ACIT, CHENNAI V. M/s. Balaji Distilleries Ltd., CHENNAI

ITA 1321/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58093 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KEB RENG
• Keywords: Capital asset; Depreciation; Business expenditure; Earning of tax free income; Source of fund; Difference of opinion; Deemed dividend; Commercial expediency; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 14A; 37(1); 147; 37; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.53 TO 56, 1098 & 1320 TO 1322(MDS)/2011 ASST. YEARS:2002-03 TO 2005-06, 2003-04, 2006-07 TO 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE I(2)/I(3), CHENNAI. VS. M/S. BALAJI DISTILLERIES LTD., BYE PASS ROAD, POONAMALLEE, CHENNAI-600 056. PAN AAACB3879Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, IRS, COMMI SSIONER OF IT & SHRI KEB RENGARAJAN, JR.STANDING COUNSEL RESPONDENT BY : DR.ANITHA SUMANTH, ADCOCATE DATE OF HEARING : 07 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 16 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS IS A BUNCH OF EIGHT APPEALS. ALL THE APPEAL S ARE FILED BY THE REVENUE. THE APPEALS RELATE TO THE ASSESSME NT YEARS 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-0 8 AND 2008-09. THERE ARE TWO APPEALS FOR THE ASSESSMENT YEAR - - ITA 53 TO 56 OF 2011, ETC. 2 2003-04, ONE ARISING OUT OF THE REGULAR ASSESSMENT AND THE OTHER ARISING OUT OF THE INCOME-ESCAPING ASSESSMENT. 2. ALL THESE APPEALS ARE DIRECTED AGAINST THE SEVE RAL ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX(APP EALS)-III AT CHENNAI, ON DIFFERENT DATES, 7-10-2010, 25-10-20 10, 11-3-2011 AND 11-4-2011. EXCEPT THE REGULAR ASSESS MENT APPEAL FOR THE ASSESSMENT YEAR 2003-04, ALL THE OTH ER SEVEN APPEALS ARISE OUT OF THE INCOME-ESCAPING ASSESSMENT S COMPLETED UNDER SECTION 143(3), READ WITH SECTION 1 47 OF THE INCOME-TAX ACT, 1961. 3. IN THE COURSE OF THE RESPECTIVE ASSESSMENT PROCEEDINGS, THE ASSESSING AUTHORITY HAS MADE OUT A CASE THAT THE ASSESSEE HAD DIVERTED INTEREST-BEARING FUNDS AS LOANS AND ADVANCES TO M/S.RAGHAVA ENTERPRISES P LTD.(REPL) A S INTEREST- FREE, THUS CLAIMING DEDUCTION OF EXPENDITURE NOT IN CURRED FOR THE PURPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THESE DISALLOWANCES WERE DELETED BY THE COMMISSIONER OF I NCOME- TAX(APPEALS) ON THE GROUND THAT NO SUCH INTEREST-BE ARING FUNDS WERE DIVERTED BY THE ASSESSEE TO REPL, EXCEPT A SMA LL PORTION, AND THERE WAS NO JUSTIFICATION IN MAKING SUCH A WHO LESALE - - ITA 53 TO 56 OF 2011, ETC. 3 DISALLOWANCE. THE REVENUE IS AGGRIEVED ON THIS POI NT. THIS COMMON GROUND IS RAISED BY THE REVENUE FOR ALL THE EIGHT ASSESSMENT YEARS, IN THE CONTEXT OF INCOME-ESCAPING ASSESSMENTS. 4. THE ASSESSEE HAD AVAILED FOREIGN EXCHANGE LOANS TO ACQUIRE CAPITAL ASSETS FOR THE PURPOSE OF ITS BU SINESS. AS PER THE ACCOUNTING STANDARD TO BE FOLLOWED, THE ASSESSE E HAS BEEN RESTATING THOSE FOREIGN EXCHANGE LIABILITIES AS ON THE CLOSING DAY OF THE RESPECTIVE FINANCIAL YEAR. ON RESTATING THE FOREIGN EXCHANGE LIABILITY, THE ASSESSEE HAD TO PROVIDE FOR LOSS CAUSED ON ACCOUNT OF THE FOREIGN EXCHANGE FLUCTUATION. TH IS ADJUSTMENT WAS RESORTED TO BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05. THIS FOREIGN EXCHANG E LOSS PROVIDED FOR BY THE ASSESSEE HAS BEEN DISALLOWED BY THE ASSESSING AUTHORITY ON THE GROUND THAT THE LOSS WAS CAPITAL IN NATURE. IN FIRST APPEAL, THE COMMISSIONER OF INCOM E- TAX(APPEALS) DELETED THOSE DISALLOWANCES/ADDITIONS AND HELD THAT THE FOREIGN EXCHANGE LOSS PROVIDED FOR BY THE ASSES SEE IS DEDUCTIBLE AS REVENUE EXPENDITURE. THE REVENUE IS AGGRIEVED - - ITA 53 TO 56 OF 2011, ETC. 4 ON THE ABOVE ISSUE AND HAS RAISED THE SAME FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05. 5. IN THE CASE OF THE ASSESSMENT YEAR 2003-04, THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS HELD THAT T HE REASSESSMENT COMPLETED BY THE ASSESSING AUTHORITY W AS NOT VALID IN LAW. THE REVENUE HAS FILED A GROUND AGAIN ST THE ABOVE FINDING IN ITS APPEAL FILED FOR THE ASSESSMENT YEAR 2003-04. 6. IN THE APPEAL ARISING OUT OF THE REGULAR ASSESS MENT COMPLETED FOR THE ASSESSMENT YEAR 2003-04, THE ISSU E RAISED BY THE REVENUE IS ON THE QUESTION OF GRANTING DEPRECIA TION ALLOWANCE ON SALE AND LEASE BACK TRANSACTIONS. 7. ANOTHER COMMON ISSUE RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS 2004-05, 2005-06, 2006-07, 200 7-08 AND 2008-09 IS THE DISALLOWANCE OF EXPENDITURE UNDER SE CTION 14A, READ WITH RULE 8D, IN THE MATTER OF EXPENSES STATED TO BE INCURRED IN EARNING DIVIDEND INCOME, WHICH IS EXEMP T FROM TAXATION. 8. THUS IT IS TO BE SEEN THAT ALMOST ALL THE GROUN DS RAISED BY THE REVENUE ARE COMMON FOR THE ASSESSMENT YEARS INVOLVED IN THESE APPEALS PLACED BEFORE US. - - ITA 53 TO 56 OF 2011, ETC. 5 9. SHRI ANIRUDH RAI, THE LEARNED COMMISSIONER OF INCOME-TAX, ALONGWITH SHRI K.E.B.RENGARAJAN, THE LE ARNED STANDING COUNSEL, APPEARED BEFORE US ON BEHALF OF T HE REVENUE. DR.ANITHA SUMANTH, THE LEARNED COUNSEL, APPEARED FO R THE ASSESSEE AND DEFENDED THE ORDERS OF THE COMMISSIONE R OF INCOME-TAX(APPEALS). BOTH THE SIDES HAVE ARGUED AT LENGTH AND ALSO BOTH THE SIDES FILED DETAILED PAPER-BOOKS CONC ERNING THE VARIOUS EVIDENCES AND DOCUMENTS RELEVANT IN DISPOSI NG OF THESE APPEALS. 10. AFTER HEARING BOTH THE PARTIES IN DETAIL, NOW LET US PROCEED TO DISPOSE OF THE APPEALS ASSESSMENT-YEAR-W ISE. WHEREVER A COMMON ISSUE IS DISCUSSED AND ADJUDICATE D IN A PARTICULAR ASSESSMENT YEAR, THE SAME SHALL DISPOSE OF SIMILAR ISSUE FOR THE SUCCEEDING ASSESSMENT YEARS BY MAKING A REFERENCE TO THE ORDER PASSED IN THE CASE OF EARLIE R ASSESSMENT YEAR. THUS WE MAY AVOID REPETITIVE DISCUSSIONS CON CERNING THE SAME ISSUE. 11. FIRST WE SHALL CONSIDER THE ISSUE OF DISALLOWA NCE OF FOREIGN EXCHANGE LOSS CLAIMED BY THE ASSESSEE AS DE DUCTION. IN THE FINANCIAL YEAR 1994-95 THE ASSESSEE HAD RAISED FOREIGN - - ITA 53 TO 56 OF 2011, ETC. 6 CURRENCY LOANS FOR PURCHASING SHIPS. THESE SHIPS W ERE LATER SOLD IN THE FINANCIAL YEAR 2000-01. THE SALE PROCEEDS W ERE ADJUSTED AGAINST FOREIGN CURRENCY LOANS. THE BALANCE AMOUNT OF LOANS PAYABLE BY THE ASSESSEE WAS CONVERTED BY THE CREDIT ORS TO WORKING CAPITAL LOAN. WHEN THE ASSESSEE RESTATED T HE LIABILITY AS ON THE LAST DAY OF THE PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR 2002-03, THERE WAS A LOSS WHICH HAD TO BE PROV IDED FOR DEDUCTION. THE ASSESSING AUTHORITY HELD, RELYING O N THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F KESORAM INDUSTRIES AND COTTON MILLS LTD. VS. CIT, 196 ITR 8 45, THAT THE LIABILITY WAS CAPITAL IN NATURE AND, THEREFORE, THE RESTATEMENT OF LOANS WAS ALSO CAPITAL IN NATURE. ACCORDINGLY, THE CLAIM WAS DISALLOWED BY THE ASSESSING AUTHORITY. WHEN THIS M ATTER IS TAKEN IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX(APP EALS) FOUND THAT THREE OF THE LOANS AVAILED BY THE ASSESSEE WER E WORKING CAPITAL LOANS AND TWO OF THE LOANS ALONE WERE UTILI ZED FOR BUYING SHIPS. AS THE SHIPS WERE ALREADY SOLD AND THE SALE PROCEEDS WERE ADJUSTED TOWARDS LOAN AMOUNT, THE BALANCE OF T HE FOREIGN EXCHANGE LOANS ON THAT ACCOUNT WERE CONVERTED INTO WORKING CAPITAL LOAN BY THE CREDITORS AND IN SUCH CIRCUMSTA NCES AS FAR AS - - ITA 53 TO 56 OF 2011, ETC. 7 THE IMPUGNED ASSESSMENT YEAR 2002-03 IS CONCERNED, THE RESTATED LOSS WAS REVENUE IN NATURE. IN COMING TO THE ABOVE CONCLUSION, THE LEARNED COMMISSIONER OF INCOME-TAX( APPEALS) RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- 1. SUTLEJ COTTON MILLS LTD. VS CIT, 116 ITR 1 (SC ). 2. CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD., 312 ITR 254 (SC). 3. CIT VS. DEMPO & CO. PVT. LTD., 206 ITR 291 (BO M.) 4. CIT VS. BANK OF INDIA, 218 ITR 371 (BOM.). 12. WE CONSIDERED THE ISSUE IN DETAIL. IN THE CAS E OF ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 THE A SSESSEE HAS CLAIMED DEDUCTIONS TOWARDS LOSS ARISING OUT OF RESTATEMENT OF FOREIGN EXCHANGE LOANS PAYABLE. A SIMILAR ISSUE WAS CONSIDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DEMPO & CO. PVT. LTD., 206 ITR 291. IN THAT CA SE, THE FOREIGN EXCHANGE LOAN WAS GIVEN BY THE ASSESSEE TO A COMPANY, WHICH WAS LATER ON PAID BY ADJUSTING THE PRICE OF I RON ORE SUPPLIED. IN THOSE CIRCUMSTANCES IT WAS HELD BY TH E HONBLE BOMBAY HIGH COURT THAT WHATEVER MIGHT HAVE BEEN THE ORIGINAL OBJECT OF THE LOAN, AT THE TIME OF DEVALUATION, THE AMOUNT OF LOAN WAS UTILIZED BY THE ASSESSEE AS CIRCULATING CAPITAL . THAT BEING - - ITA 53 TO 56 OF 2011, ETC. 8 SO, THE LOSS OCCURRED DUE TO DEVALUATION OF THE IND IAN RUPEE WAS HELD TO BE A REVENUE LOSS AND ALLOWABLE AS DEDUCTIO N IN COMPUTING THE INCOME OF THE ASSESSEE. THE HONBLE SUPREME COURT HAS DISCUSSED THE PRINCIPLE IN THE MATTER OF TREATING THE PROFIT OR LOSS ARISING ON ACCOUNT OF APPRECIATION O R DEPRECIATION OF FOREIGN CURRENCY IN THE CASE OF SUTLEJ COTTON MILLS LTD. VS. CIT, 116 ITR 1. THE COURT HAS HELD THAT IF THE FOREIGN EXCHANGE LOAN WAS UTILIZED FOR ACQUIRING CAPITAL ASSET, ANY LOSS ARISING OUT OF RESTATEMENT OF SUCH LOAN, SHALL BE IN THE NATURE OF CAPITAL LOSS AND IF THE FOREIGN EXCHANGE LOANS WERE UTILIZED FOR WORKING CAPITAL, THE CORRESPONDING LOSS WILL BE IN THE NATU RE OF REVENUE LOSS. IT IS IN THE LIGHT OF THE ABOVE PRINCIPLE LA ID DOWN BY THE HONBLE SUPREME COURT THAT AGAIN THE HONBLE APEX C OURT HAS HELD IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD., 312 ITR 254, THAT THE LOSS SUFFERED BY ASSESSEE ON ACCOUNT OF EXCHANGE DIFFERENCES AS ON THE DATE OF THE BALANCE SHEET, IS AN EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE IN COME-TAX ACT, 1961. 13. IN THE PRESENT CASE BEFORE US AS WELL, AT THE TIME OF RESTATEMENT OF THE FOREIGN EXCHANGE LOAN LIABILITY, THE LOANS WERE - - ITA 53 TO 56 OF 2011, ETC. 9 UTILIZED BY THE ASSESSEE COMPANY FOR ITS WORKING CA PITAL REQUIREMENTS. WHEREVER IT UTILIZED THE FOREIGN EXC HANGE LOAN FOR ACQUIRING ASSETS LIKE SHIPS, THE ASSETS WERE ALREAD Y SOLD OFF, THE PROCEEDS HAVING BEEN SET OFF AGAINST THE LOANS, WHE REAFTER THE BALANCES WERE CONVERTED BY THE CREDITORS INTO WORKI NG CAPITAL LOANS. THEREFORE, IN THESE APPEALS BEFORE US, AS F AR AS THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 ARE CONCERNED, THE FOREIGN EXCHANGE LOANS REFLECTED ON THE BALANCE SHEET WERE IN FACT WORKING CAPITAL LOANS AND ACCORD INGLY ANY LOSS ARISING ON RESTATEMENT OF THOSE LOANS IN TERMS OF F OREIGN EXCHANGE RATES HAVE NECESSARILY TO BE TREATED AS RE VENUE LOSS. 14. IN FACT, WHILE THE ASSESSEE HAS RETURNED LOSS TOWARDS FOREIGN EXCHANGE RESTATEMENT FOR THE ASSESS MENT YEARS 2002-03, 2003-04 AND 2004-05, THE ASSESSEE HAD DECLARED AN INCOME OF ` 1,89,90,445/- FOR THE ASSESSMENT YEAR 2005-06 ON THE SAME GROUND. THE PROFIT OF ` 1,89,90,445/-, ACCOUNTED BY THE ASSESSEE AS A RESULT OF RESTATEMEN T OF FOREIGN EXCHANGE LOAN AS ON 31-3-2005, WAS OFFERED AS INCOM E FOR ASSESSMENT BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER HAS ACCEPTED THIS AND BROUGHT TO TAX THE - - ITA 53 TO 56 OF 2011, ETC. 10 INCOME AS OFFERED BY THE ASSESSEE. IT SHOWS THAT T HE ASSESSING AUTHORITY HAS ALREADY FOLLOWED THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE DECISIONS MENTIONED AB OVE AND HAS TREATED THE PROFIT ARISING OUT OF THE RESTATEME NT OF THE FOREIGN EXCHANGE LOANS, DEPENDING UPON THE PURPOSE FOR WHIC H SUCH LOANS WERE UTILIZED BY THE ASSESSEE. ON THE SAME S ET OF FOREIGN EXCHANGE LOAN ACCOUNT, WHERE THE ASSESSING AUTHORIT Y HAS ASSESSED THE PROFIT AS INCOME FOR THE ASSESSMENT YE AR 2005-06, HE SHOULD HAVE ALLOWED THE LOSS ARISING FOR THE ASS ESSMENT YEARS 2002-03, 2003-04 AND 2004-05 AS LOSS. IN THE PRESENT CASE, THE ASSESSING AUTHORITY HAS FOLLOWED AN INCON SISTENT PRACTICE, CONTRARY BOTH TO FACTS AND LAW. IT IS NO T PROPER TO SAY THAT THE EXCESS ARISING OUT OF THE RESTATEMENT OF F OREIGN EXCHANGE LOANS IS ASSESSED AS INCOME BY WAY OF PROF IT AND AT THE SAME TIME SUCH LOSS ARISING ON ACCOUNT OF RESTA TEMENT OF FOREIGN EXCHANGE LOANS WILL NOT BE ALLOWED AS DEDUC TION. 15. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUS TIFIED IN HIS FINDING AND HIS DIRECTION TO ALLOW THE LOSSES AS DE DUCTIONS IS JUST AND PROPER. THE ISSUE OF FOREIGN EXCHANGE LOSS IS THUS DECIDED - - ITA 53 TO 56 OF 2011, ETC. 11 IN FAVOUR OF THE ASSESSEE. THE GROUNDS RAISED BY T HE REVENUE ON THIS ISSUE ARE LIABLE TO BE DISMISSED. 16. THE NEXT COMMON ISSUE FOR ALL THE SEVEN ASSESSMENT YEARS IS THE QUESTION WHETHER THE ASSESS EE HAS DIVERTED INTEREST-BEARING FUNDS TO SISTER CONCERNS AS INTEREST-FREE LOAN AND WHETHER HAS CLAIMED EXPENDITURE AS DEDUCTI ONS NOT PERMISSIBLE UNDER SECTION 37 OF THE ACT. 17. IT IS THE CASE OF THE ASSESSING AUTHORITY THAT THE ASSESSEE COMPANY HAS DIVERTED FUNDS TO VARIOUS SIST ER CONCERNS THROUGH THE MEDIUM OF M/S. RAGHAVA ENTERPRISES LTD. (REPL), AS INTEREST-FREE ADVANCES AND IN SUCH CIRCUMSTANCE S THE CLAIM OF INTEREST EXPENDITURE AS DEDUCTION PERTAINING TO THESE INTEREST- FREE ADVANCES GIVEN BY THE ASSESSEE CANNOT BE ALLOW ED IN COMPUTING THE INCOME. 18. THE ASSESSING AUTHORITY HAS HELD THAT INTEREST - BEARING FUNDS HAVE BEEN DIVERTED BY THE ASSESSEE AS INTEREST- FREE ADVANCES. THOSE FUNDS WERE NOT USED FOR THE P URPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE. SO MUCH S O, THE INTEREST PERTAINING TO THOSE DIVERTED FUNDS CANNOT BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OR LOSS OF THE AS SESSEE. - - ITA 53 TO 56 OF 2011, ETC. 12 REJECTING THE OBJECTION RAISED BY THE ASSESSEE, THE ASSESSING OFFICER HAS HELD THAT THE NEXUS BETWEEN THE BORROWE D FUNDS AND THE INTEREST-FREE ADVANCES ALONE IS NOT THE PARAMET ER TO DECIDE THE MATTER CONCLUSIVELY. VARIOUS OTHER FACTORS HAV E TO BE TAKEN INTO CONSIDERATION TO SEE WHETHER THE INTEREST-BEAR ING FUNDS AVAILED BY THE ASSESSEE WERE IN FACT UTILIZED FOR I TS OWN BUSINESS OR NOT. REFERRING TO THE PRINCIPLE OF COMMERCIAL E XPEDIENCY, THE ASSESSING OFFICER HELD THAT NO SUCH CASE OF COMMERC IAL EXPEDIENCY IS ESTABLISHED IN THE PRESENT CASE, AS T HE ASSESSEE WAS NOT IN A POSITION TO JUSTIFY THE GIVING OF SUCH INTEREST-FREE ADVANCES, WAS IN FACT TO THE ADVANTAGE OF THE BUSIN ESS CARRIED ON BY THE ASSESSEE. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT THE ASSESSEE WAS TRANSMITTING THE FUNDS TO ITS SISTER CONCERN THROUGH REPL AND THE SAME WAS ATTEMPTED TO AVOID TH E PROVISIONS OF SECTION 2(22)(E), RELATING TO DEEMED DIVIDEND. 19. THE ASSESSING AUTHORITY HAS RELIED ON THE JUDG MENTS IN THE CASE OF STATE OF ANDHRA PRADESH VS. H.ABDUL BAKSHI & BROS., 15 STC 644; IN THE CASE OF CIT VS. HR SUGAR FACTORY PVT. LTD., 187 ITR 363; IN THE CASE OF CALDERN PHARMACEU TICALS LTD. VS. CIT, 265 ITR 244 AND IN THE CASE OF CIT VS. BOM BAY - - ITA 53 TO 56 OF 2011, ETC. 13 SAMACHAR LTD., 74 ITR 723. HE ALSO RELIED ON THE J UDGMENTS IN THE CASE OF INDIAN SHAVINGS PRODUCTS LTD. VS. CIT, 265 ITR 250 AND ALSO IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., 286 ITR 1. HE DISTINGUISHED THE FACTS OF THE PRESENT CASE FROM THAT OF S.A.BUILDERS VS CIT, 288 ITR 1 AND HELD THAT THE AS SESSEE CANNOT TAKE THE DEFENCE OF COMMERCIAL EXPEDIENCY. 20. THE ASSESSEE SUBMITTED DETAILED PARTICULARS BE FORE THE COMMISSIONER OF INCOME-TAX(APPEALS) REGARDING T HE SOURCE OF FUNDS AVAILABLE IN THE HANDS OF THE ASSESSEE SO AS TO MAKE INTEREST-FREE ADVANCES TO REPL. ON EXAMINING THE D ETAILS FURNISHED BEFORE HIM, THE COMMISSIONER OF INCOME-TA X(APPEALS) HELD THAT EXCEPT FOR CERTAIN AMOUNTS, THE ASSESSEE HAD GIVEN INTEREST-FREE ADVANCES TO REPL OUT OF ITS FREE FUND S CONSISTING OF CAPITAL, RESERVES, PROFIT AND LOSS ACCOUNT AND OTHE R INTEREST-FREE FUNDS. HE ACCEPTED THE CONTENTION OF THE ASSESSEE THAT FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 THE VERY SAM E ISSUE WAS CONSIDERED IN THE LIGHT OF REVISION PROCEEDINGS COMPLETED UNDER SECTION 263 AND FINALLY IT CAME OUT THAT THE ASSESSEE HAD NOT MADE ANY DIVERSION OF INTEREST-BEARING FUNDS. IN THE LIGHT OF THOSE FACTS AND EVIDENCES PLACED BEFORE HIM, HE DEL ETED SUCH - - ITA 53 TO 56 OF 2011, ETC. 14 DISALLOWANCE OF INTEREST EXCEPT WHERE THE ASSESSEE WAS NOT IN A POSITION TO CO-RELATE BETWEEN INTEREST-FREE FUNDS A ND INTEREST-FREE ADVANCES. 21. ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE FOR THESE IMPUGNED ASSESSMENT YEARS, THE COMMISSIONER OF INCOME-TAX(APPEALS) HAD ALSO HELD T HAT THE ASSESSEE HAD NOT MADE ANY FRESH ADVANCES TO REPL DU RING THE PREVIOUS YEARS RELEVANT TO CERTAIN ASSESSMENT YEARS . 22. WE CONSIDERED THE ISSUE IN DETAIL. THE ASSESS EE IS A BOTTLER OF IMFL BRANDS, BELONGING TO UNITED SPIRI TS LTD., WHO HAD A WIDE NETWORK OF BOTTLERS, FRANCHISES, DEALERS , ASSOCIATES AND SUPPLIERS ACROSS THE COUNTRY. THE ASSESSEE, OU T OF BUSINESS NECESSITY, IS SUPPOSED TO ACT AS PER THE DIRECTIONS OF UNITED SPIRITS LTD. ON MATTERS RELATING TO MANAGEMENT OF F UNDS AND MARKETING CONTROL. THE QUESTION OF COMMERCIAL EXPE DIENCY HAS TO BE EXAMINED IN THE ABOVE CIRCUMSTANCES. 23. THE HONBLE SUPREME COURT IN THE CASE OF S.A.BUILDERS PVT. LTD. VS CIT, 288 ITR 1, HAS HELD THAT THE EXPRESSION OF COMMERCIAL EXPEDIENCY IS AN EXPRESSIO N OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT B USINESS- - - ITA 53 TO 56 OF 2011, ETC. 15 MAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPEND ITURE MAY NOT HAVE BEEN INCURRED IN LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE, IF IT WAS INCURRED ON GROU NDS OF COMMERCIAL EXPEDIENCY. 24. THEREFORE, IT IS APPARENT IN THE PRESENT CASE THAT BY VIRTUE OF THE POSITIONING OF THE ASSESSEE COMPANY I N ITS BUSINESS AND ALSO BECAUSE OF ITS BUSINESS DEPENDENCE ON UNIT ED SPIRITS LTD., THE ASSESSEE HAD TO OPERATE ITS BUSINESS ON T HE DIRECTIONS ISSUED BY UNITED SPIRITS LTD., WHEREBY THE ASSESSEE WAS SUPPOSED TO INFUSE FUNDS INTO VARIOUS COMPANIES INC LUDING THE TRANSACTIONS IT HAD WITH REPL. THE BUSINESS CARRIE D ON BY THE ASSESSEE IS THAT OF BOTTLING IMFL AND THE ASSESSEE COULD NOT HAVE CARRIED ON THE SAID BUSINESS WITHOUT THE EXCLU SIVE SUPPORT OF UNITED SPIRITS LTD., WHO IS IN FACT CONTROLLING THE BUSINESS. THEREFORE, THE ARGUMENT OF COMMERCIAL EXPEDIENCY, A DVANCED BY THE ASSESSEE, IS TO BE ACCEPTED AND WE FIND THAT THE ASSESSING AUTHORITY WAS NOT JUSTIFIED IN BRUSHING A SIDE THAT ARGUMENT WITHOUT CONSIDERING THE SAME IN A PROPER M ANNER. APART FROM THE ABOVE, A PERUSAL OF THE ORDERS OF TH E COMMISSIONER OF INCOME-TAX(APPEALS), PASSED FOR ALL THE SEVEN - - ITA 53 TO 56 OF 2011, ETC. 16 ASSESSMENT YEARS, SHOWS THAT THE ASSESSEE HAS FURNI SHED THE DETAILS OF THE OPENING FUNDS AVAILABLE WITH IT, BOT H INTEREST-FREE AND INTEREST-BEARING, AS WELL AS THE OPENING BALANC ES OF ADVANCES MADE TO OTHERS INCLUDING INTEREST-FREE ADV ANCES. ON EXAMINATION OF ALL THESE DETAILS OF INFLOW AND OUTF LOW OF FUNDS, THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FACTUALLY E STABLISHED THAT THE ASSESSEE HAS NOT DIVERTED ITS INTEREST-BEA RING FUNDS AS ADVANCES TO REPL. ON THE OTHER HAND, IT IS CLEAR F ROM THE DETAILS FURNISHED BEFORE THE LOWER AUTHORITIES THAT INTERES T-FREE ADVANCES GIVEN TO REPL WERE MADE OUT OF INTEREST-FREE FUNDS AVAILABLE IN THE HANDS OF THE ASSESSEE COMPANY. THIS NEXUS IS A LSO ESTABLISHED IN THE PRESENT CASE. 25. IT IS ONLY IN CERTAIN CASES THAT THE COMMISSIO NER OF INCOME-TAX(APPEALS) HAS FOUND THAT CERTAIN ADVANCES GIVEN BY THE ASSESSEE PERTAINED TO INTEREST-BEARING FUNDS. IN SUCH CASES THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ORDERED PROPORTIONATE DISALLOWANCE OF INTEREST EXPENDITURE. 26. IT IS TO BE SEEN THAT THE VERY SAME ISSUE WAS CONSIDERED IN THE EARLIER ASSESSMENT YEARS AS WELL, BOTH BY THE TRIBUNAL AND BY THE COMMISSIONER OF INCOME-TAX UNDE R SECTION - - ITA 53 TO 56 OF 2011, ETC. 17 263 OF THE ACT. ALL THESE WERE EXPLAINED BY THE AS SESSEE COMPANY AND SEEM TO HAVE BEEN ACCEPTED BY THE COMPE TENT AUTHORITIES. 27. THE ASSESSING OFFICER HIMSELF HAS ADMITTED THA T REPL IS NOT A SISTER CONCERN OF THE ASSESSEE AND TH ERE ARE NO COMMON SHAREHOLDINGS OR COMMON DIRECTORS. IN SUCH CIRCUMSTANCES, IT IS NOT POSSIBLE TO ALLEGE THAT TH E ASSESSEE COMPANY HAS TRANSMITTED FUNDS THROUGH REPL TO AVOID THE PROVISIONS OF DEEMED DIVIDEND IN SECTION 2(22)(E). LIKEWISE, THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE FUN DS, DIVERTED BY THE ASSESSEE TO REPL, WERE UTILIZED IN THE STOCK MARKET OPERATIONS. THESE ARE ALL SOME INTELLIGENT PRESUMP TIONS OF THE ASSESSING AUTHORITY. 28. ON GOING THROUGH THE FACTS OF THE PRESENT CASE , WE FIND THAT THE RELIANCE PLACED BY THE ASSESSING OFFI CER ON VARIOUS JUDICIAL PRONOUNCEMENTS LIKE CIT VS. BOMBAY SAMACHA R LTD., 74 ITR 723, ETC. IS NOT RELEVANT IN THESE CASES. 29. THEREFORE, IN THE FACTS AND CIRCUMSTANCES WE A GREE WITH THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(A PPEALS) PASSED FOR THE IMPUGNED ASSESSMENT YEARS ON THIS IS SUE OF - - ITA 53 TO 56 OF 2011, ETC. 18 DIVERSION OF INTEREST-BEARING FUNDS. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THE GROUNDS OF THE REVENUE ARE LIABLE TO BE DISMISSED. 30. THE NEXT COMMON ISSUE RAISED FOR THE ASSESSMEN T YEARS 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-0 9 IS THE QUESTION OF DISALLOWANCE OF EXPENDITURE MADE UNDER SECTION 14A, READ WITH RULE 8D. 31. FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSING OFFICER HAS DISALLOWED ` 13,85,166/-, WHICH HAS BEEN REDUCED TO ` 50,000/- BY THE COMMISSIONER OF INCOME-TAX(APPEALS ). THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT EVEN IF RULE 8D WAS NOT APPLICABLE TO THE ASSESSMENT YEAR 2004-0 5, A REASONABLE DISALLOWANCE WAS CALLED FOR AND THUS FIX ED A DISALLOWANCE OF ` 50,000/-. WE AGREE WITH THE REASONING ARRIVED AT BY THE COMMISSIONER OF INCOME-TAX(APPEALS), BUT WE DO NOT AGREE WITH THE QUANTUM. THE DISALLOWANCE OF ` 50,000/- MADE BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IS TOO L OW. WE MODIFY THE DISALLOWANCE TO ` 2 LAKHS. 32. IN THE CASE OF THE ASSESSMENT YEAR 2005-06 THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS MODIFIED TH E - - ITA 53 TO 56 OF 2011, ETC. 19 DISALLOWANCE TO ` 1 LAKH AS AGAINST THE DISALLOWANCE OF ` 28,26,976/- MADE BY THE ASSESSING OFFICER. FOR TH E REASONS ALREADY STATED FOR THE ASSESSMENT YEAR 2004-05, WE FIND THAT IT IS NECESSARY TO INTERFERE WITH THE QUANTUM OF DISALLOW ANCE SUSTAINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS ). WE MODIFY THE DISALLOWANCE TO ` 3 LAKHS. 33. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF ` 84.68 LAKHS STATED TO BE WORKED OUT IN ACCORDANCE WITH RULE 8D. BUT, IN FAC T RULE 8D IS ONLY PROSPECTIVE IN OPERATION AND APPLIES TO THE AS SESSMENT YEAR 2008-09 ONWARDS. THEREFORE, THE METHOD OF COMPUTAT ION OF DISALLOWANCE, AS ARGUED BY THE REVENUE, IS NOT SUST AINABLE IN LAW. BUT WE FIND THAT THE ADDITION OF ` 4 LAKHS SUSTAINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IS LOW. ON A R EASONABLE BASIS, WE MODIFY THE DISALLOWANCE TO ` 6 LAKHS. 34. IN THE CASE OF THE ASSESSMENT YEAR 2007-08, TH E ASSESSING OFFICER HAS MADE A DISALLOWANCE OF ` 98.44 LAKHS UNDER RULE 8D, WHICH HAS BEEN MODIFIED TO ` 5 LAKHS BY THE COMMISSIONER OF INCOME-TAX(APPEALS). FOR THE REASON S ALREADY STATED ABOVE, WE MODIFY THE DISALLOWANCE TO A SUM O F ` 8 LAKHS. - - ITA 53 TO 56 OF 2011, ETC. 20 35. FOR THE ASSESSMENT YEAR 2008-09, THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER WAS ` 88.99 LAKHS, STATED TO BE MADE IN THE LIGHT OF RULE 8D. THIS HAS BEEN MODIFI ED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) TO ` 10 LAKHS. THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT THE ASSESSING AUTHORITY HIMSELF HAS OBSERVED THAT NO EXPENDITURE WAS DIRECTLY ATTRIBUTABLE TO THE INVESTMENTS. THEREFORE, HE HEL D THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, EVEN IF UNDER RULE 8D, WAS EXCESSIVE. AT THE SAME TIME, HE ALSO DID N OT ACCEPT THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED IN RELATION TO THE EXEMPT INCOME. RULE 8D IS OF-COURS E APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR 2008-09. BUT, RUL E 8D DOES NOT RULE OUT THE POSSIBILITY OF ASSESSEE ESTABLISHI NG THE ACTUAL AMOUNT OF EXPENDITURE INCURRED BY IT. TAKING INTO CONSIDERATION ALL THE ASPECTS OF THE CASE, THE DISALLOWANCE UNDER SECTION 14A IS MODIFIED TO ` 15 LAKHS. 36. THE REVENUE HAS RAISED CONTENTION IN RESPECT O F DISALLOWANCE UNDER SECTION 14A FOR THE FIVE ASSESSM ENT YEARS FROM 2004-05 TO 2008-09. FOR ALL THESE ASSESSMENT YEARS, THIS ISSUE IS DECIDED PARTLY IN FAVOUR OF THE REVENUE. - - ITA 53 TO 56 OF 2011, ETC. 21 37. ANOTHER ISSUE TO BE CONSIDERED IS THE VALIDITY OF THE REASSESSMENT ARISING FOR THE ASSESSMENT YEAR 2003-0 4. THE GROUND RAISED BY THE REVENUE IN ITA NO.1098(MDS)/20 11 IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N HOLDING THAT THE REASSESSMENT PROCEEDINGS ARE NOT VALID. T HE REASSESSMENT WAS MADE FOR EXAMINING THE ISSUE OF FO REIGN EXCHANGE LOSS AND THE INTEREST ATTRIBUTABLE TO INTE REST-FREE ADVANCES MADE TO REPL. THE COMMISSIONER OF INCOME- TAX(APPEALS) FOUND THAT THESE ISSUES WERE ENQUIRED INTO BY THE ASSESSING AUTHORITY IN THE REGULAR ASSESSMENT COMPL ETED UNDER SECTION 143(3). THE COMMISSIONER OF INCOME-TAX(APP EALS) FURTHER OBSERVED THAT THERE WAS AN EARLIER REASSESS MENT PROCEEDING UNDER SECTION 143(3), READ WITH SECTION 147, AND IN THE COURSE OF THAT PROCEEDINGS ALSO, THE ASSESSEE W AS ASKED TO FURNISH THE DETAILS OF THE ABOVE ISSUES. THE ASSES SEE HAD FURNISHED ALL THE NECESSARY DETAILS AND IT IS ONLY AFTER CONSIDERING THOSE DETAILS, THAT THE EARLIER INCOME-ESCAPING ASS ESSMENT WAS COMPLETED BY THE ASSESSING AUTHORITY. THE COMMISSI ONER OF INCOME-TAX(APPEALS) ALSO FOUND THAT THE ISSUE OF IN TEREST ON INTEREST-FREE ADVANCES WAS AGAIN CONSIDERED UNDER S ECTION 263 - - ITA 53 TO 56 OF 2011, ETC. 22 FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 AND HELD THAT THERE WAS NO NEXUS BETWEEN THE INTEREST-FREE ADVANC ES GIVEN BY THE ASSESSEE AND THE INTEREST-BEARING LOANS AVAILED BY IT. THE COMMISSIONER OF INCOME-TAX(APPEALS) ALSO FOUND THAT NO FRESH INFORMATION WAS AVAILABLE WITH THE ASSESSING OFFICE R TO AGITATE THE VERY SAME ISSUE IN A SECOND ROUND OF INCOME-ESC APING ASSESSMENT PROCEEDINGS. IT IS IN THE ABOVE CIRCUMS TANCES THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT T HE REOPENING OF THE ASSESSMENT WAS MADE BY THE ASSESSI NG AUTHORITY ONLY ON THE BASIS OF CHANGE OF OPINION AN D AS SUCH THE REASSESSMENT WAS NOT VALID IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR OF INDIA LTD., 320 ITR 561. 38. AFTER CONSIDERING THE DETAILED DISCUSSION MADE BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IN HIS ORDE R, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUS TIFIED IN HOLDING THAT THE REASSESSMENT WAS INVALID. THE ISS UES OF FOREIGN EXCHANGE LOSS AND INTEREST ON INTEREST-FREE ADVANCE S WERE AGITATED AND RE-AGITATED BY THE ASSESSING OFFICER I N EARLIER PROCEEDINGS FOR MORE THAN ONCE AND THE ASSESSEE HAD FURNISHED - - ITA 53 TO 56 OF 2011, ETC. 23 ALL THE NECESSARY DETAILS IN RESPONSE TO THE ENQUIR IES MADE BY THE ASSESSING AUTHORITY. THE EXPLANATIONS OFFERED BY THE ASSESSEE WERE ACCEPTABLE TO THE ASSESSING AUTHORITY IN THE COURSE OF EARLIER PROCEEDINGS AND IT WAS FOR THAT R EASON THAT NO ADDITIONS OR DISALLOWANCES WERE MADE IN THOSE ASSES SMENTS. AS A MATTER OF FACT, THIS ISSUE WAS CONSIDERED IN AN E ARLIER REVISION PROCEEDING UNDER SECTION 263 AS WELL. IT IS ALSO T O BE SEEN THAT THERE WAS NO FRESH MATERIAL IN THE HANDS OF THE ASS ESSING AUTHORITY TO JUSTIFY STILL ANOTHER INVESTIGATION ON THE MATTER. THE ASSESSING AUTHORITY IS AGITATING OVER THE SAME ISSU ES WHICH WERE ALREADY EXPLAINED SUFFICIENTLY AND CONSIDERED IN TH E EARLIER PROCEEDINGS. THEREFORE, THERE IS NO GROUND BEFORE US TO DEVIATE FROM THE VIEW TAKEN BY THE COMMISSIONER OF INCOME- TAX(APPEALS) THAT THE REASSESSMENT WAS INITIATED AS A RESULT OF CHANGE OF OPINION. HE HAS RIGHTLY HELD SO. 39. THIS GROUND IS DECIDED AGAINST THE REVENUE. 40. THE LAST ISSUE TO BE CONSIDERED IS THE GROUND OF THE REVENUE FOR THE ASSESSMENT YEAR 2003-04 RAISED IN I TA NO.54(MDS)/2011 THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF ` 1,79,27,758/-, BEING - - ITA 53 TO 56 OF 2011, ETC. 24 THE EXCESS CLAIM OF DEPRECIATION ON SALE AND LEASE BACK TRANSACTIONS. 41. IT IS THE CASE OF THE ASSESSING OFFICER THAT C ERTAIN LEASE TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN EARLIER YEARS WERE TREATED AS NON GENUINE AND DEPRECIATION WAS DI SALLOWED. THEREFORE, THE ASSESSING AUTHORITY ADJUSTED THE WRI TTEN DOWN VALUE AND CONSEQUENTLY THE DEPRECIATION FOR THE IMP UGNED ASSESSMENT YEAR AS WELL. AS A RESULT OF THIS ADJUS TMENT, DEPRECIATION WAS WORKED OUT AT ` 1,46,81,306/- AS AGAINST ` 3,26,09,064/- CLAIMED BY THE ASSESSEE. THE BALANCE DEPRECIATION OF ` 1,79,27,758/- WAS DISALLOWED BY THE ASSESSING AUTHORITY AND ADDED TO THE INCOME OF THE ASSESSEE. IN DOING SO, THE ASSESSING OFFICER HAS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SIRPUR PAPER MILLS LTD . VS. CCE, 97 ELT 3; THE HONBLE KARNATAKA HIGH COURT DECISION I N THE CASE OF AVASARIA AUTOMATION LTD. VS JCIT, 266 ITR 178 AND T HE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL, MUMBAI, IN TH E CASE OF MID EAST PORTFOLIO MANAGEMENT LTD. 42. THE ASSESSEE ARGUED BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS) THAT THE SALE AND LEASE BACK TR ANSACTIONS - - ITA 53 TO 56 OF 2011, ETC. 25 WERE ENTERED INTO BY THE ASSESSEE COMPANY WITH STAT UTORY UNDERTAKINGS LIKE RAJASTHAN STATE ELECTRICITY BOARD AND MADHYA PRADESH STATE ELECTRICITY BOARD AND, THEREFORE, THE RE CANNOT BE A CASE OF COLLUSION BETWEEN THE PARTIES. THE ASSESSE E ALSO EXPLAINED BEFORE THE COMMISSIONER OF INCOME-TAX(APP EALS) THAT THE TWIN CONDITIONS NECESSARY FOR CLAIMING DEPRECIA TION UNDER SECTION 32, NAMELY, OWNERSHIP AND USER, HAVE BEEN S ATISFIED AND THOSE FACTS HAVE BEEN CONFIRMED BY THE RAJASTHAN ST ATE ELECTRICITY BOARD AND THE MADHYA PRADESH STATE ELEC TRICITY BOARD. AFTER CONSIDERING ALL THE ASPECTS OF THE CA SE, THE COMMISSIONER OF INCOME-TAX(APPEALS) ALLOWED THE CON TENTION OF THE ASSESSEE AND DELETED THE DISALLOWANCE ON SALE A ND LEASE BACK TRANSACTIONS. 43. WE CONSIDERED THE MATTER IN DETAIL. THE HONB LE ORISSA HIGH COURT IN THE CASE OF INDUSTRIAL DEVELOP MENT CORPORATION OF ORISSA VS. CIT, 268 ITR 130 AND THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. GEORGE WI LLIAMSON (ASSAM) LTD., 265 ITR 626, HAVE HELD THAT IT IS NOT POSSIBLE TO PRESUME ANY COLLUSION BETWEEN THE PARTIES OF SALE A ND LEASE BACK TRANSACTIONS, WHERE ONE OF THE PARTIES IS GOVE RNMENT OR A - - ITA 53 TO 56 OF 2011, ETC. 26 GOVERNMENT AGENCY OR A GOVERNMENT UNDERTAKING. IN THE PRESENT CASE, THE PARTIES TO THE TRANSACTIONS ARE S TATE ELECTRICITY BOARDS. THEY ARE ALL STATUTORY BODIES CONSTITUTED BY THE CONCERNED STATE GOVERNMENTS. THEIR ACCOUNTS ARE OP EN FOR PUBLIC SCRUTINY THROUGH THE OFFICE OF THE CONTROLLE R AND AUDITOR GENERAL OF INDIA. SO MANY OTHER INTERNAL REQUIREME NTS ARE THERE. INSPITE OF THESE, THERE IS NO CASE AGAINST THOSE ST ATE ELECTRICITY BOARDS THAT THEY HAVE COLLUDED WITH THE ASSESSEE TO AVAIL UNDUE ADVANTAGE UNDER THE INCOME-TAX LAW. NO OTHER DIREC T EVIDENCES ARE AVAILABLE AGAINST THE ASSESSEE. THEREFORE, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY ON DEP RECIATION RELATING TO SALE AND LEASE BACK TRANSACTIONS. 44. THIS GROUND RAISED BY THE REVENUE IS DISMISSED . 45. THE ISSUES RAISED BY THE REVENUE IN THE MATTER S OF FOREIGN EXCHANGE LOSS, DIVERSION OF INTEREST-BEARIN G FUNDS, REASSESSMENT, DEPRECIATION ON SALE AND LEASE BACK T RANSACTIONS ARE DECIDED AGAINST IT. THE CONTENTION OF THE REVE NUE ON THE ISSUE OF DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A IS PARTLY ALLOWED. - - ITA 53 TO 56 OF 2011, ETC. 27 46. IN RESULT, THE APPEALS FILED BY THE REVENUE FO R THE ASSESSMENT YEARS 2002-03 AND 2003-04 ARE DISMISSED. THE APPEALS FILED FOR THE ASSESSMENT YEARS 2004-05, 200 5-06, 2006-07, 2007-08 AND 2008-09 ARE PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 16 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH MARCH, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.