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Dilli Karigari Ltd. A-185, Okhla Industrial Area, Phase-I, New 110020 Vs DCIT, Circle-10(1), New Delhi-110001
February, 05th 2015
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

              IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCHES `B' NEW DELHI

       BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
                        AND
       SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER

                      ITA NO. 5837/DEL/2012
                      ASSTT.YEAR: 2009-10

Dilli Karigari Ltd.,              vs      DCIT,
A-185,                                    Circle-10(1),
Okhla Industrial Area,                    New Delhi-110001
Phase-I, New Delhi-110020
(PAN: AACCD6741L)

                      ITA NO. 6120/DEL/2012
                      ASSTT.YEAR: 2009-10

DCIT, Circle-10(1),                vs Dilli Karigari Ltd.,
New Delhi.                             New Delhi.
(Appellant)                                    (Respondent)
                         Appellant by: Shri Navin Kumar Jain, CA
                             Respondent by: Smt. Parwinder Kaur, Sr.DR
       O R D E R

PER CHANDRAMOHAN GARG, J.M.

       These appeals have been preferred by the assessee and the revenue

against the order of the CIT(A)-XIII, New Delhi dated 05.09.2012 in Appeal

No. 212/11-12 for AY 2009-10.


2.     Briefly stated the facts giving rise to these appeals are that the assessee

company is engaged in the business of sale of branded readymade garments and


                                                                                1
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

made up articles of textiles. The assessee company is also trading in personal

care, organics, jewellery and fabric. The case was selected for scrutiny under

CASS and the AO issued notice u/s 143(2) and 142(1) of the Income Tax Act,

1961 (for short the Act), along with a detailed questionnaire which were duly

served upon the assessee. After considering the details and explanation of the

assessee, the AO has held that the assessee is subsidiary of FabIndia Overseas

Pvt. Ltd. which deals in artisans based products of designer quality and the

assessee company is doing the role of coordinator between artisans and Fab

India Overseas Pvt. Ltd. (FOPL). Thus, the assessee company neither carried

out any manufacturing activity nor any trading activity during the relevant

period under consideration. The AO disallowed Rs.1,25,70,364/- out of total

rent paid by the assessee company, also disallowed Rs.22,43,080 out of

professional charges paid by the assessee company and further disallowed

interest payment of Rs.6,57,669/- paid by the assessee company. The AO

finalised the assessment at Rs.3,03,70,867 as against the returned income of the

assessee of Rs.1,48,99,754. Being aggrieved by the above assessment order, the

assesse company preferred appeal before the CIT(A) which was partly

disallowed on the issue of disallowance of interest payment to the group

companies but partly allowed on the issue of rent payment and professional

charges. Now, the aggrieved assessee as well as the revenue has preferred these

appeals before this Tribunal.



                                                                               2
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

Assessee in ITA No. 5837/Del/2012

3.     The assessee has raised sole ground in this appeal which reads as under:-


              "1. a) The ld. CIT(A) has erred in upholding the
        disallowance of Rs.6,57,669/- made by the AO on account of
        interest paid to M/s Fab India Overseas Private Limited."
4.     Apropos sole ground of the assessee, ld. AR submitted that the AO was

not justified in making disallowance of Rs.6,57,669/- by holding that when

both the companies happen to be group companies and transactions are covered

u/s 40A(2)(b) of the Act, then assessee company is not subsidiary company of

Fab India Overseas (P) Ltd.. The AR further contended that admittedly the

assessee company has received a sum of Rs. 2,52,89,149 from its holding

company as unsecured loan but at the same time, the company has shown Fab

India as its debtor for a sum of Rs.5,26,61,159.         The AR reiterating its

submission before the AO submitted that the assessee company is paying

interest on unsecured loan and the same company is a debtor, as the assessee

company from day one maintained separate ledger for loan account and separate

ledger account for sales to Fab India Overseas Pvt. Ltd. on bill to bill basis and

asseesee company is receiving payments against sales from FOPL on bill to bill

basis. The AR also contended that the assessee company is getting funds from

FOPL which has invested in purchases which were made for FOPL and

accordingly, the interest pertains to purchase amount. The AR has also drawn

our attention towards Paper Book and submitted that the purchases made are


                                                                                   3
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

ultimately sold to FOPL and, accordingly, beneficiary for the purchase is also

FOPL.





5.     Replying to the above, ld. DR placed reliance on the orders of the

authorities below and submitted that it was claimed by the assessee company

that both the accounts are separately maintained on bill to bill basis and

payments are received from FOPL in respect of sales made. The DR further

submitted that it is also a claim of the assessee company that unsecured loan

were raised from FOPL for smooth conducting of business; if the assessee

company had not taken from FOPL, then it would have borrowed the same from

other parties. The DR further submitted that this explanation and contention of

the assessee is not sustainable because the assessee company could have asked

FOPL to clear its dues of sales made instead of taking loans from the same

company as unsecured loan on interest. The DR has also drawn our attention

towards the fact that the amount of sundry debtors is huge and it may be

pertaining to the sales of more than one month, therefore, low unsecured loan

transaction from the assessee company FOPL cannot be isolated with the

amount of debt lying with FOPL. The DR finally submitted that the accounting

principle makes it clear that credit and debit entry should go side by side and the

only impact ultimately has to be seen for calculating interest and since amount

of debt is higher than the amount of loan, therefore, interest on such loan cannot

be allowed.


                                                                                 4
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

6.     On careful consideration of above submissions, we observe that the

CIT(A) upheld the action of the AO confirming the disallowance with following

observations and conclusion:-


" Decision

        I have considered the submission of the appellant and
        observation of the Assessing Officer. It is seen that appellant
        company has received a sum of Rs. 59,149/-from M/s Fabindia
        Overseas Pvt. Ltd. It is also seen that appellant company has
        shown FOPL as debtor of Rs. 5,26,61,159/-in its balance
        sheet. The appellant company is paying interest on the loans
        taken from FOPL but not charging interest on the amount
        shown as debtor in the balance sheet. The appellant is a group
        company of FOPL. It is claimed by the appellant that both the
        accounts are separately maintained and bill to bill payments
        are received from FOPL in respect of sales made. It is also
        claimed by the appellant that loan was from FOPL for smooth
        conducting of business and if appellant had not taken loan
        from FOPL then. it would have borrowed the same from other
        parties. It is claimed by the appellant that unsecured loan
        account and debtors account cannot be co-related with each
        other. It is seen from the facts of the case that at one side the
        appellant is supplying goods to FOPL and showing debtor of
        Rs. 5,26,61,159/- and on the other side it is receiving loans
        from same company on interest. The appellant company could
        have ask the FOPL to clear its dues of sales made instead of
        taking loans from the same company as unsecured loans. The
        amount of sundry debtor is huge and it may be pertaining to
        the sales of more than one month. The transaction of the
        appellant from FOPL cannot be isolated with the amount of
        debt lying with FOPL. The accounting principle makes it clear
        that credit and debit entry should go side by side and only the
        ultimate impact has to be seen for calculating the interest.
        Since the FOPL is a debtor to the extent of Rs. 5,26,61,159/-
        as against the loan amount of Rs. 2,52,89,149/-. Therefore,
        interest on such loan cannot be allowed. Even after adjusting
        the loan amount against the sundry debtor of Rs. 5,26,61,159/-
        the appellant still to receive Rs. 2,73,72,010/- from FOPL.

                                                                            5
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

        Therefore, tile accounting policy adopted by the appellant is
        not in accordance with the principle of accountancy and same
        cannot be allowed. The expenditure claimed by the appellant
        on interest of Rs. 6,57,669/- is not laid out and expanded for
        the business purposes. It is indirect benefit given by the
        appellant to the FOPL and same amounts to diversion of
        income by the appellant. Hence, the disallowance of interest of
        Rs. 6,57,6691- made by the Assessing Officer on loan amount
        of Rs. 2,52,89,149/- is upheld and this ground of appeal of the
        appellant is rejected."
7.     On careful consideration of rival submissions of both the parties and

conclusion of the CIT(A), we note that admittedly the assessee company

received loan of Rs.2,52,89,149 from FOPL and at the same time FOPL was a

debtor of Rs.5,26,61,151 as per balance sheet of the assessee submitted before

the AO. Although the assessee company has explained that the unsecured loan

was necessary for the smooth operation of the assessee company which was also

taken on lower rate of interest, but when the amount of sales is more than

double of unsecured loan, then the transaction of unsecured loan and transaction

of sale with the same company may be seen by the intention of the parties but

ultimate purchaser of the product of the company is a debtor to the extent of Rs.

5.26 crore as against the loan amount of Rs. 5.52 crore, then interest on such

loan cannot be allowed. We are in agreement with the conclusion of the CIT(A)

that even after adjusting the loan amount against the sundry debtor, the assessee

company is still to receive Rs.2,73,72,010 from FOPL, therefore, interest on

such loan cannot be allowed and expenditure claimed by the assessee company

on interest is not allowable. If interest so paid is allowed, then it would be


                                                                                6
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

indirect benefit given by the assessee company to the FOPL and the same

amounts to diversion of income of the assessee company which is not

permissible. In view of above and on the basis of foregoing discussion, we

uphold the action of the AO and we are unable to see any ambiguity, perversity

or any other valid reason to interfere with the findings of the CIT(A) on the

impugned addition on this point. Accordingly, sole ground of the assessee

being devoid of merits is dismissed.


ITA No.6120/Del/2012

8.     The revenue has raised following two grounds in this appeal:-

             "1.     Whether the CIT(A) under the facts and
        circumstances of the case and in law was justified in deleting
        the disallowance of Rs. 1,25,70,364/- made by the AO out of
        rent paid to M/s Fabindia Overseas Pvt. Ltd. ?
        2. Whether the CIT(A) under the facts and circumstances of
        the case and in law was justified in deleting the disallowance
        of Rs.22,43,080/- made by the AO on account of professional
        charges paid to M/s Artesian Micro Finance Pvt. Ltd. ?"
Ground no. 1 of the Revenue

9.     We have heard arguments of both the sides and carefully perused the

relevant material on record. Ld. DR submitted that the AO rightly noted that

the assessee has abruptly increased the expenditure under the head `rent' from

zero to Rs.1,88,55,547. The DR further contended that the assessee company

hired premises from M/s Fab India Overseas Pvt. Ltd. without consent of the

owner/landlord of the building, thus, the assessee company is not having any

                                                                             7
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

documentary evidence to prove that the premises was hired on rent from the

owner of the building, therefore, the payment of rent was not allowable for the

assessee. The DR vehemently contended that the assessee company hardly

required any space for business activity and only small space, if ever required is

for administrative purposes. Therefore, the AO was right in allowing 1/3rd of

expenses and disallowing the balance 2/3rd expense of Rs.1,25,70,364.


10.    The DR alleging the impugned order contended that the CIT(A) was not

justified in deleting the impugned addition because Fab India Overseas Pvt. Ltd.

also treated the same amount as business income and not as rental income since

this was a sub-lease transaction without the consent of owner/landlord of the

premises.


11.    Ld. DR further agitated the issue by stating that the assessee company

was not requiring such huge premises of 28250 sq ft for running of its office

and for storing of inventory and, therefore, the expenditure on rent incurred by

the assessee cannot be said to be wholly and exclusively for the business

purpose of the assessee company.


12.    Replying to the above, ld. AR reiterating its submissions before the

authorities below, as reproduced by the CIT(A) in para 2.6 of the impugned

order, submitted that all the grounds on the basis of which 2/3rd expenses on rent

has been disallowed by the AO are factually incorrect. The AR contended that

the entire expenditure has been incurred wholly for the purpose of business and
                                                                                8
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

the AO arbitrarily disallowed 2/3rd of the expenses without any reason and

basis. Ld. AR further contended that the assessee company had made purchases

of Rs. 4612.01 lakh and spent Rs.1241.19 lakh towards job work and Rs.40.79

lakh towards packing material and consumables and at the same time, the

assessee company was maintaining inventory of various items which was

valued as on 31.3.2009 at Rs. 11.88 crore, therefore, for stocking of items of

inventory the assessee company needed huge facilities, therefore, amount so

paid by the assessee after deducting TDS was incurred wholly and exclusively

for the purpose of business of the company. Ld. AR strenuously contended that

the AO disallowed 2/3rd rent without any justified and cogent basis and the same

was rightly deleted by the CIT(A) by holding that the assessee company had

actually paid rent to FOPL for the area of 28,250 sq ft occupied by it for

running its office and for storing of the inventory and finished goods.


