M/s Siddharth Tubes Ltd., V. The JCIT, S. R. 2,

ITA 171/IND/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1396 (ITAT-INDORE)
• Duration Of Justice: 6 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-11-2009
• Assessment Year: 1994-1995
• Appeal Filed On: 26-02-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K K SINGH
• Keywords: Reopening of assessment; Business income; Depreciation; Difference of opinion; Capital receipt; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 80HHC; 80HH; 191; 147; 148

Judgement Text

PAGE 1 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : GIR S-5 I.T.A.NO.275/IND/2003 A.Y. : 1994-95 ACIT, M/S.SIDDHARTH TUBES LIMITED, 4(2). VS INDORE. INDORE APPELLANT RESPONDENT PAN NO. : GIR S-5 I.T.A.NO.171/IND/2003 A.Y. : 1994-95 M/S.SIDDHARTH TUBES LIMITED, JT. CIT, (ASSESSMENT ) SPECIAL RANGE II, INDORE. VS INDORE APPELLANT RESPONDENT DEPARTMENT BY : SHRI K.KSINGH, CIT DR RESPONDENT BY : SHRI PRAKASH JAIN, C. A. DATE OF HEARING : 17/11/2009 O R D E R PER V.K. GUPTA, A.M. THESE CROSS APPEALS ARISE OUT OF ORDER OF THE LD. C IT(A)-II,INDORE, DATED 10.01.2003, FOR THE ASSESSMENT YEAR 1994-95. PAGE 2 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE 2. FIRST, WE SHALL TAKE UP REVENUES APPEAL IN I.T.A.N O. 275/IND/2003. 3. IN GROUND NO.1, THE REVENUE IS AGGRIEVED BY THE DE CISION OF LD. CIT(A) IN ANNULLING THE ASSESSMENT ORDER AND QUASHI NG THE ISSUE OF NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961. 4. THE FACTS, IN BRIEF, ARE THAT THE ORIGINAL ASSESSM ENT FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1)(A) OF THE ACT ON 9.2.1995 WITHOUT MAKING ANY ADJUSTMENT. SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED ON 30 TH APRIL, 1998, FOR TWO REASONS. FIRSTLY, THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 35-D AT RS. 1,20,000/- AS AGAINST RS. 1,64,560/- CLAIMED BY THE ASSESSEE. THE BASIS FOR SUCH REASON WAS ASSESSM ENT ORDER PASSED IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 1994-9 5. SECONDLY, POWER SUBSIDY OF RS. 5,06,608/- CLAIMED BY THE ASSESSEE A S CAPITAL RECEIPT WAS TO BE TAXED AS REVENUE RECEIPT IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS L IMITED & OTHERS, VS. CIT AS REPORTED IN 228 ITR 253. THE ASSESSEE, IN T HE COURSE OF REASSESSMENT PROCEEDINGS, CONTENDED THAT ITS CLAIM FOR DEDUCTION U/35-D HAD BEEN ACCEPTED BY THE CIT(A) IN SUBSEQUENT YEAR, HENCE, NO DISALLOWANCE WAS WARRANTED. THE LD. CIT(A), HOWEVER , HELD THAT SECOND APPEAL HAD BEEN FILED BEFORE THE TRIBUNAL, HENCE, P ENDING SUCH APPEAL, THE ASSESSMENT FOR EARLIER YEARS COULD BE REOPENED. THEREAFTER, THE A.O. PAGE 3 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE BASED UPON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1995-96 ALLOWED THAT DEDUCTION OF RS. 1.20 LAKHS ONLY. THE A.O. ALS O TREATED THE POWER SUBSIDY AS REVENUE RECEIPT AND ADDED THE SAME TO TH E TOTAL INCOME OF THE ASSESSEE. BESIDES THIS, THE A.O. ALSO MADE VARIOUS OTHER ADDITIONS/DISALLOWANCES, WHICH SHALL BE TAKEN UP WH ILE DECIDING THE SPECIFIC GROUNDS RAISED IN RESPECT OF THOSE ISSUES, IF NEEDED. THE ASSESSEE, IN APPEAL, BEFORE THE LD. CIT(A) CHALLENGED THE VAL IDITY OF REOPENING FOR THE REASON THAT ISSUE OF SECTION. 35-D HAD SUBSEQUE NTLY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE LD. CIT(A) AND THE A. O. WAS AWARE OF THIS FACT, BUT THE A.O. MERELY WANTED TO KEEP THIS ISSUE ALIVE, HENCE, WITHOUT HAVING ANY MATERIAL AND FORMING REQUISITE BELIEF OF INCOME BEING ESCAPED FROM ASSESSMENT, HE REOPENED THE ASSESSMENT AND, TH EREFORE, SUCH REOPENING WAS BAD AND TO BE QUASHED. SIMILARLY, AS REGARDS TO TAXABILITY OF POWER SUBSIDY, THE ASSESSEE CONTENDED THAT THE V IEW TAKEN BY THE ASSESSEE AS REGARD TO THE NATURE OF SUCH SUBSIDY, B EING A CAPITAL RECEIPT, WAS DULY SUPPORTED BY THE JUDICIAL DECISIONS, HENC E, REOPENING WAS NOT CORRECT IN LAW ON THIS ISSUE AS WELL. THE LD. CIT(A ), ON THE BASIS OF APPELLATE ORDERS IN RESPECT OF THE ISSUE OF DEDUCTI ON U/S 35-D, HELD THAT THE VERY BASIS OF REOPENING OF ASSESSMENT DID NOT S URVIVE AS THERE COULD NOT BE ANY ADDITION U/S 148 SIMPLY TO KEEP THE MATT ER ALIVE. PAGE 4 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE 5. AS REGARDS THE OTHER REASON OF POWER SUBSIDY, THE L D. CIT(A) HELD THAT SEVERAL HIGH COURTS HAD TAKEN A VIEW THAT SUCH RECEIPT WAS OF CAPITAL NATURE, HENCE, THE REOPENING ON THIS ASPECT WAS ALSO NOT CORRECT. THE LD. CIT(A) ALSO HELD THAT HON'BLE M.P. HIGH COU RT IN JUDGMENT DATED 1.10.1997 IN THE CASE OF CIT VS. RAJARAM MAIZ E PRODUCTS AS REPORTED IN 144 CTR 267, WHICH WAS SUBSEQUENT TO TH E DECISION OF THE HON'BLE APEX COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED VS. CIT, (SUPRA) HAS HELD THAT POWER SUBSIDY WAS A CAPITAL RECEIPT. HE FURTHER HELD THAT THE ASSESSEE, IN ASSESSMENT YEAR 1995-96, HAD SETTLED THE MATTER UNDER K.V.S.S. AND, THEREFORE, ANY FINDING I N THAT ASSESSMENT YEAR PRIOR TO SUCH SETTLEMENT HAD NO EVIDENTIARY VALUE A FTER SUCH SETTLEMENT. ACCORDINGLY, HE QUASHED THE NOTICE ISSUED U/S 148 A ND, CONSEQUENTLY, THE ASSESSMENT ORDER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE PREFERRED TO RE LY ON THE ORDER OF THE A.O. THE LEARNED COUNSEL FOR THE ASSES SEE, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LD . CIT(A), BESIDES PLACING RELIANCE ON THE DECISION OF THE HON'BLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. SITADEVI, AS REPORTED IN 148 ITR 50 6, ON THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CENTURY ENKA LIMITED VS. ITO, AS REPORTED IN 143 ITR 629, AND ON THE DECISIO N OF HON'BLE DELHI HIGH COURT IN THE CASE OF JAI BHARAT MARUTI LIMITED VS. CIT, AS REPORTED PAGE 5 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE IN 223 CTR 269. THE LEARNED COUNSEL FURTHER CONTEND ED THAT AFTER PROCESSING U/S 143(1)(A) OF THE ACT, NO MATERIAL OR INFORMATION WAS BROUGHT ON RECORD, WHICH COULD JUSTIFY THE REOPENIN G OF THE ASSESSMENT. FOR THIS PROPOSITION, HE PLACED STRONG RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. O.P.CHAWLA, AS REP ORTED IN 6 TTJ 755, (DEL) ( T.M.) AND THE DECISION OF INDORE BENCH OF T HE TRIBUNAL IN THE CASE OF PRAVEEN JINDAL VS. ITO, AS REPORTED IN 12 ITJ 22 7. 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE MAIN BASIS FOR QUASHING THE RE -ASSESSMENT BY THE CIT(A) IS THAT ISSUE OF QUANTUM OF ALLOWANCE U/ S 35-D HAD ATTAINED FINALITY AND POWER SUBSIDY WAS A CAPITAL RECEIPT AS HELD BY VARIOUS HIGH COURTS INCLUDING, THE HON'BLE JURISDICTIONAL HIGH C OURT IN THE CASE OF RAJA RAM MAIZE PRODUCTS (SUPRA) AND, THUS, IT WAS A CASE OF CHANGE OF OPINION AND NO NEW MATERIAL EXISTED. WE, HOWEVER, F IND THAT IT IS A CASE WHERE RETURN HAS BEEN PROCESSED U/S 143(1)(A) OF T HE ACT. HENCE, IT CANNOT BE A CASE OF CHANGE OF OPINION AS JUDICIALLY SETTLED NOW BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F RAESH JHAVERI STOCK BROKERS AS REPORTED IN 291 ITR 500. HOWEVER, THIS F ACT ALONE DOES NOT AUTOMATICALLY LEAD TO A CONCLUSION THAT ALL OTHER R EQUISITE CONDITIONS MENTIONED IN SECTION 147 HAVE BEEN COMPLIED WITH, B ECAUSE THE WORDS PAGE 6 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE REASON TO BELIEVE STILL EXIST EVEN AFTER ENLARGEM ENT OF SCOPE OF PROVISIONS OF SECTION 147 WITH EFFECT FROM 1.4.198 9. IN A NUMBER OF JUDICIAL DECISIONS, AFTER CONSIDERING THE AMENDED P ROVISIONS, IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 147 CANNOT BE I NVOKED, IN A LIGHTLY MANNER, TO DISTURB THE FINALITY OF A RETURN FILED B Y AN ASSESSEE UNLESS THERE EXISTS SOME INFORMATION OR MATERIAL HAVING CLOSED N EXUS WITH THE REASONS RECORDED BY THE ASSESSING OFFICER. THUS, WITHOUT GO ING INTO THE OTHER ASPECTS INVOLVED IN THE PROVISIONS OF SECTION 147, THE MATERIAL POINT FOR OUR CONSIDERATION HERE IS THAT WHETHER THERE EXISTS ANY MATERIAL OR INFORMATION. IN THIS REGARD, WE FIND THAT COUNSEL I N THE COMPUTATION CHART ATTACHED A NOTE REGARDING TREATING POWER SUBSIDY AS A CAPITAL RECEIPT ON THE BASIS OF THE THEN AVAILABLE DECISION OF THE TRI BUNAL. IT IS FURTHER NOTED THAT SUCH RETURN WAS FILED ON 30.11.1994, WHICH WAS PROCESSED UNDER SECTION 143(1)(A) ON 9.2.1995. THE NOTICE U/S 148 H AS BEEN ISSUED ON 30.4.1998 WITHIN FOUR YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR ON THE BASIS OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED (SUPRA), WHICH WAS PRONOUNCED ON 19.9.1997. IT IS A SETTLED POSITION THAT THE HON'BL E SUPREME COURT DECLARES THE LAW AND THE RATIO OF A DECISION GIVEN BY THE HO N'BLE SUPREME COURT IS BINDING ON ALL COURTS/TRIBUNAL FUNCTIONING WITHIN T HE TERRITORY OF THIS COUNTRY UNDER ARTICLE 141 TO THE CONSTITUTION OF IN DIA. IT IS ALSO A SETTLED PAGE 7 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE PRINCIPLE THAT SUCH DECISION CONSTITUTES INFORMATIO N, WHICH CAN BE USED FOR REOPENING A CONCLUDED ASSESSMENT PROVIDED TIME IS AVAILABLE TO DO SO AS PER THE PROVISIONS OF LAW. IT IS NOT THE CASE OF THE ASSESSEE THAT SUCH TIME IS NOT AVAILABLE I.E. THE ACTION OF REOPENING IS TIME BARRED. THUS, REOPENING DONE BY THE A.O. ON A SUBSEQUENT DECISIO N OF THE HON'BLE SUPREME COURT IS VALID. IN THIS REGARD, WE FURTHER FIND THAT THE LD. CIT(A) HAS HELD THAT THE HON'BLE M.P. HIGH COURT IN THE CA SE OF RAJA RAM MAIZE PRODUCTS (SUPRA), PRONOUNCED ON 1.10.1997 I.E. SUBS EQUENT TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEE L AND PRESS WORKS LIMITED (SUPRA) HAD HELD THAT POWER SUBSIDY WAS A C APITAL RECEIPT. HENCE, REOPENING WAS NOT VALID. WE FIND THAT IN THE CASE O F RAJARAM MAIZE PRODUCTS, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED (SUPRA), WAS N OT BROUGHT TO THE NOTICE OF THE HON'BLE HIGH COURT AS THE DECISION IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED HAD BEEN PRONOUNCED J UST TWO WEEKS BEFORE THE DECISION PRONOUNCED BY THE HON'BLE M.P. HIGH COURT. HOWEVER, IN THE JUDICIAL HIERARCHY, THE DECISION OF THE HON'BLE SUPREME COURT IS TO BE GIVEN PREFERENCE OVER THE DECISION O F THE HON'BLE JURISDICTIONAL HIGH COURT. HENCE, WE HOLD THAT VIEW TAKEN BY THE CIT(A) IS NOT CORRECT IN LAW. NOW, ONCE THE REOPENING OF A N ASSESSMENT HAS BEEN FOUND TO BE VALID ON THIS REASON, HENCE, IN OUR VIE W, THERE IS NO NEED TO PAGE 8 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE LOOK INTO THE VALIDITY OF REOPENING ON THE OTHER IS SUE AS ONCE INITIATION OF REOPENING IS FOUND TO BE VALID ON ONE REASON, THAT IS SUFFICIENT. OUR THIS VIEW IS DULY SUPPORTED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF THANTHI TRUST VS. ITO, AS REPORTED IN 91 ITR 261, B Y THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. ANAND & CO. AS REPORTED IN 191 ITR 82. ACCORDINGLY, WE DO NOT CONS IDER IT NECESSARY TO DEAL WITH OTHER CONTENTIONS RAISED BY THE ASSESSEE. THUS, GROUND NO.1 OF THE REVENUES APPEAL IS ALLOWED. 9. GROUND NO. (II) (A) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING RELIEF ON BELATED PAYMENT OF EMPL OYEES AND EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AMOUNTING TO RS.1,27,707/-. 10. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY O UT-SET, SUBMITTED THAT THE IMPUGNED SUM HAD BEEN PAID WITHI N THE GRACE PERIOD, HENCE, ALLOWABLE U/S 43-B. BESIDES THIS, LEARNED CO UNSEL ALSO SUBMITTED THAT THIS ISSUE WAS ALSO COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 1996-97 IN I.T.A.NO. 85/IND/2000 ORDER DATED 31.7.2008 AND REF ERRED TO PARA 19 AT PAGE 8 OF THE SAID ORDER. HE ALSO SUBMITTED THAT IN ASSESSMENT YEAR 1996- 97, THE TRIBUNAL FOLLOWING THIS ORDER AGAIN ACCEPTE D THIS CLAIM OF THE PAGE 9 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/2 003 M/S.SIDDHARTH TUBES LIMITED,INDORE ASSESSEE AND REFERRED TO PARA 19 AT PAGES 17 & 18 O F THE ORDER OF THE TRIBUNAL DATED 17TH OCTOBER,2008. THE LD. DEPARTMEN TAL REPRESENTATIVE COULD NOT CONTROVERT THIS CLAIM OF THE ASSESSEE, HO WEVER, HE PREFERRED TO RELY ON THE ORDER OF THE A.O. 11. ON DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE IM PUGNED ADDITION, AS THESE SUMS HAVE BEEN HAVE DEPOSITED WITH THE COMPET ENT AUTHORITIES WITHIN GRACE PERIOD. THUS, THIS GROUND OF THE REVE NUES APPEAL IS ALSO DISMISSED. 12. GROUND NO. (II)(B) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING RELIEF ON ADDITION OF RS. 44,516/- U/S 35-D. 13. THE LEARNED COUNSEL, AT THE VERY OUT-SET, SUBMITTED THAT THIS ISSUE WAS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE SAID YEARS AND DREW OUR ATTENTION TO RELEVANT PAGES OF THE ORDERS OF THE TRIBUNAL, THOUGH THE LD. DEPARTMENTAL REPRESENTATIVE PREFERRED TO RELY ON THE ORDER OF THE REVENUE AUTHO RITY. 14. WE FIND THAT THE TRIBUNAL IN REVENUES APPEAL IN AS SESSMENT YEAR 1996-97 HAS HELD THAT ASSESSEES CLAIM FOR ALL OWANCE OF A SUM OF RS. 44,415/- U/S 35-D WAS CORRECTLY DECIDED BY THE CIT( A). THE FACTS ARE PAGE 10 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE IDENTICAL AND THERE BEING NO CHANGE IN LAW, HENCE, WE ALSO DISMISS THIS GROUND BY FOLLOWING THE RATIO OF THE IMPUGNED ORDER OF THE TRIBUNAL. 15. GROUND (II)( C) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING RELIEF ON EXCLUSION OF EXP ORT INCENTIVE AND CERTAIN OTHER INCOME AMOUNTING TO RS. 1,41,88,802/- FOR COMPUTING DEDUCTION U/S 80HH & 80 -I. 16. IN ABOVE GROUND, NUMBER OF ISSUES ARE INVOLVED. THE LEARNED COUNSEL SUBMITTED THAT AS FAR AS THE ISSUE OF REFUN D OF EXCISE DUTY OF RS. 49,65,793/- WAS CONCERNED, THIS ISSUE WAS COVERED I N FAVOUR OF ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 IN CROSS APPEALS NO. 479/IND/2000, 490 /IND/2000 ORDER DATED 17 TH OCTOBER, 2008, AND DREW OUR ATTENTION TO PAGE 68 O F THE ORDER. 17. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDER OF THE A.O. 18. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEAR 1997-9 8 FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1995-96 IN I.T.A.NO. 54/IND/200 2 DATED 4 TH APRIL, 2006, HELD THAT EXCISE DUTY REFUND WAS LIABLE TO BE INCLUDED IN THE GROSS TOTAL INCOME FOR COMPUTING THE DEDUCTION U/S 80HH & 80-I OF THE PAGE 11 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE INCOME-TAX ACT, 1961. ACCORDINGLY, WE UPHOLD THE OR DER OF THE LD. CIT(A) ON THIS ASPECT. 19. AS REGARD THE ISSUE OF ELIGIBILITY OF DUTY DRAW B ACK FOR DEDUCTION U/S 80HH & 80I, THE LEARNED COUNSEL FAIRL Y STATED THAT THE ISSUE OF CONSIDERATION OF DUTY DRAW BACK OF RS. 26, 89,348/- FOR COMPUTING DEDUCTION U/S 80-HH & 80-I WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F LIBERTY INDIA VS. CIT, AS REPORTED IN 317 ITR 218, WHEREIN SUCH AMOUN T HAD BEEN FOUND TO HAVE NOT BEEN DERIVED FROM INDUSTRIAL UNDERTAKING, AS THE SOURCE OF SUCH INCENTIVE WAS SCHEME OF THE GOVERNMENT. ACCORDINGLY , WE ACCEPT THIS PART OF THIS GROUND RAISED BY THE REVENUE. 20. THE LEARNED COUNSEL, THEREAFTER, SUBMITTED THAT THE AMOUNT OF RS. 57,99,800/- WAS RECEIVED BY THE ASSESSEE FROM T HE GOVERNMENT UNDER INTERNATIONAL PRICE REIMBURSEMENT SCHEME FORMULATED BY THE GOVERNMENT TO REIMBURSE THE PART OF SALE CONSIDERATION TO THE EXPORTER, WHO SOLD THE GOODS IN INTERNATIONAL MARKET AT A LESSER PRICE TO COMPETE GLOBALLY, HENCE, THIS AMOUNT WAS ELIGIBLE FOR DEDUCTION U/S 80HH & 8 0I. AT THIS STAGE, A QUERY WAS RAISED THAT GOVERNMENT COULD EITHER REIMB URSE THE COST OF PRODUCTION OR A PART OF SALE CONSIDERATION. HENCE, ONCE DUTY DRAW BACK, BEING A REIMBURSEMENT OF COST COULD NOT BE CONSIDER ED AS DERIVED FROM INDUSTRIAL UNDERTAKING, HOW THIS AMOUNT, WHICH WAS ALSO REIMBURSED BY PAGE 12 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE THE GOVERNMENT UNDER ITS SCHEME COULD BE CONSIDERE D AS DERIVED FROM INDUSTRIAL UNDERTAKING, IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA). THE LEARNED C OUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY EFFECTIVE REPLY TO THIS QUERY. A CCORDINGLY, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AS THE SOURCE OF SU CH SUM IS ALSO A SCHEME OF THE GOVERNMENT BY FOLLOWING THE RATIO OF THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA). 21. AS REGARDS THE EXCLUSION FOR COMPUTING DEDUCTION U/ S 80HH & 80I, THE LEARNED COUNSEL FAIRLY SUBMITTED THAT THIS ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASES FOR ASSESSMENT YEARS 1996-97 AND 1997-98. ACCORDING LY, WE ALLOW THIS PART OF THIS GROUND OF THE REVENUES APPEAL. 22. SIMILARLY, THE ASSESSEE AGREED THAT THE ISSUE REGAR DING INSURANCE CLAIM FOR COMPUTING DEDUCTION U/S 80HH/80I WAS ALSO COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 1997-98. ACCORDINGLY, THIS PART OF THIS GROUND IS ALSO DECIDED AGAINST THE ASSESSEE. THUS, GROUND NO. (II) (C) STANDS PARTLY ALLOWED. 23. GROUND NO. II(D) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING RELIEF ON EXCLUSION OF OTH ER INCOME PAGE 13 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE INCLUDING INTEREST INCOME FOR WORKING THE QUANTUM F OR DEDUCTION U/S 80HHC. 24. THE LEARNED COUNSEL FAIRLY SUBMITTED THAT OTHER INCOME COMPRISED OF INTEREST RECEIVED ON SURPLUS FUND AND INSURANCE CLAIM. HE FURTHER SUBMITTED THAT INTEREST INCOME WAS LIABLE T O BE EXCLUDED IN COMPUTING THE DEDUCTION U/S 80HHC IN TERMS OF PROVI SIONS OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC AND INSURANCE CLAIM REFUND WAS TO BE CONSIDERED AS PART OF PROFITS OF BUSINESS, IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1996-97 AND DREW OUR ATTENTION TO PAGE 32 OF THE ORDER OF THE T RIBUNAL. 25. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED STRONG R ELIANCE ON THE ORDER OF THE REVENUE AUTHORITY. 26. ON DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1996- 97, WE HOLD THAT INTEREST INCOME IS NOT ELIGIBLE FO R COMPUTING DEDUCTION U/S 80HHC AND INSURANCE CLAIM IS TO BE CONSIDERED F OR THIS PURPOSE. THUS, GROUND NO.2(E) IS ALSO PARTLY ALLOWED. 27. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. 28. NOW, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I.T. A.NO. 171/IND/2003. PAGE 14 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE 29. GROUND NO. 1 IS OF GENERAL NATURE, HENCE, NO SPECIF ICATION DECISION IS CALLED FOR. 30. GROUND NO.2 READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN UPHOLDING THE A.OS ACTION IN R ESPECT OF DISALLOWANCE OF RS. 3,75,000/- BEING ROC EXPENSES R ELATING TO FILING FEES PAID FOR INCREASE IN AUTHORIZED SHAR E CAPITAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT ACCEPTING THE ALTERNATE PLEA ON THE APPELLANT THAT IF THE DISALLOWANCES OF ROC FEE IS C ONFIRMED IN THAT CASE DEDUCTION U/S 35D BE ALLOWED BY TREATI NG THE SAME AS DEFERRED REVENUE EXPENSES. 31. THE LEARNED COUNSEL FAIRLY SUBMITTED THAT THIS ISSU E WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF TH E TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1996-97 IN THE APPEAL CITED HEREINABOVE AND DREW OUR ATTENTION TO PARA 20 AT PA GE 18, WHEREIN THE TRIBUNAL BY FOLLOWING THE DECISION OF HON'BLE SUPRE ME COURT IN THE CASE OF BROOKE BOND INDIA LIMITED VS. CIT, AS REPORTED I N 225 ITR 798, HAD HELD THAT FEE PAID TO ROC FOR INCREASE IN AUTHORIZE D CAPITAL WAS A CAPITAL EXPENDITURE. THE FACTS ARE IDENTICAL. HENCE, WE DIS MISS THIS GROUND OF THE ASSESSEE IN THIS YEAR ALSO. PAGE 15 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE 32. GROUND NO. 3 READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE A.OS ACTION IN R ESPECT OF ADDITION OF RS. 5,06,608/-ON ACCOUNT OF POWER SUBSI DY. 33. THE LEARNED COUNSEL FAIRLY SUBMITTED THAT THE ISSUE OF POWER SUBSIDY WAS ALSO COVERED AGAINST THE ASSESSEE BY TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAWHNEY STEEL AND PRESS WORKS LIMITED VS. CIT, REPORTED IN 228 ITR 253, WHEREIN S UCH RECEIPT HAS BEEN HELD TO BE OF REVENUE NATURE. ACCORDINGLY, WE DISMI SS THIS GROUND OF THE ASSESSEE ALSO. 34. GROUND NO. 4 READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE A.OS ACTION IN R ESPECT OF AD HOC ADDITION OF RS. 50,000/- BEING 50% OF RS. 1, 00,000/- TOWARDS ENTERTAINMENT EXPENSES WITHOUT GIVING ANY B ASIS FOR THE SAME. 35. THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE WAS C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE TRI BUNAL IN ASSESSEES OWN CASE AND DREW OUR ATTENTION TO RELEVANT PARAGRAPHS OF THE SAID ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD. CIT(A). PAGE 16 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE 36. WE FIND THAT THE SIMILAR ADDITION MADE BY THE ASSES SING OFFICER HAS BEEN DELETED BY THE CIT(A) IN THOSE YEARS AND T HE TRIBUNAL HAS CONFIRMED THIS DECISION OF THE LD. CIT(A). IN THIS YEAR, THE SIMILAR DISALLOWANCE HAS BEEN MADE, HENCE, WE ACCEPT THIS C LAIM OF THE ASSESSEE, FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER Y EARS. THUS, THIS GROUND OF THE ASSESSEE STANDS ALLOWED. 37. GROUND NOS. 5, 6 & 7 RELATING TO ALLOWANCE OF PUBLI C ISSUE EXPENSES, CONSIDERATION OF INTEREST OF INCOME FOR D EDUCTION U/S 80HHC AND SET OFF OF UNABSORBED DEPRECIATION AND INVESTME NT ALLOWANCE FROM BUSINESS INCOME FOR COMPUTING DEDUCTION U/S 80HHC W ERE NOT PRESSED, HENCE, DISMISSED AS NOT PRESSED. 38. GROUND NO. 8 READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT DIRECTING THE A.O. TO RECAL CULATE THE AMOUNT OF INTEREST CHARGED U/S 234-B. THE INTEREST SO CHARGED IS VERY EXCESSIVE AND HIGH, THE SAME REQUIR ES TO BE CONSIDERABLY REDUCED. 39. THE ISSUE RAISED IN GROUND NO. 8 REGARDING CHARGEAB ILITY OF INTEREST U/S 234-B, WHICH IS OF CONSEQUENTIAL NATUR E, HENCE THE A.O. IS DIRECTED TO CHARGE THE INTEREST AS PER LAW AFTER GI VING EFFECT TO OUR DIRECTIONS. THUS, THIS GROUND OF THE ASSESSEE IS AL LOWED. PAGE 17 OF 17 I.T.A.NOS. 275/IND/2003 AND 171/IND/ 2003 M/S.SIDDHARTH TUBES LIMITED,INDORE 40. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 41. TO SUM UP, BOTH REVENUE AS WELL AS ASSESSEES APPEA L STAND PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2009. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :26 TH NOVEMBER, 2009. CPU* 1924D25