DCIT, New Delhi v. M/s. Central Warehousing Corp., New Delhi

ITA 3439/DEL/2014 | 2007-2008
Pronouncement Date: 31-05-2021 | Result: Partly Allowed

Appeal Details

RSA Number 343920114 RSA 2014
Assessee PAN AAACC1206D
Bench Delhi
Appeal Number ITA 3439/DEL/2014
Duration Of Justice 6 year(s) 11 month(s) 25 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Central Warehousing Corp., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2021
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-05-2021
Date Of Final Hearing 04-07-2017
Next Hearing Date 04-07-2017
First Hearing Date 04-07-2017
Assessment Year 2007-2008
Appeal Filed On 05-06-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI O.P. KANT ACCOUNTANTMEMBER AND SHRI K.N. CHARY JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.3885/DEL./2011 ASSESSMENT YEAR: 2006-07 CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI VS. ACIT CIRCLE-3(1) C.R. BUILDING NEW DELHI PAN :AAACC1206D (APPELLANT) (RESPONDENT) AND ITA NO.3942/DEL./2011 ASSESSMENT YEAR: 2006-07 DCIT CIRCLE-3(1) C.R. BUILDING NEW DELHI VS. CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI PAN :AAACC1206D (APPELLANT) (RESPONDENT) AND ITA NO.3439/DEL./2014 ASSESSMENT YEAR: 2007-08 DCIT CIRCLE-3(1) NEW DELHI VS. CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI PAN :AAACC1206D ( APPELLANT ) (RESPONDENT) 2 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 AND C.O. NO.93/DEL./2015 [IN ITA NO.3439/DEL./2014] ASSESSMENT YEAR: 2007-08 CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI VS. DCIT COMPANY CIRCLE-3(1) NEW DELHI PAN :AAACC1206D (APPELLANT) (RESPONDENT) AND ITA NO.3440/DEL./2014 ASSESSMENT YEAR: 2008-09 DCIT CIRCLE-3(1) NEW DELHI VS. CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI PAN :AAACC1206D ( APPELLANT ) (RESPONDENT) AND C.O. NO.94/DEL./2015 [IN ITA NO.3440/DEL./2014] ASSESSMENT YEAR: 2008-09 CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI VS. DCIT COMPANY CIRCLE-3(1) NEW DELHI PAN :AAACC1206D ( APPELLANT ) (RESPONDENT) 3 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 AND ITA NO.2201/DEL./2014 ASSESSMENT YEAR: 2009-10 CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI VS. DCIT CIRCLE-3(1) NEW DELHI PAN :AAACC1206D (APPELLANT) (RESPONDENT) AND ITA NO.5784/DEL./2014 ASSESSMENT YEAR: 2010-11 DCIT CIRCLE-3(1) NEW DELHI VS. CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI PAN :AAACC1206D ( APPELLANT ) (RESPONDENT) AND C.O. NO.158/DEL./2015 [IN ITA NO.5784/DEL./2014] ASSESSMENT YEAR: 2010-11 CENTRAL WAREHOUSING CORPORATION WAREHOUSING BHAWAN 4/1 SIRI INSTITUTIONAL AREA HAUZ KHAS AUGUST KRANTI MARG NEW DELHI VS. DCIT COMPANY CIRCLE-3(1) NEW DELHI PAN :AAACC1206D ( APPELLANT ) (RESPONDENT) 4 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 ORDER PER O.P. KANT AM: THESE CROSS APPEALS/CROSS OBJECTIONS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS PASSE D BY THE LD. FIRST APPELLATE AUTHORITY IN THE CASE OF THE ASSESS EE I.E. THE CENTRAL WAREHOUSING CORPORATION. THE ISSUES INVOLVE D IN THESE APPEALS/CROSS OBJECTIONS ARE COMMON AND THEREFORE THESE WERE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS CONS OLIDATED ORDER FOR CONVENIENCE AND AVOID REPETITION OF FACTS. ITA NO. 3885/DEL./2011 & 3942/DEL./2011 2. FIRST WE TAKE UP APPEAL OF THE ASSESSEE (ITA NO. 3885/DEL/2011) AND CROSS APPEAL OF THE REVENUE (ITA NO. 3942/DEL/2011) FOR ASSESSMENT YEAR 2006-07. 3. THE ASSESSEE ORIGINALLY RAISED 14 GROUNDS IN ITS A PPEAL HOWEVER DURING THE COURSE OF THE HEARING THE ASSES SEE ON 31/03/2015 SUBMITTED SEVEN (7) CONDENSED/CONCISE G ROUNDS AS UNDER: 1. ORIGINAL GROUND NO. 1 TO 3 AND 13 & 14;- A. IT IS CONTENDED THAT NON ACCEPTANCE OF THE REVI SED RETURN FILED BY THE CORPORATION WITH IN THE TIME LIMIT PRESCRIBED U /S 139(5) IS UNLAWFUL. ASSESSEE BY SHRI S. KRISHNAN ADV. & SHRI V. RAJA KUMAR ADV. DEPARTMENT BY MS. NIDHI SRIVASTAVA CIT(DR) SHRI MAHESH THAKUR SR.DR DATE OF HEARING 06.04.2021 DATE OF PRONOUNCEMENT 31.05.2021 5 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 B. IT IS CONTENDED THAT THE CIT(APPEAL) HAS MADE W RONG CONCLUSION THAT THE REVISED RETURN SHOULD HAVE BEEN FILED BEFO RE THE COMPLETION OF THE PROCESSING U/S 143(1). 2. ORIGINAL GROUND NO.4 & 5:- A. IT IS CONTENDED THAT THE CIT(A) HAD ERRED IN NO T ACCEPTING THE CONTENTION OF THE APPELLANT WITH REGARD TO THE APPL ICABILITY OF PROVISIONS OF U/S 36(L)(XII) WHILE APPELLANT FULFIL LS ALL THE CONDITIONS LAID DOWN IN THIS SECTION AND ACCORDINGLY ELIGIBLE FOR DEDUCTION. 3. ORIGINAL GROUND NO. 6 TO 8:- A. IT IS CONTENDED THAT THE ASSESSING OFFICER HAS WRONGLY INVOKED SEC 14A R/W RULE 8D IN THE INSTANT CASE. THE ASSESS ING OFFICER HAS WRONGLY COMPUTED THE AMOUNT ALLOCABLE U/S 14A A S RS. 11327837/-BY INVOKING RULE 8D(2) ESPECIALLY WHEN T HE RULE 8D IS APPLICABLE ONLY FROM ASST. YEAR 2008-2009 AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOD REJ BOYCE. B. CIT(APPEAL) HAS ERRED IN RESTRICTING THE DISALL OWANCE TO 5% OF THE TOTAL EXEMPTED INCOME AND ERRED IN SUSTAINING AN AD DITION OF RS. 1908487/-. 4. ORIGINAL GROUND NO. 9 & 10:- A. IT IS CONTENDED THAT ADDITION ON ACCOUNT OF DEP RECIATION ON ASSETS COSTING UPTO 5000/- AS PER ACCOUNTING POLICY OF THE CORPORATION AMOUNTING TO RS. 14142259/- IS WRONG. B. IT IS CONTENDED THAT THIS AMOUNT HAS NO BEARING ON THE COMPUTATION OF THE INCOME FOR TAX PURPOSES SINCE TH E ENTIRE AMOUNT OF RS. 14142259/- HAS BEEN ADDED BACK TO THE PROFIT DISCLOSED AS PER BOOKS AND PROPER DEPRECIATION IN A CCORDANCE WITH SEC 32 HAD BEEN CLAIMED. 5. ORIGINAL GROUND NO. 11 :- IT IS CONTENDED THAT THE ASSESSING OFFICER HAS ERRED INNOT ALLOWING THE RELIEF CLAIMED BY THE CORPORATION ON ACCOUNT OF ITS SHARE OFINCOME FROM THE JOINT VENTUR E CFS AT LUDHIANA FOR THE YEARS 2003-2004 2004-2005 WHICH HAS BEEN TA XED TWICE I.E. ONCE WHILE FRAMING THE ASSESSMENT OF RESPECTIVE ASS T. YEARS AND THEN DURING THE CURRENT ASST YEAR WHEREIN THE AGGREGAT E AMOUNT FOR BOTH THESE YEARS CLUBBED WITH THE SHARE FOR 2005-2006 WA S ACCOUNTED FOR AND CONSEQUENTLY OFFERED FOR TAX BY THE BY THE APPE LLANT CORPORATION. 6. ORIGINAL GROUND NO. 12 :- IT IS CONTENDED THAT THE ASSESSING OFFICER HAS ERRED IN NOT ALLOWING THE CLAIM OF THE CORPORAT ION FOR RS. 88 14 00 000/- TOWARDS PROVISION MADE FOR POST - RE TIREMENT MEDICAL 6 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 BENEFITS IN PURSUANCE TO ACCOUNTING STANDARD NO. 15 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA DURING THE YEAR 2005-2006 THROUGH THE REVISED INCOME TAX RETURN AS THE LEGITI MATE BUSINESS EXPENDITURE SINCE THE SAME IS NOT A SUBJECT MATTER OF SECTION 43B OF THE IT ACT AND HAS TO BE ALLOWED IN THE YEAR OF ACCOUNT AL. 7 . ORIGINAL GROUND NOS. 15 TO 17 ARE GENERAL. 3.1 THE ASSESSEE ALSO SUBMITTED THREE ADDITIONAL GROUN DS ON 10/09/2012 AS FOLLOWS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE APPELLANT BEING A CORPORATION CREATED BY AN ACT OF PARLIAMENT COULD BE CONSTRUED TO BE A COMPANY FOR THE PURPOSES OF APPLY ING THE PROVISIONS OF SECTION 115JA OF THE IT ACT. 2 WHETHER BOTH ON THE FACTS AND ON LAW NON-SCHEDU LE VI COMPANIES ARE EXEMPT FROM THE PROVISIONS OF THE MIN IMUM ALTERNATE TAX (MAT) SINCE SUCH NON- SCHEDULE VI CO MPANIES ARE NOT REQUIRED UNDER THE PROVISO TO SECTION 211(2) OF THE COMPANIES ACT TO PREPARE THEIR PROFIT & LOSS ACCOUNT IN ACCOR DANCE WITH SCHEDULE VI OF THE COMPANIES ACT 1956. 3. WHETHER BOTH ON FACTS AND ON LAW FOR THE PURPOS E OF COMPUTING THE BOOK PROFIT UNDER SECTION 115JA OF THE INCOME T AX ACT THE PROFIT & LOSS ACCOUNT; PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE APPELLANTS REGULATORY ACT VIZ. THE WAREHOUS ING CORPORATIONS ACT 1962 READ WITH CENTRAL WAREHOUSIN G CORPORATION RULES 1963 AND CENTRAL WAREHOUSING COR PORATION (GENERAL REGULATIONS) 1965 SHALL BE TAKEN AS THE B ASIS FOR COMPUTING THE BOOK PROFIT UNDER SECTION 115JA OF TH E INCOME TAX ACT. 3.2 THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL ARE REPRODUCED AS UNDER: 1. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.40205550/- ON ACCOUNT OF DISALLOWANCE OF PROVISI ON FOR PRODUCTIVE LINK INCENTIVE IGNORING THAT THE ASSESSE E FAILED TO SUBSTANTIATE ITS CLAIM WITH ANY DOCUMENTARY EVIDENC E BEFORE THE ASSESSING OFFICER. 2. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN D ELETING ADDITION OF RS.6944300/- ON ACCOUNT OF CAPITALIZATION OF SLP DU NNAGE EXPENSES IGNORING THAT: A) BOTH THE DUNNAGES ARE USED FOR SAME PURPOSE I.E . TO PREVENT THE STORAGE FROM FLOOR SEEPAGE THEN HOW THE SPECIAL DUNNAGE (SLP) IS CAPITAL ASSET AND ORDINARY DUNNAGE IS REVENUE IN NATURE. 7 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 B) ON THE ISSUE OF CONSISTENCY RELIANCE IS PLACED O N THE HON'BLE SUPREME COURT IN THE CASE OF DWARKADAS KESA RDEO MORARKA VS CIT 441 1TR 529 AND IN JOINT FAMILY OF U DAYAN CHINUBHAI VS CIT 63 ITR 416 HAS DECIDED THAT EACH Y EARS ASSESSMENT IS SEPARATE FROM THAT OF EARLIER YEARS THEREFORE THE TAXING AUTHORITIES ARE NOT BOUND TO FOLLOW THE DECI SION TAKEN IN EARLIER YEARS. 3. THE LD.CIT(A) HAS ERRED ON FACTS IN LAW IN DELET ING ADDITION OF RS.716955/- ON ACCOUNT OF DISALLOWANCE OF QUALITY I MPROVEMENT EXPENSES IGNORING THAT SUCH EXPENDITURE ARE INCURRE D BY THE ASSESSEE FOR IMPROVING THE WORKING ENVIRONMENT AND EFFICIENCY OF ITS EMPLOYEES AND THESE EXPENSES ARE PROVIDING BENE FITS OF ENDURING NATURE OF THE ASSESSEE COMPANY. 4. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.40754700/- ON ACCOUNT OF DISALLOWANCE OF UNABSOR BED ENGINEERING OVERHEADS EXPENSES IGNORING THAT THE AS SESSEE FAILED TO PROVIDE DOCUMENTARY EVIDENCE BEFORE THE AO AND A LSO BENEFIT OF ENDURING NATURE WAS DRAWN BY THE ASSESSEE ON THIS A CCOUNT. 5. THELD.CIT(A) HAS ERRED ON FACTS IN LAW IN DELETI NG THE DISALLOWANCE U/S 14A READ WITHRULE 8D UPTO RS.94193 50/- AS AGAINST TOTAL DISALLOWANCE OF RS.L 1327837/-. LD.CI T(A) HAS FAILED TO TAKE COGNIZANCE OF SUB-SECTION (3) OF SECTION 14 A WHICH SPECIFIES THAT EVEN IF THE ASSESSEE MAKES A CLAIM T HAT NO EXPENDITURE HAS BEEN INCURRED IN EARNING THE EXEMPT ED INCOME SUBSECTION) OF SECTION 14A SHALL APPLY MEANING TH EREBY DISALLOWANCE U/S 14A(1) US CALLED FOR. 6. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN D ELETING ADDITION OF RS.72444000/- ONACCOUNT OF DISALLOWANCE OF INCOME FROM BONDED WAREHOUSES IGNORING THAT THE ASSESSEE D ID NOT ACCOUNT FOR THIS ACCRUED INCOME EVEN AS THE ASSESSE E IS FOLLOWING MERCHANTILE SYSTEM OF ACCOUNTING. 7. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING ADDITION MADE ON ACCOUNT OFCOMPUTING BOOK PROFIT U/ S 115JB PROVISION FOR MEETING LIABILITIES OTHER THAN ASCERT AINED LIABILITIES SUCH AS PROVISION FOR GRATUITY (RS.63759797/-) PRO VISION FOR BAD AND DOUBTFUL DEBTS(RS.89686802/-) PROVISION FOR WE ALTH TAX(RS.662044/-) PROVISION FOR LEAVE ENCASHMENT(RS .54227950/-) AND PROVISION FOR PLI (RS.40205550/-) IGNORING THE FACT THAT PROVISIONS OF SECTION 115JB CLAUSES (A) TO (F) ARE APPLICABLE IN THIS CASE. 8. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND MODIFY ALTER ADD OR FOREGO ANYGROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A GOVERNMENT OF INDIA UNDERTAKING ESTABLISHED UNDER SECTION 3 OF 8 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 THE WAREHOUSING CORPORATION ACT 1962 AND FOR THE P URPOSE OF THE INCOME- TAX ACT 1962 ( IN SHORT THE ACT) IT IS DEEMED TO BE A COMPANY WITHIN THE MEANING OF THE ACT. IT IS AN AUT HORITY CONSTITUTED UNDER THE LAW FOR THE PURPOSE OF WAREHO USING AND MARKETING OF COMMODITIES / AGRICULTURAL PRODUCTS. T HE ASSESSEE DERIVED ITS INCOME FROM LETTING OUT OF GODOWNS OR W AREHOUSES FOR STORAGE PROCESSING OR FACILITATING/MARKETING OF CO MMODITIES. IN FINANCIAL YEAR 1984 THE ASSESSEE DIVERSIFIED ITS O PERATION AND STARTED NEW LINE OF BUSINESS OF RUNNING CONTAINER F REIGHT STATIONS (CFS) AND INLAND CONTAINER DEPOTS (ICD). F OR THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED RETURN OF I NCOME ON 29/11/2006 DECLARING TOTAL INCOME OF 107 49 47 352/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES UNDER THE ACT WERE ISSUED AND COMPLIED WITH. IN THE SCRUTINY ASSESSMENT COMPLETED ON 16/12/2008 UNDER SECTION 143(3) OF THE ACT CERTAI N ADDITIONS/DISALLOWANCES WERE MADE AND INCOME OF 126 45 30 182/-WAS COMPUTED FOR THE YEAR UNDER CONS IDERATION UNDER REGULAR PROVISIONS OF THE ACT WHICH AFTER AD JUSTMENT OF BROUGHT FORWARD LOSSES WAS ASSESSED AT NIL INCOME. THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT WAS COMPUTED AT 127 96 53 053/-. THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE VIDE IMPUGNED ORDER DATED 20/06/2011. AGG RIEVED BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEF ORE THE INCOME-TAX APPELLATE TRIBUNAL (IN SHORT THE TRIBUN AL) RAISING THE GROUNDS AS REPRODUCED ABOVE. 9 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 5. BEFORE US THE PARTIES APPEARED THROUGH VIDEO CONF ERENCING FACILITY AND FILED PAPER-BOOK AND OTHER DOCUMENTS T HROUGH EMAIL. 6. THE CONDENSED GROUND NO. 1 OF THE APPEAL OF THE AS SESSEE RELATES TO VALIDITY OF REVISED RETURN FILED IN TERM S OF SECTION 139(5) OF THE ACT. 6.1 THE BRIEF FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 29/11/2006. NOTICE UNDER SECTION 143(2) OF THE ACT FOR SELECTION OF THE CASE UNDER SCRUTINY WAS ISSUED ON 12/10/2007 . THIS RETURN OF INCOME WAS PROCESSED ON 28/03/2008 UNDER SECTION 143 (1) OF THE ACT. LATER ON THE ASSESSEE WANTED T O MAKE CLAIM FOR PROVISION OF POST-RETIREMENT MEDICAL BENEFIT AN D FOR THIS PURPOSE THE ASSESSEE ATTEMPTED TO REVISE THE ORIGI NAL RETURN OF INCOME FILED. AS PER INCOME-TAX RULES 1962 DURING RELEVANT TIME THE ASSESSEE WAS REQUIRED TO UPLOAD THE REVISED RET URN OF INCOME ON THE WEBSITE OF THE DEPARTMENT. THOUGH THE ASSESS EE COULD NOT UPLOAD THE REVISED RETURN OF INCOME ON THE WEB PORT AL OF THE INCOME TAX DEPARTMENT ON 31/03/2008 DUE TO SOME TEC HNICAL ERRORS HOWEVER ON 31/03/2008 IT SENT REVISED RETU RN OF INCOME THROUGH EMAIL TO THE DIRECTORATE OF INCOME TAX (SYS TEM) NEW DELHI I.E. RELEVANT OFFICE OF THE INCOME TAX DEPA RTMENT RESPONSIBLE FOR MANAGING E-FILING OF RETURN OF INCO ME. THE ASSESSEE ALSO SENT HARD COPY OF THE REVISED RETURN OF INCOME BY SPEED POST ON 31/03/2008 AND UPLOADED THE SAID REVI SED RETURN ELECTRONICALLY ON 01/04/2008. AS PER THE PROVISIONS OF THE ACT I.E. SECTION 139(5) AN ASSESSEE CAN REVISE ITS RET URN OF INCOME WITHIN ONE YEAR FROM THE END OF THE RELEVANT ASSESS MENT YEAR (I.E. 10 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 31/03/2008) OR BEFORE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER. THE LD. ASSESSING OFFICER IGNORED THE R EVISED RETURN OF INCOME FILED BY THE ASSESSEE. ACCORDING TO THE LD. CIT(A) THE INTIMATION UNDER SECTION 143(1) WAS SENT ON 28/03/2 008 WHICH IS IN THE NATURE OF THE ASSESSMENT AND THEREFORE THE REVISED RETURN OF INCOME FILED THEREAFTER ON 31/03/2008 W AS NOT VALID IN TERMS OF SECTION 139(5) OF THE ACT. 6.2 FURTHER THE CONDENSED GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE RELATES TO CLAIM FOR ALLOWING PROVISION OF POST-RETIREMENT MEDICAL BENEFIT WHICH WAS CLAIMED UNDER REVISED RE TURN OF INCOME. 6.3 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE REF ERRED TO PAPER-BOOK PAGE 16 WHICH IS RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2019-20 AND SUBMITTED THAT PROVISIO N FOR POST- RETIREMENT MEDICAL BENEFIT HAS BEEN ADDED BACK WHIL E COMPUTING THE INCOME AND CLAIMED ON THE BASIS OF THE ACTUAL A MOUNT PAID. ACCORDINGLY THE LEARNED COUNSEL SUBMITTED THAT CON DENSED GROUND NO. 1 AND 6 OF THE APPEAL WERE NOT PRESSED HOWEVER ALTERNATIVELY HE REQUESTED TO RESTORE THE MATTER T O THE LD. ASSESSING OFFICER FOR EXAMINING THE CLAIM OF POST-R ETIREMENT MEDICAL BENEFIT AS PER LAW. 6.4 THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT C LAIM OF POST-RETIREMENT MEDICAL BENEFIT WAS NOT AGITATED BE FORE THE LEARNED CIT(A) AND THEREFORE THE ASSESSEE SHOULD N OT BE ALLOWED TO CONTEST NOW. 6.5 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. SINCE THE ASSESSEE HAS SOUGHT 11 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 NOT TO PRESS THE CONDENSED GROUND NOS. 1 AND 6 OF T HE APPEAL WE ACCEPT THIS REQUEST AND DISMISS THESE GROUNDS AS WI THDRAWN AND THEREFORE WE ARE NOT DECIDING THE ALTERNATIVE REQU EST OF THE ASSESSEE FOR RESTORING THE GROUND NO.6 OF THE APPEA L TO THE ASSESSING OFFICER FOR VERIFYING THE CLAIM OF THE AS SESSEE. THE CONDENSED GROUND NO. 1 AND 6 OF THE APPEAL OF THE A SSESSEE ARE ACCORDINGLY DISMISSED. 7. THE CONDENSED GROUND NO. 2 OF THE APPEAL OF THE AS SESSEE RELATES TO CLAIM OF DEDUCTION UNDER SECTION 36(1)(X II) OF THE ACT. 7.1 BEFORE THE ASSESSING OFFICER THE ASSESSEE CLAIMED FOR ALLOWING ALL THE EXPENDITURE DEBITED IN PROFIT AND LOSS ACCOUNT IN VIEW OF SECTION 36(1)(XII) OF THE ACT BUT THE ASSE SSING OFFICER DID NOT GIVE ANY FINDING ON THIS CLAIM OF THE ASSESSEE. THE LD. CIT(A) REJECTED THE CLAIM OBSERVING AS UNDER: 8. THERE IS NO DOUBT THAT THE ASSESSEE CORPORATION WAS CREATED UNDER WAREHOUSING CORPORATION ACT 1962. IT IS ALSO NOT I N DISPUTE THAT IT IS AN AUTHORITY CONSTITUTED UNDER THE LAW FOR THE MARK ETING OF COMMODITIES AND DERIVES BULK OF ITS INCOME FROM THE LETTING OFF OF GODOWNS OR WAREHOUSES. HOWEVER AS PER THE PROVISIO NS OF THE INCOME TAX ACT THE AUTHORITY OF THE AO NOT TO CLOSELY DIS SECT THE ACCOUNTS OF THE ASSESSEE CAN BE TAKEN AWAY FROM HIM. THE LD. AO IS DUTY BOUND TO CLOSELY PERUSE THE OBJECTS OF THE COMPANY AS ALSO T O CLOSELY ASCERTAIN TO HIS SATISFACTION THAT EACH OF THE EXPENDITURE NOT BEING OF A CAPITAL NATURE HAS BEEN SPENT TOWARDS THE OBJECTS OF THE C OMPANY. IN SHORT JUST BECAUSE THE EXPENDITURE HAS BEEN BOOKED IN THE PROFIT & LOSS A/C DOES NOT TAKE AWAY THE POWER OF THE AO. THE ASSESSE E FAILS IN GROUND OF APPEAL NO. 3. 7.2 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED THAT DIRECTION MAY BE ISSUED TO THE ASSESSING OFFIC ER FOR EXAMINING AND ALLOWING THE CLAIM AS PER LAW. 7.3 THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT EXPENDITURE CLAIMED IN PROFIT AND LOSS ACCOUNT HAS BEEN ALLOWED 12 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 BY THE ASSESSING OFFICER SUBJECT TO THE PROVISIONS OF THE ACT AND ALL EXPENDITURE CANNOT BE ALLOWED TO DEDUCT MERELY ON THE GROUND THE SAME HAS BEEN DEBITED IN THE PROFIT AND LOSS AC COUNT OF THE ASSESSEE. 7.4 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. THE SECTION 36(1)(XII) OF THE A CT DURING RELEVANT PERIOD IS REPRODUCED AS UNDER: 36(1)(XII) ANY EXPENDITURE (NOT BEING IN THE NATU RE OF CAPITAL EXPENDITURE) INCURRED BY A CORPORATION OR A BODY CO RPORATE BY WHATEVER NAME CALLED CONSTITUTED OR ESTABLISHED BY A CENTRAL STATE OR PROVINCIAL ACT FOR THE OBJECTS AND PURPOSES AUTH ORIZED BY THE ACT UNDER WHICH SUCH CORPORATION OR BODY CORPORATE WAS CONSTITUTED OR ESTABLISHED. 7.4.1 THE ABOVE PROVISION WAS INSERTED IN THE ACT BY WAY OF FINANCE ACT 2003. IN THE NOTES ON FINANCE BILL FOR 2003 RELATED TO PROVISION OF THE DIRECT TAX PURPOSE OF PROPOSING T HE ABOVE PROVISION HAS BEEN EXPLAINED AS UNDER: MEASURES FOR RATIONALISATION AND SIMPLIFICATION DEDUCTION FOR EXPENDITURE INCURRED BY ENTITIES ESTA BLISHED UNDER ANY CENTRAL STATE OR PROVINCIAL ACT ENTITIES THAT ARE CREATED UNDER AN ACT OF PARLIAMEN T HAVE THE BASIC OBJECT AND FUNCTION OF CARRYING ON DEVELOPMEN TAL ACTIVITIES IN THE AREAS AS SPECIFIED IN THE SAID ACTS. BY THE FIN ANCE ACT 2001 AND FINANCE ACT 2002 TAX EXEMPTION OF CERTAIN BOD IES SET UP THROUGH ACTS OF THE PARLIAMENT WAS WITHDRAWN. SUBSEQUENT TO THE REMOVAL OF THE TAX SHIELD A DOUBT HAS ARISEN THAT SOME OF THE ACTIVITIES HAVING NO PROFIT MOTIVE BEING CARRIED ON BY SUCH ENTITIES CANNOT BE SAID TO BE BUSINESS AND THEREFO RE EXPENDITURE INCURRED ON SUCH DEVELOPMENTAL ACTIVITIES MAY NOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE IN COME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PRO FESSION. THE BILL PROPOSES TO INSERT A NEW CLAUSE (XII) IN S UB-SECTION (1) OF SECTION 36 SO AS TO PROVIDE THAT ANY EXPENDITURE (N OT BEING IN THE NATURE OF CAPITAL EXPENDITURE) INCURRED BY A CORPOR ATION OR A BODY CORPORATE BY WHATEVER NAME CALLED CONSTITUTED OR ESTABLISHED BY A 13 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 CENTRAL STATE OR PROVINCIAL ACT FOR THE OBJECTS AN D PURPOSES AUTHORIZED BY THE ACT UNDER WHICH SUCH CORPORATION OR BODY CORPORATE WAS CONSTITUTED OR ESTABLISHED SHALL BE A LLOWED AS A DEDUCTION IN COMPUTING THE INCOME UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS OR PROFESSION'. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL 2002 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YE AR 2002-03 AND SUBSEQUENT YEARS. (EMPHASIS SUPPLIED EXTERNALLY) 7.4.2. IT IS EVIDENT FROM ABOVE EXPLANATION THAT THIS PRO VISION HAS BEEN INSERTED TO TAKE CARE OF THE EXPENSES IN THE N ATURE OF THE DEVELOPMENT ACTIVITIES OF STATUTORY CORPORATIONS WHICH MAY NOT BE IN THE NATURE OF BUSINESS ACTIVITY BUT INCURRED FOR THE OBJECTS AND PURPOSES AUTHORIZED BY RELEVANT ACT UNDER WHICH SUCH CORPORATION OR BODY WAS CONSTITUTED OR ESTABLISHED. THUS UNDER THIS PROVISION THE EXPENSES WHICH MAY NOT BE ALLOWA BLE UNDER SECTION 37 OF THE ACT FOR NOT INCURRED WHOLLY AND A CTUALLY FOR THE PURPOSE OF THE BUSINESS HOWEVER SAME WERE INCURRED FOR THE OBJECTS AND PURPOSES AUTHORISED BY THE RELEVANT ACT UNDER WHICH SUCH CORPORATION HAS BEEN ESTABLISHED THEN THOSE E XPENSES MIGHT BE ALLOWED UNDER SECTION 36(1)(XII) OF THE AC T. 7.5 BEFORE US THE LEARNER CONSUL OF THE ASSESSEE DID NOT FURNISH DETAILS OF ANY AMOUNT ELIGIBLE FOR DEDUCTION UNDER THE SECTION 36(1)(XII) OF THE ACT. NO EVIDENCE HAVE BEEN FILED BEFORE US TO SUBSTANTIATE THAT SAID DETAILS WERE EVER FILED BEFO RE THE ASSESSING OFFICER OR THE LD. CIT(A). THE ASSESSEE HAS NEVER C ONTESTED DEDUCTION UNDER ABOVE PROVISION IN EARLIER YEARS. E VEN IN SUBSEQUENT ASSESSMENT YEAR I.E. AY 2007-08 THE ASS ESSEE HAS NOT PRESSED THIS GROUND OF CROSS OBJECTION. THUS I T IS EVIDENT THAT GROUND IN CURRENT YEAR HAS BEEN RAISED IN CASU AL MANNER 14 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 WITHOUT ANY DETAIL OF ACTUAL AMOUNT ELIGIBLE UNDER THE ABOVE PROVISION. THE CLAIM OF THE ASSESSEE BEFORE THE AS SESSING OFFICER WAS THAT ALL EXPENDITURES HAVE BEEN INCURRED FOR TH E OBJECT AND PURPOSE OF THE CENTRAL WAREHOUSING ACT. THE LD. CIT (A) ALSO REJECTED THE CLAIM OF THE ASSESSEE. 7.6 IN OUR OPINION IT IS FOR THE ASSESSEE TO SUBSTA NTIATE WHETHER PARTICULAR EXPENDITURE HAS BEEN INCURRED FO R THE OBJECTS AND PURPOSE OF THE CENTRAL WAREHOUSING ACT 1962. I N ABSENCE OF ANY SUCH DETAIL OF THE CLAIM OF DEDUCTION UNDER SEC TION 36(1)(XII) OF THE ACT NO USEFUL PURPOSE WILL BE SERVED IN RES TORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. W E ACCORDINGLY DISMISSED THIS GROUND OF THE APPEAL OF THE ASSESSEE . 8. THE CONDENSED GROUND NO. 3 (THREE) OF THE APPEAL O F THE ASSESSEE AND GROUND NO. 5 (FIVE) OF THE APPEAL OF THE REVENUE RELATE TO DISALLOWANCE UNDER SECTION 14A OF THE ACT . 8.1 THE ASSESSING OFFICER OBSERVED DIVIDEND INCOME OF 3 81 69 742/- WHICH WAS CLAIMED BY THE ASSESSEE AS EXEMPT INCOME BUT NO SUO-MOTU DISALLOWANCE FOR ADMINISTRATIVE/MANAGEMENT OR OTHER EXPENSES EARNING FOR SUCH EXEMPT INCOME WAS MADE BY THE ASSESSEE. ON BEING S PECIFICALLY ASKED BY THE ASSESSING OFFICER FOR MAKING SUCH DISA LLOWANCE NO REPLY WAS FILED BY THE ASSESSEE BEFORE HIM. THE ASS ESSING OFFICER ACCORDINGLY IDENTIFIED ADMINISTRATIVE AND INTEREST EXPENSES OF 182.71 CRORES AND DISALLOWED SAID EXPENSES IN THE R ATIO OF EXEMPTED INCOME TO TOTAL INCOME WHICH WAS WORKED OUT AT 1 13 27 837/-. BEFORE THE LD. CIT(A) THE ASSESSEE CLAIMED THAT IT HAS INVESTED IN THE SHARES OF STATE WAREHOUSING COR PORATIONS 15 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 WHICH ARE MANDATORY IN NATURE AND CANNOT BE EQUATED TO ANY COMPANY INVESTING SURPLUS MONEY IN STOCK/SHARES OF THE CORPORATION FOR EARNING DIVIDEND. IT WAS ALSO SUBMI TTED THAT NO DIRECT EXPENSES HAD BEEN INCURRED FOR EARNING EXEMP TED DIVIDEND INCOME. FURTHER THE ASSESSEE CONTESTED THAT DISALL OWANCE OF PROPORTIONATE EXPENSES WAS HIGH AND EXCESSIVE. THE LEARNED CIT(A) NOTED THAT ASSESSEE HAD NOT CONTESTED THE AD DITION FUNDAMENTALLY AND WHAT WAS CONTESTED WAS THE QUAN TUM OF ADDITION. THE LEARNED CIT(A) FOLLOWING THE DECISIO N OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE M FG. CO. LTD VS DCIT (2010) 328 ITR 81 (BOM) HELD THAT DISALLOW ANCE OF 5% OF EXEMPTED INCOME WOULD BE REASONABLE IN THE CASE OF THE ASSESSEE AND ACCORDINGLY HE SUSTAINED DISALLOWANCE OF 19 08 487/-. 8.2 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE REF ERRED TO PAGES 47 AND 62 OF THE PAPER-BOOK WHICH IS SCHEDUL E OF INVESTMENT TO BALANCE-SHEET AS ON 31/03/2006 AND SU BMITTED THAT ASSESSEE HAS MADE INVESTMENT OF RS.56.44 CRORE S IN SHARE CAPITAL OF VARIOUS STATE WAREHOUSING CORPORATION IN TERMS OF REQUIREMENT OF CENTRAL WAREHOUSING CORPORATION ACT 1962. HE SUBMITTED THAT MOST OF THE SHARES WERE SUBSCRIBED A T THE TIME OF THE FORMING OF STATE WAREHOUSING CORPORATIONS AND T HOSE SHARES ARE NOT LISTED AND HAVE NEVER BEEN TRADED. HE SUBMI TTED THAT WAREHOUSING CORPORATION ACT HAS BEEN RESTRUCTURED I N SUCH A MANNER SO THAT THE ASSESSEE I.E. CENTRAL WAREHOUSIN G CORPORATION DOES BUSINESS THROUGH STATE WAREHOUSING CORPORATIONS. HE SUBMITTED THAT THE BOARD OF DIRECT ORS OF THE 16 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 STATE WAREHOUSING CORPORATION(S) ARE APPOINTED BY THE ASSESSEE AND EVEN SALARY OF MANAGING DIRECTOR(S) OF THE STAT E WAREHOUSING CORPORATIONS IS ALSO FIXED IN CONSULTATION WITH THE ASSESSEE CORPORATION. THUS ACCORDING TO THE LEARNED COUNSEL THE WAREHOUSING BUSINESS OF THE STATE WAREHOUSING CORPO RATIONS (SWC) IS CONDUCTED THROUGH THE ASSESSEE CORPORATION AND THEREFORE EXPENSES IN HOLDING SHARES OF THOSE SWCS ARE DEDUCTIBLE AGAINST BUSINESS INCOME OF THE ASSESSEE. THE LEARNED COUNSEL SUBMITTED THAT SHARES IN THE STATE WAREHOUS ING CORPORATION ARE A TOOL IN ASSESSEE CORPORATIONS TR ADE. THE LEARNED COUNSEL RELIED ON THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF STATE BANK OF PATIALA WHICH WAS GIVEN ALONGWITH THE CIVIL APPEAL IN THE CASE OF MAXOPP IN VESTMENT LTD VS CIT 402 ITR 640. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE INVESTMENTS IN STATE WAREHOUSING CORPORATION ARE LEGACY INVESTMENT AND NO BORROWED F UNDS HAVE BEEN UTILIZED. NO DECISION WAS REQUIRED AS TO PERIO D OF HOLDING OR VALUATION SINCE SAME IS AS PER THE STATUTORY MANDAT E AND SHARES ARE NOT VALUED AND CANNOT BE TRADED. THE LEARNED CO UNSEL SUBMITTED THAT IN THE ASSESSMENT YEAR 2002-03 AND 2 005-06 THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSIN G OFFICER FOR DECIDING IN ACCORDANCE TO THE LATEST JUDGEMENTS. 8.3 ON THE OTHER HAND THE LEARNED DR RELIED ON THE OR DER OF THE ASSESSING OFFICER AND SUBMITTED THAT IN VIEW OF NO DETAILS OF EXPENSES INCURRED IN RELATION TO THE EXEMPTED INCOM E PROVIDED BY THE ASSESSEE THE LEARNED ASSESSING OFFICER WAS JUS TIFIED IN 17 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 MAKING PROPORTIONATE DISALLOWANCE OF ADMINISTRATIVE AND OTHER EXPENSES. 8.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF 3 81 69 742/-FROM INVESTMENT IN SHARES OF VARIOUS S TATE WAREHOUSING CORPORATIONS. THIS DIVIDEND INCOME HAS BEEN CLAIMED AS EXEMPTED INCOME. BUT THE ASSESSEE HAS C LAIMED THE ACTIVITY OF INVESTMENT IN THE STATE WAREHOUSING COR PORATION AS PART OF ITS BUSINESS ACTIVITY AND THUS CLAIMED THAT EXPENSES INCURRED FOR INVESTMENT ACTIVITY ARE PART OF THE BU SINESS EXPENSES AND ALLOWABLE AGAINST BUSINESS INCOME. IN THE CASE OF STATE BANK OF PATIALA WHICH WAS DECIDED BY THE HONBLE SUPREME COURT ALONG WITH MAXOPP INVESTMENT LTD. (SUPRA) THE ISSUE OF D IVIDEND EARNED FROM SHARES HELD AS A STOCK IN TRADE WAS RAI SED. THE HONBLE SUPREME COURT ON THE ISSUE OF DISALLOWANCE OF DIVIDEND EARNED FROM STOCKS HELD AS A STOCK-IN-TRADE ADJUDIC ATED AS UNDER: 31. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ARGUMENT OF COUNSEL FOR THE PARTIES ON BOTH SIDES IN THE LIGHT OF VARIOUS JUDGMENTS WHICH HAVE BEEN CITED BEFORE US SOME OF WHICH HAVE ALREADY BEEN TAKEN NOTE OF ABOVE. 32. IN THE FIRST INSTANCE IT NEEDS TO BE RECOGNIZE D THAT AS PER SECTION 14A(1) OF THE ACT DEDUCTION OF THAT EXPENDITURE IS NOT TO BE ALLOWED WHICH HAS BEEN INCURRED BY THE ASSESSEE IN RELATIO N TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS A CT. AXIOMATICALLY IT IS THAT EXPENDITURE ALONE WHICH HAS BEEN INCURRED I N RELATION TO THE INCOME WHICH IS INCLUDIBLE IN TOTAL INCOME THAT HAS TO BE DISALLOWED. IF AN EXPENDITURE INCURRED HAS NO CAUSAL CONNECTION WI TH THE EXEMPTED INCOME THEN SUCH AN EXPENDITURE WOULD OBVIOUSLY BE TREATED AS NOT RELATED TO THE INCOME THAT IS EXEMPTED FROM TAX AN D SUCH EXPENDITURE WOULD BE ALLOWED AS BUSINESS EXPENDITURE. TO PUT IT DIFFERENTLY SUCH EXPENDITURE WOULD THEN BE CONSIDERED AS INCURRED IN RESPECT OF OTHER INCOME WHICH IS TO BE TREATED AS PART OF THE TOTAL INCOME. 18 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 33. THERE IS NO QUARREL IN ASSIGNING THIS MEANING T O SECTION 14A OF THE ACT. IN FACT ALL THE HIGH COURTS WHETHER IT IS TH E DELHI HIGH COURT ON THE ONE HAND OR THE PUNJAB AND HARYANA HIGH COURT O N THE OTHER HAND HAVE AGREED IN PROVIDING THIS INTERPRETATION TO SECTION 14A OF THE ACT. THE ENTIRE DISPUTE IS AS TO WHAT INTERPRETATIO N IS TO BE GIVEN TO THE WORDS IN RELATION TO' IN THE GIVEN SCENARIO VIZ. WHERE THE DIVIDEND INCOME ON THE SHARES IS EARNED THOUGH THE DOMINANT PURPOSE FOR SUBSCRIBING IN THOSE SHARES OF THE INVESTEE COMPANY WAS NOT TO EARN DIVIDEND. WE HAVE TWO SCENARIOS IN THESE SETS OF AP PEALS. IN ONE GROUP OF CASES THE MAIN PURPOSE FOR INVESTING IN SHARES W AS TO GAIN CONTROL OVER THE INVESTEE COMPANY. OTHER CASES ARE THOSE WH ERE THE SHARES OF INVESTEE COMPANY WERE HELD BY THE ASSESSEES AS STOC K-IN-TRADE (I.E. AS A BUSINESS ACTIVITY) AND NOT AS INVESTMENT TO EARN DIVIDENDS. IN THIS CONTEXT IT IS TO BE EXAMINED AS TO WHETHER THE EXP ENDITURE WAS INCURRED IN RESPECTIVE SCENARIOS IN RELATION TO T HE DIVIDEND INCOME OR NOT. 34. HAVING CLARIFIED THE AFORESAID POSITION THE FI RST AND FOREMOST ISSUE THAT FALLS FOR CONSIDERATION IS AS TO WHETHER THE D OMINANT PURPOSE TEST WHICH IS PRESSED INTO SERVICE BY THE ASSESSEES WOUL D APPLY WHILE INTERPRETING SECTION 14A OF THE ACT OR WE HAVE TO G O BY THE THEORY OF APPORTIONMENT. WE ARE OF THE OPINION THAT THE DOMIN ANT PURPOSE FOR WHICH THE INVESTMENT INTO SHARES IS MADE BY AN ASSE SSEE MAY NOT BE RELEVANT. NO DOUBT THE ASSESSEE LIKE MAXOPP INVESTMENT LIMITED MAY HAVE MADE THE INVESTMENT IN ORDER TO GAIN CONTR OL OF THE INVESTEE COMPANY. HOWEVER THAT DOES NOT APPEAR TO BE A RELE VANT FACTOR IN DETERMINING THE ISSUE AT HAND. FACT REMAINS THAT SU CH DIVIDEND INCOME IS NON-TAXABLE. IN THIS SCENARIO IF EXPENDITURE IS INCURRED ON EARNING THE DIVIDEND INCOME THAT MUCH OF THE EXPENDITURE W HICH IS ATTRIBUTABLE TO THE DIVIDEND INCOME HAS TO BE DISALLOWED AND CAN NOT BE TREATED AS BUSINESS EXPENDITURE. KEEPING THIS OBJECTIVE BEHIND SECTION14A OF THE ACT IN MIND THE SAID PROVISION HAS TO BE INTERPRET ED PARTICULARLY THE WORD IN RELATION TO THE INCOME' THAT DOES NOT FORM PART OF TOTAL INCOME. CONSIDERED IN THIS HUE THE PRINCIPLE OF APPORTIONM ENT OF EXPENSES COMES INTO PLAY AS THAT IS THE PRINCIPLE WHICH IS E NGRAINED IN SECTION 14A OF THE ACT. THIS IS SO HELD IN WALFORT SHARE AND STOCK BROKERS P LTD. RELEVANT PASSAGE WHEREOF IS ALREADY REPRODUCED AB OVE FOR THE SAKE OF CONTINUITY OF DISCUSSION WE WOULD LIKE TO QUOTE THE FOLLOWING FEW LINES THEREFROM. THE NEXT PHRASE IS IN RELATION TO INCOME WHICH D OESNOT FORM PART OF TOTAL INCOME UNDER THE ACT. IT MEANSTHAT I F AN INCOME DOES NOT FORM PART OF TOTAL INCOME THEN THE RELATED EXPE NDITURE IS OUTSIDE THE AMBIT OF THEAPPLICABILITY OF SECTION 14 A .. XXX XXXXXX 19 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE HAS IN PRINCIPLE BEEN NOW WIDENED UND ER SECTION 14A. 35. THE DELHI HIGH COURT THEREFORE CORRECTLY OBSE RVED THAT PRIOR TO INTRODUCTION OF SECTION 14A OF THE ACT THE LAW WAS THAT WHEN AN ASSESSEE HAD A COMPOSITE AND INDIVISIBLE BUSINESS W HICH HAD ELEMENTS OF BOTH TAXABLE AND NON-TAXABLE INCOME TH E ENTIRE EXPENDITURE IN RESPECT OF SAID BUSINESS WAS DEDUCTI BLE AND IN SUCH A CASE THE PRINCIPLE OF APPORTIONMENT OF THE EXPENDI TURE RELATING TO THE NON-TAXABLE INCOME DID NOT APPLY. THE PRINCIPLE OF APPORTIONMENT WAS MADE AVAILABLE ONLY WHERE THE BUSINESS WAS DIVISIBL E. IT IS TO FIND A CURE TO THE AFORESAID PROBLEM THAT THE LEGISLATURE HAS NOT ONLY INSERTED SECTION 14A BY THE FINANCE (AMENDMENT) ACT 2001 BU T ALSO MADE IT RETROSPECTIVE I.E. 1962 WHEN THE INCOME TAX ACT I TSELF CAME INTO FORCE. THE AFORESAID INTENT WAS EXPRESSED LOUDLY AND CLEAR LY IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2001. WE THUS AGREE WITH THE VIEW TAKEN BY THE DELHI HIGH C OURT AND ARE NOT INCLINED TO ACCEPT THE OPINION OF PUNJAB & HA RYANA HIGH COURT WHICH WENT BY DOMINANT PURPOSE THEORY. THE AFORESAID REASONING WOULD BE APPLICABLE IN CASES WH ERE SHARES ARE HELD AS INVESTMENT IN THE INVESTEE COMPANY MAY BE FOR THE PURPOSE OF HAVING CONTROLLING INTEREST THEREIN. ON THAT REASON ING APPEALS OF MAXOPP INVESTMENT LIMITED AS WELL AS SIMILAR CASES WHERE SHARES WERE PURCHASED BY THE ASSESSEES TO HAVE CONTROLLING INTEREST IN THE INVESTEE COMPANIES HAVE TO FAIL AND ARE THEREFORE DISMISSED. 36. THERE IS YET ANOTHER ASPECT WHICH STILL NEEDS T O BE LOOKED INTO. WHAT HAPPENS WHEN THE SHARES ARE HELD AS STOCK-IN- TRADE' AND NOT AS INVESTMENT' PARTICULARLY BY THE BANKS? ON THIS S PECIFIC ASPECT CBDT HAS ISSUED CIRCULAR NO. 18/2015 DATED NOVEMBER 02 2015. 37. THIS CIRCULAR HAS ALREADY BEEN REPRODUCED IN PA RA 19 ABOVE. THIS CIRCULAR TAKES NOTE OF THE JUDGMENT OF THIS COURT I N NAWANSHAHAR CASE WHEREIN IT IS HELD THAT INVESTMENTS MADE BY A BANKING CONCERN ARE PART OF THE BUSINESS OR BANKING. THEREFORE THE INCOME ARISES FROM SUCH INVESTMENTS IS ATTRIBUTABLE TO BUSINESS OF BAN KING FALLING UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESS ION'. ON THAT BASIS THE CIRCULAR CONTAINS THE DECISION OF THE BOARD THA T NO APPEAL WOULD BE FILED ON THIS GROUND BY THE OFFICERS OF THE DEPARTM ENT AND IF THE APPEALS ARE ALREADY FILED THEY SHOULD BE WITHDRAWN . A READING OF THIS CIRCULAR WOULD MAKE IT CLEAR THAT THE ISSUE WAS AS TO WHETHER INCOME BY WAY OF INTEREST ON SECURITIES SHALL BE CHARGEABL E TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES' OR IT IS TO FALL UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION' . THE BOARD GOING BY THE DECISION OF THIS COURT IN NAWANSHAHAR CASE CLARIFIED THAT IT HAS TO BE TREATED AS INCOME FALLING UNDER THE HEAD PROFITS AND GAINS OF 20 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 BUSINESS AND PROFESSION'. THE BOARD ALSO WENT TO TH E EXTENT OF SAYING THAT THIS WOULD NOT BE LIMITED ONLY TO CO-OPERATIVE SOCIETIES/BANKS CLAIMING DEDUCTION UNDER SECTION 80P(2)(A)(I) OF TH E ACT BUT WOULD ALSO BE APPLICABLE TO ALL BANKS/COMMERCIAL BANKS TO WHI CH BANKING REGULATION ACT 1949 APPLIES. 38. FROM THIS PUNJAB AND HARYANA HIGH COURT POINTE D OUT THAT THIS CIRCULAR CARVES OUT A DISTINCTION BETWEEN STOCK-IN -TRADE' AND INVESTMENT' AND PROVIDES THAT IF THE MOTIVE BEHIND PURCHASE AND SALE OF SHARES IS TO EARN PROFIT THEN THE SAME WOULD BE TREATED AS TRADING PROFIT AND IF THE OBJECT IS TO DERIVE INCOME BY WAY OF DIVIDEND THEN THE PROFIT WOULD BE SAID TO HAVE ACCRUED FROM INVESTMEN T. TO THIS EXTENT THE HIGH COURT MAY BE CORRECT. AT THE SAME TIME WE DO NOT AGREE WITH THE TEST OF DOMINANT INTENTION APPLIED BY THE PUNJA B AND HARYANA HIGH COURT WHICH WE HAVE ALREADY DISCARDED. IN THAT EVE NT THE QUESTION IS AS TO ON WHAT BASIS THOSE CASES ARE TO BE DECIDED W HERE THE SHARES OF OTHER COMPANIES ARE PURCHASED BY THE ASSESSEES AS STOCK-IN-TRADE' AND NOT AS INVESTMENT'. WE PROCEED TO DISCUSS THIS ASPECT HEREINAFTER. 39. IN THOSE CASES WHERE SHARES ARE HELD AS STOCK- IN-TRADE THE MAIN PURPOSE IS TO TRADE IN THOSE SHARES AND EARN PROFIT S THEREFROM. HOWEVER WE ARE NOT CONCERNED WITH THOSE PROFITS WH ICH WOULD NATURALLY BE TREATED AS INCOME' UNDER THE HEAD PR OFITS AND GAINS FROM BUSINESS AND PROFESSION'. WHAT HAPPENS IS THAT IN THE PROCESS WHEN THE SHARES ARE HELD AS STOCK-IN-TRADE' CERTA IN DIVIDEND IS ALSO EARNED THOUGH INCIDENTALLY WHICH IS ALSO AN INCOME. HOWEVER BY VIRTUE OF SECTION 10 (34) OF THE ACT T HIS DIVIDEND INCOME IS NOT TO BE INCLUDED IN THE TOTAL INCOME AN D IS EXEMPT FROM TAX. THIS TRIGGERS THE APPLICABILITY OF SECTION 14A OF THE ACT WHICH IS BASED ON THE THEORY OF APPORTIONMENT O F EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE INCOME A S HELD IN WALFORT SHARE AND STOCK BROKERS P LTD. CASE. THEREF ORE TO THAT EXTENT DEPENDING UPON THE FACTS OF EACH CASE THE EX PENDITURE INCURRED IN ACQUIRING THOSE SHARES WILL HAVE TO BE APPORTIONED. 40. WE NOTE FROM THE FACTS IN THE STATE BANK OF PATIALA CASES THAT THE AO WHILE PASSING THE ASSESSMENT ORDER HAD ALREADY RESTRICTED THE DISALLOWANCE TO THE AMOUNT WHICH WAS CLAIMED AS EXEMPT INCOME BY APPLYING THE FORMULA CONTAINED IN RULE 8D OF THE RULES AND HOLDING THAT SECTION 14A OF THE AC T WOULD BE APPLICABLE. IN SPITE OF THIS EXERCISE OF APPORTIONME NT OF EXPENDITURE CARRIED OUT BY THE AO CIT(A) DISALLOWED THE ENTIRE DEDUCTION OF EXPENDITURE. THAT VIEW OF THE CIT(A) WA S CLEARLY UNTENABLE AND RIGHTLY SET ASIDE BY THE ITAT. THEREF ORE ON FACTS THE PUNJAB AND HARYANA HIGH COURT HAS ARRIVED AT A CORRECT CONCLUSION BY AFFIRMING THE VIEW OF THE ITAT THOUG H WE ARE NOT SUBSCRIBING TO THE THEORY OF DOMINANT INTENTION APPL IED BY THE 21 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 HIGH COURT. IT IS TO BE KEPT IN MIND THAT IN THOSE CASES WHERE SHARES ARE HELD AS STOCK-IN-TRADE' IT BECOMES A BUSINESS ACTIVITY OF THE ASSESSEE TO DEAL IN THOSE SHARES AS A BUSINESS PROP OSITION. WHETHER DIVIDEND IS EARNED OR NOT BECOMES IMMATERIAL. IN FA CT IT WOULD BE A QUIRK OF FATE THAT WHEN THE INVESTEE COMPANY DECLAR ED DIVIDEND THOSE SHARES ARE HELD BY THE ASSESSEE THOUGH THE ASSESSE E HAS TO ULTIMATELY TRADE THOSE SHARES BY SELLING THEM TO EARN PROFITS. THE SITUATION HERE IS THEREFORE DIFFERENT FROM THE CASE LIKE MAXOPP INVESTMENT LTD. WHERE THE ASSESSEE WOULD CONTINUE TO HOLD THOSE SHARES AS IT WANTS TO RETAIN CONTROL OVER THE INVESTEE COMPANY. IN THAT CASE WH ENEVER DIVIDEND IS DECLARED BY THE INVESTEE COMPANY THAT WOULD NECESSA RILY BE EARNED BY THE ASSESSEE AND THE ASSESSEE ALONE. THEREFORE EVE N AT THE TIME OF INVESTING INTO THOSE SHARES THE ASSESSEE KNOWS THA T IT MAY GENERATE DIVIDEND INCOME AS WELL AND AS AND WHEN SUCH DIVIDE ND INCOME IS GENERATED THAT WOULD BE EARNED BY THE ASSESSEE. IN CONTRAST WHERE THE SHARES ARE HELD AS STOCK-IN-TRADE THIS MAY NOT BE NECESSARILY A SITUATION. THE MAIN PURPOSE IS TO LIQUIDATE THOSE S HARES WHENEVER THE SHARE PRICE GOES UP IN ORDER TO EARN PROFITS. IN TH E RESULT THE APPEALS FILED BY THE REVENUE CHALLENGING THE JUDGMENT OF TH E PUNJAB AND HARYANA HIGH COURT IN STATE BANK OF PATIALA ALSO FA IL THOUGH LAW IN THIS RESPECT HAS BEEN CLARIFIED HEREINABOVE. (EMPHASIS SUPPLIED EXTERNALLY) 8.5 THUS IN THE CASES WHERE SHARES ARE HELD FOR BUSIN ESS PURPOSES AND DIVIDEND INCOME IS ALSO EARNED FROM SU CH SHARES THE DISALLOWANCE OF EXPENSES FOR EARNING EXEMPT DIV IDEND INCOME HAS TO BE MADE ON PROPORTIONATE BASIS. THE ASSESSME NT YEAR UNDER CONSIDERATION BEING PRIOR TO ASSESSMENT YEAR 2008-09 RULE 8D OF INCOME TAX RULES 1962 (IN SHORT THE RU LES) CANNOT BE INVOKED IN THE CASE AND THE DISALLOWANCE OF EXPE NSES HAS TO BE MADE ON REASONABLE BASIS. THE ISSUE IN ASSESSMENT Y EAR 2002-03 ( ITA NO. 635/DEL/2012) HAS BEEN RESTORED BY THE IT AT TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH OBSERV ING AS UNDER: 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE FIND THAT THERE I S A FORCE IN THE CLAIM OF THE LEARNED AR THAT RULE 8D IS NOT APPLICA BLE TO THE IMPUGNED ASSESSMENT YEAR HENCE THE MATTER HAS TO BE RECONSIDERED IN THE LIGHT OF THE AFOREMENTIONED DEC ISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT-L IMITED VS. CIT 22 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 (SUPRA) AS THE SAID DECISION OF HON'BLE DELHI HIGH COURT WAS NOT AVAILABLE WHEN LEARNED CIT (A) HAS DECIDED THE ISSU E. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR RE-DETERMINATION OF THE DISALLOWANCE U/S 14A. WE DIRECT ACCORDINGLY. THIS ISSUE OF DISALLOWANCE U/S 14A IS CONSIDERED TO BE ALLOWED FO R STATISTICAL PURPOSES IN THE MANNER AFORESAID. 8.6 THE IDENTICAL ISSUE IN AY 2005-06 (ITA NO. 2918/DE L/2009) HAS BEEN RESTORED BY THE ITAT TO THE FILE OF THE AS SESSING OFFICER OBSERVING AS UNDER: 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED T HE RECORDS. WE FIND THAT HON'BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DOT IN ITA NO. 626 OF 2010 234 CT R 1 HAS OVERRULED THE STAT DECISION OF DAGA CAPITAL MANAGEM ENT (SUPRA) AND HELD THAT RULE 8D HAS BEEN NOTIFIED ON 24.3.200 8 AND WILL BE APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. 6.1 FRONT THE ABOVE WE FIND THAT RULE 8D WOULD NOT BE APPLICABLE. HOWEVER THE HON'BLE MUMBAI HIGH COURT HAS HELD THA T THE REASONABLE DISAFLOWANCE HAS TO BE MADE. HENCE WE R EMIT THIS ISSUE TO THE FILES OF THE ASSESSING OFFICER TO CONSIDER T HE SAME AFRESH AND DECIDE AS PER . THE LAW IN LIGHT OF THE ABOVE CITE D HON'BLE MUMBAI HIGH COURT DECISION. NEEDLESS TO ADD THAT THE ASSES SEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 8.7 IN VIEW OF THE LATEST JUDGMENTS CITED ABOVE THE QUANTIFICATION OF DISALLOWANCE IN THE YEAR UNDER CO NSIDERATION IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING IN ACCORDANCE WITH LAW KEEPING IN VIEW THE OVERALL FAC TS AND CIRCUMSTANCES OF THE CASE INCLUDING DISALLOWANCES M ADE IN EARLIER ASSESSMENT YEARS I.E. ASSESSMENT YEARS 2002-03 AND 2005-06 . THE CONDENSED GROUND NO. 3 (THREE) OF THE APPEAL AS SESSEE AND GROUND NO. 5 (FIVE)OF THE APPEAL OF THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. THE CONDENSED GROUND NO.4 (FOUR) OF THE APPEAL OF THE ASSESSEE RELATES TO DEPRECIATION ON THE ASSETS HAVI NG COST UPTO 23 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 5000/-. THE ASSESSING OFFICER OBSERVED FROM CLAUSE 7(D )AND 7(E) OF THE TAX AUDIT REPORT (TAR) THAT DEPRECIATION AT THE RATE OF HUNDRED PERCENTILE ( 100 %) WAS CHARGED IN THE BOO KS OF ACCOUNTS IN CASE OF ASSETS HAVING COST UPTO 5000/-. THE ASSESSEE EXPLAINED THAT SAID DEPRECIATION CLAIMED I N THE BOOKS OF ACCOUNTS WAS ADDED BACK FOR THE PURPOSE OF COMPUTAT ION OF INCOME AS PER INCOME-TAX ACT. THE SAID SUBMISSION O F THE ASSESSEE WAS IGNORED BY THE ASSESSING OFFICER IN AB SENCE OF DETAILED LIST OF SUCH ASSETS AND HE DISALLOWED 5% O F THE TOTAL DEPRECIATION CLAIMED WHICH WAS WORKED OUT TO 1 41 42 259/-. THE LD. CIT(A) UPHELD THE DISALLOWANCE OBSERVING AS UNDER: 38. I HAVE GONE THROUGH THE ORDER OF THE LD. AO AN D THE SUBMISSIONS MADE BY THE LD. AR OF THE ASSESSEE. THE RE CAN BE NO DOUBT THAT 100% DEPRECIATION CAN BE CLAIMED ON ASSE TS WHICH DO NOT COST MORE THAN RS. 5 000/-. HOWEVER IN THE CASE IN HAND THE LD. AO HAD SPECIFICALLY REQUESTED FOR THE DETAILS OF THE A SSETS WHEREIN EXPENDITURE TO THE TUNE OF RS.5 000/- PER SE HAD BE EN MADE. THE ASSESSEE DID NOT PROVIDE THE DETAILED LIST OF ASSET S. IT ONLY REFERS TO AN ENCLOSURE FILED ALONG WITH THE TAX AUDIT REPORT WH ICH TO MY MIND IS INADEQUATE. ONCE THE ASSESSEE HAS NOT AVAILED OF TH IS OPPORTUNITY IT DOES NOT DESERVE ANY SYMPATHY. IN CIT VS. MOTOR GEN ERAL FINANCE LTD. (2002) 254 ITR 449 THE DELHI HIGH COURT HAS HELD T HAT THE FAILURE OF THE ASSESSEE TO PRODUCE DOCUMENTS DURING THE COURSE OF HEARING CAN LEAD TO AN ADVERSE INFERENCE TO THE EFFECT THAT IF PRODUCED THEY WOULD HAVE GONE AGAINST ASSESSEE IN TERMS OF SECTION 114 OF THE EVIDENCE ACT 1872. THIS CASE HAD GONE TO THE SUPREME COURT WHEREIN THE APEX COURT RETURNED THE CASE TO THE HIGH COURT AS REPOR TED IN 267 ITR 381 (SC) BUT DID NOT COMMENT UPON THE PRESUMPTION RAISE D U/S 114 OF THE EVIDENCE ACT. THUS IN SUCH CIRCUMSTANCES WHEN THE ASSESSEE HAS NOT PRODUCED THE PRIMARY BILLS/VOUCHERS IT DESERVES TO FAIL. AS SUCH THE ASSESSEE DESERVES TO FAIL IN GROUND OF APPEAL NO. 9 . 9.1 THE LEARNED COUNSEL BEFORE US REFERRED TO PAGE 84 OF THE PAPER-BOOK WHICH IS COMPUTATION OF INCOME FOR THE PURPOSE OF THE ACT AND SUBMITTED THAT ENTIRE DEPRECIATION CLAI MED IN BOOKS OF ACCOUNTS WAS ADDED BACK AND THE DEPRECIATION OF 24 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 28 28 45 181/-AS PER THE PROVISIONS OF THE ACT WAS ONLY CLAIMED. THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE MIGHT BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIF ICATION OF THE CLAIM OF THE ASSESSEE. 9.2 THE LEARNED DR ON THE OTHER HAND RELIED ON THE O RDER OF THE ASSESSING OFFICER BUT DID NOT OBJECT TO THE CON TENTION OF THE ASSESSEE FOR SENDING THE MATTER BACK FOR VERIFICATI ON BY THE ASSESSING OFFICER. 9.3 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. THE CONTENTION OF THE ASSESSEE THAT SAID DEPRECIATION O N THE ASSETS HAVING COST LESS THAN 5000/- WAS CLAIMED IN THE BOOKS OF ACCOUNTS HOWEVER WAS NOT CLAIMED FOR THE PURPOSE OF COMPUTING INCOME AS PER INCOME-TAX ACT. SINCE THIS DISPUTE IS A MATTER OF VERIFICATION OF THE CLAIM OF THE DEPRECIATION MADE FOR THE PURPOSE OF COMPUTATION OF INCOME UNDER INCOME-TAX ACT WE F EEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF TH E ASSESSING OFFICER FOR ADJUDICATION AFTER VERIFICATION OF DOCUMENTARY EVIDENCES IN THIS REGARD. THE GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. THE CONDENSED GROUND NO. 5(FIVE) OF THE APPEAL OF THE ASSESSEE RELATES TO VERIFICATION OF SHARE OF INCOME FROM JOINT VENTURE CFS LUDHIANA. 10.1 BEFORE THE LEARNED CIT(A) THE ASSESSEE SUBMITTED T HAT CONTAINER FREIGHT STATION (CFC) LUDHIANA WAS BEING RUN AS A JOINT-VENTURE WITH PUNJAB STATE WAREHOUSING CORPORA TION ON 50- 50 PROFIT/LOSS BASIS. THE ASSESSEE ALSO MADE INVEST MENT IN OTHER 25 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 JOINT VENTURES BUT IN ABSENCE OF THE AUDITED ACCOUN TS INCOME OF THOSE JOINT VENTURES WAS NOT REPORTED ON ACCRUAL BA SIS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. BEFORE US LEARNED COUNSEL OF THE ASSESSEE REFERRED TO VARIOUS PAGES OF THE PAPER -BOOK AND SUBMITTED THAT SAID INCOME FROM JOINT VENTURES SHOU LD BE TAXED ONCE ONLY I.E. EITHER ON MERCANTILE BASIS OR ON CAS H BASIS. ACCORDINGLY HE SUBMITTED THAT ISSUE IN DISPUTE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATI ON THAT INCOME OF JOINT-VENTURE(S) IS ACCOUNTED ON THE BASIS OF AUDIT ED ACCOUNTS AND NOT ON ESTIMATE BASIS. 10.2 THE LEARNED DR ON THE OTHER HAND DID NOT OBJEC T FOR VERIFICATION OF THE ISSUE IN DISPUTE BY THE ASSESSI NG OFFICER. 10.3 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. IT IS UNDISPUTED THAT INCOME FROM JOINT-VENTURE HAS TO BE TAXED IN THE HANDS OF THE ASSESSEE ONCE AND SAME INCOME CANNOT B E TAXED TWICE. SINCE THE ASSESSEE IS FOLLOWING MERCANTILE S YSTEM OF ACCOUNTING THE INCOME FROM JOINT-VENTURE IS REQUIR ED TO BE TAXED ON ACCRUAL BASIS AFTER VERIFICATION OF AUDITED ACCO UNTS OF THE JOINT VENTURES. THE LEARNED COUNSEL OF THE ASSESSEE HAS N OT DISPUTED TAXING THE SAME FOLLOWING MERCANTILE SYSTEM AND THE REFORE WE ARE NOT GOING INTO THE ASPECT WHETHER THOSE RECEIPT SHO ULD BE TAXABLE ON CASH BASIS . THE INCOME FROM JOINT-VENTURE ONCE CONSIDERED ON MERCANTILE BASIS IN THE YEAR UNDER CONSIDERATION S AME INCOME CANNOT BE TAXED BY THE ASSESSING OFFICER ON CASH BA SIS IN SUBSEQUENT YEARS AT THE TIME OF RECEIPT. ACCORDINGL Y THE ISSUE IN DISPUTE IS RESTORED TO THE FILE OF THE ASSESSING OF FICER FOR 26 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 ADJUDICATION AFTER VERIFICATION OF THE DOCUMENTARY EVIDENCE INCLUDING AUDITED ACCOUNTS OF THE JOINT VENTURES UN DER REFERENCE. THE GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE IS A CCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 11. REGARDING ADDITIONAL GROUNDS CHALLENGING THE APPLI CABILITY OF PROVISION OF SECTION 115JA OF THE ASSESSEE THE LEA RNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE GROUNDS RAISED BEIN G LEGAL AND NO INVESTIGATION OF THE FRESH FACTS REQUIRED THE A DDITIONAL GROUND RAISED BY THE ASSESSEE MIGHT BE ADMITTED. SUPPORTIN G THE GROUNDS THE LEARNED COUNSEL SUBMITTED THAT MINIMUM ALTERNATE TAX (MAT) IS NOT APPLICABLE OVER THE ASSESSEE BEING A NON- SCHEDULE SIX COMPANY AND BOOKS OF ACCOUNTS OF THE A SSESSEE COMPANY ARE PREPARED IN ACCORDANCE WITH THE PROVISI ONS OF THE WAREHOUSING CORPORATION ACT 1962 READ WITH CENTRAL WAREHOUSING CORPORATION RULES 1963. HE SUBMITTED TH AT ISSUE IN DISPUTE MIGHT BE RESTORED TO THE FILE OF THE ASSESS ING OFFICER FOR DECIDING AFRESH. 11.1 THE LEARNED DR ON THE OTHER HAND OPPOSED THE ADMISSIBILITY OF THE ADDITIONAL GROUNDS RAISED AFTE R A SUBSTANTIAL PERIOD AFTER FILING OF THE APPEAL. HE SUBMITTED THA T ISSUE THAT THE ASSESSEE IS A NON-SCHEDULE VI COMPANY WAS NEVER RA ISED BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT THE ADDITI ONAL GROUND RAISES NOT COVERED BY THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF NTPC LTD VERSUS CIT (1998) 229 ITR 383 (SC) AS THE ISSUE IS NOT HAVING ANY BEARING ON THE TAX LIA BILITY OF THE ASSESSEE. AS FAR AS MERIT OF THE GROUND IS CONCERNE D THE LEARNED DR SUBMITTED THAT SECTION 211(3) OF THE COMPANIES ACT 1956 27 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 HAS PRESCRIBED THAT FOR EXEMPTION FOR ANY CLASS OF THE COMPANIES FROM REQUIREMENT OF SCHEDULE VI AN NOTIFICATION HA S TO BE ISSUED BY THE CENTRAL GOVERNMENT. THE LEARNED DR SPECIFIED THAT NO SUCH NOTIFICATION HAD BEEN ISSUED BY THE CENTRAL GO VERNMENT FOR EXEMPTING THE COMPANIES ESTABLISHED UNDER THE CENTR AL WAREHOUSING ACT (SUPRA). HE ALSO SUBMITTED THAT THE RE IS NO SPECIFIC PROVISION IN THE RELEVANT REGULATORY ACT R EGARDING ACCOUNTING STANDARDS OR MAINTENANCE OF BOOKS OF ACC OUNTS AND THUS BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED AS PER THE COMPANIES ACT AND THEREFORE PROVISIONS OF SECTION 115JB HAVE BEEN CORRECTLY APPLIED IN THE CASE OF THE ASSESSEE. 11.2 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON TH E ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE BEING OF LEGAL NATURE AND NO FRESH INVESTIGATION OF THE FACTS WAS REQUIRE D AND THEREFORE SAME WERE ADMITTED FOLLOWING THE RATIO IN THE CASE OF NTPC LTD. (SUPRA). THE CONTENTION OF THE ASSESSEE IS THAT PR OVISION OF MINIMUM ALTERNATIVE TAX (MAT) ARE NOT APPLICABLE OV ER THE ASSESSEE BEING A NON-SCHEDULE VI COMPANY OF COMPANI ES ACT. UNDER THE SECTION 115JB THE BOOK PROFIT IS TAKEN A S PROFIT COMPUTED ON THE BASIS OF BOOKS OF ACCOUNTS MAINTAIN ED AS PER COMPANIES ACT. THE PART OF SECTION 115JB OF THE ACT DURING RELEVANT PERIOD IS REPRODUCED AS UNDER: (2) EVERY ASSESSEE BEING A COMPANY SHALL FOR TH E PURPOSES OF THIS SECTION PREPARE ITS PROFIT AND LOSS ACCOUNT FOR TH E RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE 6 TO THE COMPANIES ACT 1956 ( 1 OF 1956). 28 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 11.3 THE SAID SCHEDULE VIOF COMPANIES ACT 1956 HAS PROVI DED INSTRUCTION FOR PREPARING PROFIT AND LOSS ACCOUNT F OR THE FINANCIAL YEAR AND BALANCE SHEET AT THE FINANCIAL YEAR END. T HE RELEVANT SECTION 211 OF THE COMPANIES ACT 1956 SPECIFYING T HE FORM AND CONTENT OF THE BALANCE-SHEET IS REPRODUCED AS UNDER FOR READY REFERENCE: 211. FORM AND CONTENTS OF BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT.-(1) EVERY BALANCE-SHEET OF A COMPANY SHALL GIVE A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS OF THE COMPANY AS AT THE END OF THE FINANCIAL YEAR AND SHALL SUBJECT TO THE PROVISIONS OF THIS SECTION BE IN THE FORM SET OUT IN PART I OF SCHEDULE VI. OR AS NEAR THERETO AS CIRCUMSTANCES ADMIT OR IN SUCH OTHER FORM AS MAY BE APPROVED BY THE CENTRAL GOVERNMENT EITHER GENERALLY OR IN ANY P ARTICULAR CASE ; AND IN PREPARING THE BALANCE-SHEET DUE REGARD SHALL BE HAD AS FAR AS MAY BE TO THE GENERAL INSTRUCTIONS FOR PREPARATI ON OF BALANCE- SHEET UNDER THE HEADING. NOTES AT THE END OF THAT PART: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY INSURANCE OR BANKING COMPANY OR TO ANY OTHER C LASS OF COMPANY FOR WHICH A FORM OF BALANCE SHEET HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY. (2) EVERY PROFIT AND LOSS ACCOUNT OF A COMPANY SHALL GIVE A TRUE AND FAIR VIEW OF THE PROFIT OR LOSS OF THE COMPA NY FOR THE FINANCIAL YEAR AND SHALL SUBJECT AS AFORESAID COM PLY WITH THE REQUIREMENTS OF PART II OF SCHEDULE VI SO FAR AS THEY ARE APPLICABLE THERETO PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY INSURANCE OR BANKING COMPANY OR ANY COM PANY ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY OR TO ANY OTHER CLASS OF COMPANY FOR WHICH A FORM OR PROFIT AND LOSS ACCOUNT HAS BEEN IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY (3) THE CENTRAL GOVERNMENT MAY BY NOTIFICATION IN T HE OFFICIAL GAZETTE EXEMPT ANY CLASS OF COMPANIES FROM COMPLIANC E WITH ANY OF THE REQUIREMENTS IN SCHEDULE VI IF IN ITS OPINION IT IS NECESSARY TO GRANT THE EXEMPTION IN THE PUBLIC INTEREST ANY SUCH EXEMPTION MAY BE GRANTED EITHER UNCONDITIO NALLY OR SUBJECT TO SUCH CONDITIONS AS MAY BE SPECIFIED IN T HE NOTIFICATION 29 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 (4) THE CENTRAL GOVERNMENT MAY ON THE APPLICATION OR WITH THE CONSENT OF THE BOARD OF DIRECTORS OF THE COMPANY B Y ORDER MODIFY IN RELATION TO THAT COMPANY ANY OF THE REQUIREMENTS OF THIS ACT AS TO THE MATTERS TO BE STATED IN THE COMPANY'S BALANCE SHEET OR PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF ADAPTING THEM TO TH E CIRCUMSTANCES OF THE COMPANY (5) THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOU NT OF A COMPANY SHALL NOT BE TREATED AS NOT DISCLOSING A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS OF THE COMPANY MERELY BY REAS ON OF THE FACT THAT THEY DO NOT DISCLOSE- (I) IN THE CASE OF AN INSURANCE COMPANY ANY MATTER S WHICH ARE NOT REQUIRED TO BE DISCLOSED BY THE INSURANCE ACT 1938 (IV OF 1938); (II) IN THE CASE OF A BANKING COMPANY ANY MATTERS WHICH ARE NOT REQUIRED TO BE DISCLOSED BY THE BANKING COMPANIES A CT. 1949 (X OF 1949) ; (III) IN THE CASE OF A COMPANY ENGAGED IN THE GENER ATION OR SUPPLY OF ELECTRICITY ANY MATTERS WHICH ARE NOT REQUIRED TO B E DISCLOSED BY BOTH THE INDIAN ELECTRICITY ACT 1910 AND THE ELECT RICITY (SUPPLY) ACT 1948; (IV) IN THE CASE OF A COMPANY GOVERNED BY AN OTHER SPECIAL ACT FOR THE TIME BEING IN FORCE ANY MATTERS WHICH ARE NOT REQU IRED TO BE DISCLOSED BY THAT SPECIAL ACT; OR (V) IN THE CASE OF ANY COMPANY ANY MATTERS WHICH A RE NOT REQUIRED TO BE DISCLOSED BY VIRTUE OF THE PROVISIONS CONTAIN ED IN SCHEDULE VI OR BY VIRTUE OF A NOTIFICATION ISSUED UNDER SUB-SEC TION (3) OR AN ORDER ISSUED UNDER SUB-SECTION (4) . 11.4 THE SUB SECTION (2) OF SECTION 211 OF THE COMPANI ES ACT 1956 HAS SPECIFICALLY EXCLUDED APPLICATION OF PREPA RING PROFIT AND LOSS ACCOUNT AS PER SCHEDULE VI TO THE INSURANCE AN D BANKING COMPANIES OR COMPANIES ENGAGED IN THE GENERATION O R SUPPLY OF THE ELECTRICITY OR ANY OTHER CLASS OF THE COMPANY S PECIFIED. THE SUB-SECTION (3) HAS SPECIFIED REQUIREMENT OF ISSUE OF NOTIFICATION BY THE CENTRAL GOVERNMENT FOR EXEMPTION FROM THE RE QUIREMENT OF SCHEDULE VI OF THE COMPANIES ACT 1956. EVEN BEING SPECIFICALLY 30 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 ASKED FOR NO SUCH NOTIFICATION ISSUED BY THE CENTR AL GOVERNMENT WAS PRODUCED BEFORE US BY THE LEARNED COUNSEL OF TH E ASSESSEE. THE LEARNED COUNSEL ALSO FAILED BEFORE US TO EXPLAI N ABOUT ANY DEVIATION IN THE MANNER OF COMPUTATION OF PROFIT A ND LOSS AND BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION IN T ERMS OF INSTRUCTION IN SCHEDULE VI OF COMPANIES ACT 1956. T HE GUIDELINES PRESCRIBED IN THE CENTRAL WAREHOUSING ACT 1962 REG ARDING MAINTENANCE OF BOOKS OF ACCOUNTS ARE REPRODUCED AS UNDER: 31. ACCOUNTANTS AND AUDIT OF WAREHOUSING CORPORAT ION. (1) EVERY WAREHOUSING CORPORATION SHALL MAINTAIN PROPER ACCOU NTS AND OTHER RELEVANT RECORDS AND PREPARE AN ANNUAL STATEMENT OF ACCOUNTS INCLUDING THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET IN SUCH FORM AS MAY BE PRESCRIBED: PROVIDED THAT IN THE CASE OF THE CENTRAL WAREHOUSI NG CORPORATION THE ACCOUNTS RELATING TO THE WAREHOUSING FUND AND THE G ENERAL FUND SHALL BE MAINTAINED SEPARATELY. (2) THE ACCOUNTS OF A WAREHOUSING CORPORATION SHALL BE AUDITED BY AN AUDITOR DULY QUALIFIED TO ACT AS AN AUDITOR OF COMP ANIES UNDER SECTION 226 OF THE COMPANIES ACT 1956 (1 OF 1956). (3) THE SAID AUDITOR SHALL BE APPOINTED BY THE APPR OPRIATE GOVERNMENT ON THE ADVICE OF THE COMPTROLLER AND AUDITOR-GENERAL O F INDIA. (4) THE AUDITOR SHALL BE SUPPLIED WITH A COPY OF TH E ANNUAL BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT OF THE WAREHOUSING CORPORATION AND IT SHALL BE HIS DUTY TO EXAMINE THEM TOGETHER WITH THE ACCOUNTS AND VOUCHERS RELATING THERETO AND HE SHALL HAVE A LIST DELIVERED TO HIM OF ALL BOOKS KEPT BY THE CORPORATION AND SHALL AT ALL REASONABLE TIMES HAVE ACCESS TO THE BOOKS ACCOUNTS AND OTHER DOCUMENTS OF THE CORPORATION AND MAY REQUIRE FROM ANY OFFICER OF THE CORPORATION SUCH INFORMATION AND EXP LANATIONS AS THE AUDITOR MAY THINK NECESSARY FOR THE PERFORMANCE OF HIS DUTI ES AS AUDITOR. (5) THE AUDITOR SHALL MAKE A REPORT TO THE SHAREHOL DERS ON THE ACCOUNTS EXAMINED BY HIM AND ON THE ANNUAL BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT AND IN EVERY SUCH REPORT HE SHALL STATE WH ETHER IN HIS OPINION THE ACCOUNTS GIVE A TRUE AND FAIR VIEW () IN THE CASE OF THE BALANCE SHEET OF THE STATE OF THE CORPORATION'S AFFAIRS AT THE END OF ITS FINANCIAL YEAR AND 31 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 () IN THE CASE OF THE PROFIT AND LOSS ACCOUNT OF THE PROFIT OR LOSS FOR ITS FINANCIAL YEAR AND IN CASE HE HAS CALLED FOR ANY E XPLANATION OR INFORMATION FROM THE OFFICERS WHETHER IT HAS BEEN GIVEN AND WH ETHER IT IS SATISFACTORY. (6) THE APPROPRIATE GOVERNMENT MAY AFTER CONSULTAT ION WITH THE COMPTROLLER AND AUDITOR- GENERAL OF INDIA AT ANY TI ME ISSUE DIRECTIONS TO THE AUDITOR REQUIRING HIM TO REPORT TO THE APPROPRIATE GOVERNMENT UPON THE ADEQUACY OF MEASURES TAKEN BY A WAREHOUSING CORPORA TION FOR THE PROTECTION OF ITS SHAREHOLDERS AND CREDITORS OR UPON THE SUFFI CIENCY OF HIS PROCEDURE IN AUDITING THE ACCOUNTS OF THE CORPORATION AND MAY EN LARGE OR EXTEND THE SCOPE OF THE AUDIT OR DIRECT THAT A DIFFERENT PROCEDURE I N AUDIT MAY BE ADOPTED OR DIRECT THAT ANY OTHER EXAMINATION MAY BE MADE BY TH E AUDITOR IF IN THE OPINION OF THE APPROPRIATE GOVERNMENT PUBLIC INTEREST SO RE QUIRES. (7) A WAREHOUSING CORPORATION SHALL SEND A COPY OF EVERY REPORT OF THE AUDITOR TO THE COMPTROLLER AND AUDITOR-GENERAL OF I NDIA AND TO THE CENTRAL GOVERNMENT AT LEAST ONE MONTH BEFORE IT IS PLACED B EFORE THE SHAREHOLDERS. (8) NOTWITHSTANDING ANYTHING HEREINBEFORE CONTAINED IN THIS SECTION THE COMPTROLLER AND AUDITOR- GENERAL OF INDIA MAY EITH ER OF HIS OWN MOTION OR ON A REQUEST RECEIVED IN THIS BEHALF FROM THE APPROPRI ATE GOVERNMENT UNDERTAKE IN RESPECT OF A WAREHOUSING CORPORATION SUCH AUDIT AND AT SUCH TIME AS HE MAY CONSIDER NECESSARY: (9) THE COMPTROLLER AND AUDITOR-GENERAL OF INDIA A ND ANY PERSON AUTHORISED BY HIM IN CONNECTION WITH THE AUDIT OF T HE ACCOUNTS OF A WAREHOUSING CORPORATION SHALL HAVE THE SAME RIGHTS PRIVILEGES AND AUTHORITY IN CONNECTION WITH SUCH AUDIT AS THE COMPTROLLER AN D AUDITOR-GENERAL HAS IN CONNECTION WITH THE AUDIT OF GOVERNMENT ACCOUNTS AN D IN PARTICULAR SHALL HAVE THE RIGHT TO DEMAND THE PRODUCTION OF BOOKS ACCOUN TS CONNECTED VOUCHERS AND OTHER DOCUMENTS AND PAPERS AND TO INSPECT THE O FFICE OF THE CORPORATION. (10) THE ANNUAL ACCOUNTS OF A WAREHOUSING CORPORATI ON TOGETHER WITH THE AUDIT REPORT THEREON SHALL BE PLACED BEFORE THE ANN UAL GENERAL MEETING OF THE CORPORATION WITHIN SIX MONTHS OF THE CLOSE OF THE F INANCIAL YEAR. (11) EVERY AUDIT REPORT UNDER THIS SECTION SHALL BE FORWARDED TO THE APPROPRIATE GOVERNMENT WITHIN A MONTH OF ITS BEING PLACED BEFORE THE ANNUAL GENERAL MEETING AND THAT GOVERNMENT SHALL AS SOON T HEREAFTER AS MAY BE CAUSE THE SAME TO BE LAID BEFORE BOTH HOUSES OF PAR LIAMENT OR THE LEGISLATURE OF THE STATE AS THE CASE MAY BE. 11.5 THE LD. COUNSEL OF THE ASSESSEE FAILED TO EXPLAIN A NY SPECIFIC GUIDELINES/INSTRUCTION FOR PREPARING PROFI T AND LOSS ACCOUNT AND BALANCE SHEET IN THE RELEVANT REGULATOR Y ACTS WHICH 32 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 COULD BECOME BASIS FOR NON-APPLICATION OF SUB-SECTI ON 2 OF SECTION 115JB OF THE ACT. MOREOVER THE ASSESSEE HAS COMPLI ED THE PROVISIONS OF SECTION 115JA OR JB IN EARLIER YEARS AND THIS DOUBT HAS BEEN RAISED FOR THE FIRST TIME IN CASUAL MANNER WITHOUT SUPPORTING WITH ANY PROVISION UNDER ANY LAW. 11.6 IN VIEW OF THE ABOVE THE REQUEST OF THE LEARNED CO UNSEL TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER IS NOT JUSTIFIED AND ACCORDINGLY REJECTED. THE ADDITIONAL GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 12. THE GROUND NO.1 RAISED BY THE REVENUE RELATES TO DISALLOWANCE OF 4 02 05 550/- FOR PRODUCTIVITY LINKED INCENTIVES (PLI) TO EMPLOYEES DEBITED IN PROFIT AN D LOSS ACCOUNT. THE ASSESSEE CLAIMED THAT SAID PROVISION WAS CREATE D ON THE BASIS OF PARAMETERS LAID DOWN IN THE APPROVED PLI SCHEME OF THE ASSESSEE CORPORATION HOWEVER ACCORDING TO THE ASS ESSING OFFICER NEITHER DETAILS REGARDING WORKING OF THE PROVISION NOR EVIDENCE OF THE PAYMENT BEFORE FILING RETURN OF INCOME WERE FIL ED. ACCORDING TO THE ASSESSING OFFICER THE PROVISION WAS IN THE NAT URE OF AN UNASCERTAINED LIABILITY AND THEREFORE HE ADDED THE SAME BACK TO THE RETURNED INCOME OF THE ASSESSEE. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE LIABILITY DOES NOT ATTR ACT PROVISIONS OF SECTION 43B OF THE ACT AND IT HAS TO BE ALLOWED WHE N SAME IS CRYSTALLIZED. FURTHER IT WAS SUBMITTED THAT IT WAS AN ASCERTAINED LIABILITY COMPUTED IN ACCORDANCE WITH THE PLI SCHEM E FRAMED BY THE CORPORATION KEEPING IN VIEW THE GOVERNMENT GUID ELINES DULY APPROVED BY THE BOARD OF DIRECTORS. IT WAS SUBMITTE D THAT PROVISION WAS BEING MADE IN EARLIER YEARS ALSO AND HAVE BEEN 33 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 ALLOWED BY THE DEPARTMENT EXCEPT FOR THE ASSESSMENT YEARS 2004- 05 AND 2005-06. THE LD. CIT(A) HAS DELETED ADDITION S MADE BY THE ASSESSING OFFICER OBSERVING AS UNDER: 11. I HAVE CONSIDERED THE ORDER OF THE LD. AO AND THE SUBMISSIONS MADE BY THE LD. AR OF THE ASSESSEE. GOING THROUGH T HE ORDER FOR A.Y. 2004-05 OF MY LD. PREDECESSOR IN APPEAL NO. 365/06- 07 IT WAS HELD IN PARA 2.2 AS UNDER: 2.2 CONSIDERING THE ARGUMENTS OF LD. AR AND ON GOI NG THROUGH THE OBSERVATIONS OF THE A.O. I FIND THAT THE A.O. HAD DISALLOWED THE PLI AMOUNT RS.2 74 83 334/- WITH THE OBSERVATIO N. SINCE THE PROVISION FOR PLI MADE WAS AN UNASCERTAINED LIABILI TY THE SAME HAS BEEN ADDED BACK TO THE INCOME OF THE ASSESSEE. ON THE CONTRARY IN RESPECT OF PLI EXPENDITURE RS.2 74 83 334/- LD. A.R. BROUGHT TO MY NOTICE THAT PROVISIONS FOR PRODUCTIVE LINK INCENTIVE (PLI) WAS MADE IN ACCORDANCE WITH CWC EMPLOYEES PRO DUCTIVE LINK INCENTIVE SCHEME 1998 WHICH WAS FORMULATED A S PER THE GUIDELINES OF GOVT. OF INDIA. THE AMOUNT OF PLI EXP ENDITURE TO THE EXTENT OF RS.2 74 83 334/- WAS DETERMINED ON THE BA SIS OF SUCH SCHEME AND THE PAYMENT WAS MADE IN SUBSEQUENT YEARS AFTER GETTING THE APPROVAL FROM THE BOARD OF DIRECTORS. H E FURTHER BROUGHT TO MY NOTICE THAT THIS PRACTICE HAS BEEN FO LLOWED REGULARLY AND THE SIMILAR EXPENDITURE WAS DEBITED TO THE P&L ACCOUNT EVEN IN EARLIER YEARS BUT NO SUCH DISALLOWANCE WERE EVER MADE. CONSIDERING THE FACTS OF THE CASE I FIND THAT IT W AS REGULAR EXPENDITURE AND ASCERTAINED LIABILITY. HENCE THE S AME CANNOT BE SAID AS MERE PROVISION OR UNASCERTAINED LIABILITY. THUS I HOLD THAT THE AO WAS NOT JUSTIFIED TO DISALLOW THE SAME OF RS .2 74 83 334/-. HENCE THE DISALLOWANCE OF RS.2 74 83 334 IS DELETE D. 12. IT IS CLEAR FROM THE ABOVE THAT MY LD. PREDECES SOR HAS DELETED THE ADDITION. THERE IS NO CHANGE OF FACT OF LAW. JU DICIAL DISCIPLINE DEMANDS THAT I SHOULD FOLLOW THE ORDER OF MY PREDEC ESSOR IN SUCH CIRCUMSTANCES. AS SUCH THE ASSESSEE SUCCEEDS IN GRO UND OF APPEAL NO. 4. 12.1 BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIVE (DR) RELIED ON THE ORDER OF THE LEARNED ASSESSING OFFICE R AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO ESTABLISH WITH DOCUMENTARY EVIDENCE THAT IT WAS AN ASCERTAINED LIA BILITY AND THEREFORE THE LD. CIT(A) IS NOT JUSTIFIED IN DELETI NG THE ADDITION. SHE SUBMITTED THAT ISSUE IN DISPUTE MAY BE SENT BAC K TO THE FILE 34 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 OF THE LEARNED ASSESSING OFFICER FOR DECIDING AFRES H IN THE LIGHT OF DETAILS FURNISHED BY THE ASSESSEE BEFORE THE LEARNE D CIT(A). 12.2 ON THE CONTRARY THE LEARNED COUNSEL OF THE ASSESS EE REFERRED TO PAGE 24 OF THE PAPER-BOOK AND SUBMITTED THAT INFORMATION DOCUMENTS AND EVIDENCES WERE FILED BEF ORE THE ASSESSING OFFICER ALONG WITH LETTER DATED 22/11/200 8. HE ALSO REFERRED TO A COPY OF SAID DETAILS OF THE CLAIM CA LCULATION AND BREAKUP OF OFFICES AVAILABLE ON PAGE 138 TO 145 OF THE PAPER-BOOK. IT WAS ALSO SUBMITTED THAT ENTIRE LIABILITY WAS PAI D BEFORE DUE DATE OF FILING OF RETURN. THE LEARNED COUNSEL RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF CONTAINER CORPORATION OF IN DIA LTD ( ITA NO.1555/DEL/2012 AND 1363/DEL/2012) FOR ASSESSMENT YEAR 2006-07 AND SUBMITTED THAT IDENTICAL LIABILITY OF P LI HAS BEEN HELD TO BE NON-CONTINGENT AND ALLOWABLE. 12.3 WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. IT IS UNDISPUTED THAT LIABILITY OF PLI HAS BEEN ALLOWED B Y THE ASSESSING OFFICER IN THE CASE OF THE ASSESSEE EXCEPT FOR ASSE SSMENT YEAR 2004-05 TO 2005-06. THE LD. CIT(A) HAS DELETED THE ADDITION IN ALL THE THREE ASSESSMENT YEARS. THE COUNSEL SUBMITTED T HAT IN THE AYS 2004-05 AND 2005-06 NO APPEAL WAS FILED BY THE REVENUE IN ABSENCE OF COD (COMMITTEE OF DISPUTES) APPROVAL . THE PAGE 141 OF THE PAPER-BOOK SHOWS CALCULATION OF CORPORATE PR ODUCTIVITY INDEX FOR PLI FOR FINANCIAL YEAR 2005-06 I.E. RELEV ANT TO ASSESSMENT YEAR UNDER CONSIDERATION WHICH IS REPRO DUCED AS UNDER: CENTRAL WAREHOUSING CORPORATION (A GOVT. OF INDIA UNDERTAKING) CALCULATION OF CORPORATE PRODUCTIVITY INDEX FOR PLI FOR THE YEAR 2005-2006 35 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 S.NO. PRODUCTIVITY INDICATOR ACTUAL VALUES FOR LAST FOUR YEARS WEIGHT TARGET BASIS TARGET VALUE FOR CPI 2001-02 2002-03 2003-04 2004-05 2005-2006. 1 RETURN ON CAPITAL EMPLOYED 12.713 6.417 4.511 7.515 30 BEST OF PAST 4 YEARS 12.713 13.595 30.416 2 VALUE ADDED TO EMPLOYEE COST 1.825 1.463 1 491 1.643 30 BEST OF PAST 4 YEARS 1.825 1.792 29.458 3 . CAPACITY UTILIZATION 79.298 66.008 59.293 66.835 20 BEST OF PAST 4 YEARS 79.298 79.159 19.965 4 GROWTH IN TEUS HANDLED 6.598 28.182 18 682 20.151 20 AVERAGE OF PAST 4 YEARS 14.310 16.125 20.507 TOTAL CPI 100 100.345 PERCENTAGE OF PLI DUE TO EMPLOYEES 15.000 AMOUNT OF PLI PAYABLE TO EACH EMPLOYEE 6300 PROVISION MADE FOR PLIIN THE ACCOUNTS FOR THE YEAR ENDING 31.03.2006 NUMBER RATE AMOUNT (RS.) TOTAL (RS.) CHARGED TO CONSTRUCTION STAFF 214 6300 1348200 1348200 CAPITAL PROJECTS GENERAL STAFF .. 6199 6300 39053700 PAYABLE TO EMPLOYEES WHO HAVE WORKED IN CWC FOR PAR T OF THE YEAR ON PRORATA BASIS 230 1151850 40205550 REVENUE TOTAL PLI PROVISION 41553750 12.4 THE CALCULATION HAS BEEN MADE ON PRODUCTIVITY INDI CATOR AND LIABILITY TOWARD EACH EMPLOYEE HAS BEEN WORKED OUT TO RS.6300/-. THE PROVISION OF 4 15 53 750 /- HAS BEEN MADE FOR STAFF ENGAGED IN DIFFERENT SECTORS LIKE CONSTRUCTION GENERAL ETC . AND ALSO OFFICE LOCATION WISE ( PB-138). THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER PRIMA FACIE SHOWS THAT LIABILITY IS AN ASCERTAINED LIABILITY AND NOT A CONTINGENT LIABILIT Y. WE FIND THAT TRIBUNAL IN THE CASE OF CONTAINER CORPORATION OF IN DIA LTD. (SUPRA) HAS ALLOWED THE PROVISION OF PRODUCTIVITY LINKED IN CENTIVE ON THE GROUND THAT THE LIABILITY IS IN PRESENT QUANTIFIAB LE AND NOT CONTINGENT. SINCE THE QUANTIFICATION OF LIABILITY H AS NOT BEEN VERIFIED AT THE LEVEL OF THE ASSESSING OFFICER IN THE INTEREST OF SUBSTANTIAL JUSTICE WE FEEL APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF D OCUMENTARY EVIDENCES AND DECIDE IN THE LIGHT OF THE DECISION I N THE CASE OF CONTAINER CORPORATION OF INDIA LTD (SUPRA). THE G ROUND NO. 1 OF 36 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 THE APPEAL OF THE REVENUE IS ACCORDINGLY ALLOWED FO R STATISTICAL PURPOSES. 13. THE GROUND NO. 2 OF THE APPEAL RELATES TO ADDITION OF 69 44 300/-ON ACCOUNT OF CAPITALIZATION OF SPECIAL ( SLP) DUNNAGE WHICH HAS BEEN DELETED BY THE LEARNED CIT( A). 13.1 THE FACTS IN BRIEF QUA THE ISSUE-IN-DISPUTE ARE THA T THE ASSESSING OFFICER OBSERVED FROM BALANCE-SHEET OF TH E ASSESSEE THAT SPECIAL (SPL) DUNNAGE HAS BEEN TREATED AS CAPI TAL ASSET AND DEPRECIATION HAS BEEN CLAIMED ON THE SAME HOWEVER IN THE PROFIT AND LOSS ACCOUNT A SUM OF 69 44 300/-WAS CLAIMED AS REVENUE EXPENDITURE ON ACCOUNT OF EXPENSES MADE FOR PURCHAS E OF ORDINARY DUNNAGE. THE ASSESSING OFFICER NOTED THAT BOTH THE DUNNAGE WERE USED BY THE COMPANY FOR THE SAME PURPO SE I.E. TO PREVENT THE STORAGE FROM FLOOR SEEPAGE. THE ASSESSE E SUBMITTED THAT SPECIAL DUNNAGE WAS HAVING LONGER LIFE WHEREAS THE ORDINARY DUNNAGE BEING A SHORTER LIFE DEBITED AS REVENUE EXP ENDITURE. ACCORDING TO THE ASSESSING OFFICER NO EVIDENCE/SUP PORTING DOCUMENTS IN RESPECT OF THIS CLAIM OF SHORTER LIFE OF THE ORDINARY DUNNAGE WERE FURNISHED BY THE ASSESSEE AND THEREFOR E HE REJECTED THE CLAIM OF THE ASSESSEE FOR ALLOWING THE EXPENDIT URE AS REVENUE IN NATURE HOLDING THAT METHOD OF ACCOUNTING FOLLOWE D BY THE ASSESSEE IS ARBITRARY AND WITHOUT ANY BASIS. BEFORE THE LD. CIT(A) THE ASSESSEE EXPLAINED THAT ACCOUNTS OF THE ASSESSE E COMPANY HAVE BEEN ACCEPTED BY THE COMPTROLLER AND AUDITOR G ENERAL OF INDIA (CAG) AND THEREFORE COMMENT REGARDING ARBIT RARINESS OF THE METHOD OF ACCOUNTING WERE MISPLACED. IT WAS SUB MITTED THAT THE ORDINARY DUNNAGE COMPRISE OF BAMBOO MATS AND SA ND 37 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 SNAKES WHICH ONCE USED CANNOT BE REUSED. WHEREAS THE SPECIAL DUNNAGE IS HIGH-EFFICIENCY FLOORING DUNNAGE MADE FR OM JUTE IMPREGNATED WITH COAL TAR AND POLYFILM TO PREVENT THE FLOOR SEEPAGE HAVING ITS LIFE EXPECTANCY OF SIX OR MORE Y EARS AND THEREFORE IT WAS CAPITALIZED. THE LD. CIT(A) OBSERV ED THAT THE DEPARTMENT IN EARLIER YEARS HAS ACCEPTED THE SPECIA L DUNNAGE UNDER THE HEAD CAPITAL ASSET AND ORDINARY DUNNAGE A S REVENUE EXPENDITURE AND THE REVENUE CANNOT ABRUPTLY CHANGE ITS STANCE WITHOUT ANY CHANGE OF THE FACTS. ACCORDING TO HIM THE RULE OF CONSISTENCY MUST BE FOLLOWED. HE ALSO ANALYSED THE NATURE OF EXPENDITURE IN VIEW OF THE JUDICIAL PRECEDENTS AND CONCLUDED THAT ORDINARY DUNNAGE SHOULD BE CONSIDERED IN THE NATURE OF THE REVENUE EXPENDITURE AND ACCORDINGLY HE DELETED THE ADDITION. 13.2 BEFORE US THE LEARNED DR RELIED ON THE ORDER OF TH E ASSESSING OFFICER AND SUBMITTED THAT THERE WAS NO D IFFERENCE IN THE USE OF BOTH THE DUNNAGE AND THEREFORE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 13.3 THE LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER H AND SUBMITTED THAT ISSUE-IN-DISPUTE IS COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CAS E OF THE ASSESSEE FOR ASSESSMENT YEAR 2012-13. 13.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. WE FIND THAT THE IDENTICAL ISSUE OF SPECIAL VERSUS ORDINARY DUNNAGE AND THEIR TREATMENT AS CAPITAL EXPENDITURE OR REVENUE E XPENDITURE HAS BEEN ADJUDICATED BY THE TRIBUNAL IN APPEAL FILED BY THE REVENUE IN THE CASE OF THE ASSESSEE IN ITA NO. 5449/DEL/201 7 FOR 38 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 ASSESSMENT YEAR 2012-13. THE RELEVANT FINDING OF TH E TRIBUNAL IS REPRODUCED AS UNDER: 11. WE HAVE PERUSED THE RECORD IN THE LIGHT OF SUB MISSIONS MADE ON EITHER SIDE. AT THE OUTSET THERE IS NO DISPUTED TH AT THE ASSESSEE HAS BEEN USING TWO TYPES OF DUNNAGE THOUGH FOR THE SAM E PURPOSE BUT WITH TWO DIFFERENT LIFE TIMES NAMELY THE SPECIAL DUNNAGE HAVING LIFE TIME OF MORE THAN FIVE YEARS WHEREAS THE ORDINARY DUNNAGE HAS TO BE USED ONLY FOR ONE YEAR AD UN-USABLE THEREAFTER. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS CAPITALIZED THE EXPENDITURE O N THE SPECIAL DUNNAGE IN THEIR ACCOUNTS AND HAS BEEN CLAIMING DEP RECIATION @ 16% PER ANNUM OVER THE USEFUL PERIOD AND ON THE SAME AN ALOGY IN RESPECT OF ORDINARY DUNNAGE THEY ARE TREATING THE EXPENDIT URE FOR ONE YEAR AND DEBITING THE SAME TO THE PROFIT AND LOSS ACCOUN T TO CLAIM IT AS REVENUE EXPENDITURE. IT IS ALSO NOT IN DISPUTE THAT THE REVENUE HAS BEEN ACCEPTING THE CAPITALIZATION OF SPECIAL DUNNAG E AND ALLOWING DEPRECIATION @ 16% PER ANNUM OVER THE PERIOD OF LIF E EXPECTANCY OF SUCH DUNNAGE. 12. HAVING REGARD TO THIS FACT THAT THE LIFE EXPECT ANCY IS TAKEN AS THE DETERMINING FACTOR FOR THE SEPARATE TREATMENT TO T HE DUNNAGE WE DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN THE VIEW TAKEN BY THE LD. CIT(A) THAT BECAUSE OF THE SINGLE USE WITHIN A YEAR IN RES PECT OF ORDINARY DUNNAGE THE EXPENDITURE THEREON HAS TO BE TAKEN AS REVENUE EXPENDITURE AND NO ADDITION ON THAT SCORE COULD BE MADE. THIS FINDING OF THE LD. CIT(A) CANNOT BE SAID TO BE ILLEGAL OR I RREGULAR OR PERVERSE. WE THEREFORE FIND THE GROUND NO. 1 OF THE APPEAL OF T HE REVENUE AS DEVOID OF MERITS. 13.5 RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL (SUPRA) WE DO NOT FIND ANY ERROR OR PERVERSITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME. THE GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 14. GROUNDS NO. 3 OF THE APPEAL OF THE REVENUE RELATES TO DISALLOWANCE OF 7 16 955/- FOR QUALITY IMPROVEMENT EXPENSES WHICH HAS BEEN DELETED BY THE LEARNED CIT(A). 14.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE THA T THE ASSESSEE CONTENDED THAT EXPENDITURE OF 7 16 955/- INCURRED FOR IMPROVING THE WORKING ENVIRONMENT AND EFFICIENCY OF THE 39 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 EMPLOYEES WAS REVENUE IN NATURE WHEREAS ACCORDING TO THE ASSESSING OFFICER THE EXPENDITURE PROVIDED ENDURIN G BENEFIT TO THE ASSESSEE AND THEREFORE IT WAS IN THE NATURE OF THE CAPITAL EXPENDITURE AND HE DISALLOWED THE SAID EXPENDITURE. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT BY WAY OF E NTERING THE EXPENDITURE FOR IMPROVING THE WORKING ENVIRONMENT A ND EFFICIENCY OF THE EMPLOYEES NO NEW ASSET HAS BEEN CREATED NOR THE LIFE OF AN EXISTING ASSET WAS IMPROVED AND THEREFORE EXPENDITU RE WAS PURELY REVENUE IN NATURE. IT WAS ALSO SUBMITTED THAT IN EA RLIER YEAR NO SUCH DISALLOWANCE WAS MADE. THE LD. CIT(A) FOLLOWIN G FINDING OF HIS PREDECESSOR DELETED THE ADDITION. HIS PREDECES SOR IN ASSESSMENT YEAR 2005-06 RECORDED THE DETAILS OF QUA LITY IMPROVEMENT EXPENSES CONSISTING OF NOMINATION FEE F OR TRAINING OF INTERNATIONAL QUALITY AUDIT FOR ISO PAYMENT TO M/S BSI INDIA PRIVATE LIMITED FOR CONTINUOUS ASSESSMENT FEE AND T RAVELLING AND OTHER INCIDENTAL CHARGES REGISTRATION AUDIT ETC. PRINTING OF CUSTOMER FEEDBACK INLAND LETTERS PRINTING OF FIRE SAFETY POSTERS COMPUTER PRINTING OF ISO DOCUMENTS CASUAL LABOUR E NGAGED FOR CLEANING OF GODOWNS LAMINATION AND FRAMING WORK ET C. 14.2 THE LEARNED DR BEFORE US SUBMITTED THAT NO DETAILS OF THE EXPENSES ARE AVAILABLE ON RECORD IN THE YEAR UNDER CONSIDERATION ON THE BASIS OF WHICH THE CAPITAL OR REVENUE NATURE OF SUCH EXPENSES COULD BE DECIDED AND THEREFORE ISSUE IN DI SPUTE MAY BE RESTORED BACK TO THE FILE OF THE LD. CIT(A) OR THE ASSESSING OFFICER. 14.3 THE LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER H AND REFERRED TO PAGE 24 OF THE PAPER-BOOK AND SUBMITTED THAT DETAILS IN RESPECT OF THE EXPENSES WERE PROVIDED TO THE ASS ESSING OFFICER 40 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 WITH LETTER DATED 22/11/2008. THE LEARNED COUNSEL R EFERRED TO THE DETAILS OF THE EXPENSES FILED IN THE PAPER-BOOK FROM PAGES 153 TO 164. HE SUBMITTED THAT EXPENSES INCURRED ARE MOS TLY OF THE ROUTINE OFFICE EXPENSES NATURE. 14.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON TH E ISSUE IN DISPUTE. THE MAIN ISSUE-IN-DISPUTE IS WHETHER THE E XPENSES INCURRED UNDER THE HEAD QUALITY IMPROVEMENT EXPENS ES ARE IN THE NATURE OF THE CAPITAL OR REVENUE. THE LOWER AUT HORITIES HAVE NOT APPRECIATED THE DETAILS OF EXPENSES FURNISHED B Y THE ASSESSEE. THE LD. CIT(A) HAS ALSO DECIDED THE ISSUE FOLLOWING HIS PREDECESSOR WITHOUT EXAMINING THE EXPENDITURE INCUR RED IN THE YEAR UNDER CONSIDERATION. UNDER THE ACCOUNT HEAD OF QUALITY IMPROVEMENT EXPENSES THE ASSESSEE HAS INCURRED VA RIOUS EXPENSES DETAILS OF WHICH ARE AVAILABLE ON PAGE 153 TO 164 OF THE PAPER-BOOK. THE DETAILS INCLUDE UNIT-WISE EXPENSES AS WELL AS NATURE OF THE EXPENSES WHICH INCLUDE EXPENSES ON LA BOUR LAMINATION PURCHASE OF THE CLEANING MATERIAL EXPE NSES RELATED TO ISO AUDIT SUPPLY OF VARIOUS CONSTRUCTION AND MISCE LLANEOUS MATERIAL. ALL THESE EXPENSES NEED TO BE LOOKED INTO FROM THE ANGLE THAT SAME ARE IN THE NATURE OF THE CAPITAL EXPENDIT URE OR IN THE NATURE OF THE REVENUE EXPENDITURE. IN VIEW OF THE F ACTS AND CIRCUMSTANCES AND IN THE INTEREST OF THE JUSTICE W E FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF TH E LEARNED ASSESSING OFFICER FOR DECIDING AFRESH AFTER AFFORDI NG ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GRO UND NO. 3 OF THE APPEAL OF REVENUE IS ACCORDINGLY ALLOWED FOR ST ATISTICAL PURPOSES. 41 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 15. GROUND NO.4 OF THE APPEAL OF THE REVENUE RELATES T O DISALLOWANCE OF RS.4 07 54 700/- FOR UNABSORBED OVE RHEAD ON CAPITAL WORKS EXPENDITURE WHICH HAS BEEN DELETED B Y THE LEARNED CIT(A). 15.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE THA T THE ASSESSEE CORPORATION RESORT TO MONITORING OF CONSTR UCTION OF WAREHOUSES BY VARIOUS CONTRACTORS THROUGH THE CONST RUCTION CELLS OF COMPANY. THE ADMINISTRATIVE EXPENSES OF THE CONS TRUCTION CELLS HAVE BEEN TREATED BY THE ASSESSEE AS INDIRECT COST WHICH TOGETHER WITH THE REPAIR EXPENSES HAVE BEEN CHARGED DIRECTLY TO REVENUE EXPENDITURE. THE ASSESSEE FURTHER EXPLAINED THAT AN ACCOUNTING POLICY HAS BEEN LAID DOWN BY THE ASSESSEE FOR CHARG ING OF CONSTRUCTION MONITORING EXPENSE AS REVENUE EXPENSES WHEREBY ALL INDIA PERCENTAGE OF SUCH OVERHEADS IS DETERMINE D AND ACTUAL OVERHEADS OF EACH CONSTRUCTION CELL RESTRICTED TO THE ALL INDIA AVERAGE PERCENTAGE ARE CAPITALISED AND BALANCES CH ARGED TO THE REVENUE EXPENSES. FOLLOWING THIS POLICY THE ASSESS EE IN THE YEAR UNDER CONSIDERATION OUT OF THE TOTAL CONSTRUCTION M ONITORING EXPENDITURE OF 11 78 00 000/- DEBITED RS.40 22 000/- AS REPAIR AND MAINTENANCE AND TREATED 5 46 35 000/-AS CAPITAL EXPENDITURE AND CLAIMED BALANCE AMOUNT OF 4 52 83 000/-AS REVENUE EXPENDITURE UNDER THE HEAD UNABSORBED OVER HEADS ON CAPITAL WORKS. THE ASSESSING OFFICER NOTED THAT NO DETAILS OF THE RELEVANT EXPENSES WERE PROVIDED BY THE ASSESSEE AND NO DISTINCTION HAS BEEN BROUGHT OUT AS HOW A PART OF T HE EXPENSE WAS CAPITAL AND BALANCE WAS TREATED AS REVENUE EXPE NDITURE. IN VIEW OF THE FACTS THE ASSESSING OFFICER TREATED TH E REVENUE 42 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 EXPENDITURE OF 4 52 83 000/- AS CAPITAL EXPENDITURE AND AFTER ALLOWING DEPRECIATION AT THE RATE OF THE 10% DISAL LOWED THE BALANCE AMOUNT OF 4 07 54 700/-. THE LD. CIT(A) FOLLOWING THE FINDING OF HIS PREDECESSOR DELETED THE ADDITION IN DISPUTE. 15.2 BEFORE US THE LEARNED DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER AND SUBMITTED THAT IN VIEW OF THE NO DETAILS OF ACTUAL EXPENSES INCURRED THERE WAS NO OPTION WITH THE ASSESSING OFFICER EXCEPT TO TREAT THE SAME AS CAPITAL EXPENDI TURE. THE LEARNED DR SUBMITTED THAT ISSUE IN DISPUTE MAY BE R ESTORED TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR DECID ING AFRESH IN THE LIGHT OF THE NATURE OF THE EXPENSES ACTUALLY INCURR ED. 15.3 THE LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT DETAIL IN RESPECT OF THE EXPENSES WA S ALREADY FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER ALONGW ITH LETTER DATED 22/11/2008. THE LEARNED COUNSEL ALSO REFERRED TO NO TES TO THE ACCOUNTS I.E. NOTE 7(A) AND (B) AVAILABLE ON PAGE 69 OF THE PAPER- BOOK. THE LEARNED COUNSEL FAIRLY ACCEPTED THAT THE ISSUE IN DISPUTE IN THE ASSESSMENT YEAR 2005-06 HAS BEEN RES TORED TO THE FILE OF THE ASSESSING OFFICER. 15.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON TH E ISSUE IN DISPUTE. THE ISSUE IS WHETHER THE PART OF OVERHEAD CHARGES ON MONITORING OF THE CAPITAL EXPENDITURE OF CONSTRUCTI ON COULD BE CHARGED TO REVENUE EXPENDITURE. THE CLAIM OF THE AS SESSEE THAT SAME HAVE BEEN CHARGED TO REVENUE EXPENSES FOLLOWI NG REGULAR ACCOUNTING PRACTICE WHEREAS ACCORDING TO THE REVENU E IN ABSENCE OF DETAILS OF EXPENSES ACTUALLY INCURRED NO EXPEND ITURE CAN BE ALLOWED AS REVENUE EXPENDITURE ONLY ON THE AD-HOC A CCOUNTING 43 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 PRACTICE. WE FIND THAT THE TRIBUNAL IN ITA NO. 2918 /DEL./2009 FOR ASSESSMENT YEAR 2005-06 HAS RESTORED THE IDENTICAL ISSUE TO THE FILE OF THE ASSESSING OFFICER AFTER EXAMINING THE N ATURE OF THE EXPENSES. THE RELEVANT FINDING OF THE TRIBUNAL IS R EPRODUCED AS UNDER: 11.2 WE HAVE THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE NOTE THAT LD. COMMISS IONER OF INCOME TAX (APPEALS) HAS NOTED THAT ASSESSEE WAS ASKED TO GIVE COMPLETE DETAILS OF THE EXPENDITURE BUT THE SAME HAVE NOT B EEN PRODUCED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN OU R CONSIDERED OPINION IF THE MATTER IS NOT ENQUIRED EARLIER THE SAME CANNOT ACT AS AN ESTOPPELS FOR THE REVENUE AUTHORITIES THAT THE SAME CANNOT BE ENQUIRED IN THE CONCERNED ASSESSMENT YEAR. HOWEVER AS NOTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PROPER DETAIL S IN THIS REGARD HAS NOT BE SUBMITTED. THE LD. COUNSEL OF THE ASSESS EE ALSO DID NOT ELABORATE ON THE SYSTEM ADOPTED IN THIS REGARD WITH COGENT MATERIAL EXCEPT ASSERTING THAT THIS SYSTEM WAS FOLLOWED FOR A LONG PERIOD. HENCE IN THE INTEREST OF JUSTICE WE REMIT THIS ISS UE TO THE FILES OF THE ASSESSING OFFICER TO CONSIDER THE SAME AFRESH. NEED LESS TO ADD THAT THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BE ING HEARD. HOWEVER THE ASSESSEE IS DIRECTED TO PROVIDE NECESS ARY DETAILS IN THIS REGARD BEFORE THE AUTHORITIES BELOW. 15.5 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES THE ISSUE IN DISPUTE IN THE YEAR UNDER CONSIDERATION IS ALSO RES TORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH AFTER PROVIDING REASONABLE AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 16. THE GROUND NO. 6 OF THE APPEAL OF THE REVENUE RELA TES TO ADDITION FOR INCOME FROM BONDED WAREHOUSES AMOUNTIN G TO 7 24 44 000/- WHICH HAS BEEN DELETED BY THE LEARNE D CIT(A). 16.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE THA T THE ASSESSEE OPERATES BONDED WAREHOUSE UNDER A LICENSE GIVEN BY THE CUSTOMS DEPARTMENT WHERE IMPORTED CONSIGNMENTS ARE BEING 44 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 DEPOSITED BY THE IMPORTERS TO ENABLE THEM TO TAKE D ELIVERY OF THE CONSIGNMENT BY PAYING CUSTOM DUTY AND WAREHOUSING C HARGES AT THE TIME OF THE ACTUAL RELEASE OF THE IMPORTED GOOD S. THESE WAREHOUSING CHARGES ARE BEING ACCOUNTED BY THE ASSE SSEE ON REALISATION BASIS. THE CONTENTION OF THE ASSESSEE T HAT REALISATION OF SUCH WAREHOUSING CHARGES IS UNCERTAIN AS SOMETIM ES PAYING OF CUSTOM DUTY AND WAREHOUSING CHARGES BECOMES COMMERC IALLY UNVIABLE TO THE IMPORTER AND THEREFORE IMPORTERS AR E NOT INDUCED TO TAKE DELIVERY OF SUCH CONSIGNMENT. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE IS FOLLOWING MERCANTILE SYSTE M AND THEREFORE INCOME HAS TO BE BOOKED AS AND WHEN IT IS ACCRUED T O THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT EVEN IF THE IMPORTER DECIDED NOT TO GET HIS CARGO RELEASED THE WAREHOUS ING CHARGES IS PAYABLE TO THE ASSESSEE CORPORATION FROM THE AUCTIO N PROCEEDS OF THE CARGO. ACCORDINGLY THE LEARNED ASSESSING OFFIC ER MADE ADDITION FOR THE AMOUNT OF 7 24 44 000/-FOR BONDING WAREHOUSE ON ACCRUAL BASIS. THE LD. CIT(A) FOLLOWING THE FIND ING OF HIS PREDECESSOR THAT THERE WAS UNCERTAINTY IN THE INCOM E OF THE BONDED WAREHOUSE HE DELETED THE ADDITION MADE ON T HIS ACCOUNT. 16.2 BEFORE US THE LEARNED DR SUBMITTED THAT THE ASSESS EE CANNOT BE ALLOWED FOR BOTH CASH AND MERCANTILE SYST EM OF ACCOUNTING I.E. MIXED ACCOUNTING SYSTEM. HE SUBMITT ED THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AN D ACCORDINGLY THE INCOME IS TAXABLE WHENEVER IT IS ACCRUED OR REC EIVED WHICHEVER IS EARLIER AND THUS INCOME OF BONDED WARE HOUSE IS LIABLE TO BE ASSESSED IN THE YEAR UNDER CONSIDERATI ON. 45 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 16.3 ON THE OTHER HAND THE LEARNED COUNSEL OF THE ASSES SEE CONCURRED THAT THERE CANNOT BE MIXED ACCOUNTING SYS TEM AND INCOME HAS TO BE TAXED ON THE ACCRUAL BASIS IN THE CASE OF THE ASSESSEE HOWEVER HE SUBMITTED THAT THE INCOME OFF ERED BY THE ASSESSEE ON CASH BASIS SHOULD BE REDUCED. ACCORDING LY HE SUBMITTED THAT ISSUE IN DISPUTE MAY BE RESTORED BAC K TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR WORKING OUT THE Q UANTUM OF INCOME TO BE TAXED. 16.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. IN THE CASE THE ASSESSEE HAS CREDITED THE INCOME FROM THE BONDED WAREHOUSE ON REALISATION BASIS I.E. CASH BASIS BUT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF THE ACCOUNTING AND T HEREFORE INCOME HAS TO BE CREDITED IN THE PROFIT AND LOSS AC COUNT AS AND WHEN IT IS ACCRUED TO THE ASSESSEE. THE ASSESSING O FFICER HAS ADDED THE INCOME FROM WAREHOUSING CHARGES WHICH IS ACCRUED DURING THE YEAR UNDER CONSIDERATION. THE LEARNED CO UNSEL HAS AGREED IN PRINCIPLE THAT WAREHOUSING CHARGES IS LIA BLE TO BE ASSESSED ON ACCRUAL BASIS IN VIEW OF MERCANTILE SYS TEM FOLLOWED BY THE ASSESSEE BUT HE EMPHASIZED THAT INCOME WHIC H HAS BEEN TAXED ON ACCRUAL BASIS IN THE YEAR UNDER CONSIDERAT ION SHOULD NOT BE SUBJECTED TO TAX TWICE I.E ONCE ON MERCANTIL E BASIS AND SECOND ON CASH BASIS. WE CONCUR WITH THE ABOVE CONT ENTION OF THE LEARNED COUNSEL OF THE ASSESSEE. ACCORDINGLY THE B ONDED WAREHOUSE INCOME ADDED BY THE ASSESSING OFFICER ON ACCRUAL BASIS IS HEREBY CONFIRMED HOWEVER THE ASSESSING OFFICER IS DIRECTED TO ASCERTAIN THAT BONDED WAREHOUSE INCOME WHICH HAS 46 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 BEEN ADDED ON MERCANTILE BASIS IN THE YEAR UNDER CO NSIDERATION IS NOT AGAIN SUBJECTED TO TAX ON CASH BASIS IN SUBS EQUENT YEARS. THE GROUND NO. 6 OF THE APPEAL OF THE REVENUE IS AC CORDINGLY PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. 17. IN GROUND NO.7 THE REVENUE HAS CONTESTED THE ADDIT IONS FOR VARIOUS PROVISIONS MADE BY THE ASSESSING OFFICER I N TERMS OF SECTION 115JB OF THE ACT WHICH THE LD. CIT(A) HAS DELETED. 17.1 THE FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE THAT SECTION 115JB OF THE ACT SPECIFIES THAT PROVISIONS MADE FOR MEETING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES ARE TO BE ADDED TO THE BOOK PROFIT AS PER CLAUSE (C) OF SAID SECTION. THE ASSESSEE IN ITS BOOKS OF ACCOUNTS MADE PROVISION FOR PAYMENT OF GRA TUITY AT RS.6 37 59 797/- PROVISION FOR BAD AND DOUBTFUL DE BTS AT 8 96 86 802/- PROVISION FOR PAYMENT OF WEALTH TAX AT RS.6 62 044/- PROVISION FOR LEAVE ENCASHMENT AT 5 42 27 950/- AND PROVISION FOR PLI OF 4 02 05 550/-. FOR WORKING OUT BOOK PROFIT AS PER SECTION 115JB OF THE ACT THE ASSESSI NG OFFICER ADDED THESE PROVISIONS TO THE BOOK PROFIT SHOWN BY THE AS SESSEE IN THE BOOKS OF ACCOUNTS. BEFORE THE LD. CIT(A) THE ASSES SEE CLAIMED THAT PROVISION FOR PAYMENT OF THE GRATUITY AND LEAV E ENCASHMENT WAS CREATED AS PER THE ACTUARIAL VALUATION AND THER EFORE THOSE WERE ASCERTAINED LIABILITIES. THE LD. CIT(A) ACCORD INGLY HELD THAT THERE WAS NO SCOPE FOR MAKING ANY ADDITION FOR THOS E PROVISIONS UNDER SECTION 115JB OF THE ACT. REGARDING WEALTH TA X PROVISIONS IT WAS SUBMITTED BY THE ASSESSEE THAT IT WAS AN EXA CT AMOUNT OF THE LIABILITY AND WHICH HAS BEEN ADDED BACK IN THE COMPUTATION BEING INADMISSIBLE IN NATURE. THE LD. CIT(A) FOLLOW ING THE FINDING 47 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 OF HIS PREDECESSORS IN ASSESSMENT YEAR 2003-04 200 4-05 AND 2005-06 DELETED THE ADDITION. AS FAR AS PROVISION O F PLI IS CONCERNED THE LEARNED CIT(A) DELETED THE ADDITION IN VIEW OF THE HOLDING THE SAME AS ASCERTAINED LIABILITY WHILE ADJ UDICATING ADDITIONS UNDER REGULAR PROVISIONS OF THE ACT. THE ADDITION FOR PROVISION OF BAD AND DOUBTFUL DEBT WAS DELETED FOLL OWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F HCL COMNET SYSTEMS AND SERVICES 305 ITR 409 (SC). 17.2 THE LEARNED DR SUBMITTED THAT THE LIABILITIES BEI NG UNASCERTAINED THE LD AO HAS CORRECTLY ADDED THE IT EMS TO THE PROFIT AS PER BOOKS OF ACCOUNTS FOR ARRIVING AT BOO K PROFIT AS PER THE PROVISIONS OF SECTION 115JB READ WITH EXPLANAT ION 1(C) OF THE ACT. 17.3 THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON THE O RDER OF THE LEARNED CIT(A) AND SUBMITTED THAT ITEMS IN DISP UTE ARE ASCERTAINED LIABILITY AND THEREFORE CANNOT BE ADDED INVOKING EXPLANATION 1(C) OF SECTION 115JB OF THE ACT. 17.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED T HAT PROVISION FOR GRATUITY AND LEAVE ENCASHMENT HAVE BEEN MADE ON THE BASIS OF THE ACTUARIAL VALUATION AND THEREFORE THESE ARE AS CERTAINED LIABILITIES. SIMILARLY REGARDING WEALTH TAX PROVIS IONS IT HAS BEEN SUBMITTED THAT THE LIABILITY HAS BEEN ADDED BACK. S IMILAR SUBMISSIONS HAVE BEEN MADE REGARDING PROVISION FOR BAD AND DOUBTFUL DEBTS. REGARDING PROFIT LINKED INCENTIVES WE HAVE ALREADY RESTORED THE ISSUE IN DISPUTE TO THE FILE O F THE ASSESSING 48 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 OFFICER FOR VERIFICATION OF THE WORKING OF SAID LIA BILITY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE FEEL IT APPRO PRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE OF ACTUARIAL VALUATION AND OTHER DOCUMENTARY EVIDENCE TO SUBSTANTIATE THAT THE RELEV ANT LIABILITIES ARE ASCERTAINED LIABILITIES. THE GROUND NO. 7 OF TH E APPEAL OF THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURP OSES. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE AS WELL AS APPEAL OF THE REVENUE BOTH ARE ALLOWED PARTLY FOR THE STATIS TICAL PURPOSES. ITA NO. 3439/DEL./2014 & C.O. NO.93/DEL./2015 19. NOW WE TAKE UP THE APPEAL OF THE REVENUE AND CROS S OBJECTION OF THE ASSESSEE FOR ASSESSMENT YEAR 2007- 08. THE GROUNDS RAISED BY THE REVENUE ARE REPRODUCED AS UND ER: GROUNDS OF APPEAL OF THE REVENUE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN: (I) DELETING THE ADDITION OF RS. 81 60 521 /- MADE ON ACCOUNT OF DISALLOWANCE OF SLP DUNNAGE TREATING IT AS REVENUE EXPENDITURE INSTEAD OF CAPITAL EXPENDITURE AS HELD BY THE AO. (II) IN DELETING THE ADDITION OF RS. 1 70 80 395/- MADE BY THE AO WHO DISALLOWED THE DEPRECIATION CLAIMED AT 100% ON ASSE TS COSTING LESS THEN RS. 5 000/- BY ESTIMATING IT AT 5%OF THE TOTAL DEPRECIATION SINCE DETAILS OF ASSETS COSTING LESS THAN RS. 5 000/- WERE NOT PRODUCED. (III) IN DELETING ADDITION OF RS. 19 76 364/- MADE BY THE AO WHO DISALLOWED SOCIAL OBLIGATION EXPENDITURE AS NOT REL ATED TO BUSINESS ACTIVITIES. (IV) IN DELETING THE ADDITION OF RS. 78 434/- MADE BY THE AO WHO DISALLOWED SOCIAL IMPROVEMENT EXPENSES AS BEING CAP ITAL IN NATURE. (V) IN DELETING THE ADDITION MADE AT RS. 25 37 000 /- ACCRUED ON ACCOUNT OF SHARE OF INCOME FROM PSWC BY ACCEPTING T HE ASSESSEES CLAIM THE THIS WAS OFFERED TO TAX IN THE YEAR OF RECEIPT 49 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 BY IGNORING THE FACT THAT THE ASSESSEE WAS FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING APPEAL. 19.1 THE CROSS OBJECTION RAISED BY THE ASSESSEE ARE REPR ODUCED AS UNDER: CROSS OBJECTION OF THE ASSESSEE: 1. IT IS CONTENDED THAT THE APPELLANT IS ENTITLED AND COVERED BY REVISION OF SECTION 36(1)(XII). ACCORDINGLY ALL EX PENDITURE OTHER THAN THE CAPITAL EXPENDITURE SHOULD BE ALLOWED. 2. IT IS CONTENDED THAT THE PROVISION OF SECTION 11 5JB IS NOT APPLICABLE IN THE CASE OF THE APPELLANT CORPORATION SINCE IT IS NOT COVERED UNDER SCHEDULE VI OF THE COMPANIES ACT. 20. THE GROUND NO. 1(I) OF THE APPEAL OF THE REVENUE BEING IDENTICAL TO GROUND NO. 2 (TWO) OF THE APPEAL OF T HE REVENUE IN ASSESSMENT YEAR 2006-07 ACCORDINGLY FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2006-07 THIS GROUND OF THE APPEAL IS DISMISSED. 21. THE GROUND NO. 1 (II) OF THE APPEAL OF THE REVENUE THE IDENTICAL TO GROUND NO. 4 (FOUR) OF THE APPEAL OF T HE ASSESSEE IN ASSESSMENT YEAR 2006-07 AND THUS THE GROUND OF THE APPEAL OF THE REVENUE IS RESTORED TO THE FILE OF THE ASSESSIN G OFFICER FOR DECIDING AFRESH IN THE LIGHT OF THE DIRECTION GIVEN IN ASSESSMENT YEAR 2006-07. THE GROUND IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 22. THE GROUND NO. 1(III) OF THE APPEAL OF THE REVENUE RELATES TO DISALLOWANCE OF SOCIAL OBLIGATION EXPENDITURE. 22.1 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE A SSESSEE OF SOCIAL OBLIGATION EXPENSES AMOUNTING TO 19 76 364/-ON THE GROUND THAT THERE WAS NO PROVISION IN THE ACT TO AL LOW SUCH 50 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 EXPENSES. ACCORDING TO THE ASSESSING OFFICER THE B USINESS OF THE ASSESSEE CORPORATION DEPENDS ON THE QUALITY OF THE SERVICE PROVIDED BY THE CORPORATION TO ITS CUSTOMER AND NOT ON DISCHARGING OF SOCIAL OBLIGATIONS. THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UNDER: 12.GROUND NO 8: THIS DISALLOWANCE IS IN RESPECT OF SOCIAL OBLIGATION EXPENDITURE OF RS 19 76 364/-. THE AO IN HIS ASSESS MENT ORDER HAS DISALLOWED THESE EXPENSES HOLDING THAT THE BUSINESS OF THE ASSESSEE CORPORATION DEPENDS ON THE QUALITY OF SERVICE WHICH THE ASSESSEE PROVIDES TO ITS CUSTOMERS AND NOT ON THE DISCHARGIN G OF SOCIAL OBLIGATION. ON ITS PART THE APPELLANT HAS FILED VA RIOUS DOCUMENTS WITH REFERENCE TO THE EXPENSES INCURRED FOR SOCIAL UP- LIFTMENT WHICH IS A PART OF THE CORPORATE SOCIAL RESPONSIBILITY OF THE APPELLANT CORPORATION AS PER THE DIRECTIONS ISSUED BY THE MI NISTRY. TAKING IN TO ACCOUNT ALL THESE FACTORS BEING A GOVERNMENT CORPO RATION IN MY CONSIDERED VIEW SUCH EXPENSES MADE BY THE APPELLANT TOWARDS MEETING THE SOCIAL OBJECTIVE ARE AN ALLOWABLE BUSIN ESS EXPENDITURE EVEN THOUGH IT MAY NOT HAVE DIRECTLY YIELDED TO IMM EDIATE REVENUE ON ONE TO ONE BASIS. THE ASSESSEE SUCCEEDS IN THIS GROUND. ACCORDINGLY GROUND NO.8 IS ALLOWED. 22.2 BEFORE US THE LEARNED DR SUBMITTED THAT CORPORATE SOCIAL RESPONSIBILITY EXPENSES ARE NOT ALLOWABLE IN TERMS OF EXPLANATION- 2 TO SECTION 37 OF THE ACT. 22.3 THE LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER H AND SUBMITTED THAT EXPENSES HAVE BEEN INCURRED AS PER DIRECTION OF THE MINISTRY TO MEET THE SOCIAL OBLIGATIONS OF THE ASSESSEE CORPORATION. HE REFERRED TO THE DETAIL OF THE EXPEN SES PLACED ON PAGE 248 OF THE PAPER-BOOK AND SUBMITTED THAT EXPLA NATION-2 TO SECTION 37 OF THE ACT HAS BEEN EFFECTIVE FROM 01/04 /2015 ONLY AND NOT IN THE YEAR UNDER CONSIDERATION. 22.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE. ACCORDING TO THE REVENUE THE EXPENSES ARE 51 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 DISALLOWABLE IN VIEW OF THE EXPLANATION -2 TO SECTI ON 37 OF THE ACT. THE RELEVANT EXPLANATION IS REPRODUCED AS UNDER: GENERAL. 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PRO FESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. EXPLANATION 1.... EXPLANATION 2.FOR THE REMOVAL OF DOUBTS IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF SUB-SECTION (1) ANY EXPENDITUR E INCURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SO CIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT 20 13 (18 OF 2013) SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. 22.5 WE FIND THAT THIS EXPLANATION HAS BEEN MADE EFFECTI VE FROM 01/04/2015. THE TRIBUNAL IN THE CASE OF ADDL CIT VS RITES LTD ( ITA NO. 6447/DEL/2017) HAS HELD THIS EXPLANATION AS PROSPECTIVE IN NATURE. RESPECTFULLY FOLLOWING THE ABOVE DECISI ON THE CORPORATE SOCIAL RESPONSIBILITY EXPENSES INCURRED B Y THE ASSESSEE IN THE YEAR UNDER CONSIDERATION CANNOT BE DISALLOWE D INVOKING EXPLANATION -2 TO SECTION 37 OF THE ACT. ACCORDINGL Y THIS GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 23. THE GROUND NO.1(IV) OF THE APPEAL OF THE REVENUE IS IDENTICAL TO THE GROUND NO. 3 (THREE) OF THE APPEAL OF THE RE VENUE IN ASSESSMENT YEAR 2006-07. FOLLOWING OUR FINDING IN A SSESSMENT YEAR 2006-07 THIS GROUND OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 24. GROUND NO. 1(V) OF THE APPEAL OF THE REVENUE IS ID ENTICAL TO GROUND NO. 5 (FIVE) OF THE APPEAL OF THE ASSESSEE I N ASSESSMENT 52 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 YEAR 2006-07. FOLLOWING OUR FINDING IN ASSESSMENT Y EAR 2006-07 THIS GROUND OF THE APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. 25. AS FAR AS CROSS OBJECTION NO. 1 OF THE ASSESSEE IS CONCERNED THE LEARNED COUNSEL DID NOT PRESS THE SAID OBJECTIO N ACCORDINGLY SAME IS DISMISSED AS INFRUTUOUS. 26. THE CROSS OBJECTION NO.2 RAISED BY THE ASSESSEE IS IDENTICAL TO GROUND NO.7 (SEVEN) OF THE APPEAL OF THE ASSESSE E FOR ASSESSMENT YEAR 2006-07 ACCORDINGLY THIS GROUND IS DISMISSED FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2006-07. 27. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWE D PARTLY FOR THE STATISTICAL PURPOSES WHEREAS CROSS OBJECTION O F THE ASSESSEE ARE DISMISSED. ITA NO.3440/DEL./2014 & C.O. NO.94/DEL./2015 (AY 2008 -09) ITA NO. 2201/DEL/2014 (AY 2009-10) ITA NO. 5784/DEL/2014 & CO NO. 158/DEL/2015 (AY 2010- 11) 28. NOW WE TAKE UP THE APPEALS OF THE REVENUE AND CRO SS OBJECTIONS OF THE ASSESSEE FOR ASSESSMENT YEAR 2008 -09 AND 2010-11 AND APPEAL OF THE ASSESSEE FOR AY 2009-10. THE RESPECTIVE GROUNDS OF APPEALS AND CROSS OBJECTIONS ARE REPRODUCED AS UNDER: (I) THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITA NO. 3440/DEL/2014 ARE AS UNDER: 53 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 THE DCIT CIRCLE - 3(1) NEW DELHI IS HEREBY DIRECT ED TO FILE APPEAL IN THE ABOVEMENTIONED CASE BEFORE THE 1TAT NEW DELHI ON T HE FOLLOWING GROUND OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN: (I) DELETING THE ADDITION OF RS. 66 01 019 /- MADE ON ACCOUNT OF DISALLOWANCE OF SLP DUNNAGE TREATING IT AS REVENUE EXPENDITURE INSTEAD OF CAPITAL EXPENDITURE AS HELD BY THE AO. (II) DELETING THE ADDITION OF RS. 14 42 792/- MADE ON ACCOUNT OF DISALLOWANCE OF QUALITY IMPROVEMENT EXPE NSES BY HOLDING IT AS REVENUE EXPENDITURE INSTEAD OF CAP ITAL EXPENDITURE AS HELD BY THE AO. (III) RESTRICTING THE DISALLOWANCE OF RS. 4 17 16 6 50/- U/S 14A TO 5% OF THE EXEMPTED INCOME THEREBY ALLOWING A REL IEF OF RS. 39 57 454/- TO THE ASSESSEE. (IV) ALLOWING SOCIAL OBLIGATION EXPENDITURE OF RS. 17 75 000/- AS A DEDUCTION BY TREATING IT AS EXPENDITURE RELATE D TO BUSINESS ACTIVITIES OF THE ASSESSEE. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. (II) THE CROSS OBJECTIONS RAISED BY THE ASSESSEE IN C.O. NO. 94/DEL./2015 ARE AS UNDER: 1) IT IS CONTENDED THAT THE ASSESSING OFFICER HAS E RRED IN MAKING AD- HOC DISALLOWANCE U/S 14A R.W. RULE 8D. WHILE WORKIN G INVESTMENT IN SISTER CONCERN OR INVESTMENT AS A MAN DATORY DIRECTION IN STATE WAREHOUSING CORPORATION SHOULD N OT BE CONSIDERED AS INVESTMENT.. 2) IT IS CONTENDED THAT THE PROVISION OF SECTION 11 5JB IS NOT ATTRACTED IN THE APPELLANT CORPORATION CASE SINCE T HE APPELLANT IS NOT COVERED BY COMPANIES ACT AND ITS BALANCE SHEET IS DRAWN ACCORDING TO RULES FRAME UNDER WAREHOUSING CORPORAT IONS ACT 1962. (III) THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN IT A NO. 2201/DEL./2014 ARE AS UNDER: 54 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 1. IT IS CONTENDED THAT BOTH THE ASSESSING OFFICER AND THE LD. CIT APPEALS HAVE ERRED IN DISALLOWING EXPENSES OF RS.67 04796/- BY INVOKING SECTION 14 A OF THE IT ACT. 1.01 THE PROVISIONS OF 14 A OF THE IT ACT ARE NOT A PPLICABLE IN THE INSTANT CASE SINCE THE AO AND CIT APPEALS HAVE FAIL ED TO PROVE THE NEXUS OF THE EXPENDITURE THAT IT RELATES TO EAR NING OF EXEMPTED INCOME. 1.02 IT IS CONTENDED WITHOUT PREJUDICE TO THE ABOVE GROUNDS THAT THE INVESTMENT MADE IN VARIOUS STATE WAREHOUSING CORPOR ATIONS IS IN ACCORDANCE WITH THE STATUTORY OBLIGATIONS UNDER WAR EHOUSING CORPORATIONS ACT AND SUCH INVESTMENT IS MADE MORE T O SECURE CONTROL AND MANAGEMENT FOR THE SMOOTHSAILING OF THE STATE WAREHOUSING CORPORATION AND NOT WITH THE PURPOSE OF EARNING DIVIDEND INCOME. 1.03 ACCORDINGLY THE AFORESAID INVESTMENT SHOULD NO T FORM PART OF INVESTMENT WHILE CALCULATING THE DISALLOWANCE UNDER RULE 8 D OF THE IT RULES TO ARRIVE AT 0.5% OF THE AVERAGE OF OP ENING AND CLOSING VALUE OF THE INVESTMENT. 1.04 IT IS CONTENDED WITHOUT PREJUDICE THE ABOVE G ROUNDS THAT THE DISALLOWANCE MADE IS HIGH AND EXCESSIVE. FURTHER TH E WORKING OF DISALLOWANCE BY THE AO IS WRONG. 2. BOTH ON FACTS AND ON LAW THE DISALLOWANCE OF RS .3945000/- UNDER THE HEAD SOCIAL OBLIGATION EXPENSES ARE NORMA L ROUTINE BUSINESS EXPENSES WITH A VIEW TO ACHIEVE A CORPORAT E SOCIAL RESPONSIBILITY AS PER THE GUIDELINES OF THE DEPT O F PUBLIC ENTERPRISES GOVT OF INDIA. 3. IT IS CONTENDED THAT BOTH ON FACT AND IN LAW TH E DISALLOWANCE OF RS.409.43 LACS AS AN UNABSORBED OVERHEAD ON CAPITAL WORKS EXPENDITURE TREATING THE SAME AS CAPITAL EXPENDITUR E. 3.01 IT IS CONTENDED THAT THE EXPENSES OF RS 409.4 3 LACS BEING AN UNABSORBED OVERHEAD EXPENSE ARE REVENUE EXPENSES AN D FULLY ALLOWABLE AS IN THE PAST. 4. IT IS CONTENDED THAT THE AO HAS ERRED IN ADDING A SUM OF RS.282351000/- AS INCOME OF THE BONDED WAREHOUSE. 4.01 IT IS CONTENDED THAT THE AFORESAID BONDED INC OME HAS NEITHER ACCRUED TO THE CORPORATION IN THE PREVIOUS YEAR NOR IS CAPABLE OF BEING QUANTIFIED HENCE DOES NOT QUALIFY AS INCOME. 5. IT IS CONTENDED THAT THE AO HAD ERRED IN DISALLO WING RS. 1557766/- AS INTEREST ON SERVICE TAX WHICH HAS WRON GLY BEEN TAKEN AS PENALTY. 6. IT IS CONTENDED THAT THE APPELLANT CORPORATION N OT BEING A SCHEDULE VI COMPANY THE PROVISIONS OF SECTION 115 JB ARE NOT APPLICABLE. 6.01 THE COMPUTATION OF BOOK PROFIT WITHOUT PREJUD ICE TO THE ABOVE CONTENTION IS WRONG AND REQUIRES REVISION. 55 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 7. IT IS CONTENDED THAT THE CHARGE OF INTEREST UND ER SECTION 234B AND 234D IS WRONG AND REQUIRES REVISION. 8. IT IS CONTENDED THAT THE WITHDRAWAL OF INTEREST EARLIER ALLOWED U/S 244A IS WRONG AS NO SUCH WITHDRAWAL O F INTEREST IS WARRANTED IN THE INSTANT CASE. 9. IT IS CONTENDED THAT THE AO AND THE CIT (APPEALS ) HAVE NOT QUANTIFIED THE EARLIER BROUGHT FORWARD LOSSES AND U NOBSERVED DEPRECIATION WHICH WILL EXACTLY BE QUANTIFIED AFTER GIVING PROPER APPEAL EFFECTS. 10. IT IS PRAYED THAT THE APPELLANT MAY BE PERMITTE D TO ADD ALTER OR WITHDRAW ANY OF THE GROUNDS AT THE TIME OF THE HEAR ING. (IV) THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITA NO. 5784/DEL./2014 ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10756157/- MA DE ON ACCOUNT OF DISALLOWANCE OF SLP DUNNAGE TREATING IT AS REVE NUE EXPENDITURE INSTEAD OF CAPITAL EXPENDITURE AS HELD BY THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 23052221- MADE ON ACCOUNT OF DISALLOWANCE OF QUALITY IMPROVEMENT EXPE NSES BY HOLDING IT AS REVENUE EXPENDITURE INSTEAD OF CAPITA L EXPENDITURE AS HOLED BY THE A.O. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. (V) THE CROSS OBJECTIONS RAISED BY THE ASSESSEE IN C .O. NO. 158/DEL./2015 ARE AS UNDER: 1) IT IS CONTENDED THAT THE SECTION 14A HAS NO APP LICATION IN THE INSTANT CASE AND DISALLOWANCE TO THE EXTENT OF RS.7 5 23 199/- WITHOUT BRINGING ON RECORD ANY MATERIAL TO THE FACT THAT EXPENSES HAVE BEEN INCURRED BY THE APPELLANT FOR EARNING EXE MPTED INCOME IS WRONG. 2) WITHOUT PREJUDICE TO THE ABOVE IT IS CONTENDED THAT DISALLOWANCE UNDER SECTION 14A IS WRONG AND REQUIRE REVISION SIN CE INVESTMENT IN SUBSIDIARY HAVE TO BE EXCLUDED. 3) IT IS CONTENDED THAT ENGINEERING OVERHEADS ON C APITAL WORKS HAS BEEN WRONGLY DISALLOWED BY THE ASSESSING OFFICER TR EATING THESE AS CAPITAL EXPENDITURE. THERE HAS BEEN NO CHANGE IN THE TREATMENT AND PRINCIPLE OF CONSISTENCY SHOULD HAVE BEEN FOLLO WED. 56 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 4) IT IS CONTENDED THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE IN THE INSTANT CASE SINCE IT IS A NON-SC HEDULE VI COMPANY. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND MODIFY ALTER ADD OR FOREGO ANY CROSS OBJECTION(S) TO GROUNDS OF APPEAL FILED BY THE REVENUE AT ANY TIME BEFORE OR D URING THE HEARING OF THIS APPEAL. 29. THE GROUND NO. 1(I) OF THE APPEAL OF THE REVENUE FOR AY 2008-09 AND GROUND NO. 1 OF APPEAL OF REVENUE FOR AY 2010-11 RELATES TO DISALLOWANCE OF DONNAGE EXPENDITURE . TH ESE GROUNDS ARE IDENTICAL TO GROUND NO. 2 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2006-07.ACCORDINGLY FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2006-07 THESE GROUND OF THE APPEAL OF THE REVENUE ARE DISMISSED. 30. THE GROUND NO.1(II) OF THE APPEAL OF THE REVENUE FO R AY 2008- 09 AND GROUND NO. 2 OF THE APPEAL OF THE REVENUE F OR AY 2010- 11 ARE IDENTICAL TO THE GROUND NO. 3 (THREE) OF THE APPEAL OF THE REVENUE IN ASSESSMENT YEAR 2006-07 THUS THESE GROU NDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES FOLLOW ING OUR FINDING IN ASSESSMENT YEAR 2006-07. 31. THE GROUND NO. 1(III) (THREE) OF THE APPEAL OF TH E REVENUE FOR AY 2008-09 THE CROSS OBJECTION NO. 1 (ONE) OF THE ASSESSEE FOR AY 2008-09 AND GROUND NO. 1 OF THE APPEAL OF THE ASSES SEE FOR AY 2009-10 AND GROUND NO. 1 AND 2 OF THE CROSS OBJECTI ON FOR AY 2010-11 ARE RELATED TO DISALLOWANCE UNDER SECTION 1 4A OF THE ACT READ WITH RULE 8D OF THE RULES. THE IDENTICAL GROUN DS OF THE REVENUE AND THE ASSESSEE IN ASSESSMENT YEAR 2006-07 HAVE BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR D ECIDING AFRESH IN 57 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 THE LIGHT OF THE RECENT DECISIONS OF THE HONBLE CO URTS. ACCORDINGLY THE RESPECTIVE GROUNDS FOR AY 2008-09 ; 2009-10 AND 2010-11 ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING IN ACCORDANCE WITH LAW. THE RESPECTIVE GRO UNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 32. THE GROUND NO. 1(IV) OF THE APPEAL OF THE REVENUE FOR AY 2008-09 AND GROUND NO. 2 OF THE APPEAL OF THE ASSES SEE FOR AY 2009-10 ARE RELATED TO SOCIAL OBLIGATION EXPENSE. T HESE GROUNDS ARE IDENTICAL TO GROUND NO. 3 (THREE) OF THE APPEA L OF THE REVENUE IN ASSESSMENT YEAR 2007-08. FOLLOWING OUR FINDING I N ASSESSMENT YEAR 2007-08 THE GROUNDS OF THE APPEAL OF THE REVE NUE IS DISMISSED WHEREAS GROUND OF THE ASSESSEE IS ALLOWE D. 33. CROSS OBJECTION NO. 2 (TWO) OF THE ASSESSEE FOR AY 2008-09; GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2009-10 AND CROSS OBJECTION NO. 4 (FOUR) FOR ASSESS MENT YEAR 2010-11 ARE IDENTICAL TO GROUND NO. 7 (SEVEN) OF TH E APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 2006-07. FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2006-07 THE CROSS OBJECTION NO.2 O F THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 ; GROUND NO. 6 (SIX) OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 AND CROSS OBJECTION NO. 4 FOR ASSESSMENT YEAR 2010-11 ARE DIS MISSED ACCORDINGLY. 34. THE GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 AND CROSS OBJECTION NO. 3(T HREE) OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 RELATES TO UNA BSORBED ENGINEERING OVERHEADS. THESE ISSUES ARE IDENTICAL TO GROUND NO. FOUR OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YE AR 2006-07 58 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 WHICH HAS BEEN RESTORED TO THE FILE OF THE ASSESSIN G OFFICER FOR DECIDING AFRESH. ACCORDINGLY FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2006-07 THESE GROUNDS OF THE APPEAL AND CROSS OBJECTION OF THE ASSESSEE ARE RESTORED TO THE FILE OF THE ASSESS ING OFFICER. THESE GROUNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. 35. THE GROUND NO. 4 (FOUR) OF THE APPEAL OF THE ASSES SEE FOR ASSESSMENT YEAR 2009-10 RELATES TO INCOME FROM BOND ED WAREHOUSE. THE IDENTICAL GROUND RAISED BY THE REVEN UE IN ASSESSMENT YEAR 2006-07 HAS BEEN RESTORED TO THE FI LE OF THE ASSESSING OFFICER FOR DECIDING AFRESH. ACCORDINGLY FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2006-07 THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALSO RESTORED TO THE FILE OF THE AS SESSING OFFICER FOR DECIDING AFRESH. THE GROUND OF THE APPEAL OF THE AS SESSEE IS ACCORDINGLY ALLOWED FOR THE STATISTICAL PURPOSES. 36. THE GROUND NO. 5(FIVE) OF THE APPEAL OF THE ASSESS EE FOR ASSESSMENT YEAR 2009-10 RELATES TO INTEREST ON SERV ICE TAX AMOUNTING TO 15 57 766/-DISALLOWED BY THE ASSESSING OFFICER. NO JUSTIFICATION WAS SUBMITTED BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER FOR ALLOWING THIS EXPENDITURE. TH E ASSESSING OFFICER HELD SAME TO BE IN THE NATURE OF THE PENALT Y BY THE SERVICE TAX DEPARTMENT FOR DEFAULT ON THE PART OF THE ASSES SEE AND ACCORDINGLY HE DISALLOWED THE EXPENSE IN TERMS OF EXPLANATION-1 1 TO SECTION 37(1) OF THE ACT. THE LEARNED CIT(A) U PHELD THE DISALLOWANCE OBSERVING AS UNDER: 5.9.3 THE COURTS OF LAW OF THE COUNTRY HAVE TIME A ND AGAIN HELD THAT THE NOMENCLATURE OF PENALTY ETC DOES NOT DETER MINE WHETHER IT IS PENAL OR COMPENSATORY IN NATURE. WHENEVER ANY STAT UTORY IMPOST IS PAID BY THE ASSESSEE BY WAY OF DAMAGES OR PENALTY O R INTEREST NOT WITHSTANDING NOMENCLATURE OF IMPOST AS GIVEN BY STA TUES ONE HAS TO 59 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 FIND OUT AS TO WHETHER IT IS COMPENSATORY OR PENAL IN NATURE. FURTHER WHERE EVER SUCH IMPOST IS FOUND TO .BE OF COMPOSITE NATURE AUTHORITIES ARE OBLIGED TO BIFURCATE THE TWO COMPON ENTS OF IMPOSTS AND GIVE DEDUCTION TO THAT COMPONENT WHICH IS COMPE NSATORY IN NATURE AND REFUSE TO GIVE DEDUCTION TO THAT COMPONE NT WHICH IS PENAL IN NATURE. THIS HAS BEEN HELD IN THE CASE OF CIT V. CATHOLIC SYRIAN BANK LTD. (2004) 265 ITR 177 (KER). 5.9.4 IN CIT V. ENCHANTE JEWELLERY LTD. (2012) 83 C CH 088 DEL HC IT HAS BEEN HELD INTEREST PAID ON CUSTOMS DUTY FOR PURCHASE OF CAPITAL ASSET AFTER COMMENCEMENT OF BUSINESS IS ALL OWABLE U/S 37(1) OF THE ACT AS THE INTEREST PAID WAS NOT IN THE NATU RE OF PENALTY FOR INFRACTION OF LAW. 5.9.5 HOWEVER IN ACIT V. BHANVI AGRO (P) LTD. (201 2) 32 CCH 288 JODHPUR TRIB: (2012) 51 SOT 182 (JODH) (URO) IT HA S BEEN HELD THAT COMPOUNDING FEE UNDER SALES TAX ACT DEBITED TO THE A/C SALES TAX' IS NOT ALLOWABLE AS AMOUNT PAID FOR INFRACTION OF L AW IS NOT ALLOWABLE U/S 37(1) OF THE ACT. 5.9.6 THEREFORE UNDER THE PROVISION OF EXPLANATION TO SECTION 37(1) OF THE ACT THE EXPENDITURE INCURRED FOR ANY PURPOS ES WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW CANNOT BE ALL OWED AS A DEDUCTION. THIS EXPLANATION WAS INTRODUCED TO REITE RATE THE POSITION TAKEN BY VARIOUS COURTS THAT ANY EXPENDITURE INCURR ED IN CONNECTION WITH INFRINGEMENT OF LAW IS NOT AN ALLOWABLE BUSINE SS DEDUCTION. IN HAJI AZIZ & ABDUL SHAKOOR BROS V. CIT (1961) 41 ITR 350(SC) IT WAS HELD BY THE APEX COURT THAT NO ITEM OF EXPENDITURE WHICH IS PAID BY WAY OF PENALTY FOR THE BREACH OF LAW WILL BE ALLOWE D AS IT CANNOT BE SAID THAT THE AMOUNT IS INCURRED WHOLLY AND EXCLUSI VELY FOR THE BUSINESS OF THE ASSESSEE. CONSIDERING THE FACT THAT THE ASSESSEE HAS PAID INTEREST ON DELAYED PAYMENT OF SERVICE TAX TH E VIEW TAKEN BY THE AO IS HELD TO BE CORRECT AS THAT TANTAMOUNT TO PENALIZING THE ASSESSEE FOR SUCH DEFAULT OR INFRINGEMENT OF LAW. I JF THE PRELIMINARY LIABILITY TO BE DISCHARGED BY THE ASSESSEE IS NOT A LLOWED AS EXPENSES LAID OUT OR INCURRED FOR THE PURPOSE OF TH E BUSINESS ORDINARILY THE INTEREST PAID THEREON ALSO CANNOT B E CONSIDERED AS EXPENSES /AID OUT OR INCURRED WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AS HELD IN SAURASHTRA CEMENT & CHEMICA L INDUSTRIES LTD. V. CIT (1995) 213 ITR 523 (GUJ). THEREFORE TH E ADDITION OF RS. 15 57 766/- IS HEREBY CONFIRMED AND THE ASSESSEE GE TS NO RELIEF ON THIS GROUND OF APPEAL. 36.1 BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SUBM ITTED THAT INTEREST ON DELAYED DEPOSIT OF SERVICE TAX IS COMPENSATORY IN 60 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 NATURE AND NOT PENAL. HE SUBMITTED THAT ISSUES STAN DS SETTLED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF LACHMANDAS MATHURA VS CIT (2002 ) 254 ITR 799 (SC) AND CIT VS LUXMI DEVI SUGAR MILLS LTD (199 1) 188 ITR 041 (SC). THE LEARNED DR ON THE OTHER HAND RELIED O N THE ORDER OF THE LOWER AUTHORITIES. 36.2 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON TH E ISSUE IN DISPUTE. THE ISSUE INVOLVED IS WHETHER INTEREST PAID ON DELAYED DEPOSIT OF THE SERVICE TAX IS IN THE NATURE OF THE COMPENSATORY OR IN THE NATURE OF THE PENALTY. IF IT IS IN THE NATUR E OF PENALTY THEN IT IS LIABLE TO BE DISALLOWED IN TERMS OF EXPLANATI ON- 1 TO SECTION 37(1) OF THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF LACHMANDAS MATHURA (SUPRA) HELD THAT INTEREST PAID ON SALES TAX IS COMPENSATORY IN THE NATURE. THE FINDING OF THE H ONBLE SUPREME COURT IS REPRODUCED AS UNDER: 2. WHILE GRANTING SPECIAL LEAVE TO APPEAL THE APPEAL HAS BEEN CONFINED TO QUESTION NOS. 1 AND 2 ONLY. THE HIGH CO URT HAS PROCEEDED ON THE BASIS THAT THE INTEREST ON ARREARS OF SALES-TAX IS PENAL IN NATURE AND HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT IT IS COMPENSATORY IN NATURE. IN TAKING THE SAID VI EW THE HIGH COURT HAS PLACED RELIANCE ON ITS FULL BENCH DECISION IN S ARAYA SUGAR MILLS (P) LTD. VS. CIT 1978 CTR (ALL)(FB) 329 : (1979) 11 6 ITR 387 (ALL) (FB) : TC 17R.797. THE LEARNED COUNSEL APPEARING FOR THE APPELLANT- ASSESSEE STATES THAT THE SAID JUDGMENT OF THE FULL BENCH HAS BEEN REVERSED BY THE LARGER BENCH OF THE HIGH COURT IN T RIVENI ENGINEERING WORKS LTD. VS. CIT (1984) 38 CTR (ALL)( FB) 107 : (1983) 144 ITR 732 (ALL)(FB) : TC 17R.794 WHEREIN IT HAS B EEN HELD THAT INTEREST ON ARREARS OF TAX IS COMPENSATORY IN NATUR E AND NOT PENAL. THIS QUESTION HAS ALSO BEEN CONSIDERED BY THIS COUR T IN CIVIL APPEAL NO. 850/79 TITLED SARAYA SUGAR MILLS (P) LTD. VS. C IT DECIDED ON 29TH FEB. 1996. IN THAT VIEW OF THE MATTER THE APP EAL IS ALLOWED AND THE QUESTION NOS. 1 AND 2 ARE ANSWERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE. NO ORDER AS TO CO STS. 61 ITA NOS.3885/DEL./2011; 3942/DEL./2011; 3439/DEL/.2014; 3440/DEL./2014; 2201/DEL./2014; & 5784/DEL./2014 C.O. NOS. 93/DEL./2015; 94/DEL./2015 & 158/DEL./2015 36.3 THE PAYMENT OF SALES-TAX AND SERVICE TAX BOTH ARE I NDIRECT TAXES WHICH BEING PARI MATERIA SAID EXPENDITURE ON INTEREST FOR DELAYED PAYMENT OF SERVICE TAX IS ELIGIBLE FOR ALLO WANCE AS REVENUE EXPENDITURE FOLLOWING THE FINDING OF THE HONBLE SU PREME COURT ABOVE. ACCORDINGLY THIS GROUND OF APPEAL IS RESTOR ED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION WHETHER THE ASSESSEE HAS FOLLOWED INCLUSIVE/EXCLUSIVE METHOD OF ACCOUNTING F OR SERVICE TAX AND THEN DECIDE IN ACCORDANCE WITH LAW. THE GROUND OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR THE STAT ISTICAL PURPOSES. 37. IN THE RESULT ALL THE APPEALS FILED BY THE REVENU E I.E. 3942/DEL/2011 3439/DEL/2014 3440/DEL/2014 & 5784/DEL/2014 AND THE APPEALS FILED BY THE ASSESSEE I.E. ITA NO.3885/DEL/2011 & 2201/DEL/2014 AS WELL AS THE CRO SS OBJECTIONS I.E. C.O. NO. 94/DEL./2015 AND 158/DEL ./2015 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES; WHEREAS TH E CROSS OBJECTIONS I.E. C.O. NO. 93/DEL./2015 IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2021 SD/- SD/ (K.N. CHARY) (O.P. KANT) JUDICIALMEMBER ACCOUNTANTMEMBER DATED: 31 ST MAY 2021. RK/- (DTDS) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI