Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 86074 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-03-2015
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
26-02-2015
Assessment Year
2009-2010
Appeal Filed On
11-10-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1412/BANG/2013 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE. VS. M/S. MICROLABS LTD. NO.27, K.C.N. TOWERS, RACE COURSE ROAD, BANGALORE. PAN: AABCM 2131N APPELLANT RESPONDENT ITA NO.1429/BANG/2013 & 764/BANG/2014 ASSESSMENT YEAR : 2009-10 M/S. MICROLABS LTD. BANGALORE. PAN: AABCM 2131N VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE. APPELLANT RESPONDENT REVENUE BY : SHRI C.H. SUNDAR RAO, CIT-I(DR) ASSESSEE BY : SHRI S. PARTHASARTHI, ADVOCATE DATE OF HEARING : 26.02.2015 DATE OF PRONOUNCEMENT : 05.03.2015 ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 2 OF 29 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER ITA NOS. 1412 & 1429/B/13 ARE CROSS APPEALS BY TH E REVENUE AND ASSESSEE RESPECTIVELY DIRECTED AGAINST THE ORDER DA TED 18.7.2013 OF THE CIT(APPEALS), LTU, BANGALORE RELATING TO ASSESSMENT YEAR 2009-10. ITA 764/B/14 IS AN APPEAL BY THE ASSESSEE AGAINST THE O RDER DATED 9.4.2014 OF THE CIT(APPEALS), LTU, BANGALORE PASSED U/S. 154 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT ] RELATING TO ASSESSMENT YEAR 2009-10. ITA NOS. 1412/12 & 764/13 2. FIRST WE SHALL TAKE UP FOR CONSIDERATION THE AP PEALS BY THE REVENUE IN ITA NO.1412/B/13 AND THAT OF THE ASSESSEE IN ITA NO.764/B/14 AGAINST THE ORDER U/S. 154 OF THE ACT. 3. GROUND NO.2 RAISED BY THE REVENUE IN ITS APPEAL AND THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARISE OUT OF I DENTICAL FACTS AND CIRCUMSTANCES AND ARE THEREFORE TAKEN UP FOR CONSID ERATION TOGETHER. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- REVENUES GROUND 2. THE LD CIT(A) ERRED IN ALLOWING THE GROSS EXPEN DITURE INCURRED ON SCIENTIFIC RESEARCH U/S 35(2AB). ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 3 OF 29 ASSESSEES GROUNDS OF APPEAL 1. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRE D IN PASSING RECTIFICATION ORDER U/S 154 OF THE INCOME T AX ACT, 1961 REVERSING THE DECISION TAKEN BY HIM IN APPEAL ALLOW ING COMPUTATION OF R & D EXPENDITURE ON THE GROSS EXPEN DITURE. THE APPELLANT HAS CLAIMED THE DEDUCTION IN ITS RETURN U /S 35(2AB) ON THE GROSS EXPENDITURE BUT THE ASSESSING OFFICER HAS REDUCED THE SALES REALIZATION OF ITS PRODUCTS. THE APPELLANT FI LED THE APPEAL BEFORE THE COMMISSIONER OF INCOME TAX AND HE IS ALL OWED DEDUCTION U/S 35(2AB) ON THE GROSS EXPENDITURE. HOW EVER THE LEARNED COMMISSIONER OF INCOME TAX HAS PASSED A REC TIFICATION ORDER U/S 154 ALLOWING R & D EXPENDITURE U/S 35(2AB ) ON THE NET EXPENDITURE AFTER REDUCING SALES REALIZED. 2. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRE D IN NOT FOLLOWING THE SUBSTANCE OF DSIR GUIDELINES WHIC H INDICATES THAT THE SALES REALIZATION ARISING OUT OF ASSETS SO LD SHOULD BE REDUCED WHILE CLAIMING THE DEDUCTION BUT THE LEARNE D COMMISSIONER OF INCOME TAX HAS ERRED IN REDUCING TH E SALE OF PRODUCTS OUT OF R & D EXPENDITURE. SALE OF THE PROD UCT WHICH IS AN OUTGO OF THE R&D, CANNOT BE SAID TO BE THE ASSET BELONGING TO THE ASSESSEE TO JUSTIFY SET-OFF OF SALE PROCEEDS AG AINST THE EXPENDITURE. 3. THE LEARNED COMMISSIONER OF INCOME TAX HAS NO P OWER U/S 154 TO RECTIFY HIS OWN ORDER WHEN THE ISSUE IS DEBATABLE. THE ISSUE HAS BEEN SETTLED DOWN AT THE SUPREME COURT IN THE CASE OF T.S.BALARAM ITO BOMBAY VS VOLKART BROTHERS & OTHERS 82 ITR 50. 4. THE FACTS MATERIAL FOR ADJUDICATION OF THE AFORE SAID GROUNDS OF APPEAL, ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF PHARMACEUTICALS. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ENTITLED TO CLAIM WEIGHTED DEDUCTION U /S. 35(2AB) OF THE ACT. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 4 OF 29 THE PROVISIONS OF SEC.35(2AB) OF THE ACT IN SO FAR AS IT RELATES TO THE DISPUTE IN THE PRESENT APPEAL ARE AS FOLLOWS: SEC.35 (2AB)(1) WHERE A COMPANY ENGAGED IN THE BUS INESS OF BIO- TECHNOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRO DUCTION OF ANY ARTICLE OR THING, NOT BEING AN ARTICLE OR THING SPE CIFIED IN THE LIST OF THE ELEVENTH SCHEDULE INCURS ANY EXPENDITURE ON SCIENTI FIC RESEARCH (NOT BEING EXPENDITURE IN THE NATURE OF COST OF ANY LAND OR BUILDING) ON IN- HOUSE RESEARCH AND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY, THEN, THERE SHALL BE ALLOWED A DEDUCTION OF A SUM EQUAL TO ONE AND ONE AND HALF TIMES OF THE EXPE NDITURE SO INCURRED. EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE, 'EXPENDITURE ON SCIENTIFIC RESEARCH', IN RELATION TO DRUGS AND PHAR MACEUTICALS, SHALL INCLUDE EXPENDITURE INCURRED ON CLINICAL DRUG TRIAL , OBTAINING APPROVAL FROM ANY REGULATORY AUTHORITY UNDER ANY CENTRAL STA TE OR PROVINCIAL ACT AND FILING AN APPLICATION FOR A PATENT UNDER TH E PATENTS ACT, 1970 (39 OF 1970). (2) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE MENTIONED IN CLAUSE (1) UNDER ANY OTHER PROVISION O F THIS ACT. (3) NO COMPANY SHALL BE ENTITLED FOR DEDUCTION UNDE R CLAUSE (1) UNLESS IT ENTERS INTO AN AGREEMENT WITH THE PRESCRI BED AUTHORITY FOR COOPERATION IN SUCH RESEARCH AND DEVELOPMENT FACILI TY AND FOR AUDIT OF THE ACCOUNTS MAINTAINED FOR THAT FACILITY. (4) THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPOR T IN RELATION TO THE APPROVAL OF THE SAID FACILITY TO THE DIRECTOR GENER AL IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. (5) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE REFERRED TO IN CLAUSE (1) WHICH IS INCURRED AFTER T HE 31ST DAY OF MARCH, 2017. (6) NO DEDUCTION SHALL BE ALLOWED TO A COMPANY APPR OVED UNDER SUB-CLAUSE (C) OF CLAUSE (IIA) OF SUB-SECTION (1) I N RESPECT OF THE EXPENDITURE REFERRED TO IN CLAUSE (1) WHICH IS INCU RRED AFTER THE 31ST DAY OF MARCH, 2008. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 5 OF 29 5. THE ASSESSEE HAD QUANTIFIED THE DEDUCTION U/S. 3 5(2AB) AT A SUM OF RS.12,57,00,920. IT HAD RECEIVED A SUM OF RS.57,47 ,808 AS PRODUCT DEVELOPMENT CHARGES. THE ASSESSING OFFICER WAS OF THE VIEW THAT U/S. 35(2AB), IT IS ONLY NET EXPENDITURE ON SCIENTIFIC R ESEARCH THAT SHOULD BE ALLOWED AS DEDUCTION, NOT THE GROSS EXPENDITURE. A CCORDINGLY, HE REDUCED THE PRODUCT DEVELOPMENT CHARGES RECEIVED BY THE ASS ESSEE AND ALLOWED DEDUCTION U/S. 35(2AB) OF RS.11,70,79,207 WHICH WAS CALCULATED AS FOLLOWS:- REVENUE EXPENDITURE AS PER 3 CD REPORT 8,16,77,006 LESS : PRODUCT DEVELOPMENT CHARGES RECEIVED 57,47,808 TOTAL 7,59,29,198 ADD : CAPITAL EXPENDITURE AS PER 3 CD REPORT 21,23,607 TOTAL EXPENDITURE 7,80,52,805 DEDUCTION U/S35(2AB) AT 150% OF THE R & D EXPENDITU RE (DEDUCTION TO BE A1LOWED) 11,70,79,207 LESS DEDUCTION U/S 35(2AB) CLAIMED IN THE RETURN OF INCOME 12,57,00,920 EXCESS DEDUCTION CLAIMED TO BE DISALLOWED 86,21,713 6. AGGRIEVED BY THE ORDER OF AO, ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(A) HELD THAT DEDUCTION CLAIM ED BY THE ASSESSEE U/S. 35(2AB) HAS TO BE ALLOWED AS THE PROVISIONS OF SEC.35(2AB) OF THE ACT TALK ONLY ABOUT EXPENDITURE AND DOES NOT SPEAK OF N ET EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. FOLLOWING WERE HER RELEVAN T OBSERVATIONS:- 3.1 I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE LEGAL PROVISION APPLICABLE. SEC.35(2AB) REFERS TO A SITUA TION WHEN THE COMPANY INCURS ANY EXPENDITURE ON SCIENTIFIC RESEA RCH (NOT BEING EXPENDITURE IN THE NATURE OF COST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY AS APPRO VED BY THE PRESCRIBED AUTHORITY, THEN, THERE SHALL BE ALLOWED A DEDUCTION OF A ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 6 OF 29 SUM EQUAL TO TWO TIMES OF THE EXPENDITURE INCURRED (EMPHASIS ADDED). A PLAIN READING OF THIS SECTION SHOWS THAT THE ENTIRE EXPENDITURE (ANY EXPENDITURE) INCURRED FOR IN-HOU SE R & D FACILITY IS EXPECTED TO BE ALLOWED AS A DEDUCTION ( SO INCURRED) AND THE INTERPRETATION OF THE DEDUCTION AS BEING FO R NET EXPENDITURE IS NOWHERE EVIDENT FROM THE PROVISION. ACCORDINGLY, THE APPELLANTS CLAIM OF WEIGHTED DEDUCTION ON THE GROSS REVENUE EXPENDITURE IS HELD TO BE IN ORDER. THIS GROUND, TH EREFORE, SUCCEEDS. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HA S RAISED GROUND NO.2 BEFORE THE TRIBUNAL. AFTER FILING OF REVENUE S APPEAL RAISING GROUND NO.2, THE CIT(A) PROPOSED TO RECTIFY THE ORDER DATE D 27.12.13 WHEREBY DEDUCTION U/S. 35(2AB) WAS ALLOWED TO THE ASSESSEE AS CLAIMED. THE REASONS FOR INVOKING THE PROVISIONS OF SEC. 154 OF THE ACT WAS THAT AS PER GUIDELINES FOR APPROVAL IN FORM 3CM BY THE DEPARTME NT OF SCIENTIFIC & INDUSTRIAL RESEARCH (DSIR) AS REQUIRED UNDER THE PROVISIONS OF SEC. 35(2AB), SALES REALIZATION ARISING OUT OF ASSETS SO LD SHOULD BE OFFSET AGAINST R&D EXPENDITURE. IT IS AFTER TAKING NOTE O F THIS GUIDELINE THAT THE CIT(A) INITIATED PROCEEDINGS U/S. 154 OF THE ACT. 8. IN REPLY TO THE SHOW CAUSE NOTICE ISSUED U/S.15 4 OF THE ACT PROPOSING TO RECTIFY HER ORIGINAL ORDER, THE ASSESS EE SUBMITTED BEFORE THE CIT(A) THAT THE GUIDELINES PROVIDES FOR SET-OFF OF REALIZATION OF SALE OF ASSETS USED FOR R & D ACTIVITIES. THIS IS OBVIOUS SINCE TH E COST OF ASSETS IS ALLOWED AS DEDUCTION U/S. 35(2AB) OF THE ACT, OBVIOUSLY THE SALE OF SUCH ASSETS SHOULD GO TO REDUCE THE COST OF EXPENDITURE. SALE O F PRODUCT WHICH IS AN ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 7 OF 29 OUTGO OF THE R&D, CANNOT BE SAID TO BE THE ASSET BE LONGING TO THE ASSESSEE TO JUSTIFY SET-OFF OF SALE PROCEEDS AGAINS T THE EXPENDITURE. SIMILARLY, WHAT IS REQUIRED TO BE REDUCED IS GRANTS /GIFTS DONATIONS ETC AND IN THE CASE OF THE ASSESSEE THERE WAS NO SUCH PROCEEDS . THUS, IN THE APPELLATE ORDER, THE CIT(A) HAS RIGHTLY ALLOWED THE ENTIRE EXPENDITURE ON R&D FOR CONSIDERING THE DEDUCTION U/S. 35(2AB) OF T HE ACT. THERE BEING NO INFIRMITY IN THE APPELLATE ORDER OR THERE BEING NO MISTAKE APPARENT FROM THE APPELLATE ORDER, THE PROPOSED ACTION IS WITHOUT JUR ISDICTION AND UNWARRANTED. 9. THE CIT(A), HOWEVER, DID NOT AGREE WITH THE SUBM ISSIONS OF THE ASSESSEE AND HELD THAT SUBSTANCE OF THE DSIR GUIDEL INES CLEARLY INDICATE THE REDUCTION OF RECEIPTS RELATED TO THE IN-HOUSE R & D CENTRE FROM THE GROSS EXPENDITURE OUTFLOW ON R & D. HE WAS OF THE VIEW THAT IN THE PRESENT CASE THE APPLICABILITY OF THE DSIR GUIDELIN ES IS NOT DISPUTED. THE SUBSTANCE OF THE IMPUGNED PROVISIONS IN THE GUIDELI NE FOR REDUCING RECEIPTS OF THE R & D CENTRE FROM THE OUTFLOW IS ALSO VERY C LEAR. HENCE, THE ISSUE ON HAND REPRESENTS AN ERROR APPARENT FROM RECORDS. HE THEREFORE RECTIFIED ON THE ASPECT OF CLAIM OF DEDUCTION BY THE ASSESSEE U/ S.35(2AB) AND UPHELD THE AOS DECISION IN THIS MATTER. 10. AGGRIEVED BY THE AFORESAID DECISION OF THE CIT( A), THE ASSESSEE HAS FILED APPEAL BEING ITA NO.764/B/14. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 8 OF 29 11. THE ISSUE THAT NEEDS TO BE DECIDED NOW IS AS T O, WHAT IS THE NATURE OF PRODUCT DEVELOPMENT CHARGES OF RS.57,47,808 RECE IVED BY THE ASSESSEE? THE DETAILS FROM WHOM THE AFORESAID SUM WAS RECEIVED WHICH IS AT PAGE 37 OF THE PB IS GIVEN AS ANNEXURE-I TO THIS ORDER. 12. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AN D THE LD. COUNSEL FOR THE ASSESSEE AND ALSO PERUSED THE DOCUMENTS FIL ED IN PAPERBOOK. AS WE HAVE ALREADY SEEN, THE ASSESSEE CARRIES ON SCIEN TIFIC RESEARCH. IT IS IN THE BUSINESS OF MANUFACTURE OF DRUGS AND PHARMACEUT ICALS. IT INCURRED EXPENDITURE ON SCIENTIFIC RESEARCH AND THE QUANTUM OF SUCH EXPENDITURE ON SCIENTIFIC RESEARCH, WHICH IS A SUM OF RS.7,80,52,8 05, IS NOT IN DISPUTE. THE WEIGHTED DEDUCTION U/S. 35(2AB) AT 150% WAS CLAIMED BY THE ASSESSEE AT A SUM OF RS.12,57,00,920. WHAT IS NOW TO BE EXAMIN ED IS THE GUIDELINES OF DSIR, WHICH THE PRESCRIBED AUTHORITY U/S. 35(2AB )(3) & (4) OF THE ACT, HAS TO FOLLOW BEFORE GRANTING APPROVAL OF THE SCIEN TIFIC RESEARCH CARRIED OUT BY THE ASSESSEE AS ELIGIBLE FOR DEDUCTION U/S. 35(2 AB). A COPY OF THE GUIDELINES OF DSIR IS AT PAGES 27 TO 33 OF ASSESSEE S PAPERBOOK. GUIDELINE 5(VII) IS RELEVANT FOR THE PRESENT CASE A ND IT READS AS FOLLOWS:- (VII) ASSETS ACQUIRED AND PRODUCTS, IF ANY EMANATING OUT OF R&D WORK DONE IN APPROVED FACILITY, SHALL NOT BE DI SPOSED OFF WITHOUT APPROVAL OF THE SECRETARY, DSIR. SALES REALISATION ARISING OUT OF THE ASSETS SOLD SHALL BE OFFSET AGAI NST THE R&D EXPENDITURE OF THE R&D CENTRE CLAIMED UNDER SECTION 35(2AB) FOR THE YEAR IN WHICH SUCH SALES REALISATION ACCRUE S UNDER SECTION 35(2AB) OF IT ACT, 1961. EXPENDITURE CLAIMED FOR DE DUCTION UNDER THE SUBSECTION SHALL BE REDUCED TO THAT EXTEN T. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 9 OF 29 13. THE CIT(A) IN HIS ORDER PASSED U/S. 154 OF THE ACT HAS NOT QUOTED THE FIRST SENTENCE OF THE GUIDELINE 5(VII) (GIVEN A BOVE IN BOLD LETTERS), WHICH IN OUR OPINION, IS VERY MATERIAL. THE ABOVE GUIDEL INE ONLY MEANS THAT IN THE PROCESS OF CARRYING OUT THE R&D WORK, IF THE ASSESS EE ACQUIRES ANY ASSETS OR PRODUCTS THAT SHOULD NOT BE DISPOSED OF WITHOUT THE APPROVAL OF SECRETARY, DSIR. IF SUCH ASSETS ARE SOLD, THE SALE S REALIZATION ARISING THEREFROM ARE TO BE SETOFF AGAINST THE R&D EXPENDIT URE OF THE R&D CENTRE WHICH IS CLAIMED AS DEDUCTION U/S. 35(2AB). IT IS EVIDENT FROM THE ABOVE GUIDELINE THAT IT IS ONLY SALES REALIZATION ARISING OUT OF THE ASSETS SOLD THAT SHOULD BE OFFSET AGAINST R&D EXPENDITURE. IN RESPE CT OF SALE OF PRODUCTS ACQUIRED EMANATING OUT OF R&D WORK DONE IN AN APPRO VED FACILITY, THE SALE PROCEEDS NEED NOT BE REDUCED FROM THE R&D EXPENDITU RE. IN OUR VIEW, THE REASON FOR NOT INCLUDING SALES REALIZATION ARISING OUT OF PRODUCTS EMANATING OUT OF R&D WORK DONE AND SOLD IS BECAUSE SUCH SALES WOULD BE REFLECTED AS RECEIPTS BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND INCOME FROM BUSINESS WOULD BE COMPUTED TREATING SUCH SALE AS PA RT OF BUSINESS RECEIPTS. THE RECEIPTS ARISING OUT OF SALE OF PROD UCTS WILL NOT GO TO REDUCE THE EXPENDITURE ON R&D, WHEREAS THE ASSETS ACQUIRED IN THE PROCESS OF CARRYING OUT THE R&D IF THEY ARE SOLD, SUCH SALES R EALIZATION WOULD GO TO REDUCE THE EXPENDITURE ON SCIENTIFIC RESEARCH AND T HAT IS WHY SALES REALIZATION ARISING OUT OF ASSETS SOLD IS REQUIRED TO BE OFFSET AGAINST R&D EXPENDITURE. THE ABOVE EXPLANATION WILL BE SUFFICI ENT TO HOLD THAT THE ORDER ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 10 OF 29 PASSED BY THE CIT(A) U/S.154 OF THE ACT IS UNSUSTAI NABLE. NEVERTHELESS, WE WILL ALSO EXAMINE AS TO WHAT IS THE EXACT NATURE OF RECEIPTS FROM SALE OF PRODUCTS. 14. A COPY OF LICENSE AND SUPPLY AGREEMENT WHICH W AS FILED BY THE ASSESSEE BEFORE THE AO AS WELL AS CIT(A) IS AT PAGE S 5 TO 26 OF THE ASSESSEES PAPERBOOK. THE SALE OF PRODUCTS IS NOTH ING BUT THE SALE OF DOSSIERS BY THE ASSESSEE TO PERSONS NOT ASSOCIATED WITH THE ASSESSEE OR ITS DIRECTORS. IN THE COURSE OF CARRYING OUT THE S CIENTIFIC RESEARCH, THE ASSESSEE PREPARES ELABORATE DOCUMENTS REGARDING THE PRODUCTS THAT WOULD EMANATE FROM CARRYING OUT SCIENTIFIC RESEARCH. THI S WOULD ALSO INCLUDE THE REQUIREMENT OF HEALTH AUTHORITIES FOR GRANT OF LICE NSE TO APPROVE THE PRODUCTS FOR HUMAN USE. THE ASSESSEE GIVES THE DOS SIERS SO PREPARED TO ENTITIES OUTSIDE INDIA, WHO ARE INTERESTED IN GETTI NG THE MARKETING AUTHORIZATION FOR THE PRODUCT IN A PARTICULAR TERRI TORY. THEY PAY TO THE ASSESSEE THE DOSSIER CHARGES AND APPLY FOR LICENSE TO MARKET THE PRODUCTS FOR HUMAN USE IN THEIR RESPECTIVE TERRITORIES. ON GETTING THE LICENSE, THEY GET MARKETING AUTHORIZATION FROM THE ASSESSEE. THE PERSON WHO TAKES THE DOSSIER (KNOWHOW) TAKES IT FOR THE LIMITED PURPOSE OF REGISTRATION OF PRODUCT IN OTHER COUNTRIES AND AFTER REGISTRATION SALE OF T HE PRODUCTS IN THEIR COUNTRY. IF THEY GET ANY ORDER M/S. MICRO LABS WILL MANUFACT URE AND SELL THEM AT AGREED PRICE. SO THE KNOWHOW GIVEN TO THEM IS ONLY FOR LIMITED PURPOSE OF REGISTERING WITH THE DRUG CONTROL AUTHORITIES FOR A PPROVAL FOR HUMAN CONSUMPTION. THE FOREIGN ENTITIES WHO GET THE DOSS IERS WILL GET RIGHTS TO ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 11 OF 29 MARKET THE ASSESSEES PRODUCTS IN THEIR TERRITORY A ND THE ACTUAL MANUFACTURE IN COURSE OF TIME WILL BE DONE BY M/S. MICRO LABS L IMITED I.E., THE ASSESSEE. 15. ALL INTELLECTUAL PROPERTY RIGHTS, TITLE AND INT EREST OF ANY KIND WHATSOEVER IN AND/OR TO THE DOSSIER AND THE PRODUCT S SHALL BE THE EXCLUSIVE PROPERTY OF MICRO LABS (THE ASSESSEE). MICRO LABS I.E., THE ASSESSEE MAY SELL THE DOSSIER TO ANY THIRD PARTY, INCLUDING ITS CLIENTS WITHOUT THE CONSENT OF FOREIGN ENTITY BUYING THE DOSSIER. HOW EVER, MICRO LABS (THE ASSESSEE) SHALL NOTIFY THE PERSON ACQUIRING THE DOS SIER OF THE TRANSFER OR SALE OF THE DOSSIER TO SUCH THIRD PARTY AND SHALL U NDERTAKE THAT SUCH THIRD PARTY RESPECT THE TERMS AND CONDITIONS OF THE AGREE MENT WITH THE OTHER THIRD PARTY WHO BUYS DOSSIER FROM THE ASSESSEE. 16. DSIR GUIDELINES NO. VII HAS SPECIFICALLY PROVID ED THAT ASSETS ACQUIRED IF ANY OUT OF R & D WORK SHALL BE DISPOSED WITH APP ROVAL OF DSIR. THE ASSESSEE HAS BEEN SUBMITTING YEARLY AUDIT REPORTS & ACCOUNTS OF APPROVED R & D SANCTION TO DSIR. THE R & D ACCOUNTS HAVE BE EN SEPARATELY MAINTAINED AND SEPARATE P & L ACCOUNT PREPARED AND THE DOSSIER SALES HAVE BEEN CREDITED TO P & L ACCOUNT OF R & D BECAUS E THESE SALES ARE PART OF NORMAL SALES. 17. IT IS CLEAR FROM THE SAMPLE COPY OF THE LICENSE AND SUPPLY AGREEMENT FILED BEFORE US THAT THE PRODUCT DEVELOPMENT CHARGE S RECEIVED BY THE ASSESSEE WILL NOT BE COVERED UNDER CLAUSE 5(VII) OF THE DSIR GUIDELINES. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 12 OF 29 AS WE HAVE ALREADY SEEN, THESE RECEIPTS ARE CREDITE D TO PROFIT & LOSS ACCOUNT ARE PART OF NORMAL SALES. THEY ARE, THEREF ORE, NOT TO BE REDUCED FROM THE EXPENDITURE INCURRED BY THE ASSESSEE ON CA RRYING OUT SCIENTIFIC RESEARCH ON WHICH DEDUCTION U/S. 35(2AB) HAS TO BE ALLOWED. WE ARE, THEREFORE, OF THE VIEW THAT THERE IS NO MERIT IN GR OUND NO.2 RAISED BY THE REVENUE AND THAT THE ORDER PASSED BY THE CIT(A) DAT ED 9.4.2014 U/S. 154 OF THE ACT CANNOT BE SUSTAINED AND THE SAME IS HEREBY REVERSED. THUS, ITA NO.764/B/14 BY THE ASSESSEE IS ALLOWED, WHILE GROUN D NO.2 RAISED BY THE REVENUE IS DISMISSED. 18. GROUND NO.3 RAISED BY THE REVENUE READS AS FOL LOWS:- 3. THE LD CIT(A) ERRED IN DELETING THE ADDITION T O BOOK PROFIT MADE BY AO BY ADDING THE EXPENDITURE U/S 14A TO THE BOOK PROFIT. 19. THE ASSESSEE, AS WE HAVE ALREADY SEEN, IS A COM PANY. SECTION 115JB OF THE ACT PROVIDES THAT WHERE IN THE CASE OF AN ASSESSEE BEING A COMPANY, THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE ACT IN RESPECT OF PREVIOUS YEAR IS LESS THAN 7 % OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME TAX @ 7%. THE METHOD OF COMPUTING THE BOOK PROFITS IS LAID DOWN IN SECTION 115JB(2) OF THE ACT. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 13 OF 29 20. FOR THE A.Y. 2009-10, THE TAX PAYABLE ON THE TO TAL INCOME COMPUTED UNDER THE ACT WAS LESS THAN THE SPECIFIED PERCENTAG E OF BOOK PROFITS AND THEREFORE THE TAXABLE INCOME WAS COMPUTED U/S. 115J B OF THE ACT. 21. WHILE COMPUTING THE BOOK PROFITS FOR THE PURPO SE OF SEC. 115JB OF THE ACT, THE AO ADDED TO THE NET PROFITS AS PER P&L ACCOUNT A SUM OF RS.66,56,821 WHICH WAS THE DISALLOWANCE OF EXPENSES INCURRED BY THE ASSESSEE TO EARN INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AS LAID DOWN U/S. 14A OF THE ACT. THE QUANTUM OF SUM SO DI SALLOWED WAS ADDED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE UN DER THE NORMAL PROVISIONS OF THE ACT. THIS SUM WAS ALSO ADOPTED F OR THE PURPOSE OF ADDING TO THE PROFIT AS PER P&L ACCOUNT TO ARRIVE AT THE B OOK PROFITS AS REQUIRED UNDER EXPLANATION BELOW S. 115JA(1)(F) OF THE ACT. 22. THE ASSESSEE CHALLENGED BEFORE THE CIT(APPEALS ) THAT THE AMOUNT DISALLOWED U/S. 14A OF THE ACT CANNOT BE ADOPTED FO R THE PURPOSE OF ADDING TO THE PROFIT AS PER P&L ACCOUNT FOR ARRIVING AT TH E BOOK PROFIT U/S. 115JA OF THE ACT. THE CIT(A), HOWEVER, HELD IN FAVOUR OF TH E ASSESSEE, OBSERVING AS FOLLOWS:- 5.1 THE APPELLANT, IN THE ADDITIONAL GROUNDS OF AP PEAL, HAS ALSO REFERRED TO THE ENHANCEMENT OF THE BOOK PROFIT BY T HE EXPENDITURE RELATING TO EXEMPT INCOME OF RS.66,56,821 WORKED OU T BY THE AO U/S.14A READ WITH RULE 8D(2). THE AO HAS NOT REFERR ED TO ANY LEGAL PROVISION WHILE ENHANCING THE BOOK PROFIT BY THIS AMOUNT BUT IT APPEARS TO HAVE BEEN DONE KEEPING IN MIND CL AUSE (F) TO EXPLANATION 1 OF SEC.115JB OF THE ACT WHERE THE EXP ENDITURE RELATABLE TO ANY INCOME TO WHICH SEC.10 (OTHER THAN PROVISION ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 14 OF 29 CONTAINED IN CLAUSE 38 THEREOF) OR SEC.11 OR SEC.12 APPLY HAS BEEN REFERRED TO. THIS IS AN ARGUMENT OF ANALOGY WH ICH IS NOT PERMISSIBLE UNDER THE SCHEME OF MAT. THE COMPUTATIO N OF BOOK PROFIT FOR PURPOSES OF SEC. 115JB FOR DETERMINING T HE MINIMUM ALTERNATIVE TAX IS DONE AS PER THE BOOK PROFIT EVID ENT FROM THE FINANCIAL STATEMENTS DRAWN UNDER THE COMPANIES ACT. SEC.14A AND THE DISALLOWANCE ENVISAGED UNDER IT BY APPLYING RULE 8D ARE ADJUSTMENTS SPECIFIC TO THE INCOME TAX ACT. EVEN WH ERE THE BOOK PROFIT AS PER THE COMPANIES ACT HAS BEEN ALLOWED TO BE ADJUSTED BY THE IT ACT, IT HAS BEEN DONE THROUGH VERY SPECIF IC PROVISIONS IN TERMS OF THE EXPLANATIONS TO SEC. 115JB. WHEN TH E LANGUAGE OF THE EXPLANATION IS SPECIFIC AND UNEQUIVOCAL AND MEN TIONS SPECIFIC EXEMPTED INCOMES IN EXPLANATION 1(F), THERE IS NO S ITUATION FOR READING IN ANY OTHER INTERPRETATION EVEN IF THEY AR E ANALOGOUS TO THE SPECIFIED SECTIONS. WHILE SEC.14A DEALS WITH DISALLOWANCE OF EXPENDITURE RELATED TO EXEMPT INCOME, IT CANNOT BE EQUATED IN LETTER AND SPIRIT WITH EXEMPTED INCOME U/S.10 AN D EXPENDITURE RELATED TO IT WHICH IS PROVIDED IN EXPL ANATION 1(F) OF SEC. 115JB. HENCE, THE INCLUSION OF EXPENDITURE DISALLOWED U/S. 14A FOR COMPUTING BOOK PROFIT FOR MAT PURPOSES IS NOT WITHIN THE SCHEME OF THE LEGAL PROVISIONS AND THE S AME IS, THEREFORE, DIRECTED TO BE DELETED . (EMPHASIS SUPPLIED) 23. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE H AS RAISED GROUND NO.3 BEFORE THE TRIBUNAL. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 115JB EXPLANATION 1(F) AND SUBMITTED THAT THE AMOUN T OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 APPLIES , SHOULD BE ADDED TO THE PROFIT AS PER THE P&L ACCOUNT. HIS SUBMISSION WAS THAT SECTION 14A OF THE ACT R.W. RULE 8D OF THE RULES IS A REASONABLE METHO D OF CALCULATING THE ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 15 OF 29 AMOUNT OF EXPENDITURE AND THEREFORE WITHOUT GOING I NTO THE QUESTION OF WHETHER RULE 14A CAN BE IMPORTED INTO THE PROVISION S OF CLAUSE (F) TO EXPLANATION (1) TO SECTION 115JB OF THE ACT, THE CI T(A) OUGHT TO HAVE SUSTAINED THE ADDITION MADE BY THE AO. HE ALSO PLA CED RELIANCE ON THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF DCIT V. SOBHA DEVELOPERS, ITA NO.1410/B/2013 FOR A.Y. 2008-09 ORD ER DATED . 25. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT SECTION 14A OF THE ACT IS VERY SPECIFIC AND IS APPL ICABLE ONLY FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV OF THE A CT. HIS SUBMISSION WAS THAT SECTION 115JB APPEARS IN CHAPTER XII-B OF THE ACT DEALING WITH SPECIFIC PROVISIONS RELATING TO CERTAIN COMPANIES AND THEREF ORE THOSE PROVISIONS CANNOT BE APPLIED. IT WAS HIS FURTHER SUBMISSION T HAT EVEN ASSUMING THAT THOSE PROVISIONS ARE APPLICABLE U/S. 115JB OF THE A CT, IT IS ONLY DIRECT EXPENSES THAT ARE CONTEMPLATED AS CAPABLE OF BEING ADDED TO THE PROFITS AS PER P&L ACCOUNT. IN THIS REGARD, OUR ATTENTION WAS DRAWN TO THE EXPRESSION EXPENDITURE RELATABLE USED IN SUB-CLAUSE (F) OF EXPLANATION (1) TO SECT ION 115JB OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE CONTRASTED THE ABOVE EXPRESSION WITH THE EXPRESSION USED IN 14A OF THE A CT WHICH SAYS EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO . HE ALSO POINTED OUT THAT IN THE PRESENT CASE, THERE WAS NO DIRECT EXPEN SES IN EARNING THE EXEMPT INCOME AND THIS FACT IS ACCEPTED BY THE AO I N THE ORDER OF ASSESSMENT. HE THEREFORE PRAYED THAT THE ORDER OF CIT(APPEALS) SHOULD BE SUSTAINED. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 16 OF 29 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE RELEVANT PROVISIONS OF SEC.115JB(2) AND EXPLANATION THERETO NEED TO BE SEEN. THE SAID PROVISIONS READ THUS: SEC.115JB:SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSE SSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOM E AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2012, IS LESS THAN EIGHTEEN AND ONE-HALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL IN COME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RAT E OF EIGHTEEN AND ONE-HALF PER CENT. (2) EVERY ASSESSEE, ( A ) BEING A COMPANY, OTHER THAN A COMPANY REFERRED T O IN CLAUSE ( B ), SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956); OR ( B ) BEING A COMPANY, TO WHICH THE PROVISO TO SUB-SEC TION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION , PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS Y EAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY: PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING S UCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 17 OF 29 ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURP OSE OF PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS A CCOUNT AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETI NG IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 1956 (1 OF 1956) : PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956) 97B , WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THI S ACT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING S UCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUN TING STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPREC IATION WHICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLU DING PROFIT AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION [ 1 ].FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOS S ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTI ON (2), AS INCREASED BY ( A ) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND TH E PROVISION THEREFOR; OR ( B ) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED, OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC; OR ( C ) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MA DE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILI TIES; OR ( D ) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUB SIDIARY COMPANIES; OR ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 18 OF 29 ( E ) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPO SED ; OR ( F ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE T O ANY INCOME TO WHICH SECTION 10 (OTHER THAN THE PROVISIO NS CONTAINED IN CLAUSE ( 38 ) THEREOF OR SECTION 11 OR SECTION 12 APPLY; OR ( G ) THE AMOUNT OF DEPRECIATION, ( H ) THE AMOUNT OF DEFERRED TAX AND THE PROVISION THER EFOR, ( I ) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, ( J ) THE AMOUNT STANDING IN REVALUATION RESERVE RELAT ING TO REVALUED ASSET ON THE RETIREMENT OR DISPOSAL OF SUC H ASSET, IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (I) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF ANY AMOUNT REFERRED T O IN CLAUSE (J) IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY, ( I ) .. OR ( II ) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISI ONS OF SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF)] OR SECTION 11 OR SECTION 12 APPLY, IF A NY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT; OR ( IIA ) .. (OTHER PORTIONS OF THE SECTION ARE NOT RELEVANT FOR THE PRESENT CASE) 27. A READING OF THE PROVISIONS OF SEC.115JB(1) SH OWS THAT WHEN AN ASSESSEE IS A COMPANY AND THE INCOME-TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT (UNDER THE NORMAL PROVIS IONS OF THE ACT) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR IS LESS THAN ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 19 OF 29 PRESCRIBED PERCENTAGE (THIS PERCENTAGE KEEPS CHANGI NG FOR VARIOUS AYS) OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED T O BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RATE OF EI GHTEEN AND ONE-HALF PER CENT. BOOK PROFIT FOR THE PURPOSE OF SEC.115JB OF THE ACT HAS BEEN DEFINED BY EXPLN.-1 BELOW SEC.115JB(2) AS NET PROFIT AS SHO WN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARE D IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPANI ES ACT, 1956 (1 OF 1956). EXPLN.1 BELOW SEC.115JB(2) ALSO PROVIDES FOR CERTAI N ADDITIONS AND DEDUCTIONS FROM THE SAID PROFIT WHERE SUCH SUMS HAV E EITHER BEEN ADDED OR REDUCED WHILE ARRIVING AT THE PROFIT AS PER PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 195 6). 28. IN THE PRESENT CASE WE ARE CONCERNED WITH ONE ITEM WHICH NEEDS TO BE ADDED TO THE TOTAL INCOME LAID DOWN IN THE FIRST PART OF EXPLN.1 CLAUSE (F) VIZ., THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABL E TO ANY INCOME TO WHICH SECTION 10 (OTHER THAN THE PROVISIONS CONTAIN ED IN CLAUSE (38) THEREOF) OR SECTION 11 OR SECTION 12 APPLY. IDENTI CAL ISSUE CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN DCIT V. SOBHA DEVELOPERS, ITA NO.1410/B/2013 FOR A.Y. 2008-09 WHEREIN ON IDENTICAL ORDER OF CIT(A) AND ON IDENTICAL FACTS AND IDENTICAL ARGUMENTS BY THE A SSESSEE AND REVENUE, THIS TRIBUNAL HELD AS FOLLOWS:- ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 20 OF 29 33. AS FAR AS GROUND NO.3 IS CONCERNED, VIZ., THE ADDITION TO THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT EXPEN DITURE INCURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF THE T OTAL INCOME UNDER THE ACT, U/S.10 OF THE ACT, IT IS SEEN THAT T HE QUANTUM OF EXPENDITURE DISALLOWED BY THE AO BY INVOKING THE PR OVISIONS OF SEC.14A OF THE ACT WHILE COMPUTING TOTAL INCOME UND ER THE NORMAL PROVISIONS OF THE ACT HAS NOT BEEN CHALLENGE D BY THE ASSESSEE AND THE SAID DISALLOWANCE HAS BEEN ACCEPTE D BY THE ASSESSEE. THE PROVISIONS OF SECTION 115JB EXPLANATI ON 1(F) LAY DOWN THAT THE AMOUNT OF EXPENDITURE RELATABLE TO IN COME TO WHICH SECTION 10 APPLIES, SHOULD BE ADDED TO THE PROFIT A S PER THE P&L ACCOUNT. SECTION 14A OF THE ACT R.W. RULE 8D OF TH E RULES IS A REASONABLE METHOD OF CALCULATING THE AMOUNT OF EXPE NDITURE, IN A CASE WHERE THE ASSESSEE HAS NOT BEEN ABLE TO SATISF Y THE AO REGARDING THE QUANTUM OF EXPENDITURE INCURRED IN EA RNING INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IF THE ASSESSEE SATISFIES THE AO REGARDING THE QUANTUM OF EXPENDITURE INCURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT THAN THAT CAN BE ADOPTED FOR T HE PURPOSE OF ADDITION UNDER CLAUSE (F) OF EXPLN.1 BELOW SEC.115J B(2) OF THE ACT. RULE 8D OF THE RULES COME INTO PLAY ONLY WHEN THERE IS NO OTHER BASIS FOR ARRIVING AT THE QUANTUM OF EXPENDIT URE INCURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF THE TOTA L INCOME UNDER THE ACT. 34. IN OUR OPINION, THE QUESTION FORMULATED BY THE CIT(A) WHETHER SEC. 14A OF THE ACT READ WITH RULE 8D OF TH E RULES CAN BE IMPORTED INTO THE PROVISIONS OF CLAUSE (F) TO EX PLANATION (1) TO SECTION 115JB OF THE ACT, IS ITSELF ERRONEOUS. THE QUESTION TO BE ASKED IS AS TO HOW TO GIVE EFFECT TO THE PROVISIONS OF CLAUSE (F) TO EXPLANATION (1) TO SECTION 115JB OF THE ACT. WE DO NOT THINK THAT THERE IS ANY PROHIBITION TO ADOPT THE DISALLOWANCE MADE BY THE AO U/S.14A OF THE ACT READ WITH RULE 8D OF THE RULE S, WHILE COMPUTING TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSE E THAT SECTION 14A OF THE ACT IS VERY SPECIFIC AND IS APPLICABLE O NLY FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV OF THE ACT AND THAT SECTION 115JB APPEARS IN CHAPTER XII-B OF THE ACT DEALING WITH SPECIFIC PROVISIONS RELATING TO CERTAI N COMPANIES AND THEREFORE THE PROVISIONS OF SEC.14A READ WITH RULE 8D OF THE RULES CANNOT BE APPLIED WHILE MAKING ADDITION TO NE T PROFIT AS PER PROFIT AND LOSS ACCOUNT U/S.115JB EXPLN.1 CLAUSE (F ) OF THE ACT, ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 21 OF 29 BECAUSE THE EXPRESSION EXPENDITURE RELATABLE IS U SED IN SUB- CLAUSE (F) OF EXPLANATION (1) TO SECTION 115JB OF T HE ACT WHEREAS EXPRESSION WITH THE EXPRESSION USED IN 14A OF THE A CT IS EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION T O AND THEREFORE ONLY DIRECT EXPENDITURE ATTRIBUTABLE TO EARNING OF INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T CAN BE ADDED UNDER CLAUSE(F) OF EXPLN.1 BELOW SEC.115JB(2) OF TH E ACT, CANNOT BE ACCEPTED. IN OUR VIEW, THERE IS NO DIFFERENCE B ETWEEN THE EXPRESSION EXPENDITURE RELATABLE AND THE EXPRESSI ON EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION T O. BOTH THE EXPRESSIONS MEAN THAT WHATEVER EXPENDITURE ARE INCU RRED TO EARN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, BOTH DIRECT AND INDIRECT EXPENDITURE, HAVE TO BE DISALLOWED. THERE IS NO BASIS FOR THE ARGUMENT U/S. 115JB OF TH E ACT, IT IS ONLY DIRECT EXPENSES THAT ARE CONTEMPLATED AS CAPABLE OF BEING ADDED TO THE PROFITS AS PER P&L ACCOUNT UNDER CLAUSE (F) TO EXPLN.1 BELOW SEC.115JB(2) OF THE ACT. 35. AS WE HAVE ALREADY SEEN, THE QUANTUM OF EXPEND ITURE DISALLOWED BY THE AO BY INVOKING THE PROVISIONS OF SEC.14A OF THE ACT WHILE COMPUTING TOTAL INCOME UNDER THE NORM AL PROVISIONS OF THE ACT HAS NOT BEEN CHALLENGED BY TH E ASSESSEE AND THE SAID DISALLOWANCE HAS BEEN ACCEPTED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, WE DO NOT SEE ANY REASON WHY TH E SAME DISALLOWANCE CANNOT BE ADOPTED WHILE ARRIVING AT TH E BOOK PROFITS U/S.115JB (2) OF THE ACT READ WITH EXPLANATION 1(F) THERETO. IN OUR VIEW THE CIT(A) HAS FALLEN INTO AN ERROR IN COM ING TO A CONCLUSION CONTRARY. WE THEREFORE REVERSE THE ORDE R THE CIT(A) AND RESTORE THE ORDER OF THE AO IN THIS REGARD. 29. IN OUR VIEW, THE AFORESAID DECISION WILL APPLY TO THE FACTS OF THE PRESENT CASE ALSO, HOWEVER, WITH THE MODIFICATION T HAT THE QUANTUM OF DEDUCTION U/S. 14A OF THE ACT WHICH IS DETERMINED W HILE COMPUTING THE TOTAL INCOME OF ASSESSEE UNDER NORMAL PROVISIONS OF THE A CT AND WHICH IS ULTIMATELY SUSTAINED BY THE TRIBUNAL WILL BE SUBSTI TUTED WITH THE SUM DISALLOWED BY THE AO. THUS, GROUND NO.3 RAISED BY THE REVENUE IS ALLOWED. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 22 OF 29 30. IN THE RESULT, THE APPEAL BY THE REVENUE IS PA RTLY ALLOWED AND THE ASSESSEES APPEAL IS ALLOWED. ITA 1429/13 (ASSESSEES APPEAL) 31. GROUND NO.1 IS GENERAL IN NATURE AND CALLS FOR NO SPECIFIC ADJUDICATION. 32. GROUND NO.2 RAISED BY THE ASSESSEE READS AS FO LLOWS:- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN SUSTAINING THE ADDITIONS MADE BY THE ASSES SING OFFICER U/S. 14A READ WITH RULE 8D ON THE GROUND THAT THE A PPELLANT HAS NOT PRODUCED THE EVIDENTIARY SUPPORT IN RELATION TO DISPERSAL OF LOAN AND UTILIZATION OF LOAN. WHEREAS THE APPELLAN T HAS PRODUCED THE EVIDENCE THAT THE AMOUNT INVESTED WAS OUT OF PO SITIVE BANK BALANCE AND NO BORROWINGS WERE UTILIZED FOR THE PUR POSE OF INVESTMENT. 33. THE ASSESSEE EARNED DIVIDEND INCOME OF RS.38,75 ,857. IT QUANTIFIED A SUM OF RS.3,22,426 AS EXPENDITURE INCU RRED IN EARNING TAX FREE INCOME DIVIDEND INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AND WHICH IS TO BE DISALLOWED U/S. 14A OF THE ACT. 34. THE BREAK-UP OF THE SUM OF RS.3,22,426 IS NOT SPECIFICALLY GIVEN, BUT IS STATED TO BE RELATING TO MANAGEMENT FEE, LEGAL & PROFESSIONAL CHARGES, SECURITY TRANSACTION CHARGES AND NSDL CHARGES. IT I S THUS CLEAR THAT THE ASSESSEE BY IMPLICATION HAD CLAIMED THAT THERE WAS NO EXPENDITURE INCURRED BY WAY OF INTEREST, EITHER DIRECTLY OR IND IRECTLY, WHICH IS ATTRIBUTABLE ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 23 OF 29 TO THE BORROWED FUNDS WHICH WERE USED FOR THE PURPO SE OF INVESTMENT WHICH YIELDED TAX FREE INCOME. 35. THE AO OBSERVED THAT SCHEDULE G TO THE FINANCI AL STATEMENTS OF THE ASSESSEE HAD SHOWN INVESTMENT TO THE TUNE OF RS .28,45,29,937 IN SHARES MUTUAL FUNDS OF VARIOUS COMPANIES. HE WAS O F THE VIEW THAT SUCH INVESTMENTS CANNOT BE MADE ROUTINELY. NO PRUDENT B USINESSMAN WOULD MAKE ANY INVESTMENT WITHOUT APPLYING THE RESOURCES WISELY. OBVIOUSLY THIS ENTAILS EXPENDITURE, DIRECT AS WELL AS INDIRECT. H E THEREAFTER PROCEEDED TO MAKE DISALLOWANCE U/S. 14A OF THE ACT, WHICH IS GIV EN AS ANNEXURE TO THE ASSESSMENT ORDER AND ENCLOSED AS ANNEXURE-II TO THIS ORDER . 36. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSE E PREFERRED APPEAL BEFORE THE CIT(APPEALS). 37. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT INT EREST BEARING LOANS WERE BORROWED FOR SPECIFIC PURPOSES AND NOT FOR INV ESTMENT PURPOSES AND IN SUPPORT OF THE ABOVE CONTENTION, THE ASSESSEE FI LED COPIES OF BALANCE SHEETS AS ON 31.03.2003 UPTO 31.03.2009 TO SHOW THA T THE VARIOUS LOANS AVAILED FROM BANKS WERE ALL TAKEN FOR SPECIFIC PURP OSES AND COULD NOT HAVE BEEN UTILIZED FOR MAKING ANY INVESTMENTS OUT OF WHI CH EXEMPT INCOME WAS EARNED. THESE LOANS INCLUDE SHORT TERM LOANS FROM I DBI BANK, EXIM BANK, BARCLAYS BANK AND STANDARD CHARTERED BANK IN RESPEC T OF WHICH IT WAS EXPLAINED THAT THE LOANS COULD NOT HAVE BEEN USED F OR MAKING ANY LONG TERM INVESTMENT. COPIES OF SOME COMMUNICATIONS FROM BANKS REGARDING ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 24 OF 29 SANCTION OF THE LOANS WERE ALSO FILED BEFORE ME TO SUBSTANTIATE THE NATURE OF THE LOAN. IN RESPECT OF IDBI LOAN, IT WAS SUBMITTED THAT THE SAME HAD BEEN RETURNED BACK BEFORE THE YEAR END, THUS BRINGING TH E BALANCE TO NIL. 38. ON CONSIDERATION OF THE ABOVE SUBMISSIONS AND O N PERUSAL OF THE RELEVANT DOCUMENTS, THE CIT(A) WAS OF THE VIEW THAT THE CLAIM OF THE ASSESSEE WAS NOT EVIDENCED FROM THE DOCUMENTS SUBMI TTED IN VIEW OF THE LOANS AND OTHER SOURCES OF FUNDS BEING MIXED UP IN THE COMMON POOL OF FUNDS. THE CIT(A) FURTHER HELD THAT THE BURDEN OF PROOF IN THIS MATTER CLEARLY CONTINUES TO REST WITH THE ASSESSEE AND THAT IT WAS NOT ENOUGH TO MERELY SHOW THAT SURPLUS FUNDS WERE AVAILABLE OR THAT BANK LOANS HAD BEEN AVAILED FOR SPECIFIC PURPOSES INCLUDING SHORT TERM REASONS. A ONE-TO-ONE CORRELATION MUST ALSO BE ESTABLISHED TO PROVE THAT THE LOANS WE RE ABSOLUTELY UTILISED FOR THE PURPOSE FOR WHICH THEY WERE CLAIMED. THE CIT(A) ALSO HELD THAT THERE WAS NO UTILISATION CERTIFICATE FROM THE BANK FILED BEFORE THE AO NOR WAS SUCH EVIDENCE FURNISHED BEFORE THE CIT(A). THE CIT(A) ALSO HELD THAT THE DOCUMENTS SUBMITTED FROM THE BANK DURING THE COURSE OF APPEAL ONLY REFER TO THE DISBURSAL OF THE LOAN AND EVEN THESE SPECIFY CERTAIN CONDITIONS REQUIRED TO BE MET. THE DATE-WISE ACTUAL DISBURSAL AND UTILISATION IS NOT PROVED FROM THE LEDGER COPIES AS SUBMITTED. THE CIT (A) ALSO REFERRED TO THE DECISION OF MUMBAI ITAT IN THE CASE OF HERCULES HOI STS LTD. (ITA NO.7944, 7946, 2255 & 7943/MUM/2011), WHEREIN IT WAS HELD TH AT WITH THE INTRODUCTION OF RULE 8D THE BURDEN OF PROOF ON THE ASSESSEE HAS BECOME MORE STRINGENT, SO THAT RATHER THAN SHOWING EXISTE NCE OF SUFFICIENT CAPITAL, ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 25 OF 29 THE MATTER WOULD BE REQUIRED TO BE EXAMINED FROM TH E STAND POINT OF UTILISATION OF THE BORROWED INTEREST BEARING FUNDS. IN THE ABSENCE OF CATEGORICAL UTILISATION CERTIFICATE FROM THE BANK, THE CIT(A) WAS OF THE VIEW THAT THERE WAS NO EVIDENTIARY SUPPORT OF THE ASSES SEES CLAIM. HENCE, THE DISALLOWANCE U/S.14A OF THE ACT AS MADE BY THE AO W AS UPHELD BY THE CIT(A). 39. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS RAISED GROUND NO.2. 40. WE HAVE HEARD THE RIVAL SUBMISSIONS. A COPY O F THE AVAILABILITY OF FUNDS AND INVESTMENTS MADE WAS FILED BEFORE US WHIC H IS AT PAGES 38 TO 42 OF THE ASSESSEES PAPERBOOK AND THE SAME IS ENCLOSE D AS ANNEXURE-III TO THIS ORDER . IT IS CLEAR FROM THE SAID STATEMENT THAT THE AVA ILABILITY OF PROFIT, SHARE CAPITAL AND RESERVES & SURPLUS WAS MU CH MORE THAN INVESTMENTS MADE BY THE ASSESSEE WHICH COULD YIELD TAX FREE INCOME. 41. THE HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (BOM) HAS HELD THAT WHERE THE INTEREST FREE FUNDS FAR EXCEED THE VALUE OF INVESTMENTS, IT SHOULD BE CONSI DERED THAT INVESTMENTS HAVE BEEN MADE OUT OF INTEREST FREE FUNDS AND NO DI SALLOWANCE U/S. 14A TOWARDS ANY INTEREST EXPENDITURE CAN BE MADE. THIS VIEW WAS AGAIN CONFIRMED BY THE HONBLE BOMBAY HIGH COURT IN CIT V. HDFC BANK LTD., ITA NO.330 OF 2012, JUDGMENT DATED 23.7.14 , WHEREIN IT WAS HELD THAT ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 26 OF 29 WHEN INVESTMENTS ARE MADE OUT OF COMMON POOL OF FUN DS AND NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENTS IN TAX FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE U/S. 14A CAN B E MADE. 42. IN THE LIGHT OF ABOVE SAID DECISIONS, WE ARE O F THE VIEW THAT DISALLOWANCE OF INTEREST EXPENSES IN THE PRESENT CA SE OF RS.49,42,473 MADE UNDER RULE 8D(2)(II) OF THE I.T. RULES SHOULD BE DELETED. WE ORDER ACCORDINGLY. 43. AS FAR AS DISALLOWANCE OF RS.13,91,922 MADE BY THE AO UNDER RULE 8D(2)(III) OF THE RULES I.E., OTHER EXPENSES ARE CO NCERNED, WE FIND THAT THE ASSESSEE HAD MADE A CLAIM BEFORE THE AO THAT OTHER EXPENSES TO BE CONSIDERED FOR DISALLOWANCE UNDER RULE 8D(2)(III) I S ONLY RS.3,22,426. THE ASSESSEE HAD ALSO GIVEN A BREAK-UP OF OTHER EXPENS ES ALSO. WITHOUT REJECTING THE CLAIM OF ASSESSEE, THE AO PROCEEDED T O MAKE A DISALLOWANCE INVOKING RULE 8D OF THE RULES. IN THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO., 328 ITR 81 (BOM) , IT WAS HELD THAT RULE 8D CAN BE RESORTED TO BY THE AO ONLY WHEN HE REJECTS THE CLAIM MADE BY THE ASSESSEE REGARDING EXPENDITURE IN CURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. I N THE PRESENT CASE, THE AO HAS NOT DONE SO. WE THEREFORE DEEM IT FIT AND P ROPER TO RESTORE THIS ISSUE OF DISALLOWANCE UNDER RULE 8D(2)(III) TO THE AO FOR FRESH CONSIDERATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE, AFTER AFFO RDING ASSESSEE ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 27 OF 29 OPPORTUNITY OF BEING HEARD. THUS, GROUND NO.2 RAIS ED BY THE ASSESSEE IS ALLOWED TO THE EXTENT INDICATED ABOVE. 44. GROUND NO.3 RAISED BY THE ASSESSEE READS AS FO LLOWS:- 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN SUSTAINING THE ADDITION REGARDING WEALTH T AX LIABILITY UNDER THE PROVISIONS OF SECTION 115JB TREATING THE PROVISION FOR WEALTH TAX AS UNASCERTAINED LIABILITY. 45. THE QUESTION THAT ARISES FOR CONSIDERATION ON T HE AFORESAID GROUND OF APPEAL BY THE ASSESSEE IS AS TO WHETHER WEALTH TAX LIABILITY COULD BE ADDED TO THE PROFIT AS PER P&L ACCOUNT FOR THE PURPOSE OF ARRIVING AT THE BOOK PROFITS U/S. 115JB OF THE ACT? THE AO DID NOT GIVE ANY REASON FOR ADDING PROVISION FOR WEALTH-TAX TO THE NET PROFIT AS PER P &L ACCOUNT FOR ARRIVING AT THE BOOK PROFITS OF THE ASSESSEE. 46. THE CIT(A) JUSTIFIED THE ACTION OF AO OBSERVING AS UNDER:- 5. THE APPELLANT HAS GRIEVED AGAINST THE AO ADDIN G THE PROVISION OF WEALTH TAX TO THE BOOK PROFIT U/S. 115 JB WHEREAS EXPLANATION 1(A) TO SEC. 115JB ONLY REFERS TO THE AMOUNT OF INCOME TAX PAID OR PAYABLE, AND THE PROVISION THERE FOR. WHILE AGREEING WITH THE APPELLANTS VIEW THAT WEALTH TAX HAS NOT BEEN SPECIFICALLY MENTIONED IN THIS EXPLANATION, I NEVER THELESS FIND THAT ANY PROVISION FOR MEETING LIABILITIES OTHER THAN AS CERTAINED LIABILITIES IS LIABLE TO BE ADDED BACK TO BOOK PROF IT AND THE APPELLANTS DEBITING OF WEALTH TAX PROVISIONS WOULD BE COVERED UNDER THIS PROVISION. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 28 OF 29 47. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT AS PER EXPLANATION (1)(A) TO SECTION 115JB, THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND THE PROVISION THEREFOR; HAS TO BE ADDED, AND WEALTH-TAX IS NOT INCLUDED THEREIN. ACCORDING TO HIM, IF AT ALL, ADD ITION COULD BE MADE U/S. EXPLANATION (1)(C) ON THE GROUND THAT PROVISION MAD E IS NOT FOR AN ASCERTAINED LIABILITY. IT WAS SUBMITTED BY HIM THA T PROVISION FOR WEALTH-TAX LIABILITY IS MADE ON THE BASIS OF ACTUAL NET WEALTH DECLARED BY THE ASSESSEE IN WEALTH-TAX RETURNS AND IT IS NOT AN UNASCERTAINE D LIABILITY AS IS SOUGHT TO BE MADE OUT BY THE REVENUE. 48. WE AGREE WITH THE SUBMISSION OF THE LEARNED CO UNSEL FOR THE ASSESSEE THAT WEALTH TAX LIABILITY PROVISION IS NOT COVERED UNDER EXPLN 1(A) TO SEC.115JB(2) OF THE ACT. REGARDING APPLICA BILITY OF EXPLN-1(C ) TO SEC.115JB(2) OF THE ACT IS CONCERNED, WE ARE OF THE VIEW THAT IT WOULD BE JUST AND PROPER TO REMAND THIS ISSUE FOR FRESH CONS IDERATION TO VERIFY THE CLAIM OF ASSESSEE TO THE EXTENT THAT THE PROVISION FOR WEALTH-TAX IS BASED ON THE ACTUAL WEALTH-TAX RETURNS FILED BY THE ASSESSEE (AND IF SO), THEN THE SAME CANNOT BE CONSIDERED AS UNASCERTAINED LIABILIT Y. GROUND NO.3 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 49. THUS, THE APPEAL BY THE ASSESSEE IS PARTLY ALL OWED. ITA NOS.1412 & 1429/B/13 & 764/B/14 PAGE 29 OF 29 50. IN THE RESULT, THE APPEALS VIZ., ITA NO.1412/1 2 AND 1429/12 ARE PARTLY ALLOWED AND ITA NO.764/14 IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF MARCH , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 5 TH MARCH , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.
