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TMI Blog2000 (3) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the first order of the CIT(A), as mentioned above, dealt with the issues remitted to him in certain manners. This order was again appealed against by the assessee and the CIT(A) passed a fresh order on 23-3-1992 (this CIT(A) and his order in this regard will henceforth be called as the second CIT(A) and the order of the second CIT(A) respectively). Thereafter, the Assessing Officer passed a fresh order under section 143(3),read with section 250 on 22-3-1993 (this order of the Assessing Officer will be called henceforth the third order passed by the Assessing Officer). As against the said order, the CIT(A) came up with another order dated 9-12-1994 which is being impugned before us by the Department [this CIT(A) and this order of the CIT(A) are henceforth being called respectively as the third CIT and the third order of the CIT(A)]. 3. In this appeal against the order of the third CIT(A), the first issue, which has been raised by the Department, relates to the deletion of the addition of Rs. 48,07,733 made on account of expenditure towards consultancy services. In the first order passed by the Assessing Officer, the matter was discussed in detail to the effect that a paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly for business purposes. The disallowance made by him is upheld in principal." The CIT(A) thereafter discussed that, however, the claim of the assessee regarding the amount relating to this matter (the disallowance) needed to be looked into. He also discussed that the Assessing Officer had obtained information regarding the amount from TMMC without allowing any opportunity to the assessee to cross-examine the said other party on this point. In the interest of justice, the CIT(A) directed the Assessing Officer to allow opportunity to the assessee to cross-examine TMMC for this purpose. The CIT(A), however, ended his discussion in this regard as below : ". . . it does not mean the mere denial by the appellant regarding the amount paid would mean the quantum is in dispute. If TM MC have reflected this amount in their returns for the purpose of taxation, it would have to be accepted as the amount involved." 5. It appears that at the stage of passing the second order, the Assessing Officer merely repeated the earlier order without affording a chance of cross-examining TMMC to the assessee. When the matter came up before the second CIT(A), he found that there was no evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and motion, is quite clear. The issue arising from the disallowance of Rs. 48,07,733 has to again go back to the Assessing officer for fresh examination. Accordingly, the issue is restored for a de novo decision subject to the direction to the appellant that it should furnish to the Assessing Officer such evidence as it ought to have in course of the original assessment proceeding to establish the bona fide in its claim. The Assessing Officer is under direction to carry out the fresh exercise according to the tests laid down in the judicial presidents as referred above." It thus appears that the second CIT(A) went beyond his mandate and declared the entire issue once more open. 7. In the third order passed by the Assessing Officer, he made certain discussions once more about the disallowed portion of the payment being of capital nature. He stressed the point that the Agreement had been made for a full period of five years and held that, therefore, the assessee was to receive an enduring benefit of the nature of restraining others from getting the relevant information and in that way preventing competition in the line of its business. He also found out that as per the version of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apportionment of quantum of payment is concerned, the ld. DR strongly argued that even the second CIT(A) had not disputed such apportionment. Alternatively, the ld. DR tried to argue that the payment was made for extra-commercial consideration and was not related to the actual business needs of the assessee, as was held by the first CIT(A). 10. On the other hand, the ld. counsel for the assessee has strongly supported the order of the third CIT(A) by arguing that by making the payment no capital asset was actually acquired by the assessee, nor even was any enduring benefit obtained by the assessee. He argued that although it is correct that any payment made to ward off the competitors would be a capital expenditure, so far as the present case is concerned, there was no warding off the competitors by the restrictive clause in the Agreement under consideration. The following judgments have been relied upon by the ld. counsel, in support of his contention : 1. CIT v. Electro Steelcastings Ltd [1995] 215 ITR 541 (Ori.) 2. CIT v. Hyderabad Asbestos Cement Products Ltd. [I 984] 150 ITR 517 (AP) 3. ClT v. Madras Auto Service (P.) Ltd. [1998] 233 ITR 468 (SC) 4. CIT v. Kirlo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the disallowable element out of the total payment. The Assessing Officer merely stated at the stage of the first assessment that TMMC had furnished the apportionment of the expenses before him to the effect that Rs. 48,07,733 was towards the restrainment of the trade and the meagre amount of Rs. 1,09,267 related to the services actually rendered. This so-called statement of TMMC is no where on our record. During the subsequent proceedings also, the department was not in a position to substantiate this version by catching hold of TMMC and allowing the assessee a chance of cross-examining that concern with regard to the apportionment of the expenses under consideration. Hence, we attach little value to the so-called apportionment of the expenses as considered in all the orders of the Assessing Officer. Even looking from the angle of reality also, it would seem quite inconceivable that the assessee would spend over Rs. 48 lakhs simply for keeping information relating to services rendered by TMMC to it, away from others; whereas the value of the services itself is of a meagre amount of Rs. 1 lakh and odd. In fact, the consideration for the services actually rendered should out-w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be directed to adopt book profit method for working out the profit derived from sale of tea manufactured out of bought leaves. The second CIT(A) thus restored the issue back to the file of the Assessing Officer for recalculation on the lines already indicated in the above-mentioned appellate order dated 22-2-1991 for the assessment year 1987-88. 14. At the third stage also, the Assessing Officer reiterated his earlier method. The third CIT(A) by following the specific directions given by the second CIT(A) directed the Assessing Officer to accept the profit disclosed from tea manufactured from green leaves purchased at Rs. 2,21,743, as computed by the assessee. Since this particular calculation is as per the direction given by the second CIT(A) against which no appeal was preferred by the Department, we are of the opinion that the matter has become final and the ultimate order of the third CIT(A) in directing to accept the working of the assessee is required to be sustained. We, therefore, uphold the order of the CIT(A) on this issue. 15. In the third ground, the department challenges the direction given by the third CIT(A) to delete the interest charged under sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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