The Commissioner Of Income Tax v. M/S.mega Management Services Pvt.ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.748 OF 2004 The Commissioner of Income Tax, Vs. M/s.Mega Management Services Pvt.Ltd. ..Respondent ..Appellant Mr.Suresh Kumar for the Appellant.Mr.P.J.Pardiwalla i/b.Megandhi Shah & Himayatullah forthe Respondent. CORAM :- DR.S.RADHAKRISHNAN &V.C.DAGA, JJ.DATE : 29TH SEPTEMBER, 2008 P.C. .Heard the learned Counsel for the parties. The above Appeal was admitted on the followingsubstantial question of law: behalf, the Tribunal after considering the matter in depth has observed in paragraph No.12, as under: as an expenditure. In that 12. We have heard the rival submissions andperused the material available on record. Asfar as the project expenses are concerned, itis clear that in pursuance to the directionsof the CIT(A) in remand proceeding, theconfirmations filed by the assessee wereexamined. The confirmations contained variousdetails. The AO summoned the parties inresponse to which both the parties, i.e.Shri.Shantilal Jain and Smt.Sukhideviappeared. It is undisputed that the assesseehas earned Rs.2 Crores by way of projectreport from Welspun. The assessee isfollowing mercantile system of accounting.The assessee produced the above parties, whowere examined on oath u/s.131. They confirmedhaving supplied the project report for theagreed consideration. The details ofexpenditure incurred by them have been givenin response to question No.23. Shri.ShantilalJain confirmed having deployed variousprofessionals. In effect, it emerges from therecord that the recipients of the projectexpenses confirmed having rendered services,i.e. supply of project reports and raised thedebit notes. Both of them are assessed totax. Their details about permanent accountnumber, filing of return etc. have beenanswered in the above statement. It shall bepertinent here to mention that there is noadverse inference or discrepancy, which hasbeen reported by the AO in these statements.Coming to the objections of CIT(A), thelearned Counsel has laid arguments on theseven points in this behalf. According to us,these arguments are sufficient to meet theobjections raised by the learned CIT(A).Coming to the additional evidence filed by theassessee, we are not inclined to accept thesame regarding the subsequent payments tothese parties. The same is therefore notconsidered. However, the assessee beforeCIT(A), while responding to the remand report,gave the reason for non-payment, which arereproduced above. This was to the effect thatSidharth Traders and M/s.Sumo SalesCorporation were given additional assignmentsfor Rs.12 lakhs and Rs.10 lakhs respectively,which were not honoured by them. Thereforethe payments were held back. Consequently,the assessee had given the reasons for :3: withholding the payments before CIT(A). Thereis no adverse comment on this issue. Underthese circumstances, it emerges from recordthat the assessee’s non-payment to theseparties was on the basis of proper reasons.In fine, the identity of the parties, theamount of consideration and genuineness of thetransaction stand proved by the assessee. Theparties have confirmed the same in remandproceedings in statement u/s.131. The sevenobjections raised by the CIT(A) have been metout by the assessee. besides, the assesseehas also explained the reason for withholdingof the payment as the subsequent obligationswere not honoured by these two parties. Theassessee was following mercantile system ofaccounting, which is accepted by thedepartment and the expenses have been incurredin the previous year. Under thesecircumstances, the expenses have to be allowedin this year. In view of all the above facts,we hold that the expenses incurred by theassessee were genuine and for the purposes ofits business and the same are allowableexpenditure. Therefore the same should beallowed to the assessee. Ground No.1 of theassessee succeeds. for the business purpose and hence, the same are allowable as expenditure.