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TMI Blog2010 (11) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ar issue was considered by this Bench of the Tribunal in ITA Nos. 64 to 74/Coch/2006 pertaining to the asst. yrs. 1991-92 to 1997-98 and 1999-2000 to 2002-03, in the assessee's own case and vide its order detailed dt. 31st Oct., 2007, the Tribunal decided the issue in favour of the assessee and dismissed the appeals of the Revenue, by observing as under:- "23. In our opinion, the payment made by the assessee company is on account of commercial expediency. We agree with the opinion expressed by the CIT(A) that the business of the assessee is inextricably interlinked with the support and patronage provided by the Government of Kerala and hence the assessee has never challenged the levy of service charges with a view of commercial expediency. On the careful consideration of the reasons given by the CIT(A), we are of the opinion that no interference with the orders of the CIT(A) is called for and the CIT(A) has rightly deleted the additions made by the AO. We, therefore, confirm the orders of the CIT(A) on this issue." It is also conceded that there is no change in the facts and circumstances of the case. 4. We have heard rival submissions and considered the facts and materials o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the asst. yrs. 1991-92 to 1995-96 based on the directions of the Hon'ble High Court. 3. The matter again travelled to the Tribunal and except for this asst. yr. 1998-99, the other asst. yrs. 1991-92 to 1997-98 and 1999-2000 to 2002-03 on appeal by the Department the Tribunal vide its order dt. 31st Oct., 2007 confirmed the order of the learned CIT(A) on this service charges payment while dismissing the Departmental appeal for all the above years mentioned. This is the only year left out i.e. asst. yr. 1998-99. 4. My learned Brother by following the earlier assessment years' decision comprised in the Tribunal's order dt. 31st Oct., 2007 dismissed the Departmental appeal for this asst. yr. 1998-99 which is the draft order for which I am not subscribing to the finding of my learned Brother. 5. The service charges are amounting to huge sum of Rs. 5,83,90,000. This was allegedly paid to Government of Kerala. The assessee company itself is a Kerala Government, company. The assessee declared income only to the tune of Rs. 44,32,760 whereas the service charges paid to Government of Kerala is Rs. 5,83,90,000 which is highly alarming in view of the decision of the Hon'ble jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the directions of the Hon'ble jurisdictional High Court have not been followed in true spirit. Therefore, I beg to differ with the finding of my learned Brother. The rule of consistency is to be followed for which I have no quarrel. But at the same time, precipitating the mistake is not heroism. Here, the Hon'ble jurisdictional High Court specifically directed what is the actual basis on which the Government had demanded the service charges from a Government company. Whether it can be allowed under s. 37 is also the issue. 7. Sec. 37 is the general provision and that section reads as under:- "Any expenditure not being expenditure of the nature described in s. 30 to s. 36 and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'." 8. We are not concerned with the Explanation to that section. The claim of the assessee is that the assessee has paid the service charges to Government of Kerala for the various services rendered by them. It is for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is a difference of opinion, the matter is being referred to the Hon'ble President of the Tribunal with a request that following question may be referred to a Third Member or pass such order as the Hon'ble President may think fit:- "Whether on the facts and circumstances of the case, the services charges paid by the assessee company (Government of Kerala undertaking) to the Government of Kerala is to be allowed as expenditure following the earlier order of the Tribunal in the assessee's own case or the same is to be disallowed for the reasons stated by JM in his separate order?" G.C. Gupta, Vice President (As Third Member):- 21st Sept., 2010 1. On account of difference of opinion between the Hon'ble AM and Hon'ble JM of the Cochin Bench, this matter has been referred to me by the Hon'ble President, for consideration and disposal under s. 255(4) of the IT Act, 1961. The Hon'ble President has referred the following question:- "Whether on the facts and circumstances of the case, the services charges paid by the assessee company (Government of Kerala undertaking) to the Government of Kerala is to be allowed as expenditure following the earlier order of the Tribunal in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue was identical with the issue referred to me by the Hon'ble President for the relevant asst. yr. 1998-99. The identical issue in the asst. yrs. 1991-92 to 1997-98 and 1999-2000 to 2002-03 had been decided by the Hon'ble High Court in assessee's own case in favour of the assessee. I find that the assessee-respondent is a State Government undertaking with 80 per cent shares held by the Kerala Government. The respondent-assessee company is engaged in the manufacture and sale of titanium dioxide and being a Government company, it is under the control of the Government and its board of directors is constituted with the Government nominees. The Government is rendering a lot of services and incentives by way of reduction of sales-tax for marketing the products of the company whenever there is a slump in the market. In consideration of the services rendered by the Government, the State Government issued an order dt. 25th March, 1988 directing the assessee company to pay service charges at a certain rate for the titanium dioxide produced and sold by the assessee company w.e.f. 1st April, 1987. The assessee paid the service charges to the Government as per the directives of the State Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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