ACIT, CHENNAI V. Chemplast Sanmar Limited, CHENNAI

ITA 1349/CHNY/2008

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9125 (ITAT-CHENNAI)
• Duration Of Justice: 7 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 15-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 19-06-2008
• Court: TRIBUNAL
• Department Lawyers: R VIJAYARAGHAVAN
• Assessee Lawyers: SUNDAR RAO
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Recovery proceedings; Business income; Depreciation; Business expenditure; Principle of natural justice; Retrospective amendment; Question of law; Cost of acquisition; Scheme of amalgamation; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 50C; 80G; 28

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 1143/MDS/2008, 52/MDS/2009, 119 AND 120/MDS/2012 ASSESSMENT YEAR S :200 3 - 0 4, 05 - 06, 06 - 07 & 07 - 08 M/S. CHEMPLAST SANMAR LIMITED, 9, CATHEDRAL ROAD, CHENNAI 600 086. [PAN: AAACC3000F ] VS. THE ASSISTANT COMMISSIONER OF INCOME T AX , C OMPANY CIRCLE I (3) , CHENNAI. ( / APPELLANT ) ( / RESPONDENT ) I.T.A.NO S . 1348 & 1349/MDS/2008, 558/MDS/2009, 289 & 290/MDS/2012 ASSESSMENT YEAR S :2003 - 04, 04 - 05, 05 - 06, 06 - 07 & 07 - 08 THE ASSISTANT /DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3)/ LTU, CHENNAI. M/S. CHEMPLAST SANMAR LIMITED, 9, CATHEDRAL ROAD, CHENNAI 600 086 ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI SUNDAR RAO, CIT - DR / DATE OF HEARING : 15 . 03 .201 6 / DATE OF P RONOUNCEMENT : 13 .06 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH ESE CROSS APPEALS ARE DIRECTED AGAINST THE SEPARATE ORDER S OF THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) , CHENNAI FOR DIFFERENT ASSESSMENT YEAR S AS STATED ABOVE. THE REVENUE HAS ALSO FILED AN APPEAL I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 2 DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) III, CHENNAI FOR THE ASSESSMENT YEAR 2004 - 05. SINCE ALL THE APPEALS PERTAIN TO SAME ASSESSE E AND HEARD TOGETHER, ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. I.T.A. NO. 1143/MDS/2008 : A.Y. 2003 - 04 [ASSESSEE S APPEAL] 2. THE FIRST GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIR MING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE LUMPSUM CONSIDERATION OF . 65,00,000/ - TOWARDS SALE OF DRUM PLANT (GIVING UP RIGHT TO MANUFACTURE) AS BUSINESS INCOME AS AGAINST CAPITAL GAINS ADMITTED BY THE ASSESSEE. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS RECEIVED AN AMOUNT OF .65,00,000/ - FROM M/S. BALMER LAWRIE & CO. LTD. TOWARDS GIVING UP OF RIGHT TO MANUFACTURE. THE CONSIDERATION FOR GIVING UP THE RIGHT TO MANUFACTURE WAS RECEIVED IN PURSUANCE TO AN AGREEMENT DATED 27.11.2002 ENTERED INTO BETWEEN THE ASSESSEE AND M/S. BALMER LAWRIE & CO. LTD. [A GOVERNMENT OF INDIA ENTERPRISES]. THE ASSESSEE HAS CLAIMED THE ABOVE LUMPSUM CONSIDERATION OF .65 LAKHS AS CAPIT AL GAIN, WHEREAS, THE ASSESSING OFFICER HAS TREATED THE SAME AS BUSINESS INCOME BY RELYING ON THE DECISION IN THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 3 CASE OF MCDOWELL AND COMPANY LTD. V. COMMERCIAL TAX OFFICER 154 ITR 148(SC). 4. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND ALSO BY CONSIDERING RELEVANT PROVISIONS OF SECTION, BY CONFIRMING THE ORDER OF THE ASSESSING OFFICER, THE LD. CIT(A) HAS HELD AS UNDER: 7.4. I HAVE CAREFULLY GONE THROUGH THE ORDER OF A.O AND THE DETAILED SUBMISSION MADE BY AR ABOUT THE IMPUGNED IS SUE. 7.5. THE ISSUE BEFORE ME IS : (A) WHETHER THE LUMP SUM CONSIDERATION - RECEIVED BY THE APPELLANT IS CHARGEABLE UNDER THE HEAD CAPITAL GAIN OR BUSINESS INCOME. (B) WHETHER THE ABOVE STATED LUMP SUM CONSIDERATION CAN BE TREATED AS PART OF TRANSFER OF THE ASSET AND DEPRECIATION HAS TO BE COMPUTED AS DELETION TO BLOCK OF ASSETS AS RS 95 LACS INSTEAD OF RS 30 LACS. (C) WHETHER THE AMOUNT OF RS 65 LACS HAS TO BE SPREAD OVER A PERIOD OF 5 YEARS STARTING FROM NOVEMBER 2002. (D) WHETHER THE LUMP SUM CONSIDERATION RECEIVED BY THE APPELLANT CONSTITUTE CAPITAL RECEIPT NOT ELIGIBLE TO TAX. 7.6.1 THERE IS SOME OVERLAPPING OF PROVISIONS OF SECTION 55 (2)(A) AND SECTION 28(VA). RELEVANT PORTIONS OF SECTION 55 (2)(A) AND SECTION 28(VA) ARE REPRODUCED: ( I) SECTION 55(2): 'FOR THE PURPOSE OF SECTION 48 AND 49 COST OF ACQUISITION, - (A) IN RELATION TO CAPITAL ASSET, BEING GOODWILL OF A BUSINESS OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH BUSINESS OR A RIGHT TO MANUFACTURE. PRODUCE OR PROCESS ANY ARTICL E OR THING OR RIGHT TO CARRY ON ANY BUSINESS , TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 4 (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE; AND (II) IN AN Y OTHER CASE NOT BEING A CASE FALLING UNDER SUB CLAUSES (I) TO (IV) OF SUBSECTION (1) OF SECTION 49, SHALL BE TAKEN TO BE NIL; (II) 28(VA) : 'ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN CASH OR KIND, UNDER AN AGREEMENT FOR - (A) NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS OR (B) NOT SHARING ANY KNOW HOW, PATENT, COPY RIGHT, TRADE MARK, LICENSE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE OR INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PROCE SSING OF GOODS OR PROVISION OF SERVICES PROVIDED THAT SUB - CLAUSE (A) SHALL NOT APPLY TO - (I) ANY SUM, WHETHER RECEIVED OR RECEIVABLE IN CASH OR KIND, ON ACCOUNT OF TRANSFER OF RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CA RRY ON ANY BUSINESS, WHICH IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS. 7.6.2. THOUGH PROVISO TO 28(VA) ABUNDANTLY CLARIFIES THAT SECTION 28(VA)(A) INTENDS TO TAX ONLY THOSE ITEMS WHICH ARE NOT TAXABLE UNDER THE HEAD CAPITAL GAIN, YET THE PROVISIONS OF TH E ACT NEITHER EXPRESSLY NOR BY IMPLICATION CONVEY THAT SECTION 55(2) OVERRIDES SECTION 28(VA). THE NON USAGE OF THE WORDS 'NON WITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THE ACT IN SECTION 55, FURTHER MAKES IT CLEAR THAT A PARTICULAR ITEM C OULD BE TAXED EITHER UNDER THE HEAD CAPITAL GAIN OR UNDER BUSINESS INCOME DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7.6.3. NO DOUBT, IT IS TRUE AS CITED BY THE AR THAT THE AGREEMENT CONSIST OF 3 PARTS (I) TRANSFER OF PLANT & MACHINERY FO R RS 30 LACS , WHICH THE BUYER HAS TO PAY TO THE APPELLANT. (II) GIVING UP THE RIGHT TO MANUFACTURE FOR RS 65 LACS, FOR WHICH THE BUYER HAS TO PAY THE APPELLANT FOR REFRAINING FROM MANUFACTURE AND I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 5 (III) SUPPLY AND PROCUREMENT OF MATERIAL FOR 5 YEARS - THIS IS MUTUALLY DEPENDED AND SUBJECT TO PENALTY FOR NON FULFILLMENT OF THE RESPECTIVE OBLIGATION AND FURTHER BACKED BY BANK GUARANTEE ON EITHER SIDE. HOWEVER, IN PAGE 2 OF THE AGREEMENT BETWEEN M/S. CHEMPLAST SANMAR LTD AND BALMER LAWRIE LTD , DATED 2 7TH DAY OF NOVEMBER 2002 , THE FOLLOWING HAS BEEN PROVIDED: AND WHEREAS BALMER LAWRIE HAS AGREED TO PAY CHEMPLAST A SUM OF RS 65 LACS (RS SIXTY FIVE LACS) UPON EXECUTION OF THIS AGREEMENT AS ONE TIME LUMPSUM PAYMENT IN CONSIDERATION FOR CHEMPLAST TO GIVE UP ITS RIGHT TO MANUFACTURE THE SAID BARRELS AND DRUMS DURING THE TENURE OF THIS AGREEMENT. CHEMPLAST WOULD ALSO SIMULTANEOUSLY DURING THE TENURE OF THIS AGREEMENT GIVE AN ASSURED BUSINESS OF BARRELS AND DRUMS TO BALMER LAWRIE AS DETAILED LATER IN THE AG REEMENT. 7.6.4. THE PAYMENT OF RS. 65,00,000/ - AS ONE TIME LUMPSUM PAYMENT IN CONSIDERATION FOR CHEMPLAST TO GIVE UP ITS RIGHT TO MANUFACTURE THE SAID BARRELS AND DRUMS AS CITED ABOVE CANNOT BE VIEWED IN ISOLATION, IT HAS TO BE READ HARMONIOUSLY WITH CH EMPLAST PROVIDING ASSURED BUSINESS OF BARRELS AND DRUMS TO BALMER LAWRIE. 7.6.5. IN VIEW OF THE ABOVE, I UPHOLD THE VIEWS OF THE A.O AS TO THE TREATMENT OF ONE TIME LUMPSUM PAYMENT IN CONSIDERATION FOR CHEMPLAST TO GIVE UP ITS RIGHT TO MANUFACTURE THE S AID BARRELS AND DRUMS AS BUSINESS INCOME. HOWEVER I FEEL THAT THE OBSERVATION OF THE A.O THAT THE TREATMENT OF THE ABOVE INCOME BY ASSESSEE COMPANY AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME AS COULARABLE DEVISE IS NOT RIGHT. THE BASIC ISSUE HERE IS WHETHE R THE PARTICULAR INCOME COULD FIT INTO BUSINESS INCOME UNDER SECTION 28 (VA) OR WHETHER PROVISO TO SECTION 28 (VA) WILL APPLY. 7.6.6. INCIDENTALLY THE APPELLANT MADE TWO ALTERNATE SUBMISSIONS, WHICH ARE DEALT AS BELOW: ALTERNATE SUBMISSION - 1 THE A PPELLANT CONTENDED THAT, AS THE COMPENSATION FOR GIVING UP THE RIGHT TO MANUFACTURE IS RELATED TO SALE OF PLANT AND MACHINERY, THE CONSIDERATION RECEIVED SHOULD ALSO BE TREATED AS PART OF TRANSFER OF THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 6 ASSET AND DEPRECIATION HAS TO BE COMPUTED AS DELETIO N TO BLOCK OF ASSETS AS RS 95 LACS INSTEAD OF RS 30 LACS ADOPTED BY THE APPELLANT. THE ABOVE SUBMISSION OF THE AR IS UNTENABLE. THE AGREEMENT CLEARLY STIPULATES SEPARATE CONSIDERATION OF RS 30 LACS FOR TRANSFER OF THE ASSETS. THAT BEING SO TREATING THE O NE TIME LUMPSUM CONSIDERATION OF RS 65 LACS ALSO AS PART OF TRANSFER OF ASSETS DOES NOT HOLD WATER. ALTERNATE SUBMISSION - 2 THE APPELLANT SUBMITTED THAT AS THE A A HELD THE COMPENSATION FOR GIVING UP THE RIGHT TO MANUFACTURE IS A BUSINESS RECEIPT AS IT IS LINKED WITH THE COMMITMENT GIVEN BY THE APPELLANT FOR THE PURCHASE OF MATERIAL FOR A CERTAIN PERIOD, THE INCOME SHOULD ALSO BE ACCRUED DURING THE PERIOD OF AGREEMENT. THE APPELLANT THEREFORE SUBMITS THAT THE AMOUNT OF RS. 65 LACS HAS TO BE SPREAD OVER A PERIOD OF 5 YEARS STARTING FROM NOVEMBER 2002. THE ARGUMENT OF THE AR HERE ALSO IS UNTENABLE. THE APPELLANT COMPANY ALREADY RECEIVED THE ENTIRE CONSIDERATION AND THERE IS NO CONCEPT OF DEFERRED REVENUE INCOME UNDER THE INCOME TAX ACT. MOREOVER SECTION 28(VA) CLEARLY TAXES ANY SUM RECEIVED OR RECEIVABLE UNDER AN AGREEMENT FOR NOT CARRYING OUT ANY ACTIVITY IN RELATION TO BUSINESS. THE PROVISIONS OF THE ACT DOES NOT DIFFERENTIATES BETWEEN LUMPSUM CONSIDERATION OR OTHERWISE. 7.6.7. FOR THE REASON STATED ABOVE THE ASSESSEE'S APPEAL FAILS. THE TREATMENT OF RS. 65 LACS BEING COMPENSATION FOR GIVING UP THE RIGHT TO MANUFACTURE AS BUSINESS INCOME BY THE A.A IS UPHELD. NO RELIEF FOR THE APPELLANT. 5. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER TREATED THE LUMPSUM AMOUNT RECEIVED BY THE ASSESSEE TOWARDS SALE OF DRUM PLANT (GIVING - UP RIGHT TO MANUFACTURE) . WHILE SUSTAINING , T HE LD. CIT(A) HAS ALSO REJECTED THE ALTERNATIVE PLEAS RAISED BEFORE HIM DURING APPELLATE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 7 PROCEEDINGS. IN AN IDENTICAL ISSUE RAISED ON SIMILAR FACTS AND CIRCUMSTANCES, BY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE O F GUFFIC CHEM PVT. LTD. V. CIT 332 ITR 602, THE AHMEDABAD BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF DCIT V. M/S. GUFIC LIMITED IN I.T.A. NO. 3355/AHD/2008 FOR THE ASSESSMENT YEAR 1997 - 98 DATED 31.01.2012, BY OBSERV ING AS UNDER: 2. IN RESPECT OF THE IMPUGNED ADDITION FACTS IN BRIEF AS NOTED BY THE AO VIDE AN ORDER U/S.143(3) R.W.S. 147 OF THE IT ACT DATED 30/11/2004 WHILE PASSING THE ORDER FOR A.Y. 1997 - 98 WERE THAT THE ASSESSEE - COMPANY HAD CLAIMED THE AMOUNT OF RS .50 LACS AS EXEMPT WHICH WAS IN THE NATURE OF NON - COMPETE FEES AND THEREFORE TREATED AS CAPITAL RECEIPT. IT WAS FOUND THAT A NON - COMPETITION AGREEMENT WAS EXECUTED BY THE ASSESSEE COMPANY WITH M/S. RANBAXY LAB LIMITED DATED 31.03.1997. THE NONCOMPETITION AGREEMENT WAS WITH A CLAUSE NOT TO MANUFACTURE THE BRAND MOX FOR NEXT TWENTY YEARS. THE ASSESSEE S SUBMISSION WAS THAT BY THIS AGREEMENT THE ASSESSEE HAD LOST INCOME BY STOPPING THE MANUFACTURE AND SALE OF THE PRODUCT. BY STOPPING THE MANUFACTURING OF T HE SAID PRODUCT, IN LIEU, THE ASSESSEE HAD RECEIVED RS.50 LACS AS LUMP SUM AMOUNT. AS PER AO, IT WAS A REVENUE RECEIPT, HENCE TAXED ACCORDINGLY BY REFERRING SECTION 28(VA) OF IT ACT. 3. LD. CIT(A) HAS DISCUSSED SEVERAL CASE LAWS AND THEREAFTER NOTED THA T AT THE TIME WHEN THE RANBAXY LAB LTD. HAD DECIDED TO TAKE OVER THE PRODUCT OF GUFIC LTD. DEFINITELY THERE WAS A THREAT OF DAMAGING THE INTEREST OF RANBAXY LAB LTD., THEREFORE, NON - COMPETITION AGREEMENT WAS ENTERED INTO. IT HAS ALSO BEEN NOTED THAT BY INS ERTION OF CLAUSE (VA) OF SECTION 28 W.E.F. 01/04/2003 THE AMOUNT IN QUESTION HAS BEEN BROUGHT INTO TAX NET. UPTO 01/04/2003, THE AMOUNT IN QUESTION COULD NOT BE BROUGHT TO TAX U/S.28(VA). THE ADDITION WAS DELETED, HENCE THE REVENUE IS IN APPEAL. HAVING H EARD THE SUBMISSIONS OF BOTH THE SIDES, NOW THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON BLE SUPREME COURT PRONOUNCED IN ASSESSEE S GROUP CASE TITLED AS GUFFIC CHEM P.LTD. VS. CIT (C.A.NO.2522 OF 2011) :: CIT VS. MANDALAY INVESTMENT P.LTD. (C.A. N O.2523 OF 2011) REPORTED IN 332 ITR 602 (SC), WHEREIN IT WAS HELD THAT VIDE FINANCE ACT 2002 W.E.F. 01/04/2003 I.E. FROM A.Y. 2003 - 04 THE SAID CAPITAL RECEIPT IS MADE TAXABLE. FACTS OF THE SAID CITED DECISION WERE IDENTICAL THAT DURING A.Y.1997 - 98 THE SAI D APPELLANT HAD RECEIVED RS.50 LACS FROM RANBAXY LAB LTD. AS NON - COMPETITION FEES IN TERMS OF AN AGREEMENT DATED 31/03/1997. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: - I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 8 THE ASSESSEE, WHICH WAS CARRYING ON THE BUSINESS OF MANUFACTURING, SELLING AND DIS TRIBUTION OF PHARMACEUTICAL AND MEDICAL PREPARATIONS, RECEIVED DURING THE ASSESSMENT YEAR 1997 - 98 RS.50 LAKHS FROM RANBAXY AS NON - COMPETITION FEE. IT AGREED TO TRANSFER ITS TRADE MARKS TO RANBAXY AND IN CONSIDERATION FOR SUCH TRANSFER THE ASSESSEE AGREED THAT IT SHALL NOT CARRY ON DIRECTLY OR INDIRECTLY THE BUSINESS HITHERTO CARRIED ON BY IT. THE AGREEMENT WAS FOR 20 YEARS. THE TRIBUNAL HELD THAT THE AMOUNT WAS A CAPITAL RECEIPT; BUT THE HIGH COURT REVERSED THE DECISION. ON APPEAL TO THE SUPREME COURT: H ELD, REVERSING THE DECISION OF THE HIGH COURT, THAT PRIOR TO APRIL 1, 2003, WHEN PARLIAMENT STEPPED IN TO SPECIFICALLY TAX SUCH RECEIPTS, THE PAYMENT WAS IN THE NATURE OF A CAPITAL RECEIPT. 4.1. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE HON BLE APEX COURT, WE HEREBY AFFIRM THE FINDINGS OF LD.CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. 7. ON PERUSAL OF THE AHMEDABAD BENCH DECISION WHERE THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF GUFFIC CHEM P. LTD. V. CIT (SUPRA) HAS BEEN FOLLOWED, WE ARE OF THE OPINION THAT BOTH NON - COMPETE FEE AND GIVING - UP RIGHT TO NOT MANUFACTURE ARE ONE AND SAME AND THEREFORE, R ESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) ON TH IS ISSUE AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 8. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO ADOPTION OF GUIDELINE VALUE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN UNDER SECTION 50C OF THE ACT. 8.1 DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAS EFFECTED SALE OF ITS LAND TOGETHER WITH SUPER STRUCTURE FOR A CONSIDERATION OF .1,44,00,000 . THE SALE WAS EFFECTED TO CHENNAI PETROLEUM CORPORATION LTD. THROUGH I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 9 REGISTERED SALE DEED DATED 27.06.2002. THE ASSESSEE RETU RNED THE INCOME FROM CAPITAL GAINS ARISING FROM THIS TRANSACTION AT .1,33,95,555/ - . THE ASSESSING OFFICER EXAMINED THE DOCUMENTS IN RESPECT OF THE ABOVE TRANSACTION AND FOUND THAT THE REGISTERING AUTHORITY HAS DETERMINED THE VALUE OF THE PROPERTY AT .55 3.68 LAKHS. AS THE VALUE DETERMINED BY THE REGISTERED AUTHORITY WAS FELT VERY EXORBITANT, THE PURCHASER FILED REPRESENTATION BEFORE THE SPECIAL DY. COLLECTOR (STAMPS), WHO BY HIS ORDER DATED 30.01.2003 DETERMINED THE VALUE AT .501.36 (LAND 497.04 LAKHS AN D BUILDING .4.32 LAKHS). NOT ACCEPTING THE VALUE AS DETERMINED, THE PURCHASER APPROACHED THE APPELLATE FORUM VIZ., THE INSPECTOR GENERAL OF REGISTRATION, WHO VIDE HIS ORDER DATED 02.01.2004, DETERMINED THE VALUE OF THE PROPERTY AT .396,72,377/ - (LAND .3 92,40,000/ - , BUILDING .432,377/ - ). AS EVEN THE ORDER OF THE APPELLATE AUTHORITY WAS FELT UNREALISTIC, THE PURCHASER APPROACHED THE HON BLE HIGH COURT OF MADRAS, WHICH GRANTED AN INTERIM STAY ON THE OPERATION OF THE ORDER OF THE INSPECTOR GENERAL OF REGIST RATION. 8.2 FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT AS PER THE PROVISIONS OF SECTION 50C OF THE ACT, WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASST BEING LAND OR BUILDING OR BOTH, IS LES S THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY, THE VALUE SO ADOPTED SHALL FOR THE PURPOSE OF SECTION 48 OF THE ACT BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED/ACCRUED AS A RESULT OF SUCH I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 10 TRANSFER. IN THE INSTANT CASE, THE VALUE FIX ED BY THE STAMP VALUATION AUTHORITY WAS .553.68 LAKHS, WHICH HAS BEEN REDUCED TO .396.72 LAKHS ON APPEAL BY THE INSPECTOR GENERAL OF REGISTRATION. SUCH BEING THE CASE WHERE THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY IS HIGHER THAN THE ACTUAL CONS IDERATION STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE, THE CONSIDERATION FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN SHALL BE TAKEN AS .3,96,72,377 AS DETERMINED BY THE STAMP VALUATION AUTHORITY. THEREFORE, THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE ABOVE SAID VALUE SHOULD NOT BE TAKEN AS THE FULL VALUE OF CONSIDERATION. THE ASSESSEE MAINLY SUBMITTED BEFORE THE ASSESSING OFFICER THAT HAVING APPROVED THE SALE CONSIDERATION BY THE APPROPRIATE AUTHORITY CONSTITUTED UNDER THE PROVISIONS OF THE INCOME TAX ACT, IT IS NOT OPEN FOR THE ASSESSING OFFICER TO SUBSTITUTE SUCH VALUE BY SOME OTHER NOTIONAL VALUE. IN VIEW OF THIS THE CONSIDERATION FOR TRANSFER OF PROPERTY OF .144 LAKHS SHOULD NOT BE DISTURBED. ANY ATTEMPT TO MAKE SUBSTITUTION OF ACTUAL CONSIDERA TION BY NOTIONAL VALUE IN SUCH CASE WOULD NOT ONLY AGAINST THE PRINCIPLE OF NATURAL JUSTICE BUT ALSO BAD IN LAW. 8.3 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THE PROVISIONS OF SECTION 50C OF THE ACT IS A DEEMING PROVISION WHICH SHALL BE APPLICABLE IN ALL CASES INCLUDING GOVERNMENT COMPANIES WHERE THE CONSIDERATION RECEIVED IS LESSER THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY. A REFERENCE TO A VALUATION I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 11 OFFICE UNDER SECTION 50C OF THE ACT COULD HAVE BEEN MADE IN THIS CASE, IF ONLY THE ASSESSEE HAS NOT DISPUTED THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY IN APPEAL BEFORE THE APPROPRIATE AUTHORITY. EVEN THOUGH A REFERENCE TO THE VALUATION OFFICER COULD NOT BE MADE IN THE INSTANT CASE AS THE ASSESSEE HAS GONE ON APPEAL BEFORE THE APPELLATE AUTHORITY, THE DEEMING PROVISION OF SECTION 50C OF THE ACT CANNOT BE OVERLOOKED. ACCORDINGLY, THE ASSESSING OFFICER HAS TAKEN THE VALUE OF .3,96,76,377/ - AS DETERMINED BY THE INSPECTOR GENERAL OF REGISTRAT ION AS THE FULL VALUE OF THE CONSIDERATION. HOWEVER, SINCE THE OPERATION OF THE ORDER OF THE INSPECTOR GENERAL OF REGISTRATION HAS BEEN STAYED BY THE HON BLE MADRAS HIGH COURT, THE RECOVERY PROCEEDINGS PURSUANT TO THE TREATMENT OF THE DISPUTED VALUE AS FUL L VALUE OF CONSIDERATION IS ALSO STAYED TILL THE DISPOSAL OF THE CASE BY THE HON BLE MADRAS HIGH COURT. 8.4 ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT THE PROVISION OF THE SECTION 50C OF THE ACT CONTEM PLATES A SITUATION WHERE IN THE VALUE ADOPTED BY STATE GOVERNMENT AUTHORITY EXCEEDS THE VALUE ADOPTED BY THE ASSESSEE. AS LONG AS THE GUIDELINE VALUE IS LOWER THAN THE ACTUAL CONSIDERATION, THERE IS NO ISSUE. HOWEVER, WHEN THE CONSIDERATION HAPPENS TO BE L OWER THAN THE GUIDELINE VALUE, THE DEEMING PROVISIONS OF SECTION 50C OF THE ACT WOULD AUTOMATICALLY OPERATES AND ACCORDINGLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 12 8.5 ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8.6 WE HA VE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CAS E, THE ASSESSEE HAS EFFECTED SALE OF ITS LAND TOGETHER WITH SUPER STRUCTURE FOR A CONSIDERATION OF .1,44,00,000/ - TO CHENNAI PETROLEUM CORPORATION LTD. THROUGH REGISTERED SALE DEED DATED 27.06.2002. THE ASSESSEE RETURNED THE INCOME FROM CAPITAL GAINS ARIS ING FROM THIS TRANSACTION AT .1,33,95,555/ - . THE ASSESSING OFFICER EXAMINED THE DOCUMENTS IN RESPECT OF THE ABOVE TRANSACTION AND FOUND THAT THE REGISTERING AUTHORITY HAS DETERMINED THE VALUE OF THE PROPERTY AT .553.68 LAKHS. AS THE VALUE DETERMINED BY T HE REGISTERED AUTHORITY WAS FELT VERY EXORBITANT, THE PURCHASER FILED REPRESENTATION BEFORE THE SPECIAL DY. COLLECTOR (STAMPS), WHO HAS DETERMINED THE VALUE AT .501.36 (LAND 497.04 LAKHS AND BUILDING .4.32 LAKHS). NOT ACCEPTING THE VALUE AS DETERMINED, T HE PURCHASER APPROACHED THE APPELLATE FORUM VIZ., THE INSPECTOR GENERAL OF REGISTRATION, WHO VIDE HIS ORDER DATED 02.01.2004, DETERMINED THE VALUE OF THE PROPERTY AT .396,72,377/ - (LAND .392,40,000/ - , BUILDING .432,377/ - ). AS EVEN THE ORDER OF THE APPEL LATE AUTHORITY WAS FELT UNREALISTIC, THE PURCHASER APPROACHED THE HON BLE HIGH COURT OF MADRAS, WHICH GRANTED AN INTERIM STAY ON THE OPERATION OF THE ORDER OF THE INSPECTOR GENERAL OF REGISTRATION. THE CASE OF THE ASSESSEE COULD NOT BE REFERRED TO THE VALU ATION OFFICER SINCE THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 13 ASSESSEE HAS GONE ON APPEAL BEFORE THE APPELLATE AUTHORITY. HOWEVER, THE DEEMING PROVISION OF SECTION 50C OF THE ACT CANNOT BE OVERLOOKED. THEREFORE, THE ASSESSING OFFICER HAS TAKEN THE VALUE OF .3,96,76,377/ - AS DETERMINED BY THE INSPECTOR GENERAL OF REGISTRATION AS THE FULL VALUE OF THE CONSIDERATION. HOWEVER, SINCE THE OPERATION OF THE ORDER OF THE INSPECTOR GENERAL OF REGISTRATION HAS BEEN STAYED BY THE HON BLE MADRAS HIGH COURT, THE RECOVERY PROCEEDINGS PURSUANT TO THE TREATMEN T OF THE DISPUTED VALUE AS FULL VALUE OF CONSIDERATION IS ALSO STAYED TILL THE DISPOSAL OF THE CASE BY THE HON BLE MADRAS HIGH COURT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 8.7 THE ABOVE TRANSACTION WAS TAKEN PLACE THROU GH REGISTERED SALE DEED DATED 27.06.2002. UNDER SECTION 269 UL(1) OF THE INCOME TAX ACT, THE APPROPRIATE AUTHORITY OF THE INCOME TAX DEPARTMENT HAS GIVEN NO OBJECTION CERTIFICATE FOR THE ABOVE TRANSACTION AT THE SALE VALUE OF .1,44,00,000/ - ON 21.06.200 2 IN TERMS OF CHAPTER XXC OF THE INCOME TAX ACT. THE CASE OF THE ASSESSEE COULD NOT BE REFERRED TO THE VALUATION OFFICER SINCE THE ASSESSEE HAS GONE ON APPEAL BEFORE THE APPELLATE AUTHORITY, WHO HAS GIVEN NOC FOR THE SALE VALUE OF .1,44,00,000/ - . CHAPTER XXC OF THE INCOME TAX ACT WAS BASICALLY A PROVISION, WHICH AUTHORIZED THE CENTRAL GOVERNMENT TO HAVE PRE - EMPTIVE PURCHASE RIGHT AND INTENDED TO HAVE A CHECK ON UNDER VALUATION OF THE PROPERTY. THE DEEMING PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 14 CAM E INTO EFFECT FROM 1 ST APRIL, 2003, I.E., IN THE FINANCIAL YEAR 2003 - 04 RELEVANT TO THE ASSESSMENT YEAR 2004 - 05. WHEN THE PROVISIONS OF SECTION 50C OF THE ACT WAS NOT AT ALL AVAILABLE AT THE TIME OF SALE AGREEMENT DATED 27.06.2002, THE PROVISIONS OF CHAPTE R XXC OF THE ACT WAS AVAILABLE WITH THE AVOWED OBJECT OF ENSURING THE PAYMENT OF TAX PROPERLY PAYABLE ON THE MARKET VALUE OF THE IMMOVABLE PROPERTY TRANSFERRED INTER - VIVO AND FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS, THE CONSIDERATION SHOWN BY THE A SSESSEE IN THE SALE AGREEMENT FOR WHICH NOC WAS GRANTED BY THE APPROPRIATE AUTHORITY UNDER CHAPTER XXC OF THE ACT, BOTH THE PENAL PROVISIONS OF CHAPTER XXC OF THE ACT AND THE PROVISIONS OF SECTION 50C OF THE ACT, WHICH CAME INTO EFFECT AT A LATER DATE SHOU LD NOT AFFECT JOINTLY. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT WHEN THE PENAL PROVISIONS OF CHAPTER XXC OF THE ACT WAS VERY MUCH AVAILABLE AT THE TIME OF TRANSACTION TAKEN PLACE AND WHEN THE PROVISIONS OF SECTION 50C OF THE ACT CAME INTO EFFECT IN THE SUBSEQUENT FINANCIAL YEAR, THE ASSESSING OFFICER WAS NOT CORRECT IN APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT. SIMILAR RATIO WAS LAID DOWN BY THE KOLKATA BENCHES OF THE TRIBUNAL IN THE CASE OF NEVILLE DE NORANHA V . ACIT 115 TTJ 390. HOWEVER, ANY FINAL JUDGEMENT AGAINST THE STAY ON OPERATION OF THE ORDER OF THE INSPECTOR GENERAL OF REGISTRATION, WHICH IS PENDING BEFORE THE HON BLE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 15 JURISDICTIONAL HIGH COURT, WOULD BE FINAL. THE GROUND RAISED BY THE ASSESSEE IS ALLOWE D SUBJECT TO THE DECISION OF THE HON BLE MADRAS HIGH COURT . I.T.A. NO. 52/MDS/2009 A.Y. 2005 - 06 [ASSESSEE S APPEAL] 9 . WITH REGARD TO THE ASSESSMENT YEAR 2005 - 06, THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFI RMATION OF DISALLOWANCE OF PROVISIONS FOR GRATUITY. 9 .1 THE ASSESSEE HAS MADE A PROVISION OF .7,50,23,640/ - TOWARDS GRATUITY FUND WITH LIFE INSURANCE CORPORATION OF INDIA, WHICH WAS ALSO APPROVED BY THE COMMISSIONER OF INCOME TAX, CHENNAI. THE ASSESSEE CLAIMED THE SAME AS PER THE PROVISIONS OF SECTION 40A(7)(B) OF THE ACT. HOWEVER, THE ASSESSING OFFICER NEGATED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD ONLY MADE THE PROVISION AND NOT MADE ACTUAL PAYMENT, AND THEREFORE, THE SAME CANNOT BE ALLOWED AS PER THE PROVISIONS OF SECTION 43B OF THE ACT. 9 .2 ON APPEAL, BY FOLLOWING THE DECISION IN THE CASE OF CIT V. SREE MAKAKAHYA TEA CO. (P) LTD. 199 ITR 714, THE LD. CIT(A) HAS OBSERVED THAT EVEN IF ANY SUM IS ALLOWABLE AS PER SECTION 40A(7) IF IT DOES NOT SATISFY THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 16 PAYMENT CRITERION OF SECTION 43B OF THE ACT THAT WILL NOT BE ALLOWED. HAD IT NOT BEEN SO THERE WAS NO NEED FOR THE LEGISLATURE TO BRING IN SECTION 43B(B) OF THE ACT WHICH COVERS ANY SUM PAYABLE TO A GRATUITY FUND. THEREFORE, IN V IEW OF THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SREE MAKAKAHYA TEA CO. (P) LTD. (SUPRA), THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 9 .3 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. TH E LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. TYCO SANMAR LTD. IN I.T.A. NO. 1551/MDS/2014 DATED 12.12.2014. ON THE OTHER HAND, THE LD. DR SUPP ORTED THE ORDER OF THE AUTHORITIES BELOW. 9 .4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ON SIMILAR FACTS AND CIRCUMSTANCES IN AN IDENTICAL ISSUE, AFTER CONSIDERING VARIOUS CASE LAW, THE COORDINATE BENCH OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER : 2. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT FOUND THAT ASSESSEE MADE PROVISION FOR GRATUITY OF .32,54,120/ - AND THIS WAS NOT ADDED BACK WHILE COMPUTING TAXABLE INCOME IN ITS COMPUTATION. THE ASS ESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THIS PROVISION MADE FOR GRATUITY SHOULD NOT BE DISALLOWED. THE ASSESSEE CONTENDED THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007 - 08, IT MADE PROVISION TOWARDS GRATUITY WITH LIC O F INDIA WHICH WAS APPROVED BY THE COMMISSIONER OF INCOME TAX . THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT IS ALLOWABLE AS DEDUCTION AS PER PROVISIONS OF SECTION 40A(7)(B) OF THE ACT. IT WAS THE SUBMISSION OF THE ASSESSEE THAT CLAIM SHOULD BE ALLOWED UNDER THE PROVISIONS OF SECTION 40A(7)(B) WHICH IS A SPECIFIC PROVISION AND HENCE THE SAME OVERRIDES SECTION 43B OF THE ACT, AS SECTION 43B IS ONLY GENERAL PROVISION. THE ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE AND DISALLOWED I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 17 THE PROVISION FO R GRATUITY HOLDING THAT UNLESS THE SAID PROVISION IS PAID, IT IS NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 43B OF THE ACT. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE DISALLOWANCE OBSERVING THAT SIMILAR ISSUE HAS BEEN ALLOWED IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING THE PROVISION FOR GRATUITY SUBMITTING THAT SINC E THE SAID AMOUNT IS ONLY A PROVISION AND NOT PAID IS HIT BY THE PROVISIONS OF SECTION 43B OF THE ACT. 4. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). HE FURTHER SUBMITS THAT THE REVENUE IN EARLIER YEARS ACCEP TED THE DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE PROVISION FOR GRATUITY FOR THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 AND NO FURTHER APPEAL WAS FILED BY THE REVENUE ON SIMILAR ISSUE. COUNSEL RELIED ON THE FOLLOWING DECISIONS IN S UPPORT OF HIS CONTENTIONS THAT PROVISION MADE FOR APPROVED GRATUITY FUND IS ALLOWABLE AS DEDUCTION UNDER SECTION 40A(7)(B) OF THE ACT AND SUCH PROVISION FOR GRATUITY IS NOT HIT BY THE PROVISIONS OF SECTION 43B OF THE ACT: - I) CIT VS. BECHTEL INDIA (P) LT D. (2 DTR (DEL) 145) II) CIT VS. COMMON WEALTH TRUST (P) LTD & ANR (269 ITR 290)(KER) (III) CIT VS. EASWARAN & SONS ENGINEERS LTD.[TAX APPEAL NO.596 OF 2005 DATED 26.09.2011(MADRAS) (IV) MEWAR SUGA MILLS LTD. VS. DCIT (THIRD MEMBER) (65 ITD 163)(JAIPUR BENCH) 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON. THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEA R 2007 - 08 CREATED PROVISION OF . 32,54,120/ - TOWARDS GRATUITY WITH LIC OF INDIA. THIS FUND WAS APPROVED BY THE COMMISSIONER OF INCOME TAX. THE ASSESSING OFFICER DISALLOWED THE SAID PROVISION FOR GRATUITY FOR THE REASON THAT ASSESSEE DID NOT PAY THE SAID GRATUITY DURING THE ASSESSMENT YE AR 2007 - 08. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS MADE ONLY A PROVISION THE SAME IS NOT ALLOWABLE IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 43B OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE FO LLOWING THE ORDERS PASSED IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2005 - 06 & 2006 - 07 BY ORDERS DATED 01.12.2011 & 01.02.2013 RESPECTIVELY. IT WAS THE SUBMISSION OF THE COUNSEL THAT NO FURTHER APPEAL WAS PREFERRED BY THE REVENUE AND THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WAS ACCEPTED. ON A PERUSAL OF THE DECISIONS RELIED ON BY THE ASSESSEE, WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY VARIOUS HIGH COURTS AND HELD THAT THE PROVISION MADE BY THE ASSESSEE TOWARDS CONTRIBUTION TO APPROVED GRATUITY FUND IS AN ASCERTAINED LIABILITY AND IS ALLOWABLE AS DEDUCTION UNDER SECTION 40A(7)(B)OF THE ACT. IT WAS FURTHER HELD THAT THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 18 PROVISIONS OF SECTION 40A(7)(B) OVERRIDES SECTION 43B OF THE ACT. SIMILAR VIEW WAS ALSO TAKEN BY THE THIRD MEMBER OF JA IPUR BENCH OF THIS TRIBUNAL IN THE CASE OF MEWAR SUGAR MILLS LTD. VS. DCIT (SUPRA). 6. THE HON BLE KERALA HIGH COURT IN THE CASE OF CIT VS. COMMON WEALTH TRUST (P) LTD & ANR. (SUPRA) HELD AS UNDER: - SECTION 40A(7) OF THE INCOME - TAX ACT, 1961, WAS INTROD UCED BY THE FINANCE A C T, 1975, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 1973, AND SECTION 43B WAS INTRODUCED BY THE FINANCE ACT, 1983, WITH EFFECT FROM APRIL 1, 1984. S E CTION 4 0A SAYS THAT THE PROVISIONS OF THIS SECTION SHALL HAVE EFFECT NOTWITHSTAND I NG A N Y THING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION OF THE ACT RE LAT I N G TO T H E COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BU SINE S S O R P ROFESS I ON' . SIMILARLY, SECTION 43B OPENS W I TH A NON OBSTANTE C L A US E. S ECTI ON 40A(7) PROVIDES THAT IN C ASES COVERED B Y THE PROVISIONS OF C LAUS E (A) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF A N Y PROVISION WHETHER CA LL E D A S SUCH OR BY ANY OTHER NAME MADE BY THE ASSESSEE FOR THE PAYMENT OF G RATUITY OF HIS EMPLOYEES ON THEIR RETIREMENT OR ON T ERMINATION OF TH EIR EMPLOYM E NT FOR ANY REASON . HOWEVER, CLAUSE (B) OF SECTION 40A(7) CLEARLY PROVIDES THAT TO ANY PROVISION MADE BY THE ASSESSEE FOR T HE PURPOSE OF PAYM E N T O F A SUM BY WAY OF ANY CONTRIBUTION TOWARDS A N APPROVED GRATUITY FU ND , O R F OR THE PURPOSE OF PAYMENT OF ANY GRATUITY, TH AT HAS BECOME PAYABLE DU R ING T H E PRE VIOUS Y EAR CLAUSE (A) WILL NOT APPLY. THI S M EANS EXCEPTION HAS BEEN CARVED O UT I N RE SP E CT OF PAYM E NT OF SUMS BY WA Y OF ANY CONTRIBUTIO N T OWARDS AN AP P R O V E D G RATUITY FUND . THUS THE LEG I SLA TURE W ANTED T O GIVE A SPE C IA L T REATME N T T O P ROVISION MADE BY AN ASSESSEE FOR T HE P URPOSE OF PAYM E NT BY WAY O F A NY CO NTRI B UTION TOWARDS AN APPROV E D GRAT UI TY FUND. THIS HA S TO BE TR EA T E D AS A SP EC IAL PROVISION. THE MARGINAL NOTE TO SE C TION 43B CLEARLY SAYS 'CE RT A I N DE DUC TIONS TO B E ONLY ON ACTUAL PAYMENT' . I T DEALS WITH VARIOUS ITEMS. SECTION 43B(B) DEALS GENERALLY WITH ANY SUM PAYABLE BY THE ASSESSEE AS AN EMP L OYER BY WAY OF CONTR IB UTION TO ANY PROVIDENT FUND A T SUPERANNUATION FUND OR GRATUITY FUND OR ANY O T HER FUND FOR THE WELFARE OF THE EMPLOYEES. OF COURSE, THE GRATUITY FUND IS ALSO REFERRED TO. SECTION'40A(7), CLAUSE (B), PARTICULARLY SUB - CLAUSE ( I), THEREOF IS A SPECIAL PROVISION IN REGARD TO A CLAIM FOR DEDUCTION BASED ON A PROVISION MADE FOR PAYMENT TOWARDS UNAPPRO VED GRATUITY FUND. THERE IS NO CLEAR INCONSISTENCY BETWEEN THE TWO PROVISIONS, VIZ., SECTIONS 40A ( 7 ) AND 43B . SECTION 40A(7) IS IN NEGATIVE TERMS AND SE C TION 43B IS IN POSITIVE TERMS, THE EFFECT OF BOTH THESE PROVISIONS I S THAT IN ORDER TO CLAIM DEDUCTION IN RESPECT OF PAYMENT TO A GRATUITY FUND THE R E MUST BE ACTUAL PAYMENT AND THAT DEDUCTION CANNOT BE ALLOWED ON THE BASIS O F ANY PROVISION. THE ONLY EXCEPTION TO THE ABOVE RULE IS WITH REGARD TO THE P R OVISION FOR PAYMENT TO AN APPROVED GRATUITY FUND. IT CANN OT BE INTERPRETED THAT THE LATER PRO VISION IN SECTION 43B BY INTRODUCING THE NON OBSTANTE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 19 CLAUSE WOULD ABROGATE THE SPECIAL PROVISION WITH REGARD TO THE PROVISION MADE FO R PAYMENT TO AN APPROVED GRATUITY FUND CONTAINED IN SECTION 4 0 A(7)(B)(I). THIS IS ALL THE MORE SO SINCE NO PATENT CONFLICT OR INCONSISTENCY CAN BE SPELT OUT . BOTH THE PROVISIONS CAN CO - EXIST. A HARMONIOUS CONSTRUCTION OF THE TWO PROVISIONS WOULD CLEARLY INDICATE THAT THE LEGISLATURE NEVER INTENDED TO TAKE AWAY THE BENEFIT CONFERRED UNDER C LAUSE (B) OF SECTION 40A(7) BY THE PROV I SIONS OF SECTION 43B(B). 7. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BECHTEL INDIA (P) LTD. (SUPRA) HELD AS UNDER: 6. FURTHER, WE ARE IN AGREEMENT WITH THE TRIBUNAL THAT S. 40A(7)(B) OF THE ACT WILL HA VE AN ' OVERRIDING EFFECT OVER S.43B OF THE ACT. IN THE FIRST PLACE SECTION 40A(1) IS AN UNEQUIVOCAL NON - OBSTANTE CLAUSE AND SINCE S. 40A(7)(B) SPECIFICALLY PERMITS A DEDUCTION OF A SUM CONSTITUTING THE PROVISION TOWARDS AN APPROVED GRATUITY FUND, THE SAID PROVISION WILL TAKE PRECEDENCE OVER A COMPARATIVELY GENERAL PROVISION LIKE S. 43B. SECONDLY, S. 40A(7)(A) WHICH DISALLOWS DEDUCTION OF ANY PROVISION OF GRATUITY TO EMPLOYEES ON THEIR RETIREMENT IS ITSELF MADE SUBJECT TO S. 40A(7)(B) WHICH ALLOWS SUCH DEDUC TION AS LONG AS IT IS MADE TOWARDS AN APPROVED GRATUITY FUND. THERE IS NO DISPUTE THAT IN THE INSTANT CASE THE PROVISION MADE IS TOWARDS CONTRIBUTION TO AN APPROVED GRATUITY FUND . THEREFORE THE CLAIM BY THE ASSESSEE FOR DEDUCTION ON THIS SCORE WAS CLEARLY JUSTIFIED. WE ARE ACCORDINGLY OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW AR I SES I N THIS REGARD AS WELL. 8. RESPECTFULLY FOLLOWING THE SAID DECISIONS, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE M ADE FOR APPROVED GRATUITY FUNDS. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 9 .5 AFTER CONSIDERING THE RATIO LAID DOWN BY THE HON BLE KERALA HIGH COURT AND THE HON BLE DELHI HIGH COURT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACI T V. TYCO SANMAR LTD. (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IS ALSO APPLIES TO THE FACT OF THE PRESENT CASE. HOWEVER, FOR MORE CLARITY, THE GRATUITY TO BE DEDUCTIBLE, THE CONDITIONS LAID DOWN IN SECTION 40A(7) HAD TO BE FULFILLED. THE DEDUCTI ON COULD NOT BE ALLOWED ON GENERAL I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 20 PRINCIPLES UNDER ANY OTHER SECTION OF THE ACT, BECAUSE SUB - SECTION (1) OF SECTION 40A MADE IT CLEAR THAT THE PROVISIONS OF THE SECTION HAD EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISIONS OF THE ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . IN OTHER WORDS, SECTION 40A HAD EFFECT NOTWITHSTANDING ANYTHING CONTAINED IN SS. 30 TO 39 OF THE ACT. IN VIEW OF THE ABOVE OBSERVATION, THE ASSES SING OFFICER IS DIRECTED TO FOLLOW THE DECISION IN THE CASE OF SHREE SAJJAN MILLS LTD. V. CIT 156 ITR 585 (SC) AND ALSO THE DECISION IN THE CASE OF SOUTH MADRAS ELECTRIC SUPPLY CORPORATION LTD. V. CIT 244 ITR 780 (MAD) AND DECIDE THE ISSUE AFRESH. ACCORDIN GLY , WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. SIMILAR GROUND HAS ALSO BEEN RAISED IN THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 AN D IN VIEW OF THE ABOVE DECISION FOR THE ASSESSMENT YEAR 2005 - 06, THE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 ARE ALSO ALLOWED FOR STATISTICAL PURPOSES . 11. THE NEXT COMMON GROUND RAISED IN THE APPEALS OF THE ASSESSEE F OR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 IS WITH REGARD TO CONFIRMATION OF ADDITION TOWARDS CLAIM OF ERP EXPENSES. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 21 11.1 THE ASSESSEE HAS INCURRED SOFTWARE EXPENDITURE TO THE EXTENT OF .5,10,182/ - & .38,380/ - TOWARDS ERP EXPENSES & HRM PAY ROLE MODULE EXPENDITURE RESPECTIVELY. ACCORDING TO THE ASSESSING OFFICER, SINCE THE EXPENDITURE HAS RESULTED IN SOFTWARE WHICH PROVIDES ENDURING BENEFIT TO THE ASSESSEE, THE SOFTWARE HAS TO BE TREATE D AS PART OF COMPUTER FOR THE PURPOSES OF DEPRECIATION. BY ALLOWING DUE DEPRECIATION AT 60%, THE ASSESSING OFFICER TREATED THE EXPENSES AS CAPITAL IN NATURE AND ADDED AN AMOUNT OF .2,19,425/ - . 11.2 ON APPEAL, THE LD. CIT(A) HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER SINCE THE ISSUE IS APPEARING IN THE DEPRECIATION SCHEDULE SINCE 2003 - 04. 11.3 AFTER HEARING BOTH SIDES, WE FIND THAT SIMILAR ADDITION WAS MADE IN THE ASSESSMENT YEAR 2003 - 04 BY THE ASSESSING OFFICER, WHICH WAS NOT DISPUTED BEFOR E THE LD. CIT(A). AGAIN IN THE ASSESSMENT YEAR 2005 - 06, AGAINST SIMILAR ADDITION, THE ASSESSEE HAS CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND BY FOLLOWING THE ORDER OF EARLIER ASSESSMENT YEAR OF ONE OF THE GROUP COMPANY OF THE ASSESSEE, THE LD. CIT( A) DISMISSED THE GROUND RAISED BY THE ASSESSEE. FURTHER, IT IS AN ADMITTED FACT THAT FOR BOTH THE ASSESSMENT YEARS 2003 - 04 AND 2005 - 06, THE ASSESSEE HAS NOT DISPUTED ABOUT THE ADDITION BEFORE THE TRIBUNAL. AGAINST THE GROUND RAISED IN THE ASSESSMENT YEARS I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 22 2006 - 07 AND 2007 - 08, THE LD. COUNSEL FOR THE ASSESSEE, BY RELYING ON THE DECISIONS IN THE CASE OF ACIT V. TORRENT PHARMACEUTICALS LTD. 137 ITD 301 (AHD) AND ESCORT LTD. V. ACIT 104 ITD 427 (DEL), SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ABOVE DE CISION AND EXPENDITURE INCURRED ON ERP SHOULD BE OF REVENUE IN NATURE. 11.4 AFTER PERUSING THE ABOVE ORDERS, WE FIND THAT BY FOLLOWING THE DECISION OF THE DELHI BENCHES OF ITAT IN THE CASE ESCORT LTD. V. ACIT (SUPRA), THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. TORRENT PHARMACEUTICALS LTD. (SUPRA) , HAS OBSERVED AND HELD AS UNDER: 10. FIRST GROUND IS WITH REGARD TO CONFIRMING THE DISALLOWANCE OF RS.63 LAKH WHICH WAS CLAIMED BY ASSESSEE ON REVENUE ACCOUNT. THE CONTENTION OF ASSESSEE BEFORE LD. CIT(A) WAS THAT THE ASSESSEE - COMPANY HAD ENTERED INTO AN AGREEMENT WITH IBM. IN PURSUANCE OF THIS AGREEMENT, IBM WOULD UNDERTAKE TO STUDY THE EXISTING BUSINESS SYSTEM AND COME WITH SOLUTIONS AS REQUIRED BY AN ENTERPRISE RESOURCE PLANNING (ERP FOR SHOR T) PROVIDED BY SAP. IT WOULD ALSO TRAIN PEOPLE SO THAT DATA MIGRATION FROM LEGACY SYSTEM TO SAP WOULD SMOOTH AND TRAIN PEOPLE IN THE RUNNING OF THE ERP SYSTEM. TOTAL PAYMENTS MADE TO IBM AMOUNTING TO RS.63 LAKH. IT WAS SUBMITTED BEFORE LD. CIT(A) THAT ERP EXPENDITURES ARE ESSENTIALLY REVENUE IN NATURE WHICH ARE RELATED TO UPGRADING ITS PRESENT ACCOUNTING SOFTWARE AND ENTIRE EXERCISE OF GOING FOR ERP FOR SMOOTH FUNCTIONING OF THE ORGANIZATION. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SUBMISSION OF ASS ESSEE WAS NOT CONSIDERED IN RIGHT PERSPECTIVE BY LD. CIT(A). HE SUBMITTED THAT THE EXPENDITURE AS CLAIMED BY ASSESSEE ARE REVENUE IN NATURE IN VIEW OF VARIOUS JUDICIAL PRONOUNCEMENTS IN THIS REGARD. LD. AR SUBMITTED THAT THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE IN ASSESSEE S OWN CASE IN ITA NO.4343/AHD/2007 ORDER DATED 31 - 01 - 2011. LD. AR FURTHER SUBMITTED THAT IN IDENTICAL FACTS, THE HON BLE BOMBAY HIGH COURT HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN TAX APPEAL NO.4176 OF 2009 DATED 04 - 07 - 2011 IN T HE CASE OF CIT V. M/S. RAYCHEM RPG LTD. ON THE CONTRARY, LD. CIT - DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 23 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY THE RIVAL PARTIES. WE FIND THAT HON BLE CO - ORDINATE BENCH HAS DECIDED THIS ISSUE IN PARA - 47 IN ASSESSEE S OWN CASE IN ITA NO.4343/AHD/2007 (SUPRA), WHICH REPRODUCED AS UNDER: - 47. WE FIND THAT THE REVENUE HAS RELIED ON THE DECISION OF THIS TRIBUNAL DELHI BENCH IN THE CASE OF ESCORTS L TD. V ACIT (2007) 104 ITD 427 (DEL), WHEREIN THE EXPENDITURE ON SOFTWARE IS CONSIDERED AS CAPITAL IN NATURE BY HOLDING THAT WHERE THE ASSESSEE ACQUIRES ERP BUSINESS SOFTWARE WITH UNLIMITED USERS OF LICENCE AND EXPENDITURE INCURRED ON ACQUISITION OF SOFTWAR E BY WAY OF OUTRIGHT PURCHASE IS TO BE CONSIDERED AS CAPITAL IN NATURE. BUT IN THE PRESENT CASE, THE FACTS ARE ENTIRELY DIFFERENT AND IT IS NOT THE ALLEGATION OF THE REVENUE FROM THE ASSESSING OFFICER S STAGE TILL NOW THAT THE ASSESSEE HAS ACQUIRED THIS SO FTWARE FOR UNLIMITED USER OF LICENCE AND THIS IS OUTRIGHT PURCHASE. THE REVENUE ALSO RELIED ON THE DECISION OF HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. ARAWALI CONSTRUCTIONS CO. (P) LTD. (2003) 259 ITR 30 (RAJ) BUT THE FACTS IN THAT CASE ARE ALSO IN REGARD TO DISTINGUISHABLE AS IN THAT CASE THE SOFTWARE WAS AN OUTRIGHT PURCHASE OF COMPUTER PROGRAMME WHICH RELATES TO TECHNICAL KNOW - HOW . WE FIND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING AS TO THE FACT THAT WHETHER EXPENDITURE ON COMPUTE R SOFTWARE GIVES AN ENDURING BENEFIT TO AN ASSESSEE, THE DURATION OF TIME FOR WHICH THE ASSESSEE RIGHT TO USE THE SOFTWARE BECOMES RELEVANT. ACCORDINGLY WE ARE OF THE VIEW THAT IN CASE THE SOFTWARE BECOMES OBSOLETE WITH TECHNOLOGICAL INNOVATION AND ADVANCE MENT WITHIN A SHORT SPAN OF TIME, IT CAN BE SAID THAT WHERE THE LIFE OF THE COMPUTER SOFTWARE IS SHORTER OR SAY LESS THAN 2 YEARS, IT MAY BE TREATED AS REVENUE EXPENDITURE. HENCE, WE FIND THAT THE CIT(A) HAS RECORDED A CATEGORICAL FINDING THAT THE SOFTWARE PROGRAMME WITHOUT WHICH THE COMPUTER CANNOT WORK AND WITH THE ADVANCEMENT OF TECHNOLOGY, THE PROGRAMME CHANGES DURING SHORT PERIOD AND THIS CHANGE IS REQUIREMENT OF THE BUSINESS OF THE ASSESSEE I.E. SHARE BROKING. ACCORDINGLY, WE DELETE THE ADDITION CONFI RMED BY CIT(A) AND THIS ISSUE OF ASSESSEE S APPEAL IS ALLOWED. . I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 24 FURTHER THE HON BLE BOMBAY HIGH COURT IN TAX APPEAL NO.4176 OF 2009 IN THE CASE OF M/S. RAYCHEM RPG LTD. (SUPRA), HAS AFFIRMED THE VIEW OF ITAT SPECIAL BENCH WHICH HAS HELD THAT THE EXPENDI TURE INCURRED ON ERP IS OF REVENUE IN NATURE. RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION, WE ALLOW THIS GROUND OF ASSESSEE S APPEAL. 11.5. THOUGH THE TWO COORDINATE BENCHES OF THE TRIBUNAL HAVE OBSERVED THAT THE ERP EXPENSES INCURRED BY THE ASSES SEE IS OF REVENUE IN NATURE, THE ASSESSING OFFICER HAS NOT PASSED SPEAKING ORDER AS TO WHETHER THE SOFTWARE WAS AN OUTRIGHT PURCHASE OF COMPUTER PROGRAMME WHICH RELATES TO TECHNICAL KNOW - HOW . ACCORDING TO THE ASSESSING THE EXPENDITURE ON COMPUTER SOFTWAR E GIVES AN ENDURING BENEFIT TO AN ASSESSEE, BUT HE HAS NOT STATED THE DURATION OF TIME FOR WHICH THE ASSESSEE RIGHT TO USE THE SOFTWARE OR THE SOFTWARE CAN BE USED PERMANENTLY THEN IT CAN BE SAID THAT THE ASSESSEE CAN ENJOY ENDURING BENEFIT, BUT IF THE LIF E SPAN OF THE SOFTWARE IS SHORTER OR LESS THAN TWO YEARS, THE EXPENDITURE INCURRED FOR THE PURCHASE OF SOFTWARE SHOULD BE TREATED AS REVENUE EXPENDITURE. WITH THE ABOVE OBSERVATIONS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO EXAMINE THE ISSUE IN LINE OF THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL AS REFERRED HEREIN ABOVE. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 25 I.T.A.N OS.1348 & 1349/MDS/2008, 558/MDS/2009, 289 & 290/MDS/2012 1 2 . THE FIRST COMMON GROUND RAISED IN THE APPEALS OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CONTRIBUTION TO BENEVOLENT FUND UNDER SECTION 40A( 9) OF THE ACT. 12 .1 IN THE ASSESSMENT YEAR 2003 - 04, THE ASSESSEE HAS CONTRIBUTED AN AMOUNT OF .1,14,114/ - TO A BENEVOLENT FUND FOR THE WELFARE OF THE EMPLOYEES. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT AS PER PROVISIONS OF SECTION 40A(9) OF THE ACT, NO DEDUCTION SHOULD BE ALLOWED IN RESPECT OF ANY SUM PAID BY THE ASSESSEE A S AN EMPLOYER EXCEPT IN THE CASE OF RECOGNIZED PROVIDENT FUND/SUPERANNUATION FUND OR APPROVED GRATUITY FUND. AS THE ASSESSEE HAS CONTRIBUTED TO A BENEVOLENT FUND FOR THE WELFARE OF THE EMPLOYEES WHICH IS NEITHER A RECOGNIZED PROVIDENT FUND NOR AN APPROVED GRATUITY FUND, THE CLAIM IS NOT IN ACCORDANCE WITH THE LAW. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CONTENDED THAT AN IDENTICAL ISSUE HAS BEEN ALLOWED IN ITS FAVOUR IN THE APPELLATE FORUM IN ITS OWN CASE. HOWEVER, THE ASSESSING OFFICER HA S NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE SINCE THE FACT REMAINS THAT THE ISSUE HAS NOT REACHED FINALITY. 12 .2 ON APPEAL, THE LD. CIT(A) HAS OBSERVED THAT IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 1998 - 99, 1999 - 2000 & 2001 - 02, THE LD. CIT(A) IN HIS ORDER IN ITA NOS. 152 TO 154/2004 - 05 DECIDED THE ISSUE IN FAVOUR OF THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 26 ASSESSEE. ACCORDINGLY, BY FOLLOWING HIS OWN ORDER FOR THE EARLIER ASSESSMENT YEARS, FOR THE YEAR UNDER APPEAL ALSO, THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE ADDITION OF .1,14,115/ - MADE BY THE ASSESSING OFFICER WAS DELETED. 12 .3 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. AGAINST THE ABOVE DELETION OF ADDITION UNDER SECTION 40A(9) OF THE ACT, THE REVENUE HAS FILED APPEALS FOR THE ASSESSMENT YEARS 2004 - 05, 2005 - 06, 2006 - 07 AND 2007 - 08. 12 .4 WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AGAINST THE CLAIM OF THE ASSESSEE TOWARDS CONTRIBUTION TO BENEVOLENT FUND, THE ASSESSING OFFICER HAS MADE ADDITION UNDER SECT ION 40A(9) OF THE ACT IN THE ASSESSMENT YEAR 1998 - 99 . BY FOLLOWING THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF INDIA PISTONS REPCO V. IAC 26 ITD 413), THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW CONTRIBUTION MADE BY THE ASSE SSEE TO BENEVOLENT FUND BY OBSERVING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, CASE LAWS AND THE SUBMISSIONS OF THE ID. AR. IT IS CLEAR THAT MEMORANDUM OF SETTLEMENT WAS EXECUTED IN TERMS OF SECTION 18(1) OF THE INDUSTRIAL DISPUTE A CT, 1947 AND IS BINDING ON BOTH THE PARTIES I.E. THE EMPLOYER AND THE WORKMEN. THE CONTRIBUTION TO THE BENEVOLENT FUND WAS MADE IN TERMS OF CLAUSE 3 OF THE SAID MEMORANDUM OF SETTLEMENT. THUS THE FUND WAS NOT CREATED SUO - MOTE BY THE APPELLANT BUT WAS BASED ON THE MEMORANDUM OF SETTLEMENT BETWEEN THE EMPLOYER AND THE WORKMEN IN TERMS OF SECTION 18(1) OF THE INDUSTRIAL DISPUTE ACT, 1947. THE CASE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 27 RELIED BY THE LD. AO SUPRA IS ALSO NOT APPLICABLE TO THE CASE IN HAND AS IT PERTAINED TO PAYMENT OF COMMISSION TO MANAGING AGENT. IT WAS HELD IN THE SAID CASE BY THE HON'BLE SUPREME COURT THAT IN VIEW OF SECTION 326 OF THE COMPANIES ACT, 1956, WHICH CONTAINED AN ABSOLUTE PROHIBITION AGAINST THE APPOINTMENT OR REAPPOINTMENT OF A MANAGING AGENT BEFORE APPROVAL OF THE CE NTRAL GOVERNMENT WAS OBTAINED, THE APPELLANT COMPANY'S LIABILITY TO PAY THE REMUNERATION OF THE MANAGING AGENTS AROSE ONLY WHEN THE GOVERNMENT CONVEYED ITS APPROVAL AND NOT PRIOR TO THAT DATE. THE FACTS OF THE APPELLANT'S CASE ARE DIFFERENT. IN THE PRESENT CASE THE PAYMENT HAS BEEN MADE PURSUANT TO THE MEMORANDUM OF SETTLEMENT U/S 18(1) OF THE INDUSTRIAL DISPUTE ACT, 1947. FURTHER SECTION 29 OF THE INDUSTRIAL DISPUTE ACT, 1947 PRESCRIBES PENALTY FOR ANY PERSON BREACHING THE SETTLEMENT. FURTHER, THE CHENNAI TRIBUNAL, IN THE CASE OF INDIA PISTONS REPCO LTD V. LAC (MAD) (26 ITD 413), HELD THAT CONTRIBUTION MADE BY THE ASSESSEE TOWARDS THE DEATH RELIEF FUND CONSTITUTED UNDER A MEMORANDUM OF SETTLEMENT U/S 18(1) OF THE INDUSTRIAL DISPUTE ACT BETWEEN THE ASSESSEE AND THE WORKMEN WAS AN ALLOWABLE DEDUCTION INSPITE OF PROVISIONS OF SECTION 40A(9). I N VIEW OF THE ABOVE REASONS, THE CONTENTION OF THE APPELLANT THAT CONTRIBUTION MADE BY IT TO THE BENEVOLENT FUND CONSTITUTED UNDER A MEMORANDUM OF SETTLEMENT U/S 18(1) OF THE INDUSTRIAL ACT IS STATUTORY IN NATURE AND HENCE COVERED BY EXCEPTION PROVIDED UNDER SECTION 40A(9) IS ACCEPTABLE. ACCORDINGLY, I DIRECT THE AO TO ALLOW CONTRIBUTION OF RS.97,335/ - MADE BY THE APPELLANT TO THE BENEVOLENT FUND. THE APPELLANT, THEREFORE, SUCCEEDS ON THIS GROUND. BY FOLLOWING THE ABOVE ORDER OF THE LD. CIT(A) AND ALSO BY FOLLOWING HIS OWN ORDER FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2003 - 04 AND FOR THE A SSESSMENT YEARS 2004 - 05, 2005 - 06, 2006 - 07 AND 2007 - 08 ALSO THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE ONLY CONTENTION OF THE DEPARTMENT IS THAT THE EARLIER ORDER OF THE LD. CIT(A) IN ASSESSEE S OWN CASE IN ITA NOS. 152 TO 154/20 04 - 05 HAS NOT BECOME FINAL CANNOT BE ACCEPTED SINCE THE DEPARTMENT HAS NOT FILED ANY ORDER OF HIGHER I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 28 FORUM HAVING MODIFIED OR REVERSED THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE SUSTAIN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE FOR ALL THE ABOVE ASSESSMENT YEARS UNDER APPEAL AND DISMISS THE GROUND RAISED BY THE REVENUE. 13. THE NEXT COMMON GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEARS 2003 - 04, 2004 - 05, 2006 - 07 AND 2007 - 08 IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT ON CAPTIVE POWER CONSUMPTION. 13. 1 THE ASSESSEE HAS SET UP A 18 MW (6 MW X 3) COMBINED POWER PLANT AT PLANT III, RAMAN NAGAR, METTUR DAM, SALEM DISTRICT OF TAMIL NADU DURING THE FINANCIAL YEAR 1996 - 97. THE ASSESSEE, VIDE ITS REVISED RETURN DATED 09.02.2005 CLAIMED DEDUCTION OF . 3,12,88,685/ - UNDER SECTION 80IA OF THE ACT ON THE PROFITS ARISING OUT OF POWER GENERATED AT THE ABOVE PLANT. TH E POWER GENERATED BY THIS PLANT HAS BEEN DISTRIBUTED TO THE ASSESSEE S OTHER MANUFACTURING DIVISIONS. WHILE THE POWER GENERATED HAS BEEN CAPTIVELY CONSUMED BY THE ASSESSEE ITSELF, THE CLAIM UNDER SECTION 80IA OF THE ACT HAS BEEN MADE ON THE NOTIONAL PROFIT S CLAIMED TO HAVE BEEN MADE BY THE POWER PLANT. THE ASSESSEE HAS SUBMITTED THE DETAILED DISTRIBUTION OF POWER GENERATED BEFORE THE ASSESSING OFFICER. BY RELYING ON THE DECISION IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. V. CIT 107 ITR 195, THE ASSES SEE VIDE ITS LETTER DATED 07.12.2005 AND 08.09.2005 SUBMITTED A DETAILED WRITTEN I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 29 SUBMISSIONS WITH REGARD TO THE ELIGIBILITY OF DEDUCTION AS CLAIMED BY IT. AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT T HE CAUSTIC CHLOR/ CHLOROMETHANE DIVISION, PLANT II PVC DIVISION AND METKEM DIVISION PLANT IV ARE BELONG TO THE ASSESSEE COMPANY ITSELF AND THE COMPANY M/S. COBAT SANMAR LTD. IS A SISTER CONCERN OF THE ASSESSEE COMPANY TO WHOM THE POWER GENERATED BY THE ASSESSEE WERE DISTRIBUTED. HE ALSO OBSERVED THAT OUT OF TOTAL POWER GENERATED, 96.2% HAVE BEEN SUPPLIED TO THE UNITS BELONGING TO THE MANUFACTURING DIVISIONS OF THE ASSESSEE COMPANY ITSELF AND ONLY A MEAGRE QUANTITY AMOUNT TO AROUND 1% OF THE POWER GENERA TED HAS BEEN SOLD TO TNEB. IN OTHER WORDS, OVER 96% OF THE POWER GENERATED HAS BEEN CAPTIVELY CONSUMED IN THE ASSESSEE S FACTORY ITSELF. THEREFORE, AFTER CONSIDERING THE FACTS OF THE CASE AND PROVISIONS OF LAW AND ALSO BY RELYING VARIOUS CASE LAW, THE ASSE SSING OFFICER HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSING OFFICER HAS ALSO MENTIONED THAT ON SIMILAR DISALLOWANCE IN THE CASE OF CHETTINAD CEMENTS CORPORATION FOR THE ASSESSMENT YEAR 2001 - 02, T HE LD. CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 13.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO BY CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS I NCLUDING THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. TANFAC INDUSTRIES IN I.T.A. NO. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 30 2800/MDS/2005 AND 48/MDS/2007 DATED 31.10.2007, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT AND ALLOWED THE GROUND RAISED BY THE ASSESSEE. 13.3 ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ON SIMILAR FACTS OF THE CASE, THE REVENUE ALSO FILED APPEAL FOR THE ASSESSMENT YEAR 2007 - 08. THE LD. DR MAINLY RELIED ON THE DECISION OF THE TRIBUNA L IN THE CASE OF CHETTINAD CORPORATION LTD. IN I.T.A. NO. 1029/MDS/2005 DATED 05.01.2007, WHICH THE LD. CIT(A) OUGHT TO HAVE FOLLOWED. 13.4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT I S AN ADMITTED FACT THAT 96% OF THE POWER GENERATED BY THE ASSESSEE HAS BEEN CAPTIVELY CONSUMED IN THE ASSESSEE S FACTORY ITSELF. THEREFORE, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT. B Y FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. TANFAC INDUSTRIES (SUPRA), THE LD. CIT(A) HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT. AGAINST THE ORDER OF THE TRIBUNAL, THE DEPARTMENT CARRIED THE MAT TER IN APPEAL BEFORE THE HON BLE JURISDICTIONAL HIGH COURT AND THE HON BLE HIGH COURT IN T.C. NO. 1773 OF 2008 DISMISSED THE APPEAL FILED BY THE DEPARTMENT. AGAINST THE ORDER OF THE HON BLE MADRAS HIGH COURT, THE DEPARTMENT PREFERRED SPECIAL LEAVE PETITION BEFORE THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 31 HON BLE SUPREME COURT AND THE HON BLE SUPREME COURT, VIDE ITS S.L.P. (C) NO. 18537 OF 2009, DISMISSED THE SLP FILED BY THE DEPARTMENT. THUS, THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF ACIT V. TANFAC INDUSTRIES (SUPRA) ATTAINED ITS FINALITY . 13.5 FURTHER, I N SIMILAR FACTS AND CIRCUMSTANCES ON AN IDENTICAL ISSUE IN THE CASE OF ACIT V. OPG ENERGY PVT. LTD. IN I.T.A. NOS. 1878 & 1879/MDS/2012 FOR THE ASSESSMENT YEARS 2005 - 06 AND 2009 - 10 VIDE ORDER DATED 20.12.2012, BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TAMILNADU PETRO PRODUCTS V. CIT 338 ITR 643, THE COORDINATE BENCH OF THE TRIBUNAL HAS HELD AS UNDER: 2. GRIEVANCE OF THE REVENUE IS THAT CIT(APPEALS) HELD THE ASSESSEE TO BE ELIGIBLE FOR CLAIMING DE DUCTION UNDER SECTION 80 - IA(10) OF INCOMETAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF CAPTIVE CONSUMPTION OF POWER. AS PER REVENUE, ONE OF THE CONCERNS TO WHICH POWER WAS SOLD BY ASSESSEE, NAMELY, M/S OPG METALS LIMITED, WAS NOT ONLY A GROUP CONCERN, B UT WAS LOCATED IN THE SAME PREMISES AS THAT OF ASSESSEE. 3. WHEN THE MATTER CAME UP, LEARNED D.R. FAIRLY ADMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2006 - 07, WHERE IT WAS HELD THAT ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80 - IA(10) OF THE ACT FOR CAPTIVE CONSUMPTION OF POWER. IN ANY CASE, WHETHER AN ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80 - IA, IN RESPECT OF NOTIONAL PROFITS ON ACCOUNT OF POWER GENERATED FROM ITS OWN C APTIVE POWER PLANT AND UTILIZED BY ITSELF, IS NO MORE AN ISSUE WHICH IS RES INTEGRA. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TAMILNADU PETRO PRODUCTS LTD. V. ACIT (338 ITR 643) HAS HELD THAT BENEFIT UNDER SECTION 80 - IA(10) COULD BE GIVEN EVEN IN R ESPECT OF ELECTRICITY GENERATED BY AN ASSESSEE ON CAPTIVE BASIS. THERE IS NO NECESSITY THAT POWER GENERATED SHOULD BE WHEELED THROUGH AN ELECTRICITY BOARD GRID, I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 32 BEFORE IT IS CONSUMED. FURTHER, WE ALSO FIND THAT THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSE SSMENT YEAR 2006 - 07 IN I.T.A. NO. 1014/MDS/10 DATED 3RD JUNE, 2011, HAD HELD AS UNDER AT PARAS 12 TO 16 OF THIS ORDER: - 12. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD SOLD TO M/S OPG METALS P. LTD. DIRECTLY WITHOUT WHEELING THE ELECTRICITY THROUGH TNEB GRID. OUT OF THE TOTAL POWER GENERATED 39% WAS SOLD BY ASSESSEE TO THE SAID M/S OPG METALS P. LTD. A.O. PUT THE ASSESSEE ON NOTICE THAT INCOME ATTRIBUTABLE TO SALE OF POWER TO M/S OPG METALS P. LTD. WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA OF TH E ACT. ASSESSEE REPLIED THAT THERE WAS NO DIFFERENCE BETWEEN DRAWING POWER FROM CAPTIVE GENERATION OR THROUGH THE GRID AND BOTH HAD TO BE CONSIDERED IN THE SAME STATUS. A.O. WAS NOT IMPRESSED. HE HELD THAT CAPTIVE CONSUMPTION OF ELECTRICITY WOULD NOT BE EL IGIBLE FOR DEDUCTION UNDER SEC.80IA OF THE ACT. RESULTANT DISALLOWANCE OF DEDUCTION CAME TO .9,36,80,721/ - . 13. IN ITS APPEAL BEFORE THE CIT(A), ARGUMENT OF THE ASSESSEE WAS THAT AN UNREASONABLE DISTINCTION WAS MADE BETWEEN CAPTIVE UNIT AND NON - CAPTIVE UNIT AND JUST BECAUSE POWER WAS NOT WHEELED THROUGH TNEB, A.O. OUGHT NOT HAVE DISALLOWED DEDUCTION UNDER SEC. 80IA OF THE ACT. RELYING ON SUB - SEC.(8) OF SEC.80IA OF THE ACT, ASSESSEE ARGUED THAT CAPTIVE CONSUMPTION WAS RECOGNIZED BY THE STATUTE FOR THE PU RPOSE OF WORKING OUT DEDUCTION UNDER SEC.80IA OF THE ACT. CIT(A) WAS APPRECIATIVE OF THIS CONTENTION AND HELD THAT ASSESSEE HAD SATISFIED THE REQUIREMENTS OF SEC.80IA OF THE ACT AS CAPTIVE CONSUMPTION ALSO WAS RECOGNIZED FOR THAT PURPOSE AND HENCE IT COULD NOT BE DENIED DEDUCTION UNDER SEC.80IA OF THE ACT ON BILLINGS MADE FOR CAPTIVE CONSUMPTION. 14. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE ORDER OF LD. CIT(A), SUBMITTED THAT IN VIEW OF THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL IN M/S CHITTI NADU CEMENT CORPORATION LTD. (SUPRA), ASSESSEE S CLAIM OUGHT NOT HAVE BEEN ALLOWED. PER CONTRA, LD. AR SUBMITTED THAT IN THE CASE OF CHETTINADU CEMENT CORPORATION LTD. (SUPRA), THAT COMPANY WAS NOT ENGAGED IN THE BUSINESS OF GENERATING ELECTRICITY, WHEREAS HERE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY. ACCORDING TO HIM, THE DECISION IN CHETTINADU CEMENT I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 33 CORPORATION LTD. (SUPRA) COULD NOT BE APPLIED ON FACTS HERE. RELIANCE WAS PLACED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. AHMEDABAD MANUFACTURING & CALICO PRINTING CO. LTD. (59 ITR 514) AND THAT HON BLE DELHI HIGH COURT IN THE CASE OF CIT V. DCM SRIRAM CONSOLIDATED LTD. (176 TAXMAN 49). 15. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. W HETHER BILLINGS FOR POWER CAPTIVELY CONSUMED WOULD BE ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA OF THE ACT IS NO MORE AN ISSUE WHICH IS RES INTEGRA INSOFAR AS THIS TRIBUNAL FALLING WITHIN THE JURISDICTION OF HON BLE MADRAS HIGH COURT, IS CONCERNED. IT IS FOR THE REASON THAT HON'BLE JURISDICTIONAL HIGH COURT HAS DEALT WITH THIS MATTER ELABORATELY IN THE CASE OF CIT V. THIAGARAJAR MILLS LTD. (TCA 68 TO 70 OF 2010 DATED 07 - 06 - 2010). RELEVANT PARAS 8 AND 9 OF THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE ABOVE CASE ARE REPRODUCED BELOW: - 8. THE CONTENTION THAT ONLY WHATEVER POWER GENERATED FROM THE SALE TO AN OUTSIDER OF THE ELECTRICITY BOARD, AND THE PROFIT OR GAIN DERIVED BY SUCH SALE ALONE CAN BE TAKEN AS PROFIT OR GAINS DERIVED BY THE ASSESSE E AS MENTIONED IN SEC. 80IA(1) OF THE ACT, HAS BEEN REJECTED BY THE TRIBUNAL IN THE ORDER IMPUGNED. IN OUR CONSIDERED VIEW, THE TRIBUNAL WAS WELL JUSTIFIED IN HAVING REJECTED SUCH A STAND OF THE APPELLANT. HAVING REFERRED TO SEC. 80IA(1) OF THE ACT, WE ARE ALSO CONVINCED THAT WHAT ARE ALL TO BE SATISFIED IN ORDER TO BE ELIGIBLE FOR THE DEDUCTION AS PROVIDED UNDER SUB - SEC.(1) OF SEC.80IA, THE ASSESSEE SHOULD HAVE SET UP AN UNDERTAKING OR AN ENTERPRISE AND FROM AND OUT OF SUCH AN UNDERTAKING OR AN ENTERPRISE SET UP, ANY PROFIT OR GAIN IS DERIVED, FALLING UNDER SUB - SEC. COVERED BY SUB - SEC.(4) OF SEC.80IA OF THE ACT SUCH PROFIT OR GAIN DERIVED BY THE ASSESSEE CAN BE DEDUCTED IN ITS ENTIRETY FOR A PERIOD OF 10 YEARS STARTING FROM THE DATE OF FUNCTIONING OF THE SE T UP. THE CONTENTION THAT PROFIT OR GAINS CAN BE CLAIMED BY THE ASSESSEE ONLY IF SUCH PROFIT OR GAIN IS DERIVED BY THE SALE OF ITS PRODUCT OR POWER GENERATED TO AN OUTSIDER CANNOT BE THE MANNER IN WHICH THE PROVISIONS CONTAINED IN SEC.80IA(1) CAN BE INTERP RETED. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 34 THE EXPRESSION DERIVED ; USED IN THE SAID SEC.80IA(1) IN THE BEGINNING AS WELL AS IN THE LAST PART OF THE SUB - SEC. (4) MAKES IT ABUNDANTLY CLEAR THAT SUCH PROFIT OR GAIN COULD BE OBTAINED BY ONE S OWN CONSUMPTION OF THE OUTCOME OF ANY SUCH UNDERTAK ING OR BUSINESS ENTERPRISES AS REFERRED TO IN SUB - SEC.(4) OF SEC.80IA. THE DICTIONARY MEANING OF THE EXPRESSION DERIVE IN THE NEW OXFORD DICTIONARY OF ENGLISH STATES OBTAINING SOMETHING FROM A SPECIFIED SOURCE . IN SEC.80IA(1) ALSO NO RESTRICTION HAS BE EN IMPOSED AS REGARDS THE DERIVING OF PROFIT OR GAIN IN ORDER TO STATE THAT SUCH PROFIT OR GAIN DERIVED ONLY THROUGH AN OUTSIDE SOURCE ALONE WOULD MAKE ELIGIBLE FOR THE BENEFITS PROVIDED IN THE SAID SECTION. 9. THEREFORE, THERE IS NO DIFFICULTY IN HOLDI NG THAT CAPTIVE CONSUMPTION OF THE POWER GENERATED BY THE ASSESSEE FROM ITS OWN POWER PLANTS WOULD ENABLE THE RESPONDENT/ASSESSEE TO DERIVE PROFITS AND GAINS BY WORKING OUT THE COST OF SUCH CONSUMPTION OF POWER INASMUCH AS THE ASSESSEE IS ABLE TO SAVE TO T HAT EXTENT WHICH WOULD CERTAINLY BE COVERED BY SEC.80IA(1). WHEN SUCH WILL BE THE OUTCOME OF OWN CONSUMPTION OF THE POWER GENERATED AND GAINED BY THE ASSESSEE BY THE ASSESSEE BY SETTING UP IS OWN POWER PLANT, WE DO NOT FIND ANY LACK OF MERIT IN THE CLAIM O F THE RESPONDENT/ASSESSEE WHEN IT CLAIMED BY RELYING UPON SEC.80IA(1) OF THE ACT BY WAY OF DEDUCTION OF THE VALUE OF SUCH UNITS OF POWER CONSUMED BY ITS OWN PLANT BY WAY OF PROFITS AND GAINS FOR THE RELEVANT ASSESSMENT YEARS. 16. SINCE THE ABOVE DECISIO N OF THE JURISDICTIONAL HIGH COURT EFFECTIVELY OVERRULES THE COORDINATE BENCH DECISION IN CHETTINADU CEMENT CORPN LTD. (SUPRA), WE ARE OF THE OPINION THAT RELIANCE PLACED BY LD. DR ON THE LATTER DECISION IS OF NO SUPPORT TO THE REVENUE. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. IN THE ABOVE CIRCUMSTANCES, GROUND NO.3 OF THE REVENUE STANDS DISMISSED. 4. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THESE APPEALS OF THE REVENUE, WHICH STAND DISMISSED. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 35 13.6 T HE RELIANCE PLACED BY THE LD. DR ON THE DECISION OF THE TRIBUNAL IN THE CASE OF CHETTINAD CORPORATION LTD. WAS OVERRULED BY THE HON BLE MADRAS HIGH COURT WHEN THE SAID CASE LAW WAS RELIED ON BY THE DEPARTMENT IN THE CASE OF CIT V. THIAGARAJAR MILLS LTD. (S UPRA). 13.7 UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A) HOLDING THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07 AND 2007 - 08 IS DISMISSED. 14. THE NEXT COMMON GROUND RAISED IN THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2004 - 05, 2005 - 06, 2006 - 07 AND 2007 - 08 IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ENTIR E UPFRONT FEE AND GUARANTEE COMMISSION PAID BY THE ASSESSEE IS ALLOWABLE. 14.1 IN THE ASSESSMENT YEAR 2004 - 05, THE ASSESSEE HAS INCURRED AN AMOUNT OF .1,01,13,627/ - TOWARDS UPFRONT FEES ( .47,50,000) AND GUARANTEE COMMISSION ( .53,63,627) AND CLAIMED TH E SAME AS REVENUE EXPENSES. THE ASSESSING OFFICER, HOWEVER, TREATED THE SAME AS PREPAID EXPENSES AND ALLOWED ONLY .14,84,764/ - AS AN ALLOWABLE EXPENSE. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 36 14.2 DURING THE COURSE OF HEARING BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THE DETAILS OF U PFRONT FEES/GUARANTEE COMMISSION AND CLAIMED THAT THE UPFRONT FEES WERE ALL REVENUE EXPENSES. IN VIEW OF THE DECISION IN THE CASE OF CIT V. MEENAKSHI MILLS LTD. 290 ITR 107 (MAD) AND IN THE CASE OF DCIT V. GUJARAT ALKALIES AND CHEMICALS LTD. SC 167 TAXMAN 203/215 CTR 10, THE LD. CIT(A) HAS HELD THAT THE UPFRONT FEES OF .47,50,000/ - PAID BY THE ASSESSEE IS OF REVENUE IN NATURE AND ALLOWED THE SAME. WITH REGARD TO GUARANTEE COMMISSION BY FOLLOWING THE DECISIONS IN THE CASE OF CIT V. MADRAS CEMENTS LTD. 254 ITR 423 (MAD) AND CIT V. SIVAKAMI MILLS LTD. 227 ITR 465 (SC), WHE REIN THE HON BLE SUPREME COURT HAS HELD THAT GUARANTEE COMMISSION PAID WAS ALLOWABLE AS BUSINESS EXPENDITURE, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS UNDER APPEAL. 14.3 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 14.4 AFTER HEARING BOTH SIDES, WE FIND THAT IN THE CASE OF CIT V. MEENAKSHI MILLS LTD. (SUPRA), THE HON BLE MADRAS HIGH COURT HAS HELD THAT THE AMOUNT PAID BY THE ASSESSEE TO THE BANK AS UPFRONT FEES WAS DEDUCTIBLE AS BUSINESS EXPENDITURE. IN T HE CASE OF DCIT V. GUJARAT ALKALIES AND CHEMICALS LTD. (SUPRA), THE HON BLE SUPREME COURT HAS HELD THAT THE COMMITMENT CHARGES, WHICH ARE IN THE NATURE OF UPFRONT FEES ARE ALLOWABLE AS REVENUE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 37 EXPENDITURE. FURTHER IN THE CASE OF CIT V. MADRAS CEMENTS LTD. (SUPRA) , THE HON BLE MADRAS HIGH COURT HAS ALLOWED THE APPEAL OF THE ASSESSEE, WHEREIN THE ASSESSEE HAS PAID GUARANTEE COMMISSION TO THE BANK FOR PURCHASE OF MACHINERY. MOREOVER, IN THE CASE OF CIT V. SIVAKAMI MILLS LTD. (SUPRA), THE HON BLE SUPREME COURT HAS ALSO HELD THAT GUARANTEE COMMISSION PAID WAS ALLOWABLE AS BUSINESS EXPENDITURE. IN VIEW OF THE RATIO LAID DOWN BY THE HON BLE MADRAS HIGH COURT AND THE HON BLE SUPREME COURT, THE LD. CIT(A) HAS RIGHTLY ALLOWED THE GROUND RAISED BY THE ASSESSEE WITH REG ARD TO THE CLAIM OF DEDUCTION OF UPFRONT FEES AND GUARANTEE COMMISSION. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS UNDER APPEAL IS DISMISSED. 15. THE NEXT COMMON GROUND RAISED IN THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 IS THAT THE LD. CIT(A) IS ERRED IN HOLDING THAT THE PROVISION FOR GRATUITY MADE ON ACTUARIAL BASIS SHOULD NOT BE ADDED BACK WHILE COMPUTING THE BOOK PROFITS. 15.1 THE ASSES SEE HAS MADE A PROVISION OF .61,71,603/ - FOR GRATUITY. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE BY STATING THAT THE PROVISION FOR GRATUITY IS ONLY A PROVISION IN THE NATURE OF UNASCERTAINED LIABILITY AND THE SAME REQUIRES TO BE ADDED BACK TO THE BOOK PROFITS. O N APPEAL, BY FOLLOWING VARIOUS DECISION, THE LD. CIT(A) HAS HELD THAT THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 38 PROVISION FOR GRATUITY OF .61,71,603/ - SHOULD BE ADDED BACK TO THE BOOK PROFITS AND ALLOWED THE GROUND RAISED BY THE ASSESSEE. 15.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THE OBSERVATIONS OF THE LD. CIT(A) IS FOUND TO BE CORRECT, WHEREIN THE LD. CIT(A) HAS HELD AS UNDER: 10.1 HOWEVER DURING THE COURSE OF THE HEARING THE APPELLANT HAS PUT FORTH BEFORE ME TWO DECISIONS SUBSTANTIATING ITS CLAIM. I HAVE CAREFULLY CONSID ERED THE SUBMISSIONS AND GONE THROUGH BOTH THE DECISIONS. IN THE CASE OF DCIT VS EICHER MOTORS LTD - 82 TTJ 61, THE HON'BLE INDORE BENCH HAS HELD THAT THE PROVISION FOR GRATUITY, MADE ON ACTUARIAL VALUATION WAS AN ASCERTAINED LIABILITY AND THE SAME COULD NOT BE ADDED BACK TO THE BOOK PROFITS. IN THE OTHER CASE CITED BY THE APPELLANT THE HON'BLE ITAT MUMBAI IN THE CASE OF GREAVES CHITRAM UD VS DCIT - (9 SOT 143) HAS ALSO HELD THAT THE GRATUITY LIABILITY, WHICH WAS BASED ON ACTUARIAL VALUATION, WAS DEDUCTIBL E FROM THE BOOK PROFITS AS ASCERTAINED LIABILITY. AS THE FADS AND CIRCUMSTANCES OF THE APPELLANT ARE EXACTLY SIMILAR TO THE CASE DISCUSSED ABOVE AND AS IT HAS NOT BEEN DENIED BY THE AO THAT PROVISION FOR GRATUITY HAS BEEN MADE ON ACTUARIAL BASIS, RESPECTFU LLY FOLLOWING THE DECISION OF THE ITAT, INDORE (SUPRA) AND THE ITAT, MUMBAI (SUPRA), I HOLD THAT THE PROVISION FOR GRATUITY OF RS.61,71,603/ SHOULD NOT BE ADDED BACK TO BOOK PROFITS. THE APPELLANT SUCCEEDS ON THIS GROUND. 15.3 THE LD. DR COULD NOT CONTR OVERT THE ABOVE FINDINGS OF THE LD. CIT(A), WHEREIN THE LD. CIT(A), BY FOLLOWING THE DECISIONS OF THE INDORE AND MUMBAI BENCHES OF THE TRIBUNAL, HELD THAT THE PROVISION FOR GRATUITY OF .61,71,603/ - SHOULD BE ADDED BACK TO THE BOOK PROFITS AND ALLOWED THE GROUND RAISED BY THE ASSESSEE. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE GROUND RAISED BY THE FOR THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 IS DISMISSED. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 39 16. THE NEXT COMMON ISSUE RAISED IN THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 IS THAT THE LD. CIT(A) IS ERRED IN HOLDING THAT THE NON COMPETE FEES PAID BY THE ASSESSEE IS ALLOWABLE AS DEFERRED REVENUE EXPENDITURE. 16.1 DUR ING THE ASSESSMENT YEAR 2006 - 07, THE APPELLANT COMPANY ENTERED INTO A NON - COMPETE AGREEMENT WITH MR. B.H. KOTHARI IN RELATION TO CAUSTIC SODA BUSINESS AND PAID .15 CRORES TO SECURE B.H. KOTHARI NOT TO CARRY ON THE BUSINESS OF CAUSTIC SODA BUSINESS DIRECTLY OR THROUGH ANOTHER PERSON ACTING AS HIS NOMINEE OR AGENT OR REPRESENTATIVE FOR A PERIOD OF 10 YEARS. THE APPELLANT HAS CLAIMED IN THE BOOKS OF ACCOUNTS, THIS AMOUNT AS DEFERRED REVENUE EXPENDITURE. FOR INCOME - TAX PURPOSES, THE APPELLANT CLAIMED .1.5 CRORES, BEING 1/10 TH OF THE TOTAL INCOME AS DEDUCTION IN THE RETURN OF INCOME OVER A PERIOD OF 10 YEARS BECAUSE MR. B.H. KOTHARI WAS PROHIBITED FROM TAKING OFF THI S BUSINESS FOR A PERIOD OF 10 YEARS. THE ASSESSING OFFICER HAS DENIED THIS PAYMENT AS NOT ADMISSIBLE. 16.2 ON APPEAL, THE LD. CIT(A) ALLOWED THE GROUND RAISED BY THE ASSESSEE FOR BOTH ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. 16.3 THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR STRONGLY RELIED ON THE DECISIONS IN THE CASE OF TAMILNADU DIARY DEVELOPMENT I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 40 CORPORATION 239 ITR 142 (MAD) AND CHELPARK COMPANY LTD. 191 ITR 249 AND SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 16.4 PER CONTRA, BY R ELYING THE RECENT JUDGEMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CARBORANDUM UNIVERSAL LIMITED V. JCIT IN T.C.(A) NO. 244 OF 2006 DATED 10.09.2012, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 16.5. W E HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE NON - COMPETE FEES PAID BY THE ASSESSEE HAS BEEN CLAIMED AS DEFERRED REVENUE EXPENDITURE WAS DISALLOWED BY THE ASSESSING OFFICER. B Y CONSIDERING TH E DECISION S OF THE CHENNAI BENCHES OF THE TRIBUNAL IN THE CASE OF ORCHID CHEMICALS & PHARMACEUTICALS V. ACIT 137 TTJ 373 AND ALSO IN THE CASE OF ITO V. SEAFIL LEASING 124 TTJ 531, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO TREAT THE NON - COMPETE FEES PAID AS DEFERRED REVENUE EXPENDITURE AND ALLOW 1/10 TH OF THE EXPENDITURE AS DEDUCTION FOR EVERY YEAR BY OBSERVING AS UNDER: 4.2 I HAVE CONSIDERED VARIOUS SUBMISSIONS MADE BY THE APPELLANT DURING THE APPEAL PROCEEDINGS. IN SIMILAR CIRCUMSTANCES, THERE IS A D ECISION OF HON'BLE CHENNAI ITAT IN THE CASE OF ORCHID CHEMICALS & PHARMACEUTICALS VS ACIT 137 TTJ 373 AND ALSO ONE MORE DECISION OF H ON'BLE ITAT CHENNAI IN THE CASE OF ITO VS SEAFIL LEASING 124 TTJ 531 ITAT, CHENNAI. I AM OF THE CONSIDERED OPINION THAT THESE DECISIONS HAVE SIMILARITIES TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND HENCE THIS EXPENDITURE MAY BE ALLOWED AS DEFERRED REVENUE EXPENDITURE FOR A PERIOD OF 10 YEARS. THIS DECISION OF MINE IS IN COMMENSURATE WITH THE METHOD ADOPTED BY THE APPELLANT HIMSELF FOR THE PURPOSES OF I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 41 MAINTENANCE OF BOOKS OF ACCOUNTS BY THE APPELLANT. IN OTHER WORDS, THE ASSESSING OFFICER IS DIRECTED TO TREAT THE NON - COMPETE FEES PAID AS DEFERRED REVENUE EXPENDITURE AND ALLOW 1 / L0TH OF THE EXPENDITURE AS DEDUCTION FOR EVERY YEAR. SINCE THIS ISSUE IS THERE FOR BOTH THE ASSESSMENT YEARS, THIS DECISION IS APPLICABLE FOR BOTH THE ASSESSMENT YEARS IN QUESTION. 16.6 OVER AND ABOVE, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CARBORANDUM UNIVERSAL LIMITED V. JC IT (SUPRA) HAS HELD AS UNDER: 5. THIS LEAVES US WITH THE THIRD QUESTION AS REGARDS THE NATURE OF EXPENDITURE ON THE NON - COMPETE FEE PAID TO U.MOHANRAO. IT IS SEEN FROM THE FACTS NARRATED IN THE ORDER DATED 17.07.1998 THAT THIS COURT GRANTED THE SCHEME OF AMALGAMATION OF THE FOLLOWING COMPANIES WITH M/S.CARBORANDUM UNIVERSAL LIMITED (CUMI), THE ASSESSEE COMPANY: (I) M/S.CUTFAST ABRASIVES (II) M/S.CUTFAST POLYMERS (III) M/S.EASTERN ABRASIVES LTD. (PREVIOUSLY A SUBSIDIARY OF THE ASSESSEE) AND (IV) M /S.CARBORANDUM UNIVERSAL INVESTMENTS LTD. 6. THE SCHEME OF AMALGAMATION WAS EFFECTIVE FROM 01.04.1997. CONSEQUENT ON THE AMALGAMATION, THE ASSESSEE ENTERED INTO A NON - COMPETE AGREEMENT WITH U.MOHANRAO, FORMERLY CHAIRMAN AND MANAGING DIRECTOR OF CUTFAST ABRASIVE TOOLS LIMITED AND WHO ALSO HAPPENED TO BE THE CHAIRMAN AND MANAGING DIRECTOR OF M/S.CUTFAST POLYMERS PRIVATE LIMITED. THE NON - COMPETE AGREEMENT DATED 29.04.1996 STATED THAT THE SAID U.MOHANRAO, ASSOCIATED WITH M/S.CUTFAST POLYMERS PRIVATE LIMITED (HEREINAFTER CALLED AS CPPL), HAD ACCESS TO ALL INFORMATION ON PROCESS, KNOWHOW, CLIENTELE OF THE PRODUCTS DEALT WITH BY CPPL AND PRICING AND MARKETING OF ALL THE PRODUCTS RELATING TO CPPL AND WAS IN A POSITION TO INFLUENCE THE BUSINESS OF MANUFACTURE, SAL E AND DISTRIBUTION OF THE PRODUCTS HELD BY THE SAID COMPANY. IN THE CIRCUMSTANCES, IN ORDER THAT THE SAID MOHANRAO'S EXPERTISE IN THAT FIELD DID NOT, IN ANY MANNER, PREJUDICE THE GOOD PROSPECTS OF THE BUSINESS OF THE ASSESSEE COMPANY IN FUTURE, THE PARTIES AGREED THAT IN RESPECT OF THE PRODUCTS, NAMELY, PHENOL FORMALDEHYDE RESIN (IN LIQUID AND POWDER FORMS), SATURATED POLYESTER RESIN, UNSATURATED POLYESTER RESIN, MODIFIED ALKALYD AND ANY OTHER RESIN, ALL HAVING APPLICATION IN COATED AND BONDED ABRASIVES I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 42 MAN UFACTURE, SHALL NOT BE DEALT WITH BY THE SAID U.MOHANRAO. IN CONSIDERATION OF THE SAME, THE SAID U.MOHANRAO WOULD BE PAID A SUM OF RS.50,00,000/ - AS A NON - COMPETE FEE. THE AGREEMENT LAID DOWN THE RESTRICTIVE COVENANTS THAT THE SAID U.MOHANRAO SHALL NOT MAN UFACTURE DIRECTLY OR INDIRECTLY ANY OF THE PRODUCTS MENTIONED ABOVE AND SHALL NOT DEAL WITH THE SAID PRODUCTS IN ANY MANNER OR ADVISE, ASSIST, AID, EITHER DIRECTLY OR INDIRECTLY, ANY COMPETITOR OR ANY OTHER PERSON IN EITHER ESTABLISHING, MANAGING, PROMOTIN G OR DEVELOPING THE BUSINESS OF THE SAID PRODUCTS OR ANY PRODUCT SIMILAR THERETO; HE SHALL NOT ACT AS A CONSULTANT OR USE ANY KNOWHOW, DESIGN OR DRAWINGS DIRECTLY OR INDIRECTLY AND REFRAIN FROM DISCLOSING OR DIVULGING ANY INFORMATION RELATING TO THE KNOWHO W, TRADE PRACTICES, ETC. THE AGREEMENT WAS TO BE EFFECTIVE FOR A PERIOD OF FIVE YEARS FROM THE DATE OF THE AGREEMENT. 7. ON 29.04.1996, YET ANOTHER AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE AND THE SAID U.MOHANRAO, FORMER CHAIRMAN AND MANAGING DIR ECTOR OF CUTFAST ABRASIVE TOOLS LIMITED, AS BY WAY OF A NON - COMPETE AGREEMENT THAT THE SAID U.MOHANRAO SHALL NOT, IN ANY MANNER, ASSIST ANY THIRD PARTY, OR SELL OR RENDER ADVISE OR ACT AS A CONSULTANT IN RESPECT OF THE PRODUCTS, NAMELY, COATED AND BONDED A BRASIVES, CURRENT RANGE OF PRODUCTS OF THE ELECTROMINERALS DIVISION OF CATL AND CLOTH PROCESSING FOR COATED ABRASIVES. IN CONSIDERATION OF THE SAID AGREEMENT, THE SAID U.MOHANRAO WAS PAID A SUM OF RS.1,75,00,000/ - TOWARDS NON - COMPETE FEE. ON 14.10.1996, TH ERE WAS A SUPPLEMENTARY AGREEMENT BETWEEN THE ASSESSEE AND THE SAID U.MOHANRAO, WHICH CONTEMPLATED INCLUSION OF OTHER PRODUCTS, NAMELY, COATED AND BONDED ABRASIVES, CURRENT RANGE OF PRODUCTS OF THE ELECTROMINERALS DIVISION OF CATL AND ALSO ALL OTHER ELECTR OMINERAL PRODUCTS, USED OR CAPABLE OF BEING USED IN THE MANUFACTURE OF ABRASIVE PRODUCTS (BOTH BONDED AND COATED), AND CLOTH PROCESSING FOR COATED ABRASIVES. THE AGREEMENT WAS TO BE EFFECTIVE FOR A PERIOD OF FIVE YEARS AND A FURTHER SUM OF RS.35,00,000/ - W AS AGREED TO BE PAID TO THE SAID U.MOHANRAO. THUS, IN ALL, THE ASSESSEE HAD A SUM OF RS.2.6 CRORES TO THE SAID U.MOHANRAO AS BY WAY OF NON - COMPETE FEE. THE ASSESSEE CLAIMED THIS AMOUNT AS A REVENUE EXPENDITURE. IT IS A FACT THAT THE ASSESSEE DID NOT WRITE OFF THIS AMOUNT IN THE BOOKS OF ACCOUNTS. HOWEVER, PLACING RELIANCE ON THE DECISION REPORTED IN [1987] 165 ITR 63 (COMMISSIONER OF INCOME TAX VS. LATE G.D.NAIDU AND OTHERS) (MAD.) AND 87 ITD 541 (SRI ANNAPURNA GOWRI SHANKAR HOTEL PVT. LTD. VS. CIT), THE AS SESSEE CONTENDED THAT IT WAS ENTITLED TO DEDUCTION. THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAID U.MOHANRAO WAS THE ERSTWHILE CHAIRMAN AND I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 43 MANAGING DIRECTOR OF THE COMPANY AND SUCH NON - COMPETE AGREEMENT HAD IN CREASED THE ASSESSEE'S MARKET PRESENCE AND IMPROVED ITS POTENTIAL TO HAVE BETTER RESULTS IN THE MARKET; THE PAYMENT MADE OVER A PERIOD OF MORE THAN FIVE YEARS ONCE WAS FOR PROCURING AN ENDURING BENEFIT TO THE BUSINESS. CONSEQUENTLY, THE OFFICER HELD THAT T HE EXPENDITURE WAS IN THE CAPITAL FIELD AND NOT AS REVENUE. 8. AGGRIEVED BY THIS, THE ASSESSEE WENT ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), WHO UPHELD THE DECISION OF THE ASSESSING AUTHORITY. AGGRIEVED BY THIS, THE ASSESSEE WENT ON FU RTHER APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. REFERRING TO THE DECISION REPORTED IN [1991] 191 ITR 249 (CHELPARK COMPANY LTD. VS. COMMISSIONER OF INCOME TAX) AND [1999] 239 ITR 142 (TAMILNADU DAIRY DEVELOPMENT CORPN. LTD. VS. COMMISSIONER OF INCOM E - TAX), THE TRIBUNAL, BY A CRYPTIC ORDER, REJECTED THE ASSESSEE'S CLAIM. THERE IS HARDLY ANY DISCUSSION IN THE ORDER, PARTICULARLY WITH REFERENCE TO THE NON - COMPETE FEE AGREEMENTS, REFERRED TO ABOVE. AGGRIEVED BY THIS, THE ASSESSEE IS ON APPEAL BEFORE THIS COURT. 9. LEARNED COUNSEL APPEARING FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE APEX COURT REPORTED IN [1971] 82 ITR 902 (CIT VS. COAL SHIPMENTS P. LTD (S.C.)), [1980] 124 ITR 1 (EMPIRE JUTE CO. LTD. VS. COMMISSIONER OF INCOME TAX (S.C.)) A ND [1989] 177 ITR 377 (ALEMBIC CHEMICAL WORKS CO. LTD.) AND POINTED OUT TO THE GUIDING FACTOR IN THE MATTER OF CONSIDERING THE CLAIM AS TO WHETHER THE EXPENDITURE WOULD FALL UNDER THE CAPITAL OR REVENUE HEAD. MAKING PARTICULAR EMPHASIS ON THE FACT THAT THE EXPENDITURE INCURRED WAS MORE IN THE FIELD OF INDEFINITE INCOME EARNING OPERATION AND NOT IN THE CONTEXT OF STRENGTHENING THE INCOME EARNING STRUCTURE, HE SUBMITTED THAT THE TRIBUNAL AND THE AUTHORITIES BELOW COMMITTED A SERIOUS ERROR IN LOOKING AT THE EN DURING BENEFIT CONCEPT FOR THE PURPOSE OF REJECTING THE ASSESSEE'S CASE. 10. REFERRING TO THE DECISION REPORTED IN [1980] 124 ITR 1 (EMPIRE JUTE CO. LTD. VS. COMMISSIONER OF INCOME TAX (S.C.)), HE SUBMITTED THAT THE EXPENDITURE INCURRED WAS FOR THE EXPL OITATION OF A COMMERCIAL ASSET; HENCE WAS REVENUE IN CHARACTER. EVEN WHERE AN EXPENDITURE IS INCURRED BY OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, IT MAY, NONETHELESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. HE FURTHER SUBM ITTED THAT WHAT IS MATERIAL HEREIN IS TO CONSIDER THE NATURE OF ADVANTAGE IN A COMMERCIAL SENSE. IF THE ADVANTAGE IS IN THE FIELD OF FACILITATING THE ASSESSEE'S BUSINESS OPERATION I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 44 MORE EFFECTIVELY OR MORE PROFITABLY LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT. 11. REFERRING TO THE DECISION REPORTED IN [1991] 191 ITR 249 (CHELPARK COMPANY LTD. VS. COMMISSIONER OF INCOME TAX), LEARNED COUNSEL POINTED OUT THAT THE DECISION HAS TO BE UNDERSTOOD IN THE LIGHT OF THE FACTS F OUND HEREIN. SO TOO [1987] 165 ITR 63 (COMMISSIONER OF INCOME TAX VS. LATE G.D.NAIDU AND OTHERS) (MAD.). THUS, REITERATING THE PRINCIPLES LAID DOWN IN [1980] 124 ITR 1 (EMPIRE JUTE CO. LTD. VS. COMMISSIONER OF INCOME TAX (S.C.)) AND [1989] 177 ITR 377 (ALE MBIC CHEMICAL WORKS CO. LTD.), LEARNED COUNSEL FURTHER MADE REFERENCE TO [1999] 239 ITR 142 (TAMILNADU DAIRY DEVELOPMENT CORPN. LTD. VS. COMMISSIONER OF INCOME - TAX) AND [2008] 302 ITR 249 (CIT VS. EICHER LTD. (DELHI)) TO SUBMIT THAT THE AGREEMENT ENTERED I NTO BETWEEN THE ASSESSEE COMPANY WITH U.MOHANRAO WOULD CLEARLY SHOW THAT THE EXPENDITURE WAS ONLY ON THE REVENUE ACCOUNT. 12. COUNTERING THE CLAIM OF THE ASSESSEE, LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE SUPPORTED THE ORDER OF THE TRIBUNAL AN D PLACED RELIANCE ON THE DECISION REPORTED IN [1971] 82 ITR 902 (CIT VS. COAL SHIPMENTS P. LTD (S.C.)) AND [1991] 191 ITR 249 (CHELPARK COMPANY LTD. VS. COMMISSIONER OF INCOME TAX) THAT WHEN THE ASSESSEE HAD NOT WRITTEN OFF THE SAID EXPENDITURE IN ITS ACCO UNTS AND THE AMOUNT PAID WAS TO WARD OFF ANY COMPETITION IN THE BUSINESS OF THE ASSESSEE, THE EXPENDITURE MADE WAS ONLY A CAPITAL EXPENDITURE; HENCE, NOT ENTITLED TO DEDUCTION. 13. HEARD LEARNED COUNSEL APPEARING FOR BOTH SIDES AND PERUSED THE MATERIALS PLACED ON RECORD. 14. AS FAR AS THE QUESTION AS TO WHETHER AN EXPENDITURE COULD BE A CAPITAL EXPENDITURE OR REVENUE EXPENDITURE IS CONCERNED, THE CONCEPT THAT THE EXPENDITURE YIELDING AN ADVANTAGE OF AN ENDURING NATURE WOULD BE ONLY A CAPITAL EXPENDITU RE, HAS BEEN FINE - TUNED, THAT EVEN WHEN EXPENDITURE WAS INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFIT, NONETHELESS, THE SAME CAN BE TAKEN AS ONE OF REVENUE ACCOUNT. IN THE DECISION REPORTED IN [1980] 124 ITR 1 (EMPIRE JUTE CO. LTD. VS. COMMISSIONER OF INCOME TAX (S.C.)), THE APEX COURT POINTED OUT THAT THE TEST OF ENDURING BENEFIT IS NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. IN A TRANSAC TION OF TRANSFER OF ALLOTMENT OF LOOM HOURS, ON THE QUESTION AS TO WHETHER IT IS A I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 45 REVENUE EXPENDITURE OR A CAPITAL EXPENDITURE, THE APEX COURT POINTED OUT THAT A PAYMENT MAY BE A REVENUE PAYMENT FROM THE POINT OF VIEW OF THE PAYER AND A CAPITAL PAYMENT FR OM THE POINT OF VIEW OF THE RECEIVER AND VICE VERSA. THUS WHETHER AN EXPENDITURE IS CAPITAL OR REVENUE HAS TO BE DETERMINED WITH REGARD TO THE NATURE OF THE TRANSACTION AND OTHER RELEVANT FACTORS. REFERRING TO THE DECISION REPORTED IN [1965] 58 ITR 241 (PC ) (COMMISSIONER OF TAXES V. NCHANGA CONSOLIDATED COPPER MINES LTD.), THE APEX COURT POINTED OUT THAT 'THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFIT, MAY, NONETHELESS, BE ON REVENUE ACCOUNT AND THE TEST O F ENDURING BENEFIT MAY BREAK DOWN. ... WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. I F THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDIT URE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE.' 15. REFERRING TO THE DECISION REPORTED IN [1965] 56 ITR 52 (SC) (BOMBAY STEAM NAVIGATION CO. [1953] P. LTD. V. CIT) AS WELL AS [1924] 8 TC 671 AT 676, (ROBE RT ADDIE AND SONS' COLLIERIES LTD. V. IRC), THE APEX COURT REFERRED TO THE WORDS OF LORD SUMNER, WHICH MAY USEFULLY BE EXTRACTED HEREIN TOO: ' IF THE OUTGOING EXPENDITURE IS SO RELATED TO THE CARRYING ON OR THE CONDUCT OF THE BUSINESS THAT IT MAY BE REGA RDED AS AN INTEGRAL PART OF THE PROFIT - EARNING PROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER, THE POSSESSION OF WHICH IS A CONDITION OF THE CARRYING ON OF THE BUSINESS, THE EXPENDITURE MAY BE REGARDED AS REVENUE EXPENDITUR E. SEE BOMBAY STEAM NAVIGATION CO. (1953) P. LTD. V. CIT [1965] 56 ITR 52 (SC). THE SAME TEST WAS FORMULATED BY LORD CLYDE IN ROBERT ADDIE AND SONS' COLLIERIES LTD. V. IRC [1924] 8 TC 671, 676 (C SESS) IN THESE WORDS: 'IS IT A PART OF THE COMPANY'S WORKING EXPENSES? -- IS IT EXPENDITURE LAID OUT AS PART OF THE PROCESS OF PROFIT EARNING? -- OR, ON THE OTHER HAND, IS IT A CAPITAL OUTLAY? -- IS IT EXPENDITURE NECESSARY FOR THE ACQUISITION OF PROPERTY OR OF RIGHTS OF A PERMANENT CHARACTER, THE POSSESSION OF WHICH IS A CONDITION OF CARRYING ON ITS TRADE AT ALL?' IT IS CLEAR FROM THE ABOVE DISCUSSION THAT THE PAYMENT MADE BY THE ASSESSEE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 46 FOR PURCHASE OF LOOM HOURS WAS EXPENDITURE LAID OUT AS PART OF THE PROCESS OF PROFIT EARNING. IT WAS, TO USE LORD SUMNER'S WORDS, A N OUTLAY OF A BUSINESS 'IN ORDER TO CARRY IT ON AND TO EARN A PROFIT OUT OF THIS EXPENSE AS AN EXPENSE OF CARRYING IT ON'. [JOHN SMITH AND SON V. MOORE [1921] 12 TC 266, 296 (HL)]. IT WAS PART OF THE COST OF OPERATING THE PROFIT - EARNING APPARATUS AND WAS C LEARLY IN THE NATURE OF REVENUE EXPENDITURE. ' 16. THUS THE QUESTION AS TO WHETHER AN EXPENDITURE IS REVENUE OR NOT HAS TO BE SEEN FROM THE CONTEXT OF AN EXPENDITURE FORMING 'PART OF THE COST OF THE INCOME - EARNING MACHINE OR STRUCTURE' AS OPPOSED TO PAR T OF 'THE COST OF PERFORMING THE INCOME - EARNING OPERATIONS'. -- [1971] 82 ITR 902 (CIT VS. COAL SHIPMENTS P. LTD. (S.C.). 17. THUS, THE CONSISTENT GUIDING PRINCIPLES IN MATTERS OF UNDERSTANDING AN EXPENDITURE AS A CAPITAL OR REVENUE, AS HELD BY THE APEX COURT, IS TO FIND OUT THE AIM AND OBJECT OF THE EXPENDITURE AND THE COMMERCIAL NECESSITIES OF MAKING SUCH AN EXPENDITURE. THE QUESTION HAS TO BE CONSIDERED IN THE BACKGROUND OF THE FACTS OF EACH CASE, THAT 'THE IDEA OF 'ONCE FOR ALL' PAYMENT AND 'ENDURING BENEFIT' ARE NOT TO BE TREATED AS SOMETHING AKIN TO STATUTORY CONDITIONS; NOR ARE THE NOTIONS OF 'CAPITAL' OR 'REVENUE' A JUDICIAL FETISH. ' - [1989] 177 ITR 377 (ALEMBIC CHEMICAL WORKS CO. LTD.). 18. GOING BY THE ABOVE - SAID PRINCIPLE, IF ONE LOOKS AT THE DECISION REPORTED IN [1991] 191 ITR 249 (CHELPARK COMPANY LTD. VS. COMMISSIONER OF INCOME TAX), ONE MAY FIND THAT THE DECISION THAT THE EXPENDITURE WAS A CAPITAL EXPENDITURE AND HENCE NOT DEDUCTIBLE, RESTED IN THE CONTEXT OF THE PECULIAR FACTS OF THE C ASE; THE PARTNERSHIP WITH WHICH THE ASSESSEE HAD THE NON - COMPETE AGREEMENT GOT DISSOLVED IMMEDIATELY AFTER THE PAYMENT OF THE NON - COMPETE FEE AND THE POTENTIAL COMPETITOR HAD VANISHED. ON THESE FACTS, THIS COURT OBSERVED THAT, WHATEVER THE ASSESSEE HAD PAI D FOR WAS OF PERMANENT OR ENDURING QUALITY, IN THE SENSE THAT COMPETITION HAD BEEN TOTALLY ELIMINATED AND PROTECTION HAD BEEN ACQUIRED FOR THE BUSINESS OF THE ASSESSEE AS A WHOLE. WE DO NOT FIND THAT THE REVENUE COULD DRAW ANY SUPPORT FROM THE SAID DECISIO N OF THIS COURT, IT BEING ONE BASED ON THE FACTS OF THE SAID DECISION. THE QUESTION HEREIN AS TO WHETHER NON - COMPETE FEE PAID TO THE EX - MANAGING DIRECTOR WAS A REVENUE OR A CAPITAL EXPENDITURE, HAS TO BE SEEN IN THE CONTEXT OF THE FACTS OF THIS CASE AND TH E CIRCUMSTANCES IN WHICH THE PAYMENTS WERE MADE. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 47 19. IT IS NOT DENIED BY THE REVENUE THAT U.MOHANRAO WAS THE CHAIRMAN AND MANAGING DIRECTOR OF SOME OF THE COMPANIES WHICH GOT MERGED WITH THE ASSESSEE COMPANY. THE SAID U.MOHANRAO HAD ACCESS TO ALL INFORM ATION STARTING FROM MANUFACTURING PROCESS, KNOWHOW TO THE CLIENTELE AND THE PRODUCTS, INCLUDING THE PRICING OF THE PRODUCTS. BY A PROCESS OF AMALGAMATION, THE ASSESSEE HAD ACQUIRED THE BUSINESS OF THE AMALGAMATING COMPANIES. HOWEVER, FOR THE FRUITFUL EXERC ISE OF ITS BUSINESS AS A BUSINESS PROPOSITION, THE ASSESSEE THOUGHT IT FIT TO ENTER INTO A NON - COMPETE AGREEMENT WITH A PERSON WHO HAD THE KNOWLEDGE OF THE ENTIRE OPERATIONS, SO AS TO GET THE FULL YIELD OF THE AMALGAMATED COMPANY'S BUSINESS. IN THAT CONTEX T, RIGHTLY, THE ASSESSEE TOOK A COMMERCIAL DECISION TO PAY NON - COMPETE FEE TO U.MOHANRAO AND GOING BY THE DECISION OF THE APEX COURT, PARTICULARLY THE DECISION REPORTED IN [1971] 82 ITR 902 (CIT VS. COAL SHIPMENTS P. LTD (S.C.)), THAT THE PAYMENT WAS IN RE SPECT OF THE PERFORMING OF THE BUSINESS OF THE ASSESSEE, WE HAVE NO HESITATION IN HOLDING THAT THE EXPENDITURE IS ONLY ON REVENUE ACCOUNT AND NOT ON CAPITAL ACCOUNT. IN THE CIRCUMSTANCES, WE ACCEPT THE CASE OF THE ASSESSEE, SET ASIDE THE ORDER OF THE TRIBU NAL AND ALLOW THE TAX CASE. 16.7 AS THE CASE LAW RELIED ON BY THE LD. DR, THE DEPARTMENT HAS ALSO RELIED ON BOTH THE DECISIONS IN THE CASE OF TAMILNADU DIARY DEVELOPMENT CORPORATION (SUPRA) AND CHELPARK COMPANY LTD. (SUPRA) BEFORE THE HON BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CARBORANDUM UNIVERSAL LIMITED V. JCIT (SUPRA) . HOWEVER, BY CONSIDERING THE JUDGEMENT OF THE HON BLE APEX COURT IN THE CASE OF CIT V. COAL SHIPMENTS P. LTD. (SUPRA), THE HON BLE HIGH COURT HAS OBSERVED THAT THE PAYMENT WAS IN R ESPECT OF THE PERFORMING OF THE BUSINESS OF THE ASSESSEE, HELD THAT THE EXPENDITURE IS ONLY ON REVENUE ACCOUNT AND NOT ON CAPITAL ACCOUNT. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CARBORANDUM UNIVERS AL LIMITED V. JCIT (SUPRA), WE FIND NO INFIRMITY IN THE ORDER PASSED BY I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 48 THE LD. CIT(A) FOR BOTH ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 17. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2005 - 06 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE REPAIRS IN THE FORM OF RENOVATION TO BUILDING. 17.1 THE ASSESSEE HAS INCURRED A SUM OF .60,35,328/ - TOWARDS REPAIRS IN THE FORM OF RENOVATION TO BUILDING AND CLAIMED THE SAME AS REVENUE EXPENSES. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE COMPANY HAS NOT DERIVED ANY BENEFIT OF ENDURING NATURE FROM THESE EXPENSES AND THEREFORE CLAIMED THE EXPENSES AS REVENUE EXPENSES. BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO BY CONSIDERING VARIOUS DECISIONS, THE ASSESSING OFFICER NEGATED THE CLAIM OF THE ASSESSEE AND ALLOWED DEPRECIATION @ 10% ON THIS EXPENSES. 17.2 ON APPEAL, BY RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS, THE AR OF THE ASSESSEE STRONGLY CONTENDED THAT THE EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF RENOVATION OF EXISTING BUILDING SHOULD BE TREATED AS REVENUE EXPENSES. BY FOLLOWING THE DECISION IN THE CASE OF FLOWSERVE SANMAR LTD. (GROUP COMPANY OF THE ASSESSEE) , THE LD. CIT(A) ALLOWED THE GROUND RAI SED BY THE ASSESSEE. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 49 17.3 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR STRONGLY RELIED ON THE ASSESSMENT ORDER, WHEREIN THE DECISION IN THE CASE OF CIT V. SARAVANA SPINNING MILLS LTD. 293 ITR 201 HAS BEEN RELIED ON. 17.4 ON THE O THER HAND, BY RELYING ON THE DECISION IN THE CASE OF CIT V. OOTY DASAPRAKASH 2 3 7 ITR 902 (MAD) , THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE REPAIR TO BUILDING, A PERMANENT EXISTING ASSET CANNOT BE EQUATED WITH PLANT AND MACHINERY AND ANY REPLAC EMENT OF PARTS OR REPAIR OF THE MACHINERY SHALL ENHANCE THE PRODUCTION CAPACITY WHICH GIVE ENDURING BENEFIT, WHEREAS, REPAIR TO EXISTING BUILDING SHALL NOT GIVE ANY ENDURING BENEFIT. 17.5 WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ASSESSING OFFICER DISALLOWED THE EXPENSES INCURRED TOWARDS REPAIRS AND RENEWALS OF THE BUILDING BY STATING THAT IT PROVIDES THE ASSESSEE WITH ENDURING BENEFITS. THE LD. CIT(A), AFTER CON SIDERING DECISION IN THE CASE OF FLOWSERVE SANMAR LTD. GROUP COMPANY OF THE ASSESSEE, ALLOWED THE CLAIM OF THE ASSESSEE. IN THIS CASE, THE ASSESSEE HAS INCURRED EXPENDITURE OF .60,35,328/ - TOWARDS (I) CIVIL AND SANITARY WORK, (II) CARPENTRY WORK , (III) FALSE CEILING, (IV) ELECTRICAL WORK, (V) DATA CABLING AND WIRING AND (VI) OTHERS TO AN ALREADY EXISTING BUILDING. BY DOING SUCH REPAIR AND RENOVATION WORK, THE ASSESSEE HAS NOT C REATED ANY NEW ASSET, IT CANNOT BE SAID THAT THE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 50 EXPENDITURE INCURRED IS OF CAPITAL IN NATURE. THE EXPENDITURE INCURRED ON FIXED ASSET INCLUDES COSTS THAT ARE AIMED AT MAINTAINING RATHER THAN ENHANCING THE EARNING CAPACITY OF THE ASSETS. THESE COSTS THAT ARE INCURRED ON A REGULAR BASIS AND THE BENEFIT FROM THESE COSTS ARE OBTAINED OVER A RELATIVELY SHORT PERIOD OF TIME. ANY REPAIR AND RENOVATION WORK CARRIED ON IN A BUILDING CANNOT LONG LOST AND AFTER SHORT PERIOD AGAIN SUCH REPAIR/RENOVATION WORK HAS TO BE CARRIED OUT, OTHERWISE, THE BUILDING CAN BE RUINED. THE CASE LAW RELIED ON BY THE ASSESSING OFFICER AS WELL AS THE LD. DR IN THE CASE OF CIT V. SARAVANA SPINNING MILLS P. LTD. (SUPRA), THE ASSESSEE WHO ENGAGED IN THE MANUFACTURE OF YARN, SPENT AMOUNTS F OR REPLACEMENT OF RING FRAMES, WHICH HAD WORN OUT. WHEN THE ASSESSEE HAS CLAIMED IT UNDER CURRENT REPAIRS WITHIN THE MEANING OF SECTION 31(I) OF THE ACT, THE HON BLE SUPREME COURT HAS OBSERVED THAT THE REPLACEMENT OF THE RING FRAME CONSTITUTED SUBSTITUTION OF AN OLD ASSET BY A NEW ASSET AND THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE DID NOT FALL WITHIN THE MEANING OF CURRENT REPAIRS IN SECTION 31(I) OF THE ACT. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS NOT ACQUIRED OR CREATED ANY NEW ASSET T O ENHANCE THE INCOME OF THE ASSESSEE. THEREFORE, THE CASE LAW RELIED ON BY THE LD. DR HAS NO APPLICATION TO THE FACTS OF THE CASE. 17.6 IN THE CASE OF CIT V. OOTY DASAPRAKASH (SUPRA), THE HON BLE MADRAS HIGH COURT HAS HELD THAT THE EXPENDITURE WAS INCURR ED SOLELY FOR REPAIRS AND I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 51 MODERNIZING THE HOTEL AND REPLACING THE EXISTING COMPONENTS OF THE BUILDING, FURNITURE AND FITTINGS WITH A VIEW TO CREATE A CONDUCIVE AND BEAUTIFUL ATMOSPHERE FOR THE PURPOSE OF RUNNING THE BUSINESS OF A HOTEL AND THE EXPENDITURE INCURRED WAS NOT OF AN ENDURING NATURE AND WAS ALLOWABLE AS REVENUE EXPENDITURE UNDER SECTION 37 OF THE ACT. 17.7 UNDER THE ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE RATIO LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. OO TY DASAPRAKASH (SUPRA), WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO SEGREGATE THE TOTAL EXPENDITURE AS CAPITAL AND REVENUE AND CONSIDER THE SAME APPROPRIATELY. THIS GROUND OF APPEAL OF THE REVENUE IS REMITTED TO THE ASSESSING OFFICER FO R FRESH CONSIDERATION. 18. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2005 - 06 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF ROYALTY PAID. 18.1 THE ASSESSING OFFICER HAS NOTICED FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT AN AMOUNT OF .25,54,971/ - HAS BEEN DEBITED AS ROYALTY TO THE DISTRICT COLLECTOR, VEDARANYAM FOR LEASEHOLD LANDS SITUATED AT VEDARANYAM. THE ASSESSEE HAS BEEN SHOW CAUSED AS TO WHY THE ABOVE PAYMENT OF ROYALTY FOR MINING LEASE OF ACQUIRING LEASE - HOLD RIGHT FOR EXTRACTING SALTS FROM THE MINERAL BEARING LAND CANNOT BE DISALLOWED AS PER THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ENTERPRISING I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 52 ENTERPRISES V. CIT 293 ITR 437. IN RESPONSE THERETO, THE ASSESSEE HAS STATED THA T THE ABOVE CASE IS RELATED TO EXTRACTION OF GRANITE WHEREAS IN THE ASSESSEE S CASE, IT IS PAID FOR THE EXTRACTION OF SALT. HENCE, THE ABOVE CASE LAW CITED CANNOT BE APPLICABLE FOR THE INSTANT CASE. THE CONTENTION OF THE ASSESSEE WAS REJECTED BY THE ASSESS ING OFFICER DUE TO THE FACT THAT THE HON BLE SUPREME COURT IN THE ABOVE CITED CASE DISTINGUISHED THE PREVIOUS DECISION MADE IN THE CASE OF GOTAN LIME SYNDICATE V. CIT 59 ITR 718 (SC), PINGLE INDUSTRIES V. CIT 40 ITR 67 (SC) AND ADITYA MINERALS P. LTD. V. C IT 8 SCC 97 [239 ITR 817 (SC)]. FURTHER, THE COURT OBSERVED THAT MINERALS IN SITU IS A CAPITAL ASSET. HENCE THE ROYALTY PAID FOR EXTRACTING THE MINERALS BY MEANS OF PAYMENT MADE EITHER AT A TIME OR IN INSTALMENTS SHALL BE THE CAPITAL EXPENDITURE. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER TREATED IT AS CAPITAL EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 18.2 ON APPEAL, BY FOLLOWING THE DECISION IN THE CASE OF GOTAN LIME SYNDICATE V. CIT 59 ITR 718 (SC), THE LD. CIT(A) ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. 18.3 THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) . THE LD. DR RELIED ON THE DECISION IN THE CASE OF ENTERPRISING ENTERPRISES V. CIT 293 ITR 437 (SC) AND SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 18.4 WE HAVE H EARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. BY FOLLOWING THE DECISION IN THE CASE I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 53 OF GOTAN LIME SYNDICATE V. CIT (SUPRA) THE LD. CIT(A) ALLOWED THE GROUND RAISED BY THE ASSESSEE, WHEREIN THE HON BLE SU PREME COURT HAS OBSERVED AS UNDER: THE APPELLANT FIRM, WHICH CARRIED ON THE BUSINESS OF MANUFACTURING FROM LIMESTONE, WAS GRANTED, UNDER A LEASE DATED MARCH 4, 1949, FROM THE GOVERNMENT OF JOD H PUR, THE RIGHT TO EXCAVATE LIMESTONE IN CERTAIN AREAS. THE LEA SE EXPIRED ON JULY 14, 1952, BUT IT WAS EXTENDED BY THE GOVERNMENT FOR A SHORT PERIODS. PURSUANT TO A POLICY ADOPTED BY THE GOVERNMENT, THE RAJPRAMUKH OF RAJASTHAN SANCTIONED 15 SQ. MILES OF LIME DEPOSITS TO THE APPELLANT ON OCTOBER 4, 1954, ON THE TERMS A ND CONDITIONS PRESCRIBED UNDER THE JODHPUR DIVISION VINDHYAN LIMESTONE MINING LEASES RULES, 1954. FOR THE PERIOD JULY, 1952 TO THE DATE THE NEW LEASE WAS TO BE GIVEN EFFECT TO, A FIXED ROYALTY OF RS. 96,000 PER ANNUM HAD TO BE PAID ON THE BASIS OF DEAD REN T. UNDER THE JODHPUR DIVISION VINDHYAN LIMESTONE MINING LEASES RULES, 1954, A MINING LEASE COULD BE GRANTED ONLY TO A HOLDER OF A CERTIFICATE OF APPROVAL FROM THE MINING DEPARTMENT AND THE LEASE WAS TO BE FOR A PERIOD OF FIVE YEARS WITH AN OPTION FOR RENEW AL FOR ANOTHER PERIOD OF FIVE YEARS. DEAD RENT WAS TO BE CHARGED AT RS.10 PER ACRE WHILE ROYALTY WAS TO BE CHARGED AT 1 A. 6 PS. PER MAUND OF LUMP LIME AND 1 A. PER MAUND OF LIMESTONE. RULE 19 OF THE RULES LAID DAWN THAT THE LESSEE SHALL NOT ENCROACH UPON CULTIVABLE LAND OR BAPI HOLDINGS WITHIN THE LEASED AREA WITHOUT OBTAINING THE PERMISSION OF THE DIRECTOR OF MINES AND PAYMENT OF COMPENSATION TO THE HOLDER OF SUCH LAND. THE LESSEE COULD NOT CARRY AWAY ANY OTHER MINERALS WHICH MIGHT BE FOUND IN THE AREA AN D HE WAS FURTHER OBLIGED TO ALLOW OTHER LESSEES OF THESE MINERALS TO GO ON THE LAND AND WIN THEM. THE APPELLANT NEVER EXECUTED THE CONTEMPLATED LEASE DEED BUT CONTINUED TO WORK THE LIME DEPOSITS. PAYMENTS WERE FINALISED BY THE MINING ENGINEER WHO FIXED THE ROYALTY AT RS. 96,000 PER YEAR AS THE ROYALTY AT THE RATE FIXED BY THE RULES WAS FAR LESS THAN THAT FIGURE. FOR EACH OF THE ASSESSMENT YEARS 1954 - 55, 1955 - 56 AND 1956 - 57 THE APPELLANT PAID A SUN OF RS. 96,000 TO THE GOVERNMENT AND CLAIMED IT AS A REVENUE DEDUCTION : HELD, ON THE FACTS, THAT IN THE ABSENCE OF MATERIAL TO SHOW THAT ANY PART OF THE ROYALTY HAD TO BE TREATED AS PREMIUM AND REFERABLE TO THE ACQUISITION OF THE MINING LEASE, THE ROYALTY PAYMENT, INCLUDING THE DEAD RENT, HAD RELATION ONLY THE L IME DEPOSITS TO BE GAT AND HAD THEREFORE TO BE TREATED AS REVENUE EXPENDITURE. ALTHOUGH THE APPELLANT I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 54 DID DERIVE AN ADVANTAGE - ASSUMING THAT THAT ADVANTAGE WAS TO LAST AT LEAST FOR A PERIOD OF FIVE YEARS - THERE WAS NO PAYMENT ONCE FOR ALL. NO LUMP SUM PAYMEN T WAS EVER SETTLED OR PAID; THERE WAS ONLY AN ANNUAL PAYMENT OF ROYALTY OR DEAD RENT. THE ROYALTY WAS NOT A DIRECT PAYMENT FOR SECURING AN ENDURING ADVANTAGE; IT HAD RELATION TO THE RAW MATERIAL TO BE OBTAINED. THE REASON WHY ROYALTY HAS TO BE ALLOWED AS REVENLTE EXPENDITURE IS THE RELATION WHICH IT HAS TO THE RAW MATERIALS TO BE EXCAVATED OR EXTRACTED: THE MORE YOU TAKE THE MORE ROYALTY YOU PAY. THE MINIMUM PAYMENT OR THE DEAD RENT ALSO HAS THE SAME CHARACTERISTIC, I.E., IT IS AN ADVANCE PAYMENT IN RESPE CT OF A CERTAIN AMOUNT OF RAW MATERIAL TO BE EXCAVATED. ABDUL KAYOOM V. COMMISSIONER OF INCOME - TAX [1962)44 LT.R. 689) (S.C.) AND PINOL INDUSTRIES LTD. V. COMMISSIONER OF INCOME - TAX [1960] 40 LT.R. 67 (S.C.) DISTINGUISHED. NONE OF THE TESTS LAID DOWN IN THE VARIOUS AUTHORITIES TO DISTINGUISH BETWEEN REVENUE EXPENDITURE AND CAPITAL EXPENDITURE IS EXHAUSTIVE OR UNIVERSAL. EACH CASE MUST DEPEND ON ITS OWN FACTS, AND A CLOSE SIMILARITY BETWEEN ONE CASE AND ANOTHER IS NOT ENOUGH, BECAUSE EVEN A SINGLE SIGNIFI CANT DETAIL MAY ALTER ENTIRE ASPECT. IN DECIDING SUCH CASES ONE SHOULD AVOID THE TEMPTATION TO DECIDE BY MATCHING THE COLOUR OF ONE CASE AGAINST THE COLOUR OF ANOTHER. ABDUL KAYOOM V. COMMISSIONER OF INCOME - TAX [1962] 44 LT.R. 689 (S.C.) FOLLOWED. IT I S NOT THE LAW IN EVERY CASE, THAT IF AN ENDURING ADVANTAGE IS OBTAINED THE EXPENDITURE FOR SECURING IT MUST BE TREATED AS CAPITAL EXPENDITURE, FOR THE ORDINARY CASE, THE COST OF THE MATERIAL WORKED UP IN A MANUFACTORY IS NOT A CAPITAL EXPENDITURE, IT IS A CURRENT EXPENDITURE, AND DOES NOT BECOME A CAPITAL EXPENDITURE MERELY BECAUSE THE MATERIAL IS PROVIDED BY SOMETHING LIKE A FORWARD CONTRACT, UNDER WHICH A PERSON FOR THE PAYMENT OF A LUMP SUM DOWN SECURES A SUPPLY OF THE RAW MATERIAL FOR A PERIOD EXTENDING OVER SEVERAL YEARS,' ALIANZA CO. V. BELL [1904] 2 K.B. 666 AT 673 APPROVED. I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 55 DECISION OF THE RAJASTHAN HIGH - COURT IN COMMISSIONER OF INCOME - TAX V. GOTAN LIME SYNDICATE [1964] 51 I.T.R. 533 REVERSED. 18.5 IN VIEW OF THE ABOVE DECISION OF THE HON BLE SUPREME COURT, WHICH WAS FOLLOWED BY THE LD. CIT(A), WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 19. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERR ED IN DELETING THE DISALLOWANCE OF EXPENDITURE RELATED TO TSUNAMI RELIEF. 19.1 THE ASSESSEE HAS CONTRIBUTED A SUM OF .38,50,000/ - AS TSUNAMI RELIEF TO THE CHIEF MINISTER RELIEF FUND OF TAMILNADU AND PONDICHERRY. THE ASSESSEE HAS CLAIMED THE SAME UNDER S ECTION 80G OF THE ACT. APART FROM THE ABOVE, THE ASSESSEE HAS ALSO INCURRED A SUM OF .7,01,617/ - AS TSUNAMI RELIEF EXPENSES. THE ASSESSEE HAS CLAIMED THE ABOVE EXPENSES AS REVENUE EXPENSES. HOWEVER, THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE SUM IN V IEW OF THE FACT THAT THE DEPARTMENT HAS FILED A SPECIAL LEAVE PETITION ON SIMILAR ISSUE BEFORE THE HON BLE. APEX COURT. 19.2 ON APPEAL, THE LD. CIT(A) HAS OBSERVED AND HELD AS UNDER: 8.4 I HAVE CAREFULLY CONSIDERED THE ISSUE. THE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT V. MADRAS REFINERIES LTD. HAS HELD THAT EXPENDITURE ON PROVIDING DRINKING WATER FACILITY TO THE RESIDENTS AROUND ASSESSEE S FACTORY AND AID TO A SCHOOL IN THAT AREA IS AN ALLOWABLE EXPENSE. I DO NOT SEE THE EXPENSE INCURRED IN CONNECT ION WITH TSUNAMI I.T.A. NO . 1143/M/08, 52/M/09, 119 - 120/ M/12 1348 & 1349/M/08, 558/M/09, 289 & 290/M/12 56 RELIEF AS DIFFERENT FROM THE ABOVE NATURE. RESPECTFULLY FOLLOWING THE DECISION OF THE HIGH COURT OF MADRAS, I AM INCLINED TO ALLOW THE TSUNAMI RELIEF EXPENSE OF .7,01,617/ - INCURRED BY THE APPELLANT AS REVENUE DEDUCTION. THE APPELLANT FAI LS ON THIS GROUND. 19.3 FROM THE ABOVE FINDINGS OF THE LD. CIT(A), CLEARLY MENTIONING THAT THE APPELLANT FAILS ON THIS GROUND , WE ARE UNABLE TO UNDERSTAND AS TO HOW THE DEPARTMENT IS AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT(A), WHO HAS NOT ALLOWED T HE GROUND RAISED BY THE ASSESSEE. THUS, THE GROUND RAISED BY THE REVENUE IS NOT MAINTAINABLE AND ACCORDINGLY, THE SAME STANDS DISMISSED. 20. IN THE RESULT, THE ASSESSEE S APPEAL IN I.T.A. NO. 1143/MDS/2008 IS ALLOWED AND I.T.A. NOS. 52/MDS/2009, 119 & 1 20/MDS/2012 ARE ALLOWED FOR STATISTICAL PURPOSES, WHEREAS, IN REVENUE S APPEAL IN I.T.A. NOS. 1348 & 1349/MDS/2008 AND 289 & 290/MDS/2012 ARE DISMISSED AND I.T.A. NO. 558/MDS/2009 [A.Y. 2005 - 06] IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 13 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 13. 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.