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2016 (4) TMI 993 - ITAT PUNE

2016 (4) TMI 993 - ITAT PUNE - TMI - Addition u/s 40A - Held that:- The issue arising before us is identical to the issue before the Tribunal in Tata Johnson Controls Automotive Ltd. Vs. DCIT (2016 (4) TMI 963 - ITAT PUNE) and following the same parity of reasoning, we hold that the said expenditure is to be allowed in entirety in the hands of assessee being paid in accordance with the terms of the Agreement agreed upon between the parties and for the purpose of carrying on the business of asses .....

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e Assessing Officer to allow the expenditure in entirety in the hands of assessee. - Decided in favour of assessee.

Disallowance of expenses incurred on engineering services - Held that:- Before the CIT(A), the assessee had explained the nature of expenses that the said expenses were incurred for testing of flow through heat exchangers manufactured by the assessee under computer aided simulated conditions. The said testing is called as CFD Analysis. The assessee had undertaken the sai .....

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e of ₹ 26,50,000/-, the assessee has not acquired any software perse. However, engineering services were provided by CSM Software Pvt. Ltd. in order to carry out the CFD Analysis of hood components manufactured by the assessee. We find merit in the plea of the assessee in this regard. he Hon’ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court ) has laid down the ratio that where the software facilitates the assessee’s trading operations or enables the ma .....

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y High Court, we hold that in the alternate, in case the expenditure is said to be on acquisition of software package by the assessee, then the same is allowable as expenditure in the hands of assessee.- Decided in favour of assessee.

Disallowance of expenses on repairs to building - Held that:- The perusal of the details of the appellate order reflects that the total of ₹ 4,59,804/- is including VAT. As referred to by us in the paras hereinabove, the assessee has booked the exp .....

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and the same is dismissed - Decided against assessee.

Disallowance of rent expenses - Held that:- The case of the assessee before the authorities below was that the said expenditure was crystallized during the year though relates to prior year, hence was booked as expenditure during the year. Both the authorities below have disallowed the claim of assessee since the expenditure did not relate to the year under consideration. The assessee before us has failed to furnish any evidence to .....

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e for the year 2001-02 and the said demand was disputed. However, under protest, the assessee deposited sum of ₹ 7,01,572/- during the year under consideration. Once the amount has been deposited by the assessee during the year and no deduction on this account has been taken by the assessee in any of the earlier years, then under the provisions of section 43B of the Act, such Sales Tax payment is duly allowable as deduction in the hands of assessee. However, the assessee had furnished a ch .....

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urposes.

Disallowance of performance incentive - Held that:- It is provided under the said section 43B of the Act that notwithstanding anything contained in any other provisions of the Act, the deduction on account of the sums referred to thereunder, in various clauses is to be allowed as deduction in the hands of person claiming the same, only on payment of the same during the year. However, in the proviso, it is further provided that in case the said amount is paid on or before due .....

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services rendered and hence, we find no merit in the claim of the assessee in this regard.- Decided against assessee.

Disallowance of equated rent - Held that:- The assessee had accounted for lease equalization charges in accordance with Accounting Standards-19 issued by the Institute of Chartered Accountants of India. The details i.e. computation of equalized rent along with lease agreement between the assessee and the Lessor were filed before the CIT(A). The learned Authorized Repre .....

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the amount due to the employees has been paid by the assessee before due date of filing the return of income. The CIT(A) has directed the Assessing Officer to verify the said claim by seeing bank entries in the hands of assessee. We find no error in the said directions given by the CIT(A) and confirm the same. - ITA No.1029/PN/2013, ITA No.1034/PN/2013, ITA No.1030/PN/2013, ITA No.1035/PN/2013, ITA No.1595/PN/2013, ITA No.1648/PN/2013, ITA No.1596/PN/2013, ITA No.1649/PN/2013 - Dated:- 18-3-2016 .....

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ct , 1961 (in short the Act ). Another two cross appeals filed by the assessee and Revenue are against consolidated order of CIT (A)-III, Pune, dated 19.10.2012 relating to assessment years 2008-09 and 2009-10 against respective orders passed under section 143(3) of the Income Tax Act, 19 61 (in short the Act ). 2. This bunch of four cross appeals relating to assessment years 2006-07 to 2009-10 were heard together and are being disposed of by this consolidated order for the sake of convenience. .....

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easonable having regard to services rendered by TACO and the legitimate business needs of the appellant. 2. The learned CIT(A) erred in making the following observations: a) ... The appellant company was incorporated in the year 1997 and the initial start-up phase of the company including land acquisition, construction of factory premises etc. is already over and therefore, question of availing any services by the appellant from TACO, during the year on account of start-up phase of the company d .....

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e year ... e) ... the payments to TACO at a fixed percentage of the turnover irrespective of actual services rendered in a particular year are not at all justified ... f) ... There could be business expediency to avail the services of TACO in the initial formative years of the company i. e. during start-up phase but once the company is well established, it cannot be said that the expenditure to the extent claimed by the appellant at a fixed percentage of turnover was incurred on account of busin .....

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5,657. 5. The learned CIT(A) erred in confirming the disallowance of expenses on rent, crystalized during the year, amounting to ₹ 1,51,896. 6. The learned CIT(A) erred in confirming the disallowance of sales tax expenses, paid by the appellant, amounting to ₹ 7,01,572. 7. The learned CIT(A) erred in making the following observations: (a) ... But as admitted by the appellant itself, the above two installments were remitted to the Sales Tax Department under protest. To a specific quer .....

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o amend, to alter, to substitute, and to withdraw any or all of the above grounds of appeal. 5. The Revenue in ITA No. 1029/PN/2013 has raised the following concise grounds of appeal:- 1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the disallowance of ₹ 93,08,043/- i.e. erred in deleting 25% of the disallowance of Administrative service charges made by the Assessing Officer when learned CIT(A) had himself held in his order. That no documentar .....

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TACO to the assessee during the year under consideration. The Appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed off. It is prayed that the order of Commissioner of Income Tax (Appeals) be set aside and that of the A.O be restored. 6. The issue raised vide grounds of appeal No.1 and 2 by the assessee and vide ground of appeal No.1 by the Revenue is on the issue of allowability of expenditure of administrative services charges paid to Tata .....

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lf in case of Tata Johnson Controls Automotive Ltd., was of the view that only expenditure to the extent of 25% of the total expenditure was allowable in assessee s hands and hence, disallowance was made to the extent of ₹ 2,79,24,130/-. 8. The assessee is in appeal against the said upholding of disallowance of ₹ 2,79,24,130/- and the Revenue is in appeal against the order of CIT(A) in directing the Assessing Officer to allow 25% of the administrative service charges to the extent of .....

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o an Agreement with TACO and had made payments to the said concern on account of administrative support services taken from TACO. The Assessing Officer took note of Agreement between TACO & TTR -SAP Consulting & Implementation dated 17.11.2008 and Project Charter entered into between the assessee and TACO. During the course of assessment proceedings, the assessee had submitted copies of few e-mail correspondences between the employees of the assessee company and the employees of TACO. Th .....

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ve and technical expenses including paying salary to technical, administrative and marketing staff. Further, the assessee was incurring administrative expenses including advertisement, marketing staff training, sales promotion, audit fees, etc. Further, the assessee was incurring expenditure both on direct and indirect overheads required for running of the organization. The Assessing Officer observed that fees payable by the assessee to TACO was made as a percentage of total turnover of the asse .....

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for the assessee to produce the administrative services bills raised by TACO and also date-wise services provided by TACO. However, the assessee failed to furnish any details nor copies of bills were produced for verification. In the circumstances, the Assessing Officer was of the view that the assessee had not taken any services from TACO and payments made were not justified. In the absence of any documentary evidence filed by the assessee as to whether the expenditure was directly or indirectl .....

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dministrative Support Agreement renewed on 13.04.2006, was of the view that the said terms and conditions in the Agreement talk of various activities, which broadly consist of support in activities during start-up phase and during operative phase. The assessee had agreed to pay for the services provided at an amount equal to 2% of Ex-factory selling price as fees for the support received. In addition to the said fees payable, the assessee was to bear all out of pocket expenses or any outsourced .....

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TACO during start-up phase of the company. The CIT(A) thus, concluded that if at all any support services were rendered by TACO, the same could only be in respect of activities carried on by the assessee during the operating phase of the company. In support thereof, the assessee had produced e-mail correspondence between TACO Group Office and the assessee, which as per the assessee, prima facie indicate rendering of some services and support to the assessee in various fields of activities. In t .....

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he extent of ₹ 3.72 crores in assessment year 2006-07 and ₹ 4.67 crores in assessment year 2007-08. 11. The second aspect which was considered by the CIT(A) vide para 3.3.2 at pages 13 onwards was whether payments made at 2% of the total turnover was reasonable having regard to the nature of services rendered by TACO or the legitimate needs of the business of the assessee. Another aspect of the issue was its allowability under section 37 of the Act, which was also considered and adju .....

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of Act and paid taxes on the book profits under section 115JB of the Act , it could not be said that it was revenue neutral. The CIT(A) upheld the order of Assessing Officer in applying the provisions of section 40(A)(2)(b) of the Act. However, the CIT(A) was of the view that in view of the correspondence between the assessee and TACO, there was prima facie case that some support from TACO was received by the assessee during the year under consideration. Accordingly, claim to the extent of 25% w .....

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ontrols Automotive Ltd. Vs. DCIT and vice-versa in ITA No.1450/PN/2011 and 1454/PN/2011, relating to assessment year 2006-07, order dated 09.12.2015. The learned Authorized Representative for the assessee pointed out that the CIT(A) while deciding the present appeal against the assessee had also referred to his order in Tata Johnson Controls Automotive Ltd. under para 3.2.8 at page 8 of the appellate order and had held that the expenditure claimed was restricted to 25% of the total expenditure c .....

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motive Ltd. 15. We find that identical issue of allowability of claim arose before the Tribunal in Tata Johnson Controls Automotive Ltd. Vs. DCIT (supra), where the JV was formed between TACO and Johnson Control Inc. ( JCI ) and the concerned JV entered into an Agreement with TACO for providing administrative services both at start-up and operating phases. Even in the facts of the present case, the assessee was a JV company with 51:49 share between TACO and Tata Toyo Radiator Pvt. Ltd. The asses .....

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at length and after consideration of various aspects of the case, had held as under:- 23. We have heard the rival contentions and perused the record. In the facts of the present case as referred to by us in the paras hereinabove, the assessee was a joint venture company with 50:50 share between TACO and Johnson Control Inc. After formation of joint venture company, it was engaged in the business of providing services on account of automobile sector i.e. seating systems for motor cars. Equal cont .....

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eration had paid sum of ₹ 2,00,84,162/- to TACO and the question of its deductibility has arisen by way of present grounds of appeal raised. The Assessing Officer was of the view that since TACO was a related party, in view of the provisions of section 40A(2)(b) of the Act, the said expenditure has to be looked into accordingly. The assessee furnished certain information before the Assessing Officer. However, the Assessing Officer was of the view tha t there was no justification in the cla .....

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of the expenditure has to be allowed in the hands of assessee. Both the assessee and the Revenue are in appeal against the said order of CIT(A). 24. The first issue to be addressed in this regard is whether in order to judge commercial exigency of the agreement and the quantum of remuneration paid in view of the terms of agreement entered into between two parties, can the reasonableness of expenditure be viewed by the authorities or reasonableness has to be established from the view point of bu .....

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by TACO, for which remuneration was due to them. The list of services are enlisted in the agreement and undoubtedly, the said agreement has been in force for more than 7 years and the amounts have been paid and allowed as expenditure in the hands of assessee from year to year. In the entirety of the above said facts and circumstances, we find no merit in the order of Assessing Officer in holding that the entire expenditure merits to be disallowed in the hands of the assessee, since the quantum o .....

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is to be allowed in the hands of assessee. Both the authorities below have considered the related party transaction as referred to in section 40A(2) of the Act. The said provisions of the Act lay down that the services to a related party, as envisaged in section 40A(2)(b) of the Act, shall not be allowed as deduction under section 40A(2)(a) of the Act, where the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the market value of the goods, .....

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uch invoking of the powers, the Assessing Officer is not empowered to sit in the seat of businessman to decide the merits of quantum of claim to be allowed in the hands of assessee. The authorities below in the present case have not disputed the terms of agreement, but were of the view that remuneration paid at a percentage of turnover, in view of the assessee having established its business, was excessive. The contention of the assessee on the other hand was that for smooth running of its busin .....

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us. The Id. CA submitted that the assessee is engaged in multiple business activities like tea and rubber cultivation by technology, structural, civil, mechanical and electrical engineering, trading in tea, coffee, spices and export of the same estate supplies and trading, clearing and shipping, air travel and air cargo. The assessee-company has entered into an agreement dated 8-8-1994 with M/s. RPGEL to acquire the non-exclusive licence to use "RPG" Logo owned by RPGEL for the purpos .....

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rther submitted, that due to the use of the logo RPGEL provides the infrastructure for developing certain code of conduct and to operate and run the organization for promoting and monitoring standard industrial, commercial and trade practices in the pursuit of attainment of excellence in quality of their products and services. The costs of rendering the group resources were shared by the licensee companies and that enables the licensee company like the present assessee to avail the benefits of t .....

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ment information, taxation, quality management, project development, information technology and corporate governance, etc. The said RPGEL with group resources are having talented and highly qualified experts in diversified fields and assessee and other companies who are licensees availed, the expertise in the required field for the excellence in the corporate management as well as promoting business standards. He further submitted that if the assessee has to acquire this expertise, the cost of i .....

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1 (SC) (iii) Bombay Steam Navigation Co. (1953) (P.) Ltdd. Vs. CIT (1965) 56 ITR 52 (SC) (iv) CIT Vs. Malayalam Plantations Ltd. (1964) 53 ITR 140 (SC) 17……. 18……. 19……. 20. The authorities below have not disputed the terms of the agreement but it appears from the reasons given by the CIT(A) that the said payment was not required at all. The concept of business is changing due to globalization. The market strategies of the corporate organizations are als .....

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and quality. In the changing scenario of globalization, one cannot go with the conservative concept of the early fifties. As far as HRD is concerned, it has gained importance in the industrial and business world. We find force in the argument of the Id. CA that RPGEL is having the infrastructure which is used by the assesseecompany for the development of its business. Whether any particular payment is on account of business expediency or not is to be considered for allowing the same under sectio .....

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ian Income-tax Act, 1922 does not mean "necessarily". Ordinarily it is for the assessee to decide, whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profit then he can claim the deduction even though there was no compelling necessity to incur such expenditure (head notes). The principles laid down by the Hon'ble Supreme C .....

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te on turnover as referred to in para 16 of the decision. 28. Next aspect of the issue, where the payments have been made to TACO, on which taxes have been paid by TACO, disallowance made in the hands of assessee would result in double taxation. Admittedly, the concern TACO has furnished Nil return of income under normal provisions, but has paid taxes under section 115JB of the Act. The Hon ble Bombay High Court in CIT Vs. Indo Saudi Services (Travel) (P.) Ltd. (2008) 219 CTR 562 (Bom) have cons .....

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f handling charges. (ii) For the asst. yrs. 1991-92 and 1992-93 the AO by his orders dated 25th March, 1994 and 31st Jan., 1995 respectively held that the incentive commission paid to M/s Middle East International (sister concern of the assessee) was half per cent more than other sub-agents. The AO invoked section 40A(2) of the IT Act and disallowed the excess commission paid to the assessee's sister concern @ 1/2 per cent. The CIT(A) by orders dated 5th Jan., 1995 and 14th Nov., 1995 confir .....

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g out of the Tribunal's order dated 3rd April, 1997. Thereafter the Tribunal by its order dated 21st Oct., 1999 allowed the appeal of the assessee partly and deleted the additions which were earlier confirmed. (iv) The appellant (Revenue) being aggrieved by the Tribunal's order dated 21st Oct., 1999 filed the above appeals, inter alia contending that the Tribunal was not right in law in allowing the assessee's claim of incentive commission paid to its sister concern which was half pe .....

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(i) That the assessee apart from paying handling charges @ 9 1/2 per cent to its sister concern, have paid handling charges at the same rate to other agents viz., M/s A.K.Travels, M/s Om Travels and M/s Jet Age Travels. (ii) For asst. yrs. 1986-87 and 1987-88 the assessee had paid the handling charges @ 10 per cent to the sister concern of the assessee and such charges paid were considered to be reasonable by the appellant. (iii) For asst.yrs. 1989-90 and 1990-91 the assessee had reduced the pa .....

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sister concern @ 9.5 per cent have been considered to be reasonable and allowed. (iv) The sister concern of the assessee M/s Middle East International is also assessed to tax and income assessed for the asst. yr. 1991-92 is ₹ 9,38,510 and for asst.yr. 1992-93 is ₹ 14,65,880 and the said assessment orders have been placed on record. (v) Under the CBDT Circular No. 6-P, dated 6th July, 1968 it is stated that no disallowance is to be made under section 40A(2) in respect of the payments .....

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of higher commission to its sister concern since the sister concern was also paying tax at higher rate and copies of the assessment orders of the sister concern were taken on record by the Tribunal. 6. We, therefore, answer the above question of law raised in these appeals in affirmative and dismiss the above appeals filed by the appellant. There will, however, be no order as to costs. 30. Applying the above ratio laid down by the Hon ble Bombay High Court in CIT Vs. Indo Saudi Services (Travel .....

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tion of papers including the copies of reports, e-mails and other documents evidencing the rendering of services from day to day. All these documents were not considered by the authorities below and we find no merit in the orders of revenue authorities in brushing aside those documents in a summary manner without properly analyzing the same. We find in similar circumstances, the Mumbai Bench of Tribunal in Dresser-Rand India (P.) Ltd. Vs. Addl.CIT (supra) had observed as under:- 8. We find that .....

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aid audit fees to external firm. Similarly, the Transfer Pricing Officer was of the view that the assessee had management experts on its rolls, and, therefore, global business oversight services were not needed. It is difficult to understand, much less approve, this line of reasoning. It is only elementary that how an assessee conducts his business is entirely his prerogative and it is not for the revenue authorities to decide what is necessary for an assessee and what is not. An assessee may ha .....

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not approve this approach of the revenue authorities. We have further noticed that the Transfer Pricing Officer has made several observations to the effect that, as evident from the analysis of financial performance, the assessee did not benefit, in terms of financial results, from these services. This analysis is also completely irrelevant, because whether a particular expense on services received actually benefits an assessee in monetary terms or not even a consideration for its being allowed .....

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eceding years without any consideration or not is also irrelevant. The AE may have given the same service on gratuitous basis in the earlier period, but that does not mean that arm's length price of these services is 'nil'. The authorities below have been swayed by the considerations which are not at all relevant in the context of determining the arm's length price of the costs incurred by the assessee in cost contribution arrangement. We have also noted that the stand of the rev .....

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led a huge compilation of papers, running into almost three hundred pages, including copies of reports, emails and other documents evidencing the rendering of services. Yet, the DRP simply brushed aside these documents by simply observing that "The DRP has perused the submissions of the assessee and the documents. In view of the DRP, such documents do not prove the receipt of services by the assessee ascertained (asserted ?) to be provided by its AE, and, accordingly, the action of the AO i .....

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to a conclusion in the order are not set out, it is not possible to do a meaningful scrutiny of the order, but we find no reasoning at all in the order passed by the DRP. We may in this regard refer to the observations made by Hon'ble Supreme Court in the case of Union of India v. MohanLal Capoor AIR 1974 SC 87, wherein Their Lordships have, inter alia, observed as follows: "If the statute requires recording of reasons, then it is the statutory requirement and, therefore, there is no s .....

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nistrative or quasi judicial. They should reveal rational nexus between the facts considered and the conclusion reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. " 9. In our considered view, it is not open to Dispute Resolution Panel to reject the objections of the assessee in a summary manner without properly analyzing the objections of the assessee and dealing with evidences filed by the assessee. Under section 144 C (6), the Dispu .....

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d soul of the matter. And further, the same also facilitates appreciation when the order is called in question by the superior forum". Yet, more often than not, the orders passed by the Dispute Resolution Panels, like one before us, are not only wanting in terms of their analysis of facts and law and lacking in reasons for arriving at conclusions, these orders also offer us no assistance in any manner at all. In this view of the matter, we deem it fit and proper to remit the matter to the f .....

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t on record to establish that the expenditure incurred by the assessee was excessive i.e. more than market value of the said services, we find no merit in the orders of authorities below in invoking provisions of section 40A(2)(a) of the Act. Accordingly, we modify the order of CIT(A) and direct the Assessing Officer to allow the expenditure in totality in the hands of the assessee as the said expenditure has been laid down in terms of the agreement agreed upon between the parties and is for car .....

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assessee being paid in accordance with the terms of the Agreement agreed upon between the parties and for the purpose of carrying on the business of assessee more efficiently. It may be pointed out herein that the assessee had initially entered into an Agreement with TACO in 1997 and the said expenditure had been allowed in the hands of assessee from year to year. However, the assessee renewed the Agreement in 2006 and the expenditure for the first time was not allowed in the hands of assessee .....

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09-10. Accordingly, we allow the claim of assessee vis-à-vis the said expenditure in all the years i.e. assessment years 2006-07 to 2009-10. The grounds of appeal No.1 and 2 raised by the assessee in all the appeals are thus, allowed and the grounds of appeal No.1 and 2 raised by the Revenue in all the appeals is thus, dismissed. 17. Now, we proceed to take up the other grounds of appeal, which are raised in different assessment years. 18. The assessee in assessment year 2006-07 has raise .....

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bited on 05.09.2005 with the narration CFD Analysis of under hood components . The said payment was made to CSM Software Pvt. Ltd. for the purchase of software. The Assessing Officer was of the view that the software was an intangible asset and was of capital nature and hence, the same was added to the total income of the assessee. 21. The CIT(A) held as under:- It is gathered from the Website of CSM that they have a full spectrum of services catering to all the engineering needs during product .....

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he customer of the appellant. The engineering services provided for CFD analysis of under hood components also include software tools which provide enduring advantage to the appellant over a period of time and therefore, the expenditure incurred by the appellant for engineering services from CSM is rightly treated as capital expenditure by the Assessing Officer and depreciation was allowed at the rate applicable to software. 22. The assessee is in appeal against the finding of CIT(A). 23. The le .....

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urred on acquisition of SAP software was held to be revenue in nature. 24. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 25. We have heard the rival contentions and perused the record. The assessee for the year under consideration had debited an expenditure of ₹ 26,50,000/- on account of engineering service charges provided for CFD Analysis of hood components. The said services were provided by CSM Software Pvt. Ltd. and had raised two invo .....

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ng capital in nature. Before the CIT(A), the assessee had explained the nature of expenses that the said expenses were incurred for testing of flow through heat exchangers manufactured by the assessee under computer aided simulated conditions. The said testing is called as CFD Analysis. The assessee had undertaken the said testing to find out whether the product manufactured by it complied with the parameters laid down by the customer of the assessee. The said testing was done by CSM Software Pv .....

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nalysis of hood components manufactured by the assessee. We find merit in the plea of the assessee in this regard. The Hon ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (supra) has laid down the ratio that where the software facilitates the assessee s trading operations or enables the management to conduct its business more efficiently or more profitably, then such package software was not in the nature of profit making apparatus, and software expenditure was allowable as revenue expenditure .....

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dingly, we hold so. We direct the Assessing Officer to allow the expenditure of ₹ 26,50,000/- as revenue expenditure. The ground of appeal No.3 raised by the assessee is thus, allowed. 26. The issue in ground of appeal No.4 raised by the assessee is against the disallowance of expenses on repairs to building amounting to ₹ 11,85,657/-. 27. The perusal of the assessment order reflects the break-up of sum of ₹ 11,85,657/-, out of total debit to repairs to building account of S .....

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t scrap yard was constructed at a new location by incurring expenditure totaling ₹ 4,59,804/-. Since the expenditure was incurred for the construction of scrap yard at new location and not for repairs to the existing scrap yard, the CIT(A) in turn, relying on the ratio laid down by the Hon ble Supreme Court in Balimal Naval Kishore Vs. CIT reported in 224 ITR 414 (SC), held that where a new scrap yard was constructed, the same was at the root of fixed capital asset and the same was not all .....

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s been confirmed by the CIT(A). 30. The learned Authorized Representative for the assessee pointed out that out of total expenditure considered by the CIT(A) at ₹ 4,59,804/-, the Assessing Officer had disallowed sum of ₹ 4,42,775/- only. It was stressed by the learned Authorized Representative for the assessee that the expenditure was revenue in nature and was allowable in the hands of assessee. 31. The learned Departmental Representative for the Revenue placed reliance on the order .....

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tion of scrap yard at new location and where the amount has been spent for bringing into existence a new asset, the same is definitely capital expenditure and is to be disallowed in the hands of assessee. 33. Now, coming to the stand of the learned Authorized Repr esentative for the assessee before us that, the Assessing Officer had disallowed sum of ₹ 4,42,775/- as against the expenditure considered by the CIT(A) at ₹ 4,59,804/-. The perusal of the details at page 27 of the appellat .....

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ng VAT, Education Cess, etc. is to be disall owed in the hands of assessee. Accordingly, we find no merit in the claim of the assessee in this regard and the same is dismissed. The ground of appeal No.4 raised by the assessee is dismissed. 34. The issue in ground of appeal No.5 raised by the assessee is with regard to disallowance of rent expenses totaling ₹ 1,51,896/-. 35. The case of the assessee before the authorities below was that the said expenditure was crystallized during the year .....

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d expenditure on rent relating to prior years, is not allowable as expenditure during the year. Accordingly, we confirm the addition of ₹ 1,51,896/-. The ground of appeal No.5 is thus, dismissed. 36. The issue in grounds of appeal No.6 and 7 is with regard to disallowance of sales tax expenses of ₹ 7,01,572/-. 37. The Assessing Officer from the details of miscellaneous expenses of ₹ 42,13,164/- debited by the assessee, noted that sum of ₹ 1 lakh on 09.10.2005 and ₹ .....

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though relating to the year 2001-02, arose in the year under consideration consequent to the Sales Tax assessme nt order passed on 30.06.2005. However, in the course of appellate proceedings, the learned Authorized Representative for the assessee informed the CIT(A) that the liability in question was challenged by the assessee in appeal. Though the assessee claimed to have paid two sums i.e. ₹ 1 lakh and ₹ 6,01,572/-, but the assessee furnished only one challan for the remittance of .....

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ssee pointed out that even under the provisions of section 43B of the Act, irrespective of the year to which the Sales Tax demand relates, the same is allowable in the hands of assessee only on payment. Since the assessee for the year under consideration has paid the above said amount, hence, the same was allowable in the hands of assessee. 41. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 42. We have heard the rival contentions and perused the r .....

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vision of the Act, it is provided under the Statute that certain amounts shall be allowed as deduction only on payment. One such clause under section 43B of the Act deals with the Sales Tax payment. Admittedly, the demand was raised against the assessee for the year 2001-02 and the said demand was disputed. However, under protest, the assessee deposited sum of ₹ 7,01,572/- during the year under consideration. Once the amount has been deposited by the assessee during the year and no deducti .....

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Assessing Officer to allow the claim of assessee on satisfaction that both the amounts have been paid by the assessee during the year under consideration, though the demand relates to the year 2001-02. Thus, the grounds of appeal No.6 and 7 are allowed for statistical purposes. The grounds of appeal raised by the assessee are thus, partly allowed. 43. The assessee in ITA No.1035/PN/2013 relating to assessment year 2007 - 08 has raised further grounds of appeal No.3 and 4 against the disallowanc .....

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ection 43B of the Act was made lesser by ₹ 32,69,953/-. On enquiry, the learned Authorized Representative for the assessee stated that the amount of incentive paid to the employees after signing of tax audit report, but before filing the return of income, was claimed as deduction on payment basis. Since the assessee had failed to furnish any proof of payment, the Assessing Officer disallowed sum of ₹ 32,69,953/-. 45. Before the CIT(A), the assessee has raised two contentions that the .....

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that the details furnished by the assessee requires further verification with reference to relevant bank account extract of the assessee. Since these details were not furnished before the Assessing Officer, the CIT(A) directed the Assessing Officer to verify the claim of assessee vis-à-vis payment of incentive to the employees on or before due date of filing the return of income and if the said incentive was so paid and the same was directed to be allowed as deduction by the CIT(A). 46. T .....

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filed on 15.11.2007 and our attention was drawn to the details of payment placed at page 49 of the Paper Book. It was the case of learned Authorized Representative for the assessee that no disallowance is warranted in the hands of assessee. 48. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 49. We have heard the rival contentions and perused the record. The issue arising before us is in relation to the performance incentive paid to the employees. .....

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other hand, is aggrieved by the proposition of CIT(A) in holding that the payment of performance incentive in the hands of assessee is governed by the provisions of section 43B of the Act. The perusal of said section reflects that under clause (c) to section 43B of the Act, any sum referred to in section 36(1)(ii) of the Act is covered. It is provided under the said section 43B of the Act that notwithstanding anything contained in any other provisions of the Act, the deduction on account of the .....

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for services rendered is to be allowed as deduction while computing the income under section 28 of the Act. In the facts of the present case before us, the assessee claims to have paid performance incentive to the employees which is covered by the term commission for services rendered and hence, we find no merit in the claim of the assessee in this regard. 50. Now, coming to the second aspect of the application of provisions of section 43B of the Act, we find that the CIT(A) has already directed .....

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3 relating to assessment year 2008- 09 has raised no other grounds of appeal except against the disallowance of administrative service charges. We have already adjudicated the same in paras hereinabove, and hence the same are allowed. 52. In ITA No.1596/PN/2013 relating to assessment year 2009-10, the issue vide ground of appeal No.3 raised by the assessee is against the disallowance of expenses on rent totaling ₹ 3,36,393/-. 53. The Assessing Officer had disallowed the said claim of the a .....

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ssing Officer noted from the details filed by the assessee that sum of ₹ 14,62,772/- was claimed under the head Equated rent as per AS19 on FEM Lease . However, no details were furnished and the said amount was added in the hands of assessee. The CIT(A) confirmed the said disallowance. 57. The assessee is in appeal against the same and the learned Authorized Representative for the assessee pointed out that the assessee had accounted for lease equalization charges in accordance with Account .....

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on 145 of the Act. 58. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 59. We have heard the rival contentions and perused the record. The expenditure claimed on account of lease equalization charges amounting to ₹ 14,62,772/-. In view of the concession of the learned Authorized Representative for the assessee, we decide the present issue against the assessee, in turn, following the principal laid down by Special Bench of Tribunal. The ground .....

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he disallowance of ₹ 29 lakhs and the ground of appeal No.5 is dismissed. 62. Now, coming to the appeal in ITA No.1649/PN/2013 relating to assessment year 2009-10. Besides the common grounds of appeal, the Revenue has also raised ground of appeal No.3, which reads as under:- 3. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of ₹ 3,61,000/- and ₹ 6,14,768/- by admitting additional evidence without following the mandatory p .....

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64. On perusal of record and after hearing the rival contentions, we find that the issue raised vide ground of appeal No.3 by the Revenue is against the disallowance made by the Assessing Officer being 10% out of repairs to machinery at ₹ 3,61,000/-. Another disallowance made by the Assessing Officer was on account of selling and distribution expenses of ₹ 6,14,768/-. Both these disallowances were made since the assessee had failed to furnish the relevant details and supporting evide .....

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hinery and same was not in the nature of capital expenditure. With regard to selling and distribution expenses, the Assessing Officer had stated that despite several opportunities, the assessee had not furnished the details of expenditure incurred totaling ₹ 6,14,768/-. The claim of the assessee before the CIT(A) was that most of the details were made available before the Assessing Officer and hence, there was no merit in any disallowance. The CIT(A) after going through the expenses, delet .....

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Addl.CIT for rent expenses in relation to repairs to machinery and in relation to selling and distribution expenses. All these details are furnished at pages 81 to 100 of the Paper Book. However, at the end of index, the assessee while certifying as to whether the documents attached in the Paper Book were furnished, has certified that pages 1 to 100 are filed before the CIT(A). The perusal of the details at pages 81 and 98 of Paper Book does not reflect whether these details were filed as no co .....

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