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TMI Blog2020 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... -7-2020 - Ms. Sushma Chowla, VP And Shri Prashant Maharishi, AM For the Appellant : Ms. Rakhi Vimal, Sr. DR For the Respondent : Sh. Atul Ninawat, C.A. ORDER PER SUSHMA CHOWLA, VP This bunch of four appeals filed by Revenue are against orders of CIT(A)- 6, Delhi dated 11.01.2017, 14.06.2017, 02.04.2018 and 23.10.2018 relating to assessment years 2012-13 to 2015-16 respectively against the order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The Revenue has raised following grounds of appeal for the Assessment Year 2012-13:- 1. Whether in facts and on circumstances of the case, the Ld. CIT(A) is legally justified in deleting addition of ₹ 4,68,45,000/ by ignoring a fact that above referred to addition wad made on a valid basis taking into account rate of charging lease rental and maintenance charge agreed earlier between the assessee and Devki Devi Foundation (DDF) and providing financial assistance to DDF by reducing the rate of lease rental and maintenance charge was not the purpose of the business of the assessee? 2. Whether in facts and on circumstances of the case, the Ld. CIT(A) is legally justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing and sale of medical and other equipment to customers and to deal in all kinds of pharmaceuticals, chemicals, medicines and drugs. The assessee has filed return of income declaring loss of ₹ 12,15,22,410/-. The case of the assessee was taken up for scrutiny. The assessee during the course of assessment proceedings, filed copy of supplementary agreement dated 21.02.2009 with M/s Devki Devi Foundation. The assessee company agreed to receive 8% of the share of revenue earned by Devki Devi Foundation towards leasing of medical other equipment. Earlier this percentage was fixed at 10% vide agreement dated 10.12.2001. Similarly, vide separate agreement dated 21.02.2009, the assessee agreed to receive 5% of the share of revenue earned by M/s Devki Devi Foundation for maintenance and healthcare facilities provided by the assessee company. Earlier this percentage was 6% as per Agreement dated 10.12.2001. The assessee was asked to explain as to why the expenses equal to the amount by which the income from lease and income from maintenance has been reduced, due to downward re-adjustment of percentage of profit as per the agreement dated 21.02.2009, be not disallowed. The reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed was revised downward from 10% to 8% and 6% to 5%, respectively. The revision of the aforesaid agreement, in accordance with the terms of supplementary agreement dated 21.02.2009 has been contended to be on account of financial difficulties being faced by DDF. The AO had doubted the reasonableness of the aforesaid downward revision in the fee receivable by the assessee from DDF and on the basis has disallowed expenses incurred by the assessee during the year on adhoc basis. We find that the similar issue arose before the Tribunal in assessee s own case and the Tribunal has deleted the addition and concluded vide paras 12 and 13 as under:- 12. As regard to the ad-hoc disallowance made by the AO, the assessee submitted to the ld. CIT(A) that the AO made the arbitrary disallowance without pointing out, any defect in the books of accounts maintained or any specific vouchers of disallowable nature. The said action of the AO was purely based on suspicion and surmises without bringing any evidence on record in support of the disallowance. The reliance was placed on the following case laws: Dwarka Prasad Agarwal Vs ITO 52 ITD 239 (Cal) Rattah Mechanical Works Ltd. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year and that it was only the percentage of fees agreed between the parties originally was revised downward, on grounds of commercial expediency which could not be disputed/dictated by the AO. The ld. CIT(A) deleted the ad-hoc disallowance made by the AO. 12. The question raised before the Hon ble High Court was as under:- Whether the ITAT is justified in deleting the disallowance made by the Assessing Officer ( AO ) on account of the change in percentage of profit of the Assessee and M/s Devki Devi Foundation from 10% to 8%? 13. The Hon ble High Court held as under:- 3. The admitted facts are that the Assessee is engaged in a business of constructions of hospitals, leasing and sale of medical equipments and deals in chemicals, medicines and drugs. The returns filed for the AYs in question were picked up for scrutiny. One of the issues that arose was the agreement entered into between the Assessee and the aforementioned M/s Devki Devi Foundation on 10th December 2011, where the profit sharing percentage for the period of 30 years was 10%. The Assessee pointed out that for the AYs in question on account of the business exigencies the profit sharing percentage had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the expenses, particularly when no defect was pointed out in the books of accounts maintained by the assessee. 17. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it appears that the AO made the disallowance of the expenses only on this basis that there was reduction in the sharing of the revenue in comparison to the earlier years, no other reasons has been given. In the instant case, it is also noticed that there was increase in the income earned by the assessee in comparison to the earlier year i.e. 53% more than the preceding year as is evident from the chart furnished by the assessee before the ld. CIT(A), which shows that even after reduction in the percentage of share, the assessee earned more revenue in comparison to the earlier year. In the present case, the AO did not point out any defect in the books of account maintained by the assessee in the regular course of business, it was also not brought on record that any of the expenses was not incurred wholly and exclusively for the purpose of the business. The AO made the disallowance only on the basis of surmises and conjecture which is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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