Tesco Hindustan Service Centre Private Limited, Bangalore v. DCIT, Bangalore

ITA 1633/BANG/2012 | 2008-2009
Pronouncement Date: 18-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 163321114 RSA 2012
Assessee PAN AAACO5753D
Bench Bangalore
Appeal Number ITA 1633/BANG/2012
Duration Of Justice 3 year(s) 10 month(s)
Appellant Tesco Hindustan Service Centre Private Limited, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 18-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 18-10-2016
Date Of Final Hearing 03-08-2016
Next Hearing Date 03-08-2016
Assessment Year 2008-2009
Appeal Filed On 18-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BANGALORE BEFORE SHRI S.K.YADAV JUDICIAL MEMBER AND SHRI A. K. GARODIA ACCOUNTANT MEMBER IT (TP) A NO.182 (BANG) 2014 (ASSESSMENT YEARS : 2009 10) M/S OBULAPURAM MINING CO. PVT. LTD. NO.6/4 ENNOBLE HOUSE RAGHAVACHARI ROAD BELLARY PAN: AAACO5753D APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 1(3) BANGALORE RESPONDENT ASSESSEE BY : SHRI MAYANK JAIN & SHRI MADHUR JAIN A DVOCATES REVENUE BY : SHRI SANJAY KUMAR CIT DR DATE OF HEARING : 22-08-2016 DATE OF PRONOUNCEMENT : 20-10-2016 O R D E R PER A. K. GARODIA A.M.: THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 144C (13) AS PER THE D IRECTIONS DRP FOR A. Y. 2008 09. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THE ORDER OF THE LEARNED ASSESSING OFFICER UNDER SECTIO N 143(3) R.W.S 144C(13) OF THE ACT IS OPPOSED TO LAW/ FACTS AND CIRCUMSTANCES OF THE CASE AND THEREFORE LIABLE TO BE CANCELLED. IT(TP)A NO.182/BANG/2014 PAGE 2 OF 21 2. THE LEARNED LOWER AUTHORITIES ERRED IN MAKING A REFERENCE U/S.144C WITHOUT MEETING THE ARGUMENTS/OBJECTIONS O F THE APPELLANT AS NOTED IN PARA 5.2 OF THE ORDER OF THE LEARNED DRP AND AS SUCH THE REFERENCE U/S.144C IS INVALID AND THE ENTIRE ASSESSMENT ITSELF IS INVALID. 3. THE LEARNED AO SHOULD HAVE APPRECIATED THAT TH E APPELLANT IS NOT AN 'ELIGIBLE ASSESSEE' AS DEFINED IN SECTION 144C(15)(B) SINCE IT IS NOT A FOREIGN COMPANY BUT AN INDIAN COMPANY AND THEREFORE THE PROVISIONS OF SECTION 14 4C DO NOT APPLY AND ALSO THE PROVISIONS OF THE TRANSFER PRICI NG DOES NOT APPLY. 4. THE LEARNED DRP HAS ERRED IN HOLDING THAT ONLY TP ISSUE HAS BEEN OBJECTED WITHOUT CONSIDERING THE FACT THAT ALL THE ADJUSTMENTS AND ADDITIONS MADE BY THE AO HAVE BEEN OBJECTED VIDE LETTER DTD: 14.03.2013 FILED BEFORE IT. 5. THE ORDER UNDER SECTION 144C IS BARRED BY LIMIT ATION IN VIEW SECTION 144C (12) AND THEREFORE LIABLE TO BE C ANCELLED SINCE IT AMOUNTS TO NON-COMPLIANCE TO SECTION 144C OF THE ACT. 6. THE LEARNED DRP HAS ERRED IN NOT CONSIDERING TH E OBJECTIONS MADE TO DISALLOWANCE OF TRANSPORTATION C HARGES DISALLOWANCE OF EXPENDITURE UNDER EXPLANATION TO SE CTION 37(1) AND ADDITIONS MADE ON ACCOUNT OF SALE OF LAND AND ACCOMMODATION ENTRY. 7. APPLLCATLON OF TP PROVISIONS: (A). THE LEARNED DISPUTE RESOLUTION PANEL (DRP) AN D THE LOWER AUTHORITIES OUGHT TO HAVE HELD THAT THERE IS NO A.E. SINCE THE AUTHORITIES ARE UNABLE TO SHOW THAT THE PROVISI ONS OF SUB SECTION (L) OF SEC.92A ARE ATTRACTED AND ALSO THE C RITERIA IN SUB SECTION TO 92A ARE ALSO SATISFIED AND OUGHT TO HAVE CONCLUDED THAT THE TRANSFER PRICING (TP) PROVISIONS DO NOT APPLY T O THE FACTS OF THE APPELLANT. (B). THE LEARNED DRP AND THE LOWER AUTHORITIES ERRE D IN HOLDING THAT THE DEEMING PROVISION IN SEC.92B(2) IS ATTRACT ED WITHOUT FIRST POINTING OUT HOW THE PROVISIONS OF SEC.92A(1) IS AT TRACTED AND ALSO CRITERIA LAID DOWN IN SEC.92A(2) IS ALSO SIMUL TANEOUSLY ATTRACTED. IT(TP)A NO.182/BANG/2014 PAGE 3 OF 21 (C). THE LEARNED AUTHORITIES FAILED TO APPRECIATE T HAT IN THE ABSENCE OF AN A.E. AS DEFINED IN SEC.92A THERE CAN BE NO APPLICATION OF SEC. 92B(2) OF THE ACT. (D). THE LEARNED DRP HAS ERRED IN HOLDING THAT THE RE IS NO BASIS FOR THE ARGUMENT OF THE APPELLANT THAT THE TRANSFER PRICING OFFICER (THE TPO) HAS NO JURISDICTION TO RESORT TO AN IMPLI ED PROVISIONS OF LAW OR A DEEMING PROVISION FOR THE PURPOSE OF DETER MINATION OF THE ACTUAL STATE OF AFFAIRS IN A BUSINESS ARRANGEME NT WITHOUT APPRECIATING THE SETTLED LEGAL POSITION AS NOTED IN PARA 5.3 OF THE ORDER OF THE LEARNED DRP. (E). THE LEARNED AUTHORITIES ERRED IN APPLYING THE DECISION IN MCDOWELL LTD. VS.CTG 154 ITR 148(SC) WITHOUT APPR ECIATING THE FACT THAT THIS TRANSACTION ENTERED INTO WAS MEA NT TO SAFEGUARD THE APPELLANT AGAINST PRICE FLUCTUATION ON A LONG T ERM BASIS AND NOT WITH ANY VIEW TO AVOID A TAX LIABILITY THAT MIG HT ARISE AT A LATER STAGE WHICH THE APPELLANT EVEN COULD NOT HAVE FORE SEEN. (F). THE LEARNED AUTHORITIES FAILED TO APPRECIATE THAT WHEN THE CONTRACT WAS ENTERED INTO WITH M/S. GLA LTD. ADMIT TEDLY SRI. GALI JANARDHANA REDDY WAS NOT THE DIRECTOR OF THE S AID M/S. GLA LTD. AND AS SUCH THERE WAS NO COMMON DIRECTOR AND THEREFORE THE TRANSACTIONS MADE IN PURSUANCE OF THE CONTRACT ARE MADE UNDER UNCONTROLLED CONDITIONS. (G). THE LEARNED AUTHORITIES ERRED IN NOT APPRECIA TING THE LEGAL POSITION THAT THE DECISION IN MCDOWELL (SUPRA) DOES NOT IN ANY WAY ALTER THE LEGAL POSITION AS NOTED BY THE LEARNE D DRP IN PARA 5.3 OF ITS ORDER AND AS SUCH RELIANCE ON THE SAID D ECISION IS MISPLACED AND OUT OF CONTEXT. (H). THE LEARNED AUTHORITIES HAVE GROSSLY FAILED T O MEET THE ARGUMENTS AND THE OBJECTIONS RAISED BY THE APPELLAN T - BECAUSE THAT IS THE ONLY VIEW POSSIBLE IN LAW - AND AS SUCH SHOULD HAVE HELD IN FAVOUR OF THE APPELLANT REGARDING THE APPLI CATION OF TRANSFER PRICING PROVISIONS. (I). THAT PARTICIPATION IN MANAGEMENT OR CONTROL O R CAPITAL ENVISAGED IN CLAUSES (A) OR (B) OF SECTION 92A(L) C AN BE EXERCISED ONLY BY VIRTUE OF SHARE HOLDING SPECIFIED IN CLAUSE S (A) AND (B) OF SECTION 92A(2) AS PER THE SETTLED LAW AND WHEN SHR I. GALI JANARDHAN REDDY IS ONLY A DIRECTOR WITHOUT ANY SHAR E HOLDING IN M/S.GLA LTD. AND FURTHER WITHOUT ATTRACTING EITHER CLAUSE (E) OR IT(TP)A NO.182/BANG/2014 PAGE 4 OF 21 CLAUSE (F) OF SECTION 92A(2) SUCH RIGHT OF PARTICI PATION OR MANAGEMENT OR CONTROL DID NOT EXIST AND THEREFORE THERE WAS NO A. E U/S. 92A. (J). NO INDIVIDUAL OR OTHER PERSON HAVING ANY CONT ROL OR CONTROLLING INTEREST IN M/S. GLA INTERNATIONAL PTE LTD. HAS ANY CONTROL OVER THE APPELLANT AND THEREFORE CLAUSE (J) OR CLAUSE (K) OF SECTION 92A (2) IS ALSO NOT SATISFIED AND AS SUCH I T IS NOT RELEVANT THAT SRI GALI JANARDHANA REDDY BECAME ONE OF THE DI RECTORS OF M/S. GLA INTERNATIONAL PTE LTD. FOR THE PURPOSE OF SECTION 92A. 8. DETERMINATION OF ALP: WITHOUT PREJUDICE THAT- (A). THE AUTHORITIES SHOULD HAVE APPRECIATED THAT THE CONTRACTUAL TERMS IS MATERIAL TO THE DETERMINATION OF ALP AS PER CLAUSE (C) OF RULE 10B(2) AND THEREFORE THE ARMS L ENGTH PRICE (ALP) SHOULD BE DETERMINED BY TAKING ONLY SUCH UNCO NTROLLED TRANSACTIONS WHICH ALSO HAD SIMILAR CONTRACTUAL TER MS AS NMDC AND MMTC WHOSE FINANCIAL DATA IS AVAILABLE IN PUBL IC DOMAIN. (B). IT SHOULD HAVE BEEN APPRECIATED THAT NMDC AND MMTC COULD NOT BE ACCUSED OF ENTERING INTO TAINTED AGREE MENTS OR EXERCISING UNDUE INFLUENCE FOR THE PURPOSE OF AVOID ING OR SHIFTING OF PROFITS AND THEREFORE COMPARABLE 'UNCONTROLLED T RANSACTIONS' DEFINED IN RULE 10B(2) READ WITH RULES 10B(3) AND 1 0C OF THE I.T. RULES FOR DETERMINATION OF ALP. (C). THE AUTHORITIES SHOULD HAVE APPRECIATED THAT THE PRICES OF DGCIS ADOPTED ARE ONLY THE LIST OF PRICES AND NOT C OMPARABLE UNCONTROLLED TRANSACTIONS SINCE THE ENTERPRISES ENT ERING TO SUCH TRANSACTIONS AND THEIR FINANCIAL PROFILE IS NOT KNO WN IN ORDER TO DETERMINE THE ALP APPLYING CUP UNDER RULE 10B(A) RE AD WITH RULE 10C. (D). THE ALP DETERMINED IS NOT IN ACCORDANCE WITH THE RULES PRESCRIBED AND THEREFORE LIABLE TO BE CANCELLED AND TREATING THE PURPORTED INTERNATIONAL TRANSACTIONS AS AT ARM'S LE NGTH. (E). THE 5 PERCENT STANDARD DEDUCTION OUGHT TO HAV E BEEN GIVEN WHILE DETERMINING THE ALP. IT(TP)A NO.182/BANG/2014 PAGE 5 OF 21 (F). THE AUTHORITIES ERRED IN NOT APPRECIATING THA T M/S.GLA INTERNATIONAL PTE LTD. IS RESPONSIBLE FOR THE PAY MENT DELIVERY OF GOODS AND FURTHER OBLIGED TO PAY MINIMUM OF 35% ON COST WHICH IS A SIGNIFICANT RISK WHILE EVALUATING THE AL P. (G). THE AUTHORITIES SHOULD HAVE APPRECIATED THAT THE PRICE /PROFIT MARGIN OF MINIMUM OF 35% ON COST AT ALL TIM ES EVEN UNDER DEPRESSED MARKET CONDITIONS IS WHAT THE APPELLANT C OULD NOT HAVE SECURED FROM ANY OTHER IMPORTER AND THEREFORE SUCH A PRICE EVEN UNDER ALLEGED CONTROLLED CONDITIONS IS AT ARM'S LE NGTH. (H). THE AUTHORITIES SHOULD HAVE APPRECIATED THAT THE TRANSACTION REPRESENTING PAYMENT TO M/S. OSS MANAGE MENT PRIVATE LTD. IS NOT A DEEMED INTERNATIONAL TRANSAC TION U/S.92B(2) SINCE M/S. OSS MANAGEMENT PRIVATE LTD. IS A RESIDE NT AND NOT A NON-RESIDENT AND FURTHER THAT IT IS NOT INTERPOSED TO AVOID PAYMENT TO AN ASSOCIATED ENTERPRISE. (I). THE AUTHORITIES SHOULD HAVE APPRECIATED THAT THE PAYMENT TO M/S. OSS MANAGEMENT PRIVATE LTD. IS LESS THAN W HAT IT HAS PAID TO AN ALLEGED ASSOCIATED ENTERPRISE OUTSIDE IN DIA AND THEREFORE ONLY DOWNWARD ADJUSTMENT COULD BE MADE T O THE ALP DETERMINED. 9. THE ADDITION MADE IN RESPECT OF TRANSPORTATION CHARGES IS LIABLE TO BE DELETED SINCE NO STATEMENTS ARE GIVEN AND ALSO NO OPPORTUNITY OF CROSS EXAMINING THE WITNESSES WAS GI VEN. 10. IT SHOULD HAVE BEEN APPRECIATED THAT THE EXPLAN ATION TO SEC. 37(1) HAS NO APPLICATION TO THE EXPENDITURE DI SALLOWED. 11. IT SHOULD HAVE BEEN APPRECIATED THAT NO INCOME HAS ACCRUED AND NO ADDITION COULD BE MADE IN RESPECT OF SALE OF LAND. THE APPELLANT SEEKS YOUR LEAVE TO ADD ALTER AMEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIME OF HEARING. 3. IN PARA 1.2 OF THE ASSESSMENT ORDER THE A.O. HA S GIVEN THE REASONS FOR WHICH HE HAS HELD THAT THE ASSESSEES CONTENTION THAT M/S (GLAITPL) IS NOT AN AE OF THE ASSESSEE COMPANY IS NOT IT(TP)A NO.182/BANG/2014 PAGE 6 OF 21 ACCEPTABLE. FOR THE SAKE OF READY REFERENCE WE REP RODUCE THIS PARA OF THE ASSESSMENT ORDER. THIS IS AS UNDER:- THE ASSESSEES CONTENTION THAT M/S GLA INTERNATIONAL TRADING PTE LTD. IS NOT AN ASSOCIATED ENTERPRISE (AE) OF M/S OBULAPURAM MINING CO. PVT.LTD. CANNOT BE ACCEPTED FOR THE FOLLOWING REASONS: M/S GLA TRADING INTERNATIONAL PTE LTD. IS AN ASSOCIATED ENTERPRISE (AE) OF M/S OBULAPURAM MINING CO. PVT.LTD. WITHIN THE MEANING OF SEC.92A BASED O THE FACT THAT SRI G JANARDHANA REDDY DIRECTOR OF THE TAXPAYER COMPANY WAS APPOINTED AS DIRECTOR OF M/S GLA TRADING INTERNATIONAL PTE LTD. ON 19/12/2007. SUBSEQUENTLY ON 21/12/2007 THE ONLY ISSUED AND PAID UP SHARES OF THE COMPANY (OF THE VALUE OF 1 SINGAPORE DOLLAR) WHICH WAS HITHERT O HELD BY SRI ARANGANNAL WAS TRANSFERRED TO M/S GJR HOLDINGS INTERNATIONAL LTD. ANOTHER COMPANY REGISTERED IN THE ISLE OF MAN OF WHICH SRI G. JANARDHANA REDDY IS ONE OF THE DIRECTORS. IT WAS CONFIRMED BY SRI G.JANARDHANA REDDY IN HIS STATEMENT RECORDED ON 29/12/2009 BEFORE THE DCIT CENTRAL CIRCLE-1(3) BANGALORE. THESE FACTS GO ON T O SHOW THAT THE ENTIRE ISSUED AND PAID UP SHARE CAPITAL OF M/S GLA TRADING INTERNATIONAL LTD. WAS HELD BY M/S GJR HOLDINGS INTERNATIONAL COMPANY (M/S GJR HOLDINGS INTERNATIONAL) WHERE HE HAD CONTROL OVER THE ACTIVITIES AND MANAGEMENT OF THE SAID COMPANY. IN BRIEF THESE FACTS CLEARLY ESTABL ISH IT(TP)A NO.182/BANG/2014 PAGE 7 OF 21 THAT M/S OMCPL AND M/S GLA TRADING INTERNATIONAL PTE.LTD. SINGAPORE ARE AES WITH THE MEANING OF SEC.92A OF THE IT ACT 1961. 4. BEFORE US LEARNED AR OF THE ASSESSEE SUBMITTED THAT EVEN IF THE ALLEGATION OF THE A.O. IS ACCEPTED THAT THIS CO MPANY I.E. M/S (GLAITPL) IS AN AE OF THE ASSESSEE COMPANY FOR THIS REASON THAT ENTIRE SHARE CAPITAL I.E. ONE SHARE OF M/S (GLAITPL ) WAS TRANSFERRED BY SHRI ARANGANNAL TO M/S (GJRHIL) ON 21.12.2007 T HEN ALSO IT IS AN AE OF THE ASSESSEE COMPANY FOR TWO DAYS ONLY BEC AUSE THE SAID ONE SHARE OF GLATIPL WAS TRANSFERRED BY GJRHIL TO I NTER LINK SERVICES GROUP LTD. ILSGL ON 22.12.2007 AND WITH TH IS COMPANY OR ITS DIRECTORS THE ASSESSEE COMPANY OR ITS DIRECTOR S HAS NO RELATIONSHIP. IT WAS SUBMITTED BY THE LEARNED AR O F THE ASSESSEE THAT REGARDING TP ISSUES THIS IS THE SUBMISSION TH AT TP PROVISIONS CANNOT BE APPLIED IN THE PRESENT CASE BECAUSE THE P ARAMETERS SPECIFIED U/S 92A (2) OF THE I. T. ACT ARE NOT ATTR ACTED. HE PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF PAGE INDUSTRIES LIMITED VS. DCIT IN ITA NO. 163/BANG/201 5 COPY AVAILABLE ON PAGES 15 TO 38 OF THE PAPER BOOK. HE A LSO SUBMITTED THAT ON PAGES 5 TO 14 OF THE SAME PAPER BOOK IS A C OPY OF NOTARIAL CERTIFICATE ISSUED TO INTER LINK SERVICES GROUP LIM ITED AND IN PARTICULAR OUR ATTENTION WAS DRAWN TO PAGE 11 AS P ER WHICH ON THE IT(TP)A NO.182/BANG/2014 PAGE 8 OF 21 DATE 12.05.2011 THE CURRENT DIRECTOR OF INTER LINK SERVICES GROUP LIMITED WAS ARANGANNAL S/O KATHAMUTHU AND HE WAS AP POINTED ON 24.04.2001 AND THE CURRENT SHAREHOLDER ON THAT DATE WAS IYER CORPORATE SERVICES PTE LTD. (FORMERLY KNOWN AS CRES T SERVICES PTE LTD.). THEREAFTER HE SUBMITTED THAT AS PER THE ASS ESSMENT ORDER THE A.O. HAS HELD THAT M/S GLA TRADING INTERNATIONA L PTE LTD. (GLATIPL) IS AN AE OF THE ASSESSEE COMPANY AS PER S ECTION 92A OF THE I. T. ACT AND HIS DECISION IS ON THIS BASIS THA T SRI G. J. REDDY A DIRECTOR OF THE ASSESSEE COMPANY WAS APPOINTED AS A DIRECTOR OF (GLATIPL) ON 19.12.2007 AND THEREAFTER ON 21.12.20 07 THE ENTIRE SHARE CAPITAL OF (GLATIPL) BEING ONLY ONE SHARE OF THE VALUE OF 1 SINGAPORE DOLLAR WAS TRANSFERRED TO GJR HOLDINGS IN TERNATIONAL LTD. (GJRHIL) REGISTERED IN THE ISLE OF MAN AND SHRI G. J. REDDY IS ONE OF THE DIRECTORS OF THAT CO. ALSO I.E. (GJRHIL). TH EREAFTER HE SUBMITTED THAT THE SAID ONE SHARE OF (GLATIPL) WAS TRANSFERRED BY GJRHIL TO INTER LINK SERVICES GROUP LTD. (ILSGL) ON 22.12.2007 AND THE NECESSARY EVIDENCE IN THIS REGARD IS AVAILA BLE ON PAGE 169 OF THE PAPER BOOK. HE SUBMITTED THAT IN THE PRESENT YEAR I.E. DURING 01.04.2008 TO 31.03.2009 THE ONLY ONE SHARE OF GLA TIPL WAS HELD BY ILSGL AND NEITHER THE ASSESSEE COMPANY NOR ITS D IRECTORS ARE HOLDING ANY SHARE OF THAT CO. I.E. ILSGL AND THE DI RECTORS OF THE ASSESSEE COMPANY ARE NOT A DIRECTOR IN THAT CO. I.E . ILSGL AND HENCE PROVISIONS OF SECTION 92A ARE NOT APPLICABLE UNDER THESE IT(TP)A NO.182/BANG/2014 PAGE 9 OF 21 FACTS AND IN VIEW OF THIS TRIBUNAL ORDER RENDERED I N THE CASE OF PAGE INDUSTRIES LIMITED VS. DCIT (SUPRA). 5. AS AGAINST THIS LEARNED DR OF THE REVENUE SUPPO RTED THE ASSESSMENT ORDER TPOS ORDER AND THE ORDER OF DRP. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL WE REPRODUCE THE PROVISIONS OF SECTION 92A OF THE I. T . ACT AS IT CONTAINS THE DEFINITION OF THE TERM ASSOCIATED ENT ERPRISE I.E. AE. THESE ARE AS UNDER:- 92A. (1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 9 2 92B 92C 92D 92E AND 92F ASSOCIATED ENTERPRISE IN RELAT ION TO ANOTHER ENTERPRISE MEANS AN ENTERPRISE (A) WHICH PARTICIPATES DIRECTLY OR INDIRECTLY OR THROUGH ONE OR MORE INTERMEDIARIES IN THE MANAGEMENT OR CONTROL O R CAPITAL OF THE OTHER ENTERPRISE; OR (B) IN RESPECT OF WHICH ONE OR MORE PERSONS WHO PA RTICIPATE DIRECTLY OR INDIRECTLY OR THROUGH ONE OR MORE INTE RMEDIARIES IN ITS MANAGEMENT OR CONTROL OR CAPITAL ARE THE SAME PERSONS WHO PARTICIPATE DIRECTLY OR INDIRECTLY OR THROUGH ONE OR MORE INTERMEDIARIES IN THE MANAGEMENT OR CONTROL OR CAP ITAL OF THE OTHER ENTERPRISE. (2) FOR THE PURPOSES OF SUB-SECTION (1) TWO ENTERP RISES SHALL BE DEEMED TO BE ASSOCIATED ENTERPRISES IF AT ANY TIME DURING THE PREVIOUS YEAR (A) ONE ENTERPRISE HOLDS DIRECTLY OR INDIRECTLY SHARES CARRYING NOT LESS THAN TWENTY-SIX PER CENT OF THE VOTING POWER I N THE OTHER ENTERPRISE; OR (B) ANY PERSON OR ENTERPRISE HOLDS DIRECTLY OR IN DIRECTLY SHARES CARRYING NOT LESS THAN TWENTY-SIX PER CENT OF THE V OTING POWER IN EACH OF SUCH ENTERPRISES; OR IT(TP)A NO.182/BANG/2014 PAGE 10 OF 21 (C) A LOAN ADVANCED BY ONE ENTERPRISE TO THE OTHER ENTERPRISE CONSTITUTES NOT LESS THAN FIFTY-ONE PER CENT OF THE BOOK VALUE OF THE TOTAL ASSETS OF THE OTHER ENTERPRISE; OR (D) ONE ENTERPRISE GUARANTEES NOT LESS THAN TEN PE R CENT OF THE TOTAL BORROWINGS OF THE OTHER ENTERPRISE; OR (E) MORE THAN HALF OF THE BOARD OF DIRECTORS OR ME MBERS OF THE GOVERNING BOARD OR ONE OR MORE EXECUTIVE DIRECTORS OR EXECUTIVE MEMBERS OF THE GOVERNING BOARD OF ONE ENT ERPRISE ARE APPOINTED BY THE OTHER ENTERPRISE; OR (F) MORE THAN HALF OF THE DIRECTORS OR MEMBERS OF THE GOVERNING BOARD OR ONE OR MORE OF THE EXECUTIVE DIRECTORS OR MEMBERS OF THE GOVERNING BOARD OF EACH OF THE TWO ENTERPRISES ARE APPOINTED BY THE SAME PERSON OR PERSONS; OR (G) THE MANUFACTURE OR PROCESSING OF GOODS OR ARTI CLES OR BUSINESS CARRIED OUT BY ONE ENTERPRISE IS WHOLLY DEPENDENT O N THE USE OF KNOW-HOW PATENTS COPYRIGHTS TRADE-MARKS LICENCE S FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE OR ANY DATA DOCUMENTATION DRAWING OR SPECIFICATION RELATING TO ANY PATENT INVENTION MO DEL DESIGN SECRET FORMULA OR PROCESS OF WHICH THE OTHER ENTER PRISE IS THE OWNER OR IN RESPECT OF WHICH THE OTHER ENTERPRISE H AS EXCLUSIVE RIGHTS; OR (H) NINETY PER CENT OR MORE OF THE RAW MATERIALS A ND CONSUMABLES REQUIRED FOR THE MANUFACTURE OR PROCESSING OF GOODS OR ARTICLES CARRIED OUT BY ONE ENTERPRISE ARE SUPPLIED BY THE OTHER ENTERPRISE OR BY PERSONS SPECIFIED BY THE OTHER EN TERPRISE AND THE PRICES AND OTHER CONDITIONS RELATING TO THE SUP PLY ARE INFLUENCED BY SUCH OTHER ENTERPRISE; OR (I) THE GOODS OR ARTICLES MANUFACTURED OR PROCESSE D BY ONE ENTERPRISE ARE SOLD TO THE OTHER ENTERPRISE OR TO PERSONS SPECIFIED BY THE OTHER ENTERPRISE AND THE PRICES A ND OTHER CONDITIONS RELATING THERETO ARE INFLUENCED BY SUCH OTHER ENTERPRISE; OR (J) WHERE ONE ENTERPRISE IS CONTROLLED BY AN INDIV IDUAL THE OTHER ENTERPRISE IS ALSO CONTROLLED BY SUCH INDIVIDUAL OR HIS RELATIVE OR JOINTLY BY SUCH INDIVIDUAL AND RELATIVE OF SUCH INDIVIDUAL; OR IT(TP)A NO.182/BANG/2014 PAGE 11 OF 21 (K) WHERE ONE ENTERPRISE IS CONTROLLED BY A HINDU UNDIVIDED FAMILY THE OTHER ENTERPRISE IS CONTROLLED BY A MEM BER OF SUCH HINDU UNDIVIDED FAMILY OR BY A RELATIVE OF A MEMBER OF SUCH HINDU UNDIVIDED FAMILY OR JOINTLY BY SUCH MEMBER AN D HIS RELATIVE; OR (L) WHERE ONE ENTERPRISE IS A FIRM ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS THE OTHER ENTERPRISE HOLDS NOT LESS THAN TEN PER CENT INTEREST IN SUCH FIRM ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS; OR (M) THERE EXISTS BETWEEN THE TWO ENTERPRISES ANY RELATIONSHIP OF MUTUAL INTEREST AS MAY BE PRESCRIBED. 7. NOW WE TAKE NOTE OF THE OBJECTIONS OF THE A.O. ASSESSEES EXPLANATIONS AND RELEVANT FACTS IN THIS REGARD. THE OBJECTIONS OF THE A.O. AS REPRODUCED ABOVE ARE THESE THAT SHRI GJR ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY WAS APPOINTED A DIRECTOR OF (GLATIPL) ALSO ON 19.12.2007 AND ON 21.12.2007 THE ENTIRE SHARE CAPITAL OF (GLATIPL) BEING ONE EQUITY SHARE WAS TRANSFERRED TO (GJRHIL) IN WHICH SHRI GJR IS O NE OF THE DIRECTORS. HENCE AS PER THE OBJECTIONS OF THE A.O. THE ENTIRE SHARE CAPITAL OF (GLATIPL) IS HELD BY (GJRHIL) ON 21.12.2007 AND ON THAT DATE SHRI GJR ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY IS DIRECTOR OF (G JRHIL) ALSO BEING A COMPANY HOLDING ENTIRE SHARE CAPITAL O F (GLATIPL). WE WILL SEE THAT WHETHER THESE FACTS MAK E (GLATIPL) AN AE OF THE ASSESSEE COMPANY LATER BUT B EFORE THAT WE FIRST EXAMINE THE FACTS IN THE PRESENT YEA R AND SEE THAT WHETHER DURING THE PERIOD FROM 01.04.20208 TO 31.03.2009 ALSO THE FACTS WERE SAME OR NOT BECAUSE IF THE FACTS ARE NOT SAME IN THIS LATER PERIOD THEN EVEN IF IT IS HELD THAT (GLATIPL) IS AE OF THE ASSESSEE COMPANY O N IT(TP)A NO.182/BANG/2014 PAGE 12 OF 21 21.12.2007 IT WILL NOT HELP THE REVENUE IN THE PRE SENT YEAR. AS PER THE SUBSEQUENT DEVELOPMENTS FOR WHICH EVIDEN CES ARE ALSO AVAILABLE ON RECORD THE SAID ONE SHARE OF (GLATIPL) WAS TRANSFERRED BY (GJRHIL) TO INTER LINK SERVICES GROUP LTD. (ILSGL) ON 22.12.2007 AND THE NECESSARY EVIDENCE IN THIS REGARD IS AVAILABLE ON P AGE 169 OF THE PAPER BOOK. HENCE ON AND FROM 22.12.2007 ( ILSGL) IS THE SHAREHOLDER OF (GLATIPL) HOLDING ITS ENTIRE SHARE CAPITAL AND THE ONLY DIRECTOR OF (ILSGL) AS PER NOT ARIAL CERTIFICATE ISSUED TO (ILSGL) ON 12.05.2011 THE CU RRENT DIRECTOR OF INTER LINK SERVICES GROUP LIMITED WAS ARANGANNAL S/O KATHAMUTHU AND HE WAS APPOINTED ON 24.04.2001 AND THE CURRENT SHAREHOLDER ON THAT DATE WAS IYER CORPORATE SERVICES PTE LTD. (FORMERLY KNOWN AS CREST SERVICES PTE LTD.). HENCE IT IS SEEN THAT FROM 22. 12.2007 TILL 12.05.2001 AT LEAST THE ENTIRE SHARE CAPITAL OF (GLATIPL) WAS HELD BY (ILSGL) AND WITH THIS COMPANY THE ASSESSEE COMPANY OR ITS DIRECTORS HAS NO RELATIONSH IP. 8. FROM THE PROVISIONS OF SECTION 92A AS PER SUB S ECTION (2) OF SECTION 92A FOR THE PURPOSE OF SUB SECTION (1) OF SECTION 92A AT LEAST ONE CONDITION OUT OF 13 CONDITIONS PRESCRIBED IN SUB SECTION (2) AS PER CLAUSE (A) TO (M) HAS TO BE SATISFIED. S INCE THE ONLY ONE SHARE OF GLATIPL WAS HELD BY ILSGL AND THE ASSESSEE COMPANY OR ITS DIRECTORS ARE NOT HOLDING ANY SHARE IN THAT COM PANY AND NONE OF THE DIRECTORS OF THE ASSESSEE COMPANY IS A DIRECTOR OF ILSGL NONE OF THE CONDITIONS SPECIFIED IN SUB SECTION 2 OF SEC TION 92A IS BEING IT(TP)A NO.182/BANG/2014 PAGE 13 OF 21 SATISFIED. A SPECIFIC QUERY WAS PUT TO LEARNED DR O F THE REVENUE IN THIS REGARD AND IN REPLY HE STATED THAT CONDITION SPECIFIED IN CLAUSE (J) OF SUB SECTION (2) IS SATISFIED IN THE PRESENT CASE. BUT WE FIND THAT EVEN THIS CLAUSE IS NOT APPLICABLE BECAUSE THERE IS NO COMMON DIRECTOR OR COMMON SHAREHOLDING IN THE CASE OF THE ASSESSEE COMPANY AND ILSGL. ADMITTEDLY THERE IS A COMMON DI RECTOR OF THE ASSESSEE COMPANY AND GLATIPL I.E. MR. G. J. REDDY BUT IN VIEW OF THIS FACT THAT THE ENTIRE SHARE CAPITAL BEING ONE S HARE OF GLATIPL IS HELD BY ILSGL AND THERE IS NO LINK OR RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND ILSGL OR BETWEEN THE DIRECTORS OF THE ASSESSEE COMPANY AND DIRECTORS OF ILSGL IT CANNOT BE SAID THAT GLATIPL IS CONTROLLED BY SHRI G. J. REDDY MERELY B ECAUSE HE IS A DIRECTOR OF GLATIPL WITHOUT ANY SHAREHOLDING IN TH AT COMPANY OR WITHOUT ANY RELATIONSHIP WITH THE DIRECTORS OF HOLD ING COMPANY OF GLATIPL I.E. ILSGL OR WITH THE DIRECTOR OF ILSGL. 9. NOW IN THE LIGHT OF THESE FACTS WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF PAGE INDUSTRIES LIMITED VS. DCIT (SUPRA). PARA NO. 11 11.1 AND 11.2 OF THI S TRIBUNAL ORDER ARE RELEVANT AND HENCE THESE PARAS ARE REPRODUCED HEREIN BELOW:- 11. IT IS THE CASE OF THE AO THAT THE ASSESSEE -COMPANY AND JII ARE AES AS THEY FALL WITHIN THE PARAMETERS OF CLAUS E (G) OF SUB- SEC. (2) OF SEC.92A OF THE ACT. IT IS NOT THE CASE OF THE AO THAT THE PRESENT CASE FALLS WITHIN PARAMETERS OF SUB-SEC TION (1) OF SEC.92A OF THE ACT. IN THIS BACKGROUND WE ARE CAL LED UPON TO ADJUDICATE WHETHER BOTH THE ENTITIES ARE AES WITHIN THE MEANING IT(TP)A NO.182/BANG/2014 PAGE 14 OF 21 OF SEC.92A OF THE ACT. THE DEFINITION OF THE TERM AE IS DIVIDED INTO TWO SUB-SECTIONS (1) AND (2). SUB-SEC. (1) CON TAINS (MEANS) DEFINITION OF AE IS .PARA METERS OF MANAGEMENT CONT ROL OR CAPITAL OF THAT ENTERPRISE. SUB-SEC. (2) CONTAINS A DEEMIN G PROVISION AND ALSO ENUMERATES CIRCUMSTANCES WHEN THE ENTERPRISE C AN BE DEEMED TO BE AE. THE OPENING WORDS OF SUB-SEC. (2) ARE AMENDED BY FINANCE ACT 2002 W.E.F. 1/4/2002. THE AMENDMENT WAS EXPLAINED AS FOLLOWS BY THE MEMORANDUM OF FINAN CE BILL 2002: IT IS PROPOSED TO AMEND SUB-SEC. (2) OF THE SAID S ECTION TO CLARIFY THAT THE MERE FACT OF PARTICIPATION OF ONE ENTERPRISE IN THE MANAGEMENT OR CONTROL OR CAPITAL OF THE OTHE R ENTERPRISE OR THE PARTICIPATION OF ONE OR MORE PERS ONS IN THE MANAGEMENT OR CONTROL OR CAPITAL OF BOTH THE ENTERPRISES SHALL NOT MAKE THEM ASSOCIATED ENTERPRI SE UNLESS THE CRITERIA SPECIFIED IN SUB-SEC (2) ARE FU LFILLED. THE RESULTANT OF THE AMENDMENT IS THUS EXPLAINED TH AT UNLESS THE REQUIREMENTS OF SUB-SEC. (2) ARE FULFILLED THE SUB - SECTION (1) CANNOT BE APPLIED AT ALL. THIS IMPLIES THAT IN ORD ER TO CONSTITUTE RELATIONSHIP OF AN AE THE PARAMETERS LAID DOWN IN BOTH SUB- SECTIONS (1) AND (2) SHOULD BE FULFILLED. IF WE WE RE TO HOLD THAT THERE IS A RELATIONSHIP OF AE ONCE THE REQUIREMENT S OF SUB-SEC. (2) ARE FULFILLED THEN THE PROVISIONS OF SUB-SEC. (1) RENDERS OTIOSE OR SUPERFLUOUS. NOW IT IS WELL SETTLED CANON INTE RPRETATION OF STATUTES THAT WHILE INTERPRETING THE TAXING STATUTE CONSTRUCTION SHALL NOT BE ADOPTED WHICH RENDERS PARTICULAR PROVI SION OTIOSE. WHEN INTERPRETING A PROVISION IN A TAXING STATUTE A CONSTRUCTION WHICH WOULD PRESERVE THE PURPOSE OF THE PROVISION MUST BE ADOPTED. 11.1 AS OBSERVED IN STATE OF TAMIL NADU V. M.K. KANDASWAMI [(1975) 36 STC 191 198 (SC)] IN INTERPRETING A PROVISION A CONSTRUCTION WHICH WOULD DEFEAT ITS PURPOSE AND IN EFFECT OBLITERATE IT FROM THE STATUTE BOOK SHOULD BE ESCHE WED. IF MORE THAN ONE CONSTRUCTION IS POSSIBLE THAT WHICH PRESE RVES ITS WORKABILITY AND EFFICACY IS TO BE PREFERRED TO THE ONE WHICH WOULD RENDER IT OTIOSE OR STERILE. IN THAT VIEW OF THE MATTER COURTS SHOULD NOT ADOPT CONSTRUCTION WHICH WOULD UPSET OR EVEN IMPAIR THE PURPOSE IN INTRODUCING A PARTICULAR PROVISION I N THE STATUTE [ CALCUTTA JUTE MANUFACTURING CO. V. CTO (1997) 106 STC 433 439 (SC)]. THEREFORE FOLLOWING THIS PRINCIPLE WE HOLD THAT IT IS SINCE THE PARAMETERS LAID DOWN IN SUB-SECTION (1) A RE NOT FULFILLED IT(TP)A NO.182/BANG/2014 PAGE 15 OF 21 THERE IS NO RELATIONSHIP OF AE BETWEEN ASSESSEE-COM PANY AND JII AND THEREFORE THE PROVISIONS OF CHAPTER X OF THE A CT HAVE NO APPLICATION. 11.2 IN THE RESULT THE TRANSFER PRICING ADJUSTM ENT MADE BY THE TPO IS NOT VALID IN LAW. 10. IN OUR CONSIDERED OPINION IN THE FACTS OF THE PRESENT CASE THIS TRIBUNAL ORDER IS SQUARELY APPLICABLE BECAUSE AS PER THE REVENUE ONLY BECAUSE ONE OF THE DIRECTORS OF THE A SSESSEE COMPANY AND OF GLATIPL IS COMMON SECTION 92CA IS APPLICABL E BUT IT WAS HELD BY THE TRIBUNAL IN THIS CASE THAT IN ORDER TO CONSTITUTE RELATIONSHIP OF AN AE THE PARAMETERS LAID DOWN IN BOTH SUB SECTIONS (1) AND (2) SHOULD BE FULFILLED. AS PER TH E EXPLANATION AMENDMENT CARRIED OUT IN SUB SECTION (2) OF SECTION 92A BY FINANCE ACT 2002 W.E.F. 01.04.2002 AS REPRODUCED BY THE T RIBUNAL IN PARA 11 REPRODUCED ABOVE MERE PARTICIPATION OF ONE OR M ORE PERSONS IN THE MANAGEMENT OR CONTROL OR CAPITAL OF BOTH THE EN TERPRISES SHALL NOT MAKE THEM AE UNLESS THE CRITERIA SPECIFIED IN S UB SECTION (2) ARE FULFILLED. WE HAVE SEEN THAT EVEN AS PER THE LE ARNED DR OF THE REVENUE CLAUSE (J) OF SUB SECTION (2) OF SECTION 9 2A IS ATTRACTED BUT THIS CLAIM IS ALSO DEVOID OF MERIT BECAUSE HE COULD ONLY POINT OUT THAT ONE DIRECTOR OF THE ASSESSEE COMPANY AND OF GL ATIPL IS COMMON BUT THIS FACT ALONE DOES NOT ESTABLISH THAT THE SAID COMMON DIRECTOR IS CONTROLLING GLATIPL WHEN THE SA ID COMPANY IS IT(TP)A NO.182/BANG/2014 PAGE 16 OF 21 A SUBSIDIARY OF ILSGL AND THE ASSESSEE COMPANY OR I TS DIRECTORS ARE NOT HAVING ANY RELATIONSHIP WITH ILSGL OR DIRECTOR OF ILSGL. HENCE BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER WE H OLD THAT SINCE THE PARAMETERS LAID DOWN IN SUB SECTION (1) AND (2) OF SECTION 92A ARE NOT FULFILLED THERE IS NO RELATIONSHIP OF AE BETWE EN THE ASSESSEE COMPANY AND GLATIPL AND THEREFORE THE PROVISIONS O F CHAPTER X OF I. T. ACT HAVE NO APPLICATION. 11. NOW WE DEAL WITH GROUNDS RELATING TO CORPORATE TAX ISSUE AS PER GROUNDS NO. 6 9 AND 10. LEARNED AR OF THE ASSE SSEE SUBMITTED THAT THREE ISSUES ARE INVOLVED IN THIS GROUND I.E. 1) DISALLOWANCE OF TRANSPORTATION CHARGES 2) DISALLOWANCE OF EXPENSES UNDER EXPLANATION TO SECTION 37 (1) AND 3) ADDITION MADE ON ACCOUNT OF SALE OF LAND. HE SUBMITTED THAT ALL THESE THREE ISS UES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER RENDER ED IN ASSESSEES OWN CASE FOR A. Y. 2010 11 IN ITA NO. 653/BANG/20 15 DATED 29.07.2016. HE SUBMITTED A COPY OF THIS TRIBUNAL OR DER AND POINTED OUT THAT AS PER PARA 8 OF THIS TRIBUNAL ORDER TRAN SPORTATION CHARGES WAS DELETED BY THE TRIBUNAL IN THAT YEAR AND ACCORD INGLY IN THE PRESENT YEAR ALSO THIS DISALLOWANCE SHOULD BE DELE TED BECAUSE FACTS ARE SAME. THEREAFTER HE SUBMITTED THAT PARA 14 AND 15 OF THIS TRIBUNAL ORDER ARE RELEVANT IN RESPECT OF DISALLOWA NCE OF EXPENSES UNDER EXPLANATION TO SECTION 37 (1) WHICH WAS DELE TED BY THE IT(TP)A NO.182/BANG/2014 PAGE 17 OF 21 TRIBUNAL IN THAT YEAR. REGARDING THE THIRD ISSUE I. E. ADDITION MADE ON ACCOUNT OF SALE OF LAND HE SUBMITTED THAT IN PA RA 21 OF THAT TRIBUNAL ORDER THE TRIBUNAL HELD THAT GROSS AMOUNT OF SALE PROCEEDS CANNOT BE TAXED AND THE MATTER WAS RESTORED BACK TO THE AO FOR A FRESH DECISION WITH THE DIRECTION THAT DEDUCTION SH OULD BE ALLOWED REGARDING COST OF ACQUISITION IF ANY INCURRED BY T HE ASSESSEE. HE SUBMITTED THAT ALL THESE THREE ISSUES MAY BE DECIDE D IN THE PRESENT YEAR ALSO ON SIMILAR LINE. LEARNED DR OF THE REVENU E SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT HE COULD NOT PO INT OUT ANY DIFFERENCE IN FACTS. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FI RST OF ALL WE REPRODUCE PARA 8 14 15 AND 21 OF THIS TRIBUNAL OR DER FOR THE SAKE OF READY REFERENCE. THE SAME ARE AS UNDER:- '08. IN THE NEXT JUDGMENT OF THE HON'BLE DELHI HI GH COURT RENDERED IN THE CASE OF CIT VS PRADEEP KUMAR GUPTA (SUPRA) ALSO IT WAS HELD BY THE HON'BLE DELHI HIGH COURT T HAT IT WAS MANDATORY FOR THE REVENUE TO PRODUCE A FOR CROSS EX AMINATION BY THE ASSESSEE ON THE SPECIFIC DEMAND IN THIS REGARD AND THEREAFTER IT WAS HELD THAT THE VIOLATION OF THE REVENUE TO PR ODUCE A FOR CROSS EXAMINATION BY THE ASSESSEE ASSUMES FATAL CON SEQUENCES. HENCE AS PER THESE TWO JUDGMENTS FOR THIS REASON ALONE THAT THE REVENUE HAS NOT MADE AVAILABLE THESE PERSONS FOR CR OSS EXAMINATION OF THE ASSESSEE DESPITE SUCH REQUEST BY THE ASSESSEE BEFORE THE AO THESE STATEMENTS CANNOT BE USED AGAI NST THE ASSESSEE AND WITHOUT TAKING HELP FROM THESE STATEME NTS OF THE TRANSPORTERS THE DISALLOWANCE MADE BY THE AO OUT O F TRANSPORTATION CHARGES IS NOT SUSTAINABLE AS PER TH ESE TWO JUDGMENTS RELIED UPON BY THE ID. AR OF THE ASSESSEE AND NO CONTRADICTORY JUDGMENT OF THE HON'BLE JURISDICTIONA L HIGH COURT IT(TP)A NO.182/BANG/2014 PAGE 18 OF 21 OR APEX COURT OR OF ANY OTHER HIGH COURTS COULD BE MADE AVAILABLE BEFORE US BY THE LD. DR OF THE REVENUE AN D THEREFORE RESPECTFULLY FOLLOWING THESE TWO JUDGMENTS OF THE H ON'BLE DELHI HIGH COURT WE HOLD THAT IN THE FACTS OF THE PRESENT CASE THESE DISALLOWANCE OUT OF TRANSPORTATION ALLOWANCE IS NOT SUSTAINABLE. GROUND 0.2 OF THE ASSESSEE IS ALLOWED. .. 14. IN THE PRESENT CASE WE ARE NOT CONCERNED AS T O WHETHER HE ASSESSEE IS ENGAGED IN ILLEGAL MINING OR NOT BUT IN THE PRESENT CASE BECAUSE THIS IS NOT THE CASE OF THE AO THAT ANY DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE FOR FACILITATING T O CARRY OUT THE ILLEGAL MINING ALLEGED BY THE AO OR FOR ANY PENALTY IN RESPECT OF SUCH ILLEGAL MINING BECAUSE THE DISALLOWANCE HAS BE EN MADE BY THE AO TO THE EXTENT OF 40% OF THE TOTAL MINING EXP ENSES AND SINCE 60% OF THE EXPENSES ARE ALLOWED BY THE AO TH E REMAINING 40% OF THE SAME EXPENSES CANNOT BE CONSIDERED AS EX PENSES FOR THE PURPOSE OF OFFENCE OR UNLAWFUL PURPOSES. HENCE THIS DISALLOWANCE IS NOT JUSTIFIED. 15. NOW WE EXAMINE THE APPLICABILITY OF VARIOUS JU DGMENTS CITED BY THE ID. AR OF THE ASSESSEE. THE FIRST JUDG MENT CITED BY HIM IS OF THE HON'BLE APEX COURT RENDERED IN THE CA SE OF CIT VS PIARA SINGH (SUPRA). IN THIS CASE IT WAS HELD THAT LOSS ARISING OF CONFISCATION BY CUSTOMS AUTHORITIES IS DEDUCTIBLE F ROM THE INCOME DERIVED FROM SMUGGLING ACTIVITIES. HENCE EX PENSES INCURRED IN COURSE OF AN ILLEGAL BUSINESS IS ALLOWA BLE FOR COMPUTING INCOME FROM SUCH BUSINESS BUT THIS JUDGME NT IS PRIOR TO INTRODUCTION OF EXPLANATION -1 TO SEC.37 OF THE IT ACT AND THEREFORE THIS JUDGMENT IS NOT RELEVANT IN RESPECT OF THOSE EXPENSES WHICH ARE HIT BY THIS EXPLANATION AND IN O UR CONSIDERED OPINION THE NORMAL MINING EXPENSES ARE NOT HIT BY THIS EXPLANATION AND HENCE THIS ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THIS JUDGMENT SINCE THE EXPLANATION TO SECTION 37 (1) IS NOT ATTRACTED IN THE FACTS OF THE PRESENT CASE. SIMILARLY THE OTHER TWO JUDGMENTS OF WHICH RELIANCE HAS BEEN PLACED BY THE LD. AR OF THE ASSESSEE ARE ALSO FOR T HE PERIOD PRIOR TO INTRODUCTION OF EXPLANATION-1 TO SEC.37 (1) OF T HE ACT 1961 AND THEREFORE AS PER THESE JUDGMENTS ALSO THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE SINCE THE EXPLANATION TO SEC TION 37 (1) IS NOT ATTRACTED IN THE FACTS OF THE PRESENT CASE. IN VIEW OF OUR ABOVE DISCUSSION GROUND NO.3 OF THE ASSESSEE IS ALLOWED. IT(TP)A NO.182/BANG/2014 PAGE 19 OF 21 ......... 21. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND F ORCE IN THE SUBMISSION OF THE LD. AR OF THE ASSESSEE BECAUSE WE FIND THAT THE AMOUNT OF RS.86 60 079/- FOR WHICH ADDITION HAS BEE N BY THE AO IS THE AMOUNT OF ASSESSEE'S SHARE IN THE SALE CONSIDERATION FOR SALE OF LAND AND HENCE EVEN IF IT IS HELD THAT INCOME O N THIS ACCOUNT IS TO BE TAXED IN THE PRESENT YEAR THE SAME CANNOT BE TO THE EXTENT OF GROSS AMOUNT OF SALE PROCEEDS AND INCOME HAS TO BE ASSESSED AFTER ALLOWING DEDUCTION REGARDING COST OF ACQUISIT ION IF ANY INCURRED BY THE ASSESSEE BUT SINCE THERE IS NO DISC USSION ON THIS ASPECT IN THE ORDERS OF THE AUTHORITIES BELOW WE F EEL IT PROPER THAT THIS ISSUE SHOULD BE RESTORED BACK TO THE FILE OF T HE AO FOR A FRESH DECISION IN THE LIGHT OF THE ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . WE ORDER ACCORDINGLY. THIS GROUND IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. 13. SINCE LEARNED DR OF THE REVENUE COULD NOT POIN T OUT ANY DIFFERENCE IN FACTS WE FIND NO REASON TO TAKE A CO NTRARY VIEW IN THE PRESENT YEAR. HENCE IN LINE WITH THE TRIBUNAL ORDER IN A.Y. 2010 11 IN ASSESSEES OWN CASE WE DELETE FIRST TWO DISALLO WANCES I.E. 1) DISALLOWANCE OF TRANSPORTATION CHARGES AND 2) DISA LLOWANCE OF EXPENSES UNDER EXPLANATION TO SECTION 37 (1) AND IN RESPECT OF THIRD ISSUE I.E. ADDITION MADE ON ACCOUNT OF SALE O F LAND WE SET ASIDE THE ORDER OF CIT (A) ON THAT ISSUE AND RESTOR E THE MATTER TO A.O. FOR A FRESH DECISION WITH SAME DIRECTIONS AS W ERE GIVEN BY THE TRIBUNAL IN A. Y. 2010 11. GROUND NO. 6 IS ALLOWE D IN THIS MANNER. IT(TP)A NO.182/BANG/2014 PAGE 20 OF 21 14. IN VIEW OF OUR ABOVE DECISION OTHER GROUNDS RA ISED BY THE ASSESSEE DO NOT REQUIRE ANY SEPARATE ADJUDICATION. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MEN TIONED ON THE CAPTION PAGE. (SUNIL KUMAR YADAV) (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : 20.10.2016 AM/AKG/ DS/ COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR ITAT BANGALORE. 6 GUARD FILE BY ORDER AR ITAT BANGALORE IT(TP)A NO.182/BANG/2014 PAGE 21 OF 21 1. DATE OF DICTATION 2. DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !' + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !' ' - ) IF NOT UPLOADED FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .