Alpha Foam Ltd.,, Pune v. Dy.CIT, Range 8, Pune, Pune

ITA 1617/PUN/2008 | 2004-2005
Pronouncement Date: 24-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 161724514 RSA 2008
Assessee PAN AACCA4196J
Bench Pune
Appeal Number ITA 1617/PUN/2008
Duration Of Justice 2 year(s) 3 month(s) 1 day(s)
Appellant Alpha Foam Ltd.,, Pune
Respondent Dy.CIT, Range 8, Pune, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 24-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 24-03-2011
Assessment Year 2004-2005
Appeal Filed On 23-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER I.T.A. NO. 1617/PN/2008 : A.Y. 2004-05 ALPHA FOAM LTD. J-172 MIDC BHOSARI PUNE-411 028 PAN AACCA 4196 J APPELLANT VS. DY. CIT R-8 PUNE RESPONDENT APPELLANT BY: SHRI NIKHIL PATHAK RESPONDENT BY: SHRI H.C. LEUVA ORDER PER SHAILENDRA KUMAR YADAV JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT-(A)-III PUNE DATED 30-9-2008 FOR A.Y. 2004-05 O N THE FOLLOWING GROUNDS WITHOUT PREJUDICE TO EACH OTHER: (1) THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE EXPENDITURE INCURRED ON PURCHASE OF PRINTER AND COMPUTER MODEM WAS CAPITAL IN NATURE. 1.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HIS EXPENDITURE WAS ONLY ON CERTAIN ATTACHMENTS TO THE COMPUTERS AND HENCE NO NEW ASSET WAS CREATED BY TH E ASSESSEE AND THEREFORE THE SAME OUGHT TO HAVE BEEN ALLOWED AS REVENUE EXPENDITURE. 2] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF BUSINESS PROMOTION EXPENSES OF RS. 10 12 961/- WITHOUT APPRECIATING THAT ALL THE EXPENSES WERE INC URRED FOR THE PURPOSES OF DIE BUSINESS. 2.1] THE LEARNED CIT(A) ERRED IN NOT ADMITTING THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE COMPANY WITHOUT APPRECIATING THAT THERE WAS REASONABLE CAUSE ON THE PART PAGE 2 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 OF THE ASSESSEE IN NOT SUBMITTING THE SAME BEFORE T HE LEARNED A.O. 3] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF GUARANTEE COMMISSION PAID TO SHRI RAJIV RANKA AN D MRS. SUREKHA RANKA DIRECTORS OF RS. 7 52 0001- U/S. 40A(2)(B) OF THE ACT. A. THE RATE OF COMMISSION PAID BY THE ASSESSEE WAS VER Y REASONABLE AS COMPARED TO THE MARKET RATE AND THERE FORE THE DISALLOWANCE WAS NOT JUSTIFIED. B. THE ASSESSEE HAD PAID COMMISSION @ 1.77 % WHICH WAS MUCH LESSER THAN THE RATE CHARGED BY THE BANK AND H ENCE THE DISALLOWANCE OUGHT TO HAVE BEEN DELETED. C. THE GUARANTEE WAS FURNISHED AS REQUIRED BY THE BANK AND HENCE THE GUARANTEE COMMISSION WAS BUSINESS EXPENDITURE. 3.2] WITHOUT PREJUDICE TO GROUND NOS. 3 & 3.1 T HE ASSESSEE SUBMITS THAT THE DISALLOWANCE IS ON A VERY HIGH SID E AND BE REDUCED SUBSTANTIALLY. 4] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF INTEREST PAID TO DIRECTORS OF RS.3 54 732/- U/S. 40A(2 )(B). 4.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THA T THE RATE OF INTEREST PAID TO THE DIRECTORS ON AMOUNTS BORROWED WAS REASONABLE CONSIDERING THE FACT THAT THE ASSESSEE W AS NOT LIABLE TO SUBMIT ANY GUARANTEE OR SECURITY ETC. AN D ACCORDINGLY THE SAME OUGHT TO HAVE BEEN ALLOWED. 5] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF TELEPHONE EXPENSES OF RS.52 195/- OUT OF TOTAL EXPENDITURE OF RS.5 31 690/- ON THE GROUND THAT THEY ARE NOT FOR THE PURPOSES OF BUSINESS. 5.1] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATE D THAT IN CASE OF A COMPANY NO SUCH DISALLOWANCE IS WARRANTED. 6] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF TRAVELING AND CONVEYANCE EXPENSES OF RS. 71 6221- OUT OF TOTAL EXPENDITURE OF RS. 7 16 217/- 6.1] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATE D THAT IN CASE OF A COMPANY NO SUCH DISALLOWANCE IS WARRANTED. 7] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF DEPRECIATION ON VEHICLES OF RS. 37 564/- OUT OF TOTAL DEPRECIATION OF RS. 3 75 642/-. PAGE 3 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 7.1] THE LEARNED CIT( A) OUGHT TO HAVE APPRECIATE D THAT IN CASE OF A COMPANY NO SUCH IS ALLOWANCE IS WARRANTED. 8] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF DEDUCTION U/S. 80IB OF RS. 28 07 464/- ON THE GR OUND THAT THE ASSESSEE HAD NOT ENCLOSED THE CORRECT AUDIT REP ORT ALONG WITH THE RETURN OF INCOME. 8.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE HAD COMPLIED WITH ALL THE CONDITIONS STIPULATED U/S . 80IB AND SIMPLY BECAUSE THE CORRECT AUDIT REPORT WAS NOT FIL ED THERE WAS NO REASON TO DISALLOW THE DEDUCTION. 8.2] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT THE LEARNED A.O HAD NOT GIVEN ANY OPPORTUNITY TO THE AS SESSEE TO RECTIFY THE MISTAKE AND HENCE THERE WAS NO REASON TO DENY THE DEDUCTION CLAIMED BY THE ASSESSEE. 9] THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR DELETE ANY OF THE ABOVE GROUNDS. 2. AT THE OUTSET OF HEARING THE LEARNED AR DID NOT PRESS GROUND NO. 1. THE SAME IS DISMISSED AS SUCH. THE NEXT ISS UE IS WITH REGARDS TO DISALLOWANCE OF BUSINESS PROMOTION EXPEN SES OF RS. 10 12 961/-. THE ASSESSING OFFICER FOUND THAT OUT OF TOTAL EXPENSES OF RS. 11 02 053/- DEBITED UNDER THE HEAD BUSINESS PROMOTION EXPENSES EXPENDITURE OF RS. 9 40 051/- WAS INCURR ED FOR PURCHASE OF US $. FOR WANT OF SUPPORTING EVIDENCES IN JUSTIF ICATION THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM OF EXPENDITURE OF RS. 9 40 051/-. HE MADE A FURTHE R DISALLOWANCE OF RS. 72 910/- UNDER THIS HEAD AFTER OBSERVING THA T NO JUSTIFICATION HAS BEEN FURNISHED BY THE ASSESSEE IN RESPECT OF TH E EXPENDITURE OF RS. 72 910/- AS INCURRED FOR THE PURPOSE OF BUSINES S. THIS ISSUE WAS RAISED BY WAY OF ADDITIONAL EVIDENCE FILED BY T HE ASSESSEE AT THE APPELLATE STAGE. THE CIT(A) HAS REJECTED THE ADDIT IONAL EVIDENCE BY OBSERVING THAT NO JUSTIFICATION HAS BEEN GIVEN FOR ADMITTING THIS PAGE 4 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 ADDITIONAL EVIDENCE AT THE APPELLATE STAGE. ACCORD INGLY THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE WAS CONFIRMED. 2.1. THE LEARNED AR PLACED RELIANCE ON THE DECISIO N OF RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF PAWAN CONSTRUC TION VS. ITO (2004) 90 TTJ (RAJKOT) 208. IN THE SAID CASE THE ASSESSEE HAVING OFFERED AN AMOUNT FOR ADDITION AS IT COULD NOT PROD UCE ANY EVIDENCE REGARDING GENUINENESS OF THE CREDIT THIS COULD NOT STOP THE ASSESSING OFFICER TO PROCEED AGAINST THE ASSESSEE F OR INITIATING THE PENALTY AS PER THE PROVISIONS OF LAW. THE RATIO OF THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THIS CASE BECAUSE THE ASSESSEE COULD NOT DISCHARGE THE BURDEN THAT HE WAS PREVENTED BY A REASONABLE CAUSE FROM PRODUCING EVIDENCE AT THE RELEVANT POINT OF TIME AND THAT THE ASSESSEE IN THE PRESENT CASE WAS PREVENTED BY REASONABLE CAUSE AND UNDER THE BONAFIDE MISTAKE DID FILE AUDI T REPORT IN THE WRONG FORM WHICH WAS SUBSEQUENTLY RECTIFIED DURING APPELLATE PROCEEDINGS. THIS TECHNICAL MISTAKE RECTIFIED AT TH E APPELLATE STAGE SHOULD NOT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTI ON. 2.2. BEFORE US THE ASSESSEE SUBMITTED THAT IT WAS PREVENTED BY A REASONABLE CAUSE TO FURNISH THE EVIDENCE WITH REGAR DS TO THE EXPENDITURE IN QUESTION BEFORE THE ASSESSING OFFICE R BUT AT THE APPELLATE STAGE HE COULD TRACE OUT THE DETAILS AND HENCE TRIED TO PLACE ON RECORD WITH A REQUEST TO ADMIT THE SAME AS AN ADDITIONAL EVIDENCE WHICH WAS REJECTED BY THE CT(A). ACCORDIN G TO US THE ASSESSEE WAS PREVENTED BY A REASONABLE CAUSE IN NOT PRODUCING THE DETAILS OF EXPENDITURE IN QUESTION BEFORE THE ASSES SING OFFICER BUT PAGE 5 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 IN CASE HE IS CLAIMING TO HAVE TRACED OUT THE DETA ILS SUBSEQUENTLY. THUS IT COULD NOT BE REJECTED. DUE OPPORTUNITY OF HEARING IS ESSENCE OF PRINCIPLES OF NATURAL JUSTICE WHICH IS M ISSING IN THIS CASE. SO ON TECHNICAL GROUNDS AND IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFIC ER WITH A DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVID ING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F GUARANTEE COMMISSION PAID TO SHRI RAJIV RANKA AND MRS. SUREKH A RANKA THE DIRECTORS AMOUNTING TO RS. 7 52 000/- U/S 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER DISALLOWED GUARANTEE COMMISSION P AID TO MR. RAJIV RANKA AND MRS. SUREKHA RANKA OF RS. 7 52 000/ - BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. TH E ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 10 52 000/- AS GUARANTEE COMMISSION UNDER THE HEAD INTEREST AND F INANCIAL CHARGES PAID TO MR. RAJIV RANKA AND MRS. SUREKHA R ANKA AMOUNTING TO RS. 5 26 000/- EACH. HE OBSERVED THAT MR. RAJIV RANKA AND MRS. SUREKHA RANKA WERE THE DIRECTORS OF THE COMPANY HAVING ALMOST 10% SHARE HOLDING. ACCORDING TO THE ASSESSING OFFICER THE COMMISSION PAID @ 3.51% TO THE DIRECTO RS OF THE COMPANY WAS HIT BY THE PROVISIONS OF SECTION 40A(2) (B) OF THE ACT. HE WAS OF THE VIEW THAT AS TRUSTEES OF THE COMPANY THE DIRECTORS SHOULD NOT HAVE CHARGED ANY COMMISSION ON THEIR GUA RANTEE TO THE BANKERS. MOREOVER THE COMMISSION PAID @ 3.5% WAS EXCESSIVE AND EXORBITANT CONSIDERING THE FACT THAT EVEN THE BANKS CHARGE PAGE 6 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 GUARANTEE COMMISSION @ 1% ONLY. ACCORDINGLY THE A SSESSING OFFICER RESTRICTED THE ALLOWANCE OF GUARANTEE COMMI SSION @ 1% ONLY WHICH RESULTED INTO A DISALLOWANCE OF RS. 7 52 000/ - UNDER THIS HEAD WHICH WAS CONFIRMED BY THE CIT(A). 3.1. BEFORE US THE STAND OF THE ASSESSEE WAS THAT AT THE ASSESSMENT STAGE ON ACCOUNT OF INADVERTENT MISTAKE ON THE PART OF THE NEW ACCOUNTANT THE RATE OF COMMISSION WAS SHOW N AS 3.50% IN PLACE OF CORRECT RATE OF 1.77% AT WHICH THE GUARANT EE COMMISSION HAS ACTUALLY BEEN PAID. THE ASSESSEE ALSO DISPUTED THE OBSERVATION OF THE ASSESSING OFFICER WITH REGARDS TO FACT THAT THE BANK CHARGES GUARANTEE COMMISSION @ 1%. IN THIS REGARD THE ASSE SSEE FURNISHED A CERTIFICATE FROM SBI TO THE EFFECT THAT THE COMMI SSION ON BANK GUARANTEE IS CHARGED MAXIMUM TO THE EXTENT OF 2.5% PER ANNUM. THE LEARNED A.R DREW OUR ATTENTION TO PAGE 6 PARA 5 OF THE CIT(A) WHEREIN IT WAS POINTED OUT THAT THE COMPANY HAS DEB ITED A SUM OF RS. 10 52 000/- AS GUARANTEE COMMISSION UNDER THE H EAD INTEREST AND FINANCIAL CHARGES PAID TO MR. RAJIV RANKA AND MRS. SUREKHA RANKA RS. 5 26 000/- EACH. THE LEARNED A.R FURTHER DREW OUR ATTENTION TO THE FACT THAT THE CERTIFICATE ISSUED BY THE BANK WAS SUFFICIENT TO SHOW THAT THERE WAS NO NEED OF ADDITI ONAL SECURITY. CONSEQUENTLY THE ASSESSEE COMPANY HAS TAKEN CREDI T FACILITIES AND LOAN OF RS. 2.98 CRORES FROM BANK AND THE ASSESSEE HAD PAID COMMISSION OF IN QUESTION. THE STAND OF THE ASSESSE E THAT BOTH MR. RAJIV RANKA AND MRS. SUREKHA RANKA HAVE BEEN PAID C OMMISSION AT RS. 5 26 000/- EACH AGAINST THE TOTAL AMOUNT OF RS. 3 CRORES. PAGE 7 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 ACCORDING TO THE ASSESSEE GUARANTEE COMMISSION IS PAID @ 1.77% AND INADVERTENTLY RECORDED AT 3.5% BY THE ACCOUNTAN T. IT WAS THUS POINTED OUT THAT THE RATE OF COMMISSION PAID BY THE ASSESSEE WAS REASONABLE AS COMPARED TO MARKET RATE AND THEREFORE THE DISALLOWANCE IS NOT JUSTIFIED. THE ASSESSEE HAS PAI D COMMISSION @ 1.77% WHICH WAS MUCH LESSER THAN THE CHARGES PAID T O THE BANK AND THIS AMOUNT WAS NOT JUSTIFIED. WE FIND THAT ON THE ISSUE IS OF PERCENTAGE OF GUARANTEE COMMISSION VIS--VIS THE W HOLE AMOUNT OF LOAN OF RS. 3.00 CRORES WHICH COMES TO @ 1.77% WHIC H IS REASONABLE. REVENUE IS NOT JUSTIFIED TO CLUB BOTH G UARANTEE TOGETHER AND CALCULATE PERCENTAGE AGAINST WHOLE AMOUNT. EVE N BANK CHARGES ON THIS ACCOUNT ARE @ 2.5%. SO ASSESSEES CLAIM OF GUARANTEE COMMISSION @ 1.77% AS DISCUSSED ABOVE IS REASONABLE. ACCORDINGLY DISALLOWANCE MADE BY INVOKING PROVISION OF SEC. 40A(2)(B) OF THE ACT IS NOT JUSTIFIED. SAME IS DIRE CTED TO BE DELETED. 4. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F INTEREST PAID TO DIRECTORS OF RS. 3 54 732/- U/S 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER FUND THAT THE ASSESSEE HAS DEBITE D A SUM OF RS. 21 28 394/- ON ACCOUNT OF INTEREST PAID ON UNSECURE D LOANS TO VARIOUS RELATED PERSONS AT THE EXCESSIVE ATE OF 18% P.A. AS COMPARED TO THE INTEREST PAID TO BANKS ETC. @ 13.5% AND THEREFORE WAS HIT BY THE PROVISIONS OF SECTION 40A(2)(B) OF T HE ACT. ACCORDINGLY HE DISALLOWED AN AMOUNT OF RS. 3 54 73 2/- OUT OF RS. 21 00 000/- AFTER ALLOWING INTEREST @ 15% WHICH WAS CONFIRMED BY THE CIT(A). SAME HAS BEEN OPPOSED BEFORE US. PAGE 8 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 4.1 WE FIND THAT THE ASSESSING OFFICER HAS NOT APPR ECIATED THE FACT THAT IN CASE OF AMOUNT BORROWED FROM DIRECTORS NO SECURITY IS REQUIRED TO BE GIVEN WHILE FOR BORROWING FROM BANK ASSESSEE HAS TO INCUR OTHER EXPENSES. WE FIND THAT IN THE CASE OF S OM DUTT GOEL & SONS VS. ITO (2009) 27 DTR (DEL) (TRIB) 263 THE ASS ESSEE HAS PAID INTEREST @ 18% ON LOANS TAKEN FROM PERSONS COVERED BY CLAUSE (B) OF SECTION 40A(2) AS AGAINST THE PREVAILING MARKET RAT E OF 11 TO 12%. IN THIS REGARD IT WAS HELD BY THE TRIBUNAL THAT HA D THESE LOANS BEEN TAKEN FROM BANK OR ANY FINANCIAL INSTITUTION THE ASSESSEE WAS REQUIRED TO COMPLETE LOT OF PAPER FORMALITIES AND R EPAY THE AMOUNT ACCORDING TO THE CONDITIONS ENUMERATED IN THE AGREE MENT. IT WOULD ALSO HAVE BEEN REQUIRED TO GIVE SECURITY FOR THE AM OUNTS. IN VIEW OF THE AFORESAID DIFFICULTIES IN OBTAINING LOAN FROM B ANK OR FINANCIAL INSTITUTION THE INTEREST PAID BY THE ASSESSEE ON U NSECURED LOANS TAKEN FROM RELATIVES AT A RATE LITTLE HIGHER THAN T HE MARKET RATE CANNOT BE DISALLOWED U/S 40A(2) OF THE ACT. IN VIE W OF THE ABOVE DISCUSSION DISALLOWANCE IS NOT JUSTIFIED. SAME AR E DIRECTED TO BE DELETED. 5. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F TELEPHONE EXPENSES OF RS. 52 195/- OUT OF TOTAL EXPENDITURE O F RS. 5 31 690/- TRAVELING AND CONVEYANCE EXPENSES OF RS. 71 622/- O UT OF TOTAL EXPENDITURE OF RS. 7 16 217/- AND DEPRECIATION ON V EHICLES OF RS. 37 564/- OUT OF TOTAL DEPRECIATION OF RS. 3 75 642/ -. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT MAINTAINED ANY TELEPHONE CALL REGISTERS IN RESPECT OF TELEPHONES INSTALLED I N THE BUSINESS AS PAGE 9 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 WELL AS RESIDENTIAL PREMISES OF THE DIRECTORS AND T HE EMPLOYEES OF THE COMPANY. ACCORDINGLY HE DISALLOWED AN AMOUNT OF RS. 52 195/- ON ACCOUNT OF PERSONAL USE OF THE TELEPHON ES. SIMILARLY HAVING OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINE D LOG BOOK THE ASSESSING OFFICER DISALLOWED 10% OF THE AMOUNT UNDE R TRAVELING AND CONVEYANCE AND DEPRECIATION ON VEHICLES ON ACCOUNT OF PERSONAL USE WHICH WAS CONFIRMED BY THE CIT(A). 5.1. TAKING INTO CONSIDERATION THE FACTS AND CIRCUM STANCES OF THE CASE THE ORDER OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE BECAUSE ASSESSEE COULD NOT DISCHARGE THE BURDEN CAS T UPON HIM THAT WHOLE EXPENDITURE WAS INCURRED FOR BUSINESS NE ED OF ASSESSEE. SO THE ORDER OF THE CIT(A) ON THESE ISSUES IS CONFI RMED. 6. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F DEDUCTION U/S 80-IB OF THE ACT AMOUNTING TO RS. 28 07 464/-. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTI ON OF RS. 28 07 464/- U/S 80-IB OF THE ACT BUT THE AUDIT REPO RT IN PRESCRIBED FORM NO. 10-CCB WAS NOT FURNISHED BY THE ASSESSEE A LONG WITH THE RETURN OF INCOME. REFERRING TO SECTION 80-IB(13) R EAD WITH SECTION 80-IA(7) THE ASSESSING OFFICER HELD THAT IN ORDER TO AVAIL DEDUCTION U/S 80-IB IT IS MANDATORY TO ENCLOSE AUDIT REPORT I N THE PRESCRIBED FORM. SINCE THE ASSESSEE FAILED TO DO SO THE ASSE SSING OFFICER DISALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80-IB FOR WANT OF COMPLIANCE OF THE STATUTORY REQUIREMENT. THE MATTE R WAS CARRIED IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO UPH ELD THE ORDER OF THE ASSESSING OFFICER. SAME HAS BEEN OPPOSED BEFORE US BY WAY OF PAGE 10 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 VARIOUS CONTENTIONS. ON THE OTHER HAND THE LEARNED DR SUPPORTED THE ORDER OF AUTHORITIES BELOW. 6.1. THE STAND OF THE ASSESSEE HAS BEEN THAT THE AS SESSING OFFICER OUGHT TO HAVE GIVEN AN OPPORTUNITY TO SUBMIT REPORT IN THE NEW FORM BUT HAVING NOT DONE SO THE DISALLOWANCE WAS N OT JUSTIFIED. THE ASSESSEE HAS SUBSEQUENTLY SUBMITTED THE REPORT IN THE CORRECT FORM AS PER THE REQUIREMENT OF SECTION 80IB THE SA ID CONDITION SHOULD BE TREATED AS FULFILLED. IN THIS REGARD T HE LEARNED AR PLACED RELIANCE ON THE DECISION OF MUMBAI G BENCH OF THE TRIBUNAL IN THE CASE OF MRS. MEENA S. BANERJI VS. ITO (2007) 14 SOT 569 (MUMBAI) WHEREIN THE ASSESSEE'S CLAIM OF DEDUCTION U/S 80-H HC OF THE ACT ON EXPORT OF SOFTWARE OF LITERARY WORK HAS NOT BEEN REJECTED ON THE GROUND THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80-HHE AND NOT U/S 80-HHC OF THE ACT AS THE LANGUAGE OF BO TH THE SECTIONS IS IDENTICAL AND THE DEPARTMENT ITSELF HAS ALLOWED THE CLAIM OF DEDUCTION U/S 80-HHC OF THE ACT FOR EARLIER YEAR AS WELL AS IN SUBSEQUENT YEAR. IT WAS HELD THAT THE SOFTWARE OF LITERATURE BOOKS AND COLLEGE LEVEL INSTRUCTIONAL TEXTS EXPORTED BY T HE ASSESSEE CONSTITUTED GOODS FOR THE PURPOSE OF SECTION 80-HHC OF THE ACT. IN THE SAID CASE THE ASSESSING OFFICER DENIED THE CLA IM OF DEDUCTION ON THE GROUND THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80- HHE AND NOT U/S 80-HHC AND THE AUDIT REPORT WAS PRE PARED IN FORM NO. 10CCAC. THE TRIBUNAL HELD THAT IF THE CLA IM OF ASSESSEE WAS ALLOWABLE THEN IT WAS THE DUTY OF THE ASSESSING OFFICER TO ALLOW THE SAME. DENIAL OF CLAIM OF THE ASSESSEE ON THE R EASON THAT IT PAGE 11 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 CLAIMED UNDER WRONG SECTION WAS NOT JUSTIFIED. THE ASSESSING OFFICER SHOULD HAVE ASKED THE ASSESSEE TO RECTIFY T HE MISTAKE BY FILING CORRECT FORM 10CCAF. FURTHER THE DEPARTMEN T HAS ALLOWED THE CLAIM OF DEDUCTION U/S 80-HHC IN THE EARLIER YE AR AS WELL AS IN THE SUBSEQUENT YEAR. THEREFORE THE ASSESSEES CLAI M WAS HELD TO BE ALLOWABLE. WITH REGARDS TO SOFTWARE LITERATURE BOO KS AND COLLEGE LEVEL INSTRUCTIONAL TEXTS EXPORTED BY THE ASSESSEE CONSTITUTED GOODS. ACCORDING TO US IN CASE THE ASSESSEE FILES ANY WRO NG FORMAT THE ASSESSING OFFICER SHOULD HAVE RECTIFIED BY ASKING F OR AUDIT REPORT IN CORRECT FORM. IN THE CASE BEFORE US AUDIT REPORT IN THE CORRECT FORM HAS BEEN FILED BEFORE THE CIT(A). UNDER THE CIRCUMS TANCES THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE SAME BEC AUSE IT WAS NOT FILED BEFORE THE ASSESSING OFFICER AT THE ASSESSMEN T STAGE. SIMILAR VIEW WAS TAKEN BY CHANDIGARH A BENCH OF THE TRIBU NAL IN THE CASE OF DURGA PRODUCTS VS. ITO (2008) 12 DTR (CHD) (TRB) 297 WHEREIN IT WAS HELD THAT PREPARATION OF EXERCISE NOTEBOOKS AND REGISTERS FROM RAW MATERIAL IS THE MANUFACTURE ELIGIBLE FOR DEDUCT ION U/S 80-IB. IN THE CASE OF DURGA PRODUCTS (SUPRA) THE ASSESSEE FILED RETURN ACCOMPANIED WITH AUDIT REPORT IN OLD FORM. BUT THE DEFECT WAS REMOVED IN THE COURSE OF ASSESSMENT. SO THERE WAS SUBSTANTIVE COMPLIANCE AND HENCE RELIEF U/S 80-IB COULD NOT BE DENIED. IN THE CASE BEFORE US RECTIFICATION OF MISTAKE HAS BEEN D ONE AT THE APPELLATE STAGE WHICH HAS NOT BEEN DISPUTED. IN TH E FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) WAS NOT JUSTI FIED IN REJECTING THE CLAIM OF THE ASSESSEE AS THE DEFECT WITH REGARD TO AUDIT REPORT WAS RECTIFIED AT APPELLATE STAGE. WE FIND THAT THE A.O AS WELL AS PAGE 12 OF 12 ITA NO. 1617/PN/2008 ALPHA FOAM LTD. A.Y. 2004-05 CIT(A) HAVE REJECTED THE CLAIM OF ASSESSEE ON TECH NICAL GROUND AS DISCUSSED ABOVE WHICH IS NOT JUSTIFIED. IN THE INT EREST OF JUSTICE THE ASSESSING OFFICER IS DIRECTED TO GRANT RELIEF ON TH IS ACCOUNT. 7. IN THE RESULT THE APPEAL IS PARTLY ALLOWED AS I NDICATED ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH 2011. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 24 TH MARCH 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- (A) III PUNE 4. THE CIT- IV PUNE 5. THE D.R B BENCH PUNE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE