DCIT, Hyderabad V. M/s Heritage Foods(India) Ltd., Hyderabad

ITA 1163/HYD/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53553 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-07-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 28-11-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K GOPAL CHOUDARY
• Keywords: Depreciation; Difference of opinion; Change of opinion; Capital expenditure
• Section: 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER SL. NO. ITA NO. & A.Y. APPELLANT RESPONDENT 1. 368/HYD/2000 A.Y. 1996-97 M/S. HERITAGE FOODS (I) LTD., HYDERABAD PAN/GIR NO. H-9 JCIT (ASSTS), SR-2 HYDERABAD 2. 311/HYD/2003 A.Y. 1999-2000 -DO- ACIT, CIRCLE 1(4) HYDERABAD 3. 1030/HYD/2003 A.Y. 2000-01 -DO- -DO- 4. 1100/HYD/2004 A.Y. 2001-02 -DO- -DO- 5. 1101/HYD/2004 A.Y. 2002-03 -DO- -DO- 6. 529/HYD/2006 A.Y. 1997-98 -DO- ACIT, CIRCLE 2(2) HYDERABAD 7. 20/HYD/2002 A.Y. 1998-99 -DO- JCIT (ASSTS), SR-II, HYDERABAD. 8. 1211/HYD/2006 A.Y. 1998-99 -DO- ACIT, CIRCLE 2(2) HYDERABAD 9. 1212/HYD/2006 A.Y. 2002-03 -DO- -DO- 10. 1213/HYD/2006 A.Y. 2000-01 -DO- -DO- 11. 1177/HYD/2005 A.Y. 2003-04 -DO- ASST. CIT, CIRCLE 1(4), HYDERABAD 12. 1162/HYD/2006 A.Y. 1998-99 DCIT, CIRCLE 2(2) HYDERABAD M/S. HERITAGE FOODS (I) LTD., HYDERABAD PAN/GIR NO. H-9 13. 1163/HYD/2006 A.Y. 1999-2000 -DO- -DO- 14. 1164/HYD/2006 A.Y. 2000-01 -DO- -DO- ASSESSEE BY: SHRI K. GOPAL CHOUDARY REVENUE BY: SHRI M.S. CHANDRA SEKHARAN SHRI T. DIWAKAR PRASAD DATE OF HEARING: 10.08.2011 DATE OF PRONOUNCEMENT: 26.08.2011 ORDER PER CHANDRA POOJARI, A.M: ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 2 THESE APPEALS BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE CIT(A) -II AND CIT(A)-III FOR VARIOUS ASSESSMENT YEARS. SINCE THE ISSUE INVOLVED IN THESE APPEALS ARE COMMON IN NATURE, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON GROUND IN ASSESSEES APPEALS I. T.A. NOS. 368/HYD/2000, 20/HYD/2002 AND 311/HYD/2003 IS THAT WHETHER PRODUCING OF TONED MILK, STANDARD MILK ETC., AMOUNT S TO MANUFACTURE FOR ELIGIBILITY U/S. 80IB OF THE INCOME-TAX ACT, 1961. 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT THE SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN A SSESSEES OWN CASE FOR A.YS. 1997-98, 1998-99, 1995-96, 2000-01 AND 19 99-2000 IN I.T.A. NOS. 809/HYD/2000, 269/HYD/02, 366/HYD/03, 922/HYD/ 04 AND 1002/HYD/02, RESPECTIVELY AND THE TRIBUNAL VIDE ORD ER DATED 30.11.2010 HELD AS FOLLOWS: 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THE PROCESS EMPLOYED BY THE ASSESSEE COMPANIES IN ALL THESE CASES UNDER CONSIDERATION IS IDENTICAL AND SIMILAR TO THE PROCESS EMPLOYED IN TH E CASE OF B.G. CHITALE (SUPRA). WE FIND NO MAJOR DIFFER ENCE IN THE MAIN PROCESSES AT ANY STAGE WITH THAT OF B. G. CHITALES CASE AS EVIDENCED FROM THE FLOW CHART PLA CED BEFORE US, IN RESPECT OF PROCESS OF PASTEURIZATION OF MILK. IN ALL DIARY INDUSTRIES, THE PROCEDURE/PROCESS FOLL OWED FROM PROCUREMENT OF MILK TO PASTEURIZATION, STANDARDIZATION, PACKAGING ETC., ARE SAME. THE CHIL LING PLANT OR COLD STORAGE PLANT USED BY THE ASSESSEE IS ONLY A ANCILLARY ACTIVITY TO THE MAIN ACTIVITY OF THE MILK PROCESSING. WHAT IS MANUFACTURE UNDER OTHER LAWS N EED NOT NECESSARILY AMOUNT TO MANUFACTURE UNDER INCOME- TAX LAW. A NEW PRODUCT SHOULD EMERGE WHICH BEARS SOME DISTINCTIVENESS AND NOT JUST BE A MORE STANDARDIZED FORM OF THE SAME PRODUCT. THE END PRODUCT SHOULD MEET T HE TEST OF SUFFICIENT DIFFERENCE IN NAME, CHARACTER, U SE AND CLASS OF CUSTOMERS, ETC., NOTWITHSTANDING THE DEPLO YMENT OF SOPHISTICATED MACHINERY, LABOUR AND VALUE ADDITI ON. IT IS THE FACT THAT PRODUCT CATEGORY OF THE INPUT IS M ILK, AND THE PRODUCT CATEGORY OF THE OUTPUT REMAINS MILK ONL Y. THE ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 3 SPECIAL BENCH OF THE TRIBUNAL [PUNE] OBSERVED THAT THREE TESTS HAVE TO BE SATISFIED TO CONSTITUTE MANUFACTU RE (A) A CERTAIN COMMODITY SHOULD HAVE BEEN PRODUCED; (B) TH E PROCESS OF PRODUCTION SHOULD INVOLVE EITHER LABOUR OR MACHINERY AND (C) THE END PRODUCT SHOULD HAVE A DIS TINCT CHARACTER, NAME AND USE. THE TERM PRODUCTION HAS A WIDER CONNOTATION THAN THE WORD MANUFACTURE. THER E IS A DIFFERENCE BETWEEN PROCESSING AND PRODUCTION AND CONCLUDED THAT THE PROCESS OF PASTEURIZATION AND STANDARDIZATION OF MILK DOES NOT AMOUNT TO MANUFACT URE / PROCESSING FOR PURPOSES OF SECTIONS 80-I AND 80-HHA AS WHILE PASTEURIZED MILK IS IMPROVED IN QUALITY, IT I S NOT A COMMERCIALLY DIFFERENT PRODUCT AS COMPARED TO RAW M ILK. IN THE CASE UNDER CONSIDERATION ALSO, THE ASSESSEE COMPANIES PASTEURIZES MILK AND SELL THE SAME IN THE MARKET APART FROM MAKING DAIRY PRODUCTS. FOR THE ASSESSMENT YEARS UNDER CONSIDERATION, THE TERM MANUFACTURE HAD NO PRESCRIBED DEFINITION. EVEN DEFINITION INTRODUCED LATER IN FINANCE ACT 2009, DE MANDS NEWNESS WITH REFERENCE TO NAME, CHARACTER AND USE, OR DISTINCTIVENESS WITH REFERENCE TO CHEMICAL COMPOSIT ION OR INTEGRAL STRUCTURE. IN OUR CONSIDERED OPINION, TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE BY THE AFORESAID DECISION OF PUNE SPECIAL BENCH. THE DECISION OF THE SPECIAL BENCH IS BINDING ON THE BENCHES AND TO THE CASES WHERE THE FACTS AND CIRCUMSTANCES ARE SIMILAR AND IDENTICAL TO THE CASE OF THE SPECIAL BENCH. HENCE THE ASSESSEE COMPANIES ARE NOT ENTITLED FOR DEDUCTION UNDER SECTIONS 80I, 80IA AND 80IB OF THE ACT AS THE CASE MAY BE FOR ALL THE YEARS UND ER CONSIDERATION. HOWEVER, AS OBSERVED BY THE PUNE SPECIAL BENCH, IF THE ASSESSEE COMPANY MARKETS CURD , GHEE OR OTHER PRODUCTS AFTER PROCESSING, THE SAME AMOUNTS TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. BY APPLYING THE RATIO LAID DOWN IN THE SPECI AL BENCH, THE ITEMS SUCH AS BUTTER MILK, CURD, CREAM, GHEE AND CHEESE ARE ENTIRELY NEW ITEMS AND SAME ARE DIFF ERENT FROM RAW MATERIAL I.E., MILK. HENCE, THESE ITEMS A RE ENTITLED FOR DEDUCTION UNDER SECTION 80I/80IA/80IB AS THE CASE MAY BE AS THEY ARE NEW ITEMS MANUFACTURED/ PRODUCED CONSEQUENT TO PROCESSING OF MILK. THESE IT EMS HAVE CLEAR, SEPARATE AND MARKETABLE IDENTITIES. I N VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSEE COMPANIES A RE ENTITLED TO GET PROPORTIONATE RELIEF UNDER SECTION 80I/80IA/80IB AS THE CASE MAY BE IN RESPECT OF SALE S OF BUTTERMILK, CREAM, CURD, GHEE AND CHEESE IN CONFORM ITY WITH THE DECISION OF THE PUNE SPECIAL BENCH IN THE CASE OF B.G. CHITALE [SUPRA]. WE DIRECT ACCORDINGLY. ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 4 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS T RIBUNAL, WE ARE INCLINED TO DISMISS THE ABOVE GROUND TAKEN BY THE A SSESSEE. 5. THE NEXT COMMON GROUND IN I.T.A. NOS. 1030/HYD/0 3, 1100/HYD/04, 1101/HYD/04 AND 1177/HYD/05 FOR A.YS. 2000-01, 2001- 02, 2002-03 AND 2003-04 IS THAT WHETHER MILK PRODUC TS SUCH AS GHEE, BUTTER, CREAM, ETC., ARE PRODUCED AND ADMITTEDLY AM OUNTING TO MANUFACTURE AND DEDUCTION U/S. 80IB IS TO BE ALLOWE D ON THE WHOLE OF THE PROFIT OF THE INDUSTRIAL UNDERTAKING AND NOT ON LY ON THE PROPORTIONATE PROFIT ON THE TURNOVER BASIS. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE TRIBUNAL IN EARLIER ORDER (SUPRA) WRONGLY HELD THAT THE ASSESSEE IS ENTITLED TO GET PROPORTIONATE RELIEF U/S. 80I/80IA AND 80IB OF THE ACT, AS THE CASE MAY BE, IN RESPECT OF SALES OF BUTTER MILK , CREAM, CURD, GHEE AND CHEESE IN CONFORMITY WITH THE DECISION OF THE P UNE SPECIAL BENCH IN THE CASE OF B.G. CHITALE VS. DCIT REPORTED IN 30 5 ITR 81 (AT) (SB) (PUNE). ACCORDING TO THE LEARNED COUNSEL FOR THE A SSESSEE, THE SPECIAL BENCH HAS NOT GIVEN ANY FINDING ON THE IMPU GNED ISSUE. HE SUBMITTED THAT PROPORTIONATE ALLOWABILITY OF THE DE DUCTION IS NOT PROVIDED UNDER THE ACT AND THE TRIBUNAL CANNOT PUT DIFFERENT WORDS IN THE ACT WHEN THE ASSESSEE IS CONSIDERED AS INDUSTRI AL UNDERTAKING, IT IS ENTITLED FOR FULL DEDUCTION U/S. 80IB IN RESPEC T OF PROFIT OF THE INDUSTRIAL UNDERTAKING AS A WHOLE AND NOT THE PROFI T DERIVED FROM THE ABOVE PRODUCTS MANUFACTURED BY THE INDUSTRIAL UNDER TAKING. PRODUCTION OF THE ABOVE PRODUCTS, EVEN THOUGH, MEA NT FOR CAPTIVE CONSUMPTION, BUT THE SAME AMOUNTS TO MANUFACTURE AN D THE ENTIRE PROFIT OF THAT INDUSTRIAL UNDERTAKING IS TO BE CONS IDERED FOR DEDUCTION U/S. 80I/80IA/80IB OF THE ACT. 7. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE EARLIER ORDER OF THE TRIBUNAL (CITED SUPRA) SPECIFICALLY ON PARAS 9 AND 10 OF THE ITAT ORDER. ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 5 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE ARGUMENT OF THE ASSESSEES COUNSEL LOO KS VERY ATTRACTIVE BUT IS UN-PRACTICABLE AND IT TO LEADS TO AN ABSURD SITUATION. THE INTENTION OF THE LEGISLATURE IS TO GIVE DEDUCTION T O AN INDUSTRIAL UNDERTAKING ENGAGED IN MANUFACTURE OF AN ARTICLE OR THING. WE HAVE TO SEE THE OBJECT OF THE PROVISIONS OF THE ACT. IF WE CONSIDER THE ARGUMENTS OF THE ASSESSEES COUNSEL, IT AMOUNTS TO GIVE A DEDUCTION U/S. 80I/80IA/80IB ON ENTIRE PROFIT OF THE INDUSTRI AL UNDERTAKING EARNED BY THE ASSESSEE BY CARRYING ON VARIOUS ACTIVITIES O F NON- MANUFACTURING ALONG WITH MANUFACTURING OF SINGLE ARTICLE. THIS IS NOT THE INTENTION OF THE LEGISLATURE UNDER THE PROVISIONS OF SECTION 80I /80IA/80IB OF THE ACT. WE FIND NO MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL. WE HAVE TO CONSIDER THE PROFIT DERIVED FROM THE ELIGIBLE BU SINESS OF AN UNDERTAKING TO GRANT DEDUCTION U/S. 80I/80IA/80IB O F THE I.T. ACT. IT WAS CONSIDERED BY THIS TRIBUNAL ON AN EARLIER OCCASION IN ASSESSEES OWN CASE THAT MANUFACTURE OF BUTTER MILK, CURD, CREAM, GHEE AND CHEESE ARE ENTIRELY NEW ITEMS AND SAME ARE DIFFERENT FROM THE RAW MATERIAL I.E., MILK, AND ENTITLED FOR DEDUCTION U/S. 80I/80IA/80IB OF THE I.T. ACT ON PROPORTIONATE BASIS. THE CONCEPT OF PROPORTIONATE DEDUCTION IS NOT STRANGE TO THE INCOME-TAX ACT. IT WAS THE DUTY OF THE INCOME-TAX OFFICER TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE AND D ETERMINE THE TAX PAYABLE, EVEN IF THE INCOME OF THE ASSESSEE COULD N OT BE DEDUCED FROM THE BOOKS OF THE ASSESSEE DUE TO THE METHOD OF ACCO UNTING EMPLOYED BY THE ASSESSEE. THE DIFFICULTY IN APPORTIONMENT C ANNOT BE A GROUND FOR GRANTING DEDUCTION U/S. 80I/80IA/80IB OF THE I. T. ACT ON WHOLE PROFIT OF THE INDUSTRIAL UNDERTAKING. IN THE PRESENT CAS E, THE DEDUCTION UNDER SECTION 80I/80IA/80IB IS AVAILABLE ONLY IN RESPECT OF MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE IN RESPECT OF I TEMS LIKE BUTTER MILK, CURD, CREAM, GHEE AND CHEESE AND THE PROFIT FROM TH IS ACTIVITY IS ONLY ENTITLED FOR DEDUCTION U/S. 80I/80IA/80IB OF THE AC T. THE ASSESSEE HEREIN HAD KEPT A COMPOSITE ACCOUNT AND PREPARED A COMBINED PROFIT & LOSS ACCOUNT FOR ALL THE ACTIVITIES CARRIED ON BY T HE ASSESSEE. IT IS FAIR TO APPORTION THE PROFIT AMONG THE ACTIVITIES CARRIE D ON BY THE ASSESSEE ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 6 ON THE PRINCIPLES OF COMMERCIAL ACCOUNTING. IN OUR OPINION, THE APPORTIONMENT OF PROFIT ON THE BASIS OF TURNOVER IS ONE OF THE METHODS TO ASCERTAIN PROFIT OF EACH ACTIVITY CARRIED ON BY THE ASSESSEE AND THEREBY GRANT THE DEDUCTION TO THE ELIGIBLE BUSINES S OF THE INDUSTRIAL UNDERTAKING. ACCORDINGLY, WE HOLD THAT THE ASSESSE E IS ENTITLED FOR DEDUCTION U/S. 80I/80IA/80IB ONLY IN RESPECT OF PRO FIT DERIVED FROM MANUFACTURING OF BUTTER MILK, CURD, CREAM, GHEE AND CHEESE AND NOT ON THE WHOLE OF THE PROFIT OF THE INDUSTRIAL UNDERTAKI NG. ACCORDINGLY, WE DISMISS THIS GROUND. 9. THE NEXT COMMON GROUND IN I.T.A. NOS. 1211/HYD/2 006, 1212/HYD/2006, 1213/HYD/2006 AND 1101/HYD/2004 IS W HETHER DISALLOWANCE OF 80IB IN RESPECT OF UNITS SET UP AFT ER 31.3.2005 WAS JUSTIFIED. THIS IS GROUND IS NOT PRESSED BEFORE US. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 10. THE NEXT COMMON GROUND IN I.T.A. NO. 20/HYD/02, 311/HYD/03 1030/HYD/03, 1100/HYD/2004, 1101/HYD/04 AND 1177/HY D/05 IS WHETHER THE DISALLOWANCES OF CERTAIN INCOMES FROM C OMPUTATION OF PROFIT FOR ALLOWING DEDUCTION U/S. 80IB WAS JUSTIFI ED. ACCORDING TO THE AR, THE FOLLOWING INCOME IS TO BE CONSIDERED AS INC OME DERIVED FROM INDUSTRIAL UNDERTAKING OF THE ASSESSEE. ITEM 1998 - 99 1999 - 00 2000 - 01 2001 - 02 2002 - 03 2003 - 04 SCRAP SALES 515834 649106 812173 843079 LATE ARRIVAL PENALTIES 313456 59322 65787 28337 MILK CONVERSION CHARGES 9233 SALE OF GUNNY BAGS 960 UNCLAIMED SECURITY DEPOSITS 30000 BANK, WATER, RENTAL CHARGES 20000 MILK SHORTAGE RECOVERY FROM TRANSPORTERS 53096 EXCESS FEED RECOVERY 41307 186261 OTHERS 11118 6343 424000 182959 40272 CATTLE LOAN INTEREST 585797 2335000 1506686 37229 29 INTEREST ON DEPOSITS 7710 INTEREST ON LOANS TO EMPLOYEES 43985 36399 38292 24921 33901 61658 MARGIN MONEY INTEREST WITH BANKS 75350 33000 31138 43812 INTEREST ON SECURITY DEPOSITS WITH APSEB 85005 11486 68027 122000 8645 8252 ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 7 INTEREST ON BANK DEPOSITS 5550 7000 271743 159298 INTEREST ON SECURITY DEPOSITS WITH APPLE CREDIT CORPN. FOR CAR LOAN 11673 INTEREST ON ADVANCES 66366 INTEREST ON SECURITY DEPOSITS 12290 INTEREST ON I.T. REFUND 43985 772868 BILL DISCOUNTING CHARGES 40921 SALE OF GRAPES & COCONUTS 235626 54839 25000 64754 LEASE RENT FROM PETR BULK COOLERS 30000 DIVIDEND INCOME 148000 698638 1486369 INTEREST ON ICD'S 124986 894730 DIMINUTION ON INVESTMENT VALUE REVERSED 86000 STORAGE CHARGES FROM APDDC LTD. 115307 CREDITORS BALANCES AND SECURITY DEPOSIT REVERSAL 23168 INSURANCE CLAIMS RECEIVED 23500 RECOVERY OF OLD DUES 10000 PROFIT ON SALE OF ASSETS 2794 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENTITLED TO A DEDUCTION OF THE SPECIFIE D PERCENTAGE OF THE PROFITS AND GAINS THAT ARE DERIVED FROM AN ELIGIBLE INDUSTRIAL UNDERTAKING. HE SUBMITTED THAT THE RATIO OF THE DE CISION OF THE SUPREME COURT IN PANDIAN CHEMICALS LTD. (262 ITR 27 8) CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. HE SUBMI TTED THAT IN THAT CASE IT WAS HELD THAT THE WORD 'DERIVED FROM' MUST BE UN DERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDIATE NEXUS WITH THE INDUSTRIAL UNDERTAKING. THAT MUCH IS CERTAINLY THE LAW DECLAR ED BY THE APEX COURT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE APPLICATION OF THAT LAW TO SPECIFIC FACTS AND THE Q UESTION AS TO WHETHER THERE IS A DIRECT OR IMMEDIATE NEXUS, HOWEVER, MUST BE CONSIDERED ON A CASE BY CASE BASIS ON THE FACTS AND CIRCUMSTANCES OF THAT CASE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TERM 'DERIVED FROM' IS NOT TO BE APPLIED SELECTIVELY AND RESTRICT IVELY ONLY TO RECEIPTS OF THE INDUSTRIAL UNDERTAKING BUT THE TEST HAS TO BE I N RESPECT OF THE PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING AND NEEDS TO BE CONSIDERED IN THAT PERSPECTIVE. 'PROFITS AND GAINS' IS ARITHMETI CALLY AND PRACTICALLY REPRESENTED BY THE DIFFERENCE BETWEEN INCOME AND EX PENDITURE TOGETHER WITH ACCOUNTING FOR CHARGES IN THE VALUE O F ASSETS. HE ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 8 SUBMITTED THAT ALL TRANSACTIONS THAT ARE NECESSARY FOR CARRYING OUT OF THE BUSINESS MUST NECESSARILY BE CONSIDERED AS A WHOLE AS AFFECTING AND PRODUCING THE PROFITS AND GAINS OF THE BUSINESS. T HE DIRECT OR IMMEDIATE NEXUS WITH THE BUSINESS OF THE INDUSTRIAL UNDERTAKING HAS TO BE SEEN AND EXAMINED IN THE LIGHT OF WHETHER THE TR ANSACTION WAS IN THE COURSE OF THE BUSINESS AND FOR THE PURPOSES OF CARR YING OUT THE BUSINESS AND THE BUSINESS MUST BE SEEN AS A WHOLE. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAW DOES NOT SAY THAT RECEIPTS ALONE ARE TO BE CONSIDER ED TO THE EXCLUSION OF EXPENDITURE. THE LAW REQUIRES THE TESTS TO BE A PPLIED TO PROFITS AND GAINS WHICH ENVISAGE THE RESULTANT OF, AND INCLUDIN G, BOTH RECEIPTS AND EXPENDITURE TOGETHER. THE TEST SHOULD BE APPLIED T O RECEIPTS AND ALSO TO THE EXPENDITURE IN THE SAME MANNER. HE SUBMITT ED THAT INTEREST ON CERTAIN DEPOSITS IS TO BE CONSIDERED FOR THE PURPOS E OF DEDUCTION BECAUSE THE IMMEDIATE SOURCE OF THE INTEREST IS DEP OSIT AND NOT THE BUSINESS IS NOT CORRECT. IT MUST NECESSARILY FOLLO W THAT THE INTEREST EXPENDITURE IN RELATION TO THE LOAN AND NOT THE BUS INESS. HE SUBMITTED THAT IF ONE GOES BY THE REASONS GIVEN BY THE ASSESS ING OFFICER ON EACH ITEM OF RECEIPT AND EACH ITEM OF EXPENDITURE, IT WO ULD BE ONLY THE DIRECT SALES REVENUE AND THE DIRECT MANUFACTURING COSTS TH AT COULD BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE QUALI FYING AMOUNT FOR DEDUCTION U/S. 80IB. THE ASSESSING OFFICER HAS NOT EXTENDED THE REASONING ADOPTED BY HIM TO BOTH RECEIPTS AS WELL A S EXPENDITURE, NOR PROCEEDED TO ALLOW THE DEDUCTION ON THE GROSS PROFI T OR ON THAT BASIS. 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF 'GROSS PROFIT' IS NOT THE QUALIFYING AMOUNT FOR DEDUCTION U/S. 80IB, AND IF EXPENDITURE IS NOT TO BE EXAMINED ON THE SAME TOUCH STONE AS THE RECEIPTS ARE SOUGHT TO BE EXAMINED, IT WOULD NECESS ARILY FOLLOW THAT THE CORRECT INTERPRETATION OF SECTION 80IB IS THAT THE 'PROFITS AND GAINS' MUST BE SEEN WITH REGARD TO THE BUSINESS OF THE UNDERTAK ING AS A WHOLE AND BY TAKING INTO ACCOUNT ALL TRANSACTIONS THAT ACTUAL LY OCCUR IN THE COURSE ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 9 OF BUSINESS AND FOR THE PURPOSE OF BUSINESS. THERE FORE, ALL RECEIPTS IN THE COURSE OF THE BUSINESS ACTIVITY AND ALL EXPENDI TURE AND THE CHANGES IN THE VALUE OF ASSETS (E.G., DEPRECIATION, CHANGES IN VALUATION OF STOCKS) IN RELATION TO THE INDUSTRIAL UNDERTAKING, FOLLOWING THE SAME PRINCIPLES AS LAID DOWN IN CHAPTER IV PART D OF THE ACT FOR THE COMPUTATION OF INCOME CHARGEABLE TO TAX UNDER THE H EAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' HAS TO BE TAKEN IN TO ACCOUNT FOR DETERMINING THE PROFITS AND GAINS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION 80IB. HE FURTHER SUBMITTED THAT IT IS CLEAR FROM THE LANGUAGE OF SECTION 80IB THAT THE PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION 80IB IS A HO MOGENEOUS AND LIKE SUBSET OF THE INCOME CHARGEABLE TO TAX UNDER THE HE AD 'PROFITS AND GAINS OF BUSINESS' OF THE ASSESSEE. 14. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF CIT VS. MADRAS MOTORS LTD./ MM FORGINGS LTD. (25 7 ITR 60), THE MADRAS HIGH COURT CONSIDERED THE ISSUE WHETHER INTE REST EARNED BY THE ASSESSEE ON BELATED PAYMENTS FROM THE PURCHASER S OF FORGINGS WOULD BE COVERED BY SECTION 80HH. THE HIGH COURT H ELD THAT IF THE PURCHASERS OF THE FORGINGS DID NOT MAKE THE PAYMENT S FOR FORGINGS AND THEN AGREED TO PAY THE INTEREST ON THE DELAYED PAYM ENTS, THE SAID INTEREST WOULD HAVE DIRECT NEXUS WITH THE BUSINESS OF FORGINGS AND THAT THE INTEREST BEING DIRECTLY RELATABLE ONLY TO THE A MOUNTS RECEIVABLE BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS ON A CCOUNT OF THE SALE OF FORGINGS, THIS INTEREST WOULD HAVE TO BE INCLUDE D AS THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF THE ASSESSEE. T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS DECISION WAS F OLLOWED IN THE ORDER OF THE THIRD MEMBER DECISION OF THE PUNE BENCH IN T HE CASE OF KIRLOSKAR ELECTRODYNE (271 ITR 69), AGREEING WITH T HE ACCOUNTANT MEMBER, WHEREIN IT WAS HELD THAT THE INTEREST RECEI VED ON BELATED PAYMENTS FOR GOODS ARE DIRECTLY RELATABLE TO THE BU SINESS OF THE ASSESSEE. IT MAY ALSO BE NOTICED THAT IN THE SAID CASE, THE ACCOUNTANT MEMBER HAD OBSERVED THAT THOUGH THE EXPRESSION 'DER IVED FROM' IS ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 10 NARROWER THAN THE EXPRESSION 'ATTRIBUTABLE TO', IT DID NOT MEAN THAT WHEN TEN ACTIVITIES ARE SO INTERLINKED WITH ANY IMM EDIATE, CLOSE AND NECESSARY NEXUS THE ENTIRE ACTIVITY OF THE UNDERTAK ING WHICH PRODUCES THE PROFITS AND GAINS HAS TO BE REGARDED AS ONE COM POSITE ACTIVITY. FOR THIS PURPOSE HE RELIED ON THE DECISION OF AP HI GH COURT IN CIT VS. VIDYUT STEEL (219 ITR 30) WHERE IT WAS HELD THAT WH EN TWO TRANSACTIONS ARE SO INEXTRICABLY CONNECTED WITH EACH OTHER, THER E CAN BE NO QUESTION OF ISOLATING THEM AND TREATING THEM SEPARATELY. 15. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT IF THERE WERE TO BE SOME SURPLUS FUNDS PARKED IN FDS O R OTHER INVESTMENTS AND SUCH FUNDS ARE NOT USED IN BUSINESS AND KEPT SEPARATELY, THE INTEREST OR OTHER INCOME DERIVED FR OM SUCH DEPOSITS OR INCOME WOULD NOT, ON THE TEST OF DIRECT IMMEDIATE N EXUS, BE ELIGIBLE FOR CONSIDERING THE DEDUCTION U/S. 80IB, IN SUCH A CASE THERE IS NO DISPUTE. BUT TO EXTEND THE EXCLUSION TO ALL MANNERS OF INTER EST INCOME WITHOUT DISTINGUISHING THE FACTS AND CIRCUMSTANCES OF THE C ASE WOULD DO VIOLENCE TO THE INTENT AND PROVISION OF LAW. ACCO RDINGLY, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAW EXP ECTS AND REQUIRES A RATIONAL APPLICATION OF THE TEST TO THE FACTS WHEN THE INTEREST IS IN THE COURSE OF CARRYING ON THE BUSINESS. FINALLY , HE RELIED ON THE ORDER OF THE TRIBUNAL DATED 14.2.2005 IN ITA NO.692/HYD/200 0 & CO/HYD/2001 FOR THE ASSESSMENT YEAR 1997-98 IN THE CASE OF DR . REDDYS HOLDINGS LTD., HYDERABAD WHEREIN HELD THAT THE INTEREST RECE IVED FROM DEBTORS SHOULD BE CONSIDERED AS INCOME DERIVED FROM INDUSTR IAL UNDERTAKING. 16. THE LEARNED DR SUBMITTED THAT THE BELOW MENTION ED INCOME CANNOT BE CONSTRUED AS INCOME DERIVED FROM THE INDU STRIAL UNDERTAKING OF THE ASSESSEE: 1. LATE ARRIVAL PENALTIES 2. UNCLAIMED SECURITY DEPOSITS 3. BANK, WATER, RENTAL CHARGES 4. EXCESS FEED RECOVERY ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 11 5. OTHERS 6. INTEREST ON DEPOSITS 7. INTEREST ON LOANS TO EMPLOYEES 8. INTEREST ON BANK DEPOSITS 9. INTEREST ON SECURITY DEPOSITS WITH APPLE CREDIT CORPN. FOR CAR LOAN 10. INTEREST ON I.T. REFUND 11. SALE OF GRAPES & COCONUTS 12. LEASE RENT FROM PETR BULK COOLERS 13. DIVIDEND INCOME 14. INTEREST ON ICD'S 15. DIMINUTION ON INVESTMENT VALUE REVERSED 16. CREDITORS BALANCES AND SECURITY DEPOSIT REVERSA L 17. PROFIT ON SALE OF ASSETS 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD ON THIS ISSUE. SECTION 80I, 8 0IA & 80IB PROVIDES DEDUCTION IN RESPECT OF PROFIT AND GAINS FROM INDUS TRIAL UNDERTAKING. THIS DEDUCTION IS ADMISSIBLE IN A CASE WHERE GROSS TOTAL OF THE INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIV ED BY AN INDUSTRIAL UNDERTAKING, FROM ANY BUSINESS REFERRED IN SUB SECT ION OF THIS SECTION I.E., 80I/80IA/80IB. THE DEDUCTION IS ADMISSIBLE I N THE MANNER PROVIDED IN THE SECTION SUBJECT TO BE CONDITIONS ST IPULATED THEREIN. THE ONLY INCOME DERIVED FROM INDUSTRIAL UNDERTAKING I S ENTITLED FOR DEDUCTION UNDER THE AFORESAID SECTION. THE EXPRESS ION DERIVED FROM CAME TO BE CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOOD (237 ITR 579) (SC), WHEREIN I T WAS HELD THAT THERE MUST BE A DIRECT NEXUS BETWEEN THE PROFITS AN D GAINS AND THE INDUSTRIAL UNDERTAKING. IN A CASE WHERE THE NEXUS WAS NOT DIRECT BUT ONLY INCIDENTAL, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION U/S ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 12 80HH SIMILAR TO SECTION 80IA. THE HONBLE SUPREME COURT HELD THAT PROFIT FROM IMPORT ENTITLEMENTS COULD NOT CONSTITUT E PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING AND, THEREFO RE, THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80HH. THE HONBL E SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. VS. CIT (267 ITR 278) (SC) AGAIN CONSIDERED THE EXPRESSION DERIVED FROM. IN THAT CASE, THE ASSESSEE HAD EARNED INTEREST ON DEPOSITS MADE WITH ELECTRICITY BOARD FOR SUPPLY OF ELECTRICITY TO AN INDUSTRIAL UNDERTAK ING. THE HONBLE SUPREME COURT HELD THAT ALTHOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSE OF AN INDUSTRIAL UNDERTAKING, THE DEPOSIT R EQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRI AL UNDERTAKING AS THE SAME COULD NOT BE SAID TO BE FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND NO PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SPECIAL DEDUCTION U/ S 80HH. WHILE TAKING SUCH VIEW, THE HONBLE SUPREME COURT RELIED ON THE JUDGEMENT IN THE CASE OF PRIVY COUNSEL IN THE CASE OF CIT VS. RAJ BAHADUR KAMAKHAYA NARAYAN SINGH & OTHERS (16 ITR 325) (PC) AND ITS OWN RATIO OF JUDGEMENT IN THE CASE OF MRS. BACHA F. GU ZDAR VS. CIT (27 ITR 1) (SC). WHEN WE APPLY THE RATIO OF THE ABOVE JUDGEMENTS TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE INCOME FROM THE FOLLOWING HEADS OF INCOME CANNOT BE CONSTRUED AS INCOME DERIV ED FROM THE INDUSTRIAL UNDERTAKING: A. LATE ARRIVAL PENALTIES B. UNCLAIMED SECURITY DEPOSITS C. BANK, WATER, RENTAL CHARGES D. EXCESS FEED RECOVERY E. OTHER INCOMES F. INTEREST ON DEPOSITS G. CATTLE LOAN INTEREST H. INTEREST ON LOANS TO EMPLOYEES I. MARGIN MONEY INTEREST WITH BANKS J. INTEREST ON SECURITY DEPOSITS WITH APSEB K. INTEREST ON BANK DEPOSITS L. INTEREST ON SECURITY DEPOSITS WITH APPLE CREDIT CORPN. FOR CAR LOAN M. INTEREST ON ADVANCES N. INTEREST ON SECURITY DEPOSITS ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 13 O. INTEREST ON IT REFUND P. BILL DISCOUNTING CHARGES Q. SALE OF GRAPES AND COCONUTS R. LEASE RENT FROM PETROL BUNK COOLERS S. DIVIDEND INCOME T. INTEREST ON ICDS U. DIMINUTION IN INVESTMENT VALUE REVERSED V. STORAGE BALANCES AND SECURITY DEPOSIT REVERSAL W. RECOVERY OF OLD DUES X. PROFITS ON SALE OF ASSETS 18. REGARDING THE BALANCE ITEMS OF INCOME, THE ASSE SSING OFFICER IS DIRECTED TO EXAMINE THE NEXUS OF THESE INCOMES TO T HE INDUSTRIAL UNDERTAKING AND IF THERE IS A DIRECT NEXUS OF THESE INCOMES WITH THE INDUSTRIAL UNDERTAKING, THE SAME IS TO BE CONSIDERE D FOR DEDUCTION U/S 80IA/80IA/80IB OF THE ACT AS THE CASE MAY BE. FURTH ER, WE MAKE IT CLEAR THAT THERE IS NO QUESTION OF NETTING OF EXPEN SES WITH CORRESPONDING INCOME. EXPENSES CLAIMED AS DEDUCTION IN THE COMPUTATION OF PROFITS AND GAINS OF BUSINESS CANNOT BE SET OFF AGAINST THE INCOME RECEIVED AND COMPUTED UNDER THE HEAD IN COME FROM OTHER SOURCES. THE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS AND INCOME EARNED FROM OTHER SOURCES CANNOT BE SET OFF EACH OTHER. EVEN, THIS INCOME IS ASSESSED AS INCOME FROM BUSINESS COR RESPONDING DEDUCTION CANNOT BE GIVEN TOWARDS EXPENSES IF THE E XPENSES ARE NOT INCURRED TO EARN THAT INCOME. ACCORDINGLY, THIS GR OUND OF THE ASSESSEE IS PARTLY ALLOWED. 19. THE NEXT COMMON GROUND IN ASSESSEE APPEALS IN I TA NOS. 529/HYD/06, 20/HYD/02, 311/HYD/03, 1030/HYD/03 AND REVENUE APPEALS IN ITA NOS.1162/HYD/06, 1163/HYD/06, AND 11 64/HYD/06 IS WHETHER THE EXPENDITURE ON CANS AND CRATES IS REVEN UE EXPENDITURE OR CAPITAL EXPENDITURE AND IF CAPITAL EXPENDITURE, IS THE DEPRECIATION ALLOWABLE @ 50% AS CONTAINERS MADE OF PLASTIC USED AS REFILLS OR @ 25% UNDER GENERAL RESIDUAL RATE FOR PLANT. 20. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF MADRAS HIGH ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 14 COURT IN THE CASE OF CIT VS. MADURAI SOFT DRINKS ( P) LTD. (276 ITR 607) (MDS.) WHEREIN IT WAS HELD THAT CRATES AND B OTTLES WERE ENTITLED FOR DEPRECIATION @ 100%. A SIMILAR VIEW IS ALSO TAKEN BY A DIVISION BENCH OF THE ALLAHABAD HIGH COURT IN CIT VS. AQUEO US VICTUALS P LTD. (2004) (266 ITR 573) WHERE ALSO THE BOTTLES AND CRA TES USED BY THE SOFT DRINK BOTTLERS WERE HELD ENTITLED TO DEPRECIAT ION. IN THE SAID DECISION, THE ALLAHABAD HIGH COURT, FOLLOWING A DEC ISION OF THE ANDHRA PRADESH HIGH COURT IN CIT VS. SRI KRISHNA BOTTLERS PVT. LTD. (1989) (175 ITR 154) HELD THAT BOTTLES WERE ESSENTIAL TOOL S OF THE TRADE. WITHOUT THE BOTTLES AND SHELLS, THE SOFT DRINKS COU LD NOT BE EFFECTIVELY TRANSPORTED. THE BOTTLES AND THEIR CONTAINERS TOTA LLY INTER DEPENDENT. SO WERE THE SHELLS. THE BOTTLES AND SHELLS ALSO SA TISFIED THE DURABILITY TEST BECAUSE IT WAS NOBODYS CASE THAT THEIR LIFE W AS SO TRANSITORY OR NEGLIGIBLE AS TO WARRANT AN INTERFERENCE THAT THEY HAD NO FUNCTION TO PLAY IN THE ASSESSEES TRADE. THEY WERE, THEREFORE , PLANT FOR THE PURPOSE OF THE ACT AND THE ASSESSEE IS ENTITLED TO DEPRECIATION IN RESPECT OF THEM U/S 32(1)(II) OF THE ACT. THE SAID DECISION OF THE ANDHRA PRADESH HIGH COURT IN CIT VS. SRI KRISHNA BOTTLERS PVT. LTD. (175 ITR 154), WAS CONFIRMED BY THE APEX COURT BY A DECISION REPORTED IN (1994) , 209 ITR (ST.) 85. THE VIEW TAKEN BY THE A LLAHABAD HIGH COURT IN CIT VS. AQUEOUS VICTUALS PVT. LTD. (2004) (266 I TR 573), WAS ALSO CONFIRMED BY THE APEX COURT BY A DECISION REPORTED IN (2004) 266 ITR (ST.) 2. APPLYING THE RATIO ENUNCIATED FROM THE AF ORESAID DECISIONS TO THE FACTS OF THE PRESENT CASE ON HAND, WE ARE OF TH E CONSIDERED OPINION THAT THE CANS AND CRATES ENTITLED FOR DEPRECIATION AT 100%. THIS GROUND IS DECIDED AGAINST THE DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. 21. THE NEXT GROUND IS REGARDING RE-OPENING OF ASSE SSMENT U/S. 147 IS IN I.T.A. NO. 1211/HYD/2006, 1212/HYD/2006 AND 1 213/HYD/2006. THE CONTENTION OF THE LEARNED AR IS THAT THE ASSESS MENT IS REOPENED FOR THE ASSESSMENT YEAR 1998-99 BY RELYING ON THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT 2001-02 WITHOUT AN Y FRESH FACTS IN THE POSSESSION OF ASSESSING OFFICER AND THE REOPEN IS ONLY ON THE BASIS ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 15 OF CHANGE OF OPINION WHICH IS INVALID. THE DR RELI ED ON THE ORDER OF THE LOWER AUTHORITIES. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD ON THIS ISSUE. IN OUR OPINION, THE REOPENING OF THE ASSESSMENT IS NOT ON THE BASIS OF CHANGE OF OPINI ON BUT ON THE FACT THAT THE ASSESSEE HAD CLAIMED BENEFIT U/S 80IA/80IB ON UNITS COMMENCING PRODUCTION AFTER 31.3.1995 WHICH WAS NOT ENTITLED FOR THE SAME. THIS FACT WAS COME TO THE NOTICE OF THE ASSE SSING OFFICER DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEA R 2001-02. AS THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THESE FACTS, AND IT WAS NOTICED THAT ONLY TWO OF THE FOUR PLANTS WERE ELIGIBLE FOR DEDUCTION SINCE THE OTHER TWO PLANTS COMMENCED ITS PRODUCTION AFTER 1.4.1999, THE EXCESS DEDUCTION ALLOWED TO THE ASSES SEE U/S 80IA WAS TO BE WITHDRAWN, FOR WHICH THE ASSESSING OFFICER VA LIDLY REOPENED THE ASSESSMENT U/S 147 OF THE ACT. ACCORDINGLY, THERE IS NO MERIT IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. HENCE, THE GROUND RELATING TO REOPENING OF THE ASSESSMENT IS DISMIS SED. 23. THE NEXT GROUND IS REGARDING VALIDITY OF INVOKI NG THE PROVISIONS OF SECTION 263 IN I.T.A. NO. 529/HYD/2006. THIS GR OUND IS NOT PRESSED. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 24. IN THE RESULT, (A) THE ASSESSEE APPEALS IN ITA NOS.20/HYD/2002, 311/HYD/2003 1030/HYD/2003, ITA NO.529/HYD/2006, 11 00/HYD/2004, 1101/HYD/2004 AND 1177/HYD/2005 ARE PARTLY ALLOWED. (B) THE ASSESSEE APPEALS IN ITA NO.368/HYD/2000, 1 211/HYD/2006, 1212/HYD/2006 AND 1213/HYD/2006 ARE DISMISSED. (C) THE REVENUE APPEALS IN ITA NO.S1162 TO 1164/H YD/2006 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2011. ITA NO. 368/HYD/2000 & OTHERS M/S. HERITAGE FOODS (INDIA) LTD. ====================== 16 SD/SD/- SD/- D/- (G.C. GUPTA) S-SD/- SD/- (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED THE 26 TH AUGUST, 2011 COPY FORWARDED TO: 1. M/S. HERITAGE FOODS (INDIA) LTD., C/O. M/S. RAJU & PRASAD, CHARTERED ACCOUNTANTS, 401, IV, FLOOR, DIAMOND HOUS E, PUNJAGUTTA, HYDERABAD-500 082. 2. JCIT (ASSTS), SPECIAL RANGE-2, HYDERABAD. 3. ACIT, CIRCLE 1(4), AAYAKAR BHAVAN, HYDERABAD. 4. ACIT, CIRCLE 2(2), HYDERABAD. 5. THE CIT(A)-III, HYDERABAD 6. CIT(A)-II, HYDERABAD 7. THE CIT, AP-I, HYDERABAD 8. THE CIT-II, HYDERABAD 9. THE DR, A-BENCH, ITAT, HYDERABAD. TPRAO