THE ACIT Rg.-6(2), MUMBAI V. CENTURY TETILES & INDUSTRIES LTD, MUMBAI

ITA 1454/MUM/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70755 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 11-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 28-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: Y P TRIVEDI; P R TOPRANI
• Keywords: Business income; Depreciation; Business expenditure; Capital receipt; Revenue expenditure
• Section: 80HHC; 115JB; 37(1); 10B; 27; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 1073/MUM/08 ASSESSMENT YEAR: 2004 - 05 M/S. CENTURY TEXTILES AND INDUSTRIES LTD., CENTURY BHAVAN, DR. A NNIE BESANT ROAD, WORLI, MUMBAI - 400 030 PAN: AA ACC2 6 5 9Q VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, RANGE 6 ( 2 ), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 (APPELLANT) (RESPONDENT) ITA NO. 1454/MUM/08 ASSESSMENT YEAR: 2004 - 05 THE ASSISTANT COMMISSIONER OF INCOME TAX, RANGE 6(2), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 VS. M/S. CENTURY TEXTILES AND INDUSTRIES LTD., CENTURY BHAVAN, DR. ANNIE BESANT ROAD, WORLI, M UMBAI - 400 030 PAN: AAACC2659Q ( CROSS OBJECTOR ) (RESPONDENT) ASSESSEE BY : SHRI Y.P. TRIVEDI & SHRI P.R. TOPRANI REVENUE BY : SHRI P.K. SHUKLA, D.R. DATE OF HEARING : 30 .07.13 DATE OF PRONOUNCEMENT : 21.08.13 O R D E R PER S ANJAY GARG , J UDICIAL M EMBER : THE PRESENT APPEAL OF THE ASSESSEE AS WELL AS CROSS APPEAL OF THE REVENUE HA S BEEN DIRECTED AGAINST THE ORDER OF THE LD. CITA ORDER DATED 03.12.07. VARIOUS ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 2 GROUNDS OF APPEAL AND EACH GROUND OF APPEAL IS DEALT WITH SEPARATELY IN THE PRECEDING PARAGRAPHS OF THIS ORDER. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE. GROUND NO.I THE GROUND NO.I READ AS UNDER: DISALLOWANCE OF DEDUCTION U/S 10B OF THE ACT IN RESPECT OF C ERTAIN INCOME : 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSISTANT COMMISSIONER OF INCOME TAX, 6(2), MUMBAI (THE AO) OF DISALLOWING THE FOLLOWING RECEIPTS FOR THE PURPOSE OF DEDUCTION U/S 10B OF THE ACT, ON THE GROUND THAT THE SAID RECEIPTS ARE NOT DERIVED FROM THE ELIGIBLE UNDERTAKING QUALIFIED U/S 10B OF THE ACT. SR NO. PARTICULARS OF INCOME AMOUNT (RS.) 1. SALE OF HOOPS AND WRAPPERS 8,08,590 2. DISCOUNT/BONUS ON STORE ITEMS 1,55,59 0 3. STAFF AGREEMENT DEPOSIT FORFEITED 13,406 4. RECOVERY AGAINST DAMAGED PROPERTY 600 5. NOTICE PERIOD SALARY RECEIVED FROM STAFF 21,762 6. SUNDRY BALANCE WRITTEN OFF 7,445 7. UNCLAIMED SALARY FORFEITED 2,729 8. OCTROI REFUND 2,025 9. OTHER IN COME 200 TOTAL 10,12,347 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE ABOVE RECEIPTS ARE QUALIFIED FOR DEDUCTION UNDER SECTION 10B OF THE ACT. 3 . WITHOUT PREJUDICE TO ABOVE, IF AT ALL THE ACTION OF THE CIT(A) IS CONFIRMED, THEN, IN THAT CASE, ONLY THE N ET RECEIPT BE EXCLUDED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B OF THE ACT 2. THE ASSESSEE IS AGGRIEVED AGAINST THE CONFIRMATION OF THE DISALLOWANCES MADE BY THE A.O. RELATING TO THE INCOME /RECEIPTS AS DETAILED ABOVE WHICH ARE DEALT HEREWITH SEPAR ATELY. 1. SALE OF HOOPS AND WRAPPERS (RS.8,08,590) : THE LD. CIT(A) WHILE CONFIRMING THE DISALLOWANCE RELATING TO S ALE OF HOOPS AND WRAPPERS HAS OBSERVED AS UNDER: 2.5 I FIND THA T CIT(A) - VI, MUMBAI, HAS ALREADY CONSIDERED THIS ISSUE IN HIS ORDER NO.CIT9A ) - VI/DCIT 6(2)/1/06 - 07 DATED 8.9.2006 FOR A.Y. 2003 - 04. IN THAT ORDER, THE CIT(A) HAS HELD THAT THE FOLLOWING INCOMES ARE TO BE INCLUDED FOR COMPUTING EXEMPTION U/S.10B: - ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 3 CENTURY DENIM (RS.) I ) WORKERS HOUSE RENT RECOVERY 49,645 II ) STAFF HOUSE RENT RECOVE RY 80,090 III ) STORE BARDANA SALES 9,38,898 IV ) SUNDRY CREDIT BALANCE APPROPRIATED 4,34,705 V ) EXCESS PROVISION WRITTEN OFF 48,414 VI ) FREIGHT REBATE ON EXPORT SALE 2,87,613 VII ) PROVISION NO LONGER REQUIRED 8,61,301 HOW EVER, ITEM NO.4 I.E. HOOPS & WRAPPERS SALES AMOUNTING TO RS.8,08,590/ - IS AN ITEM WHICH IS NOT CONNECTED WITH THE EXPORT BUSINESS OF THE ASSESSEE, HENCE THIS INCOME IS TO BE EXCLUDED FOR COMPUTING EXEMPTION U/S 10B. 3. LEARNED A.R. BEFORE US HAS SUBMITTED THAT AS OBSERVED BY THE LD. CIT(A) IN HIS ORDER AS REPRODUCED ABOVE, THE INCOME/RECEIPTS RELATING TO STORE BARDANA SALES HAD BEEN ALLOWED BY THE CIT(A) FOR ASSESSMENT YEAR 2003 - 04. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE CIT(A) RELYING UPON TH E ORDER OF HIS PREDECESSOR RELATING TO ASSESSMENT YEAR 2003 - 04 HAS ALSO ALLOWED INCOME/RECEIPTS RELATING TO STORE BARDANA SALES. HOWEVER HE HAS DISALLOWED INCOME/RECEIPTS RELATING TO HOOPS & WRAPPERS SALES WITHOUT POINTING OUT AS TO WHY THESE INCOME/RECEI PTS ARE NOT RELATED TO EXPORT BUSINESS OF THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THE STORE BARDANA MATERIALS ARE THE DIFFERENT TYPE OF PACKING MATERIAL S LIKE WOODEN BOXES , PLASTIC AND STEEL DRUMS, BOTTLES ETC. IN WHICH THE VARIOUS STORE MATERIALS PUR CHASED BY THE ASSESSEE WERE PACKED. THE SAID PACKING MATERIAL WAS SOLD BY THE ASSESSEE DURING THE YEAR AND THE AMOUNT WAS CREDITED UNDER THE HEADING STORE BARDANA SALE ACCOUNT. THE COST OF STORE BARDANA INCLUDES INCOME/RECEIPTS INCURRED BY THE SUPPLIER O N THIS ACCOUNT. THUS THE RECEIPTS ON THIS ACCOUNT REDUCE THE COST OF STORE MATERIAL PURCHASED DURING THE COURSE OF PRODUCTION. HE HAS FURTHER SUBMITTED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE UNIT HAD PURCHASED COTTON BALES. THE COTTON B ALES HAD BEEN PACKED IN CLOTH, IRON STRIP, PLASTIC STRIPS ETC. THE UNIT HAD SOLD THE SAID PACKING MATERIAL DURING THE YEAR AND CREDITED IT UNDER THE HEAD HOOPS & WRAPPERS SALES ACCOUNT. THE RECEIPTS ON THIS ACCOUNT REDUCE THE COST OF COTTON BALES PURCH ASED DURING THE COURSE OF PRODUCTION. SO THE SALES ON HOOPS & WRAPPERS FALL IN THE SAME CATEGORY AS THAT OF SALES OF STORE BARDANA. THERE IS NO DIFFERENCE BETWEEN THE TWO AS BOTH THE SAID MATERIALS ARE IN THE SHAPE ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 4 OF PACKING MATERIALS AND THE INCOME FR O M PACKING MATERIAL CREDITED UNDER THE HEAD STORE BARDANA SALES HAS ALREADY BEEN ALLOWED IN THE EARLIER YEARS. WE AGREE WITH THE CONTENTIONS RAISED BY THE LD. A.R. TO THE EXTENT THAT HOOPS & WRAPPERS ARE THE PACKING MATERIALS LIKE OTHER STORE BARDANA. TH E INCOME FROM THE SALE OF THE SAID PACKING MATERIAL HAS CONSISTENTLY BEEN ALLOWED TO THE ASSESSEE IN THE EARLIER YEARS. THE LD. D.R. BEFORE US COULD NOT BRING ANY POINT TO THE EFFECT THAT SALES FROM HOOPS & WRAPPERS IS DIFFERENT FROM THE SALES OF STORE BA RDANA SALES. ACCORDINGLY THE INCOME DERIVED FROM THE SALE OF HOOPS & WRAPPERS SALES IS HEREBY DIRECTED TO BE ALLOWED. 2. DISCOUNT/BONUS ON STORE ITEMS (RS.1,55,590/ - ) THE LD. CIT(A) HAS DISALLOWED THE RECEIPTS UNDER THE ABOVE SAID HEAD OBSERVING A S UNDER: 2.6 AS REGARDS MISCELLANEOUS RECEIPTS, IT MAY BE NOTED THAT DISCOUNT/BONUS ON STORE ITEMS PURCHASED FROM SUPPLIERS HAS NO CONNECTION WITH INDUSTRIAL UNDERTAKING AND THE SAME IS REQUIRED TO BE EXCLUDED. HENCE, I DIRECT THE A.O. TO EXCLUDE THE ITE M OF MISCELLANEOUS RECEIPT AMOUNTING TO RS.1,55,509/ - . HOWEVER, THE LD. A.R. BROUGHT OUR ATTENTION TO THE FACT THAT THE ISSUE RELATING TO THE INCOME UNDER THIS HEAD HAD COME FOR CONSIDERATION BEFORE THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO.5935/MUM/06 RELATING TO THE ASSESSMENT YEAR 2003 - 04 , THE RELEVANT FINDING OF THE TRIBUNAL IN THIS RESPECT IS REPRODUCED AS UNDER: 4.2 WITH REFERENCE TO ITEM NO.II & V I.E. BONUS RECEIVED AGAINST PURCHASE OF SPARES, THE LE ARNED CIT(A) RELIED ON THE ORDERS IN EARLIER YEARS IN HOLDING THAT THIS ITEM CANNOT BE CONSIDERED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. HOWEVER, AS SEEN FROM THE ORDERS OF THE ITAT IN ASSESSMENT YEAR 2003 - 04 IN ITA NO.6365/MUM/2005 THIS ISSUE WAS RESTORED TO THE FILE OF AO FOR FRESH EXAMINATION. IT WAS HELD AS UNDER: (II) REGARDING BONUS RECEIVED AGAINST PURCHASE OF IMPORTED SPARES OF AUTO CORNERS M/C. AMOUNTING TO RS.24,693/ - , IT IS SEEN FROM THE PERUSAL OF THE APPELLATE ORDER AS WELL AS THE ASSESSMENT ORDER, THAT THIS ISSUE HAS NOT BEEN PROPERLY EXAMINED BY EITHER OF THE AUTHORITIES BELOW, THEREFORE, ON THE FACTS AND CIRCUMSTANCES, THIS ISSUE IS RESTORED BACK TO ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 5 THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING IT AFRESH AFTER GIVING OPPO RTUNITY TO THE ASSESSEE. THUS, THIS ISSUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 4.3 ACCORDINGLY SINCE THE LEARNED CIT(A) RELIED ON THE EARLIER YEARS ORDER WITHOUT EXAMINING THE FACTS, IN THE INTEREST OF JUSTICE WE RESTORE THIS ISSUE TO THE FI LE OF AO FOR FRESH EXAMINATION AND DECIDE IT ACCORDINGLY. 4. SINCE IN THE EARLIER YEARS, THE ISSUE HAS ALREADY BEEN RESTORED BACK TO THE FILE OF THE A.O., SO IT WILL BE JUST AND PROPER FOR THIS YEAR ALSO TO DIRECT THE A.O. TO DECIDE THE SAME AS PER THE DIRECTIONS GIVEN BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEARS RELATING TO THE SAME ISSUE. HENCE, THIS ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECIDE THE SAME IN TERMS OF THE ORDER DATED 12.06.13 OF THE CO - OR DINATE BENCH OF THIS TRIBUNAL AS REPRODUCED ABOVE. 3. STAFF AGREEMENT DEPOSIT FORFEITED (RS.13,406): THE LD. A.R. HAS BEEN FAIR ENOUGH TO ADMIT THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE VIDE FINDINGS OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL GIVE N IN ITA NO.5935/MUM/06 FOR THE ASSESSMENT YEAR 2003 - 04 OBSERVED AS UNDER: 4.4 ITEM NO.III. STAFF AGREEMENT DEPOSIT IS COVERED GAINST ASSESSEE IN EARLIER YEARS. WE FIND THAT THIS ISSUE HAS BEEN DECIDED AGAINST ASSESSEE IN ITA NO.3890 AND 3507/MUM/2005 DATED 13 TH JULY, 2009 IN ASSESSMENT YEAR 1999 - 2000 IN PARA 20 AND IN ITA NO.3906/MUM/2005 FOR ASSESSMENT YEAR 2001 - 02 VIDE PARA 14. WE DO NOT INTEND TO DISTURB THE ACCEPTED POSITION. HENCE WE HOLD THAT THIS AMOUNT DID NOT QUALIFY FOR EXEMPTION UNDER SECT ION 10B AS THESE ARE NOT HELD TO BE THE RECEIPTS DERIVED FROM THE INDUSTRIAL UNDERTAKING 5. RESPECTFULLY FOLLOWING THE CONSISTENT FINDING S GIVEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS ON THIS ISSUE, THIS ISSUE IS DECIDED AGAIN ST THE ASSESSEE. 4. RECOVERY AGAINST DAMAGED PROPERTY (RS.600/ - ) THE LD. A.R. HAS NOT PRESSED THIS ISSUE BEFORE US. HENCE THE SAME IS DECIDED AGAINST THE ASSESSEE. 5. NOTICE PERIOD SALARY RECEIVED FROM STAFF (RS.21,762/ - ) ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 6 THIS ISSUE HAS ALSO NOT BE EN PRESSED BY THE LD. A.R. BEFORE US. HENCE THE SAME IS DECIDED AGAINST THE ASSESSEE. 6. SUNDRY BALANCE WRITTEN OFF (RS.7,445/ - ) THE LD. A.R. HAS BEEN FAIR ENOUGH TO BRING INTO OUR ATTENTION TO THE FACT THAT THE SAID ISSUE IS COVERED AGAINST THE ASSESS EE VIDE ORDER DATED 16.05.12 OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL PASSED IN THE OWN CASE OF THE ASSESSEE VIDE ITA NO.3926/MUM/05 OF THE ASSESSMENT YEAR 2001 - 02. THE RELEVANT FINDING HAS BEEN GIVEN IN PARA 12 OF THE SAID ORDER , WHICH FOR THE SAKE OF C ONVENIENCE IS REPRODUCED AS UNDER: 12. GROUND NO.2(IV) RELATES TO SUNDRY CREDIT BALANCE WRITTEN BACK. THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN I.T.A. NOS.3890 & 3507/MUM/2005 IN ASSESSMENT YEAR 1999 - 2000 IN PARA 20. WE DO NOT INTEND TO DIS TURB THE ACCEPTED POSITION, HENCE WE HOLD THAT THESE AMOUNTS DO NOT QUALIFY FOR THE EXEMPTION U/S 10B AS THE CANNOT BE HELD TO BE RECEIPTS DERIVED FROM THE INDUSTRIAL UNDERTAKINGS. GROUND NO.2(IV) IS DISMISSED. 6. RESPECTFULLY FOLLOWING THE CONSISTENT FINDINGS GIVEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS ON THIS ISSUE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 7. UNCLAIMED SALARY FORFEITED (RS.2,729/ - ) IT MAY BE OBSERVED THAT THE RECEIPTS ON THIS ACCOUNT ARE IN THE NATURE OF THE RECEIPTS CREDITED IN STAFF AGREEMENT DEPOSITED FORFEITED AS WELL AS NOTICE PERIOD SALARY RECEIVED FROM STAFF . THE SAID RECEIPTS AS OBSERVED ABOVE HAVE BEEN DISALLOWED. THE LD. A.R. BEFORE US COULD NOT BRING AS TO WHY THESE RECEIPTS SHOULD NOT BE DISALLOWED , ESPECIALLY WHEN THE RECEIPTS OF THIS NATURE HAVE ALREADY BEEN DISALLOWED IN THE EARLIER YEARS. HENCE THE DISALLOWANCE UNDER THIS HEAD IS HEREBY UPHELD. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 7 8. OCTROI REFUND (RS.2,025/ - ) : IT MAY BE OBSERVED THAT THE RECEIPTS ON THIS ACCOU NT ARE JUST THE REFUND OF THE OCTROI PAID BY THE ASSESSEE FOR PURCHASE/TRANSPORTATION OF THE MATERIALS TO THE UNIT AS OBSERVED UNDER THE HEADING SALE OF SALE OF HOOPS & WRAPPERS . THE RECEIPTS ON THIS ACCOUNT REDUCE THE COST OF STORE MATERIALS PURCHASED DURING THE COURSE OF PRODUCTION. HENCE THE RECEIPTS ON THIS ACCOUNT, IN VIEW OF OUR FINDINGS ABOVE ARE HEREBY ORDERED TO BE ALLOWED. 9. OTHER INCOME (RS.200/ - ) THIS ISSUE HAS NOT BEEN PRESSED BY THE LD. A.R. BEFORE US HENCE THE FINDING OF THE LD. CIT( A) ON THIS ISSUE IS HEREBY UPHELD. GROUND NO.II THE GROUND NO.I I READ AS UNDER: TREATMENT OF CAPITAL RECEIPT AS REVENUE RECEIPT: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF TREAT ING CAPITAL RECEIPT OF RS.60,552/ - , BEING SECURITY DEPOSIT FORFEITED, AS REVENUE RECEIPT AS AGAINST CAPITAL RECEIPT TREATED BY THE APPELLANT. HOWEVER SINCE DEDUCTION HAS NOT BEEN MADE BY THE APPELLANT, THERE WOULD NOT BE ANY EFFECT ON THE TOTAL INCOME. 2 . APPELLANT PRAYS THAT IT BE HELD THAT THE ABOVE RECEIPT BE TREATED AS CAPITAL IN NATURE. 7. THE LD. A.R. HAS BEEN FAIR ENOUGH TO ADMIT THAT THIS GROUND IS SQUARELY COVERED AGAINST THE ASSESSEE IN THE OWN CASE OF THE ASSESSEE VIDE ORDER OF THE TRIBUNAL PA SSED IN ITA NO.5935/MUM/06 FOR THE ASSESSMENT YEAR 2003 - 04. THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER: 5. GROUND NO.2 PERTAINS TO THE ISSUE OF TREATING THE FORFEITURE OF SECURITY DEPOSIT COLLECTED FROM EMPLOYEES AND ASSESSEE TREATING THE SAME AS CAPITAL IN RECEIPTS. 5.1 AT THE TIME OF HEARING THE LEARNED COUNSEL AT THE OUTSET FAIRLY ADMITTED THAT THIS ISSUE IS COVERED AGAINST ASSESSEE BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 8 IN ITA NO.3926/MUM/2005 FOR ASSESSMENT YEAR 2001 - 02 VIDE ORDER DATED 16.05.12 AND ALSO BY ITA NO.6365/MUM/2005 FOR ASSESSMENT YEAR 2002 - 03 DATED 31.10.12. 5.2 AFTER GOING THROUGH THE ORDERS OF THE PRECEDING YEARS, WE FIND THAT THIS ISSUE STANDS COVERED AGAINST ASSESSEE FROM MANY YEARS AND THEREF ORE, WE DO NOT INTEND TO DISTURB THE FINDINGS OF THE CO - ORDINATE BENCH. THE GROUND IS DECIDED AGAINST ASSESSEE AND ACCORDINGLY DISMISSED. 8. RESPECTFULLY FOLLOWING THE CONSISTENT FINDING GIVEN BY THE TRIBUNAL RELATING TO EARLIER ASSESSMENT YEARS ON THI S ISSUE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. THE ORDER OF THE LEARNED CIT(A) IS HEREBY UPHELD. GROUND NO.III THE GROUND NO.III READ AS UNDER: DISALLOWANCE OF AMOUN TS PAID TO VARIOUS AUTHORITIES ; 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF DISALLOWING RS.5,17,959/ - BEING AMOUNTS PAID TO VARIOUS AUTHORITIES, ON THE GROUND THAT THESE ARE PENAL IN CHARACTER AND NOT COMPENSATORY IN NATURE, BY INVOKING EXPLANATION TO SECTION 37(1) OF THE ACT. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE ABOVE PAYMENTS BE TREATED AS COMPENSATORY IN NATURE AND BE ALLOWED AS REVENUE EXPENDITURE. 9. THE LD. A.R. HAS BROUGHT OUR ATTENTION TO THE FACT THAT THIS ISSUE CAME INTO CONSIDERATION BEFORE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL RELATING TO THE OWN CASE OF THE ASSESSEE IN ITA NO.5935/MUM/06 FOR THE ASSESSMENT YEAR 2003 - 04. WHILE ADJUDICATING ON THIS ISSUE FOR THE ASSESSMENT YEAR 2003 - 04 THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL HAS OBSERVED AS UNDER: 6.1 THE LD. CIT(A) IN HIS ORDER DISTINGUISHED THE ENTIRE AMOUNT DISALLOWED BY AO AND ALLOWED THE SAME AMOUNTS PARTLY STATING THAT IT IS COMPENSATORY IN NATURE, WHEREAS HE HAS CONFIRMED THE ABOVE AMOUNTS AS PENALTY. IT WAS FAIRLY ADMITTED THAT THIS ISSUE WAS RESTORED TO AO IN IMMEDIATELY PRECEDING YEAR FOR FRESH EXAMINATION IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT TO DECIDE WHETHER THE AMOUNTS ARE COMPENSATORY IN NATURE OR PENAL IN NATURE. THE FINDINGS OF THE ITAT IN ASSESSMENT YEAR 2001 - 02 ON THE ISSUE ARE AS UNDER: 41. THIS ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL IN ITA NOS.3925 & 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01,IN PARAS 69, 70 AND 71 WHICH READ AS UNDER: ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 9 69. BEFORE US, IT WAS SUBMITTED THAT THE AMOUNTS DISALLOWED BY THE CIT(A) ARE BASICALLY OF COMPENSATORY NATURE AND THEREFORE THE SAME SHOULD HAVE BEEN ALLOWED. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF PRAKASH COTTON MILLS PVT. LTD. VS. CIT (201 ITR 684) (SC) AND STANDARD BATTERIES LTD. VS. CIT (211 ITR 444) (SC). 70. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDER OF CIT(A). 71. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE HONBLE SUPREME COURT IN THE CASES OF PRAKA SH COTTOM MILLS PVT. LTD. (SUPRA) AND STANDARD BATTERIES LTD. VS. CIT (SUPRA) HAS OBSERVED THAT WHATEVER IS PAID TO THE GOVT. AUTHORITIES, THOUGH KNOWN AS PENALTY, BUT IF THE SAME IS OF COMPENSATORY NATURE, THEN THE SAME, STRICTLY SPEAKING, IS NOT PENALTY AND HAS TO BE ALLOWED AS BUSINESS EXPENDITURE. THE HONBLE COURT HAS GIVEN THE AMPLE OF PENALTY PAID FOR DELAYED PAYMENT OF SALES - TAX WHICH WAS HELD TO BE COMPENSATORY NATURE. SINCE NO DETAILS HAVE BEEN GIVEN FOR THE AMOUNT PAID, WHICH HAS BEEN DISALLOW ED BY THE AO, AND EVEN THE SR. COUNSEL OF THE ASSESSEE HAS NOT PLACED ANY DETAILS BEFORE US, THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO FOR RE - EXAMINATION OF THE ISSUE AND IF VARIOUS PENALTIES PAID ARE FOUND TO BE ONLY COMPENSATORY INNATURE IN VIEW OF THE DECISIONS OF THE HONBLE SUPREME COURT (SUPRA), THEN THE SAME MAY BE ALLOWED. RESPECTFULLY FOLLOWING THE DECISION TAKEN BY THE CO - ORDINATE BENCH IN THE ASSESSEES OWN CASE, WE IN THE CURRENT YEAR, SET ASID E THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO TO RE - EXAMINE THE EXACT NATURE OF PAYMENTS, I.E., WHETHER THESE ARE COMPENSATORY OR THESE ARE PENAL IN NATURE. THE GROUND IS ALLOWED TO THAT EXTANT. GROUND NO.1 IS ALLOWED FOR STATIS TICAL PURPOSES. 6.2 RESPECTFULLY FOLLOWING THE ABOVE, WE RESTORE THE MATTER TO THE FILE OF AO TO EXAMINE THE EXACT NATURE OF THE AMOUNTS PAID AND CONSIDER ACCORDINGLY. GROUND NO.3 IS ALLOWED FOR STATIS TICAL PURPOSES. 10. SINCE IN THE EARLIER YEARS, T HE ISSUE HAS ALREADY BEEN RESTORED BACK TO THE FILE OF THE A.O., SO IT WILL BE JUST AND PROPER FOR THIS YEAR ALSO TO DIRECT THE A.O. TO DECIDE THE SAME AS PER THE DIRECTIONS GIVEN BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEARS RELATING TO THE SAME ISSUE. HENCE, THIS ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME IN TERMS OF THE ORDER DATED 12.06.13 OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL AS REPRODUCED ABOVE. GROUND NO.IV THE GROUND NO.IV IS REPRODUCED AS UNDER: ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 10 DISALLOWANCE OF LEASEHOLD AMOUNT WRITTEN OFF 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF DISALLOWING THE LEASEHOLD AMOUNT WRITTEN OFF OF RS.1,73,945/ - ON THE GROUND THAT IT IS CAPITAL IN NATURE. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE AMOUNT WRITTEN OF ON ACCOUNT OF LEASEHOLD BE ALLOWED AS REVENUE EXPENDITURE AND/OR BUSINESS LOSS. 11. THIS ISSUE ALSO HAS BEEN RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO IN THE OW N CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 IN ITA NO. 5935 OBSERVING AS UNDER: 7. GROUND NO.4 PERTAINS TO THE DISALLOWING THE LEASEHOLD AMOUNT WRITTEN OFF IN VARIOUS DIVISIONS OF RS.1,80,291/ - . 7.1 THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAS BEEN RESTORED TO THE FILE OF AO IN ASSESSEES OWN CASE IN AY 2001 - 02 AND 2002 - 03. AFTER GOING THROUGH THE ORDER OF THE TRIBUNAL, WE FIND THAT THIS ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOLLOWING THE EARLIER YEARS ORDER AFTER O BSERVING AND HOLDING AS UNDER: 24. THE ISSUE HAD BEEN SET ASIDE TO THE FILE OF THE AO IN THE PRECEDING YEAR IN ITA NOS.3925 & 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01, FOR RE - EXAMINATION OF THE ISSUE IN THE LIGHT OF THE SPECIAL BENCH DECISION OF THE TR IBUNAL IN THE CASE OF MUKUND LTD. REPORTED IN 106 ITD 231 (MUM SB) FOR FINDING THE NATURE OF THE PREMIUM PART. RESPECTFULLY FOLLOWING THE ORDER, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO FOR PASSING FRESH ORDER ON THE IM PUGNED ISSUE AFTER PROPER OPPORTUNITY TO THE ASSESSEE. GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSES. 7.2 ACCORDINGLY, IN THIS YEAR ALSO, THIS ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED IN VIEW OF THE DIRECTION GIVEN ABOVE . ACCORDINGLY, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12 . SINCE IN THE EARLIER YEARS, THE ISSUE HAS ALREADY BEEN RESTORED BACK TO THE FILE OF THE A.O., SO IT WILL BE JUST AND PROPER FOR THIS YEAR ALSO TO DIRECT THE A.O. TO DECIDE TH E SAME AS PER THE DIRECTIONS GIVEN BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEARS RELATING TO THE SAME ISSUE. HENCE, THIS ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME IN TERMS OF THE ORDER DATED 12.06 .13 OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL AS REPRODUCED ABOVE. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 11 GROUND NO.V THE GROUND NO.V READ AS UNDER: REDUCTION IN CLAIM OF MINING LEASE EXPENSES : 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING T HE ACTION OF AO OF ALLOWING ONLY 1/20 TH OF MINING LEASE EXPENSES INCURRED AS AGAINST 1/10 TH WRITTEN OFF BY THE APPELLANT. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT CLAIM AS MADE FOR 1/10 TH OF LEASE EXPENDITURE BE ALLOWED TO THE APPELLANT. 13. THIS ISS UE CAME INTO CONSIDERATION BEFORE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO.593 5 / MUM/ 200 6 FOR THE ASSESSMENT YEAR 2003 - 04 . W HILE DECIDING THE SAID ISSUE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ABOVE SAI D APPEAL OBSERVED AS UNDER: 8 . GROUND NO.5 PERTAINS TO THE ISSUE OF CONFIRMING THE ACTION OF AO IN DISALLOWING THE CLAIM FOR MINING LEASE EXPENSES FOR CENTURY CEMENT DIVISION TO 1/20 TH OF RS.16,23,610/ - AS AGAINST 1/10 TH CLAIMED BY ASSESSEE ON THE GROU ND THAT PERIOD OF LEASE IS 20 YEARS. 8.1 LEARNED COUNSEL SUBMITTED THAT THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE EARLIER YEAR. LEARNED CIT DR FAIRLY ADMITTED TO THIS FACT. 8.2 AFTER GOING THROUGH THE FINDINGS OF THE TRIB UNAL, WE FIND THAT THIS ISSUE HAS COME UP FOR CONSIDERATION IN THE EARLIER YEARS IN THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL. IN THE ASSESSMENT YEAR 2001 - 02, THE TRIBUNAL HAS ALLOWED THIS GROUND FOLLOWING THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 - 01. THE ASSESSING OFFICER HAS DISALLOWED THE LEASE EXPENSES OF RS.16,23,610/ - AS AGAINST 1/10 TH CLAIMED AT RS.81,180/ - BY THE ASSESSEE. SINCE THIS ISSUE HAS BEEN DECIDED IN THE EARLIER YEAR ALLOWING THE ASSESSEES CLAIM, THEREFORE, IN THIS YEAR ALSO, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE SAME. ACCORDINGLY, THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. 1 4 . SO RESPECTFULLY FOLLOWING THE CONSISTENT FINDING OF THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL RELATING TO EARLIER ASSESSMENT YEARS , T HIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.VI THE GROUND NO.VI READ AS UNDER: ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 12 TREATING BUSINESS INCOME AS INCOME FROM HOUSE PROPERTY : 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE AC TION OF THE AO IN TREATING RS.8,79,282/ - BEING INCOME FROM THE EXPLOITATION OF BUSINESS ASSET, AS PROPERTY INCOME AS AGAINST BUSINESS INCOME TREATED BY THE APPELLANT. 2 . THE CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWIONG EXPENS ES AND DEPRECIATION AMOUNTING TO RS.13,36,979/ - (RS.12,83,805/ - + RS.53,174/ - ) IN RESPECT OF THE BUSINESS ASSET. 3 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE INCOME FROM EXPLOITATION OF COMMERCIAL PROPERTY BE TREATED AS BUSINESS INCOME AND RELATED EXPEND ITURE AND DEPRECIATION ON THE SAME BE ALLOWED. 4 . WITHOUT PREJUDICE TO ABOVE, IF AT ALL THE ACTION OF THE CIT(A) IS CONFIRMED, THEN, IN THAT CASE, THE RECEIPT FROM COMMERCIAL PROPERTY BE TREATED AS INCOME FROM OTHER SOURCES AND THE CORRESPONDING EXPENDITURE INCURRED TO EARN ABOVE INCOME BE ALLOWED U/S 57 OF THE ACT. 5 . WITHOUT PREJUDICE TO ABOVE, IF AT ALL THE ACTION OF THE CIT(A) IS CONFIRMED, THEN, IN THAT CASE, THE EXPENDITURE BE ALLOWED TO THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV - C OF THE ACT. 1 5 . THE LD. A.R. HAS BEEN FAIR ENOUGH TO BRING TO OUR ATTENTION THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE. THIS ISSUE CAME INTO CONSIDERATION BEFORE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO.5935 / MUM/ 2006 . W HILE DECIDING THE SAID ISSUE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ABOVE SAID APPEAL OBSERVED AS UNDER: 9. GROUND NO.6 PERTAINS TO THE CONFIRMATION OF THE ACTION OF AO IN BRINGING TO TAX COMPENSATION RECEIVED FROM EXPLOITATION O F COMMERCIAL PREMISES NAMELY CENTURY BHAVAN, MUMBAI AND INDUSTRY HOUSE, KOLKATA AS INCOME OF RS. 8,07,652 / - UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME. 9.1 AT THE OUTSET THE LEARNED COUNSEL APPEARING FOR ASSESSEE POINTED OUT T HAT THIS ISSUE IS COVERED AGAINST ASSESSEE IN ASSESSEES OWN CASE IN EARLIER YEARS. SINCE THE ISSUE IS ALREADY DECIDED AGAINST ASSESSEE IN ALL THE EARLIER YEARS INCLUDING THE AY 2001 - 02 AND 2002 - 03 BY THE ORDERS QUOTED (SUPRA) WE DO NOT SEE ANY REASON TO D IFFER FROM THE SAID FINDINGS. ACCORDINGLY THE ISSUE IS DECIDED AGAINST ASSESSEE AND GROUND NO.6 STANDS DISMISSED. 16. RESPECTFULLY FOLLOWING THE CONSISTENT FINDINGS GIVEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS ON THIS ISSUE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 13 GROUND NO.VII THE GROUND NO.VII READ AS UNDER: DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES RS.2,80,730/ - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTIO N OF AO OF DISALLOWING FOREIGN TRAVELLING EXPENSES OF THE WIFE OF THE DIRECTOR. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE EXPENDITURE ON FOREIGN TRAVELLING OF DIRECTORS WIFE BE ALLOWED AS REVENUE EXPENDITURE. 17 . IT MAY BE OBSERVED THAT THE ISSUE C AME INTO CONSIDERATION BEFORE THE HONBLE HIGH COURT IN THE OWN CASE S OF THE ASSESSEE PERTAINING TO EARLIER YEARS . T HE SAID ISSUE HAS BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN F AVOUR OF THE ASSESSEE IN APPEAL NO.4218/09 RELATING TO ASSESSMENT YEA R 199 6 - 97 AS WELL APPEAL NO. 3723/09 RELATING TO ASSESSMENT YEAR 1997 - 98 DECIDED VIDE ORDER DATED 21.06.11. THE FINDING S OF THE HONBLE HIGH COURT PASSED IN APPEAL NO.4218/09 ON THIS ISSUE ARE REPRODUCED AS UNDER: 3. AS REGARDS THE THIRD QUESTION IS CO NCERNED, THE TRIBUNAL FOLLOWING ITS DECISION IN THE ASSESSEES OWN CASE FOR EARLIER YEARS HAS ALLOWED THE CLAIM OF THE ASSESSEE. AS HELD BY THIS COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. ALFA LAVAL (I) LTD., REPORTED IN (2006) 282 ITR 445 (BOM.) , THE EXPENDITURE ON FOREIGN TRAVEL EXPENSES OF DIRECTORS WIFE MAY BE ALLOWED, DEPENDING ON THE STATUS OF THE PARTIES, NATURE OR CHARACTER OF THE TRADE OR VENTURE, THE PURPOSE FOR WHICH THE EXPENSES WERE INCURRED AND THE OBJECT SOUGHT TO BE ACHIEVED BY IN CURRING SUCH EXPENSES. IN THE PRESENT CASE, THE ITAT AFTER CONSIDERING ALL FACTS ON RECORD HAS ALLOWED THE CLAIM. MOREOVER, SIMILAR EXPENSES ALLOWED IN THE PAST HAVE ATTAINED FINALITY. IN THIS VIEW OF THE MATTER, IN OUR OPINION, QUESTION NO.3 RAISED BY THE REVENUE CANNOT BE ENTERTAINED. 18 . IN VIEW OF THE FINDINGS GIVEN BY THE HONBLE HIGH COURT PERTAINING TO EARLIER ASSESSMENT YEARS IN THE OWN CASES OF THE ASSESSEE, THIS ISSUE IS ACCORDINGLY HEREBY DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REV ENUE. GROUND NO.VIII THE GROUND NO.VIII READ AS UNDER: DISALLOWANCE OF INTEREST PAID ON INCOME TAX RS.4,23,587/ - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF DISALLOWING INTEREST ON INCO ME TAX. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 14 2 . THE APPELLANT PRAYS THAT THE CLAIM OF THE APPELLANT BE ALLOWED. 1 9 . THIS ISSUE IS ALSO COVERED AGAINST THE ASSESSEE VIDE FINDINGS OF THE TRIBUNAL GIVEN I THE OWN CASE OF THE ASSESSEE IN ITA NO.5935/MUM/2006 FOR ASSESSMENT YEAR 2003 - 04 VIDE PAR A 10 WHICH IS REPRODUCED AS UNDER: 10. GROUND NO.7 IS WITH REFERENCE TO THE DISALLOWANCE OF RS. 2,83,559 / - BEING INTEREST PAID ON INCOME TAX AS IN EARLIER YEARS THIS CLAIM WAS NOT ALLOWED BY THE CIT (A) AS THERE IS NO REASON FOR ALLOWING THE EXPENDITURE AS BUSINESS EXPENDITURE. THIS ISSUE WAS CONFIRMED AGAINST ASSESSEE BY THE ORDERS OF THE ITAT IN ITA NO.6365/MUM & 6269/MUM/2005 FOR AY 2002 - 03 WHEREIN IT WAS CONSIDERED THAT THERE IS NO MERIT IN SUCH CLAIM. ACCORDINGLY THE SAME WAS NOT ALLOWED AND THE GROU ND STANDS DISMISSED . 20. RESPECTFULLY FOLLOWING THE CONSISTENT FINDINGS GIVEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS ON THIS ISSUE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. GROUND NO.IX THIS GROUND OF THE APPEAL IS REPRODUC ED AS UNDER: DISALLOWANCE OF INTEREST PAID TO SSI UNITS ON DELAYED PAYMENTS RS.3, 40 , 240 / - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF DISALLOWING INTEREST PAID TO SSI UNITS ON DELAYED P AYMENT ON THE ALLEGED GROUND THAT THE INTEREST WAS PAID FOR INFRACTION OF LAW. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE INTEREST PAID BE ALLOWED TO THE APPELLANT 21. THIS ISSUE IS ALSO COVERED AGAINST THE ASSESSEE VIDE FINDINGS OF THE TRIBUNAL GIV EN IN THE OWN CASE OF THE ASSESSEE IN ITA NO.5935/MUM/2006 FOR ASSE SSMENT YEAR 2003 - 04 VIDE PARA 11, WHICH IS REPRODUCED AS UNDER: 11. GROUND NO.8 PERTAINS TO THE ACTION OF AO OF DISALLOWING THE AMOUNT OF RS. 3,03,477 / - BEING THE INTEREST PAID TO SSI UNI TS ON DELAYED PAYMENTS. THE LEARNED COUNSEL FAIRLY ADMITTED THAT THIS ISSUE STANDS COVERED AGAINST ASSESSEE IN ASSESSEES OWN CASE IN EARLIER AYS. AFTER GOING THROUGH THE ORDERS PASSED BY THE ITAT IN 2001 - 02 AND 2002 - 03, WE FIND THAT THE TRIBUNAL HAS RECOR DED A FINDING THAT THIS ISSUE STANDS COVERED AGAINST ASSESSEE IN ASSESSEES OWN CASE FROM AYS 1990 - 01 ONWARDS. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 15 IN VIEW OF THE ADMITTED POSITION, THIS ISSUE IS DECIDED AGAINST ASSESSEE AND THE GROUND IS REJECTED. 2 2 . RESPECTFULLY FOLLOWING THE CONSISTENT FINDINGS GIVEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS ON THIS ISSUE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. GROUND NO.X GROUND N O.X OF THE APPEAL OF THE ASSESSEE READ AS UNDER: DISALLOWANCE OF PROVISION IN RESPECT OF DIFF ERENCE OF ELECTRICITY DUTY ON COLONY CONSUMPTION PAYABLE TO CSEB AND PROVISON FOR REIMBURSEMENT TO CONSIGNMENT AGENT ON ACCOUNT OF ENTRY TAX, ETC.RS.2,73,79,585/ - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF DISALLOWING PROVISION MA D E IN RESPECT OF DIFFERENCE BETWEEN ELECTRICITY DUTY ON COLONY CONSUMPTION PAYABLE TO CSEB AND PROVISION FOR REIMBURSEMENT TO CONSIGNMENT AGENT ON ACCOUNT OF ENTRY TAX, ETC, ON THE GROUND THAT IT IS CONTINGENT I N NATURE. THE CIT (A) HAS DIRECTED THE AO TO ALLOW ONLY ACTUAL PAYMENTS AND WHEN MADE BY THE APPELLANT OUT OF THE AFORESAID PROVISION IN SUBSEQUENT YEARS. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE PROVISION BE ALLOWED TO THE APPELLANT, INSTEAD OF AC TUAL PAYMENT AS AND WHEN MADE BY THE APPELLANT. 2 3 . THIS ISSUE CAME INTO CONSIDERATION BEFORE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO.5935/MUM/2006. WHILE DECIDING THE SAID ISSUE THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ABOVE SAID APPEAL OBSERVED AS UNDER: 12. GROUND NO.9 PERTAINS TO THE ACTION OF AO IN DISALLOWING PROVISIONS IN RESPECT OF DIFFERENCE OF ELECTRICITY DUTY ON COLONY CONSUMPTION PAYABLE TO MPEB/CSEB ETC., FOR `.86,74,603 ON THE GROUND TH AT IT WILL BE ALLOWED ON PAYMENT BASIS IN SUBSEQUENT YEARS. THE LEARNED COUNSEL POINTED OUT THAT THIS ISSUE HAS BEEN RESTORED TO THE ASSESSING OFFICER WITH A DIRECTION IN THE APPEAL FOR THE ASSESSMENT YEAR 2001 - 02, WHEREIN THE TRIBUNAL HAS DIRECTED THE ASS ESSING OFFICER TO ALLOW THE EXPENDITURE ON PAYMENT BASIS. THE RELEVANT OBSERVATION AND FINDING OF THE TRIBUNAL IN THE ASSESSMENT YEAR2001 - 02, READS AS UNDER: '28 . THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN PRECEDING YEARS WHER EIN THE AO WAS DIRECTED TO ALLOW THE EXPENDITURE ON PAYMENT BASIS CONSISTENTLY, WHATEVER SYSTEM OF ACCOUNTING IS ADOPTED BY THE ASSESSEE, IS TO BE FOLLOWED YEAR TO YEAR. AFTER CONSIDERING THAT THE ISSUE HAS NOT BEEN DECIDED BY THE AO ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 16 IN THE PRECEDING YEAR AND THE SAME FINDING IS TO BE ADOPTED HEREIN AS WELL, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR ADJUDICATION. GROUND NO. 8 IS ALLOWED FOR STATISTICAL PURPOSES.' 12.1 THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THIS ISSUE IS RES TORED TO THE FILE OF THE ASSESSING OFFICER WITH A SIMILAR DIRECTION AND TO ADJUDICATE THE SAME AFTER GETTING THE DETAILS FROM THE ASSESSEE. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 24. SINCE IN THE EARLIER YEARS, THE ISSUE HAS ALREADY BEEN RESTORED BACK TO THE FILE OF THE A.O., SO IT WILL BE JUST AND PROPER FOR THIS YEAR ALSO TO DIRECT THE A.O. TO DECIDE THE SAME AS PER THE DIRECTIONS GIVEN BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEARS RELATING TO THE SAME ISSUE. HEN CE, THIS ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. AND THE A.O. IS DIRECTED TO DECIDE THE SAME IN TERMS OF THE ORDER DATED 12.06.13 OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL AS REPRODUCED ABOVE. GROUND NO.XI THIS GROUND OF APPEAL IS REPRODUCED AS UND ER: DISALLOWANCE OF DEDUCTION UNDER CHAPTER VI - A OF THE ACT 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT GIVING FINDING AS TO WHETHER AFTER GIVING EFFECT TO THE ORDERS OF ALL THE APPELLATE AUTHORITIES, IF THE GROS S TOTAL INCOME TURNS OUT TO BE POSITIVE, THEN, IN THAT CASE, TO THE EXTENT OF GROSS TOTAL INCOME, THE DEDUCTION UNDER CHAPTER VI - A BE ALLOWED TO THE APPELLANT UNDER THE RELEVANT SECTIONS THEREOF WHEREVER APPLICABLE. 2 5 . THIS GROUND IS CONSEQUENTIAL I N NATURE. NO FINDING IS REQUIRED ON THIS ISSUE AT THIS STAGE. THE ASSESSEE WILL BE AT LIBERTY TO PUT HIS CASE ON THIS ISSUE, IF NEED BE, BEFORE THE A.O. AND OBIVIOUSLY THE A.O. WILL DECIDE THE SAME IN ACCORDANCE WITH LAW. GROUND NO. XII GROUND NO.XII OF TH E APPEAL IS REPRODUCED AS UNDER: DEDUCTION UNDER SECTION 80HHC OF THE ACT 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT CONSIDERING THE CLAIM FOR DEDUCTION U/S.80HHC OF THE ACT ON THE GROUND THAT AS PER NORMAL COMPU TATION OF INCOME THE APPELLANT HAS NO PROFIT. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT THE LOWER AUTHORITY/IES BE DIRECTED TO CONSIDER THE CLAIM U/S. 80HHC OF THE ACT. IF THE COMPUTATION UNDER THE HEAD BUSINESS INCOME TURNS OUT TO BE POSITIVE AFTER G IVING EFFECT TO ORDERS OF APPELLATE AUTHORITIES. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 17 2 6 . THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE FOR THE ASSESSMENT YEAR 2003 - 0 4 WITH THE FINDINGS OF THE TRIBUNAL GIVEN IN ITA NO.5935/MUM/2006 VIDE PARAS 14 TO 14.1 WHICH ARE REPROD UCED AS UNDER: 14. GROUND NO.11 PERTAINS TO DISALLOWING THE DEDUCTION UNDER SECTION 80HHC ON THE ALLEGED REASON THAT THE INCOME AS PER NORMAL COMPUTATION IS NIL AND ACCORDINGLY NO DEDUCTION IS ALLOWED UNDER SECTION 80HHC WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB. 14.1 AFTER GOING THROUGH THE FINDINGS OF THE CIT (A) AS WELL AS AO WE FIND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF AJANTA PHARMA VS. CIT (327 ITR 305)(SC). IN EA RLIER YEAR ALSO THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE FOLLOWING THE ITAT SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. IS SYNCOME FORMULATIONS (I) LTD.292 ITR (AT) 144 (MUM)(SB) WHICH IN TURN WAS APPROVED BY THE HONBLE SUPREME COURT IN THE CASE OF AL KABIR EXPORTS LTD. IN VIEW OF THE SETTLED POSITION OF THE LAW, AO IS DIRECTED TO WORKOUT THE 80HHC DEDUCTIONS ON THE BOOK PROFITS SEPARATELY AND ALLOW THE SAME. GROUND IS CONSIDERED ALLOWED. 2 7 . SO RESPECTFULLY FOLLOWING THE FINDING OF THE LD. CO - OR DINATE BENCH OF THIS TRIBUNAL RELATING TO EARLIER ASSESSMENT YEAR, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.XIII ( A) 28. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS WHETHER THE SALES TAX IS TO BE EXCLUDED FROM THE TOTAL TURNOVER WH ILE COMPUTING U/S.80HHC OF THE ACT. THE GROUND NO. XIII(A) OF THE APPEAL READ AS UNDER: ADDITION OF SALES TAX TO THE TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT GIV ING ANY FINDING AS TO WHETHER SALES TAX BE TREATED AS PART OF TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC OF THE ACT. THE APPELLANT PRAYS THAT THE SALES TAX BE NOT TREATED AS PART OF TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. 2 9 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD. IT MAY BE OBSERVED THAT T HE CO - ORDINATE BENCH OF THE TRIBUNAL IN BANCO PRODUCTS (INDIA) LTD. ITA NO.1450/AHD/2006 DATED 30 - 6 - 2010 FOLLOWING THE DECISION OF APEX COURT IN THE CASE O F LAKSHMI MACHINE WORKS, HAS DISMISSED THE REVENUE'S APPEAL BY HOLDING AS UNDER: - ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 18 ' 8. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS (2007) 290 ITR 667(SC), WHEREIN THE HON'BLE APEX COURT HAS HELD AS UNDER: - 'IN FACT, IN CIVIL APPEAL NO.4409 OF 2005, THE ABOVE PROPOSITION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER (SEE: PAGE NO.24 OF THE PAPER BOOK), IF SO, THE N EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE 'TOTAL TURNOVER' UNDER SECTION 80HHC(3), OTHERWISE THE FORMULA BECOMES UNWORKABLE. IN OUR VIEW, SALES TAX AND EXCISE DUTY ALSO DO NOT HAVE ANY ELEMENT OF 'TURNOVER' WHICH IS THE POSITION EVEN IN THE CASE OF RENT, COMMISSION, INTEREST ETC., IT IS IMPORTANT TO BEAR IN MIND THAT EXCISE DUTY AND SALES TAX ARE INDIRECT TAXES. THEY ARE RECOVERED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT. THEREFORE, IF THEY ARE MADE RELATABLE TO EXPORTS, THE FORMULA UNDER SECTION 80HHC WOULD BECOME UNWORKABLE. THE VIEW WHICH WE HAVE TAKEN IS IN THE LIGHT OF THE AMENDMENTS MADE TO SECTION 80HHC FROM TIME TO TIME.' 30 . SINCE THE ISSUE BEFORE US IS SQUARELY COVERED BY THE ABOVE NOTED DECISIONS, HENCE RESPECTFULLY FOLLOWING DEC ISION OF HON'BLE APEX COURT AND OF CO - ORDINATE BENCH IN ITA NO.1450/AHD/2006 WE CONFIRM THE ORDER OF THE CIT (A) AND ACCORDINGLY THIS GROUND OF THE REVENUE IS DISMISSED. GROUND NO. XIII B GROUND NO. XIII B IS REPRODUCED AS UNDER: 1 . ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT GIVING ANY FINDING AS TO WHETHER THE AMOUNT RECEIVED ON ACCOUNT OF DEPB IS COVERED U/S. 28 (IIIA), (IIIB) OR (IIIC) OF THE ACT OR NOT. 2 . THE APPELLANT PRAYS THAT IT BE HELD THAT PROFIT ON S ALE OF DEPB BE TREATED AS U/S. 28 (IIIA), (IIIB) OR (IIIC) FOR THE PURPOSE OF CALCULATING DEDUCTION U/S. 80HHC OF THE ACT. 3 . WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT PRAYS THAT ITS CLAIM FOR DEPB INCENTIVE BE ALLOWED IN ACCORDANCE WITH THE PROVISIONS O F SECTION 80HHC OF THE ACT. 31 . LEARNED AR HAS BROUGHT OUR ATTENTION TO THE LAW LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT, 342 ITR 49, WHERE IN THE HONBLE SUPREME COURT HAS OBSERVED THAT THE OBJECTIVE OF DEPB IS TO NEU TRALISE THE INCIDENCE OF CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCTS. HENCE, IT HAS DIRECT NEXUS WITH THE COST OF THE IMPORTS MADE BY AN EXPORTER FOR MANUFACTURING THE EXPORT PRODUCTS. THE COST OF CUSTOMS DUTY IS NEUTRALIZED UNDER THE DEPB ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 19 SC HEME, BY GRANTING A DUTY CREDIT AGAINST THE EXPORT PRODUCT AND THIS CREDIT CAN BE UTILISED FOR PAYING CUSTOMS DUTY ON ANY ITEM WHICH IS FREELY IMPORTABLE. DEPB IS CASH ASSISTANCE RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER THE SCHEME OF THE GOVERNMENT OF INDIA AND FALLS UNDER SECTION 28(IIIB) OF THE ACT. ACCORDINGLY, DEPB IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION EVEN BEFORE IT IS TRANSFERRED BY THE TAXPAYER. UNDER SECTION 28(IIID) OF THE ACT, ANY PROFIT O N TRANSFER OF DEPB IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS AN ITEM SEPARATE FROM CASH ASSISTANCE UNDER SECTION 28(IIIB) OF THE ACT. THE FACE VALUE OF THE DEPB WILL FALL UNDER SECTION 28(IIIB) OF THE ACT, THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALUE OF THE DEPB WILL FALL UNDER SECTION 28(IIID) OF THE ACT. THE COST OF ACQUIRING DEPB IS NOT NIL BECAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT AND THE DEPB WHICH ACCRUES TO A PERSON AGAINST EXPORTS HAS A COST ELEMENT IN IT. THIS ISSUE IS THUS DECIDED ACCORDINGLY. THE A.O. IS DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH THE LAW LAI D DOWN BY THE SUPREME COURT IN THE CASE OF TOPMA N EXPORTS VS. CIT, 342 ITR 49, AS DISCUSSED ABOVE. GROUND NO.XIV THIS GROUND OF APPEAL IS REPRODUCED AS UNDER: ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF PASSING ORDER OF INITIATI NG PENALTY PROCEEDINGS U/S. 28 (IIIA), (IIIB) OR (IIIC)ACCOUNT OF DEPB IS COVERED U/S. 271 (1)(C) OF THE ACT OR NOT. 32 . IT IS ADMITTED FACT THAT NO PENALTY PROCEEDINGS YET HAVE BEEN INITIATED AGAINST THE ASSESSEE. MOREOVER, THE ISSUE RELATING TO W HETHER PENALTY IMPOSED UNDER A PARTICULAR HEAD IS JUSTIFIED OR NOT IS TO BE DECIDED IN THE PENALTY ORDER ITSELF. SO THIS ISSUE RAISED BEFORE US DOES NOT LIE AT THIS STAGE AND THE SAME IS DISMISSED BEING PRE - MATURED. GROUND NO.XV OF THE APPEAL IS GENERAL IN NATURE. ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 20 ITA NO. 1454/MUM/08 THE REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 IN ITS GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.13,70,98,459/ - MADE BY THE AO IN R ESPECT OF ARREARS OF DEPRECIATION FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT EVEN THOUGH THE HONBLE ITAT IN ASSESSEES OWN CASE VIDE THEIR ORDER DATED 26.04.07 IN ITA NO.1503/BOM/95 FOR A.Y. 1988 - 89 AND ITA NO.8153/BOM/1995 FOR A.Y. 1989 - 90 HAVE CONFIRMED THE ACTION OF THE AO IN THIS ISSUE. 3 3. IT MAY BE OBSERVED THAT SIMILAR TYPE OF ISSUE CAME FOR CONSIDERATION BEFORE THE HONBLE BOMBAY HIGH COURT IN CASE OF KIN ETIC MOTOR CO. LTD. REPORTED AT ( 2003 ) 262 ITR 330 (BOM.) . TH E HONBLE HIGH COURT WHILE DEALING WITH THE ISSUE IN PARAGRAPH 10 OF THE JUDGMENT HAS OBSERVED AS UNDER: 10. THE SHORT QUESTION THAT ARISES FOR CONSIDERATION IN THIS TAX APPEAL IS WHETHER IT IS OPEN TO THE AO TO MAKE ADJUSTMENT TO THE BOOK PROFITS B EYOND WHAT IS AUTHORIZED BY THE DEFINITION GIVEN IN EXPLANATION TO S.115J OF THE IT ACT, IF THE ACCOUNTS ARE PREPARED AND CERTIFIED TO BE IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. IN THE CASE OF APOLLO TYRES LTD. (SUPR A), THE APEX COURT HELD THAT WHILE COMPUTING THE INCOME UNDER S. 115J OF THE IT ACT, THE AO HAS ONLY POWER TO EXAMINE WHETHER THE BOOKS OF ACCOUNT WERE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WI TH THE COMPANIES ACT. IT IS FURTHER HELD THAT THE AO THEREAFTER HAS LIMITED POWERS OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. THE APEX COURT FURTHER HELD THAT THE AO DOES NOT HAVE THE JURISDICTION TO GO BEY OND THE NET PROFITS SHOWN IN THE P&L A/C, EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO S.115J OF THE IT ACT. IN THE INSTANT CASE, THE ACCOUNTS MAINTAINED BY THE ASSESSEE ARE CERTIFIED BY THE AUDITORS. UNDER THE CIRCUMSTANCES, THE BOOK ADJUSTMENT M ADE BY THE AO BEING CONTRARY TO THE DECISION OF THE APEX COURT, QUESTION NO.1 IS ANSWERED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 34 . IN VIEW OF THE FINDING GIVEN BY THE HONBLE HIGH COURT FOLLOWING THE LAW LAID DOWN BY THE HONBLE APEX COURT IN APOLLO TYRES LTD. VS. CIT (2002) 174 CTR (SC) 521 : (2002) 255 ITR 273 (SC), THIS ISSUE IS DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE AND FINDING OF THE LD. CIT( A) IN RESPECT OF THE SAID ISSUE ARE HEREBY UPHELD. GROUND NO.2 2. ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN HOLDING THAT TAX ON PROFIT DISTRIBUTED AS DIVIDEND U/S. 115 - O IS ALLOWABLE AS A DEDUCTION IN COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 21 35 . I T MAY BE OBSERVED THAT SIMILAR ISS UE CAME INTO CONSIDERATION OF THE KOLKATA BENCH OF THE TRIBUNAL IN ASSTT. CIT VS BALARAMPUR CHINI MILLS LTD. (2007) 109 ITD 146 (KOL), AND WHILE DEALING WITH THE ISSUE, THE COORDINATE BENCH OF THE K OLKATA T RIBUNAL HAS HELD THAT TAX ON PROFIT DISTRIBUTED AS DIVIDEND U/S. 115 - O IS ALLOWABLE AS DEDUCTION IN COMPUTATION OF BOOK PROFITS FOR THE PURPOSE OF SECTION 115JB OF THE ACT AND, THEREFORE, TAX ON PROFIT DISTRIBUTED AS DIVIDEND U/S. 115 - O IS REQUIRED TO BE REDUCED WHILE COMPUTING THE BOOK PROFITS U/S. 11 5JB OF IT A CT. THE RELEVANT FINDING S ARE REPRODUCED AS UNDER: 34. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF TAX AUTHORITIES. WE HAVE ALSO CONSIDERED THE PAPER BOOK FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WRITTEN SUBMISSIONS BY THE LEARNED DR AND THE CIRCULAR NO. 8 DATED 29 - 8 - 2005 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES. THE REVENUE IN THIS CASE HAS OBJECTED TO THE CLAIM OF THE ASSESSEE THAT TAX ON DIVIDEND DISTRIBUTED UNDER SE CTION 115 - O SHOULD BE DEDUCTED FROM THE NET PROFIT FOR DETERMINING BOOK PROFIT UNDER SECTION 115JB. IT HAS BEEN CONTENDED BY THE LEARNED D.R. THAT TAX ON DISTRIBUTED PROFIT COULD NOT BE TREATED AT PAR WITH FRINGE BENEFIT TAX AND, THEREFORE, THE ACTION OF L EARNED COMMISSIONER (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO ALLOW SUCH CLAIM IS NOT CORRECT. 35. IN THIS CASE, AS PER THE OBJECTION OF REVENUE THE SPECIFIED ADDITION TO BE MADE TO THE NET PROFIT TO ARRIVE AT BOOK PROFIT ON WHICH THE TAX ON PROFIT DISTRIBUTED AS DIVIDEND TO THE PROFIT AND LOSS ACCOUNT CAN BE COVERED UNDER CLAUSE (A) TO THE EXPLANATION TO SUB - SECTION (2) OF SECTION 115JB. HOWEVER, OBSERVING THE NATURE OF PAYMENT, WE ARE OF THE CONSIDERED OPINION THAT SUCH TAX ON DISTRIBUTED PROFIT A S DIVIDEND COULD NOT BE COVERED UNDER THE SAID CLAUSE AS THERE ARE BASIC FUNDAMENTAL DIFFERENCES BETWEEN INCOME TAX PAID OR PAYABLE AND TAX ON PROFIT DISTRIBUTED. SINCE INCOME TAX IS PAYABLE ON THE INCOME EARNED BY THE ASSESSEE, TAX ON DIVIDEND AS PER THE PROVISION OF SECTION 115 - O IS PAID AT THE TIME OF DISTRIBUTION OF PROFIT IN THE FORM OF DIVIDEND I.E., AT THE TIME OF APPLICATION OF THE INCOME ON WHICH INCOME TAX HAS ALREADY BEEN PAID. FURTHERMORE AS PER SUB - SECTION (2) OF SECTION 115 - O MAKES IT CLEAR TH AT TAX ON DISTRIBUTION OF PROFIT HAS TO BE PAID BY A DOMESTIC COMPANY EVEN IF NO INCOME TAX IS PAYABLE IN THE YEAR IN WHICH DIVIDEND IS DISTRIBUTED BY THE COMPANY. WE HAVE ALSO CONSIDERED THE ORDER OF TRIBUNAL, PANAJI BENCH IN THE CASE OF SALGAOCAR MINING IND. (P.) LTD. (SUPRA), WHEREIN INTEREST ON INCOME TAX WAS EXCLUDED FROM THE SAID CLAUSE AS BOTH WERE TO BE TREATED SEPARATELY. SINCE IN THE PRESENT CASE ALSO, TAX ON DISTRIBUTED PROFIT IS DIFFERENT THAN INCOME TAX PAYABLE, THE SAME CANNOT BE COVERED UNDER CLAUSE (A) TO EXPLANATION TO SUB - SECTION (2) OF SECTION 115JB. 36. SO FAR AS THE ACTION OF LEARNED COMMISSIONER (APPEALS) IN DELETING THE ADDITION FOLLOWING THE CIRCULAR NO. 8 DATED 29 - 8 - 2005 BY CBDT, IN OUR CONSIDERED OPINION, SUCH ACTION OF LEARNED CO MMISSIONER (APPEALS) WAS BASED ON THE CORRECT APPRECIATION OF THE SPIRIT OF THE CIRCULAR. IN OUR CONSIDERED OPINION ON DISTRIBUTION OF PROFIT PAYABLE AS PER PROVISION OF SECTION 115 - O OF THE ACT IS OF SIMILAR NATURE AS FRINGE BENEFIT TAX PAYABLE UNDER CHAP TER XII - H OF THE ACT, SINCE BOTH ARE PAYABLE AT THE TIME OF INCURRING ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 22 CERTAIN EXPENDITURE WHICH IS IN THE FORM OF FRINGE BENEFIT GIVEN TO EMPLOYEES OR DIVIDEND TO SHAREHOLDERS WHICH ARE NOT OTHERWISE TAXABLE UNDER THE OTHER PROVISIONS OF THE ACT. THEREFORE , IN OUR CONSIDERED OPINION, BOTH FRINGE BENEFIT TAX AND TAX ON DISTRIBUTION OF PROFIT ARE SIMILAR IN NATURE. SINCE CIRCULAR NO. 8 DATED 29 - 8 - 2005 ISSUED BY THE CBDT MAKES IT CLEAR THAT FRINGE BENEFIT TAX IS AN ALLOWABLE DEDUCTION IN THE COMPUTATION OF BOO K PROFIT UNDER SECTION 115JB OF THE ACT WHILE DEALING IN QUESTION NO. 103, A COPY OF WHICH IS ALSO AVAILABLE ON RECORD, IN OUR CONSIDERED OPINION, THE LEARNED COMMISSIONER (APPEALS) HAS RIGHTLY TREATED THE TAX ON PROFIT DISTRIBUTED AS DIVIDEND IN SIMILAR M ANNER AS FRINGE BENEFIT TAX AND HAS THEREAFTER RIGHTLY DIRECTED THE ASSESSING OFFICER NOT TO ADD BACK SUCH TAX ON DISTRIBUTED PROFIT IN THE COMPUTATION OF BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB. WE, THEREFORE, DO NOT SEE ANY REASON TO INTERFERE WITH SUCH ORDER OF LEARNED COMMISSIONER (APPEALS) AND ACCORDINGLY UPHOLD HIS ORDER AND REJECT THE GROUNDS RAISED BY THE REVENUE. 37. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 36 . S INCE THE ISSUE INVOLVED IS SQUARELY COVERED BY THE ABOVE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL, HENCE RESPECTFULLY FOLLOWING THE RATIO OF LAW LAID DOWN IN THE ABOVE SAID AUTHORITY, WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE CIT(A) ON THIS ISSUE AND AS SUCH THE SAME IS UPHELD. GROUND NO.3 GROUND NO.3 OF THE R EVENUES APPEAL IS REPRODUCED AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN HOLDING THAT DEDUCTION U/S. 80HHC FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S. 115JB SHOULD BE CALCULATED ON ADJUSTED BOOK PROFIT EVEN THOUGH CLAUSE (IV) OF EXPLANATION BELOW SECTION 115JB PROVIDED FOR COMPUTATION OF DEDUCTION U/S. 80HHC UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB - SECTION (3) OR SUB - SECTION (3A) OF SECTION 80HHC, WHICH IS NIL IN THIS CAS E. 37 . THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE VIDE FINDINGS OF THE TRIBUNAL GIVEN IN THE OWN CASE OF THE ASSESSEE IN ITA NO.5935/MUM/2006 FOR THE ASSESSMENT YEAR 2003 - 04 , W HICH FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER: 14. GROUND NO.11 PERTA INS TO DISALLOWING THE DEDUCTION UNDER SECTION 80HHC ON THE ALLEGED REASON THAT THE INCOME AS PER NORMAL COMPUTATION IS NIL AND ACCORDINGLY NO DEDUCTION IS ALLOWED UNDER SECTION 80HHC WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB. 14.1 AFTER GOING THROUGH THE FINDINGS OF THE CIT (A) AS WELL AS AO WE FIND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE ITA NO . 1073/MUM/08 & ITA NOS.1454/MUM/08 M/S. CENTURY TEXTILES AND INDUSTRIES LTD. 23 CASE OF AJANTA PHARMA VS. CIT (327 ITR 305)(SC). IN EARLIER YEAR ALSO THIS ISSUE IS COVERED I N FAVOUR OF ASSESSEE FOLLOWING THE ITAT SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. IS SYNCOME FORMULATIONS (I) LTD.292 ITR (AT) 144 (MUM)(SB) WHICH IN TURN WAS APPROVED BY THE HONBLE SUPREME COURT IN THE CASE OF AL KABIR EXPORTS LTD. IN VIEW OF THE SE TTLED POSITION OF THE LAW, AO IS DIRECTED TO WORKOUT THE 80HHC DEDUCTIONS ON THE BOOK PROFITS SEPARATELY AND ALLOW THE SAME. GROUND IS CONSIDERED ALLOWED. 38 . SO RESPECTFULLY FOLLOWING THE FINDING OF THE LD. CO - ORDINATE BENCH OF THIS TRIBUNAL RELATIN G TO EARLIER ASSESSMENT YEAR, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 39. GROUND NO S .4 & 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY FINDING . 40 . IN VIEW OF OUR SEPARATE FINDINGS GIVEN ON EACH ISSUE OF THE ABOVE NOTED APPEALS, THE APPEA L OF THE ASSESSEE IS PARTLY ALLOWED WHER E AS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.08. 2013. SD/ - SD/ - ( P.M. JAGTAP ) ( SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.08. 2013. * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MU MBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.