M/S. ESSEL PROPACK LTD., Mumbai v. THE ADDL CIT CIR6(2), Mumbai

ITA 1064/MUM/2005 | 2001-2002
Pronouncement Date: 04-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 106419914 RSA 2005
Assessee PAN AAACE1568L
Bench Mumbai
Appeal Number ITA 1064/MUM/2005
Duration Of Justice 6 year(s) 26 day(s)
Appellant M/S. ESSEL PROPACK LTD., Mumbai
Respondent THE ADDL CIT CIR6(2), Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 04-03-2011
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year 2001-2002
Appeal Filed On 08-02-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO.1064/MUM/2005 (ASSESSMENT YEAR: 2001-02) ESSEL PROPACK LTD. (ESSEL PACKAGING LTD.) CONTINENTAL BUILDING 135 DR. ANNIE BESANT ROAD WORLI MUMBAI -400 018 .... REVENUE VS ADDL. COMMISSIONER OF INCOME-TAX CIRCLE 6(2) MUMBAI -400 020 ASSESSEE PAN: AAACE 1568 L ITA NO.650/MUM/2005 (ASSESSMENT YEAR: 2001-02) DY. COMMISSIONER OF INCOME-TAX CIRCLE 6(2) MUMBAI -400 018 .... REVENUE VS ESSEL PROPACK LTD. (ESSEL PACKAGING LTD.) CONTINENTAL BUILDING 135 DR. ANNIE BESANT ROAD WORLI MUMBAI -400 018 .ASSESSEE PAN: AAACE 1568 L ASSESSEE BY: S/SHRI SHIVRAM & PARAS SAVLA REVENUE BY: MISS REENA JHA TRIPATI ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 2 O R D E R PER R.S. PADVEKAR JM THESE TWO CROSS APPEALS ONE BY THE REVENUE AND ONE BY THE ASSESSEE ARE FILED CHALLENGING THE IMPUGNED ORDER O F THE LD. CIT (A) MUMBAI DATED 23.11.2004 FOR THE A.Y. 2001-02. 2. WE FIRST TAKE-UP ASSESSEES APPEAL BEING ITA NO. 1064 OF 2005. 3. THERE IS A DELAY OF ONE DAY IN FILING THE APPEAL OF THE ASSESSEE. THE ASSESSEE HAS FILED THE APPLICATION FOR CONDONATION OF DELAY SUPPORTED BY THE AFFIDAVIT EXPLAINING THE REASONS ATTRIBUTABLE FOR DELAY OF ONE DAY IN FILING THE APPEAL. 4. WE HAVE HEARD THE PARTIES AND REASONS GIVEN BY T HE ASSESSEE IN THE AFFIDAVIT. CONSIDERING THE EXPLANATION OF THE ASSE SSEE WE CONDONE THE DELAY OF ONE DAY AND DECIDE THE APPEAL ON MERIT AFT ER HEARING BOTH THE PARTIES. 5. THE ASSESSEE HAS FILED THE REVISED GROUNDS OF AP PEAL AND REVISED GROUNDS ARE CONSIDERED WHILE DECIDING THIS APPEAL. GROUND NO.1 READS UNDER:- 1. THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOL DING THE DISALLOWANCE OF ` 32 07 521/- OUT OF THE PRIOR PERIOD EXPENSES. THE REASONS GIVEN BY HIM ARE IMPROPER AND WRONG.. 6. THE ASSESSEE-COMPANY IS ENGAGED IN MANUFACTURING AND PACKING MATERIALS I.E. MULTILAYER COLLAPSIBLE TUBES USED FO R DENTIFRICE COSMETICS ETC. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE- COMPANY HAS CLAIMED ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 3 DEDUCTION OF ` 32 52 820/- UNDER THE HEAD PRIOR PERIOD EXPENSES AND CLAIMED THE DEDUCTION. THE ASSESSEE CONTENDED BEFO RE THE A.O. THAT THOSE EXPENSES WERE INCURRED FOR THE PURPOSE OF THE BUSINESS AND LIABILITY THEREOF WAS CRYSTALLISED AND SETTLED DURI NG THE YEAR. AS PER RECORD THE DETAILS OF THE PRIOR PERIOD EXPENDITURE ARE AS UNDER:- (I) EXCISE DUTY FOR EARLIER YEARS ` 31 46 196/- (II) EXCISE PENALTY AND INTEREST ` 53 804/- (III) GRATUITY ` 4 534/- (IV) AND AMOUNT PAID TO MEGHATAKE POWER EQUIPMENT THE A.O. MADE THE DISALLOWANCE AND MADE THE ADDITIO N IN RESPECT OF THE ABOVE PRIOR PERIOD EXPENDITURE. THE ASSESSEE CHALL ENGED THE SAME BEFORE THE LD. CIT (A) AND SUCCEEDED IN GETTING THE RELIEF OF ` 45 293/-. SO FAR AS EXCISE DUTY IS CONCERNED THE SAME WAS DISPUTED BY THE ASSESSEE WHICH WAS PERTAINING TO THE EARLIER YEARS AND ALSO SUBSEQ UENTLY CONFIRMED BY THE CEGAT. THE ARGUMENT OF THE LD. COUNSEL IS THAT THE ASSESSEE HAS FILED AN APPEAL BEFORE THE HIGH COURT AND THE SAID EXPENDITURE WAS NOT CLAIMED IN THE RESPECTIVE YEARS. SO FAR AS THE ISS UE OF EXCISE DUTY IS CONCERNED I.E. ` 31 46 196/- WHEN THE ASSESSEE HAS DISPUTED THE LIABILITY IN APPEAL IT DOES NOT MEAN THAT THE LIAB ILITY IS NOT CRYSTALLISED. IN FACT THIS ISSUE GOES AGAINST THE ASSESSEE BY TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MFG. CO . LTD.-82 ITR 363. SO FAR AS ELEMENT OF PENALTY IS CONCERNED THE LD. COUNSEL DID NOT SERIOUSLY PRESSED THE SAID ISSUE. WE THEREFORE C ONFIRM THE ORDER OF THE LD. CIT (A) ON THIS GROUND AND GROUND NO.1 IS DISMI SSED. 7. GROUND NO.2 READS AS UNDER: 2(I) THE LD. CIT (A) WHILE ALLOWING APPELLANTS GRO UND OF APPEAL ERRED IN LAW IN DIRECTING TO EXCLUDE ` 27 67 11 866/- TOWARDS EXCISE DUTY AND ` ` 10 18 40 698/- TOWARDS SALES TAX INSTEAD OF ` ` ` ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 4 291165905/- AND ` ` 112826448/- RESPECTIVELY FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80H HC OF THE ACT. (IIA) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPH OLDING THE EXCLUSION OF FOLLOWING INTEREST RECEIPT FROM PROFITS OF THE BUSI NESS FOR COMPUTING THE DEDUCTION U/S.80HHC OF THE ACT WHEN THESE INTE RESTS ARE DERIVED AND PERTAIN TO BUSINESS OF THE APPELLANT. INTEREST ON MSEB DEPOSITS SECURITY DEPOSIT ` 5 85 739 INTEREST OF STAFF LOAN ` 9 91 351 INTEREST FROM BANK ON SHORT TERM DEPOSIT ` 53 68 364 ------------------- ` 69 45 454 ========== WITHOUT PREJUDICE TO ABOVE 90% OF THE INTEREST IN STEAD OF 100% SHOULD HAVE DEDUCTED FROM PROFITS OF THE BUSINESS. II)(B) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UP HOLDING EXCLUSION OF NET INTEREST RECEIPT OF ` 5 78 37 829/- FROM PROFITS OF THE BUSINESS FOR COMPUTING DEDUCTION U/S.80HHC OF THE ACT INSTEAD OF TREATING IT AS BUSINESS INCOME. WITHOUT PREJUDICE TO ABOVE 90% OF ` 5 78 37 829/- OUGHT TO HAVE BEEN DEDUCTED FROM BUSINESS PROFIT UNDER EXPLANATION (BA A). III) INTEREST OF ` 427 469/-. THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING 100% EXCLUSION OF INTEREST OF ` 4 27 469/- ON CALL MONEY FROM PROFIT OF BUSINESS FOR COMPUTING DEDUCTION U/S .80HHC OF THE ACT. WITHOUT PREJUDICE TO ABOVE 90% OF ` 4 27 469/- OUGHT TO HAVE BEEN DEDUCTED FROM BUSINESS PROFIT UNDER EXPLANATION (BA A). IV) THE LD. CIT (A) ERRED IN LAW AND FACTS IN DEDUC TING 100% OF NET DIVIDEND FROM PROFITS OF THE BUSINESS INSTEAD OF 90 % OF NET DIVIDEND OF NET DIVIDEND FOR COMPUTING DEDUCTION U/S.80HHC OF THE A CT. V) THE LD. CIT (A) ERRED IN LAW AND FACTS IN CONFIR MING THE EXCLUSION OF ` 37 236 530/- DEPB BENEFIT FROM PROFIT OF THE BUSIN ESS FOR COMPUTING ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 5 DEDUCTION U/S.80HHC OF THE ACT EVEN WHEN THERE IS N O SALE OF DEPB HENCE THERE IS NO PROFIT ON SALE OF DEPB WHICH CAN BE DED UCTED. THE LD. CIT (A) FAILED TO APPRECIATE THE FACT THAT THERE IS NO SALE OF DEPB LICENSE BUT IT IS UTILIZATION BENEFIT FOR ASSESSEE S OWN IMPORT OF RAW MATERIALS (PARA 5.6.1). THE DEPB ENTITLEMENT BEING USED OUGHT TO HAVE BEEN CONSIDERED AS BUSINESS INCOME. VI) THE LD. CIT (A) ERRED IN LAW AND FACTS IN HOLDI NG THAT EXCHANGE GAIN IS ` 30 58 419 IS TO BE DEDUCTED FROM THE PROFIT OF THE BUSINESS INSPITE OF HOLDING THAT EXCHANGE GAIN IS IN THE NATURE OF BUSI NESS PROFIT (PARA 5.7.1). THE EXCHANGE GAIN / LOSS DERIVED FROM BUSINESS TRAN SACTIONS OUGHT TO HAVE BEEN CONSIDERED AS BUSINESS INCOME AND INCLUDED IN TURNOVER. VII) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHO LDING THAT INTEREST OF ` 1 21 79 276/- ON ASSIGNMENT OF SALES TAX LOAN IS IN THE NATURE OF INCOME FROM OTHER SOURCES AND EXCLUDED FROM ELIGIBLE PROFI TS OF THE BUSINESS AND EVEN NOT CONSIDERED UNDER CLAUSE (BAA) TO EXPL. OF SEC. 80HHC OF THE ACT (PARA 5.8.1). THE SALES TAX LOAN ADDITION OUGHT TO HAVE BEEN CONSIDERED AS BUSINESS INCOME. 8. WE HAVE HEARD THE PARTIES. THE ISSUE AND SUB-IS SUES ARISING FROM GROUND NO.2 ARE IN RESPECT OF THE COMPUTATION OF TH E ALLOWABLE DEDUCTION U/S.80HHC OF THE ACT. IN GROUND NO.2(I) THE GRIEVA NCE OF THE ASSESSEE IS THAT THE TURNOVER OF THE ASSESSEE CONTAINS THE ELEM ENT OF EXCISE DUTY AND THE SALES-TAX WHICH WAS EXCLUDED BY THE ASSESSEE F OR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.80HHC FROM THE TOTAL TU RNOVER. THE A.O. INCLUDED THE ELEMENT OF THE SALES-TAX AS WELL AS TH E EXCISE DUTY IN THE TOTAL TURNOVER REJECTING THE CONTENTION OF THE ASSE SSEE. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A). THE LD. CIT (A) ON PRINCIPAL ACCEPTED THAT THE ELEMENT OF EXCISE DUTY AND THE SA LES TAX CANNOT BE INCLUDED FOR THE PURPOSE OF COMPUTING THE TOTAL TUR NOVER BUT AT THE SAME TIME HE HAS RESERVATION IN EXCLUDING GROSS ELEMENT LIKE CENTRAL EXCISE ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 6 AS WELL AS SALES-TAX. THE LD. CIT (A) OBSERVED THAT THE ASSESSEE WAS ENTITLED FOR SALES-TAX SET OFF UNDER RULE 41(D) OF THE SALES-TAX RULES TO THE EXTENT OF ` 1 09 85 750/-. HE THEREFORE ACCEPTED THE PLEA OF THE ASSESSEE BY HOLDING THAT NET OF THE SALES-TAX I.E. AFTER REDUCING THE ALLOWABLE SET-OFF SHOULD BE EXCLUDED FROM THE TOTAL TURNOVER. HE ALSO DIRECTED TO EXCLUDE EXCISE DUTY TO THE EXTENT OF ` 27 67 11 866/- FOR THE REASON THAT THE ASSESSEE HAS UTILIZED MODVAT/CENVAT OF ` 27 28 11 320/- + PAID ` 39 00 546/- IN THE P&L ACCOUNT THEREBY TOTALING TO RS 27 67 11 866/-. HIS FINDING WAS BASED ON THE REASON THAT WHILE DECIDING ONE OF THE ISSUE FOR VERIFICATION OF ` 85 53 399/- WHICH WAS MADE U/S.145A IN RESPECT OF CENVAT/MODVAT OF THE CL OSING STOCK OF THE RAW MATERIAL / STORES AND SPARES. HE HAS HELD THAT THE ASSESSEE HAS UTILIZED MODVAT / CENVAT TO THE EXTENT OF ` 27 28 11 320/- AND ONLY TO THAT EXTENT THE ELEMENT OF THE EXCISE DUTY SHOULD H AVE BEEN EXCLUDED. IN OUR OPINION THE SAID FINDING OF THE LD. CIT (A) IS ERRONEOUS. THE UNUTILIZED MODVAT CREDIT CANNOT BE CONSIDERED BUT A CTUAL EXCISE DUTY PAID BY THE ASSESSEE HAS TO BE EXCLUDED. IN FACT WHILE DECIDING THE GROUND IN RESPECT OF THE ADDITION MADE U/S.145A THA T WAS RELATING TO ADJUSTMENT MADE TO THE CLOSING STOCK THE LD. CIT ( A) ENHANCED ADDITION. WE ARE THEREFORE OF THE OPINION THAT THE EXERCISE DONE BY THE CIT (A) FOR ENHANCING THE ADDITION TOWARDS ADJUSTMENT MADE U/S .145A TOWARDS THE CLOSING STOCK THAT WILL NOT HAVE DIRECT BEARING ON THE SALES TURNOVER FOR THE PURPOSE OF DETERMINING THE TURNOVER U/S.80HHC A S ONLY TOTAL TURNOVER OF THE SALES IS TO BE CONSIDERED. WE THE REFORE DIRECT THE A.O. TO EXCLUDE THE ACTUAL ELEMENT OF THE EXCISE DUTY COMPR ISE IN THE SALES MADE BY THE ASSESSEE AND TO THAT EXTENT REDUCED THE TOTA L TURNOVER. MOREOVER THIS ISSUE STANDS COMPLETELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF LAKSHMI MACHINE WORKS-290 ITR 667 (BOM). ACCORDINGLY GROU ND 2(I) IS PARTLY ALLOWED. ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 7 9. THE LD. COUNSEL SUBMITTED THAT AS PER INSTRUCTIO N OF THE ASSESSEE HE HAS NOT PRESSING GROUND NO.2(III) AND GROUND 2(I V) OF THE GROUNDS OF APPEAL AS THE SAID GROUNDS ARE NOT PRESSED THE SAM E ARE DISMISSED. 10. SO FAR AS GROUND NO.2(II)(A) AND GROUND 2(II)(B ) ARE CONCERNED THE LD. COUNSEL WAS FAIR ENOUGH TO CONCEDE THAT BOTH TH E GROUNDS HAVE TO BE DISMISSED AS BOTH THE ISSUES STAND COVERED AGAINST THE ASSESSEE. WE ACCORDINGLY DISMISSED GROUND NO.2(II)(A) AND 2(II) (B) AS THE ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ASIAN STAR CO. LTD. 32 6 ITR 56. 11. THE NEXT GROUND 2(V) IS CONCERNED THE LD. COUN SEL SUBMITTED THAT THIS GROUND HAS TO GO BACK TO THE A.O. FOR RE-EXAMI NATION IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF KALPATRU COLOURS & CHEMICALS LTD. 328 ITR 451 AND HE FURTHER PLEADED THAT IN THE RECENT DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. VIJAY SILK HOUSE (BANGALORE) LTD. I.T.A. NO 1908 OF 2001 THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE A.O. WITH A DIRECT IONS THAT ANY OTHER DECISION OF THE HIGH COURT OR APEX COURT AS MAY BE CITED BY THE ASSESSEE MAY ALSO BE CONSIDERED AND SAME DIRECTIONS MAY BE G IVEN. THE LD. D.R. HAS NO OBJECTION TO RESTORING THE ISSUE TO THE FILE OF THE A.O. WE ACCORDINGLY WITH THE CONSENT OF BOTH THE PARTIES RE STORE GROUND NO.2(V) TO FILE OF THE A.O. WITH THE DIRECTION THAT HE SHOULD ADJUDICATE THIS ISSUE IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF KALPATRU COLOURS & CHEMICALS L TD. (SUPRA). THE A.O. IS ALSO DIRECTED TO TAKE INTO CONSIDERATION TH E ARGUMENTS OF THE ASSESSEE THAT IF THE DEPB IS NOT SOLD BY THE ASSESS EE BUT HAS UTILIZED FOR HIS OWN IMPORTS OF THE MATERIAL AND THE CREDIT IS R EVERSED IN THE NEXT YEAR WHEN UTILIZED AND THEN WHETHER IN VIEW OF THE NEWLY INSERTED CLAUSE (IIID) TO SECTION 28 IS APPLICABLE OR NOT. THE A.O. IS ALSO DIRECTED TO TAKE ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 8 INTO CONSIDERATION ANY OTHER DECISION OF THE JURISD ICTIONAL HIGH COURT OR APEX COURT AS MAY BE CITED BY THE ASSESSEE AT THAT TIME. ACCORDINGLY GROUND NO.2(V) IS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.2(VI) IS IN RESPECT OF WHETHER THE LD . CIT (A) IS JUSTIFIED IN HOLDING THAT EXCHANGE GAIN IS IN THAT NATURE OF INTEREST COMMISSION ETC. AND IN VIEW OF EXPLANATION (BAA) THE SAME IS TO BE EXCLUDED AT 90% FROM THE PROFITS OF THE BUSINESS FOR COMPUTING THE DEDUCTION U/S.80HHC. 13. WE HAVE HEARD THE PARTIES. THE A.O. HAS EXCLUD ED 90% OF THE EXCHANGE GAIN OF ` 30 58 419/- BY APPLYING EXPLANATION (BAA) AS HE IS OF THE OPINION THAT IT PARTAKES THE CHARACTER OF OTHER ITEMS/RECEIPTS SPECIFIED IN EXPL. (BAA) TO SEC. 80HHC; LIKE BROKER AGE COMMISSION INTEREST RENT CHARGES ETC. IN OUR OPINION SUCH APPROACH IS NOT CORRECT. ADMITTEDLY EXCHANGE GAIN IS ON ACCOUNT OF FLUCTUAT ION OF THE FOREIGN CURRENCY RATES IN THE MARKET AFTER CONSIDERING MARK ET RATES OF INDIAN CURRENCY AND IT IS NOTHING BUT A PART OF THE SALE C ONSIDERATION. WE THEREFORE DIRECT THE A.O. THAT 90% OF THE EXCHANGE GAIN SHOULD NOT BE EXCLUDED BY APPLYING EXPLANATION (BAA) TO SECTION 8 0HHC AND NO REDUCTION ON THAT ACCOUNT SHOULD BE MADE FOR COMPUT ING THE PROFITS OF THE BUSINESS. ACCORDINGLY GROUND 2(VI) IS ALLOWED . 14. GROUND 2(VII) IS IN RESPECT OF THE INTEREST OF ` 1 21 79 276/- ON ASSIGNMENT OF SALES TAX LOAN WHICH WAS NOT CONSIDE RED AT ALL AS PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUC TION U/S.80HHC. THE LD. COUNSEL ARGUED THAT IN ASSESSEES OWN CASE FOR THE A.Y. 1999- 2000 THE TRIBUNAL HAS CONSIDERED THIS ISSUE AND HAS HELD THAT INTEREST INCOME SHOULD BE TREATED AS INCOME FROM BUSINESS BU T BY APPLYING EXPLANATION (BAA) 90% OF THE SAME SHOULD BE REDUCED . HE THEREFORE PLEADED THAT AS PER THE DIRECTIONS GIVEN IN A.Y. 19 99-2000 THIS YEAR ALSO ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 9 ON THE SAME DIRECTIONS THE ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. WE HAVE ALSO HEARD THE LD. D.R. 15. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL IN IT A NO.4771 AND 4271/M/2003 VIDE ORDER DATED 21.11.2008 IN THE SAI D ORDER THE ISSUE WAS WHETHER THE A.O. WAS JUSTIFIED IN APPLYING EXPL ANATION (BAA) AND THEREBY REDUCING 90% OF THE AMOUNT MENTIONED THERE IN FOR THE PURPOSE OF COMPUTING THE PROFITS OF THE BUSINESS. SO FAR A S THIS YEAR IS CONCERNED IN OUR OPINION THE FACTS PERTAINING TO THE ISSUE ARE TOTALLY DIFFERENT. WE FIND THAT THERE IS NO CLEAR DISCUSSI ON ON THIS ISSUE BY BOTH THE AUTHORITIES BELOW AND RELEVANT FACTS ARE ALSO N OT ON RECORD. WE DO NOT AGREE WITH THE LD. COUNSEL THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 19 99-2000. WE THEREFORE CONSIDERED IT FIT TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. AS ADMITTEDLY THE LD. CIT (A) HAS NOT DISCUSSED THE RE LEVANT FACTS IN HIS ORDER (PARA 5.8.1. OF LD. CIT (A)S ORDER) WITH TH E DIRECTION THAT ALL THE RELEVANT FACTS SHOULD BROUGHT ON RECORD AND ACCORDI NGLY THE ISSUE SHOULD BE ADJUDICATED. IN THE RESULT GROUND NO. 2(VII) I S ALLOWED FOR THE STATISTICAL PURPOSES 16. GROUND NO.3 READS AS UNDER:- 3. THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOL DING THAT ENTITLEMENT OF DUTY FREE ADVANCE IMPORT LICENSES OF ` 1 02 56 836/- INCOME LIABLE TO BE INCLUDED IN THE TOTAL INCOME WITHOUT R ECEIPT OR UTILIZATION EVEN WHEN THIS BENEFIT IS NOTIONAL NOT REAL AND FRA UGHT WITH VARIOUS CONTINGENCIES. 17. THE ISSUE IS IN RESPECT OF FREE ADVANCE IMPORT LICENSE OF ` 1 02 56 836/-. 18. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUB MITS THAT THE UTILIZATION OF THE ADVANCE LICENSE IS CONTINGENT IN NATURE. IT IS A QUANTITY ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 10 BASED LICENSE AND HAS TO BEAR PRICE FLUCTUATION. H E FURTHER ARGUES THAT IT HAS TO BE USED WITHIN LIMITED TIME LIMIT AND IF NOT USED THEN IT EXPIRES AND THERE IS MONETARY BENEFIT TO THE ASSESSEE. HE ARGUED THAT THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE AS SESSEE AND SAME HAS BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH C OURT. WE HAVE ALSO HEARD THE LD. D.R. 19. WE HAVE PERUSED THE ORDER OF HONBLE HIGH COURT IN ASSESSEES OWN CASE BEING ITA NO.2305 OF 2009 FOR THE A.Y. 1999-20 00. IT IS PLACED AT PAGES NO.162 TO 168 OF THE COMPILATION. WE FURTHE R FIND THAT THIS ISSUE HAS ALSO BEEN CONSIDERED AND DECIDED BY THE TRIBUNA L IN ASSESSEES OWN CASE IN ITA NOS.4771 & 4271/MUM/2003 ORDER DATED 21 .11.2008 IN PARA NO.31 OF THE SAID ORDER IN WHICH THE FINDINGS ON THIS ISSUE ARE GIVEN FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF JAMSHRI RAJIT SINGH SPINNING & WEAVING MILLS LTD VS. IAC 41 ITD 142 (MUM). WE THEREFORE FOLLOWING THE REASONS GIVEN ON THIS ISSUE IN THE A.Y. 1999- 2000 IN ASSESSEES OWN CASE ALLOW GROUND NO.3. AS NO REAL INCOME ACCRUES TO THE ASSESSEE BY GETTING THE DUTY FREE AD VANCE LICENSE UNLESS THE SAME IS UTILIZED. THE A.O. CAN TAX THE SAME IN THE YEAR IN WHICH THE SAME IS UTILIZED. ACCORDINGLY GROUND NO.3 IS ALLO WED. 20. GROUND NO.4 IS IN RESPECT OF THE DISALLOWANCE M ADE U/S.14A OF THE ACT. THE LD. COUNSEL SUBMITS THAT AS PER THE INSTR UCTIONS OF THE ASSESSEE HE IS NOT PRESSING GROUND NO.4. AS GROUN D NO.4 IS NOT PRESSED THE SAME IS DISMISSED. 21. GROUND NO.5 READS AS UNDER:- 5. THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOL DING THE DISALLOWANCE OF ` 10 05 848/- OUT OF INTEREST OF ` 29 57 532/- ON THE ADVANCE (EXPENSES RECOVERABLE) RECOVERABLE FROM ITS SUBSIDI ARY COMPANIES. ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 11 THE DISALLOWANCE OF INTEREST OF ` ` 10 50 848/- OUGHT TO HAVE BEEN DELETED. 21. THE ISSUE IS IN RESPECT OF THE DISALLOWANCE MAD E U/S.36(1)(III) OF THE ACT OF ` 10 05 848/-. THE LD. COUNSEL SUBMITS THAT THE A.O. MADE THE DISALLOWANCE OF INTEREST OF ` 29 57 532/- ON THE GROUND THAT INTEREST BEARING FUNDS WERE DIVERTED TO THE SUBSIDIARY COMPA NIES. THE LD. CIT (A) CONFIRMED THE DISALLOWANCE TO THE EXTENT OF ` 10 05 848/-. HE FURTHER ARGUES THAT THE ASSESSEE IS HAVING RUNNING ACCOUNT OF THE SUBSIDIARIES. NO DISALLOWANCE WAS MADE IN PAST IN RESPECT OF THE ADVANCES MADE TO EGYPTIAN INDIA CO. ESSEL PACKAGING GUANGZHOUS LIMI TED ESSEL PACKAGING NEPAL PVT. LTD. WITH WHOM THERE ARE OUTST ANDING BALANCES ON ACCOUNT OF THE ASSESSEE. THE LD. COUNSEL HAS PLACE D RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. RELIANCE UTILITIES LTD.- 313 ITR 340 IN WHICH IT IS HELD THA T IF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WHICH IS SUFFICIENT TO MEET ITS INVESTMENT AND AT THE SAME TIME THE ASSESSEE HAS RAISED A LOAN TH EN IT CAN BE PRESUMED THAT THE INVESTMENTS ARE MADE FROM AVAILABLE INTERE ST FREE FUNDS. THE LD. COUNSEL ALSO RELIED ON THE DECISION OF THE SUPR EME COURT IN THE CASE OF S.A. BUILDERS VS. CIT 288 ITR 1 BY TAKING PLEA OF THE COMMERCIAL EXPEDIENCY. ALTERNATIVELY HE PLEADED THAT DISALLO WANCE OF THE INTEREST SHOULD NOT BE MORE THAN ` 44 525/- AS THE A.O. HAS WRONGLY CALCULATED INTEREST BASED ON THE CLOSING BALANCES INSTEAD OF DAY-WISE CALCULATION. WE HAVE ALSO HEARD THE LD. D.R. WE FIND THAT IN RE SPECT OF THE FOLLOWING COMPANIES AS PER OUTSTANDING BALANCES THE A.O. HA S MADE THE DISALLOWANCE WHICH HAS BEEN SUSTAINED BY THE LD. CI T (A):- I) EGYPTIAN INDIA COMPANY ` 61 390/- II) ESSEL PACKAGING GUNGZHOU LTD. ` 7 67 429/- III) ESSEL PACKAGING NEPAL PVT. LTD. ` 1 77 029/- ------------------- TOTAL ` 10 05 848/- ============= ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 12 WE FIND THAT THERE IS NO DETAILED DISCUSSION IN THE ORDER OF THE LD. CIT (A). THERE IS NO DISPUTE ABOUT THE FACT THAT ADVAN CES ARE GIVEN TO THE SUBSIDIARY COMPANIES. NOTHING IS ON RECORD TO SUPP ORT THE CONTENTION OF THE LD. COUNSEL THAT THE ASSESSEE HAS SUFFICIENT IN TEREST FREE FUNDS TO SAY THAT THE ADVANCES GIVEN ARE OUT OF THE SAME. MOREO VER SO FAR AS PLEA OF THE COMMERCIAL EXPEDIENCY IS CONCERNED IN OUR OPIN ION MERELY BECAUSE THE ADVANCES ARE GIVEN TO THE SUBSIDIARY COMPANY TH AT WOULD NOT PROTECT THE ASSESSEE FROM DISALLOWANCE AS BURDEN IS ON THE ASSESSEE TO PROVE IN STRICT SENSE THE COMMERCIAL EXPEDIENCY. IT IS AL SO SEEN THAT REVENUE HAS ALSO TAKEN A GROUND TO THE EXTENT OF THE RELIEF GIV EN BY THE LD. CIT (A). WE THEREFORE CONSIDER IF FIT TO RESTORE THIS ISSU E TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION AND TO DECIDE THE SAME DE NOVO IN THE LIGHT OF OUR ABOVE OBSERVATION. THE ASSESSEE IS TO DEMONSTRATE THAT FOR ADVANCES TO ITS SISTER CONCERN WERE OUT OF THE INTEREST FREE FU NDS. IF THE ASSESSEE TAKES THE PLEA OF COMMERCIAL EXPEDIENCY THEN HE HAS TO DEMONSTRATE HOW THE SAME CAN BE TREATED ON ACCOUNT OF COMMERCIAL EX PEDIENCY. ACCORDINGLY GROUND NO. 4 IN ASSESSEES APPEAL AND RELEVANT GROUND IN REVENUES APPEAL ARE ALLOWED FOR THE STATISTICAL PU RPOSES. 22. GROUND NO.6 READS AS UNDER:- 6(I) THE LD. CIT (A) ERRED IN LAW AND FACTS IN CONF IRMING THE ADDITION OF ` 85 53 399/- AND ENHANCING THE ADDITION BY ` 53 11 601/- TO ` 138.65 LACS ON ACCOUNT OF UNUTILIZED MODVAT CREDIT INCLUDING DISALLOWANCE U/S 43B ON ACCOUNT OF EXCISE DUTY ON M ATERIAL CONSUMED IN WIP AND FINISHED GOODS SOLD. 23. THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 1999-2000 IN ITA 4271 & 4771/ MUM/2003 COPY PLACED AT PAGES 138 TO 153 OF THE COMPILATION. THI S ISSUE IS DISCUSSED IN THE SAID ORDER IN PARA 22. THE TRIBUNAL HAS FOLLOW ED THE DECISION OF THE ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 13 HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. MAHAVIR ALLUMINIUM LTD. 297 ITR 77 (DEL.) AND DIRECTED THE A.O. THAT T HE ADJUSTMENT SHOULD ALSO BE MADE TO THE OPENING STOCK. THE LD. COUNSEL ALSO SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THE JURISDICTIONAL H IGH COURT IN THE FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS. MAHALAXMI GL ASS WORKS (P) LTD 318 ITR 116 (BOM) AND HENCE THIS ISSUE MAY BE REST ORED TO THE FILE OF THE A.O. TO RE-COMPUTE ADJUSTMENT AFTER CONSIDERING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE AS WELL AS THE DECISION OF J URISDICTIONAL HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS (P) LTD. (SUPR A). WE ACCORDINGLY RESTORE THIS ISSUE OF ADDITION U/S.145A IN RESPECT OF THE UNUTILIZED MODVAT CREDIT TO THE FILE OF THE A.O. FOR FRESH ADJ UDICATION IN THE LIGHT OF OUR ABOVE DISCUSSION. ACCORDINGLY GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSES. THE A.O. IS DIRECTED TO CONSIDER ALL THE PLEAS OF THE ASSESSEE AND ALSO BRING ON RECORD ALL THE FACTS AND FIGURES. 24. SO FAR AS GROUND NO.7 IS CONCERNED I.E. IN RES PECT OF THE DEDUCTION U/S.80IA THE LD. COUNSEL SUBMITS THAT HE IS NOT PR ESSING THE SAID GROUND AS PER THE INSTRUCTIONS OF THE ASSESSEE. AS GROUND NO.7 IS NOT PRESSED THE SAME IS DISMISSED AS NOT PRESSED. 25. NOW WE TAKE-UP THE REVENUES APPEAL BEING ITA NO.650/MUM/2005. 26. GROUND NO.1 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE SALES- TAX OF ` 27 67 11 866/- AND EXCISE DUTY OF ` 10 18 40 698/- FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80HHC BY RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF SUDARSHAN CHEMICALS INDUSTRIES LTD. (24 5 ITR 769) AS ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 14 THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPA RTMENT AND THE SLP IS PENDING BEFORE THE APEX COURT. 27. NOW WE HAVE HEARD THE PARTIES. THE LD. D.R. HA S FAIRLY CONCEDED THAT NOW THIS ISSUE STAND COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. LAKSHMI MACHINES WORKS 290 ITR 667. AS THIS ISSUE STANDS C OVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LA KSHMI MACHINE TOOLS (SUPRA) WE DISMISS GROUND NO.1. 28. GROUND NO.2 READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE ENTIRE INTEREST INCOME OF ` 6 7 83 283/- AFTER NETTING OFF INTEREST PAID AND RECEIVED ON ICDS WITHOUT APPRECIATING THAT AS PER T HE PROVISIONS OF EXPLANATION (BAA) TO SECTION 80HHC(4A) 90% OF INTE REST RECEIPT ATTRIBUTABLE TO THE EXPORT ACTIVITY OF THE ASSESSEE NEEDS TO BE REDUCED FROM THE PROFITS AND GAINS OF BUSINESS AND AS THE INTEREST RECEIVED BY THE ASSESSEE WAS NOT ATTRIBUTABLE TO TH E EXPORT ACTIVITY THE SAME NEEDED TO BE EXCLUDED TOTALLY WITHOUT ANY NETTING OF THE SAME. 28. THE LD. D.R. SUBMITS THAT THERE IS NO NEXUS BET WEEN BORROWED FUNDS IN RESPECT OF WHICH THE DETAILS ARE FILED BEF ORE THE A.O. AND THE INTEREST RECEIVED ON ICDS. IT IS ARGUED THAT NETTI NG OF INTEREST CANNOT BE ALLOWED UNLESS THERE IS A DIRECT NEXUS BETWEEN THE INTEREST PAID AND INTEREST RECEIVED. THE LD. D.R. RELIED ON THE DECI SION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. ASIAN STAR C O. LTD. 326 ITR 56 AS WELL AS DECISION OF CIT VS. LIBERTY FOOTWEAR 287 IT R 339. WE HAVE ALSO HEARD THE LD. COUNSEL. WE FIND THAT NOTHING IS BRO UGHT ON RECORD TO SHOW THAT THE BORROWED FUNDS ARE UTILIZED FOR THE P URPOSE OF INVESTMENT ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 15 IN THE ICDS. IN OUR OPINION THE RATIO LAID DOWN IN THE CASE OF ASIAN STAR CO. LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE FACT S OF THE PRESENT CASE. HENCE THE BENEFIT OF THE NETTING CANNOT BE GIVEN T O THE ASSESSEE. WE ACCORDINGLY RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF ASIAN STAR CO. LTD. (SUPRA) ALLOW GROUND NO.2 AND D IRECT THE A.O. TO EXCLUDE 90% OF THE GROSS INTEREST UNDER EXPLANATION (BAA) FOR THE PURPOSE OF COMPUTING PROFITS OF THE BUSINESS UNDER SEC. 80HHC. 29. GROUND NO.3 READS AS UNDER:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE DEDUCTION OF DIVIDEND INCOME FROM BUSINESS PROFIT T O THE EXTENT OF ` ` 1 03 12 644/- AND NOT TO THE EXTENT OF ` 3 28 42 292/- WITHOUT APPRECIATING THE FACT THAT THE SAID RECEIPT DID NOT HAVE ANY NEXUS WITH THE SALE PROCEEDS FORM EXPORT ACTIVITIES. 30. WE HAVE HEARD THE PARTIES. THE LD. CIT (A) HAS DIRECTED THE A.O. TO TREAT THE DIVIDEND AS INCOME FROM OTHER SOURCES. THE ASSESSEE HAS RECEIVED DIVIDEND INCOME FROM FOREIGN SUBSIDIARIES WHICH IS TAXABLE IN INDIA. THE ASSESSEE HAS ALLOCATED THE INTEREST COS T TO THE DIVIDEND. THE A.O. HAS COMPUTED AND DISALLOWED THE INTEREST OF ` 1 99 35 645/- I.E. AFTER REDUCING THE INTEREST TO AYEPEE LAMITUBE LTD. WHICH IS NOT A SUBSIDIARY COMPANY ON THE INVESTMENT MADE IN A FORE IGN SUBSIDIARY COMPANIES ON THE GROUND THAT NO DIVIDEND INCOME YIE LDED ON THE SAID INVESTMENT. THE LD. CIT (A) WAS OF THE OPINION THA T IF THE SAME IS DISALLOWED U/S.36(1)(III) THEN CONSIDERING THE FACT THAT INVESTMENTS ARE MADE IN THE SHARES OF THE SUBSIDIARIES THEN THE SAM E IS REQUIRED TO BE ALLOWED U/S.57(III) OF THE ACT AND DIRECTED THE A.O . ONLY TO BRING TO TAX NET DIVIDEND INCOME AS INCOME FROM OTHER SOURCES AND TO EXCLUDE 100% FROM THE COMPUTATION OF DEDUCTION U/S.80HHC. IN OU R OPINION NO ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 16 INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT (A) AS THE A.O. HIMSELF HAS HELD THAT THE ASSESSEE HAS MADE THE INVESTMENT IN ITS SUBSIDIARY COMPANIES AND BORROWED FUNDS ARE USED. WE ACCORDI NGLY CONFIRM THE ORDER OF THE LD. CIT (A) AND DISMISS GROUND NO.3. 31. GROUND NO.4 READS AS UNDER:- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO INCLUDE THE TECHNICAL KNOWHOW FEES OF ` ` 55.50 LAKHS IN THE TOTAL TURNOVER AS WELL AS THE EXPORT TURNOVER FOR THE PURPOSE OF COMP UTING THE DEDUCTION U/S.80HHC WITHOUT APPRECIATING THE FACT T HAT THE SAME CANNOT BE HELD TO HAVE BEEN RECEIVED ON ACCOUNT OF EXPORT OF GOODS OR MERCHANDISE AS ENVISAGED IN SECTION 80HHC(1). 32. THE ISSUE IS WHETHER THE TECHNICAL KNOWHOW FEES OF RS 55.50 LAKHS RECEIVED BY THE ASSESSEE CAN BE INCLUDED IN THE TOT AL TURNOVER AS WELL AS EXPORT TURNOVER FOR THE PURPOSE OF GIVING BENEFIT O F DEDUCTION TO THE ASSESSEE U/S.80HHC OF THE ACT. THE ASSESSEE HAS RE CEIVED RS 55.50 LAKHS ON ACCOUNT OF TECHNICAL FEES FROM ESSEL DEUTS LAND GMBH GERMANY. THE A.O. WAS OF THE OPINION THAT THE TEC HNICAL KNOWHOW FEES RECEIVED BY THE ASSESSEE WOULD NOT FORM THE PART OF THE TOTAL TURNOVER AS WELL AS EXPORT TURNOVER. THE A.O. ALSO EXCLUDED SA ID AMOUNT FROM THE PROFITS OF THE BUSINESS. THE LD. CIT (A) TREATED T HE SAME AS A BUSINESS INCOME AND HELD THAT EXPLANATION (BAA) DOES NOT APP LY AND HE ALSO HELD THAT THE SAID AMOUNTS SHOULD BE TREATED AS A PART O F THE TOTAL TURNOVER AS WELL AS EXPORT TURNOVER. THE LD. D.R. SUBMITS THAT THE TECHNICAL FEES WERE RECEIVED IN LIEU OF TRAINING OF THE FOREIGN PE RSONNEL AND HENCE DOES NOT RELATE TO THE BUSINESS INCOME OF THE ASSESSEE. THE ARGUMENT OF THE LD. COUNSEL IS THAT IT HAS TECHNICAL KNOWHOW FEES H AS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. ALTERNATIVELY HE SU BMITTED THAT IF THE ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 17 AMOUNT IS NOT CONSIDERED IN THE TOTAL TURNOVER THE SAME SHOULD ALSO NOT BE INCLUDED AS PART OF THE EXPORT TURNOVER. 33. WE HAVE HEARD THE PARTIES. AT THE FIRST INSTANC E WE FIND THAT THE TECHNICAL FEES OF ` 55.50 LAKHS RECEIVED BY THE ASSESSEE IS NOT ON ACC OUNT OF ANY SALES OR ANY SALES RELATED EXPORT. IN OUR O PINION IT IS A TOTALLY INDEPENDENT INCOME AND HAS NOTHING TO DO WITH THE E XPORT OF THE ASSESSEE. AT THE SAME TIME WE FIND FORCE IN THE AL TERNATE CONTENTION OF THE LD. COUNSEL THAT IF IT IS NOT TREATED AS A BUSI NESS INCOME THEN THE SAME SHOULD ALSO NOT BE INCLUDED IN THE TOTAL TURNO VER AS WELL AS EXPORT TURNOVER AND ACCORDINGLY WE ACCEPT ALTERNATE PLEA OF THE ASSESSEE AND DIRECT THE A.O. THAT TECHNICAL KNOWHOW FEES SHOUL D BE EXCLUDED FROM THE PROFIT OF THE BUSINESS AND SHOULD NOT ALSO INCLUDED IN THE TOTAL TURNOVER AS WELL AS IN THE EXPORT TURNOVER. ACCORDINGLY WE ALLOW GROUND NO.4 TAKEN BY THE REVENUE. 34. GROUND NO.5 READS AS UNDER:- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE DEPB BENEFIT AS EXPORT INCENTIVE AS PER PROVISO TO SECTI ON 80HHC(3) WITHOUT APPRECIATING THAT DEPB LICENSE IS NOT PART OF EXPORT INCENTIVE AND ACCORDINGLY THE SAME CANNOT FALL UN DER SECTION 28(IIIA) (IIIB) & (IIIC). 35. WE HAVE HEARD THE PARTIES. THE ISSUE OF THE DE PB HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT OF BOMBAY IN T HE CASE OF KALPATRU COLOURS & CHEMICALS LTD. 328 ITR 451. THE LD. COUN SEL SUBMITS THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. F OR FRESH ADJUDICATION IN THE LIGHT DECISION OF THE HONBLE HIGH COURT IN THE CASE OF KALPATRU COLOURS & CHEMICALS LTD. (SUPRA). THE LD. D.R. HAS NO OBJECTION. ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 18 36. WHILE DECIDING ASSESSEES APPEAL WE HAVE RESTO RED IDENTICAL ISSUE TO THE FILE OF THE A.O. (PARA.11 OF THIS ORDER). WE ACCORDINGLY RESTORE GROUND NO.5 TO THE FILE OF THE A.O. ON THE SAME DIR ECTIONS. ACCORDINGLY GROUND NO.5 IS ALLOWED FOR THE STATISTICAL PURPOSES . 37. IN THE RESULT BOTH THE APPEALS OF ASSESSEE AND REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 4 TH MARCH 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 4TH MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XIX MUMBAI. 4) THE CIT 19 MUMBAI. 5) THE D.R. C BENCH MUMBAI. BY ORDER ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 1064/M/2005 ITA 650/M/2005 ESSEL PROPACK LTD. 19 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 24.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 28.02.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER