TMI Blog2007 (8) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... ice charges out of which Rs. 75,000 was shown as paid to M/s Business Enterprises, Delhi. The AO disallowed the claim in respect of Rs. 75,000, inter alia on the grounds that the registered letter sent to the party at the address supplied by the assessee was received back with the remark, "there is no person by this name", that the identity of the payee was not established by the assessee. 4. Shri S.U. Pathak, learned Authorised Representation, reiterated the arguments put forward on behalf of the assessee before the AO and the CIT(A). He, inter alia, submitted that the payment of Rs. 75,000 was made by the assessee to Shri Ashok Malhotra of M/s Business Enterprises for services rendered, and that it was paid by crossed demand draft. He however admitted that the party was not traceable and that confirmation could not be filed. He placed reliance on the decision of Tribunal Kolkata in the case of Syntexa vs. Asstt. CIT (2000) 111 Taxman 47 (Kol)(Mag). 5. Shri Pradeep Sharma, the learned Departmental Representative placed reliance on the orders of the lower authorities. He submitted that the provisions of s. 170 were applicable to the facts of this case. He vehemently argued sayi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of certain amounts as commission, assuming there was such payment, does not bind the ITO to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the ITO to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under s. 37 of the Act." 9. The facts of the case of Syntexa, relied upon by the learned Authorised Representative are distinguishable. In that case the Tribunal had noted that the payment towards brokerage/commission was made for rendering services. In the present case, on the facts available on record, no such finding can be given. Therefore, in view of the facts and circumstances of the case and the position of law, as discussed in the above paras, we see no reason to interfere with the conclusions reached by the CIT(A). The ground No. 1 is accordingly rejected. Ground No. 2 "2. In view of the facts and circumstances of the case lower authorities have erred both on facts as well as in law in tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited. We find that the decisions relied upon by the learned Authorised Representative either relate to the applicability of the provisions of s. 41 (1) or to s. 176 of the Act, whereas the issue involved in this case relates to the applicability of s. 170 of the Act. 14. In the present case the company M/s Finolex Plastics (P) Ltd. amalgamated with another company M/s Finolex Pipes (P) Ltd. and as a result of this amalgamation the business, which was being carried on by M/s Finolex Plastics (P) Ltd., was taken over by another company M/s Finolex Pipes (P) Ltd. Therefore it was surely a case of 'succession to business' within the meaning of s. 170 of the Act. The amalgamating company, M/s Finolex Plastics (P) Ltd., was the 'predecessor' and the other company, M/s Finolex Pipes (P) Ltd., which took over that business, was the 'successor'. There was no discontinuance of business and therefore the provisions of s. 176 do not have any application to the facts of this case. This was a case of change of ownership of the business. 15. The expression "amalgamation" in relation to companies is defined in cl. (1B) of s. 2 of the IT Act, 1961 as merger of one company with another. When o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nabhai Co. (1985) 48 CTR (AP) 251 : (1986) 158 ITR 353 (AP) it was held by the Andhra Pradesh High Court that the provisions of s. 170(1)(b) authorize the assessment in the hands of successor assessee in respect of the income of the previous year after the date of succession. 21. The 'discontinuance' of business and the 'succession' to business are mutually exclusive concepts. And amalgamation of one company with another. is surely a case of 'succession' to business rather than a 'discontinuance' of business. The s. 176 deals with the cases of 'discontinuance of business' whereas the s. 170 deals with the cases of 'succession to business'. 22. The details of the impugned amounts of Rs. 6,13,895, as given in para 16 of the order of the AO, are as under: -------------------------- Particulars Rs. -------------------------- Cash assistance 5,95,360 -------------------------- Duty drawback 2,286 -------------------------- Cash assistance 16,249 -------------------------- Total 6,13,895 -------------------------- 23. The above amounts were otherwise taxable under s. 28 of the Act, in the hands of M/s Finolex Plastics (P) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assessee." 25. Manifestly, the above observations of the Supreme Court apply to a receipt which is taxable under s. 41(1) of the Act and do not apply to a receipt which is directly taxable under s. 28 of the Act. In the present case the impugned amount of Rs. 6,13,895 was taxable under s. 28 of the Act and therefore our decision in the case of Thermax (P) Ltd., which related to the applicability of the provisions of s. 41(1) has no application to the facts of the present case. 26. The other decisions relied upon by Shri Pathak are also distinguishable and do not apply to the facts of the present case. These are briefly discussed in the following paras. 27. In the case of Bhagwandas Associates Trading Co. the issue for consideration before the Tribunal 'was about the applicability of the provisions of s. 41(1) of the Act. 28. In the case of New Cownpore Flour Mills (P) Ltd. the assessee company had taken over the business of a firm which had paid certain sales-tax. The levy was contested in appeal and the assessee company succeeded and received a refund. The AO took the view that the aforesaid amount was taxable under s. 41(1). The CIT(A), while disagreeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the above paras, we have no doubt in our mind that the receipt, of Rs. 6,13,895 was taxable in the hands of the assessee company, under the provisions of s. 170 of the Act. The ground No. 2 is accordingly rejected. Ground No. 3 "3. In view of the facts and circumstances of the case the CIT(A) has erred both on facts as well as in law in only allowing 50 per cent deduction on road repairs to the extent of Rs. 67,405 as against company's claim of Rs. 1,34,810 i.e. the total expenditure on road repairs is revenue expenditure. It is prayed that whole of the expenditure be declared as revenue expenditure and allowed in full." 32. The assessee had claimed Rs. 1,34,810 as expenditure incurred on the repairs of road. The AO disallowed the claim on the ground that the expenditure was of capital in nature. The CIT(A) restricted the assessee's claim to 50 per cent for the reasons given in para 23 of his order: "23. I have considered the grounds on both sides. It is true that the expenditures are quite heavy and it is mostly of the nature of renovation, as will be clear from the breakdown of the details (of bills), quoted by AO. In my view, it will be fair to estimate 50 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------- Add: -------------------------------------------------------- Payment to restaurants attributable to employees 15,690 accompanying the guests -------------------------------------------------------- Out of canteen expenses 15,000 -------------------------------------------------------- Total 49,301 -------------------------------------------------------- 37. The assessee challenged the addition of Rs. 15,690 before the CIT(A) and he confirmed the addition. The Tribunal, Pune has been consistently holding that the expenses attributable to the employees accompanying the guests are not to be considered for disallowance. We respectfully follow the precedents and decide this issue in favour of the assessee. The ground No. 4 is accordingly al1owed. Ground No. 5 "5. In view of the facts and circumstances of the case the CIT(A) has erred in not dealing with the ground 'assessee company denies this liability under ss. 139 and 215'." 38. This ground was not pressed by the learned Authorised Representative and therefore, it is rejected. Additional grounds 39. The assessee, had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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