The ITO, Ward-4(1),, Ahmedabad v. Gujarat Paguthan Energy Corpn. Ltd.,, Ahmedabad

ITA 2839/AHD/2008 | 2005-2006
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 283920514 RSA 2008
Assessee PAN AAACG7999P
Bench Ahmedabad
Appeal Number ITA 2839/AHD/2008
Duration Of Justice 3 year(s) 7 month(s) 22 day(s)
Appellant The ITO, Ward-4(1),, Ahmedabad
Respondent Gujarat Paguthan Energy Corpn. Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-03-2012
Date Of Final Hearing 08-02-2012
Next Hearing Date 08-02-2012
Assessment Year 2005-2006
Appeal Filed On 08-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT JUDICIAL MEMBER AND SHRI A. K. GARODIA ACCOUNTANT MEMBER I.T.A. NO2839 / AHD/2008 (ASSESSMENT YEAR 2005-06) ITO WARD 4(1) AHMEDABAD VS. GUJARAT PAGUTHAN ENERGY CORPN. 6 TH FLOOR CHANAKYA BUILDING OFF ASHRAM ROAD AHMEDABAD C.O. NO.234/AHD/2008 (ASSESSMENT YEAR 2005-06) GUJARAT PAGUTHAN ENERGY CORPN. VS. ITO WARD 4(1) 6 TH FLOOR CHANAKYA BUILDING AHMEDBAAD OFF ASHRAM ROAD AHMEDABAD PAN/GIR NO. : AAACG7999P (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI KARTAR SINGH CIT DR RESPONDENT BY: SHRI S N SOPARKAR AR DATE OF HEARING: 08.02.2012 DATE OF PRONOUNCEMENT: 30.03.2012 O R D E R PER SHRI A. K. GARODIA AM:- THESE ARE CROSS APPEALS FILED BY HE REVENUE AND TH E ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDER OF LD . CIT(A) VIII AHMEDABAD DATED 13.05.2008 FOR THE ASSESSMENT YEAR 2005-06. BOTH W ERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 2 2. FIRST WE TAKE UP THE REVENUES APPEAL IN I.T.A. NO. 2839/AHD/2008:- 2.1 GROUND NO.1 IS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING TO GIVE CREDIT FOR IDS IN RESPECT OF INTE REST RECEIPTS AND BILL DISCOUNTING CHARGES WHEN THE CORRESPONDING IN COME HAS NOT BEEN OFFERED TO TAX. 2.1.1 BRIEF FACTS OF THE CASE TILL THE ASSESSMENT S TAGE ARE NOTED BY LD. CIT(A) IN PARA 4 OF HIS ORDER WHICH IS REPRODUCED B ELOW: GROUND NO.2 IS WITH REFERENCE TO CREDIT FOR ADVANC E TAX AND TDS NOT GIVEN BY THE A.O. THE APPELLANT HAS CONTENDED THAT IT HAD CLAIMED CREDIT FOR PRE-PAID TAXES AS UNDER: ADVANCE TAX RS.10 55 00 000/- TDS RS.16 30 15 973/- AS AGAINST THE ABOVE THE TOTAL CREDIT ALLOWED BY T HE A.O. IS OF RS.19 23 36 093/-. NO BREAK UP OF THE AMOUNT FOR WH ICH CREDIT HAS BEEN GIVEN HAS BEEN STATED IN THE DEMAND NOTICE OR IN TH E ASSESSMENT ORDER. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE A.O. HAD ASKED THE APPELLANT TO SUBMIT RECONCILIATION IN RESPECT OF IN TEREST RECEIPT AS PER IDS CERTIFICATE WITH THE AMOUNTS CREDITED AS INCOME IN THE BOOKS. THE APPELLANT PROVIDED DETAILS ON THE BASIS OF WHICH TH E A.O. OBSERVED THAT IN THE FOLLOWING CASES THOUGH THE CLAIM FOR IDS HAS BE EN MADE IN F.Y.2004- 05 CORRESPONDING INCOME HAS NOT BEEN SHOWN/OFFERED FOR TAXATION. NAME OF THE PARTY GROSS PAYMENT RECEIVED AS PER TDS CERTIFICATE(RS.) TDS AMOUNT AMOUNT CREDITED IN P & L ACCOUNT (RS.) DIFFERENCE (RS.) BANK OF INDIA 22264703 5087066 19410637 2854066 DENA BANK 17568 3602 7396 10172 BANK OF BARODA 22074693 4590178 21908255 166438 I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 3 IT WAS FURTHER OBSERVED BY THE A.O. THAT IN RESPECT OF FOLLOWING PAYMENTS THE TDS CREDIT HAS BEEN CLAIMED ON ACCOUNT OF TAX D EDUCTED AT SOURCE FROM DISCOUNTING CHARGES RECEIVED FROM GEB BUT NO S UCH INCOME WAS ACCOUNTED IN THE F.Y. 2004-05. GROSS PAYMENT RECEIVED AS PER TDS CERTIFICATE (RS) TDS AMOUNT (RS) DATE OF DEPOSIT INTO GOVT. A/C. 12304686 2583984 17.05.2005 5116636 10744994 07.04.2005 10807399 2269554 17.05.2005 2111532 443422 17.05.2005 TAX EACH YEAR 30481647 640146 17.05.2005 64356026 13514765 01.01.2005 TOTAL 171227926 35957865 THE APPELLANT'S EXPLANATION HAS BEEN REFERRED TO IN PARA 3.3 OF THE ASSESSMENT ORDER. HOWEVER THE SAME WAS NOT ACCEPTE D BY THE A.O. BY OBSERVING THAT AS PER THE PROVISIONS OF SECTION 199 OF THE I.T. ACT THE TDS CREDIT CAN BE ALLOWED TO THE APPELLANT IN ANY RELEV ANT ASSESSMENT YEAR IN WHICH THE CORRESPONDING INCOME HAS BEEN OFFERED FOR TAXATION. HE HAS OBSERVED THAT IN THE APPELLANT'S CASE FOR THE PART OF THE TDS CREDIT CLAIMED BY THE APPELLANT THE INCOME HAS NOT BEEN OFFERED I N F.Y. 2004-05 AND ACCORDINGLY THE CREDIT FOR SUCH TDS AMOUNT CANNOT B E GIVEN IN F.Y. 2004-05 FOR WHICH CORRESPONDING INCOME HAS NOT BEEN OFFERED FOR TAXATION. IT IS FURTHER STATED THAT IN RESPECT OF D ISCOUNTING CHARGES RECEIVED FROM GEB SUCH DISCOUNTING CHARGES HAVE BEEN RECEIVE D AS REIMBURSEMENT FROM GEB AND NEITHER THE INCOME NOR T HE EXPENDITURE RELATING TO THE SAME HAS BEEN RECOGNIZED BY THE APP ELLANT IN ITS BOOKS OF ACCOUNTS AND THEREFORE CREDIT TO TDS PERTAINING T O THE SAME CANNOT BE GIVEN. THUS WHERE THE INCOME HAS NOT BEEN OFFERED I N F.Y. 2004-05 TDS CREDIT WAS NOT GIVEN. 2.1.2 BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 4 CREDIT AND DEBITS ARE SET OFF AND IN THE P & L ACCO UNT BOTH ARE NOT REFLECTED BUT THE SAME ARE DULY CREDITED IN THE BOO KS AND AT THE SAME TIME AND CORRESPONDING DEBIT FOR THE CHARGE RECOVERED BY THE BANK FROM THE ASSESSEE IS ALSO ENTERED IN THE BOOKS. ON THIS BAS IS IT WAS HELD BY THE LD. CIT(A) THAT THERE IS NO JUSTIFICATION FOR NOT ALLOW ING THE CREDIT FOR THE TDS AND HE DIRECTED THE A.O. TO VERIFY THE ENTRIES AS REFERRED TO BY CIT(A) AND TO GRANT CREDIT FOR THE TDS FOR THE CORR ESPONDING AMOUNT. NOW THE REVENUE IS IN APPEAL BEFORE US. 2.1.3 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSM ENT ORDER WHEREAS THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION RENDERED I N THE CASE OF ESCORTS LTD. VS DCIT AS REPORTED IN 15 SOT 368 (DEL.). 2.1.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE DECISION CITED BY THE LD. A.R. OF THE ASSESSEE. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 4.2 OF HIS O RDER WHICH IS REPRODUCED BELOW: 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY. ON GOING THROUGH THE ASSESSMENT ORDER AND THE ABOVE EX PLANATION GIVEN BY THE APPELLANT WHICH WAS ALSO GIVEN TO THE A.O. IT IS NOTICED THAT IT IS NOT DISPUTE THAT SO FAR INTER EST IS CONCERNED THE INCOME AS PER CERTIFICATE IS DULY ACCOUNTED FOR LI THE BOOKS OF ACCOUNTS OF THE APPELLANT OVER A PERIOD OF TWO YEAR S I.E. F.Y. 2003- 04 AND 2004-05. THE DIFFERENCE IN THE INCOME ACCOUN TED FOR IN THE P & L ACCOUNT FOR THIS YEAR AND THE INCOME AS PER T DS CERTIFICATE IS MAINLY FOR THE REASON THAT THE APPELLANT ACCOUNT S FOR INCOME UP TO THE END OF THE RELEVANT F.Y. WHEREAS THE BANK IN THEIR BOOKS ACCOUNTS INTEREST AND GIVES CREDIT FOR THE PERIOD U P TO A CUT OFF DATE WHICH IS FIXED AS PER THEIR CONVENIENCE. THEREFORE FOR THE INTERVENING PERIOD THE BANK GIVES CREDIT IN THE SUB SEQUENT YEAR ALONG WITH CREDIT FOR INTEREST FOR THE CURRENT PERI OD. THUS IT IS NOT THE CASE THAT THE INCOME HAS NOT BEEN CREDITED IN T HE BOOKS. THEREFORE CONSIDERING THE RATIO OF THE DECISION OF THE IT AT DELHI I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 5 IN THE CASE OF ESCORTS LTD. REFERRED TO ABOVE THE A.O. IS DIRECTED TO GRANT CREDIT TO TDS FROM INTEREST AS CLAIMED. IN SO FAR AS THE CREDIT FOR BILL DISCOUNTING CHARGES RECOVERED IS CONCERNED THE A.O.'S STAND IS THAT THE APPELLANT HAS NOT RECOGNIZED RECE IPT AS WELL AS EXPENDITURE IN THE BOOKS OF ACCOUNTS. HOWEVER ON TH E OTHER HAND THE APPELLANT HAS EXPLAINED THAT FIRST IT IS PAYING DISCOUNTING CHARGES TO BANK FOR WHICH NECESSARY ENTRIES HAVE BE EN MADE FOR THE DEBIT OF DISCOUNTING CHARGES. THE SAME ARE RECOVERE D BY DEBITING TO GEB AND AT THAT TIME CREDIT HAS BEEN GIVEN TO DI SCOUNTING CHARGES. THUS IT IS NOT CORRECT TO SAY THAT THE AMO UNT HAS NOT BEEN CREDITED IN THE BOOKS OF ACCOUNTS. THIS EXPLANATION OF THE APPELLANT IS TENABLE. THE APPELLANT HAS EXPLAINED THAT THE CR EDIT AND DEBIT ARE SET OFF AND THEREFORE IN THE P&L ACCOUNT BOTH ARE NOT REFLECTED OUT THE SAME IS DULY CREDITED IN THE BOOKS AND AT THE S AME TIME CORRESPONDING DEBIT FOR THE CHARGES RECOVERED BY TH E BANK FROM THE APPELLANT IS ALSO MADE IN THE BOOKS. IN THE CIRCUMS TANCES WHEN THE APPELLANT HAS CREDITED THIS AMOUNT IN THE ABOVE MAN NER AND FROM SUCH CREDIT TAX HAS BEEN DEDUCTED THERE IS NO JUST IFICATION FOR NOT ALLOWING CREDIT FOR THE SAME. THE A.O. IS DIRECTED TO VERIFY THE ENTRIES AS REFERRED ABOVE AND GRANT CREDIT FOR THE TDS FOR THE CORRESPONDING AMOUNT. 2.1.5 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A) WE FIND THAT IT IS NOTED BY HIM THAT INTEREST INCOME WAS ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OVER A PERIOD OF TWO YEARS I.E. FINANCIAL YEAR 2003-04 AND 2004- 05 RELEVANT TO ASSESSMENT YEAR 2004-05 AND 2005-06. BUT CREDIT FOR TDS WAS CLAIMED IN THE ASSESSMENT YEAR 2005-06 ALONE FO R THE ENTIRE AMOUNT OF TDS. IN THE LIGHT OF THESE FACTS WE NOW EXAMIN E THE APPLICABILITY OF THE TRIBUNAL DECISION CITED BY THE LD. A.R. AND FOL LOWED BY LD. CIT(A). IN THAT CASE THE FACTS WERE THAT THE INTEREST INCO ME WAS DULY DECLARED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR I.E. A SSESSMENT YEAR 2001-02 TO 2003-04 BUT TDS WAS DEDUCTED AND PAID BY THE DED UCTOR ON 29.03.2004 AND PRIOR TO 29.03.2004 NEITHER THE TAX WAS DEDUCTED NOR ANY AMOUNT WAS DEPOSITED IN THE GOVERNMENT TREASURY NOR ANY CERTIFICATE WAS ISSUED TO THE ASSESSEE IN RESPECT TO THE TAX ALLEGE D TO BE DEDUCTED AT I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 6 SOURCE. UNDER THESE FACTS IT WAS HELD BY THE TRIB UNAL IN THAT CASE THAT ONCE TAX IS DEDUCTED ON THE INCOME CREDITED BY THE ASSESSEE IN THE BOOKS AND REQUISITE CERTIFICATE IS ISSUED THEREAFTER BY T HE DEDUCTOR AFTER DEPOSIT OF TAX AMOUNT IN THE GOVERNMENT TREASURY THE ASSES SEE BECOMES ENTITLED FOR THE CREDIT OF SUCH TDS WHILE COMPUTING THE TAX LIABILITY FOR THE RELEVANT PERIOD. FROM THIS FINDING OF THE TRIBUNAL IN THAT CASE IT IS CLEAR THAT CREDIT FOR TDS IS TO BE ALLOWED IN THE RELEVAN T PERIOD TO WHICH INCOME IS RELATED AND THE YEAR IN WHICH THE INCOME IS DISCLOSED BY THE ASSESSEE EVEN IF TDS WAS DEDUCTED AFTERWARDS. AS PER THIS RATIO LAID DOWN BY THE TRIBUNAL IN THAT CASE THE ASSESSEE IS ELIGIBLE FOR CREDIT OF TDS TO THE EXTENT THE CORRESPONDING INCOME WAS DEC LARED BY THE ASSESSEE IN THE PRESENT YEAR AND FOR THAT PORTION O F INCOME WHICH WAS DECLARED BY THE ASSESSEE IN THE FINANCIAL YEAR 2003 -04 RELEVANT TO ASSESSMENT YEAR 2004-05 CREDIT FOR TDS CANNOT BE A LLOWED IN THE PRESENT YEAR ALTHOUGH THE SAME MAY BE CLAIMED IN ASSESSMENT YEAR 2004-05 AS PER LAW. HENCE ON THIS ASPECT WE FIND THAT THE O RDER OF LD. CIT(A) IS NOT SUSTAINABLE AND HENCE WE MODIFY THE SAME AND D IRECT THE A.O. TO ALLOW CREDIT OF TDS ON THIS INTEREST TO THE EXTENT INCOME WAS DECLARED IN THE PRESENT YEAR. 2.1.6 THE SECOND ASPECT INVOLVED IS REGARDING TDS ON BILL S DISCOUNTING CHARGES RECOVERED. ON THIS ASPECT THIS FINDING IS GIVEN BY LD. CIT(A) THAT CREDIT AND DEBIT ARE SET OFF AND THEREFORE IN THE P & L ACCOUNT BOTH ARE NOT REFLECTED. LD. D.R. COULD NOT CONTROVERT T HIS FINDING OF LD. CIT(A). HENCE ON THIS ASPECT THERE IS NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). THIS GROUND IS PARTLY ALLOWED AS DI SCUSSED ABOVE. 2.2 GROUND NO.2 IS AS UNDER: 2. THE LD.CLT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO DELETE THE ADJUSTMENT TO THE BOOK PROFIT MADE I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 7 BY THE ASSESSING OFFICER OF RS.5 95 72 169/- ON ACC OUNT OF PROVISION FOR DOUBTFUL DEBTS. 2.2.1 IT WAS SUBMITTED BY THE LD. D.R. OF THE REVEN UE THAT THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE RETROSPECTI VE AMENDMENT IN SECTION 115JB BY THE FINANCE (NO.2) ACT 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2001 AS PER WHICH CLAUSE (I) WAS INTROD UCED IN EXPLANATION (1) TO SECTION 115JB WHICH SAYS THAT INCOME AS PER P & L ACCOUNT SHOULD BE INCREASED BY THE AMOUNT SET ASIDE AS PROV ISION FOR DIMINISHING IN THE VALUE OF ANY ASSET. HE SUBMITTED THAT PROVI SIONS FOR BAD DEBT IS ALSO A PROVISION FOR DIMINUTION IN THE VALUE OF DEB T WHICH IS AN ASSET AND THEREFORE THE SAME HAS TO BE ADDED BACK AS PER THI S CLAUSE OF EXPLANATION (1) TO SECTION 115JB OF THE ACT. LD. A.R. SUPPORTE D THE ORDER OF LD. CIT(A). 2.2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. IN VIEW OF THE RETROSPECTIVELY AMENDED PROVISIONS OF SECTION 1 15JB WE REVERSE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE A.O. THIS GROUND OF THE REVENUE STANDS ALLOWED. 2.3 GROUND NO.3 IS AS UNDER: 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION OF RS.8 78 00 000/- ON ACCOUN T OF ACCRUED DPC ( DELAYED PAYMENT CHARGES)/INTEREST RECEIVABLE FROM GEB. 2.3.1 THE FACTS OF THIS ISSUE TILL THE ASSESSMENT S TAGE ARE NOTED BY LD. CIT(A) IN PARA 7 & 7.1 OF HIS ORDER WHICH ARE REPRO DUCED BELOW: 7. THE GROUND OF APPEAL NO.5.1 RELATES TO ADDITION OF RS.8 78 00 000/- MADE BY THE A.O. IN THE COMPUTATIO N OF TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT ON AC COUNT OF ACCRUED DPC I.E. DELAYED PAYMENT CHARGE OF INTEREST AND ALSO NOT GRANTING DEDUCTION U/S.80 1A WITH REFERENCE SUCH AD DITION. THIS ADDITION HAS BEEN DISCUSSED IN PARA 4 OF THE ASSESS MENT ORDER. THE I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 8 A.O. NOTICED THAT THE APPELLANT HAD NOT RECOGNIZED THE DELAYED PAYMENT CHARGES (DPC) RECEIVABLE FROM GEB THOUGH SI MILAR CHARGES WERE SHOWN IN THE EARLIER YEARS. THE APPELL ANT'S EXPLANATIONS IN THIS REGARD HAS BEEN REPRODUCED IN PARA 4.2 AND 4.4 OF THE ASSESSMENT ORDER. THE SAID EXPLANATIONS HAVE NOT BEEN ACCEPTED BY THE A.O. THE APPELLANT'S EXPLANATION BE FORE THE A.O. HAS BEEN SUMMARIZED AS UNDER: I) IN F.Y. 2003-04 DPC INCOME WAS BOOKED BAS ED ON THE FACT THAT GEB (NOW KNOWN AS GUVNL) HAD DEDUCTED TAX AT S OURCE ON SUCH CHARGES. HOWEVER THEREAFTER GEB HAD DISPUTED T HE LIABILITY FOR PAYMENT OF DPC ON THE GROUND THAT THE MATTER WA S REFERRED TO GOVT. OF GUJARAT AND COMMITTEE APPOINTED BY GOVT. W AS OF THE VIEW THAT NO DPC WAS PAYABLE. GEB HAD IN THE ABOVE CIRCUMSTANCES IN NOVEMBER 200 4 UNILATERALLY REVERSED THE ENTRIES OF DPC DEBITED BY THE APPELLANT IN ITS BOOKS FOR THE YEAR ENDED 31 SI MARCH 2004 AND DENIED TO ACCEPT ANY LIABILITY ON ACCOUNT OF DPC FOR THE F.Y. 2004-05. IN THE ABOVE CIRCUMSTANCES IT WAS EXPLAINED THAT TH ERE WAS NO INCOME ON ACCOUNT OF DPC FOR THE YEAR UNDER CONSIDE RATION. IT WAS ALSO EXPLAINED THAT THE APPELLANT WAS INFORM ED THAT THE GOVERNMENT OF GUJARAT HAD REVIEWED THE MATTER OF DP C CLAIM FOR ALL IPPS. AS PER THE FORMULA FINALLY WORKED OUT IN K ARCH 2007 IT WAS AGREED UPON THAT 100% WAIVER TO BE MADE BY ALL IPPS UPTO 31 ST MARCH 2000 40 % WAIVER TO BE MADE UPTO 31 ST MARCH 2005. NO WAIVER WITH EFFECT FROM 1 ST APRIL 2005. DPC RATE APPLICABLE FOR THE COMPUTATION TO BE WEIGHTED AVERAGE RATE OF WORKING CAPITAL OF THE CONCERNED 1PP OR GUV NL WHICHEVER IS LOWER W.E.F. FROM L ST APRIL 2005 ONWARDS TO BE 1% HIGHER THAN THE WEIGHTED AVERAGE INTEREST RATE OF W ORKING CAPITAL OF GUVNL OR CONCERNED IPP WHICHEVER IS LOWER. '' IT WAS EXPLAINED THAT THUS THERE WAS NO CERTAINTY O F DPC BEING PAID BY THE GEB PARTICULARLY WHEN THEY HAD REVERSED THE PREVIOUS ENTRIES. ON THE BASIS OF THE ABOVE EXPLANATION THE A.O. ARRI VED AT THE CONCLUSION THAT IN VIEW OF THE WAIVER DPC CHARGES ACCRUED FROM TIME TO TIME. HE THEREFORE PROPOSED TO MAKE AN AD DITION OF RS.8.78 CRORES. THE APPELLANT HAD AGAIN-GIVEN EXPLA NATION TO THE A.O. STATING THAT UP TO F.Y. 2003-04 DPC CHARGES WE RE NOT DISPUTED BY THE GEB BUT SUBSEQUENTLY THEY REVIEWED IT IN F.Y. 2004-05 AND DISPUTED THE VERY LIABILITY FOR PAYMENT OF DPC. EVEN I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 9 THEY HAD REVERSED THE ENTRY IN THEIR BOOKS FOR DPC UP TO MARCH 2004 AND FOR F.Y. 2004-05 THEY HAD TOTALLY DENIED T HE LIABILITY. HENCE THERE WAS NO INCOME AT ALL. IT WAS ALSO EXPL AINED THAT WITHOUT PREJUDICE TO THE SAID EXPLANATION EVEN IF ON THE BASIS OF FORMAL DECISION TAKEN IN MARCH 2007 THE AMOUNT OF D PC CHARGES COULD BE CALCULATED FOR THE YEAR IT WOULD AS UNDER : TIME PERIOD OF_DPC _ ADMITTED BY GUVNL (RS. CRORES) FOR THE PERIOD UP TO MARCH 2005 226.39 WAIVER AS PER AGREEMENT 90.56 NET RECEIVABLE 135.83 AMOUNT ALREADY ACCOUNTED AS INCOME UPTO MARCH 2004 217.83 BALANCE AMOUNT TO BE RECOGNIZED NIL THUS THE APPELLANT HAVING ALREADY ACCOUNTED MORE TH AN WHAT IS RECEIVABLE AS ABOVE THERE WAS NO QUESTION OF MAKIN G ANY ADDITION. THE APPELLANT IN THE ALTERNATIVE ALSO STATED BEFO RE THE A.O. THAT EVEN IF ANY ADDITION WAS MADE ON THIS ACCOUNT IT W AS DELAYED PAYMENT CHARGES FROM THE CUSTOMER AGAINST SALE AND THEREFORE IT SHOULD BE CONSIDERED AS ELIGIBLE FOR OF DEDUCTION U /S.80 1A. RELIANCE WAS PLACED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF NIRMA LTD. 283 ITR 402. ; 7.1 THE A O. HAS NOT ACCEPTED THE EXPLANATION OF T HE APPELLANT. HIS MAIN CONTENTIONS ARE THAT THE APPELLANT IS FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING AND HENCE THE DPC CHARGES HAD. ALREADY ACCRUED IN F.Y. 2004-05 AND WAIVER OF THE SAME IN F .Y. 2006-07 WILL NOT HAVE ANY CONSEQUENCE IN RESPECT OF ACCRUAL . IT IS STATED THAT WAIVER OF ANY INCOME AFTER THE CLOSE OF THE YEAR WI LL M/. HAVE ANY CONSEQUENCE IN RESPECT OF ACCRUAL OF INCOME. IT IS ALSO STATED BY THE A.O. THAT DPC CHARGES HAD ALREADY ACCRUED IN THE YE AR AND HENCE AS PER THE AGREEMENT REACHED BETWEEN THE APPELLANT AND THE GEB THE APPELLANT HAD AGREED FOR WAIVER OF 40% OF SUCH ACCRUED DPC. IT IS FURTHER STATED BY HIM THAT WAIVER CAN BE OF A CCRUED INCOME ONLY AND THERE WAS NO QUESTION OF WAIVER OF ANY INC OME WHICH HAS NOT ACCRUED. HE HAS RELIED UPON THE FOLLOWING CASES : I) SARASWATI INSURANCE CO. LTD. VS. CIT 25 2 ITR 430 (DELHI) II) WESTERN INDIA DISTRIBUTION CO' LTD. VS. CI T 206 ITR 359 (BOM.) III) MORVI INDUSTRIES LTD. VS. CIT 82 ITR 83 5 (SC) I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 10 IV) CIT VS. HINDUSTAN MOTORS LTD. 202 ITR 839 (CAL.) V) GAPPUMAL KANHAIYALAL VS. CIT 117 ITR 78 (ALL) ACCORDINGLY THE A.O. TAXED RS.8.78 CRORES BEING TH E DIFFERENCE BETWEEN THE AMOUNT OF DPC ACCRUED TO THE APPELLANT UP TO MARCH 2005 OF RS.226.39 AND THE AMOUNT OF DPC ALREADY ACC OUNTED BY THE APPELLANT UP TO MARCH 2004. 2.3.2 BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A) WHO HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND NOW THE REVENUE IS IN APPEAL BEFORE US. 2.3.3 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSM ENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 2.3.4 WE HAVE CONSIDERED THE RIVAL SUBMISSION PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT IS NOTED BY THE LD. CIT(A) IN HIS ORDER THA T EVEN AS PER FINAL DECISION TAKEN IN THE MONTH OF MARCH 2007 THE AMOU NT OF DPC CHARGES COULD BE CALCULATED UP TO MARCH 2005 AT RS.226.39 C RORES OUT OF WHICH WAIVER IS ALLOWED AS PER THE AGREEMENT TO THE EXTEN T OF RS.90.56 CRORES AND HENCE THE NET RECEIVABLE AMOUNT OF DPC CHARGE UP TO 31.03.2005 WAS ONLY RS.135.83 CRORES AND THE AMOUNT ALREADY AC COUNTED FOR AS INCOME UP TO MARCH 2004 WAS MORE THAN THIS AMOUNT I .E. RS.217.83 CRORES AND THEREFORE THERE IS NO FURTHER AMOUNT T O BE RECOGNIZED AS INCOME IN THE PRESENT YEAR. IN THE LIGHT OF THESE FACTS WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED F OR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE S TANDS REJECTED. 2.4 GROUND NO.4 IS AS UNDER: 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.1 16 64 000/- BEIN G MISC. EXPENSES WRITTEN OFF. I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 11 2.4.1 THE BRIEF FACTS OF THIS ISSUE TILL THE ASSESS MENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 8 OF HIS ORDER WHICH ARE REPRODU CED BELOW: 8. THE GROUND OF APPEAL IN PARA 5.2 IS THAT THE A. O. HAS ERRED IN NOT ALLOWING DEDUCTION OF RS. 1 16 64 000/- BEING M ISCELLANEOUS EXPENSES WRITTEN OFF AND FURTHER ERRED IN NOT COVER ING IT UNDER THE PROVISIONS OF SEC.8OIA. IN PARA 5 OF THE ASSESSMENT ORDER THE A.O. HAS STATED THAT THE APPELLANT HAD EXPLAINED BEFORE HIM THAT MAJOR MAINTENANCE EXPENSES WERE INCURRED IN YEAR ENDING M ARCH 2003 AND IT WAS EXPECTED TO DERIVE BENEFIT FOR NEXT 5 YE ARS. THEREFORE L/5 TH OF SUCH EXPENSES WAS DEBITED AS MISCELLANEOUS EXPE NSES IN EACH YEAR. THE APPELLANT CLAIMED SUCH LIABILITY ACC ORDINGLY ON THE BASIS OF THE TREATMENT GIVEN IN THE BOOKS. THE APPE LLANT RELIED UPON THE SUPREME COURT DECISION IN THE CASE OF MADRAS IN DUSTRIAL INVESTMENT CORPORATION REPORTED IN 225 ITR 802(SC). THE A.O. HAS NOT ACCEPTED THE CLAIM ON THE GROUND THAT THE A PPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE E XPENDITURE WAS INCURRED IN THE EARLIER YEAR AND IT WAS NOT REL ATED TO THIS YEAR SO THE SAID EXPENDITURE CAN BE ALLOWED IN THE YEAR IN WHICH IT WAS INCURRED AND THE APPELLANT HAS NOT SUBMITTED ANY PR OOF THAT LIABILITIES FOR THE SAID EXPENDITURE HAD CRYSTALLIZ ED DURING THE F.Y.2004-05. HENCE HE DISALLOWED THE SAID EXPENDIT URE. 2.4.2 BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A) IT WAS SUBMITTED TH AT FROM THE FIRST YEAR OF INCURRING SUCH EXPENDITURE 1/5 TH OF EXPENSES ARE BEING WRITTEN OFF AS DEFERRED EXPENSES IN EACH YEAR AND SUCH CLAIM WAS A CCEPTED BY THE DEPARTMENT IN THE PAST AND THEREFORE THERE WAS NO JUSTIFICATION FOR TAKING A DIFFERENT VIEW IN THIS MATTER IN THE PRESENT YEAR ESPECIALLY WHEN THE FACTS REMAIN THE SAME. LD. A.R. OF THE ASSESSEE PL ACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION AS REPORTED IN 22 5 ITR 802 (S.C.). LD. CIT(A) DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS THAT WHEN THIS CLAIM IS BASED ON THE PAST PRACTICE WHICH HAS NOT BEEN DENIED IN THE EARLIER YEAS BY THE DEPARTMENT AND THE FACTS BEING THE SAME THERE IS NO I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 12 JUSTIFICATION FOR NOT ALLOWING THE CLAIM. NOW THE REVENUE IS IN APPEAL BEFORE US. 2.4.3 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSM ENT ORDER. HE ALSO SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO T HE FILE OF THE A.O. TO EXAMINE AS TO WHAT WAS THE FACTS AND DECISION IN AS SESSMENT YEAR 2003-04 AND 2004-05. AS AGAINST THIS LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) AND HE ALSO SUBMITTED THAT THER E IS NO NEED TO SEND THE MATTER BACK TO THE FILE OF THE A.O. 2.4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT WAS THE SUBMISSION BY THE ASSESSEE BEFORE T HE A.O. THAT IN THE YEAR ENDED 31.03.2003 THE ASSESSEE COMPANY HAD SPENT MA JOR AMOUNT AND THE BENEFIT OF WHICH WAS EXPECTED TO BE DERIVED FOR NEX T FIVE YEARS AND THEREFORE IN THE BOOKS OF ACCOUNT THE SAME EXPEND ITURE WAS DEBITED TO MISCELLANEOUS EXPENSES AND 1/5 TH OF THE SAME I.E. RS.116.64 LACS IS WRITTEN OFF EVERY YEAR. THERE IS NOTHING ON RECOR D IN THIS REGARD AS TO WHETHER IN THE ASSESSMENT YEAR 2003-04 FULL DEDUCT ION WAS ALLOWED OR ONLY 1/5 TH DEDUCTION WAS ALLOWED IN THAT YEAR. IT MAY BE TH ERE THAT IN THE BOOKS OF ACCOUNT THE ASSESSEE HAS DEBITED ONLY 1/5 TH OF THE AMOUNT IN THAT YEAR BUT IN THE COMPUTATION OF INCOME THE ENTIRE A MOUNT CAN BE CLAIMED AS DEDUCTION AND THE SAME MIGHT HAVE BEEN ALLOWED I N THAT YEAR TO THE EXTENT OF 100%. WITHOUT EXAMINING THIS ASPECT ALL OWING ANY FURTHER DEDUCTION IN THE PRESENT YEAR WILL RESULT INTO ALLO WING THE DOUBLE DEDUCTION. NO FINDING IS GIVEN BY LD. CIT(A) AS TO WHETHER HE HAD EXAMINED THE PAST RECORD PARTICULARLY THE ASSESSMEN T RECORD OF ASSESSMENT YEAR 2003-04 AS TO WHETHER ONLY 1/5 TH DEDUCTION WAS ALLOWED IN THAT YEAR AND HENCE WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE TO RESTORE BACK THIS MATTER TO THE FILE OF THE A.O. FOR A FRES H DECISION. IF IN THESE TWO I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 13 YEARS I.E. ASSESSMENT YEARS 2003-04 AND 2004-05 O NLY 1/5 TH OF THE EXPENDITURE ON THIS ACCOUNT WAS ALLOWED THEN NO DI SALLOWANCE SHOULD BE MADE IN THE PRESENT YEAR. THERE IS AN ALTERNATIVE CONTENTION OF THE ASSESSEE THAT EVEN IF NO DEDUCTION IS ALLOWED ON TH IS ACCOUNT IN THE PRESENT YEAR CORRESPONDING INCREASE IN THE INCOME SHOULD BE CONSIDERED FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 80IA. WE DIRECT THE A.O. TO CONSIDER THIS ASPECT ALSO IF IT IS ULTIMATELY HELD BY HIM THAT NO DEDUCTION IS ALLOWABLE IN THE PRESENT YEAR ON ACCOUNT OF 1/5 TH OF THE MISCELLANEOUS EXPENSES I.E. RS.116.64 LACS. THE A.O. SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE RE VENUE IS ALLOWED FOR STATISTICAL PURPOSES. 2.5 GROUND NO. 5 IS AS UNDER: 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.17 04 831 /- MADE U/S.6 8 OF THE ACT. 2.5.1 THE BRIEF FACTS OF THE CASE ARE THAT IT IS NO TED BY THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS RECEIVED UNS ECURED LOANS/DEPOSITS FROM 27 PERSONS IN THE PRESENT YEAR TO THE EXTENT O F RS.18 04 831/-. THE A.O. ASKED THE ASSESSEE TO SUBMIT COMPLETE NAMES AN D ADDRESSES OF THE ABOVE PARTIES ALONG WITH CONFIRMATION LETTER INCLUD ING THEIR INCOME TAX ASSESSMENT PARTICULARS. IT IS NOTED BY THE A.O. TH AT THE ASSESSEE COULD NOT SUBMIT THE NECESSARY CONFIRMATION LETTERS. WHEN TH E A.O. AGAIN ISSUED SHOW CAUSE NOTICE IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT THE INFORMATION CONTAINED IN THE TAX AUDIT REPORT I N CLAUSE 24 OF THE FORM 3CD RELATES TO RETENTION MONEY DEDUCTED FROM THE PA YMENTS TO CREDITORS AND EARNEST MONEY DEPOSITS TAKEN FROM VENDORS AND T HESE ARE NOT UNSECURED LOANS. ASSESSEE PROVIDED PAN AND CONFIRM ATION OF SOME OF THE PARTIES. THE A.O. WAS NOT SATISFIED AND EXCEPT ONE PARTY I.E. M/S. I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 14 RADHA KRISHNA HOSPITALITIES SERVICES HE HELD THAT THE ASSESSEE COULD NOT ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THES E PARTIES AS WELL AS GENUINENESS OF TRANSACTIONS AND BY INVOKING THE PRO VISIONS OF SECTION 68 HE MADE ADDITION OF RS.17 .04 831/-. BEING AGGRIEV ED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT THE ASS ESSEE HAS FILED DETAILS OF NAMES AND ADDRESSES PAN OF THE CREDITORS BEFORE TH E A.O. AND HAS FILED CONFIRMATION BEFORE HIM AND THEREFORE THE GENUINE NESS OF THE PARTIES AND TRANSACTION IS ESTABLISHED AND THE ADDITION MADE DE SERVES TO BE DELETED. NOW THE REVENUE IS IN APPEAL BEFORE US. 2.5.2 IT IS SUBMITTED BY THE LD. D.R. OF THE REVENU E THAT NO REMAND REPORT WAS OBTAINED FROM THE A.O. AND THERE IS NO FINDING GIVEN BY LD. CIT(A) THAT CREDITWORTHINESS WAS ESTABLISHED AND HENCE TH E ORDER OF LD. CIT(A) SHOULD BE REVERSED AND THAT OF THE A.O. SHOULD BE R ESTORED. LD. A.R. OF THE ASSESSEE SPORTED THE ORDER OF LD. CIT(A). 2.5.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT AN ADDITION WAS MADE BY THE A.O. ON THE BASIS THAT ALL THE THREE INGREDIENTS OF SECTION 68 I.E. IDENTITY CREDITWORT HINESS OF THE CREDITORS AND THE GENUINENESS OF TRANSACTION WERE NOT ESTABLI SHED. THE FINDING GIVEN BY LD. CIT(A) IS REGARDING GENUINENESS OF PAR TIES AND TRANSACTION IN VIEW OF THE FACT THAT THE ASSESSEE HAS GIVEN COM PLETE NAMES ADDRESSES AND PAN OF THE CREDITORS. IT MAY ALSO BE ACCEPTED THAT THE IDENTITY IS ALSO ESTABLISHED. BUT THERE IS NO WHISPER ABOUT THE CRE DITWORTHINESS OF THESE PARTIES. UNDER THESE FACTS WE FEEL THAT THE ORDER OF LD. CIT(A) IS NOT SUSTAINABLE BECAUSE EVEN BEFORE US NOTHING HAS BEE N PRODUCED TO SHOW THE CREDITWORTHINESS OF THESE PARTIES AND HENCE WE REVERSE THE ORDER OF I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 15 LD. CIT(A) AND RESTORE THAT OF THE A.O. THIS GROU ND OF THE REVENUE IS ALLWOED. 2.6 GROUND NO.6 IS AS UNDER: 6. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO DEDUCT THE FIGUR E OF INTEREST FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S. 80!A ONLY AF TER NETTING OFF INTEREST EXPENDITURE AGAINST INTEREST INCOME. 2.6.1 THE BRIEF FACTS TILL THE ASSESSMENT STAGE ON THIS ISSUE ARE NOTED BY LD. CIT(A) IN PARA 10 OF HIS ORDER WHICH IS REPRODU CED BELOW: THE GROUND OF APPEAL IN PARA 5.4 IS AGAINST REJECT ION OF CLAIM U/S 80-IA WITH REFERENCE TO THE FOLLOWING INCOMES: (A) INTEREST INCOME RS.45 52 33 000/- (B) MISCELLANEOUS INCOME RS. 4 57 000/- (C) LIABILITIES WRITTEN BACK AS NO LONGER REQUIRED RS. 5 83 000/- TOTAL RS. 45 62 73 0007- IT IS OBSERVED BY THE A.O. THAT THE ABOVE INCOMES W ERE NOT INCOME OR PROFIT DERIVED FROM THE ELIGIBLE INDUSTRIAL UNDE RTAKING. THE APPELLANT EXPLAINED THAT IN A.Y. 2004-05 CLAIM OF T HE APPELLANT REGARDING INTEREST INCOME WAS ALLOWED BY THE CIT(AP PEALS). OTHER TWO ITEMS BEING MISCELLANEOUS INCOME AND LIABILITY NO LONGER REQUIRED THE APPELLANT EXPLAINED THAT THE AMOUNT OF RS.4.57 LACS REPRESENTED SCRAP SALES GENERATED FROM OPERATION AN D WAS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THE LIABILITY NO L ONGER REQUIRED REPRESENTED EXCESS PROVISION MADE FOR OPERATING EXP ENSES AND FOR LIABILITY MADE IN THE PAST. THEREFORE BOTH THESE I TEMS ARE FORMING PART OF THE INCOME OF THE INDUSTRIAL UNDERTAKING. T HE A.O. HAS NOT ACCEPTED THE ABOVE CLAIM ON THE GROUND THAT THE INC OME IS NOT DERIVED FROM THE UNDERTAKING ELIGIBLE FOR DEDUCTION AND IN THIS CONNECTION HE RELIED UPON THE FOLLOWING CASES: 1. HINDUSTAN LEVER LTD. VS.CIT-239 ITR297(SC) 2. STERLING FOODS VS. CIT -237 ITR 579(SC) 3. PANDIAN CHEMICALS LTD. VS. CIT -262 ITR 278 (SC) 2.6.2 BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A)WHO HAS DECIDED THIS ISSUE REGARDING INTE REST PART ON THIS BASIS I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 16 THAT AS PER THE ORDER OF LD. CIT(A) FOR THE ASSESSM ENT YEAR 2004-05 DATED 26.02.2007 THE A.O. HAS TO CONSIDER THE INTEREST I NCOME AS WELL AS INTEREST EXPENDITURE WHICH IS CONNECTED WITH THE SA ME AND REWORK THE DEDUCTION U/S 80IA AS MAY BE NECESSARY. IT GOES TO SHOW THAT TO THE EXTENT THE ASSESSEE IS ELIGIBLE TO ESTABLISH THE NE XUS OF INTEREST EXPENDITURE WITH INTEREST INCOME BY SHOWING THAT TH E INTEREST EXPENDITURE WAS INCURRED FOR EARNING INTEREST INCOME NETTING H AS TO BE ALLWOED AND ONLY SUCH NET INTEREST INCOME HAS TO BE EXCLUDED FR OM BUSINESS PROFITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION ALLOWABLE U /S 80IA. ON THIS ASPECT WE DO NOT FIND ANY REASON TO INTERFERE IN T HE ORDER OF LD. CIT(A). 2.6.3 REGARDING THE REMAINING ASPECT I.E. SCRAP SAL E AND PROVISION NO LONGER REQUIRED WRITTEN BACK IT WAS HELD BY THE LD . CIT(A) THAT THE SAME ARE NOT INCOME DERIVED FORM INDUSTRIAL UNDERTAKING AND HE CONFIRMED THE ASSESSMENT ORDER ON THIS ASPECT. BEFORE US REVEN UE HAS RAISED ONLY ONE ASPECT I.E. REGARDING ALLOWING OF NETTING OF INTERE ST INCOME WHICH WE HAVE APPROVED AND THEREFORE THIS GROUND OF THE REVENUE IS ALSO REJECTED. 2.7 GROUNDS NO.7 & 8 ARE GENERAL. 2.8 IN THE RESULT THE APPEAL OF THE REVENUE STANDS PARTLY ALLWOED IN THE TERMS INDICATED ABOVE. 3. NOW WE TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTI ON ARE AS UNDER: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E RESPONDENT'S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN TREAT ING THE FIRST GROUND OF THE RESPONDENT'S APPEAL BEFORE HIM CHALLE NGING THE VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HI M AS BEING ONLY GENERAL IN NATURE AND ON THAT BASIS IN NOT AD JUDICATING UPON THE SAME. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN REJEC TING GROUND NO. 4 OF THE RESPONDENT'S APPEAL BEFORE HIM CHALLENGING THE VERY LEVY OF INTEREST U/S. 234B ON THE GROUND THAT THE RESPON DENT WHOSE I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 17 LIABILITY TO TAX UNDER THE ASSESSMENT ORDER IMPUGNE D BEFORE HIM HAD ARISEN NOT UNDER THE NORMAL PROVISIONS OF COMPU TATION OF TOTAL INCOME BUT UNDER THE PROVISIONS OF MINIMUM ALTERNAT E TAX CONTAINED IN SECTION 115JB CANNOT BE VISITED WITH THE LEVY. HE OUGHT TO HAVE APPRECIATED INTER ALIA (A) THAT THERE COULD BE NO QUESTION FOR UPHOLD ING SUCH LEVY AFTER THE SUPREME COURT HAD RENDERED ITS DECIS ION IN CIT V. KWALITY BISCUITS LTD.'S CASE (284 ITR 434) DISMISSI NG THE DEPARTMENT'S APPEAL AGAINST THE DECISION OF THE KAR NATAKA HIGH COURT IN KWALITY BISCUITS LTD. V. CIT(243 ITR 519) AND (B) THAT IT WAS NOT AS IF THE SUPREME COURT HAD MERELY REFUSED TO GRANT THE DEPARTMENT LEAVE TO APPEAL AGA INST THE HIGH COURT'S ORDER; THAT WHAT THE SUPREME COURT HAD DONE WAS TO DISMISS THE DEPARTMENT'S APPEAL AGAINST THE HIGH CO URT'S ORDER. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN NOT A DJUDICATING UPON THE RESPONDENT'S ALTERNATIVE PLEA BEFORE HIM IN RES PECT OF THE ADDITION OF RS.8 78 00 000 ON ACCOUNT OF DISCOUNTIN G CHARGES SOUGHT TO BE RECOVERED FROM THE GUJARAT ELECTRICITY BOARD BUT DISPUTED AND NOT ACCEPTED BY IT TO THE EFFECT THAT THE ADDITION EVEN IF IT WERE SUSTAINED WAS ELIGIBLE TO THE DEDUCTION UNDER SECTION 80- IA ON THE GROUND THAT HE HAD ORDERED FOR THE DELET ION OF THE ADDITION ITSELF. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN NOT A DJUDICATING UPON THE RESPONDENT'S ALTERNATIVE PLEA BEFORE HIM IN RES PECT OF THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF MISCELLANEOUS EXPENSES RS. 1 16 64 000 TO THE EFFECT THAT THE AD DITION EVEN IF IT WERE SUSTAINED WAS ELIGIBLE TO THE DEDUCTION UNDER SECTION 80-IA ON THE GROUND THAT HE HAD ORDERED FOR THE DELETION OF THE ADDITION ITSELF. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOL DING THE LEARNED ASSESSING OFFICER'S ACTION OF EXCLUDING MISCELLANEO US INCOME REPRESENTING SALE OF SCRAP RS. 4 57 000 AND WRITE B ACK OF LIABILITIES NO LONGER REQUIRED RS.5 83 000 FROM INC OME ELIGIBLE TO THE DEDUCTION UNDER SECTION 80-IA. HE OUGHT TO HAVE APPRECIATED INTER ALIA THAT BOTH THESE ITEMS WERE DIRECTLY REL ATED TO THE BUSINESS OF THE RESPONDENT'S UNDERTAKING WHOSE PROFITS WERE ELIGIBLE TO THE DEDUCTION UNDER SECTION 80-IA AND AS SUCH THEY WER E BOTH ELIGIBLE TO SUCH DEDUCTION. I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 18 6. THE RESPONDENT CRAVES LEAVE TO ADD ALTER AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS-OBJECTIONS EITHER BEFORE OR AT THE TIME OF HEARING OF THE CROSS-OBJECTIONS. 3.1 GROUND NO.1 OF THE C.O. WAS NOT PRESSED BY THE LD. A.R. OF THE ASSESSEE AND ACCORDINGLY THE SAME IS REJECTED AS N OT PRESSED. 3.2 REGARDING GROUND NO.2 IT WAS FAIRLY CONCEDED B Y THE LD. COUNSEL FOR THE ASSESSEE THAT THIS ISSUE IS NOW COVERED AGA INST THE ASSESSEE BY THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF JCIT VS. ROLTA INDIA LTD. AS REPORTED ION 330 ITR 470. RESPECTFUL LY FOLLOWING THIS JUDGMENT OF HONBLE APEX COURT GROUND NO.2 OF THE ASSESSEES CROSS OBJECTION IS REJECTED. 3.3 REGARDING GROUND NO.3 OF THE ASSESSEES C.O. I T WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS ISSUE IS CONNECTED WITH GROUND NO.3 OF THE REVENUES APPEAL WHICH WE HAVE ALREADY DECIDED IN FAVOUR OF THE ASSESSEE AND THEREFORE GROUND NO.3 OF ASSE SSEES C.O. HAS BECOME INFRUCTUOUS AND ACCORDINGLY REJECTED AS INFR UCTUOUS. 3.4 GROUND NO.4 OF THE ASSESSEES C.O. IS CONNECTED WITH GROUND NO.4 OF THE REVENUES APPEAL WHICH WE HAVE ALREADY DECID ED AND DIRECTED THE A.O. TO CONSIDER THIS ALTERNATIVE CLAIM OF THE ASSE SSEE REGARDING ALLOWABILITY OF DEDUCTION U/S 80IA IF IT IS ULTIMAT ELY HELD THAT NO DEDUCTION IS ALLOWABLE OF MISCELLANEOUS EXPENSES WR ITTEN OF RS.116.64 LACS. HENCE THIS GROUND OF THE ASSESSEES C.O. ST ANDS ALLWOED FOR STATISTICAL PURPOSES. 3.5 REGARDING GROUND NO.5 OF THE ASSESSEES C.O. N O SERIOUS ARGUMENT WAS MADE BY THE LD. A.R. OF THE ASSESSEE AND HENCE THE SAME IS REJECTED AS NOT PRESSED. 3.6 GROUND NO.6 IS GENERAL. 4. IN THE RESULT CROSS OBJECTION OF THE ASSESSEE S TANDS PARTLY ALLOWED. I.T.A.NO. 2839/AHD/2008 C.O. NO.234/AHD/2008 19 5. IN THE COMBINED RESULT APPEAL OF THE REVENUE AN D THE CROSS OBJECTION OF THE ASSESSEE ARE PARTLY ALLOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR AHMEDABAD BY ORDER 6. THE GUARD FILE AR ITAT AHMEDABAD 1. DATE OF DICTATION 21/3 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/3/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 30/3 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30/3 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/3/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .