I.T.O WD - 8(3),KOLKATA, KOLKATA vs. M/S RUIA SONS PVT LTD., KOLKATA

The brief facts arising in this case are that the assessee company filed its return of income for A.Y.2009-10 on 24.09.2009 declaring loss of Rs.30,97,3290/-. Notices u/s 143(2) and 143(1) of the Act were issued to the assessee and as and when called for the assessee has produced documentary evidence, books of account, bank statements, agreements etc. The assessment was completed u/s 143(3) of the Act vide order 16.12.2011 on the total income of Rs.11,57,41,510/- after making some additions/disallowances. That in the grounds of appeal appearing before us it is the numerical format as appearing before the ld. CIT(A).Therefore ground no.19 in the grounds of appeal is general in nature and hence no adjudication is required. Ground nos. 1 to 15 relate to the relief granted to the assessee company hold that the payment of Rs.11,75,82,702/- as stand by SBLC to M/s. Shalini Properties & Developers Limited was allowable due to commercial expediency. With regard to this ground the ld. CIT(A) in his order has stated after considering all the facts and circumstances in this case and the remand report of the AO it was observed by the ld. CIT(A) as follows :- “In the profit and loss account, an amount of Rs.l1, 75,82-,702/- was debited under the head Bank Charges/Guarantee commission which included payment of Rs.11, 74,12,5001- to M/s: Shalini Properties and Developers Pvt. Ltd. on account of Standby Letter of Credit Charges. However, from the notes contained in the tax audit report, the Assessing Officer observed that (i) "The company has not taken any loans, secured or unsecured, from Companies, firms or other parties covered in the register maintained under section 301 of the Act and as such clauses (iiitle) to (iii)(g) are not applicable to it,' 2 M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 and (ii) "The Company has not given guarantee for loans taken by others from bank or financial institutions. " From the details submitted it is noted that the appellant company had given guarantee commission to M/s Shalini Properties and Developers Pvt. Ltd. Thus, it is noted that the report of the Auditor does not commensurate with the accounts and the same was pointed out to the assessee company. The case of the Assessing Officer for making the impugned addition has been that - the transactions entered into by the assessee company were with group companies having the same management and controlling authority, decisions were taken on behalf of all the companies by only a few; i) The Directors and the principal persons of the assessee company were only aware of the major decisions taken in the entire group. ii) Opportunity was provided. to .the assessee to come out clean with a clear picture of the exact disclosure of facts and not fictions. As all the information was within the control and specific knowledge of the assessee, therefore, it was the duty of the assessee to prove and establish the same, which they did not. This brings out a clear picture that the total group companies are engaged in colorable transactions amongst themselves. Similar view had been taken in the case of Logitronics Pvt. Ltd. ITA 4716/DEL of 2009 dated 30.04.2010, ITAT, New Delhi and in the case of Kay Cee Electricals v DCIT (2003) 87.ITD 35 (Delhi). (iii) the contentions expressed in the copies of the extracts of the board resolution, as claimed by the appellant, has already been duly considered in the assessment stage and strongly refuted in .the assessment order itself with logic as well as relevant case laws. (iv) It is also pertinent to mention here that it is incumbent on the Assessing Officer to explore the total gamut' of the affairs of the assessee company. The transactions entered into by the assessee company are often not indicative of what meets the naked eye. The intention and actual purpose of the assessee company along with its ramifications on its past, present and future incomes, as well as the effect it is going to case on other affected parties and beneficiaries have to be considered. The Assessing Officer has to lift the corporate veil and bring out the actual purpose of the actions of the assessee company to light. This has also been upheld in the case of CIT vs Indian Express Newspapers Madurai Pvt. Ltd. 238 ITR 70 (Mad.), Thus, the case of the Assessing Officer is that the group companies were managed by a few, who could manage the affairs to reduce the tax burden through colourable devices. 5.1..9 On the other hand, to support its claim, it was explained that the appellant company is the flagship company of the Ruia Group and during the financial year: 2008- 2009, relevant to Asst. Year, 2009-2010 , it had entered into an agreement with Dunlop India Limited with the help and support of M/s Shalini Properties & Developers P Ltd. This agreement with Dunlop India Ltd was for the appellant company to use the 'Dunlop', brand name logo for -a period of ten years commencing from 01.04.2008 to 31.03.iO'18. The manner and influence of M/s Shalini Properties & Developers. P Ltd. in obtaining such brand name by the appellant company and the payment of SBLC charges to Shalini Properties & Developers P Ltd. is the entire ,issue for this addition made by the Assessing Officer. The fact is that prior to Asst. Year 2009-10 i. e. in NY 2008-09, the appellant was M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 not having any business activity nor deriving any income and this was also the case in many more previous years. In sum and substance,. it: is submitted that the appellant was not having source of income prior to A.Y 2009-2010. It was looking for avenues to earn income and steps were being taken by the appellant which is the matter of resolution of the Board of the appellant company as on 20th Feb 2008 placed at page 53 of the paper book. M/s Shalini Properties & Developers p Ltd. are substantial share holders of Dunlop India Limited and the appellant came to an understanding with M/s Shalini Properties & Developers P Ltd. that the latter would help and make all efforts to obtain the 'Dunlop' brand name in favour of the appellant from Dunlop India Ltd. and the appellant would be obliged to bear the SBLC charges to be paid to M/s Shalini Properties & Developers P Ltd. who, in turn, shall pay such charges to ICICI Bank, To this effect, Board of the appellant company passed resolution dated 12th March 2008. Board resolution dated 28th March 2008 was passed by the Board of the appellant which incorporated the agreement entered into by the appellant with Dunlop India Ltd for use of ‘Dunlop' Brand and Logo. The Board's resolution also incorporated and thanked M/s Shalini Properties & Developed P Ltd for their efforts in obtaining the brand name from Dunlop India Ltd. and payment of SB Le charges as soon as Mls.Shalini Properties I & Developers P Ltd. requires the sum. Subsequently, when the loan was sanctioned by the ICICI Bank where M/s Shalini Properties & Developers P Ltd. was guarantor, another Board resolution was passed dated 28th of June 2008 for reimbursement of the SBLC charges to M/s Shalini Properties Developers P Ltd. 5.1.10 The A/R further argued that during the year, on use of the 'Dunlop' brand name and logo by way of royalty and SBLC charges the appellant had income of Rs.123643645/-. Not only this, the income earning apparatus of the appellant company being the brand name and logo 'Dunlop' has resulted in much higher income in the subsequent years. Only in respect of royalty income from the use of ‘Dunlop' brand name and logo the jump in the royalty income is as under.- Financial Year Falcon Tyres India Tyre Dunlop Total & Rubber Goodyear Rs. Tyre 2008-09 33903897 1050305 0 34954202 2009-10 91472539 827016 0 92299555 2010-11 165818393 875089 0 166693482 2011-12 155880408 611723 6314287 162806418 Total Rs. 447075237 3364133 6314287 456753657 The processing fees paid by the company are as under: Financial Year Amount Rs. 2008-09 117412500 2009-10 87668527 2010-11 29062500 2011-12 27906250 Total Rs. 26204977 _ M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 Referring to the above factual position, the AIR stated that the appellant company was exploring various avenues for augmenting its income and it approached M/s. Shalini Properties and Developers Private Limited to arrange for the assignment of Dunlop brand name and agree to pay/reimburse the standby letter of credit charges to M/s. Shalini. Properties and Developers Private Limited and also agreed to pay a sum of Rs.200 lakhs to Dunlop India Limited directly. Shalini Properties and Developers Private Limited, according to the appellant, informed it that it was the ultimate shareholder of Dunlop India Limited and also it is a guarantor for the loan taken by Wealth Sea Pte. Ltd. Singapore. Shalini was holding the shares of WealthSea Pte. Ltd, Singapore and Wealthsea Pte.Ltd, Singapore, was holding the shares in DIL Rim and Wheel Corporation Limited which was holding the shares of Dunlop India Limited. Thus Shalini was controlling the shares of Dunlop India Limited. In this connection, reference was made to the proceedings of the Board of Directors and the various Resolutions passed by the Directors during the period 20th February 2008 to 28th June 2008 as stated above. The appellant's submissions are that the corporate veil is a mere facade and that the expenditure had been incurred for commercial expediency. 5.1.11. It is noted that the Assessing Officer while disallowing the. claim of the appellant of Rs.1l7412500/- as SBLC charges paid to M/s Shalini Properties & Developers P Ltd. has held the transaction to be a colourable device to eat into the profit of the appellant company. The Assessing Officer also relied upon the decision in relation to colourful device to hold that the expenses of Rs.117412S00/- could not be said to be laid out or expended wholly and exclusively for the purposes of the business of the appellant company and that the transaction was a colourful device. While holding, the Assessing Officer has considered the agreement and the fact of the case. The Assessing Officer has also gone on to point out the utilization of such loan taken by Wealthsea Pte.Ltd. In the remand report the Assessing Officer has not mentioned anything new than what has already been I stated in the assessment order and in fact the Board's resolution which was considered as a fresh evidence has been brushed aside by the Assessing Officer by treating the same to be part of the assessment record and not fresh evidence. M/s Shalini Properties & Developers P. Ltd held 100% shares in Hiland Traders Pvt. Ltd. which, in turn, held substantial shares in Dunlop India Ltd. M/s Shalini Properties & Developers P. Ltd. also held 45% in the equity capital of Wealthsea Pte. Ltd. which held the entire share holding in DIL Rim & Wheels Corpn. Ltd. which, in turn, held substantial shares in Dunlop India Ltd. Therefore, Shalini Properties &, Developers Ltd. was having substantial interest in Dunlop India Ltd.. Accordingly, Wealthsea Pte Ltd. had approached ICICI Bank, Singapore which was agreeable to release funds provided a Standby Letter of Credit was given by Shalini Properties & Developers P. Ltd. being the substantial share holder of Wealth sea Pte. Ltd. M/s Shalini Properties & Developers P. Ltd were not having any income and in order to provide such finance charges it approached the appellant company. The resolutions passed by the Board throw light to the affair of. the appellant company and the method adopted for source of earning by the appellant company. The fact that the appellant was looking for a source of income and in previous Asst. Years not having any income cannot be denied. It is also true that M/s Shalini Properties & Developers P Ltd. being substantial shareholders of Dunlop India Ltd. had mutual understanding prior to the agreement made by the appellant company with Dunlop India Ltd. It was in the influence and effort of M/s Shalini Properties & Developers P Ltd. 5 M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 that the 'Dunlop' brand name was obtained on lease for a period of ten years by the appellant. It is also a fact that from thy use of the 'Dunlop' brand name, the appellant company has earned substantial income on account of royalty, service charges in the impugned Asst. Year and increasing in subsequent years. It is also illustrated in the chart given above that purely on royalty income-from use of the 'Dunlop' brand name in comparison to reimbursement of SBLC charges in three years, the income has outshown the expenses substantially putting the appellant company in a guided seat and showing the actual picture of the understanding with M/s Shalini Properties & Developers P Ltd. Dunlop India Ltd. is doing business of manufacturing of tyres and tubes and has been constantly in the news and for steps taken for revival of the same. Prior to the acquisition of Dunlop India Ltd. By the Ruia Group the same was a sick unit and subsequently it revived and came out from being a sick unit. The transaction of payments made by the appellant company of the SBLC charges, processing fees/finance charges by whatever name it may be called are a larger picture to the revival of the group company and mainly Dunlop India Ltd. which was to be starting production, up and in running. The arrangement made between the group companies, share holder company has resulted in business in these companies and giving rise to capital generation for benefit of Dunlop India Ltd, as a whole. So, it is incorrect to say that Dunlop India Limited has not been benefited from the finances obtained by Wealthsea Pte. Ltd .. in terms of which the appellant company has paid processing fee, SBLC charges to M/s Shalini Properties & Developers P. Ltd. who in turn has paid the same to ICICI Bank Ltd. . ' 5.1.12 One of the allegations of the Assessing Officer is that it is a colourful device which .resort to eat away the profit of the appellant company or diversion of the income. On the facts of the case, it seems to be unusual that at one instance the company would be earning income from utilization of resources from its group companies and on the other hand resort to a colourful device to eat away into the income. It is unusual because it is' not the case of the appellant company that the income is being earned from third party or it is a fixed income being earned from previous year and in order to eat: into such income a method or a resort is being adopted which is colourful in nature. Here, it is from the AN 2009-10 that the source of income has been generated and Board's resolution is absolutely clear as to the gamut of affairs of the appellant company and the involvement of M/s Shalini Properties & Developers Ld. is not in doubt. Even before the agreement was made between Dunlop India Ltd. and ;the appellant company for use of the 'Dunlop' brand name and logo, M/s Shalini Properties & Developers P. Ltd. had made an understanding with the appellant for providing of SBLC charges and once this fact is undisputed by the Assessing 'Officer, then there can be no question raised as to the colourful device or a method adopted to eat into the profit. A Board's resolution is no doubt an important piece of evidence and even though it is made by the Board of Directors, it has to be considered and taken cognizance of and cannot be brushed aside. The Supreme Court in the case of Union of India Vs Azadi Bacho Andolen 263 ITR 706 (SJ~) after considering the decision of the Supreme Court in the case of MacDowell 154 ITR 148 made a distinction between tax avoidance and tax planning. it was held:- "having anxiously scanned MacDowell' s case, we find no reference therein to having dissented from or overruled the decision of the Privy Council in the Bank of Chettinands case 8 ITR 522 (PC). In any the principles appears to have been reiterated with approval by the Constitution Bench of this court in Mathuram's case 8 SCC 667 para 6 M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 12. We are, therefore unable to accept the contention of the respondent that there has been fl very drastic change in the final jurisprudence in India, as would entail a departure. In our judgment from Westminister's case to Bank of Chettinands case to Mathurams case despite the hiccups of Maclrowell's case, the law has remained the same. We are unable to agree with the submission that an Act which is otherwise, valid on law can be treated non- est merely on the base of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interest as perceived by the respondents." In the case of IRC vs Fisher Excecutor 1926 AC 395 it was held " My Lords the highest authorities have always recognized that the subject is entitles to arrange his affairs as not to attract tax imposed by the crown, so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed terms or of any omission that he can find in his favour in taxing Act. In so doing he neither comes under liability nor incurs blame.' In the case of Sankarlal Balabhai 69 ITR 186 (Guj) it was held "Tax avoidance postulates that the assessee is in receipt of amount which is really and in truth his income eligible to tax but on which he avoids payment of tax by some artifice or device. Such artifice or device may apparently show the income as accruing to another person, at the same time making it available for use and enjoyment to the 'assessee as in the case falling within section 44D or mask the true character of the income by disguising it as a capital receipt as in a case falling within section 44E or assume diverse other forms. But there must be some artifice or device enabling the assessee to avoid payment of tax on which is really and in truth his income. If the assessee parts with his income producing asset, so that the right to receive income arising from the asset which therefore belonged to the assessee is transferred to and vested in some other person, there is no avoidance of tax liability, no part of the income from the asset goes into the hands of the assessee in shape of income or under any guise." .' 5.1.13. Reliance has been placed by the Assessing Officer in the case of Kaycee Electrical Vs. DCIT 87 ITD 35 (De i) in which case the facts were that the entire transaction which could generate income were kept secret and not entered into the regular books of account it was held to be undisclosed income. The principle laid down in the said decision was where. any assets is found in the possession and control of the assessee it is not recorded in the regular books of accounts maintained by him then the onus shift upon the assessee to prove the same and on such transactions it was held to be colourful device. Further, in the case of CIT Vs. Indian Express Newspapers (Madurai) P.Ltd. 238 ITR 70 (Mad.) as relied upon by the Assessing Officer, in the said case, it was decided that where the borrowers borrowing money was diverted to the associate concern the interest payment on such borrowers was not deductible u/s 36(1)(iii) and it was held to be a colourful device. The facts of the case are distinguishable and not similar to the facts of the case of the appellant. In the case of Atherton Vs British Insulator and Helsby Cables Ltd. 10 Tax cases 155, 191, it was held - "a sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency and in order indirectly to facilitate the carrying on of the business, may yet be expended wholly and exclusively for the purposes of the trade ". 5.1.14 Moreover, the facts and material brought on record show that the group of the appellant company are engaged in the manufacture of tyres and It had obtained the benefit of use brand name of "Dun lop India Ltd." and it had increased its revenue by way service charges received from such companies. Information and material evidence brought on 7 M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 record also show that the company, M/s Shalini Properties and Developers Ltd., had been controlling the shares of Dunlop India Ltd. The appellant company had furnished copies of resolutions to show that the said company, M/s Shalini Properties & Developers had been instrumental in arranging the transaction of obtaining the rights over the brand name of "Dunlop" to the appellant company. On the other hand, the Assessing Officer has not brought any material on record to show that the transaction is a sham or that the group of companies have adopted a colourable. device to defraud the revenue. Merely because the appellant company had no guarantor or that the appellant had not taken any loan or merely because the expenditure had been debited in the profit and loss account under a different nomenclature) the transaction could not be called into question as a colourable device. In Birla Cotton Spinning & Wvg. Mills Ltd. vs. CIT (1971) 82 ITR 166(SC), it has been held that "It must be remembered that the earning of profits and the payments of taxes ,are not isolated and independent activities of a business. These activities are continuous and take place from year to year during the whole period for which the business continues. If the assessee takes steps for reducing its liability to tax: which results in more fund being left for the purpose of carrying on the business there is always a possibility of higher profits. The expenditure which was incurred by the assessee was, therefore, allowable - Birla Cotton Spg. & Wvg. Mills Ltd vs. CIT (1967) 64ITR 568(Cal) followed. On the facts and in the circumstances of the case, what is to be examined is whether the transaction is a revenue expenditure and if so, whether the said expenditure had been laid out wholly and exclusively for commercial expediency. As the Income- tax Act does not define the terms "capital/expenditure" and "revenue expenditure " one has to depend upon their natural meaning as well as decided cases. General principles to decide whether an expenditure is capital or revenue in nature, the following points of distinction are relevant. (a) Capital expenditure is incurred in acquiring, extending or improving a fixed asset, whereas revenue expenditure is incurred in the normal course of business as a routine business expenditure; (b) Capital expenditure produces benefits for several years, whereas revenue expenditure is consumed within a previous year; ( c ) Capital expenditure makes improvements in earning capacity of a business. Revenue expenditure, on the other hand, maintains the profit making capacity of a business. (d) Usually capital expenditure is a non-recurring outlay, whereas revenue expenditure is normally a recurring outlay. (e) In order to determine whether expenditure is capital or revenue in nature, the fact that it is a lump sum payment or periodic payment is not important. (f) For determining whether expenditure is of capital or revenue nature, It is immaterial whether expenditure is made out of money withdrawn from capital or out of profits- Schenectady Beck India Ltd. v. CIT [2004] 91 ITD 23 (Mum.). It is well-settled that capital expenditure cannot be attributed to revenue and vice versa. Secondly, it is equally clear that a payment in lump sum does not necessarily make the payment a capital one. It may still possess revenue character in the same way as a series of payments. Thirdly, if there is a lump sum payment but there is no possibility of a recurrence, it is probably of a capital nature though this is by no means a decisive test. Further, if the payment of a lump sum closes the liability to make repeated and periodic payments in the future, it may generally be regarded as a payment of a revenue character. 8 M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 Lastly, if the ownership of the money whether in point of fact or by a resulting trust is still with the taxpayer, then there is acquisition of a capital asset and not an expenditure of a revenue character as per ratio laid down in Indian Mosasses Co.(P.) Ltd. v. CIT [1959] 37 ITR 66 (SC), Hylam Ltd. v. CIT [1973.1,87 ITR 310 (AP). Though the dividing line between a capital and revenue ,expenditure is real, yet sometimes it becomes difficult to draw. Therefore, a decision is to be taken in each case in the light of the facts and surrounding circumstances. However, the following judicial pronouncements should be kept. in view while determining whether a particular expenditure is a capital or revenue in nature. In Empire Jut Co. Ltd. v. CIT [1980] 124 ITR 1 (SC), it has been held that "if the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business-to be carried on more efficiently or profitably while leaving the fixed capita untouched, the expenditure would be on revenue account, even though the advantage-may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanical without regard to the particular facts and circumstances of a given case." In the instant case, the payment has not been made for acquiring a brand name, but for facilitating for acquisition of the brand name, which in turn, made substantial improvement in earning capacity of the appellant's business. The payment is in the form of a brokerage or commission or service charges (not-withstanding its liability for TDS), Therefore, on the facts and in the circumstances of the case, in my view, the expenditure incurred by the appellant company for the payment made to M/s. Shalini Properties & Developers Pvt.Ltd is a revenue expenditure. 5.1.15. Now, the issue remaining for consideration is whether the expenditure is allowable as business expenditure under section 37(1) of the Act. In CIT v. Navsari Cotton &\'Bilk Mills Ltd.(135 ITR 546(Guj), the Hon'ble Gujrat High court have evolved the: following tests( which can be divided into two categories positive tests and negative tests) for deciding whether a particular expenditure can be termed as revenue or capital expenditure. One (at least one) of the positive tests must nod its head and none (not even one) of the negative tests must do so in order to affirmatively hold that the expenditure is deductible under section 37(1). The positive tests are: If the expenditure is incurred: (i) with a view to bring profits or monetary advantage either today or tomorrow; (ii) to render the assessee immune from impending or reasonably apprehended litigation; (iii) in order to save losses in foreseeable future; (iv) for effecting economy in working which may pay dividends today or tomorrow; (v) for increasing efficiency in working; (vi) for removing inefficiency in the working; (vii) where the expenditure incurred is such as a wise, prudent, pragmatic and ethical man of the world of business would conscientiously incur with an eye on promoting his business prospects, subject to the expenditure being genuine and within reasonable limits; (viii) where it is incurred solely by way of a civil duty owed by the assessee to the society having regard to the nature of his business which brings him profits. but results in some detriment to the public at large either by way of health hazard or ecological pollution or serious inconvenience to the citizens with a view to mitigate the aforesaid evil consequences and consequences of a like nature, subject to its being genuine and within reasonable limits.

We have perused the case records and heard the rival contentions and considered the facts and circumstances of the case in its entirety. We do not find any infirmity in the findings of the ld. CIT(A) which is a speaking order in itself. There is a commercial expediency in payment of SLBC charges by the assessee to M/s. Shalini P.Ltd and hence payment of rs.11,74,12,500/- is an allowable expenditure. Therefore the deletion of disallowance made by the ld. CIT(A) is sustained. This ground appearing in ground nos. 1 to 15 is decided in favour of the assessee.

In the light of the above discussion and observation and perusing the facts of the case and keeping in view the emerging legal position as above and also for the following summerised reasons, this ground of appeal is decided accordingly :- (i)The appellant has paid professional charges of Rs. 9,24,547/- which includes payment of out of pocket expense of Rs. 2,93,404/-. (ii) As per the Id AR the appellant has paid Rs. 2,93,404/- before the end of the year hence, in view of decision of special bench of ITAT in the case of Merlyn Shipping Transports v ACIT ITA No. 477/VIZ/2008 this payment cannot be disallowed by applying section 40(a)(ia). (iii) Since in the remand report the AO has not commented on correctness or otherwise of submission of ld AR hence AO has directed to verify and allow all the payment which were made during the year and to disallow only those payment which were 14 M/s.Ruia Sons Pvt. Ltd. A.Yr.2009-10 outstanding as on last day of the accounting year. Accordingly this ground is decided in favour of the appellant as above.

The next ground nos. 17 and 18 as appearing in the grounds of appeal relate to the deletion of disallowance made by the AO of Rs.11,32,925/- u/s 40(a)(ia) of the Act on account of failure to deposit within 31st March, 2009. The tax deducted at source of the month of March, 2009 by the assessee from the payments u/s 194C and 194J of the Act in contravention of the provision of section 40(a)(ia)(b) of the Act.

We have perused the case records on this issue and we find that the ld. CIT(A) had rightly sustained the disallowance of Rs.73556/- u/s 194J of the Act and Rs.120961/- u/s 194C of the Act in the facts and circumstances of the case. This ground of appeal is dismissed.

In the result the appeal by the revenue is partly allowed.