DCIT, NEW DELHI vs. M/S. KENMORE VIKAS INDIA (P) LTD., NEW DELHI

PER R.K. PANDA, AM

This appeal filed by the revenue is directed against the order dated 28.2.2017 of the Ld. CIT(A) – 5, New Delhi relating to assessment year 2012-13.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

proceedings the AO noticed that the assessee had claimed renting of surplus area of factory premises as income from house property. The reply given by the assessee was not convincing to the AO as renting of surplus area of factory building, which was a business asset, amounted to income from other source instead of property income. The assessee had claimed depreciation on factory building along with standard deduction @ 30% out of rent received. The standard deduction of Rs.98,49,707/- was disallowed by treating the income as income from other sources.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

“3.2 I have perused the facts as per the impugned assessment orders and the submissions made by the AR. In order to adjudicate the issue, an extensive analysis of various case laws available on various aspects of the issue was undertaken, including inter alia, what is the appropriate head of income under which an income earned by an assessee has to be taxed vis-a-vis section 14, whether income earned from ownership vis-a-vis exploitation of the property in question can be treated as rental income/income from other sources or/business income, what is the intention of an assessee, vis-a-vis the usage of the property in question etc. It was found that the determination of the issue would depend on the finding under each of these sub-heads and therefore I proceed to determine these aspects of the issue as under:

(i) the appropriate head of income under which an income earned by an assessee has to be taxed vis-a-vis section 14?

3.2.1 The consistent view of the Courts has been that the income of an assessee is to be specifically charged to tax under the heads of income provided u/s 14 of the I.T. Act, 1961. Each head of income specified u/s 14 would arise from a particular source, which determines the nature of the receipt and if it falls under one particular head, it has to be charged under that head and no other. The landmark decisions of UCO Bank Ltd.(32 ITR 688) and East India Housing & Land Development Trust Ltd. (42 ITR 49), which were both Three Judge Bench decisions of the Supreme Court were perused wherein

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

it had been held that various sections were available in the IT Act, 1922 (sections 7 to 12) corresponding to sections available in the IT Act, 1961 (sections 15 to 58) to direct the modes in which the income is to be assessed. As per the classification mentioned in section 14 of the IT Act, 1961, if the income is from a source falling within a specific head, it has to be assessed under that head and no other. These sections were held to be mutually exclusive. In the case of Cocanada Radhaswami Bank Ltd. (57 ITR 306), the Supreme Court held that the heads of income must be decided from the nature of the income by applying practical notions and not by reference to an assessee's treatment of income. Again the Apex Court in the case of Nalinikant Ambalal Mody vs. S.A.L. Narayan Rao (61 ITR 428) observed that the several heads of income mentioned in section 6 are mutually exclusive; a particular income can come only under one of them. It was held following the principle of the decision in UCO Bank Ltd. case that, if a particular income is taxable as income from property under section 9 (of 1922 Act), any residual receipt from the property in excess of the annual value assessed under section 9 cannot be assessed again as residual income under section 12 (of 1922 Act). Thus, from a conjoint reading of section 14 and 22 of the I.T.Act, it would seem that any income from property (building and land appurtenant thereto) has to be taxed u/s 22.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

(ii) whether income earned from ownership vis-a-vis exploitation of the property in question can be treated as rental income, income from other sources or business income:

3.2.2. The Courts have held that where income is derived by way of rent by an assessee incorporated with the object of buying and developing land, collection of rents or development of markets, property there on, the income there from was assessable as income from house property. The cases of East India Housing (supra), Chugandas &Co. (55 ITR 17), SG Mercantile Corporation (83 ITR 700) and Sultan Brothers (51 ITR 353) decided by the Hon'ble SC are to this effect. On this issue, a wealth of subsequent decisions by Apex Court are available on the issue as to the fundamental concept that the objective of letting out the property and/or the temporary or permanent letting out & property would not make any difference. Different decisions have been rendered in a somewhat different factual context. For eg. the Supreme Court in the case of Vikram Cotton Mills Ltd. (169 ITR 597) was examining a case where the assessee company, which had been engaged in the business of manufacture of textiles but had stopped the manufacture owing to heavy accumulated losses and thereafter let out plant and machinery of hire was to be assessed as business income or under the head income from other sources. The Supreme Court followed its earlier decision in Sri Laxmi Silk Mills Ltd. (20 ITR 451) to hold that the yield of income from a commercial asset, irrespective of the manner in which the assets were exploited

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

by the owner of the business, would be business income. It was emphasized that the assessee was entitled to the assets to its best advantage which he might do, either by using it personally, or by letting it out to someone else. Keeping in mind that there was only a temporary suspension of business and no act has been performed to show that the assessee never intended to discontinue business, the Supreme Court held that it has rightly been assessed as business income. However, taking a slightly different view in the case of Universal Plast Ltd., the Supreme Court (237 ITR 454) after examining all the earlier decisions on the issue arrived at the broad proposition that where all the assets of the business are let out, the period of letting out and the intention of the assessee i.e. whether to go out of business altogether or to come back and restart the same would be a relevant factor. It was held then that when only or a few business assets are let out temporarily while the assessee is carrying out his other business activity, then it is a case of exploiting business assets; but if the business never started or has started but ceased with no intention to be resumed, then the assets will also cease to be business assets and the transaction will only be exploitation of property by an owner, but not exploitation of business assets. In the latest decision the Apex Court, approved the Madras High Court decision in Chennai Properties & Investments Ltd. (373 ITR 673) that in all the cases involving commercial and residential buildings owned by an assessee, the rental income realized is assessable under the head "income from house property". The only exceptions are cases where the letting of building is inseparable from letting of

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

machines of plant & furniture. Since in such cases, rental would not have been realized but for letting out, it was to be assessed as 'income from other sources'. The/ case of the appellant is apposite to the majority view of the Supreme Court in m e above cited cases.

3.2.3 Keeping these citations in mind, when the facts of the present case are appraised, it is found that the appellant company is the absolute owner of the impugned property, and earned rental income of Rs.3.36 crores therefrom during the A.Y. 2012-13. The appellant had a turnover of Rs.24.40 crores during the impugned A.Y. 2012-13, which demonstrates that the manufacturing activities were very much ongoing. Similar is the position for A.Y. 2013-14, wherein rental income of (Rs.3.03 crores) is just 11.5% of the total turnover (Rs.26.20 crores). The appellant purchased the said property located at Industrial Plot No.5, New Industrial Area, NIT, Faridabad along with construction thereon in the year 2004. The lease agreement shows that part of the property i.e. the industrial sheds was leased out w.e.f. 1.6.2007 and the office space was leased out w.e.f. 15.10.2009. During the impugned A.Y. 2012-13 & 2013-14, the area rented out and the rent received by way of rental from industrial sheds and office area are as under: A.Y. 2012-13 Name of the Company Nature of Premises Area Sq. ft. Total Rent Industrial Shed 22,824 89,77,790 Borgwarner Vikas Emissions Sys India Pvt. Ltd. Dayco Vikas Enqine System Pvt. Ltd. Industrial Shed 4,425 1,32,300 MARK IV Air Intake India Pvt. Ltd. Industrial Shed 11,290 1,193,430 Ecocat (India) Pvt. Ltd. Industrial Shed 48,681 19,594,561 Ecocat (India) Pvt. Ltd. Office Area 5,890 2,934,276 Total 32,834,358

