Dy. Commissioner of Income Tax, Circle-17(2), Hyderabad V. Visaka Industries Limited, Secunderabad

ITA 1631/Hyd/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6018 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 25-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GITENDER MANN
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Capital asset; Business income; Rule of consistency; Revenue expenditure; Capital expenditure
• Section: 143(3); 153A; 80IB; 37(1); 37

Judgement Text

ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1646 TO 1648/HYD/2017 (ASSESSMENT YEARS: 2008-09 TO 2010-11) M/S. VISAKA INDUSTIES LTD SECUNDERABAD PAN: AAACV7263K VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(2) HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1631/HYD/2017 (ASSESSMENT YEARS: 2009-10) DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(2), HYDERABAD VS M/S. VISAKA INDUSTIES LTD SECUNDERABAD PAN: AAACV7263K (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI M.V. ANIL KUMAR FOR REVENUE : SMT. GITENDER MANN, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. ALL THESE ARE ASSESSEES APPEALS FOR THE A.Y 2008-0 9 TO 2010-11 AND THE CROSS APPEAL OF THE REVENUE FOR THE A.Y 2009-10 RESPECTIVELY. ITA NO.1646/HYD/2017 2. THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF T HE CIT (A)-5, HYDERABAD DATED 24.07.2017 CONFIRMING THE AD DITIONS MADE BY THE AO U/S 143(3) R.W.S. 153A OF THE ACT. DATE OF HEARING: 21.05 . 201 8 DATE OF PRONOUNCEMENT: 31.05.2018 ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 2 OF 16 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING OF ASBESTO S SHEETS, SYNTHETIC BLENDED YARN AND GARMENTS ETC., FILED ITS RETURN OF INCOME FOR THE A.Y 2008-09 ON 29.09.2008 DECLARING TOTAL INCOME OF RS.16,56,27,491. DURING THE ASSESSMENT PROCEEDIN GS U/S 143(3) OF THE ACT, THE AO, WHILE CALCULATING THE PR OFITS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT, OBSERVED THAT THE AS SESSEE HAS TAKEN INTO ACCOUNT THE OTHER INCOME OF RS.22,56,743 /- ALSO. HE HELD THAT THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/ S 80IB OF THE ACT AS IT IS NOT DERIVED FROM ITS BUSINESS OF MANUFACTU RING. THE ASSESSEE SUBMITTED THAT IT IS A PART OF THE OTHER INCOME DERIVED FROM SALE OF SCRAP AND INSURANCE INCOME ON DAMAGED GOODS ETC., AND THEREFORE, IS ELIGIBLE FOR DEDUCTION. THE AO HO WEVER, WAS NOT CONVINCED WITH THE ASSESSEES CONTENTIONS AND DISAL LOWED THE CLAIM TO THE EXTENT OF RS.6,77,023/-. AGGRIEVED, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO CONFIRM ED THE ORDER OF THE AO AND THE ASSESSEE PREFERRED FURTHER APPEAL BE FORE THE ITAT IN ITA NO.503/HYD/2012 DATED 27.11.2015. ITAT, VIDE ORDERS DATED 27.11.2015 HAS HELD THAT THE ASSESSEE IS ELIG IBLE TO CLAIM INCOME FROM SCRAP SALES AND ALSO INCOME FROM INSURA NCE ETC., ON THE GOODS DAMAGED AFTER MANUFACTURING AND DURING TR ANSIT, AS INCOME DERIVED FROM INDUSTRIAL PROCESS AND THAT THE ASSESSEE IS ENTITLED TO CLAIM U/S 80IB OF THE ACT ON THE SAME. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT VIDE ORDERS DATED 31.03.2016 BY MAKING THE VERY SAM E ADDITIONS AND THE CIT (A) HAS CONFIRMED THE SAID ADDITION AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 3 OF 16 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE WAS NO MATERIAL FOUND DURING THE COURSE OF SE ARCH RELATING TO THE DEDUCTION U/S 80IB AND IN THE ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT, THE AO HAS REPEATED THE ADD ITIONS MADE DURING THE EARLIER ASSESSMENT PROCEEDINGS U/S 143(3 ) DATED 30.12.2015. THEREFORE, ACCORDING TO HIM, THE ADDITI ONS CANNOT BE SUSTAINED. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE VERY SAME ADDITION HAD COME UP FOR CONSIDERATION OF THE COORDINATE BENCH OF THIS TRIBU NAL (TO WHICH BOTH OF US ARE SIGNATORIES) AND THE TRIBUNAL HAS HE LD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INCOME FROM SALE OF SCRAPS AND DAMAGED SHEETS ETC. FOR THE SAKE OF CLARITY AND READY REFERENCE, THE RELEVANT PARAGR APHS ARE REPRODUCED HEREUNDER: 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS CITED. THE A O DISALLOWED THE CLAIM OF ASSESSEE U/S 80IB BY HOLDING THAT OTHER IN COME WAS NOT DERIVED FROM THE BUSINESS OF ASSESSEE. THE CIT(A) CONFIRMED THE ACTION OF THE AO. 16.1 THE CASES REFERRED BY THE ASSESSEE AND THE RAT IOS LAID DOWN IN THESE JUDGMENTS WERE, THE ASSESSEE HAD DONE A PROCESS ON THE RAW MATERIAL WHICH WAS NOTHING BUT A PART AND PARCEL OF THE MANU FACTURING PROCESS OF THE INDUSTRIAL UNDERTAKING. THE RECEIPTS LIKE JOB W ORK, SCRAP AND LABOUR CHARGES COULD NOT BE SAID TO BE INDEPENDENT INCOME OF THE MANUFACTURING ACTIVITIES OF THE UNDERTAKING OF THE ASSESSEE AND, THUS, COULD NOT BE EXCLUDED FROM THE PROFITS AND GAINS DERIVED FROM TH E INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IB. THOSE ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 4 OF 16 WERE GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND SO, ENTITLED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IB. 16.2 CONSIDERING THE ABOVE RATIOS LAID DOWN IN THE CASES, WE ARE OF THE OPINION THAT THE ASSESSEE IS ELIGIBLE TO CLAIM INCO ME FROM SCRAP SALES. THE SCRAP IS PART AND PARCEL OF ANY INDUSTRIAL UNDE RTAKING, WITHOUT WHICH, THERE IS NO MANUFACTURING ACTIVITY. HENCE, E NTITLED TO CLAIM BENEFIT U/S 80IB. 16.3 COMING TO THE INCOME FROM INSURANCE, THE UNDER TAKING CLAIMED LOSS FROM INSURANCE COMPANY, IT IS NOTHING BUT COMPENSAT ION FOR THE FINISHED GOODS LOST AFTER MANUFACTURING IN THE UNDERTAKING A ND DURING TRANSIT. IT IS SIMILAR TO THE SCRAP SALES INCOME DERIVED AS PART O F THE INDUSTRIAL PROCESS. SIMILARLY, THE INSURANCE INCOME DERIVED DU E TO LOSS OF MANUFACTURED FINISHED GOODS. HENCE, IT IS ENTITLED TO CLAIM BENEFIT U/S 80IB . 7. RESPECTFULLY FOLLOWING THE SAME, WE DELETE THE DISALLOWANCE CONFIRMED BY THE CIT (A). THE ASSESSEE IS APPEAL IS ACCORDINGLY ALLOWED. ITA NOS. 1647 & 1631/2017 A.Y 2009-10 8. BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEALS AGAINST THE ORDER OF THE CIT (A)-5, HYDERAB AD DATED 24.7.2017. THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL: 1. YOUR APPELLANT SUBMITS THAT THE ASSESSMENT UNDER SECTION 153A IS BAD IN LAW IN ABSENCE OF ANY INCRIMINATING MATERIAL PERTAINING TO THAT YEAR AND ORIGINAL ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED. 2. YOUR APPELLANT SUBMITS THAT IN ABSENCE OF INCRIMINATING MATERIAL AND ASSESSMENT UNDER SECTION 143(3) COMPLETED, THE PROCEEDING UNDER SECTION 153A HAVE ABATED. THEREFORE, THE ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 153A IS BAD IN LAW. 3. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE DISPOSED OF THE GROUNDS 4,5,6 & 7 ON MERITS FOLLOWING HIS PREDECESSOR'S ORDER INSTEAD OF STATIN G THAT 'SINCE THESE ISSUES (GROUNDS NOS. 4,5,6& 7) WERE ALREADY COVERED IN THE ORIGINAL ASSESSMENT AND SUBSEQUENTLY ADJUDICATED BY MY PREDECESSOR, ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 5 OF 16 THE RELEVANT GROUNDS ARE NOT CONSIDERED IN THIS ASSESSMENT MADE UNDER SECTION 153A.' 4. THE CIT(A) HAVING GIVEN A FINDING THAT ISSUES COVERED BY GROUND NOS. 45,6,& 7 ARE NOT MADE ON THE BASIS OF ANY INCRIMINATING MATERIAL DISCOVERED DURING THE SEARCH, OUGHT TO HAVE DELETED THE ADDITION. 5. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE ALLOWED RS. 2,26,16,000 AND RS. 59,29,841/-, BEING AMOUNTS WRITTEN OFF, INCURRED IN THE COURSE O F BUSINESS AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IN THE YEAR THEY HAVE BECOME NOT FRUITFUL. 6. YOUR APPELLANT SUBMITS THE CIT(A) ERRED IN LAW AND FACTS OF THE CASE IN DISALLOWING THE AMOUNT OF RS. 2,26,16,000/- BEING THE MOUNT PAID AS ADVANCE TO MAHINDRA INDUSTRIAL PARK LTD FOR PURCHASE OF LAND TO SET UP A TEXTILE UNIT, WHICH WAS NOT VIABLE AND FRUITFUL, AS CAPITAL EXPENDITURE. 7. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS. 59,29,841/- FOLLOWING HIS PREDECESSORS ORDER, BEING THE AMOUNT PAID TO APGENCO. 8. YOUR APPELLANT SUBMITS THAT THE AMOUNT OF RS. 59,29,841/- WAS PAID TO APGENCO FOR THE PURPOSE OF UP GRADATION OF ITS OPERATION AND MAINTENANCE OF FLY ASH EXTRACTION SYSTEM IN THE PAST TO BE ADJUSTE D OUT OF SUPPLY OF FLY ASH, THE BALANCE WAS WRITTEN O FF IN THE COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS IN THIS YEAR AS THE SAME BECAME NOT FRUITFUL OR RECOVERABLE. 9. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE FOLLOWED HIS PREDECESSORS ORDER BY DIRECTING THE ASSESSING OFFICER NOT TO RESTRICT THE DEDUCTION ON RS. 18,28,863/- UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961, BEING INCOME DERIVED FROM THE BUSINESS OF THE UNDERTAKING BY WAY OF SALE OF SCRAP, DAMAGED SHEETS, GUNNIES ETC. 10. THE CIT (A) OUGHT TO HAVE CONSIDERED THE INCOME FROM SALE OF SCRAP, GUNNIES, DAMAGED SHEETS AS BUSINESS INCOME OF THE UNDERTAKING AND THEREBY ALLOWED THE DEDUCTION U/S 80IB ON SUCH INCOME ALSO. ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 6 OF 16 9. AS REGARDS GROUNDS 1 TO 4 ARE CONCERNED, THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E DOES NOT WISH TO PRESS THESE GROUNDS OF APPEAL. THEY ARE ACC ORDINGLY REJECTED AS NOT PRESSED. 10. AS REGARDS GROUNDS 5 TO 6 ARE CONCERNED, BRIEF FACTS ARE THAT THE ASSESSEE, WITH A VIEW TO START APPAREL BUSINESS, HAD ENTERED INTO AN AGREEMENT IN 2005 WITH MAHINDRA IND USTRIAL PARK LTD HAVING ITS REGISTERED OFFICE AT CHENNAI FOR ACQ UIRING 7 ACRES OF LAND AT SEZ AREA, CHENNAI, ON LEASE BASIS FOR 99 YE ARS FOR A CONSIDERATION OF RS.224 LAKHS. AS THE COMPANY COULD NOT GO AHEAD WITH PERFORMANCE OF ITS PART OF THE CONTRACT DUE TO ADVERSE MARKET CONDITION, THE LESSOR HAD TERMINATED THE CON TRACT AND CONFISCATED THE ADVANCE LEASE AMOUNT GIVEN BY THE C OMPANY, FOR BREACH OF CONTRACT. THE ASSESSEE CLAIMED THIS AS BU SINESS EXPENDITURE U/S 37(1) OF THE ACT. THE AO HOWEVER, H ELD THAT THIS EXPENDITURE IS CAPITAL IN NATURE AS IT IS IN CONNEC TION WITH THE ACQUISITION OF LAND FOR ITS APPAREL BUSINESS. THERE FORE, HE DISALLOWED THE SUM OF RS.2,26,16,000. THE ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA NO.1048/HY D/2013 FOR THE A.Y 2009-10 AND THE COORDINATE BENCH OF THIS TR IBUNAL AT PARAS 14 TO 14.1 HAS HELD AS UNDER: 14. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE HAVE NOTICED THAT ASSESSEE HAS ENTERED INTO AN AGRE EMENT OF LEASE WITH M/S MAHINDRA INDUSTRIAL PARK LTD., CHENNAI FOR ACQUIRIN G 7 ACRES OF LAND AT 562 ON LEASE FOR 99 YEARS FOR A CONSIDERATION OF RS.224 LA KHS AND DUE TO NON- PERFORMANCE OF CONDITIONS STIPULATED IN THE AGREEME NT BY THE ASSESSEE, THE LESSOR HAS CONFISCATED THE ADVANCE. SIMILARLY, ASSE SSEE PAID A SECURITY ADVANCE TO PURCHASE TEXTILE MACHINERY FOR EXPANSION OF TEXT ILE BUSINESS TO M/S LAXMI MACHINE WORKS OF RS.164 LAKHS. DUE TO SLUGGISH MARK ET CONDITION, IT HAD TO DROP THE EXPANSION PLAN AND ACCORDINGLY THE SECURIT Y DEPOSITS WERE FORFEITED. LD. CIT(A) HAS TREATED THE ABOVE LOSSES AS THE CAPI TAL IN NATURE AND SUSTAINED THE DISALLOWANCE MADE BY AO. LD. DR ALSO SUPPORTED THE VIEWS OF THE TAX ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 7 OF 16 AUTHORITIES AND RELIED ON FOLLOWING CASE LAW AND WE HAVE ANALYSED EACH CASE AS BELOW: 1. HASIMARA INDUSTRIES LTD. (SUPRA): IN THIS CASE, ASSESSEE HAS DIVERSIFIED ITS ACTIVITY INTO COTTON BUSINESS. IN THIS PROCESS, IT HAD DEPOSITED RS. 20 LAKHS TO SECURE LICENCE IN PURSUANT TO A LEAVE AND LICENCE A GREEMENT. AFTER EXPIRY OF SCHEDULED PERIOD, THE LICENSOR COMPANY WENT INTO LI QUIDATION. THE ASSESSEE COULD NOT RECOVER THE DEPOSIT AND IT WAS WRITTEN OF F. THE SAME WAS HELD TO BE CAPITAL LOSS. IN THE SAID CASE, THE ASSESSEE WAS IN TO DIVERSIFICATION WHEREAS IN THE CASE ON HAND, IT WAS EXPANSION OF TEXTILE BUSIN ESS. HENCE, THE SAID CASE IS NOT APPLICABLE TO THE CASE UNDER CONSIDERATION. 2. TATA HONEYWELL LTD. (SUPRA): IN THIS CASE, A MAC HINERY WAS LEASED OUT BY CFSL TO BSL FOR A PERIOD OF 9 YEARS. AFTER EXPIRY O F 5 YEARS, THE ASSESSEE APPROACHED BOTH THE ABOVE COMPANIES FOR TRANSPOSING IT AS LESSEE IN THE PLACE OF BSL FOR THE REMAINING PERIOD OF 4 YEARS. THE SAM E WAS ACCEPTED AND TRIPARTITE AGREEMENT WAS ENTERED. THERE WAS A RENEW AL CLAUSE, WHICH GAVE RIGHT TO THE ASSESSEE TO RENEW AS MUCH TIME AS IT WANTED AS LONG AS IT COMPLIED WITH THE TERMS OF AGREEMENT/DEED. SINCE, ASSESSEE GOT EN DURING BENEFIT M/S VISAKA INDUSTRIES LTD., SEC'BAD DUE TO RENEWAL CLAUSE, IT WAS TREATED AS LEASEHOLD RIGHTS IN THE MACHINERY, THEREFORE, IT IS TREATED A S CAPITAL ASSET AND THE EXPENDITURE AS CAPITAL EXPENDITURE. IN THE CASE BEF ORE US, THERE IS NO RENEWAL CLAUSE AND IT IS FOR FIXED PERIOD OF 99 YEARS. SINC E THE ASSESSEE FAILED TO PERFORM ITS PART OF DUTY, IT HAS LAST THE ADVANCE PAYMENT. THE ASSESSEE HAS NOT ENJOYED THE BENEFIT. THEREFORE, IT CANNOT BE TREATED AS ANY ASSET. 3. R.G. SCIENTIFIC ENTERPRISES (P) LTD. (SUPRA): IN THIS CASE, ASSESSEE PAID ADVANCE FOR PURCHASE OF PREMISES. DUE TO SOME REASO NS, PURCHASE COULD NOT BE COMPLETED AND SELLER REFUSED TO RETURN THE MONEY. A SSESSEE CLAIMED THIS AS REVENUE EXPENDITURE. IT WAS HELD THAT IT WAS ADVANC ED FOR PURCHASE OF A CAPITAL ASSET THEREFORE IT IS CAPITAL LOSS. THIS TRANSACTIO N IS NOT THE REGULAR BUSINESS TRANSACTION OF THE ASSESSEE, IT IS INDEPENDENT TRAN SACTION FOR PURCHASE OF CAPITAL ASSET UNCONNECTED TO THE BUSINESS CARRIED ON BY THE ASSESSEE. THEREFORE, THIS ISSUE CANNOT BE CONSIDERED IN THE PRESENT CASE ON H AND AS THE ASSESSE WANTED TO EXPAND THE EXISTING BUSINESS IN THE TEXTILE. 4. EID PARRY (INDIA) LTD. (SUPRA): IN THIS CASE ALS O, ASSESSEE INCURRED EXPENDITURE FOR THE PURPOSE OF SETTING UP A NEW PRO JECT. THIS PROJECT WAS ABANDONED SUBSEQUENTLY. IT WAS HELD THAT THE EXPEND ITURE SHOULD BE TREATED AS CAPITAL EXPENDITURE. AGAIN THIS CASE ALSO NOT APPLI CABLE TO THE CASE ON HAND AS IT IS FOR NEW PROJECT NOT FOR EXPANSION. 5. ENTERPRISING ENTERPRISES (SUPRA): THIS CASE ALSO SIMILAR TO HASIMARA INDUSTRIES LTD. THE QUESTION WAS WHETHER LEASE RENT PAID IS CAPITAL OR NOT. AGAIN THIS CASE IS NOT APPLICABLE TO THE FACTS OF T HE CASE ON HAND. 6. KANORIA CHEMICALS (SUPRA): IN THIS CASE, THE LET TER OF INTENT WAS OBTAINED TO START A NEW PROJECT, WHICH WAS ABANDONED. THE CASE IN HAND IS NOT ABOUT NEW PROJECT BUT EXPANSION. HENCE, NOT APPLICABLE. 7. SWADESHI COTTON MILLS CO. LTD., (SUPRA): IN THIS CASE, ASSESSEE ENTERED INTO TWO CONTRACTS WITH TWO OTHER PARTIES FOR PURCHASE O F TEXTILE MACHINERY IN ORDER ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 8 OF 16 TO EXPAND ITS FACTORY, SUBSEQUENTLY, HAVING REGARD TO ALTERED CIRCUMSTANCES, DECIDED TO CANCEL BOTH CONTRACT. THE CANCELLATION O F THESE CONTRACTS, ASSESSEE HAS TO INCUR COST. THESE COSTS WERE CLAIMED AS REVE NUE EXPENDITURE. IT WAS HELD, THE PAYMENT MADE TO AVOID A LARGER CAPITAL EXPENDIT URE THAT WOULD NOT HAVE SERVED THE INTEREST OF THE COMPANY. SUCH PAYMENT MA DE IS CLEARLY IN THE NATURE OF A CAPITAL EXPENDITURE AND NOT AN EXPENDITURE INC URRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. 14.1 THE LAST CASE IS ON THE SUBJECT OF EXPANSION. THE HON'BLE SUPREME COURT HAS DISALLOWED THE CLAIM OF THE ASSESSEE BUT WE NOT ICED IN THE SUBSEQUENT DECISION IN THE CASE OF SASSON J. DAVID & CO. P. LT D., 118 ITR 261, THE HON'BLE SUPREME COURT EXPRESSED THEIR OPINION AND DISCUSSED THE SIMILARITIES WITH SECTION 10(2)(XV) OF THE I.T. ACT, 1921 AND PURSUANT TO SECTION 37 OF I.T. ACT, 1961, IN THE FOLLOWING PARA: 20. THE NEXT CONTENTION URGED ON BEHALF OF THE DEPA RTMENT WAS THAT SINCE DAVIDS AND TATAS WERE INDIRECTLY BENEFITED BY THE R ETRENCHMENT OF THE SERVICES OF THE EMPLOYEES OF THE COMPANY AND PAYMENT OF COMP ENSATION TO THEM AND SINCE THERE WAS NO NECESSITY TO RETRENCH THE SERVIC ES OF ALL THE EMPLOYEES, THE EXPENDITURE IN QUESTION COULD NOT BE TREATED AS AN EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE COMPANY. IT HAS TO BE OBSERVED HERE THAT THE EXPRESSION 'WHOLLY AND EXCLUSIVELY' USED IN S. 10(2)(XV) OF THE ACT DOES NOT MEAN 'NECESSARILY'. ORDINARILY, IT IS FOR THE ASSES SEE TO DECIDE WHETHER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF HIS OR ITS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY AND IF IT IS INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PRO FITS, THE ASSESSEE CAN CLAIM DEDUCTION UNDER S. 10(2)(XV) OF THE ACT EVEN THOUGH THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE. IT IS RELEVANT TO REFER AT THIS STAGE TO THE LEGISLATIVE HISTORY OF S. 37 OF THE IT ACT, 1961, W HICH CORRESPONDS TO S. 10(2)(XV) OF THE ACT. AN ATTEMPT WAS MADE IN THE IT BILL OF 1961 TO LAY DOWN THE 'NECESSITY' OF THE EXPENDITURE AS A CONDITION F OR CLAIMING DEDUCTION UNDER S. 37. SEC. 37(1) IN THE BILL READ 'ANY EXPENDITURE... ..LAID OUT OR EXPENDED WHOLLY, NECESSARILY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED....' THE INTRODUCTION OF THE WORD 'NECES SARILY' IN THE ABOVE SECTION RESULTED IN PUBLIC PROTEST. CONSEQUENTLY, WHEN S. 3 7 WAS FINALLY ENACTED INTO LAW, THE WORD 'NECESSARILY' CAME TO BE DROPPED. THE FACT THAT SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITED BY THE EXPENDIT URE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF DEDUC TION UNDER S. 10(2)(XV) OF THE ACT IF IT SATISFIES OTHERWISE THE TESTS LAID DO WN BY LAW. THIS VIEW IS IN ACCORD WITH THE FOLLOWING OBSERVATIONS MADE BY THIS COURT IN CIT VS. CHANDULAL KESHAVLAL & CO. : (1960) 38 ITR 601 (SC) : TC16R.50 7: IN THE ABOVE DISCUSSION, THE HON'BLE SUPREME COURT HAS ALLOWED THE APPEAL OF THE ASSESSEE U/S 10(2)(XV) OF THE I.T. ACT, 1921 BY OBSERVING THAT AN EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS AND NOT NECESSARILY FOR THE PURPOSE OF THE BUSINESS IS ALLO WABLE. THEREFORE, IN OUR VIEW, THERE IS CLEAR POSSIBILITY THAT IN THE CASE OF EXPA NSION, THE EXPENDITURE IS FOR THE PURPOSE OF BUSINESS ONLY. 11. WE FIND THAT IN THE ASSESSMENT PROCEEDINGS U/S 153A OF THE ACT, THE AO HAS REPEATED THE ADDITIONS MADE BY THE AO U/S ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 9 OF 16 143(3) OF THE ACT AND THERE WAS NO INCRIMINATING MA TERIAL FOUND DURING THE COURSE OF SEARCH RELATING TO THIS TRANSA CTION. THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE IS ALREADY DE CIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND RESPECTFULLY FOLLOWING THE SAME (TO WHICH JM IS THE SIGNATORY), THE DISALLOWAN CE OF RS.2,26,16,000/- IS DELETED. 12. AS REGARDS GROUNDS 7 & 8 ARE CONCERNED AGAINST THE DISALLOWANCE OF RS.59,27,841, WE FIND THAT THIS ISS UE ALSO IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN THE APPEAL AGAINST 143(3) ORDER AND AT PARA 22 O F ITS ORDER, THE TRIBUNAL HAS HELD AS UNDER: 22. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. LD. AR HAS SUBMITTED THAT ASSESSEE HAS MADE THE INVESTMENT IN ORDER TO GET THE BENEFIT OF PROCURING THE FLY ASH A T A CONCESSIONAL RATE. WHEN THE BENCH ASKED TO SUBSTANTIATE THE SUBMISSION , LD. AR BROUGHT ON RECORD THE VARIOUS PURCHASE STATEMENTS, WHICH AR E PART OF RECORD. IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE AND FOR P ROPER JUSTICE, WE ARE INCLINED TO REFER THIS MATTER BACK TO FILE OF AO WI TH LIMITED PURPOSE TO VERIFY THE SUBMISSION OF THE ASSESSEE, WHETHER ASSE SSEE HAS PROCURED THE FLY ASH ON CONCESSION, WHICH SUPPORTS THE INVES TMENT DECISION. IN CASE, IT IS FOUND THAT ASSESSEE HAS PURCHASED THE F LY ASH AT CONCESSIONAL RATE ( LESS BY RS. 40/- PER TONNE) THEN THE AO MAY ALLOW THE CLAIM OF THE ASSESSEE, OTHERWISE, ADDITION MAY BE SUSTAINED. THEREFORE, GROUND RAISED BY REVENUE IS ALLOWED FOR STATISTICAL PURPOS ES. 13. SINCE THE VERY SAME ADDITION HAD BEEN REPEATED U/S 153A OF THE ACT, AND THE SUBJECT MATTER OF APPEAL B EFORE US IN THIS APPEAL IS THE SAME, RESPECTFULLY FOLLOWING THE DECI SION OF THE COORDINATE BENCH, WE REMIT THIS ISSUE ALSO TO THE F ILE OF THE AO FOR RECONSIDERATION IN ACCORDANCE WITH THE DIRECTIONS G IVEN IN ITA NOS.1048 & 1058/HYD/2013, DATED 25.01.2018. GROUNDS 7 AND 8 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 10 OF 16 14. GROUND NO.9 IS AGAINST THE RESTRICTION OF THE D EDUCTION U/S 80IB OF THE ACT, BY DISALLOWING THE INCOME FROM SALE OF SCRAP, DAMAGED SHEETS, GUNNIES ETC., WE FIND THAT THIS ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORD INATE BENCH IN THE ASSESSEES OWN CASE FOR THE A.Y 2008-09 AND RESPECT FULLY FOLLOWING THE SAME, WE DIRECT THE AO TO ALLOW THE DEDUCTION O N SUCH INCOME ALSO. 15. IN THE RESULT ITA NO.1647/HYD/2017 IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ITA NO.1631/HYD/2017 16. IN THE REVENUES APPEAL, THE ISSUE IS ONLY AGAI NST THE PARTIAL RELIEF GRANTED BY THE CIT (A) ON THE DISALL OWANCE MADE BY THE AO ON THE AMOUNT PAID TO THE APGENCO FOR OPERATION AND MAINTENANCE OF FLY ASH. IN THE ASSESSEES APPEAL, G ROUND NOS. 7 & 8 ARE ON THE VERY SAME ISSUE AND SINCE THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO, THE GRIEVANCE OF THE REVENUE CA N ALSO BE CONSIDERED BY THE AO. THEREFORE, THE REVENUES APPE AL IS ALSO TREATED AS ALLOWED STATISTICAL PURPOSES. 17. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.1648/HYD/2017 18. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT (A)-5, HYDERABAD, DATED 24.7.2017. THE ASSE SSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. YOUR APPELLANT SUBMITS THAT THE ASSESSMENT UNDER SECTION 153A IS BAD IN LAW IN ABSENCE OF ANY INCRIM INATING ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 11 OF 16 MATERIAL PERTAINING TO THAT YEAR AND ORIGINAL ASSES SMENT UNDER SECTION 143(3) WAS COMPLETED. 2. YOUR APPELLANT SUBMITS THAT IN ABSENCE OF INCRIM INATING MATERIAL AND ASSESSMENT UNDER SECTION 143(3) COMPLE TED, THE PROCEEDING UNDER SECTION 153A HAVE ABATED. THER EFORE THE ASSESSMENT ORDER UNDER SECTION 143(3) LW.S 153A IS BAD IN LAW. 3. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE ALLOWED RS. 49,59,201 BEING THE AMOUNT WRITTEN OFF TOWARDS OBSOLETE STOCKS, INCURRED IN THE COURSE OF BUSINESS AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IN THE YEAR THEY HAVE BECOME OBSOLETE AND NOT FIT FOR PRODUCTION. 4. THE CIT(A) AND ASSESSING OFFICER HAVE NOT DISPUT ED THE FACT THAT THE OBSOLETE STOCK HAVE BEEN IDENTIFIED, WRITTEN OFF AND REDUCED FROM THE CLOSING STOCK OUGHT TO HAVE AL LOWED THE SAME. 5. YOUR APPELLANT SUBMITS THAT ALTERNATIVELY THE SA ME AMOUNT HAS BEEN OFFERED TO TAX IN THE NEXT YEAR AND DISALLOWANCE IN THIS YEAR WOULD AMOUNT TO DOUBLE TA XATION OF THE SAME, THIS FACT IS EVIDENT FROM COMPUTATION PRODUCED BEFORE THE CIT(A) AND ASSESSING OFFICER, OUGHT TO H AVE DELETED THE ADDITION IN THIS YEAR OR GIVEN DIRECTIO N TO REDUCE THE SAME FROM INCOME IN THE NEXT ASSESSMENT YEAR. . 6. YOUR APPELLANT SUBMITS THAT OTHER RECEIPTS INCLU DE AN AMOUNT OF RS. 4,23,753 COMPRISED OF SUNDRY BALANCES WRITTEN BACK WHICH ARE TRADE CREDITORS, OUGHT TO/HA VE ALLOWED DEDUCTED UNDER SECTION 80IB ON SAME, AS THE SE RECEIPTS ARE DERIVED FROM THE ELIGIBLE BUSINESS. 19. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS GROUNDS 1 & 2, THEY ARE ACCORDINGLY REJECTED AS NOT PRESSED. 20. AS REGARDS GROUNDS 3 & 4 ARE CONCERNED, WE FIND THAT THE AO HAS REPEATED THE ADDITIONS MADE DURING THE ASSES SMENT PROCEEDINGS U/S 143(3) OF THE ACT AND THIS VERY SAM E ISSUE HAD TRAVELLED UPTO ITAT AND THE TRIBUNAL IN ITS ORDER I N ITA NO. 172/HYD/2014, DATED 6.4.2018 HAS HELD AS UNDER: ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 12 OF 16 5. THE FIRST ISSUE FOR CONSIDERATION IS THE ADDITIO N ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR NON-MOVING RAW MATERIAL. THE FIRST THREE GROUNDS OF APPEAL RE LATE TO THE DISALLOWANCE OF A SUM OF RS. 49,59,201/- DEBITED BY ASSESSEE UNDER THE HEAD OTHER EXPENSES TOWARDS PROVISION FOR NON-MOVING RAW MATERIAL. ASSESSEE HAD SUBMITTED BEFORE THE A.O THAT IT HAD IDENTIFIED OLD RAW MATERIAL IN ITS TEXTILE DIVISION (DYED POLYESTER, DYED VISCOSE, RAW WHITE COTTONISED FLAX, SCOURED WOOL WHITE, DYED WOOL TOPS, RAW WHITE ACRYLIC, RAW WHITE POLYESTER CATIONIC) WHICH WAS NOT IN GOOD CONDITION FOR PROCESSING THE FINISH ED PRODUCTS, THAT THERE WAS NO PROVISION IN THE ACCOUNTING SYSTEM TO WRITE OFF STOCKS, THAT IT HAD THEREFORE MADE PROVISION FOR THIS OLD STOCK BY REDUCING THE CLOSING STOCK TO THIS EXTENT, THAT IT HAD NOT ADDED THIS PROVISION TO THE TAXABLE INCOME SINC E THE PROVISION HAD BEEN REVERSED IN THE NEXT YEAR AN D OFFERED TO TAX AND THAT IT HAD NOT CLAIMED ANY DEDUCTION OF INCOME TAX AGAINST THAT REVERSAL OR PROVISION. ASSESSEE SUBMITTED THAT SINCE THERE WAS NO IMPACT ON THE TAX ON THESE ENTRIES AS A WHOLE, T HE EXPENDITURE SHOULD BE ALLOWED. ASSESSING OFFICER HELD THAT AS PER THE PROVISION OF INCOME TAX ACT, E ACH ASSESSMENT YEAR WAS SEPARATE AND THE INCOME FOR EACH ASSESSMENT YEAR WAS TO BE ASSESSED SEPARATELY. 5.1 BEFORE LD. CIT(A) IT WAS SUBMITTED THAT THE RAW MATERIAL CONCERNED WAS NOT IN GOOD CONDITIO N AND NOT USABLE FOR PRODUCTION HAD NOT BEEN DISPUTED BY THE ASSESSING OFFICER. ASSESSEE ALSO SUBMITTED THAT THE FACT THAT THE STOCK HAD BEEN WRITTEN OFF W AS EVIDENT FROM THE PROFIT & LOSS ACCOUNT TO WHICH THE SUM HAD BEEN DEBITED AND REDUCED FROM THE CLOSING STOCK. FURTHER IT WAS SUBMITTED THAT THIS STOCK DI D NOT HAVE ANY REALIZABLE VALUE IN THE MARKET AND THEREFORE THE DISALLOWANCE WAS NOT WARRANTED. ASSESSEE ALSO SUBMITTED THAT THIS STOCK HAD BEEN WRITTEN OFF IN THE BOOKS OF THE CURRENT YEAR, IT HA D BEEN REVERSED AND ADMITTED TO TAX IN THE SUBSEQUENT YEAR AND THAT ALTERNATELY, IN CASE OF DISALLOWANCE IN THIS YEAR, IT WOULD AMOUNT TO DOUBLE TAXATION OF TH E SAME ITEM. 5.2 LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS HE LD AS UNDER: 4.4. I HAVE CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR. THE APPELLANT HAS NOT DISPUTED THE MERITS OF THE DISALLOWANCE; IT HAS MERELY PLEADED ABOUT THE EQUITY OF DISALLOWING AN ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 13 OF 16 AMOUNT WHICH HAD BEEN REVERSED BY IT IN THE SUBSEQUENT YEAR. HOWEVER, THE MERE FACT THAT THE APPELLANT HAS REVERSED THIS ENTRY IN THE SUCCEEDING HEAR IS OF NO CONSEQUENCE SINCE EACH ASSESSMENT YEAR STANDS ON ITS OWN FOOTING FOR THE PURPOSE OF INCOME TAX ASSESSMENT. WHILE THERE IS MERIT IN THE PLEA OF THE AR THAT THE DISALLOWANCE OF THE PROVISI ON MAY LEAD TO DOUBT DISALLOWANCE (IN VIEW OF ITS REVERSAL IN THE FOLLOWING YEAR), THAT IS A SITUATIO N FOR WHICH THE APPELLANT MUST EXPLORE ALTERNATE REMEDIES. THE DISALLOWANCE OF THE PROVISION FOR NO N- MOVING RAW MATERIAL FOR RS. 49,59,201 IS THEREFORE, UPHELD AND THE FIRST THREE GROUNDS ARE DISMISSED. 5.3 REFERRING THE PAPER BOOK FILED, IT WAS THE SUBMISSION THAT ASSESSEE IS CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING AND THERE IS NO LOSS OF REVENUE AS THE SAME AMOUNT WAS OFFERED TO TAX IN TH E LATER YEAR AND ON THE PRINCIPLE OF CONSISTENCY THE SAME SHOULD BE ALLOWED. 5.4 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE WITH THE ORDER OF LD. CIT(A). ASSESSEE HAS FURNISHED THE FOLLOWING DETAILS OF PROVISION IN VARIOUS YEARS: VISAKA INDUSTRIES LTD PROVISION FOR NON-MOVING RAW MATERIAL GROUPED IN OT HER EXPENSES OF P&L A/C F.Y DATE DEBIT CREDIT 2009 - 10 AS ON 31.03.10 49,59,201 2020 - 11 AS ON 31.3.11 19,20,000 49,59,201 NET PROVISION 30,39,201 2011 - 12 0 2012 - 13 AS ON 31.3.13 86,34,000 19,20,000 NET PROVISION 67,14,000 2013 - 14 AS ON 31.3.14 0 0 5.5 AS CAN BE SEEN FROM THE ABOVE THE PROVISION WAS MADE FOR THE FIRST TIME IN THIS YEAR AND THE SAME W AS WRITTEN BACK IN LATER YEAR. THUS, THE OBSOLESCENCE OF STOCK ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 14 OF 16 WAS NOT ESTABLISHED. MOREOVER, CONSISTENCY PRINCI PLE DOES NOT APPLY AS THE CLAIM WAS MADE FOR THE FIRST TIME, WHICH ASSESSING OFFICER HAS NOT ALLOWED. SINCE ASSESSEE FAILED TO SATISFY THE CONDITION FOR MAKING A GENUINE CLAIM U/ S 37(1) OF THE IT ACT, THE PROVISION AS SUCH CANNOT BE ALLO WED BECAUSE NO LIABILITY WAS ACTUALLY EXISTING AT THE T IME OF MAKING PROVISION. CONSIDERING THE FACTS AND CIRCUM STANCES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE FROM THE ORDER OF THE LD. CIT(A). AS FAR AS THE DIRECTION F OR REDUCING THE SAME IN NEXT YEAR, LD. CIT(A) ALREADY GAVE A DI RECTION TO ASSESSEE TO MAKE NECESSARY CLAIMS IN LATER YEAR. ASSESSEE IS FREE TO MAKE THE CLAIM BEFORE ASSESSING OFFICER FOR APPROPRIATE RELIEF. WE CANNOT GIVE ANY SPECIFI C DIRECTION AS THAT YEAR IS NOT BEFORE US AND ASSESSEE HAS NOT FURNISHED ANY EVIDENCE OF MAKING A CLAIM EVEN. THE GROUNDS 1 & 2 RAISED ARE DISMISSED AND GROUND 3 IS PARTLY ALLOWED. 6. THE ISSUE IN GROUND 4 IS WITH REFERENCE TO THE C LAIM OF 80IB OF THE IT ACT ON OTHER INCOME. ASSESSING OF FICER HAS NOT CONSIDERED VARIOUS INCOMES SHOWN AS OTHER INCO ME IN PROFIT & LOSS ACCOUNT WHILE COMPUTING THE DEDUCTION U/S 80IB OF THE IT ACT. LD. CIT(A) HAS CONSIDERED THEM IN DETAIL AND ALLOWED MAJOR AMOUNTS AND REJECTED TWO ITEMS. ONE SUCH AMOUNT REJECTED WAS CLAIM ON INSURANCE ON RAW MATERIAL TO AN EXTENT OF RS. 4.72,244/-. LD. CIT(A ) REJECTED THE CLAIM STATING AS UNDER: 5.5 SIMILARLY, IT WAS HELD IN THE CASE OF KHEMKA CONTAINER P LTD V CIT 275 ITR 559 (P&H) THAT INSURA NCE CLAIM RECEIVED ON ACCOUNT OF LOSS OF RAW MATERIAL I N FIRE IS NOT INCOME DERIVED FROM INDUSTRIAL UNDERTAKING FO R 80IA. APPLYING THE RATION OF THIS DECISION, DEDUCTION U/S 80IB CANNOT BE ALLOWED ON THE RECEIPT OF RS. 4,72,244 AS INSURANCE CLAIM ON RAW MATERIALS. 6.1 LD. COUNSEL REFERRED TO THE CLAIM AND SUBMITTED THAT THE INSURANCE CLAIM IS ON RAW MATERIAL WHICH DIRECT LY EFFECT THE PROFIT & LOSS ACCOUNT AND THE AMOUNT WAS DERIV ED FOR THE PURPOSE OF CLAIM U/S 80IB OF THE IT ACT. HE RE LIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT DECI SION IN THE CASE OF CIT VS. SREE RAMA MULTI TECH LTD., REP ORTED IN 33 TAXMAN.COM 194(GUJ). 6.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE CASE LAW RELIED. EVEN THOUGH LD. CIT(A) RELIED ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT, THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SPORTKING INDIA PVT LTD., 324 ITR 283 (DEL) AND THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS . SRI RAMA MULTI TECH (SUPRA) ARE IN FAVOUR OF ASSESSEE. IN THE CASE OF CIT VS. SRI RAMA MULTI TECH (SUPRA) IT WAS HELD AS UNDER: ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 15 OF 16 IF ASSESSEE HAD EITHER CONSUMED THE RAW MATERIAL IN ITS INDUSTRIAL ACTIVITY OR SOLD THE FINISHED GOOD BUT F OR THE UNFORTUNATE FIRE, SURELY ASSESSEE WOULD HAVE EARNED INCOME. SUCH INCOME WOULD HAVE BEEN ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. IF THIS MUCH IS UNDISPUTED, MERELY BECAUSE OF THE FIRE AND DESTRUCT ION OF SUCH GOODS BEFORE SALE WOULD HARDLY MAKE ANY SIGNIF ICANT DIFFERENCE INSOFAR AS DEDUCTION UNDER SECTION 80-IA OF THE ACT IS CONCERNED. WHAT ASSESSEE ACHIEVED THROUGH PASSING OF THE INSURANCE CLAIM WAS REDUCTION OF THE LOSS ARISING OUT OF THE INDUSTRIAL UNDERTAKING. SUCH RE COUPING OR REDUCTION OF THE LOSS CANNOT BE KEPT OUT OF CONSIDERATION WHILE COMPUTING ASSESSEES INCOME ELI GIBLE FOR REDUCTION UNDER SECTION 80-IA OF THE ACT. 6.3 RESPECTFULLY FOLLOWING THE ABOVE, SINCE THESE T WO DECISIONS ARE IN FAVOUR OF ASSESSEE, WE ARE OF THE OPINION THAT THE INSURANCE CLAIM ON RAW MATERIALS WOULD BE INCOME ELIGIBLE FOR DEDUCTION U/S 80IB OF THE IT ACT. ASS ESSING OFFICER IS DIRECTED TO ALLOW THE SAME. THE GROUND I S ALLOWED. 21. SINCE THERE WAS NO INCRIMINATING MATERIAL FOUND FOR BRINGING THE ABOVE ITEMS TO TAX, RESPECTFULLY FOLLO WING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE, THE AD DITIONS MADE ARE DELETED AND THESE GROUNDS OF APPEAL ARE ALLOWED . 22. IN THE RESULT, ASSESSEES APPEAL FOR A.Y 2008-0 9 TO 2010- 11 ARE PARTLY ALLOWED AND THE REVENUES APPEAL FOR A.Y 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2018. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST MAY 2018. VINODAN/SPS ITA NOS 1646 TO 1648 AND 1631 OF 2017 VISAKA INDUSTRIES LTD SECUNDERABAD. PAGE 16 OF 16 COPY TO: 1 C/O. M.ANANDAM & CO. CAS, 7A SURYA TOWERS, SP ROA D, SECUNDERABAD 2 DY.CIT, CIRCLE 17(2) HYDERABAD 3 CIT (A) - 5, HYDERABAD 4 PR. CIT 5 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER