Indian Rayon & Inds Ltd., V. ACIT Rg - 3(2),

CO 15/MUM/2004

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7506 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 5 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 08-06-2012
• Assessment Year: misc
• Appeal Filed On: 13-01-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBACHAM RAM
• Assessee Lawyers: J D MISTRY
• Keywords: Depreciation; Additional depreciation; Question of law; Capital receipt; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 40A(3); 143(3); 244A; 37(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI N.K. BILLAIYA (ACCOUNTANT MEMBER ) ITA NOS. 6421 & 6422/MUM/2002 ASSESSMENT YEARS-1996-97 & 1997-98 M/S. INDIAN RAYON & INDUSTRIES LTD., (NOW KNOWN AS M/S. ADITYA BIRLA NUVO LTD., CORPORATE FINANCE DIVISION, A-4, ADITYA BIRLA CENTRE, S.K. AHIRE MARG, WORLI, MUMBAI-400 030 PAN-AAACI 1747H VS. THE DY. CIT, WARD 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) ITA NO. 6836/MUM/2002 A N D ITA NO. 41/MUM/2003 ASSESSMENT YEARS-1996-97 & 1997-98 THE DY. CIT, WARD 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. INDIAN RAYON & INDUSTRIES LTD., (NOW KNOWN AS M/S. ADITYA BIRLA NUVO LTD., CORPORATE FINANCE DIVISION, A-4, ADITYA BIRLA CENTRE, S.K. AHIRE MARG, WORLI, MUMBAI-400 030 C.O.NO. 14 /MUM/2004 (ARISING OUT OF ITA NO. 6836/MUM/2002 ASSESSMENT YEAR-1996-97 M/S. INDIAN RAYON & INDUSTRIES LTD., (NOW KNOWN AS M/S. ADITYA BIRLA NUVO LTD., CORPORATE FINANCE DIVISION, A-4, ADITYA BIRLA CENTRE, S.K. AHIRE MARG, WORLI, MUMBAI-400 030 PAN-AAACI 1747H VS. THE DY. CIT, WARD 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 (CROSS OBJECTOR) (RESPONDENT) ADITYA BIRLA NUVO LTD., 2 C.O.NO. 15 /MUM/2004 (ARISING OUT OF ITA NO. 41/MUM/2003 ASSESSMENT YEAR-1997-98 M/S. INDIAN RAYON & INDUSTRIES LTD., (NOW KNOWN AS M/S. ADITYA BIRLA NUVO LTD., CORPORATE FINANCE DIVISION, A-4, ADITYA BIRLA CENTRE, S.K. AHIRE MARG, WORLI, MUMBAI-400 030 PAN-AAACI 1747H VS. THE DY. CIT, WARD 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY: SHRI J.D. MISTRY DEPARTMENT BY: SHRI SUBACHAM RAM DATE OF HEARING : 8.06.2012 DATE OF PRONOUNCEMENT: 22.6.2012 O R D E R PER BENCH: THESE CROSS APPEALS ARE FILED BY ASSESSEE AND DEPAR TMENT AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 1996-97 & 1997-98 AGAINST ORDERS OF LD. CIT(A)-CENTRAL II, MUMBAI DT. 2 5 TH SEPTEMBER, 2002. SINCE ISSUES ARE COMMON IN THESE APPEALS, THESE WER E HEARD TOGETHER AND ARE BEING DISPOSED OFF THROUGH THIS CONSOLIDATED OR DER. 2. FIRSTLY WE TAKE UP APPEAL FILED BY ASSESSEE BEIN G ITA NO. 6421/M/02. 3. THE FACTS ARE THAT THE ASSESSEE IS A COMPANY ENG AGED IN MANUFACTURING OF DIVERGENT PRODUCTS RANGING FROM TE XTILES TO CEMENT AND INSULATOR TO CARBON BLACK. THE RETURN OF INCOME FO R THE YEAR UNDER CONSIDERATION WAS FILED ON 29.11.1996 DECLARING TOT AL INCOME AT RS. 59,68,19,288/-. THE RETURN WAS ACCOMPANIED WITH TA X AUDIT REPORT, PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND OTHER DOCUMENTS . THE RETURN WAS REVISED ON 30.3.1998. ADITYA BIRLA NUVO LTD., 3 4. DURING THE YEAR, COMPANY COMMISSIONED THREE NEW INDUSTRIAL UNDERTAKINGS I.E. POWER PLANT II AT RAJASHREE CEMENT, MALKHED, GRINDING UNIT AT HOTGI SHOLAPUR OF MAHARASHTRA AND CLINKERISATION UNIT AT MALKHED IN KARNATAKA. THE RETURN WAS PROCESSED AND SELECTED F OR SCRUTINY ASSESSMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER SOUGHT EXPLANATION ON VARIOUS ISSUES AND AFTER CONSIDERING THE SUBMISSIONS, THE AO COMPLETED THE ASSESSMENT ON 31.12.1998 AFTER MAKING ADDITIONS ON VARIOUS HEADS. THE MATTER WAS TAKEN BY THE ASSESSEE BEFORE THE LD. CIT(A). 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS AND THE DOCUMENTS SUBMITTED BY AO IN SUPPORT OF ITS CLAIM PARTLY ALLO WED THE APPEAL. 6. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. CIT(A). THE SENIOR COUNSEL FOR THE ASSESSEE FILED A DETAILE D CHART SHOWING GROUNDS OF APPEAL WHICH HAVE BEEN DEALT BY THE AO AND THE L D. CIT(A) AND BY THE ITAT MUMBAI IN ITS EARLIER YEARS ORDERS IN ASSESSE ES OWN CASE. 7. GROUND NO. 1 RELATES TO DISALLOWANCE OF EXPENSE S AT RS. 1,75,308/- MADE U/S. 6D BY THE AO AND CONFIRMED BY LD. CIT(A). WE FIND THAT SIMILAR ISSUE WAS THERE BEFORE TRIBUNAL IN THE ASSESSMENT Y EAR 1992-93, 1993-94, 1994-95 AND 1995-96. 