Punjab Tractors Limited, Mohali V. JCIT, Patiala

ITA 102/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60811 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: H P AGGARWAL
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Earning of tax free income; Revenue expenditure
• Section: 5(2); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.107/CHD/2010 ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE, V M/S PUNJAB TRACTORS LTD., PATIALA. SAS NAGAR, MOHALI. PAN: AAACP-8578K & ITA NO. 102/CHD/2010 ASSESSMENT YEAR : 2006-07 M/S PUNJAB TRACTORS LTD., V JCIT, CIRCLE, SAS NAGAR, PATIALA. MOHALI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. JYOTI KUMARI ASSESSEE BY : SHRI H.P.AGGARWAL DATE OF HEARING : 12.03.2012 DATE OF PRONOUNCEMENT : 10.04.2012 ORDER PER MEHAR SINGH, AM THE PRESENT CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY, ARE DIRECTED AGAINST THE ORD ER DATED 19.11.2009 PASSED BY THE LD. CIT(A) U/S 250(6) OF T HE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). ITA 107/CHD/2010 (REVENUES APPEAL A.Y. 2006-07) 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.6,42,045/-, IGNORIN G THE FACT THAT 2 MAJOR REPAIRS TANTAMOUNT TO ADDITIONS TO CAPITAL AS SETS BEING OF ENDURING BENEFIT AND, HENCE, THE SAME HAD BEEN WRON GLY CLAIMED AS REVENUE EXPENDITURE BY THE ASSESSEE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION TO THE TUNE OF RS.2,34,99,000/- OUT OF THE TOTAL OF RS.2,59,99,000/-, MADE ON ACCOUNT OF APPORTIONMENT OF EXPENSES U/S 14A, ON ADHOC BASIS WITHOUT RECORDING ANY COGENT REASONS, IGNORING THAT THE ASSESSEE HAD FAILED TO PROVIDE SEPARATE DETAILS OF EXPENSES, PERTAINING TO THE EXEMPT INCOME, DURING THE ASSESSMENT PROCEEDING S AND THE AO HAD CLEARLY ESTABLISHED THAT THE ASSESSEE HAD TO IN CUR OPERATING & ADMINISTRATIVE EXPENSES ON THE INVESTMENT ON WHIC H HUGE DIVIDEND I.E. EXEMPT INCOME HAD BEEN EARNED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS, WHILE RESTRICTING THE DISALLOWANCE U/S 14A TO RS. 25 LACS , GIVEN A FINDING THAT THERE IS NO ELEMENT OF INTEREST EXPEND ITURE DISALLOWANCE ON THIS ACCOUNT, OVERLOOKING THAT THE ASSESSEE HAD INCURRED INTEREST OF RS. 6.36 CRORES, WHICH COULD H AVE BEEN LESSER TO THAT EXTENT, HAD THE ASSESSEE NOT DIVERTED RS. 6 .36 CRORES OF BUSINESS FUNDS BY WAY OF INVESTMENT IN SHARES, THE DIVIDEND INCOME OF T WHICH IS EXEMPT FROM TAXATION. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CI T(A), WHILE RESTRICTING THE DISALLOWANCE U/S 14A TORS.25 LACS, FAILED TO APPRECIATE THAT THE ASSESSEE, HAVING WITH HELD THE BREAK-UP OF EXPENSES ATTRIBUTABLE TO EXEMPT INCOME, THE AO WAS JUSTIFIED IN TAKING AN ADVERSE VIEW AS PER S ECTION 114 OF THE INDIAN EVIDENCE ACT. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CI T(A) HAS ERRED IN DIRECTING THE AO TO ALLOW INCENTIVE PAID T O DEALERS IN RESPECT OF WHOM PAN HAVE BEEN PROVIDED BY THE ASSESSEE AND ALSO IN FURTHER DIRECTING TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO PROVIDE PAN OF THE REMAINING DEALERS AND RESTRICT THE DISALLOWANCE ONL Y IN 3 RESPECT OF THE CASES WHERE THE ASSESSEE FAILED TO P ROVIDE PAN/GIR OF THE DEALERS, WITHOUT APPRECIATING THAT T HE ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THE PAYMEN TS SO MADE HAD BEEN WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF THE BUSINESS. 6. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BE SET A SIDE AND THAT OF THE AO RESTORED. 7. THE APPELLANT CARVES LEAVE TO ADD OR AMEND ANY GRO UNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED O F. 3. IN GROUND NO. 1, THE REVENUE CONTENDED THAT CIT( A) ERRED IN DELETING THE DISALLOWANCE OF RS.6,42,045/- , IGNORING THE FACT THAT MAJOR REPAIRS TANTAMOUNT TO ADDITION TO CAPITAL ASSETS BEING OF ENDURING BENEFIT AND, HENCE, THE SA ME HAD BEEN WRONGLY CLAIMED AS REVENUE EXPENDITURE. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT THE ISSUE IS COVERED BY ASSESSEE'S OWN CASE IN ITA NO. 594/CHD/2008 ASSESSMENT YEAR 2004-05. 5. LD. 'DR' PLACED RELIANCE ON THE ORDER PASSED BY THE AO WHEREAS LD. 'AR' PLACED RELIANCE ON THE ORDER PASSE D BY THE CIT(A) AND ORDER PASSED BY THE ITAT, IN ASSESSEE'S OWN CASE IN ITA NO. 594/CHD/2008 (SUPRA), ORDER, DATED 20.11 .2009. IN THIS CASE, THE AO TREATED EXPENSES ON FABRICATIO N WORK DONE IN PLANT, OF RS.6,42,045/- IN THE NATURE OF CA PITAL EXPENDITURE. THE CIT(A) DELETED IMPUGNED ADDITIONS . HOWEVER, AS STATED BY THE LD. 'AR', ISSUE IS COVERE D BY THE ORDER OF THE ITAT IN ASSESSEE'S OWN CASE. THE LD. 'DR', DID NOT DISPUTE THIS CONTENTION OF THE LD. 'AR'. THE RELEVANT PART 4 OF THE ORDER IS REPRODUCED HEREUNDER : 39. THE GROUND NO.1 RAISED BY THE REVENUE IS IDENTI CAL TO THE GROUND NO.2 RAISED BY THE REVENUE IN ITA NO. 270/CHD/2006. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD INCURRED EXPENDITURE ON REPAIR AND MAI NTENANCE OF BUILDING TOTALING RS. 1.06 CRORES AND MACHINERY REPAIRS TOTALING RS. 1.19 CRORES. THE ASSESSING OFFICER DIS ALLOWED THE SAID EXPENDITURE ON THE GROUND THAT THE EXPENDI TURE IN THE YEAR AS COMPARED TO THE EARLIER YEAR HAD GONE U P BY RS. 17.98,000/-. THE CIT(A) ALLOWED THE CLAIM OF THE AS SESSEE AS THE EXPENDITURE WAS INCURRED FOR PRESERVING AND MAI NTAINING AN EXISTING ASSET AND ARE TO BE ALLOWED AS CURRENT REPAIRS. THE ISSUE IS IDENTICAL TO THE ISSUE RAISED IN THE E ARLIER YEARS AND THE EXPENDITURE BEING INCURRED ON THE PRESERVAT ION AND MAINTENANCE OF AN EXISTING ASSET IS TO BE ALLOWED A S A DEDUCTION, IN LINE WITH RATIO LAID DOWN IN THE PAR AS HEREIN ABOVE. WE DISMISS THE GROUND NO.1 RAISED BY THE RE VENUE. 6. IN VIEW OF THE LEGAL AND FACTUAL DISCUSSIONS, IT IS EVIDENT THAT THE ISSUE IN QUESTION IS, COVERED BY THE ABOVE REPRODUCED RELEVANT PART OF THE TRIBUNALS ORDER, I N ASSESSEE'S OWN CASE. THEREFORE, THIS GROUND OF APP EAL, RAISED BY THE REVENUE IS DISMISSED. 6(I) THE LD. 'AR', AT THE OUTSET, MADE THIS STATEME NT THAT THE ISSUE RAISED IN GROUND NOS. 2, 3 & 4 OF THE REVENUE S APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE. LD. 'DR', HO WEVER, PLACED RELIANCE ON THE ORDER PASSED BY THE AO. 7. GROUND NOS. 2, 3 AND 4 RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE, IN ASSESSEE'S OW N CASE IN ITA NO. 594/CHD/2008 (SUPRA), AS IS EVIDENT FROM PA RA 42 TO 45 OF THE SAID ORDER. 8. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND FOUND THAT THE ISSUE IS SQUARELY CO VERED BY 5 THE DECISION OF THE HON'BLE TRIBUNAL, IN ASSESSEE'S OWN CASE, AS CONTENDED BY THE LD. 'AR'. IN THIS CASE, THE AO JUSTIFIED THE DISALLOWANCE OF RS.2,59,09,900/- ON THE FOLLOWI NG GROUNDS: 'THE ASSESSEE HAS CONTENDED THAT IT RECEIVED THE DI VIDEND BY POST AND DEPOSITED INTO BANK ACCOUNT OF THE COMPANY AND THER E WAS NO EXPENDITURE INCURRED FOR EARNING DIVIDEND INCOME. THIS PLEA OF ASSESSEE IS NOT CORRECT BECAUSE WHEN THE ASSESSEE HAS INVESTED 6 CRORES APP ROX. IN DIFFERENT SECURITIES AND THE SECURITIES ARE OF SUCH A VOLATIL E NATURE THAT ONE HAVE TO KEEP CONSTANT VIGIL ON THE MOMENT OF PRICES AS WELL AS FINANCIAL GROUP VIABILITY OF THE COMPANY, MOMENT OF THE COMPANY, IT S SHARE PRICE ETC. HOW THE COMPANY REMAIN CONFIDENT WITHOUT EMPLOYING A SI NGLE PERSON FOR THE JOB. SECONDLY, IN A CORPORATE ENTITY, THE COMPANY HAS TO REMAIN VIGILANT AND HAS TO KEEP TRACK OF EACH ACTIVITY UNDERTAKEN SO THAT S TAFFS RESPONSIBLE HAVE TO ANSWER ANY NEGLIGENCE FOUND BY THE MANAGEMENT. THIRDLY, IT HAS TO KEEP SEPARATE RECORDS, FILING CO RRESPONDENCE WITH COMPANY THEIR PORTFOLIO MANAGERS TRACK WITH STOCK E XCHANGE, ADHERENCE TO SEBI GUIDELINES, MAINTENANCE OF STATUTORY REGISTER HOLDING OF BOARD MEETING ETC. FOURTHLY, THE ASSESSEE HAS POINTED OUT THAT IT HAS MADE THE INVESTMENTS WAY BACK. THIS PLEA OF ASSESSEE IS ALSO NOT TENABLE, HE RE IT NEED TO BE APPRECIATED THAT IF THESE FUNDS WERE NOT BLOCKED IN THESE SECURITIES THEN THESE TO BE USED IN BUSINESS PURPOSE AND COMPANY TO THAT EXTENT MAY NOT HAVE