M/s. Genus Electrotech Ltd.,, Ahmedabad v. The Dy.CIT, Circle- 2(1)(1),, Ahmedabad

ITA 2461/AHD/2015 | 2012-2013
Pronouncement Date: 11-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 246120114 RSA 2015
Assessee PAN AABCH9645H
Bench Delhi
Appeal Number ITA 2461/AHD/2015
Duration Of Justice 5 year(s) 6 month(s) 22 day(s)
Appellant M/s. Genus Electrotech Ltd.,, Ahmedabad
Respondent The Dy.CIT, Circle- 2(1)(1),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 17-02-2021
Date Of Final Hearing 10-07-2017
Next Hearing Date 10-07-2017
First Hearing Date 10-07-2017
Assessment Year 2012-2013
Appeal Filed On 19-08-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI O.P. KANT ACCOUNTANT MEMBER AND SHRI K.N. CHARY JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.99/AHD./2014 ASSESSMENT YEAR: 2007-08 AND ITA NO.100/AHD./2014 ASSESSMENT YEAR: 2008-09 AND ITA NO.1898/AHD./2014 ASSESSMENT YEAR: 2009-10 AND ITA NO.1899/AHD./2014 ASSESSMENT YEAR: 2010-11 AND ITA NO.701/AHD./2015 ASSESSMENT YEAR: 2011-12 AND ITA NO.2617/AHD./2015 ASSESSMENT YEAR: 2012-13 AND ITA NO.2830/AHD./2013 ASSESSMENT YEAR: 2007-08 AND ITA NO.2831/AHD./2013 ASSESSMENT YEAR: 2008-09 AND ITA NO.1763/AHD./2014 ASSESSMENT YEAR: 2009-10 DCIT/ACIT CIRCLE-4 AHMEDABAD VS. M/S. GENUS ELECTROTECH LTD. 308 DEVARC COMPLEX OPP. BIG BAZAR S.G. HIGHWAY AHMEDABAD PAN :AABCH9645H (APPELLANT) (RESPONDENT) 2 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 AND ITA NO.348/AHD./2015 ASSESSMENT YEAR: 2011-12 AND ITA NO.2461/AHD./2015 ASSESSMENT YEAR: 2012-13 M/S. GENUS ELECTROTECH LTD. 308 DEVARC COMPLEX OPP. BIG BAZAR S.G. HIGHWAY AHMEDABAD VS. DCIT/ACIT CIRCLE-4 AHMEDABAD PAN :AABCH9645H (APPELLANT) (RESPONDENT) ORDER PER BENCH: THESE CROSS APPEALS BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS PASSED BY THE FIR ST APPELLATE AUTHORITY I.E. LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) FOR DIFFERENT ASSESSMENT YEARS AS TABULATED BELOW: ASSESSEE BY SHRI NEERAJ JAIN ADV. SHRI MS. SMRITI SAHAY CA DEPARTMENT BY MS. SUNITA SINGH CIT(DR) MS. PARUL SINGH SR. DR DATE OF HEARING 17.02.2021 DATE OF PRONOUNCEMENT 11.03.2021 APPEAL/CROSS OBJECTION NUMBER FIRST APPELLATE AUTHORITY DATE OF ORDER OF FIRST APPELLATE AUTHORITY APPELLANT RESPONDENT ASSESSMENT YEAR 99/AHD./2014 CIT(APPEALS)- VIII AHMEDABAD 28.10.2013 DCIT CIRCLE-4 AHMEDABAD M/S. GENUS ELECTROTECH LTD. 2007-08 2830/AHD./2014 CIT(APPEALS)- VIII AHMEDABAD 28.10.2013 M/S. GENUS ELECTROTECH LTD. DCIT CIRCLE-4 AHMEDABAD 2007-08 3 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 2. AS IDENTICAL ISSUE ARISING FROM SAME SET OF THE FA CTS AND CIRCUMSTANCES ARE INVOLVED IN ABOVE APPEALS THEREF ORE SAME WERE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER FOR SAKE OF CONVENIENCE. ITA NO. 99/AHD./2014 (REVENUES APPEAL) ITA NO. 2830/AHD./2013 (ASSESSEES APPEAL) 3. FIRST WE TAKE UP THE APPEAL OF THE REVENUE (ITA N O. 99/AHD./14) AND APPEAL OF THE ASSESSEE (ITA NO.2830 /AHD./13) FOR ASSESSMENT YEAR 2007-08. THE GROUNDS RAISED BY THE REVENUE ARE REPRODUCED AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1 27 46 480/- MADE ON ACCOUNT OF TRE ATING THE SUBSIDY ON SALES-TAX AS REVENUE RECEIPT AS AGAINST CLAIM OF 100/AHD./2014 CIT(APPEALS)- VIII AHMEDABAD 28.10.2013 DCIT CIRCLE-4 AHMEDABAD M/S. GENUS ELECTROTECH LTD. 2008-09 2831/AHD./2013 CIT(APPEALS)- VIII AHMEDABAD 28.10.2013 M/S. GENUS ELECTROTECH LTD. DCIT CIRCLE-4 AHMEDABAD 2008-09 1898/AHD./2014 CIT (APPEALS)- VIII AHMEDABAD 31.03.2014 DCIT CIRCLE-4 AHMEDABAD M/S. GENUS ELECTROTECH LTD. 2009-10 1763/AHD./2014 CIT(APPEALS)- VIII AHMEDABAD 31.03.2014 M/S. GENUS ELECTROTECH LTD. ACIT CIRCLE-4 AHMEDABAD 2009-10 1899/AHD./2014 CIT(APPEALS)- VIII AHMEDABAD 31.03.2014 DCIT CIRCLE-4 AHMEDABAD M/S. GENUS ELECTROTECH LTD. 2010-11 701/AHD./2015 CIT(APPEALS)-2 AHMEDABAD 12.12.2014 DCIT CIRCLE- 2(1)(1) AHMEDABAD M/S. GENUS ELECTROTECH LTD. 2011-12 348/AHD./2015 CIT(APPEALS)-2 AHMEDABAD 12.12.2014 M/S. GENUS ELECTROTECH LTD. DCIT CIRCLE-4 AHMEDABAD 2011-12 2617/AHD./2015 CIT(APPEALS)-2 AHMEDABAD 05.06.2015 DCIT CIRCLE- 2(1)(1) AHMEDABAD M/S. GENUS ELECTROTECH LTD. 2012-13 2461/AHD./2015 CIT(APPEALS)-2 AHMEDABAD 05.06.2015 M/S. GENUS ELECTROTECH LTD. DCIT CIRCLE- 2(1)(1) AHMEDABAD 2012-13 4 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 THE ASSESSEE AS CAPITAL SUBSIDY WITHOUT V PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON R ECORD. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.7 90 94 513/- MADE ON ACCOUNT OF CEN TRAL EXCISE REFUND RECEIVED TREATING IT AS REVENUE RECEIPT AS AGAINST CLAIM OF THE ASSESSEE AS CAPITAL RECEIPT WITHOUT PROPERLY A PPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECOR D. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF RS.2 95 69 239/- AND RS.73 83 957/- BEING PRIOR PERIOD EXPENSES AND TRADE DISCOUNT RESPECTIVELY WITHOUT PROPERLY APPRECIATIN G THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 3.1 GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS U NDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN CONFIRMING NON-EXCLUSION OF DEBT REDEMPTION FUND OF RS.4.50 CRORE FROM THE BOOK PROFIT FOR THE PURPOSE OF TAXA TION U/S 115JB. 2. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER TO DELETE FROM OR SUBSTANTIATE THE ABOVE GROUND OF APPEAL. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY WAS ENGAGED IN THE BUSINESS OF THE MANUFACT URING OF TELEVISION PRINTED CIRCUIT BOARD (PCB) WASHING MA CHINES ETC. INCLUDING ORIGINAL EQUIPMENT MANUFACTURING (OEM) FO R LG ELECTRONIC PVT. LTD. THE ASSESSEE FILED RETURN OF I NCOME FOR THE YEAR UNDER CONSIDERATION ON 24/10/2007 DECLARING L OSS OF RS. (-) 15 84 31 600/- WHICH WAS FURTHER REVISED TO RS. (- ) 18 80 00 836/-. THE RETURN OF INCOME FILED BY THE A SSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTI CES UNDER INCOME-TAX ACT 1961 (IN SHORT THE ACT) WERE ISSU ED AND COMPLIED WITH. THE ASSESSMENT UNDER SECTION 143(3) OF THE AC T WAS COMPLETED ON 29/12/2009 DETERMINING TOTAL INCOME AT 5 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 5 54 93 353/-. ON FURTHER APPEAL THE LD. CIT(A) IN THE IMPUGNED ORDER DATED 28/10/2013 ALLOWED THE APPEAL PARTLY. A GGRIEVED BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEF ORE THE INCOME-TAX APPELLATE TRIBUNAL (IN SHORT THE TRIBUN AL) RAISING THE RESPECTIVE GROUNDS AS ABOVE. 5. IN GROUND NO. 1 THE REVENUE HAS CHALLENGED ADDITI ON OF 12 74 46 480/- DELETED BY LD. CIT(A) IN RESPECT OF SALES TAX SUBSIDY WHICH WAS HELD AS REVENUE RECEIPT BY THE ASSESSING OFFICER. THE GROUND NO. 2 IS IN RESPECT OF ADDITION OF 7 90 94 513 DELETED BY THE LEARNED CIT(A) IN RESPEC T OF CENTRAL EXCISE SUBSIDY WHICH WAS HELD AS REVENUE BY THE A SSESSING OFFICER. 5.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE TH AT ASSESSEE RECEIVED SUBSIDY OF 12 74 46 480/- BY WAY OF SALES TAX EXEMPTION UNDER THE SCHEME OF THE GUJARAT GOVERNME NT FOR SETTING UP OF THE UNIT IN THE DISTRICT OF KUTCH. TH E ASSESSEE NEITHER PAID ANY AMOUNT OF SALES TAX ON PURCHASE N OR CHARGED ANY SALES TAX INVOICE FROM THE CUSTOMERS. THE ASSES SEE CLAIMED THAT A NOTIONAL SUBSIDY ELEMENT IS INBUILT IN SAL ES REVENUE RECEIVED FROM CUSTOMERS AND THEREFORE IT WAS A SUBS IDY RECEIVED BY IT IN RESPECT OF THE SALES TAX. THE ASSESSEE ALS O RECEIVED 7 90 94 513/- AS EXCISE DUTY BENEFIT UNDER CENTRAL GOVERNMENT SCHEME. UNDER THE SCHEME THE ASSESSEE WAS TO CHARGE FULL DUTY ON SALES INVOICE ADJUST THE CENVAT CREDIT AVAILABLE TO IT ON PURCHASE AND WAS REQUIRED TO PAY THE BALANCE AMOUNT THROUGH PERSONAL LEDGER ACCOUNT (PLA). SUBSEQUENTLY THE BA LANCE AMOUNT PAID THROUGH PLA WAS TO BE REFUNDED BY THE C ENTRAL EXCISE DEPARTMENT. THE ASSESSEE CLAIMED THAT SALES TAX SUBSIDY 6 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 AND CENTRAL EXCISE SUBSIDY REFUND SHOWN AS INCOME I N THE PROFIT AND LOSS ACCOUNT ARE CAPITAL RECEIPT. THE ASSESSEE RELIED ON VARIOUS DECISIONS IN SUPPORT OF ITS CLAIM. 5.2 THE LEARNED ASSESSING OFFICER REJECTED THE CLAIM O F THE ASSESSEE FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD VS CIT 228 ITR 253(SC) AND CIT VS PONNI SUGAR AND CHEMICALS LTD 306 ITR 392(SC) . IN VIEW OF THE ABOVE DECISIONS THE LEARNED ASSES SING OFFICER CONCLUDED THAT SALES TAX INCENTIVE IS A CAP ITAL RECEIPT OBSERVING AS UNDER: APPLYING THE TESTS LAID DOWN IN THE TWO LEADING DE CISIONS OF HON'BLE SUPREME COURT AS DISCUSSED ABOVE FOLLOWING FACTS EM ERGE IN THIS CASE ALSO I) THE SALES TAX INCENTIVE GIVEN TO THE ASSESSEE IS ONLY AFTER COMMENCEMENT OF PRODUCTION AND THAT TOO WITHIN SPEC IFIED DATE. II) THE ASSESSEE IS UNDER NO STIPULATION TO APPLY T HE AMOUNT OF INCENTIVE TOWARDS REPAYMENT OF CAPITAL COST [ AS WA S CASE IN PONNI SUGAR & CHEMICALS LTD. ] AND IS FREE TO UTILI ZE IT. III) THE NATURE OF ASSISTANCE WAS FOR THE PURPOSE O F TRADE. IT WAS GIVEN TO THE ASSESSEE FOR SUPPLEMENTING THE PROFITS . IV) IN EFFECT SALES TAX INCENTIVE REDUCED THE COST RESULTANTLY PROFITS OF THE ASSESSEE GOT ENHANCED AND ITS GOODS BY VIRTU E OF SALES TAX EXEMPTION GOT COMPETITIVE ADVANTAGE WHICH WAS O N REVENUE ACCOUNT. THEREFORE THE SALES TAX INCENTIVE RECEIVED BY THE ASSESSEE CLEARLY IS ON REVENUE ACCOUNT AND NOT CAPITAL RECEI PT AS CLAIMED BY THE ASSESSEE. ACCORDINGLY THE DEDUCTION CLAIMED BY ASSESSEE IN RESPECT OF SALES TAX INCENTIVE OF RS. 12 74 46 680/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. 5.3 SIMILARLY IN RESPECT OF THE CENTRAL EXCISE REFUND THE ASSESSING OFFICER CONCLUDED AS UNDER: IN RESPECT OF CENTRAL EXCISE REBATE REFUND THE PO SITION IS CLEARLY THE SAME AS :- 7 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 I) THE REBATE/REFUND IS AVAILABLE ONLY AFTER COMMEN CEMENT OF PRODUCTION AND IS AVAILABLE ONLY FOR PERIOD OF 5 YE ARS FROM DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION. II) THERE IS NO STIPULATION REGARDING UTILIZATION O F THE MONEY SO RECEIVED. THE ASSESSEE IS FREE TO UTILIZE THE MONEY AS IT FEELS TO DO SO. THEREFORE THERE IS NO STIPULATION OF IT BEING USED ONLY TO REPAY CAPITATCOMTHLFMENT: COST ETC. THEREFORE THIS SUBSI DY IS ALSO IN NATURE OF REVENUE RECEIPT SATISFYING TESTS LAID DOW N IN ALREADY DISCUSSED DECISION OF HON'BLE SUPREME COURT. ACCORD INGLY AN AMOUNT OF RS. 7 90 94 513/- IS HELD TO BE REVENUE R ECEIPT AND DEDUCTION OF RS.7 90 94 513/- IS DISALLOWED AND ADD ITION IS MADE TO THE TOTAL INCOME. [ADDITION OF RS.7 90 94 513/-] 5.4 THE LD. CIT(A) FOLLOWING THE FINDING OF HIS PREDEC ESSOR IN ASSESSMENT YEAR 2006-07 HELD BOTH THE RECEIPT OF S ALES TAX INCENTIVE AND CENTRAL EXCISE REFUND AS CAPITAL RECE IPT. THE RELEVANT FINDING OF THE LEARNED CIT(A) IS REPRODUCE D AS UNDER: 3.4 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. IT IS NOTED THAT THE AO HAS HELD THAT THE SALES TAX INCENTIVE AND TH E CENTRAL EXCISE REBATE REFUND WERE REVENUE RECEIPTS AND NOT THE CAP ITAL RECEIPTS AS CLAIMED BY THE APPELLANT. IT IS NOTED FROM RECORDS AND THE SUBMISSION OF THE APPELLANT THAT THE SIMILAR ISSUE WAS ALSO INVOLVED IN A. Y. 2006-07. MY PREDECESSOR WHILE DECIDING THE APPEAL FOR THAT YEAR VIDE APPEAL NO. CIT(A)-VIII/447/ADDL.CIT/R-L 2 /11-12 DATED 26/09/2012 HAS DECIDED THE ISSUE. IT IS NOTED FROM HIS ORDER THAT THE ISSUE HAS BEEN DEALT BY HIM IN DETAIL. HE HAS D ISCUSSED ALL THE JUDGEMENTS QUOTED BY THE AO AS WELL AS THE APPELLAN T AND HAS ARRIVED AT THE DECISION AFTER ANALYSING ALL ASPECTS OF THE SUBSIDY RECEIVED BY THE APPELLANT ON ACCOUNT OF SALES TAX A ND CENTRAL EXCISE. HE HAS GIVEN THE DECISION IN PARA-3.4 TO 3. 8 OF HIS ORDER. FOR THE SAKE OF CLARITY AND CONVENIENCE THE RELEVANT PO RTION OF THE DECISION GIVEN BY MY PREDECESSOR IN THE ABOVE REFER RED ORDER ARE REPRODUCED HERE UNDER: - 3.4. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL AND ALSO CONSIDERED THE FINDING RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE FACTS OF THE C ASE ARE THAT THE APPELLANT HAD SET UP AN INDUSTRIAL UNIT IN KUTCH DI STRICT TO AVAIL THE BENEFIT OFNOTIFICATION NO. 39/2001-C.E. DATED 31.07 .2001 AS 8 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 AMENDED BY NOTIFICATION NO. 55/2004-CE DATED 09.11. 2004 AND RECEIVED THE EXCISE DUTY INCENTIVE OF RS. OF RS.321 35417/- AND SALES TAX INCENTIVE OF RS.43657867/- UNDER THE SCHE ME OF THE CENTRAL GOVT FORMULATED AND ISSUED VIDE GENERAL EX EMPTION NO. 38 AND NOTIFICATION NO. 39/2001-C.E. DATED 31.07.2001 AS AMENDED BY NOTIFICATION NO. 55/2004-CE DATED 09.11.2004. WH ILE MAKING THE ABOVE DISALLOWANCE THE AO HAS MADE THE FOLLOWING O BSERVATIONS:- I. THE SALES TAX INCENTIVE AND EXCISE DUTY INCENTIV E GIVEN TO THE ASSESSEE IS ONLY AFTER COMMENCEMENT OF PRODUCTION A ND THAT TOO WITHIN SPECIFIED DATE. II. THE ASSESSEE IS UNDER NO STIPULATION TO APPLY T HE AMOUNT OF INCENTIVE TOWARDS REPAYMENT OF CAPITAL COST (AS WAS CASE IN PONNI SUGAR AND CHEMICALS LTD.) AND IS FREE TO UTILIZE IT . III. THE NATURE OF ASSISTANCE WAS FOR THE PURPOSE O F TRADE. IT WAS GIVEN TO THE ASSESSEE FOR SUPPLEMENTING THE PROFITS . IV. IN EFFECT SALES TAX INCENTIVE AND EXCISE DUTY I NCENTIVE REDUCE THE COST RESULTANTLY PROFITS OF THE ASSESSEE GOT ENHANC ED AND ITS GOODS BY VIRTUE OF SALES FAX EXEMPTION GOT COMPETITIVE AD VANTAGE WHICH WAS ON REVENUE ACCOUNT. THE AO HAS FURTHER RELIED UPON THE DECISION OF THE HON'BLE SC IN THE CASE OF SAWHNEY STEEL AND PRESS WORKS LTD VS CIT 22 8 ITR 253 (SC) THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS CIT VS DUSAD INDUSTRIES 162 ITR 784 AND THE DECISI ON OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS PONNI SUGAR AND CHEMICALS LTD. 306 ITR 392. IN VIEW OF THE FINDINGS DISCUSSED ABOV E THE AO HELD THAT THE SALES TAX INCENTIVE AND EXCISE DUTY INCENT IVE RECEIVED BY THE APPELLANT WAS CLEARLY ON THE REVENUE ACCOUNT AN D NOT A CAPITAL RECEIPT AS CLAIMED BY THE APPELLANT. IN ACCORDANCE WITH THE ABOVE FINDING THE AO DISALLOWED THE DEDUCTION OF SALES TA X INCENTIVE OF RS.43657867/- AND EXCISE DUTY INCENTIVE OF RS. OF R S.32135417/- CLAIMED BY THE APPELLANT AS CAPITAL RECEIPT AND MAD E AN ADDITION OF THE ABOVE AMOUNT TO THE APPELLANT'S INCOME. 3.5. THE APPELLANT HAS SUBMITTED THAT IT IS UNDISPU TED FACT THAT INCENTIVE HAS BEEN PROVIDED WITH THE OBJECTIVE OF C REATING NEW EMPLOYMENT OPPORTUNITIES THROUGH NEW INDUSTRIES AND TO MAKE LIVE THE INDUSTRIAL AND ECONOMIC ENVIRONMENT OF THE KUTC H REGION WHICH WAS DESTROYED DUE TO EARTHQUAKE. THE APPELLANT HAS SUBMITTED THAT IN FACT THE EXTRACT OF SUPREME COURTS OBSERVATION RELIED UPON BY THE AO (SUPRA) SUPPORTS THEIR CASE WHERE THE HON'BLE CO URT HAS OBSERVED THAT IT IS THE OBJECT FOR WHICH SUBSIDY/ASSISTANCE IS GIVEN WHICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY AND THE FORM OR MECHANISM THROUGH WHICH SUBSIDY IS GIVEN IS IRRELEV ANT (PARA 14 OF 9 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 SUPREME COURT'S DECISION IN THE CASE OF PONNY SUGAR ). THE APPELLANT HAS SUBMITTED THAT THE FACTS OF THEIR CASE ARE ALMO ST SIMILAR TO THOSE OF PONNY SUGAR IN THE MATTER OF PURPOSE TEST AND AL SO IN THE MATTER OF MECHANISM OF GRANTING INCENTIVE AND IN BOTH CASE S INCENTIVE HAD TO BE COMPUTED AND GRANTED WITH REFERENCE TO PRODUC TION/SALE. THE APPELLANT HAS SUBMITTED THAT IT IS MANIFEST THAT TH EIR CASE IS FULLY SUPPORTED BY THE DECISION IN THE CASE OF PONNY SUG AR IN VIEW OF THE PURPOSE TEST AND THE DECISION IN THE CASE OF 'SAHNE Y STEEL' ALSO SUPPORTS THE CASE AS THE INCENTIVE HAS NOT BEEN GI VEN FOR RUNNING THE BUSINESS MORE EFFICIENTLY BUT FOR THE LARGER PU RPOSE OF INDUSTRIALIZATION WHICH IN FACT PROMPTED BY HUMANIT ARIAN CONDITIONS. THE APPELLANT HAS BROUGHT TO THE NOTICE OF THE JUDG EMENT OF AHMEDABAD ITAT DECISION IN THE CASE OF ACIT VS. BIR LA VXL LTD (ITA/247-249/RAJKOT 12011). WHILE DECIDING THIS ISS UE IN FAVOUR OF ASSESSEE HON'BLE IT AT HAD REFERRED THE SALES TAX / EXCISE INCENTIVES MEANT FOR EARTHQUAKE RAVAGED KUTCH DISTR ICT:- 'THE ASSESSEE HAS ITS INDUSTRIAL UNIT WITH HUGE CAP ITAL INVESTMENT IN THE KUTCH REGION WHICH WAS BADLY AFFE CTED BY THE EARTHQUAKE. THE PROJECT OF THE ASSESSEE FOR PUT TING UP INDUSTRIAL UNIT IN THE EARTHQUAKE AFFECTED AREA HAS BEEN APPROVED FOR THE PURPOSE OF AVAILING EXEMPTION UNDE R THE RELEVANT NOTIFICATIONS FOR SCHEMES OF INDUSTRIAL DE VELOPMENT IN THE WAKE OF EARTHQUAKE. THE SCHEMES HAVE BEEN NOTIF IED THAT THE PURPOSE OF THE CENTRAL GOVERNMENT AND GOVERNMEN T OF GUJARAT BY GIVING THE INCENTIVES IS TO PROMOTE INVE STMENT OF CAPITAL AND THEREBY FOR INDUSTRIAL DEVELOPMENT AND TO GENERATE EMPLOYMENT IN THE KUTCH DISTRICT WHICH WAS AFFECTED BY EARTHQUAKE. THUS ON APPLICATION OF THE PURPOSE T EST IT IS QUITE CLEAR THAT THE PURPOSE OF THE INCENTIVE SCHEM ES IS NOT TO ASSIST IN THE CARRYING ON OF THE ASSESSEE'S TRADE O R BUSINESS. THE PURPOSE IS CLEARLY FOR PROMOTING CAPITAL INVEST MENT AND THEREBY INDUSTRIAL DEVELOPMENT IN THE EARTHQUAKE AF FECTED DISTRICT. THE PURPOSE IS TO GENERATE EMPLOYMENT IN THE SAID DISTRICT.' FURTHER THE HONORABLE ITAT RELIED ON THE CO-ORDINA TE BENCH DECISION IN CASE OF AJANTA MANUFACTURING LTD [ITA(793/RJT (2 010] AND OBSERVED THAT: '17. THE HON'BLE SUPREME COURT IN THE CASE OF SAHNE Y STEEL AND PONNY SUGAR HAS LAID DOWN THE PRINCIPLE THAT TH E CHARACTER OF THE SUBSIDY WHETHER REVENUE OR CAPITAL IN THE HANDS OF THE RECIPIENT WILL HAVE TO BE DETERMINED B Y HAVING REGARD TO THE PURPOSE OF WHICH SUBSIDY IS GIVEN. TH US THE SAID DECISION THOUGH RELIED BY THE REVENUE ACTUALL Y SUPPORTS THE CASE OF THE ASSESSEE.' 10 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 RELIANCE WAS ALSO PLACED ON THE DECISION OF THE MUM BAI SPECIAL BENCH IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES L TD. REPORTED IN 88 ITD 273 (MUMBAI)(SB). ON CONSIDERATION OF THE SCHEM E OF THE CENTRAL GOVERNMENT IT WAS NOTICED THAT THE SCHEME WAS FORM ULATED ONLY FOR THE KUTCH DISTRICT WHERE THE ECONOMIC ACTIVITIES CA ME TO A STANDSTILL ON ACCOUNT OF THE DEVASTATING EARTHQUAKE IN THE STA TE ON 26TH JANUARY 2001 TO PROMOTE LARGE SCALE INVESTMENT IN N EW INDUSTRIAL UNITS WITH A VIEW TO GENERATE EMPLOYMENT. THE APPEL LANT HAS FURTHER SUBMITTED THAT THERE IS NO DISPUTE W.R.T THE FACT T HAT APPELLANT HAD SET UP ITS UNIT IN KUTCH AND AVAILED SALES TAX / EX CISE INCENTIVE AS PER INCENTIVE NORMS AND IT IS REQUESTED TO TREAT TH E INCENTIVE AS CAPITAL RECEIPTS AND DELETE THE ADDITIONS MADE IN T HIS REGARD. 3.6. THE SUBMISSION OF THE APPELLANT IS CONSIDERED AFTER CAREFUL STUDY OF THE FACTS AND CASE LAWS. THE APPELLANT'S C ASE IS SIMILAR TO THE FACTS IN THE CASE OF DCIT VS. RELIANCE INDUSTRI ES LTD. 88 ITD 273 (MUM (SB) DECIDED BY HON'BLE SPECIAL BENCH OF MUMBA I AS RELIED ON BY THE LEARNED COUNSEL. THE HON'BLE SPECIAL BENCH O F MUMBAI TRIBUNAL HAD RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VS. PONNI SUGARS & CHEMICALS L TD. 260 ITR 605 (MAD). THIS DECISION WAS LATTER ON AFFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. PONNI SUGARS & CHEMICA LS LTD. 306 ITR 392 (SC) BY HOLDING THAT THE CHARACTER OF THE RECEI PTS IN THE HANDS OF THE ASSESSEE HAVE TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IN OTHER WORDS IN SUCH CASES ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME WHEN THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL AND THE FORM OF SUBSIDY IS ALSO IMMATERIAL. IT IS EVIDENT FROM THE SCHEME ITSE LF THAT THE SALES TAX AND EXCISE DUTY INCENTIVES WERE NOT GIVEN TO TH E APPELLANT FOR ASSISTING IN CARRYING OUT THE BUSINESS OPERATIONS. THE PURPOSE OF THIS SCHEME WAS TO ATTRACT THE LARGE SCALE INVESTME NT TO GENERATE NEW EMPLOYMENT. THE SCHEME WAS FORMULATED ONLY FOR THE KUTCH DISTRICT WHERE THE ECONOMIC ACTIVITIES CAME TO A ST ANDSTILL ON ACCOUNT OF THE DEVASTATING EARTHQUAKE IN THE STATE ON 26TH JANUARY 2001. IN VIEW OF THE ABOVE JUDICIAL DECISIONS AND PARTICULAR LY CONSIDERING THE PURPOSE AND OBJECT OF THE EXCISE DUTY INCENTIVE SCH EME IT IS HELD THAT THE SALES TAX AND EXCISE DUTY INCENTIVES RECEI VED BY THE APPELLANT WERE IN THE NATURE OF CAPITAL RECEIPTS AN D THUS WERE NOT CHARGEABLE TO TAX. 3.7. ON MERITS OF THE ISSUE I HAVE CAREFULLY CONSI DERED THE SUBMISSION OF THE LEARNED COUNSEL AND ALSO CONSIDER ED THE FINDINGS OF THE ASSESSING OFFICER. THE SUBSIDY/SALES TAX INC ENTIVE WAS AVAILABLE TO THE APPELLANT FOR ESTABLISHING THE IND USTRIAL UNIT IN THE KUTCH DISTRICT OF GUJARAT. THE INCENTIVE SCHEME WAS FORMULATED VIDE RESOLUTION NI. INC-10200-903-1 DATED 09/11/2001 OF INDUSTRIES OF MINES DEPARTMENT GOVERNMENT OF GUJARAT. IN THE PRE AMBLE ITSELF IT WAS STATED THAT THE ECONOMIC ACTIVITIES IN THE DIS TRICT OF KUTCH CAME TO A STANDSTILL ON ACCOUNT OF THE DEVASTATING EARTH QUAKE IN THE STATE 11 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 ON 26TH JANUARY 2001. NEW EMPLOYMENT OPPORTUNITIES COULD BE CREATED. IF NEW INVESTMENT TAKES PLACE THE GOVERNM ENT IS COMMITTED TO ATTRACTING INDUSTRIES IN THE DISTRICT TO MAKE THE INDUSTRIAL AND ECONOMIC ENVIRONMENT LIVE. GOVERNMEN T OF INDIA HAS ANNOUNCED EXCISE DUTY EXEMPTION FOR NEW INDUSTRIES TO PROMOTE LARGE SCALE INVESTMENT IN THE DISTRICT ALONGWITH WH ICH THE STATE GOVERNMENT HAS ALSO DECIDED TO ANNOUNCE THE SCHEME OF SALES TAX INCENTIVES. SINCE THE SCHEME IS AIMED AT MAKING THE ECONOMIC ENVIRONMENT OF KUTCH DISTRICT LIVE IT HAS BEEN DEC IDED O CONFINE THE SAME ONLY TO KUTCH DISTRICT'. THE APPELLANT COMPANY IS AVAILING THE BENEFIT OF SCHEME BY NOT PAYING SALES TAX ON PURCHA SES WHILE ON SALES COMPANY IS COLLECTING SALES FAX ON SALES MAD E AND THE SAME IS CARRIED UNDER THE HEAD DIRECT INCOME UNDER THE P ROFIT AND LOSS ACCOUNT OF THE COMPANY. IT IS EVIDENT FROM THE PREA MBLE OF THE SCHEME THAT THE INCENTIVES WERE GIVEN TO ENTREPRENE URS TO ATTRACT THE LARGE SCALE INVESTMENT TO GENERATE NEW EMPLOYMENT A ND FOR MAKING THE ECONOMIC ENVIRONMENT OF KUTCH DISTRICT LIVE. TH US NEITHER THE INCENTIVES WERE GIVEN FOR MEETING THE COST OF THE I NVESTMENT NOR WERE GIVEN FOR ASSISTING THE APPELLANT IN CARRYING OUT T HE BUSINESS OPERATIONS. THUS THE SUBSIDY IN THE FORM OF EXEMPT ION FROM THE LIABILITY TO PAY SALES TAX IS ON CAPITAL ACCOUNT AN D NOT ON REVENUE ACCOUNT. '3.8. THE FACTS OF THE APPELLANT'S CASE ARE SIMILAR . IT IS EVIDENT FROM THE SCHEME ITSELF THAT THE SALES TAX SUBSIDY/INCENT IVES WERE NOT GIVEN TO THE APPELLANT FOR ASSISTING IT IN CARRYING OUT THE BUSINESS OPERATIONS. THE OBJECT OF THE SUBSIDY WAS TO ENCOUR AGE LARGE SCALE INVESTMENT BY ATTRACTING ENTREPRENEURS FOR SETTING UP OF INDUSTRIES IN THE NOTIFIED AREA OF KUTCH DISTRICT WHERE THE ECONO MIC ACTIVITIES CAME TO A STANDSTILL ON ACCOUNT OF THE DEVASTATING EARTH QUAKE IN THE STATE ON 26TH JANUARY 2011. THE SCHEME WAS FORMULATED AND THE INCENTIVES WERE GIVEN TO ENTREPRENEURS TO ATTRACT T HE LARGE SCALE INVESTMENT TO GENERATE NEW EMPLOYMENT AND FOR MAKIN G THE ECONOMIC ENVIRONMENT OF KUTCH DISTRICT OF GUJARAT B EFORE THE SPECIFIED DATE AS PER THE SCHEME OF INCENTIVE. THE LIMIT OF THE INCENTIVE WAS FIXED. THE APPELLANTS CASE IS COVERE D BY THE DECISION OF HON'BLE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. 88 ITD 273 (MUM. (SB) AS R ELIED ON BY THE LEARNED COUNSEL. THE HON'BLE SPECIAL BENCH OF MUMBA I TRIBUNAL HAD RELIED ON THE DECISION OF THE HON'BLE MADRAS HIGH C OURT IN THE CASE OF VS. PONNI SUGARS & CHEMICALS LTD. 260 ITR 605 MA D). THIS DECISION WAS LATTER ON AFFIRMED BY THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. PONNI SUGARS & CHEMICALS LTD. 306 I TR 392 (SC) BY HOLDING THAT THE CHARACTER OF THE RECEIPT IN THE HA NDS OF THE APPELLANT HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FO R WHICH THE SUBSIDY IS GIVEN. IN OTHER WORDS IN SUCH CASES ONE HAS TO APPLY PURPOSE TEST'. THE POINT OF TIME WHEN THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL AND THE FORM OF SUBSIDY IS ALSO 12 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 IMMATERIAL. IT IS EVIDENT FROM THE INCENTIVE SCHEME ITSELF THAT THE PURPOSE OF THE SCHEME WAS TO ATTRACT THE LARGE SCAL E INVESTMENT TO GENERATE NEW EMPLOYMENT AND FOR MAKING THE ECONOMIC ENVIRONMENT OF KUTCH DISTRICT LIVE. IN VIEW OF THE ABOVE JUDICI AL DECISIONS AND CONSIDERING THE FACTS OF THE CASE AND ALSO RELYING ON THE DECISION OF THE JURISDICTIONAL BENCH OF ITAT IN THE CASE OF AC/ 7 VS. BIRLA VXL LTD (ITA1247-2491RAJKOT /20! 1) I AM OF THE CONSIDERED OPINION THAT THE SALES TAX INCENTIVE OF RS.43657867 AND EXCISE DUTY INCENTIVE OF RS. OF RS.32135417/- RECEIVED BY THE APPELLANT WERE IN THE NATURE OF CAPITAL RECEIPTS AND THUS WERE NOT CHARGEABLE TO TA X. THE AO IS DIRECTED TO DELETE THE ABOVE ADDITIONS. THE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. IT IS CLEAR FROM THE ABOVE DISCUSSION THAT THE ISSU E OF SALES TAX INCENTIVE AND EXCISE DUTY INCENTIVE HAS BEEN DECIDE D IN FAVOUR OF THE APPELLANT BY THE ABOVE REFERRED ORDER. AS THE F ACTS ARE IDENTICAL RESPECTFULLY FOLLOWING THE JUDGEMENT OF MY PREDECES SOR IT IS HELD THAT THE SALES TAX AND EXCISE DUTY INCENTIVE ARE NOT OF REVENUE NATURE AND THE SAME SHOULD BE TREATED AS CAPITAL RECEIPTS. ACCORDINGLY THE ADDITIONS MADE BY THE AO FOR ASSESSMENT YEAR 2007-0 8 AND 2008- 09 ON ACCOUNT OF SALES TAX AND EXCISE DUTY INCENTIV E ARE DIRECTED TO BE DELETED AND APPELLANT IS ENTITLED FOR DEDUCTION AS THE SAME HAVE BEEN HELD TO BE CAPITAL RECEIPTS. THE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED FOR BOTH THE ASSESSMENT YEARS. 6. AT THE OUTSET THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE A SSESSEE BY THE ORDER OF THE TRIBUNAL IN ITA NO. 2826/AHD./2012 FOR ASSESSMENT YEAR 2006-07. WHEREAS THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE IN VIEW OF THE PURPOSE TEST THE SUBSIDIES RECEIVED BY THE ASSESSEE ARE OF REVENUE NATURE AND THUS ADDITIONS NEED TO BE SUSTAINED. 7. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. THE ISSUE INVOLVED IS WHETHER THE SALES TAX INCENTIVE AND EXCISE DUTY REFUND RECEIVED BY THE ASSESSEE UND ER THE RESPECTIVE SCHEME OF GUJARAT GOVERNMENT AND CENTRAL GOVERNMENT ARE IN THE NATURE OF CAPITAL RECEIPT OR REVENUE 13 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 RECEIPT. THE ASSESSEE HAS TAKEN BENEFIT OF THESE SC HEMES IN THE PRECEDING ASSESSMENT YEAR 2006-07 AND THE LD. CIT( A) HAS IN PRESENT ASSESSMENT YEAR FOLLOWED FINDING OF HIS PRE DECESSOR IN THE ASSESSMENT YEAR 2006-07. IN THE SAID ASSESSMENT YEA R THE TRIBUNAL HAS HELD THAT RECEIPT OF SALES TAX INCENTI VE AND CENTRAL EXCISE REFUND ARE IN THE NATURE OF CAPITAL RECEIPT. THE RELEVANT FINDING OF THE TRIBUNAL (SUPRA) IS REPRODUCED AS UN DER: 11. WE FIND THAT SO FAR AS THE SPECIAL BENCH DECIS ION OF THIS TRIBUNAL IN THE CASE OF RELIANCE INDUSTRIES (SUPRA) IS CONCERNED IT STILL HOLDS THE FIELD. ALL THAT HAS HAPPENED AS A RESULT OF HONBLE SUPREME COURTS DECISION DATED 9 TH SEPTEMBER 2011 IS THAT HONBLE BOMBAY HIGH COURT HAS NOW ADMITTED THE QUESTION WH ETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE TR IBUNAL WAS RIGHT IN HOLDING THAT SALES TAX EXEMPTION WAS A CAPITAL R ECEIPT AND WILL IN DUE COURSE THOUGH ADJUDICATE ON THIS LEGAL ISSU E. TO THAT EXTENT HONBLE BOMBAY HIGH COURTS ORDER DATED 15 TH APRIL 2009 TO THE EXTENT OF DECLINING TO ADMIT THIS QUESTION STANDS REVERSED. HOWEVER THE DECISION OF THE SPECIAL BENCH STILL HOLDS GOOD AS THE SAME HAS NOT AND AT LEAST NOT YET EVEN BEEN EXAMINED BY HO NBLE BOMBAY HIGH COURT. MERE ADMISSION OF APPEAL AGAINST A DECI SION AS IS ELEMENTARY DOES NOT AFFECT THE BIDING NATURE OF A JUDICIAL PRECEDENT. THE SPECIAL BENCH DECISION IN THE CASE OF RELIANCE INDUSTRIES LTD (SUPRA) WAS NOT REVERSED BY HONBLE SUPREME COURT BUT WAS DIRECTED TO BE EXAMINED ON MERITS BY HONBLE BOMB AY HIGH COURT. THAT IS QUITE DIFFERENT FROM DISAPPROVING THE SPECI AL BENCH DECISION BUT IT APPEARS THAT THE COORDINATE BENCH WAS LED TO BELIEVE AND THERE COULD NOT HAVE BEEN ANY OTHER REASON FOR IGNO RING THE SPECIAL BENCH DECISION THAT THIS SPECIAL BENCH DECISION IS REVERSED. THAT IS PATENTLY INCORRECT AND WHEN WE POINTED IT OUT TO T HE LEARNED COMMISSIONER (DR) HE DID NOT HAVE MUCH TO SAY EXCE PT TO RELY UPON THE COORDINATE BENCH DECISION WHICH SEEMS TO HAVE F OLLOWED THAT APPROACH. THE COORDINATE BENCH IN THE CASE OF JIND AL STEEL (SUPRA) DID INDEED TRAVEL MUCH BEYOND ITS LIMITED MANDATE I N IGNORING A BINDING JUDICIAL PRECEDENT SIMPLY BECAUSE APPEAL AG AINST THAT SPECIAL BENCH DECISION IS NOW PENDING BEFORE HONBL E BOMBAY HIGH COURT. WHEN POSED WITH A SPECIAL BENCH DECISION AND A DIVISION BENCH DIRECTLY ON THE ISSUE THOUGH TOUCHING DIFFER ENT CHORDS WE HAVE NO DIFFICULTY IN RECOGNIZING OUR LIMITATIONS. THE WISDOM OF A DIVISION BENCH EVEN IF SUPERIOR- AS STRENUOUSLY AR GUED BY THE LEARNED COMMISSIONER HAS TO MAKE WAY FOR THE HIGHE R WISDOM OF A LARGER BENCH. IT IS THIS FAITH OF JUDICIAL HIERARCH ICAL SYSTEM THAT IS THE STRENGTH OF OUR FUNCTIONING AND WE MUST FOLLOW THE SAME. WE 14 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 THEREFORE REGRET OUR INABILITY TO FOLLOW THE DIVIS ION BENCH IN THE CASE OF JINDAL POWER NO MATTER HOW DEEPLY WE RESPECT AN D ADMIRE THE WORK OF ALL OUR COLLEAGUES AND WE WOULD RATHER BE GUIDED BY THE SPECIAL BENCH DECISION - WHICH IS EXACTLY WHAT ANOT HER DIVISION BENCH ON THE SAME SET OF FACTS AS BEFORE US DID I N THE CASE OF AJANTA MANUFACTURING LTD (SUPRA). AS FOR LEARNED CO MMISSIONER (DR)S SUGGESTION THAT WE SHOULD FOLLOW THE JURISDI CTIONAL HIGH COURT DECISION IN THE CASE OFF COLOURMAN DYECHEM (SUPRA) WE FIND THAT THEIR LORDSHIPS IN THIS CASE WERE DEALING WITH AN ENTIRELY DIFFERENT TYPE OF SUBSIDY WHICH WAS CLEARLY DEALING WITH AN E XPANSION SITUATION. HOWEVER WE WOULD RATHER REFRAIN FROM MA KING ANY FURTHER DETAILED OBSERVATIONS ON THIS ISSUE AS WE ARE ALIVE TO THE FACT THAT HONBLE JURISDICTIONAL HIGH COURT IN TAX APPEAL NO 358 OF 2012 HAS ADMITTED APPEAL AGAINST THE DECISION OF T HIS TRIBUNAL IN AJANTAS CASE (SUPRA) AND ALL THESE ISSUES WILL NOW COME UP FOR CONSIDERATION OF THEIR LORDSHIPS. THE FACT THAT APP EAL IS ADMITTED DOES NOT AS WE HAVE.SFATED EARLIER AS WELL DOES N OT AFFECT THE BINDING NATURE OF THE \ JUDICIAL PRECEDENTSVRHERE I S NO DISPUTE BEFORE US THAT THE SCHEME UNDER WHICH THE SALES TAX AND EXCISE DUTY SUBSIDY ARE GIVEN TO THIS ASSESSE ARE THE SAME AS I N THE CASE OF AJANTA MANUFACTURING LTD (SUPRA). ALL THE MATERIAL FACTS BEING THE SAME THERE IS NO REASON TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. WE MUST THEREFORE UPHOLD THE CONCLUSIONS ARRIVED AT BY THE COMMISSION ER (APPEALS) WHICH ARE IN CONSONANCE WITH THE SPECIAL BENCH DECI SION IN THE CASE OF RELIANCE INDUSTRIES (SUPRA) AND COORDINATE BENCH DECISION IN THE CASE OF AJANTA MANUFACTURING LTD (SUPRA) AND DECLI NE TO INTERFERE IN THE MATTER. 12. THE APPEAL OF THE ASSESSING OFFICER IS THUS DIS MISSED. 13. THAT TAKES US TO THE APPEAL FILED BY THE ASSESS EE. 7.1 AS THE ISSUE INVOLVED BEFORE US IS EMANATING FROM THE SCHEMES OF THE STATE AND CENTRAL GOVERNMENT WHICH HAVE BEEN ALREADY CONSIDERED BY THE TRIBUNAL (SUPRA) AND THER EFORE BEING IDENTICAL ISSUE-IN-DISPUTE WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. THE GROUNDS NO. 1 & 2 OF T HE APPEAL OF THE REVENUE ARE ACCORDINGLY DISMISSED. 8. IN GROUND NO.3 THE REVENUE HAS CHALLENGED DELETIO N OF ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF 2 95 69 239/- AND 73 83 957/- BEING PRIOR PERIOD EXPENSES AND TRADE DISCOUNT RESPECTIVELY. 15 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 8.1 THE FACTS IN BRIEF QUA THE ISSUE OF PRIOR PERIOD E XPENSES OF RS. 2 95 69 239/- ARE THAT IN THE REVISED RETURN FI LED FOR OF THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED AMOU NT OF 2 95 69 239/- UNDER THE HEAD PRIOR PERIOD EXPENSES PERTAINING TO ASSESSMENT YEAR 2006-07 AS EXPENSES INCURRED FOR THE PURPOSE OF IMPORT OF COMPONENTS. THE ASSESSEE SUBMITTED THA T IT HAD INCURRED SAID EXPENDITURE ON IMPORT CLEARANCE OF CO MPONENTS OF THE LG BRAND WASHING MACHINE AND HAD DEBITED THE SAID SOME TO LG ELECTRONICS INDIA PRIVATE LIMITED (IN SHORT LG) UNDER A MISREPRESENTATION THAT THOSE EXPENSES WERE TO BE BO RNE AND REIMBURSED BY THE LG AND HENCE SAME WAS NOT CLAIM ED AS EXPENSES IN THE FINANCIAL YEAR RELEVANT TO ASSESSME NT YEAR 2006- 07. THIS SUM WAS DISPUTED BY THE LG AND SUBSEQUEN TLY SETTLED IN FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YE AR UNDER CONSIDERATION AS PER WHICH EXPENSES WERE TO BE BOR NE BY THE ASSESSEE ONLY. THIS WAS NOT CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AS SAME WERE SUPPOSED TO BE BORNE BY THE LG ONLY TILL THE TIME BOOKS OF ACCOUNTS HAD BEEN FINA LIZED. AS A CLAIM SETTLED IN THE SUCCEEDING YEAR THE ASSESSEE HAD MA DE A CLAIM OF THIS EXPENDITURE IN THE REVISED RETURN OF INCOME FI LED. THE ASSESSING OFFICER VERIFIED THE ABOVE CLAIM WITH LG AND FOUND THAT SAID SOME WAS NOT REIMBURSED TO THE ASSESSEE IN LIE U OF THE DEBIT NOTE FILED BY THE ASSESSEE. THE LG PROVIDED COPY OF THE AGREEMENTS WHEREIN ALL INCIDENTAL EXPENSES RELATED TO IMPORTS WERE AGREED TO BE BORNE BY THE ASSESSEE. SINCE THE CLAIM OF THE ASSESSEE WAS DENIED BY THE LG WHICH WAS BASED UP ON THE AGREEMENTS DULY ENTERED INTO BY THE ASSESSEE WITH LG THE ASSESSING OFFICER DENIED THE CLAIM OF PRIOR PERIOD EXPENSES. 16 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 8.2 BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE CLAIM OF EXPENSES OF CUSTOM DUTY ON IMPORT OF COMPONENTS OF WASHING MACHINES PURCHASED ON HIGH SEAS WAS FINALLY SETTLED THROUGH THE LETTER OF LG ELECTRONICS PRIVATE LIMITED DATED 05/0 9/2006. THE LEARNED CIT(A) OBSERVED THAT SINCE THE DISPUTE WAS SETTLED AND THE CONTRACTUAL LIABILITY WAS FASTENED AND TO THE A SSESSEE IN THE FINANCIAL YEAR 2006-07 THE ISSUE SHOULD BE EXAMINE D IN THE ASSESSMENT YEAR RELEVANT TO FINANCIAL YEAR 2006-07. THE LD. CIT(A) FURTHER NOTED THE CORRESPONDENCE OF THE ASSE SSEE WITH THE LG AND CONCLUDED THAT ISSUE HAD BEEN SETTLED IN T HE FINANCIAL YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR ONLY THEREFORE PAYMENT AND GENUINENESS THEREOF WAS NOT DOUBTED. AC CORDING TO HIM THE LIABILITY WAS CRYSTALLIZED IN THE CURRENT A SSESSMENT YEAR THEREFORE IT SHOULD BE ALLOWED IN THE YEAR UNDER CO NSIDERATION. 8.3 BEFORE US THE LEARNED DR SUBMITTED THAT ASSESSEE HAS NOT LITIGATED THE ISSUE IN ANY COURT OF LAW WHICH INDIC ATES THAT IT WAS THE LIABILITY OF THE ASSESSEE FROM THE VERY BEGINNI NG AND THEREFORE ITSHOULD HAVE BEEN CLAIMED IN THE RELEVANT ASSESSME NT YEAR 2006- 07 AND CANNOT BE ALLOWED IN THE YEAR UNDER CONSIDER ATION. 8.4 ON THE CONTRARY THE LEARNED COUNSEL OF THE ASSESS EE RELIED ON THE ORDER OF THE LD. CIT(A) AND ALSO PLACED RELI ANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. VS. CIT [(1995) 213 ITR 0523 (HC. GUJ.)] AND DECISION OF THE DELHI TRIBUNAL IN THE CASE OF DAKSHIN HAYRANA BIJLI VITRAN NIGAM LTD VS. ACIT [ITA NO. 3412 & 3413/DEL./2016 (HC. DEL.)] . THE LEARNED COUNSEL FURTHER SUBMITTED THAT IT WAS NOT N ECESSARY TO 17 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 ALWAYS GO INTO COURT FOR RESOLVING THE DISPUTE AND SAME CAN BE SETTLED OTHERWISE THAN BY COURT ALSO. 8.5 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. THE ASSESSEE HAS MADE A HIGH SEA PURCHA SE OF IMPORT CONSIGNMENT AND THE DISPUTE WAS REGARDING PAYMENT O F IMPORT DUTY. THE ASSESSEE HAS INITIALLY PAID THE IMPORT DU TY UNDER THE IMPRESSION THAT LIABILITY OF THE SAME LIES WITH THE LG FROM WHOM IT PURCHASED THE GOODS. BUT FINALLY IT WAS SETTLED BETWEEN THE PARTIES AND COMMUNICATED TO THE ASSESSEE IN THE FIN ANCIAL YEAR RELEVANT TO THE CURRENT ASSESSMENT YEAR THAT IT WAS THE RESPONSIBILITY OF THE ASSESSEE. IN VIEW OF THE FACT S THE LIABILITY CRYSTALLIZED IN THE FINANCIAL YEAR CORRESPONDING TO THE CURRENT ASSESSMENT YEAR AND THEREFORE IT HAS RIGHTLY BEEN A LLOWED BY THE LD. CIT(A) IN ASSESSMENT YEAR UNDER CONSIDERATION. 8.6 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE L EARNED CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY UPH OLD THE SAME. 9. THE FACTS QUA THE ISSUE OF TRADE DISCOUNT ARE THAT THE ASSESSEE IS ORIGINAL EQUIPMENT MANUFACTURER (OEM) O F LG ELECTRONICS PRIVATE LIMITED. THE LG SUPPLIES COMP ONENTS FOR WASHING MACHINES TVS ETC. TO THE ASSESSEE AND THE ASSESSEE SELLS FINAL MANUFACTURED PRODUCT TO THE LG AT MUTUALLY AGREED PRICE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE S OLD FINAL MANUFACTURED PRODUCTS I.E. TV WASHING MACHINE ET C. OF 13 24 77 243/- TO LG AND GRANTED IT DISCOUNT OF 73 60 112/-. THIS DISCOUNT WAS ADJUSTED WITH SALES ACCOUNT INST EAD OF DEBITING INTO THE PROFIT AND LOSS ACCOUNT. THE TRAD E DISCOUNT WORKS OUT TO 5.56% ON SALES. 18 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 9.1 THE LEARNED ASSESSING OFFICER DISALLOWED THE CLAIM OF THE TRADE DISCOUNT ON THE GROUND THAT COPY OF THE SALE AGREEMENT DOES NOT CONTAIN ANY SPECIFIC CLAUSE REGARDING TRAD E DISCOUNT. THE LEARNED ASSESSING OFFICER FURTHER OBSERVED THAT NO EVIDENCE OF THE NEGOTIATION OF SUCH TRADE DISCOUNT AND THE M ANNER IN WHICH THE UNDERSTANDING FOR THE DISCOUNT WAS ARRIVE D AT OR DETAILS OF CORRESPONDENCE/DISCUSSION REGARDING THE ISSUE OF THE TRADE DISCOUNT WAS NOT FILED BY THE ASSESSEE. ACCOR DING TO THE ASSESSING OFFICER THE TRADE DISCOUNT DOES NOT ARISE OUT OF COMMERCIAL EXPEDIENCY CONSIDERATION. HE OBSERVED TH AT THIS IS THE FIRST YEAR IN WHICH THE ASSESSEE RESORTED TO TRADE DISCOUNT WHEREAS IN EARLIER YEARS NO SUCH DISCOUNTS WERE EVE R PASSED BY THE ASSESSEE TO THE LG ELECTRONICS PRIVATE LIMITED. 9.2 THE LD. CIT(A) HOWEVER OBSERVED THAT THE TRADE DIS COUNT GIVEN BY THE ASSESSEE WAS NOT IN DOUBT. THE ONLY DI FFERENCE WAS THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE H AS DEBITED THE TRADE DISCOUNT SEPARATELY IN THE PROFIT AND LOSS AC COUNT INSTEAD OF ADJUSTING IT IN THE SALES ACCOUNT OF LG. THE LD. CIT(A) CONCLUDED THAT CLAIM OF THE ASSESSEE CANNOT BE DISA LLOWED MERELY ON THE GROUND THAT ALL THE ACTIVITIES OF THE ASSESS EE ARE CONTROLLED BY THE LG ELECTRONICS AS THE ASSESSEE HAS ALREADY S UBMITTED ALL RELEVANT DETAILS TO SUBSTANTIATE HIS STAND. 9.3 BEFORE US THE LEARNED DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER AND SUBMITTED THAT NO EVIDENCE IN RESPECT OF CORRESPONDENCE REGARDING TRADE DISCOUNT WAS SUBMITT ED BY THE ASSESSEE. 9.4 ON THE CONTRARY THE LEARNED COUNSEL OF THE ASSESS EE SUBMITTED THAT IT WAS CLEARLY MENTIONED IN THE AGRE EMENT THAT 19 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 PRICE OF COMPONENTS PURCHASED FROM AND FINISHED GOO DS SOLD TO LG WOULD MUTUALLY DECIDED AND THIS WAS NOTHING UNUS UAL IN BUSINESS PRACTICE. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT FOUND THE DISCOUNT TO BE NOT GENUINE. ACCORDING TO HIM IT HAS BEEN GRANTED EXCLUSIVELY NECESSARILY FOR ADVANCING BUSINESS OF THE ASSESSEE IN KEEPING RELATIONSHIP INTACT WITH THE L G. THE LEARNED COUNSEL SUBMITTED THAT INVOICES OF THE TRADE DISCOU NT AND CONFIRMATION LETTER THEREOF DATED 17/12/2009 FROM LG WAS FILED BEFORE THE ASSESSING OFFICER BUT HE IGNORED SAID C ONFIRMATION FROM LG. 9.5 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. ONCE A CONFIRMATION LETTER FROM THE LG REGARDING THE TRADE DISCOUNT HAS BEEN FILED BY THE ASSESSEE IT I S EVIDENT THAT THE TRADE DISCOUNT PASSED BY THE ASSESSEE IS A GENU INE ONE. IN OUR OPINION IT IS NOT FOR THE THE ASSESSING OFFICER TO DECIDE WHAT IS ESSENTIAL FOR RUNNING A BUSINESS. IT IS THE ASSE SSEE WHO IS TO PROTECT ITS BUSINESS INTEREST AND FOR FURTHERANCE O F THE SAME IF CERTAIN DISCOUNT IS GRANTED TO THE PRINCIPLE COMPAN Y IT CANNOT BE HELD TO BE UNJUSTIFIED. THE TRADE DISCOUNT HAS BEEN GIVEN IN EARLIER YEARS AND ALLOWED BY THE AO IN EARLIER YEAR S. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DEBITED THE D ISCOUNT SEPARATELY IN PROFIT AND LOSS ACCOUNT INSTEAD OF D EBITING IN SALES LEDGER ACCOUNT. THIS ACCOUNTING ENTRY CANNOT BE A B ASIS FOR REJECTION OF EXPENDITURE OF TRADE DISCOUNT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE-IN-DISPUTE AND ACCO RDINGLY WE UPHOLD THE SAME. 20 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 9.6 ACCORDINGLY THE GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS DISMISSED. 10. THE GROUNDS NO. 4 & 5 OF THE APPEAL BEING GENERAL IN NATURE ARE DISMISSED AS INFRUCTUOUS. HENCE THE APPEAL OF REVENUE IS DISMISSED. 11. THE ASSESSEE IN ITS GROUND NO. 1 OF THE APPEAL HAS CHALLENGED CONFIRMATION OF NON-EXCLUSION OF DEBT RE DEMPTION FUND OF 4.50 CRORES FROM THE BOOK PROFIT FOR THE PURPOSE O F TAXATION UNDER SECTION 115JB OF THE ACT. 11.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE TH AT THE ASSESSEE WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT CLAIMED DEDUCTION FROM THE BOOK PROFIT FOR AN A MOUNT OF 4.50 CRORES ON ACCOUNT OF DEBT REDEMPTION FUND. H OWEVER ACCORDING TO THE ASSESSING OFFICER THIS CLAIM WAS ERRONEOUS AND AGAINST THE PROVISION OF THE ACT. ACCORDING TO HIM ONCE THE PROFIT BEFORE TAX HAS TO BE CONSIDERED THERE IS NO PROVIS ION FOR MAKING ANY ADJUSTMENT ON ACCOUNT OF SUCH RESERVES. THIS IS AN APPROPRIATION FOR THE PURPOSE OF CREATING RESERVE A ND IS BELOW THE LINE ADJUSTMENT WHICH IS NOT FALLING UNDER ANY OF THE CATEGORY OF ADJUSTMENT PROVIDED IN SECTION 115JB OF THE ACT. TH E LD. CIT(A) ALSO HELD THAT THAT REDEMPTION RESERVE IS NOT IN AC ERTAIN LIABILITY AND FURTHER IT IS ON ACCOUNT OF THE APPROPRIATION O F THE PROFIT THEREFORE HE UPHELD THE FINDING OF THE ASSESSING OF FICER. 11.2 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SUBM ITTED THAT ISSUE IN DISPUTE IS COVERED IN THE FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE TRIBUNAL AHMEDABAD BENCH FOR A SSESSMENT YEAR 2006-07. ON THE CONTRARY THE LEARNED DR RELIE D ON THE FINDING OF THE LOWER AUTHORITIES. 21 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 11.3 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT METAL ON RECORD . WE FIND THAT TRIBUNAL IN ITA NO. 2826/AHD./12 ADJUDICATED THE I DENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE TRIBUNAL IS REPRODUCED AS UNDER: 15 IN GROUND NO. 3 THE SHORT ISSUE IS THAT THE LE ARNED CIT(A) ERRED IN CONFIRMING NON EXCLUSION OF DEBT REDEMPTION FUND OF RS 2.50 CRORES FROM THE BOOK PROFIT FOR THE PURPOSE OF COMP UTING BOOK PROFITS UNDER SECTION 115JB. 16. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS THE ADJUSTMENT FOR DEBT REDEMPTION FUND AT RS 2.50 CRO RES WAS DECLINED WITH A SHORT OBSERVATION THAT 'DEBT REDEMP TION FUND OF RS 2.50 CRORES IS AN APPROPRIATION FOR PURPOSE OF CREA TING A RESERVE AND IS A BELOW THE LINE ADJUSTMENT IT DOES NOT FALL IN ANY CATEGORY OF THE ADJUSTMENTS PROVIDED UNDER SECTION 115JB. LEARNED CIT(A) CONFIRMED THE SAME ON THE SAME BASIS AND REJECTED A SSESSEES STAND THAT IT IS COVERED BY HONBLE BOMBAY HIGH COU RTS JUDGMENT IN THE CASE OF CIT VS RAYMONDS LTD [21 TAXMANN.COM 80] IT WAS HELD THAT THE PURPOSE OF DEBT REDEMPTION RESERVE IS CREA TION OF A RESERVE AND IS NOT A PERMISSIBLE ADJUSTMENT. THE ASSESSEE I S AGGRIEVED AND IS IN APPEAL BEFORE US. 17. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD WE FIND THAT THE ISSUE IS INDEE D COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RAYMONDS LTD [(2012) 71 DTR 265 (BOM)] WHEREIN THEI R LORDSHIPS HAVE INTER ALIA OBSERVED AS FOLLOWS: 2. RE QUESTION (A): SECTION 115JA OF THE INCOME TAX ACT 1961 PROVIDES IN SUBSECTION (2) THAT EVERY ASSESSEE BEIN G A COMPANY SHALL FOR THE PURPOSE OF THE SECTION PREPARE ITS PROF IT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE W ITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT 1956. THE EXPLANATION TO THE SECTION PROVIDES THAT FOR THE PURPOSE OF THE SECTION 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUBSECTION (2) AS INCREASED INTER ALIA BY '(B) T HE AMOUNTS CARRIED TO ANY RESERVES BY WHATEVER NAME CALLED'. PART I II OF SCHEDULE VI TO THE COMPANIES ACT 1956 PROVIDES INT ER ALIA IN CLAUSE 7(1 )(B) THAT 'THE EXPRESSION 'RESERVE' SHAL L NOT INCLUDE ANY AMOUNT WRITTEN OFF OR RETAINED BY WAY OF PROVIDING FO R DEPRECIATION RENEWALS OR DIMINUTION IN VALUE OF ASS ETS OR RETAINED BY WAY OF PROVIDING FOR ANY KNOWN LIABILITY'. 3. THE NATURE OF A DEBENTURE REDEMPTION RESERVE (DRR) HAS BEEN CONSIDERED BY THE JUDGMENT OF THE SUPREME COURT IN NA TIONAL 22 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 RAYON CORPORATION LTD. VS. COMMISSIONER OF INCOME TAX [(1997) 227 ITR 764]. THE SUPREME COURT AFTER ADVERTING TO T HE PROVISIONS OF CLAUSE 7 OF PART III TO SCHEDULE VI OF THE COMPAN IES ACT 1956 HELD THAT 'THE BASIC PRINCIPLE IS THAT AN AMOUNT SET APART TO MEET A KNOWN LIABILITY CANNOT BE REGARDED AS RESERVE'. WHE RE A COMPANY ISSUES DEBENTURES THE LIABILITY TO REPAY ARISES THE M OMENT THE MONEY IS BORROWED. BY ISSUING DEBENTURES A COMPANY T AKES A LOAN AGAINST THE SECURITY OF ITS ASSETS. THOUGH THE LOAN MAY NOT BE REPAYABLE IN THE YEAR OF ACCOUNT THE OBLIGATION TO REPAY IS A PRESENT OBLIGATION. HENCE ANY MONEY SET APART IN THE ACCOUNTS OF THE COMPANY TO REDEEM THE DEBENTURE HAS TO BE TREATED AS MONIES SET APART TO MEET A KNOWN LIABILITY. CONSEQUENTLY DEBENTURES HAVE TO BE SHOWN IN THE BALANCE SHEET OF A COMPANY AS A LIABILITY. BEING MONIES SET APART TO MEET A KNOWN LIABILITY A DEBEN TURE REDEMPTION RESERVE CANNOT BE REGARDED AS A RESERVE FO R THE PURPOSE OF SCHEDULE VI TO THE COMPANIES ACT 1956. IN NATIONAL RAYON CORPORATION THE SUPREME COURT FOLLOWED ITS EARLI ER DECISION IN VAZIR SULTAN TOBACCO CO. LTD. VS. CIT [[1981] 132 ITR 559] IN HOLDING THAT SINCE THE CONCEPT OF RESERVE AND OF A PRO VISION IS WELL KNOWN IN COMMERCIAL ACCOUNTANCY AND IS USED IN THE COMPANIES ACT 1956 WHILE DEALING WITH THE PREPARATION OF BA LANCE SHEETS AND PROFIT AND LOSS ACCOUNTS THE MEANING OF THAT CON CEPT WOULD HAVE TO BE GATHERED FROM THE MEANING ATTACHED IN TH E COMPANIES ACT ITSELF. THE FOLLOWING OBSERVATIONS OF THE SUPRE ME COURT ARE OF SIGNIFICANCE: 'THE DEBENTURES WERE NOTHING BUT SECURED LOANS. MEREL Y BECAUSE THE DEBENTURES WERE NOT REDEEMABLE DURING THE ACCOUNTIN G PERIOD THE LIABILITY TO REDEEM THE DEBENTURES DID NOT CEASE TO EXIST. IT WAS REDEEMABLE OR REPAYABLE AT A FUTURE DATE. BUT IT WAS A KNOWN LIABILITY. IN THE FORM OF BALANCE-SHEET PRESCRIBED BY THE ACT IN SCHEDULE VI THE SECURED LOANS HAVE TO BE SHOWN UNDE R THE HEADING 'LIABILITIES'. SECURED LOANS INCLUDE (1) DEBENTURES (2) LOANS AND ADVANCES FROM BANKS (3) LOANS AND ADVANCES FROM SU BSIDIARIES AND (4) OTHER LOANS AND ADVANCES. THE SECURED LOANS M IGHT NOT BE IMMEDIATELY REPAYABLE BUT THE LIABILITY TO REPAY TH ESE LOANS IS AN EXISTING LIABILITY AND HAS TO BE SHOWN IN THE COMPA NY'S BALANCE- SHEET FOR THE RELEVANT YEAR OF ACCOUNT AS A LIABILITY. AMOUNTS SET APART TO PAY THESE LOANS CANNOT BE 'RESERVE'. THE INT ERPRETATION CLAUSE OF THE BALANCE-SHEET IN SCHEDULE VI OF THE C OMPANIES ACT SPECIFICALLY LAYS DOWN THAT RESERVES SHALL NOT INCLUD E ANY AMOUNT WRITTEN OFF OR RETAINED BY WAY OF PROVIDING FOR A KN OWN LIABILITY.' 4. THE MERE FACT THAT A DEBENTURE REDEMPTION RESERVE IS LABELED AS A RESERVE WILL NOT RENDER IT AS A RESERVE I N THE TRUE SENSE OR MEANING OF THAT CONCEPT. AN AMOUNT WHICH IS RETA INED BY WAY OF PROVIDING FOR A KNOWN LIABILITY IS NOT A RESERVE. CONS EQUENTLY THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE AMOUNT WHICH WAS SET APART AS A DEBENTURE REDEMPTION RESERVE IS NOT A RESER VE WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 115JA OF THE INCOME TAX ACT 1961. 18. WE THEREFORE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT THE RELIEF ACCORDINGLY. 11.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL WE DIRECT THE ASSESSING OFFICER TO ALLOW THE RELIEF AC CORDINGLY. THE 23 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ACCORD INGLY ALLOWED. HENCE THE APPEAL OF ASSESSEE IS ALLOWED. ITA NO. 100/AHD./2014 (REVENUES APPEAL) ITA NO. 2831/AHD./2013 (ASSESSEES APPEAL 12. NOW WE TAKE UP THE APPEAL OF THE REVENUE (ITA NO. 100/AHD./2014) AND THE ASSESSEE (ITA NO. 2831/AHD. /2013) FOR ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE REVENUE AND ASSESSEE ARE REPRODUCED AS UNDER: 13. GROUNDS OF APPEAL OF THE REVENUE: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1 27 46 480/- MADE ON ACCOUNT OF TRE ATING THE SUBSIDY ON SALES-TAX AS REVENUE RECEIPT AS AGAINST CLAIM OF THE ASSESSEE AS CAPITAL SUBSIDY WITHOUT PROPERLY APPRE CIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECOR D. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.9 26 21 625/- MADE ON ACCOUNT OF CEN TRAL EXCISE REFUND RECEIVED TREATING IT AS REVENUE RECEIPT AS AGAINST CLAIM OF THE ASSESSEE AS CAPITAL RECEIPT WITHOUT PROPERLY A PPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECOR D. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 13.1 GROUNDS OF APPEAL OF THE ASSESSEE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN CONFIRMING NON-EXCLUSION OF DEBT REDEMPTION FUND O F RS.7.50 CRORE FROM THE BOOKS PROFIT FOR THE PURPOSE OF TAX ATION U/S 115JB. 2. THE APPELLANT CRAVES LEAVE TO AD TO ALTER TO D ELETED FROM OR SUBSTANTIATE THE ABOVE GROUND OF APPEAL. 14. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME ON 18/09/2008 DECLARING LOSS OF 15 01 96 030/-. THE RETURN OF INCOME FILED BY THE A SSESSEE WAS 24 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE IS SUED AND COMPLIED WITH. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 27/12/2000 DETERMINING TOTAL INCOM E AT 8 10 41 270/-. THE LD. CIT(A) ALLOWED PART RELIEF T O THE ASSESSEE. AGGRIEVED BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL. 14.1 IN GROUNDS NO.1 AND 2 OF THE APPEAL THE REVENUE HAS RAISED THE ISSUE OF DELETION BY THE LEARNED CIT(A) OF THE ADDITION IN RESPECT OF SALES TAX SUBSIDY OF 1 27 46 480/- AND CENTRAL EXCISE REFUND OF 9 26 21 625/- HELD AS CAPITAL SUBSIDY BY THE ASSESSING OFFICER. 14.2 THE GROUNDS RAISED ARE IDENTICAL TO GROUNDS NO. 1 & 2 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2007-08. THE LD. CIT(A) HAS ALSO DECIDED BOTH THE ASSESSMENT YEAR IN A COMMON ORDER. TO HAVE CONSISTENCY IN OUR DECISION FOLLOWI NG OUR FINDING IN ASSESSMENT YEAR 2007-08 BOTH THESE GROUNDS OF T HE APPEAL OF THE REVENUE ARE DISMISSED. 15. THE GROUNDS NO. 3 & 4 OF THE APPEAL OF THE REVENUE BEING GENERAL IN NATURE ARE DISMISSED AS INFRUCTUOUS. ACC ORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED. 16. THE GROUND NO.1 RAISED IN THE APPEAL OF THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION IS IDENTICAL TO THE GROUND RAISED IN ASSESSMENT YEAR 2007-08. LEARNED CIT(A) HAS DECIDED BOTH THE APPEAL BY WAY OF THE COMBINED ORDER. TO HAVE CONSIS TENCY IN OUR DECISION FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2007-08 THE GROUND NO. 1 RAISED IN THE PRESENT APPEAL IS ALLOWE D. 25 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 17. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE BEI NG GENERAL IN NATURE IS DISMISSED AS INFRUCTUOUS. ACCORDINGLY THE APPEAL OF ASSESSEE IS ALLOWED. ITA NO. 1898/DEL./2014 (REVENUES APPEAL) ITA NO. 1763/AHD./2014 (ASSESSEES APPEAL) 18. NOW WE TAKE UP THE APPEAL OF THE REVENUE (ITA NO. 1898/AHD/2014) AND ASSESSEE (ITA NO. 1763/AHD/2014) FOR ASSESSMENT YEAR 2009-10. 19. THE GROUNDS RAISED BY THE REVENUE AND THE ASSESSEE ARE REPRODUCED AS UNDER: 19.1 GROUNDS OF APPEAL OF THE REVENUE: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11 51 04 944/- MADE ON ACCOUNT OF DI SALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF SAL ES TAX INCENTIVE TREATED AS REVENUE RECEIPTS WITHOUT PROP ERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ADDITIONAL GROUND OF THE ASSESSEE THEREBY DIRECTING TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF EXC ISE DUTY INCENTIVE OF RS.8 50 85 955/- TREATING IT AS CAPITA L RECEIPT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 19.2 GROUNDS OF APPEAL OF THE ASSESSEE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE INTEREST EXPENDI TURE AMOUNTING TO RS. 14 68 306/- IN PROPORTION TO ADVANCE AGAINST SUPPLY OF PAPER GIVEN TO SISTER CONCERN. 26 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF I THE DEPRECIATION O F RS. 6 50 222/- ON THE PORTION OF FOREIGN FLUCTUATION LOSS WHICH HA D BEEN DEBITED IN RESPECTIVE PLANT & MACHINERIES. 3. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER TO DELETE FROM OR SUBSTANTIATE THE ABOVE GROUND OF APPEAL. 20. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME ON 27/09/2009 DECLARING LOSS OF R S.(-) 02 13 53 589/- . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES ISSUED UNDER THE ACT WERE COMPLIED WITH. THE ASSESSMENT UNDER SECTION 14 3(3) OF THE ACT WAS COMPLETED ON 09/12/2011 DETERMINING TOTAL I NCOME AT 9 58 69 880/-. ON FURTHER APPEAL THE LD. CIT(A) AL LOWED PART RELIEF TO THE ASSESSEE. AGGRIEVED BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 21. THE GROUND NO. 1 & 2 OF THE APPEAL OF THE REVENUE ARE IDENTICAL TO GROUND NO. 1 & 2 OF THE APPEAL OF THE REVENUE IN ASSESSMENT YEAR 2007-08 WHEREIN WE HAVE DISMISSED BOTH THE GROUNDS NO. 1 & 2. FOLLOWING OUR FINDING IN AY 2007 -08 THE GROUND NO. 1 & 2 OF THE APPEAL OF THE YEAR UNDER CO NSIDERATION ARE ALSO DISMISSED TO HAVE CONSISTENCY IN OUR DECIS ION. 22. THE GROUND NO. 3 & 4 OF THE APPEAL OF THE REVENUE ARE GENERAL IN NATURE AND THUS DISMISSED AS INFRUCTUOUS . ACCORDINGLY APPEAL OF REVENUE IS DISMISSED. 23. IN GROUND NO. 1 OF THE APPEAL THE ASSESSEE HAS CH ALLENGED CONFIRMATION OF THE DISALLOWANCE OF INTEREST EXPEND ITURE AMOUNTING TO 14 68 306/- IN PROPORTION OF ADVANCE TO SISTER CONCERN. 27 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 23.1 THE FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASS ESSEE ADVANCED A SUM OF 1 15 00 000/- TO M/S GENUS PAPER PRODUCTS LTD. (I.E. A SISTER CONCERN) AGAIN SUPPLY OF THE PA PER AND THE AMOUNT OUTSTANDING AT THE YEAR END I.E. 31/03/2009 WAS OF 1 22 35 888/-. ACCORDING TO THE ASSESSEE IT HAD PL ACED AN ORDER FOR PURCHASE OF CRAFT PAPERS FOR PACKAGING FROM M/S GENUS PAPER PRODUCTS LTD. (GPPL) AND AS PER THE TERMS OF THE PU RCHASE ORDER THE ASSESSEE HAD TO MAKE HUNDRED PERCENT ADVANCE PA YMENT. THE ASSESSEE HAD ALSO SOUGHT QUOTATIONS FROM OTHER LOCA L SUPPLIERS HOWEVER RATES QUOTED BY THEM WAS HIGHER AS COMPARE D TO GPPL SO THE ASSESSEE PURCHASED FROM GPPL AND SAVED RS. 2 5 LAKHS. 23.2 HOWEVER ACCORDING TO THE ASSESSING OFFICER THE A SSESSEE HAD ADVANCED ITS BORROWED FUNDS FOR NON-BUSINESS PU RPOSES TO SISTER CONCERN AND DID NOT CHARGE ANY INTEREST ON I T AND PROPORTIONATE INTEREST OF 14 68 306/- WAS DISALLOWED IN TERMS OF SECTION 36(1)(III) OF THE ACT. THE LD. CIT(A) ALSO UPHELD THE DISALLOWANCE OBSERVING THAT AMOUNT OF ADVANCE GIVEN BY IT WAS DISPROPORTIONATE TO THE PURCHASE REGULARLY MADE BY IT FROM THE SISTER CONCERN. THE LEARNED CIT(A) OBSERVED THAT AD VANCE HAD BEEN GIVEN APPARENTLY FOR SOME OTHER PURPOSE AND TH EREFORE THE ASSESSEE FAILED TO ESTABLISH THE BUSINESS MOTIVE BE HIND GIVING SUCH ADVANCE. 23.3 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SU BMITTED THAT ADVANCE GIVEN BY THE ASSESSEE TO M/S GPPL WAS ON ACCOUNT OF COMMERCIAL EXPEDIENCY. DUE TO HUNDRED PERCENT AD VANCE GIVEN LESSER RATE HAD BEEN CHARGED BY THE GPPL ON SUCH PU RCHASES WHICH HAVE RESULTED IN OVERALL SAVING OF 25 LAKH AND AND IT WAS MORE BENEFICIAL TO GIVE ADVANCE AND BUY FROM GPPL. THE SAID 28 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 ADVANCE RESULTED IN SUBSTANTIAL SAVING ON ACCOUNT O F PURCHASE OF PAPER WHICH IS MAINLY USED IN THE PACKAGING UNIT. ACCORDING TO THE LEARNED COUNSEL THE INTEREST FACTOR HAD BEEN CO NSIDERED BEFORE MAKING ADVANCE PAYMENT. 23.4 THE LEARNED COUNSEL ALSO SUBMITTED THAT ASSESSEE WAS HAVING ITS OWN CAPITAL INCLUDING RESERVE AND SURPLU S OF 50 CRORES AND MORE AND THE SECURED LOANS WERE UTILIZE D TOWARDS THE RESPECTIVE PROJECTS AND NO BORROWED FUNDS HAVE BEEN UTILIZED FOR ADVANCING THE SUM TO M/S GPPL FOR PURCHASE. 23.5 THE LEARNED COUNSEL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS LTD VS CIT 206 ITR 631(SC). HE ALSO RELIED ON THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES AND POWER LTD. [(2009) 178 TAXMAN 135 (BOM.)] AND DECISION OF THE TRIBUNAL IN THE CASE OF M/S LMJ BUSINESS CENTRE (P) LTD VS ITO (ITA NO. 540 & 541/KOL./2012). 23.6 THE LEARNED DR ON THE OTHER HAND RELIED ON THE ORD ER OF THE LOWER AUTHORITIES AND SUBMITTED THAT ADVANCES MADE WERE DISPROPORTIONATE TO THE PURCHASES MADE. THE LEARNED DR RELIED ON THE DECISION OF THE HONBLE PUNJAB AND HARYANA H IGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (268 ITR 01) 23.7 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT METAL ON RECORD . 23.8 THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF ABHISHEK INDUSTRIES (SUPRA) HAS HELD THAT LOAN FROM MIXED FUNDS OF SHARE CAPITAL/RESERVED LOAN IS NOT SUFFICIENT T O EXPLAIN THAT LOAN/ADVANCE IS FROM OWN FUND. THE RELEVANT FINDING IS REPRODUCED AS UNDER: 29 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 34. RESPECTFULLY DISAGREEING WITH THE VIEWS EXPRES SED BY DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX V. TIN BOX CO. (SUPRA) AND COMMISSIONER OF INCOME TAX V. ORISSA CEMENT LTD . (SUPRA); ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME-TAX V. RADICO KHAITAN LTD. (SUPRA) AND COMMISSIONER OF INCOME- TA X V. PREM HEAVY ENGINEERING WORKS (P) LTD. (SUPRA); CALCUTTA HIGH COURT IN COMMISSIONER OF INCOME TAX V. BRITANNIA INDUSTRIES LTD. (SUPRA) AND MADHYA PRADESH HIGH COURT IN R.D. JOSHI AND CO. V. COMMISSIONER OF INCOME-TAX (SUPRA) WE DO NOT SUBSCRIBE TO THE O BSERVATION IN THE JUDGMENTS TO THE EFFECT THAT IF THE AMOUNT IS ADVAN CED FROM A MIXED ACCOUNT OR SHARE CAPITAL OR SALE PROCEEDS OR PROFIT S ETC. THE SAME WOULD NOT BE TERMED AS DIVERSION OF BORROWED CAPITA L OR THAT THE REVENUE HAD NOT BEEN ABLE TO ESTABLISH NEXUS OF THE FUNDS ADVANCED TO THE SISTER CONCERNS WITH THE BORROWED FUNDS. ONC E IT IS BORNE OUT FROM THE RECORD THAT THE ASSESSEE HAD BORROWED CERT AIN FUNDS ON WHICH LIABILITY TO PAY TAX IS BEING INCURRED AND ON THE OTHER HAND CERTAIN AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERN S OR OTHERS WITHOUT CARRYING ANY INTEREST AND WITHOUT ANY BUSIN ESS PURPOSE THE INTEREST TO THE EXTENT THE ADVANCE HAD BEEN MADE WI THOUT CARRYING ANY INTEREST IS TO BE DISALLOWED UNDER SECTION 36(L )(III) OF THE ACT. SUCH BORROWINGS TO THAT EXTENT CANNOT POSSIBLY BE H ELD FOR THE PURPOSE OF BUSINESS BUT FOR SUPPLEMENTING THE CASH DIVERTED WITHOUT DERIVING ANY BENEFIT OUT OF IT. ACCORDINGLY THE AS SESSEE WILL NOT BE ENTITLED TO CLAIM DEDUCTION OF THE INTEREST ON THE BORROWINGS TO THE EXTENT THOSE ARE DIVERTED TO SISTER CONCERNS OR OTH ER PERSONS WITHOUT INTEREST. 23.9 WE FIND THAT THE ARGUMENT OF AVAILABILITY OF OWN FUNDS HAS BEEN TAKEN BEFORE US FOR THE FIRST TIME. ON PERUSAL OF THE BALANCE- SHEET OF THE ASSESSEE AS ON 31/03/2009 WE FIND THA T ASSESSEE WAS HAVING ITS OWN CAPITAL OF 57 67 86 521/- INCLUDING SHARE CAPITAL AND RESERVE AND SURPLUS WHEREAS THE LOAN F UNDS OF 66 39 70 950/-CONSIST MAINLY OF TERM LOAN AND VEHIC LE LOANS ET CETERA WHICH MUST HAVE BEEN UTILIZED TOWARD RESPECT IVE PROJECTS AND VEHICLES . BUT THE ASSESSEE HAS ALSO TAKEN WOR KING CAPITAL LOANS OF 22 40 39 624/- AND PAID INTEREST TOWARD THE SAME AND THEREFORE IN ABSENCE OF COMPLETE FUND FLOW DURI NG THE YEAR 30 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 UNDER CONSIDERATION IT CANNOT BE SAID WITH CERTAIN TY THAT BORROWED FUNDS HAVE NOT BEEN UTILIZED FOR EXTENDING LOAN TO RELATED PARTIES. HOWEVER AS FAR AS CONTENTION OF T HE ASSESSEE OF BUSINESS EXPEDIENCY IS CONCERNED WE FIND THAT ADVA NCE HAS BEEN GIVEN IN RELATION TO PURCHASE ORDER OF CRAFT PAPERS TO BE UTILIZED IN PACKING OF THE PRODUCTS I.E. BUSINESS OF THE ASSESS EE. THE LD. CIT(A) HAS HELD THAT THE AMOUNT OF ADVANCE GIVEN BY THE ASSESSEE WAS DISPROPORTIONATE TO THE PURCHASES REGULARLY MAD E BY THE ASSESSEE FROM THAT CONCERN BUT NO DETAILS ARE PROV IDED AS HOW IT WAS DISPROPORTIONATE TO THE PURCHASES MADE BY THE A SSESSEE. THE LEARNED CIT(A) ON THE BASIS OF OBSERVATION OF THE D ISPROPORTIONATE ADVANCE PRESUMED THAT ADVANCE WAS GIVEN FOR SOME OT HER PURPOSES. LEARNED DR ALSO COULD NOT SUBSTANTIATE AS HOW THE ADVANCE GIVEN BY THE ASSESSEE WAS DISPROPORTIONATE TO THE PURCHASES REGULARLY MADE. THE LEARNED DR ALSO FAILE D TO REBUT THE CLAIM OF THE ASSESSEE OF BENEFIT OF 25 LAKH ON PURCHASES FROM THE GPPL WITH FACILITY OF ADVANCE GIVEN WHICH IS M ORE THAN THE AMOUNT OF DISALLOWANCE OF INTEREST. IN THE CASE OF SA BUILDERS LTD VS CIT 206 ITR 631(SC) THE HONBLE SUPREME COURT HAS HELD THAT IF ANY ADVANCES GIVEN TO SISTER CONCERN I S AS A MEASURE OF COMMERCIAL EXPEDIENCY THE INTEREST ON BORROWED FUNDS IS TO BE ALLOWED. RESPECTFULLY FOLLOWING THE FINDING OF THE HONBLE SUPREME COURT THE PAYMENT OF THE INTEREST IN THE INSTANT C ASE DESERVE TO BE ALLOWED BEING ADVANCE PAID IN THE NATURE OF COMM ERCIAL EXPEDIENCY. WE HOLD ACCORDINGLY. THE GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 24. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE REL ATES TO CONFIRMING THE DISALLOWANCE OF THE DEPRECIATION OF 6 50 222/- ON 31 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 THE PORTION OF THE FOREIGN EXCHANGE FLUCTUATION LOS S IN RESPECT OF PLANT AND MACHINERY. 24.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE T HAT DURING PRECEDING YEAR THE ASSESSEE HAD TAKEN FOREIGN CURR ENCY LOAN FOR PURCHASE OF PLANT AND MACHINERY. ON ACCOUNT OF FORE IGN CURRENCY FLUCTUATION THE ASSESSEE INCURRED A NOTIONAL LOSS OF 86 69 532/- WHICH WAS DEBITED TO PLANT AND MACHINERY AND DEPR ECIATION OF 6 50 222/-WAS CLAIMED ON THE SAME. DURING ASSESSMEN T PROCEEDING VIDE LETTER DATED 09/12/2011 THE ASSES SEE CLAIMED THE SAID AMOUNT OF DEPRECIATION FOR TAXATION BUT T HE ASSESSING OFFICER DISALLOWED THE SAME. THE LD. CIT(A) ALSO CO NFIRMED THE DISALLOWANCE IN VIEW OF THE ADMISSION BY THE ASSESS EE BEFORE THE ASSESSING OFFICER AND ALSO IN ABSENCE OF ANY DETAIL ED EXPLANATION REGARDING THE ACCOUNTING TREATMENT GIVEN BY THE ASS ESSEE FOR THE FOREIGN EXCHANGE FLUCTUATION LOSS INCURRED. 24.2 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED THAT THERE IS NO ESTOPPELS IN LAW AND IF THE DEPREC IATION IS ALLOWABLE IN LAW THEN ASSESSEE CANNOT BE BIND BY I TS OFFER BEFORE THE ASSESSING OFFICER. THE LEARNED DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 24.3 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE. ON PERUSAL OF SCHEDULE -5 OF THE BALANC E-SHEET ( I.E FIXED ASSETS SCHEDULE) AVAILABLE ON PAGE 25 OF THE PAPER-BOOK WE FIND A NOTE BELOW THE CHART WHICH READS THAT UNDER THE HEAD OF PLANT AND MACHINERY AGAINST THE FCNRB TERM LOAN 86 69 632/- WAS CAPITALIZED FOLLOWING THE NOTIFICATION OF MCA D ATED 31/03/2009 RELATING TO AS-II ON FOREIGN EXCHANGE FL UCTUATION AND WHICH WOULD BE WRITTEN OFF IN THREE EQUAL INSTA LLMENTS I.E. 32 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 28 89 877 EVERY YEAR UPTO 31/03/2011. THE ASSESSEE HAS ALSO FILED BEFORE US LETTER DATED 24/06/2009 ISSUED BY T HE STATE BANK OF INDIA TO THE ASSESSEE GIVING REFERENCE OF FORWA RD CONTRACT ENTERED INTO BY THE ASSESSEE IN RESPECT OF FOREIGN CURRENCY TERM LOAN WHICH HAS BEEN ROLLED FROM TIME TO TIME. 24.4 WE FIND THAT AS FAR AS THE PROVISIONS OF THE INCO ME TAX ACT ARE CONCERNED THE EFFECT OF CHANGE IN RATE OF THE EXCHANGE OF THE CURRENCY IN RESPECT OF PURCHASE OF CAPITAL ASSET HA S BEEN SPECIFICALLY PROVIDED IN SECTION 43A OF THE ACT. AC CORDING TO THE SAID SECTION ANY INCREASE OR DECREASE IN LIABILITY TOWARDS REPAYMENT OF ALL OR ANY PART OF THE MONEY BORROWED BY THE ASSESSEE IN ANY FOREIGN CURRENCY SPECIFICALLY FOR THE PURPOSE OF ACQUIRING THE ASSET THEN IRRESPECTIVE OF THE METHO D OF ACCOUNTING FOLLOWED BY THE ASSESSEE THE ACTUAL COST OF THE AS SET HAS TO BE INCREASED OR DECREASED ACCORDINGLY AND THE DEPRECIA TION WILL THEN BE ALLOWABLE AS PER PROVISIONS OF THE ACT. IF THE T RANSACTION OF PURCHASE OF THE ASSET IS HEDGED THEN EFFECT OF THE SAME ALSO NEEDS TO BE TAKEN INTO CONSIDERATION AS PER THE EXP LANATION TO THE SECTION 43A OF THE ACT. SINCE NO DETAILS OF ACTUAL COST OF THE ASSET PURCHASED AND EFFECT OF FOREIGN CURRENCY FLUCTUATIO N HAS BEEN PROVIDED BY THE ASSESSEE EITHER BEFORE THE LOWER A UTHORITIES OR BEFORE US. THERE IS NO OPTION WITH US EXCEPT RESTO RING THE MATTER BACK TO THE LOWER AUTHORITIES. THEREFORE IN THE I NTEREST OF JUSTICE WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE IN ACCORDANCE WITH LAW. IN THE RESULT THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 33 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 25. THE GROUND NO. 3 OF THE APPEAL BEING GENERAL IN NA TURE SAME IS DISMISSED AS INFRUCTUOUS. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES . ITA NO. 1899/AHD./2014 (REVENUES APPEAL) 26. NOW WE TAKE UP THE APPEAL OF THE DEPARTMENT (ITA NO. 1899/AHD./2014) FOR ASSESSMENT YEAR 2010-11. THE GR OUNDS RAISED BY THE REVENUE ARE REPRODUCED AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.6 97 89 361/- MADE ON ACCOUNT OF DIS ALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF SAL ES TAX INCENTIVE TREATED AS REVENUE RECEIPTS WITHOUT PROP ERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ADDITIONAL GROUND OF THE ASSESSEE THEREBY DIRECTING TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF EXC ISE DUTY INCENTIVE OF RS.4 46 14 822/- TREATING IT AS CAPITA L RECEIPT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 27. SINCE BOTH THE GROUNDS RAISED BY THE DEPARTMENT AR E IDENTICAL TO THE GROUNDS RAISED IN ASSESSMENT YEAR 2007-08 THEREFORE FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2007-08 BOTH GROUND NO. 1 & 2 OF THE PRESENT APPEAL ARE DISMISSE D. ACCORDINGLY THE APPEAL OF REVENUE IS DISMISSED. ITA NO. 701/DEL./2015 (REVENUES APPEAL) ITA NO. 348/DEL./2015 (ASSESSEES APPEAL) 28. NOW WE TAKE UP THE APPEAL OF THE REVENUE (ITA NO. 701/AHD/2015) AND APPEAL OF THE ASSESSEE (ITA NO. 348/DEL/2015) FOR ASSESSMENT YEAR 2011-12. 34 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 29. THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE ARE REPRODUCED AS UNDER: 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 1 40 32 708/- MADE BY AO ON ACCOUNT OF SALES TAX INCENTIVE. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS I N DELETING SALES TAX INCENTIVE AMOUNTING OF RS. 1 40 32 708/- ADDED BY A O IN COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 30. IDENTICAL GROUNDS RAISED BY THE REVENUE IN ASSESSME NT YEAR 2007-08 HAVE BEEN DISMISSED ACCORDINGLY FOLLOWING OUR FINDING IN ASSESSMENT AT 2007-08 THE GROUND NO. 1 & 2 OF THE APPEAL OF THE REVENUE ARE DISMISSED. ACCORDINGLY APPEAL OF REVEN UE IS DISMISSED. 31. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL A RE REPRODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY AO U/S 36(1) (VA) R .W. SEC 2(24) (X) OF RS. 2 37 861/- ON ACCOUNT OF EMPLOYEE'S CON TRIBUTION TO PROVIDENT FUND ON THE GROUND OF PAYMENT AFTER DUE D ATE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) GROSSLY ERRED IN CONFIRMING THE ACTION OF AO IN DISALLOWING DEPRECIATION OF RS. 13 37 020/- ON FOREIGN EXCHANGE FLUCTUATION LOS S WHICH HAS BEEN CAPITALIZED TO PLANT AND MACHINERY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF AO IN DISALLOWING PRIOR PE RIOD EXPENSES OF RS. 92 889/-. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) GROSSLY ERRED IN CONFIRMING THE ACTION OF AO IN ADDING BACK RS 6 25 00 000/-TO BOOK PROFIT ON ACCOUNT OF DEBT REDE MPTION RESERVE . 5. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER TO DELETE FROM OR SUBSTANTIATE THE ABOVE GROUNDS OF 35 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 32. THE GROUND NO. 1 OF THE APPEAL RELATES TO DISALLOW ANCE OF 2 37 861/- UNDER SECTION 36(1)(VA) OF THE ACT TOWAR DS EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. 32.1 THE ASSESSING OFFICER OBSERVED LATE PAYMENT OF EM PLOYEES CONTRIBUTION TO THE PROVIDENT FUND FOR THE MONTH OF MAY 2010 AND DECEMBER 2010 TOTALLING TO 2 37 861/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS A CUSTODIAN OF COLLECTING AND DEPOSITING THE EMPLOYEES CONTRIBUTION TO THE PR OVIDENT FUND HOWEVER IN VIEW OF THE LATE PAYMENT SAME WAS DISALL OWABLE IN TERMS OF SECTION 36(1)(VA) OF THE ACT. THE ASSESSIN G OFFICER ALSO RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS GSRTC (SUPRA). THE LD. CIT(A) ALSO UPHELD THE DISALLOWANCE OBSERVING AS UNDER: 4.3 DECISIONS: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT IT IS NOTED THAT THE ISSUE OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION IS COVERED AGAINST THE APPELLANT BY A RECENT JUDGEMENT OF HONOURABLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE RO AD TRANSPORT CORPORATION 41 TAXMAN.COM 100 WHEREIN IT HAS BEEN HELD THAT SECTION 43B WHICH PERMITS A DEDUCTION FOR PAYMENTS MADE UP TO THE DUE DATE FOR FILING THE ROI APPLIES ONLY TO THE EMP LOYER'S CONTRIBUTION TO THE PROVIDENT FUND ETC. IT DOES NOT APPLY TO THE EMPLOYEES' CONTRIBUTION. THE EMPLOYEES' CONTRIBUTION RECEIVED BY THE EMPLOYER- ASSESSEE IS DEEMED TO BE INCOME IN THE ASSESSEES H ANDS U/S 2(24) (X) AND IF THE ASSESSEE HAS NOT CREDITED THE SAID S UM TO THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE MENTIONED IN EXPLANATION TO SECTION 36(1 ) (VA) THE ASSESSEE SHALL NOT BE ENTITLED TO DEDUCTIONS OF SUC H AMOUNT IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF T HE ACT. THE HONOURABLE COURT HAS HELD THAT THE ARGUMENT THAT TW O VIEWS WERE POSSIBLE WAS NOT ACCEPTABLE BECAUSE ONLY ONE VIEW W AS POSSIBLE ON A CORRECT INTERPRETATION OF THE PROVISION. THE RELE VANT EXTRACT FROM THE JUDGEMENT IS QUOTED AS UNDER: - 36 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 'SECTION 438 READ WITH SECTION 36(1 )(VA) OF THE I NCOME-TAX ACT 1961 - BUSINESS DISALLOWANCE - CERTAIN DEDUCTI ONS TO BE ALLOWED ON ACTUAL PAYMENT (EMPLOYEES CONTRIBUTION) - WHETHER WHERE AN EMPLOYER HAS NOT CREDITED SUM RECEIVED BY IT AS EMPLOYEES' CONTRIBUTION TO EMPLOYEES' ACCOUNT IN RE LEVANT FUND ON OR BEFORE DUE DATE AS PRESCRIBED IN EXPLANATION TO SECTION 36(1)(VA) ASSESSEE SHALL NOT BE ENTITLED TO DEDUCT ION OF SUCH AMOUNT THOUGH HE DEPOSITS SAME BEFORE DUE DATE PRES CRIBED UNDER SECTION 43B I.E. PRIOR TO FILING OF RETURN U NDER SECTION 139(1) - HELD YES - ASSESSEE STATE TRANSPORT CORPO RATION COLLECTED A SUM BEING PROVIDENT FUND CONTRIBUTION F ROM ITS EMPLOYEES - HOWEVER IT HAD DEPOSITED LESSER SUM IN PROVIDENT FUND ACCOUNT - ASSESSING OFFICER DISALLOW ED SAME UNDER SECTION 43B - HOWEVER COMMISSIONER (APPEALS) DELETED DISALLOWANCE ON GROUND THAT EMPLOYEES CONTRIBUTION WAS DEPOSITED BEFORE FILING RETURN - WHETHER SINCE ASSE SSEE HAD NOT DEPOSITED SAID CONTRIBUTION IN RESPECTIVE FUND ACCOUNT ON DATE AS PRESCRIBED IN EXPLANATION TO SECTION 36(1 ) (VA) DISALLOWANCE MADE BY ASSESSING OFFICER WAS JUST AND PROPER - HELD YES [PARA 8] [IN FAVOUR OF REVENUE]' RESPECTFULLY FOLLOWING THE JUDGEMENT OF JURISDICTI ONAL HIGH COURT THE DISALLOWANCE MADE BY THE AO IS UPHELD AS IT IS THE CASE OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION. THE GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 32.2 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED THAT DEDUCTION FOR EMPLOYEES CONTRIBUTION IS ALLOWA BLE ON PAYMENT BASIS AS PER SECTION 43B OF THE ACT AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS AIMIL LTD. [(2010) 321 ITR 508 (HC DELHI) . WHEREAS THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) HAS CORRECTLY DIS ALLOWED IN TERMS OF THE JURISDICTIONAL HIGH COURT DECISION. SH E FURTHER SUBMITTED THAT EVEN HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARAT HOTELS LTD. (IN ITA NO. 271/2005) HAS HEL D THAT EMPLOYEES CONTRIBUTION IS ALLOWED IF PAID BEFORE THE DUE DATE PROVIDED IN PROVIDENT FUND ACT. 37 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 32.3 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE. WE FIND THAT LD. CIT(A) HAS FOLLOWED TH E DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ASSESS EE THEREFORE WE DO NOT FIND ANY ERROR IN THE FINDING OF THE LEARNED CIT (A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY WE UPHOLD THE SAM E. THE GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS DISMI SSED. 33. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE REL ATES TO DISALLOWANCE OF DEPRECIATION ON FOREIGN EXCHANGE FL UCTUATION. THE CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE ASS ESSING OFFICER FOLLOWING HIS FINDING IN EARLIER YEARS I.E. ASSES SMENT YEAR 2009- 10 AND 2010-11. 33.1 WE FIND THAT IDENTICAL ISSUE OF DISALLOWANCE OF D EPRECIATION ON FOREIGN EXCHANGE FLUCTUATION HAS BEEN RESTORED T O THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH IN ASSESS MENT YEAR 2009-10 AND THUS FOLLOWING OUR FINDING IN ASSESS MENT YEAR 2009-10 THE ISSUE-IN-DISPUTE IN THE YEAR UNDER CON SIDERATION IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH IN VIEW OF OUR DIRECTION IN ASSESSMENT YEAR 2009-10 . THE GROUND OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWE D FOR STATISTICAL PURPOSES. 34. THE GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE RELA TES TO DISALLOWANCE OF PRIOR PERIOD EXPENSES OF 92 889/-. 34.1 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SUBM ITTED THAT THE ASSESSEE DID NOT WANT TO PRESS THE GROUND DUE TO SMALLNESS OF THE AMOUNT. ACCORDINGLY THE GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 35. THE GROUND NO. 4 OF THE APPEAL RELATES TO EXCLUSIO N OF THE DEBT REDEMPTION RESERVE OF 6 25 00 000/- MAT CALCULATION. 38 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 35.1 ACCORDING TO THE ASSESSING OFFICER DEBT REDEMPT ION ADJUSTMENT APPROPRIATION IS FOR THE PURPOSE OF CREA TING RESERVE AND IS BELOW THE LINE ADJUSTMENT WHICH DOES NOT FA LL IN ANY OF THE CATEGORY OF THE ADJUSTMENT PROVIDED IN SECTION 115J B OF THE ACT. THE LEARNED CIT(A) ALSO UPHELD THE DISALLOWANCE FOL LOWING HIS FINDING IN EARLIER YEARS. 35.2 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE. THIS ISSUE IS IDENTICAL TO THE ISSUE RA ISED IN ASSESSMENT YEAR 2007-08 ACCORDINGLY FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2007-08 THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. ACCORDINGLY THE APPEAL OF ASS ESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2617/AHD./2015 (REVENUES APPEAL) ITA NO. 2461/AHD./2015 (ASSESSEES APPEAL) 36. NOW WE TAKE UP THE APPEAL OF THE REVENUE (ITA NO. 2617/AHD/2015) AND APPEAL OF THE ASSESSEE (ITA NO. 2641/AHD/2015) FOR ASSESSMENT YEAR 2012-13. THE GR OUNDS OF APPEAL OF THE REVENUE AND ASSESSEE ARE REPRODUCED A S UNDER: 36.1 GROUNDS OF APPEAL OF THE REVENUE: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2 83 98 056/- MADE ON ACCOUNT OF DIS ALLOWANCE OF DEDUCTION CLAIMED IN RESPECT OF SALES TAX INCENTIVE WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2 83 98 056/- IN THE BOOK PROFIT U/S 115JB ON ACCOUNT OF SALES TAX INCENTIVE DISALLOWANCE MADE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 39 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 5. THE APPELLANT CRAVES LEAVE TO AMEND ALTER OR A DD A NEW GROUND WHICH ' MAY BE NECESSARY. 36.2 GROUNDS OF APPEAL OF THE ASSESSEE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY AO ON ACCOUNT OF PR IOR PERIOD EXPENSES OF RS. 35 631/- . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) GROSSLY ERRED IN CONFIRMING THE ADDITION MADE BY AO ON ACCO UNT OF INTEREST INCOME OF RS. 20 66 369/- 3. THE LD ASSESSING OFFICER GROSSLY ERRED IN DISAL LOWING DEPRECIATION OF RS. 11 36 467/- ON THAT PART OF THE COST OF PLAN T & MACHINERY WHICH WAS CAPITALIZED ON ACCOUNT OF FOREIGN EXCHANG E FLUCTUATION LOSS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) GROSSLY ERRED IN CONFIRMING THE ACTION OF AO IN ADDING BACK RS 6 25 00 000/-TO BOOK PROFIT ON ACCOUNT OF DEBT REDE MPTION RESERVE . 5. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER TO DELETE FROM OR SUBSTANTIATE THE ABOVE GROUNDS OF APPEAL. 36.3 BOTH THE PARTIES AGREED THAT GROUND OF 1 & 2 OF THE APPEAL OF THE REVENUE ARE IDENTICAL TO THE GROUNDS RAISED IN ASSESSMENT YEAR 2007-08 ACCORDINGLY FOLLOWING OUR FINDINGS IN ASSESSMENT YEAR 2007-08 THE GROUNDS OF THE APPEAL OF THE REVE NUE ARE DISMISSED. HENCE THE APPEAL OF REVENUE IS DISMISSE D. 37. AS FAR AS GROUND NO. 1 OF THE APPEAL OF THE ASSESS EE OF PRIOR PERIOD EXPENSES OF 35 631 IS CONCERNED THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT WI SH TO PRESS THE GROUND IN VIEW OF THE SMALLNESS OF THE AMOUNT. ACCORDINGLY THIS GROUND OF THE APPEAL IS DISMISSED AS INFRUCTUO US. 38. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE REL ATES TO ADDITION ON ACCOUNT OF THE INTEREST INCOME OF RS. 2 0 66 369/-. THE ASSESSING OFFICER HAS MADE AN ADDITION ON ACCOU NT OF THE INTEREST AS NOT ACCOUNTED IN THE BOOKS ON THE BASIS OF THE FORM 40 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 NO. 26AS AND TDS RECONCILIATION. THE ADDITIONAL EVI DENCE SUBMITTED BY THE ASSESSEE WERE NOT ADMITTED BY THE LEARNED CIT(A) AND HE UPHELD THE DISALLOWANCE. 38.1 BEFORE US BOTH THE PARTIES AGREED THAT THE DISPO SAL OF THE ISSUE NEED VERIFICATION BY THE ASSESSING OFFICER. B OTH PARTIES ACCORDINGLY AGREED TO RESTORE THIS ISSUE BACK TO TH E ASSESSING OFFICER FOR DECIDING AFRESH IN THE LIGHT OF THE EVI DENCES AND DOCUMENTS FURNISHED BY THE ASSESSEE. ACCORDINGLY W E SET ASIDE THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE IN D ISPUTE AND RESTORE THIS MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR DECIDING AFRESH AFTER PROVIDING ADEQUATE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT THE GROUND NO . 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 40. IN GROUND NO. 3 THE ASSESSEE HAS RAISED THE ISSUE OF THE DISALLOWANCE OF DEPRECIATION ON FOREIGN EXCHANGE FL UCTUATION AMOUNTING TO BE RS.11 36 467/-. 40.1 SINCE IDENTICAL GROUND RAISED IN ASSESSMENT YEAR 2 009-10 HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFI CER ACCORDINGLY THIS ISSUE IN THE YEAR UNDER CONSIDERATION IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH I N THE LIGHT OF OR DIRECTION IN THE ASSESSMENT YEAR 2009-10. THIS GROU ND OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSES. 41. THE GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE RELA TES TO EXCLUSION OF THE DEBT REDEMPTION RESERVE FOR MAT CA LCULATION. 41.1 THE IDENTICAL GROUND RAISED IN THE ASSESSMENT YEA R 2007-08 HAS BEEN ALLOWED THUS FOLLOWING OUR FINDING THE G ROUND NO. 4 OF 41 ITA NOS.99/AHD./2014; 2830/AHD./2013;100/AHD./2014; 2831/AHD./2013; 1898/AHD./2014; 1763/AHD./2014; 1899/AHD./2014; 701/AHD./2015; 348/AHD./2015; 2617/AHD./2015 & 2461/AHD./2015 THE APPEAL OF THE ASSESSEE IS ALLOWED. HENCE THE A PPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 42. IN THE RESULT THE APPEALS OF THE REVENUE AND ASSE SSEE ARE DECIDED AS UNDER: APPEAL/CROSS OBJECTION NUMBER ASSESSMENT YEAR FILED BY RESULT OF APPEAL 99/AHD./2014 2007 - 08 REVENUE DISMISSED 2830/AHD./2014 2007 - 08 ASSESSEE ALLOWED 100/AHD./2014 2008 - 09 REVENUE DISMISSED 2831/AHD./2013 2008 - 09 ASSESSEE ALLOWED 1898/AHD./2014 2009-10 REVENUE DISMISSED 1763/AHD./2014 2009-10 ASSESSEE ALLOWED PARTLY FOR STATISTICAL PURPOSES 1899/AHD./2014 2010-11 REVENUE DISMISSED 701/AHD./2015 2011-12 REVENUE DISMISSED 348/AHD./2015 2011-12 ASSESSEE PARTLY ALLOWED FOR S TATISTICAL PURPOSES 2617/AHD./2015 2012-13 REVENUE DISMISSED 2461/AHD./2015 2012-13 ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH 2021 SD/- SD/- (K.N. CHARY) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH MARCH 2021. RK/- (DTDS) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI