TaxTMI 
TaxTMI 
2016 (9) TMI 1255
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....ese appeals, therefore, these were heard together and are being disposed of by this common order. 2. The first issue in the grounds of appeal that is common for all the years except for A.Y. 2000-01 relates to the order of CIT(A) in confirming the action of the AO in treating the lease rental as 'income from house property' as against 'business income' treated by the assessee. 3. First we take up ITA No.2130/PN/2013 for A.Y.2001-02 as the lead case. Facts of the case, in brief, are that the assessee is a Pvt. Ltd. Company and is engaged in the business of warehousing as per the license granted to it under the Bombay Warehousing Act, 1959. The warehousing receipts with the lease charges were assessed as business income right from 1973-74 to 1999-2000. However, for the impugned assessment year, the AO assessed the lease charges as property income. In appeal the Ld.CIT(A) held that even the warehousing receipts are also to be assessed as property income. The Tribunal confirmed the order of the CIT(A). The assessee went in appeal before the Hon'ble Bombay High Court and the Hon'ble High Court vide order dated 18-02-2010 set aside the order of the Tribunal and directed the AO to d....
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.... the warehouse for the relevant period. 5. Copy of warehousing/rental agreements for all the tenants/clients since financial year 1998-99 till financial year 2005-06. 6. Names, designations and roles of the persons employed by the assessee for warehousing activity. 7. The assessee inter alia submitted the following points which has been incorporated by the AO at Page 3 of his order and which can be summarized as under : (a) The company was incorporated on 07-07-1972 with the main object of carrying on the business of warehousing, cold storage and refrigeration. The business of company is governed by the provisions of Bombay Warehousing Act, 1959. The company has obtained license under the said Act which is renewed from time to time. As per the Bombay Warehousing Rules, 1960 every warehouseman is required to submit the current rates of warehousing service charges and u/s 20(1), every warehouseman is required to insure the goods in the warehouse against the loss or damage by fire or burglary. That the company is complying these conditions. (b) It was submitted that the assessee company is liable to pay service tax on the service of storage and w....
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.... the assessee company has incurred substantial expenses on providing various services to the clients which the company is contractually obliged to provide and these services are not such which are ordinarily provided by landlord to a tenant. (j) That the expenses claimed by the assessee company are genuine and supported by documentary evidences. They have been incurred directly in connection with the services which the assessee is contractually required to provide to their client. Hence, the assessee company is legitimately untitled to claim the expenses as business expenses. (k) That the Ld. CIT has passed an order u/s.264 in the case of Sajjad Hussain Gabrani, Prop. of Storewell Warehousing Corporation, Pune wherein he has held that income from warehousing activity is income from business. (l) In Central Warehousing Act, Section 2(t) which says warehousing business has been defined as "warehousing business means the business of maintaining warehouses for the stores of goods and issuing negotiable warehousing receipts. (m) That the Allahabad High Court, Luknow Bench in the case of CIT Vs. Goel Builders reported in 192 Taxman 28 has held that con....
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....which the income is to the taxed. c. The contention of the assessee that out of 250000 lakhs sqft. of warehouses it owns only 70000 Sqft and remaining 180000 sq.ft have been leased is also not correct. Though the assessee has leased the land from its sister concerns, yet the constructions of the warehouses have been done by the assessee company by utilizing borrowed funds and deposit and these warehouses are shown as fixed assets in the Balance Sheet of the assessee and the assessee has been claiming depreciation. Hence for all practical purpose the assessee is the owner of these warehouses. d. The contention of the assessee that it is providing services like loading unloading, transportation, security, maintenance, electricity are not relevant as for as the lease property is concerned and the question of composite charges does not arise. e. The contention of the assessee that Hon'ble tribunal's decision for A.Y. 1994-95 to 1996-97 be followed for subsequent years as well as there is no change in facts as well as the business model of warehousing, is not acceptable because there is change in the facts. With the construction and long term lease of ....
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....mmercial activity, it is stated that there is no complex activity involved as for as the leased property is concerned. 9. Having dealt with the issues raised by the assessee in its various submissions as above, the AO proceeded to decide the issue in hand, i.e. whether the income from warehousing activities carried out by the assessee are to be treated as 'Business Income' or 'Income from House property' or partly as 'Business Income' and partly as 'House Property' income and whether the lease rental constitutes the dominant part of the warehousing activity or is subservient to it. He observed that the Hon'ble High Court in order dt.18.02.2010 in the Income Tax Appeal No.1269 of 2007 in Para No.6 has observed as under: "What has to be deduced is to letting out of the property constitutes a dominant aspect of the transaction or whether it was subservient to the main business of the assessee of carrying out warehousing activities". 10. Keeping the above in mind, the AO noted that the assessee is carrying out two types of activities. (i) Leasing out of the custom made factory premises to the Hindustan Lever Limited for its 100% Export Oriented Unit engaged ....
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.... 6. That the machinery, furniture and fixtures, electrical equipment and other utilities installed or kept in the said premises which are owned by the lessee shall always belong to and be the property of the assessee. 7. That the lessee shall insure the machinery installation, stocks and other contents in the demised premises which are owned by the lessee. 8. That the lessee will pay for electricity, power and water charges during the tenancy on the basis of actual reading of the meter/submeter installed in the premises. 9. That the lessee will be entitled to construct at its cost in the said premises, partitions and such other fixtures as may be necessary for the lessee to carry on their industrial activities. 10. That the lease shall be renewable at the option of the lessee for such further period and such terms as may be mutually agreed between the lessee and the lessor. 13. In view of the above terms and conditions of the lease agreement, the AO held that the premises has been given on a lease of 10 years, construction has been as per the requirement of the lessee, furniture and fixers and plant and machinery are owned by the lesse....
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.... f. that the warehousing activity carried out by the assessee company is an activity involving a property of the complexity and becomes a commercial asset and the assessee company is not simply renting out warehouse premises per se. g. that the assessee has bus facility for transport of staff from warehouse to Swargate, Pune. h. that the agreement are made for a segment of three years and the clients may join at any time and the client and the assessee company can vacate/get it vacated by three months notice. Hence, it is claimed that the agreement is not for long term as in case of lease agreement. i. that the assessee has installed a fire hydrant system with a capacity of 2 50,000/- liter to keep the warehouses fire proof. 16. The AO noted from the above that the assessee is actively involved in the warehousing activities and the warehouse is being commercially exploited on business lines so far as it related to pure warehousing activities. The Hon'ble High Court in the above referred order has observed that the Hon'ble Tribunal in the order dated 3108-2006 has not referred to any of the warehousing agreements of the assessee and has based th....
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.... Business and Profession'. The AO accordingly determined the taxable income at Rs. 70,66,483/- which comprised of income from house property at Rs. 28,20,676/- as business income at Rs. 42,45,807/-. 20. Before CIT(A) the assessee reiterated the same submissions as made before the AO. It was submitted that the Tribunal in assessee's own case for A.Yrs.94-95, 95-96 and 96-97 has allowed the claim of the assessee in treating the lease rental income as 'income from business'. It was submitted that the warehouses provided for warehousing as well as those provided to M/s. HUL is one and the same activity and there is no scope for any segregation. Further on the entire receipts the company is subjected to service tax. It was submitted that the business of the assessee company is governed by the provisions of Bombay Warehousing Act, 1959. Referring to the Central Warehousing Act it was submitted that provisions of section 2(t) defines warehousing business as the business of maintaining warehouses for the storage of goods and issuing negotiable warehousing receipts. It was submitted that the dominant object is to carry on the warehousing activity as business activity and leasing is in....
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....ly because of bare letting of the property and the said character cannot change and the income does not change or become income from business or profession merely because letting out included certain minor additional services provided to the lessee. Relying on various decisions he held that the activity of the assessee of leasing and letting activity cannot be termed as a business activity. He accordingly held that the lease rent received by the assessee from HUL has rightly been assessed as income from house property. 23. As regards the contention of the assessee that the AO was not justified in allowing only 31% of the interest he held that the assessee could not conclusively establish the nexus between the utilization of the loan and the construction of the warehouse leased out to M/s. HUL. Since the AO has held that 31% of the area of the property, whose income is taxable under the head income from house property, therefore, the allowance of interest to the extent of 31% and disallowance of depreciation to the extent prima-facie appears to be reasonable. He accordingly dismissed the ground raised by the assessee before him. 24. Aggrieved with such order of the CIT(A) the ....
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....en leased out to HUL right from 1982 which is being continued. The warehousing receipts with the lease charges have been assessed as business income right from A.Y. 1973-74 to A.Y. 1999-2000. He submitted that during A.Y. 9495 and 96-97 the AO for the first time assessed the lease charges as property income. Referring to pages 223 to 230 of the paper book he submitted that the Tribunal vide ITA No.1014/PN/1997, 01/PN/1998 and 02/PN/1998 order dated 19-03-2001 has held warehouse of the assessee was part and parcel of the warehousing activity of the assessee. Out of the many warehouses one had been leased out to a valuable customer who was also availing of the warehousing facilities and therefore the same is only the exploitation of a commercial asset and there is hardly any basis for treating such lease rent on a different footing. Accordingly, the claim of the assessee for treating such lease rental as 'business income' was accepted. He submitted that the AO in A.Y. 2001-02 assessed the lease charges as property income. The Ld.CIT(A) held that even the warehousing receipts also be assessed as property income. The Tribunal confirmed the order of the CIT(A). On further appeal by the ....
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....ld have followed the rule of consistency in absence of any compelling reasons justifying the deviation : i. Commissioner of Central Excise vs. M/s.Doaba Steel Rolling Mills SC vide Civil Appeal No.3400/2003 order dated July 6, 2011. ii. State CBI Vs. Shashibala Subramanyam SC reported in 289 ITR 8 iii. Burger Paints India Ltd. vs. CIT reported in 266 ITR 99 (SC) iv. Radhasoami Satsang Vs. CIT reported in 193 ITR 321 (SC) v. CIT vs. Excel Industries Ltd. reported in 358 ITR 295 SC vi. CIT vs. J.K. Charitable trust reported in 220 CTR 105 vii. CIT vs. Goel Builders reported in 236 CTR 472 viii. Dr. Narendra Prasad Patna HC reported in 235 CTR 583 29. Referring to the recent decision of the Hon'ble Supreme Court in the case of M/s. Chennai Properties Vs. CIT vide Civil Appeal No.4494 of 2004 and 4491 to 4493 of 2004 order dated 09-04-2015 he submitted that the assessee in that case is a company incorporated under the Indian Companies Act. Its main object as stated in the memorandum of association is to acquire the properties in the City of Madras and to let out those properties. The assessee had rented out such....
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....1. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the Ld.CIT(A) has given justifiable reasons for treating the income from lease rental as income from house property. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the revenue on this issue be dismissed. 32. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only dispute in the above grounds is regarding the treatment of the lease income from Hindustan Lever Ltd. as 'income from house property' or as 'business income'. We find the Hon'ble High Court while setting aside the issue to the file of the AO has observed as under : "The question as to whether the income which is received by the assessee from the transaction which has been entered into in respect of the immovable property in question should be treated as income from house property or as income from business would have to be resolved on the basis of the well settled tests laid down in th....
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....ribunal noted two decisions of the Tribunal, the first in Vora Warehousing P. Ltd. v. Asst. CIT [1999] 70 ITO 518 (Mum) (SMC) where the rent which was realized from warehousing activity was held to be assessable as business income and the second in the case of V. N. Rukari v. ITO in ITA No. 84/PN/2001 in which the Tribunal held that the income which was realized from warehousing activity would be assess-able as income from house property. The Tribunal followed a decision of the Madras High Court in CIT v. Indian Warehousing Industries Ltd. [2002] 258 ITR 93 and was of the view that the facts of that case were identical, in holding that the income received from the leasing of the ware-house was assessable as income from house property. Ex facie, therefore, the terms of the warehousing agreement were not considered by the Tribunal. Merely styling an agreement as a warehousing agreement would not be conclusive of the nature of the transaction since it is for the Tribunal to determine as to whether the transaction was a bare letting out of the asset or whether the assessee was carrying on a commercial activity involving warehousing operations. Since the Tribunal has not consid....
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....nant activity of the assessee. 35. From the various details furnished by the assessee in the paper book, we find the main objects to be pursued by the assessee company on its incorporation are as under : "iii. Objects : The objects for which the Company is established are : Main Objects Of the company to be pursued by the Company on its incorporation are : A (1)(a) To carry on the business of Warehousing, cold storage and refrigeration in all its branches and activities and sphere. (b) To carry on the business of storage of fertilizers, insecticides, quality seeds, agricultural and horticultural equipment, tools and machinery. (c) To carry on the business of quality seeds and develop quality seeds, acquire suitable lands and carry on agriculture. (d) To produce material and fertilizers and insecticides and acquire agency in the above lines and act as Commission Agents. (e) To act as clearing and forwarding agents of the aforesaid products. (f) To provide facilities and godowns for proper and safe storing of valuable agricultural and horticultural produce and to provide goods and services of all kinds in conn....
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....parties vis-à-vis the main objects of the assessee company show that warehousing activity is the dominant activity and leasing out being incidental is subservient. 39. We find merit in the submission of the Ld. Counsel for the assessee that the assessee has constructed several sheds for industrial and warehouse purposes which proves that the leasing is done for exploitation of the commercial asset. We also find force in the submission of the Ld. Counsel for the assessee that the assessee has not merely leased out the 4 walls of the warehouse. It has also provided essential and necessary services of supervisory, loading and unloading, handling, security, transporting etc. to all the clients including the Hindustan Lever Ltd. on daily basis during working hours. The assessee has incurred expenditure on Electricity, Maintenance, Staff etc. which proves that leasing is a complex activity directly linked with the main warehousing activity. Therefore, it is subservient to the warehousing activity. Further, since plots have been acquired on lease as well as plots owned by the assessee are used for constructing the warehouses the same clearly proves the commercial use of the ware....
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....(A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as "Chennai House" and "Firhavin Estate" both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasise is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order. It transpires that the return of a total income of Rs. 244030 was filed for the assessment year in question that is assessment year 1983-1984 and the entire income was through letting out of the aforesaid two properties namely, "Chennai House" and "Firhavin Estate". Thus, there is no other income of the assessee except the income from letting out of these two properties. We have to decide the issue keeping in mind the aforesaid aspects. With this background, we first refer....
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....under which income can be categorised / classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These heads are in a sense exclusive of one another and income which falls within one head cannot be assigned to, or taxed under, another head. Thereafter, the Court pointed out that the deciding factor is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them. It was highlighted and stressed that the objects of the company must also be kept in view to interpret the activities. In support of the aforesaid proposition, number of judgments of other jurisdictions, i.e. Privy Counsel, House of Lords in England and US Courts were taken note of. The position in law, ultimately, is summed up in the following words: - "As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; bu....
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....late Tribunal. No orders as to costs." 41. We find subsequent to the hearing of the appeal before us the Hon'ble Supreme Court in the case of M/s. Rayala Corporation Pvt. Ltd. Vs. ACIT vide Civil Appeal No.6437/2016 order dated 11-08-2016 following the decision in the case of M/s. Chennai Properties (Supra) has decided an identical issue by holding that where the business of the company is to lease its property and to earn rent, such rental income has to be treated as income from 'profits and gains of business or profession'. The relevant observations of the Hon'ble Supreme Court reads as under : "The appellant-assessee, a private limited company, is having house property, which has been rented and the assessee is receiving income from the said property by way of rent. The main issue in all these appeals is whether the income so received should be taxed under the head "Income from House Property" or "Profit and gains of business or profession". The reason for which the aforestated issue has arisen is that though the assessee is having the house property and is receiving income by way of rent, the case of the assessee is that the assessee company is in business of rentin....
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.... having only an activity with regard to the leasing its properties and earning rent therefrom. Thus, except leasing the properties belonging to the assessee company, the company is not having any other business and the said fact is not in dispute at all. 7. For the afore-stated reasons, the learned counsel submitted that the impugned judgment delivered by the High Court is not proper for the reason that the High Court has directed that the income earned by the appellant assessee should be treated as "Income from House Property". 8. On the other hand, the learned counsel appearing for the respondentRevenue made an effort to justify the reasons given by the High Court in the impugned judgment. The learned counsel also relied upon the judgment delivered by this Court in the case of M/s. S.G. Mercantile Corpn. (P) Ltd. v. CIT, Calcutta (1972) 1 SCC 465. According to him, the important question which would arise in all such cases is whether the acquisition of property for leasing and letting out all the shops and stalls would be essentially a part of business and trading operations of the assessee. According to the learned counsel appearing for the Revenue, leasing and....
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....horticultural produce and to provide godowns and warehousing facilities for goods of all description of agricultural and allied products. Similarly, the other objects of the assessee company also provide to let on lease or hire the whole or any part of the real and personal property of the assessee company. We, therefore, respectfully following the above two decisions of the Hon'ble Supreme Court cited (Supra) hold that the lease income received by the assessee on account of let out of the warehouses/godowns as 'profits and gains from business or profession'. We therefore set aside the order of the CIT(A) and direct the AO to treat the lease rentals received by the assessee company from Hindustan Lever Ltd. as 'business income'. 43. Since the assessee succeeds on this issue the grounds of appeal No.3 and 4 by the assessee company become academic in nature and therefore are not being adjudicated. 44. Identical grounds have been taken by the assessee in the appeals for A.Yrs. 2002-03 to 2006-07 and 2008-09. Following the same reasonings, the grounds raised by the assessee in appeals for A.Yrs. 2002-03 to 2006-07 and 2008-09 on this issue are allowed. 45. The second issue rai....
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....e AO to justify the issue of notice u/s. 148. Therefore, reopening is invalid. For the above proposition he relied on the decision of Hon'ble Supreme Court in the case of Kelvinator of India Ltd. reported in 320 ITR 561. 49. So far as the AO's reliance on the decision of Rajesh Javeri Stock Brokers is concerned he submitted that the same is misplaced. He submitted that the validity is not challenged on the ground of change of opinion but the ground that no new tangible material has been possessed by the AO. The Ld. Counsel for the assessee submitted that in following decisions, this proposition has been laid down by distinguishing the ratio decided in Rajesh Javeri Stock Broker's case : 1. H. V. Transmission Ltd. Vs. ACIT - ITA No.2230/Mum/2010 order dated 07-10-2011 2. Telco Dadajee Dhackjee Ltd. Vs. DCIT - ITA No.4613/Mum/2005 3. Parveen P. Bharucha Vs. DCIT and Another reported in 348 ITR 325 4. D.T.T.D.C. Vs. DCIT reported in - 350 ITR 216 5. Orient Craft - ITA No.555/2012 order dated 12-12-2012 Delhi High Court 50. The Ld. Departmental Representative on the other hand heavily relied on the order of CIT(A). He submitted....
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....lowing reasons recorded u/s 148(2) : "From the Balance Sheet, Annexure 11, it is seen that assessee has incurred expenses towards Enterprise Resource Planning Software amounting to Rs. 95,14,000/-. In the accounts, the assessee has debited 25% of this amount i.e. 23,78,500/- whereas in the computation of income, the assessee has claimed entire amount of Rs. 95,14,000/- as a deduction. The expense incurred by the assessee towards Enterprise Resource Planning Software is payment for acquisition of software which is capital in nature and hence the assessee's claim of the same as revenue expenses is not allowable." As is clearly evident from the reasons recorded by the AO, there was no new material coming to the possession of the AO on the basis of which the assessment completed u/s 143(1) was reopened and this position has not been disputed even by the learned DR. Relying on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), he, however, has contended that the reopening of assessment completed originally u/s 143(1) is permissible without there being any new material coming to the possession of the AO if the re....
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.... cannot be challenged on the ground of a mere change of opinion, still it is open to an assessee to challenge the notice on the ground that there is no reason to believe that income chargeable to tax has escaped assessment. As regards the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) cited by the Revenue and relied upon by the Accountant Member, the Third Member held that the same was applicable in cases where the return was processed u/s 143(1) but later on notice was issued u/s 148 and the assessee challenges the notice on the ground that it is prompted by a mere change of opinion. The Third Member then referred to the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India (supra) wherein it was held that there should be "tangible material" to come to the conclusion that income had escaped assessment. Relying on the said decision, it was held by the Third Member that while resorting to section 147 even in a case where only an intimation had been issued u/s 143(1)(a), it is essential that the AO should have before him tangible material justifying his reason to believe that income had escaped assessment. Since t....
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.... the opinion of the AO, the sale proceeds of the Quota cannot be considered as export turnover but represented business income covered u/s.28 (iv) and had to be reduced to the extent of 90% from the business income as treated by Explanation (baa) to section 80HHC. Not doing so resulted in excessive allowance of deduction u/s.80HHC and consequently in escapement of income chargeable to tax. The assessee filed return in response to notice u/s.148. He also asked for the reasons and filed objections thereafter. The AO rejected such objections and completed the assessment by making certain additions. The assessee challenged the validity of the reassessment proceedings before CIT(A). The Ld.CIT(A) rejected the ground relating to validity of the reassessment proceedings but decided the appeal on merit in favour of the assessee. Both the assessee and revenue filed appeal before the Tribunal. The assessee challenged the jurisdiction of the AO to reopen the assessment u/s.147 and also certain issues on merit which was decided against it by the CIT(A). The Revenue filed appeal on the point on which the CIT(A) had given relief to the assessee. The Tribunal following the decision of Hon'ble Sup....
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....143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression "reason to believe" in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed. 14. Certain observations made in the decision of Rajesh Jhaveri (supra) are sought to be relied upon by the revenue to point out the difference between an "assessment" and an "intimation". The context in which those observations were made has to be kept in mind. They were made to point out that where an "i....
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....d assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements. 14. In the present case the reasons disclose that the Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT vs. Kelvinator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words "reason to believe" vis-à-vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147. 15. For ....
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....y the AO or the CIT(A) to prove that the same should have been charged at lesser rate than what has been paid by the assessee. He accordingly submitted that this disallowance be cancelled. 61. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 62. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find in the instant case the assessee has shown total service charges received at Rs. 42,93,005/- from various companies against the services such as loading, unloading, handling, security services and transportation etc. Against the above income the assessee company has paid Rs. 27,02,000/- to Shri Industrial Suppliers as handling charges which is the proprietary concern of the Director Mr. G.M. Navlakha. We find the AO following the provisions of section 40A(2)(b) disallowed an amount of Rs. 13,51,000/- being 50% of such service charges. While doing so, he noted that Shri Industrial Suppliers is the proprietary concern of Shri G.M. Navlakha who is the Principal Director of the assessee company. Further, as against the receipt of R....