ACIT, New Delhi v. M/s Dalmia Bros. (P) Ltd., New Delhi

ITA 1243/DEL/2011 | 2006-2007
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 124320114 RSA 2011
Assessee PAN AAACD3525G
Bench Delhi
Appeal Number ITA 1243/DEL/2011
Duration Of Justice 6 month(s) 20 day(s)
Appellant ACIT, New Delhi
Respondent M/s Dalmia Bros. (P) Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-09-2011
Date Of Final Hearing 10-08-2011
Next Hearing Date 10-08-2011
Assessment Year 2006-2007
Appeal Filed On 10-03-2011
Judgment Text
BEFORE THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.887/DEL.2011 (ASSESSMENT YEAR : 2006-07) M/S. DALMIA BROS. (P) LTD. VS. ACIT CIRCLE 10 ( 1) 2 ND FLOOR INDRAPRAKASH BUILDING NEW DELHI. 21 BARAKHAMBA ROAD NEW DELHI. (PAN NO.AAACD3525G) ITA NO.1243/DEL.2011 (ASSESSMENT YEAR : 2006-07) ACIT CIRCLE 10 (1) VS. M/S. DALMIA BROS. (P) LT D. NEW DELHI. 2 ND FLOOR INDRAPRAKASH BUILDING 21 BARAKHAMBA ROAD NEW DELHI. (PAN NO.AAACD3525G) (APELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.L. DUJARI CA DEPARTMENT BY : SHRI SALIL MISHRA SENIOR DR O R D E R PER B.C. MEENA ACCOUNTANT MEMBER : BOTH THE CROSS APPEALS FILED BY THE ASSESSEE AS WEL L AS BY THE REVENUE ARISE OUT OF THE ORDER OF CIT (APPEALS)-XVII NEW D ELHI DATED 14.12.2010 FOR THE ASSESSMENT YEAR 2006-07. ITA NO.1243 & 887/DEL./2011 2 2. THE GROUNDS OF APPEAL OF ASSESSEES APPEAL READ AS UNDER :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.26 84 594/- CLAIMED AS DEDUCTION U/S 28(I) OF TH E INCOME TAX ACT 1961 READ WITH SECTION 37(1) OF THE SAID A CT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.2 17 348/-. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF TRAINING PROGRAM EXPENSES OF SHRI NEELABH DALMIA AMOUNTING T O RS.L 60 763/-. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RENT AMOUNTING TO RS.23 24 808/-. 5. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PR EJUDICE TO ONE ANOTHER. 6. THAT THE APPELLANT CRAVES PERMISSION TO ADD AL TER AMEND VARY OR DELETE ONE OR MORE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. THE GROUNDS OF APPEAL OF REVENUES APPEAL READ AS U NDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN ALLOWING THE RELIEF OF 25% OF SALARY EXPENSE INSPITE OF THE FACT THAT THE ASSESSE E WAS UNABLE TO SUBSTANTIATE THE EXPENSES CLAIMED UNDER THIS HEA D. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.70 25 000/- MADE BY AO U/S 68 OF THE I.T. ACT 1 961. 3. THE APPELLANT CRAVES TO LEAVE TO ADD ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. ITA NO.1243 & 887/DEL./2011 3 ITA NO.887/DEL/2011 3. THE RETURN OF INCOME FILED ON 30.11.2006 DECLARI NG A LOSS OF RS.22 76 178/-. THE RETURN WAS PROCESSED U/S 143(1 ) ON 31.03.2008. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS FINALIZED U/S 143(3) ON 26.12.2008 AT THE INCOME OF RS.2 15 69 420/-. THE ASSESSEE COMPANY IS CARRYING OUT BUSINESS OF RENDERING CONSULTANCY SERV ICES. THE TOTAL PROFESSIONAL AND CONSULTANCY RECEIPTS ARE RS.3 40 0 4 600/-. 4. IN THE GROUND NO.1 OF ASSESSEES APPEAL THE ISS UE INVOLVED IS CONFIRMING THE DISALLOWANCE OF RS.26 84 594/-. ASS ESSEE DEBITED BAD DEBT OF RS.68 63 369/- IN THE PROFIT & LOSS ACCOUNT. THE A O DISALLOWED THE TOTAL CLAIM OF RS.68 63 367/-. OUT OF THIS PART WAS CLA IMED AS BUSINESS LOSS. WITH REGARD TO THIS CLAIM OF RS.26 84 594/- ASSESSEE SU BMITTED THAT IN ADDITION TO CONSULTANCY SERVICES ASSESSEE IS ALSO INVOLVED IN EXPLORING VARIOUS PROJECTS FOR WHICH THIS EXPENDITURE WAS INCURRED. THIS EXPE NSE WAS INCURRED TILL AY 2001-02. THESE PROJECTS COULD NOT BE FINALIZED AND COULD NOT BE HANDED OVER TO THE CONSTITUENTS OR THE COMPANY. THE AMOUNT IS WRITTEN OFF DURING THE YEAR AND CLAIMED AS BUSINESS LOSS U/S 37 OF THE INCOME-T AX ACT. THE CIT (A) GRANTED THE RELIEF OF BAD DEBT CLAIM AND CONFIRMED THE ADDITION WHICH WAS CLAIMED AS BUSINESS LOSS U/S 37 OF THE INCOME-TAX A CT. THE CIT (A) CONFIRMED THIS ADDITION BY HOLDING AS UNDER : ITA NO.1243 & 887/DEL./2011 4 2.11. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. AR AND PERUSED THE ASSESSMENT ORDER PASSED BY THE AO. SO FAR AS THE AMOUNT OF RS.26 84 594/- IS CONCERNED THE APPE LLANT HAS FAILED TO EVEN ESTABLISH THAT THIS AMOUNT WAS IN TH E NATURE OF DEBT. THE CLAIM OF THE APPELLANT THAT THE AMOUNT IS ALLOWABLE AS BUSINESS LOSS IS DEVOID OF ANY MERIT. THE APPELLANT HAS NOT EVEN BOTHERED TO SPECIFY THE NAME OF THE PARTIES OR CLIENTS FOR WHOM THE EXPENDITURE WAS INCURRED AS CLAIMED BY IT. IT IS NOT THE BUSINESS OF THE ASSESSEE TO EXPLORE POWER PROJE CTS. OTHER THAN THE MERE CLAIM AND SUBMISSION MADE THE APPELL ANT HAS FAILED TO 'ESTABLISH WITH EVIDENCE THAT THE AMOUNT CLAIMED WAS ALLOWABLE AS BUSINESS LOSS. THE APPELLANT HAS FAILE D TO DISCHARGE IT ONUS FOR CLAIMING THIS AMOUNT AS ALLOW ABLE DEDUCTION. THE NECESSARY EVIDENCES LIKE AUDITED STA TEMENT FOR ACCOUNT OF EARLIER YEARS WERE FURNISHED DISCLOSING WHETHER THERE WAS DISCLOSURES IN THE EARLIER YEARS ABOUT TH E NATURE OF AMOUNT DEBITED IN POWER PROJECT ACCOUNT AND CORRESP ONDENCES WITH THE CLIENTS FOR WHOM THE APPELLANT IS CLAIMING TO HAVE INCURRED EXPENDITURES. IN VIEW OF THE ABOVE FACTUAL POSITION THERE IS NO MERIT IN THE CLAIM OF DEDUCTION OF RS.2 6 84 594/- AS ALLOWABLE BUSINESS EXPENDITURE FOR LOSS. THEREFORE THE ADDITION MADE BY THE AO IS CONFIRMED. THE ASSESSEE HAS COME IN APPEAL BEFORE US IN RESPEC T OF THIS CLAIM OF BUSINESS LOSS OF RS.26 84 594/-. ASSESSEE CLAMS THAT IT IS ALLOWABLE AS PER PROVISIONS OF SECTION 28(I) READ WITH SECTION 37 OF THE INCOME -TAX ACT. THUS BEFORE US THE CLAIM IS NOT OF BAD DEBT U/S 36(1)(VII) OF THE INCOME-TAX ACT. 5. THE LEARNED AR SUBMITTED THAT THIS EXPENSE WAS M ADE ON VARIOUS PROJECTS UP TO AY 2001-02 WHICH COULD NOT BE FINALI ZED AND FINALLY COULD NOT BE HANDED OVER TO CONCERNED PERSONS HENCE IT WAS A BUSINESS LOSS. THIS IS ALLOWABLE U/S 37 OF THE INCOME-TAX ACT TO WORK OUT INCOME UNDER HEAD PROFIT & GAIN OF BUSINESS. HE PLEADED THAT THIS WAS AN A LLOWABLE EXPENSES AND SAME SHOULD BE ALLOWED TO THE ASSESSEE. ITA NO.1243 & 887/DEL./2011 5 6. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS BEFORE THE AUTHORITIES BELOW IN RESPECT OF THESE EXPENSES. ASSESSEES CLAIM THAT ASSESSEE WAS DOING PROJECTS IN ADDITION TO CONSULTANCY SERVICE IS NOT PROVED. THE ASSESSEE HA S CLAIMED IT AS A BAD DEBT IN PROFIT & LOSS ACCOUNT. NOW THE CLAIM HAS BEEN M ADE AS A BUSINESS LOSS U/S 37 OF INCOME-TAX ACT. NO DETAILS OF ANY OF SUCH PR OJECTS HAVE BEEN FILED. THEREFORE THE ORDERS OF THE AUTHORITIES BELOW DESE RVE TO BE SUSTAINED. 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND PE RUSED THE RECORDS. THE ASSESSEE DEBITED THE AMOUNT AS BAD DEBTS IN THE B OOKS OF ACCOUNT. WHEN THE CASE WAS SELECTED FOR SCRUTINY IN THE SUBMISSI ONS THE ASSESSEE HAS STATED THAT THIS AMOUNT WAS INCURRED ON VARIOUS PROJECTS A S THE ASSESSEE ALSO INVOLVED IN EXPLORING VARIOUS PROJECTS IN ADDITION TO CONSULTANCY SERVICES. THIS EXPENDITURE CLAIMED TO BE INCURRED ON THESE PR OJECTS. ASSESSEE CLAIMS THAT THESE PROJECTS COULD NOT BE COMPLETED AND COUL D NOT BE HANDED OVER. BUT THE FACTS ON RECORD SHOW THAT NO DETAILS WERE FILED BEFORE THE AUTHORITIES BELOW AND BEFORE US ALSO WITH REGARD TO THIS CLAIM. NOTH ING ON RECORD TO ESTABLISH THAT THE ASSESSEE WAS ALSO INVOLVED IN EXPLORING VA RIOUS PROJECTS FOR WHICH THIS EXPENDITURE INCURRED. THERE IS NOTHING ON REC ORD WHICH COULD PROVE THAT THIS CLAIM RELATED TO THE PROJECT WHICH COULD NOT B E FINALIZED AND COULD NOT BE HANDED OVER TO THE CONSTITUENTS OR THE COMPANY. IN ABSENCE OF ALL THESE DETAILS IT WAS NOT TO BE CLAIMED AS BUSINESS LOSS U/S 37 OF THE INCOME-TAX ACT. ITA NO.1243 & 887/DEL./2011 6 OTHER THAN MERE CLAIM AND SUBMISSIONS IN THIS REGAR D THE ASSESSEE HAS COMPLETELY FAILED TO ESTABLISH WITH ANY EVIDENCE TH AT THE AMOUNT WAS AN ALLOWABLE BUSINESS LOSS. THUS THE ASSESSEE HAS ALSO FAILED TO ESTABLISH THAT THIS EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSES OF THE BUSINESS. SINCE THE ASSESSEE HAS FAILED TO DISCHAR GE THE ONUS WITH REGARD TO THE CLAIM WE UPHOLD THE ORDER OF THE CIT (A) AND D ISMISS THIS GROUND OF ASSESSEES APPEAL. 8. IN THE GROUND NO.2 THE ISSUE INVOLVED IS CONFIR MING OF RS.2 17 348/- FROM THE CLAIM OF BAD DEBTS. THIS AMOUNT WAS PART OF TOTAL CLAIM OF RS.68 63 367/- DETAILS ARE AS UNDER :- NAME OF THE COMPANY AMOUNT (RS.) PREMIER PAPER MILL LTD. 1 61 665/- RAIGARH PAPER 2 41 086/- TFC OLECHEMICAL 2 17 348/- POWER PROJECT 26 84 595/- DSS MOBILE 35 58 675/- TOTAL 68 63 367/- 9. THE CIT (A) HAS CONFIRMED THE ADDITION OF RS.2 1 7 348/- IN RESPECT OF THE TFC OLIO CHEMICALS LTD. BY HOLDING AS UNDER :- REGARDING THE AMOUNT OF RS.2 17 348/- IN RESPECT OF TFC OLIOCHEMICALS IT IS AN ADMITTED FACT THAT THE AMOU NT IS IN RESPECT OF CERTAIN EXPENSES RECOVERABLE PERTAINING TO MORE THAN TEN YE ARS BACK. IT IS NOT A CASE OF DEBT. THEREFORE AT THE OUTSET THIS AMOUNT CANNOT BE ALLOWED AS DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF. IT IS ALSO AN ADM ITTED FACT BY THE APPELLANT ITSELF THAT EVEN PRIOR TO RECEIPT OF ANY AMOUNT OR RENDERI NG OF ANY SERVICES THE SAID COMPANY I.E. TFC OLIOCHEMICALS GOT LIQUIDATED IN 19 97. THE APPELLANT HAS NOT ESTABLISHED BY WAY OF ANY EVIDENCE THAT THE AMOUNT OF RS.2 17 348/- WAS NECESSITATED BY ANY BUSINESS EXPEDIENCY. NO AGREEME NT OR ARRANGEMENT WITH THE PARTY IF ANY WAS PRODUCED EITHER BEFORE AO OR BEFO RE ME TO SHOW THE OBLIGATION UNDER WHICH THE AMOUNT WAS INCURRED. THEREFORE MER ELY BECAUSE THE AMOUNT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS DURIN G THE YEAR WILL NOT ITA NO.1243 & 887/DEL./2011 7 AUTOMATICALLY MAKE IT AN ALLOWABLE DEDUCTION. IN VI EW OF THE ABOVE THE ADDITION OF RS.2 17 348/- MADE BY THE AO IS CONFIRMED. 10. THE LEARNED AR SUBMITTED THAT THIS AMOUNT RECOV ERABLE FROM TFC OLIO CHEMICALS WAS A DEBT. THIS AMOUNT WAS INCURRED EX PENSES IN PURSUANCE TO THE CONSULTANCY AGREEMENT WITH TFC OLIO CHEMICALS P VT. LTD. . THESE AMOUNTS WERE REDUCED FROM THE EXPENSES HEAD IN THE YEAR IN WHICH THESE WERE INCURRED BY DOING SO THE INCOME OF THAT YEAR INCR EASED. NO EXPENSES WERE CLAIMED IN THAT YEAR HENCE THESE CANNOT BE SAID TO BE PRIOR PERIOD EXPENSES. DURING THIS YEAR THESE EXPENSES INCURRED BECOME UN RECOVERABLE HENCE THE SAME HAS BECOME BAD AND HAVE BEEN WRITTEN OFF THER EFORE THESE ARE ALLOWABLE U/S 36(1)(VII). CIT (A) UPHELD THE ADDIT ION BY HOLDING THAT NO DOCUMENTS IN THE FORM OF AGREEMENT WITH THE PARTY S UBMITTED EITHER BEFORE AO OR BEFORE HIM. CIT (A) HELD THAT IT WAS NOT A B AD DEBT. THESE WERE EXPENSES PRIOR TO ANY RECEIPT FROM THE TFC OLIO CHE MICALS. THE COMPANY WENT INTO LIQUIDATION IN 1997. HENCE THERE IS NO J USTIFICATION OF CLAIMING THE SAME IN THIS YEAR. IT IS ALSO NOT ESTABLISHED THAT THE EXPENSES WERE INCURRED FOR BUSINESS EXPEDIENCY. 11. ON THE OTHER HAND THE LEARNED DR SUBMITTED THA T THE ASSESSEE HAS FAILED TO ESTABLISH BY WAY OF ANY EVIDENCE THAT THI S AMOUNT OF RS.2 17 348/- WAS A DEBT OR IT WAS NECESSITATED BY ANY BUSINESS E XPEDIENCY. NO AGREEMENT OR ARRANGEMENTS WERE FILED WHICH COULD SHOW THAT A SSESSEE WAS UNDER OBLIGATION TO INCUR THESE AMOUNT. HE ALSO PLEADED THAT THE AMOUNT WHICH IS ITA NO.1243 & 887/DEL./2011 8 WRITTEN OFF MUST HAVE COME THROUGH THE PROFIT & LOS S ACCOUNT OF THE ASSESSEE. IT WAS A PRIOR PERIOD CLAIM WHICH IS NOT ESTABLISHE D BY ANY EVIDENCE THAT IT WAS A DEBT IN THAT PERIOD. HE PLEADED TO SUSTAIN T HE ORDER OF AUTHORITIES BELOW. 12. AFTER HEARING BOTH THE SIDES ON THE ISSUE WE A RE OF THE VIEW THAT THE ASSESSEE HAS FIRST TO ESTABLISH THAT IT WAS A DEBIT OUTSTANDING AND THE DEBIT HAS COME THROUGH THE PROFIT & LOSS ACCOUNT OF THE ASSES SEE. THE AMOUNT HAS BEEN OFFERED FOR TAXATION IN EARLIER YEARS. SINCE ASSES SEE HAD FAILED TO ESTABLISH THAT IT WAS A DEBT AT ALL MERE WRITING OFF AN AMOUNT WHI CH IS NOT PROVED AS DEBT THIS CLAIM CANNOT BE ALLOWED U/S 36(1)(VII) OF THE ACT. THE ASSESSEE HAS ALSO FAILED TO ESTABLISH THAT THIS WAS INCURRED FOR BUSI NESS EXPEDIENCY. SINCE THE ASSESSEE HAS ALSO FAILED TO PRODUCE ANY DOCUMENT WH ICH COULD SHOW THAT IT WAS A DEBIT WHICH INCURRED DURING THE NORMAL COURSE OF BUSINESS OF THE ASSESSEE. IN VIEW OF THESE FACTS WE CONFIRM THE O RDER OF THE CIT (A) AND DISMISS THIS GROUND OF ASSESSEES APPEAL. 13. THE GROUND NO.3 OF ASSESSEES APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF TRAINING PROGRAM EXPENSES OF SHRI N EELABH DALMIA AMOUNTING TO RS.1 60 763/-. WHILE DECIDING THE ITA NO.886/DEL/2011 FOR THE AY 2005-06 IN THE ASSESSEES OWN CASE VIDE ORDER DA TED 19.08.2011 WE HAVE DEALT THIS ISSUE AS UNDER :- 4. AT THE OUTSET OF HEARING THE LEARNED AR SUBMIT TED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE EARLIER ITA NO.1243 & 887/DEL./2011 9 YEAR ORDERS OF THE ITAT. THE FACTS REMAIN THE SAME . THIS WAS AN EXPENDITURE INCURRED ON FOREIGN STUDY OF SHRI NE ELABH DALMIA SON OF SHRI ANURAG DALMIA AN EMPLOYEE OF T HE COMPANY. THIS ISSUE IS COVERED IN FAVOUR OF REVENU E BY THE DECISION OF ITAT IN ASSESSEES OWN CASE IN ITA NO.2720/DEL/2006 FOR AY 2002-03 DATED 17.10.2008 WH EREIN THE ITAT HAS HELD AS UNDER :- 2. THE ISSUE FOR CONSIDERATION RELATES TO CONFIRMI NG THE DISALLOWANCE OF TRAINING PROGRAMME EXPENSES OF RS.18 92 379/-. THE FACTS OF THE CASE RELATING TO THIS GROUND OF APPEAL ARE THAT THE ASSESSEE. COMPANY DEB ITED THE TRAINING PROGRAMME EXPENSES OF RS.18 92 379/- I N RESPECT OF SHRI NEELABH DALMIA SON OF SHRI ANURAG DALMIA. THE EXPENSES INCURRED CONSISTS OF AIR TICKE TS TUITION FEE LIVING EXPENSES ETC. ON FURTHER. ENQUI RY THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IS AN ASS OCIATE COMPANY OF DALMIA GROUP OF COMPANIES AND THE EXPENSES WERE INCURRED IN THE GARB OF TRAINING OF S HRI NEELABH DALMIA BEING SON OF SHRI ANURAG DALMIA WHO WAS ADVISOR OF THE ASSESSEE AND WAS DIRECTOR OF OTH ER MAJOR COMPANIES OF DALMIA GROUP. THE EXPENSES INCURRED HAD NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE AND EVEN ON THE DATE OF ASSESSMENT ' SHRI NEELABH DALMIA WAS NOT AN EMPLOYEE OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESS EE HAS NOT DISCHARGED ITS ONUS TO ESTABLISH THAT SHRI NEEL ABH DALMIA WAS THE EMPLOYEE OF THE ASSESSEE COMPANY PRI OR TO HIS LEAVING ABROAD FOR STUDY NOR ANY DOCUMENTARY EVIDENCE OF THE TYPE OF TRAINING ALLEGEDLY TAKEN UP BY HIM WAS FILED. THE LETTER OF OFFER DATED 15/01/2001 ISSUED BY THE COMPANY TO SHRI NEELABH DALMIA WAS AN INTERNAL ADJUSTMENT MADE BY THE ASSESSEE WHICH COU LD NOT BE MADE AS A BASIS FOR ALLOWING DEDUCTION IN RE SPECT OF STUDY EXPENSES IN THE GARB OF TRAINING EXPENSES. IN OTHER WORDS IT WAS A COLOURABLE DEVISE ADOPTED BY THE ASSESSEE FOR CLAIMING DEDUCTION ON ACCOUNT OF STUDY EXPENSES ON A SON OF A DIRECTOR OF DALMIA GROUP OF COMPANIES IN THE GARB OF TRAINING EXPENSES. HE PLAC ED RELIANCE ON DECISION OF HON'BLE MADRAS HIGH COURT I N THE CASE OF M. SUBRAMANIAM BROS. VS. CIT 250 ITR 76 9 (MAD.) WHEREIN IT WAS HELD THAT THE AGREEMENT DRAWN TO ITA NO.1243 & 887/DEL./2011 10 GIVE COLOUR OF COMMERCIAL EXPEDIENCY COULD NOT BE RELIED UPON. THE ASSESSING OFFICER DISTINGUISHED TH E FACTS O[THE ASSESSEE'S CASE WITH THE CASE OF J. P. ADVANI & CO. LTD. VS. JCIT ITAT MUMBAH 'H'-BENCH 92 ITJ 175 O N WHICH THE ASSESSEE PLACED RELIANCE. SINCE THE ASSES SEE COMPANY WAS NOT ABLE TO EXPLAIN AND JUSTIFY NATURE AND COURSE OF STUDY AND ITS USEFULNESS FOR THE BUSINESS THE ASSESSING OFFICER DISALLOWED THE AMOUNT CLAIMED AS TRAINING EXPENSES. 3. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT SHRI NEELABH DALMIA WAS AN EXISTING EMPLOYEE IF THE ASSESSEE BEFORE LEAVING THE COUNTRY FOR DOING MBA A ND CONTINUED TO WORK AFTER COMPLETION OF STUDIES. RELI ANCE WAS PLACED ON THE COPY OF APPOINTMENT LETTER ISSUED TO SHRI NEELABH DALMIA AND THE BOARD'S RESOLUTION IN T HIS REGARD. IT WAS PLEADED THAT THE ASSESSEE'S CASE WAS SQUARELY COVERED BY THE DECISION OF ITAT IN THE CAS E OF J. P. ADVANI & CO. LTD. (SUPRA). THE ID. CIT (APPEA LS) EXAMINED THE MATTER IN THE LIGHT OF THE APPOINTMENT ORDER ISSUED AND THE BOARD'S RESOLUTION MADE IN THI S REGARD. HE ALSO EXAMINED THE AGREEMENT ENTERED INTO WITH SHRI NEELABH DALMIA. THE LD. CIT (APPEALS) OBSERVED THAT SHRI NEELAHH DALMIA GOT ADMISSION TO INDIANA UNIVERSITY USA THROUGH LETTER DATED 2ND MARCH 2001. SHRI NEELABH DALMIA PASSED HIS ALL IND IA SENIOR SCHOOL CERTIFICATE EXAMINATION IN THE YEAR 2 001 FOR WHICH THE RESULTS ARE GENERALLY OUT BY THE END OF MAY MEANING THEREBY SHRI NEELABH DALMIA ALREADY INTENDED TO GO TO USA TO PURSUE HIS HIGHER STUDIES IN INDIANA UNIVERSITY USA. EVEN VISA WAS ISSUED TO HI M ON 11/06/2001. THESE SEQUENCE OF EVENTS SHOWED THAT SHRI NEELABH DALMIA WAS TAKEN AS AN EMPLOYEE OF THE COMPANY ONLY WITH AN ULTERIOR MOTIVE OF SHOWING THE PERSONAL EXPENSES IN THE GARB OF BUSINESS EXPENSES IN THE CASE OF ASSESSEE COMPANY. THE AGREEMENT BETWEEN SHRI NEELABH DALMIA AND THE ASSESSEE WAS NOT A REGISTERED DOCUMENT. THE LD. CIT (APPEALS) FURTHER OBSERVED THAT AS PER THE AGREEMENT THE ASSESSEE COMPANY WAS TO INCUR EXPENSES TOWARDS TUITION FEE BOARDING & LODGING LIVING EXPENSES TO AND FRO PAS SAGE CHARGES ON ACTUAL BASIS AND OTHER INCIDENTAL AND RE LATED ITA NO.1243 & 887/DEL./2011 11 OUT OF POCKET EXPENSES NOT EXCEEDING US DOLLARS 100 0 PER MONTH AND ONE TIME EXPENDITURE FOR INITIAL ESTABLISHMENT / SET UP IN THE FIRST YEAR TO THE EXT ENT NOT EXCEEDING US DOLLARS 5000 AND FOR THE SUBSEQUENT YE AR SUCH ONE TIME PAYMENT WAS BE COMPENSATED AT THE DISCRETION OF THE COMPANY MEANING THEREBY THAT ALL THE EXPENSES EVEN DAY-TO-DAY EXPENSES WERE MET BY THE ASSESSEE WHICH COULD NEVER BE THE CASE IF A GENUIN E EMPLOYEE WITH NO RELATION WITH THE MANAGEMENT OF TH E COMPANY WENT ABROAD FOR PROSECUTING HIGHER STUDIES. THE ID. CIT (APPEALS) FURTHER OBSERVED THAT SHRI NEELABH DALMIA OBTAINED ADMISSION TO INDIANA UNIVERSITY MUCH BEFORE HIS JOINING THE SERVICES OF THE ASSESSEE COMPANY. NO BOND GOT FILLED LIP FROM SHRI NEELABH DALMIA AND THE ASSESSEE COMPANY NEVER OBTAINED ANY GUARANTEE FROM HIM IN CASE HE DEFAULT ED FROM THE TERMS AND CONDITIONS OF THE SO-CALLED AGREEMENT DATED 6/08/2001. HE ALSO OBSERVED THAT BEFORE AND AFTER THIS PARTICULAR SO-CALLED SPONSORS HIP THE ASSESSEE NEVER SENT ANY OF THE EMPLOYEES ABROAD FOR STUDIES / TRAINING IN COMMERCE / BUSINESS MANAGEMEN T ETC. THEREFORE IT WAS HARD TO BELIEVE THE CONTENTI ON 'THAT IN THE PRESENT GLOBAL AND MICRO-ECONOMIC MARK ET PROFESSIONAL MANAGEMENT IS BECOMING MORE IMPORTANT' FOR THE REASON THAT IF THE ASSESSEE WAS SINCERELY INTERESTED TO CATCH-UP WITH THE FAST CHANGING MARKE T CONDITIONS THEN WHY NO RECRUITMENT HAD BEEN DONE O F THE CANDIDATES HAVING EXPERIENCE IN PARTICULAR FIEL D AND/OR A PERSON ALREADY HAVING ACQUIRED SPECIALIZED KNOWLEDGE OF PARTICULAR FIELD. THE ASSESSEE COULD N OT EXPLAIN THIS. THE ID. CIT (APPEALS) THEREFORE AGR EED WITH THE ASSESSING OFFICER THAT THE STUDY EXPENSES WERE NOT RELATED TO BUSINESS OF THE ASSESSEE. HE ACCORDI NGLY UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 4. BEFORE US SIMILAR ARGUMENTS WERE MADE BY THE LD . AR OF THE ASSESSEE. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 5. WE HAVE HEARD BOTH THE PARTIES. THERE IS NO DISPUTE THAT SHRI NEELABH DALMIA PASSED HIS ALL IND IA SENIOR CERTIFICATE EXAMINATION IN MAY 2001. IT IS ALSO ITA NO.1243 & 887/DEL./2011 12 ADMITTED FACT THAT HE GOT ADMISSION TO INDIANA UNIVERSITY USA MUCH BEFORE HE GOT SELECTED IN THE ASSESSEE COMPANY ON 1/06/2001. SHRI NEELABH DALMIA WAS INFORMED BY INDIANA UNIVERSITY VIDE LETTER DATE D 2/03/2001 ABOUT HIS SELECTION TO THE UNIVERSITY. THEREFORE THE APPOINTMENT OF SHRI NEELABH DALMIA S ON OF THE DIRECTOR OF DALMIA GROUP OF COMPANIES AS A TRAINEE WAS WITH AN INTENTION TO SHOW THE PERSONAL EXPENSES ON HIS STUDY IN USA AS BUSINESS EXPENDITUR E. SHRI NEELABH DALMIA DID NOT SIGN ANY BOND NOR ANY GUARANTEE WAS TAKEN FROM SHRI NEELABH DALMIA IN CAS E OF DEFAULT FOR REIMBURSEMENT OR COMPENSATION OF EXPENDITURE INCURRED. THE AGREEMENT WAS DRAFTED IN SUCH A WAY THAT NOT ONLY THE TUITION FEE BOARDING & LODGING EXPENSES EVEN DAY-TO-DAY EXPENSES WERE INCLUDED IN IT. THE ASSESSEE HAD NOT SENT ANY PERSO N FOR TRAINING ABROAD BEFORE AND AFTER THE SPONSORSHIP OF SHRI NEELABH DALMIA. MOREOVER PERUSING STUDIES IN REGULA R COURSE OF MBA CAN BY NO STRETCH OF IMAGINATION BE TREATED AS IMPARTING OF TRAINING. IT IS NOT A CASE OF ASSESSEE THAT YOUNG TALENTS ARE PICKED UP IN DIFFER ENT FIELD AFTER SCHOOL EDUCATION AND TRAINING IS IMPART ED IN DIFFERENT FIELDS TO MAKE THEM READY FOR TAKING UP T HE ASSIGNMENTS IN THE ORGANIZATION. THEREFORE BY NO STRETCH OF IMAGINATION UNDER THESE FACTS AND CIRCUMSTANCES THE EXPENDITURE INCURRED ON EDUCATIO N OF A SON OF DIRECTOR OF DALMIA GROUP OF COMPANIES CAN BE TREATED THE EXPENDITURE INCURRED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. IN THE CASE OF CIT VS. HINDUSTAN HOSIERY INDUSTRIES (1994) 209 ITR 383 TH E HON'BLE BOMBAY HIGH COURT OBSERVED AS FOLLOWS:- ' THE ASSESSEE FIRM WAS A FAMILY CONCERN OF A MOTHER AND HER FOUR SONS FIVE PARTNERS) AMONGST 'WHOM V WAS ONE OF THE SONS. THE ASSESSEE FIRM CARRIED ON BUSINESS AS MANUFACTURER OF NYLON SOCKS AND UNDERWEAR. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1976-77 V WHO WAS 21 YEARS OF AGE WAS SENT TO THE UNITED STATES OF AMERICA FOR HIGHER STUDIES AND HAD OBTAINED A DEGREE IN BUSINESS MANAGEMENT FROM AN AMERICAN UNIVERSITY. THE ASSESSEE FIRM HAD TAKEN V AS A ITA NO.1243 & 887/DEL./2011 13 PARTNER IN THE FIRM AT THE SAME TIME WHEN V WAS SENT FOR HIGHER STUDIES TO THE USA. THE ASSESSEE CLAIMED THAT AN EXPENDITURE OF RS.60 678/- INCURRED BY IT FOR THE TRAINING OF V BE ALLOWED AS BUSINESS EXPENDITURE. THE INCOME-TAX OFFICER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE EXPENDITURE WAS OF PERSONAL NATURE AND NOT A BUSINESS EXPENDITURE. THE COMMISSIONER OF INCOME-TAX (APPEALS) AFFIRMED THE ORDER OF THE INCOME-TAX OFFICER ON THE GROUND THAT THERE WAS NO NEXUS BETWEEN THE BUSINESS OF THE ASSESSEE AND THE EXPENDITURE INCURRED. THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. ON A REFERENCE: HELD REVERSING THE DECISION OF THE TRIBUNAL THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAD NO NEXUS WITH THE BUSINESS OF THE ASSESSEE AND WAS NOT DEDUCTIBLE AS BUSINESS EXPENDITURE.' 6. FROM THE FACTS OF THE CASE IT IS CLEAR THAT SHRI NEELABH DALMIA WAS NOT EMPLOYEE OF THE ASSESSEE. HE WAS TAKEN INTO EMPLOYMENT AS TRAINEE AFTER HIS ADMISSION IN INDIANA UNIVERSITY USA. HE IS A SON O F DIRECTOR OF DALMIA GROUP OF COMPANIES. THE ASSESSEE HAD NOT INCURRED EXPENDITURE ON TRAINING ABROAD ON ANY EMPLOYEE BEFORE AND AFTER SPONSORSHIP OF SHRI NEELA BH DALMIA. THEREFORE THE CONTENTION OF THE ASSESSEE T HAT IT WANTED TO CLOTHE WITH THE KNOWLEDGE OF PROFESSIONAL MANAGEMENT IN PRESENT GLOBAL AND MICRO-ECONOMIC MARKET IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE . THE CONDUCT OF THE ASSESSEE RATHER PROVES TO THE CO NTRARY AS NO EMPLOYEE WAS SENT FOR TRAINING FOR THE PURPOS E OF UPDATING OF KNOWLEDGE IN THE FIELD OF MANAGEMENT AN D TECHNOLOGY. THE ASSESSEE'S CASE IS SQUARELY COVETED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. HINDUSTAN HOSIERY INDUSTRIES (SUPRA). RESPECTFULLY FOLLOWING THE PRECEDENT IT IS HELD TH AT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION ON ACCOUNT O F TRAINING EXPENSES AS THE SAME HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ITA NO.1243 & 887/DEL./2011 14 ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY THE ID. CIT (APPEALS) CONFIRMING THE ADDITION. SINCE THE ISSUE IS ALREADY DECIDED AGAINST THE ASSE SSEE ON THE SAME FACTS BY THE ITAT THEREFORE WE UPHOLD THE OR DER OF THE CIT (A) FOR CONFIRMING THE DISALLOWANCE AND DISMISS THIS GROUND OF ASSESSEES APPEAL. SINCE WE HAVE ALREADY DECIDED THE ISSUE AGAINST THE ASSESSEE IN EARLIER YEAR ON THE SAME FACTS THEREFORE WE UPHOLD THE ORDER OF C IT (A) FOR CONFIRMING THE DISALLOWANCE. 14. THE ISSUE INVOLVED IN GROUND NO.4 IS AGAINST TH E CONFIRMATION OF DISALLOWANCE OF RS.23 24 808/- OUT OF RENT. THIS I SSUE IS ALSO COMING OUT OF THE PRECEDING YEAR AND IN THE ITA NO.886/DEL/2011 F OR THE AY 2005-06 VIDE ORDER DATED 19.08.2011 WE HAVE DECIDED THE ISSUE B Y HOLDING AS UNDER :- 7. IN THE GROUND NO.3 OF ASSESSEES APPEAL THE IS SUE INVOLVED IN CONFIRMING THE DISALLOWANCE OF RENT OF RS.24 63 702/-. 8. AT THE OUTSET OF THE HEARING THE LEARNED AR SUB MITTED THAT THIS ISSUE HAS ALSO BEEN RESTORED BY THE ITAT TO THE FILE OF AO FOR RE-DETERMINATION FOR THE AY 2002-03 AND 2004 -05. THE ISSUE HAS BEEN DECIDED BY THE ITAT IN THE AY 20 04-05 IN PARAS 10 TO 13 OF THE ORDER WHEREIN THE ITAT HAS DE CIDED THE ISSUE AS UNDER :- 10. SO FAR AS REGARDS GROUND NO.3 THE ASSESSEE CLAIMED OFFICE RENT OF RS.49 50 504/- FOR THE PREMI SES AT 2ND FLOOR INDRAPRAKASH BUILDING BARAKHAMBA ROAD NEW DELHI. OUT OF THIS A SUM OF RS.72 000/- HAD BEE N REDUCED AS RENT RECEIVED FROM GECL. THE AO OBSERVED THAT FOR ASSESSMENT YEAR 2002-03 IT HAD BEEN HELD THAT THE ASSESSEE WAS SHARING THE PREMISES WITH OTHER GR OUP COMPANIES AND THE RENTAL EXPENSES TO THE EXTENT OF 50% ITA NO.1243 & 887/DEL./2011 15 HAD BEEN DISALLOWED; AND THAT FOR ASSESSMENT YEAR 2 003- 04 THE DEPARTMENT'S APPEAL WAS PENDING BEFORE THE ITAT. 11. THE LD. CIT(A) FOLLOWING HIS DECISION FOR ASSESSMENT YEAR 2002-03 DIRECTED THE AO TO ALLOW RS.19 75 252/- AND TO DISALLOW RS.5 LAKHS ATTRIBUTA BLE TO M/S. WGP FINANCIAL SERVICES LTD. IT WAS HELD THAT T HE ASSESSEE OUGHT TO GET CREDIT FOR THE RENT PAYABLE E XCEPT IN THE CASE OF M/S. WGF FINANCIAL SERVICES LTD. FR OM WHOM NO CONSULTANCY FEE HAD BEEN RECEIVED FOR THE LAST MANY YEARS. THIS ISSUE AGAIN IT IS SEEN HAS BEEN RESTORED TO THE FILE OF THE AO BY THE ITAT FOR RE- EXAMINATION FOR ASSESSMENT YEAR 2002-03 IN ITA NOS.2720 AND 2783 (DEL.) 06 (A PB 1 TO 15). IT WAS HELD AS FOLLOWS :- WE HAVE HEARD BOTH THE PARTIES. THE REVENUE IS IN APPEAL FOR DELETION OF ADDITION OF RS.37 37 000/- WHEREAS THE ASSESSEE IS IN APPEAL AGAINST THE SUSTAINING THE ADDITION OF RS.5 00 000/-. FROM THE FACTS STATED ABOVE IT IS CLEAR THAT THERE WERE EIGHT ASSOCIATE COMPANIES HOUSED ON THE SAME SECOND FLOOR OF INDRAPRAKASH BUILDING. THE AREA OCCUPIED BY EACH COMPANY HAS NOT BEEN SPECIFIED. THE ASSESSING OFFICER HAS DISALLOWED 2/3RD OF THE RENT PAID ON ESTIMATED BASIS. THE LD. CIT(APPEALS) HOWEVER ESTIMATED THE DISALLOWANCE OF RS.5 00 000/ - IN RESPECT OF THE SPACE OCCUPIED BY M/S. WGF FINANCIAL SERVICES LTD. THE ASSESSEE HAS RECEIVED RENT OF RS.72 000/- FROM GECL. THE ASSESSEE HAS ALSO STATED THAT M/S. ARCHANA TRADING AND INVESTMENT CO. PVT. LTD. M/S. ANURAG TRADING & INVESTMENT CO. LTD. M/S. SANJAY TRADING & INVESTMENT LTD. AND M/S. DALMIA FOUNDATIONS WERE FUNCTIONING FROM A VERY SMALL SPACE OCCUPIED BY THEM. THE ASSESSEE HAS NOT PROVIDED THE DETAILS OF THE AREA OCCUPIED BY THESE COMPANIES. IN THE ABSENCE OF DETAILS IT MAY NOT BE POSSIBLE FOR US TO DECIDE AS TO HOW MUCH EXPENSES ON ACCOUNT OF RENTAL PAID RELATES TO THE GROUP OF COMPANIES. TO BE FAIR AND ITA NO.1243 & 887/DEL./2011 16 REASONABLE IN OUR OPINION THE ISSUE IS REQUIRED TO BE RECONSIDERED BY THE ASSESSING OFFICER WITH REFERENCE TO THE SPACE OCCUPIED BY GROUP CONCERNS THE AGREEMENT WITH THE ASSESSEE FOR PROVIDING SERVICES ETC. THE ASSESSING OFFICER WILL ESTIMATE THE DISALLOWANCE IF ANY BASED ON THE AREA OCCUPIED BY THE GROUP CONCERNS FOR WHICH THE ASSESSEE HAD MADE PAYMENT OF RENT WITHOUT ANYTHING HAVING BEEN RECEIVED FROM THEM. THE ASSESSING OFFICER WILL ALSO KEEP IN MIND THE AGREEMENTS FOR CONSULTANCY FEE WAS INCLUSIVE OF INFRASTRUCTURE FACILITIES OR NOT. THE ASSESSING OFFICER WILL DECIDE THE ISSUE AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD.' 12. THE FACTS REMAINING THE SAME FOR THE YEAR UNDER CONSIDERATION ALSO THE ISSUE IS REMITTED TO THE FI LE OF THE AO TO BE DECIDED AFRESH' WITH REFERENCE TO THE SPAC E OCCUPIED BY THE GROUP COMPANY AND THE AGREEMENT FO R PROVIDING SERVICES ETC. IN KEEPING WITH THE DIRECT IONS ISSUED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2002-03 (SUPRA) THE AO WILL ESTIMATE THE DISALLOWANCE IF ANY BASED ON THE AREA OCCUPIED BY THE GROUP CONCERNS F OR WHICH THE ASSESSEE HAD MADE PAYMENT OF RENT WITHOU T HAVING RECEIVED ANYTHING FROM THEM. THE AO WILL ALS O KEEP IN MIND WHETHER AS PER THE AGREEMENT FOR CONSULTANCY FEE SUCH FEE WAS INCLUSIVE OF INFRASTRUCTURAL FACILITIES OR NOT. OBVIOUSLY THE A O WILL AFFORD ADEQUATE OPPORTUNITY OF HEARING TO THE ASSES SEE. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED AS INDICATED. THE FACTS REMAINING THE SAME FOR THE YEAR UNDER CON SIDERATION THE ISSUE IS REMITTED TO THE FILE OF AO TO DECIDE A FRESH WITH REFERENCE TO SPACE OCCUPIED BY THE GROUP COMPANY AN D THE AGREEMENT OF PROVIDING SERVICES ETC. KEEPING IN V IEW THE DIRECTION ISSUED IN THE AY 2002-03 AND 2004-05 THI S ISSUE IS RESTORED TO THE FILE OF AO. ITA NO.1243 & 887/DEL./2011 17 SINCE WE HAVE ALREADY DECIDED THE ISSUE BY REMANDIN G THE SAME TO THE FILE OF THE AO TO DECIDE AFRESH WITH REFERENCE TO SPACE OCC UPIED BY THE GROUP COMPANY AND THE AGREEMENT OF PROVIDING SERVICES ET C. THEREFORE WE DECIDE THIS ISSUE ACCORDINGLY. 15. GROUND NO.5 & 6 IN ASSESSEES APPEAL ARE GENERA L IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. ITA NO.1243/DEL/2011 16. IN THE REVENUES APPEAL IN THE GROUND NO.1 TH E ISSUE INVOLVED IS GRANTING THE RELIEF OF 25% ON SALARY EXPENSES. WE HAVE ALREADY DECIDED THIS ISSUE IN ITA NO.1369/DEL/2011 FOR AY 2005-06 IN REV ENUES APPEAL VIDE ORDER DATED 19.08.2011 AS UNDER :- 10. IN GROUND NO.1 OF REVENUES APPEAL THE ISSUE INVOLVED IS ALLOWING THE RELIEF OF RS.49 61 170/- ON ACCOUNT OF DISALLOWANCE MADE BY THE AO. 11. LEARNED DR RELIED ON THE ORDER OF THE AO. THE LEARNED AR RELIED ON THE ORDER OF THE CIT (A) AND SUBMITTED THAT THE DELETION OF ADDITION IN THE EARLIER YEARS FOR AY 20 02-03 AND 2004-05 HAVE BEEN CONFIRMED BY THE ITAT ON THE GROU ND THAT MOST OF THE EMPLOYEES WERE OLD EMPLOYEES OF THE ASS ESSEE. AFTER HEARING BOTH THE SIDES WE FIND THAT THE ITAT WHILE DECIDING THE ISSUE FOR AY 2004-05 IN ITA NO.789/DEL /2008 IN ITS ORDER DATED 30.6.2009 HAS DECIDED VIDE PARS 15 TO 18 AS UNDER :- 15. SO FAR AS REGARDS THE FIRST GROUND THE ASSESS EE HAD CLAIMED AN AMOUNT OF RS.L 83 73 049/- ON ACCOUNT OF SALARY EXPENSES. THE AO ASKED THE ASSESSEE TO GIVE NAMES ADDRESSES QUALIFICATIONS AND NATURE OF DUTI ES OF ITS EMPLOYEES TO WHOM THE SALARY HAD BEEN PAID. IT WA S ALSO ITA NO.1243 & 887/DEL./2011 18 ASKED AS TO WHETHER ALL THE EMPLOYEES WERE EXCLUSIV ELY WORKING FOR THE ASSESSEE COMPANY OR FOR ASSOCIATED COMPANIES OR CONSTITUENTS ALSO. THE ASSESSEE HAS TO JUSTIFY THAT THE SALARY PAID TO EACH OF THE EMPLOYEES WAS COMMENSURATE WITH THEIR ABILITY AND QUALIFICATIONS. THE AO OBSERVED THAT IN RESPONSE MERELY SUBMITTED A SUMMARY OF PERSONAL COSTS STATING THAT THE INCREAS E IN THE SALARY TO EMPLOYEES THAT PAID RS.1 73 80 487/- IN T HE EARLIER YEAR WAS ONLY RS.16.61 LAKHS WHICH WAS ABO UT 7.5% AS COMPARED TO THE SALARY PAID IN THE IMMEDIAT ELY PRECEDING YEAR WHICH WAS QUITE REASONABLE; THAT TH E ASSESSEE HAD FURNISHED A PERSON-WISE SALARY CHART W ITH NAMES ADDRESSES QUALIFICATIONS DESIGNATIONS AND DATE OF JOINING; THAT NO JUSTIFICATION FOR THE EXPENSES HAD BEEN FILED; THAT NOTHING HAD BEEN STATED AS TO WHETHER A LL THE EMPLOYEES WERE EXCLUSIVELY WORKING FOR THE COMPANY OR AS TO WHETHER THE SALARY PAID WAS COMMENSURATE WITH THE PARITY AND QUALIFICATIONS OF EACH OF THE EMPLOYEES AND THE INCOME GENERATED BY THEM IF THEY WERE HAVING TECHN ICAL QUALIFICATIONS. IT WAS HELD THAT THE ASSESSEE HAD T HUS NOT DISCHARGED ITS ONUS BY EXPENDING HUGE SALARY EXPENS ES. THE AO THEREFORE HELD THAT THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE ASSESSEE'S BUSINESS BUT ALSO FOR THE ASSOCIATED COMPANIES OR CONSTITUENTS. IT WAS OBSERVED THAT SIMILAR ADDITION S HAD BEEN MADE FOR ASSESSMENT YEARS 2002-03 AND 2003-04; THAT FOR ASSESSMENT YEAR 2002-03 THE LD. CIT (A) HA D DELETED THE ADDITIONS BUT THE DEPARTMENT WAS IN AP PEAL. THE AO THUS DISALLOWED 1/4 TH OF THE TOTAL EXPENSES AMOUNTING TO RS.45 93 262/-. 16. THE LD. CIT(A) FOLLOWING HIS ORDER FOR ASSESSM ENT YEAR 2002-03 IN THE ASSESSEE'S CASE DIRECTED THE AO TO DELETE THE ADDITION. 17. THE TRIBUNAL IT IS SEEN THAT FOR ASSESSMENT YEAR 2002-03 (SUPRA) HAS UPHELD THE CIT(A)'S ORDER DELE TING THE ADDITION HOLDING AS FOLLOWS:- WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. FROM THE ASSESSMENT ORDER IT IS ITA NO.1243 & 887/DEL./2011 19 CLEAR THAT THE ASSESSING OFFICER HAS NOT BROUGHT AN Y MATERIAL ON RECORD TO PROVE THAT THE PAYMENT OF SALARY WAS NOT JUSTIFIED. THE ASSESSEE HAD FILED COPIES OF FORM NO.16 INDICATING THE NAME AND ADDRESS OF THE PERSONS EMPLOYED THE NATURE OF JOB ASSIGNED TO THEM ETC. IN IMMEDIATE PRECEDING YEAR AN AMOUNT OF RS.1 39 05 000/- WAS CLAIMED AND ALLOWED. THE ASSESSEE HAD DEDUCTED TAX AT SOURCE. SINCE THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO INDICATE THAT THE PAYMENTS OF SALARY WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS WE ACCORDINGLY DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) DELETING THE ADDITION. ' 18. THE FACTS HEREIN REMAINING UNDISPUTEDLY THE SAM E FOR ASSESSMENT YEAR 2002-03 (SUPRA) RESPECTFULLY FOLLOWING THE SAID TRIBUNAL ORDER THIS ISSUE IS DE CIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. GROUND NO.1 RAISED BY THE DEPARTMENT IS ACCORDINGL Y REJECTED. THE FACTS IN AYS 2002-03 AND 2004-05 REMAINING THE SAME AS THAT OF THE ASSESSMENT YEAR UNDER CONSIDERATION RE SPECTFULLY FOLLOWING THE DECISION IN ASSESSEES OWN CASE THE GROUND NO.1 OF REVENUES APPEAL IS DISMISSED. THE FACTS REMAIN THE SAME AND THEREFORE RESPECTFU LLY FOLLOWING OUR DECISION AFORESAID WE DISMISS THIS GROUND OF REVENUES APPE AL. 17. IN THE GROUND NO.2 THE ISSUE INVOLVED IS DELET ING THE ADDITION OF RS.70 25 000/- MADE BY AO U/S 68 OF THE INCOME-TAX ACT. 18. AS PER THE ASSESSEES BALANCE SHEET AS ON 31.03 .2006 UNDER THE HEAD CURRENT LIABILITIES AND PROVISIONS THE ASSESSEE HAS SHOWN SHARE APPLICATION MONEY OF RS.75 25 000/-. THE SHARE APPLICATION MON EY STATED TO BE RECEIVED FROM FOLLOWING THREE PERSONS :- ITA NO.1243 & 887/DEL./2011 20 NAME OF THE ASSESSEE AMOUNT M/S. CARISSA INVESTMENT P. LTD. 45 50 000/- M/S. LOVELY INVESTMENT P. LTD. 20 00 000/- M/S. ALTAR INVESTMENT P. LTD. 4 75 000/- THE AO MADE THE ADDITION U/S 68 BY TREATING THE SAM E AS UNEXPLAINED CASH CREDITS IN THE BOOKS OF ASSESSEE. BEFORE THE AO T HE ASSESSEE SUBMITTED ONLY THE UNSIGNED LEDGER ACCOUNT OF THESE COMPANIES OF A PARTICULAR DAY. THE AO ASKED TO FILE THE LEDGER ACCOUNT ALONG WITH THE CON FIRMATION AND BALANCE SHEET AS ON 31.03.2006 AND AS PER AOS VERSION NOTHING HA S BEEN PRODUCED BEFORE HIM IN THIS REGARD AND HE MADE THE ADDITION. 19. BEFORE THE CIT (A) THE ASSESSEE SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE FOLLOWING DOCUMENTS WERE SUBMITTED IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED FROM THESE PARTIES :- (I) CONFIRMATIONS FROM ALL THE SHARE SUBSCRIBERS WHICH ALSO CONTAIN THEIR PERMANENT ACCOUNT NUMBERS. (II) PHOTOCOPIES OF THE ACKNOWLEDGEMENTS OF THE INC OME TAX RETURNS FILED BY THE SHARE SUBSCRIBERS. (III) COPIES OF THE BANK STATEMENTS OF SHARE SUBSCR IBERS FOR THE RELEVANT PERIOD EVIDENCING PAYMENT OF SHARE APPLICATION MONE Y. (IV) COPY OF APPELLANTS LEDGER ACCOUNT IN THEIR BO OKS. THE CIT (A) GRANTED THE RELIEF RELYING ON THESE DOC UMENTS AND ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIVINE LEASING AND FINANCE LTD. 299 ITR 268 (DELHI). 20. THE LEARNED DR RELIED ON THE ORDER OF AO AND AL SO SUBMITTED THAT THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WH ERE THE ASSESSEE WAS ITA NO.1243 & 887/DEL./2011 21 FOUND TO HAVE BEEN RECEIVED SHARE APPLICATION MONEY FROM THE PERSONS WHO WERE DEALING IN ACCOMMODATION ENTRIES THEREFORE T HE CIT (A) WAS NOT JUSTIFIED IN GRANTING THE RELIEF. ON THE OTHER HAN D THE LEARNED AR RELIED ON THE ORDERS OF CIT (A). 21. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND AFTER HEARING BOTH THE SIDES WE FIND THAT THE CIT (A) HAS GRANTED THE REL IEF ON THE BASIS OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF DIVINE LEASING AND FINANCE LTD. CITED SUPRA. THEREFORE IN THE L IGHT OF THIS JUDICIAL PRONOUNCEMENT WE FIND NO FAULT IN THE ORDER OF THE CIT (A) AND SUSTAIN THE SAME ON THIS ISSUE. 22. GROUND NO.3 IN REVENUES APPEAL IS GENERAL IN N ATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 23. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER 2011. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF SEPTEMBER 2011/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXV NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.