Asst. Comm. of Income-tax, Circle-8, Pune V. Atlas Copco (India ) Ltd., Pune

ITA 1414/PUN/2011

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8483 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-07-2019
• Assessment Year: 2002-2003
• Appeal Filed On: 14-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUN A; SANJIV SHANKAR CIT ITA NOS
• Assessee Lawyers: R MURLIDHAR; PRASHANT GANDHI
• Keywords: Business income; Depreciation; Transfer pricing; Principle of natural justice; Earning of tax free income; Bad and doubtful debts; Corroborative evidences; TDS; Set aside
• Section: 14A; 133(6); 250; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, PUNE BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM . / I TA NO.1311 /PUN/20 11 / ASSESSMENT YEAR : 2002 - 03 ATLAS COPCO (INDIA) LIMITED, SVEANAGAR, DAPODI, PUNE - 411 012. PAN : AAACA4074D ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8, PUNE. / RESPONDENT . / ITA NO.1414/PUN/2011 / ASSESSMENT YEAR : 2002 - 03 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 8, PUNE. ... / APPELLANT / V/S. ATLAS COPCO (INDIA) LTD. MUMBAI - PUNE ROAD, DAPODI, PUNE - 411 012. PAN: AAACA4074D / RESPONDENT A SSESSEE BY : SHRI R. MURLIDHAR & SHRI PRASHANT GANDHI REVENUE BY : SHRI SANJIV SHANKAR, CIT 2 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 / DATE OF HEARING : 0 9 .0 7 .2019 /10.07.2010 / DATE OF PRONOUNCEMENT : 16 .0 7 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THESE CROSS APPEALS PREFERRED BY THE ASSESSEE AND THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - V, PUNE DATED 12.08.2011 FOR THE ASSESSMENT YEARS 2002 - 03 AS PER THE GROUNDS OF APPEAL ON RECORD. 2. THESE CASES WERE HEARD TOGETHER. SINCE ISSUES COMMON, FACTS ARE SIMILAR, THESE CASES ARE BEING DISPOSED OF VIDE THIS CONSOLIDATED ORDER. IN ORDER TO ADJUDICATE T HE ISSUE S , WE WOULD FIRST TAKE THE ASSESSEES APPEAL IN ITA NO.1311/PUN/ 2011. ITA NO.1311/ PUN/2011 ( BY ASSESSEE) A.Y.2002 - 03 3. GROUND NO.1 RELATES TO THE FACT THAT THE ASSESSING OFFICER HAD MADE DISALLOWANCE OF INTEREST INCOME OF RS.5,37,352 / - AND ADMINISTRATIVE EXPENSES OF RS.9,02,198/ - U/S. 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) . THE EXEMPT INCOME EARNED WAS RS.1,80,43,953/ - OUT OF WHICH RS.2,10,000/ - WAS FROM TAX FREE BONDS AND REMAINING FROM DIVIDEND FROM TRADE AND NON - TRADE INVESTMENTS . THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.14,39,550/ - BEING THE EXPENDITURE INCURRED BY WAY OF INTEREST EXPENSE AND ADMINISTRATIVE EXPENSE FOR EARNING THE EXEMPT INCOME. THE DETAIL OF DISALLOWANCE MADE BY THE ASSES SING OFFICER IS AS FOLLOWS: 3 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 PARTICULARS AMOUNT RS. INTEREST EXPENSES ATTRIBUTABLE TO EXEMPT DIVIDEND INCOME 3,09,448/ - INTEREST EXPENSE ATTRIBUTABLE TO EXEMPT INTEREST INCOME 2,27,904/ - ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EXEMPT INCOME ( 5% OF RS.18,043,953) 9,02,198/ - TOTAL 14,39,550/ - 4. THEREAFTER, THE MATTER TRAVELLED BEFORE THE LD. CIT(APPEALS) AND THEREIN THE ASSESSEE SUBMITTED THAT INVESTMENTS WERE MADE BY THE ASSESSEE OUT OF ITS OWN FUNDS (INTEREST FREE FUNDS) AND DEMONSTRATED THROUGH BOOKS OF ACCOUNT THAT THE OWN FUNDS WE RE FAR IN EXCESS OF INVESTMENTS MADE DURING THE YEAR. THEREFORE, NO DISALLOWANCE FOR INTEREST INCOME CAN BE MADE UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. THE ASSESSEE HAD RESERVE AND SURPLUS OF RS.115.27 CRORES AS ON 31.03.2002 AND PROFIT BEFORE TAX DURING THE CURRENT YEAR AT RS.15.26 CRORES. IT WAS FURTHER STATED BY THE ASSESSEE THAT NON TRADE INVESTMENTS WERE CARRIED FORWARD FROM THE ERSTWHILE CHICAGO PNEUMATICS INDIA LTD. WHICH GOT MERGED WITH THE ASSESSEE. THE BORROWED FUNDS MAJORLY CONSTITUTES O F CASH CREDIT AND BANK OVERDRAFT AND SALES TAX DEFERRAL LOAN FROM GOVERNMENT OF MAHARASHTRA WHICH ARE NON INTEREST BEARING FUNDS WHICH ARE ONLY TO THE TUNE OF 3% OF THE TOTAL FUNDS OF THE ASSESEE. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMISSION S OF T HE ASSESSEE AND THE FACTS OF THE CASE, HAS GIVEN A DETAILED REASONED DECISION . THE LD. CIT(APPEALS) OBSERVED THAT THE ASSESSING OFFICER MADE DISALLOWANCE FOR ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EXEMPT INCOME AT RS.9,02,198/ - , FOR INTEREST ON BORROWED F UNDS RELATED TO THE INVESTMENT MADE IN SHARES ON WHICH DIVIDEND HAS BEEN EARNED RS.3,09,448/ - AND INTEREST EXPENSES ATTRIBUTABLE TO EXEMPT INTEREST INCOME ON TAX FREE BONDS RS.2,27,904/ - . SO FAR AS TAX FREE BONDS ARE CONCERNED, THE ASSESSEE HAS EXPLAINED T HAT THE TOTAL EXEMPT INTEREST WAS ONLY 4 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 RS.2,10,000/ - AGAINST WHICH THE ALLOCATION ON INTER EST EXPENSES OF RS.2,27,904/ - IS EXORBITANT AND AGAINST THE PRINCIPLE OF PARITY. THIS EXPLANATION WAS FOUND TO BE ACCEPTABLE AND THE DISALLOWANCE WITH REG ARD TO EXEMPT INTEREST INCOME WAS RESTRICTED TO 10% OF THE DISALLOWANCE ACTUALLY MADE BY THE ASSESSING OFFICER GIVING PARTIAL RELIEF. 4.1 SO FAR AS THE OTHER DISALLOWANCE U/S.14A OF THE ACT MADE BY THE ASSESSING OFFICER WA S CONCERNED, THE SAME GOT SUSTAINED BY THE LD. CIT(APPEALS) AND THEREFORE, THE ASSESSEE GOT RELIEF TO RS.2,05,114/ - OUT OF THE TOTAL DISALLOWANCE MADE AT R S.14,39,550/ - AND DISALLOWANCE WA S THEREFORE, RESTRICTED TO RS.12,34,436/ - . 5. AT THE TIME OF HEAR IN G, THE LD. AR OF THE ASSESSEE WITH REGARD TO THE DISALLOWANCE SUSTAINED U/S.14A OF THE ACT, INVITED OUR ATTENTION TO PAGE 19, VOL UME - 1 OF THE PAPER BOOK AND DEMONSTRAT ED THAT THE ASSESSEE HAD OWN FUNDS FAR IN EXCESS THAN BORROWED FUNDS. THE LD. AR FURTHER REITERATED THE SUBMISSION S AS PLACED BEFORE THE SUB - ORDINATE AUTHORITIES AND RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD., 313 ITR 340 (BOM.). 5.1 WITH REGARD TO THE ADDITION ON ADMINISTRATIVE EXPENSES, THE LD. AR PRAYED BEFORE THE BENCH THAT CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES, SOME PETTY ADDITION MAY BE MADE ON THIS COUNT. 6. PER CONTRA, THE LD. DR PLACED STRONG RELIANCE ON THE ORDERS OF THE SUB - ORDINATE AUTHORI TIES. 7. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO GIVEN THOUGHTFUL CONSIDERATION TO THE JUDICIAL PRONOUNCEMENT S 5 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 PLACED BEFORE US. WITH REGARD TO THE DISALLOWANCE MADE U/S.14A OF THE ACT, IT IS QUITE ASCERTAINABLE AND ACCEPTABLE FACTS ON RECORD AS PLACED BEFORE US AT PAGE 19, VOLUME - 1 OF THE PAPER BOOK THAT THE ASSESSEE HAD OWN FUNDS FAR IN EXCESS OF INVESTMENT MADE DURING THE YEAR. THE ASSESSEE HAD RESERVE AND SURPLUS OF RS.115.27 CRORES AS ON 31.03.2002 AND PROFIT BEF ORE TAX DURING THE CURRENT YEAR OF RS.15.26 CRORES. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD.(SUPRA.) ANALYSED THE SITUATION THAT WHEN IT IS ESTABLISHED THAT THE ASSESSEE IS HAVING SUFFICIENT FUNDS THEN PRESUMPT ION WOULD ARISE THAT INVESTMENTS WAS MADE OUT OF SUCH FUNDS AVAILABLE WITH THE COMPANY. IN THAT CASE, THE ASSESSEE HAD INTEREST FREE FUNDS OF RS.398.19 CRORES COMPRISING SHARE CAPITAL, RESERVE & SURPLUS, DEPRECIATION RESERVES. THEREFORE, ENTIRE INVESTMENT MADE IN THE SISTER CONCERN WAS OUT OF THE OWN FUNDS OF THE COMPANY AND THE PRESUMPTION TILTED IN FAVOUR OF THE ASSESSEE AS PER THE OBSERVATION OF THE HONBLE JURISDICTIONAL HIGH COURT. 7.1 REVERTING TO THE FACTS OF THE PRESENT CASE, IT IS ALREADY ANALYZED THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS AND THEREFORE, WHATEVER INVESTMENT WAS MADE, THE LEGAL PRESUMPTION IS THEY WERE FROM THE SAID OWN FUNDS OF THE ASSESSEE. THEREFORE, NO DISA LLOWANCE U/S.14A OF THE ACT IS CALLED FOR. 7.2 WITH REGARD TO THE DISALLOWANCE ON ADMINISTRATIVE EXPENSES, CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE, WE DIRECT THE ASSESSING OFFICER TO SUSTAIN % OF THE DISALLOWANCE ON ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EXEMPT INCOME. IN VIEW OF OUR ABOVE FINDINGS ON THIS ISSUE, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND PARTLY ALLOW THIS GROUND. HENCE, GROUND NO.1 RAISED IN APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. 6 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 7.3 IN THE REVENUES APPEAL IN ITA NO.1414/PUN/2011, GROUND NO.1 IS AGAINST THE PART RELIEF PROVIDED BY THE LD. CIT(APPEALS). WE HAVE DECIDED THIS ISSUE IN ASSESSEES APPEAL AS HEREIN ABOVE MENTIONED AND IN VIEW OF THE MATTER, GROUND NO.1 OF REVENUE IS DISMIS SED . 8. GROUND NO.2 RELATES TO DISALLOWANCE OF WARRANTY PROVISION BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT . THE ASSESSEE HAS MADE PROVISION FOR WARRANTY WITH RESPECT TO ATLAS COPCO - PUNE DIVISION AND CHICAGO PNEUMATIC DIVISION. THAT BEFORE THE ASSESSING OFFICER, IT WAS CONTENDED THAT THE ASSESSEE UNDERTAKES WARRANTY ON ITS PRODUCTS FOR A PERIOD OF 12 MONTHS FROM THE DATE OF COMMISSIONING OR 18 MONTHS FROM THE DATE OF DISPATCH WHICHEVER I S EARLIER. THE ASSESSEE STATES THAT TO TAKE CARE OF SUCH EXPENSES THAT IT MAY INCUR, AN ESTIMATED PROVISION HAS BEEN MADE IN ITS ACCOUNTS BASED ON PAST EXPERIENCE. ACCORDING TO THE ASSESSEE , THE PROVISION MADE ON WARRANTY IS NOT THE NATURE OF CONTINGENT LI ABILITY AND THE SAME SHOULD BE ALLOWED IN FULL. THE ASSESSEE HAS ALSO CONTENDED THAT AFTER EXPIRY OF THE WARRANTY PERIOD, THE EXCESS PROVISION, IF ANY, IS WRITTEN BACK IN THE ACCOUNTS AND OFFERED TO TAX. THE ASESSEE HAS ALSO POINTED OUT THAT THE PROVISION MADE FOR THE PREVIOUS YEAR UNDER CONSIDERATION IS ONLY RS.95,15,024/ - AS AGAINST THE FIGURE OF RS.1,03,01,499/ - APPEARING IN THE SPECIAL AUDIT REPORT. THE ASSESSING OFFICER AT THE VERY OUTSET ACCEPTED THE CONTENTION OF THE ASSESSEE THAT DURING THE CURRENT YEAR, AMOUNT OF PROVISION FOR WARRANTY IS RS. 95,15,024/ - AS AGAINST THE FIGURE OF RS.1,03,01,499/ - APPEARING IN THE SPECIAL AUDIT REPORT. THE ASSESSING OFFICER FOUND THAT THE PROVISION MADE BY THE ASSESSEE HAS BEEN MUCH EXCESSIVE TO THE ACTUAL EXPENDITURE ON THIS COUNT. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENSES TO RS.67,65,915/ - DURING THE YEAR TOWARDS WARRANTY IN PUNE DIVISION, THE FUNDS FOR WHICH HAD 7 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 BEEN VERY MUCH AVA ILABLE FROM OPENING BALANCE OF RS.1,89,94,994/ - . IN OTHER WORDS, THERE HAS BEEN NO NEED FOR THE ASSESSEE TO MAKE FURTHER PROVISIONS DURING THE CURRENT YEAR. IN ADDITION TO THIS, THE ASSESSEE HAS ALSO RECEIVED RS.27,95,163/ - FROM VENDORS TOWARDS WARRANTY EX PENSES WHICH HAS TO BE CONSIDERED AS THE INCOME OF THE ASSESSEE OF THE CURRENT YEAR. AS REGARDS THE CHICAGO PNEUMATIC DIVISION, THE ASSESSEE HAD AN OPENING BALANCE OF RS.49,35,909/ - AND MADE FURTHER PROVISION OF RS.3,10,33,820/ - DURING THE YEAR. AS AGAINS T THIS, THE ASSESSEE HAS INCURRED EXPENSES OF RS.3,11,63,197/ - AND THERE HAS BEEN AN EXCESS PROVISIONING OF RS.48,06,532/ - DURING THE CURRENT YEAR WHICH THE ASSESSING OFFICER HAS DISALLOWED. 9. THE LD. CIT(APPEALS) ON THIS ISSUE HAS OBSERVED THAT IN ASSE SSEES OWN CASE, THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE IN ITA NO.1424 & 1425/PN/07 DATED 30.11.2010 FOR ASSESSMENT YEAR 1996 - 97 & 1998 - 99 HAS HELD THAT VALIDITY OF SUCH AN ESTIMATION MADE ON A REASONABLE BASIS FOR PROVISION FOR WARRANTY BASED ON PAST HISTORY OF THE CASE. CONSEQUENTLY, THE CO - ORDINATE BENCH OF THE TRIBUNAL , PUNE ALLOWED ESTIMATION OF PROVISION FOR WARRANTY @ 0.4% OF THE NET SALES WHICH WAS CONSIDERED BY THE LD. CIT(APPEA LS) TO BE REASONABLE ESTIMATE AND T HEREFORE, ALLOW ED @ 0.4% ON NET SALES OF RS.213,37,81,502/ - WHICH WORKS OUT TO RS.85,35,126/ - . 10. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES ON THIS ISSUE. IT IS NOTICED THAT THE ASSESSEE CLAIMED P ROVISION F OR WARRANTY UNDER TWO DIVISIONS , NAMELY , ATLAS COPCO DIVISION AND CP DIVISION. IN SO FAR AS ATLAL COPCO DIVISION IS CONCERNED , IT IS SEEN THAT THE LD. CIT(APPEALS) FOLLOWED THE TRIBUNAL ORDER F OR AN EARLIER YEAR IN WHICH SUCH PROVISION FOR WARRANTY WAS HELD TO BE REASONABLE @ 0.4% OF SALES. NO MATERIAL HAS BEEN PLACED ON RECORD TO JUSTIFY AN Y VARIATION IN PERCENTAGE OF PROVISION 8 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 FOR SUCH EARLIER YEAR. FOLLOWING THE PRECEDENT, WE HOLD THAT PROVISION AT THE RATE OF 0.40% OF THE SALES OF ATLAS COPCO DIVISION IS REASONABLE AND IS ACCORDINGLY DIRECTED TO BE ALLOWED INSTEAD OF THE CLAIM OF THE ASSESSEE AT RS.95,15,025/ - . HOWEVER, IT IS PERTINENT TO HAVE A LOOK AT A T ABLE DRAWN BY THE LD. CIT(A) ON PAGE NO.8 OF THE IMPUGNED ORDER, WHICH WAS FURNISHED BY THE ASSESSEE ITSELF . T HERE IS AN ITEM IN THE TABLE WITH A SUM OF RS.67,55,915/ - , BEING `EXPENSES ACTUALLY INCURRED. THIS AMOUNT WILL BE DEBITED TO THE PROVISION FOR WARRANTY AND NO SEPARATE DEDUCTION WILL B E ALLOWED FOR IT. THERE IS ANOTHER SUM OF RS.35,09,550/ - IN THIS TABLE, WHICH HAS BEEN DESCRIBED AS `TRANSFER OR PROVISION FROM OTHER LIABILITY ACCOUNT. AS THIS IS A SEPARATE PROVISION FROM SOME `OTHER LIABILITY ACCOUNT, NO DEDUCTION CAN BE ALLOWED FOR THE SAME. IN CASE, IT IS A CASE OF REVERSAL OF SOME PROVISION, THEN IT N EEDS TO BE SEEN IF ANY DEDUCTION WAS ALLOWED AT THE TIME OF CREATION OF SUCH A PROVISION. IF YES, THEN SUCH REVERSAL SHOULD BE ADDED NOW AT THE TIME OF ITS REVERSAL. THERE IS A NOTHER SUM OF RS.27,95,163/ - IN THE TABLE, WHICH HAS BEEN SHOWN AS `CLAIMS RECOVERED. THE LD. AR STATED THAT THE ASSESSEE RECOVERED CLAIMS FROM SOME PARTIES. THIS AMOUNT IS DIRECTED TO BE CREDITED TO PROVISION FOR WARRANTY, THEREBY REDUCING THE AMOUNT OF EXPENSES INCURRED DURING THE YEAR. THERE IS ANOTHER SUM OF RS.55,03,000/ - , WHICH IS `REVERSAL DURING THE YEAR. AS THE ASSESSEE IS GETTING DEDUCTION ON CREATION OF PROVISION, SUCH REVERSAL, BEING EXCESSIVE PROVISION CREATED IN THE PAST, NEEDS TO BE RECOGNIZED AS INCOME FOR THE YEAR. IN SO FAR AS CP DIVISION IS CONCERNED, THE ASSESSEE MADE PROVISION DURING THE YEAR AT RS.3,10,33,820/ - . AS AGAINST THAT, THE AMOUNT OF ACTUAL EXPENDITURE IS RS.3,11,63,197/ - . IN VIEW OF THE FACT THAT ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE IN CP DIVI SION IS MORE THAN THE AMOUNT OF PROVISION, WE HOLD THAT DEDUCTION SHOULD BE ALLOWED FOR THE AMOUNT OF PROVISION CREATED. 9 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 IN THE ABSENCE OF SUCH A POSITION, WE WOULD HAVE DIRECTED TO FOLLOW THE SAME RULE OF ALLOWING PROVISION AT THE RATE OF 0.40% OF THE SAL ES OF CP DIVISION. ONCE DEDUCTION IS ALLOWED ON CREATION OF PROVISION, THERE CAN BE NO QUESTION OF ALLOWING DEDUCTION FOR ACTUAL EXPE NSES INCURRED IN THIS DIVISION. THE AO IS DIRECTED TO GIVE EFFECT TO OUR ABOVE DIRECTIONS/OBSERVATIONS AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES . 11. IN THE REVENUES APPEAL, GROUND NO.2 IS AGAIN ST THE DECISION OF THE LD. CIT(APPEALS) IN PROVIDING WARRANTY PROVISION @ 0.4 % OF NET SALES. IN THE ASSESSEES APPEAL , WE HAVE ALREADY DECIDED THERE IS NO INFIRMITY IN THE FINDINGS OF THE LD. CIT(APPEALS), HENCE, GROUND NO.2 OF REVENUES APPEAL IS DISMISSE D. 12. GROUND NO.3 RELATES TO DISALLOWANCE OUT OF VOLUNTARY RETIREMENT SCHEME EXPENSES (VRS EXPENSES) TO THE TUNE OF RS.2,41,32,829/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.64,790,700/ - AS EXPENDITURE ON VRS UNDER SECTION 35DDA OF THE ACT BEING 1/5 TH OF THE TOTAL EXPENDITURE OF RS.32,39,53,501/ - INCURRED TILL MARCH, 2002. AS PER THE PROVISION OF SECTION 35DDA, THE ASSESSING OFFICER WAS OF THE VIEW THAT DEDUCTION OF 1/5 TH OF THE AMOUNT ACTUALLY PAID ONLY COULD BE CLAIMED UNDER THE SAID PROVISION. SINCE ACTUAL PAYMENT BY THE ASSESSEE WAS ONLY TO THE TUNE OF RS.20,32,89,362/ - , THE ASSESSING OFFICER HELD THAT ONLY 1/5 TH OF THE SAID AMOUNT I.E. RS.4,06 ,57,873/ - ONLY WAS ADMISSIBLE TO THE ASSESSEE UNDER SECTION 35DDA OF THE ACT AND NOT RS.6,47,90,700/ - AS CLAIMED AND THEREFORE, DIFFERENCE OF RS.2,41,32,829/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. 10 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 13. THE LD. CIT(APPEALS) ON THIS ISSUE AS PER REASONING GIVEN IN HIS ORDER HAS UPHELD THE FINDINGS OF THE ASSESSING OFFICER. 14. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE SUB - ORDINATE AUTHORITIES. THE LD. AR VEHEMENTLY ARGUED THAT THE PROVISION OF S ECTION 35DDA OF THE ACT IS TO BE READ WITH SECTION 43(2) OF THE ACT WHICH IS IN THE TRUE SPIRIT OF INTERPRETATION OF THE STATUTES WHICH ULTIMA TELY SIGNIFIES THE ACTUAL SIGNIFICANCE OF THE ACT . SECTION 43(2) OF THE ACT PROVIDES THAT THE TERM PAID MEANS A CTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING.. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE AS PER ITS ACCOUNT HAS INCURRED TOTAL VRS EXPENSES OF RS.323,953,501/ - OF WHICH 1/5 TH OF VRS EXPENSES I.E.64,790,700/ - SHOU LD BE ALLOWED TO THE ASSESSEE. THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND ALSO THE SAME SYSTEM OF ACCOUNTING IS APPLIED FOR DETERMINING THE PROFITS OR GAINS COMPUTED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, THE D EDUCTION IS CORRECTLY CLAIMED AT 1/5 TH OF THE AMOUNT OF EXPENDITURE INCURRED ON VRS, IN ACCORDANCE WITH SECTION 35DDA READ WITH SECTION 43(2) OF THE ACT. THE LD. AR FURTHER REFERRED TO THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF PEREIRA AND ROCHE VS. CIT, 61 ITR 371 (1966) WHEREIN IT HAS BEEN HELD THAT THE TERM ACTUALLY PAID IS NOT TO BE UNDERSTOOD IN A PHYSICAL SENSE BUT IN THE SENSE THAT THE EXPENDITURE IS ACTUALLY INCURRED. THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. TATA HYDRO ELECTRIC SUPPLY CO. LTD. (1995) 219 ITR 178 HAS HELD THAT THE MEANING OF THE WORD PAID AS USED IN SECTION 36(1)(IV) OF THE ACT HAS TO BE CONSTRUED IN THE SENSE SET OUT IN CLAUSE (2) OF SECTION 43 OF THE ACT. 11 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 15. PER CONTRA, THE LD. DR HAS PLACED STRONG RELIANCE ON THE ORDERS OF THE SUB - ORDINATE AUTHORITIES. 16. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTION. WE OBSERVE THAT SECTION 35DDA OF THE ACT DOES NOT MAKE ANY REFERENCE TO SUM S A CTUALLY PAID. IT REFERS EXPENDITURE THAT EXPENDITURE CAN BE ACTUALLY INCURRED OR PAID. THE SPIRIT OF INTERPRETATION WITH ANY SCHEME OF ACT PROVIDES THAT THERE HAS TO BE A HOLISTIC APPROACH IN INTERPRETING THE STATUTES AND WITHIN THE FRAME WORK OF THE STATUE ITSELF THERE CANNOT BE ANY ISOLATED OR SECLUDED INTERPRETATION UNTIL OR UNLESS EXCLUSIVELY PROVIDED WITHIN THE STATUTE ITSELF. WE HAVE TO READ SECTION 35DDA ALONG WITH SECTION 43(2) OF THE ACT AND IN VIEW OF THE BINDING JUDICIAL PRONOUNCEMENTS HEREI NABOVE REFERRED, WE HOLD THAT WITHIN THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THEY MAY HAVE PAID CERTAIN AMOUNT BUT THE ASSESSEE HAS KEPT THE PROVISION AS THE EXPENSES WERE ALSO INCURRED. THEREFORE, AS PER THE STYLE OF ACCOUNT ING , THE TERM PAID SHALL INCLUDE ACTUALLY PAID OR INCURRED. IN THE INSTANT CASE, THE REVENUE AUTHORITIES HAVE ONLY TRIED TO INTERPRETE THE PROVISION OF SECTION 35DDA OF THE ACT WITHOUT CONSIDERING THE ENTIRE SPIRIT AND INTENT OF THE ACT . WE THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND THE AMOUNT OF VRS EXPEN DITURE CLAIMED BY THE ASSESSEE I.E. 1/5 TH OF VRS EXPENSES INCURRED OF RS.6 , 47 , 90,700/ - IS THEREFORE ALLOWED. HOWEVER, IT IS MADE CLEAR THAT ONCE THE ASSES SEE IS ALLOWED DEDUCTION ON INCURRING EXPENSES TOWARDS VRS, NO DEDUCTION U/S.35DDA SHOULD BE ALLOWED AT THE TIME OF ACTUAL PAYMENT THEREOF. THE ASSESSING OF FICER IS DIRECTED TO VERIFY IF ANY DEDUCTION ON THIS SCORE IS NOT CLAIMED/ ALLOWED IN THE SUBSEQUENT YEARS AT THE TIME OF ACTUAL PAYMENT . IN CASE HE FINDS THAT THE ASSESSEE WAS ALLOWED DEDUCTION AT THE TIME OF PAYMENT, 12 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 THEN SUCH AN AMOUNT SHOULD BE ADDED BACK. IT GOES WITHOUT SAYING THAT ONCE DEDUCTION HAS BEEN ALLOWED ON THE BASIS OF I NCURRING OF LIABILITY, THERE CANNOT BE ANY DEDUCTION ON THE BASIS OF PAYMENT. THUS, GROUND NO.3 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 17. GROUND NO.4 IS WITH REGARD TO THE DISALLOWANCE OF AMALGAMATION EXPENSES TO THE TUNE OF RS.49,60,536/ - CONTENDING THAT THE STAMP DUTY ON IMMOVABLE PROPERTY AND FEES PAID FOR INCREASE IN AUTHORIZED SHARE CAPITAL DO NOT QUALIFY FOR DEDUCTION UNDER SECTION 35DD OF THE ACT . THE ASSESSING OFFICER HAS DISALLOWED AMALGAMATION EXPENSES OF RS.49,6 0,536/ - CONTENDING THAT THE STAMP DUTY PAID IN RESPECT OF TRANSFER OF IMMOVABLE PROPERTY ACQUIRED IN AMALGAMATION PROCEEDINGS CANNOT FORM PART OF AMALGAMATION EXPENSES AND FEES PAID FOR INCREASE IN AUTHORIZED SHARE CAPITAL IS NOT PART OF THE AMALGAMATION E XPENSES SINCE THIS INCREASE IS SUBSEQUENT TO THE AMALGAMATION. 18. THE LD. CIT(APPEALS) ON THIS ISSUE OBSERVED THAT THE SAME MATTER HAS BEEN DECIDED IN ASSESSES OWN CASE FOR ASSESSMENT YEAR 2004 - 05 AND 2005 - 06 IN THE PROCEEDINGS BEFORE HIS PREDECESSOR A ND EVEN THE QUANTUM OF CLAIM I.E. RS.49,60,536/ - IS THE SAME AS WAS IN THOSE YEARS. IN THOSE APPELLATE ORDERS, IT WAS HELD THAT STAMP DUTY EXPENSES ON IMMOVABLE PROPERTY AMOUNTING TO RS. 2,37,52,680/ - WAS ELIGIBLE FOR AMORTIZATION UNDER SECTION 35DD OF THE ACT WHILE FEES FOR INCREASE IN AUTHORIZED SHARE CAPITAL I.E. RS.10,50,00/ - WAS NOT ELIGIBLE FOR AMORTIZATION IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN INSECTICIDES LTD. 250 ITR 338. THEREFORE, THE LD. CIT(APP EALS) HEREIN ALLOWED THE STAMP DUTY EXPENSES AS ELIGIBLE FOR AMORTIZATION UND ER SECTION 35DD OF THE ACT BUT FEES 13 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 FOR INCREASE IN AUTHORIZED SHARE CAPITAL WAS FOUND AS NOT ELIGIBLE IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT (SUPRA.). 19. GROUND NO.3 OF REVENUES APPEAL IS AGAINST THE PARTIAL RELIEF PROVIDED BY THE LD. CIT(APPEALS) IN FAVOUR OF THE ASSESSEE ON THIS ISSUE . 20. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE CASE LAW RELIED ON BY THE LD. CIT(APP EALS) OF THE HONBLE DELHI HIGH COURT IS SUBSTANTIALLY DIFFERENT ON FACTS WITH REGARD TO THAT OF THE ASSESSEEE. IN THE CASE OF THE ASSESSEE, THERE WAS AMALGAMATION PROCEEDINGS AND AS PER SUCH AMALGAMATION, AUTHORIZED SHARE CAPITAL WAS TO BE INCREASE D AND THEREFORE, IT IS AMORTIZED U/S.35DD OF THE ACT WHEREAS, THE CASE LAW REFERRED TO BY THE LD. CIT(APPEALS) RELATES TO THE EXPENSES INCURRED BY WAY OF REGISTRATION OF A COMPANY AND AMORTIZATION OF EXPENDITURE S FOR FEE S U/S. 35D (2) (C)(III) OF THE ACT. 21. TH E LD. DR ON THE OTHER HAND RELIED ON THE FINDINGS O F THE SUB - ORDIANTE AUTHORITIES. 22. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO ANALYZED THE FACTS AND CIRCUMSTANCES ON THE ISSUE. THE LD. CIT(APPEALS) ALLOWED THE STAMP DUTY EXPENSES TO BE AMORTIZ ED U/S.35DD OF THE ACT STATING THAT TO BE PA RT OF AMALGAMATION PROCEEDINGS, F OLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 200 4 - 05 AND 2005 - 06 AS ON RECORD. T HE ASSESSING OFFICER AND THE L D. CIT(APPEALS) HAS NOT DENIED THE FACTS THAT THERE WERE AMALGAMATION PROCEEDINGS WITH RESPECT TO THE ASSESSEE , HOWEVER THEY HAVE NOT BROUGHT OUT ANY REASONS , SPECIALLY IN THE ORDER OF THE LD. CIT(APPEALS) THAT WHEN ENTIRE EXPENSES ARE IN 14 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 CONNECTION WITH AMA LGAMATION PROCEEDINGS AND THE REVENUE AUTHORITIES HAVE ALLOWED STAMP DUTY EXPENSES AS DEDUCTION U/S.35DD OF THE ACT THEN WHAT IS THE REASON FOR NOT ALLOWING THE EXPENSES INCURRED REGARDING FEES FOR INCREASE IN AUTHORIZED SHARE CAPITAL WHICH IS ALSO PART O F THE SAME AMALGAMATION PROCEEDINGS. WE ARE ALSO INCLINED TO AGREE WITH THE SUBMISSION OF THE LD. AR AFTER PERUSING FACTS OF THE CASE IN THE DECISION OF THE HONBLE DELHI HIGH COURT (SUPRA.) THAT IT RELATES TO FEES FOR REGISTRATION OF COMPANY AND ESSENTIAL LY DEALING WITH PROVISION OF SECTION 35D(2)(C)(III) OF THE ACT. THERE IS SUBSTANTIAL DIFFERENCE BETWEEN REGISTRATION OF A COMPANY AND ACTION TAKEN FOR INCREASE IN AUTHORIZED SHARE CAPITAL. IN THE CASE OF THE ASSESSEE BECAUSE OF AMALGAMATION PROCEEDINGS, THERE WAS NEED TO INCREASE IN AUTHORIZED SHARE CAPITAL AND THEREFORE, SUCH EXPENSES CANNOT BE SEGREGATED FROM THE MAIN AMALGAMATION PROCEEDINGS AND THEREFORE , THESE EXPENSES ARE PART OF AMALGA MATION EXPENSES. 23. IN VIEW OF THE MATTER, WE SET ASIDE THE O RDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION FROM THE HANDS OF THE ASSESSEE. THUS, GROUND NO.4 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED AND GROUND NO.3 OF THE REVENUES APPEAL IS DISMISSED. 24. GROUND NO.5 RELATES TO DISALLOWANCE OF PROVISION ON STOCK OBSOLESCENCE . IT IS OBSERVED BY THE REVENUE AUTHORITY THAT THE ASSESSEE MADE MERE PROVISIONS FOR OBSOLESCENCE BUT ALL OF THE CORRESPONDING ITEMS WERE NOT ACTUALLY WRITTEN OFF FROM THE CLOSING STOC K BUT STILL THE DEDUCTION WAS CLAIMED FOR THE PROVISION FOR STOCK OBSOLESCENCE. THE FACTS ON RECORD DEMONSTRATES THAT THE COMPARATIVE FIGURES GIVEN IN ASSESSMENT YEAR 2001 - 02 AGAINST THE PROVISION MADE OF RS.2,17,38,129/ - , THE ACTUAL WRITE OFF OF 15 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 OBSOLETE STOCK WAS WORTH RS.1,22,83,015/ - ONLY. SIMILARLY IN THE RELEVANT YEAR, THE ASSESSEE CLAIMED A DEDUCTION OF RS.5,77,48,543/ - ON THE BASIS OF PROVISION FOR OBSOLESCENCE OF THE INVENTORY WHEREAS THE ACTUAL WRITE OFF OF STOCK WAS MADE TO THE EXTENT OF RS.3,70,21,550/ - ONLY. SIMILARLY IN ASSESSMENT YEAR 2003 - 04, THE ASSESSING OFFICER POINTED OUT THAT THE PROVISIONING OF ACCOUNT WAS MADE EVERY YEAR WHEREAS THE ACTUAL WRITE OFF IS OF A MUCH SMALLER AMOUNT. FURTHER, NO DOCUMENTARY EVIDENCES WERE FURNISHED REGARDING THE SAME. THE LD. CIT(APPEALS) OBSERVED IN HIS ORDER THAT THERE IS TENDENCY OF THE ASSESSEE TO MAKE HIGHER PROVISION FOR S TOCK OF OBSOLESCENCE WHEREAS ACTUAL WRITE OFF IS OF MUCH SMALLER AMOUNT AND THIS, THEREFORE, CANNOT BE TREATED AS PROPER AND SOUND ACCOUNTING PRINCIPLES. THE LD. CIT(APPEALS) HELD THAT WHILE PROVISION FOR STOCK OBSOLESCENCE AMOUNTING TO RS.5,77,48,543/ - CA NNOT BE ALLOWED AS DEDUCTION DURING THE YEAR HOWEVER THE AMOUNT OF STOCK ACTUALLY WRITTEN OFF AT RS.3,70,21,550/ - BE ALLOWED. THEREFORE, PARTIAL RELIEF WAS PROVIDED TO THE ASSESSEE BY THE LD. CIT(APPEALS). 25. AT THE TIME OF HEARING, THE LD. AR OF THE AS SESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION IN ASSESSEES OWN CASE BY THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE IN ITA NO. 448/PN/2010 AND ITA NO.409/PN/2010 FOR ASSESSMENT YEAR 2001 - 02 DECIDED ON 30.01.2012. IN THIS CASE, THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE ON THIS ISSUE HAS HELD AS FOLLOWS: 45. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, THE SUM AND SUBSTANCE OF THE DISPUTE REVOLVES AROUND A PROVISION MADE BY THE ASSESSEE IN RESPECT OF DIMINUTION IN VALUE OF STOCK OF A SUM OF RS 2,17,38,129/ - . ON BEING ASKED TO EXPLAIN BEFORE THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THE PROVISION WAS MADE ON ACCOUNT OF THE DIMINUTION IN VALUE OF OBSOLETE AND OLD NON MOVING ITEMS OF STO CK. THE ASSESSEE POINTED OUT THAT IT WAS INTRODUCING NEW PRODUCTS IN THE MARKET AND IN TERMS THEREOF, THE STOCKS OF OLD PRODUCTS AND ITS SPARES AND COMPONENTS DO NOT GET SOLD AND THEREFORE, ON THE BASIS OF A CONSISTENT POLICY THE VALUE OF SUCH OBSOLETE AND SLOW MOVING STOCK IS IDENTIFIED AND PROVISION MADE FOR ITS DIMINUTION. IT WAS EXPLAINED BY THE ASSESSEE THAT AT THE END OF EACH YEAR, AGE - ANALYSIS OF THE INVENTORY IS CARRIED OUT AND ANY 16 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 MATERIAL WHICH DOES NOT MOVE FOR A PERIOD OF 12 TO 24 MONTHS IS WRITTEN OFF AT 50% OF THE BOOK VALUE OF SUCH STOCK AND 100% IF IT HAS NOT MOVED FOR MORE THAN 24 MONTHS. THE ASSESSEE FURTHER EXPLAINED THAT AFTER THE STOCK IS WRITTEN OFF, THE SAME IS SOLD AS SCRAP AND THE INCOME THEREOF IS OFFERED TO TAX IN RES PECTIVE YEARS. THE DETAILS OF SUCH WRITE OFF, WHICH ARE PLACED AT PAGES 235 TO 291OF THE PAPER BOOK, BEAR OUT THE POLICY ADOPTED BY THE ASSESSEE FOR IDENTIFYING THE STOCK TO BE WRITTEN OFF AND ITS DISPOSAL AS SCRAP. IN OUR CONSIDERED OPINION, THE CLAIM OF THE ASSESSEE CANNOT BE FAULTED INASMUCH AS IT IS WELL ESTABLISHED THEORY THAT THE CLOSING STOCK IS LIABLE TO BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER. THE PRINCIPLE APPLICABLE WITH REGARD TO OBSOLETE STOCK IS AKIN TO THE AFORESAID THEORY AND TH E ASSESSEE MADE NO MISTAKE IN ADOPTING SUCH A POLICY TO MAKE A PROVISION FOR THE OBSOLETE STOCK. IN THE PRESENT CASE, IN OUR VIEW, THE COMMISSIONER OF INCOMETAX (APPEALS) MADE NO MISTAKE IN DELETING THE ADDITION. IN FACT, THE LEARNED COUNSEL FOR THE ASSESS EE HAD POINTED OUT THAT A SIMILAR DISPUTE HAD ARISEN IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1973 - 74 TO 1975 - 76 AND THE TRIBUNAL HAD UPHELD THE STAND OF THE ASSESSEE AND FOR THAT MATTER A REFERENCE WAS MADE TO THE DECISION OF THE TRIBUNAL, BOMB AY BENCH IN THE CASE OF IAC V. CONSOLIDATED PNEUMATIC TOOL CO. (I) LTD. 15 ITD 564 (BOM). IT IS FURTHER POINTED OUT THAT SUCH POLICY OF IDENTIFYING AND MAKING A PROVISION FOR DIMINUTION OF VALUE OF OBSOLETE STOCK WAS ACCEPTED BY THE DEPARTMENT IN THE PAST AND NO DISALLOWANCE WAS MADE TILL THE INSTANT ASSESSMENT YEAR. IN THIS BACKGROUND OF THE MATTER ALSO, WE FIND THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS RIGHTLY DELETED THE ADDITION AND THAT THE GROUND OF APPEAL RAISED BY THE REVENUE LACKS MERIT. GR OUND NO. 8 OF APPEAL IS THUS DISMISSED. 26. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES ON THIS ISSUE. WE HAVE ALSO GIVEN THOUGHTFUL CONSIDERATION TO THE JUDICIAL PRONOUNCEMENT PLACED BEFORE US IN ASSESSEES OWN CASE WHEREI N IT HAS BEEN DECIDED THAT SUCH PROVISION FOR STOCK OBSOLESCENCE IS ALLOWED AS DEDUCTION AND IT IS NOT ONLY LIMITED TO THE STOCK ACTUALLY WRITTEN OFF. THERE IS NO DIFFERENCE IN THE FACTS AND CIRCUMSTANCES AS APPEARING TO THAT YEAR AND THE RELEVANT YEAR IN THE CASE OF THE ASSESSEE. FURTHER, WE FIND AS SUBMITTED BY THE LD. AR THAT THIS DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL , PUNE IN ASSESSEES OWN CASE HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN INCOME TAX APPEAL (LOD) NO.1107 OF 2 012 DECIDED ON 1 ST FEBRUARY, 2013 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS FOLLOWS: 6. SO FAR AS QUESTION (F) IS CONCERNED, THE CONTROVERSY IS WITH REGARD TO WRITING OFF OF THE CLOSING STOCK TO THE EXTENT OF RS.2.17 CRORES. THE TRIBUNAL I N ITS ORDER RECORDED A FINDING OF FACT THAT AT THE END OF EACH AGE ANALYSIS OF THE INVENTORY IS CARRIED OUT BY THEM AND ANY MATERIAL WHICH 17 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 DOES NOT MOVE FOR A PERIOD OF 12 TO 24 MONTHS IS WRITTEN OFF AT 50% OF THE BOOK VALUE AND AT 100% OF BOOK VALUE IF IT HAS NOT MOVED FOR MORE THAN 24 MONTHS AND THEREAFTER SOLD AS A SCRAP AND THE INCOME THEREOF IS OFFERED TO TAX. BEFORE THE TRIBUNAL, THE RESPONDENT - ASSESSEE HAD POINTED OUT THAT SIMILAR DISPUTE HAS ARISEN IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1973 - 74 TO 1975 - 76 AND THE TRIBUNAL UPHELD THE STAND OF THE RESPONDENT - ASSESSEE. IT ALSO RECORDS THE FACT THAT THE RESPONDENT - ASSESSEES POLICY OF IDENTIFYING AND MAKING PROVISION FOR THE DIMINUTION OF THE VALUE OF THE OBSOLETE STOCK WAS ACCEPTED BY THE D EPARTMENT FOR EARLIER ASSESSMENT YEARS AND NO DISALLOWANCE WAS MADE IN THE EARLIER ASSESSMENT YEARS TILL THE INSTANT ASSESSMENT YEAR. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT ANY DISTINGUISHABLE CIRCUMSTANCES DURING THE CURRENT ASSESSMENT YEAR FROM THAT EXISTING AND ACCEPTED IN THE EARLIER ASSESSMENT YEARS AND ALSO MORE PARTICULARLY WITH REGARD TO THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 1973 - 74 TO 1975 - 76. IN THE AFORESAID CIRCUMSTANCES, WE SEE NO REASON TO ENTERTAIN QUESTION (F) AS FORMULATED BY THE TAKEN REVENUE. RESPECTFULLY, FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO PROVIDE PROVISION FOR STOCK OBSOLESCENCE TO THE ASSESSEE AND DELETE THE ADDITION THEREIN. THUS, GROUND NO.5 RAISED I N APPEAL BY THE ASSESSE IS ALLOWED . 27. THE REVENUE IN ITS APPEAL IN GROUND NO.5 HAS CHALLENGED THE PART RELIEF GIVEN TO THE ASSESSEE ON THE STOCK ACTUALLY WRITTEN OFF. WE HAVE DECIDED THIS ISSUE IN ASSESSEES APPEAL ALLOWING STOCK OBSOLESCENCE TO THE ASS ESSEE. THEREFORE, GROUND NO.5 OF THE REVENUES APPEAL IS DISMISSED . 28. GROUND NO.6 PERTAINS TO CONFIRMING THE ADDITION OF RS.3 , 40,443/ - BEING INCOME FROM SCRAP SALE WHICH ACCORDING TO THE ASSESSEE WAS THE AMOUNT ALREADY OFFERED TO TAX IN ASSESSMENT YEAR 2001 - 02 I.E. PRECEDING ASSESSMENT YEAR . 29. THE FACTS ON THIS ISSUE ARE THAT IN THE SPECIAL AUDIT REPORT (SAR), THE ASSESSEE HAS DEBITED RS.3,40,443/ - TO SALE OF SCRAP ACCOUNT GIVING EFFECT TO THE SALE OF CAR AND THIS HAS RESULTED IN REDUCING THE INCOME FROM SALE OF SCRAP BY THE SAID AMOUNT. THE ASSESSEE BY WAY OF ITS EXPLANATION VIDE LETTER DATED 18 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 05.05.2005 HAS STATED THAT THIS HAS ONLY BEEN A RECTIFICATION ENTRY PASSED IN ITS BOOKS BROUGHT IN FROM THE EARLIER YEAR WHEREIN THE INCOME FROM SALE OF CAR WAS CREDITED TO SCRAP SALE ACCOUNT. THE ASSESSEE WAS OF THE OPINION THAT NO ADJUSTMENT IS CALLED FOR IN THE Y EAR UNDER CONSIDERATION FOR ASSESSMENT. HOWEVER, IT HAS BEEN POINTED OUT IN THE SAR THAT FROM THE CURRENT YEARS SCRAP SALE ACCOUNT, THE AMOUNT OF RS.3,40,443/ - HAS BEEN REDUCED AND CONSEQUENTLY THE INCOME ON SCRAP SALES BY THE SAID AMOUNT. ACCORDINGLY, T HE ASSESSING OFFICER MADE ADDITION OF RS.3,40,443/ - ON INCOME ON SCRAP SALES ACCOUNT. 30. BEFORE THE LD. CIT(APPEALS), THE ASSESSEE SUBMITTED THAT DURING THE FINANCIAL YEAR 2000 - 01, THE ASSESSEE HAD SOLD SOME CARS AND THE SA LE PROCEEDS OF RS.3,40,443/ - WE RE ERRONEOUSLY ACCOUNTED FOR AS SALE OF SCRAP AND THE SAME WAS OFFERED TO TAX IN THAT YEAR, FOR WHICH NECESSARY RECTIFICATION ENTRY WAS PASSED IN THE BOOKS OF ACCOUNT AND ENTRY REVERSED IN THE YEAR UNDER APPEAL. THE LD. CIT(APPEALS) ON THIS ISSUE UPHELD TH E FINDINGS OF THE ASSESSING OFFICER AND DISMISSED THE CONTENTION OF THE ASSESSEE. 31. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES ON THIS ISSUE. IN ORDER TO MEET THE ENDS OF JUSTICE, WE FIND IT DEEM AND APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CONTENTIONS OF THE ASSESSEE WHETHER THE AMOUNT REFLECTED IN THE SCRAP SALE S ACCOUNT WAS ACTUAL INCOME FROM SALE OF SOME CARS IN THE FINANCIAL YEAR 2000 - 01 RELEVANT TO ASSESSMENT YEAR 2001 - 02 I. E. JUST PRECEDING ASSESSMENT YEAR AND WHETHER SAME WAS OFFERED TO TAX IN THAT YEAR. IF THE AMOUNT WAS OFFERED TO TAX IN THAT YEAR THEN IN THIS RELEVANT YEAR SAME AMOUNT AGAIN CANNOT BE BROUGHT TO TAX AND SHOULD BE DELETED. HENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE IT TO THE FILE 19 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 OF THE ASSESSING OFFICER AS PER DIRECTIONS HEREINABOVE PROVIDED . NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH LAW. THUS , GROUND NO.6 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 32. GROUND NO.7 IS WITH REGARD TO THE DISALLOWANCE OF PROVISION FOR MISCELLANEOUS EXPENSES OF RS.5,16,954/ - TREATED AS EXCESS CLAIM . THIS AMOUNT RELATES TO DISALLOWANCE OF EXCESS CLAIM OUT OF PROVISION MADE FOR SHARE HANDLING CHARGES INCLUDED UNDER THE HEAD MISCELLANEOUS EXPENSES. TOTAL PROVISION FOR SHARE HANDLING CHARGES MADE WAS RS.14,76,398/ - WHEREAS THE ACTUAL EXPENSES INCURRED WAS RS.9,59,431/ - . ACCORDINGLY BASED ON THE SPECIAL AUDIT REPORT, THE EXCESS PROVISION MADE AT RS.5,16,957/ - WAS DISALLOWED BY THE ASSESSING OFFICER. 33. BEFORE THE LD. CIT(APPEALS), THE SUBMISSION OF THE ASSESSEE WA S THAT THE ASSESSEE HAS MADE MONTHLY PROVISI ON OF RS.1,20,000/ - FOR SHARE HA NDLING CHARGES ACCOUNT WHICH WAS PAID TO THE REGISTRAR OF THE COMPANY IN RELATION TO THE EXPENSES INCURRED RELATING TO THE COMPANY MATTER S DURING FINANCIAL YEAR 2001 - 02 I.E. ASSESSMENT YEAR 2002 - 03. OUT OF THE TOTAL PROVISION OF RS.1,476,398/ - IN THE SHARE HANDLING ACCOUNT, THE ASSESSEE HAS ACTUAL INCURRED EXPENSES AMOUNTING TO RS.959,431/ - IN RELATION TO THE SHARE HANDLING CHARGES. OUT OF BALANCE PROVISION OF RS.516,954/ - , THE SUM OF RS.501,463/ - HAS BEEN ACTUALLY INCURRED OUT IN SUBSEQUENT FINANCIAL YEAR 2002 - 03 I.E. ASSESSMENT YEAR 2003 - 04. IT IS THE PLEA OF THE ASSESSEE THAT THIS PROVISION GOES ON FOR EVERY YEAR AND ADEQUATE PROVISIONS ARE MADE IN THE BOOKS OF ACCOUNT. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MAHINDRA UGINE AND STEEL CO. LTD., 250 ITR 84 WHEREIN IT HAS BEEN HELD THAT THE PROVISION FOR EXPENDITURE MADE 20 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 ON A REASONABLE BASIS FOR ANTICIPATED EXPENDITURE IS AN ALLOWABLE EXPENDITURE. THE ASSESSEE SUBMITS THAT EXPENDITURES ARE INCURRED IN THE REGISTRAR OF THE COMPANY FOR WHICH PROVISIONS ARE MADE AND IT IS ANTICIPATED EXPENDITURE ON REASONABLE BASIS AND THEREFORE, SHOULD BE ALLOWED. 34. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTI ONS ON THIS IS SUE. THIS ISSUE REQUIRES DETAILED FACTUAL VERIFICATION AND IT IS TO BE VERIFIED WHETHER SUCH PROVISION MADE CONSISTENTLY FOLLOWED BY THE ASSESSEE AND OUT OF BALANCE PROVISION OF RS.5,16,957/ - , WHETHER THE SUM OF RS.501,463/ - HAVE BEEN ACTUALL Y INCURRED OUT IN SUBSEQUENT FINANCIAL YEAR I.E. 2002 - 03. IN VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION IN COMPLIANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. TH US, GROUND NO.7 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 35. GROUND NO.8 RELATES TO DISALLOWANCE OF AMOUNT WRITTEN OFF OUT OF ADVANCE TO CUSTOMS ON ACCOUNT OF RS.16,44,087/ - . 36. THE FACTS ON THIS ISSUE ARE THAT THE ASSESSEE IN ADVANCE TO CUSTOMS A/C HAD MADE CERTAIN ENTRIES WHICH HAS THE EFFECT OF CLAIMING RS.16,44,087/ - AS DEDUCTION WITHOUT ANY PROPER SUPPORTING DOCUMENTS AND EXPLANATION FOR MAKING SUCH ENTRIES. ON THIS ISSUE, THE ASSESSING OFFICER NOTICED THAT TH E ASSESSEE HAS NOT PRODUCED ANY WORKING AS TO WHEN AND FOR WHICH CONSIGNMENT THE CUSTOM DUTY WAS PAID AND HOW MUCH CUSTOM DUTY WAS ADJUSTED AGAINST THE ACTUAL IMPORT AND WHAT IS THE NATURE OF THE AMOUNT OF RS.16,44,087/ - . EXCEPT MAKING A STATEMENT THE ASSE SSEE COMPANY HAS NOT GIVEN THE BREAKUP OF THE PAYMENTS MADE AND SUPPORTING S AS TO WHY THAT EXPENDITURE QUALIFIES FOR DEDUCTION. THEREFORE, THE AMOUNT OF RS.16,44,087/ - 21 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 WAS DISALLOWED BY THE ASSESSING OFFICER AND ADDED TO THE INCOME OF THE ASSESSEE. 37. ON THIS ISSUE, THE LD. CIT(APPEALS) OBSERVED THAT THE ASSESSING OFFICER DISALLOWED THE ADVANCE TO CUSTOMS WRITTEN OFF ON THE BASIS OF THE SPECIAL AUDIT REPORT IN WHICH IT IS STATED THAT THE ASSESSEE HAS WRITTEN OFF THIS AMOUNT AFTER RECONCILIATION WHEN THE SAME COULD NOT BE RECONCILED. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE COULD NOT PRODUCE ANY WORKING AS TO WHEN AND FOR WHICH CONSIGNMENT CUSTOM DUTY WAS PAID AND HOW MUCH WAS ADJUSTED AGAINST THE ACTUAL IMPORT AND WHAT IS THE N ATURE OF THIS AMOUNT OF RS.16,44,087/ - . THE ASSESEE COULD NOT GIVE THE BREAKUP AND THE DETAILS WITH SUPPORTING EVIDENCES AS TO WHY THIS WRITE OFF OF UNRECONCILED AMOUNT WAS ALLOWABLE AS DEDUCTION. THE LD. CIT(APPEALS) UPHELD THE FINDINGS OF THE ASSESSING O FFICER STATING THAT NO WORKING ALONG WITH SUPPORTING EVIDENCES HAS BEEN PLACED ON RECORD BY THE ASSESSEE REGARDING THIS AMOUNT AND JUSTIFICATION FOR CLAIMING IT AS DEDUCTION HAS NOT BEEN EXPLAINED. THE LD. AR OF THE ASSESSEE AT THE TIME OF HEARING PRAYED THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WHERE THEY WOULD PROVIDE NECESSARY EVIDENCES AND WORKING AND WOULD PRESENT THEIR CASE ON MERITS. 38. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THIS CA SE. ON THIS ISSUE, THE REVENUE AUTHORITIES HAVE MADE ADDITION SINCE THE ASSESSEE WAS UNABLE TO EXPLAIN THE MODUS OF WORKING OF SUCH PROVISION IN ITS BOOKS OF ACCOUNT AND WAS ALSO NOT ABLE TO JUSTIFY WITH SUPPORTING EVIDENCES THAT WHY THIS AMOUNT SHOULD BE ALLOWED AS DEDUCTION. HOWEVER, PRAYER OF THE LD. AR IS THAT THEY ARE READY WITH ENTIRE WORKING OF THE SAID AMOUNT AND RELEVANT SUPPORTING DOCUMENTS AND THEY WANT ONE 22 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 OPPORTUNITY TO PRESENT THIS ISSUE ON MERITS ONCE AGAIN BEFORE THE ASSESSING OFFICER. IN VIEW OF THE MATTER AND IN THE SPIRIT OF WELFARE LEGISLATION WHICH IS WITHIN THE AMBIT OF THE TAXING STATUTES, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE IT TO THE FILE OF THE ASSESSING OFFICER FOR NECESSARY VERIFICATION AS PER LAW FOLLOWING PRINCIPLE S OF NATURAL JUSTICE. THUS, GROUND NO.8 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 39. GROUND NO.9 IS WITH REGARD TO THE DISALLOWANCE OF EXPENSES OF RS.9 , 22,6 96/ - . THE ASSESSING OFFICER DISALLOWED THE EXPENSES ON THE BASIS THAT THE ASSESSEE HAD NOT PRODUCED THE VOUCHERS/ SUPPORTING DOCUMENTS IN RESPECT OF THESE EXPENSES AMOUNTING TO RS.29,76,126/ - OUT OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. IT IS NOTED BY TH E ASSESSING OFFICER THAT THE ASSESSEE SUBSEQUENTLY FU RNISHED THE SUPPORTING FOR RS.2 0 , 53,430/ - OUT OF THE TOTAL AMOUNT OF RS.29,76,126/ - REPORTED IN THE SAR AND THEREFORE, DIFFERENTIAL AMOUNT OF RS.9,22,696/ - ( RS.29,76,126/ - - RS.20,53,430/ - ) WAS DISALLOW ED BY THE ASSESSING OFFICER. 40. BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED BY THE ASSESSEE TH AT THERE WERE INCORRECT VOUCHER NUMBER S MENTIONED IN SOME OF THE CASES IN THE SAR ON WHICH RELIANCE HAS BEEN PLACED BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSEE COULD NOT FURNISH THE NECESSARY EVIDENCES/SUPPORTING DOCU MENTS/EXPLANATION SINCE VOUCHER NUMBERS WERE INCORRECT. THE ASSESSEE SUBMITTED THAT DOCUMENTS AND SUPPORTING EVIDENCES PERTAINING TO THE DISALLOWED AMOUNT OF RS.9,22,696/ - CAN BE PRODUCED BE FORE THE LD. 23 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 CIT(APPEALS) . HOWEVER, SUBMISSIONS OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE LD. CIT(APPEALS) WHO UPHELD THE FINDINGS OF THE ASSESSING OFFICER. 41. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THIS CASE. WE FIND THAT THE ASSESSEE CLAIMS DUE TO INCORRECT VOUCHER NUMBERS MENTIONED IN THE SAR THEY WERE UNABLE TO PROVIDE EVIDENCES/ EXPLANATIONS WITH REGARD TO THE REMAINING DISALLOWED AMOUNT OF RS.9,22,696/ - . THE ASSESSEE FURTHER CLAIMS THAT THEY ARE READY WITH R ELEVANT SUPPORTING DOCUMENTS AND EVIDENCES PERTAINING TO TH IS AMOUNT AND HAS PRAYED THAT AN OPPORTUNITY BE PROVIDED SO THAT ON MERITS BEFORE THE FIRST APPELLATE AUTHORITY , THE ASSESSEE CAN DEMONSTRATE ITS CASE. IN THE CASE BEFORE US, MOST OF THE ISSUES REL ATING TO FACTUAL VERIFICATION ARE BEING RESTORED TO THE FILE OF ASSESSING OFFICER AND THIS ISSUE ALSO QUALIFIES IN THAT CATEGORY . IN VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT( APPEALS) ON THIS ISSUE AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFTER FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NO.9 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 42. GROUND NO.10 IS WITH REGARD TO THE DISALLOWANCE OF EX CESS PROVISIONS OF RS.8,25,000/ - . THE ASSESSING OFFICER RELYING ON THE OBSERVATION OF SAR HAS DISALLOWED THE PROVISION FOR EXPENSES OF RS.8,25,000/ - CONSIDERING THE SAME AS EXCESSIVE PROVISION AGAINST WHICH NO EXPEN DITURE WERE ACTUALLY INCURRED BY THE ASSESSEE DURING THE YEAR. THE SPECIAL AUDITOR HAD POINTED OUT THAT THE ASSESSEE WAS MAKING AD - HOC PROVISION EVERY MONTH END IN CP DIVISION OF THE COMPANY, THE ENTIRE SUCH PROVISIONS WERE ADDED TO THE BROUGHT FORWARD OPE NING BALANCE OF THE PROVISIONS AND CARRIED FORWARD TO THE NEXT YEAR. THUS, NO EXPENDITURE WAS ACTUALLY INCURRED OUT OF THESE PROVISIONS DURING THE YEAR. 24 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 43. THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS BEFORE THE LD. CIT(APPEALS). THE LD. CIT( APPEALS) ON THE ISSUE HAS HELD AS FOLLOWS: 64. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT ALONG WITH THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT RELIED UPON BY IT. IT IS NOTICED THAT THE APPELLANT WAS MAKING AD - HOC PROVISIONS FOR EXPENSES IN THE CP DIVISION AT EVERY MONTH END. THE OPENING BALANCE IN SUCH PROVISION ACCOUNT WAS ADDED TO THE PROVISION CREATED DURING THE YEAR OF RS.8,25,000/ - A ND THE TOTAL CREDIT BALANCE IN THE PROVISION ACCOUNT OF RS.11,13,000/ - WAS CARRIED FORWARD TO THE NEXT YEAR, WITHOUT ANY EXPENSES HAVING BEING DEBITED AND CLAIMED IN THIS ACCOUNT. THUS, IT IS NOTICED THAT THERE IS NO BASIS FOR THIS AD - HOC PROVISION BEING MADE EVERY MONTH IN THE ACCOUNTS OF THE CP DIVISION. IT HAS BEEN DISCUSSED ELSEWHERE THAT THE APPELLANT WAS MAKING ALL SORTS OF PROVISIONS IN VARIOUS ACCOUNTS, AND STILL IT IS NOTICED THAT IN RESPECT OF GROUND NO.16 THAT PRIOR PERIOD EXPENSES WERE CLAIMED SINCE THE SAME EXCEEDED THE PROVISION MADE IN THOSE ACCOUNTS. ON THE OTHER HAND, FOR THIS PARTICULAR PR OVISION MADE AT EACH MONTH END THERE WAS NO BASIS AND JUSTIFICATION WHATSOEVER. THE JUDGMENT QUOTED OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA UGINE AND STEEL CO. LTD.(SUPRA) WAS ON AN ALTOGETHER DIFFERENT MATTER. IN THAT CASE, IT WAS AFTER A PROTRACTED NEGOTIATION FOR WAGE SETTLEMENT THAT IT WAS ARRIVED AT WITH THE EMPLOYEES FOR THE PERIOD 1 ST JAN. 1985 TO 31 ST DEC. 1986. ON THE BASIS OF THE IMPENDING SETTLEMENT, THE ASSESSEE CLAIMED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING 30.06.1986 , AN AMOUNT TO DISCHARGE THE INCREASED LIABILITY DUE TO SETTLEMENT REACHED SUBSEQUENTLY. THE TRIBUNAL HELD THAT THE PROVISION WAS MADE ON A REASONABLE BASIS FOR ANTICIPATED EXPENDITURE WHICH RELATED TO THE YEAR UNDER CONSIDERATION AND THEREFORE WAS AN ALLO WABLE DEDUCTION. THE HIGH COURT DECLINED TO INTERFERE WITH THE FINDING OF FACT RECORDED BY THE TRIBUNAL. THESE FACTS OF THE DECISION RELIED UPON BY THE APPELLANT REVEALED THAT THIS JUDGMENT WAS DISTINGUISHABLE ON FACTS WITH REFERENCE TO THE APPELLANT'S CAS E. IN THE APPELLANT'S CASE NO BASIS WHATSOEVER HAS BEEN GIVEN FOR MAKING THE AD - HOC PROVISIONS, AND THERE WERE NO EXPENSES INCURRED AT ALL FROM THESE PROVISIONS DURING THE YEAR. THE EXCESS PROVISION CREATED ON AD - HOC BASIS WAS THEREFORE NOT ALLOWABLE AND T HE DISALLOWANCE MADE BY THE AO IS HEREBY SUSTAINED. GROUND NO.8 IS ACCORDINGLY DISMISSED. 44. WE HAVE PERUSED THE CASE RECORDS AND GIVEN THOUGHTFUL CONSIDERATION TO THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. THERE IS A CLEAR CUT VERIFICATION ON FACTS WHICH IS ON RECORD THAT THE ASSESSEE HAS GIVEN NO BASIS WHATSOEVER FOR MAKING SUCH AD - HOC PROVISIONS AND ACTUALLY THERE WERE NO EXPENSES INCURRED AT ALL FROM THIS PROVISIONS DURING THE YEAR. THEREFORE, WE DO NOT FIND ANY INF IRMITY WITH THE FINDINGS OF THE LD. CIT(APPEALS) AND THE SAME IS THEREBY UPHELD. THUS, GROUND NO.10 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED . 25 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 45. GROUND NO.11 IS WITH REGARD TO THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF RS.74,24,121/ - . THE ASSESSIN G OFFICER DISALLOWED THE ENTIRE BAD DEBTS CLAIMED BY THE ASSESSEE AS PER THE FINDINGS RECORDED IN HIS ORDER. 46. THE LD. CIT(APPEALS) ON THIS ISSUE HAS OBSERVED AND HELD AS FOLLOWS: 69. NOW THE DISCUSSION MADE ABOVE REGARDING THE AOS REASONING FOR THE DISALLOWANCE OF BAD DEBT IN THE TWO DIVISIONS IN WHICH THE BAD DEBTS WERE CLAIMED REVEAL THAT THIS CONDITION GIVEN U/S 36(2)(I ) IS NOT SATISFIED FOR A PART OF THE CLAIM MADE UNDER BAD DEBT WRITTEN OFF. THE AO'S FINDING IS BASED ON THE SPECIAL AUDIT REPORT, ACCORDING TO WHICH IN THE ATLAS COPCO DIVISION OUT OF THE TOTAL CLAIM OF RS.74,56,049/, FOR THE AMOUNT OF RS.9,86,019/ - THE D ETAILS REGARDING THE NATURE OF THE DEBT AND WHETHER IT WAS INCLUDED AS INCOME IN ANY OF THE EARLIER PERIOD, COULD NOT BE PROVIDED. MOREOVER, FOR THE CP DIVISION, WHERE TOTAL CLAIM WAS RS.64,38,102/ - , THE AO HAS POINTED OUT TO A DOUBLE CLAIM TO THE EXTENT O F RS.2,46,600/ - ; AND IN RESPECT OF THE REMAINING AMOUNT, NO DETAILS, BREAKUP, ETC. COULD BE GIVEN TO SHOW THAT THESE DEBTS WERE OFFERED TO TAX AS INCOME IN THE EARLIER YEARS. THUS, THE AO NOTED THAT CONDITION U/S.36(2) WAS NOT SATISFIED FOR THE BAD DEBT C LAIMED OF CP DIVISION. IN SPITE OF THESE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER, IN THE SUBMISSION DATED 28.06.2011 AND 27.07.2011, THE APPELLANT HAS NOT BEEN ABLE TO ADDRESS THE SAME SPECIFICALLY. MANY OF THE POINTS RAISED BY THE AO ON THE BA SIS OF THE SPECIAL AUDIT REPORT COULD NOT BE ANSWERED SATISFACTORILY BY THE APPELLANT, AND THE APPELLANT HAS ONLY RELIED ON THE JUDGMENT OF THE HON'BLE APEX COURT (SUPRA) THAT THE WRITE OFF OF THE BAD DEBT AS IRRECOVERABLE IN THE ACCOUNTS WAS SUFFICIENT. I N VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT ONLY FOR THE AMOUNT OF RS.64,70,030/ - CLAIMED AS BAD DEBT IN THE ATLAS COPCO PUNE DIVISION, FOR WHICH DETAILS REGARDING THE SAME HAVING BEEN INCLUDED AS SALES IN THE EARLIER PERIOD WAS GIVEN, IT COULD BE CONS IDERED TO HAVE SATISFIED THE CONDITION GIVEN U/S 36(2)(I) OF THE ACT. FOR THE REMAINING AMOUNT OF RS.9,86,019/ - OF THE ACP DIVISION AND THE ENTIRE AMOUNT OF RS.64,38,102/ - OF THE CP DIVISION (WHICH INCLUDES THE DOUBLE CLAIM OF RS.2,46,600/ - ALSO), THE APPEL LANT CANNOT BE CONSIDERED TO HAVE SATISFIED THE CONDITION U/S 36(2)(I) OF THE IT ACT. ACCORDINGLY, IT IS HELD THAT OUT OF THE TOTAL CLAIM OF BAD DEBT FOR THE TWO DIVISIONS MADE AT RS.1,38,94,151/ - , BAD DEBTS CLAIMED TO THE EXTENT OF RS.64,70,030/ - IS ALLOW ABLE AS DEDUCTION FOR WHICH THE CONDITION GIVEN U/S.36(2)(I) WAS SATISFIED AND THE DISALLOWANCE OF THE REMAINING CLAIM IS HEREBY UPHELD. THIS GROUND OF APPEAL, WILL THEREFORE, BE TREATED AS PARTLY ALLOWED. 47. WE HAVE PERUSED THE CASE RECORDS AND CONSIDERED THE LEGAL PARAMETERS INVOLVED IN THIS ISSUE. IT HAS BEEN CLEARLY ANALYZED BY THE ASSESSING OFFICER AS WELL AS BY THE LD. CIT(APPEALS) THAT THE DISALLOWANCE OF BAD DEBTS IN RESPECT 26 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 OF TWO DIVISION HAVE BEEN MA DE SINCE THE CONDITIONS GIVEN U/S.36(2)(I) OF THE ACT IS NOT BEEN SATISFIED. IN THE SAR REGARDING ATLAS COPCO DIVISION OUT OF THE TOTAL CLAIM OF RS.74,56,049/ - FOR THE AMOUNT OF RS.9,86,019/ - THE DETAILS REGARDING THE NATURE OF THE DEBT AND WHETHER IT WAS INCLUDED AS INCOME IN ANY OF THE EARLIER PERIOD COULD NOT BE PROVIDED. MOREOVER, FOR THE CP DIVISION, WHERE TOTAL CLAIM WAS RS.64,38,102/ - , THE ASSESSING OFFICER HAS POINTED OUT TO A DOUBLE CLAIM TO THE EXTENT OF RS.2,46,600/ - ; AND IN RESPECT OF THE REMAI NING AMOUNT, NO DETAILS, BREAKUP, ETC. COULD BE GIVEN TO SHOW THAT THESE DEBTS WERE OFFERED TO TAX AS INCOME IN THE EARLIER YEARS. THUS, THE ASSESSING OFFI C ER NOTED THAT CONDITION U/S.36(2) WAS NOT SATISFIED FOR THE BAD DEBT CLAIMED OF CP DIVISION. THE LD. CIT(APPEALS) HAS OBSERVED THAT FOR THE AMOUNT OF RS.64,70,030/ - CLAIMED AS BAD DEBT IN THE ATLAS COPCO PUNE DIVISION, FOR WHICH DETAILS REGARDING THE SAME HAVING BEEN INCLUDED AS SALES IN THE EARLIER PERIOD WAS GIVE N THAT WAS CONSIDERED TO HAVE SATISFIED THE CONDITION GIVEN U/S 36(2)(I) OF THE ACT. FOR THE REMAINING AMOUNT OF RS.9,86,019/ - OF THE ACP DIVISION AND THE ENTIRE AMOUNT OF RS.64,38,102/ - OF THE CP DIVISION, THE ASSESSEE CANNOT BE CONSIDERED TO HAVE SATISFIED THE CONDITION U/S 36(2)(I ) OF THE ACT. THEREFORE, WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(APPEALS) AND THE SAME IS THEREBY UPHELD. THUS, GROUND NO.11 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED . 48. GROUND NO.12 RELATES TO CONFIRMING THE DISALLOWANCE O F INTER - CORPORATE DEPOSIT (ICD) WRITTEN OFF OF RS.4,400,000/ - . 49. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION IN ASSESSEES OWN CASE IN ITA NO.448/PN/2010 AND ITA NO.409/PN/2010 27 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 (SUPRA.) WHEREIN THE ISSUE RAISED BEFORE THE CO - ORDINATE BENCH OF THE TRIBUNAL WITH REGARD TO ICD WAS AS UNDER : 4. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS 1,00,000/ - BEING ADVANCES WRITTEN - OFF UNDER THE HEAD 'MISCELLANEOUS EXPENSES', WHICH IS THE SUBJECT MATTER OF DISPUTE IN GROUND NO. 2. THE SAID AMOUNT REPRESENTED AN INTER - CORPORATE DEPOSIT GIVEN TO ONE M /S VITARA CHEMICALS LTD. WHICH ACCORDING TO THE ASSESSEE, COULD NOT BE RECOVERED DUE TO BAD FINANCIAL CONDITION OF THE PARTY AND WAS WRITTEN - OFF. THE ASSESSING OFFICER DISALLOWED THE CLAIM HOLDING THAT SUCH LOSS WAS NOT INCURRED IN THE NORMAL COURSE OF BUS INESS AND THAT THE ADVANCE WAS CAPITAL IN NATURE. IN APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS), ASSESSEE CONTENDED THAT THE AMOUNT WRITTEN OFF WAS ALLOWABLE AS A BUSINESS LOSS UNDER SECTION 28 OF THE ACT AS IT WAS INCURRED IN THE NORMAL COURSE OF BUSINESS. HOWEVER, THE COMMISSIONER OF INCOME - TAX (APPEALS) DID NOT FIND ANY SUBSTANCE IN THE AFORESAID SUBMISSION OF THE ASSESSEE, AND SUSTAINED THE ADDITION, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. IT WAS SUBMITTED BY THE LD. AR THAT SIMILA R CLAIM FOR THE ASSESSMENT YEAR 2000 - 01 WAS SUBJECT MATTER OF CONSIDERATION BY THE TRIBUNAL IN THE ASSESSEE'S OWN CASE IN ITA NOS . 4335 & 3132/MUM/04 DATED 19.11.2010 AND THE ASSESSEE'S CLAIM HA D BEEN ALLOWED. IT WAS SUBMITTED THAT EVEN IN THE EARLIER YEAR , THE CLAIM RELATED TO AN INTER - CORPORATE DEPOSIT (ICD) PLACED WITH THE VERY SAME CONCERN I.E. M/S VITARA CHEMICALS LTD. AS WA S THE CASE IN THE YEAR 2000 - 01 , THEREFORE, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. 50. THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE ON THIS ISSUE HA D HELD AND OBSERVED AS FOLLOWS: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RELEVANT RECORD. IN ASSESSMENT YEAR 2000 - 01, THE TRIBUNAL IN ITS ORDER DATED 19.11.2 010 (SUPRA) HAS CONSIDERED THE ALLOWABILITY OF THE WRITE - OFF OF ADVANCE GIVEN TO M/S VITARA CHEMICALS LTD. IN THE FOLLOWING WORDS: 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE SEEN THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE AND IN CLAUSE 17 OF THE OTHER OBJECTS CLAUSE PERMITS THE ASSESSEE TO ENGAGE IN THE BUSINESS OF LENDING MONEY OF THE COMPANY NOT IMMEDIATELY REQUIRED. IT IS FURTHER SEEN THAT THE ASSESSEE HAS BEEN SYSTEMATICALLY AND PERIODICALLY MAKING ICDS. AT PAGE 201 OF THE ASSESSEE'S PAPER BO OK WE FIND THAT ASSESSEE HAS DURING THE PERIOD FROM APRIL, 1999 TO OCTOBER 1999 MADE INTER CORPORATE DEPOSITS TOTALING RS . 4,08,23,117/ - . THE ICDS WERE MADE IN ABOUT 15 COMPANIES. THE INTEREST EARNED ON ICDS HAS BEEN REGULARLY OFFERED T O TAX AS 28 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 BUSINESS INCOME. IN THIS REGARD WE HAVE SEEN HE ASSESSMENT ORDERS IN ASSESSEE'S CASE FOR AY 1999 - 2000 AND 1998 - 99, WHEREIN THE INTEREST INCOME HAS BEEN OFFERED AS BUSINESS INCOME AND TAX ACCORDINGLY. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE FINDINGS OF THE CIT(A) THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF MAKING ICDS HAS TO BE UPHELD. IT IS FURTHER SEEN THAT THE COMPANY M/S VITARA CHEMICALS LTD. BECAME A SICK COMPANY. THE ASSESSEE FILED A CRIMINAL COMPLAINT U/S 138 OF THE NEGOTIABLE INST RUMENT ACT AGAINST M/S VITARA CHEMICALS LTD., BUT THE SAME DID NOT BARE ANY RESULT. M/S VITARA CHEMICALS WAS DECLARED AS SICK COMPANY UNDER THE SICK INDUSTRIES SPECIAL PROVISIONS ACT . IN THE ABOVE CIRCUMST ANCES, WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE THAT IT HAD INCURRED A BUSINESS LOSS TO THE EXTENT OF RS 48.00 LACS U/S 28 OF THE ACT HAS TO BE ACCEPTED. EVEN OTHERWISE AS LAID DOWN BY THE HON'BLE DELHI BENCH OF THE ITAT IN THE CASE OF POYSHA OXYG EN PVT. LTD. V. ACIT (2008) 19 SOT 711 (DEL) MONEYS LENT Y WAY OF ICDS WAS A LOAN TRANSACTION AND REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF MONEY LENDING AND, THEREFORE, ALLOWABLE AS DEDUCTION U/S 36(1)(VII) R.W.S. 36(2)(A) OF THE ACT. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND NO. 4 RAISED BY THE REVENUE.' THE LD. AR FURTHER DEMONSTRATED THAT IN THE CASE REFERRED ABOVE, T HE ASSESSEE FILED A CRIMINAL COMPLAINT U/S . 138 OF THE NEGOTIABLE INSTRUMENT ACT AGAINST M/S VITARA CHEMICALS LTD., BUT THE SAME DID NOT BARE ANY RESULT. M/S VITARA CHEMICALS WAS DECLARED AS SICK COMPANY UNDER THE SICK INDUSTRIES SPECIAL PROVISIONS ACT . SIMILARLY, IN THE PRESENT CASE , THE ASSESSEE HAS WRITTEN OF INTER - CORPORATE DEPOSIT OF RS.4,400,000/ - PLACED WITH PRECISION FASTENERS LIMITED ON ACCOUNT OF ACUTE FINANCIAL CONDITION OF PRECISION FASTENERS LIMITED. THE LD. AR FURTHER SUBMITTED THAT TH EY HAVE FILED CASE FOR RECOVERY OF THE DUES FROM PRECISION FASTENERS LIMITED IN THE COURT OF METROPOLITAN MAGISTRATE, MUMBAI AS A LEGAL RECOURSE FOR RECOVERY OF DUES. THEREFORE, THE FACTS AND CIRCUMSTANCES WITH REGARD TO THE FACTS OF THE CASE OF M/S. VITAR A CHEMICALS ARE SIMILAR WITH THE CASE OF ASSESSEE AND THEREFORE, GROUND NO.12 OF THE ASSESSEE SHOULD BE ALLOWED. THE LD. AR FURTHER SUBMITTED THAT THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE IN ITA NO.448/PN/2010 & ITA NO.409/PN/2010 (SUPRA ) HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN INCOME TAX APPEAL NO.2285 OF 2011 IN 29 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 THE CASE OF CIT - V, PUNE VS. ATLAS COPCO (INDIA) LTD. THE ISSUE CONSIDERED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WAS AS FOLLOWS: (II) THE RESPONDENT - A SSESEE HAD ADVANCED AS INTER CORPORATE DEPOSIT OF VARIOUS AMOUNTS TO ABOUT 15 COMPANIES AND THE INTEREST EARNED ON THEM WERE OFFERED TO TAX. THE RESPONDENT ASSESSEE HAD ADVANCED AS INTER CORPORATE DEPOSIT AN AMOUNT OF RS.50 LAKHS TO ONE VITARA CHEMICALS LT D. DURING THE ASSESSMENT YEAR 1999 - 2000. THE INTEREST RECEIVED ON THE INTER CORPORATE DEPOSITS FROM VITARA CHEMICALS LTD. WERE OFFERED TO TAX IN THE ASSESSMENT YEARS 1999 - 2000 AS BUSINESS INCOME AND ACCEPTED BY THE REVENUE. IN THE CURRENT ASSESSMENT YEAR T HE SAID VITARA CHEMICALS LTD. BECAME A SICK COMPANY AND THE BALANCE AMOUNT OF RS.48 LAKHS WAS NOT RECOVERABLE IN SPITE OF PROCEEDINGS UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT. THUS, THE RESPONDENT ASSESSEE WROTE OFF THE AMOUNT AS BAD DEBTS. THE ASSESSING OFFICER DID NOT ALLOW THE DEDUCTION AS IT HAD NOTHING TO DO WITH THE RESPONDENT ASSESSEES BUSINESS. THE HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE HAS HELD AS FOLLOWS: (III) IN APPEAL, THE CIT(A) DELETED THE DISALLOWANCE OF RS.48 LAKHS AND HELD IT TO BE BUSINESS LOSS. THE TRIBUNAL IN AN APPEAL BY THE REVENUE, UPHELD THE ORDER OF CIT(A). THE CASE OF THE REVENUE THAT THE LOSS HAD NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE, COULD NOT BE ALLOWED AS BUSINESS LOSS WAS NEGAT IVED BY THE TRIBUNAL WITH A FINDING OF FACT THAT THE RESPONDENT ASSESSEE WAS LENDING ITS SURPLUS MONEY AS INTER CORPORATE DEPOSITS AND THE INTEREST EARNED ON THE SAME WERE BEING SUBJECTED TO TAX AS INCOME FROM BUSINESS. CONSEQUENTLY, THE SAME WAS ALLOWED A S A BUSINESS LOSS. WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL IN DELETING THE DISALLOWANCE OF RS.48 LAKHS AND UPHOLDING THE ORDER OF CIT(A). AS THE DECISION OF THE TRIBUNAL WAS BASED ON A FINDING OF FACT, WE SEE NO REASON TO ENTERTAIN THE QUESTION (C) . 51. WE HAVE PERUSED THE CASE RECORD S AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. THAT ON THE ISSUE THE FACTS ARE IDENTICAL WITH THE CASE IN ASSESSEES OWN MATTER REFERRED BEFORE US BY THE LD. AR OF THE ASSESSEE . THEREAFTER, THE HONBLE JURISDICTIONAL HIGH COURT HAD UPHELD THE ORDER OF TRIBUNAL IN FAVOUR OF ASSESSEE. RESPECTFULLY, FOLLOWING THE RULING OF THE HONBLE HIGH COURT, WE ALLOW GROUND NO.12 RAISED IN APPEAL BY THE ASSESSEE . 30 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 52. GROUND NO.13 IS WITH REGARD TO THE ADDITION TO THE TOTAL INCOME A SUM OF RS.2 0 , 10,925 / - BEING SUNDRY LIABILITY CONSIDERING THE SAME AS INCOME FROM SALE OF SCRAP . 53. THE FACTS ON THIS ISSUE ARE THAT IN THE SPECIAL AUDIT REPORT, ON SALE OF SCRAP EFFECTED BY THE ASSESSEE AMOUNTING TO RS.20, 10,925/ - , IT HAS BEEN REPORTED AS UNDER: THE COMPANY HAS SOLD CERTAIN SCRAP AMOUNTING TO RS.20,10,925 / - AND SUCH AMOUNT HAS BEEN REFLECTED IN LIABILITY ACCOUNT INSTEAD OF INCOME ACCOUNT. WE HAVE BEEN EXPLAINED THAT THE COMPANY HAS IMPORTED GOODS (DRILL RODS) FROM ATLAS COPCO SECORAC/INTEROCK. THE SAID GOODS WERE OBSOLETE STOCK AND HENCE THE ATLAS INTEROCK HAS GIVEN CREDIT NOTE FOR THE TOTAL INVOICE AMOUNT TO THE COMPANY. THE COMPANY HAS SOLD SAID GOODS AS SCRAP AT THE VALUE OF RS.20,10,925/ - DURING THE YEAR. THE COMPANY HAS CREDITED THE SAID SALE OF SCRAP TO THE SUNDRY LIABILITY ACCOUNT AS THE SAME AMOUNT WAS PAYABLE TO THE ATLAS COPCO SECOCRAC/INTEROCK. AS PER DETAILS PROVIDED TO US THE SAID AMOUNT WAS WRITTEN BACK AS INCOME IN THE SUBSEQUENT FINANCIAL YEAR ENDED 31 ST MARCH, 2003. THE ENTRY FOR THE WRITE BACK OF THE AMOUNT HAS BEEN PASSED ON 28.11.2002. BEI NG THE SAID AMOUNT IS NOT BE REFUNDED, THEN INCOME ON ACCOUNT OF SALE OF SCRAP SHOULD HAVE BEEN BOOKED IN THE FINANCIAL YEAR ENDED 31.03.2002 AND NOT IN SUBSEQUENT YEAR. 54. THE ASSESSEE WAS REQUESTED TO EXPLAIN THE ISSUE AND THE ASSESSEE SUBMITTED ITS WRITTEN SUBMISSIONS WHICH ARE AS FOLLOWS: THE SUBMISSIONS MADE VIDE OUR LETTER DATED MAY, 05, 2005 ARE REPRODUCED BELOW: THE COMPANY HAD IMPORTED FROM A PARTY CERTAIN PRODUCTS, WHICH WERE LATER FOUND TO BE DEFECTIVE AND HENCE THE COMPANY HAD SAID THEM AS SCRAP FOR RS.2,010,925 / - . INITIALLY, IT WAS UNDERSTOOD THAT THE COMPANY WILL GET THE REPLACEMENT FOR THESE PARTS AND THE MONEY RECEIVED FROM SCRAP SALE WOULD BE RETURN ED TO THE PARTY. ACCORDINGLY, THE AMOUNT RECEIVED AS SCRAP SALE WAS NOT ACCOUNTED AS INCOME BUT SHOWN AS LIABILITY. LATER, THE PARTY DID NOT GIVE REPLACEMENT FOR THESE PARTS AS MUTUALLY AGREED. AS A RESULT, THE AMOUNT SHOWN AS PAYABLE TO THE PARTY 'WAS TRA NSFERRED TO MISCELLANEOUS INCOME IN AY 2003 - 04 AND WAS CORRECTLY OFFERED FOR TAX, HOWEVER THIS WILL NOT HAVE ANY IMPACT ON THE OVERALL TAXABILITY. IN VIEW OF THE ABOVE SUBMISSIONS WE WOULD ALSO LIKE TO ADD THAT THE AMOUNT WAS PAYABLE TO THE PARTY AS OF MA RCH, 31, 2002 AND IN THE SUBSEQUENT YEAR AS THE PARTY HAS NOT GIVEN ANY REPLACEMENT FOR THE FAULTY MATERIAL THE SAID AMOUNT WAS TRANSFERRED TO MISCELLANEOUS INCOME AND OFFERED TO TAX. AS AT MARCH, 31, 2002 SINCE THIS WAS CERTAIN LIABILITY 31 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 AND HENCE THE QUE STION OF DEFERRING THE INCOME TO NEXT YEAR DOES NOT ARISE. WITHOUT PREJUDICE TO OUR ABOVE SUBMISSIONS IF THE AMOUNT OF RS.20,10,925/ - IS TAXED IN THE A.Y.2002 - 03, THE SAME SHOULD NOT BE AGAIN TAXED IN A.Y.2003 - 04. 55. WE HAVE PERUSED THE CASE RECORDS AND HAVE GIVEN CONSIDERABLE THOUGHT TO THE FINDINGS OF THE REVENUE AUTHORIT IES . THE RECORD DEMONSTRATES THAT THE COMPANY HAS SOLD SAID GOODS AS SCRAP AT THE VALUE OF RS.20,10,925 / - DURING THE YEAR. THE COMPANY HAS CREDITED THE SAID SALE OF SCRAP TO THE SUNDRY LIABILITY ACCOUNT AS THE SAME AMOUNT WAS PAYABLE TO THE ATLAS COPCO SECOCRAC/INTEROCK. AS PER DETAILS PROVIDED TO US THE SAID AMOUNT WAS WRITTEN BACK AS INCOME IN THE SUBSEQU ENT FINANCIAL YEAR ENDED 31 ST MARCH, 2003. THE ENTRY FOR THE WRITE BACK OF THE AMOUNT HAS BEEN PASSED ON 28.11.2002. BEING THE SAID AMOUNT IS NOT BE REFUNDED, THEN INCOME ON ACCOUNT OF SALE OF SCRAP SHOULD HAVE BEEN BOOKED IN THE FINANCIAL YEAR ENDED 31.03. 2002 AND NOT IN SUBSEQUENT YEAR. 55.1 THE LD. CIT( APPEALS) ON THE ISSUE OBSERVED THAT THE INCOME OF RS.20,10,925/ - WAS GENERATED BY WAY OF SALE OF SCRAP DURING THE YEAR AND ONLY BECAUSE IT WAS THOUGHT TO BE REFUNDABLE TO THE PARTY FROM WHOM IMPORTS WERE MADE, IT WAS KEPT AS OUTSTANDING LIABILITY IN THIS Y EAR AND TRANSFERRED TO MISCELLANEOUS INCOME AND OFFERED TO TAX IN A.Y. 2003 - 04. THIS METHOD OF ACCOUNTING WAS NOT ACCEPTED BY THE LD. CIT(APPEALS) SINCE INCOME HAS ARISEN IN THIS YEAR ON ACCOUNT OF SALE OF SCRAP AND HE HAD THEREFORE, UPHELD THE FINDINGS OF THE ASSESSING OFFICER. WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(APPEALS) AND THE SAME IS THEREBY UPHELD. THUS, GROUND NO.13 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED. 32 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 56. GROUND NO.14 PERTAINS TO EXCLUSION OF 90% OF FOLLOWING RE CEIPTS FROM PROFIT OF BUSINESS FOR THE PURPOSE OF DEDUCTION U/S.80HHC OF THE ACT: (I) SERVICE CHARGES RS.45,160,615/ - (II) OTHER MISCELLANEOUS RECEIPTS RS.14,04,329/ - 57. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQU ARELY COVERED BY THE DECISION IN ASSESSEES OWN CASE IN ITA NO. 1424 & 1425/PN/2007 FOR ASSESSMENT YEAR 1996 - 97 & 1998 - 99 DECIDED ON 30.11.2010. THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE HAS RESTORED THE MATTER TO THE FILE OF THE LD. CIT(APPEALS) FOR RE - EXAMINATION OF FACTS AND THEREAFTER, ADJUDICATE THE ISSUE. THE LD. AR PRAYED THAT A SIMILAR DIRECTION MAY BE GIVEN IN THE INSTANT CASE ALSO. 58. WE HAVE PERUSED THE CASE RECORDS AND CONSIDERED THE JUDICIAL PRONOUNCEMENT S PL ACED BEFORE US. WE APPRECIATE THAT THIS ISSUE HAS BEEN RESTORED TO THE FILE OF THE LD. CIT(APPEALS) IN ASSESSEES OWN CASE. HOWEVER, IN THE PRESENT SCENARIO WHERE MOST OF THE ISSUES, WE HAVE RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION, THIS ISSUE, THEREFORE IS RESTORED TO THE FILE OF ASSESSING OFFICER F OR RE - EXAMINATION AND ADJUDICATING THE MATTER AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) ON THE ISSUE AND ALLOW THE GROUND NO.14 OF THE ASSESSEES APPEAL FOR STATISTICAL PURPOSES. 59. WITH REGARD TO GROUND NO.15 , THE LD. AR OF THE ASSESSEE SUBMITTED THAT THEY ARE NOT PRESSING THIS GROUND. IN VIEW OF THE SUBMISSION OF THE LD. AR, GROUND NO.15 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED AS NOT PRESSED . 33 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 ITA NO.1414/PUN/2011 ( BY REVENUE) A.Y.2002 - 03 60. AT THE VERY OUTSET, IT IS MENTION ED THAT GROUND S NO.1, 2, 3 AND 5 OF THE REVENUES APPEAL HAVE BEEN DECIDED WHILE ADJUDICATING THE SIMILAR GROUNDS RAISED IN ASSESS EES APPEAL. NOW WE TAKE UP THE NEW GROUNDS RAISED IN APPEAL BY THE REVENUE. 61. GROUND NO.4 OF REVENUES APPEAL IS WITH REGARD TO ALLOWING THE CLAIM OF DEALER COMMISSION . 62. THE LD. AR OF THE ASSESSEE AT THE VERY OUTSET AFTER TAKING PERMISSION FROM THE BENCH SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.448/PN/2010 & ITA NO.409/PN/2010 FOR ASSESSMENT YEAR 2001 - 02 WHEREIN THE ISSUE FOR CONSIDERATION BEFORE THE CO - ORDINATE BENCH OF THE TRIBUNAL WAS AS FOLLOWS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS 2,20,84,664/ - MADE BY AO ON ACCOU NT PAYMENT OF COMMISSION BY THE ASSESSEE, WHEN THE ASSESSEE HAD FAILED IN HIS DUTY TO SHOW THAT THE SAID COMMISSION PAYMENTS WERE COMMENSURATE WITH THE SERVICES RENDERED AND ALSO IN IGNORING THE FACT THAT IN SOME CASES THE COMMISSION WAS PAID EVEN WHERE TH E CUSTOMERS WERE GOVT. AGENCIES WHICH IS AGAINST THE PUBLIC POLICY? THE FACTS ON THE ISSUE WERE AS UNDER: 19. THE BRIEF FACTS RELATING TO GROUND NO. 1 OF APPEAL ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) TO 17 RANDOMLY SELECTED PARTIES TO WHOM COMMISSION WAS STATED TO HAVE BEEN PAID BY THE ASSESSEE. OF THESE, REPLIES FROM 12 PARTIES WERE RECEIVED. THE ASSESSING OFFICER ALSO CALLED FOR DETAILED INFORMATION REGARDING THE NAMES AND ADDRESSES, NATURE OF SERVICES RENDERED, PROOF OF PAYMENT OF COMMISSION ETC. FROM THE ASSESSEE, TO WHICH ASSESSEE SUBMITTED A DETAILED NOTE. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASS ESSEE AND DISALLOWED THE COMMISSION FOR THE REASON THAT ASSESSEE FAILED TO PRODUCE ANY EVIDENCE OF ACTUAL SERVICES RENDERED BY THE PARTIES, OR ANY 34 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 CORRESPONDENCE BETWEEN THE PAYEES AND THE ULTIMATE CUSTOMERS. ACCORDING TO THE ASSESSING OFFICER, THERE WAS N O EVIDENCE TO SHOW THAT THE COMMISSION PAYMENTS WERE COMMENSURATE WITH THE SERVICES RENDERED BY THE PAYEE AGENTS. HE ALSO FOUND THAT COMMISSION WAS PAID EVEN WHERE THE CUSTOMERS WERE GOVERNMENT AGENCIES. ACCORDING TO THE ASSESSING OFFICER, THERE WAS NO SCO PE FOR PAYMENT OF COMMISSION IN GOVERNMENT CONTRACTS AND THUS, THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF COMMISSION PAYMENTS TO THE VARIOUS PARTIES. FOR ALL THE ABOVE REASONS, THE ASSESSING OFFICER DISALLOWED THE COMMISSION PA YMENTS OF RS . 2,20,84,664/ - . AGAINST THIS ACTION, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) AND FILED DETAILED SUBMISSIONS TO SUBSTANTIATE IT CLAIM OF HAVING INCURRED EXPENDITURE BY WAY OF COMMISSION. 20. THE COMMISSIONER O F INCOME - TAX (APPEALS) CONSIDERED THE ELABORATE AND EXHAUSTIVE SUBMISSIONS MADE BY THE ASSESSEE BEFORE HIM AND DELETED THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE COMMISSIONER OF INCOME - TAX (APPEALS) ARE EXTRACTED HERE INBELOW: '7. I HAVE CAREFULLY CONSIDERED THE REASONS CITED BY THE AO IN THE ASSESSMENT ORDER FOR MAKING THE SAID DISALLOWANCE AND ALSO TO THE APPELLANT'S SUBMISSIONS. IN MY VIEW, THE APPELLANTS HAVE BEEN ABLE TO SUBSTANTIATE THEIR CLAIM OF COMMISSION PAYME NT. THE APPELLANTS HAD SUBMITTED DETAILED JUSTIFICATION FOR THE PAYMENTS. A MAJORITY OF THE PAYEES SELECTED RANDOMLY BY THE AO HAD CONFIRMED THE RECEIPT OF COMMISSION PAYMENT. THE AO HAS NOT RAISED ANY SERIOUS QUESTIONS REGARDING THE VERACITY OF THE INFORM ATION RECEIVED FROM THESE PARTIES. SIGNIFICANTLY, IN NO CASE PAYMENT WAS DENIED BY ANY PARTY (IN SOME CASES THERE WAS NO RESPONSE). THE AO ALSO ACKNOWLEDGES THAT THE PAYMENTS HAD BEEN MADE THROUGH CHEQUES. THERE IS NOTHING TO INDICATE THAT THE PARTIES TO W HOM COMMISSION PAYMENTS WERE MADE WERE RELATED PARTIES OR THAT THE PAYMENTS WERE MADE OTHER THAN ON COMMERCIAL CONSIDERATION. UNDER THE CIRCUMSTANCES, IN MY VIEW, IT CANNOT BE SAID THAT THE APPELLANTS HAD FAILED TO PROVIDE SUFFICIENT PROOF AND JUSTIFICATIO N FOR THE COMMISSION PAYMENTS. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED AND THE ADDITION MADE IS DELETED.' BEING AGGRIEVED BY THE DELETION OF THE ADDITION MADE BY THE COMMISSIONER OF INCOME - TAX (APPEALS), REVENUE IS IN APPEAL BEFORE US. 21. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REITERATED THE REASONS DETAILED BY THE ASSESSING OFFICER IN SUPPORT OF THE CASE OF THE REVENUE, WHICH HAVE ALREADY BEEN NOTED BY US IN PARA 19 ABOVE AND ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY. WITH REGAR D TO THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) DELETING THE DISALLOWANCE, IT HAS BEEN ARGUED THAT THE OBJECTIONS RAISED BY THE ASSESSING OFFICER HAVE NOT BEEN ADDRESSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THAT THE ADDITION HAS BEEN DELETED ON GENERALIZED CONSIDERATIONS. 22. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) MADE NO MISTAKE IN DELETING THE ADDITION ON THE BASIS OF THE MATERIAL AND SUBMISSIONS PUT - FORTH BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. IN THIS REGARD, REFERENCE HAS BEEN MADE TO THE RELEVANT PAGES OF THE PAPER BOOK TO POINT OUT THE MATERIAL WHICH WAS PLACED BEFORE THE LOWER AUTHORITIES. OUR ATTENTION HAS BEEN DRAWN TO THE DETAILS OF THE COMMISSIO N PAID 35 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 INDICATING THE NAME AND ADDRESS OF THE PARTIES TO WHOM COMMISSION IS PAID AS WELL AS THE COMPARATIVE CHART OF THE COMMISSION PAID FOR THE EARLIER TWO YEARS, COPIES OF WHICH HAVE BEEN PLACED AT PAGES 35 TO 39 OF THE PAPER BOOK. THE DETAILS OF COMMISS ION PAID LINKING IT TO THE SALES MADE DURING THE YEAR ALONG WITH THE COPIES OF AGREEMENTS ENTERED WITH DEALERS ON A SAMPLE BASIS, ETC., HAS ALSO BEEN REFERRED TO IN THE PAPER BOOK WHICH ARE PLACED AT PAGES 42 TO 181. IT HAS FURTHER BEEN POINTED OUT THAT IN THE PAST YEARS ALSO IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1986 - 87, 88 - 89, 91 - 92, 92 - 93, 03 - 94 AND 95 - 96 IN ITA NOS 5141, 5142/BOM/94, ITA NOS L7280 TO 7282/BOM/95, 1978/BOM/97, 3315/BOM/99 & 152/BOM/2003 AND ITA NO 4335/MUM/04 FOR ASSESSMENT YE AR 2000 - 01, THE TRIBUNAL HAD AN OCCASION TO DEAL WITH SIMILAR DISALLOWANCES OUT OF COMMISSION EXPENSES AND THE SAME HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE. IT IS FURTHER POINTED OUT THAT THE PRACTICE OF GIVING COMMISSION TO THE DEALERS/AGENTS IN CONSID ERATION OF SERVICES RENDERED BY THEM HAS BEEN DULY RECOGNIZED BY THE DEPARTMENT IN THE PAST AND IN THIS YEAR ALSO, THE EXPENDITURE HAS BEEN INCURRED ON SIMILAR LINES. THEREFORE, ACCORDING TO HIM, THE COMMISSIONER OF INCOME - TAX (APPEALS) MADE NO MISTAKE IN DELETING THE IMPUGNED DISALLOWANCE. 63. THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE ON THIS ISSUE HAS HELD AS FOLLOWS: 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ASSESSEE'S WRITTEN SUBMISSIONS AND OTHER MATERIAL PLACED ON RECORD, WHICH HAS BEEN REFERRED TO IN THE COURSE OF THE HEARING BEFORE US. BRIEFLY PUT, AS PER THE MATERIAL ON RECORD, IT EMERGES THAT THE ASSESSEE COMPANY HAS CUSTOMERS SPREAD ALL OVER INDIA AND IN ORDER TO SERVE SUCH CUSTOMERS AT VARIOUS LOCATIONS, ASSESSEE APPOINTS DEALERS FOR ITS VARIOUS PRODUCTS, NAMELY, COMPRESSORS, CONSTRUCTION AND MINING EQUIPMENT, SPARES AND ACCESSORIES. IT HAS BEEN EXPLAINED THAT THE DEALERS ALSO UNDERTAKE DIRECT SALES AN D ORDERS ARE ALSO BOOKED BY THE DEALERS AND PRODUCTS ARE INVOICED/SUPPLIED TO THE CUSTOMERS. ON THE LATTER ACTIVITIES OF THE DEALER, ASSESSEE PAYS COMMISSION. IT HAS ALSO BEEN EXPLAINED THAT THE DEALERS ARE MAINLY RESPONSIBLE FOR FOLLOW UP FOR THE QUOTATIO NS AND TO HELP THE COMPANY IN PROCURING THE ORDERS AND ALSO FOR EFFECTING RECOVERIES AND COLLECTION OF 'C' FORM ETC. EVEN WITH REGARD TO THE GOVERNMENT CUSTOMERS, ASSESSEE'S PERSONNEL AT THE REGIONAL OFFICES ARE SUPPORTED BY THE NETWORK OF DEALERS WHO ARE BASED AT A CLOSER LOCATION TO THE CUSTOMERS' SITE. IN SUCH CASES, THE RESPONSIBILITY OF THE DEALER IS TO PROVIDE NECESSARY LOGISTIC AND COMMUNICATION SUPPORT TO THE ASSESSEE'S STAFF. THE WARRANTY SERVICES OF THE PRODUCT, WHICH INCLUDE REGULAR SERVICE VISIT S TO ENSURE SMOOTH OPERATION OF THE EQUIPMENT AT THE CUSTOMER'S SITE IS ALSO ARRANGED THROUGH THE DEALER - ENGINEER AND AS A PART OF THE APPOINTMENT TERMS OF THE DEALERS, THEY ARE REQUIRED TO STOCK SUFFICIENT PARTS AT THEIR END, SO THAT TIMELY DELIVERY OF PA RTS AND SERVICES IS OFFERED. IN ORDER TO COMPENSATE THE DEALER FOR THE ABOVE SERVICES, THE ASSESSEE GIVES SERVICE COMMISSION TO COVER ALL THE COSTS THAT THE DEALER INCURS TOWARDS TRAVELLING, BOARDING AND LODGING, STOCKING OF PARTS AS WELL AS TRAINING OF TH E PERSONNEL. 24. ALL THE AFORESAID FACTUAL ASPECTS OF THE MATTER HAVE NOT BEEN FOUND TO BE NON - EXISTENT BY THE EITHER OF THE AUTHORITIES BELOW DURING THE YEAR 36 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 UNDER CONSIDERATION. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE COMMISSION EXPENSES HAVE NO T BEEN REGULARLY INCURRED BY THE ASSESSEE AS IN THE PAST YEARS. IN FACT, ONE OF THE POINTS RAISED BY THE ASSESSING OFFICER IS WITH REGARD TO THE COMMISSION PAID TO DEALERS WHERE THE CUSTOMERS INCLUDE GOVERNMENT AGENCIES. IN THIS REGARD, WE FIND THAT THE AS SESSEE SPECIFICALLY EXPLAINED IN ITS WRITTEN SUBMISSIONS, COPY OF WHICH HAS BEEN PLACED 182 - 183 OF THE PAPER BOOK, THAT GENERALLY THE ORDERS RECEIVED FROM THE GOVERNMENT AGENCIES ARE FROM THE REMOTE LOCATIONS, VIZ, BORDER ROADS ORGANIZATION OR MINING CUSTO MERS FROM REMOTE LOCATIONS. THE COMPANY HAS ITS REGIONAL OFFICES WITH ITS TEAM OF SALES AND SERVICE PERSONNEL WHO LOOK AFTER A LARGE AREA COVERING 4 TO 5 STATES AND THIS TEAM IS SUPPORTED BY THE NETWORK OF DEALERS WHO ARE LOCATED CLOSE TO THE REMOTE SITES OF THE CUSTOMERS. IN THIS SITUATION, THE DEALER RESPONSIBILITY FOR SUCH GOVERNMENT CUSTOMER IS TO PROVIDE LOGISTICS AND COMMUNICATION SUPPORT FOR FOLLOW UP AND SECURING THE ORDERS FROM THE VARIOUS DEPARTMENTS, ETC. WE DO NOT FIND ANY MATERIAL ADVERSE TO TH E AFORESAID EXPLANATION OF THE ASSESSEE. EVEN OTHERWISE, IT HAS BEEN POINTED OUT THAT COMMISSION PAYMENT TO DEALERS WITH RESPECT TO THE ORDERS FROM A GOVERNMENT AGENCY WAS A SUBJECT MATTER OF CONSIDERATION BY THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASS ESSMENT YEAR 1985 - 86 VIDE ITA NO 114/M/03 DATED 25.7.2007. IN THIS PRECEDENT, THE TRIBUNAL HAS ALLOWED THE DEDUCTION AFTER BEING SATISFIED OF THE PRACTICE OF COMMISSION PAYMENT. IN THIS BACKGROUND OF THE MATTER, AND WITH NO ADVERSE MATERIAL ON RECORD, WE D O NOT FIND ANY MERIT IN THE OBJECTIONS RAISED BY THE ASSESSING OFFICER WITH REGARD TO COMMISSION PAYMENT TO DEALERS RELATING TO THE ORDERS FROM THE GOVERNMENT AGENCIES. AT THIS POINT, WE MAY ALSO OBSERVE THAT EVEN WITH REGARD TO THE VERIFICATION EXERCISE C ARRIED OUT BY THE ASSESSING OFFICER, WE FIND NOTHING ADVERSE SO AS TO INFER THAT THE IMPUGNED COMMISSION PAYMENTS WERE INGENUINE. THE ASSESSING OFFICER ISSUED SUMMONS TO 17 RANDOMLY SELECTED PARTIES, OUT OF WHICH 12 REPLIES WERE RECEIVED AND 4 SUMMONS CAME BACK UNSERVED. IN RELATION TO ONE PARTY, NO RESPONSE WAS RECEIVED IN - SPITE OF SERVICE OF SUMMONS. WITH REGARD TO SUCH SOLITARY PARTY, LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 215 OF THE PAPER BOOK WHEREIN NECESSARY CONFIRMATION HAS BEEN PLACED, T HOUGH THE PARTY HAD NOT RESPONDED TO THE SUMMONS ISSUED BY THE ASSESSING OFFICER. IN FACT THE FACTUAL SCENARIO OF THE VERIFICATION EXERCISE WOULD REVEAL THAT OVERWHELMING NUMBER OF PARTIES RANDOMLY CHOSEN BY THE ASSESSING OFFICER HAS ACKNOWLEDGED THE COMMI SSION PAYMENTS AND IN ANY CASE, THERE IS NO DENIAL OF THE PAYMENT IN ANY OF THE CASE. CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT YEAR AS ALSO THE PRECEDENT IN THE ASSESSEE'S OWN CASE WHEREIN THE PRACTICE OF PAYING COMMISSION TO DEALERS/AGENTS, STAND ESTABLISHED, WE FIND NO REASONS TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE COMMISSIONER OF INCOME - TAX (APPEALS) OF HAVING DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. RESULTANTLY, GROUND NOS. 1 & 2 ARE DISMISSED. I T WAS FURTHER POINTED OUT BY THE LD. AR OF THE ASSESSEE THAT THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 2285 OF 2011 IN THE CASE OF CIT - V, PUNE VS. ATLAS COPCO (INDIA) LTD. 37 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 64. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE JUDICIAL PRONOUNCEMENT S PLACED BEFORE US. WE OBSERVE THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE IN ASSESSEES OWN CASE HAD CONSIDERED THIS ISSUE IN THE LIGHT OF ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR S 1986 - 87, 1988 - 89, 1991 - 92, 1992 - 93, 1993 - 94 AND 1995 - 96. IN THE AFORESAID YEARS, THE COMMISSION EXPENSES INCURRED BY THE ASSESSEE WERE ALLOWED AS DEDUCTION. THE HONBLE JURISDICTIONAL HIGH COURT HAD OBSERVED THAT WHILE PROVIDING RELIEF THE TRIBUNAL HAD CONSIDERED THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE EVEN IN EARLIER ASSESSMENT YEARS AND ALL THROUGHOUT THE SAID YEARS, COMMISSION EXPENSES INCURRED BY THE ASSESSEE WERE ALLOWED AS DEDUCTION IN DETERMINING PROFIT OF THE ASSESSEE. THE H ONBLE JURISDICTIONAL HIGH COURT FURTHER OBSERVED THAT NOTHING HAS BEEN BROUGHT ON RECORD TO INDICATE THAT THE REVENUE HAS CHALLENGED THE ORDERS OF TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS WHERE THE CLAIM OF COMMISSION EXPENSES INCURRED BY THE ASSESSEE WA S ALLOWED. MOREOVER, NEITHER BEFORE THE TRIBUNAL NOR BEFORE US, THE REVENUE MADE ANY ATTEMPT TO DISTINGUISH THE ORDERS OF THE TRIBUNAL FOR THE EARLIER YEARS FROM THE FACTS AS APPEARING IN THE PRESENT ASSESSMENT YEAR. THIS SIGNIFIES THAT THE ISSUE HAS ATTAI NED FINALITY AS ON DATE. RESPECTFULLY FOLLOWING THE AFORESAID RULING IN THIS RELEVANT YEAR ALSO, WE SUSTAIN THE RELIEF PROVIDED TO THE ASSESSEE BY THE LD. CIT(APPEALS). HENCE, GROUND NO.4 OF REVENUES APPEAL IS DISMISSED . 65. GROUND NO.6 OF REVENUES APPEAL IS WITH REGARD TO THE DELETION OF DISALLOWANCE OF PRIOR PERIOD ROYALTY AMOUNTING TO RS.95,77,308/ - , ON ACCOUNT OF NON DEDUCTION OF TDS ON RS.74,59,035/ - AND THE BALANCE OF RS.21,18,113/ - BEING PRIOR PERIOD EXPENSES. 38 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 66. IN RE SPECT OF THE DISALLOWANCE U/S.40(A)(I) OF THE ACT, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT NO EVIDENCE HAD BEEN PRODUCED BY THE ASSESSEE THAT IT HAD DEBITED THE TAX AT SOURCE AND PAID THE TAX BEFORE THE EXPIRY OF THE TIME PRESCRIBED U/S.200(1) OF THE ACT. THIS WAS ON THE BASIS OF TH E SPECIAL AUDIT REPORT IN WHICH IT WAS OBSERVED THAT NO TDS HAD BEEN MADE OR PAID DURING THE PREVIOUS YEAR IN RESPECT OF ROYALTY PROVISION OF RS.95,77,308/ - AS ON 31.03.2002. THE ASSESSING OFFICER DISALLOWED THIS AMOUNT OBS ERVING THAT OUT OF THIS PROVISION FOR ROYALTY EXPENSE OF RS.95,77,308/ - , RS.21,18,113/ - PERTAINED TO F.Y. 2000 - 01 AND WAS THEREFORE DISALLOWABLE AS PRIOR PERIOD EXPENSES. FOR THE REMAINING AMOUNT WHICH PERTAINED TO THIS YEAR, IT WAS CONTENDED THAT THERE WA S NO EVIDENCE SHOWING THAT THE TDS WAS MADE AND PAID IN THE REQUISITE PERIOD OF TIME. 67. BEFORE THE LD. CIT(APPEALS), THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS WHICH IS ON RECORD. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE, ASSESSMENT ORDER AND THE FACTS OF THE CASE HAS HELD AS FOLLOWS: 46. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT READ WITH ITS PROVISO, SINCE THE TDS IN RESPECT OF THE ROYALTY AMOUNT OF RS.21 , 18, 113/ - HAS BEEN MADE AND PAID DURING THE A.Y.2002 - 03, THOUGH THE AMOUNT MAY RELATE TO A.Y.2001 - 02, IT IS LIABLE TO BE ALLOWED AS DEDUCTION IN THIS YEAR. OUT OF THE BALANCE AMOUNT, THE APPELLANT'S EXPLANATION IT SELF REVEALS THAT FROM THE TOTAL TDS LIABILITY OF RS.9,31,789/ - , ONLY RS.3,02,040 / - WORTH TDS HAS BEEN DEDUCTED AND PAID DURING THE F.Y. RELEVANT TO A . Y.2002 - 03. ACCORDINGLY, ONLY THE CORRESPONDING AMOUNT OF RS. 30,20 , 400 / - WAS LIABLE TO BE ALLOWED AS DEDUC TION IN THIS YEAR, WHEREAS THE ROYALTY PROVISION AMOUNTING TO RS.62, 97,481 / - ON WHICH THE TDS OF RS.6,29,749/ - HAS BEEN MADE AND PAID DURING THE NEXT F.Y. I.E. A.Y. 2003 - 04, THE SAME CANNOT BE ALLOWED AS A DEDUCTION IN THIS YEAR. THEREFORE, IT IS HELD THA T INSTEAD OF THE DISALLOWANCE AMOUNTING TO RS.95,77,308/ - (INCLUSIVE OF THE PRIOR PERIOD EXPENSES AS STATED ABOVE), THE DISALLOWANCE OF RS.62,97,481 / - IS HEREBY SUSTAINED AND THE BALANCE IS DELETED. THIS GROUND OF APPEAL WILL THEREFORE BE TREATED AS PARTLY ALLOWED. 39 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 68. WE HAVE PERUSED THE CASE RECORDS AND GIVEN CONSIDERABLE THOUGHT TO THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. THE LD. CIT(APPEALS) HAS OBSERVED THAT IN VIEW OF THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT READ WITH ITS PROVISO, SINCE THE TDS IN RESPECT OF THE ROYALTY AMOUNT OF RS.21,18, 113/ - H AS BEEN PAID DURING THE A.Y.2002 - 03, THOUGH THE AMOUNT MAY RELATE TO A.Y.2001 - 02, IT IS LIABLE TO BE ALLOWED AS DEDUCTION IN THIS YEAR. OUT OF THE BALANCE AMOUNT, THE APPELLANT'S EXPLANATIO N ITSELF REVEALS THAT FROM THE TOTAL TDS LIABILITY OF RS.9,31,789/ - , ONLY RS.3,02,040/ - WORTH TDS HAS BEEN DEDUCTED AND PAID DURING THE F.Y. RELEVANT TO A.Y.2002 - 03. ACCORDINGLY, ONLY THE CORRESPONDING AMOUNT OF RS. 30,20,400/ - WAS LIABLE TO BE ALLOWED AS D EDUCTION IN THIS YEAR, WHEREAS THE ROYALTY PROVISION AMOUNTING TO RS.62, 97,481/ - ON WHICH THE TDS OF RS.6,29,749/ - HAS BEEN PAID DURING THE NEXT F.Y. I.E. A.Y. 2003 - 04, THE SAME CANNOT BE ALLOWED AS A DEDUCTION IN THIS YEAR. THEREFORE, INSTEAD OF THE DISA LLOWANCE AMOUNTING TO RS.95,77,308/ - , THE DISALLOWANCE OF RS.62,97,749/ - WAS SUSTAINED BY THE LD CIT(APPEALS) AND THE BALANCE AMOUNT WAS DELETED. WE DO NOT FIND ANY INFIRMITY WITH THIS FINDING OF THE LD. CIT(APPEALS) ON THE ISSUE AND THE SAME IS THEREBY UP HELD. THUS, GROUND NO.6 OF THE REVENUES APPEAL IS DISMISSED . 69. GROUND NO.7 OF REVENUES APPEAL IS WITH REGARD TO DELETING THE ADDITION ON ACCOUNT OF ADJUSTMENT OF ARMS LENGTH PRICE ON ALLOWABLE ROYALTY PAYMENT AMOUNTING TO RS.80,44,106/ - . 70. THE FACTS ON THIS ISSUE ARE THAT THE TRANSFER PRICING OFFICER (TPO) IN HIS ORDER PASSED U/S.92CA(3) OF THE ACT DATED 20 TH MAY, 2005 HAD MADE ADJUSTMENT TO THE TUNE OF RS.80,44,106/ - ON ACCOUNT OF THE ARMS LENGTH PRICE OF THE ROYALTY ON THE BASIS THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY DOCUMENTARY EVIDENCE THAT THE ASSOCIATED ENTERPRISES (AE) HAS 40 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 DISCONTINUED THE PRODUCTION OF THOSE PRODUCTS ON WHICH THE ROYALTY WAS PAID. IN FACT, THE TPO DISALLOWED THE ENTIRE PAYMENT OF ROYALTY ON EXPORT SALES MADE TO AE. SIMILARLY, THE ASSESSING OFFICER MADE ADJUSTMENT OF RS.80,44,106/ - ON ACCOUNT OF ARMS LENGTH PRICE OF ROYALTY PAYMENT. ON THIS ISSUE, THE LD. CIT(APPEALS) HAS HELD AND OBSERVED AS FOLLOWS: 49. I HAVE GIVEN CAREFUL CONSIDERATION TO THE SUBMISSI ONS MADE BY THE APPELLANT AND ALSO THE TRIBUNAL DECISION CITED BY IT. IT IS NOTICED THAT THIS ISSUE REGARDING PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISES FOR USE OF TECHNOLOGY ON EXPORTS MADE TO THEM IS DEALT WITH BY MY PREDECESSOR IN THE APPELLATE ORDERS FOR AY 2004 - 05 AND AY 2005 - 06. THE RELEVANT PORTION OF MY PREDECESSORS ORDER IN THE APPELLANTS CASE FOR AY 2004 - 05 IS BEING REPRODUCED AS UNDER: WHETHER THE TPO WAS RIGHT IN RECOMMENDING AN ADJUSTMENT IN RESPECT OF ROYALTY PAYMENT TO AES TO WHOM THE EX PORT SALES HAD BEEN MADE? AS ALREADY STATED IN THE FIRST PART OF HIS ORDER, THE LEARNED TPO RECOMMENDED AN ADJUSTMENT OF RS.45,69,753/ - ON ACCOUNT OF ROYALTY PAYMENT TO THE VERY SAME AES TO WHOM SALES HAD BEEN MADE. ALTHOUGH ULTIMATELY NO SEPARATE ADDITION WAS RECOMMENDED BY THE TPO ON THIS COUNT AS AN ADJUSTMENT WAS TO BE MADE IN RESPECT OF THE ENTIRE AMOUNT OF ROYALTY PAID ( INCLUDING ROYALTY PAID TO AES TO WHOM SALES ALSO HAVE BEEN MADE) THIS QUESTION WHICH ARISES FROM THE ORDER OF THE TPO REQUIRES TO BE ANSWERED SEPARATELY. THIS ADJUSTMENT WAS RECOMMENDED BY THE LEARNED TPO MAINLY BECAUSE IN HIS VIEW THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE TO PROVE DISCONTINUATION BY THE APPELLANT BY THE AES OF PRODUCTION OF THE PRODUCTS ON WHICH ROYA LTY WAS PAID TO THEM. THE APPELLANTS SUBMISSION IN THIS REGARD IS THAT UNDER THE LICENSE AGREEMENTS FOR THE USE OF TECHNOLOGY, ROYALTIES WERE PAYABLE UNIFORMLY AT THE RATE OF 5% FOR TERRITORY SALES AND 6% FOR SALES OUTSIDE THE TERRITORY AND NO DISTINCTION WAS MADE BETWEEN SALES TO ASSOCIATED ENTITIES AND SALES TO NON ASSOCIATED ENTITIES. AS SUCH THE APPELLANT SUBMITS THAT THERE IS NO RATIONALE FOR HOLDING THAT ROYALTY PAYMENT MADE IN RESPECT OF SALES MADE TO AES ALONE WAS NOT AT ARMS LENGTH. AS ALREADY ME NTIONED, THE TPO HAS MAINLY RELIED ON THE FACT THAT THE APPELLANT HAD FAILED TO SUBSTANTIATE ITS CLAIM BEFORE HIM THAT THE AES WHO HAD SUPPLIED THE TECHNOLOGY HAD STOPPED MANUFACTURING PRODUCTS BY UTILIZING THE SAID TECHNOLOGY. BEFORE ME, THE LEARNED AR OF THE APPELLANT BRIEFLY EXPLAINED THE MANNER IN WHICH THE TECHNOLOGY IS OBTAINED BY THE APPELLANT FOR UTILIZATION IN PRODUCTION. IT IS STATED THAT VARIOUS NEW DESIGNS ARE AVAILABLE ON THE COMPANYS WORLDWIDE INTERNET AND ANY ENTITY BELONGING TO THE GROUP A ND HAVING ACCESS TO THE SECURE INTERNET, IS ENTITLED TO DOWNLOAD THE SAME AND UTILIZE IT FOR PRODUCTION SUBJECT TO PAYMENT OF ROYALTY AT THE RATE PRESCRIBED THROUGH A LICENSE AGREEMENT. THE APPELLANT DECIDES THE SALE PRICE OF ITS PRODUCTS KEEPING IN VIEW ALL ITS COSTS, INCLUDING THE AMOUNT OF ROYALTY PAYABLE. UNDER THE CIRCUMSTANCES, THERE IS NO GOOD REASON, ACCORDING TO THE LEARNED AR OF THE APPELLANT FOR ROYALTY PAYMENT TO BE INFLUENCED BY THE FACT OF SOME PART OF SALES BEING MADE TO THE SAME AES TO WHOM ROYALTY IS PAID, AS THE TWO TRANSACTIONS ARE SEPARATE FROM EACH OTHER. HAVING CONSIDERED THE FACTS ON RECORD, THE ORDER OF THE TPO AND THE SUBMISSIONS OF THE APPELLANT, I AM INCLINED TO AGREE WITH THE APPELLANT ON 41 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 THIS COUNT ALSO. WHEN ROYALTY WAS PAYABLE AT A FIXED RATE IN RESPECT OF ALL SALES, AND THE SALE PRICE ALREADY FACTORS IN THE ROYALTY COST AND WHEN ONE REPRESENTS AN ITEM OF EXPENDITURE TO THE APPELLANT AND THE OTHER A SOURCE OF REVENUE, IT WAS ONLY APPROPRIATE IN MY VIEW TO ACCOUNT FOR THE FULL R OYALTY PAYMENT ON THE ONE HAND AND THE FULL SALE CONSIDERATION RECEIVED (INCLUDING THE COST OF ROYALTY PAYABLE) ON THE OTHER. NO PRESUMPTION OF NON - ARMS LENGTH PAYMENT OF ROYALTY AROSE UPON THESE FACTS IN MY VIEW. 50. HAVING GONE THROUGH THE CONTENTS OF THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT, I AM OF THE VIEW THAT THE FACTUAL MATRIX AND LEGAL POSITION RELATING TO THIS ITEM OF EXPENDITURE ARE NOT DIFFERENT FROM THE AY 2004 - 05 AND AY 2005 - 06 WHEREIN MY PREDECESSOR HAS DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ROYALTY PAYMENTS ON EXPORT TO AES. ACCORDINGLY, FOR THE REASONS DISCUSSED IN THE APPELLATE ORDER FOR AY.2004 - 05 & 2005 - 06, THIS GROUND OF APPEAL IS ALLOWED. 71. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT TRANSACTIONS WITH AES ARE NOT DISPUTED, ROYALTY PAYMENT AT ARMS LENGTH PRICE ARE ALSO NOT DISPUTED AND PAYMENTS WERE MADE AS PER RBI NORMS WHICH ARE ALSO NOT DISPUTED. THE LD. AR FURTHER SUBMITTED WHETHER AE HAS STOPPED PRODUCTION OF THE PRODUCTS ON WHICH ROYALTY WAS PAID , IS NOT A RELEVANT CONSIDERATING FACTOR FOR THE ASSESSEE. 72. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THE CASE. WE FIND THAT EVEN IN ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 ON THIS ISS UE, RELIEF WAS PROVIDED TO THE ASSESSEE. FOLLOWING THE DECISION FOR ASSESSMENT YEAR 2004 - 05 AND 2005 - 06, THE LD. CIT(APPEALS) HAS DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ROYALTY PAYMENTS ON EXPORT TO AES. FOR THIS YEAR ALSO, FACTUAL MATRIX BEING SAME, IT WAS PERFE CT DECISION RENDERED BY THE LD. CIT(APPEALS). MOREOVER, WE OBSERVE THAT PAYMENT OF ROYALTY TO AES IS NOT DISPUTED WHICH HAS BEEN DONE AS PER RBI NORMS AND AS PER RELEVANT AGREEMENT ENTERED INTO. THE ENTIRE TRANSACTIONS HAVE ALSO BEEN ACCEPTED BY THE REVENUE. THE LD. DR COULD NOT CONTROVERT THESE FACTS. 42 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 IN VIEW OF THE MATTER, WE SUSTAIN THE RELIEF PROVIDED TO THE ASSESSEE BY THE LD. CIT(APPEALS) AND CONFIRM THE FINDINGS OF THE LD. CIT(APPEALS) ON THIS ISSUE. THUS, GROUND NO. 7 RAISED IN APPEAL BY THE REVENUE IS DISMISSED. 73. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1311/PUN/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE IN ITA NO.1414/PUN/2011 IS DISMISSED . O RDER PRO NOUNCED ON 16 TH DAY OF JU LY , 201 9 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 16 TH JU LY , 2019 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - V, PUNE. 4. THE CIT - V, PUNE. 5 . , , , / DR, ITAT, C BENCH, PUNE. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 43 ITA NOS. 1311 & 1414/PUN/2011 A.Y. 2002 - 03 * DATE 1 DRAFT DICTATED ON 09 .0 7 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 12 .0 7 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER