DCIT,Circle-12, Kolkata, Kolkata V. M/s Hindustan Gums & Chemicals Ltd., Kolkata

ITA 1393/KOL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5637 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 28-09-2012
• Court: TRIBUNAL
• Department Lawyers: S P LAHIRI LD CITSR
• Assessee Lawyers: J P KHAITAN; S BHOWMICK ADVOCA
• Keywords: Business income
• Section: 260A; 10B

Judgement Text

, A , INCOME TAX APPELLATE TRIBUNAL, BENCH- A KOLKATA ( ) BEFORE . . , SHRI P.K.BANSAL, ACCOUNTANT MEMBER !' /AND #$#% 1 ' , SHRI GEORGE MATHAN, JUDICIAL MEMBER '( / ITA NOS. 1393/KOL/2012 & 1723/KOL/2012 A.YS 2005-06 & 2006-07 D.C.I.T CIR-12, KOLKATA - ! - - VERSUS - . M/S. HINDUSTAN GUMS & CHEMICALS LTD. PAN: AAACH 7214E ( '* / APPELLANT ) ( +,'* / RESPONDENT ) '* . / FOR THE APPELLANT /SHRI S.P. LAHIRI, LD. CIT/SR.DR +,'* . / FOR THE RESPONDENT: / S/SHRI J.P. KHAITAN & S.BHOWMICK, ADVOCATE, LD.ARS /!0 1 2 /DATE OF HEARING : 06-01-2014 34 1 2 /DATE OF PRONOUNCEMENT:09-01-2014 / ORDER #$#% 1 ' , SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 1393/KOL/2012 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-X II, KOLKATA IN APPEAL NO. 382/XII/R-12/08-09 DATED 11-06-2012 FOR THE ASSESSM ENT YEAR 2005-06 AND ITA NO. 1723/KOL/2012 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XIX, KOLKATA IN APPEAL NO. 47/CIT(A)- XIX/ADDL.CIT, R-12/KOL/11-12 DATED 28-08- 2012 FOR THE ASSESSMENT YEAR 2006-07. 2. AS BOTH THE REVENUES APPEALS RELATE TO THE SAM E ASSESSEE AND ARE INTER- CONNECTED, THE SAME ARE BEING DISPOSED OF BY THIS COMMON ORDER. 3. SHRI S.P. LAHIRI, LEARNED CIT(DR) REPRESENTED O N BEHALF OF THE REVENUE AND S/SHRI J.P KHAITAN AND SHRI S.BHOWMICK ADVOCATES, LEARNED ARS REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO.1393/KOL/2012 A.Y 2005-06 (BY THE REVENUE) ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 2 4. IN THIS THE REVENUES APPEAL, THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL:- I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE EXEMPTED INCOME U/S. 10B FOR INTEREST EARNED FROM SUSPENSE FUND OF RS. 28, 50,639/-. 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, LD.CIT(A) WAS JUSTIFIED IN ALLOWING THE EXEMPTED I NCOME U/S. 10B FOR FOREIGN TRAVEL EXPENSE OF RS.11,93,596/- ITA NO.1723/KOL/2012 A.Y 2006-07 (BY THE REVENUE) 5. IN THIS THE REVENUES APPEAL, THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL:- I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE EXEMPTED I NCOME U/S.10B FCR INTEREST EARNED FROM SUSPENSE FUND OF RS.23,29, 084/-. 2. WHETHER ON T E FACTS AND IN THE CIRCUMSTANCE O F THE CASE, LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE EXEMPTED I NCOME U/S.10B FOR FOREIGN TRAVEL EXPENSE OF RS.5 ,45,955/-. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, LD. CIT(A) WAS JUSTIFIED IN ALLOWING RS.2,13,517/- AS PRIOR PERIOD EXPENSES IS NOT AN ALLOWABLE EXPENDITURE. 6. AT THE TIME OF HEARING, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE GROUND NO.1 IN BOTH THE REVENUES APPEALS IN ITA NOS. 1393 /KOL/2012 & 1723/KOL/2012 FOR THE ASSESSMENT YEARS 2005-06 & 2006-07 WAS SQUARELY CO VERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2003-04 IN ITA NOS. 150/KOL/2007 AND 277/KOL/2007 D ATED 28-12-2007, WHEREIN THE ISSUE HAS BEEN HELD IN FAVOUR OF THE ASSESSEE IN PA RAS 6.4 TO 6.7 AS FOLLOWS:- 6.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF TH E PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. AS ALREADY NOTED ABO VE, THE INTEREST INCOME EARNED BY THE ASSESSEE HAS NOT BEEN TREATED BY IT AS INCOME FROM OTHER SOURCES. THE ASSESSEE DID NOT SHOW ANY INTEREST INCOME UNDER THE HEAD OTHER SOURCES IN ITS COMPUTATION OF INCOME. IN THE ASSESSMENT ORDER, INTEREST INCOME HAS BEEN ASSESSED UNDER BUSINESS HEAD AND NOT AS OTHER SOURCE INCOME. THE A.OS OB SERVATION IN THE ASSESSMENT ORDER THAT THE INTEREST INCOME ON THE SU RPLUS BUSINESS FUNDS OF THE 100% EOU WAS NOTHING BUT AN INCOME IN THE N ATURE OF OTHER SOURCE IS ONLY TO HIGHLIGHT HIS VIEW POINT THAT TH ERE WAS NO DIRECT NEXUS BETWEEN THE INTEREST INCOME AND THE INDUSTRIAL UNDE RTAKING. THIS IS QUIET APPARENT FROM THE FACT THAT IN HIS FINAL COMPUTATIO N, THE ASSESSING OFFICER ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 3 ASSESSED THE INTEREST INCOME UNDER THE HEAD BUSINE SS AND NOT OTHER SOURCES. IN ANY EVENT, AS HELD BY THE JURISDICTION AL HIGH COURT IN CIT - VS- TIRUPATI WOOLEN MILLS LIMITED (SUPRA), SUCH INT EREST INCOME HAS TO BE ASSESSED UNDER THE HEAD BUSINESS. 6.5. THE JUDGMENT OF THE HONBLE SUPREME COURT IN S TERLING FOODS (SUPRA) RELIED UPON BY DEPARTMENT WAS RENDERED WITH REFERENCE TO THE PROVISIONS OF SECTION 8OHH WHICH ARE FOUND TO BE MA TERIALLY DIFFERENT. SUB-SECTION (1) OF SECTION 8OHH READS AS FOLLOWS:- WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUD ES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERT AKING, OR THE BUSINESS OF A HOTEL, TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF T HIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE. A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO TWENTY PER CENT THEREOF . (EMPHASIS SUPPLIED) SECTION 80HH PROVIDES FOR DEDUCTION OF 20% OF THE P ROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING. HOWEVER, SE CTION 8OHH. UNLIKE SECTIONS 10B AND 8OHHC, DOES NOT LAY DOWN THE MANNE R OF COMPUTATION OF SUCH PROFITS. IN THE ABSENCE OF STATUTORY PRESCR IPTION, IT WAS HELD BY THE HONBLE SUPREME COURT THAT DERIVED FROM DENOTED A DIRECT NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UN DERTAKING. 6.6. SEC 10B REFERS TO THE PROFITS AND GAINS DERIV ED BY A 100% EOU FROM EXPORT AND THEN GOES OR TO LAY DOWN THE METHOD OF C OMPUTATION OF SUCH PROFITS WITH REFERENCE TO THE PROFITS OF THE BUSIN ESS OF THE UNDERTAKING. THE LANGUAGE OF SEC. 10B BEING UNEQUIVOCAL, THE DEC ISION OF HONBLE COURT RENDERED IN THE CONTEXT OF SEC. 8OHH, THE LAN GUAGE EMPLOYED WHEREIN IS MATERIALLY DIFFERENT HAS NO APPLICATION IN THE INSTANT CASE. THE MATERIAL PORTIONS OF SUB-SECS. (1) AND (4) OF SECTI ON 10B ARE AS UNDER: (1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PERCENT EXPORT-ORIENTED UNDERTAKING FROM THE EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE SHALL BE ALLOWED FROM TOTAL INCOME OF THE ASSESSEE: (EMPHASIS SUPPLIED) 4) FOR THE PURPOSES OF SUB-SECTION (1) , THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE S HALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS O F THE IUNDERTAKING , THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFT WARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY T HE UNDERTAKING (EMPHASIS SUPPLIED) 6.7 THE DEDUCTION OF THE PROFITS AND GAINS DERIVED BY A 100% EOU FROM EXPORT PROVIDED FOR IN SUB-SECTION (1) OF SECTION 10B IS SUBJECT TO THE PROVISIONS OF THE SAID SECTION, SUB-SECTION(4) LAYS DOWN ITS OWN FORMULA FOR COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING FROM EXPORT. THE FORMULA IS AS FOLLOWS:- ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 4 PROFITS OF THE BUSINESS EXPORT TUR NOVER UNDERTAKING X TOTAL TU RNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING THEREFORE, PROFITS AND GAINS DERIVED BY THE UNDERT AKING FROM EXPORT FOR THE PURPOSES OF SECTION 10B ARE REQUIRED TO BE COMPUTED IN ACCORDANCE WITH SUB-SECTION(4) OF SEC. 10B. SUB-SECTION (4) SPEAKS OF PROFITS OF THE BUSINESS OF THE UNDERTAKING. TO SUCH FIGURE OF PRO FITS, THE RATIO OF THE EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSIN ESS CARRIED ON BY THE UNDERTAKING IS TO BE APPLIED TO DETERMINE THE PRO FITS ELIGIBLE FOR DEDUCTION. THERE IS NO REQUIREMENT FOR THE PURPOSES OF SECTION 10B TO ESTABLISH DIRECT NEXUS BETWEEN THE INCOME AND THE UNDERTAKING. THE ENTIRE BUSINESS INCOME OF THE 100% EOU WILL BE THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. IT HAS BEEN HELD ABOVE THAT THE INTEREST EARNED ON TEMPORARILY SURPLUS BUSINESS FUNDS OF THE 100% EOU DEPOSITED WITH BANKS FOR SHORT PERIODS IS BUSINESS INCOME AND H AS IN FACT BEEN SO ASSESSED. IT IS NOT IN DISPUTE THAT THE SURPLUS FU NDS WERE OF THE 100% EOU. AS SUCH, THE INTEREST EARNED THEREON HAS TO BE REGARDED AS PART OF THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. W E FURTHER FIND THAT THE TRIBUNAL IN THE CASE OF CHEVIOT CO. LTD FOR ASSESSM ENT YEARS 2003-04 AND 2004-05, RELIED UPON BY THE ASSESSEE, HAS DEALT WIT H SIMILAR ISSUE. IN THOSE CASES, THE DIFFERENCE BETWEEN THE PROVISIONS OF SECTIONS 10B AND 80HH WAS NOTED AND AFTER CONSIDERING THE JUDGMENTS OF THE HONBLE SUPREME COURT IN STERLING FOODS (SUPRA) AND IN P.R PRABHAKAR- VERSUS- CIT [284 ITR 548(SC)] APPROVING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN INTERNATIONAL RESEARCH PARK LABORATORIE S LIMITED-VERSUS- ASSISTANT C.I.T [212 ITR (AT) 1 (SB)], IT WAS HELD THAT THE PROFITS OF THE BUSINESS OF THE UNDERTAKING WOULD INCLUDE ITS ENT IRE BUSINESS INCOME. KEEPING IN VIEW THE ABOVE DISCUSSION AND THE DECIS ION OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HA S TO SUCCEED. THE ASSESSING OFFICER IS DIRECTED TO TREAT THE INTEREST OF RS.28,74,473/- AS PART OF THE PROFITS OF THE BUSINESS OF THE 100% EOU ELIG IBLE FOR DEDUCTION UNDER SECTION 10B AND COMPUTE THE DEDUCTION ACCORDINGLY. THE ASSESSING OFFICER SHOULD DEDUCT THE SUM OF RS.8,01,30,294/- (RS.7,72,54,821/-+ 28,74,473/-) AND NOT ONLY RS.7,72,54,821/- FROM THE PROFIT AS PER PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF SEPARATE CONSIDERA TION UNDER SECTION 10B. GROUND NOS. 3,4 AND 5 OF THE ASSESSEES APPEA L ARE THUS ALLOWED. 7. IT WAS, HOWEVER, SUBMITTED BY THE LEARNED CIT ( DR) THAT THE REVENUE HAS FILED SECOND APPEAL U/S. 260A AGAINST THE SAID ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (REFER TO SUPRA) A ND THE MATTER IS PENDING. ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 5 8. IN REGARD TO GROUND NO.2 OF BOTH THE REVENUES A PPEALS IN ITA NOS. 1393/KOL/2012 & 1723/KOL/2012 FOR THE ASSESSMENT Y EARS 2005-06 & 2006-07, IT WAS ALSO FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSU E WAS SQUARELY COVERED BY THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (REFER TO SUPRA), WHEREIN IN PARA 5.5 THE ISSUE HAS BEEN HELD IN FAVOUR OF THE ASSESSEE AS FOLLOWS:- 5.5. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PA RTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE GRIEVANCE OF THE DEPARTMENT WAS THAT THE C.LT.(A) IN CONTRAVENTION OF RULE 46A HAS DECIDED THE ISSUE BY TAKING INTO CONSIDERATION THE FRESH EVIDENCE WHICH WERE NOT MADE AVAILABLE TO THE A.O. FROM THE WRITTEN SUBMISSION F ILED BEFORE THE C.LTJA), WHICH HAS BEEN REPRODUCED ABOVE, WE FIND T HAT THE ASSESSEE FILED THE SEPARATE PROFIT & LOSS A/C, AND BALANCE S HEET OF THE 100% EOU AS WELL AS BREAK-UP OF THE MISCELLANEOUS EXPENS ES OF THE 100% EOU WHICH INCLUDED TRAVELING EXPENSES OF RS.16,965I - AND CONVEYANCE EXPENSES OF RS.L.08.600/-. TOTALLING TO RS.L25.565/-,. BEFORE THE C.LT.(A) AND ALSO BEFORE THE A.O. THESE PAPERS HAVE ALSO BEEN FILED BEFORE US WHICH FIND PLACE ON PAGES 14 T O 17 OF THE PAPER BOOK. PAGE-17 OF THE PAPER BOOK IS A LETTER DATED 2 0,3,2006 ADDRESSED TO THE I.T 0. WARD-L2(4. KOLKATA. WHEREBY AS PER R EQUISITION THE ASSESSEE FILED BREAK-UP OF THE MISCELLANEOUS EXPENS ES APPEARING IN THE PROFIT & LOSS A/C OF THE 100% EOU, WHICH INCLUD ED TRAVELING & CONVEYANCE EXPENSES ALSO. THEREFORE, WE FIND NO JUS TIFICATION IN THE SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE A ND GROUNDS RAISED IN THIS REGARD THAT THE C.I.T.(A) DECIDED TH E ISSUE ON THE BASIS OF NEW EVIDENCE WHICH WERE NOT FILED BEFORE THE A.O. A S EXPLAINED BY THE LD. COUNSEL, THE CUSTOMERS OF THE 100% EOU WERE FIX ED AND NO TRAVEL INCLUDING FOREIGN TRAVEL WAS REQUIRED FOR SELLING I TS PRODUCT AND ONLY LOCAL TRAVELLING AND CONVEYANCE EXPENSES WERE INCUR RED. IT WAS ALSO EXPLAINED AS TO WHY THE TRAVELLING AND CONVEYANCE E XPENSES OF THE OTHER UNITS, WHICH INCLUDED FOREIGN TRAVEL EXPENSES FOR SELLING THE PRODUCTS OF THOSE UNITS, WERE HIGHER. THE DEPARTMEN T HAS NOT DISPUTED ANY OF THE FACTS ASSERTED BY THE ASSESSEE. IN THAT VIEW OF THE MATTER, THE CIT(A) WAS JUSTIFIED IN ACCEPTING THE ASSESSEE S CONTENTION THAT THE TRAVELLING AND CONVEYANCE EXPENSES OF THE 100% EOU WERE RS. 1,25,565/- ONLY WHICH HAD ALREADY BEEN DEBITED WHIL E COMPUTING THE PROFITS OF THE BUSINESS OF THE 100% EOU AND THAT TH E SAID EXPENDITURE WAS NOT REQUIRED TO BE INCREASED SINCE THE ASSESSEE DID NOT INCUR ANY OTHER AMOUNT FOR TRAVELLING AND CONVEYANCE RELATING TO THE 100% EOU. FURTHER, ONCE THE ENTIRE EXPENDITURE INCURRED ON TR AVELLING AND CONVEYANCE OF THE 100% EOU WAS DEBITED IN THE SEPAR ATE ACGOUNTS MAINTAINED FOR IT, WE FIND NO JUSTIFICATION FOR APP ORTIONING THE EXPENDITURE UNDER THE HEAD APPEARING IN THE CONSO LIDATED ACCOUNTS ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 6 OF THE ASSESSEE AS REFERABLE TO THE 100% EOU ON TH E BASIS OF TURNOVER RATIO OF 21% WORKED OUT BY THE AO. KEEPIN G IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE C ASE AND THE ACCOUNTS OF THE ASSESSEE, WE FIND NO MERIT IN THE GROUNDS R AISED BY THE DEPARTMENT AND THE SAME ARE DISMISSED. THE ORDER OF THE CIT(A) ON THIS ISSUE, THEREFORE, STANDS CONFIRMED. 9. IT WAS, HOWEVER, SUBMITTED BY THE LEARNED CIT(DR ) THAT THE REVENUE HAS FILED SECOND APPEAL U/S.260A OF THE ACT AGAINST THE SAID ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (REFER TO SUPR A) 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE ISSUES IN RESPECT OF GROUND NOS.1 & 2 OF BOTH THE REVENUES A PPEALS IN ITA NOS.1393/KOL/12 & 1723/KOL/12 FOR THE A.YS 2005-06 & 2006-07 ARE SQUA RELY COVERED BY THE SAID ORDER/DECISION OF THE CO-ORDINATE BENCH OF THIS TRI BUNAL IN ASSESSEES OWN CASE (REFER TO SUPRA) IN SO FAR AS THE SAID ORDER OF THE TRIBUN AL HAS NOT YET BEEN DISTURBED AS ALSO ON ACCOUNT OF THE FACT THAT THERE IS NO CHANGE IN THE FACTS FOR THE RELEVANT ASSESSMENT YEARS 2005-06 & 2006-07 COMPARED TO THE FACTS AS AVAILABLE FOR THE ASSESSMENT YEAR 2003-04 [IN ASSESSEES OWN CASE] (REFER TO SUP RA) THE FINDINGS OF THE LD.CIT(A) ON THE ISSUES STAND CONFIRMED. THESE ISSUES OF BOTH T HE REVENUES APPEALS IN ITA NOS. 1393/KOL/12 & 1723/KOL/12 FOR THE ASSESSMENT YEARS 2005-06 & 2006-07 STAND DISMISSED. 11. IN REGARD TO GROUND NO.3 OF THE REVENUES APPEA L IN ITA NO. 1723/KOL/2012 FOR THE ASSESSMENT YEAR 2006-07, IT WAS FAIRLY AGREED B Y BOTH THE SIDES THAT THE ISSUE WAS SQUARELY COVERED BY THE SAID ORDER/DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE(REFER TO SUPRA) FOR THE ASSESSMENT YEAR 2003-04, WHEREIN IN PARA 7.3 THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AS FOLLOWS:- 7.3 WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL PLACED BEFORE US. AS PER TAX AUDIT REPORT, THE SUM OF RS. 47,972/- WAS PRIOR PERIOD EXPENSES AND INCOME OF RS. 31,64,850/- WAS ALSO RELATING TO EARLIER YEARS. THE AO TOOK INTO CONSIDERATION TH E INCOME EXCLUDING THE EXPENDITURE. WE FIND THAT OUT OF THE EXPENDITUR E OF RS.47,972/-, A SUM OF RS.23,888/- WAS ON ACCOUNT OF RATES & TAXES, WHICH WAS ADMITTEDLY NOT PAID DURING THE RELEVANT YEARS. H OWEVER, AS HAS BEEN POINTED OUT BEFORE THE CIT(A) AND CONTENDED BEFORE US, THE ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 7 ASSESSEE ITSELF HAS DISALLOWED THE SAID EXPENDITU RE U/S. 43B. OUT OF THE REMAINING EXPENDITURE OF RS.24,084/- [RS.47,9 72 RS.23,888], SUM OF RS. 6,769/- WAS ON ACCOUNT OF INTEREST FOR WHICH, ACCORDING TO THE ASSESSEE, DEBIT ADVICE WAS ISSUED BY THE BANK ON 1.4.2002 AND HENCE THE SAID AMOUNT GOT LEFT OUT FROM CONSI DERATION IN THE ACCOUNTS FOR THE YEAR ENDED 31.3.2002, BUT REFLEC TED IN THE ACCOUNTS AS ON 31.3.2003. CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES OF THE CASE, WE FIND SUBSTANTIAL FORC E IN THE CONTENTION OF THE ASSESSEES LEARNED COUNSEL THAT THE AO WAS NOT JUSTIFIED IN TAKING INTO CONSIDERATION ONLY THE INCOME EXCLUDIN G THE RELATED EXPENDITURE OF THE EARLIER YEARS AND DISALLOWING THE EXPENDITURE AS PRIOR PERIOD EXPENDITURE. INCOME AND EXPENDITURE IS CORRELATED. IF INCOME IS TO BE CONSIDERED, THEN AUTOMATICALLY EX PENDITURE IN RELATION TO SUCH INCOME NEEDS TO BE TAKEN CARE OF. THE ASSESSEE DESERVES TO SUCCEED ON THIS GROUND. 11.1 IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES ON CASE FOR TH E ASSESSMENT YEAR 2003-04, THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STAND CONFI RMED. THIS GROUND OF REVENUES APPEAL STANDS DISMISSED. 12. IN THE RESULT, BOTH THE REVENUES APPEALS IN I TA NOS. 1393/KOL/12 & 1723/KOL/12 FOR THE ASSESSMENT YEARS 2005-06 & 200 6-07 STAND DISMISSED AS STATED ABOVE. 5 / 6 / 7 58 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 9.1. 14 SD/- SD/- ** PRADIP SPS 1 +..9 :94; / COPY OF THE ORDER FORWARDED TO: 1. . '* / THE APPELLANT : DCIT,CIR-12, P-7 CHOWRINGHEE SQ ,AAYKAR BHAWAN, 7 TH FL, KOL-69. 2 +,'* / THE RESPONDENT- M/S. HINDUSTAN GUMS & CHEMICAL S LTD 9/1 R.N MUKHERJEE RD, KOL-1 3 . / THE CIT, ( . . , ) ( P.K.BANSAL, ACCOUNTANT MEMBER ) ( #$#% 1 ' , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( ( 2 2 2 2 ) )) ) DATE 9.1.14 ITA NOS. 1393/KOL/12 & 1723/KOL/12-A M/S. HINDUSTA N GUMS & CHEM. LTD 8 4. . . ( )/ THE CIT(A) 5 . !<.7 +. / DR, KOLKATA BENCH 6 . GUARD FILE . ,9 +./ TRUE COPY, // BY ORDER, 5 '# /ASSTT REGISTRAR