TMI Blog2017 (2) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... er:- No. Appeal No. Particulars 1. ITA No. 3253/Mum/2009 Assessee s Appeal for AY 2003-2004 2. ITA No. 3369/Mum/2009 Assessee s Appeal for AY 2004-2005 3. C.O.No. 3/Mum/2009 Revenue s Cross Appeal for AY 2003-2004 4. C.O.No.4/Mum/2009 Revenue s Cross Appeal for AY 2004-2005 5. ITA No. 1865/Mum/2012 Assessee s Appeal Against penalty order for AY 2003-2004 6. ITA No. 1866/Mum/2012 Assessee s Appeal Against penalty order for AY 2004-2005 Since common and inter-related issues are involved, we dispose-off all the appeals by this common order for the sake of convenience and brevity. First, we take up Assessee s Appeal ITA No. 3253/Mum/2009 as the lead case which is against the order of Ld. Commissioner of Income Tax (Appeals)-VIII [CIT(A)], Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e common agreement. The Tribunal in the immediately preceding year allowed the appeal of the assessee qua this expenditure and hence following the same, the expenses of the current year, being paid pursuant to same agreement, should also be allowed. But not convinced, CIT(A) dismissed this ground of assessee s appeal by distinguishing the facts of the impugned AY and after placing reliance on various judicial pronouncements and considering the statutory provisions of Section 37(1). Aggrieved, the assessee is in appeal before us. 4. The Ld. Counsel for assessee [AR] has raised multiple contentions in support of the assessee s claim, first and foremost being, that similar payment has been allowed by the Tribunal in assessee s favor in immediately preceding years. All these payments spring out of one single agreement and there is no reason to deviate from the earlier stand taken by the Tribunal, there being no change in facts or circumstances. Further, the assessee was associated with a foreign entity and was created in India for limited purpose of facilitating various projects on behalf of foreign entity. After fulfillment of its objectives, it was in the process of winding up its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. DR drew out attention to the fact that the order of Tribunal in immediately preceding year has been challenged by the revenue before Hon ble High Court and the same is pending and hence the Tribunal s decision of earlier years is not conclusive. Further, the agreement entered into between the assessee and the payee was only a colorable device and mere after thought of the assessee to evade the taxes and give legal shape to the illegal payments made by the assessee. The payee was entrusted with heavy legal responsibilities whereas they had no professional expertise, background or qualification to handle those proceedings. The agreement itself was full of discrepancies and also the bills raised by payee were mere piece of self serving documents. The payments were exchanged without rendering of services and the payee never actively participated in the stated Income Tax proceedings. The quantum of payment was exorbitant vis- -vis payment made to other professional. Further, the impugned payments were opposed to public policy as per Section 23 of the Indian Contracts Act and hence hit by explanation to Section 37(1). The assessee failed to produce any partner of the firm to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paid. So far as the legality of the payment is concerned, a perusal of the case laws cited by the Ld. AR, give rise to conclusion that there was no illegality in such mode of payment to non-professional entities. In particular, the following observation of the Hon ble Apex court in Mr. G [supra] deserves attention:- 11. Now it can be accepted at once that a contract of this kind would be legally unobjectionable if no lawyer was involved. The rigid English rules of champerty and maintenance do not apply in India, so if this agreement had been between what we might term third parties, it would have been legally enforceable and good. It may even be that it is good in law and enforceable as it stands though we so not so decide because the question does not arise; but that was argued and for the sake of argument even that can be conceded. It follows that there is nothing morally wrong, nothing to shock the conscience, nothing against public policy and public morals in such a transaction per se, that is to say, when a legal practitioner is not concerned. But that is not the question we have to consider, However much these agreements may be open to other men what we have to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1). It is also an admitted position that there was no violation of applicable TDS provisions and due TDS has been deducted from these payments by the assessee. Few TDS certificates have been placed on pages 23-26 of the assessee s paper-book. We have also perused Tribunal s order for AY 2002-2003 ITA No.3747/Mum/05 order dated 26/11/2008 where we find that the assessee suffered similar disallowance of ₹ 70,19,102/- qua professional payment made to the payee. This payment also arose from the terms of same agreement dated 01/11/2001.Similar allegations were also made by the revenue against the assessee. The coordinate bench of the Tribunal after examining the conduct of the assessee and payee concluded that the payee had rendered the services by attending various Income Tax proceedings and there was no violation of any provisions of law and hence, these expenses were allowable. We have also perused the various Income Tax Assessment orders passed by various authorities, which are placed in the paper-book wherein we find that that representative of the payee namely Sh.D.Kumar appeared from time to time and the perusal of invoices reflects that services of varied natures have been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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