ACIT, CHENNAI V. M/s. Sterlite Industries (India) Ltd., Tuticorin

ITA 1020/CHNY/2010

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7414 (ITAT-CHENNAI)
• Duration Of Justice: 6 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 21-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; International transaction; Earning of tax free income; Proportionate interest; Wholly owned subsidiary; Block assessment; Notional interest; Commercial expediency; Revenue expenditure; TDS; Rule 8D; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 92D; 80HHC; 14A; 40(a)(ia); 80G; 195; 64; 43; 48; 13; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , !' .$%$&, ( ') BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NOS.318 & 319/MDS/2008 & +& / ASSESSMENT YEAR : 2004-05 ./ ITA NO. 1020/MDS/2010 & +& / ASSESSMENT YEAR : 2005-06 ./ ITA NO. 1665/MDS/2010 & +& / ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), CHENNAI - 600 034. V. M/S STERLITE INDUSTRIES (INDIA) LTD., 1, SAI FLATS, 55, PILLAIYAR KOIL ST., KANAGAM, THARAMANI, CHENNAI - 600 113. PAN : AABCS 4955 Q (-./ APPELLANT) (/0-./ RESPONDENT) ./ ITA NO.86/MDS/2008 & +& / ASSESSMENT YEAR : 2004-05 ./ ITA NO. 1386/MDS/2010 & +& / ASSESSMENT YEAR : 2006-07 M/S STERLITE INDUSTRIES (INDIA) LTD., 1, SAI FLATS, 55, PILLAIYAR KOIL ST., KANAGAM, THARAMANI, CHENNAI - 600 113. V. THE DEPUTY COMMISSIONER OF INCOME TAX / THE ADDITIONAL COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, RANGE VI, CHENNAI - 600 034. (-./ APPELLANT) (/0-./ RESPONDENT) $ 1 2 /REVENUE BY : SHRI M. SWAMINATHAN, SR.STANDING COUNSEL &34 1 2 /ASSESSEE BY : SHRI G. BASKAR, ADVOCATE 2 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 5 1 4( / DATE OF HEARING : 13.02.2017 67+ 1 4( / DATE OF PRONOUNCEMENT : 29.03.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEALS). SINCE COMMON ISSUES ARISE FO R CONSIDERATION IN ALL THESE APPEALS, WE HEARD THESE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. LETS FIRST TAKE ASSESSEES APPEAL IN I.T.A. NO.8 6/MDS/2008 FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST GROUND OF APPEAL IS RELATING TO REDUCT ION OF DEDUCTION UNDER SECTION 80-IB OF THE INCOME-TAX ACT , 1961 (IN SHORT 'THE ACT') FOR THE PURPOSE OF COMPUTING ELIGIBLE PR OFIT FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. 3. SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER REDUCED THE DEDUCTION AL LOWED UNDER SECTION 80-IB OF THE ACT WHILE COMPUTING ELIGIBLE P ROFIT UNDER SECTION 80HHC OF THE ACT. ACCORDING TO THE LD. COU NSEL, SECTION 3 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 80HHC OF THE ACT IS AN INDEPENDENT PROVISION, THERE FORE, THE DEDUCTION ALLOWED UNDER SECTION 80-IB OF THE ACT CA NNOT BE REDUCED FROM THE ELIGIBLE PROFIT COMPUTED UNDER SECTION 80H HC OF THE ACT. 4. ON THE CONTRARY, SHRI M. SWAMINATHAN, LD. SR.STA NDING COUNSEL FOR THE REVENUE, SUBMITTED THAT THE CIT(APP EALS), BY FOLLOWING THE SPECIAL BENCH DECISION OF THIS TRIBUN AL IN ACIT V. ROHINI GARMENTS (2007) 294 ITR (AT) 15, FOUND THAT THE ASSESSEE CANNOT CLAIM MORE THAN THE PROFIT COMPUTED UNDER TH E PROVISIONS OF THE ACT. IF THE DEDUCTION ALLOWED UNDER SECTION 80 -IB OF THE ACT WAS NOT REDUCED FROM THE ELIGIBLE PROFIT COMPUTED UNDER SECTION 80HHC OF THE ACT, THEN THE DEDUCTION CLAIMED BY THE ASSES SEE WOULD EXCEED THE TOTAL PROFIT. IT CANNOT BE THE INTENTIO N OF THE PARLIAMENT TO ALLOW DEDUCTION UNDER SECTION 80HHC AND 80-IB OF THE ACT MORE THAN THE PROFIT EARNED BY THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT(APPEALS) HAS RIGH TLY DIRECTED THE ASSESSING OFFICER TO REDUCE THE DEDUCTION ALLOWED U NDER SECTION 80-IB OF THE ACT WHILE COMPUTING DEDUCTION UNDER SE CTION 80HHC OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE JUDGMENT OF 4 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 MADRAS HIGH COURT IN SCM CREATIONS V. ACIT (2008) 3 04 ITR 319 WOULD COVER THE ISSUE. ACCORDINGLY, THE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE IN THE LIGHT OF THE JUDGMENT OF MADRAS HIGH C OURT IN SCM CREATIONS (SUPRA) AFTER GIVING A REASONABLE OPPORTU NITY TO THE ASSESSEE. 6. THE NEXT GROUND OF APPEAL ARISES FOR CONSIDERATI ON IS WITH REGARD TO INITIATION OF PENALTY PROCEEDING UNDER SE CTION 271AA AND 271G OF THE ACT. 7. WE HAVE HEARD THE LD.COUNSEL FOR THE ASSESSEE AN D THE LD. SR. STANDING COUNSEL FOR THE REVENUE. FROM THE ORD ER OF THE ASSESSING OFFICER IT APPEARS THAT THE ASSESSING OFF ICER HAS INITIATED THE PENALTY PROCEEDINGS AND NO ORDER APPEARS TO HAV E BEEN PASSED. THE ASSESSEE HAS SOUGHT REMEDY BY WAY OF A PPEAL BEFORE THE CIT(APPEALS) AND FURTHER APPEAL BEFORE THIS TRI BUNAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 271AA AND 271G OF THE ACT. THEREFORE, MERE INITIATION OF PRO CEEDINGS BY ISSUING SHOW CAUSE NOTICE CANNOT BE A SUBJECT MATTE R OF APPEAL BEFORE THIS TRIBUNAL. HENCE, THE CIT(APPEALS) HAS RIGHTLY CONSIDERED THIS AS PREMATURE. THIS TRIBUNAL DO NOT FIND ANY REASON 5 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 8. IN THE RESULT, THE ASSESSEES APPEAL IN I.T.A. N O.86/MDS/2008 STANDS DISMISSED. 9. NOW COMING TO THE REVENUES APPEAL IN I.T.A. NO. 319/MDS/2008 FOR THE ASSESSMENT YEAR 2004-05, THE F IRST GROUND OF APPEAL IS WITH REGARD TO ADDITION OF ` 5.50 CRORES IN RESPECT OF DONATION MADE BY THE ASSESSEE TO M/S PUBLIC & POLIT ICAL AWARENESS TRUST. 10. SHRI M. SWAMINATHAN, LD. SR.STANDING COUNSEL FO R THE REVENUE, SUBMITTED THAT THE ASSESSEE MADE DONATION TO M/S PUBLIC & POLITICAL AWARENESS TRUST AND CLAIMED DEDUCTION U NDER SECTION 80GGB OF THE ACT. REFERRING TO THE PROVISIONS OF S ECTION 29A OF THE REPRESENTATION OF THE PEOPLE ACT, 1951, THE LD. SR. STANDING COUNSEL SUBMITTED THAT THE ASSESSEE BEING A MULTINA TIONAL CORPORATION, IS NOT ENTITLED TO CONTRIBUTE TO ANY P OLITICAL PARTY. SUCH A DONATION WAS ALSO PROHIBITED UNDER SECTION 2(E) O F FOREIGN CONTRIBUTION (REGULATION) ACT, 1976. REFERRING TO THE WORD CONTRIBUTION IN SECTION 293A OF THE COMPANIES ACT , 1956, THE LD. 6 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 SR. STANDING COUNSEL SUBMITTED THAT IT REFERS ONLY DIRECT CONTRIBUTION AND INDIRECT CONTRIBUTION SUCH AS GIVING ADVERTISEM ENT IN ANY OF THE PUBLICATION BY OR ON BEHALF OF ANY POLITICAL PARTY. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT( APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 11. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT SECTION 80GGB OF THE ACT C LEARLY SAYS THAT IN COMPUTING THE TOTAL INCOME, THERE SHALL BE DEDUCTED ANY SUM CONTRIBUTED TO ANY POLITICAL PARTY OR ELECTORAL TRU ST. EXPLANATION TO SECTION 80GGB OF THE ACT CLARIFIES THAT THE WORD C ONTRIBUTE HAS THE SAME MEANING AS IT IS ASSIGNED TO IT UNDER SECTION 293A OF THE COMPANIES ACT, 1956. REFERRING TO SECTION 293A OF THE COMPANIES ACT, THE LD.COUNSEL SUBMITTED THAT A COMPANY, WHICH IS NOT BEING A GOVERNMENT COMPANY, MAY CONTRIBUTE NOT EXCEEDING 5% OF ITS AVERAGE NET PROFIT TO ANY POLITICAL PARTY OR TO ANY POLITICAL PURPOSE, TO ANY PERSON. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE BEING AN INDIAN COMPANY HAS TAKEN THE TRUST AS MEDI UM TO DONATE FUNDS FOR POLITICAL PURPOSE AND THE ACTUAL BENEFICI ARY ARE THE POLITICAL PARTIES AND NOT THE TRUST. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF T HE ASSESSEE UNDER SECTION 80GGB OF THE ACT. 7 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 80 GGB OF THE ACT WHICH READS AS FOLLOWS:- DEDUCTION IN RESPECT OF CONTRIBUTIONS GIVEN BY COMPANIES TO POLITICAL PARTIES IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, BEIN G AN INDIAN COMPANY, THERE SHALL BE DEDUCTED ANY SUM CONTRIBUTED BY IT, IN THE PREVIOUS YEAR TO ANY POLITICAL PARTY OR AN ELECTORAL TRUST. [PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED UNDER THIS SECTION IN RESPECT OF ANY SUM CONTRIBUTED BY WAY OF CASH.] EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED TH AT FOR THE PURPOSES OF THIS SECTION, THE WORD CONTRIBUTE, W ITH ITS GRAMMATICAL VARIATION, HAS THE MEANING ASSIGNED TO IT UNDER SE CTION 293A OF THE COMPANIES ACT, 1956 (1 OF 1956). 13. BEFORE 01.04.2010, THE AMOUNT CONTRIBUTED BY AN Y INDIAN COMPANY TO ANY POLITICAL PARTY HAS TO BE REDUCED FR OM TOTAL INCOME FOR THE PURPOSE OF COMPUTING TAXABLE INCOME. THE P ARLIAMENT BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 01.04.201 0 AMENDED SECTION 80GGB BY INCORPORATING THE WORD OR AN ELEC TORAL TRUST. THEREFORE, WITH EFFECT FROM 01.04.2010, IF A CONTRI BUTION WAS MADE TO AN ELECTORAL TRUST, THAT AMOUNT IS ELIGIBLE FOR DEDUCTION WHILE COMPUTING THE TAXABLE INCOME. IN THE CASE BEFORE U S, ADMITTEDLY, 8 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 THE CONTRIBUTION WAS MADE TO TRUST AND NOT TO ANY P OLITICAL PARTY DIRECTLY. EVEN THOUGH COMPANIES ACT, MORE PARTICUL ARLY SECTION 293A(2)(B), ALLOWS THE COMPANIES TO DONATE FOR POLI TICAL PURPOSE TO ANY PERSON, THE INCOME-TAX ACT ALLOWS THE PAYMENT M ADE TO A POLITICAL PARTY. THEREFORE, THE QUESTION ARISES FO R CONSIDERATION IS WHEN THE ASSESSEE CONTRIBUTED TO A TRUST, WHETHER S UCH PAYMENT MAY BE CONSTRUED AS PAYMENT MADE TO A POLITICAL PAR TY? IT IS TO BE KEPT IN MIND THAT THE ASSESSMENT YEAR UNDER CONSIDE RATION IS 2004- 05. THE AMENDMENT CARRIED OUT BY PARLIAMENT BY FIN ANCE (NO.2) ACT, 2009 WITH EFFECT FROM 01.04.2010 INCORPORATING THE WORD OR AN ELECTORAL TRUST MAY NOT BE APPLICABLE AT ALL. EXP LANATION TO SECTION 80GGB OF THE ACT SAYS THAT THE WORD CONTRIBUTE HA S THE MEANING WHICH WAS ASSIGNED TO IT UNDER SECTION 293A OF THE COMPANIES ACT. HOWEVER, THE CONTRIBUTION SHALL BE MADE TO POLITICA L PARTY DIRECTLY BEFORE 01.04.2010. IN THE CASE BEFORE US, ADMITTED LY, THE CONTRIBUTION WAS MADE TO PUBLIC AND POLITICAL AWARE NESS TRUST AND NOT TO ANY POLITICAL PARTY. HENCE, THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE CONTRIBUTION MADE BY THE ASSESSEE TO THE EXTENT OF ` 5.50 CRORES TO PUBLIC & POLITICAL AWARENESS TRUST F OR THE ASSESSMENT YEAR 2004-05 CANNOT BE CLAIMED AS DEDUCT ION UNDER SECTION 80GGB OF THE ACT. IN OTHER WORDS, THE INCO ME-TAX ACT, 9 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 BEING A SPECIAL ENACTMENT FOR COMPUTING THE TAXABLE INCOME, IT WILL OVERRIDE OTHER ENACTMENTS INCLUDING THE COMPANIES A CT. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE C LAIM OF THE ASSESSEE. 14. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF MADRAS HIGH COURT IN CHERAN ENGINEERING CORPORATION LTD. V . CIT (1999) 238 ITR 892. IN THAT CASE, THE CONTRIBUTION WAS MA DE BY THE EMPLOYER TO THE WELFARE OF THE EMPLOYEES. THEREFOR E, THE MADRAS HIGH COURT HELD THAT IT HAS TO BE ALLOWED UNDER SEC TION 37 OF THE ACT. IN THE CASE BEFORE US, IT IS NOT THE CONTRIBU TION MADE BY THE ASSESSEE TO THE WELFARE OF THE EMPLOYEES. IT WAS M ADE TO A TRUST FOR CREATING POLITICAL AWARENESS, THEREFORE, THE JU DGMENT OF MADRAS HIGH COURT IN CHERAN ENGINEERING CORPORATION LTD. ( SUPRA) MAY NOT BE APPLICABLE AT ALL. HENCE, WE ARE UNABLE TO UPHO LD THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS SET ASIDE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE E XTENT OF ` 5.50 CRORES IS RESTORED. 15. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 38.83 CRORES. 10 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 16. SHRI M. SWAMINATHAN, LD. SR.STANDING COUNSEL FO R THE REVENUE, SUBMITTED THAT THE ASSESSEE CHANGED ITS ME THOD OF ACCOUNTING IN RESPECT OF COPPER CONCENTRATE PURCHAS ES FROM MARK TO MARKET TO TAKE INTO EFFECT THE INCREASE IN THE LIAB ILITY OF THE ASSESSEE WHICH WAS ASCERTAINED. ACCORDING TO THE LD. SR. ST ANDING COUNSEL, CHANGE OF ACCOUNTING METHOD IS NOT COMPULSORY. THE ASSESSEE SHOULD HAVE ACCOUNTED FOR INCREASE IN PURCHASE PRIC E AT THE TIME OF FINALIZATION OF ACCOUNTS ON 31.03.2004. BY INCREAS ING THE PURCHASE PRICE, ACCORDING TO THE LD. SR. STANDING COUNSEL, T HE ASSESSEE IS MAKING AN ATTEMPT TO REDUCE THE PROFIT, THEREFORE, THE CIT(APPEALS) IS NOT CORRECT IN ALLOWING THE CLAIM OF THE ASSESSE E. 17. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT IN FACT, THE ASSESSEE CHAN GED THE METHOD OF ACCOUNTING FROM MARK TO MARKET. IT IS FOR THE A SSESSEE TO CHANGE THE METHOD OF ACCOUNTING WITH REGARD TO POLICY OF T HE COMPANY. THE ASSESSING OFFICER CANNOT COMMENT ON THE POLICY OF T HE COMPANY UNLESS AND UNTIL THE METHOD OF ACCOUNTING ADOPTED B Y THE ASSESSEE DOES NOT DISCLOSE THE CORRECT PROFIT OF THE ASSESSE E. EVEN THOUGH THE PURCHASE PRICE WAS INCREASED BY CHANGING THE ME THOD OF ACCOUNTING FROM MARK TO MARKET, THE ASSESSEE WAS UN IFORMLY FOLLOWING THE METHOD TO SUBSEQUENT YEARS. THEREFOR E, ACCORDING TO 11 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 THE LD. COUNSEL, IT CANNOT BE SAID THAT THE ASSESSE E WAS MAKING AN ATTEMPT TO REDUCE THE PROFIT BY SHIFTING THE ACCOUN TING POLICY. AS RIGHTLY OBSERVED BY THE CIT(APPEALS), THE METHOD OF ACCOUNTING HAVE BEEN FOLLOWED CONSISTENTLY, HENCE, THE CIT(APP EALS) HAS RIGHTLY DELETED THE ADDITION. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, A COM PANY CAN ADOPT ANY ONE OF THE METHODS PERMISSIBLE FOR COMPUTING TH E PROFIT. ONCE THE ASSESSEE CHANGED ITS METHOD OF ACCOUNTING AND C ONSISTENTLY FOLLOWED THE SAME IN SUBSEQUENT YEARS, THE DEPARTME NT CANNOT DOUBT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSE SSEE. IN THE INITIAL YEARS, THERE MAY BE FLUCTUATION IN THE PROF IT OF THE ASSESSEE DUE TO INCREASE IN PURCHASE PRICE BY CHANGING THE M ETHOD OF ACCOUNTING. HOWEVER, WHEN THE ASSESSEE WAS CONSIST ENTLY FOLLOWING THE SAME, THERE WILL BE REVENUE NEUTRAL, HENCE THERE CANNOT BE LOSS TO THE REVENUE. THEREFORE, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTL Y ALLOWED THE CLAIM OF THE ASSESSEE UNDER THE PROVISIONS OF SECTI ON 145A OF THE ACT. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTER FERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 12 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 19. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 14,58,83,105/- CONSEQUENT TO THE BLOCK ASSESSMENT I N THE ASSESSEES CASE. 20. SHRI M. SWAMINATHAN, LD. SR.STANDING COUNSEL FO R THE REVENUE, SUBMITTED THAT CONSEQUENT TO THE BLOCK ASS ESSMENT, THE ASSESSING OFFICER MADE AN ADDITION OF ` 14,58,83,105/-. HOWEVER, THE CIT(APPEALS) FOUND THAT IN THE BLOCK ASSESSMENT , THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF ` 14,00,86,150/- WAS DELETED. DUE TO EXCHANGE FLUCTUATION, THE ADDITION MADE IN PURSUANCE OF BLOCK ASSESSMENT, WAS ALSO DELETED BY THE CIT(APPEALS) TO THE EXTENT OF ` 57,96,955/-. ACCORDING TO THE LD. D.R., THE ADDITION MADE BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT IS WITH REGARD TO UNDISCLOSED INCOME. T HE PRESENT ASSESSMENT IS UNDER SECTION 143(3) OF THE ACT. THE REFORE, ACCORDING TO LD. SR. STANDING COUNSEL, THE ORDER OF THE CIT(APPEALS) FOR THE BLOCK ASSESSMENT CANNOT BE A R EASON FOR DELETING THE ADDITION MADE IN THE REGULAR ASSESSMEN T. 21. WE HAVE HEARD THE LD.COUNSEL FOR THE ASSESSEE A LSO. ACCORDING TO THE LD. COUNSEL, THE ADDITION MADE IN THE BLOCK 13 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 ASSESSMENT WAS DELETED, THEREFORE, CONSEQUENTLY, TH ERE CANNOT BE ANY ADDITION IN THE REGULAR ASSESSMENT. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ADDITION MADE IN THE BLOCK ASSESSMENT IS IN RESPECT OF THE U NDISCLOSED INCOME. THE ADDITION MADE IN THE PRESENT CASE IS I N THE ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT. U NDER THE SCHEME OF INCOME-TAX ACT, THERE CAN BE SIMULTANEOUS ASSESSMENT ONE FOR REGULAR ASSESSMENT AND ANOTHER FOR BLOCK PE RIOD. THEREFORE, AS RIGHTLY SUBMITTED BY THE LD. SR. STAN DING COUNSEL FOR THE REVENUE, THE BLOCK ASSESSMENT MADE BY THE ASSES SING OFFICER WAS SEPARATE AND DISTINCT. HOWEVER, IT NEEDS TO BE VERIFIED WHETHER THE SAME INCOME WHICH FORMED PART OF UNDISCLOSED IN COME FOR THE BLOCK PERIOD HAS BEEN ADDED ONCE AGAIN IN THE REGUL AR ASSESSMENT. FOR THE PURPOSE OF VERIFICATION, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED. A CCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE WITH REGARD TO ADDITION OF ` 14,58,83,105/- IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL RE-EXAMINE THE ISSUE AND BRING ON RECORD WHETHER ANY INCOME WH ICH FORMED 14 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 PART OF UNDISCLOSED INCOME IN THE BLOCK ASSESSMENT WAS INCLUDED IN THIS ASSESSMENT. THE ASSESSING OFFICER SHALL DELET E THE INCOME WHICH FORMED PART OF UNDISCLOSED INCOME FOR THE BLO CK PERIOD. WITH THE ABOVE OBSERVATION THE MATTER IS REMITTED BACK T O THE FILE OF THE ASSESSING OFFICER. 23. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION OF ` 4.44 CRORES UNDER SECTION 37 OF THE ACT. 24. SHRI M. SWAMINATHAN, LD. SR.STANDING COUNSEL FO R THE REVENUE, SUBMITTED THAT FCC BOND HOLDERS HAD THE OP TION TO CONVERT THE BONDS INTO SHARES. THEREFORE, THE DECI SION OF DELHI BENCH OF THIS TRIBUNAL IN DCIT V. RANBAXY LABORATOR IES LTD. (88 ITD 283) APPLICABLE TO THE FACTS OF THE CASE. LD. SR. STANDING COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO CHANGE D ITS METHOD OF ACCOUNTING IN RELATION TO EXPENSES INCURRED FOR ISS UE OF FCC BONDS. THE EXPENSES SPREAD OVER FOR SEVEN YEARS. THEREFOR E, THE CLAIM OF THE ASSESSEE TO THE EXTENT OF ` 4.44 CRORES CANNOT BE ALLOWED. 25. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE CLAIMED EXPEN SES FOR ISSUE OF FCC BONDS UNDER SECTION 37 OF THE ACT. THE EXPE NSES FOR ISSUE 15 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 OF FCC BONDS MAY NOT FALL UNDER SECTION 35D OF THE ACT. ACCORDING TO THE LD. COUNSEL, SECTION 37 AND SECTION 35D OF T HE ACT ARE ENABLING PROVISIONS AND NOT MUTUALLY EXCLUSIVE. RE FERRING TO THE JUDGMENT OF APEX COURT IN INDIA CEMENTS LTD. V. CIT (1966) 60 ITR 52, THE LD.COUNSEL SUBMITTED THAT WHERE A COMPANY W AS IN THE BUSINESS, INCURRED EXPENDITURE ON ISSUE OF DEBENTUR ES, SUCH AN EXPENDITURE HAS TO BE ALLOWED WHILE COMPUTING THE T OTAL INCOME OF THE ASSESSEE. AS HELD BY APEX COURT IN INDIA CEMEN TS LTD. (SUPRA), SUCH AN EXPENDITURE NEED NOT BE AMORTIZED AGAINST T HE PROFIT OVER THE PERIOD. THEREFORE, THE CIT(APPEALS) BY FOLLOWI NG THE JUDGMENT OF APEX COURT AND ACCOUNTING STANDARD AS 26, ALLOWE D THE CLAIM OF THE ASSESSEE. 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-COMPANY IS ALREADY IN BUS INESS, THEREFORE, THE EXPENSES FOR ISSUE OF DEBENTURES NEE D NOT BE AMORTISED UNDER SECTION 35D OF THE ACT AND IT HAS T O BE ALLOWED UNDER SECTION 37 OF THE ACT. THE CIT(APPEALS), IN FACT, HAS PLACED HIS RELIANCE IN INDIA CEMENTS LTD. (SUPRA). THEREF ORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 16 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 27. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF ` 2.13 CRORES TOWARDS NOTIONAL INTEREST ON INTEREST F REE LOAN ADVANCED TO WHOLLY OWNED SUBSIDIARY COMPANY. 28. SHRI M. SWAMINATHAN, LD. SR.STANDING COUNSEL FO R THE REVENUE, SUBMITTED THAT THE ASSESSEE ADVANCED MONEY TO SUBSIDIARY COMPANY OUTSIDE THE COUNTRY. IN FACT, T HE LOAN WAS BORROWED IN INDIA AND ADVANCED IT TO ITS WHOLLY OWN ED SUBSIDIARY COMPANIES OUTSIDE INDIA. ACCORDING TO THE LD. SR. STANDING COUNSEL, BY DIVERTING THE BORROWED FUNDS OUTSIDE IN DIA, THE ASSESSEE IS DIVERTING THE TAXABLE PROFIT OUTSIDE TH E JURISDICTION. REFERRING TO THE ASSESSMENT ORDER, THE LD. SR. STAN DING COUNSEL SUBMITTED THAT THE TRANSFER PRICING OFFICER ORIGINA LLY SUGGESTED TO MAKE ADJUSTMENT TO THE EXTENT OF ` 13,64,01,948/-. HOWEVER, ON THE REPRESENTATION MADE BY THE ASSESSEE, AN ADJUSTMENT WAS MADE TO THE EXTENT OF ` 2,13,80,690/-. ACCORDING TO LD. SR. STANDING COUNSEL, THE ADVANCE WAS MADE TO MONTE CELLO BV. S INCE THE LOAN WAS ADVANCED TO FOREIGN COMPANY, ACCORDING TO LD. S R. STANDING COUNSEL, THE INTEREST CLAIMED BY THE CANNOT BE ALLO WED. 17 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 29. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE BORROWED LOAN FOR BUSINESS PURPOSE AND THE SAME WAS ADVANCED TO TWO COMPANIES FROM WHOM THE ASSESSEE WAS PURCHASING COPPER ORE, WHICH IS RA W MATERIAL FOR THE ASSESSEE. THEREFORE, THERE WAS A BUSINESS EXPE DIENCY AS HELD BY APEX COURT IN S.A. BUILDERS LTD. V. CIT (288 ITR 1). REFERRING TO THE ADVANCE MADE TO MONTE CELLO BV, THE LD.COUNSEL SUBMITTED THAT THE ADVANCE WAS MADE FOR EARLIER ASSESSMENT YEAR AN D NOT IN THE CURRENT YEAR. THEREFORE, THE OBSERVATION MADE BY T HE TPO IS NOT CORRECT. SINCE NO ADVANCE WAS MADE DURING THE YEAR UNDER CONSIDERATION, ACCORDING TO THE LD. COUNSEL, THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT BE JUSTIFIED, ACCOR DINGLY, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE, IN FACT, ADVANCED MONEY TO TWO COMPANIES WHICH ARE OUT SIDE INDIA. THE ASSESSEE CLAIMED THAT TWO COMPANIES ARE ENGAGED IN EXCAVATION OF COPPER ORE AND THE ASSESSEE WAS PURCH ASING COPPER CONCENTRATE FROM THOSE COMPANIES. THE QUESTION ARI SES FOR CONSIDERATION IS WHEN THE ASSESSEE ADVANCED MONEY T O THE 18 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 COMPANIES OUTSIDE INDIA, WHETHER THE INTEREST ON TH E BORROWED FUNDS CAN BE ALLOWED WHILE COMPUTING THE TAXABLE IN COME? THE ASSESSEE CLAIMS THAT DUE TO BUSINESS EXPEDIENCY, TH E ADVANCE WAS MADE. THE REVENUE CONTENDS THAT SINCE MONEY WAS BO RROWED IN INDIA AND PAID INTEREST, THE PROFIT IN INDIA WAS CO NSIDERABLY REDUCED, SINCE THE PROFIT OF THE ASSESSEE WAS SHIFTED TO OUT SIDE THE JURISDICTION. THE CIT(APPEALS) BY PLACING RELIANCE ON THE JUDGMENT OF APEX COURT IN S.A.BUILDERS LTD. (SUPRA), ALLOWED THE CLAIM OF THE ASSESSEE. THE FACT THAT THE ADVANCE WAS MADE TO FO REIGN COUNTRIES AND SHIFTING OF PROFIT TO OTHER NATION WAS NOT EXAM INED BY THE CIT(APPEALS). THEREFORE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED. ACCORDIN GLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE TRANSFE R PRICING ADJUSTMENT MADE BY THE ASSESSING OFFICER IS REMITTE D BACK TO HIS FILE. THE ASSESSING OFFICER SHALL RE-EXAMINE THE M ATTER AND REFER THE SAME TO TPO FOR RECONSIDERATION. THE TRANSFER PRICING OFFICER SHALL EXAMINE THE MATTER AFRESH AND FIND OUT WHETHE R ANY ADVANCE WAS MADE TO FOREIGN COMPANY DURING THE CURRENT YEAR AND WHETHER SUCH ADVANCE WOULD AMOUNT TO SHIFTING OF PROFIT TO OTHER NATION. THEREAFTER THE ASSESSING OFFICER SHALL DECIDE THE I SSUE AFRESH IN 19 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 31. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION OF ` 4.35 CRORES. 32. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ASSESSEE HAS CLAIMED ` 4.35 CRORES TOWARDS MANAGEMENT CONSULTANCY FEES. THE TRANSFER PRICING OFFICER FOUND THAT THE DETAILS OF SPECIFIC SERVICES PROVIDED BY THE ASSESSEE ARE NOT AVAILABLE. THE ASSESSEE ASSUMED M ARGIN OF 15% ON THE COST AND COMPUTED THE ARM'S LENGTH PRICE. T HE TRANSFER PRICING OFFICER FOUND THAT THE METHOD OF COMPUTATIO N OF ARM'S LENGTH PRICE BY THE ASSESSEE WAS NOT CORRECT. ACCORDING T O THE LD. SR. STANDING COUNSEL, IN TERMS OF PROPERTY, PLANT AND E QUIPMENT USED, THE VALUE OF THE ASSET IS ALMOST EIGHT TIMES THAT O F THE COMPARABLE COMPANY. THE INVENTORY OF FOUR TIMES THAT OF THE C OMPARABLE COMPANY WAS NOT TAKEN INTO CONSIDERATION BY THE TPO AND THE ASSESSING OFFICER. ACCORDING TO LD. SR. STANDING C OUNSEL, CONSIDERING THE PROPORTION OF THE COMPARABLE COMPAN IES, BUSINESS SIZE, THE VALUE OF THE ASSET, IT WAS REASONABLE TO CONCLUDE THAT THE ASSESSEE HAS NOT AVAILED ANY SERVICE FROM THE SO-CA LLED ASSOCIATE 20 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 ENTERPRISE. HOWEVER, THE CIT(APPEALS) FOUND THAT T HE TRANSFER PRICING OFFICER ARBITRARILY ESTIMATED THE MANAGEMEN T SERVICES FEE AT ` 8.70 CRORES AS AGAINST ` 4.35 CRORES RECEIVED BY THE ASSESSEE. ACCORDINGLY, THE CIT(APPEALS) DIRECTED THE ASSESSIN G OFFICER TO DELETE THE ADDITION OF ` 4.35 CRORES. 33. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE TRANSFER PRICING OFFIC ER FOUND THAT THE DETAILS OF THE SERVICES SAID TO BE PROVIDED BY THE ASSESSEE WERE NOT PROVIDED. HOWEVER, THIS IS NOT CORRECT. THE ASSES SEE HAS PRODUCED A COPY OF THE AGREEMENT BEFORE THE TRANSFER PRICING OFFICER AS WELL AS THE ASSESSING OFFICER. IT IS ALSO NOT CORRECT T O CLAIM THAT THE DETAILS OF EXPERTS MADE AVAILABLE TO THE ASSESSEE W ERE NOT PROVIDED TO THE TRANSFER PRICING OFFICER. THE TRANSFER PRIC ING OFFICER HIMSELF REFERRED THE NAMES OF THE PERSONS WHO HAD BEEN ENGA GED BY THE ASSESSEE FOR PROVIDING EXPERT SERVICE. REFERRING T O THE EVIDENCES FOR EXPENSES, THE LD.COUNSEL SUBMITTED THAT THE ASS ESSEE-COMPANY IS A VERY BIG COMPANY HAVING FACTORY AT MULTIPLE LO CATIONS IN THE GLOBE, THE EVIDENCES WERE MADE AVAILABLE BEFORE THE TPO AND THE ASSESSING OFFICER. THE DETAILS OF THE EVIDENCES, W HICH WERE MADE AVAILABLE BEFORE THE TPO AND THE ASSESSING OFFICER WERE PRODUCED 21 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 BEFORE THE CIT(APPEALS) AND THIS TRIBUNAL AS WELL. HENCE, THE CIT(APPEALS) FOUND THAT THE TRANSFER PRICING OFFICE R ARBITRARILY ESTIMATED THE MANAGEMENT SERVICE FEES AT ` 8.70 CRORES AS AGAINST ` 4.35 CRORES ACTUALLY RECEIVED BY THE ASSESSEE. THE REFORE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 34. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE- COMPANY CLAIMS TO HAVE RECEIVED MANAGEMENT SERVICE FEE OF ` 4.35 CRORES EACH FROM CMT AND TCM. HOWEVER, IT APPEARS THE ASSESSEE COULD NOT PROVIDE THE DETAILS OF SPECIFIC SERVICES PROVIDED TO THOSE ENTITIES. THE ASSESSEE CLAIMS THAT THE DE TAILS WERE MADE AVAILABLE BEFORE THE TPO AND THEY ARE AVAILABLE BEF ORE THE CIT(APPEALS) AND BEFORE THIS TRIBUNAL. IT IS NOT I N DISPUTE THAT THE ASSESSEE-COMPANY ASSUMED A PROFIT OF 15% ON THE REV ENUE IN THE FORM OF MANAGEMENT SERVICE FEE. THE ASSESSEE FURTH ER CLAIMED BEFORE THE CIT(APPEALS) THAT THE TPO ARBITRARILY ES TIMATED THE FEE AT ` 8.70 CRORES INSTEAD OF ` 4.35 CRORES. THE ASSESSEE APPEARS TO HAVE ADOPTED COST PLUS METHOD FOR COMPUTING ARM'S L ENGTH PRICE IN RESPECT OF MANAGEMENT CONSULTANCY CHARGES. FROM TH E TABULAR 22 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 COLUMN AVAILABLE AT PAGE 69 OF THE ORDER OF THE CIT (APPEALS), IT APPEARS THE BUSINESS SIZE OF CMT IS ALMOST TWICE TH AT OF TCM. MOREOVER, IN TERMS OF PROPERTY, PLANT, EQUIPMENT, V ALUE OF THE ASSET, CMT IS ALMOST EIGHT TIMES BIGGER THAN THAT OF TCM. THEREFORE, THE TRANSFER PRICING OFFICER ASSUMED THAT THE ASSESSEE- COMPANY SHOULD HAVE RECEIVED DOUBLE THE AMOUNT TOWARDS MANA GEMENT CONSULTANCY FEE FROM TCM AND CMT. 35. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F RULE 10C OF INCOME-TAX RULES, 1962. FOR THE PURPOSE OF DETE RMINING THE MOST APPROPRIATE METHOD, THE TRANSFER PRICING OFFIC ER HAS TO IDENTIFY THE NATURE AND CLASS OF INTERNATIONAL TRANSACTION. APART FROM THAT, THE DEGREE OF COMPARABILITY BETWEEN INTERNATIONAL T RANSACTION AND UNCONTROLLED TRANSACTION BETWEEN THE ENTERPRISES EN TERED INTO SUCH TRANSACTION HAS TO BE IDENTIFIED. IN THE CASE BEFO RE US, THE TRANSFER PRICING OFFICER HAS NOT COMPARED THE THIRD PARTY CO MPARABLE CASES. MOREOVER, IT IS NOT KNOWN THE ACTUAL SERVICES RENDE RED BY THE ASSESSEE TO CMT AND TCM. UNLESS AND UNTIL THE SERV ICES RENDERED BY THE ASSESSEE ARE BROUGHT ON RECORD, THE BUSINESS SIZE OF CMT AND TCM CANNOT DETERMINE THE COMPARABILITY OF SERVI CES RENDERED AND CONSIDERATION RECEIVED BY THE ASSESSEE. THEREF ORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT IS OB LIGATORY ON THE PART 23 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 OF THE TRANSFER PRICING OFFICER TO BRING ON RECORD THE EXACT NATURE OF SERVICES RENDERED BY THE ASSESSEE AND THEREAFTER HA S TO COMPARE THE TRANSACTION WITH OTHER COMPANIES IN THE INTERNA TIONAL TRANSACTION WITH UNCONTROLLED TRANSACTION. SINCE SUCH AN EXERC ISE WAS NOT DONE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER AF TER REFERRING THE MATTER TO THE TRANSFER PRICING OFFICER ONCE AGAIN. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REFER THE MATTER TO TPO ONCE AGAIN AN D DETERMINE THE ARM'S LENGTH PRICE IN RESPECT OF SERVICES RENDERED BY THE ASSESSEE IN THE LIGHT OF FINDING AND CONCLUSION THAT MAY BE REACHED BY THE TRANSFER PRICING OFFICER. 36. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION OF ` 30.50 LAKHS TOWARDS MANAGEMENT CONSULTANCY FEES PAID TO M/S TWIN STAR HOLDINGS LTD., MAURITIUS. 37. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ASSESSEE CLAIMS TO HAVE PAID ` 30.50 LAKHS TOWARDS ECONOMIC COST OF FUNDS PAID TO M/S TW IN STAR HOLDINGS LTD., MAURITIUS. REFERRING TO THE ORDER O F THE TRANSFER 24 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 PRICING OFFICER, THE LD. SR. STANDING COUNSEL SUBMI TTED THAT THE PAYMENT MADE TO M/S TWIN STAR HOLDINGS LTD. IS NOT EXCLUSIVELY FOR BUSINESS OF THE ASSESSEE. REFERRING TO THE ORDER O F THE CIT(APPEALS), THE LD. SR. STANDING COUNSEL SUBMITTE D THAT IT IS NOT KNOWN HOW THE PAYMENT OF ` 30.50 LAKHS MADE TO M/S TWIN STAR HOLDINGS LTD., MAURITIUS BENEFITED THE ASSESSEE-COM PANY. REFERRING TO THE OBSERVATION MADE BY THE CIT(APPEAL S), THE LD. SR. STANDING COUNSEL SUBMITTED THAT THE CIT(APPEALS) MA DE GENERALIZED REMARKS THAT THE ASSESSEES MARKET CAPI TALIZATION HAS GONE UP SUBSTANTIALLY AFTER LISTING OF HOLDING COMP ANY IN THE UK STOCK EXCHANGE, THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 38. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS PRODUCED DETAILS OF CONSULTANCY SERVICES PROVIDED BY M/S TWIN STAR HOLD INGS LTD., MAURITIUS ALONG WITH COPY OF AGREEMENT BEFORE THE A SSESSING OFFICER AS WELL AS THE TRANSFER PRICING OFFICER. T HE ASSESSEE HAS ALSO EXPLAINED THE NATURE OF CONSULTANCY CHARGES PA ID. HOWEVER, THE TRANSFER PRICING OFFICER IGNORING THE EXPLANATI ON OFFERED BY THE ASSESSEE, ARBITRARILY DECIDED AND OBSERVED THAT M/S TWIN STAR 25 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 HOLDINGS LTD. LACKED RESOURCE FOR PROVIDING MANAGEM ENT CONSULTANCY TO THE ASSESSEE-COMPANY, THEREAFTER DET ERMINED ECONOMIC COST OF FUNDS PAID TO M/S TWIN STAR HOLDIN GS LTD. ACCORDING TO THE LD. COUNSEL, THE PAYMENT OF ` 30.50 LAKHS TO M/S TWIN STAR HOLDINGS LTD. WAS MADE OUT OF COMMERCIAL EXPEDIENCY AND THE ASSESSEE-COMPANY GREATLY BENEFITED OUT OF T HE PAYMENT SINCE THE HOLDING COMPANY WAS LISTED IN UK STOCK EX CHANGES. 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAS PAID MANAGEMENT CONSULTANCY FEES TO M/ S TWIN STAR HOLDINGS LTD., MAURITIUS. FROM THE MATERIAL AVAILA BLE ON RECORD, IT APPEARS THAT M/S TWIN STAR HOLDINGS LTD. PRINCIPALL Y HOLDS INVESTMENTS. IT IS NOT KNOWN WHAT KIND OF SERVICES / CONSULTANCY WAS PROVIDED TO THE ASSESSEE-COMPANY BY M/S TWIN ST AR HOLDINGS LTD., MAURITIUS. THE ASSESSEE CLAIMS THAT IT OBTAI NED A GREAT ADVANTAGE IN THE PAYMENT OF ` 30.50 LAKHS. IT ALSO CLAIMED BY THE ASSESSEE BEFORE THE CIT(APPEALS) THAT THE MARKET CA PITALIZATION OF THE ASSESSEE SUBSTANTIALLY RAISED AFTER LISTING OF HOLDING COMPANY IN UK STOCK EXCHANGES. THE MAIN CONTENTION OF THE REV ENUE APPEARS TO BE THAT M/S TWIN STAR HOLDINGS LTD. HAS NO RESOURCE TO 26 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 PROVIDE MANAGEMENT CONSULTANCY SERVICES. THIS CLAI M OF REVENUE WAS NOT CONSIDERED BY THE CIT(APPEALS). SO, WHAT K IND OF MANAGEMENT CONSULTANCY OR SERVICES WERE PROVIDED BY M/S TWIN STAR HOLDINGS LTD. HAS TO BE BROUGHT ON RECORD. SI NCE THE ACTUAL SERVICE RENDERED BY M/S TWIN STAR HOLDINGS LTD. WAS NOT BROUGHT ON RECORD BY THE CIT(APPEALS), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED. A CCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REFER THE MATTER TO THE TPO ONCE AGAI N AND TPO SHALL EXAMINED THE ACTUAL SERVICE RENDERED BY M/S TWIN ST AR HOLDINGS LTD. TO THE ASSESSEE AND THEREAFTER DETERMINE THE A RM'S LENGTH PRICE AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESS EE. 40. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF ` 1.68 CRORES UNDER SECTION 14A OF THE ACT. 41. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE CIT(APPEALS) DELETED ` 1.68 CRORES UNDER SECTION 14A OF THE ACT ON THE GROUND THAT THE INVESTMENT MADE BY THE ASSESSEE IN BALCO CANNOT BE EQUATED WIT H ORDINARY INVESTMENT OF THE ORDINARY SHAREHOLDER. ACCORDING TO THE LD. SR. 27 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 STANDING COUNSEL, THE ASSESSEE IS ENGAGED IN THE BU SINESS OF MANUFACTURING NON-FERROUS METALS, NAMELY, COPPER, Z INC AND ALUMINIUM. THE ASSESSEE MADE INVESTMENT IN BALCO I N THE YEAR 2001 TO THE EXTENT OF ` 553.17 CRORES OUT OF WHICH ` 551.92 CRORES WAS OUT OF BORROWED FUNDS. SINCE ` 69.92 CRORES WAS OUTSTANDING IN THE ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER DISALLOWED THE PROPORTIONATE INTEREST OF ` 1.68 CRORES. THEREFORE, ACCORDING TO LD. SR. STANDING COUNSEL, THE CIT(APPEALS) IS NOT JUSTI FIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 42. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT ADMITTEDLY THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF COPPER, ZINC AND ALUMI NIUM. THE INVESTMENT MADE BY THE ASSESSEE IN BALCO WAS PART O F ITS BUSINESS EXPANSION ALL OVER THE WORLD. THE INVESTMENT MADE BY THE ASSESSEE IN BALCO CANNOT BE EQUATED WITH ORDINARY I NVESTMENT MADE BY ORDINARY SHAREHOLDER TO EARN CAPITAL GAIN O R EXEMPTED INCOME. THE INVESTMENT WAS MADE BY THE ASSESSEE IN ORDER TO DIVERSIFICATION IN THE NON-FERROUS METAL SECTOR. T HEREFORE, THE INTEREST, IF ANY, PAID BY THE ASSESSEE HAS TO BE AL LOWED UNDER SECTION 36(1)(III) OF THE ACT. SINCE THE INVESTMEN T WAS MADE IN THE 28 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 COURSE OF BUSINESS, THERE CANNOT BE ANY DISALLOWANC E TOWARDS INTEREST ON BORROWED FUNDS. THE LD.COUNSEL FURTHER SUBMITTED THAT THE INCOME EARNED FROM THE INVESTMENT IN BALCO IS B USINESS INCOME. THE INVESTMENT MADE IN BALCO WAS FOR RUNNING BUSINE SS OF THE ASSESSEE IN A PROFITABLE MANNER. THEREFORE, ACCORD ING TO THE LD. COUNSEL, THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER WAS RIGHTLY DELETED BY THE CIT(APPEALS). 43. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF MANUFACTURING COPPER, ZINC AND ALUMINIUM. THE ASSE SSEE CLAIMS THAT THE INVESTMENT IN BALCO WAS FOR BUSINESS PURPO SE. ADMITTEDLY, OUT OF TOTAL INVESTMENT OF ` 553.17 CRORES, ` 551.92 CRORES WAS OUT OF BORROWED FUNDS. THE QUESTION ARISES FOR CONSIDE RATION IS WHETHER THE INVESTMENT MADE IN BALCO IS FOR BUSINESS PURPOS E OR NOT? THE RELATIONSHIP BETWEEN THE ASSESSEE AND BALCO IS NOT KNOWN. HOW THE INVESTMENT MADE IN BALCO BENEFITS THE ASSESSEE IS ALSO NOT KNOWN. THE RELATIONSHIP BETWEEN THE ASSESSEE AND B ALCO WAS NOT BROUGHT ON RECORD BY THE TRANSFER PRICING OFFICER A S WELL AS THE CIT(APPEALS). THEREFORE, THIS TRIBUNAL IS UNABLE T O UPHOLD THE ORDER 29 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 OF THE LOWER AUTHORITY. HOWEVER, SINCE THE NATURE OF TRANSACTION AND THE RELATIONSHIP WAS NOT BROUGHT ON RECORD, THE MAT TER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE WITH REGARD TO DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT I S REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSIN G OFFICER SHALL RE- EXAMINE THE MATTER AFRESH AND BRING ON RECORD THE P URPOSE FOR WHICH THE INVESTMENT WAS MADE IN BALCO AND THE RELA TIONSHIP BETWEEN THE ASSESSEE AND BALCO AND THEREAFTER DECID E THE ISSUE AFRESH, IN ACCORDANCE WITH LAW, AFTER GIVING A REAS ONABLE OPPORTUNITY TO THE ASSESSEE. 44. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DEDUCTION MADE BY THE ASSESSEE UNDER SECTION 80-IA OF THE ACT. 44. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCT ION UNDER SECTIONS 80-IA, 80-IB AND 80HHC OF THE ACT. REFERR ING TO SECTION 80-IA(9) OF THE ACT, THE LD. SR. STANDING COUNSEL S UBMITTED THAT THE CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO REDU CE DEDUCTION ALLOWED UNDER SECTION 80-IA OF THE ACT WHILE COMPUT ING DEDUCTION UNDER SECTION 80HHC OF THE ACT. 30 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 45. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE DEDUCTION ALLOWED UNDE R SECTION 80-IA OF THE ACT SHALL BE REDUCED WHILE COMPUTING RELIEF UNDER SECTION 80HHC OF THE ACT. THE LD.COUNSEL PLACED HIS RELIAN CE ON THE JUDGMENT OF MADRAS HIGH COURT IN SCM CREATIONS V. A CIT. 46. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ISSUE WAS CONSIDERED BY THE MADRAS HIGH COURT IN SCM CREATION S (SUPRA). THE MADRAS HIGH COURT BY FOLLOWING THE JUDGMENT OF MADHYA PRADESH HIGH COURT IN J.P. TOBACCO PRODUCTS PVT. LT D. V. CIT (1998) 229 ITR 123 AND THE JUDGMENTS OF VARIOUS HIG H COURTS, FOUND THAT THE DEDUCTION ALLOWED UNDER SECTION 80-I A OF THE ACT NEED NOT BE REDUCED WHILE COMPUTING RELIEF UNDER SE CTION 80HHC OF THE ACT. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH C OURT, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 47. NOW COMING TO REVENUES APPEAL IN I.T.A. NO.318 /MDS/2008 FOR ASSESSMENT YEAR 2004-05, THE ONLY ISSUE ARISES FOR 31 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 CONSIDERATION IS WITH REGARD TO LEVY OF PENALTY UND ER SECTION 271G OF THE ACT. 48. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH THE INFORMATION IN RESPECT OF INTERNATIONAL TRANSACTION UNDER SECTION 92D(3) OF THE ACT. REFERRING TO SECTION 92D(3) OF THE ACT, THE LD. SR. STANDING COUNSEL SUBMITTED THAT EVERY PERSON WH O ENTERS INTO INTERNATIONAL TRANSACTION SHALL KEEP AND MAINTAIN S UCH INFORMATION AND DOCUMENT AS PRESCRIBED. REFERRING TO RULE 10D OF INCOME-TAX RULES, 1962, THE LD. SR. STANDING COUNSEL SUBMITTED THAT RULE 10D PROVIDES FOR DETAILS OF INFORMATION AND DOCUMENTS T O BE KEPT AND MAINTAINED UNDER SECTION 92D OF THE ACT. ADMITTEDL Y, THE ASSESSEE HAS NOT PRODUCED THE BILLS AND VOUCHERS AND THE REQ UIRED INFORMATION AS PROVIDED IN RULE 10D(3)(G) OF INCOME -TAX RULES, 1962. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE PENAL TY UNDER SECTION 271G OF THE ACT. 49. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER LEVI ED PENALTY OF ` 1,43,58,919/- UNDER SECTION 271G OF THE ACT. THE P ENALTY WAS, IN 32 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 FACT, LEVIED FOR NON-PRODUCTION OF INFORMATION REGA RDING THE EXPENSES INCURRED FOR PROVIDING MANAGEMENT CONSULTA NCY SERVICE TO CMT AND TCM. REFERRING TO THE ORDER OF THE CIT(APP EALS), THE LD.COUNSEL SUBMITTED THAT THE ALLEGATION OF THE REV ENUE IS THAT THE ASSESSEE FURNISHED ONLY EXTRACTS OF INFORMATION INS TEAD OF DOCUMENTARY EVIDENCE REQUIRED BY THE TRANSFER PRICI NG OFFICER UNDER RULE 8D(D) OF INCOME-TAX RULES, 1962. THE AD DITION MADE BY THE ASSESSING OFFICER WAS DELETED BY THE CIT(APPEAL S). THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT PRODUCE D NECESSARY DETAILS OF INFORMATION AND DOCUMENTS AS REQUIRED FO R INTERNATIONAL TRANSACTION. THE LD.COUNSEL FURTHER SUBMITTED THAT IT IS NOT THE CASE OF THE TRANSFER PRICING OFFICER THAT THE REQUIRED I NFORMATION AND DOCUMENT WERE NOT PRODUCED BEFORE HIM. ACCORDING T O THE LD. COUNSEL, THE DETAILED INFORMATION SUPPORTED BY DOCU MENTARY EVIDENCE REGARDING THE OWNERSHIP, INTERNATIONAL TRA NSACTION, COPIES OF BALANCE SHEET, COPIES OF COMPARABLE TRANSACTIONS , ETC WERE SUBMITTED BEFORE THE TRANSFER PRICING OFFICER. THE ASSESSING OFFICER HAS SIMPLY INITIATED THE PENALTY PROCEEDING UNDER SECTION 271G OF THE ACT WITHOUT INDICATING THE DOCUMENT WHI CH WAS NOT PRODUCED BY THE ASSESSEE. ACCORDING TO THE LD. COU NSEL, THE ASSESSEES ACCOUNTS WERE DULY AUDITED BY THE STATUT ORY AUDITOR AS 33 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 WELL AS INTERNAL AUDITORS. THE AUDITED ACCOUNTS WE RE ALSO PUBLISHED IN THE ANNUAL REPORT. THE APPORTIONMENT OF EXPENDI TURE WAS ON THE BASIS AS DONE IN THE LAST YEAR. THEREFORE, THE CIT (APPEALS) HAS RIGHTLY DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 50. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE MAIN REASON ON WHICH THE PENALTY WAS DELETED WAS THAT THE CIT(A PPEALS) DELETED THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER IN RESPECT OF MANAGEMENT CONSULTANCY SERVICE SAID TO BE PROVIDED BY THE ASSESSEE TO TCM AND CMT. WHILE CONSIDERING THE APP EAL OF THE REVENUE IN RESPECT OF THE QUANTUM ADDITION, THIS TR IBUNAL REMITTED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICE R FOR RECONSIDERATION WITH A DIRECTION TO BRING ON RECORD THE ACTUAL SERVICES SAID TO BE RENDERED BY THE ASSESSEE TO CMT AND TCM. 51. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE CIT(APPEALS). THE ASSESSING OFFICER REFERRING TO T HE OBSERVATION MADE BY THE TRANSFER PRICING OFFICER, MORE PARTICUL ARLY PAGE 27 OF HIS ORDER, FOUND THAT THE ASSESSEE HAS FAILED TO FU RNISH INFORMATION AND DOCUMENTS REGARDING THE EXPENSES SAID TO BE INC URRED BY PROVIDING MANAGEMENT CONSULTANCY SERVICES TO CMT AN D TCM. TO 34 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 ASCERTAIN THE NATURE OF SERVICE RENDERED BY THE ASS ESSEE TO CMT AND TCM, THE MATTER WAS REMITTED BACK TO THE FILE O F THE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271G OF THE ACT ALSO NEEDS TO BE RECONSIDERED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF PENALTY LEVIED UNDER SECTION 271G OF THE ACT IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE TH E MATTER AFRESH AND BRING ON RECORD THE ACTUAL SERVICE RENDERED BY THE ASSESSEE TO CMT AND TCM AND, THEREAFTER DECIDE THE ISSUE AFRESH AFTER BRINGING ON RECORD THE FAILURE OF THE ASSESSEE TO PROVIDE TH E EXACT INFORMATION AND DOCUMENTS WHICH ARE REQUIRED TO BE PRODUCED FOR INTERNATIONAL TRANSACTION AND, THEREAFTER DECIDE TH E ISSUE IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPO RTUNITY TO THE ASSESSEE. 52. NOW COMING TO REVENUES APPEAL IN I.T.A. NO. 1020/MDS/2010 FOR ASSESSMENT YEAR 2005-06, THE FIRS T ISSUE ARISES FOR CONSIDERATION IS DEDUCTION CLAIMED BY THE ASSES SEE UNDER SECTION 80-IA OF THE ACT. 35 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 53. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE CIT(APPEALS) OUGHT TO H AVE FOLLOWED THE DECISION OF CHENNAI BENCH IN CHETTINADU CEMENT CORPORATION LTD. V. ACIT IN I.T.A. NO.1029/MDS/2005 DATED 05.01 .2007. ACCORDING TO THE LD. SR. STANDING COUNSEL, WHEN THE ASSESSEE USED THE POWER GENERATOR FOR CAPTIVE CONSUMPTION, DEDUCT ION UNDER SECTION 80-IA OF THE ACT CANNOT BE ALLOWED. THEREF ORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT(APPEALS) IS N OT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 54. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT IN FACT, THIS TRIBUNAL IN MOHAN BREWERIES & DISTILLERIES LTD. V. ACIT (2009) 311 ITR (AT) 346, FOUND THAT THE CAPTIVE POWER PLANT SET UP FOR DISTILLERY UNIT IS E LIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. MOREOVER, IN THE A SSESSEE'S OWN CASE, THIS TRIBUNAL FOR THE EARLIER ASSESSMENT YEAR FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION WHEN THE POWER G ENERATED USED FOR CAPTIVE CONSUMPTION. THE MUMBAI BENCH OF THIS TRIBUNAL HAS ALSO TAKEN A SIMILAR VIEW ALLOWING THE IDENTICAL CL AIM OF THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT A NY OF THE CONDITION PRESCRIBED FOR ALLOWING DEDUCTION UNDER S ECTION 80-IA OF THE ACT WAS NOT COMPLIED WITH. MERELY BECAUSE THE POWER WAS 36 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 UTILISED FOR CAPTIVE CONSUMPTION THAT CANNOT BE A R EASON FOR DISALLOWING THE CLAIM OF THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED T HE CLAIM OF THE ASSESSEE. 55. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS USED THE POWER FOR CA PTIVE CONSUMPTION AND CLAIMED DEDUCTION UNDER SECTION 80- IA OF THE ACT. THIS TRIBUNAL IN MOHAN BREWERIES & DISTILLERIES LTD . (SUPRA) EXAMINED THIS ISSUE ELABORATELY AND FOUND THAT EVEN THOUGH THE POWER WAS GENERATED FOR CAPTIVE CONSUMPTION, THE AS SESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE A CT. A SIMILAR VIEW WAS TAKEN BY MUMBAI BENCH OF THIS TRIBUNAL AS WELL. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. HENCE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 56. NOW COMING TO DISALLOWANCE OF ` 1 CRORE DONATED TO TSUNAMI RELIEF FUND OF RAJIV GANDHI RELIEF AND NATIONAL WEL FARE TRUST. 37 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 57. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE PAYMENT MADE BY THE ASS ESSEE TO TSUNAMI RELIEF FUND IS NOT FOR BUSINESS PURPOSE. U NDER SECTION 37 OF THE ACT, THE EXPENDITURE INCURRED BY THE ASSESSE E FOR RUNNING THE BUSINESS ALONE IS ELIGIBLE FOR DEDUCTION. DONATION TO TSUNAMI RELIEF FUND AND A TRUST CANNOT BE CONSTRUED AS AN EXPENDIT URE FOR EARNING THE INCOME OF THE ASSESSEE. THEREFORE, THE CIT(AP PEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 58. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT IN FACT, THE ASSESSEE CLAI MED DEDUCTION TO THE EXTENT OF ` 1,75,58,500/- UNDER SECTION 80G OF THE ACT. THE ASSESSING OFFICER RESTRICTED THE CLAIM TO THE EXTEN T OF ` 1,73,250/- SINCE THE DONATION MADE TO RAJIV GANDHI RELIEF AND NATIONAL WELFARE TRUST WAS ELIGIBLE FOR DEDUCTION ONLY FOR 5 0% AS AGAINST 100% CLAIMED BY THE ASSESSEE. HOWEVER, THE CIT(APP EALS) ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 37 OF THE ACT. SINCE IT IS NOT A BUSINESS EXPENDITURE, ACCORDING T O THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF T HE ASSESSEE. 59. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE 38 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 DONATED ` 1 CRORE TO RAJIV GANDHI RELIEF AND NATIONAL WELFARE TRUST. THE AMOUNT WAS DONATED TOWARDS CORPORATE SOCIAL RES PONSIBILITY. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED UNDER SECTION 37 OF THE ACT. THE MADRAS HI GH COURT IN CIT V. VELUMANICKAM LODGE (2009) 317 ITR 338 HAS CONSID ERED A SIMILAR ISSUE. THE ASSESSEE BEFORE THE MADRAS HIGH COURT, A CIVIL CONTRACTOR, CONSTRUCTED A HOCKEY STADIUM IN THE COL LECTORATE COMPLEX AT RAMANATHAPURAM. THE ASSESSEE CLAIMED TH E EXPENDITURE FOR CONSTRUCTING THE HOCKEY STADIUM AS REVENUE EXPENDITURE. THE MADRAS HIGH COURT AFTER CONSIDERI NG ITS EARLIER JUDGMENT IN CHOLAN ROADWAYS CORPORATION LTD. V. CIT (1999) 235 ITR 473, FOUND THAT THE CONTRIBUTION MADE TOWARDS F LAG DAY FUND AND CHIEF MINISTERS REHABILITATION FUND ARE DEDUCT IBLE AS THEY ARE NOT IN CONTRAVENTION OF ANY LAW. THE MADRAS HIGH C OURT FURTHER FOUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS CONSTRUCTION OF HOCKEY STADIUM WAS FOR PROMOTION OF ITS BUSINESS, HENCE IT WAS ALLOWED AS REVENUE EXPENDITURE. 60. IN THIS CASE BEFORE US ALSO THE DONATION OF ` 1 CRORE WAS MADE TO RAJIV GANDHI RELIEF AND NATIONAL WELFARE TR UST WITH AN INTENTION TO GIVE RELIEF TO THE PEOPLE WHO ARE AFFE CTED BY TSUNAMI. 39 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 THE PAYMENT MADE BY THE ASSESSEE IS NOT IN CONTRAVE NTION OF ANY LAW. IT IS FOR THE WELFARE OF THE PEOPLE. IT IS C OMMON KNOWLEDGE THAT THE STATE OF TAMIL NADU WAS VERY BADLY AFFECTED DUE TO TSUNAMI AND SEVERAL LAKHS OF PEOPLE WERE MADE HOMELESS. TH E ASSESSEE IS DOING BUSINESS IN THE STATE OF TAMIL NADU, MORE PAR TICULARLY IN THE DISTRICT OF TUTICORIN, THEREFORE, THERE IS AN OBLIG ATION ON THE PART OF THE ASSESSEE TO GIVE DONATION TO THE REHABILITATION WORK SO THAT THE ASSESSEE CAN CARRY ON ITS BUSINESS ACTIVITY IN A PE ACEFUL ATMOSPHERE. THEREFORE, EVEN THOUGH TECHNICALLY SPE AKING, THE DONATION IS NOT FOR EARNING ANY BUSINESS INCOME, IT WOULD DEFINITELY MITIGATE THE DIFFICULTIES SUFFERED BY THE LOCAL PEO PLE WHO ARE AFFECTED BY TSUNAMI. THEREFORE, AS FOUND BY THE MADRAS HIGH COURT IN CHOLAN ROADWAYS CORPORATION LTD. (SUPRA) AND VELUMA NICKAM LODGE (SUPRA), THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 61. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE UNDER SECTION 14A OF THE ACT. 62. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ASSESSING OFFICER DISAL LOWED ` 27.48 40 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 LAKHS WHICH WAS 2% OF THE EXEMPT INCOME OF ` 13.74 CRORES. IN FACT, THE DISALLOWANCE WAS MADE BY THE ASSESSING OF FICER BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN SUNDARAM FI NANCE LTD. THE CIT(APPEALS), HOWEVER, DELETED THE ADDITION. NO SU CH ADDITION WAS MADE IN THE ASSESSEE'S OWN CASE FOR THE EARLIER ASS ESSMENT YEAR. ACCORDINGLY, HE RESTRICTED THE SAME TO ` 5 LAKHS ON ESTIMATE BASIS. THE LD. SR. STANDING COUNSEL SUBMITTED THAT THIS TR IBUNAL UNIFORMLY ESTIMATED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT BEFORE INTRODUCTION OF RULE 8D OF INCOME-TAX RULES, 1962 A T 2%. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALL OWING THE CLAIM OF THE ASSESSEE. 63. WE HAVE HEARD SHRI G. BASKAR, THE LD.COUNSEL FO R THE ASSESSEE, ALSO. IT IS NOT IN DISPUTE THAT RULE 8D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. AS RIGHTLY SUBMITTED BY THE LD. SR. STANDING COUNSEL, THIS TRIBUNAL IS UNIFORMLY ESTIMA TING THE EXPENDITURE AT 2% BEFORE INTRODUCTION OF RULE 8D OF INCOME-TAX RULES, 1962. THE CIT(APPEALS) WITHOUT ANY BASIS HA S RESTRICTED THE SAME TO ` 5 LAKHS INSTEAD OF DISALLOWING ` 27.48 LAKHS WHICH COMES TO 2% OF EXEMPT INCOME EARNED BY THE ASSESSEE. THE REFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITY. 41 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(APPEA LS) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 64. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 10.99 CRORES AS LOSS ON ACCOUNT OF CHANGE IN METHOD OF ACCOUNTING. 65. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT DUE TO CHANGE IN THE METHOD OF ACCOUNTING, THERE WAS A LOSS TO THE EXTENT OF ` 10.99 CRORES. ACCORDING TO THE LD. SR. STANDING COUNSEL, THERE WA S NO REASON FOR CHANGE IN THE METHOD OF ACCOUNTING WHICH WAS REGULA RLY FOLLOWED BY THE ASSESSEE FOR SEVERAL YEARS. CHANGE IN THE MET HOD OF ACCOUNTING RESULTED DECREASE IN PROFIT. THE LD. SR . STANDING COUNSEL FURTHER SUBMITTED THAT EACH TRANSACTION IS DIFFERENT AND INDEPENDENT FROM OTHER TRANSACTIONS, THEREFORE, JUS T BECAUSE THE ASSESSEE CHANGED THE METHOD OF ACCOUNTING FOR ALL T HE TRANSACTIONS THAT CANNOT BE A REASON FOR SETTING UP OF LOSS SUFF ERED IN ONE UNIT AGAINST THE OTHER. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT(APPEALS) OUGHT TO HAVE UPHELD THE ADDITION OF ` 10.99 CRORES. 42 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 66. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED IN ACCORDANCE WITH METHOD OF ACCOUNTING RE GULARLY FOLLOWED BY THE ASSESSEE. THE ASSESSEE CAN ALSO CH ANGE THE METHOD OF ACCOUNTING, IN CASE ADOPTION OF DIFFERENT ACCOUNTING POLICY WAS REQUIRED TO DETERMINE THE CORRECT TAXABL E INCOME. THE ASSESSEE ADOPTED PRUDENT ACCOUNTING POLICY ON MARK TO MARKET BASIS. IN FACT, THE LIABILITY OF THE ASSESSEE TO P AY ON ACCOUNT OF MTM COPPER CONCENTRATE GOES UP SUBSTANTIALLY IN VIE W OF INCREASE IN THE PRICES OF COPPER CONCENTRATE AND FLUCTUATION IN FOREIGN CURRENCY. THE INCREASE IN PRICE WAS NOT ACCOUNTED. THEREFORE, THE ACCOUNTS OF THE ASSESSEE WOULD NOT REFLECT THE TRUE AND FAIR VIEW AS PER ACCOUNTING STANDARD - 1 PRESCRIBED BY THE INSTI TUTE OF CHARTERED ACCOUNTANTS OF INDIA. IN ORDER TO DETERMINE THE CO RRECT TAXABLE INCOME, THE ASSESSEE HAS CHANGED THE ACCOUNTING POL ICY. IN FACT, THE ASSESSEE KNOWING FAIRLY WELL THAT THE LIABILITY TO PAY TOWARDS PURCHASE OF COPPER CONCENTRATE HAS GONE UP SUBSTANT IALLY, BONAFIDELY CHANGED THE METHOD OF ACCOUNTING. THERE FORE, THE CIT(APPEALS) FOUND THAT THE METHOD OF ACCOUNTING WA S CHANGED BY THE ASSESSEE IN ORDER TO COMPLY WITH THE MANDATORY ACCOUNTING STANDARD WHICH REQUIRES AN AUDITOR TO STATE THE EFF ECT OF CHANGE OF 43 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 METHOD OF ACCOUNTING, WHICH HAS MATERIAL IMPACT IN THE DETERMINATION OF TAXABLE PROFIT. THE ASSESSEE HAS TO CHANGE THE METHOD OF ACCOUNTING POLICY IN ORDER TO GUARD HIMSE LF FROM THE FLUCTUATION IN THE LINE OF BUSINESS WHICH IS CARRIE D ON BY THE ASSESSEE. THE BUSINESS CARRIED ON BY THE ASSESSEE ALWAYS SUFFERED FLUCTUATION AT VARIOUS LEVELS, THEREFORE, THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS BONAFIDE WHIC H WAS SUBSEQUENTLY FOLLOWED REGULARLY. HENCE, ACCORDING TO THE LD.COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED TH E CLAIM OF THE ASSESSEE. 67. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS CHANGED ITS METHOD OF ACCOUNTING POLICY. NOW THE ASSESSEE CLAIMS BEFORE THIS TRIBUN AL THAT THE METHOD OF ACCOUNTING WAS CHANGED AS PER THE ACCOUNT ING STANDARD-I PRESCRIBED BY INSTITUTE OF CHARTERED ACC OUNTANTS OF INDIA. THE ACCOUNTING STANDARD 1 PRESCRIBED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA WAS ADOPTED BY CENTRAL BOARD O F DIRECT TAXES UNDER SECTION 145 OF THE ACT. THE ASSESSEE CLAIMS BEFORE THIS TRIBUNAL THAT THE METHOD OF ACCOUNTING, WHICH WAS F OLLOWED IN THE EARLIER ASSESSMENT YEAR, WAS CHANGED IN ORDER TO GU ARD ITSELF FROM 44 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 THE FLUCTUATION IN THE MARKET. IT IS NOBODYS CASE THAT THE CHANGE OF METHOD OF ACCOUNTING WAS DUE TO MALAFIDE INTENTION OF THE ASSESSEE. WHEN THE ASSESSEE BONAFIDELY CHANGED THE METHOD OF ACCOUNTING AS PER THE ACCOUNTING STANDARD ADOPTED U NDER SECTION 145 OF THE ACT AND CONTINUES TO FOLLOW THE SAME, EV EN THOUGH THERE WAS LOSS AT INITIAL YEAR, THE SAME WOULD NOT STAND IN THE WAY OF CHANGING THE ACCOUNTING POLICY. IN OTHER WORDS, TH E LOSS SUFFERED IN THE FIRST YEAR WOULD BE SET OFF IN THE SUBSEQUENT Y EAR AND THERE WOULD BE REVENUE NEUTRAL. HENCE, THERE CAN BE NO L OSS TO THE REVENUE. THEREFORE, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE ADDITIO N OF ` 10.10 CRORES ON ACCOUNT OF FALL IN NET PROFIT DUE TO CHAN GE IN THE METHOD OF ACCOUNTING CANNOT BE SUSTAINED. THIS TRIBUNAL DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUT HORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 68. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 11.08 CRORES ON ACCOUNT OF DEPRECIATION ON BOGUS ST EEL PURCHASES AND CAPITALIZATION OF FOREIGN EXCHANGE FLUCTUATION. 69. WE HAVE HEARD LD. SR. STANDING COUNSEL FOR THE REVENUE AND THE LD.COUNSEL FOR THE ASSESSEE. THE ONLY CONT ENTION OF THE 45 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 LD.COUNSEL FOR THE ASSESSEE IS THAT IN THE BLOCK AS SESSMENT, THE ORDER OF THE ASSESSING OFFICER WAS SET ASIDE ON THE GROUND THAT IT WAS BARRED BY LIMITATION. THIS ISSUE WAS EXAMINED BY THIS TRIBUNAL IN IN THE CASE OF ASSESSEE IN I.T.A. NO.718/MDS/201 1 & I.T.A. NO.1008/MDS/2011 AND BY ORDER DATED 23.09.2016, THE VERY SAME ISSUE WAS REMITTED BACK TO THE FILE OF THE ASSESSIN G OFFICER FOR RECONSIDERATION. FOR THE REASON STATED IN THE ORDE R DATED 23.09.2016 IN THE ASSESSEE'S OWN CASE, ON IDENTICAL CIRCUMSTANCES, THIS ISSUE IS REMITTED BACK TO THE FILE OF THE ASSE SSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH AND THEREAFTER DECIDE AS INDICATED IN THE ORDER OF THIS TRIBUNAL D ATED 23.09.2016. 70. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 4,00,099/- TOWARDS PRIOR PERIOD EXPENSES. 71. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ADDITION OF ` 4,00,099/- WAS NET OF A DEBIT OF AN EXPENDITURE TO THE EXTENT OF ` 4,14,832/- BEING THE COMPENSATION PAID TO A TRANSPORTER ON ACCOUNT OF LO SS SUFFERED BY THEM DUE TO TSUNAMI AND FLOOD IN THE STATE OF TAMIL NADU. THE ONLY CONTENTION OF THE ASSESSEE WAS THAT THE PAYMEN T WAS MADE DURING THE YEAR UNDER CONSIDERATION. THE TAX AUDIT REPORT OF THE 46 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 ASSESSEE CLEARLY SHOWS THAT THE COMPENSATION WAS PA ID IN RESPECT OF GOODS TRANSPORTER FOR EARLIER ASSESSMENT YEAR. SINCE THE LIABILITY TO PAY THE TRANSPORT CHARGES AROSE FOR THE EARLIER ASSESSMENT YEAR, THE COMPENSATION ALSO HAS TO BE PAID IN THE EARLIER ASSESSMENT YEAR, THEREFORE, THIS CANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. 72. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT EVEN THOUGH THE GOODS WERE TRANSPORTED IN THE EARLIER ASSESSMENT YEAR, DUE TO TSUNAMI AND HEAVY FLOOD IN THE STATE, THE TRANSPORTER SUFFERED A HEAVY LOSS, T HEREFORE, THEY CLAIMED COMPENSATION DURING THE YEAR UNDER CONSIDER ATION. THE LIABILITY TO PAY COMPENSATION AROSE IN THE ASSESSME NT YEAR UNDER CONSIDERATION, THEREFORE, THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE. 73. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE TRANSPORTERS TRANSPORTED GOODS IN THE EARLIER ASSESSMENT YEAR. THE ASSESSEE NOW CLAIMS THAT THER E WAS LIABILITY TO PAY COMPENSATION DURING THE YEAR UNDER CONSIDERA TION WHICH WAS UNFORESEEN DUE TO TSUNAMI AND HEAVY FLOOD IN THE ST ATE. IT IS NOT IN 47 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 DISPUTE THAT THE TAX AUDIT REPORT CLEARLY SAYS THAT THE GOODS WERE TRANSPORTED IN THE EARLIER YEARS, THEREFORE, THE PA YMENT TO BE MADE RELATES TO THE EARLIER ASSESSMENT YEAR. IT IS NOBO DYS CASE THAT THE COMPENSATION WAS PAID IN RESPECT OF LOSS SUFFERED D URING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT KNOWN HOW THE LOSS WAS QUANTIFIED TO PAY COMPENSATION BY THE ASSESSEE. IN THE ABSENCE OF ANY MATERIAL AVAILABLE ON RECORD REGARDING THE QUAN TIFICATION OF COMPENSATION AND LIABILITY TO PAY THE SAME, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECO NSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF COMPENSATION IS REMI TTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL BRING ON RECORD THE LIABILITY TO PAY COMPENSATION BY THE ASS ESSEE AND THE YEAR IN WHICH THE LIABILITY WAS CRYSTALLIZED AND TH EREAFTER DECIDE IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 74. IN THE RESULT, THIS APPEAL OF THE REVENUE IS PA RTLY ALLOWED. 75. NOW COMING TO ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 1386/MDS/2010 FILED BY THE ASSESSEE, THE FIRST GROU ND OF THE APPEAL IS WITH REGARD TO DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80-IB OF THE ACT. 48 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 76. SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 8 0-IB OF THE ACT IN RESPECT OF CHINCHPADA AND RAKHOLI UNITS FOR 8 TH AND 7 TH YEAR RESPECTIVELY. THE LD.COUNSEL SUBMITTED THAT THE CI T(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT THE CLAIM IS FOR 7 TH OR 8 TH YEAR, THE DEDUCTION CLAIMED BY THE ASSESSEE IS ONLY AT 30%, THEREFORE, THE CIT(APPEALS) FOUND THAT THE ISSUE BECOMES INFRUCTUOUS. ACCORDING TO THE LD. COUNSEL, THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF CHINCHPADA AND RAKHOL I UNITS WAS FOR 8 TH AND 9 TH YEAR RESPECTIVELY, THEREFORE, THE ASSESSING OFFICE R IS NOT JUSTIFIED. 77. WE HAVE HEARD SHRI M. SWAMINATHAN, LD. SR. STAN DING COUNSEL FOR THE REVENUE, ALSO. ACCORDING TO THE LD . SR. STANDING COUNSEL, THE ASSESSEE CLAIMS THAT THE CLAIM WAS 7 TH AND 8 TH YEAR. ADMITTEDLY, THE DEDUCTION UNDER SECTION 80-IB OF TH E ACT IS ONLY 30% FROM THE ELIGIBLE UNDERTAKING FROM 6 TH YEAR TO 10 TH YEAR. THEREFORE, IRRESPECTIVE OF THE YEAR IN WHICH IT WAS CLAIMED WHETHER IT BE 7 TH YEAR OR 8 TH YEAR OR 6 TH TO 10 TH YEAR, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ONLY AT 30%. AS LONG AS THE ASSESSEE FAL LS WITHIN THE PERIOD OF 6 TH TO 10 TH YEAR, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION 49 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 UNDER SECTION 80-IB OF THE ACT AT THE RATE OF 30%. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE ISSU E RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS. 78. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SI DE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE PROVISIONS OF SECTION 80-IB OF THE A CT. THE ONLY CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL IS THAT THE ASSESSING OFFICER CHANGED THE YEAR OF CLAIM TO 9 TH AND 10 TH YEAR ARBITRARILY. THE FACT REMAINS THAT THE ASSESSEE IS ELIGIBLE FOR DEDU CTION FROM 6 TH YEAR TO 10 TH YEAR. THEREFORE, WHETHER THE CLAIM IS FOR 7 TH YEAR OR 8 TH YEAR, SO LONG IT FALLS WITHIN THE PERIOD OF 6 TH TO 10 TH YEAR, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB OF THE A CT AT 30%. THEREFORE, AS RIGHTLY SUBMITTED BY THE CIT(APPEALS) , THE ISSUE BECOMES INFRUCTUOUS. ACCORDINGLY, THE SAME IS CONF IRMED. 79. THE NEXT GROUND OF APPEAL IS WITH REGARD TO MAN AGEMENT CONSULTANCY FEE DISALLOWED TO THE EXTENT OF ` 13,38,30,000/- UNDER SECTION 40(A)(I) OF THE ACT FOR NON-DEDUCTION OF TA X AT SOURCE. 80. SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPECT OF MANAGEMENT CONSULTANCY FEE OF US D 3 MILLION 50 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 WHICH IS EQUIVALENT TO ` 13,38,30,000/- PAID TO THE HOLDING COMPANY, NAMELY, VEDANTA RESOURCE PLC, THE ASSESSEE IS NOT R EQUIRED TO DEDUCT TAX AT ALL. THE MANAGEMENT CONSULTANCY FEE IS NOT TAXABLE IN INDIA, THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 81. ON THE CONTRARY, SHRI M. SWAMINATHAN, LD. SR. S TANDING COUNSEL SUBMITTED THAT THE ASSESSEE HAS PAID USD 3 MILLION TOWARDS MANAGEMENT CONSULTANCY SERVICE AND ALSO PAI D USD 2 MILLION AS REPRESENTATIVE OFFICE FEES. BOTH THE PA YMENTS WERE ADMITTEDLY MADE TO VEDANTA RESOURCES PLC, A BODY CO RPORATE INCORPORATED IN ENGLAND AND WALES. IN RESPECT OF R EPRESENTATIVE OFFICE FEES, THE CIT(APPEALS) HIMSELF FOUND THAT TH E SAID FEES IS NOT CHARGEABLE TO TAX IN INDIA. ACCORDINGLY, IT WAS FO UND THAT NO TDS IS REQUIRED TO BE MADE. HOWEVER, IN RESPECT OF MANAGE MENT CONSULTANCY FEES, THE CIT(APPEALS) FOUND THAT VEDAN TA RESOURCES PLC, UK COMPANY AGREED TO PROVIDE SERVICES. REFERR ING TO ARTICLE 13 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDI A AND UK, IT WAS FOUND THAT THE FOREIGN COMPANY HAS DEPUTED THE SKILLED EMPLOYEES TO INDIA AND THE ASSESSEE-COMPANY AVAILED THEIR SERVICES. THEREFORE, THE CIT(APPEALS) FOUND THAT T HE ASSESSEE- 51 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 COMPANY UTILISED THE SERVICES IN INDIAN SOIL. THER EFORE, THE TRANSACTION BETWEEN THE ASSESSEE AND THE UK COMPANY HAS TO BE TREATED AS TECHNICAL SERVICES IN TERMS OF SECTION 9 (1)(VII) OF THE ACT AS WELL AS ARTICLE 13 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND UK. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT(APPEALS) FOUND THAT THE ASSESSEE I S LIABLE TO DEDUCT TAX. 82. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS PAID MANAGEMENT CONSULTANCY FEES AND REPRESENTA TIVE OFFICE FEES TO ITS HOLDING COMPANY IN UK. IN RESPECT OF R EPRESENTATIVE OFFICE FEES, THE CIT(APPEALS) HIMSELF FOUND THAT TH E PAYMENT WAS MADE FOR THE SERVICE RENDERED OUTSIDE INDIA, THEREF ORE, IT WAS NOT LIABLE FOR TAXATION IN INDIA. ACCORDINGLY, THE CIT (APPEALS) FOUND THAT THERE IS NO NEED TO DEDUCT TAX. 83. COMING TO MANAGEMENT CONSULTANCY FEES, THE CIT( APPEALS) FOUND THAT THE UK COMPANY RENDERED SERVICE IN INDIA , AFTER DEPUTING THEIR EMPLOYEES IN INDIA. THEREFORE, THE CIT(APPEA LS) FOUND THAT THE UTILIZATION OF SERVICE WAS IN INDIA, HENCE THE TRANSACTION HAS TO BE CONSTRUED AS TECHNICAL SERVICES BOTH IN TERMS OF ARTICLE 13 OF 52 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA A ND UK AND IN TERMS OF SECTION 9(1)(VII) OF THE ACT. ACCORDIN GLY, THE CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING O FFICER. IT IS NOT IN DISPUTE THAT UK COMPANY DEPUTED THEIR SKILLED EM PLOYEES TO INDIA TO RENDER SERVICES TO THE ASSESSEE. IN FACT, THE A SSESSEE-COMPANY AVAILED SERVICES OF UK COMPANY IN INDIA. THEREFORE , THE PAYMENT MADE TO THE ASSESSEE TOWARDS MANAGEMENT CONSULTANCY FEES IS LIABLE TO TAX IN INDIA. HENCE THE ASSESSEE HAS TO NECESSARILY DEDUCT TAX AS MANDATED UNDER SECTION 9(1)(VII) OF THE IN R ESPECT OF THE PAYMENT OF MANAGEMENT CONSULTANCY FEES. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 89. NOW COMING TO REVENUES APPEAL IN I.T.A. NO.1665/MDS/2010 FOR ASSESSMENT YEAR 2006-07, THE G ROUND OF APPEAL IS REGARDING DEDUCTION CLAIMED BY THE ASSESS EE UNDER SECTION 80-IA OF THE ACT FOR THE POWER PLANT SET UP BY THE ASSESSEE. 90. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE SUBMITTED THAT THE ASSESSEE USED THE POWER GENERATED FOR CAPTIVE CONSUMPTION. THEREFORE, THE ASSESSEE IS NO T ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. 53 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 91. WE HAVE HEARD SHRI G. BASKAR, THE LD.COUNSEL FO R THE ASSESSEE, ALSO. THIS ISSUE WAS EXAMINED BY THIS TR IBUNAL FOR ASSESSMENT YEAR 2005-06 IN THE REVENUES APPEAL AT PARAS 52 TO 55 OF THIS ORDER. THIS TRIBUNAL FOUND THAT EVEN TH OUGH THE POWER GENERATED WAS USED FOR CAPTIVE CONSUMPTION, THE ASS ESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE A CT. IN FACT, THIS TRIBUNAL PLACED ITS RELIANCE IN MOHAN BREWERIES & D ISTILLERIES LTD. (SUPRA). IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 92. THE NEXT GROUND OF APPEAL RELATES TO DEDUCTION CLAIM OF THE ASSESSEE UNDER SECTION 80GGB OF THE ACT. 93. WE HAVE HEARD SHRI M. SWAMINATHAN, LD. SR. STAN DING COUNSEL FOR THE REVENUE AND SHRI G. BASKAR, THE LD. COUNSEL FOR THE ASSESSEE. THE DEDUCTION CLAIMED BY THE ASSESSE E UNDER SECTION 80GGB OF THE ACT WAS EXAMINED BY THIS TRIBU NAL IN THE EARLIER PART OF THIS ORDER FOR ASSESSMENT YEAR 2004 -05. AFTER REFERRING TO THE AMENDMENT CARRIED OUT BY THE PARLI AMENT BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 01.04.201 0, THIS TRIBUNAL FOUND THAT THE CONTRIBUTION MADE BY THE ASSESSEE WA S TO M/S PUBLIC 54 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 & POLITICAL AWARENESS TRUST AND NOT TO ANY POLITICA L PARTY. ACCORDINGLY, THIS TRIBUNAL FOUND THAT THE CIT(APPEA LS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. THIS TRIBUN AL HAS ALSO FOUND THAT THE JUDGMENT OF MADRAS HIGH COURT IN CHERAN EN GINEERING CORPORATION (SUPRA) WAS IN RESPECT OF THE CLAIM MAD E BY THE ASSESSEE UNDER SECTION 37 OF THE ACT, THEREFORE, TH E SAID JUDGMENT IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIE W OF THE ABOVE, THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 94. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO CLAIM OF THE ASSESSEE UNDER RULE 8D OF THE INCOME-TAX RUL ES, 1962. 95. WE HAVE HEARD SHRI M. SWAMINATHAN, LD. SR. STAN DING COUNSEL FOR THE REVENUE AND SHRI G. BASKAR, THE LD. COUNSEL FOR THE ASSESSEE. ADMITTEDLY, RULE 8D IS NOT APPLICABL E FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE EXPENDITURE INCU RRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME CANNOT BE ALLOWE D AS EXPENDITURE FOR EARNING TAXABLE INCOME. THEREFORE, CERTAIN DISALLOWANCE HAS TO BE MADE. THIS TRIBUNAL CONSIST ENTLY DISALLOWING THE CLAIM AT THE RATE OF 2% OF THE EXEMPT INCOME EA RNED BY THE ASSESSEE BEFORE THE INTRODUCTION OF RULE 8D OF INCO ME-TAX RULES, 55 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 1962. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO DISALLOW 2% OF EXEMPT INCOME EARNED BY THE ASSESSEE FOR THE YEAR U NDER CONSIDERATION. 96. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION ON ACCOUNT OF BOGUS STEEL PURCHASE. 97. THE ISSUE OF BOGUS STEEL PURCHASE WAS EXAMINED BY THIS TRIBUNAL IN THE EARLIER PART OF THIS ORDER. REFERR ING TO THE ORDER PASSED BY THE ASSESSING OFFICER FOR THE BLOCK PERIO D, THIS TRIBUNAL FOUND THAT THE ORDER PASSED BY THE ASSESSING OFFICE R IS BARRED BY LIMITATION. THIS TRIBUNAL HAD NO OCCASION TO GO IN TO THE MERIT OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORD INGLY, THIS ISSUE WAS REMITTED BACK TO THE FILE OF THE ASSESSIN G OFFICER. FOR THE SAKE OF CONSISTENCY, THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THE ISSUE OF CLAIM OF BOGUS STEEL PURCHASE IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL RE- EXAMINE THE MATTER AFRESH IN THE LIGHT OF THE MATER IAL AVAILABLE ON RECORD AND THEREAFTER DECIDE THE ISSUE AFRESH, IN A CCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 98. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80- IB OF THE ACT. 56 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 99. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL F OR THE REVENUE, SUBMITTED THAT THE ASSESSEE CLAIMS DEDUCTI ON UNDER SECTION 80-IB OF THE ACT IN RESPECT OF OTHER INCOME OF THE ASSESSEE. REFERRING TO SECTION 80-IB OF THE ACT, THE LD. SR. STANDING COUNSEL SUBMITTED THAT SECTION 80-IB OF THE ACT IS APPLICAB LE ONLY IN RESPECT OF INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. REF ERRING TO JUDGMENT OF APEX COURT IN PANDIAN CHEMICALS LTD. V. CIT (262 ITR 278), THE LD. SR. STANDING COUNSEL SUBMITTED THAT T HE PROFIT OR GAIN OF THE ASSESSEE MUST BE DERIVED FROM ACTUAL CONDUCT OF THE BUSINESS. A MERE COMMERCIAL CONNECTION BETWEEN INC OME AND INDUSTRIAL UNDERTAKING WOULD NOT BE SUFFICIENT FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 80-IB OF THE ACT. IF THE INCOME OF THE ASSESSEE IS PART AND PARCEL OF MANUFACTURING AC TIVITY, THERE IS NO NEED FOR THE ASSESSEE TO DISCLOSE INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS ADMITTEDLY DERIVED FROM OTHER SOURCES OTHER THAN THE MANUFACTURING PROCESS, THE ASSESSEE CANNOT SAY THAT IT WAS DERIVED FROM ELIGIBLE INDUSTRIAL UNDERTAKING. THEREFORE, ACCORDING TO THE LD. SR. STANDING COUNSEL, THE CIT( APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 57 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 100. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSE L FOR THE ASSESSEE, SUBMITTED THAT THE INCOME WHICH WAS SHOWN AS OTHER INCOME, WAS FROM SALE OF RAW MATERIAL, UNCLAIMED LI ABILITIES WRITTEN BACK, INTEREST RECEIVED FROM CUSTOMERS, INTEREST ON EMPLOYEE LOANS, ETC. THESE INCOMES ARE INEXTRICABLY CONNECTED WITH BUSINESS OF THE ASSESSEE, THEREFORE, IT HAS TO BE CONSTRUED THAT TH E SAME WAS DERIVED FROM INDUSTRIAL UNDERTAKING. REFERRING TO THE JUDGMENT OF KARNATAKA HIGH COURT IN MOTOR INDUSTRIES COMPANY LT D. (37 DTR 94), THE LD.COUNSEL SUBMITTED THAT WHAT WAS OBSERVE D BY KARNATAKA HIGH COURT IN MOTOR INDUSTRIES COMPANY LTD. (SUPRA) IS EQUALLY APPLICABLE TO THE CLAIM MADE BY THE ASSESSEE UNDER SECTION 80-IB OF THE ACT. ACCORDING TO THE LD. COUNSEL, SALE OF SCRAP WOULD FORM PART OF TOTAL TURNOVER OF ELIGIBLE BUSINESS, THEREF ORE, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION IN RESPECT OF SALE OF SCRAP. REFERRING TO THE UNCLAIMED LIABILITIES W RITTEN BACK, THE LD.COUNSEL SUBMITTED THAT AT THE TIME OF CREATION O F LIABILITIES, THE SAME WAS NOT ALLOWED AS DEDUCTION AND HENCE, WRITTE N BACK OF SUCH UNCLAIMED LIABILITIES IN THE BOOKS OF ACCOUNT WOULD FORM ART OF PROFITS DERIVED FROM ELIGIBLE BUSINESS. SIMILARLY, THE EXC HANGE RATE FLUCTUATION ON SALE OF FINISHED GOODS WOULD ALSO FO RM PART OF THE TOTAL TURNOVER OF THE ASSESSEE. MOREOVER, THE INTEREST RECEIVED ON SALE 58 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 OF FINISHED GOODS FROM CUSTOMERS WOULD FORM PART OF SALE PRICE AS HELD BY MADRAS HIGH COURT IN CIT V. MADRAS MOTORS L TD. (2002) 257 ITR 60. THE LOAN GIVEN TO THE EMPLOYEES WAS FOR BU SINESS ACTIVITY, THEREFORE, THE INTEREST RECEIVED ON THE LOAN FROM E MPLOYEES WOULD GO TO REDUCE THE COST OF MANUFACTURING ACTIVITY, TH EREFORE, SUCH INTEREST IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80-IB OF THE ACT. THEREFORE, TO THE EXTENT INTEREST RECEIVED ON THE L OAN GIVEN TO THE EMPLOYEES, THE PROFIT COULD BE INCREASED. 101. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE APPEARS TO HAVE CLAIMED DEDUCTION UNDER SECTION 80- IB OF THE ACT IN RESPECT OF FOREIGN EXCHANGE FLUCTUATION ON SALE OF FINISHED GOODS, UNCLAIMED LIABILITIES WRITTEN BACK, INTEREST RECEIV ED FROM CUSTOMERS, SCRAP SALES AND INTEREST ON EMPLOYEES LOAN. THOUGH THE ASSESSEE CLAIMED BEFORE THE LOWER AUTHORITIES THAT FOREIGN E XCHANGE FLUCTUATION ON SALE OF FINISHED GOODS, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT PROFIT ON SALE OF FINISHED GOODS, DUE TO FLUCTUATION IN FOREIGN EXCHANGE, THE SAME HAS TO BE CONSTRUED AS DERIVED FROM INDUSTRIAL UNDERTAKING. IN CASE THE P ROFIT WAS ON THE SALE OF RAW MATERIAL, THE SAME CANNOT BE TAKEN AS I NCOME DERIVED FROM INDUSTRIAL UNDERTAKING AT ALL. SINCE NO DETAI LS/MATERIALS ARE 59 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 AVAILABLE BEFORE THIS TRIBUNAL, IT HAS TO BE FIRST ASCERTAINED WHETHER PROFIT ON FOREIGN EXCHANGE FLUCTUATION WAS DUE TO S ALE OF FINISHED GOODS OR RAW MATERIAL. NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE FOREIGN EXCHANGE FLUCTUATION WAS DUE TO SA LE OF FINISHED GOODS ON EXPORT. THEREFORE, THIS TRIBUNAL IS OF TH E CONSIDERED OPINION THAT THE MATTER NEEDS TO BE VERIFIED BY THE ASSESSING OFFICER. 102. NOW COMING TO UNCLAIMED LIABILITIES WRITTEN BA CK, THE UNCLAIMED LIABILITIES RELATE TO EARLIER ASSESSMENT YEAR, DUE TO UNCLAIMED LIABILITIES OF THE EARLIER YEAR, THE SAME WERE WRITTEN BACK IN THE BOOKS OF ACCOUNT AND TREATED AS INCOME OF TH E ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT DED UCTION UNDER SECTION 80-IB OF THE ACT IS ONLY IN RESPECT OF CURR ENT PROFIT. THE PROFIT WRITTEN BACK IN THE BOOKS OF ACCOUNT AS UNCL AIMED OF THE EARLIER YEAR CANNOT BE CONSTRUED AS PROFIT OF CURRE NT YEAR, THEREFORE, BY INCLUDING THE UNCLAIMED LIABILITIES WRITTEN BACK IN THE BOOKS OF ACCOUNT, THE ASSESSEE CANNOT INFLATE THE ELIGIBLE P ROFIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IB OF THE ACT . 103. NOW COMING TO THE INTEREST RECEIVED FROM CUSTO MERS, IT IS NOT KNOWN WHETHER THE INTEREST WAS RECEIVED ON SALE OF FINISHED GOODS 60 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 OR INTEREST WAS RECEIVED ON ANY OTHER SITUATION. I F THE INTEREST WAS RECEIVED ON SALE PRICE FOR DELAYED PAYMENT OF SALE PRICE, THEN AS FOUND BY MADRAS HIGH COURT IN MADRAS MOTORS LTD. (S UPRA), ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -IB OF THE ACT. IF THE INTEREST WAS RECEIVED FOR ANY OTHER REASON AND NOT FOR DELAYED PAYMENT OF SALE PRICE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE SAME CANNOT BE CONSTRUED AS DERIVED FROM INDUST RIAL UNDERTAKING. IN THE ABSENCE OF ANY MATERIAL, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE BOOKS OF ACCOUNT NEED T O BE VERIFIED AND FIND OUT WHETHER THE INTEREST WAS RECEIVED FOR DELAYED PAYMENT OF SALE PRICE OR FOR ANY OTHER REASON. MOREOVER, THE SCRAPE SALE IS CONCERNED, WHETHER THE ASSESSEE GENERATED THE SCRAP E SALES DURING ITS OWN MANUFACTURING ACTIVITY OR THE SCRAPE SALE WAS A SEPARATE BUSINESS NEEDS TO BE VERIFIED. 104. NOW COMING TO INTEREST ON EMPLOYEES LOAN, IT H AS TO BE ASCERTAINED WHETHER THE LOAN GIVEN TO EMPLOYEES WAS TO REDUCE THE COST OF MANUFACTURING ACTIVITY OR NOT. IN THE ABSE NCE OF ANY DETAILS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE VERIFIED. ACCORDINGLY, THE ORDERS OF THE LOWER AUT HORITIES ARE SET ASIDE AND THE CLAIM OF DEDUCTION UNDER SECTION 80-I B OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING 61 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 OFFICER SHALL RE-EXAMINE THE MATTER AFRESH AND THER EAFTER DECIDE THE ISSUE AFTER CONSIDERING THE JUDGMENTS OF APEX COURT IN CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT (113 ITR 84), CIT V. STERLING FOODS (237 ITR 579) AND PANDIAN CHEMICALS LTD. V. CIT (262 ITR 278) AND THEREAFTER, DECIDE THE ISSUE IN A CCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 105. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WIT H REGARD TO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 106. SHRI M. SWAMINATHAN, LD. SR. STANDING COUNSEL FOR THE REVENUE, SUBMITTED THAT THE ASSESSEE HAS PAID REPRE SENTATIVE OFFICE FEES OF USD 20 LAKHS. CONSIDERING THE NEED OF BUSINESS OF THE ASSESSEE, THE ASSESSEE REQUIRED PRESENCE OF M/S VEDANTA RESOURCES PLC, A UK COMPANY, TO REPRESENT IT IN LON DON. ACCORDING TO LD. SR. STANDING COUNSEL, THE ASSESSEE-COMPANY A VAILED THE SERVICES OF REPRESENTATIVE OFFICE OF M/S VEDANTA RE SOURCES PLC TO EXPAND ITS BUSINESS OPERATION AND INTERACT WITH CON SULTANT. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE IS LIAB LE TO TAX UNDER SECTION 195 OF THE ACT AT THE TIME OF MAKING PAYMEN T. 107. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSE L FOR THE ASSESSEE, SUBMITTED THAT ADMITTEDLY THE ASSESSEE HA S PAID USD 20 62 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 LAKHS TOWARDS REPRESENTATIVE OFFICE FEES. REFERRIN G TO ARTICLE 13 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN UK AND INDIA, THE LD.COUNSEL SUBMITTED THAT REPRESENTATIVE OFFICE FEE S IS NOT LIABLE TO TAX IN INDIA. SINCE NO TAX IS TO BE LEVIED IN RESP ECT OF PAYMENT MADE TO UK COMPANY IN INDIA, ACCORDING TO THE LD. COUNSE L, THE ASSESSEE NEED NOT DEDUCT TAX, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 108. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE-COMPANY NOMINATED M/S VEDANTA RESOURCES PL C, A UK COMPANY TO REPRESENT IT IN LONDON. THE ASSESSEE-CO MPANY AVAILED THE SERVICES OF M/S VEDANTA RESOURCES PLC TO EXPAND ITS BUSINESS OPERATION AND INTERACT WITH ITS CONSULTANT IN LONDO N. THE UK COMPANY APPEARS TO HAVE NOT MADE AVAILABLE ANY TECH NICAL KNOWLEDGE TO THE ASSESSEE-COMPANY. THE UK COMPANY RENDERED ITS SERVICES ONLY IN LONDON METAL EXCHANGE FOR THE PURPOSE OF EXPANDING ITS BUSINESS OPERATION IN LONDON. SINCE NO ACTIVITY WAS CARRIED OUT IN INDIA BY THE FOREIGN COMPANY, AND EN TIRE ADVICE WAS MADE BY UK COMPANY TO EXPAND THE ASSESSEES BUSINES S IN UK, NAMELY, LONDON METAL EXCHANGE. THEREFORE, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE PAYMENT MADE TO M/S VED ANTA 63 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 RESOURCES PLC, UK IS NOT LIABLE TO TAX IN INDIA. A CCORDINGLY, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX UNDER SECTION 195 OF THE ACT. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE UNDER S ECTION 40(A)(IA) OF THE ACT. 109. NOW COMING TO DISALLOWANCE OF NOTIONAL INTERES T, A SIMILAR ISSUE WAS CONSIDERED FOR THE ASSESSMENT YEAR 2004-0 5. IN THE EARLIER PART OF THIS ORDER, THIS TRIBUNAL FOUND THA T THE ADVANCE WAS MADE TO COMPANIES OUTSIDE INDIA AND THE LOWER AUTHO RITIES HAVE NOT EXAMINED WHETHER THE ADVANCE MADE TO THE COMPANIES OUTSIDE INDIA WOULD AMOUNT TO SHIFTING OF PROFIT TO OTHER J URISDICTION. ACCORDINGLY, THE MATTER WAS REMITTED BACK TO THE FI LE OF THE ASSESSING OFFICER. FOR THE VERY SAME REASON, THE O RDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE DISALLOWANC E OF NOTIONAL INTEREST IS REMITTED BACK TO THE FILE OF THE ASSESS ING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRES H AND FIND OUT WHETHER THE PAYMENT OF INTEREST ON THE ADVANCE MADE TO THE COMPANIES OUTSIDE THE COUNTRY WOULD AMOUNT TO SHIFT ING OF PROFIT TO OTHER JURISDICTION. THEREAFTER HE SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPO RTUNITY TO THE ASSESSEE. 64 ITA NOS.318,319 & 86/08 ITA NO.1020,1665 & 1386/MDS/10 110. TO SUM UP THE RESULT, REVENUES APPEALS IN ITA NO.319/MDS/2008 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.318/MDS/2008 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1020/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1665/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ASSESSEES APPEALS IN ITA NO.86/MDS/2008 IS DISMI SSED. ITA NO.1386/MDS/2010 IS DISMISSED. ORDER PRONOUNCED ON 29 TH MARCH, 2017 AT CHENNAI. SD/- SD/- ( !' .$%$& ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) ( / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 9 /DATED, THE 29 TH MARCH, 2017. KRI. 1 /4:; <;+4 /COPY TO: 1. &34 /ASSESSEE 2. ASSESSING OFFICER 3. 5 =4 () /CIT(A) V / XI, CHENNAI 4. 5 =4 /CIT-III, CHENNAI 5. ;> /4 /DR 6. & ? /GF.