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TMI Blog2010 (9) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... Infra Trade Pvt. Ltd. A query was raised and incompliance it was submitted that certain services were provided by M/s. Jay Infra Trade Pvt. Ltd. and in lieu of those services the said amount was paid. About the services it was explained that the assessee is occupying an office building admeasuring about 3000 sq. ft. along with furniture stated to be belonging to the said sister-concern. The Assessing Officer has summoned some of the employees of M/s. Jay Infra Trade Pvt. Ltd. to examine the nature of duty and the services rendered. The Assessing Officer has also enquired about the details of the office premises and other facilities, such as , furniture etc. used by the assessee belonging to the said sister-concern. However, it was mentioned by the Assessing Officer that for Assessment Year 2002-03 identical issue had cropped up and a disallowance was made. He has also noted that in the case of the said sister-concern, viz. M/s. Jay Infra Trade Pvt. Ltd. while passing the order u/s.143(3) of the I.T. Act, 1961, it was decided to quantify the cost of services received. The amount was determined at ₹ 98,465/-. On the basis of said information, the Assessing Officer has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have to be considered. In the absence of holistic approach such an attempt cannot be held as tenable on peripheral issues. There is nothing on record that it was an attempt to divert the profit. The services rendered with the main object of exploiting the business assets though in a composite manner cannot be held as a design to avoid tax liability nor the same be a reason for working out any excessive payments. Consistent with my findings in other cases of recipients of services, I hold that the payment of ₹ 12 lacs though only charges for the composite services cannot be bifurcated for making such disallowance. The addition in this regard is directed to be deleted. 4. Likewise for Assessment Year 2004-05 following the aforesaid decision, the relief was granted. 5. With this brief background, we have heard both the sides. As is apparent from the above discussion, the impugned disallowance as made for the years under consideration had a past history, therefore, now before us certain decisions of the Respected Co-ordinate Bench ITAT Ahmedabad have been placed for our perusal. Before we will discuss those decisions, it is worth to mention that the Learned Departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the litigants in the administration of justice. 6. Keeping this verdict in mind, we hereinbelow now refer the decisions of the Respected Co-ordinate Bench which were passed either in the case of the said services provider, i.e. M/s. Jay Infra Trade Pvt. Ltd. or in assessee s own case. We will start with Assessment Year 2002-03 and in that year in assessee s own case the Learned CIT(Appeals) has taken a view in assessee s favour , namely J.H. Kharawala Pvt. Ltd. order dated 31/07/2006 (for A.Y. 2002-03) vide paragraph No.10.2; reproduced below:- 10.2. I have carefully considered the appellant s submissions and also perused the assessment order page 11. The AO made the above disallowance by referring to absence of details and that it was a lump sum amount without calculation for the services. No basis is given as to why ₹ 9,00,000/- out of ₹ 12,00,000/- was disallowed. During the course of hearing the appellant s counsel put forth that no specific details in this regard was called for by the AO except the first notice. The appellant offered its explanation. It was also mentioned, as seen from the assessment order that the annual accounts of Jay Infra Trade Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- 8. We have heard the rival submissions, perused the orders of the lower authorities and the materials available on record. In our considered view, there is no case for interference in the order of the Learned CIT(Appeals). The reasons are:- (i) That, the Assessing Officer has not doubted that what the assessee is receiving is income from business as part of it as has been so assessed by him. Only a part amounting to ₹ 69,88,836/- has been treated as income form other sources . (ii) That, the assessee has been assessed in the past on these receipts from House Keeping Services under the head Business . Facts remaining the same, the Revenue should take a consistent view. It has been so held by the Hon'ble Rajasthan High Court in the case of CIT vs. Malbaro Polychem Pvt.Ltd. (2009) 309/ITR 43 (Raj.), of Hon'ble Delhi High Court in the case of CIT vs. Moon Light Builders and Developers (2008) 307 ITR 197 (Delhi) and of Hon'ble Madhya Pradesh High Court in the case of CIT vs. Dineshkumar (2008) 299 ITR 59 (M.P.). Thus, if the facts are not different, then view once taken should be followed in subsequent year also. (iii) If certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of housekeeping charges. The Assessing Officer disallowed the above sum holding it as excessive payment referable to services provided by Jay Infra Trade Pvt. Ltd. to the appellant company. He invoked the provisions of section 40A(2)(b). He totally relied on his decision in the case of Jay Infra Trade Pvt. Ltd. for A.Y. 2003-04. The Assessing Officer also arrived at a sum of ₹ 4,10,279/- as reasonable expenditure payable to Jay Infra Trade Pvt. Ltd. by the appellant company for this year. 4.1 Before me, the learned counsel for the appellant drew my attention to the appellate order for A.Y. 2003-04 (Appeal No. CIT(A)- VIII/DC-4/262 05-06 dated 16.10.2006) in the case of Jay Infra Trade Pvt. Ltd. wherein the entire receipts of ₹ 76 lacs from group concerns were held to be in connection with provisions of various business services assessable as business receipts. Accordingly, it was contended that the Assessing Officer without proper appreciation of entirety of services, including the main aspect of office accommodation worked out a meager sum as reasonable and disallowed the balance of ₹ 45,89,729/- as excessive. In view of the appellant order cited above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at reasonable expenditure of ₹ 4,10,279/- and thus disallowed an expenditure of ₹ 45,85,729/-. 19. We agree with Ld. Commissioner of Income Tax(Appeals) that Assessing Officer has not proved that excessive payment has been made to M/s. Jay Infra Trade Private Ltd. being an associate concern of the assessee. The genuineness of the transactions is not in dispute. The further reliance by the Assessing Officer on the order of J. Infra Trade Private Limited is not proper as that order has been reversed by the Ld. Commissioner of Income Tax(Appeals) and confirmed by the Tribunal. The assessee had provided calculation of fair value of services before the Ld. Commissioner of Income Tax(Appeals) which was sent to the Assessing Officer during remand proceedings. There is no material to justify the disallowance made by the Assessing Officer. Further, Tribunal in the case of Jay Infra Trade Private Limited ITA No.261/Ahmedabad/2007 decided on 30-09-2009 held that there is no excessive payment for services provided by Jay Infra Trade Private Limited. Thus, once factum of excessive payment for services are not proved, there is no case of any addition even in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 687/- out of labour contract charges. Miscellaneous expenses and repairs and maintenance expenses. The Assessing Officer has observed in para 6(ii) of his order of his order that the appellant when asked to file the bills/vouchers for verification expressed its inability to produce the bills and vouchers as the same were not traceable. Therefore, the Assessing Officer disallowed 1/7th of the total expenses which came to ₹ 13,97,687/-. 3.1. Disputing the said disallowance the appellant stated that the books of accounts of the appellant are audited and even after detailed scrutiny the Assessing Officer did not find any defects. The payments to contractors are subject to TDS has been deducted on such payments. None of the parties have been found to be non genuine. As regards higher repairs and maintenance expenditure it was submitted that the appellant was using acidic and base chemicals, so there was higher wear and tear. The expenses of repairs and maintenance have decreased to ₹ 28.27 lakhs as compared to ₹ 75.65 lakhs. In the preceding year A.Y. 2003-04. Similarly, the miscellaneous expenses are of ₹ 38.44 lakhs as compared to ₹ 45.64 lakhs in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uniform if compared with the past history of the case. The details and the Charts produced before us have depicted the same information. In such a situation, it was expected from the first appellate authority to either called-for a remand report or in the alternate would have granted an opportunity of hearing to the Assessing Officer so that the requisite information could have been verified. It is not a simple disallowance on abhoc basis, but the impugned 1/7th disallowance was made by the Assessing Officer due to the gross failure on the part of the assessee. The situation was not that the assessee has produced books of account and got verified the reasonableness as well as the genuineness of the expenses, but even then a partial adhoc disallowance was made. Rather the admitted position is that the assessee has not substantiated the genuineness or the reasonableness of the claim of expenses, though the opportunity was granted to the assessee. In view of this, we hereby hold that the relief granted by the Learned CIT(Appeals) was not on firm-footing which can be upheld either on facts or on law. We, therefore, restore this issue back to the stage of first appellate authority to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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