BEEN NECESSARY TO BORROW FROM THE BANK AND CER TAINLY, THE INTEREST BURDEN SHALL BE REDUCED APART FROM OTHER ENDURING B ENEFITS DERIVED BY THE COMPANY DUE TO ITS EASIER LIQUIDITY. FIFTHLY, THE COMPANY HAD EMPLOYING BANK FACILITY SI NCE LONG AND PAYING REGULARLY HEAVY INTEREST ON THESE BORROWED FUNDS, A S SUCH, THERE IS DIRECT NEXUS BETWEEN INVESTMENT AND BORROWED FUNDS. ACCORDINGLY, SECTION 14A CLEARLY HAS APPLICATION IN THIS C ASE . AS DISCUSSED ABOVE, THE ASSESSEE HAD DEPLOYED SUFFICIE NT STAFF/OFFICERS TO HANDLE WITH THE INVESTMENT PORTFOLIO FOR WHICH T HE ASSESSEE SHOULD HAVE INCURRED SUBSTANTIAL AMOUNT OF EXPENDIT URE FOR VARIOUS OPERATIONS. THE ASSESSEE COULD NOT PROVIDE SEPARATE DETAIL OF THESE 6 EXPENSES RELATING TO DIVIDEND INCOME. I HAVE, THERE FORE, TO TREAT INCOME EARNED AS CRITERIA TO ESTIMATE EXPENSES INCURRED TO EARN EXEMPTED INCOME.' 9. THE LD. CIT(A) RECORDED HIS FINDING IN PARA 5.7, WHICH IS REPRODUCED HEREUNDER : 5.7 I HAVE CONSIDERED THE CONTENTION OF THE A.O. AS WELL AS THE ARGUMENTS OF THE ASSESSEE. I HAVE ALSO CAREFULLY PE RUSED THE STATEMENT AND. PAPER BOOK FILED BY THE COUNSEL OF THE ASSESSE E. I HAVE ALSO GONE THROUGH THE DETAIL OF OPERATING AND ADMINISTRATIVE EXPENSES. IT IS ALSO CLEAR ON FACTS THAT THERE IS NO ELEMENT OF INTEREST IN THE EXPENDITURE WHICH COULD BE DISALLOWED UNDER SECTION 14A. THUS, THE ON LY DISALLOWANCE WOULD BE FROM OUT OF GENERAL ADMINISTRATIVE EXPENSE S. FURTHER, CONSIDERING THE FACT THAT OPERATING AND ADMINISTRAT IVE EXPENSES PRIMARILY RELATE TO MANUFACTURING ACTIVITIES OF THE ASSESSEE, I ESTIMATE THE DISALLOWANCE AT RS.25 LACS IN CONSONANCE WITH MY OR DER FOR A.Y. 2004-05. 1 DO NOT SUBSCRIBE TO THE ASSESSEE'S SUBMISSION THA T RULE 8D MAY BE APPLIED AND DISALLOWANCE SHOULD BE CALCULATED ACCOR DINGLY AS IT WOULD BE INAPPROPRIATE TO TAKE A DIFFERENT VIEW TAKEN BY ME EARLIER IN ASSESSMENT YEAR 2004-05. 10. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER PASSED BY THE TRIBUNAL REFERRED TO ABOVE. HO WEVER, FOR THE SAKE OF READY REFERENCE, THE SAME IS REPRODUCED HEREUNDER: 42. THE ASSESSEE IN ITS APPEAL FOR THE YEAR UNDER CONSIDERATION HAS RAISED THE ISSUE AGAINST THE DISA LLOWANCE OF RS. 25 LAKHS CONFIRMED BY CIT(A) U/S 14A OF THE ACT BY WAY OF GROUND NO.3. THE REVENUE IS IN APPEAL AGAIN ST THE SCALING DOWN OF DISALLOWANCE U/S 14A OF THE ACT. 43. THE QUESTION FOR ADJUDICATION IS WHETHER ANY DISALLOWANCE IS WARRANTED UNDER SECTION 14A OF THE ACT IN A CASE WHERE THE ASSESSEE CLAIMS TO HAVE MADE THE INV ESTMENT IN THE SHARES OF INDIAN COMPANIES, IN THE PAST YEAR S AND THE DIVIDEND INCOME FROM WHICH IS CLAIMED AS EXEMPT. TH E CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW IS THA T NO PART OF THE INTEREST EXPENDITURE IS ATTRIBUTABLE TO THE INVESTMENTS 7 MADE IN SHARES OF INDIAN COMPANIES AS THE SAID INVE STMENTS WERE MADE IN THE EARLIER YEARS WHEREIN NO DISALLOWA NCE HAD BEEN MADE. FURTHER THE ASSESSEE CLAIMS THAT DURING THE YEAR UNDER CONSIDERATION, NO EXPENDITURE IS ATTRIBUTABLE TO THE EARNING OF DIVIDEND INCOME. FROM THE PERUSAL OF TH E ASSESSMENT ORDER, WE FIND THAT THE CLAIM OF THE ASS ESSEE WAS TO HAVE MADE THE INVESTMENTS IN THE SHARES FROM WHI CH DIVIDEND INCOME HAD ARISEN AS UNDER:- INVESTMENT (IN LACS) YEAR OF INVESTMENT . SHIMLA 304.50 1985 SEL 68.65 1990 SAL 5.83 1980 IDBI 224.44. 1995 44. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS HERO CYCLES L TD WHEREIN IT HAS BEEN HELD AS UNDER:- IN VIEW OF FINDING REPRODUCED ABOVE, IT IS CLEAR THAT THE EXPENDITURE ON INTEREST WAS SET OFF AGAINST THE INCOME FROM INTEREST AND THE INVESTMENT IN THE SHARE AND FUNDS WERE OUT OF DIVIDEND PROCEEDS. IN VIEW OF THIS FINDING OF FACT, DISALLOWANCE U/S 14A WAS NOT SUSTAINABLE. WHETHER, IN A GIVEN SITUATION, ANY EXPENDITURE WAS INCURRED WHICH WAS TO BE DISALLOWED, IS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THAT DIRECTLY OR INDIRECTLY SOME EXPENDITURE IS ALWAYS INCURRED WHICH MUST BE DISALLOWED UNDER SECTION14A AND THE IMPACT OF EXPENDITURE SO INCURRED CANNOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SECTION14A, CAN NOT BE ACCEPTED. DISALLOWANCE U/S 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE UNDER SECTION 14A CANNOT STAND. IN THE PRESENT CASE FINDING ON THIS ASPECT, AGAINST THE REVENUE, IS NOT SHOWN TO BE 8 PERVERSE. CONSEQUENTLY, DISALLOWANCE IS NOT PERMISSIBLE. WE HAVE TAKEN THIS VIEW EARLIER ALSO IN ITA NO. 504 OF 2008 (COMMISSIONER OF INCOME TAX CHANDIGARH II VS M/S WINSOME TEXTILE INDUSTRIES LIMITED, CHANDIGARH ) DECIDED ON25.8.2009, WHEREIN IT WAS OBSERVED AS UNDER:- 6. CONTENTION RAISED ON BEHALF OF THE ASSESSEE HAD MADE INVESTMENT IN SHARES OUT OF ITS OWN FUNDS, THE ASSESSEE HAD TAKEN LOANS ON WHICH INTEREST WAS PAID AND ALL THE MONEY AVAILABLE WITH THE ASSESSEE WAS IN COMMON KITTY, AS HELD BY THIS COURT IN CIT VS ABHISHEK INDUSTRIES LIMITED (2006) 286 ITR 1 AND THEREFORE, DISALLOWANCE UNDER SECTION 14A WAS JUSTIFIED. 7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. JUDGMENT OF THIS COURT IN ABHISHEK INDUSTRIES (SUPRA) WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIVEN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THAT DEDUCTION OF INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FOR BUSINESS PURPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WITHOUT HAVING NEXUS WITH THE BUSINESS. OBSERVATIONS MADE THEREIN HAVE TO BE READ IN THAT CONTEXT. IN THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATION, SECTION 14A COULD HAVE NO APPLICATION. (UNDERLINE PROVIDED BY US) 9 45. IN LINE WITH THE RATIO LAID DOWN BY THE HON'BL E PUNJAB & HARYANA HIGH COURT IN CIT VS M/S HERO CYC LES LTD (ITA NO.331 OF 2009) ORDER DATED NOVEMBER, 4, 2 009- AND IN VIEW OF THE FACT THAT THE AUTHORITIES BELOW HAVE FAILED TO POINT OUT ANY INTEREST / EXPENDITURE ATTR IBUTABLE TO EARNING OF DIVIDEND INCOME DURING THE YEAR, NO DISALLOWANCE U/S 14A OF THE ACT IS WARRANTED. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DEL ETE THE DISALLOWANCE OF RS. 25 LAKHS MADE U/S 14A OF THE I. T. ACT. THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED AND GROUND NO. 3 RAISED BY THE ASSESSEE IS ALLOWED. 11. WE HAVE CAREFULLY, PERUSED THE RELEVANT RECORD, RIVAL SUBMISSIONS AND THE FINDINGS OF THE LOWER REVENUE AUTHORITIES. IT IS EVIDENT THAT RULE 8D IS NOT APP LICABLE TO THE ASSESSMENT YEAR IN QUESTION. THE ISSUE IS COVE RED BY THE ORDER OF TRIBUNAL IN ASSESSEE'S OWN CASE, AS REPROD UCED ABOVE. RESPECTFULLY FOLLOWING THE FINDINGS OF THE T RIBUNAL IN ASSESSEE'S OWN CASE, AS REPRODUCED ABOVE, THESE GRO UNDS OF APPEAL, RAISED BY THE REVENUE ARE DISMISSED. 12. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT GROUND NO.5 RAISED BY THE REVENUE I S COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE'S OWN CASE IN THE ORDER OF ITAT IN ITA NO. 270/CHD/2006 ORDER DATED 20.11.2 009. THE RELEVANT PART OF THE SAID ORDER IS REPRODUCED H EREUNDER : 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RECORD. THE ASSESSEE IS A STATE GOVERNMENT UNDERTA KING CARRYING ON THE BUSINESS OF MANUFACTURING OF TRACTO RS. THE ASSESSEE FOR ALL TRACTOR SALES EXCEPT GOVERNMENT IN STITUTION SALE, BILLS TO RESPECTIVE DEALERS AT DEALER PRICE. THE DEALERS IN TURN SELL THE TRACTORS AT MRP, THEREBY TAKING HI S PROFIT MARGIN. THE ASSESSEE CLAIMS THAT 99 PERCENT OF ITS TURN OVER IS DIRECTLY DEALER SALE WITH NO COMMISSION. THE GO VERNMENT 10 INSTITUTION SALE IS ROUTED THROUGH RESPECTIVE DEALE RS REGION WHERE THE GOODS ARE SOLD ON TENDER RATES AND DEALER IS PAID COMMISSION SEPARATELY. THE SAID COMMISSION IS ADDE D IN THE QUOTATION AND THUS IS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE COMPANY. HOWEVER, BECAUSE OF TOUGH MARKET CONDITIONS, DURING THE YEAR THE ASSESSEE COMPANY PR OMOTED INCENTIVE SCHEME FOR ITS DEALERS TO PROMOTE SALES A ND TO REALIZE THE SALE PROCEEDS. THE SCHEME WAS BASED ON INSTALLATION, OFF TAKES AND PAYMENT TARGETS WHEREIN INCENTIVE WAS PAID ON ACHIEVING CUMULATIVE MONTH END SALES OV ER A CERTAIN TARGET AND ALSO MEETING THE PAYMENT TARGETS . DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE PA ID A SUM OF RS. 1,81,72,000/- AS INCENTIVE TO DEALERS WERE C LAIMED THE SAME AS BUSINESS EXPENDITURE. SIMILAR INCENTIVE TO DEALERS WAS PAID IN ASSESSMENT YEARS 1997-98 AND 1998-99 AN D WERE ALLOWED. HOWEVER, NO INCENTIVE WAS PAID IN ASSESSME NT YEARS 1999-2000 AND 2000-01. FROM THE PERUSAL OF DETAILS OF INCENTIVE PAID TO THE DEALERS, IT TRANSPIRES THAT T HE ASSESSEE HAD PAID THE SAID INCENTIVE TO 186 DEALERS AS AGAIN ST 355 DEALERS CONNECTED TO THE ASSESSEE. THE SAID INCENT IVE WAS PAID ON ACHIEVING CUMULATIVE MONTH END SALES AND FO R MEETING BILLING PAYMENT TARGETS. THE ASSESSEE HAS FILED THE COPY OF SPECIAL INCENTIVE SCHEME APRIL 2001 BEFOR E US IN WHICH THE POLICY OF THE COMPANY FOR PAYING INCENTIV E IN RESPECT OF DIFFERENT MODELS OF TRACTOR IS INCORPORA TED. THE SCHEME FURTHER PROVIDES THAT THE SPECIAL INCENTIVE WOULD BE GIVEN ONLY ON THE RECEIPT OF PAYMENT FOR FULL VALUE OF MODEL AND NOT PART VALUE. THE EXPENDITURE INCURRED BY TH E ASSESSEE FOR ACHIEVING TARGETS OF ITS BUSINESS ARE TO BE ALLOWED AS BUSINESS EXPENDITURE IN THE HANDS OF THE ASSESSEE KEEPING INTO CONSIDERATION THE FACT THAT THE ASSESS EE IS A STATE GOVERNMENT UNDERTAKING AND NO PECUNIARY BENEF IT IS DERIVED BY ACHIEVING HIGHER TARGETS OF SALE. THE THEME FORMULATED BY THE ASSESSEE WAS IN RESPECT OF THE TA RGETS BEING ACHIEVED OVER AND ABOVE A BENCHMARK ESTABLISH ED BY THE ASSESSEE COMPANY. ACCORDINGLY, IN SOME CASES THE INCENTIVE WAS ALLOWED FOR SALE OF TWO TO THREE TRAC TORS ONLY. THE INCENTIVE PAID TO THE DEALERS IS IN THE NATURE OF BUSINESS EXPENDITURE AND HENCE NO ELEMENT OF ADVERTISEMENT. IN THE 11 ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT THE PAYMENTS BEING MADE TO T HE DEALER WERE NOT GENUINE OR THE DEALERS HAD NOT MADE THE SA LES OF TRACTORS IN RESPECT OF WHICH IT WAS ALLOWED THE INC ENTIVES, WE CONFIRM THE ORDER OF CIT(A) IN ALLOWING THE CLAI M OF THE ASSESSEE IN ENTIRETY. THE GROUND NO. 3 RAISED BY T HE REVENUE IS THUS DISMISSED. 13. THE FINDINGS OF THE LD. CIT(A) ARE CONTAINED IN PARA 7.10 OF THE ORDER, WHICH ARE REPRODUCED HEREUNDER : 7.10 FROM THE ABOVE, IT APPEARS THAT THE ABO VE POINTS HAVE BEEN TAKEN BY THE LD. AO FROM ASSESSMENT ORDER FOR A. Y. 2002-03, 2003-04 & 2004-05 IN WHICH ASSESSMENT YEARS, THE SIMILAR ISSU E AROSE AND THE ADDITION WAS DELETED. I HAVE CONSIDERED THE SUBMISS ION MADE BY THE ASSESSEE. THE A.O. REQUIRED THE ASSESSEE TO GIVE PA N OF ALL THE DEALERS AND THE ASSESSEE WAS UNABLE TO GIVE PAN/GIR OF ALL THE DEALERS. IN THAT CASE, THE DISALLOWANCE OF THE INCENTIVE BONUS WHERE PAN W AS PROVIDED IS NOT JUSTIFIED. THE A.O. IS, THEREFORE, DIRECTED TO ALLO W THE INCENTIVE BONUS PAID TO DEALERS WHOSE PAN IS PROVIDED BY THE ASSESSEE. T HE A.O. IS FURTHER DIRECTED TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO PROVIDE THE PAN OF THE BALANCE DEALERS. THE CASES WHERE ASSESSEE DOES NOT PROVIDE PAN / GIR, THE INCENTIVE PAID TO THOSE DEALERS WILL BE DISALLO WED. 14. THE AO DID NOT ACCEPT ASSESSEE'S CONTENTION THA T THE ASSESSEE HAD PAID INCENTIVES TO DEALERS ON THE BASI S OF TARGETS FOR TRACTOR, OFF-TAKE, BILLING AND DEALER H AS TO BE ENSURED THAT THEY REMIT PAYMENT UPTO A PARTICULAR D ATE BY HOLDING THAT INCENTIVE BONUS HAS NO LINKAGE WITH TH E PAYMENT MADE BY THE DEALERS AND THE EXPLANATION FILED BY TH E ASSESSEE IS ON FLIMSY GROUNDS. ACCORDINGLY, AO MADE THE DISALLOWANCE. THE AO DISALLOWED 1/3 RD OF THE TOTAL INCENTIVES PAID TO THE WORKERS. 15. HAVING REGARD TO THE RIVAL SUBMISSIONS, FACTS O F THE CASE AND FINDINGS OF THE CIT(A), AS ALSO THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE, WE ARE OF THE CONSIDERED OP INION THAT 12 THE ISSUE STANDS COVERED BY THE FINDINGS OF THE TRI BUNAL REPRODUCED ABOVE. RESPECTFULLY FOLLOWING THE DECISI ON OF THE TRIBUNAL IN ASSESSEE'S OWN CASE, THIS GROUND OF APP EAL OF THE REVENUE IS DISMISSED. 16. GROUND NOS. 6 & 7 ARE GENERAL IN NATURE, THEREF ORE, NEED NO SEPARATE ADJUDICATION. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NO. 102/CHD/2010 ( ASSESSEE'S APPEAL - A.Y. 200 6-07) 18. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. THAT THE ORDER PASSED BY THE LEARNED CIT ( A) IS BAD IN LAW. I 2. THAT THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FA CTS OF THE CASE IN HOLDING THAT AN ADHOC ESTIMATE OF RS. 2 5 LACS WILL BE APPROPRIATE TO DEAL WITH ESTABLISHMENT AND ADMINISTRATIVE EXPENSES FOR ALLOCATION U/S 14A AGAINST DIVIDEND INCOME THAT IS EXEMPT FROM TAX. THE ASSESSING OFFICER MADE THE DISALLOWANCE O F RS. 2,59,00,000/- BY APPORTIONING ADMINISTRATIVE AN D FINANCIAL EXPENSES U/S 14A . 3. THE LEARNED CIT (APPEALS) HAS ERRED IN FACTS AN D LAW IN DISALLOWING RS1,89,27,512 BY RESTRICTING THE DEPREC IATION CLAIM ON PLANT AND MACHINERY TO 15% INSTEAD OF 40%, AS CLAIMED BY THE APPELLANT, THUS IGNORING THE REQUIRE D APPROVAL RECEIVED FROM DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE AND TECHNO LOGY, GOVT OF INDIA, WITH REGARD TO CLAIM OF ACCELERATED DEPRECIATION UNDER RULE 5(2) OF INCOME TAX ACT, BEI NG BASED ON CONJECTURES AND SURMISES AND WITHOUT APPRECIATING MATERIAL ON RECORD. 13 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN DIRECTING THE ASSESSING OFFICER THAT WHERE THE ASSESSEE DOES NOT PROVIDE PAN/GIR OF DEALERS RECEIV ING INCENTIVE, THE INCENTIVE PAID TO THOSE DEALERS MAY BE DISALLOWED. THE ASSESSING OFFICER HAD DISALLOWED 1/ 3 RD OF THE EXPENDITURE ON ACCOUNT OF INCENTIVES PAID TO DE ALERS I.E. RS. 76,32,667/- (1/3 RD OF RS. 2,28,98,000/-). 5. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN HOLDING THAT THE INITIATION OF PENALTY U/S 271 (1 )(C) OF INCOME-TAX ACT, 1961 IS PREMATURE . 6. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS OF THE CASE IN CHARGING INTEREST U/S 234B, 234C & 2 34D OF THE INCOME-TAX ACT, 1961. 7. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR MODIF Y ANY GROUND OF APPEAL BEFORE THE DISPOSAL OF THE APPEAL. 19. GROUND NO. 1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE. HENCE, NEEDS NO SEPARATE ADJUDICATION 20. IN GROUND NO.2, ASSESSEE CONTENDED THAT CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT AN ADHOC ESTIMATE OF RS.25,00,000/- WILL BE APPROPRIATE TO DEAL WITH EST ABLISHMENT AND ADMINISTRATIVE EXPENSES FOR ALLOCATION U/S 14A AGAINST DIVIDEND INCOME I.E. EXEMPT FROM TAX. THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT V HERO CYCLES LTD. (2010) 323 ITR 581 ( P&H) AND ON ANOTHER DECISION OF HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT V METALMAN AUTO PVT. LTD. (2011) 336 ITR 434 (P&H). LD. 'DR' PLACED RELIANCE ON THE DECISIO N OF THE BOMBAY HIGH COURT REPORTED IN 328 ITR 81 (BOM). 21. WE HAVE CAREFULLY PERUSED THE FACT-SITUATION OF THE PRESENT CASE, RIVAL SUBMISSIONS AND FIND THAT THERE IS SUBSTANCE IN THE CONTENTION MADE BY THE ASSESSEE. THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE J URISDICTIONAL 14 HIGH COURT IN THE CASE OF CIT V HERO CYCLES (SUPRA) AND CIT V METALMAN AUTO PVT. LTD. (SUPRA). FURTHER, THE IS SUE HAS ALSO BEEN DEALT WITH BY THE ITAT IN ITA NO. 594/CHD /2006 FROM PARA 42 TO 45 IN THE ORDER DATED 20.11.2009, F OR THE A.Y. 2004-05. THEREFORE, RESPECTFULLY FOLLOWING TH E DECISION OF THE JURISDICTIONAL HIGH COURT AND THE RELEVANT F INDINGS OF THE ITAT, THE GROUND OF APPEAL RAISED BY THE ASSESS EE IS ALLOWED. 22. IN GROUND NO.3, THE ASSESSEE CONTENDED THAT CIT (A) ERRED ON FACTS AND IN LAW IN DISALLOWING RS.1,89,27 ,512/- BY RESTRICTING THE DEPRECIATION CLAIMED ON PLANT & MAC HINERY TO 15% INSTEAD OF 40% CLAIMED BY THE APPELLANT, THUS, IGNORING THE REQUIRED APPROVAL RECEIVED FROM DEPARTMENT OF S CIENTIFIC & INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE AND TECH NOLOGY, GOVT. OF INDIA, WITH REGARD TO CLAIM OF ACCELERATED DEPRECIATION UNDER RULE 5(2) OF THE INCOME TAX RULE S, BEING BASED ON CONJECTURES AND SURMISES, WITHOUT PROVIDIN G THE MATERIAL ON RECORD. LD. 'AR' REFERRED TO PAGE 14 A ND 16 OF THE ASSESSMENT ORDER AND ALSO RULE 5(2) OF THE INCOME T AX RULES, WHICH WAS INTRODUCED IN THE YEAR 1988. LD. 'AR' AL SO REFERRED TO PAGE 11 OF THE PAPER BOOK WHICH CONTAINS CERTIFI CATE DATED 15.06.2007. THE FINDINGS OF THE LD. CIT(A) ARE REC ORDED IN PARA 6.6, 6.7 & 6.8 OF HIS ORDER, WHICH IS REPRODUC ED HEREUNDER : 6.6 I HAVE CONSIDERED RIVAL SUBMISSION OF THE ASSESS EE, COUNTER COMMENTS OF THE A.O. AND REPLY OF THE ASSESSEE TO T HE COUNTER COMMENTS OF THE AO. I HAVE ALSO CONSIDERED THE RIVAL SUBMISSION OF THE ASSESSEE. RULE 5(2) STATES AS UNDER: (A) 'THE MACHINERY IS INSTALLED FOR THE PURPOSE OF BUSI NESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING A ND SUCH 15 ARTICLE OR THING IS MANUFACTURED OR PRODUCED BY USING ANY TECHNOLOGY OR OTHER KNOW HOW DEVELOPED IN OR (B) IS ARTICLE OR THING INVENTED IN, A LABORATORY OWNED OR FINANCED BY THE GOVT. OR A LABORATORY OWNED BY A PUBLIC SECTOR COMPANY OR A UNIVERSITY OR AN INSTITUTION RECOGNISED IN THIS B EHALF BY THE SECRETARY, DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH (DSIR), GOVERNMENT OF INDIA, SUCH PLANT OR MACHINERY SHALL BE TREATED AS APART OF BLOCK OF ASSETS QUALIFYING FOR DEPRECIATIO N AT THE RATE OF 40 PER CENT OF WRITTEN DOWN VALUE , IF THE FOLLOWING C ONDITIONS ARE FULFILLED, NAMELY:- (I) THE RIGHT TO USE SUCH TECHNOLOGY (INCLUDING ANY PRO CESS) OR OTHER THAN KNOW-HOW OR TO MANUFACTURE OR, PRODUCE SUCH AR TICLE OR THING HAS BEEN ACQUIRED FORM THE OWNER OF SUCH LABORATORY OR ANY PERSON DERIVING TITLE FROM SUCH OWNER. II) THE RETURN, FURNISHED BY THE ASSESSEE FOR ANY PREVIOUS YEAR IN WHICH THE SAID MACHINERY OR PLANT IS ACQUIRED, S HALL BE ACCOMPANIED BY A CERTIFICATE FROM THE SECRETARY, DE PARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, GOVERNMENT OF I NDIA, TO THE EFFECT THAT SUCH ARTICLE OR THING IS MANUFACTURED OR PRODU CED BY USING SUCH TECHNOLOGY (INCLUDING ANY PROCESS) OR THEIR KNOW-HO W DEVELOPED IN SUCH LABORATORY OR IS AN ARTICLE OR THING INVENTED IN SUCH LABORATORY. (III) THE MACHINERY OR PLA NT IS NOT USED FOR THE PURPOSE OF BUSINESS OF MANUFACTURE OF PRODUCTION OF ANY ARTICL E OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDULE TO THE ACT 6.7 ACCORDING TO THE ASSESSEE, IT IS PRODUCING / M ANUFACTURING TRACTORS BY USING THE TECHNOLOGY ACQUIRED IN 1972. HOWEVER, ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THIS FACT BY WAY OF DOCUMENTARY EVIDENCE. I AGREE WITH THE OBSERVATION OF THE A.O. THAT BASED ON SINGLE AGREEMENT SIGNED IN 1972 AND NO FURTHER IMPR OVEMENTS THEREAFTER IN THE TECHNOLOGY, THE CLAIM FOR HIGHER DEPRECIATION CANNOT BE ALLOWED. THE FACT REMAINS THAT WHETHER AS SESSEE HAS FULFILLED ALL THE CONDITIONS AS PROVIDED UNDER RULE 5(2) BOTH IN LETTER AND SPIRIT AND ACCORDING TO A.O. AS IS EVIDE NT FROM DISCUSSION ABOVE THE SAME HAS NOT BEEN COMPLIED WIT H FULLY. THE THEN A.O., JCIT PATIALA ALSO ATTENDED DURING THE CO URSE OF APPELLATE PROCEEDINGS ALONGWITH ACIT CIRCLE PATIALA WITH CASE RECORDS IN PRESENCE OF APPELLANT'S COUNSEL AND IT WAS ARGUED B Y BOTH OF THEM THAT THEIR STAND GETS FURTHER SUBSTANTIATED IN AS M UCH AS IN SUBSEQUENT YEARS NOT EVEN A SINGLE CERTIFICATE OF A PPROVAL HAS BEEN 16 GRANTED TILL DATE BY SECRETARY DSIR AND WHEN ASKED FROM THE COUNSEL ABOUT THE VORACITY OF THE FACT HE ADMITTED THE SAME THAT SUBSEQUENTLY NO CERTIFICATE TILL DATE HAVE BEEN REC EIVED ALTHOUGH APPLICATION IS PENDING . THE COUNSEL'S PLEA THAT ON CE THE CERTIFICATE IS ISSUED BY THE SECRETARY DSIR AND THA T IS CONCLUSIVE AND THE A.O. IS BARRED FROM MAKING FURTHER PROBE IN TO THE AFFAIRS OF THE APPELLANT'S COMPANY AFFAIRS IS NOT SUSTAINABLE IN AS MUCH AS A.O. IS NOT BARRED TO ASCERTAIN THE TRUE STATE OF A FFAIRS IN THE CASE OF ASSESSEE COMPANY AND EVEN THE PRINCIPLE OF RESJU DICATA ( ALTHOUGH DESIREABLE) IS NOT MECHANICALLY APPLICABLE TO INCOME TAX MATTERS. MORE SO, ASSESSEE IS GETTING ADDED BEN EFIT IN FORM OF ACCELERATED DEPRECIATION CANNOT SULK HIS RESPONSIBI LITY AS SUCH BY GIVING SKELTON REPLY TO THE VARIOUS RELEVANT QUERIE S RAISED BY THE AO IN ASSESSMENT PROCEEDINGS. THEREFORE, CONSIDERIN G THE TOTALITY OF THE FACTS I FIND MYSELF IN AGREEMENT WITH THE VI EW TAKEN BY THE AO FOR NOT ALLOWING HIGHER DEPRECIATION AND THE APP ELLANTS GROUND ON THIS SCORE IS DISMISSED. 6.8 THEREFORE, GROUND NO. 7 IS DISMISSED. 23. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORDS AND HAVE ALSO CAREFULLY PERUSED RULE 5(2) OF THE INCOME TAX RULES. THE CER TIFICATE (PB-II) ISSUED BY THE MINISTRY OF SCIENCE AND TECHN OLOGY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, NEW DELHI DATED 15.06.2007, WHEREBY IN PARA 4 OF THE SAID CER TIFICATE, IT IS CERTIFIED THAT ; IT IS CERTIFIED THAT OUT OF THE CLAIMS MADE IN PARA 3 ABOVE, PLANT AND MACHINERY INSTALLED AT A CO ST OF RS.1,11,99,571/- DURING THE FINANCIAL YEAR 2005-06, ARE FOR IMPROVED DESIGN OF TRACTORS IN THE PLANT SET-UP FOR THE MANUFACTURE OF AGRICULTURAL TRACTORS, HARVESTER COM BINES AND INDUSTRIAL FORKLIFTS BASED ON TECHNOLOGY ORIGINALLY ACQUIRED FROM CENTRAL MECHANICAL ENGINEERING RESEARCH INSTIT UTE, DURGAPUR (CMERI) AND IMPROVEMENTS MADE THEREON BASE D ON THEIR OWN IN HOUSE R & D EFFORTS. 17 24. SIMILARLY, A REFERENCE WAS MADE BY THE LD. 'AR' TO PAGE 13 OF THE PAPER BOOK WHICH CONTAINS A LETTER DATED 06.05.2003 WHEREBY MINISTRY OF SCIENCE & TECHNOLOGY , GOVT. OF INDIA, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RES EARCH, NEW DELHI HAD ACCORDED RENEWAL OF RECOGNITION TO THE IN -HOUSE R&D UNIT OF THE ASSESSEE, UPTO 31.3.2006. 25. HAVING REGARD TO THE CLEAR CONTENTS OF THESE TW O LETTERS, EMANATING FROM THE MINISTRY, AS ALSO TO RULE 5(2) O F THE INCOME TAX RULES, IT IS EVIDENT THAT ASSESSEE SATIS FIED THE REQUISITE CONDITIONS FOR ACCELERATED DEPRECIATION A ND THE REVENUE FAILED TO BRING EVIDENCE ON RECORD TO REBUT SUCH EVIDENCES. ACCORDINGLY, FINDINGS OF THE CIT(A) CAN NOT BE SUSTAINED AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 26. IN GROUND NO.4, ASSESSEE CONTENDED THAT CIT(A) ERRED IN DIRECTING THE AO THAT WHERE THE ASSESSEE DOES NOT P ROVIDE PAN/GIR OF DEALERS RECEIVING INCENTIVE, THE INCENTI VE PAID TO THOSE DEALERS MAY BE DISALLOWED. 27. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT THE ISSUE IS COVERED BY THE DECISIO N OF THE ITAT IN ITA NO. 270/CHD/2006 IN ASSESSEE'S OWN CASE . LD. 'AR' PLACED RELIANCE ON THE ORDER PASSED BY THE CIT (A). 28. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND FOUND THAT THE ISSUE IS SQUARELY CO VERED BY THE DECISION OF THE TRIBUNAL IN ITA NO. 270/CHD/200 6 DATED 20.11.2009, FOR THE ASSESSMENT YEAR 2003-04. THE R ELEVANT PART AS CONTAINED IN PARA 23 OF THE SAID TRIBUNALS ORDER, HAS 18 BEEN REPRODUCED UNDER PARA 12 OF THIS ORDER, WHILE DEALING WITH THE SAME ISSUE IN THE REVENUES APPEAL, AS ADJ UDICATED ABOVE. 29. IN VIEW OF THE ABOVE LEGAL AND FACT-SITUATION, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 30. IN GROUND NO. 5, THE ASSESSEE APPELLANT RAISED THE ISSUE IN RESPECT OF INITIATION OF PENALTY U/S 271(1)(C) O F THE ACT WHICH IS PRE-MATURE IN NATURE AND, HENCE, THE SAME IS DISMISSED. 31. IN GROUND NO.6, ASSESSEE CHALLENGED THE CHARGIN G OF INTEREST U/S 234B, C AND D OF THE ACT. IN THIS CON TEXT, WE ARE OF THE CONSIDERED OPINION THAT SUCH CHARGING OF INTEREST IS MANDATORY AND CONSEQUENTIAL IN NATURE AND, HENCE , THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 32. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, ON THE ABOVE INDICATED TERMS. 33. IN THE RESULT, WHEREAS APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH APRIL,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 10 TH APRIL, 2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH