THE ACIT 4(3), MUMBAI v. M/S. SKF BEARINGS INDIA LTD, MUMBAI

ITA 616/MUM/2006 | 2001-2002
Pronouncement Date: 29-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 61619914 RSA 2006
Assessee PAN AAACS0684H
Bench Mumbai
Appeal Number ITA 616/MUM/2006
Duration Of Justice 5 year(s) 11 month(s) 1 day(s)
Appellant THE ACIT 4(3), MUMBAI
Respondent M/S. SKF BEARINGS INDIA LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-12-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 29-12-2011
Date Of Final Hearing 26-12-2011
Next Hearing Date 26-12-2011
Assessment Year 2001-2002
Appeal Filed On 27-01-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI B.R. MITTAL JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER ITA NO. 616/MUM./2006 (ASSESSMENT YEAR : 2001-02 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .... RESPONDENT ITA NO. 720/MUM./2006 (ASSESSMENT YEAR : 2001-02 ) M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... RESPONDENT SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 2 ITA NO. 617/MUM./2006 (ASSESSMENT YEAR : 2002-03 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .... RESPONDENT ITA NO. 721/MUM./2006 (ASSESSMENT YEAR : 2002-03 ) M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... RESPONDENT ITA NO. 2640/MUM./2007 (ASSESSMENT YEAR : 2003-04 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .... RESPONDENT SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 3 ITA NO. 2660/MUM./2007 (ASSESSMENT YEAR : 2003-04 ) M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... RESPONDENT ITA NO. 4625/MUM./2008 (ASSESSMENT YEAR : 2004-05 ) M/S. SKF BEARINGS INDIA LTD. MAHATMA GANDHI MEMORIAL BUILDING N.S. ROAD MUMBAI 400 002 PAN AAACS0684H .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE-4(3) R.NO.649 6 TH FLOOR AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : MR. KANCHAN KAUSHAL A/W MR. DHANESH BAFNA MR. CHIRAG DOSHI & MR. ALIASGAR RAMPURAWALA REVENUE BY : MRS. MALATHI SRIDHARAN DATE OF HEARING 26.12.2011 DATE OF ORDER 29.12.2011 O R D E R PER BENCH CROSS APPEALS FOR ASSESSMENT YEAR 2001-02 ARE DIRE CTED AGAINST THE IMPUGNED ORDER DATED 28 TH OCTOBER 2005 CROSS APPEALS FOR ASSESSMENT YEAR 20 02- 03 ARE DIRECTED AGAINST THE IMPUGNED ORDER DATED 3 1 ST OCTOBER 2005 CROSS APPEALS FOR ASSESSMENT YEAR 2003-04 ARE DIRECTED AGAINST T HE IMPUGNED ORDER DATED 11 TH JANUARY 2007 PASSED BY THE COMMISSIONER (APPEALS)- XIV MUMBAI AND THE APPEAL PREFERRED BY THE ASSESSEE FOR ASSESSMENT YEAR 2004- 05 IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 29 TH APRIL 2008 PASSED BY THE COMMISSIONER ( APPEALS )-XV MUMBAI RESPECTIVELY. AS THE ISSUES ARISING IN ALL THESE APPEALS ARE COMMON FOR THE SAKE OF CONVENIENCE THESE APPEALS WERE HEARD TOGET HER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 4 2. FACTS IN BRIEF :- THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE IN BALL AND ROLLER BEARINGS AND TEXTILE COMPONENTS. THE ASSESSEE COMPANY IS ALSO ENGAGED IN MARKETING OF SKF IMPORTE D BEARING ACCESSORIES AND MAINTENANCE PRODUCTS. 3. WE HAVE HEARD THE LEARNED COUNSELS MR. KANCHAN KAU SHAL A/W MR. DHANESH BAFNA & ORS. REPRESENTING THE ASSESSEE AND MRS. MALATHI SRIDHARAN REPRESENTING THE REVENUE. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO.720/MU M./2006 FOR ASSESSMENT YEAR 2001-02. 4. GROUNDS NO.1 AND 2 ARE ON THE ISSUE OF VALUATION O F CLOSING STOCK UNDER SECTION 145A OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT ) 5. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE U S THAT THE ASSESSING OFFICER HAS AT PARA-5.2 / PG.3 OF HIS OR DER AGREED WITH THE ASSESSEE THAT THE OPENING STOCK FOR THE ACCOUNTING YEAR SHOULD BE INCREASED BY THE MODVAT ELEMENT IN IT. HE SUBMITTED THAT THE COMMISSIONER (APPEALS) CONFIRMED THIS AND HENCE HE HAS NO GRIEVANCE AND DID NOT WISH TO PRESS THESE GROUNDS. CONSEQUENTLY GROUNDS NO.1 AND 2 AR E DISMISSED AS NOT PRESSED . 6. GROUND NO.3 IS ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. 7. LEARNED COUNSEL SUBMITS THAT THE ASSESSEE HAS SUFFI CIENT SURPLUS FUNDS WHICH HE HAD INVESTED IN INVESTMENTS AND THE DISALL OWANCE OF INTEREST OF ` 52 95 600 IS BAD-IN-LAW. A STATEMENT IS FILED AT P G.110 WHICH GIVES THE VALUE OF INVESTMENTS DURING THE YEAR AND THE PROFIT S EARNED BY THE ASSESSEE COMPANY DURING THE YEAR. ON A QUERY FROM THE BENCH THE LEARNED COUNSEL ADMITTED THAT THIS DOCUMENT IS NOT BEFORE THE AUTHO RITIES BELOW. HE RELIED ON A NUMBER OF DECISIONS FOR THE PROPOSITION THAT THE PRESUMPTION SHOULD BE THAT WHEN INTEREST FREE FUNDS WERE AVAILABLE WITH T HE ASSESSEE IT SHOULD BE HELD AS THAT WHICH IS UTILISED FOR INVESTMENT PURPO SE. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 5 8. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND AGREED THAT THE ISSUE SHOULD BE RESTORED TO THE FILE OF ASSESSI NG OFFICER AS THE GROUND ON RATE OF INTEREST HAS BEEN TAKEN BY THE REVENUE. 9. AFTER HEARING THE RIVAL CONTENTIONS WE RESTORE THI S ISSUE TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH IN LINE W ITH THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S RELIANCE UTILI TIES AND POWERS LTD. [2009] 313 ITR 0340 (BOM.) AND OTHER DECISIONS OF THE TRIB UNAL ON THE ISSUE. THUS GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO.4 IS ON THE ISSUE OF DISALLOWANCE UNDER SECTION 40A(9) OF THE ACT IN RESPECT OF CONTRIBUTION OF ` 50 000 MADE TO SKF CHRISTIAN EMPLOYEE ASSOCIATION. 11. LEARNED COUNSEL SUBMITTED THAT HE HAS NOT PRESSED A SIMILAR ISSUE IN THE EARLIER ASSESSMENT YEAR DUE TO SMALLNESS OF THE AMOUNT. IN VIEW OF THIS WE DISMISS GROUND NO.4 AS NOT PRESSED . 12. GROUND NO.5 READS AS FOLLOWS:- 5 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE CAP ITAL GAINS OF ` 19 72 77 000 UNDER SECTION 50 OF THE ACT ARISING ON SALE OF LONG TERM CAPITAL ASSET IS CHARGEABLE TO TAX AT THE RATE APP LICABLE TO SHORT TERM CAPITAL GAINS INSTEAD OF THE RATE APPLICABLE TO LON G TERM CAPITAL GAIN. 13. THE FACTS AS BROUGHT OUT BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER VIDE PARA-11 AND 11.1 / PAGE-9 ARE EXTRACTED BELOW:- 11. CAPITAL GAINS IN RETURN OF INCOME ASSESSEE HAS OFFERED CAPITAL GA INS OF RS. 19 57 77 000/- AS LONG TERM CAPITAL GAINS COMPUTED AS PER SECTION 50 AND LONG TERM CAPITAL GAINS OF RS.63 87 664/-. THE ASSESSEE HAS RELIED ON THE DECISION OF ACE BUILDERS (P) LIMITED V/S ACI T (2001) 76 ITD 389 AND CONSIDERED CAPITAL GAINS IN RESPECT OF DEPR ECIABLE ASSETS COMPUTED UNDER SECTION 50 AS LONG TERM CAPITAL GAIN S INSTEAD OF SHORT TERMS CAPITAL GAINS. IN SUPPORT OF THEIR CONTENTION ASSESSEE HAS GIVEN FOLLOWING NOTE IN RETURN OF INCOME. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 6 IN THE CASE OF ACE BUILDERS (P) LID. V/S ACIT (20O1 ) 76 LTD 389 THE ITAT MUMBAI BENCH HAS OBSERVED THAT THE ASSUMPTION OF TREATING/DEEMING ANY CAPITAL GAIN ARISING ON TRANSF ER OF A DEPRECIABLE ASSET AS SHORT-TERM CAPITAL GAIN UNCLE - SECTION 5 0 IS FOR THE PURPOSE OF SECTION 48 MID 49 ONLY AND THEREFORE IT CANNOT B E EXTENDED TO OTHER PROVISIONS OF THE INCOME-TAX ACT AS IF IT IS SO EX TENDED IT WOULD AMOUNT TO EXTENDING THE DEEMING PROVISIONS BEYOND I TS LEGITIMATE FIELD. IT HAS FURTHER BEEN OBSERVED THAT THE SPEC IALTY ATTACHED TO SECTION 50 IS TO BE RESTRICTED TO ONLY FOR THE METH OD OF COMPUTING THE CAPITAL GAIN AND NOT FOR DETERMINING THE NATURE GAI N. IN VIEW OF THE ABOVE DECISION OF THE ITAT MUMBAI BENCH AND FACTS IN OUR CASE THE CAPITAL GAIN COMPUTED VIDE ANNEXUREI AS PER PROVIS IONS OF SECTION 50 HAVE BEEN TREATED AS LONG TERM CAPITAL GAINS AN D ACCORDINGLY TAXED AT 20% AS PER SECTION 1 12(I)(B ). WITHOUT PREJUDICE TO ABOVE IN CASE IT IS HELD THAT CAPITAL GAINS UNDER SECTION 50 SHOULD BE TREATED AS SHORT TERM CAPITAL GAINS THEN DEDUCTION UNDER CHAPTER VIA SHOULD BE GRANTED TO TH E COMPANY AND ACCORDINGLY GROSS TOTAL INCOME MENTIONED IN THE AB OVE COMPUTATION SHOULD BE REDUCED BY THE AMOUNT OF CHAPTER VIA DEDU CTIONS WHICH ARE MENTIONED BELOW: DEDUCTION UNDER SECTION 80G: RS.850 625 (AS PER CLA USE 26 OF FORM NO.3CD) DEDUCTION UNDER SECTION 8OHHC: RS. 712 011 (AS PER CLAUSE 26 OF FORM NO.3CD AND REPORT IN FORM NO.10CCAC ENC LOSED IN ORIGINAL). 11.1 FURTHER THE ASSESSEE HAS GIVEN ITS SUBMISSION S IN SUPPORT OF THEIR ABOVE CONTENTION VIDE THEIR LETTER DTD. 21.11 .2002 AND 27.11.2002. IN ITS LETTER DTD. 21.11.2002 THE ASSES SEE HAS SUBMITTED THE FOLLOWING:- CAPITAL GAINS COMPUTED AS PER SECTION 50 OF THE INC OME-TAX ACT IN RESPECT OF SALE OF NON-RESIDENTIAL BUILDING ARE TR EATED AS LONG TERM CAPITAL GAINS FOR THE FOLLOWING REASONS:- SECTION 2(29B ) DEFINES LONG TERM CAPITAL GAIN AS THE CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSES. SECTION 2(29A) DEFINES LO NG TERM CAPITAL ASSET AS A CAPITAL ASSET HELD BY AN ASSESSEE FOR M ORE THAN THIRTY SIX MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSF ER. THUS CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET HELD B Y AN ASSESSEE FOR MORE THAN THIRTY SIX MONTHS IMMEDIATELY PRECEDING T HE DATE OF ITS TRANSFER ARE LONG-TERM CAPITAL GAINS. DURING THE PREVIOUS. YEAR ENDED 31 ST MARCH 2001 FOLLOWING NON-RESIDENTIAL PROPERTIES DEPRECIABLE ASSETS WERE SOLD:- 1. GROUND FLOOR AND FIRST FLOOR IN IN UDYOG BHAVAN WHICH ACQUIRED ON 2 ND FEBRUARY 1994 2. 11 TH AND 12 TH FLOOR OF HOECHST HOUSE WHICH WAS ACQUIRED ON 12 TH APRIL 1985. THUS BOTH THE ABOVE CAPITAL ASSETS WERE HELD BY TH E COMPANY FOR MORE THAN THIRTY SIX MONTHS BEFORE THEIR TRANSFER / SALE HENCE WERE SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 7 LONG TERM CAPITAL ASSETS AND ACCORDINGLY GAIN ON THEIR TRANSFER COMPUTED AS PER PROVISIONS OF SECTION 50 IS LONG T ERM CAPITAL GAIN. IT MAY BE NOTED THAT THE CASE OF ACE BUILDERS (P) L TD. V/S ACIT (2001) 76 ITD 389 THE ITAT MUMBAI BENCH HAS OBSERVED THAT THE ASSUMPTION OF TREATING / DEEMING ANY CAPITAL GAIN ARISING ON T RANSFER OF A DEPRECIABLE ASSET AS SHORT TERM CAPITAL GAIN UNDER SECTION 48 AND 49 ONLY AND THEREFORE IT CANNOT BE EXTENDED TO OTHER P ROVISIONS OF THE ACT AS IF IT IS SO EXTENDED IT WOULD AMOUNT TO EX TENDING THE DEEMING PROVISIONS BEYOND ITS LEGITIMATE FIELD. IT HAS FURT HER BEEN OBSERVED THAT THE SPECIALTY ATTACHED TO SECTION 50 IS TO BE RESTRICTED TO ONLY FOR THE METHOD OF COMPUTING THE CAPITAL GAIN AND NOT FO R DETERMINING THE NATURE GAIN. IN VIEW OF THE ABOVE DECISION OF THE ITAT MUMBAI BE NCH AND FACTS IN OUR CASE THE CAPITAL GAIN OF ` 19 57 77 000 COMPUTED AS PER PROVISIONS OF SECTION 50 HAVE BEEN TREATED AS LONG TERM CAPITAL GAIN AND ACCORDINGLY TAXED AT 20% (PLUS APPLICABLE SURCH ARGE) AS PER SECTION 112(1)(B) . 14. THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTEN TION OF THE ASSESSEE. HE HELD THAT THE AMOUNT SHOULD BE TAXED A S SHORT TERM CAPITAL GAIN. 15. WHEN THE MATTER WAS CARRIED BEFORE THE COMMISSIONER (APPEALS) THE FINDINGS OF THE ASSESSING OFFICER THAT THE AMOUNT I N QUESTION HAS TO BE TAXED AS SHORT TERM CAPITAL GAIN WAS UPHELD. AS THERE WER E CERTAIN INVESTMENTS THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF U NDER SECTION 54EC. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 16. BEFORE US THE LEARNED COUNSEL RELIED ON THE WORDIN GS IN SECTION 54EC AND SUBMITTED THAT THE LEGISLATURE USED THE WORDS WHERE THE CAPITAL GAINS ARISES FROM THE TRANSFER OF A LONG TERM CAPITAL ASS ETS AND SUBMITTED THAT SIMILAR WORDINGS HAS BEEN USED IN SECTION 74 AS WE LL AS IN SECTION 112 OF THE ACT. HE RELIED ON THE FOLLOWING DECISIONS FOR THE P ROPOSITION THAT THE PROVISIONS OF SECTION 50 OF THE ACT ARE APPLICABLE ONLY UPTO THE STAGE OF COMPUTATION ASSETS AND ONCE CAPITAL GAINS IS COMPUT ED ON DEPRECIABLE ASSETS AS PER SECTION 50 WHICH IS IN THIS CASE A LONG TERM CAPITAL ASSET THE OPERATION OF SUCH SECTION IS OUSTED. HIS CASE IS T HAT IF THE ASSESSEE IS OTHERWISE ELIGIBLE FOR ANY BENEFIT UNDER THE ACT W HICH IS ATTACHED TO THE LONG TERM CAPITAL ASSET THE SAME SHALL REMAIN INTACT. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 8 MANALI INVESTMENTS V/S ACIT 56 DTR (MUM.) (TRIB.) 218; WEIKFIELD PRODUCTS CO. I.P. LTD. V/S DCIT 71 TTJ ( PUNE) 518; ACE BUILDERS P. LTD. V/S CIT 71 TTJ 188 (MUM.); CIT V/S ASSAM PETROLEUM INDUSTRIES P. LTD. 262 ITR 587 (GAU.); CIT V/S RAJIV SHUKLA 334 ITR 138 (DEL.); CIT V/S DELITE TIN INDUSTRIES ITA NO.1118 OF 2008 (BOM.); CIT V/S DELITE TIN INDUSTRIES CC 11431 OF 2009 (SL P-SC). 17. SPECIFIC RELIANCE IS PLACED AT PARA-25 OF THE JUDGM ENT OF HON'BLE JURISDICTIONAL HIGH COURT IN ACE BUILDERS PVT. LTD. (SUPRA) AS WELL AS IN THE CASE OF MANALI INVESTMENTS (SUPRA). 18. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND STRONGLY RELIED AT PARA-26 OF THE JUDGMENT OF HON'BLE JURISD ICTIONAL HIGH COURT IN ACE BUILDERS (SUPRA) AND SUBMITTED THAT THE ISSUE IS NO MORE RESINTEGRA. SHE DISTINGUISHED THE OTHER CASE LAWS BY SUBMITTING THA T THEY DEALT WITH EXEMPTION PROVISIONS BUT NOT THE RATE OF TAXATION. SHE ARGUED THAT IF TAX IS LEVIED UNDER SECTION 112 THEN THE WORDING UNDER SE CTION 50 DEEMING THE TAX AS SHORT TERM CAPITAL GAIN WOULD HAVE NO MEANING. 19. LEARNED COUNSEL SUBMITS THAT THE QUESTION BEFORE TH E HIGH COURT IS WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 54E AND THAT THE ISSUE OF RATE OF TAX WAS NOT BEFORE THE HIGH COURT AND HENCE THE ISSUE CANNOT BE TAKEN AS HAVING BEEN DECIDED BY THE HIGH COURT. 20. WE HAVE HEARD THE RIVAL CONTENTIONS. SECTION 50 OF THE ACT READS AS FOLLOWS:- SECTION 50 769 [SPECIAL PROVISION FOR COMPUTATION OF CAPITAL G AINS IN CASE OF DEPRECIABLE ASSETS. NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2 WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDE R THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT 1922 (11 OF 1922) THE P ROVISIONS OF SECTIONS 48 AND 49 SHALL BE SUBJECT TO THE FOLLOWIN G MODIFICATIONS: SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 9 (1) WHERE THE FULL VALUE OF THE CONSIDERATION RECEI VED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ASSET TOGETHER WITH T HE FULL VALUE OF SUCH CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHIN THE BLOCK OF ASS ETS DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF THE FOLLOWING AMOUNT S NAMELY: (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER OR TRANSFERS; (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR; AND (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN T HE BLOCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR SUCH EXCESS SHAL L BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHOR T-TERM CAPITAL ASSETS; (2) WHERE ANY BLOCK OF ASSETS CEASES TO EXIST AS SU CH FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK ARE TRANSFERRED D URING THE PREVIOUS YEAR THE COST OF ACQUISITION OF THE BLOCK OF ASSET S SHALL BE THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR AS INCREASED BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK OF ASSETS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THE INCOME RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER OR TRANSFERS SHALL BE DEEMED TO BE THE CAPITAL GAINS A RISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSETS.] 769. SUBS. BY TAXATION LAWS (AMENDMENT AND MISC. PR OVISIONS) ACT 1986 S. 9 (W.E.F. 1-4-1986). PRIOR TO THAT IT STO OD AS UNDER : '50. SPECIAL PROVISION FOR COMPUTING COST OF ACQUIS ITION IN THE CASE OF DEPRECIABLE ASSETS.WHERE THE CAPITAL ASSET IS AN A SSET IN RESPECT OF WHICH A DEDUCTION ON ACCOUNT OF DEPRECIATION HAS BE EN OBTAINED BY THE ASSESSEE IN ANY PREVIOUS YEAR EITHER UNDER THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT 1922 (11 OF 1922) OR ANY ACT REPEA LED BY THAT ACT OR UNDER EXECUTIVE ORDERS ISSUED WHEN THE INDIAN INCOM E-TAX ACT 1886 (2 OF 1886) WAS IN FORCE THE PROVISIONS OF SECTIO NS 48 AND 49 SHALL BE SUBJECT TO THE FOLLOWING MODIFICATIONS: (1) THE WRITTEN DOWN VALUE AS DEFINED IN CLAUSE (6 ) OF SECTION 43 OF THE ASSET AS ADJUSTED SHALL BE TAKEN AS THE COST OF ACQUISITION OF THE ASSET. (2) WHERE UNDER ANY PROVISION OF SECTION 49 READ WI TH SUB-SECTION (2) OF SECTION 55 THE FAIR MARKET VALUE OF THE ASSET O N THE *[1ST DAY OF APRIL 1974 ] IS TO BE TAKEN INTO ACCOUNT AT THE OP TION OF THE ASSESSEE THEN THE COST OF ACQUISITION OF THE ASSET SHALL A T THE OPTION OF THE ASSESSEE BE THE FAIR MARKET VALUE OF THE ASSET ON THE SAID DATE AS REDUCED BY THE AMOUNT OF DEPRECIATION IF ANY ALLO WED TO THE ASSESSEE AFTER THE SAID DATE AND AS ADJUSTED.'. 21. ON PLAIN READING OF THE ABOVE SECTION SHOWS THAT TH E EXCESS IN QUESTION SHALL BE DEEMED TO BE THE CAPITAL GAINS AR ISING FROM THE TRANSFER OF A SHORT TERM CAPITAL ASSET. BOTH THE SECTION 54EC A ND SECTION 74 DO NOT SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 10 SPEAK ABOUT SHORT TERM CAPITAL GAIN OR LONG TERM CA PITAL GAIN. THESE SECTIONS DEAL WITH CAPITA GAINS / LOSS ARISING FROM TRANSFER OF LONG TERM CAPITAL ASSETS. SECTION 112 ALSO DEALS WITH INCOME ARISING FROM TR ANSFER OF LONG TERM CAPITAL ASSETS. SECTION 112(B)(I) AND (II) SPECIFICALLY MEN TIONS LONG TERM CAPITAL GAIN. WHEN SECTION 50 DEEMS THAT INCOME EARNED FROM A DEP RECIABLE ASSET HAS TO BE DEEMED AS SHORT TERM CAPITAL GAIN THE QU ESTION OF APPLYING THE RATE OF TAX SPECIFIED IN SECTION 112(1) DOES NOT AR ISE. THIS IS WHAT THE HON'BLE JURISDICTIONAL HIGH COURT STATED AT PARA-26 OF ITS JUDGMENT IN THE CASE OF ACE BUILDERS (SUPRA). WE EXTRACT THE SAME F OR READY REFERENCE:- 26. IT IS TRUE THAT S. 50 IS ENACTED WITH THE OBJEC T OF DENYING MULTIPLE BENEFITS TO THE OWNERS OF DEPRECIABLE ASSE T. HOWEVER THAT RESTRICTION IS LIMITED TO THE COMPUTATION OF CAPITA L GAINS AND NOT TO THE EXEMPTION PROVISIONS. IN OTHER WORDS WHERE THE LON G TERM CAPITAL ASSET HAS AVAILED DEPRECIATION THEN THE CAPITAL GA IN HAS TO BE COMPUTED IN THE MANNER PRESCRIBED UNDER SECTION 50 AND THE CAPITAL GAINS TAX WILL BE CHARGED AS IF SUCH CAPITAL GAIN H AS ARISEN OUT OF A SHORT TERM CAPITAL ASSET BUT IF SUCH CAPITAL GAIN IS INVESTED IN THE MANNER PRESCRIBED IN S. 54E THEN THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 OF THE ACT. TO PUT IS SIMPLY THE BENEFIT OF S. 54E WILL BE AVAILABLE TO THE ASSESSEE IRRESPECTIVE OF THE FA CT THAT THE COMPUTATION OF CAPITAL GAINS IS DONE EITHER UNDER S ECTION 48 AND 49 OR UNDER SECTION 50. THE CONTENTION OF THE REVENUE THA T BY AMENDMENT TO S. 50 THE LONG TERM CAPITAL ASSET HAS BEEN CONV ERTED INTO A SHORT TERM CAPITAL ASSET IS ALSO WITHOUT ANY MERIT. AS ST ATED HEREINABOVE THE LEGAL FICTION CREATED BY THE STATUTE IS TO DEEM THE CAPITAL GAIN AS SHORT TERM CAPITAL GAIN AND NOT TO DEEM THE ASSET A S SHORT TERM CAPITAL ASSET. THEREFORE IT CANNOT BE SAID THAT S. 50 CONV ERTS LONG TERM CAPITAL ASSET INTO A SHORT TERM CAPITAL ASSET . [EMPHASIS OWN] 22. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF TH E HON'BLE JURISDICTIONAL HIGH COURT THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 23. THE LAST GROUND IS ON THE ISSUE OF RELIEF CLAIMED U NDER SECTION 80HHC OF THE ACT. 24. LEARNED COUNSEL SUBMITTED THAT THE ISSUE IS PRESENT LY COVERED AGAINST THE ASSESSEE BUT IN CASE THE COMPUTATION OF INCOME AFTER THE DECISION ON CERTAIN ISSUES BY THE TRIBUNAL RESULTS IN THE PROFI T THEN THE MATTER MAY BE CONSIDERED BY THE ASSESSING OFFICER AS PER LAW. 25. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTIO N. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 11 26. IN VIEW OF THE RIVAL SUBMISSIONS WE DISPOSE OFF TH IS MATTER WITH A RIDER THAT IN CASE THE COMPUTATION OF INCOME OF THE ASSES SEE IS A POSITIVE FIGURE THEN THE CLAIM OF DEDUCTION UNDER SECTION 80HHC MAY BE CONSIDERED BY THE ASSESSING OFFICER IN ACCORDANCE WITH LAW. THIS GROU ND IS THUS ALLOWED FOR STATISTICAL PURPOSE. 27. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.616/MUM./ 2006 FOR ASSESSMENT YEAR 2001-02 . 28. GROUND NO.1 IS ON THE ISSUE OF ALLOWABILITY OF CLA IM OF INTEREST PAID BY THE ASSESSEE ON FUNDS BORROWED FOR THE PURPOSE OF A CQUIRING CAPITAL ASSETS. 29. THE FIRST APPELLATE AUTHORITY AT PARA-4.2 OF ITS O RDER HELD AS FOLLOWS. 4.2 BESIDES ABOVE THE APPELLANT ALSO RELIES ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CORE HEAL TH CARE LTD. (251 ITR 61). A COPY OF THIS DECISION IS ALSO PLACED ON MY RECORD. THE ISSUE BEING EXHAUSTIVELY DEALT WITH AND COVERED BY EARLIE R YEARS APPELLATE ORDERS AS ALSO BY A RECENT DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT V. TATA CHEMICALS LTD. (256 ITR 395 ) WHICH HAS APPROVED THE DETAILED DECISION BY THE TRIBUNAL IN T HE SAME CASE (72 LTD 1) I DELETE THE ADDITION OF RS.46 21 997 MADE BY THE A.O. THIS GROUND OF APPEAL STANDS ACCORDINGLY ALLOWED . 30. BOTH THE PARTIES SUBMITTED THAT THE VERY SAME ISSUE HAS COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSE SSMENT YEARS 1994-95 1995-96 1997-98 AND 1999-2000. THE TRIBUNAL ALLOWE D THE CLAIM OF THE ASSESSEE. IN VIEW OF THE CO-ORDINATE BENCH DECISION OF THE TRIBUNAL WE DISMISS THIS GROUND OF THE REVENUE. 31. GROUND NO.2 IS ON THE ISSUE OF RESTRICTING DISALLO WANCE UNDER SECTION 14A OF THE ACT. 32. WHILE DISPOSING OFF GROUND NO.3 IN ASSESSEES APPEA L IN ITA NO.720/ MUM./2006 WE RESTORED THE MATTER TO THE FILE OF AS SESSING OFFICER. CONSISTENT WITH THE VIEW TAKEN THEREIN WE SET ASID E THE IMPUGNED ORDER SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 12 PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE TH E ISSUE TO THE FILE OF ASSESSING OFFICER FOR READJUDICATION IN ACCORDANCE WITH LAW. 33. GROUND NO.3 IS ON THE ISSUE OF ALLOWANCE OF BENEFI T OF EXEMPTION UNDER SECTION 54EC OF THE ACT ON THE GAINS ARISING OUT OF TRANSFER OF LONG TERM CAPITAL ASSET WHICH ARE SUBJECT MATTER OF TAX ATION UNDER SECTION 50 OF THE ACT. THE ASSESSEE HAS INVESTED AN AMOUNT OF ` 2 13 30 000 IN CAPITAL GAIN BONDS ISSUED BY NABARD WHICH IS ELIGIBLE FOR E XEMPTION UNDER SECTION 54EC. OUT OF THIS AMOUNT INVESTMENT TO THE TUNE OF ` 1 32 63 017 CLAIMED AGAINST LONG TERM CAPITAL GAINS EARNED ON SALE OF S HARES OF HDFC LIMITED UNDER SECTION 54EC. FURTHER AN AMOUNT OF ` 80 66 983 WAS CLAIMED AS DEDUCTION UNDER SECTION 54EC ON CAPITAL GAINS EARNE D ON SALE OF SHARES OF HDFC BANK. WHILE SO THE COMMISSIONER (APPEALS) CAM E TO A CONCLUSION THAT AN AMOUNT OF ` 62 25 381 IS THE BALANCE UNUTILISED INVESTMENT MA DE IN CAPITAL GAIN BONDS ISSUED BY NABARD AND THIS CAN BE EXEMPT UNDER SECTION 54EC AGAINST THE GAINS RECEIVED BY THE ASSESSEE ON TRANSFER OF LONG TERM CAPITAL ASSETS WHICH WERE ALSO DEPRECIABLE ASSETS. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT I N ACE BUILDERS (SUPRA). 34. THE COMMISSIONER (APPEALS) AT PARAS-9 AND 10 OF TH E IMPUGNED ORDER HELD AS FOLLOWS:- IT IS SUBMITTED THAT A RESIDENTIAL PROPERTY SITUATE AT KORAMANGALA EXTENSION BUILDING. BANGALORE ACQUIRED ON 6 FEBRUA RY 1989 WAS SOLD ON 141 FEBRUARY 2001. THE OPENING WDV OF THE RESIDENTIAL BUILDING BLOCK W AS NIL AND THE NET SALE PROCEEDS REALISED IS RS 62 25 381 AND ACCORDINGLY CAPITAL GAINS OF RS.62.25.381 ARISES FROM SALE OF RESIDENTI AL PROPERTY. A COPY OF TOTAL INCOME FILED BY THE APPELLANT INCLU DING THIS CALCULATION OF CAPITAL GAINS IS INCLUDED AT PAPER B OOK PAGES LI TO L9 FILED BEFORE ME. IT IS POINTED OUT THAT ON 31ST MAY 2001 APPELLANT HAS INVESTED A SUM OF RS 2 13 30 000 IN CAPITAL GAINS BONDS ISSU ED BY NATIONAL BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT (NABARD ). WHICH ARE ELIGIBLE FOR EXEMPTION UNDER SECTION 54EC OF IT ACT AND THEREFORE THE EXCESS OF ENTIRE SALE PROCEEDS OF RS.62 25 381 GIVI NG RISE TO DEEMED SHORT TERM GAINS UNDER SECTION 50 WOULD GET FULLY A ND WHOLLY SHELTERED BY THE INVESTMENT IN CAPITAL GAINS BONDS AND THE BE NEFIT OF SECTION 54EC WOULD BE AVAILABLE TO THE APPELLANT. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 13 IN ASSESSMENT PROCEEDINGS THE A.O. NEGATED THIS CO NTENTION AND HELD THAT PROVISIONS OF SECTION 54EC CANNOT BE APPLIED TO ACTUAL LONG TERM CAPITAL GAINS DEEMED TO BE SHORT TERM CAP ITAL GAINS UNDER THE DEEMING PROVISION OF SECTION 50 AND THEREFORE DENIED THE EXEMPTION UNDER SECTION 54EC AND ASSESSED THE ENTIR E GAIN OF RS 62 25.38 1 AS SHORT TERM CAPITAL GAINS. IT IS SUBMITTED BEFORE ME THAT IDENTICAL ISSUE CAME UP TBR CONSIDERATION BEFORE THE HONBLE BOMBAY TRIBUNAL IN THE CASE OF ACE BUILDERS (76 ITD 389) COPY WHEREOF IS PLACED AT PA PER BOOK PAGES ML TO M14 AS WELL AS BEFORE GAUHATI HIGH COURT IN THE CASE OF CIT V. ASSAM PETROLEUM INDUSTRIES (P.) LTD. (262 ITP 587). COPY WHEREOF IS PLACED AT PAPER BOOK PAGES N1 TO N6 AND IT WAS CONT ENDED THAT THE FICTION OF DEEMED SHORT TERM GAINS CREATED BY SECTI ON 50 SHOULD BE RESTRICTED AND CONFINED ONLY AND ONLY TO SECTIONS 4 8 AND 49 AND NOT CARRIED BEYOND THESE EXPRESS PROVISIONS AND THE APP ELLANT SHOULD NOT BE DENIED BENEFIT OF SECTION 54EC. 9.2 I FIND THAT THIS DECISION OF THE HONBLE TRIBUN AL IN THE CASE OF ACE BUILDERS WAS CARRIED TO HIGH COURT AND THE HONBLE JURISDICTIONAL HIGH COURT HAS AFFIRMED THIS ASPECT OF THE DECISION VIZ. GRANTING OF RELIEF THIS HIGH COURT DECISION IS REPORTED IN 195 CTR 1. RESPECTFULLY FOLLOWING DECISION OF THE JURISDICTIO NAL HIGH COURT I DELETE THE ADDITION OF DEEMED SHORT TERM CAPITAL GA INS OF ` 62 25 381 MADE IN THE ASSESSMENT ORDER AND ALLOW THE APPELLAN T TO APPROPRIATE LIKE AMOUNT OUT OF ITS INVESTMENTS OF RS 2 13 30 00 0 IN NABARD BONDS AND ALLOW THE BALANCE INVESTMENT OF RS 1 51.04 619 AGAINST OTHER LONG TERM CAPITAL GAINS DURING THIS YEAR. THIS GROUND IS THEREFORE ALLOWED. 10. THE NEXT SUB-GROUND RELATES TO APPLICABILITY OF CONCESSIONAL RATE UNDER SECTION 112 TO LONG TERM CAPITAL GAINS DEEMED SHORT TERM UNDER PROVISIONS OF SECTION 50. 10.1 AT THE TIME OF HEARING BEFORE MY PREDECESSOR THE APPELLANT HAS PRESSED INTO SERVICE THE DECISION OF THE HONBLE TR IBUNAL IN THE CASE OF ACE BUILDERS. HOWEVER TODAY I HAVE THE BENEFIT OF THE VERY SAME DECISION AS DECIDED BY THE HONBLE JURISDICTIONAL H IGH COURT WHEREIN FOR RATE PURPOSES THE FICTION OF LAW STANDS APPLIE D FOR RATE PURPOSES. 10.2 THE APPELLANT BEFORE ME THEREFORE HAS TO PAY T AX AT THE RATE APPLICABLE TO SHORT TERM CAPITAL GAINS ON LONG TERM GAINS DEEMED SHORT TERM UNDER SECTION 50 THIS SUB-GROUND IS THEREFORE REJECTED . 35. AFTER HEARING RIVAL CONTENTIONS WE ARE OF THE CONS IDERED OPINION THAT IN PRINCIPLE THE ASSESSEE SHOULD BE ENTITLED TO EX EMPTION UNDER SECTION 54EC ON GAINS EARNED ON TRANSFER OF LONG TERM CAPI TAL ASSETS THOUGH THEY ARE DEPRECIABLE ASSETS. THIS ISSUE IS COVERED IN IT S FAVOUR BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN ACE BUILDERS ( SUPRA). NEVERTHELESS THE SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 14 DETAILS OF THE BONDS INVESTED ARE NOT CLEAR. THUS WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND REST ORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION IN ACC ORDANCE WITH LAW. WE ALSO DIRECT THE ASSESSING OFFICER TO VERIFY AS TO WHETHE R THE ASSESSEE HAS SUFFICIENT INVESTMENTS IN NABARD CAPITAL BONDS TO C OVER THE CAPITAL GAIN ARISING OUT OF SALE OF DEPRECIABLE ASSETS I.E. RES IDENTIAL PROPERTY SITUATED IN KORAMANGALA BANGALORE AS WELL AS CAPITAL GAINS ON SALE OF SHARES. HE SHALL ALSO EXAMINE AS TO WHETHER THE OTHER CONDITIONS SPE CIFIED IN SECTION 54EC ARE SATISFIED OR NOT. ACCORDING THIS GROUND IS ALL OWED FOR STATISTICAL PURPOSES. 36. GROUND NO.4 IS ON THE ISSUE AS TO WHETHER THE COMM ISSIONER (APPEALS) WAS JUSTIFIED IN ALLOWING THE ADDITION CL AIM OF THE ASSESSEE FOR DEDUCTION OF ` 5 75 725. 37. THE COMMISSIONER (APPEALS) AT PAGES-9 (LAST PARA) AND 10 (FIRST PARA) OF THE IMPUGNED ORDER STATED AS FOLLOWS:- IT IS SUBMITTED THAT A CLAIM WAS MADE IN THE COURS E OF ASSESSMENT PROCEEDINGS FOR THIS YEAR AND COPY OF TH IS LETTER FILED BEFORE THE A.O. IN THE COURSE OF ASSESSMENT PROCEED INGS WAS SHOWN TO ME. THIS APPEARS TO BE AN INADVERTENT OMISSION TO CONSI DER THE CLAIM OF THE APPELLANT WHICH ACCORDING TO ME IS JUSTIFIED ON T HE FACTS AND THE MERITS OF THE MATTER. THE A.O. IS DIRECTED TO ALLOW THE DEDUCTION OF A SUM OF ` 4 75 725. THIS GROUND IS THEREFORE ALLOWED . 38. THE CASE OF REVENUE IS THAT THE JUDGMENT OF HON'BLE SUPREME COURT IN GOETZE (INDIA) LTD. 284 ITR 323 APPLIES. THE ASSES SEES CASE IS THAT THE FACTS ARE ON RECORD AND THE COMMISSIONER (APPEALS) S POWERS ARE NOT AFFECTED BY THE JUDGMENT OF HON'BLE SUPREME COURT I N GOETZE (INDIA) LTD. (SUPRA). 39. AFTER HEARING BOTH THE PARTIES WE UPHOLD THE FINDI NGS OF THE COMMISSIONER (APPEALS). THE FACTS ARE ON RECORD. TH E COMMISSIONER (APPEALS) HAS POWERS TO ENTERTAIN A CLAIM FOR DEDUC TION MADE FOR THE FIRST TIME BEFORE HIM PROVIDED THE FACTS ARE ON RECORD. THE LEARNED COUNSEL RIGHTLY RELIED ON THE FOLLOWING CASE LAWS:- SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 15 CIT V/S PRABHU STEEL INDUSTRIES PVT. LTD. [1988] 1 71 ITR 0530 (BOM); CIT V/S JAI PARABOLIC SPRINGS LTD. [2008] 306 ITR 042 (DEL); 40. RESPECTFULLY FOLLOWING THE PROPOSITIONS LAID DOWN I N THE AFORESAID CASE LAWS WE DISMISS THIS GROUND OF THE REVENUE. 41. GROUND NO.5 IS ON THE ISSUE OF COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT IN RESPECT OF PROVISIONS MADE FOR DOUBTFUL DEBTS. 42. AS ADMITTED BY BOTH THE PARTIES IN VIEW OF RETROSPE CTIVE AMENDMENT TO CLAUSE (I) OF EXPLANATION-1 TO SECTION 115JB THE I SSUE HAS TO BE DECIDED IN FAVOUR OF THE REVENUE. THIS GROUND OF THE REVENUE I S ALLOWED. 43. GROUNDS NO.6 AND 7 ARE ON THE ISSUE OF VALUATION O F CLOSING STOCK UNDER SECTION 145A OF THE ACT. 44. THIS ISSUE IS COVERED BY THE DECISION OF MUMBAI BEN CH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.5993/MUM./ 2002 F OR ASSESSMENT YEAR 1999-2000 ORDER DATED 26 TH AUGUST 2009 WHEREIN THE TRIBUNAL VIDE PARA- 10.7 / PAGE-12 HELD AS FOLLOWS:- 10.7 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE AS SESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE ASSESSING OFFICER MADE AN ADDITION OF ` 4 93 22 786 TO THE CLOSING STOCK OF ACCOUNT OF MODVAT EXCISE DUTY CRED IT IN VIEW OF SECTION 145A OF THE ACT WHICH WAS INTRODUCED BY THE FINANCE ACT WITH EFFECT FROM 1.4.1999. WE FIND THE LEARNED CIT(A) UP HELD THE ACTION OF THE ASSESSING OFFICER BY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MELMOULD C ORPORATION SUPRA. WE FIND THE MATTER NEEDS TO BE READJUDICATED IN THE LIGHT OF THE RECENT DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT V/S MAHALAXMI GLASS WORKS P. LTD. VIDE ITA NO.192 OF 20 09 ORDER DATED 1 ST APRIL 2009 WHICH WAS NEITHER AVAILABLE AT THE TIM E OF ASSESSMENT PROCEEDINGS NOR AVAILABLE AT THE TIME OF APPEAL PRO CEEDINGS BEFORE THE LEARNED CIT(A). WE THEREFORE RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION NOT ADJUDICA TE THE ISSUE AFRESH IN THE LIGHT OF THE RECENT DECISION OF THE HON'BLE JUR ISDICTIONAL HIGH COURT AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. TH IS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 16 45. CONSISTENT WITH THE VIEW TAKEN THEREIN WE SET ASID E THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND REST ORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION IN ACCO RDANCE WITH LAW. THIS GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. 46. IN THE RESULT REVENUES APPEAL IS PARTLY ALLOWED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.721/MUM. /2006 FOR ASSESSMENT YEAR 2002-03 . 47. GROUNDS NO.1 AND 2 ARE ON THE ISSUE OF VALUATION O F CLOSING STOCK WITH REFERENCE TO SECTION 145A OF THE ACT. 48. CONSISTENT WITH THE VIEW TAKEN IN PARA-6 ABOVE IN A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 WE DISMISS THESE GROUN DS AS NOT PRESSED . 49. GROUND NO.3 IS ON THE ISSUE OF RATE OF TAX APPLICA BLE FOR CAPITAL GAINS ARISING OUT OF TRANSFER OF DEPRECIABLE ASSETS WHICH WAS A LONG TERM ASSET. WE HAVE DEALT WITH THE ISSUE IN GROUND NO.5 IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2001-02 CONSISTENT WITH THE VIEW T AKEN THEREIN WE DISMISS THIS GROUND RAISED BY THE ASSESSEE. 50. GROUND NO.4 IS ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. 51. CONSISTENT WITH THE VIEW TAKEN BY US IN THIS ORDER VIDE PARA-8 TO 10 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICA TION IN ACCORDANCE WITH LAW. 52. GROUNDS NO.5 AND 6 ARE ON THE ISSUE OF TAXABILITY OF INTEREST INCOME AND DEDUCTION UNDER SECTION 57(III) OF THE ACT. 53. LEARNED COUNSEL FOR THE ASSESSEE DID NOT WISH TO PR ESS THIS GROUND. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTIO N. CONSEQUENTLY THESE GROUNDS ARE DISMISSED. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 17 54. GROUND NO.7 IS ON THE ISSUE OF DISALLOWANCE OF CLA IM UNDER SECTION 80HHC OF THE ACT AS THE ASSESSEE HAS NO POSITIVE IN COME. 55. THIS ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 VIDE PARAS-25 26 AND 27 A BOVE SIMILAR DIRECTIONS ARE ISSUED ON THIS GROUND ALSO. THUS TH IS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 56. GROUND NO.8 IS AGAINST LEVY OF INTEREST UNDER SECT ION 234D OF THE ACT. 57. THE REFUND HEREIN WAS GRANTED ON 12 TH MAY 2003. THE LEARNED COUNSEL RELIED ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HI GH COURT IN CIT V/S BAJAJ HINDUSTAN LTD. ITA NO.198 OF 2009 JUDGMENT DATED 15 TH APRIL 2009 AND OTHER CASE LAWS WHEREIN IT HAS BEEN HELD THAT INTER EST UNDER SECTION 234D CANNOT BE CHARGED IN RESPECT OF REFUND GRANTED PRIO R TO 1 ST JUNE 2003. 58. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND RELIES ON THE JUDGMENT OF HONBLE KERALA HIGH COURT IN CIT V/S KE RALA CHEMICALS AND PROTEINS LTD. [2010] 323 ITR 0584 (KER.) WHEREIN IT IS HELD THAT INTEREST UNDER SECTION 234D HAS TO BE CHARGED FROM 1 ST JUNE 2003. 59. AFTER HEARING THE RIVAL CONTENTIONS WE FIND THAT T HE HON'BLE JURISDICTIONAL HIGH COURT IN BAJAJ HINDUSTAN LTD. ( SUPRA) HAS HELD AS FOLLOWS:- Q. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE INTEREST UNDER SECTION 234D CANNOT BE CHARGED IN RESPECT OF REFUND GRANTED PRIO R TO 1.6.2003 . 60. THE HON'BLE JURISDICTIONAL HIGH COURT ANSWERED THIS QUESTION AT PARA-5 OF ITS JUDGMENT DATED 15 TH APRIL 2009 (SUPRA) WHICH READS AS FOLLOWS:- 5. SO FAR AS THE LAST QUESTION IS CONCERNED IT IS SEEN THAT THE SUBJECT PROVISION CAME ON STATUTE BOOK W.E.F. 1.6.2 003. IF THAT BE SO THE SAID PROVISION DOES NOT HAVE RETROSPECTIVE EFFE CT. IN THIS VIEW OF THE MATTER WE DO NOT SEE APPEAL GIVING RAISE TO AN Y SUBSTANTIAL QUESTION OF LAW. APPEAL IS THEREFORE DISMISSED IN LIMINI WITH NO ORDER AS TO COST. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 18 61. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF TH E HON'BLE JURISDICTIONAL HIGH COURT WE ALLOW THE GROUND RAIS ED BY THE ASSESSEE. 62. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.617/MUM./ 2006 FOR ASSESSMENT YEAR 2002-03 63. GROUNDS NO.1 TO 4 READ AS FOLLOWS:- 1. ALLOWANCE OF CLAIM OF INTEREST PAID ON BORROWE D FUNDS TAKEN FOR ACQUISITION OF CAPITAL ASSET. 2. RESTRICTING DISALLOWANCE OF ASSESSEE UNDER SECTI ON 14A BASED ON THE WORKING GIVEN BY THE ASSESSEE WHICH WAS NEVER F IELD BEFORE THE ASSESSING OFFICER. IN CONTRAVENTION OF RULE-46A. 3. ALLOWANCE OF BENEFIT OF EXEMPTION UNDER SECTION 54EC TO THE SHORT TERM CAPITAL GAIN UNDER SECTION 50. 4. CLAIM IN RESPECT OF PRIOR PERIOD EXPENSES WHICH WAS NOT CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. 64. GROUND NO.1 IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 1994-95 1995-96 19997-98 1998-99 AND 1999-2000 WHEREIN THE TRIBUNAL HAS ALLOWED SIMILAR GROUNDS RA ISED BY THE ASSESSEE. CONSISTENT WITH THE VIEW TAKEN THEREIN WE DISMISS THIS GROUND RAISED BY THE REVENUE. 65. GROUND NO.2 CONSISTENT WITH THE VIW TAKEN IN ASSES SEES OWN CASE FOR ASSESSMENT YEAR 2001-02 AT PARAS-32 ABOVE WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND REST ORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH. 66. INSOFAR AS GROUND NO.3 IS CONCERNED IDENTICAL ISS UE AS HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 VIDE PARAS-33 TO 35 ABOVE. SIMILAR DIRECTIONS ARE ISSUED ON THIS GROUND ALSO. THUS WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 19 (APPEALS) AND ALLOW THE GROUND RAISED BY THE REVENU E FOR STATISTICAL PURPOSE.S 67. AS REGARDS GROUND NO.4 IS CONCERNED AFTER HEARING BOTH THE PARTIES WE FIND THAT THE CASE LAWS RELIED UPON BY THE LEARN ED DEPARTMENTAL REPRESENTATIVE ARE DISTINGUISHABLE IN NATURE. SIMIL ARLY ISUUE WAS DECIDED BY US IN THE ASSESSMENT YEAR 2001-02 AT PARA-37 TO 40 OF THIS ORDER. CONSISTENT WITH THE VIEW TAKEN THEREIN WE DISMISS THE GROUND RAISED BY THE REVENUE. 68. IN THE RESULT REVENUES APPEAL IS PARTLY ALLOWED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.2660/MUM ./2007 FOR ASSESSMENT YEAR 2003-04 69. GROUNDS NO.1 AND 2 READ AS FOLLOWS:- 1. ADDITION ON ACCOUNT OF CLOSING STOCK OF MODVAT UNDER SECTION 145A. 2. WITHOUT PREJUDICE TO GROUND NO.1 TO MAKE CONSEQ UENTIAL ADJUSTMENTS IN THE PURCHASES. 70. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT WISH TO PRESS THESE GROUNDS. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. CONSEQUENTLY THESE GROUNDS ARE DISMISSED AS NOT PRESSED . 71. GROUND NO.3 IS ON THE ISSUE OF TAXING THE GAIN FRO M DEPRECIABLE LONG TERM CAPITAL ASSET AT A RATE APPLICABLE TO SHORT TE RM CAPITAL GAIN. 72. AFTER HEARING BOTH THE PARTIES WE FIND THAT IDENTI CAL ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 VIDE PARAS-20 TO 22 ABOVE WHEREIN THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. THE RATE OF TAX APPLICABLE IS WHAT IS AP PLICABLE TO SHORT TERM CAPITAL GAIN. CONSISTENT WITH THE VIEW TAKEN THEREI N THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 20 73. GROUND NO.4 IS WITH REFERENCE TO COMPUTATION OF RE LIEF UNDER SECTION 80HHC. 74. AFTER HEARING RIVAL CONTENTIONS WE FIND THAT THE A SSESSEE WAS NOT IN A POSITION TO FURNISH DETAILS AS WELL EXPLAIN THE NAT URE OF INCOME EARNED BY WAY OF SPINDLE SERVICE CHARGES AND MISCELLANEOUS INCOME BY WAY OF SALE OF CATALOGUE. THUS AS THE NATURE OF INCOME AND ITS NE XUS WITH THE OPERATIONS OF THE ASSESSEE HAVE NOT BEEN ESTABLISHED THE DECI SION OF THE REVENUE AUTHORITIES ON THE MATTER IS UPHELD. 75. COMING TO THE ISSUE OF SALE OF SCRAP AND CASH DISCO UNT ON PURCHASES WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS NOT ADJUDICATED THE MATTER IN ACCORDANCE WITH LAW. 76. THE COMMISSIONER (APPEALS) HAS ALSO NOT APPLIED HIS MIND TO THE ISSUE. THE ASSESSEE IN THIS CASE HAS RIGHTLY RELIED ON T HE DECISION OF THE HON'BLE MADRAS HIGH COURT IN FENNER (I) LTD. V/S CIT 241 I TR 803 (MAD.) AND CIT V/S KAR MOBILES LTD. 333 ITR 478 (KER.) AND OTHER JUDGMENTS. 77. IN OUR OPINION AS THE FACTS HAVE TO BE VERIFIED B OTH THESE ISSUES ARE RESTORED TO THE FILE OF ASSESSING OFFICER FOR ADJUD ICATION AFRESH IN ACCORDANCE WITH LAW. THIS GROUND IS THUS ALLOWED FOR STATIST ICAL PURPOSES. 78. COMING TO ALTERNATE CONTENTIONS OF THE ASSESSEE IN GROUND NO.6 IS THAT ONLY 90% OF THE SPINDLE SERVICE CHARGES AND MISCELL ANEOUS INCOME HAS TO BE EXCLUDED IN TERMS OF CLAUSE (BAA) TO EXPLANATION TO SECTION 80HHC WE HOLD THAT THESE ARE INDEPENDENT STREAMS OF INCOME AND AR E NOT ITEMS WHICH WERE EXCLUDED BY INVOKING CLAUSE (VAA) TO EXPLANATION TO SECTION 80HHC. HENCE THE CLAIM FOR DISALLOWANCE OF 90% ONLY IS DEVOIDE O F MERIT. THUS GROUND NO.4 IS ALLOWED PARTLY AND GROUND NO.6 IS DISMISSE D. 79. GROUND NO.5 IS ON THE ISSUE OF REDUCING GROSS INTE REST INCOME INSTEAD OF NET INTEREST INCOME FOR THE PURPOSES OF COMPUTIN G DEDUCTION UNDER SECTION 80HHC. SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 21 80. THIS ISSUE IS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S ASIAN STAR CO. LTD. 326 ITR 056 (BOM.). RESPECTFUL LY FOLLOWING THE SAME WE DISMISS THIS GROUND OF THE ASSESSEE. 81. GROUND NO.7 IS ON THE ISSUE OF COMPUTATION OF RELI EF UNDER SECTION 80HHC. 82. ADMITTEDLY THE ISSUE IS COVERED AGAINST THE ASSESS EE AND IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF HON'BLE SUPREME COUR T IN IPCA LABORATORY LTD. V/S DCIT [2004] 266 ITR 0521 (SC) WHEREIN IT HAS BEEN HELD THAT IF THE COMPUTATION OF PROFITS AFTER EXCLUDING THE EXPO RT INCENTIVES RESULTS INTO NEGATIVE PROFITS THEN DEDUCTION U/S 80-HHC CANNOT BE ALLOWED TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME WE DISMI SS THIS GROUND OF THE ASSESSEE. 83. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.2640/MUM. /2007 FOR ASSESSMENT YEAR 2003-04 . 84. GROUND NO.1 RELATES TO COMPUTATION OF RELIEF UNDER SECTION 80HHC WITH REFERENCE TO FEE FOR TECHNICAL SERVICE AND SALE OF SCRAP. 85. AS FAR AS FEE FOR TECHNICAL SERVICE IS CONCERN BOT H THE PARTIES AGREE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1995-96 TO 1998-99. CONSISTENT WITH THE VIEW TAKEN THEREIN WE DISMISS THIS PART OF THE GROUND RELATING TO FEE FOR TECHNICAL SE RVICES VIS--VIS COMPUTATION OF RELIEF UNDER SECTION 80HHC. 86. THE SECOND PART OF THE GROUND RELATES TO SALE OF SC RAP. 87. CONSISTENT WITH THE VIEW TAKEN ON THIS ISSUE WHILE DISPOSING OFF GROUND NO.4 IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2003 -04 WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 22 TO THE FILE OF ASSESSING OFFICER FOR RE-ADJUDICATIO N IN ACCORDANCE WITH LAW. THIS GROUND IS ALLOWED IS PARTLY ALLOWED. 88. THE NEXT GROUND IS ON THE ISSUE OF COMPUTATION OF R ELIEF UNDER SECTION 80HHC OF SALES TAX SET-OFF AMOUNTING TO ` 15 60 668. 89. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE TR IBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1997-98 AND 1998-99 DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. THE REVENUE HAS TAKEN A WRONG GROUND. THE ASSESSING OFFICER WHILE PROPOSING THE APPEAL AND TH E COMMISSIONER WHILE APPROVING THE GROUND OF APPEAL HAVE NOT APPLIED TH EIR MIND RESULTING IN CONFUSION AND WASTAGE OF TIME. IN ANY EVENT AS THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE THE GROUND RAISED BY THE RE VENUE IS DISMISSED. 90. IN THE RESULT REVENUES APPEAL IS PARTLY ALLOWED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.4625/MUM ./2008 FOR ASSESSMENT YEAR 2004-05 . 91. GROUND NO.1 IS ON THE RATE OF TAX APPLICABLE ON CA PITAL GAINS WHICH IS ARISING ON SALE OF DEPRECIABLE ASSETS WHICH IS A LO NG TERM CAPITAL ASSETS. 92. AFTER HEARING BOTH THE PARTIES WE FIND THAT IDENTI CAL ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 VIDE PARAS-20 TO 22 ABOVE WHEREIN THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. IT WAS HELD THAT THE RATE OF TAX APPLICA BLE IS THAT WHICH IS APPLICABLE TO SHORT TERM CAPITAL GAIN. CONSISTENT WITH THE VIEW TAKEN THEREIN THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 93. GROUND NO.2 IS ON THE ISSUE OF REDUCING GROSS INTE REST INCOME INSTEAD OF NET INTEREST INCOME FOR THE PURPOSES OF COMPUTIN G DEDUCTION UNDER SECTION 80HHC. 94. THIS ISSUE IS COVERED AGAINST THE ASSESSEE AND IN F AVOUR OF THE REVENUE BY THE JUDGMENT OF HON'BLE JURISDICTIONAL H IGH COURT IN CIT V/S SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 23 ASIAN STAR CO. LTD. 326 ITR 056 (BOM.). RESPECTFUL LY FOLLOWING THE SAME WE DISMISS THIS GROUND OF THE ASSESSEE. 95. GROUNDS NO.3 AND 4 ARE ALTERNATIVE GROUNDS VIDE WH ICH THE ASSESSEE SEEKS REDUCTION OF ONLY 90% OF INTEREST INCOME FROM PROFITS AS PER CLAUSE (BAA) TO EXPLANATION TO SECTION 80HHC. 96. IN OUR OPINION AS THE DISALLOWANCE WAS MADE BY INV OKING THE PROVISIONS OF CLAUSE (BAA) TO EXPLANATION-1 TO SECT ION 80HHC ONLY 90% OF THE INTEREST INCOME HAS TO BE DISALLOWED AS PER THE ACT. WE ORDER ACCORDINGLY. THUS THESE GROUNDS ARE ALLOWED. 97. GROUNDS NO.5 6 AND 7 READ AS FOLLOWS:- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE HONBLE CIT(A) HAS LEGALLY ERRED IN CONFIRMING THE ACTION O F THE LEARNED AO REGARDING ADDITION OF RS. 1 54 64 391 BEING BALANC E OF CENVAT CREDIT AS ON MARCH 31 2004 AS PER EXCISE RECORDS AT THE B ANGALORE FACTORY TO THE CLOSING STOCK OF THE APPELLANT BY APPLYING PROVISIONS OF SECTION 1 45A OF THE THE ACT. IT IS PRAYED THAT THE ADDITIO N OF RS. 1 54 64 391 SHOULD BE DELETED FROM THE INCOME OF THE APPELLANT. 6. WITHOUT PREJUDICE TO THE 5 ABOVE AND ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE CIT(A) HAS L EGALLY ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO OF NOT MAKI NG CONSEQUENTIAL ADJUSTMENT TO THE PURCHASES SALES AND OPENING STOC K MADE DURING THE YEAR WHICH ARE ACCOUNTED UNDER EXCLUSIVE METHOD AN D NEED TO BE ENHANCED SO AS TO CONFIRM TO THE INCLUSIVE METHOD F ORCED ON THE APPELLANT BY THE LEARNED AO. 7. WITHOUT PREJUDICE TO GROUNDS NO. 5 AND 6 ABOVE A ND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ANY EVENT OF THE MATTER THE FIGURE OF OPENING STOCK OF THIS YEAR OUGHT TO BE EN HANCED BY RS. 4 85 47 928 BEING THE AMOUNT OF SIMILAR ADDITION M ADE TO THE CLOSING STOCK OF PREVIOUS YEAR ON ACCOUNT OF MODVAT ADJUSTM ENT. 98. INSOFAR AS THE AFORESAID GROUNDS ARE CONCERNED THE LEARNED COUNSEL DID NOT WISH TO PRESS. LEARNED DEPARTMENTAL REPRESE NTATIVE HAS NO OBJECTION. CONSEQUENTLY THESE GROUNDS ARE DISMISSE D. 99. GROUND NO.8 READS AS FOLLOWS. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LE ARNED AO IN SKF INDIA LTD. A.YS 2001-02 2002-03 2003-04 & 2004-05 24 DISALLOWING RS. 6 95 37 531 INSTEAD OF RS. 6 95 27 531 BEING THE AMOUNT RELATING TO THE VOLUNTARY RETIREMENT SCHEME DEBITED TO PROFIT AND LOSS ACCOUNT FOR THE PURPOSES OF GRANTING DEDU CTION AS PER SECTION 35DDA OF THE ACT. 100. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT DUE TO SMALLNESS OF THE AMOUNT I.E. ONLY ` 10 000 DID NOT WISH TO PRESS THIS GROUND. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. CONSEQUENTLY THIS GROUND IS DISMISSED AS NOT PRESSED . 101. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.2011 SD/- B.R. MITTAL JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 29.12.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR E BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI