SKM Egg Products Export (India) Limited, Erode V. ACIT, Erode

ITA 1522/CHNY/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4202 (ITAT-CHENNAI)
• Duration Of Justice: 6 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 16-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M N MAURYA
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , ! , ! & BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.83/MDS/2010 /ASSESSMENT YEAR: 2002-03 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.86/MDS/2010 /ASSESSMENT YEAR: 2002-03 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. VS. M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., NO.180, GANDHIJI ROAD, ERODE-638 001. [PAN: AACCS 7106 G] ( ( /APPELLANT) ( )*( /RESPONDENT) CROSS - OBJECTION NO . 8 /MDS/20 10 (IN ITA NO.86/MDS/2010) /ASSESSMENT YEAR: 2002-03 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 2 -: ./ ITA NO.84/MDS/2010 /ASSESSMENT YEAR: 2003-04 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.87/MDS/2010 /ASSESSMENT YEAR: 2003-04 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. VS. M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., NO.180, GANDHIJI ROAD, ERODE-638 001. [PAN: AACCS 7106 G] ( ( /APPELLANT) ( )*( /RESPONDENT) CROSS - OBJECTION NO . 9 /MDS/20 10 (IN ITA NO.87/MDS/2010) /ASSESSMENT YEAR: 2003-04 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.1521/MDS/2010 /ASSESSMENT YEAR: 2004-05 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 3 -: ./ ITA NO.1577/MDS/2010 /ASSESSMENT YEAR: 2004-05 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. VS. M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE-638 001 [PAN: AACCS 7106 G] ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.1966/MDS/2011 /ASSESSMENT YEAR: 2005-06 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.85/MDS/2010 /ASSESSMENT YEAR: 2006-07 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.88/MDS/2010 /ASSESSMENT YEAR: 2006-07 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. VS. M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., NO.180, GANDHIJI ROAD, ERODE-638 001. [PAN: AACCS 7106 G] ( ( /APPELLANT) ( )*( /RESPONDENT) ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 4 -: CROSS - OBJECTION NO . 10 /MDS/20 10 (IN ITA NO.88/MDS/2010) /ASSESSMENT YEAR: 2006-07 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 185, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.828/MDS/2010 /ASSESSMENT YEAR: 2007-08 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 156, GANDHI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )* ( /RESPONDENT) ./ ITA NO.1522/MDS/2010 /ASSESSMENT YEAR: 2007-08 M/S.SKM EGG PRODUCTS EXPORT (INDIA) LTD., 156, CHENNIMALAI ROAD, ERODE [PAN: AACCS 7106 G] VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. ( ( /APPELLANT) ( )*( /RESPONDENT) ASSESSEE BY : MR.G. BASKAR, ADV. DEPARTMENT BY : MR.M.N.MAURYA, CIT , /DATE OF HEARING : 20.06.2017 , /DATE OF PRONOUNCEMENT : 20.06.2017 / O R D E R PER BENCH : ITA NO.83/MDS/2010 IS AN APPEAL FILED BY THE ASSES SEE AND ITA NO.86/MDS/2010 IS AN APPEAL FILED BY THE REVENUE A GAINST THE ORDER OF ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 5 -: THE LD.CIT(A)-1, COIMBATORE, IN APPEAL NO.237/08-09 DATED 09.11.2009 FOR THE AY 2002-03. CO NO.8/MDS/2010 IS A CROSS OB JECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL NO.86/MDS/2010. ITA NO.84/MDS/2010 IS AN APPEAL FILED BY THE ASSESSEE AND ITA NO.87/MD S/2010 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CI T(A)-1, COIMBATORE, IN APPEAL NO.239/08-09 DATED 09.11.2009 FOR THE AY 200 3-04 AND CO NO.9/MDS/2010 IS A CROSS OBJECTION FILED BY THE ASS ESSEE IN THE REVENUES APPEAL NO.87/MDS/2010. ITA NO.1521/MDS/2010 IS AN APPEAL FILED BY THE ASSESSEE AND ITA NO.1577/MDS/2010 IS AN APPEAL FILE D BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(A)-1, COIMBATORE, I N APPEAL NO.135/09-10 DATED 14.07.2010 FOR THE AY 2004-05. ITA NO.1966/M DS/2011 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF T HE LD.CIT(A)-1, COIMBATORE, IN APPEAL NO.180/10-11 DATED 22.09.2011 FOR THE AY 2005- 06. ITA NO.85/MDS/2010 IS AN APPEAL FILED BY THE A SSESSEE AND ITA NO.88/MDS/2010 IS AN APPEAL FILED BY THE REVENUE AG AINST THE ORDER OF THE LD.CIT(A)-1, COIMBATORE IN APPEAL NO.238/08-09 DATE D09.11.2009 FOR THE AY 2006-07. CO NO.10/MDS/2010 IS A CROSS OBJECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL IN ITA NO.88/MDS/2 010. ITA NO.828/MDS/2010 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S.263 BY THE LD.CIT(A)-2, COIMBATORE IN C. NO.220(2)/CIT II/CBE/09-10 DATED 31.03.2010 FOR THE AY 2007-08. ITA NO.1522/MDS/2010 IS AN APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 6 -: THE LD.CIT(A)-1, COIMBATORE IN APPEAL NO.172/09-10 DATED 30.07.2010 FOR THE AY 2007-08. 2. SHRI M.N.MAURYA, CIT, REPRESENTED ON BEHALF OF T HE RESPONDENT AND SHRI G. BASKAR, ADV., REPRESENTED ON BEHALF OF THE APPELLANTS. ITA NO.83/MDS/2010 FOR THE AY 2002-03: 3. IT WAS A SUBMISSION THAT GROUND NO.1 WAS AGAINST THE RE-OPENING OF THE ASSESSMENT. THE ASSESSEE DID NOT RAISE ANY SPE CIFIC ARGUMENTS AGAINST THE RE-OPENING. CONSEQUENTLY, THE SAME IS STANDS REJECTED. 4. IN REGARD TO GROUND NOS.2 TO 4, IT WAS A SUBMISS ION THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) IN UPHOLDIN G THE ACTION OF THE AO IN SETTING OFF THE LOSES RELATING TO THE EARLIER YE ARS AGAINST THE CURRENT YEARS PROFITS FOR THE PURPOSE OF COMPUTING THE DED UCTION U/S.10B OF THE ACT. IT WAS A SUBMISSION THAT THE ASSESSEE IS A CO MPANY WHICH WAS SET UP DURING THE AY 1998-99 AS AN 100% EXPORT ORIENTED UN IT NEAR ERODE FOR MANUFACTURING OF EGG & EGG PRODUCTS. IT WAS A SUBM ISSION THAT FOR THE AYS 1998-99, 1999-00, 2000-01 & 2001-02, THE ASSESS EE WAS HAVING LOSSES AND CONSEQUENTLY HAD NOT CLAIMED THE DEDUCTI ON U/S.10B OF THE ACT. IT WAS A SUBMISSION THAT THE COMPANY EARNED PROFIT FOR THE FIRST TIME DURING THE AY 2002-03. CONSEQUENTLY, THE ASSESSEE HAD CLAIMED THE DEDUCTION U/S.10B OF THE ACT FOR THE FIRST TIME FOR THE AY 2002-03. THE AO ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 7 -: WHILE COMPUTING THE DEDUCTION U/S.10B OF THE ACT, H AD SET OFF THE BROUGHT FORWARD UNABSORBED DEPRECIATION AND BUSINESS LOSSES OF THE EARLIER YEARS AND SET OFF THE SAME AGAINST THE CURRENT YEARS PRO FITS. AS THE TOTAL INCOME AFTER SET OFF THE BROUGHT FORWARD LOSSES, WA S NIL, THE ASSESSEE WAS DENIED THE BENEFIT OF DEDUCTION U/S.10B OF THE ACT. IT WAS SUBMITTED BY THE LD.AR THAT FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.10B OF THE ACT DEDUCTION U/S.10B OF THE ACT, THE BROUGHT F ORWARD LOSSES WERE NOT LIABLE TO BE SET OFF. FOR THIS PROPOSITION, HE HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. YOKOGAWA INDIA LTD., REPORTED IN (2017) 291 CTR 0001 (SC) WH EREIN THE HONBLE SUPREME COURT IN PARA NO.17 OF THE ORDER AS HELD AS FOLLOWS: 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST PROVISO TO SECTIONS 10A(1); 10A (IA) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTE MPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKINGS HAS TO BE INDEPENDENTLY AND THEREFORE, IMMEDIATELY AFTER T HE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOM ES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OF AND CARRY FORWARD CONTAINED I N SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN U NDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM T HE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF T HE ASSESSEE IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTA NDING THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF TH E UNDERTAKING. 5. IT WAS A SUBMISSION THAT IN VIEW OF THE PRINCIPL ES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. YOKOGAW A INDIA LTD. REFERRED TO SUPRA, IT WAS A PRAYER THAT THE AO MAY BE DIRECT ED TO GRANT THE ASSESSEE, THE BENEFIT OF DEDUCTION U/S.10B BEFORE T HE SET OFF OF THE BROUGHT FORWARD LOSSES. ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 8 -: 6. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE AO & THE LD.CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD., WHICH HAS BEEN EXTRACTED ABOVE CLEARLY SHOWS THAT T HE BENEFIT OF DEDUCTION U/S.10B IS TO BE GRANTED AT THE STAGE OF THE PROFITS AND GAINS OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING ARRIVED AT INDEPENDENTLY. IN THESE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD., RE FERRED TO SUPRA, THE AO IS DIRECTED TO GRANT THE ASSESSEE, THE BENEFIT OF D EDUCTION U/S.10B WITHOUT SET OFF OF THE BROUGHT FORWARD LOSSES OF THE EARLIE R YEARS. 8. IN THE RESULT, GROUND NOS.2 TO 4 OF THE ASSESSEE APPEAL ARE STANDS ALLOWED. 9. IN REGARD TO GROUND NO.5 WHICH WAS AGAINST THE L EVY OF INTEREST U/S.234B, THE SAME IS CONSEQUENTIAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 9 -: 11. IN REGARD TO THE APPEAL FILED BY THE REVENUE IN ITA NO.86/MDS/2010 AND CROSS OBJECTION FILED BY THE ASSESSEE IN CO NO. 8/MDS/2010 AGAINST THE COMPUTATION OF THE BOOK PROFITS U/S.115JB. 12. IT WAS SUBMITTED BY THE LD.AR THAT WHEN COMPUTI NG THE BOOK PROFITS U/S.115JB OF THE ACT, THE ASSESSEE HAD SET OFF THE DEPRECIATION AS PER THE COMPANIES ACT BUT WHEN COMPUTING THE MAT U/S.115JB, THE AO HAD SUBSTITUTED THE DEPRECIATION AS PER THE COMPANIES A CT APPLIED BY THE ASSESSEE WITH THE DEPRECIATION AS PER THE IT ACT. IT WAS A SUBMISSION THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE APOLLO TYRES LTD. V. CIT REPORTED IN 255 ITR 273, THE AO COULD N OT TINKER WITH THE CALCULATION OF THE BOOK PROFITS U/S.115JB OF THE AC T. 13. IT WAS SUBMITTED BY THE LD.DR THAT THE LD.CIT(A ) HAD DIRECTED THE AO TO ALLOW THE DEDUCTION U/S.10B ON THE BOOK PROFI TS COMPUTED U/S.115JB OF THE ACT. IT WAS, HOWEVER, FAIRLY AGRE ED BY BOTH THE SIDES THAT AS THE DEDUCTION U/S.10B OF THE ACT COMPUTED W ITHOUT SETTING OFF BROUGHT FORWARD LOSSES OF THE EARLIER YEARS, IN VIE W OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. YOKOGAW A INDIA LTD. REFERRED TO SUPRA, THE ISSUE OF THE COMPUTATION OF BOOK PROF ITS U/S.115JB WOULD UNDERGO SUBSTANTIAL MODIFICATION. IT WAS A SUBMISS ION THAT THE ISSUE OF THE COMPUTATION OF BOOK PROFITS U/S.115JB COULD BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING THE ASSES SEE THE BENEFIT OF ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 10 -: DEDUCTION U/S.10B IN LINE WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND MERIT IN THAT. CONSEQUENTLY, THE COMPUTATION OF BOOK PROFITS U/S.1 15JB IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE CROSS OBJECTION FILE D BY THE ASSESSEE IS STANDS DISMISSED IN SO FAR AS IT IS IN SUPPORT OF T HE ORDER OF THE LD.CIT(A). ITA NO.84/MDS/2010 FOR THE AY 2003-04: 16. IN REGARD TO GROUND NO.1 AGAINST THE RE-OPENING , NO SERIOUS ARGUMENTS HAVE BEEN PLACED. CONSEQUENTLY, THE SAME STANDS DISMISSED. 17. IN REGARD TO GROUND NOS.2 TO 4 AGAINST THE ACTI ON OF THE LD.CIT(A) IN NOT GRANTING THE BENEFIT OF DEDUCTION U/S.10B BEFOR E THE SET OFF THE BROUGHT FORWARD LOSSES, SIMILAR TO GROUND NOS.2 TO 4 IN ITA NO.83/MDS/2010 FOR THE AY 2002-03, OUR FINDINGS IN GROUND NOS.2 TO 4 IN ITA NO.83/MDS/2010 FOR THE AY IN THE ASSESSEES APP EAL WOULD APPLY TO THESE GROUNDS. CONSEQUENTLY, GROUND NOS.2 TO 4 ARE STANDS ALLOWED. ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 11 -: 18. IN REGARD TO GROUND NO.5 AGAINST THE LEVY OF IN TEREST U/S.234B, THE SAME IS CONSEQUENTIAL. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 20. IN RESPECT OF ITA NO.87/MDS/2010 BEING THE APPE AL OF THE REVENUE AND THE CO NO.9/MDS/2010, IN LINE WITH OUR DECISION IN THE REVENUES APPEAL NO.86/MDS/2010 AND CO NO.10/MDS/2010 FOR THE AY 2002-03 IN THE ASSESSEES CASE, THE ISSUE OF THE COMPUTATION O F BOOK PROFIT U/S.115JB STANDS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDI CATION. CONSEQUENTLY, THE REVENUE APPEAL IN ITA NO.87/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND CO NO.9/MDS/2010 STANDS DISMISSED. 21. IN REGARD TO ITA NO.1520/2010 BEING THE ASSESSE ES APPEAL FOR THE AY 2004-05. IN RESPECT OF GROUND NOS.1 TO 3 BEING IN RESPECT OF DEDUCTION U/S.10B ON IDENTICAL FINDINGS AS GIVEN IN RESPECT OF GROUND NOS.2 TO 4 IN THE ASSESSEES APPEAL IN ITA NO.83/MD S/2010 FOR THE AY 2002-03, THE SAID GROUNDS STANDS ALLOWED. IN RESPEC T OF GROUND NO.4 AGAINST THE LEVY OF INTEREST U/S.234B, THE SAME IS CONSEQUENTIAL. IN REGARD TO THE ADDITIONAL GROUNDS IN RESPECT OF THE RE-OPEN ING, NO SERIOUS ARGUMENTS HAVING BEEN PLACED AND THE SAME STANDS DI SMISSED. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 12 -: 22. IN RESPECT OF THE REVENUE APPEAL FOR THE AY 200 4-05 IN ITA NO.1577/MDS/2010, THE ISSUE BEING AGAINST THE COMPU TATION OF BOOK PROFITS U/S.115JB, IN LINE WITH OUR DECISION IN THE REVENUES APPEAL IN ITA NO.86/MDS/2010 FOR THE AY 2002-03 IN THE ASSESSEE OWN CASE, THIS ISSUE IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATI ON. CONSEQUENTLY, THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 23. IN REGARD TO THE ASSESSEES APPEAL FOR THE AY 2 005-06 IN ITA NO.1966/MDS/2011 BEING IN RESPECT OF THE DEDUCTION U/S.10B, IN VIEW OF OUR DECISION IN ITA NO.83/MDS/2010 IN THE ASSESSEE S APPEAL FOR THE AY 2002-03, IN RESPECT OF GROUND NOS.2 TO 4, THE SAID GROUNDS ARE PARTLY ALLOWED. CONSEQUENTLY, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED. 24. IN RESPECT OF THE ASSESSEES APPEAL FOR THE AY 2006-07 IN ITA NO.85/MDS/2010, GROUND NOS.1 TO 3 IN RESPECT OF THE DEDUCTION U/S.10B, IN VIEW OF OUR FINDINGS IN THE ASSESSEES OWN CASE FOR THE AY 2002-03 IN RESPECT OF GROUND NOS.2 TO 4 OF ITA NO.83/MDS/2010, THE SAID GROUND NOS.1 TO 3 OF THE APPEAL STANDS ALLOWED. IN RESPEC T OF GROUND NO.4, WHICH IS AGAINST THE LEVY OF INTEREST U/S.234B, THE SAME IS CONSEQUENTIAL. 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 13 -: 26. IN RESPECT OF THE REVENUES APPEAL FOR THE AY 2 006-07 IN ITA NO.88/MDS/2010 AND THE ASSESSEES CROSS OBJECTION I N CO NO.10/MDS/2010 WHICH IS IN RESPECT OF COMPUTATION O F BOOK PROFITS U/S.115JB, IN VIEW OF OUR FINDINGS IN THE REVENUE A PPEAL IN THE ASSESSEES OWN CASE FOR THE AY 2002-03 IN ITA NO.86/MDS/2010, THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. 27. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CO FILED BY THE ASSESS ES STANDS DISMISSED. 28. IN RESPECT OF ITA NO.828/MDS/2010 FOR THE AY 20 07-08 WHICH WAS AGAINST THE ACTION OF THE LD.CIT-II, COIMBATORE, IN PASSING THE ORDER U/S.263, IT WAS SUBMITTED BY THE LD.AR THAT IN THE ORDER U/S.263, THE LD.CIT-II HAS DIRECTED THE AO TO DENY THE BENEFIT O F DEDUCTION U/S.10B IN RESPECT OF THE INTEREST EARNED BY THE ASSESSEE AS A LSO THE INTEREST SUBSIDY RECEIVED BY THE ASSESSEEE. IT WAS A SUBMISSION THA T THE ASSESSEE HAD RECEIVED INTEREST INCOME OF RS.30,67,412/- FROM THE ASSESSEES SISTER CONCERN AND ALSO FROM FIXED DEPOSIT WITH SBI AND FR OM ELECTRICITY DEPOSIT WITH TAMIL NADU ELECTRICITY BOARD. IT WAS A SUBMIS SION THAT THE WORDINGS OF SEC.10B WERE BUSINESS OF THE UNDERTAKING. THE INTEREST INCOME WAS LIABLE TO BE TREATED AS PART OF THE INCOME ELIGIBLE U/S.10B OF THE ACT. ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 14 -: 29. IT WAS A SUBMISSION THAT THE LD.CIT-II ERRED IN PASSING THE ORDER U/S.263 BY HOLDING THAT THE SAME WAS NOT ALLOWABLE WHEN COMPUTING THE DEDUCTION U/S.10B. 30. IN REPLY, LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT-II. 31. IT WAS A SUBMISSION THAT EARNING OF INTEREST WA S NOT THE BUSINESS OF THE ASSESSEE. 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE PROVISIONS OF SEC.10B(I) SHOWS THAT THE WORDS USED ARE DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY 100% EXPORT ORI ENT UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS .. 33. THE INTEREST INCOME HAS NOT BEEN EARNED BY THE ASSESSEE FROM THE EXPORT OF ANY ARTICLE OR THING. CONSEQUENTLY, IT D OES NOT FORM PART OF THE PROFITS AND GAINS AS DERIVED BY THE 100% EXPORT ORI ENT UNDERTAKING FROM THE EXPORT OF ANY ARTICLE OR THING. CONSEQUENTLY, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA REPORTED IN 371 ITR 218 AND ALSO DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DOLLAR APPARELS REPORTED IN 294 ITR 484, THE FIN DINGS OF THE LD.CIT ON THIS ISSUE STANDS CONFIRMED. HOWEVER, IT IS NOTICE D THAT THE ASSESSEE HAS SHOWN THE NET INTEREST OF ONLY RS.23,54,802/- DURIN G THE RELEVANT AY AFTER ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 15 -: REDUCING THE INTEREST INCOME OF RS.7,19,517/- WHICH HAS BEEN OFFERED AS AN INCOME IN THE EARLIER YEARS. THE ASSESSEE HAVIN G OFFERED INTEREST INCOME OF RS.7,19,817/- IN THE EARLIER YEARS, THE I NTEREST INCOME THAT IS TO BE CONSIDERED IS RS.23,54,802/-. THE ORDER OF THE L D.CIT-II PASSED U/S.263 ON THIS ISSUE STANDS MODIFIED TO THIS EXTEN T. 34. IN RESPECT OF THE ISSUE OF THE INTEREST SUBSIDY , IT WAS A SUBMISSION THAT THE ASSESSEE HAD RECEIVED AN INTEREST SUBSIDY OF RS.1,06,63,099/- REPRESENTING 4% OF THE INTEREST CHARGED BY THE BANK S ON THE BORROWINGS WHICH WAS REDUCED/WAIVED AS PER THE SCHEME ON ACCOU NT OF THE COMPANYS OPERATIONS BEING SEVERELY AFFECTED FOR TH E AY 2007-08 BY BIRD FLU. IT WAS A SUBMISSION THAT THE SUBSIDY RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF THE PROFITS AND GAINS OF THE ASSESSEE S BUSINESS AND WAS CONSEQUENTLY ENTITLED TO THE DEDUCTION U/S.10B OF T HE ACT. 35. IN REPLY, LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT-II PASSED U/S.263. 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SUBSIDY GRANTED TO THE ASSESSEE ON ACCOUNT OF THE BUSINESS OF THE ASSE SSEE BEING AFFECTED BY BIRD FLU IS NOT THE INCOME DERIVED BY THE ASSESSEE FROM THE EXPORT OF ANY ARTICLE/THING. THIS BEING SO, IN VIEW OF THE DECIS ION OF THE HONBLE ITA NOS.83 TO 88, 828, 1521-1522, 1577 & 1966/MDS/2010 & CO NOS.8 TO 10/MDS/2010 :- 16 -: SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD., RE FERRED TO SUPRA, THE FINDINGS OF THE LD.CIT-II ON THIS ISSUE STANDS CONF IRMED. 37. IN THE RESULT, THE APPEAL OF THE ASSESSE IS PAR TLY ALLOWED. 38. IN RESPECT OF THE ASSESSEES APPEAL IN ITA NO.1 522/MDS/2010 FOR THE AY 2007-08 WHICH WAS AGAINST THE COMPUTATION OF BOO K PROFITS U/S.115JB, IN VIEW OF OUR FINDINGS IN THE REVENUES APPEAL IN ITA NO.86/MDS/2010 FOR THE AY 2002-03, THE ISSUE OF COMPUTATION OF BOOK PR OFITS U/S.115JB IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. 39. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 20, 201 7, AT CHENNAI. SD/- SD/- ( ) ( S. JAYARAMAN ) ! / ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 1 /DATED: JUNE 20, 2017. TLN , )23 43 /COPY TO: 1. ( /APPELLANT 4. 5 /CIT 2. )*( /RESPONDENT 5. 3 ) /DR 3. 5 ( ) /CIT(A) 6. /GF