THE ITO 10(3)(4), Mumbai V. M/S. STRIDES ARCDAB LTD, Mumbai

CO 132/MUM/2005

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7715 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 09-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 17-03-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Retrospective amendment; Question of law; Scheme of amalgamation; Revised return
• Section: 43B; 143(3); 80HHC; 14A; 115JB

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI .. , ! .. , ' !, # BEFORE SHRI R.S.SYAL, AM AND SHRI I.P.BANSAL, JM ./ ITA NO.6487/MUM/2004 ( '% & '% & '% & '% & / / / / ASSESSMENT YEAR : 2001-2002) THE INCOME TAX OFFICER WARD 10(3)(4) MUMBAI. M/S.STRIDES ARCOLAB LIMITED 201 DEVAVRATA , SECTOR 17 VASHI, NEW MUMBAI 400 703. PAN :AADCS8104P. ( '( / // / APPELLANT) % % % % / VS. ( )*'(/ RESPONDENT) )*# ./ CO NO.132/MUM/2005 ( '% & '% & '% & '% & / / / / ASSESSMENT YEAR :2001-2002) M/S.STRIDES ARCOLAB LIMITED 201 DEVAVRATA , SECTOR 17 VASHI, NEW MUMBAI 400 703. THE INCOME TAX OFFICER WARD 10(3)(4) MUMBAI. ( )*# / CROSS OBJECTOR) % % % % / VS. ( )*'(/ RESPONDENT) + + + + , ,, , - - - - / REVENUE BY : SHRI NARENDRA KUMAR '% ./ '% ./ '% ./ '% ./ , - , - , - , - / ASSESSEE BY : SHRI P.J.PARDIWALLA % , / / / / / DATE OF HEARING : 31.07.2012 01& , / / DATE OF PRONOUNCEMENT : 03.08.2012 !2 !2 !2 !2 / / / / O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) ON 15.06.2004 IN RELATION TO THE ASSESSME NT YEAR 2001- 2002. 2. FIRST GROUND OF THE REVENUES APPEAL AS WELL AS THE ASSESSEES CROSS OBJECTION RELATE THE DISALLOWANCE U/S 14A. BR IEFLY STATED THE ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 2 FACTS OF THESE GROUNDS ARE THAT THE ASSESSEE CLAIME D DIVIDEND INCOME OF ` 33,06,831 AS EXEMPT U/S 10(33) OF THE ACT. THE ASSE SSING OFFICER OBSERVED THAT THE PROVISIONS OF SECTION 14A REQUIRE MAKING OF DISALLOWANCE OF ANY EXPENDITURE INCURRED FOR EARNIN G THE EXEMPT INCOME. ON BEING CALLED UPON TO EXPLAIN AS TO WHY T HE INTEREST EXPENDITURE ON INVESTMENT IN SHARES SHOULD NOT BE D ISALLOWED UNDER THIS SECTION, THE ASSESSEE SUBMITTED AN EXPLANATIO N TO THE EFFECT THAT IT HAD OPENING RESERVES AND SHARE CAPITAL TO THE EXTEN T OF ` 151.68 CRORE, AS AGAINST WHICH IT HAD MADE INVESTMENT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR ONLY TO THE EXTENT OF ` 61.25 CRORE. THE OTHER BALANCE SHEET FIGURES WERE ALSO PUT FORTH BEFORE THE A.O. TO BRING HOME THE POINT THAT NO DISALLOWANCE WAS CALLE D FOR U/S 14A. THE ASSESSING OFFICER NOTICED THAT THE TOTAL INTERE ST EXPENDITURE INCURRED BY THE ASSESSEE WAS TO THE TUNE OF ` 19.41 CRORE. BY CONSIDERING THE TOTAL AMOUNT OF INTEREST BEARING BO RROWINGS, THE ASSESSING OFFICER WORKED OUT AVERAGE RATE OF INTERE ST AT 13.63%. SUCH RATE WAS APPLIED TO THE INVESTMENTS MADE BY TH E ASSESSEE IN SHARES FOR WORKING OUT DISALLOWANCE AT ` 6,38,37,708. THE LEARNED CIT(A) OBSERVED THAT ONLY THE DIVIDEND INCOME RECEI VED FROM A DOMESTIC COMPANY IS EXEMPT U/S 10(33) OF THE ACT. A S THE ASSESSEE HAD INVESTED INTER ALIA IN EQUITY SHARES OF STRIDES INC., USA, ARCOLAB SA SWITZERLAND, INFRA INDUSTRI, BRAZIL AND SOLARA FARMACEUTICA, MEXICO, THE LEARNED CIT(A) HELD THAT INTEREST IN RE LATION TO INVESTMENT IN THE SHARES OF SUCH FOREIGN COMPANIES WAS NOT LIABLE TO BE CONSIDERED U/S 14A. IT WAS STILL FURTHER NOTED T HAT THE ASSESSEE HAD ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 3 INVESTED IN THREE DOMESTIC COMPANIES, NAMELY, DENA BANK, KOTHARI PIONEER INFOTECH AND KOTHARI PIONEER BLUE CHIP FUND . THESE INVESTMENTS AS ON 31.03.2001 TOTALLED ` 2.84 CRORE. HE DETERMINED AVERAGE RATE OF INTEREST AT 6.20%. THE SAID PERCENT AGE WAS APPLIED ON THE TOTAL INVESTMENT OF ` 2.84 CRORE FOR SUSTAINING THE DISALLOWANCE AT ` 17,66,427. BOTH THE SIDES ARE IN APPEAL AGAINST THE IR RESPECTIVE STANDS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. SECTION 14A(1) PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY TH E ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. SECTION 10(33), AT THE MATERIAL TIME, EX EMPTED INTER ALIA DIVIDEND REFERRED TO IN SECTION 115-O FROM THE PURV IEW OF TAXATION. SECTION 115-O TALKS OF A `DOMESTIC COMPANY. A `DOM ESTIC COMPANY HAS BEEN DEFINED U/S 2(22A) TO MEAN `AN INDIAN COMP ANY OR ANY OTHER COMPANY WHICH, IN RESPECT OF ITS INCOME LIABL E TO TAX UNDER THIS ACT, HAS MADE THE PRESCRIBED ARRANGEMENT FOR THE DE CLARATION AND PAYMENT, WITHIN INDIA, OF THE DIVIDEND (INCLUDING D IVIDENDS ON PREFERENCE SHARES) PAYABLE OUT OF SUCH INCOME. A B ARE PERUSAL OF THE DEFINITION OF `DOMESTIC COMPANY TRANSPIRES THAT IT IS ONLY INDIAN COMPANY OR ANY OTHER COMPANY, WHICH IN RESPECT OF I TS INCOME IS LIABLE TO TAX UNDER THIS ACT, HAS MADE PRESCRIBED ARRANGEMENT FOR THE DECLARATION AND PAYMENT OF DIVIDEND. OBVIOUSLY THI S DEFINITION DOES NOT EXTEND TO FOREIGN COMPANIES. AS SUCH THE DISALL OWANCE U/S 14A IS CONCEIVABLE IN RESPECT OF INVESTMENT MADE IN THE SH ARES OF DOMESTIC ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 4 COMPANIES AND NOT FOREIGN COMPANIES. NO MATERIAL H AS BEEN BROUGHT ON RECORD BY THE LEARNED DEPARTMENTAL REPRESENTATIV E TO CONTROVERT THE FINDING RECORDED BY THE LEARNED CIT(A) IN RESPE CT OF THE COMPANIES REFERRED TO IN THE IMPUGNED ORDER AS FORE IGN COMPANIES. IN VIEW OF THESE FACTS, IT BECOMES APPARENT THAT TH E PROVISIONS OF SECTION 14A CANNOT EXTEND TO INVESTMENTS MADE IN T HE SHARES OF SUCH FOREIGN COMPANIES. TO THIS EXTENT WE UPHOLD THE IMP UGNED ORDER. 4. COMING TO THE ASSESSEES OBJECTION ABOUT THE SUS TAINABILITY OF PART OF DISALLOWANCE U/S 14A, WE OBSERVE FROM PAGE 3 OF THE IMPUGNED ORDER THAT TOTAL INVESTMENTS MADE IN THE S HARES OF DOMESTIC COMPANY IS TO THE TUNE OF ` 2.84 CRORE. IT IS PALPABLE THAT THE ASSESSEE MADE INVESTMENTS IN SHARES OF DENA BANK IN FINANCIA L YEAR 1996- 1997. INVESTMENT IN KOTHARI PIONEER INFOTECH AND K OTHARI PIONEER BLUE CHIP FUND WAS MADE IN THE PREVIOUS YEAR ENDING 31.03.2000. IT SHOWS THAT NO FRESH INVESTMENT WAS MADE BY THE ASSE SSEE DURING THE CURRENT YEAR IN THE SHARES OF THESE COMPANIES. THE ASSESSEES ANNUAL ACCOUNTS FOR THE CURRENT AND ALSO THE EARLIER RELEV ANT YEARS ARE AVAILABLE IN THE PAPER BOOK. PAGE 11 IS COPY OF PRO FIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.03.2001 AS WELL AS 3 1.03.2000. OUT OF THE TOTAL INVESTMENTS OF ` 2.84 CRORE, THE ASSESSEE HAD MADE INVESTMENT IN SHARES OF DENA BANK TO THE TUNE OF ` 12.57 LAKH, THEREBY LEAVING REMAINING INVESTMENT OF ` 2.72 CRORE MADE IN THE YEAR ENDING 31.03.2000 IN THE SHARES OF KOTHARI PIONEER INFOTECH AND KOTHARI PIONEER BLUE CHIP FUND. A CLOSE LOOK AT THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE-COMPANY FOR THE CORRESPONDI NG DATE OF ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 5 31.03.2000 DIVULGES THAT THE ASSESSEE EARNED PROFIT FOR THE SAID YEAR AMOUNTING TO ` 24.56 CRORE. THE AMOUNT OF DEPRECIATION ITSELF FOR THAT YEAR STANDS AT ` 6.07 CRORE WHICH IS A NON-CASH ITEM. WHEN WE CONSIDER THE MAGNITUDE OF PROFIT WITH THE COMPANY A ND THE INVESTMENTS MADE IN THESE SHARES OF KOTHARI GROUP, IT CAN BE EASILY NOTICED THAT THE PROFIT FOR THE RELEVANT YEAR ITSEL F WAS MUCH MORE THAN THE AMOUNT OF INVESTMENT. COMING TO THE INVESTMENTS IN THE SHARES OF DENA BANK IN FINANCIAL YEAR 1996-1997 IT IS OBSERVE D THAT THE SHARE CAPITAL OF THE COMPANY FAR EXCEEDS THE AMOUNT OF IN VESTMENT IN SHARES AS AT THE END OF SUCH FINANCIAL YEAR. THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LTD. [(2009) 313 ITR 340 (BOM.)] HAS HELD THAT IF THERE BE INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME LOAN HAS BEEN RAISED, IT CAN BE PR ESUMED THAT THE INVESTMENTS WERE MADE FROM INTEREST FREE FUNDS. WHIL E REACHING THIS CONCLUSION THE HONBLE JURISDICTIONAL HIGH COURT CO NSIDERED THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F EAST INDIA PHARMACEUTICAL WORKS LTD. VS. CIT [(1997) 224 ITR 6 27 (SC)]. IN VIEW OF THE AFORESAID PRECEDENT OF THE HONBLE JURI SDICTIONAL HIGH COURT, IT IS APPARENT THAT NO INTEREST BEARING FUND S CAN BE SAID TO HAVE BEEN DEPLOYED BY THE ASSESSEE FOR THE PURPOSES OF M AKING INVESTMENT IN THE SHARES OF THESE THREE COMPANIES, FROM WHICH EXEMPT DIVIDEND INCOME WAS EARNED. IT IS AXIOMATIC THAT WHERE INVES TMENT IS MADE OUT OF ASSESSEES OWN FUNDS AND NOT OUT OF BORROWED FUN DS, THERE CAN BE NO DISALLOWANCE U/S 14A. OUR VIEW IS FORTIFIED BY T HE JUDGMENT OF THE ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 6 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. K.RAHEJA CORPORATION PVT. LTD., A COPY OF THIS JUDGMENT DATED 8 TH OCTOBER, 2011, HAS BEEN PLACED ON RECORD. IN VIEW OF THE FO REGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED C IT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE AT ` 17.65 LAKH U/S 14A IN RESPECT OF THE INVESTMENTS MADE BY THE ASSESSEE IN THE SHARES OF THREE DOMESTIC COMPANIES. THE GROUND RAISED BY THE ASSES SEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 5. GROUND NOS.2 AND 3 OF THE REVENUES APPEAL AND G ROUND NOS.2 AND 3 OF THE ASSESSEES CROSS OBJECTION DEAL WITH T HE DISALLOWANCE U/S 43B. THE ASSESSING OFFICER MADE DISALLOWANCE U/S 43 B AMOUNTING TO ` 39,46,088 ON THE GROUND THAT THE ASSESSEE DEFAULTED IN DEPOSITING EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI W ITHIN THE PERMISSIBLE TIME. HE ALSO MADE ADDITION OF ` 37,83,095 ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYERS SHARE OF PROVIDENT FU ND AND ESIC. THE LEARNED CIT(A) DELETED THE DISALLOWANCE TO THE EXTENT THE ASSESSEE HAD DEPOSITED THE CONTRIBUTIONS WITHIN THE GRACE PERIOD. HOWEVER THE REMAINING ADDITION WAS SUSTAINED FOR WH ICH THE AMOUNT WAS DEPOSITED BY THE ASSESSEE BEYOND THE GRACE PERI OD BUT BEFORE THE DUE DATE PRESCRIBED U/S 139(1) OF THE ACT. BOTH THE SIDES ARE IN APPEAL AGAINST THEIR RESPECTIVE STANDS. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE HONBL E SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD. [(2009) 319 ITR 306 (SC )] ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 7 HAS HELD THAT THE AMENDMENT TO FIRST PROVISO AND TH E OMISSION OF THE SECOND PROVISO TO SECTION 43B BY THE FINANCE ACT, 2 003 IS RETROSPECTIVE. IN THAT VIEW OF THE MATTER ANY AMOUN T REFERRED TO IN SECTION 43B, BEING THE SUM PAYABLE BY THE EMPLOYER SHALL BE ALLOWED AS DEDUCTION IF IT IS PAID BEFORE THE DUE DATE OF F ILING OF THE RETURN. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. AIMIL LTD. [(2010) 321 ITR 508 (DEL.)] HAS HELD THAT IF EMPLOYEES SHARE IS DEPOSITED BEFORE THE DUE DATE THEN NO DISALLOWANCE IS CALLED FOR. IN REACHING THIS CONCLUSION, THE HONBLE DELHI HIGH C OURT RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. VINAY CEMENT LTD. [(2007) 213 CTR (SC) 268] IN WHICH IT WAS HELD THAT THE AMOUNT OF EMPLOYEES CONTRIBUTION ETC. DEPOSITED BEF ORE THE FILING OF RETURN, CANNOT BE DISALLOWED U/S 43B. IN VIEW OF TH E ABOVE DISCUSSION, THE GRIEVANCE OF THE ASSESSEE IS ACCEPT ED AND OBJECTION OF THE REVENUE IS OVERRULED. 7. GROUND NO.4 OF THE REVENUES APPEAL IS AGAINST D ELETION OF DISALLOWANCE OF ` 4,57,765 TOWARDS FOREIGN TRAVEL EXPENSES. THE ASSESSING OFFICER DISALLOWED 10% OF THE FOREIGN TRA VEL EXPENSES BY RELYING ON THE VIEW TAKEN BY HIM IN THE IMMEDIATELY PRECEDING YEAR. THE LEARNED CIT(A) DELETED THE DISALLOWANCE BY HOLD ING THAT FOREIGN TRAVEL EXPENSES WERE INCURRED FOR THE PURPOSE OF BU SINESS. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE IMMEDIAT ELY PRECEDING ASSESSMENT YEAR, THAT IS, 2000-2001 CAME UP FOR ADJ UDICATION BEFORE ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 8 THE TRIBUNAL. VIDE ITS ORDER, COPY OF WHICH IS AVAI LABLE ON RECORD, THE TRIBUNAL, THROUGH PARA 10, HAS HELD THAT NO DISALL OWANCE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES CAN BE SUSTAINED. AS THE VIEW OF THE ASSESSING OFFICER IN MAKING THE DISALLOWANCE IS BAS ED ON HIS VIEW FOR ASSESSMENT YEAR 2000-2001, WHICH NO MORE SURVIV ES, IN OUR CONSIDERED OPINION, THERE CAN BE NO JUSTIFICATION I N SUSTAINING THIS DISALLOWANCE ALSO. WE, THEREFORE, UPHOLD THE IMPUGN ED ORDER ON THIS ISSUE. 9. GROUND NO.5 OF THE REVENUES APPEAL AND GROUND N O.5 OF THE ASSESSEE CROSS OBJECTION ARE ON THE QUESTION AS TO WHETHER RELIEF U/S 80-IA/80-IB SHOULD BE ADJUSTED BEFORE ALLOWING DEDU CTION U/S 80HHC. WHILE COMPUTING `PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S 80HHC, THE ASSESSING OFFICER DEDUCTED THE AMOUNT OF DEDUCTION U/S 80-IB BY CONSIDERING SUB-SECTION (9) OF SECTION 80-IA. THE LEARNED CIT(A) OBSERVED THAT ONLY 30% OF PROFIT OF ELIGIBLE UNIT QUALIFIED FOR DEDUCTION U/S 80-IA/80-IB. HE, THEREF ORE, HELD THAT ONLY THIS MUCH PERCENTAGE OF PROFIT WAS REQUIRED TO BE D EDUCTED FOR COMPUTING CLAIM U/S 80HHC. 10. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD WE FIND THAT THIS ISSUE IS NO MO RE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PVT. LTD. V. DCIT & ANR. [(2011 ) 332 ITR 42 (BOM.)] IN WHICH IT HAS BEEN HELD THAT RESTRICTION U/S 80- IA(9) IS NOT APPLICABLE AT THE STAGE OF COMPUTING DEDUCTI ON U/S 80HHC BUT ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 9 ONLY AT THE STAGE OF ALLOWING DEDUCTION U/S 80HHC. IN VIEW OF THE ABOVE JUDGMENT OF THE HONBLE HIGH COURT, IT BECOME S APPARENT THAT THE ACTION OF THE ASSESSING OFFICER IN ENTIRETY CAN NOT BE SUSTAINED. THE IMPUGNED ORDER TO THE EXTENT IT IS AGAINST THE ASSESSEE IS VACATED AND TO THE EXTENT IT IS AGAINST THE REVENUE IS UPHE LD. THE ASSESSEES GROUND IS ALLOWED AND REVENUES GROUND IS DISMISSED . 11. GROUND NO.6 OF THE REVENUES APPEAL IS AGAINST NETTING OF INTEREST RECEIPTS FOR THE PURPOSE OF DEDUCTION U/S 80HHC. THE ASSESSING OFFICER, WHILE COMPUTING DEDUCTION U/S 80 HHC CONSIDERED THE GROSS AMOUNT OF INTEREST. THE LEARNED CIT(A), H OWEVER, OVERTURNED THIS FINDING BY HOLDING THAT ONLY THE NE T AMOUNT OF INTEREST WAS TO BE CONSIDERED. HAVING HEARD THE RIVAL SUBMI SSIONS IT IS NOTICED THAT THIS ISSUE HAS BEEN SETTLED BY THE HON BLE SUPREME COURT IN ASSOCIATED CAPSULES PVT. LTD. V. CIT [(2012) 343 IT R 89 (SC)] BY HOLDING THAT NETTING OF INTEREST IS PERMISSIBLE. TH E RELIANCE OF THE LD. DR ON THE JUDGMENT IN THE CASE OF CIT VS. ASIAN ST AR CO. LTD. (2010) 326 ITR 56 (BOM) IS MISCONCEIVED AS THE SAM E HAS BEEN REVERSED BY THE HONBLE SUPREME COURT IN THE AFORE NOTED CASE. AS SUCH NO FAULT CAN BE FOUND WITH THE IMPUGNED ORDER ON THIS SCORE. THIS GROUND IS NOT ALLOWED. 12. GROUND NO.7 OF THE REVENUES APPEAL IS AGAINST THE DIRECTION OF THE LEARNED CIT(A) TO EXCLUDE THE AMOUNT OF EXCISE DUTY ON ` 8.92 CRORE FROM `TOTAL TURNOVER FOR THE PURPOSES OF COM PUTING DEDUCTION U/S 80HHC. THE ASSESSING OFFICER INCLUDED THE AMOUN T OF EXCISE ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 10 DUTY IN `TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 80HHC. THE LEARNED CIT(A) OVERTURNED THE ASSESSMENT ORDER ON T HIS POINT. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THIS ISSUE HAS ALSO BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. LAXMI MACHINE WORKS [(2007) 290 ITR 667 (SC)] HOLDING THAT THE EXCISE DUTY IS NOT INCLUDIBLE IN THE `TOTAL TURNOVER IN THE FORMULA CONTAINED IN SECTION 80HHC. THE IMPUGNED ORDER ON THIS ISSUE, BEING IN CONFORMITY WITH THE VIEW TAKEN BY THE HONBLE SUPRE ME COURT, DOES NOT WARRANT ANY INTERFERENCE. THIS GROUND IS NOT AL LOWED. 14. GROUND NO.8 OF THE REVENUES APPEAL IS AGAINST THE DIRECTION OF THE LEARNED CIT(A) FOR TREATING THE PROFIT ON SALE OF DEPB LICENCE AS EXPORT INCENTIVES AND ALLOWING DEDUCTION U/S 80HHC UNDER PROVISO TO SECTION 80HHC(3) OF THE ACT. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ISSUE RAISED THROUGH THIS GROUNDS IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS V. ITO [(2012) 67 DTR 185 (SC)] IN WHICH IT HAS BEEN HELD THAT WHEN DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSFER OF DEPB WILL BE SALES VALUE OF DEPB LESS ITS FACE VALUE. IT HAS FURTHER BEEN HE LD THAT DEPB IS CHARGEABLE AS INCOME U/S 28(IIIB) IN THE YEAR IN WH ICH SUCH PERSON APPLIES FOR DEPB AGAINST THE EXPORTS AND PROFIT ON SALE OF DEPB IS ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 11 CHARGEABLE U/S 28(IIID) IN THE YEAR IN WHICH HE TRA NSFERS DEPB. RESPECTFULLY FOLLOWING THE PRECEDENT WE SET ASIDE T HE IMPUGNED ORDER ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO A LLOW THE CLAIM IN ACCORDANCE WITH THE AFORENOTED JUDGMENT OF THE HON BLE SUPREME COURT . 16. GROUND NO.9 IS AGAINST THE DIRECTION OF THE LEA RNED CIT(A) TO REDUCE 10% EXPORT INCENTIVES FROM THE GROSS INDIREC T COST BY CONSIDERING THE SAME AS INDIRECT EXPENDITURE INCURR ED IN EARNING SUCH INCIDENCE. HAVING HEARD THE RIVAL SUBMISSIONS IT IS NOTED THAT THIS GROUND IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF HERO EXPORTS V. CIT [295 ITR 454 (SC)]. IN THIS CASE IT HAS BEEN HELD THAT THE PRINCIPLE OF ATTRIBUTION IS APPLICABLE TO CASES FALLING U/S 80HH C(3)(B) AND THEREFORE, PART OF INDIRECT COST HAS TO BE APPORTIO NED TO EXPENSES INCURRED FOR EARNING EXPORT INCENTIVES. 10% OF TOTA L INCOME HAS BEEN HELD AS FAIR ESTIMATE IN THIS CASE. AS THE VIEW TAK EN BY THE LEARNED CIT(A) MATCHES WITH THAT OF THE HONBLE SUPREME COU RT IN THE AFORENOTED CASE, WE ARE OF THE CONSIDERED OPINION T HAT NO INTERFERENCE CAN BE MADE IN THE IMPUGNED ORDER ON THIS ISSUE. TH IS GROUND IS NOT ALLOWED. 17. LAST GROUND OF THE REVENUES APPEAL IS AGAINST THE DIRECTION OF THE LEARNED CIT(A) TO REDUCE EXPORT PROFITS BASED O N BOOK PROFIT IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER AND NOT THE QUANTUM OF ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 12 DEDUCTION AS WORKED OUT U/S 80HHC FOR THE PURPOSES OF WORKING OUT `BOOK PROFIT LIABLE FOR MAT U/S 115JB OF THE ACT. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THIS ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HO NBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. V. CIT [(2010) 327 ITR 305 (SC)] IN WHICH IT HAS BEEN HELD THAT CLAUSE (IV) OF THE EXPLANATION TO SECTION 115JB COVERS FULL EXPORT PROFITS OF 100% AS `ELIGIBLE PROFITS AND THE SAME CANNOT BE REDUCED TO 80% BY RELYING ON SECTION 80HHC(1B). THUS IT IS EVIDENT THAT THE LEARNED CIT( A) HAS TAKEN AN INESCAPABLE VIEW ON THIS POINT WHICH DOES NOT REQUI RE ANY INTERFERENCE. THIS GROUND IS NOT ALLOWED. 19. GROUND NO.4 OF THE ASSESSEES CROSS OBJECTION I S AGAINST THE DIRECTION OF THE LEARNED CIT(A) FOR TREATING SALE O F SCRAP AS PART OF `TOTAL TURNOVER IN THE COMPUTATION OF DEDUCTION U/ S 80HHC. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE LEARNE D CIT(A) SUSTAINED THE INCLUSION OF `SCRAP SALE WITHIN THE `TOTAL TU RNOVER. THE ASSESSEES CONTENTION THAT THE AMOUNT OF REALIZATIO N FROM SALE OF SCRAP SHOULD BE REDUCED FROM THE DIRECT COST OF EXPORTS I S NOT ACCEPTABLE IN VIEW OF THE FACT THAT THERE IS NO MATERIAL ON RECOR D TO INDICATE THAT THE SCRAP WAS GENERATED FROM THE MATERIAL DIRECTLY USED FOR MANUFACTURE OF GOODS EXPORTED HAVING NO ELEMENT OF PROFIT. THE HONBLE PUNJAB ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 13 & HARYANA HIGH COURT IN CIT V. BICYCLE WHEELS (INDIA) [(2011) 335 ITR 384 (P&H)] HAS HELD THAT THE SALE OF SCRAP CANNOT BE EXCLUDED FROM `TOTAL TURNOVER WHICH SHALL INCREASE THE DENO MINATOR OF FORMULA FOR DETERMINING THE EXTENT OF BENEFIT ADMISSIBLE TO AN ASSESSEE U/S 80HHC OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY TH E MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S.ALBRIGHT & WILSON CHEMICALS INDIA LIMITED VS. DCIT IN ITA NO. 4362/M/2003. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) WAS JUSTIFIED IN DECIDING ACCORDINGLY. THIS GROUND OF C.O. IS NOT ALLOWED. 21. THE ASSESSEE HAS RAISED TWO ADDITIONAL GROUNDS. THE LD. AR STATED THAT BOTH THE GROUNDS INVOLVE ONLY THE DETER MINATION OF QUESTION OF LAW WITHOUT REQUIRING ANY CONSIDERATION OF FRESH FACTS. NO SERIOUS OBJECTION WAS TAKEN BY THE LEARNED DEPARTME NTAL REPRESENTATIVE AGAINST THE RAISING OF SUCH ADDITION AL GROUNDS. WE, THEREFORE, ADMIT SUCH ADDITIONAL GROUNDS FOR DISPOS AL ON MERITS. 22. THE FIRST ADDITIONAL GROUND IS AGAINST N ON-CHARGING THE INTEREST U/S 234D OF THE ACT. THE LEARNED COUNSEL F OR THE ASSESSEE STATED THAT THE RETURN FOR THE RELEVANT ASSESSMENT YEAR I.E. 2001-2002 WAS FILED ON 31.10.2001 CLAIMING A REFUND OF ` 73,82,177. REFUND OF ` 81,13,024 (INCLUDING INTEREST) WAS GRANTED ON 24.04 .2003. ASSESSMENT ORDER IN THIS CASE WAS PASSED U/S 143(3) ON 16.02.2004 RAISING A DEMAND OF ` 4,38,03,112 INCLUSIVE OF INTEREST U/S 234D TO THE ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 14 TUNE OF ` 5,24,101. THE ASSESSEE HAS CHALLENGED THE LEVY OF I NTEREST U/S 234D. 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND P ERUSED THE RELEVANT MATERIAL ON RECORD. SECTION 234D WAS INSERTED BY TH E FINANCE ACT, 2003 WITH EFFECT FROM 01.06.2003 PROVIDING FOR THE LEVY OF INTEREST ON EXCESS REFUND. SUB-SECTION (1) READS AS UNDER:- `234D. INTEREST ON EXCESS REFUND.(1) SUBJECT TO TH E OTHER PROVISIONS OF THIS ACT, WHERE ANY REFUND IS GRANTED TO THE ASSESSEE UNDER SUB-SECTION (1) OF SECTION 143, AND (A) NO REFUND IS DUE ON REGULAR ASSESSMENT ; OR (B) THE AMOUNT REFUNDED UNDER SUB-SECTION (1) OF S ECTION 143 EXCEEDS THE AMOUNT REFUNDABLE ON REGULAR ASSESSMENT , THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF ONE-HALF PER CENT. ON THE WHOLE OR THE EXCESS AM OUNT SO REFUNDED, FOR EVERY MONTH OR PART OF A MONTH COMPRI SED IN THE PERIOD FROM THE DATE OF GRANT OF REFUND TO THE DATE OF SUCH REGULAR ASSESSMENT. (EMPHASIS SUPPLIED BY US) 24. DOUBTS WERE EXPRESSED IN CERTAIN QUART ERS ABOUT THE SIGNIFICANCE OF THE DATE OF 1.6.2003, BY WHICH THIS PROVISION BECAME A PART OF THE STATUTE BY THE FINANCE ACT, 2003. IT WAS INTERPRETE D BY SOME PERSONS AS AN INDICATIVE OF THE ASSESSMENT YEAR FROM WHICH THIS P ROVISION IS INTENDED TO COME INTO FORCE, VIZ., A.Y. 2004-05. OTHERS LOOKED AT IT AS THE DATE OF INTIMATION U/S 143(1) AND THE RESULTANT GRANTING OF REFUND. STILL SOME OTHERS INTERPRETED IT AS THE DATE OF PASSING THE RE GULAR ASSESSMENT ORDER, ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 15 CURTAILING OR ELIMINATING THE REFUND EARLIER GRANTE D PURSUANT TO INTIMATION UNDER SECTION 143(1). TO RESOLVE THE CONTROVERSY, T HIS ISSUE WAS REFERRED TO THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. EKTA PROMOTERS PVT. LTD. [(2008) 113 ITD 719 (DEL) (SB)] . THE SPECIAL BENCH NOTICED THAT SECTION 234D WAS INSERTED WITH E FFECT FROM 01.06.2003. THIS PROVISION, BEING SUBSTANTIVE IN NA TURE, WAS HELD NOT TO HAVE RETROSPECTIVE EFFECT AND HENCE APPLICABLE F ROM ASSESSMENT YEAR 2004-2005 ONLY. IT WAS, THEREFORE, HELD THAT I NTEREST U/S 234D IS CHARGEABLE FROM ASSESSMENT YEAR 2004-2005 ONLY AND HENCE THIS SECTION CANNOT BE APPLIED TO EARLIER ASSESSMENT YE ARS EVEN THOUGH REGULAR ASSESSMENT FOR SUCH ASSESSMENT YEARS WERE F RAMED AFTER 1 ST JUNE, 2003 OR THE REFUND GRANTED FOR THOSE YEARS A FTER THE SAID DATE. THE HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX V. JACABS CIVIL INCORPORATED [(2011) 330 ITR 578 (D EL.)] UPHELD THE VIEW TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE AFORE NOTED CASE BY HOLDING THAT SECTION 234D IS APPLICABLE ON LY FROM ASSESSMENT YEAR 2004-2005. THE HONBLE MADRAS HIGH COURT IN CIT V. INFRASTRUCTURE DEVELOPMENT FINANCE CO. LTD. TOOK A CONTRARY VIEW VIDE ITS JUDGMENT DATED 8 TH SEPTEMBER, 2011 REPORTED IN [(2012) 340 ITR 580 (MAD.) BY HOLDING THAT FOR THE APPLICABILI TY OF SECTION 234D WHAT IS RELEVANT IS THE DATE OF ASSESSMENT AND NOT THE YEAR OF ASSESSMENT. SINCE REGULAR ASSESSMENT IN THAT CASE W AS COMPLETED ON 30 TH MARCH, 2004 AND SECTION 234D CAME INTO OPERATION F ROM 1 ST JUNE, 2003, THE HONBLE HIGH COURT HELD THAT THE ASSESSEE WAS LIABLE TO PAY INTEREST ON THE EXCESS REFUND AMOUNT RECEIVED. ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 16 25. AT THIS JUNCTURE IT IS RELEVANT TO NOTE THAT TH E FINANCE ACT, 2012 HAS INSERTED EXPLANATION 2 TO SECTION 234D WITH RETROSPECTIVE EFFECT FROM 01.06.2003, WHICH READS AS UNDER:- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT THE PROVISIONS OF THIS SECTION SHALL ALSO APPLY TO AN ASSESSMENT YEAR COMMENCING BEFORE THE 1 ST DAY OF JUNE, 2003, IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSMENT YEAR IS COMPLETED AFTER THE SAID DATE. (EMPHASIS SUPPLIED BY US) 26. THE RATIONALE OF THE INSERTION OF EXPLANATION 2 HAS BEEN EXPLAINED IN THE MEMORANDUM EXPLAINING THE PROVISIO N OF FINANCE BILL 2012 AS UNDER:- CLAUSE 85 OF THE BILL SEEKS TO INSERT A NEW EXPLANA TION TO SECTION 234D OF THE INCOME-TAX ACT RELATING TO INTE REST ON EXCESS REFUND. THE EXISTING PROVISIONS OF SUB-SECTION (1) OF THE AFORESAID SECTION 234D PROVIDES THAT WHERE ANY REFU ND IS GRANTED TO THE ASSESSEE UNDER SUB-SECTION (1) OF SE CTION 143 AND NO REFUND IS DUE ON REGULAR ASSESSMENT, OR THE AMOUNT REFUNDED UNDER SUB-SECTION (1) OF SECTION 14 3 EXCEEDS THE AMOUNT REFUNDABLE ON REGULAR ASSESSMENT , THEN, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE IN TEREST AT THE RATE OF ONE-HALF PER CENT. ON THE WHOLE OR THE EXCESS AMOUNT SO REFUNDED FOR EVERY MONTH OR PART OF A MON TH COMPRISED IN THE PERIOD FROM THE DATE OF GRANT OF R EFUND TO THE DATE OF SUCH REGULAR ASSESSMENT. . ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 17 IT IS PROPOSED TO INSERT A NEW EXPLANATION SO AS TO CLARIFY THAT THE PROVISIONS OF THIS SECTION SHALL ALSO APPLY TO AN ASSESSMENT YEAR COMMENCING BEFORE THE 1ST DAY OF JU NE, 2003 IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSMENT YEAR IS COMPLETED AFTER THE SAID DATE. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FRO M 1ST JUNE, 2003. 27. A GLANCE AT THE LANGUAGE OF EXPLANATION 2 TO SECTION 234D ALONG WITH THE INTENTION OF THE LEGISLATURE EMANATING FRO M THE MEMORANDUM EXPLAINING THE PROVISIONS MAKES TWO THINGS ABUNDANT LY CLEAR. FIRST, THE USE OF THE WORD ` ALSO MAKES IT MANIFEST THAT INTEREST U/S 234D IS CHARGEABLE IN RESPECT OF ANY ASSESSMENT YEAR COMMEN CING BEFORE OR AFTER THE 1 ST DAY OF JUNE, 2003. SECOND, THE DEPLOYMENT OF LANGU AGE ` IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSMENT YE AR IS COMPLETED AFTER THE SAID DATE MAKES IT UNEQUIVOCAL THAT THE CUT-OFF DATE OF 01.06.2003 IS RELEVANT FOR THE COMPLETION OF ASSESS MENT. THE UPSHOT IS THAT THE DIRECTIVE OF SECTION 234D APPLIES TO A NY ASSESSMENT YEAR COMMENCING BEFORE OR AFTER THE 1 ST DAY OF JUNE, 2003 IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSMENT YEAR IS C OMPLETED AFTER THE SAID DATE. IN OTHER WORDS, IF THE REGULAR ASSESSME NT IS COMPLETED AFTER THE CUT OFF DATE WHICH RESULTS IN OBLITERATING OR R EDUCING THE AMOUNT OF REFUND WHICH WAS GRANTED EVEN PRIOR TO SUCH DATE , INTEREST U/S 234D IS CHARGEABLE. WITH THIS LEGISLATIVE INSERTION, THE VIEW EXPRESSED BY THE HONBLE MADRAS HIGH COURT IN INFRASTRUCTURE DEVELOPMENT FINANCE CO. LTD.(SUPRA) HAS BEEN ACCEPTED AND THE ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 18 CONTRARY VIEW RENDERED BY THE HONBLE DELHI HIGH CO URT IN JACABS CIVIL INCORPORATED (SUPRA) THAT SECTION 234D APPLIES ONLY FROM A.Y. 2004-05, HAS BEEN NEGATED. 28. THUS, THE NET EFFECT OF INSERTION OF EXPLANATIO N 2 IS THAT WHERE ANY REFUND IS GRANTED TO THE ASSESSEE U/S 143(1) AN D DUE TO THE FRAMING OF THE REGULAR ASSESSMENT AFTER 01.06.2003, SUCH REFUND IS WIPED OUT FULLY OR PARTLY, THE ASSESSEE WILL BE LIA BLE TO PAY INTEREST U/S 234D FROM THE DATE OF GRANT OF REFUND TO THE DATE O F SUCH REGULAR ASSESSMENT. HENCE THE CUT-OFF DATE IS RELEVANT ONL Y IN THE CONTEXT OF PASSING OF THE REGULAR ASSESSMENT ORDER CURTAILING OR ELIMINATING THE REFUND. 29. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 234D CANNOT APPLY TO THE EXTANT CASE BECAUSE REFUND WAS GRANTED ON 24.04.2003 WHICH IS WELL BEFORE THE DATE OF INSERTI ON OF SECTION 234D ITSELF. REFERRING TO THE LANGUAGE OF SUB-SECTION ( 1) : ` WHERE ANY REFUND IS GRANTED ., IT WAS STATED THAT SINCE THE ONLY WOR D `IS USED WHICH IS NOT ACCOMPANIED BY `OR HAS BEEN, IT WOULD MEAN THAT IF THE REFUND IS GRANTED AFTER 01.06.2003, THE PRO VISION SHALL FAIL. 30. WE ARE NOT IMPRESSED WITH THIS SUBMISSION. THE LD. AR IS READING THE WORD `IS IN ONLY HALF OF THE PROVISION , THEREBY LEAVING THE OTHER PART OF THE SENTENCE AS SUCH. IN FACT, SUB-SE CTION (1) AS REPRODUCED ABOVE, HAS TWO CLAUSES (A) AND (B) AND T HE FULL STOP COMES ONLY AT THE END OF SUB-SECTION. CLAUSE (A), WHICH IS IMMEDIATELY NEXT TO THE LINE `WHERE ANY REFUND IS GRANTED TO THE AS SESSEE ALSO USES ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 19 THE WORD `IS. WHEN WE METICULOUSLY READ THE RELEVAN T PARTS OF THE SUB-SECTION IN ENTIRETY, WHAT EMERGES IS THAT : `W HERE ANY REFUND IS GRANTED TO THE ASSESSEE UNDER SUB-SECTION (1) OF SE CTION 143, AND NO REFUND IS DUE ON REGULAR ASSESSMENT ., THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST . FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD FROM THE DATE OF GRANT OF REFUND TO T HE DATE OF SUCH REGULAR ASSESSMENT. AN OVERVIEW OF THIS PROVISION INDICATES THAT IT HAS THREE MAJOR SEGMENTS, VIZ., FIRST, WHERE ANY RE FUND IS ISSUED U/S 143(1); SECOND, THE AMOUNT OF REFUND IS ERADICATE D OR REDUCED IN REGULAR ASSESSMENT; AND THIRD, WHICH IS A COROLLARY OF THE FIRST TWO, IS THE LEVY OF INTEREST. AS EACH OF THE FIRST TWO SEGM ENTS USE THE WORD `IS, THERE CAN BE NO LOGIC IN ARGUING THAT THIS SE CTION DOES NOT OPERATE IN RELATION TO THE CASES WHERE REFUND HAS BEEN GRAN TED PRIOR TO THE CUT- OFF DATE. IT IS FURTHER RELEVANT TO NOTE THAT THE W ORD `SHALL HAS BEEN USED IN CONSEQUENTIAL PART OF THIS PROVISION, WHI CH DECLARES THAT THE CO-EXISTENCE OF FIRST TWO SEGMENTS SHALL RESULT IN THE LEVY OF INTEREST. IT IS SELF EVIDENT THAT THE UNDERLYING OBJECT AND T HE COMMAND OF SECTION 234D IS TO CHARGE INTEREST. THE OCCASION F OR CHARGING OF INTEREST U/S 234D CAN ARISE ONLY ON THE COMPLETION OF ASSESSMENT AND NOT WHEN THE ORIGINAL REFUND WAS GRANTED. THE DATE OF ORIGINAL GRANT OF REFUND IS RELEVANT ONLY FOR THE PURPOSE OF CALCU LATION OF THE AMOUNT OF INTEREST UNDER THIS SECTION AS THE INTEREST IS P AYABLE BY THE ASSESSEE FROM THE DATE OF GRANT OF REFUND TO THE DATE OF REG ULAR ASSESSMENT. 31. IF WE INTERPRET SECTION 234D AS SUGGESTED BY TH E LEARNED AR, THEN THE EFFECT OF INSERTION OF EXPLANATION 2 WILL BE RENDERED ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 20 REDUNDANT AND IT WILL LEAD TO TAKING THE CLOCK BACK TO THE PRE- AMENDMENT POSITION THUS READING SUB-SECTION (1) DE HORS EXPLANATION 2. IN OUR CONSIDERED OPINION, THERE IS NO MERIT IN THE CONTENTION RAISED BY THE LEARNED AR IN THIS REGARD. AS THE REGULAR ASSESSMENT IN THIS CASE WAS COMPLETED ON 16.02.2004 WHICH IS WELL AFTER THE CUT OFF DATE OF 1 ST JUNE, 2003, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER WAS JUSTIFIED IN CHARGING INTERES T U/S 234D. THIS ADDITIONAL GROUND IS NOT ALLOWED. 32. THE LAST ADDITIONAL GROUND IS AS UNDER:- THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT, T HE RESPONDENTS ARE ENTITLED FOR CREDIT IN RESPECT OF M INIMUM ALTERNATE TAX PAID BY THE AMALGAMATING COMPANY VIZ. BOMBAY DRUGS & PHARMA LTD., AS THE SAID COMPANY HAS AMALGAMATED WITH THE RESPONDENTS COMPANY DURING THE ASSESSMENT YEAR 2001-02. 33. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE FILED ITS RETURN ON 31.10.2001. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE ALSO FILED LETTER READING AS U NDER:- M/S BOMBAY DRUG & PHARMA LTD., UNDER SCHEME OF AMALGAMATION HAS BEEN AMALGAMATED WITH THE ASSESSEE COMPANY W.E.F. 1 ST APRIL, 2000. HOWEVER, RECEIPT OF FINAL COURT ORDER APPROVING THE AMALGAMATION IS PENDING. THE ACCOUNTS OF THE TWO COMPANIES HAVE BEEN PREPARED SEPARATELY. ACCORDINGLY, THE RETURN OF INCOME HAS B EEN FILED M/S. BOMBAY DRUG & PHARMA LTD HAS BEEN FILED ON 25.10.01 WITH THE ADDL.CIT. RG.9(1), MUMBAI. ALSO F OR THE SAME REASON OUR CLIENT ARE FILING THEIR RETURN OF ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 21 INCOME WITHOUT INCORPORATING THERE IN THE ASSESSABL E PROFIT AND GAIN OF THE SAID COMPANY VICE M/S BOMBAY DRUG & PHARMA LTD. ON RECEIPT OF THE COURT ORDER, O UR CLIENT WILL FILE A REVISED RETURN INCORPORATING THE REIN THE ASSESSABLE PROFIT & GAIN OF THE SAID M/S BOMBAY DRU G & PHARMA LTD., WHICH MAY PLEASE BE NOTED. 34. THEREAFTER A REVISED RETURN WAS FILED IN VIEW OF THE NOTE GIVEN IN THE ORIGINAL RETURN. THE SAID RETURN WAS ACCOMPANIE D BY COPY OF ANNUAL ACCOUNT OF BOMBAY DRUGS & PHARMA LTD. MERGED WITH THE ASSESSEE-COMPANY. THE LEARNED AR CONTENDED THAT THE ASSESSING OFFICER HAS FAILED TO GIVE TAX CREDIT EARNED BY BOM BAY DRUGS & PHARMA LTD. WHICH GOT AMALGAMATED WITH IT. ON A PER TINENT QUERY IT WAS ADMITTED THAT THIS GROUND WAS NOT TAKEN BEFORE THE LEARNED CIT(A). IT WAS, HOWEVER, MAINTAINED THAT ALL THE RE LEVANT FACTS IN THIS REGARD ARE AVAILABLE ON RECORD WHICH IS APPARENT FR OM THE ASSESSMENT ORDER ITSELF WHEREBY THE SAID NOTE HAS BEEN REPRODU CED BY THE A.O. THE LD. AR REQUESTED THAT THE A.O. BE DIRECTED TO ALLOW THE TAX CREDIT IN RESPECT OF BOMBAY DRUGS & PHARMA LTD. THE LEARNE D DEPARTMENTAL REPRESENTATIVE DID NOT RAISE ANY OBJEC TION TO IT. 35. HAVING HEARD THE RIVAL BUT COMMON SUBMISSIONS I N THIS REGARD, WE FIND THAT NO FACTUAL DETAILS IN THIS REGARD ARE AVAILABLE BEFORE US. IN OUR CONSIDERED OPINION, IT WILL BE JUST AND FAIR IF THE ASSESSING OFFICER IS DIRECTED TO LOOK INTO THESE ASPECTS AS P ER LAW AND THEN DECIDE THE MATTER AFRESH. NEEDLESS TO SAY THE ASSES SEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD. ITA NO.6487/MUM/2004 & CO.132/M/2005 M/S.STRIDES ARCOLAB LIMITED. 22 36 . . /3 + , 4 .+ , +/ 56 '% ./ , )*# 72 / 8 , +/ 56. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF TH E ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 3 RD DAY OF AUGUST, 2012. !2 , 01& 9!%3 1 , : SD/- SD/- (I.P.BANSAL) (R.S.SYAL) ' ! ' ! ' ! ' ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; 9!% DATED : 3 RD AUGUST, 2012. DEVDAS* !2 , )'/7; <;&/ !2 , )'/7; <;&/ !2 , )'/7; <;&/ !2 , )'/7; <;&// COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. = () / THE CIT(A)-X, MUMBAI. 4. = / CIT 5. ;@: )'/'% , , / DR, ITAT, MUMBAI 6. :A B / GUARD FILE. !2% !2% !2% !2% / BY ORDER, *;/ )'/ //TRUE COPY// C C C C/ // /5 + 5 + 5 + 5 + ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI