TaxTMI 
TaxTMI 
2018 (8) TMI 1048
X X X X Extracts X X X X
X X X X Extracts X X X X
....A) is not justified in law as well as in facts in deleting the addition of Rs. 33,28,47,561 /- made by the AO U/s 68 of the Act. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as in facts in deleting the addition of Rs. 49,01,411 /- made by the AO on account of bogus lease rental expenses. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in not accepting the examination of findings made by the AO on the issues. 4. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. 3. Brief facts of the case are that assessee is a company engaged in the business of manufacture and sale of ferro alloys like charge chrome/high carbon ferro chrome and ferro silicon and filed the return of income electronically for the assessment year 2013-2014 on 29.11.2013 disclosing total income at Rs. 37,23,24,370/-. Subsequently, the case was selected for scrutiny under CASS and notices u/s.143(2) & 142(1) of the Act along with questionnaire were issued to the assessee. In compliance, ld. AR of the assessee appeared and filed the required/re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not much relevant so far as the genuineness of the sale is concerned since a credit sale is also a legally valid sale. The sale and lease-back arrangement made between the assessee and its subsidiary IAFL was in pursuance to the joint venture agreement between the assessee and M/s. POSCO, a South Korean company which is one of the largest producers of steel in the world. The sale and lease-back arrangement entered into by the assessee and IAFL is a'valid financial transaction which is recognized as such by well recognized accounting standards. It is also quite clear from the facts of the case that all the three ingredients of section 68 have been proved by the assessee. It is evident from the assessment order that before making the impugned addition u/s.68, the AO has not mentioned anywhere about the failure of the assessee to prove any of the three ingredients of the so-called credits. The case laws relied upon by the AO appear to have no relevance to the facts of the assessee's case. 3.2.1 The AO has raised certain points in the assessment order which have created suspicion in his mind about the genuineness of the arrangement of sale and lease-back made between the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n take place by taking over possession and it is not necessary that the transfer should be preceded by a written instrument. Oral contracts for transfer are also well recognized by law. A subsequent instrument recording an earlier transfer by handing over possession is equally enforceable in law and cannot be considered as bogus. 3.2.3 The AO has also pointed out in the assessment order that there was no physical transfer of the asset sold to IAFL and the asset continued at the same place where it was installed prior to sale. Perhaps this is another point which has created suspicion in the mind of the AO about the genuineness of the transaction. A similar question arose before the Hon'ble ITAT, Delhi Bench 'C in the case of Consortium Finance Ltd. v. JCIT where there was sale- cum-lease-back transaction without physical delivery of the machinery and the AO considered the transaction as a sham transaction. The Hon'ble ITAT vide their order dt.30.4.2002 [2002] 82 ITD 808 (Delhi)/ 77 TTJ 795 (Delhi) held that in sale-cum-lease- back transaction duly supported by documentary evidence, physical delivery of machinery is not essential as constructive delivery will suffice as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame is upheld and the grounds raised by the Revenue are dismissed. 9. Thus, appeal of the Revenue i.e. ITA No.412/CTK/2016 for assessment year 2013-2014 is dismissed. 10. In appeal for assessment year 2007-2008 in ITA No.220/CTK/2017, the Revenue has raised the following grounds of appeal :- 1. On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as well as on facts in deleting addition of Rs. 7,77,82,376/- on account of transmission charges. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as well as on facts in deleting addition of Rs. 6,00,434/-out of total addition of Rs. 8,00,576/-on account of travelling expenses. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as well as on facts in deleting addition of Rs. 1,60,00,000/- on account of Director's remuneration. 4. On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as well as on facts in deleting addition of Rs. 3,59,48,117/- u/s 40(a) (i) of the Act. 5. On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the principles of ejusdem generis. The learned CIT(A) has also held that for applying the provisions of Section 194-I there is no need to restrict the meaning of term "physical use". 26. The contention of the learned AR of the assessee is that the meaning of the word "rent" cannot be given such wide meaning to include every type of payments de hors the meaning of the words lease, sub-lease or tenancy. The learned AR of the assessee has tried to make out a case on the basis of the reasoning given by some of the Circulars issued by CBDT but we do notice that while interpreting the meaning of the word "rent" in the case of payment of hotel in Circular No. 5 dt. 30.7.2002, for payments made by film distributor to a film exhibitor owning a cinema theatre in Circular No. 736 dt.17.2.1996 restricted meaning has been given to the word "rent". However, in view of the judgments referred to by the learned DR in the case of United Airlines (supra), Japan Airlines Co. Ltd. ( supra) and Vodafone Essar Ltd (supra), we are of the considered view that the word "rent" will have wider meaning and accordingly, the contention of the learned AR of the assessee on this aspect is rejected. 27. How....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the facility created by service provider who was the owner of the entire network and related equipments. This principle will also address the issue and examples given by the learned AR of the assessee in respect of use of books by an Advocate while providing consultation service to the clients. When a client walks into the room of an advocate and the advocate consulting the books and provides the advice and charges the client for the services rendered by him, it cannot be said that the client had made payment for use of the books. It is the Advocate who has used the books and not the client. Similar is the case where a Doctor carrying out operation. In that case the Doctor has used the equipment but not the patient. The situation would have been different had a person walks into the room of an Advocate and seeks permission of the Advocate to allow him to use his books for consideration and the person reads the books and makes payment for the same, in that situation it can be said that the payment has been made for use of the books. In the present case on hand it is clear that OPTCL is providing power transmission services and accordingly OPTCL is using its equipments and machinerie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l, with whom the assessee has a GSM Roaming Agreement. He has neither seen the equipment nor has any direct contact with the same. All that he knows is that because he has the roaming facility in his cellphone, he can make a call from Delhi to any other place even though he is registered with the assessee only in Mumbai. He is the person who is entitled to the roaming service which is provided by the other service provider with whom the assessee has a working arrangement and for that reason he cannot be said to use the equipment involved in providing the roaming facility. Even if we assume for the sake of argument that the subscriber is the person who makes use of the equipment, the liability to deduct tax would be on him and not on the assessee." 29. This view also gets support from various CBDT Circulars on applicability of Section 194-I which have been referred to supra. We also rely on the judgment of AAR in the case of Dell International Services (P.) Ltd. (supra). It was held by the AAR that the word used "in relation to the equipment" is not to be understood in the broad sense of availing the benefit of equipment, but it indicated that there must be some positive act of ut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e have held that Section 194-I is not applicable in respect of transmission charges and consequently, no disallowance can be made u/s.40(a)( ia) in respect of transmission charges, the other grounds raised by the assessee including ground No.2 to the effect that it has not availed any services from the OPTCL and on the ground it is a merely debit and credit entry without any claim of expenditure and ground No.10 regarding OPTCL being a loss making Company and as such, having no tax implication, is only academic and hence, they are not adverted to. 32. For the reasons discussed in the foregoing paragraphs, we are of the considered view that the Assessing Officer was not justified in invoking the provisions of Section 40(a)( ia) of the I.T. Act for disallowance of the transmission and wheeling charges. Hence, we direct deletion of the said disallowance. 33. In the result, the appeal of the assessee allowed. Respectfully following the judicial precedence, we have no hesitation but to uphold the findings of the CIT(A) in this regard and accordingly, we dismiss this ground of appeal of Revenue. 14. Ground No.4 is with regard to deleting the addition made u/s.40(a)(ia) of the Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition made by the AO on account of travelling expenses, director's remuneration and prior period expenses, whereas ld. AR relied on the order of CIT(A). 17. We have heard rival submissions and perused the material on record. We find that the CIT(A) with regard to travelling expenses, has restricted the disallowance to 20% and with regard to director's remuneration, the CIT(A) deleted the addition observing that the addition made by the AO is not based on any evidence or legal proposition. Similarly the CIT(A) deleted the addition partly on account of prior period expenses observing that the explanation of the assessee in this regard is reasonable and logical. Before us ld. DR could not bring out any new material/cogent facts to controvert the above observations of the CIT(A). Accordingly, we uphold the findings given by the CIT(A) in regard to addition made on travelling expenses, director's remuneration and prior period expenses and dismiss the grounds No.2,3&5 of the Revenue's appeal. 18. Thus, the appeal of the Revenue for the assessment year 2007- 2008 in ITA No.220/CTK/2017 is dismissed. 19. In ITA No. 411/CTK/2016(M/s IMFA Alloys & Finlease Ltd) for the assessment year 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....levant provisions of section 195 of the I.T.Act. 24. We have heard rival submissions and perused the material on record. We find that the issue involved in the present appeal of the Revenue has already been decided by us in appeal of Revenue in ITA No.411/CTK/2016 for the assessment year 2013-2014, wherein we have upheld the findings of the CIT(A) as the issue is covered by the order of this bench of the Tribunal in the case of Paradeep Phosphates Limited, ITA No.289/CTK/2014 & ITA No.264/CTK/2015, order dated 04.08.2017 and in the case of CIT Vs. Eon Technology P. Ltd., 343 ITR 366 (Delhi). Accordingly, we confirm the findings given by the CIT(A) in this regard and dismiss the ground raised by the Revenue in its appeal. 25. Thus, appeal of Revenue in ITA No.342/CTK/2016 is dismissed. 26. Now, we shall take up the appeal of the assessee in ITA No.230/CTK/2017 for assessment year 2007-2008, wherein the assessee has raised the following grounds of appeal :- 1. That on the facts and circumstances of the case and in law, the Commissioner of Income tax (Appeals) ['CIT(A)'] erred in confirming the action of the Assessing Officer ('AO') in disallowing deduction of Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration. That the above grounds of appeal are without prejudice to each other. That the appellant seeks leave to add, alter, amend or withdraw any ground of appeal before or at the time of hearing of this appeal. 27. In ground No.1, the assessee has agitated that the CIT(A) has erred in confirming the disallowance of deduction by invoking 43B of the Act. Ld. AR before us filed Form No.8 regarding declaration under Section 158A(1) of the Act, 1961 to be made by an assessee claiming that identical question of law is pending before the High Court or the Supreme Court. The substantial questions of law framed by the Hon'ble High Court are as under :- "08.02.2016 Mr. S.Jolly, learned counsel & his associate have entered appearance on behalf of the petitioner by filing a vakalatnama in Court today. The same is accepted and taken on record. Heard learned counsel for the petitioner. This Income Tax Appeal is admitted on the following substantial questions of law: B) Whether on facts and circumstances of the case and in law, the ITAT was right in confirming the action of the AO and CIT(A) in disallowing deduction of payment of electricity duty by erroneously invoking Section 43B ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ien bank account, in accordance with the directions of the Hon'ble Supreme Court of India. 1.1 That in confirming the disallowance, the CIT(A) erred in relying upon the decision of this Hon'ble Tribunal in ITA No.521/CTK/2013 passed in the Appellant's own case for AY 2009-10 without appreciating that the decision of the Hon'ble Tribunal has been stayed by the Hon'ble Odisha High Court vide Order dated 08.02.2016 passed in ITANo.20/2014. 1.2 That CIT(A) erred in not appreciating that the said amount was deposited on specific directions of the Hon'ble Supreme Court of India and there was actual outflow of cash from the Appellant, which tantamounts to actual payment for the purposes of Section 43BoftheAct. 2. That the CIT(A) erred on facts and in law in partly confirming the action of the AO in disallowing deduction of Rs. 25,87,387/-, being 10% of expenditure incurred on foreign travel of directors on the ground that the Appellant had not submitted complete details of the expenses incurred on foreign travel of directors and that the same was not related to the business of the Appellant. 2.1 That the CIT(A) erred on facts and in law in holding that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... consider based on the final outcome of the assessee's appeal in identical issue pending before the Hon'ble High Court for the assessment ear 2009-2010 as mentioned in the Form No.8. Accordingly, this ground of appeal is allowed for statistical purposes. 32. In regard to ground No.2, the ld. AR of the assessee before us could not produce any new material to controvert the findings of the CIT(A). On perusal of the order of CIT(A), we find that the CIT(A) has granted relief to the assessee after considering the submissions of the assessee and findings of the Assessing Officer. Therefore, we do not see any good reason to interfere in the findings of the CIT(A) in this regard and we uphold the same. 33. In regard to ground No.3 to 3.4, we find that the issues involved in the present appeal of the assessee are covered by the order of this bench of the Tribunal in the case of Paradeep Phosphates Limited, ITA No.289/CTK/2014 & ITA No.264/CTK/2015, order dated 04.08.2017 and in the case of CIT Vs. Eon Technology P. Ltd., 343 ITR 366 (Delhi). Accordingly, we delete the addition confirmed by the CIT(A) on account of advisory services, export commission, VMI Charges and other export service....