ACIT, Chandigarh V. M/s Steel Strips Wheels Ltd., Chandigarh

ITA 1115/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63895 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: RAJESH GARG
• Keywords: Capital asset; Depreciation; Audit objection; Bonafide belief; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 37; 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1115/CHD/2010 ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE 5(1), V M/S STEEL STRIPS WHEELS LTD. CHANDIGARH. SCO 49-50, SECTOR 26, MADHYA MARG, CHANDIGARH. PAN: AACCS-3003L & ITA NO. 1139/CHD/2010 ASSESSMENT YEAR: 2007-08 M/S STEEL STRIPS WHEELS LTD. V ACIT, CIRCLE 5(1), SCO 49-50, SECTOR 26, CHANDIGARH. MADHYA MARG, CHANDIGARH. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT. JYOTI KUMARI ASSESSEE BY : SHRI RAJESH GARG DATE OF HEARING : 17.07.2012 DATE OF PRONOUNCEMENT : 29.08.2012 ORDER PER MEHAR SINGH, AM THESE ARE CROSS-APPEALS, FILED BY THE REVENUE AND T HE ASSESSEE RESPECTIVELY, AGAINST THE ORDER DATED 14.0 6.2010 PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-T AX ACT,1961 (IN SHORT 'THE ACT') FOR THE ASSESSMENT YE AR 2007-08. 2. IN ITA NO.1115/CHD/2010, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN 2 LAW, THE LD. CIT(A) HAS ERRED IN ALLOW ING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CAS E. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S.9,32,34,275/- MADE BY THE A.O. ON ACCOUNT OF DIE AND TOOL CHARGES EXPE NDITURE. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS THAT THE EXPENDITURE IS TO BE CAPITALIZED AND NOT TO BE TREATED AS REVENUE EXP ENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 15,59,413/-MADE BY THE A.O. ON TECHNICAL KNOW-HOW. THE LD. CIT(A) H AS FAILED TO APPRECIATE THE FACTS THAT THE EXPENDITURE ON TECHNI CAL KNOW-HOW IS TO BE CAPITALIZED AND NOT TO BE TREATED AS REVENUE EXP ENDITURE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 13,94,043/- ON ACCOUNT OF PRIOR PERIOD EXPENSES BY NOT APPRECIATIN G THE FACTS THAT EVERY YEAR IS AN INDEPENDENT YEAR AND AS PER ACCOUN TING STANDARD AND METHOD OF ACCOUNTING BEING FOLLOWING BY THE ASSESSEE, NO EXPENSES RELATED TO ANY PREVIOUS YEAR SHALL BE ALLO WED AS DEDUCTION IN THE SUBSEQUENT YEAR. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E ARID IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION O F RS.60,34,757/- (RS. 11,19,043/- ON ACCOUNT OF PRIOR PERIOD CONSULTANCY +RS. 9,15,714/- ON ACCOUNT OF REDEMPTION PREMIUM ON OCPS). THE ASSESSE E FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND BOTH THESE ITEM S DO NOT RELATE TO THE RELEVANT ASSESSMENT YEAR IN WHICH THESE HAVE BEEN C LAIMED. 6. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE S ET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED O FF. 3. IN ITA NO. 1139/CHD/2010, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,68,87,361 BEING NOTIONAL SALES TAX LIABILIT Y ON ACCOUNT OF SALES TAX EXEMPTION/SUBSIDY TREATING THE SAME AS RE VENUE RECEIPT, WHEREAS, THE SAME IS A CAPITAL RECEIPT. THEREFORE T HE ADDITION OF RS.4,68,87,361/- MAY KINDLY BE DELETED. 2. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE CHARGING OF INTEREST U/S 234B, WHEREAS THE ASSESSEE IS NOT LIAB LE TO PAY ANY INTEREST UNDER SECTION 234B OF THE INCOME-TAX ACT, AS THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE SALES TAX SUBSI DY IS A CAPITAL RECEIPT NOT LIABLE FOR TAX. THEREFORE, INTEREST CHA RGED U/S 234B MAY PLEASE BE DELETED. 3. THAT ASSESSEE CRAVES LEAVE TO ADD, ALTER AND AME ND THE ABOVE GROUND OF APPEAL BEFORE THE SAME IS HEARD OR DISPOSED OF. 3 4. IT IS RESPECTFULLY PRAYED THAT THE RELIEF MAY KI NDLY BE ALLOWED TO THE ASSESSEE KEEPING IN VIEW OF THE AFORESAID GR OUND OF APPEAL. 4. GROUND NO. 1 RAISED BY THE REVENUE IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. THEREFORE, THE S AME IS DISMISSED. 5. IN GROUND NO.2, REVENUE CONTENDED THAT CIT(A) ER RED IN DELETING ADDITION OF RS.9,32,34,275/-, MADE BY T HE AO, ON ACCOUNT OF DIE AND TOOL CHARGES EXPENDITURE. 6. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT THE ISSUE IS COVERED BY THE ORDER O F THE TRIBUNAL DATED 27.11.2007, IN ASSESSEE'S OWN CASE I N ITA NO. 341/CHD/2007, ASSESSMENT YEAR 2004-05 VIDE PARA 7 & 8 OF THE ORDER. 