8. DURING THE YEAR THE ASSESSEE HAS DEBITED AN AMOU NT OF RS. 5,75,53,123/- TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD TRAVELLING EXPENSES WHICH INCLUDES FARE, LODGING AND BOARDING CHARGES A ND OTHER RELATED EXPENSES. THE ASSESSEE HAS ITSELF DISALLOWED IN TH E COMPUTATION OF INCOME AN AMOUNT OF RS. 1,07,863/-. THE DISALLOWANCE BY T HE ASSESSEE IS BASED ON THE DECISION OF ITAT IN THE CASE OF S.V. GHATALIA I N ITA NO. 3294/B/91. THE CLAIM OF THE ASSESSEE WAS DISREGARDED BY THE AO WHO WENT ON TO CALCULATE THE DISALLOWANCE AS PER PROVISIONS OF RULE 6D FOR D IFFERENT UNITS ON THE BASIS OF PER PERSON PER TRIP. THE LD. SENIOR COUNSEL FAI RLY CONCEDED THAT THE ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE JUDGEMENT OF HONBLE HIGH COURT OF MUMBAI IN THE CASE OF CIT VS ARROW INDIA LTD. 229 I TR 325 (BOM) AND THE ADITYA BIRLA NUVO LTD., 4 DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR TH E PRECEDING ASSESSMENT YEARS. RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF LD. CIT(A). ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS UPHELD. 9. GROUND NOS. 2, 12, 15, 16 & 17 HAVE NOT PRESSED BY THE SENIOR COUNSEL. THEREFORE IT IS DISMISSED AS NOT PRESSED. 10. GROUND NO. 3 RELATES TO DISALLOWANCE OF RS. 58,951/- UNDER RULE 6D BEING TRAVELLING EXPENSES INCURRED FOREIGN CITIZENS TRAVELLING IN INDIA. THE ASSESSEE HAS DISALLOWED RS. 50,911/- IN THE COMPUTA TION OF INCOME. HOWEVER, THE AO INVOKED THE PROVISIONS OF RULE 6D A ND ACCORDINGLY ADDED RS. 1,09,862/- CALCULATED ON THE BASIS OF PRESENT PER TRIP BEING IN EXCESS OF LIMITS LAID DOWN UNDER RULE 6D. THE SAME WAS CONF IRMED BY LD. CIT(A). 11. THE SENIOR COUNSEL POINTED OUT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE IN EARLIER ASSESSMENT YEARS. RESPECTFULLY FOLLOWING THE SAID DECISION, WE CONFIRM THE ORDER OF LD. CIT(A) UPHOLDING THE DISALLOWANCE THIS YEAR ALSO. 12. GROUND NO. 4 RELATES TO DISALLOWANCE OF GUEST H OUSE EXPENSES U/S. 37(4) OF RS. 24,83,326/-. WE FIND THAT IN THE COMP UTATION THE ASSESSEE HAS DISALLOWED AN AMOUNT OF RS. 7,53,891/- U/S. 37(4) O F THE I.T. ACT UNDER THE HEAD GUEST HOUSE EXPENSES . THE AO POINTED OUT TH AT THE ASSESSEE HAS NOT CONSIDERED THE FOLLOWING EXPENDITURE RELATING TO GU EST HOUSE FOR CALCULATING THE DISALLOWANCE. A) RENT RS. 14,24,947/- B) REPAIRS RS. 3,72,743/- C) DEPRECIATION RS. 6,85,636/- ------------------ RS. 24,83,326/- ========== ADITYA BIRLA NUVO LTD., 5 13. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) AT PAGE 4 PARA-6 OF HIS ORDER HELD THAT SIMILAR DI SALLOWANCE MADE BY AO IN EARLIER ASSESSMENT YEARS WERE CONFIRMED BY HIMSELF ACCORDINGLY LD. CIT(A) CONFIRMED THE ADDITIONS FOLLOWING HIS EARLIER YEARS ORDERS. 14. WE FIND THAT THE ISSUE IS SETTLED BY THE JUDGEM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF BRITANIA INDUSTRIES LT D., 278 ITR 546 (SC) WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE EARLIER YE ARS APPEALS IN ASSESSEES OWN CASE. RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE SUPREME COURT AND THE TRIBUNAL, FINDING OF THE LD. CIT(A) ARE CON FIRMED. THIS GROUND OF THE APPEAL IS DISMISSED ACCORDINGLY. 15. GROUND NO. 5 RELATES TO RESTRICTING THE DISALLO WANCE OF ENTERTAINMENT EXPENSES INCURRED ON EMPLOYEES TO 25%. THE ASSESSE E IN THE COMPUTATION OF INCOME ON ITS OWN HAS DISALLOWED AN AMOUNT OF RS. 3 4,55,235/- BY WAY OF ENTERTAINMENT EXPENSES. HOWEVER, THE AO NOTED THAT THE ASSESSEE HAS NOT CONSIDERED THE FOLLOWING EXPENSES TO WORK OUT THE D ISALLOWANCE U/S. 37(2) OF THE I.T. ACT. I) 50% OF EXPENDITURE INCURRED IN HOTELS CLUBS, ETC. AS INCURRED ON EMPLOYEES RS. 25,21,5 55/- II) EXPENDITURE ON PRESS CONFERENCES/ SALE DEALERS CONFERENCES RS. 18,27,429/- ------------------- TOTAL RS. 43,48,984/- ========== THUS, THE AO CONSIDERED THE TOTAL AMOUNT OF DISALL OWANCE U/S. 37(2) AT RS. 38,97,110/- BEING IN EXCESS OF LIMITS LAID DOWN U/S. 37(2) OF I.T. ACT. 16. WHEN THE MATTER WAS TAKEN UP BEFORE THE LD. CIT (A), THE LD. CIT(A) FOLLOWING HIS FINDINGS FOR THE PRECEDING ASSESSMENT YEAR WHERE HE HAD ADITYA BIRLA NUVO LTD., 6 RESTRICTED THE DISALLOWANCE OF EXPENDITURE ON EMPLO YEES TO 25% AGAINST 50% CLAIMED BY THE ASSESSEE. 17. WE FIND THAT WHEN THE MATTER TRAVELLED BEFORE T HE TRIBUNAL IN THE ASSESSMENT YEAR 1995-96, THE TRIBUNAL HAS FOLLOWED THE DECISION TAKEN IN ASSESSMENT YEAR 1994-95 IN ITA NO. 2326/M/01. THE SENIOR COUNSEL SUBMITTED THAT THE FACTS FOR THE YEAR UNDER CONSIDE RATION ARE IDENTICAL WITH THE FACTS OF THE PRECEDING ASSESSMENT YEAR. THEREF ORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER ASSESSMENT YEARS, WE CONFIRM THE ORDER OF LD. CIT(A). THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED. 18. GROUND NO. 6 RELATES TO DISALLOWANCE OF RS. 13, 70,572/- INCURRED TOWARDS SALES CONFERENCE AND PRESS CONFERENCE. 19. THE LD. CIT(A) HAS DEALT THIS ISSUE AT PARA 8.1 ON PAGE-5 OF HIS ORDER WHEREIN HE HAS FOLLOWED HIS OWN DECISION IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 1995-96. WHEN THE MATTER WAS ARGUE D BEFORE ITAT, WE FIND THAT THE TRIBUNAL HAS FOLLOWED ITS OWN DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1994-95 IN ITA NO. 2479/M/2000. WE FIND THAT THE TRIBUNAL HAS FOLLOWED THE DECISION OF SPECIAL BENCH IN THE C ASE OF LAKHANPAL NATIONAL LTD. VS ITO 69 ITD 9(SB) AND ALLOWED THE EXPENDITUR E. 20. WE FIND THAT THE FACTS FOR THE YEAR UNDER CONSI DERATION ARE IDENTICAL, THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF IT AT IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE CLAIM OF ASSESSEE. THIS GROUND OF TH E ASSESSEE IS ALLOWED. 21. GROUND NO. 7 RELATES TO DISALLOWANCE OF RS. 5,0 7,261/- BEING RURAL DEVELOPMENT EXPENDITURE. DURING THE YEAR, THE ASSE SSEE HAS CLAIMED AN EXPENDITURE OF RS. 5,07,261/- AS DEDUCTION ON ACCOU NT OF RURAL DEVELOPMENT EXPENDITURE WHICH COMPRISES OF RS. 2,69,068/- WAS I NCURRED AT VERAVAL AND AN AMOUNT OF RS. 2,38,193/- AT MALKHED. WHEN THE A O SOUGHT EXPLANATION, ASSESSEE SUBMITTED THAT THESE EXPENSES WERE INCURRE D FOR WELFARE AND ADITYA BIRLA NUVO LTD., 7 UPLIFTMENT OF THE RURAL AREAS SURROUNDING THE FACTO RY SITE WHERE WORKERS OF THE ASSESSEE RESIDE AND CLAIMED THAT SUCH RURAL EXP ENSES ARE ALLOWABLE U/S. 37(1) OF THE I.T. ACT. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT SIMILAR DISALLOWANCES WERE MADE IN THE EARLIER YEAR ALSO. WHEN THE MATTER WAS TAKEN UP BEFORE THE LD. CIT(A), CIT(A) H ELD THAT AS IN THE PRECEDING ASSESSMENT YEAR, HE HAS CONFIRMED SIMILAR DISALLOWANCE ACCORDINGLY FOLLOWING HIS OWN ORDER, LD. CIT(A) CONFIRMED THE D ISALLOWANCE. 22. BEFORE US, THE SENIOR COUNSEL SUBMITTED THAT T HE TRIBUNAL IN THE EARLIER ASSESSMENT YEAR HAS ALLOWED THE CLAIM OF TH E ASSESSEE. 23. WE HAVE PERUSED THE ORDERS OF THE TRIBUNAL IN A SSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR. WE FIND THAT IN THE EARLI ER ASSESSMENT YEAR, THE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE OF AO. THE AO IN HIS ORDER GIVING EFFECT AND ALLOWED THE CLAIM OF THE ASSESSEE. THE FACTS BEING IDENTICAL, THE CLAIM OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION IS ALSO ALLOWED. 24. GROUND NO. 8 RELATES TO WITHOUT PREJUDICE CLA IM OF THE ASSESSEE IN RESPECT OF RS. 4 CRORES INCURRED ON PREMIUM ON REDE MPTION OF NON- CONVERTIBLE DEBENTURES AS REVENUE EXPENDITURE. 25. THE SENIOR COUNSEL AT THE VERY OUTSET POINTED O UT THAT IN THE EARLIER YEAR THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE TRIBUNAL AND THE EXPENDITURE HAS BEEN ALLOWED AS EXPENDITURE. 26. WE HAVE PERUSED THE ORDERS OF THE TRIBUNAL. WE FIND THAT IN THE PRECEDING ASSESSMENT YEAR, THE TRIBUNAL IN ITA NO. 3207/M/02 FOR ASSESSMENT YEAR 1995-96 HAVE DISCUSSED THIS ISSUE A T PAGE NO. 6 PARA 2.7 WHEREIN THE TRIBUNAL HAS FOLLOWED ITS EARLIER YEARS ORDER. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER Y EAR, GROUND NO. 8 IS APPEARS TO BE INFRUCTUOUS AND ACCORDINGLY DISMISSED. 27. GROUND NO. 9 RELATES TO DISALLOWANCE OF CLUB EX PENSES OF RS. 24,050/- BEING EXPENDITURE ON FOOD AND DRINKS. ADITYA BIRLA NUVO LTD., 8 28. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSES UNDER THE HEAD PAYMENT TO CLUBS: 1) MEMBERSHIP AND SUBSCRIPTION RS. 81,556/- 2) OTHERS RS. 24,050/- ---------------- TOTAL RS.1 ,05,606/- ========= THE AO CONSIDERED THESE EXPENSES TOTALING TO RS. 1 ,05,606/- TO BE IN THE NATURE OF PERSONAL EXPENSES AND DISALLOWED THE CLAIM OF ASSESSEE. 29. WHEN THE MATTER WAS TAKEN BEFORE THE LD. CIT(A) , CIT(A) HELD THAT EXPENDITURE AMOUNTING TO RS. 24,050/- HAS ALREADY B EEN CONSIDERED AS DISALLOWANCE IN ENTERTAINMENT EXPENDITURE AND THE D ISALLOWANCE OF EXPENDITURE AGAIN WOULD AMOUNT TO DOUBLE DISALLOWAN CE AND ACCORDINGLY DIRECTED THE AO TO DELETE THE ABOVE DISALLOWANCE AF TER PROPER VERIFICATION. 30. WE FIND THAT IN THE EARLIER YEAR ALSO IN THE CA SE OF THE ASSESSEE IDENTICAL ISSUE WAS THERE BEFORE THE TRIBUNAL WHERE IN THE TRIBUNAL HAS CONFIRMED THE FINDINGS OF LD. CIT(A). RESPECTFULLY FOLLOWING THE FINDINGS OF TRIBUNAL, ON IDENTICAL FACTS, THIS YEAR ALSO FINDIN G OF LD. CIT(A) ARE UPHOLD. 31. GROUND NO. 10 RELATES TO THE GRIEVANCE OF THE A SSESSEE IN RESPECT OF INTEREST AMOUNT OF RS. 1,40,02,326/- BEING INTEREST RECEIVABLE FOR A.Y. 1995- 96 U/S. 244A WHICH HAS NOT BEEN EXCLUDED BY AO. 32. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE HAS CLAIMED THAT IT HAS RECEIVED INTEREST U/S. 244A AMO UNTING TO RS. 1,40,02,326/- FOR ASSESSMENT YEAR 1995-96 AS PER INTIMATION U/S. 143(1)(A) WHICH IT HAS OFFERED FOR TAX IN THAT YEAR. SUBSEQUENTLY, WHEN T HE SAID ASSESSMENT WAS COMPLETED U/S. 143(3) AND AS THERE WAS ADDITIONAL P AYMENT OF RS. 8.26 CRORES, THE INTEREST ALLOWED VIDE INTIMATION U/S. 1 43(1)(A) WAS WITHDRAWN. THE ASSESSEE CONTENTED THAT SINCE IT HAS OFFERED TH E INTEREST IN ASSESSMENT ADITYA BIRLA NUVO LTD., 9 YEAR 1995-96, WHICH WAS SUBSEQUENTLY WITHDRAWN BY T HE DEPARTMENT IN MARCH, 1998, THE SAID INTEREST AMOUNT OF RS. 1,40,0 2,326/- SHOULD BE ALLOWED AS DEDUCTION IN THE COMPUTATION OF INCOME FOR THE Y EAR UNDER CONSIDERATION. THE CONTENTION OF ASSESSEE WAS REJECTED BY AO WHO H ELD THAT AS THE INTEREST WAS WITHDRAWN IN MARCH, 1998, THE CONTENTION OF ASS ESSEE MAY BE CONSIDERED ONLY IN THE ASSESSMENT YEAR 1998-99 AND NOT IN THE YEAR UNDER CONSIDERATION. 33. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT (A) AT PAGE-11 PARA 17.2 OF HIS ORDER, HE REJECTED THE CLAIM OF ASSESSE E HOLDING THAT THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS BRITISH PAINTS INDIA LTD. 188 ITR 44 SQUARELY APPLIED TO THE CASE O F THE ASSESSEE COMPANY. WE FIND THAT SIMILAR ISSUE HAD COME TO THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1998-99 AND 1999-2000 IN ITA N OS. 6668 & 6669/M/03 THE TRIBUNAL HAD AT PAGE-4 WHILE DECIDED IN GROUND NO. 2 OF THOSE APPEALS FOUND THAT THE ISSUE IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AVADA TRADING CO. VS ACIT R EPORTED IN 104 TTJ 83 AND ACCORDINGLY FOLLOWED THE DECISION OF THE SPECIAL BE NCH. AS THE FACTS AND ISSUES ARE IDENTICAL, RESPECTFULLY FOLLOWING THE DE CISION OF SPECIAL BENCH OF THE TRIBUNAL AND THE TRIBUNAL, WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE GROUND TAKEN BY THE ASSESSEE. ACCORDINGLY, THE SA ID IS REJECTED. HOWEVER AS HAS BEEN OBSERVED IN THE ORDER OF TRIBUNAL AS MENTI ONED HEREIN ABOVE, IF ANY CHANGE OR REDUCTION IN THE AMOUNT OF INTEREST REFUN D TO THE ASSESSEE U/S. 244A, THE SAME HAS TO BE TAKEN INTO ACCOUNT U/S. 15 4 OF THE ACT. 34. GROUND NO. 11 RELATES TO DISALLOWANCE OF DEPRE CIATION ON ROLL OVER CHARGES. 35. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION OF RS. 67,847/- ON ROLL OVER CHARGES CLAIMED AS REVENUE EXPENDITURE. IN EARLIER ASSESSMENT YEAR THE SAME WAS TREATED AS CAPITAL EXPENDITURE. IT WAS NOTICED BY THE AO THAT SINCE THE ASSESSEE HAS PREFERRED APPEALS IN EARLIER ASSESSMENT YEARS FOR T HE CLAIM OF SAID EXPENDITURE AS REVENUE EXPENDITURE AND AS THE MATTE R IS IN DISPUTE, THE AO ADITYA BIRLA NUVO LTD., 10 REJECTED THE CLAIM OF ASSESSEE. THE LD. CIT(A) AT PAGE-12 IN PARA 18.1 OF HIS ORDER HELD THAT THE APPEAL FILED BY THE ASSESSEE O N THIS GROUND BEFORE ITAT WAS SUCCESSFUL IN ASSESSMENT YEAR 1986-87 WHEREIN T HE TRIBUNAL HAS HELD THAT THE AMOUNT WAS REVENUE EXPENDITURE. THE LD. CIT(A) REJECTED THE CLAIM OF DEPRECIATION AND CONFIRMED THE FINDING OF AO. 36. WE FIND THAT SIMILAR ISSUE HAS COME UP BEFORE T HE TRIBUNAL IN ITA NO. 6962/M/1995 FOR ASSESSMENT YEAR 1991-92 WHEREIN TH E TRIBUNAL WHILE DECIDING GROUND NO. 5 OF THAT APPEAL AT PAGE 4 IN P ARA-16 ONWARDS HELD THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL JUDGEMENT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1990-91. R ESPECTFULLY FOLLOWING THE PRECEDENT, THIS GROUND OF APPEAL IS TREATED AS INFR UCTUOUSE AS THE SAME HAS BEEN CLAIMED AND ALLOWED AS REVENUE EXPENDITURE IN EARLIER YEAR. 37. GROUND NO. 13 RELATES TO DISALLOWANCE OF RS. 21 ,59,851/- BEING EXPENDITURE INCURRED ON PAYMENT MADE TO SCHOOLS AT VERAVAL AND MALKHED. 38. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAS PAID TOTAL AMOUNT OF RS. 21,59,851/- T O INDIAN RAYON SCHOOL AT VERAVAL AND MALKHED AND CLAIMED IT AS BUSINESS EXPE NDITURE. THE ASSESSEE CLAIMED THAT SINCE CHILDREN OF SOME OF THE EMPLOYE ES STUDYING IN THE SAID SCHOOL, THE PAYMENT SHOULD BE ALLOWED AS BUSINESS E XPENDITURE. HOWEVER, THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO A S SIMILAR DISALLOWANCES IN EARLIER YEARS WERE CONFIRMED BY LD. CIT(A). 39. WHEN THE MATTER WAS ARGUED BEFORE THE LD. CIT(A ), THE CIT(A) FOLLOWED HIS EARLIER ORDER AND CONFIRMED THE DISALL OWANCE. 40. WE FIND THAT SIMILAR MATTER HAD TRAVELLED BEFOR E THE TRIBUNAL IN EARLIER ASSESSMENT YEARS STARTING FROM ASSESSMENT YEARS 199 2-93 TO 1995-96 AND 1998-99 AND 1999-2000. WE ALSO FIND THAT WHILE DEC IDING THE APPEAL IN ITA NOS. 6668 & 6669/MUM/2003 PERTAINING TO ASSESSMENTS 1998-99 & 1999- 2000 THE TRIBUNAL WHILE ADJUDICATING ON GROUND NO. 4 ON PAGE-8 PARA-16 HAS ADITYA BIRLA NUVO LTD., 11 HELD THAT ON IDENTICAL ISSUE THE TRIBUNAL HAD ALLOW ED THE CLAIM IN EARLIER YEARS. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, AS FACTS BEING IDENTICAL, WE ALLOW THE CLAIM OF THE AS SESSEE FOR YEAR UNDER CONSIDERATION. GROUND NO. 13 IS ALLOWED. 41. GROUND NO. 14 RELATES TO DISALLOWANCE OF RS. 28 ,140/- U/S. 40A(3) OF I.T. ACT. 42. AFTER PERUSING THE ORDERS OF LOWER AUTHORITIES , WE FIND THAT FOLLOWING EXPENSES HAVE BEEN REPORTED BY THE AUDITOR IN THE T AX AUDIT REPORT WHO HAVE BEEN MADE IN CASH DURING THE PREVIOUS YEAR UNDER C ONSIDERATION. DATE OF PAYMENT AMOUNT (RS) PARTICULARS REASONS 11.4.1995 10,950/- EX-GRATIA PAYMENT TO MR. K.C. MAHESHWARI EXPLOYEE PAYMENT WAS URGENTLY NEEDED. 15.4.95 25.4.95 29.4.95 2.5.95 4.5.95 5.5.95 5.5.95 11,000/- 21,000/- 15,000 14,000 11,000 15,750 ADVANCE AGAINST LTA MR. R.K. VAISHNAVI ADVANCE AGAINST LTA MR. K.N. RAO ADVANCE AGAINST LTA MR.B. KASINATH ADVANCE AGAINST LTA MR. N.K. DWEVEDI ADVANCE AGAINST LTA MR. S.R. UPADHYAY ADVANCE AGAINST LTA MR. H.S. SOMASEKHARPPA ADVANCE AGAINST LTA MR. H.S. SHEKHAWAT THESE PAYMENTS WERE MADE TO OUR EMPLOYEES. THE AMOUNTS WERE URGENTLY NEEDED BY THEM FOR BUYING TICKETS, ETC. ALSO IN ALL THESE CASES, ADVANCE WAS GIVEN AGAINST LTA, WHICH WAS SUBSEQUENTLY ADJUSTED WHEN EMPLOYEES PRESENTED THEIR TRAVEL BILL. HENCE, WE WOULD LIKE TO SUBMIT THAT WE HAVE GIVEN ADVANCE AND NOT INCURRED EXPENDITURE. SECTION 40A(3) SPEAKS OF PAYMENT MADE FOR ANY EXPENDITURE. 19.5.95 12,000 REIMBURSEMENT OF SOFT FURNISHING EXPENSES OF MR. G. JAYARAMAN THE PAYMENTS WERE MADE TO EMPLOYEES TO BUY FURNITURE. SINCE ADITYA BIRLA NUVO LTD., 12 19.5.95 12,000 REIMBURSEMENT OF SOFT FURNISHING EXPENSES OF MR. O.P. TAPARIA THE SHOPKEEPER DID NOT ACCEPT PAYMENT BY CHEQUE, THE SAME WERE GIVEN TO EMPLOYEES AS CASH. AMOUNT DISALLOWED 20% OF RS. 1,40,700 I.E. RS. 28 ,140/- 43. THE LD. CIT(A) REJECTED THE CONTENTION OF THE A SSESSEE AND HELD THAT THE PAYMENTS ARE IN CONTRAVENTION OF PROVISIONS OF SEC. 40A(3) AND DO NOT FORM UNDER THE EXEMPTIONS GIVEN IN RULE 6DD AND AC CORDINGLY CONFIRMED THE DISALLOWANCE. 44. BEFORE US, THE SENIOR COUNSEL ARGUED THAT THE P AYMENTS WERE MADE TO EMPLOYEES TO PURCHASE TICKETS ARE NOT IN VIOLATION OF SEC. 40A(3) AND PAYMENTS MADE TO BUY FURNITURE AND FIXTURES WERE O UT OF COMMERCIAL EXPEDIENCY AS THE SHOP KEEPERS DID NOT ACCEPT PAYM ENT BY CHEQUE. 45. WE FIND FORCE IN THE SUBMISSION OF SENIOR COUNS EL. SO FAR AS THE PAYMENTS FOR PURCHASE OF TICKETS ARE CONCERNED, TH E SAME IS NOT IN VIOLATION OF SECTION 40A(3) BUT PAYMENTS MADE TO BUY FURNITUR E IS IN VIOLATION OF SEC. 40A(3) OF THE ACT, THEREFORE, WE DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE TO 20% OF RS. 24,000/-. GROUND NO. 14 IS, THEREFORE, P ARTLY ALLOWED. 46. IN GROUND NO. 18 THE SENIOR COUNSEL DREW OUR ATT ENTION TO LETTER DT. 24 TH AUGUST, 2007 BY WHICH ASSESSEE COMPANY HAS REQUEST ED TO RAISE THE FOLLOWING ADDITIONAL GROUNDS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE APPELLANT PRAYS THAT THE AO BE DIRECTED : A) EXCLUDE FROM TAXABLE PROFITS, THE SALES TAX EXEMPTI ON BENEFIT OF RS. 2,42,58,647/- WHICH IS INCLUDED IN SALES AND WH ICH IS TAXED IN THE ASSESSMENT ORDER AS PART OF PROFITS OF THE B USINESS AND B) TO TREAT THE SAME AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. ADITYA BIRLA NUVO LTD., 13 47. THE SENIOR COUNSEL STATED THAT THE ASSESSEE HAD NEITHER CLAIMED ANY EXEMPTION IN THE RETURN OF INCOME FILED NOR THE LOW ER AUTHORITIES GRANTED SUCH EXEMPTION. IT WAS FURTHER POINTED OUT THAT THE SPEC IAL BENCH OF ITAT IN THE CASE OF DCIT VS RELIANCE INDUSTRIES LTD. 88 ITD 273 HAS HELD THAT SUBSIDY GRANTED BY GOVERNMENT TO SET UP INDUSTRY IN A BACK WARD AREA WOULD BE IN THE NATURE OF CAPITAL RECEIPT AND CANNOT BE TREATE D AS REVENUE RECEIPT. THE SENIOR COUNSEL CONCLUDED THAT THIS DECISION SQUAREL Y APPLIES TO THE FACTS OF THE ASSESSEES CASE. 48. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OB JECTED TO THE ADMISSION ON THIS ADDITIONAL GROUND. THE MAIN CONT ENTION OF THE LD. DR IS THAT IN THE GARB OF TAKING ADDITIONAL GROUNDS, THE ASSESSEE IS TAKING ALTOGETHER A NEW PLEA WHICH WAS NEVER RAISED BEFORE THE LOWER AUTHORITIES. TO SUBSTANTIATE HIS SUBMISSION, THE LD. DR RELIED UPON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER VS CIT (1998) 229 ITR 383 AND GOETZE INDIA LTD., VS CIT (2006) 284 ITR 32 3. 49. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF HONBLE SUPREME COURT. WE FIND THAT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. (SUPRA), THE HONBLE SUPREME COURT HAS HEL D THAT UNDOUBTEDLY, THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED T O CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE A SSESSMENT PROCEEDINGS, WE FAIL TO SEE WHY SUCH A QUESTION SHOULD NOT BE ALLOW ED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO COR RECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 50. IN THE CASE OF GOETZE (INDIA) LTD. VS CIT (SUPR A) THE HONBLE SUPREME COURT HAS HELD THAT CLAIM FOR DEDUCTION NOT MADE I N THE RETURN CANNOT BE ENTERTAINED BY THE AO OTHERWISE THAN BY FILING A RE VISED RETURN. HOWEVER, IN THE SAME DECISION, THE HONBLE SUPREME COURT HAS FU RTHER OBSERVED THAT HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER ADITYA BIRLA NUVO LTD., 14 OF AO AND DOES NOT IMPINGE ON THE POWER OF THE TRI BUNAL U/S. 254 OF THE I.T. ACT, 1961. 51. WE FIND THAT SIMILAR ADDITION GROUND WAS RAISED DURING THE APPEALS OF ASSESSMENT YEARS 1995-96, 1998-99 AND 1999-2000 BEF ORE THE TRIBUNAL. WHILE DECIDING THE APPEAL FOR A.Y. 1995-96 IN ITA N O. 3207/M/02, THE TRIBUNAL AT PARA 2.13.5 HAS HELD THAT THE ADJUDICATABILITY OF THE GROUND IS DIFFERENT FROM THE ADMISSIBILITY OF ADDITIONAL GROU ND. IN CASE, FOR ADJUDICATING A GROUND ALREADY ADMITTED, SOME MORE MATERIAL IS REQUIRED TH E TRIBUNAL CAN ALWAYS RESTORE THE ISSUE TO THE FILE OF AO FOR PASS ING A FRESH ORDER AFTER CONSIDERING ALL THE RELEVANT FACTS. BUT ON THIS G ROUND, THE ASSESSEE CANNOT BE DENIED ITS RIGHT TO RAISE THE GROUND WHICH ARISE S ON THE BASIS OF FACTS ON RECORD AND WHICH IS RELEVANT FOR DETERMINING THE TA X LIABILITY OF THE ASSESSEE CORRECTLY . WE THEREFORE, ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. SINCE ADJUDICATION OF THE GROUND WILL REQUIRE GOING INTO THE INCENTIVE SCHEME FRAMED BY THE U.P. GOVERNMENT WHICH WAS NOT AVAILAB LE BEFORE THE LOWER AUTHORITIES, THE ISSUE IS RESTORED TO THE FILE OF A O FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPO RTUNITY OF HEARING TO THE ASSESSEE. 52. THE FACTS AND CIRCUMSTANCES BEING IDENTICAL, WE ALSO ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. RESPECTF ULLY FOLLOWING THE DECISION OF THE TRIBUNAL MENTIONED HEREIN ABOVE, THE ISSUE I S RESTORED TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATI ON AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. THEREFORE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. 53. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 6836/MUM/2002 A.Y. 1996-97-REVENUES APPEA L 54. THE ISSUE RAISED IN GROUND NO.1 IS IDENTICAL WI TH ISSUE RAISED BY GROUND NO. 5 IN ITA NO. 6421/M/02 FOR ASSESSMENT YEAR 1996 -97 AT PARAS 15 TO 17. ADITYA BIRLA NUVO LTD., 15 WHILE DECIDING THE ISSUE IN ASSESSEES APPEAL, THE TRIBUNAL HAS FOLLOWED THE DECISION TAKEN IN ASSESSMENT YEAR 1994-95 IN ITA NO . 2326/M/01. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER ASSESSMENT YEARS, WE CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND OF THE REVENUE IS DISMISSED. 55. GROUND NO. 2 IS IDENTICAL WITH THE ISSUE RAISED BY GROUND NO. 6 IN ITA NO. 6421/M/02 FOR ASSESSMENT YEAR 1996-97 AT PARAS 18 TO 20. WHILE DECIDING THE ASSESSES APPEAL, THE TRIBUNAL HAS FOL LOWED THE DECISION IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YE AR AND SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOWED THE CLAIM OF TH E ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION IN ASSESSEES OWN CASE, WE D ISMISS THIS GROUND RAISED BY THE REVENUE. 56. GROUND NO. 3 IS IDENTICAL WITH THE ISSUE RAISED BY GROUND NO. 8 IN ITA NO. 6421/M/02 FOR ASSESSMENT YEAR 1996-97 AT PARAS 24 TO 26. WHILE DECIDING THE APPEAL IN ASSESSES APPEAL, THE TRIBUN AL IN ITA NO. 3207/M/02 FOR ASSESSMENT YEAR 1995-96 HAVE DISCUSSED THIS ISS UE AT PAGE NO. 7 PARA 2.7.1 WHEREIN THE TRIBUNAL HAS FOLLOWED ITS EARLIER YEARS ORDER. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER Y EAR, WE DISMISS REVENUES APPEAL. 57. IN GROUND NO. 4 RELATES TO DELETION OF RS. 99,87 ,962/- REPRESENTING THE VALUE OF UNUTILIZED MODVAT EMBEDDED IN CLOSING STOC K. 58. IT IS SEEN THAT THE AO HAS TREATED RS. 99,87,962 /- AS UNDER VALUATION OF CLOSING STOCK. THE ADDITION HAS BEEN MADE BECAUSE THE AO HAS VALUED THE CLOSING STOCK ON GROSS OF MODVAT SYSTEM WHEREAS THE ASSESSEE HAS VALUED THE CLOSING STOCK ADOPTING NET OF MODVAT SYSTEM. THE SUBMISSIONS OF THE ASSESSEE WAS REJECTED BY THE AO WHO MADE AN ADDITIO N OF RS. 99,87,962/-. 59. THE LD. CIT(A) DELETED THE ADDITION FOLLOWING T HE RATIO LAID DOWN BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT O F MUMBAI IN THE CASE OF CIT VS INDIA NIPPON CHEMICALS LTD. ,112 TAXMAN 555. ADITYA BIRLA NUVO LTD., 16 60. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT NOW THIS ISSUE IS COVERED BY THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS INDIO NIPPON CHEMICALS 261 ITR 275 ( SC). WE FIND THAT FACTS AND ISSUES ARE SIMILAR. RESPECTFULLY FOLLOWING TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS INDIO NIPPON CHE MICALS (SUPRA), GROUND NO. 4 IS DISMISSED. 61. GROUND NO. 5 RELATES TO DELETION OF DISALLOWANC E OF RS. 11,88,730/- PAID FOR LAYING TRANSMISSION LINE AND RS. 1,08,06,1 54/- PAID TOWARDS THE CONSTRUCTION OF ACCESS ROAD. 62. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO FOUND THAT THE ASSESSEE HAS DEBITED RS. 11,88,730/- AS PAYMENT MAD E TO MSEB FOR LAYING OF TRANSMISSION LINE AT HOTGI PLANT AT SOLAPUR AND CLA IMED IT AS REVENUE EXPENDITURE. THE AO WAS OF THE OPINION THAT SINCE LAYING OF TRANSMISSION LINE IS OF AN ENDURING NATURE THE ASSESSEE WILL DERIVE T HE BENEFITS IN LONG TERM FOR ITS BUSINESS ACCORDINGLY TREATED IT AS CAPITAL EXPE NDITURE. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS ALSO DEBITED RS. 1,08 ,06,154/- TOWARDS CONSTRUCTION OF ACCESS ROAD AND LAYING OF 132KV TRA NSMISSION LINE AND CLAIMED IT AS REVENUE EXPENDITURE. WHEN QUESTIONED BY AO O N THE ALLOWABILITY OF THE CLAIMED EXPENSES, THE ASSESSEE RELIED UPON THE JUDG EMENT OF HONBLE SUPREME COURT IN THE CASES OF CIT VS ASSOCIATED CEM ENT COMPANIES LTD 172 ITR 257 AND L.H. SUGAR FACTORY AND OIL MILLS (P) LT D VS CIT 125 ITR 293 AND CLAIMED THAT THE EXPENDITURE SHOULD BE DEDUCTIBLE A S REVENUE EXPENDITURE. HOWEVER, THE AO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MODELLA WOOLLENS LTD. VS CIT 120 ITR 7 26 IN WHICH CASE THE HONBLE BOMBAY HIGH COURT HAS GIVEN A CLEAR FINDIN G THAT THE EXPENDITURE INCURRED FOR THE CONSTRUCTION OF A PUCCA APPROACH R OAD TO FACTORY PREMISES IS NOT A DEDUCTIBLE REVENUE EXPENDITURE AND HAVE TO BE REGARDED AS CAPITAL EXPENDITURE. THE AO ACCORDINGLY DISALLOWED THE EXP ENDITURE OF RS. 1,08,06,154/-. ADITYA BIRLA NUVO LTD., 17 63. WHEN THE MATTER WAS ARGUED BEFORE THE LD. CIT(A ), THE CIT(A) FOLLOWING HIS OWN ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1995-96 ALLOWED THE EXPENDITURE AS REVENUE EXPENDITURE. 64. BEFORE US, THE LD. DR POINTED OUT THAT IN THE I MMEDIATELY PRECEDING ASSESSMENT YEAR I.E. A.Y. 1995-96, ITAT I BENCH, M UMBAI IN ITA NO. 3207& 3614/M/02 & C.O. NO. 142/M/03 AT PAGE 25 PARA 3.6.3 TO 3.6.7 ON SIMILAR FACTS AND CIRCUMSTANCES AND AFTER CONSIDERING THE D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MODELLA WOOLLENS LTD. VS CIT (SUPRA), CIT VS ASSOCIATED CEMENT COMPANIES LTD (SUPRA), L.H. SUGAR FACTORY AND OIL MILLS (P) LTD VS CIT(SUPRA) CIT VS EXCEL INDUSTRIES LTD 12 2 ITR 985 AND ALSO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF EM PIRE JUTE CO. 01 HAS HELD THAT THE EXPENDITURE WAS CAPITAL IN NATURE. 65. WE HAVE CONSIDERED THE ORDERS OF LOWER AUTHORIT IES AND THE ORDER OF TRIBUNAL FOR A.Y. 1995-96. THE LD. SENIOR COUNSEL VEHEMENTLY ARGUED THAT THE TRIBUNAL WHILE DECIDING THE CASE FO A.Y. 1995-9 6 HAS NOT PROPERLY CONSIDERED THE JUDGEMENT OF THE HONBLE SUPREME CO URT CITED HEREIN ABOVE. HE ARGUED THAT EXPENSES DESERVED TO BE ALLOWED AS R EVENUE EXPENDITURE FOLLOWING THE JUDGEMENTMENT OF THE HONBLE SUPREME COURT IN THE CASES CITED HEREIN ABOVE. WE FIND THAT THE TRIBUNAL WHILE DECI DING THE ISSUE FOR ASSESSMENT YEAR 1995-96 HAS CONSIDERED WHAT HAS BEE N ARGUED BY THE SENIOR COUNSEL BEFORE US. RESPECTFULLY FOLLOWING T HE FINDING OF THE TRIBUNAL GIVEN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 1995-96 WE HOLD THAT THE EXPENDITURE SO CLAIMED ARE CAPITAL IN NATURE AC CORDINGLY ORDER OF THE LD. CIT(A) IS SET ASIDE AND THAT OF THE AO IS RESTORED. THEREFORE GROUND NO. 5 RAISED BY THE REVENUE IS ALLOWED. 66. GROUND NO. 6 RELATES TO DELETION OF DISALLOWAN CE OF INTEREST FOR THE PERIOD PRIOR TO COMMENCEMENT OF BUSINESS AMOUNTING TO RS. 6,65,28,237/-. WHILE FRAMING THE ASSESSMENT, THE AO FOUND THAT THE ASSESSEE CLAIMED INTEREST ON BORROWED CAPITAL FOR ITS NEW PROJECT/EX PANSION NAMELY RAJSHREE CEMENT, J.S.T (FLAX), J.S.T (R.C.M.) AND RAJSHREE S YNTEX, BIRLE PENCLASE, ADITYA BIRLA NUVO LTD., 18 RAYON CAUSTIC, WHILE CEMENT CAPITALIZED SHOWN UNDER CAPITAL WORK-IN- PROGRESS. THE INTEREST PAID TO THE TUNE OF RS. 6,6 5,28,237/- WAS CLAIMED AS DEDUCTIBLE REVENUE EXPENDITURE. THE AO AFTER DISCU SSING VARIOUS JUDICIAL PRONOUNCEMENTS AND SUBMISSIONS OF THE ASSESSEE CAME TO THE CONCLUSION THAT NEW OPERATIONS DO NOT CONSTITUTE SAME BUSINESS AS I NTEREST HAVE BEEN PAID ON FUNDS BORROWED FOR THE OPERATIONS OF THE NEW PR OJECT IS NOT AN ALLOWABLE DEDUCTION U/S. 3636(1)(III) OF THE I.T. ACT. 67. WHEN THE MATTER WAS ARGUED BEFORE THE LD. CIT(A ), THE LD. COUNSEL POINTED OUT THAT SIMILAR MATTER WAS ARGUED FOR THE PRECEDING ASSESSMENT YEAR 1995-96. THE LD. CIT(A) HELD THAT SINCE HE HAS AL LOWED THE ISSUE ON IDENTICAL FACTS, THE CLAIM OF INTEREST PAID ON BORR OWED CAPITAL AS DEDUCTIBLE EXPENDITURE IN THE IMMEDIATELY PRECEDING YEAR, HE A LLOWED THE EXPENSES FOR THE YEAR UNDER CONSIDER ALSO. 68. THE LD. DR RELIED UPON THE FINDING OF AO. THE LD. SENIOR COUNSEL POINTED OUT THAT THE FACTS AND ISSUE ARE IDENTICAL WITH THE FACTS AND ISSUE OF EARLIER ASSESSMENT YEARS 1995-96, 1998-99 AND 1999- 2000. 69. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND THE ORDER OF TRIBUNAL FOR THE RELE VANT PRECEDING ASSESSMENT YEAR AS POINTED OUT BY THE SENIOR COUNSEL. WE FI ND THAT WHILE DECIDING THE APPEAL IN ITA NOS. 6668 AND 6669/M/03 FOR ASSESSME NT YEARS 1998-99 AND 1999-2000 AND ITA NOS 6762 & 63/M/03 FOR THE SAME A SSESSMENT YEAR, THE TRIBUNAL RELIED UPON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF DCIT VS CORE HEALTH CARE LTD. 298 ITR 194 AND IN TH E CASE OF GRASIM INDUSTRIES LTD. 64 TTJ 357(MUM ITAT) DECIDED THE APP EAL IN FAVOUR OF ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF T RIBUNAL FOR THE ASSESSMENT YEAR MENTIONED HEREIN ABOVE IN ASSESSEES OWN CASE, GROUND NO. 6 RAISED BY THE REVENUE IS DISMISSED. 70. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. ADITYA BIRLA NUVO LTD., 19 C.O. NO. 14/M/2004 FILED BY ASSESSEE FOR ASSESSMENT YEAR 1996-97 71. IN THE CROSS OBJECTION GROUND NO. 1 RAISED BY TH E ASSESSEE IS AN ALTERNATIVE GROUND BY WHICH THE ASSESSEE HAS CLAIME D EXPENDITURE OF RS. 4 CRORES INCURRED ON PREMIUM ON REDEMPTION OF NON CON VERTIBLE DEBENTURES U/S. 35D OF I.T. ACT. 72. THE LD. SENIOR COUNSEL POINTED OUT THAT NCD EXP ENSES HAVE BEEN ALLOWED IN THE EARLIER ASSESSMENT YEARS. THEREFORE THIS GROUND BECOME INFRUCTUOUS. 73. ON THIS SUBMISSION OF SR. COUNSEL AND THE PERUS AL OF THE ORDERS OF TRIBUNAL FOR THE ASSESSMENT YEAR 1992-93 AND 1995-9 6, WE HOLD THAT GROUND NO. 1 ACTUALLY BECOME INFRUCTUOUS ACCORDINGLY IT IS DISMISSED. 74. GROUND NO. 2 IS AGAIN AN ALTERNATIVE GROUND WHI CH HAS BEEN TAKEN WITHOUT PREJUDICE TO THE GROUND TAKEN IN THE APPEAL FOR ASSESSMENT YEAR 1995-96 THAT NO ADDITION MADE IN THE TOTAL INCOME OF THAT YEAR ON ACCOUNT OF UNUTILIZED MODVAT CREDIT. 75. THE LD. SENIOR COUNSEL WAS VERY CONSIDERATE IN POINTING OUT THAT THIS GROUND IS ALSO INFRUCTUOUS AS ADDITION OF CLOSING S TOCK IN THE ASSESSMENT YEAR 1994-95 HAS BEEN DELETED BY THE TRIBUNAL. 76. WE HAVE GONE THROUGH THE TRIBUNAL ORDER AND FIN D THAT THE ISSUE RAISED IN GROUND NO. 2 IS INFRUCTUOUS AND ACCORDINGLY DISM ISSED. 77. GROUND NO. 3 RELATES TO CLAIM OF DEPRECIATION O N EXPENDITURE OF RS. 1,19,94,884/- INCURRED TOWARDS CONSTRUCTION OF ACCE SS ROAD. AS THE MATTER WAS RESTORED BACK TO THE FILE OF AO FOR THE ASSESSM ENT YEAR 1995-96, DEPRECIATION HAS BEEN ALLOWED AND THE CLAIM OF THE ASSESSEE DOES NOT HOLD ANY WATER, THEREFORE GROUND NO. 3 IS ACCORDINGLY DI SMISSED. C.O. NO. 15/M/2004 FILED BY ASSESSEE FOR ASSESSMENT YEAR 1997-98 ADITYA BIRLA NUVO LTD., 20 78. THE ISSUE RAISED IN GROUND NO.1 IS IDENTICAL W ITH ISSUE RAISED BY GROUND NO. 2 IN C.O. NO. 14/M/04 FOR ASSESSMENT YEAR 1996- 97. THEREFORE IT IS INFRUCTUOUS AND ACCORDINGLY DISMISSED. 79. THE ISSUES INVOLVED ARE SAME THAT QUANTUM MAY D IFFER ON SIMILAR LINES, SIMILAR REASON, THE APPEAL FILED BY THE ASSESSEE I N ITA NO. 6422/M/2002 FOR ASSESSMENT YEAR 1997-98 AND THE APPEAL FILED BY TH E REVENUE IN ITA NO. 41/M/2003 FOR ASSESSMENT YEAR 1997-98 ARE PARTLY AL LOWED. 80. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AND THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED AND THE CROSS OBJECT IONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 22 ND DAY OF JUNE,2012 SD/- SD/- (B.R. MITTAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 22 ND JUNE, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ADITYA BIRLA NUVO LTD., 21 DATE INITIALS 1. DRAFT DICTATED ON: 13.06.2012 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 15/18.06.2012 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: