M/s Crescent Foundry Co Pvt Ltd, Kolkata V. D.C.I.T Cir - 3,kolkata, Kolkata

CO 70/KOL/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2354 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 19-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2013
• Court: TRIBUNAL
• Department Lawyers: MD G HYAS UDDIN
• Assessee Lawyers: PAWAN KUMAR KEDIA
• Keywords: Business income; Depreciation; Additional depreciation; Retrospective amendment; Bad and doubtful debts; Reassessment proceedings
• Section: 143(3); 80HHC; 14A; 147; 28

Judgement Text

1 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM ] ITA NOS.973& 974 /KOL/2013 ASSESSMENT YEARS : 2003-04 & 2006-07 D.C.I.T., CIRCLE-3, -VERSUS- M/S. CRESCENT FOUNDR Y CO. PVT.LTD KOLKATA KOLKATA (PAN:AABCC 0101 C) (APPELLANT) (RESPONDENT) C.O.NO.70/KOL/2013 A/O ITA NO.974/KOL/2013 ASSESSMENT YEAR : 2006-07 M/S. CRESCENT FOUNDRY CO.PVT.LTD. -VERSUS- D.C.I.T. , CIRCLE-3, KOLKATA KOLKATA (PAN:AABCC 0101 C) (CROSS OBJECTOR) (RESPONDENT) FOR THE DEPARTMENT: MD.GHYAS UDDIN, JCIT, SR.DR FOR THE ASSESSEE : SHRI PAWAN KUMAR KEDIA, FCA DATE OF HEARING : 19.07.2016. DATE OF PRONOUNCEMENT : 03.08.2016. ORDER PER N.V.VASUDEVAN, JM ITA NO.973/KOL/2013 IS AN APPEAL BY THE REVENUE AG AINST THE ORDER DATED 04.01.2013 OF CIT(A)-XX, KOLKATA, RELATING TO AY 2 003-04. ITA NO.974/KOL/2013 IS ALSO AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 04.01.2013 OF CIT(A)-XX, KOLKATA, RELATING TO AY 2006-07. C.O. NO.70/KOL/201 3 IS A CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-XX, KOLKA TA DATED 04.01.2013 RELATING TO AY 2006-07. ITA NO. 973/KOL/2013 (A.Y.2003-04): 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. LD. CIT(A) IS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY ALLOWING DEDUCTION U/S 80HHC FOR RS.1,33,92,449/- B Y VIOLATING THE PROVISIONS OF RULE 46A AND ALLOWING THE CLAIM OF THE ASSESSEE WITHOUT DUE VERIFICATION OF THE FACTS & FIGURES REQUIRED TO ARRIVE AT THE CORRECT AMOUNT OF ALLOWANCE. 2 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 2. THAT THE DEPARTMENT CRAVES LEAVE TO ADD, ALTER O R MODIFY ANY GROUND OF APPEAL DURING THE HEARING. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUS INESS OF MANUFACTURE OF IRON CASTINGS, MS ITEM & PLASTIC ITEMS. THE ASSESSEE FIL ED RETURN OF INCOME FOR A.Y.2003- 04 DECLARING THE TOTAL INCOME OF RS.1,49,71,820/-. ORDER OF ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (ACT) WAS PASSED ON 30.03. 2005. LATER ON, THE AO NOTICED THAT BECAUSE OF THE CHANGE IN LAW BY THE TAXATION L AWS (AMENDMENT) ACT , 2005 WITH RETROSPECTIVE EFFECT FROM 01.04.1998, THE ASSESSEE S CLAIM FOR DEDUCTION U/S 80HHC(3) OF THE ACT THAT WAS ALLOWED IN ORIGINAL ASSESSMENT PROCEEDINGS WAS EXCESSIVE. THEREFORE REASSESSMENT PROCEEDINGS WERE INITIATED A GAINST THE ASSESSEE U/S 147 OF THE ACT. THE ISSUE THAT WAS CONSIDERED BY THE AO IN THE RE-ASSESSMENT PROCEEDINGS WAS AS TO THE MANNER IN WHICH PROFIT ON SALE OF DEPB LICEN CE HAD TO BE COMPUTED. THE AO NOTICED THAT THE TOTAL VALUE OF EXPORT INCENTIVE IN THE FORM OF DEPB LICENCE RECEIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS A SUM OF RS.,1,31,54,015/-. THE ASSESSEE HAD HOWEVER TAKEN ONLY RS.2,14,209/- AS THE VALUE O F EXPORT INCENTIVE WHICH HAD TO BE DEDUCTED FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/ S 80HHC OF THE ACT. THE AO ACCORDINGLY RECOMPUTED THE DEDUCTION U/S 80HHC AS F OLLOWS :- DEDUCTION COMPUTED AS PER FORM NO.10CCAC RS.2,9 0,07,262/- LESS : 90% OF DEPB LICENSES OF THE ASSESSEE RS.1 ,18,38,614/- RS.1,71,68,648/- 50% THEREOF RS.85,84,324/- PENALTY U/S 271(1)(C) IS INITIATED SEPARATELY., HENCE, INCOME OF THE ASSESSEE IS ASSESSED U/S 147/1 43(3) OF THE ACT AS FOLLOWS: INCOME ASSESSEE U/S 143(3) RS.2,95,59,195/- LESS: DEDUCTION U/S 80HHC RS. 85,84,324/- TOTAL INCOME RS.2,09,74,871/- ROUNDED OFF RS.2,09,74,870/- THE DEDUCTION U/S 80HHC WHICH WAS ORIGINALLY ALLOWE D WAS A SUM OF RS.1,45,45,505/-. IN THE REASSESSMENT PROCEEDINGS T HE SUM STOOD REDUCED TO RS.85,84,324/-. 3. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PREFE RRED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE SUBMITTED IT IS ENGAGED IN EXPO RT OF 100% OF GOODS MANUFACTURED 3 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 BY THEM AND THE EXPORT TURNOVER ADMITTEDLY EXCEEDED RS.10 CRORE DURING THE YEAR UNDER REVIEW. IT HAD AN OPTION TO CHOOSE EITHER DUT Y DRAW BACK OR DUTY ENTITLEMENT PASSBOOK SCHEME (DEPB) AND THE RATE OF DRAWBACK CRE DIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS NOT .HIGHER THAN THE RATE OF CREDIT ALLOWA BLE UNDER DEPB. THE ASSESSES COMPANY THUS OPTED FOR DEPB AND HENCE THE SECOND, T HIRD, AND FOURTH PROVISO TO SEC 80HHC (3) WOULD NOT APPLY TO THE ASSESSEE. THE BENEFIT U/S 80HHC(3) FOR THE ASSESSEE WOULD THU S BE CALCULATED AS UNDER: A) PROFIT OF THE BUSINESS X EXPORT TURNOVER TOTAL TURNOVER B) THE AMOUNT IN. (A) ABOVE. SHALL BE INCREASED BY 90% OF AMOUNT IN CLAUSE (IIIA), (IIIB) AND (IIIC) O F SECTION 28 X EXPORT TURNOVER TOTAL TURNOVER. C) 'PROFIT OF BUSINESS' MEANS THE PROFIT OF THE BU SINESS AS COMPUTED UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION AS REDU CED BY - ' I) NINETY PERCENT OF ANY SUM REFEREED TO IN CLAUSES ( IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28. OR ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, OR ANY OTHER .RECEIPT OF A SIMILAR ' NATURE INCLUDED IN SUCH PROFITS AND (II) THE PROFITS OF ANY BRANCH, .OFFICE, WAREHOUSE OR ANY OTHER. ESTABLISHMENTS OF THE ASSESSEE SITUATED OUTSIDE INDIA. IN THE PRESENT CASE THE ASSESSEE HAS AVAILED OF THE DEPB AND THEREFORE CLAUSE (IIID) OF SEC. 28 WOULD BE APPLICABLE. CLAUSE(IIID) OF SECTION 28 DEALING WITH DEPB READS AS UNDER: ( IIID) ANY PROFIT ON THE TRANSFER OF THE DULY EN TITLEMENT PASS BOOK SCHEME, BEING THE DUTY. REMISSION SCHEME UNDER THE EXPORT A ND IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOR EIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992) IT WAS SUBMITTED THAT IN CLAUSE (IIID) THE WORD MEN TIONED IS 'ANY PROFIT ON TRANSFER OF ........... ' IT IS THUS ONLY THE PROFIT ARISING ON SALE OR TRANSFER OF DEPB IS COVERED U/S 28(IIID) OF THE ACT AND NOT THE ENTIRE REALIZATION ON TRANSFER OF DEPB. UPON MAKING AN EXPORT THE EXPORTER BECOMES ENTITLED TO CLAIM CREDI T OF CERTAIN PERCENTAGE OF VALUE .OF EXPORTED PRODUCT WHICH CAN BE USED TO ADJUST THE AM OUNT PAYABLE ON ACCOUNT OF 4 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 CUSTOMS DUTY, IF ANY IMPORT IS MADE BY HIM. SO AS S OON AS EXPORT IS MADE IT GIVES RISE TO AN ENTITLEMENT BASICALLY TO NEUTRALIZE THE DUTY COMPONENT COMPRISED IN RAW MATERIAL USED IN GOODS EXPORTED. THE EXPORTER CAN EITHER IMP ORT THE GOODS AND USE THIS ENTITLEMENT FOR PAYMENT OF CUSTOMS DUTY OR TRANSFER THE SAME TO ANY OTHER IMPORTER WHO GETS THE SAME BENEFIT. THE EXPORTER THUS BUYS G OODS IN LOCAL MARKET PAYING DUTIES AND OFFSET THE DUTY ELEMENT BY TRANSFERRING HIS ENT ITLEMENT. THIS IS A VITAL ELEMENT FOR CALCULATION OF COST WHEN THE EXPORTER CALCULATES HI S SALES PRICE IN A COMPETITIVE ENVIRONMENT. THE PROFIT ON TRANSFER OF DEPB ENTITLE MENT IS THE PREMIUM THAT THE EXPORTER GETS OVER AND ABOVE THE CREDIT VALUE FROM THE INTENDING BUYER. AND IT IS ONLY THIS PROFIT: WHICH IS ENVISAGED U/S 28(IIID). THE F ACE VALUE OF DEPB, BEING IN THE NATURE OF AN ASSISTANCE, IS CHARGEABLE U/S 28(IIIB) . 4. THE ASSESSEE SUBSTANTIATED THE ABOVE CONTENTIO N WITH AN EXAMPLE, BY ASSUMING THAT I) AN EXPORTER HAS EXPORTED GOODS WORTH RS.100/-. II) AS. PER IMPORT AND EXPORT POLICY HE IS ENTITLE FOR 10% OF THE -VALUE OF GOODS EXPORTED UNDER DEPB SCHEME. SO HE IS ENTITLED FOR R S.I0/- UNDER. III) THE EXPORT CAN IMPORT HIS RAW MATERIAL AND RED UCE HIS COST BY AVAILING THE CREDIT OF RS.-10/- AGAINST HIS LIABILITY OF CUSTOMS DUTY OR B UY THE RAW MATERIAL INDIGENOUSLY BY PAYING A HIGHER PRICE AND TRANSFER DEPB, WHICH MAY BE AT A BIT PREMIUM OR DISCOUNT DEPENDING ON 'MARKET CONDITION. IV) IN THE -FIRST OPTION OF MAKING IMPORT, THERE IS NO TRANSFER OF DEPB WHILE IN THE SECOND OPTION HE TRANSFERS HIS ENTITLEMENT OF RS:I0 /- FOR SAY RS.11/. V) THE ENTITLEMENT VALUE OF RS.L0/-, WHICH COULD BE USED FOR AVAILING TAX CREDIT HAS IS, THUS, NOTHING BUT HIS COST AND ANY PREMIUM RECEIVED OVER AND ABOVE THE ENTITLEMENT VALUE IS HIS PROFIT; WHICH IN INSTANT EXAMPLE IS RE .1/-. 5. IN THE. LIGHT OF ABOVE,. WHILE CALCULATING PRO FIT OF BUSINESS' U/S 80HHC(4C)(BAA) ONLY PROFIT ELEMENT ON TRANSFER OF DEPB ENTITLEMEN T IS REQUIRED TO BE DEDUCTED AND NOT THE ENTIRE VALUE RECEIVED ON TRANSFER OF DEPB. IT WAS SUBMITTED THAT THE ABOVE PROPOSITION OF LAW HAS BEEN UPHELD BY SPECIAL BENCH OF HON'BLE ITAT, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS. ITO 318 ITR 87 (MUM) (SB)(AT) AND THE SAME WAS 5 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 ALSO CONFIRMED BY THE HONBLE SUPREME COURT. IT WA S ARGUED THAT THE AO HAS TAKEN ENTIRE AMOUNT RECD ON DEPB SALE AS PROFIT U/S 28(II ID) WHICH NEEDS TO BE BIFURCATED INTO COST, THE ENTITLEMENT PORTION, AND THE PROFIT, THE DIFFERENCE BETWEEN SALE PRICE AND ENTITLEMENT PORTION. THE PROFIT CAN ONLY BE IGNORED WHILE CALCULATING DEDUCTION U/S80HHC AND NOT THE ENTIRE SALE PROCEED. 6. THE CIT(A) FOUND FORCE IN THE CONTENTION OF THE ASSESSEE AND UPHELD THE STAND TAKEN BY THE ASSESSEE. THE FOLLOWING WERE HIS FIND INGS: 6.2 I HAVE PERUSED THE ASSESSMENT ORDER AND CONSID ERED THE SUBMISSION OF THE APPELLANT. FOLLOWING THE JUDGEMENT IN THE CASE OF T OPMAN EXPORT OF HON'BLE SUPREME COURT THE AO IS DIRECTED TO CALCULATE THE D EDUCTION U/S.80HHC AS UNDER: TURNOVER MFG.EXPORT TRADING EXPORT DOMESTIC SALE TOTAL SALES 167441560 1737155 13154015 182332730 LESS : FREIGHT 6902552 21115 6923667 160539008 1716040 13154015 175409063 PROFIT OF THE BUSINESS INCOME AS PER ORDER U/S 143(3) DT. 30.03.2005 2957 7634 LESS: PROFIT ON SALE OF INVESTMENT 105766 90% OF DIVIDEND RECD 10955 90% OF INTEREST 332914 90% OF FACE VALUE DEPB ENTITLEMENT 14406917 90% OF PROFIT ON SALE OF DEPB28(IIID) 192789 150493 41 14528293 INDIRECT COST TOTAL COST 154713808 LESS:DIRECT COST OF TRADING GOODS 1092759 DIRECT COST OF MFG. GOODS 123907873 FREIGHT 6923667 131924299 TOTAL INDIRECT COST 22789509 INDIRECT COST OF TRADING GOODS (22789509*1716040/17 5409063) 222951 PROFIT IN RESPECT OF TRADING GOODS OPENING STOCK 67520 ADD:PURCHASE 1095430 1162950 LESS: CLOSING STOCK 70191 6 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 DIRECT COST 1092759 EXPORT TURNOVER OF TRADING GOODS 1716040 LESS : DIRECT COST 1092759 INDIRECT COST 222951 1315710 400330 PROFIT IN RESPECT OF MFG. SALE ADJUSTED PROFIT OF THE BUSINESS PROFIT OF THE BUSINESS 14528293 LESS : PROFIT OF EXPORT OF TRADING GOODS 400330 A 14127963 ADJUSTED EXPORT TURNOVER EXPORT TURNOVER 162255048 LESS: EXPORT TURNOVER OF TRADING GOODS 1716040 B 160539008 ADJUSTED TOTAL TURNOVER TOTAL TURNOVER 175409063 LESS: EXPORT TURNOVER OF TRADING GOODS 1716040 173693023 PROFIT FROM EXPORT OF MFG. GOODS (A*B/C) 13058033 FIRST PROVISO 90% OF SUM REFERRED TO IN SECTION 28(IIIA),(IIIB) & (IIIC)-I.E. FACE VALUE OF DEPB LICENCE ENTITLEMENT 14406917 EXPORT TURNOVER 162255048 TOTAL TURNOVER 175409063 AMOUNT TO BE ADDED UNDER FIRST PROVISO 13326535 DEDUCTION AVAILABLE U/S 80HHC PROFIT IN RESPECT OF TRADING GOODS 400330 PROFIT OF MFG GOODS 13058033 AMOUNT ADDED IN FIRST PROVISO 13326535 26784898 AMOUNT DEDUCTIBLE @ 50% 13392449 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED., 7. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. IT CAN BE SEEN FROM THE GROUN DS OF APPEAL FILED BY THE REVENUE THAT THE REVENUE DOES NOT DISPUTE THE CORRECTNESS O F THE ACTION OF CIT(A) IN HOLDING THAT THE IT IS ONLY THE PROFIT ARISING OF SALE OF T RANSFER OF DEPB THAT IS COVERED U/S 7 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 28(III) OF THE ACT AND NOT THE ENTIRE REALISATION O F TRANSFER OF DEPB. THE LD. DR HOWEVER WAS OF THE VIEW THAT EVEN THE ACTION OF CIT (A) IN COMING TO THE CONCLUSION THAT IT IS ONLY THE PROFIT ARISING OUT OF SALE FOR TRANSFER OF DEPB WHICH IS COVERED U/S 28(III) OF THE ACT IS ALSO CHALLENGED IN THE GROUND S OF APPEAL. WE ARE OF THE VIEW THAT EVEN IF THE CONTENTION OF THE DR IS ACCEPTED THE SA ME IS WITHOUT ANY MERIT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF TOPMAN EXPORTS CIVIL APPEAL NO.1699 OF 2012 ARISING OUT OF SLP (C) NO.26 558 OF 2010 DATED 8.2.2012 WHEREBY THE RULING OF THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA) HAS BEEN UPHELD. HENCE, THE COMPUTATION OF DEDUCTION U /S.80HHC AS DONE BY THE CIT(A) IS IN ORDER AND CALLS FOR NO INTERFERENCE. 8. AS FAR AS VIOLATION OF THE PROVISION OF RULE 46 A OF THE IT RULES AS RAISED BY THE REVENUE IS CONCERNED, THE LD. COUNSEL FOR THE ASESS EE HAD NO OBJECTION IF THE FIGURES WHICH HAVE BEEN CONSIDERED BY CIT(A) AND THE STATEM ENT IN SUPPORT OF THE SAME ARE RE-CONSIDERED BY THE AO. IN VIEW OF THE ABOVE, WE S ET ASIDE THE ORDER OF CIT(A) IN SO FAR AS IT RELATES TO THE COMPUTATION OF THE QUANTUM OF DEDUCTION U/S 80HHC OF THE ACT IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA). FOR STATISTICAL PURPOSES THE APPEA L OF THE REVENUE IS TREATED AS ALLOWED. ITA NO.974/KOL/2013 A.Y.2006-07 9. AS FAR AS THE APPEAL OF THE REVENUE IS CONCERNE D, GROUND NO.1 RAISED BY THE REVENUE READS AS FOLLOWS :- 1. LD. CIT(A) IS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY DELETING OF RS. 14,32,581/ - ACCEPTING THE WRITTEN SUBMISSION WHICH IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES LIKE CERTIFICATE FROM POL LUTION CONTROL AUTHORITY, OR ANY CERTIFICATE FROM ANY TECHNICAL PERSON / AUTHORITY C ERTIFYING THAT THE ASSETS IN QUESTION ARE POLLUTION CONTROL EQUIPMENT. 10. THE FACTS AS FAR AS GROUND NO.1 RAISED BY THE REVENUE IS CONCERNED ARE THAT THE ASSESSEE CLAIMED DEPRECIATION AT 100% ON POLLUTION CONTROL EQUIPMENTS. THE AO CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS ON WHICH THE DEPRECIATION HAS BEEN CLAIMED. THE ASSESEEE FURNISHED COPIES OF THE BILLS BEFORE THE AO. THE AO ON PERUSAL OF THE BILLS NOTICED THAT THE ASSESSEE HAD PURCHASE D RAW MATERIALS LIKE H.R. COIL, PLATE, CD BARS ETC. THE ASSESSEE FURTHER CLAIMED THAT FROM THESE RAW MATERIALS THE ASSESSEE 8 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 HAD MANUFACTURED ON ITS OWN POLLUTION CONTROL EQUIP MENTS ON WHICH DEPRECIATION AT 100% WAS CLAIMED. THE AO HOWEVER MADE THE FOLLOWING OBSERVATIONS IN THE ORDER OF ASSESSMENT TO DENY THE CLAIM OF THE ASSESSEE TO DEP RECIATION ON POLLUTION CONTROL EQUIPMENT. THE ASSESSEE WAS REQUESTED TO JUSTIFY THE CLAIM OF DEPRECIATION @100% ON ALLEGED POLLUTION CONTROL EQUIPMENTS. THE DETAILS SUBMITTED BY THE ASSESSEE DID NOT JUSTIFY THE ASSESSEE'S CLAIM OF DEPRECIATION ON SUCH POLLUTION CONTROL EQUIPMENTS. THE CLAIM OF TILE ASSESSEE APPEARS TO BE WITH AN INTENTION TO SUPPRES S THE PROFITS. IT IS HELD THAT THE CLAIM OF DEPRECIATION BY THE ASSESSEE @L00% ON POLLUTION CONTROL EQUIPMENT IS NOT GENUINE. THE ASSESSEE HAS NOT BEEN ABLE CONCLUSIVELY TO ESTA BLISH THE JUSTIFICATION OF THE CLAIM. HOWEVER, THE ASSESSEE IS ALLOWED THE CLAIM DEPRECIA TION ,ON THE EQUIPMENT, CONSIDERING THE EQUIPMENT AS 'PLANT & MACHINERY'. THEREFORE, TH E CLAIM IS ALLOWED @15%. ACCORDINGLY, THE DEPRECIATION IS RE-WORKED TO RS.2, 11 ,602/ - AND THE BALANCE AMOUNT OF DEPRECIATION AMOUNTING TO RS.14,32,581/- IS DISALLO WED OUT OF THE CLAIM OF DEPRECIATION AND ADDED BACK TO THE ASSESSEES TOTAL INCOME. 11. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS IN THE MANUFACTURE OF IRON CASTINGS. IN THE PROCESS OF MANUFACTURING OF C ASTINGS A CONSIDERABLE AMOUNT OF POLLUTED AIR IS RELEASED. THE ASSESSEE GAVE A LIST OF POLLUTION CONTROL EQUIPMENTS IT HAD INSTALLED TO REDUCE THE AIR POLLUTION. THIS LIST IS GIVEN IN PARA 5.1. OF THE CIT(A)S ORDER. THE ASSESSEE FURTHER POINTED OUT THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO CARRY ON ITS MANUFACTURING ACTIVITY WITHOUT SUCH POLLUTIO N CONTROL EQUIPMENTS AS THESE ARE STATUTORY REQUIREMENTS AND INSPECTED BY THE POLLUTI ON CONTROL AUTHORITIES. THE ASSESSEE ALSO POINTED OUT THAT THE AO HAS NOT DOUBTED THE CL AIM OF THE ASSESSEE THAT IT HAD ON ITS OWN MANUFACTURED THE POLLUTION CONTROL EQUIPMENTS B Y BUYING THE REQUIRED RAW MATERIALS AND IN THE CIRCUMSTANCES THE CLAIM FOR DE DUCTION OF DEPRECIATION AT 100% SHOULD BE ALLOWED. THE CIT(A) FOUND FORCE IN THE S UBMISSIONS OF THE ASSESSEE AND HE HAS ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE B Y OBSERVING AS FOLLOWS :- 5-2 I HAVE PERUSED THE ASSESSMENT ORDER AND CONSID ERED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT THE APPELLA NT CLAIMED DEPRECIATION ON AN ASSET CLAIMING AS POLLUTION CONTROL EQUIPMENT, HOWEVER, THE A.O TREATED THE SAME AS PLANT AND MACHINERY AND ACCORDINGLY ALLOWED DEPRECIATION @15% AS AGAINST' 100% CLAIMED BY THE APPELLANT. HOWEVER; .THE A.O COULD NOT BRING ANY MATERIAL ON RECORD TO ESTABLISH THAT SAME WAS NOT POLLUTION CONTROL EQUIPMENT WHE REAS THE APPELLANT PROVED THE REQUIREMENT AND ESTABLISHED THE SAME BEING POLLUTIO N CONTROL EQUIPMENT. AFTER' CAREFUL CONSIDERATION OF THE SUBMISSION, I FIND FROM THE FA CTS THAT THE SO CLAIMED ASSET WAS POLLUTION CONTROL EQUIPMENT WHICH CAN NOT BE TREAT ED AS GENERAL PLANT AND MACHINERY 9 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 BECAUSE ALL THE FACTS AND CONDITIONS WHICH REQUIRE FOR AN ASSET TO TREAT IT AS POLLUTION CONTROL EQUIPMENT ARE SATISFIED. THEREFORE, THE GRO UND OF APPEAL IS ALLOWED. 12. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE H AS RAISED GROUND NO.1 BEFORE THE TRIBUNAL. THE LD. DR PLACED RELIANCE ON THE ORDER O F AO AND FURTHER FILED BEFORE US COPIES OF THE BILLS WHICH ACCORDING TO HIM THE EVID ENCE FOR PURCHASE OF RAW MATERIALS. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF CIT(A). 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT THE AO IN THE ORDER OF ASSESSMENT, THE AO HAS NOT DISPUTED THE CLAIM OF TH E ASSESSEE THAT RAW MATERIALS AND PARTS WHICH ARE PURCHASED HAD BEEN USED FOR MANUFAC TURE OF POLLUTION CONTROL EQUIPMENT. IN A LETTER DATED 26.11.2008 FILED BEFO RE THE AO THE ASSESSEE CLEARLY BROUGHT TO THE NOTICE OF THE AO THAT THE ASSESSEE D ID NOT BUY ANY POLLUTION CONTROL EQUIPMENT THAT IT BOUGHT RAW MATERIALS SUCH AS COIL , PLATE ETC AND GOT THE EQUIPMENTS FABRICATED IN HOUSE. THE ASSESSEE ALSO FILED A CERT IFICATE OF A TECHNICAL TEAM WHICH CERTIFICATE WAS SUBMITTED BY THE TECHNICAL TEAM TO THE MANAGEMENT ON COMPLETION OF INSTALLATION OF POLLUTION CONTROL EQUIPMENTS. IN FA CT THE TEST OF EMISSION AFTER INSTALLATION OF POLLUTION CONTROL EQUIPMENTS WAS CO NDUCTED BY ONE M/S. ENVIROCHEK AND A COPY OF THE SAID REPORT WAS FILED BEFORE THE AO. ORDER OF THE AO IS SILENT ON ALL THESE FACTS. THE REASONS ASSIGNED BY THE AO FOR REJ ECTING THE CLAIM OF 100% DEPRECIATION BY THE ASSESSEE WAS, A MERE OBSERVATIO N THAT THE ASSESSEE DID NOT JUSTIFY THE CLAIM FOR DEPRECIATION ON POLLUTION CONTROL EQU IPMENTS. THERE IS NO FINDING OF THE AO THAT THE ASSESSEE DID NOT MANUFACTURE POLLUTION CONTROL EQUIPMENTS BY UTILISING THE RAW MATERIALS WHICH IT HAD PURCHASED. IN THE GIVEN CIRCUMSTANCES WE ARE OF THE VIEW THAT THE EQUIPMENTS IN QUESTION ON WHICH THE DEPREC IATION AT 100% WAS CLAIMED WAS POLLUTION CONTROL EQUIPMENTS AND THE ASSESSEE WAS E NTITLED TO THE CLAIM OF DEPRECIATION AT 100% AS CLAIMED BY IT. WE DO NOT FIND ANY GROUND TO INTERFERE WITH THE ORDER OF CIT(A) ON THIS ISSUE. HENCE GROUND NO.1 RAISED BY T HE REVENUE IS DISMISSED. 14. GROUND NO.2 RAISED BY THE REVENUE READS AS FOL LOWS :- 2. LD. CIT(A) IS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY DELETING OF RS. 3,88,731/ - IN RESPECT OF DISALLOWA NCE U/S 14A WITHOUT TAKING INTO ACCOUNT THE VERDICT OF JURISDICTIONAL HIGH COURT IN THE CASE OF DHANUKA & SONS VS. CIT (CENTRAL)-I, KOLKATA (2011) 12 TAXMAN. CORN 227 (CA L) DATED 19.04.2011, WHERE THE 10 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 HON 'BLE COURT HELD THAT IT IS TO THE ASSESSEE TO S HOW BY FLOW OF FUND THAT NO AMOUNT OF EXPENDITURES HAS BEEN INCURRED IN RELATION TO EXEMP T INCOME AND ASSESSEE COMPANY FAILED TO DISCHARGE THE BURDEN. 15. THE ASSESSEE EARNS DIVIDEND INCOME OF RS.7,69, 946/- WHICH DID NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN VIEW OF THE PROV ISION OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES, 1962 (RULES) ANY EXPE NDITURE INCURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE TOTAL INCOME. ON A QUERY BY THE AO ON THE DISALLOWANCE U/S 14A OF THE ACT THE ASSESSEE SPECIF ICALLY BROUGHT TO THE NOTICE OF THE AO THAT IT HAD SUFFICIENT OWN FUNDS OUT OF WHICH IN VESTMENTS WHICH YIELDED TAX FREE INCOME WAS MADE. THE ASSESSEE ALSO SUBMITTED THAT SURPLUS FUNDS WERE INVESTED TO MAKE INVESTMENTS. THE ASSESSEE HAD AUTHORIZED THE BANK TO MAKE INVESTMENTS AND NO EXPENDITURE WHATSOEVER WAS INCURRED TO EARN THE TAX FREE INCOME AND THEREFORE NO DISALLOWANCE OF EXPENSES U/S.14A OF THE ACT IS NECE SSARY. 16. THE AO HOWEVER IN THE ORDER OF ASSESSMENT DID NOT MAKE ANY REFERENCE TO THE AFORESAID CONTENTION OF THE ASSESSEE AND PROCEEDED TO DETERMINE THE DISALLOWANCE U/S 14A OF THE ACT BY APPLYING THE FORMULA GIVEN IN RU LE 8D OF RULES. THE FOLLOWING WAS THE COMPUTATION DONE BY THE AO :- THE DISALLOWANCE IN RESPECT OF THE LONG TERM INVES TMENTS AS ABOVE IS COMPUTED UNDER RULE 8D READ WITH SEC.14A HOLDING TH AT THE PROVISIONS OF RULE 8D ARE APPLICABLE WITH RETROSPECTIVE EFFECT AS UNDE R: DIRECT EXPENSES : THE AMOUNT OF EXPENDITURE DIRECT LY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME IN THE P&L A/C . NO ITEM OF EXPENDITURE IS IDENTIFIED WHICH CAN BE DIRECTLY ATTRIBUTABLE TO EA RNING OF SUCH INCOME OR MAKING OF THE LONG TERM INVESTMENTS LISTED ABOVE. T HEREFORE, THIS FIGURE IS ADOPTED AT RS. NIL. DISALLOWANCE OF INTEREST = A X B/C WHERE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR : B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR ; C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; HERE, A = RS.27,38,878/- B = RS, 1,80,72,310/- (BEING AVERAGE OF LO NG TERM ASSETS AS ON 31.03.05 AND THOSE AS ON 31.03.06.) 11 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 C = RS.16,58,94,269/- (BEING AVERAGE OF TO TAL ASSETS APPEARING IN THE BALANCE SHEET AS ON 31.03.06 AND 31.03.05 RESPECTIV ELY.) THEREFORE, THE DISALLOWANCE = RS.27,38,878/- X RS.1 ,80,72,310/- = RS.2,98,370/- RS.16,58,94,269/- DISALLOWANCE OF % OF AVERAGE VALUE OF INVESTMENT : THE AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME IN ASSESSEES CASE IS RS.1,80,72,310/-. THEREFORE, THIS COMPONENT OF DISALLOWANCE WOULD BE RS.90,362/-. THEREFORE, TOTAL DISALLOWANCE U/R. 8D READ WITH SEC . 14A = (I) + (II) = (III) = RS.3,88,731/-. 17. BEFORE THE CIT(A) THE ASSESSEE REITERATED ITS STAND, AS WAS TAKEN BEFORE THE AO. NO INTEREST EXPENSES WHATSOEVER WERE INCURRED FOR M AKING THE INVESTMENTS WHICH YIELDED TAX FREE INCOME. WITH REGARD TO THE DISALLO WANCE OF OTHER EXPENSES ADMISSIBLE U/R 8D (2)(III) OF THE RULES THE ASSESSEE POINTED O UT THAT IT HAD SURPLUS FUNDS WHICH THE BANKERS HAD INVESTED FROM TIME TO TIME IN LIQUID UN ITS OF MUTUAL FUNDS AND THEREFORE NO EXPENSES WHATSOEVER WAS INCURRED BY THE ASSESSEE TO EARN THE DIVIDEND INCOME. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE ASSESSEE NOT BEING INCURRED IN INTEREST EXPENDITURE ATTRIBUTABLE TO THE MAKING OF INVESTMENTS IN THE UNITS OF MUTUAL FUND WHICH YIELDED THE TAX FREE INC OME. THEREFORE THE DISALLOWANCE OF INTEREST EXPENSES OF RS.2,98,370/- MADE BY THE AO W AS DELETED BY THE CIT(A). AS FAR AS THE DISALLOWANCE OF OTHER EXPENSES IS CONCERNED THE CIT(A) HELD THAT DISALLOWANCE OF 1% OF THE TAX FREE INCOME WOULD BE JUST AND PROP ER. IN THIS REGARD THE CIT(A) FOUND THAT FOR A.Y. PRIOR TO A.Y.2008-09 RULE 8D WA S NOT APPLICABLE AND THEREFORE DISALLOWANCE HAD TO BE MADE ON A REASONABLE BASIS. IN COMING TO THE AFORESAID CONCLUSION THE CIT(A) RELIED ON THE DECISION OF THE ITAT, KOLKATA BENCH IN THE CASE OF SAGRIKA GOODS & SERVICES PVT. LTD. VS ITO IN ITA NO.1278/KOL/2010. 18. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A)T HE REVENUE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. THE LD. DR RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 12 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT ORDER OF THE CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFER ENCE. AS FAR AS THE DISALLOWANCE ON INTEREST EXPENSES IS CONCERNED THE AVAILABLE FUNDS AVAILABLE WITH THE ASSESSEE WERE MUCH MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE . THE FOLLOWING CHART WOULD DEMONSTRATE THE SAME. A. DIVIDEND EARNED 7,69,946.27 B. B. INVESTMENT AS ON 31/03/2005 2,28,41,863.34 C. INVESTMENT AS ON 31/03/2006 1,33,02,756.00 D. OWN CAPITAL (EQUITY + RESERVES) AS N 31/03/2005 11 ,22,47,485.07 E. OWN CAPITAL (EQUITY + RESERVES) AS ON 31/03/2006 1 1,63,18,706.73 FURTHER THERE WAS SHORT TERM CAPITAL GAIN OF RS.460 893/- ON ABOVE INVESTMENTS, ON WHICH TAX IS DULY PAID. THE DELETION OF THE ADDITION MADE ON ACCOUNT OF DIS ALLOWANCE OF INTEREST EXPENSES IS THEREFORE HELD TO BE PROPER AND ORDER OF THE CIT(A) ON THE SAME IS CONFIRMED. 20. AS FAR AS THE DISALLOWANCE OF OTHER EXPENSES I S CONCERNED IT HAS BEEN HELD BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE REFE RRED TO BY THE CIT(A), THAT PRIOR TO A.Y.2008-09 RULE 8D WAS NOT APPLICABLE AND DISALLOW ANCE U/S 14A OF THE ACT HAD TO BE MADE ON A REASONABLE BASIS. THE TRIBUNAL IN SEVE RAL CASES HAS APPLIED 1% OF THE TAX FREE INCOME HAS AMOUNT WHICH CAN BE DISALLOWED UNDE R THE HEAD OTHER EXPENSES THIS VIEW OF THIS TRIBUNAL HAS ALSO BEEN APPROVED B Y THE HONBLE CALCUTTA HIGH COURT. WE THEREFORE CONFIRM THE ORDER OF THE CIT(A) ON THI S ISSUE ALSO. 21. GROUND NO.3 RAISED BY THE REVENUE READS AS FOL LOWS :- 3. LD. CIT(A) IS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY DELETING OF RS. 40,23,251/- MADE ON ACCOUNT BAD DEB T WITHOUT REBUTTING THE CASE LAWS CITED BY THE AO AND THE REASONS STATED BY THE AO. 22. THE ASSESSEE HAD WRITTEN OFF A SUM OF RS.80465 02/- OUT- OF TOTAL OUTSTANDING OF RS.13410837/- DUE FROM M/S MCCOY CASTINGS INC. OF C ANADA AS BAD DEBTS AND CLAIMED THE SAME AS DEDUCTION. THE ASSESSEE CLAIMED THAT TH E OVERSEAS FIRM WENT BANKRUPT AND RECEIVER WAS APPOINTED. IT WAS ESTIMATED THAT NOT M ORE THAN 40% OF THE OUTSTANDING 13 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 WOULD BE RECOVERABLE AND HENCE 60% WAS WRITTEN OFF AS BAD DEBT IN THE BOOKS OF ACCOUNTS. THE A.O DIFFERED ON THE ESTIMATION AND DI SALLOWED 50% OF THE CLAIM OF BAD DEBTS ON THE REASONING THAT THE ASSESSEE HAS TO EST ABLISH THAT THE DEBT HAS BECOME BAD. 23. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT THE DEDUCTION ON A/C OF BAD DEBT AS ALLOWED U/S 36(L)(VII) READ WITH SECTION 36(2), AFT ER AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT 1987, ENVISAGE MERELY WIRING O FF THE DEBT AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE AS A CONDITION FOR SUC H AN ALLOWANCE. BEFORE THE AMENDMENT BY THE DTL (AMENDMENT) ACT 1987, OF COURS E, THERE WAS A CONDITION TO ESTABLISH THAT THE DEBT HAS BECOME BAD. AFTER THE A MENDMENT THE CBDT ISSUED A CIRCULAR NO 551 DATED 23.03.1990 CLARIFYING THAT AF TER THE AMENDMENT THE LAW NO LONGER REQUIRES THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS ACTUALLY BECOME BAD. IT WAS CLARIFIED THAT UNDER THE AMENDED LAW WRITE OFF OF D EBT WOULD BE REGARDED AS SUFFICIENT COMPLIANCE OF THE PROVISION IN ORDER TO CLAIM DEDUC TION U/S 36(1)(VII) OF THE ACT. FURTHER HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED VS C.I.T REPORTED IN 323 ITR 397(SC) HAS CLEARLY OBSERVED THAT AFTER 01.04.1 989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. HENCE IT WAS CLAIMED THAT IN VIEW OF THE ABOVE CIRCULAR OF CBDT AND THE ABOVE JUDGMENT OF HON'BLE SUPREME COURT, THE A.O. HAS CLEARLY ERRED I N RESTRICTING THE CLAIM OF BAD DEBT TO 50% OF THE CLAIMED AMOUNT AND THE ENTIRE AMOUNT OF BAD DEBT OF RS.8046502/- NEEDS TO ALLOWED U/S 36(L)(VII). 24. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSE SSEE AND DELETED THE DISALLOWANCE MADE BY THE AO. AGGRIEVED BY THE ORDER OF CIT(A) TH E REVENUE HAS RAISED GROUND NO.3 BEFORE THE TRIBUNAL. 25. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AN D RELIED ON THE ORDER OF AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT ORDER OF THE CI T(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. AS RIGHTLY HELD BY CIT(A) THE DED UCTION ON ACCOUNT OF BAD DEBTS HAD TO BE ALLOWED IF THE DEBT IN QUESTION OR PART THERE OF IS WRITTEN OFF AS BAD IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THERE ARE OTHER CONDIT IONS FOR ALLOWING THE CLAIM FOR 14 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 DEDUCTION ON ACCOUNT OF BAD DEBTS BUT THE EXISTENCE OF THOSE CONDITIONS IN THE CASE OF THE ASSESSEE HAS NOT BEEN DISPUTED BY THE AO. THE O NLY DISPUTE RAISED BY THE REVENUE IS THAT THE ONLY PART OF THE DEBT WRITTEN OFF IS BA D AND THEREFORE IT CANNOT BE SAID THAT THE DEBT ITSELF HAS BECOME BAD. IN OUR VIEW THIS IN FERENCE DRAWN BY THE AO IS NOT CORRECT AND IN THE LIGHT OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED VS CIT 323 ITR 397 (SC) IT IS NOT NE CESSARY AFTER THE AMENDMENT TO THE LAW W.E.F. 01.04.1989 PROVISION OF SECTION 36(1 )(VII) OF THE ACT THAT THE ASSESSEE IS NO LONGER REQUIRED TO ESTABLISH THAT THE DEBT IN QU ESTION WHICH IS WRITTEN OFF AS BAD HAS IN FACT BECOME BAD AND IRRECOVERABLE. WE FIND NO GR OUNDS TO INTERFERE WITH THE ORDER OF CIT(A). CONSEQUENTLY GROUND NO.3 RAISED BY THE R EVENUE IS DISMISSED. 26. IN THE RESULT THE APPEAL BY THE REVENUE IS DIS MISSED. C.O.NO.70/KOL/2013 (A/O ITA NO.974/KOL/2013 A.Y.200 6-07 27. THE GROUNDS RAISED IN THE CROSS OBJECTION BY T HE ASSESSEE READ AS FOLLOWS :- 1.FOR THAT THE CIT(A) SHOULD HAVE ALLOWED THE ASSE SSEES CLAIM FOR ADDITIONAL DEPRECIATION @20% ON RS.1644183/- U/S 32 (IIIA). 2.FOR THAT THE CIT(A) SHOULD HAVE DELETED THE ENTIR E DISALLOWANCE OF RS.388731/- UNDER SECTION 14A. 28. AS FAR AS GROUND NO.1 IS CONCERNED THIS GROUND IS AN ALTERNATIVE CLAIM IN THE EVENT OF DEPRECIATION ON POLLUTION CONTROL EQUIPMENTS IS NOT ALLOWED AT 100% AS CLAIMED BY THE ASSESSEE. SINCE WE HAVE ALREADY ALLOWED THE CLA IM OF THE ASSESSEE FOR DEDUCTION AT 100% ON POLLUTION CONTROL EQUIPMENTS THIS GROUND RA ISED IN THE CROSS OBJECTION HAS BEEN INFRUCTUOUS AND THE SAME IS DISMISSED AS INFRU CTUOUS. 29. AS FAR AS GROUND NO.2 RAISED IN THE CROSS OBJE CTION IS CONCERNED THE ASSESSEE HAS SUBMITTED THAT NO DISALLOWANCE OF OTHER EXPENSES UN DER RULE 8D (2)(III) OF THE IT RULES SHOULD HAVE SUSTAINED. WE ARE OF THE VIEW THA T IN THE LIGHT OF THE DECISION OF THE TRIBUNAL REFERRED TO BY CIT(A), FOR SUSTAINING THE DISALLOWANCE AT 1% OF THE TAX FREE INCOME, WE DO NOT FIND ANY MERIT IN THIS GROUND RAI SED IN THE CROSS OBJECTION. ACCORDINGLY THIS GROUND RAISED IN THE CROSS OBJECTI ON IS DISMISSED. 15 ITA NOS.973&974/KOL/2013&C.O.70/KOL/2013-M/S. CRESC ENT FOUNDRY CO.P.LTD.A.Y.200304&2006-07 30. IN THE RESULT THE CROSS OBJECTION OF THE ASSES SEE IS DISMISSED. 31. IN THE RESULT ITA NO.973/KOL/2013 OF THE REVEN UE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.974/KOL/2013 OF THE REVENUE IS DIS MISSED AND C.O.NO.70/KOL/2013 OF THE ASSESSEE IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 03.08.2016. SD/- SD/- [WASEEM AHMED ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.08.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. CRESCENT FOUNDRY CO. PVT. LTD., SUIT NO.406, 7/1, LORD SINHA ROAD, KOLKATA- 700071. 2.D.C.I.T., CIRCLE-3, KOLKATA 3. CIT(A)-XX, KOLKATA 4. CIT-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY B Y ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES KOLKATA BENCHES