THE ACIT RG 10(1), MUMBAI v. M/S. SYNCHEM CHEMICALS (I) PVT. LTD, MUMBAI

ITA 881/MUM/2008 | 2002-2003
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 88119914 RSA 2008
Assessee PAN AAECS5976Q
Bench Mumbai
Appeal Number ITA 881/MUM/2008
Duration Of Justice 3 year(s) 5 month(s) 22 day(s)
Appellant THE ACIT RG 10(1), MUMBAI
Respondent M/S. SYNCHEM CHEMICALS (I) PVT. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 29-07-2011
Date Of Final Hearing 18-07-2011
Next Hearing Date 18-07-2011
Assessment Year 2002-2003
Appeal Filed On 07-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 619/MUM/2008 (ASSESSMENT YEAR: 2002-03) M/S. SYNCHEM CHEMICALS (I) P. LTD. A C I T 10 (1) 159 CST ROAD KALINA AAYAKAR BHAVAN M.K. ROAD MUMBAI 400098 VS. MUMBAI 400020 PAN - AAECS 5976 Q APPELLANT RESPONDENT ITA NO. 881/MUM/2008 (ASSESSMENT YEAR: 2002-03) A C I T 10 (1) M/S. SYNCHEM CHEMICALS (I) P. LTD. AAYAKAR BHAVAN M.K. ROAD 159 CST ROAD KALINA MUMBAI 400020 VS. MUMBAI 400098 PAN - AAECS 5976 Q APPELLANT RESPONDENT ASSESSEE BY: MS. VASANTI PATEL REVENUE BY: MS. KUSUM INGLE DATE OF HEARING: 18/07/2011 DATE OF PRONOUNCEMENT: 29/07/2011 O R D E R PER B. RAMAKOTAIAH A.M. THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AGA INST THE ORDER OF THE CIT(A) X MUMBAI 31.11.2007. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - DISALLOWANCE OF AMORTISATION OF LEASE PREMIUM 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN DISA LLOWING THE AMOUNT OF RS.14 034/- IN RESPECT OF AMORTIZATION OF LEASEHOLD PREMIUM. DISALLOWANCE UNDER SECTION 14A 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN DISA LLOWING AN AMOUNT OF RS.3 03 200 UNDER SECTION 14A. ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 2 3. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE TO EARN THE DIVIDEND INCOME. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ESTABLISHING NEXUS BETWEEN EXPENDITURE INCURRED AND EXEMPT INCOM E EARNED. DEDUCTION UNDER SECTION 80HHC 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE DE DUCTION UNDER SECTION 80HHC ON THE BASIS OF COMPANY AS A WHOLE AN D NOT CONSIDERING EXPORT UNIT AS A SEPARATE UNDERTAKING A S COMPUTED BY THE APPELLANT. 6. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD MAINTAINED SEPARATE BOOKS OF ACCOUNTS HAS SEPARATE STAFF MANAGEMENT LOCATION FUND MANAG EMENT ETC. IN RESPECT OF EXPORT UNIT AND THEREFORE EXPORT UNIT WAS SEPARATE UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HHC. 7. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT SECTION 80HHC IS A BENEFICIAL PROVISION AND SH OULD BE CONSTRUED LIBERALLY. 8. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN NOT EXCLUDING CA RRIAGE INSURANCE AND FREIGHT ON EXPORTS FROM TOTAL TURNOVE R WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. 9. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING WHOL E 90% OF OTHER INCOME AS INCOME FROM OTHER SOURCES WHILE ARRIVING AT PROFIT OF THE BUSINESS. LEVY OF INTEREST UNDER SECTION 234D 10. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAV E APPRECIATED THE FACT THAT SECTION 234D PROVIDES FOR A NEW LEVY OR CHARGE W.E.F. 1/6/2003 AND THEREFORE THE PROVISIONS OF T HE SAME SHALL APPLY FROM THE NEXT SUCCEEDING ASSESSMENT YEAR I.E. FOR ASSESSMENT YEAR 2004-05 AND SUBSEQUENT ASSESSMENT Y EARS. GROUND NOS. 8 & 9 DID NOT ARISE OUT OF THE ORDER UN DER SECTION 143(3) BUT AROSE OUT OF THE ORDER UNDER SECTION 154 WHICH WAS NOT SUBJECT MATTER OF APPEAL. THEREFORE THESE GROUNDS ARE NOT CONSIDERED. REVENUE HAS RAISED THE FOLLOWING GROUND: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO ALL OW THE CLAIM FOR LIQUIDATED DAMAGES OF RS.19.10 LAKHS AS BUSINES S EXPENSES SOLELY RELYING ON THE AGREEMENT OF THE ASSESSEE WIT H ITS GROUP CONCERN LUPIN LABORATORIES LTD AND WITHOUT APPRECIA TING THE FACT ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 3 THAT THE ASSESSEE FAILED TO FURNISH ANY PROOF OR EV IDENCE FOR USAGE OF THE FACTORY PREMISES. 3. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D .R IN DETAIL. 4. GROUND NO. 1 IS ASSESSEES APPEAL PERTAIN TO THE IS SUE OF DISALLOWANCE OF AMORTISATION OF LEASE PREMIUM. ASSESSEE ENTERED INTO LEASE AGREEMENT WITH GIDC FOR A PERIOD OF 99 YEARS WITH A STIPULATI ON THAT ON TERMINATION OF LEASE PERIOD THE LAND ALONGWITH SUPER STRUCTURES WE RE TO BECOME PROPERTY OF THE LESSOR. BASED ON THE CONCEPT OF COST MATCHING R EVENUE ASSESSEE CLAIMED THE PREMIUM PAID FOR ACQUIRING THE LEASEHOLD PREMIS ES AS RENT PAID IN ADVANCE FOR ACQUIRING THE BUSINESS AND CLAIMED IT A S A REVENUE EXPENDITURE. ON IDENTICAL FACTS THE SPECIAL BENCH OF THE ITAT IN JCIT VS. MUKUND LTD. 291 ITR (AT) 249 (MUM)(SB) HELD THAT AMORTISATION O F LEASEHOLD LAND WAS TO BE CONSIDERED AS CAPITAL EXPENDITURE AND THEREFORE CANNOT BE ALLOWED AS REVENUE EXPENDITURE. SIMILARLY IN ASSESSEES GROUP CONCERNS CASE OF LUPIN LABORATORIES LTD. THE ITAT WAS CONSISTENTLY HOLDING THAT THE LEASE HOLD PREMIUM PAID HAS AN ENDURING BENEFIT AND THEREFORE CAPITAL IN NATURE WHICH WAS NOT ALLOWABLE UNDER SECTION 37(1) OF THE I.T. ACT. THE CIT(A) HAS FOLLOWED THE ABOVE ORDERS WHILE DECIDING THE ISSUE AGAINST ASSESSEE. SINCE THE ISSUE WAS HELD AGAINST THE ASSESSEE IN ITS SIST ER CONCERNS CASE M/S. LUPIN LABORATORIES LTD. IN ITA NOS. 2447 & 2448/MUM / 2005 DATED 30.12.2010 FOLLOWING THE PRINCIPALS ESTABLISHED BY THE SPECIAL BENCH (SUPRA) THE GROUND IS DISMISSED. 5. LD. COUNSEL PLACED RELIANCE ON THE JUDGEMENT OF HON BLE GUJARAT HIGH COURT JUDGEMENT IN THE CASE OF DCIT VS SUN PHARMACE UTICALS LTD WHEREIN ADVANCE RENT OF RS. 48 CRORES WAS ALLOWED AS REVENU E EXPENDITURE IN THE FIRST YEAR. NO AGREEMENT WAS PLACED ON RECORD TO EX AMINE WHETHER THE SAME PRINCIPLES WILL APPLY TO THE ASSESSEE. THE AMOUNT I NVOLVED WAS ONLY RS.14 034 AND IT IS NOT FIRST YEAR OF PAYMENT. THER EFORE WE DO NOT INTEND TO DEVIATE FROM THE EARLIER ORDERS IN THE ASSESSEE CA SE. 6. GROUND NO. 2 3 4 PERTAINS TO THE DISALLOWANCE UNDER SECTION 14A. ASSESSEE HAS EARNED DIVIDEND INCOME OF ` 30.32 LAKHS AS EXEMPT UNDER SECTION 10(33) OF THE I.T. ACT. THE A.O. ESTIMATED 10% OF THE DIVIDEND ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 4 AMOUNT AS EXPENSES INCURRED IN EARNING THE EXEMPT I NCOME. ACCORDINGLY HE DISALLOWED A SUM OF ` 3 03 200/- ON ESTIMATE BASIS. ASSESSEE CONTESTED BEFORE THE CIT(A) THAT OUT OF THE TOTAL OF ` 2 40 CRORES OF EXPENSES BOOKED IN THE P & L ACCOUNT ASSESSEE SUO-MOTO DISALLOWED AN A MOUNT OF ` 1.39 CRORES AND THE BALANCE OF ` 1.01 CRORES WAS COMPLETELY FOR THE PURPOSE OF BUSIN ESS IN CONNECTION WITH MANUFACTURING AND SALE OF PHARMA CEUTICAL PRODUCTS. THEREFORE NO DISALLOWANCE MAY BE MADE UNDER SECTIO N 14A. THE CIT(A) ELABORATELY DISCUSSED THE ISSUE INCLUDING VARIOUS P RINCIPLES ESTABLISHED IN VARIOUS JUDGEMENTS AND CAME TO A CONCLUSION THAT AD HOC DISALLOWANCE OF 10% IS NOT CORRECT AND DIRECTED THE A.O. TO MAKE DI SALLOWANCE OF CORPORATE/HEAD OFFICE EXPENSES INCLUDING DEPRECIATI ON IN THE PROPORTION OF DIVIDEND RECEIPTS TO TOTAL RECEIPTS OF THE COMPANY. WHILE DOING SO THE A.O. WAS DIRECTED TO GIVE RELIEF TO ASSESSEE WITH REGARD TO EXPENSES WHICH WERE ALREADY BEEN DISALLOWED IN THE COMPUTATION OF INCOM E. WITH THESE DIRECTIONS THE APPEAL WAS DISPOSED OFF. ASSESSEE IS CONTESTING THE ABOVE IN THREE GROUNDS RAISED. EVENTHOUGH THE AMOUNT CONTESTED IN GROUNDS WAS STATED AT AT ` 3.03 LAKHS THE AMOUNT IS NOT CORRECTLY ASCERTAINED AS PER THE DIRECTIONS OF THE CIT(A). BE THAT AS IT MAY THE LEARNED COUNS EL SUBMITTED THAT THE DISALLOWANCE CAN BE AT 5% ON REASONABLE BASIS AS HA S BEEN HELD BY THE ITAT IN VARIOUS ORDERS. HOWEVER WE ARE OF THE OPINION T HAT THIS ISSUE REQUIRES RE- EXAMINATION BY THE A.O. CONSEQUENT TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. VS. DCIT 328 ITR 81 TO DETERMINE THE REASONABLE EXPENDITURE WITH REFERENCE TO EARNING OF INCOME. THEREFORE IN THE INTEREST OF JUSTICE THIS ISSUE IS RESTORED TO THE FILE OF THE A.O. TO DETERMINE THE REASONABLE AMOUNT ON THE BASIS OF PRINCIPLES ESTABLISHED BY THE HON'BLE BOMBAY HIGH COURT. HOWEVER DISALLOWANC E IN NO CASE SHOULD EXCEED THE AMOUNT WHICH WAS ORIGINALLY DETERMINED B Y THE A.O. ON ADHOC BASIS. WITH THESE DIRECTIONS THE MATTER IS RESTORE D TO THE FILE OF THE A.O. 7. GROUND NOS. 5 6 & 7 PERTAIN TO THE DEDUCTION UNDER SECTION 80HHC. IT IS ASSESSEES CONTENTION THAT DEDUCTION IS ALLOW ABLE TO THE ASSESSEE QUA BUSINESS BUT NOT QUA ASSESSEE AS IT HAD VARIOUS BUS INESS AND SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED WITH REFERENCE TO EXPORT ACTIVITIES. IT WAS SUBMITTED THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE GROUP ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 5 CONCERNS CASE WHEREIN ON SIMILAR ISSUE THE ITAT HA S CONSIDERED AND ALLOWED ASSESSEES CONTENTION. THE ORDER IN GROUP C ONCERNS CASE IN ITA NOS. 2447 & 2448/MUM/2005 IN THE CASE OF LUPIN LABORATOR IES LTD. IS PLACED ON RECORD. IT WAS CONSIDERED AND DECIDED ON SIMILAR FA CTS AS UNDER: - GROUND NO.5 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF DEDUCTION U/S.80HHC ON THE BASIS OF COMPANY AS A WHOLE AS AGA INST ON THE BASIS OF EACH BUSINESS UNIT SEPARATELY. AT THE OUTSET THE LE ARNED COUNSEL SUBMITTED THAT THE ISSUE IS DECIDED IN FAVOUR THE ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 1997-98 WHEREIN IT WAS HELD AS UNDER: - 26. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND M ERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN ASSESSEE'S OWN CASE IN ITA NO.3314 AND 3242/MUM/2005 FOR ASSES SMENT YEAR 2000-01 WHEREIN VIDE PARA-11 OF THE ORDER DATED 23. 9.2008 IT HAS BEEN HELD AS UNDER :- 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE ORDERS OF THE LOWER AUTHORITIES ALONG WITH THE JUDGMENTS RELIED U PON BY THE PARTIES. FROM THE PERUSAL OF THE JUDGMENT IN THE CASE OF M. GANI & CO. (SUPRA) WE FIND THAT THE ASSESSEE IS ENTITLED TO THE ALLOWABILITY OF DED UCTION U/S.80 HHC WITH THE TURNOVER OF QUA ASSESSEE AND NOT THE QUA BUSINESS WHEN ASSESSEE HAVING MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR DIFFERENT BUSINESS WHICH IS THE CASE IN THE INSTANT CASE ALSO. THEREFORE WE ARE O F THE CONSIDERED OPINION THAT THE CIT(A) ORDER IS SET ASIDE ON THIS ISSUE AND ASS ESSING OFFICER IS DIRECTED TO RECOMPUTE ALLOWABILITY OF DEDUCTION U/S.80 HHC QUA BUSINESS AND NOT QUA ASSESSEE AS SEPARATE BOOKS OF ACCOUNTS MAINTAINED B Y THE ASSESSEE FOR BULK DRUGS FORMULAS EXPORT DIVISIONS ETC. THE MERGER O F ACCOUNTS AT THE HEAD OF OFFICE FOR MAKING OF SINGLE PROFIT AND LOSS ACCOUNT WILL NOT COME IN THE WAY AS SUCH MERGER IS ONLY FOR THE LIMITED PURPOSE OF MA KING OF THE FINANCIAL STATEMENTS AS BOOKS OF ACCOUNTS IS ALLOWABLE. ACCO RDINGLY GROUND 3 IS ALLOWED. THE ABOVE ORDER HAS BEEN CONSISTENTLY FOLLOWED BY T HE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEARS 1996-9 7 2001-02 AND 2002-03 SUPRA. 27. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE CONSIS TENT VIEW OF THE TRIBUNAL DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION U/S.80HHC IN THE LIGHT OF THE ORDER OF THE TRIBUNAL SUPRA AND ALLOW THE SAME. THE GROUND TAKEN BY THE ASSESSEE IS THEREFOR E ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO ORDINATE BENCH WE ALLOW THIS GROUND OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO ORDINATE BENCH ON PRINCIPLE WE ALLOW ASSESSEES CONTENTION THAT 80HH C QUANTIFICATION HAS TO ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 6 BE DONE ON THE BASIS OF THE UNIT FOR WHICH BOOKS OF ACCOUNT ARE SEPARATELY MAINTAINED. 8. HOWEVER THE FACTS OF SEPARATE BOOKS OF ACCOUNT AND INCOMES EARNED ON EXPORT SEEMS TO HAVE NOT BEEN EXAMINED BY THE A. O. IN ITS CORRECT PERSPECTIVE. THEREFORE FOR THE PURPOSE OF EXAMINATI ON OF THE FACTS AND QUANTIFICATION OF DEDUCTION THE MATTER IS RESTORED TO THE A.O. FOR EXAMINATION. IT WAS ALSO FURTHER NOTICED THAT ASSES SEE HAS LEASED OUT THE FACTORY TO SISTER CONCERN AND USED THE SAME FACTORY FOR PRODUCTION AND EXPORT OF GOODS DURING THE YEAR FOR WHICH LIQUIDITY DAMAGES WERE PAID TO AN EXTENT OF ` 19 18 351/- WHICH WAS THE ISSUE IN REVENUE APPEAL. THEREFORE THE A.O. IS DIRECTED TO EXAMINE THE ASPECT OF SEPAR ATE BOOKS OF ACCOUNT ON THE EXPORT ACTIVITY LEASE OF FACTORY LEASE RENT R ECEIVED FOR USING OF THE FACTORY IN ITS CORRECT PERSPECTIVE BEFORE DECIDING THE QUANTUM OF DEDUCTION U/S 80HHC. WITH THESE DIRECTIONS THE ISSUE WAS REST ORED TO THE A.O. FOR QUANTIFICATION TREATING THE UNIT AS SEPARATE FOR A RRIVING AT THE DEDUCTION UNDER SECTION 80HHC. THE SET OFF HOWEVER IS SUBJE CT TO AVAILABILITY OF GROSS TOTAL INCOME. WITH THESE DIRECTIONS THE GROUNDS AR E CONSIDERED ALLOWED. 9. GROUND NO. 10 PERTAINS TO THE ISSUE OF LEVY OF INTE REST UNDER SECTION 234D. A.O. LEVIED INTEREST UNDER SECTION 234D WHILE DETERMINING THE INCOME WHICH THE CIT(A) HAS CONFIRMED STATING THAT WHETHE R REFUND WAS GIVEN PRIOR TO 01.06.2003 OR POST 01.06.2003 INTEREST WAS LEVIA BLE EVEN THOUGH THE ASSESSEE SUBMITTED THAT THE REFUND WAS GRANTED ON 1 7.03.2003 I.E. BEFORE 01.06.2003. THIS ISSUE IS NOW SETTLED BY THE DECISI ON OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BAJAJ HINDUSTAN LTD IN ITA NO 198 OF 2009 DT 15-04-09 WHEREIN THE JURISDICTIONAL HIGH COURT H AS STATED THAT IT DOES NOT HAVE ANY RETROSPECTIVE EFFECT. IN VIEW OF THIS THE A.O. IS DIRECTED NOT TO LEVY INTEREST UNDER SECTION 234D IN RESPECT OF REFUND GR ANTED PRIOR TO 01.06.2003. GROUND IS CONSIDERED ALLOWED. 10. IN THE REVENUE APPEAL. REVENUE IS CONTESTING THE DI RECTION OF THE CIT(A) IN ALLOWING LIQUIDITY DAMAGES OF ` 19.10 LAKHS AS BUSINESS EXPENSES. IT WAS THE CONTENTION THAT THE CIT(A) ERRED IN RELYING ON THE AGREEMENT OF THE ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 7 ASSESSEE WITH ITS GROUP CONCERN LUPIN LABORATORIES LTD (NOW LUPIN LTD). WITHOUT ESTABLISHING THE PROOF OF USAGE OF THE FACT ORY PREMISES. 11. BRIEFLY STATED ASSESSEE HAS ENTERED INTO BUSINESS C ONDUCTING AGREEMENT DATED 30.06.2000 FOR LEASING OUT THE PREM ISES ALONGWITH PLANT AND MACHINERY TO LUPIN LTD. ON CONDUCTING BASIS. DU RING THE YEAR UNDER ASSESSMENT ASSESSEE COMPANY REQUIRED THE MANUFACTUR ING FACILITY ON TEMPORARY USAGE BASIS FOR ITS OWN USE AND ACCORDING LY LIQUIDITY DAMAGE/ COMPENSATION AMOUNTING TO ` 19 18 351/- HAS BEEN PAID. THE WORKING WAS FURNISHED TO THE A.O. WITH REFERENCE TO THE CLAIM. THE A.O. HOWEVER DISALLOWED THE AMOUNT STATING THAT THERE IS NO PROO F IN SUPPORT OF USAGE OF FACTORY PREMISES. BEFORE THE CIT(A) IT WAS CONTENDE D THAT CLAUSE 2 OF THE AGREEMENT STIPULATES LIQUIDITY DAMAGES/ COMPENSATIO N WHICH SHALL BE CALCULATED AT 2.50% OF THE SALE VALUE OF THE GOODS MANUFACTURED BY THE OWNER IN CASE AT ANY TIME DURING THE SUBSISTENCE O F THE AGREEMENT THE OWNER I.E. ASSESSEE INTENDS TO USE THE UNDERTAKING FOR ITS OWN PURPOSE. ON EXAMINING THE COPY OF THE AGREEMENT AND WORKING OF THE LIQUIDITY DAMAGES THE CIT(A) DIRECTED THE LIQUIDITY DAMAGES TO BE ALL OWED AS BUSINESS EXPENSES. 12. AFTER CONSIDERING THE ARGUMENTS OF THE LEARNED D.R. AND THE LEARNED COUNSEL FOR THE ASSESSEE WE SEE NO REASON TO INTER FERE WITH THE FINDINGS OF THE CIT(A). IT IS ON RECORD THAT ASSESSEE HAS LEASE D OUT THE ENTIRE FACTORY PREMISES ON CONDUCTING BASIS TO M/S. LUPIN LTD. WH ICH IS A PUBLIC LIMITED COMPANY. CLAUSE 2 STIPULATES THAT ASSESSEE HAS TO P AY LIQUIDITY DAMAGES CALCULATED ON 2.5% OF THE SALE VALUE OF THE GOODS M ANUFACTURES IN CASE OF USAGE BY THE OWNERS. ACCORDINGLY ASSESSEE PAID THE LIQUIDITY DAMAGES TO THE SAID LUPIN LTD. IN VIEW OF THE EXPLANATION GIVEN BY THE ASSESSEE AND THE FINDINGS OF THE CIT(A) THE EXPENDITURE WITH REFERE NCE TO LIQUIDITY DAMAGES IS ALLOWABLE AS BUSINESS EXPENDITURE. WE ARE UNABLE TO UNDERSTAND WHAT FURTHER PROOF IS REQUIRED WHEN THE ASSESSEE HAS ADM ITTED THAT IT HAS UTILISED THE FACTORY PREMISES FOR MANUFACTURING AND THE SAME WERE SOLD ON WHICH 80HHC DEDUCTION WAS CLAIMED. IN THESE CIRCUMSTANCES WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND RAISED BY THE R EVENUE. ITA NOS. 619&881/MUM/2008 M/S. SYNCHEM CHEMICALS (I) P. LTD. 8 13. IN THE RESULT ASSESSEES APPEAL IN ITA NO. 619/MUM /2008 IS ALLOWED PARTLY AND REVENUES APPEAL IN ITA NO. 881/MUM/2008 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 29 TH JULY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) X MUMBAI 4. THE CIT X MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.