TMI Blog2016 (1) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... - The coordinate Bench of the Tribunal in assessee’s own case for A.Y 2005-06, 06-07 and 08-09 had considered identical issue and set aside the issue to the file of AO by observing a cohesive verification of material appears to be not made. Assessee has produced the income tax record of the survey agencies which in support of its version; there exist no reasoning as to why they are being ignored by ld. AO & CIT (A). There exist conflicting claims about the existence of such survey agencies coupled with non supply of Inspectors report and non-allowing the customary right of cross examining the denying witnesses. Thus assessee has made out a case for violation of principles of natural justice. In the entirety of facts and circumstances we are inclined to set aside the issues relating to Marketing and Survey expenses back to the file of AO to decide afresh after considering the entire evidence and giving the assessee an adequate opportunity of being heard - Decided in favour of assessee Additional depreciation on Plant and Machinery - CIT(A) allowed the claim - Held that:- Hon’ble Tribunal in assessee’s own case for A.Y. 2005-06, 06-07 and 08-09 had considered the identical issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmations, invoices, tracking sheets, etc., thus the action of the ld. CIT (A) being unfair deserves to be hold bad in law and the additions uphold deserves to be deleted. 2.2. That the ld. CIT (A) has further erred in ignoring the fact that the recipient has duly confirmed the transactions and also declared the receipts in their income tax returns which were not doubted thus the disallowances made in the hands of the assessee deserves to be deleted. Revenue s Grounds : (ITA No. 223/JP/2014) On the facts and in the circumstances of the case and in law the ld. CIT (Appeals) has erred in :- (i) Allowing additional depreciation of ₹ 54,34,045/- without appreciating the fact that printing of paper cannot be considered as producing a new article or thing. 2. The assessee is engaged in the business of printing publishing of Newspaper and Periodicals. It has filed return of income for the assessment year 2007-08 on 31.10.2007 showing NIL income. The assessee s case was scrutinized under section 143(3) of the IT Act. 3. The first ground of the assessee is against confirming the disallowance of ₹ 5,00,000/- made out of general/other expenses claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative evidences. The AO has been very fair and reasonable in making disallowance of ₹ 5,00,000/- out of total expenditure of ₹ 3,02,68,784/- which was not amenable to verification. It was held by Hon ble Rajasthan High Court in the case of Jaipur Electro Private Limited vs. CIT (223 ITR 535) that doctrine that businessman is the best judge of the business expediency will not impact the right or duty of the AO to examine whether payments were for the purpose of the business or not. In the present case, I do not find any reason to interfere with the findings of the AO. The addition of ₹ 5,00,000/- made by the AO is confirmed. This ground of appeal dismissed. It is not in dispute that facts of this year are same as assessment year 2008-09. Therefore respectfully following the aforesaid appeal order on the identical facts, addition made by the assessing officer is confirmed. 5. Now the assessee is before us. The ld. A/R submitted that entire expenses was incurred in the normal course of business and their utility to the business cannot be denied merely because nature of expenses incurred is that personal element could be involved more particularly when the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Sayaji Iron and Engg. Co. (supra) is applicable to disallowance retained alleging personal user by the company. Respectfully following it we hold that in the case of assessee being a limited company which is an inanimate person, there can be no personal expenditure. Consequently the disallowances attributed to be personal user cannot be justified and are deleted. viii. For A.Y. 2006-07 qua the same disallowances assessee has paid more Fringe Benefit Tax (FBT). As over FBT and IT provisions if any expenditure is taxable under FBT it cannot be disallowed again in Income Tax provisions. 3.7. Considering the entirety of above observations, we have no hesitation in deleting the disallowances/additions retained by ld. CIT (A) out of various expenses mentioned in respective grounds for A.Y. 2005-06, 2006-07 2008-09 which are deleted. Grounds raised by assessee in this behalf in all these years are allowed. Respectfully following the coordinate Bench decision on identical facts, we have no hesitation to delete the addition confirmed by ld. CIT (A). Accordingly this ground of appeal is allowed. 8. Assessee s second ground is against confirming the disallowance of Marketin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residing in a adjacent two plots having area of 50 sq. yards each stated to be purchased by Shri Pushpendra Singh few years back through finance from bank. The educational qualification of Smt. Shakuntala Singh is 10th failed. Shri Pushpendra Singh is B.Sc. 1st year in 1996 and Shri Hanuman Singh is B.A. Final year in 1999-2000 as stated by them in their statements. Shri Pushpendra Singh has a two wheeler Hero Puch since 1997, Shri Hanuman Singh has a Splendor Motorcycle since 2006 and both of them do not have any other vehicle including any four wheeler. Presently Shri Pushpendra Singh is running a small restaurant preparing and selling Samosa Kachori since 2007 on a rental site. As per the AO, these persons were of small means and did not cater any resources and for such a small persons entry for business in a highly big group of assessee is just impossible. 8.1. Both the persons attended the office with only a copy of acknowledgement of return and computation of income but no final accounts were produced/furnished. 8.2. On being asked, though they admitted that they themselves appointed the staff but were still unable to tell the complete names of their staff. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of M/s. Harshit Marketing, M/s. Sharma Marketing, M/s. Lakshya Marketing, M/s. Anoop Marketing, M/s. The Indian Institute of Public Opinion P. Ltd. and Ms Asha Sharma. The assessee replied by letter dated 29.12.2009 which has been reproduced by the AO at pages 12, 13 14 of the assessment order. After considering the submissions of the assessee, the AO held that assessee has failed to produce even a single new party from whom it claimed to have carried out the survey work and to whom the payments on account of survey work are claimed to have been made. The assessee had squarely failed to put forth even any other reliable document/evidence in respect of the other parties which could bear even a little substance of authenticity. Therefore, he disallowed the total expenditure claimed by the assessee under the head Marketing and Survey at ₹ 67,73,510/-. 8.10. He further relied on the case of CIT vs. Calcutta Agency Ltd., 19 ITR 191 (SC), Liberty Cinema vs. CIT, 152 ITR 153 wherein it has been held that in order to claim an expenditure falls under section 37(1), the burden of proving the necessary facts in that connection is on the assessee. 9. Being aggrieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y salary of ₹ 21,000/- per month from ICICI Mutual Fund. In the earlier years also, the claim of marketing survey fess could not be substantiated by the assessee company. The department also took photographs of the office premises of the alleged concerns and these were made part of the assessment order to show that no business activities were carried out by M/s Perfect N Marketing, M/s A One Marketing and M/s Aneu Marketing in AY 2006-07. The office of M/s A One Marketing was stated to be 5, Hotel Rajdoot, M I Road. When the Inspector went to serve summons to the said party, it was not found to be in existence there. The Inspector reported that M/s First F1ight Courier was operating from said office. The results of these inquiries were made available to the assessee company for its comments. The daily survey reports filed before the AO were hurriedly prepared in the office the assessee company just to give shade of genuineness to the alleged transactions. However these documents did not prove that M/s Perfect Requirement Consultancy Services, M/s A One Marketing, M/s Harshit Marketing, M/s Sharma Marketing, M/s Lakshya Marketing and M/s Anoop Marketing had rendered any ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the surveyor and the representatives of the assessee company on such daily working sheets. In fact these daily working sheets should have been produced either by the alleged concerns or their representatives. However these documents have not been submitted by the assessee company during appellate proceedings so as to verify the genuineness of the alleged survey work carried out by these concerns. However it is surprising to note that not a single daily working sheet had been furnished by the assessee to the department obviously for the reasons best known to it. The alleged monthly market survey reports submitted during the course of appellate proceedings were prepared by the temporary employees of the appellant who were paid marketing and survey fees of ₹ 4,39,94,858/-. These reports were signed by the supervisors employed by the appellant company. The appellant had tried to confuse the department by filing monthly reports prepared by its supervisors. No primary door to door reports prepared by surveyors of the alleged concerns had been submitted which could have been subjected to investigation / inquiry for determination of the genuineness of the claim. Smt. Hemanti Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination obviously for the reason that her statements might have disclosed the collusion in a more candid manner. The same was also true for Smt Hemanti kumara, Smt Meena Kumari and Smt Kamlesh Kumari. The results of inquiries made by the AO in AY 2006-07 are enumerated as under: i) The proprietors of the alleged concerns were family members. Sh Hanumant Singh Sh Pushpendra Singh were brothers while Smt. Shakuntla Singh, Proprietor of M/s A One Marketing was the wife of Sh. Pushpendra Singh. The alleged proprietors did not have necessary educational qualifications to render any kind of consultancy services to the appellant company. Smt Shakuntala Singh had not passed even the matriculate examination whereas Sh Pushpendra Singh Sh Hanuman Singh were college dropouts. Sh Pushpendra Singh was running a small restaurant in a rental plot. ii) The proprietors of the alleged concerns were men of meagre means. They were residing in plots of 50 sq yds and that too was financed by the bank. They possessed only three wheelers and did not have any four wheelers. It did not transpire that they could have engaged employees / staff to render any kind of consultancy services to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Emsan Tools Mfg Corporation Vs ITO (207 CTR 577), the assessee claimed deduction of ₹ 12,19,587 as commission for rendering services like liaisoning for procurement of orders, getting material passed and release of payments etc., paid to M/s Vashisht Industrial Products (P.) Ltd. The assessing officer rejected this claim on the ground that the assessee failed to establish that the commission was wholly and ex1usively for the purpose of business of the assessee. This, view was reversed by the Commissioner (Appeals) with the observation that the assessee had paid similar commission in the previous years and that Shri Amarjeet Dhal had confirmed that the payment had been given for the services rendered by Shri P.D. Sharma. M/s Vashisht Industrial Products (P.) Ltd. had used their own resources to get the work done for the assessee-company. On further appeal by the revenue, the Tribunal set aside the view taken by the CIT and restored the view taken by the assessing officer. The Tribunal gave following reasons in support of this view:- i) First, according to Shri Brijesh Kumar and Shri Amarjeet Dhal, Shri P.D. Sharma rendered various services like procuring orders, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten document containing terms of the agreement with a person to whom commission was being paid in lakhs, discrepancies in the statements of the assessee and Sh. P.D. Sharma, Brijesh Kumar, ignorance of the recipient of commission about the rate of commission did not inspire confidence. Seeking cross-examination of the witnesses while filing written arguments before the Tribunal would not improve the case of the assessee when the entire material was disclosed in the order of assessment and first appeal. It was held that the view taken by the Tribunal was certainly a possible view. Similarly the Hon'ble Jaipur ITAT in the case of ACIT Vs Mehru Electrical Engg Pvt Ltd (128 ITD 247) upheld the disallowance of commission when the assessee could not produce any evidence for rendering of services by the commission agent. In the cited case, the AO noticed that no proof of substantial efforts mode for earning of commission had been furnished. The expenses debited by the recipients did not indicate that they had made expenses relating to phone call, meeting expenses, frequent travelling, discussion, competitors report etc. and this showed that payment of commission was not a genuine pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther document submitted to the assessee company for receiving payment. Inspite of repeated opportunities, they could not submit any evidence for having worked for the appellant company. They did not have an iota of evidence to show that they had actually rendered any services to the appellant. The Honourable Delhi High Court in the case of Schneider Electric India Ltd. (304 ITR 360) has upheld the disallowance of commission even though the assessee had submitted debit notes and payment to commission agent had been made by account payee cheques. It was observed as under: There is absolutely no material on record to suggest that M/s Ram Agencies had procured any sale orders for the assessee. The production of a few bills or payments having been made by account payee cheques cannot by itself show that M/s Ram Agencies had procured sale orders for the assessee. Apart from an internal note, there is no evidence of any correspondence or any personal meetings, etc., between the assessee and M/s Ram Agencies to suggest that there was any relationship on the basis of which M/s Ram Agencies procured some orders for the assessee for which it was entitled to receive commission. Moreover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s promotion expenses. In the case of CIT Vs McDowell Co Ltd. (291 ITR 107), commission paid to agents was disallowed as there was no evidence to prove that the commission agents had rendered any services to the assessee. Accordingly it was held that the assessee was not entitled to deduction of commission. No cognizance can be accorded to the fact that the recipients had filed their returns of income wherein the survey fees paid by the appellant had been offered to tax. It was held by Honourable Punjab Haryana High Court in the case of Mittal Belting and Machinery Stores Vs CIT (253 ITR 341) that if on the examination of the evidence, it was found that there was no genuine transaction between the parties, a pure paper transaction could not have entitled the assessee to claim benefit under the law. Despite the documentation supporting the claim of the assessee superficially, the evidence could not be accepted in view of the surrounding circumstances and human probabilities. There were certain features in the present case which belied the documentary evidence. Respectfully following the above decisions and the facts of the present case, I am of the opinion that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The company also wanted to sustain and increase the present readership base and to convert the readers of other competitive newspaper to the newspaper published by the assessee company. Further, assessee company wanted to know the profile of the readers which may ultimately turn into the increase in the advertisement revenue. The purpose of the survey was to identify the area where vigorous marketing and promotion are required to increase the sales and readership of the newspaper and such exercise has ultimately reflected in the random survey conducted by the independent credit/circulation rating agencies like IRS/NRS, whose results are widely accepted in the print media business and other government agencies allotting various licenses. The assessee company had appointed 9 independent parties to conduct the survey in and around the Municipal limits of Jaipur District. The said firms had conducted the survey by their self hired staff, who had visited door to door in a particular area on a particular day and collected the information, like number of house where assessee s newspaper is read, other competitive newspaper is read, where both the newspapers are read and no newspaper is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scount Company Ltd. The ld. A/R argued that the AO cannot walk into the shoes of the businessman to verify the necessity or the business expediency. He further relied on the case of Empire Jute Co. Ltd. vs. CIt, 124 ITR 1 (SC) and S.A. Builders vs. CIT, 158 Taxman 74 (SC) and argued that it was a business need to incur the expenditure on marketing. Therefore, he requested to delete the addition confirmed by ld. CIT (A). 12. At the outset, the ld. CIT DR vehemently supported the order of the ld. CIT (A) and reiterated the arguments given by the lower authorities that these parties did not have any capacity/expertise to render the required services for which payment had been made by the assessee. Therefore, he requested to uphold the order of ld. CIT (A). 13. We have heard rival contentions and perused the material available on record. The coordinate Bench of the Tribunal in assessee s own case in ITA No. 519, 520 and 521/JP/2012 for A.Y 2005-06, 06-07 and 08-09 had considered identical issue and set aside the issue to the file of AO by observing in para 4.15 of the order as under :- 4.15. We have heard the rival contentions and peruse the material available on record. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up which can be termed as manufacturing of article. He further relied on the order of Hon ble Supreme Court in the case of CIT vs. Pio Food Packers (1980) 46 ITR 63 (SC), Union of India vs. Delhi Cloth and General Mills (1977) ELT(J) 199 (SC), South Bihar Sugar Mills vs. Union of India (1978) ELT(J)(3) (SC), Empire Industries Ltd. vs. Union of India (1986) 162 ITR 846 (SC) on manufacturing. The assessee itself had not treated the printing and publication activity as manufacture in the past and no additional depreciation has been claimed by the assessee in the past. Therefore, he disallowed the additional depreciation claimed by the assessee of ₹ 54,34,045/-. 15. Being aggrieved by the order of the AO, assessee carried the matter before ld. CIT (A) who had deleted the addition by observing as under :- 11.3. I have considered the facts of the case; assessment order and appellant s written submission. Against this disallowance, appellant submitted that identical issue came up in assessment year 2008-09 and CIT (A) while deciding appeal by appeal order dated 28.3.2012 allowed additional depreciation. Relevant extract of the order of CIT (A) is quoted below I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional depreciation claimed by the appellant is allowed. 16. Now the Revenue is before us. 17. The ld. D/R vehemently supported the order of AO and argued that these disallowances were made by the AO consistently on the ground that assessee was not in any manufacturing activity. Therefore, additional depreciation claimed by the assessee is not allowable. Thus he requested to confirm the order of the A.O. 18. At the outset, the ld. A/R of the assessee submitted that Hon ble Tribunal in assessee s own case for A.Y. 2005-06, 06-07 and 08-09 had considered the identical issue and upheld the order of ld. CIT (A). He further argued that manufacture had not been defined in section 32(1)(iia) of the IT Act but same can be referred in section 2(29BA) of the IT Act. The assessee is covered by the definition provided in section 2(29BA) of the Act. He further relied on the decision in the case of CIT vs. Delhi Press Patra Prakashan Ltd. (2013) 355 ITR 14 (Delhi), DCIT vs. M/s. Mathrubhumi Printing and Publishing Co. Ltd. and as per the amended provision by Finance Act 2005 with effect from 1.4.2006 the additional depreciation is allowable only on new plant and machinery. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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