M/S. CRESCENT ORGANICS P. LTD, MUMBAI v. DCIT - 8(1), MUMBAI

ITA 365/MUM/2009 | 2004-2005
Pronouncement Date: 28-02-2011 | Result: Partly Allowed

Appeal Details

RSA Number 36519914 RSA 2009
Assessee PAN AAACC1690D
Bench Mumbai
Appeal Number ITA 365/MUM/2009
Duration Of Justice 2 year(s) 1 month(s) 11 day(s)
Appellant M/S. CRESCENT ORGANICS P. LTD, MUMBAI
Respondent DCIT - 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 28-02-2011
Date Of Final Hearing 10-01-2011
Next Hearing Date 10-01-2011
Assessment Year 2004-2005
Appeal Filed On 16-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI B. RAMAKOT AIAH (A.M.) ITA NO.365/MUM/2009 ASSESSMENT YEAR : 2004-2005 ITA NO.366/MUM/2009 ASSESSMENT YEAR : 2005-2006 CRESCENT ORGANICS P. LTD. 201 WINDSOR 2 ND FLR. CST RD. KALINA SANTACRUZ(E) MUMBAI 400 098 PAN : AAACC1690D VS. D.C.I.T.-8(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.N. MOTIWALLA & PIYUSH CHAJED (AR) RESPONDENT BY : SHRI NAVEEN GUPTA D.R. O R D E R PER B. RAMAKOTAIAH A.M. THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDERS DATED 02.12.2008 OF THE CIT(A)-VIII MUMBAI RELATI NG TO ASSESSMENT YEARS 2004-05 AND 2005-06. SINCE COMMON ISSUES ARE INVOLV ED THESE ARE HEARD TOGETHER AND DECIDED. ITA NO.365/MUM/2009 2. GROUND NO.1 READ AS UNDER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE OF ` 10 43 348/- OUT OF COMMISSION AND BROKERAGE EXPENSE S THOUGH ALL THE DETAILS WERE FILED BEFORE THE ASSESS ING OFFICER. 2.1 THIS GROUND IS WITH REFERENCE TO THE DISALLOWAN CE OF COMMISSION AND SERVICE CHARGES. ON NOTICING THAT THE ASSESSEE CLA IMED THESE CHARGES TO THE EXTENT OF ` 48 50 189/- THE AO ASKED FOR DETAILS AND SERVICES RENDERED SO AS TO EXAMINE THE ALLOWABILITY. THE ASSESSEE FURNISHE D DETAILS WHICH ASSESSING OFFICER EXAMINED AND DISALLOWED AN AMOUNT OF ` 6 88 101/- TOWARDS ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 2 COMMISSION AND ` 3 55 247/- TOWARDS SERVICE CHARGES STATING THAT TH E ASSESSEE DID NOT PROVE THE SERVICES RENDERED IN THE SE CASES. THE DETAILS ARE AS UNDER: A. COMMISSION & BROKERAGE : SR. NO. DATE NAME OF THE PARTIES AMOUNT ( ` ) 1 30.03.2004 MEENA & CO. 2 82 146 2 31.03.2004 ROHIT B. SHAH 1 00 000 3 31.03.2004 ROHIT B. SHAH 1 00 000 4 31.03.2004 TURAKHIA BROTHERS 2 501 5 31.03.2004 HEMANT PARIKH 4 652 6 31.03.2004 SUNIL C. MEHTA 5 374 7 31.03.2004 BHARAT K. MEHTA 7 706 8 31.03.2004 BIPIN B. SANGHVI 10 596 9 31.03.2004 VIJAY P AJMERA 24 890 10 31.03.2004 ARVIND C. MEHTA 65 451 11 31.03.2004 SHASHIKANT SAYER & BRO. 78 822 12 31.03.2004 KALPESH A. MEHTA 652 13 31.03.2004 NILESH R. MORABIA 222 14 31.03.2004 KAYUR DOSHI 711 15 31.03.2004 PARAG SHAH 284 16 31.03.2004 SATISH DALAL 530 17 31.03.2004 NIPESH KHIMCHAND 265 18 31.03.2004 JAYANTI V. SANGANI 853 19 31.03.2004 PRADIP P. DOSHI 940 20 31.03.2004 ASHWIN N. MEHTA 1296 21 31.03.2004 JAYANT MEHTA 163 22 31.03.2004 DEVANG R. SHAH 47 TOTAL 6 88 101 B. SERVICE CHARAGES : SR. NO. DATE NAME OF THE PARTIES AMOUNT ( ` ) 1 12.03.2004 HIREN B. AJMERA 1 44 053 2 12.03.2004 BIPIN R. AJMERA 1 52 880 3 29.03.2004 HAREN PRADEEP PAREKH 58 314 TOTAL 3 55 247 [A] + [B] = ` `` ` 10 43 348/- 2.2 THE ASSESSEE CONTENDED THAT THE IT HAD FURNISHE D ALL THE DETAILS AND SERVICES SUPPORTED BY INVOICES BUT THE CIT(A) IN H IS ORDER CONFIRMED THE DISALLOWANCE. ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 3 3. DRAWING OUR ATTENTION TO THE VOLUMINOUS DETAILS FILED BEFORE THE ASSESSING OFFICER WHICH ARE PLACED ON RECORD IN TH E FORM OF PAPER BOOK IT WAS THE CONTENTION OF THE LEARNED COUNSEL THAT THE ASSESSING OFFICER DID NOT TAKE INTO CONSIDERATION ALL THE DETAILS. REFERRIN G TO THE FIRST ITEM OF COMMISSION DISALLOWED M/S. MEENA & CO. SECUNDERAB AD THE COUNSEL REFERRED TO THE PAGE 14 OF PAPER BOOK- DETAILS OF S ERVICES CHARGES FOR THE SAME COMPANY OF ` 1 06 980/- WHICH WAS ALLOWED BY THE ASSESSING OFFI CER. THE DETAILS OF COMMISSION PAID TO THE SAID M/S. MEE NA & CO. VOUCHERS DETAILING PAYMENT BY CHEQUES DEBIT NOTE BY THE SAI D COMPANY WERE REFERRED TO SUBMIT THAT THE ASSESSEE HAD PAID THE AMOUNT IN THE COURSE OF ITS BUSINESS AND THE ASSESSING OFFICER FAILED TO EXAMIN E THE DETAILS FURNISHED TO HIM. IT WAS HIS SUBMISSION THAT THE MATTER CAN BE REFERRED TO THE ASSESSING OFFICER FOR EXAMINATION AND ALLOWANCE OF THE CLAIM. THE LEARNED DR RELIED ON THE ORDERS OF THE AUTHORITIES. 4. WE HAVE EXAMINED THE ISSUE. THE ASSESSEE HAD FU RNISHED VOLUMINOUS DETAILS BEFORE ASSESSING OFFICER AND ASSESSING OFFI CER ALLOWED MANY OF THE CLAIMS. ONLY IN FEW CASES WITHOUT ANY DETAILED REAS ONS ON INDIVIDUAL CASES DISALLOWED THE AMOUNTS STATING THAT THE ASSESSEE HA S NOT PROVED THE SERVICES. IT IS NOT KNOWN ON WHAT BASIS THE ASSE SSING OFFICER ARRIVED AT THE CONCLUSION. THE SAME SORT OF DETAILS WERE FURNISHED WITH REFERENCE TO THE TOTAL CLAIM. ASSESSING OFFICER AS POINTED OUT A LLOWED THE SERVICES CHARGES OF M/S. MEENA & CO. BUT DISALLOWED THE COMMISSION C HARGES. WE ARE OF THE VIEW THAT THE ACTION OF THE ASSESSING OFFICER IS AR BITRARY AND HAS NO BASIS AT ALL. HOWEVER SINCE THE DETAILS FURNISHED WERE NOT EXAMINED IN THE RIGHT PERSPECTIVE AND AS ASSESSEE HAS NO OBJECTION IN TH E INTEREST OF JUSTICE WE SET ASIDE THE ORDERS OF THE AUTHORITIES ON THIS ISS UE AND RESTORE ISSUE OF COMMISSION AND SERVICE CHARGES OF ` 10 43 348/- TO THE ASSESSING OFFICER TO EXAMINE THE DETAILS AND ALLOW THE CLAIMS AFTER VERI FICATION. THE GROUND IS TREATED AS ALLOWED. ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 4 5. GROUND NO.2 ON 14A DISALLOWANCE IS NOT PRESSED H ENCE TREATED AS WITHDRAWN. 6. IN THE RESULT APPEAL IS PARTLY ALLOWED. ITA NO.366/MUM/2009 ASSESSMENT YEAR : 2005-2006 7. IN THIS APPEAL THE ASSESSEE CONTESTS VARIOUS ISS UES IN SEVEN GROUNDS. GROUND NO.1 IS AS UNDER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLO WANCE OF ` 22 92 947/- OUT OF COMMISSION AND BROKERAGE EXPENSE S THOUGH ALL THE DETAILS WERE FILED BEFORE THE ASSESS ING OFFICER. 7.1 THE ASSESSING OFFICER DISALLOWED THE COMMISSION OF ` 6 62 619/- AND SERVICE CHARGES OF ` 16 30 328/- ON REASON OF NOT FURNISHING CORROBORAT IVE EVIDENCE OR CONFIRMATION OF PARTIES. IN THIS YEAR THE ENTIRE CLAIM WAS DISALLOWED. CONSIDERING THE FACT THAT THE DETAILS ARE FURNISHED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER ALLOWED COMMISSION AND SERVICE CHARGES IN EARLIER YEAR TO A LARGE EXTENT TO THE SA ME PARTIES FOR THE REASONS STATED IN APPEAL NO.365/MUM/09 IN GROUND NO.1 THE ISSUE OF COMMISSION AND SERVICES CHARGES IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE IT AFRESH AND ALLOW THE SAME. GROUND NO.1 IS CONSIDERED AS ALLOWED. 8. GROUND NO.2 ON DISALLOWANCE U/S.14A WAS NOT PRES SED HENCE TREATED AS WITHDRAWN. 9. GROUND NO.3 READ AS UNDER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE OF ` 1 66 395/- IN RESPECT OF PAYMENTS TO CLUBS. ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 5 9.1 THE ASSESSING OFFICER HAS OBSERVED THAT THE ASS ESSEE COMPANY HAS PAID AN AMOUNT OF ` 1 66 395/- ON ACCOUNT OF EXPENDITURE INCURRED ON CLUBS. ACCORDINGLY A SHOW CASE NOTICE WAS ISSUED T O EXPLAIN WHY THE EXPENSE INCURRED AS CLUB FEES FOR STERLING HOLIDAY RESORTS RCI (INDIA) LTD. TALWALKAR HEALTH COMMUNITY AND MAHINDRA CLUB AMOUNT ING TO ` 1 66 395/- SHOULD NOT BE DISALLOWED BEING PERSONAL EXPENDITURE. THE ASSESSEE COMPANY SUBMITTED ITS REPLY BEFORE THE ASS ESSING OFFICER. AFTER CONSIDERING THE REPLY OF THE ASSESSEE COMPANY THE ASSESSING OFFICER HAS CONCLUDED THAT THE CLUBS TO WHICH THE ASSESSEE COMP ANY HAS SUBSCRIBED NAMELY STERLING HOLIDAY RESORTS RCI (INDIA) LTD. T ALWALKAR HEALTH COMMUNITY AND MAHINDRA CLUB ARE CHAIN OF HOLIDAY RE SORTS WHICH ARE LOCATED AT VARIOUS FAR OFF PLACES ACROSS INDIA AND ABROAD AND WHERE NO BUSINESS ACTIVITIES HAVE BEEN CARRIED OUT BY THE AS SESSEE COMPANY. FURTHER TALWALKAR HEALTH COMMUNITY IS A FITNESS CENTRE/GYMN ASIUM WHERE NO ARRANGEMENT FOR MEETINGS/CONFERENCES CAN BE MADE. SINCE THE ASSESSEE COMPANY HAS NOT SUBMITTED ANY SUPPORTING EVIDENCE T O SUBSTANTIATE ITS CLAIM THAT THE EXPENDITURE WAS INCURRED FOR BUSINES S EXPEDIENCY THE ASSESSING OFFICER DISALLOWED ` 1 66 395/-. THE CIT(A) CONFIRMED THE ORDER. 9.2 THE LEARNED COUNSEL RELIED ON THE DECISION OF T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVATORS CO. (INDIA) LTD . 195 ITR 682 FOR THE PROPOSITION THAT THE EXPENDITURE IS REVENUE IN NATU RE. FURTHER THE AR RELIED ON DECISION OF ITAT MUMBAI IN THE CASE OF M/S. MET RO EXPORTERS PVT. LTD. IN ITA NO.2027 & 2095/MUM/08 WHEREAS THE LEARNED DR D ISTINGUISHED THE CASE STATING THAT THE ISSUE BEFORE THE HONBLE BOMB AY HIGH COURT WAS WITH REFERENCE TO SUBSEQUENT FEES REIMBURSEMENT TO THE E MPLOYEES AND NOT ENTRANCE FEES WHICH IS THE ISSUE BEFORE THE TRIBUN AL. 10. WE HAVE CONSIDERED THE ISSUE. IN THE CASE OF M/S. METRO EXPORTS IT WAS CONSIDERED IN PARA 9 AS UNDER: WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE DE TAILS FILED THE CLUB MEMBERSHIP WAS TAKEN IN THE NAME OF THE CO MPANY ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 6 FOR THE BENEFIT OF MRS. SMITA P. BHATIA JOINT MANA GING DIRECTOR AS SOLE NOMINEE FOR A PERIOD OF 10 YEARS. EVENTHOU GH THE AMOUNT OF ` 15 00 000/- WAS PAID IN LUMP SUM FOR A PERIOD OF 10 YEARS THE ASSESSEE HAS CLAIMED ONLY A PROPORTION ATE AMOUNT DURING THE YEAR CLAIMING ONLY ` 1 37 500/-. THE DISPUTE IS REGARDING ALLOWABILITY OF EXPENDITURE ON ACCOUNT OF ENTRANCE FEES TOWARDS MEMBERSHIP OF A CLUB. THE AS SESSING OFFICER AND CIT(A) HAS HELD THE AMOUNT AS CAPITAL I N NATURE HOWEVER THERE IS NO FINDING THAT THIS AMOUNT WAS N OT SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN ORDER TO ALLOW THE EXPENDITURE WHAT IS REQUIRED TO BE SEEN I S WHETHER THE EXPENDITURE HAS RESULTED INTO AN ADVANTAGE IN T HE REVENUE FIELD OR IN THE CAPITAL FIELD. IN THE CASE THE EXP ENDITURE HAS NOT RESULTED IN CREATION OF ANY CAPITAL ASSET OR ANY NE W SOURCE OF INCOME AND IT HAS NOT BEEN CHANGED THE CAPITAL STRU CTURE OF THE COMPANY AND HAD BEEN INCURRED ONLY FOR CONDUCT OF T HE BUSINESS MORE EFFICIENTLY AND PROFITABLY THEN IT WI LL BE REVENUE EXPENDITURE. THE LEARNED DR DISTINGUISHED THE JUDG MENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVA TORS CO. (INDIA) LTD. 195 ITR 682 WHERE THE ISSUE WAS WITH R EFERENCE TO THE REIMBURSEMENT OF EXPENDITURE SPENT IN THE CLUB AND NOT THE FEE PAID FOR OBTAINING THE MEMBERSHIP. HOWEVER T HERE IS A JUDGMENT OF THE HONBLE GUJRAT HIGH COURT IN THE CA SE OF GUJARAT STATE EXPORT CORPORATION LTD. 209 ITR 649 IN WHICH THE LUMP SUM ENTRANCE FEES PAID TOWARDS MEMBERSHIP OF THE CLUB HAS BEEN HELD TO BE REVENUE EXPENDITURE. SIM ILAR VIEW WAS ALSO TAKEN IN THE CASE OF CIT VS. SAMTEL COLOR LTD. 180 TAXMAN 82 (DEL) WHEREIN THE HONBLE DELHI HIGH COUR T HAS ALLOWED THE EXPENDITURE HOLDING THAT THE ADMISSION FEE PAID TOWARDS CORPORATE MEMBERSHIP WAS AN EXPENDITURE INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NOT TOWARDS CAPITAL ACCOUNT AS IT ONLY FACILITATED SMOO TH AND EFFICIENT RUNNING OF THE BUSINESS ENTERPRISE AND DI D NOT ADD TO PROFIT EARNING APPARATUS OF THE BUSINESS ENTERPRISE . HOWEVER THE HONBLE KERALA HIGH COURT IN THE CASE OF FRAMAT ONE CONNECTOR OEN LTD. VS. DCIT 294 ITR 559 CONSIDERED SIMILAR PAYMENT PAID TO COCHIN YATCH CLUB TOWARDS INSTITUTI ONAL MEMBERSHIP FEE AND HELD THAT THE EXPENDITURE EFFECT ED BY THE ASSESSEE WAS CAPITAL IN NATURE. ONCE THE ASSESSEE P AID THE AMOUNT TO A CLUB FOR MEMBERSHIP IT WAS A PAYMENT ON CE AND FOR ALL RESULTING IN AN ENDURING BENEFIT TO THE INS TITUTION. THE MERE FACT THAT ASSESSEES REPRESENTATIVE LIKE THE MANAGING DIRECTORS PARTICIPATION IN THE CLUB PROMOTED THE A SSESSES BUSINESS DID NOT CHANGE THE CHARACTER OF THE PAYMEN T WHICH WAS MADE ONCE AND FOR ALL. THE HONBLE KERALA HIGH COURT FOLLOWED THE PRINCIPLES ESTABLISHED BY THE APEX COU RT IN PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS. C IT 225 ITR 792 IN ARRIVING AT THE ABOVE DECISION. ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 7 9.1 IN THE CASE OF SHAH RUKH KHAN IN ITA NO. 1489/MUM/2006 DATED 23.07.2009 THE COORDINATE BENCH OF THE ITAT HELD THAT THOUGH THE HONBLE HIGH COURT O F KERALA IN THE CASE OF CONNECTOR OVEN LTD. HAVE TAKEN A DIFFE RENT VIEW WE HAVE TO FOLLOW THE VIEW TAKEN BY HONBLE HIGH CO URT OF GUJARAT WHICH IS FAVOURABLE TO THE ASSESSEE HAS TO BE TAKEN INTO ACCOUNT IN VIEW OF THE JUDGEMENT OF THE HONBL E SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS 88 ITR 192. VARIOUS COORDINATE BENCHES IN THE CASE OF SUNITHI CONSULTAN CY SERVICES LTD. VS. ACIT IN ITA NO. 3554/MUM/2007 DATED 06.10. 2010 AND JINDAL DYE INTERMEDIATE PVT. LTD. VS. DCIT 1 SO T 243 (MUM) AND VIMAL B. SHAH ITA 1182/MUM/2006 DATED 08.11.2008 AND ACTI VS. SHRI RAMESH M. DAMANI ITA N O. 5143/MUM/2006 DATED 13.08.2008 HAVE TAKEN A VIEW TH AT THE ADMISSION FEE PAID WAS ALLOWABLE AS REVENUE EXP ENDITURE. 9.2 GENERALLY ENTRANCE FEE WAS PAID AS ONETIME PAYM ENT AND THE BENEFIT IS OF ENDURING NATURE. THERE IS NO JURI SDICTIONAL HIGH COURT JUDGMENT ON THIS ISSUE THOUGH THE JUDGMENT IN THE CASE OF OTIS ELEVATORS CO. (INDIA) LTD. (SUPRA) IS IN TH E CONTEST OF REIMBURSEMENT OF MEMBERSHIP FEES OF THE EMPLOYEES P AID BY THE COMPANY. EVEN IN THE CASE OF HONBLE DELHI HIG H COURT JUDGMENT IN THE CASE OF SAMTEL COLOR LTD. 180 TAXMA N 82 (DEL) THE FACTS INDICATE THAT THE ASSESSEE COMPANY NOMINA TED EMPLOYEES WHO WOULD AVAIL THE BENEFIT OF CORPORATE MEMBERSHIP GIVEN TO THE ASSESSEE. IN THOSE CIRCUMS TANCES THE EXPENDITURE WAS ALLOWED UNDER SECTION 37(1). WE SEL DOM COME ACROSS ANY COMPANY ALLOWING THE EMPLOYEES TO ENJOY THE BENEFITS. IN THE PRESENT CASE THE MEMBERSHIP WAS RE STRICTED TO ONLY JT. MANAGING DIRECTOR AND NOT TO ANY OTHER DIR ECTORS OR EMPLOYEES. THIS ISSUE HAS TO BE RESOLVED IN APPROPR IATE CASE BY THE HONBLE BOMBAY HIGH COURT. HOWEVER IN VIEW OF THE DECISIONS OF THE COORDINATE BENCHES IT IS TO BE HE LD THAT THE MEMBERSHIP FEE PAID TO THE WILLINGDON SPORTS CLUB MUMBAI DOES NOT RESULT IN ANY ENDURING BENEFIT AND ACCORDI NGLY THE SAME IS ALLOWABLE DEDUCTION. THE GROUND OF THE ASSE SSEE IS ALLOWED. 10.1. HOWEVER THE FACTS IN THE ABOVE SAID CASE INDI CATE THAT THE CLAIM WAS ON ACCOUNT OF PAYMENT TO SPORTS CLUB IN THE CITY OF MUMBAI WHERE AS IN THIS CASE THE PAYMENTS PERTAINS TO VARIOUS HOLIDAY RESORTS WHERE ASSESSE HAS NO BUSINESS ACTIVITY. MOREOVER THE ASSESSING O FFICER STATED THAT THE ASSESSEE FAILED TO FURNISH DETAILS AND SUBSTANTIATE THE CLAIM. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE MATTER CAN BE RE-EXA MINED BY THE ASSESSING OFFICER AFTER OBTAINING THE DETAILS AND EXAMINING T HE JUSTIFICATION IN CLAIMING ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 8 AS BUSINESS EXPENDITURE. THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR CONSIDERING ACCORDINGLY. THE GROUND IS CONSIDERED ALLOWED. 11. GROUND NO.4 IS READ AS UNDER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE OF 20% OF TRAVELING EXPENSES AT ` 8 28 629/-. 11.1 THE ASSESSING OFFICER HAS OBSERVED THAT THE AS SESSEE COMPANY HAS DEBITED AN AMOUNT OF ` 4 82 237/- FOR TRAVELING INLAND AND ` 36 60 906/- ON ACCOUNT OF FOREIGN TRAVEL. THE ASSESSING OFFICE R HAS ALSO NOTICED THAT AS PER 4B IN SCHEDULE 14 TO THE BALANCE SHEET ON NOTES AND INFORMATIONS FORMING PART OF ACCOUNTS THE AUDITORS HAVE STATED THAT EXPENSES / PAYMENTS INCLUDING PAYMENTS THROUGH CREDIT CARDS AN D CONSUMPTION OF PACKAGING MATERIAL RECOVERY OF FREIGHT ETC. ARE NO T PROPERLY SUPPORTED MOVEMENTS OF MATERIAL AND SHORTAGE HAVE BEEN TAKEN AS CERTIFIED BY THE MANAGEMENT. 11.2 THE ASSESSING OFFICER HAS GIVEN A SHOW CAUSE NOTICE TO THE ASSESSEE COMPANY TO SUBMIT THE DETAILS OF TRAVELING EXPENSES WITH THE NEXUS THAT THESE ARE INCURRED FOR BUSINESS PURPOSES. AFTER PE RUSING THE DETAILS FURNISHED THE ASSESSING OFFICER HAS NOTICED THAT T HE ASSESSEE COMPANY HAS NOT BEEN ABLE TO EXPLAIN THE REASONS FOR LONG FOREI GN TOURS AND NO REASON WAS GIVEN TO EXPLAIN THE TOURS AND NO REASON WAS GI VEN TO EXPLAIN THE TOURS OF DIRECTORS AND AUDITORS OF THE COMPANY TO MIDDLE EAST AND THE ENTRIES OF FOREIGN TRAVEL PAYMENTS MADE THROUGH CREDIT CARDS W ERE ALSO NOT EXPLAINED WITH ANY CORROBORATIVE EVIDENCE. THE ASSESSING OFF ICER HAS ALSO NOTICED THAT THE DIRECTORS OF THE COMPANY ARE ALSO PARTNERS IN T HE FIRM M/S. CRESCENT CHEMICALS DEALING IN THE SIMILAR LINE OF BUSINESS A ND ALSO OPERATING FROM THE SAME BUILDING. CONSIDERING ALL THESE FACTS AND CIR CUMSTANCES THE ASSESSING OFFICER HAS CONCLUDED THAT THE EXPENSES F OR TRAVELING TO MIDDLE EAST BY THE DIRECTORS AND AUDITORS WERE VIRTUALLY M EANT FOR INCORPORATION OF ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 9 KEMSOL LTD A GROUP COMPANY. FURTHER IT WAS HELD THAT THE ASSESSEE HAS FAILED TO PROVE THAT THESE EXPENSES WERE MADE FOR I TS OWN BUSINESS AFFAIRS. THEREFORE THE ASSESSING OFFICER HAS DISALLOWED 20% OF TRAVELING EXPENSES AND MADE AN ADDITION OF ` 8 28 629/-. THE CIT(A) CONFIRMED THE SAME. 11.3 IT WAS THE SUBMISSION THAT THE ASSESSEE FURN ISHED THE DETAILS AND JUSTIFICATION AND REFERRED TO PARA 9.2 OF CIT(A)S ORDER AND THE DETAILS IN PAGE 232-236 IN THE PAPER BOOK. THE DR RELIED ON THE O RDERS. 11.3 WE HAVE EXAMINED THE DETAILS AND THE ARGUMENTS . THE ASSESSEE SUPPORTED THE CLAIM BY FURNISHING DETAILS OF JOURNE YS WHERE AS ON THE BASIS OF THE NOTE BY THE AUDITORS THE ASSESSING OFFICER D ISALLOWED THE 20% OF THE EXPENDITURE CLAIM. KEEPING IN VIEW THE SUBMISSIONS AND THE DETAILS PLACED ON RECORD AND THE NOTE OF THE AUDITORS WE ARE OF T HE OPINION THE DISALLOWANCE CAN BE RESTRICTED TO 10% OF THE FOREIG N TRAVEL EXPENDITURE. THE ASSESSING OFFICER IS DIRECTED TO RESTRICT ACCORDING LY. THE GROUND IS PARTLY ALLOWED. 12. GROUND NO.5 READ AS UNDER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE OF ` 6 03 977/- IN RESPECT OF ENTERTAINMENT EXPENSES AND SALES PROMOTION EXPENSES. 12.1 THE ASSESSING OFFICER HAS NOTICED THAT THE ASS ESSEE HAS DEBITED AN AMOUNT OF ` 30 19 884/- ON ACCOUNT OF ENTERTAINMENT AND SALES PROMOTION EXPENSES. THE ASSESSING OFFICER HAS ISSUED A QUEST IONNAIRE TO THE ASSESSEE COMPANY TO FURNISH DETAILS OF ENTERTAINMENT AND SAL ES PROMOTION EXPENSES. ACCORDINGLY THE ASSESSEE COMPANY HAS SUBMITTED THE COPY OF LEDGER ACCOUNT. FROM THE PERUSAL OF THESE DETAILS THE A SSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAD DEBITED MOST OF THE EXPENSES PAID BY CREDIT CARDS BOTH IN INDIA AND ABROAD. FURTHER IT WAS H ELD THAT THE ASSESSEE HAS NOT GIVEN ANY CORROBORATIVE EVIDENCE IN SUPPORT OF THE NEXUS BETWEEN THE ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 10 EXPENSES INCURRED UNDER THE HEAD ENTERTAINMENT EXPE NSES BUSINESS PROMOTION EXPENSES CONFERENCE AND SEMINAR AND THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY. AFTER CONSIDERING ALL THESE FACTS THE ASSESSING OFFICER HAD DISALLOWED 20% OF THESE EXPENSES BEING PERSONAL AND NOT SUPPORTED BY DOCUMENTARY EVIDENCES HENCE MADE AN AD DITION OF ` 6 03 977/-. 12.2 THE CIT(A) CONFIRMED THE SAME. ON CONSIDERING THE SUBMISSIONS OF THE RIVAL PARTIES AND EXAMINING THE DETAILS ON RECO RD WE ARE OF THE OPINION THAT THE EXPENDITURE WAS DISALLOWED ON ADHOC BASIS PURELY ON SURMISES. THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE HENC E WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SAME. THE GROUND IS ALLOWED. 13. GROUND NO.6 IS READ AS UNDER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE OF ` 27 81 772/- IN RESPECT OF INTEREST ON INVESTMENT IN SISTER CONCERN. 13.1 FROM THE PERUSAL OF BALANCE SHEET OF THE COMPA NY THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAS MADE FRESH INVESTMENT OF ` 3 57 96 450/- IN 1500000 EQUITY SHARES OF KEMSOL LTD. ` 16 25 348/- IN 7000 EQUITY SHARES OF BHUSHAN STEEL & STRIPS LTD. AND ` 2 31 187/- IN 2000 EQUITY SHARES OF RAIPUR ALLOYS AND STEEL LTD. FURTHER UNSECURED LOANS FROM DIRECTORS AND SHAREHO LDERS HAD BEEN SHOWN AT ` 2 72 50 000/- FOR WHICH INTEREST OF ` 27 87 772/- WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. ACCORDINGLY THE ASSESSING O FFICER HAD GIVEN A SHOW CAUSE NOTICE TO EXPLAIN WHY THIS INTEREST SHOULD NO T BE DISALLOWED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE COMPANY THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE HAS NOT ADVANCED AN Y LOAN WHICH THEY WOULD RECOVER BACK FROM THE COMPANIES INCLUDING SUB SIDIARY COMPANY AND FURTHER ANY INCOME IF ACCRUED TO THE SUBSIDIARY IS NOT LIKELY TO BE TAXED IN ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 11 INDIA. AFTER GIVING DETAILS IN THE ASSESSMENT ORDE R THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST OF ` 27 87 772/-. 13.2 THE ASSESSEE SUBMITTED BEFORE THE CIT(A) AS UNDER: THE ASSESSEE COMPANY HAS MADE THE FOLLOWING FRESH I NVESTMENTS DURING THE YEAR UNDER CONSIDERATION. (A) 59 LACS EQUITY SHARES OF M/S. KEMSOL (I) LTD. A MOUNTING TO ` 3 57 96 450/- (B) 7000 EQUITY SHARES OF M/S. BHUSHAN STEEL & STRI PS AMOUNTING TO ` 16 25 348/- (C) 2 000 EQUITY SHARES OF M/S. RAIPUR ALLOYS & STE EL LTD. ` 2 31 187/- THE TOTAL UNSECURED LOANS FROM DIRECTORS FOR THE YE AR UNDER CONSIDERATION HAD BEEN SHOWN AT 2 72 50 000/- FOR W HICH INTEREST AT THE RATE OF 12% WAS PAID AT ` 27 87 772/-. THE SAID INTEREST IS DEBITED TO THE P & L A/C. FURTHER THE ASSESSEE VIDE ITS LETTER DATED 07.12.2 07 HAS STATED THAT SUM OF ` 3.57 CRORES WAS INVESTED IN THE COURSE OF ACQUIRIN G 60% HOLDING OF KEMSOL LTD. (A SUBSIDIARY OF THE COMPANY ) IN THE LAST WEEK OF APRIL 2004 AND THE COMPANY HAS BORROWED ` 2.23 CRORES FROM THE SHARE HOLDERS FOR A SHORT PERIOD AND PAID INTEREST OF ` 1 08 078/- ON THE SAME. THE DETAILED STATEMENT SHOWING NAME OF THE PERSON DATE AMOUNT RECEIVED AMOUNT PAID NO. OF DAYS AMOUNTS U TILIZED INTEREST PAID @12% AND THE TOTAL INTEREST AMOUNT. THUS THE COMPANY HAS PAID ` 10 80 781/- ONLY ON THE FUNDS BORROWED FOR THE INV ESTMENT IN KEMSOL LTD. THE INVESTMENTS IN THE SUBSIDIARY ARE MADE WITH A COMMERCIAL EXPEDIENCY TO ACQUIRE 60% SHARES AND THE FUNDS ARE USED BY THE SUBSIDIARY FOR THE PURPOSE OF ITS BUSINESS. HENCE THE INTEREST PAID ON BORROWINGS FOR THE PURPOSE OF INVESTMENT IN THE SHARES OF SUBSIDIARIES IS AN ALLOWABLE EXPENDITURE AS HAS BEE N DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. VS. CIT(A) & ANR (2006) 206 CTR (SC) 631. 14. RELYING ON THE DECISION OF THE HONBLE ITAT MU MBAI IN THE CASE OF KANKHAL INVESTMENTS & TRADING CO. (P) LTD. VS. ACIT (2008) 6 DTR (MUMBAI)(TRIB) 174 WHEREIN IT WAS HELD THAT INTERE ST ON CAPITAL BORROWED FOR INVESTMENT IN SHARES COULD NOT BE ALLOWED AS BUSINE SS EXPENDITURE U/S.36(1)(III) AS INCOME THEREFROM WAS NOT ASSESSAB LE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION BUT PROFITS FR OM SALE OF SHARES IF ANY ARE ASSESSABLE UNDER THE HEAD CAPITAL GAINS AND D IVIDEND INCOME THOUGH EXEMPT U/S.10(33) IF TAXABLE WOULD HAVE FALLEN UN DER THE HEAD INCOME ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 12 FROM OTHER SOURCES DEDUCTION COULD NOT ALSO BE CLA IMED AGAINST INCOME FROM INTEREST DEBENTURES THE SOURCE OF INCOME BEIN G DIFFERENT. THE CIT(A) ACCORDINGLY CONFIRMED THE DISALLOWANCE STATING THAT THE ASSESSEE COMPANY HAD BORROWED FUNDS FROM THE DIRECTORS OF THE COMPAN Y AND SHARE HOLDERS AND UTILIZED FOR THE INVESTMENTS IN SHARES OF DIFFE RENT COMPANY AND CLAIMED DEDUCTION U/S.36(1)(III) WHICH IS NOT ALLOWABLE AS PER PROVISIONS OF THE ACT. 15. THE LEARNED DR RELIED ON THE ORDERS OF THE ASSE SSING OFFICER AND CIT(A) AND SUBMITTED THAT BORROWED FUNDS WERE DIVER TED FOR INVESTMENTS IT IS NOT A LOAN OR ADVANCES IN THE COURSE OF BUSINESS . THE LEARNED DR RELIED ON THE PRINCIPLE ESTABLISHED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT(A) VS. SMT. LEENA RAMACHANDRAN [45 DTR (KER) 37 2] (2010) FOR THE PROPOSITION WITH INTEREST ON BORROWED FUNDS UTILIZE D FOR ACQUISITION OF SHARES WAS NOT ENTITLED FOR DEDUCTION. THE LEARNED AR HAS SUBMITTED THAT THE ASSESSEE COMPANY INVESTED 60% SHARE AMOUNT IN THE S ISTER CONCERN M/S. KEMSOL (I) LTD. AND THESE ARE SHOWN AS TRADE INVEST MENTS. IT WAS FURTHER SUBMITTED THAT DIVIDEND INCOME THEREON IS TAXABLE I N INDIA AS THERE IS NO EXEMPTION OF FOREIGN DIVIDEND RECEIVED FROM THE COM PANY IN DUBAI. HE RELIED ON THE PRINCIPLE ESTABLISHED BY HONBLE SUPR EME COURT IN THE CASE OF MUNJAL SALES CORPORATION VS CIT 298 ITR 298 (SC). THE ASSESSEE SUBMITTED THAT THE AMOUNT IS ALLOWABLE AS BUSINESS EXPENDITUR E FOLLOWING THE PRINCIPLES ESTABLISHED BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. VS CIT(A) (288 ITR 1). IT WAS FURTHE R SUBMITTED THAT ASSESSEE ALSO QUANTIFIED THAT THE AMOUNT BORROWED WAS ONLY ` 2.23 CRORES ON WHICH ACTUAL INTEREST PAID WAS ` 10 80 781. IT WAS ALSO SUBMITTED THAT THE AMOUNT HAS TO BE RESTRICTED TO THE EXTENT OF INTEREST PAI D ON BORROWED FUNDS IN CASE THE SAME IS DISALLOWED WHEREAS BALANCE INTEREST PAI D WAS FOR BUSINESS PURPOSE AS ASSESSEE HAS ITS OWN FUNDS ALSO FOR INV ESTMENTS. 16. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE DETAILS. DURING THE YEAR THE ASSESSEE MADE FRESH INVESTMENT OF ` 3 57 96 450/-IN GROUP COMPANY APART FROM PURCHASE OF SHARES IN OTHER COMP ANIES. IT WAS ALSO ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 13 ADMITTED THAT UNSECURED LOANS FROM DIRECTORS AND SH ARE HOLDERS HAD BEEN TAKEN AT ` 2.3 CRORES FOR INVESTMENT IN THE GROUP COMPANY FOR ACQUIRING 60% OF THE SHARES AND AN INTEREST OF ` 10 80 781/- WAS PAID ( IN SOME PLACE IT WAS SHOWN AS ` 1 08 078/- IN THE ORDERS). WE ARE OF THE OPINION THAT THE INTEREST PAID DIRECTLY ON BORROWALS UTILIZED FOR IN VESTMENTS IN FOREIGN COMPANY CANNOT BE ALLOWED AS DEDUCTION AS THE SAME IS NOT IN THE COURSE OF ASSESSEES BUSINESS. THERE WAS NO EVIDENCE PLACE D ON RECORD TO SUPPORT THE ARGUMENT OF COMMERCIAL EXPEDIENCY IN MAKING TH E INVESTMENT ABROAD AS BOTH THE REVENUE AUTHORITIES EXAMINED THIS CONT ENTION AND REJECTED. IN THE CASE OF S.A. BUILDERS LTD. VS. CIT(A) IN 288 IT R 1 THE HONBLE SUPREME COURT HAS EXAMINED THE ISSUE OF COMMERCIAL EXPEDIEN CY AND DEDUCTION U/S.36(1)(III) AND HELD AS UNDER: IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORRO WED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G. A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION U/S.36(1)(III) OF THE I.T. ACT 1961 ONE HAS TO EN QUIRE WHETHER THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEASURE OF COMM ERCIAL EXPEDIENCY. THE EXPRESSION COMMERCIAL EXPEDIENCY IS ONE OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT B USINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITU RE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION BUT YET I T IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. DECISIONS RELATING TO SECTION 37 WILL ALSO BE APPLI CABLE TO SECTION 36(1)(III) BECAUSE IN SECTION 37 ALSO THE EXPRESSIO N USED IS FOR THE PURPOSE OF THE BUSINESS. FOR THE PURPOSE OF BUSI NESS INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXP EDIENCY AND IT IS IMMATERIAL IF A THIRD PARTY ALSO BENEFITS THEREB Y. THE EXPRESSION FOR THE PURPOSE OF BUSINESS IS WID ER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS. TO CONSIDER WHETHER ONE SHOULD ALLOW DEDUCTION U/S. 36(1)(III) OF THE INTEREST PAID BY THE ASSESSEE ON AMOUNTS BORROWED B Y IT FOR ADVANCING TO A SISTER CONCERN THE AUTHORITIES AND THE COURTS SHOULD ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 14 EXAMINE THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CONCERN DID WITH THE MONEY. TH AT THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN B USINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER C ONCERN IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE P OINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS . 17. RELIANCE ON ABOVE DECISION BY THE ASSESSEE IS N OT CORRECT AS IN THE SAID CASE THE FACTS ARE THAT AN AMOUNT OF ` 82 LAKHS WAS ADVANCED AS LOAN BUT ONLY A SUM OF ` 18 LAKHS HAD BEEN ESTABLISHED TO HAVE BEEN ADVANCE D OUT OF BORROWED FUNDS AND THERE WAS FINDING THAT TH E FUNDS ARE USED FOR THE PURPOSE OF BUSINESS. HOWEVER IN THE ASSESSEES CAS E IT WAS NOT OF ADVANCING A LOAN BUT INVESTMENT IN SHARE CAPITAL O F A COMPANY ESTABLISHED IN FOREIGN COUNTRY. SIMILARLY THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATION VS CIT 298 ITR 298 (SC) WAS ALSO NOT RELEVANT AS THE ISSUE THERE IN WAS AGAIN ABOUT ADVA NCES TO SISTER CONCERNS AND THE ISSUE WAS EXAMINED WITH REFERENCE TO SCOPE AND AMBIT OF S.40(B) (IV) VIS-A- VIS S. 36(1)(III) AND FURTHER THERE WAS A FI NDING IN EARLIER YEARS THAT NO BORROWED FUNDS WERE UTILIZED FOR ADVANCING TO SISTE R CONCERNS AND INTEREST WAS ALLOWED BEFORE CHANGE OF LAW IN EARLIER YEARS. IN THIS CASE IT WAS ADMITTED THAT ASSESSEE HAD UTILIZED AN AMOUNT OF ` `` ` 37 85 00 000/- FOR INVESTMENT IN THE CAPITAL OF THE ANOTHER COMPANY ES TABLISHED IN DUBAI AND SINCE THE PURPOSE OF BORROWAL IS DIRECTLY RELATED T O INVESTMENT IN THE SHARE CAPITAL WE ARE OF THE OPINION THAT THE CLAIM OF I NTEREST ON THE SAID AMOUNT FOR THE PURPOSE OF BUSINESS ON THE PRINCIPLE OF COM MERCIAL EXPEDIENCY CAN NOT BE ACCEPTED SINCE IT IS NOT THE AMOUNT ADVANCE D IN THE COURSE OF BUSINESS BUT THE INVESTMENT DIRECTLY MADE WITH THE BORROWED FUNDS THE NEXUS OF WHICH WAS ADMITTED. THE ARGUMENT THAT DIVI DEND IS TAXABLE IN INDIA ALSO CAN NOT BE ACCEPTED AS SUCH A CLAIM WAS EXAMINED IN THE CASE OF CHEMINVEST LTD VS ITO BY THE SPECIAL BENCH REPORTED AS 317 ITR (AT) 86(DEL)(SB) WHERE IN IT WAS HELD THAT INTEREST CAN NOT BE ALLOWED WHETHER ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 15 THE SHARES ARE HELD AS INVESTMENTS OR AS STOCK-IN-T RADE AND WHETHER DIVIDEND WAS RECEIVED OR NOT. THE CLAIM OF INTEREST IS RELATED TO EARNING OF DIVIDEND AND SO CAN ONLY BE CLAIMED UNDER OTHER SO URCES AS AND WHEN THE TAXABLE DIVIDEND WAS EARNED. THE INTEREST PAID ON T HAT BORROWED FUNDS CANNOT BE ALLOWED AS DEDUCTION UNDER 36(1)(III) AGA INST BUSINESS INCOME. IN VIEW OF THIS WE UPHOLD THE ORDER OF THE CIT(A) TO THE EXTENT OF INTEREST CLAIMED ON BORROWED FUNDS FOR INVESTMENTS IN M/S. K EMSOL (I) LTD. THE BALANCE OF INVESTMENT SEEMS TO BE OUT OF ASSESSEES OWN FUNDS AND THE ASSESSING OFFICER HAS NOT MADE OUT ANY CLAIM TO EST ABLISH THAT THE BORROWED FUNDS ARE DIVERTED FOR INVESTMENT. 18. HOWEVER THE AMOUNT OF INTEREST PAID ON THE BORROWED AMOUNT IS TO BE ASCERTAINED. IN THE ORDER OF AO AS WELL AS CIT(A ) IT STATED AS ` 10 80 781/- WHERE AS IT WAS ALSO STATED AS ` 1 08 081/-. THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF ` 27 87 772/- THE CALCULATION OF WHICH COULD NOT BE ASCERTAINED FROM THE ORDER SINCE THE E NTIRE AMOUNT HAS BEEN DISALLOWED. THEREFORE TO THE EXTENT OF QUANTIFICAT ION OF INTEREST FOR DISALLOWANCE U/S.36(1)(III) THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO WORK OUT THE CORRECT AMOUNT OF DISALLOWA NCE AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. SUBJECT TO VERIFICAT ION AND QUANTIFICATION OF THE DISALLOWANCE THE GROUND IS CONSIDERED AS PARTL Y ALLOWED. 19. IN THE RESULT BOTH THE APPEALS ARE PARTLY ALLO WED. ORDER PRONOUNCED ON THIS 28 TH DAY OF FEBRUARY 2011. SD/- (D K AGARWAL) JUDICIAL MEMBER SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI DATED: 29 TH FEBRUARY 2011 JANHAVI ITA NO.365/MUM/2009 ITA NO.366/MUM/2009 16 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUM BAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH MUMBA I //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI