Advik Hi tech Pvt Ltd, Chakan V. Additional C.I.T., Pune

ITA 1743/PUN/2012

• Counselvise Citation: 174324514 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 27-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Business expenditure; Opportunity of being heard; Competent authority; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.1743 & 1744/PN/2012 (A.YS. 2008-09 & 2009-10) ADVIK HI TECH PVT. LTD., GAT NO.357, PLOT NO.99 PART A, CHAKAN TALEGAON ROAD KHARABWADI, CHAKAN 410501 PAN: AACCA3106E APPELLANT VS. ADDL.CIT, RANGE 8, PUNE RESPONDENT ITA NOS.1706 & 2041/PN/2012 (A.YS. 2008-09 & 2009-10) ADDL.CIT, RANGE 8, PUNE APPELLANT VS. ADVIK HI TECH PVT. LTD., GAT NO.357, PLOT NO.99 PART A, CHAKAN TALEGAON ROAD KHARABWADI, CHAKAN 410501 PAN: AACCA3106E RESPONDENT ASSESSEE BY : S/SHRI SHARAD SHAH & ROHIT TAPADIYA DEPARTMENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 21.07.2014 DATE OF PRONOUNCEMENT : 30.07.2014 ORDER PER SHAILENDRA KUMAR YADAV : THESE CROSS APPEALS PERTAIN TO THE SAME ASSESSEE ON ALMOST SIMILAR GROUNDS AGAINST THE ORDER OF THE COMMISSION ER OF INCOME ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. TAX(APPEALS)-V, PUNE. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. IN ITA NO.1743/PN/2012 FOR A.Y. 2008-09, THE ASS ESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. THE LEARNED A.O. ERRED IN TREATING (AND LEARNED CIT-A ERRED IN CONFIRMING) THAT THE SHORT TERM CAPITAL GAIN OF RS.9,27,194/- AS BUSINESS INCOME. 2. THE LEARNED A.O. ERRED IN (AND LEARNED CIT-A ERRED IN CONFIRMING) NOT ALLOWING THE LOSS OF RS.1,53,269/ - SUFFERED BY THE ASSESSEE AND HAVING BEEN WRITTEN OFF AS UNRECOVERABLE. 3. THE LEARNED A.O. ERRED IN (AND LEARNED CI T-A ERRED IN CONFIRMING) DISALLOWING LUMP SUM OF RS.4,00 ,000/- OUT OF FOREIGN TRAVEL EXPENSES INCURRED BY THE A SSESSEE IN THE COURSE OF BUSINESS. 4. THE LEARNED A.O. ERRED IN (AND LEARNED CIT-A ERRED IN CONFIRMING) DISALLOWING THE CLAIM OF DEDUCTION U/S 80IB(3)(II). THE AMOUNT CLAIMED IS RS.2,26,97,837/- 5. A) THE LEARNED A.O. ERRED IN DISALLOWING MAT CREDIT OF RS. 30,60,944/- (ARISING OUT OF PAYMENT UNDER MAT F OR A.Y. 2006-07) CLAIMED BY THE ASSESSEE. B) THE LEARNED CIT-A ERRED IN NOT ADJUDICATING THE GROUND NO. 6 OF THE APPELLANT [WHICH READS AS IN SUB GROUN D (A) HERE ABOVE]. 6. THE LEARNED A.O. ERRED IN NOT ACCEPTING THE INCOME AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE. 7. THE APPELLANT CRAVES ITS RIGHT TO ADD TO OR ALTER T HE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF HEARING OF THE CASE. 2.1 THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACT URING OF AUTO COMPONENTS SUCH AS LIFTERS, TENSIONER ASSEMBLI ES, OIL PUMPS, FUEL PUMPS, ETC. IT HAS WIND MILLS AT SANGLI AND D HULE. ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. 2.2 THE FIRST ISSUE IS WITH REGARD TO TREATMENT OF RS.9,27,194/- BEING PROFIT FROM PURCHASE AND SALE OF SHARES. THE ASSESSING OFFICER HAS TREATED THE SAME AS INCOME FROM BUSINES S AS AGAINST SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER IN EARLIER YEARS TREATED THE PROFIT ON PURC HASE AND SALE OF SHARES AS BUSINESS INCOME WHICH WAS CONFIRMED BY TH E CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED O UT THAT A SIMILAR ISSUE AROSE IN ASSESSEES OWN CASE IN ITA N O.541/PN/2012 FOR A.Y. 2007-08, IN WHICH THE TRIBUNAL HAS OBSERVE D AS UNDER: 4. WE FIND FROM THE ORDER OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR A.Y. 2006-07 THAT THE TRIBUNAL VIDE ITA NO.24/PN/2010 ORDER DATED 06-01-2012 HAS RESTORED T HE ISSUE TO THE FILE OF THE CIT(A) IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06. SINCE IDENTICAL ISSUE IS PENDING BEFORE THE CIT(A) FOR TH E TWO PRECEDING ASSESSMENT YEARS AND SINCE THE ASSESSING OFFICER WHILE DECIDING THE ISSUE HAS FOLLOWED THE ORDER OF HIS PREDECESSOR IN THE CASE OF THE ASSESSEE IN A.Y. 200 6-07, THEREFORE, WE IN THE INTEREST OF JUSTICE, DEEM IT P ROPER TO RESTORE THE ISSUE TO THE FILE OF THE LD. CIT(A) FOR DECIDING THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVIN G DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO.1 BY THE R EVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 2.3 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING, WE IN THE INTEREST OF JUSTICE, DEEM IT P ROPER TO RESTORE THE ISSUE TO THE FILE OF THE CIT(A) FOR DECIDING TH E ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 3. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF RS.1,53,269/- BEING WRITTEN OFF AS IRRECOVERABLE MADE BY THE ASSE SSING OFFICER. ASSESSING OFFICER NOTICED THAT THE AMOUNT IN QUESTI ON PERTAINS TO TDS PAID IN RESPECT OF TECHNICAL KNOWHOW FEES PAYAB LE TO COLLABORATORS WHICH WAS ULTIMATELY NOT PAID ON ACCO UNT OF ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. INTERPRETATION ISSUES. THE ASSESSING OFFICER HELD THAT THE AMOUNT IN QUESTION COULD NOT BE SAID TO BE BUSINESS EXPENS ES OF THE ASSESSEE. ACCORDINGLY, HE DISALLOWED THE CLAIM. IN APPEAL, THE ASSESSEE HAD CLAIMED THAT THE EXPENSES BORNE WERE P ART OF COMPLIANCE OF THE RUNNING BUSINESS AND THEREFORE, T HE SAME SHOULD BE ALLOWED U/S.37 OF THE I.T. ACT. THE CIT( A) HAS DECIDED THIS ISSUE BY OBSERVING AS UNDER: 11. 1 HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AS WELL AS REPLY OF THE APPELLANT, THE AMOUNT IN QUESTION BEING TDS CANNOT BE SAID TO BE BUSINESS EXPENDITURE OF THE AP PELLANT COMPANY AND THEREFORE, THE SAME CANNOT BE ALLOWED. ACCORDINGLY, THE GROUND FAILS. THUS, GROUND NO.2 IS DISMISSED. 3.1 ACCORDING TO US, THE CIT(A) HAS NOT GIVEN COGEN T REASONING WHILE UPHOLDING THE ORDER OF THE ASSESSING OFFICER AND HE HAS SIMPLY STATED THAT THE AMOUNT IN QUESTION BEING TDS CANNOT BE SAID TO BE BUSINESS EXPENDITURE OF THE ASSESSEE COM PANY AND THEREFORE, THE SAME COULD NOT BE ALLOWED. ACCORDIN G TO US, THE ORDER OF CIT(A) IS NON-SPEAKING ONE AS IT CONTAINS NO REASONING. IN THE ABSENCE OF REASONING, THE ORDER CANNOT BE UPHEL D, SO IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE C IT(A) WITH A DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AF TER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE WE ARE RESTORING THE ISSUE ON PRELIMINARY GROUND, WE ARE REFRAINING FROM COMMENTING ON THE MERIT OF THE ISSUE AT HAND. 4. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OU T OF FOREIGN TRAVEL EXPENSES. THE ASSESSING OFFICER HAD DISALLO WED RS.4,00,000/- OUT OF FOREIGN TRAVEL EXPENSES. DURI NG THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE COMPANY HAD INCURRED RS.20 LACS ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. THE EXPENSES RELATED TO FOREIGN T RAVEL OF SHRI ADITYA BHARTIA, HIS WIFE PAYAL BHARTIA AND HIS FATH ER RADHE SHYAM ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. BHARTIA. BASED UPON THE FINDINGS FOR A.Y. 2007-08, THE ASSESSING OFFICER HELD THAT THERE WAS NO JUSTIFICATION FOR FO REIGN TRAVEL OF SMT, PAYAL BHARTIA AND SHRI RADHE SHYAM BHARTIA, ACCORDI NGLY, HE DISALLOWED RS. 4 LACS TREATING THE SAME AS NON-BUSI NESS EXPENDITURE, WHICH WAS CONFIRMED BY THE CIT(A). TA KING OVER ALL VIEW AND IN THE INTEREST OF JUSTICE, WE RESTRICT TH E DISALLOWANCE TO RS.2 LACS. 5. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF THE CLAIM U/S.80IB(3)(II) OF THE I.T. ACT AMOUNTING TO RS.2,2 6,97,837/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE DEDUCTION WHICH IS AVAILAB LE TO SMALL SCALE UNIT HAS BEEN CLAIMED EVEN THOUGH PLANT & MACHINERY EXCEEDED 3 CRORES. THE ASSESSING OFFICER ALSO NOTED THAT THE CLAIM WAS MADE IN A.Y. 2003-04, 2004-05, & 2005-06 EARLIER, BUT IN A.Y. 2006-07 & 2007-08, NO SUCH CLAIM WAS MADE. THE ASSESSEE AG AIN MADE THE CLAIM IN A.Y. 2008-09 WHICH IS UNDER CONSIDERATION. THE ASSESSING OFFICER CONFRONTED THE ASSESSEE ON THE ISSUE AND TH E CONTENTION OF THE ASSESSEE WAS THAT CRITERIA OF SSI UNIT WERE APP LICABLE ONLY IN THE INITIAL YEAR AND THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION EVEN IF THE ASSESSEE CEASED TO BE SSI IN SUBSEQUENT YEARS. THE ASSESSING OFFICER DID NOT ACCEPT THE VIEW OF THE ASSESSEE AND HE DISALLOWED THE CLAIM AS THE ASSESSEE CEASED TO BE SSI DURING T HE PREVIOUS YEAR RELEVANT TO THE YEAR UNDER CONSIDERATION. 5.1 IN APPEAL, THE CIT(A) OBSERVED THAT DEDUCTION U /S.80IB(3)(II) IS ALLOWED TO SSI UNIT. THE DEDUCTION IS AVAILABLE FOR 10 CONSECUTIVE YEARS BEGINNING WITH THE INITIAL YEAR. THEREFORE, IN ORDER TO CLAIM DEDUCTION UNDER THE ABOVE NAMED SECTION, ELIGIBILIT Y OF BEING SSI UNIT CONTINUES FOR THE ENTIRE PERIOD OF CLAIM AND N OT ONLY IN THE INITIAL A.Y. AS ARGUED BY THE ASSESSEE. RECENTLY T HE ISSUE CAME UP BEFORE THE PUNE TRIBUNAL IN THE CASE OF SAMRUDDHI I NDUSTRIES LTD. VS. JT. COMMISSIONER OF INCOME-TAX R-L, SANGLI IN I TA NO. ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. 1002/PN/09 WHEREIN ON SIMILAR FACTS, THE TRIBUNAL H AS OBSERVED AS UNDER. '9. WE HAVE CAREFULLY EXAMINED THE RIVAL CONTENTION S AND FIND OURSELVES UNABLE TO ACQUIESCE TO THE PLEA OF THE AS SESSEE COMPANY. NO DOUBT, THE CONDITIONS PRESCRIBED IN SUB -SECTION (2) OF SECTION 80-IB ARE REQUIRED TO BE EXAMINED IN THE INITIAL ASSESSMENT YEAR, HOWEVER, THERE IS NOTHING IN PHRAS EOLOGY OF SUB-SECTION (2) TO SUGGEST THAT THE CONDITION IN CL AUSE (III) THEREOF HAS TO BE EXAMINED ONLY IN THE INITIAL ASSE SSMENT YEAR. WE ARE IN AGREEMENT WITH THE POSITION OF THE APPELLANT THAT IN SO FAR AS CONDITIONS PRESCRIBED IN CLAUSES (I) AND (II) ARE CONCERNED, THE SAME RELATE TO A POINT OF TIME W HICH CAN ONLY BE EXAMINED IN THE COURSE OF THE INITIAL ASSES SMENT YEAR. CLAUSE (I) REQUIRES AN EXAMINATION AS TO WHETHER TH E INDUSTRIAL UNDERTAKING IS FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. CLAUSE (II) RELATES TO EXAMINING WHETHER THE INDUSTRIAL UNDERTA KING IS FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINE RY OR PLANT ALREADY USED IN BUSINESS. EVIDENTLY, THE COND ITIONS IN CLAUSES (I) AND (II) CAN ONLY BE EXAMINED AT THE TI ME OF FORMATION OF A UNIT, WHICH IS THE INITIAL YEAR. CL AUSE (III) WHICH IS UNDER CONSIDERATION DOES NOT IMPLY ANY SUC H INTERPRETATION. IN OUR CONSIDERED OPINION, THE IMP ORT OF THE CONDITION PRESCRIBED IN CLAUSE (III) IS THAT THE IN DUSTRIAL UNDERTAKING OUGHT TO BE A SMALL SCALE UNDERTAKING I N THE YEAR OF CLAIM OF DEDUCTION, BE IT BE THE INITIAL YEAR OR ANY OF THE SUBSEQUENT YEARS, SO LONG AS IT MANUFACTURES PRODUC TS LISTED IN THE ELEVENTH SCHEDULE. QUITE CLEARLY, IN THIS CA SE ADMITTEDLY THE ASSESSEE IS MANUFACTURING ARTICLES O R THINGS STATED IN THE ELEVENTH SCHEDULE AND IT DOES NOT QUA LIFY TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING IN THE INSTANT Y EAR AND, THUS, THE SAID CONDITION IS NOT FULFILLED. 10. MUCH HAS BEEN ARGUED BY THE APPELLANT TO THE EF FECT THAT THE CONDITIONS ARE TO BE VERIFIED ONLY IN THE INITI AL YEAR AND SUCH EXAMINATION IS NOT INTENDED BY THE LEGISLATURE TO BE CARRIED OUT IN THE SUBSEQUENT YEARS BY THE ASSESSIN G OFFICER. FOR THIS PROPOSITION, HEAVY RELIANCE HAS BEEN PLACE D ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD (SUPRA) . WE HAVE PERUSED THE SAID DECISION. IN THE CASE OF SAUR ASHTRA CEMENT & CHEMICAL INDUSTRIES LTD.(SUPRA), THE FACTS WERE AS FOLLOWS. THE ASSESSEE WAS CARRYING ON BUSINESS OF MANUFACTURING CEMENT AND THE CAPACITY OF THE FIRST CEMENT PLANT WAS 600 TONS PER DAY. IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 1968-69, THE CAPACITY WAS EXPANDED AND IT WAS RAISED TO 1600 TONS PER DAY. THE ASSESSEE COMPA NY ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. THEREFORE MADE A CLAIM FOR RELIEF UNDER SECTION 80J OF THE ACT WITH REFERENCE TO THE CAPITAL EMPLOYED IN THE EXPAN SION OF THE PLANT AND MACHINERY. THE ASSESSING OFFICER ALLOWED THE SAID CLAIM FOR THE ASSESSMENT YEAR 1968-69. HOWEVER, IN THE ASSESSMENT YEAR 1969-70 THE ASSESSING OFFICER DISAL LOWED THE ASSESSEE'S CLAIM, AS IN HIS OPINION, THE EXPANSION OF CEMENT MANUFACTURING UNIT DID NOT AMOUNT TO SETTING UP A N EW INDUSTRIAL UNDERTAKING, IN AS MUCH AS THE ACTIVITIE S OF THE EXPANDED PART OF THE UNIT AS WELL AS THOSE OF THE O RIGINAL UNITS WERE MUCH INTERCONNECTED. THUS, HE DISALLOWED THE C LAIM ON THE GROUND THAT NO NEW UNIT CAN BE SAID TO HAVE BEE N SET UP SEPARATE FROM THE EXISTING UNIT ON ACCOUNT OF MERE EXPANSION. THE APPELLATE COMMISSIONER, IN APPEAL, HELD THAT IN THE ABSENCE OF THERE BEING ANY SPECIFIC PROVISION IN TH E ACT THAT THE NEW UNIT SHOULD BE ALTOGETHER DISTINCT AND EVEN PHYSICALLY AT A DISTANCE FROM THE OLD UNIT, AND THAT, IF THE R ELIEF WAS ADMISSIBLE FOR ASSESSMENT YEAR 1968-69, IN RESPECT OF THE EXPANDED UNIT OF THE ASSESSEE COMPANY, THAT RELIEF WOULD CONTINUE TO BE AVAILABLE TO THE ASSESSEE FOR THE SU BSEQUENT PERIOD OF FOUR YEARS. THE TRIBUNAL ALSO UPHELD THE ORDER OF THE APPELLATE COMMISSIONER GRANTING RELIEF TO THE ASSES SEE SINCE IN THE OPINION OF THE TRIBUNAL UNLESS THE ASSESSMEN T FOR THE ASSESSMENT YEAR 1968-69 WAS DISTURBED BY WITHDRAWAL OF THE RELIEF, THERE COULD BE NO SUBSTANCE OR JUSTIFICATIO N IN THE REVENUE'S ATTEMPT TO WITHDRAW THE CLAIM UNDER SECTI ON 80J OF THE ACT FOR THE SUBSEQUENT YEAR, I.E. ASSESSMENT YE AR 1969- 70. THE HON'BLE HIGH COURT HELD THAT IF THE RELIEF OF TAX HOLIDAY WAS GRANTED TO THE ASSESSEE FOR THE ASSESSM ENT YEAR 1968-69, THE ASSESSEE WAS ENTITLED TO CONTINUANCE O F THAT RELIEF FOR THE SUBSEQUENT FOUR YEARS AND THE ASSESS ING OFFICER WOULD NOT BE JUSTIFIED IN REFUSING TO CONTINUE THE ALLOWANCE FOR THE ASSESSMENT YEAR 1969-70, WITHOUT DISTURBING THE RELIEF FOR THE INITIAL YEAR. IN THE WORDS OF THE HON'BLE H IGH COURT, - 'NO DOUBT, THE RELIEF OF TAX HOLIDAY UNDER SECTION 80J CAN BE WITHHELD OR DISCONTINUED PROVIDED THE RELIEF GRANTE D IN THE INITIAL YEAR OF ASSESSMENT IS DISTURBED OR CHANGED ON VALID GROUNDS. BUT WITHOUT DISTURBING THE RELIEF GRANTED IN THE INITIAL YEAR, THE ITO CANNOT EXAMINE THE QUESTION A GAIN AND DECIDE TO WITHHOLD OR WITHDRAW THE RELIEF WHICH HAS BEEN ALREADY ONCE GRANTED.' 11. AS THE AFORESAID DISCUSSION SHOWS, THE MATRIX OF THE DISPUTE IN CEMENT & CHEMICALS LTD (SUPRA) STOOD ON AN ALTOGETHER DIFFERENT FOOTING. THE ASSESSMENT YEAR I N DISPUTE WAS 1969-70, WHICH WAS THE SECOND YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80J OF THE ACT. IN THE IN ITIAL ASSESSMENT YEAR OF 1968-69 THE CLAIM WAS ALLOWED BY TREATING THE EXPANSION IN CAPACITY AS FORMATION OF A NEW IND USTRIAL UNDERTAKING. WHETHER EXPANSION IN CAPACITY AMOUNTED TO ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. FORMATION OF A NEW INDUSTRIAL UNDERTAKING WAS A CON DITION REQUIRED TO BE EXAMINED ONLY IN THE INITIAL YEAR, A ND WHICH WAS DONE IN THE COURSE OF ASSESSMENT FOR THE ASSESS MENT YEAR 1968-69, BEING THE INITIAL YEAR. IN THE ASSESSMENT YEAR 1969- 70, THE ASSESSING OFFICER SOUGHT TO DENY THE DEDUCT ION ON THE GROUND THAT EXPANSION OF MANUFACTURING CAPACITY DID NOT AMOUNT TO GETTING UP OF A NEW INDUSTRIAL UNDERTAKIN G. IN OTHER WORDS, A CONDITION WHICH WAS RELEVANT ONLY AT THE TIME OF FORMATION OF UNIT, WAS EXAMINED AND ACCEPTED IN THE ASSESSMENT YEAR 1968-69 AND THE SAME WAS SOUGHT TO BE REVIEWED BY THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT FOR THE SUBSEQUENT ASSESSMENT YEAR 1969- 70 AND ARRIVE AT A DIFFERENT CONCLUSION. THIS ACTION WAS N EGATED BY THE HON'BLE HIGH COURT WITH AFORESAID OBSERVATIONS THAT WITHOUT DISTURBING THE RELIEF GRANTED IN THE INITIA L YEAR, THE REVENUE CANNOT EXAMINE 'THE QUESTION AGAIN' TO DENY THE RELIEF IN SUBSEQUENT YEAR. IN OUR CONSIDERED OPINIO N, IN THE INSTANT CASE MATRIX STANDS DIFFERENTLY, IN AS MUCH IN THE INSTANT CASE THE ASSESSING OFFICER IS NOT ATTEMPTIN G TO REVIEW A POSITION ACCEPTED WITH REFERENCE TO THE INITIAL Y EAR. IN FACT, IN THE PRESENT CASE ON ACCOUNT OF CHANGED CONDITION NAMELY THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE LOOSING THE STATUS OF A SMALL SCALE INDUSTRIAL UNDERTAKING UNDER THE I DR ACT, THE ASSESSING OFFICER SEEKS TO HOLD THAT THE SAID CONDI TION IS NOT SATISFIED DURING THE YEAR UNDER CONSIDERATION. THE SAID ACTION CANNOT BE INTERPRETED TO MEAN THAT THERE IS AN ATTE MPT BY THE REVENUE TO REVIEW AN ACCEPTED POSITION OF THE INITI AL ASSESSMENT YEAR WHICH WAS THE CASE BEFORE THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (SUPRA). IN THE CASE OF SA URASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (SUPRA) ONCE HAVI NG ACCEPTED IN THE INITIAL ASSESSMENT YEAR THAT THE EX PANSION IN CAPACITY AMOUNTED TO SETTING UP OF A NEW UNIT, THE SAME WAS SOUGHT TO BE REVIEWED IN THE SUBSEQUENT YEAR BY HOL DING DIFFERENTLY. IN FACT, THE HON'BLE GUJARAT HIGH COUR T ITSELF ENVISAGED THAT THE RELIEF OF TAX HOLIDAY UNDER SECT ION 80J CAN BE WITHHELD, PROVIDED THE RELIEF GRANTED IN THE INI TIAL YEAR IS DISTURBED OR CHANGED ON VALID GROUND. IN THE PRESEN T CASE, IT IS QUITE CLEAR THAT ON ACCOUNT OF EVENTS SUBSEQUENT TO THE INITIAL ASSESSMENT YEAR THE ASSESSEE FAILS TO FULFI LL THE IMPUGNED CONDITION AND, THEREFORE, IT IS INELIGIBLE (OR THE CLAIM OF DEDUCTION IN THIS YEAR. IN OUR CONSIDERED OPINION, THE RATIO OF THE JUDGMENT OF THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICALS LTD. (SUPRA) DOES NOT HELP THE ASSESSEE IN THE PRESENT CASE. 12 THE NEXT DECISION RELIED UPON BY THE APPELLANT I S IN THE CASE OF PAUL BROTHERS (SUPRA) WHEREIN THE FACTS WER E AS FOLLOWS. IN THE CASE OF PAUL BROTHERS (SUPRA), THE ISSUE RELATED ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. TO JURISDICTION ASSUMED BY THE COMMISSIONER UNDER S ECTION 263 OF THE ACT FOR ASSESSMENT YEARS 1981-82 AND 198 2-83 WHICH WAS QUASHED BY THE TRIBUNAL, WHICH WAS APPEAL ED BY THE REVENUE BEFORE THE HON'BLE HIGH COURT. THE FACT S WERE THAT THE ASSESSEE FIRM HAD BRANCHES IN BACKWARD ARE AS CARRYING ON THE BUSINESS OF CONSTRUCTION OF BUILDIN GS, TRANSPORTATION AND MANUFACTURE AND SUPPLY OF BRICKS . FOR THE USE IN CONSTRUCTION ACTIVITY, ASSESSEE ALSO MANUFAC TURED WINDOWS, CONCRETE SLABS ETC. FOR ASSESSMENT YEARS 1 980-81 AND 1981-82 IT CLAIMED DEDUCTION UNDER SECTION 80HH OF THE ACT, WHICH WAS ALLOWED FOR THE ASSESSMENT YEAR 1980 -81 BY THE ASSESSING OFFICER WITHOUT DISCUSSION AND SUCH ASSESSMENT HAD BECOME FINAL. IN THE ASSESSMENT YEAR 1981- 82 ALSO THE DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER AND WHILE ALLOWING DEDUCTION, RELIANCE WAS PLACED O N THE JUDGMENT OF THE HONBLE ORISSA HIGH COURT IN THE CA SE OF CIT V N.C. BUDHARAJA & CO 121 ITR 212 (ORI) WHICH WAS T HE ONLY DECISION THEN OPERATING IN THE FIELD. FOR THE ASSES SMENT YEAR 1981-82, THE ASSESSEE HAD PREFERRED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME-TAX (APPEALS) ON CERTAIN OTH ER ISSUES. AGAIN FOR ASSESSMENT YEAR 1982-83 THE ASSES SING OFFICER ALLOWED DEDUCTION UNDER SECTION 80HH OF THE ACT. THE COMMISSIONER EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT QUASHED THE ORDERS OF THE ASSESSING OFFICER FOR ASSESSMENT YEARS 1981-82 AND 1982-83. AS PER THE TR IBUNAL, (I) SINCE THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1981-82 WAS MERGED IN THE APPELLATE ORDER, SECTION 263 JURI SDICTION COULD NOT BE EXERCISED BY THE COMMISSIONER; (II) SI NCE THE ASSESSMENT WAS BASED ON A BINDING DECISION OF THE H IGH COURT, IT COULD NOT BE INTERFERED UNDER SECTION 263 OF THE ACT; (III) UNLESS DEDUCTION ALLOWED IN THE ASSESSMENT YE AR 1980-81 ON THE SAME GROUND WAS WITHDRAWN, THEY COULD NOT BE DENIED FOR THE SUBSEQUENT YEARS. THE HON'BLE HIGH COURT AF FIRMED THE APPROACH OF THE TRIBUNAL ON ALL THE THREE COUNT S. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT POINTED O UT THAT THE PARITY OF REASONING APPROVED BY THE HIGH COURT TO T HE EFFECT THAT UNLESS DEDUCTION ALLOWED IN A PRECEDING YEAR O N THE SAME GROUND IS WITHDRAWN, SIMILAR RELIEF FOR THE SU BSEQUENT YEARS COULD NOT BE WITHHELD. SECONDLY, THE LEARNED COUNSEL ALSO REFERRED TO THE OBSERVATIONS OF THE HON'BLE HI GH COURT THAT IN SECTIONS 80HH OR SECTION 80J THERE IS NO PR OVISION FOR WITHDRAWAL OF SPECIAL DEDUCTION FOR THE SUBSEQUENT YEARS FOR BREACH OF CONDITIONS. IT WAS POINTED OUT THAT SIMIL AR IS THE SITUATION WITH REGARD TO THE PROVISIONS OF SECTION 80-IB AND THEREFORE IN THE INSTANT CASE THE RELIEF UNDER SECT ION 80-IB COULD NOT BE DENIED IN THIS YEAR. 13. IN OUR CONSIDERED OPINION, THE RATIO OF THE AFORESAID JUDGMENT ALSO DOES NOT HELP THE ASSESSEE IN THE INS TANT CASE. ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. THE FACTUAL MATRIX IN THE AFORESAID CASE WAS THAT I N EARLIER YEAR THE BENEFIT STOOD ALLOWED TO THE ASSESSEE AND WITHOUT ANY CHANGED CIRCUMSTANCES, THE SAID CLAIM WAS SOUGH T TO BE DENIED IN A SUBSEQUENT YEAR, AND SUCH AN ATTEMPT WA S NEGATED BY THE HON'BLE HIGH COURT. IN THE INSTANT C ASE, AS WE HAVE NOTED EARLIER THE CIRCUMSTANCES HAVE CHANGED A FTER THE INITIAL ASSESSMENT YEAR AND THEREFORE, THE CLAIM IS SOUGHT TO BE DENIED ON VALID GROUNDS AND WITHOUT DISTURBING T HE CLAIM IN THE INITIAL YEAR BECAUSE THE CIRCUMSTANCES IN TH E INITIAL YEAR HAVE NOT UNDERGONE ANY CHANGE. THEREFORE, THE DECISION IS INAPPLICABLE TO THE INSTANT CASE. 14. IN THE RESULT, WE HEREBY AFFIRM THE ORDERS OF T HE AUTHORITIES BELOW DENYING RELIEF TO THE ASSESSEE UN DER SECTION 80-IB OF THE ACT. THE ASSESSEE FAILS'. 5.2 IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN R EJECTING THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF SIMILAR I SSUE DECIDED BY THE TRIBUNAL IN SAMRUDDHI INDUSTRIES LTD. (SUPRA) H OLDING THAT THE ASSESSEE IS NOT ENTITLED AS IT DID NOT CONTINUE SSI DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 6. THE NEXT ISSUE IS WITH REGARD TO ALLOWABILITY OF MAT CREDIT OF RS.30,60,944/- (ARISING OUT OF PAYMENT UNDER MAT FO R A.Y. 2006- 07) CLAIMED BY THE ASSESSEE. THE LEARNED AUTHORIZE D REPRESENTATIVE HAS POINTED OUT THAT THE CIT(A) ERRE D IN NOT ADJUDICATING THE GROUND NO.6 OF THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT DISPUTE THE S AME. SO IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO T HE FILE OF CIT(A) WITH A DIRECTION TO DECIDE THE SAME AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE WE ARE RESTORIN G THE ISSUE ON PRELIMINARY GROUND, WE ARE REFRAINING FROM COMMENTI NG ON THE ISSUE AT HAND. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. 8. IN ITA NO.1706/PN/2012 FOR A.Y. 2008-09, THE REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT FOR THE PUR POSE OF SECTION 80IA THE YEAR IN WHICH THE ASSESSEE CHOOSES TO CLAIM DEDUCTION HAS TO BE TREATED AS 'INITIAL ASSESSMENT YEAR'? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT PROFIT OF T HE ELIGIBLE BUSINESS HAS TO BE COMPUTED WITHOUT DEDUCTING THERE FROM BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION P RIOR TO THE INITIAL YEAR OF CLAIM DE HORS THE PROVISION U/S . 80IA(5) OF THE ACT? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) ERRED IN IGNORING THAT THE ASSESSEE WAS I N POWER GENERATION BUSINESS AND HOLDING THAT EACH WINDMILL HAS TO BE TAKEN AS INDEPENDENT 'ELIGIBLE BUSINESS'. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN HOLDING THAT EACH WINDMILL UNIT HAS TO BE TREATED ON STANDALONE BASIS DE HORS THE SPECIFIC ST IPULATION IN SECTION 80IA(5) OF THE ACT THAT 'PROFIT AND GAINS O F ELIGIBLE BUSINESS' BEING POWER GENERATION BUSINESS HAVE TO B E TAKEN? 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 9. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM O F DEDUCTION U/S.80IA(4)(IV)(A) OF THE I.T. ACT AMOUNTING TO RS. 43,93,235/-. THE ASSESSING OFFICER ALSO TREATED SANGLI AND DHULE UNI TS AS SINGLE ONE HAVING SAME ELIGIBLE BUSINESS. THE CLAIM WAS MADE IN RESPECT OF WIND MILL LOCATED AT SANGLI. THE ISSUE PERTAINS TO LOSSES OF THE UNDERTAKING BEFORE THE INITIAL YEAR ALREADY ADJUSTE D AGAINST OTHER INCOME. DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS, THE ASSESSEE RELIED UPON VARIOUS DECISIONS INCLUDING PU NE TRIBUNAL'S DECISION IN THE CASE OF POONAWALA FINVEST & AGRO (P ) LTD. VS. ASST. COMMISSIONER OF INCOME-TAX REPORTED IN (2008) 118 T TJ (PUNE) 68. THE ASSESSING OFFICER HOWEVER RELYING UPON SPECIAL BENCH DECISION OF AHMEDABAD TRIBUNAL REPORTED IN THE CASE OF ACIT VS. ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. GOLDMINE SHARES & FINANCE (P) LTD. REPORTED IN 116 TTJ (AHMEDABAD) 705, DISALLOWED THE CLAIM OF THE ASSESS EE. WHILE DOING SO, THE ASSESSING OFFICER ALSO HELD THAT INIT IAL ASSESSMENT YEAR HAS TO BE CONSIDERED AS THE YEAR IN WHICH POWE R GENERATION COMMENCES AND NOT THE YEAR IN WHICH IT CHOOSES TO M AKE CLAIM FOR DEDUCTION FOR THE FIRST TIME. THE ASSESSING OFFICE R HELD THAT IN THE CURRENT SECTION 80IA(5), THERE IS NO OPTION GIVEN T O THE ASSESSEE TO CHOOSE INITIAL ASSESSMENT YEAR. 9.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS FACTUAL AND LEGAL CONTENTIONS W ERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAD ALLOWED THE CLAIM OF THE ASSESSEE ON BOTH ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT F OR THE PURPOSE OF SECTION 80IA THE YEAR IN WHICH THE ASSESSEE CHOOSES TO CLAIM DEDUCTION HAS TO BE TREATED AS INITIAL ASSESSMENT Y EAR. THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT PROFIT OF THE ELI GIBLE BUSINESS HAS TO BE COMPUTED WITHOUT DEDUCTING THEREFROM BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION PRIOR TO THE INIT IAL YEAR OF CLAIM DE HORS THE PROVISION U/S. 80IA(5) OF THE ACT. THE CIT(A) ERRED IN IGNORING THAT THE ASSESSEE WAS IN POWER GENERATION BUSINESS AND HOLDING THAT EACH WINDMILL HAS TO BE TAKEN AS INDEP ENDENT ELIGIBLE BUSINESS. ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN HOLDING THAT EACH WINDMILL UNIT HAS TO BE TREATED ON STANDALONE BASIS DE HORS THE SPECIFIC STIPULATION I N SECTION 80IA(5) OF THE ACT THAT 'PROFIT AND GAINS OF ELIGIBLE BUSIN ESS' BEING POWER GENERATION BUSINESS HAVE TO BE TAKEN. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATI VE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. 9.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT AS PER SEC. 80IA(2) OF THE IT. ACT, THE ASSESSEE HAS OPTION TO EXERCISE THE CHOOSING OF INI TIAL ASSESSMENT YEAR OUT OF FIFTEEN YEARS BEGINNING WITH THE YEAR I N WHICH THE UNDERTAKING STARTS PRODUCTION. THE ASSESSING OFFIC ER WAS NOT CORRECT IN ASSERTING THAT THERE WAS NO OPTION TO TH E ASSESSING OFFICER TO EXERCISE OPTION IN CHOOSING THE INITIAL ASSESSMENT YEAR. AS REGARDS THE ISSUE OF LOSSES AND UNABSORBED DEPRE CATION OF THE UNDERTAKING ALREADY ADJUSTED AGAINST THE OTHER INCO ME IT WAS FOUND THAT THE SAME IS COVERED BY THE DECISION OF P UNE TRIBUNAL IN CASE OF POONAWALA FINVEST (SUPRA) IN FAVOUR OF THE ASSESSEE. THE ASSESSING OFFICER HAS RELIED UPON SPECIAL BENCH DEC ISION OF AHMEDABAD TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. REPORTED IN 116 TTJ (AHMEDABAD) 70 5. HOWEVER, THE SAME COULD NOT BE FOLLOWED IN VIEW OF THE HON'B LE MADRAS HIGH COURT JUDGMENT IN CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. VS. ACIT REPORTED IN 38 DTR 57. ITAT, BANGALORE BE NCH IN THE CASE OF ANIL H LAD VS. DCIT DID NOT FOLLOW THE SPEC IAL BENCH DECISION OF THE AHMEDABAD BENCH TRIBUNAL IN VIEW OF ABOVE JUDGMENT OF MADRAS HIGH COURT. RELEVANT PORTION OF THE ORDER IS REPRODUCED FOR THE SAKE OF CLARITY: 'FROM READING OF THE ABOVE, IT IS CLEAR THAT THE EL IGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISE OPTI ON, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL A.Y . ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS W HICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL A SSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINS T THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE S ET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOM E OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMO UNT AND BRING IT NOTIONALLY. FICTION IS CREATED ONLY FOR TH E LIMITED ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED.' 27. THUS, THE HON'BLE MADRAS HIGH COURT HAS CLEARLY HELD THAT WHERE THE DEPRECIATION AND LOSS OF EARLIER ASS ESSMENT YEARS HAVE ALREADY BEEN SET OFF AGAINST OTHER BUSIN ESS INCOME OF THOSE ASSESSMENT YEARS, THERE IS NO NEED FOR NOT IONALLY CARRYING FORWARD AND SETTING OFF OF THE SAME DEPREC IATION AND LOSS IN COMPUTING THE QUANTUM OF DEDUCTION AVAILABL E U/S.80I. THE HON'BLE COURT HAS HELD FURTHER THAT TH E YEAR OF COMMENCEMENT ALONE NEED NOT BE THE 'INITIAL YEAR', BUT DEPENDING UPON THE FACTS OF THE CASE AND THE OPTION EXERCISED BY THE ASSESSEE, THE YEAR OF CLAIM ALSO CAN BE CONS IDERED AS 'INITIAL ASSESSMENT YEAR'. THE COURT HAS ALSO EXAMI NED THE ISSUE FROM A DIFFERENT LEGAL ANGLE AND HELD THAT TH E PROPOSITION ARGUED BY THE REVENUE IS NOT COMPATIBLE WITH THE SCHEME OF GROSS TOTAL INCOME CONCEPTUALIZED IN THE IT ACT ESPECIALLY IN THE LIGHT OF SECTION 80AB WHICH ARE A LL RELEVANT WHILE CONSIDERING THE DEDUCTION U/S.80IA WHICH IS F ALLING UNDER CHAPTER VIA OF THE I.T. ACT, 1961. WHERE THE EARLIER DEPRECIATION AND LOSSES HAVE ALREADY BEEN SET OFF, THOSE LOSS AND DEPRECIATION DO NOT GO TO REDUCE THE GROSS TOTA L INCOME OF AN ASSESSEE WITHIN THE MEANING OF SEC.80AB AND THER EFORE, BRINGING THE NOTIONAL CONCEPT OF CARRYING FORWARD A ND SET OFF WILL BE CONTRARY TO THE SCHEME OF SEC.80AB AND CONC EPT OF GROSS TOTAL INCOME. 28. NOW, IT IS CLEAR AS WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE ABOVE DISCUSSED JUDGEMENT OF THE HON 'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPI NNING MILLS P. LTD. VS. ACIT (38 DTR 57). WHERE SUCH AN OVERRIDING JUDGEMENT OF THE CONSTITUTIONAL COURT IS GOVERNING THE ISSUE, WE ARE NOT PERMITTED TO RELY ON THE DECISION OF THE SPECIAL BENCH OF THE AHMEDABAD TRIBUNAL. 29. THEREFORE, FOLLOWING THE ABOVE JUDGEMENT OF THE HON'BLE HIGH COURT OF MADRAS, WE ACCEPT THE CONTENTION OF T HE ASSESSEE AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) ON THIS POINT AN DIRECT THE ASSESSING AUTHORITY TO GRANT DEDUCTION TO THE ASSESSEE U/S.80IA FOR THE QUANTUM CLAIMED BY THE ASSESSEE WITHOUT DILUTING THE SAME B Y THE NOTIONAL DEDUCTION OF EARLIER LOSS AND DEPRECIATION '. 9.3 IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S.80IA(4 )(IV)(A) OF THE ACT WITHOUT DEDUCTING BROUGHT FORWARD LOSS OR UNABSORBE D ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. DEPRECIATION PRIOR TO INITIAL YEAR ON NOTIONAL BASI S. THIS REASONED FACTUAL AND LEGAL FINDING OF CIT(A) NEEDS NO INTERF ERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 9.4 AS A RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 10. A SIMILAR ISSUE CAME UP IN REVENUES APPEAL IN ASSESSEES OWN CASE IN ITA NO.2041/PN/2012 FOR A.Y. 2009-10. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. 11. IN ITA NO.1744/PN/2012, THE ASSESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. THE LEARNED A.O. ERRED IN (AND LEARNED CIT-A ERRED IN CONFIRMING) DISALLOWING THE CLAIM OF DEDUCTION U/S 80IB(3)(II). THE AMOUNT CLAIMED IS RS. 2,504,534/- 2. THE LEARNED A. O. ERRED IN (AND LEARNED CIT-A ERRED IN CONFIRMING) DISALLOWING THE CLAIM OF WEIGHTED DEDUC TION OF RS. 85,39,848/- (IN ASSESSMENT ORDER AO WRONGLY WOR KS OUT THE DISALLOWANCE OF RS.1,09,26,167/-) U/S. 35 ( 2AB). 3. THE LEARNED A.O. ERRED IN (AND LEARNED CIT-A ERRED IN CONFIRMING) DISALLOWING FOREIGN TRAVEL EXPENSES RS. 5,43,641/- INCURRED BY THE ASSESSEE IN THE COURSE O F BUSINESS. 4. THE LEARNED A.O. ERRED IN NOT ACCEPTING THE INCOME AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE. 5. THE APPELLANT CRAVES ITS RIGHT TO ADD TO OR ALTER T HE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF HEARING OF THE CASE. 12. THE FIRST ISSUE IS WITH REGARD TO THE CLAIM OF DEDUCTION U/S.80IB(3)(II) OF THE ACT OF RS.2,55,94,534/-. WE HAVE DISCUSSED AND DECIDED THIS ISSUE IN ASSESSEES OWN CASE FOR A .Y. 2008-09 VIDE PARA 7.1 OF THIS ORDER. FACTS BEING SIMILAR, SO FO LLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A) ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. WHO HAS CONFIRMED THE DISALLOWANCE OF CLAIM OF DEDU CTION U/S.80IB(3)(II) OF RS.2,55,94,534/-. WE UPHOLD THE SAME. 13. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE O F DEDUCTION U/S.35(2AB). THE ASSESSING OFFICER NOTICED THAT TH E ASSESSEE COMPANY HAD CLAIMED WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT AMOUNTING TO RS.2,56,19,543/- WHICH ALSO PERTAINS T O REVENUE EXPENSES INCURRED IN HOUSE RESEARCH AND DEVELOPMENT AMOUNTING TO RS.1,46,93,376/-. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION U/S.35 IN RE SPECT OF CAPITAL EXPENDITURE ONLY, IN EARLIER YEARS BUT IN T HIS YEAR IT HAD CLAIMED DEDUCTION U/S. 35(2AB) OF ACT @ 150% OF CAP ITAL & REVENUE EXPENDITURE BOTH. THE ASSESSING OFFICER ALSO NOTICE D THAT APPLICATION FOR THIS PURPOSE WAS MADE ON 03.10.2009 AND ON THE BASIS OF APPLICATION CLAIM U/S 35(2AB) WAS MADE IN THE RETURN OF INCOME FOR A.Y. 2009-10 WHICH WAS FILED ON 31.10.20 09. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAIM SH OULD HAVE BEEN MADE AFTER GETTING APPROVAL FROM MINISTRY OF SCIENC E AND TECHNOLOGY, NEW DELHI. ACCORDINGLY, HE MADE DISALL OWANCE OF RS.1,09,26,167/- I.E. (RS.2,56,19,544 RS.1,46,93, 376) 13.1 HAVING CONSIDERED THE SAME, THE CIT(A) RESTR ICTED THE DISALLOWANCE OF RS.85,39,848/- AND ALLOWED THIS GRO UND PARTLY. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF TH E ASSESSEE, INTER ALIA, SUBMITTED THAT THE ASSESSEE COMPANY IS A MANUFACTURER OF AUTOMOTIVE COMPONENTS HAD CLAIMED DEDUCTION U/S. 35 IN EARLIER YEARS. THE R & D FACILITY OF THE ASSESSEE COMPANY WAS RECOGNIZED VIDE MINISTRY OF SCIENCE AND TECHNOLOGY VIDE THEIR LETTER NO.TU/IV- RD/2852/2009 DATED 11.02.2009 WHICH WAS VALID TILL 31.03.2011. SINCE LETTER FOR APPROVAL WAS MADE ON 24.09.2008 TH E CLAIM FOR WEIGHTED DEDUCTION OF R & D EXPENDITURE @ 150% U/S 35(2AB) @ 150% WAS MADE IN A.Y. 2009-10. THE APPLICATION FOR GRANTING OF ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. APPROVAL U/S 35(2AB) WAS MADE ON 03.10.2009. THE R EQUISITE APPROVAL IN FORM 3 CM WAS GRANTED BY THE COMPETENT AUTHORITY OF MINISTRY OF SCIENCE & TECHNOLOGY, NEW DELHI VIDE OR DER DATED 10.10.2011 WHICH WAS VALID FROM 01. 04. 2009 TO 31. 03. 2012. THE RELIANCE WAS PLACED UPON THE DECISION OF HON'BL E DELHI HIGH COURT IN THE CASE OF SANDEN VIKAS (LNDIA) LTD ITA N O. 348/211 WHICH FOLLOWED THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CLARIS LIFE SCIENCES LTD. (2010) 32 6 ITR 251 (GUJ). ACCORDINGLY, CLAIMED THAT THE CIT(A) WAS NOT JUSTIF IED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF WEIGHTED DEDUCTION OF RS.85,39,848/-. ACCORDINGLY, THE SAME SHOULD BE ALLOWED. ON THE OT HER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED T HE ORDER OF CIT(A). 13.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS A ND MATERIAL ON RECORD WE FIND THAT THE DEDUCTION U/S.35(2AB) OF TH E ACT IS ALLOWED TO CERTAIN COMPANIES ENGAGED IN THE SCIENTIFIC RESE ARCH. FOR THE SAKE OF CLARITY SEC. 35(2AB) IS REPRODUCED AS UNDER : '[(2AB)(1) WHERE A COMPANY ENGAGED IN THE BUSINESS OF [BIO- TECHNOLOGY OR IN THE BUSINESS OF] MANUFACTURE OR PR ODUCTION OF ANY DRUGS, PHARMACEUTICALS, ELECTRONIC EQUIPMENT S, COMPUTERS, TELECOMMUNICATION EQUIPMENTS, CHEMICALS OR ANY OTHER ARTICLE OR THING NOTIFIED BY THE BOARD INCURS ANY EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING EXPEN DITURE IN THE NATURE OF COST OF ANY LAND OR BUILDING) ON IN-H OUSE RESEARCH AND DEVELOPMENT FACILITY AS APPROVED BY TH E PRESCRIBED AUTHORITY, THEN, THERE SHALL BE ALLOWED A DEDUCTION OF (A SUM EQUAL TO ONE AND ONE-HALF TIMES OF THE EX PENDITURE] SO INCURRED. (EXPLANATION-FOR THE PURPOSE OF THIS CLAUSE, 'EXPEN DITURE ON SCIENTIFIC RESEARCH', IN RELATION TO DRUGS AND PHAR MACEUTICALS, SHALL INCLUDE EXPENDITURE INCURRED ON CLINICAL DRUG TRIAL, OBTAINING APPROVAL FROM ANY REGULATORY AUTHORITY UN DER ANY CENTRAL, STATE OR PROVINCIAL ACT AND FILING AN APPL ICATION FOR A PATENT UNDER THE PATENTS ACT, 1970 (39 OF 1970).] ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. (2) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE MENTIONED IN CLAUSE (1) UNDER ANY OTHER PROVISION OF THIS ACT. (3) NO COMPANY SHALL BE ENTITLED FOR DEDUCTION UNDE R CLAUSE (1) UNLESS IT ENTERS INTO AN AGREEMENT WITH THE PRE SCRIBED AUTHORITY FOR COOPERATION IN SUCH RESEARCH AND DEVE LOPMENT FACILITY AND FOR AUDIT OF THE ACCOUNTS MAINTAINED F OR THAT FACILITY. (4) THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPOR T IN RELATION TO THE APPROVAL OF THE SAID FACILITY TO THE DIRECTO R GENERAL IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED .] [(5) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF TH E EXPENDITURE REFERRED TO IN CLAUSE (1) WHICH IS INCU RRED AFTER THE 31 ST DAY OF MARCH, [2012).' FROM THE READING OF THE SECTION IT IS CLEAR THAT FO R CLAIMING DEDUCTION U/S 35(2AB) OF ACT FOLLOWING CRITERIA NEE DS TO BE SATISFIED BY THE COMPANY. (I) EXPENDITURE SHOULD BE INCURRED ON SCIENTIFIC RESE ARCH (NOT BEING EXPENDITURE IN THE NATURE OF COST OF ANY LAND AND BUILDING). (II) IN HOUSE R & D FACILITY SHOULD BE APPROVED BY THE PRESCRIBED AUTHORITY I.E. SECRETARY, DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, GOVT. OF INDIA. (III) FOR CLAIMING DEDUCTION U/S 35(2AB), THE COMPANY WIL L HAVE TO ENTER INTO AN AGREEMENT WITH PRESCRIBED AUTHORITY FOR CO- OPERATION IN SUCH R & D FACILITY AND FOR AUDIT OF ACCOUNTS OF SUCH FACILITY, (IV) THE PRESCRIBED AUTHORITY IS REQUIRED TO SUBMIT IT'S REPORT IN RELATION TO THE APPROVAL OF THE SAID FACILITY TO DIRECTOR GENERAL OF INCOME-TAX IN PRESCRIBED FORM AND TIME, (V) THE RELEVANT RULES ARE RULE 6(IB),(4), (5A) AND (7A ) AND RELEVANT FORMS ARE FORM 3CK TO 3CM. THE IMPORTANT EVENTS ASSOCIATED WITH THE ISSUE ARE SUMMARIZED AS UNDER: ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. DATE REMARKS 24.09.2008 APPLICATION FOR RECOGNITION OF IN HOUSE R & D UNIT IS FILED WITH THE PRESCRIBED AUTHORITY VIDE LETTER DATED 23.09.2008 11.02.2009 RECOGNITION GRANTED TO THE R & D UNIT UPTO 31.03.2011 VIDE ORDER DATED 11.02.2009. 03.10.2009 APPLICATION FOR 35(2AB) MADE. 10.10.2011 APPROVAL GRANTED IN FORM NO. 3CM FROM 01.04.2009 TO 31.03.2012 IT SHOWS THAT APPROVAL U/S. 35(2AB) OF ACT HAS BEEN GRANTED BY THE PRESCRIBED AUTHORITY VIDE ORDER DATED 10.10. 2011. THE ABOVE APPROVED ORDER READS AS UNDER : 'THE ABOVE RESEARCH & DEVELOPMENT FACILITY IS APPRO VED FOR THE PURPOSE OF SEC. 35(2AB) FROM 01.04.2009 TO 31.03.20 12, SUBJECT TO THE CONDITIONS UNDERLINED THEREIN'. FROM THE APPROVAL ORDER, IT IS EVIDENT THAT THE ASS ESSEE COMPANY IS ENTITLED FOR DEDUCTION U/S 35(2AB) OF TH E ACT FROM A.Y. 2009-10. THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 3 5(2AB) OF THE ACT IN A.Y. 2009-10 ON THE BASIS OF THE FACT THAT I T'S R & D UNIT WAS RECOGNIZED ON 11.02.2009 ON THE BASIS OF IT'S APPLI CATION DATED 23.08.2008 WHICH WAS FILED BEFORE PRESCRIBED AUTHOR ITY ON 24.08.2008. THE ASSESSEE COMPANY HAS STATED THAT F OR THE PURPOSE OF MAKING CLAIM U/S.35(2AB) OF THE ACT, REC OGNITION OF THE R & D UNIT WHICH WAS OBTAINED DURING THE PREVIOUS Y EAR RELEVANT TO THE A.Y. 2009-10 IS THE ONLY IMPORTANT CRITERIA. WHILE APPROVAL U/S. 35(2AB) IN FORM 3CM IS PROCEDURAL REQUIREMENT WHICH IS DIRECTORY AND NOT MANDATORY. THE ASSESSEE HAS ALSO RELIED UPON DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF SANDAN VIKAS INDIA LTD. (SUPRA) WHICH HAS FOLLOWED HON'BLE GUJAR AT HIGH COURT'S DECISION IN THE CASE OF CLARIS LIFE SCIENCE LTD. (S UPRA). ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. 13.3 THE ARGUMENT OF THE ASSESSEE THAT OBTAINING OF APPROVAL IN FORM NO. 3CM IS A MERE PROCEDURAL REQUIREMENT WAS N OT FOUND TO BE CORRECT BY THE CIT(A). THE APPROVAL U/S 35(2AB) WAS GIVEN ONLY AFTER FULFILLING CERTAIN STATUTORY REQUIREMENTS. A S PER SEC. 35(2AB)(3) IT IS MANDATORY FOR THE COMPANY TO ENTER INTO AGREEMENT WITH THE PRESCRIBED AUTHORITY FOR CO-OPERATIONS IN RESEARCH AND DEVELOPMENT FACILITY AND AUDIT OF THE ACCOUNTS MAIN TAINED FOR SUCH FACILITY. FURTHER, THE PRESCRIBED AUTHORITY IS REQ UIRED TO SUBMIT ITS REPORT TO DIRECTOR GENERAL OF INCOME-TAX REGARDING APPROVAL OF SUCH FACILITY. FOR COMPLIANCE TO THE STATUTORY REQUIREM ENTS, FORM 3CK TO 3CM HAS BEEN INCORPORATED IN THE RULES. WHILE F ORM 3CK IS APPLICATION FOR ENTERING INTO AGREEMENT WITH THE DE PARTMENT OF SCIENCE AND INDUSTRIAL RESEARCH (DSIR) FOR CO-OPERA TION IN IN- HOUSE RESEARCH AND DEVELOPMENT FACILITY AND AUDIT O F ACCOUNTS, FORM 3CL IS FOR REPORT TO BE SUBMITTED BY PRESCRIBE D AUTHORITY TO DIRECTOR GENERAL OF INCOME-TAX (EXEMPTIONS). FORM N O.3CM IS ORDER OF APPROVAL U/S. 35(2AB) ISSUED BY THE PRESCR IBED AUTHORITY. THEREFORE, THE VARIOUS STAGES OF COMPLIANCE ARE STA TUTORY IN NATURE WHICH IS COMPLETED BY WAY OF APPLICATION TO THE APP ROVAL STAGE BY FORM 3CK TO 3CM. THEREFORE, IT COULD NOT BE SAID T HAT FORM NO. 3CM IS JUST PROCEDURAL FORMALITY. THE DECISION IN CASE OF SANDAN VIKAS INDIA LTD WHICH HAS FOLLOWED HON'BLE GUJARAT HIGH COURT ORDER IN CASE OF CLARIS LIFE SCIENCES (SUPRA) IS MI SPLACED AS THE ABOVE DECISIONS HAVE BEEN GIVEN SIMPLY HOLDING THAT ONCE R & D FACILITY IS APPROVED BY THE PRESCRIBED AUTHORITY, T HE ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION U/S. 35(2AB) OF INCO ME-TAX ACT AND ALSO THAT THERE IS NO PROVISION FOR CUT OFF DATE IN FORM NO.3CM. ACCORDING TO CIT(A), THIS VIEW HAS BEEN GIVEN WITHO UT CONSIDERING SEC.35(2AB) IN ENTIRETY AND CONDITIONS STIPULATED T HEREIN. THE HON'BLE DELHI HIGH COURT IN THE CASE OF APOLLO TYRE S LTD. VS. UOI [2010-279-HC-DEL-IT] IN W.P(C) NO.13338/09 HAS HELD THAT THE WEIGHTED DEDUCTION ON IN-HOUSE R & D EXPENDITURE U/ S. 35(2AB) OF THE ACT IS ALLOWED ONLY FROM THE YEAR IN WHICH THE PETITIONER HAS ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. MADE AN APPLICATION AND ENTERED INTO AN AGREEMENT W ITH DSIR. IN THE SAID CASE THE HON'BLE DELHI HIGH COURT REJECTED THE WRIT PETITION FILED BY THE ASSESSEE COMPANY WHEREIN IT W AS PLEADED THAT IT WAS ENTITLED TO BENEFIT FROM A.Y. 2004-05 W.E.F FIRST YEAR OF RECOGNITION. WHILE DSIR HAD GIVEN APPROVAL FROM A.Y . 2007-08 ON THE BASIS OF FORM 3CK FILED BY THE ASSESSEE COMPANY . THE ASSESSEE FILED WRIT PETITION BEFORE HIGH COURT CONTENDING TH AT DSIR OUGHT TO HAVE GRANTED APPROVAL WITH EFFECT FROM A.Y. 2004-05 AS SOUGHT BY IT. THE HON'BLE DELHI HIGH COURT DISMISSING THE WR IT PETITION OBSERVED AS UNDER. ENTERING INTO AN AGREEMENT FOR CO-OPERATION AND AU DITS OF ACCOUNTS OF THE IN-HOUSE R & D FACILITY AS PRESCRIB ED IN FORM NO. 3CK, IS A STATUTORY PRE-REQUISITE FOR THE PURPO SE OF QUALIFYING FOR WEIGHTED DEDUCTION. THOUGH THE IN-HO USE R & D FACILITIES OF THE TAXPAYER WERE 'RECOGNIZED' FROM T AX YEAR 2004-05, THIS CONDITION STOOD FULFILLED ONLY ON 21. 08.2008 WHEN THE TAXPAYER SUBMITTED APPLICATION TO DSIR IN FORM 3CK SINCE THE APPLICATION WAS MADE IN TAX YEAR 2008-09, THE BENEFIT OF WEIGHTED DEDUCTION WOULD HAVE NORMALLY A CCRUED TO THE TAXPAYER ONLY FROM THIS YEAR. IT IS ONLY BY VIR TUE OF BENEFICIAL PROVISION IN, DSIR GUIDELINES THAT TAXPA YER IS EXTENDED THE BENEFIT FOR AN EARLIER YEAR ALSO, THOU GH IT IS RESTRICTED OF CAPITAL EXPENDITURE ONLY. THE TAX PAYER IS THEREFORE, NOT ENTITLED TO THE BEN EFIT OF WEIGHTED DEDUCTION FOR EARLIER YEARS WITHOUT COMPLY ING WITH DSIR GUIDELINES. FURTHER, THE RELEVANT PORTION OF THE ORDER IS REPR ODUCED FOR THE SAKE OF CLARITY. '9, AFTER HAVING CONSIDERED THE ARGUMENTS ADVANCED BY THE COUNSEL FOR THE PARTIES, WE ARE INCLINED TO ACCEPT THE SUBMISSIONS MADE BY MR.CHANDHIOK ON BEHALF OF THE RESPONDENT. WHILE IT MAY BE TRUE THAT, INITIALLY, T HE PETITIONER HAD OBTAINED APPROVAL RIGHT UPTO 31.03.2010, BUT TH AT APPROVAL WOULD BE RELATABLE ONLY TO SECTION 35(2AB) (1). BEFORE A COMPANY IS ENTITLED FOR DEDUCTION UNDER TH E SAID SUB-SECTION (1), IT MUST ALSO ENTER INTO AN AGREEME NT WITH THE PRESCRIBED AUTHORITY FOR CO-OPERATION IN SUCH RESEA RCH AND ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. DEVELOPMENT FACILITY AND FOR AUDIT OF ACCOUNTS MAIN TAINED FOR THAT FACILITY. THIS IS SPECIFICALLY STIPULATED IN C LAUSE (3) OF SECTION 35 (2AB) OF THE SAID ACT. WE FIND THAT THE AGREEMENT WAS ENTERED INTO ONLY ON 21.08.2008 WHEN THE PETITI ONER MADE THE APPLICATION IN FORM 3CK. WE HAVE ALREADY MENTIONED THAT PART 'B' OF THE SAID FORM COMPRISES OF THE SAID AGREEMENT. SUCH AN AGREEMENT IS A CONDITION PRECEDE NT TO THE KIND OF APPROVAL, FOR THE PURPOSES OF DEDUCTION, WH ICH THE PETITIONER IS SEEKING. THIS CONDITION WAS ONLY MET ON 21.08.2008. THEREFORE, THE PETITIONER'S PLEA THAT I T OUGHT TO HAVE BEEN GRANTED APPROVAL WITH EFFECT FROM 01.04.2 004 AND NOT WITH EFFECT FROM 01.04.2007 IS NOT ACCEPTABLE.' 13.4 ACCORDING TO THE CIT(A), THE APPROVAL APPL ICATION WAS MADE ON 03.10.2009 WHILE THE APPROVAL WAS GRANTED VIDE L ETTER DATED 10.10.2011 FROM 01.04.2009 TO 31.03.2012. THEREFOR E FACTS BEING IDENTICAL THE DECISION OF HON'BLE DELHI HIGH COURT IS APPLICABLE TO THE FACTS OF THE PRESENT CASE, EVEN THOUGH IT IS DE LIVERED IN A WRIT MATTER BUT CONSIDERING THE FACT THAT HON'BLE HIGH C OURT HAS DISCUSSED THE ISSUE IN DETAIL AND HELD THAT THE PRO CEDURE IS PART OF STATUTORY COMPLIANCE STIPULATED IN CLAUSE (3) OF SE C. 35(2AB) OF THE ACT, IT PROVIDES VALUABLE GUIDANCE. THEREFORE, IN VIEW OF THE ABOVE RATIO OF W.P. IN THE CASE OF APOLLO TYRES LTD. (SUP RA), THE CIT(A) RIGHTLY HELD THAT THE APPROVAL U/S.35(2AB) OF THE A CT HAS BEEN ACCORDED TO R & D UNIT OF ASSESSEE COMPANY FROM 01. 04.2009 TO 31.03.2012 WHICH ENTITLES THE ASSESSEE TO CLAIM WEI GHTED DEDUCTION U/S 35(2AB) FROM A.Y. 2010-11. THUS, REL YING UPON CLEAR CUT FINDING OF HON'BLE DELHI HIGH COURT IN TH E CASE OF APOLLO TYRES LTD. (SUPRA) THE ACTION OF THE ASSESSING OFFI CER DENYING THE DEDUCTION U/S. 35(2AB) OF THE ACT WAS RIGHTLY UPHEL D BY THE CIT(A). REGARDING THE QUANTIFICATION OF DISALLOWANCE, THE A SSESSEE SUBMITTED THAT COMPUTATION AT RS.1,09,26,167/- WAS NOT CORRECT AND IT SHOULD BE RS.85,39,848/-. IN THIS REGARD, A LETTER WAS FILED ON 20.06.2012 WHICH READS AS UNDER: 'DISALLOWANCE OF WEIGHTED DEDUCTION AMOUNTING TO RS . 1,09,26,167/- U/S 35(2AB) ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. FURTHER, TO OUR SUBMISSION, IT IS CLARIFIED THAT TH E LD. A.O.'S ORDER HAS STATED THE TOTAL DISALLOWANCE AT RS. 1,09 ,26,167/- BEING THE ADDITIONAL CLAIM OF WEIGHTED DEDUCTION IN THE COMPUTATION OF INCOME. THE LD. A.O. IN PARA 30 OF T HE ASSESSMENT ORDER ON PAGE 27 HAS WRONGLY STATED THE EXPENSES ON IN HOUSE R & D AS RS.1,46,93,376/- WHER EAS THE TOTAL R & D EXPENDITURE INCURRED BY THE ASSESSEE IS RS. 1,70,79,696/- AS REFLECTED IN THE CHART: NATURE OF R & D EXPENDITURE ACTUAL EXPENDITURE WEIGHTED DEDUCTION (150%) MARK UP (A-B) CAPITAL EXPENDITURE 23,86,320 35,79,480 11,93,200 REVENUE EXPENDITURE 1,46,93,376 2,56,19,544 85,39,848 TOTAL 1.70,79,696 2,56,19,544 85,39,848 TOTAL DISALLOWANCE BY LD. A. O. = RS.1,09,26,167/- WEIGHTED DEDUCTION CLAIMED BY ASSESSEE (REFER TABLE ABOVE UNDER THE COLUMN MARKUP) = RS.85,39,848/- FROM THE ABOVE, IT IS EVIDENT THAT THE ACTUAL DISAL LOWANCE FIGURE WORKS OUT TO RS.85,39,848/- AGAINST THE RS. 1,09,26,167/- AS STATED BY THE LD. ASSESSING OFFICE R.' 13.5 CONSIDERING THE SUBMISSIONS AS RAISED ABOV E, THE CONTENTIONS OF THE ASSESSEE WAS FOUND CORRECT BY TH E CIT(A) AND ACCORDINGLY, HE DIRECTED ASSESSING OFFICER TO RESTR ICT THE DISALLOWANCE U/S. 35(2AB) OF THE ACT TO RS.85,39,84 8/-. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FR OM OUR SIDE. WE UPHOLD THE SAME. 14. THE LAST ISSUE REMAINS WITH REGARD TO DISALLOWA NCE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES OF RS.5,43,641/- CLAIMED TO BE INCURRED IN THE COURSE OF BUSINESS. THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAS DEBITED ITS P & L ACCOUNT BY RS.57,44, 020/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.5,43,641/- ON ACCOUNT OF NON-BUS INESS EXPENDITURE AND THE SAME WAS UPHELD BY THE CIT(A). A SIMILAR ISSUE IN ASSESSEES OWN CASE FOR A.Y. 2008-09 HAS B EEN DECIDED ITA NOS.1743, 1744, 1706 & 2041 OF 12 ADVIK HI TECH P. LTD. VIDE PARA 5 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING AND TAKING ALL FACTS INTO CONSIDERATION, WE RESTRICT THIS DISALLOWANCE TO 2,70,000/-. 15. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR BOTH YEARS ARE PARTLY ALLOWED AND THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY OF 30 TH JULY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADA V) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 30 TH JULY, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) THE DEPARTMENT 3) THE CIT(A)-V, PUNE 4) THE CIT-V, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, ITAT, PUNE.