M/s. Borkar Packaging P. Ltd., Margao v. Asst. Commissioner of Income tax Cir. 1 (1), Margao

CO 48/PAN/2013 | 2006-2007
Pronouncement Date: 04-04-2014

Appeal Details

RSA Number 4824123 RSA 2013
Assessee PAN AAACB7618N
Bench Panaji
Appeal Number CO 48/PAN/2013
Duration Of Justice 6 month(s) 18 day(s)
Appellant M/s. Borkar Packaging P. Ltd., Margao
Respondent Asst. Commissioner of Income tax Cir. 1 (1), Margao
Appeal Type Cross Objection
Pronouncement Date 04-04-2014
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 04-04-2014
Date Of Final Hearing 11-03-2014
Next Hearing Date 11-03-2014
Assessment Year 2006-2007
Appeal Filed On 16-09-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI P. K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER ITA NO. 244/PNJ/2013 ITA NO. 245/PNJ/2013 ITA NO. 246/PNJ/2013 ITA NO.247/PNJ/2013 ITA NO. 248/PNJ/2013 ITA NO. 23/PNJ/201 4 A.Y - 2005 - 06 A.Y - 2006 - 07 A.Y - 2007 - 08 A.Y - 2007 - 08 A.Y - 2007 - 08 A.Y - 2009 - 1 0 M/S. BORKAR PACKAGING PVT. LTD LAKE PLAZA OPP. NEHRU STADIUM FATORDA MARGAO - GOA PAN: AAACB7618N(APPELLANT) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE - 1 MARGAO GOA (RESPONDENT) ITA NO. 239/PNJ/2013 ITA NO. 240/PNJ/2013 ITA NO. 260/PNJ/2013 ITA NO. 261/PNJ/2013 ITA NO. 262/PNJ/2013 ITA NO.05/PNJ/2014 A.Y - 2005 - 06 A.Y - 2006 - 07 A.Y - 2007 - 08 A.Y - 2007 - 08 A.Y - 2007 - 08 A.Y.2009 - 10 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE - 1 MARGAO GOA APPELLANT M/S. BORKAR PACKAGING PVT. LTD LAKE PLAZA OPP. NEHRU STADIUM FATORDA MARGAO - GOA PAN: AAACB7618N (RESPONDENT) C.O. NO. 47/PNJ/2013 (OUT OF ITA 239/PNJ/2013) C.O. NO. 48/PNJ/2013 (OUT OF ITA 240/PNJ/2013) C.O. NO. 53/PNJ/2013 (OUT OF ITA 260/PNJ/2013) C.O. NO. 54/PNJ/2013 (OUT OF ITA 261/PNJ/2013) C.O. NO. 55/PNJ/2013 (OUT OF ITA 262/PNJ/2013) A.Y.2005 - 06 A.Y.2006 - 07 A .Y.2007 - 08 A.Y.2007 - 08 A.Y.2007 - 08 2 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) C.O. NO. 12/PNJ/2014 (OUT OF ITA 05/PNJ/2013) A.Y.2009 - 10 M/S. BORKAR PACKAGING PVT. LTD LAKE PLAZA OPP. NEHRU STADIUM FATORDA MARGAO - GOA PAN: AAACB7618N(OBJECTOR) THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE - 1 MARGAO GOA (RESPONDENT) ASSESSEE BY : SHRI R.K. PIKALE CA. REVENUE BY : SHRI B. BARTHAKUR LD. DR. DATE OF HEARING : 10/3/2014 11/3/204 DA TE OF ORDER : 04 /04 /2014 O R D E R PER: D.T. GARASIA ITA NO. 239/PNJ/2013 AND C.O. NO. 47/PNJ/2013 (A.Y.2005 - 06) : 1. THIS APPEAL IS FILED BY THE DEPARTMENT AND C.O. IS FILED BY THE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - PANAJI FOR THE A.Y. 2005 - 06. 2. THE ONLY GROUND INVOLVED IN THIS APPEAL RELATES TO DELETION OF THE ADDITION OF RS.2 95 05 113/ - ON ACCOUNT OF DEPRECIATION U/S 37(1) CLAIMED BY THE ASSESSEE. 3 . THE SHORT FACTS OF THE CASE ARE AS UNDER: 3 .1. THE ASSESSEE COMPANY FILED ITS RETURN OF INC OME DECLARING A TOTAL INCOME OF RS. 63 30 161 UNDER REGULAR PROVISIONS AND RS.3 06 41 616/ - UNDER SECTION 115JB ON 31.10.2005. THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 16.01.2006 DECLARING TOTAL INCOME OF RS. 46 36 303/ - UNDER REGULAR PROVISIONS A ND INCOME UNDER S ECTION 115JB REMAINING THE SAME. THE ASSESSMENT U/S. 143 (3) WAS COMPLETED ON 28.12.2007 DETERMINING TOTAL INCOME AT RS. 16 42 043/ - UNDER THE NORMAL PROVISIONS AND THE BOOK PROFIT U/S 115JB WAS NOT DISTURBED. THE VARIATION IN THE INCOME AS PER RETURN AND ASSESSED INCOME WAS BECAUSE OF ADJUSTMENTS MADE IN THE PROFITS OF UNIT - I AND UNIT - II. THE COMMISSIONER OF 3 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) INCOME TAX PANAJI FOUND THE ORDER PASSED BY A.O. U/S. 143(3); ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND RESTORED THE ASSESSMENT BACK TO THE A.O. WITH DIRECTIONS EXAMINE THE DETAILS OF ADDITIONS MADE IN RESPECT OF FIXED ASSETS OF THE NEW UNIT LOCATED AT NALAGARH IN HIMACHAL PRADESH. THE A.O. COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 263 ON 20.10.2010 BY DISALLOWING THE CLAIM O F DEPRECIATION AMOUNTING TO RS. 2 95 05 180/ - U/S 37(1) OF THE I.T. ACT. 3.2 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: 9. I HAVE GONE THROUGH THE ASSESSMENT ORDER HAVE PERUSED THE GROUNDS OF APPEALS GONE THROUGH THE WRITTEN SUBMISSIONS AND HEARD ORAL ARGUMENTS OF THE LEARNED COUNSEL. THE CIT PANAJI SET ASIDE ORIGINAL ASSESSMENT WITH A DIRECTION TO VERIFY ADDITION TO FIXED ASSETS AND THEN TAKE A DECISION ACCORDING TO THE LAW. FOLL OWING THE DIRECTIONS OF THE CIT THE A.O. CALLED FOR THE BILLS AND VOUCHERS RELATING TO PURCHASE AND INSTALLATION OF FIXED ASSETS AND REACHED A CONCLUSION THAT THEY WERE NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION AND DISALLOWED THE CLAIM OF DEPRECIATION OF THE APPELLAN T. I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE A.O. AS FAR AS LEGALITY IS CONCERNED. HOWEVER ON FACTS I DIFFER FROM THE CONCLUSIONS DRAWN BY THE A. O. BECAUSE OF FOLLOWING REASONS: I IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE A.O. DID NOT ASK THE ASSESSEE TO PROVE THAT THE FIXED ASSETS WERE ACTUALLY PUT TO USE DURING THE YEAR UNDER CONSIDERATION. II THE ASSESSEE HAD DISCLOSED SALES AMOUNTING TO RS.37 34 923/ - DURING FINANCIAL YEAR 2004 - 05 WHICH IS PART OF ASSESSEES P & L ACCOUNT. III P & L ACCOUN T WAS AVAILABLE WITH THE A.O. AT THE TIME OF FINALIZATION OF ASSESSMENT PROCEEDINGS. IV THE A.O. HAS ALSO NOT DISPUTED THE SALES DISCLOSED BY THE ASSESSEE IN THE ASSESSMENT ORDER THEREBY ACCEPTING THAT THERE WAS PRODUCTION AND THE FIXED ASSETS WERE PUT TO USE. V DURING THE COURSE OF APPELLANT PROCEEDINGS THE ASSESSEE SUBMITTED COPIES OF: COMMENCEMENT OF COMMERCIAL PRODUCTION CERTIFICATE. COPIES OF SALES TAX RETURN FILED AND COPIES OF SALES BILL. . COPIES OF SALES BILL. 10. IN VIEW OF THE ABOVE DISCUSSED FACTS I AM OF THE OPINION THAT THE A.O. MADE THE DISALLOWANCE OF CLAIM OF DEPRECIATION AMOUNTING TO RS.2 95 05 113/ - NOT ON THE BASIS OF FACTS ON RECORD BUT ON THE BASIS OF GUESS WORK AND SURMISES AND THEREFORE THE 4 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) ADD ITION CANNOT BE SUSTAINED. THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF DISALLO WANCE OF CLAIM OF DEPRECIATION. 3.3 . THE LEA RNED DR SUBMITTED THAT ASSESSEE S COMPANY HAS STARTED UNIT V AT HIMACHAL PRADESH AND HAS PURCHASED BUILDING FACTORY PLANT & MACHINERY AND FURNITURE & FIXTURE TOTALING RS. 251 456 659. THE ASSESSEE WAS REQUESTED TO PROVIDE THE BILL FOR FIXED ASSETS AND ASSESSEE COULD NOT PROVIDE THE BILL F OR RS. 23 59 51 331. THE ASSESSEE C OULD NOT ESTABLISH HOW THE ASSETS WERE UTILIZED IN THE ASSESSEES BUSINESS OPERATION. THEREFORE DEPRECIATION WAS NOT ALLOWED. 3.4 . ON THE OTHER HAND LEARNED AR RELIED UPON THE ORDER OF COMMISSIONER. 3.5 . WE HAVE HEA RD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT ASSESSING OFFICER WAS OF THE VIEW THAT BILLS AND VOU CHERS RELATING TO PURCHASE AND INSTALLATION OF ASSETS AND REACH TO CONCLUSION THAT THEY WERE N OT PUT TO USE DURING THE YEAR UNDER CONSIDERATION AND DISALLOWED THE CLAIM OF DEPRECIATION OF THE ASSESSEE. THE ASSESSEE HAS PRODUCED THE COPY OF SALES TAX RETURN FILES SALES BILL AND THE CERTIFICATE OF COMMENCING OF COMMERCIAL PRODUCTION THAT ALL THE EVI DENCE WAS PRODUCED BEFORE CIT(A) AND CIT(A) WAS SATISFIED WITH THIS EVIDENCE AND HE HAS ALLOWED THE CLAIM. T HEREFORE IN OUR OPINION CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 3.6 . IN THE RESULT ITA NO. 239 IS DISMISSED. C.O. NO. 47/PNJ/2013 IS SUPPORTING TO THE ORDER OF CIT( A) THEREFORE C.O. IS DISMISSED. ITA NO. 244/PNJ/2013 (A.Y. 2005 - 06) 4 . DURING THE COURSE OF HEARING LEA RNED AR HAS WIT HDRAWN THE ITA NO. 244/PNJ/2013. T HEREFORE WE DISMISS THE APPEAL AS IT IS WITHDRAWN . 4.1 . IN THE RESULT DEPARTMENTS APPEAL CROSS OBJECTION AND ASSESSEES APPEAL ARE DISMISSED. 5 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) ITA NO. 240 /PNJ/2013 ITA NO.245 AND C.O. NO. 48 /PNJ/2013 (A.Y.2006 - 07) : 5 . ITA NO. 240/PNJ/2013 FILED BY THE DEPARTMENT ITA NO .245/PNJ/2013 FILED BY THE ASSESSEE AND C.O. NO. 48 FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - PANAJI FOR THE A.Y. 2006 - 07. 5.1 . DURING THE COURSE OF HEARING THE ASSESSEE HAS WITHDRAWN HIS APPEAL ITA NO. 245/PNJ/2013 THEREFORE IT IS DISMISS ED AS NOT PRESSED. 5.2 . ITA NO. 240/PNJ/2013 FILED BY THE DEPARTMENT AND C.O. NO. 48 IS SUPPORTING THE ORDER OF THE COMMISSIONER THEREFORE IT IS DISPOSED BY THE COMMON ORDER. 5.3 . THE SHORT FACTS OF THE CASE ARE AS UNDER: 5.4 . GROUND NO. 2 IS GENERAL. T HE ASSESSEE HAS CLAIMED 80IB DEDUCTION IN RESPECT OF 2 UNITS AND THE SAME WAS ALLOWED AT THE TIME OF SCRUTINY ASSESSMENT. ON EXAMINATION OF THE 10CCB REPORT IT IS SEEN THAT ONE OF THE ESSENTIAL CONDITION FOR BECOMING ELIGIBLE UNIT I.E. NUMBER OF WORKERS EMPLOYED IN EACH UNIT HAS NOT BEEN REPORTED IN THE 10CCB REPORT AND IT IS MENTION ED A S NOT APPLICABLE. THE ASSESSEE DID NOT MENTION THE NUMBER OF EMPLOYEES THEREFORE AO WAS OF A VIEW THAT THE CLAIM OF DEDUCTION U/S 80IB CANNOT BE ALLOWED AND HE HAS DISALLOWED THE CLAIM OF RS. 54 94 088/ - . 5 . 6. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 6.2. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND CONTENTS OF THE ARGUMENTS PLACED BY THE LEARNED C OUNSEL OF THE APPELLANT. I HAVE ALSO PERUSED THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. THE A.O. HAS DENIED THE DEDUCTION U/S 801B AND 801C ON THE BASIS OF THE FACT THAT FORM NO. 1OCCB WAS NOT CORRECTLY FILLED IN. THERE IS NO DOUBT A BOUT THE FACT THAT THIS IS A MISTAKE ON PART OF THE APPELLANT AT THE SAME TIME THIS IS ALSO A FACT THAT THIS IS A RECTIFIABLE MISTAKE. APART FROM THIS MISTAKE THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS REQUIRED FOR CLAIMING DEDUCTION U/S 801B. THE RA TIO OF THE HONOURABLE SUPREME COURTS JUDGEMENT IN THE CASE OF M/S 6 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) HINDUSTAN STEEL LIMITED REPORTED IN 83 ITR 23 (SC) WHEREIN IT WAS HELD THAT IN TOTALITY OF THE FACTS AND CIRCUMSTANCES AND PROVISIONS OF LAW FURNISHING OF DEFECTIVE FORM 1OCCB COULD AT THE MOST BE A DEFAULT OF TECHNICAL AND VENIAL NOT SO FATAL SO AS TO MERIT THE PENALTY OF DISALLOWANCE OF DEDUCTION UNDER CONSIDERATION. SINCE THE DECISION OF THE ABOVE QUOTED CASE IS SQUARELY APPLICABLE TO THE FACTS OF THE APPLICANT THE A.O. IS DIRECTED TO NOT TO DISALLOW THE CLAIM OF DEDUCTION OF THE APPELLANT ON THE GROUND THAT THE FORM NO. 10CCB WAS DEFECTIVE. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 5.7 . L EARNED DR SUBMITTED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB IN RESPECT OF 2 UNITS. THE ASSESSING OFFICER HAS VERIFIED 10CCB REPORT AND IN THAT REPORT IT WAS MENTIONED AS NOT APPLICABLE. THE ASSESSEE HAS SUBMITTED THE CERTIFICATE REGARDING NUMBER OF EMPLOYEES AT THE TIME OF ASSESSMENT AND COPIES OF CERTIFICAT E HAVE BEEN FILED BUT THE AO HAS NOT ALLOWED THE CLAIM. THE CIT(A) WITHOUT VERIFYING THE NUMBER OF EMPLOYEES HE HAS SIMPLY RELIED UPON THE CERTIFICATE AND ALLOWED THE CLAIM THEREFORE DEPARTMENT IS IN APPEAL. 5.8 . LEARNED AR RELIED UPON THE ORDER OF TH E CIT(A). LEARNED AR FURT HER SUBMITTED THAT THE ASSESSEES CHARTERED ACCOUNTANT H AS FORGOTTEN TO MENTION THE NUMBER OF EMPLOYEES IN FORM NO. 10CCB FILED ALONG WITH THE REPORT BUT AT THE APPELLATE STAGE THE ASSESSEE HAS COMPL I ED WITH THE CONDITION AND WHEN ASSESSEE HAS COMPLIED WITH THE CONDITION AN D CIT(A) HAS VERIFIED THE CLAIM T HE CIT(A) RELYING UPON THE DECISION OF HONBLE MP HIGH COURT IN THE CASE OF CIT V S. MEDI CAPS LTD; (2010) 323 ITR 554(MP) HAS ALLOWED THE CLAIM. 5.9 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. L OOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND FROM THE ORDER OF THE COMMISSIONER THAT THE ASSESSEE W AS DENIED THE DEDUCTION UNDER 80 IB ON THE GROUND THAT ASSESSEE HAS NOT SUBMITTED THE FORM NO. 10CCB. WE FIND THAT WHILE THE ASSESSEE WAS FI LING THE RETURN THE ASSESSEE DID NOT FILE THE REPORT BUT D URING THE ASSESSMENT PROCEEDING THE ASSESSEE HAS RECTIFIED THE M ISTAKE BY FILING THE REPORT AND COMPLIED WITH THE CONDIT ION. AS PER DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. MEDICAPS LTD; (2010) 323 ITR 554(MP) WHEREIN THE 7 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) HONBLE HIGH COURT HAS HELD THAT THE FURNISHING AUDIT REPORT NOT MANDATORY THE AUDIT R EPORT CAN BE FILED AT ANY STAGE I F THE REPORT I S FILED BEFORE COMPLETING THE ASSESSMENT IT IS THE SUFFICIENT COMPLIANCE. THEREFORE WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. WE FIND THAT THE NEXT QUESTION COMES WHETHER THE A SSESSEE HAS ENGAGED TEN NUMBERS OF E MPLOYEE IN EACH UNIT FOR WHICH THE ASSESSEE HAS SUBMITTED THE CERTIFICATE REGARDING THE NUMBER OF EMPLOYEES IN EACH UNIT AND VERIFIED BY CIT(A) THEREFORE CIT(A) HAS GRANTED THE RELIEF AND OUR INTERFERENCE IS NOT REQUIRED. 5.10 . IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMISSED ON THIS GROUND. 11 . GROUND NO. 3 RELATES TO DIS ALLOWING THE CLAIM OF DEDUCTION U/S. 80IC. THE ASSESSING OF FICER HAS VERIFIED THE SALES IN THE NALAGARH UNIT WHICH IS INCIDENTALLY 100% OF EXEMPT TO THE OTHER UNIT S. COMPARISON OF SALES VERS ES ELECTRICITY CONSUMED IN EACH UNITS BETWEEN A.Y. 2005 - 06 AND 2006 - 07 ARE AS UNDER: UNIT SALES % ELECTRICITY CONSUMED % A.Y. 2005 - 06 A.Y.2006 - 07 A.Y.2005 - 06 A.Y.2006 - 07 SEAROCK 30% 80IB 27623560 21835948 79 450427 38775 86 CURTORIM UNIT (NON 80IB) 130507625 133361993 102 962614 1246383 130 DAMAN (30% 80IB) 457791613 469433551 103 5380726 6921603 123 NALAGARH (HP) 80IC 3734123 265238793 7102 469016 7020545 1497 THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE AND ASSESSEE HAS CONTENDED BEFORE AO THAT THE MACHINERIES AT GOA UNITS ARE 20 YEARS OLD WHEREAS THE MACHINERIES AT DAMAN ARE 10 YEARS OLD AND MACHINERIES AT NALAGARH UNIT ARE LESS THAN 1 YEAR OLD. THE GOA UNITS IS MANUFACTURING ONLY TWO COLOUR PRINTING WHEREAS THE DAMAN UNIT IS MANUFACTURING SIX COL OUR PRINTING AND NALAGARH UNIT ARE UNIT IS 8 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) MANUFACTURING IN MULTIPLE COLOURS. ALL THE MACHINERIES ARE OF DIFFERENT TECHNOLOGIES. MOREOVER THE SOME PRODUCTS ARE EXCISABL E PRODUCTS AND SOME IN HIMACHAL PRADESH UNIT THERE IS EXCISE EX EMPTION FOR 10 YEARS. T HERE ARE VARIOUS REASON FOR DISPARITY BUT AO WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSE E . HE DISALLOWED THE DEDUCTION UNDER 80IC AT RS. 2 95 50 892 / - . 1 1 . 1 THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE ARGUMENTS OF THE APPELLANT. IN THE ORDER THE A.O. HAS COMPARED CONSUMPTION OF ELECTRICITY BY VARIOUS UNITS OWNED AND O PERATED BY THE APPELLANT AND HAS REACHED A CONCLUSION THAT THE PROFIT DISCLOSED BY THE NEWLY ESTABLISHED NALAGARH UNIT IS UNREASONABLY HIGH. HOWEVER THE A.O. HAS NOT ESTABLISHED WHERE INCOME DISCLOSED BY NALAGARDH UNIT IN REALITY RELATES TO SOME OTHER UNI T WHOSE INCOME IS CHARGEABLE TO TAX. SINCE THE INCOME OF NALAGARH UNIT IS DEDUCTIBLE @ 100% ANY INCREASE OR DECREASE IN THE INCOME OF THIS UNIT WILL NOT HAVE ANY IMPACT ON THE TAXABLE INCOME OF THE APPELLANT. IN VIEW OF THE ABOVE AND VARIOUS JUDICIAL PRO NOUNCEMENTS RELIED UPON BY THE APPELLANT IN MY OPINION THE DISALLOWANCE OF DEDUCTION MADE BY THE A.O. IS NOT SUSTAI NABLE AND HE IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION OF THE APPELLANT U/S 801C IN RESPECT OF NALAGARH UNIT. THIS GROUND OF APPEAL OF TH E APPELLANT IS ALLOWED ACCORDINGLY. 11 . 2. THE LEARN ED AR RELIED UPON THE ORDER OF CIT(A). 1 1 . 3. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS OF THE CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSING OFFICER HAS VERIFIED THE ELECTRICITY CONSUMED AND SALES IN DIFFEREN T UNIT SITUATED AT DIFFERENT FAR WAY PLACES. THE AS SESSING OFFICER HAS VERIFIED THE DISPARITY OF ELECTRICITY CONSUMPTION OF NALGARAH UNIT AND INCOME OF SALES OF NALAGRAH UNIT IN COMPARISON TO OTHER UNITS WERE H IGHER . THE MAIN CONTENTION OF THE AO THAT IN COMPARISON TO ELECTRICITY CONSUME D THE SALES OF NA LAGARH UNIT HAS SHOWN VERY HIGH SALES. WE FIND THAT THE ASSESSEE HAS EXPLAINED BEFORE US THAT THE MACHINERIES AT GOA UNITS ARE 20 YEARS OLD WHEREAS THE VARIOUS MACHINERIES AT DAMAN ARE 10 YEARS OLD AND MACHINERIES AT NALAGARH UNIT ARE LESS THAN 1 YEAR OLD . ALL THE MACHINERIES ARE OF D IFFERENT TECHNOLOGIES. THE GOA UN IT IS MANUFACTURING ONLY TWO COLOUR PRINTING WHEREAS THE DAMAN UN IT IS 9 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) MANUFACTURING SIX COLOUR PRINTING AND NALAGARH UNIT IS MANUFACTURING IN MULTIPLE COLOURS. THE MACHINERIES AT NALAGARH ARE FULLY AUTOMATIC AND TECHNICALLY ADVANCED WITH MUCH HIGHER OUTPUT I.E. MORE THAN 10 TIMES HIGHER THAN MACHINERIES AT GOA AND DAMAN WHICH ARE CAPABLE OF ACHIEVING THIS PRODUCTION MORE E FFICIEN TL Y WITH LESS THAN CONSUMPTION OF ELECTRICITY. THE REQUIREMENTS OF CUSTOMERS AT GOA UNIT ARE DIFFERENT FROM THOSE OF DAMAN UNIT. THE QUALITY OF PRINTING SALE VALUE AND CONTRIBUTION OF NALAGARH UNIT IS MUCH HIGHER AS COMPARED TO OTHER UNITS. THE PRODUCTS MANUFACTURED AT GOA & DAMAN ARE EX CISABLE PRODUCTS WHEREAS N ALAGARH UNIT IS EXCISE EXEMPT FOR 10 YEARS. MOREOVER THE ELECTRICITY POWER RATE AT GOA DAMAN ARE DIFFERENT FROM THE POWER RATES AT HIMACHAL PRADESH. WE FIND THAT THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THE AO SHOULD B RING OUT THE REASON OF MORE SALES AT NALAGARH UNIT. WE FIND THAT AO HAS NOT CARRIED OUT ANY EXCISE. WE FIND THAT IN THE INSTANT CASE THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT. WE FIND THAT THERE ARE MANY REASONS FOR HIGHER ELECTRICITY CONSUMPTION THER EFORE ON THIS SIMPLE DISPARITY THE AO CANNOT DI SALLOW THE DEDUCTION U/S 80IC. WE FIND THAT THE CIT(A) HAS DEALT THIS ISSUE IN DETAIL. THEREFORE OUR INTERFERENCE IS NOT REQUIRED. 1 1 . 4. IN THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 1 2. GROUND NO. 4 - THE SHORT FACTS OF THE CASE ARE THAT THE AO HAS DISALLOWED THE CLAIM O F 80IB AND 80IC TO THE ASSESSEE O N THE GROUND THAT THE ASSESSEE HAS FILED RETURN ALONG WITH DEFECTIVE 10CCB AUDIT REPORT. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO WAS OF A VIEW THAT THE AO COULD NOT VERIFY THE CLAIM OF THE ASSESSEE AS 10CCB REPORT WAS DEFECTIVE. THE ASSESSEE HAS SUBMITTED 10CCB REPORT WHEREIN THE TAX AUDIT OR HAS NOT MENTIONED THE NUMBER OF EMPLOYEES. IN RE SPECT OF CLAIM U/S. 80IC THE ASSESSEE HAS NOT PROPERLY F ILED FORM NO. 10CCB. HENCE THE CLAIM WAS REJECTED. 10 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) 1 2.1 . DURING THE COURSE OF HEARING LEARNED AR POINT ED OUT THAT DURING THE APPELLATE STAGE THE ASSESSEE HAS COMPLIED WITH THE 10CCB REPORT AND THERE WAS COMPLIANCE DURING THE APPELLATE PROCEEDING. 1 2.2 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE HONBLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS. MEDI CAPS LTD; (2010) 323 ITR 554 HAS HELD THAT FOR CLAIMING DEDUCT ION UNDER 80IB/80IC IF THE REPORT IS SUBMITTED AT THE APPELLATE STAGE IT IS COMPLIANCE OF STATUTORY REQUIREMENT. IN THE INSTANT CASE THE ASSESSEE HAS FILED THE REPORT DURING THE APPELLATE STAGE. THEREFORE WE DISMISS THIS GROUND. 1 2.3 . IN THE RESULT D EPARTMENTS APPEAL ASSESSEES APPEAL AND C.O BY ASSESSEE ARE DISMISSED. ITA NO. 246 247& 248 /PNJ/2013 (A.Y.2007 - 08) BY THE ASSESSEE. ITA NO.260 261&262/PNJ/2013(A.Y.2007 - 08) BY THE DEPARTMENT. C.O. NO. 53 54 &55/PNJ/2013(A.Y.2007 - 08) BY THE ASSESSEE. 13 . DURING THE COURSE OF HEARING LEARNED AR HAS WITHDRAWN ITA NO. 246 247 AND 248/PNJ/2013 (A.Y.2007 - 08) FILED BY THE ASSESSEE. THESE ALL APPEALS WERE FILED BY THE ASSESSEE WHICH HAS BEEN WITHDRAWN BY THE ASSESSEE THEREFORE IT IS DISM ISSED. 13.1 . FOLLOWING APP EALS ARE FILED BY THE ASSESSEE AS WELL AS DEPARTMENT AGAINST THE ORDER U/S 143(3) AND 154 R.W.S. 143(1) (I) ITA NO. 246/PNJ/2013 BY THE ASSESSEE ITA NO. 260 /PNJ/2013 BY THE DEPARTMENT AND C.O. NO. 53 /PNJ/2013 BY T HE ASSESSEE. (I I ) ITA NO. 247 BY ASSESSEE ITA NO. 261/PNJ/2013 BY THE DEPARTMENT AND C.O.NO. 54 /PNJ/2013 BY ASSE SSEE . 11 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) (II I ) I TA NO. 248/PNJ/2013 BY ASSESSEE ITA NO. 262 BY DEPARTMENT AND C.O. NO.55/PNJ/2013 BY THE ASSESSEE. 1 3 . 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: 1 3. 3 . THE ASSESSEE HAS FILED THE RETURN OF INCOME DE CLARING THE TOTAL INCOME OF RS. 1 59 60 100/ - ON 30.10.2007. THE QUESTIONNAI RE WAS ISSUED TO THE ASSESSEE CALLING FOR VARIOUS PARTICULARS OF CLAIM FOR EARLIER YEAR. THE AO WAS OF A VIEW THAT ASSESSEE CONTINUED TO ADOPT THE SAME STANDARD OF ACCOUNTANCY. THE A.O WHILE PROCESSING THE RETURN THE ASSESSEE WAS DENIED THE DEDUCTION UNDER CHAPTER VI A AS THE ASSESSEE HAS NOT FILED ITR - V WITHIN 15 DAYS OF FILING OF RETURN I.E. 30.10.200 7. THE ASSESSEE HAS FILED FORM NO. ITR V ON 18.01.2008 AND HENCE THE ASSESSING OFFICER DEEMED THAT RETURN WAS NOT FILED U/S. 139(1) AND ACCORDINGLY AS PER THE PROVISION OF SECTION 80AC DENIED CHAPTER VI A DEDUCTION . 1 3 .4 . THE AO HAS PASSED THE ORDER U/S. 143(1) AGAINST WHI CH ASSESSEE HAS FILED THE APPEAL. THE ASSE SSEE HAS MOVED 154 APPLICATION AGAINST INTIMATION U/S. 143(1) WHICH WAS ALSO REJECTED. 13.5 . THE ASSESSEE CONTENDED THAT THE RETURN WAS FILED ELECTRONICALLY BEFORE DUE DA T E U/S. 139(1) I.E. 30.10.2007. AFTER ELECTRONICALLY FILING THE RETURN OF INCOME ON 30.10.2007 DUE TO CONGESTION IN THE NETWORK OR DUE TO SOFTWARE PROBLEM WHILE UPLOADING THE RETURN IT TOOK LOT OF TIME TO TRANSMIT THE DATA AND THEREAFTER IT WAS NOT POSS IB LE TO GET THE PRINTOUT OF ITR - V. THE ASSESSEE HAS FILED THE APPLICATION U/S. 154 FOR ALLOWING THE DEDUCTION U/S. 80IB AND 80IC AND ALSO DELETING THE INTEREST U/S. 234(A) WHICH WAS REJECTED BY AO. 13.6 . TH E CIT(A) BY HIS COMMON ORDER PASSED U/S.143(3) 1 43 AND U/S. 154 ALLOWING THE APPEAL BY OBSERVING AS UNDER: 11. I HAVE GONE THROUGH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CRAWFORD BAYLEY & CO. V/S. UNION OF INDIA REPORTED IN (2011) 16 TAXMAN.COM 323 (BOM.) WHEREIN THE HONOURABLE HIGH COURT HELD HAS UNDER: 12 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) SECTION 139(9) STIPULATES THAT WHERE THE ASSESSING OFFICER CONSIDERS THAT A RETURN OF INCOME FURNISHED BY THE ASSESSEE IS DEFECTIVE. H E MAY INTIMATE THE DEFECT TO THE ASSESSEE AND FURNISH N OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD OF FIFTEEN DAYS OR WITHIN SUCH FURTHER PERIOD WHICH ON AN APPLICATION MADE IN THIS BEHALF THE ASSESSING OFFICER MAY ALLOW. IF THE DEFECT IS NOT RECT IFIED WITHIN A PERIOD OF FIFTEEN DAYS OR THE EXTENDED PERIOD AS ALLOWED THE RETURN SHALL NOTWITHSTANDING THE PROVISIONS OF LAW BE TREATED AS AN INVALID RETURN AND THE PROVISIONS OF THE ACT SHALL APPLY AS IF THE ASSESSEE HAS FAILED TO FILE THE RETURN. THE PROVISO TO SUBSECTION(9) STIPULATES THAT WHERE THE ASSESSEE RECTIFIES THE DEFECT AFTER THE EXPIRY OF THE SAID PERIOD OF FIFTEEN DAYS OR THE FURTHER PERIOD ALLOWED BUT BEFORE THE ASSESSMENT IS MADE THE ASSESSING OFFICER MAY CONDONE THE DELAY AND TREAT TH E RETURN AS A VALID RETURN. THE EXPLANATION TO SUB - SECTION (9) PROVIDES THAT A RETURN OF INCOME SHALL BE TREATED AS DEFECTIVE UNLESS ALL CONDITIONS PRESCRIBED THEREIN ARE FULFILLED. AMONGST THE CONDITIONS THE CONDITION IN CLAUSE (A) IS THAT THE ANNEXURES STATEMENTS AND COLUMNS IN THE RETURN OF INCOME RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER EACH HEAD OF INCOME COMPUTATION OF GROSS TOTAL INCOME AND TOTAL INCOME HAVE BEEN DULY FILLED IN. (PARA 6) TREATING A RETURN FILED BY THE ASSESSEE AS AN INVA LID RETURN HAS SERIOUS CONSEQUENCES. THE PARLIAMENT HAS IN SUB - SECTION(9)OF SECTION 139 MADE ADEQUATE PROVISIONS FOR THE ASSESSING OFFICER TO FURNISH IN THE FIRST INSTANCE A PERIOD OF FIFTEEN DAYS TO RECTIFY A DEFECT IN THE RETURN. A PROVISION HAS BEEN MAD E FOR EXTENSION OF THE PERIOD WITHIN WHICH THE DEFECTS HAVE TO BE RECTIFIED. THEREAFTER UNDER THE PROVISO IT IS STIPULATED THAT WHERE AN ASSESSEE RECTIFIES A DEFECT E AFTER THE EXPIRY OF FIFTEEN DAYS OR THE FURTHER PERIOD ALLOWED BUT BEFORE AN ASSESSMENT IS MADE THE ASSESSING OFFICER MAY CONDONE THE DELAY AND TREAT THE RETURN AS A VALID RETURN THESE ARE POWERS WHICH ARE VESTED IN THE ASSESSING OFFICER. (PARA7) THOUGH THE DEPARTMENT MADE A PROVISION FOR ELECTRONIC FILING OF RETURNS IT APPEARS THAT THE ITR - V FORM CONTAINING THE DUE VERIFICATION OF THE RETURN OF THE ASSESSEE WAS REQUIRED TO BE REMITTED ONLY BY ORDINARY POST. THE INSTRUCTIONS WHICH WERE FURNISHED TO ASSESSEE A COPY OF WHICH HAS BEEN PLACED ON RECORD SPECIFICALLY STIPULATE THAT THE ITR - V FORM SHOULD NOT BE SENT EITHER BY REGISTERED POST OR BY SPEED POST OR COURIER. THE ASSESSEE HAS FURNISHED ADEQUATE MATERIAL BEFORE THE COURT IN SUPPORT OF ITS CONTENTION THAT HAVING FILED THE RETURN ELECTRONICALLY IT HAD ALSO SUBMITTED THE ITR - V FORM BY ORDINARY POST. THE ASSESSEE HAS DONE SOON 05.04.2010 18.05.2010 AND 18.11.2010. IN THAT VIEW OF THE MATTER THE COMMUNICATION ISSUED BY THE DEPARTMENT ON ON 21.03.2011 IS THOROUGHLY MISCONCEIVED. THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2009 - 10 HAS STI LL NOT BEEN PASSED. HENCE THE PROVISIONS OF SECTION 139(9) CAN BE FULFILLED BY PERMITTING THE ASSESSEE TO FILE A VERIFICATION OF THE RETURN BEFORE THE ASSESSING OFFICER WITHIN A PERIOD OF ONE WEEK FROM TODAY. IN THAT VIEW OF THE MATTER AND WITH THE AFORES AID DIRECTION THE IMPUGNED ORDER HAS TO BE QUASHED. 12. NOW WE NEED TO EXAMINE THE INSTANT CASE IN THE LIGHT OF THE JUDGMENT OF THE ABOVE REFERRED CASE. IN THE INSTANT CASE THE ASSESSEE ELECTRONICALLY FILE D ITS RETURN ON 30. 10.2007 Z. E. IN TIME . THE ASSESSEE DID NOT FURNISH ITR - V WITHIN 15 DAYS TO THE CPC. NO COMMUNICATION WAS RECEIVED BY THE ASSESSEE REGARDING NON - S UBMISSION OF FORM ITR - V. 13 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) THE ASSESSEE VOLUNTARILY FURNI SHED FORM ITR - V ON 18.01.2008 I . E. BELATEDLY. THE A.O TREATED THE RETURN OF INCO ME AS BELATED RETURN AND DENIED ASSESSEES CLAIM OF DEDUCTION U/S 801B & 801C. THUS CAN BE SEEN THAT SINCE THERE WAS NOTHING WRONG WITH THE :RZCALLV FILED RETURN OF INCOME AND IN ABSENCE OF FURNISHING OF ITR - V IT BECAME A DEFEC TIVE RETUR N WHICH WAS REMOVED WHEN ITR - V WAS ULTIMATELY SUBMITTED. THEREFORE IN MY OPINION THE RATIO OF THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF CRAWF ORD BAY LEV & CO. V/S UNION OF INDIA IS APPLICABLE IN THIS CASE AND DATE OF FILING OF RET URN SHOULD HAVE BEEN TAKEN AS 30.10.2007 AT LEAST DURING SCRUTINY PROCEEDINGS AND ALLOWABILITY OF DEDUCTION U/S 801B AND 801C SHOULD HAVE BEEN EXAMINED ON MERITS IN PLACE OF TECHNICAL GROUNDS. THESE GROUNDS OF APPEAL OF THE APPELLANT ARE ALLOWED ACCORDING LY. SI NC E THERE IS NO DEFECT IN THE CLAIM OF DEDUCTION TO U/S 801B AND 801C THE A.O IS DIRECTED TO ALLOW THE CLAIM OF THE APPELLANT. 13 . 7. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS FILED RETURN ELECTRONICALLY BUT THEREAFTER ASSESSEE WAS OBLIGED TO SUBMIT ITR - V IN THE OFFICE WITHIN 15 DAYS. THE DUE DATE OF RETURN IS 30.10.2007. WITHIN 15 DAYS THE ASSESSEE HAS SUBMITTED THE RETURN AND A SSESSEE HAS SUBMITTED ITR - V ON 18.1.2008 THEREFORE THE ASSESSEE WAS NOT ALLOWED THE DEDUCTION U/S. 80IB AND 80IC. TH E ASSESSMENT WAS ALSO SELECTED FOR SCRUTINY U/S. 143(3) AND THE ASSESSEE WAS FAILED TO FILE THE ITR - V THEREFORE CIT(A) HAS NOT CONSIDERE D THE CBDT CIRCULAR WHICH PROHIBITS THE ASSESSEE TO GRANT ANY RELIEF THEREFORE CIT(A) IS NOT JUSTIFIED. 13.8 . ON THE OTHER HAND LEARNED AR RELIED UPON THE ORDER O F CIT(A). THE ASSESSEE CONTENDED THAT ASSESSEE HAS ELECTRONICALLY FILED THE RETURN OF INCO ME ON 30.10.2007 DUE TO CONGESTION OF NETWORK OR DUE TO SOFTWARE PROBLEM WHILE UPLOADING THE RETURN IT TOOK LOT OF TIME TO TRANSMIT THE DATE AND THEREAFTER IT WAS NOT POSS IBLE TO GET THE PRINTOUT OF ITR - V. MANY TIMES EITHER DUE TO CONGESTION IN THE NETWOR K OR DUE TO SOFTWARE PROBLEM OR DUE TO POWER FLUCTUATION AND/OR MANY OTHER REASONS IT IS NOT POSSIBLE TO GENERATE THE PRINTOUT. THE RETURN WAS ELECTRONICALLY SUBMITTED THEREFORE WHEN THE ASSESSEE HAS FILED THE RETURN IN TIME THE ASSESSEE DID NOT RECEIVE COMMUNICATION REGARDING NON - SUBMISSION OF ITR - V THEREFORE IT MAY BE ALLOW. 14 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) 13.9 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. L OOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE BOMBAY HIGH COURT IN THE CASE OF CRAWFORD BAYL EY & CO. V/S. UNION OF INDIA REPORTED IN (2011)16 TAXMAN COM 323 (BOM) WHEREIN THE HONOURABLE HIGH COURT HAS HELD THAT AS PER SECTION 139(9) WHERE THE ASSESSING OFF ICER CONSIDER S TH E RETURN OF INCOME IS DEFECTIVE HE MAY INTIMATE DEFECT TO THE ASSESSEE AN D FURNISH AN OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD OF 15 - DAYS OR WITHIN SUCH PERIOD WHICH ON AN APPLICATION MADE IN THIS BEHALF THE ASSESSING OFFICER MAY ALLOW. IF THE DEFECT IS NOT RECTIFIED WITHIN A PERIOD OF 15 DAYS OR EXTENDED PERIOD AS A LLOWED THE RETURN SHALL NOTWITHSTANDING THE PROVISIONS OF LAW BE TREATED AS AN INVALID RETURN AND THE PROVISIONS OF THE ACT SHALL APPLY AS IF THE ASSESSEE HAS FAILED TO FILE THE RETURN. IN THE INSTANT CASE THE ASSESSEE HAS FILED THE RETURN ON 30.10.2007 IN TIME. THE ASSESSEE COULD NOT FURNISH ITR - V WITHIN 15 DAYS OF CPC. THE ASSESSEE VOLUNTARILY FURNISHED FORM NO. ITR - V ON 18.01.2008. WE FIND THAT AS PER PROVISIONS OF SECTION 139(9) OF THE ACT IT IS THE DUTY OF THE ASSESSING OFFICER TO INTIMATE THE ASSESSEE TO RECTIFY THE MISTAKE BY GIVING S HOW CAUSE NOTICE AND ASSESSEE MUST BE GIVEN 15 DAYS TIME TO REMOVE THE DEFECT IN THE RETURN. IF THE ASSESSEE F AIL S TO RECTIFY THE MISTAKE WITHIN 15 DAYS OF THE TIME THEN THE ASSESSING OFFICER SHOULD TREAT THE RETURN FILE D AS DEFECTIVE RETURN . IN THE INSTAN T CASE THE ASSESSEE HIMSELF HAS RECTIFIED THE MISTAKE WITHOUT COMMUNICATION FROM THE ASSESSING OFFICER THEREFORE IN OUR OPINION THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IS APPLICABLE TO THE FACTS OF THE CASE. THE DECISION OF BOMBAY HIGH COURT I N THE CASE OF CRAWFORD BAYLEY & CO. VS. UNION OF INDIA REPORTED IN (2011) 16 TAXMN.CM 323 (BOM) HAS HELD AS UNDER: SECTION 139(9) STIPULATES THAT WHERE THE ASSESSING OFFICER CONSIDERS THAT A RETURN OF INCOME FURNISHED BY THE ASSESSEE IS DEFECTIVE. HE M AY INTIMATE THE DEFECT TO THE ASSESSEE AND FURNISH N OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD OF FIFTEEN DAYS OR WITHIN SUCH FURTHER PERIOD WHICH ON AN APPLICATION MADE IN THIS BEHALF THE ASSESSING OFFICER MAY ALLOW. IF THE DEFECT IS NOT RECTIFI ED WITHIN A PERIOD OF FIFTEEN 15 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) DAYS OR THE EXTENDED PERIOD AS ALLOWED THE RETURN SHALL NOTWITHSTANDING THE PROVISIONS OF LAW BE TREATED AS AN INVALID RETURN AND THE PROVISIONS OF THE ACT SHALL APPLY AS IF THE ASSESSEE HAS FAILED TO FILE THE RETURN. THE PR OVISO TO SUBSECTION(9) STIPULATES THAT WHERE THE ASSESSEE RECTIFIES THE DEFECT AFTER THE EXPIRY OF THE SAID PERIOD OF FIFTEEN DAYS OR THE FURTHER PERIOD ALLOWED BUT BEFORE THE ASSESSMENT IS MADE THE ASSESSING OFFICER MAY CONDONE THE DELAY AND TREAT THE R ETURN AS A VALID RETURN. THE EXPLANATION TO SUB - SECTION (9) PROVIDES THAT A RETURN OF INCOME SHALL BE TREATED AS DEFECTIVE UNLESS ALL CONDITIONS PRESCRIBED THEREIN ARE FULFILLED. AMONGST THE CONDITIONS THE CONDITION IN CLAUSE (A) IS THAT THE ANNEXURES ST ATEMENTS AND COLUMNS IN THE RETURN OF INCOME RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER EACH HEAD OF INCOME COMPUTATION OF GROSS TOTAL INCOME AND TOTAL INCOME HAVE BEEN DULY FILLED IN. (PARA 6) TREATING A RETURN FILED BY THE ASSESSEE AS AN INVALID RETURN HAS SERIOUS CONSEQUENCES. THE PARLIAMENT HAS IN SUB - SECTION(9)OF SECTION 139 MADE ADEQUATE PROVISIONS FOR THE ASSESSING OFFICER TO FURNISH IN THE FIRST INSTANCE A PERIOD OF FIFTEEN DAYS TO RECTIFY A DEFECT IN THE RETURN. A PROVISION HAS BEEN MADE F OR EXTENSION OF THE PERIOD WITHIN WHICH THE DEFECTS HAVE TO BE RECTIFIED. THEREAFTER UNDER THE PROVISO IT IS STIPULATED THAT WHERE AN ASSESSEE RECTIFIES A DEFECT E AFTER THE EXPIRY OF FIFTEEN DAYS OR THE FURTHER PERIOD ALLOWED BUT BEFORE AN ASSESSMENT IS MADE THE ASSESSING OFFICER MAY CONDONE THE DELAY AND TREAT THE RETURN AS A VALID RETURN THESE ARE POWERS WHICH ARE VESTED IN THE ASSESSING OFFICER. (PARA7) THOUGH THE DEPARTMENT MADE A PROVISION FOR ELECTRONIC FILING OF RETURNS IT APPEARS THAT THE IT R - V FORM CONTAINING THE DUE VERIFICATION OF THE RETURN OF THE ASSESSEE WAS REQUIRED TO BE REMITTED ONLY BY ORDINARY POST. THE INSTRUCTIONS WHICH WERE FURNISHED TO ASSESSEE A COPY OF WHICH HAS BEEN PLACED ON RECORD SPECIFICALLY STIPULATE THAT THE ITR - V FO RM SHOULD NOT BE SENT EITHER BY REGISTERED POST OR BY SPEED POST OR COURIER. THE ASSESSEE HAS FURNISHED ADEQUATE MATERIAL BEFORE THE COURT IN SUPPORT OF ITS CONTENTION THAT HAVING FILED THE RETURN ELECTRONICALLY IT HAD ALSO SUBMITTED THE ITR - V FORM BY ORD INARY POST. THE ASSESSEE HAS DONE SOON 05.04.2010 18.05.2010 AND 18.11.2010. IN THAT VIEW OF THE MATTER THE COMMUNICATIO N ISSUED BY THE DEPARTMENT ON 21.03.2011 IS THOROUGHLY MISCONCEIVED. THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2009 - 10 HAS STILL NOT BEEN PASSED. HENCE THE PROVISIONS OF SECTION 139(9) CAN BE FULFILLED BY PERMITTING THE ASSESSEE TO FILE A VERIFICATION OF THE RETURN BEFORE THE ASSESSING OFFICER WITHIN A PERIOD OF ONE WEEK FROM TODAY. IN THAT VIEW OF THE MATTER AND WITH THE AFORESAID DI RECTION THE IMPUGNED ORDER HAS TO BE QUASHED. WE RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT WE ARE OF THE VIEW THAT CIT(A) JUSTIFIED IN TREATING THE ASSESSEES RETURN AS VALID THEREFORE OUR INTERFERENCE IS NOT REQUIRED. 14 . DURING THE COURSE OF ASSESSMENT PROCEEDING WE FIND THAT THE AO HAS TREATED THE RETURN AS DEFECTIVE RETURN AND ASSESSEE S CLAIM FOR DEDUCTION U/S. 80IB AND 80IC WAS NOT ALLOWED TO THE ASSES SEE. THE CIT(A) HAS VERIFIED THE CLAIM OF DEDUCTION U/S. 80IB AND 80IC AND HE WAS OF THE VIEW THAT THE ASSESSEE 16 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) IS ENTITLED FOR DEDUCTION U/S. 80IB AND 80IC. DURING THE COURSE OF HEARING T HE LEARNED D R COULD NOT PRODUCE ANY EVIDENCE BEFORE US TO SHOW THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER 80IB AND 80IC. THEREFORE WHEN TH E CIT(A) HAS ALLOWED THE CLAIM O UR INTERFERENCE IS NOT REQUIRED. 14.1 . IN THE RESULT WE DISMISS ALL TH E DEPARTMENT S APPEAL ITA NO S . 260 261 & 262/PNJ/2013 AND C.O . NOS. 53 54 & 55 /PNJ/2013 ARE SUPPORTING TO THE ORDER OF THE COMMISSIONER A S WE HAVE ALREADY HELD DISMISS THE DEPARTMENT S APPEAL S THEREFORE C.OS. BECOME INFRUCTUOUS. THE ASSESSEE HAS ALSO FILED THE APPEAL AGAINST THE ORDER OF SECTION - 143(1) (A) 143(3) A ND 154 OF THE IT ACT WHICH WAS ALLOWED BY THE CIT(A) AND WHEN ASSESSEES RETURN WAS TREATED AS VALID RETURN IT IS NOT NECESSARY FOR US TO G IVE ANY FINDING ON THIS GROUND. THE CIT(A) HAS PASSED THE COMMON ORDER THEREFORE WE DISMISS ALL THE APPEALS. 14.2 . IN THE RESULT ALL THE APPEALS FILED BY T HE DEPARTMENT ASSESSEE AND C.OS ARE DISMISSED. ITA NO. 05/PNJ/2014 ITA NO. 23/PN J/2014 AND C.O. 12/PNJ/2014 FOR (A.Y.2009 - 10). ITA NO. 05/PNJ /2014(A.Y.2009 - 10 ) 15 . GROUND NO. 1 IS RELATES TO DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 7 65 639/ - ON GOOD WILL. THE ASSESSEE HAS CLAIMED DEPRECIATION ON GOOD WILL IT WAS EXPLAINED TO THE AUTHORISED REPRES ENTATIVE THAT AS IN THE EARLIER YEAR DEPRECIATION ON GOODWILL WILL BE DISALLOWED. THE HONBLE ITAT IN ITA NO. 94/PNJ/2009 HAS ALLOWED THE ASSESSEES APPEAL AND HELD THAT THE DEPRECIATION ON GOODWILL IS AN ALLOWABLE DEPRECIATION. HOWEVER THE DEPARTMENT H AS NOT ACCEPTED THE DECISION OF THE ITAT AND FILED AN APPEAL BEFORE HIGH COURT OF MUMBAI THEREFORE THE AO HAS MADE THE ADDITION. 17 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) 15.1 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE DEPRECIATION. 15.2 . WE HAVE HEARD THE RIVAL CONTENTION OF BO TH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE COURSE OF HEARING THE LEARNED AR HAS SUBMITTED COPY OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SMIFS SECURITIES LTD WHEREIN THE HONBLE SUPREME COURT HAS HELD AS UNDER: QUESTION NO.[B] : WHETHER GOODWILL IS AN ASSET WITHIN THE MEANING OF SECTION 32 OF THE INCOME TAX ACT 1961 AND WHETHER DEPRECIATION ON GOODWILL IS ALLOWABLE UNDER THE SAID SECTION? ANSWER: IN THE PRESENT CASE THE A SSESSEE HAD CLAIMED DEDUCTION OF RS.54 85 430/ - AS DEPRECIATION ON GOODWILL. IN THE COURSE OF HEARING THE EXPLANATION REGARDING ORIGIN OF SUCH GOODWILL WAS GIVEN AS UNDER: IN ACCORDANCE WITH SCHEME OF AMALGAMATION OF YSN SHARES & SECURITIES (P) LTD WITH SMIFS SECURITIES LTD (DULY SANCTIONED BY HONBLE HIGH COURTS OF BOMBAY AND CALCUTTA) WITH RETROSPECTIVE EFECT FROM 1ST APRIL 1998 ASSETS AND LIABILITIES OF YSN SHARES & SECURITIES (P) LTD WERE TRANSFERRED TO AND VEST IN THE COMPANY. IN THE PROCESS GOODWI LL HAS ARISEN IN THE BOOKS OF THE COMPANY. IT WAS FURTHER EXPLAINED THAT EXCESS CONSIDERATION PAID BY THE ASSESSEE OVER THE VALUE OF NET ASSETS ACQUIRED OF YSN SHARES AND SECURITIES PRIVATE LIMITED [AMALGAMATING COMPANY] SHOULD BE CONSIDERED AS GOODWILL ARISING ON AMALGAMATION. IT WAS CLAIMED THAT THE EXTRA CONSIDERATION WAS PAID TOWARDS THE REPUTATION WHICH THE AMALGAMATING COMPANY WAS ENJOYING IN ORDER TO RETAIN ITS EXISTING CLIENTELE. THE ASSESSING OFFICER HELD THAT GOODWILL WAS NOT AN ASSET FALLING UN DER EXPLANATION 3 TO SECTION 32(1) OF THE INCOME TAX ACT 1961 [ ACT FOR SHORT]. WE QUOTE HEREIN BELOW EXPLANATION 3 TO SECTION 32(1) OF THE ACT: EXPLANATION 3. -- FOR THE PURPOSES OF THIS SUB - SECTION THE EXPRESSIONS ASSETS AND BLOCK OF ASSETS SHALL MEAN -- [A] TANGIBLE ASSETS BEING BUILDINGS MACHINERY PLANT OR FURNITURE; [B] INTANGIBLE ASSETS BEING KNOW - HOW PATENTS COPYRIGHTS TRADEMARKS LICENCES FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. EXPLANATION 3 STATES THA T THE EXPRESSION ASSET SHALL MEAN AN INTANGIBLE ASSET BEING KNOW - HOW PATENTS COPYRIGHTS TRADEMARKS LICENCES FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. A READING THE WORDS ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIM ILAR NATURE IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WOULD FALL UNDER THE EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRETING THE SAID EXPRESSION W HICH FINDS PLACE IN EXPLANATION 3(B). 18 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT GOODWILL IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. IN THE PRESENT CASE THE ASSESSING OFFICER AS A MATTER OF FACT CAME TO THE CONCLUSION THAT NO AMOUNT WAS ACTUALLY PAID ON ACCOUNT OF GOODWILL. THIS IS A FACTUAL FINDING. THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A) FOR SHORT] HAS COME TO THE CONCLUSION THAT THE AUTHORISED REPRESENTATIVES HAD FILED COPI ES OF THE ORDERS OF THE HIGH COURT ORDERING AMALGAMATION OF THE ABOVE TWO COMPANIES; THAT THE ASSETS AND LIABILITIES OF M/S. YSN SHARES AND SECURITIES PRIVATE LIMITED WERE TRANSFERRED TO THE ASSESSEE FOR A CONSIDERATION; THAT THE DIFFERENCE BETWEEN THE COS T OF AN ASSET AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT THE ASSESSEE COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WORTH OF THE ASSESSEE - COMPANY STOOD INCREASED. THIS FINDING HAS ALSO BEEN UPHELD BY INCOME TAX APPELLATE TRIBUNAL [ITAT FOR SHORT]. WE SEE NO REASO N TO INTERFERE WITH THE FACTUAL FINDING. ONE MORE ASPECT WHICH NEEDS TO BE MENTIONED IS THAT AGAINST THE DECISION OF ITAT THE REVENUE HAD PREFERRED AN APPEAL TO TH E HIGH COURT IN WHICH IT HAD RAISED ONLY THE QUESTION AS TO WHETHER GOODWILL IS AN ASSET UNDER SECTION 32 OF THE ACT. IN THE CIRCUMSTANCES BEFORE THE HIGH COURT THE REVENUE DID NOT FILE AN APPEAL ON THE FINDING OF FA CT REFERRED TO HEREINABOVE. WE RESP ECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SMIFS SECURITIES LTD WE DISMISS THE DEPARTMENTS APPEAL. 15.3 . THE A SSESSING O FFICER HAS VERIFIED THE BA LANCE SHEET FILED BY THE NALAGARH UNIT ( THE INCOME OF UNIT HAS BEEN CLAIMED AS DEDUCTION U/S. 80IC ) IT IS NOTICED THAT THIS UNIT HAS SHOWN UNSECURED LOAN FROM ITS INT ER UNITS (TAXABLE UNITS) OF RS. 49 97 06 803/ - . THE DETAILS OF SUCH INTER UNIT UNSECURED LOAN TAKEN BY NALAGARH UNIT IT IS SHOWN AS UN DER: NAME OF THE UNIT UNSECURED LOAN IN THE NALAGARH UNIT AS ON 31.03.2009 FROM THE TAXABLE UNIT. DETAILS OF DEDUCTION AVAILABLE BY THE ASSESSEE UNSECURED LOAN IN THE NALAGARH UNIT AS ON 31.03.2008. DAMAN UNIT 373355799 TAXABLE - 1424287 TAXABLE - 124926717 TAXABLE - TOTAL 499706803 383197453 19 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) THE ASSESSING OFFICER WAS OF THE VIEW THAT NALAGARH UNIT IS EXEMPT UNIT AND HAS TAKEN THE LOAN FROM OTHER UNITS WHICH IS TAXABLE UNIT. THE ASSESSEE HAS NOT CHARGED ANY INTEREST TO NALAGARH UNIT AND CREDITED SUCH INTEREST TO ITS OTHER UNITS. THEREFORE ASSESSEE HAS NOT SHOWN THE CORRECT INCOME IN THE TAXABLE UNITS. THE SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE. THE ASSESSE E REPLIED AS UNDER: A) CL ARIFICATION REGARDING THE BANK INTEREST 1) WE HAVE UNITS AT GOA DAMAN NAL AGARH AND ACCOUNTS ARE MAINTAINED UNITWISE AND FINAL ACCOUNTS ARE ALSO DRAWN UNITWISE WE ALSO PREPARE THE CONSOLIDATED TRIAL BALANCE BALANCE SHEET AND P ROFIT & LOSS ACCOUNT. 2) WE HAVE TAKEN TERM LOANS BANK OVER DRAFT (CASH CREDIT) LOAN AGAINST THE FIXED DEPOSIT AND VEHICLE LOANS FROM VARIOUS BANKS DURING THE FINANCIAL YEAR 2008 - 2009 (RE: ASSESSMENT YEAR 2009 - 2010.) 3) THE TERM LOANS AND VEHICLE LOANS A RE TAKEN EXCLUSIVELY FOR A PARTICULAR FAC TORY/UN IT BY MORTGAGING/HYPOTHE CATING THE VARIOUS MACHINERIES AND VEHICLES OF THAT PARTICULARS FACTORY/UNIT. THE BANKS SANCTION THESE LOANS TO A PARTICULAR UNIT NOT AS COMPANY AS WHOLE. 4) THE INTEREST ON THE ABOVE MENTIONED TERM LOANS ARE ACCOUNTED IN THE UNIT WHERE THOSE LOANS ARE TAKEN AND UTILI ZED. 5) AS FAR AS BANK OVERDRAFT IS CONCERNED WE HAVE CASH CREDIT FACULTY SANCTIONED BY THE BANK FROM TIME TO TIME FOR COMPANY AS WHOLE. WE ACCOUNT THIS BANK OVERDRAFT IN THE BOOKS OF ONE OF OUR UNIT FOR CONTROL AND RECONCILIATION PURPOSE AS WE HAVE TO MONITOR THE BALANCE ON DAY TO DAY BASIS. DURING THE YEAR 2005 - 2006 THE BANK OVERDRAF T IS SHOWN IN OUR DAMAN UNIT (PL EASE REFER TO SCHEDULE 2 OF SECURED LOANS - RS. 230143835. 00). THE BANKS HAVE SANCTIONED THIS FACULTY AGAINST THE HYPOTHECATION OF COMMON STOCK AND BOOK DEBTS. 6) THE ABOVE SAID BANK OVERDRAFT (CASH CREDIT) FACILITY IS USED BY ALL THE UNITS FOR THEIR WORKING CAPITAL REQUIREMENTS. 7) THE INTEREST ON THIS OVERDRAFT BANK ACCOUNTS IS ALLOCATED AMONG ALL OF OUR UNIT VIZ DAMAN GOA AND NALAGARH BASED ON THE SALES TURNOVER RATIO. B) INTER UNIT TRANSACTIONS (SHOWN AS LOANS FROM I NTER UNITS/ADVANCES TO INTER UNI TS) THE INTER UNIT TRANSACTIONS ARE ACCOUNTED AND SHOWN AS LO AN FROM INTER UNITS OR ADVANCES TO INTER UNITS AS THE CASE MAY BE IN THE UNIT WISE ACCOUNTS. KINDLY NOTE THAT THE BALANCE APPEARING IN THE UNIT WISE ACCOUNTS ARE YEAR END BALANCE WHICH ARE ACCUMULATED OVER YEARS. THESE DO NOT EXCLUSIVELY CONSIST OF THE MON EY TRANSFERRED BETWEEN UNITS. AS SUCH WE DO NOT TRANSFER ANY FUNDS FROM ONE UNIT TO ANOTHER UNIT. FURTHER WE A/SO TRANSFER THE RAW MATERIALS. THE RAW MATERIALS ARE SENT FROM ONE UNIT TO ANOTHER UNIT TO MEET PRODUCTI ON URGENCY AND THESE ARE ON RETURNABLE B ASIS WHEN THE OTHER UNIT PROCURE THE MATERIAL SUBSEQUENTLY. THEREFOR E THE INTER UNIT BOOK BALANCES AL SO INCLUDE THESE TYPE OF INTER UNIT TRANSFER OF RAW MATERIALS. 20 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) SUMMARILY FROM THE ABOVE DISCUSSIONS/POINTS IT CAN BE CLARIFIED THAT; 1) THE BANK INTEREST ARE SHOWN IN THE UNIT WISE ACCOUNTS ARE IN RESPECT OF THE LOANS EXCLUSIVELY TAKEN AND UTILIZED BY THAT UNIT. 2) THE BANK INTEREST IN RESPECT OF COMMON BANK OVERDRAFT (CASH CREDIT) ARE ALLOCATED AMONG UNITS BASED ON THE SALES TURN OVER AND ACCOUNTED ACCOR DINGLY AND HENCE BANK INTEREST ON COMMON CREDIT FACILITY IS PROPERLY AND ADEQUATELY ACCOUNTED. 3) THE INTER UNIT TRANSACTIONS ARE CONCERNED THESE ARE THE END BALANCE APPEARING IN THE BOOKS OF ACCOUNTS INCLUDING THE DEBITS/CREDITS IN RESPECT OF THE INTER U NIT RAW MATERIALS TRANSFERS NOT1 MERELY THE FUND TRANSFERS. 4) ALL THE CLARIFICATIONS/DISCUSSIONS AS ABOVE CAN BE VERIFIED FROM TH E BOOKS OF ACCOUNTS MAINTAINED BY US UNITWISE. AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE HAS ADVANCE D SUM OF RS. 49 97 06 803/ - TO THE NON TAXABLE UNIT FROM THE TAXABLE UNITS. THE ASSESSEE SHOULD HAVE DEBITED INTEREST IN THE NON TAXABLE UNITS AND CREDITED THE SAME TO ITS TAXABLE UNITS TO ARRIVE AT THE CORRECT INCOME OF THE T AXABLE UNITS. THE AS SESSEE HAS GIVEN ADVANCE OF RS. 49 97 06 803 / - OUT OF WHICH RS. 12 78 23 853/ - BEING RESERVE ACCUMULATED UP TO 31.03.2008 IN THE NALAGARH UNIT AND ALSO NON TAXABL E UNIT HAS GIVEN ADVANCE OF RS. 2 10 39 613/ - TO TAXABLE UNITS. THEREFORE TH E NET ADVANCE GIVEN BY THE TAXABLE UNI TS TO NON TAXABLE UNIT COMES TO RS. 35 08 43 337/ - THE ASSESSING OFFICER HAS WORKED OUT THE INTEREST WHICH NEARLY COMES TO THE PROFIT DECLARED BY NALAGARH UNIT. THEREFORE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS DIVERTED THE PROFIT FROM ONE UNIT TO ANOTHER UNIT AND AO HAS WORKED O UT THE INTEREST AT RS. 3 66 49 663 / - AND ADDED IT TO THE TAXABLE UNITS OF THE ASSESSEE. 1 5 . 4. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: 4.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE CONTENTS OF THE SUBMISSION MADE BY LEARNED COUNSEL OF THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. OBSERVED THAT THE ASSESSEE WAS SHOWING HIGHER PROFITS IN RESPECT OF ITS NALAGARH UNIT COMPARED TO OTHER UNITS. THE NALAGARH UNIT OF THE ASSESSEE COMPANY IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 801C AND AS PER THE 21 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) PROVISIONS UNDER THE INCOME TAX ACT 100% OF SUCH PROFITS IS ELIGIBLE FOR DEDUCTION FROM THE GROSS TOTAL INCOME OF THE ASSESSEE. IN THAT SENSE IT CAN BE SAID THAT INCOME ARISING FROM 801C ELIGIBLE UNIT IS NOT TAXABLE. SINCE ENTIRE PROFITS ARISING OUT OF NALAGARH UNITS IS CLAIMED AS DEDUCTION ONE HAS TO WORK OUT THE PROFITS AS IF THAT UNIT IS AN IN DEPENDENT UNIT AND THE PROFIT HAS TO BE WORKED OUT ON STAND - ALONE BASES. THE METHODOLOGY FOR WORKING OUT THE PROFITS HAS TO BE THE SAME AS IN THE CASE OF AN INDEPENDENT ASSESSEE AND AS ANY PRUDENT BUSINESS MAN WILL DO AS PER STANDARD ACCOUNTING SYSTEM AND AS PER THE PROVISIONS OF INCOME TAX ACT. SINCE THE A.O. FOUND THAT PROFITABILITY DECLARED IN RESPECT OF 801C ELIGIBLE NALAGARH UNIT IS HIGHER COMPARED TO OTHER UNITS THOUGH BUSINESS BEING THE SAME IT WAS HIS DUTY TO COMPUTE CORRECT PROFITS OF THAT UNIT A ND ALLOW CORRECT DEDUCTION U/S 8 01C TO THE APPELLANT. THE A.O. F OUND THAT THE APPELLANT HAS BORROWED FUNDS WHICH HAS BEEN USED FOR NALAGARH UNIT BUT INTEREST HAS NOT BEEN CHARGED AS EXPENSES WHILE WORKING OUT THE PROFITS OF NALAGARH UNIT. THE A.O. ALSO F OUND OUT THAT THE APPELLANT HAS PAID INTEREST ON BORROWED FUNDS @ 13% P.A. AND THEREFORE HE APPLIED THE RATE OF 13% ON FUNDS UTILIZED BY NALAGARH UNIT AND TREATED THE SAME AS EXPENSES OF NALAGARH UNIT WHILE WORKING OUT THE PROFITS OF THAT UNIT . I DO NOT S EE ANY MISTAKE IN THE PRINCIPLE ADOPTED BY THE A.O. HOWEVER THE LEARNED COUNSELS OF THE APPELLANT DURING ORAL ARGUMENTS POINTED OUT THAT INTEREST HAS INDEED BEEN CHARGED AND CLAIMED AS EXPENSES IN RESPECT OF NALAGARH UNIT AND FURNISHED A CHART SHOWING AP PORTIONMENT OF THESE INTEREST EXPENSES IN THE RATIO OF TURNOVER: STATEMENT SHOWING THE INTEREST/ FINANCIAL CHARGES FOR THE FINANCIAL YEAR 2 008 - 09 (ASSESSMENT YEAR (2009 - 1 0) PARTICULARS DAMAN N GARH BORKAR IND SEAROCK TOTAL A) INTEREST/FINANCE CHARGES SPECIFIC TO PARTICULARS UNIT - BANK CHARGES 1448515 2614370 459335 121498 4643718 - INTEREST ON TERM LOANS 11897246 24247572 2474647 632281 39251746 - INTEREST VEHICLE LOANS 210855 165067 15630 0 391552 - LOAN PROCESSING FEES 0 98000 0 0 98000 OTHER INTEREST (INTEREST ON OVEDUE BILLS/LCS) 7237528 568654 402286 76590 7147750 TOTAL (A) 20794144 26556355 3351898 830369 51532766 B) OD INTEREST ON COMMON CASH CREDIT ACCOUNT ALLOCATED ON TURN OVER RATIO (AS PER ATTACHED SHEET) 8676250 15659432.3 2751304 727747 27814733 TOTAL (B) 8676250 15659432 2751304 727747 27814733 22 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) TOTAL INTEREST/FINANCIAL CHARGES(A +B) 29470394 42215787 6103202 1558116 79 347499 TOTAL OVERDRAFT INTEREST INCURRED BY THE COMPANY DURING THE FINANCIAL YEAR 2008 - 09. THE STATEMENT SHOWING THE ALLOCATION OF OD INTEREST ON COMMON CASH CREDIT ACCOUNT BASED ON THE SALES TURNOVER. PARTICULARS DAMAN NGARH BORKAR IND SEAROCK TOTAL SALES TURN OVER AS PER AUDITED ACCOUNTS SALES TURNOVER RATIO 405076093 31. 19% 731106407 56.30% 128452684 9.89% 33976999 2.62% 1298612183 OD INTEREST BASED ON SALES TURN OVER RATIO 8676250 15659432.3 2751304 727747 27814733 OD INTEREST AS PER BOOKS OF ACCOUNT 8676250 15659432 2751304 727747 27814733 FROM THE ABOVE CHART IT CAN BE SEEN THAT THE APPELLANT DEBITED AN AMOUNT OF RS.4 22 15 787/ - AS EXPENSES IN RESPECT OF NALAGARH UNIT IN THE RATIO OF TURNOVER. THE APPELLANT FURTHER CONTENDED THAT THE INCOME OF NALAGARH UNIT IS HIGHER COMPARED TO OTHER UNITS IS BECAUSE: I) THIS IS A VERY NEW UNIT AND PLANT AND MACHINERY ARE NEW REQUIRING LESSER EXPENDITURE ON REPAIRS AND MAINTENANCE. II) THEY ARE HIGHLY AUTOMIZED HAVING HIGHER PRODUCTION RATE AND REQUIRING LESSER MAN - POWER DEPLOYMENT AND III) THE MAIN CUSTOMER BEING NEXT DOOR SAVING COST ON TRANSPORTATION. IN VIEW OF THE ABOVE EXPLANATION OF THE APPELLANT AND BECAUSE OF THE FACT THAT THE APPELLANT HAS ALREADY DEBITED AN AMOUNT OF RS.4 22 15 787/ - AS INTEREST AND FINANCE CHARGES TOWARDS NALAGARH UNIT IN PROPORTION TO THE TURNOVER NO SEP ARATE ADDITION ON ACCOUNT OF INTEREST IS WARRANTED AND THE A.O. IS DIRECTED TO DELETE THE ADDITION AMOUNTING TO RS.3 66 49 663/ - MADE ON NOTIONAL BASIS. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 15.5 . THE LEARNED DR SUBMITTED THAT THE NALAGARH UNIT IS ENJOYING THE BENEFI T OF 80IC. THE PROFIT DECLARED OF NALAGARH UNIT IS RS. 6 70 40 508 / - WHICH IS IN 23 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) TERMS OF TURN OVER THE PERCENTAGE OF PROFIT COME TO 9.16% WHILE THE OTHER UNITS PERCENTAGE OF PROFIT WIT H REFERENCE TO THE TURN OVER COMES TO 2.48% IN RESPECT OF DAMAN UNIT SER ROCK PRINTERS AND UNIT - 2 BORKAR INDUSTRIES. THE ASSESSEE HAS NOT CHARGED THE INTEREST ON THE ADVANCE GIVEN TO NALAGARH UNIT . THE ASSESSEE HAS ADVANCED SUM OF RS. 49 97 06 803/ - TO TH E NON TAXABLE UNIT FROM THE TAXABLE UNITS. THE ASSESSEE HAS DEBITED THE INTEREST IN THE NON TAXABLE UNIT AND CREDITED THE SAME TO ITS TAXABLE UNITS TO ARRIVE AT THE CORRECT INCOME OF THE TAXABLE UNITS. SINCE THE ASSESSEE HAS NOT CHARGED THE INTEREST ON TH E INTER UNIT LOANS THE SAME AMOUNTS TO DIVERSION OF FUNDS FROM TAXABLE UNITS TO NON TAXABLE UNIT. THE CIT(A) WITHOUT VERIFYING THIS FACTS ALLOW THE CLAIM OF THE ASSESSEE. 15.6 . THE LEARNED AR SUBMITTED THAT ASSESSEE HAS UNITS AT GOA DAMAN NALANGARH AN D ACCOUNTS ARE MAINTAINED UNITWISE AND FINAL ACCOUNTS ARE ALSO DRAWN UNITWISE. THE ASSESSEE PREPARED THE CONSOLIDATED TRIAL BALANCE BALANCE SHEET AND PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS TAKEN TERM LOANS BANK OVER DRAFT (CASH CREDIT) LOAN AGAINST TH E FIXED DEPOSIT AND VEHICLE LOANS FR OM VARIOUS BANKS DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THE TERM LOANS AND VEHICLE LOANS ARE EXCLUSIVE FOR A PARTICULAR FACTORY/UNIT BY MORTGAGE/HYPOTHECATING THE VARIOUS MACHINERIES AND VEHICLES OF THAT PARTICULARS FACTORY/UNIT. THE INTEREST ON THE ABOVE MENTIONED TERM LOAN S ARE ACCOUNTED IN THE UNIT WHERE THOSE LOANS ARE TAKEN AND UTILIZED BY UNITWISE. THE ASSESSEE HAS TAKEN THE CASH CR EDIT FACILITIES FROM THE FOR DAMAN UNIT. THE BANK HAS GIVEN THIS SANCTION OF CASH CREDIT FACILITIES AGAINST HYPOTHECATION OF COMMON STOCK AN D BOOK DEBTS. THE ABOVE BANK OVERDRAFT (CASH CREDIT) FACILITY IS USED BY USED BY ALL THE UNITS FOR THEIR WORKING CAPITAL REQUIREMENTS. THE INTEREST ON THIS OVERDRAFT BANK ACCOUNTS IS ALLOCATED AMONG ALL OF OUR UNIT VIZ. DAMAN GOA AND NALAGARH BASED ON TH E SALES TURNOVER RATIO. THE INTER UNIT TRANSACTIONS ARE ACCOUNTED AND SHOWN AS LOAN FROM INTER UNITS OR ADVANCES TO INTER UNITS AS THE CASH MAY BE IN THE UNIT WISE ACCOUNTS. THE ASSESSEE DO NOT EXCLUSIVELY CONSIST 24 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) OF THE MONEY TRANSFERRED BETWEEN UNITS. T HE ASSESSEE TRANSFERRED THE RAW MATERIALS FROM ONE UNIT TO ANOTHER UNIT BY DEBITING THE UNIT WHICH RECEIVES THE RAW MATERIALS. THE R AW MATERIALS ARE SENT FROM ONE UNIT TO ANOTHER UNIT TO MEET PRODUCTION URGENCY AND THESE ARE ON RETURNABLE BASIS WHEN THE OT HER UNIT PROCURE THE MATERIAL SUBSEQUENTLY. THE ASSESSEE HAS SHOWN THE BANK INTEREST IN THE UNITWISE ACCOUNT IN RESPECT OF LOANS EXCLUSIVELY TAKEN AND UTILIZED THAT UNIT. THE BANK INTEREST IN RESPECT OF COMMON BANK OVERDRAFT (CASH CREDIT) ARE ALLOCATED AM ONG UNITS BASED ON THE SALES TURN OVER AND ACCOUNTED ACCORDINGLY AND HENCE THE BANK INTEREST ON COMMON CREDIT FACILITIES IS PROPERLY AND A DEQUATELY ACCOUNTED. ALL THE INTER UNITS ARE VERIFIED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE THEREFORE CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THERE WILL BE DISALLOWANCE U/S 36(1)(III) THAT THE BORROWED FUNDS HAVE NOT BEEN UTILIZED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEES OWN OR OF ANY SISTER CONCERNED OR EVEN OF ANY THIRD PARTY. 15.7 . THE LEARNED AR SUBMITTED THAT THE AO HAS GIVEN THE FINDING THAT INTEREST B EARING FUNDS HAVE BEEN UTILIZED FOR HIS OWN BUSINESS. SECONDLY THE AO HAS GIVEN THE SPECIFIC FINDING THAT THE INTEREST BEARING FUNDS HAVE BEEN GIVEN AS INTEREST FREE LOANS T O OTHER PERSONS. IF THE IN TEREST BEARING LOANS IS GIVEN THEN QUESTION OF ALLOWING THE EXPENDITURE WILL ARISE. IN THIS CASE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT THE LOANS GIVEN WERE IN NATURE OF A CAPITAL EXPENDITURE. THEREFORE CIT(A) IS NOT J USTIFIED IN HIS ACTION AND DEPARTMENT S APPEAL MAY BE DISMISSED. 15. 8 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. L OOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSEE IS HAVING UNITS AT GOA DAMAN NALAGAR. THE ACCOUNTS ARE MAINTAINED UNITWISE AND FINAL ACCOUNTS ARE DRAWN UNITWISE. THE ASSESSEE PREPARED THE CONSOLIDATED TRIAL BALANCE BALANCE SHEET AND PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS TAKEN BANK OVER 25 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) DRAFT FACILITIES I.E. CASH CREDIT FACILITIES FOR DAMAN UNIT AS PER SCHEDULE - 2 OF SECURED LOANS RS. 230143835.00. THE BANKS HAVE SANCTIONED THIS FACILITIES AGAINST THE HYPOTHECATION OF COMMON STOCK AND BOOK DEBITS. THE ABOVE BANK OVER DRAFT (CASH CREDIT) FACILITIES IS USED BY ALL THE UNITS FOR THEIR WORKING CAP ITAL REQUIREMENT. THE ASSESSEES INTEREST ON THIS OVERDRAFT BANK INTEREST AMOUNT ALL THE UNITS ON SALES TURN OVER RECEIPT. THE ASSESSEE DO NOT TRANSFER MONEY FROM ONE UNIT TO ANOTHER UNIT. THE ASSESSEE USED RAW MATERIALS FROM ONE UNIT TO ANOTHER UNIT BY D EBITING THE UNIT WHICH RECEIVES THE RAW MATERIALS. THE RAW MATERIALS ARE SENT FROM ONE UNIT TO ANOTHER UNIT TO MEET PRODUCTION URGENCY AND THESE ARE ON RETURNABLE BASIS WHEN OTHER UNIT PROCURE THE MATERIALS SUBSEQUENTLY. WE FIND THAT ASSESSEE HAS ALLOCATED THE INTEREST IN RESPECT OF COMMON BANK DRAFT FACILITIES IS PROPERLY AND ADEQUATELY ACCOUNTED. WE FIND THAT THE ASSESSEE HAS SUBMITTED THE ALLOCATION OF INTEREST CHARGE ON THE NALAGARH UNIT AND OTHER UNITS WHICH ARE AS UNDER. STATEMENT SHOWING THE INTERES T/FINANCIAL CHARGES FOR THE FINANCIAL YEAR 2 008 - 09 (ASSESSMENT YEAR (2009 - 10 ) PARTICULARS DAMAN N GARH BORKAR IND SEAROCK TOTAL A) INTEREST/FINANCE CHARGES SPECIFIC TO PARTICULARS UNIT - BANK CHARGES 1448515 2614370 459335 121498 4643718 - INTEREST ON TERM LOANS 11897246 24247572 2474647 632281 39251746 - INTEREST VEHICLE LOANS 210855 165067 15630 0 391552 - LOAN PROCESSING FEES 0 98000 0 0 98000 OTHER INTEREST (INTEREST ON OVEDUE BILLS/LCS) 7237528 568654 402286 76590 7147750 TOTAL (A) 20794144 26556355 3351898 830369 51532766 B) OD INTEREST ON COMMON CASH CREDIT ACCOUNT ALLOCATED ON TURN OVER RATIO (AS PER ATTACHED SHEET) 8676250 15659432.3 2751304 727747 27814733 26 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) TOTAL (B) 8676250 15659432 2751304 727747 27814733 TOTAL INTEREST/FINANCIAL CHARGES(A+B) 29470394 42215787 6103202 1558116 79347499 TOTAL OVERDRAFT INTEREST INCURRED BY THE COMPANY DURING THE FINANCIAL YEAR 2008 - 09 27814733 THE STATEMENT SHOWING THE ALLOCATION OF OD INTEREST ON COMMON CASH CRED IT ACCOUNT BASED ON THE SALES TURNOVER. PARTICULARS DAMAN NGARH BORKAR IND SEAROCK TOTAL SALES TURN OVER AS PER AUDITED ACCOUNTS SALES TURNOVER RATIO 405076093 31. 19% 731106407 56.30% 128452684 9.89% 33976999 2.62% 1298612183 OD INTEREST BASED ON SALES TURN OVER RATIO 8676250 15659432.3 2751304 727747 27814733 OD INTEREST AS PER BOOKS OF ACCOUNT 8676250 15659432 2751304 727747 27814733 FROM THIS ABOVE DETAILS WE FIND THAT DURING THE YEAR UNDER CONSIDERATION DAMAN UN IT HAS DEBITED AN AMOUNT OF RS. 2 72 98 289/ - TO THE ACCOUNT OF NON TAXABLE UNIT IS NOT CORRECT. WE FIND THAT THAT ASSESSEE AS PER THE AO HAS TRANSFERRED THE INTEREST BEARING FUND TO SISTER CONCERN WITHOUT CHARGING THE INTEREST ON THE FUNDS TRANSFERRED TO NALAGARH UNIT. THEREFORE D ISALLOW THE SAME BUT WE ARE OF THE VIEW THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. VS. COMMISSIONER OF INCOME TAX (A); (2006) 288 ITR 1 (SC ) HAS HELD AS UNDER: TO CONSIDER WHETHER ONE SHOULD ALLOW DEDUCTION U/S 36(1)(III) OF INTEREST PAID BY THE ASSESSEE ON AMOUNTS BORROWED BY IT FOR ADVANCING TO A SISTER CONCERN THE AUTHORITIES AND THE COURTS SHOULD EXAMINE THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CONCERN DIE WITH MONEY. THAT THE BORROWED AMOUNT IS NO T UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETH ER THE AMOUNT WAS ADVANCED FOR EARNING PROFIT. ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSI NESS OF THE ASSESSEE ITSELF ) THE 27 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10) REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM - CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFITS . FROM THIS DECISION ONE HAS TO VERIFY THE FACTS ON THE RECORD IN THE INSTANT CASE WE ARE OF THE VIEW THAT THE CIT(A) HAS VERIFIED THE STATEMENT OF SHOWING THE INTEREST CHARGES FOR FINANCIAL YEAR 2008 - 09 AND HE HAS ALSO VERIFIED THE STATEMENT SHOWING ALLOCA TION OF CD INTEREST ON COMMON CASH CREDIT BASIS ON THE SALES TURN OVER AND THE CIT(A) HAS HELD AS PER THE ABOVE CHART THE ASSESSEE HAS DEBITED AMOUNT OF RS. 4 22 15 787/ - AS EXPENSES IN RESPECT OF NALAGARH UNIT IN RATIO OF TURN OVER. THE ASSESSEE HAS DEBITED THE AMOUNT AS INTEREST/FINANCIAL CHARGES TOWARDS NALAGARH UNIT IN PROPORTIONED TO THE TURN OVER THEREFORE SEPARATE ADDITION ON ACCOUNT OF INTEREST IS NOT WARRANTED THEREFORE WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENC E IS NOT REQUIRED. 15. 9. I N THE RESULT DEPARTMENT S APPEAL A SSESSEES APPEAL AND C.O. ARE DISMISSED. ORDER PRON OUNCED IN THE OPE N COURT ON 4 .4 .2014. S D / - S D / - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER P LACE : PANAJI / GOA D AT ED : 4 .4 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY BY ORDER 28 . ITA NO S . 239 240 244 - 248 261 - 262/PNJ/2013 5 &23/PNJ/2014 C.O. NOS.47 48 53 - 55/PNJ/2013 & 12/PNJ/2014 (A.Y.2005 - 06 - 07 - 08 &2009 - 10)