Reliance Petroleum Ltd.(Now Reliance Indus.Ltd.), MUMBAI v. DCIT Range 3(3),

ITA 4734/MUM/2004 | 1998-1999
Pronouncement Date: 31-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 473419914 RSA 2004
Assessee PAN AAACR5691P
Bench Mumbai
Appeal Number ITA 4734/MUM/2004
Duration Of Justice 9 year(s) 1 month(s) 22 day(s)
Appellant Reliance Petroleum Ltd.(Now Reliance Indus.Ltd.), MUMBAI
Respondent DCIT Range 3(3),
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 31-07-2013
Date Of Final Hearing 10-06-2013
Next Hearing Date 10-06-2013
Assessment Year 1998-1999
Appeal Filed On 08-06-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI R.K.GUPTA JM & SHRI N.K.BILLAIYA AM ITA NO S . 4734 & 4735 / MUM/ 20 04 ( ASSESSMENT YEAR S : 1998 - 19 99 & 2001 - 02 ) RELIANCE PETROLEUM LIMITED (NOW MERGED WITH RELIANCE INDUSTRIES LTD.) MAKER CHAMBER IV 3 RD FLOOR 222 NARIMAN POINT MUMBAI - 400 021 . VS. DCIT RANGE - 3(3) MUMBAI PAN/GIR NO. : A AAC R 5691 P ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 3384 /MUM/20 0 7 ( ASSESSMENT YEAR :200 1 - 02 ) RELIANCE PETROLEUM LIMITED (NOW MERGED WITH RELIANCE INDUSTRIE S LTD.) MAKER CHAMBER IV 3 RD FLOOR 222 NARIMAN POINT MUMBAI - 400 021. VS. DCIT RANGE - 3(3) MUMBAI PAN/GIR NO. : AAACR 5691 P ( APPLICANT ) .. ( RESPONDENT ) AND ITA NO S . 5005 & 5006 /MUM/20 04 ( ASSESSMENT YEAR :1998 - 1999 & 2001 - 02 ) DCIT RANGE - 3(3) MUMBAI VS. RELIANCE PETROLEUM LIMITED (NOW MERGED WITH RELIANCE INDUSTRIES LTD.) MAKER CHAMBER IV 3 RD FLOOR 222 NARIMAN POINT MUMBAI - 400 021. PAN/GIR NO. : AAACR 5691 P /ASSESSEE BY : MR. FARUKH IRANI /REVENUE BY : MR. PAVAN VED & MR. D.K.SINHA ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 2 DATE OF HEARING : 1 0 TH JUNE 201 3 DATE OF PRONOUNCEMENT : 31 ST JULY 2013 O R D E R PER SHRI R.K.GUPTA : THIS COMMON ORDER SHALL GOVERN THE DISPOSAL OF FIVE APPEALS WHICH HAVE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT AGAINST THE ORDER OF LEARNED CIT(A) FOR ASSESSMENT YEARS 1998 - 99 & 2001 - 02 RESPECTIVELY. 2 . SINCE COMMON ISSUES ARE INVOLVED IN ALL THE CASES THEREFORE FOR THE SAKE OF CONVENIENCE ALL THE CASES HAVE BEEN HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 3 . FIRST WE WILL TAKE UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1998 - 99 (I.E. ITA NO. 4734 /MUM/20 04 ). 3 . 1 THE ASSESSEE IN ITS APPEALS HAS RAISED FIRST GROUND IN REGARD TO CONFIRMING THE ACTION OF THE AO IN RESTRICTING THE CLAIM UNDER SECTION 35D OF THE ACT TO RS. 3 57 23 033/ - AS AGAINST CLAIM OF THE ASSESSEE OF RS. 6 50 08 291/ - . 3 . 2 THE ASSESSEE IN THE RETURN OF INCOME CLAIMED DEDUCTION UNDER SECTION 35D AT RS.6 50 08 291/ - BASED ON ADDITIONAL EXPENSES INCURRED ON ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS. THE AO RESTRICTED THE CLAIM UNDER SECTION 35D AT RS.3 57 23 093/ - . ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 3 3. 3 T HE CIT(A) FOLLOWING THE ORDER FOR ASSESSMENT YEAR 1999 - 2000 WHEREIN HE HAD CONFIRMED THE ACTION OF THE AO IN RESTRICTING THE DEDUCTION UNDER SECTION 35D CONFIRMED THE ACTION OF THE AO. 3. 4 LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE HAS B EEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE WHILE DISPOSING THE APPEAL FOR ASSESSMENT YEAR S 1997 - 98 1999 - 2000 AND 2000 - 2001. 3. 5 AFTER CONSIDERING THE ORDER OF THE AO CIT(A) AND THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEARS 1997 - 98 1999 - 2000 AND 2000 - 2001 WE FOUND THAT SIMILAR ISSUE INVOLVED IN THESE APPEALS WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. THE DECISIONS OF THE TRIBUNAL WAS TAKEN IN ITA NO.4733/M/2004 FOR ASSESSMENT YEAR 1997 - 98 AND OTHERS VIDE ORDER DATED 4 - 2 - 2009. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD. THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL FOR EARLIER YEAR WE CONFIRM THE ORDER OF THE LEARNED CIT(A) FOR THE YEAR UNDER CONSIDERATION ALSO AS THE FACTS ARE SIMILAR. 4 . GROUND NO.2 IN APPEALS OF THE ASSESSE E FILED FOR THE ASSESSMENT YEAR 1998 - 99 IS IN REGARD TO CONFIRMING AND NOT ALLOWING THE LOSS INCURRED ON SALE OF INVESTMENT OF RS. 8 12 43 132/ - UNDER THE PORTFOLIO MANAGEMENT SCHEME. 4.1 DURING THE ASSESSMENT PROCEEDING THE AO NOTICED THAT THE ASSESSEE H AS CLAIMED THE LOSS OF RS. 8 12 43 132/ - INCURRED ON ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 4 INVESTMENT UNDER PORTFOLIO MANAGEMENT SCHEME. THE AO NOTED THAT THE ASSESSEE HAS INVESTED SHORT TERM SURPLUS FUNDS THROUGH ITS PORTFOLIO MANAGER - M/S RELIANCE INFRASTRUCTURE DEVELOPMENT LIMITED (HEREINAFT ER REFERRED TO AS RIDPL ) INVESTED THE MONIES ON BEHALF OF THE ASSESSEE AND IN ADDITION TO OTHER SHARES IT HAD ALSO PURCHASED 180000 SHARES OF M/S VERONICA TRADING PRIVATE LIMITED (HEREINAFTER REFERRED TO AS VERONICA) @ RS. 495/ - PER SHARE ON 29 TH MARC H 1996 . THUS THE TOTAL INVESTMENT IN SHARES OF VERONICA WAS TO THE EXTENT OF RS. 8 91 00 000/ - . THE ASSESSEE ALSO INCURRED COST OF TRANSFER STAMP OF RS. 44 550/ - THUS THE AGGREGATE INVESTMENT WAS RS. 8 91 44 550/ - . SUBSEQUENTLY IN SEPTEMBER 1997 THE CO MPANY VERONICA HAD GONE IN FOR VOLUNTARY LIQUIDATION UNDER SECTION 484 OF THE COMPANIES ACT 1956. THE ASSESSEE COMPANY WHICH HAD MADE ITS INVESTMENTS THROUGH RIDPL WAS INFORMED OF THE SAME. ON ITS LIQUIDATION THE ASSESSEE COMPANY RECEIVED ONLY RS. 79 01 4 18/ - THEREBY INCURRING A LOSS OF RS.8 12 43 132/ - . THE AO DISALLOWED THE ASSESSEES CLAIM OF LOSS ON INVESTMENT FOR WANT OF DETAILS AND HELD THAT THE SAME WAS NOT GENUINE. THE AO HAS OBSERVED IN HIS ORDER THAT IN SPITE OF REPEATED REMINDERS THE ASSESSEE H AS NEITHER FILED THE REQUISITE DETAILS CONCERNING PURCHASE PRICE AND RESULTANT LOSS IS SHARES OF VERONICA NOR PROVED ITS CLAIM FOR DEDUCTION OF LOSS ON LIQUIDATION OF THE COMPANY. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 5 4.2 . SIMILAR ARGUMENTS WERE TAKEN BEFORE THE LEARNED CIT(A). NECESSARY DETA ILS WERE ALSO FILED . LEARNED CIT(A) BY OBSERVING THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF PURCHASE PRICE OF THE SHARE AND HAS ALSO NOT FILED DETAILS CALLED FOR BY THE AO. IN ABSENCE OF THE VARIOUS DETAILS CONCERNING PURCHASE OF SHARES OF VERONI CA AND RESULTANT LOSS ON LIQUIDATION OF THE COMPANY THE CIT(A) CONFIRMED THE ACTION OF THE AO. LEARNED CIT(A) HAS ALSO OBSERVED WHILE CONFIRMING THE ACTION OF THE AO THAT THE ASSESSEE HAS NOT FURNISHED ANY FURTHER EVIDENCE TO JUSTIFY ITS CLAIM FOR LOSS IN RESPECT OF SHARES OF VERONICA. 4.3 . LEARNED COUNSEL OF THE ASSESSEE WHO APPEARED BEFORE THE TRIBUNAL ARGUED THAT THE OBSERVATION OF THE AO THAT LOSS IS NOT GENUINE IN FACT IS INCORRECT BECAUSE ALL THE DETAILS FILED BEFORE HIM HAVE BEEN MENTIONED BY THE AO HIMSELF IN PARA 4.2 AT PAGE 7 OF HIS ORDER. IT HAS BEEN STATED THAT THE SHARES OF M/S VERONICA WAS WERE PURCHASED FROM RIDPL. THE SHARES OF M/S VERONICA WAS NOT QUOTED AS IT WAS A PRIVATE LIMITED COMPANY NO MARKET QUOTATION IS AVAILABLE ON THE DATE OF PURCHASE OF SHARES. THE TRANSACTIONS ARE AT ARMS LENGTH NONE OF THE DIRECTORS OF THE VERONICA OR ITS SHARESHOLDERS ARE IN ANY WAY RELATE D TO THE DIRECTORS OF THE ASSESSEE COMPANY. IT WAS EXPLAINED THAT THERE IS NO RELATIONSHIP OF THE DIRECTORS OF M /S VERONICA WITH THE RELIANCE INFRASTRUCTURE DEVELOPMENT PRIVATE LIMITED. RELIANCE INFRASTRUCTURE DEVELOPMENT PRIVATE LIMITED (RIDPL) IS A PORTFOLIO ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 6 MANAGER OF THE ASSESSEE COMPANY WHO PURCHASED SHARES OF M/S VERONICA ON BEHALF OF THE ASSESSEE. THEREFORE WHATEVER THE LOSSES INCURRED ON ACCOUNT OF PURCHASE OF SHARES OF VERONICA BELONGS TO ASSESSEE COMPANY AND IS ALLOWABLE AS PER PROVISION OF LAW . IT WAS FURTHER EXPLAINED THAT THE FACTUM OF THE CASE IS NOT IN DISPUTE. THE PURCHASE PRICE WERE PAID THROUGH P ROPER BANKING CHANNELS. THE SHARES PURCHASED WERE SHOWN IN THE BALANCE SHEET OF M/S RIDPL WHO INVESTED THE MONEY ON BEHALF OF THE ASSESSEE. THEREFORE ON LIQUIDATION OF M/S RIDPL THE ASSESSEE RECEIVED ONLY A SUM OF RS. 79 01 418/ - WHICH RESULTED A LOSS O F RS. 8 12 43 132/ - . THE SALE PRICE IS ALSO NOT IN DISPUTE AS THE AO HAS NOT DISPUTED THE SAME THEN HOW THE LOSS INCURRED BY THE ASSESSEE IS NOT GENUINE. IT WAS FURTHER SUBMITTED THAT THE COMPANY M/S VERONICA WIND ED UP AND THEREAFTER ON LIQUIDATION ONLY A SUM OF RS. 79 01 418/ - WERE RECEIVED BY THE ASSESSEE WHICH WERE INVESTED THROUGH HIS PORTFOLIO MANAGER M/S RIDPL. COPY OF TH E PRESS NOTE IS PLACED IN THE COMPILATION AT PAGE 1. COPY OF THE LETTER DATED 10 - 10 - 1997 ISSUED BY THE M/S RIDPL TO THE ASSESSEE INF ORMING THAT THEY HAVE LIQUIDATED THE INVESTMENT IN M/S VERONICA TRADING PVT. LIMITED HELD ON BEHALF OF THE ASSESSEE WHICH RESULTED A LOSS OF RS. 8 12 43 132/ - . IN THIS LETTER THE SHARE PURCHASED ON 29 TH MARCH 1996 @ 495/ - PER SHARE IS MENTIONED. ALONG WIT H SALE PROCEEDS RECEIVED FROM M/S VERONICA CONSEQUENT TO VOLUNTARY ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 7 LIQUIDATION OF THE M/S VERONICA TRADING PVT. LIMITED AT RS. 79 01 418/ - IS MENTIONED. ACCORDINGLY IT WAS SUBMITTED THAT NO DOUBT REMAIN S THAT THERE WAS A LOSS SUF FERED BY THE ASSESSEE ON A CCOUNT OF SHARE PURCHASE OF M/S VERONICA. IT WAS FURTHER SUBMITTED THAT THERE MAY BE A WRONG DECISION IN PURCHASING THE SHARES OF M/S VERONICA BUT WRONG DECISION CANNOT BE HELD RESPONSIBLE FOR NOT ALLOWING THE CLAIM OF LOSS BY THE DEPARTMENTAL AUTHORITIES. THE LOSS IS ALLOWABLE WHICH IS GENUINE ONE. 4.4 PER CONTRA LEARNED DR STRONGLY PLACED RELIANCE ON THE ORDER OF AO AND LEARNED CIT(A) . IT WAS ALSO SUBMITTED THAT THERE IS NO CERTIFICATE FILED BY THE ASSESSEE TO PROVE THAT THESE DETAILS WERE FILED BEFO RE THE AO AND LEARNED CIT(A). 4.5 IN REPLY LEARNED COUNSEL OF THE ASSESSEE STATED THAT THERE IS A VALID CERTIFICATE. IN THE CHART ITSELF WHERE DETAILS ARE MENTIONED AND IT HAS BEEN MENTIONED THAT WHICH DETAIL WAS FILED BEFORE WHICH AUTHORITY. ACCORDINGLY IT IS SUBMITTED THAT THE CONTENTIONS OF THE LEARNED DR ARE NOT CORRECT. 4.6 WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ARGUMENTS ADVANCED AT THE HANDS OF THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS BY THE LEARNED DR. AFTER CONSIDERING THE RI VAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD WE FOUND THAT THE CLAIM OF LOSS IS ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 8 ALLOWABLE. THE ASSESSEE HAS FILED EACH AND EVERY DETAIL BEFORE THE AO . THE PURCHASE PRICE OF SHARES OF M/S VERONICA WAS PAID THROUGH PROPER BANKING CHANNEL WHICH WERE PURCHASED IN THE YEAR 1996 - 97. INVESTMENTS WERE SHOWN IN THE BALANCE SHEET OF THE ASSESSEE. THE INVESTMENT MADE IN THE FINANCIAL YEAR 1996 - 97 WAS NOT DOUBTED AS THE ASSESSMENT FOR ASSESSMENT YEAR 1997 - 98 WAS COMPLETED UNDER SECTION 143(3) . WE FURTHER NOTED THAT ON LIQUIDATION OF M/S VERONICA A SUM OF RS. 79 01 418/ - ONLY W AS RECEIVED BY THE ASSESSEE AGAINST COST OF SHARES OF RS. 8 91 44 550/ - . WHETHER THE DECISION FOR PURCHASING SHARES WAS CORRECT OR NOT BUT THERE IS NO DISPUTE IN INCURRING OF LOSS. ALL RELE VANT DETAILS ARE PLACED ON RECORD WHICH HAS BEEN MENTIONED BY THE AO ALSO IN HIS ORDER IN PARA 4.2 AT PAGE 7. LEARNED CIT(A) MERELY OBSERVING THAT THE ASSESSEE COULD NOT FILE ANY FURTHER EVIDENCE IN RESPECT OF CLAIM OF LOSS HAS REJECTED THE CLAIM OF THE ASSESSEE. ONCE ALL RELEVANT DETAILS ARE ON RECORD THEN LEARNED CIT(A) SHOULD HAVE CONSIDERED ALL THESE DETAILS ON MERIT AND T HE DECISION SHOULD HAVE TAKEN AS TO WHETHER THE LOSS IS ALLOWABLE OR NOT. AFTER CONSIDERING ALL THESE DETAILS PLACED ON RECORD WE ARE OF THE VIEW THAT THE LOSS IS GENUINE THEREFORE THE SAME IS ALLOWABLE. ACCORDINGLY WE DIRECT TO ALLOW THE LOSS OF RS. 8 12 43 132/ - CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 9 5 . NOW WE WILL TAKE UP THE APPEAL OF THE DEPARTMENT FOR ASSESSMENT YEAR 1998 - 99 (I.E. ITA NO . 5005 /M/2004) . THE ONLY ISSUE IN THE APPEAL OF THE DEPARTMENT IS AGAINST IN HOLDING THAT THE SWAP INCOME FROM FORWARD CONTRACT IN FOREIGN CURRENCY AMOUNTING TO RS.4 70 28 140/ - IS IN THE NATURE OF CAPITAL RECEIPTS AND NOT LIABLE TO TAX. 5.1 DURING THE ASSESSMENT PROCEEDING THE AO NOTICED THAT THE ASSESSEE HAS EARNED INCOME OF RS. 4 70 28 140/ - IN SWAPPING OF FORWARD RATE CONTRACT OF FOREIGN CURRENCY BOOKED FOR PURCHASE OF CAPITAL ASSETS FOR ITS JAMNAGAR REFINERY PROJECT. THE ASSE SSEE HAS CLAIMED THAT THE FORWARD RATE CONTRACT IS ENTERED INTO IN RESPECT OF CURRENCY IN WHICH IT IS AGREED THAT AT A LATER DATE FOREIGN CURRENCY IS MADE AVAILABLE TO THE ASSESSEE AT THE FIXED EXCHANGED RATE. SINCE THE FOREIGN CURRENCY WAS REQUIRED FOR PU RCHASE OF CAPITAL GOODS THE INCOME REALIZED IN SWAPPING OF FORWARD CONTRACT IN FOREIGN CURRENCY WAS CONSIDERED BY THE ASSESSEE AS CAPITAL IN NATURE AND NOT OFFERED TO TAX. THE ASSESSEE ALSO RELIED UPON SECTION 43A OF THE IT ACT IN SUPPORT OF HIS CONTENTIO N HOWEVER THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT SWAPPING IN FOREIGN CURRENCY CONSTITUTES ITS BUSINESS ACTIVITY. THE AO ALSO HELD THAT SECTION 43A ONLY DEALS WITH CAPITALIZATION OF EXCHANGE DIFFERENCE AND DOES NOT SUPPORT THE CL AIM OF THE ASSESSEE. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 10 5.2 BEFORE THE CIT(A) IT WAS SUBMITTED THAT IN THE PROCESS OF SETTING UP A REFINERY AND THE CONSTRUCTION ACTIVITY WAS IN FULL SWING. THE ACTIVITY OF SETTING UP OF THE REFINERY INVOLVED IMPORT OF CAPITAL GOODS FROM VARIOUS VENDORS TO WHOM THE PAYMENTS WERE REQUIRED TO BE MADE IN FOREIGN CURRENCY OF THAT COUNTRY. THE ASSESSEE THOUGHT FIT TO REDUCE ITS FOREIGN EXCHANGE RISK. IN ORDER TO DO SO THE ASSESSEE ENTERED INTO FORWARD RATE AGREEMENT AND SWAP TRANSACTIONS. THE TRANSACTIONS WERE TO COVER THE FOREIGN EXCHANGE RISK FLUCTUATION. REGARDING JUSTIFICATION WHETHER THE SWAP INCOME AND FORWARD RATE INCOME IS ON CAPITAL ACCOUNT THE ASSESSEE RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF BHARAT HEAVY ELECTRICALS LTD. REP ORTED 156 CTR 12 AND ALSO IN THE CASE OF M/S SUTLEJ COTTON MILLS LTD. REPORTED IN 116 ITR 1. THE ASSESSEE HAS FURTHER REFERRED TO EXPLAN A TION (3) BELOW SECTION 43A TO SUGGEST THAT ANY GAIN OR LOSS ON FORWARD CONTRACT IN FOREIGN CURRENCY RELATING TO FOREIG N CURRENCY LOAN REQUIRED TO BE CAPITALIZED. LEARNED CIT(A) AFTER CONSIDERING THE ORDER OF AO FOUND THAT THE ASSESSEE HAS TAKEN LOANS IN FOREIGN CURRENCY TO MEET COST OF IMPORT OF MACHINERY REQUIRED FOR INSTALLATION AND TO SET UP REFINERY OF THE COMPANY. A S PER RBI GUIDELINES AN IMPORTER OF CAPITAL GOODS IS PERMITTED TO ENTER INTO SWAP OF FOREIGN CURRENCY AND ENTERING INTO FOREIGN RATE CONTRACT TO HEDGE AGAINST THE RISK OF EXCHANGE FLUCTUATION. SINCE ALL THE CONDITIONS WERE SATISFIED TO ENTER INTO SWAP OF FOREIGN ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 11 CURRENCY AND ENTERING INTO FOREIGN RATE CONTRACT TO HEDGE AGAINST THE RISK FLUCTUATION THEREFORE THE CIT(A) FOUND THAT THE CONTRACT WAS FOR CAPITAL ASSET AND THEREFORE ANY PROFIT AND LOSS ON ACCOUNT OF CONTRACT HAS TO BE TAKEN ON CAPITAL ACCOU NT. ACCORDINGLY HE HELD THAT ANY PROFIT EARNED BY THE ASSESSEE WHICH WAS A CAPITAL IN NATURE AND NOT LIABLE TO TAX. 5.3 LEARNED DR PLACED RELIANCE ON THE ORDER OF AO. ON THE OTHER HAND LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CIT (A). 5.4 AFTER CONSIDERING THE RIVAL SUBMISSION AND PERUSING THE ORDERS OF THE AUTHORITIES BELOW WE FOUND NO INFIRMITY IN THE FINDINGS OF THE LEARNED CIT(A) WHO ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. UNDISPUTEDLY THE INCOME EARNED IN THE ACCOUNT OF SWAPPING OF FORWARD RATE CONTRACT OF FOREIGN CURRENCY BOOKED FOR THE PURPOSE OF CAPITAL ASSETS FOR ITS JAMNAGAR REFINERY PROJECT WAS EARNED ON ACCOUNT OF CONTRACT FOR BUYING THE CAPITAL ASSET. THE EXPLANATION TO SECTION 43A IS ALSO APPLICABLE ON THE FA CTS OF THE PRESENT CASE. EVEN AND OTHERWISE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ONGC WHICH IS FORTIFIED BY THE HONBLE SUPREME COURT WHEREIN IT HAS BEEN HELD THAT IF THE FOREIGN EXCHANGE LOSS IS ON ACCOUNT O F PURCHASE OF CAPITAL ASSET THEN IT GOES TO CAPITAL ACCOUNT AND IF THE ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 12 LOSS IS ON ACCOUNT OF LOAN FOR WORKING CAPITAL THEN IT GOES TO REVENUE ACCOUNT. THE DECISION OF THE HONBLE DELHI HIGH COURT AS WELL AS H O N BLE SUPREME COURT IN THE CASE OF BHARAT HEA VY ELECTRICALS LTD. 156 CTR 12 AND M/S SUTLEJ COTTON MILLS LTD. 116 ITR 1 ARE SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. THEREFORE WITHOUT GOING INTO DETAIL FURTHER WE HOLD THAT LEARNED CIT(A) WAS JUSTIFIED IN ALLOWING THE ISSUE IN FAVOUR O F THE ASSESSEE. THEREFORE WE CONFIRM THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE INVOLVED IN APPEAL OF THE DEPARTMENT. 6 . NOW WE WILL TAKE UP THE APPEAL OF THE ASSESSEE FO R THE ASSESSMENT YEAR 2001 - 2002 (I.E. ITA NO. 4735 /M/2004) 6.1 GROUND NO.1 IS AGAI NST CONFIRMING THE ACTION OF THE AO IN RESTRICTING THE CLAIM UNDER SECTION 35D. 6.2 SIMILAR GROUND WAS INVOLVED IN THE ASSESSMENT YEAR 1998 - 99 WHERE WE HAVE CONFIRMED THE ACTION OF THE LEARNED CIT(A). THEREFORE ON THE SAME REASONING THIS GROUND IS HEREB Y DISMISSED. 6.3 GROUND NO.2 RELATES TO CONFIRMING THE ADDITION OF RS. 63 . 36 CRORES BEING INSURANCE CLAIMED RESPECTIVELY AGAINST THE CLAIM FOR LOSS OF REVENUE INCREASED COST OF WORKING AND OTHER LIKE LOSS ES WAS NOT PRESSED T HEREFORE THE SAME IS DISMIS SED AS NOT PRESSED. 6.4 GROUND NO. 3 RELATES TO CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OF RS. 21 33 075/ - BEING EXPENDITURE INCURRED TO ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 13 EARN DIVIDEND INCOME WHILE COMPUTING BOOK PROFIT AS WELL AS UNDER THE NORMAL PROVISION OF THE ACT. 6. 5 THE AO DISALLOWED A SUM OF RS.21 33 075/ - UNDER SECTION 14A BY CONSIDERING THE ISSUE IN PARA 8 AT PAGE 25 & 26 OF HIS ORDER. DETAILED SUBMISSIONS WERE FILED BEFORE THE CIT(A) WHICH ARE REPRODUCED IN HIS ORDER AT PAGES 18 & 19. IT WAS EXPLAINED THAT THE EXPENSES CLAIMED BY THE ASSESSEE PERTAIN TO DEMAT CHARGES AND OTHER EXPENSES ARE RELATING TO EARNING DIVIDEND INCOME. IT WAS EXPLAINED THAT DEMAT CHARGES OF RS. 17 64 625/ - ARE NOT RELATED TO EXEMPTED INCOME AS THEY WERE NOT INCURRED FOR CONVERTING HOLDING OF INVESTMENT IN SHARES AND SECURITIES . THESE CHARGES WERE DEFINITELY NOT INCURRED IN RELATION TO EARNING OF EXEMPTED INCOME AS CONTEMPLATED UNDER SECTION 14A OF THE ACT. IT WAS FURTHER EXPLAINED THAT DEMAT REALIZATION CHARGES AND THE EXPENSES FOR HOLDING THE INVESTMENTS IN A PARTICULAR FORM AND NOT FOR EARNING OF INCOME WHICH CAN BE CONSIDERED FOR DISALLOWANCE UNDER SECTION 14A. HOWEVER LEARNED CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION. ACCORDINGLY HE UPHELD THE ACTION OF THE AO. 6.6 THE CONT ENTION S RAISED BEFORE THE LEARNED CIT(A) WERE REITERATED BEFORE THE TRIBUNAL BY THE LEARNED AR OF THE ASSESSEE. ON THE OTHER HAND LEARNED DR PLACED STRONG RELIANCE ON THE ORDER OF THE AO AND LEARNED CIT(A). ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 14 6.7 AFTER HEARING THE RIVAL SUBMISSIONS AND CON SIDERING THE MATERIAL ON RECORD WE FOUND THAT THE CONTENTION S OF THE LEARNED AR ARE NOT ACCEPTABLE . LEARNED AR HAS STATED THAT THE DEMAT ACCOUNT EXPENSES ARE NOT FOR THE PURPOSE OF EARNING ANY DIVIDEND INCOME AS THESE EXPENSES WERE FOR THE PURPOSE OF HOL DING THE ASSET IN A PARTICULAR MANNER. THE DEMAT ACCOUNT RELATES TO PURCHASE AND SALE OF SHARES . THE ASSESSEE HIMSELF HAS ACCEPTED THAT THERE IS DIVIDEND INCOME WHICH IS EXEMPT TO TAX. THE DEMAT ACCOUNT WAS OPENED FOR THE PURPOSE OF HOLDING THE SHARES IN A PARTICULAR ACCOUNT AS PER GUIDELINES OF THE APPROPRIATE AUTHORITY. ON OPENING THE DEMAT ACCOUNT ETC. THE AMOUNTS WERE INCURRED ON THAT DIRECTLY LINKED WITH PURCHASE AND SALE OF SHARES ON WHICH DIVIDEND INCOME IS EARNED WHICH IS EXEMPT TO TAX. THEREFORE IT CANNOT BE SAID THAT THESE EXPENSES ARE FOR ANY OTHER PURPOSE AND NOT RELATED TO EXEMPTED INCOME. IF THE SHARES ARE PURCHASED AND SOLD AND THEY ARE KEPT IN A PARTICULAR ACCOUNT AND ANY EXPENDITURE INCURRED ON ACCOUNT OF THAT ACCOUNT IT HAS TO BE TAKEN THAT THEY ARE DIRECTLY LINKED WITH THE PURCHASE AND SALE OF SHARES. LEARNED AR HAS FAIRLY STATED THAT THE DIVIDEND INCOME IS EXEMPT TO TAX THEREFORE WE ARE OF THE CONSIDERED VIEW THAT EXPENSES INCURRED ON DEMAT ACCOUNT IS DIRECTLY LINKED WITH THE EARNING OF EXEMPTED INCOME. ACCORDINGLY THE PROVISIONS OF SECTION 14A ARE APPLICABLE. THEREFORE WE HOLD THAT THE LEARNED AO AND LEARNED CIT(A) WERE JUSTIFIED THAT ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 15 SUCH EXPENSES ARE DISALLOWABLE UNDER SECTION 14A. RULE 8D IS PROSPECTIVE IN NATURE. THEREFORE W E DIRECT THE AO TO RECALCULATE THE EXPENDITURE DISALLOWABLE UNDER SECTION 14A AS PER PROVISION OF LAW APPLICABLE FOR THE YEAR UNDER CONSIDERATION. WE ORDER ACCORDINGLY. 7 . THE NEXT ISSUE RELATES TO CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234B&C. 7.1 LEARNED AR OF THE ASSESSEE FAIRLY STATED THAT THIS GROUND HAS BEEN DECIDED AGAINST THE ASSESSEE IN EARLIER YEAR. 7.2 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WE CONFIRM THE ORDER OF THE LEARNED CIT(A) IN THIS RESPECT. 8 . NOW WE WILL TAKE UP THE APPEAL OF THE DEPARTMENT FOR THE ASSESSMENT YEAR 2001 - 02 ( I.E. IT A NO.5006/M/2004 ) . 8 .1 THE FIRST ISSUE RELATES TO ALLOWING THE ASSESEES CLAIM FOR DEDUCTION OF SALES TAX INCENTIVE OF RS. 288 28 81 284/ - AS BEING IN THE NATURE OF CAPITAL R ECEIPT. 8 .2 DURING THE ASSESSMENT PROCEEDING THE AO NOTICED THAT THE AMOUNT OF RS. 288 28 81 284/ - HAS BEEN CLAIMED BY THE ASSESSEE AS THE AMOUNT OF SALES TAX COLLECTED BY THE ASSESSEE FROM THE C USTOMERS WHICH ASSESSEE IS NOT REQUIRED TO PAY TO THE SALES T AX DEPARTMENT IN VIEW OF SALES TAX EXEMPTION SCHEME. IT WAS SUBMITTED BEFORE THE AO ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 16 THAT THE ASSESSEE COMPANY IS ENTITLED TO THE SALES TAX INCENTIVES UNDER THE CAPITAL INVESTMENT INCENTIVE PREMIER/PRESTIGIOUS UNIT 1995 - 2000 ANNOUNCED BY GOVERNMENT OF GUJAR AT INDUSTRIES MINES AND ENERGY DEPARTMENT IN THEIR RESOLUTION DATED 11 TH SEPTEMBER 1995. THE COPY OF THE SCHEME WAS ALSO FILED. IT WAS ALSO EXPLAINED THAT THE SALES TAX COLLECTED BEING THE AMOUNT OF NOTATIONAL SALES TAX IN RESPECT OF REFINERY UNIT AT JAMN AGAR T HEREFORE THE IMPUGNED AMOUNT WAS AVAILED AS INCENTIVE UNDER THE SCHEME NOTIFIED AND THE NATURE OF THE SAME IS CAPITAL IN NATURE NOT LIABLE TO TAX. RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF PARENT COMPANY I.E. M/S RELIANCE INDUSTRIES LIMITED FOR ASSESSMENT YEAR 1985 - 86 AND 1986 - 87 WHEREIN THE SIMILAR CLAIMS IN RESPECT OF SALES TAX INCENTIVE WERE ACCEPTED BY THE TRIBUNAL TO BE OF CAPITAL IN NATURE. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. VS. CIT REPORTED IN 228 ITR 253 . HOWEVER THE AO WAS NOT SATISFIED. IN HIS VIEW THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) WAS IN FAVOUR OF THE DEPARTMENT. TH EREFORE HE TREATED THE SALES TAX RECEIPT AS REVENUE RECEIPT. 8.3 THE C ONTENTIONS RAISED BEFORE THE AO WERE REITERATED BEFORE THE LEARNED CIT(A) . COPY OF THE SCHEME BY THE GUJARAT GOVERNMENT WAS ALSO FILED. RELIANCE WAS PLACED ON THE DECISION OF LEARNED CIT(A) FOR ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 17 ASSESSMENT YEAR 1998 - 99 TO 2000 - 2001 IN THE CASE OF PARENT COMPANY I.E. M/S RELIANCE INDUSTRIES LIMITED WHEREIN THE ISSUE LAWS DECIDED IN FAVOUR OF THE PARENT COMPANY. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL DECIDED IN ITA N O. 7554 /BOM /1989 VIDE ORDER DATED 25 - 7 - 2002 IN THE CASE OF PARENT COMPANY I.E. M/S RELIANCE INDUSTRIES LIMITED. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD LEARNED CIT(A) FOUND THAT THE ISSUE IS NOW COVERED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF PARENT COMPANY I.E. M/S RELIANCE INDUSTRIES LIMITED(SUPRA) . THE FINDINGS OF THE TRIBUNAL RECORDED IN PARA 117 OF THE ORDER OF THE TRIBUNAL WERE ALSO REPRODUCED BY THE LEARNED CIT(A) IN HIS ORDER . THEREAFTER FOLLOWI NG THE DECIS ION OF THE TRIBUNAL LEARNED CIT(A) HELD THAT THE SALES TAX INCENTIVE COLLECTED BY THE ASSESSEE ARE CAPITAL IN NATURE AND NOT LIABLE TO TAX. HOWEVER THE ALTERNATE GROUND OF THE ASSESSEE THAT THE SALES TAX COLLECTED SHOULD BE TREATED AS UNDER DEFERRAL SCHE ME T HE CIT(A) HAS OBSERVED IN HIS ORDER IN PARA 2.12 AT PAGE 9 THAT THE ASSESSEES CASE DOES NOT FALL WITHIN THE CLARIFICATION ISSUED BY THE CBDT IN THE AFORESAID CIRCULARS. ACCORDINGLY THE APPELLANTS CLAIM IS NOT COVERED BEING UNDER SALES TAX DEFERRED SCHEME . BY HOLDING SO THE CIT(A) HAS OBSERVED THAT THE ASSESSEE COMPANY HAS OPTED FOR SALES TAX EXEMPTION AND NOT DEFERRAL SCHEME. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 18 8.4 LEARNED DR WHO APPEARED BEFORE THE TRIBUNAL FAIRLY STATED THAT THE ISSUE IS DECIDED AGAINST THE DEPARTMENT BY THE SPE CIAL BENCH IN THE CASE OF PARENT COMPANY OF THE ASSESSEE HOWEVER HE PLACED RELIANCE ON THE ORDER OF AO. 8.5 ON THE OTHER HAND LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CIT(A). 8.6 AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE P ARTIES AND THE ORDERS OF THE AUTHORITIES BELOW WE FIND THAT LEARNED CIT(A) FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF PARENT COMPANY OF THE ASSESSEE I.E. M/S RELIANCE INDUSTRIES LIMITED HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE REFORE WE SEE NO REASON TO INTERFERE IN THE FINDING OF THE LEARNED CIT(A) . FINDINGS OF THE LEARNED CIT(A) AT PAGES 4 TO 6 REMAINED UNCONTROVERTED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE WE CONFIRM THE ORDER OF THE LEARNED CIT(A) IN THIS RE SPECT. 9. GROUND NO. 2 RELATES TO DIRECTING THE AO NOT TO THRUST UPON THE ASSESSEE THE CLAIM FOR DEPRECIATION ON THE ASSETS AND ACCORDINGLY ALLO WED THE DEDUCTION UNDER SECTION 80IB WITHOUT CONSIDERING DEPRECIATION. 9.1 DURING THE ASSESSMENT PROCEEDING THE AO NOTICED THAT THE ASSESSEE HAS OPTED NOT TO CLAIM DEPRECIATION ON REFINERY & SBM ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 19 UNITS. THE ASSESSEE WAS REQUIRED THAT AS TO WHY THE ASSESSEE HAS NOT CLAIMED DEPRECIATION. IT WAS EXPLAINED THAT IT IS OPTIONAL FOR THE ASSESSEE TO CLAIM DEPRECIATION AND T HE SAME CANNOT BE THRUST UPON IT IF NOT CLAIMED. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAHENDRA MILLS REPORTED IN 243 ITR 56 AND ALSO SUBSEQUENT DECISIONS OF THE TRIBUNAL. HOWEVER THE AO REJECTED THE ASS ESSEES CONTENTION AND THRUST UPON THE ASSESSEE T HE DEDUCTION OF DEPRECIATION ON THE ASSETS ON THE GROUND THAT IT IS MANDATORY TO COMPUTE DEDUCTION OF DEPRECIATION AND TAKE INTO ACCOUNT THE SAME WHILE COMPUTING PROFITS AND GAINS OF BUSINESS AS PROVIDED UND ER SECTION 29 OF THE ACT. THE AO HAS OBSERVED THAT THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF MAHENDRA MILLS (SUPRA) DOES NOT APPLY TO THE FACTS OF THE ASSESSEES CASE A S THE LAW H AS AMENDED WITH EFFECT FROM ASSESSMENT YEAR 1998 - 99 AFTER THE INTRODUCTION OF BLOCK OF ASSET CONCEPT. THE AO ALSO OBSERVED THAT SECTION 34 STANDS OMITTED W.E.F. 1 - 4 - 1988 ON INTRODUCTION OF NEW CONCEPT OF BLOCK OF ASSETS. THEREFORE THE DECISION OF THE HON BLE SUPREME COURT WHICH IS RELEVANT TO THE PRIOR ASSESSMENT Y EAR I.E. BEFORE THE AMENDMENT CAME ON STATUTE. ACCORDINGLY THE AO WORKED OUT THE DEPRECIATION AND CONSIDERED THE SAME WHILE COMPUTING BUSINESS PROFIT. THEREAFTER THE AO COMPUTED THE TAXABLE INCOME AND ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 20 CONSEQUENTIAL CLAIM FOR DEDUCTION UNDER SECTION 80IB O F THE ACT AFTER ALLOWING THE DEPRECIATION ON REFINER & SBM UNITS WAS WORKED OUT. 9.2 THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) BEFORE WHOM THE ACTION OF THE AO WAS STRONGLY OBJECTED. DETAILED WRITTEN SUBMISSIONS WERE FILED WHICH ARE REPRODUCED IN THE ORDER OF THE LEARNED CIT(A) AT PAGES 10 TO 13. IT WAS EXPLAINED THAT THE DEPRECIATION AMOUNTING TO RS. 3286 17 78 706/ - CANNOT BE THRUST UPON THE ASSESSEE. THIS IS ASSESSEES CHOICE BECAUSE CLAIMING OF DEPRECIATION IS OPTIONAL. IT WAS EXPLAINED THAT UND ER THE HEAD PROFIT AND LOSS OF BUSINESS AND PROFESSION THE INCOME TAX ACT PERMITS VARIOUS DEDUCTION SPECIFIED IN SECTION 28 TO 37 OF THE ACT. IT WAS FURTHER EXPLAINED BEFORE THE LEARNED CIT(A) THAT FOR CLAIMING ANY ALLOWANCE AVAILABLE TO THE ASSESSEE IT IS REQUIRED TO MAKE AN APPROPRIATE CLAIM DURING THE ASSESSMENT PROCEEDING. IT WAS FURTHER EXPLAINED THAT IF SUCH CLAIM IS PUT BEFORE THE AO THEN ONLY AO CAN CONSIDER OTHERWISE CANNOT BE THRUST UPON THE ASSESSEE TO CLAIM ANY DEDUCTION WHICH IS NOT CLAIMED . RELIANCE WAS PLACED ON VARIOUS DECISION OF VARIOUS HIGH COURTS INCLUDING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SOMESHWAR SAHAKARI SAKHAR KARKHANA LTD. 177 ITR 443 . RELEVANT PORTION OF THE DECISION OF THE HON BLE HIGH COURT WAS ALSO PROVIDED WHICH IS INCORPORATED IN THE ORDER OF LEARNED CIT(A) AT PAGE 12. THEREAFTER RELIANCE WAS PLACED ON VARIOUS DECISIONS OF THE ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 21 TRIBUNAL WHICH IS ALSO MENTIONED IN THE ORDER OF LEARNED CIT(A) AT PAGES 12 & 13. ACCORDINGLY IT WAS SUBMITTED THAT THE DEPRECIATION SHOULD NOT BE CONSIDERED AS DEDUCTABLE FOR THE PURPOSE OF DEDUCTION CLAIMED UNDER SECTION 80IB. THEREAFTER LEARNED CIT(A) FOUND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON BLE BOMBAY HIGH COURT AND BY THE DECISION O F THE HON BLE SUPREME COURT IN THE CASE OF MAHENDRA MILLS (SUPRA) . IT WAS ALSO OBSERVED BY THE LEARNED CIT(A) THAT SIMILAR CLAIM IN THE CASE OF PARENT COMPANY I.E M/S RELIANCE INDUSTRIES LIMITED FOR ASSESSMENT YEAR 1997 - 98 TO ASSESSMENT YEAR 2000 - 01 HAVE B EEN ALLOWED . ACCORDINGLY HE ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE AO WAS DIRECTED TO RECOMPUTE THE DEDUCTION UNDER SECTION 80IB WITHOUT THRUSTING UPON THE DEPRECIATION. THE FINDINGS OF THE LEARNED CIT(A) HAVE BEEN RECORDED IN PARA 3.2 TO .4 AT PAGES 13 & 14 WHICH ARE AS UNDER : - 3 .2. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND ALSO GONE THROUGH THE IMPUGNED ORDER OF ASSESSMENT. THE ISSUE RELATING TO THE DEDUCTION OF DEPRECIATION WHILE COMPUTING PROFITS AND GAIN? OF BUSIN ESS HAS BEEN SETTLED BY THE SUPREME COURT IN THE CASE OF C I T VS. MAHINDRA MILLS - (243 ITR 56). THE POINT THAT REMAINS TO BE CONSIDERED IS WHETHER THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF MAHINDRA MILLS ALSO APPLY SUBSEQUENT TO ASSESSMENT YE AR 1988 - 89 WHEN THE CONCEPT OF BLOCK OF ASSET WAS INTRODUCED FOR THE PURPOSES OF COMPUTING CLAIM FOR DEPRECIATION AND SECTION 34 REQUIRING FILING OF PRESCRIBED PARTICULARS STAND OMITTED. THIS ISSUE HAS COME UP BEFORE THE HON'BL E ITA T MU M BAI IN VARIOUS APP EALS CITED HEREINABOVE WHERE AFTER ANALYSING THE SUPREME COURT JUDGMENT IN THE CASE OF MAHENDRA MILLS THE HON'BLE TRIBUNAL HAS COME TO A CONCLUSION THAT THE DEPRECIATION CAN BE ALLOWED ONLY WHEN THE CLAIM FOR SUCH DEDUCTION IS MADE BY THE ASSESSEE. MOREO VE R THE HON'BLE TRIBUNAL HAS FURTHER OBSERVED THAT EVEN AFTER OMISSION OF SECTION 34 AND INTRODUCTION OF BLOCK OF ASSET CONCEPT FROM ASSESSMENT YEAR 1988 - ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 22 89. THE RATIO LAID DOWN BY THE SUPREME COURT STILL HOLDS GOOD. THE CLAIM FOR DEPRECIATION IS OPTIONAL AND CAN BE ALLOWED ONLY IF CLAIMED BY THE ASSESSEE. THE HON'BLE [TAT HAS FURTHER REFERRED TO THE EXPLANATION - 5 INSERTED IN SECTION 32 OF THE LT. ACT BY FINANCE ACT 200 I WITH EFFECT FROM 114/2002 AND HAVE OBSERVED THAT THE EXPLANATION 5 HAS BEEN PROSPECT IVE IN ITS EFFECT; THE PRINCIPLE LAID DOWN BY THE SUPREME COURT HOLDS GOOD AND APPLIES TO ALL THE YEARS PRIOR TO INTRODUCTION OF SAID EXPLANATION. THE VARIOUS JUDGEMENTS RELIED UPON BY THE APPELLANT CLEARLY SUPPORT THE APPELLANT'S STAND TO THE EFFECT THAT THE CLAIM FOR DEPRECIATION CANNOT BE FORCED UPON THE APPELLANT IF NOT CLAIMED WHILE COMPUTING TOTAL INCOME. RESPECTFULLY FOLLOWING THE VARIOUS DECISIONS RELIED UPON BY THE APPELLANT I HOLD THAT THE DEPRECIATION OF RS.3286 17 78.706/- CANNOT BE THRUST UPON THE APPELLAN T AND THE CLAIM FOR DEDUCTION U/ S 80IB SHALL BE ALLOWED WITHOUT REDUCING THE PROFIT BY THE AMOUNT OF DEPRECIATION. 3.3. THE IDENTICAL ISSUE HAS BEEN CO NSIDERED BY ME IN THE CASE OF M/ S. RELIANCE INDUSTRIES LIMITED FOR THE A.Y. 1997 - 98 1998 - 99 1999 - 2000 & 2000 - 200 1 AND I HAVE TAKEN THE VIEW THAT THE CLAIM FOR DEPRECIATION CANNOT BE THRUST UPON THE APPELLANT AND THE SUPREME COURT'S JUDGEMENT DELIVERED IN THE CASE OF MAHENDRA MILLS (243 ITR 56) HOLDS GOOD EVEN IN THE CASE OF A PPELLANT FOR THE A:Y. 2001 - 2002. 3.4. FOLLOWING MY VIEW TAKEN IN EARLIER YEAR I DIRECT THE AO NOT TO THRUST UPON THE ASSESSEE THE CLAIM FOR DEPRECIATION ON ABOVE ASSETS AND ACCORDINGLY ALLOW THE 80IB DEDUCTION WITHOUT CONSIDERING DEPRECIATION. 9.3 LEARNED DR STATED THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PLASTIBLENDS INDIA LIMITED V. ASSISTANT COMMISSIONER OF INCOME - TAX REPORTED IN (2009) 318 ITR 352(BOM ) WHEREBY IT HAS BEEN PROVIDED THAT AFTER AMENDMEN T THE DEPRECIATION HAS TO BE CLAIMED BY THE ASSESSEE ON THE BASIS OF AMENDED PROVISION OF LAW. 9.4 ON THE OTHER HAND LEARNED COUNSEL OF THE ASSESSEE FAIRLY STATED THAT THOUGH THE ISSUE IS COVERED BY THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN FAVOUR OF THE DEPARTMENT HOWEVER THE AO SHOULD BE ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 23 DIRECT ED TO COMPUTE THE NORMAL INCOME FIRST AND THEREAFTER TO WORK OUT THE ELIGIBLE DEDUCTION UNDER SECTION 80IB AS NORMAL COMPUTATION IS NECESSARY BEFORE ALLOWING THE DEDUCTION UNDER SECTION 80IB . 9.5 WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSION AND TAKING INTO CONSIDERATION THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF PLASTIBLENDS INDIA LIMITED (SUPRA) WE FIND THAT THE ISSUE IS NOW SQUARELY CO VERED IN FAVOUR OF THE DEPARTMENT. THE HON BLE BOMBAY HIGH COURT AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MAHENDRA MILLS (SUPRA) AND THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. REPORTED IN 245 ITR 677 AND IN THE CASE OF INDIAN RAYON CORPORATION LTD. V. COMMISSIONER OF INCOME - TAX REPORTED IN (2003) 261 ITR 98 (BOM) HELD THAT : - THE ASSESSEE BY NOT CLAIMING CURRENT DEPRECIATION SOUGHT TO INFLATE THE PROFIT LINK INCENTIVE PROV IDED UNDER SECTION 80IA OF THE ACT WHICH WAS NOT PERMISSIBLE. ONCE IT WAS FOUND THAT DISCLAIMING DEPRECIATION WAS NOT IN THE INTEREST OF THE ASSESSEE THE AO WAS JUSTIFIED IN ALLOWING THE CURRENT DEPRECIATION TO THE ASSESSEE AND IN DEDUCTING THE ALLOWABLE DEPRECIATION FOR THE PURPOSE OF SPECIAL DEDUCTION UNDER CHAPTER VI(A) OF THE ACT EVEN THOUGH THE ASSESSEE HAD DISCLAIMED THE ALLOWANCE FOR THE PURPOSE OF REGULAR ASSESSMENT. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 24 9.6 ACCORDINGLY WE REVERSE THE FINDINGS OF THE LEARNED CIT(A) AS THE ISSUE I S NOW SQUARELY COVERED BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT. FOR THE SAKE OF CLARIFICATION VARIOUS DECISIONS CONSIDERED BY THE LEARNED CIT(A) HAVE ALREADY BEEN CONSIDERED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF PLASTIBLENDS IND IA LIMITED (SUPRA) AND THEN ONLY IT HAS BEEN HELD THAT THE DEPRECIATION HAS TO BE THRUST UPON WHETHER THE SAME HAS BEEN CLAIMED BY THE ASSESSEE OR NOT. 9.7 HOWEVER WE FOUND WEIGHT IN THE ALTERNATIVE CONTENTIONS OF THE LEARNED AR THAT AFTER THRUSTING UPO N THE DEPRECIATION NORMAL COMPUTATION HAS TO BE ARRIVED AT FOR THE PURPOSE OF ELIGIBLE DEDUCTION UNDER SECTION 80IB. ACCORDINGLY WE DIRECT THE AO FIRST TO COMPUTE THE NORMAL COMPUTATION OF INCOME AFTER THRUSTING UPON THE DEPRECIATION AND THEREAFTER TO AL LOW THE DEDUCTION UNDER SECTION 80IB IF ANY AS PER PROVISION OF LAW. WE ORDER ACCORDINGLY. 10 . GROUND NO. 3(A) & (B) IS AGAINST DELETING THE ADDITION OF RS. 10 LAKHS ON ACCOUNT OF TRAVELLING EXPENSES SPOUSES OF THE EXECUTIVES OF THE ASSESSEE COMPANY 10.1 LEARNED DR PLACED RELIANCE ON THE ORDER OF AO. ON THE OTHER HAND LEARNED COUNSEL OF THE ASSESSEE PLACED IN THE CASE OF LEARNED CIT(A) IN RESPECT TO THE ABOVE GROUNDS. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 25 10. 2 THE AO MADE AD HOC DISALLOWANCE OF RS. 10 LAKHS BEING TRAVELLING EXPENSES INCURRE D ON SPOUSE S TRAVELLING EXPENSES ON THE BASIS OF GENERAL NOTE GIVEN BY THE ASSESSEE. IT WAS STATED BEFORE THE CIT(A) THAT THE ASSESSEE COMPANY HAS NOT INCURRED ANY EXPENSES TOWARDS SPOUSE TRAVELLING AND THEREFORE THE AD HOC DISALLOWANCE WAS NOT JUSTIFIE D. THE CIT(A) ASKED FOR THE DETAILS IN RESPECT OF TRAVELLING EXPENSES. DETAILS OF TRAVELLING EXPENSES WERE FILED. AFTER PERUSING THE DETAILS THE CIT(A) FOUND THAT NO EXPENSES HAVE BEEN INCURRED TOWARDS TRAVELLING OF SPOUSES OF EXECUTIVES OF THE ASSESSEE . ACCORDINGLY HE DELETED THE DISALLOWANCE OF RS. 10 LACS MADE BY THE AO ON AD - HOC BASIS. 10. 3 AFTER CONSIDERING THE ORDER OF THE AO AND LEARNED CIT(A) WE FOUND NO INFIRMITY IN THE FINDINGS OF THE LEARNED CI T(A) WHO DELETED THE AD HOC DISALLOWANCE BY ASCE RTAINING THE FACTUAL ASPECT THAT NO EXPENSES HAVE BEEN INCURRED ON TRAVELLING EXPENSES OF SPOUSE OF THE EXECUTIVES OF THE COMPANY. THIS FACTUAL FINDING GIVEN BY THE LEARNED CIT(A) REMAINED UNCONTROVERTED. ACCORDINGLY WE CONFIRM THE ORDER OF THE LEARNED CI T(A) IN THIS RESPECT. 11 . THE REMAINING ISSUE IN APPEAL OF THE DEPARTMENT IS AGAINST IN HOLDING THAT DEDUCTION OF ELIGIBLE EXPORT PROFIT FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB SHALL BE COMPUTED WITH ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 26 REFERENCE TO PROFIT AS PER B OOKS OF ACCOUNTS AND NOT RESTRICTED TO AMOUNTS COMPUTED AND ALLOWED UNDER NORMAL PROVISIONS OF ACT. 11.1 LEARNED DR AGAIN PLACED RELIANCE ON THE ORDER OF AO. ON THE OTHER HAND LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CIT(A) . FURTH ER RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C IT V. BHARI INFORMATION TECH. SYS. P. LTD. REPORTED IN (2012) 340 ITR 593 AND IN THE CASE OF SYNCOME REPORTED IN 106 ITD 193 (SB) . 11.2 DURING THE ASSESSMENT PROCEEDING ON PERUSAL OF THE STATEMENT OF INCOME THE AO NOTICED THAT THE ASSESSEE COMPANY HAS PROVIDE D WORKING OF TAX UNDER SECTION 115JB ON THE DEEMED INCOME AS THERE IS NO TAX PAYABLE ON THE INCOME AS PER NORMAL PROVISION OF LAW. THE AO FURTHER NOTED THAT THE WHILE ARRIVING AT THE AFORESAID BOOK PROFIT AN AMOUNT OF RS. 3 66 75 88 232/ - HAS BEEN REDUCED WHICH INCLUDES DIVIDEND INCOME OF RS. 67 01 909/ - AND ELIGIBLE EXPORT PROFIT UNDER SECTION 80HHC OF RS. 366 08 86 323/ - . THE ASSESSEE WAS ASKED AS TO WHY THE DEEMED INCO ME UNDER SECTION 115JB SHOULD NOT BE REVISED CONSIDERING THE EXPENSES ATTRIBUTABLE TO EARN THE EXEMPT INCOME UNDER SECTION 10(33) AND ALSO THE DEDUCTION ON ACCOUNT OF ELIGIBLE EXPORT PROFIT UNDER SECTION 80HHC SHOULD NOT BE DENIED IN THE LIGHT OF THE NIL ALLOWABILITY OF DEDUCTION UNDER SECTION 80HHC AS PER ITS OWN WORKING OF DEDUCTION. DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 27 THE AO WHICH HAS BEEN REPRODUCED IN THE ORDER OF AO AT PAGES 26 & 27 ONWARDS. AFTER CONSIDERING THE SUBMISSIONS THE AO REWOR KED THE BOOK PROFIT FOR THE PURPOSE OF COMPUTING PROFIT UNDER SECTION 115JB . 11.3 BEFORE THE LEARNED CIT(A) ALSO DETAILED WRITTEN SUBMISSIONS WERE FILED. THE PROVISION OF SECTION 115J AND 115JB WERE EXPLAINED. RELIANCE WAS PLACED ON VARIOUS CASE LAWS ALSO INCLUDING THE DECISION IN THE CASE OF PARENT COMPANY M/S RELIANCE INDUSTRIES LIMITED FOR ASSESSMENT YEAR 2000 - 01. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS ALONG WITH PROVISION OF SECTION 80HHC READ WITH SECTION 115JB AND THE CLARIFICATION ISSUED B Y THE CBDT HELD THAT THE AO WAS NOT JUSTIFIED IN RECOMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. THE FINAL FINDING S OF THE LEARNED CIT(A) HAVE BEEN RECORDED IN PARA 7.3 & 7.4 AT PAGES 26 & 27 OF HIS ORDER WHICH ARE AS UNDER : - 7 .3 I HAVE CAREFULLY CONSIDERED THE RELEVANT PROVISIONS OF LAW SUBMISSIONS OF THE APPELLANT AND REASONING OF THE AO. I AM OF THE CONSIDERED VIEW THAT THE DEDUCTION U/S.80HHC IS PROVIDED IN SUB SEC(1) OF SEC.80HHC AND NOT BY SUB - SEC (3) OF SEC. 80HHC WHICH I S REFERRED IN CLAUSE (IV) OF SEC. 115JB SUB - SEE (3) OF SEC. 80EHC ONLY SUGGESTS T HE MANNER IN WHICH THE DEDUCTION SHOULD BE COMPUTED AS IT LAYS DOWN THE FORMULA FOR ARRI VING AT THE DEDUCTION U/S 80HHC AND HENCE THE OMISSION OF THE WORDS. 'IN THE MANNER SPE CIFIED' FROM THE CLAUSE (IV) OF SEC. 115JB DO NOT ALTER THE BASIS OF DEDUCTION. I AM ALSO OF THE VIEW THAT THE BASIS OF DEDUCTION I.E. 'PROFITS OF THE BUSINESS' SHOULD BE THE BOOK PROFITS COMPUTED AS PER SEC. 115JB AND NOT PROFITS AND GAINS OF BUSINESS AS PER NORMAL PROVISIONS OF THE ACT AS CLARIFIED BY THE CBOT AND SUBSEQUENTLY APPROVED BY KERALA HC DECISION . 7 .4. IN VIEW OF THE CLARIFICATION ISSUED BY CBOT THE OBSERVATIONS MADE BY KERALA HIGH COURT CAREFUL READING OF CLAUSE (III) OF SEC. ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 28 115 J AND C LAUSE (IV) OF SEE 115 JB AND ALSO CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT I AM OF THE VIEW THAT THERE IS NO MATERIAL CHANGE IN THE LANGUAGE OF CLAUSE (III) OF SEC. 115J AND CLAUSE (IV) OF SEC. 115JB THEREFORE DIRECT THE AO TO COMPUTE DEDUCTION U/S. 80HHC OUT OF BOOK PROFIT U/S. 115JB ONLY WITH REFERENCE TO PROFIT AS PER ACCOUNTS AND NOT TO RESTRICT TO THE AMOUNT COMPUTED AND ALLOWED UNDER NORMAL PROVISIONS OF THE ACT. THE SIMILAR ISSUE HAS COME UP IN AP PEAL BEFORE ME IN THE CASE OF M/ S. RELIANCE INDUSTRIES LIMITED FOR AY.2000 - 2001 AND VIDE MY ORDER NO. CIT(A) - IIILRG.3(3)/IT.571102 - 03 DATED 14.08.2003 I HAVE HELD THAT DEDUCTION OF ELIGIBLE EXPORT PROFIT OUT OF BOOK PROFIT U/S. 115JB SHALL BE COMPUTED WITH REFERENCE TO PROFIT AS PER ACCOUNTS AND NOT RESTRICTED TO AMOUNT COMPUTED AND ALLOWED UNDER NORMAL PROVISIONS OF THE ACT. IN VIEW OF WHAT IS HELD ABOVE I ALLOW THIS GROUND IN FAVOUR OF THE APPELLANT. 11.4 AFTER CONSIDERING THE SUBMISSION AND THE ORDER OF THE AUTHORITIES AND TAKING INTO CONSIDERATI ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF C IT V. BHARI INFORMATION TECH. SYS. P. LTD. (SUPRA) AND THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SYNJCOME (SUPRA) WE FIND NO INFIRMITY IN THE FINDINGS OF THE LEARNED CIT( A) . THE HON BLE SUPREME COURT IN THE CASE OF BHARI INFORMATION TECH. SYS. P. LTD. (SUPRA) HAS HELD THAT THE DEDUCTION UNDER SECTION 80HHC OF THE ACT IN CASE OF EXPORT OF COMPUTER SOFTWARE HAS GOT TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT UNDER SECTION 115JA AND NOT ON THE BASIS OF COMPUTED UNDER THE REGULAR PROVISION OF LAW AVAILABLE TO THE COMPUTATION OF PROFIT AND GAINS OF THE BUSINESS. THE DECISION OF THE HON BLE SUPREME COURT IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. WE FURTHE R NOTED THAT THE SPECIAL BENCH IN THE CASE OF SYNJCOME (SUPRA) HAS HELD THAT THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115JA IS TO BE ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 29 WORKED ON THE BASIS OF ADJUSTED BOOK PROFIT AND NOT ON THE BASIS OF PROFIT COMPUTED UNDER REGULAR PROVISION OF LAW AP PLICABLE TO COMPUTATION OF PROFITS AND GAINS OR BUSINESS. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT AS WELL AS THE SPECIAL BENCH WE HOLD THAT THE LEARNED CIT(A) WAS JUSTIFIED IN ALLOWING THE ISSUE IN FAVOUR OF THE ASSESSEE. THE FINDINGS OF THE LEARNED CIT(A) ARE REPRODUCED SOMEWHERE ABOVE IN THIS ORDER WHICH REMAINED UNCONTROVERTED ALSO. THEREFORE FOR THIS REASON ALSO THE ORDER OF THE LEARNED CIT(A) IS CONFIRMED. 12 . NOW WE WILL TAKE UP THE APPEAL THE ASSESSEE LISTED U NDER ITA NO. 3384/M/2007 FILED FOR ASSESSMENT YEAR 2001 - 02 WHICH RELATES TO CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) AT RS. 6 56 118/ - . 12.1 THE AO LEVIED A PENALTY OF RS. 10 LAKHS ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME ON TH E AMOUNT OF RS. 21 33 075/ - WHICH DISALLOWED BY THE AO UNDER SECTION 14A OF THE ACT. 12.2 LEARNED CIT(A) RESTRICTED THE LEVY OF PENALTY ON THE AMOUNT OF RS. 18 7 4 625/ - AND THE AMOUNT OF RS. 2 58 450/ - WAS DELETED. IN THIS WAY THE CIT(A) CONFIRMED THE LE VY OF PENALTY OF RS. 6 56 118/ - OUT OF RS. 10 LAKHS LEVIED BY THE AO. 12.3 LEARNED AR STATED THAT MERELY ON ACCOUNT OF DISALLOWANCE OF EXPENSES PENALTY IS NOT LEVIABLE. IT WAS ALSO STATED THAT THERE ARE TWO ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 30 THINGS AVAILABLE AS CERTAIN DECISION SAYS THAT DE MAT CHARGES ARE ALLOWABLE AS REVENUE EXPENSES AND CERTAIN DECISION SAYS THEY ARE NOT ALLOWABLE. THEREFORE FOR THIS REASON ALSO PENALTY IS NOT LEVIABLE. 12.4 ON THE OTHER HAND LEARNED DR PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(A) . 12.5 AFTER CO NSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD WE FIND THAT THE ASSESSEE DESERVES TO SUCCEED IN THIS APPEAL. THERE IS NO DISPUTE THAT EACH AND EVERY DETAILS WERE FURNISHED BEFORE THE AO IN RESPECT OF CLAIM OF EXPENDITURE OF RS. 21 33 075/ - H OWEVER THE AO WAS OF THE VIEW THAT THESE EXPENSES ARE TO BE DISALLOWED UNDER SECTION 14A AS THE INCOME IN ACCOUNT OF PURCHASES AND SALES OF SHARES IS EXEMPT UNDER SECTION 10(33) OF THE ACT. 12.6 IN OUR VIEW PENALTY ON THE AMOUNT OF DISALLOWANCE UNDER SE CTION 14A IS NOT LEVIABLE BECAUSE THE ASSESSEE HAS FURNISHED EACH AND EVERY DETAIL. THIS IS ASSESSEES CLAIM THAT DEMAT CHARGES ARE FOR THE PURPOSE OF HOLDING THE SHARES WHICH IS A SOURCE OF INCOME BUT NOT DIRECTLY LINK WITH THE EXEMPTED INCOME. THOUGH W E HAVE REJECTED THIS CLAIM OF THE ASSESSEE WHILE DISPOSING OF F THE APPEAL ON MERIT HOWEVER WE ARE OF THE CONSIDERED VIEW THAT AT LEAST PENALTY ON THIS AMOUNT IS NOT LEVIABLE AS THERE WAS NO CASE OF FURNISHING INACCURATE PARTICULARS. THIS IS A CLAIM OF AS SESSEE WHETHER THE SAME IS ALLOWABLE OR NOT ITA NO S . 4734 4735 5005 5006/ 04 & 3384/07 31 ALLOWABLE IS THE SUBJECT MATTER OF DISPUTE. ACCORDINGLY WE HOLD THAT LEVY OF PENALTY WAS NOT JUSTIFIED ON ACCOUNT OF DEMAT CHARGES EXPENSES DISALLOWED BY THE AO. THEREFORE LEVY OF PENALTY IS CANCELLED. 13 . I N THE RESULT APPEAL S OF THE ASSESSEE IN QUANTUM MATTER (I.E.ITA NOS. 4734 & 4735 /M/2004 ) ARE ALLOWED IN PART AND APPEAL RELATING TO PENALTY PROCEEDING (I.E. ITA NO. 3384/M/2007) IS ALLOWED WHEREAS THE APPEAL OF THE DEPARTMENT (I.E. ITA NO. 500 5 /M/2004) IS D ISMISSED AND THE APPEAL OF THE DEPARTMENT RELATING TO ASSESSMENT YEAR 2001 - 02 (I.E ITA NO. 500 6 /M/2004) IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JUL . 2013 . SD/ - ( ) ( N.K.BILLAIYA ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUM BAI ; DATED : 31/07 /2013 . /PKM PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) MUMBAI. 4. / CIT 5. / DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER ( ASSTT. REGISTRAR) / ITAT MUMBAI