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TMI Blog2018 (9) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... f stores and spares comprising of various facilities offered to workmen in all of its tea estates. There is no rebuttal forthcoming to the clinching figures of comparison qua the impugned expenditure vis-a-vis the three preceding assessment years hereinabove. The Assessing Officer appears to have conducted remand proceedings wherein he could not find out even a single irregularity in assessee’s books of account as well as all other details produced. We therefore uphold the CIT(A)’s finding under the challenge in this instant common issue in these two assessment years - decided in favour of assessee Disallowance of nursery expenditure - revenue or capital expenditure - Revenue’s only argument is that such nursery expenditure as the one in hand before us ought not to have been treated as a revenue item of claim in the lower appellate proceedings - Held that:- Coming to enduring advantage spread over number of years hon'ble apex court’s decision in Taparia Tools Ltd. Vs. JCIT [2015 (3) TMI 853 - SUPREME COURT] rejects Revenue’s similar reasoning in concluding that such an approach does not form a justifiable ground to reject a claim of revenue expenditure. We further reiterate tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s different orders right from assessment year(s) 1988-89 to 1992-93 onwards regarding the very payee. The Assessing Officer s sole reason for invoking the impugned disallowance is that Revenue s appeals against the said tribunal s decision(s) are pending before hon'ble jurisdictional high court. He further made it clear that the impugned disallowance is meant to protect Revenue s interest only. The CIT(A) s findings in para-3 page 4 make it clear that assessee has already succeeded on the very issue in case of M/s Koomber Properties Leasing Co. Pvt. Ltd. He has therefore adopted judicial consistency in the impugned assessment year as well. We therefore find no merit in Revenue s instant common substantive ground for lack of distinction on facts or law in these three assessment year(s). The Revenue s first substantive grievance is therefore rejected in all three cases. 3. The Revenue s second substantive grievance for assessment years 2009-10 and 2010-11 seeks to restore the Assessing Officer s identical action disallowing assessee s commission payments to non-resident export agents amounting to ₹23, 87, 696/- in former and ₹22, 09, 101/- in latter assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court decision in 320 ITR 209 (supra) was overruled by the Hon'ble Supreme Court in the case of GE India Technology Centre Pvt . Ltd . Vs . CIT and Another, (327 ITR 456) . In GE India Technology Centre's case the Hon'ble Court explained the decision in 239 ITR 587 (supra) and observed that in that case the non-residents had entered into a composite contract which consists supply of plant and machinery and Equipments in India and also its installation and commission in India and admitted that the erection and commissioning of plant and machinery and Equipments gave rise to income liable to tax in India . In view thereof it was held that the payment required to be made to the non-residents included an element of income and accordingly section 195( 1) is attracted and it is necessary for the tax payer to make an application u/s 195(2) of the Act to the Income Tax Officer and obtain his permission for deducting tax at source at lower amount . The Hon'ble Supreme Court in this case also observed that the decision in Transmission Corporation case was misunderstood by the Hon'ble Kamataka High Court to mean that it is not open for the payer to conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent does not contain the element of income chargeable to tax in India, the payer cannot be made liable to deduct tax u/s 195 and accordingly such payment cannot be disallowed under clause a(i) of section 40 of the Act . The A . Rs of the appellant also referred to a case which inter alia deals with the issue of deduction of tax at source on commission paid to non-resident agents in the case of Director of Income Tax (International Taxation) Vs . Wizcraft International Entertainment Pvt . Ltd . ( 364 ITR 227 - Bombay High Court) . The fact involved in this case as far as it relates to payment of commission to non-resident agents was that a non- resident agent of artists in foreign countries was engaged by the resident assessee to bring foreign artists to perform in India, but the agent has no participation in the event organized in India . The agent was paid commission for his services rendered outside India . On the fact the question arose as to whether tax is required to be deducted at source from the commission paid to non-resident agent even though tax was deducted at source on the payment made to artists for performance in India . The Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce by the Assessing Officer concerned of the International Taxation, Kolkata . The A . Rs of the appellant also submitted that similar disallowance made in the assessment year 2007-08 was deleted by the CIT(Appeals) vide his order dated 27 . 02 . 2015 in Appeal No . 582/CIT(A)-2/14-15 wherein he has observed as under: I have considered the views expressed by the AO and the submissions of the company and I am of the view that the decisions in Transmissions Corporation's case and Samsung Electronics' case relied by the AO has no application to the facts of the present case . In the case of assessee company services had been rendered outside India and the remittance for such services was also made outside India . It is also found from the agreement that the non-resident export agents is not required to be rendered any services in India nor they have any Permanent Establishment in India . Therefore, the remittances made for the services rendered outside India do not partake the Income payments and accordingly it is not taxable in India . It is well settled that if the payments made to non-resident export agents are chargeable to tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in GE India Technology Centre Pvt . Ltd . Vs . CI T and Another 327 ITR 456 (SC) settles the law that Chapter XVII of the Act applies only in case the payments in issue are taxable in the hands of overseas recipients hands in India and not otherwise. The assessee has also succeeded on the very issue in preceding assessment year 2007-08 as well. We therefore decline Revenue s instant substantive grounds in both of these captioned appeals. 5. The Revenue s third substantive ground identical in assessment year 2009-10 and 2010-11 seeks to revive the Assessing Officer s action disallowing assessee s stores and spares consumption claims of ₹31, 53, 42, 998/- and ₹58, , 51, 350/-; respectively as deleted in the course of lower appellate proceedings. Learned Departmental Representative takes us to CIT(A) s detailed discussion in the above former assessment year 2009-10 discussing the entire issue as follows:- I have considered the views expressed by the AO and the submissions of the ARs along with the remand report and comment thereon by the ARs . It is a fact that the appellant has 17 tea gardens 2 in Upper Assam, 3 in the hilly regions of Darjeeli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption of stores and spares per kg of saleable production, workmen and staff welfare expenses per kg of saleable production and Miscellaneous expenses as % age of gross sales were filed for substantiating the appellant s contention that there was no wide variance of these expenditure as compared to last three years . The said statement is as under: Consumption of stores spare parts of 3 preceding years: Year ended Assmt. Year Saleable production Consumption of stores spares Consumption of stores spares per kg of saleable production 31 . 03 . 06 06-07 18, 228, 797 235 . 000 . 615 12 . 89 31 . 03 . 07 07-08 19, 575 . 505 237, 161, 851 12 . 12 31 . 03 . 08 08-09 20, 949 . 531 257, 191, 786 12 . 28 31 . 03 . 09 09-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case the appellant did maintain all necessary records and documents at its gardens in respect of the stated expenditure especially when those records are under scrutiny by different Government authorities and auditors of the company . I have also noticed that in estimating 20% of such expenditure there is no specified finding of the AO related to the expenditure which he considered as inflated by the assessee from details filed . The that the aforesaid expenditure was inflated to reduce profit was not borne out by evidences . Thus taking into account all the facts I am of the considered view that the disallowance made by the AO is not justified . The expenditure so incurred by the assessee company was all related to the business and deductible u/s . 37(1) of the Act . The observation of the Hon'ble Supreme Court in the case of Ganapathy Co . Vs . CIT, reported in 381 ITR 363, at page 372, 1st para, 5th line, is that the main ingredients to be satisfied by the assessee for claiming the deduction u/s . 37(1) is that the expenditure laid out or expended is exclusively for the purpose of business . From the facts submitted by the ARs and see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 13, 48, 486/- relating to initial budding of tea. The Assessing Officer disallowed the same on the ground that this nursery head of expenditures gave enduring advantage spread over to number of years not to be forming a revenue expenditure claims. The CIT(A) accepts assessee s argument as follows:- The ARs of the appellant have filed a detailed submission explaining the nature of expenses and the method of accounting followed in respect of nursery expenses . The ARs have cited decision reported in 262 ITR 388 (Calcutta High Court) in the case of CIT Vs . Tasati Tea Company Ltd . The submissions of the appellant are reproduced as under:- The appellant maintains nursery in its gardens for the purpose of replanting and planting of tea bushes in an area where the tea bushes are dead or became useless or in an area previously abandoned and also for extensions planting . The total expenditure incurred on account of maintenance of plants in the nursery was Rs . 2, 72, 80, 342/- . The garden-wise expenditure incurred for maintenance and upkeep of the nursery treated as revenue and debited to Profit and Loss A/c was furnished to the Assessing Officer vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants raised during the year 1, 63, 97, 003 1, 08, 83, 339 Less: Cost of plants utilized for refilling and replantation in an existing planted area during the year Less: Cost of plants used for extension planting during the year 1, 13, 48, 486 1, 51, 435 2, 72, 80, 342 1, 14, 99, 921 Cost of stock of plants in nursery as at 31. 03. 2009 1, 57, 80, 421 The method of accounting consistently followed by the appellant in regard to the accounting of nursery expenditure debited to the Profit and Loss A/c is only the cost of maintenance and upkeep of tea plants in the nursery used during the year for replantation or replacement of tea bushes in an area already planted without any expansion or plantation of area which was previously abandoned . Thus the Assessing Officer s disallowance of the said nursery expenditure cannot be justified either on facts or in law . Thus the entire expenditure disallowed by the Assessing Officer be deleted . Thus the explanation provided to the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dding of tea which gives advantage to the assessee for number of years . . The Assessing Officer s such assertion was not supported by any materials on record . The appellant submitted that from the nature and character of the expenditure and the purpose for which nursery is being maintained and the expenditure debited to the Profit and Loss A/c it is clear that it is a revenue expenditure for maintenance of plantation for the purpose of its business . Thus in fact the ruling of the Calcutta High Court in 262 ITR 388 (supra) supports appellant s contention that the expenditure claimed was revenue expenditure . The appellant further submits that the maintenance and upkeep of nursery for the purpose of raising tea bushes for utilization of it in future for replantation of dead or useless bushes was not debited to the Profit and Loss A/c, but it was shown as stock of tea plants in the Balance Sheet under the Account head Advance . Thus the claim of nursery expenditure as revenue expenditure during the year would come within the scope and ambit of rule 8(2) of the Rules . Further the expenditure on plants raised in the nursery for expansion of the planted are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as main appeal ITA 2086/Kol/2016 for assessment year 2009-10. 8. This leaves us with this Revenue s appeal 2088/Kol/2016 for AY 2011- 12 raising the latter ground in seeking to revive sales promotion expenditure disallowance of ₹9, 48, 411/- made by the assessing officer and deleted in course of lower appellate proceedings as follows:- Ground Nos . 3 is against the disallowance of Sales Promotion Expenses amounting to Rs . 9, 48, 411/- . The Assessing Officer on page 2 of the assessment order has stated as under:- The assessee claimed sales promotion expenses of Rs . 15, 41, 48, 965/- which includes an amount of Rs . 12, 36, 81, 695/- under the sub-head trade promotional schemes . In course of hearing of the case, details were called for and to the extent of Rs . 9, 48, 411/-, the A/R could not file supporting evidence and coined the same as other small parties . In absence of supporting evidence addition of Rs . 9, 48, 411/- is made for trade promotional expenses The ARs of the appellant submitted the breakup of Sales promotion expenses amounting to Rs . 15, 41, 48, 9 65/- during the assessment proceedings as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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