M/s. Premier Protiens Ltd., V. The DCIT(Asstt.), S.R.-1,

ITA 140/IND/1997

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1406 (ITAT-INDORE)
• Duration Of Justice: 12 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-10-2009
• Assessment Year: 1993-1994
• Appeal Filed On: 11-02-1997
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C MEHTA; H CHIMNANI CAS
• Assessee Lawyers: V K KARAN
• Keywords: Depreciation; Proportionate interest; Competent authority; TDS
• Section: 80HHC; 80HH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI V.K.GUPTA,A.M. PAN NO. : 18-110-CQ-9521 I.T.A.NO. 223/IND/97. DEPUTY COMMISSIONER OF INCOME TAX SPECIAL RANGE-II, INDORE PREMIER PROTEINS LTD. CHETAK CENTRE, RNT MARG, INDORE VS APPELLANT RESPONDENT I.T.A.NO. 140/IND/97. INDORE PREMIER PROTEINS LTD. CHETAK CENTRE, RNT MARG, INDORE DEPUTY COMMISSIONER OF INCOME TAX SPECIAL RANGE-II, INDORE VS APPELLANT RESPONDENT ASSESSEE BY : SH V.K.KARAN, SR, DR DEPARTMENT BY : SHRI M.C.MEHTA & H. CHIMNANI, CAS O R D E R PER V.K.GUPTA, AM THIS APPEAL, FILED BY THE ASSESSEE, ARISES OUT OF O RDER OF LD. CIT DATED 20.12.1996. 2 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIAL ON RECORD. 3. GROUND NO.1& 2 READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS, 2,81,250/- THAT WAS MADE BY THE AO ON ACCOUNT OF LOSS ON MANUFACTURING NUGGETS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 56,250/- THAT WAS MADE BY THE AO ON ACCOUNT OF EXCESSIVE CLAIM OF WASTAGE . 4. THE FACTS, IN BRIEF, ARE THAT ASSESSEE USED SOYA FLAKES SEEDS WEIGHING 581878 MT TO MAKE SOYA POWDER AT 5653.88 MT FROM SO YA POWDER, THE ASSESSEE MANUFACTURED SOYA NUGGETS .THE ASSESSEE AL SO PURCHASED SOYA POWDER FROM OUTSIDE PARTIES. THE QUANTITY OF SOYA N UGGETS WAS LESS BY 36.772 MT. THE AO ASKED THE ASSESSEE TO EXPLAIN SUC H SHORTAGE. THE ASSESSEE SUBMITTED THAT THERE WAS A MANUFACTURING L OSS IN CONVERTING SOYA FLAKES INTO POWDER IN THE RANGE OF 3 TO4%. SIMILARL Y THERE WAS A LOSS 4 TO 5 % IN CONVERTING SOYA POWDER TO SOYA NUGGETS. THE ASSESSEE ALSO SUBMITTED THAT SUCH MANUFACTURING LOSS WAS ALSO DEPENDENT ON QUALITY OF RAW MATERIAL AND INTERRUPTIONS IN THE MANUFACTURING PROCESS DUE TO POWER BREAKDOWNS .THE AO, HOWEVER, HELD THAT THESE CONTENTIONS OF TH E ASSESSEE REMAINED UNSUBSTANTIATED, HENCE, AFTER GIVING CREDIT OF 11.7 72 MT DUE TO POWER BREAKS OWN AND OTHER PROCESS LOOSES, HE HELD THAT T HE 25 MT QUANTITY OF NUGGETS HAD BEEN SOLD OUT OF THE BOOKS AND WORKED O UT THE VALUE THEREOF AT RS. 281250/-. FURTHER, THE AO FOUND THAT ASSESSEE H AD SHOWN SALE OF REJECTED NUGGETS WEIGHING 21.785 MT @RS. 150 PER BAG. THE AO AFTER MAKING DUE INQUIRIES FROM THE ASSESSEE HELD THAT 15 MT QUANTIT Y OF SUCH NUGGETS WAS OF 3 GOOD QUALITY AND SHOULD HAVE BEEN SOLD @ RS. 225 PE R BAG , HENCE, HE ADDED A SUM OF RS. 56,250/- AS TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE L D CIT (A) WHEREIN MANUFACTURING PROCESS WAS EXPLAINED AND LOOSED SUFF ERED BY THE ASSESSEE IN EARLIER TWO ASSESSMENT YEARS WERE BROUGHT TO THE N OTICE OF LD CIT (A). THE LD CIT(A) AFTER CONSIDERING THIS DETAIL DELETED BOT H THE ADDITIONS. THE RELEVANT FINDINGS OF THE LD OF CIT(A) ARE AS UNDER: - PARA 4 . I HAVE PERSUED THE DETAILS OF INVOICES CONTAINED A T PAGE 28 TO 36 OF THE COMPILATION. THESE DETAILS CONTAINS UN SORTED SOYA BEDI WHICH IS OF INFERIOR QUALITY AND THIS FACTS SHOULD NOT JUST HAVE BEEN BRUSHED ASIDE BY THE ASSESSING OFFICER. IT IS ALSO A FACT IN THE EARLIER YEAR NO SUCH ADDITION ON THIS COUNT HAS BEE N MADE, THEREFORE, UNLESS CERTAIN COMPARATIVE INSTANCES HAV E BEEN CITED THAT THE APPELLANT HAS SUPPRESSED PRODUCTION BY CLAIMING EXCESSIVE LOSSES UNDER VARIOUS HEADS THIS ADDITION IS NOT JUS TIFIED AND DELETED. EVEN THE RESULTS OF THE APPELLANT APPEARED FAVOURAB LE WITH THOSE OF EARLIER YEARS. PARA 5. NEXT POINT IS AGAINST ADDITION OF RS, 56,250/- TOW ARDS EXCESS CLAIMS OF WASTAGE. FOR THE REASONS DISCUSSED IN THE EARLIER PARAGRAPH ABOVE, ADDITION ALSO IS NOT JUSTIFIED AND DELETED. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT LOSS WAS EXCESSIVE AND NO DETAILS OF INFERIOR QUALITY OF NUG GETS WERE SUBMITTED, HENCE, THE ORDER OF AO TO BE SUSTAINED. 4 6. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT I N EARLIER 2 ASSESSMENT YEARS THE WASTAGE IN MAKING POWDER FROM FLAKES WAS 2.90% AND 2.93% AND THE QUANTUM OF PRODUCTION WAS ROUGHLY 20000 MT. SIM ILARLY, THE PERCENTAGE OF LOSS IN MAKING FROM BADI FROM POWDER WAS 2.64% A ND 2.97% IN A.Y 1991-92 & 92-93 RESPECTIVELY. THE QUANTUM OF PRODUC TION OF NUGGETS WAS 1020 MT AND 777 MT RESPECTIVELY. IN THE YEAR CONSID ERATION, THE ASSESSEE SCALED DOWN THESE ACTIVITY SUBSTANTIALLY AND ONLY 5 18 MT APPROX FLAKES WAS CONSUMED TO MAKE THE POWDER AND ONLY 510.813 MT NUG GETS WERE PRODUCED AND TOTAL WASTAGE IN BOTH THE PROCESSES WAS 36.772 MT. THUS, THE PERCENTAGE OF LOSS IN THE YEAR CONSIDERATION WAS ON HIGHER SIDE DUE TO LESS QUANTUM OF CONSUMPTION/PRODUCTION AS COMPARED TO EA RLIER YEAR, HOWEVER, STILL THE SAME WAS WITHIN THE PERMISSIBLE RANGE. IT WAS ALSO CONTENDED THAT NO ADDITION WAS MADE ON THIS ACCOUNT IN EARLIER YEARS. IT WAS ALSO CONTENDED THAT BOOKS OF ACCOUNT WERE DULY AUDITED AND ENTIRE QUANTITY DETAILS HAD BEEN MAINTAINED WHICH WERE ALSO SUBJECT TO SUPERVISION B Y THE EXCISE DEPARTMENT, HENCE, WITHOUT POINTING OUT ANY SPECIFIC DEFECTS TH EREIN, THE PROCESS LOSS COULD NOT BE REJECTED. THE LD. COUNSEL FURTHER PLAC ED RELIANCE ON THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF R.J. TRIVEDI (HUF) VS. CIT AS IN REPORTED IN 144 ITR PAGE 877 IN THIS REGA RD. HE FURTHER PLACED STRONG RELIANCE ON THE ORDER OF LD CIT (A). 7. WE HAVE CONSIDERED THE SUBMISSION MADE BY BOTH T HE SIDE MATERIAL ON RECORD AND ORDERS OF AUTHORITY BELOW. WE FIND THAT ASSESSEES ACCOUNTS ARE AUDITED AND ARE ALSO SUBJECT TO SUPERVISION OF THE EXCISE DEPARTMENT .NO DEFECT HAS BEEN POINTED OUT BY THE AO IN SUCH ACCOU NTS. WE FURTHER FIND THAT THE PERCENTAGE OF MANUFACTURING LOSS IN THE PRODUCT ION OF SOYA NUGGETS IS 5 COMPARABLE TO PERCENTAGE OF SUCH LOSS IN EARLIER YE ARS WHEREIN NO SUCH ADDITION HAS BEEN MADE. WE ALSO FIND THAT THE AO HA S ACCEPTED CERTAIN PART OF MANUFACTURING LOSS AS GENUINE WITHOUT GIVING ANY BASIS FOR REJECTING THE REMAINING QUANTUM OF SUCH LOSS. IN OUR OPINION, THE SUCH KIND OF MANUFACTURING PROCESS RESULTS INTO MANUFACTURING LO SSES, HENCE, IT CAN NOT BE SAID THAT ASSESSEE HAS SHOWN SOMETHING WHICH IS NOT POSSIBLE. FURTHER, THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUBSTA NTIATE HIS CLAIM THAT CERTAIN QUANTITY HAD BEEN SOLD OUT OF THE BOOK INSP ITE OF SUPERVISION OF EXCISE DEPARTMENT. THUS, IN OUR OPINION THE LD CIT( A) HAS RIGHTLY DELETED THIS ADDITION. AS REGARDS THE SALE OF INFERIOR QUAL ITY OF NUGGETS IS CONCERNED, THE ASSESSEE HAS GIVEN ALL THE DOCUMENTARY EVIDENCE S IN SUPPORT OF SUCH CLAIM AND THE AO ORDER IS A CASE OF PRESUMPTION AND SUBSTANTIATE ONLY AS NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO SU BSTANTIATE THE SAME. ACCORDINGLY, BOTH THESE GROUNDS OF THE REVENUE ARE DISMISSED. 8. GROUND NO. 3 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 23,37 ,310/- THAT WAS MADE BY THE AO ON ACCOUNT OF EXCESSIVE CONSUMPTION OF COAL. 9. BOTH THE PARTIES AGREED THAT THIS ISSUE WAS COVE RED IN FAVOUR OF ASSESSEES BY THE ORDER OF THE TRIBUNAL IN ASSESSE S OWN CASES FOR A.YRS 91- 92 AND 92-93 WHICH WERE FOLLOWED BY THE LD CIT (A). ACCORDINGLY, WE DISMISS THIS GROUND OF THE REVENUE AND FOR BETTER A PPRECIATION OF FACTS WE REPRODUCE THE FINDINGS OF THE LD. CIT(A) AS UNDER:- 6 PARA 6 NEXT POINT IS AGAINST ADDITION OF RS.23,37,310/- O UT OF EXPENSES INCURRED ON COAL CONSUMPTION WHICH COMPRISES OF RS. 21,24,882/- AND RS. 2,12,428/-.THE APPELLANT DURING THE YEAR HAD PROCES SED 54466.575 M.T OF SOYASEED ON WHICH COAL CONSUMPTION HAS BEEN SHOWN A T 7618.230 MT WHICH GIVES AN AVERAGE CONSUMPTION OF 140 KG OF COA L FOR PROCESSING ONE M.T OF SOYA SEED. THE ABOVE CONSUMPTION OF COAL HAS BEEN CONSIDERED BY THE ASSESSING OFFICER TO BE EXCESSIVE AND HE HAS AL LOWED THE COAL CONSUMPTION AT 100 KG FOR ONE M.T. OF PROCESSING SO YA SEED TO BE REASONABLE RESULTING IN THE IMPUGNED ADDITION. THE LD. REPRESENTATIVES RELIES ON THE APPELLATE ORDER IN THE CASE OF THE AP PELLANT FOR ASSESSMENT YEAR 1991-92 AND 1992-93 WHERE COAL CONSUMPTION HAS BEEN CONSIDERED REASONABLE AT 140 KG AND 136.91 KG RESPECTIVELY. HE HAS ALSO RELIED ON THE ITAT INDORE BENCH INDORE ORDER IN THE CASE OF VIPPY SOLVEX IN WHICH HIGHER CONSUMPTION OF COAL WAS ACCEPTED. IT IS ALSO POINTED OUT THAT THE SAME ASSESSING OFFICER IN THE CASE OF THE APPELLANT FOR ASSESSMENT YEAR 1989-90 HAD ACCEPTED THE COAL CONSUMPTION @ 203 KG PER M.T OF SOYA SEED CRUSHED AS REASONABLE, THEREFORE, THE ADDITION IS UNCALLED FOR. FOLLOWING THE APPELLATE ORDERS IN THE CASE OF THE A PPELLANT FOR EARLIER YEARS AND REASONS DISCUSSED THEREIN ADDITION OF RS. 23,37 ,310/- IS NOT JUSTIFIED AND DELETED. 10. GROUND NO. 4 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN DIRECTING THE AO TO ALLOW DEPRECIATION ON INCREASED COST OF PLANT & MACHINERY DUE TO FLUCTUATION IN RATE OF FOREIGN E XCHANGE . 11. BOTH THE PARTIES AGREED THAT THIS ISSUES WAS AL SO COVERED IN FAVOURE OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 22. 08.08 IN ASSESSEES OWN 7 CASE A.Y 92-93 AND DREW OUR ATTENTION TO PARA 30 & 31 OF THE SAID ORDER PLACED AT PAGE 125 OF THE PAPER BOOK. WE FIND THAT THE TRIBUNAL, IN THE SAID ORDER, HAS HELD THAT ASSESSEE WAS ELIGIBLE FOR DEPR ECIATION ON INCREASED COST OF PLANT AND MACHINERY DUE TO FLUCTUATION IN FOREIG N EXCHANGE RATE. THUS, RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS GR OUND OF THE REVENUE. 12. GROUND NO. 5 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 11,22,630/- T HAT WAS MADE BY THE AO ON ACCOUNT OF GUNNY BAGS AND RS. 3,80,400/- ON ACCO UNT OF PURCHASE FROM ITS SISTER CONCERN PREMIER INDUSTRIES INDIA LTD. 13. BOTH PARTIES AGREED THAT THIS ISSUE WAS ALSO CO VERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASES FOR A.YRS 91- 92 & 92-93 AND DREW OUR ATTENTION PAGE 109, 122 AN D 123 IN THIS REGARD. WE FIND THAT THIS ISSUE FIRSTLY AROSE BEFORE TRIBUN AL IN A.Y 90-91 AND FOLLOWING THAT ORDER, THE TRIBUNAL DISMISSED REVENU ES APPEAL IN A.Y 91-92 & 92-93 ALSO. THE FACTS ARE IDENTICAL, HENCE, FOLLO WING THE EARLIER ORDER,WE DISMISS THIS GROUND OF THE REVENUE. 14. GROUND NO. 6 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN HOLDING THAT DEDUCTION U/S 80-HH AND 80-I SHOULD BE ALLOWED ON GROSS TOTAL INCOME AND NOT ON THE INCOME REDUCED BY THE AMOUNT ALLOWED U/S 80-HH 8 15. BOTH THE PARTIES AGREED THAT THIS ISSUE ARE ALS O COVERED IN THE FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESS EES OWN CASES FOR VARIOUS YEARS AND REFEREED TO PARA 42 & 43 OF THE ORDER OF THE TRIBUNAL FOR A.Y 91- 92 OF PAGE 122 OF THE PAPER BOOK . WE FIND THAT THE A VIEW IN FAVOUR OF THE ASSESSEE HAS BEEN TAKEN BY THE TRIBUNAL BY FOLLOWIN G THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF J. B. TOBAOCE CO. LTD. AS REPORTED IN 229 ITR PAGE 123, HENCE, IN THE BACKGRO UND OF THE FACT THAT THERE IS NO CHANGE IN THE LAW AS ADMITTED BY BOTH THE PAR TIES, WE DISMISS THIS GROUND OF THE REVENUE IN THE YEAR UNDER CONSIDERATI ON ALSO. 16. GROUND NO. 7 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DIRECTING THE AO TO CONSIDER THE LOSS CLAI MED BY THE ASSESSEE ON TRADING OF EXPORT GOODS FOR ALLOWING DEDUCTION U/S 80-HH & 80-I 17. THE FACTS, IN BRIEF, ARE THAT WHILE COMPUTING D EDUCTION U/S 80 HH & 80-I, THE AO CONSIDERED LOSS ON ACCOUNT OF EXPORT O F TRADING GOODS AT RS. 36,82,910/- .THE ASSESSEE , IN APPEAL BEFORE THE L D CIT (A), SUBMITTED THAT WHEN DEDUCTION UNDER THIS SECTION WAS NOT ALLOWABLE ON TRADING PROFIT, HENCE, LIKEWISE TRADING LOSS HAD TO BE ADDED TO BUS INESS INCOME TO CORRECTLY WORK OUT THE PROFITS OF ELIGIBLE INDUSTRIAL UNDERT AKING. THE ASSESSEE ALSO PLACE RELIANCE ON THE DECISION OF THE TRIBUNAL IN T HE CASE OF DCIT VS. M/S STEEL INGOTS PVT. LTD..THE LD CIT (A) , ACCORDINGLY , DIRECTED THE AO TO IGNORE THE LOSS SUFFERED BY THE ASSESSEE ON TRADING OF EXPORTS GOODS FOR ALLOWING DEDUCTION U/S 80-HH & 80-I. 9 AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFOR E US. 18. IT WAS SUBMITTED THAT IN A.Y 92-93, TRIBUNAL HA D RESTORED THIS ISSUE TO THE FILE OF AO TO DECIDE THE MATTER AFRESH FOLLOWIN G THE DECISION IN THE CASE OF SIDHARTH TUBES LTD. IN ITA NO 85/IND/00 FOR A.Y 96-97, HOWEVER, IN THE YEAR UNDER CONSIDERATION, IT WAS NOT A CASE OF TWO UNITS OF THE SAME COMPANY BUT THE CASE OF TRADING LOSS SUFFERED BY THE SAME E LIGIBLE INDUSTRIAL UNDERTAKING. THE LD. COUNSEL FURTHER PLACED RELIANC E OF THE DECISION OF THE TRIBUNAL IN THE CASE OF EMERSON NETWORK POWER INDIA (P) LTD. VS. ACIT AS REPORTED IN 122 TTJ (MUMBAI) 67 WHEREIN IT WAS HELD THAT ASSESSEE COMPANY AND INDUSTRIAL UNDERTAKING WERE TWO INDEPENDENT ENT ITIES FOR THE PURPOSES OF THE INCOME TAX ACT , HENCE, TRADING PROFIT OF THE C OMPANY HAD TO BE IGNORED AS SAME WAS OF THE COMPANY AND NOT OF THE INDUSTRIA L UNDERTAKING AND , THUS, ON THE SAME ANALOGY, TRADING LOSS HAD TO BE IGNORED I.E PROFITS OF INDUSTRIAL UNDERTAKING WERE TO BE INCREASED BY THE QUANTUM OF SUCH TRADING LOSS. IN THIS REGARD THE LD. COUNSEL FURTHER PLACED RELIANCE ON T HE DECISION ON THE THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF GUJR AT AMBUJA CEMENT AS REPORTED IN 120 TTJ PAGE 883. .THE LD. DEPARTMENTAL REPRESENTATIVES, ON THE OTHER HAND, PLACE STRONG RELIANCE ON THE ORDER OF T HE AO. 19. WE HAVE CONSIDERED THE SUBMISSION MADE BY BOTH THE SIDES MATERIAL ON RECORD AND ORDERS OF THE REVENUE AUTHORITIES. IT IS NOT IN DISPUTE THAT INDUSTRIAL UNDERTAKING HAS BEEN RECOGNIZED INDEPE NDENT OF ITS OWNER FOR THE PURPOSES OF GRANTING RELIEF / DEDUCTION UNDER V ARIOUS PROVISIONS OF THE INCOME TAX ACT, 1961. GENERALLY, AN INDUSTRIAL UNDE RTAKING IS ESTABLISHED TO MANUFACTURE OR PRODUCE OR PROCESS AN ARTICLE OR THI NG AND , THEREFORE, THE TRADING ACTIVITIES WOULD NOT FALL WITHIN THE SCOPE OF OPERATIONS OF AN 10 INDUSTRIAL UNDERTAKING AND IF SOME TRADING ACTIVITI ES HAVE BEEN CARRIED OUT BY AN ASSESSEE WHO ALSO OWNS AN INDUSTRIAL UNDERTAKING IN THE RELEVANT PERIOD, THEN, SUCH ACTIVITY WOULD BE ATTRIBUTABLE TO SUCH O WNER AND NOT TO THE INDUSTRIAL UNDERTAKING. ON THE BASIS OF THIS THIS A NALOGY, THE INDUSTRIAL UNDERTAKING CANNOT GET ANY DEDUCTION ON SUCH TRADIN G PROFITS AND LIKEWISE TRADING LOSSES HAVE WILL HAVE TO BE IGNORED IN COMP UTING DEDUCTION U/S 80HH & 80-I OF THE ACT. THE JUDICIAL DECISIONS CITE D BY THE ASSESSEE, IN THIS REGARD, ALSO SUPPORT THE CLAIM OF THE ASSESSEE. THU S, WE ACCEPT THIS CLAIM OF THE ASSESSEE. BEFORE PARTING WITH THE ISSUE, WE MAY ADD THAT, IN VIEW OF OUR DECISION FOR REASON STATED ABOVE, WE DO NOT CONSIDE R IT NECESSARY TO EXPRESS ANY OPINION ON THE OBSERVATIONS MADE BY LD. CIT (A) WHILE GRANTING RELIEF TO THE ASSESSEE ON THIS ISSUE. 20. GROUND NO 8 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN DIRECTING AO TO INCLUDE PROFIT ON SALE OF COAL ASH OF RS. 11.7498/- RESTRICTING THE DISALLOWANCE ON SALE OF RICE OF RS. 53,052/- ONLY. EVEN WHEN THE PROPORTIONATE PROFIT ON TRADING GOODS HAS CORRECTLY BEEN CALCULATED AND DEDUCTED FROM THE TOTAL INCOME. 21. THE LD. COUNSEL FOR THE ASSESSEE, AT THE VERY O UTSET, SUBMITTED THAT ISSUE OF PROFIT ON SALE OF COAL ASH WAS CONNECTED W ITH GROUND NO.3 , HENCE, IF THE ASSESSEES CLAIM REGARDING CONSUMPTION OF COAL ACCEPTED, THEN, THIS ISSUE WOULD NOT SURVIVE . SINCE WE HAVE DISMISSED GROUND NO.3 OF REVENUES APPEAL HEREIN BEFORE, HENCE, THIS PART OF THIS GROU ND IS DISMISSED. AS REGARD, THE OTHER ISSUE INVOLVED IN THIS GROUND, WE FIND TH AT IT IS THE CASE OF SALE AND 11 PURCHASE OF RICE BRAN BY THE ASSESSEE WHEREON THE A SSESSEE EARNED A NET PROFIT OF RS. 53,052/- AND THIS BEING A TRADING PRO FIT, CANNOT BE INCLUDED IN ELIGIBLE PROFITS IN COMPUTING THE DEDUCTION U/S 80H H/80I FOR THE REASONS GIVEN BY US WHILE DISPOSING OF GROUND NO.7 HEREIN A BOVE. ACCORDINGLY, WE HOLD THAT THE DECISION OF THE CIT (A) IS CORRECT IN LAW, HENCE, WE DISMISS THIS PART OF THIS GROUND AS WELL. THUS, THIS GROUND IS A LSO DISMISSED. 22. IN THE RESULT APPEAL FILED BY THE REVENUE STAND S DISMISSED. 23. NOW WE SHALL TAKE UP ASSESSES APPEAL IN ITA NO. 140/IND/97. 24. GROUND NO. 1 READS AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN NOT DIRECTING THE AO TO ALLOW CREDI T OF TDS OF RS. 15,875/- IN THE ASSESSMENT YEAR 19992-93 WHICH IS A LLOWABLE AS PER LAW. 25. THE FACTS, IN BRIEF, ARE THAT ASSESSEE CLAIMED CRE DIT OF TAX OF RS. 15875/- WHICH PERTAIN TO INCOME OFFERED BY THE ASSE SSEE A.Y. 92-93, HENCE, THE AO DID NOT GAVE CREDIT THEREOF IN THE YEAR UNDE R CONSIDERATION. THE LD CIT(A) ALSO CONFIRMED THE ACTION OF AO. STILL AGGR IEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 26. THE LD. COUNSEL NARRATED THE FACTS AND SUBMITTE D THAT THE ASSESSEE SHOULD HAVE BEEN ALLOWED CREDIT OF SUCH TDS EITH IN THE YEAR CONSIDERATION OR IN A.Y 92-93 WHEREIN SUCH INCOME HAD BEEN OFFERE D. 12 27. THE LD. DR, ON THE OTHER HAND, PLACED STRONG RE LIANCE ON THE ORDER OF LD. CIT(A) 28. WE HAVE CONSIDERED SUBMISSION MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND ORDERS OF REVENUE AUTHORITIES. IT IS NOT IN DISPUTE THAT INCOME, WHEREON SUCH TAX HAS BEEN DEDUCTED FROM SOURCE, HAS BEEN OFFERED IN A.Y92-93 AND CERTIFICATE FOR SUCH TDS WAS RECEIVED BY THE ASSESSEE SUBSEQUENT TO FILLING OF RETURN FOR THAT ASSESSMENT YEAR. IN THE BACKGROUND OF THESE FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) SHOULD HAVE ACCEPTED THE CONTENTION OF THE ASSESSEE FOR ALLOWING CREDIT THER EOF IN A.Y 92-93 IF NO CREDIT WAS GIVEN IN THE YEAR UNDER CONSIDERATION. A CCORDINGLY, WE DIRECT THE AO TO ALLOW THE CREDIT OF SUCH TDS IN A.Y 92-93. TH US, THIS GROUND OF THE ASSESSEE IS ALLOWED. 29. GROUND NO. 2 READS AS UNDER: 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE EVIDENCE FILED AND AS SETTLED POSITION OF LAW THE L D. CIT(A) ERRED IN SUMMARILY DISALLOWING THE CLAIM OF PRIOR PERIOD EXPENSES OF RS. 86,317/- WHEN DEDUCTION FOR WHICH IS ALLOWABLE IN T HIS YEAR. 30. THE FACTS, IN BRIEF, ARE THAT THE AO, DISALLOWE D THE IMPUGNED EXPENSES PERTAIN TO EARLIER YEARS. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED THAT OUT OF SUCH EXPENSES ESI PAYMENT OF RS. 61,667/- CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION ON THE BASIS OF SUC H LIABILITY BEING CREATED DUE TO ASSESSMENT MADE BY THE REGIONAL OFFICER IN T HE YEAR UNDER CONSIDERATION. THE LD. CIT (A), HOWEVER, UPHELD TH E ACTION OF AO. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 13 31. THE LD. COUNSEL DID NOT PRESS AMOUNT OF RS.2145 0/- AND 1200/- OUT OF SUCH PRIOR PERIOD EXPENSES, HENCE, TO THIS EXTENT, THE ASSESSEES IS GROUND IS DISMISSED. AS REGARD THE ADDITIONAL ESIC CONTRIBUTI ON, WE FIND THAT THIS AMOUNT HAS BEEN DEPOSITED IN THE YEAR UNDER CONSIDE RATION PURSUANT TO ORDER OF COMPETENT AUTHORITY DATED 10.03.93, HENCE, THE L IABILITY TO PAY SUCH SUM HAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATIO N AND, THEREFORE, THE SAME IS ALLOWABLE. ACCORDINGLY, THIS PART OF THIS GROUND IS ACCEPTED. THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 32. GROUND NO. 3 READS AS UNDER: 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE OF INTEREST OF RS. 4322/- ON ADVANCE GIVEN TO AN ASSOCIATE COMPANY. 33. . THE FACTS, IN BRIEF, ARE THAT AO, NOTED THAT ASSESSEE HAD GIVEN INTEREST FREE ADVANCE OF RS. 335000/- TO M/S NARMAD A SUGAR LTD. AND ON THE BORROWED FUNDS IT HAD PAID INTEREST @ 21% PER ANNUM .THE AO REQUIRED THE ASSESSEE AS TO WHY PROPORTIONATE INTEREST SHOULD NO T BE DISALLOWED. THE ASSESSEE SUBMITTED THAT THIS COMPANY WAS A SUBSIDIA RY OF THE ASSESSEE COMPANY TILL A.Y 94-95 , HENCE, SUCH ADVANCE WAS FO R BUSINESS PURPOSE. THE AO, HOWEVER, COMUPTED THE PROPORTIONATE INTEREST ON SUCH INTEREST FREE ADVANCE AND DISALLOWED, THE SAME AS INCURRED FOR NO N BUSINESS PURPOSES. ON APPEAL BY THE ASSESSEE, THE LD. CIT (A) ALSO CONFIR MED THE ACTION OF AO. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. THE LD. COUNSEL SUBMITTED THAT SUCH INTEREST FREE ADVANCE HAD BEEN MADE OUT OF INTEREST FREE 14 FUNDS, HENCE, NO DISALLOWANCE WAS WARRANTED. HE FUR THER PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F S.A. BUILDERS AS REPORTED IN 288 ITR 1. 34. . THE LD. DR, ON THE OTHER HAND, CONTENDED THAT NO COMMERCIAL CONSIDERATIONS WERE INVOLVED AND ASSESSEE HAD ALSO NOT TAKEN ANY PLEA BEFORE THE REVENUE AUTHORITY REGARDING INTEREST FRE E FUNDS BEING SOURCE OF SUCH INTEREST FREE ADVANCE, HENCE, THERE WAS NO MER IT IN THE CONTENTIONS OF THE ASSESSEE. 35. WE HAVE CONSIDERED SUBMISSION MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND ORDERS OF REVENUE AUTHORITIES. IT IS NOT ED THAT ASSESSEE HAS ADVANCED THIS SUM IN THE YEAR UNDER CONSIDERATION T O M/S NARMADA SUGAR LTD. WITHOUT INTEREST. IT IS ALSO NOT IN DISPUTE TH E SAID COMPANY IS A SUBSIDIARY OF THE ASSESSEE COMPANY. IN THIS CIRCUMS TANCES, THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE S .A. BUILDERS (SUPRA) IS SQUARLY APPLICABLE AND , THEREFORE, THE AMOUNT SO A DVANCED IS TO BE TREATED AS DISBURSED FOR PURPOSES OF ITS BUSINESS. HENCE, NO D ISALLOWANCE IS WARRANTED OUT OF INTEREST PAID ON BORROWED FUNDS. THUS, THIS GROUND OF ASSESSEE IS ALLOWED. 36. GROUND NO. 4 ,5,6, 7 & 8 READ AS UNDER: 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED IN HOLDING THAT COMMISSION AND SERVICE CHARGES RECEIVED OF RS. 22,52,459/- WERE NOT ENTITLED TO DEDUCTION U/S 80HH & 80-I 5. THAT LIKEWISE ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE THE LD. CIT (A) ERRED IN HOLDING THAT INTEREST AT RS 61 ,662/- RECEIVED FROM 15 ULVVONO EXPORT, MOSCOW AND RS. 12,457/- FROM SBI IN DORE AND MISC. ITEMS OF RS. 28,024/- WERE NOT ENTITLED TO DE DUCTION UNDER SECTION 80HH & 80I. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT (A) ERRED IN HOLDING THAT DEDUCTION U/S 80HH AND 80 -I WAS NOT ALLOWABLE ON MISC RECEIPTS OF RS. 3,56,964/- 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN NOT DECIDING WHETHER SALE OF SCRAP OF RS. 2,70,596/- SALE OF EMPTY DRUMS OF RS. 37,362/- SALE OF COAL ASH OF RS. 8,17,871, SALE OF GUNNY BAGS OF RS, 14,30,393/- AND SALE OF COAL CHUR I OF RS. 3,79,563/- AS CREDITED IN THE BOOKS AND INCLUDED IN THE FIGURE OF TOTAL TURNOVER BY THE AO FOR ALLOWANCE OF DEDUCTION U/S 80HHC WAS CORRECT OR NOT. THAT AS PER SETTLED POSITION OF LAW, THESE ITEMS DO NOT FORM PA RT OF TOTAL TRURNOVER. THE SAME THEREFORE REQUIRE TO BE EXCLUDED FROM TOTAL TU RNOVER. 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE CLEAR PROVISIONS OF LAW AND DECIDED CASES, THE DEDUCTION U/S 80HHC REQUIRES TO BE ALLOWED ON THE ASSESSED MANUFACTURING PROFITS AN D 90% OF EXPORT INCENTIVES AS PER PROVISO TO SECTION 80HHC (3), WIT HOUT SET OFF OF THESE ITEMS AGAINST LOSS ON EXPORT OF TRADING GOODS. 37. THESE GROUNDS WERE NOT PRESSED, HENCE, DISMISSED AS NOT PRESSED. 38. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 39. TO SUM UP, THE REVENUES APPEAL STANDS DISMISSE D AND ASSESSEES APPEAL STANDS PARTLY ALLOWED. 40. ORDER PRONOUNCED IN THE OPEN COURT ON12.11.2009 SD/- SD/- (JOGINDER SINGH) (V.K.GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12.11.2009 *KONGE* 16