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

A.Y. 2013-14 Name of the Company Nature of Premises Area Sq. ft. Total Rent Industrial Shed 22,824 64,06,864 Borgwarner Vikas Emissions Sys India Pvt. Ltd. Ecocat (India) Pvt. Ltd. Industrial Shed 48,681 20,639,432 Ecocat (India) Pvt. Ltd. Office Area 5,890 4,153,319 31,199,615 The facts and figures as per above table are taken from the respective lease agreements and there is no letting out of any other asset, such as plant, machinery or furniture. There is also no consideration received on account of any services provided, as per the lease agreements. The AO has merely assumed that certain services/facilities have been rendered in his order for A.Y. 2013-14. However, the basis of his assumption is not recorded in the assessment order. A building/office space cannot be divorced of basic facilities such as common area, stair case, toilets, electricity and drinking water. These are essential facilities for renting a property. The facts of the appellant's case are distinguishable from the facts of the cases relied upon by the AO, in National Storage (SC) & Sarabhai (P) Ltd. (Gujarat High Court) wherein specialized vaults, railway booking offices, staff/housekeeping, canteen, central air conditioning etc had been provided by the assessee. In my view, therefore, the appellant has rightly treated this rental as 'income from house property' qua ownership alone and no complex commercial services/facilities have been provided. There is no commercial exploitation of the property indicated on the basis of facts available before me.

(iii) whether income can be assumed under head "other sources' as, on the facts of the case, the factory/industrial sheds cannot be said to be building.

3.2.5 In the A.Y. 2012-13, there is not much discussion on this aspect in the assessment. However, in the A.Y. 2013-14, the AO has discussed this aspect at 10

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length. He has held that industrial shed along with adjoining office space, cannot be covered under the definition of building. He has taken the view that services of common facilities (for example: toilets/passageways etc.) furniture, maintenance and security services have also been provided and expenses debited to P&L account. Further he has held that income cannot be assessed u/s 22 when only a part of the building has been let out. Finally, since appellant had claimed depreciation on the entire office space, he has proceeded to reject the claim that it was 'income from house property' and held that the appropriate head to tax this amount would be 'income from other sources'. 3.2.6 At the outset, it is to be noted that the purchase deed dated 30.7.2004 of the factory premises at plot no. 4 & 5, New Industrial Area, NIT Faridabad mentions purchase of land of Rs.19,760 sq. yards alongwith construction thereon of approximately 60,000 sq. ft. alongwith power having connected load of 886.370 KW with contract demand of 500KVA including one transformer, cables, panel bands, electronic meter, electrical fitting & security deposit etc. The purchase deed specifically refers to 'buildings' & 'sanctioned building plan'. Hence it is an admitted fact that the appellant possessed part of the structure since the year 2004. Thereafter, construction has been carried out by the appellant by way of additional structures such as R&D section, stores, industrial sheds, security and time office space etc. Since the AO has taken the definition of 'building' from the business dictionary (the same not being defined under the I.T. Act, 1961) it is imperative to discuss other statutes to understand the issue. For eg. Section 2(5)of the Real Estate 11

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

(Regulation & Development) Act, 2016 defines building to include "any structure or erection or part of a structure or erection intended to be used for residential, commercial or for purpose of any business, occupation, profession, trade or any other related purposes". A temporary structure such as one with mud, bamboo, leaves, grass etc. is also defined as a 'building' in various Municipal Corporation Acts & Building Tax Acts in India (refer appellant's submissions). The Madras High Court in the case of Chennai Properties & Investments Ltd. (supra) discussed the meaning of the word 'building'to state that building is not confined in its scope only to dwelling houses. It was stated that:

'House' is defined in the Oxford Dictionary of English 10th Edition as ; a building for human habitation especially one that is lived in by a family or by a small group of people consisting of ground floor and one or more number of storeys. The word 'house' in association with other words also has many other meanings. But> a commercial building is not regarded as a house. That, however, would not take the income from such building out of the ambit of section 22. Though it is not dear from the context as to why the Act describes income from property as income from house property, the substantive provision of law which creates the charge and obligates the person who receives such income to have it assessed under that head does not confine its application only to house property, but extends to all buildings whether such buildings is used as dwelling house or for other purposes".

3.2.7 Hence the structure rented out is undeniably a building. It is not mentioned by the AO that the appellant was not carrying out manufacturing activities in the 12

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

impugned premises. When section 22 is perused, it is clear that when any surplus property, being buildings or lands appurtenant to building, either than what an assessee occupies for purposes of business & profession, the income thereof is assessable as income from house property and that is exactly what the appellant has done.

(iv) The intention to determine whether income earned from ownership vis-a-vis exploitation of the property in question is rental income or business income is material:

3.2.8 As held by the Hon'ble Supreme Court in the case of Shambhu Investments (263 ITR 143) affirming the decision of Calcutta High Court reported in 49 ITR 47, the key test to be applied is the 'primary object' of the assessee or 'intention' in exploiting the property and if it is found, applying such test, that the main intention is for letting out the property or any portion thereof, the same must be considered as rental income or income from property. In case, it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event, it must be held as business income. Applying the ratio of this decision to the appellant's case, it is noted that there are no complex commercial activities whatsoever being carried out to justify the exploitation of the asset in question. No such complex commercial activities were being carried out by the appellant, as evident from the lease agreements nor is it obvious from the financials for the year. The conclusion that can be drawn is that, in effect, there is

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

only rental income for leasing of the asset in question.

(v) Whether object clause would be the determinative factor to arrive at the conclusion that income arose from business or from letting out: 3.2.9 The Constitution Bench in the case of Sultan Brothers Pvt. Ltd. (Supra) has clarified that an entry in the objects clause showing a particular object would not be a determinative factor in concluding whether income is to be treated as income from business. According to the Supreme Court, a thing by its very nature cannot be a commercial asset and therefore it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. When read in conjunction with the subsequent decisions of the Hon'ble Supreme Court such as Karanpura Development, SG Mercantile and the latest decision in Chennai Properties and Investments, it is found that the question as to whether a particular income is business income or house property income is to be determined with regard to the intention, the general common sense view, the conduct of the parties concerned etc. When we keep the above principles in mind and examine the facts of the present case, it is seen that there is no intention to carry out business that is use of the property in question as circulating capital leading to profits of business, for acquiring more properties for profitable exploration, there are no complex commercial activities nor it can be said that the asset jS question constituted a commercial asset which was being exploited, rather than lying idle and spare. There is no activity carried out by the appellant except in the capacity of a normal owner of property carrying out normal maintenance and repays and

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

providing the standard facilities such as power, clean drinking water, lighting and upkeep. Hence I do not see any infirmity in the assessment of the rentals received under the head income from house property.

3.2.10 Keeping in view the discussion at preceding paras 3.2 to 3.2.9 hereinabove, the ground 1 for 2012-13 and grounds 1(1) to 1(d) for A.Y. 2013-14 are allowed. “

7.1 Ld. DR heavily relied on the order of the AO. He submitted that income received from letting out of the surplus area of the building which is a business asset has to be treated as income from other sources instead of property income. He submitted that the decision of the Hon’ble Supreme Court in the case of Universal Plast Ltd. vs CIT 237 ITR 454 (SC) is directly applicable to the facts of the present case and the Ld. CIT(A) should have followed the above decision and should have held the income as income from other sources. He accordingly submitted that the order of the Ld. CIT(A) being not in accordance with law should be reversed and that of the AO be restored.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

7.2 Ld. Counsel for the assessee on the other hand heavily relied on the order of the Ld. CIT(A). He submitted that in the immediately preceding assessment year such income was accepted by the revenue as income from house property. Further the Ld. CIT(A) after considering the decision of Hon’ble Supreme Court in the case of Universal Plast Ltd. (supra) has decided the issue in favour of the assesee. Referring to the decision of Hon’ble Supreme Court in the case of Universal Plast Ltd. vs. CIT (supra) Ld. Counsel for the assessee submitted that in the said decision it has been held that no precise test can be laid down to ascertain whether income received by an assessee from licensing or letting out of asset would fall under the head profits and gains of business or profession since it was a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case. He submitted that since the Ld. CIT(A) has considered various decisions of Hon’ble Supreme Court and has come to a finding that the income has to be treated as income from house property, therefore, there is no infirmity in the order of the Ld. CIT(A) on this issue and the same should be

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

upheld and the grounds raised by the revenue should be dismissed.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

assessee that the Ld. CIT(A) has distinguished the decision in the case of M/s. Universal Plast Ltd. & Others and has allowed the claim of standard deduction holding the rental income as income from house property.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

the detailed reasoning given by the Ld. CIT(A) while treating the income as “income from house property” and considering the fact that in the past also such income was accepted by the revenue as income from house property. we do not find infirmity in the order of the Ld. CIT(A) on this issue. Accordingly the order of the Ld. CIT(A) on this issue is upheld and the ground raised by the revenue is dismissed.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

It was submitted that ICD on which interest had been earned are out of own funds of the company. Rejecting the various explanations given by the assessee the AO recomputed the disallowance u/s 14A and made further disallowance of Rs. 3556757/- which is over and above the disallowance already made by the assessee at Rs. 45,11,099/-.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

13.1 Aggrieved with such order of the Ld. CIT(A) revenue is in appeal before the Tribunal.

3.5.2 I have perused the submission made. During the year the appellant has earned exempt income by way of dividend amounting to Rs.2,13,58,588/-. It has offered disallowance u/s 14A r.w. Rule 8D of Rs.45,11,099/-. There is no dispute with regard to either the direct expenses as per Rule 8D(2)(i) or with regard to indirect expenses as per Rule 8D(2)(iii).

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

The only difference in the calculation made by the AO and the appellant, relates to interest expenditure. The appellant has taken the interest expenditure to be net of the interest income earned as the said interest income is taxable under the head 'business'. Moreover, the appellant has taken the interest expenditure for apportionment at Rs.1,66,14,072/- whereas the total expenditure incurred under this head during this year stands at Rs.2,13,14,321/-. The claim is that this was the interest figure mandated under Rule 8D(2)(ii) i.e. relating to mixed pool of funds and common interest expenditure. However, this is not substantiated by way of filing the bank statements or cash flow statement for the year. The Karnataka High Court in the case of Bharath Beedi Works (P)Ltd. (242 Taxman 492) has held that the burden is upon the assessee to show and prove that interest free funds far exceed the value of investment and thereafter, to justify the quantification of interest towards disallowance for the exempted income. In the present case, the said burden has not been discharged satisfactorily and thereafter, the assessing officer has proceeded to apply the formula provided under Section 8D(2)(ii) read with Section 14A of the Act. The Delhi High Court in the case of Indiabulls Financial Services Pvt. Ltd. (ITA 470/2016) has held that while the language of section 14A presupposes that the AO has to adduce some reasons if he is not satisfied

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with the amount offered by way of disallowance by the assessee, at the same time section 14A(2) as indeed Rule 8D(i) leave the AO equally with no choice in the matter in as much as the statute in both these provisions mandates that the particular methodology enacted should be followed. In other words, the AO is under mandate to apply the formulae as it were under Rule 8D because of section 14A(2). Hence, the AO would adopt the gross figure of Rs.2,13,14,321/- as the starting point for computing Rule 8D(2)(ii), It has been held by the Delhi ITAT in the case of Keshav Shares and Stocks Ltd. (ITA 4394/Del./2011) that while making disallowance u/s 14A, if there is interest income which is taxable as business income, only the net interest that has been paid, is to be considered. The ITAT decision does not appear to be inconsonance with the definition of interest as per Rule 8D and therefore, presumably, the gross interest without reducing the interest earned, should be taken for disallowance. However, since there is a jurisdictional ITAT decision and the facts are exactly identical, the issue regarding apportionment of net interest has to be decided in favour of the appellant. Several other decisions of the Tribunals including the one relied upon by the appellant namely Aditya Medisales Ltd. (1616/Ahd./2015) Morgan Stanley India Securities Bombay) and Karnavati Petrochem Pvt. Ltd. (Ahmedabad) are also in favour of the appellant. Accordingly, the AO would

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reduce the interest income of Rs.93,30,918/- from the gross interest of Rs.2,13,14,321/- and thereafter compute Rule 8D(2)(ii). Subject to these directions ground No. 9 for AY 2012-13 is held to be partly allowed.”

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

Jain had rendered such services for execution of sale transactions. The explanation given was not found sufficient to prove that such an expense had been incurred for execution of sale agreement. In view of the above the AO disallowed the impugned payment of Rs. 1,00,00,000/- and added back to the total income from capital gain.

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

“3.7.2 I have given my careful consideration to the facts and circumstances of the case. The payment has been made to two persons Mr. Srinivas Kasibhatla who is a mechanical engineer and degree holder from IIM Bangalore. He has worked in the automotive sector and is a professional director associated with the appellant company. He does not hold any shares in the company. As explained to me, the appellant had earlier formed a joint venture with Ensa Spain called Ensa Vikas EGR Systmes Pvt. Ltd. for manufacturing EGR coolers necessary for Euro IV plus diesel applications in India. Ensa Vikas as other Ensa Companies had been acquired by Borgwarner USA, a fortune 500 company. At the time of acquisition Borgwarner, wanted to own hundred per cent shares of Ensa Vikas and Sh. K. Srinivas was the CEO of this company at that time. Sh. Dinesh Nandan Jain was associated with the promoters of the appellant company by rendering advice relating to finance, accounts, taxation etc. Both the persons were involved in the negotiation, drafting and final execution of the transaction thereby earning huge capital gains by the appellant company. The AO has commented only on the aspect of services rendered, thereby neglecting to take notice of the fact that these were professionals who were

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

associated with the company whose shares were sold to Borgwarner, USA. He has also failed to note that the claim of the appellant was not based u/s 37(1) but u/s 57(iii) as expenses wholly and exclusively incurred for earning the said income, which in this case, was capital gains. Moreover, the Board Resolution filed at Pages 89 to 90 of the paper book records the consent of the board of directors, including independent directors, for payment of the remuneration in connection with the sale of the impugned shares. It is also found that both the persons have accounted for this receipt in their returns of income, copies of which have been filed before the undersigned and paid taxes @30% thereon. The capital gains in the hands of the appellant has been taxed at 20% and if the intention of the appellant was malafide, this payment need not have been made. In the consequence and keeping all these facts in mind it is held that the disallowance of Rs. 1 crore is unjustified. Ground no.11 for AY 2012-13 is allowed.”

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

also gone through the paper book filed before us. We find the AO in the instant case made disallowance of Rs. 1 crore incurred by the assessee as expenditure on sale of shares on the ground that there is no document or agreement on record which shows that Shri K. Shri Niwas and Shri Dinesh N Jain have rendered some services for execution of sale transactions. According to the AO the explanation given is not sufficient to prove that such expenses have been incurred for execution of sale agreement. We find Ld. CIT(A) deleted the addition on the ground that such expenditure was approved by the Board Resolution which includes for payment of the remuneration in connection with the sale of the shares. He has further given a finding that Shri K Shri Niwas and Shri Dinesh N Jain had declared such income and paid taxes @ 30% whereas the assessee company was liable to tax @ 20% on the capital gain and therefore the intention of the assessee can not be considered as malafide. Further he has also given a finding that Shri K Shri Niwas who is a Mechanical Engineer and a diploma holder in advance management program from IIM, Bangalore is a professional director associated with the assessee company and does not hold any shares of the company. Similarly Shri Dinesh Nandan Jain has a long association with the

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.

promoters of Kenmore Vikas and is not a shareholder in the company. He has considered the role of Shri K Shri Niwas and Shri Dinesh Nandan Jain in the transaction and after considering the nature of services has allowed the claim. He has further noted that the claim of the assessee was not based on 37(1) but u/s 57(iii) and the expenditure was incurred by the assessee for earning the huge capital gain. Since the Ld. CIT(A) has passed a detailed order giving reasons and since Ld. DR could not controvert the findings given by the Ld. CIT(A), therefore, we do not find any infirmity in the same. Accordingly the order of the Ld. CIT(A) on this issue is upheld. Ground No. 4 and 5 of the revenue are dismissed

In the result the appeal of the revenue is dismissed.

Order pronounced on 30th September, 2020.

sd/- sd/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/09/2020 Veena

ITA No. 2673/Del/2017 DCIT vs. Kenmore Vikas India (P) Ltd.