CIT CIR 9, Pune v. YAMAZAKI MAZAK SINGAPORE P LTD, Pune

ITA 1035/PUN/2006 | 2000-2001
Pronouncement Date: 27-07-2011 | Result: Dismissed

Appeal Details

RSA Number 103524514 RSA 2006
Assessee PAN AAACY0807K
Bench Pune
Appeal Number ITA 1035/PUN/2006
Duration Of Justice 4 year(s) 8 month(s) 26 day(s)
Appellant CIT CIR 9, Pune
Respondent YAMAZAKI MAZAK SINGAPORE P LTD, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 27-07-2011
Date Of Final Hearing 12-07-2011
Next Hearing Date 12-07-2011
Assessment Year 2000-2001
Appeal Filed On 31-10-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER I.T.A. NO. 1034 AND 1035/PN/2006 A.Y. 1999-00 AND 2000-01 YAMAZAKI MAZAK SINGAPORE PTE. LTD. ELPRO COMPOUND CHINCHWAD GAON PUNE-411 033 PAN AAACY 0807 K APPELLANT VS. ASSTT. CIT CIR. 9 PUNE RESPONDENT APPELLANT BY: SHRI S.H. AMBEKAR RESPONDENT BY: SHRI S.K. AMBASTH ORDER PER SHAILENDRA KUMAR YADAV JM BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-III PUNE B OTH DATED 29-8-2006 FOR A.Y. 1999-00 AND 2000-01 RAISE COMMON ISSUES. THEY WERE THEREFORE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. ITA NO. 1034/PN/2006 FOR A.Y. 1999-00 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS. 1) THE ASSESSMENT MADE BY THE LEARNED A.O U/S 143 R.W.S. 147 BE DECLARED NULL AND VOID AS THE NOTICE U/S 143(2) WAS ISSUED AFTER ONE YEAR FROM THE END OF TH E MONTH OF FILING THE RETURN OF INCOME U/S 148 BY THE APPELLANT. 2 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 WITHOUT PREJUDICE TO THE ABOVE GROUND THE ASSESSEE SUBMITS THE FOLLOWING GROUNDS: 2) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED ON TEMPORARY WOODEN PARTITIONS WAS REVENUE IN NATURE AS NO NEW ASSET WAS CREATED B Y THE ASSESSEE COMPANY AND IT SHOULD HAVE BEEN ALLOWE D AS A DEDUCTION FROM THE TOTAL INCOME. 2.1 ALTERNATIVELY THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED DEPRECIATION @ 100% IN RESPECT OF THE EXPENDITURE INCURRED ON TEMPORARY WOODEN PARTITIONS IN THE LEASEHOLD PROPERTY FOR OFFICE USE. 3. THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE FOREIGN EXCHANGE LOSS OF RS. 72 35 260/- WHICH WAS WORKED OUT AS PER AS II ISSUED BY ICAI INSTEAD OF SETTING IT ASIDE TO THE A.O TO DETERMINE THE LOSS A S PER RATIO LAID DOWN BY SPECIAL BENCH I N 83 ITD 151. 3.1 THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE ABOVE CLAIM OF FOREIGN EXCHANGE LOSS IN VIEW OF THE SUBMISSIONS MADE AND THE FACTS ON RECORD. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF COMMISSION OF RS. 1 00 000/- PAID T O BHATNAGAR ENTERPRISES. 4.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ABOVE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND NO DISALLOWANCE WAS JUSTIFIED. 5. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF TELEPHONE EXPENSES TO THE TUNE OF 2 0% OF THE TOTAL TELEPHONE EXPENDITURE WITHOUT APPRECIA TING THAT IN CASE OF A COMPANY NO SUCH DISALLOWANCE COUL D BE MADE. 5.1 WITHOUT PREJUDICE IT IS SUBMITTED THAT THE DISALLOWANCE IS ON A HIGHER SIDE AND MAY BE REDUCED SUBSTANTIALLY. 6. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INAUGURATION EXPENSES OF RS. 4 74 873/- WITHOUT APPRECIATING THAT THE ENTIRE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF THE ASSESSEE COMPANY. 3 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 3. THE ASSESSEE COMPANY IS A BRANCH OF YAMAZAKI MAZ AK SINGAPORE PTE. LTD. AT THE TIME OF HEARING THE LEA RNED AR FOR THE ASSESSEE CONTENDED THAT HE IS NOT PRESSING GROUND NO. 1. HENCE THE SAME IS DISMISSED AS NOT PRESSED . 4. THE NEXT ISSUE IS WITH REGARDS TO ALLOWABILITY OF EXPENDITURE INCURRED ON WOODEN PARTITION. THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS MADE INVESTMENT IN LEASEHOLD PROPERTY AFTER 30-9-2000 AMOUNTING TO RS. 74 86 252/- AND CLAIMED 100% DEPRECIATION. INVOKING THE PROVISIONS OF EXPLANATI ON 1 OF SUB-SECTION (1) OF SECTION 32 OF THE ACT THAT THE DEPRECIATION IS TO BE ALLOWED ON THE RENOVATION /EX TENSION OR IMPROVEMENT TO THE BUILDING NOT OWNED BY THE ASS ESSEE BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHTS OF OCCUPANCY AND HAS INCURRED CAPITAL EXPEND ITURE FOR THE PURPOSE OF BUSINESS THE ASSESSING OFFICER ALLOWED DEPRECIATION ON THE AMOUNT OF INVESTMENT OF RS. 74 86 252/- @ 10% AND THE EXCESS AMOUNT OF DEPRECIA TION WAS DISALLOWED. 4.1 THE MATTER WAS CARRIED IN APPEAL BEFORE THE FIR ST APPELLATE AUTHORITY WHEREIN AFTER CONSIDERING THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE THE C IT(A) OBSERVED THAT SUBSTANTIAL IMPROVEMENT HAS BEEN MADE BY 4 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 THE ASSESSEE BY MAKING INVESTMENT IN THE LEASEHOLD PROPERTY. FROM THE COPY OF AGREEMENT BETWEEN M/S. ELPRO INTERNATIONAL LTD. (LICENSOR) AND THE ASSESSEE (LI CENSEE) THE CIT(A) OBSERVED THAT THE SAID PROPERTY HAS BEEN TAK EN ON LEASE FOR TEMPORARY PERIOD. THE RATE PER MONTH FOR THE PERIOD OF FIRST TERM OF THREE YEARS IS AS FOLLOWS: 1-3-1998 TO 28-2-1999 RS. 1 27 500/- 1-3-1999 TO 29-2-2000 RS. 1 36 500/- 1-3-2000 TO 28-2-2001 RS. 1 46 000/- 4.2 FROM THE ABOVE FIGURES THE CIT(A) OBSERVED THA T THE ASSESSEE HAD TO PAY THE AMOUNT OF RS. 15 00 000/- APPROXIMATELY FOR THE FIRST YEAR OF LEASE COMPARING THE AMOUNT OF RENT PAID/PAYABLE BY THE ASSESSEE FOR THE FIRST YEAR AND THE AMOUNT INVESTED BY THE ASSESSEE IN RENOVATION OF THE PROPERTY WAS TO THE TUNE OF RS. 74 896 252/-. FROM THIS THE CIT(A) INFERRED THAT T HE AMOUNT HAS BEEN SPENT BY THE ASSESSEE IN ORDER TO H AVE ENDURING BENEFIT FROM THE INVESTMENT FOR FUTURE YEA RS. THE ASSESSEES SUBMISSION THAT THE PROPERTY HAS BEEN TA KEN ON LEASE FOR A PERIOD OF THREE YEARS ONLY IS ALSO CON TRADICTED BY CLAUSE 18 OF THE AGREEMENT WHICH STIPULATES THAT THE TERMS AND CONDITIONS REGARDING THE ESCALATION FOR T HE LICENSE FEES @ 7% PER ANNUM ARE SUBJECT TO REVISION AFTER THE END OF THE FIFTH YEAR. THE ASSESSEES SUBMISSI ON WAS FURTHER CONTRADICTED BY THE FACT THAT EVEN AFTER TH E LAPSE OF EIGHT YEARS THE ASSESSEE IS CONTINUING AS LICENSE E AND IS 5 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 ENJOYING THE BENEFITS OF THE INVESTMENT MADE BY IT IN THE RENOVATION OF THE PROPERTY IN THE VERY FIRST YEAR O F THE LEASE. FROM THIS THE CIT(A) OBSERVED THAT THE INV ESTMENT MADE BY THE ASSESSEE IS FOR ENDURING BENEFITS AND T HEREFORE OF THE NATURE OF CAPITAL EXPENDITURE. AS SUCH THE PROVISIONS OF EXPLANATION 1 OF SUB-SECTION (1) OF S ECTION 32 ARE ATTRACTED. ACCORDINGLY THE ASSESSING OFFICER HAS ALLOWED DEPRECIATION ONLY @ 10% ON AMOUNT OF INVEST MENT MADE AND THE CIT(A) HAS CONFIRMED THE SAME. THE SAM E HAS BEEN OPPOSED BY THE ASSESSEE BEFORE US. 4.3. THE STAND OF THE ASSESSEE IS THAT THE CIT(A) H AS FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED ON TEMP ORARY WOODEN PARTITIONS WAS REVENUE IN NATURE AS NO NEW A SSET WAS CREATED BY THE ASSESSEE AND IT SHOULD HAVE BEEN ALLOWED AS A DEDUCTION FROM THE TOTAL INCOME. ALTERNATIVELY IT WAS ARGUED THAT THE DEPRECIATION @ 100% IN RESPECT OF THE EXPENDITURE INCURRED ON TEMPORARY WOODEN PARTITIONS IN THE LEASEHOLD PROPERTY FOR OFF ICE USE BE ALLOWED. THE LEARNED AR FOR THE ASSESSEE RELYING ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CI T VS. HEDE CONSULTANCY PVT. LTD. (2002) 258 ITR 380 (BOM) WHICH HAS BEEN FOLLOWED BY A CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF KHANDELWAL JAIN & CO. VS. A CIT IN ITA NO. 570/PN/2003 FOR A.Y. 1998-99 SUBMITTED THAT THE 6 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 CLAIM OF THE ASSESSEE BE ALLOWED. ON THE OTHER HAND THE LEARNED DR SUPPORTED THE ORDER OF THE CIT(A). 4.3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE CASE OF H EDE CONSULTANCY PVT. LTD. (SUPRA) THE ASSESSEE HAS TAK EN GODOWN ON LEASE AND CONVERTED INTO OFFICE BY SPENDI NG RS. 9 20 436/-. FOR CONVERTING THE GODOWN PREMISES INTO OFFICE BY RENOVATING IT AND INCURRING EXPENSES ON INTERI OR DECORATION RESULTED IN REPLACEMENT OF THE EXISTING ROOF WITH THAT OF CEMENT SHEETS PLACEMENT OF FLOOR WITH THAT OF MARBLE PLASTERING OF WALLS AND CONSTRUCTION OF BAT HROOMS AND W.C ETC. THE ASSESSEE CLAIMED THE EXPENDITURE A S REVENUE EXPENDITURE WHICH WAS DISALLOWED BY THE ASS ESSING OFFICER AND THE TRIBUNAL ALLOWED THE SAME. HONBLE BOMBAY HIGH COURT OBSERVED THAT SINCE THE ASSETS CREATED B Y SPENDING THE SAID AMOUNTS DID NOT BELONG TO THE ASS ESSEE BUT THE ASSESSEE GOT THE BUSINESS ADVANTAGE OF USIN G MODERN BUSINESS PREMISES AT A LOW RENT THUS SAVING CONSIDERABLE REVENUE EXPENDITURE FOR A LONG PERIOD. THIS JUDGMENT OF BOMBAY HIGH COURT HAS BEEN FOLLOWED BY A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KHAN DELWAL JAIN & CO. (SUPRA). IN THE SAID CASE THE RELEVANT FACTS WERE THAT THE ASSESSEE SPENT THE AMOUNT ON WOODEN PARTITIONS/STRUCTURES ERECTED IN THE OPEN SPACE TAK EN ON 7 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 LEASE AND LICENSE FEE IN RESPECT OF WHICH DEPRECI ATION AT 100% WAS CLAIMED. THE ASSESSING OFFICER DISALLOWE D THE ASSESSEES CLAIM WHICH WAS CONFIRMED BY THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS. ON FURTHER APPEAL TH E TRIBUNAL HELD THAT THE EXPENDITURE WAS REVENUE IN N ATURE BEING INCURRED WITH A VIEW TO OBTAIN A COMMERCIAL ADVANTAGE AND FOR FACILITATING TRADING OPERATIONS. IN THE CASE BEFORE US THE ASSESSEE HAD TAKEN AN OLD BUILD ING WHICH WAS NOT INACTIVE USE FOR A LARGE NUMBER OF YE ARS BY THE OWNER M/S. ELPRO INTERNATIONAL LTD. THE PROPER TY WAS TAKEN ON LEASE AND LICENCE FOR A PERIOD OF THREE YE ARS AND NEEDED LOT OF REPAIRS TO ENABLE THE ASSESSEE TO USE IT FOR A BUSINESS PURPOSE FOR WHICH SUBSTANTIAL REPAIRS WERE CARRIED OUT. FURTHER APART FROM EXPENDITURE OF RS . 74 86 252/- THE ASSESSEE HAD CAPITALIZED RS. 24 36 062/- AS FURNITURE ON WHICH DEPRECIATION WAS CLAIMED. THE EXPENDITURE WAS INCURRED ON LEASED PREMISES AND AFT ER THE TERMINATION OF THE LEASE PERIOD THE ASSESSEE WOULD NOT BE ABLE TO USE THE PREMISES. THUS THE FACTS OF THE PR ESENT CASE ARE IN PARI MATERIA WITH THOSE IN THE CASE OF KHANDELWAL JAIN & CO. (SUPRA) WHEREIN FOLLOWING THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF HEDE CONSULTANCY PVT. LTD.(SUPRA) THE TRIBUNAL ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE IS OF RE VENUE IN NATURE. IN THIS VIEW OF THE MATTER WE HOLD THAT TH E 8 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF RENOVATION OF LEASED PREMISES IS REVENUE IN NATURE. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE. SINCE THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE IS OF REVENUE IN NATURE HAS BEEN ACCEPT ED BY US THE PLEA OF DEPRECIATION AT 100% GOES ACADEMIC. 5. THE NEXT ISSUE REGARDING ALLOWABILITY OF FOREIGN EXCHANGE LOSS OF RS. 72 35 260/.- WAS NOT PRESSED B Y THE LEARNED AR FOR THE ASSESSEE. THE SAME IS THEREFORE DISMISSED AS NOT PRESSED. 6. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F COMMISSION OF RS. 1 00 000/- PAID TO BHAGTNAGAR ENTERPRISES. THE ASSESSING OFFICER OBSERVED THAT TH IS AMOUNT WAS PAID AS COMMISSION TO BHATNAGAR ENTERPRI SES ON ACCOUNT OF HOUSE AGREEMENT MADE FOR JAPANESE STA FF. HE OBSERVED THAT TO MAKE AGREEMENT FOR OBTAINING HOUSE ON RENT FOR STAFF OR TO INCUR EXPENSES IN THAT CONNECT ION IS NOT THE DUTY OF THE ASSESSEE. THEREFORE THE EXPENSES INCURRED ON ACCOUNT OF COMMISSION RENT ETC. FOR MAKING ARRANGEMENT FOR ACCOMMODATION FOR THESE PERSONS COU LD NOT BE TREATED AS BUSINESS EXPENSES. THE SAME WAS CONFIRMED BY THE CIT(A) WHICH HAS BEEN OPPOSED BEFO RE US. 9 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 6.1. AFTER HEARING THE SUBMISSIONS OF BOTH THE PART IES AND PERUSING THE MATERIAL ON RECORD WE FIND THAT AT NO STAGE THE ASSESSEE TRIED TO ESTABLISH THAT IT WAS UNDER A N OBLIGATION TO MAKE ARRANGEMENTS FOR ACCOMMODATION F OR THE JAPANESE STAFF. IN FACT SAME WAS SENT BY THE HEAD OFFICE. AS SUCH THE AMOUNT SPENT AS COMMISSION BY THE ASSES SEE COULD NOT BE ALLOWED AS BUSINESS EXPENDITURE. THE SAME HAS RIGHTLY BEEN DISALLOWED BY THE REVENUE AUTHORIT IES. WE UPHOLD THE SAME. 7. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F TELEPHONE EXPENSES TO THE TUNE OF 20% OF THE TOTAL EXPENDITURE. THE ASSESSING OFFICER MADE DISALLOWANC E OF RS. 2 13 116/- BEING 25% OF TOTAL EXPENDITURE WHICH WAS RESTRICTED BY THE CIT(A) AT 20%. THE SAME HAS BEEN OPPOSED BY THE ASSESSEE BEFORE US. THERE IS NOTHIN G ON RECORD TO SUGGEST THAT THE ASSESSEE WAS MAINTAINING ANY RECORD OF THE TELEPHONES. THE ASSESSEE HAS FAILED TO MEET THE OBSERVATIONS OF THE ASSESSING OFFICER. THE A SSESSEE COULD NOT ESTABLISH THAT ALL CALLS MADE FROM THE SA ID TELEPHONES WERE FOR BUSINESS PURPOSES. THE ASSESSI NG OFFICER MADE THE DISALLOWANCE CONSIDERING THE PERSO NAL NATURE TO SOME EXTENT AND SO ALSO THE CIT(A) IN RES TRICTING THE DISALLOWANCE TO THE EXTENT OF 20%. THE ORDER OF THE 10 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 CIT(A) DOES NOT REQUIRE ANY INTERFERENCE FROM OUR H ANDS ON THIS ISSUE. THE SAME IS UPHELD. 8. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F INAUGURATION EXPENSES OF RS. 4 74 873/-. THE ASSES SING OFFICER OBSERVED THAT THE INAUGURATION EXPENSES DEB ITED TO THE PROFIT AND LOSS ACCOUNT INCLUDED THE EXPENSES W HICH HAVE TO BE INCURRED BY THE HEAD OFFICE. HE FOUND TH AT THE BRANCH OFFICE IS NOT HAVING THE VOUCHERS AND THE EX PENSES ARE INCURRED ONLY FOR THE ADVERTISEMENT OF THE HEAD OFFICE AND THEIR GOODS. FOR WANT OF PROOF OF BUSINESS EXPE NSES HAVING ACTUALLY BEEN INCURRED THE ASSESSING OFFICE R DISALLOWED AN AMOUNT OF RS. 4 74 873/- AND ADDED TH E SAME TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS UPHELD BY THE CIT(A) IN THE APPEAL. THE SAME HAS BEEN OPP OSED BEFORE US. 8.1. THE STAND OF THE ASSESSEE IS THAT PART OF THE INAUGURATION EXPENSES WERE BORNE BY THE HEAD OFFICE DIRECTLY AND THE HEAD OFFICE HAD RAISED THE DEBIT N OTE ON THE ASSESSEE. THE EXPENSES WERE INCURRED FOR PRINT ING PAMPHLETS BROCHURES ETC. IT WAS CONTENDED THAT TH E EXPENDITURE INCURRED IS PURELY BUSINESS EXPENDITURE AND IS ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCOME O F THE ASSESSEE. 11 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 8.2 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD WE ARE NOT INCLINED TO INTERFER E WITH THE DECISION OF THE CIT(A) ON THIS ISSUE. WE FIND THAT THE EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE ONLY O N THE BASIS OF A DEBIT NOTE RECEIVED FROM THE HEAD OFFICE WITHOUT HAVING ANY PROOF OF THE EXPENDITURE BEING ACTUALLY INCURRED BY THE ASSESSEE THAT TOO FOR ITS BUSINESS PURPOSE. SO THERE IS A POSSIBILITY OF INFLATION OF EXPENSES BY PREPAR ING ONLY MEMO TO REDUCE THE PROFITABILITY AS HEAD OFFICE AN D BRANCH OFFICE ARE NOTHING BUT THE SAME PARTY. THEY CAN PRE PARE ONLY DEBIT MEMO TO CLAIM THE EXPENSES. THE ASSESSE E COULD NOT JUSTIFY THAT THE ABOVE EXPENDITURE WAS MADE FOR THE PURPOSE OF BUSINESS. SO THE AUTHORITIES BELOW WERE JUSTIFIED IN MAKING THE DISALLOWANCES IN QUESTION. THIS REASONED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFE RENCE FROM OUR SID.E. WE UPHOLD THE SAME. ITA NO. 1035/PN/2006 FOR A.Y. 2000-01 9. IN THIS APPEAL FOLLOWING GROUNDS HAVE BEEN RAIS ED. ON THE FACTS AND IN LAW 1) THE ASSESSMENT MADE BY THE LEARNED A.O U/S 143 R.W.S. 147 BE DECLARED NULL AND VOID AS THE NOTICE U/S 143(2) WAS ISSUED AFTER ONE YEAR FROM THE END OF TH E MONTH OF FILING THE RETURN OF INCOME U/S 148 BY THE APPELLANT. WITHOUT PREJUDICE TO THE ABOVE GROUND THE ASSESSEE SUBMITS THE FOLLOWING GROUNDS: 2) THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE FOREIGN EXCHANGE LOSS OF RS. 1 26 20 134/- WHICH WA S 12 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 WORKED OUT AS PER AS II ISSUED BY ICAI INSTEAD OF SETTING IT ASIDE TO THE A.O TO DETERMINE THE LOSS A S PER RATIO LAID DOWN BY SPECIAL BENCH IN 83 ITD 151. 2.1 THE CIT(A) OUGHT TO HAVE ALLOWED THE ABOVE CLA IM OF FOREIGN EXCHANGE LOSS IN VIEW OF THE SUBMISSIONS AND THE FACTS ON RECORD. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF COMMISSION OF RS. 45 000/- PAID TO BHATNAGAR ENTERPRISES. 3.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ABOVE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND NO DISALLOWANCE WAS JUSTIFIED. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF TELEPHONE EXPENSES TO THE TUNE OF 2 0% OF THE TOTAL TELEPHONE EXPENDITURE WITHOUT APPRECIA TING THAT IN CASE OF A COMPANY NO SUCH DISALLOWANCE COUL D BE MADE. 4.1 WITHOUT PREJUDICE IT IS SUBMITTED THAT THE DISALLOWANCE IS ON A HIGHER SIDE AND MAY BE REDUCED SUBSTANTIALLY. 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF SEMINAR EXPENSES OF RS. 2 02 513/- WITHOUT APPRECIATING THAT THE ENTIRE EXPENDITURE WA S INCURRED FOR THE PURPOSE OF THE ASSESSEE COMPANY. 6. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF WARRANTY EXPENSES OF RS. 6 86 713/- 10. AT THE TIME OF HEARING LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUNDS NO. 1 AND 2. SO THE SAME ARE DISMISSED AS NOT PRESSED. 11. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE OF COMMISSION OF RS. 45 000/-PAID TO BHAGTNAGAR ENTERP RISES. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE US I N 13 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 ASSESSEES APPEAL IN ITA NO. 1034/PN/2006 FOR A.Y. 1999- 00. WE HAVE DISCUSSED AND DECIDED THIS ISSUE IN PAR A 6 AND 6.1 OF THIS ORDER. FOLLOWING THE SAME WE CONFI RM THE ORDER OF THE CIT(A) ON THIS ISSUE AND REJECT THE GR OUND RAISED BY THE ASSESSEE. 12. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE OF TELEPHONE EXPENSES TO THE TUNE OF 20% OF THE TOTAL EXPENDITURE. SIMILAR ISSUE CAME UP FOR CONSIDERATIO N BEFORE US IN ASSESSEES APPEAL IN ITA NO. 1034/PN/2 006 FOR A.Y. 1999-00. WE HAVE DISCUSSED AND DECIDED THIS IS SUE IN PARA 7 OF THIS ORDER. FOLLOWING THE SAME WE CONFIR M THE ORDER OF THE CIT(A) ON THIS ISSUE AND REJECT THE GR OUND RAISED BY THE ASSESSEE. 13. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE OF SEMINAR EXPENSES OF RS. 2 02 513/-. THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED SEMINAR EXPE NSES AMOUNTING TO RS. 2 78 814/- WHICH INCLUDED THE EXPE NSES INCURRED BY THE HEAD OFFICE AMOUNTING TO RS. 2 02 5 13/-. IT WAS EXPLAINED THAT THESE EXPENSES ARE INCURRED B Y THE HEAD OFFICE ON BEHALF OF THE BRANCH OFFICE AND THE ASSESSEE HAS ONLY PASSED JOURNAL ENTRY AND DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. FOR WANT OF PROOF OF EXPEN SES HAVING ACTUALLY BEEN INCURRED THE ASSESSING OFFICE R 14 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 DISALLOWED AN AMOUNT OF RS. 2 02 513/- AND ADDED TH E SAME TO THE INCOME OF THE ASSESSEE WHICH WAS UPHELD BY THE CIT(A) IN THE APPEAL. THE SAME HAS BEEN OPPOSE D BEFORE US. 13.1 THE STAND OF THE ASSESSEE IS THAT THE SEMINAR HAS BEEN CONDUCTED BY THE HEAD OFFICE AND THEREFORE THE REAL BENEFIT OF THE SEMINAR GOES TO THE HEAD OFFICE ONLY . THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH ITS CLAIM O F HAVING INCURRED THE ABOVE EXPENDITURE BY PRODUCING NECESSA RY EVIDENCE FOR THE PURPOSES AT ANY STAGE. THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE DISAL LOWANCE ON ACCOUNT OF FAILURE TO PRODUCE NECESSARY EVIDENCE FOR ACTUALLY INCURRING THE ABOVE EXPENDITURE WHICH HAS RIGHTLY BEEN CONFIRMED BY THE CIT(A). THE ORDER OF THE CIT (A) THEREFORE DOES NOT CALL FOR ANY INTERFERENCE AT OU R HAND. THE GROUND RAISED BY THE ASSESSEE IS THUS REJECTED. 14 THE NEXT ISSUE IS WITH REGARD TO CONFIRMATION OF DISALLOWANCE OF WARRANTY EXPENSES OF RS. 6 86 713/- . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DE BITED WARRANTY CLAIM EXPENSES AMOUNTING TO RS. 6 86 718/- . IT WAS EXPLAINED BY THE ASSESSEE THAT THESE EXPENSES A RE INCURRED BY THE ASSESSEE OUT OF COMMISSION INCOME RECEIVED. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE 15 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 ASSESSEE IS A BRANCH OFFICE AND THEY ARE PROVIDING SERVICES TO THE CUSTOMERS AFTER THE SALES MADE BY THE HEAD O FFICE. THEREFORE WHATEVER EXPENSES ARE INCURRED BY THE AS SESSEE ARE ONLY ON BEHALF OF THE HEAD OFFICE AND ARE NOT T O BE DEBITED TO THE PROFIT AND LOSS OF THE ASSESSEE. AC CORDINGLY THE ASSESSING OFFICER DISALLOWED THE WARRANTY CLAIM EXPENSES WHICH WAS CONFIRMED BY THE CIT(A). THE SA ME HAS BEEN OPPOSED BEFORE US. 14.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. IN THE PRESENT CASE THE ASSES SEE HAS NOT PRODUCED ANY DOCUMENT IN THE SHAPE OF AGREEMENT OR OTHERWISE TO ESTABLISH THAT THE WARRANTY CLAIM EXPE NSES WAS A LIABILITY TO BE MET BY THE ASSESSEE OUT OF TH E COMMISSION RECEIVED BY IT FROM THE PARENT COMPANY. UNDER THESE CIRCUMSTANCES THE ASSESSING OFFICER WAS JUST IFIED IN MAKING THE DISALLOWANCE OF RS. 6 86 173/- ON ACCOUN T OF WARRANTY WHICH HAS RIGHTLY BEEN CONFIRMED BY THE CI T(A). THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTER FERENCE AT OUR HANDS ON THIS ISSUE. THE GROUND RAISED BY THE A SSESSEE IS THUS REJECTED. 15. IN THE RESULT ASSESSEES APPEAL IN ITA NO. 1034/PN/2006 IS PARTLY ALLOWED WHILE THE APPEAL IN ITA NO. 1035/PN/2006 IS DISMISSED. 16 ITA NO.1034 AND 1035/PN/2006 YAMAZAKI MAZAK SINGAPORE A.Y. 1999-00 AND 2000-01 ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH JULY 2011. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 27 TH JULY 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II PUNE 4. THE CIT III PUNE 5. THE D.R ITAT A BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL