TMI Blog2003 (1) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... and demand notice which were not in accordance with the law". (vii) "For that learned Assessing Officer may be directed to allow refund of tax paid with interest thereon". (viii) "For that the appellant seeks kind permission to raise new contention and grounds of appeal". 2. So far as the first and second grounds of appeal are concerned, the ld. A.R. emphatically stated that in order to attract capital gains, the precondition is cost of acquisition and cost of improvement. In order to substantiate his case, he cited certain case-laws in favour of the same which are analysed here as under one by one: CIT v. Home Industries Co. [1977] 107 ITR 609 (Bom.)- This case-law relates to attractability of capital gains on self-generated goodwill and the Hon'ble Bombay High Court has held that in case of the same, there was no transfer or sale of goodwill so as to attract section 12B(1) of the 1922 Act. (ii) Evans Fraser Co. Ltd. v. CIT [1982] 137 ITR 493 (Bom.)- In this case, the Hon'ble Bombay High Court has held the income chargeable to capital gains, tax is to be computed by deducting from the full value of the consideration "the cost of acquisition of the capital assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition of shares was nil to the assessee and, therefore, no capital gain could be levied thereon. (iv) CIT v. Sakarlal Balabhai Co. Ltd. [1996] 222 ITR 486 (SC)- In this case, the Hon'ble Apex Court has given direction to give reasoning regarding rejection of application under section 256(2) relating to attractability of capital gains on bonus shares. (v) Escorts Farms (Ramgarh) Ltd. v. CIT [1996] 222 ITR 509 (SC)-- In this case, the Hon'ble Apex Court explained the procedure for computation of cost of bonus shares on the basis of spreading over of the cost of original shares and the Hon'ble Apex Court has held that this method would apply to Dealers and Investors in shares. The Apex Court ultimately agreed with the High Court in this case that subsequent issue of bonus shares had the affect of altering the original costs of acquisition of shares. In reply to the ld. A.R.'s contention, the ld. D.R. cited certain Case-laws, which are also analysed as hereunder:-- Ld. DR. in the course of the hearing emphatically stated that CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC) does not have relevance in the case, since it relates to goodwill and the Id. A.R. has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned. Despite the A.O.'s query for filing details and asking for the I.T. File Nos., the same could not be furnished by the assessee in course of the hearing of the assessment proceedings. I totally agree with the contention of the assessee that business might have increased to a greater extent with the help of the services taken by Shri Taneja and Shri Surana. But under the provisions of the Income-tax Act, objective satisfaction of the Assessing Officer is the sine qua non of the principles of law. Since no documentary evidence in support of the services rendered by the persons concerned has been filed at the assessment stage, I totally agree with the ld. CIT(A) in confirming the disallowance. 5. The 4th ground relates to disallowance of travelling expenses. After hearing the rival submission and going through the materials available on record, I find justification in confirming the disallowance by the CIT(A). The CIT(A) on page 4, para 5 of his order has categorically stated that the assessee has utterly failed to furnish the details of her tour abroad giving details of the places visited, contacts made by her and results of her contacts during her foreign tour. Hence, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed in the first appeal. The said service charges were paid to Shri Sanjiv Taneja and Shri Vijay Kumar Surana. My learned brother has merely relied on the discussions made by the Assessing Officer in the assessment order to the effect that the assessee could not offer any details of the nature and the services rendered to her by above-mentioned two persons. However, the detailed agreement between the group consisting of the main associate M/s. Parasmani Investment Co. P. Ltd. and others (including the assessee) on the one hand and S/Shri Vijay Kumar Surana and Sanjiv Taneja on the other, which is dated 15-4-1991 clearly spells out the nature of services to be rendered by the abovementioned two persons to all the five members of the contracting group as below:-- 'Nature of services:-- You will provide services to us and our associates in the field of our business of financing, money lending, investment, leasing, hire purchase, trading, consultancy, agency, broking etc. as may be required from time to time. Within our various business matters you will help us by advising and rendering services as follows:-- (i) Raising of funds by way of loans, deposits, intercorporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing into consideration the purely oral nature of the services rendered by the two persons like advising the members of the group on various matters, it would be difficult to expect maintenance of any written documents in this regard. Services of this type do not generally carry any demonstrable evidences. 4. However, it is required to be noted that the Departmental authorities have not challenged the genuineness of the payments. The two persons concerned have also not been found to be closely connected with the assessee so as to make the transaction fall within the ambit of section 40A(2). It is also not the Departmental case that the amounts paid to these two persons came back to the assessee through some backdoor ways. My brother, Judicial Member has been of the view that under the provisions of the Income-tax Act, objective satisfaction of the Assessing Officer is a sine qua non of the principles of law. There cannot be any doubt about the same. But the 'objective satisfaction' should be based on the limits of reasonableness and the factual circumstances of the given case. In a case like this, where no documentary evidence in support of the services rendered by the persons con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1992-93 had come up for hearing before the "E' Bench of the Tribunal. Since there was a difference of opinion amongst the Judicial Member and the Accountant Member in regard to the following issue, I was nominated as Third Member by the Hon'ble President under section 255(4) of the Income-tax Act, 1961:-- "Whether, on the facts and in the circumstances of the case, the payment of service charges of Rs. 1,58,600 to Shri Sanjiv Taneja and Shri Vijay Kumar Surana should be allowed as a deduction?" 2. Identical issue came up before me as 3rd Member in the case of Parasmani Investment Co. (P.) Ltd. [IT Appeal No. 516 (Cal.) of 1996] for assessment year 1992-93. Facts and circumstances of the instant case being similar, the conclusion cannot but be the same as arrived in the aforementioned appeal. Agreeing thus with the conclusion of the Ld. Judicial Member and for the reasons given by me in the case of Parasmani Investment Co. (P.) Ltd. I uphold the disallowance of service charges in respect of payments to Sri Sanjiv Taneja and Sri Vijay Kr. Surana. 3. The orders passed in this case may be placed before the Bench for passing consequential order in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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