Venkateshwara Hatcheries Pvt.Ltd.,, Hyderabad v. ACIT, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMBE R ITA NO. ASSESSMENT YEAR APPELLANT RESPONDENT 402/HYD/2004 2000-01 VENKATESWARA HATCHERIES LTD. HYDERABAD (PAN -AAACV 7247H) ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 3(4) HYDERABAD 342/HYD/2006 2002-03 VENKATESWARA HATCHERIES PVT LTD. HYDERABAD (PAN -AAACV 7247H) ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 3(4) HYDERABAD 350/HYD/2006 2002-03 ASST. COMMISSIONER OF INCOME-TAX CIRCLE 3(4) HYDERABAD VENKATESWARA HATCHERIES LTD. HYDERABAD (PAN -AAACV 7247 H) 1260/HYD/2006 2003-04 VENKATESWARA HATCHERIES P. LTD. HYDERABAD (PAN -AAACV 7247H) ASST. COMMISSIONER OF INCOME-TAX CIRCLE 3(3) HYDERABAD 1270/HYD/2006 2003-04 DY. COMMISSIONER OF INCOME-TAX CIRCLE 3(3) HYDERABAD VENKATESWARA HATCHERIES (P) LTD. HYDERABAD (PAN -AAACV 7247 H) 1162/HYD/2007 2003-04 VENKATESWARA HATCHERIES P. LTD. HYDERABAD (PAN -AAACV 7247H) ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 3(3) HYDERABAD APPELLANT BY : SHRI P.J.PARDIWALA RESPONDENT BY : SHRI T.VENKAT REDDY 2 O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THERE ARE SIX APPEALS IN ALL IN THIS BUNCH. FOUR O F THEM ARE BY THE ASSESSEE AND TWO OF THEM ARE BY THE REVENUE. THE RE ARE CROSS APPEALS ARISING OUT OF REGULAR ASSESSMENT PROCEEDINGS FOR T HE ASSESSMENT YEARS 2002-03 AND 2003-04 WHICH ARE DIRECTED A GAINST THE ORDERS OF THE CIT(A)-IV HYDERABAD DATED 15.2.2006 AN D 31.10.2006 RESPECTIVELY. ASSESSEE'S APPEAL FOR THE ASSESSMENT YEAR 2000- 01 IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV HYDERABAD DATED 3RD FEBRUARY 2004. THERE IS ONE MORE APPEAL OF THE ASSE SSEE FOR THE ASSESSMENT YEAR 2003-04 VIZ. ITA NO.1162/HYD/07 WHICH IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX I II HYDERABAD DATED 4.10.2007 PASSED UNDER SECTION 263 OF THE ACT. S INCE COMMON ISSUES ARE INVOLVED ALL THESE APPEALS ARE TAKEN UP TOGE THER FOR DISPOSAL BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.402/HYD/2004 (ASSESSEE'S APPEAL- A.Y. 2000-0 1) 2. BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE A LIMITE D COMPANY FILED ITS RETURN DECLARING 'NIL' INCOME UNDER THE NORM AL PROVISIONS OF THE ACT AND RS.1 87 35 530 UNDER SECTION 115JA OF THE ACT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER S.143(3) OF THE ACT WITH CERTAIN ADDITIONS/DISALLOWANCES. AGGRIEVED BY THIS ORDER THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). THE CIT (A) PARTLY ALLO WED THE APPEAL OF THE ASSESSEE BY CONFIRMING CERTAIN DISALLOWANCES MADE BY THE ASSESSI NG OFFICER. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BE FORE US. 3. FIRST GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS THAT THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF THE CLA IM OF THE ASSESSEE 3 IN RESPECT OF ELECTRICITY CHARGES OF RS.11 09 477 ON THE GROUND THAT THE LIABILITY WAS NOT ALLOWABLE UNDER S.43B OF THE ACT. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 1999-2000 IN ITA NO.400/HYD/04 DATED 24-8-2007. WE HAVE GONE THROUGH THE SAID ORDER AND FIND THAT THE FACTS AND THE CIRCUMSTANCES FOR THE YEA R UNDER APPEAL ARE SIMILAR. HENCE RESPECTFULLY FOLLOWING THE ABOVE D ECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE AND FOR THE REASONS MENTIONE D IN OUR ORDER DATED 24.8.2007 WE ALLOW THE CLAIM OF THE ASSE SSEE IN THIS REGARD. HENCE THIS GROUND OF THE ASSESSEE STANDS ALLOWED. 4. SECOND GROUND OF THE ASSESSEE IN THIS APPEAL IS THAT T HE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING O FFICER IN DISALLOWING THE EXPENSES PERTAINING TO THE ASSESSMENT YEAR 2000-01 BUT DEBITED IN THE ASSESSMENT YEAR 2001-02. AT THE TIME OF HEARING LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THIS GROUND. IT IS ACCORDINGLY REJECTED AS NOT PRESSED. 5. THIRD GROUND OF THE ASSESSEE IS THAT THE CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE ON ACCOUNT OF DELAYED P AYMENT OF CONTRIBUTION OF PF ESIC AND OTHER LABOUR WELFARE FU NDS. IT IS THE CONTENTION OF THE ASSESSEE THAT THOUGH THOSE PAYMENTS HAVE BEEN PAID BEYOND THE DUE DATE PRESCRIBED UNDER THE RELEVANT STA TUTES THEY WERE PAID WITHIN THE PREVIOUS YEAR ITSELF. WE FIND THAT T HIS ISSUE IS COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V/S. ALOM EXTRUSIONS LIMITED REPORTED IN 319 ITR 306 (SC) WHER EIN IT WAS HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B OF THE IN COME-TAX ACT BY THE FINANCE ACT 2003 OPERATED RETROSPECTIVELY W.E.F. 1 -4-1988 AND NOT PROSPECTIVELY FROM 1-4-2004. BY VIRTUE OF THE RATIO O F THE JUDGMENT 4 THOUGH THE PAYMENTS HAVE BEEN MADE BEYOND THE DUE DA TE SINCE THE SAME ARE PAID WITHIN THE PREVIOUS YEAR THEY ARE NOT LIABLE FOR DISALLOWANCE UNDER S. 43B OF THE ACT. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED. 6. FOURTH GROUND OF THE ASSESSEE IS THAT THE CIT (A) ER RED IN UPHOLDING THE AD-HOC DISALLOWANCE OF RS.5 00 000 OUT OF OFFICE AND GENERAL EXPENSES MADE BY THE ASSESSING OFFICER. THE ALTER NATIVE SUBMISSION OF THE ASSESSEE IS THAT THE DISALLOWANCE SHOULD HAV E BEEN RESTRICTED TO THE ITEMS SPECIFIED IN ASSESSMENT ORDER WHICH AGGREGATED TO RS.3 53 391 ONLY AND HENCE THERE WAS NO JUSTIFICATION TO MAKE AD HOC DISALLOWANCE OF RS.1 46 609 OVER AND ABOVE THE AMOUNT OF RS.3 53 391. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE. SINCE THE ASSESSING OFFICER IDENTIFIED IN THE ASSESSMENT ORDER ONLY AN AMOUN T OF RS.3 53 391 AS NOT RELATED TO BUSINESS ACTIVITIES OF THE ASSESSEE CONSID ERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN THE ABSENCE OF ANY JUSTIFICATION FOR FURTHER DISALLOWANCE OVER AND ABOVE T HIS AMOUNT WE FIND IT JUST AND PROPER TO RESTRICT THE DISALLOWANCE TO RS.3 53 391. THEREFORE THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 7. FIFTH GROUND OF THE ASSESSEE IS THAT THE CIT (A) ERR ED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLO WING THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM CAPITAL LOSS ARISING OUT OF EXTINGUISHMENT OF SHARES OF ERSTWHILE BALAJI FOODS AND F EEDS LTD. ON AMALGAMATION. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY WAS HOLDING 22 57 375 SHARES IN BALAJI FOO DS AND FEEDS LTD. VALUED AT RS.2 08 65 297. THE SAID SHARES WE RE SHOWN AS 5 INVESTMENTS IN THE BALANCE SHEET OF THE ASSESSEE COMPANY. DURING THE YEAR UNDER CONSIDERATION THERE WAS AMALGAMATION OF M/ S. BALAJI FOODS WITH ASSESSEE COMPANY AND THE AMALGAMATION TOOK PLACE ON 1.4.1999 AS PER THE DIRECTIONS OF THE HON'BLE A.P. HIGH COURT. P URSUANT TO THE AMALGAMATION WHILE THE ASSESSEE COMPANY ALLOTTED ITS OW N SHARES TO THE EXISTING SHARE-HOLDERS OF M/S. BALAJI FOODS ASSESSEE'S O WN SHARE HOLDING IN M/S. BALAJI FOODS STOOD EXTINGUISHED SINCE A SSESSEE CANNOT ALLOT ITS OWN SHARES TO ITSELF. THE ASSESSEE COMPANY WHIL E COMPUTING THE TAXABLE INCOME TREATED THE VALUE OF THE SHARES EX TINGUISHED AS LONG TERM CAPITAL LOSS. HOWEVER THE ASSESSING OFFICER DID NOT AGREE WITH THE SAME AND HELD THAT THE SAID TRANSACTION DID NOT CONSTITUT E 'TRANSFER' WITHIN THE MEANING OF S.2(47) OF THE INCOME-TAX ACT. IN SUPPORT OF THIS CONCLUSION HE RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF VANIA SILKS P. LTD. V/S. CIT(191 ITR 647). THE LEARN ED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REASONING GIVEN BY THE ASSESSING OFFICER FOR DISALLOWANCE MADE IS BASED MERELY ON THE DECISION OF THE APEX COURT NOTED ABOVE THOUGH THE SAME IS NO LONGER A GOOD LAW AND IT HAS BEEN REVERSED BY THE SUBSEQUENT DECISION OF THE APEX COURT IN THE CASE OF CIT V/S. GRACE COLLIS AND OTHERS (248 ITR 323). HENCE HE SUBMITTED THAT SURRENDER OF SHARES ON AMALGAMATION AMOUNTS TO EXT INGUISHMENT OF RIGHTS OF THE ASSESSEE AND IT INVOLVES TRANSFER. IN SUPP ORT OF THIS PROPOSITION LEARNED COUNSEL ALSO RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF SUSHILKUMAR R. MEHTA V/S. CIT( 154 CTR 70). THERE IS NO DISPUTE ABOUT THE LOSS AND THE CIT(A) SIMP LY RELIED ON THE PROVISIONS OF S.47(VI) OF THE ACT AND HELD THAT THE SA ID TRANSACTION IS NOT IN THE NATURE OF TRANSFER FOR THE PURPOSE OF CAPITAL G AINS UNDER S.45. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND ALSO SUBMITTED THAT THE AMALGAMATING COMPANY VIZ. M/S. BALAJI FOODS IS A FULLY OWNED 6 SUBSIDIARY OF SURVIVING ASSESSEE COMPANY AND S.47(VII) OF THE ACT SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE AND CONSEQ UENTLY THE TRANSACTION IN QUESTION CANNOT BE REGARDED AS 'TRANSFER' AND HENCE THE LOWER AUTHORITIES ARE RIGHT IN REJECTING THE ASSESSEES'S CLA IM FOR CAPITAL LOSS. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE LE ARNED CIT (A) IS JUSTIFIED IN UPHOLDING DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE LONG TERM CAPITAL LOSS ARISING ON ACCOUNT OF EXTINGUISHMENT OF SHARES OF ERSTWHILE BALAJI FOODS & FE EDS LIMITED ON AMALGAMATION. THE PROVISION OF SECTION 47(VII) OF THE ACT SQUARELY APPLIES TO THE CASE UNDER CONSIDERATION FOR THE REASON THAT THE SAID TRANSACTION CAN NOT BE REGARDED AS TRANSFER. THE ASSESSEE COM PANY AS THE AMALGAMATED COMPANY WHILE ISSUING ITS OWN SHARE S TO THE OTHER SHARE HOLDERS OF M/S. BALAJI FOODS IF IT HAS NOT ISSUED THE SAME IN RESPECT OF ITS OWN SHARE HOLDING IN M/S. BALAJI FOODS IT IS BECAUSE IT CANNOT ISSUE ITS OWN SHARES TO ITSELF. SIMPLY FOR THE RE ASON THAT IT COULD NOT ISSUE ITS OWN SHARES TO ITSELF AND CONSEQUENTLY ITS SHARE-HOLDING IN THE AMALGAMATING COMPANY VIZ. M/S.BALAJI FOODS STOOD EXTINGUISHED IT CANNOT BE SAID THAT IT SUFFERED ANY CAPITAL LOSS BECAUSE I T HAS IN FACT BECOME THE SUCCESSOR OF M/S. BALAJI FOODS INHERITING ALL TH E ASSETS AND LIABILITIES OF THE SAID AMALGAMATING COMPANY. IN ANY EVENT SINCE UNDER LAW NO ONE CAN NOT ENTER INTO ANY TRANSACTION WITH ON ES OWN SELF AND MUCH LESS SUFFER ANY LOSS OUT OF ONE'S OWN SELF NO LOSS CAN BE DETERMINED IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF EXT INGUISHMENT OF ITS SHARE HOLDING IN M/S. BALAJI FOODS UPON AMALGA MATION OF THAT COMPANY WITH THE ASSESSEE COMPANY. THE RATIO OF THE DECISI ON OF THE APEX COURT IN THE CASE OF CIT V/S. GRACE COLLIS AND OTH ERS (SUPRA) CITED 7 BY THE LEARNED COUNSEL FOR THE ASSESSEE HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE IN AS MUCH AS IN THAT CASE THERE ARE TH REE ENTITIES WITH TWO COMPANIES UPON AMALGAMATION RESULTED IN A N EW SUCCESSOR COMPANY. IN THIS VIEW OF THE MATTER AND CONSIDERING T OTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED VI EW THAT THE CIT (A) IS PERFECTLY JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD AND NO INFERENCE IS CALLED FOR. HE NCE WE CONFIRM THE ORDER OF THE CIT (A) AND DISMISS THE GROUND RAISED BY THE ASSESSEE. 11. SIXTH GROUND OF THE ASSESSEE IS THAT THE CIT (A) ER RED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLO WING THE CLAIM OF THE ASSESSEE IN RESPECT OF DEPRECIATION ON 'GOODWILL'. L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXTRA CONSIDERATION PA ID BY IT OVER THE NET WORTH IN THE PROCESS OF AMALGAMATION WAS PAYMEN T MADE FOR ACQUIRING ALL THE BUSINESS AND COMMERCIAL RIGHTS AND WOULD FIT INTO LANGUAGE OF THE DEFINITION OF 'INTANGIBLE ASSETS' GIV EN IN APPENDIX-I RULE 5 OF THE INCOME-TAX RULES AND THEREFORE WOULD BE ELIGIBLE FOR DEPRECIATION. IT WAS FURTHER CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CIT(A) WAS NOT CORRECT IN CONCLUDING THA T THE DETAILS OF VALUATION WAS NOT FURNISHED BY THE ASSESSEE. IN THIS R EGARD THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT HAD FUR NISHED THE SCHEME OF AMALGAMATION TO THE CIT(A) WHICH HAD MENTION ED THE VALUATION OF SHARES BY TWO FIRMS. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE CIT (A) WAS NOT CORRECT IN ST ATING THAT THE ASSETS ARE TAKEN OVER AT BOOK VALUES AND NOT REVALUED F IGURES AND CONSIDERATION PAID TO SHAREHOLDERS BY WAY OF PREFERENCE SHARES NEEDS TO BE COMPARED WITH THE REVALUED FIGURES OF ASSETS AND NOT AT BOOK VALUES. HE FURTHER SUBMITTED THAT FOR THE AMALGAMATION OF TH E COMPANIES IT IS NOT ALWAYS NECESSARY TO REVALUE THE ASSETS AND HENCE THER E IS NO GROUND 8 FOR DENYING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON GOODWILL. IT IS FURTHER SUBMITTED THAT THOUGH THIS VERY ISSUE CAME UP BE FORE THE TRIBUNAL IN THE APPEAL FOR THE ASSESSMENT YEAR 2001-02 NO ARGUMENTS WERE ADVANCED BY THE PARTIES BEFORE THIS TRIBUNAL FOR THAT YEAR AS JIT WAS MUTUALLY AGREED BY THE PARTIES THAT THIS ISSUE MAY BE DECIDED IN CONSONANCE WITH THE VIEW THAT MAY BE TAKEN BY THIS TRIB UNAL FOR THE ASSESSMENT YEAR UNDER APPEAL. HOWEVER THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2001-02 UPHELD THE DISALLOWANCE OF DEPRE CIATION ON GOODWILL BY RELYING UPON THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF R.G. KESWANI V/S. ACIT [ITA NO.1463/MUM/200 5] AND REJECTED THE REQUEST OF THE PARTIES FOR FOLLOWING THE VIEW THAT MAY BE TAKEN FOR THE ASSESSMENT YEAR 2000-01. IN SUPPORT OF HI S CONTENTIONS LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS- (A) SKYLINE CATERERS P.LTD. V/S ITO(306 ITR(AT) 369)- MUM (B) KOTAK FOREX BROKERAGE LTD. V/S. ACIT(ITA NO.2692 /MUM/2007) (C) BOSCH LTD. V/S. CIT(ITA NO.329/BANG/2009) (D) GURUJI ENTERTAINMENT NETWORK LTD. V/S. ACIT(14 S OT 556)-DEL. (E) HINDUSTAN COCA COLA BEVERAGES (P) LTD. V/S. DCIT (3 4 SOT 171) 12. ON THE OTHER HAND THE LEARNED DEPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF RIVAL PARTIE S AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND TH AT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.1251/HYD/04 DATED 19-6-2009 FOR ASSESSMENT YEAR 2001- 02 WHERE IN FOLLOWING THE DECISION OF BOMBAY BENCH OF THE TRIB UNAL IN THE CASE OF 9 R.G. KESWANI V/S. ACIT [ITA NO.1463/MUM/2005] DISALL OWANCE OF ASSESSEE'S CLAIM FOR THAT YEAR WAS UPHELD BY THE TRIBUNAL. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND KEEPIN G IN MIND THE PRINCIPLE OF CONSISTENCY IN THE ABSENCE OF ANY DISTINGUISHI NG FEATURES BROUGHT ON RECORD BY THE PARTIES WE PREFER TO FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2001-02 WHICH IN TURN AS NOTED ABOVE I S BASED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN TH E CASE OF R.G.KESWANI (SUPRA)) WE CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) AND REJECT TH IS GROUND TAKEN BY THE ASSESSEE. 14. THE LAST GROUND OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE BOOK PROFIT UNDER S.115JA BY ADDING TO THE BOOK PROFIT PROVISION FOR DECLINE IN VALUE OF INVESTMENT OF RS.17 06 250 AND PROVISION F OR BAD AND DOUBTFUL DEBTS OF RS.86 29 699 AS UNASCERTAINED LIABILI TY. 15. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISION FOR DECLINE IN VALUE OF INVESTMENT AND PROV ISION FOR BAD AND DOUBTFUL DEBTS DO NOT CONSTITUTE LIABILITY AND HENCE TH ERE IS NO QUESTION OF ADDING THE SAME UNDER CLAUSE (C) OF EXPLANATION TO SECTION 115JA AND PRAYED TO DIRECT THE ASSESSING OFFICER TO REDUCE THE PROVI SION FOR DECLINE IN VALUE OF INVESTMENT AND PROVISION FOR BAD AND DOU BTFUL DEBTS FROM THE COMPUTATION OF BOOK PROFITS AND THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT BOTH THE PROVISIONS I.E. PROVIS ION FOR DOUBTFUL DEBTS AND PROVISION FOR DIMINUTION IN THE VALUE OF IN VESTMENT WERE SPECIFIC PROVISIONS AND NOT AD-HOC PROVISIONS AND THEREFORE IF THESE PROVISIONS WERE CONSIDERED AS FOR MEETING THE LIABILITY THEY WERE 10 ASCERTAINED LIABILITY AND NOT UNASCERTAINED LIABILITY A ND IT WAS CONTENDED THAT THE ASSESSEE HAD FURNISHED THE PARTY WISE DETAILS OF BAD AND DOUBTFUL DEBTS VIDE ITS AUTHORIZED REPRESENTATIVE LETT ER DATED 11TH DEC. 2003. 16. ON THE OTHER HAND THE LEARNED DR WHILE SUPPORT ING THE ORDER OF THE CIT (A) CONTENDED THAT THE CIT (A) IS F ULLY JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER AND ARRIVIN G AT BOOK PROFIT UNDER S. 115JA BY ADDING TO THE BOOK PROFIT PROVISIO N FOR DECLINE IN VALUE OF INVESTMENT AND PROVISION FOR BAD AND DOUBTFU L DEBTS AS MENTIONED ABOVE. 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER THE I NSERTION OF CLAUSE [I] TO EXPLANATION UNDER SECTION 115JA OF THE ACT WITH RE TROSPECTIVE EFFECT FROM 1.4.1998 IN THE EXISTING LIST OF ADJUSTMENTS TH AT WERE THE ITEMS DEBITED TO THE PROFIT AND LOSS ACCOUNT BUT THE SAME HAS T O BE ADDED TO THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FO R THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER MAT ANY AMOUNT OR AMOUNTS THAT HAS BEEN SET ASIDE AS PROVISION OR FOR DIMINUTION IN THE VA LUE OF ANY ASSET THE SAME SHALL BE ADDED BACK TO THE BOOK PROFIT. IN VI EW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T (A) AND THE SAME IS CONFIRMED. THE CIT [A] IS FULLY JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD AND NO INTERFERENCE IS CALL ED FOR. THEREFORE THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 18. IN THE RESULT THE APPEAL BY THE ASSESSEE FOR ASSESSMEN T YEAR 2000-01 IS PARTLY ALLOWED. 11 ITA NO.342/HYD/2006 (ASSESSEE'S APPEAL- A.Y. 2002-0 3) 19. FIRST GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE UNDER SECTION 43B OF THE INCOME-TAX ACT OF RS.1 09 07 662. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL DATED 19TH JUNE 2009 IN ASSESSEE'S OWN CASE IN ITA NO.1251/HYD/04 FO R ASSESSMENT YEAR 2001-02 VIDE PARAS 35 TO 38 OF THE SAID O RDER. WE HAVE GONE THROUGH THE SAID ORDER OF THE TRIBUNAL AND FIND THE PAYMENTS MADE BY THE ASSESSEE ARE NOT IN THE NATURE OF ADVANCE P AYMENTS AND THOSE WERE ONLY PREPAID TAXES PAID BY THE ASSESSEE COMPANY AS PER THE DIRECTIONS OF THE RESPECTIVE REVENUE AUTHORITIES. MOREOV ER THE ADVANCE PAYMENT IS ALLOWABLE ON ACTUAL PAYMENT BASIS IRRESPECTIVE OF THE YEAR OF ACCRUAL OF LIABILITY OR METHOD OF ACCOUNTING FOLLOWED B Y THE ASSESSEE IN TERMS OF PROVISIONS OF S.43B OF THE ACT. THEREFORE TH ERE CANNOT BE ANY DISALLOWANCE ON THAT ACCOUNT UNDER S. 43B OF THE ACT. FO R THESE REASONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE NOTED ABOVE WE ALLOW THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. 20. GROUND NO.2 IS WITH REGARD TO DISALLOWANCE OF EXP ENSES PERTAINING TO ASSESSMENT YEAR 2002-03 BUT DEBITED IN AS SESSMENT YEAR 2003-04 AMOUNTING TO RS.19 09 076. WE FIND THAT AS PE R THE ACCOUNTING PRINCIPLE THE EXPENDITURE IS DEDUCTIBLE IN THE YEAR T O WHICH IT RELATES. THE INCOME HAS TO BE COMPUTED IN EACH YEAR AGAINST THE RELATABLE EXPENDITURE OF THAT YEAR ONLY. WE DO NOT SEE ANY MER IT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR ALLOWING EXPE NDITURE OF EARLIER YEAR IN THE ASSESSMENT YEAR UNDER CONSIDERATION A ND THEREFORE THE LOWER AUTHORITIES. IN OUR OPINION ARE RIGHT IN DISALLOWING THE SAID EXPENDITURE. THE ASSESSEE FAILS ON THIS GROUND. 12 21. THIRD GROUND OF THE ASSESSEE IS WITH REGARD TO DISAL LOWANCE OF ELECTRICITY CHARGES OF RS.7 91 415. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUND OF T HE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2000-01 IN ITA NO.402/HYD/20 04 AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE VIDE PARA-3 OF THIS ORDER ABOVE. FOR THE DETAILED REASONING GIVEN IN THAT CONT EXT IN PARA-3 ABOVE WE ALLOW THIS GROUND OF THE ASSESSEE. 22. FOURTH AND FIFTH GROUNDS OF APPEAL ARE WITH REG ARD TO DISALLOWANCE OUT OF ADVERTISEMENT EXPENSES ON DEATH ANNI VERSARY OF FOUNDER MEMBER RS.4 05 451 AND OUT OF ADVERTISEMENT E XPENSES OF RS.4 00 000 OUT OF THE SPONSORSHIP RESPECTIVELY. WE FIN D THAT SIMILAR ISSUE WAS CONSIDERED BY THE BENCH OF THIS TRIBUNAL IN ASSESSEE 'S OWN CASE FOR ASSESSMENT YEAR 2001-02 IN ITA NO.1251/HYD/04 WH EREIN VIDE ITS ORDER DATED 19TH JUNE 2009 ALLOWED THE EXPENDIT URE AND DIRECTED THE ASSESSING OFFICER TO APPORTION THE EXPENDITURE INCUR RED ON THE OCCASION OF THE DEATH ANNIVERSARY OF THE FOUNDER MEMBER AMONGST VARIOUS GROUP COMPANIES AND DISALLOW THE EXPENDITURE RE LATED TO OTHER GROUP COMPANIES IN THE HANDS OF THE ASSESSEE COMPANY. SINCE AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THE SAID DIRECTIONS OF THE TRIBUNAL WITH REGARD TO APPORTIONMENT OF THE AD VERTISEMENT EXPENDITURE AMONGST THE GROUP COMPANIES HAS ALREADY BEE N COMPLIED BY THE ASSESSEE COMPANY WE ALLOW THE GROUND OF THE ASSESSEE FOLLOWING OUR EARLIER ORDER NOTED ABOVE WITHOUT ANY FURTHER D IRECTIONS IN THIS REGARD. HENCE BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 23. SIXTH GROUND OF APPEAL IS RELATING TO THE DISALL OWANCE OF INTEREST UNDER S. 36(1)(III) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT FOR THE PURPOSE OF ALLOWABILITY OF I NTEREST UNDER S. 13 36(1)(III) THE PURPOSE OF EXPENSES I.E. WHETHER CAPITA L EXPENSES OR REVENUE EXPENSES IS WHOLLY IMMATERIAL AND WHAT IS OF SI GNIFICANCE IS THAT THE AMOUNT SHOULD HAVE BEEN UTILISED FOR THE PUR POSE OF BUSINESS AND THIS FACT WAS NOT DISPUTED BY THE ASSESSING OFFICER. IT IS FURTHER SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF APEX COURT IN THE CASE OF DCIT V/S. CORE HEALTH CARE LIMITED (167 TAXMAN 206). IT IS FURTHER SUBMITTED T HAT THE PROVISO INTRODUCED IN SECTION 36(1)(III) OF THE ACT DISALLOWING THE INTEREST EXPENDITURE UP TO THE DATE OF PUTTING THE ASSET INTO USE IS EFFECTIVE ONLY FROM ASSESSMENT YEAR 2004-05 AND HENCE THE SAME IS NOT REL EVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE WE AGREE THA T THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE O F CORE HEALTH (SUPRA). RESPECTFULLY FOLLOWING THE SAME. WE ACCORDINGL Y ALLOW THE GROUNDS RAISED ON THIS ASPECT. HOWEVER THE ASSESSEE IS NOT E LIGIBLE TO CLAIM DEPRECIATION ON CAPITALIZATION OF INTEREST. 24. SEVENTH GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF DEPRECIATION ON 'GOODWILL'. WE HAVE ALREADY DEALT W ITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF THE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSMENT YEAR 2000-01 IN ITA NO.402/HY D/2004 AND VIDE PARA 13 HEREINABOVE DECIDED THIS ISSUE AGAINST T HE ASSESSEE. FOR THE DETAILED REASONING GIVEN IN THAT CONTEXT IN PARA- 13 ABOVE WE CONFIRM THE DISALLOWANCE AND REJECT GROUNDS OF THE ASSESSEE ON THIS ISSUE. 25. THE GROUND NO. 8(A) RELATES TO WHETHER 90% OF MISCELLANEOUS INCOME OF RS.79 61 047 IS TO BE EXCLUDED F OR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER S. 80HHC UNDER THE EX PLANATION 14 (BAA) TO SECTION 80HHC OF THE ACT. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE NATURE OF INCOME CLEARLY INDICA TES THAT ALL THE INCOMES EXCEPT COMMISSION ON SALE OF POULTRY EQUIPMENT ARE IN THE NATURE OF BUSINESS INCOME AND THE SAME CANNOT BE EQUATE D WITH BROKERAGE COMMISSION INTEREST RENT ETC. WHICH ARE PA SSIVE INCOME BEARING THE CHARACTER OF INCOME FROM 'OTHER SOURCE' RATH ER THAN 'BUSINESS INCOME'. IF AT ALL IT HAS TO BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER S. 80HHC OF THE ACT ONLY THE NET INCOME IS TO BE EXCLUDED. ON THE OTHER HAND THE LEARN ED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE AUTHORITI ES BELOW. 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS AS HATCHERIES. NONE OF THE ITE MS OF DISPUTED INCOME CAN BE SAID TO HAVE BEEN DERIVED FROM THE HATCHE RIES BUSINESS OF THE ASSESSEE. THAT BEING SO WE AGREE WITH THE LOWER AUTHORITIES THAT THE SAID INCOME HAS TO BE TREATED AS MISCELLANEOUS INCOME ONLY LIABLE TO BE EXCLUDED IN TERMS OF EXPLANATION TO S.80HHC. HO WEVER WE AGREE WITH THE ALTERNATIVE CONTENTION OF THE ASSESSEE AND DIR ECT THE ASSESSING OFFICER TO TAKE INTO ACCOUNT ONLY THE NET INCOME UNDER VARIOUS HEADS FOR PURPOSES OF EXCLUSION IN TERMS OF EXPLANATION TO S.80HHC OF THE ACT. ASSESSEE'S GROUNDS ON THIS ISSUE ARE ALLOWED IN PART. 27. GROUND NO. 8(B) RELATES TO DEDUCTION UNDER S. 80 IA OF RS.3 98 83 430. THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER OF REDUCING THE DEDUCTION CLAIMED UNDER S. 80IA OF THE ACT IN RESPECT OF POONAPALLY FEED MILL AMOUNTING TO 1 19 65 029 RELYING ON THE PROVISIONS OF SECTION 80IA(9) OF THE ACT AND FURTHER SUBM ITTED THAT NO 15 AMOUNT IS REQUIRED TO BE REDUCED FROM THE DEDUCTION CO MPUTED UNDER S. 80HHC. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY HA D NOT MADE ANY EXPORT OF THE GOODS MANUFACTURED IN THE UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. IF THE GOODS M ANUFACTURED IN THE UNITS AVAILING DEDUCTION UNDER SECTION 80IA OF THE ACT WERE NOT EXPORTED THEN NATURALLY THE GOODS MANUFACTURED IN T HOSE UNITS WOULD NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF COMPUTATIO N OF DEDUCTION UNDER S. 80HHC OF THE ACT. AS PER THE AUDITOR'S REPORT IN FORM 10CCB THE AUDITORS CERTIFIED THAT THE ASSESSEE COMPANY CLAIMED DE DUCTION UNDER S. 80IA IN RESPECT OF POONAPALLY FEED MILL UNIT AND THEREFORE THE QUESTION OF APPLYING THE PRINCIPLES LAID DOWN UNDER SECT ION 80IA (9) OF THE ACT WHILE COMPUTING THE DEDUCTION UNDER S. 80HHC DO ES NOT APPLY. OUR VIEW IN THIS BEHALF IS FORTIFIED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF GODREJ AGROVET LIMITED V/S. ACIT (290 I TR 252). IN THE CIRCUMSTANCES WE SET ASIDE THE ORDER OF THE CIT(A) ON THI S ISSUE AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION UND ER S.80IA OF THE ACT. ASSESSEE'S GROUNDS ON THIS ISSUE ARE ACCORDINGLY ALLOW ED. 28. GROUND NO.8(C) IS WITH REGARD TO SET-OFF OF UNA BSORBED DEPRECIATION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING O FFICER OF SETTING OFF OF THE UNABSORBED DEPRECIATION IN ARRIVING AT THE PROFITS ELIGIBLE FOR DEDUCTION UNDER S. 80HHC OF THE ACT AND FURTHER SUBMITTE D THAT FOR THE PURPOSE OF COMPUTING 'PROFITS OF THE BUSINESS' FOR CALCULAT ING DEDUCTION UNDER S. 80HHC THE UNABSORBED DEPRECIATION IS NOT REQUI RED TO BE SET OFF AGAINST THE PROFITS OF THE BUSINESS. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF T HE AUTHORITIES BELOW. 16 29. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE APEX CO URT IN THE CASE OF CIT V/S. SHIRKE CONSTRUCTION EQUIPMENT LIMITED ( 291 ITR 380) WHEREIN IT WAS HELD THAT IN DETERMINING THE BUSINESS PR OFITS FOR PURPOSE OF DEDUCTION UNDER S. 80HHC OF THE ACT THE UNABSORBED B USINESS LOSSES OF EARLIER YEARS UNDER S.72 SHOULD BE SET OFF. RESPECTF ULLY FOLLOWING THE AFORESAID DECISION OF APEX COURT WE UPHOLD THE ORDERS OF THE LOWER AUTHORITIES AND REJECT THE GROUND RAISED BY THE ASSESSEE O N THIS ISSUE. 30. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1260/HYD/2006 (ASSESSEE'S APPEAL- A.Y. 2003- 04) 31. FIRST AND SECOND GROUNDS RAISED IN THIS APPEAL ARE W ITH REGARD TO AD-HOC DISALLOWANCE OUT OF ADVERTISEMENT EXPE NSES ON DEATH ANNIVERSARY OF FOUNDER MEMBER AMOUNTING TO RS.7 85 20 0 AND OUT OF ADVERTISEMENT EXPENSES RS.2 50 000 RESPECTIVELY. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE CORRESPOND ING GROUNDS OF THE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSMENT YEAR 20 02-03 IN ITA NO.342/HYD/2006 AND VIDE PARA 22 HEREINABOVE D ECIDED THE SAME THIS ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE DETAILED R EASONING GIVEN IN THAT CONTEXT IN PARA-22 ABOVE WE ALLOW GROUNDS OF TH E ASSESSEE ON THIS ISSUE. 32. THIRD GROUND OF APPEAL RELATES TO DISALLOWANCE O F INTEREST UNDER S. 36(1)(III) OF THE ACT AMOUNTING TO RS.49 97 031. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF THE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSME NT YEAR 2002-03 IN ITA NO.342/HYD/2006 AND VIDE PARA-23 HER EINABOVE 17 DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE DET AILED REASONING GIVEN IN THAT CONTEXT IN PARA-23 ABOVE WE ALLOW GRO UNDS OF THE ASSESSEE ON THIS ISSUE. 33. FOURTH GROUND OF APPEAL IS WITH REGARD TO DISAL LOWANCE OF DEPRECIATION ON 'GOODWILL'. WE HAVE ALREADY DEALT W ITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF THE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSMENT YEAR 2000-01 IN ITA NO.402/HYD /2004 AND VIDE PARA 13 HEREINABOVE DECIDED THE THIS ISSUE IN AG AINST THE ASSESSEE CONFIRMING THE DISALLOWANCE MADE BY THE LOWER AU THORITIES. FOR THE DETAILED REASONING GIVEN IN THAT CONTEXT IN P ARA-13 ABOVE WE CONFIRM THE DISALLOWANCE AND REJECT THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. 34. NEXT GRIEVANCE OF THE ASSESSEE COVERED BY GROUND N O.5(A) IN THIS APPEAL RELATES TO WHETHER 90% OF MISCELLANEOUS I NCOME OF RS.1 19 55 954 HAS TO BE CONSIDERED TO BE CONSIDERED FOR EXCLUSION IN TERMS OF EXPLANATION TO S.80HHC. WE HAVE ALREADY DEA LT WITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF T HE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSMENT YEAR 2002-03 IN IT A NO.342/HYD/2006 AND VIDE PARA 26 HEREINABOVE. FOR THE DETAILED REASONING GIVEN IN THAT CONTEXT IN PARA-26 ABOVE WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE RELIEF UNDER S.80HHC IN ACCORDANCE WITH THE DIRECTIONS NOTED ABOVE FOR THE ASSESSMENT YEAR 2002-03. ASSESSEE'S GROUNDS ON THIS ISSUE ARE PARTLY ALLOWED. 35. THE NEXT GRIEVANCE OF THE ASSESSEE COVERED BY GROU ND NO.5(B) IN THIS APPEAL IS WHETHER REDUCTION OF THE REL IEF UNDER S.80IA OF RS.1 02 21 640 IS TO BE MADE FOR THE PURPOSES OF COMPUTI NG RELIEF UNDER 18 S.80HHC IN TERMS OF THE PROVISIONS OF S.80IA(9). WE H AVE ALREADY DEALT WITH THESE ISSUES IN THIS ORDER IN PARAGRAPH-27 A ND ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE. FOLLOWING THE SAME REASONING MENTIONED ABOVE WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE FOR THIS YEAR ALSO AND DIRECT THE ASSESSING OFFICER TO RECOMPUT E THE DEDUCTION UNDER S.80IA OF THE ACT. ASSESSEE'S GROUNDS ON THIS ISSUE ARE ACCORDINGLY ALLOWED. 36. THE LAST GROUND OF APPEAL IS WITH REGARD TO IN TEREST UNDER SECTION 234D OF THE ACT. WE FIND THAT THE ISSUE IS SQUAREL Y COVERED BY THE DECISION OF DELHI ITAT SPECIAL BENCH IN THE CASE OF I TO VS. EKTA PROMOTERS PRIVATE LIMITED IN ITA NO. 2551-2553/DEL/2 006 DATED 11-7- 2008 WHEREIN IT WAS HELD THAT THE INTEREST UNDER S. 2 34D COULD NOT BE CHARGED IN RESPECT OF ASSESSMENT YEARS FALLING PRIOR TO ASSE SSMENT YEAR 2004-05. RESPECTFULLY FOLLOWING THE SAID DECISION WE HOLD THAT THE LOWER AUTHORITIES ARE NOT CORRECT IN LEVYING INTEREST O N THE ASSESSEE- COMPANY UNDER S. 234D OF THE ACT IN THE YEAR UNDER CON SIDERATION. HENCE THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 37. IN THE RESULT THE APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.350/HYD/2006 (REVENUE'S APPEAL- A.Y. 2002-03 ) 38. GROUND NOS. 1 AND 6 RAISED IN THIS APPEAL ARE GEN ERAL IN NATURE AND THEY REQUIRE NO SEPARATE ADJUDICATION. 39. GROUND NOS. 2 3 AND 4 ARE WITH REGARD TO EXCLU SION OF SALES TAX FROM TURNOVER. THE LEARNED DEPARTMENTAL REPRESE NTATIVE CONTENDED THAT THE CIT (A) IS NOT JUSTIFIED IN DELETING SALES-TAX OF RS.2 44 08 085 FROM TOTAL TURNOVER FOR THE PURPOSE OF WORKING OUT T HE DEDUCTION UNDER 19 S. 80HHC. HE SUBMITTED THAT THE CIT(A) OUGHT TO HAVE A PPRECIATED THE DEFINITION OF THE TERM 'TOTAL TURNOVER' IN EXPLANAT ION (BA) TO SECTION 80HHC (4B) WHICH SPECIFIES THAT THE SUMS WHICH ARE NOT INCLUD ED IN 'TOTAL TURNOVER'. IT WAS FURTHER CONTENDED THAT THE C IT(A) OUGHT TO HAVE APPRECIATED THAT 'SALES-TAX' IS NOT SPECIFIED TO BE INCL UDED IN THE DEFINITION OF THE TERM TOTAL TURNOVER IN THE EXPLAN ATION TO (BA) TO SECTION 80HHC (4B) OF THE ACT. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT (A) ON THIS ISSUE. 40. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'B LE SUPREME COURT IN THE CASE OF CIT V/S. LAKSHMI MACHINE WORKS (290 ITR 667). RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON'BLE SUP REME COURT WE DISMISS THESE GROUNDS RAISED BY THE REVENUE. 41. FIFTH GROUND OF APPEAL OF THE REVENUE IS WITH R EGARD TO DEDUCTION UNDER S. 80IA OF THE ACT. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF T HE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSMENT YEAR 2002-03 IN IT A NO.342/HYD/2006 AND VIDE PARA 27 HEREINABOVE WE HA VE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND DIRECT ED THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION UNDER S.80IA IN ACCOR DANCE WITH THE DIRECTIONS GIVEN BY US IN THAT CONTEXT. IN THIS VIEW OF THE MATTER WE FIND NO MERIT IN THE GROUNDS OF THE REVENUE ON THIS ISSUE W HICH ARE ACCORDINGLY REJECTED. 42. IN THE RESULT THE APPEAL BY THE REVENUE FOR TH E ASSESSMENT YEAR 2002-03 STANDS DISMISSED. 20 ITA NO.1270/HYD/2006 (REVENUE'S APPEAL- A.Y. 2003-0 4) 43. GROUND NOS. 1 AND 7 RAISED IN THIS APPEAL ARE GEN ERAL IN NATURE AND THEY REQUIRE NO ADJUDICATION. 44. SECOND GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE OF EXPENSES PERTAINING TO ASSESSMENT YEAR 2003-04 BUT DEBIT ED IN ASSESSMENT YEAR 2004-05. THE LEARNED DEPARTMENTAL REPRE SENTATIVE SUPPORTING THE ORDER OF THE ASSESSING OFFICER SUBMITTED T HAT THE CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE WI TH REGARD TO THE EXPENSES PERTAINING TO ASSESSMENT YEAR 2003-04 BUT DEBIT ED IN THE ASSESSMENT YEAR 2004-05 DISALLOWED BY THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMI TTED THAT THE VIEW TAKEN BY THE ASSESSING OFFICER MERITS A RECONSIDERATIO N AND FURTHER SUBMITTED THAT AFTER DUE EXAMINATION OF EXPENSES THE ASSESSEE HAD MADE A SPECIFIC CLAIM OF SUCH EXPENSES DURING THE COURSE OF SCRUTINY PROCEEDING. IN THE CIRCUMSTANCES THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE SAME AND SHOULD HAVE ALLOWED THE DEDUCTIO N AS THE EXPENSES PERTAINED TO ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMITTED THAT IT IS A SETTLED LEGAL POSITION N OW THAT THE TREATMENT ACCORDED IN BOOKS OF ACCOUNTS IS NOT RELEVANT T O DETERMINE THE ALLOWABILITY OF EXPENSES AND THE ALLOWABILITY IS I NDEED IS GOVERNED BY THE TAX LAWS AND CANNONS OF TAXATION. 45. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UND ISPUTED FACT THAT THE EXPENSES IN QUESTION RELATE TO THE ASSESSMENT YEAR 200 3-04 THOUGH THE SAME WERE DEBITED IN THE BOOKS OF ACCOUNT IN THE ASS ESSMENT YEAR 2004-05. IT IS A SETTLED POSITION OF LAW THAT ENTRIES IN THE BOOKS OF 21 ACCOUNT ALONE ARE NOT DETERMINATIVE OF THE YEAR IN WH ICH RELEVANT EXPENDITURE HAS TO BE ALLOWED. IN THIS VIEW OF THE MATTER CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERI NG THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING WE ARE OF THE OPINION THAT THE CIT(A) IS PERFECTLY J USTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE AND NO INTERFERENCE IS CALLED FOR. T HIS GROUND OF THE REVENUE IS THEREFORE DISMISSED. 46. THIRD GROUND OF APPEAL IS WITH REGARD TO DISALL OWANCE OF ENTRY TAX. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTING THE ORDER OF THE ASSESSING OFFICER SUBMITTED T HAT THE CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE. O N THE OTHER HAND THE LEARNED COUNSEL FOR HE ASSESSEE SUBMITTED THAT ENTRY TAX IS A STATUTORY LIABILITY AND THE MOMENT DEMAND WAS RAISED AGAINST THE ASSESSEE IT BECOMES AN ALLOWABLE DEDUCTION AND IT WAS ALLO WABLE EVEN IN TERMS OF S.43B OF THE ACT SINCE THE SAID AMOUNT HAS ACTUALLY BEEN PAID. 47. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS O N THIS ISSUE WE FIND THAT THAT THE CIT (A) IS PERFECTLY JUSTIF IED IN ALLOWING THE CLAIM OF THE ASSESSEE AND NO INTERFERENCE IS CALLED FOR. ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT (A) ON THIS ISSUE AND DIS MISS THE GROUND RAISED BY THE REVENUE. 48. FOURTH GROUND OF APPEAL IS WITH REGARD TO DISAL LOWANCE OF DEPRECIATION AT 40% ON POULTRY SHEDS TREATING THE SAME AS PLANT AND MACHINERY INSTEAD OF 10%. THE LEARNED DEPARTMENTAL RE PRESENTATIVE STRONGLY RELYING ON THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN ALLOWING DEPRECIATION AT H IGHER RATE TREATING 22 THE POULTRY SHEDS AS PLANT AND MACHINERY. THE LEARNE D COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT BASED ON FU NCTIONAL TEST POULTRY SHED CONSTITUTES 'PLANT' AND ACCORDINGLY DEPRECIA TION OUGHT TO HAVE BEEN GRANTED AT THE RATE APPLICABLE TO PLANT AS DONE BY THE CIT(A). 49. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE G ONE THROUGH THE ORDER OF THE CIT (A) ON THIS ISSUE AND FIND THAT THE CIT (A) IS PERFECTLY JUSTIFIED IN DIRECTING ALLOWANCE OF DEPRECIATION ON POU LTRY SHEDS AT THE RATE APPLICABLE TO PLANT. WE ACCORDINGLY UPHOLD THE O RDER OF THE CIT(A) AND REJECT THE GROUND TAKEN BY THE REVENUE. 50. FIFTH GROUND OF APPEAL IS WITH REGARD TO EXCLUSIO N OF SALES TAX FROM TOTAL TURNOVER WHILE WORKING OUT THE DEDUCTION UNDER S. 80HHC OF THE ACT. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 2002-03 IN ITA NO.350/HYD/2006 AND VIDE PARA 3 9 HEREINABOVE WE HAVE CONFIRMED THE VIEW TAKEN BY THE CIT(A) FOR T HAT YEAR AND REJECTED THE GROUNDS OF THE REVENUE. IN THIS VIEW OF THE MATTER FOR THE REASONS GIVEN IN PARA-39 ABOVE WE FIND NO MERIT IN T HE GROUNDS OF THE REVENUE ON THIS ISSUE FOR THE ASSESSMENT YEAR 2003-04 AS W ELL. WE ACCORDINGLY REJECT THE SAME. 51. SIXTH GROUND OF APPEAL IS REGARDING ELIGIBILITY OF DEDUCTION UNDER S. 80IA OF THE ACT. WE HAVE ALREADY DEALT WIT H THIS ISSUE WHILE DEALING WITH THE CORRESPONDING GROUNDS OF THE ASSESSEE ON THIS ISSUE IN ITS APPEAL FOR ASSESSMENT YEAR 2002-03 IN ITA NO.342/HYD /2006 AND VIDE PARA 27 HEREINABOVE WE HAVE SET ASIDE THE ORDER S OF THE LOWER AUTHORITIES ON THIS ISSUE AND DIRECTED THE ASSESSING OFFICER TO RECOMPUTE 23 THE DEDUCTION UNDER S.80IA IN ACCORDANCE WITH THE DIRECT IONS GIVEN BY US IN THAT CONTEXT. IN THIS VIEW OF THE MATTER WE FIN D NO MERIT IN THE GROUNDS OF THE REVENUE ON THIS ISSUE WHICH ARE ACCORDING LY REJECTED. 52. IN THE RESULT THE APPEAL BY THE REVENUE FOR TH E ASSESSMENT YEAR 2003-04 STANDS DISMISSED. ITA NO.1162/HYD/2007 (ASSESSEE'S APPEAL- A.Y. 2003- 04) 53. GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL WHICH I S DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCO ME TAX-III HYDERABAD PASSED UNDER S.263 OF THE INCOME-TAX ACT 19 61 ARE AS UNDER:- '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT-III HYDERABAD (HEREINAFTER REFERRED TO AS 'CIT') HAS ERRED IN PASSING THE ORDER UNDER S. 143(3) DATED 31 -10-2006 TO VERIFY THE PROFITS OF FEED DIVISION. 2. THE ASSESSEE SUBMITS THAT SETTING ASIDE THE ASSE SSMENT ORDER BASED ON SURMISES AND CONJECTURE IS ERRONEOUS AND B AD IN LAW. 3. THE ASSESSEE SUBMITS THAT IT HAD FURNISHED THE R ELEVANT INFORMATION IN FORM OF 10CCB OF AND THE ASSESSING O FFICER HAD APPLIED HIS MIND WHILE PASSING THE ASSESSMENT ORDER AND ALLOWED THE DEDUCTION UNDER S. 80IA. HENCE THE SAID ORDER CANNOT BE SAID TO BE ERRONEOUS. 4. THE ASSESSEE SUBMITS THAT THE ISSUE OF DEDUCTION UNDER S. 80IA HAS BEEN A PART OF CIT(A)'S ORDER AND HENCE THE ASS ESSMENT ORDER HAS MERGED WITH CIT(A)'S ORDER. HENCE THE O RDER PASSED BY CIT IS BAD IN LAW. 5. THE ASSESSEE SUBMITS THAT PASSING THE ORDER UND ER S. 263 TO VERIFY THE ISSUE OF PROFIT OF FEED DIVISION ITSELF IS A VAGUE FINDING AND ORDER PASSED ONLY FOR THAT PURPOSE IS BAD IN LA W. 6. THE ASSESSEE SUBMITS THAT CIT CANNOT SUBSTITUTE HIS JUDGMENT OVER THAT OF THE DECISION OF THE ASSESSING OFFICER. 24 7. THE ASSESSEE SUBMITS THAT IF THE PROCEEDING UNDE R S. 263 IS INITIATED PURSUANT TO AUDIT OBJECTION THE SAME IS AGAIN BAD IN LAW. 8. THE ASSESSEE THEREFORE PRAYS YOUR HONOUR THAT O RDER PASSED UNDER S. 263 BE SET ASIDE AND CANCELLED.' 54. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEDUCTION UNDER S.80IA OF THE ACT OF RS.1 02 21 640 F OR ITS FEED MILL UNIT AT POONAPALLY TAMIL NADU. THE ASSESSING OFFICER WHILE PASSING THE ORDER UNDER S. 143(3) OF THE ACT ALLOWED THE CLAIM OF THE A SSESSEE FOR DEDUCTION UNDER S. 80IA OF THE ACT IN ITS ENTIRETY. T HE CIT OBSERVING THAT THE ASSESSING OFFICER ALLOWED THE DEDUCTION UNDER S. 80IA OF THE ACT WITHOUT VERIFYING THE DETAILS REGARDING THE INCOME A ND EXPENDITURE OF THE POONAPALLY UNIT AND THERE IS POSSIBILITY OF GRANTI NG OF EXCESS DEDUCTION UNDER S. 80IA BY THE ASSESSING OFFICER THE CO MMISSIONER OF INCOME TAX HELD THAT THE ORDER PASSED UNDER S. 143(3) OF THE ACT ON 24TH FEBRUARY 2006 IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. THE COMMISSIONER OF INCOME TAX ACCORDINGLY SET ASIDE THE ORDER OF ASSESSMENT ON THIS ISSUE AND RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FURTHER VERIFICATION AND ASSESSME NT IN THIS REGARD. AGGRIEVED BY THIS ORDER THE ASSESSEE IS IN AP PEAL BEFORE US. 55. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY FURNISHED AUDIT REPORT IN FORM 10CCB CLAI MING THE DEDUCTION UNDER S. 80IA ALONG WITH THE RETURN OF INCO ME. THE SAID REPORT PROVIDED THE INFORMATION ABOUT THE ELIGIBILI TY LIKE TURNOVER PLANT AND MACHINERY AND PROFITABILITY ETC. AND HENCE THE FI NDINGS OF THE COMMISSIONER OF INCOME TAX THAT ASSESSING OFFICER DID NOT E XAMINE THE INCOME AND EXPENDITURE ACCOUNT OF POONAPALLY UNIT ARE NOT CORRECT. A COPY OF THE LETTER ISSUED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER S. 143(3) OF THE ACT IS FURN ISHED AT PAGE NO.24 OF THE PAPER BOOK AND IT IS SUBMITTED THA T THE ASSESSING 25 OFFICER RAISED VARIOUS ISSUES IN THE SAID LETTER WHICH INCL UDED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER S.80IA. HE SUBMI TTED THAT THE ASSESSEE FURNISHED RELEVANT INFORMATION TO THE ASSESSIN G OFFICER IN RESPONSE TO THE SAID LETTER AND IN TURN THE ASSESSING OFFICER HAD APPLIED HIS MIND WHILE PASSING THE ASSESSMENT ORDER AND A LLOWED THE DEDUCTION UNDER S. 80IA SUBJECT TO CERTAIN ADJUSTMENTS. IN THESE CIRCUMSTANCES HE SUBMITTED THAT THE ORDER UNDER S. 263 P ASSED BY THE COMMISSIONER OF INCOME TAX WITH A DIRECTION TO VERIFY T HE ISSUE OF PROFIT FROM POONAPALLY UNIT ITSELF IS LEGALLY NOT TENABLE AND VAGUE. HE SUBMITTED THAT THE COMMISSIONER IN THE GUISE OF EXERCISI NG JURISDICTION UNDER S.263 CANNOT SUBSTITUTE HIS JUDGMENT FOR THE DECI SION OF THE ASSESSING OFFICER. IN THIS VIEW AOF THE MATTER HE SUBMIT TED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX IS LIABLE TO BE CANCELLED. IN SUPPORT OF THESE ARGUMENTS THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- 1) SALORA INTERNATIONAL VS. ACIT (2 SOT 704 (DEL) 2) CIT VS. TRUSTEES OF ANUPAM CHARITABLE TRUST (167 ITR 12 9) (RAJ). 3) VENKATAKRISHNA RICE COMPANY VS. CIT (163 ITR 129) (M AD.) 4) CIT VS. BHAGAT SHYAM & COMPANY (55TAXMAN 163) (ALL) 5) CIT VS. GOEL PRIVATE FAMILY SPECIFIC TRUST (35 TAXMAN 522) (ALL) 56. ON THE OTHER HAND THE LEARNED DEPARTMENTAL RE PRESENTATIVE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX AND SUBMITTED THAT THE ORDER OF THE CIT IN RESTORING THE ISSUE TO T HE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE PROFITS DECLARED BY THE ASSESSEE IS IN ORDER. HE RELIED ON THE FOLLOWING DECISIONS:- 1. SMT. TARA DEVI AGGARWAL VS. CIT (88 ITR 323) (SC) 26 2. CIT VS. SMT. PUSHPA DEVI (173 ITR 445) (PATNA) 3. ADDL. CIT VS. MUKUR CORPORATION (111 ITR 312) (GUJ.) 4. RAMPYARI DEVI SARAOGI VS.CIT (67 ITR 84) (SC) 57. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY HAD FURNISHED AUDIT REPORT IN FORM 10CCB CONTAINING DETAI LED INFORMATION AS TO TURNOVER PLANT AND MACHINERY PROFIT ETC. IT I S NOT CORRECT TO SAY THAT WHEN THE PROFITABILITY OF THE PARTICULAR UNIT I .E. POONAPALLY UNIT IS FURNISHED IN FORM 10CCB NO SEPARATE INCOME AND EXPEN DITURE ACCOUNT IS AVAILABLE. MERELY BECAUSE IT IS FELT BY THE COMMISSIO NER THAT SOME MORE ENQUIRIES AND VERIFICATION COULD HAVE BEEN MADE B Y THE ASSESSING OFFICER THE ORDER OF ASSESSMENT CANNOT BE DECLARED TO BE ERRONEOUS UNLESS IT IS FOUND THAT EITHER THE RELEVANT INFORMATIO N WAS NOT THEREFORE BEFORE THE ASSESSING OFFICER OR THE ASSESSING OFFICER GROSSLY F AILED TO APPLY HIS MIND TO THE SAME. THE ERROR ENVISAGED UNDER S. 263 IS NOT ONE WHICH IS DEPENDENT ON POSSIBILITY OR GUESS WORK BUT IT SHO ULD BE ACTUALLY AN ERROR EITHER OF FACT OR LAW. IT IS AN UNDISPUTED F ACT THAT THE ASSESSING OFFICER ALLOWED THE DEDUCTION UNDER S. 80IB DULY MAK ING CERTAIN ADJUSTMENTS WHICH CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND WITH REGARD TO THE CLAIM OF THE ASSESSEE AND ON EXAMINATION OF THE INFORMATION AVAILABLE BEFORE HIM ON RECORD. T HE QUERIES RAISED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS ALSO M AKE IT CRYSTAL CLEAR THAT THE ASSESSING OFFICER HAS THOROUGHLY E XAMINED THE CLAIMS OF THE ASSESSEE INCLUDING THE ONE IN RELATION TO S .80IA DEDUCTION FROM DIFFERENT ANGLES AND MADE PROPER ENQUIRIES BEFOR E QUANTIFYING ULTIMATELY THE DEDUCTION ALLOWABLE UNDER S. 80IA OF THE ACT. MERELY BECAUSE THE ASSESSING OFFICER HAS NOT MADE ELABORATE DISCUSSIO N ON THE ISSUE IN THE ASSESSMENT ORDER THE ASSESSMENT CANNOT TREATED A S EITHER 27 ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVEN UE. THE FINDING OF THE COMMISSIONER OF INCOME TAX TREATING THE IMPUGNED ORDER OF ASSESSMENT IN RELATION TO THE ASSESSEE'S CLAIM UNDER S.80IA A S ERRONEOUS IS VERY VAGUE AND WITHOUT ANY BASE. IF THE PROVISIONS OF S.263 ARE GIVEN ENLARGED INTERPRETATION IT WILL EN D UP IN A SITUATION WHERE EACH AND EVERY ORDER OF ASSESSMENT CAN BE ASSAILED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND BROUG HT WITHIN THE SWEEPING THE PROVISIONS OF S.263. 58. IN THE CASE OF SMT TARA DEVI (SUPRA) BEFORE THE HON'BLE SUPREME COURT RELIED ON BY THE LEARNED DEPARTMENTA L REPRESENTATIVE THERE WAS MATERIAL BEFORE THE COMMISSIONER OF INCOME T AX TO JUSTIFY HIS FINDING THAT THE ORDER OF THE ASSESSMENT WAS ERRONEOUS IN SO AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE CA SE OF PUSHPA DEVI (SUPRA) THE ASSESSMENTS WERE DONE UNDER S. 143(1) OF THE INCOME-TAX ACT AND CONSIDERING THE FACTS OF THAT CASE IT WAS HELD BY T HE PATNA HIGH COURT THAT THE ASSESSMENT ORDERS WERE IRREGULAR ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN THE CASE O F MUKUR CORPORATION (SUPRA) THE ASSESSEE CLAIMED TWO DEDUCTIONS FROM THE PROFI T DECLARED AND THE ASSESSING OFFICER WITHOUT PROBING INTO THE CLAIM S FOR DEDUCTION ALLOWED BOTH OF THEM. IN THE CASE OF RAM PYARI DEVI (SUPRA) THERE WAS AMPLE MATERIAL BEFORE THE COMMISSIONER OF INCOME TAX T O SHOW THAT THE ASSESSING OFFICER HAD MADE THE ASSESSMENT WITH UNDUE HASTE IN THE ABSENCE OF ANY SUPPORTING EVIDENCE ADDUCED BY THE ASSESSEE T O SUBSTANTIATE ITS CLAIMS WITHOUT CONDUCTING ANY ENQUIRY. FOR THESE REASONS THE CASE-LAW RELIED ON BY THE LEARNED DEPARTM ENTAL REPRESENTATIVE IS CLEARLY DISTINGUISHABLE AND THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 28 59. IN THE LIGHT OF THE ABOVE DISCUSSION WE ARE OF T HE CONSIDERED VIEW THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX PASSED UNDER S. 263 OF THE ACT CANNOT BE SUSTAINAD INASM UCH AS THE ASSESSMENT IN THE INSTANT CASE WAS COMPLETED AFTER EXAMINING THE RELEVANT INFORMATION AVAILABLE ON RECORD AND ON DUE APPLICATION OF MIND AFTER MAKING CERTAIN ADJUSTMENTS TO THE CLAIM OF THE AS SESSEE FOR RELIEF UNDER S.80IA OF THE ACT AND AS SUCH IT CANNOT BE SAID T O BE AN ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE IN TERMS OF S.263 OF THE ACT. WE ACCORDINGLY CANCEL THE OR DER OF THE COMMISSIONER OF INCOME TAX AND ALLOW THE GROUNDS OF THE ASSESSEE IN THIS APPEAL. 60. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . 61. TO SUM UP WHILE OUT OF THE FOUR APPEALS FILED BY THE ASSESSEE ITA NO.1162/HYD/2007 IS ALLOWED THE OTHER THRE E APPEALS VIZ. ITA NO.402/HYD/2004 342/HYD/2006 AND 1260/HYD/0 6 ARE PARTLY ALLOWED AND BOTH THE APPEALS FILED BY THE DEPARTMEN T VIZ. ITA NOS.350/HYD/2006 AND 1270/HYD/2006 ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 9-4-2010. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DATED THE 9TH APRIL 2010. COPY FORWARDED TO: 1. M/S. VENKATESWARA HATCHERIES PVT. LTD. VENKATESHWARA HOUSE 3-5-808 808/1 HYDERGUDA HYDERABAD. 2. ASST. COMMISSIONER OF INCOME TAX CIRCLE 3(4) HYDERABAD. 29 3. ASST. COMMISSIONER OF INCOME TAX CIRCLE 3(3) HYDERABA D. 4. 5. COMMISSIONER OF INCOME TAX III HYDERABAD COMMISSIONER OF INCOME TAX (A) IV HYDERABAD. 6. THE DR ITAT HYDERABAD. JMR*/ B.V.S.