLE ON THE FACTS OF THE CASE. 8. THE CIT(A) FAILED TO APPRECIATE THAT THE CLAIM O F THE ASSESSEE OF THE SUPERVISORY CHARGES PAID IN THE ASST. YEAR 2 010-11 IN THE CURRENT YEAR, I.E., 2011-12 ON REMITTING THE TDS AM OUNT, IS IN ACCORDANCE WITH THE PROVISO TO SEC.40(A)(I) AND HEN CE THE DISALLOWANCE OF THE CLAIM UNDER SEC.37 OF THE ACT I S UNJUST AND UNTENABLE ON THE FACTS OF THE CASE. 9. THE CIT(A) FURTHER TAILED TO APPRECIATE THAT THE SUPERVISORY CHARGES ARE PAID TO THE PARENT COMPANY AS CONSIDERA TION FOR THE SERVICES RENDERED BY DONGWOO HST CO. LTD., BY W AY OF DISPATCHING ITS EMPLOYEES TO THE FACTORY SITE IN RE NDERING THE TECHNICAL KNOWHOW FOR MANUFACTURE AND MAINTENANCE O F FURNACE MACHINE AND MACHINE PARTS AND IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THUS SATIS FYING THE PARAMETERS FOR ALLOWANCE OF THE AMOUNT UNDER SEC.37 OF THE ACT. 10. THE CIT(A), IN ANY VIEW OF THE MATTER, OUGHT TO HAVE SEEN THAT REOPENING OF ASSESSMENT IN VIOLATION OF PROVIS O TO SEC.147 WAS UNTENABLE IN LAW AND ALSO OUGHT TO HAVE DELETED THE ENTIRE DISALLOWANCE WITH DUE REGARD TO THE CONTENTIONS OF THE ASSESSEE AND THUS ALLOWED THE APPEAL. 3. THE REVENUE HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR ASSESSMENT YEARS 2014-15 AND 2015-16, THEREFORE, FOR THE SAKE OF BREVITY, GROUNDS OF APPE AL FILED FOR 4 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 ASSESSMENT YEAR 2014-15 IN ITA NO.1560/CHNY/2019 AR E REPRODUCED AS UNDER:- 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD. CIT(A) ERRED IN GIVING RELIEF TO THE AS SESSEE BY DELETING THE SUPERVISORY FEE BASED ON FRESH EVIDENC E SUBMITTED FOR THE FIRST TIME BEFORE THE CIT(A) WITHOUT GIVING OPPORTUNITY TO THE AO UNDER RULE 46A OF THE INCOME TAX RULES, FOR VERIFYING THE SAID CLAIM OF THE ASSESSEE BASED ON EVIDENCES F ILED AFRESH DURING APPELLATE PROCEEDINGS. 2.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AO HAD DISALLOWED THE SUPERVISORY FEE U/S 37 OF THE INCOME TAX ACT FOR LACK OF GENUINENESS AND COMMERCIAL EXPEDIENCY. 2.3 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AS SESSEE ALTHOUGH DISALLOWED THE SUPERVISORY FEE CLAIMED DUR ING THE PREVIOUS YEAR RELEVANT TO THE A.Y.2014-15 U/S 40(A) (I) OF THE ACT, WITHOUT PRODUCING ANY PROOF FOR THE GENUINENESS OF ITS CLAIM, HAD CLAIMED THE SAME AFTER DEDUCTING TDS FOR SUCH F EE INCURRED DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y.2013-1 4 AFTER DEDUCTING TDS DURING THE SUBSEQUENT PREVIOUS YEAR, THUS AVOIDING FURNISHING OF ANY DETAIL/DOCUMENTARY EVIDE NCE BEFORE THE AO AS NOT RELEVANT TO THE YEAR UNDER CONSIDERAT ION. 2.3 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ASSESSEE HAD NOT PRODUCED ANY PROOF FOR HAVING RECEIVED SUCH SERVICES FOR THE SUPERVISORY FEE CLAIMED DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y.2013-14 WHICH WAS ACTUALLY DISA LLOWED U/S 40(A)(I) OF THE ACT FOR THE NON-DEDUCTION OF TDS AN D CLAIMED THE SAME DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2014- 15 AFTER REMITTING THE TDS IN THAT YEAR. 2.4 THE LD. CIT(A) OUGHT TO HAVE APPRECIATE THE MOD US OPERANDI OF THE ASSESSEE IN AS MUCH AS HE HAD SUBMI TTED THE PROOF OF HAVING PAID THE TDS FOR THE A.Y.2012-13 IN THE A.Y.2014-15 SO AS TO ESCAPE DISALLOWANCE OF THE SAM E U/S 37 OF THE ACT, BUT U/S 40(A)(I) OF THE ACT DURING THE RELEVANT YEAR WHICH COULD BE SUBSEQUENTLY CLAIMED IN THE YEAR IN WHICH THE TDS WAS DEDUCTED ON THE SAID PAYMENT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 5 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 4. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA N O. 1560/CHNY/2019 FOR ASST. YEAR 2014-15 ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING , SUPPLY AND INSTALLATION OF INDUSTRIAL FURNACES AND RELATED SERVICES. THE PARENT COMPANY OF THE ASSESSEE M/S. DONGWOO HST CO . LTD., WHICH IS IN POSSESSION OF VITAL TECHNIQUES, PROCES SES CONCERNING HEAT TREATMENT, COATING, FURNACE OF MET AL, SALE AND SERVICES TO CUSTOMERS. THE SAID TECHNOLOGY WAS TRA NSFERRED TO THE ASSESSEE COMPANY AS KNOW-HOW. THE ASSESSEE COMP ANY CARRIED OUT THE PROCESS UNDER THE SUPERVISION OF PA RENT COMPANY. THE PARENT COMPANY M/S. DONGWOO HST CO. LTD RENDERS SUPERVISORY SERVICES TO THE ASSESSEE BY DI SPATCHING EXPATRIATES TO INDIA FOR CARRYING OUT WORK FOR WHIC H THE ASSESSEE COMPANY HAS AGREED TO PAY SUPERVISORY AND MANAGERIA L FEES VIDE AGREEMENT DATED 25.12.2007. THE SCOPE OF SUPE RVISORY SERVICES AS PER AGREEMENT DATED 25.12.2007 HAS BEEN DEFINED AS PER WHICH PARENT COMPANY SHALL PROVIDE NECESSARY MANPOWER SUPPORT TO ENABLE INSPECTION, TESTING OF M AIN AND ASSOCIATED EQUIPMENTS IN TUNE WITH LATEST APPROVED NATIONAL AND INTERNATIONAL STANDARDS AND CODE OF PRACTICE. T HE ASSESSEE 6 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 HAS PAID SUPERVISORY FEES TO ITS PARENT COMPANY IN TERMS OF AGREEMENT ENTERED INTO BETWEEN THE PARTIES DATED 25 .12.2007. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO JUSTI FY PAYMENT OF SUPERVISORY FEES TO ITS PARENT COMPANY WITH NECE SSARY EVIDENCES. THE ASSESSEE IN RESPONSE HAS FILED NECES SARY EVIDENCES, INCLUDING AGREEMENT ENTERED INTO WITH M/ S. DONGWOO HST CO. LTD. AND CLAIMED THAT IT HAS PAID SUPERVISO RY FEES TO ITS PARENT COMPANY FOR RENDERING VARIOUS SERVICES I NCLUDING DISPATCHING ITS EMPLOYEES TO FACTORY SITE IN RENDER ING TECHNICAL KNOW-HOW FOR MANUFACTURE AND MAINTENANCE OF FURNAC ES MACHINE AND MACHINE PARTS. THE ASSESSING OFFICER, H OWEVER WAS NOT CONVINCED WITH EXPLANATION FURNISHED BY THE ASSESSEE AND ACCORDING TO HIM, EXCEPT COPIES OF INVOICES AND AGREEMENT ASSESSEE HAS NOT ABLE TO FILE ANY OTHER EVIDENCES T O JUSTIFY PAYMENT OF SUPERVISORY FEES TO ITS PARENT COMPANY F OR RENDERING SERVICES. THE ASSESSING OFFICER FURTHER NOTED THAT SCOPE OF WORK SPECIFIED IN AGREEMENT BETWEEN PARTIES IS GENERAL I N NATURE AND THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO PROVE KIND OF SERVICES RECEIVED FROM ITS PARENT COMPANY TO JUS TIFY PAYMENT 7 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 OF SUPERVISORY FEES. THE ASSESSING OFFICER HAS DIS CUSSED THE ISSUE AT LENGTH IN LIGHT OF TRANSACTIONS BETWEEN T WO RELATED PARTIES AND OPINED THAT THE ASSESSEE HAS BY NO MEAN S BEEN ABLE TO PROVIDE ANY EVIDENCE, WHATSOEVER TO PROVE T HAT SUCH SERVICES AS BEING MENTIONED IN THE AGREEMENT WAS RE CEIVED. THEREFORE, THE ASSESSING OFFICER OPINED THAT IT IS ONLY A DEVICE ADOPTED BY THE ASSESSEE AND ITS PARENT COMPANY TO S HIFT PROFIT FROM ONE TAX TERRITORY TO ANOTHER TAX TERRITORY WIT HOUT ANY ACTUAL BUSINESS EXPEDIENCY. HENCE, THE ASSESSING OFFICER D ISALLOWED ENTIRE PAYMENT OF SUPERVISORY FEES PAID TO ITS PARE NT COMPANY AND ADDED BACK TO THE TOTAL INCOME. THE RELEVANT FI NDINGS OF THE ASSESSING OFFICER ARE AS UNDER:- THE ASSESSEE HAS BY NO MEANS BEEN ABLE TO P ROVIDE ANY EVIDENCE WHATSOEVER TO PROVE THAT SUCH SERVICES AS BEING MENTIONED IN THE AGREEMENT WAS RECEIVED. THIS IS AF TER PROVIDING NUMEROUS OPPORTUNITIES AS REQUESTED. IN A COMPANY BEING A SUBSIDIARY OF FOREIGN PA RENT COMPANY, IT IS ROUTINE TO HAVE A SUPERVISORY CONTRO L BY THE PARENT COMPANY WITH REGARDS TO OVERALL POLICY MATTE RS. HOWEVER, THAT DOES NOT WARRANT OR JUSTIFY THE PAYME NTS BEING MADE WHICH ONLY SERVES IN REDUCING THE TAXABLE PROF IT OF THE SUBSIDIARY COMPANY IN INDIA. THE COMPANIES ARE BASI CALLY INDULGING IN PROFIT SHIFTING AND THE SAME IS BEING DONE UNDER THE PRETEXT OF SUCH GHOST CHARGES WITH AGREEMENTS PUT I N PLACE. IT IS TO BE REITERATED THE ASSESSEE WAS NOT EVEN ABLE TO PRODUCE ANY EVIDENCE FOR ROUTINE SUPERVISORY COMMUNICATIONS AS WELL. 8 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 IN SUCH CIRCUMSTANCES, IT IS ONLY LOGICAL TO CONCLUDE THAT THE SAID PAYMENT IS BEING MADE WITHOUT ANY ACTUAL B USINESS EXPEDIENCY AND AGAINST WHICH NO PARTICULAR SERVICE IS RECEIVED. THE SAME IS THEREFORE LIABLE TO BE DISALLOWED UNDER SECTION 37 OF THE ACT. IN VIEW OF THE DISCUSSIONS MADE, IT WAS CONCLUDED THAT THE SAID PAYMENT OF RS. 1,19,90,852/- WAS DISA LLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOR Y 14-15. 5.1 THE DEDUCTION OF SUM OF RS.3,13,07,498/- CLAIME D IN AY 2011-12 AS SUPERVISORY FEES PAID FOR EARLIER YEARS (ON THE BASIS OF TDS DEDUCTED IN THE CURRENT YEAR) IS NOT ALLOWAB LE AS THE PRINCIPAL ISSUE OF SUPERVISORY FEES ITSELF HAS BEEN DECIDED AS NOT ALLOWABLE UNDER SECTION 37 OF THE INCOME-TAX AC T,1961. FURTHER, THE ASSESSEE COULD NOT FURNISH ANY PROOF F OR THE RECEIPT OF ACTUAL SERVICES FOR WHICH THE HUGE PAYMENTS WERE BEING MADE MENTIONING IN ONLY BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF THE COMPANY AS BEING VETTED BY THE PAREN T COMPANY AND NOTHING IN THE MATTER OF SUPERVISORY SERVICES B EING RENDERED AS MENTIONED. THIS IS DESPITE THE OPPORTUN ITIES GIVEN AND EVEN AFTER THE SHOW CAUSE NOTICE GIVEN. IN SUCH CIRCUMSTANCES, IT IS ONLY LOGICAL TO CONCLUDE THAT THE SAID PAYMENT IS BEING MADE WITHOUT ANY ACTUAL BUSINESS E XPEDIENCY AND AGAINST WHICH NO PARTICULAR SERVICE IS RECEIVED AND ALSO IN LINE WITH THE STAND TAKEN BY THE ASSESSING OFFICER IN ASSESSEES OWN CASE FOR Y 2014-15. IN VIEW OF THE DISCUSSIONS MADE THE DEDUCTION OF SUM OF RS.3,13,07,498/- CLAIMED IN AY 2011-12 AS SUPERVISORY FEES PAID FOR EARLIER YEARS (ON THE BAS IS OF TDS DEDUCTED IN THE CURRENT YEAR) IS DISALLOWED AND ADD ED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 6. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT (A). THE ASSESSEE HAS CHALLENGED ADDITIONS MADE BY THE ASSESSING OFFI CER TOWARDS DISALLOWANCE OF SUPERVISORY FEES AND ARGUED THAT THE ASSESSEE HAS PAID SUPERVISORY FEES TO ITS PARENT CO MPANY FOR 9 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 RENDERING VARIOUS SERVICES INCLUDING TECHNOLOGY SUP PORT FOR MANUFACTURE AND INSTALLATION OF HEAT TREATMENT FURN ACES AND SUCH SERVICES WERE PROVIDED BY THE PARENT COMPANY B Y DISPATCHING EXPATRIATES TO INDIA FOR CARRYING OUT W ORK AT VARIOUS SITES. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS P AID SUPERVISORY FEES TO ITS PARENT COMPANY IN PURSUANT TO AN AGREEMENT DATED 25.12.2007 ENTERED INTO WHICH SPECI FIES SCOPE OF WORK. THE ASSESSEE HAS ALSO FILED OTHER EV IDENCES INCLUDING BILLS ISSUED BY PARENT COMPANY AND TRAVEL DETAILS OF EXPATRIATES TO INDIA ON VARIOUS OCCASIONS TO PROVID E SERVICES. 7. THE LEARNED CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF VARIOUS REASONS GIVEN BY THE ASSESSING OFFICER TO DISALLOW SUPERVISORY FEES HAS OPINED THAT THE ASSESSEE HAS PROVIDED VARI OUS DETAILS INCLUDING COPIES OF TRAVEL ORDERS, VISA AND OTHER S UPPORTING BILLS IN RESPECT OF KOREAN EXPATRIATES WHO HAD COME AND R ENDERED SERVICES IN INDIA. THE ASSESSEE HAD ALSO FURNISHED EXTRACTS OF E-MAIL COMMUNICATION WITH RESPECT TO WORK INSTRUCTI ONS AND DRAFT PLANS MADE DURING THE RELEVANT PERIOD. THE AS SESSEE HAD ALSO FURNISHED COPY OF AGREEMENT ENTERED INTO WITH ITS PARENT 10 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 COMPANY FOR SUPERVISORY SERVICES TO BE RENDERED BY THEM. THE LEARNED CIT(A) FURTHER NOTED THAT THE ASSESSEE HAD ALSO TESTED ITS TRANSACTIONS WITH ASSOCIATED ENTERPRISES BY ADO PTING TRANSACTIONAL NET MARGIN METHOD, AS PER WHICH TRANS ACTIONS OF THE ASSESSEE WITH ITS AES ARE AT ARMS LENGTH PRICE . THEREFORE, THE LEARNED CIT(A) OPINED THAT THE ASSESSEE BEING I N THE BUSINESS OF MANUFACTURING AND SALE OF MACHINES AND MACHINE PARTS HAS CARRIED OUT PROCESS CONCERNING HEAT TREA TMENT, COATING FURNACE OF METAL AND SUCH PROCESS HAD BEEN CARRIED OUT WITH ASSISTANCE AND TECHNOLOGICAL SUPPORT PROVI DED BY PARENT COMPANY M/S. DONG WOO HST CO. LTD. HENCE, THE LEARNED CIT(A) OPINED THAT EXPENDITURE INCURRED UND ER THE HEAD SUPERVISORY CHARGES AND PAID TO ITS PARENT COM PANY IS SUPPORTED BY NECESSARY EVIDENCES AND ACCORDINGLY, D ELETED ADDITIONS MADE BY THE ASSESSING OFFICER. THE LEARNE D CIT(A) HAS ALSO TAKEN NOTE OF FACT THAT THE ASSESSEE HAS R EMITTED SUPERVISORY FEES AFTER DEDUCTING NECESSARY WITHHOLD ING TAX AS PER LAW. THE RELEVANT FINDINGS OF THE LEARNED CIT(A ) ARE AS UNDER:- THE SUBMISSIONS OF THE APPELLANT WERE CONSIDERED VIS-A-VIS THE FINDINGS OF THE A.O. DURING THE APPELLATE PROCE EDINGS, THE APPELLANT FURNISHED WRITTEN SUBMISSIONS DATED 2/1/2 018. IT WAS EXPLAINED THAT THE APPELLANT COMPANY WAS CARRYING O UT 11 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 PROCESSES CONCERNING HEAT TREATMENT, COATING, FURNA CE OF METAL AND SALES AND SERVICES TO CUSTOMERS. THESE PROCESSE S HAD BEEN TRANSFERRED BY THE PARENT COMPANY I.E. DONG WO O HST COMPANY LTD. THE APPELLANT CARRIED OUT THESE PROCES SES UNDER THE SUPERVISION OF THE PARENT COMPANY. IT WAS STATE D THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS. THE APPELLANT ALSO STATED THAT THE SER VICES HAD BEEN RENDERED BY THE PARENT COMPANY BY DESPATCHING EXPATRIATES TO INDIA FOR CARRYING OUT THIS WORK. A DETAILED NOTE IN THIS REGARD HAD BEEN FURNISHED DURING THE ASSESSMEN T PROCEEDINGS. COPIES OF TRAVEL ORDERS, VISA AND OTHE R SUPPORTING BILLS WITH RESPECT OF THE KOREAN EXPATRIATES WHO RE NDERED SERVICES IN INDIA WERE SUBMITTED DURING THE APPELLA TE PROCEEDINGS. EXTRACTS OF E-MAIL COMMUNICATIONS WITH RESPECT TO WORK INSTRUCTIONS AND DRAFT PLANS MADE DURING THE F .Y. 2013-14 WERE ALSO FURNISHED. THE APPELLANT ALSO FURNISHED A COPY OF THE AGREEMENT ENTERED INTO BY THE APPELLANT COMPANY FOR THE SUPERVISORY SERVICES TO BE RENDERED BY THE PARENT C OMPANY. THE APPELLANT STATED THAT IT HAD COMPLIED WITH THE ARMS LENGTH PRICE UNDER TRANSACTIONAL NET MARGIN METHOD DULY CO RROBORATED BY THE FACTS CONTAINED IN FORM 3CEB. IN THE WRITTEN SUBMISSIONS DATED 15/2/20 18, THE CO MPANY STATED THAT THE SAID SUPERVISORY FEE INCOME OF RS.1 ,19,90,852/- HAD BEEN OFFERED TO TAX IN THE STATEMENT OF INCOME AND TAXED BY THE PARENT COMPANY IN ITS ITR. THE APPELLANT FILED A COPY OF THE STATEMENT OF INCOME AND ITR 6. THE COMPANY ALSO FUR NISHED WORKINGS WITH REGARD TO ARMS LENGTH PRICE (ALP) FOR THE SAID SUPERVISORY FEE PAYMENT. THE APPELLANT COMPANY HAD ALREADY DISALLOWED RS.1,1 9,90,852/- IN THEIR INCOME TAX RETURN OF A.Y. 2014-15 U/S.40(A )(I) ON ACCOUNT OF NON DEDUCTION/NON PAYMENT OF TDS. HENCE, IT WAS STATED THAT DISALLOWING THE SAME ONCE AGAIN RESULTS IN ERRONEOUS DOUBLE DISALLOWANCE. THE APPELLANT HAD AL SO FURNISHED THE RELEVANT EXTRACT OF ITR AND STATEMENT OF INCOME COMPUTATION ALONG WITH ANNEXURES FOR THE A.Y. 2014- 15. TAKING INTO ACCOUNT THESE FACTUAL SUBMISSIONS AND T HE EVIDENCES FURNISHED BY THE APPELLANT, I FIND THAT T HERE IS CONSIDERABLE MERIT IN THE CONTENTIONS OF THE APPELL ANT. THE DISALLOWANCE OF SUPERVISORY FEE OF RS.1,19,90,852/- PERTAINING 12 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 TO A.Y. 2014-15 REQUIRES TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. DISALLOWANCE OF SUPERVISORY FEE TOTALING TO RS. 1,3 1,30,658/- PERTAINING TO AY 2013-14 WHICH WAS DISALLOWED U/S 4 0(A)(I) OF THE ACT FOR NON-DEDUCTION OF TAX, CLAIMED DURING AY 2014-15: 4A(1) ASSESSMENT PROCEEDINGS: DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. HELD THAT THE ASSESSEE HAD CLAIMED THE SUPERVISORY FEE O F RS.1,31,30,658/- PAID IN THE PREVIOUS YEAR AS A DED UCTION IN THE CURRENT YEAR AS THE SAME WAS DISALLOWED IN THE PREV IOUS YEAR COMPUTATION BY THE ASSESSEE FOR NON DEDUCTION OF TA X. THE A.O. HELD THAT THE SAME WAS NOT AN ALLOWABLE EXPENSE. TH E DEDUCTION MADE IN THE COMPUTATION OF RS.1,31,30,658 /- WAS THEREFORE DISALLOWED. 4B(2) APPELLATE PROCEEDINGS: DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT FURNISHED THE FOLLOWING SUBMISSIONS: 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISAL LOWING THE EXPENSES INCURRED IN THE FY 2012-13 OF THE RELEVANT ASSESSMENT YEAR 2013-14, DISALLOWING OF EXPENSES PE RTAINING TO THE PREVIOUS FINANCIAL YEAR IS UNJUST. II. THE EXPENSES WERE INCURRED IN THE PREVIOUS FINA NCIAL YEAR AND HOWEVER NO QUESTION REGARDING ITS ALLOWABILITY AND GENUINITY DURING THE RELEVANT SCRUTINY ASSESSMENT. SOLE REASO N FOR SUO MOTO DISALLOWANCE WAS NON DEDUCTION OF TAX AT SO URCE AS PER SECTION 40(A)(I) OF THE INCOME TAX ACT, 1961. IN AS MUCH AS THE ABOVE FACTS, THE DISALLOWANCE OF EXPENSES WITH RESPECT TO PREVIOUS YEAR HAS TO BE DELETED. 4B(3) CIT(A)S INFERENCES AND DECISION: THE SUBMISSIONS OF THE APPELLANT WERE CONSIDERED VI S--VIS THE FINDINGS OF THE A.O. IN THEIR SUBMISSIONS DATED 2/1 /2018, THE APPELLANT STATED THAT THE A.O. HAD ERRED IN DISALLO WING RS.1,31,30,658/- STATED AS PERTAINING TO A.Y. 2013- 14 WHICH WAS ORIGINALLY CLAIMED AT RS.1,31,99,390/- U/S.40(A )(I) ON REMITTANCE OF TDS IN THE A.Y. 20 14-15 BEING THE SU PERVISORY FEES WHICH WAS SUO MOTO DISALLOWED IN THE INCOME TA X RETURN OF A.Y. 2012-13 U/S.40(A)(I) ON ACCOUNT OF NON DEDUCTI ON OF TDS. 13 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 THE APPELLANT STATED THAT THE A.O. HAD NOT CALLED F OR ANY SUBMISSIONS, EXPLANATIONS, SUPPORTING DOCUMENTS FOR VERIFYING THIS EXPENDITURE. THE APPELLANT MAINTAINED THAT IT WAS AN ADMISSIBLE EXPENDITURE AND THESE EXPENSES HAD ORIGI NALLY BEEN FULLY ALLOWED DURING A.Y. 20 12-13. IN THEIR WRITTE N SUBMISSIONS DATED 21/2/2018, THE APPELLANT FURNISHED TDS CHALAN FOR RS.13,33,870/- ON THE SUPERVISORY FEE RELATING TO A .Y: 2012-13 WHICH HAD BEEN REMITTED DURING THE AY 2014-15. IN THEIR WRITTEN SUBMISSIONS DATED 18/2/2019, THE APPELLANT FURNISHED EVIDENCES SUCH AS COPIES OF TRAVEL ORDER, VISA AND OTHER SUPPORTING BILLS WITH RESPECT OF THE KOREAN E XPATRIATES WHO CAME TO INDIA DURING F.Y. 2011-12 FOR RENDERING SERVICES. THE EXTRACTS OF E-MAIL COMMUNICATIONS REGARDING WOR K INSTRUCTIONS, DRAFT PLANS AND BASIS OF BILLING MADE ON DONG WOO INDIA BY HST KOREA FOR RS.1,31,99,390/- WERE SUBMIT TED. THE CORRECTNESS OF THE PRICING OF THE SAID SUPERVISORY FEE WAS STATED TO BE IN LINE WITH THE ALP AS PER TP REGULATIONS. T HE RELEVANT TP STUDY EXTRACT AND FORM 3CEB WERE ALSO FURNISHED FACTUAL DETAILS. TAKING INTO ACCOUNT THE EXPLANATIONS AND DOCUM ENTARY EVIDENCE THAT WERE FURNISHED DURING THE APPELLATE P ROCEEDINGS, THE APPELLANTS CONTENTIONS HAD BEEN FOUND TO BE TE NABLE. THIS DISALLOWANCE OF RS.1,31,30,658/- REQUIRES TO BE DEL ETED. THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVEN UE IS IN APPEAL BEFORE US. 8. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) HAS ERRED IN DELETING SUPERVISORY FEES PAID BY THE ASSE SSEE TO ITS PARENT COMPANY BASED ON FRESH EVIDENCES SUBMITTED F OR THE FIRST TIME DURING APPELLATE PROCEEDINGS WITHOUT GI VING ANY OPPORTUNITY TO THE ASSESSING OFFICER IN VIOLATION O F RULE 46A OF 14 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 INCOME TAX RULES, 1962. THE LEARNED DR FURTHER SUB MITTED THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE FA CT THAT THE ASSESSING OFFICER HAD DISALLOWED SUPERVISORY FEES U /S.37 OF THE INCOME TAX ACT, 1961, FOR LACK OF GENUINENESS AND C OMMERCIAL EXPEDIENCY, WHEREAS THE LEARNED CIT(A) HAS DELETED ADDITIONS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT N ECESSARY TDS HAS BEEN DEDUCTED AND THUS, SAME CANNOT BE DISA LLOWED U/S.40(A)(I) OF THE ACT, WITHOUT APPRECIATING FACT THAT ONCE A PARTICULAR EXPENDITURE IS CONSIDERED TO BE NOT ALLO WABLE U/S.37 OF THE ACT, THEN OTHER FORMALITIES OF NON-DEDUCTION OF TDS AND CONSEQUENT DISALLOWANCES IS ACADEMIC IN NATURE. 9. THE LEARNED A.R FOR THE ASSESSEE, ON THE OTHER H AND, SUPPORTING ORDER OF THE LEARNED CIT(A) SUBMITTED TH AT THE ASSESSEE HAS PAID SUPERVISORY FEES TO ITS PARENT C OMPANY M/S. DONG WOO HST CO. LTD. FOR RENDERING VARIOUS SERVICES INCLUDING TECHNOLOGICAL SUPPORT AND PROCESS CONCERN ING HEAT TREATMENT, COATING FURNACES OF METAL, SALE AND SERV ICES TO CUSTOMERS. THE PARENT COMPANY HAS PROVIDED SUCH SER VICES IN PURSUANT TO AN AGREEMENT DATED 25.12.2007 BETWEEN T HE PARTIES, AS PER WHICH TECHNICIANS FROM PARENT COMPA NY HAS 15 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 TRAVELLED TO INDIA ON VARIOUS OCCASIONS FOR RENDERI NG SERVICES IN CONNECTION WITH MANUFACTURING AND INSTALLATION OF H EAT TREATMENT OF FURNACES FOR WHICH THE ASSESSEE HAS FURNISHED NE CESSARY EVIDENCES INCLUDING AGREEMENT BETWEEN THE PARTIES, TRAVEL DOCUMENTS OF EXPATRIATES WHO VISITED INDIA FOR REND ERING SERVICES. THE LEARNED A.R FURTHER SUBMITTED THAT TH E ASSESSEE IS IN THE BUSINESS OF MANUFACTURING, SUPPLY AND INS TALLATION OF INDUSTRIAL FURNACES AND SAID ACTIVITY CANNOT BE CAR RIED OUT WITHOUT ASSISTANCE OF ITS PARENT COMPANY, BECAUSE T ECHNOLOGY REQUIRED FOR SAID ACTIVITY IS PROVIDED BY PARENT CO MPANY AND FURTHER SUPERVISORY AND PROCESS CONCERNING HEAT TRE ATMENT, COATING FURNACES OF METALS WAS ALSO PROVIDED BY PAR ENT COMPANY. THE LEARNED CIT(A) AFTER CONSIDERING RELEV ANT FACTS HAS RIGHTLY DELETED ADDITIONS MADE BY THE ASSESSING OFFICER AND HIS ORDER SHOULD BE UPHELD. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA L AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS IN THE BUSINESS OF MANUFACT URE, SUPPLY AND INSTALLATION OF INDUSTRIAL FURNACES AND RELATED SERVICES. THE ASSESSEE HAS CARRIED OUT MANUFACTURING AND INSTALLA TION OF 16 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 INDUSTRIAL FURNACES UNDER SUPERVISION OF ITS PARENT COMPANY M/S. DONG WOO HST CO. LTD. THE TECHNOLOGY REQUIRED FOR P ROCESS CONCERNING HEAT TREATMENT, COATING, FURNACE OF META L WAS PROVIDED BY ITS PARENT COMPANY. THE ASSESSEE HAS E NTERED INTO AN AGREEMENT WITH ITS PARENT COMPANY M/S. DON G WOO HST CO. LTD. VIDE AGREEMENT DATED 25.12.2007 AND SA ID AGREEMENT WAS RENEWED FROM TIME TO TIME. THE AGREEM ENT BETWEEN THE PARTIES SPECIFIED SCOPE OF SERVICES TO BE PROVIDED BY ITS PARENT COMPANY. AS PER SAID AGREEMENT, SCOPE OF SERVICES INCLUDES COMPLETE PROJECT MANAGEMENT, DESI GN, ERECTION, TESTING AND COMMISSIONING FOR PLANT AND M ACHINERY FOR HEAT TREATMENT PLANT. THE PARENT COMPANY SHALL PROV IDE NECESSARY SUPERVISORY SERVICES TO ENABLE THE ASSESS EE TO SUCCESSFULLY MANUFACTURE AND SUPPLY INDUSTRIAL FURN ACES. THE SAID AGREEMENT FURTHER PROVIDES FOR INSPECTION, TES TING AND OTHER RELATED SERVICES. FOR THIS PURPOSE, PARENT CO MPANY HAS DEPUTED 3 TO 4 SENIOR MEMBERS OF THE MANAGEMENT HEA DED BY MR.CHUNG SOO JIN AND OTHER PERSONS, WHO FREQUENTLY VISITS INDIA FOR PROVIDING ON SIGHT SUPERVISORY SERVICES F OR MANUFACTURING, SUPPLY AND INSTALLATION OF INDUSTRIA L FURNACES FOR WHICH THE ASSESSEE HAS PAID SUPERVISORY FEES TO ITS PARENT 17 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 COMPANY. THE ASSESSEE HAS FURNISHED NECESSARY EVIDE NCES, INCLUDING AGREEMENT BETWEEN THE PARTIES, INVOICES R AISED BY PARENT COMPANY, TRAVEL DOCUMENTS OF EXPATRIATES, WH O VISITED INDIA FOR RENDERING SERVICES, THEIR VISA, PASSPORT AND AIR TICKETS. THE ASSESSEE HAD ALSO FURNISHED E-MAIL CORRESPONDEN CE BETWEEN ITS PARENT COMPANY FOR EXCHANGE OF INFORMAT ION REGARDING TECHNOLOGICAL SUPPORT REQUIRED FOR MANUFA CTURING AND INSTALLATION OF INDUSTRIAL FURNACES. THE SAID PAYME NT HAS BEEN MADE AFTER WITHHOLDING NECESSARY TDS APPLICABLE AS PER LAW. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT SUPER VISORY FEES PAID BY THE ASSESSEE TO ITS PARENT COMPANY M/S. DON G WOO HST CO. LTD. IN PURSUANT TO AN AGREEMENT DATED 25.1 2.2007 IS GENUINE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND WHICH IS S UPPORTED BY NECESSARY EVIDENCES. 11. THE ASSESSING OFFICER HAS DISBELIEVED GENUINE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOS E OF BUSINESS ONLY FOR THE REASON THAT SAID TRANSACTION WAS ENTERED INTO BETWEEN THE ASSESSEE AND ITS PARENT COMPANY. T HE ASSESSING OFFICER HAD ALSO QUESTIONED NECESSITY OF MAKING 18 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 SUCH PAYMENTS. THEREFORE, HE OPINED THAT PAYMENT MA DE TO ITS PARENT COMPANY FOR RENDERING SUPERVISORY FEES IS NO THING BUT SHIFTING OF PROFIT FROM ONE TAX TERRITORY TO ANOTHE R TAX TERRITORY WITHOUT ANY ACTUAL BUSINESS EXPEDIENCY AND AS AGAIN ST WHICH NO PARTICULAR SERVICE IS RECEIVED. WE HAVE GONE THR OUGH REASONS GIVEN BY THE ASSESSING OFFICER IN LIGHT OF VARIOUS EVIDENCES FILED BY THE ASSESSEE INCLUDING AGREEMENT BETWEEN PARTIES AND WE DO NOT OURSELVES SUBSCRIBE TO REASON S GIVEN BY THE ASSESSING OFFICER FOR THE SIMPLE REASON THAT IT IS WELL SETTLED PRINCIPLE OF LAW THAT THE ASSESSING OFFICER CANNOT SIT IN THE ARMCHAIR OF BUSINESSMAN AND DECIDE WHETHER PARTICUL AR EXPENDITURE IS REQUIRED TO BE INCURRED OR NOT. IT I S ALSO AN ADMITTED LEGAL POSITION THAT THE ASSESSING OFFICER CANNOT QUESTION RATIONAL AND NECESSITY OF INCURRING ANY PA RTICULAR EXPENDITURE. WHAT IS REQUIRED TO BE SEEN IS WHETHER PARTICULAR EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND FURTHER SUCH EXPEND ITURE IS SUPPORTED BY NECESSARY EVIDENCES. IN THIS CASE, THE ASSESSEE HAS FILED ALL POSSIBLE EVIDENCES INCLUDING AGREEMEN T BETWEEN PARTIES TO PROVE GENUINENESS OF EXPENDITURE INCURRE D FOR SUPERVISORY SERVICES. THE ASSESSEE HAD ALSO FURNISH ED 19 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 NECESSARY SUPPORTING EVIDENCES INCLUDING TRAVEL DOC UMENTS OF EXPATRIATES, WHO VISITED INDIA FOR RENDERING SERVIC ES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OF FICER WAS ERRED IN DISALLOWING EXPENDITURE INCURRED BY THE AS SESSEE FOR PAYMENT MADE TO ITS PARENT COMPANY FOR RENDERING SU PERVISORY SERVICES. THIS LEGAL POSITION IS SUPPORTED BY THE D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS CHANDU LAL KESHAVLAL & CO. (1960) 38 ITR 601 (SC), WHERE IT WAS HELD THAT IN DECIDING WHETHER A PAYMENT OF MONEY IS A D EDUCTIBLE EXPENDITURE, ONE HAS TO TAKE INTO CONSIDERATION QUE STIONS OF COMMERCIAL EXPEDIENCY AND THE PRINCIPLES OF ORDINAR Y COMMERCIAL TRADING. IF ANY PAYMENT OR EXPENDITURE I S INCURRED FOR THE PURPOSE OF TRADE OF THE ASSESSEE, IT DOES N OT MATTER THAT PAYMENT MAY INURE TO THE BENEFIT OF A THIRD PARTY. ANOTHER TEST IS WHETHER THE TRANSACTION IS PROPERLY ENTERED INTO AS A PART OF THE ASSESSEE'S LEGITIMATE COMMERCIAL UNDERTAKING IN ORD ER TO FACILITATE THE CARRYING ON OF ITS BUSINESS AND IT I S IMMATERIAL THAT A THIRD PARTY ALSO BENEFITS THEREBY. BUT, IN EVERY CASE, IT IS A QUESTION OF FACT WHETHER EXPENDITURE IS EXPENDED WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADE OR BUSINESS OF THE ASSESSEE. IN THE PRESENT CASE, THERE IS NO DOUBT OF WHATSOEVER 20 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 WITH REGARD TO GENUINENESS OF PAYMENT MADE BY THE ASSESSEE TO ITS PARENT COMPANY, BECAUSE SUCH PAYMENT WAS MAD E IN PURSUANT TO AGREEMENT BETWEEN PARTIES AND FURTHER, THE ASSESSEE HAS DEDUCTED APPLICABLE TDS AS PER LAW. TH E ASSESSEE HAD ALSO FURNISHED OTHER SUPPORTING EVIDEN CES TO PROVE RECEIPT OF SERVICES FROM ITS PARENT COMPANY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT EXPENDITURE INCU RRED BY THE ASSESSEE TOWARDS PAYMENT MADE TO ITS PARENT COMPANY FOR RENDERING SUPERVISORY SERVICES IS GENUINE EXPENDITU RE, WHICH WAS INCURRED WHOLLY AND EXCLUSIVELY FOR PURPOSE OF BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER WITHOUT APPRECI ATING FACTS HAS SIMPLY DISALLOWED SUPERVISORY FEES PAID TO THE ASSESSEES PARENT COMPANY. THE LEARNED CIT(A), AFTER CONSIDERI NG RELEVANT FACTS HAS RIGHTLY DELETED ADDITIONS MADE BY THE ASS ESSING OFFICER. HENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF THE LEARNED CIT(A) AND REJECT GROUNDS TAKEN BY THE REVENUE. 12. THE OTHER ASPECT OF NON-DEDUCTION TAX DEDUCTED AT SOURCE AND CONSEQUENT DISALLOWANCE OF EXPENDITURE B Y THE ASSESSEE IN CERTAIN YEARS AND CLAIMING DEDUCTION FO R SAID EXPENDITURE IN THE YEAR OF PAYMENT IS NOT DISPUTED BY THE 21 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 ASSESSING OFFICER, BECAUSE THE ASSESSING OFFICER HA S PRIMARILY HELD THAT EXPENDITURE INCURRED BY THE ASSESSEE UNDE R THE HEAD SUPERVISORY FEES IS HELD TO BE NOT DEDUCTIBLE UNDER SECTION 37 OF THE INCOME TAX ACT, 1961. BUT, THE LD. CIT(A) HAS E XAMINED SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE IN EARLIER YEARS FOR NON-DEDUCTION OF TAX DEDUCTED AT SOURCE AND SUB SEQUENT DEDUCTION CLAIMED IN THE YEAR OF PAYMENT AND HELD T HAT THE ASSESSEE HAS RIGHTLY CLAIMED DEDUCTION TOWARDS EXPE NDITURE INCURRED IN EARLIER YEARS IN THE IMPUGNED ASSESSMEN T YEARS, BECAUSE, IT WAS DISALLOWED IN EARLIER YEARS FOR NON DEDUCTION OF TDS AND FURTHER, THE SAME HAS BEEN CLAIMED AS AND W HEN TDS HAS BEEN DEDUCTED AND REMITTED TO GOVT. ACCOUNT. FU RTHER, THE LD. CIT(A) HAS RECORDED CATEGORICAL FINDINGS THAT F OR THE ASSESSMENT YEAR 2014-15, THE ASSESSEE CLAIMED DEDUC TION TOWARDS SUPERVISORY FEE OF RS.1,31,30,658/- PERTAIN TO EARLIER ASSESSMENT YEAR, AS THE SAME WAS DISALLOWED IN THE PREVIOUS YEAR IN THE STATEMENT OF TOTAL INCOME OF THE ASSES SEE FOR NON- DEDUCTION OF TAX. SIMILARLY, FOR ASSESSMENT YEAR 2 015-16, THE ASSESSEE CLAIMED DEDUCTION OF RS.1,44,29,888/- TOWA RDS SUPERVISORY FEES INCURRED IN EARLIER FINANCIAL YEAR AND 22 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 DISALLOWED IN THE STATEMENT OF TOTAL INCOME FOR NON -DEDUCTION OF TDS U/S.40(A)(I) OF THE ACT. 13. IN THIS VIEW OF THE MATTER AND CONSIDERING FACT S AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE CONSIDERE D VIEW THAT THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE L D. CIT(A) TO DELETE DISALLOWANCES MADE BY THE AO TOWARDS SUPERVI SORY FEES PAID BY THE ASSESSEE TO ITS PARENT COMPANY. HENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF LD. CIT(A) AND REJEC T GROUNDS TAKEN BY THE REVENUE FOR ASSESSMENT YEARS 2014-15 A ND 2015- 16. 14. IN THE RESULT, APPEALS FILED BY THE REVENUE FO R ASSESSMENT YEARS 2014-15 AND 2015-16 ARE DISMISSED. ITA NO.939 & 940/CHNY/2020: (A.Y. 2011-12 & 2013-14 ): 15. THE FACTS AND ISSUES INVOLVED IN THESE TWO APPE ALS FILED BY THE ASSESSEE ARE IDENTICAL TO THE FACTS AND ISSU ES WHICH WE HAD CONSIDERED IN ITA NO.1560/CHNY/2019 FOR ASSESS MENT YEAR 2014-15, BUT FOR REASSESSMENT U/S.147 R.W.S.14 3(3) OF THE 23 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 INCOME TAX ACT, 1961. THE ISSUE OF DISALLOWANCE OF SUPERVISORY FEE PAID TO PARENT COMPANY IS IDENTICAL TO THE ISSU E WHICH WE HAD CONSIDERED IN ITA NO.1560/CHNY/2019 FOR ASSESSM ENT YEAR 2014-15. THE REASONS GIVEN BY US IN PRECEDING PARAG RAPHS OF ITA NO.1560/CHNY/2019 SHALL MUTATIS MUTANDIS APPLY TO THESE APPEALS AS WELL. THEREFORE, FOR SIMILAR REASONS, WE DIRECT THE ASSESSING OFFICER TO DELETE ADDITIONS MADE TOWARDS DISALLOWANCE OF SUPERVISORY FEE PAID BY THE ASSESSE E TO ITS PARENT COMPANY FOR ASST. YEARS 2011-12 AND 2013-14. AS REGARDS LEGAL GROUND TAKEN BY THE ASSESSEE CHALLENG ING VALIDITY OF REOPENING OF ASSESSMENT U/S.147 OF THE ACT, WE F IND THAT SINCE WE HAVE DECIDED ISSUE OF DISALLOWANCE OF SUPE RVISORY FEE IN FAVOR OF THE ASSESSEE, LEGAL GROUND TAKEN BY THE ASSESSEE CHALLENGING REOPENING OF ASSESSMENT BECOMES ACADEMI C IN NATURE. HENCE, LEGAL GROUND TAKEN BY THE ASSESSEE C HALLENGING VALIDITY OF REASSESSMENT FOR ASST. YEARS 2011-12 AN D 2013-14 IS DISMISSED ACCORDINGLY. 16. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FO R ASSESSMENT YEARS 2011-12 AND 2013-14 ARE ALLOWED AN D 24 ITA NOS.1560, 1920/CHNY/2019 & ITA NOS.939 & 940/CHNY/2020 APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2 014-15 & 2015-16 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) ( G.MANJUNATHA ) ' ) / JUDICIAL MEMBER ) / ACCOUNTANT MEMBER ' /CHENNAI, + /DATED 22 ND OCTOBER, 2021 DS -. /. /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .