RAYMOND LIMITED, MUMBAI V. ACIT RG -2(3), MUMBAI

ITA 1973/MUM/2009

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2995 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 31-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSON
• Assessee Lawyers: Y P TRIVEDI
• Keywords: Cost of acquisition; Reasonable cause; Scheme of amalgamation; Capital receipt; Condonation of delay; Ignorance of law
• Section: 28; 80HHC; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN , JM ITA NO. 1973/MUM/2009 (ASSESSMENT YEAR: 2004 - 05 ) RAYMOND LIMITED NEW HIND HOUSE, NAROTTAM MORARJEE MARG, BALLARD ESTATE, MUMBAI - 400 001 VS. ADDL. CIT, RANGE 2(3), AAYAKAR BHAVANA, M. K. ROAD, 5 TH FLOOR, MUMBAI - 400 020 PAN/GIR NO. AAACR 4896 A ( ASSESSEE ) : ( REVENUE ) & CROSS OBJECTION NO. 286/ MUM/ 2017 ITA NO. 1973/MUM/2009 (ASSESSMENT YEAR: 2004 - 05 ) ADDL. CIT, RANGE 2(3), AAYAKAR BHAVANA, M. K. ROAD, 5 TH FLOOR, MUMBAI - 400 020 VS. RAYMOND LIMITED NEW HIND HOUSE, NAROTTAM MORARJEE MARG, BALLARD ESTATE, MUMBAI - 400 001 PAN/GIR NO. AAACR 4896 A ( REVENUE ) : ( ASSESSEE ) APPELLANT BY : SHRI Y. P. TRIVEDI RESPONDENT BY : SHRI AWUNGSHI GIMSON DATE OF HEARING : 11.12.2018 DATE OF PRONOUNCEMENT : 20.02 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE AND CROSS OBJECTION BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XXX, MUMBAI (LD.CIT(A) FOR SHORT) DATED 22.01.2007 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2004 - 05. 2. THE GROUNDS OF APPEAL RAISED IN THE ASSESSEES APPEAL READ AS UNDER: 2 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX (HEREIN AFTER REFERRED TO AS 'ASSESSING OFFICER') IN DISALLOWING A SUM OF RS. 3,21,73,680 / - UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT) OUT OF INTEREST EXPENSES. (B) THE APPELLANT SUBMITS THAT IT HAD SUFFICIENT FUNDS OF ITS OWN AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE IGNORING THE SUBMISSIONS OF THE APPELLANT GIVING FULL DETAILS ABOUT UTILIZATION OF FUNDS IN MAKING THE INVE STMENTS. 2. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX (HEREIN AFTER REFERRED TO AS 'ASSESSING OFFICER') IN NOT ALLOWING DED UCTION UNDER SECTION 35D OF RS. 60,00,1 50 / - BY HOLDING THAT IT PERTAINS TO STEEL DIVISION WHICH WAS SOLD DURING THE FINANCIAL YEAR 2000 - 2001. (B) THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECT ION 35D IN RESPECT OF SUM OF RS.60,00,150/ - PERTAINING TO STEEL DIVISION, IN ACCORDANCE WITH THE PROVISIONS OF AFORESAID SECTION AS THERE IS NO PROHIBITION, IN THE ACT, ON ALLOWANCE OF AFORESAID DEDUCTION IN CASE A DIVISION IS TRANSFERRED AND NO DEDUCTION IS ALLOWABLE TO THE TRANSFEREE. (C) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT THE APPELLANT HAS NOT STATED FULL FACTS WHICH IS CONTRARY TO THE SUBMISSIONS MADE THAT IN THE CASE OF THE APPELLANT THE UNDERTAKING WAS TRANSFERRED A S A SLUMP SALE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ANNUAL VALUE OF THE PROPERTY DETERMINED BY THE ASSESSING OFFICER AT RS. 3,60,21,880/ - AS AGAINST RS. 2,89,000/ - , AS DETERMINED BY THE APPELLANT, SINCE IT IS NOT IN ACCORDANCE WITH SECTION 23 OF THE INCOME TAX ACT, 1961 (THE ACT). 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NOT TREATING THE ISSUE OF BONDS AGAINST UNITS OF US - 64 AS T RANSFER AND T HUS DISALLOWING THE LOSS OF RS. 6,89,82,716 / - . THE APPELLANT SUBMITS THAT UPON ISSUANCE OF BONDS, THE UNITS OF US - 64 GET EXTINGUISHED AND IT THUS AMOUNTS TO TRANSFER AND CAPITAL LOSS THEREON OUGHT TO HAVE BEEN ALLOWED. 5. (A) THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEDUCTION UNDER SECTION 80HHC ON EXPORT INCENTIVES DISREGARDING THE FACT THAT THE AMENDED PROVISIONS VIS - A - VIS SECTION 80HHC SHALL APPLY ONLY IN RESPECT OF PROFIT ON TRANSFER OF DUTY ENTITLEMENT PASS BOOK (DEPB) AND IT DOES NOT COVER DEPB USED FOR OWN CONSUMPTION. (B) THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD THAT NOTIONAL ENTRIES OF CREDITING DEPB AND DEBITING THE SAME AMOUNT AS NOTIONAL CUSTOMS DUTY IN PROFIT & LOSS ACCOUNT DOES NOT RESULTS IN ADDITIONAL PROFITS. THE APPELLANT SUBMITS THAT AS AN ALTERNATE TO SELF CONSUMPTION, IT COULD HAVE SOLD THE DEPB LICENCES AND WHEN NECESSARY, WOULD HAVE BEEN REQU IRED TO PAY IMPORT DUTY FOR IMPORTS WHICH COULD HAVE RESULTED INTO EXPENDITURE ALLOWABLE UNDER THE PROVISIONS OF THE ACT. (C) WITHOUT PREJUDICE THE APPELLANT SUBMITS THAT ASSUMING THAT THE VIEW OF THE ASSESSING OFFICER IS CORRECT, THAN THE LEARNED COMMISS IONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD THAT EXPORT INCENTIVES WHICH HAVE BEEN CREDITED TO PROFIT & LOSS ACCOUNT FORMING PART OF OTHER INCOME SHOULD NOT BE CONSIDERED AS TAXABLE UNDER SECTION 28(IIID) AND SHOULD BE CONSIDERED AS CAPITAL RECEIPT. ( D) WITHOUT PREJUDICE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD THAT AMOUNT OF DEPB RECEIVED BY THE APPELLANT USED FOR IMPORTING GOODS SHALL 3 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 NOT BE REGARDED AS TRANSFER, AS MENTIONED IN SECTION 28(IIID), HENCE SHOULD BE TREATED AS CAPITAL RECEIPT. 6. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED: A) TO DELETE THE DISALLOWANCE OF RS.3,21,73,680 / - UNDER SECTION 14A; B) TO ALLOW DEDUCTION UNDER SECTION 35D OF RS.60,00,150 / - ; C) TO DELETE THE ADDITION MADE BY DETERMINING ANNUAL VALUE OF THE PROPERTY AT A HIGHER AMOUNT AS AGAINST RS.2,89,000 / - ; D) TO ALLOW LOSS OF RS 6,89,82,716 / - BY TREATING ISSUE OF BONDS AGAINST UNITS OF US - 64 AS 'TRANSFER'; E) TO ALLOW DEDUCTION UNDER SECTION 8 0HHC ON EXPORT INCENTIVES USED FOR ITS OWN CONSUMPTION; AND TO MODIFY THE ASSESSMENT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 7. EACH OF THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. 3 . THE GROUNDS RAISED IN THE CROSS OBJECTION BY THE REVENUE ARE AS UNDER: 1. THE CIT(A) HAS ERRED IN TAKING THE RENTAL INCOME AT 12% OF THE COST OF LAND AND BUILDING, WHICH WILL NOT CHANGE OVER THE YEARS AND HAVE ITS EFFECT IN FUTURE YEARS. 2. THE CIT(A) HAS ER RED IN NOT TAKING THE ANNUAL VALUE OF THE PROPERTY AS PER SECTION 22 AND 23 OF THE I.T. INCOME TAX ACT, 1961, THAT THE ANNUAL VALUE OF THE PROPERTY IS A SUM WHICH MAY BE EXPECTED TO BE LET OUT FROM YEAR TO YEAR BASIS. 4 . AT THE OUTSET, IT IS NOTED THAT T HIS IS A DELAY OF 3127 DAYS (8 YEARS 7 MONTHS & 21 DAYS) IN FILING THE CROSS OBJECTION BEFORE US. THE REASON FOR CONDONATION OF DELAY IN THE FILING THE CROSS OBJECTION ARE AS UNDER: 2. IN THIS CASE, APPEAL WAS FILED BY THE ASSESSEE BEFORE THE IT AT ON 31.03.2009. A LETTER DATED 03/07/20L7WAS RECEIVED FROM THE OFFICE OF COMMISSIONER OF INCOME - TAX (DR), ITAT - 4, 'D' BENCH, MUMBAI, WHEREIN THE DR HAS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS IT IS OBSERVED THAT AS PER PROVISIONS OF SECTION 22 A ND 23 OF THE INCOME TAX ACT, 1961, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. SINCE, THE COST OF LAND AND CONSTRUCTION OF THE BUILDING WILL NOT CHANGE OVER TH E YEARS, THE ANNUAL VALUE WILL ALSO NOT CHANGE. FURTHER, THE DECISION OF THE CIT(A), SINCE CONFIRMED BY THE ITAT, IS ACCEPTED, THE ANNUAL VALUE OF THE PROPERTY WILL REMAIN UNCHANGED FOR ALL SUBSEQUENT YEARS, WHICH WOULD BE CONTRARY TO THE PLAIN MEANING OF THE PROVISIONS. THE ANNUAL VALUE OF THE HOUSE IS TO BE DETERMINED AS THE SUM WHICH MAY BE EXPECTED TO LET FROM YEAR TO YEAR. AS A RESULT, THE INCOME FROM HOUSE PROPERTY CANNOT REMAIN CONSTANT IN ALL YEARS. 3. THE DR HAS PUT FORTH THIS ARGUMENT BEFORE THE I TAT DURING THE COURSE OF HEARING. THE ITAT POINTED OUT THAT THE DEPARTMENT HAS NOT RAISED THIS GROUND OF APPEAL BEFORE IT NOR ANY CROSS OBJECTIONS FILED. IN THE ABSENCE OF GROUND/CROSS OBJECTION THE PLEA OF THE DR WAS NOT ENTERTAINED. FURTHER, THE ITAT HAS GRANTED TWO MONTHS TIME FOR FILING OF ADDITIONAL GROUNDS/CROSS OBJECTION. 4 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 4. IN VIEW OF THE ABOVE, IT IS PLEADED THAT CONDONATION OF DELAY FOR 8 YEARS 7 MONTHS & 21 DAYS BE ALLOWED AND THE PRESENT APPEAL MAY KINDLY BE ADMITTED KEEPING IN VIEW THE ABOVE SI TUATION. 5 . IN THIS REGARD, THE ASSESSEE HAS FILED OBJECTION TO TH E CONDONATION AS UNDER: I, ATUL SHAH AN INDIAN HINDU INHABITANT RESIDING AT MULUND, MUMBAI DO HEREBY SOLEMNLY AFFIRM AND STATE AS FOLLOWS: 1. THAT I AM A CHARTERED ACCOUNTANT EMPLO YED BY M/S. RAYMOND LTD. AND AM AUTHORIZED TO REPLY TO THE AFFIDAVIT OF DELAY FILED BY THE APPELLANT IN THE ABOVE MATTER. 2. I HAVE SEEN THE AFFIDAVIT AND WOULD STATE THAT AFFIDAVIT DOES NOT EXPLAIN AN}' REASON FOR THE DELAY OF 3129 DAYS IN FILING TH E CROSS OBJECTIONS. THE CROSS OBJECTIONS HAVE TO BE FILED WITHIN 30 DAYS OF THE RECEIPT OF THE APPEAL AND IN THE PRESENT CASE CROSS OBJECTIONS ARE HOPELESSLY DELAYED. THERE IS NO REASON GIVEN WHAT CAUSED THE DELAY IN FILING HE CROSS OBJECTIONS. CHANGE OF V IEW BY I.T. DEPARTMENT ON A POINT OF LAW CANNOT BE A REASON FOR DELAY IN FILING CROSS OBJECTIONS. CHANGE OF VIEW BY I. T. DEPARTMENT ON A POINT OF LAW CANNOT BE A REASON FOR DELAY IN FILING CROSS OBJECTIONS. 3. THE SAME ISSUE W AS RAISED IN ASSESSMEN T YE ARS FROM A.Y. 1994 - 95 TO A.Y. 1996 - 97 (ITA NO. 2600/M/98, ITA NO.257/M/99 & ITA NO. 6269/M/99) AND THIS HON'BLE TRIBUNAL BY ITS ORDER DATED 22 - 03 - 2007 HAS DECIDED THE POINT OF ANNUAL LETTING VALUE IN FAVOUR OF THE RESPONDENT ON THE APPEALS FILED BY THE ASSESSE. THE INCOME TAX DEPARTMENT WHO IS THE PRESENT APPELLANT HAD NOT EVEN FILED ANY APPEAL AGAINST THE ORDER OF CIT (APPEALS). THE SAME ISSUE ABOUT THE ANNUAL LETTING VALUE HAD ALSO COME UP IN THE FOLLOWING ASSESSMENT YEARS WHERE THIS HON'BLE TRIBUNAL FOLLOWED ITS EARLIER ORDERS. IN NONE OF THOSE YEARS INCOME TAX DEPARTMENT FILED ANY APPEAL OR CROSS OBJECTIONS AGAINST THE ORDER OF THE CIT (APPEALS). IN SUBSEQUENT YEARS THEY HAVE ACCEPTED THE ORDER OF THE CIT (APPEALS). 4. IN FACT, IT WAS THE ASSES SE WHO WAS AGGRIEVED BY THE ORDER OF CIT (APPEALS) AND EVEN WHEN THEY LOST BEFORE THIS HON'BLE TRIBUNAL, THEY HAVE TAKEN THE MATTER TO HIGH COURT AND THE SAID APPEALS ARE STILL PENDING. THE INCOME TAX DEPARTMENT HAS NOT APPROACHED EITHER THE TRIBUNAL OR TH E HIGH COURT IN ANY OF THESE YEARS. 5. THE ANNUAL LETTING VALUE OF A PROPERTY CANNOT CHANGE FROM YEAR TO YEAR. IT REMAINS THE SAME AS THE STANDARD RENT IN THOSE PLACES WHERE THE RENT CONTROL ACT IS IN M FORCE. THIS IS A SETTLED POSITION OF LAW. ONLY BECAUSE FOR ASSESSMENT YEARS 2004 - 05, 2007 - 08 & 2008 - 09, THE DEPARTMENT WANTS TO ARGUE THAT THE ANNUAL LETTING VALUE SHOULD CHANGE FROM YEAR TO YEAR, NEED NOT BE A GROUND FOR THE DELAY IN FILING CROSS OBJECTIONS AFTER 3129 DAYS. THIS IS NOT THE CASE O F IGNORANCE OF LAW. BUT, OF NOT ACCEPTING TRIBUNAL'S VERDICT IN EARLIER YEARS IN THE CASE OF THE SAME ASSESSE. 6. IT IS THEREFORE, PRAYED THAT NO CASE HAS BEEN MADE OUT FOR EXPLAINING THE DELAY OF THE DEPARTMENT AND THE APPLICATION FOR DELAY AND THE CROSS OBJECTIONS SHOULD BE DISMISSED IN LIMINE. A SSESSEE S A P P E A L : 6. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED A CHART SHOWING THAT THE ISSUES RAISED ARE COVERED AS FOLLOWS: SR. NO. GROUNDS OF APPEAL ITAT ORDER ITA NO. ITAT ORDER ITA NO. REMARKS 5 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 1972/M/2009 A.Y. 2003 - 04 PAGE/PARA 7793/M/201 0 A.Y. 2005 - 06 PAGE/PARA 1. DEDUCTION U/S14A - 2/4.1 COVERED BY ITAT ORDER OF A.Y.2005 - 06, PAGE 2 PARA 4. 1 . ITAT DIRECTED TO WORKOUT DISALLOWANCE U/S 14A WITHOUT APPLYING RULE8D. 2. DEDUCTION U/S35D 3/3 6/7.3 COVERED IN FAVOUR OF ASSESSEE BY ITAT ORDER OF A.Y. 2003 - 04 AS WELL AS A.Y. 2005 - 06. 3. INCOME FROM HOUSE PROPERTY 5/8 2/3.1 IN THE ASSESSE' S OWN APPEAL FOR A.Y. 1995 - 96 THE CIT (A) HAS HELD TO DETERMINE THE ANNUAL VALUE OF THE PROPERTY @ 12% OF THE COST OF LAND & BUILDING AND DISMISSED THE GROUND OF ASSESSEE. SAID JUDGMENT IS CONFIRMED AS WELL AS FOLLOWED BY ITAT FROM A.Y. 1994 - 95 TO A.Y. 2001 - 02, A.Y. 2003 - 04, A.Y. 2005 - 06 AND A.Y. 2006 - 07. 4. LOSS ON COMPULSORY CONVERSION OF UNITS OF US 64 - ITAT IN CASE OF SCHRADER DUNCAN LTD. VS. ACITSPL.RG. 10(33), 1 8 TAXMANN.COM 287 (MUM) HAS DISMISSED THE APPEAL ON SIMILAR GROUND. THE BOMBAY HC HAS ADMITTED SAID APPEAL VIDE ITA NO. 602 OF 20 12 5. DEDUCTION U/S80HHC 6/13 COVERED IN FAVOUR OF ASSESSEE BY ITAT ORDER OF A.Y. 2003 - 04. PAGE 6 PARA 13 AS PER TOPMAN EXPORTS VS. CIT. 342 ITR 49 SC) APROPOS GROUND RELATING TO DEDUCTION U/S. 14A OF THE ACT : 7. ON THIS ISSUE, THE A.O. MADE A DISALLOWANCE OF RS. 3,21,73,680/ - BEING DISALLOWANCE FOR INT EREST ON FUNDS USED FOR MAKING THE INVESTMENT FOR EARNING THE TAX FREE INCOME. THE A.O. DISREGARDED THE ASSESSEES SUBMISSIONS THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE OWN FUNDS. THE A.O. REJECT ED THE CONTENTION BY OBSERVING THAT THE ASSESSEE HAS FAI LED TO PROVE THE NEXUS BETWEEN THE INTEREST FREE FUNDS AVAILABLE AND THE INVESTMENTS MADE . HENCE, THE A.O. PROCEEDED TO CONCLUDE THE DISALLOWANCE OF INTEREST. 8. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE A.O.S ACTION BY HOLDING THAT IN EA RLIER YEARS THE LD. CIT(A) HAS CONFIRMED THE SIMILAR ADDITION. 9. AGAINST THIS ADDITION, THE ASSESSEE IS IN APPEAL BEFORE US. 6 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE INASMUCH AS THE ITAT IN ITS ORDER FOR A.Y. 2005 - 06 IN ASSESSEES OWN CASE HAS DIRECTED TO WORK OUT A DISALLOWANCE U/S. 14A WITHOUT APPLYING RULE 8D. WE FIND THAT THIS ARGUMENT OF THE LD. COUNSEL OF THE ASSESSEE IS MISPLACED INASM UCH AS THE ISSUE BEFORE THE ITAT IN THE CASE REFERRED ABOVE WAS THE APPLICABILITY OF RULE 8D FOR DISALLOWANCE U/S. 14A. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE REVENUE THAT THE DISALLOWANCE IS AS PER RULE 8D. RATHER, THE ASSESSEE HAS MADE THE SUBMIS SIONS THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO MAKE THE INVESTMENTS. THIS ARGUMENT THIS HAS BEEN REJECTED BY THE A.O. BY HOLDING THAT THE ASSESSEE HAS NOT PRODUCED THE NEXUS BETWEEN THE INTEREST FREE FUNDS AND INVESTMENT IN TAX FRE E INSTRUMENTS MADE. W E FIND THAT THIS ARGUMENT OF THE A.O. IS MISPLACED AND NOT SUSTAINABLE IN VIEW OF THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF RELIANCE UTILITIES AND POWER LTD 313 ITR 340 (BOM) AND CIT VS. HDFC BANK LTD. (366 ITR 505 ) . IN THESE C ASE LAWS , IT WAS EXPOUNDED THAT IF THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO MAKE THE IN VESTMENT IN TAX FREE INSTRUMENT, DISALLOWANCE U/S. 14A CANNOT BE DONE. RESPECTFULLY FOLLOWING THE HON'BLE JURISDICTIONAL HIGH COURT DECISION AS ABO VE, WE REMIT THE ISSUE TO THE FILE OF THE A.O. TO D ECIDE AS PER THE HON'BLE JURISDICTIONAL HIGH COURT S DECISION AS REFERRED ABOVE. APROPOS DEDUCTION U/S. 35D: 11. ON THIS ISSUE, IT IS NOTED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.60,00,15 0/ - U/S. 35D IN RESPECT OF ITS STEEL D IVISION. HOWEVER, WHILE COMPLETING THE ASSESSMENT, THE A.O. 7 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 HAS DISALLOWED THE AFORESAID CLAIM ON THE GROUND THAT THE ASSESSEE HAS SOLD ITS STEEL DIVISION . THE LD. CIT(A) HAS REJECTED THE ASSESSEES CLAIM THAT THE ASSESSEES CLAIM WAS IN ACCORDANCE WITH SECTION 35D INASMUCH AS HE OBSERVED THAT THE ASSESSEE HAS NOT STATED THE FULL FACTS THAT AFTER THE SALE OF THE UNIT, WHETHER UNIT WAS AMALGAMATED OR MERGED WITH ANOTHER COMPANY. IN THIS REGARD, IT IS THE CONTENTION OF TH E LD. COUNSEL OF THE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT ORDER FOR THE A.Y. 2003 - 04 AS WELL AS 2005 - 06 IN ASSESSEES OWN CASE. WE FIND THAT THE ITAT ON THIS ISSUE VIDE ORDER DATED 28.10.2015 IN ASSESSEES OWN CASE IN IT A NO.7793/MUM/ 2010 HAS HELD AS UNDER: 7.2 WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. SECTION 35D OF THE ACT RELATES TO AMORTIZATION OF CERTAIN PRELIMINARY EXPENSES WHEREBY THE ASSESSE E IS ALLOWED DEDUCTION OF AN AMOUNT EQUAL TO 1/10TH OF SUCH EXPENDITURE FOR EACH OF THE TEN SUCCESSIVE PREVIOUS YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH THE BUSINESS COMMENCED OR AS THE CASE MAY BE THE PREVIOUS YEAR IN WHICH THE EXTENSION OF THE UND ERTAKING IS COMPLETED OR THE NEW UNIT COMMENCED PRODUCTION OR OPERATION. THE PAST HISTORY OF THE ASSESSEE WAS THAT THERE IS NO DISPUTE INSOFAR AS THE ELIGIBILITY CRITERIA OF THE ASSESSEE IS CONCERNED. THE PRELIMINARY EXPENSES WERE INCURRED BY THE ASSESSEE IN ASSESSMENT YEAR 1996 - 97, WHICH WAS THE FIRST YEAR OF THE CLAIM OF 1/10TH OF THE EXPENDITURE. SINCE THEN 1/10TH WAS CLAIMED AND ALLOWED TILL ASSESSMENT YEAR 2001 - 2002. THE IMPUGNED ASSESSMENT YEAR, I.E., M/S.RAYMOND LIMITED. ASSESSMENT YEAR 2005 - 2006 IS THE LAST ASSESSMENT YEAR, I.E., THE TENTH YEAR OF CLAIM OF DEDUCTION, WHICH HAS BEEN DENIED SINCE THE STEEL UNIT HAS BEEN SOLD BY THE ASSESSEE. ON A PERUSAL OF SECTION 35D SHOWS THAT THE ACT IS SILENT IN THE CASE WHEN A UNIT IS SOLD. SECTION 35D(5) OF THE ACT REFERS TO THE TRANSFER BEFORE THE EXPIRY OF THE PERIOD OF 10 YEARS TO ANOTHER INDIAN COMPANY IN A SCHEME OF AMALGAMATION AND SECTION 35D(5A) REFERS TO THE TRANSFER BEFORE THE EXPIRY OF THE PERIOD IN A SCHEME OF DEMERGER. THERE IS NO CLAUSE IN THE SECTION WHICH DEBARS THE ASSESSEE FROM CLAIMING THE EXPENSES AS A WRITE OFF ON SALE OF THE UNDERTAKING. W E, THEREFORE, DO NOT FIND ANY REASON FOR DECLINING THE CLAIM OF THE ASSESSEE. 7.3 LET US CONSIDER THIS ISSUE FROM ANOTHER ANGLE. THE PRELIMINARY EXPENSES WERE INCURRED IN ASSESSMENT YEAR 1996 - 97 AND AS PER WELL SETTLED ACCOUNTING PRINCIPLES, THE ASSESSEE WAS ENTITLED TO CLAIM THE ENTIRE EXPENDITURE IN THE FIRST YEAR OF INCURRING THEM. HOWEVER, DUE TO A SPECIFIC PROVISION IN THE ACT, THE AMORTIZATION WAS ALLOWED TO BE CLAIMED AT 1/10TH IN TEN SUCCESSIVE ASSESSMENT YEARS. ASSUMING THAT THIS PROVISION IS NOT THERE IN THE ACT, THEN THE ENTIRE CLAIM WAS TO BE ALLOWED IN ASSESSMENT YEAR 1996 - 97 IRRESPECTIVE OF THE FACT THAT IN SUBSEQUENT YEAR THE UNDERTAKING WAS SOLD. BY THE SAME ANALOGY IF THE UNDERTAKING IS SOLD DURING THE INTERVENING PERIOD, THEN THE CLAIM CA NNOT BE DENIED. FURTHER AS MENTIONED ELSEWHERE, THE CLAIM CAN BE DENIED IN THE CASE OF AMALGAMATION AND DEMERGER BUT SINCE THE ACT IS SILENT IN THE CASE OF SALE OF UNDERTAKING, IN OUR UNDERSTANDING OF THE LAW, THE REVENUE AUTHORITIES HAVE ERRED IN DENYING THE CLAIM. 8 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 WE ACCORDINGLY SET ASIDE THE FINDING OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF M/S.RAYMOND LIMITED. DEDUCTION U/S 35D OF THE ACT. ACCORDINGLY, GROUND NO.4, WITH ALL ITS SUB - GROUNDS, IS ALLOWED. SINCE THE ITAT HAS DECIDED THE IDENT ICAL ISSUE IN FAVOUR OF THE ASSESSEE AND IT IS NOT THE CASE THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS REVERSED THE DECISION, RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE A SSESSEE. APROPOS DELETION OF ADDITION ON ACCOUNT OF ANNUAL VALUE OF THE PROPERTY: 12. BRIEF FACTS ON THIS ISSUE ARE AS UNDER: THE A.O. OBSERVED THAT O N PERUSAL OF THE COMPUTATION OF INCOME , IT IS NOTICED THAT THE ASSESSEE HAS SHOWN INCOME FROM HOUSE PROPERTY OF RS 6,28,050. DURING THE ASSESSMENT PROCEEDING , IT IS NOTICED THAT THE ASSESSEE COMPANY HAS LET OUT ITS JK HOUSE PROPERTY TO TWO OF THE ENTITIES CONNECTED WITH THE COMPANY AS UNDER: - NAME OF CONCERN TO WHOM LET OUT AREA OF THE LET OUT PROPERTY ANNUAL RENT CHARGED RS. RATE PER SQ. FT. (RS.) 1. J.K. TRUST, 1 ST TO 4 TH FLOOR OF JK HOUSE 18325 SQ FT 1,000 0.05 2. PASHMINA HOLDINGS LTD,5 TH TO 12 FLOORS 23367 SQ.FT. 2,88,000 12.32 THE A.O. FURTHER OBSERVED THAT T HE FOLLOWING FACTS ARE NOTICED DURING THE PROCEEDINGS FROM THE EARLIER RECORDS & SUBMISSIONS MADE DURING THE PROCEEDINGS: - (A) THE J.K. HOUSE PROPERTY LET OUT BY THE ASSESSEE COMPANY IS LOCATED IN POSH COMMERCIAL AREA AT WARDEN ROAD. (B) M/S. PASHMINA HOLDINGS LTD TO WHOM 23367 SQ. FT. HAVE BEEN LET OUT, IS A FULLY OWNED SUBSIDIARY COMPANY OF THE ASSESSEE & JK TRUST TO WHOM 18325 SQ FT IS ALSO THE TRUST IN WHICH THE DIRECTORS OF THE COMPANY ARE TRUSTEE. THE A.O. FURTHER NOTED THAT THE A SSESSE E COMPAN Y D URING THE ASSESSMENT PROCEEDING HAS TAKEN THE FOLLOWING CONTENTIONS: - 9 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 (I) THE ACTUAL RENT RECEIVED FROM THE ABOVE MENTIONED TENANTS IN THIS YEAR IS MORE THAN THE MUNICIPAL RATEABLE VALUE OF RS. 1,05,275/ - , HENCE, THE INCOME UNDER THE HEAD HOUSE PROPERTY H AS TO BE COMPUTED ON THE BASIS OF ACTUAL RENT RECEIVED. (I I) IN THE PRECEDING YEARS C IT (A) HAS TAKEN STAND THAT RENTAL INCOME CAN NOT BE TAKEN AT MARKET RENT. (III) ALTERNATIVELY, IT INCOME MAY BE DETERMINED BASED ON ORDERS C I T(A) IN EARLIER. THE A.O. REFERRED TO THE PROVISION OF SECTION 23 AND ALSO NOTED THAT SEVERAL CASE LAWS H AS THE COMPARABILITY WITH THE CENTRAL GOVERNMENT QUARTERS AT BELVED E RE AND CONCLUDED AS UNDER: IN VIEW OF THE FINDING GIVEN ABOVE AND ALSO DISCUSSED IN DETAIL IN THE ORDER, IT IS EVIDENT THAT THE ASSESSEE HAS NOT CHARGED THE FAIR RENT , LOOKING TO THE FACTS DISCUSSED ABOVE THE FAIR MARKET RENT IS DETERMINED 20 % ABOVE THE RATES FIXED @ 60.50 PER SQ FT PERMONTH FOR THE CENTRAL GOVERNMENT FLATS LOCATED IN THE AREA IE AT THE RATE OF RS 72 PER SQUARE FEET PER MONTH IE RS 864 PER SQ FT PER ANNUM ACCORDINGLY THE FAIR RENTAL VALUE FOR THE AREA OF 41,692 SQ FT LET OUT TO THE ABOVE TWO CONCERNS IS DETERMINED AT RS 3,60,21 R 880. CONSIDERING THE ABOVE, THE INCOME UNDER THE HEAD OF' INCOME FROM HOUSE PROPERT Y IS DETERMINED AS UNDER - ANNUAL VALUE OF THE PROPERTY OF JK HOUSE LET OUT, AS DETERMINED ABOVE 3,60,21,880 ____________ ADD: RENT FROM SILVER SPARK APPEAREL LTD 7,03,226 TOTAL ANNUAL VALUE AS DISCUSSED ABOVE 3,67,25,106 LESS MUNICIPAL TAXES 95,012 3,66,30,094 LESS: 30% FOR REPAIRS 1,09,89,028 INCOME UNDER THE HEAD HOUSE PROPERTY 2,56,41,066 THE ASSESSEE HAS DISCLOSED THE INCOME UNDER THE ABOVE HEAD IN COMPUTATION OF INCOME AT RS.6,28,050/ - . SO, THE ADDITION UNDER THE ABOVE HEAD WORKS OUT TO (RS.2,56,41,066 RS.6,28,050) RS.2,50,13,016/ - . THE SAME IS ADDED TO THE INCOME OF THE ASSESSEE. 13. THE LD. CIT(A) NOTED THE ASSESSEES SUBMISSIONS AND HELD AS UNDER: 11. I HA VE CONSIDERED THE FACTS OF THE CASE AND THE ARGUMENTS OF THE APPELLANT IN THIS REGARD. THIS ISSUE, AS STATED BY THE APPELLANT HAS BEEN DECIDED BY THE CIT(A) IN A.Y. 2001 - 02 WHEREBY, HE HELD THAT THE ANNUAL VALUE SHOULD BE DETERMINED WITH REFERENCE TO THE S TANDARD RENT OF THE PROPERTY DETERMINABLE AS PER THE RELEVANT PROVISIONS OF THE RENT ACT I.E. 12% OF THE COST OF LAND AND BUILDING. THE CIT(A) IN THIS A REGARD HAS STATED AS UNDER: 'SIMILAR ISSUE HAD COME UP FOR APPEAL FOR ASSESSMENT YEAR 1997 - 98 TO 2000 - 0 1 WHEREIN SIMILAR ORDER OF EARLIER YEAR WAS FOLLOWED. THE DIRECTION GIVEN WERE AS FOLLOWS: 10 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 ( I ) ANNUAL VALUE CANNOT BE BASED ON MARKET RENT OF THE PROPERTY. ( II ) MUNICIPAL VALUE OR ACCRUAL RENT RECEIVED, WHICHEVER IS HIGHER CANNOT BE TAKEN AS A BASIS FOR DETERMINING ANNUAL VALUE. ( II I) ANNUAL VALUE HAS TO BE DETERM INED WITH REFERENCE TO THE STANDARD RENT OF THE PROPERTY DETERMINABLE AS PER THE RELEVANT PROVISIONS OF THE RENT ACT. IN CONFORMITY WITH APPELLATE OR DER FOR A.Y. 1997 - 98 TO 2000 - 01, THE ASSESSING OFFICER IS DIRECTED TO MODIFY THE ASSESSMENT ORDER ACCORDINGLY. ' 11.1 FROM THE ABOVE, IT IS SEEN THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE CIT(A). I AM IN AGREEMENT WITH THE SAME. I, THEREFORE, DIRECT THE ASSESSING OFFICER TO COMPUTE THE ANNUAL VALUE WITH REFERENCE TO THE STANDARD RENT OF THE PROPERTY DETERMINABLE AS PER RELEVANT PROVISIONS OF THE RENT ACT AND MODIFY THE ASSESSMENT ACCORDINGLY. 14. AGAINST THE ABOVE ORDER, THE ASSESSEE HAS FILED APPEA L BEFORE US. 15. THE REVENUE HAS ALSO FILED THE CROSS OBJECTION AGITATING THAT DETERMIN ING THE ANNUAL VALUE @ 1 2 % OF THE COST OF LAND AND BUILDING SHALL MEAN THAT THE SAME ANNUAL VALUE SHALL REMAIN FOR ETERNITY AS THE C OST OF THE LAND AND BUILDING WILL NEVER CHANGE. 16. WE FIND THAT THE REVENUES CROSS OBJECTION IS DELAYED AND THE ASSESSEE HAS VEHEMENTLY ARGUED THAT THE DELETION SHOULD NOT BE CONDONED, AS THERE IS NO REASONABLE CAUSE FOR THE DELAY. WE FIND THAT ON THIS I SSUE, THE ASSESSEE HAS MADE THE FOLLOWING SUBMISSIONS: IN THE ASSESSE' S OWN APPEAL FOR A.Y. 1995 - 96 THE CIT (A) HAS HELD TO DETERMINE THE ANNUAL VALUE OF THE PROPERTY @ 12% OF THE COST OF LAND & BUILDING AND DISMISSED THE GROUND OF ASSESSEE. SAID JUDGMENT IS CONFIRMED AS WELL AS FOLLOWED BY ITAT FROM A.Y. 1994 - 95 TO A.Y. 2001 - 02, A.Y. 2003 - 04, A.Y. 2005 - 06 AND A.Y. 2006 - 07. 17. IN THIS REGARD, WE MAY GAINFULLY REFER TO THE ADJUDICATION OF THIS ISSUE IN THE ASSESSEES OWN CASE FOR A.Y. 2003 - 04 IN I TA NO. 1972/MUM/2009 VIDE ORDER DATED 21.06.2017, THE SAME READ AS UNDER: 8. GROUND NO.2 IS IN RELATION TO INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS SHOWN THE ANNUAL VALUE OF THE PROPERTY AT RS.2,89,000/ - AND A.O. HAS DETERMINED THE ANNUAL VALUE OF THE PROPERTY AT RS.3,50,21,280/ - . 9. THE MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS DISMISSED THE APPEAL. 11 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 10. DURING THE COURSE HEARING THE LD. D.R. SUBMITTED THAT THIS ISSUE IS DECIDED AGAINST THE ASSESSEE IN THE OWN CASE OF THE ASSESSEE IN EARLIER YEARS ALSO. THEREFORE, IT MAY BE DECIDED AGAINST THE ASSESSEE. 11. SINCE THE ISSUE HAS ALREADY BEEN DECIDED AGAINST THE ASSESSEE IN THE OWN CASE OF THE AS SIN EARLIER YEARS, WE DISMISS GROUND NO.2 OF THE ASSESSEE. IN ITA NO. 7793/MUM/2010 IN ASSESSEES O WN CASE FOR A.Y. 2005 - 06 VIDE ORDER DATED 28.10.2015 , THE ITAT HAS HELD AS UNDER ON THIS ISSUE: 3. THE FIRST GROUND RELATES TO THE TREATMENT OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE IS AGGRIEVED BY THE DIRECTION OF THE CIT(A) TO DETERMINE THE ANNUAL VALUE OF THE PROPERTY AT 12% OF THE COST OF LAND AND BUILDING. AT THE VERY OUTSET, THE COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE TRIBUNAL VIDE A C ONSOLIDATED ORDER DATED 1ST MAY, 2009 FOR ASSESSMENT YEARS 1999 - 2000, 2000 - 2001 AND 2001 - 2002. 3.1 WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN PARA 2.7 OF ITS ORDER AND AT 2.7.1, THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE CO - ORDINATE BENCH GIVEN FOR ASSESSMENT YEARS 1994 - 95 AND 1995 - 96 TO ASSESSMENT YEAR 1998 - 99. FOLLOWING THE DECISION OF THE TRIBUNAL, THE APPEAL OF THE ASSESSEE WAS DISMISSED. AS THE LEARNED SENIOR COUNSEL HAS FAIRLY CONCEDED THAT SINCE THIS ISSUE HAS BEEN DEC IDED AGAINST THE ASSESSEE BY THE TRIBUNAL, THE SAME VIEW SHOULD BE TAKEN. RESPECTFULLY FOLLOWING THE FINDING OF THE CO - ORDINATE BENCH IN ASSESSEE'S OWN CASE (SUPRA) GROUND NO.1 IS DISMISSED. A READING OF THE ABOVE DECISIONS AND THE PLEADINGS OF THE LD. CO UNSEL OF THE ASSESSEE AND THE SUB MISSIONS OF THE LD. DR SHOWS THA T T H E A.O. HAS COMPUTED THE ANNUAL VALUE OF THE PROPERTY AT RS.3 ,60,21,880/ - AND THE INCOME CHARGEABLE UNDER THE PROPERTY CAN BE RS.2 ,56,41,066/ - . THE LD. CIT(A) ON THE OTHER HAND DIRECTED TH E A.O. TO COMPUTE THE ANNUAL VALUE OF THE PROPERTY WITH REFERENCE TO THE STANDARD RATE OF THE PROPERTY DETERMINABLE AS PER THE RELEVANT PROVISIONS OF THE RENT ACT AND MODIFY THE A.O.S ORDER ACCORDINGLY. IN THIS REGARD, THE ASSESSEES CONTENTION IS THAT TH E DIRECTION SHOULD BE GIVEN IN ACCORDANCE WITH THE EARLIER YEAR ITAT ORDER THAT T H E ANNUAL VALUE OF THE PROPERTY SHOULD BE 12% OF THE COST AND THE LAND AND BUILDING. IN THIS REGARD, WE NOTE THAT IT IS THE PLEA OF THE REVENUE THAT MAKING AN ANNUAL VALUE AS A PERCENTAGE OF THE COST OF THE LAND AND BUILDING FOREVER WILL LEAD TO ANNUAL VALUE FIXED FOR ETERNITY WHICH CAN NEVER BE 12 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 PERMITTED. WE FIND THAT THE ITAT EARLIER HAD CONFIRMED THE SAME DIRECTION . THE MATTER IS ALREADY BEFORE THE HON'BLE JURISDICTIONAL HIG H COURT. WE DO NOT FIND ANY COGENT REASON TO DEPART FROM THE EARLIER ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE. HENCE, WE FOLLOW THE SAME AND DIRECT THAT THE ITATS ORDER IN ASSESSEES OWN CASE ON THIS ISSUE BE FOLLOWED, AS THE SAME HAS NOT BEEN REV ERSED BY THE HON'BLE JURISDICTIONAL HIGH COURT. THE REVENUES CROSS OBJECTION IN THIS REGARD IS REJECTED IN LIMINE BEING TIME BARRED BY 3127 DAYS. WE ARE NOT PERSUADED BY THE REASONABLE CAUSE ATTRIBUTED FOR THE DELAY BY THE REVENUE. THE REASONABLE CAUSE INFACT SUBMITS THAT WE S I T IN JUDGMENT OVER A CO - ORDINATE BENCH JUDGMENT IN ASSESSEES OWN CASE. THIS IS NOT AT ALL PERMISSIBLE . APROPOS ISSUE OF LOSS ON COMPULSORY CONVERSION OF US - 64: 18. THE BRIEF FA CTS ON THIS ISSUE ARE AS UNDER: THE ASSESSEE HAD INVESTED A SUM OF RS. 5,56,31,882/ - IN UNITS OF US - 64 . AGAINST THESE UNITS, THE ASSESSEE WAS ISSUED BONDS OF RS. 3,75,37,240/ - RE SULTING INTO A BOOK LOSS OF RS. 1,80,94,642/ - CONSIDERING THE BENEFIT OF INDEXED COST OF ACQUISITION, THE LOSS ON SUCH UNITS WORKED OUT BE RS. 6,89,82,716/ - THE AFORESAID LOSS WAS SET OFF BY THE ASSESSEE AGAINST OTHER CAPITAL GAINS IN ACCORDANCE WITH THE PROVISION OF THE ACT. THE ASSESSING OFFICE, HOWEVER, DISALLOWED THE SAID LOSS ON THE GROUND THAT CONVERSION OF UNITS INTO BONDS DOES NOT AMOUNT TO TRANSFER. 19. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE A.O.S ACTION. 20. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 21. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ITAT IN THE CASE OF SCHRADER DUNCAN LTD. VS. ADDL. CIT 13 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 [2012] 1 8 TAXMANN.COM 287 (MUM.) VIDE ORDER DATED 13.01.2012 HAS DISMISSED THE ASSESSEES APPEAL ON SIMILAR ISSUE AND THE HON'BLE BOMBAY HIGH COURT HAS ADMITTED THE SAID APPEAL . 22. UPON CAREFUL CONSIDERATION, WE FIND THAT ON THE SAME ISSUE , THE ITAT HAS DECIDED THE CASE AGAINST THE ASSESSEE AND IT IS NOT THE CASE THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS REVERSED THE SAID DECISION. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE LD. CIT(A). APROPOS ISSUE OF DEDUCTION U/S. 80HHC : 23. BRIEF FACTS ON THIS ISSUE ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON DEPB. THE A.O. OBSERVED THAT O N PERUSAL OF AUDI T REPORT IN FORM 10 CCAC IT IS NOTICED THAT THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION UNDER SECTION 80 HHC ON PROFIT FROM DEPB AMOUNTING TO RS.2136.15 LACS AND OTHER EXPORT INCENTIVE IE DUTY DRAWBACK OF RS 9.09 LAKHS & 6.06 LAKHS ON PREMIUM ON LICENSES, T OTALING TO RS.2151.30 LACS. THE A.O. NOTED THAT T HE PROFIT ON DEPB ARE COVERED UNDER 3 RD PROVISO TO SECTION 80 HHC, AS PER THE THIRD PROVISO OF SECTION 80HHC OF THE ACT, THE PROFITS COMPUTED U/S.80HHC(3) SHALL BE FURTHER INCREASED BY AMOUNT WHICH BEARS TO NINETY PER CENT, OF ANY SUM REFERRED TO IN DAUSE (IIID) (IE PROFIT ON TRANSFER DUTY ENTI TLEMENT PASS BOOK SCHEME) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE, ONLY IF, THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT: - A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME; AND 14 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN TRIE RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLEMENT PASS B OOK, BEING THE DUTY REMISSION SCHEME: DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY WAS ASKED TO FURNISH THE EVIDENCES TO PROVE THAT THE CONDITIONS LAID DOWN UNDER THE ABOVE PROVISO HAVE BEEN FULFILLED. 24. THE A.O. FURTHER OBSERVED THAT THE AS SESSEE HAS MADE THE FOLLOWING SUBMISSIONS: (I) THE DEPB SCHEME CAME INTO EFFECT FROM APRIL, 1997 AND REPLACED A NUMBER OF OTHER SCHEMES FOR DUTY FREE IMPORTS FOR EXPORT PRODUCTION. THE PURPOSE OF THE DEPB SCHEME WAS TO GIVE CUSTOMS DUTY CREDIT ENTITLEMENT AT A PRE DETERMINED RATE SO THAT EXPORTERS MIGHT KNOW BEFORE HAND WHAT WOULD BE THE COST OF EXPORT. (II) BOTH MERCHANT EXPORTERS AND MANUFACTURER EXPORTERS ARE ELIGIBLE FOR CREDIT UNDER THE DEPB SCHEME. THE DEPB CAN BE ISSUED EITHER ON POST EXPORT OR PRE - EXPORT BASIS. UNDER THE POST - EXPORT PASS BOOK THE CUSTOMS DUTY CREDIT IS EARNED AT THE SPECIFIED RATE ON EXPORT OF THE PRODUCT AND GRANTED AGAINST EXPORT ALREADY MADE. AT THE TIME OF IMPORT, THE CUSTOMS DUTY PAYABLE WILL BE ADJUSTED AGAINST THE CREDIT EARN ED BY EXPORTS. THE PASS BOOK IS ALSO SALEABLE. THUS, THE CREDIT EARNED ON EXPORTS OF TRADING OR MANUFACTURED PRODUCTS ARE USED TO SET OFF THE CUSTOMS DUTY PAYABLE ON THE IMPORT CONTENT OF THE PRODUCTS OR THE PASS BOOK IS SOLD AS SUCH WITHOUT UTILIZATION AG AINST CUSTOMS DUTY ON IMPORTED PRODUCTS. (III) THE DEDUCTION U/S 80HHC SHALL BE RESTRICTED ONLY ON THAT AMOUNT WHICH IS REALIZED IN EXCESS OF THE LICENSE VALUE. IN OTHER WORDS THE PROFIT ON TRANSFER OF DEPB CONSISTS OF ONLY THOSE AMOUNTS WHICH ARE REALIZED IN EXCESS OF DEPB LICENSE VALUE. THUS, DEDUCTION U/S 80HHC SHALL BE ALLOWED, SINCE THERE IS NO PROFIT INVOLVED IN CASE OF TRANSFER OF DEPB. (IV) THE ASSESSEE ALSO SUBMITTED THAT, IN THE AMENDED PROVISIONS STRESS IS ON PROFITS AND TRANSFER, USED FOR OWN CONSUMPTION SHALL NOT BE REGARDED AS TRANSFER. THEREFORE DEDUCTION U/S 80HHC ON OWN CONSUMPTION OF DEPB SHALL NOT BE DISALLOWED. (V) IF DUTY DRAW BACK IS NOT PRESCRIBED FOR SPECIFIC CATEGORY, THAN THE PROVISO WILL NOT APPLY 25. HOWEVER, THE A.O . WAS NOT CONVINCED. HE REJECTED THE ASSESSEES CONTENTION BY OBSERVING AS UNDER: THE ABOVE ARGUMENTS ARE NOT TENABLE IN VIEW OF THE FACT THAT THE ASSESSEE COMPANY IT SELF HAS CREDITED THE ENTIRE AMOUNT AS PROFIT FROM DEPB IN THE PROFIT & LOSS ACCOUNT EVEN IF WE CONSIDER, THE ARGUMENT THAT THE DEPB CERTIFICATES WERE UTILISED IN PURCHASE OF RAW MATERIAL ETC , THAN ALSO THE ENTIRE AMOUNT OF CREDIT AVAILED IS 'PROFIT ON TRANSFER' ON UTILISATION , AS THE CREDIT CAN NOT BE ALLOWED WITHOUT THE TRANSFER OF DEPB CE RTIFICATES IN FAVOUR OF THE EXCISE & CUSTOM AUTHORITIES. EVEN OTHER WISE , THE ASSESSEE IT SELF IN THE 15 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 STATEMENTS OF DEDUCTION FILED WITH THE RETURN OF INCOME HAS CLAIMED THE DEDUCTION SHOWING THE DEPB AMOUNT OF AS EXPORT INCENTIVE ONLY AND IN THE AUDIT RE PORT ALSO THE AMOUNT HAS BEEN SHOWN AS EXPORT INCENTIVE ONLY. THE EXPORT INCENTIVES ARE INCLUDED IN THE BUSINESS PROFITS UNDER CLAUSE (IIIA) TO (IIIE) OF SECTION 28. THE PROFIT ON TRANSFER OF DEPB IS COVERED IN CLAUSE (IIID) OF SECTION 28 . IN VIEW OF THE ABOVE , AS THE ASSESSEE HAS FAILED TO SATISFY THE CONDITIONS LAID DOWN UNDER 3 RD PROVISO TO SUB SECTION (3) OF SECTION 80 HHC , HENCE , THE DEDUCTION ON THE DEPB CERTIFICATES CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE. FURTHER, THE ASSESSEE ALSO FAILED TO FURNISH ANY EVIDENCES TO PROVE THAT THE PREMIUM ON SALE OF LICENSES ARE ELIGIBLE F OR DEDUCTION AS PER PROVISO TO THE SECTION, THUS THE SAME IS THE RECEIPT OF THE NATURE OF INCOME OF WHICH 90% TO BE EXCLUDED FOR WORKING OUT THE ' PROFIT OF BUSINESS' BUT NOT ELIGIBLE FOR DEDUCTION U/S 80 HHC 26. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE A.O.S ACTION. 27. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 28. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY IT AT ORDER FOR A.Y. 2003 - 04 VIDE ORDER DATED 21.06.2017 AND TOPMAN EXPORTS VS. CIT [2012] 342 ITR 49 (SC) . WE FIND THAT THE ITA T IN THE ABOVE REFERRED ORDER HAS HELD AS UNDER: 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF HSC IN THE CASE OF TOPMAN EXPORTS (SUPRA) WHEREIN IT IS HELD AS UNDER: EXPORT SPECIAL EDUCATION - MODE OF COMPUTATION OF PROFITS OF BUSINESS - SALE OF CREDIT I N DULY ENTITLEMENT PASS BOOK - ENTIRE SALE PROCEEDS NOT TO BE TREATED AS PROFITS BUT ONLY DIFFERENCE BETWEEN SALE VALUE AND FACE VALUE OF CREDIT DEPB CREDIT CHARGEABLE AS INCOME UNDER SECTION 28(IIIB) IN YEAR IN WHICH APPLIED FOR AGAINST EXPORTS PROFIT O N TRANSFER OF CREDIT CHARGEABLE UNDER SECTION 28(IIID) IN YEAR IN WHICH TRANSFERRED NO DOUBLE TAXATION ASSESSEE HAVING TURNOVER OF OVER RS.10 CRORES NOT TO BE DENIED BENEFIT OF EXCLUSION OF SMALLER FIGURE FROM PROFITS OF BUSINESS UNDER EXPLANATION (BAA) INCOME TAX INCOME TAX ACT, 1961, 1961, SS.28(IIIB), (IIIB), 80HHC. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT (SUPRA), WE ALLOW THE GROUND N O . 4 OF THE ASSESSEE. FOLLOWING THE ABOVE PRECEDENT, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 16 ITA NO.1973/MUM/2009 & CO NO. 286/MUM/2017 29. IN THE RESULT, THE ASSESSEES APPEAL IS P A R T L Y ALLOWED FOR STATISTICAL PURPOSE AND THE REVENUES CROSS OBJECTION IN THIS REGARD IS REJECTED IN LIMINE BEING TIME BARRED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0 . 0 2 . 2 0 1 9 S D / - S D / - ( SANDEEP GOSAIN ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 0 . 0 2 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI