DCIT, New Delhi v. M/s. Orient Ceramics and Industries Ltd., New Delhi

ITA 4879/DEL/2010 | 2007-2008
Pronouncement Date: 14-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 487920114 RSA 2010
Assessee PAN AAACO0305P
Bench Delhi
Appeal Number ITA 4879/DEL/2010
Duration Of Justice 2 month(s) 4 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Orient Ceramics and Industries Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 14-01-2011
Date Of Final Hearing 11-01-2011
Next Hearing Date 11-01-2011
Assessment Year 2007-2008
Appeal Filed On 09-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES E: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO. 4879/DEL/2010 ASSESSMENT YEAR: 2007-08 DCIT VS. ORIENT CERAMICS AND INDUSTRIES LTD. CIRCLE 13(1) IRIS HOUSE 16 BUSINESS CENTRE C.R. BLDG. I.P. ESTATE NANGAL RAYA NEW DELHI. NEW DELHI. AAACO0305P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. RAVI RAMCHANDARAN SR. D R RESPONDENT BY : SHRI SALIL AG GARWAL ADV. ORDER PER I.P. BANSAL J.M. THIS IS AN APPEAL FILED BY THE DEPARTMENT. IT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) DATED 10 TH AUGUST 2010 FOR A.Y. 2007-08. 2. GROUND NO. 1 READ AS UNDER: - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 4 10 200/- MADE BY THE AO ON ACCOUNT OF CLAIM OF DEPRECIATION ON CAPITALIZATI ON OF PAYMENT ON CUSTOMS DUTY AS THE ASSESSEE HAS NOT ACCEPTED THE CUSTOMS D UTY AS A LIABILITY IN ITS BOOKS OF ACCOUNTS AND IS DISPUTING THE SAME. ITA NO. 4879/D/10 2 3. DURING THE COURSE OF ASSESSMENT PROCEEDING THE A O FOUND THAT ACCORDING TO ASSESSEE COMPANYS NOTES TO ACCOUNTS A T PAGE 40 OF PRINTED ANNUAL REPORT MENTIONED AT ITEM (D) UNDER THE HEAD CONTINGENT LIABILITY THAT THE COMPANY HAD IMPORTED CERTAIN EQUIPMENT UNDER TH E INDUSTRIAL POLLUTION PREVENTION PROJECT BASED ON THE CERTIFICATE ISSUED BY THE PROJECT IMPLEMENTING AUTHORITY UNDER NOTIFICATION 84/97 CUS T. DT. 11.11.1997. SUBSEQUENTLY THE CERTIFICATES WERE FOUND TO BE NOT IN ORDER AND COMPANY PAID BACK THE PRINCIPLE AMOUNT OF CUSTOM DUTY OF RS . 4 25 34 028/- UNDER PROTEST IN RESPECT OF SUCH IMPORTS AND SUBSEQUENTLY UPON DIRECTION OF HONBLE ALLAHABAD HIGH COURT THE MINISTRY OF FINANC E HAS NOMINATED THE LINE MINISTRY AND THE COMPANY HAS FILED CERTIFIED T RUE COPIES OF THE EARLIER CERTIFICATES WITH THE LINE MINISTRY WITH A VIEW TO CURE THE PROCEDURAL DEFECTS AND THE RESTORATION OF EXEMPTION AND THUS ACCORDIN G TO AO THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT TREATED THE PAYMENT OF CUSTOM DUTY AS ADVANCE PAYMENT AND HAD SHOWN AS CONTINGENT LIABILI TY WHICH WILL BE CRYSTALLIZED ON A FUTURE DATE. IN THESE CIRCUMSTAN CES THE AO REFERRING TO ASSESSMENT YEARS 2005-06 AND 06-07 HAS OBSERVED THA T IN THOSE YEARS THE ASSESSEE HAS CAPITALIZED THE SAID AMOUNT ON IMPORTE D MACHINERY AND DEPRECIATION WAS CLAIMED U/S 32 OF THE ACT. IN THO SE YEARS THE DEPRECIATION CLAIM OF THE ASSESSEE WAS DISALLOWED AND REFERRING TO THOSE YEARS THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPR ECIATION CLAIMED FOR THE YEAR UNDER CONSIDERATION ALSO SHOULD NOT BE DISALLO WED. THE DISALLOWANCE MADE BY THE AO HAS BEEN DELETED BY LD. CIT(A) ON TH E BASIS OF EARLIER ITA NO. 4879/D/10 3 ORDERS OF CIT(A) FOR ASSESSMENT YEARS 2005-06 AND 0 6-07. THE DEPARTMENT IS AGGRIEVED HENCE IN APPEAL. 4. AT THE TIME OF HEARING LD. AR AFTER NARRATING T HE FACTS SUBMITTED THAT FOR ASSESSMENT YEARS 05-06 AND 06-07 DEPARTMENT HAD PREFERRED AN APPEAL AGAINST AFOREMENTIONED ORDER PASSED BY LD. CIT(A) V IDE WHICH THE ASSESSEE HAD BEEN GRANTED RELIEF BY HOLDING THAT ASSESSEE WA S ENTITLED TO DEPRECIATION ON THE SAID CUSTOM DUTY AND THE TRIBUN AL HAS CONFIRMED THE VIEW ADOPTED BY LD. CIT(A) VIDE ITS ORDER DATED 11. 2.10 PASSED IN ITA NOS. 1302 AND 445/DEL/09. HE HAS PLACED COPY OF ORDER O N OUR RECORD IN WHICH VIDE PARA NO. 5 THE TRIBUNAL HAD UPHELD THE ORDER O F CIT(A). THUS IT WAS PLEADED THAT THE ORDER OF CIT(A) IN THIS REGARD SHO ULD BE UPHELD AND THIS GROUND OF THE DEPARTMENT SHOULD BE DISMISSED. 5. ON THE OTHER HAND RELYING UPON THE ORDER OF AO IT WAS PLEADED BY LD. DR THAT THE ORDER OF LD. CIT(A) SHOULD BE SET ASIDE AND THAT OF AO SHOULD BE RESTORED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. AFTER CAREFUL PERUSAL WE FOUND THAT THE ISSUE RAISED BY THE REVENUE IS COVERED BY THE AFOREMENTIO NED ORDER OF THE TRIBUNAL. THE RELEVANT OBSERVATIONS OF THE TRIBUNA L WHILE DECIDING THE ISSUE FOR A.Y. 05-06 AND 06-07 FROM AFOREMENTIONED ORDER ARE REPRODUCED BELOW: ITA NO. 4879/D/10 4 5. WE HAVE HEARD THE PARTIES AT LENGTH AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LD. DR RELIED UP ON THE ORDER OF THE AO AND ARGUED THAT THE IMPUGNED PAYMEN T OF CUSTOM DUTY IS NOT A LIABILITY INCURRED BY THE ASSE SSEE. THE SAID PAYMENT IS AN ADVANCE PAYMENT AS SHOWN IN THE BOOKS OF ACCOUNT AND THE ASSESSEE HAS FILED THE APPEAL BE FORE THE CUSTOMS AUTHORITIES. THE FACTS HAVE BEEN ADMITTED BY THE ASSESSEE VIDE LETTER DATED 1.10.2007. THE LD. CIT( A) ON WRONG APPRECIATION OF FACTS HAS ALLOWED THE APPEAL OF THE ASSESSEE. WHEREAS ON THE OTHER HAND THE LD. COUNS EL FOR THE ASSESSEE SHRI SALIL AGGARWAL AT THE OUTSET ARGU ED THAT MERE ENTRIES IN THE BOOKS OF ACCOUNT CANNOT BE DECI SISVE OF ASCERTAINING OF INCOME. THE ACCOUNTING PRACTICE CA NNOT OVER-RIDE ANY PROVISION OF THE ACT. WHETHER A PART ICULAR RECEIPT IS AN INCOME OR NOT IS A QUESTION OF LAW WH ICH HAS TO BE DECIDED BY THE COURT ON THE BASIS OF THE PROVISI ONS OF THE ACT. HE RELIED UPON THE DECISIONS OF VARIOUS COURT S OF LAW WHICH ARE AS UNDER: - 1. SHOORJI VALLABHDAS & CO. 46 ITR 144 (SC); 2. TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS . CIT 227 ITR 172 (SC); 3. KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT 82 ITR 363; 4. SUTLEJ COTTON MILLS LTD. VS. CIT 116 ITR 1 (SC ). SHRI SALIL AGGARWAL FURTHER ARGUED THAT EVEN THE LIABILITY DOES NOT BECOME CONTINGENT BECAUSE IT IS CONTESTED IN APPEAL AND THE EXCISE DEPARTMENT RAISED THE DEMA ND ASKING THE ASSESSEE TO PAY THE DUTY FOR EARLIER YEA RS. HE RELIED UPON THE JUDGMENT IN THE CASE OF CIT VS. BHA RAT CARBON & RIBBON MFG. CO. P. LTD. 192 ITR 221 (DEL) WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT REPO RTED IN ITA NO. 4879/D/10 5 239 ITR 505. IT WAS ALSO ARGUED BY SHRI SALIL AGGA RWAL THAT THERE IS NO APPEAL FILED BY THE ASSESSEE BEFORE THE CUSTOMS AUTHORITIES AND IT HAS WRONGLY BEEN MENTIONED BY TH E ASSESSEE BEFORE THE AO THAT THE APPEAL HAS BEEN FIL ED BEFORE THE CUSTOMS AUTHORITIES. THIS FACT WAS BROU GHT TO THE NOTICE OF THE LD. CIT(A) ALSO. SHRI SALIL AGGARWAL FURTHER RELIED UPON THE SUBMISSIONS AND ARGUMENTS MADE BEFO RE THE LD. CIT(A) AND SUPPORTED THE ORDER OF THE LD. CIT(A ) WITH REGARD TO ALLOWING THE CLAIM OF THE ASSESSEE. 6. AT THE OUTSET WE ARE CONVINCED WITH THE ARGUMENT S MADE BY SHRI SALIL AGGARWAL ADVOCATE THAT MERE BOOK EN TRIES ARE NOT DECISIVE OF ANY INCOME. THE QUESTION IS WHETHE R A RECEIPT OF MONEY IS TAXABLE OR NOT WHETHER CERTAIN DEDUCTIONS FROM THAT RECEIPT ARE PERMISSIBLE IN LAW OR NOT THE QUESTION HAS TO BE DECIDED ACCORDING TO THE PRI NCIPLES OF LAW AND NOT IN ACCORDANCE WITH THE BOOK ENTRIES FOR THE ACCOUNTING PRACTICE SINCE THE ACCOUNTING PRACTICE C ANNOT OVER RIDE THE PROVISIONS OF THE ACT. THESE VIEWS A RE FORTIFIED BY THE JUDGMENT OF VARIOUS COURTS OF LAW IN THE CAS ES OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPR A) KEDARNATH JUTE MANUFACTURING CO. LTD. (SUPRA) SUTL EJ COTTON MILLS LTD. (SUPRA) & SHOORJI VALLABHDAS & CO. (SUPR A). THERE IS NOTHING ON RECORD PLACED BY THE DEPARTMENTAL REPRESENTATIVE TO ESTABLISH THAT THE APPEAL HAS BEE N FILED BY THE ASSESSEE AGAINST ANY ORDER OF THE CUSTOMS DEPAR TMENT. THE EXPLANATION THEREFORE APPEARS TO BE SATISFACT ORY THAT ON THE DIRECTIONS ISSUED BY THE CUSTOMS DEPARTMENT THE PAYMENT OF CUSTOM DUTY HAS BEEN MADE THOUGH THE SAM E HAS BEEN SHOWN AS ADVANCE OR A NOTE HAS BEEN APPEND ED IN THE ACCOUNTS FOR CONTINGENT LIABILITY. THEREFOR E IN OUR VIEW THE ASSESSEE HAS MADE THE PAYMENT OF CUSTOM DUTY ON LY ITA NO. 4879/D/10 6 WHEN THE LIABILITY HAS ACCRUED ON IT. SINCE THE CU STOM DUTY HAS BEEN PAID TO ACQUIRE THE PLANT AND MACHINERY AN D THEREFORE IT HAS TO BE CAPITALIZED MOREOVER THER E IS NO DISPUTE TO THE FACT THAT SUCH EXPENDITURE CANNOT BE CAPITALIZED AS OBSERVED BY THE AO IN HIS ORDER IN P ARA 2.3. THE OBLIGATION TO PAY THE EXCISE DUTY AROSE DURING THE IMPUGNED YEAR AND THEREFORE THE LIABILITY TO PAY THE AMOUNT HAD ACCRUED TO THE ASSESSEE DURING THE YEAR ITSELF AND THE SAID LIABILITY CANNOT BE SAID TO BE CONTINGENT AND CANNOT BE SAID TO BE AN ADVANCE PAYMENT. THE ORDER OF THE LD . CIT(A) IS A REASONED ORDER WHO HAS RIGHTLY ACCEPTED THE C ONTENTION AND EXPLANATION OF THE ASSESSEE AND HAS RIGHTLY ALL OWED THE CLAIM OF THE ASSESSEE FOR CAPITALIZATION OF THE PAY MENT OF EXCISE DUTY AMOUNTING TO RS. 4 25 34 027/- AND HAS RIGHTLY DIRECTED THE AO TO ALLOW THE DEPRECIATION ON THE SA ID AMOUNT. WE FIND NO INFIRMITY IN THE ORDER OF THE L D. CIT(A). THUS GROUND NO. 1OF THE REVENUE IS DISMISSED. 7. RESPECTFULLY FOLLOWING THE AFOREMENTIONED ORDER. WE REJECT GROUND NO. 1 FILED BY THE REVENUE. 8. GROUND NO. 2 READ AS UNDER: - 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE DISALLOWANCE OF RS. 47 95 694/- MADE BY THE AO ON ACCOUNT OF EXPENDITURE ON GLOW SIGNS AND TREA TING IT AS A REVENUE EXPENDITURE WHEN THE ASSESSEE ITSELF HAS TREATED IT AS A CAPITAL EXPENDITURE IN IT BOOKS OF ACCOUNTS. ITA NO. 4879/D/10 7 9. THE ASSESSEE CLAIMED A TOTAL SUM OF RS. 87 68 57 2/- TOWARDS GLOW SIGN BOARDS AND HOARDING UNDER THE HEAD ADVERTISEM ENT AND SALES PROMOTION EXPENSES. THE AO FOUND THAT OUT OF THE SAID AMOUNT 32 55 922/- WAS INCURRED ON REPAIRS AND INSTALLATIO N OF BOARD FOR LIMITED PERIOD WHICH WAS ALLOWED AS REVENUE EXPENDITURE. T HE BALANCE AMOUNT OF RS. 55 12 650/- WAS TREATED AS CAPITAL EXPENDITURE FOLLOWING THE ASSESSMENT ORDER FOR A.Y. 05-06 AND 15% DEPRECIATIO N WAS ALLOWED WHICH WAS WORKED OUT AT RS. 7 16 956/- BY WORKING OUT THE NUMBER OF DAYS AS FOR 12 74 971/- THE GLOW SIGN WERE USED FOR A PERIOD OF LESS THAN 180 DAYS. ACCORDINGLY DISALLOWANCE OF RS. 47 95 694/- WAS MAD E. 10. LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSE E OF THE ENTIRE EXPENSES BEING REVENUE IN NATURE FOLLOWING THE EARL IER ORDERS PASSED BY CIT(A) FOR ASSESSMENT YEARS 05-06 AND 06-07. 11. FOR THIS ISSUE ALSO THE DEPARTMENT HAD FILED AN APPEAL BEFORE TRIBUNAL IN RESPECT OF ASSESSMENT YEARS 05-06 AND 0 6-07 AND THE ORDER OF CIT(A) ON THIS ISSUE WAS UPHELD VIDE AFOREMENTIONED ORDER DATED 11.2.10 THE RELEVANT OBSERVATIONS OF THE TRIBUNAL AS CONTAI NED IN THE SAID ORDER IN PARA NO. 10 TO 11 ARE REPRODUCED BELOW: - 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE LD. DR RELYING UPON THE ORD ER OF THE AO ARGUED THAT THE ASSESSEE HAD BEEN CAPITALIZING S UCH EXPENDITURE BEFORE THE IMPUGNED YEAR AND ALL OF A S UDDEN A ITA NO. 4879/D/10 8 TURN HAS BEEN TAKEN AND THE CHANGE IN ACCOUNTING PO LICY WAS MADE TO CLAIM IT AS REVENUE EXPENDITURE WHICH CANNOT BE ALLOWED. THE LD. COUNSEL FOR THE ASSESSEE SHRI SALIL AGGARWAL ON THE OTHER HAND RELIED UPON THE ORDER O F THE LD. CIT(A) AND THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LIBERTY GROUP MARKETING DIVISI ON (SUPRA) AND ARGUED THAT NO ASSET OF ENDURING NATURE COMES I NTO EXISTENCE AND SUCH EXPENSES ARE OF REGULAR IN NATUR E AND THE LIFE OF THE GLOW SIGN BOARD IS SHORT WHICH REQU IRES REPLACEMENT. 11. THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE HAVE BEEN FOUND TO BE CONVINCING THAT THE GLOW SIGN BOARD REQUIRES FREQUENT REPLACEMENT AND EXPEND ITURE DOES NOT BRING INTO EXISTENCE AN ASSET OF ENDURING IN NATURE. JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LIBERTY GROUP MARKETING DIVISION (SUPRA) SU PPORTS SUCH VIEWS THAT EXPENDITURE INCURRED ON GLOW SING B OARD DOES NOT BRING INTO EXISTENCE ANY ASSET OR ADVANTAG E FOR THE ENDURING BENEFIT OF THE BUSINESS AND SUCH ASSET IS NOT OF ENDURING NATURE AND THEREFORE SUCH EXPENDITURE HA S TO BE TREATED AS OF REVENUE IN NATURE. NO CONTRARY JUDGM ENT HAS BEEN BROUGHT ON RECORD BY THE LD. DR. IN THE CIRCU MSTANCES AND FACTS OF THE CASE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH APPEARS TO BE REASONED ORDER. THU S GROUND NO. 2 OF THE REVENUES IS DISMISSED. 12. IN THIS VIEW OF THE SITUATION AFTER HEARING BO TH THE PARTIES WE FOUND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF ASSESS EE BY THE AFOREMENTIONED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEARS 05-06 AND 06-07. ACCORDINGLY THIS GROUND OF THE REVENUE IS ALSO DISMISSED. ITA NO. 4879/D/10 9 13. GROUND NO. 3 READ AS UNDER: - 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2 25 000/- MADE BY THE AO ON ACCOUNT OF FILING FEE PAID TO REGISTRAR OF COMPA NIES FOR INCREASE IN AUTHORIZED SHARE CAPITAL AND TREATING IT AS REVENUE EXPENDITURE. THE LD. CIT(A) HAS ERRED IN IGNORING THE PROVISIONS OF SEC. 35D OF THE ACT WHICH CLEARLY DEALS WITH EXPENDITURE OF THIS NATURE. THE LD. CIT(A) ALSO FAILED TO APPRECIATE THAT THIS VIEW GETS SUPPORT FROM THE S.C . JUDGMENT IN THE CASE OF CIT VS. BROKE BOND INDIA LTD. 225 ITR 798 WHICH HAS BEEN REFERRED TO IN THE ASSESSMENT ORDER. 14. DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS NOTICED BY THE AO THAT ASSESSEE HAD MADE INCREASE IN ITS AUTHORIZE D SHARE CAPITAL BY RS. 5 CRORE VIDE SUBMISSION DATED 2/3.12.09 DETAILS WER E SUBMITTED IN WHICH IT WAS POINTED OUT THAT A SUM OF RS. 2 50 000/- WAS PA ID TO REGISTRAR OF COMPANIES FOR INCREASING AUTHORIZE CAPITAL AND SUCH EXPENDITURES WERE CLAIMED AS REVENUE EXPENDITURE UNDER THE HEAD ROAD S AND TAXES. THE ASSESSEE CLAIMED THE SAID FEE AS REVENUE EXPENDITUR E. THE AO AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AND AFTER REFERRING TO SEC. 35D HAS CAPITALIZED 1/10 TH AMOUNT OF RS. 2 50 000/- AND BY ALLOWING RS. 25 000/- ADDITION OF RS. 2 25 000/- WAS MADE. LD. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. GENERAL INSURANCE CORPORATIO N 286 ITR 232 (SC). THE DEPARTMENT IS AGGRIEVED AND HAS RAISED AFOREME NTIONED GROUND. ITA NO. 4879/D/10 10 15. AFTER NARRATING THE FACTS IT WAS PLEADED BY LD . DR THAT LD. CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE AS THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. GENERAL INSURA NCE CORPORATION (SUPRA) WAS NOT APPLICABLE TO THE FACTS OF THE PRES ENT CASE. HE SUBMITTED THAT THE SAID CASE RELATES TO ISSUE OF BONUS SHARES WHICH DID NOT RESULT IN ANY INFLOW OF FRESH FUNDS OR INCREASE IN THE CAPITA L EMPLOYED AND THE CAPITAL EMPLOYED IN THE SAID CASE REMAINED THE SAME AND WHE REAS IN THE CASE OF THE ASSESSEE THERE WAS INCREASE IN THE AUTHORIZE SH ARE CAPITAL VIDE WHICH THE ASSESSEE HAD ISSUED 58 50 000/- EQUITY SHARES O F RS. 10 EACH AMOUNTING TO RS. 5 85 00 000/-. HE SUBMITTED THAT EVEN AO HAS WRONGLY APPLIED PROVISIONS OF SEC. 35D. HE SUBMITTED THAT LD. CIT(A) HAS RECORDED A WRONG FINDING THAT THESE SHARES WERE ISSUED AS BONU S SHARES WHEREAS THESE SHARES WERE NOT IN THE SHAPE OF BONUS SHARES. 16. ON THE OTHER HAND LD. AR DID NOT CONTROVERT TO THE PLEADING OF LD. DR THAT THESE SHARES WERE NOT IN THE NATURE OF BONUS S HARES. HOWEVER HE RELIED UPON THE ORDER OF CIT(A). 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT APPEARS THAT LD. CIT (A) HAS FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. GENERAL INSURANCE CORPORATION (SUPRA) ON THE BASIS OF WRITT EN SUBMISSIONS OF THE ASSESSEE IN WHICH IT WAS CLAIMED THAT THE INCREASE IN AUTHORIZE SHARE ITA NO. 4879/D/10 11 CAPITAL WAS ON ACCOUNT OF BONUS SHARES. THE NATURE OF ISSUE OF SHARES HAS NOT BEEN CONTROVERTED BY LD. AR WHICH IS NOT IN THE SHAPE OF BONUS SHARES. THEREFORE RELYING UPON THE DECISION OF CIT VS. GEN ERAL INSURANCE CORPORATION (SUPRA) RELIEF COULD NOT BE GIVEN TO TH E ASSESSEE AS THE SHARES ISSUED BY THE ASSESSEE COMPANY ARE NOT IN THE NATUR E OF BONUS SHARES. THERE WAS FRESH FLOW OF FUNDS AND THERE WAS INCREAS E IN THE CAPITAL EMPLOYED. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. BROOK BOND INDIA LIMITED 25 ITR 798 IS CLEARLY ATTR ACTED. THEREFORE THE DISALLOWANCE MADE BY THE AO WAS TO BE UPHELD. SO F AR AS IT RELATES TO ARGUMENT OF LD. DR THAT EVEN AO IS WRONG IN APPLYIN G SEC. 35D. WE DO NOT EXPRESS ANY OPINION AS THE SAME WAS NEVER A SUBJECT MATTER OF APPEAL BY THE ASSESSEE BEFORE CIT(A) AND OUR ADJUDICATION IS LIMITED TO THE DISALLOWANCE DELETED BY LD. CIT(A). WITH THESE OBS ERVATIONS THE GROUNDS OF APPEAL FILED BY THE REVENUE IS ALLOWED. 18. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.1.11 (A.K. GARODIA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: ITA NO. 4879/D/10 12 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT