TaxTMI 
TaxTMI 
2017 (10) TMI 580
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.... of reduction in the revenue recognized by ignoring the facts discussed by the AO in his order. 2. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 3. That the grounds of appeal are without prejudice to each other. 4. That the appellant craves leave to add, alter, amend or forego any grounds of the appeal raised above at the time of hearing." 4. From the above grounds, it would be clear that only grievance of the department relates to the deletion of disallowance made by the AO out of the expenditure equal in percentage of reduction in the revenue recognized. 5. Facts of the case in brief are that the assessee filed the return of income declaring a loss of Rs. 12,02,84,626/- on 13.10.2010 and thereafter, revised the return of income on 30.03.2012 declaring a loss of Rs. 10,34,39,778/-. The reason for filing revised return was that in the revised return, the assessee suo moto disallowed interest amounting to Rs. 1,68,44,848/- u/s 36(1)(iii) of the Income Tax Act, 1961 (hereinafter referred to as the Act). The said return was processed u/s 143(1) of the Act and later on the case was selected for scrutiny. The AO du....
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.... Owner has requested the Contractor for certain concessions with respect to the payments required to be made to Contractor under the Construction & Maintenance agreement and certain amendments to the payments terms set out there under. E. The parties wish to enter into this agreement to amend the Construction & Maintenance Agreement as set out here under." We however wish to bring to your honor's kind notice that inspite of the readjustment of percentages; there has been an increase in revenue of the assessee company. This can be seen from the increasing trend in % of revenue of FY 2009-10 to FY 2011-12, as demonstrated in the below table: (Figures in Lacs) Particular Share of Revenue FY 2009-10 FY 2009-10 FY 2010-11 Increase from FY 2009-10 FY 2011-12 Increase from FY 2009-10 Income from Leasing 8% 627 959 53% 1,249 99% Income From Deferred Credits 2% 317 433 37% 544 71% Income from Maintenance of Healthcare Facility 5% 392 599 53% 781 99% Please find enclosed the copy of the extract of Income Statement of FY 2009-10, 2010-11 and 2011-12 for your reference at....
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....ocumentation in the above regard, please do let us know and we will furnish the same at the earliest.' 7. The AO after considering the submissions of the assessee observed that the assessee entered into an agreement with M/s Devki Devi Foundation as far back as in the year 2001 and the percentage of share from the revenue earned was fixed in that very year and that the agreement was a long term agreement for 30 years from the date of execution. Thus, the terms & conditions and the percentage of profits agreed between the parties were fixed after considering all the pros & cons of the business as also the duration of the agreement with future perspectives. He further observed that with the increase of cost of service being provided by the assessee due to inflation and other factors, no prudent business organization would agree to any downward adjustment for percentage of profits/revenue already fixed long back and still to run for a long time and that the version of the assessee that the user of the services had financial difficulties did not hold ground because income of the user as well as the assessee, was showing upward trend. Therefore, there was no reason as to why the perc....
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....ifficulties, the User has requested the Company for certain concessions with respect to the payments required to be made to the Contractor under the Equipment Leasing Agreement and certain amendments to the payments terms set out there under. D. The Parties wish to enter into this Agreement to amend the Equipment Leasing Agreement as set out here under." Further, as per clause D and E of the Supplementary Agreement dated February 21, 2009, entered between the Appellant and the service provider, the Construction & Maintenance agreement was revised due to the following reasons: "D. Pursuant to financial difficulties, the Owner has requested the Contractor for certain concessions with respect to the payments required to be made to the Contractor under the Construction & Maintenance agreement and certain amendments to the payments terms set out there under. E. The Parties wish to enter into this Agreement to amend the Construction & Maintenance Agreement as set out here under." The Ld. AO has made an addition of Rs. 2,30,93,000 being the difference in the percentage of revenue under the supplementary agreement and the revenue to be earned by....
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....credits 2% 317 433 37% 544 71% Income from maintenance of Healthcare facility 5% 392 599 53% 781 99% Thus, the action of the Ld. AO to disallow the aforesaid expenditure is uncalled for and liable to be deleted, since he cannot examine the question of the commercial expediency of the Appellant to earn profits in a particular manner." 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 ITO 87 Taxman 288 (Chd.) * Shriram Pistons and Rings Ltd. Vs IAC 39 TTJ 132 (Del.) * Roger Enterprises Pvt. Ltd. Vs ITA 52 TTJ 198 (Del.) * Ramji Das Modi Vs DCIT 110 Taxman 107 (JP) * ACIT Vs Bateli Tea Co. Ltd. (2003) SOT ....
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....owance made by the AO. 14. As regards to the disallowance on account of expenditure attributable to goods sold on cost to cost basis. The ld. CIT(A) observed that it had not been established by the AO that any undisclosed income was earned by the assessee nor any tangible material was available on record for the same, consequently no addition to income was to be made in the assessment order. According to the ld. CIT(A) if the expenditure was found to have been incurred for the purposes of business, no part thereof can be disallowed on ad-hoc basis. The ld. CIT(A) was held that there was no valid basis to disallow expenses incurred during the relevant year, admittedly, for the purposes of business, without there being any single expenditure/voucher suggesting no business nexus. Accordingly, the disallowance made by the AO was disallowed. 15. Now the department is in appeal. The ld. CIT DR strongly supported the order passed by the AO and reiterated the observations made in the assessment order dated 06.02.2013. 16. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order ....