The DCIT, Central Circle, Vijayawada v. M/s KCP Ltd., Chennai

ITA 630/VIZ/2002 | 1998-1999
Pronouncement Date: 19-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 63025314 RSA 2002
Bench Visakhapatnam
Appeal Number ITA 630/VIZ/2002
Duration Of Justice 7 year(s) 5 month(s) 26 day(s)
Appellant The DCIT, Central Circle, Vijayawada
Respondent M/s KCP Ltd., Chennai
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 19-03-2010
Date Of Final Hearing 19-01-2010
Next Hearing Date 19-01-2010
Assessment Year 1998-1999
Appeal Filed On 23-09-2002
Judgment Text
PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO: 583/VIZAG/2002 ASSESSMENT YEAR: 1998-99 THE KCP LTD. VS. DCIT CENTRAL CIRCLE CHENNAI VIJAYAWADA (APPELLANT) (RESPONDENT) ITA NO: 630/VIZAG/2002 ASSESSMENT YEAR: 1998-99 DCIT CENTRAL CIRCLE VS. THE KCP LTD. VIJAYAWADA CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUBRATA SARKAR CIT (DR) RESPONDENT BY: SHRI C. SUBRAHMANYAM CA ORDER PER BENCH: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 25-6-2002 PASSED BY THE LD CIT (A)-I HYDERABAD AND IT RELATES TO THE A SSESSMENT YEAR 1998-99. 2. THE REVENUE IS IN APPEAL BEFORE US IN RESPECT OF THE FOLLOWING THREE ISSUES: A) BUILDING CONSTRUCTED FOR A POLYTECHNIC COLLEGE - RS.40 00 000/- B) COST OF LIMESTONE CRUSHER - RS.62 97 382/- C) INTEREST ON BORROWALS FOR HYDEL PROJECT - RS.3. 99 CRORES 3. THE ASSESSEE IS IN APPEAL IN RESPECT OF THE FOLL OWING ISSUES: I) REPAIRS TREATED AS CAPITAL EXPENDITURE - RS. 68 4 46.00+ RS. 65 150.00 RS .1 33 596.00 II) ADVERTISEMENT EXPENDITURE - RS. 5 10 300.00 PAGE 2 OF 8 4. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE A SSESSEE COMPANY IS ENGAGED IN VARIOUS TYPES OF ACTIVITIES. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99 DETERMINING THE TOTAL INCOM E AT RS.8.21 CRORES. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LD CIT (A) GRANTED P ARTIAL RELIEF. AGGRIEVED BY THE ORDER OF THE LD CIT (A) BOTH THE PARTIES ARE IN APPEAL B EFORE US. 5. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE REL ATES TO THE BUILDING CONSTRUCTED BY THE ASSESSEE FOR A POLYTECHNIC COLLEGE RUN BY A CHARITABLE TRUST NAMED V. RAMA KRISHNA CHARITABLE TRUST. THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAD PAID A SUM OF RS.40.00 LAKHS TO A BUILDING CONTRACTOR NAME D M/S BHAGYAM CONSTRUCTIONS TOWARDS COST OF BUILDING CONSTRUCTED IN POLYTECHNIC COLLEGE RUN BY THE TRUST CITED ABOVE. THE AO TREATED THE SAID PAYMENT AS DONATION AND DISALLOWED THE SAME. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE THAT THE S AID PAYMENT WAS MADE TO THE TRUST ON THE BASIS OF A MEMORANDUM OF UNDERSTANDING (MOU) ACCORDING TO WHICH THE CHILDREN OF THE EMPLOYEES OF THE ASSESSEE COMPANY A RE TO BE GIVEN ADMISSION IN THE POLYTECHNIC COLLEGE AND HENCE THE CONSTRUCTION OF B UILDING IS AN EMPLOYEE WELFARE MEASURES. IN THE APPEAL THE LD CIT (A) CONSIDERED T HE MOU AND ALSO THE FOLLOWING CASE LAW AND GRANTED RELIEF TO THE ASSESSEE: I) PALANI ANDAVAR MILLS LTD VS. CIT (1977) 110 ITR 742 (MAD) II) ITAT VS. B.HILLS & CO (P) LTD (1983) 142 ITR 185 (A LL.) III) CIT VS. BHARAT COMMERCE AND INDUSTRIES LTD (NO.1) ( 1990) 184 ITR 90 (DELHI) IV) MYSORE KIRLOSKAR LTD VS. CIT (1987) 166 ITR 836 (KA R) V) CIT VS. VAZIR SULTAN TOBACCO CO LTD (1981) 169 ITR 139 (AP) VI) UDAIPUR MINERAL DEVELOPMENT SYNDICATE (P) LTD VS. I TO (1992) 44 TTJ (JP) 113 5.1. WE HAVE HEARD THE PARTIES ON THIS ISSUE AN D CAREFULLY PERUSED THE RECORD. THE FACTS RELATING TO THE ISSUE ARE LISTED OUT BELOW: A. THE IMPUGNED AMOUNT OF RS.40.00 LAKHS WAS GIV EN TO A CIVIL CONTRACTOR NAMED M/S BHAGYAM CONSTRUCTIONS FOR CONSTRUCTION OF BUILDING IN A POLYTECHNIC COLLEGE NAMED M/S V.RAMAKRISHNA POLYTECHNIC. PAGE 3 OF 8 B. THE POLYTECHNIC COLLEGE IS MAINTAINED BY A TRU ST NAMED M/S VELAGAPUDI RAMAKRISHNA CHARITABLE TRUST A PUBLIC CHARITABLE T RUST STARTED BY THE FOUNDER OF THE ASSESSEE COMPANY. C. THE ASSESSEE AND THE TRUST ENTERED INTO A MEM ORANDUM OF UNDERSTANDING (MOU) ON 26.07.1996. ACCORDING TO THE MOU THE PO LYTECHNIC COLLEGE WHICH IS RUN BY THE TRUST IS ALREADY ENGAGED IN IMPARTING EDUCATION IN THE TECHNICAL SPHERES REQUIRED FOR THE ASSESSEE COMPANY AND HAS POTENTIAL TO EXPAN D WITHOUT MUCH INVESTMENT AND DIFFICULTY. AS PER THE MOU THE COLLEGE SHOULD PRO VIDE FOLLOWING FACILITIES TO THE ASSESSEE COMPANY. (I) TRAIN THE EMPLOYEES OF THE PARTY NO.1 IN THE FI ELDS OF TECHNOLOGY IN ACCORDANCE WITH A SCHEME TO BE FORMULATED BETWEEN B OTH THE PARTIES FROM TIME TO TIME AS TO THE NUMBER OF BATCHES TIMINGS AREAS OF TRAINING PROCUREMENT OF REQUIRED FACULTY FROM WITHIN AND OUTSIDE REIMBURSEMENT OF T HE EXPENSES BY THE FIRST PARTY BOTH RECURRING AND NON-RECURRING ETC. (II) GIVE PREFERENCE IN ADMISSION OF CANDIDATES IN DIFFERENT COURSES TO THE EXTENT IT IS PERMITTED TO DO SO BY THE RULES AND REGULATIO NS THAT ARE IN FORCE FOR THE TIME BEING TO THE CHILDREN OF THE EMPLOYEES OF THE FIRST PARTY OR TO THOSE WHO ARE RECOMMENDED BY THE FIRST PARTY SUBJECT HOWEVER TO THE ADMISSION CRITERIA APPLICABLE TO ALL THE STUDENTS OF THE RELEVANT COURSES FROM T IME TO TIME. (III) ENSURE THAT ITS PROSPECTIVE MERITORIOUS OUTG OING STUDENTS PARTICULARLY THE CHILDREN OF THE EMPLOYEES OF OR THOSE SUGGESTED BY THE PARTY OF THE FIRST PART AT THEIR INITIAL ADMISSION OFFER THEIR SERVICES FOR EMPLOYM ENT FIRST TO THE PARTY OF THE FIRST PART HEREIN AND IN CASE THERE ARE NO AVAILABLE VACANCIES AT THAT TIME WITH THE PARTY OF THE FIRST PART OR FOR ANY OTHER REASON SUCH CANDIDATE W OULD NOT BE ABLE TO BE ABSORBED IN THE SERVICES OF THE K.C.P LIMITED THEN THE SAID CA NDIDATE/S WOULD BE FREE TO SEEK EMPLOYMENT ELSEWHERE: D. THE LIABILITY OF THE ASSESSEE COMPANY AS PE R THE MOU IS GIVEN BELOW: I) MEET THE COST OF OR REIMBURSE ANY EXPENDITURE BOTH RECURRING AND NON- RECURRING TO BE MET BY THE PARTY OF THE SECOND PAR T IN EXTENDING THE ABOVE FACILITIES TO THE PARTY OF THE FIRST PART AND SUCH EXPENDITURE SH ALL BE BUDGETED APPROVED AND MONITORED BY THE PARTY OF THE FIRST PART: II) REIMBURSE THE DEFICIT INCURRED BY THE PARTY OF THE SECOND PART IN THE RUNNING OF THE POLYTECHNIC WHICH REMAINS AFTER SET TING OFF THE TUITION FEES AND OTHER RECEIPTS FROM THE STUDENTS GRANTS AS ARE ALLOWED B Y THE GOVERNMENT BOTH STATE AND CENTRAL FOR THE PURPOSE AND ALSO ANY DONATIONS COL LECTED FROM ANY PERSON INSTITUTION OR AUTHORITY IN THIS REGARD. 5.2 ON A CAREFUL PERUSAL OF THE TERMS OF THE MO U WE NOTICE THE FOLLOWING: PAGE 4 OF 8 A. AS POINTED OUT BY THE AO THE CHILDREN OF T HE EMPLOYEES GET ONLY A PREFERENCE IN ADMISSION AND NOT ASSURED ADMISSION S INCE THEIR ADMISSION IN THE COLLEGE IS SUBJECT TO THE FULFILLMENT OF THE ADMISSION CRIT ERIA APPLICABLE TO ALL THE STUDENTS. THUS IT CANNOT BE SAID THAT THE POLYTECHNIC COLLEGE IS M EANT MAINLY FOR THE WELFARE OF THE EMPLOYEES. B. THE ASSESSEE COMPANY SHALL MEET THE RECURRI NG AND NON RECURRING EXPENDITURE INCURRED BY THE TRUST IN EXTENDING THE FACILITIES TO THE ASSESSEE COMPANY. THE DEFICIT INCURRED BY THE TRUST IN RUNNING THE PO LYTECHNIC SHALL ALSO BE REIMBURSED BY THE ASSESSEE COMPANY. WHEN THE COLLEGE IS NOT MEA NT FOR THE WELFARE OF THE CHILDREN OF EMPLOYEES THE RATIONALE IN MEETING THE DEFICIT INCURRED BY THE COMPANY IS NOT UNDERSTANDABLE. IN ADDITION THERETO THE ASSESSEE HAS ACCEPTED TO BEAR THE COST OF INCURRING THE RECURRING AND NON RECURRING EXPENSES IN EXTENDING THE FACILITIES TO IT. C. THE IMPUGNED AMOUNT OF RS.40.00 LAKHS HAS B EEN GIVEN FOR CONSTRUCTION OF BUILDING IN THE COLLEGE. IT IS NOT VERY CLEAR WHET HER THE SAID PAYMENT IS COVERED BY THE LIABILITY ACCEPTED BY THE ASSESSEE COMPANY IN THE M OU. D. SINCE THE MOU CANNOT BE TREATED AS THE EMPL OYEE ORIENTED MEASURE IT CANNOT BE THAT THERE WAS BUSINESS EXPEDIENCY IN CON STRUCTING A BUILDING FOR THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS AGREED TO REIMBURSE THE COST OF RECURRING AND NON RECURRING EXPENSES INCURRED BY TH E COLLEGE IN EXTENDING THE FACILITIES TO THE ASSESSEE COMPANY. HENCE THE CONTRIBUTION OF RS.40.00 LAKHS APPEARS TO BE OVER AND ABOVE THE REGULAR REIMBURSEMENT CITED ABOVE. E. IN THE CASE LAW RELIED UPON BY THE ASSESSEE THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARAT COMMERCE & INDUSTRIES LTD. S UPRA HAS HAD HELD THE QUESTION WHETHER THE DONATION GIVEN TO A SCHOOL IN WHICH MAJ ORITY OF CHILDREN ARE STUDYING WAS BUSINESS PURPOSE OR NOT IS A QUESTION OF FACT. HEN CE THE OTHER CASE LAW RELIED UPON BY THE ASSESSEE HAVE BEEN DECIDED ON THE FACTS OF THE EACH CASE AND HENCE CANNOT HAVE A BINDING FORCE. IN ANY CASE WE BRIEFLY DISCUSS ALL THE CASE LAW BELOW: (I) IN THE CASE OF PALANI ANDAVAR MILLS LTD. SUPR A A SCHOOL BUILDING WAS CONSTRUCTED ON THE LAND BELONGING TO THE EMPLOYEES HOUSING CO-OPERATIVE SOCIETY. THE CONCERNED MUNICIPALITY WROTE TO THE ASSESSEE THAT I T COULD NOT INCUR ANY EXPENDITURE OF A CAPITAL NATURE. HENCE THE ASSESSEE CONTRIBUTED A MOUNT FOR CONSTRUCTION OF THE BUILDING AND THE SAID BUILDING WAS HANDED OVER THE MUNICIPALITY. PAGE 5 OF 8 (II) IN THE CASE OF VAZIR SULTAN TOBACCO CO. LTD . THE ASSESSEE THEREIN FORMED AN IRREVOCABLE TRUST FOR EXTENDING FINANCIAL ASSIST ANCE AND EDUCATION TO THE CHILDREN OF EMPLOYEES AND GAVE A DONATION OF RS.1 65 000/-. IN THIS CASE THE TRUST WAS FORMED FOR THE WELFARE OF THE EMPLOYEES OF THE COMPANY. (III) IN THE CASE OF MYSORE KIRLOSKAR LTD. SUPRA THE ASSESSEE COMPANY CONSTITUTED A TRUST FOR THE PROMOTION OF EDUCATION OF THE CHILDREN OF THE EMPLOYEES EX- EMPLOYEES. HOWEVER THE CHILDREN OF THE MEMBERS OF THE PUBLIC WERE ALSO ADMITTED. DURING THE RELEVANT YEAR 61.1% OF THE TOTAL STUDEN T STRENGTH CONSISTED OF THE CHILDREN OF THE EMPLOYEES. ACCORDINGLY THE ASSESSEE CLAIMED 61.1% OF THE DONATION GIVEN TO THE SCHOOL AS REVENUE EXPENDITURE. HOWEVER THE HO NBLE COURT REMANDED THE MATTER TO THE TRIBUNAL TO FIND WHETHER THE DONATION CAN BE CONSIDERED AS AN EXPENDITURE. (IV) IN THE CASE OF B.HILL & CO. (P) LTD. THE AS SESSEE COMPANY MADE DONATION TO TWO SCHOOLS WHICH WERE SET UP BY THE ASSESSEE CO MPANY WITH A VIEW TO PROVIDE EDUCATIONAL FACILITIES TO THE LABOURERS AND THEIR C HILDREN. PART OF DONATION WAS MADE FOR CONSTRUCTING BUILDINGS. HOWEVER IN THIS CASE THE SCHOOLS WERE SET UP BY THE ASSESSEE COMPANY. THUS IT CAN BE SEEN THAT THE CASE LAW CITED ABOVE H AVE BEEN DECIDED ON THE FACTS OF EACH CASE. 5.3 HOWEVER IN THE CASE ON HAND THE POLYTECHN IC COLLEGE WAS NOT SET UP BY THE ASSESSEE COMPANY FOR THE WELFARE OF THE LABOURERS O R THE CHILDREN OF ITS EMPLOYEES. THE POLYTECHNIC COLLEGE WAS ALREADY FUNCTIONING PRI OR TO THE MOU. BY ENTERING INTO THE MOU THE CHILDREN OF THE EMPLOYEES OF THE ASSESSEE COMPANY WERE NOT GIVEN ANY PREEMPTIVE RIGHT OVER THE ADMISSION. THE MOU PROVI DES FOR THE REIMBURSEMENT OF THE EXPENSES INCURRED FOR THE FACILITIES PROVIDED BY TH E COLLEGE TO THE ASSESSEE COMPANY. THE MOU DOES NOT PROVIDE FOR THE CONSTRUCTION OF TH E BUILDING. APART FROM THE MOU THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO SHOW TH E BUSINESS EXIGENCY IN MAKING THE IMPUGNED DONATION OF RS.40.00 LAKHS. HENCE WE DO N OT FIND ANY COMMERCIAL EXPEDIENCY IN MAKING THIS DONATION. IN VIEW OF TH E FOREGOING DISCUSSION WE REVERSE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH E ADDITION OF RS.40.00 LAKHS MADE BY THE AO. 6. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE REL ATES TO THE MODERNIZATION EXPENDITURE INCURRED BY THE ASSESSEE IN ITS CEMENT UNIT NAMED M /S RAMA KRISHNA CEMENTS. THE ASSESSEE ORIGINALLY CLAIMED A SUM OF RS.1.81 CRORES AS REVENUE EXPENDITURE TOWARDS PAGE 6 OF 8 MODERNIZATION OF CEMENT UNIT. HOWEVER BEFORE THE L D CIT (A) THE ASSESSEE COMPANY AGREED FOR ADDITION OF RS.1.18 CRORES. ACCORDINGLY THE LD CIT (A) SUSTAINED THE ADDITION TO THE EXTENT OF RS.1.18 CRORES AND DELETED THE ADD ITION OF RS.62 97 382/-. THE AMOUNT SO DELETED REPRESENTED THE COST OF LIMESTONE CRUSHE R. 6.1 WE NOTICE THAT IN THE ASSESSEES OWN CASE R ELATING TO THE ASSESSMENT YEAR 1996- 97 IN ITA NO.178/VIZAG/2002 AND NO.233/VIZAG/2002 THIS BENCH OF TRIBUNAL VIDE ITS ORDER DATED 31-07-2008 HAD SET ASIDE A SIMILAR ISS UE TO THE FILE OF THE AO FOR FRESH CONSIDERATION IN VIEW OF THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF SARAVANA SPINNING MILLS (P) LTD. (2007 293 ITR 20 1). SINCE THE ISSUE BEFORE US IS ALSO IDENTICAL WITH THE ISSUE RELATING TO THE ASSESSMENT YEAR 1996-97 WE THINK IT PROPER TO SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE AO IN ORDER TO ENABLE HIM TO MAKE A HARMONIOUS DECISION. ACCORDINGLY THE ISSUE BEFORE US IS SET ASIDE TO THE FILE OF AO WITH A DIRECTION TO CONSIDER THE ISSUE AFRESH IN ACCORDA NCE WITH THE LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF IN TEREST PAID ON THE BORROWALS MADE FOR THE HYDEL PROJECT. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE TREATING THE HYDEL PROJECT AS A NEW LINE OF BUSINESS. IN THE ASS ESSEES OWN CASE RELATING TO THE ASSESSMENT YEAR 1996-97 (ORDER DATED 31-07-2008 PAS SED IN THE CASE OF THE ASSESSEE HEREIN IN ITA NO.178/V/2002 AND ITA NO.233/V/2002) SIMILAR DISALLOWANCE OF INTEREST HAS BEEN DELETED BY THIS BENCH OF TRIBUNAL. THE RE LEVANT OBSERVATIONS OF BENCH ARE EXTRACTED BELOW: 10.1 WE HEARD THE PARTIES. INTEREST ON BORROWED CA PITAL IS ALLOWED U/S 36(1)(III) OF THE INCOME TAX ACT. THE HONBLE CALCU TTA HIGH COURT IN THE CASE OF CIT VS. RAJEEV LOCHAN KANORIA 208 ITR 616 HAS OBSERVED THAT THE ONLY ENQUIRY THAT IS TO BE MADE IS WHETHER THE PAYMENT OF INTEREST WAS IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF ASSESSEES BUSINESS. IN THIS CONNECTION IT IS PERTINENT TO NO TE THE FOLLOWING OBSERVATIONS OF THE LD CIT (A): ADMITTEDLY IN THE CASE ON HAND THE CAPITAL WAS B ORROWED FOR THE PURPOSE OF SETTING UP OF A HYDEL PROJECT FOR GENERA TION OF POWER FOR CAPTIVE CONSUMPTION AS A BACKWARD INTEGRATION AND T HEREFORE IT WAS FOR THE PURPOSE OF BUSINESS AND CONSEQUENTLY THE IN TEREST COST INCURRED THEREON IS TO BE ALLOWED AS DEDUCTION FROM ITS BUSINESS PROFITS. PAGE 7 OF 8 HENCE THERE IS A CLEAR FINDING THAT THE HYDEL PROJE CT IS MEANT FOR GENERATION OF POWER FOR CAPTIVE CONSUMPTION AND HEN CE IT CANNOT BE TAKEN AS A NEW PROJECT. SINCE THE DECISION OF LD CI T (A) IS IN ACCORDANCE WITH THE SETTLED LAW WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT (A). SINCE THE DECISION RENDERED BY LD CIT (A) IS IN ACC ORDANCE WITH THE DECISION OF THIS TRIBUNAL CITED ABOVE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. 8. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE RE LATES TO THE DISALLOWANCE OF RS.68 446/- SPENT FOR LIGHT FITTING TO THE SWIMMING POOL AND FURTHER A SUM OF RS.65 150/- SPENT FOR CIVIL WORKS AT THE SULLIVAN G ARDENS. THE AO TREATED THE SAME AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME. THE LD CIT (A) SUSTAINED THE ADDITION BY FOLLOWING HIS ORDER FOR THE ASSESSMENT YEAR 1997-98 . HOWEVER ON PERUSAL OF THE ORDER OF THE TAX AUTHORITIES WE NOTICE THAT NO WHERE THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE HAS BEEN SPELT OUT. THE CLAIM OF THE ASSESSEE IS THAT THESE EXPENDITURES HAVE BEEN INCURRED IN THE NORMAL COURSE OF PRESERVA TION AND DAY-TO-DAY MAINTENANCE OF THE BUILDING. HOWEVER THE REVENUE CLAIMS THE SAME AS CAPITAL EXPENDITURE. HENCE IN THE ABSENCE OF THE DETAILS OF EXPENDITURE CITED ABO VE WE ARE UNABLE TO TAKE A DECISION IN THIS REGARD. IN VIEW OF THE ABOVE WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER THE DETAILS AND NATURE OF THESE TWO TYPES OF EXPENDITURE AND ACCORDINGLY DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW. 9. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE IS RELATING TO THE DISALLOWANCE OF ADVERTISEMENT EXPENDITURE OF RS.5 10 300/-. THE ASS ESSEE COMPANY PAID CHARGES FOR PUBLICATION OF AN ADVERTISEMENT IN A NEWS PAPER NAM ED THE HINDU. ON VERIFICATION OF THE RELEVANT VOUCHER THE AO NOTICED THAT THE BILL HAS BEEN RAISED IN THE NAME OF RAMA KRISHNA CULTURAL AND WELFARE CLUB MADRAS. AS THE ASSESSEE DID NOT EXPLAIN THE RELEVANCE OF THE EXPENDITURE VIS--VIS ASSESSEES B USINESS THE AO DISALLOWED THE SAME. BEFORE THE LD CIT (A) THE ASSESSEE SUBMITTED THAT T HE ADVERTISEMENT WAS ISSUED ON BEHALF OF THE STAFF RECREATION CLUB ON THE EVE OF T HE 60 TH BIRTHDAY OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. HOWEVER LD CIT (A) SUSTAINED THE ADDITION. HOWEVER WE NOTICE THAT THE ASSESSEE HAS OFFERED THE EXPLANATION GIVEN FIRST TIME BEFORE THE LD CIT (A). AS STATED EARLIER THE ASSESSEE D ID NOT SUBMIT THE SAID EXPLANATION BEFORE THE AO. HENCE WE THINK IT PROPER TO SET ASI DE THIS ISSUE ALSO TO THE FILE OF THE AO PAGE 8 OF 8 FOR FRESH CONSIDERATION. NEEDLESS TO MENTION THE AS SESSEE SHOULD BE GIVEN PROPER OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 19-03-2010. S D/ - SD/ - (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 19 TH MARCH 2010. COPY TO 1 THE KCP LTD. RAMAKRISHNA BUILDINGS 2 DR. P.V. CH ERIAN CRESCENT CHENNA I - 8 2 THE D CIT CENTRAL CIRCLE VIJAYAWADA 3 THE CIT VIJAYAWADA 4 THE CIT(A) - I HYDERABAD 5. THE CIT ( CENTRAL ) HYDERABAD 6 THE DR ITAT VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM