9911796707
TMI Blog2017 (1) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act. 2) As common issues are involved in both these appeals, we first deal with those issues in deciding the appeal of the parties for assessment year 2010-11 and subsequently if no change in the facts and circumstances of the issues involved are found, we will accordingly apply our decision in appeal for assessment year 2010 -11 while disposing of the appeal for assessment year 2011 - 12 of the parties. Therefore, firstly we record facts of the case for assessment year 2010 -11. 3) The assessee is a joint-venture company between Hero group, India and Honda motor Co, Japan engaged in the business of manufacturing of two wheelers. As stated by appellant company , the assessee is having 59% share of motorcycle market in India. For assessment year 2010 -11 assessee filed return of income on 30 September 2010 declaring total income of Rs. 16302076983/-. As the assessee was involved in international transactions with its associated enterprises, the learned assessing officer made reference to the learned transfer-pricing officer for examining the determination of arm's length price of those international transactions. The Ld. Transfer pricing officer passed an order under section 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consistent, regular and accepted method of valuation of inventory followed by the assessee, the aforesaid costs being incurred in exceptional situations, is not to be considered for the purposes of valuation of closing inventory. 2.2 That the assessing officer erred on facts and in law in not appreciating that the aforesaid addition was revenue neutral inasmuch as the same would warrant enhancement in the value of opening stock in the immediately succeeding year, which does not affect the tax liability to be collected from the appellant as a whole. 3. That the assessing officer erred on facts and in law in enhancing the value of closing inventory of finished goods and thereby income of the appellant by an amount of Rs. 6.40 lacs, in respect of cost of rejection of semi finished goods and obsolete items. 3.1 That on facts and circumstances of the case, the assessing officer failed to appreciate that the aforesaid costs was abnormal in nature and, therefore, in accordance with the consistent, regular and accepted method of accounting was not considered for the purpose of valuation of closing inventory. 3.2 Without prejudice, the assessing officer erred on facts and in law in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, which were reversed in the succeeding year, alleging the same to be excessive. 7.1 That the assessing officer erred on facts and in law in alleging that the provision for expenses at the end of relevant previous year was not made on scientific basis and was not a reasonable estimate and, therefore, contingent in nature. 7.2 That the assessing officer erred on facts and in law in observing that the appellant failed to substantiate the method of creating the aforesaid provision. 8. That the assessing officer / the Transfer Pricing Officer (the TPO) erred on facts and in law in making adjustment of Rs. 31,98,97,455 to the income of the assessee on account of the following international transactions disregarding the benchmarking analysis applying Transactional Net Margin Method ("TNMM") undertaken by the assessee: s. No. International Transactions Amount of international transaction shown by the assessee Proposed Arm's length price of the international transaction Difference 1. Payment of Export Commission 159,127,093 NIL 159,127,093 2. Payment of Model Fee 159,044,986 NIL 159,044,986 4. Royalty paid on exports made to the AEs. 1,725,376 NIL 1,725,37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent company will not allow a third party access to its network. Hence, the access that the assessee has gained to the marketing / dealer network of HMCL is incidental to its being part of the group. As per the OECD guidelines such incidental services do not call for a separate payment. (g) It is evident from para 7.4, 7.5 & 7.6 of OECD guidelines that the key measures in identifying intra group services and in applying arm's length test are whether - * the services have been provided in order to meet specific need of the recipient; * any benefit has accrued to the recipient; * in comparable circumstances an independent enterprise would have been willing to pay an independent thirty party to do so. From the available details, it is more than evident that the assessee has not received any service that an independent entrepreneur would have been willing to pay for. (h) It can clearly be seen that all the responsibility of activities connected to export of goods lies on the shoulders of the assessee. An export agent would not leave it to principal to carry out all these functions. Hence, there is no comparison between the AE and an export agent in this matter. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 40(a)(ia) expenditure of Rs. 64,08,000 incurred on account of provision towards advertisement and publicity expenses created at the end of year, on the ground that the assessee failed to deduct tax at source therefrom under section 194C of the Act. 9.1 That the assessing officer erred on facts and in law in holding that an assessee is obliged to withhold tax in respect of provisions, even where the (i) exact amount identifiable, at the time of creating the provision. 10. That the assessing officer erred on facts and in law in disallowing amount of Rs. 1,47,34,700 on account of provision made towards commission paid on institutional sales to dealers, on the ground that the assessee failed to deduct tax at source under section 194H from the amount of aforesaid provision invoking provision of section 40(a)(ia) of the Act. 10.1 That the assessing officer erred on facts and in law in not appreciating that since the contract between the dealers and the appellant was on principal to principal basis, the provisions of section 194H were not applicable on the aforesaid amount of commission. 10.2 That the assessing officer erred on facts and in law in observing that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexus of services availed from the aforesaid party with the business of assessee company and, therefore, not being incurred wholly and exclusively for the purpose of business. 12.1 That the assessing officer erred on facts and in law in observing that since Hero Corporate Services Ltd. was related to assessee in terms of AS 18, although not related in terms of section 40A(2)(b) of the Act, the Revenue had powers to determine the reasonableness of the aforesaid payment made by the assessee to the said party. 13. That the assessing officer erred on facts and in law in holding that purchases made from certain vendors aggregating to Rs. 3828.78 crores are disallowable under section 40(a)(ia) on the ground that assessee failed to deduct tax at source (TDS) therefrom under section 194C of the Act. 13.1 That the assessing officer erred on facts and in law in observing that contracts entered with the aforesaid vendors were in the nature of 'work contract' and, therefore, payments made thereunder were subject to TDS under section 194C of the Act. 13.2 That on the facts and circumstances of the case, the assessing officer failed to appreciate that the provisions of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciating that no disallowance against the aforesaid expenditure could be made exceeding the outstanding liability as at the end of the year. 14.3 Further, without prejudice, the assessing officer erred on facts and in law in not appreciating that since the payees have also paid tax on the income receivable from the assessee, no disallowance could be made under section 40(a)(ia) of the Act for alleged default in deduction of tax at source by the assessee. 15. That the assessing officer erred on facts and in law in disallowing expenditure of Rs. 36,88,02,598 incurred towards quarterly target and turnover discount and trade discount of Rs. 27,74,47,608 given to the dealers/customers on the ground that the assessee failed to deducted tax at source there from under section 194H of the Act, invoking provisions of section 40(a)(ia) of the Act. 15.1 That the assessing officer erred on facts and in law in not appreciating that the aforesaid discounts were offered under contracts entered into with the dealers on a principal to principal to basis, and did not constitute 'commission' as referred to in section 194H of the Act. 16. That the assessing officer erred on facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id payments were subject to TDS under section 1941, instead of section 194C of the Act applied by the assessee. 17.2 Without prejudice, that on the facts and circumstances of the case, the assessing officer failed to appreciate that an expenditure cannot be disallowed under section 40(a)(ia) of the Act if tax has been deducted at source there from under the provisions of the Act, notwithstanding that tax as per the assessing officer was deductible under a different provision than that applied by the assessee. 17.3 Further Without prejudice, that the assessing officer erred on facts and in law in not appreciating that since the assessee harboured a bona fide belief that no tax was required to be deducted there from, no disallowance was warranted under section 40(a)(ia) of the Act 17.4 Without prejudice, the assessing officer erred on facts and in law in not appreciating that the disallowance against the aforesaid expenditure could not be made exceeding the outstanding liability as at the end of the year. 17.5 Further, without prejudice, the assessing officer erred on facts and in law in not appreciating that since the payees have also paid tax on the income receivable from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred on account of royalty, technical guidance fees and model fees as capital expenditure as opposed to 25% of similar expenditure held to be capital expenditure in earlier years. 20. That the assessing officer erred on facts and in law in treating gains arising from sale of investments made during the year as business income, instead of "capital gains" as considered by the assessee. 20.1 That the assessing officer erred on facts and in law in observing that investments were made by the assessee with a view to earn profit from selling the same at a later stage and, therefore, profits were taxable under the head "business income". 20.2 That the assessing officer erred on facts and in law in observing that since the turnover from sale of investments was higher than the turnover from business of selling motor vehicles, therefore, the assessee was primarily engaged in activity of investments, which was to be regarded as business activity and, accordingly, income arising therefore was taxable under the head "business income". 21. That the assessing officer erred on making disallowance of Rs. 2,22,50,0637- on account of PMS fee on protective basis on the ground that same sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer erred on facts and in law in holding that the appellant failed to justify the commercial expediency for making the aforesaid payment of commission to the Managing Director. 25.2 That on the facts and circumstances of the case the assessing officer failed to appreciate that the commission was paid to Shri Munjal in lieu of services rendered by him and not in lieu distribution of profits. 25.3 That the assessing officer erred on facts and in law in not appreciating that dividend was separately distributed amongst all the shareholders, including Shri Munjal and thus, payment of commission was not in lieu of distribution of dividend. 26. That the assessing officer erred on facts and in law in disallowing deduction of Rs, 8,07,76,420/- claimed under section 801A of the Act in respect of captive power generating unit situated at Gurgaon. 26.1 That the assessing officer erred on facts and in law in computing income of the power generating unit by considering the rate of Rs. 4.39 per unit, at which power was supplied by State Electricity Board, as the 'market price' of the power, supplied by that unit to the vehicle manufacturing unit of the assessee, as again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no liability outstanding as at the end of the relevant year, no part of the aforesaid expenditure was disallowable under section 40(a)(ia) of the Act. 29. That the assessing officer erred on facts and in law in disallowing deduction under section 80IC of the Act, aggregating to Rs. 997,25,35,090, on an ad-hoc basis, on the ground that the assessee failed to give sufficient documentary evidence substantiating fulfillment of conditions precedent for claiming deduction under that section, without pointing out any such single condition not being fulfilled by the assessee. 29.1 That the assessing officer erred on facts and in law in not appreciating that all the conditions precedent for claiming deduction under section 80IC were satisfied by the assessee. 30. That the assessing officer erred on facts and in law in disallowing deduction under section 80IC by an amount of Rs. 6,25,55,736, being the amount of markup at 12.48% attributed over the value of goods, aggregating to Rs. 50,12,47,888, procured from other non-eligible units, by applying the provisions of section 80IA(8) read with section 80IC(7) of the Act, on the ground that deduction under the former section needs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer erred in making a separate and additional disallowance of the aforementioned amount, without appreciating that the entire deduction claimed by the appellant u/s80IC has already been disallowed in entirety (challenged in ground of appeal no. 29 supra), resulting in double disallowance of the same amount to the total taxable income. 33. That the assessing officer erred on facts and in law in disallowing deduction under section 80IC of the Act by an amount of Rs. 697.40 crores on the ground that part of profits earned by the eligible unit should have been attributed to advertisement and marketing activities carried out at head-office, and such profits were not derived from the business of manufacturing, which were only eligible for deduction under the aforesaid section. 33.1 That the assessing officer erred on facts and in law in holding that part of extraordinary profits earned by eligible unit at Haridwar were attributable to profit earned from marketing of products and brand value. 33.2 That the assessing officer erred on facts and in law in holding that since marketing activities were carried out at Head Office, therefore, the assessee should have transferred good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,618/- incurred on repair, maintenance of various existing assets at Nagpur office premises, holding that said office premise was not put to use for business purposes of the assessee during the relevant assessment year. 36. That the assessing officer erred on facts and in law in treating expenditure incurred towards support of up gradation of softwares aggregating to Rs. 25.05 lakhs incurred by the assessee during the year as capital expenditure and making a net disallowance of Rs. 17.53 lakhs, after allowing depreciation @ 30%. 36.1 That on the facts and circumstances of the case the assessing officer failed to appreciate that the aforesaid expenditure did not result in acquisition of any new asset or benefit of any enduring nature in the capital field, to be regarded as capital in nature. 37. That the assessing officer erred on facts and in law in making disallowance of expenses of Rs, 118.58 crores incurred on repair and maintenance to plant and machinery and stores and tools consumed on the ground that total expenses cannot be accepted to be in the nature of "current repairs" in the absence requisite information being provided by the assessee in the prescribed format. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred on facts and in law in disallowing depreciation by an amount of Rs. 1,56,37,228/- in respect of depreciation claimed @ 100% on secured land fill system at Haridwar unit on the ground that the aforesaid asset did not specifically fall under any sub clause of clause III(3)(ix) of Appendix to Income Tax Rules, 1962 ('the Rules'), entitling depreciation @100%.. 40.1 That the assessing officer erred on facts and in law in not following binding directions of the DRP without appreciating that all details in respect of said claim were filed by the appellant. 40.2 Without prejudice, the assessing officer erred in not allowing the expenditure incurred on construction of rain harvesting system and land fill system as revenue expenditure under section 37(1) of the Act. 41. That the assessing officer erred on facts and in law in making ad hoc addition of Rs. 20,10,00,000, being 10% of additions made to plant and machinery and land and building during the year, on the ground that assessee failed to provide requisite information in the prescribed format. 41.1 That the assessing officer erred in making the ad hoc disallowance without examining the nature of such expenditure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of depreciation on wrong classification of assets under the head computers in the draft order? 6. Whether Hon'ble DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 404.84 lacs made by the AO on account of deemed dividend in the draft order? 7. Whether Hon'ble DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 9149.48 lacs made by the AO on account of disallowance of reimbursement of free service coupon u/s 40(a) (ia) in the draft order? 8. Whether Hon'ble DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 30,800/- lacs made by the AO on account of disallowance of legal and professional expenses u/s 40(a)(ia) in the draft order? 9. Whether Hon'ble DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 190.86 lacs made by the AO on account of disallowance of foreign traveling expenses in the draft order? 10. Whether Hon'ble DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 48.94 lacs made by the AO on account of disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat most of the time it purchases material on CIF basis and therefore the cost of delivery of goods to location of the company are embedded in the purchase price hence , inward charges and important cleaning charges towards purchase of a material are preliminary included in the valuation of the closing stock. It further stated that only in rare cases the material is purchased on the urgent basis where the transportation charges and freight inward charges etc are to be incurred by the company. As those materials are purchased on the urgent basis necessity, they are not forming part of the closing stock and therefore no such cost is required to be added to the value of the closing stock of the assessee. The Ld. assessing officer rejected the contention of the appellant and stated that according to section 145 of the income tax act the value of the purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head profits and gains of business or profession shall be in accordance with the method of accounting regularly employed by the assessee and it should further be adjusted to include the amount of any tax duty cess or fee actually paid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing. Since the invoice is received after receipt and consumption of material in the manufacturing process, the said expenditure is not, therefore, attributable to closing inventory. That apart, it would further be appreciated that the appellant follows a consistent and regular method of not considering the aforesaid expenditure for purposes of valuing closing stock, which has always been accepted by the Revenue in past. Since the method of valuation of closing stock, without including such cost in the valuation of closing inventory having been consistently followed and accepted by the Revenue, no adjustment is called for in the year under appeal. The contention of the assessing officer that the aforesaid aspect was not examined in the earlier years (prior to AY 2007-08) and the Department had mistakenly accepted the valuation of closing stock exclusive of similar expenses in the past and thus, consistency cannot be a ground for following the same method of valuation of closing stock, without basis cannot be correct , since (i) firstly, the assessments in the past (prior to AY 2007-08) have been made under section 143(3) of the Act and it cannot be said that the issue of valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore the suppliers are required to provide the goods at the factory location and therefore in the closing stock of inventory there cannot be any element of freight etc ,this issue has been considered by the coordinate bench in appellant's own case for A Y 2007-08 where in it has been held that :- "7.13. We have considered the submissions and the material filed by both the parties. The issue in question is regarding method of valuation of closing stock. The primary contention of the assessee is that it had to make emergency purchases and that these stocks so purchased were immediately consumed. In such exceptional situations, the assessee has directly accounted the freight and import clearing charges to the profit and loss account. This means that such raw material stocks are not part of closing stock at all. Further, this fact is not rebutted by the DR. 7.14. Though technically it can be argued that the value of closing inventory must include freight/ import clearing charges, the facts explained by the assessee are that the purchases in question are done under exceptional circumstances (which are well known in this type of industry) for immediate consumption. They are in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a subsequent year". 7.18. This view has been followed by the Hon'ble Delhi High Court in the case of CIT vs. Neo Ploy Pack (P) Ltd [2000] 245 ITR 492 and the Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit [2011] 336 ITR 287. 7.19. Further, the Hon'ble Supreme Court in the case of CIT vs. Realest Builders and Services Limited (2008) 307 ITR 202 held that: "In cases where the department wants to tax an assessee on the ground of the liability arising in a particular year, it should always ascertain the method of accounting followed by the assessee in the past and whether change in method of accounting was warranted on the ground that profit is being underestimated under the impugned method of accounting. If the Assessing Officer comes to the conclusion that there is underestimation of profits, he must give facts and figures in that regard and demonstrate to the Court that the impugned method of accounting adopted by the assessee results in underestimation of profits and is, therefore, rejected. Otherwise, the presumption would be that the entire exercise is revenue neutral. In the instant case, that exercise had never been undertaken. The Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the method of accounting which is consistently followed by the assesseee on the ground that there may be chance where in a particular year, the method adopted by the assessee may result in underestimation of profits. However, the Revenue failed to demonstrate with facts and figures that the impugned method of accounting may result in material underestimation of profits. On the contrary, the assessee has demonstrated that the change in the method of accounting for year under appeal would result in loss to the revenue as the opening stock would also require similar adjustment and the cascading effect will be loss to revenue. We observe that in many of the additions made in this case by the revenue, the consistent method of accounting is unnecessarily disturbed, though it has been accepted in many years. In our view such tinkering with the method is unjustified when the exercise does not materially alter the profits. The facts and figures in many additions demonstrate that the issue raised is revenue neutral in the long run. Such petty additions should be avoided on the ground of materiality, as AS-1 which talks about materiality, consistency, prudence etc. is part of the I.T.Act afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point out any contrary decision and therefore, respectfully following the decision of the coordinate bench we allow ground No. 2 of the appeal of the assessee. 13) Ground No. 3 of the appeal of the assessee is against the action of the Ld. AO in enhancing the value of closing inventory of finished goods and thereby the income of the appellant by an amount of Rs. 6.40 Lacs in respect of cost of rejection of semi finished goods and obsolete items. Brief facts of the issue is that assessee has incurred cost of rejection of Rs. 1352.28 Lacs which has not been considered for the purpose of valuation of the closing stock of inventory and the same has been wrongly charged to the profit and loss account according to the assessing officer. He referred to the para No. 13 of the accounting standard (AS - 2) wherein it is mentioned that in determining the cost of inventory in accordance with paragraph 6, it is appropriate to exclude certain cost and recognize them as expenses in the period in which they are incurred. The example of such cost are the abnormal amounts of wastages of material labour or other production cost. Therefore according to him what is to be excluded is only abnormal los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT v. Sankarapandia: 130 ITR 541 (Mad.) vi. Balapur Mandali v. CIT: 135 ITR 91 (Guj.) He further stated that In any case, considering that the appellant is a high tax paying company, subjected to uniform rate of tax, no adjustment is even otherwise called for in view of the following: a. If the closing stock of the year is to be varied, similar adjustments would need to be made to the opening stock, too. (Refer: K.G. Khosla & Co. Ltd. v. CIT: 99 ITR 574 (Del.) and CIT vs. M/s. The Mahalaxmi Glass Works Pvt. Ltd. : ITA No. 192 of 2009) b. Corresponding adjustment would need to be carried out in the opening stock of the succeeding year. c. The addition, if any, is revenue neutral, if seen in a macro perspective and, therefore, no adjustment is called for. [Refer: CIT v. Excel Industries Ltd.:358 ITR 295 (SC); CIT v. Nagri Mills Company Ltd.: 33 ITR 681 (Bom.); Triveni Engineering Industries Ltd.: 336 ITR 374 (Del.)] d. He further argued that The contention of the assessing officer that the revenue aspect will keep on changing from year to year, as there might be chances when in one year the closing inventory will be very high or it may be very low in other years, is in our resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and loss account, without any allocation to the value of closing inventory. 8.11. The assessing officer's case is that cost of rejections needed to be included in the value of closing stock. Assessing officer worked out an amount of Rs. 9.24 lacs as attributable to closing stock out of total expenditure of Rs. 12.49 crores and closing stock value of Rs. 275 crores. The assessee as a consistent accounting policy has been claiming the cost of abnormal rejections as revenue expenditure for the previous years and this has been regularly accepted by department in past. 8.12. The amount of Rs. 9.24 lacs attributed by the assessing officer, in our view, is materially inconsequential so as to warrant disturbing the regular method of valuation of closing stock being followed by the assessee company. The quantum of the addition of Rs. 9.24 lacs is less than 0.74% of the value of abnormal rejections. As a percentage of total stocks / turn over/ profits declared, this figure is miniscule. 8.13. Accounting Standard-2 stipulates that abnormal wastages should not be considered for valuation of inventory. It reads as follows: "16. Examples of costs excluded from the cost of inventories and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the basis of creating the said provision was not comprehensible. During the course of the assessment proceedings assessee has provided this sum as an year-end provision in respect of purchases submitting the detailed breakup of these provisions. The Ld. assessing officer has noted that a sum of Rs. 1034.90 lakhs has been provided against the price amendments made, while remaining amount of Rs. 5125 Lacs has been provided against the provisions for price amendment on estimated basis. The Ld. assessing officer noted that the purchase orders issued by the assessee does not have the condition which allow them to amend effective from back dates and this practice has been regularly followed by the assessee. As the price amendments are not in line with the purchase orders placed by the appellant he did not accept that the provisions are business expenditure. Ld. assessing officer further stated that the issue decided by the Hon'ble tribunal wherein the similar addition has been deleted in appellant's own case is not accepted by the revenue as the appeal has been filed before the Hon'ble Delhi High Court. Therefore he disallowed a sum of Rs. 6159.90 Lacs out of purchases to the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant year. Therefore according to him , during the relevant previous year, the appellant made aggregate provision of Rs. 6159.90 lacs, comprising of Provision for purchase orders issued for price amendment as at 31.3.2012 of Rs. 1034.90 lacs and Provision on estimated basis for price amendments under negotiation as on 31.3.2012 of Rs. 5125 lacs. Further, it is submitted, that the appellant has been making the aforesaid provisions as per industry/trade practice consistently year after year, which has always been accepted and allowed by the Revenue in the past. Without prejudice, it is further submitted that out of the aggregate provision of Rs. 6,159.90 lacs, the amount of Rs. 1,034.90 was made on the basis of actual supplies made upto the end of the year as per price amendments actually issued as on 31.03.2010 lacs, detailed working whereof is enclosed in paper book and therefore, such amount cannot in any case be disallowed on the ground of the same being contingent in nature. He further submitted that similar provision for increase in prices as at the end of the year was accepted and allowed in the assessment order for the assessment year 2007-08. In that year, it was on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, there is not only upward revision but downward revision also and further the issue is squarely covered in favour of the appellant by virtue of the decision of the coordinate bench in appellant's own case for earlier years. 19) Ld. departmental representative submitted that the pricee revision has been made by the assessee after the purchase orders having placed before the parties and further the quantification made by appellant was not submitted before the Ld. assessing officer and the working arrived at the amended prices was subject to verification pursuance to the order of the Ld. dispute resolution panel. He further stressed up on the finding of the Ld. assessing officer that that the disallowances entirely attributable to the assessee's failure to submit relevant detail for purpose of verification by the assessing officer. He therefore eminently relied upon the order of the Ld. AO. 20) We have carefully considered the rival contentions and also perused order of the coordinate bench in the appellant's own case for earlier years. We have also perused the page No. 1130 to 1140 of the paper book volume 3 submitted by the assessee before the Ld. assessing officer in pursuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. In view of the above discussion, we allow this ground of assessee for statistical purpose and direct the assessing officer to properly verify the figures and allow the claim of the assessee." Subsequently for the assessment year 2008- 2009 when the similar disallowance was made by the Ld. assessing officer the coordinate bench vide its order dated 13/06/2014 has deleted the disallowance made by the assessing officer keeping in view the principle of materiality and consistency followed by the appellant . On the ground that the mention has been made in the purchase order that there cannot be any revision of the prices subsequently and the prices mentioning the purchase order of final based on which the Ld. assessing officer has relied very heavily we are of the view that that these are the general terms and conditions of the purchase order claimed by the appellant upon its various vendors and there is no prohibition in the said purchase orders that subsequently the prices cannot be revised. Many times the prices are dependent upon the cost of the raw material such as metal etc of the vendors which is highly fluctuating, which may result into subsequent price revision. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the year end had, thus, accrued during the year under consideration, was an allowable business expenditure. The Supreme Court in the case of Rotork Control versus CIT 314 ITR 62 has held that the provision made for liabilities accrued upto the end of the year, is an allowable expenditure in accordance with the Mercantile System of Accounting. In that view of the matter, the action of the assessing officer in disallowing the aforesaid provision on the ground of being not arising from the terms and conditions of the purchase order or on the ground of being contingent in nature is not valid and deserves to be reversed. As regards the finding of the DRP as also the assessing officer qua the method followed for creating the aforesaid provision, we have seen the working of the same at page 1140 of the paper book. The provision has been made on a scientific basis by estimating the actual increase in price of material and the amount of material that was already supplied and consumed in the vehicles manufactured up to the end of the year. Considering that the provision has been made on the basis of scientific estimation, having regard to the principles laid down by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his 5th ground of appeal preferred before us. 22) Ld. authorized representative of the assessee submitted before us that It is an admitted position that the appellant has not maintained register containing item wise details of scrap generated in the course of manufacturing, but has instead furnished item-wise details of scrap sold during the year. The appellant it is submitted cannot be expected to keep quantitative tally of each nut and bolt, which gets scrapped in the course of manufacturing. Such a requirement from the assessing officer is highly impracticable and not in consonance with the business realities; he submitted that The amount of scrap lying at shop floor is miniscule having regard to total turnover of appellant, which is further corroborated by the fact that only an amount of Rs. 3.02 lacs was estimated as value of scrap as on 31.03.2010 in the assessment order. He further submitted that , it was, having regard to the impracticality in taking stock of the scrap generated in the manufacturing process and the concept of materiality for the purposes of accounting, that the items scrapped are not valued at the end of the year for the purposes of accounting in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an ad-hoc basis by estimating the average of scrap lying in the closing stock as a proportion of scrap sales for the last 15 days for the ended 31.03.20007 and the first 15 days of the subsequent financial year, to the extent of Rs. 4 lacs. He further pointed out that the aforesaid disallowance sustained by the Tribunal was challenged by the assessee in further appeal before the Honourable Court, which has been admitted by the honourable High Court, vide order dated 19.11.2015 in ITA No. 341/2014, as involving substantial question of law. He stated that the assessee is sanguine that the aforesaid issue would be decided in favour of the assessee upon disposal of appeal by the Hon'ble Court. 23) Ld. departmental representative relied upon the order of the Ld. assessing officer and Ld. dispute resolution panel and submitted that that assessee has not accounted for the scrap realized during the course of the year and specifically in the last 15 days of this year and 1st 15 days of the next year therefore the addition made by the Ld. assessing officer is sustainable he further stated that in the case of the assessee in the previous year's identical addition has been sustained. 24) We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar adjustment (which has not been carried out by the assessing officer) is made to the opening stock, no additional tax liability would delve upon the appellant It could also be seen that the addition of Rs. 3.02 lacs is miniscule having regard to the size of the company, which has declared turnover of Rs. 16,000 crores (approx.) during the year under consideration and net profit of Rs. 2232 crores. The aforesaid renders force in the arguments taken by the Ld. Counsel that an assesse engaged in the business of manufacturing, especially that of the size of the appellant, cannot be expected to keep quantitative tally of miniscule items like nuts and bolts lying in the scrap yard. In view of the aforesaid, keeping in mind the principle of materiality, we find that there is no error in the system and regular practice followed by the appellant of not estimating the value of scrap lying in the scrap yard and accounting for sale as and when such scrap is sold and removed from the factory premises. For the aforesaid cumulative reasons we do not find any justification in sustaining the addition of Rs. 3.02 lacs made by the assessing officer in the assessment order. As regards the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent year and not in the succeeding years and therefore the addition was made in the hands of the assessee of Rs. 3822168/-. On objection before the Ld. dispute resolution panel it was directed to the Ld. assessing officer to carry on verification as directed by the Hon'ble ITAT in relevant year and to decide the issue accordingly. However Ld. assessing officer in final assessment order made the above addition is according to him the assessee could not provide any scientific basis for proving its version. And therefore assessee is in appeal before us. 26) Ld. authorized representative submitted that As per AS-9 on Revenue Recognition, revenue can be recognized only if the same is measurable and ultimate collection thereof can be estimated with reasonable certainty. It is submitted that income accrues to an assessee only when the same can be finally ascertained as has been held in the following cases: i. J P Shrivastava and Sons (Bhopal) Private Ltd vs. CIT: 57 ITR 624 (SC) ii. ThiagarajaChettiar& Co. vs. CIT, Madras: 51 ITR 393 (Mad.) iii. CIT vs. South Madras Industrial Development Co. (P) Ltd. : 120 ITR 913 (Mad.) iv. CIT vs. Seshasayee Bros. (P.) Ltd.: 239 ITR 471 (Mad.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the income accrued to the appellant there is no reason that it should be added in the current year and further the issue is squarely covered in the favour of the assessee on account of the assessment carried out by the assessee in earlier years consequent to the direction of the tribunal in assessee's own case. 28) Ld. departmental representative relied upon the order of the Ld. assessing officer and submitted that the liquidated damages are pertaining to this year and therefore same should be accounted for in this year only. Merely because the assessee has offered the such income in the subsequent year it cannot be excluded as income of the assessee in the current year. 29) We have heard the rival contentions. We agree with the contentions of the appellant that even under the mercantile system of accounting revenue cannot be recognized as income on estimate basis unless the same can be measured with reasonable certainty. In the present case, as submitted by the appellant, which has not been disputed by the assessing officer that the information qua delay in delivery of vehicles before the end of the previous year is not available with the appellant. The assessing officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer was of the view that these provisions crystallizing in the next financial year when amount of expenditure incurred was less than the provisions made and therefore it was stated by him that there is an excess provision of Rs. 196581820/- was booked by the assessee. Therefore, according to the Ld. assessing officer the provisions made is a contingent and no scientific basis of reasonable estimate is proved. He rejected the contention of the appellant that that the liability was not crystallized till to date of finalization of the accounts. Therefore, he proposed an addition of this sum in the draft assessment order, which was objected by the appellant before the Ld. Dispute resolution panel. The Ld. Dispute resolution panel directed the Ld. assessing officer to do verification as per the order of coordinate bench in earlier years. For the purpose of verification by the Ld. assessing officer the assessee submitted a chart giving party wise breakup and details of provisions for advertisement expenses on the basis of the purchase order issued. However the Ld. assessing officer was of the view that as agreement between assessee and the various parties has not been produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous locations throughout the country and several departments, the aforesaid variation, which is 0.001 % of the total turnover, cannot be said to be unreasonable or excessive. There is no mala fide involved in the process of making provision for expenses. Further, there can be no allegation of suppression of taxable income considering that the appellant is a large tax company with increasing revenues, year after year. Additionally, any short fall or excess in the amount of provision is debited/credited in the books of account in the succeeding year in accordance with the method followed consistently year after year which has been accepted by the Revenue. On an overall basis, there is even otherwise no loss to Revenue. In these circumstances, no disallowance can be made only for the reason that provision made exceeded the actual amount of liability devolving on the assessee and no loss is caused to the revenue. It is a settled law that where liability has accrued during the previous year, the same needs to be provided in the books, provided the same is capable of being estimated with reasonable certainty, even if the liability is quantified and discharged at a future date. He relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter back to the file of the assessing officer to reconsider the issue, having regard to the method of making provisions followed by the appellant and accepted by the Revenue in preceding years. He further stated that the Ld. assessing officer , in the set-aside proceedings, vide order dated 26.02.2015, accepted the claim of the assessee and allowed relief on the aforementioned identical issue by observing that the assessee had computed the provision on the basis of actual Purchase Orders, which was scientific and logical in nature. For this he referred to the page No. 582 - 583 of paper book volume 1. 32) The Ld. departmental representative relied upon the order of the Ld. assessing officer and submitted that in the absence of proper details furnished by the appellant the relevant disallowances been made by the Ld. assessing officer. He vehemently supported the order of the Ld. assessing officer on this disallowance. 33) We have heard the rival contentions. We agree with the submissions of the Ld. Counsel of the appellant, which, in fact, have even been agreed by the DRP and endorsed by Tribunal in the order for AY 2008-09, that a provision made for expenses on a scientific and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such commission in similar circumstances as the associated enterprise continues its business as usual in those overseas territories without withdrawing from that particular territory or withdrawing some restrictions placed on it. Further he held that the restriction to export products was imposed by the associated enterprise itself he further hold that assessee has exports to south-east Asian countries consist of motorcycles of various capacities and the associated enterprise does not have a manufacturing facility for these classes of motorcycles in those countries. According to the Ld. transfer pricing officer on reading of the entire arrangement it is clear that the associated enterprise has simply used the assessee to position these products in the South Asian market at competitive prices without ceding the market and nor confirming any special benefit upon the assessee. The Ld. transfer pricing officer has further determined the arm's length price of payment of modal fees of Rs. 159044986/- at Rs. nil as according to him the payment of modal fees and the royalties are for the same set of services. He further held that the arm's length price of international transaction of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas territories and it is only the associated enterprise of that has been benefited from the export of the product by the assessee as the same is to support its existing subsidiaries or group companies and to promote market for its products in those countries. On the objection filed by the appellant before the Ld. dispute resolution Panel it was held that the transaction of payment of the commission is a different class of transaction on its own as it is different from other international transactions. It was further held that therefore it should be benchmarked separately it was further held by the Ld. dispute resolution panel that assessee has also paid payment of modal fees and technical guidance fees that cover similar kind of services and therefore no independent party would have made these 3 separate payments for the same set of services and hence they upheld the adjustment proposed by the Ld. transfer pricing officer. Accordingly the arm's length price of the export commission payment was held to be Rs. nil. Therefore aggrieved by the order of the Ld. assessing officer/transfer pricing officer/dispute resolution panel the assessee has preferred appeal before us. 35) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . transfer pricing officer has held that the arm's length price of the international transaction of payment of royalty related to the export of products to the associated enterprise is Rs. nil for the reason that assessee is paying royalty to the associated enterprise as well as export commission also. He was further of the view that assessee is a contract manufacturer and no contract manufacturer would pay royalty and to an independent party. He further gave a reason that when the assessee is making a part of it sale to as is related parties and the benefit of producing component is also obtained by associated enterprise is therefore the payment charges for royalty do not conform to at arm's length prices. Against the order of the Ld. transfer pricing officer and Ld. assessing officer in draft assessment order appellant preferred objections before the dispute resolution panel who upheld the reasoning's of Ld. transfer pricing officer and held that arm's length price of payment of royalty is correctly determined by him at Rs. nil. 37) Ld. authorized representative has submitted point wise arguments with respect to all 3 services before us. 38) His arguments with respect to the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT (ITA No 1356/Bang/2011) v. Avery Dennison India Pvt Ltd vs ACIT (ITA No 4868/Del/2014) vi. Cummins India Ltd vs Addl CIT (ITA No 1616/PN/2011) g) It would be appreciated that the aforesaid issue is squarely covered in favour of the appellant by the decision of the Delhi Bench of Tribunal in appellant's own case for the assessment years 2006-07, 2007-08 & 2008-09, wherein the Tribunal deleted the similar adjustment made by the TPO. 39) Learned authorized representatives' arguments with respect to the model fees payment are as under:- a) The payment of model fee has been made in terms of License and Technical Assistance Agreement (approved by the Government) in consideration of license to manufacture 'Products' and using technical knowhow a provided by the associated enterprises during the currency of the agreement . b) The payment of model fee, therefore, it would be appreciated, is a consideration in terms of agreement with the associated enterprises for availing license to use their proprietary technology. In other words, the payment of model fee is necessary cost incurred for obtaining know-how for manufacture of products by the appellant. c) It would be appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of consideration for availing technology, as aforesaid, is consistent with the industrial policy of the Government. i) It would be appreciated that the aforesaid issue is squarely covered in favour of the appellant by the decision of the Delhi Bench of Tribunal in appellant's own case for the assessment years 2006-07, 2007-08 & 2008-09, wherein the Tribunal deleted the similar adjustment made by the TPO. j) It is submitted that the finding of the Hon'ble Tribunal in this regard for assessment year 2006-07 has been approved by the Hon'ble High court in Department's appeal No. ITA 923/2015 wherein the Hon'ble High Court accepting the decision of the Tribunal declined to frame a question of law on allowance of Model Fee. 40) The Ld. authorized representative put forth his argument with respect to arm's length price of royalty as under:- a) The contention of the assessing officer that the appellant is acting as contract manufacturer with regard to the transaction of export to the AE is erroneous and inconsistent with the facts on record. b) The appellant acts as an independent manufacturer of products, viz., two wheelers and not as a contractor manufacturer as observed by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is not able to export any model which it wants to export but it was required to export certain prescribed models. However, without the export agreement, the assessee was not able to export any of the models. It is only because of the export agreement the assessee is permitted to export the specified models to the specified countries. Therefore, the export agreement has benefited the assessee and not detrimental to the assessee as alleged by the Assessing Officer. The second condition pointed out by the TPO is that the assessee cannot use any other distributor except the group companies and the subsidiaries. We have already pointed out that in fact the assessee is benefited by using the marketing network of the subsidiaries of HMCL because the assessee has not paid any amount to the subsidiaries of AEs. If the assessee utilizes the services of any other person, it would have been required to pay for those services. The TPO has also mentioned that the assessee is expected to bear the warranty cost. However, such warranty cost is to be borne by the assessee even in the case of domestic sale. Even otherwise, the warranty cost is always to be borne by the manufacturer. The TPO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee to the recipient foreign company. The assessee has furnished the entire information asked for by the AO/TPO. It is not even the allegation of the Revenue that any information is not furnished by the assessee. The technical assistance received by the assessee by way of development of new model was essential for the purpose of assessee's business. It is also not in dispute that the assessee was benefited from the know-how and technical assistance by way of model development by HMCL. The said technical assistance was all pervasive in the operation of the assessee's business. 89. Now, the only question remains whether the assessee has been able to discharge the initial onus to justify that the quantum of remuneration was reasonable. In our opinion, the assessee has been able to discharge the said onus - (i) by producing the copy of the correspondence between the assessee and the Government of India, Ministry of Heavy Industries by which it is evident that the Government has given approval only after examining in detail the reasonableness of the payment. In the letter dated 12.05.2005 written to the Ministry of Heavy Industries, the assessee has also specified how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the arm's length price prescribed under Section 92C(1) of the Income-tax Act. In view of the above, the decision of Hon'ble Jurisdictional High Court in the case of Nestle India Ltd. (supra) would support the case of the assessee rather than the Revenue. In view of the totality of above facts, we are unable to uphold the view of the TPO that the arm's length price of model development should be to the extent of 25% of the payment towards model fee. The same is set aside and the addition made on this count is accordingly directed to be deleted. 91. The next issue is disallowance of royalty paid on exports made to associate enterprise amounting to Rs. 4,08,32,068/- by determining the arm's length price at nil. The TPO made the disallowance with the following observations:- "11.1 During the year under consideration the assessee has paid a royalty of Rs. 212,40,40,877/- to the AE. It is seen from the details furnished and the agreements that the royalty has been paid on the Exports also. It has already been discussed that the exports have been made only to the AEs. This implies that the royalty has been paid on all the exports made to the AEs. The data furnished by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that the Tribunal has not considered certain aspects while disposing of the matter in the earlier year. In the absence of any specific submission in this behalf, we are inclined to follow the coordinate Bench order, which has considered the technical knowhow agreement dated 2-6-2004 which is approved by the Central government on 6-9-2004 as well as the supplementary agreement dated 30-1-2004 and 20-9-2005, both of which were approved by the Central government and had come to the conclusion referred to above. In view of the above discussion, we allow this ground of the assessee." 43) For the subsequent year also the coordinate benches followed the similar view with respect to all the payments. Further with respect to the allowance of the model fee the Hon'ble Delhi High Court in appellant's own case for assessment year 2006 - 07 has not admitted the appeal of the revenue on this aspect, and further with respect to the arm's length price of payment of royalty on sales to associated enterprise the appellant has submitted that revenue has not challenged the aforesaid finding of the tribunal before the Hon'ble high court which fact is not controverted by Ld. DRP therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s portion of total expense, which did not constitute income of the recipient dealers, the same was not subject to TDS under section 194C of the Act. Under section 194C of the Act, a person is liable to deduct tax at source at specified rate on income comprised in amount payable to a contractor. Thus, liability to deduct tax at source arises only if the payment includes any element of income. The amount of Rs. 64,08,000/- is provision for expenses in respect of all bills, which are pending to be processed as on 31.03.2010 and booked as provision on 31.03.2010. In view of the mercantile system of accounting being mandatory for the assessee company to follow, the assessee company, on the basis of bills received from dealers, which are pending for processing, makes estimate and creates provision for such liability. These invoice/bills of dealers are processed in the subsequent year and credited to the said provision account and any shortfall in the provision is debited in or any excess provision is reversed in such year. It was submitted that the aforesaid provision of liability towards dealers was reasonably estimated on the basis of bills pending to be processed during the year and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Reliance, in this regard, is placed on the following decisions, wherein it has been held that the payer is not obliged to deduct tax at source from re-imbursement of expenses under any provision of Chapter XVII-B of the Act, since the same does not constitute income of the payee: I. ITO v. Dr. Willmar Schwabe India (P) Ltd.: 95 TTJ 53 (Del.) (Further, appeal dismissed by the Delhi High Court). ii. CIT vs. DLF Commercial Project Corp.: ITA No. 627/2012 (Del.) iii. CIT v. Fortis Healthcare ltd.: 181 Taxman 257 (Del.) iv. CIT vs. Siemens Aktiongesellschaft: 310 ITR 320 (Bom.) v. United Hotels Ltd. v. ITO: 93 TTJ 822 (Del) vi. Karnavati Co-op. Bank Ltd. V. DCIT: 134 ITD 486 (Ahd.) vii. Mahyco Monsanto Biotech (India) Ltd. v. Addl. CIT: ITA NO. 5842/MUM/2012 (Mum.)(ITAT) d) The aforesaid issue has also been decided in favor of the appellant by the Tribunal in appeal for the AY 2007-08, wherein it has been held that there is no obligation to deduct tax at source from re-imbursement of expenses. [Refer Pages 19 of Vol-1, Para 35.4to 35.6] e) Without prejudice to the above, even otherwise, the appellant was not obliged to deduct tax at source from the aforesaid expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he recipient is vested with a right to receive payment from the payer, no income can be said to have accrued in the hands of such payee. b. ACIT v. Motor Industries Co.: 249 ITR 141 (Kar.) c. Ericsson Communication Ltd.: TS-523-HC-DEL h) Without prejudice, considering that similar payments were made by the applicant in preceding assessment years, without deduction of tax at source, which was always accepted by the Revenue, the applicant was under the bonafide belief that no tax was required to be deducted there from and accordingly, having regard to the decision of CIT v. Kotak Securities Ltd.: 245 CTR 3, no disallowance was warranted under section 40(a)(ia) of the Act. i) Further, without prejudice, it is submitted, that since the payees have also paid tax on the income receivable from the assessee, no disallowance could be made under section 40(a)(ia) of the Act for alleged default in deduction of tax at source by the assessee. j) The aforesaid legal position has also been recently endorsed by the Finance Act, 2012 (passed on 28.5.2012) whereby, section 40(a)(ia) has been amended to provide that the assessee shall be deemed to have deducted and deposited tax, on the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated that though the aforesaid amendment, by way of insertion of second proviso in section 40(a)(ia) of the Act has been made applicable from 1 April 2013, i.e., from assessment year 2013-14 onwards, but since the said amendment is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the taxpayers, the same should be regarded as clarificatory and retrospective in nature. It is well settled law that when a provision is inserted as a remedy to make the provision workable, it is required to be considered to be applicable retrospectively. [Refer: Allied Motors (P.) Ltd. vs. CIT: 224 ITR 677 (SC); CIT vs. Alom Extrusions Ltd: 319 ITR 306 (SC)] n) Reference at this juncture may also be made to the amendment to section 40(a)(ia) of the Act vide Finance Act, 2010, w.e.f. 01.04.2010 by way of insertion of the first proviso thereto, which provided relaxation from disallowance under the said section, where the assessee had deducted tax at source on payments made in conformity with Chapter XVII-B and deposited the same on or before due date specified in section 139(1) of the Act. o) Controversy arose as to whether amendment made by the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rresponding amendment in section 40(a)(ia) of the Act should also be construed to have retrospective application. r) In that view of the matter, without prejudice to the submissions that (i) there was no failure on the part of the appellant to deduct tax at source and (ii) the alleged failure, if any, was on the basis of bonafide belief/difference of opinion, it is respectfully prayed that since the payees have also paid tax on the income received/ receivable from the appellant, no disallowance could have been made in the hands of the appellant under the said section for alleged failure to deduct tax at source, in view of the amendment made to section 40(a)(ia) of the Act, which is clarificatory in nature and, therefore, applicable retrospectively. In the event, it is decided that the assessee was liable to deduct tax at source from the aforesaid provision, the matter may be set-aside to check if the payees had paid the taxes and no part of such provision be disallowed. s) In all fairness, it is submitted, that the aforesaid issue that the similar issue that assessee is liable to deduct tax at source from provision has been decided against the appellant by the Tribunal in assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation of the Ld. assessing officer that appellant has not disputed that the applicability of section 194H on the aforesaid amount of provision made towards commission payable to dealers though contract between the dealers in the appellant was on principle to principle basis and according to the appellant the provisions of section 194H were not applicable on the aforesaid amount of commission. The brief facts of the disallowances that as per the arrangement of the appellant with the government institutions like canteen stores Department etc vehicles are sold to such institutions or their representative at an agreed price which is normally less than the prevailing market price. In respect of such sales made by a dealer at a concessional price, the appellant compensates the dealer at a predetermined rate, the dealer remain liable for any defects in the vehicle on principal-to-principal basis. On receipt of the instant intimation from dealers across the country at the end of the financial year, which is voluminous, the regional journal cell office provides information about the number of vehicles sold to institutional customers. The amount of compensation to the dealer is compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curities Ltd.: 245 CTR 3, no disallowance was warranted under section 40(a)(ia) of the Act. He further submitted that since the payees have also paid tax on the income received/ receivable from the applicant, no disallowance could be made under section 40(a)(ia) of the Act for alleged default in deduction of tax at source by the appellant. The assessee relied upon submission supra that amendment by way insertion of second proviso to section 40(a)(i), being clarificatory in nature, has retrospective application and, therefore, were payee have paid taxes no disallowance could even otherwise be made under section 40(a)(ia) of the Act. He submitted that the aforesaid issue is squarely covered in favour of the applicant by the order of the Tribunal in applicant's own case for assessment year 2007-08 and 2008-09, wherein it was held by the Tribunal that tax is not required to be deducted under section 194H on payments made to dealers on account of sales by dealers on principal to principal basis. 49) The Ld. departmental representative relied upon the order of the Ld. assessing officer and the Ld. dispute resolution panel and submitted that that assessee has paid discount/commission to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... native of the relationship between the Dairy and the concessionaires with regard to the sale of the milk and other products. They were licensees of the premises and were permitted the use of the equipment and furniture for selling the milk and other products. But so far as the milk and the other products are concerned, these items became their property the moment they took delivery of them. They were selling the milk and the other products in their own right as owners. These are two separate legal relationships. The income tax authorities were not justified or correct in law in mixing up the two distinct relationships or telescoping one into the other to hold that because the concessionaires were selling the milk and the other products from the booths owned by the Diary and were using the equipment and furniture in the course of sale of the milk and other products, they were carrying on the business only as agents of the Diary. 45.12. The Hon'ble High Court held that in such circumstances S.194H is not attracted. 45.13. In the case of Jai Drinks (P) Ltd. 336 ITR 383 (Del.), the Hon'ble Delhi High Court has held as follows: "Held, dismissing the appeal, that a perusal of the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has procured certain material such as critical components like shock absorber carburetors etc which are fitted in the 2 wheeler manufactured by the appellant from a single vendor having the requisite technology to manufacture the same, in accordance with the specifications given by the appellant. The appellant procure this material and components from this single vendor. The purchase price of components which are purchased from various suppliers are based upon the negotiations with such vendor and a different due to various factors like level of automation vendor, amount of investment by the vendor, age of the plant, capacity utilization, volume of the supply, geographical differences and tax effect on the purchase of those goods. During the course of assessment proceedings the Ld. assessing officer after comparing purchase price of certain products, which were purchased from the aforesaid related parties is also from unrelated parties, alleged that the purchase price from the related parties was excessive in order to reduce the taxable income of the appellant. The AO was also of the view that the shareholding in various companies as been organized in such a manner t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny also preferred purchasing material from more than one suppliers, due to business/commercial expediency, viz., derisking the supply chain to reduce dependence, inability of one supplier to meet demand increase, etc., even if the price paid is nominally higher vis-à-vis the price charged by another supplier. He further submitted that submitted, that it was on account of the aforesaid business considerations that the purchase were made from related parties, at prices nominally higher than those paid to unrelated parties. He also submitted that there are several instances where purchases were made from related parties at a price lower than the price charged by unrelated parties, which clearly demonstrates that prices are negotiated based on various commercial factors and the fact that the vendor is related or unrelated to the appellant is not relevant. According to him purchases are made at higher rate from such parties on account of commercial/business expediency, like, derisking the supply chain to reduce dependence, inability of existing supplier to meet demand increase etc. he further submitted that it was not that in every instance purchases made from related parties we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxpayer and is between related parties. Similarly, the fact that transaction is between two unrelated parties would not also mean that such transaction could not be regarded as a sham transaction. i) Aradhana Beverages & Foods Co. P. Ltd. v. DCIT: 21 taxmann.com 135 (Del.) ii) CIT v. Samsung India Electronics Ltd.: 243 CTR 235 (Del.): SLP filed by the Revenue has been dismissed in CC 21452/2011. iii) CIT v. George Williamson (Assam) Ltd. 265 ITR 626 (Gau) iv) CIT vs Bihariji Construction (India) Ltd. 289 ITR 303 (Gau) v) CIT vs Lazor Syntex Ltd. Income Tax Application No. 11 of 1999 (rendered on 11 Jun 2007) (Bom) vi) CIT v. Rockman Cycle Industries (P) Ltd. (2009) 226 CTR 562 (P&H) vii) Porrits and Spencer (Asia) Ltd. v. CIT (2010) 231 CTR 294 (P&H) viii) DCIT v. ICICI Web Trade Ltd.: ITA No. 6559/M/2006 : Lex Doc ID 391299 On the issue of the inclusion of those parties is related party in accounting standard 18 disclosure in this financial statements he submitted that appellant did not participate in the management of the said vendors and the commercial transactions were entered into with them are at arm's length (which is also demonstrated by the fact that several tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come tax act but there covered as related party in terms of the provisions of the accounting standard issued by the ICAI and when there are payments made to those parties which are beyond the market rate the disallowances rightly been made by the Ld. assessing officer and confirmed by the Ld. dispute resolution panel. 55) We have carefully considered the rival contention and perused the relevant records placed before us. It was submitted by the parties that there is no change in the facts and circumstances of the case in the present assessment year compared to the assessment year for which the coordinate bench is decided this issue in the favour of the appellant for assessment year 2007 - 08 and 2008 - 09 wherein this issue has been decided by the coordinate bench as under:- "13.14. The basic requirement for the applicability of section 40A(2) of the Act is that the payment should be made to a related person i.e. to a person referred to in clause (b), of sub-section (2) of section 40A of the Act. 13.15. In the present case, it is an undisputed fact that the payments are not made to a person mentioned in clause (b) of section 40A (2) of the Act. 13.16. Clause (a ) of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / assesses. There is no loss to the revenue if only the excess payment of price is taken, but this situation is not considered by the Revenue. Except for allegation that excess price is paid to reduce profit, no other evidence is gathered by assessing officer to prove that the assessee had in fact evaded or saved tax by such exercise. The argument of the Revenue fails. The allegation that the assessee has structured his associate concern so as to avoid sec. 40A (2) is also devoid of merit, as the revenue has failed to demonstrate as to how it has come to such a conclusion. The allegation means that profit is transferred to third parties, where the share holding of the assessee is not a major share holding. The allegation means that the assessee is distributing profits to companies with majority holding by unrelated parties for the purpose of reducing taxes. Such wild allegation cannot be endorsed by us. 13.19. The assessee does not dispute the fact that certain purchases are made at a rate higher than the rate paid to certain other parties for the same periods. The assessee at pages 1523 to 1523.18 of the paper book also furnished instances where purchases were made from these par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter from their own view point but that of a prudent businessman...." 13.25. It is a well settled principle that Commercial expediency cannot be judged by the Revenue from its point of view. In the present case, we are of the view that the assessing officer has made this disallowance based on surmises and conjectures without properly examining the facts on record and without bringing any evidence that the purchases were made at an excessive price compared to fair market value to evade tax. 13.26. In view of the above discussions, and bearing in mind entirety of the case, we are of the considered view that the impugned disallowance was indeed uncalled for on the facts of this case. Hence, we uphold the grounds of the assessee." In view of the above about decision of the coordinate bench in appellant's own case and further failure on part of the revenue to controvert any of the findings in the earlier order of the tribunal or pointing out any contrary decisions on this issue, the respectfully following the order of the coordinate bench to not inclined to uphold the disallowance made by the Ld. assessing officer on account of the purchases of Rs. 7 2.40 crores made from the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raining programme was implemented by the appellant. HCSL subsequently provided support to the appellant to evaluate the progress and attendance of training conducted for employees. ii. Updating/evaluation of Information technology support/up gradation required by the appellant. Incidentally, during the relevant previous year, there was no information-technology in charge in the appellant company and therefore, the appellant availed full IT support from HCSL. HCSL during the year also developed supporting software programmes to streamline support functions of the appellant. He further submitted that appellant is a listed company and various investors/fund wants to have interaction with the top management/senior staff of the appellant in order to disseminate information about the appellant, its growth plan, etc. HCSL acted as a communication channel between the appellant and the aforesaid investors. According to him services were, therefore, provided by the aforesaid company, which was related to the business of the appellant company. He stated that The fee paid by the appellant to HCSL was wholly and exclusively for the purpose of business and the expense was incurred on grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant's own case for the assessment year 2007-08 and 2008-09, wherein the ad-hoc disallowance made out of total expenditure incurred in that year was deleted on the ground that services were rendered by HCSL to the appellant and the assessing officer could not sit in the arm chair of a businessmen to decide reasonableness of an expenditure. 58) Ld. departmental representative submitted that the assessee has paid the sum to the sister concern of the assessee and then excess of such services with the business of the appellant are not ascertained and further the assessee is also not satisfied this Ld. assessing officer as to how the services availed by the assessee how it is commercially expedient to the business of the appellant. According to him the expenditure incurred by the assessee was not wholly annexed was duly for the purposes of the business as it is paid to the related party. 59) We have carefully considered the rival contentions. We have also noted the documents in relation to various services provided by HCSL, the necessity thereof was explained by the appellant in his submissions discussed above. We have also gone through the order of the Tribunal for AY 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case under consideration, and in absence of any contrary decision pointed out by the Ld. departmental representative and any changes in the facts and circumstances of the case in the present assessment year we respectfully following the aforesaid finding given by the coordinate bench in appeal order for AY 2007-08 in case of appellant. Direct the assessing officer to delete the disallowance made of Rs. 2 crores on account of advisory services expenditure incurred on payment to hero corporate services Ltd. Therefore ground nos. 12 of the appeal of the assessee is allowed. 60) Ground No. 13 of the appeal of the assessee is against the disallowance of purchases made from certain Vendors amounting to Rs. 3 828.78 crores by applying the provisions of section 40(a) (ia) as according to the Ld. assessing officer the assessee has failed to deduct tax at source under the provisions of section 194C of the income tax act. According to the Ld. assessing officer the above payment for purchases of goods is in the nature of work's contracts and therefore take should have been deducted on these payments. The brief facts of the issue is that as the assessee is a Manufacturing con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain customized intermediary products like wheel assembly, seat assembly, sheet metal components etc. b) While placing the aforesaid purchase orders to the vendors, the appellant also provides the specifications of the products to be purchased, as also the names of suppliers, from whom the vendor is required to purchase raw materials/components to be used in manufacture of customized intermediary products at the price negotiated by the assessee with such suppliers. c) The names of the suppliers and the price at which the vendors are required to procure raw materials, etc., from such supplier, is advised by the appellant in order to ensure proper quality and uniform pricing of the finished products to be supplied by such vendors. It is to be appreciated that the prices of raw-materials like, rubber, plastics, aluminum, steel fluctuates quite frequently and could substantially affect the cost of intermediary customized products required to be supplied by the vendors, which in turn can have a substantial bearing on the price of the final product. The appellant in order to hedge itself against the price fluctuation and also to get best rates on account of bulk volumes, negotiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plier must be in a position to serve the appellant's long term needs by adhering to the delivery agreements with higher technical production level. Therefore, selecting the most appropriate suppliers is considered as an important strategic management decision that helps the company to ensure uniform quality, control prices and ensure continuous and uninterrupted supply of material. Excise duty, sales tax, etc. and other applicable taxes are paid by the vendors on manufacture and sale of goods to the applicable, while claiming CENVAT credit in respect of duty paid on raw materials purchased by the vendors (from the suppliers) for manufacture of goods. f) The raw material is acquired by the vendor from suppliers, specified by the appellant, in their own name and not on account or behalf of the appellant. The appellant at no point of time acquires ownership of raw material, etc., supplied by the suppliers to the vendors. The goods manufactured remain at the risk of the vendors until supplied to the appellant. The appellant acquires ownership only of the finished goods manufactured and supplied by the vendors at that stage and not at any anterior point of time. Thus, the aforesaid con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d two parties, without any involvement, much less control, or transfer of ownership in the hands of appellant. m) Similarly, the salient features of the terms and conditions of the purchase order raised by the appellant upon the vendors are as under: "7. SUPPLY QUALITY ASSURANCE: The Supplier shall be subject to SUPPLY QUALITY ASSURANCE which entails free access to inspectors detailed by us for purpose of inspecting manufacturing and inspection procedures at your site, and for assisting in delivery schedules and inspection of raw material, machines, tools, fixtures, jigs, or any other items in connection with the manufacture of components for us. 8. SAMPLE INSPECTION: The Purchase Order stands valid only on acceptance of samples to be confirmed by us in writing, unless otherwise provided in Purchase Order itself. 9. DELIVERY SCHEDULE: We reserve the right to return the material at supplier's cost or cancel the Purchase Order(s) in the event of non-compliance of delivery schedule. 10. SHIPPING DOCUMENTS: Demurrage and penalties etc. becoming leviable on account of delay in delivery of dispatch of Railway Receipts, Goods Receipt or any other shipping documents will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement of the failed parts which must reach HHML premises within one month from the date of receiving intimation from HHML." (emphasis supplied) n) The aforesaid terms and conditions establish that the contract between the appellant and the vendor was in the nature of contract of sale and not works contract, in view of the following: (i) The purchase order stood valid only on acceptance of samples of goods, by the appellant; (Clause 8) (ii) The appellant has the right to return the material at vendor's cost or cancel the purchase order, in case the vendor does not supply the goods as per the agreed delivery schedule; (Clause 9) (iii) Demurrage and penalties leviable on account of delay in delivery of dispatch documents is on vendor's account; (Clause 10) (iv) In case the purchase order is rejected, cost of samples manufactured by the vendor is to the account of vendor and cannot be recovered from the appellant; (Clause 12) (v) Goods rejected on account of defect found therein, are to the account of vendor; (Clause 13) (vi) All charges relating to replacement of rejections are on account of the vendor; (Clause 14) (vii) The vendor shall provide warranty for replacement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 194C of the Act. The fact of the matter and the position in law is that the raw material is purchased by the vendors from the suppliers, and not from the appellant, under a legally valid commercial contract between the vendor and the supplier. There is no privity of contract between the appellant and the suppliers. t) In these circumstances, even the amended provisions of section 194C of the Act do not cover the case of the appellant. u) The allegation made by the assessing officer that the appellant had arranged the said purchase transaction in the aforesaid manner simply to hoodwink the Revenue in order to avoid deduction of tax at source is not based on correct appreciation of facts and the position in law pointed above. The disallowance made on the aforesaid basis has, therefore, no legs to stand and needs to be deleted. v) The assessing officer has failed to appreciate the aforesaid distinction between contract of sale and works contract and has merely on surmises and conjectures, without any basis, alleged that the vendors never acquired title in raw materials purchased from supplier specified by the appellant. w) That apart and without prejudice to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ia) has been amended to provide that the appellant shall be deemed to have deducted and deposited tax, on the amount on which tax was deductible but was, in fact, not deducted, on the date of furnishing of return of income by the resident payee, if the resident payee has included the said amount in its taxable income and has furnished certificate from a Chartered Accountant in the prescribed form, to this effect. aa) Reliance is placed on the submission and decisions referred for the aforesaid proposition supra, which are not repeated for the sake of brevity, wherein it has been upheld that the aforesaid amendment in section 40(ia), will have retrospective application. bb) The appellant has attached certificates from the Chartered Accountant certifying that payments received from the appellant were offered to tax by the vendors in their return of income for the assessment year 2010-11. Accordingly, for that reason as well, the aforesaid disallowance under section 40(a)(ia) deserves to be deleted. cc) Further without prejudice, only the outstanding liabilities against expenses incurred at the end of the year are liable for disallowance under section 40(a)(ia), in the event of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dors 219,69,48,651 TOTAL 3828,78,85,133 65) We note that the Ld. assessing officer had adopted the findings and reasons given in the assessment order for AY 2007-08, while repeating the disallowance in the assessment year under consideration. The Tribunal in the order for AY 2007-08 in appellant's own case has reversed the aforesaid findings of the assessing officer. The coordinate bench has held that impugned transaction is not covered within the scope of section 194C of the Act. The relevant observations of the coordinate bench are as under: "14.58. The issue before us for adjudication is whether on the facts and circumstances of the case, the customized intermediatery products like wheel assembly, seat assembly etc. sourced by the assessee from the vendors is a contract of sale by the vendors or a contract of work. 14.59. The assessing officer issued summons u/s 131 to nine vendors and recorded their statements. This exercise resulted in the assessing officer gathering information from the vendors that they have procured material from the sources specified by the assessee and at rates specified by the assessee. Based on the statements from nine vendors, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re independent legal establishments engaged in the manufacturing of finished products and are not captive units of the assessee. (2) The vendors have their own manufacturing establishments, employing huge labour; utilize the raw materials purchased by them, for producing customized finished goods for the assessee. (3) The assessee has issued purchase orders for supply of components as per the assessee's specification. The assessee has filed copies of the purchase orders/ invoices. The same finds place in the paper book filed by the assessee. (4) The raw materials are delivered to the vendors by the suppliers and are at the risk and title of the vendors. The suppliers collect from the vendors, sales tax, VAT etc. on sale of raw material and the vendor paid the same. (5) Excise duty is paid by the vendors in their own right, as an independent manufacturer and not as a job worker in respect of goods manufactured and sold to the assessee. (6) The assessee has paid sales tax/VAT, as the case maybe, for the goods purchased from the vendors. 14.88. Further on perusal of the sample purchase orders produced before us and the terms and conditions on which the purchase order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is no. We are unable to understand as to how the assessing officer as well as the DRP has considered this as a deemed purchase by the assessee. The reason enunciated by the assessee w.r.t identifying the suppliers of the material along with the determination of price of the raw material fixing of payment terms etc., clearly constitutes a matter of business expediency for the assessee. 14.93. Further, in the statement recorded from the vendors after summoning them u/s 131 of the Act, the vendors have confirmed that this is a case of sale of goods and not a works contract. Mr. Yogesh Kumar Jindal has explained the purpose for which the assessee specifies the suppliers and the rate. 14.94. We have carefully gone through the decision of the Karnataka High Court in the case of Nova Pharma Ltd. (supra) relied by the Ld. DR and are of the view that the fact of the case is clearly distinguishable and cannot be applied to the facts of the present case. The assessee has rightly distinguished the case. As the same is brought out in the earlier part of the order, for sake of brevity we do not repeat the same. 14.95. In this case, there is no supply of raw material by the assessee to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase/sale between the vendor and supplier, like payment terms, period of delivery etc. is for acquisition of ascertained goods - the contract is thus one of sale and not a contract for carrying out work. 14.99.In view of the above finding, we are not adjudicating on the other arguments raised by the assessee on this issue, though we find force in the argument of the assessee that since all the vendors have filed their returns of income and paid taxes on the receipts from the assessee, no disallowance under section 40(a)(ia) is warranted. Hence the additional evidence and additional argument is not adjudicated as it would be an academic exercise. In the result, this ground of the assessee is allowed." 66) In absence of any contrary decision pointed out by the Ld. departmental representative and the facts and circumstances of the case remaining the same was the assessment years , We follow the aforesaid findings given in the appeal order for 2007-08 and therefore, we hold that the transaction entered by the appellant for purchase of material from vendors is outside the scope of section 194C of the Act. Accordingly, for the aforesaid cumulative reasons, we delete the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh court in case of CIT versus Kotak securities Ltd 245 CTR 3 (BOM). However he readily agreed that similar issue has been decided in appellant's own case for the earlier years where the coordinate bench has taken a view that the appellant should have deducted tax at source from such payments. He further submitted that against the order of the coordinate bench delay appellant has further preferred appeal before the Hon'ble Delhi High Court which is been admitted involving this substantial question of law. He therefore submitted that the disallowance made by the Ld. assessing officer is not proper. 69) Ld. departmental representative submitted that the assessee should have deducted tax at sources the payment to the portal false under the provisions of section 194I of the income tax act and as assessee is regularly taking those hotel on rent the disallowance has rightly been made. He further submitted that in the assessee's own case the coordinate benches already decided this issue against the appellant therefore there is no reason to deviate from that decision. 70) We have carefully considered the rival contentions. We find that the Tribunal in the orders passed for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternative ground of bona fide belief, the said decision continues to hold the field. Having held as above, coming back to the facts of the present case, the CBDT in its Circular has clarified that payments made to hotels would be subject to TDS under section 194-I, if the hotel room is take on hire on regular basis. Accordingly, it implies that where hotel room is not taken on hire on regular basis, payment made in lieu thereof will not be subject to TDS under section 194-I of the Act. The appellant had been acting on the aforesaid bona fide belief while making payments for taking hotel rooms on hire on certain solitary occasion while organizing staff meetings, etc. Although, the Tribunal in the appeal order for the AY 2007-08 has held that even such solitary payment would be subject to TDS under section 194-I, but did not give any finding whether any bona fide belief was formed by the appellant or not. The, latter question is therefore open for consideration. The Ld. departmental representative did not contest that the assessee did not have the bonafide belief. According to us the assessee was under and bonafides believe to for not deduction of tax at source as in the past years n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd assessing officer on this count appeal is been preferred before us. 73) Ld. authorized representative submitted before us that for the purpose of selling vehicles/spare parts, the appellant company had entered into agreements with stockiest/dealers at various locations in India, on a principal to principal basis. Under such agreements, stockiest/dealers, inter alia, purchase spare parts from the appellant-company at a predetermined price and sell the same on their own account at price negotiated with the customers, subject to MRP. The company, in order to promote sales of spare parts to such stockiest/dealers, offers various schemes, whereby stockiest/dealers are eligible for discounts, which are to be allowed with reference to the progressive amount of purchases made by such stockiest/dealers from the company. Thus, higher the amount of purchase orders placed by the stockiest/dealers, higher is the amount of discounts, to which the dealers are entitled. Cash discount is also offered on timely payments by the dealers/stockiest against aforesaid purchases. The provisions of section 194H are applicable, where payment by way of commission or brokerage is made for any services rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the vehicles and thereby, was not based on achievement of turnover targets, as alleged by the assessing officer and was not in the nature of commission so as to be liable for the deduction of tax under section 194H of the Act. He alternatively submitted that, considering that the appellant was under the bonafide belief that no tax was required to be deducted there from, accordingly, having regard to the decision of Kotak Securities (supra), no disallowance is warranted under section 40(a)(ia) of the Act. Further according to him that since the payees have also paid tax on the income receivable from the appellant, no disallowance could be made under section 40(a)(ia) of the Act for alleged default in deduction of tax at source by the appellant. He reiterated his argument that disallowance under section 40(a)(ia) can be made only qua liabilities which are not paid and are outstanding at the end of the year. (Refer: Vector Shipping Services P. Ltd: 357 ITR 642 (All.) [SLP filed by revenue has been dismissed vide CC No(s). 8068/2014 dated 02.07.2014] and Merilyn Shipping and Transport v. ACIT: 146 TTJ 1 (Vishak.)(SB)]. In the end he submitted that the aforesaid issue is squarely cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question is not in the nature of commission or the brokerage which attracts sec. 194H. In the case of CIT Vs. Mother Dairy Ltd. (ITA no. 1925/2010(Del) the Hon'ble Delhi High Court was considering similar case and held as follows: "3. The assessee explained in writing that it sold the products to the concessionaires on a principal to principal basis, that the concessionaires buy the products at a given price after making full payment for the purchases on delivery, that the milk and other products once sold to the concessionaires became their property and cannot be taken back from them, that any loss on account of damage, pilferage and wastage is to the account of the concessionaires and that in these circumstances the payment made to the concessionaires cannot be treated as "commission" for services rendered and consequently there was no liability on the part of the assessee to deduct tax. It is irrelevant that the concessionaires were operating from the booths owned by the Dairy and were also using the equipment and furniture provided by the Dairy. That fact is not determinative of the relationship between the Dairy and the concessionaires with regard to the sale of the mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is against the disallowance of expenditure of Rs. 1 561 2424 on account of payment to FX enterprise solutions private limited toward room reimbursement of cost of gifts distributed to customers on the ground that the aforesaid payments are made under a contract for carrying out any work and the tech should have been deducted on such payment under the provisions of section 194C of the income tax act and hence the disallowance. The brief facts of the disallowances that the appellant had lost passport scheme wherein the customer became members on payment of membership fees and were entitled to certain point for each transactions like services of vehicle, purchase of parts etc which were redeemable against this gifts. Under the aforesaid scheme the responsibility of the distributing gifts to the eligible customer was that of the dealer. The appellant was only bearing the cost of gift given to a customer at the time of the customers became member of this particular scheme or 50% of the cost of gift when gift was given redemption of more than a specified limit by the customer. For this purpose the appellant has appointed the FX enterprise solution two-minute the procurement a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anded cost of goods purchased from vendors shortlisted by the appellant, the contract was in the nature of contract of sale only and aggregate payment including profit margin of FX was towards purchase price of goods and not in lieu of any work/services carried by said party. Reliance, in this regard, is placed on arguments taken in GOA 13 (supra), wherein applicability of 194C has been dealt with. Without prejudice, since the payee has also paid tax on income receivable from appellant, no disallowance could be made under section 40(a)(ia). The aforesaid legal position has been set right by the Finance Act, 2012 (passed on 28.5.2012) whereby, section 40(a)(ia) has been amended to provide that the appellant shall be deemed to have deducted and deposited tax, on the amount on which tax was deductible but was, in fact, not deducted, on the date of furnishing of return of income by the resident payee, if the resident payee has included the said amount in its taxable income and has furnished certificate from a Chartered Accountant in the prescribed form, to this effect. It is submitted, that considering the legislative intent, the provisions of section 40(a)(ia) of the Act needs to be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectures. 80) We have heard the rival contentions. We have gone though the MOU entered between the appellant and FX Enterprise Solutions India Pvt. Ltd. No doubt the aforesaid party was entitled to profit of 1.5% over the landed cost of product supplied to the customers on redemption of certain points. However, if we see the dominant nature of the transaction, the same is in the nature of purchases or, in other words, contract or sale inasmuch as the appellant never had title in the goods before same were procured by FX and further supplied either to dealers or the appellant. We have held in ground of appeal No.13 (supra) that sale contract, even where the goods are purchased by the vendor as per the specifications of the purchaser, is not in the nature of work contract covered within the scope of section 194C of the Act. Furthermore, we note that when the assessing officer had accepted the aforesaid nature of transaction as 'contract of sale' in the set-aside orders passed for the assessment years 2007-08 an 2008-09, no different view could have been taken in the assessment year under consideration, on the grounds of consistency. For the cumulative reasons, we hereby delete the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment made to the private bus owners. Similarly, drawing analogy from the aforesaid Circular, the contract for availing transport service through air-craft, being similar in nature, would be a transport contract in terms of the aforesaid Circular. Reliance, in this regard, is placed on the following decisions, wherein it has been held that payment under contract of transport coupled with other services, like services of driver, etc. would be subject to TDS under section 194C and not 194I of the Act: i. CIT vs. Swayam Shipping Services Pvt. Ltd.: Tax Appeal No. 1037 of 2009(Guj. HC) ii. Ahmedabad Urban Development Authority vs. ACIT: ITA No.1637/Ahd/2010 (ITAT Ahd) iii. ACIT vs. Accenture Services Pvt. Ltd.: ITA No. 5920-5922/Mum/2009 (Mum. ITAT) iv. SKIL Infrastructure v. ITO (TDS): ITA No. 3419 and 3420/Mum/2010 (Mum. ITAT) v. ITO v. Indian Oil Corporation: ITA Nos. 1829 to 1834/Del/2011 (Del. ITAT) vi. ACIT v. Sh. Manish Dutt: ITA No. 4017/M/2007 (Mum.)(ITAT) 83) He further submitted that since the appellant had, in any case, under a bonafide belief, deducted tax at source under section 194C, instead of section 194I of the Act, provisions of section 40(a)(ia) cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta High Court in the case of S.K Tekriwal (supra). 85) We have heard the rival contentions. We have gone through the charter agreement entered between the appellant and Forum India Aviation Ltd. The appellant did not take air-craft on hire, simply. The aircraft was always in the possession of the vendor. The appellant only got a right to use the facility of aircraft as and when required. Thus, the appellant was availing composite services, which involved facility to board the aircraft, facility of pilot, fuel, repair and maintenance, etc. The provisions of section 194I, in our opinion, are attracted where the assets like vehicles or aircraft are taken on hire. If, apart from using the asset/vehicle, additional services are also obtained from the vendor, then the contract do not remain a contract for hire but a contract for obtaining composite services or, in other word, contract for carrying out work. We have noted that a similar controversy arose before the Hon'ble Gujarat High Court in the case of Swayam Shipping Services Pvt. Ltd.: 339 ITR 647. In that case, the assessee had taken cranes / trailers on rent from various transport companies and handling agents. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the CIT(A). 7. In view of the above discussion, there being no legal infirmity in the impugned order of the Tribunal the same does not give rise to any question of law, much less, a substantial question of law so as to warrant interference by this Court. The appeal is, accordingly, dismissed." 86) Further The Circular No.558 dated 28.3.90 issued by the Board in connection with payments to be made by State Road Transport Corporation to private bus owners was also to the same effect. To the same effect are the decisions of the various Benches of the Tribunal: i. Ahmedabad Urban Development Authority vs. ACIT: ITA No.1637/Ahd/2010 (ITAT Ahd) ii. ACIT vs. Accenture Services Pvt. Ltd.: ITA No. 5920-5922/Mum/2009 (Mum. ITAT) iii. SKIL Infrastructure v. ITO (TDS): ITA No. 3419 and 3420/Mum/2010 (Mum. ITAT) iv. ITO v. Indian Oil Corporation: ITA Nos. 1829 to 1834/Del/2011 (Del. ITAT) v. ACIT v. Sh. Manish Dutt: ITA No. 4017/M/2007 (Mum.)(ITAT) In view of the above, we hold that the appellant had rightly deducted tax at source from the aforesaid payments made to Forum India Aviation Ltd. u/s 194C of the Act. Since the appellant had deducted tax at source under the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or thing after 31st March, 2005. Accordingly, in terms of provisions of section 32(1)(iia) of the Act, the appellant in the return of income for the relevant assessment year, claimed additional depreciation amounting to Rs. 70,39,799/- on computers installed at supervisory offices located in the compound of factory at Gurgaon / Dharuhera/Haridwar Plant, on the ground that such offices formed integral part of the factory. The said section 32(iia) was introduced with an intent to give boost to the manufacturing sector and accordingly the said benefit has been extended to assets installed in the manufacturing premises and not in the office premises. Supervisory offices located in the compound of factory at Gurgaon / Dharuhera Plant, being dedicated to supervision of manufacturing activity, constituted integral part of factory and cannot be said to be office premises for the purposes of section 32(iia). Reliance in this regard is placed on the decision of the Gujarat High Court in the case of CIT vs Statronics and Enterprises (P) Ltd.: 288 ITR 455. In that case, the issue for consideration before the Court was whether additional depreciation is allowable in respect of computer insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid disallowance sustained by the Tribunal was challenged by the appellant in further appeal before the High Court, which has been admitted by the High Court, vide order dated 19.11.2015 in ITA No. 341/2014, as involving substantial question of law. 89) Ld. departmental representative submitted that the Ld. assessing officer has not granted additional depreciation on the computers that they are installed in the office of the factory premises and they are not eligible for the additional depreciation. He further stated that the issue is already been decided against the assessee nearly areas and therefore same needs to be followed. 90) We have heard the rival contentions. We find that there is no dispute to the effect that the computers on which additional depreciations have been claimed during the year under consideration are not installed on the shop floor or such computers directly facilitate in the manufacturing process, but have been installed in the administrative / supervisory offices located in the compound of the factory premises. The plea of the appellant has been that for the purpose of additional depreciation, distinction has to be drawn between the computers installed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the amount admissible under clause (ii) (exclusive of extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year : Provided that no deduction shall be allowed under this clause in respect of- (a) any machinery or plant installed in any office premises or any residential accommodation ; . . . " 9. It is submitted that even if the computers and data processing machines are taken to be plant and machinery and are entitled to investment allowance, because of their location in the office, additional depreciation would not be allowable. The thrust of the argument is on the words " office premises" . 10. The submission is that the computers and the data processing machines are always kept in the office and in this case, when the computer and the data processing machines are used in the office, then, the additional depreciation would not be allowable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation at the rate of 25% on the above expenses. The Ld. assessing officer was of the view that the assessee has acquired capital asset in the nature of intellectual property rights and patents from Honda on payment of royalty and technical guidance fee under the license and technical assistance agreement. According to him the assessee has received the benefit of enduring nature as the assessee has obtained exclusive right to my feature and sell the products within the territory of India and licenses a degree perpetual as it was being renewed and extended year after year. Further the assessee was aggrieved on account of disallowance of hundred percent of expenditure incurred on account of royalty technical guidance fees and model fees as capital expenditure as in past earlier years 25% of such similar expenditure were held to be capital expenditure. The brief fact of the expenditure incurred by the assessee and its rational are that appellant is engaged in the business of manufacture and sale of motorcycles using technology licensed by Honda Motor Co. Ltd, Japan ("Honda"). The appellant makes payment of royalty to Honda for use of know-how and technical guidance fee, as per agreed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant during the currency of the agreement only had a limited right to use the technology of Honda. (ii) The ownership/proprietary rights in the technical know-how continued to vest in Honda and the appellant was not authorized to transfer, assign or convey the know-how/technical information to any third party. b) No ownership rights - only limited right to use During the currency of the agreement, the appellant only had a limited right to use the technology of Honda. Ownership/proprietary rights in the technical know-how continued to vest in Honda and the appellant was not authorized to transfer, assign or convey the know-how/technical information to any third party as the appellant only acquired limited right to use and exploit the know-how. c) No exclusive license (i) The aforesaid right vested with the appellant was not exclusive in as much as, in terms of Article 2 of LTAA, Honda reserved the right to provide technology to HMSI to manufacture motorcycles. (ii) That aforesaid limited right were available to the appellant and the fact of such rights being not exclusive can be gathered from the following clauses of the agreement:- "Article 2 (Grant of License and Exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ITO : 73 ITD 189 (Del)(TM) xii) ITO vs. Shivani Locks : 118 TTJ 467 (Del) xiii) Climate Systems India Ltd. vs. CIT: 319 ITR 113 (Del-HC) xiv) CIT vs. Sharda Motor Industries Ltd: 319 ITR 109 (Del-HC) xv) CIT vs. Essel Propack 325 ITR 185 (Bom-HC) (iii) Since, no proprietary rights in the know how vested in the appellant, the appellant being a mere licensee with limited rights to use the technical assistance during the currency of the agreement, there is no explicit or implied intention to transfer or create ownership in the technical know-how /technical information in the appellant. (iv) In view of the aforesaid, expenditure by way of royalty, technical guidance fee and model fees incurred by the appellant was allowable revenue deduction since- (v) payment was made for limited license to use the know-how provided by Honda, as the proprietary and ownership rights in the same continued to remain vested with Honda at all times and, therefore, there was no absolute parting of know-how in favour of the appellant resulting in acquisition of any asset, (vi) no benefit of enduring nature in the capital field accrued to the appellant, even if the license to manufacture and sell p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il: 244 ITR 734 (Del.) (x) Vesta Investment and Trading CO. (P) Limited v. CIT: 70 ITD 200 (Chd.) g) The aforesaid issue is covered in favour of the appellant by the decision of Tribunal in the assessment years 2000-01; 2001-02; 2002-03, 2006-07, 2007-08 and 2008-09 wherein the Tribunal has held that annual payment of royalty/technical guidance fee was allowable revenue expenditure. It would be pertinent to note that he aforesaid orders of the Tribunal relating to assessment years 2000-01 to 2002-03 have been affirmed by the Delhi High Court in the appellant's own case reported as CIT v. Hero Honda Motors Ltd.: 372 ITR 481. 94) The Ld. departmental representative vehemently supported the order of the Ld. assessing officer and submitted that the demo payment has resulted into the enduring benefit as the appellant was entitled to use information even after the termination of agreement and there is it is degree of perpetuating India war agreements based on which the payments have been made. He therefore submitted that the disallowance made by the Ld. assessing officer of these payments as capital expenditure is correct. He reiterated the submission that the order of the coordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f investments like mutual fund, portfolio management services and shares. The gain arising from the sale of such various instruments during the year of Rs. 1 94.04 crores were disclosed by the assessee under the head of the capital gains. However the Ld. assessing officer has held that with respect to the magnitude in volume of the total turnover from sale of such investment the aforesaid income was taxable under the head business income and not as a capital gain. On objection filed before the Ld. dispute resolution panel the opinion of the Ld. assessing officer was confirmed and therefore assessee is in appeal before us. 97) Before us the Ld. authorized representative submitted that a) The appellant is engaged in the business of manufacture and sale of two wheelers. During the relevant previous year, the turnover from sale of vehicles was Rs. 16,780 crores (approx.). b) The appellant, it is submitted, realizes funds from sale of vehicles on daily basis. However, the appellant makes payment to various vendors in four tranches/dates during a month. Accordingly, the appellant generates substantial surplus funds in the course of the aforesaid business activities, which remain idle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in facts in the year under consideration, to warrant any deviation/departure from the accepted position. j) Further, the purchase/redemption/transfer of various units of mutual funds/investments made during the year, on almost daily basis, was only with a view to properly manage cash/funds and not with a view to earn profit, as a dealer in such investments. k) Reliance is placed on the following decisions, wherein inspite of large volume /frequency of transaction of sale/purchase of shares, considering the intention behind such investments, the gains realized there from have been held to be taxable under the head 'capital gains' instead of 'business income': i. CIT v. Gopal Purohit: 336 ITR 287 (Bom.) (SLP dismissed by SC at 334 ITR 308 (st.)) ii. Jindal Photo Investment Ltd.: 334 ITR 308 (St.) (SC) iii. CIT vs M/s Devasan Investments Pvt. Ltd.[2014]: SLP(C) No. 30606 of 2014 (SC) iv. CIT v. Rohit Anand: 327 ITR 445 (Del.) v. CIT v Consolidated Finvest and Holding Ltd (2011) 337 ITR 264 (Delhi) vi. CIT v. Avinash Jain : 214 Taxman 260 (Del) vii. CIT v. PNB Finance & Industries Ltd: 236 CTR 1 (Del) viii. CIT V. Ess Jay Enterprises (P) Limited: 173 Taxman 1 (Del.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of one year or more, should be considered as shares acquired and held for a long span of time, and hence giving rise to long term capital gains under the Act. o) That apart, the Calcutta Bench of the Tribunal in the case of ITO vs Neeraj Vanijya (P) Ltd.: LexDoc Id: 407109 held that gains on mutual funds cannot be treated as business income. p) In so far as the investment in shares is concerned, it is to be appreciated that the same was primarily made either through PMS. Under PMS, the company advances funds to the Portfolio Manager, who in turn makes investment in various shares. In substance the investments under PMS is similar to investment in mutual funds. The appellant, it is reiterated, is only interested in the return on funds invested and does not act as a dealer/trader, so as to be regarded as being engaged in business activity. q) Attention in this regard is invited to decision of Mumbai Bench of Tribunal in the case of ITO vs. Radha Birju Patel: 5382/Mum./2009, wherein it has been held that investments made in various shares through PMS scheme, with a view to earn optimum return on investment / wealth creation/maximization cannot be treated as income taxable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on the recent Circular No.6 of 2016 dated 29.02.2016 wherein it has been, inter alia, directed by the CBDT that gain from listed shares/ securities held for more than 12 months shown as capital gains by the assessee be not disputed by the assessing officer. y) Further reliance is placed on the recent decision of the Jaipur Bench of Tribunal in the case of DCIT vs. Mahender Kumar Bader ITA 605/D/2013, wherein it has been held that in view of the aforesaid CBDT Circular No. 6/2016 dated 29.02.2016, if assessee has consistently shown shares as an "investment" and offered gains as capital gains, AO is not entitled to urge that the same constitutes "stock-in-trade" and assess gains as business profits on grounds that there were substantial and frequent transactions and motive was to earn profit and holding period of such shares was very short. z) The aforesaid issue is squarely covered in favour of the appellant by the decision of the Delhi bench of the tribunal in the appellant's own case for the AY 2007-08 and 2008-09, wherein after considering the legal position and intention of the appellant company, the Tribunal came to the conclusion that income from sale of shares/mutual f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of keeping it in the banks. For the year under appeal, the assessee earned dividend income of Rs. 22.61 crores from investments held in shares and mutual funds. Treatment in the books of accounts: 65.30. It is an undisputed fact that the assessee had treated the transaction as investment in its books of accounts and not as stock in trade. The assesse has shown the investments in shares both at the beginning and closing of the year as an investment only and not as stock in trade. 65.31. The assessee has valued the investments at cost as per Accounting standard 13- Accounting for Investments and not in accordance with Accounting Standard -2 which deals with valuation of inventories. 65.32. The assessee has been holding the securities/ shares as investments from year to year and consistently following the same method of accounting for the purpose of disclosure and valuation. This treatment by the assessee was accepted by the Revenue for the past years. 65.33. The assessee had earned income from both long term and short term capital gains which means the assessee has also held shares for a period of more than 12 months. Whether the investments are made out of borrowed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment in shares was primarily made either through PMS or under Initial Public Offer. Under PMS, the company advances funds to the Portfolio Manager, who in turn makes investment in various shares. In substance the investments under PMS are similar to investment in mutual funds. The assessee, reiterated that it is only interested in the return on funds invested and does not act as a dealer/trader, so as to be regarded as being engaged in business activity. 65.41. In view of the above factual matrix it emerges that assessee is: (i) not a trader in stocks (ii) Intention of holding the shares as investment/ stock is manifest. (iii) Sales are effected by delivery. (iv) Department has itself in earlier years taxed such transactions under the head "Capital Gains". 65.42. Considering these facts and applicable judicial precedents on the issue, we are of the considered opinion that the income in question can be taxed only under the head "Capital Gains" and not under the head business income. This ground of the assessee is allowed." 100) In addition to the aforesaid observations, the appellant in this year also has benefit of the recent Circular No.6 of 2016 dated 29.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the investment is held as capital asset, income there from would be taxable as capital gains. However, expenditure incurred for the administration and management of funds in the course of business being towards cash management/optimum utilization of business funds would be considered as expenditure for the purposes of business and hence allowable business deduction. In view the above, the aforesaid deduction has been rightly claimed by the appellant and no part of the same is to be allocated for the purposes of computation of capital gains. He also submitted that, in the event the Tribunal were to hold the aforesaid PMS expenses to be not an allowable business expenditure, the assessing officer may be directed to allow the same as deduction from income under the head "capital gains", in accordance with law. However he further submitted that In all fairness the Tribunal in appellant's own case in for A.Y 2008-09 while holding the income from PMS as "capital gains" held the PMS expenses for administering the funds are not allowable business expenditure. However, the Tribunal, in the said order accepted the alternate contention of the appellant by directing the AO to allow reductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, by attributing proportionate amount of salary paid to employees involved in treasury functions as well as the proportionate amount of PMS fee towards earning of exempt income. The working of the disallowance made by appellant was also submitted before the Ld. assessing officer. However the Ld. assessing officer rejected the method of disallowance computed by the appellant under section 14 A of the income tax settlement but the disallowance of his 145.62 lakhs invoking the provisions of rule 8D of the rules after reducing suo motto disallowance of 16.46 Lacs made by the appellant in the return of income. On objection before the Ld. dispute resolution panel would directed the Ld. assessing officer to carry out similar exercise is was directed by the tribunal in earlier years however the Ld. assessing officer disallowed Rs. 1 45.62 lakhs in the final assessment order. Therefore the assessee is in appeal before us. 106) Ld. authorized representative submitted that As per section 14A(2), disallowance under that section as per Rule 8D can be made only if the assessing officer records satisfaction/finding as to the incorrectness in the method of disallowance followed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unsatisfactory, only then the AO can proceed further. He stated that even otherwise, there is no nexus of expenses, like interest expenditure and other administrative expenses with investments, warranting disallowance under section 14A. Regarding interest expenditure he submitted that appellant is a cash rich company, which does not borrow funds for making investment. The marginal interest expenditure of Rs. 2.10 crores was incurred on other temporary loans/dealers deposit, having nexus with main business function. Further, no direct nexus of interest expenditure with investments or earning of dividend income was established by the assessing officer, for which the initial burden was on the assessing officer. [Refer: CIT vs. Hero Cycles: 323 ITR 518 (P&H) and Godrej & Boyce Mfg. Co. Ltd. v. CIT: 328 ITR 81 (Bom.). He submitted that That apart, the appellant had substantial free reserves of Rs. 3760.81 crores at the beginning of the relevant previous year and had also generated substantial surplus/interest free funds of Rs. 2686.64 crores during the year, which were sufficient to make net investment of Rs. 527.63 crores during the year. In such circumstances, it is to be presumed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Del/2012 (Del). All the expenses, other than the suo-moto disallowance by the appellant, related to main business function of manufacturing vehicles. In the absence of any proximate nexus having been established by the assessing officer. He further pointed out that the Tribunal in the appellant's own case for the assessment year 2007-08 and 2008-09 set-aside the matter to the file of the assessing officer to be decided afresh as per law, having regard to the satisfaction to be recorded qua correctness of the suo-moto disallowance made by the appellant in the return of income and to adjudicate afresh following the decisions of the Delhi High Court in the case of Maxopp Investment Ltd. (supra). He stated that The AO, in the set aside proceedings for assessment year 2007-08, vide order dated 30.10.2014 passed under section 254/143(3) of the Act [at Pg. 553-558 of PB Vol. 1]did not make any disallowance in respect of interest expenses since there was no nexus between the income and such expenditure, The AO however, made disallowance of administrative expenses under section 14A in proportion the total profit before tax bears to tax free income, which has been challenged in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to and applying the provisions of Rule 8D of the Rules. In view of such findings, the additional disallowance made by the assessing officer u/s 14A stands deleted on the aforesaid ground at the threshold. That apart, we also agree with the submissions of the appellant that, since the appellant is a cash-rich company, which, in fact, is investing surplus/idle funds in various modes of investments, there could be no nexus of interest-bearing borrowed funds with such investments. The appellant is having substantial free reserves of Rs. 3760.81 crores at the beginning of the relevant year and has generated surplus interest free funds of Rs. 268.64 crores during the year. The assessing officer, too, in the set-aside proceedings for the AY 2007-08 had accepted the aforesaid cash flow position and deleted the disallowance of interest expenditure. In view of this we reverse the finding of the Ld. assessing officer about disallowance of Rs. 145.62 lakhs under section 14 A of the income tax act applying the rule 8D of the income tax rules 1962. He in the result ground No. 22 of the appeal of the assessee is allowed. 109) The ground No. 23 of the appeal of the assessee is against the acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly related to affecting change in the location and condition of the inventory. Since Model Fee paid to the foreign collaborator is akin to R&D cost and not in the nature of conversion cost, is not to be considered for the purposes of loading to closing inventory. He submitted that in accordance with section 145A of the Act, closing stock should be valued as per method of valuation of stock consistently and regularly followed. It was the main contention that The appellant has been following the same system of accounting and valuation of inventory for the past several years, which has always been accepted by the department. In the absence of any change in the method of accounting and/or the books of accounts maintained by the appellant, during the relevant previous year, as compared to earlier years, the method of accounting/valuation followed by the assessee-company cannot be disturbed as has been held in following cases: UCO Bank v. CIT: 240 ITR 355 (SC) CIT v. Singaribai: 13 ITR 224 (All.)(FB) Juggilal v. CIT: 101 ITR 40 (All.) CIT v. TISCO: 106 IR 363 (Bom.) CIT v. Sankarapandia: 130 ITR 541 (Mad.) Kone Elevator India (P.) Ltd v ACIT: 355 ITR 139 (Madras) Balapur Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition is made in this regard, would be revenue neutral if seen in a macro perspective. From the orders of the authorities below, we clearly observe that the AO has not disputed the mode of valuation of inventory made by the assessee during preceding years and if any kind of adjustment is held to be attributable to the value of finished closing stock, then the said corresponding amount/adjustment would need to be made in the opening stock of the succeeding year and in a broader sense, such kind of adjustment/addition would be revenue neutral. On specific query from the Bench, the DR submitted that the treatment given by the revenue authorities on the issue in the preceding year is not known to him and in this situation, we hold that the / department has not disputed the claim of the assessee in the preceding years. 220. It is well accepted legal proposition that when the department has taken a particular stand on a particular issue, then the department cannot take a deviated stand on the issue in the succeeding year without ant sound, justifiable and cogent reason. The department has not disputed the fact that impugned expenditure was incurred prior to commencement of producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenditure satisfies the test of business / commercial expediency, the same needs to be allowed as business deduction under the said section. In view of the same, the impugned expenditure was incurred to remember and bestow gratitude to the Founder /ex-employee of the appellant company on account of commercial expediency, which would be regarded as being incurred for the purpose of business under section 37(1) of the Act. Reliance, in this regard, is placed on the following decisions, of the Supreme Court, wherein it has been held that the expression " expenditure laid out or expended wholly and exclusively for the purpose of such business" used in section 37(1) includes expenditure voluntarily incurred out of commercial expediency, in order to indirectly facilitate the business; the expression "commercial expediency" is an expression of wide import and includes expenditure a prudent man may incur for the purpose of the business; the reasonableness whereof has to be seen from the point of view of businessman and not that of the Revenue: i. Hero Cycles (P) Ltd. v. CIT: 281 CTR 481 ii. S.A. Builder v. CIT: 288 ITR 1 iii. CIT vs. Walchand& Co.: 65 ITR 381 iv. J.K. Woollen Manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure in the assessment orders passed under section 143(3) of the Act. In view of the above, the aforesaid expenditure having been accepted to be an allowable business deduction in the earlier years, the said expenditure on the grounds of consistency, too, could not have been disallowed in the assessment year under consideration. Reliance, in this regard, is placed on the following decisions: * CIT v. Excel Industries: 358 ITR 295 (SC) * RadhasoamiSatsang v. CIT: 193 ITR 321 (SC) * CIT v. Rajasthan Breweries: SLP (C) 1379/2014 (SC) * CIT v. Realest Builders and Services: 307 ITR 202 (SC) * CIT V. Neo Polypack (P) Ltd: 245 ITR 492 (Del.) * CIT V. Dalmia Promoters Developers (P) Ltd: 281 ITR 346 (Del.) * DITv. Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del.) * CIT V. A.K.J. Security Printers: 264 ITR 276 (Del) * DIT(E) vs. Apparel Export Promotion Council: 244 ITR 734 (Del.) * Vesta Investment and Trading CO. (P) Limited v. CIT: 70 ITD 200 (Chd.) For the aforesaid cumulative reasons, it is submitted that the aforesaid expenditure was allowable deduction under section 37(1) of the Act. The disallowance made by the assessing officer is not based on correct apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be not incurred for the purpose of business. More so when in past assessment years the similar expenditure have been incurred by the assessee but have not been disallowed by the Ld. assessing officer and this fact has not been controverted by the Ld. departmental representative even on the principle of consistency also we are not inclined to upheld the disallowance. In that view of the matter, we do not agree with the findings of the assessing officer in disallowing the expenditure of Rs. 3 465552/- incurred for giving advertisements in newspaper to commemorate Mr. Munjal's death anniversary. In the result ground No. 24 of the appeal of the assessee is allowed. 117) Ground No. 25 is against the disallowance of Rs. 29500 0000/- on account of commission paid to the managing director Mr. Munjal under section 36 (1) (ii) of the act on the ground that the commission was paid in view of distribution of dividends to him was also shareholder of the assessee company. The assessee was further aggrieved against the observation of the Ld. assessing officer that the appellant failed to justify the commercial expediency for making the aforesaid payment of commission to the managing director an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that such an expense would not be deductible if the same would have been payable to an employee as share of profits or dividend. It is respectfully submitted that in the case of appellant, commission was paid in lieu of services rendered by the Managing Director and not in lieu of distribution of profits. He further mentioned that the commission was paid to Managing Director, in addition to salary and other benefits, in accordance with the terms of employment, in lieu of services rendered and not in lieu of distribution of dividend entitled to shareholders. It is not in doubt that Mr. Munjal is actively engaged in supervising the business operation of the applicant company, in his capacity of Managing Director, which has not even been doubted by the assessing officer; the other part his remuneration package, viz., salary and other benefits paid to him have been accepted as an allowable revenue expenditure to have been incurred for the purpose of business in lieu of service rendered by him to the applicant company. His main argument was that remuneration to executive directors is recommended by the Remuneration Committee and duly approved by the Board of Directors, comprising of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act: - ShahzadaNand and Sons vs CIT: 108 ITR 358 (SC) - AMD Metplast P. Ltd. v. DCIT: 341 ITR 563 (Del) - CIT v. Bony Polymers Ltd.: ITA No. 1298/Del/2011 (Del) - DCIT v. Celsius Refrigeration P. Ltd.: ITA No. 4746/Del/2010 (Del) - Career Launcher (India) Ltd. v. ACIT: ITA No. 4924/Del/2009 (Del) [affirmed by Del HC in 358 ITR 179] - DCIT v. CTI Shipbrokers India P. Ltd: ITA No. 84(Del) 2011 - CIT v Convertech Equipments (P.) Ltd: 217 Taxman 115 (Delhi) - Arihant am Infraprojects (P.) Ltd v JCIT: 64 taxmann.com 404 (Pune - Trib.) With respect to the observation of the assessing officer that the payment of commission reduced the corpus available for distribution as dividend with the intention of avoiding dividend distribution tax by paying commission to the Director, it is submitted is based on surmises and conjectures, without appreciating the facts and financial position of the applicant company. The applicant, it is submitted, during the year under consideration, even after declaration of dividend @5500 %, and payment of commission had sufficient profits. Thus, commission cannot be alleged to have been paid to reduce surplus and reduce distribution of dividend. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholding in the appellant company in line with dividend distributed to the shareholders; (iv) There is no whisper or any evidence being brought on record by the assessing officer in the assessment order, which suggests that profits were distributable to Shri Munjal as a shareholder of 0.02% shares in appellant company in lieu of which commission was paid. (v) The commission paid to Managing Director in earlier years, in accordance with the terms of employment, have been accepted as allowable business deduction in the earlier years. Without there being any change in facts during the impugned year, the commission paid could not have been disallowed on the grounds of consistency as well. (vi) In the end is submitted that issue is squarely covered in favour of appellant by the order of Delhi Bench of the Tribunal in the case of group concern of the appellant company, viz. Hero Honda Finlease Ltd. v. Addl. CIT: ITA No 4329/Del/2010 (Del) relating to assessment year 2005-06. Further, the Delhi High Court, vide order dated 08.04.2015 passed in ITA No. 99/2015 for assessment year 2009-10 has also dismissed the appeal of the Revenue on the aforesaid issue. 119) Ld. departmental represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant, the commission constitutes part of Mr. Munjal's remuneration package, the computation whereof is simply based on the percentage of net profit. The computation of remuneration with reference to profit does not, ipso facto, classify the same as payment of profit or dividend, covered within the exception provided in section 36(1)(ii) of the Act. In the case of a company, recipient is entitled to dividend with reference to percentage of his/her shareholding in the company. In the present case, Mr. Munjal held 0.02% of shares in the appellant company, for which separate dividend was received as per the total amount of dividend declared by the company to its all shareholders. The provisions of section 36 provides that "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- ii) any sum paid to an employee as bonus or commission32 for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;' In the present case the assessee has paid Rs. 29.50 crores to the managing dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bombay High Court (supra) does not assist the revenue and that so long as the bonus or commission is paid to the directors for services rendered and as part of their terms of employment it has to be allowed and sec.36(1)(ii) does not apply. 21. Having regard to the above legal position and the factual findings recorded by the Tribunal, we are unable to say that the Tribunal erred in holding that the bonus payment was allowable u/s.36(1)(ii) of the Act. The substantial questions of law are answered in the affirmative, against the revenue and in favour of the assessee for both the years." We also agree with the decision taken by the Tribunal in the case of appellant group company, viz., Hero Honda Finlease Ltd. Vs. Addl. CIT : ITA No.4329/Del/2010 relating to AY 2005-06, wherein the similar disallowance was deleted. In view of this we are of the opinion that in making payment of commission to the managing director of the company of 29.50 crore the provisions of section 36 (1) (ii) of the income tax act cannot be applied. Furthermore regarding the commercial expediency of the above sum the such commission was decided by the remuneration committee constituted by the company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit the appellant adopted the transfer price of power for captive consumption from power generating unit to the manufacturing unit as cost of generation of the power along with a markup of 15%. According to the working of the assessee the cost of generating the power was Rs. 7.61 per unit and after reading markup thereon it was 8.75 per unit. Based on this the assessee derived the profit of Rs. 8 0 7.76 Lacs from that industrial undertaking which is eligible for deduction. However the Ld. assessing officer rejected the market price adopted by the assessee and substituted same by the rate of state Electricity Board taking same at Rs. 4.39 per unit and the fair market price because the assessee was also getting power from state Electricity Board that rate. The Ld. that assessing officer proposed the amount disallowance in the computation of total income while framing the draft assessment order against which the assessee preferred objections before the Ld. dispute resolution panel who in turn confirmed the findings of the assessing officer and therefore the assessee is in appeal before us. 122) Before us the Ld AR of the appellant submitted that :- a) The terms of provisions of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 4631/Mum./2009, wherein it has been held that the rate of supply of power by the State Electricity Board will not be determinative of market price where, other benchmarks of actual sale of power were available to an assessee. g) Kind attention is further invited to the decision of the Jaipur bench of the Tribunal in the case of Shree Cement v. Addl. CIT: 160 TTJ 529, wherein the Tribunal while adjudicating the issue regarding allowability of deduction under section 80IA of the Act while computing the profits and gains derived by captive power undertaking, held as under: "13. In the light of the aforesaid, we hold that:- (a) the value adopted by the assessee be it value as per independent third party trading transactions or as per power exchange (IEX etc.) or any other independent transaction (for the relevant period and which has taken place in the relevant area where the eligible unit is located) constitute 'market value' in terms of Explanation to s. 80-IA(8); (b) the value at which State grid has sold power to the cement unit of the assessee (average annual landed cost) also constitute 'market value' in terms of Explanation to s. 80-IA(8) but the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only submission of the appellant was that Maruti was supplying power to business associates, who were not related to Maruti, much less in terms of section 40A(2) of the Act, and there was no occasion for Maruti to charge higher price, or for such business associates to pay higher price to Maruti in consideration of supply of power. k) Further, the appellant had filed miscellaneous application against the aforesaid order passed by the Tribunal in the relevant assessment year pointing out that the assumption by the Tribunal that Maruti supplied power to related/ associated enterprises, which have been defined under section 92CA of the Act to mean companies having common control/ directions, etc., had no factual foundation. Further, no opportunity was allowed to the appellant to lead evidence to rebut such erroneous factual assumption which is not borne out from record. l) The Tribunal, while adjudicating upon the aforesaid application of the appellant, vide order dated 06.09.2013, modified its earlier order by substituting the words "associated enterprises" with "ancillary units", but did not reverse the finding given in the original order. m) Following the aforesaid decision, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power at the same rate at which power is supplied by HSEB or at a lower rate. But since the actual facts are reverse inasmuch as HSEB is not able to meet the power requirement of the consumers, private entities are forced to generate power for self-consumption, as in the case of appellant, or supply in the market like Maruti Udyog at a higher price. The consumers in the free market conditions are, therefore, willing to pay higher price to meet their power consumption needs. In such a situation, under an arm's length condition, if the appellant, too, like Maruti was to supply power to third party located in its vicinity, the appellant could have also charged price higher than that charged by HSEB. The aforesaid discussion leads to the conclusion that the price charged by HSEB, at best under the facts and circumstances of the case and looking to the power situation at Haryana, cannot be said to be 'market price' within the meaning of Explanation to section 80IA(8) of the Act. We find that the Tribunal in appellant's own case for assessment year 2006-07 dismissed the aforesaid claim on a mistaken belief that the rate at which power was supplied by Maruti was not a proper benchmark, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Asstt. CIT v. Maersk Global Service Center (India)(P.) Ltd. [2011] 133 ITD 543/16 taxmann.com 47 (Mum.) wherein while interpreting the transfer pricing provisions, the Courts have held that it is the assessee who is the best judge to know the transactions undertaken and thus finding out the comparable cases from the vast database available in the public domain. Once the assessee has adopted the same, the AO has to examine whether the same is market price or not. AO has the power to adopt the market price only when the price adopted by the assessee does not correspond to market value. In the present case, we find that the assessee has adopted a rate at which actual transactions have been undertaken by unrelated entities. The volumes of transaction as relied upon are also substantial and hence it cannot be said that the assessee has handpicked some transactions, which are beneficial to it. The Departmental Representative submitted that since the assessee has itself drawn power from the grid, the grid rate represents the 'best market value' and hence the same should only be adopted. We are not agreeable to the above contention of the Department. No doubt the grid rate is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and mark up thereon ( iii) the rates at which power is supplied by Independent party to its ancillary unit . Therefore there are multiple basket of the market rates. As held in above decision that where multiple options for the price of a product are available, then the option which is most favorable to assesse needs to be adopted for the purposes of determining inter-unit transfer price u/s 80 IA(8) of the Act. Further it is not the case of the revenue that the power cost incurred by the assessee is inflated or incorrect. In that view of the matter, in the present case, considering that three different prices for supply of power are available in the market, the method adopted by the appellant to compute inter-unit transfer price by imputing a reasonable mark-up on its cost of production, i.e., Rs. 8.75, which was less than the rate of Rs. 9.84 charged by Maruti, was quite a reasonable for the purposes of computing deduction u/s 80IA(4) of the Act. Therefore we reverse the disallowance made by the Ld. assessing officer of deduction of Rs. 8 0 7.76 Lacs under section 80 IA, in relation to the generation of power. .Accordingly, the ground No. 26 of appeal stands allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s advanced by the learned Addl. Solicitor General on behalf of the Department before us was that the word "expenditure" in s. 37(1) connotes "what is paid out" and that which has gone irretrievably. In this connection, heavy reliance was placed on the judgment of this Court in the case of Indian Molasses Company (supra). Relying on the said judgment, it was sought to be argued that the increase in liability at any point of time prior to the date of payment cannot be said to have gone irretrievably as it can always come back. According to the learned counsel, in the case of increase in liability due to foreign exchange fluctuations, if there is a revaluation of the rupee vis-a-vis foreign exchange at or prior to the point of payment, then there would be no question of money having gone irretrievably and consequently, the requirement of "expenditure" is not met. Consequently, the additional liability arising on account of fluctuation in the rate of foreign exchange was merely a contingent/notional liability which does not crystallize till payment. In that case, the Supreme Court was considering the meaning of the expression "expenditure incurred" while dealing with the question as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrency held by it, on conversion into another currency, such profit or loss would ordinarily be a trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature." (Emphasis, italicized in print, supplied) 21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into a composite contract for organizing an event, which involved arrangement for booking of hotel, arranging transfer of guests from the airport to hotel, breakfast-lunch in hotel, engaging various artists, staging green rooms, light and sound for theatre projection system, taking venue on rent, etc. b) The said activities, it would be appreciated, did not involve any specialized skill / intellect on the part of the vendor, but were predominantly physical involving organizing / arranging of facilities in order to hold an event. c) The aforesaid activities, therefore, fell within the meaning of 'contract for carrying out work' under section 194C and were not in the nature of service contract, much less professional / technical services covered under section 194J of the Act. [refer Del HC in case of SRF Finance Ltd. v. CBDT: 211 ITR 861] d) Analogy for the aforesaid can also be drawn from Circular No.715, dated 8.8.1995, issued by CBDT wherein for contract entered by an appellant with advertising agencies, it has been opined, that such composite contract falls within the meaning of 'contract for carrying out work' under section 194C of the Act. e) The aforesaid two expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is predominantly physical and does not involve use of knowledge / specialized skill. k) It is only where the service provided involved specialized knowledge or skill, the same would fall within the meaning of "technical service" under section 194J of the Act, as has been held in the following decisions: a) SRF Finance Ltd. v. CBDT: 211 ITR 861 (Del) b) Skycell Communications Ltd. and Anr. v. DCIT: 251 ITR 53 (Mad) c) Yashraj Films v. ITO: 140 ITD 625 (Mum) d) CIT v. Bharti Cellular Ltd.: 319 ITR 139 (Del. HC) e) Dr. Hutarew & Partner (India) P. Ltd. v. ITO: 25 SOT 347 (Del. Trib.) f) Credit Lyonnais v. ADIT: 144 ITD 644 (Mum. Trib.) g) ACIT v. Evolv Clothing Co. (P) Ltd.: 142 ITD 618 (Mad. Trib.) h) Singapore Airlines Ltd. v. ITO: 7 SOT 84 (Mad. Trib.) i) Canara Bank v. ITO: 117 ITD 207 (Ahd. Trib.) l) In view of aforesaid, the vendor has not rendered any service, which involved use of specialized skill or knowledge or applied/industrial science. The service rendered by the vendor was predominantly physical involving organizing of various facets to hold an event/conference and, therefore, do not fall within the meaning of word 'technical'. Re: Managerial: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2007-08 and 2008-09, wherein disallowances made in that year for alleged short deduction of tax at source were deleted by the Tribunal, by following the decision of Calcutta High Court in the case of S.K. Tekriwal (supra). u) Further, without prejudice, the appellant was under the bonafide belief that tax was required to be deducted under section 194C for reasons discussed in detail above, accordingly, having regard to the decision of Naresh Kumar and Ors (supra) and Kotak Securities (supra) v) Without prejudice to the above, it is submitted, that there was no outstanding liability, against the aforesaid expenses at the end of the year and therefore no disallowance could have been made under section 40(a)(ia) of the Act for that reason also. (Refer: Vector Shipping Services P. Ltd: 357 ITR 642 (All.) [SLP filed by revenue has been dismissed vide CC No(s). 8068/2014 dated 02.07.2014] and Merilyn Shipping and Transport v. ACIT: 146 TTJ 1 (Vishak.)(SB)] w) Further, without prejudice, it is submitted, that for the reasons discussed supra, since the payees have also paid tax on the income receivable from the appellant, no disallowance could be made under section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices' to understand and appreciate their purport and meaning. We have to examine the general or common usage of these words or expressions, how they are interpreted and understood by the persons engaged in business and by the common man who is aware and understands the said terms. The expression "management services" was elucidated upon by this Court in J.K. (Bombay) Ltd. v. CBDT, [1979] 118 ITR 312/1 Taxman 537 in the following terms:- '6. It may be asked whether management is not a technical service. According to an Article on "Management Sciences", in 14 Encyclopaedia Britannica 747, the management in organisations include at least the following: "(a) discovering, developing, defining and evaluating the goals of the organization and the alternative policies that will lead toward the goals, (b) getting the organization to adopt the policies, (c) scrutinizing the effectiveness of the policies that are adopted, (d) initiating steps to change policies when they are judged to be less effective than they ought to be." Management thus pervades all organisations. Traditionally administration was distinguished from management, but it is now recognised that management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in the New Oxford Dictionary is adjective 1. of or relating to a particular subject, art or craft or its techniques: technical terms (especially of a book or article) requiring special knowledge to be understood: a technical report. 2. of involving, or concerned with applied and industrial sciences: an important technical achievement. 3. resulting from mechanical failure: a technical fault. 4. according to a strict application or interpretation of the law or the rules: the arrest was a technical violation of the treaty. Having regard to the fact that the term is required to be understood in the context in which it is used, "fee for technical services" could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with "technical" is "involving or concerning applied and industrial science".' 19. The said term was also interpreted by this Court in case of Bharti Cellular Ltd. (supra) where emphasis was laid on the element of human intervention, but we are not concerned with the said aspect in the present case. The non-resident had not undertaken or performed "technical services", where specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the troubleshooting database. 42. Many categories of e-commerce transactions similarly involve the provision of the use of, or access to, data and software (see, for example, categories 7, 8, 9, 11, 13, 15, 16, 20 and 21 in annex 2). The service of making such data and software, or functionality of that data or software, available for a fee is not, however, a service of a technical nature. The fact that the development of the necessary data and software might itself require substantial technical skills is irrelevant as the service provided to the client is not the development of that data and software (which may well be done by someone other than the supplier) but rather the service of making the data and software available to that client. For example, the mere provision of access to a troubleshooting database would not require more than having available such a database and the necessary software to access it. A payment relating to the provision of such access would not, therefore, relate to a service of a technical nature. Managerial services 43. The Group considers that services of a managerial nature are services rendered in performing management functions. The Group did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, see CIT v. Estel Communication (P.) Ltd. [2009] 318 ITR 185 (Del) and Skycell Communications Ltd. (supra)]." Further Hon'ble Delhi tribunal has also explained the word 'consultant 'in the same decision as under as under:- "21. The word "consultant" refers to a person, who is consulted and who advises or from whom information is sought. In Black's Law Dictionary, Eighth Edition, the word "consultation" has been defined as an act of asking the advice or opinion of someone (such as a lawyer). It may mean a meeting in which parties consult or confer. For consultation service under Explanation 2, there should be a provision of service by the non-resident, who undertakes to perform it, which the acquirer may use. The service must be rendered in the form of an advice or consultation given by the non-resident to the resident Indian payer." The word 'technical services' under section 9(1)(vii) read with section 194J has also been recently explained by the apex Court in the case of CIT v. Kotak Securities Ltd.: 383 ITR 1, in the following words: " "Technical services" like "Managerial and Consultancy service" would denote seeking of services to cater to the special needs of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rojections of the talent which is natural, or acquired by training. A surgery certainly involves physically visible and tangible work; but, inherently, it is the mental skill developed by the intellectual exercise that permeates the operation. "Word 'work' may have different and wider meanings. But, here, we have to find out the real meaning of the word in the context of its setting in section 194C. The meaning attributable should fit into the clause "for carrying out any work". An architect is not engaged to carry out the work of drawing a sketch. A lawyer is not engaged to carry out the work of arguing a case; he is engaged, to `argue' a case or to `conduct' a case; he is paid `fee' for the services rendered by him and not any `price' for the work done by him.."(emphasis supplied) In light of the aforesaid decisions, the contract for carrying out any 'work' would refer to contract, where the activity is predominantly physical and not intellectual. If the contract involves mental or intellectual attributes of the vendor, the same may qualify as a service contract. In the present case, the services provided by the vendor, in our opinion, are predominantly physi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of manufacture of two wheelers as also to claim deduction for such activity under section 80IC of the Act. The only permission required was the aforesaid license to work as factory, which was submitted along with audit report in Form 10CCB read with Rule 18BBB(4) of the Rules. In view of the aforesaid, the appellant claimed deduction of Rs. 997.25 crore under section 80IC of the Act during the relevant assessment year. However, the Ld. assessing officer disallowed the entire deduction for the reason that appellant failed appellant has failed to comply with the rule 18 BBB of the rules, in as much as the appellant did not obtain any approval for carrying on the business of manufacturing of dwellers in the state of Uttarakhand. Further, according to him the appellant could not also comply with the condition of the employment of natives of that particular state as a precondition of the industrial policy of the government of the state. Further, the assessee could not also comply with the condition of continuous employment of specified number of employees on the given Day as contained in the factory license. The Ld. Dispute resolution panel on objection filed by the assessee agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een incorporated either explicitly or implicitly therein. d) It is submitted that violation of conditions contained in the State industrial policy, if any, can be considered as a default under that policy, which may lead to withdrawal of benefits, if any, granted by the State, but the said violation, not being a pre-requisite condition for claiming tax benefit under section 80IC, would not jeopardize the claim under that section. e) It is reiterated that provisions of section 80IC have to be strictly construed and in the absence of any condition contained therein qua fulfillment of terms of the industrial policy, the latter cannot be read into that section. The conditions prescribed in that section, having been satisfied by the appellant, the appellant must be allowed deduction under section 80IC of the Act, as directed by the DRP which directions have been overlooked by the assessing officer while framing the final order. 135) He further submitted that non-satisfaction of condition prescribed in Rule 18BBB of the Rules regarding obtaining approval to carry on the eligible business a) For the purposes of claiming deduction under section 80IC, as per sub-section (7) thereof, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides that if an appellant is required to obtain any approval/license to do the eligible business, copy of same must be attached with the audit report. It does not tantamount to imposing any condition precedent to the effect that deduction under section 80IC would be admissible only if such approval is obtained, even if such approval is otherwise not required in law. i) For establishing a factory, the assessee, as per the Factory Act, 1948, was only required to obtain permission/license to establish the factory in the State of Uttarakhand from the appropriate authority, in accordance with local State Government Factory Rules, i.e., Uttar Pradesh Factory Rules, 1950, which were applicable in the present case. j) In accordance with the aforesaid applicable law, the assessee obtained factory license from the appropriate State authority, which was attached along with the audit report in Form 10CCB, in compliance of Rule 18BBB(4) of the Rules. k) There being no other approval / permission required from the Central / State Government for setting up factory for manufacture of two-wheelers at Haridwar, in the State of Uttarakhand, no such approval / permission was obtained by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) We have heard the rival contentions. The case of the assessing officer was that the appellant is not eligible for claiming deduction u/s 80IC since it did not satisfy the following conditions: a) The appellant failed to comply with Rule 18BBB of the Rules inasmuch as the appellant did not obtain any approval for carrying on the business of manufacturing two-wheelers in the State of Uttaranchal; b) The appellant failed to comply with the condition of employment of natives of State of Uttaranchal at prescribed percentage as contained in the industrial policy issued by the Government for the State of Uttaranchal; [Communication no.429/lnd. Dev. / Employment /2005-06, dated 19.11.2005, issued by the Secretary, Industrial Development to Director, Industries, Uttranchal] c) The appellant failed to meet the condition of continuous employment of specified number of employees on any given day, as contained in the factory license. As regards the first condition prescribed in Rule 18BBB regarding approval to carry on the eligible business, it was explained by the appellant that for the purposes of carrying on business of manufacturing two-wheelers other than obtaining factory license as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly supported with the audit report in Form 10CCB issued by the auditors, answering each question in the format and how the appellant satisfied all such conditions. In the final assessment order, the assessing officer has not pointed out violation of any such condition precedent. We agree with the submissions of the Ld. Counsel that the various errors (assuming without admitting) in submission of complete details/information by the appellant to the assessing officer, as noted in the assessment order, related to the computation of deduction, on the basis of which entire claim could not have been denied. Accordingly, in our view, the assessing officer was not justified in denying the benefit of deduction u/s 80IC to the appellant of Rs. 9972535090/-. In view of this ground No. 29 of the appeal of the assessee is allowed. 137) Ground No. 30 of the appeal of the assessee is against disallowing deduction under section 80 IC by an amount of Rs. 6 255 5736/best being an amount of markup at 12.48% attributed over the value of goods, aggregating to Rs. 5 0124 7888/best procured from other non eligible units by applying the provisions of section 80 I A (8) read with section 80 I C (7) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative submitted that:- i) The purchase of components by non-eligible units at Gurgaon or Dharuhera from third parties and thereafter transfer of same at the same purchase price to the eligible unit at Haridwar did not involve any value addition in such components as was carried out by the non-eligible units. ii) The non-eligible units in the aforesaid transaction merely incurred the cost of purchase on behalf of the eligible unit, which was subsequently debited to such unit. Accordingly, the aforesaid transaction was not in the nature of inter-unit purchase and sale of goods, covered within the provisions of section 80IA(8) read with section 80IC(7) of the Act and were, therefore, not reported by the auditors in the audit report. iii) The said transaction cannot be said to be not at market price, since the components procured from third parties by the non-eligible units have been transferred at that very price. The only additional cost incurred on account of purchase of components by the non-eligible units first and then transfer thereof to the eligible units was the element of freight, which has been directly paid and charged at the eligible unit itself. iv) As a result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave also done at its plant, which did not result in enhancement of market price of such goods, in as much as, no buyer would have been willing to pay more price than the actual cost for such semi-finished components. xii) Without prejudice to the above, the AO could have only added labour charges incurred by the non-eligible units to the material cost of the aforesaid components (semi-finished), as opposed to mark-up of on the entire purchase cost. 139) Ld. departmental representative submitted that that inter-unit transfer of goods should have been recorded in the market price instead of cost prices carried out by the appellant and therefore, the Ld. assessing officer has correctly attributed the markup of 12.48%. He therefore vehemently supported the order of the assessing officer regarding the adjustment in the deduction claimed by the assessee under section 80 IC (7) of the income tax act. 140) We have heard the rival contentions. We have observed that merely because there was inter-unit transfer of certain goods from non-eligible unit to eligible unit, the assessing officer automatically applied the provisions of section 80IA(8) of the Act to hold that such transfer should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores, which were transferred by the non-eligible unit to the eligible unit at Haridwar after nominal processing, too, in our opinion, does not result in enhancement of any market price of such goods; in other words, in a free market condition such goods would have also been sold at the same price at which they have been transferred by the non-eligible unit to the eligible unit. In that view of the matter, we find that the present issue was not decided by the assessing officer in correct perspective and, therefore, erred in disallowing deduction under section 80IC, by enhancing the purchase price by adding certain markup thereon. In view of this we allow ground No. 30 of the appeal of the assessee. 141) Ground No. 31 of the appeal of the assessee was also against the denial of deduction under section 80 IC of the income tax act by Ld. assessing officer on account of inflation of profit by charging higher basic price. The brief facts of the issue are that the appellant is engaged in the business of manufacturing two-wheelers. For the units sold by eligible business unit of appellant situated at Haridwar, the basic sale price charged from customers is higher than the basic sale pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged from customers was exclusive of excise duty, whereas in case of eligible units owing to exemption from excise duty, basic price was higher on account of element of excise duty. c) The aforesaid can be understood with the help of the following illustration: Non-eligible unit Eligible unit (Amount in Rs.) (Amount in Rs.) Basic Price 90 100 Excise Duty 10 Nil Sale Price 100 100 d) The aforesaid higher basic price charged at Haridwar unit vis-à-vis price charged for products sold by the non-eligible unit did not result in earning of any extraordinary profits / higher profits by the eligible unit, vis-à-vis, other / non-eligible units, in as much as, in the latter unit(s), as per CENVAT Rules, the appellant was eligible to take credit of excise duty paid on purchase of excisable goods against the excise duty charged and collected from customers, which reduced the cost of production in such units, whereas in the case of eligible unit, in the absence of exemption from charging excise duty, the excise duty paid on purchase of components was not available for credit and formed part of cost of production, which consequently reduced t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers/dealers will collide with the appellant to pay higher price so as to allow earning of higher profits to the appellant j) The allegation that finished goods should have been transferred from Haridwar unit to Head Office at normal profit and thereafter Head Office should have sold the aforesaid products at higher predetermined sales value is also not correct. k) The business of appellant is to manufacture and sell two-wheelers, which is to be considered as profit earning activity as a whole, which is carried out by the manufacturing plants. The Head Office, it is submitted, is not a separate entity/person and just like the eligible unit, is part of the appellant-company. The head-office was not engaged in any separate business or of rendering services and was, therefore, not a separate profit centre; on the contrary, the Head Office is a separate cost centre l) The role of head office was to facilitate and incur common expenses, for the aforesaid profit earning activity carried out at manufacturing plants. For instance, administrative staff is employed at head office to facilitate smooth running of manufacturing and sale operations carried out at profit centers, viz. manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... war. In view of the same, there was basic fallacy in the entire case made by the assessing officer, while disallowing deduction under section 80IC on the aforesaid ground. That apart, although the appellant had submitted, that no additional profits accrued to the eligible unit on account of exemption from excise duty and charging higher basic price vis-à-vis basic price at non-eligible unit due to non-availment of CENVAT credit of excise duty paid on purchases at the said unit, we hold that even assuming higher profits were earned by the eligible unit, the same cannot be disallowed by applying provisions of section 80IA(10) read with section 80IC(7) of the Act which reads as under: "(10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the profit of the industrial undertaking after valuing service of selling and distribution arm of the company at market rate. At present assessee has allocated it at cost. Therefore, ld. AO has invoked provisions of section 80 IA (8) of the act. It is not dispute that that products manufactured by these industrial units are sold by selling and distribution arm of the assessee and the cost incurred is allocated to these respective units on the basis of appropriate allocation key of sales. Ld. AR of the appellant relying on the decision of coordinate bench of Cadila Healthcare Ltd vs. ACIT 21 Taxmann.com 483 has submitted that there cannot be any specific demarcation between manufacturing and selling activities of the assessee and profit accrues only at the time of sales of the goods only. Therefore, the contention of the revenue that selling and distribution function of the assessee is a separate profit center is required to be rejected at threshold. We have carefully considered the argument of ld. AR and of the revenue on this point as well as the ld. AO and Ld. DRP. We are of the view that this argument is almost similar to the argument raised by the revenue in the case of Cadil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer compared the electricity unit consumed with respect to each vehicle manufactured at all the three units of the assessee. On the basis of the lower consumption of electricity per unit at the eligible unit. He assumed that the part of many featuring activities of the land were outsourced and accordingly disallowed proportion of outsourced Manufacturing activities. He worked out a sum of Rs. 497.42 crores as profit which is attributable to the manufacturing activity at Haridwar plant which are outsourced and therefore this sum was disallowed. The action of the Ld. assessing officer was confirmed by the Ld. Dispute resolution panel on objection raised by the assessee and therefore assessee is in appeal before us. 148) Ld. authorized representative submitted before us that there are specific reasons for the lower consumption of electricity at a further unit at the Harbor plant was equipped with the latest efficient technology for carrying out the production process which led to power consumption at lower-level compared to the other plants. He mainly submitted that:- a) It is pointed out that the reason for lower consumption of electricity at Haridwar unit was that Haridwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts Pvt Ltd: 282 ITR 568 (Guj.) - Liberty Group Marketing Division v. CIT: 164 Taxman 608 (P&H) f) In view of the above, in respect of deduction claimed under section 80-IC on the aforesaid ground, disallowance made in the assessment order is not based on correct appreciation of facts and the position in law and, thus, the disallowance made for being deleted. 149) Ld. departmental representative relied upon the orders of lower authorities and submitted that power contention of the Harbor unit is substantially lower than other units of the appellant and there is no difference between the manufacturing process and therefore the Ld. assessing officer has correctly taken a view and disallowed the proportionate amount of deduction eligible on account of activities outsourced from that particular plant. He vehemently relied on the findings of the Ld. assessing officer. 150) We have heard the rival contentions. On query from the bench, the appellant had furnished the process chart for manufacturing of final products followed in all the three units. On perusal of the same, it was noted that since plant at Haridwar was a new plant and Gurgaon and Dharuhera were old plants, certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction under section 80 IC. On a rational and scientific basis. In that view of the matter the expenses on such expenditure incurred at the end of his were duly required to be allocated to manufacturing units and have been reduced by the assessee while computing the profits of the unit eligible for the claim of deduction under section 80 IC of the act. However, the Ld. assessing officer held that the appellant company is deriving profit from three centers that is manufacturing of the assets, brand value of the assets and marketing of the assets wherever the deduction under section 80 IC is available only on profits derived from the business of manufacturing of specified. Articles of things. Therefore, he stated that the manufacturing and marketing activities were required to be carried out at the head office and therefore the brand developed was not owned by the eligible unit, which came into existence much later than the existence of the appellant company as a whole. Thus part of the profits are required to be attributable to the advertising and marketing activities carried out by the head office from the profits earned by the eligible unit. Therefore, the Ld. assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacture and sale of two-wheelers. v) Reliance, in this regard is placed on the decision of Ahmedabad Bench of the Tribunal in the case of Cadila Healthcare Ltd. v. ACIT: ITA No. 3140/Ahd/2010. vi) As regards the marketing and advertisement activities, the same are not a separate profit-earning operation carried out by the appellant. The same forms an integral part of the business of manufacture and selling two-wheelers. The manufacturing activity, it is submitted, could not, on a 'standalone basis', result in earning of any profit to the appellant-company. vii) Profit accrues to an appellant only when the goods manufactured are sold in the market. In order to sell goods, an appellant needs to incur several kind of marketing expenses, which include advertisements and promotion of brand. The marketing activity, thus, forms an integral part of the business of manufacturing and selling two-wheelers and cannot be said to be a separate profit-earning operation. viii) Simply because, the said expenses, instead of being directly incurred by eligible unit, were incurred by head-office, to take advantage of economies of scale, and were subsequently allocated to the eligible unit, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived at the net profit for the financial year 1984-85, being the first year of operation of the appellant-company, at 6.85%, by taking average increase of 0.49% each year over a period of 12 years, viz., between financial years 1998-99 to 2009- 10. The assessing officer applied the aforesaid ad-hoc rate for purpose of attribution of profit to the manufacturing activity carried out at the eligible unit., on the ground that in the first year, profit was earned by the appellant solely on the basis of manufacturing activity. xiv) Without prejudice to the contention of the assessee that the profits of the assessee cannot be segregated between manufacturing activity and marketing activity, it is submitted, that the aforesaid manner of arriving at the net profit rate of the first year and attributing the same to the manufacturing activity is purely arbitrary and based on conjectures and surmises. The disallowance/attribution made on such arbitrary basis, therefore, needs to be reversed. xv) That apart, during the relevant previous year, the appellant has earned net profit @ 15.99% of turnover. Major part of the aforesaid profit, it is submitted, is attributable to manufacturing acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is allowed. 155) Ground No. 34 of the appeal of the assessee is against denial of deduction under section 80 IC of the act on account of other income related to the interest, freight recovery from customer, sundry sales, profit on sale of plant and machinery, miscellaneous income from Vendor of Discounting and exchange fluctuation amounting to Rs. 1947220072/- . During the year the assessee has shown this income as other income and claimed deduction on these income since the said receipts are directed immediate nexus with the business of manufacturing and selling of the vehicles. The Ld. assessing officer held that the aforesaid income not derived from the business of manufacturing of article or thing and were therefore taxable under the head income from other sources and not as business income and therefore they are not eligible. Accordingly, for deduction under section 80 IC of the income tax act. On objection filed before the Ld. dispute resolution panel the opinion of the Ld. assessing officer was confirmed and therefore the assessee is in appeal before us. 156) Ld. authorized representative submitted on each of the items of other income as under:- Re. Interest on Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be used in the manufacture of two wheelers at the relevant plant. In a case, where the said vendors face financial difficulty in carrying out the manufacture of components, the appellant company provided financial support to such vendors by way of extending working capital support at market rate of interest, so that the supply of components from such vendor and consequently the manufacturing operations of the appellant do not take a hit, owing to such financial difficulty. b) In this connection, copy of correspondences exchanged with vendor on sample basis establishing working capital support raised by the vendors are attached at Pg. 3213-3216 of paper book Vol. 8 c) The aforesaid loan/working capital support, it is submitted, is, thus, directly related / has first-degree nexus with the activity of manufacture of article or thing, since the vendors were manufacturing components, which were to be used by the appellant in manufacturing two wheelers at eligible unit. d) If the working capital support was not provided by the appellant to such vendors, they would have faced difficulty in providing continuous / uninterrupted supply of components to the appellant, which, in turn, would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be eligible for deduction under the relevant sections, the interest income earned from creditors/vendors by way of providing working capital support in order ensure continuous/uninterrupted supply of components is also to be considered as income derived from industrial undertaking, which is eligible for deduction under section 80IC of the Act. Freight recovery from customers a) The aforesaid receipt was against recovery from customers against freight expenses incurred for delivery of goods to such customer. In order to deliver goods to the customers, the appellant first incurs expenditure on account of freight. Subsequently, such expenses are recovered from the customers and are income as part of gross sales in the profit and loss account. b) The said recovery of freight expenses did not constitute a new source of income for the appellant company, but was only in the nature of recovery/re-imbursement of actual freight expenses incurred in connection with delivery of vehicles sold by the eligible undertaking. c) Considering that freight expenses incurred are allowed as deduction against income derived from the business of manufacturing vehicles, the recovery of such amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, comprising of original cost of components and processing charges c) It would be appreciated that the aforesaid transaction was directly related to and formed integral part of the entire process / activity of manufacturing of two wheelers. Although the aforesaid supplies to vendors/ancillaries was separately credited in the profit and loss account at cost of such components, but the same did not result in earning of any separate / new income to the appellant company. Miscellaneous Income Vendors - Cash Discounting a) This income has arisen on account of discount received from vendors on early/prompt payment made to them against purchases. The aforesaid benefit being directly related to the cost of purchases, the same was reduced from the cost of such purchases. b) Since, purchase of goods for the purpose of carrying on manufacturing activity is directly related and has immediate nexus with the said activity, therefore, benefit received on account of reduction in such costs is also intrinsically linked to the activity of manufacture. c) That apart, considering that cost of purchases are allowed as deduction against income derived from the business of manufacturing vehicles, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... currency against import of goods to be used in the business/activity of manufacture of vehicles at the eligible unit. Since the aforesaid gain was directly related to import of material to be used in the activity of manufacture, the same had direct/immediate nexus with the manufacturing activity and, therefore, was to be considered as derived from the said business. h) Reliance, in this regard, is placed on the decision of Bombay High Court in the case of CIT v. Rachna Udhyog: 230 CTR 72, wherein it has been held that gain arising from fluctuation in foreign currency on revenue account earned by eligible units is to be considered as derived from eligible business, which would be eligible for deduction under the relevant section. 157) The Ld. departmental representative relied upon the order of the Ld. assessing officer and submitted that all these incomes are not income derived from the industrial undertaking and therefore are not eligible for deduction under section 80 IC of the income tax act, he vehemently relied upon the order of the Hon'ble Supreme Court in case of liberty India versus CIT 317 ITR 218 and submitted that these are not be income which have the direct nexus of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recovery from customers The assessing officer has completely gone wrong in considering freight charges recovered from customers as an independent source of income. The freight charges recovered by the appellant for supply of vehicle are recoupment of such charges, which were paid by the appellant at the first place to the transporter delivering the vehicle to the customer/dealers. There is no profit element in the aforesaid recovery. In the absence of any income on the aforesaid recovery there was no warrant to deny benefit of deduction under section 80IC on the above. Accordingly, the action of the assessing officer is reversed on this ground. 4. Sundry Sales The present issue is also similar to the immediately preceding issue relating to freight recovery. The sale of some finished components also does not involve any income element inasmuch as semi-finished components are supplied to ancillary units for further processing and finished components procured there from are subsequently debited at cost in the books. There is no profit element in the aforesaid transaction and therefore the benefit of deduction under section 80IC cannot be denied on above. In that view of the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 673 2831/- and exchange fluctuation of Rs. 2 416 7060/-. In the result ground No. 34 of the appeal of the assessee is partly allowed. 159) Ground No. 35 of the appeal of the assessee is against the disallowance of expenses incurred on repairs and maintenance of assets at Nagpur premises alleging that the premises were not put to use. The appellant has acquired office at Nagpur wide agreement to sell dated 07/03/2008. The possession of the premises was taken during the relevant financial year itself. During the relevant assessment year, the appellant incurred the expenses on repairs and maintenance expenses of existing assets and relatable to the office premises at Nagpur which were claimed as revenue expenditure. The nature of expenditure is, electrical item purchase etc. interior work, wooden floor, fixing, additional civil work done, electrical works, additional electrical works, dismantling of and conditions, Pinewood on board purchase. The total expenditure incurred were Rs. 4 721618/-. The Ld. assessing officer disallowed the aforesaid expenditure on the ground that the office premises at Nagpur were not put to use during the relevant previous year, and thereby the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd take possession of the property as per the terms and conditions to be fulfilled as per that agreement and the sale could be registered at a later date. Accordingly, as per the said practice, the appellant in the present case took possession of the property, pursuant to the agreement of sale deed dated 07.03.2008. Further, if the possession was not taken by the appellant the question of incurrence of various repairs and maintenance expenses under consideration would not have arisen. These expenses were incurred since the possession was with the appellant and considering the transaction as per the terms and conditions of agreement to sale was executed, the appellant invested sum of Rs. 47.21 lacs on the property. Accordingly, the property was clearly in possession with the appellant. In that view of the matter there was no valid basis to disallow the expenses of repair and maintenance of existing assets in the office premises at Nagpur on the ground that there was no evidence of possession of such property with the appellant and consequently the property was not put to use. In that view of the matter, we delete the disallowance made by the Ld. assessing officer amounting to Rs. 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that it is so even though the software has been classified as a separate asset under the income tax rules for the purpose of claiming depreciation under section 32 of the income tax act. He relied upon the number of decisions to support its claim and submitted that in view of the above the expenditure incurred by the appellant should be allowed as revenue expenditure. In the and he submitted that coordinate bench in appellant's own case in assessment year 2008 - 09, while holding that the expenses incurred on software are allowable revenue deduction held that the expenses incurred for the purchase of servers are capital in nature. He further submitted that there is no purchase of any severed in the present expenditure claimed. 165) The Ld. departmental representative relied upon the order of the lower authorities and submitted that the software has been classified as an capital expenditure in the income tax rules in the schedule of depreciation. Further, he submitted that the depreciation is allowable on that particular asset and thus the expenditure on software cannot be of revenue, nature. He further submitted that there is no difference between the new software purchase and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting plant and machinery of the appellant and further the store sales tools were consumed in relation to the existing plant and machinery without their being in inning any increase in the production capacity. The Ld. assessing officer proposed an end of disallowance at the rate of 50% of the aforesaid total expenditure for the reason that appellant has failed to furnish the requisite information in the prescribed format and that the expenses incurred on repairs and maintenance to plant and machinery were not in the nature of the current repairs buttock immolated repairs. Ld. dispute resolution panel disapproved the finding of the Ld. assessing officer. Regarding the dark disallowances. However, despite this, the Ld. assessing officer made 100 % of the total expenditure incurred by the assessee in the final assessment order which was subsequently rectified wide order dated 07/05/2015 wherein under section 154 of the income tax act no. Assessing officer to Rs. 5 9.29 crores. Therefore aggrieved by the order of the Ld. assessing officer the assessee has filed appeal before us. 168) Ld. authorized representative submitted that appellant duly complied with notices issued/queries rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA 686/Del/2005 (Del ITAT) (ix) Southern Coalfields Ltd. 85 ITD 608 (Nagpur - ITAT) (x) CIT vs Prabhu Spg. Mills (P) Ltd.: 113 TTJ 372 (ITAT - Chennai) He further submitted that The entire expenses claimed by the appellant were in the nature of "revenue" expenditure and were duly accounted and fully supported by the necessary bills/vouchers. He vehemently stated that there could be no justification to make any ad hoc addition since the books of accounts have been duly audited in accordance with the provisions of the Act and have been accepted as true and correct without any adverse inference being drawn against the appellant. [Refer: Jai Engineering Limited: 113 ITR 389 (Del)].Further he stated that, in the following cases, adhoc disallowance made in absence of any specific mention of any unvouched expenditure liable to be disallowed has been held to be untenable and not called for. (i) Dwarka Prasad Agarwal v. ITO: 52 ITD 239 (Cal) (ii) Mahendra Oil cake Industries Pvt. Ltd. v ACIT: 55 TTJ 711 (Ahd.) (iii) Rattah Mechanical Works Ltd. v ITO: 87 Taxman 288 (Mag)Cd.) (iv) Shriram Pistons and Rings Ltd. v IAC: 39 TTJ 132 (Del.) (v) Roger Enterprises Pvt. Ltd. v. ITA : 52 TT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no necessity to make the aforesaid distinction or the aforesaid distinction will not serve any useful purpose, since even if expenditure is not found to be in nature of current repair under section 31(1) but an ordinary repair, the same would be allowable under section 37(1) of the Act. The reference in this regard could be made to the decision of Supreme Court that in the case of CIT v. Sarvana Spinning Mills Pvt. Ltd: 293 ITR 201 and Ramaraju Surgical Cotton Mills: 294 ITR 328. In that view of the matter unless the case of the assessing officer was that the details/documents to verify the actual nature of expenditure or actual incurrence of an expenditure is not provided by the appellant, disallowance of such magnitude and that, too, on ad-hoc basis cannot be made for non furnishing the details in prescribed format. It is not the case of the assessing officer that the expenses incurred by the appellant were not supported by necessary bills/vouchers nor any unvouched expenditure was pointed out. The appellant is a listed company, whose books of account are subjected to several audits. No adverse remark in maintenance of books of account has even been pointed by the aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and Ld. assessing officer and Ld. dispute resolution panel themselves have held that these expenditure on capital in nature and therefore now the revenue cannot say that the possession of the property was not available with the assessee during the year. He therefore submitted that the assessee should be entitled to the depreciation as assessee has owned the premises and also used for the purpose of the business during the year and therefore satisfied all the conditions prescribed under section 32 of the income tax act. 173) Ld. departmental representative relied upon the order of the assessing officer and submitted that has no valid registration has been done in favour of the appellant the depreciation is rightly been disallowed by the Ld. assessing officer. 174) We have heard the rival contentions. The issue raised herein has linked to our findings given in ground of appeal No.35 above. We have held that there was no valid basis for the assessing officer to assume that building was not in the possession of the appellant and consequently not put to use until the date of registration of the sale deed. The present issue relating to allowance of depreciation on the said office p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion. b) Under item -III (3) of the table of rates of depreciation in Appendix 1 to the Income-tax Rules, 1962, the depreciation @ 100% is available in respect of equipment falling within the ambit of pollution control. c) The expenditure incurred by the appellant on construction of rainwater harvesting system in Dharuhera Plant was eligible for 100% depreciation since the same fell within the category of water pollution control equipment, contained in clause (ix) of Part III(3) of Appendix-1 to the Rules. The said system included filtration tank and injection well for storage of rainwater, which was developed for the purpose of storage and filtration of water. d) As regards the secured landfill system, the same included collection sump, rainwater collection pond, monitoring bore wells, hide pipeline network, misc. of civil works for extension of Bund level of SFL Facility etc. Same was used for the purpose of handling of industrial waste as a result of manufacturing activities. e) It would be appreciated that purpose behind preventing/controlling water pollution was to provide safe water for the purposes of drinking and use of living beings. Therefore, if the fresh/pollutant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of business" used in the aforesaid section is not limited to earning profit alone and if the expenditure incurred satisfies the test of business / commercial expediency, the same is allowable as business deduction under the aforesaid section. l) In the present case, as explained above, the assessee, in order to fulfill its corporate social responsibility and also in view of the public notice issued to provide safe drinking water for the purposes of use by general public/ inhabitants in the area in which the assessee's factory is situated, incurred the expenditure on construction of rain water harvesting system, on account of business / commercial expediency. In view of the same, the aforesaid expenditure satisfies the test of having been incurred for the purposes of business.[Refer: Mysore Kirloskar Ltd. vs. CIT: 166 ITR 836 (Kar.); Mahindra and Mahindra vs. CIT 261 ITR 501(Bom.); CIT vs. Mahindra & Mahindra: 284 ITR 679; CIT v. India Radiators Ltd.: 236 ITR 719 (Mad.)] In view of the above, it is submitted, that the aforesaid expenditure are in the alternate admissible for deduction as revenue expenditure under section 37(1) of the Act. 177) Ld. departmental represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant has made an addition to the block of plant and machinery and building on which depreciation at the specified rate was claimed. The appellant has set up plant and machinery of Rs. 1 73.73 crores and land and building of Rs. 2 7.24 crores during the year. The Ld. it assessing officer disallowed 10% of the above addition made to the block of plant and machinery and land and building. According to the Ld. assessing officer there would have been certain preoperative expenses which ought to have been capitalized but not capitalize by the appellant and certain preoperative expenses which would have in claimed as revenue expenditure and not capitalize, there would have been claim of the depreciation at incorrect rates and there is some disallowance on account of excess/incorrect/wrong is inconsistent claim of depreciation with respect to similar items of different units. He further made the dog disallowances under the pretext that there may be claim of depreciation on certain assets, which are not put to use by the appellant during the year. Against this disallowance of depreciation the appellant has preferred this ground of appeal before us. 180) Ld. authorized representative su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts have been duly audited in accordance with the provisions of the Act and have been accepted as true and correct without any adverse inference being drawn against the appellant. [Refer: Jai Engineering Limited: 113 ITR 389 (Del)] i) Further, in following cases, adhoc disallowance made in absence of any specific mention of a unvouched expenditure liable to be disallowed have been held to be untenable and not called for. i) Dwarka Prasad Agarwal v. ITO: 52 ITD 239 (Cal) ii) Mahendra Oil cake Industries Pvt. Ltd. v ACIT: 55 TTJ 711 (Ahd.) iii) Rattah Mechanical Works Ltd. v ITO: 87 Taxman 288 (Mag)Cd.) iv) Shriram Pistons and Rings Ltd. v IAC: 39 TTJ 132 (Del.) v) Roger Enterprises Pvt. Ltd. v. ITA : 52 TTJ 198 (Del.) vi) Ramji Das Modi v. DCIT: 110 Taxman 107 (JP) (Mag) vii) ACIT v. Bateli Tea Co. Ltd. [2003] SOT 72 viii) Continental Seeds & Chemicals Ltd. v. ACIT: (2003) SOT 393 For the aforesaid cumulative reasons, the disallowance made by the assessing officer is not based on correct appreciation of facts and the position in law discussed above, and therefore such addition shall be deleted by the Tribunal. 181) The Ld. departmental representative relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however the certain columns or desire details in requisite format could not be filled as the information was either unrelated or the information was to be obtained through a luminous exercise or such information is available with the assessing officer through other information furnished by the assessee. However it was pointed out by him that despite filing the complete details. The Ld. assessing officer could not point out a single discrepancy in the details furnished by the assessee but the disallowance has been made by the Ld. assessing officer is certain columns only were left blank in view of above facts. He further explained that credit card expenses are duly submitted which shows that the expenses were incurred wholly and expose you for the purpose of the business of the appellant and were rival allowable as revenue reductions these expenses include amounts paid for meeting official telephone bill of the employees, travel expenses, card membership fees, etc and none of the expenses are related to the personal expenses of the employees. He submitted that the appellant company is a public limited company therefore there cannot be any element of the personal expenditure. He fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing the details in prescribed format, although the entire details to the best extent possible were provided by the appellant, was not correct. Accordingly, we direct the Ld. assessing officer to delete the disallowance of 50% of the total expenses incurred through credit cards of Rs. 8 025935 made on ad hoc basis without indicating any expenditure of personal gesture or non-business purposes in the result ground No. 42 of the appeal of the assessee is allowed. 187) Ground No. 43 of the appeal of the assessee is against not giving credit in respect of tax deduction at source of Rs. 72203977. In ground No. 44 of the appeal of the assessee is against charging of interest under section 234D of the income tax act. Both these grounds of appeal of the assessee were not pressed before us by the Ld. authorized representative. Hence, we dismissed Ground No. 43 and ground No. 44 of the appeal of the assessee. 188) In the result appeal of the assessee in ITA No. 1545/DEL/2015 for assessment year 2010 -11 is partly allowed. 189) Now we come to the appeal of the revenue in ITA No. 2424/del/2015 wherein 15 grounds of appeal have been raised as under. 190) The 1st ground of the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He submitted that as and when this items are sold a scrap it would form part of scrap sale recorded in the books of the assessee and would be duly offered to tax at that particular time, but not immediately when the store's items are written off they can be shown a scale of scrap unless they are sold, they cannot be accounted on the credit side of the profit and loss account and therefore the observation of the Ld. assessing officer that there is no correlation proved by the assessee between the scrap written off in the books of account as obsolete item and scrap sales shown in the profit and loss account. He submitted that that the above issue is squarely covered in favour of the assessee by the decision of the coordinate bench in the appellant's own case for the assessment year 2007 - 08 and 2008- 2009 wherein similar ad hoc disallowance on account of obsolete items rejected in the course of manufacturing on the ground that the assessee could not substantiate the actual amount of loss with the scrap register was deleted by the tribunal, holding that keeping in view the size of the company and its operation and reasonableness of the claim and accepted past history deduction clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bench in the appellant's own case for the earlier years. We dismiss ground No. 1 of the appeal of the revenue. 194) The 2nd ground of appeal of the revenue is regarding the prepaid expenses not provided for by the appellant. It was found by the Ld. AO during the assessment proceeding that assessee has claimed certain expenditure which are not pertaining to this year but subsequent year. Therefore he held that the amount of Rs. 1 8752/- pertain to the subsequent year and therefore same are not allowable as expenses. In this year. On objection before the Ld. dispute resolution panel. It directed the Ld. assessing officer to delete the aforesaid disallowance by observing that under the Mercantile system of accounting. An item can be recognized as expense only. The right to incurred such expenses are has accrued to the assessee notwithstanding that such expensive pertain to a transaction of an earlier year. 195) Ld. Departmental representative relied upon the order of the Ld. assessing officer and submitted that the expenses are not pertaining to this year but to subsequent year and therefore there rightly disallowed by the Ld. assessing officer. 196) Ld. authorized representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the assessee. 39. Ld. DR fairly accepted that the issue has been decided in favour of the assessee by the decision of the Tribunal in assessee's own case for AY 2007- 08 (supra). 40. Accordingly, in view of above submissions of both the patties, we hold that when the assessee is following a consistent method of accounting which was accepted by the revenue in the earlier years, then the same cannot be disturbed by the revenue by taking a deviated stand without any justified and reasonable cause. Therefore, ground no. 7 to 7.2 of the assessee are allowed by respectfully following the decision of the Tribunal in assessee's own case for A Y 2007-08 (supra) and the AO is directed to delete the addition in the light of observations and findings of the Tribunal in assessee's own case for AY 2007-08." The Ld. departmental representative could not point out any change in the facts and circumstances of the case of the appellant as compared to the assessment year in which the above issue is decided by the coordinate bench. No other contrary decision was also pointed out therefore, respectfully following the decision of the coordinate bench in the appellant's own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the amount of all the aforesaid expenses notice retained during the relevant previous year only on receipt of bills from the vendor the liability crystallizing such year and is allowable deduction. During the relevant previous year. He further relied upon the several decisions of various high courts wherein on in identical facts and circumstances such expenditure are allowed as deduction where liability against such expenses cannot be ascertained with reasonable certainty. Further submitted that the aforesaid expenditure which crystallized during the year under consideration, although pertaining to the preceding year would be allowable as business deduction in the current year in which the bills of the vendor , service providers is Approved and admitted by the assessee. He further referred to the similar circumstances pertaining to the sales promotion expenditure, travelling expenditure, annual general meeting expenses, annual maintenance contract under that repairs and maintenance of plant and machinery expenditure, Gen plant expenditure, professional and legal charges, marketing professional charges and sharing debenture handling expenses. In the Andy referred that the issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties fairly agreed that the assessee claimed deduction for following miscellaneous expenses aggregating to Rs. 7,09,31,076 but in the assessment order, the amount of Rs. 7,15,91,826 has been incorrectly reported on account of totaling expenses. From page no. 14-16 of DRP order, we observe that the DRP has also pointed out mistake of totaling. At the outset, we observe that the Assessing Officer has nowhere disputed the genuineness of the expenditure claimed by the assessee and if assessee is denied deduction, then it would never get deduction for such expenses. From DRP Order, we also observed that the DRP has followed its decision in respect of immediately preceding year. At the same time, we observe that the mistake of totaling and the working given by the assessee has not been properly verified at the end of Assessing Officer and the same should have been verified by the Assessing Officer. Under above circumstances, we hold that the issue is squarely covered in favour of the assessee by the decision of Hon'ble ITAT 'C' Bench in assessee's own case for AY 2007-08 (supra) and we direct the Assessing Officer to allow the claim of the assessee after proper exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired up gradation periodically therefore, these expenses cannot result into the benefit of enduring nature as it becomes obsolete very fast. He further placed reliance on the plethora of decision of the jurisdictional High Court as well as other high courts. He further submitted that merely because the software has been listed in the depreciation schedule in the income tax rules. The license of a software cannot become a capital expenditure. He further submitted that in the case of the appellant itself. The coordinate bench is allowed as deduction in earlier years holding such expenditure as revenue in nature. 205) We have heard the rival contentions. We note that similar issue relating to disallowance of software expenses was deleted by the Tribunal in the assessee's own case for assessment year 2008-09. The relevant observations of the Tribunal for assessment year 2008-09 are as under: "59. On careful consideration of above submissions and contentions of both the parties and on careful perusal of the decision of Hon'ble High Court of Delhi in the case of CIT vs Asahi India Safety Glass Ltd. (supra) and CIT vs Amway India Enterprises (supra), we clearly observe that the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Tribunal in the assessee's own case for assessment year 2008-09. The relevant observations of the Tribunal for assessment year 2008-09 are as under: "175. It is a well-accepted legal proposition that the ratio of decisions of Hon'ble High Court are binding on the lower courts and the Tribunal until and unless they are set aside or modified by the higher forum i.e. Hon'ble Supreme Court of India. The issue of depreciation on computer peripherals is being contested by the department before the Hon'ble apex court and the case is pending. At the same time, we also take cognizance of decision of Hon'ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs. BSES Rajdhani Powers Ltd. (supra), wherein it has been held that the depreciation on computer peripherals is allowable @60%. In this situation, the contention of the revenue is not acceptable that certain components such as UPS and access ports are capable of use on stand-alone basis, independent of computer. Therefore, these are eligible for depreciation at the rate applicable to plant and machinery. Accordingly, ground no. 46 of the assessee is allowed by respectfully following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend as per the income tax act. 212) Ld. departmental representative relied upon the orders of the lower authorities and submitted that the provisions of deemed dividend applicable in the present case. 213) The Ld. authorized representative submitted that the assessee is a large size benefit sharing company having a gross turnover of Rs. 16,000 crores and with the dealer network across the country. He submitted that the financing company is engaged in the financing of the vehicle purchased by the dealers from the assessee does not have such huge infrastructure including the collection Centre at several places across the country like that maintained by the assessee company. In view of the above, the dealers of the assessee were also the customers of that finance company make payment of amounts due to that finance company to the assessee for onward remittance to the finance company. He therefore submitted that the about transaction is carried out only on account of convenience of facility to the dealers. Thus, there was no loan or advance is given by the finance company to the assessee. He further submitted that that assessee also does not enjoy the loan and advances given by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the amount cannot be deemed as dividend in the hands of the assessee. The arguments of the Ld. DR that since no interest was charged/ chargeable thereon from the assessee, the aforesaid loan cannot be said to be given in the ordinary course of business of HHFL is taken to its logical conclusion, supporting our view that this is not a loan or advance. 16.29.Considering the decision of the Hon'ble Delhi High Court and the intent of the Legislature in introduction of Section 2(22)(e) of the Act, we are of the view that the transaction in question would not fall within the provisions of section 2(22)(e) of the Act. Accordingly, this ground of the assessee is allowed." The Ld. departmental representative could not point out any change in the facts and circumstances of the case of the appellant as compared to the assessment year in which the above issue is decided by the coordinate bench. No other contrary decision was also pointed out therefore, respectfully following the decision of the coordinate bench in the appellant's own case for the earlier years, We dismiss ground No.6 of the appeal of the revenue 215) Ground No. 7 of the appeal of the revenue is against the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler to handle the business of dealership at its own expense as also to efficiently and promptly service the vehicles of the customers. e) The products sold by the company to the dealers and further sale by the dealers to the customers are with free service coupons, i.e., the sale price of the vehicles embeds therein free service obligation. f) On sale of vehicle by the dealer to the customer, it is the obligation of the dealer to service products sold to the customer, on customer bringing the vehicle to the dealer for free service. The payment in lieu of service provided by the dealers is made by the customers in the form of free service coupons received at the time of purchase of vehicles. The company honors such free service coupons when the same are presented by the dealers to the company, in terms of the reciprocal obligation of the company towards the dealers, incurred by the company at the time of sale of products to the dealers. g) The liability to deduct tax, if any, in law is on the service recipient viz., the customer and cannot be shifted on to the company merely because payment is made by the customer not in cash but by way of prepaid coupon, the liability where und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said amount in its taxable income and has furnished certificate from a Chartered Accountant in the prescribed form, to this effect. n) It is submitted, that considering the legislative intent, the provisions of section 40(a)(ia) of the Act needs to be liberally construed and no disallowance could be made under that section, where tax has been paid by the recipients. o) Without prejudice, as discussed in detail in assessee's appeal, the assessee was under the bonafide belief that no tax was required to be deducted there from and accordingly, having regard to the decision of CIT v. Kotak Securities Ltd.(Supra), no disallowance is warranted under section 40(a)(ia) of the Act. p) Further, without prejudice, it is submitted, that since the payees have also paid tax on the income received/ receivable from the applicant, no disallowance could be made under section 40(a)(ia) of the Act for alleged default in deduction of tax at source by the appellant. The assessee relies upon submissions in assessee's appeal that amendment by way insertion of second proviso to section 40(a)(i), being clarificatory in nature, has retrospective application and, therefore, where payees have paid taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As already stated, even f it taken as a service availed by the assessee, sec. 194J is not attracted as this is not a technical service. 29.43.Revenue has placed reliance in Circular No. 8/2009 dated 24-11-2009. In this circular it was clarified that payments made by TPA on behalf of insurance company to Hospitals are liable for deduction of tax at source. The view in this case is that the service is a professional service in the field of medical service. Hence Sec. 194J was made applicable. The same does not apply here. Even otherwise, this proposition as a matter of fact supports of the case of the assessee. In the case of the assessee, the dealer is playing a role similar to that of the TPA in as much it is making payment to the person doing the repair job. This payment made for service rendered is only being made by the dealer. Applying the proposition laid out in the Board Circular, technically it is the dealer who is liable to deduct tax at source on payments made to the service provided for doing the repair jobs but not the assessee. The subsequent reimbursement made by the assessee to the dealer cannot be covered under the provisions of sec. 194J of the Act. 29.45. On thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reimbursement of expenses does not constitute income in the hands of the recipient and therefore the assessee was not liable to deduct tax at source there from. He placed reliance upon the plethora of decision including the decision of coordinate bench in appellant's own case for the earlier year wherein it has been held that the disallowance of expenditure on account of reimbursement of the out-of-pocket expenses incurred by the professional benders are not hit by the provisions of the non-deduction of tax at source because there in the nature of the reimbursement. 222) We have heard the rival contentions. We note that similar issue relating to disallowance relating to re-imbursement of professional expenses was deleted by the Tribunal in the assessee's own case for assessment year 2007-08 which was followed in assessment year 2008-09. The relevant observations of the Tribunal for assessment year 2007-08 are as under: "35.8. It is the case of the assessee that it had reimbursed the expenses incurred by various consultants and vendors on travelling and out of pocket expenses. It is also claimed that out of an amount of Rs. 10.68 lacs expenses to the extent of Rs. 6.01 lacs were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al difficulties/impossibilities in producing invoices for petty expenses like local conveyance, telephone bills, etc. The employees are only required to submit details of expenditure incurred in specified form, on basis of which travel bill is settled. The Ld. AO disallowed the aforesaid expenditure, aggregating to Rs. 190.86 lacs, on the ground that the aforesaid reimbursements were not backed by bills/invoices of actual expenditure incurred by the employees, which is necessary in law before allowing deduction of foreign travel expenditure. On objection before Ld. DRP . It allowed the claim of the assessee and directed the AO to delete the proposed disallowance on the basis of the order of ITAT passed in the assessee's own case for AY 2007-08 and 2008-09. Therefore, revenue is aggrieved by the order of the Ld. dispute resolution panel and therefore in appeal before us. 224) The Ld. departmental representative relied upon the orders of the Ld. assessing officer and vehemently supported is order stating that protection to be deducted on the reimbursement of foreign travel expenses paid to the directors, and employees and therefore the disallowance is rightly made by the Ld. assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2008-09. The relevant observations of the Tribunal for assessment year 2007-08 are as under: "51.15.The assessing officer in this case has not doubted the fact that employees/ directors of the company travelled abroad and the fact that they have incurred incidental expenses in foreign currency. The reason for disallowance is that employees have not furnished to the assessee evidence in support of the fact that they have incurred conveyance, boarding and lodging expenses etc. When reasonable amount of daily allowance is fixed as per the rules of the company and when these D.A. rules are followed by the assessee, in our view, the incurring of expenditure by the employees is not to be doubted. Even in cases where officers of the government of India travel abroad, daily allowance is given and vouchers for such expenditure are not insisted because of practical difficulties in submitting bills/ vouchers of petty expenses. In such circumstances, what is to be examined by the assessing officer is the reasonableness of the expenses incurred as compared to the general rates of expenses and allow the same. The assessee submits that the fixed per diem allowance payable to employees d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to construct manufacturing plant thereon. The AO also alleged that the aforesaid payment of lease enhanced the profit earning apparatus of the assessee whose benefit was of enduring nature and therefore was capital in nature. On objection before Ld. DRP, the Ld. DRP , after taking the assessee's submissions on record and considering the case-laws on the issue, directed the AO to delete the proposed disallowance. 228) Ld. departmental representative submitted that the disallowances made by the Ld. assessing officer based on the reasoning that the aforesaid premium was paid to acquire the right and interest in the land which is resulted into acquisition of capital asset in the form of land and further the benefit of enduring nature in the capital field is obtained by the appellant and therefore the expenditure incurred by the assessee was in capital in nature and therefore rightly disallowed by the Ld. assessing officer further more is recess it is not any intangible asset which is eligible for depreciation according to the income tax act. 229) The Ld. authorized representative submitted that the assessee has not acquired any capital asset and he also raised the alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 329 ITR 479 (Guj)- Revenue's SLP Dismissed in SLP No.33784/09 vide order dated 4.12.2009, reported at 325 ITR (st) 6. * CIT v. H. M.T. Ltd. (No. 2): 203 ITR 820 (Kar) * CIT v. UCAL Fuel Systems Ltd.: 296 ITR 702 (Mad.) * CIT v. Gemini Arts P. Ltd.: 254 ITR 201 (Mad.) (SLP dismissed) * United Phosphorus Ltd. v. ACIT: [2015] 230 Taxman 596 (Gujarat) * M/s. Lupin Limited v. JCIT: ITA No.5088/Mum/2005 (Mum. Trib.) * Emerson Network Power (India) P Ltd v. ACIT: ITA No. 118/Mum/2010 (Mum. Trib.) * GMM Pfaudler Ltd. vs. JCIT: ITA No. 2627/Ahd/2008 (Ahd. Trib.) g) In view of the aforementioned legal position, it is submitted that the assessing officer has erred in treating the impugned payment on account of premium paid to take land on lease as capital expenditure. h) In all fairness, it is pointed out that a contrary view has been taken by the Delhi High Court in the case of GAIL India Ltd. v. JCIT: [2012] 211 Taxman 587. However, SLP bearing SLP No(s).12614-12615/2013 there against has been admitted by the Supreme Court vide order dated 07/05/2014 and is pending disposal. 2) On claim of depreciation on these rights as intangible assets a) premium would fall within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for exemption from capital gain on compulsory acquisition of lands and building also includes exemption for interalia transfer of "any right in land or building"; f) Further, analogy can be drawn from the decision of Bombay High Court in the case of CIT v. Tata Services Ltd.: 122 ITR 594, wherein it was held that the word "property" of any kind used in section 2(14) of the Act is a word of the widest amplitude and would include any right which can be called "property" in the definition of "capital asset". In that case, the right to obtain conveyance of immoveable property was held to be a capital asset. g) The Delhi High Court in the case of Bawa Shiv Charan Singh v. CIT: 149 ITR 29, held that the word "property" used in section 2(14) is a term of the widest import and signifies every possible interest which a person can acquire, hold and enjoy. It was held that tenancy right/right to continue in the possession of a property as a tenant, is a valuable right, which falls within the meaning of the term "capital asset" under section 2(14) of the Act. The aforesaid decision has been noted with approval by Supreme Court in D.P. Sandhu Bros., Chembur P. Ltd.: 273 ITR 1 (SC).T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets/rights acquired by an assessee by way of slump sale or amalgamation, as the case may be, included lease/leasehold rights, which was held to be eligible for depreciation under section 32(1)(ii) of the Act as falling within the scope of 'business or commercial rights': * Areva T & D India Ltd. & Ors. vs. DCIT: 345 ITR 421 (Del.) * ThyssenKrupp Elevator (India) (P.) Ltd. v. ACIT: 167 TTJ 131 (Delhi - Trib.) * Cosmos Co-op Bank Ltd. v. DCIT: 64 SOT 90 (Pune) m) Reliance, in this regard, is placed on the following decisions, wherein it has been held premium paid for acquisition of leasehold rights would fall within the meaning of 'business or commercial rights' under section 32(1)(ii) of the Act and would accordingly be eligible for depreciation under that section: * East India Minerals Limited V. JCIT: ITA No.224/CTK/2012 (Cuttack) * NMDC Ltd v JCIT: ITA No 714 and 885/Hyd/2012 (Hyd.) * Tirumala Music Centre Pvt Ltd v ACIT: ITA No 37/Hyd/2012 (Hyd.) Therefore he submitted that for the aforementioned reasons sticking to his main plea that lease premium in the facts and circumstances of the case is an allowable revenue expenditure, in the event, it is held to be capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Limited (1965) 57 ITR 422 and DurgaMadiraSangh vs. Commissioner of Income Tax (1969) 72 ITR 769. In all these cases, the Court upheld the Revenue's contention and stated that the expenditure towards acquisition of lease amounted to "brining into existence an asset or advantage for enduring benefit of the business" and was properly attributable by way of capital expenditure - of (Assam Bengal Cement Co Limited). In Panbari Tea Company Limited (Supra), the Court underlined the fact where the party consciously chose to assign two different meanings to the expressions "Premium" and "Rent". The Court would not be justified in concluding that the premium paid constituted advance rent. Significantly this Court notices that in Panbari Tea Company Limited, the lease arrangement itself were for a period of 10 years, despite which the Supreme Court held it to constitute a capital asset. In the present case, unlike in Madras Auto Services or other decisions of the Supreme Court cited by the assessee, the lease arrangements are for a substantially long period i.e. 60-95 years. That the arrangements do not confer outright ownership rights to the lessee is beside the point as the enjoyme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this stage, which was not objected to by the DR. In order to answer the aforesaid plea, the first issue that arises is whether the appellant has acquired any capital asset on payment of premium by entering into the lease agreement. Once we apply the decision of the Hon'ble Delhi High Court in the case of GAIL India (supra), the premium paid has been held to be not allowable revenue expenditure, but a capital expenditure on the ground that assessee/lessee acquires substantial rights equitable to an owner under a long term lease entered with the lessor. The aforesaid substantial rights are also capable for transfer/alienation for consideration, subject to prior approval from the lessor. The Hon'ble Bombay High Court in the case of CIT v. Tata Services Ltd: 122 ITR 594 is an authority for the proposition that any substantial right vesting with an assessee falls within the meaning of 'capital asset' under section 2(14) of the Act. Accordingly, by applying the ratio emanating from the decision of Bombay High Court (supra) read with the decision of Delhi High Court in the case of GAIL India (supra), rights vesting with the appellant in a long term lease; to be compendiously called as le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) Kancast v. ITO: 68 SOT 110 (Pune Trib.) In view of the above, we hold that leasehold right is an independent asset and does not fall in the category of asset as land. Having held as above, the next issue that arises is whether leasehold rights could be said to fall within the meaning of "business or commercial rights of similar nature" prescribed for depreciation under section 32(1)(ii) of the Act. The Hon'ble Delhi High Court in the case of Areva T&D India Ltd. v. DCIT: 345 ITR 421, has categorically held that an intangible asset in the nature of 'business or commercial rights' need not answer the description of "know-how, patents, trademarks, license, or franchises" specifically prescribed before the use of such expression under section 32(1)(ii) of the Act. The Hon'ble High Court held that any asset satisfies the test of larger genus of intangible assets relating to business, the same would be eligible for depreciation under section 32(1)(ii) of the Act. The relevant observations of the High Court in this regard are as under: "13. In the present case, applying the principle of ejusdem generis, which provides that where there are general words following particular and speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew is fortified by the ratio of the decision of the Supreme Court in Techno Shares & Stocks Ltd. ( supra) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a "license" or "akin to a license" which is one of the items falling in Section 32(1)(ii) of the Act. 14. In view of the above discussion, we are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section." We may at this stage also refer to the decision of the Hon'ble Supreme Court in the case of CIT v. Smif Securities Ltd: 348 ITR 302, wherein the apex Court held that goodwill arising on amalgamation of companies is also a separate intangible asset, which is eligible for depreciation under section 32(1)(ii) of the Act, although goodwill has also not been specified in the preceding list of assets. We have also noted that the Court/Tribunal in the following cases have allowed depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. dispute resolution panel to delete the disallowance of expenses incurred on account of corporate social responsibility amounting to Rs. 4 417308/- which was debited in the head community development expenses in the books of accounts of the appellant. The Ld. AO disallowed the aforesaid expenses on the ground that it was not incurred wholly and exclusively for the purposes of earning business income from the activity of manufacture and sale of two-wheelers and, therefore, such expenditure was not allowable deduction under section 37(1) of the Act. It was also observed that the aforesaid payments were in the nature of application of income, which were not allowable as expenditure under the provisions of the Act and that the assessee failed to establish with necessary documentary evidences, the onus cast upon it as per law. On objection before the Ld. DRP, after taking the assessee's submissions on record and considering the case-laws on the issue, directed the AO to delete the proposed disallowance. 232) The Ld. departmental representative relied upon the order of the Ld. assessing officer and submitted that the corporate social responsibility expenditure are not allowable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and publicizes the products, viz., two-wheelers manufactured and sold by the assessee. The control of traffic in the area around the factory premises also helps in saving the time of assessee's staff, employees and labour in order to reach the factory premises. He submitted that Expenses on construction / renovation of the school was incurred on aforesaid activity for schools located in the vicinity of the assessee-company where children of employees of the assessee company were studying, and the same was incurred to provide good education facility to the children of employees as a measure of staff/employees welfare. Thus, it will be appreciated that the expenses on aforesaid activities incurred for public welfare, in order to promote goodwill/name of the assessee or to impart employees' welfare, is an allowable business deduction under section 37(1) of the Act. Further, where expenditure is incurred for public welfare, in order to promote goodwill/name of the assessee or to impart employees' welfare, the same is an allowable business deduction under section 37(1) of the Act. He further referred to the following decisions holding that expenditure incurred to promote goodwill/na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of commercial / business expediency, the same is allowable as business deduction under section 37(1) of the Act: (i) CIT vs. Walchand& Co.: 65 ITR 381 (SC) (ii) J.K. Woollen Manufacturers vs. CIT: 72 ITR 612(SC) (iii)Aluminium Corporation of India Ltd. vs. CIT: 86 ITR 11 (SC) (iv) CIT vs. PanipatWoollen& General Mills Co. Ltd.: 103 ITR 666 (SC) (v) S.A. Builders: 288 ITR 1(SC) (vi) J.J. Enterprises v. CIT: 254 ITR 216 (SC) (vii) CIT v. Dalmia Cement (P.) Ltd: 254 ITR 377 (Delhi) 234) Therefore he submitted that For the aforesaid cumulative reasons, expenditure incurred under the head "community development expenses" for public welfare, in order to promote goodwill/name of the assessee or to impart employees' welfare, having been incurred for the purposes of business and on account of commercial / business expediency, is allowable business deduction under section 37(1) of the Act. 235) We have heard the rival contentions. We have given our findings while disposing ground of appeal no. 24 in the assessee's appeal supra that under section 37(1) of the Act, the expression 'for the purpose of business' is wide enough to cover expenses incurred on account of business/commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being allowed as a deduction under section 37(1) of the Act. Nevertheless, it is expenditure allowable as deduction under the Act. (ii) That the word "expenditure" primarily denoted the idea of spending or paying out or away. It was something which was gone irretrievably, but should not be in respect of an unascertained liability of the future. It must be an actual liability in praesenti, as opposed to a contingent liability of the future. (iii) The reasons given by the Tribunal for rejecting the claim of the assessee were not sound. Moreover, since the Tribunal had not recorded a finding as to whether the donation made by the assessee to the trust could be considered as "expenditure", the matter had to be remanded to the Tribunal for decision afresh in the light of the observations contained in the judgment." (ii) In the case of Mahindra and Mahindra vs. CIT 261 ITR 501, the Bombay High Court allowed deduction of expenditure incurred by the assessee in making initial contribution to the approved superannuation fund to an educational society, which was running school for children of employees, as business expenditure under section 37(1) of the Act. It was held that the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Plastics India Ltd. 292 ITR 115 (Mad.), the assessee claimed deduction in relation to contribution to Madras Chamber of Commerce, of which the assessee was a member, as business expenditure. It was contended that since the maintenance of the trade Chamber was for the furtherance of business interests of the constituents of the Chamber, the contribution made had to be treated as business expenditure. The assessing officer rejected the claim for deduction, which was allowed by the Tribunal. The Hon'ble High Court approved the view taken by the ITAT by holding that since activities of the Chamber of Commerce were closely linked with the welfare of corporate entities who were its members and whose interests were taken care of by the Chamber, the expenditure was deductible, irrespective of whether the expense incurred was compulsory or otherwise. (v) In the case of CIT v. Madras Refineries Ltd.: 266 ITR 170, the Madras High Court observed as under: "The concept of business is not static. It has evolved over a period of time to include within its fold the concrete expression of care and concern for the society at large and the people of the locality in which the business is loc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 37(1) as well. Therefore, merely because the expenditure in question was in the nature of donation, or, as per the words of the Commissioner (Appeals), 'prompted by altruistic motives', it did not cease to be an expenditure deductible under section 37(1). In the case of Mysore Kirloskar Ltd. (supra), the High Court observed that even if the contribution by the assessee is in the form of donations, but if it could be termed as expenditure of the category falling in section 37(1), then the right of the assessee to claim the whole of it as a deduction under section 37(1) cannot be declined. What is material in this context is whether the expenditure in question was in question was necessitated by business considerations or not. Once it is found that the expenditure was dictated by commercial expediencies, the deduction under section 37(1) cannot be declined. In the instant case, the expenditure on 20-Point Programme was incurred in view of specific directions of the Government of India. It could not but be the business interest of the assessee to abide by the directions of the Government of India which also owned the assessee. Further, the expenditure incurred for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 Lacs to Rajasthan state industrial development and industrial Corporation for setting up the plant on land already acquired by the assessee which was debited to the profit and loss account and claimed as revenue deduction. The Ld. assessing officer proposed disallowed this expenditure on the ground that the expenditure incurred in relation to the Nevada plant which was to be set up by the assessee during the year is in the nature of preoperative expenses and thus capital expenditure. The assessing officer was also that the aforesaid expenses were not reliable in terms of specific provisions of the income tax act contained in section 35D, wherein the assessee was eligible to claim amortization of this expenses on commencement of production from new plant. On objection before the Ld. dispute resolution panel, the above proposed disallowances were directed to be deleted. Therefore, the Ld. assessing officer is aggrieved and hence in appeal before us. 239) The Ld. departmental representative submitted that expenses incurred by the assessee on account of setting of the plant were in the nature of preoperative expenses and thus capital expenditure in nature as it is not come into pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nection with expansion of business, involving setting up of new unit, which satisfies the test of unity of control, interlacing of funds, common management, etc. would be allowable revenue deduction. (i) CIT v. RelaxoFootwears Ltd: 293 ITR 231 (Del.) (ii) Indo Rama Synthetics (I) Ltd. v. CIT: 228 CTR 278 (Del. HC) (iii) Enpro India Ltd. vs. DCIT: 113 Taxman 132 (Del.) (iv) Jay Engineering Works Ltd. v. CIT: 311 ITR 405 (Del.) (v) CIT v. Tata Chemicals Ltd: 256 ITR 395 (Bom.) (vi) Addl. CIT v. Aniline Dye Stuffs & Pharmaceuticals Pvt. Ltd.: 138 ITR 843(Bom) (vii) Kesoram Industries and Cotton Mills Ltd vs CIT: 196 ITR 845 (Cal .) (viii) Hindustan Aluminim Corporation Ltd. v. CIT: 159 ITR 673 (Cal.) (ix) CIT v. Rane (Madras) Ltd.: 215 CTR 250 (Chenn.) (x) Prem Spinning and Weaving Mills Co. Ltd. v. CIT : 98 ITR 20 (All.) (xi) CIT v. Shah Theatres P. Ltd. : 169 ITR 499 (Raj.) (xii) CIT v. MalwaVanaspati& Chemicals Co. Ltd., 149 CTR 283 (MP) (xiii) CIT v. Kerala State Industrial Development Corporation Ltd.: 182 ITR 62 (Ker.) (xiv) CCIT v. Senapathy Whitely Ltd. : 101 CTR 31 (Kar.) (xv) CIT v. Hindustan Machine Tools Ltd.: 175 ITR 212 (Kar). g) Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that since the same were incurred in relation to setting-up new plant, the same are capital expenditure. ........... Our findings &conclusion: 26.19.The case laws on this issue are discussed while disposing off ground no. 20. The issue is covered by the judgments of the jurisdictional High Court in the case of JAY Engineering Works (supra) and Relaxo Footwear Ltd. (supra) relied by the assessee and is in favour of the assessee. Thus, we respectfully follow the same and allow this ground of the assessee." 242) Both the parties admitted that there is no change in the facts and circumstances of the case compared to the assessment year for which the tribunal is decided except that in that particular year, it was the Haridwar plant and in this year's it is Neemrana Plant. The Ld. departmental representative also could not point out any other judicial precedent. In view of this respectfully following the above decision, we uphold the findings of the DRP and thus dismissed the ground No. 13 of appeal raised by the department. 243) Ground 14 of the appeal of the revenue is against disallowance of expenses incurred on repairs and maintenance of various assets incurred by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset has come into existence. He submitted that these expenses were incurred by the assessee mainly to preserve the existing assets and only to carry on the business more profitably and did not result in acquisition of any new asset. He further submitted that the above issue has been decided in the earlier years in case of the appellant by the coordinate benches set aside the issue to the file of the assessing officer for verification whether the expenditure was incurred on existing assets or not. He further submitted that in pursuance of that order, the Ld. assessing officer has passed order dated 26th of February 2015 after examining the nature of expenses incurred by the assessee has held that these expenses are revenue in nature and allowable to the assessee as deduction. 246) We have heard the rival contentions. We have seen the details of expenses incurred by the assessee. The same are routine expenses, which are quite reasonable having regard to the size and magnitude of the company. Such expenses are incurred year after year, which are always allowed deduction. We also note that similar issue was allowed in the assessee's own case for assessment year 2008-09. The relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The copy of the vouchers is marked as page no. 3A57 to 3A63(forming part of volume III). The details of the same are given below:- Sl.No Account Date of Location Text Narration Total 1 Building 19.01.2008 HHHD Construction of 3,60,409 2 Maintenance- 31.03.2008 HHHD Provision for 14,39,892 Total 18,00,301 From the above facts it is seen that in respect of building maintenance expenditure of Rs. 360409/- is in fact related to construction of Air Intake Room DG set. Expenditure is clearly capital in nature. As regard balance of the payment at Rs. 1439892, where the assessee claims them to be in the nature of repairs, the Auditor has reported that vouchers are not available. Only detail submitted by the assessee is a list the provision of capital nature work as on 31.03.08. Though the inner items appear to be in the nature of repairs but no vouchers were available to the Special Auditor during the course of audit or submitted to the AO in response to the reply of final show cause. Therefore, AO is inclined to go by the nature of these expenses as given by the assessee itself i.e. provision for capital na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted that there is no difference in the facts and circumstances of the present case and also the nature of expenditure involved in the present issue compared to the nature of expenses and issued decided by the coordinate bench in above order. Even before us, the revenue could not point out that any of the expenditure incurred by the assessee on account of repairs is not on the existing assets, but new assets have been purchased out of these expenses. In view of above facts we delete the disallowance made by the Ld. and assessing officer respectfully following the decision of the coordinate bench in assessee's own case for earlier years and consequent order of the Ld. and assessing officer after examining the complete details in the result, we direct the Ld. and assessing officer to delete the disallowance made of Rs. 1 825 5930/-by holding that expenditure incurred of Rs. 1 976 6172 is allowable repairs and maintenance expenditure on the existing assets of the company and is revenue in nature. In the result ground No. 14 of the appeal of the revenue is dismissed. 249) Ground No. 15 of the appeal of the revenue is against direction of the Ld. dispute resolution panel to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r while following the decision taken while disposing of the ground of appeal no. 36 for assessee's appeal we hold that expenditure incurred towards mobile phone in the facts of the appellant's case is an allowable revenue expenditure. Accordingly, the order of the DRP is sustained and the ground of appeal raised by the department is dismissed. 252) In the result appeal No. 2424/Del/ 2015 filed by the revenue in assessment year 2010-11 is partly allowed. A Y 2011-12 253) Now we come to the appeals of the parties for the assessment year 2011 - 12. The brief facts of the assessment proceeding is that that assessee has filed his return of income declaring total income of Rs. 1388, 79, 52, 025/- on 30/11/2011. As in the return of the assessee there were international transactions. Hence, the Ld. assessing officer made a reference under section 92CA(1) to the Ld. transfer pricing officer. The Ld. transfer pricing officer in his order under section 90 2CA of the income tax act, 1961 dated 29th of January 2015 determine the arm's length price of the international transaction of payment of export commission of Rs. 1 6124 0908/-, payment of model fees of Rs. 8 8428 7976/- and payment of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of software expenses charge to revenue in the draft order? 4. Whether Ld. DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 98.66 lacs made by the AO on account of disallowance of depreciation on wrong classification of assets under the head computer in the draft order? 5. Whether Ld. DRP was correct on facts and circumstances of the case and in law in deleting 'the addition of Rs. 513.98 lacs made by the AO on account of deemed dividend in the draft order? 6. Whether Ld. DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 206.73 lacs made by the on account of disallowance of foreign travelling expenses in the draft order? 7. Whether Ld. DRP was correct on facts and circumstances of the case and in Saw in deleting the addition of Rs. 48.84 lacs made by the AO on account of disallowance of lease rent of Haridwar in the draft order? 8. Whether Ld. DRP was correct on facts and circumstances of the case and in law in deleting the addition of Rs. 42.20 lacs made by the AO on account of disallowance of community development expenses in the draft order? 9. Whether Ld. DRP was correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt involved in the ground. Therefore, following our decision in ground No. 3 of the revenue is appeal in these order for assessment year 2010 -11 wherein we have dismissed. The ground of the revenue finding no infirmity in the order of the Ld. dispute resolution panel, we also dismiss ground No. 2 of the appeal of the revenue for this year too . 257) Ground No. 3 of the appeal of the revenue is against the disallowance of software expenses of Rs. 1 30.44 Lacs on account of software purchases made by the assessing officer which was directed by the Ld. dispute resolution panel for deletion. The parties before us submitted that this issue is identical to ground No. 4 of the revenue is appeal for assessment year 2010 -11, and their arguments also remains the same. They further submitted that there is no change in the facts and circumstances of the case. We have carefully considered the rival contentions and also perused the relevant ground of appeal of the revenue for earlier year in the case of the assessee and the reasons given by the Ld. assessing officer for proposing the disallowance and the reasons given by the Ld. dispute resolution panel directing the Ld. assessing officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guments remains the same. We have carefully considered the rival contentions as well as the order of the Ld. assessing officer and the directions of the Ld. dispute resolution panel on this issue. As the issue involved in this ground of appeal is similar to the ground No. 6 of the revenue is appeal for assessment year 2010 -11 and we have dismissed that ground of appeal for the reasons contained therein and therefore for the same reasons we also dismiss ground No. 5 of the appeal of the revenue for this year. 260) Ground No. 6 of the appeal of the revenue is against the disallowance of reimbursement of foreign travelling expenses to the directors, and employees amounting to Rs. 206.73 lakhs which is directed to be deleted by the Ld. dispute resolution panel. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 9 of the revenue's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 9 of the appeal of the revenue for assessment year 2010 -11, and also perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 9 of the appeal of the revenue is appeal is against the direction of the Ld. Dispute resolution panel to delete the disallowance on account of repairs expenditure amounting to Rs. 2 65.33 lakhs. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 14 of the revenue's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 14 of the appeal of the revenue for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the revenue for the assessment year 2010 -11. We have dismissed that ground of appeal vide ground No. 14 of that appeal and therefore for the same reasons we also dismiss ground number 9 of the appeal of the revenue. 264) Ground No. 10 of the appeal of the revenue was against the direction of the Ld. dispute resolution panel against the proposed addition of Rs. 3.19 Lacs made by the Ld. assessing officer on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing analysis undertaken by the assessee in respect of the international transactions of payment of export commission, model fee and royalty by aggregating with other transactions and applying TNMM was incorrect and each such transaction is required to be analyzed separately. 3. That the assessing officer/TPO erred on facts and in law in determining the arm's length price of international transaction of payment of export commission of Rs. 16,12,40,908 at NIL, allegedly applying CUP method holding that no independent party shall pay such commission in similar circumstances since - (a) An independent enterprise would compensate another party for ceding territory to it only when the latter party either withdraws from that territory or some restrictions are placed upon it. Nothing of that sort has happened to the AE. The AE continues its business as usual in those overseas territories. (b) The restriction to export products was imposed by the AE itself. It is not as if after the AE lifted its restriction some loss was caused to it that it needed to claim compensation from the assessee. The assessee is part of the Honda group. If the AE places a restriction by one agreement, li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer/TPO erred on facts and in law in disregarding that the payment of model fees has been approved by the RBI. 4. That the assessing officer/TPO erred on facts and in law in holding that arm's length price of international transaction of payment of royalty on exports made to AEs of Rs. 6,31,680 was NIL on the ground that - (a) the assessee was acting as a contract manufacturer and hence royalty paid as percentage of sale to the associated enterprises is not at arm's length as it amounts to collecting royalty on the sale to itself. (b) the assessee is making part of its sales to related parties and the benefit of purchasing components is reaped by the associated enterprise, the payment of royalty does not conform to arm's length price. 4.1 That the assessing officer/TPO erred on facts and in law in re-characterizing the appellant as a contract manufacturer not appreciating that even with respect to exports to associated enterprises, the appellant is operating in the capacity of full risk bearing entrepreneur. 4.2 That the assessing officer/TPO officer erred on facts and in law in not appreciating that the royalty is paid by the appellant on net sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms of purchase order, rates negotiated with the vendors / cannot be modified from a prior date, thereby holding that provisions have been incorrectly made by the appellant and are not allowable expenditure. 9.2 That the assessing officer erred in not appreciating that out of the total provision of Rs. 13,458 Lakhs, provision to the extent of Rs. 8,169.57 lakhs was made on the basis of actual price revisions approved upto the end of the relevant year and balance provision to the extent of Rs. 5288.51 lakhs was made on the basis of management's best estimate, on a scientific basis, which is an allowable business expenditure, as per mercantile system of accounting, under section 37(1) of the Act. 10. That the assessing officer erred on facts and in law in making an addition of Rs. 2.51 lacs by estimating the value of scrap lying in stock as at the end of the relevant previous year, on hypothetical / notional basis. 11. That the assessing officer erred on facts and in law in disallowing a sum of Rs. 28,76,95,776 in respect of provision for advertisement expenses (incurred at the head office) made at the end of the relevant previous year, which were reversed in the succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of AS 18, although not related in terms of section 40A(2)(b) of the Act. 14. That the assessing officer erred on facts and in law in disallowing amount of Rs. 1,15,82,750 on account of provision made towards commission paid on institutional sales to dealers, on the ground that the appellant failed to deduct tax at source under section 194H from the amount of aforesaid provision invoking provision of section 40(a)(ia) of the Act. 14.1 That the assessing officer erred on facts and in law in not appreciating that since the contract between the dealers and the appellant was on principal to principal basis, the provisions of section 194H were not applicable on the aforesaid amount of commission. 14.2 That the assessing officer erred on facts and in law in observing that the appellant did not dispute applicability of section 194H on the aforesaid amount of provision made towards commission payable to dealers. Without Prejudice 14.3 Without prejudice, that the assessing officer erred on facts and in law in not appreciating that since payees were not identified nor any right to receive commission accrued in the hands of payees, there was no obligation on appellant to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer erred on facts and in law in not appreciating that the appellant had a bonafide belief that tax was not deductible at source on aforesaid transaction of supply of goods. 15.6 Further, without prejudice, that the assessing officer erred on facts and in law in not appreciating that the disallowance under section 40(a)(ia) against the aforesaid expenditure cannot exceed the outstanding liability at the end of the year. 15.7 Further without prejudice, that the assessing officer erred on facts and in law in disallowing the aforesaid purchases for alleged failure to deduct tax at source from payments made there against, without appreciating that, since the recipient had considered sales to the appellant as part of the taxable income on which tax was duly paid, the same could not have been disallowed in the hands of appellant under section 40(a)(ia)of the Act. 16. That the assessing officer erred on facts and in law in disallowing aggregate expenditure of Rs. 4,00,945 incurred on account of booking of hotel to convene training courses on the ground that appellant failed to deduct tax at source there from under section 1941 of the Act. invoking provisions of section 40(a)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not appreciating that since the payees have also paid tax on the income receivable from the appellant, no disallowance could be made under section 40(a)(ia) of the Act for alleged default in deduction of tax at source by the appellant. 18. That the assessing officer erred on facts and in law in disallowing legal and professional expenses of Rs. 41,47,4607- , on the ground that the appellant failed to deduct tax at source there from under section 194J of the Act invoking provisions of section 40(a)(ia) of the Act. 18.1 That the assessing officer erred on fact and in law in not accepting the invoices raised by the vendors for reimbursement of expenses on the ground that the said claim were raised on the basis of self serving vouchers. 18.2 Without prejudice, that the assessing officer erred on facts and in law in not appreciating that since the appellant was under a bona fide belief that no tax was required to be deducted there from, no disallowance was warranted under section 40(a)(ia)of the Act 18.3 Without prejudice, the assessing officer erred on facts and in law in not appreciating that no disallowance against the aforesaid expenditure could be made exceeding the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of factory at Gurgaon / Dharuhera / Haridwar plant, on the ground, that in terms of proviso to said section additional depreciation is not admissible on any machinery or plant installed in any office premises. 20.1 That the assessing officer erred on facts and in law on holding that since computers at supervisory offices located within the factory premises were not directly involved in manufacturing activity, were not eligible for additional depreciation under section 32(l)(iia) of the Act. 20.2 That the assessing officer erred on facts and in law in observing that since the appellant was claiming depreciation on computers @60%, the same cannot be said to be plant and machinery for the purposes of the claim of additional depreciation under section 32(l)(iia) of the Act. 21. That the assessing officer erred on facts and in law in holding that expenditure aggregating to Rs. 3,87,55,10,269 and Rs. 92,79,73,203, incurred by the appellant during the relevant previous year on account of royalty/ technical guidance fees and model fees, respectively, paid to Honda Motor Co., Japan ("Honda") under the 'License and Technical Assistance Agreement' ("LTAA") was capital in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, profits were taxable under the head "business income". 22.2 That the assessing officer erred on facts and in law in observing that since the turnover from sale of investments was higher than the turnover from business of selling motor vehicles, therefore, the appellant was primarily engaged in activity of investments, which was to be regarded as business activity and, accordingly, income arising therefore was taxable under the head "business income". 23. That the assessing officer erred on facts and in law in making additional disallowance of Rs. 6.131acs under section 14A of the Act, by applying provisions of Rule 8D of the Rules. 23.1 That the assessing officer erred on facts and in law in applying provisions of Rule 8D of the Rules, without reaching a finding/recording satisfaction as to the incorrectness of the suo moto disallowance of expenses made by the appellant under section 14A of the Act. 23.2 That the assessing officer erred on facts and in law in attributing interest expenditure incurred during the year towards earning of exempt income by applying provisions of Rule 8D of the Rules. 24. That the assessing officer erred on facts and in law in enhancing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted by the appellant. 27.2 That the assessing officer erred on facts and in law in not appreciating that the price at which electricity was supplied by HSEB was not reflective of'market price1 since electricity supply was not adequately available from HSEB at Gurgaon as per its requirement. 27.3 That the assessing officer erred on facts and in law in observing that head office expenses were not considered while computing deduction under section 80IA of the Act for the power generating unit. 28. That the assessing officer erred on facts and in law in disallowing deduction under section 80IC of the Act by an amount of 95.85 crores, being the proportionate amount of purchases from vendors after processing of semi-finished goods supplied by the appellant, amounting to Rs. 577.15 crores, computed on ad-hoc basis, on the ground that manufacturing activity to the aforesaid extent of purchases was outsourced and, therefore, proportionate amount of profit derived from such purchases was not eligible for deduction under section 80IC of the Act. 28.1 That the assessing officer erred on facts and in law in observing that purchase of finished components from the vendors for furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80IA(10) of the Act, on the ground that eligible business at Haridwar earned extraordinary profits as compared to other non-eligible units by way of charging higher amount for basic price per unit of two-wheelers vis-a-vis price charged by other non-eligible units. 31.1 That the assessing officer erred on facts and in law in holding that part of the alleged extraordinary profits earned by the eligible unit should have been attributed to the head office on account of sales/marketing set-up at head-office. 32. That the assessing officer erred on facts and in law in disallowing deduction under section 80IC of the Act by an amount of Rs. 609.39 crores (restricted to Rs. NIL, being the balance deduction claimed under section 80IC) on the ground that part of profits earned by the eligible unit should have been attributed to advertisement and marketing activities carried out at head-office, and such profits were not derived from the business of manufacturing, which were only eligible for deduction under the aforesaid section. 32.1 That the assessing officer erred on facts and in law in holding that part of the profits earned by eligible unit at Haridwar were attributable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Rs. 1038,11,93,617 (restricted to Rs. NIL, being the balance deduction claimed under section 80IC), on an ad-hoc basis, on the ground that the appellant failed to give sufficient documentary evidence substantiating fulfillment of conditions precedent for claiming deduction under that section, without pointing out any such single condition not being fulfilled by the appellant. 34.1 That the assessing officer erred on facts and in law in not appreciating that all the conditions precedent for claiming deduction under section 80IC were satisfied by the appellant. 34.2 That the assessing officer erred on facts and in law in disallowing deduction under section 80IC of the Act, aggregating to Rs. 1038,11,93,617/-, on the ground that the appellant did not satisfy the following conditions alleged as pre-requisites for claim of deduction under the said section: (i) the appellant did not comply with provisions of Rule 18BBB(4) of the Rules, by not attaching the approval obtained from an appropriate authority for carrying on the eligible business; (ii) the appellant did not comply with the conditions specified in the Industrial Policy and consequent Notification issued by Uttaranchal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,4,5 and 6 of the appeal of the assessee. 270) Ground No. 7 of the appeal of the assessee was against the addition of freight in and import clearing expenses amounting to Rs. 59.83 lakhs to the cost of closings inventory. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 2 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 2 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 2 of that appeal and therefore for the same reasons we also allow ground number 7 of the appeal of the assessee. 271) Ground No. 8 of the appeal of the assessee is against the addition on account of cost of rejection of semifinished goods and obsolete items to the value of the closing stock amounting to Rs. 0.59 Lacs. The parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 -11, We have allowed ground No. 5 of that appeal and therefore for the same reasons we also allow ground number 10 of the appeal of the assessee. 274) Ground No. 11 of the appeal of the assessee is against the disallowance of provision of head office expenses amounting to Rs. 28.77 crores which were reversed in the succeeding year. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 7 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 7 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No.7 of that appeal and therefore for the same reasons we also allow ground number 11 of the appeal of the assessee. 275) Ground No. 12 of the appeal of the assessee would is against the disallowance of Rs. 57.14 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against of this ground also remains the same. We have carefully perused the ground No. 10 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 10 of that appeal and therefore for the same reasons we also allow ground number 14 of the appeal of the assessee. 278) Ground No. 15 of the appeal of the assessee is against the disallowance of Rs. 4 095.55 crores on account of non-deduction of tax under section 194C of the income tax act for purchases. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 13 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 13 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al charges paid to the various consultant. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 8 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 8 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 8 of that appeal and therefore for the same reasons we also allow ground number 18 of the appeal of the assessee. 282) Ground No. 19 of the appeal of the assessee is against the disallowance of Rs. 27.47 crores on payment made to event organisations for failure to deduct tax at source. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 28 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 19 of that appeal and therefore for the same reasons we also allow ground number 21 of the appeal of the assessee. 285) Ground No. 22 of the appeal of the assessee is against the treatment given by the Ld. assessing officer to the gains derived from sale of investment as business income, whereas the assessee has treated them as capital gains.. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no.20 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 20 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 20 of that appeal and therefore for the same reasons we also allow ground number 22 of the appeal of the assessee. 286) G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground also remains the same. We have carefully perused the ground No. 24 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 24 of that appeal and therefore for the same reasons we also allow ground number 25 of the appeal of the assessee. 289) Ground No. 26 of the appeal of the assessee is against the disallowance of commission paid to the managing director of the company when the AO has invoked the provisions of section 36 (1)(ii) of the act. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 25 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No.25 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No. 32 of that appeal and therefore for the same reasons we also allow ground number 28 and 29 of the appeal of the assessee. 292) Ground No. 30 of the appeal of the assessee was against the disallowance of deduction under section 80 I. C of the income tax act on account of inter-unit transfer of goods. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 30 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 30 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have allowed ground No. 30 of that appeal and therefore for the same reasons we also allow ground number 30 of the appeal of the assessee. 293) Ground No. 31 of the appeal of the assessee is against the disallowance of deduction under section 80IC of the act on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While deciding the appeal of the assessee for the assessment year 2010 -11, We have decided ground No. 34 of that appeal and therefore for the same reasons we also partly allow ground number 33 of the appeal of the assessee. 296) Ground No. 34 of the appeal of the assessee is against the disallowance of deduction of Rs. 1 0 38.12 crores under section 80 I. C for alleged on satisfaction of prerequisite condition for claim of deduction under the section. The parties before us submitted that the issue involved in this appeal is identical to the ground of appeal no. 29 of the assessee's appeal for assessment year 2010 -11 and there is no change in the facts and circumstances of the case and their arguments for and against of this ground also remains the same. We have carefully perused the ground No. 29 of the appeal of the assessee for assessment year 2010 -11, and also perused the facts of this ground of appeal and we also found that they are identical except the amount involved therein. While decidin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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