THE DCIT 1(1), MUMBAI v. M/S. FORBES GOKAK LTD, MUMBAI

ITA 1573/MUM/2009 | 2004-2005
Pronouncement Date: 07-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 157319914 RSA 2009
Assessee PAN AAACF1765A
Bench Mumbai
Appeal Number ITA 1573/MUM/2009
Duration Of Justice 7 year(s) 7 month(s) 1 day(s)
Appellant THE DCIT 1(1), MUMBAI
Respondent M/S. FORBES GOKAK LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-10-2016
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 07-10-2016
Date Of Final Hearing 31-03-2016
Next Hearing Date 31-03-2016
Assessment Year 2004-2005
Appeal Filed On 06-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN JUDICIAL MEMBER ITA NO. 1382/MUM/2009 (ASSESSMENT YEAR: 2004-05) M/S. FORBES & COMPANY LTD. VS. D C I T 1(1) (FORMERLY FORBES GOKAK LTD.) FORBES BLDG. CHARANJIT RAN MARG FORT MUMBAI 400001 ROOM NO. 579 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020 PAN AAACF1765A APPELLANT RESPONDENT ITA NO. 1573/MUM/2009 (ASSESSMENT YEAR: 2004-05) D C I T 1(1) VS. M/S. FORBES & COMPANY LTD. ROOM NO. 579 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020 (FORMERLY FORBES GOKAK LTD.) FORBES BLDG. CHARANJIT RAN MARG FORT MUMBAI 400001 PAN AAACF1765A APPELLANT RESPONDENT ASSESSEE BY: SHRI GIRISH DAVE & SHRI KADAMBARI DAVE REVENUE BY: SHRI PRATAP SINH & SHRI V.K. BORA DATE OF HEARING: 29.09.2016 DATE OF PRONOUNCEMENT: 07.10.2016 O R D E R PER JASON P. BOAZ A.M. THESE ARE CROSS APPEALS BY REVENUE AND THE ASSESSE E DIRECTED AGAINST THE ORDER OF THE CIT(A)-1 MUMBAI DATED 24. 12.2008 FOR A.Y. 2004- 05. 2. THE FACTS OF THE CASE BRIEFLY ARE AS UNDER: - 2.1 THE ASSESSEE A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN ENGINEERING GOODS SHIPPING AND A HOST OF OTHER BUSINESS FILED ITS RETURN OF INCOME FOR A.Y. 2004-05 ON 27.10.2004 DEC LARING NIL INCOME ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 2 AFTER CLAIMING SET OFF OF BROUGHT FORWARD UNABSORBE D DEPRECIATION. BOOK PROFITS UNDER SECTION 115JB OF THE INCOME TAX ACT 1961 (IN SHORT 'THE ACT') WERE DECLARED AT ` 4 74 77 483/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143( 3) OF THE ACT VIDE ORDER DATED 29.12.2006; WHEREIN THE INCOME OF THE A SSESSEE WAS DETERMINED AT R. 11 35 58 715/- UNDER THE NORMAL PR OVISIONS OF THE ACT AND BOOK PROFITS UNDER SECTION 115JB OF THE ACT W ERE COMPUTED AT RS.10 94 92 680/- DUE TO CERTAIN ADDITIONS/DISALLOW ANCES. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 29.1 2.2006 FOR AY 2004- 05 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A)-I MUMBAI WHO DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DAT ED 24.12.2008 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3. PRESENTLY BOTH REVENUE AND THE ASSESSEE BEING AGGR IEVED BY THE ORDER OF THE CIT(A)-1 MUMBAI DATED 24.12.2008 FOR A.Y. 2004-05 HAVE PREFERRED APPEALS WHICH ARE BEING DISPOSED OFF HERE UNDER. ASSESSEES APPEAL IN ITA NO. 1382/MUM/2009 4. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS: - GROUND I: APPLICATION OF RULE 80 OF THE INCOME TAX RULES 1962 ('THE RULES') 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE DISALLOWANCE OF INTEREST AND OTHER EXPENDITURES U/S. 14A BY APPL YING RULE 80 OF THE RULES. 2. THE APPELLANT MOST HUMBLY PRAYS THAT IT BE HELD THAT IN VIEW OF THE PROVISIONS OF THE SECTION 295(4) THE RULE 8D IS APP LICABLE ONLY FROM ASSESSMENT YEAR 2008-09 AND NOT TO THE ASSESSMENT Y EAR 2004-05. WITHOUT PREJUDICE TO GROUND I ABOVE GROUND II : DISALLOWANCE OF INTEREST ON BORROWINGS 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF INTEREST AND OTHER EXPENDITURES U/S. 14A OF T HE ACT. 2. APPELLANT PRAYS THAT THE AFORESAID DISALLOWANCE BE DELETED . 3. WITHOUT PREJUDICE TO ABOVE THE COST OF INTERES T AND OTHER EXPENDITURES BE ALLOWED TO BE CAPITALISED BY ADDING TO THE COST OF INVESTMENTS AND BE TAKEN INTO CONSIDERATION IN THE YEAR OF SALE OF SHARES ETC WHILE COMPUTING THE CAPITAL GAINS. ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 3 GROUND III: DISALLOWANCE OF NON-COMPETE FEES PAID T O EX- DIRECTORS. 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF DISALLOWING NON- COMPETE FEES PAID TO THE EX-DIRECTORS OF THE APPELL ANT ON THE ALLEGED GROUND THAT SUCH EXPENDITURE IS OF CAPITAL NATURE. 2. THE APPELLANT PRAYS THAT THE AFORESAID ADDITION BE DELETED. GROUND IV: DISALLOWANCE OF DEDUCTION U/S 80HHC. 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE CI T(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DENYING THE APPE LLANT'S CLAIM FOR DEDUCTION U/S. 80HHC ON THE GROUND THAT ELIGIBL E PROFIT WORKS OUT TO BE NEGATIVE. 2. THE APPELLANT PRAYS THAT DEDUCTION U/S. 80HHC BE ALLOWED AS CLAIMED BY THE APPELLANT. WITH OUT PREJUDICE TO GROUND IV ABOVE: GROUND V : SETTING OF LOSSES WHILE COMPUTING DEDUCT ION U/S. 80HHC OF THE ACT 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF SETTING OFF BROUGHT FORWARD LOSSES OF EARLIER YEARS FROM BUSINESS PROFI TS FOR THE PURPOSE OF ALLOWING DEDUCTION U/S. 80HHC OF THE ACT . 2. THE APPELLANT PRAYS THAT THE DEDUCTION U/S 80HHC BE ALLOWED FROM THE BUSINESS PROFITS BEFORE SETTING OFF BROUGH T FORWARD BUSINESS LOSS. GROUND VI DEDUCTION OF MISCELLANEOUS INCOME AND OTH ER ITEMS FROM THE PROFITS WHILE COMPUTING THE DEDUCTIO N U/S SOHHC 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF EXCLUDING EXPORT INCENTIVES AND OTHER ITEMS OF MISCELLANEOUS INCOME AGGREGATING TO RS.123594369/- WHILE COMPUTING DEDUCTION U/S. 80HHC OF THE ACT ON THE GROUND THAT THEY ARE COVERED UNDER EXPLA NATION (BAA) AS 'ANY OTHER RECEIPT OF THE SIMILAR NATURE INCLUDE D IN SUCH PROFITS'. 2. THE APPELLANT PRAYS THAT IT BE HELD THAT THE SA ID ITEMS ARE RELATED TO BUSINESS OPERATIONS AND ARE NOT IN THE NATURE AS ENVISAGED UNDER EXPLANATION (BAA). WITH OUT PREJUDICE TO GROUND VI ABOVE : GROUND VII NOT ALLOWING TO SET OFF THE INCENTIVES A GAINST THE PROFITS 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF REJECTING APPELLANT'S CLAIM OF GETTING DEDUCTION U/S. 80HHC I N RESPECT OF ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 4 SALE OF DUTY ENTITLEMENT PASS BOOK ('DEPB') LICENCE AND DUTY DRAW BACK AMOUNTING TO RS . 48585160/- 2. THE APPELLANT PRAYS THAT IT BE HELD THAT THE APPELL ANT IS ENTITLED TO THE DEDUCTION U/S. 80HHC. 3. WITHOUT PREJUDICE IF THE ACT OF CIT(A) IS UPHELD T HE AO BE DIRECTED TO EXCLUDE ONLY THE PROFIT ON TRANSFER OF DEPB AND NOT THE ENTIRE DEPB RECEIPTS. GROUND VIII THE APPELLANT CRAVES LEAVE TO ADD TO ALTER AND/OR TO AMEND ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 5. GROUND NO. I & II DISALLOWANCE UNDER SECTION 14 R .W. RULE 8D 5.1 IN GROUND NO. 1 THE ASSESSEE CONTENDS THAT THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE DISALLOWANCE OF INTEREST ON BORROWINGS AND ON ACCOUNT OF OTHER EXPENDITURE UNDER SECTION 1 4A BY APPLYING RULE 8D OF THE I.T. RULES 1962 (IN SHORT THE RULES) WHEN THE PROVISIONS OF RULE 8D ARE APPLICABLE ONLY FROM A.Y. 2008-09 AND N OT FOR THE YEAR UNDER CONSIDERATION. IN GROUND NO. 2 THE ASSESSEE SUBMIT S THAT WITHOUT PREJUDICE SINCE THE LEARNED CIT(A) HAD ERRED IN CON FIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT THE SAID DISALLOWANCE SHOULD BE DELETED. AT THE OUTSET THE LEARNED D.R. SUBMITTED BEFORE US TH AT THE COORDINATE BENCH OF THE TRIBUNAL IN ITS ORDER IN THE ASSESSEE S OWN CASE IN ITA NO. 6720/MUM/2007 DATED 12.06.2013 FOR A.Y. 2002-03 HAD RESTRICTED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT TO R. 7 6 1 476/- AND THAT COMPLETE RELIEF WAS ALLOWED TO THE ASSESSEE BY ANOT HER COORDINATE BENCH IN THE ASSESSEES OWN CASE OF A.Y. 2003-04 IN ITA N O. 6721/MUM/2007 DATED 10.08.2016. THE LEARNED A.R. HOWEVER FAIRLY SUBMITTED THAT SINCE RULE 8D WAS NOT APPLICABLE FOR THE YEAR UNDER CONSI DERATION VIZ. A.Y. 2004-05 THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER (AO) FOR COMPUTING THE DISALLOWANCE UNDER SECTION 1 4A OF THE ACT. THE LEARNED D.R. ON HIS PART DID NOT OPPOSE THIS PROPOS ITION OF THE LEARNED A.R. 5.2 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CARE FULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNC EMENTS CITED. AS CONTENDED BY THE ASSESSEE IT IS SETTLED POSITION O F LAW THAT THE PROVISIONS OF RULE 8D OF THE I.T. RULES 1962 ARE APPLICABLE PROS PECTIVELY FOR AND FROM ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 5 A.Y. 2008-09 AND WOULD NOT OPERATE FOR THE ASSESSME NT YEARS PRIOR THERETO. IN THIS VIEW OF THE MATTER THE LEARNED CIT(A)S DI RECTIONS TO THE AO TO WORK OUT/COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF T HE ACT BY APPLYING RULE 8D OF THE RULES IS ERRONEOUS AND WE THEREFORE DELETE THE SAME AND IN THE FITNESS OF THINGS WE DIRECT THE AO TO RECOMPUT E THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AFRESH IN ACCORDANCE WITH T HE LAW PREVALENT FOR THE YEAR UNDER CONSIDERATION AFTER AFFORDING THE ASSES SEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS/SUBMISSIONS REQU IRED IN THIS REGARD. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY GROUNDS I AND II OF THE ASSESSEES APPEAL ARE TREATED AS ALLOWED FOR STATISTICAL PURPO SES. 6. GROUND NO. III DISALLOWANCE OF NON-COMPETE FEE PA ID TO EX- DIRECTORS 6.1 IN THIS GROUND THE ASSESSEE CHALLENGES THE IM PUGNED ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE AOS ACTION IN DIS ALLOWING NON-COMPETE FEE PAID TO EX-DIRECTORS. 6.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND THAT THIS ISSUE HAS BEEN HELD IN FAV OUR OF REVENUE AND AGAINST THE ASSESSEE IN THE DECISIONS OF THE COORDI NATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-0 4 IN ITA NO. 6721/MUM/2007 DATED 10.08.2016 FOLLOWING THE DECIS ION OF ANOTHER COORDINATE BENCH IN THE ASSESSEES OWN CASE FOR A.Y . 2002-03 IN ITA NO. 6720/MUM/2007 DATED 12.06.2013. IN ITS ORDER FOR A. Y. 2003-04 (SUPRA) TO WHICH BOTH OF US ARE PARTY AT PARA 6 THEREOF IT WAS HELD US UNDER: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED TH E MATERIALS ON RECORD AND CAREFULLY GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. ON PERUSAL OF THE RECORDS IT IS FOUND THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINAT E F BENCH OF ITAT MUMBAI VIDE ORDER DATED 12 TH JUNE 2013 FOR ASSESSMENT YEAR 2002-03 THE RELEVANT PORTION OF WHICH READS AS UND ER:- 9. GROUND NO.2 IS ABOUT DISALLOWANCE OF NON-COMPET E FEES PAID TO EX- DIRECTORS AMOUNTING TO RS.6 41 600/-. BEFORE US AR FAIRLY CONCEDED THAT THE ISSUE HAD BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL VIDE ITS ORDER DATED 25-09-2006 WHILE DECIDING THE APPEAL FOR AY 2000-01. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL WE DECIDE GROUND NO.2 AGAINST THE ASSESSEE. ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 6 WHILE AT THE TIME OF HEARING OF THE PRESENT APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-04 BOTH THE SIDES CONCEDED TO THE AFOREMENTIONED FACT WE RESPECTFULLY FOLLOWING THE ABOVE MENTIONED ORDER OF THE CO-ORDINATE BENCH AND WITH A VIEW OF M AINTENANCE OF JUDICIAL CONSISTENCY UPHOLD THE ORDERS OF THE AUTH ORITIES BELOW. AS A RESULT THIS GROUND OF ASSESSEES APPEAL STANDS DIS MISSED. FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2002-03 (S UPRA) AND 2003-04 (SUPRA) WE UPHOLD THE ORDERS OF THE AUTHORITIES BE LOW AND AGAINST THE ASSESSEE. CONSEQUENTLY GROUND III OF ASSESSEES AP PEAL IS DISALLOWED. 7. GROUND NO. IV DISALLOWANCE OF DEDUCTION UNDER SEC TION 80HHC 7.1 BEFORE US THE LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED THAT THIS GROUND IS NOT BEING PRESSED IN THIS APPEAL BY THE A SSESSEE. SINCE THIS GROUND IS NOT PRESSED IT IS RENDERED INFRUCTUOUS A ND IS ACCORDINGLY DISMISSED. 8. GROUND NO. V SETTING OFF OF LOSSES WHILE COMPUTIN G DEDUCTION UNDER SECTION 80HHC 8.1 AT THE OUTSET ITSELF THE LEARNED COUNSEL FOR T HE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE IS TO BE HELD AGAINST THE ASSESSEE IN VIEW OF THE SETTLED POSITION OF LAW LAID DOWN BY THE HON'BLE AP EX COURT IN THE CASE OF CIT VS. SHIRKE CONSTRUCTION EQUIPMENT LTD. (2007) 2 91 ITR 380 (SC) AND THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF J.K . INDUSTRIES VS. ACIT (2013) 351 ITR 434 (KAR). 8.2 AFTER HEARING BOTH PARTIES IN THE MATTER WE HO LD THIS ISSUE AGAINST THE ASSESSEE AND UPHOLD THE ORDERS OF THE AUTHORIT IES BELOW FOLLOWING INTER ALIA THE DECISIONS OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. SHIRKE CONSTRUCTION EQUIPMENT LTD. (2007) 291 ITR 3 80 (SC) AND OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF J.K. IN DUSTRIES VS. ACIT (2013) 351 ITR 434 (KAR). CONSEQUENTLY GROUND NO. V OF THE ASSESSEES APPEAL IS DISMISSED. 9. GROUND NO. VI DEDUCTION OF MISCELLANEOUS INCOME W HILE COMPUTING DEDUCTION UNDER SECTION 80HHC 9.1 IN THIS GROUND THE ASSESSEE ASSAILS THE IMPUGN ED ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ACTION OF THE AO OF EXCLUD ING INCENTIVES AND OTHER ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 7 ITEMS OF MISCELLANEOUS INCOME WHILE COMPUTING THE D ISALLOWANCE UNDER SECTION 80HHC ON THE GROUND THAT THEY ARE COVERED U NDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT. THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE VERY SAME ISSUE RAISED BY THE ASSESSEE BEF ORE A COORDINATE BENCH OF THE TRIBUNAL FOR A.Y. 2003-04 WAS SET ASIDE AND RES TORED TO THE FILE OF THE AO IN ITS ORDER IN ITA NO. 6721/MUM/2007 DATED 10.08.2 016. 9.2 AFTER HEARING BOTH PARTIES IN THE MATTER WE HA VE CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL DECISION CITED. WE FIND THAT AS CONTENDED BY THE ASSESSEE THE VERY SA ME ISSUE WAS RAISED BEFORE A COORDINATE BENCH OF THIS TRIBUNAL IN THE A SSESSEES OWN CASE FOR A.Y. 2003-04 (SUPRA). IT IS SEEN FROM A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW THAT THE AO AS IN A.Y. 2003-04 IN THIS YEAR ALSO HAS NOT EXAMINED THE ISSUE IN DETAIL BEFORE DISALLOWING THE ASSESSEES CLAIM. ON APPEAL ALSO THE LEARNED CIT(A) HAS REJECTED THE ASSESSEES CLAIM AND CONFIRMED THE AOS ACTION HOLDING THAT THERE WAS NO DIRECT NEXUS BETWEEN THE NATURE OF INCOME CLUBBED UNDER THE HEAD MISCEL LANEOUS INCOME AND THE EXPORT BUSINESS OF THE ASSESSEE WITHOUT CONSID ERING THE BREAKUP OF THE AFORESAID INCOME BROUGHT ON RECORD BY THE ASSES SEE (PAGES 86 TO 89 AND 119 OF PAPER BOOK). FOLLOWING THE DECISION OF T HE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2 003-04 IN ITA NO. 6721/MUM/2007 DATED 10.08.2016 TO WHICH BOTH OF US ARE PARTY WE SET ASIDE THE FINDING OF THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH RESPECT TO EXAMINA TION OF ASSESSEES CLAIM OF INCLUSION OF MISCELLANEOUS INCOME AND OTHER ITEMS WHILE COMPUTING THE ELIGIBLE DEDUCTION UNDER SECTION 80HHC OF THE ACT. NEEDLESS TO ADD THE ASSESSEE IS TO BE AFFORDED ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE SUBMISSIONS/DETAILS IN THIS REGARD BY THE AO BEFORE ADJUDICATING THIS ISSUE. CONSEQUENTLY GROUND NO. VI OF ASSESSEES AP PEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. VII NOT ALLOWING SET OFF OF INCENTIVES AGAINST THE PROFITS (DEPB/ DDB) 10.1 IN THIS GROUND THE ASSESSEE ASSAILS THE IMPUG NED ORDER OF THE LEARNED CIT(A) CONFIRMING THE ACTION OF THE AO IN REJECTING THE ASSESSEES ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 8 CLAIM FOR BRING ALLOWED DEDUCTION UNDER SECTION 80H HC OF THE ACT IN RESPECT OF SALE OF DEPB LICENCE AND DUTY DRAW BACK AMOUNTING TO R. 4 85 85 169/-. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VERY SAME ISSUE HAS BEEN CONSIDERED AND HELD IN FAV OUR OF THE ASSESSEE BY A COORDINATE BENCH IN THE ASSESSEES OWN CASE FOR A .Y. 2003-04 FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. AVANI EXPORTS (2015) 58 TAXMANN.COM 100 (SC) AND THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF VIJAYA SILK HOUSE (BANGALORE LTD. VS GO I (2013) 349 ITR 566 (BOM). 10.2 PER CONTRA THE LEARNED D.R. SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 10.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND THAT THE VERY SAME ISSUE HAS BEEN CO NSIDERED AND HELD IN FAVOUR OF THE ASSESSEE BY A COORDINATE BENCH OF THI S TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITS ORDER I N ITA NO. 6721/MUM/2007 DATED 16.08.2016. AT PARAS 12 AND 13 THEREOF THE COORDINATE BENCH HAS OBSERVED AND HELD AS UNDER: - 12. GROUND NO.VII OF THE APPEAL RELATES TO NOT ALL OWING SET OFF OF INCENTIVES AGAINST PROFITS. THE ASSESSEE CLAIMED SE T OFF OF MISCELLANEOUS INCOME FOR AN AMOUNT OF RS.8 39 51 29 9/-. HOWEVER THE AO TREATED THE ABOVE AMOUNT AS SUNDRY CREDITORS AND HENCE ARE NOT ELIGIBLE FOR DEDUCTION U/S 80 HHC AND HAS TO BE RED UCED TO 90%. FURTHER THE AO ALSO HELD THAT THIS AMOUNT INCLUDES THE SALE OF DEPB LICENCE OF RS.2 68 47 494/- AND DUTY DRAW BACK OF R S.1 32 91 296/- AND AS SUCH THESE HAVE NO DIRECT NEXUS WITH THE EXP ORT ACTIVITY OF THE ASSESSEE COMPANY AND IS NOT ELIGIBLE FOR DEDUCTION. WHILE THE ASSESSEE CARRIED THE MATTER IN APPEAL THE LEARNED CIT (A) H AS ALSO HELD THAT THE TURNOVER OF THE APPELLANT IS MORE THAN RS.10 CRORES AND HENCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION AS CLAIMED B Y THE ASSESSEE IN VIEW OF THE AMENDED PROVISIONS OF THE ACT AND ACCOR DINGLY THE LEARNED CIT (A) REJECTED THE CLAIM OF THE ASSESSEE. HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. AT THE TIME OF HEARING THE LEARNED AR FOR THE ASSESSEE DREW OUR OUT ATTENTION TO PAGE 94 OF THE PAPER BOOK WHEREIN THE DETAILS OF WORKING OF DEDUCTION U/S 80 HHC OF THE ACT HAVE BEE N GIVEN. FURTHER THE LEARNED AR BY RELYING ON THE DECISIONS IN THE C ASE OF (I) AVANI EXPORTS VS. CIT RAJKOT [2012] 348 ITR 391 (GUJ. HC ) (II) VIJAYA SILK ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 9 HOUSE (BANGALORE) LTD. VS. UOI [2013] 349 ITR 566 ( BOM. HC) AND (III) CIT VS AVANI EXPORTS [2015] 58 TAXMANN.COM 100 (SC) SUBMITTED THAT AMENDMENT TO SECTION 80HHC BY WAY OF ADDING THIRD A ND FOURTH PROVISOS IS ULTRA VIRES ARTICLE 14 OF THE CONSTITUT ION. ON CAREFUL PERUSAL OF THE AFORESAID DECISIONS IT IS NOTICED THAT THE H ONBLE APEX COURT IN THE CASE OF CIT VS AVANI EXPORTS HAS HOWEVER TO MA KE THE POSITION CRYSTAL CLEAR SUBSTITUTED THE DIRECTION OF THE HON BLE HIGH COURT WITH THE FOLLOWING DIRECTION: HAVING SEEN THE TWIN CONDITIONS AND SINCE 80HHC BE NEFIT IS NOT AVAILABLE AFTER 1.4.05 WE ARE SATISFIED THAT CASES OF EXPORT ERS HAVING A TURN OVER BELOW AND THOSE ABOVE 10 CR. SHOULD BE TREATED SIMILARLY. THIS ORDER IS IN SUBSTITUTION OF THE JUDGMENT IN APPEAL. THE LEARNED DR COULD NOT CONTROVERT THE AFORESAID D ECISION OF THE HONBLE APEX COURT BY PLACING ON RECORD ANY RELEVAN T MATERIAL. WE HAVE EVEN NOTICED THAT THE ASSESSEES CLAIM OF DEDUCTION U/S 80HHC RELATES TO ASSESSMENT YEAR 2003-04 I.E. PRIOR TO THE DATE O F AMENDMENT OF THE PROVISIONS WITH EFFECT FROM 1ST APRIL 2005. IN VIE W OF THE ABOVE WE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS AVANI EXPORTS CITED SUPRA HOLD THAT THE ORDER OF THE LEARNED CIT (A) IS NOT SUSTAINABLE AND ACCORDINGLY WE REVER SE THE SAME. RESULTANTLY THIS GROUND OF APPEAL OF THE ASSESSEE STANDS ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE AVANI EXPORTS (SUPRA) AND THE DECISION OF THE COORD INATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-0 4 (SUPRA) TO WHICH BOTH OF US ARE PARTY WE HOLD THAT THE IMPUGNED ORD ER OF THE LEARNED CIT(A) ON THIS ISSUE IS UNSUSTAINABLE AND REVERSE THE SAME . ACCORDINGLY WE HOLD THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CONSEQUENT LY ALLOW GROUND NO. VII OF ASSESSEES APPEAL. 11. GROUND NO. VIII BRING GENERAL IN NATURE NO ADJUDICATION IS CALL ED FOR THEREON. 12. IN THE RESULT ASSESSEES APPEAL FOR A.Y. 2004-05 I S PARTLY ALLOWED. REVENUES APPEAL IN ITA NO. 1573/MUM/2009 13. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GR OUNDS: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 59 31 4771- MADE BY THE ASSESSING OFFICER TO THE CLOSING STOCK BEING UNUTILIZED MODVAT CREDIT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ADOPT THE NET INTEREST FOR THE PURPOSE OF DEDUCTION U/S 80HHC. ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 10 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DEDUCT 90% OF THE NET SERVICE INCOME ONLY AFTER ADJUSTMENT OF EXP ENSES IF ANY FOR THE PURPOSE OF DEDUCTION U/S 80HHC. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) ERRED IN ALLOWING THE ASSESSEE'S GROUND OF APPEAL RELATING TO ADDITION OF PROVISIONS FOR DOUBTFUL DEB TS AND ADVANCES AND PROVISIONS FOR DIMINUTION IN THE VALUE OF INVES TMENT WHILE COMPUTING THE TAX LIABILITY U/S.115JB OF THE ACT. 5. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR WITHDRAW THE AFORESAID GROUND OF APPEAL. 14. GROUND NO. 1 ADDITION OF UNUTILIZED MODVAT CREDIT TO CLOSING STOCK 14.1 IN THIS GROUND REVENUE CONTENDS THAT THE LEAR NED CIT(A) ERRED IN DELETING THE ADDITION OF RS.59 31 477/- MADE BY THE AO TO THE CLOSING STOCK ON ACCOUNT OF UNUTILIZED MODVAT CREDIT. 14.2 THE LEARNED A.R. SUBMITS THAT THE SAME ISSUE H AS BEEN CONSIDERED AND HELD IN FAVOUR OF THE ASSESSEE AND AGAINST REVE NUE BY A COORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER IN ITA NO. 745/ MUM/2005 DATED 25.09.2006 IN THE ASSESSEES OWN CASE FOR A.Y. 2001 -02. 14.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND THAT AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THE VERY SAME ISS UE WAS CONSIDERED AND HELD IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y . 2001-02 IN ITS ORDER IN ITA NO. 745/MUM/2005 DATED 25.09.2006; WHEREIN AT P ARAS 36 AND 37 THEREOF IT WAS HELD AS UNDER: - 36. WITH REGARD TO GROUND NO. 3 THE LEARNED D.R. CONTENDED THAT AFTER INTRODUCTION OF SECTION 145A THE ELEMENT OF UN-UTILIZED MODVAT HAS TO BE ADDED TO THE VALUE OF THE CLOSING STOCK A ND THEREFORE IT IS ARGUED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. THE LEARNED COUNSEL FOR ASSESSEE CONTENDE D THAT THE VALUATION OF CLOSING STOCK IS ALREADY IN CONSONANCE WITH SECTION 145A. HE INVITED OUR ATTENTION TO PAGE 15 OF THE PB WHIC H CONTAINS THE WORKING OF THE OPENING STOCK AND CLOSING STOCK. IT IS POINTED OUT THAT SECTION 145A WAS INTRODUCED WITH EFFECT FROM ASSESS MENT YEAR 99-00 AND THE ASSESSMENT YEAR UNDER APPEAL IS 2001-02. IN THE EARLIER YEARS SECTION 145A WAS ALREADY COMPLIED WITH AND T HE ELEMENT OF EXCISE DUTY/MOVATWERE ADDED TO THE CLOSING STOCK AN D THE SAME HAS ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 11 BEEN BROUGHT FORWARD AS OPENING STOCK IN THE PRESEN T ASSESSMENT YEAR. SOME ADJUSTMENTS HAVE ALSO BEEN MADE IN THE V ALUE OF THE CLOSING STOCK. IT IS ARGUED THAT DISPUTED SUM OF RS .8 38 262/- IS ONLY IN THE NATURE OF DEPOSIT WITH THE EXCISE DEPARTMENT AN D IS NOT IN THE NATURE OF UN-UTILISED MODVAT CREDIT. HE RELIED ON T HE ORDER OF LEARNED CIT(A) WHO HAS RECORDED A CLEAR FINDING IN THIS RE GARD. 37. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND IN OUR VIEW THE ORDER LEARNED CIT(A) ON THIS ISSUE DESERVES TO BE UPHELD. THE LEARNED CIT(A) HAS RECORDED THE FOLLOWING FINDING ON PAGE 14 OF HI S ORDER: - AT THE TIME OF HEARING OF THIS APPEAL THE LEARNED COUNSEL FOR THE APPELLANT HAVE SUBMITTED THAT THE APPELLANT HAS ALREADY ADDED MODVAT CREDIT IN THE CLOSING STOCK OF FINISHED GOODS OF RS.1 18 860/- AN D ADDED MODVAT CREDIT ON RAW MATERIALS OF RS.51 49 495/- AND THEREFORE NO FU RTHER ADDITION IS REQUIRED TO BE MADE. IN ASSESSMENT YEAR 2000-01 ON THIS ISSUE IT WAS HELD THAT THE APPELLANT HAD ADDED BACK RS.53 38 796 AS PER PROVIS IONS OF SECTION 145A OF THE ACT AND THIS AMOUNT AS ADDED BY THE ASSESSING O FFICER IS NOT OF UNUTILISED MODVAT BUT IT WAS THE AMOUNT OF DEPOSIT MADE BY THE APPELLANT WITH THE EXCISE AUTHORITIES. THEREFORE THERE WAS NO REASON FOR MAKING THIS DISALLOWANCE BY THE ASSESSING OFFICER HENCE THIS AD DITION IS DELETED. 38. IN OUR VIEW THE ISSUE HAS BEEN RIGHTLY DECIDED BY THE LEARNED CIT(A) AND THE VALUATION OF CLOSING STOCK IS ALREAD Y IN CONSONANCE WITH SECTION 145A. HIS ORDER IS THEREFORE CONFIRMED ON THIS ISSUE. FOLLOWING THE AFORESAID DECISION OF COORDINATE BENC H OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2001-02 WE UPHOLD THE DECISION OF THE LEARNED CIT(A) IN DIRECTING THE AO TO DELETE THE AD DITION MADE IN THE CLOSING STOCK TOWARDS UNUTILIZED MODVAT CREDIT. CON SEQUENTLY GROUND NO. 1 OF REVENUES APPEAL IS DISMISSED. 15. GROUND NO. 2 DEDUCTION UNDER SECTION 80HHC AND NE T INTEREST 15.1 IN THIS GROUND REVENUE ASSAILS THE ORDER OF T HE LEARNED CIT(A) IN DIRECTING THE AO TO ADOPT THE NET INTEREST FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE LEARN ED D.R. WAS HEARD IN SUPPORT OF THE GROUND RAISED. 15.2 PER CONTRA THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) IS TO BE UPHELD AS THIS ISSUE IS WELL SETTLED BY VARIOUS JUDICIAL PRONOUNCEMENTS THE FOR THE PURPOS E OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT IT IS THE NET INTEREST EXPENSES THAT IS TO BE CONSIDERED. IN THIS REGARD RELIANCE W AS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 12 (I) ACG ASSOCIATED CAPSULES (P) LTD. VS. CIT (2012) 343 ITR 89 (SC) (II) LALSONS ENTERPRISES VS. DCIT (2004) 89 ITD 25 (DEL. SB) (III) SHRI RAM HONDA POWER EQUIPMENT (2007) 289 ITR 475 (DEL) 15.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. IN OUR VIEW THIS ISSUE IS WELL SETTLED BY T HE JUDICIAL PRONOUNCEMENTS CITED (SUPRA); BY THE DECISIONS OF THE HON'BLE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD. VS. CIT (2012) 343 ITR 89 (SC); OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SHRI RAM HO NDA POWER EQUIPMENTS (2007) 289 ITR 475 (DEL) AND OF THE ITAT DELHI (SPECIAL BENCH) IN THE CASE OF LALSONS ENTERPRISES (2004) 89 ITD 25 (DEL SB). RESPECTFULLY FOLLOWING THESE DECISIONS (SUPRA) WE CONFIRM THE D ECISION OF THE LEARNED CIT(A) IN HOLDING AND DIRECTING THE AO THAT FOR TH E PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC IF THE ACT THE N ET INTEREST IS TO BE CONSIDERED. CONSEQUENTLY REVENUES GROUND NO. 2 IS DISMISSED. 16. GROUND NO. 3 DEDUCTION UNDER SECTION 80HHC AND TR EATMENT OF INCOME FROM SERVICES 16.1 IN THIS GROUND THE REVENUE ASSAILS THE IMPUGN ED ORDER OF THE LEARNED CIT(A) FOR DIRECTING THE AO TO DEDUCT 90% O F THE NET SERVICE INCOME ONLY AFTER ADJUSTMENT OF EXPENSES IF ANY FOR THE PURPOSES OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE L EARNED D.R. WAS HEARD IN SUPPORT OF THIS GROUND. 16.2 PER CONTRA THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) IS TO BE UPHELD AS THIS ISSUE IS WELL SETTLED BY VARIOUS JUDICIAL PRONOUNCEMENTS THAT FOR THE PURPO SE OF COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT 90% OF NE T INCOME FROM SERVICES IS TO BE DEDUCTED AFTER ADJUSTMENT FOR EXP ENSES IF ANY. IN THIS REGARD RELIANCE WAS PLACED ON THE FOLLOWING JUDICI AL PRONOUNCEMENTS: - (I) ACG ASSOCIATED CAPSULES (P) LTD. VS. CIT (2012) 343 ITR 89 (SC) (II) LALSONS ENTERPRISES VS. DCIT (2004) 89 ITD 25 (DEL. SB) (III) SHRI RAM HONDA POWER EQUIPMENT (2007) 289 ITR 475 (DEL) ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 13 16.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. IN OUR VIEW THIS ISSUE IS SETTLED BY JUDICI AL PRONOUNCEMENTS CITED ABOVE BY THE DECISIONS OF THE HON'BLE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD. VS. CIT (SUPRA) OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF SHRI RAM HONDA POWER EQUIPMENT (SUPRA) AND OF THE ITAT DELHI (SPECIAL BENCH) IN THE CASE OF LALSON ENTERPRISES (2004) 89 IGD 25 (DEL SB). RESPECTFULLY FOLLOWING THESE DECIS IONS (SUPRA) WE UPHOLD THE DECISION OF THE LEARNED CIT(A) IN DIRECTING THE AO TO DEDUCT ONLY 90% OF THE NET INCOME AFTER ADJUSTMENT OF EXPENSES IF ANY FROM THE BUSINESS PROFITS WHILE COMPUTING THE ELIGIBLE DEDUCTION UNDE R SECTION 80HHC OF THE ACT. CONSEQUENTLY REVENUES GROUND NO. 3 IS DISMIS SED. 17. GROUND NO. 4 BOOK PROFITS UNDER SECTION 115JB - ADJUSTMENT FOR PROVISIONS 17.1 IN THIS GROUND REVENUE CONTENDS THAT THE LEAR NED CIT(A) ERRED IN ALLOWING THE ASSESSEES GROUND RELATING TO THE ADDI TION OF PROVISIONS FOR DOUBTFUL DEBTS AND ADVANCES AND PROVISIONS FOR DIMI NUTION IN THE VALUE OF INVESTMENTS WHILE COMPUTING THE BOOK PROFITS UNDE R SECTION 115JB OF THE ACT. THE LEARNED D.R. WAS HEARD IN SUPPORT OF THE G ROUND RAISED AND SUBMITTED THAT THE SAME ISSUE WAS CAME UP FOR CONSI DERATION BEFORE A COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04 AND IN ITS ORDER IN ITA NO. 6580/MUM/2007 D ATED 10.08.2016 THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF REVENU E AND AGAINST THE ASSESSEE. IT WAS ARGUED THAT FACTS BEING SIMILAR IN THIS YEAR ALSO THE LEARNED CIT(A)S ORDER ON THIS ISSUE BE REVERSED AN D THAT OF THE AO BE RESTORED. 17.2 PER CONTRA THE LEARNED A.R. SUPPORTED THE IMP UGNED ORDER OF THE LEARNED CIT(A) BUT FAIRLY CONCEDED THAT THIS ISSUE HAS BEEN HELD AGAINST THE ASSESSEE BY THE ORDER OF THE COORDINATE BENCH O F THIS TRIBUNAL IN THE ASSESSEES ON CASE FOR A.Y. 2003-04 (SUPRA) REFERRE D TO BY THE LEARNED D.R. 17.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND AS SUBM ITTED BY THE LEARNED ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 14 D.R. THAT THIS ISSUE WAS CONSIDERED AND ADJUDICATE D IN FAVOUR OF THE REVENUE BY COORDINATE BENCH OF THIS TRIBUNAL IN TH E ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITA NO. 6580/MUM/2007 DATED 10. 08.2016 (SUPRA) WHEREIN AT PARA 26 THEREOF IT HAS BEEN HELD AS UNDE R: - GROUND NO.4 RELATES TO RE-COMPUTATION OF BOOK PROFITS WITHOUT MAKING ADJUSTMENT IN RESPECTIVE PROVISIONS. THE AO HAD ADJUSTED THE PROVISIONS ON THE GROUND THAT THESE WERE MERE PROVI SIONS AND THAT THE ASSESSEE HAD BEEN WRITING BACK THESE PROVISIONS IN VARIOUS YEARS WHICH IMPLIES THAT THESE WERE UNASCERTAINABLE PROVI SIONS AND THEREFORE REQUIRED TO BE ADJUSTED FOR COMPUTATION O F BOOK PROFITS. THE ASSESSEE ARGUED BEFORE THE AO RELYING UPON THE DECI SION OF THE SPECIAL BENCH OF ITAT CALCUTTA IN THE CASE OF USHA MARTIN INDUSTRIES 105 TTJ 543 AND THE DECISION IN THE CASE OF SCL CON NECT SYSTEM REPORTED IN 292 ITR 294 THAT SECTION 115JB OF THE A CT ENVISAGES ADJUSTMENT FOR PROVISIONS FOR LIABILITY WHEREAS IN THE CASE OF THE ASSESSEE THE PROVISIONS WERE NOT FOR LIABILITY BUT FOR THE ASSETS AND IN SUCH A SITUATION ADJUSTMENT WAS NOT CALLED FOR. THE LEARNED CIT (A) CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSIO NS OF THE ASSESSEE DIRECTED THE AO TO RECOMPUTED THE BOOK PROFITS WITH OUT MAKING ADJUSTMENT IN THE RESPECTIVE PROVISIONS WHICH ARE O N ASSETS OF THE ASSESSEE INCLUDING PROVISIONS FOR DOUBTFUL AND ADVA NCES AND PROVISIONS FOR DIMINUTION IN THE VALUE OF INVESTMEN TS. IN VIEW OF THE AMENDMENT OF THE PROVISIONS OF SECTION 115JB OF THE ACT BEING RETROSPECTIVE WE FIND NO REASON TO SUSTAIN THE FIN DINGS OF THE LEARNED CIT(A). HENCE WE UPHOLD THE ORDER OF AO AND WHILE SETTING ASIDE THE ORDER OF CIT THIS GROUND OF APPEAL OF THE REVENUE I S ALLOWED. FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITA NO. 658 0/MUM/2007 DATED 10.08.2016 (SUPRA) IN VIEW OF THE AMENDMENTS TO TH E PROVISIONS OF SECTION 155JB OF THE ACT BEING OPERATIONAL RETROSPECTIVELY WE ARE UNABLE TO SUSTAIN THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND THEREFORE SET ASIDE/REVERSE HIS FINDING IN THE MATT ER AND RESTORE THAT OF THE AO. CONSEQUENTLY REVENUES GROUND NO. 4 IS ALLOWED . 18. GROUND NO. 5 BEING GENERAL IN NATURE NO ADJUDICATION IS CALL ED FOR THEREON. 19. IN THE RESULT REVENUES APPEAL FOR A.Y. 2003-04 IS PARTLY ALLOWED. ITA NOS. 1382 & 1573/MUM/2009 M/S. FORBES & COMPANY LTD. 15 20. TO SUM UP BOTH CROSS APPEALS OF THE ASSESSEE AND R EVENUE FOR A.Y. 2003-04 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER 2016. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 7 TH OCTOBER 2016 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -1 MUMBAI 4. THE CIT - 1 MUMBAI 5. THE DR F BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.