AI Drafter 
TaxTMI 
TaxTMI 
2014 (12) TMI 248
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....I, Ahmedabad dated 26.04.2012 in Assessment Year 2009-10. 2. In all the appeals filed by the Revenue, the common issue involved is that the CIT(A) erred in law and on facts in deleting the disallowance of Rs. 4,62,89,335/- in the Assessment Year 2006-07, Rs. 5,87,27,940/- in the Assessment Year 2007-08, Rs. 7,70,18,875/- in the Assessment Year 2008-09 and Rs. 6,65,41,730/- in the Assessment Year 2009-10 on account of claim for expenditure on payment of service charges u/s 40A(2)(b) of the Act without appreciating the facts that the Assessing Officer had established the charging of expenses on the basis of number of connections given during the month for charging use of office infrastructure was illogical and without any basis. 3. At the outset, the Departmental Representative submitted that as the facts and issues involved in all the years under consideration are the same, she is arguing the appeal for Assessment Year 2006- 07 and the arguments made for this year are also be taken as the arguments for the other assessment years under appeal. 4. The Departmental Representative submitted that during the assessment proceedings, the Assessing Officer observed that the assessee....
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.... was not justified in the above facts and circumstances of the case in deleting the disallowance in all the years under appeal observing that the assessee had produced the copy of agreement before the Assessing Officer who had not found any infirmity in the said agreement. 7. Further, the Departmental Representative submitted that the CIT(A), while deleting the addition, has also observed that the assessee was paying service charges to GGCL for last so many years and in the assessment made in number of earlier years u/s 143(3) of the Act, no disallowance out of service charges was made. She argued that each assessment year is independent assessment year and therefore, the findings of earlier assessment years are not relevant in making the assessment in subsequent assessment years. 8. The Departmental Representative further argued that the CIT(A) while deleting the addition also observed that the Assessing Officer, while invoking provisions of Section 40A(2)(b), has not brought any evidence on record to show how the payments made by the assessee to GGCL are excessive or unreasonable having regard to fair market value of such services. The CIT(A) has observed that Section 40A(2....
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.... that the service charges paid were higher than the market value. In absence of the same, no disallowance could be made from the service charges claimed by the assessee. 11. The Authorized Representative of the assessee further submitted that the assessee as well as the sister-concern of the assessee M/s. GGCL were both paying tax at the maximum marginal rate and therefore, no disallowance out of service charges paid by the assessee to GGCL could be made by the Assessing Officer and he relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. Glaxo Smithkline Asia (P.) Ltd., reported in [2010] 236 CTR 113 (SC), wherein the Hon'ble Supreme Court has held that "having gone through the relevant material placed before us concerning assessment year 2001-02, we are of the view that, as far as this special leave petition is concerned, no interference is called for as the entire exercise is a revenue neutral exercise." He further placed reliance on the decision of Hon'ble Bombay High Court in the case of CIT vs. Indo Saudi Services (Travel) (P.) Ltd., reported in (2009) 310 ITR 306 (Bom), where it was held that "when Revenue was not in a position to point out how the as....
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....on for Rs. 4,62,89,335/-. 13. On appeal, the CIT(A) deleted the disallowance on the ground that the Assessing Officer did not find any infirmity in the agreement entered into by the assessee with GGCL, the payments were made on the basis of this agreement in number of earlier years and no disallowance was made even in assessment completed u/s 143(3) of the Act. Further, the CIT(A) also observed that in order to invoke the provisions of Section 40A(2)(b) of the Act, the Assessing Officer has to show that the payments made by the assessee to GGCL was excessive or unreasonable having regard to the fair market value of such services. No such material was brought on record by the Assessing Officer before invoking provisions of Section 40A(2)(b) for making the impugned disallowance. 14. The Departmental Representative has relied on the order of the Assessing Officer, whereas the Authorized Representative of the assessee supported the orders of the CIT(A). 15. We find that in the instant case the assessee-company is a Government company which had made payment of service charges to another Government company. A part of the said expenses was disallowed by the Assessing Officer by i....
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....were in excess of the fair market value of such services. We, therefore, do not find any good reason to interfere with the order of the CIT(A). It is confirmed. The ground of appeal of the Revenue in all the years under appeal is dismissed. 17. In ITA No.556/Ahd/2010, the Authorized Representative of the assessee argued that the sole ground of appeal was ground No.2 raised in the appeal wherein the issue involved was that the CIT(A) erred in confirming the disallowance of Rs. 9,45,000/- made by the Assessing Officer being value of inventories written off as obsolete. He submitted that all other grounds raised in the appeal are the arguments of the assessee. 18. The brief facts of the case are that, during the assessment proceedings, the Assessing Officer required the assessee to justify the claim for inventories written off amounting to Rs. 9,45,000/-. The assessee filed details regarding gas connections apart from regulator, meter i.e. Ball Valve, gas meters, G.I. Pipes and fittings, rubber tubes, gas tape HDPE service line etc. The Assessing Officer also asked the assessee to provide account showing entries of such purchase, issue and consumption and generation of obsolete ....