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TMI Blog2016 (1) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... es is in excess of ₹ 20,000/- cannot be held to be unreasonable. We observe that revenue, except for raising the ground, has failed to bring on record any material evidence to controvert the findings of the learned CIT(A) on this issue and in this view of the matter, we uphold the finding of the learned CIT(A) on this issue. - Decided in favour of assessee. Disallowance u/s 40A(2) - CIT(A) deleted the addition - Held that:- Following the decision of the ITAT Chennai Bench in the case of M/s Empee Breweries Ltd. (2013 (2) TMI 716 - ITAT CHENNAI) wherein on similar facts payment by the assesseee in that case to UBL, for provisions of technical and management advice and consultancy by which it had received services and intangible benefits by association with UBL, was held to be allowable, thus we uphold the decision of the learned CIT(A) in deleting the disallowance made by the AO.- Decided in favour of assessee. - ITA No. 931 (B) 2014 - - - Dated:- 4-11-2015 - Vijay Pal Rao, JM And Jason P Boaz, AM For the Appellant : Shri G R Reddy, CIT-DR-I For the Respondent : Shri D Anand, Adv ORDER Per Shri Jason P Boaz, AM This appeal by the revenue is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,801/-. i) On account of capitalization of good will ₹ 10,12,955 ii) On account of cash payments u/R 6DD ₹ 5,83,758 iii) Disallowance u/s 40A(2) Rs.10,00,00.000 3.2 Aggrieved by the order of assessment dated 30-12-2011 for assessment year 2009-10, the assessee preferred an appeal before the CIT(A)-IX, New Delhi. The learned CIT(A), disposed the appeal vide order dated 10-02-2014 allowing the assessee partial relief. 4. Revenue being aggrieved by the order of the CIT(A)-IX, New Delhi dated 10-02-2014 for assessment year 2009-10, has preferred this appeal raising the following grounds; 1. The order of the ld.CIT(A) is opposed to law and facts of the case. 2. On the facts and circumstances of the case the learned CIT(A) erred in directing the AO to delete the disallowance of depreciation on goodwill without appreciating the fact that the same is not admissible as per the provisions of Section 32(1), as goodwill is not defined as an intangible asset. 3. On the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02- 03, 2006-07 and 2007-08 in ITA Nos.1968 to 1970/Del/2012 dated 23-12-2013. 6.3.1 We have heard the rival contentions of both parties and perused and carefully considered the material on record, including the judicial pronouncements cited and placed reliance upon by the assessee. We find that this issue is covered in favour of the assessee by the decision of the ITAT Delhi Bench in the assessee's own case for assessment years 2002-03, 2006- 07 and 2007-08 in ITA Nos.1968 to 1970/Del/2012 dated 23-12-2013, wherein at para 3 4 thereof the Tribunal has held as under; 3. We have heard both parties and perused the material placed before us. We find this issue to be covered n favour of the assessee b the decision of ITAT in assessee's own case for AY: 2004-05 2005-06 vide ITA No.2889 2890/Del/2009 wherein the ITAT held as under; 7. In the light of view taken by the Hon'ble Apex Court that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act, we have no hesitation in vacating the findings of the learned CIT(A) and accordingly , direct the AO to allow the claim of depreciation on goodwill in terms of aforesaid decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truck drivers. 7.3.2. Before the learned CIT(A), the assessee inter-alia submitted that these payments were made as freight to truck drivers for duties of delivery of raw materials to the brewery at odd hours i.e. late night or early morning and as they would not accept payments through cheque. After considering the explanation put forth by the assessee we agree with the view of the learned CIT(A) that considering the nature of the assessee's business the explanation put forth by the assessee that freight charges are paid in cash to the truck drivers for expenses on road like diesel, food, minor repair and the balance to truck operators for freight sometimes for more than one truck, which sometimes is in excess of ₹ 20,000/- cannot be held to be unreasonable. We observe that revenue, except for raising the ground, has failed to bring on record any material evidence to controvert the findings of the learned CIT(A) on this issue and in this view of the matter, we uphold the finding of the learned CIT(A) on this issue. Consequently, revenue's ground at sl.no.3 is dismissed. 8. Grounds 4 5: Disallowance u/s 40A(2). 8.1 In these grounds revenue assails the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with bankers to get term loans at competitive rates, coordination with distributors to meet the demand and supply, designing of packing material, supply of imported items like hops/foils, co-ordination with engineers for optimum utilization of plant and machinery and attendant intangible benefits. According to the assessee, this business arrangement has resulted in savings in purchase of various items, price hike for its products with its volume of sales increasing from 649,609 HL in FY 2007-08 to 823,596 HL in FY 2008-09 and thereby reducing its losses. 8.3.2 The contention of the AO after making various observations was that the payment to UBL was excessive and unreasonable and not wholly and exclusively for the business of the assessee and therefore, invoked the provision of Sec.40A(2) of the Act to disallow the payment. The assessee was in the business of manufacture and trading of Beer and there is no doubt that UBL, its holding company to whom the said payment was made for rendering of technical, management advisory and consultancy services, was a major player in this business. In this factual matrix, the claim of the assessee is that it has got tremendous benefits on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec.40A(2) of the Act, for making a disallowance there under, the AO should have some justification for doing so based on comparables and benchmarking to establish the existence and extent of the excessive and unreasonableness of the payments. We find from the order of assessment that the AO has not been able to prove that the payment of ₹ 10.00 Crores by the assessee to UBL was either unreasonable or that the quantum of payment was excessive and not commensurate with the services rendered to it by UBL. 8.3.4. In the context of the facts and circumstances of the case as discussed above, we have had occasion to peruse the order of the ITAT Chennai Bench of the Tribunal in the case of M/s Empee Breweries Ltd. in ITA No.1295/Mds/2012dated 14-02-2013 cited by the assessee, and find that a similar issue on similar facts of payment of ₹ 4.00 Crores by that assessee to UBL as fees for technical, advisory and management services rendered as per agreement between the parties, being disallowed by the AO as not being for business purposes was considered and held in favour of the assessee at para-18 and 19 thereof as under; 18. We have perused the orders and heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst this, assessee had returned loss of ₹ 1.08 Crores and therefore, there is much strength in the argument of learned AR that if the transaction had not gone through, revenue would only have been at a disadvantage. We cannot say that the reply given by the assessee to the queries made by the AO which has been produced at para- 11 above were such that, it called for a disallowance of the amount. Fact of the matter is that assessee paid the sum as per the agreement and receipt thereof was acknowledged by M/s UBL. Such payments were also acknowledged by the recipient as received for the technical, advisory and management fees rendered by them. Hon'ble Apex Court in the case of S.A.Builders L:td (Supra) has held that revenue could not by itself sit in the chair of a businessman and could not insist that 3every businessman should do his business in such a manner to earn maximum rate of profits. As for the reliance placed by the learned DR on the decision of the Hon'ble Calcutta High Court in Jayshree Tea Industries Ltd (Supra), in the said case the question was allowability of retrenchment compensation in one of the 21 units run by the assessee, which was closed. Tribu ..... 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