IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 508/HYD/2012 ASSESSMENT YEAR: 2008-09 M/S VIVIMED LABS LTD., HYDERABAD. PAN AACCV6060A VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(3), HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 1041/HYD/2013 ASSESSMENT YEAR: 2008-09 M/S VIVIMED LABS LTD., HYDERABAD. PAN AACCV6060A VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : SHRI R.B. NAIK DATE OF HEARING 07-04-2016 DATE OF PRONOUNCEMENT 31-05-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: ITA NO. 508/HYD/2012 BY THE ASSESSEE THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A)-IV, HYDERABAD DATED 29/02/2012 FOR AY 2008-0 9. 2. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF R&D MANUFACTURING OF SPECIALIZED CHEMICALS AND PHARMACE UTICALS. THE 2 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. ASSESSEE FILED RETURN OF INCOME ON 26/09/2008, DECL ARING TOTAL INCOME OF RS. 5,41,18,320/-. THE CASE WAS SELECTED FOR SCR UTINY AND THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 7,63,1 9,512/- U/S 143(3) OF THE INCOME-TAX ACT, 1961 ( IN SHORT ACT ) BY MAKING FOLLOWING DISALLOWANCES: A) DISALLOWANCE OF CLAIM OF INTEREST OF RS. 57,98, 000/- ON FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB). B) RESTRICTION OF CLAIM OF BANK INTEREST AND FINAN CE CHARGES BY RS. 30,10,000/- C) DISALLOWANCE OF DEPRECIATION U/S 32(1) OF RS. 4 ,46,501/-. D) ADDITION FOR DELAYED REMITTANCE OF ESI RS. 42,0 86/-. E) DISALLOWANCE OF SCIENTIFIC RESEARCH EXPENDITURE CLAIMED U/S 35(2AB) OF RS. 89,86,705/-. F) DISALLOWANCE U/S 40(A)(IA), RS. 1,00,000/-. G) DISALLOWANCE OF PROVISIONS TOWARDS GRATUITY AND LEAVE ENCASHMENT OF RS. 16,62,000/-. H) DISALLOWANCE OF CLAIM OF FLUCTUATION IN FOREIG N EXCHANGE RS. 21,48,000/-. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED APPEAL BEFORE THE CIT(A). THE CIT(A) HAD CONFIRMED THE DIS ALLOWANCE MADE BY THE AO EXCEPT GIVING DIRECTION TO AO TO VERIFY A ND ALLOW THE PAYMENTS MADE BY THE ASSESSEE BEFORE DUE DATE OF FI LING OF RETURN OF INCOME IN RESPECT OF ESI PAYMENTS BY RELYING ON THE HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF CIT VS. AIMIL LTD., 321 ITR 508. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS IN A PPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 3 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. THE HONOURABLE COMMISSIONER OF INCOME TAX(APPEALS) - IV, HYDERABAD ERRED WHILE PASSING THE ORDER IN RESPECT OF MIS. VIVIMED LABS LIMITED, FOR THE ASSESSMENT YEAR 2008- 09 WHERE IN, IT WAS HELD THAT THE ASSESSMENT ORDER PAS SED BY THE ASSESSING OFFICER U/S 143(3) DATED 30/12/2010 THE FOLLOWING ARE THE GROUNDS OF APPEAL WHICH MAY P LEASE BE CONSIDERED IN FAVOUR OF THE ASSESSEE. 1. THE ASSESSEE, M/S. VIVIMED LABS LTD. HAS FILED I TS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 5,41,18,320/ -. 2. DISALLOWANCE OF THE CLAIM OF INTEREST ON FOREIGN CURRENCY CONVERTIBLE BONDS: THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER TOWARD S DISALLOWANCE OF INTEREST ON FOREIGN CURRENCY CONVER TIBLE BONDS RS. 57,98,000/- WITH THE CONTENTION THAT, TDS HAS N OT BEEN DEDUCTED FOR THE SAID INTEREST. THE ASSESSING OFFICER, WHILE PASSING THE ORDER, DIS ALLOWED THE CLAIM OF INTEREST ON FOREIGN CURRENCY CONVERTIBLE B ONDS OF RS. 57,98,000/- ON THE CONTENTION THAT TDS REQUIRED U/S . 195 OF THE INCOME TAX ACT, 1961 HAS NOT BEEN DEDUCTED. WE WOULD LIKE TO SUBMIT THAT, CITI BANK SINGAPORE H AD DEBITED ALE WITH INTEREST, BANK CHARGES DURING THE YEAR AND THE SAME WERE ACCOUNTED UNDER 'INTEREST & FINANCIAL CHARGES' AND THE QUESTION OF THIS DOES NOT ARISE ON BANK INTEREST. FURTHER, THE ASSESSEE ALSO SUBMITTED A COPY OF THE FCCB LOAN ACCOUNT AND ALSO THE INTEREST ON FCCB ACCOUNT. A CO PY OF THE LETTER FROM THE RESERVE BANK OF INDIA DATED.31.05.2 007 WAS ADDRESSED TO THE MANAGER, CITI BANK, SECUNDERABAD W AS ALSO SUBMITTED. IN VIEW OF THE ABOVE EXPLANATION, THE DISALLOWANCE OF RS. 57,98,000/- TOWARDS CLAIM OF INTEREST ON FOREIGN CU RRENCY CONVERTIBLE BONDS IS NOT CORRECT. 3. DISALLOWANCE OF THE CLAIM 'BANK INTEREST & FINAN CIAL CHARGES' U/S. 36(L)(III): THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER WITH T HE CONTENTION THAT, CHARGING INTEREST @ 12% BPLR ON THE INVESTMEN T SHOWN AT RS. 2,50,51,000/- WHICH WORKS OUT TO RS. 30,18,000/ -. THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER TOWARD S ADDITION O FRS. 30,18,000/- AS THE CLAIM OF BANK INTEREST & FI NANCIAL 4 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. CHARGES PROPORTIONATE TO INVESTMENTS MADE IN CREATI VE CARE HEALTH CARE PRIVATE LIMITED (RS. 2,50,00,000) AND V IVIMED HOLDINGS LIMITED, HONG KONG(RS. 51,000). THE ASSESS EE CLAIM OF EXPENDITURE INCLUDED CLAIM OF BANK INTEREST & FINAN CIAL CHARGES AT RS. 5,75,56,000/- AND SECURED LOANS AND UNSECURED L OANS HAVE BEEN REPORTED AT RS. 48,30,78,888/- AND RS. 61,15,6 1,000/- RESPECTIVELY. WE WOULD LIKE TO SUBMIT THAT THIS AMOUNT REPRESENTS INVESTMENT MADE BY THE ASSESSEE COMPANY INTO THE EQUITY SHARE CAPITAL OF ITS 100% SUBSIDIARY COMPANY. THIS INVESTMENT IS OUT OF THE ACCRUALS OF THE COMPANY. IN VIEW OF THE ABOVE EXPLANATION, THE CHARGING OF I NTEREST IS NOT IN ORDER AND INVALID. 4. DISALLOWANCE OF DEPRECIATION U/S. 32 ON THE AMOU NT RECEIVED AS CENTRAL INVESTMENT SUBSIDY: THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER, WHILE REDUCING THE AMOUNT OF SUBSIDY WHILE ALLOWANCE OF DEPRECIATION W HICH IS NOT CORRECT AND JUSTIFIED IN LAW. AS THE AMOUNT HAS ALR EADY BEEN INCLUDED IN BLOCK OF ASSETS BEING GROSS VALUE OF AS SETS RECEIVED I PURCHASED BY THE COMPANY AND ENTERED INTO BLOCK A S PER SEC 43(6) BEING BLOCK OF ASSETS CONCEPT AND ONCE THE AM OUNT IS ENTERED INTO THE BLOCK OF ASSETS THE DEPRECIATION O N THE SAME HAS TO BE ALLOWED TILL THE MACHINERY IS DISPOSED AN D HENCE THE DEPRECIATION SHOULD BE ALLOWED TO THE ASSESSEE COMP ANY. 5. DISALLOWANCE OF EXPENDITURE ON SCIENTIFIC RESEAR CH: THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER WHILE DISALLOWING TOTAL CLAIM OF RS. 89,86,705/- TOWARDS EXPENDITURE ON SCIENTIFIC RESEARCH. THE ASSESSING OFFICER, WHILE PASSING THE ORDER, DIS ALLOWED THE CLAIM OF EXPENDITURE ON SCIENTIFIC RESEARCH OF RS.8 9,86, 705/-. THE ASSESSING OFFICER CONTENDED THAT DURING THE COU RSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE COMPANY HAS BEEN REQUIRED TO FURNISH THE QUANTUM OF EXPENDITURE APPROVED BY T HE PRESCRIBED AUTHORITY FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON FOR THE ALLOWANCE OF ITS CLAIM. WE WOULD LIKE TO SUBMIT THAT, THE ASSESSEE COMPANY HAS ALREADY COMPLIED WITH ALL THE NECESSARY REQUIREMENT/CONDITI ONS FOR THE ALLOWANCE OF CLAIM U/S 35(2AB) AND GOT THE APPROVAL FROM THE COMPETENT AUTHORITY. 5 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. IN VIEW OF THAT, THE EXPENDITURE MAY PLEASE BE ALLO WED TO THE ASSESSEE. 6. DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA): THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER HAS ER RED WHILE DISALLOWING REMUNERATION PAID TO AUDITORS AT RS. 1, 00,000/-. THE ASSESSING OFFICER, WHILE PASSING THE ORDER, DIS ALLOWED REMUNERATION PAID TO AUDITORS RS. 1,00,000/- CONTEN DING THAT EXPENDITURE CLAIMED TOWARDS AUDITORS REMUNERATION P AID IS WITHOUT DEDUCTING TDS. WE WOULD LIKE TO SUBMIT THAT, TDS IS DEDUCTED FROM THE REMUNERATION PAID TO THE AUDITORS AND DETAIL OF THE AMOUNT OF TDS DEDUCTED AND OTHER DETAILS ARE ALSO SUBMITTED. 7. DISALLOWANCE OF THE PROVISION MADE TOWARDS LIABI LITY VIZ. (I) GRATUITY AND (II) LEAVE ENCASHMENT: THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER HAS ER RED WHILE DISALLOWING PROVISIONS MADE TOWARDS GRATUITY AND LE AVE ENCASHMENT AT RS. 7,47,000/-. THE ASSESSING OFFICER, WHILE PASSING THE ORDER, DIS ALLOWED THE PROVISIONS MADE TOWARDS GRATUITY AND LEAVE ENCASHME NT. THE ASSESSING OFFICER CONTENDED THAT PROVISION MADE TO BE DISALLOWED AS EVIDENCE REGARDING THE PAYMENT IS NOT SUBMITTED BY THE ASSESSEE. WE WOULD LIKE TO SUBMIT THAT, THOUGH THE PROVISIONS ARE MADE BY THE ASSESSEE, THE ACTUAL PAYMENT IS ALSO MADE IN TH E SAME YEAR. THE DETAILS OF PAYMENTS ARE ALSO ENCLOSED. IN VIEW OF THE ABOVE EXPLANATION, THE PROVISION MAD E DURING THE YEAR IS THOUGH IS ALLOWED U/S. 40A(7), IF SAME IS P AID DURING THE YEAR THE AMOUNT IS NOT ALLOWED AS EXPENDITURE DEDUC TIBLE AS EXPENSES. 8. DISALLOWANCE OF THE CLAIM OF 'FLUCTUATION IN FOR EIGN EXCHANGE' THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, WHERE IN CONFIRMED THE ORDER OF THE ASSESSING OFFICER WHILE DISALLOWING CLAIM OF 'FLUCTUATION OF FOREIGN EXCHANGE' OF RS.21 ,48,000/-. THE ASSESSING OFFICER, WHILE PASSING THE ORDER, CON TENDED THAT THE ASSESSEE DEBITED TO PROFIT & LOSS ACCOUNT AN AM OUNT OF RS. 21,48,000/- TOWARDS 'FLUCTUATION IN FOREIGN EXCHANG E'. THE ASSESSING OFFICER CONTENDED THAT ASSESSEE HAS BEEN REQUIRED TO 6 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. EXPLAIN AS TO HOW THE CLAIM OF 'FLUCTUATION OF FORE IGN EXCHANGE' IS ALLOWABLE U/S. 37(1) OF THE ACT. THE THE CIT(APPEAL)-IV ERRED WHILE PASSING ORDER, W HERE IN CONFIRMED THE CONTENTION OF THE ASSESSING OFFICER T HAT THE ASSESSEE SHOULD FURNISH DETAILS AS TO WHETHER THE F OREX LOSS IS ON ACCOUNT OF REVENUE OR CAPITAL. WE WOULD LIKE TO SUBMIT THAT THE AMOUNT OF RS. 21,4 8,000/- IS ALLOWED U/S. 37(1) AS AMOUNT IS RELATED TO THE PAYM ENT MADE TO THE CREDITORS AND THUS BE ALLOWED ON REVENUE ACCOUN T AND IS NOT RELATED TO PURCHASE OF MACHINERY ETC., WHICH COULD BE DISALLOWED ON CAPITAL ACCOUNT. IN VIEW OF THE ABOVE EXPLANATION, THE 'FLUCTUATION IN FOREIGN EXCHANGE IS ALLOWED U/S. 37(1) AS AMOUNT IS RELATED TO THE PAYMENT MADE TO THE CREDITORS AND THUS HE ALLOWED O N REVENUE ACCOUNT AND IS NOT RELATED TO PURCHASE OF MACHINERY ETC WHICH COULD BE DISALLOWED ON CAPITAL ACCOUNT. 5. WE WILL ADJUDICATE THE APPEAL, ISSUE-WISE AS UND ER: A) DISALLOWANCE OF CLAIM OF INTEREST PAID ON FOREIG N CURRENCY CONVERTIBLE BONDS (FCCB): I) AO DISALLOWED THE INTEREST PAID ON FCCB AS THE A SSESSEE HAS NOT DEDUCTED TDS AS REQUIRED U/S 195 OF THE ACT. II) LD. AR SUBMITTED THAT SIMILAR ADDITION WAS MADE IN AY 2009-10 IN ASSESSEES OWN CASE. THE COORDINATE BENCH OF THIS T RIBUNAL HAS DELETED THE ADDITION MADE. HE HAS SUBMITTED THE REL EVANT DECISION IN HIS PAPER BOOK. HE PRAYED THAT THE DISALLOWANCE MAD E IN THE AY UNDER CONSIDERATION SHOULD ALSO BE DELETED BY FOLLO WING THE ABOVE DECISION. III) LD. DR RELIED ON THE ORDERS OF AO & CIT(A) AND SUBMITTED THAT IT MAY BE REMITTED BACK TO THE FILE OF THE AO TO RE-EX AMINE THE LOAN AGREEMENT AND TERMS OF SANCTION OF THE FCCB. IV) CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND MATERIAL FACTS ON RECORD, WE FIND THAT THE FACTS ARE SIMILAR TO THE FACTS OF AY 2009-10 AND THE COORDINATE BENCH OF THIS TRIBUNAL H AS GIVEN CLEAR FINDINGS ON THIS ISSUE, WHICH ARE EXTRACTED BELOW: 7 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. 28. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN, THE ASSESSEE HAS RAISED L ONG TERM BONDS FROM THE INTERNATIONAL MARKET BY ISSUING FCCBS OF US $ 50 MILLION, WITH OP TION TO CONVERT INTO EQUITY SHARES OR CLAIM REPAYMENT AFTER FIVE YEARS. THE BONDS WERE RA ISED IN THE FINANCIAL YEAR 2007-08 WITH INTEREST RATE OF 1% PER ANNUM. IT IS THE CLAIM OF THE ASSESSEE THAT NOT ONLY THE BONDS WERE RAISED FROM INTERNATIONAL MARKET, BUT TH E PAYMENTS WERE ALSO SOURCED FROM ASSESSEES BANK ACCOUNT ABROAD. THEREFORE, THE PROV ISIONS OF S.195 COULD NOT BE APPLIED. ON A PERUSAL OF THE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLATE AUTHORITY, IT IS SEEN THAT THE ONLY REASON ON WHICH THE DEPARTMENTAL AUTHORITIES DISALLOWED THE EXPENDITURE IS, ASSESSEE HAS NOT DEDUCTED TAX AT SO URCE IN TERMS OF S.195 OF THE ACT. HOWEVER, IT IS WELL SETTLED PRINCIPLE OF LAW THAT I F THE PAYMENTS ON WHICH TAX IS SOUGHT TO BE M/S. VIVIMEND LABS LIMITED, HYDERABAD 11 DEDUCTE D IS NOT CHARGEABLE TO TAX IN INDIA, PROVISIONS OF S.195 WOULD NOT APPLY. IN THE PRESENT CASE, IT IS NOT CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WITH COGENT EVI DENCE THAT NOT ONLY THE BONDS WERE RAISED OUTSIDE INDIA, BUT THE INTEREST PAYMENT S WERE ALSO MADE TO NON-RESIDENT INDIANS OUTSIDE INDIA FROM A BANK ACCOUNT HELD BY T HE ASSESSEE OUTSIDE INDIA. THEREFORE, SINCE NO PART OF THE TRANSACTION RELATING TO PAYMEN T OF INTEREST HAS TAKEN PLACE IN INDIA, IT CANNOT BE SAID THAT INTEREST PAYMENT MADE TO NON -RESIDENTS HAS ACCRUED OR ARISEN IN INDIA IN TERMS OF S.9 OF THE ACT. IN OUR VIEW, THER EFORE, THE PROVISIONS OF S.195 WOULD NOT APPLY TO SUCH PAYMENTS, THEREBY REQUIRING THE ASSES SEE TO DEDUCT TAX AT SOURCE. WE ARE SUPPORTED IN OUR VIEW BY THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DEL ETE THE DISALLOWANCE MADE IN THIS BEHALF, AND ALLOW THIS GROUND OF THE ASSESSEE. V) RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH, WE DELETE THE ADDITION MADE ON THIS COUNT. B) RESTRICTION OF CLAIM OF BANK INTEREST AND FINANC IAL CHARGES: I) DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE MADE INVESTMENTS IN EQUITY SHARE CAPITAL AND THE I NCOME DERIVED THEREFROM IS EXEMPT FROM TAX. AT THE SAME TIME, ASS ESSEE CLAIMS EXPENDITURE OF BANK INTEREST AND FINANCIAL CHARGES, BUT, NO EXPLANATION WAS OFFERED AS TO THE INVESTMENTS WERE OUT OF COMMERCIAL EXPEDIENCY. AO OPINED THAT ASSESSEE HAS SECURED LOA NS AND UNSECURED LOANS, HAD THE MONIES INVESTED IN EQUITIE S BEEN UTILIZED FOR BUSINESS PURPOSES, ASSESSEES BURDEN OF BANK INTERE ST SHOULD HAVE BEEN REDUCED TO THAT EXTENT. ACCORDINGLY, HE HAD RE STRICTED BY AN AMOUNT OF RS. 30,18,000/- U/S 36(1)(III) OF THE ACT . II) LD. AR SUBMITTED THAT SIMILAR ADDITION WAS MADE IN AY 2009-10 IN ASSESSEES OWN CASE AND THE COORDINATE BENCH OF THI S TRIBUNAL HAS DELETED THE ADDITION MADE. HE PRAYED THAT THIS ADDI TION ALSO SHOULD BE 8 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. DELETED BY FOLLOWING THE ABOVE DECISION. HE ALSO S UBMITTED THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS I N THE BUSINESS BY WAY OF RESERVES AND FUNDS GENERATION IN THE BUSINES S. HE BROUGHT TO OUR NOTICE THE BALANCE SHEET OF THIS FY (REFER PAGE 43 OF PAPER BOOK). III) LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHO RITIES. IV) CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND MATERIAL FACTS ON RECORD AND RELEVANT DECISION OF THIS TRIBU NAL, WE FIND THAT THE COORDINATE BENCH HAS GIVEN CLEAR FINDINGS ON THIS I SSUE, FOR THE SAKE OF CLARITY, WE REPRODUCE THE SAME BELOW: 18. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL ON RECORD. IT IS RELEVANT TO NOTE THAT RIGHT FROM THE ASSESSMENT STAGE, IT IS THE PLEA OF THE ASSESSEE THAT INVESTMENT IN EQUITY SHARES OF THE TW O COMPANIES WAS MADE FROM OUT OF INTERNAL ACCRUALS AND NO INTEREST BEARING FUND WAS UTILISED. IN FACT, DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), A REMAND REPORT WAS CALLED FROM THE M/S. VIVIMEND LABS LIMITED, HYDERABAD 8 ASSESSING OFFICER, WHEREIN THE ASSESSING OFFICER ACCEPTED THE PAYMENTS MADE THROUGH AXIS BANK AS FROM INTERNAL AC CRUALS OF THE COMPANY. FURTHER, THE FINANCIAL STATEMENT SUBMITTED BY THE ASSESSEE A LSO DEMONSTRATES THAT SUFFICIENT INTEREST FREE FUND WAS AVAILABLE WITH THE ASSESSEE TO MAKE THE INVESTMENT IN EQUITY SHARES OF THE TWO COMPANIES. HON'BLE BOMBAY HIGH CO URT IN THE CASE OF C.I.T. VS. RELIANCE UTILITIES & POWER LTD., (2009) 313 ITR 340 (BOM.) HAS HELD THAT WHEN THE ASSESSEE HAS MIXED FUNDS, I.E. BOTH INTEREST FREE A ND INTEREST BEARING FUNDS, PRESUMPTION WOULD BE INTEREST FREE ADVANCES ARE FROM INTEREST F REE FUNDS AVAILABLE WITH THE ASSESSEE. APPLYING THE SAME PRINCIPLE, IT HAS TO BE HELD THAT THE INVESTMENT IN EQUITY SHARES WERE MADE FROM OUT OF SURPLUS INTEREST FREE FUNDS AVAILA BLE WITH THE ASSESSEE. FURTHER, IT IS A FACT ON RECORD THAT INVESTMENTS IN EQUITY SHARES HA VE BEEN MADE DURING THE PERIOD FROM 8.10.2005 TO 21.1.2007 AND NOT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. THE DEPARTMENT ALSO HAS NOT CONTROVE RTED THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE OUT OF INTEREST EXPENDITURE WA S MADE DURING THE ASSESSMENT YEAR IN WHICH THE INVESTMENT WAS ACTUALLY MADE. IN VIEW OF THE AFORESAID FACTUAL POSITION, WE HOLD THAT THE DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO RS.17,85,000/- IS NOT SUSTAINABLE. ACCORDINGLY, WE DELETE THE SAME, ALLOW ING THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH, WE DELETE THE ADDITION MADE. C) RESTRICTION ON CLAIM OF DEPRECIATION U/S 32: I) THE AO NOTED THAT THE ASSESSEE COMPANY WAS SANCT IONED A SUBSIDY OF RS. 29,76,676/- UNDER THE 15 PERCENT CENTRAL IN VESTMENT SUBSIDY 9 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. SCHEME BY THE DIRECTORATE OF INDUSTRIES, UTTARAKHA ND, PATEL NAGAR, DEHRADUN FOR INVESTMENT IN PLANT & MACHINERY OF RS . 1,98,44,507. THE AO OBSERVED THAT THE HONBLE APEX COURT IN THE CASE OF PONNI SUGAR & CHEMICALS LTD., 306 ITR 392, HELD THAT IF T HE OBJECT OF THE ASSISTANCE UNDER SUBSIDY SCHEME WAS TO ENABLE ASSES SEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RE CEIPT FOR THE SUBSIDY WAS ON CAPITAL ACCOUNT. HE OPINED THAT THE SUBSIDY/ GRANT-IN-AID SO ALLOWED WILL GO ON TO REDUCE THE COST OF ACQUISITIO N OF THE ASSETS FOR THE PURPOSE OF CLAIMING DEPRECIATION U/S 32 OF THE IT ACT. THE ASSESSEE, HOWEVER, DID NOT REDUCE THE INVESTMENT SU BSIDY FROM THE COST OF THE RELEVANT ASSETS, BEFORE CLAIMING DEPREC IATION FOR THE AY 2008-09. THE SUBSIDY OF RS. 29,76,676/- IS TO BE R IGHTLY TREATED ON CAPITAL ACCOUNT AND HENCE, THE SAME IS REDUCED FROM THE VALUE OF ADDITIONS TO ASSETS DURING THE YEAR TO DETERMINE TH E DEPRECIATION ALLOWABLE. ACCORDINGLY, THE AO REDUCED AN AMOUNT OF RS. 4,46,501/- BEING DEPRECIATION @ 15% ON RS. 29,76,676/- FROM TH E DEPRECIATION ON BLOCK OF ASSETS PLANT & MACHINERY. THEREFORE, THE TOTAL CLAIM OF DEPRECIATION RESTRICTED BY AN AMOUNT OF RS. 4,46,50 1/-. II) LD. AR SUBMITTED THAT THE GOVT. SUBSIDY IS IN T HE NATURE OF CAPITAL RECEIPT AND CANNOT BE REDUCED FROM COST OF ASSETS. HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. P.J. CHEMICALS LTD., 210 ITR 830 (SC) AND HONBLE AP HIG H COURT IN THE CASE OF CIT VS. GODAVARI PLYWOODS LTD., 168 ITR 632 (A). III) LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHO RITIES. IV) CONSIDERING THE SUBMISSIONS AND MATERIAL FACTS ON RECORD AS WELL AS PERUSING THE HONBLE SUPREME COURTS DECISION IN THE CASE OF P.J. CHEMICALS, IT HAD ACCEPTED THE MAJORITY VIEWS OF TH E DIFFERENT HIGH COURTS, IN PARTICULAR, THE VIEWS OF HONBLE HIGH CO URT OF P&H IN THE CASE OF CIT VS. JINDAL BROS. RICE MILLS, [1989] 179 ITR 470. THE RESPECTIVE RATIO OF THE DECISION IS REPRODUCED FOR CONVENIENCE: 10 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. 13. THE QUESTION IN THE PRESENT CONTEXT IS NOT WHETHER IF A PORTION OF THE COSTS IS MET DIRECTLY OR INDIRECTLY BY ANY OTHER PE RSON OR AUTHORITY, IT SHOULD BE DEDUCTED OR NOT. QUITE OBVIOUSLY, THE PLAIN MEAN ING OF THE SECTION IS THAT IT SHALL BE. BUT THE REAL QUESTION IS AS TO THE CHARAC TER AND NATURE OF A SUBSIDY WHETHER IT WAS REALLY INTENDED TO SUBSIDISE THE COS T OF THE CAPITAL OR WAS INTENDED AS AN INCENTIVE TO ENCOURAGE ENTREPRENEURS TO MOVE TO BACKWARD AREAS AND ESTABLISH INDUSTRIES, THE SPECIFIED PERCE NTAGE OF THE FIXED CAPITAL COST WHICH IS THE BASIS FOR DETERMINING THE SUBSIDY BEING ONLY A MEASURE ADOPTED UNDER THE SCHEME TO QUANTIFY THE FINANCIAL AID. THE CONTENTION IS THAT IT IS NOT A PAYMENT, DIRECTLY OR INDIRECTLY, TO MEE T ANY PORTION OF THE 'ACTUAL COST' BUT INTENDED AS AN INCENTIVE TO ENTREPRENEURS , ITS QUANTIFICATION DETERMINED AT A PERCENTAGE OF THE FIXED CAPITAL COS T. IN GODAVARY PLYWOODS' CASE (SUPRA), THE ANDHRA PRAD ESH HIGH COURT, ADOPTING THIS VIEW, OBSERVED : 'NOWHERE HAD THE SCHEME PROVIDED AS TO HOW THE SUBS IDY SHOULD BE UTILISED AND FOR WHICH ASSETS. IT WAS OPEN TO THE ASSESSEE T O LEGITIMATELY REDUCE THE COST OF LAND IN ITS BOOKS OF ACCOUNT TO THE FULL EX TENT OF THE SUBSIDY, IN WHICH CASE THE COST OF PLANT AND MACHINERY WOULD REMAIN A T INVOICE PRICE UNINFLUENCED BY THE AMOUNT OF SUBSIDY. THE AMOUNT R ECEIVED BY WAY OF SUBSIDY COULD BE UTILISED FOR ANY PURPOSE SUCH AS A CQUIRING LAND ON WHICH NO DEPRECIATION WAS ADMISSIBLE OR ON PLANT AND MACHINE RY OR FOR ERECTION OF BUILDINGS OR FOR WORKING CAPITAL OR FOR REPAYING TH E LOANS ALREADY BORROWED. HENCE, UNLESS THE SUBSIDY RECEIVED HAD A NEXUS, DIR ECT OR INDIRECT, TO MEET A PORTION OF THE ACTUAL COST OF ANY SPECIFIC CAPITAL ASSET. IT COULD NOT BE BROUGHT WITHIN THE PURVIEW OF S. 43(1) OF THE ACT. THEREFOR E, THE SUBSIDY COULD NOT BE DEDUCTED FROM THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE AND DEPRECIATION SHOULD BE ALLOWED WITHOUT REDUCING THE SAME BY THE AMOUNT OF SUBSIDY GRANTED.' IN CIT VS. GRACE PAPER INDUSTRIES PVT. LTD. (SUPRA) , THE GUJARAT HIGH COURT SAID : 'THE DICTIONARY MEANING OF `SUBSIDY' IS `A GRANT OF MONEY FROM A GOVERNMENT TO A PRIVATE ENTERPRISE CONSIDERED AS BE NEFICIAL TO THE PUBLIC'. THE GOVERNMENT, IN ORDER TO DETERMINE THE AMOUNT OF CASH SUBSIDY, DECIDED TO FOLLOW ONE OF THE RECOGNISED METHODS OF WORKING IT OUT ON THE BASIS OF THE AMOUNT INVESTED BY AN ENTREPRENEUR IN ACQUIRING CAP ITAL ASSETS AND SPECIFIED A CERTAIN PERCENTAGE OF THE AMOUNT SO INVESTED IN T HE CAPITAL ASSETS AS CASH SUBSIDY. THE BASIS ADOPTED FOR DETERMINING THE CASH SUBSIDY WITH REFERENCE TO THE COST OR VALUE OF FIXED ASSETS WAS ONLY A MEASUR E FOR QUANTIFYING THE SUBSIDY AND THE SUBSIDY WAS NOT GIVEN FOR THE SPECI FIC PURPOSE OF MEETING ANY PORTION OF THE COST OF THE FIXED ASSETS. CONSEQUENT LY, THE SUBSIDY DID NOT FORM PART OF THE ACTUAL COST OF PLANT AND MACHINERY WITH IN THE MEANING OF S. 43 OF THE IT ACT, 1961. IT CANNOT BE DEDUCTED FROM THE CO ST OF ASSETS IN COMPUTING DEPRECIATION, DEVELOPMENT REBATE AND INVESTMENT ALL OWANCE.' 14. ON THE CONTRARY IN CIT VS. JINDAL BROS. RICE MILLS (1989) 79 CTR (P&H) 235 : (1989) 179 ITR 470 (P&H), THE PUNJAB & HARYAN A HIGH COURT HAS SAID : 'WHEN IT IS SPECIFIED IN THE INCENTIVE POLICY THAT 15 PER CENT OF THE COST OF PLANT, MACHINERY AND BUILDING WOULD BE PROVIDED BY THE STATE GOVERNMENT, THE UNDERLYING OBJECT IS TO REDUCE THE VALUE OF THE PLANT, MACHINERY AND BUILDING BY 15 PER CENT OF THE ACTUAL COST. THE ACT UAL COST WOULD SO STAND 11 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. REDUCED WITHIN THE MEANING OF S. 43(1) OF THE ACT.. .. WE ARE EQUALLY NOT IMPRESSED BY THE REASONING THAT THE BASIS ADOPTED F OR DETERMINING THE CASH SUBSIDY WITH REFERENCE TO THE FIXED CAPITAL COST IS ONLY A MEASURE ADOPTED AND CANNOT MAKE THE SUBSIDY AS GIVEN ONLY FOR THE SPECI FIC PURPOSE OF MEETING ANY PORTION OF THE FIXED CAPITAL COST..... THE INCENTIVE BY WAY OF SUBSIDY IS GIVEN FOR EACH I TEM SEPARATELY AND IT WOULD NOT BE OPEN TO THE ASSESSEE TO APPROPRIATE THE SUBS IDY FOR A PURPOSE OTHER THAN THAT FOR WHICH IT WAS GIVEN TO HIM. EVEN IF TH E ASSESSEE WRONGLY MAINTAINS THE ACCOUNT BOOKS AND UTILISES THE ENTIRE SUBSIDY AGAINST THE VALUE OF THE LAND TO REDUCE ITS COST, THE ITO WOULD NOT O VERLOOK THE MATTER AND WOULD APPROPRIATE THE SUBSIDY IN REDUCING THE COST OF THE MACHINERY, PLANT AND BUILDING FOR WHICH THE SUBSIDY WAS SPECIFICALLY GRANTED. THERE IS A NEXUS BETWEEN THE COST OF EACH ITEM AND THE SUBSIDY UNDER EACH HEAD.' 15. ON A CONSIDERATION OF THE MATTER THE VIEW THAT COM MENDS ITSELF AS ACCEPTABLE IS THE ONE WHICH HAS COMMENDED ITSELF TO THE MAJORITY OF THE HIGH COURTS. IT IS, OF COURSE, NOT THE NUMERICAL STRENGT H THAT PREVAILS --- THOUGH THE FACT THAT A PARTICULAR VIEW HAS COMMENDED ITSEL F TO A MAJORITY OF THE HIGH COURTS IN THE COUNTRY IS A MATTER FOR CONSIDERATION --- BUT THE TENSILE STRENGTH OF THE ACCEPTABLE LOGIC IN THOSE DECISIONS. IT IS A PTLY SAID THAT 'A JUDGE WHO ANNOUNCES A DECISION MUST BE ABLE TO DEMONSTRATE TH AT HE BEGAN FROM RECOGNIZED LEGAL PRINCIPLES AND REASONED IN AN INTE LLECTUALLY COHERENT AND POLITICALLY NEUTRAL WAY TO HIS RESULT'. IN THE PRES ENT CASE THE REASONING UNDERLYING, AND IMPLICIT IN, THE CONCLUSION REACHED BY THE MAJORITY OF THE HIGH COURTS CANNOT BE SAID TO BE AN UNREASONABLE VIEW AN D ON A PREPONDERANCE OF PREFERABILITY THAT VIEW COMMENDS ITSELF PARTICULARL Y IN THE CONTEXT OF A TAXING STATUTE. THE EXPRESSION 'ACTUAL COST' NEEDS TO BE I NTERPRETED LIBERALLY. THE SUBSIDY OF THE NATURE, WE ARE CONCERNED WITH, DOES NOT PARTAKE OF THE INCIDENTS WHICH ATTRACT THE CONDITIONS FOR THEIR DE DUCTIBILITY FROM 'ACTUAL COST'. GOVERNMENT SUBSIDY, IT IS NOT UNREASONABLE TO SAY, IS AN INCENTIVE NOT FOR THE SPECIFIC PURPOSE OF MEETING A PORTION OF THE COST O F THE ASSETS, THOUGH QUANTIFIED AS OR GEARED TO A PERCENTAGE OF SUCH COS T. IF THAT BE SO, IT DOES NOT PARTAKE OF THE CHARACTER OF A PAYMENT INTENDED EITH ER DIRECTLY OR INDIRECTLY TO MEET THE 'ACTUAL COST'. WE SHOULD PREFER THE REASON ING OF THE MAJORITY OF THE HIGH COURTS TO THE ONE FOUND ACCEPTABLE BY THE HIGH COURT OF PUNJAB AND HARYANA. 16 . IN THE RESULT, WE AFFIRM THE JUDGMENTS OF THE HIG H COURTS WHICH HAVE ANSWERED THE QUESTION AGAINST THE REVENUE AND DISMI SS THE FIRST BATCH OF APPEALS AND ALLOW THE SECOND BATCH PREFERRED BY THE ASSESSEE AND IN REVERSAL OF THE OPINION OF THE HIGH COURT, ANSWER THE QUESTI ON REFERRED AGAINST THE REVENUE. THE HONBLE SUPREME COURT HAD DISMISSED THE APPEAL OF THE REVENUE AND UPHELD THAT THE DETERMINATION OF THE SUBSIDY IS LIN KED TO THE SPECIFIC ASSETS BUT SUBSIDY ISSUED FOR THE OVERALL BENEFIT OF THE B USINESS. IN THE PRESENT CASE, THE SUBSIDY WAS ISSUED IN REFERENCE TO THE MA CHINERY. BUT, THE ASSESSEE HAD SUBMITTED THE LETTER OF APPROVAL OF SU BSIDY BUT FROM THAT LETTER IT COULD NOT BE ESTABLISHED WHETHER THE SUBS IDY WAS ISSUED FOR THE BENEFIT OF THE BUSINESS OR FOR THE EXPANSION OF THE BUSINESS. MOREOVER, THE 12 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. LETTER OF APPROVAL WAS ADDRESSED TO VVS PHARMACEUTI CALS & CHEMICALS PVT. LTD., WHICH IS THE PREVIOUS NAME OF THE ASSES SEE, AS CLAIMED BY THE AR. WE, THEREFORE, REMIT THE MATTER BACK TO THE FIL E OF THE AO TO CHECK THE ABOVE DEFICIENCIES. AO MAY CHECK THE TYPE OF SUBSID Y FROM THE POLICY OF THE CENTRAL GOVERNMENT ON INVESTMENT SUBSIDY SCHEME AND HOW THE SUBSIDY WAS RECEIVED BY THE ASSESSEE WHEN THE SAME WAS ADDRESSED TO OLD NAME OF THE ASSESSEE. ASSESSEE MAY BE GIVEN PRO PER OPPORTUNITY OF BEING HEARD. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. D) ADDITION ON ACCOUNT OF DELAY IN PAYMENT OF PF & ESI: I) AO DISALLOWED THE PF & ESI AS THE ASSESSEE MADE REMITTANCE OF THE AMOUNTS AFTER DUE DATE, BY VIRTUE OF INSERTION OF CLAUSE (I) OF SUB- SECTION(24) OF SECTION 2 BY FINANCE ACT, 1987, EVEN THE EMPLOYEES CONTRIBUTION TO PF AND SUBSCRIPTION TO INSURANCE ET C., ARE REQUIRED TO BE INCLUDED WITHIN THE INCOME OF THE ASSESSEE. II) LD. AR SUBMITTED THAT ALL THE REMITTANCES WERE MADE BEFORE FILING OF RETURN OF INCOME. HE SUBMITTED THAT VARIOUS HON BLE COURTS HAS HELD THAT PF & ESI REMITTANCES MADE BEFORE FILING O F RETURN OF INCOME IS DEDUCTIBLE AS EXPENDITURE. III) LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITI ES. IV) CONSIDERED THE SUBMISSIONS OF THE PARTIES AND M ATERIAL FACTS ON RECORD. IT IS A FACT THAT THE REMITTANCE OF PF & ES I WERE MADE BEFORE FILING OF RETURN OF INCOME. THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [2009] 319 ITR 306 (SC ) HELD THAT THE AMENDMENTS TO SECTION 43B BROUGHT OUT BY THE FINANC E ACT, 2003 WITH EFFECT FROM 01/04/2004 ARE RETROSPECTIVE IN NATURE AND WOULD OPERATE FROM 01/04/1988. VARIOUS BENCHES OF ITAT AND COORDI NATE BENCHES OF THIS TRIBUNAL HAVE FOLLOWED THE ABOVE DECISION AND HELD THAT THE AMENDMENT TO SECTION 43B BROUGHT OUT BY THE FINANCE ACT, 2003 IS RETROSPECTIVE IN NATURE AND JUSTIFIED IN DELETING T HE ADDITIONS MADE ON ACCOUNT OF DELAYED PAYMENT OF PROVIDENT FUND OF EMP LOYEES CONTRIBUTION. SINCE, PF & ESI ARE SAME, RESPECTFULL Y FOLLOWING THE 13 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. DECISIONS OF COORDINATE BENCHES OF THIS TRIBUNAL WE DIRECT THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF PF & ESI PA YMENTS. E) DISALLOWANCE OF CLAIM OF DEDUCTION U/S 35(2AB): I) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY HAVE BEEN REQUIRED TO FURNISH THE QUANTUM O F EXPENDITURE APPROVED BY THE PRESCRIBED AUTHORITY FOR THE AY UND ER CONSIDERATION FOR THE ALLOWANCE OF ITS CLAIM. THE ASSESSEE COMPAN Y FILED LETTER NO. TU/IV-RD/2509/2005, DT. 27/06/2006 WHEREIN THE RECO GNITION OF IN- HOUSE R&D UNIT OF THE ASSESSEE COMPANY WAS CONFIRME D BY THE DEPARTMENT OF SCIENCE AND INDUSTRIAL RESEARCH (DSIR ), MINISTRY OF SCIENCE AND TECHNOLOGY, GOVT. OF INDIA. HOWEVER, TH E ASSESSEE FURNISHED NO ORDER OF APPROVAL ISSUED BY DSIR CONTA INING THE QUANTUM OF EXPENDITURE APPROVED, ELIGIBLE FOR DEDUC TION. II) THE AO NOTED THAT AS PER CLAUSE (3) OF SUB-SECT ION (2AB) OF SECTION 35, THE ASSESSEE SHALL BE ENTITLED FOR DEDUCTION UN DER CLAUSE (1) ONLY WHEN IT ENTERS INTO AN AGREEMENT WITH THE PRESCRIBE D AUTHORITY FOR COOPERATION IN SUCH RESEARCH AND DEVELOPMENT FACILI TY AND FOR AUDIT OF THE ACCOUNTS MAINTAINED FOR THAT FACILITY. HE OBSER VED THAT THE PRESCRIBED AUTHORITY IS THE DISR, GOVT. OF INDIA. S INCE THE ASSESSEE HAS NOT FURNISHED ORDER OF APPROVAL OF DSIR CONTAIN ING THE QUANTIFICATION OF THE EXPENDITURE ENTITLED FOR DEDU CTION U/S 35(2AB) OF THE IT ACT, THE AO HELD THAT THE ASSESSEE IS NOT EN TITLED FOR THE WEIGHTED DEDUCTION CLAIMED AT RS. 89,86,705/-. III) LD. AR SUBMITTED THAT ASSESSEE IS HAVING NECES SARY APPROVAL FROM DSIR AND ADDITION CANNOT BE SUSTAINED. HE ALSO SUBM ITTED THAT SIMILAR DISALLOWANCE WAS MADE IN AY 2009-10 AND THE COORDIN ATE BENCH HAS REMITTED BACK THE ISSUE TO THE FILE OF THE AO TO VE RIFY THE APPROVAL AND ALLOW THE DEDUCTION FOUND CORRECT. IV) HE ALSO SUBMITTED THAT DSIR HAS ACCORDED APPROV AL VIDE IN ITS LETTER RECEIVED (REFER PAGES 7-8 OF PAPER BOOK) AND HE ALSO SUBMITTED THE DETAILS OF EXPENDITURES INCURRED AND SUBMISSION . 14 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. V) LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES B ELOW. VI) CONSIDERING THE SUBMISSIONS OF THE PARTIES AND MATERIAL FACTS ON RECORD, WE ARE OF THE VIEW THAT ASSESSEE HAD SUBMIT TED THE LETTER OF APPROVAL FROM DSIR, BUT, THE AO HAD DISALLOWED THE EXPENDITURE MAINLY DUE TO NO ORDER OF APPROVAL OF DSIR CONTAINI NG THE QUANTIFICATION OF THE EXPENDITURE ENTITLED FOR DEDU CTION U/S 35(2AB) OF THE ACT, HAS BEEN SUBMITTED BY THE ASSESSEE. EVEN B EFORE US, ASSESSEE HAD NOT SUBMITTED ANY RECORDS, WHICH IS RE QUIRED AS PER SUB-SECTION (3) OF SECTION 35(2AB) OF THE ACT BUT C ONTESTED THAT ALL THE RELEVANT APPROVALS WERE SUBMITTED. WE REMIT THE IS SUE BACK TO THE FILE OF THE AO TO VERIFY THE APPROVAL OF QUANTIFICA TION BY THE DSIR ALONG WITH THE AUDITED FINANCIAL RECORDS. ASSESSEE MAY BE GIVEN PROPER OPPORTUNITY OF BEING HEARD. VII) IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. F) DISALLOWANCE U/S 40(A)(IA) I) SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURC E ON THE REMUNERATION PAID TO AUDITORS AT RS. 1,00,000/-, TH E AO DISALLOWED THE EXPENDITURE CLAIMED TOWARDS AUDITORS REMUNERATION. II) LD. AR SUBMITTED THAT IF THERE IS NO DEFAULT U/ S 201(1) BY THE ASSESSEE, NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE . HE RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF VISU I NTERNATIONAL LTD., ITA NOS. 488 & 621/HYD/2013. III) LD. DR SUBMITTED THAT THE PROCEEDINGS U/S 201( 1) IS SEPARATE AND ASSESSMENT IS ITSELF DIFFERENT FROM REGULAR ASSESSM ENT U/S 143(3) OF THE ACT. IT IS NOT PRACTICABLE TO INITIATE PROCEEDI NGS U/S 201(1). IF THE ASSESSEE FAILS TO DEDUCT TAX, PARTICULAR EXPENDITUR E HAS TO BE DISALLOWED U/S 40(A)(IA). HE INSISTED THAT THIS ISS UE MAY BE REMITTED BACK TO THE FILE OF THE AO FOR VERIFICATION. 15 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. IV) CONSIDERING THE SUBMISSIONS OF THE PARTIES AND MATERIAL FACTS ON RECORD, WE FIND THAT THE COORDINATE BENCH OF THIS T RIBUNAL HAS REMITTED SIMILAR ISSUE BACK TO THE FILE OF THE AO TO VERIFY AS TO WHETHER THE ASSESSEE COMPANY IS TREATED AS AN ASSESSEE IN DEFAU LT U/S 201(1) OF THE ACT FOR ITS FAILURE TO DEDUCT TAX AT SOURCE FRO M PAYMENT MADE ON ACCOUNT OF AUDIT FEE. AS PER THE PROVISIONS OF SECT ION 201(1), THE ASSESSEE WILL BE TREATED IN DEFAULT ONLY WHEN THE P ROVISIONS OF SECTION 201(1) IS VIOLATED. AS RIGHTLY, THE COORDINATE BENC H HAS REMITTED THE MATTER TO THE FILE OF THE AO TO DETERMINE WHETHER A SSESSEE IS IN DEFAULT. SIMILARLY, WE ALSO FIND IT PROPER TO REMIT THIS MATTER BACK TO THE FILE OF THE AO TO VERIFY AS TO WHETHER THE ASSE SSEE IS TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT WITH REGA RD TO PAYMENT OF AUDIT FEES. IF IT IS FOUND ON SUCH VERIFICATION THA T THE ASSESSEE IS NOT IN DEFAULT, AO IS DIRECTED TO DELETE THE DISALLOWAN CE MADE U/S 40(A)(IA) ON ACCOUNT OF AUDIT FEES. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. G) DISALLOWANCE OF PROVISION OF GRATUITY: I) THE ASSESSEE MADE PROVISIONS TOWARDS PAYMENT OF GRATUITY AND LEAVE ENCASHMENT AT RS. 7,47,000/- AND RS. 9,15,000 /- RESPECTIVELY. AS THE ASSESSEE FAILED TO FURNISH EVIDENCE IN SUPPO RT OF PAYMENT OF GRATUITY AND LEAVE ENCASHMENT, THE AO CONSIDERED TH E SAME FOR DISALLOWANCE AND MADE ADDITION TO THE TOTAL INCOME. II) LD. AR SUBMITTED THAT ACTUAL PAYMENT WAS MADE D URING THE YEAR, THEREFORE, AO CANNOT MAKE DISALLOWANCE. HE RELIED O N THE DECISION OF THIS TRIBUNAL IN THE CASE OF SRI KRISHNA PHARMACEUT ICALS. III) LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITI ES. IV) CONSIDERING THE SUBMISSIONS OF THE PARTIES AND MATERIAL FACTS ON RECORD, WE FIND THAT THE AO HAD MADE ADDITION DUE T O NON-SUBMISSION OF PROOF FOR PAYMENT MADE ON GRATUITY AND LEAVE ENC ASHMENT. LD. AR SUBMITS THAT THE PAYMENTS WERE MADE. LD. AR RELIED ON THE CASE OF SRI KRISHNA PHARMACEUTICALS. ON PERUSAL OF ORDER, W E FIND THAT THE 16 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. FACTS OF THIS CASE ARE DIFFERENT. THE DISALLOWANCE WAS MADE DUE TO CREATION OF UNRECOGNIZED GRATUITY FUND, WHICH WAS A LLOWED U/S 37 AS DEDUCTION. BUT, IN THE PRESENT CASE, DISALLOWANCE W AS MADE DUE TO NON FILING OF PROOF OF PAYMENT. WE REMIT THIS ISSUE BACK TO THE FILE OF THE AO TO VERIFY THE PROOF OF PAYMENT AS CLAIMED BY THE ASSESSEE ON PAYMENT OF GRATUITY AND LEAVE ENCASHMENT. IF FOUND PROPER, HE MAY ALLOW THIS EXPENDITURE, OTHERWISE, THE DISALLOWANCE MAY BE SUSTAINED. ASSESSEE MAY BE GIVEN PROPER OPPORTUNITY OF BEING H EARD. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. H) DISALLOWANCE OF THE CLAIM OF FOREIGN EXCHANGE FL UCTUATION: I) THE ASSESSEE DEBITED TO PROFIT & LOSS ACCOUNT AN AMOUNT OF RS. 21,48,000/- TOWARDS FLUCTUATION IN FOREIGN EXCHANGE . WHEN AO ASKED TO EXPLAIN AS TO HOW THE CLAIM OF FLUCTUATION IN FO REIGN EXCHANGE IS ALLOWABLE U/S 37(1) OF THE ACT, THE ASSESSEE HAS NO T FURNISHED ANY DETAILS AS TO WHETHER THE FOREX LOSS IS ON REVENUE ACCOUNT OR CAPITAL ACCOUNT OR DEFERMENT OF REPAYMENT OF LOAN. II) THE AO OBSERVED THAT THE IT ACT CONTEMPLATES T AXING ONLY REAL INCOME AND REAL LOSSES AND NO NOTIONAL INCOME AND N OTIONAL LOSSES ARE SUBJECTED TO TAX. THE ASSESSEE IS CLAIMING THE DEDUCTION OF EXCHANGE RATE FLUCTUATION LOSS U/S 37 WHICH IS A RE SIDUARY PROVISION, AS THERE IS NO SPECIFIC PROVISION DEALING WITH ADJU STMENT BASED ON FOREIGN EXCHANGE FLUCTUATION. THE AO OPINED THAT TH E ESSENCE OF DEDUCTIBILITY U/S 37 IS THAT THE INCREASE IN LIABIL ITY DUE TO FOREIGN EXCHANGE FLUCTUATION MUST FULFILL THE TWIN REQUIREM ENTS OF EXPENDITURE AND THE FACTUM OF SUCH EXPENDITURE HAVING BEEN LAI D OUT OR EXPENDED. THE EXPRESSION EXPENDITURE IS WHAT IS PAI D OUT AND SOMETHING WHICH IS GONE IRRETRIEVABLE. AO NOTED THA T INCREASE IN LIABILITY AT ANY POINT OF TIME PRIOR TO PAYMENT CAN NOT FALL WITHIN THE MEANING OF THE WORD EXPENDITURE IN SECTION 37(1). HE OBSERVED THAT THE REQUIREMENT OF EXPENDITURE IS NOT MET AND SIMIL ARLY THE REQUIREMENT OF MONEY BEING EXPENDED OR LAID OUT IS ALSO NOT SATISFIED. AO, THEREFORE, DISALLOWED THE ASSESSEES CLAIM OF F LUCTUATION IN 17 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. FOREIGN EXCHANGE AT RS. 21,48,000/- AND ADDED THE S AME TO THE INCOME OF ASSESSEE. III) LD. AR SUBMITTED THAT THE FOREIGN EXCHANGE FLU CTUATION IS ON CREDITORS, WHICH IS REVENUE IN NATURE. IT IS ALLOWA BLE AS EXPENDITURE. HE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CA SE OF YBRANT DIGITAL LTD. IN ITA NO. 1769/HYD/2012. IV) LD. DR PLACED RELIANCE ON THE ORDERS OF LOWER A UTHORITIES. V) WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL FACTS ON RECORD. THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. WOODWORD GOVERNER INDIA PVT. LTD, 312 ITR 254(SC) W HERE IT IS HELD AS UNDER:- WHERE IT HAS BEEN HELD THAT LOSS SUFFERED BY THE A SSESSEE IN RESPECT OF REVENUE LIABILITY ON ACCOUNT OF EXCHANGE DIFFERENCE AS ON THE DATE OF THE BALANCE SHEET IS AN ITEM OF EXPE NDITURE ALLOWABLE UNDER SECTION 37(1). AS PER AS 11, EXCHAN GE DIFFERENCE ARISING ON FOREIGN CURRENCY TRANSACTIONS HAVE TO BE RECOGNIZED AS INCOME OR EXPENSE IN THE PERIOD IN WHICH THEY ARISE . AN ENTERPRISE HAS TO REPORT THE OUTSTANDING LIABILITY RELATING TO IMPORT OF RAW-MATERIAL USING CLOSING RATE OR EXCHAN GE AND THE SAME HAS TO BE RECOGNIZED IN THE PROFIT & LOSS ACCO UNT FOR THE REPORTING PERIOD. HENCE, THE SAME MAY BE ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE SAID CASE, WE DIRECT THE AO TO DELETE THE ADDIT ION MADE ON THIS COUNT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1041/HYD/2013 BY ASSESSEE 7. THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INC OME FOR AY 2008-09 ELECTRONICALLY ON 26.09.2008 ADMITTING TOTA L INCOME OF RS.5,41,18,320/-. THE CASE WAS SELECTED FOR REGULAR ASSESSMENT AND AO COMPLETED THE ASSESSMENT U/S 143(3) AND DETERMIN ED THE TAXABLE INCOME AT RS. 7,63,19,612/- THE CIT-III BY VIRTUE OF POWER VESTED ON 18 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. HIM U/S 263 HAS CALLED FOR AND EXAMINED THE ASSESSM ENT RECORDS AND FOUND THAT FOLLOWING ISSUES WERE NOT EXAMINED BY TH E AO IN THE ASSESSMENT PROCEEDINGS: I) SALES TAX PENALTY OF RS. 12,98,812/- II) DEPRECIATION ON LIFT INSTALLED IN THE RESIDENCE OF DIRECTOR III) CLAIMED 100% DEPRECIATION ON WATER POLLUTION C ONTROL OF RS. 7,59,65,617/-. 8. THE AR OF THE ASSESSEE REPRESENTED AND STATED T HAT THE ASSESSEE PREFERRED APPEAL AGAINST THE ASSESSMENT OR DER U/S143(3) AND CIT(A) HAS GIVEN SOME RELIEF. STILL ASSESSEE FI LED FURTHER APPEAL BEFORE HONBLE TRIBUNAL AND IT IS PENDING FOR ADJUD ICATION. 9. CIT-III DID NOT ACCEPTED THE ABOVE REPRESENTATI ON AND OPINED THAT THE ISSUE RAISED BY HIM IS NOT SUB-JUDICE BEFO RE HONBLE ITAT. HE ALSO NOTICED THAT AO HAS WHILE COMPLETING THE ASSES SMENT U/S 143(3) HAS ERRONEOUSLY FAILED TO EXAMINE THE ABOVE SAID IS SUES AND ITS TAX IMPLICATIONS. THEREFORE, THE ABOVE ISSUES WERE NOT ON THE RECORD AND NOT PLACED IN THE ASSESSMENT ORDER. HENCE, CIT HAS POWER TO REVISE THE ASSESSMENT U/S 263 OF THE ACT. HE CONSIDERED TH E ASSESSMENT PASSED U/S 143(3) OF THE ACT AS ERRONEOUS AND SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 10. LD AR SUBMITTED BEFORE CIT THAT ALL THE ISSUES RAISED BY HIM WERE ALREADY DEALT BY AO DURING ASSESSMENT PROCEEDI NGS AND QUERIES RAISED BY AO WERE ALREADY PLACED ON RECORD, 11. CIT DID NOT ACCEPT THE CONTENTION OF THE ASSES SEE AND CONFIRMED THE REVISION ORDER U/S 263. 12. AGGRIEVED WITH ABOVE ORDER, ASSESSEE IS IN APPE AL BEFORE US, RAISED FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LD. CIT-III, HYDERABAD IS ERRO NEOUS BOTH ON FACTS AND IN LAW. 19 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. 2. THE LD. CIT-III, HYDERABAD HAS ERRED IN PASSING THE ORDER U/S 263 OBSERVING THAT THE ASSESSMENT ORDER PASSED U/S. 143(3) BY THE DCIT, CIRCLE-3(3), HYDERABAD IS ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE. 3. THE LD. CIT-III, HYDERABAD ERRED IN PASSING THE ORDER U/S.263 BY FORMING MERE CHANGE OF OPINION AND WITHOUT CONSI DERING THE FACT THAT THE ORIGINAL ASSESSMENT HAD BEEN COMPLETE D U/S 143(3) OF THE IT ACT, 1961 AFTER CAREFUL VERIFICATION OF A LL THE INFORMATION FURNISHED. 4. THE LD. CIT-III, HYDERABAD OUGHT TO HAVE APPRECI ATED THE JUDGMENT OF HONORABLE SUPREME COURT OF INDIA IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX (2000)-243-ITR-0083 (SC) 5. THE LD. CIT-III, HYDERABAD HAS ERRED IN HOLDING THAT THE AMOUNT OF RS.12,98,812/- IS NOT TO BE ALLOWED U/S 3 7(1). 6. THE LD. CIT-III, HYDERABAD OUGHT TO HAVE APPRECI ATED THE FACT THAT, LIFT INSTALLATION EXPENDITURE INCURRED FOR WE LFARE OF DIRECTOR IS ALLOWABLE U/S 37 OF THE IT ACT,1961. 7. THE LD. CIT-III, HYDERABAD HAS ERRED IN DIRECTIN G THE AO TO DISA1JOW THE DEPRECIATION OF RS.7,59,65,617/- ON PO LLUTION CONTROL EQUIPMENT. 8. THE LD. CIT-III, HYDERABAD ERRED IN DIRECTING TH E AO TO DISALLOW DEPRECATION ON POLLUTION CONTROL EQUIPMENT WHICH WAS ALREADY EXAMINED AND ALLOWED BY THE AO U/S143(3) OF THE IT ACT,1961. 13. LD AR SUBMITTED BEFORE US THE CORRESPONDENCE E XCHANGED WITH AO DURING ASSESSMENT PROCEEDINGS, WHICH ARE SUBMITT ED ALONG WITH THE PAPER BOOK, REFER PAGES 30 TO 59 OF THE PAPER B OOK. HE SUBMITTED THAT AO HAD ALREADY CONSIDERED THE ISSUES WHICH ARE UNDER CONSIDERATION BY CIT-III. HE ALSO SUBMITTED BEFORE US THE QUESTIONNAIRES, WHICH WERE ASKED TO SUBMIT TO COMPL ETE THE ASSESSMENT BY AO, WHICH ARE PART OF PAPER BOOK, REF ER PAGE 70 OF THE PAPER BOOK. LD AR ALSO SUBMITTED THAT IT IS NOT NE CESSARY THAT ALL THE ISSUES TO BE PLACED ON RECORD BY AO, IT IS ENOUGH T HAT HE VERIFIES THE ISSUES AND FORM NECESSARY OPINION ON THESE ISSUES A ND PASS THE ASSESSMENT ORDER , RELIES ON THE DECISION OF JURISD ICTIONAL HIGH COURT IN SPECTRE HOLDINGS CASE. 14. LD DR RELIES ON THE ORDER OF CIT. 20 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. 15. CONSIDERED THE SUBMISSIONS OF BOTH COUNSELS AN D MATERIAL FACTS ON RECORD. WE ARE OF THE VIEW THAT CIT-III RE-EXAMI NED THE ISSUES WHICH ARE ALREADY CONSIDERED BY AO DURING THE ASSES SMENT PROCEEDINGS. SINCE AO ALREADY CONSIDERED AND TAKEN A STAND AND FORMED AN OPINION, MAY BE A POSSIBLE VIEW AT THAT P OINT OF TIME, PASSED THE ASSESSMENT ORDER BASED ON THE ABOVE OPIN ION. THE CIT-III CANNOT EXERCISE THE REVISIONAL JURISDICTIONAL POWER ON THE SAME ISSUE AGAIN AND TAKE DIFFERENT VIEW. THE CO-ORDINATE BENC H OF THIS TRIBUNAL HAS TAKEN A STAND THAT THE RE-EXAMINATION OF ASSESS MENT ORDERS ON THE SAME SET OF FACTS IS AGAINST THE LAW AND EVEN T HE HONORABLE JURISDICTIONAL HIGH COURT AND HONORABLE APEX COURT HAS OPINED THAT THIS IS AGAINST LAW AND AS PER ACCEPTED PRINCIPLE OF ASS ESSMENTS. EVEN IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. VS. CIT, 354 ITR 35(AP) CASE, THE HONBLE COURT HAS OPINED AS BELOW : IT WAS HELD THAT THE AO HAD NOT ONLY TAKEN A POSSI BLE VIEW BUT IN THE CIRCUMSTANCES THE ONLY VIEW POSSIBLE AND THEREFORE HIS ORDER COULD NOT HAVE BEEN TERMED AS ERRONEOUS OR PREJUDICIAL TO THE REVE NUE WARRANTING EXERCISE OF REVISIONAL JURISDICTION U/S.263 BY THE CIT (A). THE CIT (A) HAD NO DIFFERENT OR NEW MATERIAL TO TAKE DIFFERENT VIEW FROM THE ONE TA KEN BY THE AO AND THE REASONS GIVEN BY HIM TO REOPEN THE ASSESSMENT AND S USTAIN THE REVISION WERE TOTALLY UNACCEPTABLE. THE CIT (A) WAS NOT VESTED WI TH ANY POWER U/S.263 TO INITIATE PROCEEDINGS FOR REVISION IN EVERY CASE AND START RE-EXAMINATION AND FRESH ENQUIRIES IN MATTERS WHICH HAVE ALREADY BEEN CONCLUDED UNDER THE LAW. IT WAS FURTHER HELD THAT THE TRIBUNAL HAD GROSSLY E RRED IN AGREEING WITH THE ORDER OF THE CIT (A) AND IN UPHOLDING IT ON GROUNDS WHICH HAD NOT BEEN FOUND IN THE SHOW CAUSE NOTICE OF THE CIT (A), THAT TOO W ITHOUT CONSIDERING THE SEVERAL ISSUES OF FACT AND LAW RAISED BY THE ASSESS EE IN HIS WRITTEN SUBMISSIONS AND GROUNDS OF APPEAL. BOTH THE CIT (A) AND THE TRIBUNAL BASED THEIR ORDERS ON PRECONCEIVED NOTIONS, CONJUNCTURES AND SURMISES, MANIFESTLY MISREAD THE FACTS AND TWISTED THEM TO JUSTIFY THEIR CONCLUSIONS. IN LINE WITH THE ABOVE DISCUSSION, WE ARE OF THE OP INION THAT CIT CANNOT REVIEW THE ORDER OF AO, WHO HAS APPLIED HIS MIND ON THE ISSUES WHICH ARE SUBJECT MATTER OF DISPUTE NOW. HEN CE WE QUASH THIS ORDER OF CIT PASSED U/S 263 OF THE ACT. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 17. TO SUM UP, APPEAL IN ITA NO. 508/H/12 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL IN ITA NO. 1041/H/1 3 IS ALLOWED. 21 ITA NO. 508 /HYD/2012 & 1041/H/13 M/S VIVIMED LABS LTD. PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 31 ST MAY, 2016 KV COPY TO:- 1) M/S VIVIMED LABS LTD., C/O P. MURALI & CO., CAS. , 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500 082 2) DCIT, CIRCLE 3(3), HYDERABAD. 3 CIT(A) -IV, HYDERABAD 4) CIT - III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER