No disallowance of provisions made by assessee in previous as well as subsequent assessment years: No disallowance can be done in the current year

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No disallowance of provisions made by assessee in previous as well as subsequent assessment years: No disallowance can be done in the current year

Telco Construction Equipment Co. Ltd
[2021] 127 taxmann.com 488 (Karnataka)
Short Overview of the case:
 Where assessee claimed expenses on account of consultancy fee paid for purposes of studying and preparing a strategy to reduce cost of production by assessee, since Commissioner (Appeals) and Tribunal both founded concurrent findings of fact that study conducted was only for improving sales and profitability of assessee and no new asset had came into existence impugned consultancy fee paid by assessee was to be allowed as revenue expenditure
 Ths issue pertains to Section 40(a)(ia), read with section 194H, of the Income-tax Act, 1961 
 Business disallowance – Interest, etc., paid to a resident without deduction of tax at source (Provision) 
 Assessment year 2007-08 
 Assessee-company was carrying on business of manufacture, purchase and sale of excavators, loaders, cranes, dumpers and spare parts, etc.
 During year, assessee had made provision on account of Commission on payment to an agent 
Assessing officer noted that assessee had not deducted tax at source on such provision and, accordingly, made disallowance of said provisions under section 40(a)(ia)
It was noted that from perusal of assessment orders for assessment years 2005-06, 2006-07, 2008-09 and 2009-10, it was found that similar provisions were made in those years as well and TDS was not deducted on same
However, revenue had not made any disallowance with regard to such provisions made 
Whether following same, impugned disallowance made by Assessing Officer under section 40(a)(ia) during relevant year was also to be deleted
 Held, yes 
Another issue involved was with regard to  Section 37(1) of the Income-tax Act, 1961 
Business expenditure & Allowability of (Consultancy fee) 
Assessment year 2007-08 
Assessee-company was carrying on business of manufacture, purchase and sale of excavators, loaders, cranes, dumpers and spare parts, etc.
During year, assessee had incurred expenditure on account of consultancy fees paid for purposes of studying and preparing a strategy to reduce cost of production by assessee
Assessing Officer disallowed same treating it as capital expenditure 
Commissioner (Appeals) deleted addition holding that expenditure was incurred towards cost reduction initiative for sustained profitability of assessee and it was not case of pre initial activity or setting up of a new capital asset 
Tribunal had also confirmed same by holding that no new asset had came into existence and study conducted was only for improving sales and profitability of assessee
Whether concurrent findings of fact recorded by Commissioner (Appeals) and Tribunal could not be demonstrated to be perverse and, therefore, no interference was to be made in aforesaid concurrent findings of fact and, accordingly, impugned expenditure on account of payment of consultancy fees was to be allowed 
 Held, yes 
Conclusion:
1.Consultancy fees paid for studying & preparing a strategy to reduce cost of production is eligible for deductio
2. Where Assessing Officer made disallowance under section 40(a)(ia) on account of provisions made by assessee towards commission payment to agents on which no TDS was deducted, since revenue had not made such disallowance of provisions made by assessee in previous as well as subsequent assessment years, following same, impugned disallowance made during relevant assessment year was also to be deleted

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