13.    On careful consideration of above submissions, we observe that the

CIT(A) granted relief for the assessee with following conclusion:-


                "For stocking the above items of inventory the appellant
        was needed huge warehouse facilities. It is also contended by
        the appellant that it has taken cash credit limits from Axis
        banks of Rs. 800 lacs for which the primary security was stock
        maintained by the appellant company. Without having such a
        stock it was not possible for the bank to give cash credit
        facility to the appellant company. The documents related to
        cash credit facility are filed as Annexure-6 to the submission.
        The appellant has also filed Bajaj Allianz Insurance as
        Annexure-7 for the insurance taken against fire and special
        perils policy, for which the appellant has paid Rs. 1.96.541/-.

                                                                               9
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

        This certificate proves that appellant was holding inventory of
        stock every month, for which the insurance of more than Rs.l 0
        crore was taken by the appellant.
             During the course of assessment proceedings, the
        appellant has filed rent agreement with the appellant and
        FabIndia Overseas Pvt. Ltd. The copy of the letter through
        which copy of rent agreement filed before AO on 7.9.2011 and
        copy of rent agreement marked as Annexure-8 and 9 have
        been filed in the submission, therefore, the observation of the
        AO that copy of rent agreement was not filed before him was
        not correct.
              M/s FOPL has offered the rent income as business
        income as the same was received by way of sub-lease from the
        appellant and pay taxes thereon.
              It is also seen that appellant has deducted TOS on the
        rent paid to FOPL as per section 194-1 on monthly basis. The
        copy of the ledger account of FOPL from the books of
        appellant is filed as annexure-TO to the submission and also
        the copy of the ledger account of the appellant from the books
        of accounts of FOPL is also filed as annexure-l 1.
              It is also seen from the agreement that the rent was paid
        to FOPL on the basis of area occupied by the appellant
        company as well as FOPL. The appellant company had
        occupied 282S01-sq. feet out of which 39901-sq. feet was air-
        conditioned area and 24260/-sq. feet was non-air conditioned
        area. The rent paid by the appellant company includes security
        cover charges, maintenance charges, electricity charges and
        housekeeping charges.
              It is also seen from annexure-12 filed with the
        submission that appellant company has registered itself with
        the Sales Tax Department for warehouse purposes. The
        company was also registered with PF & ES1 on the said
        address. These facts prove that appellant company was
        operating from the said premises.
              In view of the facts discussed above, it is established
        that appellant company has paid rent to M/s FOPL for the
        area of 28250/- sq. feet occupied by it for running its office
        and for storing the inventory. Therefore, the expenditure
        incurred by the appellant was incurred wholly and exclusively

                                                                          10
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

        for the business purposes of the appellant company. The
        disallowance of 2/3 I'd rent by the Assessing Officer was
        justified and the same is deleted."
14.    On careful reading of above conclusion of the CIT(A) in the light of rival

contentions of both the parties, we note that the AO made impugned

disallowance of 2/3rd of amount of rent paid by the assessee company to FOPL.

As per submissions of the assessee before the AO, the assessee company was

incorporated on 28.10.2007 and commenced operations from 1.12.2007. It was

also contended before the AO that when the landlord/owner of the premises

denied permission and asked the assessee company to get into an agreement

with Fab India Overseas Pvt. Ltd. at their own risk, then the assessee company

which was already providing rent on provisional basis to FOPL deducted the

TDS in favour of FOPL. The DR has also pointed out that the assessee has not

properly verified that the documents submitted before CIT(A) were also placed

before the AO. From paper book of the assessee we note that verification has

been made subsequently below the signature in one paper book and in another

paper book verification seems to has been inserted after preparation and

signatures thereon. The main allegation of the AO was made that the assessee

company was not requiring such huge accommodation on huge rent, therefore,

the rent paid by the assessee company to FOPL cannot be said to be incurred

wholly and exclusively for the purpose of business. The CIT(A) went into

detail to inquire about the requirement of the assessee company and also

verified the area occupied by the assessee company out of which 3990 sq ft was




                                                                               11
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

air-conditioned and 2460 sq ft was air-conditioned area and rent paid by the

assessee company was inclusive of security cover charges, maintenance

charges, electricity charges and housekeeping charges also. The CIT(A) also

noted that the assessee company has registered itself with the sales tax

department for warehouse purposes, with PF and ESI Department on the said

addresses which clearly shows that the assessee company was operating its

business activities from the said premises for which rent was paid to FOPL. In

this situation and in the aforementioned factual matrix of the case on the issue,

we are inclined to hold that the AO made disallowance of 2/3 amount of rent by

holding that the assessee do not have documentary evidence to prove that the

premises was even hired on rent from the owner of the buildings or from its

own group company M/s Fabindia Overseas Pvt. Ltd. The CIT(A) granted relief

by observing and noticing certain facts revealed from certain documents. At the

same time we also note that theses documents require proper examination and

verification at the end of the AO to evaluate the issue as to whether the assessee

incurred expenditure on rent wholly and exclusively for the purpose of its

business . Hence we deem it just and proper to restore the matter to the file of

the AO with this direction that the AO shall adjudicate the issue afresh by

affording due opportunity of hearing for the assessee. The assessee is at liberty

to submit explanation and documentary evidence before AO to support its stand

with these directions ground No. 1 of the Revenue is deemed to be allowed for

statistical purposes.
                                                                               12
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

Ground no. 2 of the revenue

15.    Apropos this ground, we have heard arguments of both the sides and

carefully perused the relevant material placed before us on record. The AR

submitted that the AO has disallowed amount of professional charges paid to

Artisan Micro Finance Ltd. (AMFPL) amounting to Rs.22,43,080/- by wrongly

observing that there needs to be concrete evidence in the shape of actual

requirement and the practical work done and the act does not permit transfer of

profit without any plausible reason. The DR further contended that the entry

passed by the assessee company cannot be called as income tax planning and

the claim of professional charges is not relevant to the legitimate expenditure,

therefore, the AO rightly disallowed the same. The DR further contended that

the CIT(A) granted relief for the assessee on the basis of surmises and

conjectures which is not sustainable. Drawing our attention towards para 7.3 of

the impugned order, the ld. DR alleged that the AMFPL is a supply resourcing

company and providing services to 18 companies but the professional charges

paid to this company cannot be said to be an expenditure incurred wholly and

exclusively for the purpose of the assessee company because the assessee failed

to submit any sustainable or concrete evidences in the shape of actual

requirement of the assessee company and practical work done by AMFPL

against the said payment of professional charges by the assessee company.

Replying to the above, ld. AR has drawn our attention to para 7.2 of the


                                                                             13
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

impugned order and reiterated its submissions before the CIT(A) and submitted

that AMFPL is a company specially created by FOPL to deal with various

supply resources companies and the assessee company was one of the said 18

companies to which AMFPL was providing services.            Ld. AR vehemently

contended that the AMFPL was supporting in day to day activities of 18

companies including the assessee company through eminent professionals who

specialise in their field and providing all types of technical and professional

help. Ld. AR justifying the payment of professional charges by the assessee

company further submitted that AMFPL was also charging service tax on the

bills for the services provided by it and the assessee company made payment of

professional charges after complying with all the relevant provisions of the Act.

16.    On careful consideration of above submissions, we note that the CIT(A)

granted relief for the assesse with following observations and conclusions:-


        "7.3 Decision
        I have considered the submission of the appellant and
        observation of the Assessing Officer. It is seen that during the
        year appellant company has paid Rs.
        36,90,967/-as legal and professional charges paid to M/s
        Artisans Micro Finance Pvt. Ltd for the services rendered by
        the said company. The Assessing Officer has held that there is
        an abrupt increase in the legal and professional charges paid
        during the year. It is clarified by the appellant that the legal
        and professional charges in the previous year were Rs. 13,26,0
        13/-only for four months as appellant company started its
        business in December 2007 whereas the legal and professional
        charge of Rs. 36,90,967/-is for twelve months during the year,
        therefore, the same cannot be compared and there is no abrupt

                                                                               14
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

        increase. The appellant has filed agreement with Artisans
        Micro Finance Pvt. Ltd as annexure-15 with submission and
        the payment of legal and professional charges have been paid
        as per this agreement. It is also claimed by the appellant that
        M/s Artisans Micro Finance Pvt. Ltd. is supply resourcing
        company and providing services to eighteen companies. It is
        also seen from the annexure-17 filed with the submission that
        M/s Artisans' Micro Finance Pvt. Ltd. derives its income from
        professional fees received from various companies. During the
        course of assessment proceedings the memorandum of
        understanding with M/s AMFPL was filed before Assessing
        Officer on 07.10.2011, as per that MOU the AMFPL would
        provide various professional services to the appellant which
        are as under:-
        i) Assisting COCs to access funds from banks by processing
        loan applications on behalf of the company with the banks.
        (ii) Raising adequate equity for the COCs.
        (iii) Accounting, reporting and audit support to the Finance
        Department.
        (iv) Support with respect to ROC and secretarial compliances
        and shareholder
        management.
        (v) Coordinate in establishing of QC Standards.
        (vi) Empowering the supply chain.
        a. Strengthening supply capabilities where the goods are
        produced
        b. implementing common system for stocking. production
        and delivery.
        c. Allowing artisans to avail facilities set up with common
        investment for'
        processes that improve quality and add value.
        d.    Facilitating the training of artisans.
        e. Enabling the purchase of materials in bulk so as to get the
        best price.

                                                                          15
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

        The above functions assigned to AMFPL are very important
        functions and the same are necessary for smooth functioning
        of the business of the appellant. From the details filed it is
        established that M/s AMFPL through its eminent Board is
        providing full flash legal, technical and professional services
        to the appellant company for smooth running of its business.
        Therefore, the expenditure incurred by the appellant company
        on legal and professional services of Rs. 36,90,967/-was
        incurred wholly and exclusively for the business purposes of
        the appellant and same is fully allowable. The disallowance of
        Rs. 22,43,080/- made by the Assessing Officer was not
        justified. Hence, the same is deleted."
17.    On careful consideration of above submissions and contentions of both

the sides and careful perusal of the operative part of the impugned order, we

observe that the assessee was able to demonstrate that AMFPL through its

eminent board was providing full fledged legal, technical and professional

services to the assessee company for smooth running of its business. We also

observe that the AO has not disputed this fact that the assessee incurred

Rs.13,94,684/- during FY 2007-08 on the same head of professional charges

which were increased during FY 2008-09 to Rs.36,90,967.               From the

assessment order, we observe that the AO simply noted the increase of

professional charges during the relevant period and asked the assessee to justify

the same but the AO rejected the explanation of the assessee at the threshold

and concluded that there needs to be concrete evidence in the shape of actual

requirement of the assessee company and the practical work done by AMFPL

for the assessee company. Ld. DR has not disputed the fact that the AMFPL

was providing legal and professional and technical services to 18 companies


                                                                              16
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

including the assessee company and the professional services of the AMFPL

was required for the assessee company for effective operation of assessee

company's business. In this situation, when demand was also made on the same

head in the earlier year and accepted by the revenue, then in the subsequent

year, the claim of the assessee on the same head with the same set of facts and

circumstances cannot be disallowed merely on the basis that the amount has

increased without bringing out any justified reason or basis to take a different

view point or stand on the same issue. The revenue authorities are not allowed

to take an arbitrary approach to disallow the expenditure which was allowed

during the earlier financial years merely because the amount has substantially

increased during the relevant period under consideration. The AO is obviously

empowered to examine and verify the claim of the assessee but without bringing

out any adverse material, it would he held that the claim of the assessee was not

incurred or professional charges to AMFPL were not paid wholly and

exclusively for the purpose of business of the assessee. We are unable to see

any infirmity, perversity or any other valid reason to interfere with the

impugned order which granted relief for the assessee on the issue. On the basis

of foregoing discussion, we reach to a conclusion that the AO made

disallowance of professional charges without any basis which was rightly

deleted by the CIT(A) on justified and cogent reasons and we uphold the

impugned order on this issue. Accordingly, ground no. 2 of the revenue being

devoid of merits is dismissed.
                                                                              17
ITA NO. 5837 & 6120/Del/2012
Asstt.Year: 2009-10 & 2004-05

18.        In the result, appeal of the assessee and appeal of the Revenue on ground

No. 2 are disallowed and appeal of the Revenue on ground No. 1 is deemed to

be allowed for statistical purposes.


           Order pronounced in the open court on 02/02/2015

           Sd/-                                               Sd/-

  (J.S. REDDY)                                  (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER                                  JUDICIAL MEMBER

DT. 02nd February, 2015
`GS'


Copy forwarded to:-

      1.   Appellant
      2.   Respondent
      3.   C.I.T.(A)
      4.   C.I.T. 5. DR
                                                       By Order



                                                   Asstt. Registrar




                                                                                  18

 
 
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