TMI Blog2004 (12) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... factual matrix of the case as also the applicable legal position duly considered. 3. We will first take up revenue s appeal. However, wherever there are interconnected grounds raised in the assessee s appeal, the same shall also be taken up together with the related ground in revenue s appeal. 4. In the first ground of appeal, the revenue is aggrieved that the CIT(A) erred in deleting the disallowance of Rs. 15,209 under the head personal expenses made on account of expenses incurred by the assessee on travelling of its client. This ground also contends that the assessee is not supposed to incur expenses on the travelling of its clients and claim the same as its business expenditure . 5. Once it is not in dispute that the expenses are actually incurred and these are in furtherance of legitimate business interest, it is not for the Assessing Officer to decide on the business expediency of such an expenditure. As the ground itself suggest, the Assessing Officer had ended up doing precisely that. The Assessing Officer did not dispute that the expenditure was incurred, the Assessing Officer also did not dispute that it was relatable to the business, but the only reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital market and analysis of quotations for shares and debentures. It was also submitted that such market information and particulars are obtained by the assessee firm from the said concern and passed on to the clients. It was thus contended that expenditure incurred is in the nature of business expenditure which should be allowed as a deduction under section 371(1). The Assessing Officer was, however, not satisfied. He requisitioned the copies of reports and studies which have been furnished by Circon. The Assessing Officer took note of the fact that Circon was a sister concern of the assessee. In response to this requisition, the assessee filed the papers which as Assessing Officer put it, these are seen to be small 15 page pamphlets which give some information on the behaviour of stock markets and also analysis of certain companies results with recommendations as to whether the shares of the company could be bought, held or sold . The Assessing Officer also observed that in short it is like dozens of pamphlets or bulletins which are available in Bombay itself . The Assessing Officer then went on to mention that these 15 pages bulletins could be printed at a cost of Rs. 10 eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the sister concern is less than the price at which the services are obtained, there cannot be an occasion to apply the disabling provisions of section 40A(2). This exercise, therefore, necessitates a finding about the fair market value of such services. For this reason alone, the disallowance under section 40A(2) is inherently unsustainable in law on the facts of this case. It is also noteworthy that the services in question are essentially of such a nature that there cannot even be any generalizations about as to what should be the fair market value. The charges of professional advice of X lawyer may not necessarily comparable with the charges of Y lawyer, and same should be the case of investment consultants. The factum of expenditure, as also the expenditure being in the nature of business expenses, is not in doubt. There is no material to even suggest, leave aside establish, that the expenditure incurred by the assessee is excessive vis-a-vis the fair market value of such services. We are, therefore, of the considered view that it was not a fit case for invoking the provisions of section 40A(2) on the facts of the case. The CIT(A) should have deleted the entire disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 20. Ground No. 4 is dismissed. 21. In ground No. 5, revenue is aggrieved that the CIT(A) erred in restricting the disallowance of brokerage paid to M.M. Murarka Co. to Rs. 2,00,000 - as against the disallowance of Rs. 5,13,000 made by the Assessing Officer. 22. In connected ground No. 4 in assessee s appeal, the assessee is aggrieved that the CIT(A) erred in upholding the disallowance even to the extent of Rs. 2,00,000. 23. As both these grounds are interconnected, we will take up these grounds together for disposal. 24. N.M. Murarka Co. Calcutta is admittedly a sister concern of this assessee. During the relevant previous year, the assessee made payments totalling to Rs. 5,13,000 to this concern on account of commission. However, the Assessing Officer disallowed the claim of deduction on the several grounds - namely, complete transaction details are not placed on record, reconciliation between the assessee and sister concern is not properly drawn up. The genuineness of the recipient and the factum of services was said to be not free from doubt. In appeal, CIT(A) held that existence and genuineness of N.M. Murarka is well established. The assessee is an ol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000 paid to Citibank, disallowance of Rs. 72,602 paid to Bank of Rajasthan, disallowance of Rs. 2,25,000 paid to Deutsche Bank, disallowance of Rs. 5,01,817 and Rs. 1,50,000 paid to Naresh Kumar Agrawal, disallowance of Rs. 72,000 paid to Bank of Madura, and disallowance of Rs. 1,30,000 paid to American Express Bank. 29. As both these grounds are interconnected, we will take up these grounds together for disposal. 30. In all these cases, we find that the CIT(A) has dealt with the matter at a somewhat superficial level inasmuch as detailed reasonings are not given about evaluation of, and elaboration on, the evidences furnished at the appellate stage. Wherever details could not be furnished by the assessee, the CIT(A) has simply confirmed the disallowance. It is also an undisputed position that an overwhelming majority of the documents filed at first and second appellate stage were not available to the Assessing Officer. Since the exercise of examination of details involves going through voluminous evidence, we consider it appropriate not to do it first time at the Tribunal level but to remit the matter regarding claim for all these losses to the file of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rguments in support of deductibility of the same, we confirm the action of the CIT(A). To that extent, no interference. 39. To adjudicate on the remaining controversy it is sufficient to take note of the fact that a part of the repairs and maintenance expenses were disallowed by the Assessing Officer on the ground that these expenses are capital in nature. The CIT(A) also confirmed the same. What is important, however, is that the Explanation to section 30, which provides that current repairs shall not include capital expenditure, is effective assessment year 2004-05. As at the relevant point of time, therefore, the distinction between capital and revenue expenses, so far as repairs and maintenance expenses are concerned, was not relevant. Since the Expla- nation is brought with prospective effect only, there is no reason to apply the same for the assessment year 1994-95 i.e., the assessment year before us. The very basis of disallowance, therefore, was not good in law. We direct the Assessing Officer to delete the disallowance relating to capital expenses out of repairs and maintenance ( i.e., 4,59,214 minus 37,300 + 24,310). 40. Ground No. 2 is thus partly allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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