Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 96405 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-11-2015
Appeal Filed By
Department
Bench Allotted
B
Next Hearing Date
15-09-2015
Assessment Year
2010-2011
Appeal Filed On
27-05-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' # , $ %& EFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NOS. 2780 TO 2782/MDS/2014 & 1276/MDS/2015 / ASSESSMENT YEARS : 2007-08 TO 2010-11 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(1), CHENNAI 34. ( /APPELLANT) VS M/S. ACCEL FRONTLINE LTD., (FORMERLY KNOWN AS M/S. ACCEL ICIM FRONTLINE LTD.). NO.75, NELSON MANICKAM, ROAD, CHENNAI 29. PAN AAACA5622M ( /RESPONDENT) AND ./ ITA NOS. 2789 TO 2792/MDS/2014 & 1220/MDS/2015 / ASSESSMENT YEARS : 2006-07 TO 2010-11 M/S. ACCEL FRONTLINE LTD., VS THE DEPUTY COMMISSIO NER OF (FORMERLY KNOWN AS M/S. INCOME-TAX, ACCEL ICIM FRONTLINE LTD.). CHENNAI-34. CHENNAI. DEPARTMENT BY : SHRI PATHLAVATH PEERYA, CIT ASSESSEE BY : SHRI K. RAVI, CA / DATE OF HEARING : 15.09.2015 !' / DATE OF PRONOUNCEMENT : 27.11.2015 - - ITA 2780, 2790/14 ETC. 2 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE REVENUE AS WELL AS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF T HE COMMISSIONER OF INCOME-TAX(APPEALS) FOR THE ASSESSM ENT YEARS 2006-07 TO 2010-11. SINCE, CERTAIN ISSUES INVOLV ED IN THESE APPEALS ARE COMMON, THESE ARE CLUBBED TOGETHER, HEA RD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST GROUND IN ASSESSEES APPEAL IN ITA NO.2789/MDS/2014 FOR THE ASSESSMENT YEAR 2006-07 IN ASSESSEES CASE IS WITH REGARD TO DISALLOWANCE UNDE R PRIOR PERIOD EXPENSES OF ` 9,65,903/-. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF ` ` 9,65,903/- TOWARDS PRIOR PERIOD EXPENSES. SINCE THESE EXPENSES DO NOT RELATE TO ASSESSMENT YE AR 2006- 07, THE SAME WAS DISALLOWED BY THE AO. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT T HIS WAS ORIGINALLY DISALLOWED BY THE AO WHILE PASSING ORIGI NAL - - ITA 2780, 2790/14 ETC. 3 ASSESSMENT ORDER U/S.143(3) DATED 12.12.2008. THIS ASSESSMENT YEAR WAS SUBJECT MATTER OF REVISION U/S. 263 AND VIDE ORDER DATED 27.10.2009, THE AO IS DIRECTED TO CONSI DER THE ALLOWABILITY OF DEPRECIATION ON THE IMPROVEMENT MAD E TOWARDS LEASEHOLD PROPERTIES. CONSEQUENT TO THE REVISION O RDER PASSED U/S.263, THE AO PASSED IMPUGNED ASSESSMENT ORDER U/ S.143(3) READ WITH SEC.263 VIDE ORDER DATED 26.10.2010. SIN CE THE PRESENT APPEAL IS EMANATING FROM THE ORDER PASSED U /S.143(3) R.W.S.263 OF THE ACT, THE ADDITION WAS NOT EMANATIN G IN CONSEQUENTIAL ORDER AND IT IS EMANATING FROM THE OR IGINAL ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 12.12.2008. BEING SO, THE CONTENTION OF THE LD. AR IS THAT ONCE THE ASSESSMENT IS REOPENED UNDER ANY PROVISIONS OF LAW OR AN ASSESSMENT IS FRAMED, EVERY ASPECT OF SUCH ORDER CA N BE CHALLENGED IN THE ORDER CANNOT BE SURVIVED. AGAINS T THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDE R OF THE CIT(APPEALS). WE ARE OF THE OPINION THAT THE ISSUE IN DISPUTE IS NOT EMANATING FROM THE ORDER PASSED U/S.143(3) R.W. S. 263 OF THE - - ITA 2780, 2790/14 ETC. 4 ACT DATED 26.10.2010. BEING SO, THE ASSESSEE FAILE D TO CHALLENGE THE ADDITION IN THE ORIGINAL ASSESSMENT. NOW, IT CANNOT CHALLENGE THIS GROUND, AS THIS IS NOT SUBJECT MATTE R OF ORDER PASSED U/S.263. ACCORDINGLY, THIS GROUND IS REJEC TED. 5. THE NEXT GROUND IN ASSESSEES APPEAL IN ITA NOS. 2790, 2791 & 2792/MDS/14 IS WITH REGARD TO DIRECTION GIVE N BY ADDL. CIT U/S.144A OF THE ACT AND CONFIRMED THAT ACTION O F THE ADDL. CIT BY THE CIT (APPEALS). 6. AT THE TIME OF HEARING, THIS GROUND OF APPEAL IS NOT PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 7. THE NEXT COMMON GROUND IN ITA NOS.2790, 2791 & 2792/MDS/14, IS WITH REGARD TO DISALLOWANCE BY INVO KING THE PROVISIONS OF SEC.14A R.W. RULE 8D OF THE I.T.RULES . 8. THE FACTS OF THE ISSUE AS NARRATED IN ASSESSMENT YEAR 2007-08 ARE THAT THE ASSESSING OFFICER OBSERVED THA T THE ASSESSEE HAS RECEIVED AN AMOUNT OF ` 26,20,821/- AS A DIVIDEND DURING THE YEAR WHICH HAS BEEN CLAIMED AS EXEMPT U/S.10(34) OF THE ACT. SINCE ANY EXPENDITURE RELA TABLE TO EARNING OF EXEMPT INCOME IS NOT PERMISSIBLE TO BE C LAIMED AS EXPENDITURE, THE ASSESSING OFFICER HAS WORKED OUT T HE - - ITA 2780, 2790/14 ETC. 5 DISALLOWANCE BY INVOKING THE PROVISIONS OF SEC.14A R.W.R 8D. THE ASSESSING OFFICER HAS OBSERVED THAT EVEN THOUGH THE ASSESSEE INCURS VARIOUS EXPENDITURE TO MAINTAIN ITS ESTABLISHMENT AND ADMINISTRATION, IT HAS NOT ALLOWE D ANY AMOUNT PERTAINING TO EARNING OF EXEMPT INCOME. SINCE THE MANAGERIAL STAFF AND DIRECTORS ARE INVOLVED IN MAKING DECISION S ON INVESTMENTS WHICH HAVE EARNED EXEMPT INCOME, THE AO HAS RESORTED TO DISALLOWANCE U/S.14A. ACCORDING TO TH E ASSESSING OFFICER, THE PROVISIONS OF SEC.14A HAS BEEN INSERTE D W.E.F. 1.4.2007 AND RULE 8D HAS COME INTO PICTURE W.E.F. 2 4.3.2008 AND BY RELYING ON THE DECISIONS IN THE CASE OF DAGA CAPITAL MANAGEMENT P. LTD. (ITA NO.1372/DEL/2005), MAXOPP INVESTMENTS LTD. (ITA NO.183/DEL/2005) AND CHEMINVE ST LTD. (ITA NO.2048/DEL/2005), HE HAS MADE THE DISALLOWANC E SINCE THE PROVISIONS OF SEC.14A(2) AND (3) ARE PROCEDURAL IN NATURE AND EFFECTIVE RETROSPECTIVELY. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEAL S), WHO CONFIRMED THE DISALLOWANCE AT 5% OF THE GROSS DIVID ED RECEIVED BY THE ASSESSEE. 9. FOR THE ASSESSMENT YEARS 2008-09, 2009-10, THE - - ITA 2780, 2790/14 ETC. 6 COMMISSIONER OF INCOME-TAX(APPEALS) DISMISSED THIS GROUND OBSERVING THAT INDIRECT MANAGEMENT AND ADMINISTRATI ON EXPENSES QUALIFY FOR DISALLOWANCE U/S.14A R.W.RULE 8D. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. IN RESPECT OF ASSESSMENT YEAR 2007-08, IN OUR OPINION, RULE 8D HAS NO APPLICATION, SINCE THI S WAS INSERTED W.E.F. 24.3.2008. SINCE, RULE 8D HAS NO RETROSPEC TIVE EFFECT, IT CANNOT BE APPLIED FOR THE ASSESSMENT YEAR 2007-08. ACCORDINGLY, FOR THE ASSESSMENT YEAR 2007-08, WE DI RECT THE ASSESSING OFFICER TO DISALLOW 2% EXEMPTED INCOME IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF SIMPSON & CO. LTD. V. DCIT IN TCA NO.2261 OF 2006 DATED 15.10 .2012 THIS GROUND OF APPEAL IS PARTLY ALLOWED FOR THE ASSESSME NT YEAR 2007-08. 11. COMING TO THE ASSESSMENT YEARS 2008-09 AND 20 09-10, THE MAIN CONTENTION OF THE ASSESSEES COUNSEL IS TH AT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNI NG EXEMPTED INCOME AND THE ASSESSEE HAS NOT USED ANY INTEREST BEARING FUNDS FOR INVESTMENT. ON THE CONTRARY, THE LD. DR - - ITA 2780, 2790/14 ETC. 7 SUBMITTED THAT THE ASSESSEE HAS GIVEN SUFFICIENT OP PORTUNITY TO EXPLAIN THAT THE EXPENDITURE WAS INCURRED FOR EARNI NG EXEMPTED INCOME AND THE ASSESSEE HAS NOT PRODUCED NECESSARY EVIDENCE TO SUPPORT ITS CASE. IN OUR OPINION, THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DAGA GLOB AL CHEMICALS PVT. LTD. IN ITA NO.5592/MUM/2012 DATED 1.1.2015 AN D THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF JOI NT INVESTMENTS PVT. LTD. VS. CIT IN ITA NO.117 OF 2015 DATED 25.2. 2015 IS HAVING BEARING ON THIS ISSUE, WHEREIN IT WAS OBSERV ED AS UNDER: 6. HEARD BOTH THE PARTIES. ON A PERUSAL OF THE ORD ER OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DAGA GLOBAL CHEMICALS PVT. LTD. (SUPRA), WE FIND TH AT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL HOLDING THAT DISALLOWANCE UNDER SECTION 14A READ WI TH RULE 8D CANNOT EXCEED THE EXEMPT INCOME. WHILE HOLDING SO, THE TRIBUNAL OBSERVED AS UNDER:- 2. AT THE TIME OF HEARING, DR. K.SHIVARAM ALONG WI TH SHRI RAHUL HAKANI, LD. COUNSELS FOR THE ASSESSEE ADVANCED THEIR ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED BY SUBMITTING THAT NO EXPENDITURE DIRECTLY OR INDIRECTLY WAS INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME AND FURTHER THE INVESTMENT IN SHARES WAS MADE IN EARLIER YEARS OUT OF OWN FUNDS A ND NOT OUT OF BORROWED FUNDS, THEREFORE, NO DISALLOWAN CE U/S 14A R.W. RULE 8D IS TO BE MADE. 2.1. ON THE OTHER HAND, SHRI AKHILENDRA YADAV STRON GLY DEFENDED THE CONCLUSION ARRIVED AT BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BY CONTENDING THAT A WELL REASONED ORDER HAS BEEN PASSED BY THE L D. - - ITA 2780, 2790/14 ETC. 8 FIRST APPELLATE AUTHORITY AS APPORTIONMENT OF EXPENDITURE FOR EARNING THE DIVIDEND INCOME WAS DON E AS PER THE PROVISIONS OF THE ACT. IT WAS PLEADED TH AT SECTION 14A R.W. RULE 8D OF THE RULES IS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A LIMITED COMPANY, ENGAGED IN TRADING OF BULK AND FINE, CHEMICALS, SOL VENT AND PHARMACEUTICAL RAW MATERIALS DECLARED ITS INCOM E AT RS.74,40,000/- ON 26/09/2009. THE ASSESSEE CREDITED DIVIDEND INCOME OF RS.1,82,262/- IN ITS PR OFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WHILE FRAMI NG THE ASSESSMENT INVOKE SECTION 14A R.W. RULE 8D BY CONTENDING THAT ASSESSEE CLAIMED VARIOUS EXPENSES WHICH ARE RELATED TO EXEMPT INCOME IN ITS PROFIT & LOSS ACCOUNT AND DISALLOWED RS.14,58,412/-. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BROADLY THE STAND TAKEN IN THE ASSESSMENT ORDER WAS AFFIRMED AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. THE TOTALITY OF FACTS CLEARLY INDICATES, AS CLAIMED BY THE ASSESSEE THAT NO BORROWED FUNDS WERE UTILIZED FOR EARNING THE EXEMPT INCOME BY THE ASSESSEE AND FURTHER THE DIVIDEND WER E DIRECTLY CREDITED IN THE BANK ACCOUNT OF THE ASSESS EE AND NO EXPENDITURE WAS CLAIMED. WHAT IT MAY BE, WE FIND THAT THE ASSESSEE ONLY RECEIVED RS.1,82,362/- AS DIVIDEND INCOME, THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE OF RS.14,58.412/- BY INVOKING SECTION 14A R.W. RULE 8D UNDER THE FACTS AVAILABLE ON RECOR D. IT WAS ALSO EXPLAINED BY THE LD. COUNSEL FOR THE ASSES SEE THAT ON IDENTICAL FACT IN EARLIER YEARS, NO DISALLO WANCE WAS MADE. IN THE PRESENT ASSESSMENT YEAR ALSO, NO BORROWED FUNDS WERE INVESTED BY THE ASSESSEE FOR MAKING INVESTMENT IN SHARES OR FOR EARNING DIVIDEND INCOME . AT BEST, IF ANY DISALLOWANCE COULD BE MADE THAT CAN BE RESTRICTED TO RS. 1,485/- WHICH WERE CLAIMED AS DEMAT CHARGES. DISALLOWANCE U/S 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME. IN VIEW OF - - ITA 2780, 2790/14 ETC. 9 THIS FACT, WE FIND MERIT IN THE CLAIM OF THE ASSESS EE. THE APPEAL OF THE ASSESSEE IS THEREFORE, ALLOWED. FOLLOWING THE ABOVE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL, WE ARE OF THE OPINION THAT DISALLOWANCE U /S.14A R.W. RULE 8D SHOULD NOT EXCEED THE EXEMPT INCOME. THE M UMBAI BENCH IN ITS ORDER SUSTAINED THE DISALLOWANCE ON AP PLICABILITY OF PROVISIONS OF SEC.14A R.W. RULE 8D. HOWEVER, THE A LTERNATIVE CLAIM OF THE ASSESSEE WAS THAT DISALLOWANCE IF AT A LL SHOULD BE MADE, IT SHOULD BE RESTRICTED TO EXEMPT INCOME EARN ED AND NOT BEYOND THAT. ACCORDINGLY, THE AO IS DIRECTED TO LO OK AT THIS ISSUE ON THIS ANGLE AND DECIDE IT AFRESH IN THE LIGHT OF THE ABOVE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL. ACCO RDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED FOR THE ASSESSME NT YEARS 2008-09 AND 2009-10. 12. THE NEXT COMMON GROUND FOR THE ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010-11 BOTH, IN ASSE SSEES APPEALS AS WELL AS REVENUES APPEALS IS WITH REGARD TO ALLOWANCE OF EXPENDITURE IN RESPECT OF PRELIMINARY EXPENSES U/S.35D OF THE ACT. 13. THE FACTS OF THE ISSUE AS NARRATED FOR THE ASSE SSMENT - - ITA 2780, 2790/14 ETC. 10 YEAR 2007-08 ARE THAT THE AO OBSERVED THAT THE ASSE SSEE HAD CLAIMED AN AMOUNT OF ` 1,00,28,477/- AS DEDUCTION U/S.35D FOR THE YEAR IN RESPECT OF EXPENSES INCURRED IN CONNECT ION WITH THE INITIAL PUBLIC OFFER (IPO). THE AO DISALLOWED THE ABOVE SUM CLAIMED BY THE ASSESSEE BY FOLLOWING THE DIRECTIONS GIVEN BY THE ADDL. CIT IN HIS ORDER U/S.144A. THE ADDL. CIT I N HIS ORDER U/S.144A HAS DIRECTED THE AO TO DISALLOW THE EXPEND ITURE CLAIMED BY THE ASSESSEE, SINCE THE EXPENDITURE IS N OT RELATED TO THE EXTENSION OF ITS OWN UNDERTAKING OR FOR SETT ING UP OF A NEW UNIT AS STATED U/S.35D(1)(II). IT WAS OBSERVED TH AT THE AMOUNT UTILIZED WAS FOR ACQUISITION OF AN ALREADY EXISTING UNDERTAKING M/S. TELESYS GLOBAL SOLUTIONS LTD. (TGSL). THE ADD L. CIT HAS ALSO OBSERVED THAT THE EXPANSION OF THE INDUSTRIAL UNIT WAS NOT COMPLETE, SINCE MORE THAN 50% OF THE PROCEEDS WERE NOT UTILIZED DURING THE RELEVANT YEAR. ACCORDING TO THE ADDL. C IT, THE CLAIM WAS NOT WITHIN THE MEANING OF SEC.35D. AGAINST THI S, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 14. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEA LS) OBSERVED THAT FOR AMORTISATION OF EXPENDITURE U/S 3 5D CERTAIN CONDITIONS ARE TO BE FULFILLED. THE PROVISIONS OF S .35D(1)(II) - - ITA 2780, 2790/14 ETC. 11 STIPULATE THAT THE EXPENDITURE TO BE ALLOWED FOR AM ORTIZATION IS IN CONNECTION WITH THE 'EXTENSION' OF ITS (INDUS TRIAL) UNDERTAKING OR IN CONNECTION WITH ITS 'SETTING UP OF A NEW (IND USTRIAL) UNIT'. AS PER S.35D(2)(C)(IV), THE EXPENDITURE TO BE ALLOWED IS (I) UNDERWRITING COMMISSION, (II) BROKERAGE AND (III) C HARGES FOR DRAFTING, TYPING, PRINTING AND ADVERTISEMENT OF THE PROSPECTUS. THE CIT(APPEALS) FURTHER OBSERVED THAT THE AO HAS D ENIED THE ISSUE EXPENSES SINCE THE ASSESSEE HAS NEITHER FULFI LLED PROVISIONS OF S.35D(1)(II) NOR PROVISIONS OF S. 35D (2)(C)(IV). WITH REGARD TO PROVISIONS OF S.35D(1)(II) THE PRELIMINAR Y ISSUE EXPENSES WILL BE ALLOWED FOR AMORTISATION IF THE AS SESSEE HAS GONE ON PUBLIC ISSUE AFTER THE COMMENCEMENT OF THE BUSIN ESS IN CONNECTION WITH 'EXTENSION OF ITS (INDUSTRIAL) UNDE RTAKING' OR IN CONNECTION WITH ITS 'SETTING UP A NEW (INDUSTRIAL) UNIT'. THE AO HAS DENIED THE BENEFIT, SINCE THE ASSESSEE HAS UTIL ISED THE MONIES FOR TAKING AN ON-GOING CONCERN TGSL WHIC H DOES NOT FULFIL THE CONDITION 'EXTENSION' USED IN THE SEC.35 D(1)(II) EVEN THOUGH IT HAS EXPANDED ITS EXISTING BUSINESS. ACCO RDING TO THE CIT(APPEALS) THE ADDL. CIT HAS ALSO OBSERVED THAT O UT OF THE ISSUE PROCEEDS ` 19.71 CRORES WERE UNUTILISED DURING THE YEAR - - ITA 2780, 2790/14 ETC. 12 AND BALANCE WAS UTILISED ONLY IN THE NEXT TWO YEARS . 14.1 THE CIT(APPEALS) OBSERVED THAT WITH REGARD TO THE FUNDS NOT UTILISED DURING THE RELEVANT YEAR BY THE ASSESSEE, IT WAS SUBMITTED THAT THE EXPANSION WAS COMPLETE IN THE RE LEVANT YEAR ITSELF AND THE NEW UNIT ACQUIRED HAD ALSO COMMENCED ITS OPERATION AND GENERATED INCOME FROM THE SAME EXPAND ED UNIT WHICH WAS OFFERED TO TAXATION. IT WAS ALSO SUBMITTE D THAT SINCE THE ASSESSEE HAS PUT TO USE THE APPLICATION SOFTWAR E ACQUIRED FROM TGSL IT HAS CLAIMED DEPRECIATION OF ` 16.19 CRORES DURING THE YEAR. IT WAS FURTHER SUBMITTED BEFORE THE CIT(A PPEALS) THAT THE UTILISATION OF FUNDS WHICH WERE EARMARKED FOR W ORKING CAPITAL WERE AS PER THE ISSUE DOCUMENT ITSELF. ACCORDING TO THE CIT(APPEALS), THE EXPLANATION GIVEN BY THE ASSESSEE WITH REGARD TO UTILISATION OF FUNDS IS REASONABLE. 14.2 FURTHER, THE CIT(APPEALS) OBSERVED THAT WITH R EGARD TO APPLICATION OF S.35D(1)(II), SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASHOK LEYLAND T.C.(APPEAL) NO.1253, 1254 AND 1256 O F 2005 DATED 20.6.2012, WHERE MEANING OF 'EXPANSION' AND ' EXTENSION' WAS ANSWERED IN FAVOUR OF THE ASSESSEE. THE QUESTI ON RAISED - - ITA 2780, 2790/14 ETC. 13 BEFORE THE HIGH COURT IN THE ABOVE CASE IS AS UNDER : WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE TRIBUNAL WAS RIGHT IN EQUATING A PROPOSAL TO 'EXPAND' THE CAPACITY OF PRODUCTION WITH 'EXTENSION' OF INDUSTRIAL UNDERTAKING UNDER SECTION 35D OF THE INCOME TAX ACT? THE HIGH COURT HAS DECIDED THAT EXPANSION AND EXTEN SION MEAN THE SAME. ACCORDING TO THE CIT(APPEALS), IN THE IN STANT CASE, TAKING OF BUSINESS ACTIVITY OF TGSL IS CONSIDERED A S EXTENSION OF BUSINESS BY THE ASSESSEE WITHIN THE MEANING OF S.35 D(1)(II). 14.3 WITH REGARD TO PROVISIONS OF S.35D(2)(C)(IV), THE CIT (APPEALS) OBSERVED THAT THE EXPENSES PERMISSIBLE FO R AMORTISATION AR E AS UNDER : (I) UNDERWRITING COMMISSION. (II) BROKERAGE AND (III) CHARGES FOR DRAFTING, TYPING, PRINTING AND AD VERTISEMENT OF THE PROSPECTUS. AS AGAINST THIS, THE EXPENDITURE INCURRED BY THE AP PELLANT IS AS UNDER: ADVERTISEMENT EXPENSES 2,35,16,432 AUDIT EXPENSES 4,94,924 ISSUE MANAGEMENT FEES 1,68,78,853 LEGAL EXPENSES 24,81,523 - - ITA 2780, 2790/14 ETC. 14 OTHER FEES & EXPENSES 32,60,408 PRINTING CHARGES 1,97,46,544 TRAVEL EXPENSES 7,61,913 ------------------ TOTAL 6,71,40,597 =========== ACCORDING TO THE CIT (APPEALS), PRIMA FACIE ONLY ADVERTISEMENT EXPENSES AND PRINTING CHARGES ARE FITTING INTO THE NATURE OF EXPENDITURE MENTIONED IN THE PROVISIONS OF S.35D(2) (C)(IV). HE OBSERVED THAT SIMILAR ISSUE HAS COME UP FOR DISCUSS ION BEFORE THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASHOK LEYLAND LTD (SUPRA), WHEREIN IT WAS ASKED WHETHER THE WORD 'BEING' USED IN THE PROVISIONS OF S.35D(2)(C)(IV) CONNOTE THE MEANING 'LIKE'. THE HIGH COURT HAS DECIDED THE ISSUE AGAINST THE AS SESSEE. THE EXACT QUESTION RAISED BEFORE THE HIGH COURT IN THE ABOVE REFERRED CASE IS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN HOLDIN G THAT THE WORD 'BEING' AS USED IN SECTION 35D(2)(C)(IV) IS NOT 'ILLUSTRATIVE' BUT ONLY 'RESTRICTED' TO? ACCORDING TO THE CIT(APPEALS), FOLLOWING THE ABOVE DECISION OF - - ITA 2780, 2790/14 ETC. 15 THE JURISDICTIONAL HIGH COURT, THE MEANING OF 'BEIN G' WILL BE TAKEN AS 'RESTRICTIVE' AND NOT 'ILLUSTRATIVE'. 14.4 FURTHER, THE CIT(APPEALS) OBSERVED THAT WIT H REGARD TO ISSUE MANAGEMENT FEE SHOWN AS EXPENDITURE BY THE ASSESSEE, THE ADDL. CIT HELD THAT IT IS NOT FITTING INTO THE PERMISSIBLE EXPENDITURE MENTIONED IN S.35D(2)(C)(IV ). THE ASSESSEE HAS OBJECTED FOR THE 'SAME STATING THAT ISSUE MANAGEMENT FEE IS NOTHING BUT UNDERWRITING CO MMISSION. THE CIT(APPEALS) HAS NOT AGREED WITH THE ARGUMENT O F THE ASSESSEE AND HELD THAT AS PER THE SEBI GUIDELINES T HE COMPANY WHICH IS GOING FOR PUBLIC ISSUE HAS TO ENGA GE UNDERWRITERS FOR THE GUARANTEE OF ITS ISSUE THROUGH ITS LEAD MERCHANT BANKER. THE CIT(APPEALS) FURTHER OBSERVE D THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT DATED 11.9. 2006 WITH SBI CAPITAL MARKETS LTD AS LEAD MERCHANT BANKER, W HEREIN IT WAS MENTIONED THAT 2% OF THE TOTAL ISSUE SIZE IS TO BE PAID AS LEAD MANAGEMENT FEE AND 1.25% OF THE TOTAL ISSUE SI ZE IS TO BE PAID AS SELLING AND MARKETING COMMISSION. SINCE TH E FACTS REVEAL THAT THE COMPANY HAS GONE TO PUBLIC ISSUE, U NDERWRITING - - ITA 2780, 2790/14 ETC. 16 COMMISSION WILL BE PAYABLE AND WILL BECOME AN ALLOW ABLE DEDUCTION U/S 35D(2)(C)(IV). HOWEVER, OUT OF 3.25% PAYABLE TO THE LEAD BANKERS, ONLY 1.25% IS 'FITTING INTO PROVI SIONS OF S.35D(2)(C)(IV) IN THE FORM OF UNDERWRITING COMMISS ION. 14.5 FOLLOWING THE ABOVE DECISION OF THE JURISDICT IONAL HIGH COURT, THE CIT (APPEALS) DIRECTED THE AO TO CONSIDE R THE FOLLOWING EXPENSES BE ELIGIBLE FOR WORKING OF AMORT ISATION U/S 35D(2)(C)(IV): (I) ADVERTISEMENT EXPENSES ` 2,35,16,432 (II) PRINTING CHARGES ` 1,97,46,544 (III) UNDERWRITING COMMISSION ` 48,52,500 AGAINST THIS, THE ASSESSEE AS WELL AS REVENUE IS I N APPEAL. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. BEFORE US, THE LD. AR SUBMITTE D THAT THE EXPENDITURE TO BE ALLOWED U/S.35D OF THE ACT AND PL ACED DETAILED ARGUMENT AS MADE BEFORE THE CIT(APPEALS), WHICH IS KEPT ON RECORD AND ALSO SUBMITTED THAT A PORTION OF PROCEED S OF ISSUE USED FOR THE PURPOSE OF WORKING CAPITAL AND THAT PO RTION OF EXPENDITURE RELATING TO THE PROCEEDS OF ISSUE USED FOR THE WORKING CAPITAL MAY NOT BE CONSIDERED FOR ALLOWANCE U/S.35D OF - - ITA 2780, 2790/14 ETC. 17 THE ACT. ON THE OTHER HAND, IT SHOULD BE CONSIDERE D FOR ALLOWANCE U/S.37(1) OF THE ACT, IN VIEW OF THE JUDG MENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. MAHINDRA UG INE AND STEEL CO. LTD. (250 ITR 696). HOWEVER, THE CONTENT ION OF THE LD. DR IS THAT NO PART OF EXPENDITURE IS TO BE CONSIDER ED FOR ALLOWANCE NEITHER U/S.35D NOR U/S.37(1) OF THE ACT, IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF AGROCARGO TRANSPORT LTD. VS. CIT (224 ITR 90), AS T HE PROVISIONS OF SEC.35D(1) & (2) OF THE ACT ARE NOT SATISFIED. 15.1 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF AGROCARGO TRANSPORT LTD. VS. CIT (SUPRA). AS OBSER VED BY THE JURISDICTIONAL HIGH COURT, IN THAT CASE, DEDUCTION U/S.35D IS NOT ALLOWABLE IN THE ABSENCE OF NECESSARY PARTICULARS T O SHOW THAT THE EXPENDITURE WAS COVERED BY SEC.35D(1) OR (2) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE MADE AN ARGUMENT THA T THE FUNDS WAS UTILIZED BY THE ASSESSEE DURING THE RELEV ANT ASSESSMENT YEAR THAT THE EXPANSION WAS COMPLETE IN THE RELEVANT YEAR ITSELF AND THE NEW UNIT ACQUIRED HAD ALSO COMMENCED ITS OPERATION AND GENERATED INCOME FROM T HE SAME EXPENDED UNIT, WHICH WAS OFFERED TO TAXATION. HO WEVER, THERE - - ITA 2780, 2790/14 ETC. 18 IS NO EVIDENCE TO SUPPORT THE FINDINGS OF THE CIT(A PPEALS) THAT EXPANSION OR EXTENSION WAS UNDERTAKEN BY THE ASSESS EE WITHIN THE MEANING OF SEC.35D(1)(II) OF THE ACT. THE CIT( APPEALS) DID NOT APPRECIATE THE FACTS RELATING TO APPLICABILITY OF SEC.35D(1) OR (2) BY APPLYING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF AGROCARGO TRANSPORT LTD. CITED SUPRA, W HEREIN IT WAS OBSERVED THAT ADVERTISEMENT EXPENSES, PRINTING CHAR GES AND UNDERWRITING COMMISSION WERE ELIGIBLE FOR DEDUCTION U/S.35D(2) OF THE ACT. THUS, SECTION 35D PROVIDES THAT SPECIF IED EXPENDITURE SHALL BE ENTITLED FOR AMORTIZATION ONLY IF THE EXPENDITURE WERE INCURRED BEFORE THE COMMENCEMENT O F THE BUSINESS OR AFTER THE COMMENCEMENT IN CONNECTION WI TH THE EXTENSION OF ITS BUSINESS OR IN CONNECTION WITH SET TING UP OF A NEW UNIT. 16. THE ARGUMENT OF THE ASSESSEE COMPANY IS THAT T HE EXPENSES WERE INCURRED IN RAISING THE CAPITAL MONEY FOR THE EXPANSION OF ITS EXISTING BUSINESS CARRIED ON BY T HE ASSESSEE COMPANY AND, THEREFORE, IT AMOUNTED TO THE EXTENSIO N OF ITS EXISTING BUSINESS AND AS SUCH, THE ASSESSEE IS ENTI TLED FOR BENEFIT AVAILABLE U/S 35D. - - ITA 2780, 2790/14 ETC. 19 17. WE CONSIDERED THIS ISSUE VERY CAREFULLY. THER E IS NO DOUBT THAT EXPENSES WERE NOT INCURRED BEFORE THE COMMENCE MENT OF THE BUSINESS. THEREFORE, THE FIRST CONDITION IS NO T COMPLIED WITH. THE SECOND CONDITION IS THAT THE EXPENSES INCURRED AFTER COMMENCEMENT OF THE BUSINESS, SHOULD BE INCURRED IN CONNECTION WITH EXTENSION OF ITS BUSINESS OR IN CON NECTION WITH SETTING UP OF A NEW UNIT. THERE IS NO CASE OF SETTI NG UP OF A NEW UNIT. THE QUESTION IS WHETHER THERE WAS AN EXTENSIO N OF ITS EXISTING UNDERTAKING? A GREAT EMPHASIS HAS TO BE GI VEN ON THE EXPRESSION UNDERTAKING. BUSINESS EXPANSION AND MA RKET EXPANSION OF AN EXISTING BUSINESS WILL NOT AMOUNT TO EXTENSION OF THE UNDERTAKING. THE EXPRESSION UNDERTAKING DENOTES A VISIBLE EXPENDITURE ON THE PHYSICAL FACILITIES FOR MANUFACTURE AND PRODUCTION. AN UNDERTAKING IS ALWAYS HAVING AN AR EA OF PHYSICAL STRUCTURE WHICH PRODUCES GOODS AND SERVICES BY UTIL IZING THE NECESSARY FACTORS OF PRODUCTION. ENHANCEMENT OF THE GEOGRAPHICAL AREA OF MARKETING DOES NOT AMOUNT TO E XPANSION OR EXTENSION OF THE UNDERTAKING. THE EXPRESSION USED I N THE STATUTE IS EXTENSION OF ITS UNDERTAKING. IT CLEARLY MANIF ESTS THAT AN APPARENT EXTENSION OR EXPANSION MUST TAKE PLACE BY ESTABLISHING - - ITA 2780, 2790/14 ETC. 20 NEW UNDERTAKING. THERE IS NO SUCH CASE AS FAR AS TH E PRESENT CASE IS CONCERNED. THE EXPANSION IN THE PRESENT CAS E IS ACQUISITION OF EXISTING UNDERTAKING. 18. THEREFORE, WE FIND THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE COMPANY IN CONNECTION WITH THE ISSUE OF SH ARES DO NOT QUALIFY TO BE AMORTISED U/S 35D. THIS ISSUE IS ALSO DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMEN T. 18.1 THE ALTERNATE PLEA OF THE ASSESSEE IS TO ALL OW THE SAME U/S.37 OF THE ACT AND THE EXPENDITURE WAS INCURRED FOR SERVICES RENDERED IN CONNECTION WITH THE ISSUE OF SHARES TO RAISE THE CAPITAL BLOCK OF THE ASSESSEE COMPANY. THE FUNDS R AISED BY A COMPANY THROUGH ISSUE OF SHARES AUTOMATICALLY INCRE ASES THE CAPITAL VOLUME OF THAT COMPANY. THE FUNDS RAISED BY INCREASING THE CAPITAL IN THAT MANNER MAY BE USED BY THE ASSES SEE COMPANY FOR VARIOUS PURPOSES. THE CAPITAL FUNDS MAY BE USED TO SET UP THE BUSINESS; TO PURCHASE CAPITAL ASSETS; OR TO PAY OFF LIABILITIES; OR TO AUGMENT ITS WORKING CAPITAL ETC. ONCE SHARES ARE ISSUED FOR CASH, THE ASSESSEE COMPANY GETS THE FUND S IN ITS HANDS AND ONCE THE FUNDS HAVE COME INTO THE HANDS O F THE ASSESSEE COMPANY, THE PROCESS OF ISSUE OF SHARE CAP ITAL IS - - ITA 2780, 2790/14 ETC. 21 COMPLETE. THEREFORE, THE SCOPE OF EXPENDITURE INCUR RED FOR RAISING THE SHARE CAPITAL BY ISSUING SHARES MUST AL SO STOP AT THAT POINT. THE SCOPE SHOULD NOT BE ENLARGED FURTHER. IT IS THE WISDOM OF THE COMPANY TO DECIDE IN WHICH MANNER THE FUNDS AVAILABLE WITH IT, COLLECTED BY WAY OF ISSUE OF SHARES, SHOUL D BE APPLIED. IF THE FUNDS ARE UTILIZED FOR WORKING CAPITAL REQUIREM ENTS, IT IS ONLY AN APPROPRIATION OF FUNDS AVAILABLE IN THE HANDS OF THE COMPANY. RAISING THE CAPITAL AND UTILIZING THE FUNDS ARE DIF FERENT. APPLICATION OF FUNDS DOES NOT DECIDE THE CHARACTER OF THE MONEY COLLECTED AGAINST THE ISSUE OF SHARES. MONEY COLLEC TED AGAINST THE ISSUE OF SHARES ALWAYS REMAINS AS CAPITAL. THER EFORE, THE ARGUMENT OF THE LD. AR THAT THE EXPENDITURE INCURR ED FOR ISSUE OF SHARES TO AND RAISE SHARE CAPITAL FOR WORKING CAPIT AL REQUIREMENTS NEED TO BE ALLOWED AS REVENUE EXPENDIT URE CANNOT BE ACCEPTED. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED AND THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 19. THE NEXT GROUND IN ASSESSEES APPEAL FOR THE AS SESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010-11 IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION ON APPLICATION OF SOFT WARE AT LOWER RATE AND ALSO WITH REGARD TO DISALLOWANCE OF DEPREC IATION ON - - ITA 2780, 2790/14 ETC. 22 BEHALF OF ENTIRE PURCHASE VALUE OF APPLICATION OF S OFTWARE AND REDUCING THE RATE. 20. THE FACTS OF THE ISSUE AS NARRATED IN ITA NO.27 90/MDS/14 FOR THE ASSESSMENT YEAR 2007-08 ARE THAT THE AO OBS ERVED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 16,19,58,990/- AS DEPRECIATION AT THE RATE OF 100% ON APPLICATION SOF TWARE. THE ASSESSEE, DURING THE YEAR HAS ACQUIRED A UNIT FROM M/S. TELESIS GLOBAL SOLUTIONS LIMITED. ACCORDING TO THE AO, AS PART OF THIS ACQUISITION, THE APPLICATION OF SOFTWARE AMOUNTING TO ` 16,19,58,990/- HAS COME TO THE POSSESSION OF THE AS SESSEE COMPANY. THE ADDL. CIT, AFTER HEARING THE ASSESSEE AND ELABORATELY CONSIDERING THE VARIOUS PROVISIONS OF T HE IT ACT, HAS DIRECTED THE UNDERSIGNED TO RESTRICT THE DEPRECIATI ON CLAIMED ON SOFTWARE. ACCORDINGLY, THE AO, BY FOLLOWING THE DIRECTIONS OF THE ADDL. CIT IN HIS ORDER U/S.144A OF THE ACT, MAD E A DISALLOWANCE OF ` 8,06,44,794/- AND RESTRICTED THE DEPRECIATION CLAIMED ON SOFTWARE TO ` 1,96,51,441 AGAINST ` 10,02,96,235 CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. F URTHER, THE AO OBSERVED THAT AS PER THE DIRECTIONS OF THE ADDL. CIT, HE DENIED THE CLAIM OF DEPRECIATION ON GBM(IPR) SINCE TGSL HAS - - ITA 2780, 2790/14 ETC. 23 ALREADY CLAIMED 100% DEPRECIATION ON IT AND ALLOWED 25% DEPRECIATION ON INTANGIBLE ASSETS (IPR) OF ` 12,29,57,845 AND 60% ON THE REMAINING SOFTWARE OF ` 81,97,292/-. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(AP PEALS). 21. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS REVISED THE DEPRECIATION CLAIM AND RESTRICTED THE CLAIM OF DEPRECIATION ON INTANGIBLE ASSETS (IPR) TO 25% AND CLAIMED 100% ON OTHER ASSETS. ACCORDING TO THE CIT(APPEALS), THE DIREC TIONS OF THE ADDL. CIT ARE REASONABLE, SINCE THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION ON THE AMOUNT WHICH IS ALREADY C LAIMED BY THE TGSL, THE RESTRICTION OF DEPRECIATION TO 25% ON INTANGIBLE ASSETS AND 60% ON THE OTHER SOFTWARE IS ALSO REASON ABLE AND HE DISMISSED THE GROUND OF APPEAL. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS SEEN FROM THE ORDER OF THE CIT(APPEA LS) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VOLUNTARILY OFFERED TO REDUCE ITS CLAIM TOWARDS DEPRECIATION ON THE SOFTWARE AT THE RATES PRESCRIBED IN NEW APPENDIX-I UNDER THE INCOME-TAX - - ITA 2780, 2790/14 ETC. 24 RULES, 1962 AND DEPRECIATION ON THE INTANGIBLE ASSE TS BEING IPR, AT THE RATE OF 25% AS PRESCRIBED UNDER THE RULES. ACCORDINGLY, THE ASSESSEE HAS REVISED ITS CLAIM OF DEPRECIATION ON SOFTWARE AND INTANGIBLE ASSET OF IPR. HOWEVER, THE ADDL. CI T, DENIED THE DEPRECIATION ON THE IPR, REPRESENTED BY THE SOFTWAR E GBM ON THE GROUND THAT DEPRECIATION TO AN EXTENT OF 100% I N RESPECT OF THIS ASSET WAS ALREADY CLAIMED BY TGSL AND IN VIEW OF EXPLANATION 3 PLACED U/S.43(1), THE ACTUAL COST OF THIS ASSET, IN THE HANDS OF THE ASSESSEE, HAS TO BE RECKONED AS N IL ONLY. THIS CONCLUSION OF THE ADDL. CIT WAS BASED ON FINANCIAL STATEMENT OF TGSL. THE CONTENTION OF THE ASSESSEE IS THAT THE T REATMENT GIVEN BY THE TGSL IN ITS ACCOUNT CANNOT BE A REASON TO DENY THE DEPRECIATION ON THE COST INCURRED BY THE ASSESSEE. IN OUR OPINION, THIS ARGUMENT OF THE ASSESSEES COUNSEL CA NNOT BE UPHELD. THE ACTUAL COST OF ASSETS ACQUIRED FROM T GSL TO BE CONSIDERED IN TERMS OF EXPLANATION 3 TO SEC.43(1) O F THE ACT. BEING SO, THE LOWER AUTHORITIES ARE JUSTIFIED IN OB SERVING THAT THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION WHICH WAS ALREADY CLAIMED BY TGSL AND THEREBY RESTRICTING THE DEPRECI ATION AT 25% ON IPR AND 60% ON OTHER SOFTWARE. ACCORDINGLY, THI S GROUND OF - - ITA 2780, 2790/14 ETC. 25 APPEAL IS REJECTED IN ALL THESE APPEALS. 23. THE NEXT GROUND IN ASSESSEES APPEALS FOR ASSE SSMENT YEARS 2006-07 TO 2010-11 IS WITH REGARD TO DISALLOW ANCE OF DEPRECIATION ON TEMPORARY WOODEN STRUCTURES. 24. THE FACTS OF THE ISSUE AS NARRATED IN THE ASSES SMENT YEAR 2006-07 ARE THAT THE ASSESSEE HAS CLAIMED DEPRECIAT ION AT 100% ON IMPROVEMENTS MADE TO THE LEASE HOLD PROPERT IES STATING THAT IT COMPRISED OF FIXTURES AND FURNITURE IN LEASED OUT PREMISES MAINLY CUBICLE PARTITIONS AND CARPENTARY. THE AO GRANTED DEPRECIATION AT 10% ON THE SAME. AGGRIEVED , THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 25. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE DETAILS OF ADDITIONS IN TEMPORARY PARTITIONS FILED BY THE LD. AR BEFORE THE CIT(APPEALS) VIDE HIS LETTER DATED 21.7.2014 ARE AS UNDER: 1.ELECTRICAL ITEMS, FITTINGS, ACCESSORIES AND LABOU R CHARGES 31,77,305 2.PLUMBING ITEMS, FITTINGS, ACCESSORIES AND LABOUR CHARGES 26,62,533 3.TILES, CERAMICS AND FLOOR MATERIALS AND MASONRY C HARGES 26,01,480 4.WOOD AND PLYWOOD, CARPENTARY WORK AND LABOUR CHAR GES 57,32,530 5.INTRIOR WORKS, ALUMINIUM MATERIALS, VENETIAL BLIN DS FITTINGS AND POLISHING 12,52,197 6.FALSE CEILING MATERIALS, FITTINGS AND ARCHITECTUR AL CHARGES 7,38,897 THE CIT(APPEALS) OBSERVED THAT FROM THE ABOVE DETAI LS, THE EXPENDITURE INCURRED UNDER FIRST TWO. HEADS APPEAR TO BE - - ITA 2780, 2790/14 ETC. 26 RECURRING EXPENDITURE AND NEEDS TO BE TREATED AS RE VENUE. IN THE CASE OF REMAINING HEADS, THE EXPENDITURE IS IN THE NATURE OF CREATING A LASTING ASSET WHICH WILL HAVE AN ENDURIN G BENEFIT TO THE APPELLANT. WHETHER THE EXPENDITURE INCURRED IS ON T HE LEASE- HOLD PREMISES OR NOT IS NO MORE RELEVANT IN VIEW OF EXPL ANATION 1 TO SEC. 32 WHICH READS AS FOLLOWS :- 'EXPLANATION L,-WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN , THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE.' THUS, THERE IS NO DISTINCTION BETWEEN A LEASEHOLD B UILDING AND OWN BUILDING SO FAR AS THE ALLOWABILITY OF DEPRECIA TION IS CONCERNED. IN THE CASE OF INDIAN METAL & METALLURGI CAL CORPORATION (141 ITR 40)(MAD), EVEN THE PARTITION W ORKS AND FALSE CEILINGS WERE CONSIDERED AS CAPITAL ASSETS. 26. FURTHER, THE CIT(APPEALS) OBSERVED THAT WHI LE DEALING WITH IMPROVEMENTS ON LEASEHOLD BUILDING, THE FOLLOWING P OINTS HAVE TO - - ITA 2780, 2790/14 ETC. 27 BE TAKEN INTO CONSIDERATION: (I) TO SEE WHETHER THE SAID EXPENDITURE IS ON A CAP ITAL ASSET WHICH IS ELIGIBLE FOR CLAIMING DEPRECIATION. (II) FOR THE PURPOSE OF DEPRECIATION WHETHER IT IS A LEASEHOLD BUILDING OR OWN BUILDING, THEY ARE EQUALL Y ELIGIBLE FOR DEPRECIATION. IT CANNOT BE MISTAKEN TH AT THE EXPENDITURE INCURRED IS REVENUE BECAUSE IT IS A LEA SEHOLD BUILDING AND THE APPELLANT WILL BE QUITTING AFTER S OME TIME. (III) EITHER THE OWNER OF THE BUILDING CAN DO THE MODIFICATIONS AS PER THE SPECIFICATIONS OF THE TENA NT BEFORE LEASING IT OUT AND CHARGE MORE RENT OR THE TENANT BEFORE OCCUPYING THE PREMISES MAY MAKE IMPROVEMENTS FOR BETTER AMBIANCE AND ATTRACTING CUSTOMERS, BUT THE NATURE OF THE ASSET OR THE NATURE OF EXPENDITURE CANNOT CHANGE. SINCE IT I S AN IMPROVEMENT OF THE BUILDING, IT WILL PARTAKE THE CH ARACTER OF CAPITAL EXPENDITURE. (IV) TO SEE WHETHER THE EXPENDITURE INCURRED BY THE APPELLANT IS FOR THE PURPOSE OF 'CURRENT REPAIRS' O R THE MAIN PURPOSE BEHIND IS TO GET A 'NEW ADVANTAGE' OUT OF THE ABOVE EXPENSES BY MEANS OF IMPROVING THE LEASED PREMISES. IF IT IS TO GET A 'NEW ADVANTAGE' THEN IT IS CAPITAL IN NATURE AS PER THE SUPREME COURT'S DECISION IN TH E CASE OF SARAVANA SPINNING MILLS, (V) TO SEE WHETHER THE EXPENDITURE IS OF VERY TEMPO RARY IN NATURE ELIGIBLE FOR 100% DEPRECIATION. A TEMPORARY STRUCTURE MEANS IT WILL BE DISMANTLED WITHIN THE SA ME YEAR OR THE NEXT YEAR. THE EXPENDITURE ON IMPROVEME NT OF THE BUILDING LIKE PARTITIONING, FALSE CEILING ET C SHOULD NOT BE CONFUSED WITH THE TEMPORARY STRUCTURE WHICH WILL BE DISMANTLED WITHIN A VERY SHORT PERIOD. 26.2 ACCORDING TO THE CIT(APPEALS), IN THE PRES ENT CASE, THE - - ITA 2780, 2790/14 ETC. 28 ASSESSEE HAS PUT UP CUBICLE PARTITIONS, FALSE CEILI NG, TILED FLOORING ETC WHICH ARE NOT TEMPORARY STRUCTURES. SINCE IT IS AN IMPROVEMENT ON THE BUILDING, IT IS CAPITAL IN NATUR E. THERE IS ALSO NO HARD AND FAST RULE THAT ALL THE EXPENDITURE ON L EASEHOLD PREMISES WILL PARTAKE THE CHARACTER OF REVENUE EXPE NDITURE. THE EXPENDITURE INCURRED BY THE ASSESSEE IS DEFINITELY FOR IMPROVING THE LEASED PREMISES, MAKING IT FIT FOR CARRYING OUT 'ITS BUSINESS. FURTHER THE IMPROVEMENTS CARRIED OUT BY THE ASSESSE E ON THE LEASED PREMISES ARE NOT MEANT FOR DISMANTLING IN TH E SAME YEAR OR IN THE VERY NEXT YEAR. THEREFORE, THE CIT(APP EALS) HELD THAT THE AO IS JUSTIFIED IN DISALLOWING THE SAME AS CAPI TAL EXPENDITURE AS PER EXPLANATION 1 TO SEC. 32 AND ALLOWING DEPREC IATION AS APPLICABLE TO FURNITURE AND FIXTURES. AGAINST THIS , THE ASSESSEE IS IN APPEAL BEFORE US. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE MAIN CONTENTION OF TH E ASSESSEE IS THAT WHATEVER IMPROVEMENT TOOK PLACE IN THE LEASE-H OLD PREMISES AND ALL THE ASSETS CREATED THEREIN ARE TEM PORARY IN NATURE AND IT DOES NOT RESULT IN ENDURING BENEFIT. THE LD. AR RELIED ON THE JUDGMENT OF VARIOUS HIGH COURTS, WHIC H ARE KEPT ON - - ITA 2780, 2790/14 ETC. 29 RECORD, TO SUPPORT HIS ARGUMENT. IN OUR OPINION, S IMILAR ISSUE WAS CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL I N THE CASE OF K.R.BAKES PVT. LTD. V. ACIT IN ITA NO.1384/MDS/2013 DATED 29.5.2015, WHEREIN IT WAS OBSERVED AS UNDER : 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN THE BUILDI NG ON LEASEHOLD ON WHICH THE ASSESSEE CARRIED ON INTERIOR WORK AND CLAIMED AS REVENUE EXPENDITURE. THE SAME WAS REJECT ED BY THE CIT(A). THE LD. DR CONTENDED THAT THE ASSESSEE MADE NEW ADDITION THE LEASED BUILDING AND IT IS NOT THE CASE OF RENOVATION OF THE LEASED BUILDING OR IMPROVEMENT OF THE LEASED BUILDING AS IN THE CASE OF JOY ALUKKAS PVT. LTD., C ITED SUPRA AS HELD BY THE KERALA HIGH COURT. FOR SETTLING THE CON TROVERSY, WE HAVE TO GO THROUGH THE EXPLANATION 1 TO SEC. 32(1) OF THE ACT WHICH WAS INSERTED BY THE TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986 WITH EFFECT FRO M 1.4.1988 WHICH DEALS WITH THE SITUATION WHERE THE EXPENDITUR E HAS BEEN INCURRED BY THE ASSESSEE ON CONSTRUCTION OF ANY STR UCTURE ON LEASEHOLD PREMISES. THE EXPLANATION 1 IS REPRODUCED HEREWITH BELOW: EXPLANATION 1. WHERE THE BUSINESS OR PROFES SION IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RE SPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSE SSEE FOR THE PURPOSES OF BUSINESS OR PROFESSION ON THE CONSTRUCT ION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO , AND BY WAY OF RENOVATION OR EXTENSION OF IMPROVEMENT TO, BUILD ING THEN, THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE. 8. TO FALL WITHIN THE AMBIT OF EXPLANATION 1 QUE STIONS WHICH ARE TO BE ANSWERED ARE: (I)WHETHER THE ASSESSEE IS CARRYING ON BUSINESS OR PROFESSION IN A LEASED BUILDING OR OTHER RIGHTS OF OCCUPANCY? - - ITA 2780, 2790/14 ETC. 30 (II)WHETHER THE ASSESSEE HAS INCURRED ANY CAPITAL EXPENDITURE FOR THE PURPOSE OF BUSINESS ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO AND BY WAY OF RENOVATION OR EXTENSIO N OR IMPROVEMENT IN THE BUILDING. 9. IF THE ANSWER TO THE AFOREMENTIONED QUESTIONS I S IN AFFIRMATIVE, THE ASSESSEE FALLS WITHIN THE PURVIEW OF EXPLANATION 1 TO SEC. 32(1). IN THE INSTANT CASE, I T IS AN ADMITTED FACT THAT THE ASSESSEE HAS TAKEN BUILDING ON LEASE FOR SETTING UP OF BAKERY. IT IS ALSO UNDISPUTED THAT TH E ASSESSEE HAS CARRIED ON INTERIOR WORK IN THE LEASED BUILDING . THESE INTERIOR DECORATION WORKS CARRIED OUT BY THE ASSESS EE IF PUT ON TO THE TEST OF EXPLANATION 1 WOULD SHOW THAT THE C ONSTRUCTION MADE BY THE ASSESSEE ON THE LEASED OUT PREMISES WOU LD AMOUNT TO CAPITAL EXPENDITURE. THE ASSESSEE IN ORDE R TO SUPPORT HIS CASE HAS RELIED ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF TVS LEAN LOGISTICS LTD. ( SUPRA). IN THE SAID CASE, THE ASSESSEE HAD CONSTRUCTED A BUILD ING ON THE LEASED LAND FOR THE BUSINESS ADVANTAGE. THE COURT HELD THAT THE ENTIRE COST OF CONSTRUCTION IS ADMISSIBLE AS RE VENUE EXPENDITURE. EXPLANATION 1 CATEGORICALLY STATES THA T THE BUSINESS OR PROFESSION IS CARRIED ON IN A LEASED BU ILDING AND NOT ON LAND. THE HIGH COURT IN PARA 4.4 OF THE JUDG MENT FURTHER HELD AS UNDER:- 4.4 WHAT CONSTITUTES A CAPITAL EXPENDITURE AND WHA T DOES NOT, TO ATTRACT EXPLN. 1 TO SECTION 32(1) OF T HE ACT DEPENDS UPON THE CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK OR IN RELATION TO AND BY WAY OF RENOVATION, EXTENSION OR IMPROVEMENT TO THE BUILDIN G WHICH IS PUT UP IN A BUILDING TAKEN ON LEASE BY HIM FOR CARRYING ON HIS BUSINESS AND PROFESSION OF THE ASSESSEE, BUT NOT IN A CASE OF CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK OR RELATION TO WHERE SUCH BUILDING IS PUT UP/CONSTRUCTED FOR THE PURPOSE OF BUSINESS OR THE PROFESSION OF THE ASSESSEE IN A LAND TAKEN ON LEASE BY THE ASSESSEE. 10. THUS IT IS CLEAR THAT THE RATIO LAID DOWN B Y THE MADRAS - - ITA 2780, 2790/14 ETC. 31 HIGH COURT IN THE SAID JUDGMENT DOES NOT SUPPORT TH E CASE OF THE ASSESSEE. 11. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN BUILDING ON LEASE AND MADE CERTAIN INTERIOR DECORATION. IT IS T HE CASE THAT THE ASSESSE HAS BEAUTIFIED THE LEASED BUILDING. THE HIGH COURT HAS FURTHER HELD IN THE AFORESAID CASE THAT THE LAN GUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR O F THE LEGISLATIVE INTENT AND EVEN ASSUMING THERE IS A DEF ECT OR ANY OMISSION IN THE WORDS USED IN THE LEGISLATURE, THE COURT CANNOT CORRECT OR MAKE UP THE DEFICIENCY, ESPECIALL Y WHEN A LITERAL READING THEREOF PRODUCES AN INTELLIGIBLE RE SULT AN ANY DEPARTURE FROM THE LITERAL RULE WOULD REALLY BE AME NDING THE LAW IN THE GARB OF INTERPRETATION, WHICH IS NOT PER MISSIBLE AND WHICH WOULD BE DESTRUCTIVE OF JUDICIAL DISCIPLINE. 12. THE SUPREME COURT OF INDIA IN THE CASE OF MADRAS AUTO SERVICE (P) LTD., 233 ITR 468 WHILE DEALING WITH A SIMILAR CONTROVERSY HAS OBSERVED AS UNDER: 5 IN ORDER TO DECIDE WHETHER THIS EXPENDITURE IS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE, ONE HAS TO LOOK AT THE EXPENDITURE FROM A COMMERCIAL POINT OF VIEW. WHAT ADVANTAGE DID THE ASSESSEE GET BY CONSTRUCTING A BUILDING WHICH BELONGED TO SOMEBODY ELSE AND SPENDI NG MONEY FOR SUCH RECONSTRUCTION? THE ASSESSEE GOT A LONG LEASE OF A NEWLY CONSTRUCTED BUILDING SUITABLE TO ITS OWN BUSINESS AT A VERY CONCESSIONAL RENT. THE EXPENDITURE THEREFORE, WAS MADE IN ORDER TO SECURE A LONG LEASE OF NEW AND MORE SUITABLE BUSINESS PREMIS ES AT A LOWER RENT. IN OTHER WORDS, THE ASSESSEE MADE SUBSTANTIAL SAVINGS IN IN MONTHLY RENT FOR A PERIOD OF 39 YEARS BY EXPENDING THESE AMOUNTS. THE SAVING IN EXPENDITURE WAS A SAVING IN REVENUE EXPENDITURE IN THE FORM OF RENT. WHATEVER SUBSTITUTES FOR REVENUE EXPENDITURE SHOULD NORMALLY BE CONSIDERED AS REVENU E EXPENDITURE. MOREOVER, ASSESSEE IN THE PRESENT CASE DID NOT GET ANY CAPITAL ASSET BY SPENDING THE SAID AMOU NTS. THE ASSESSEE THEREFORE COULD NOT HAVE CLAIMED ANY DEPRECIATION. LOOKING TO THE NATURE OF THE ADVANTAG E - - ITA 2780, 2790/14 ETC. 32 WHICH THE ASSESSEE OBTAINED IN A COMMERCIAL SENSE, THE EXPENDITURE APPEARS TO BE REVENUE EXPENDITURE. 13. THEREAFTER, THE APEX COURT REFERRING TO SEV ERAL CASES DECIDED HELD AS UNDER: 11.ALL THESE CASES HAVE LOOKED UPON EXPENDITURE WHICH DID BRING ABOUT SOME KIND OF AN ENDURING BENEFIT TO THE COMPANY AS A REVENUE EXPENDITURE WHEN THE EXPENDITURE DID NOT BRING INTO EXISTENCE ANY CAPITAL ASSET FOR THE COMPANY. THE ASSET WHICH WAS CREATED BELONGED TO SOMEBODY ELSE AND THE COMPANY DERIVED AN ENDURING BUSINESS ADVANTAGE BY EXPENDING THE AMOUNT. IN ALL THESE CASES, THE EXPENSES HAVE BEEN LOOKED UPON AS HAVING BEEN MADE FOR THE PURPOSE OF CONDUCTING THE BUSINESS OF THE ASSESSEE MORE PROFITABLY OR MORE SUCCESSFULLY. IN THE PRESENT CASE ALSO SINCE THE ASSET CREATED BY SPENDING THE SAID AMOUNTS DID NOT BELONG TO THE ASSESSEE BUT THE ASSESSEE GOT THE BUSINESS ADVANTAGE OF USING MODERN PREMISES AT A LOW RENT, THUS SAVING CONSIDERABLE REVENUE EXPENDITURE FOR THE NEXT 39 YEARS, BOTH THE TRIBUNAL AS WELL AS THE HIGH COURT HAVE RIGHTLY COME TO THE CONCLUSION THAT THE EXPENDITURE SHOULD BE LOOKED UPON AS REVENUE EXPENDITURE. 14. FROM THE ABOVE JUDGMENT, WE CAN CONCLUDE THAT IT IS ESSENTIAL THAT THE EXPENDITURE INCURRED ON THE CONS TRUCTION OF ANY STRUCTURE ON THE LEASED PREMISES SHOULD RESULT IN ENDURING BENEFIT. THAT ANY EXPENDITURE INCURRED FOR CIVIL WORK BY A LESSEE IN RESPECT OF THE LEASE PREMISES, WITHOUT AN Y FURTHER PROOF CANNOT BE SAID TO BE CAPITAL EXPENDITURE OR R EVENUE EXPENDITURE. IN ORDER TO FIND OUT THE NATURE OF EX PENDITURE, IT IS NECESSARY TO FIND OUT THE NATURE OF CONSTRUCTION PU T UP, THE PURPOSE OF CONSTRUCTION/RENOVATION AND THE USE TO W HICH THE CONSTRUCTION PUT UP AND ALSO IF IT IS A CASE OF REP AIR, REPLACEMENT, ADDITION OR IMPROVEMENT HAS TO BE GONE INTO. IT IS ONLY ON THE AFORESAID MATERIAL, KEEPING IN MIND THE - - ITA 2780, 2790/14 ETC. 33 PRINCIPLES ENUNCIATED IN THE JUDGMENTS BY THE SUPRE ME COURT AND KEEPING IN MIND SECTION 37 AND SECTION 32 OF TH E ACT, THAT ONE HAS TO DETERMINE WHETHER THE EXPENDITURE IS REV ENUE EXPENDITURE OR CAPITAL EXPENDITURE. WHAT WOULD APP LY TO CIVIL WORK EQUALLY APPLIES TO ELECTRICAL WORK OR INTERIOR DECORATION. THE ASSESSEE HAD NOT STATED THE NATURE OF CIVIL WO RKS CONSTRUCTED, THE NATURE OF INTERIOR DECORATION MADE TO THE LEASEHOLD PREMISES AND ALSO THE NATURE OF ELECTRICA L WORK UNDERTAKEN. IN THE ABSENCE OF THAT MATERIAL AND WI THOUT PROPER APPLICATION OF MIND, THE ASSESSING AUTHORITY PROCEEDED ON THE FOOTING THAT THE EXPENDITURE CONSTITUTED CAP ITAL EXPENDITURE. 15. IN VIEW OF THE ABOVE, WE REMIT THE ISSUE I N DISPUTE TO AO TO CONSIDER WHETHER THE EXPENDITURE IS REVENUE O R CAPITAL IN NATURE AND DECIDE AFRESH. ACCORDINGLY, WE REMIT THE ISSUE IN DISPUTE TO AO TO CONSIDER WHETHER THE EXPENDITURE IS REVENUE OR CAPITAL IN NA TURE AND DECIDE AFRESH IN THE LIGHT OF THE ABOVE ORDER OF TH E TRIBUNAL. 28. THE NEXT GROUND IN DEPARTMENTAL APPEAL FOR THE ASSESSMENT YEAR 2007-08, 2008-09 IS WITH REGARD TO APPORTIONING COMMON EXPENSES TOWARDS STPI UNIT, NOT ON THE BASIS OF TURNOVER FOLLOWED BY THE COMPANY. 29. THE AO OBSERVED THAT THE ASSESSEE HAS APPORTION ED THE COMMON EXPENSES TO STPI UNIT, WHICH WORKED OUT TO 1 .56% ( ` 3,30,747/-). HOWEVER, THE AO FOLLOWING THE DIREC TIONS OF THE - - ITA 2780, 2790/14 ETC. 34 ADDL. CIT IN HIS ORDER U/S.144A OF THE ACT, TO REWO RK THE APPORTIONMENT OF COMMON EXPENSES CONSIDERING 1/3 RD OF THE AUDIT FEES AND DIRECTORS REMUNERATION TOWARDS THE S TPI UNIT, RECOMPUTED THE ALLOCATION OF COMMON EXPENSES AT ` 39,39,208/- AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS). 30. BEFORE THE CIT(APPEALS), THE LD. AR SUBMITTED T HAT THE ASSESSEE HAD ALLOCATED COMMON REVENUE EXPENSES, AMO NG DTA AND STPI UNIT, WHICH WAS CREATED DURING THE YEA R UNDER CONSIDERATION, TO ASCERTAIN THE EXEMPTED QUANTUM OF INCOME EARNED THROUGH STPI BUSINESS U/S.10A/10B OF THE ACT . FURTHER, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD PROCEEDE D ON THE BASIS OF PROPORTION/RATIO OF THE TURNOVER OF STPI U NIT TO THAT OF THE TOTAL TURNOVER, WHICH WORKED OUT TO 1.56%. ON THE BASIS OF THIS, THE ASSESSEE HAD SOUGHT TO APPORTION THE EXPENDITUR E BETWEEN ITS STPI AND DTA DIVISIONS AND REQUESTED THE CIT(AP PEALS) TO ALLOW THE SAME. THE CIT(APPEALS) AGREED WITH THE A RGUMENT OF THE LD. AR OF THE ASSESSEE AND HE HELD THAT THERE I S NO INFIRMITY ON APPORTIONMENT OF EXPENSES ON THE BASIS OF TURNOV ER OF STPI UNIT AND NON-STPI UNIT MADE BY THE ASSESSEE. AGAIN ST THIS, THE - - ITA 2780, 2790/14 ETC. 35 REVENUE IS IN APPEAL BEFORE US. 31. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CIT(APPEALS) HAS GIVEN A FINDING TH AT APPORTIONMENT OF EXPENSES TO BE DONE ON THE BASIS O F TURNOVER OF STPI UNIT AND NON-STPI UNIT. IN OUR OPINION, T HIS IS FAIR AND APPROPRIATE FINDING, WHICH IS CONFIRMED. ACCORDING LY, THIS GROUND OF APPEAL IN ITA NOS.2780 & 2781/MDS/2014 IS DISMIS SED. 32. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 27 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( #$ %&'( ) ) ( # ( * + ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJAR I) ' ); /JUDICIAL MEMBER & );/ACCOUNTANT MEMBER #&' /CHENNAI, C) /DATED, THE 27 TH NOV., 2015. MPO* - - ITA 2780, 2790/14 ETC. 36 )&D EF G&F /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H () /CIT(A) 4. H /CIT 5. FI% J /DR 6. %K L /GF.
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