7. WE HAVE CAREFULLY PERUSED THE GROUND RAISED BY T HE REVENUE. THE IDENTICAL ISSUE IS FOUND COVERED BY T HE ORDER OF THE TRIBUNAL, IN ASSESSEE'S OWN CASE, AS INDICAT ED ABOVE. FOR THE SAKE OF READY REFERENCE AND PROPER APPRECIA TION OF THE ISSUE IN QUESTION, RELEVANT PART OF THE SAID OR DER OF THE TRIBUNAL IS REPRODUCED HEREUNDER : 7. IT IS AGREED BY THE PARTIES THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2001-02 (SUPRA). THE RELEVANT DISCUSSION AND FINDINGS ON TH IS ISSUE CONTAINED IN PARA NOS 12 AND 13 O! THE ORDER WHICH ARE REPRODUCED HEREUNDER AND ADOPTED FOR THE DISPOSAL OF THE GROUND OF APPEAL RAISED BY THE REVE NUE: 12. THE NEXT GROUND RAISED BY THE REVENUE IS THA T THE ID CIT(A) ERRED IN TREATING THE DIE TOOLING CHARGES AS REVENUE EXPENDITURE AS ASSES SED 4 AS CAPITAL EXPENDITURE BEING OF ENDURING NA TURE. THE ID DR SUPPORTED THE ASSESSMENT ORDER AND PLACED RELIANCE UPON THE DECISION IN C IT VS SARASWATI INDUSTRIAL SYNDICATE LTD (166 ITR 366) AND 78 ITD 327. ON THE OTHER HAND THE CONTENT ION OF THE LEARNED COUNSEL FOR THE ASSESSEE THA T FOR EARLIER ASSESSMENT YEARS, ON IDENTICAL FACT, IT WAS ALLOWED AS REVENUE EXPENDITURE RELIANCE WAS A/SO PLACED UPON THE DECISION IN THE CASE. OF CIT VS MADRAS SPINNERS LTD (177 ITR 495) AND 275 ITR 403. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. THE CLA IM OF THE ASSESSEE BEFORE THE ID ASSESSING OFFICER WAS A S UNDER:- 'THE COMPANY HAS CLAIMED DIE TOOLING CHARGES OF RS.55791 08/- AS REVENUE EXPENDITURE WHEREAS THE SAME HAS BEEN CAPITALIZED IN THE BOOKS OF ACCOUNT BUT THE COMPANY HAS NOT CLAIMED ANY DEPRECIATION ON THE SAME IN THE INCOME TAX RETURN. THE COMPANY HAS INCURRED THE ABOVE SAID EXPENDITURE FOR DEVELOPMENT OF DIE TOOLINGS TO MANUFACTURE THE AUTOMOTIVE WHEEL RIMS WITH AN OBJECT OF ACHIEVING THE MAXIMUM OUTPUT. THE EXPENDITURE HAS BEEN INCURRED WITH AN OBJECT OF IMPROVING THE EXISTING PRODUCTS ALREADY MANUFACTURED BY THE COMPANY AND DOES NOT RELATE TO SETTING UP TO ALTOGETHER NEW PRODUCT OR FOR SELLING UP OF A NEW UNIT. THE COMPANY BY INCURRING SUCH EXPENDITURE HAS ONLY EFFECTED ECONOMY AND EFFICIENCY IN MANUFACTURING OF THE EXISTING PRODUCTS AND OBTAINED ONLY BUSINESS ADVANTAGE. AS THE EXPENDITURE INCURRED IS NOT OF ENDURING NATURE TO PUT IN THE CATEGORY OF CAPITAL EXPENDITURE AND HENCE 'THE SAME MAY PLEASE BE ALLOWED AS REVENUE EXPENDITURE. HOWEVER, THE ID ASSESSING OFFICER TREATED THE IMPUG NED AMOUNT AS CAPITAL EXPENDITURE WHICH WAS DELETED BY THE ID CIT(A) AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WE HAVE FOUND THAT THE TRIBUNAL IN THE CASE OF DC/7' VS METALMAN AUTO PRIVATE LTD ( 78 ITD 227) CHANDIGARH, ON IDENTICAL FACT, DECIDED IN 5 FAVOUR OF THE ASSESSEE IT WAS HELD TO BE REVENUE IN NATURE SINCE THE EXPENDITURE WERE INCURRED FO R MODERNIZATION OF EXISTING PROJECTS WHICH WAS ALREAD Y MANUFACTURING THE SAME PRODUCTS, AND SIMPLY TO INCR EASE THE BUSINESS MORE EFFICIENTLY AND MORE PROFITABILIT Y ESPECIALLY WHEN THE EXPENSES WERE INCURRED F OR MAKING TECHNOLOGICAL CHANGES, IT IS NOT THE CASE OF THE RE VENUE THAT NEW MACHINERY WAS INSTALLED RATHER THE ASSESSE E INCURRED EXPENSES FOR THE IMPROVEMENT OF PRODUCT AND QUALITY WITH AN OBJECT OF ACHIEVING MAXIMUM OUT PUT BY IMPROVING THE ALREADY EXISTING MACHINERY, THEREFORE , IT CANNOT BE SAID THAT IT IS SETTING UP OF ALTOGETHER NEW BUSINESS. THE ASSESSEE COMPANY BY INCURRING SUCH EXPENDITURE HAS ONLY IMPROVED THE EFFICIENCY IN MANUFACTURING OF EXISTING PRODUCTS MORE ECONOMICALLY FOR THE OF GETTING MAXIMUM BUSINESS ADVANTAGE VIEW OF THESE FACTS, WE HAVE NOT FOUND AN Y DEFECT IN THE CONCLUSION OF THE ID CIT(A). CONSEQUENTLY THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 8. SINCE THE DECISION OF THE CIT(A) IS IN ACCORD WITH THE DECISION OF THE TRIBUNAL IN ASSESSEE'S CASE REFERRED TO ABOVE, WE F IND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A). THE GROUND OF APPEAL RAISED BY THE REVENUE IS, THUS DISMISSED. 9. IN VIEW OF THE IDENTICAL ISSUE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE, REPRODUCED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THIS GROUND OF APPEAL, RAISED BY THE REVENUE, STAND S COVERED. THEREFORE, RESPECTFULLY FOLLOWING THE DEC ISION OF THE TRIBUNAL, THIS GROUND OF APPEAL OF THE REVEN UE IS DISMISSED. 10. IN GROUND NO.3, REVENUE CONTENDED THAT CIT(A) ERRED IN DELETING THE ADDITION OF RS.15,59,413/- MA DE BY THE AO ON TECHNICAL KNOW-HOW. IT IS, FURTHER, CONT ENDED 6 THEREIN THAT CIT(A) FAILED TO APPRECIATE THE FACTS THAT EXPENDITURE ON TECHNICAL KNOW-HOW IS TO BE CAPITALI ZED AND NOT TO BE TREATED AS REVENUE EXPENDITURE. 11. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT THE IDENTICAL ISSUE IS COVERED BY T HE ABOVE REFERRED ORDER OF THE TRIBUNAL, IN ASSESSEE'S OWN CASE. THE RELEVANT PART OF THE TRIBUNALS ORDER, A S CONTAINED IN PARA 3 TO 5, IS REPRODUCED HEREUNDER, FOR THE PURPOSE OF PROPER APPRECIATION OF THE ISSUE INV OLVED AND THE FINDINGS OF THE TRIBUNAL : 3. GROUND NO.1 RAISED BY THE R E V E N U E IS AS UNDER :- ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED COMMISSIONER OF INCOME-TAX (A) HAS ERRED IN ALLOWING RELIEF OF RS.45,45,968/- IN RESPECT OF TECHNICAL KNOW HOW EXPENSES TREATING THE SAME AS REVENUE EXPENSES AS AGAINST CAPITAL EXPENDITURE ASSESSE D BY THE ASSESSING OFFICER' 4. THE PARTIES AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2001-02 IN ITA NO. 750 CHANDI/2005 ORDER DATED 30.7.2007. THE SAID ORDER HAS FURTH ER BEEN FOLLOWED IN ASSESSMENT YEAR 2003 04 IN I.T.A.NO. 897/CHANDI/2006 ORDER DATED 30.7.2007 FOR THE SAKE OF READY REFERENCE AND ADOPTING THE REASONING WE REPRODUCE PARA NOS-9 TO 11 OF T H E ORDER OF T H E TRIBUNAL IN I.T.A NO 750/CHANDI/2005 (SUPRA) AS UNDER : '9. NEXT GROUND RAISED BY THE REVENUE IS THAT THE ID CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF EXPENSES ON TECHNICAL 7 KNOW-HOW AT RS. 58.44. 71 1/- TREATING THEM AS REVENUE AS AGAINST CAPITAL EXPENDITURE- AS ASSESSED BY ID ASSESSING OFFICER. IN NUTSHELL, THE LD SR DR SUPPORTED THE ASSESSMENT ORDER RELIANCE WAS PLACED UPON THE DECISION IN 224 ITR 342 AND 251 ITR 155. ON THE OTHER-HAND, THE ID COUNSEL FOR THE ASSESSEE FILED THE COPY OF AGREEMENT BY CONTENDING THAT IT WAS EXPANSION OF THE BUSINESS. RELIANCE WAS PLACED UPON 236 ITR 471 269 369. I TA 'NO 1469/CHD/95 AND 236 !TR 314(SC) 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. THE ASSESSEE PAID A SUM OF RS.58,44,711/- UNDER TECHNICAL COLLABORATION AGREEMENT, TO M/S RING TECH- COMPANY JAPAN. A SUM OF RS.25,53,906/- WAS PAID UNDER THE ORIGINAL AGREEMENT FOR THE PERIOD OF 3 YEARS FROM 23.6.97 TO 22.6.2000 AND RS. 32.90.805/- WAS PAID UNDER THE NEW AGREEMENT WHICH IS EXTENSION OF ORIGINAL AGREEMENT FROM 23.6.2000 TO 22.6.2002 FOR A PERIOD OF 2 YEARS. AS PER THE ASSESSEE THE MAIN PURPOSE OF THESE AGREEMENTS WAS TO INCREASE THE PRODUCTIVITY FROM PRESENT AVERAGE LEVEL OF 210 WHEELS PER HOURS TO 340 W HEELS PER HOURS AND FURTHER FOR REDUCTION OF REJECTIONS SUBSTANTIALLY. SIMILARLY, THE MAIN OBJECT OF THE SECOND AGREEMENT WAS TO IMPROVE PRODUCTIVITY RESOLUTION OF LICENSES CHRONIC QUALITY PROBLEMS REDUCING PROCESS REJECTION/REWORK, AND TECHNICAL UP- GRADATION IN THE EXISTING CAR LINE AND INTRODUCING OF THE MANUFACTURING FACILITY OF TRACTOR WHEELS. THE CONTENTION OF THE REVENUE IS THAT IT SHOULD BE ASSESSED AS 8 CAPITAL EXPENDITURE THE OBSERVATION OF THE ID ASSESSING OFFICER IS REPRODUCED HEREWITH: 'ATTENTION IS INVITED TO SECTION 32(1 )(N) WHEREIN KNOW HOW IS CONSIDERED TO BE AN INTANGIBLE ASSET .W.E.F. 1.4.99. IT MAY BE POINTED OUT THAT THE TECHNICAL COLLABORATION AGREEMENT SIGNED ORIGINALLY ON 23.6. 1997 BY THE ASSESSEE'S OWN ADMISSION HAS BEEN RENEWED FR OM 23.6 2000 AND IS THEREFORE SQUARELY COVERED UNDER T HE SAID PROVISION OF THE STATUTE THE CASE LAW CITED AS CC/ T V MET AIM AN A LI TO (P.) LTD (78 ITR 327) IS NOT APPLICABLE TO THE INSTANT CASE SINC E THE SAME PERTAINS TO ASSESSMENT YEAR 1991-92 WHEN THE INCOME TAX ACT DID NOT RECOGNIZE TECHNICAL KNOW HOW AS AN INTANGIBLE ASSET ON WHICH DEPRECIATION IS ALLOWABLE. FURTHER. IT IS SEEN THAT THE TECHNICAL COLLABORATIO N AGREEMENT HAS SPECIFIC CLAUSES REGARDING THE TRAINING OF ENGINEERS W R.T SPECIFIC ITEMS VIZ TRAI NING IN RIMS, TRAINING IN DISCS AND TRAINING IN DESIGN ETC THE VENUES FRO TRAINING VARY WITH THE SPECIFIC ITEMS AS AISO TRAINING SCHEDULES. IT HAS ALSO BEEN CATEGORICALLY SPECIFIED IN THE TECHNICAL COLLABORATION AGREEMENT THAT THE EXPENSES TOWARDS THE FOREIGN AND DOMESTIC TRAVE L OF THE TECHNICIANS WOULD HAVE TO BE BORNE BY THE ASSES SES FROM THE DETAILS OF THE FOREIGN TRAVELING EXPENSES, IT IS NOTICED THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED TOWARDS TO & FRO TRAVEL BETWEEN JAPAN AND INDIA FOR THE PURPOSES OF TRAINING AS PER THE TECHN ICAL COLLABORATION AGREEMENT. IF THE AFORESAID CONCLUSION OF THE ID ASSESSING OFF ICER IS ANALYSED, IT SAYS THAT THESE EXPENSES ARE LINKED TO THE EXPANSION OF THE PRESENT UNIT AND VIRTUALLY IT IS A NEW UNIT, THEREFORE, THE EXPENSES ARE OF CAPITAL NATURE WHEREAS THE CONCLUSION OF THE ID CIT(A) IS A S UNDER:- THE ASSESSEE WAS PAYING TECHNICAL KNOW HOW FEES TO M/S RING TECH CO JAPAN TO INCREASE THE PRODUCTION AND T O REDUCE THE REJECTIONS SO AS TO IMPROVED THE PRODUCT ION QUALITY AND MAKE THE OPERATION PROFITABLE. NO CAPITAL ASSET AS SUCH HAS BEEN ACQUIRED BY THE COMPANY WHICH COUL D BE CONSIDERED TO BE OF ENDURING NATURE THE OBJECT W AS (O EFFECT ECONOMY AND EFFICIENCY IN THE MANUFACTURING PROCESS THE ACQUISITION OF THE KNOWLEDGE HAS HELPED M SUBSTANTIAL INCREASE IN PRODUCTION BUT IN FACE OF SWIFT CHANGES OCCURRING I N THE TECHNOLOGICAL WORLD, IT CANNOT BE SAID THAT THE CHA NGED METHOD OF THE TECHNOLOGY ACQUIRED BY THE APPELLANT WOULD BE OF PERMANENT NATURE. THE HON'BLE SUPREME COURT DECISION IN THE CASE OF ALEMBIC 9 CHEMICAL WORKS CO LTD V CIT REPORTED IN 177 ITR 377 IS APPLICABLE TO THE FACTS OF THE CASE SO ALSO THE DECISION OF THE HON'BLE I TAT CHANDIGARH BENCH IN THE CASE OF DCIT V METALMAN AUTO P. LTD 78 /TO 327. TAKING INTO ACCOUNT ALL THE ABOVE FACTS AND FOLLOWI NG THE ABOVE JUDGMENT, THE DISALLOWANCE MADE ON THIS ACCOU NT IS HELD TO BE UNJUSTIFIED AND THE SAME IS DELETED. 11. IF THE FACTS OF THE CASE AND (HE CONCLUSION DRA WN BY ID ASSESSING OFFICER/CIT-{A) ARE ANALYSED, THE DECISION OF THE ID FIRST APPELLATE AUTHORITY SEEMS TO BE MORE REASONED ONE WHICH IS BASED ON VARIOUS JUDICIA L PRONOUNCEMENTS IDENTICAL TO THE FACTS OF THE PRESEN T APPEAL. THE ASSESSEE /S FURTHER FORTIFIED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS SWARAJ ENGINES LTD (2006) 203 CTR 310(P&H). .WHE REIN THE ASSESSEE CLAIMED DEDUCTION FOR AN AMOUNT OF RS. 26,65,340/- PAID TO M/S KIRLOSKAR OIL ENGINES LTD AS ROYALTY ON THE BASIS OF AGREEMENT FOR THE PURPOSES OF ACQUIRING TECHNICAL KNOW HOW. IT WAS DECIDED IN FAVOUR OF THE ASSESSEE BY UPHOLDING THE DECISION OF THE TRIBUNAL THE HON'BLE COURT HAS 'A/R EADY CONSIDERED (HE DECISION OF THE HON'BLE APEX COURT PRONOUNCED IN THE CASE OF RADHA SWAMI VS CIT (193 I TR 321). CIT VS WAVIN (INDIA) LTD. (236 ITR 314) AND VARIOUS OTHER DECISIONS THE HON'BLE GUJRAT HIGI COURT IN THE CASE OF C!T VS MIHIR TEXTILES LTD (2006) 287 ITR 232. ON IDENTICAL FACT DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING ''TECHNICAL SERVICE FEE I& DEDUCTIBL E. WHILE COMING TO THIS CONCLUSION THE HON'BLE COURT FOLLOWED THE DECISION IN CIT VS ASHOKA MILLS LTD (218 ITRI 526)(GUJ) THE HON'BLE APEX COURT IN THE CASE OF ALEMOIC CHEMICAL WORKS CO LTD V CIT (177 ITR 377) (SC). THE 'HON'BLE KERALA HIGH COURT IN THE CASE OF CIT V MADRAS SPINNERS LTD (177 ITR 495) AND THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF VEJAN HYDRAIR (P) LTD V CIT ('77 ITR 552). ON IDENTICAL FACT, HELD THAT THE AMOUNT SO PAID UNDER THE AGREEMENT IS REVENUE EXPENDITURE HOWEVER THE HON'BLE APEX COURT IN THE CASE OF JONAS WOODHEAD & SONS (INDIA) LTD VS CIT (224 ITR 342) WHEREIN COMPOSITE PAYMENT FOR SUPPLY OF TECHNICAL KNOW HOW AND SERVICES FOR SETTING UP PLAN T AND MANUFACTURE OF PRODUCT, IT WAS HELD THAT THE EXPENDITURE IS OF ENDURING BENEFIT TO THE ASSESSEE, THEREFORE, IS OF CAPITAL NATURE. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF 10 SHRI RAM BEARINGS LTD (251 !TR 155) WHEREIN THE ASSESSEE WAS ALLOWED TO USE TECHNICAL KNO W HOW EVEN AFTER PERIOD OF AGREEMENT, IT WAS HELD THAT THE BENEFIT IS OF ENDURING NATURE, THER EFORE IS OF CAPITAL IN NATURE HOWEVER, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES AND THE LA TEST DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SWARAJ ENGINES LTD DATED 1 8' : MAY ,2006 WHEREIN THE HON'BLE COM: HAS ALREADY FOLLOWED THE : DECISIONS FROM THE HON'BLE APEX COURT IN THE CASE OF RADHA SWAMI SATSANG VS CIT (SUPRA) AND WAVIN INDIA LTD (SUPRA), WE UPHOLD THE STAND OF THE ID CIT(A) CONSEQUENTLY, THIS GROUND OF THE REVENUE IS AL SO HAVING NO MERIT,' RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL WE UPHOLD THE VIEW OF THE COMMISSIONER OF INCOME-TAX (A) AND DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS REG ARD. 12. WE HAVE CAREFULLY PERUSED AND CONSIDERED GROUND OF APPEAL RAISED BY THE REVENUE AND IDENTICAL ISSUE, C OVERED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE, REFERRED TO AB OVE AND FOUND THAT THE SAID GROUND RAISED BY THE REVENUE, I S SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL, R EPRODUCED ABOVE. RESPECTFULLY FOLLOWING THE TRIBUNALS ORDER , THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 13. IN GROUND NO.4, REVENUE CONTENDED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, CIT(A) E RRED IN DELETING THE ADDITION OF RS.13,94,043/- ON ACCOUNT OF PRIOR PERIOD EXPENSES, BY NOT APPRECIATING THE FACTS THAT EVERY YEAR IS AN INDEPENDENT YEAR AND AS PER ACCOUNTING S TANDARD, AND METHOD OF ACCOUNTING, BEING FOLLOWED BY THE ASS ESSEE, NO EXPENSES RELATED TO ANY PREVIOUS YEAR, SHALL BE ALLOWED AS DEDUCTION IN SUBSEQUENT YEAR. 14. LD. 'DR' SUPPORTED FINDINGS OF THE AO, AS CONTAINED IN ASSESSMENT ORDER. HE, FURTHER, REFERRED TO PARA 9 OF THE 11 ORDER OF THE FIRST APPELLATE AUTHORITY. LD. 'AR', ON THE OTHER HAND, SUPPORTED THE FINDINGS OF THE CIT(A). 15. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FA CTS OF THE CASE AND THE RELEVANT RECORD IN THE MATTER. THE AO, FOUND THAT THE APPELLANT HAD CLAIMED PRIOR PERIOD E XPENSES, AMOUNTING TO RS.13,94,043/- IN THE PROFIT & LOSS AC COUNT. THE AO, REJECTED THE EXPLANATION FILED BY THE ASSES SEE, IN THE MATTER THAT AS THE ASSESSEE WAS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING, SUCH EXPENSES SHOULD HAVE BEE N DEBITED IN THE YEAR, WHEN LOSS ACTUALLY OCCURRED TO THE ASSESSEE. IT WAS, FURTHER, OBSERVED BY THE AO THAT EACH FINANCIAL YEAR IS AN INDEPENDENT YEAR AND AS PER AC COUNTING STANDARDS, AND THE METHOD OF ACCOUNTING BEING FOLLO WED BY THE ASSESSEE, NO EXPENSES, PERTAINING TO ANY PREVIO US YEAR ARE ALLOWABLE EXPENSES. CONSEQUENTLY, AO, MADE AN ADDITION OF RS.13,94,043/- TO THE INCOME OF THE ASS ESSEE. 15(I) IN THE COURSE OF APPELLATE PROCEEDINGS, B EFORE THE CIT(A), IT WAS CONTENDED BY THE APPELLANT THAT AO E RRED IN CONSIDERING THE FACT THAT ASSESSEE HAD WRITTEN-OFF LOSS IN THE CURRENT ASSESSMENT YEAR, AS IT BECAME IRRECOVERABLE IN THE CURRENT YEAR ITSELF AND LOSS HAS ACTUALLY OCCURRED IN THE CURRENT YEAR AND WRITTEN-OFF A SUM OF RS.2,75,000/- AS INCOME, WHICH IS ALSO PERTAINING TO EARLIER YEARS. THE DEPARTMENT CANNOT TAKE DIFFERENT STANDS, WHILE TAXI NG THE PREVIOUS INCOME DURING THE CURRENT YEAR AND DISALLO WING THE EXPENDITURE WHICH ADMITTEDLY OCCURRED AND WRITTEN-O FF IN THE CURRENT YEAR ITSELF. IT WAS COLLECTIVELY DECID ED BY THE TOP OFFICIALS OF THE COMPANY TO WRITE-OFF THE AMOUNT AS THE SAME 12 IS NOT RECOVERABLE. THE APPROVAL NOTE DATED 31.5.2 006, AUTHORIZED BY CONCERNED DEPARTMENTAL HEAD FOR WRITI NG-OFF THE AMOUNT, HAS BEEN ENCLOSED. THE COMPANY IS RUN BY THE CONCERNED OFFICIALS AND THE DECISION IS TAKEN BY TH EM, TO WRITE-OFF THE AMOUNT DURING ASSESSMENT YEAR 2007-08 . THEREFORE, THE SAME HAS BEEN ORDERED AND ASCERTAINE D DURING THE YEAR AND WRITTEN-OFF, ON 10.6.2006. THIS AMOUNT WAS EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE'S BUSINESS, AS THE AMOUNTS WERE NOT RECOVE RED, SO HAD TO BE WRITTEN-OFF IN THE BOOKS OF ACCOUNT. LD. CIT(A), ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE BY FO LLOWING THE DECISION OF THE GUJRAT HIGH COURT, IN THE CASE OF SAURASHTRA CEMENTS & CHEMICALS INDUSTRIES LTD. V C IT, 213 ITR 523 (GUJ) AND THE DECISION OF THE BOMBAY HI GH COURT IN CIT V NAGRI MILLS CO. LTD. 34 ITR 68. A B ARE PERUSAL OF PARA 12 OF THE APPELLATE ORDER, WHEREBY THIS GROUND IS ALLOWED, REVEALS THAT LD. CIT(A) HAS PASS ED CRYPTIC AND LACONIC ORDER, WITHOUT EVEN MARSHALLING OUT THE FACTS OF THE CASE PROPERLY, IN THE CONTEXT OF THE RELEVANT P ROVISIONS OF THE ACT AND THE FINDINGS GIVEN BY AO. THE ASSES SEE APPELLANT HAS TAKEN THE DECISION TO WRITE-OFF THE L OSS IN THE ASSESSMENT YEAR UNDER REFERENCE AS IS EVIDENT FROM THE SUBMISSION MADE BEFORE THE CIT(A), WITHOUT ESTABLIS HING THE FACTUM THAT THE LOSS HAS OCCURRED IN THE PERIOD UND ER REFERENCE. MERE WRITING-OFF LOSS BY TAKING A DECIS ION BY THE MANAGEMENT, DOES NOT RENDER THE APPELLANT ELIGIBLE FOR DEDUCTION U/S 37 OF THE ACT. FURTHER, IT IS NOT TH E CASE OF THE ASSESSEE APPELLANT THAT PROVISIONS OF SECTION 3 6(1)(VII) 13 READ WITH SUB-SECTION (2) THEREOF, ARE APPLICABLE T O THE FACT- SITUATION OF THE PRESENT CASE. EVEN, LD. CIT(A) HA S CITED, JUST CASE-LAWS, WITHOUT CONTEXTUALIZING THE RATIO O F THE CASE- LAWS, TO THE FACT-SITUATION OF THE PRESENT CASE. I N VIEW OF SUCH A SITUATION, WE DEEM IT FIT, TO RESTORE THE IS SUE IN QUESTION TO THE FILE OF CIT(A), TO MEET THE END OF JUSTICE AND TO ADJUDICATE THE ISSUE AFRESH, AS PER THE RELEVANT PROVISIONS OF THE ACT. ACCORDINGLY, THE ISSUE IN QUESTION IS RESTORED TO THE FILE OF THE CIT(A), WITH A DIRECTION, TO PASS S PEAKING ORDER, HAVING REGARD TO THE FACT-SITUATION OF THE P RESENT CASE AND THE RELEVANT PROVISIONS OF THE ACT. NEEDLESS T O SAY THAT CIT(A) MUST AFFORD REASONABLE AND PROPER OPPORTUNIT Y TO BOTH THE PARTIES. THUS, THIS GROUND OF APPEAL IS A LLOWED FOR STATISTICAL PURPOSES. 16. IN GROUND NO.5, REVENUE CONTENDED THAT CIT(A ) ERRED IN DELETING ADDITION OF RS.60,34,757/- {RS.11,19,0 43/- ON ACCOUNT OF PRIOR PERIOD CONSULTANCY + RS. 49,15,714 /- ON ACCOUNT OF REDEMPTION PREMIUM (OCPS) }. IT WAS, FUR THER, CONTENDED THAT ASSESSEE IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING AND BOTH THESE ITEMS RELATE TO THE RELEV ANT ASSESSMENT YEAR, IN WHICH THESE HAVE BEEN CLAIMED. 16(I) IN THE COURSE OF PRESENT APPELLATE PROCEED INGS, LD. 'DR' PLACED RELIANCE ON THE ORDER PASSED BY THE AO, WHEREAS LD. 'AR' REFERRED TO PAGE 9 OF THE APPELLATE ORDER AND PARA 8 OF ASSESSMENT ORDER. LD. 'AR' FURTHER PLACED RELIAN CE ON THE SUBMISSION FILED BEFORE CIT(A) AND DECISION AS REPO RTED IN SAURASHTRA CEMENTS & CHEMICALS IND. LTD. (SUPRA). THE APPELLANT IS AGGRIEVED BY THE ACTION OF THE AO, FOR NOT 14 ALLOWING THE FOLLOWING DEDUCTIONS, WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT, BY OBSERVING THAT THER E IS NO SUCH PROVISION IN SECTION 115JB OF THE ACT : I) FRINGE BENEFIT TAX RS.10.15 LACS II) (A) REDEMPTION PREMIUM ON OCPS RS.49.15 LACS CONSULTANCY FEE W/OFF RS.60.34 LACS (B) (RS.13.94 LACS-RS.2.75 LACS) RS.11.19 LACS (BOOKED UNDER THE HEAD PRIOR ---------------- --- PERIOD ADJUSTMENT) 17. LD. CIT(A), ON APPRECIATION OF THE DETAILED SUB MISSIONS AND CASE-LAWS STATED THEREIN, ADJUDICATED THE ISSUE IN FAVOUR OF THE REVENUE. THE RELEVANT FINDINGS OF TH E CIT(A), AS CONTAINED IN PARA 21 TO 26 ARE REPRODUCED HEREUN DER : 21. HAVING CONSIDERED THE CONTENTIONS OF THE ASSES SEE, I FIND THAT THE ISSUE OF FBT IS COVERED BY CIRCULAR 8 OF 2005 DATED 29.8.2005. CBDT HAS CLARIFIED THE ISSUE VIDE Q.NO. 103 WHICH IS REPRODU CED AS UNDER : 103. WHETHER FBT WOULD BE ALLOWABLE DEDUCTION WHILE COMPUTING 'BOOKPROFIT' UNDER SECTION 115JB? ANS. FBT IS A LIABILITY QUA EMPLOYER. IT IS AN EXPE NDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION OF THE EMPLOYER. HOWEVER, SUB-CLAUSE (IC) OF CLAUSE (A) OF SECTION 40 OF THE INCOME-TAX ACT EXPRESSLY PROHIBITS THE DEDUCTION OF THE AMOUNT OF FBT PAID, FOR THE PURPOSES OF COMPUTING THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THIS PROHIBITION DOES NOT APPLY TO THE COMPUTATION OF'BOOKPROFIT'FOR THE PURPOSES OF SECTION 115JB. ACCORDINGLY, THE FBT IS AN ALLOWABLE DEDUCTION IN THE COMPUTATION OF 'BOOKPROFIT' UNDER SECTION 115JB OF THE INCOME- TAX ACT. 22. IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO EXC LUDE THE FBT FROM COMPUTATION OF BOOK PROFIT. 23. FURTHER, I FIND THAT THE APPELLANT HAS CORRECTL Y DEBITED THE PREMIUM AMOUNT ON THE REDEMPTION OF OPTIONALLY CONVERTIBLE PREFERENCE SHARES AS THE SAME IS IN ACCORDANCE WITH THE GENERALLY ACCEPT ED ACCOUNTING PRINCIPLES. IF THE PROFIT HAS BEEN DETERMINED IN ACCORDANCE WITH P ART-II & PART-ILL OF SCHEDULE VI OF THE COMPANIES ACT, 1956 AND IS CONSE QUENTLY INCONSISTENT WITH THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, THEN PROFIT CANNOT BE DISTURBED FOR THE PURPOSE OF DETERMINING THE MAT LIABILITY. I N THE INSTANT CASE, NEITHER THE ASSESSING OFFICER HAS OBJECTED THAT THE TREATME NT OF PREMIUM PAID ON THE REDEMPTION OF OPTIONALLY CONVERTIBLE PREFERENCE SHA RES IS NOT IN ACCORDANCE WITH THE SCHEDULE VI / GENERALLY ACCEPTED ACCOUNTIN G PRINCIPLES NOR IS THERE ANY MATERIAL ON RECORD TO THE CONTRARY. 24. REGARDING CONSULTANCY FEE, THE APPELLANT HAS CO RRECTLY WRITTEN OFF THE NON- REFUNDABLE PART OF CONSULTANCY FEE TO THE PROF IT & LOSS ACCOUNT UNDER THE 15 HEAD 'PRIOR PERIOD ADJUSTMENT' AS THE SAME WAS AUDI TED & ACCEPTED BY THE STATUTORY AUDITOR OF THE COMPANY. ONCE THE ACCOUNTS ARE AUDITED AND THERE IS NO AUDIT OBJECTION, PROFITS CANNOT BE DISTURBED. 25. BESIDES, FOR THE PURPOSE OF DETERMINING THE MAT LIABILITY, I RELY UPON THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COUR T IN THE CASE OF APOLLO TYRES LTD. VS. CIT, 255 ITR 273. AS PER THE RATIO O F THIS JUDGEMENT, ONCE THE PROFIT HAS BEEN DETERMINED IN ACCORDANCE WITH THE P ART-II & III OF SCHEDULE VI OF THE COMPANY'S ACT, 1956 AND THE ACCOUNTS AUDI TED BY THE AUDITOR OF THE COMPANY HAVING NO AUDIT OBJECTION WITH RESPECT OF S CHEDULE VI, THEN THE NET RESULTS AS DECLARED BY THE PROFIT & LOSS OF THE ASS ESSEE IS TO BE ACCEPTED UNLESS THE ASSESSING OFFICER BRINGS ON RECORD, THE NECESSA RY MATERIAL/EVIDENCE TO ESTABLISH THAT PROFIT & LOSS ACCOUNT WAS INCONSI STENT WITH SCHEDULE VI OF THE COMPANY'S ACT 1956. IN THE INSTANT CASE, THE AS SESSEE HAS ALREADY DISCHARGED ITS ONUS BY PLACING ON RECORD THE FINANC IAL STATEMENT E ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT THE ACCOUNTS W ERE NOT PREPARED IN ACCORDANCE WITH THE SCHEDULE VI OF THE COMPANY'S ACT. 26. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL ON THE ISSUES RAISED IN GROUND NO.5 IS ALLOWED. 18. THE CIRCULAR ISSUED BY THE CBDT CLARIFIED THE I SSUE VIDE QUESTION NO. 103 WHICH HAS BEEN REPRODUCED IN THE APPELLATE ORDER UNDER PARA 21, WHEREIN IT HAS BEEN STATED THAT PROHIBITION REGARDING ALLOWABILITY OF FBT DOES NOT APPLY TO THE COMPUTATION OF BOOK PROFIT FOR THE PURPOSE O F SECTION 115JB. ACCORDINGLY, FBT IS AN ALLOWABLE DEDUCTION IN COMPUTATION OF BOOK PROFIT U/S 115JB OF THE INCOME- TAX ACT. THEREFORE, THE FINDINGS OF THE CIT(A) BASED ON THE BOARDS CIRCULAR, CANNOT BE ASSAILED. LD. CIT(A) FOUND THA T THE APPELLANT HAD CORRECTLY DEBITED THE PREMIUM AMOUNT ON THE REDEMPTION OF OPTIONALLY CONVERTIBLE PREFERENCE SHA RES, AS THE SAME IS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING POLICIES. LD. CIT(A) ALSO PLACED RELIAN CE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F APOLLO TYRES LTD. V CIT 255 ITR 273, WHEREIN IT HAS BEEN H ELD THAT ONCE THE PROFIT HAS BEEN DETERMINED IN ACCORDANCE W ITH PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 195 6 AND THE ACCOUNTS ARE AUDITED BY THE AUDITOR OF THE COMPANY, HAVING NO AUDIT OBJECTION, WITH RESPECT TO SCHEDULE VI, TH EN NET 16 RESULTS, AS DECLARED BY THE PROFIT & LOSS ACCOUNT O F THE ASSESSEE, IS TO BE ACCEPTED, UNLESS THE AO BRINGS O N RECORD THE NECESSARY MATERIAL TO ESTABLISH THAT PROFIT & L OSS ACCOUNT WAS IN CONSISTENT WITH SCHEDULE VI OF THE COMPANIES ACT, 1956. IN THE PRESENT CASE, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO DISPLACE THE SUBMISSION/CONTENTIONS MADE BY THE ASSESSEE AND TO DISTINGUISH THE APPLICABILITY OF THE RATIO OF THE D ECISION RELIED UPON BY THE CIT(A). 19. HAVING REGARD TO THE DETAILED FINDINGS GIVEN BY THE CIT(A), IN ACCORDANCE WITH RELEVANT PROVISIONS OF T HE ACT, FACTUAL MATRIX OF THE CASE AND THE DECISION BY HON' BLE SUPREME COURT, IN THE CASE OF APOLLO TYRES LTD. V C IT (SUPRA), WE DO NOT FIND ANY INFIRMITY THEREIN, HENC E, THE SAME ARE UPHELD AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 20. GROUND NOS. 6 & 7 ARE GENERAL IN NATURE AND NEE D NO SEPARATE ADJUDICATION. ACCORDINGLY, THE SAME ARE D ISMISSED. 21. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1139/CHD/2010 (ASSESSEE'S APPEAL) 22. IN GROUND NO. 1, ASSESSEE HAS CONTENDED THAT CI T(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,68,87, 361/- BEING NOTIONAL SALES TAX LIABILITY ON ACCOUNT OF SA LES TAX EXEMPTION/SUBSIDY, TREATING THE SAME AS REVENUE REC EIPT, WHEREAS THE SAME IS CAPITAL RECEIPT. 17 23. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE AO THAT ASSESSEE RECEIVED SALES TAX SUBSIDY OF RS.4,68,87,3 61/- AND TREATED THE SAME AS CAPITAL RECEIPT. LD. AO, AFFOR DED OPPORTUNITY TO THE ASSESSEE, AS TO WHY SUCH SALES T AX SUBSIDY SHOULD NOT BE TREATED AS REVENUE RECEIPT, F OLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT V ABHISHEK INDUSTRIES LTD. 286 ITR 1. ON CONSIDERA TION OF THE SUBMISSIONS FILED BY THE ASSESSEE, WHEREIN THE DECISION OF THE ITAT, CHANDIGRH BENCH IN THE CASE OF M/S VIR ENDER AGRO CHEMICAL LTD., REJECTED THE CONTENTION OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF THE JURISDI CTIONAL HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES L TD. (SUPRA). 24. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD. IT WOULD BE P ERTINENT TO REPRODUCE THE RELEVANT PART OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S ABHISH EK INDUSTRIES LTD. (SUPRA), ON THE DIRECT ISSUE OF SAL ES TAX SUBSIDY. THE RELEVANT PART OF THE DECISION IS REPR ODUCED HEREUNDER : (II) THAT THE BENEFIT UNDER RULE 4A OF THE PUNJAB G ENERAL SALES TAX (DEFERMENT AND EXEMPTION )RULES, 1991, ACCRUED FOR A PERIOD OF 10 YEARS FROM THE DATE OF PRODUCTION AND THE QUA NTUM WAS FIXED AT 300 PER CENT OF THE FIXED CAPITAL INVESTMEN T FOR CATEGORY. A INDUSTRIES AND 150 PER CENT OF THE FIXED CAPITAL IN VESTMENT FOR CATEGORY B INDUSTRIES TO BE AVAILED OF WITHIN 7 YEAR S. BESIDES THIS, THERE WAS NO OTHER DOCUMENT OR MATERIAL TO SUBS TANTIATE THE ASSESSEE'S CONTENTION THAT THE SALES TAX SUBSIDY OF THE KIND UNDER CONSIDERATION SHOULD BE TREATED AS CAPITAL RECEIPT A ND NOT A REVENUE RECEIPT OR TO SHOW THAT THE KIND OF SUBSIDY UNDER CONSIDERATION WAS GIVEN TO THE ASSESSEE FOR CREATIO N OF CAPITAL 18 ASSET AS AN AID TO SETTING UP OF THE UNIT. RATHER, IT WAS EVIDENT THAT THE SUBSIDY WAS AN OPERATIONAL SUBSIDY PROVIDED BY THE STATE AFTER THE INDUSTRY HAD BEEN SET UP AND COMMEN CED COMMERCIAL PRODUCTION. IN THE ABSENCE OF MATERIAL TO SHOW THAT THE SUBSIDY WAS TO ENABLE IT TO CARRY OUT CAPITAL INVE STMENT IT COULD NOT BE PRESUMED THAT SUCH A SUBSIDY WAS TO ENA BLE IT TO CARRY OUT CAPITAL INVESTMENT IT COULD NOT BE PRESUMED T HAT SUCH A SUBSIDY WAS A CAPITAL SUBSIDY. SAHBEY STEEL & PRESS WORKS LTD. V. CIT (1997) 228 ITR 253 (S.C) AND CIT V RAJARAM MAIZE PRODUCTS (2001) 251 ITR 427 (S.C) APPLIED. 25. THE ASSESSEE APPELLANT SUBMITTED THAT THE IMPUG NED SALE TAX SUBSIDY IS GIVEN TO THE ASSESSEE UNDER THE SCHEME IS TO BUILD A CONDUCIVE INDUSTRIAL CLIMATE, TO ATTR ACT FRESH INVESTMENT AND ALSO FACILITATE THE GROWTH AND EXPAN SION OF THE INDUSTRY IN THE STATE. FOR CREATING MORE JOB OPPORTUNITIES FOR YOUTH, THE STATE GOVERNMENT, HAS ANNOUNCED A NUMBER OF INCENTIVES, PACKAGES UNDER TH E INDUSTRIAL POLICY AND INCENTIVE BEFORE 1996, ONE OF WHICH IS THE SALES TAX SUBSIDY SCHEME. UNDER THE SCHEME, CO MPANY HAS BEEN GRANTED SALES TAX EXEMPTION FOR A PERIOD O F 10 YEARS. THE APPELLANT ALSO PLACED RELIANCE ON THE D ECISION IN THE CASE OF CIT V PONNI SUGAR & CHEMICALS LTD. 219 CTR 105. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECI SION CITED BEFORE THE AO. 26. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE, RELEVANT RECORDS AND THE DECISION RELI ED UPON BY BOTH THE PARTIES. LD. 'AR' PLACED RELIANCE ON THE DECISION OF JAMMU & KASHMIR HIGH COURT IN THE CASE OF SHRI BALA JI ALLOYS V CIT, WHEREIN EXCISE DUTY REFUND HAS BEEN CONSIDERED AS CAPITAL RECEIPT. RESPECTFULLY, IT IS SUBMITTED THAT THE DECISION OF THE HON'BLE JAMMU & KASHMIR HI GH COURT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, 19 BEING FACTUALLY DIFFERENT AND DISTINGUISHABLE. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF ABHISHEK INDUSTRIES (SUPRA) SQUARELY COVERS THE ISS UE IN THE PRESENT CASE. 26(I) ASSESSEE PLACED RELIANCE IN THE CASE OF CIT V PONNI SUGAR & CHEMICALS LTD. 306 ITR 392 (S.C) AND ON APPRECIATION OF THE RATIO AND FACTS OF THE CASE, RE LIED UPON BY THE APPELLANT, WE FIND THAT THE SAME IS NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE. IN THE CASE RELIED UPON BY THE APPELLANT, THE SUBSIDY WAS GRANTED FOR REPAYMENT OF THE CAPITAL LOANS AND THE LOAN WAS UTILIZED BY THE ASSE SSEE TO SET UP NEW UNIT. IN VIEW OF THIS, THE RATIO OF THE DECISION RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO TH E PRESENT CASE. THE DECISION OF THE HON'BLE SUPREME COURT, I N THE CASE OF SAHNEY STEEL PRESS WORKS LTD. V CIT (1997) 228 ITR 253 (S.C) IS SQUARELY APPLICABLE TO THE FACT-SITUAT ION OF THE PRESENT CASE. IN THIS CASE, SALES TAX SUBSIDY HAS B EEN GRANTED BY THE GOVERNMENT TO THE ASSESSEE, TO ASSIS T IN HIS BUSINESS AND SUCH SUBSIDY IS PATENTLY OF REVENUE NA TURE. SUCH SUBSIDIES ARE SUBSIDIARY TRADE RECEIPTS AND NO T CAPITAL RECEIPTS. IT IS A SUBSIDY GIVEN FOR RUNNING BUSINE SS AND THE ISSUE IN PRESENT CASE IS DIRECTLY COVERED BY THE DE CISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ABHISH EK INDUSTRIES (SUPRA). FURTHER, IN THE ASSESSEE'S CASE , THE ISSUE IN QUESTION HAS BEEN DECIDED AGAINST THE APPELLANT IN ITA NO. 341/CHANDI/2007 A.Y. 2004-05. HENCE, THIS GROUN D OF THE APPELLANT IS DISMISSED. 20 27. IN GROUND NO. 2, ASSESSEE CONTENDED THAT CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST U/S 234B, WH EREAS ASSESSEE IS NOT LIABLE TO PAY ANY INTEREST UNDER TH E SAID SECTION, AS THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT SALES TAX SUBSIDY IS CAPITAL RECEIPT. 27(I) WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISS IONS, FACTS OF THE CASE AND THE RELEVANT RECORD. THE ISS UE HAS BEEN DEALT WITH BY THE LD. CIT(A) IN PARA 28 AND TH E RELEVANT PARA IS REPRODUCED HEREUNDER : I HAVE CAREFULLY CONSIDERED THE ISSUE . CHARGING OF INTEREST IS MANDATORY IN NATURE AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANJUM M. H. GHASWALA AND OTHERS, 252 ITR 1 (SC). THE HON'BLE PU NJAB & HARYANA HIGH COURT HAS ALSO OPINED THAT THE INTEREST IS MANDATOR Y IN NATURE AS HELD BY IT IN THE CASE OF UPPER INDIA STEEL MFG. AND ENGG. CO. LT D., 279 ITR 123 (P&H). RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VINOD KURANA, 253 ITR 578. THU S, IN VIEW OF THESE JUDICIAL OPINIONS, THIS GROUND OF THE ASSESSEE IS D ISMISSED. 27(II) HAVING REGARD TO THE FINDINGS OF THE CIT(A ), WHEREIN DECISION OF THE SUPREME COURT HAS BEEN CITED, INCLU DING THAT OF THE HON'BLE JURISDICTIONAL HIGH COURT, THIS GROUND OF THE ASSESSEE IS DISMISSED. 27(III) ACCORDINGLY, APPEAL OF THE ASSESSEE IS DISM ISSED. 28. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF THE ASSESSEE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUG.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH AUG.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH