JT. CIT - 10(3), MUMBAI v. M/s. AARTI INDSUTRIES LTD., MUMBAI

ITA 2662/MUM/2006 | 2002-2003
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 266219914 RSA 2006
Assessee PAN AABCA2787L
Bench Mumbai
Appeal Number ITA 2662/MUM/2006
Duration Of Justice 5 year(s) 10 month(s) 29 day(s)
Appellant JT. CIT - 10(3), MUMBAI
Respondent M/s. AARTI INDSUTRIES LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-03-2012
Date Of Final Hearing 04-01-2012
Next Hearing Date 04-01-2012
Assessment Year 2002-2003
Appeal Filed On 01-05-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE HONBLE PRESIDENT SHRI G.E.VEERABHADRAPPA AND SHRI D.K.AGARWAL (JM) ITA NO. 8387/MUM/2004 (ASSESSMENT YEAR:2001-02) M/S AARTI INDUSTRIES LTD. 71 2 ND FLOOR UDYOG KSHETRA MULUND GOREGAON LINK ROAD OFF LBS ROAD MULUND (WEST) MUMBAI-400080 PAN: AABCA2787L ADDITIONAL COMMISSIONER OF INCOME TAX RANGE -10(3) AAYAKAR BHAVAN M K ROAD MUMBAI-400020. APPELLANT V/S RESPONDENT ITA NO.8554/MUM/2004 (ASSESSMENT YEAR:2001-02) D Y. COMMISSIONER OF INCOME TAX 10(3) ROOM NO.418 4 TH FLOOR AAYAKAR BHAVAN M K ROAD MUMBAI-400020. M/S AARTI INDUSTRIES LTD. 22 UDYOG KSHETRA 2 ND FLOOR GOREGAON MULUND LINK ROAD MULUND (WEST) MUMBAI-400083 PAN: AABCA2787L APPELLANT V/S RESPONDENT ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 2 ITA NO.2662/MUM/2006 (ASSESSMENT YEAR:2002-03) JOINT COMMISSIONER OF INCOME TAX 10(3) ROOM NO.451 4 TH FLOOR AAYAKAR BHAVAN M K ROAD MUMBAI-400020. M/S AARTI INDUSTRIES LTD. 22 UDYOG KSHETRA 2 ND FLOOR GOREGAON MULUND LINK ROAD MULUND (WEST) MUMBAI-400080 PAN: AABCA2787L APPELLANT V/S RESPONDENT ITA NO. 3334/MUM/2006 (ASSESSMENT YEAR:2002-03) M/S AARTI INDUSTRIES LTD. 71 2 ND FLOOR UDYOG KSHETRA MULUNG GOREGAON LINK ROAD OFF LBS ROAD MULUND (WEST) MUMBAI-400080 PAN: AABCA2787L ADDITIONAL COMMISSIONER OF INCOME TAX RANGE -10(3) AAYAKAR BHAVAN M K ROAD MUMBAI-400020. APPELLANT V/S RESPONDENT DATE OF HEARING : 5.1.2012 DATE OF PRONOUNCEMENT : 30.3.2012 ASSESSEE BY: SHRI RAJAN R.VORA AND MS.SHEETAL SHAH REVENUE BY : DR.B.SENTHILKUMAR ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 3 O R D E R PER D.K.AGARWAL (JM) THESE TWO CROSS-APPEALS FILED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDE RS DATED 24.9.2004 AND 16.2.2006 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEARS 2001-02 AND 2002 - 03 RESPECTIVELY. SINCE FACTS ARE IDENTICAL AND ISSU ES INVOLVED ARE COMMON ALL THESE FOUR APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING AND TRADING OF DYES INTERMEDIATE ORGANIC AND INORGANIC CHEMICALS FILED RETURN FOR THE ASSESSME NT YEAR 2001-02 DISCLOSING THE TOTAL INCOME AT RS.2 86 87 904/- UNDER THE NORMAL PROVISIONS OF AC T AND BOOK PROFIT U/S 115JB AT RS.14 94 68 054/-. HOWEVER THE ASSESSMENT WAS COMPLETED AFTER MAKING VARIOUS DISALLOWANCES AND ADDITIONS AT RS.9 60 28 040/- UNDER NORMAL PROVISIONS OF THE AC T ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 4 VIDE ORDER DATED 16.2.2004 PASSED U/S 143(3) OF TH E INCOME TAX ACT 1961(IN SHORT THE ACT). THE RETUR N FOR THE ASSESSMENT YEAR 2002-03 WAS FILED SHOWING AN INCOME OF RS.5 69 11 090/-. HOWEVER THE ASSESSMENT WAS COMPLETED AFTER MAKING VARIOUS DISALLOWANCES AND ADDITIONS AT RS.11 03 79 400/- V IDE ORDER DATED 4.3.2005 PASSED U/S 143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) PARTLY ALLOWED THE APPEAL S. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE AND REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO.8387/MUM/2004(AY:2001-02)(BY THE ASSESSEE) 4. GROUND NO.1 TAKEN BY THE ASSESSEE READS AS UNDER: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST RELATABLE TO EARNING DIVIDEND INCOME U/S. 14A OF THE IT ACT AS THE APPELLANT HAD HUGE OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES TO ADEQUATELY COVER THE INVESTMENT IN SHARES. 5. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASSESSEE HAS RECEIVED A DIVIDEND OF RS.40 37 504 /- ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 5 ON THE SHARES HELD BY IT OF VARIOUS SUBSIDIARIES/ ASSOCIATE COMPANIES AND OTHERS. THE ASSESSEE CLAIME D DIVIDEND INCOME EXEMPT U/S 10(33) OF THE ACT. O N BEING ASKED IT WAS INTERALIA STATED BY THE ASSESS EE THAT NO AMOUNT CAN BE APPORTIONED OUT OF INTEREST INCOME SO AS TO BE REGARDED AS INCURRED IN RELATI ON TO EARNING OF THE DIVIDEND FOR THE PURPOSE OF SECTI ON 14A OF THE ACT. THE ASSESSEE HAS ALSO SHOWN THAT IT HAS SUFFICIENT INTEREST FREE FUNDS TO COVER THE CO ST OF SHARES. HOWEVER THE AO DID NOT ACCEPT THE ASSESSEES SUBMISSIONS. HE DISALLOWED THE INTERES T ALLOCABLE TO DIVIDEND INCOME U/S 14A AMOUNTING TO RS.82 04 428/- AS PER WORKING GIVEN AT PAGE 9 OF T HE ASSESSMENT ORDER. ON APPEAL THE LD. CIT(A) HELD THAT THE DIRECT EXPENSES ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME CAN BE DISALLOWED DIRECTED THE A O TO WORKOUT THE SAME AND RESTRICT THE DISALLOWANCE O F SUCH INTEREST ONLY TO THE INTEREST COST ATTRIBUTABL E TO SUCH INVESTMENT FROM WHERE THE DIVIDEND INCOME IS DERIVED. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REFERRING TO THE VARIOUS DECISIONS AS ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 6 MENTIONED IN THE FACTS SHEET FILED DURING THE COURS E OF HEARING SUBMITS THAT IN THE ABSENCE OF ANY NEXUS N O DISALLOWANCE ON ADHOC BASIS IS CALLED FOR. HE FURT HER SUBMITS THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE ASSESS EES OWN CASE IN AARTI INDUSTRIES LIMITED V/S ACIT AND VICE-VERSA IN ITA NO.6036/MUM/2004 ITA NO.6067/MUM/2004 (AY:1999-2000) ITA NO.6037/MUM/2004 AND ITA NO.6068/MUM/2004 FOR THE ASSESSMENT YEAR 2000-01 DATED 25.1.2008 WHEREIN THE TRIBUNAL VIDE PARAGRAPH 27 OF ITS ORDE R AFTER CONSIDERING THE FUND FLOW STATEMENT TO SHOW T HAT THE INTEREST FREE FUNDS ACTUALLY AVAILABLE FOR MAK ING INVESTMENT IN SHARES RESTRICTED THE DISALLOWANCE ATTRIBUTABLE TOWARDS EARNING OF THE DIVIDEND AT 2 % OF DIVIDEND RECEIVED. HE THEREFORE SUBMITS THAT FOLLOWING THE SAID ORDER OF THE TRIBUNAL THE DUE RELIEF TO THE ASSESSEE BE ALLOWED. 7. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDE R OF THE AO. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 7 RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE ISSUE IS COVERED IN THE ASSESSEE OWN CASE BY THE ORDER OF THE TRIBUNAL (SUPRA) WHEREIN THE TRIBUNAL AFTER CONSIDERING THE FUND FLOW STATEMENT TO SHOW THAT INTEREST FREE F UNDS WERE ACTUALLY AVAILABLE FOR MAKING INVESTMENT IN SHARES HELD THAT .THUS IN OUR VIEW 2% OF THE DIVIDEND RECEIVED SHOULD BE ATTRIBUTED TOWARDS EARNING OF THE SAME.. SINCE THERE IS NO CHANGE TO THE FACTS OF THE PRESENT CASE AND IN THE ABSENCE OF ANY OTHER DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE PARTIES WE RESPECTFULLY FOLLOWING CONSISTENT VIEW OF THE TRIBUNAL (SUPRA) DIRECT THE AO TO RESTRICT THE DISALLOWANCE ATTRIBUTABLE TOWARDS EARNING OF THE DIVIDEND U/S 14A AT 2% OF THE EARNING OF DIVIDEND RECEIVED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED. 9. GROUND NO.2 TAKEN BY THE ASSESSEE READS AS UNDER : 2.1 THE LEARNED CIT(A) GROSSLY ERRED IN INVOKING SEC. 80IB(13) (ERSTWHILE 80IA(9)) WHILE CALCULATING DEDUCTION U/S. 80HHC IN VIEW OF THE FACT S. 8OHHC IS A CODE IN ITSELF PROVIDING FOR A SPECIFIC FORMUL A FOR COMPUTATION OF THE DEDUCTION AND THERE IS NO ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 8 CORRESPONDING PROVISION IN SEC. 80HHC TO RESTRICT THE DEDUCTION. 2.2 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT WAS ENTITLED TO MERELY30% DEDUCTION IN RESPECT OF THE PROFITS OF THE NEW INDUSTRIAL UNDERTAKING AND THE OVERALL DEDUCTION U/S 80IB AND S. 80HHC DID NOT EXCEED THE PROFITS OF THE NEW INDUSTRIAL UNDERTAKING AS CONTEMPLATED U/S. 80IB(13). 10. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO WHILE FOLLOWING THE VIEW TAKEN IN THE PRECEDING ASSESSMENT YEAR HELD THAT SINCE THE DEDUCTION U/S 80IB HAS ALREADY BEEN ALLOWED ON THE PROFITS OF RS.13 62 34 173/- TO THE EXTENT OF 30% I.E. RS.4 08 70 251/- U/S 80IB HENCE THE DEDUCTION U/S 80HHC CANNOT BE ALLOWED ON THE AMOUNT OF RS.4 08 70 215/-. ON APPEAL THE LD.CIT(A) WHILE AGREEING WITH THE VIEWS OF THE ASSESSING OFFICER CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICE R ON THIS ACCOUNT. 11. AT THE TIME OF HEARING THE LD. COUNSEL FOR TH E ASSESSEE WHILE RELYING ON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN ASSOCIATED CAPSULES (P) LTD. V/S DCIT (2011) 237 CTR (BOM) 408; (2011) 332 ITR ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 9 42 (BOM) SUBMITS THAT THIS ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE. 12. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORD ER OF THE AO AND THE LD. CIT(A). 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNS EL FOR THE ASSESSEE THAT THIS ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSOCIATED CAPSULES (P) LTD. (SUPRA) WHEREIN IT HAS BEEN HELD (HEADNOTE): HELD ACCORDINGLY THAT THE TRIBUNAL WAS NOT RIGHT IN HOLDING THAT SECTION 80-IA(9) OF THE ACT MANDATES THAT THE AMOUNT OF PROFITS ALLOWED AS DEDUCTION UNDER SECTION 80-IA(1) OF THE ACT HAVE TO BE REDUCED FROM THE PROFITS OF THE BUSINESS OF THE UNDERTAKING WHILE COMPUTING DEDUCTION UNDER ANY OTHER PROVISIONS UNDER HEADING C IN CHAPTER VI-A OF THE ACT. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUG HT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT DIRECT THE AO TO ALLOW THE SAME AS PER AFORESAID ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 10 DECISION. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 14. GROUND NO.3 TAKEN BY THE ASSESSEE READS AS UNDER : 3.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF THE CONTRIBUTION MADE TO PF AND ESIC OF RS.11 647/- 15. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO MADE DISALLOWANCE OF PF AND ESIC AMOUNTING TO RS.11 647/- ON THE GROUND THAT THERE WAS A DELAY IN MAKING THE PAYMENT AS AGAINST DUE DATE. THE LD. CIT(A) FOLLOWING CERTAIN DECISIONS HELD THAT SINCE THE APPELLANT HAS MADE PF PAYMENT EVEN BEYOND GRACE PERIOD CONFIRMED THE DISALLOWANCE MADE BY THE AO. 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF CIT V/S ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) M/S PIK PEN PRIVATE LIMITE D V/S ITO IN ITA NO.6847/MUM/2008 (AY: 2005-06) ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 11 DATED 28.1.2010 AND CIT V/S AIMIL LIMITED (2010) 321 ITR 508(DEL) . 17. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORD ER OF THE AO AND THE LD. CIT(A). 18. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS PAID ABOVE AMOUNT MUCH BEFORE FILING THE RETURN OF INCOME. THIS BEING SO WE RESPECTFULL Y FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN ALOM EXTRUSIONS LTD. (SUPRA) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN AIMIL LIMITED (SUPRA) WHEREIN IT HAS BEEN HELD THAT IF THE EMPLOYEES SHARE OF CONTRIBUTION OF PF IS PAID BEF ORE THE DUE DATE OF FILING OF THE RETURN U/S 139(1) TH EN NO DISALLOWANCE CAN BE MADE AND THE CONSISTENT VIEW OF THE TRIBUNAL DELETE THE DISALLOWANCE OF RS.11 64 7/- MADE BY THE AO AND SUSTAINED BY THE LD.CIT(A). THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED . 19. GROUND NO.4 TAKEN BY THE ASSESSEE READS AS UNDER : ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 12 4.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS GROSSLY ERRED IN DENYING THE CLAIM OF THE APPELLANT FOR IGNORING THE LOSS FROM TRADING EXPORT WHILE COMPUTING THE PROFITS FROM THE EXPORT ACTIVITY. 4.2 THE LEARNED CIT (A) HAS ERRED IN RELYING ON THE DECISION IN THE CASE OF IPCA LABORATORIES LIMITED 266 ITR 521 WITHOUT APPRECIATING THE FACT THAT THE SAID DECISION DEALT WITH A CASE OF LOSS CEDED TO A SUPPORTING MANUFACTURER WHEN THE OVERALL PROFITS FROM EXPORT ACTIVITY WERE NEGATIVE AND HENCE THE SAID DECISION DOES NOT HAVE ANY APPLICATION TO THE APPELLANTS CASE. 20. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUC TION U/S 80HHC SINCE THERE IS A LOSS FROM EXPORT WHICH CANNOT BE FURTHER INCREASED. ON APPEAL THE LD. CIT(A) HOWEVER DIRECTED THE AO TO COMPUTE THE ELIGIBLE DEDUCTION U/S 80HHC FOLLOWING HIS DIRECTI ONS CONTAINED IN PARAGRAPH 13.2 OF HIS ORDER. 21. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE RETROSPECTIVE AMENDMENT REPORTED I N 280 ITR (ST) 25 WHICH WAS NOT OBJECTED TO BY THE LD . DR. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 13 22. THAT BEING SO AND KEEPING IN VIEW THE RETROSPECTIVE AMENDMENT MADE UNDER THE RELEVANT PROVISIONS OF THE ACT (SUPRA) THE ISSUE IS DECIDE D AGAINST THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED. 23. GROUND NO.5 TAKEN BY THE ASSESSEE READS AS UNDER : 5.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 2 43 002/- ON THE ASSETS PURCHASED FROM M/S. PRAVIN METAL CORPORATION. 24. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DU RING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH TH E PURCHASE OF FIXED ASSETS FROM M/S PRAVIN METAL CORPORATION HENCE THE AO KEEPING IN VIEW THE FIND ING RECORDED IN THE PRECEDING YEARS DISALLOWED THE CLAI M OF DEPRECIATION ON SUCH ASSETS. 25. ON APPEAL THE LD. CIT(A) WHILE AGREEING WITH THE VIEWS OF THE AO CONFIRMED THE DISALLOWANCE MADE BY THE AO. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 14 26. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IS COVERED IN FAVOU R OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN AARTI INDUSTRIES LIMITED V/S ACIT AND VICE-VERSA (SUPRA) THEREFORE THE ISSUE MAY BE DECIDED ACCORDINGLY. 27. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDE R OF THE AO AND THE LD. CIT(A). 28. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 (SUPRA) VIDE PARAGRAPH 19 OF ITS ORDER WHIL E OBSERVING THAT THE FACTS ARE NOT EXPLICITLY CLEAR ON THIS ASPECT RESTORED THE ISSUE TO THE FILE OF THE AO TO RE-EXAMINE THIS ISSUE AND DECIDE THE SAME AFRESH AFTER GIVING AN ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL WE RESTORE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH IN THE L IGHT OF THE DIRECTION OF THE TRIBUNAL (SUPRA) AND ACCOR DING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY TO T HE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 15 ASSESSEE. THE GROUND NO.5 TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 29. GROUND NO.6 IS GENERAL IN NATURE AND IN THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DISALLOWING THE PAYMENT MADE FOR NON-COMPETITION OF RS.1 05 00 000/- TREATING THE SAME AS CAPITAL IN NATURE 30. AT THE TIME OF HEARING THE LD. COUNSEL FOR TH E ASSESSEE SUBMIT THAT HE DOES NOT WANT TO PRESS THE ABOVE GROUNDS WHICH WAS NOT OBJECTED TO BY THE LD. DR. 31. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD BY THE LEARNE D COUNSEL FOR THE ASSESSEE THE GENERAL GROUND AND ADDITIONAL GROUND TAKEN BY THE ASSESSEE ARE THEREFORE REJECTED BEING NOT PRESSED. ITA NO.8554/MUM/2004 (AY:2001-02) (BY REVENUE) 32. GROUND NO.1 TAKEN BY THE REVENUE READS AS UNDER : ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 16 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION OF ENTIRE INTEREST AND PROCESSING CHARGES ON TERM LOAN PAID TO ICICI AMOUNTING TO RS. 63 04 031/- UNDER SECTION 36(1)(III) OF THE IT. ACT 1961. 33. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS CLAIMED EXPENSES ON INTEREST AND PROCESSING CHARGES RS.63 04 031/- ON TERM LOAN TAKEN FOR EXPANSION OF JHAGADIA UNIT. ON BEING ASKED IT WAS INTERALIA STATED BY THE ASSESS EE THAT SUCH CLAIM IS ALLOWABLE AS THE CAPITAL BORROW ED WAS UTILIZED FOR THE EXPANSION OF THE EXISTING BUSI NESS. HOWEVER THE AO IN VIEW OF THE FACT THAT THE INTER EST AND PROCESSING CHARGES OF RS.63 04 031/- INCURRED PRIOR TO THE COMMENCEMENT OF PRODUCTION ADDED TO THE COST OF ASSETS ON THE SAME LINE ON WHICH THE ASSESSEE HAS CAPITALIZED IN THE BOOKS OF ACCOUNT A ND ALLOWED THE DEPRECIATION THEREON. ON APPEAL THE L D. CIT(A) KEEPING IN VIEW THE AMENDMENT IN THE ACT B Y THE FINANCE ACT 2003 WHEREIN THE LEGISLATURE HAS INSERTED NEW PROVISO TO SECTION 36(1)(III) OF THE ACT WITH PROSPECTIVE EFFECT FROM 1.4.2004 AND FOLLOWIN G THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN DCIT ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 17 V/S CORE HEALTHCARE LTD. (2001) 251 ITR 61(GUJ) A ND OTHER DECISIONS DIRECTED THE AO TO ALLOW THE DEDUCTION OF ENTIRE INTEREST OF RS.63 04 031/- UNDER SECTION 36(1)(III) OF THE ACT AND WITHDRAW THE DEPRECIATI ON. 34. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 35. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISIONS IN (A) DCIT V/S C ORE HEALTHCARE LTD. (2008) 298 ITR 194 (SC) (B) CIT V /S TATA CHEMICALS LTD. (2002) 256 ITR 395 (BOM) AND (C) IN ASSESSEES OWN CASE IN M/S AARTI INDUSTRIE S V/S DCIT AND VICE VERSA IN ITA NO.5986/MUM/2003 AND ITA NO.6240/MUM/2003 (AY-1996-97) DATED 30.11.2006. 36. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. AT THE OUTSET WE OBSERVE THAT IT IS SETTLED LAW THAT WHEN THE QUESTION IS WHETHER A RECEIPT OF MO NEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTIONS FRO M THAT RECEIPT ARE PERMISSIBLE IN LAW OR NOT THE QUE STION ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 18 HAS TO BE DECIDED ACCORDING TO THE PRINCIPLES OF LA W AND NOT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE. ACCOUNTING PRACTICE CANNOT OVERRIDE SECTION 56 OR A NY OTHER PROVISION OF THE ACT. WE FIND MERIT THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN CORE HEALTH CA RE LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 36(1)(III) P RIOR TO ITS AMENDMENT BY THE FINANCE ACT 2003 IN RELAT ION TO MONEY BORROWED FOR PURCHASE OF MACHINERY EVEN THOUGH THE ASSESSEE HAD NOT USED THE MACHINERY IN THE YEAR OF BORROWING. RESPECTFULLY FOLLOWING THE AUTHORITATIVE PRONOUNCEMENT AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) THE GROUND RAISED BY THE REVENUE IS THEREFORE REJECTED. 37. GROUND NO.2 TAKEN BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO CARRY OUT THE WORKING OF THE INVESTMENT IN THE COMPANIES FROM WHERE DIVIDEND INCOME IS DERIVED AND THE INTEREST COST ATTRIBUTABLE TO SUCH INVESTMENT FROM WHERE DIVIDEND INCOME IS DERIVED COULD BE DISALLOWED U/S.14A OF THE IT. ACT. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 19 38. THE BRIEF FACTS OF THE ABOVE ISSUE HAVE ALREAD Y BEEN DISCUSSED IN PARAGRAPH 5 OF THIS ORDER. 39. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE PLEA TAKEN BY THEM IN GROUND NO.1 I N ASSESSEES APPEAL FOR THE SAME ASSESSMENT YEAR 2001 - 02 MAY BE CONSIDERED WHILE DECIDING THE ABOVE ISSUE . 40. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. KEEPING IN VIEW OF OUR FINDING RECORDED IN PARAGRAPH 8 OF THIS ORDER WE DIRECT THE AO TO FOL LOW THE SAME. WE HOLD AND ORDER ACCORDINGLY. THE GROUN D TAKEN BY THE REVENUE IS THEREFORE DECIDED AS INDICATED ABOVE. 41. GROUND NO.3 TAKEN BY THE REVENUE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW WEIGHTED DEDUCTION UNDER SECTION 35(2AB) ON THE AMOUNT OF RS.3 57 67 089/- @ 150% INSPITE OF THE FACT THAT THE CONDITIONS LAID DOWN IN THE SECTION WERE NOT FULFILLED. 42. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT ON PERUSAL OF THE COMPUTATION OF INCOME THE AO NOTED ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 20 THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 35(2AB) AT RS.5 36 50 634/- AND IN THE REVISED RETURN TH E ASSESSEE HAS CLAIMED THE SAME DEDUCTION U/S 35(1)( I) AND 35(1) (IV) OF THE ACT. ON BEING ASKED IT WA S INTERALIA SUBMITTED BY THE ASSESSEE THAT THE ASSES SEE IS ELIGIBLE FOR THE WEIGHTED DEDUCTION OF ONE AND ONE- HALF TIMES OF EXPENDITURE INCURRED IN THE R&D FAC ILITY AND THE COMPANY HAD ALREADY COMPLIED WITH THE PROCEDURE AND HAS BEEN GRANTED RECOGNITION CERTIFICATE FROM THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH GOVERNMENT OF INDIA (DSIR) IN RESPECT OF ITS R&D UNITS AT VAPI AND TURBHE. HOWEVER THE AO OBSERVED THAT THE ASSESSEE COMPANY DID NOT FULFILL THE CONDITIONS LAID DOWN U/S 35(2AB ) OF THE ACT AND HENCE NOT ELIGIBLE FOR WEIGHTED DEDUCTI ON. HE FURTHER OBSERVED THAT THE ASSESSEE COMPANY IS HOWEVER IS ELIGIBLE FOR DEDUCTION U/S 35(1)(I) AN D 35(1)(IV) FOR THE EXPENSES INCURRED TO THE EXTENT OF RS.3 57 67 089/- FOR REVENUE EXPENSES AND RS.43 21 943/- FOR CAPITAL EXPENSES WHICH HAVE BEEN SEPARATELY CLAIMED BY THE ASSESSEE IN THE COMPUTATI ON OF INCOME. THUS THE AO DISALLOWED THE EXCESS DEDUCTION OF RS.1 78 83 545/-. ON APPEAL THE LD. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 21 CIT(A) OBSERVED THAT THE APPELLANT SHOULD NOT BE ALLOWED TO SUFFER FOR THE MERE FACT THAT THE PRESCR IBED AUTHORITY HAS ISSUED THE APPROVAL LETTER TO APPELLA NT COMPANY ON 6.7.2001 WHEREAS THE FACT THAT THE APPELLANT COMPANY HAS INCURRED THE EXPENDITURE FOR SETTING UP THE IN-HOUSE R & D FACILITY IS NOT IN DO UBT. HE FURTHER OBSERVED THAT THE APPROVAL GRANTED BY DS IR IS OPERATIVE FROM THE DATE AND YEAR AS MENTIONED IN THE APPELLANTS APPLICATION. ACCORDINGLY THE LD. CI T(A) DIRECTED THE AO TO ALLOW WEIGHTED DEDUCTION U/S 35(2AB) OF RS.3 57 67 089/-. 43. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 44. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) REFERS T O THE RECOGNITION CERTIFICATE OF R & D FACILITIES TO VAPI AND TURBHE UNITS APPEARING AT PAGES 96 TO 98 OF TH E ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT THE COPY OF APPLICATION TO DSIR AND DETAILS OF EXPENSE S ARE APPEARING AT PAGE 12 TO 26 OF THE ASSESSEES PAPER BOOK. IN THE LIGHT OF THE ABOVE DOCUMENTARY ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 22 EVIDENCE HE SUBMITS THAT SINCE THE ASSESSEE HAS FILED APPLICATION WITHIN TIME THEREFORE THE ASSE SSEE IS ENTITLED TO THE WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT AND IN SUPPORT THE RELIANCE WAS ALSO PLAC ED ON (A) ACIT V/S MECO INSTRUMENTS P.LTD. IN ITA NO.4246/MUM/2009 (AY: 2005-06) DATED 20.8.2010 (B) CIT V/S CLARIS LIFESCIENCES LTD. (2010) 326 IT R 251 (GUJ) AND ( C ) CIT V/S SANDAN VIKAS (INDIA) L TD IN ITA NO.348/2011 DATED 24.2.2011 (DELHI HIGH COURT) 45. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT RECOGNITION CERTIFICATE TO THE ASSESSEE IN RESPECT OF IN-HOUSE R&D UNITS OF TURBHE AND VAPI WAS GRANTED BY THE MINISTRY OF SCIENCE AND TECHNOLOGY DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH NEW DELHI UP TO 31.3.2003 VIDE LETTER DATED 6.7.2001. THIS BEING SO AND KEEPING IN VIEW THE RATIO OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CLARIS LIFESCIENCES LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE CUT-OFF DATE MENTIONED IN THE CERTIFICATE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 23 ISSUED BY THE DSIR WOULD BE OF NO RELEVANCE. WHAT I S TO BE SEEN IS THAT THE ASSESSEE WAS INDULGING IN R&D ACTIVITY AND HAD INCURRED THE EXPENDITURE THEREUPON . ONCE A CERTIFICATE BY DSIR IS ISSUED THAT WOULD BE SUFFICIENT TO HOLD THAT THE ASSESSEE FULFILLS THE CONDITIONS LAID DOWN IN THE AFORESAID PROVISIONS. T HE SAID DECISION HAS BEEN FOLLOWED BY THE HONBLE DELH I HIGH COURT IN SANDAN VIKAS (INDIA) LTD. (SUPRA). 46. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE LD.DR WE RESPECTFULLY FOLLOWING THE ABOVE DECISIONS HOLD THAT THE ASSES SEE IS ENTITLED TO DEDUCTION U/S 35(2AB) OF THE ACT AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE SAME. THE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 47. GROUND NO.4 TAKEN BY THE REVENUE READS AS UNDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER NOT TO RE- COMPUTE THE DEDUCTION U/S.80IB OF THE IT. ACT. 48. BRIEF FACTS ON THE ABOVE ISSUE ARE THAT THE A O NOTED THAT THE ASSESSEE COMPANY HAS CLAIMED ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 24 DEDUCTION U/S 80IB FOR 9 TH YEAR OF RS.4 22 19 595/- IN RESPECT OF PROFIT DERIVED FROM THE ACID DIVISION . THE AO AFTER CONSIDERING THE ASSESSEES CHART OF COMPUTATION OF DEDUCTION U/S 80IB OBSERVED THAT IN THE ASSESSMENT YEAR 2000-01 WHEREIN THE EXPENSES UNDER THE HEAD OFFICE & ADMINISTRATIVE EXPENSES SELLING & DISTRIBUTION EXPENSES INTEREST & FINA NCIAL CHARGES AND NON-OPERATING EXPENSES WERE ALLOCAT ED IN THE RATIO OF SALES TURNOVER OF ACID DIVISION TO THE TOTAL TURNOVER. ON THE SAME LOGIC THE AO FOR THE Y EAR UNDER CONSIDERATION ALLOWED THE DEDUCTION U/S 80IB RS.4 08 70 251/- AS AGAINST THE ASSESSEES CLAIM OF RS.4 22 19 595/-. ON APPEAL THE LD. CIT(A) WHILE OBSERVING THAT THE APPELLANT IS FOLLOWING A SCIENTI FIC METHOD FOR ALLOCATION OF THE EXPENDITURE DIS-APPRO VED THE ALLOCATION OF THE EXPENDITURE MADE BY THE AO AND DIRECTED THE AO RECOMPUTE THE DEDUCTION U/S 80IB AS PER HIS DIRECTION. 49. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 50. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WHILE REFERRING TO COMPUTATION OF DEDUCTIO N ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 25 U/S 80IB APPEARING AT PAGES 15 TO 17 OF THE ASSESSEES PAPER BOOK SUBMITS THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 (SUPRA) DATED 25.1.2008. THE RELIANCE WAS ALSO PLACED ON T HE DECISION OF THE TRIBUNAL IN THE CASE OF GLAXO SMITHKLINE ASIA (P) LTD. V/S ACIT (2005) 97 TTJ (DEL)108 AND MMTC LTD.V/S JCIT (2007) 112 TTJ (DEL)15. 51. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WHEREIN V IDE PARAGRAPH 89 OF THE ORDER THE TRIBUNAL HAS HELD AS UNDER: 89THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT ASSESSEE WAS FOLLOWING SCIENTIFIC METHOD FOR ALLOCATION OF THESE EXPENSES AND THESE FINDINGS OF THE LD. CIT(A) HAVE REMAIN UN-CONTROVERTED. WE ALSO FIND OURSELVES IN AGREEMENT WITH THE FINDINGS OF THE LD. CIT(A) THAT TURNOVER CANNOT BE THE ONLY ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 26 CRITERIA FOR ALLOCATING THESE TYPES OF EXPENSES PARTICULARLY WHEN THE ASSESSEE HAS INSTALLED A REASONABLE ACCOUNTING SYSTEM FOR IDENTIFICATION OF COSTS RELATING TO EACH DIVISION. IN THIS VIEW OF TH E MATTER WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT IN LAW. ACCORDINGLY WE CONFIRM THE SAME. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWIN G THE ORDER OF THE TRIBUNAL (SUPRA) DECLINE TO INTERF ERE WITH THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. 52. GROUNDS OF APPEAL NO.5(A) TAKEN BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE PROFIT ON SALE OF DEPB LICENSE AS EXPORT INCENTIVE AND ALLOW THE DEDUCTION UNDER SECTION 80HHC UNDER PROVISO TO SECTION 80HH(3) OF THE IT. ACT. 53. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S 80HHC AS PER PROVISO TO SUB-SECTION 3 OF SECTION 80HHC ON SALE OF DEPB LICENCES CLAIMIN G THAT SAME ARE EXPORT INCENTIVES COVERED U/S 28(III A). HOWEVER THE AO WAS OF THE VIEW THAT THE SALE OF ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 27 DEPB LICENCE ARE NOT COVERED U/S 28 (IIIA) AND ACCORDINGLY NOT ELIGIBLE FOR DEDUCTION AS PER PROVI SO TO SUB-SECTION 3 OF SECTION 80HHC. HOWEVER THE SAME HAS TO BE EXCLUDED AT THE RATE OF 90% FROM TH E PROFITS OF THE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION AS PER EXPLANATION (BAA) TO SUB-SECTION 4B OF SECTION 80HHC. ON APPEAL THE LD. CIT(A) HOWEVER DIRECTE D THE AO TO TREAT PROFIT ON SALE OF DEPB LICENSE AS EXPORT INCENTIVES AND ALLOW THE DEDUCTION U/S 80HHC UNDER PROVISO TO SECTION 80HHC(3) OF THE ACT. 54. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S KALPATARU COLOURS AND CHEMICALS (2010) 328 ITR 451 (BOM) 55. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE OPINION THAT THE ISSUE INVO LVED IN THE PRESENT CASE IS NO MORE RES INTEGRA AND IS COVERED BY THE RECENT DECISION OF THE HONBLE APE X COURT IN THE CASE OF TOPMAN EXPORTS V/S CIT (2012) 205 TAXMAN 119 (SC) WHEREIN IT HAS BEEN HELD THAT NOT THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF DEPB BUT THE SALE VALUE LESS THE FACE VALU E OF THE DEPB WILL REPRESENT PROFIT ON TRANSFER OF DEPB BY ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 28 THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE AUTHORITATIVE PRONOUNCEMENT OF THE HONBLE SUPREME COURT WE DIRECT THE AO TO RECOMPUTE THE DEDUCTION U/S 80HHC IN ACCORDANCE WITH THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT AND ACCORDINGLY THE OR DER PASSED BY THE LD.CIT(A) FOR THE ABOVE ASSESSMENT YEARS DOES NOT CALL FOR ANY INTERFERENCE. THE G ROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 56. GROUND NO.5(B) TAKEN BY THE REVENUE READS AS U NDER : 5(B). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE SALES TAX OF RS.8 23 28 526/- EXCISE DUTY OF RS.23 15 57 063/- & DUTY DRAWBACK AMOUNTING TO RS.80 466/- FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE IT. ACT. 57. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO WHILE COMPUTING THE TOTAL TURNOVER HAS ADDED THE SALES TAX EXCISE DUTY AND DUTY DRAWBACK AS PART OF THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. 58. ON APPEAL THE CIT(A) FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V/S M/S SUDARSHAN CHEMICALS LTD.(2000)(245 ITR 769) (BOM) WHEREIN IT HAS BEEN HELD THAT TOTAL TURNOVER SHO ULD REFLECT ONLY THOSE RECEIPTS WHICH HAVE PROFIT ELEM ENT IN THEM DIRECTED THE AO TO EXCLUDE THE SALES TAX EXCISE DUTY AND DUTY DRAW BACK FROM THE TOTAL ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 29 TURNOVER FOR THE PURPOSES OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. 59. AT THE TIME OF HEARING BOTH THE PARTIES AGREE D THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT V/S LAKSHMI MACHINE WORKS (2007) 290 ITR 667 (SC). THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO RE LIED ON CERTAIN OTHER DECISIONS INCLUDING THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 (SUPRA). 60. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. THE ISSUE INVOLVE IN THE PRESENT CASE IS NO MORE RES- INTEGRA AND IS COVERED BY THE DECISION OF THE HON BLE APEX COURT IN THE CASES OF AND CIT V/S CATAPHARM A (INDIA) P. LTD. (2007) 292 ITR 641 (SC). IN LAKSHMI MACHINE WORKS (SUPRA) IT HAS BEEN HELD THAT JU ST AS INTEREST COMMISSION ETC. DO NOT EMANATE FROM TH E TURNOVER SO ALSO EXCISE DUTY AND SALES TAX DO NO T EMANATE FROM SUCH TURNOVER. SINCE EXCISE DUTY AND SALES TAX DO NOT INVOLVE ANY SUCH TURNOVER SUCH TA XES ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 30 HAVE TO BE EXCLUDED. RESPECTFULLY FOLLOWING THE AUTHORITATIVE PRONOUNCEMENT OF THE HONBLE APEX COURT WE ARE NOT INCLINED TO INTERFERE WITH THE OR DER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT. THE GROUN D TAKEN BY THE REVENUE IS THEREFORE REJECTED. 61. GROUND NO.5(C) TAKEN BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER NOT TO REDUCE THE DEDUCTION U/S.80IB WHILE WORKING OUT THE PROFITS OF BUSINESS UNDER EXPLANATION (BAA) OF SECTION 80HHC WHILE CALCULATING DEDUCTION U/S.80HHC OF THE IT ACT. HE FURTHER ERRED IN DIRECTING THE ASSESSING OFFICER TO FOLLOW THE FOLLOWING SERIES OF STEPS TO GIVE EFFECT TO SECTION 80IA(9) WHILE CALCULATING DEDUCTION UNDER SECTION 80HHC OF THE SAID ACT. (I). COMPUTE THE DEDUCTION ULS.80IB BY ASCERTAINING THE PROFITS OF THE NEW (I.E. QUALIFYIN G) INDUSTRIAL UNDERTAKING AND APPLY THE RELEVANT PERCENTAGE THERETO. (II) COMPUTE (BY APPLYING SUB-SECTION (3) OF SECTION 80HHC) THE EXPORT PROFITS OF THE UNIT THE PROFITS OF WHICH ARE ELIGIBLE FOR DEDUCTION ULS.80L/80IB. (III) AS ONLY 30% OF PROFITS OF UNIT QUALIFY FOR DEDUCTION U/S.801B THUS IN THE DEDUCTION COMPUTED U/S 80IB ONLY 30% OF EXPORT PROFITS OF THAT UNIT IS EMBEDDED. THEREAFTER THE SAME IS TO BE DEDUCTED FROM THE TOTAL CLAIM OF DEDUCTION U/S.80HHC WHICH IS TO BE WORKED OUT AS PER THE DIRECTIONS CONVEYED IN THE APPELLATE ORDER. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 31 62. THE BRIEF FACTS OF THE ABOVE ISSUE HAVE ALREADY BEEN MENTIONED IN PARAGRAPH 10 OF THIS ORDER IN RESPECT OF GROUND NO.2 IN ASSESSEES APPEAL THEREFORE TO AVOID REPETITION THE SAME ARE NOT REPEATED HERE. 63. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 64. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE SAME PLEA AS MENTION ED IN PARAGRAPH 11 OF THIS ORDER REITERATES THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSOCIAT ED CAPSULES (P) LTD. (SUPRA). 65. AFTER HEARING THE RIVAL PARTIES AND PERUSING TH E MATERIAL AVAILABLE ON RECORD WE FIND THAT THERE IS NO DISPUTE THAT THE FACTS OF THE ABOVE ISSUE ARE SIM ILAR TO THE FACTS AS MENTIONED IN PARAGRAPH 10 OF THIS ORDER THEREFORE WE DIRECT THE AO TO FOLLOW OUR FINDINGS RECORDED IN PARAGRAPH 13 OF THIS ORDER. W E HOLD AND ORDER ACCORDINGLY. THE GROUND TAKEN BY TH E REVENUE IS THEREFORE REJECTED. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 32 66. GROUND NO.6 TAKEN BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT DEDUCTION U/S 115JB ON ACCOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC SHOULD BE WITH REFERENCE TO THE BOOK PROFITS AND NOT THE TAXABLE PROFITS DETERMINED FOR THE PURPOSE OF INCOME TAX ACT 1961. 67. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASSESSEE IN COMPUTATION OF INCOME HAS CLAIMED DEDUCTION UNDER EXPLANATION (IV) TO SECTION 115JB (1) ON ACCOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U/S 80 HHC AMOUNTING TO RS.5 70 69 195/-. THE DEDUCTION WAS COMPUTED IN THE MANNER AS PRESCRIBED UNDER SUB- SECTION (3) OF SECTION 80HHC. THE PROFITS OF THE BUSINESS FOR SUCH COMPUTATION WAS WITH REFERENCE TO THE BOOK PROFITS COMPUTED UNDER SECTION 115JB AND NOT TAXABLE PROFITS DETERMINED FOR THE PURPOSE OF INCOME TAX ACT 1961. THIS WAS CONSISTENT WITH THE CBDT CIRCULAR NO.680 DATED 2.12.1994 AND THE LEGAL POSITION AS PREVAILING IN THIS REGARD. HOWEVER THE AO DETERMINED THE DEDUCTION UNDER EXPLANATION (IV) AT RS. NIL WORKED OUT WITH REFERENCE TO THE TAXABLE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 33 PROFITS OF THE BUSINESS DETERMINED UNDER THE ACT. ON APPEAL THE LD. CIT(A) OBSERVED THAT THE PROFITS OF THE BUSINESS FOR SUCH COMPUTATION SHOULD BE WITH REFERENCE TO THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT AND NOT THE TAXABLE PROFITS DETERMINED FO R THE PURPOSE OF INCOME TAX ACT 1961 WHICH IS CONSISTENT WITH CBDT CIRCULAR NO.680 DATED 2.12.19 94 AND THE LEGAL POSITION IN THIS REGARD AND ACCORDING LY ALLOWED THE GROUND RAISED BY THE ASSESSEE. 68. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 69. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN AJANTA PHARMA LTD. V/S CIT (2010) 327 ITR 305(SC). HE ALSO PLACED RELIANCE ON (A) M/S APTECH LTD. V/S DCIT VICE-VERSA IN ITA NO.7114/MUM/2007 AND ITA NO.7316/MUM/2007 (AY:2004-05) DATED 25.1.2010 (B) DCIT V/S GLENMARK LABORATORIES (2010) 127 TTJ(MUM) 719 (C ) DCIT V/S SYNCOME FORMULATIONS (I) LTD.(2007) 106 ITD 193(MUM)(SB) AND (D) CIT V/S M/S BHARI ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 34 INFORMATION TECH. SYS. P.LTD SPECIAL LEAVE PETITI ON (CIVIL) NO(S.)33750/2009 DATED 20.10.2011 (SC). HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD . CIT(A) BE UPHELD. 70. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. THE ISSUE INVOLVED IN THE PRESENT CASE IS NO MORE RES- INTEGRA AND IS COVERED BY THE DECISION OF THE HON BLE APEX COURT IN AJANTA PHARMA LTD. (SUPRA) WHEREIN IT HAS BEEN HELD (HEADNOTE): (IV) THAT THEREFORE THE APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT 100 PER CENT OF THE EXPORT PROFITS EARNED BY THE ASSESSEE IS COMPUTED UNDER SECTION 80HHC (3) WAS ELIGIBLE FOR REDUCTION UNDER CLAUSE (IV) OF THE EXPLANATION TO SECTION 115JB. 71. THE ABOVE JUDGMENT HAS BEEN REITERATED BY THE HONBLE APEX COURT IN M/S BHARI INFORMATION TECH. SYS. P.LTD.(SUPRA). 72. RESPECTFULLY FOLLOWING THE ABOVE AUTHORITATIVE PRONOUNCEMENTS OF THE HONBLE APEX COURT WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY THE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 35 LD. CIT(A) ON THIS ACCOUNT. ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. ITA NO. 3334/MUM/2006 (AY:2002-03) (BY ASSESSEE) 73. GROUND NO.1.1 TAKEN BY THE ASSESSEE READS AS UNDER : 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.1 82 251/- ON THE ASSETS PURCHASED FROM M/S PRAVIN METAL CORPORATION WHICH WERE ALREADY TAXED IN THE BLOCK ASSESSMENT U/S. 158BC AT FULL VALUE THEREOF. 74. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.5 RAISED IN THE APP EAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDERED WHILE DECIDING THE ABOVE GROUND TAKEN BY THE ASSESSEE. 75. AFTER HEARING THE RIVAL PARTIES AND PERUSING T HE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECORDED IN THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 28 OF THI S ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 36 ORDER WE RESTORE THIS ISSUE TO THE FILE OF THE A O TO EXAMINE THE SAME AFRESH IN THE LIGHT OF THE DIRECTI ON OF THE TRIBUNAL (SUPRA) AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND NO.1 TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES . 76. GROUND NO.2 TAKEN BY THE ASSESSEE READS AS UNDER : 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST RELATABL E TO EARNING DIVIDEND INCOME U/S. 14A OF THE I.T. ACT AS THE APPELLANT HAD HUGE OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES TO ADEQUATELY COVER THE INVESTMENT IN SHARES. 77. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.1 RAISED IN THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDERED WHILE DECIDING THE GROUNDS TAKEN BY THE ASSESSEE. 78. AFTER HEARING THE RIVAL PARTIES AND PERUSING T HE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 37 OUR FINDINGS RECORDED IN THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 8 OF THIS ORDER WE DIRECT THE AO TO FOLLOW OUR FINDING RECO RDED THEREIN. WE HOLD AND ORDER ACCORDINGLY. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED . 79. GROUND NO.3 TAKEN BY THE ASSESSEE READS AS UNDER : 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF EXPENSES RELATING TO THE CURRENT YEAR RECORDED IN THE BOOKS IN THE SUBSEQUENT PERIOD. 80. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS TH E ABOVE GROUND WHICH WAS NOT OBJECTED TO BY THE LD. DR. 81. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD BY THE ASSESSEE THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED BEING NOT PRESSED. 82. GROUND NO.4 TAKEN BY THE ASSESSEE READS AS UNDER : ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 38 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN CONFIRMING IN PART THE DISALLOWANCE MADE BY THE ASSESSING OFFICER RELATING TO EXPENSES TREATING THEM AS PRIOR PERIOD EXPENSES WITHOUT APPRECIATING THAT THE SAID EXPENSES CRYSTALLIZED I N THE CURRENT YEAR ONLY. 83. BRIEF FACTS RELATING TO THE ABOVE ISSUE ARE TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF EXPENSES PERTAINING TO PRIOR PERIOD IN A LL AMOUNTING TO RS.2 83 339/-. ON PERUSAL OF DETAILS ACCORDING TO THE AO ALL SUCH EXPENSES WERE RELATED TO PRECEDING PREVIOUS YEAR AND CONSEQUENTLY HE DISALLOWED THE ASSESSEES CLAIM IN THIS REGARD. ON APPEAL THE LD.CIT(A) WHILE DIRECTING THE AO TO VE RIFY THE APPELLANTS CLAIM IN THIS REGARD ALLOW THE EXPENSES WHICH RELATES TO SHORT PROVISION OF EXPENS ES ON ACCOUNT OF ESTIMATION OF EXPENSES WHEREAS IN CA SE OF NON PROVISIONS HE CONFIRMED THE DISALLOWANCE. 84. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1999- 2000 AND 2000-01 (SUPRA) AND ALSO BY THE ORDER OF ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 39 THE TRIBUNAL IN THE ASSESSEES OWN CASE IN AARTI INDUSTRIES LTD. V/S ADD.CIT AND VICE-VERSA IN ITA NO.3013/MUM/2004 AND ITA NO.2998/MUM/2004 (AY:1997-98) DATED 20.2.2007. THE RELIANCE WAS ALS O PLACED ON (A) ESSAR STEEL LTD. V/S DCIT (2005) 97 I TD 125 (AHD) (TM) (B) TOYO ENGINEERING INDIA LTD. V/ S JCIT (2006)100 TTJ (MUM) 373 (C ) STERLITE INDUSTR IES (INDIA) LTD. V/S ADDL.CIT (2006) 102 TTJ (MUM) 53 AND (D) GOETZE (INDIA) LTD. V/S DCIT (2007) 112 TTJ (DEL) 1. 85. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDE R OF THE AO AND THE LD. CIT(A). 86. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE SIM ILAR DISALLOWANCE WAS MADE IN THE ASSESSMENT YEARS 1997- 98 1999-2000 AND 2000-01. THE TRIBUNAL IN THE ORDER DATED 25.1.2008 FOR THE ASSESSMENT YEAR 2000- 01 VIDE PARAGRAPH 84 OF THE ORDER WHILE ALLOWING THE EXPENSES ON THE BASIS OF ACTUALLY CRYSTALLIZED DURI NG THE YEAR DIRECTED THE AO TO ALLOW OTHER EXPENSES IN ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 40 THE YEARS TO WHICH THESE BELONG IF PERMITTED BY LA W. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE ASSESSEE WE RESPECTFULLY FOLLOWIN G THE CONSISTENT VIEW OF THE TRIBUNAL DIRECT THE AO TO ALLOW THE EXPENSES WHICH WERE ACTUALLY CRYSTALLIZED DURING THE YEAR AND FURTHER DIRECT THE AO TO ALLO W THE OTHER EXPENSES IN THE YEAR IN WHICH THESE BELON G IF PERMITTED BY LAW. THE GROUND TAKEN BY THE ASSESS EE IS THEREFORE PARTLY ALLOWED. 87. GROUND NO.5 TAKEN BY THE ASSESSEE READS AS UNDER : 5.1 THE LEARNED C1T(A) ERRED IN NOT DECIDING THE GROUND OF THE APPELLANT WITH REGARD TO THE ALLOCATION OF ADMINISTRATIVE SELLING AND DISTRIBUTION AND FINANCIAL EXPENSES ON THE BASIS OF TURNOVER AS AGAINST THE SCIENTIFIC METHOD ADOPTED BY THE APPELLANT. 88. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.4 RAISED IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2001-02 (SUPRA) THEREFORE PLEA TAKEN BY THEM IN THAT APPE AL MAY BE CONSIDERED WHILE DECIDING THE GROUND TAKEN BY THE ASSESSEE. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 41 89. AFTER HEARING THE RIVAL PARTIES AND PERUSING T HE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECORDED IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 51 OF THI S ORDER WE DIRECT THE AO TO FOLLOW OUR FINDING RECORDED THEREIN. WE HOLD AND ORDER ACCORDINGLY. TH E GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED . 90. GROUND NO.6 TAKEN BY THE ASSESSEE READS AS UNDER : 6.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN REDUCING THE UNREALIZED EXPORT TURNOVER OF RS.29 35 437/-OUT OF TOTAL EXPORT TURNOVER FOR COMPUTING THE DEDUCTION U/S. 80HHC. 6.2 THE LEARNED CIT (A) OUGHT TO HAVE CONSIDERED THAT THE APPELLANT HAD DULY FILED AN APPLICATION FO R EXTENSION OF TIME WITH THE RESERVE BANK OF INDIA AS REQUIRED U/S. 80HHC AND THE SAME WAS NOT REJECTED BY THE RBI AND HENCE OUGHT TO HAVE BEEN CONSIDERED AS ACCEPTED. IN THE CIRCUMSTANCES THE APPELLANT HAD DISCHARGED ITS ONUS. 91. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAS TREATED UNREALIZED EXPORT PROCEEDS OF RS.29 35 437/- AS EXPORT TURNOVE R EVEN THOUGH CONVERTIBLE FOREIGN CURRENCY WAS NOT BROUGHT IN INDIA WITHIN SIX MONTHS. HOWEVER THE A O ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 42 DID NOT ALLOW DEDUCTION U/S 80HHC IN RESPECT OF S ALE PROCEEDS WHICH WERE NOT RECEIVED IN FOREIGN CURRENC Y WITHIN THE TIME ALLOWED UNDER THE PROVISIONS OF SECTION 80HHC IN THE ABSENCE OF ANY APPROVAL RECEIV ED FROM THE RESERVE BANK OF INDIA IN THIS REGARD FOR EXTENSION OF TIME TO BRING SUCH AMOUNT AFTER SUCH D UE DATE. ON APPEAL THE LD. CIT(A) WHILE AGREEING WI TH THE VIEWS OF THE AO CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ACCOUNT. 92. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS MADE APPLICATION TO THE RESERVE BANK OF INDIA BUT NO ORD ER RECEIVED TILL THE DATE WHEREAS THE PAYMENT WAS RECEIVED IN THE MONTH OF OCTOBER 2003. HE FURTHER SUBMITS THAT SINCE THE ASSESSEE HAS APPLIED FOR THE APPROVAL SEEKING EXTENSION OF TIME TO THE RESERVE BANK OF INDIA THEREFORE THE EXPORT PROCEEDS SHOUL D BE TREATED AS EXPORT TURNOVER FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT. IN THIS REGARD T HE RELIANCE WAS ALSO PLACED IN ACIT V/S PRAKASH L. SH AH (2008) 115 ITD 167(MUM) (SB) AND IN M/S DIKSHA TECHNOLOGIES PVT.LTD. V/S DCIT AND VICE-VERSA IN IT A ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 43 NO.1064/B/2010 AND ITA NO.1113/B/2010(AY:2006- 07) ORDER DATED 5.8.2011. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER. 93. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDE R OF THE AO AND THE LD. CIT(A). 94. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE DEDUCTION U/S 80HHC IN RESPECT OF SALE PROCEEDS WHICH WERE NOT RECEIVED I N FOREIGN CURRENCY WITHIN THE TIME LIMIT ALLOWED UNDE R THE PROVISIONS OF SECTION 80HHC WAS NOT ALLOWED IN THE ABSENCE OF ANY SUCH EXTENSION RECEIVED FROM THE PROPER AUTHORITY. HOWEVER THERE IS NO DISPUTE THA T THE ASSESSEE HAS MADE APPLICATION TO THE RESERVE BANK OF INDIA SEEKING THE EXTENSION OF TIME. IN M /S DIKSHA TECHNOLOGIES PVT.LTD.(SUPRA) THE TRIBUNAL FOLLOWING THE DECISION IN THE CASE OF M/S WIPRO LTD . V/S DCIT (2009) TIOL 72 ITAT BANGALORE AND M/S TAXCORP E-PRACTICE MEGA DVD (2009) 30 SOT 1 (MUM) WHEREIN IT HAS BEEN HELD THAT WHERE THE ASSESSEE HA S MADE AN APPLICATION TO THE AUTHORITY SEEKING EXTENS ION FOR RECEIPT OF REMITTANCE AS PER FEMA REGULATIONS A ND ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 44 THE RESERVE BANK OF INDIA HAS TAKEN THE REMITTANC E ON RECORD THEN IT SHOULD BE ASSUMED THAT RESERVE BANK OF INDIA HAS GIVEN DEEMED APPROVAL AND SUCH RECEIPT IS TO BE CONSIDERED FOR DEDUCTION U/S 10B O F THE INCOME TAX ACT UPHELD THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE. 95. RECENTLY IN CIT V/S MORGAN STANLEY ADVANTAGE SERVICES P.LTD. (2011) 339 ITR 291(BOM) IT HAS BEE N HELD (HEAD NOTE): HELD DISMISSING THE APPEAL THAT THE RESERVE BANK OF INDIA IS THE COMPETENT AUTHORITY UNDER THE 1999 ACT. THUS WHAT SECTION 10A(3) OF THE ACT PROVIDES IS THAT THE BENEFITS UNDER SECTION 10A(1) WOULD BE AVAILABLE IF THE EXPORT PROCEEDS ARE REALISED WITHIN THE TIME PRESCRIBED BY THE COMPETENT AUTHORITY UNDER THE 1999 ACT. THE RESERVE BANK OF INDIA HAD GRANTED APPROVAL IN RESPECT OF THE EXPORT PROCEEDS REALISED BY THE ASSESSEE TILL DECEMBER 2004. THEREFORE THE APPROVAL GRANTED BY IT UNDER THE 1999 ACT WOULD MEET THE REQUIREMENTS OF SECTION 10A OF THE ACT. MOREOVER THE RESERVE BANK OF INDIA HAD NEITHER DECLINED NOR REJECTED THE APPLICATION MADE BY THE ASSESSEE SEEKING EXTENSION OF TIME UNDER SECTION 10A OF THE ACT. THEREFORE THE DECISION OF THE TRIBUNAL HOLDING THAT THE APPROVAL GRANTED UNDER THE 1999 ACT CONSTITUTED DEEMED APPROVAL GRANTED BY THE RESERVE BANK OF INDIA UNDER SECTION 10A(3) COULD NOT BE FAULTED. THE ASSESSEE WAS ENTITLED TO EXEMPTION UNDER SECTION 10A ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 45 IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE AND KEEPING IN VIEW THAT THE ASSESSEE HAS APPLIED FOR EXTENSION OF TIME WE HOLD THAT THE AO AND THE LD.CIT(A) WERE NOT JUSTI FIED IN REDUCING THE UNREALIZED EXPORT OF RS.29 35 437 /- FROM THE EXPORT TURNOVER FOR THE PURPOSE OF DEDUCTI ON U/S 80HHC. THE AO IS DIRECTED TO ALLOW THE DEDUCTI ON ON THE SAID AMOUNT OF UNREALIZED EXPORT. THE GROUN D TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 96. GROUND NO.7 TAKEN BY THE ASSESSEE READS AS UNDER : 7.1 THE LEARNED CIT (A) ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSING OFFICER BY CONSIDERING GROSS INTEREST AMOUNTING TO RS.29 98 048/- FOR COMPUTING PROFITS OF THE BUSINESS FOR THE PURPOSE OF S. 80HHC. THE CIT(A) OUGHT TO HAVE CONSIDERED ONLY THE NET INTEREST INCOME FOR THE SAID PURPOSE. 7.2 THE LEARNED CIT (A) ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSING OFFICER BY CONSIDERING GROSS RENT INCOME AMOUNTING TO RS.9 00 000/- FOR COMPUTING PROFITS OF THE BUSINESS FOR THE PURPOSE OF S. 8OHHC. THE CIT(A) OUGHT TO HAVE CONSIDERED ONLY THE NET RENT INCOME FOR THE SAID PURPOSE. 97. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT T HE AO OBSERVED THAT THE ASSESSEE EXCLUDED 90% OF INTEREST INCOME OF RS.29 98 048/- WHILE COMPUTING THE PROFIT OF BUSINESS AS PER EXPLANATION (BAA) TO SUB- ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 46 SECTION (4B) OF SECTION 80HHC. HOWEVER THE AO IN VIEW OF THE EXPLANATION (BAA) OF SUB-SECTION (4B) O F SECTION 80HHC AND THE DECISION OF THE HONBLE SUPREME COURT IN CIT V/S DR. V. P. GOPINATHAN (2001) 248 ITR 449(SC) AND THE DECISION IN CIT V/S JOSE THOMAS (2002) 253 ITR 553 (KER) HELD THAT 90% OF INTEREST HAS TO BE REDUCED FOR COMPUTING THE PROFIT OF THE BUSINESS AND ACCORDINGLY HE DISALLO WED THE SAME. ON APPEAL THE LD. CIT(A) WHILE OBSERVIN G THAT THE ASSESSEE HAS FAILED TO PROVE NEXUS UPHELD THE DISALLOWANCE MADE BY THE AO. 98. THE LD.CIT(A) FURTHER OBSERVED THAT THE ASSESS EE HAS ALSO RAISED THE ISSUE FOR REDUCING NET RENT A S AGAINST 90% OF GROSS RENT CONSIDERED BY THE AO. TH E LD. CIT(A) WHILE OBSERVING THAT IN LINE WITH THE EA RLIER GROUNDS IN RESPECT OF NETTING OF INTEREST REJECTED THE GROUND TAKEN BY THE ASSESSEE IN THIS REGARD. 99. AT THE TIME OF HEARING THE LD. COUNSEL FOR TH E ASSESSEE SUBMITS THAT THIS ISSUE IS COVERED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN TH E ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1999- 2000 2000-01 AND 2001-02. THE RELIANCE WAS ALSO ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 47 PLACED ON DECISIONS IN (A) LALSONS ENTERPRISES V/ S DCIT (2004) 89 ITD 25 (SB) ( DELHI) (B) CIT V/S SHRI RAM HONDA POWER EQUIP (2007) 289 ITR 475 (DEL) (C ) CIT V/S ANAND KUMAR (2007) 164 TAXMAN 330(DEL) AND CIT V/S TAX V/S. PUNJAB STAINLESS STE EL IND. [2007] 162 TAXMAN 9 (DELHI). 100. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORD ER OF THE AO AND LD. CIT(A) 101. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE TRIBUNAL IN PARAGRAPH 32 OF ITS ORDER DATED 25.1.2008 FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 (SUPRA) WHILE RELYING ON THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE ASSESSMENT YEAR 1997-98 (SUPRA) WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF TRIBUNAL IN LALSONS ENTERPRISES (SUPRA) HAS RESTORED BACK THE ISSUE TO THE FILE OF THE AO TO EXAMINE THE NEXUS BETWEEN THE COMMISSION RECEIVED AND COMMISSION PAID AND DECIDE THE SAME ON SIMILAR LINES. WE FURTHER FIND THAT THE TRIBUNAL ON THE ISSUE OF CONSULTANCY CHARGES AND LEASE RENT FOLLOWING THE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 48 DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN LALSONS ENTERPRISES (SUPRA) HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO VIDE PARAGRAPH 36 OF ITS ORDE R DATED 25.1.2008 (SUPRA). WE FURTHER FIND THAT ON TH E ISSUE OF NETTING OF THE INTEREST THE TRIBUNAL FOLLO WING ITS EARLIER ORDER FOR THE ASSESSMENT YEAR 1997-98 H AS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH 60 OF ITS ORDER DATED 25.1.2008 (SUPRA). 102. AFTER CONSIDERING THE RATIO OF THE ABOVE DECIS IONS TO THE FACTS OF THE PRESENT CASE WE FIND THAT THE LD. CIT(A) HAS DISALLOWED THE CLAIM OF THE ASSESSEE OF NETTING OF INTEREST AND NETTING OF THE RENT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE THE NEXUS. HOWEVER ON THE ISSUE OF NETTING OF INTERE ST RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S ASIAN STAR CO.LTD. (2010) 326 ITR 56 (BOM) HAS DISTINGUISHED THE DECISION IN SHRI RAM HONDA POWER EQUIP (SUPRA) AND DISAPPROVED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN LALSONS ENTERPRISES (SUPRA) AND HELD AS UNDER (HEADNOTE): ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 49 .HENCE FOR THE PURPOSE OF EXPLANATION (BAA) TO SECTION 80HHC THE GROSS INTEREST ON FIXED DEPOSITS IN THE BANK RECEIVED BY THE ASSESSEE SHOULD BE CONSIDERED FOR THE PURPOSES OF WORKING OUT THE DEDUCTION UNDER SECTION 80HHC AND NOT THE NET INTEREST. SINCE IN THE EARLIER ASSESSMENT YEARS THE ISSUE HA S BEEN SET ASIDE BY THE TRIBUNAL TO THE AO THEREFOR E KEEPING IN VIEW THE RULE OF CONSISTENCY WE SET ASI DE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON TH IS ACCOUNT AND RESTORE BACK THE ISSUE TO THE FILE OF T HE AO TO DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW INCLUDING THE RECENT DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASIAN STAR CO.LTD. (SUPRA) AND THE DECISION OF HONBLE DELHI HIGH CO URT IN CIT V/S J.V. ELECTRONICS PVT.LTD.(2011)16 TAXMANN.COM 319(DEL) AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTL Y ALLOWED FOR STATISTICAL PURPOSES. 103. GROUND NO.8 TAKEN BY THE ASSESSEE READS AS UNDER : 8.1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY REDUCING THE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 50 BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF ALCHEMIE ORGANICS LIMITED U/S 72A WHILE COMPUTING THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF S. 80HHC. 104. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE COMPANY WHILE CALCULATING THE PROFIT OF THE BUSINESS AS PER INCOM E TAX ACT HAS NOT REDUCED THE SET OFF OF UNABSORBED DEPRECIATION AND BUSINESS LOSS OF RS.6 17 81 271/ - CLAIMED U/S 72A OF THE ACT. IN THE LETTER DATED 4.3.2005 THE ASSESSEE HOWEVER REVISED THE FIGURE OF CARRIED FORWARD DEPRECIATION AND BUSINESS LOSS AT RS.5 95 12 446/- DUE TO EFFECT GIVEN TO THE ORDER OF THE LD. CIT(A) IN THE CASE OF AMALGAMATED COMPANY. THE AO ON PERUSAL OF THE RECORDS OF THE AMALGAMATED COMPANY FOUND THAT THE CARRIED FORWARD BUSINESS LO SS AND DEPRECIATION WAS AVAILABLE FOR SET OFF OF RS.5 89 34 686/-. THE AO AFTER CONSIDERING THE PROVISIONS OF SECTION 80AB AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATO RY LTD. V/S DCIT (2004) 266 ITR 521 (SC) AND OTHER DECISIONS HELD THAT CARRIED FORWARD LOSS COULD NO T BE SET OFF FOR COMPUTING THE PROFITS FOR THE PURPOSE OF SECTION 80HHC AND ACCORDINGLY REJECTED THE CLAIM OF ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 51 THE ASSESSEE. ON APPEAL THE LD. CIT(A) WHILE RELY ING ON THE DECISION IN IPCA LABORATORIES LIMITED (SUPR A) REJECTED THE CLAIM OF THE ASSESSEE. 105. AT THE TIME OF HEARING THE LD. COUNSEL FOR TH E ASSESSEE SUBMITS THAT IN VIEW OF THE DECISION OF T HE HONBLE DELHI HIGH COURT IN CIT V/S SONA KOYO STEERING SYSTEMS LTD. (2010) 321 ITR 463 (DEL) THE CLAIM MADE BY THE ASSESSEE BE ALLOWED. 106. ON THE OTHER HAND THE LD.DR SUPPORTS THE ORDE R OF THE AO AND THE LD. CIT(A). 107. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT IT HAS BEEN HELD BY THE HON BLE SUPREME COURT IN IPCA LABORATORIES LIMITED (SUPRA) (HEAD NOTE): A PLAIN READING OF SECTION 80HHC MAKES IT CLEAR THAT IN ARRIVING AT PROFITS EARNED FROM EXPOR T OF BOTH SELF MANUFACTURED GOODS AND TRADING GOODS THE PROFITS AND LOSSES IN BOTH TRADES HAVE TO BE TAKEN INTO CONSIDERATION. IF AFTER SUCH ADJUSTMENTS THERE IS A POSITIVE PROFIT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80HHC(1). IF THERE IS A LOSS THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION.. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 52 SECTION 80AB HAS BEEN GIVEN AN OVERRIDING EFFECT OVER ALL OTHER SECTIONS IN CHAPTER VI-A. SECTION 80HHC DOES NOT PROVIDE THAT ITS PROVISIONS ARE TO PREVAIL OVER SECTION 80AB OR OVER ANY OTHER PROVISION OF THE ACT.. 108. IN SONA KOYO STEERING SYSTEMS LTD.(SUPRA) RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE I T HAS BEEN HELD THAT THE LOSS OF ONE SUCH INDUSTRIAL UNDERTAKING COULD NOT BE SET OFF AGAINST THE PROF IT OF THE ANOTHER SUCH INDUSTRIAL UNDERTAKING TO ARRIVE AT A COMPUTATION OF THE QUANTUM OF DEDUCTION U/S 80I (1) READ WITH SECTION 80I(6) OF THE ACT. WHEREAS IN T HE CASE BEFORE US THE ASSESSEE HAS NOT REDUCED THE S ET OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION OF AMALGAMATED COMPANY U/S 72A FOR COMPUTING THE DEDUCTION U/S 80HHC WHICH IS NOT SIMILAR TO THE PROVISIONS OF SECTION 80I(1) READ WITH SECTION 80I( 6) OF THE ACT THEREFORE THE DECISION RELIED ON BY T HE LD. COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE AND NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN T HIS VIEW OF THE MATTER THE ORDER PASSED BY THE AO AND CONFIRMED BY THE LD.CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 53 109. GROUND NO.9 TAKEN BY THE ASSESSEE READS AS UNDER : 9.1 THE LEARNED CIT(A) ERRED IN UPHOLDING THE RESTRICTION OF DEDUCTION U/S. 80HHC BY INVOKING THE PROVISIONS OF S. 80IB(13) WITHOUT APPRECIATING THAT THERE IS NO CORRESPONDING AMENDMENT IN S.80HHC AND THAT THE COMPUTATION FORMULA PRESCRIBED IN S.80HHC CANNOT BE MODIFIED OR VARIED UNILATERALLY. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSING OFFICER BY RESTRICTING THE DEDUCTION U/S. 80HHC BY INVOKING SEC. 80IB(13). THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE PROVISIONS OF S. 80IB(13) R.W.S. 80IA(9) ARE APPLICABLE ONLY WHERE THE OVERALL DEDUCTIONS UNDER VARIOUS PROVISIONS OF PART C OF CHAPTER VI-A EXCEED THE PROFITS OF THE NEW INDUSTRIAL UNDERTAKING. 110. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.2 IN ASSESSEES AP PEAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE THE PLE A TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDERED WHILE DECIDING THE GROUND TAKEN BY THE ASSESSEE. 111. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY TH E REVENUE WE KEEPING IN VIEW OF OUR FINDINGS RECORDED ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 54 IN THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 13 OF THIS ORDER DIRECT TH E AO TO ALLOW THE SAME. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 112. THE ADDITIONAL GROUND NO.1 TAKEN BY THE ASSESS EE READS AS UNDER : 1.1 THE ACTION OF THE HONBLE CIT(A) IN SETTING ASIDE THE HEREINAFTER MENTIONED ISSUES TO THE FILE OF THE AO SHOULD BE STRUCK DOWN AS WITHOUT JURISDICTION AND BAD IN LAW. 113. AT THE TIME OF HEARING THE LD. COUNSEL FOR TH E ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS ADDITIONAL GROUND NO.1 TAKEN BY THE ASSESSEE WHICH WAS NOT OBJECTED TO BY THE LD. DR. 114. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE THE ADDITIONAL GROUND NO .1 TAKEN BY THE ASSESSEE IS THEREFORE REJECTED BEIN G NOT PRESSED. 115. THE ADDITIONAL GROUND NO.2 TAKEN BY THE ASSESS EE READS AS UNDER : ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 55 2.1 THE LOSS FROM TRADING EXPORTS SHOULD BE IGNORED WHILE CALCULATING DEDUCTION U/S 80HHC. 116. AT THE TIME OF HEARING THE LD. COUNSEL FOR TH E ASSESSEE SUBMITS THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT BROUGHT IN THE SECTION 80HHC BY THE TAXATION LAWS (AMENDMENT) 2005 THIS GROUND DOES NOT SURVIVE WHICH WAS NOT OBJECTED TO BY THE LD. D R. 117. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE THE ADDITIONAL GROUND N O.2 TAKEN BY THE ASSESSEE IS THEREFORE REJECTED BEING NOT PRESSED. 118. THE ADDITIONAL GROUND NO.3 TAKEN BY THE ASSESS EE READS AS UNDER : 3.1 THE SALE OF DEPB SHOULD BE CONSIDERED AS EXPORT INCENTIVES WHILE CALCULATING DEDUCTION U/S 80HHC. 119. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.5(A) RAISED IN REVEN UES APPEAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 56 PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDER ED WHILE DECIDING THE GROUND TAKEN BY THE ASSESSEE. 120. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECORDED IN THE REVENUES APPEAL FOR T HE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 55 OF TH IS ORDER WE DIRECT THE AO TO FOLLOW OUR FINDING RECO RDED THEREIN. WE HOLD AND ORDER ACCORDINGLY. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED IN THE MANNER INDICATED. ITA NO.2662/MUM/2006(AY:2002-03) (BY REVENUE) 121. GROUND NO.1 TAKEN BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW WEIGHTED DEDUCTION U/S. 35(2AB) OF THE I.T. ACT AMOUNTING TO RS.79 02 943/- AT 15% IN SPITE OF THE FACT THAT THE CONDITIONS LAID DOWN IN THE SAID SECTION WERE NOT FULFILLED BY THE ASSESSEE COMPANY. 122. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.3 RAISED IN THE REVEN UES APPEAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 57 PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDER ED WHILE DECIDING THE GROUND TAKEN BY THE REVENUE. 123. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECORDED IN THE REVENUES APPEAL FOR T HE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPHS 45 AND 46 OF THIS ORDER WE ARE OF THE VIEW THAT THE ASSE SSEE IS ENTITLED TO DEDUCTION U/S 35(2AB) OF THE ACT AN D THE LD. CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE SAME. THE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 124. GROUND NO.2 TAKEN BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) HAS ERRED I N DIRECTING THE A.O. TO ALLOW THE DEPRECIATION ON EFFLUENT TREATMENT PLANT AT 100% AS IT IS USED FOR WATER POLLUTION CONTROL RELYING ON THE CASE OF M/S. ALCHEMIE ORGANICS LTD. (NOW MERGED WITH THE ASSESSEE COMPANY) STATING THAT THIS ISSUE WAS DECIDED IN THE ABOVE SAID CASE IN ASSESSEES FAVOUR FOR A.Y. 1995-96. HOWEVER VERIFICATION OF THE RECORDS FOR A.Y. 1995-96 IN THE CASE OF M/S. ALECHEMIE ORGANICS LTD. SHOWS THAT THIS ISSUE WAS MERELY SET ASIDE BY THE THEN CIT(A) TO THE FILE OF THE A.O. FOR FURTHER VERIFICATION AND THE ISSUE WA S NOT DECIDED IN ASSESSEE COMPANYS FAVOUR. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 58 125. BRIEF FACTS ON THE ABOVE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED 100% DEPRECIATION ON EFFLUENT TREATMENT PLANT PURCHASED BY THE AMALGAMATED COMPANY ALCHEMIE ORGANIC AT RS.24 25 071/- FOR WHOLE YEAR AND RS.21 44 680/- FO R HALF OF THE YEAR. ACCORDING TO THE AO EFFLUENT TREATMENT SYSTEM WAS NOT INCLUDED ON ITEMS ON WHICH 100% DEPRECIATION IS ALLOWED AND HENCE TREATING THE SAME AS NORMAL PLANT AND MACHINERIES THE AO ALLOWE D 25% AND 12.5% DEPRECIATION RESPECTIVELY. ON APPEAL THE LD. CIT(A) ON PERUSAL OF THE APPENDIX FOUND THA T ITEM USED FOR WATER POLLUTION CONTROL EQUIPMENT A RE ELIGIBLE FOR DEPRECIATION AT 100% AND ACCORDINGLY DIRECTED THE AO TO ALLOW DEPRECIATION AT THE RATE OF 100% ON THE ABOVE PLANT AND MACHINERY. 126. AT THE TIME OF HEARING THE LD. DR SUPPORTS TH E ORDER OF THE AO. 127. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LD. CIT (A) SUBMITS THAT THE 100% DEPRECIATION IS ALLOWABLE ON ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 59 THE WATER POLLUTION CONTROL EQUIPMENT THEREFORE T HE LD.CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE SAME. 128. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COU NSEL FOR THE ASSESSEE THAT UNDER SUB-ITEM (IX) OF ITEM-I II UNDER THE HEAD MACHINERY AND PLANT OF PART-A (TANGIBLE ASSETS) OF APPENDIX I OF DEPRECIATION SCHEDULE DEPRECIATION AT THE RATE OF 100% IS ALLOWABLE ON WATER POLLUTION CONTROL EQUIPMENT. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECO RD BY THE REVENUE NO ERROR IS FOUND IN THE ORDER OF T HE LD. CIT(A) IN ALLOWING 100% DEPRECIATION ON SUCH PL ANT AND MACHINERY AND ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. 129. GROUND NO.3 TAKEN BY THE REVENUE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ENTIRE INTEREST ON TERM LOAN PAID TO ICICI AMOUNTING TO RS.10 46 055/- U/S. 36(1)(III) OF THE I.T. ACT 1961. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 60 130. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.1 RAISED IN THE REVEN UES APPEAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDER ED WHILE DECIDING THE GROUND TAKEN BY THE REVENUE. 131. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECORDED IN THE REVENUES APPEAL FOR T HE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 36 OF THI S ORDER THE GROUND TAKEN BY THE REVENUE IS THEREFOR E REJECTED. 132. GROUND NO.4 TAKEN BY THE REVENUE READS AS UNDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF SOFTWARE EXPENSES AMOUNTING TO RS.41 44 000/- TREATED BY THE A.O. AS CAPITAL EXPENDITURE RELYING ON THE CASE OF ALEMBIC GLASS (177 ITR 377) STATING THAT THE SAID EXPENDITURE ON SOFTWARE EXPENSES ARE REVENUE IN NATURE WITHOUT APPRECIATING THE FACT THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARAWALI CONSTRUCTION PVT. LTD. HAS CATEGORICALL Y STATED THAT THE SOFTWARE EXPENSES ARE IN NATURE OF CAPITAL EXPENDITURE AND CONSIDERING THAT THE RATE OF OBSOLESCENCE OF SOFTWARE IS HIGH THE ACT HAS ALLOWED DEPRECIATION AT THE RATE OF 60%. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 61 133. THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS IT WAS OBSERVED THAT ASSESSE E HAD DEBITED SUM OF RS.41 44 000/- UNDER THE HEAD ADMINISTRATIVE EXPENSES WHICH WAS INCURRED FOR COMPUTER SOFTWARE EXPENSES. THE DETAILS OF SUCH EXPENSES ARE GIVEN IN PARA 7 OF THE ORDER. ACCORDIN G TO THE ASSESSEE IT HAD INSTALLED SAP ACCOUNTING PACKAGE IN PLACE OF TALLY USED EARLIER AND THE AMO UNT OF SUCH EXPENSES DID NOT RESULT IN ENDURING ADVANTA GE TO THE ASSESSEE COMPANY AND THEREFORE IT WAS SUBMITTED BEFORE THE AO THAT SUCH EXPENSES SHOULD B E ALLOWED AS REVENUE EXPENSES. HOWEVER THE AO TAKING CLUE FROM THE DECISION OF HONBLE RAJASTHAN HIGH CO URT IN CASE OF CIT V/S ARAWALI CONSTRUCTIONS CO. (P.) L TD. (2003) 259 ITR 30 (RAJ) TREATED SUCH EXPENSES AS CAPITAL EXPENSES. ON APPEAL THE LD. CIT(A) FOLLOWI NG THE DECISION OF THE TRIBUNAL IN DANCAL (INDIA) PRI VATE LIMITED IN ITA NO.5644/MUM/1997 DIRECTED THE AO T O TREAT THE EXPENDITURE AS REVENUE EXPENDITURE AND ALLOWED THE CLAIM OF THE ASSESSEE. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 62 134. AT THE TIME OF HEARING THE LD. DR SUPPORTS TH E ORDER OF THE AO. 135. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE EXPENDITURE ON COMPUTER SOFTWARE WAS ON ACCOUNT OF SAP ACCOUNTING PACKAGE WHICH THE ASSESSEE WAS PLANNING TO INTRODUCE IN PL ACE OF ITS CURRENT TALLY PACKAGE. HOWEVER THE SAID PACKAGE DID NOT WORK AND THE ASSESSEE SCRAPPED THE SAID PACKAGE AND CONTINUED WITH THE TALLY PACKAGE THEREFORE THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE SAID PACKAGE WAS RIGHTLY ALLOWED BY THE LD.CIT( A) AS REVENUE EXPENDITURE. THE RELIANCE WAS ALSO PLAC ED ON ( A) M/S CISCO SYSTEMS (INDIA) P. LTD. V/S ACIT IN ITA NO.431/BANG/2010 (AY:2002-03) DATED 28.4.2011 (B) AMWAY INDIA ENTERPRISES V/S DCIT (2008)114 TTJ (DEL)(SB) 476 (C ) CIT V/S GE CAPITAL SERVICES LTD . 164 TAXMAN 46; 214 CTR 551(DEL) (D) CIT V/S GE POWER SERVICES INDIA LTD. 171 TAXMAN 10(DEL) (E) CIT V/S SOUTHERN ROADWAYS LTD. 304 ITR 84 (MAD) (F) AVAYA GLOBAL CONNECT LTD. 122 TTJ (MUM) 300 ( G) ANGEL CAPITAL & DEBT MARKET LTD. V/S ACIT 118 TTJ 3 51 (MUM) (H) VARINDER AGRO CHEMICALS 309 ITR 272 ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 63 (P&H) (I) RAYCHEM RPG LTD. IN ITA NO.4176 OF 2009 DATED 4.7.2011 (BOM) (J) CIT V/S UNITED BREWERIES LTD 321 ITR 546(KAR) (K) CIT V/S ESCORTS AUTO COMPONENTS LTD 323 ITR 11 (P&H) (L) INDO RAMA SYNTHETICS INDIA LTD. V/S CIT 228 CTR 278(DEL) (M) CIT V/S ANJANI KUMAR CO.LTD. 259 ITR 114 (RAJ) (N) ACIT V/S SUTLEJ INDUSTRIES LTD. 94 TTJ 108 (DEL) A ND (O) STANDARD REFINERY AND DISTILLERY LTD. V/S CIT 7 9 ITR 589 (SC). 136. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASS ESSEE HAS INCURRED EXPENDITURE ON COMPUTER SOFTWARE ON ACCOUNT OF SAP ACCOUNTING PACKAGE WHICH THE ASSESSEE WAS PLANNING TO INTRODUCE IN PLACE OF ITS CURRENT TALLY PACKAGE AND SINCE THE SAP PACKAGE DI D NOT WORK THE ASSESSEE HAS SCRAPPED THE SAID PACKAG E AND CONTINUED WITH THE TALLY PACKAGE AND CLAIMED TH E EXPENSES AS REVENUE EXPENDITURE IN THE ALTERNATIVE AS BUSINESS LOSS. IN THE ABSENCE OF ANY MATERIAL PLAC ED ON RECORD BY THE REVENUE THAT NO SUCH ACCOUNTING ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 64 PACKAGE WAS TAKEN BY THE ASSESSEE OR EXPENSES INCURRED BY THE ASSESSEE ARE NOT GENUINE OR THE SAME ARE NOT FOR BUSINESS PURPOSES WE ARE OF THE VIEW THAT THE SAP ACCOUNTING PACKAGE WAS SCRAPED BY THE ASSESSEE DUE TO COMMERCIAL EXPEDIENCY THEREFOR E THE CLAIM OF THE ASSESSEE AS BUSINESS EXPENDITURE W AS RIGHTLY ALLOWED BY THE LD.CIT(A). THE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 137. GROUND NO.5 TAKEN BY THE REVENUE READS AS UNDER : 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO COMPUTE DEDUCTION U/S. 80IB WITHOUT CONSIDERING THE ALLOCATION OF NON-OPERATING EXPENSES IN RESPECT OF ACID DIVISION FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IB 138. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S 80IB IN RESPECT OF IT S ACID DIVISION. THE AO OBSERVED THAT WHILE CLAIMING THE DEDUCTION FOR ACID DIVISION THE ASSESSEE COMPANY THOUGH ALLOCATED EXPENSES IN RESPECT OF ADMINISTRAT IVE AND OTHER FINANCIAL EXPENSES IT AGAIN ADDED A SUM OF RS.29 43 634/- FOR THE PURPOSE OF WORKING OUT ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 65 DEDUCTION U/S 80IB. HOWEVER NOT SATISFIED WITH THE METHOD ADOPTED BY THE ASSESSEE THE AO COMPUTED THE DEDUCTION U/S 80IB AFTER CONSIDERING THE ALLOCA TION OF NON-OPERATIVE EXPENSES FOR THE PURPOSE OF COMPUTING SUCH DEDUCTION. ON APPEAL THE LD. CIT(A ) WHILE RELYING ON THE REASONS RECORDED IN THE APPELL ATE ORDER FOR THE ASSESSMENT YEAR 2001-02 DIRECTED TO T HE AO RECOMPUTE THE DEDUCTION ON THE BASIS OF SAME AS ADOPTED BY THE ASSESSEE. 139. AT THE TIME OF HEARING THE LD.DR SUPPORTS TH E ORDER OF THE AO. 140. ON THE OTHER HAND THE LD.COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 1999-2000 AN D 2000-01 WHEREIN THE TRIBUNAL ON THE SIMILAR FACTS HAS ALLOWED THE CLAIM OF THE ASSESSEE. THE RELIANC E WAS ALSO PLACED ON THE DECISION OF THE TRIBUNAL IN GLAXO SMITHKLINE ASIA (P) LTD. V/S ACIT (2005) 9 7 TTJ (DEL) 108 AND MMTC LTD. V/S JCIT (2007)112 TTJ (DEL) 15. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 66 141. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE KEEPING IN VIEW OF OUR FINDING RECORDED IN ASSESSE ES APPEAL FOR THE ASSESSMENT YEAR 2002-03 IN PARAGRAP H 89 OF THIS ORDER DIRECT THE AO TO FOLLOW OUR FINDI NGS RECORDED THEREIN. WE HOLD AND ORDER ACCORDINGLY. T HE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED . 142. GROUND NO.6 TAKEN BY THE REVENUE READS AS UNDER : 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO EXCLUDE SALES TAX AND EXCISE DUTY FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE I.T. ACT RELYING ON THE DECISION IN THE CASE OF SUDARSHAN CHEMICALS (245 ITR 769). 143. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE PRESENT ISSUE ARE SIMI LAR TO THE FACTS OF THE GROUND NO.5(B) RAISED BY THE REVENUE IN APPEAL FOR THE ASSESSMENT YEAR 2001-02 THEREFORE PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDERED WHILE DECIDING THE GROUND TAKEN BY THE REVENUE. ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 67 144. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECORDED IN THE REVENUES APPEAL FOR T HE ASSESSMENT YEAR 2001-02 IN THE PARAGRAPH 60 OF THI S ORDER WE ARE NOT INCLINED TO INTERFERE WITH THE OR DER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT. THE GROUN D TAKEN BY THE REVENUE IS THEREFORE REJECTED. 145. IN THE RESULT THE ASSESSEES APPEALS STAND PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND REVENUES APPE AL FOR THE ASSESSMENT YEAR 2001-02 IS PARTLY ALLOWED AND THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2002-03 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAR. 2012. SD SD (G.E.VEERABHADRAPPA) (D.K.AGARWAL) PRESIDENT JUDICIAL MEMBER MUMBAI DATED 30 TH MAR. 2012. SRL: ITA NO. 8387/MUM/2004 ITA NO.8554/MUM/2004 ITA NO.2662/MUM/2006 ITA NO. 3334/MUM/2006 68 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI