M/s. THE BOMBAY DYEING & MFG. CO. LTD., MUMBAI v. ADDL. CIT. Rg. - 2(1), MUMBAI

ITA 4105/MUM/2005 | 2001-2002
Pronouncement Date: 14-09-2011 | Result: Dismissed

Appeal Details

RSA Number 410519914 RSA 2005
Assessee PAN AAACT2328K
Bench Mumbai
Appeal Number ITA 4105/MUM/2005
Duration Of Justice 6 year(s) 3 month(s) 13 day(s)
Appellant M/s. THE BOMBAY DYEING & MFG. CO. LTD., MUMBAI
Respondent ADDL. CIT. Rg. - 2(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 14-09-2011
Date Of Final Hearing 07-09-2011
Next Hearing Date 07-09-2011
Assessment Year 2001-2002
Appeal Filed On 01-06-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.5059/MUM/2003 (ASSESSMENT YEAR : 1999-2000) DY. COMMISSIONER OF INCOME TAX CIRCLE -2(1) AAYAKAR BHAVAN ROOM NO.575 5 TH FLOOR. M.K.ROAD MUMBAI-400020. M/S BOMBAY DYEING & MFG. CO.LIMITED NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K APPELLANT V/S RESPONDENT ITA NO.1624/MUM/2005 (ASSESSMENT YEAR : 2000-01) THE BOMBAY DYEING & MFG. CO.LTD NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K ADDL. COMMISSIONER OF INCOME TAX RANGE 2(1) AAYAKAR BHAVAN M.K.ROAD MUMBAI-400020 APPELLANT V/S RESPONDENT ITA NO.1667/MUM/2005 (ASSESSMENT YEAR : 2000-01) DY. COMMISSIONER OF INCOME TAX CIRCLE -2(1) AAYAKAR BHAVAN ROOM NO.575 5 TH FLOOR. M.K.ROAD MUMBAI-400020. THE BOMBAY DYEING & MFG. CO.LTD. NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K APPELLANT V/S RESPONDENT ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 2 ITA NO.4105/MUM/2005 (ASSESSMENT YEAR : 2001-02) THE BOMBAY DYEING & MFG. CO.LTD NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K ADDL. COMMISSIONER OF INCOME TAX RANGE 2(1) AAYAKAR BHAVAN M.K.ROAD MUMBAI-400020 APPELLANT V/S RESPONDENT ITA NO.4366/MUM/2005 (ASSESSMENT YEAR : 2001-02) DY. COMMISSIONER OF INCOME TAX CIRCLE -2(1) AAYAKAR BHAVAN ROOM NO.575 5 TH FLOOR. M.K.ROAD MUMBAI-400020. THE BOMBAY DYEING & MFG. CO.LTD. NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K APPELLANT V/S RESPONDENT ITA NO.4328/MUM/2006 (ASSESSMENT YEAR : 2002-03) THE BOMBAY DYEING & MFG. CO.LTD NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K ADDL. COMMISSIONER OF INCOME TAX RANGE 2(1) AAYAKAR BHAVAN M.K.ROAD MUMBAI-400020 APPELLANT V/S RESPONDENT ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 3 ITA NO.4548/MUM/2006 (ASSESSMENT YEAR : 2002-03) ASSISTANT COMMISSIONER OF INCOME TAX 2(1) AAYAKAR BHAVAN ROOM NO.561 5 TH FLOOR. M.K.ROAD MUMBAI-400020. THE BOMBAY DYEING & MFG. CO.LTD. NEVILLE HOUSE J.N.HERDIA MARG BALLARED ESTATE MUMBAI-400001 PAN:AAACT2328K APPELLANT V/S RESPONDENT DATE OF HEARING : 7.9.2011 DATE OF PRONOUNCEMENT : REVENUE BY : SHRI SATBIR SINGH ASSESSEE BY : SHRI MADHUR AGAR WAL : O R D E R PER D.K.AGARWAL (JM) THE APPEAL IN ITA NO.5059/MUM/2003 PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.4.20 03 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 1 999-2000 AND CROSS-APPEALS IN ITA NOS.1624/MUM/2005 & 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 AND 4328/MUM/2006 & 4548/MUM/2006 PREFERRED BY THE ASSE SSEE AND REVENUE AND DIRECTED AGAINST THE SEPARATE OR DERS DATED 30.12.2004 31.3.2005 AND 26.5.2006 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2000-01 2001-02 AN D 2002- ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 4 03 RESPECTIVELY. SINCE FACTS ARE IDENTICAL AND COM MON ISSUES ARE INVOLVED ALL THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS ORDER FOR THE SAKE O F CONVENIENCE. ITA NO.5059/MUM/2003 (AY-1999-2000)(BY REVENUE) 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND SALE OF TEXTILE AND DMT. THE ASSESSEE FILED RETURN DECLARING LOSS OF RS.14 15 83 588/-. HOWEVER THE ASSESSMEN T WAS COMPLETED AT AN INCOME OF RS.21 58 69 320/- VIDE OR DER DATED 20.3.2002 PASSED U/S 143(3) OF THE INCOME TA X ACT 1961(IN SHORT THE ACT). ON APPEAL THE LD. CIT(A) WHILE PARTLY ALLOWING THE APPEAL ALLOWED SUBSTANTIAL RELI EF TO THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A) T HE REVENUE IS IN APPEAL BEFORE US. 4. GROUND NO.1 TAKEN BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING T HE DISALLOWANCE MADE U/S 14A OF THE ACT FOR THE EXPEND ITURE RELATED TO EXEMPTED INCOME ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 5 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASSESSEE WAS ASKED TO FURNISH THE EXPLANATION IN RESPECT OF EXPENDITURE INCURRED ON INCOME EXEMPT UNDER CHAPTER III SHOWN AT RS.2 12 98 955/- SO AS TO REDUCE THE SAID EXPENDITURE FROM THE EXEMPT INCOME. IN REPLY IT WA S SUBMITTED THAT THE INVESTMENTS WERE MADE FROM INTER NAL ACCRUALS AND NOT FROM THE BORROWED FUNDS AND ALSO T HERE WAS NO FRESH INVESTMENTS MADE DURING THE CONCERNED YEA R WHOSE INCOME IS EXEMPT UNDER CHAPTER III. THE ASSESSEE FURTHER SUBMITTED THAT THERE WAS NO INTEREST EXPENDITURE IN CURRED ON EARNING OF SUCH INCOME WHICH IS EXEMPT UNDER CHAPT ER III. HOWEVER THE AO OBSERVED THAT AS PER THE AMENDED PROVISIONS OF SECTION 14A OF THE ACT WHILE COMPUT ING THE INCOME NO DEDUCTION IN RESPECT OF EXPENDITURE INCU RRED FOR EARNING SUCH INCOME WHICH DOES NOT FORM PART OF T OTAL INCOME IS ADMISSIBLE. IN THE ABSENCE OF ANY EVIDENC E IN SUPPORT OF THE CONTENTION THAT THERE WAS NO BORROWE D FUNDS WHICH WERE INVESTED IN EARNING INCOME WHICH IS EX EMPT FROM TAX AND KEEPING IN VIEW THAT SOME ADMINISTRAT IVE EXPENSES MUST HAVE BEEN INCURRED BY THE ASSESSEE COMPANY IN THIS REGARD THE AO CONSIDERED THAT 1 0% OF THE INCOME AS EXPENSES ATTRIBUTABLE TO EARN SUCH INCO ME AND ACCORDINGLY HE DISALLOWED RS.21 29 899/- AND ADDED TO THE ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 6 INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) O BSERVED THAT NO ADMINISTRATIVE EXPENSES CAN BE ALLOCATED TO THE DIVIDEND INCOME. ONLY THE INTEREST CAN BE ALLOCA TED TO THE DIVIDEND INCOME PROVIDED THE INVESTMENT IN SHARES I S MADE OUT OF THE BORROWED FUNDS. NO SUCH NEXUS BETWEEN THE INTEREST BEARING BORROWINGS AND THE INVESTMENTS IN SHARES HAS BEEN BROUGHT OUT BY THE AO AND TAKING INTO ACCO UNT THE HUGE CAPITAL AND RESERVE BALANCE OF THE APPELLANT IT CAN BE VERY WELL CONCLUDED THAT THE SHARES AND SECURITIES HAVE BEEN ACQUIRED BY THE APPELLANT OUT OF ITS OWN FUND S AND ACCORDINGLY HE DELETED THE DISALLOWANCE MADE BY TH E AO. 6. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE L D. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.21 29 899/- MADE BY THE AO. 7. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE VERY FAIRLY SUBMITS THAT HE HAS NO OBJECTI ON IF THE DISALLOWANCE MADE BY THE AO BE RESTORED. 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD IN THE ABSENCE OF ANY SUPPORTING MATERIAL PLACED ON RECOR D BY THE ASSESSEE AND KEEPING IN VIEW THAT THE LEARNED COUN SEL FOR ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 7 THE ASSESSEE HAS VERY FAIRLY AGREED FOR THE SUSTE NANCE OF DISALLOWANCE OF RS.21 29 899/- MADE BY THE AO U/ S 14A OF THE ACT WE REVERSE THE ORDER PASSED BY THE LD. C IT(A) ON THIS ACCOUNT AND RESTORE THE DISALLOWANCE MADE BY THE AO. THE GROUND TAKEN BY THE REVENUE IS THEREFORE AL LOWED. 9. GROUND NO.2 TAKEN BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN DIRECTING THE A O TO ALLOW THE EXPENDITURE OF RS.14.95 CRORES INCURRED ON VOLUNTARY RETIREMENT SCHEME TREATING THE SAME AS REVENUE EXPENDITURE 10. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO OBSERVED THAT THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY VO LUNTARY RETIREMENT SCHEME EXPENDITURE OF RS.14.95 CRORES SH OULD NOT BE TREATED AS CAPITAL EXPENDITURE. IN RESPONS E IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE ASSESS EE- COMPANY PAID A SUM OF RS.14.95 CRORES TO ITS E MPLOYEES UNDER VOLUNTARY RETIREMENT SCHEME. THE SAME IS TR EATED AS DEFERRED REVENUE EXPENDITURE IN ACCOUNTS. HOWE VER FOR INCOME TAX PURPOSE THE SAME IS TREATED AS REVENUE EXPENDITURE AND FULLY DEDUCTED OFF IN THE YEAR OF PAYMENT ITSELF. THE RELIANCE WAS ALSO PLACED BY THE ASSESS EE IN THE CASE OF SASSON J.DAVID & CO. P.LTD. V/S CIT 118 IT R 261 271 (SC) AND CIT V/S ASSAM OIL CO.LTD 154 ITR 647 ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 8 (CALCUTTA). HOWEVER THE AO OBSERVED THAT THE AS SESSEE HAS MADE PAYMENT TO ITS EMPLOYEES FOR INCREASING T HE PROFITABILITY AND ALSO TO TAKE LONG TERM ADVANTAGE OF COMPETITIVENESS. THUS MAKING THE SAID PAYMENT THE ASSESSEE HAS RECEIVED THE ENDURING BENEFITS INASMUC H AS IT COULD NOT HAVE MADE FUTURE PAYMENTS OF THE SALARI ES TO THE ABOVE EMPLOYEES. THUS THE PAYMENT OF VOLUNTARY RETIREMENT SCHEME OF RS.14.95 CRORES HAS RESULTED IN ENDURING BENEFITS TO THE ASSESSEE COMPANY AND HENCE HE TREATED THE SAME AS CAPITAL EXPENDITURE. IN SUPPOR T THE RELIANCE WAS ALSO PLACED ON THE CBDT DIRECTIONS TH AT SUCH EXPENDITURE IS TO BE TREATED AS CAPITAL EXPENDITUR E AND ALSO THAT THE NEWLY INTRODUCED SECTION 35DDA HAS NO RETROSPECTIVE EFFECT. HENCE THE AO DISALLOWED THE SUM OF RS.14.95 CRORES. HE ALSO ADDED THE AMOUNT OF RS. 1.86 CRORES DEBITED TO THE PROFIT AND LOSS ACCOUNT. O N APPEAL THE LD. CIT(A) FOLLOWING THE DECISIONS CITED BY THE ASSESSEE I.E. SASSON J.DAVID & CO. P.LTD. (SUPRA) CIT V/S SIMPSON AND CO. LTD. (NO.1) 230 ITR 703 (MAD) CIT V/S C.I.T. VS. GEORGE OAKES LTD. 197 ITR 288 (MAD.) ASSAM OIL CO.LTD (SUPRA) AND THE DECISION OF THE TRIBUNAL IN BHOR INDUSTRIES L TD. IN ITA NO.114/MUM/2000 CONFIRMED BY THE HONBLE HIGH COUR T REPORTED IN 180 ITR 508 (BOM.) HELD THAT VOLUNTARY ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 9 RETIREMENT SCHEME EXPENSES BEING INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ARE FULLY A DMISSIBLE IN THE COMPUTATION OF INCOME IN THE YEAR OF INCURREN CE AND HENCE DELETED THE ADDITION MADE BY THE AO. 11. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 12. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LD. CI T(A) FURTHER SUBMITS THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S BHOR INDUSTRIES LTD. (2003) 264 I TR 180 AND CIT V/S M/S GODREJ GE APPLIANCES LTD. IN INCOME TAX APPEAL NO.161 OF 2007 DATED 23.9.2008. HE THERE FORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE ADDITION BE UPHELD. 13. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND MERIT IN THE PLEA OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 10 14. IN THE CASE OF BHOR INDUSTRIES LTD (SUPRA) IT H AS BEEN HELD THAT THE EXPENDITURE RELATING TO VOLUNTARY RETIREMENT SCHEME WERE A REVENUE EXPENDITURE AND WERE ALLOW ABLE DEDUCTION. 15. IN M/S GODREJ GE APPLIANCES LTD. (SUPRA) THEI R LORDSHIPS FOLLOWING THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF INDIAN CABLE V/S WORKMEN REP ORTED IN AIR 1972 SUPREME COURT 2195 WHEREIN IT HAS BEEN H ELD THAT SUCH EXPENDITURE WAS ALLOWABLE U/S 37(1) OF THE INC OME TAX ACT AND WAS NOT AN EXPENDITURE OF CAPITAL EXPENDITU RE DISMISSED THE REVENUES APPEAL. 16. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE ARE OF THE VIEW THAT THE EXPENDITURE RELATING TO VOLUNTAR Y RETIREMENT SCHEME IS A REVENUE EXPENDITURE AND AL LOWABLE U/S 37(1) OF THE ACT. ACCORDINGLY WE ARE INCLIN ED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITI ON MADE BY THE AO. THE GROUND TAKEN BY THE REVENUE IS THER EFORE REJECTED. 17. GROUND NO.3 OF THE REVENUES APPEAL READS AS UN DER: 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION MADE ON ACCOUNT OF DISALLOWANCE OF PREMIUM ON DEBENTURE REDEMPTION AND INTEREST ON SECURED PREMIU M NOTES. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 11 18. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U /S 37(1) OF THE ACT IN RESPECT OF PREMIUM ON DEBENTURE REDEM PTION OF RS.13 00 000/- AND SPN INTEREST DEBITED TO THE RESE RVE ACCOUNT. ACCORDING TO THE AO SINCE THESE EXPENSES ARE APPORTIONED AGAINST SHARE PREMIUM RESERVES WHICH I S NOT TAXABLE AND NO PROVISION IS MADE IN THE BOOKS THE DEDUCTION CLAIMED U/S 37(1) IS NOT ALLOWABLE AND HENCE HE DIS ALLOWED THE SAME. ON APPEAL THE LD. CIT(A) OBSERVED AND HELD THAT THE AO WITHOUT ANALYZING THE NATURE OF THESE EXP ENSES HAD SUMMARILY DISALLOWED THE SAME WHOLLY ON ACCOUN T OF THE FACT THAT THESE EXPENSES ARE DEBITED TO THE SHARE P REMIUM RESERVE ACCOUNT. IN FACT THE PREMIUM ON DEBENTURE AND INTEREST ON SECURED PREMIUM NOTES (SPN) CONSTITUT ES INTEREST EXPENDITURE IN THE CASE OF THE APPELLANT A ND THE SAID EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF MODERNIZATION AND EXPANSION OF AN EXISTING BUSINES S. SUCH EXPENDITURE IS CLEARLY ALLOWABLE U/S 36(1)(III) OF THE ACT. HE FURTHER OBSERVED THAT THE ASSESSEE HAS BORROWED MON EY FOR THE PURPOSE OF ITS EXISTING BUSINESS AND THE MONEY SO BORROWED HAVE BEEN UTILIZED FOR FINANCIAL THE MODER NIZATION AND EXPANSION PROGRAMME OF THE APPELLANTS BUSINES S AND THEREFORE THE INTEREST PAID OR PAYABLE ON SUCH B ORROWINGS ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 12 CONSTITUTES AN ADMISSIBLE BUSINESS EXPENDITURE SP ECIFICALLY ALLOWABLE U/S 36(1)(III) OF THE ACT AND ACCORDING LY HE DELETED THE DISALLOWANCE MADE BY THE AO. 19. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 20. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LD.CIT(A ) SUBMITS THAT THIS ISSUE IS FULLY COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN DCIT V/S THE BOMBAY DYEING & MFG.CO.LTD. IN ITA NO.8127/MUM/2004 (AY-1996-97) DATED 31.8.2007. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 21. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT I S ALSO NOT IN DISPUTE THAT THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE (SUPRA) WHEREIN ON THE SIMILAR FACTS THE TRIBUNAL FOLLOWING THE DECISION IN MADRAS INDUSTRIALS INVES TMENT ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 13 CORPORATION LTD V/S CIT 225 ITR 892 (SC) HAS OBSE RVED AND HELD VIDE PARAGRAPH 2.2 OF ITS ORDER AS UNDER : 2.2 IN THE CASE OF THE ASSESSEE ALSO THOUGH THE LIABILITY TO PAY STARTS FROM FOURTH YEAR ONWARDS T HE LIABILITY IN FACT PERTAINS TO THE ENTIRE PERIOD O F SEVEN YEARS DURING WHICH THE FUNDS BORROWED BY WAY OF SP N WERE UTILIZED. THE ASSESSEE DID UTILIZE THE FUNDS B Y WAY OF SPN DURING THE FIRST THREE YEARS. HOWEVER THIS DOES NOT MEAN THAT THE FUNDS IN THE FIRST THREE YEARS WE RE INTEREST-FREE. IT IS ONLY IN VIEW OF THE TERMS AN D CONDITIONS OF SPN THAT THE INTEREST (PREMIUM) WAS PAYABLE FROM THE FOURTH YEAR ONWARDS. THE VIEW IS FORTIFIED BY THE RATIO OF MADRAS INDUSTRIAL INVESTM ENTS CORPORATION LTD. (SUPRA) AND THEREFORE THE AMOUNT OF RS.8.14 CRORES CLAIMED BY THE ASSESSEE IS AN ALLOWABLE DEDUCTION. THOUGH THE EXPENDITURE HAS BEEN SHOWN AS A PROVISION IT IS A PROVISION FOR KN OWN AND ASCERTAINED LIABILITY WHICH WAS PROPORTIONATELY SPREAD OVER THE PERIOD OF THE DEBENTURES. IN ALL T HE EARLIER YEARS AS WELL AS SUBSEQUENT YEARS EXCEPT F OR THE ASSESSMENT YEAR 1999-2000 THE CLAIM OF THE ASSESSEE HAD BEEN ALLOWED BY THE AO HIMSELF AND IN THE ASSESSMENT YEAR 1999-2000 THE CLAIM OF THE ASSESSEE HAD BEEN ALLOWED BY THE CIT(A). IN VIEW OF THE ABOVE DISCUSSION THE CIT(A) HAD RIGHTLY BEEN DIRECTED THE AO TO ALLOW DEDUCTION AMOUNTING TO RS.8.14 CRORES. THE SAME IS UPHELD. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUG HT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING T HE ORDER OF THE TRIBUNAL AND CONSISTENT VIEW UPHOLD THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE DISALLOWANCE MAD E BY THE AO. THE GROUND TAKEN BY THE REVENUE IS THEREFORE R EJECTED. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 14 22. GROUND NO.4 READS AS UNDER : 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW WARWICK EXPENSES AS REVENUE EXPENDITURE. 23. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A O OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION O F RS.4 69 00 000/- IN RESPECT OF WARWICK EXPENSES WH ICH WERE DEFERRED IN ACCOUNTS AND CLAIMED AS REVENUE EXPENDI TURE IN THE COMPUTATION OF INCOME. ACCORDING TO THE AO THE RE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE IN THE INC OME TAX ACT AND HENCE HE TREATED THE SAID EXPENDITURE AS C APITAL EXPENDITURE AND DISALLOWED THE SAME. ON APPEAL TH E LD. CIT(A) WHILE OBSERVING THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO WITHOUT ANY APPLICATION OF MIND DE LETED THE DISALLOWANCE MADE BY THE AO FOLLOWING THE RATIO OF THE DECISION CITED BY THE ASSESSEES COUNSEL. 24. AT THE TIME OF HEARING THE LD. DR SUPPORTS TH E ORDER OF THE AO. 25. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LD. CIT (A) SUBMITS THAT IN VIEW OF THE RATIO OF THE DECISION CITED BEFORE THE LD. CIT(A) THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 15 26. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED AS UNDER (PAGES 8 TO 10 OF CIT(A)S ORDER) : 8. IT IS CONTENDED BY THE APPELLANT THAT THESE EXPENSES WERE INCURRED FOR RATIONALIZING THE BUSINE SS STRUCTURE OF THE APPELLANT AND THE SAME ARE MOSTLY IN THE NATURE OF CONSULTANCY FEES PAID TO WAR WICK UNIVERSITY UK IN THE AREAS OF MARKETING MAN-POWER ETC. SO THAT THE COST OF PRODUCTION CAN BE BROUGHT DOWN THESE EXPENSES ALSO INCLUDE TRAVELING EXPENSES AS W ELL INCURRED UPON THE FOREIGN TRAVEL OF THE EMPLOYEES W HO WERE SENT ABROAD FOR TRAINING IN MARKETING AT WAR WICK UNIVERSITY OF U.K. IT WAS POINTED OUT THAT OUT OF THE EXPENDITURE OF RS.4 69 CRORES AN EXPENDITURE OF RS .3.30 CRORES WAS INCURRED TOWARDS THE CONSULTANCY FEES PAYABLE TO THE UNIVERSITY OF WAR WICK U.K. AND T HE BALANCE EXPENSES ARE INCURRED UPON THE FOREIGN TRAI NING OF THE APPELLANTS EMPLOYEES AT THE WAR WICK UNIVERS ITY. THUS THESE EXPENSES HAVE BEEN INCURRED BY THE APPELLANT FOR PROCURING THE CONSULTANCY SERVICES FO R IMPROVEMENT OF THE VARIOUS ASPECTS OF ITS TEXTILE BUSINESS I.E. OPERATIONAL MANAGEMENT MARKETING PRODUCTION PLANNING AND CONTROL AND QUALITY IMPROVEMENT MAN-POWER REDUCTION MINIMIZING THE C OST ETC. THE APPELLANT HAD ALSO RELIED UPON SOME JUDGME NTS REGARDING THE ADMISSIBILITY OF THESE EXPENSES WHIC H ARE AS UNDER : CITVS-ALUMINIUM CORPN.OF INDIA LTD.92 ITR 563 (CALCUTTA) EXPENDITURE INCURRED IN CALLING FOREIGN TECHNICIAN S TO EXAMINE THE PROCESS OF WORKING THE PLANT AND SUGGESTING IMPROVEMENT WHICH RESULTED IN SUBSTANTIAL RISE IN THE PRODUCTION IS A REVENUE EXPENDITURE CIT-VS- PRAGA TOOLS LTD. 157 ITR 282(AP.) ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 16 EXPENSES BY WAY OF CONSULTANCY FEES FOR IMPROVING QUALITY OF PRODUCTS IS REVENUE EXPENDITURE HINDUSTAN ALUMINIUM CORP.LTD. -VS- CIT 159 ITR 673 (CALCUTTA) EXPENDITURE INCURRED IN SENDING SOME OF THE EMPLOYEES TO USA FOR PRACTICAL TRAINING AND EXPERIENCE IN RUNNING THE FACTORY HELD ALLOWABLE WHILE MAKING SUCH DISALLOWANCE THE ASSESSING OFFICE R IS PREDOMINANTLY GUIDED BY THE ACCOUNTING ENTRIES RELA TING TO SUCH EXPENDITURE. THE EXPENSES ARE HELD TO BE CAPITAL IN NATURE BECAUSE THE SAME ARE TREATED AS DEFERRED REVENUE EXPENSES AND NOT DEBITED TO THE P& L ACCOUNT IN THEIR ENTIRETY. THE DISALLOWANCE HAS BE EN MADE IN A SUMMARY MANNER WITHOUT TRYING TO ASCERTAI N THE NATURE OF THESE EXPENSES AND TO EXAMINE ADMISSIBILITY OF THE SAME UNDER THE RELEVANT PROVI SIONS OF THE I.T.ACT. IT HAS BEEN OBSERVED AND HELD BY THE LD. CIT(A) (PA GE 10 OF CIT(A)S ORDER) : FROM THE SUBMISSIONS MADE BY THE A.R. OF THE APPEL LANT IT IS APPARENT THAT THE SAID EXPENDITURE HAS BEEN INCURRED ON AVAILING OF THE CONSULTANCY SERVICES AN D EXPERT ADVICE OF THE WAR WICK UNIVERSITY FOR EFFEC TING IMPROVEMENT IN THE BUSINESS OF THE APPELLANT SO TH AT THE COST OF OVER HEAD ARE MINIMIZED AND THE MARKETING O F THE APPELLANT IS IMPROVED ALONG WITH THE QUALITY IMPROVEMENT. THESE EXPENSES WERE NECESSITATED AND DICTATED BY THE COMMERCIAL EXPEDIENCY AND LOOKING T O THE FACT RECESSION AND INCREASED COMPETITIVENESS IN THE TEXTILE BUSINESS THE APPELLANT HAD TO DEVICE AND P UT INTO EFFORT THE NEW METHOD AND POLICIES FOR BOOSTING ITS MARKET SHARE BY IMPROVING ITS PRODUCT QUALITY AS WE LL AS BY REDUCING THE COST OF PRODUCTION AND OTHER OVER H EAD EXPENSES. SUCH EXPENSES CONSTITUTE REVENUE EXPENDITURE AND THE SAME HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE APPELL ANT. THE EXPENSES ON FOREIGN TRAVEL OF THE EMPLOYEES HAV E ALWAYS BEEN HELD TO BE AN ALLOWABLE DEDUCTION AND S UCH ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 17 EXPENSES ON FOREIGN TOUR UNDERTAKEN BY THE EMPLOYEE S OF THE APPELLANT FOR BUSINESS PURPOSES ARE ADMISSIB LE IN THE COMPUTATION OF INCOME. THE VARIOUS JUDGMENTS C ITED BY THE APPELLANT ARE SQUARELY APPLICABLE TO THE FAC TS OF ITS CASE AND THE CONSULTANCY EXPENSES AS WELL AS TH E EXPENSES ON THE FOREIGN TRAINING OF THE EMPLOYEES A RE ALLOWABLE AS REVENUE EXPENDITURE TO THE APPELLANT. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT ANY APPLICATION OF MIND AND THE SAME IS THE REFORE DELETED. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDINGS OF THE LD. CIT(A) AND KEEPING IN VIEW THAT IT IS WELL SETTLED THAT MAKING OF AN ENTRY OR ABSENCE OF AN ENTRY CANNOT DETERMINE RIGHTS AND LIABILITIES OF THE PARTIES AND ALSO KEEPING IN VIEW THE RATIO OF THE DECISIONS CITED IN THE ORDER OF THE LD. CIT(A) W HEREIN IT HAS BEEN HELD THAT SUCH EXPENDITURE ARE ALLOWABLE AS REVENUE EXPENDITURE WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO. THE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTE D. 27. GROUND NO.5 READS AS UNDER : 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT TH E LEASE EQUALIZATION CHARGES CANNOT BE ADDED BACK TO THE BOOK PROFIT BY WAY OF ADJUSTMENT UNDER THE PROVISIONS OF SECTION 115JA OF THE I.T.ACT. 28. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO INTERALIA OBSERVED THAT THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 18 LEASE EQUALIZATION CHARGES SHOULD NOT BE ADDED BAC K TO THE PROFIT OF THE BUSINESS UNDER THE PROVISIONS OF SECT ION 115JA OF THE ACT. IN REPLY THE ASSESSEE-COMPANY VIDE LETTER DATED 13.2.2002 HAS PUT FORWARD THE SAME ARGUMENT AS OF THE LAST YEAR. THE AO FOR THE SAME REASONS AS DISCU SSED IN DETAIL FOR THE ASSESSMENT YEAR 1998-99 ADDED THE S UM OF RS.3 36 00 000/- TO THE BOOK PROFIT AS PER SECTION 115JA OF THE ACT. ON APPEAL THE LD. CIT(A) FOLLOWING TH E APPELLATE ORDER FOR THE ASSESSMENT YEAR 1997-98 HELD THAT LEA SE EQUALIZATION CHARGES CANNOT BE ADDED BACK TO THE BO OK PROFIT BY WAY OF ADJUSTMENT AS MENTIONED U/S 115JA OF THE ACT. 29. AT THE TIME HEARING THE LD. DR SUPPORTS THE ORDER OF THE AO. 30. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE IN M/S BOMBAY DYEING & MFG. CO.LIMITED V/S DCIT AND VICE VERSA IN ITA NOS.2743/MUM/2003 2744/MUM/2003 (AY-1997-98 & 1998 - 99) AND 3619/MUM/2003 AND 3620/MUM/2003 (AY-1997-98 & 1998-99) DATED 26.2.2009 WHEREIN IT HAS BEEN HELD THAT ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 19 LEASE EQUALIZATION AMOUNT IS NOT TO BE ADDED TO THE PROFIT OF THE BUSINESS AS THE SAME FALLS OUTSIDE THE SCOPE O F EXPLANATION TO SECTION 115JA OF THE ACT. THE REL IANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN VIJAYA BANK V/S CIT (2010) 323 ITR 166(SC). 31. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE AO HAS MADE THE ADDITION FO R THE REASONS AS DISCUSSED IN DETAIL IN THE ASSESSMENT O RDER FOR THE ASSESSMENT YEAR 1998-99. THE LD. CIT(A) DELETE D THE SAME FOLLOWING THE APPELLATE ORDER FOR THE ASSESSME NT YEAR 1997-98. ON APPEAL BEFORE THE TRIBUNAL FOR THE AS SESSMENT YEARS 1997-98 AND 1998-99 THE TRIBUNAL FOLLOWING THE ORDER OF THE TRIBUNAL IN DCIT V/S SREI INTERNATION AL FINANCE LTD. (2006) 10 SOT 722 (DEL) HAS DELETED TH E ABOVE ADDITION VIDE FINDINGS RECORDED IN PARAGRAPHS 15 16 AND 23 OF ITS ORDER (SUPRA) WHICH ARE REPRODUCED AS UNDER : 15. WE FIND SIMILAR ISSUE AROSE BEFORE THE TRIBUNA L IN DCIT V/S SREI INTERNATIONAL FINANCE LTD. (SUPRA) A ND OTHER DECISIONS POINTED OUT BY THE LEARNED AR FOR T HE ASSESSEE. THE TRIBUNAL IN DCIT V/S SREI INTERNATION AL FINANCE LTD. (SUPRA) AT PAGE 725 HAVE HELD AS UNDER : .THE VERY IDEA OF CHARGING TAX ON BOOK PROFIT IS THAT THE PROFITS AS PER THE BOOKS OF A COMPANY WILL BE THE BASIS OF CHARGE. WHEN IN THE BOOKS OF THE ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 20 COMPANY DEDUCTIONS ON ACCOUNT OF LEASE EQUALIZATION CHARGES IS CLAIMED AND PROFITS ARRIVED THEREAFTER THE REVENUE CANNOT FURTHER TINKER WITH SUCH PROFITS EXCEPT TO THE EXTENT PROVIDED IN CLAUS ES (A) TO (F) OF EXPLANATION BELOW SECTION 115JA(2) . THE NATURE OF THE LEASE EQUALIZATION CHARGES IS RECOVERY OF THE FAIR VALUE OF THE LEASED ASSET OVE R THE TERM OF THE LEASE. IT IS A DEDUCTION AGAINST LEASE RENTALS TO BIFURCATE THE ANNUAL LEASE INTO REVENUE COMPONENT AND CAPITAL COMPONENT. THEY DO NOT FALL WITHIN THE CATEGORIES ENUMERATED IN CLAUS ES (A) TO ((F) OF EXPLANATION TO SECTION 115JA(2) 16. IN LINE WITH THE RATIO LAID DOWN BY THE CO-ORD INATE BENCH OF THE TRIBUNAL WE CONFIRM THE ORDER OF THE CIT(A) IN HOLDING THAT THE SAID LEASE EQUALIZATION AMOUNT IS NOT BE TO ADDED TO THE PROFITS OF THE BUS INESS AS THE SAME FALLS OUTSIDE THE SCOPE OF EXPLANATION TO SECTION 115JA OF THE ACT. HENCE THE GROUND OF APP EAL RAISED BY THE REVENUE IS DISMISSED. 23. THE ISSUE IN GROUND NO.2 RAISED BY THE REVENUE IS IDENTICAL TO THE ISSUE RAISED BY WAY OF GROUND N O.3 IN ASSESSMENT YEAR 1997-98. IN LINE WITH OUR OBSERVA TIONS IN THE PARAS HEREINABOVE WITH REGARD TO THE LEASE EQUALIZATION ADJUSTMENT AMOUNT WE ARE IN CONFORMI TY WITH THE ORDER OF THE CIT(A) AND DISMISS THE GROU ND OF APPEAL RAISED BY REVENUE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING TH E CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT THE LEASE EQUALIZATION AMOUNT IS NOT TO BE ADDED TO THE PROFI T OF THE BUSINESS AS THE IT FALLS OUTSIDE THE SCOPE OF EXPL ANATION TO SECTION 115JA OF THE ACT. ACCORDINGLY WE ARE INC LINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE LEASE EQUALIZATION CHARGES CANNOT BE ADDED BACK TO THE BO OK PROFIT ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 21 BY WAY OF ADJUSTMENT AS MENTIONED IN THE SECTION 11 5JA OF THE ACT. THE GROUND TAKEN BY THE REVENUE IS THERE FORE REJECTED. ITA NO.1667/MUM/2005(A-Y: 2000-01) (BY REVENUE) 32. GROUND NOS.1 TO 6 TAKEN BY THE REVENUE READ AS UNDER : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTIN G THE DISALLOWANCE AT RS.10 LAKHS INSTEAD OF RS.30 LAKHS MADE U/S 14A BY THE AO FOR THE EXPENDITURE RELATED TO EXEMPTED INCOME WITHOUT APPRECIATING THE FACTS BR OUGHT ON RECORD BY THE AO THAT EXPENDITURE INCURRED FOR EARNING THE EXEMPTED INCOME WHICH DOES NOT FORM PAR T OF THE TOTAL INCOME IS NOT ADMISSIBLE 2. THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO T O ALLOW THE EXPENDITURE OF RS.11.64 CRS. INCURRED ON VOLUNTARY RETIREMENT SCHEME (VRS) TREATING THE SAM E AS REVENUE EXPENDITURE. 3. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.7 LAKHS MADE ON ACCOUNT OF DISALLOWANCE OF PREMIUM ON DEBENTURE REDEMPTION WITHOUT APPRECIATIN G THE FACTS BROUGHT ON RECORD BY THE AO. 4. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.11.79 CRS MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF INTEREST ON SECURED PREMIUM NOTES WITH OUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO . 5. THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO T O ALLOW WARWICK EXPENSES AMOUNTING TO RS.2.23 CRS. AS REVENUE EXPENDITURE; 6. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LE ASE EQUALIZATION CHARGES OF RS.3.94 CRS. CANNOT BE AD DED ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 22 BACK TO THE BOOK PROFIT BY WAY OF ADJUSTMENT UNDER THE PROVISIONS OF SECTION115JA. 33. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE ABOVE CASE AND ISSUES RAISED BY THE REVENUE ARE SIMILAR TO THE GROUNDS RAISED IN THE R EVENUES APPEAL FOR THE ASSESSMENT YEAR 1999-2000 THEREFORE THE PLEA TAKEN BY THEM MAY BE CONSIDERED WHILE DECIDIN G THE APPEAL FILED BY THE REVENUE. 34. THAT BEING SO AND IN THE ABSENCE OF ANY DISTIN GUISHING FEATURE BROUGHT ON RECORD BY THE PARTIES WE KEEPIN G IN VIEW OF OUR FINDINGS RECORDED IN PARAGRAPH 8 OF THIS ORD ER REVERSE THE ORDER PASSED BY THE LD.CIT(A) AND RESTORE THE ORDER PASSED BY THE AO IN RESPECT OF GROUND NO.1 TAKEN B Y THE REVENUE. WITH REGARD TO THE ISSUES RAISED IN GROUND NOS.2 3 4 5 AND 6 WE KEEPING IN VIEW OF OUR FINDIN GS RECORDED IN PARAGRAPHS 13 TO 16 IN RESPECT OF GROUN D NO.2 PARAGRAPH 21 IN RESPECT OF GROUND NO.3 AND 4 PARAG RAPH 26 IN RESPECT OF GROUND NO.5 AND PARAGRAPH 31 IN RESPE CT OF GROUND NO.6 OF THIS ORDER WHILE UPHOLDING THE ORD ER PASSED BY THE LD. CIT(A) ON THE ABOVE ISSUES REJECT THE G ROUNDS TAKEN BY THE REVENUE. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 23 ITA NO.1624/MUM/2005 (AY : 2000-01) (BY ASSESSEE) 35. GROUND NOS.1 TO 3 TAKEN BY THE ASSESSEE READ AS UNDER : 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A MADE BY AO IN RESPECT OF EXPENDITURE IN CONNECTION WITH EXEMPT INCOME FOR RS.10 00 000/-. THE APPELLANT CONTENDS THAT THERE I S NO EXPENDITURE INCURRED IN CONNECTION WITH THE EXEMPT INCOME WHICH IS LIABLE FOR DISALLOWANCE U/S 14A. 2. THE LD. CIT(A) ERRED IN HOLDING THAT IN CASE T HERE IS NEGATIVE EXPORT PROFIT AS PER COMPUTATION UNDER CLAUSE (A) (B) AND ( C ) OF SUBSECTION (3) OF SECTION 80 HHC THE APPELLANT WOULD NOT BE ENTITLED TO DEDUCTION AS PE R PROVISO OF SECTION. 3. THE LD. CIT(A) ERRED IN HOLDING THAT SINCE THE PROFIT COMPUTED U/S 80HHC(3)(A) (B) OR (C ) ARE NEG ATIVE THEREFORE THE APPELLANT IS NOT ELIGIBLE FOR DEDUCT ION AS PER PROVISO OF THE SECTION AND NOTHING CAN BE R EDUCED FROM BOOK PROFIT U/S 115JA OF THE INCOME TAX ACT 1961. 36. AT THE TIME OF HEARING THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS THE ABOVE GROUNDS WHICH WAS NOT OBJECTED TO BY THE LD. DR. 37. THAT BEING SO AND IN THE ABSENCE OF ANY SUPPORT ING MATERIALS PLACED ON RECORD BY THE LEARNED COUNSEL F OR THE ASSESSEE THE GROUNDS TAKEN BY THE ASSESSEE ARE TH EREFORE REJECTED BEING NOT PRESSED. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 24 ITA NO.4366/MUM/2005(AY: 2001-02) (BY REVENUE) 38. GROUND NOS.1 TO 3 TAKEN BY THE REVENUE READ AS UNDER : ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF RS.3.33 CRORES ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF INTEREST ON SECURED PREMIUM NOTES WITH OUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 2. THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW WARWICK EXPENSES AMOUNT ING TO RS.3.93 CRORES AS REVENUE EXPENDITURE. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LEASE EQUALIZATION CHARGES OF RS.5.36 CRS. CANNOT BE ADDED BACK TO THE BOOK PROFIT BY WAY OF ADJUSTMENT UNDER THE PROVISIONS OF SECTION115JA. 39. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE ABOVE CASE AND ISSUES RAISED BY THE REVENUE ARE SIMILAR TO THE GROUNDS RAISED IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 1999-2000 THEREFORE THE PLEA TAKEN BY THEM MAY BE CONSIDERED WHILE DECIDIN G THE APPEAL FILED BY THE REVENUE. 40. THAT BEING SO IN THE ABSENCE OF ANY DISTINGUIS HING FEATURE BROUGHT ON RECORD BY THE PARTIES WE KEEPIN G IN VIEW ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 25 OF OUR FINDINGS RECORDED IN PARAGRAPH 21 IN RESPECT OF GROUND NO.1 PARAGRAPH 26 IN RESPECT OF GROUND NO.2 AND PA RAGRAPH 31 IN RESPECT OF GROUND NO.3 OF THIS ORDER WHILE U PHOLDING THE ORDER PASSED BY THE LD. CIT(A) ON THE ABOVE IS SUES REJECT THE GROUNDS TAKEN BY THE REVENUE. ITA NO.4105/MUM/2005 (AY : 2001-02)(BY ASSESSEE) 41. ONLY GROUND TAKEN BY THE ASSESSEE READS AS U NDER : 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A MADE BY AO IN RESPECT OF EXPENDITURE IN CONNECTION WITH EXEMPT INCOME FOR RS.10 00 000/-. THE APPELLANT CONTENDS THAT THERE I S NO EXPENDITURE INCURRED IN CONNECTION WITH THE EXEMPT INCOME WHICH IS LIABLE FOR DISALLOWANCE U/S 14A 42. AT THE TIME OF HEARING THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS THE ABOVE GROUNDS WHICH WAS NOT OBJECTED TO BY THE LD. DR. 43. THAT BEING SO AND IN THE ABSENCE OF ANY SUPPORT ING MATERIALS PLACED ON RECORD BY THE LEARNED COUNSEL F OR THE ASSESSEE THE GROUNDS TAKEN BY THE ASSESSEE ARE TH EREFORE REJECTED BEING NOT PRESSED. ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 26 ITA NO.4548/MUM/2006(AY : 2002-03)(BY REVENUE) 44. GROUND NOS.1 TO 3 TAKEN BY THE REVENUE READ AS UNDER : 1. THE LD. CIT(A) ERRED IN CANCELING THE DISALLOWANCE OF RS.1 00 000/- ON ACCOUNT OF DEDUCT ION OF INTEREST ON SECURED PREMIUM NOTES WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO . 2. THE LD. CIT(A) ERRED IN CANCELING THE DISALLOWANCE OF RS.1 89 00 000/- WHICH WAS CLAIME D UNDER THE HEAD NAV NIRMAN EXPENSES AND WERE CLAIME D AS DEFERRED REVENUE EXPENDITURE. 3. THE LD. CIT(A) ERRED IN HOLDING THAT THE LEA SE EQUALIZATION CHARGES OF RS.4.68 CRORES CANNOT BE ADDED BACK TO THE BOOK PROFIT BY WAY OF ADJUSTMENT UNDER THE PROVISIONS OF SECTION115JA. 45. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREED THAT THE FACTS OF THE ABOVE CASE AND ISSUES RAISED BY THE REVENUE ARE SIMILAR TO THE GROUNDS RAISED IN THE R EVENUES APPEAL FOR THE ASSESSMENT YEAR 1999-2000 THEREFORE THE PLEA TAKEN BY THEM MAY BE CONSIDERED WHILE DECIDIN G THE APPEAL FILED BY THE REVENUE. 46. THAT BEING SO IN THE ABSENCE OF ANY DISTINGUIS HING FEATURE BROUGHT ON RECORD BY THE PARTIES WE KEEPIN G IN VIEW OF OUR FINDINGS RECORDED IN PARAGRAPH 21 IN RESPECT OF GROUND NO.1 PARAGRAPH 26 IN RESPECT OF GROUND NO.2 AND PARAGRAPH 31 IN RESPECT OF GROUND NO.3 OF THIS ORDE R WHILE ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 27 UPHOLDING THE ORDER PASSED BY THE LD. CIT(A) ON TH E ABOVE ISSUES REJECT THE GROUNDS TAKEN BY THE REVENUE. ITA NO.4328/MUM/2006 (AY : 2002-03)(BY ASSESSEE) 47. ONLY GROUND TAKEN BY THE ASSESSEE READS AS U NDER : 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A MADE BY AO IN RESPECT OF EXPENDITURE IN CONNECTION WITH EXEMPT INCOME FOR RS.5 00 000/-. THE APPELLANT CONTENDS THAT THERE IS NO EXPENDITURE INCURRED IN CONNECTION WITH THE EXEMPT INCOME WHICH IS LIABLE FOR DISALLOWANCE U/S 14A 48. AT THE TIME OF HEARING THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS THE ABOVE GROUNDS WHICH WAS NOT OBJECTED TO BY THE LD. DR. 49. THAT BEING SO AND IN THE ABSENCE OF ANY SUPPORT ING MATERIALS PLACED ON RECORD BY THE LEARNED COUNSEL F OR THE ASSESSEE THE GROUND TAKEN BY THE ASSESSEE IS THER EFORE REJECTED BEING NOT PRESSED. 50. IN THE RESULT REVENUES APPEALS ARE PARTLY ALLOWED AND THE ASSESSEES APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER 2011. SD SD (RAJENDRA SINGH) (D.K .AGARWAL) ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI DATED 14TH SEPTEMBER 2011 ITA NO.5059/MUM/2003 ITA NOS.1624/MUM/2005 1667/MUM/2005 4105/MUM/2005 4366/MUM/2005 4328/MUM/2006 AND 4548/MUM/2006 28 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI