DCIT Cir 1(1), v. The Assciated Cement Co. Ltd,

ITA 6320/MUM/2003 | misc
Pronouncement Date: 09-03-2011 | Result: Dismissed

Appeal Details

RSA Number 632019914 RSA 2003
Bench Mumbai
Appeal Number ITA 6320/MUM/2003
Duration Of Justice 7 year(s) 5 month(s) 15 day(s)
Appellant DCIT Cir 1(1),
Respondent The Assciated Cement Co. Ltd,
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 09-03-2011
Date Of Final Hearing 28-12-2010
Next Hearing Date 28-12-2010
Assessment Year misc
Appeal Filed On 24-09-2003
Judgment Text
I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH MUMBAI. [ BEFORE SHRI R.V.EASWAR HONBLE PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ] I.T.A NO.6289/ MUM/2003 ASSESSMENT YEAR: 1998-99 ASSOCIATED CEMENT CO. LTD. APPELLANT CEMENT HOUSE 3 RD FLOOR FINANCIAL DIVISION 121 M.K. ROAD CHURCHGATE MUMBAI-20 PA NO.AAACT 1507 C VS ADDL. COMMISSIONER OF INCOME TAX SPL.RANGE 4 .. .RESPONDEN T AAYAKAR BHAVAN M.K. ROAD MUMBAI. I.T.A NO.6320/ MUM/2003 ASSESSMENT YEAR: 1998-99 ADDL. COMMISSIONER OF INCOME TAX SPL.RANGE 4 APPELLANT AAYAKAR BHAVAN M.K. ROAD MUMBAI VS ASSOCIATED CEMENT CO. LTD. RESPONDENT CEMENT HOUSE 3 RD FLOOR FINANCIAL DIVISION 121 M.K. ROAD CHURCHGATE MUMBAI-20 PA NO.AAACT 1507 C APPEARANCES: SHRI D.B.DESAI ALONGWITH SHRI SOUMEN ADAK SHRI AMI T KR MISHRA AND SHRI BASANT KASAT FOR THE ASSESSEE A.P. SINGH AND PAVAN VAID FOR THE REVENUE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 2 O R D E R PER PRAMOD KUMAR ACCOUNTANT MEMBER: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER DATED 30 TH JUNE 2003 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UN DER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 1998-9 9. AS THESE APPEALS CALL INTO QUESTION SAME ORDER PASSED BY THE CIT(A) AND AS THE SE APPEALS WERE HEARD TOGETHER WE DEEM IT FIT AND PROPER TO DISPOSE OF B OTH OF THESE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. 2. WE WILL FIRST TAKE UP ASSESSEES APPEAL I.E. ITA NO. 6289/MUM/03. 3. BY WAY OF LETTER DATED 19 TH MARCH 2009 THE ASSESSEE HAS SUBMITTED CONCISE GROUNDS OF APPEAL AND PRAYED THAT THESE GROUNDS MAY BE SUBSTITUTED FOR THE GROUNDS OF APPEAL FILED ALONGWITH THE FORM 36. WE A CCEPT THIS REQUEST AND ACCORDINGLY PROCEED TO TAKE UP THESE GROUNDS OF AP PEAL FOR DISPOSAL. 4. IN GROUND NO. 1 THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE : THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) ERRED IN CONFIRMING THE DENIAL OF CLAIM OF E XCLUSION OF ROAD TRANSPORT SUBSIDY AS CAPITAL RECEIPT AMOUNTING TO R S 18 94 31 601 IN COMPUTING TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT. 5. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS 18 94 31 601 TOWARDS TRANSPOR T SUBSIDY AND CLAIMED THE SAME I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 3 AS A CAPITAL RECEIPT BEING EXEMPT FROM TAX. AFTER CONSIDERING THE ASSESSEES SUBMISSION THE AO WAS OF THE VIEW THAT THE TRANSPO RT SUBSIDY IS A TRADING RECEIPT AND LIABLE TO BE TAXED ACCORDING TO THE PROVISIONS OF THE INCOME TAX ACT 1961. FOR THIS PROPOSITION HE RELIED ALSO ON THE DECISION OF THE HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF SAHANEY STEEL AND PRESS WOR KS LTD 228 ITR 253 (SC) P.J.CHEMICALS 210 ITR 630(SC) AND ALSO THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SADDICHHA CHITRA V CIT 189 ITR 774 (BOM). AGGR IEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). SINCE THIS GR OUND WAS NOT PRESSED BEFORE THE CIT (A) AND ALSO REFERRING TO THE DECISION IN THE C ASE OF SAHANEY STEEL AND PRESS WORKS LTD (SUPRA) THE SAME WAS DISMISSED. HOWEVER THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. LEARNED COUNSEL REFERS TO PAPER BOOK PAGES 267 T O 273 (PARA 9) WHICH CONTAIN ORDER OF THE ITAT IN ASSESSEES OWN CASE W HEREIN IDENTICAL CLAIM FOR THE ASSESSMENT YEARS 1991-92 TO 1996-97 HAS BEEN DECIDE D IN FAVOUR OF THE ASSESSEE. HE ALSO REFERS TO THE DECISION OF THE ITAT MUMBAI ( SB) IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. 88 ITD 273 (SB)(MUM) WHER EIN IT HAS BEEN HELD THAT IF A SUBSIDY IS GIVEN FOR SETTING UP OR EXPANSION OF IND USTRY IT WILL BE CAPITAL IRRESPECTIVE OF SOURCE OF FUNDS OR MODE OF DISBURSEMENT. RELIAN CE WAS MADE TO THE DECISION OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT V. PONNI SUGARS & CHEMICALS LTD 306 ITR 392(SC) WHEREIN IT HAS BEEN HELD THA T IT IS THE PURPOSE TEST WHICH DECIDES THE NATURE OF THE INCENTIVE AND NOT THE MOD ALITY OR THE SOURCE THEREOF. IN VIEW OF THIS LEARNED COUNSEL URGED US TO DECIDE TH E GROUND IN FAVOUR OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND SUBMITS THAT EVEN THOUGH THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY E ARLIER OF DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE THOSE DECISIONS ARE PER INCURIUM INASMUCH AS THESE DECISIONS HAVE IGNORED ANOTHER DIVISION BENCH DECIS ION ON THIS ISSUE WHICH WAS AGAINST THE ASSESSEE IN THE CASE OF ACIT VS. STEE L STRIPS LIMITED (108 ITD 720) WHEREIN THE COORDINATE BENCH HAD HELD THAT TRANSPOR T SUBSIDY RECEIVED BY ASSESSEE FROM STATE GOVERNMENT UNDER TRANSPORT SUBSIDY SCHEM E 1971 OF GOVERNMENT OF I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 4 INDIA AGAINST TRANSPORT COST OF RAW MATERIAL AND F INISHED GOODS WOULD BE REVENUE RECEIPT. WE ARE THUS URGED NOT TO FOLLOW THE TRIBUN AL DECISIONS IN ASSESSEES OWN CASE AND UPHOLD THE ACTION OF THE AUTHORITIES BELOW ON THIS ISSUE. IN REJOINDER LEARNED COUNSEL POINTS OUT THAT TRIBUNALS DECISION IN THE CASE OF STEEL STRIPS LIMITED (SUPRA) ITSELF DID NOT FOLLOW AN EARLIER DECISION O F THE COORDINATE BENCH IN THE CASE OF ASSAM ASBESTOS LIMITED VS. IAC ( 45 ITD 81) AND IT DID NOT DEAL WITH PURPOSE TEST TO COME TO THE CONCLUSION AS TO WHETHER OR NOT THE SUBSIDY RECEIVED WILL BE CAPITAL RECEIPT OR REVENUE RECEIPT. OUR ATTENTION IS INVITE D TO THE FACT THAT IN ANY EVENT THE SAID DB DECISION IS NO LONGER GOOD LAW IN THE LIGHT OF HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD (2010 TIOL 228 HC MUM) APPROVING SPECIAL BENCH DECISION IN THE CASE OF DCI T VS. RELIANCE INDUSTRIES LIMITED (88 ITD SB 273) WHEREIN IT WAS HELD THAT IF THE SU BSIDY IS GIVEN FOR SETTING UP OR EXPANSION OF INDUSTRY IT WILL BE CAPITAL IN NATURE IRRESPECTIVE OF THE SOURCE OF FUNDS OR MANNER OF DISBURSEMENT. IT IS ALSO POINTED OUT T HAT THE TRIBUNALS DECISION IN THE CASE OF ASSAM ASBESTOS LTD (SUPRA) HAS REACHED FIN ALITY AS REFERENCES UNDER SECTION 256(1) AND 256(2) HAVE BEEN REJECTED AND HONBLE S UPREME COURT HAS ALSO DISMISSED SLP AGAINST REJECTION OF 256(2) REFERENCE BY HONBLE GAUHATI HIGH COURT AS REPORTED IN CIT VS. ASSAM ASBESTOS LIMITED (215 ITR 847). LEARNED COUNSEL THEN TAKES US THROUGH THE NATURE OF SUBSIDY AND POINTS O UT THAT THE SUBSIDY IN QUESTION IS EXACTLY THE SAME AS WAS IN THE CASE OF ASSAM ASBEST OS LIMITED. IN BOTH THESE CASES THE TRANSPORT SUBSIDY RECEIVED BY THE ASSESSEE WAS CENTRAL TRANSPORT SUBSIDY AS AGAINST HP STATE TRANSPORT SUBSIDY RECEIPT IN THE C ASE OF STEEL STRIPS LIMITED (SUPRA). LEARNED COUNSEL THUS SUBMITS THAT A DECISION IN THE CONTEXT OF A DIFFERENT SUBSIDY SCHEME I.E. DECISION IN THE CASE OF STEEL STRIPS L TD (SUPRA) WILL HAVE NO APPLICATION IN THE MATTER. WE ARE THUS URGED TO FOLLOW THE EARL IER DECISIONS OF THE COORDINATE BENCHES IN ASSESSEES OWN CASE AND NOT BE INFLUENC ED BY COORDINATE BENCH DECISION IN THE CASE OF HP STATE TRANSPORT SUBSIDY SCHEME. 6. WE SEE MERITS IN THE SUBMISSIONS OF THE LEARNED COUNSEL. THE ISSUE IN APPEAL IS SQUARELY COVERED BY DECISIONS OF THE COORDINATE BENCHES IN ASSESSEES OWN CASE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 5 AS ALSO IN THE CASE OF ASSAM ASBESTOS LIMITED (SUPR A) WHICH HAS SINCE RECEIVED FINALITY. WE HAVE ALSO NOTED THAT COORDINATE BENCH DECISION IN THE CASE OF STEEL STRIPS LIMITED (SUPRA) WAS IN THE CONTEXT OF A DIFFERENT S TATE TRANSPORT SUBSIDY SCHEME AND IT DOES NOT THEREFORE DIRECTLY APPLY TO THE SITUA TION BEFORE US. IN VIEW OF THESE DISCUSSIONS AND CONSISTENT WITH THE VIEWS OF COORD INATE BENCHES IN ASSESSEES OWN CASE FOR EARLIER YEARS WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION O F RS 18 94 31 601 ON ACCOUNT OF CENTRAL TRANSPORT SUBSIDY. THE ASSESSEE GETS THE RE LIEF ACCORDINGLY. 6. GROUND NO. 1 IS THUS ALLOWED. 7. IN GROUND NO.2 THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE: THE LD CIT (A) ERRED IN HOLDING THAT THE AO WAS JUS TIFIED IN TREATING THE EXPENDITURE OF RS 1 21 38 100 PAID YOUR APPELLANTS TO RAJASTHAN STATE FOREST DEPARTMENT AS CAPITAL IN NATURE. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS 1 2 1 38 100 ON ACCOUNT OF COMPULSORY AFFORESTATION. THIS AMOUNT WAS PAID BY T HE ASSESSEE TO RAJASTHAN STATE FOREST CORPORATION. IT WAS SUBMITTED BY THE ASSESS EE THAT THE ASSESSEE COMPANY HAD ONE FACTORY IN LAKHERI RAJASTHAN AND AS THE MI NING FOR RAW MATERIAL WAS DONE ON THE FOREST LAND AS PER THE INSTRUCTION OF THE G OVERNMENT OF RAJASTHAN THE AMOUNT WAS PAID FOR THE FOREST DEPARTMENT TO COMPEN SATE THEM FOR LOSS OF FOREST AND TOWARDS AFFORESTATION COSTS TO MAKE GOOD THE SA ID LOSS. IT WAS ALSO SUBMITTED THAT THE AFFORESTATION WAS AN OPERATION CARRIED OUT AS A PART AND PARCEL OF THE PROCESS OF EXTRACTION OF LIMESTONE FROM THE MINES L OCATED IN THE FOREST AREA. IT WAS SUBMITTED THAT AS THIS AMOUNT HAD BEEN EXPENDED IN THE NORMAL COURSE OF THE BUSINESS OF THE COMPANY THE SAME IS DEDUCTIBLE. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION AND TREATED THE AMOUNT AS CAP ITAL EXPENDITURE . THE ASSESSEE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 6 CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SUCCES S. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 9. THE MAIN THRUST OF LEARNED COUNSELS ARGUMENTS I S THAT AFFORESTATION WAS CARRIED OUT AS A PART AND PARCEL OF THE PROCESS OF EXTRACTION OF LIMESTONE FROM THE MINES LOCATED IN THE FOREST AREA. OUR ATTENTION IS INVITED TO THE PROVISIONS OF FOREST (CONSERVATION) ACT 1980 AND IT IS SUBMITTED THAT UNLESS THE ASSESSEE MAKES PAYMENT OF THESE AFFORESTATION COSTS HE WOULD NOT BE ALLOWED TO CARRY OUT THE BUSINESS ACTIVITY OF EXTRACTING LIMESTONE. IT IS AL SO POINTED OUT THAT WHILE THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSES OF BUSINESS THESE EXPENSES NEITHER RESULT IN CREATION OF ANY ASSET FO R THE ASSESSEE NOR IN TRANSFER OF OWNERSHIP OF ANY ASSETS. OUR ATTENTION IS THEN INVI TED TO HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. KIRKEL COAL CO (77 ITR 530) WHEREIN IT IS HELD THAT EXPENDITURE INCURRED FOR STOWING OPERATIONS IS REVE NUE EXPENDITURE SINCE STOWING WAS AN OPERATION CARRIED OUT IN THE PROCESS OF EXTR ACTION OF COAL AND WITHOUT THIS OPERATION HAVING BEEN CARRIED OUT EXTRACTION OF CO AL WAS NOT POSSIBLE. OUR ATTENTION IS THEN INVITED TO DECISION OF A COORDINA TE BENCH IN THE CASE OF ORRISSA FOREST DEVELOPMENT CORPORATION LIMITED VS. JCIT ( 8 0 ITD 300) WHEREIN IT WAS HELD THAT EXPENDITURE ON AFFORESTATION IS AN ALLOWABLE E XPENDITURE. IT IS THEN CONTENDED THAT THE EXPENDITURE IS NOT ON AN ASSET OWNED BY TH E ASSESSEE AND FROM THIS POINT OF VIEW ALSO IT IS TO BE TREATED AS REVENUE EXPENDITU RE IN THE LIGHT OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. ASSOCIATED CEMENT COMPANIES LTD (172 ITR 257). A REFERENCE IS THEN MADE TO HONBLE BOMBAY HI GH COURTS JUDGMENT IN THE CASE OF NATIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED VS. CIT (203 ITR 410) WHEREIN IT WAS HELD THAT EXPENDITURE INCURRED ON CONSTRUCTION OF JETTY FOR FACILITATING TRADING OPERATIONS OF THE ASSESSEE IS A REVENUE EXPENDITURE EVEN THOUGH OWNERSHIP OF THE JETTY IS WITH THE GOVERNMENT. IT IS SUBMITTED THAT FOR ALL THESE REASONS THE EXPENSES INCURRED ON AFFORESTATION ARE CLEARLY IN THE NATURE OF REVENUE EXPENSES WHICH SHOULD BE ALLOWED AS DEDUCTION IN COMPUTATION OF BUSINESS INCOME. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITS THAT THE ASSESSEE HAS TAKEN THE MINE ON I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 7 LEASE WHICH IS CLEARLY A CAPITAL ASSET AND THE EXP ENSES ARE INCURRED FOR THE PURPOSE OF THIS CAPITAL ASSET. IT IS POINTED OUT THAT EXPE NSES TO ACQUIRE LEASE RIGHTS ARE CAPITAL EXPENSES IN NATURE AND THE CHARACTER OF EXPENSES IN CURRED ON AFFORESTATION ARE ALSO INTEGRAL PART OF EXPENSES INCURRED FOR ACQUIRING TH E LEASE. WE ARE THUS URGED TO HOLD THAT THESE EXPENSES ARE CAPITAL IN NATURE AND CANNO T BE ALLOWED AS DEDUCTION IN COMPUTATION OF BUSINESS INCOME. LEARNED DEPARTMENTA L REPRESENTATIVE THEN SUBMITS THAT KIRKEND COAL CO DECISION (SUPRA) ON W HICH RELIANCE HAS BEEN PLACED BY THE LEARNED COUNSEL IS NOT AT ALL RELEVANT IN THIS CONTEXT. IT IS SUBMITTED THAT IN THE SAID CASE THERE WAS A CATEGORICAL FINDING BY THE T RIBUNAL THAT STOWING IS AN INTEGRAL PART OF THE OPERATION OF COAL MINING AND IT WAS FO R THIS REASON THAT EXPENSE WAS HELD TO BE ALLOWABLE AS REVENUE EXPENSES. AS AGAINST THI S POSITION IN THE PRESENT CASE AFFORESTATION HAS NO BEARING ON THE ACTUAL MINING O PERATION CARRIED OUT. IT IS AN INDEPENDENT ACTIVITY WHICH IS FOR THE PURPOSE OF MA INTAINING THE LEASE RIGHTS WHICH ARE CAPITAL ASSETS. AS REGARDS COORDINATE BENCHS DECISION IN THE CASE OF ORISSA FOREST CORPORATION (SUPRA) LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT IN THE SAID CASE ASSESSEE WAS ENGAGED IN THE BUSINESS AS A FOREST CORPORATION AND SUCH DECISION IN THE CASE OF A FOREST CORPORATIONS CASE CAN NOT BE COMPARED WITH A CASE IN THE ASSESSEE IS ENGAGED IN BUSINESS OF EXTRACTING L IMESTONE. THERE IS NO DIRECT LINK BETWEEN ASSESSEES BUSINESS AND THE EXPENSES SO INC URRED. THE LINK IF AT ALL IS FAR FETCHED AND ALL THE RELEVANT FACTS HAVE NOT EVEN BE EN PLACED BEFORE THE ASSESSING OFFICER SAVE AND EXCEPT FOR GENERALIZED SUBMISSION S ABOUT THE NATURE OF EXPENSES. WE ARE URGED TO REJECT THE GRIEVANCE OF THE ASSESSE E OR AT BEST REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF ALL THE FACTUAL ELEMENTS EMBEDDED IN ASSESSEES SUBMISSIONS. IN REJOINDER LEARNED CO UNSEL SUBMITS THAT WHAT IS TO BE SEEN IS WHETHER THE MOTIVATION OF INCURRING THIS EX PENDITURE IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND WHETH ER THE EXPENDITURE IS NOT IN THE NATURE OF CAPITAL EXPENDITURE. ONCE THESE TWO CONDI TIONS ARE SATISFIED AS ARE SATISFIED IN THIS CASE THERE CANNOT BE ANY GOOD RE ASONS NOT TO ALLOW THE EXPENDITURE. WE ARE THUS ONCE AGAIN URGED TO DELETE THE IMPUGNED DISALLOWANCE. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 8 10. WE FIND THAT AS LEARNED COUNSEL RIGHTLY POINT S OUT IN ORDER TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 37(1) AN EXPENSE HAS TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND IT SHOULD NOT BE I N THE NATURE OF CAPITAL EXPENSES. THERE IS NO DISPUTE THAT THE AFFORESTATION EXPENSE IS INCURRED BECAUSE IT IS NECESSARY TO DO SO IN FURTHERANCE OF LEGITIMATE BUSINESS INT ERESTS OF THE ASSESSEE. NO ASSET IS CREATED AS A RESULT OF THIS EXPENDITURE. IT IS STAT UTORY OBLIGATION OF THE ASSESSEE TO PROVIDE FOR COMPENSATORY AFFORESTATION OF LAND AND UNLESS HE DOES SO THE ASSESSEE IS NOT ALLOWED TO CARRY OUT ITS BUSINESS ACTIVITY O F EXTRACTING FROM THE MINES. THE NEXUS IS CLEAR AND UNAMBIGUOUS. AS REGARDS LEARNED DEPARTMENTAL REPRESENTATIVES SUBMISSION THAT BEING RELATABLE TO MINING LEASE RIG HTS THE EXPENSES SHOULD BE TREATED AS CAPITAL EXPENDITURE WE ARE OF THE CONSI DERED VIEW THAT EXPENSES ARE INCURRED NOT FOR THE PURPOSE OF MINING LEASE BUT FO R THE PURPOSE OF CARRYING OUT BUSINESS ACTIVITY OF EXTRACTING LIMESTONE UNDER THE MINING LEASE. THE POINT OF TIME WHEN AFFORESTATION EXPENSES ARE REQUIRED TO BE INCU RRED IS WHEN EXTRACTION ACTIVITY IS CARRIED OUT. IN ANY EVENT THE MERE LINK WITH A CAPITAL ASSET WOULD NOT RESULT IN THE EXPENDITURE BEING TREATED AS CAPITAL EXPENDITURE. W HAT IS TO BE SEEN IS THE REASON ON ACCOUNT OF WHICH THE EXPENSES ARE INCURRED AND EVEN IF THE EXPENSES RESULT IN SOME BENEFIT OF ENDURING NATURE THAT BENEFIT WOULD NOT BE DECISIVE OF HOLDING THE EXPENSES AS CAPITAL EXPENDITURE. IN THE CASE OF CIT VS. GLAXO LABORATORIES INDIA LIMITED (181 ITR 59) EVEN EXPENSES TO INCREASE THE CAPITAL BASE HAS BEEN HELD TO BE REVENUE EXPENDITURE BECAUSE INCREASING THE SHARE CA PITAL BASE WAS NECESSARY PRECONDITION FOR CONTINUANCE OF TECHNICAL COLLABOR ATION ARRANGEMENT BY THE ASSESSEE. THE FOLLOWING ANALYSIS OF LEGAL POSITION BY HONBLE BOMBAY HIGH COURT IN SUPPORT OF THE ABOVE CONCLUSIONS IS OF GREAT RELEV ANCE IN THIS CONTEXT: 7. THAT THE COURT MUST LOOK TO THE OBJECT AND PURPO SE OF THE EXPENDITURE AND THAT FROM THE POINT OF VIEW OF THE BUSINESSMAN IS WELL ESTABLISHED. 8. IT WAS LAID DOWN IN ANGLO-PERSIAN OIL COMPANY V. DALE 16 TC 253 THAT IT WAS THE OBJECT OF THE EXPENDITURE ALONE THAT COUNTED. I T WAS NOT NECESSARY THAT THE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 9 EXPENDITURE SHOULD HAVE THE RESULT OF BRINGING AN AS SET INTO EXISTENCE. THE FACT THAT THE EXPENDITURE HAD IN FACT RESULTED IN THE CO MING INTO EXISTENCE OF SOME ADVANTAGE WHICH WOULD ENURE FOR SEVERAL YEARS WAS N OT OF CONSEQUENCE. 9. THE SUPREME COURT IN BOMBAY STEAM NAVIGATION (195 3) (P.) LTD. V. CIT [1965] 56 ITR 52 LAID DOWN THE TEST IN THESE WORDS: 'WHETHER A PARTICULAR EXPENDITURE IS REVENUE EXPEND ITURE INCURRED FOR THE PURPOSE OF BUSINESS MUST BE DETERMINED ON A CONSIDERA TION OF ALL THE FACTS AND CIRCUMSTANCES AND BY THE APPLICATION OF PRINCI PLES OF COMMERCIAL TRADING. THE QUESTION MUST BE VIEWED IN THE LARGER C ONTEXT OF BUSINESS NECESSITY OR EXPEDIENCY. IF THE OUTGOING OR EXPENDI TURE IS SO RELATED TO THE CARRYING ON OR CONDUCT OF THE BUSINESS THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFIT EARNING PROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER THE POSS ESSION OF WHICH IS A CONDITION OF THE CARRYING ON OF THE BUSINESS THE EX PENDITURE MAY BE REGARDED AS REVENUE EXPENDITURE...' (P. 59) 10. THE PATNA HIGH COURT IN THE CASE OF CIT V. KIRK ED COAL CO. [1966] 60 ITR 537 WAS CONCERNED WITH AN ASSESSEE WHICH CARRIED ON CO ALMINING. IT HAD SPENT MONIES UPON CERTAIN OPERATIONS CALLED 'STOWING'. TH E ITO CONSIDERED THAT EXPENDITURE TO BE CAPITAL EXPENDITURE BECAUSE THE EXT RACTION OF COAL HAD THEREBY BEEN MADE POSSIBLE FOR A SCORE OF YEARS. THE MATTER HAD GONE UP IN REFERENCE TO THE HIGH COURT. THE HIGH COURT NOTED T HE OBSERVATIONS IN THE CASES OF ANGLO PERSIAN OIL CO. (SUPRA) AND BOMBAY STEAM N AVIGATION CO. (1953) (P.) LTD. (SUPRA) SET OUT ABOVE. IT ALSO NOTED THAT THE SUPREME COURT IN ASSAM BENGAL CEMENT CO. LTD. V. CIT [1955] 27 ITR 34 HAD SAID THAT IF THE EXPENDITURE HAD BEEN MADE NOT FOR THE PURPOSE OF BRINGING INTO EX ISTENCE AN ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO PRODUCE PROFITS IT WA S A REVENUE EXPENDITURE AND THAT THE AIM AND OBJECT OF THE EXPENDITURE WOULD DE TERMINE THE CHARACTER OF THE EXPENDITURE WHETHER IT IS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE. APPLYING THE TESTS TO THE CASE BEFORE IT THE PATNA HIGH COURT HELD THAT MONEY EXPENDED ON STOWING OPERATIONS WAS BY WAY OF REVENU E DISBURSEMENT. THE DECISION OF THE PATNA HIGH COURT WAS THE SUBJECT OF AN APPEAL TO THE SUPREME COURT IN CIT V. KIRKEND COAL CO. [1970] 77 ITR 530 AND IT WAS UPHELD. THE SUPREME COURT QUOTED WITH APPROVAL THE PASSAGE FROM THE CASE OF BOMBAY STEAM NAVIGATION CO.(1953)(P.) LTD. (SUPRA) WHICH W E HAVE SET OUT ABOVE. 11. IN BROOKE BOND INDIA LTD. V. CIT [1983] 140 ITR 272 (CAL.) THE ASSESSEE HAD ISSUED SHARES AND INCURRED EXPENDITURE WHICH HAD BEE N CLAIMED AS A REVENUE DEDUCTION. THE TRIBUNAL HAD FOUND THAT THE ASSESSEE HAD ITSELF STATED THAT BY THE EXPENDITURE THE CAPITAL BASE OF THE ASSESSEE WAS REINFORCED ON A PERMANENT I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 10 BASIS AND THIS WAS THE MAIN PURPOSE OF THE ASSESSEE. IT WAS SUBMITTED BEFORE THE CALCUTTA HIGH COURT THAT THE OBJECT AND PURPOSE OF THE EXPENDITURE WAS TO STRENGTHEN THE CAPITAL STRUCTURE AND ONLY AS AN IN CIDENTAL RESULT MORE FUNDS HAD FLOWED TO THE ASSESSEE MAKING MORE WORKING FUND S AVAILABLE TO IT. THE HIGH COURT HELD THAT THAT COULD NOT CHANGE THE ESSENTIAL OBJECT AND PURPOSE OF INCURRING THE EXPENDITURE AND THE RESULTANT FACT T HAT IS TO SAY THE FUNDAMENTAL CHANGE IN THE INCOME-EARNING MACHINERY AND STRUCTUR E. IT HELD THAT THEREFORE THE TRIBUNAL HAD BEEN RIGHT IN DISALLOWING THE EXPEND ITURE. IN ITS EXHAUSTIVE JUDGMENT THE HIGH COURT SAID THAT IF THE MAIN OBJEC T PURPOSE AND NATURE OF THE TRANSACTION WAS TO AFFECT THE INCOME-EARNING MACHIN ERY OR STRUCTURE AS SUCH AND NOT ONLY TO MAKE THE INFLOW OF MORE FUNDS AVAIL ABLE THEN THE EXPEDITURE WOULD BE ON THE CAPITAL SIDE. IT WAS TRUE THAT THE A LTERATION IN THE CAPITAL STRUCTURE BY RAISING THE SHARE CAPITAL WOULD MAKE M ORE FUNDS AVAILABLE BUT THAT WAS NOT DECISIVE. THE ESSENTIAL OBJECT AND PUR POSE OF INCURRING THE EXPENDITURE AND THE RESULTANT FACT WAS THE FUNDAMEN TAL CHANGE IN THE INCOME- EARNING MACHINERY OR STRUCTURE. IT WAS THE RESULTAN T ADVANTAGE OBTAINED BY INCURRING THE EXPENDITURE ALONG WITH THE PURPOSE A ND OBJECT OF INCURRING THE EXPENDITURE WHICH WAS THE GUIDE TO ANSWERING THE Q UESTION. 12. OUR ATTENTION WAS DRAWN BY MR. DASTUR TO THE JU DGMENT OF THE SUPREME COURT IN PATNAIK & CO. LTD. V. CIT [1986] 161 ITR 365 WHOSE FACTS ARE NOTEWORTHY. THE ASSESSEE DEALT IN AUTOMOBILES AND SP ARE PARTS. IT HAD SUBSCRIBED TO CERTAIN GOVERNMENT LOANS AND HAD SUSTA INED A LOSS WHEN RE- SELLING THEM. IT CLAIMED THE LOSS AS A REVENUE LOSS . THE TRIBUNAL FOUND THAT HAVING REGARD TO THE SEQUENCE OF EVENTS AND THE CLO SE PROXIMITY OF THE INVESTMENT WITH THE RECEIPT OF GOVERNMENT ORDERS FO R MOTOR VEHICLES THE CONCLUSION WAS INESCAPABLE THAT THE INVESTMENT HAD BE EN MADE IN ORDER TO FURTHER THE SALES OF THE ASSESSEE AND BOOST ITS BUSI NESS. IT HAD BEEN MADE BY WAY OF COMMERCIAL EXPEDIENCY FOR THE PURPOSE OF CAR RYING ON THE BUSINESS AND THEREFORE THE LOSS SUFFERED BY THE ASSESSEE WAS A REVENUE LOSS. THE HIGH COURT HAD RE-EXAMINED THE FACTS AND HAD COME TO THE CONTR ARY CONCLUSION. ON APPEAL BY THE ASSESSEE THE SUPREME COURT REVERSED THE HIG H COURT'S DECISION. IT HELD THAT THE HIGH COURT HAD BEEN IN ERROR WHEN IT HAD PR OCEEDED TO REAPPRECIATE THE EVIDENCE. IT AFFIRMED THE FINDING OF THE TRIBUNA L THAT THE INVESTMENT MADE BY THE ASSESSEE IN GOVERNMENT LOANS HAD BEEN BY WAY OF COMMERCIAL EXPEDIENCY FOR THE PURPOSE OF CARRYING ON THE ASSES SEE'S BUSINESS AND THAT THEREFORE THE LOSS SUFFERED BY THE ASSESSEE UPON T HE SALE OF THE INVESTMENT HAD TO BE REGARDED AS A REVENUE LOSS. THE SUPREME COURT APPROVED DECISIONS OF THE MADRAS AND ORISSA HIGH COURTS THAT TOOK VIEWS SIMIL AR TO THAT TAKEN BY THE TRIBUNAL. 13. IT IS CLEAR THAT WE MUST FIND THE AIM AND OBJEC T FROM A BUSINESSMAN'S POINT OF VIEW OF INCURRING THE SAID EXPENDITURE. IT IS ESTA BLISHED UPON THE TRIBUNAL'S I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 11 FINDING THAT THE ASSESSEE HAD NO NEED FOR FUNDS. IT IS ESTABLISHED THAT IT HAD NEED OF THE TECHNICAL COLLABORATION ARRANGEMENT TO RUN PR OFITABLY. WHAT THEREFORE MOTIVATED THE BUSINESSMAN IN THE ASSESSEE WAS THE EX PEDIENCY OF ENSURING THE CONTINUANCE OF THE TECHNICAL COLLABORATION ARRANGEME NT. THE OBJECT AND PURPOSE OF THE SAID EXPENDITURE THEREFORE SEEN FR OM THE BUSINESSMAN'S POINT OF VIEW MUST BE HELD TO BE TO OBTAIN THE APPROVAL OF THE GOVERNMENT TO THE CONTINUANCE OF THE TECHNICAL COLLABORATION ARRANGEME NT. THIS BEING THE OBJECT AND PURPOSE THE SAID EXPENDITURE MUST BE HELD TO BE REVENUE EXPENDITURE AND AN ALLOWABLE DEDUCTION. THAT AN ADVANTAGE OF AN ENDU RING CHARACTER NAMELY THE INCREASE IN THE SHARE CAPITAL RESULTED CANNOT IN THE CIRCUMSTANCES BE HELD TO BE DECISIVE. 11. IN VIEW OF THE ABOVE DISCUSSIONS WE UPHOLD THE GRIEVANCE OF THE ASSESSEE ON THIS ISSUE AS WELL. ACCORDINGLY WE DIRECT THE ASS ESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS 1 21 38 100 ON ACCOUNT OF AFFORESTATION EXPENSES. 12. GROUND NO. 2 IS ALSO THUS ALLOWED. 13. IN GROUND NO.3 THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: THE LD CIT (A) ERRED IN CONFIRMING THE NON ALLOWANC E OF PROFIT FROM POWER GENERATING UNIT U/S. 80 IA WHILE COMPUTING BO OK PROFIT U/S.115JA. 14. THE SHORT ISSUE THAT IS REQUIRED TO BE ADJUDICA TED IN THIS GROUND OF APPEAL IS WHETHER FOR THE PURPOSES OF COMPUTING BOOK PROFIT UNDER SECTION 115JA BOOK PROFITS OF THE ELIGIBLE UNIT SHOULD BE EXCLUDED OR THE TAX PROFITS AS DETERMINED UNDER SECTION 80IA. THE ASSESSING OFFICER HAS HELD THAT TAX PROFIT OF THE ELIGIBLE UNIT SHOULD BE CONSIDERED FOR EXCLUSION FROM BOOK PROFIT AND THE CIT(A) HAS ALSO CONFIRMED THE SAID ACTION. LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF ITAT MUMBAI IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997-98 IN ITA NO. 4730/M/01 WHEREIN THE TRIBUNAL FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF TUSHAKO PUMPS I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 12 LIMITED VS ACIT (2 SOT 556) HAS DISMISSED THE REVEN UES APPEAL. LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER RELIES UPON THE ORDERS OF THE AUTHORITIES BELOW AND JUSTIFIES THE SAME. HE ALSO REFERS TO THE DECISION OF THE COORDINATE BENCH IN THE CASES OF ENCUBE ETHICALS PVT LTD VS ITO (16 SOT 396) WHEREIN REJECTING THE STAND OF THE ASSESSEE IT IS INTER ALIA STATED TH AT THE LANGUAGE USED IN THE SUB- CLAUSE IS QUITE UNAMBIGUOUS AND CLEAR TO EXPLAIN TH AT IT MEANS THE AMOUNT REQUIRED TO BE REDUCED IS THE PROFIT DERIVED FROM THE INDUST RIAL UNDERTAKING WHICH IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA AND NOT A PROFIT ELIGIBLE FOR DEDUCTION. A REFERENCE IS ALSO MADE TO ANOTHER COORDINATE BENCH S DECISION IN THE CASE OF MAHARSHTRA STATE ELECTRICITY BOARD VS JCIT (82 ITD 422). IN THE LIGHT OF THESE DECISIONS WE ARE URGED TO HOLD THAT WHAT IS TO BE REDUCED FROM BOOK PROFITS OF THE COMPANY IS TAX PROFITS UNDER SECTION 80IA IN RESPEC T OF ELIGIBLE UNITS. IN REJOINDER LEARNED COUNSEL REITERATES HIS SUBMISSIONS AND EXPL AINS THAT EXCLUSION OF TAX PROFITS IN THE EXERCISE OF COMPUTING BOOK PROFITS WILL RESU LT IN INCONGRUOUS RESULTS. WE ARE URGED TO UPHOLD THE STAND OF THE ASSESSEE AND DIREC T EXCLUSION OF BOOK PROFITS OF ELIGIBLE UNDERTAKING. 15. WE SEE MERITS IN THE CONTENTIONS OF THE ASSESSE E. UNDER THE SCHEME OF SECTION 115 JA THE BOOK PROFITS ARE REQUIRED TO BE REDUCED BY THE AMOUNT OF PROFIT DERIVED BY THE INDUSTRIAL UNDERTAKING WHICH IS ELIG IBLE FOR EXEMPTION UNDER SECTION 80-IA. UNDER CLAUSE (V) TO THE EXPLANATION TO SECTI ON 115JA THERE IS NO MENTION THAT THE PROFIT DERIVED BY THE INDUSTRIAL UNDERTAKING MU ST BE CALCULATED AS PER THE PROVISIONS OF THE ACT. THEREFORE THE LOGICAL INTER PRETATION WOULD BE THAT THE PROFITS DERIVED BY THE INDUSTRIAL UNDERTAKING AS PER THE BO OKS OF ACCOUNT HAVE TO BE REDUCED FROM THE BOOK PROFITS. WHEN THE BASE FIGUR E OF PROFIT IS PROFIT AS PER BOOKS OF ACCOUNTS AND THE ONLY PURPOSE OF MAKING ADJUSTM ENTS IN THE SAME IS TO REDUCE THE PROFITS OF ELIGIBLE UNDERTAKING IT IS ONLY BOO K PROFIT WHICH SHOULD LOGICALLY BE REDUCED FROM THE OVERALL BOOK PROFITS. THE TAXABLE PROFITS HAVE NO LOGICALLY NEXUS TO THIS COMPUTATION AND ITS BEING TAKEN INTO ACCOUNT FOR THE PURPOSE OF EXCLUSION OF I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 13 PROFITS OF ELIGIBLE UNDERTAKING WILL GIVE UNREASON ABLE RESULTS. IN THE INSTANT CASE WHILE COMPUTING BOOK PROFIT WHICH WAS IN CONSONANC E WITH THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT THE DEPRECIATION AS PROVIDED IN THE BOOKS OF ACCOUNT HAD BEEN CONSIDERED. IF WHILE COMPUTING THE PROFITS DERIVED BY THE INDUSTRIAL UNDERTAKING WHICH ARE REQUIRED TO BE REDUCED FROM THE BOOK PROF ITS AS PER CLAUSE (V) THE PROVISIONS OF THE ACT ARE APPLIED AND DEPRECIATION AS ADMISSIBLE UNDER ACT IS DEDUCTED IT WOULD RESULT INTO AN ANOMALOUS SITUATI ON. WHERE THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING WHICH ARE INCLUDED IN THE BOOK PROFITS HAVE BEEN COMPUTED AS PER THE BOOKS AND NO ADJUSTMENT FOR DEP RECIATION HAS BEEN MADE WHILE COMPUTING THE INCOME ELIGIBLE FOR EXEMPTION UNDER S ECTION 80-IA THE QUANTUM OF DEPRECIATION AS PER THE PROVISIONS OF THE ACT WOULD BE SUBSTANTIALLY ENHANCED. THAT WOULD VIOLATE THE VERY PURPOSE OF SECTION 115JA. TH EREFORE THE PROFIT OF THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR EXEMPTION UNDER SECTION 80-IA MUST BE COMPUTED AS PER THE BOOKS OF ACCOUNT AND THE PROVIS IONS OF THE ACT CANNOT BE APPLIED AND NO ADJUSTMENT CAN BE MADE WHICH IS NOT PERMISSIBLE UNDER THE SECTION. AS REGARDS CO ORDINATE BENCH DECISION IN THE CASE O F ENCBE ETHICALS (SUPRA) THAT DECISIONS CLEARLY DOES NOT TAKE INTO ACCOUNT A BIND ING PRECEDENT FROM A COORDINATE BENCH WHICH WAS NOT BROUGHT TO THE NOTICE OF THE BE NCH. AS TO WHAT SHOULD BE DONE IN SUCH A SITUATION AS HELD BY ANOTHER COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JKT FABRICS PVT LTD VS JCIT ( 4 SOT 84) A COO RDINATE BENCH DECISION DISREGARDING THE EARLIER COORDINATE BENCH DECISION ON THE ISSUE IS NOT A BINDING PRECEDENT. AS REGARDS LEARNED DEPARTMENTAL REPRESENTATIVES RELIA NCE ON THE CASE OF MAHARSHTRA STATE ELECTRICITY BOARD (SUPRA) WE FIND IT WAS A C ASE IN WHICH LEVY OF MINIMUM ALTERNATE TAX WAS QUASHED ON THE GROUND THAT THESE PROVISIONS DONOT APPLY TO THE ELECTRICITY COMPANIES AND SOME OBSERVATIONS WERE T HEREAFTER MADE ON MERITS BUT WE ARE UNABLE TO FIND ANY OBSERVATIONS WHICH COVER THE CASE BEFORE US. REVENUE DOES NOT THEREFORE DERIVE ANY ADVANTAGE FROM THE SAID DECISION. IN VIEW OF THESE DISCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF TH E CASE AND CONSISTENT WITH THE STAND TAKEN BY THE COORDINATE BENCH IN ASSESSEES O WN CASE WE UPHOLD THE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 14 GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO MODIFY THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115 JA ACCORDINGLY. 16. GROUND NO. 3 IS ALSO ALLOWED. 17. IN GROUND NO. 4 THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) ERRED IN CONFIRMING THE NON ALLOWANCE OF DE DUCTION UNDER SECTION 80 HHC WHILE COMPUTING BOOK PROFIT UNDER SE CTION 115JA. 18. THE SHORT ISSUE INVOLVED IN THIS APPEAL IS AS TO WHAT IS THE AMOUNT OF DEDUCTION UNDER SECTION 80 HHC EXPORT PROFITS COM PUTED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION OR EXPORT P ROFITS AS PER BOOKS OF ACCOUNTS- TO BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF BO OK PROFITS UNDER SECTION 115JA. WHILE THE ASSESSING OFFICER HAS HELD THAT THE PROFI T TO BE EXCLUDED IS PROFITS COMPUTED UNDER THE HEAD PROFITS AND GAINS FROM BUS INESS AND PROFESSION THE CIT(A) HAS CONFIRMED THE SAID ACTION BY PLACING REL IANCE ON THE IPCA LABORATORIES LIMITED VS DCIT (251 ITR 401). THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 19. IN THE CASE OF AJANTA PHARMA LTD VS CIT (327 IT R 305) THE QUESTION WHICH CAME UP FOR CONSIDERATION OF HONBLE SUPREME COURT WAS WHETHER FOR DETERMINING THE BOOK PROFITS IN TERMS OF SECTION 115JB THE N ET PROFITS AS SHOWN IN THE PROFIT AND LOSS ACCOUNT HAVE TO BE REDUCED BY THE AMOUNT O F PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OR BY THE AMOUNT OF DEDUCTION UNDER SECTION 80HHC? THEIR LORDSHIPS INTER ALIA NOTED THAT THE PROVISIONS R EGARDING MINIMUM ALTERNATE TAX AND INCENTIVES FOR EXPORTS OPERATE IN TWO DIFFERENT SPHERES AND FORMULA MEANT FOR COMPUTING EXPORT INCENTIVE CANNOT BE USED IN ADJUST MENT OF THE BOOK PROFITS FOR MINIMUM ALTERNATIVE TAX. HONBLE SUPREME COURT I NTER ALIA OBSERVED AS FOLLOWS: I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 15 SECTION 80HHC PROVIDES FOR TAX INCENTIVES. SECTI ON 80HHC(1) AT ONE POINT OF TIME LAID DOWN THAT AN AMOUNT EQUAL TO THE AMOUNT OF DEDUCTION CLAIMED SHOULD BE DEBITED TO THE PROFIT AND LOSS AC COUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH DEDUCTION IS TO BE ALLOWED AND CREDITED TO THE RESERVE ACCOUNT TO BE UTILIZED FOR THE BUSINESS PURPOSE. SE CTION 80HHC(1) CONCERNS ELIGIBILITY WHEREAS SECTION 80HHC(3) CONCERNS COMPU TATION OF THE QUANTUM OF DEDUCTION/TAX RELIEF. . A BARE READING OF SECTION 80AB SHOWS THAT COM PUTATION OF DEDUCTION IS GEARED TO THE AMOUNT OF INCOME BUT SECTION 80HH C(3) WHICH REFERS TO QUANTIFICATION OF DEDUCTION IS GEARED TO THE EXPORT S TURNOVER AND NOT TO THE INCOME. ON THE OTHER HAND SECTION 115JB REFERS TO LEVY OF MAT ON THE DEEMED INCOME. THE ABOVE DISCUSSION IS ONLY TO SHOW THAT SECTIONS 80HHC AND 115JB OPERATE IN DIFFERENT SPHERES. THUS TWO E SSENTIAL CONDITIONS FOR INVOKING SECTION 80HHC(1) ARE THAT ASSESSEE MUST BE IN THE BUSINESS OF EXPORT AND SECONDLY THAT SALE PROCEEDS OF SUCH EXPO RTS SHOULD BE RECEIVABLE IN INDIA IN CONVERTIBLE FOREIGN EXCHANGE. HENCE SE CTION 80HHC(1) REFERS TO ELIGIBILITY WHEREAS SECTION 80HHC(3) REFERS TO CO MPUTATION OF TAX INCENTIVE. COMING TO SECTION 80HHC(1B) IT IS CLEAR THAT AFTER FINANCE ACT 2000 WITH EFFECT FROM ASSESSMENT YEAR 2001-02 EXPORTERS WOULD NOT GET 100 PER CENT DEDUCTION IN RESPECT OF PROFITS DERIVED FROM EXPORT S BUT THAT THEY WOULD GET DEDUCTION OF 80 PER CENT IN THE ASSESSMENT YEAR 200 1-02 70 PER CENT IN THE ASSESSMENT YEAR 2002-03 AND SO ON. THUS SECTION 80 HHC(1B) DEALS NOT WITH ELIGIBILITY BUT WITH THE EXTENT OF DEDUCTION. A S EARLIER STATED SECTION 115JB IS A SELF-CONTAINED CODE. IT TAXES DEEMED INC OME. IT BEGINS WITH A NON OBSTANTE CLAUSE. SECTION 115JB REFERS TO COMPUTATION OF BO OK PROFITS WHICH HAVE TO BE COMPUTED BY MAKING UPWARD AND DOWNWARD A DJUSTMENTS. IN THE DOWNWARD ADJUSTMENT VIDE CLAUSE ( IV ) IT SEEKS TO EXCLUDE ELIGIBLE PROFITS DERIVED FROM EXPORTS. ON THE OTHER HAND UNDER SECT ION 80HHC(1B) IT IS THE EXTENT OF DEDUCTION WHICH MATTERS. THE WORD THEREO F IN EACH OF THE ITEMS UNDER SECTION 80HHC(1B) IS IMPORTANT. THUS IF AN A SSESSEE EARNS RS. 100 CRORES THEN FOR THE ASSESSMENT YEAR 2001-02 THE EX TENT OF DEDUCTION IS 80 PER CENT THEREOF AND SO ON WHICH MEANS THAT THE PRI NCIPLE OF PROPORTIONALITY IS BROUGHT INTO SCALE DOWN THE TAX INCENTIVE IN A P HASED MANNER. HOWEVER FOR THE PURPOSES OF COMPUTATION OF BOOK PROFITS WHI CH COMPUTATION IS DIFFERENT FROM NORMAL COMPUTATION UNDER THE 1961 AC T/COMPUTATION UNDER CHAPTER VIA. WE NEED TO KEEP IN MIND THE UPWARD AND DOWNWARD ADJUSTMENTS AND IF SO READ IT BECOMES CLEAR THAT CL AUSE ( IV ) COVERS FULL EXPORT PROFITS OF 100 PER CENT AS ELIGIBLE PROFITS AND T HAT THE SAME CANNOT BE REDUCED TO 80 PER CENT BY RELYING ON SECTION 80HHC( 1B). THUS FOR COMPUTING BOOK PROFITS THE DOWNWARD ADJUSTMENT IN THE ABOV E EXAMPLE WOULD BE RS. 100 CRORES AND NOT RS. 90 CRORES. THE IDEA BEIN G TO EXCLUDE EXPORT PROFITS FROM COMPUTATION OF BOOK PROFITS UNDER SEC TION 115JB WHICH I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 16 IMPOSES MAT ON DEEMED INCOME. THE ABOVE REASONING A LSO GETS SUPPORT FROM THE MEMORANDUM OF EXPLANATION TO THE FINANCE B ILL 2000. 10. ONE OF THE CONTENTIONS RAISED ON BEHALF OF THE DEPARTMENT WAS THAT IF CLAUSE ( IV ) OF EXPLANATION TO SECTION 115JB IS READ IN ENTIRETY INCLUDING THE LAST LINE THEREOF (WHICH READS AS SUBJECT TO THE C ONDITIONS SPECIFIED IN THAT SECTION) IT BECOMES CLEAR THAT THE AMOUNT OF PROF ITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC COMPUTED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF SUB-SECTION (3) OR SUB-SECTION (3A) AS THE CASE MAY BE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION. ACCORDING TO THE DEPARTMENT THE ASSESSEE HEREIN IS TRYING TO READ THE VARIOUS PROVI SIONS OF SECTION 80HHC IN ISOLATION WHEREAS AS PER CLAUSE ( IV ) OF EXPLANATION TO SECTION 115JB IT IS CLEAR THAT BOOK PROFIT SHALL BE REDUCED BY THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC AS COMPUTED UNDER CLA USE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF SUB-SECTION (3) OR SUB-SECTION (3A) AS THE CA SE MAY BE OF THAT SECTION AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION THEREBY MEANING THAT THE DEDUCTION ALLOWABLE WOULD BE ONLY TO THE EXTENT OF DEDUCTION COMPUTED IN ACCORDANCE WITH THE PROVISION S OF SECTION 80HHC. THUS ACCORDING TO THE DEPARTMENT BOTH ELIGIBILIT Y AS WELL AS DEDUCTIBILITY OF THE PROFIT HAVE GOT TO BE CONSIDERED TOGETHER FO R WORKING OUT THE DEDUCTION AS MENTIONED IN CLAUSE ( IV ) OF EXPLANATION TO SECTION 115JB. WE FIND NO MERIT IN THIS ARGUMENT. IF THE DICHOTOMY BE TWEEN ELIGIBILITY OF PROFIT AND DEDUCTIBILITY OF PROFIT IS NOT KEPT IN MIND T HEN SECTION 115JB WILL CEASE TO BE A SELF-CONTAINED CODE. IN SECTION 115JB AS I N SECTION 115JA IT HAS BEEN CLEARLY STATED THAT THE RELIEF WILL BE COMPUTED UND ER SECTION 80HHC(3)/(3A) SUBJECT TO THE CONDITIONS UNDER SUB-SECTIONS (4) AN D (4A) OF THAT SECTION. THE CONDITIONS ARE ONLY THAT THE RELIEF SHOULD BE CERTI FIED BY THE CHARTERED ACCOUNTANT. SUCH CONDITION IS NOT A QUALIFYING COND ITION BUT IT IS A COMPLIANCE CONDITION. THEREFORE ONE CANNOT RELY UPON THE LAST SENTENCE IN CLAUSE ( IV ) OF EXPLANATION TO SECTION 115JB [SUBJECT TO THE CONDITIONS SPECIF IED IN SUB- SECTIONS (4) AND (4A) OF THAT SECTION] TO OBLITERAT E THE DIFFERENCE BETWEEN ELIGIBILITY AND DEDUCTIBILITY OF PROFITS AS CON TENDED ON BEHALF OF THE DEPARTMENT. 20. THE SAME PRINCIPLES APPLY ON THE SITUATION BEFO RE US. THEREFORE WHAT IS TO BE EXCLUDED MUST START WITH BOOK PROFITS OF EXPORT BUSINESS AS BASE. ONE CANNOT HAVE COMPUTATION OF BOOK PROFIT WITH TAX PROFITS AS THE BASE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE BROAD PRINCIPLES CLEARLY DISCERNABLE FROM HONBLE SUPREME COURTS JUDGMENT IN AJANTA PHARMAS CASE (S UPRA) WE UPHOLD THE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 17 GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GIVER RESULTANT RELIEF IF ANY. 21. GROUND NO. 4 IS ALSO ALLOWED. 22. IN GROUND NO. 5 WHICH IS AN ADDITIONAL GROUND OF APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE APPELLANT BE ALLOWED DEDUCTION OF PROVISION FOR ADDITIONAL GRATU ITY AMOUNTING TO RS 2 82 45 524 AND GRATUITY FOR SOLD UNITS AMOUNTING T O RS 72 60 568 IN COMPUTING TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT. 23. GROUND NO. 5 AS ALSO THE OTHER REMAINING GROUND S OF APPEAL ARE ADDITIONAL GROUNDS OF APPEAL AND LEARNED DEPARTMENTAL REPRESE NTATIVE HAS MADE COMMON SUBMISSIONS OPPOSING ADMISSION OF THESE GROUNDS OF APPEAL. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY OPPOSES THE ADMISSION OF ADDITIONAL GROUND OF APPEAL. IT IS HIS CONTENTION THAT THE ASSESSEE CAN NOT BE ALLO WED TO RAISE THIS NEW PLEA AT THIS STAGE BECAUSE THE ASSESSEE HAD NOT MADE THIS CLAIM AT THE TIME OF FILING THE RETURN OF INCOME. RELYING UPON HONBLE SUPREME COURTS JUDGME NT IN THE CASE OF MOTIBHAI FULABHAI PATEL & CO VS COLLECTOR OF CENTRAL EXCISE (AIR 1979 SC 829) IT IS SUBMITTED THAT NO PERSON CAN BE PERMITTED TO BENEFIT BY HIS WRONGFUL ACT AND THAT NO RULE OF LAW SHOULD BE SO INTERPRETED SO AS TO ENCOURAGE ITS CIRCUMVENTION. IT IS CONTENDED THAT ALLOWING A TAXPAYER TO RAISE A NEW PLEA AT THI S STAGE ALLOWS HIM TO TAKE BENEFIT OF HIS OWN MISTAKE OF NOT MAKING THE CLAIM BY WAY O F AN INCOME TAX RETURN. IT IS SUBMITTED THAT THE LAW PROVIDES FOR FILING OF AN IN COME TAX RETURN AND A TIME FRAME IS PERMITTED TO REVISE THE INCOME TAX RETURN. IN CA SE TAXPAYER IS ALLOWED TO MAKE THE CLAIM AT ANY STAGE THE TIME LIMIT FOR REVISING THE INCOME TAX RETURN WILL BE RENDERED REDUNDANT. LEARNED DEPARTMENTAL REPRESENTATIVE THE N INVITES OUR ATTENTION TO THE AMENDMENT IN SECTION 143(2) BY DIRECT TAX LAW AMEND MENT ACT 1987. IT IS POINTED OUT THAT AS AGAINST AN ASSESSMENT UNDER SECTION 143 (2) BEING RESORTED TO FOR I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 18 DETERMINATION OF CORRECT TAXABLE INCOME PRIOR TO TH IS AMENDMENT THE ASSESSMENT IS NOW DONE ONLY TO ENSURE THAT ASSESSEE HAS NOT UNDER STATED HIS INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAID THE TA X LIABILITY IN ANY MANNER. THE OBJECTIVE OF THE ASSESSMENT IS THUS ONLY TO PROTECT INTERESTS OF THE REVENUE AND IT IS WRONG TO PROCEED ON THE BASIS THAT POST THIS AMENDM ENT THE OBJECTIVE OF ASSESSMENT IS TO COMPUTE CORRECT INCOME OR PROTECT THE INTERESTS OF TAXPAYER IN ANY MANNER. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT S THAT IN VIEW OF THIS PARADIGM SHIFT IN THE SCHEME OF THE ASSESSMENT HON BLE SUPREME COURT JUDGMENT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD VS CIT (229 ITR 383) CANNOT BE PUT INTO SERVICE FOR ADMISSION OF ADDITIONAL GROUND OF APPEA L BY THE ASSESSEE THOUGH IT WILL ACCORDING TO HIM CONTINUE TO HOLD GOOD SO FAR AS A DDITIONAL GROUNDS OF APPEAL BY THE ASSESSING OFFICER IS CONCERNED. IN ANY EVENT ACCOR DING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF NTPC (SUPRA) IS NOT GOOD LAW BECAUSE IT DOES NOT TAKE INTO ACCOUNT EARLIER JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS GURJARGRAVURE S PVT LTD (111 ITR 1) WHEREIN THEIR LORDSHIPS HAD HELD THAT WHEN ASSESSEE HAS NOT MADE CLAIM BEFORE THE ITO THE SAME COULD NOT HAVE BEEN MADE BEFORE TRIBUNAL EITHE R. WHEN IT IS POINTED OUT TO THE LEARNED DR THAT NTPC JUDGMENT IS BY A THREE JUDGE B ENCH WHEREAS GURJARGRAVURES JUDGMENT IS BY A TWO JUDGE BENCH THE GURJARGRAVURE S JUDGMENT DID NOT REALLY CONSTITUTE A BINDING PRECEDENT FOR HONBLE COURT IN NTPCS CASE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE VERY F ACT THAT THIS DECISION WAS NOT CONSIDERED IN NTPCS CASE TAKES AWAY BINDING NATURE OF NTPC JUDGMENT. IT IS FURTHER CONTENDED THAT IN ANY EVENT EVEN ACCORDING TO THE NTPC JUDGMENT AN ADDITIONAL GROUND CAN ONLY BE ADMITTED WHEN ALL THE RELEVANT MATERIAL FACTS ARE ALREADY ON RECORD WHEREAS IN THE CASES BEFORE US ADDITIONAL FACTS ARE REQUIRED TO BE ASCERTAINED. WE ARE THUS URGED TO REJECT THE ADDITI ONAL GROUNDS OF APPEAL AS NOT MAINTAINABLE. LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITS THAT ALL THE RELEVANT FACTS ARE ALREADY ON RECORD AND NO FUR THER INVESTIGATION OF FACTS IS REQUIRED. IT IS THEN SUBMITTED THAT THE LAW LAID DO WN BY HONBLE SUPREME COURT IN NTPCS CASE IS FREE OF ANY AMBIGUITY OR DOUBT. UNDO UBTEDLY WHILE DISCRETION OF I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 19 ADMITTING AN ADDITIONAL GROUND OF APPEAL IS WITH TH E TRIBUNAL THEIR LORDSHIPS HAVE MADE IT CLEAR THAT THE POWERS OF THE TRIBUNAL ARE N OT CONFINED ONLY TO THE ISSUES ARISING OUT OF THE CIT(A)S ORDER AND THE TRIBUNAL IS AT LIBERTY TO DEAL WITH ANY OF THE ISSUES RELATING TO THE ASSESSMENT EVEN THOUGH THE S AME IS NOT RAISED BEFORE THE ASSESSING OFFICER. AS FOR THE PARADIGM SHIFT SAID T O HAVE BEEN BROUGHT BY 1987 AMENDMENT TO SECTION 143(2) LEARNED COUNSEL SUBMIT S THAT WHATEVER BE THE GROUND ON WHICH A CASE IS SELECTED FOR SCRUTINY ASSESSMENT SUCH A NARROW INTERPRETATION TO THE SCOPE OF EXERCISE UNDER SECTION 143(2) CANNOT B E SUSTAINED IN LAW. HE SUBMITS THAT THE OBJECTIVE OF THE ASSESSMENT PROCEEDINGS IS TO ARRIVE AT THE CORRECT INCOME AND CORRECT TAX LIABILITY AND AS LONG AS PROCEEDIN GS BEFORE THE TRIBUNAL ARE ON ASSESSEE CAN INDEED TAKE UP ANY ISSUE WHICH HAS INF LUENCE ON DETERMINATION OF CORRECT INCOME TAX LIABILITY. WE ARE TAKEN THROUGH HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF NTPC AND IT IS POINTED OUT THAT THE SAID JUDGMENT IS BINDING ON US UNDER ARTICLE 141. WE ARE THUS URGED TO ADMIT THE ADDITIONAL GROUNDS OF APPEAL AND DEAL WITH THE SAME ON MERITS. 24. WE ARE UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THE STAND OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. HIS PERCEPTIONS ABOUT PARADIGM SHIFT SAID TO HAVE BEEN INTRODUCED BY DIRECT TAXES LAW (AMENDMENT) AC T IN SECTION 143(2) ARE CLEARLY ILL CONCEIVED. SECTION 143(2) AS IT STOO D PRIOR TO THE SAID AMENDMENT AND AFTER THE SAID AMENDMENT ARE AS FOLLOWS: PRIOR TO 1.4. 89 [I.E. PRE DIRECT TAX (AMENDMENT) A CT 1987 AMENDMENT] 143 (2) WHEN A RETURN HAS BEEN FILED UNDER SECTION 139 AND (A) AN ASSESSMENT HAVING BEEN MADE UNDER SUB-SECTIO N (1) THE ASSESSEE MAKES WITHIN ONE MONTH FROM THE DATE OF SERVICE OF THE NOTICE OF DEMAND ISSUED IN CONSEQUENCE OF SUCH ASSESSMENT AN APPLIC ATION TO THE ASSESSING OFFICER OBJECTING TO THE ASSESSMENT OR (B) WHETHER OR NOT AN ASSESSMENT HAS BEEN MADE UNDE R SUB-SECTION (1) THE ASSESSING OFFICER CONSIDERS IT NECESSARY OR EXPEDIE NT TO VERIFY THE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 20 CORRECTNESS AND COMPLETENESS OF THE RETURN BY REQUI RING THE PRESENCE OF THE ASSESSEE OR THE PRODUCTION OF EVIDENCE IN THIS BEHA LF THE ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM ON A DATE TO BE THEREIN SPECIFIED EITHER TO ATTEND AT T HE ASSESSING OFFICERS OFFICE OR TO PRODUCE OR TO CAUSE TO BE THERE PRODUCED AN Y EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF THE RETURN. SECTION 143(2) SUBSTITUTED BY THE DIRECT TAXES (AME NDMENT) ACT 1987 WHERE A RETURN HAS BEEN MADE UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SECTION 142 THE ASSESSING OFFICER SHALL IF HE CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIV E LOSS OR HAS NOT UNDERPAID THE TAX IN ANY MANNER SERVE ON THE ASSE SSEE A NOTICE REQUIRING HIM ON A DATE TO BE SPECIFIED THEREIN EITHER TO A TTEND HIS OFFICE OR TO PRODUCE OR CAUSE TO BE PRODUCED THERE ANY EVIDENC E ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF THE RETURN: 25. WHILE EXPLAINING THE SCOPE OF THIS AMENDMENT IN LAW CBDT CIRCULAR NO 549 INTER ALIA OBSERVED AS FOLLOWS: 5.12 SINCE UNDER THE PROVISIONS OF SUB-SECTION (1) OF THE NEW SECTION 143 AS ASSESSMENT IS NOT TO BE MADE NOW THE PROVISIONS OF SUB-SECTIONS (2) AND (3) HAVE ALSO BEEN RECAST AND ARE ENTIRELY DIFFERENT FR OM THE OLD PROVISIONS. A NOTICE UNDER SUB-SECTION (2) WHICH WILL BE ISSUED ONLY IN CASES PICKED UP FOR SCRUTINY IS NOW ISSUED ONLY TO ENSURE THAT THE ASS ESSEE HAS NOT UNDERSTATED HIS INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HA S NOT UNDERPAID THE TAX IN ANY MANNER WHILE FURNISHING HIS RETURN OF INCOME . THIS MEANS THAT UNDER THE NEW PROVISIONS IN AN ASSESSMENT ORDER PASSED U NDER SECTION 143(3) IN A SCRUTINY CASE NEITHER THE INCOME CAN BE ASSESSED A T A FIGURE LOWER THAN THE RETURNED INCOME NOR LOSS CAN BE ASSESSED AT A FIGU RE HIGHER THAN THE RETURNED LOSS NOR A FURTHER REFUND CAN BE GIVEN EX CEPT WHAT WAS DUE ON THE BASIS OF THE RETURNED INCOME AND WHICH WOULD HAVE ALREADY BEEN ALLOWED UNDER THE PROVISIONS OF SECTION 143( 1 )( A )( II ). 26. THIS IS BROADLY THE SAME APPROACH AS HAS BEEN C ANVASSED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US. HOWEVER THI S HAS NOT BEEN APPROVED BY HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF C IT VS BAKELITE HYLM LTD (237 ITR 392) AND BY HONBLE GUJARAT HIGH COURT IN THE C ASE OF GUJARAT GAS CO LTD VS JCIT I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 21 (245 ITR 84). IN BOTH OF THESE CASES REVENUES STA ND WAS THAT IN VIEW OF THE AMENDMENT IN SECTION 143(2) ASSESSED INCOME CANNOT BE LOWER THAN RETURNED INCOME. HOWEVER THIS STAND WAS UNEQUIVOCALLY REJEC TED AND THEIR LORDSHIPS IN GUJARAT GASES CASE (SUPRA) ALSO HELD THAT THE CBDT CIRCULAR TO THE EXTENT EXTRACTS REPRODUCED ABOVE IS NOT GOOD IN LAW. IN BAKELITE S CASE (SUPRA) THEIR LORDSHIPS HELD THAT REFUND IN THE PROCESS OF ASSESSMENT IS PE RMISSIBLE AND THE INCOME IS TO BE COMPUTED AS PER THE PROVISIONS OF THE ACT. IN VIEW OF THESE DISCUSSIONS THE APPROACH SOUGHT TO BE ADOPTED BY THE LEARNED DEPART MENTAL REPRESENTATIVE IS DEVOID OF ANY LEGALLY SUSTAINABLE MERITS AND WE ARE UNABLE TO SHARE HIS PERCEPTIONS ABOUT PARADIGM SHIFT IN THE SCHEME OF SECTION 143(2 ). IN OUR CONSIDERED VIEW WHATEVER BE THE GROUNDS ON WHICH THE CASE IS SELECT ED FOR SCRUTINY ONCE THE ASSESSMENT PROCEEDINGS ARE INITIATED THE DUTY OF T HE ASSESSING OFFICER IS TO DETERMINE CORRECT TAXABLE INCOME IN ACCORDANCE WITH THE LAW. RESPECTFULLY FOLLOWING THE VIEWS EXPRESSED BY HON BLE ANDHRA PRADESH HIGH COURT IN BAKELITES CASE (SUPRA) AND BY HONBLE GUJARAT HIGH COURT IN THE CA SE OF GUJARAT GASES( SUPRA) WE REJECT THE ARGUMENT OF THE LEARNED COUNSEL THAT IN THE SCHEME OF ASSESSMENT UNDER SECTION 143(2) AS IT EXISTS NOW ONLY THE INTEREST S OF REVENUE ARE PROTECTED AND THE INTERESTS OF THE ASSESSEE ARE TO BE IGNORED. 27. AS REGARDS LEARNED DEPARTMENTAL REPRESENTATIVE S SUGGESTION THAT HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF NTPC (SUPRA ) IS NOT A BINDING PRECEDENT IT IS EQUALLY DEVOID OF ANY MERITS. HIS RELIANCE ON H ONBLE SUPREME COURTS JUDGMENT IN THE CASE OF GURJARGRAVUERS (SUPRA) IS CLEARLY MI SPLACED AND IT CANNOT SUPPORT THE PROPOSITION THAT UNLESS A CLAIM IS MADE BEFORE THE ASSESSING OFFICER IT CANNOT BE RAISED BEFORE THE TRIBUNAL EITHER. A THREE JUDGE BE NCH OF HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD VS CIT ( 187 ITR 688) HAS WHILE DEALING WITH GURJARGRAVUERS DECISION OBSERVED AS FOLLOWS: I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 22 6. IN GURJARGRAVURES (P.) LTD.'S CASE (SUPRA) THIS COURT HAS TAKEN A DIFFERENT VIEW HOLDING THAT IN THE ABSENCE OF ANY CLAIM MADE BY TH E ASSESSEE BEFORE THE ITO REGARDING RELIEF HE IS NOT ENTITLED TO RAISE THE Q UESTION OF EXEMPTION UNDER SECTION 84 OF THE ACT BEFORE THE AAC HEARING APPEAL AGAINST THE ORDER OF THE ITO. IN THAT CASE THE ASSESSEE HAD MADE NO CLAIM BEFORE THE ITO F OR EXEMPTION UNDER SECTION 84 NO SUCH CLAIM WAS MADE IN THE RETURN NOR ANY MA TERIAL WAS PLACED ON RECORD SUPPORTING SUCH A CLAIM BEFORE THE ITO AT THE TIME O F ASSESSMENT. THE ASSESSEE FOR THE FIRST TIME MADE CLAIM FOR EXEMPTION UNDER SECTI ON 84 BEFORE THE AAC WHO REJECTED THE CLAIM BUT ON FURTHER APPEAL THE TRIBUNA L HELD THAT SINCE THE ENTIRE ASSESSMENT WAS OPEN BEFORE THE AAC THERE WAS NO REAS ON FOR HIS NOT ENTERTAINING THE CLAIM OR DIRECTING THE ITO TO ALLOW APPROPRIAT E RELIEF. ON A REFERENCE THE HIGH COURT UPHELD THE VIEW TAKEN BY THE TRIBUNAL. ON APP EAL THIS COURT SET ASIDE THE ORDER OF THE HIGH COURT AS IT WAS OF THE VIEW THAT THE AAC HAD NO POWER TO INTERFERE WITH THE ORDER OF ASSESSMENT MADE BY THE ITO ON A NEW GROUND NOT RAISED BEFORE THE ITO AND THEREFORE THE TRIBUNAL COMMITTED ERROR IN DIRECTING THE AAC TO ALLOW THE CLAIM OF THE ASSESSEE UNDER SE CTION 84. APPARENTLY THIS VIEW TAKEN BY TWO JUDGE BENCH OF THIS COURT APPEARS TO BE IN CONFLICT WITH THE VIEW TAKEN BY THE THREE JUDGE BENCH OF THE COURT IN KANPUR COAL SYNDICATE'S CASE (SUPRA). IT APPEARS FROM THE REPORT OR OF THE DECISION IN GUJARAT HIGH COURT CASE THE THREE JUDGE BENCH DECISION IN KANPUR COAL SYNDICATE'S CASE (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE BENCH IN GURJA RGRAVURES (P.) LTD.'S CASE (SUPRA). IN THE CIRCUMSTANCES THE VIEW OF THE LARGE R BENCH IN KANPUR COAL SYNDICATE'S CASE (SUPRA) HOLD THE FIELD. HOWEVER WE DO NOT CON SIDER IT NECESSARY TO OVER-RULE THE VIEW TAKEN IN GURJARGRAVURES (P.) LTD.'S CASE ( SUPRA) AS IN OUR OPINION THAT DECISION IS FOUNDED ON THE SPECIAL FACTS OF THE CAS E AS WOULD APPEAR FROM THE FOLLOWING OBSERVATIONS MADE BY THE COURT: '...AS WE HAVE POINTED OUT EARLIER THE STATEMENT O F CASE DRAWN UP BY THE TRIBUNAL DOES NOT MENTION THAT THERE WAS ANY MATERIA L ON RECORD TO SUSTAIN THE CLAIM FOR EXEMPTION WHICH WAS MADE FOR THE FIRST TI ME BEFORE THE APPELLATE ASSISTANT COMMISSIONER. WE ARE NOT HERE CALLED UPON TO CONSIDER A CASE WHERE THE ASSESSEE FAILED TO MAKE A CLAIM THOUGH THERE WA S NO EVIDENCE ON RECORD TO SUPPORT IT OR A CASE WHERE A CLAIM WAS MADE BUT NO EVIDENCE OR INSUFFICIENT EVIDENCE WAS ADDUCED IN SUPPORT. IN THE PRESENT CAS E NEITHER ANY CLAIM WAS MADE BEFORE THE INCOME-TAX OFFICER NOR WAS THERE AN Y MATERIAL ON RECORD SUPPORTING SUCH A CLAIM.' (P. 5) THE ABOVE OBSERVATIONS DO NOT RULE OUT A CASE FOR RA ISING AN ADDITIONAL GROUND BEFORE THE AAC IF THE GROUND SO RAISED COULD NOT HAV E BEEN RAISED AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSM ENT ORDER WAS MADE OR THAT THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF C IRCUMSTANCES OR LAW. THERE MAY BE SEVERAL FACTORS JUSTIFYING RAISING OF SUCH NE W PLEA IN APPEAL AND EACH CASE HAS TO BE CONSIDERED ON ITS OWN FACTS. IF THE AAC IS SATISFIED HE WOULD BE ACTING WITHIN HIS JURISDICTION IN CONSIDERING THE QUESTION SO RAISED IN ALL ITS ASPECTS. OF COURSE WHILE PERMITTING THE ASSESSEE TO RAISE AN A DDITIONAL GROUND THE AAC SHOULD I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 23 EXERCISE HIS DISCRETION IN ACCORDANCE WITH LAW AND REASON. HE MUST BE SATISFIED THAT THE GROUND RAISED WAS BONA FIDE AND THAT THE SAME CO ULD NOT HAVE BEEN RAISED EARLIER FOR GOOD REASONS. THE SATISFACTION OF THE A AC DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND NO RIGID PRINCIPLES OR ANY HARD AND FAST RULE CAN BE LAID DOWN FOR THIS PURPOSE. 28. A FULL BENCH OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF AHMEDABAD ELECTRICITY CO LTD VS CIT ( 199 ITR 351) ALSO HAD A N OCCASION TO DEAL WITH THE IMPACT OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF GURJARGRAVUERS (SUPRA) AND THEIR LORDSHIPS INTER ALIA OBSERVED AS FOLLOWS: 25. IN THE CASE OF GURJARGRAVURES (P.) LTD. (SUPRA) THE SUPREME COURT WAS CONCERNED WITH A CASE WHERE THE TRIBUNAL HAD ALLOWED A POINT TO BE RAISED WHICH HAD NOT BEEN TAKEN EITHER BEFORE THE ITO OR BEFO RE THE AAC. THE SUPREME COURT HELD THAT SUCH A POINT SHOULD NOT HAVE BEEN AL LOWED TO BE RAISED. IT SAID HOWEVER THAT IT WAS NOT CALLED UPON TO CONSIDER A CASE WHERE THE ASSESSEE HAD FAILED TO MAKE A CLAIM ALTHOUGH THERE WAS EVIDENCE ON RECORD TO SUPPORT IT; NOR WAS IT CALLED UPON TO CONSIDER A CASE WHERE A CLAIM WAS MADE BUT THERE WAS NO EVIDENCE OR INSUFFICIENT EVIDENCE ADDUCED IN SUPPOR T OF THE CLAIM. IN THE CASE BEFORE THE SUPREME COURT NEITHER ANY CLAIM HAD BEEN M ADE BEFORE THE ITO NOR WAS THERE ANY MATERIAL ON RECORD SUPPORTING SUCH A CLAIM AND THEREFORE SUCH A CLAIM OUGHT NOT TO HAVE BEEN ALLOWED TO BE RAISED B Y THE TRIBUNAL BEFORE IT FOR THE FIRST TIME. 26. THIS DECISION HAS NOW BEEN EXPLAINED BY THE SUPR EME COURT IN THE CASE OF JUTE CORPN. OF INDIA LTD. V. CIT [1991] 187 ITR 688 AS TURNING UPON ITS OWN SPECIAL FACTS. WE WILL REVERT TO IT A LITTLE LATER. THIS DECISION OF THE SUPREME COURT IN THE CASE OF GURJARGRAVURES (P.) LTD. (SUPR A) WAS ALSO DISTINGUISHED BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF GANGAP PA CABLES LTD. (SUPRA). THE ANDHRA PRADESH HIGH COURT ALSO SAID THAT THE TR IBUNAL DISPOSING OF AN APPEAL UNDER THE ACT HAS GOT THE POWER TO ALLOW THE ASSESSEE TO PUT FORWARD A NEW CLAIM NOTWITHSTANDING THE FACT THAT SUCH A CLA IM WAS NOT RAISED BY HIM BEFORE THE ITO OR THE AAC PROVIDED THAT THERE IS SU FFICIENT MATERIAL ON RECORD TO ALLOW SUCH A CLAIM. 29. IN VIEW OF THE ABOVE POSITION OF LAW LEARNED D EPARTMENTAL REPRESENTATIVES RELIANCE ON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF GURJARGRAVURES (SUPRA) IS OF NO ASSISTANCE TO HIS CAUSE. IT DOES NOT LAY D OWN ANY GENERAL PROPOSITION OF LAW ON THE QUESTION OF POWERS OF THE TRIBUNAL NOR DOES IT RESTRICT THE LEGAL POSITION LAID I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 24 DOWN BY LARGER BENCHES IN THE CASES OF NTPC (SUPRA) OR JUTE CORP OF INDIA (SUPRA). WE REJECT THIS ARGUMENT AS WELL. 30. LEARNED DEPARTMENTAL REPRESENTATIVES OBJECTION TO ADMISSION OF ADDITIONAL GROUNDS ON THE PLEA THAT ALL THE RELATED FACTS ARE NOT ALREADY SET OUT IN THE ORDERS IS ALSO INCORRECT. THE FACTS BEING ON RECORD AND FAC TS HAVING BEEN SET OUT IN THE ASSESSMENT ORDERS ARE EXPRESSIONS OF DIFFERENT SCOP E. THAT APART ALL THAT HONBLE SUPREME COURT HAS OBSERVED IN NTPCS CASE IS THAT W HERE ALL THE NECESSARY FACTS ARE ON ASSESSMENT RECORDS THERE IS GOOD REASON FOR NOT EXERCISING THE DISCRETION OF ADMITTING ADDITIONAL GROUND OF APPEAL ON A QUESTION OF LAW BUT IN OUR HUMBLE UNDERSTANDING THIS OBSERVATION CANNOT BE CONSTRUED TO MEAN THAT JUST BECAUSE SOME ADDITIONAL FACTUAL VERIFICATIONS ARE NEEDED T RIBUNAL IS DENUDED OF POWERS TO ADMIT THE ADDITIONAL GROUND OF APPEAL ON QUESTIONS OF LAW. IN ANY EVENT HAVING REGARD TO THE FACT THAT ISSUES RAISED IN THE ADDITI ONAL GROUNDS OF APPEAL ARE QUESTION OF LAW ARISING OUT OF FACTS ON RECORD WE REJECT TH IS OBJECTION AS WELL. AS FAR AS LEARNED DEPARTMENTAL REPRESENTATIVES SUBMISSION TH AT ADDITIONAL GROUND SHOULD NOT BE ADMITTED BECAUSE IT WILL AMOUNT TO ASSESSES S BEING PERMITTED TO TAKE ADVANTAGE OF ITS WRONG THIS OBJECTION IS ALSO DEVO ID OF ANY MERITS. BY ALLOWING THE ADMISSION OF ADDITIONAL GROUND THE ASSESSEE IS NOT BEING PERMITTED TO TAKE ANY ADVANTAGE OUT OF ITS MISTAKE BUT IT IS ONLY TO ENAB LE CORRECT COMPUTATION OF HIS INCOME AND TAX LIABILITY. TAKING ADVANTAGE OF A MIS TAKE COULD BE A SITUATION IN WHICH HE WILL BE ANY BETTER OFF ON ACCOUNT OF NOT MAKING THE CLAIM IN THE INCOME TAX RETURN VIS--VIS THE POSITION IF HE WAS TO MAKE A CLAIM IN THE INCOME TAX RETURN BUT THAT IT IS NOT THE SITUATION BEFORE US. 31. IN VIEW OF THE REASONS SET OUT ABOVE WE REJECT THE OBJECTIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. AS ADDITIONAL GROUNDS OF APPEAL ARE ON LEGAL ISSUES AND THERE IS NOTHING ON RECORD TO SUGGEST ANY MALAFIDES IN ADDITIONAL GROUNDS BEING RAISED AT THIS STAGE WE ADMIT THESE ADDITIONAL GR OUNDS OF APPEAL AND PROCEED TO TAKE UP THE GROUND OF APPEAL ON MERITS I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 25 32. ON MERITS THE ISSUE IN APPEAL LIES IN A VERY N ARROW COMPASS OF FACTS. IN THE INCOME TAX RETURN THE ASSESSEE HAD CLAIMED PROVIS ION FOR ADDITIONAL GRATUITY FOR EMPLOYEES DURING THE YEAR AND PROVISION FOR GRATUIT Y IN RESPECT OF EMPLOYEES OF UNITS SOLD. HOWEVER IN THE CASE OF THE ASSESSEE COORDINATE BENCHES HAVE HELD THAT DEDUCTION WILL BE ADMISSIBLE IN THE EARLIER YEARS . IT IS TO ENABLE THE CLAIM IN ACCORDANCE WITH THE TRIBUNAL DECISION THAT THIS AD DITIONAL GROUND IS RAISED. 33. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD WE FIND THAT CLAIM OF THE ASSESSEE DESERVE S TO BE ACCEPTED AS IDENTICAL CLAIMS HAVE BEEN ALLOWED FOR THE ASSESSMENT YEARS 1 990-91 TO 1994-95 1996-97 AND 1997-98. CONSISTENT WITH THE STAND SO TAKEN WE DIRECT THE ASSESSING OFFICER TO ACCEPT THE ALLOW THE CLAIM OF THE ASSESSEE AFTER VE RIFYING RELATED FACTS. GRIEVANCE OF THE ASSESSEE IS UPHELD. 34. GROUND NO. 5 IS THUS ALLOWED. 35. IN GROUND NO 6.1 THE ASSESSEE HAS RAISED THE F OLLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE EX CISE DUTY AND SALE OF FLATS BE EXCLUDED FROM TOTAL TURNOVER FOR THE PURPO SE OF COMPUTING DEDUCTION UNDER SECTION 80 HHC. 36. AS FAR AS EXCISE DUTY IS CONCERNED LEARNED REP RESENTATIVES AGREE THAT THE ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSE E BY HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS ( 290 ITR 667). AS REGARDS SALE OF FLATS ALSO LEARNED REPRESENTATIVES AGREE T HAT THE SAME PRINCIPLE WILL EXTEND HERE AS WELL INASMUCH WHAT CANNOT BE INCLUDED IN EX PORT TURNOVER CANNOT BE INCLUDED IN THE TOTAL TURNOVER AS WELL. IN ANY CASE SALE OF FLATS BY THE ASSESSEE ON THE FACTS OF THIS CASE AND WHERE IT IS NOT BUSINESS OF THE ASSESSEE TO SELL FLATS CANNOT BE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 26 INCLUDED IN TURNOVER. ACCORDINGLY WE UPHOLD THE GR IEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GIVE EFFECT TO THIS EXCLUSION. 37. GROUND NO. 6.1 IS THUS ALLOWED. 38. GROUND NOS. 6.2 AND 6.3 ARE NOT PRESSED AND ARE DISMISSED AS SUCH. 39. IN GROUND NO. 7 THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE POWER TARIFF FREEZE (RS 10 00 82 853) SALES TAX SUBSIDY (RS 1 3 0 25 780) TREATED AS CAPITAL RECEIPT AND HENCE NOT TAXABLE IN COMPUTING TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS IN COMP UTING BOOK PROFIT UNDER SECTION 115JA. 40. TO ADJUDICATE ON THIS GROUND OF APPEAL ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE HAD AVAILED SALES TAX A ND POWER TARIFF INCENTIVE UNDER HIMACHAL PRADESH INCENTIVES SCHEME 1991 FOR SETTIN G UP NEW UNIT IN HP. THE PURPOSE OF THESE INCENTIVES WAS TO PROMOTE GROWTH O F INDUSTRIES AND GENERATION OF EMPLOYMENT. IN THE INCOME TAX RETURN POWER TARIFF INCENTIVE WAS EXCLUDED IN COMPUTING TOTAL INCOME BUT SALES TAX INCENTIVE WAS EXCLUDED. EXCLUSION OF BOTH WAS OMITTED IN COMPUTATION OF BOOK PROFITS. AT THE ASSE SSMENT STAGE ASSESSING OFFICER TOOK THE VIEW THAT POWER TARIFF INCENTIVE WAS TO MA KE BUSINESS MORE PROFITABLE AND IN APPEAL CIT(A) CONFIRMED THE SAME. AGGRIEVED AS SESSEE IS IN FURTHER APPEAL BEFORE US. 41. AS FAR AS COMPUTATION OF INCOME UNDER THE NORMA L PROVISIONS OF THE ACT IS CONCERNED LEARNED REPRESENTATIVES AGREE THAT IDE NTICAL ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996-97 IN ITA NO.3783/M/2000 AND THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIV E HOWEVER RELIES UPON THE I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 27 STAND OF THE AUTHORITIES BELOW AND JUSTIFIES THE SA ME. HAVING HEARD BOTH THE SIDES WE FIND THAT THE ISSUE IN RESPECT OF POWER TARIFF ISSUE WAS ALLOWED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 1996-97 OBSERVING AS FOLLOWS: WE FIND FROM THE ORDER OF THIS TRIBUNAL IN ASSESS EES OWN CASE FOR A.Y. 1996-97 (SUPRA) THAT POWER TARIFF FREEZE INCENTIVE WAS DIRECTED TO BE TREATED AS CAPITAL RECEIPT VIDE PARA 6.1 OF THE ORDER. THE TRIBUNAL HAD FOLLOWED THE DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF DCI T V. RELIANCE INDUSTRIES 88 ITD 273 FOR COMING TO THIS DECISION. RESPECTFUL LY FOLLOWING THIS WE DIRECT THAT POWER FREEZE INCENTIVE BE TREATED AS CAPITAL R ECEIPT IN THE IMPUGNED YEAR ALSO. THUS GROUND NO.7 IS ALLOWED. 42. SIMILARLY WE ALSO FIND THAT ISSUE IN RESPECT OF SALES TAX SUBSIDY WAS ALLOWED BY THE TRIBUNAL OBSERVING AS FOLLOWS IT WAS POINTED OUT BY THE LEARNED A.R. THAT IDENTI CAL GROUND WAS ALLOWED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1996- 97 REFERRED SUPRA. WE FIND FROM PARA 21 OF THIS ORDER THAT SALES TAX EXEMPTION AVAILED WAS HELD TO BE CAPITAL RECEIPT. FOLLOWING THIS DECISION WE DIRECT THAT THE SALES TAX INCENTIVE/SUBSIDY RELATING TO THE IMPUGNED PREVIOUS YEAR ALSO BE TREATED ONLY AS CAPITAL RECEIPT. ASSESSEE SUCCEEDS IN ITS ADDITIONAL GROUND NO.7. 43. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH AND WE ARE IN CONSID ERED AGREEMENT WITH THE SAME. TO THIS EXTENT GRIEVANCE OF THE ASSESSEE IS UPHELD . 44. HOWEVER SO FAR AS EXCLUSION OF THESE ITEMS FRO M BOOK PROFITS UNDER SECTION 115JA IS CONCERNED WE FIND THAT EVEN THOUGH THERE ARE COORDINATE BENCHES DECISIONS IN FAVOUR OF THE ASSESSEE THESE PRECEDEN TS NO LONGER HOLD GOOD LAW IN VIEW OF SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF RAIN COMMODITIES LTD VS DCIT (40 SOT 265). RESPECTFULLY FOLLOWING THE SP ECIAL BENCH DECISION WE REJECT THE GRIEVANCE OF THE ASSESSEE AND UPHOLD THE STAND OF THE AUTHORITIES BELOW ON THIS ISSUE. 45. GROUND NO. 7 IS THUS PARTLY ALLOWED IN THE TERM S INDICATED ABOVE. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 28 46 GROUND NO. 8 IS AS FOLLOWS: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE PR OFIT ON SALE OF FIXED ASSETS (RS 15 74 02 153) AND ROAD TRANSPORT SUBSIDY (RS 18 94 31 601) BEING CAPITAL RECEIPT BE EXCLUDED IN COMPUTING THE BOOK PROFITS UNDER SECTION 115JA. 47. THE ASSESSEE HAS NOT PRESSED THE EXCLUSION OF P ROFIT ON SALE OF FIXED ASSETS AS COMPLETE DETAILS ARE SAID TO BE NOT AVAILABLE. AS R EGARDS THE EXCLUSION OF TRANSPORT SUBSIDY FROM BOOK PROFITS UNDER SECTION 115JA FOLL OWING THE VIEW TAKEN BY US ON GROUND NO 7 ABOVE WE REJECT THE GRIEVANCE OF THE A SSESSEE. 48. GROUND NO. 8 IS THUS REJECTED. 49. IN GROUND NO. 9 THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE DIVIDEND DISTRIBUTION TAX OF RS 2 06 00 000. TRANSFER TO DEBENTURE REDEM PTION RESERVE OF RS 5 00 00 000 BE EXCLUDED IN COMPUTING BOOK PROFIT U/ S.115JA. 50. LEARNED REPRESENTATIVES AGREE THAT THIS ISSUE S QUARELY COVERED BY THE DECISION OF A CO-ORDINATE BENCH OF THIS TRIBUNAL I N ASSSEES OWN CASE FOR THE ASSESSMENT YEAR 1997-98 IN ITA NO.3298/M/01 WHEREI N IN PARA 42 IT HAS BEEN OBSERVED AS FOLLOWS: 42. WE HAVE GONE THROUGH THIS DECISION AS ALSO THE AMENDMENTS IN SECTION 115JB OF THE ACT MADE WITH RETROSPECTIVE EFFECT. H OWEVER THE LEGISLATURE HAS MADE NO SIMILAR AMENDMENTS IN SECTION 115JA. IT IS THEREFORE CLEAR THAT DIVIDEND DISTRIBUTION TAX WOULD NOT FALL UNDER INCO ME TAX PAID OR PAYABLE MENTIONED IN EXPLANATION (A) TO SUB-SECTION (2) OF SECTION 115JA. THEREFORE WE DIRECT THAT DIVIDEND DISTRIBUTION TAX OF RS 4.11 CRORES SHALL NOT BE CONSIDERED AS INCOME TAX FOR THE PURPOSE OF COMPUTI NG BOOK PROFIT U/S.115JA. HENCE ASSESSEE SUCCEEDS ITS ADDITIONAL GROUND NUMBER 12. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 29 AS POINTED OUT BY THE LEARNED COUNSEL WHILE AMENDM ENTS HAVE BEEN MADE IN SECTION 115JB WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2001 BY THE FINANCE ACT 2008 NO SUCH AMENDMENTS HAVE BEEN MADE IN SECTION 115 JA. THE DECISION OF THE TRIBUNAL THUS REMAINS UNAFFECTED BY THE AMENDMENTS MADE BY FINANCE ACT 2008. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MAT TER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH AND WE ARE IN CONSIDERED AGRE EMENT WITH THE SAME. 51. GROUND NO. 9 IS THUS ALLOWED. 52. GROUND NO.10 RELATES TO RELIEF GRANTED U/S.91 IN RESPECT OF TAX DEDUCTED ON THE FEES RECEIVED FROM YANBU CEMENT COMPANY LTD. S AUDI ARABIA. 53. LEARNED REPRESENTATIVE OF THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS 25.33 CRORES BEING FEES FR OM PROJECT FROM YANBY CEMENT CORPORATION SAUDI ARABIA NET OF TAX DEDUCTED AT S OURCE IN THE SAID COUNTRY. THE ASSESSEE HAS OMITTED TO CLAIM RELIEF U/S.91 IN RESP ECT OF TAX DEDUCTED AT SAUDI ARABIA WHICH WAS OPPOSED BY LEARNED D.R. LEARNED COUNSEL ALSO POINTED OUT THAT ON SIMILAR ISSUE FOR THE ASSESSMENT YEARS 91-92 TO 97-98 THE MATTER WAS REMITTED TO THE FILE OF THE AO FOR CONSIDERING THE ALLOWABILITY OF DEDUCTION. 54. AS THERE IS NO CHANGE IN MATERIAL FACTS IN THE YEAR UNDER CONSIDERATION VIS-- VIS FACTS THAT OF THE YEARS RELIED BY LEARNED COUNS EL FOLLOWING THE PRECEDENT WE ALLOW THIS GROUND AND REMIT THE MATTER TO THE FILE OF THE AO FOR VERIFYING THE QUANTUM OF DEDUCTION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 91 OF THE ACT. THE AO IS DIRECTED ACCORDINGLY. 55. GROUND NO. 10 IS THUS ALLOWED FOR STATISTICAL P URPOSES IN THE TERMS INDICATED ABOVE. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 30 56. GROUND NO.11 RELATES TO DISALLOWANCE OF RS. 9 2 16 557 IN RESPECT OF ENCASHMENT OF LEAVE SALARY. THE DEDUCTION WAS DECLI NED BY THE ASSESSING OFFICER ON THE GROUND THAT IT IS MERELY A PROVISION WHEREAS I T WAS NOT PRESSED BEFORE THE CIT(A). THE ASSESSEE HAS NOW RAISED THE GRIEVANCE A GAINST NON DEDUCTION OF THIS PROVISION. 57. AFTER HEARING BOTH THE PARTIES WE FIND THAT T HE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS 245 ITR 428 WHEREIN IT HAS B EEN HELD THAT IF THE LIABILITY IS CERTAIN THEN DEDUCTION MUST BE ALLOWED EVEN THOUGH SUCH LIABILITY IS TO BE DISCHARGED AT A FUTURE DATE. ON THE BASIS OF THIS PRINCIPLE THE CLAIM OF THE ASSESSEE WAS HELD TO BE ALLOWABLE. RESPECTFULLY FOLLOWING TH E SAID JUDGMENT THE ORDER OF THE LEARNED CIT (A) IS SET ASIDE AND THE ASSESSING OFFI CER IS DIRECTED TO CONSIDER THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE LAW SO LAID DOWN BY HONBLE SUPREME COURT 58. GROUND NO. 11 IS THUS ALLOWED FOR STATISTICA L PURPOSES IN THE TERMS INDICATED ABOVE. 59. GROUND NOS 12 13 AND 14 WERE NOT PRESSED AND A RE DISMISSED AS SUCH. 60. IN THE RESULT APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 61. WE NOW TAKE UP THE APPEAL FILED BY THE ASSESSIN G OFFICER I.E. ITA NO. 6320/MUM/03. 62. IN GROUND NO. 1 THE GRIEVANCE RAISED IS AS FOL LOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT O F SERVICE CONNECTION CHARGES PAID TO RESB OF RS 31 67 077 AND APSSB OF RS 2 08 594 WHICH ARE OF CAPITAL NATURE. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 31 63. LEARNED REPRESENTATIVES AGREE THAT THIS ISSUE I S FULLY COVERED BY THE SERIES OF DECISION OF THE CO-ORDINATE BENCHES OF THIS TRIBUNA L IN ASSESSEES OWN CASE. THE DECISION OF THE TRIBUNAL IS ALSO FORTIFIED BY THE J UDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ASSOCIATED CEMENT COMPA NIES 172 ITR 257 (SC) AND ALSO THE HONBLE BOMBAY HIGH COURTS JUDGMENT IN THE CAS E OF CIT VS. EXCEL INDUSTRIES LTD. 122 ITR 995(BOM). RESPECTFULLY FOLLOWING TH E VIEWS OF THE COORDINATE BENCHES WE APPROVE THE STAND OF THE CIT(A) AND DE CLINE TO INTERFERE IN THE MATTER. 64. GROUND NO. 1 IS THUS REJECTED. 65. GROUND NO.2 RELATES TO DELETION OF DISALLOWANCE OF RS 40 21 000 SPENT ON ACCOUNT OF IMPROVEMENT OF INTERNAL ROADS. 66. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN T HE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INCURRED AN AMOUNT OF RS 40 21 000 ON IMPROVEMENT OF INTERNAL ROADS ON THE PSEBS LAND FOR TRANSPORT OF FLY ASH WHICH IS A COMPONENT FOR INCREASING TH E STRENGTH OF CEMENT MANUFACTURED BY THEM AT GAGAL UNIT. THE AO FOLLOWING THE ASSES SMENT ORDERS FOR THE ASSESSMENT YEARS 1991-92 TO 1997-98 DISALLOWED THE SAME. AGGR IEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). THE CIT (A) D ELETED THE DISALLOWANCE FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 1997-98 . THE ASSESSING OFFICER IS AGGRIEVED AND IN APPEAL BEFORE US. 67. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997-98 IN ITA NO.4730/M/01 WHEREIN THE TRIBUNAL FOLLOWING T HE HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. ASSOCIATED CEMENT C OMPANIES LIMITED (172 ITR 257) DISMISSED THE GROUND TAKEN BY THE REVENUE. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) WHICH IS HER EBY UPHELD. 68. GROUND NO. 2 IS THUS DISMISSED. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 32 69. IN GROUND NO.3 THE ASSESSING OFFICER IS AGGRIE VED THAT LD CIT (A) DELETED THE DISALLOWANCE OF RS 5 36 000 SPENT ON CONSTRUCTION OF HP INDOOR STADIUM AND NAMHOLE STADIUM. 70. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997-98 IN ITA NO.4730/M/01 WHEREIN THE TRIBUNAL FOLLOWING T HE DECISION OF THE ITAT IN THE CASEOF HPCL VS DCIT 96 ITD 186 (MUM) DISMISSED THE GROUND TAKEN BY THE REVENUE. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MAT TER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCHES. RESPECTFULLY FOLLOWING THE SAME WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND DECLINE TO INTERFERE I N THE MATTER. 71. GROUND NO. 3 IS ALSO DISMISSED. 72. IN GROUND NO. 4 THE ASSESSING OFFICER IS AGGRI EVED OF THE CIT(A) DELETING THE DISALLOWANCE OF RS 37.76 CRORES ON ACCOUNT OF PAYME NT TO EMPLOYEES UNDER VRS SCHEME. 73. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHOR INDUSTRIES LTD. 264 ITR 180(BOM) EVEN THOUGH LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE STAND OF THE ASSESSING OFFICER. RESPECTFULLY FOLLOWING T HE ESTEEMED VIEWS OF HONBLE JURISDICTIONAL HIGH COURT WE UPHOLD THE ORDER OF T HE CIT (A) AND DECLINE TO INTERFERE IN THE MATTER. 74. GROUND NO. 4 IS THUS ALSO DISMISSED. 75. IN GROUND NO.5 THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW LD CIT (A) ERRED IN DIRECTING THE AO TO ALLOW THE DEDUCTION OF RS 1 46 60 657 ON I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 33 ACCOUNT OF WITHDRAWALS FROM THE SHARE PREMIUM ACCO UNT TO MEET PRORATA PREMIUM ON REDEMPTION OF DEBENTURES EQUIT Y SHARES ISSUE EXPENSES AND DEBENTURE ISSUE EXPENSES WHICH ARE OF CAPITAL NATURE AND DO NOT FROM PART OF THE PROFIT AND LOSS ACCOUNT PRE PARED IN ACCORDANCE WITH THE COMPANIES ACT. 76. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS CLAIMED DEDUCTION OF RS 1 46 60 757 ON ACCOUNT OF WITHDRAWAL FROM RESER VES IN COMPUTATION OF BOOK PROFITS UNDER SECTION 115JA OF THE ACT. THE DETAIL S OF THESE EXPENSES ARE AS FOLLOWS: BONUS ISSUE EXPENSES RS 2 67 310 RIGHTS ISSUE EXPENSES RS 4 58 979 PRORATE PREMIUM ON REDEMPTION OF DEBENTURES RS 33 63 226 DEBENTURE ISSUE EXPENSES RS 1 05 71 233 77. HOWEVER FROM THE PERUSAL OF THE PROFIT AND LOS S ACCOUNT HE NOTICED THAT THESE EXPENSES HAVE BEEN DIRECTLY ADJUSTED AGAINST THE SHARE PREMIUM ACCOUNT AND HAVE NOT BEEN DEBITED TO THE PROFIT AND LOSS ACCOUN T. HE WAS OF THE VIEW THAT SINCE THESE EXPENSES HAVE NOT BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT WHICH IS IN ACCORDANCE WITH PART II AND III OF SCHEDULE VI TO T HE COMPANIES ACT THE ADJUSTMENT CANNOT BE ALLOWED. ACCORDING TO THE ASSESSING OFFI CER THE ASSESSEE OUGHT TO HAVE DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT AND A CORRESPONDING WITHDRAWAL WAS REQUIRED TO BE MADE FROM RESERVES AND ONLY THE N ADJUSTMENT IN RESPECT OF THE SAME COULD HAVE BEEN PERMITTED. THE ADJUSTMENT WAS DECLINED. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO UPHELD THE GRIEVANCE OF THE ASSESSEE AND OBSERVED THAT WHAT IS TO SEEN IS TRUE SUBSTANCE AND NATURE OF THE TRANSACTION AND THE MANNER OF DISCLOSURE WAS NOT RE ALLY DECISIVE OF THE ADMISSIBILITY OF ADJUSTMENT. AS THE EXPENSES WERE ADJUSTED AGAINS T THE RESERVE IN THE INNER COLUMN OF THE PROFIT AND LOSS ACCOUNT IT WAS A DE FACTO CREDIT OF RESERVES. THE ADJUSTMENT WAS THUS ALLOWED. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 34 78. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 79. WE FIND THAT IN TERMS OF THE PROVISIONS OF SECT ION 115JA(2)(I) TO ARRIVE AT THE BOOK PROFIT THE AMOUNT OF PROFIT AS PER PROFIT AN D LOSS ACCOUNT IS REQUIRED TO BE REDUCED INTER ALIA BY THE AMOUNT WITHDRAWN FROM ANY RESERVES OR PROVISIONS IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT AND IT IS UNDER THIS CLAUSE THAT THE ASSESSEE HAS MADE THE CLAIM FOR ADJ USTMENT. WE HAVE ALSO NOTED THAT AS EVIDENT FORM SCHEDULE 2 TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY ( AT PAGE 4 OF THE COMPILATION FILED BEFORE US) THE EXPENSES INCURRED BY THE ASSESSEE COMPANY ARE OFFSET AGAINST SHARE PREMIUM ACCOUNT IN THE INNER COLUMN OF THE PROFIT AND LOSS ACCOUNT AND THE NET DEBIT OF T HE EXPENSES IS NET OF THIS FIGURE OF TRANSFER FROM SHARE PREMIUM ACCOUNT. ON THESE FACT S THE STAND OF THE REVENUE IS THAT SINCE AMOUNT WITHDRAWN FROM RESERVES HAS NOT B EEN SHOWN TO THE CREDIT OF THE PROFIT AND LOSS ACCOUNT THE ADJUSTMENT CANNOT BE A LLOWED. WE HOWEVER SEE NO LEGALLY SUSTAINABLE MERITS IN THE HYPER TECHNICAL O BJECTION TAKEN BY THE REVENUE. AN AMOUNT BEING CREDITED TO THE PROFIT AND LOSS ACCOUN T IS NOT NECESSARILY THE SAME THING AS AMOUNT BEING SHOWN IN THE CREDIT SIDE OF T HE PROFIT AND LOSS ACCOUNT ON STANDALONE BASIS. WHETHER A CREDIT ENTRY IS REDUCE D FROM GROSS DEBITS TO EXPENSES AND THUS NET DEBIT FIGURE IS SHOWN OR WHETHER BOTH THE CREDITS AND DEBITS ARE SHOWN AT GROSS FIGURES HAS THE SAME ACCOUNTING EFFECT AND BOTH THE SITUATIONS CREDIT ENTRY CONTINUES TO HAVE THE SAME CHARACTER. IN ANY EVENT MANNER IN WHICH ADJUSTMENT IS SHOWN IN THE PROFIT AND LOSS ACCOUNT IS NOT DECISIV E OF THE NATURE OF TRANSACTION NOR IS THE PROFIT AND LOSS ACCOUNT PUBLISHED BY THE ASS ESSEE REFLECTS ALL THE DEBITS AND CREDITS IN THE SAME FORM IN WHICH THESE ARE REFLECT ED IN THE PROFIT AND LOSS ACCOUNT SHOWN THE BOOKS OF ACCOUNTS. THE VERTICAL PROFIT AN D LOSS ACCOUNT IS BASED ON THE ENTRIES MADE IN THE PROFIT AND LOSS ACCOUNT AS TRAD ITIONALLY PREPARED IN THE BOOKS OF ACCOUNTS AND IS NOT A COPY OF THE SAME. THEREFORE MERELY BECAUSE SEPARATE CREDIT ENTRY AS AN INCOME IS NOT SHOWN IN THE PROFIT AND LOSS ACCOUNT IT CAN NOT BE SAID THAT THERE HAS BEEN NO CREDIT TO THE PROFIT AND LOS S ACCOUNT. IT IS NOT SHOWN I.T.A NO.6289/ MUM/2003 I.T.A NO.6320/ MUM/2003 THE ASSOCIATED CEMENT CO. LTD 35 SEPARATELY AS AN INCOME HEAD ON THE CREDIT SIDE BI T THAT DOES NOT MEAN THAT THE AMOUNT HAS NOT BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. IN SUBSTANCE ON THE FACTS OF THIS CASE THERE WAS A CREDIT TO THE PROFI T AND LOSS ACCOUNT ON ACCOUNT OF THE TRANSFER FROM RESERVES AND THIS HAS BEEN OFFSET AGA INST THE EXPENSES INCURRED BY THE ASSESSEE. LEARNED CIT(A) WAS THEREFORE QUITE JUS TIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE IMPUGNED ADJUSTMENT. WE UPHOL D HIS ACTION AND DECLINE TO INTERFERE IN THE MATTER. 80. GROUND NO. 5 IS ALSO THUS DISMISSED. 81. IN THE RESULT APPEAL OF THE ASSESSING OFFICER IS DISMISSED. TO SUM UP WHILE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TER MS INDICATED ABOVE APPEAL OF THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH 2011 SD/- (R.V. EASWAR ) (PRESIDENT) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 9 TH MARCH 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) MUMBAI 4. COMMISSIONER OF INCOME TAX MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI