DCIT, CHENNAI V. M/s. Chennai Petroleum Corporation Limited, CHENNAI

ITA 1981/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1180 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-03-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Depreciation; Earning of tax free income; Services rendered outside India; Deemed to accrue or arise in india; Question of law; Tangible material; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure
• Section: 143(3); 14A; 37(1); 32; 147; 148; 37; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NOS.1979 & 1981/MDS/2011 ASSESSMENT YEARS : 2003-04 AND 2006-07 THE DY. CIT LARGE TAXPAYER UNIT CHENNAI VS M/S CHENNAI PETROLEUM CORPORATION LTD. 536, ANNA SALAI TEYNAMPET CHENNAI 600 018 [PAN AAACM 4392 C] (APPELLANT) (RESPONDENT) APPELLANT BY : MS. VIDISHA KALRA, CIT/DR RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 13-03-2013 DATE OF PRONOUNCEMENT : 21-03-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE LD. CIT(A), LARGE TAXPAYER UNIT, CHEN NAI, DATED 27.09.2011 AND 14.9.2011 FOR THE ASSESSMENT YEARS 2 003-04 AND 2006-07, RESPECTIVELY. I.T.A.NO.1979 & 1981/11 :- 2 -: 2. IN THE ASSESSMENT YEAR 2003-04, THE SOLE ISSUE INVO LVED IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE RE-AS SESSMENT PROCEEDINGS WERE INVALID. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS COMPLETED U/S 143(3) ON 8.12.2005. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/ S 148 OF THE ACT ON 9.3.2010 ON ACCOUNT OF ESCAPEMENT OF INCOME FOR THE FOLLOWING REASONS: 'IT HAS BEEN OBSERVED THAT THE ASSESSEE HAS PROPOSE D TO START JOINT VENTURE WITH SPIC LTD. BUT DURING THE CURRENT YEAR THE ASSESSEE HAS WRITTEN OFF RS.2204.25 LAKHS BEING AMO UNT DUE FROM M/S. SPIC LIMITED. IT HAS BEEN FURTHER OBSERVED THAT THIS AMOUNT IS NO THING BUT THE AMOUNT INVESTED BY THE ASSESSEE IN JOINT VENTURE WI TH M/S. SPIC LTD WITH NOMENOLATURE M/S. RAYCHEM LIMITED. SINCE T HE ASSESSEE HAS PULLED OUT OF THE JOINT VENTURE PROJECT UNILATERALLY, THE ABOVE EXPENDITURE CAN NOT BE ALLOWABLE AS A BUS INESS DEDUCTION U/S.37 OF THE INCOME TAX ACT BECAUSE OF CAPITAL IN NATURE. HENCE, I HAVE THE REASON TO BELIEVE THAT TH E INCOME HAS ESCAPED THE ASSESSMENT BY WAY OF EXCESS ALLOWANCE OF RS.2204.25 LAKHS FOR THE CURRENT YEAR. FURTHER, AS PER CIRCULAR NO.7/2009 OF THE CBDT, THE EARLIER CIRCULARS WHICH HAS BEEN ISSUED WITH REFERENCE TO THE PROVISIONS OF SECTION 195 VIZ., CIRCULAR NO.23 DT.23.07.1969, CIRCULAR NO. 163 DT.29.05.1975 & CIRCULAR NO. 786 DT.07.02.2000 HAS BEEN WITHDRAWN BY THE CBDT. FURTHER IT HAS BEEN ALSO OBS ERVED FROM THE FINANCE BILL 2010-11 THAT THE PROVISIONS OF SECTION 9 OF THE INCOME TAX ACT HAS BEEN AMENDED RETROSPECTIVELY FRO M 1.05.1976 IN RELATION TO THE A. Y. 1977-78 AND SUBSEQUENT YEARS THAT THE EXPENDITURE INCURRED OUTSIDE INDIA ALSO DE EMED TO ACCRUE OR ARISE IN INDIA IN RESPECT OF THE SERVICES RENDERED. I.T.A.NO.1979 & 1981/11 :- 3 -: BASED ON THE ABOVE CIRCULAR OF CBDT NO.7/2009 AND FINANCE BILL 2010-11 THAT WHATEVER THE EXPENDITURE INCURRED BY T HE ASSESSEE IN FOREIGN CURRENCY, FOR THE PURPOSE OF UTILIZATION OF SERVICES EVEN THOUGH THE SERVICES RENDERED OUTSIDE INDIA IS TAXAB LE. SINCE THE ASSESSEE HAS INCURRED EXPENDITURE IN FOREIGN CURREN CY OUTSIDE TO THE TUNE OF RS.1152.38 LAKHS DURING THE CURRENT YEAR, THE SAME HAS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 9 & 195 OF THE INCOME TAX ACT, SINCE THE ASSESSEE HAS NOT PROVIDED THE NECESSARY DETAILS ON THE SAME, THE SAME HAS TO BE D ISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(1) OF THE ACT. BASED ON THE ABOVE FACTS, I AM OF THE OPINION THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE A. Y.2003-04 HENCE, I HAVE THE REASON TO BELIEVE THAT, THE INCOM E HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT.' 4. THE ASSESSEE OBJECTED TO THE REOPENING OF THE ASSE SSMENT BEFORE THE ASSESSING OFFICER AFTER RECEIPT OF THE R EASONS FOR REOPENING OF THE ASSESSMENT. THE ASSESSING OFFICER HELD THE RE-ASSESSMENT PROCEEDINGS AS VALID FOR THE FOLLOWING REASONS: THE CONTENTIONS OF THE ASSESSEE HAVE BEEN CAREFULL Y EXAMINED. TOTAL AMOUNT CLAIMED TO BE WRITTEN OFF RE LATES TO THE COMPANY'S JOINT VENTURE PROJECT WHICH IS A CAPITAL INVESTMENT DECISION. FURTHER, IT WAS THE ASSESSEE W HO WITHDRAW FROM THE JOINT VENTURE AND NOT THE JOINT V ENTURE PARTNER M/S. SPIC LIMITED. THE ISSUE OF RECOVERY OF RS.1444.38 LAKHS IS STILL PENDING BEFORE JUDICIAL F ORUM. AS THE EXPENDITURE CLAIMED FOR WRITE OFF IS CAPITAL IN NAT URE FOR THE FACT THAT IT RELATES TO COMPANY'S JOINT VENTURE PRO JECT, IT CANNOT BE ALLOWED U/S.37. SECTION 37 OF THE ACT SPECIFICALLY PROHIBITS ALLOWANCE OF ANY EXPENDITURE OF CAPITAL I N NATURE. THE ASSESSING OFFICER DURING THE COURSE OR REGULAR ASSESSMENT DID NOT CONSIDER THIS ASPECT AT ALL AND HENCE IT DOES NOT AMOUNT TO CHANGE OF OPINION AND HENCE PROCEEDINGS U/S.147 HAVE BEEN INITIATED CORRECTLY. FOR THE ABOVE SAID REASONS THE AMOUNT OF RS.22,04,25,152/- IS DISALLOWED AND BROUGHT TO TAX.' I.T.A.NO.1979 & 1981/11 :- 4 -: 5. THE ASSESSEE, BEING NOT SATISFIED WITH THE ASSESSM ENT ORDER, FILED APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE QUOTED IN THE ORDER OF THE LD . CIT(A) AND READS AS FOLLOWS: 'THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.11.2 003 ADMITTING THE TOTAL INCOME OF RS.4297186556/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) ON 30.08.2004 AND THEREAFTER S CRUTINY ASSESSMENT UNDER SECTION 143(3) WAS PASSED ON 08.12 .2005. NOTICE UNDER SECTION 148 WAS ISSUED ON 09.03.2010. THE REASON FOR REOPENING HAS BEEN GIVEN BY THE ASSESSING OFFIC ER ON ACCOUNT OF (I) WRITE OFF OF RS.2204.25 LAKHS IN RELATION TO JOINT VENTURE AND (II) DISALLOWANCE OF EXPENDITURE INCURRED IN FOREIG N CURRENCY. THE ASSESSEE SUBMITS IN THE COURSE OF ASSESSMENT UN DER SECTION 143(3), THE ASSESSING OFFICER HAS SUBSEQUEN TLY RECALLED PARTICULARS REGARDING BREAK UP OF BAD DEBTS, ADVANC ES, CLAIMS AND MATERIAL WRITTEN OFF VIDE HIS LETTER DATED 31.0 8.2005. FURTHER IN THAT LETTER THE ASSESSING OFFICER HAS ALSO ASKED THAT WHY AN AMOUNT OF RS.2204.25 LAKHS REPRESENTING INTEREST AN D REIMBURSEMENT OF LEGAL EXPENSES DUE FROM SPIC LTD H AS BEEN WRITTEN OFF. THE ASSESSEE VIDE LETTER DATED 22.09.2 005 HAD REPLY THAT AN AMOUNT OF RS.2204.25 LAKHS REPRESENTING INT EREST AND REIMBURSEMENT OF LEGAL EXPENSES DUE FROM SPIC HAS B EEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS BASED ON DECISION OF T HE BOARD OF DIRECTORS OF THE COMPANY. THEY HAD ALSO REFERRED NO TE NO. 6 OF SCHEDULE R - NOTES ON THE ACCOUNTS FOR THE PERIOD ENDED ON 31 ST MARCH, 2003. THEY HAD ALSO CLARIFIED HIM THAT THE MAIN ISSUE PEN DING BEFORE THE JUDICIAL FORUM RELATES TO THE RECOVERY OF RS.14 44.38 IAKHS BEING THE SUM INVESTED BY THE COMPANY. THUS, THE ASSESSING OFFICER HAD INVESTIGATED AND WA S AWARE OF THE CHARACTER OF THE AMOUNT DUE FROM SPIC, WHICH HA VE BEEN WRITTEN OFF AND THE ASSESSEE HAS ALSO EXPLAINED THE REASON FOR WRITTEN OFF AT THE TIME OF REGULAR ASSESSMENT. AFTE R RECEIVING THE SAME, THE ASSESSING OFFICER HAS NOT MADE ANY AD DITION IN RESPECT OF THESE WRITE OFF IN THE ORIGINAL ASSESSME NT. HENCE THE REOPENING IS MERELY ON CHANGE OF OPINION. I.T.A.NO.1979 & 1981/11 :- 5 -: AS REGARDS THE PAYMENT IN FOREIGN CURRENCY AND DEDU CTION OF TAX AT SOURCE THERE FROM, THE ASSESSEE HAS GIVEN FULL D ETAILS ON THE SAME AND IT IS FOUND THAT THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION ON THIS ACCOUNT' 6. THE LD. CIT(A), AFTER CONSIDERING THE ABOVE SUBMISS IONS, HELD THAT THE REOPENING OF THE ASSESSMENT U/S 147 WAS I NVALID BY OBSERVING AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS OF THE ID.AR. I HAVE ALSO PERUSED THE P ROFIT AND LOSS ACCOUNT, BALANCE SHEET, THE QUESTIONERS ISSUED BY THE AO, THE REPLIES GIVEN BY THE ASSESSEE AND NOTES ON ACCOUNTS ETC. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY THE AO AND AR. IT IS EVIDENT THAT THE REOPENING WAS DON E AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. PROVISO TO S.147 LAYS DOWN GENERAL LIMITATION OF FO UR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WHERE (I) AN ASSESSMENT OR REASSESSMENT HAS ALREADY BEEN MADE AN D (II) THE ASSESSEE HAS NOT FAILED TO MAKE FULL AND TRUE D ISCLOSURE OF MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF H IS INCOME. HENCE, BEFORE DECIDING THE ISSUE, IT WOULD BE NECES SARY TO CONSIDER THE REASONS RECORDED BY THE AO TO REOPEN T HE ASSESSMENT. THE REASONS RECORDED BY THE AO READS AS UNDER: 'IT HAS BEEN OBSERVED THAT THE ASSESSEE HAS PROPOSE D TO START JOINT VENTURE WITH SPIC LTD. BUT DURING TH E CURRENT YEAR THE ASSESSEE HAS WRITTEN OFF RS.2204.2 5 LAKHS BEING AMOUNT DUE FROM M/S. SPIC LIMITED. IT HAS BEEN FURTHER OBSERVED THAT THIS AMOUNT IS NO THING BUT THE AMOUNT INVESTED BY THE ASSESSEE IN JOINT VENTURE WITH M/S. SPIC LTD WITH NOMENOLATURE M/S. RAYCHEM LIMITED. SINCE THE ASSESSEE HAS PULLED OUT OF THE JOINT VENTURE PROJECT UNILATERALLY, THE ABOVE EXPENDITURE CAN NOT BE ALLOWABLE AS A BUSINESS DEDUCTION U/S.37 OF THE INCOME TAX ACT BECAUSE OF CAPITAL IN NATURE. HENCE, I HAVE THE REASON TO BELI EVE THAT THE INCOME HAS ESCAPED THE ASSESSMENT BY WAY OF EXCESS ALLOWANCE OF RS.2204.25 LAKHS FOR THE CURRENT YEAR. I.T.A.NO.1979 & 1981/11 :- 6 -: FURTHER, AS PER CIRCULAR NO.7/2009 OF THE CBDT, THE EARLIER CIRCULARS WHICH HAS BEEN ISSUED WITH REFERE NCE TO THE PROVISIONS OF SECTION 195 VIZ., CIRCULAR NO.23 DT.23.07.1969, CIRCULAR NO. 163 DT.29.05.1975 & CIRCULAR NO. 786 DT.07.02.2000 HAS BEEN WITHDRAWN BY THE CBDT. FURTHER IT HAS BEEN ALSO OBSERVED FROM THE FINANCE BILL 2010-11 THAT THE PROVISIONS OF SECTION 9 OF THE INCOME TAX ACT HAS BEEN AMENDED RETROSPECTIVELY FROM 1.05.1976 IN RELATION TO THE A. Y. 1977-78 AND SUBSEQUENT YEARS THAT THE EXPENDITURE INCURRED OUTS IDE INDIA ALSO DEEMED TO ACCRUE OR ARISE IN INDIA IN RESPECT OF THE SERVICES RENDERED. BASED ON THE ABOVE CIRCULAR OF CBDT NO.7/2009 AND FINANCE BILL 2010-11 THAT WHATEVER THE EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CURRENCY, FOR T HE PURPOSE OF UTILIZATION OF SERVICES EVEN THOUGH THE SERVICES RENDERED OUTSIDE INDIA IS TAXABLE. SINCE T HE ASSESSEE HAS INCURRED EXPENDITURE IN FOREIGN CURREN CY OUTSIDE TO THE TUNE OF RS.1152.38 LAKHS DURING THE CURRENT YEAR, THE SAME HAS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 9 & 195 OF THE INCOME TAX ACT, SINCE THE ASSESSEE HAS NOT PROVIDED THE NECESSARY DETAILS ON THE SAME, THE SAME HAS TO BE DISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(1) OF THE ACT. BASED ON THE ABOVE FACTS, I AM OF THE OPINION THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE A. Y.2003-04 HENCE, I HAVE THE REASON TO BELIEVE THAT, THE INCOM E HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT.' IT IS CLEAR FROM THE ABOVE THAT THE REOPENING WAS D ONE MAINLY TO TREAT RS . 2204.25 LAKHS WHICH THE APPELLANT HAS WRITTEN OFF BEING AMOUNT DUE FROM M/S SPIC LIMITED AS CAPITAL I N NATURE AND TO DISALLOW U/S 40(A)(I) RS . 1152.38 LAKHS, BEING EXPENDITURE INCURRED IN FOREIGN CURRENCY OUTSIDE IN DIA . SINCE THE ASSESSMENT WAS REOPENED BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, IT IS NECESSARY TO ASCE RTAIN IF THE ASSESSEE HAD NOT FULLY AND TR ULY DISLOSED ALL MATERIAL FACTS ON THESE TWO ISSUES FOR ITS ASSESSMENT IN THE SUBJECT ASSESSMENT YEAR. I.T.A.NO.1979 & 1981/11 :- 7 -: 4.3 AS REGARDS THE FIRST ISSUE OF WRITE OFF OF RS .2204.24 LAKHS DUE FROM THE JOINT VENTURE, THE AO HIMSELF WAS AWAR E THAT IT REPRESENTED INTEREST AND LEGAL EXPENSES DUE FROM TH E JOINT VENTURE. HE HAD SPECIFICALLY VIDE HIS LETTER DATED 31.08.2005 INQUIRED FROM THE ASSESSEE AS TO WHY THIS AMOUNT SH OULD NOT BE ADDED TO THE INCOME. THE ASSESSEE VIDE THEIR LETTER DATED 22.09.2005 HAS GIVEN THE REASON FOR THE WRITE OFF O F THIS AMOUNT. OBVIOUSLY, THE AO WAS SATISFIED WITH THE EXPLANATIO N OF THE ASSESSEE AND HENCE DID NOT ADD THIS AMOUNT IN THE REGULAR ASSESSMENT. THEREFORE, THIS CANNOT BE THE R EASON FOR REOPENING OF ASSESSMENT. THERE ARE A NUMBER OF DECI SIONS OF THE HON'BLE SUPREME COURT AND DIFFERENT HIGH COURTS WHICH HAVE CLEARLY LAID DOWN THAT WHEN THERE IS NO FAILURE OF THE ASSESSEE IN DISCLOSING ANY PARTICULARS REQUIRED FOR THE ASSESSMENT, THEN REOPENING AFTER FOUR YEARS, WHERE THE ASSESSMENT U/S 143(3) HAS BEEN MADE, IS WITHOUT JUR ISDICTION. AGAIN, AS REGARDS REMITTANCE OF FOREIGN CURRENCY WI THOUT DEDUCTION OF TAX AT SOURCE, THE ID. AR SUBMITTED TH AT REQUIREMENT OF DEDUCTION OF TAX AT SOURCE HAS BEEN CONSIDERED B Y THE AUDITOR AND HAS BEEN INCLUDED IN THE REPORT U/S 44AB. FURTH ER, IN SCHEDULE V TO THE ANNUAL REPORT, THE APPELLANT HAS ALREADY FURNISHED THE DETAILS IN ITS RETURN OF INCOME. THE APPELLANT HAD DULY COMPLIED WITH THE PROVISIONS OF CHAPTER XVII-B OF THE ACT AND HAD DEDUCTED TAX WHEREVER NECESSARY. IN FACT, OUT OF THE SUM OF RS.11.52 CRORES OF FOREIGN REMITT ANCE, TAX HAD BEEN DEDUCTED ON REMITTANCE OF AS MUCH AS RS.10.89 CRORES AND NO TAX WAS DEDUCTED ON RS.63.48 LAKHS ONLY BECAUSE THEY COMPRISED EXPENSES ON TRAVEL, TRAINING, VISA FEES, BOOKS ETC WHICH DOES NOT REQUIRE TDS. FURTHER, THE AO HIMSELF HAS NOT MADE ANY ADDITION IN THIS REGARD EVEN IN THE ORDER OF REASSESSMENT. 4.4 LET US NOW EXAMINE THE DECISIONS RELIED ON BY T HE ID.AR AGAINST THE ABOVE FACTUAL BACKGROUND. THE HON'BLE S UPREME COURT IN THE CASE OF KELVINATOR OF INDIA (SUPRA) HA S HELD AS UNDER: .. P OST 1 ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' TAILING WHICH, WE ARE AFR AID,S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN THE ASSESSMENT ON THE BASIS OF 'MERE CHANGE OF OPINION' WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEE P IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REV IEW AND POWER TO RE-ASSESS. BUT REASSESSMENT HAS TO BE BASE D ON FULFILMENT OF CERTAIN PRECONDITIONS AND IF THE CONC EPT OF CHANGE I.T.A.NO.1979 & 1981/11 :- 8 -: OF OPINION IS REMOVED AS CONTENDED BY THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOU LD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPIN ION AS IN BUILT TEST CO CHECK THE ABUSE OF POWER BY THE A.O. HENCE, AFTER 1ST APRIL, 1989 THE AO HAS POWER TO REOPEN PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUS ION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. RE ASONS MUST HAVE LIVE LINK WITH THE FORMATION OF THE BELIE F. THERE IS NO REASON WHY THE RATIO OF THE ABOVE DECISION WOULD NOT BE APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. IT IS CLEAR FROM THE DISCUSSION AT PARA 4.3 THAT ALL MATERIAL FACTS WERE AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT AND THE ORDER WAS P ASSED AFTER CONSIDERING THEM. THE AO HAD CALLED FOR THE DETAILS WHICH WERE SUBMITTED BY THE ASSESSEE. AFTER EXAMINING THE DETAILS, THE AO DID NOT MAKE ANY ADDITION ON THE ISSUE. HENC E, I AM OF THE CONSIDERED OPINION THAT THERE EXISTED NO TANGIB LE MATERIAL FOR REOPENING THE ASSESSMENT. THUS, THE REOPENING IS BA SED ON CHANGE OF OPINION AND THE ACTION OF THE AO WOULD AM OUNT TO REVIEW OF THE EARLIER DECISION WHICH IS NOT PERM ISSIBLE. FURTHER, IN THE CASE OF CIT V ANNAMALAI FINANCE LTD. 275 ITR 451 (MAD), THE HONB'LE JURISDICTIONAL HIGH COURT HAS HELD THAT WHERE THE ASSESSEE HAS FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSMENTS U/S 143(3) , NOTICE U/S148 ISSUED BEYOND FOUR YEARS FOR THE ASSESSMENT YEARS 1992- 93 AND 1993-94 WAS NOT VALID. IN CASE OF INCORRECT OPINION FORMED BY THE AO, IT CANNOT BE SAID THAT THERE WAS NON- DISCLOSURE OF PRIMARY FACTS BY ASSESSEE TO JUSTIFY REASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM RELEVANT ASSESSMENT YEAR [GUJARAT CARBON & INDUSTRIAL LTD , JT. CIT, 307 ITR 271 (GUJ)]. THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT V. CHOLAMANDALAM INVESTMENT & FINANCE CO. LTD, 309 ITR 110 (MAD) ALSO SUPPORTS THE ABOVE VIEW. IN VIEW OF THE ABOVE FACTUAL POSITION AND AUTHORITATIVE PRECEDENTS , IT IS HELD THAT THE REOPENING OF ASSESSMENT U/S 147 WAS NOT VALID. ACCORDINGLY, THE GROUND IS ALLOWED. 7. THE LD. CIT/DR RELIED ON THE DECISION OF THE HON'BL E CALCUTTA HIGH COURT IN THE CASE OF SIMPLEX CONCRETE PILES (I NDIA) PVT. LTD VS DY. CIT, [2002] 255 ITR 49, AND SUBMITTED THAT IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THAT IN DECIDING VALIDITY OF A NOTICE U/S 148 OF I.T.A.NO.1979 & 1981/11 :- 9 -: THE INCOME-TAX ACT, 1961 IT WAS ONLY NECESSARY TO C OME TO THE CONCLUSION THAT THE RE-ASSESSMENT WAS VALID. IT WA S ONLY NECESSARY TO FIND OUT WHETHER THERE ARE PRIMA-FACIE REASONS ON RECORD AND ON THAT BASIS THE DEPARTMENT COULD REOPEN THE CASE. IT WAS HELD IN THAT CASE THAT THE DEDUCTIONS GRANTED UNDER SECTIONS 32A, 32 AB AND 80HH IN THE ASSESSMENT YEARS 1984-85 TO 1989-90 WERE ERRONE OUSLY GRANTED. SINCE THE ASSESSEE WAS ENGAGED IN CIVIL CONSTRUCTI ON WORK ON CONTRACT BASIS, THERE WAS NO ACTIVITY OF THE NATURE OF PRODU CTION OR MANUFACTURE OF ANY ARTICLE OR THING WITHIN THE MEANING OF EITH ER SECTIONS 32A, 32AB OR 80HH OF THE ACT AND THAT THE HON'BLE SUPREME CO URT IN THE CASE OF BUILDERS ASSOCIATIONS OF INDIA, 209 ITR 877, HAD HE LD THAT THE BENEFIT OF DEDUCTION GRANTED TO THE AS UNDER THE SAID SECTI ONS WAS NOT LEGALLY ADMISSIBLE. ON THE ABOVE FACTS, IT WAS HELD THAT T HE ASSESSING OFFICER HAD PRIMA-FACIE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND THE NOTICE OF RE-ASSESSMENT WAS INV ALID. 8. IT WAS ARGUED THAT IN THE PRESENT CASE ALSO, IN THE ASSESSMENT FRAMED U/S 143(3), DEDUCTION FOR ` 2204.25 LAKHS BEING THE AMOUNT DUE FROM M/S SPIC LTD WAS ALLOWED AS DED UCTION TO THE ASSESSEE. IT WAS LATER ON OBSERVED THAT THIS AMOUN T WAS THE AMOUNT INVESTED BY THE ASSESSEE IN A JOINT VENTURE WITH M /S SPIC LTD. AND I.T.A.NO.1979 & 1981/11 :- 10 -: SINCE THE ASSESSEE PULLED OUT OF THE JOINT VENTURE PROJECT UNILATERALLY THE EXPENDITURE COULD NOT BE ALLOWED AS A BUSINESS DEDUCTION U/S 37 OF THE ACT BECAUSE IT WAS CAPITAL IN NATURE. FURTH ER, AS PER CIRCULAR NO.7/2009 OF THE CBDT AND FINANCE BILL 2010-11, WHA TEVER EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CU RRENCY FOR THE PURPOSE OF UTILIZATION OF SERVICES EVEN THOUGH THE SERVICES RENDERED OUTSIDE INDIA WAS TAXABLE. THE ASSESSEE HAD INCUR RED EXPENDITURE IN FOREIGN CURRENCY OUTSIDE OF ` 11.52.38 LAKHS DURING THE YEAR AND THE SAME HAD TO BE ALLOWED AS PER THE PROVISIONS OF SE CTIONS 9 AND 195 OF THE INCOME-TAX ACT AND SINCE THE ASSESSEE HAD NOT PROVIDED THE NECESSARY DETAILS ON THE SAME, THE SAME HAD TO BE D ISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. THE REFORE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR ASSESSMENT YEAR 2003-04. SHE FURTHER SUBMITTED THAT AFTER VERIFICATION IN THE AS SESSMENT FRAMED U/S 143(3) R.W.S 147 OF THE ACT ON 29.11.2010 NO DISALL OWANCE WAS MADE OUT OF THE EXPENDITURE INCURRED IN FOREIGN CURRENCY OUTSIDE INDIA FOR ` 1152.38 LAKHS. HOWEVER, THE DEDUCTION CLAIMED FOR ` ` 2204.25 LAKHS WAS DISALLOWED FOR THE REASON THAT THE EXPENDITURE WAS CAPITAL IN NATURE AS IT RELATES TO COMPANYS JOINT VENTURE PRO JECT WHICH CANNOT BE ALLOWED U/S 37 OF THE ACT. I.T.A.NO.1979 & 1981/11 :- 11 -: 9. THE LD. CIT/DR FURTHER ARGUED THAT THE ASSESSEE HA S FILED A PAPER BOOK WHEREIN IT HAS FILED AT PAGES 6 TO 8, T HE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER ON 31.8.2005 ENQUIR ING WHY AN AMOUNT OF ` 2204.25 LAKHS REPRESENTING INTEREST AND REIMBURSEM ENT OF LEGAL EXPENSES DUE FROM M/S SPIC LTD HAS BEEN WRITTEN OFF EVEN THOUGH THE MATTER WAS PENDING BEFORE THE APPROPRIATE JUDICIAL FORUM AND TO SHOW CAUSE WHY THIS SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. SHE SUBMITTED THAT THE ASSESSEE HAS FILED A REPLY WITH RESPECT TO THE QUERY RAISED VIDE LETTER DATED 22.9.2005, A COPY OF WHICH IS PLACED AT PAGE 9 & 10 OF THE PAPER BOOK AND THE ASSESSEE EXP LAINED THAT THE AMOUNT OF ` 2204.25 REPRESENTING INTEREST AND REIMBURSEMENT OF LEGAL EXPENSES DUE FROM M/S SPIC LTD HAD BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT BASED ON THE DECISION OF THE BOARD OF DIREC TORS OF THE COMPANY WHICH FACT IS ALSO STATED IN NOTE NO.6 OF S CHEDULE R NOTES ON ACCOUNTS FOR THE PERIOD ENDED ON 31.3.2003. THE MAIN ISSUE PENDING BEFORE THE JUDICIAL FORUM RELATES TO THE RE COVERY OF ` 1443.38 LAKHS BEING THE SUM INVESTED BY THE COMPANY. IT WA S ARGUED THAT THOUGH THE ASSESSING OFFICER HAD RAISED QUERY DURIN G THE SCRUTINY ASSESSMENT WITH REGARD TO THE AMOUNT OF ` ` 2204.25 LAKHS THE QUERY WAS WITH REGARD TO THE WRITING OFF OF THE AMOUNT EV EN THOUGH THE MATTER WAS PENDING BEFORE THE APPROPRIATE JUDICIAL FORUM. NO QUERY I.T.A.NO.1979 & 1981/11 :- 12 -: WAS RAISED BY THE ASSESSING OFFICER REGARDING THE A LLOWABILITY OF THE SAID AMOUNT AS REVENUE EXPENDITURE. THEREFORE, REOP ENING OF THE ASSESSMENT ON THIS GROUND WAS VALID EVEN THOUGH MAD E AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SHE SUBMITTED THAT TO THIS EFFECT WAS THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SIMPLEX CONCRETE PILES (INDIA) PVT. LTD (SUPRA). 10. ON THE OTHER HAND, THE LD. A.R OF THE ASSESSEE AR GUED AND SUBMITTED THAT THE DECISION IN THE CASE OF SIMPLEX CONCRETE PILES (INDIA) PVT. LTD (SUPRA) WAS RENDERED BY THE HON'BL E CALCUTTA HIGH COURT IN A WRIT PETITION FILED BY THE ASSESSEE FO R ISSUANCE OF NOTICE U/S 148 OF THE ACT AND THE HON'BLE HIGH COURT HELD THAT THERE WAS PRIMA FACIE REASON FOR THE ASSESSING OFFICER TO BEL IEVE THAT INCOME HAD ESCAPED ASSESSMENT AND THEREFORE, THE ISSUANCE OF N OTICE WAS VALID. HE ARGUED THAT IN THE CASE OF THE ASSESSEE, THE AM OUNT OF ` 2204.25 LAKHS WRITTEN OFF BEING THE AMOUNT DUE FROM M/S SPI C LTD WAS DULY ENQUIRED INTO BY THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT AND THE ASSESSE E HAD MADE A REPLY TO THE QUERY OF THE ASSESSING OFFICER WITH DOCUMENT S AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND BEING SA TISFIED, THE ASSESSING OFFICER HAD ALLOWED THE CLAIM OF EXPENDIT URE TO THE I.T.A.NO.1979 & 1981/11 :- 13 -: ASSESSEE. THEREAFTER, THE ASSESSING OFFICER HAS BR OUGHT NO MATERIAL ON RECORD TO SHOW THE AMOUNT OF ` 2204.25 LAKHS WAS NOT ALLOWABLE TO THE ASSESSEE AS DEDUCTION AS IT WAS CAPITAL IN NATURE. HE SUBMITTED THAT THE ASSESSING OFFICER, ON THE BASIS OF THE VER Y SAME MATERIALS WHICH WERE BEFORE HIM WHILE PASSING THE ORDER U/S 143(3) OF THE ACT HAS HELD THAT THE EXPENDITURE IS NOT ALLOWABLE TO T HE ASSESSEE AS IT IS CAPITAL IN NATURE. THIS AMOUNTS TO CHANGE OF OPINI ON WHICH IS NOT PERMISSIBLE UNDER THE ACT AS HELD BY THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD., 320 ITR 56 1(S.C). HE ARGUED THAT THE ONLY OTHER REASON FOR WHICH THE REOPENING HAS BEEN MADE WAS THAT THE EXPENDITURE IN FOREIGN CURRENCY INCURRED O UTSIDE INDIA BY THE ASSESSEE OF ` 1152.38LAKHS WAS TO BE DISALLOWED AS PER THE PROV ISIONS OF SECTION 40(A)(I) OF THE ACT. HE SUBMITTED THAT IN THE RE-ASSESSMENT FRAMED U/S 147 OF THE ACT, AFTER THE REOPENING OF THE ASSESSMENT, NO ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE ON THIS COUNT. THUS, THIS CANNOT BE A VALID REASON OF REOPENING OF THE ASSESSMENT. HENCE, IT WAS HIS SUBMISSION THAT THE LD. CIT(A) HA S PASSED A WELL REASONED ORDER HOLDING THE RE-ASSESSMENT MADE U/S 147 OF THE ACT AS INVALID AND THE SAME SHOULD BE UPHELD. I.T.A.NO.1979 & 1981/11 :- 14 -: 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT NOTICE U/S 1 48 WAS ISSUED ON 9.3.2010 FOR ASSESSMENT YEAR 2003-04 I.E AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. FURT HER, IT IS ALSO NOT IN DISPUTE THAT ASSESSMENT OF THE ASSESSMENT YEAR UNDE R CONSIDERATION WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT ON 18.1.2005. SUCH ASSESSMENT MADE U/S 143(3) WAS REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ON THE FOLLOWING REASONS RECORDED U/S 148(2) OF THE ACT: 'IT HAS BEEN OBSERVED THAT THE ASSESSEE HAS PROPOSE D TO START JOINT VENTURE WITH SPIC LTD. BUT DURING THE CURRENT YEAR THE ASSESSEE HAS WRITTEN OFF RS.2204.25 LAKHS BEING AMOUNT DUE F ROM M/S. SPIC LIMITED. IT HAS BEEN FURTHER OBSERVED THAT THIS AMOUNT IS NO THING BUT THE AMOUNT INVESTED BY THE ASSESSEE IN JOINT VENTURE WI TH M/S. SPIC LTD WITH NOMENOLATURE M/S. RAYCHEM LIMITED. SINCE T HE ASSESSEE HAS PULLED OUT OF THE JOINT VENTURE PROJECT UNILATERALLY, THE ABOVE EXPENDITURE CAN NOT BE ALLOWABLE AS A BUSINESS DEDU CTION U/S.37 OF THE INCOME TAX ACT BECAUSE OF CAPITAL IN NATURE. HENCE, I HAVE THE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED THE A SSESSMENT BY WAY OF EXCESS ALLOWANCE OF RS.2204.25 LAKHS FOR THE CURRENT YEAR. FURTHER, AS PER CIRCULAR NO.7/2009 OF THE CBDT, THE EARLIER CIRCULARS WHICH HAS BEEN ISSUED WITH REFERENCE TO THE PROVISIONS OF SECTION 195 VIZ., CIRCULAR NO.23 DT.23.07.1969, CIRCULAR NO. 163 DT.29.05.1975 & CIRCULAR NO. 786 DT.07.02.2000 HAS BEEN WITHDRAWN BY THE CBDT. FURTHER IT HAS BEEN ALSO OBSERVED FROM THE FINANCE BILL 2010-11 THAT THE PROVISIONS OF SECTION 9 OF THE INCOME TAX ACT HAS BEEN AMENDED RETROSPECTIVELY FROM 1.05.1976 IN RELATION TO THE A. Y. 1977-78 AND SUBSEQUENT YEARS THAT THE EXPENDITURE INCURRED OUTSIDE INDIA ALSO DEEMED TO ACCRUE OR ARISE IN INDIA IN RESPECT OF THE SERVICES RENDERED. I.T.A.NO.1979 & 1981/11 :- 15 -: BASED ON THE ABOVE CIRCULAR OF CBDT NO.7/2009 AND FINANCE BILL 2010-11 THAT WHATEVER THE EXPENDITURE INCURRED BY T HE ASSESSEE IN FOREIGN CURRENCY, FOR THE PURPOSE OF UTILIZATION OF SERVICES EVEN THOUGH THE SERVICES RENDERED OUTSIDE INDIA IS TAXAB LE. SINCE THE ASSESSEE HAS INCURRED EXPENDITURE IN FOREIGN CURREN CY OUTSIDE TO THE TUNE OF RS.1152.38 LAKHS DURING THE CURRENT YEAR, THE SAME HAS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 9 & 195 OF THE INCOME TAX ACT, SINCE THE ASSESSEE HAS NOT PROVIDED THE NECESSARY DETAILS ON THE SAME, THE SAME HAS TO BE D ISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(1) OF THE ACT. BASED ON THE ABOVE FACTS, I AM OF THE OPINION THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE A. Y.2003-04 HENCE, I HAVE THE REASON TO BELIEVE THAT, THE INCOM E HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT.' 12. THE ABOVE REOPENING OF THE ASSESSMENT WAS HELD BY T HE LD. CIT(A) AS BARRED BY LIMITATION AS PROVIDED UNDER TH E PROVISO TO SECTION 147 OF THE ACT AND CORRESPONDINGLY HE ANNULLED THE IMPUGNED ORDER OF RE-ASSESSMENT PASSED U/S 147 OF THE ACT. THE MAIN CONTENTION OF THE REVENUE BEFORE US IS THAT THOUGH THE ASSESSING OFFI CER HAD MADE AN ENQUIRY IN THE COURSE OF THE ORIGINAL ASSESSMENT WI TH REGARD TO DEDUCTION CLAIMED OF ` 2204.25 LAKHS RELATING TO M/S RAYCHEM LTD. IN THE LINE AS TO WHY THE EXPENDITURE IS ALLOWABLE WHE N THE SUIT FILED FOR RECOVERY OF THE SAME IS PENDING AND CONSIDERING THE REPLY, ALLOWED THE DEDUCTION BUT THE ASSESSING OFFICER FAILED TO CONSI DER AS TO THE NATURE I.T.A.NO.1979 & 1981/11 :- 16 -: OF THE EXPENDITURE WHETHER THE SAME WAS CAPITAL OR REVENUE EXPENDITURE. 13. ACCORDING TO THE LD. CIT/DR, AS THE ALLOWABILITY OF THE EXPENDITURE IN QUESTION WAS NOT CONSIDERED FROM THI S ANGLE IN ORIGINAL ASSESSMENT BY THE ASSESSING OFFICER AND THEREFORE, THE REOPENING OF THE ASSESSMENT WAS VALID. THE OTHER CONTENTION OF THE LD. CIT/DR WAS THAT REOPENING OF THE ASSESSMENT IN THE EXISTING CA SE WAS ALSO VALID IN VIEW OF THE DECISION OF THE HON'BLE CALCUTTA HIGH C OURT IN THE CASE OF SIMPLEX CONCRETE PILES (INDIA) PVT. LTD VS DCIT(SUP RA). WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE LD. CIT/DR. 14. WE FIND THAT THE FIRST PROVISO TO SECTION 147 READS AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N(3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REA SON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETU RN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- SECTION(1) OF SECTION 142 OR SECTION 148 OR TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, FOR THAT ASSESSMENT YEAR. 15. IN THE INSTANT CASE, IT IS OBSERVED THAT REOPENING OF THE ASSESSMENT WAS MADE AFTER COMPLETION OF THE ORIGINA L ASSESSMENT U/S 143(3) OF THE ACT AND AFTER EXPIRY OF FOUR YEARS FR OM THE END OF THE I.T.A.NO.1979 & 1981/11 :- 17 -: RELEVANT ASSESSMENT YEAR ONLY ON THE BASIS OF THE M ATERIALS WHICH WERE BEFORE THE ASSESSING OFFICER AT THE TIME OF TH E ORIGINAL ASSESSMENT. IT IS NOT THE CASE OF THE REVENUE THAT ANY FRESH INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER A FTER COMPLETION OF THE ASSESSMENT U/S 143 WHICH SHOWS THAT INCOME HAS ESCAPED ASSESSMENT BECAUSE OF FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT. WE FIND THAT ASSESSMENT WAS REOPENED ON THE BASIS OF THE VE RY SAME FACTS WHICH WERE PROVIDED BY THE ASSESSEE DURING THE COU RSE OF ORIGINAL ASSESSMENT PROCEEDINGS. FURTHER, IN OUR CONSIDERED VIEW, THE MATERIAL FACTS WHICH THE ASSESSEE IS OBLIGED TO FURNISH UND ER THE LAW IS PRIMARY FACTS AND IT IS NOT THE DUTY OF THE ASSESSEE TO PO INT OUT WHAT INFERENCE THE ASSESSING OFFICER SHOULD DRAW FROM THE PRIMARY FACTS FURNISHED BY THE ASSESSEE. IF THE ASSESSING OFFICER FAILED TO DRAW CORRECT INFERENCE FROM THE PRIMARY FACTS FURNISHED BY THE ASSESSEE I T CANNOT BE HELD THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THEREFORE, IN VIEW O F UNAMBIGUOUS PROVISIONS CONTAINED IN PROVISO TO SECTION 147 OF T HE ACT, THE RE- ASSESSMENT PROCEEDINGS INITIATED IN THE INSTANT CAS E ON THE BASIS OF THE ABOVE RECORDED REASONS IS CLEARLY TIME BARRED AND THEREFORE, UNSUSTAINABLE. OUR ABOVE VIEW FINDS SUPPORT FROM T HE DECISION OF THE I.T.A.NO.1979 & 1981/11 :- 18 -: HON'BLE SUPREME COURT IN THE CASE OF INDIAN OIL COR PORATION VS ITO, [1986] 159 ITR 956(S.C). 16. FURTHER, WE FIND THAT THE DECISION OF THE HON'BLE C ALCUTTA HIGH COURT IN THE CASE OF SIMPLEX CONCRETE PILES (I NDIA) PVT. LTD VS DCIT (SUPRA) IS NOT APPLICABLE IN THE INSTANT CASE AS BECAUSE IN THAT CASE IT WAS NOT THE ISSUE BEFORE THE HON'BLE CALCUT TA HIGH COURT THAT WHETHER THE REOPENING OF THE ASSESSMENT IS BARRED B Y LIMITATION AS PROVIDED UNDER PROVISO TO SECTION 147 OR NOT. 17. FURTHER, THE REOPENING OF THE ASSESSMENT IN THE INS TANT CASE IS ALSO BAD IN LAW AS THE SAME WAS MERELY ON THE BA SIS OF CHANGE OF OPINION BY THE ASSESSING OFFICER ON THE VERY SAME F ACTS WHICH WERE BEFORE THE ASSESSING OFFICER AT THE TIME OF MAKING OF THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF THE FULL BENCH OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD, , 256 ITR 1 (DEL.) WHICH WAS AFFIRMED BY THE HON'BLE SUPREME COURT IN 320 ITR 56 1. WE, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REA SON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND CONSEQUENTLY, THE G ROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. I.T.A.NO.1979 & 1981/11 :- 19 -: 18. IN ASSESSMENT YEAR 2006-07, GROUND NOS. 1 & 5 OF TH E APPEAL ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. 19. IN GROUND NO.2 OF THE APPEAL OF THE REVENUE THE GRI EVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELE TING THE DISALLOWANCE OF DEPRECIATION ON GAS SWEETENING PLANT WHICH WAS N OT USED AT ALL EVEN FOR A SINGLE DAY DURING THE YEAR FOR THE PURPO SE OF THE ASSESSEES BUSINESS. 20. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED DEPRECIATION OF ` 24,65,811/- ON GAS SWEETENING PLANT ON THE GROUND THAT THE ASSET WAS NOT ACTUALLY PUT TO U SE IN THE PREVIOUS YEAR. 21. THE ASSESSEE, THEREAFTER FILED APPEAL BEFORE THE L D. CIT(A) AND SUBMITTED THAT THE ASSET WAS KEPT READY FOR USE . THE ASSESSEE WOULD HAVE PUT THE GAS SWEETENING PLANT TO USE HAD ONGC SUPPLIED SOUR GAS FOR OPERATIONS. THE ASSET COULD NOT BE PU T TO USE FOR REASONS BEYOND THE ASSESSEES CONTROL. IT WAS NOT THE INT ENTION OF THE ASSESSEE TO DELIBERATELY KEEP THE ASSET OUT OF US. THE ASSESSEES BUSINESS WAS CONTINUING AND WAS NOT UNDER ANY LOCK OUT. THE ASSET IN QUESTION WAS IN GOOD CONDITION AND IN WORKING ORDER EVEN WHEN IT WAS I.T.A.NO.1979 & 1981/11 :- 20 -: NOT PUT TO USE SO THAT IT MAY BE READY FOR ACTUAL U SE AT ANY MOMENT. THE ASSESSEE SUBMITTED THAT THE CHENNAI BENCH OF T HE TRIBUNAL IN ASSESSEES OWN CASE ON THE SAME ISSUE IN ASSESSMENT YEAR 1998-99 HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN I.T.A.NO. 1822/MDS/2006, ORDER DATED 23.10.2009, [2012] 2 ITR (TRIB) 325 (CHENNAI) BY RELYING ON THE DECISION OF THE JURISD ICTION HIGH COURT IN THE CASE OF HEERA FINANCIAL SERVICES LTD AND HAD AL SO TAKEN INTO ACCOUNT THE CONCEPT OF BLOCK OF ASSETS. 22. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, VACATED THE DISALLOWANCE BY OBSERVING THA T THE ISSUE WAS A RECURRING ONE AND HAD ALSO COME UP FOR CONSIDERATIO N BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 1998-99 REPORTED IN [2012] 2 ITR (TRIB) 325 (CHENNAI) WHEREIN THE I SSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, THEREFORE, FOLLOWING THE S AME, THE DISALLOWANCE WAS DELETED. 23. THE LD. CIT/DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. A.R OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. IN I.T.A.NO.1979 & 1981/11 :- 21 -: THE INSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATI ON OF ` 24,65,811/- ON GAS SWEETENING PLANT WHICH WAS ORIGINALLY SET UP DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1997-98. TRIAL PRODUCTION WAS MADE IN THE YEAR AND DEPRECIATION WAS ALLOWED I N THAT YEAR. THE ASSET COULD NOT BE PUT TO USE THEREAFTER FOR NON-AV AILABILITY OF RAW MATERIAL VIZ. SOUR GAS. THE ASSESSING OFFICER DISA LLOWED THE DEPRECIATION ON THE GAS SWEETENING PLANT ON THE GRO UND THAT THE ASSET WAS NOT ACTUALLY PUT TO USE IN THE PREVIOUS YEAR. 25. THE LD. CIT(A) ALLOWED THE DEPRECIATION TO THE ASS ESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 [2012] 2 ITR (TRIB) 325 (CH ENNAI)(TM) WHEREIN THE TRIBUNAL HAS HELD AS UNDER: COMING TO THE FIRST POINT OF DIFFERENCE IT SEEMS T O ME THAT EVEN AFTER THE INTRODUCTION OF THE BLOCK OF ASSETS CONCEPT, THERE IS NO CHANGE IN THE LEGAL POSITION TO THE E FFECT THAT THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION EVEN T HOUGH THE ASSETS IN QUESTION WERE NOT ACTUALLY PUT TO USE IN THE RELEVANT PREVIOUS YEAR, BUT WERE KEPT READY FOR BEING PUT TO USE FOR THE PURPOSE OF THE BUSINESS. THE JUDGMENT OF THE HONBL E MADRAS HIGH COURT ON THIS QUESTION IS IN VAYITHRI PLANTA TIONS LTD. [1981] 128 ITR 675 ; 18 CTR 9. IN THIS CASE, THE HONBLE HIGH COURT WAS CONCERNED WITH THE ASSESSMENT YEAR 1971 -72 AND WITH THE CLAIM OF DEVELOPMENT OF REBATE MADE BY THE ASSESSEE. SECTION 33 OF THE ACT DEALT WITH DEVELOPM ENT REBATE. AN ASSESSEE CAN CLAIM DEVELOPMENT REBATE IN THE Y EAR IN WHICH THE ASSET WAS INSTALLED OR IN THE IMMEDIATE LY SUCCEEDING PREVIOUS YEAR IN WHICH YEAR THE ASSET WAS FIRST PUT TO USE. THE CLAIM OF THE ASSESSEE FOR THE YEAR ENDED MARCH 31, 1971, WAS THAT THE MACHINERY HAD BEEN INSTALLED IN THE NE W TEA FACTORY BUT IT COULD NOT START REGULAR MANUFACTUR E WITH THE AID OF THE MACHINERY BECAUSE OF FREQUENT LABOUR UNREST. THE I.T.A.NO.1979 & 1981/11 :- 22 -: ASSESSING OFFICER DID NOT ALLOW THE CLAIM, SAYING THAT THE MACHINERY WAS NOT USED IN THE RELEVANT PREVIOUS YEA R AND THAT HE WOULD ALLOW DEPRECIATION IN THE NEXT YEAR, WHEN ACCORDING TO HIM, THE REGULAR PRODUCTION OF TEA WITH THE AID OF THE MACHINERY HAD COMMENCED. IT IS IN THE LIGHT OF THIS CONTROVER SY AND IN THE CONTEXT OF SECTION 33 THAT THE MATTER REACHED THE HONBLE HIGH COURT AND THE ARGUMENT OF THE DEPARTMENT WAS THAT SINCE THE MACHINERY HAD NOT BEEN USED IN THE RELEVANT PREVIOU S YEAR, THE MAIN CONDITION OF SECTION 33 WAS NOT SATISFIED. THE CONTENTION OF THE ASSESSEE WAS THAT THE CONDITION WAS SATISFIE D BECAUSE THE MACHINERY WAS KEPT READY FOR USE BUT COULD NO T BE USED ONLY BECAUSE OF FREQUENT LABOUR UNREST. THE HONB LE MADRAS HIGH COURT, IN ORDER TO RESOLVE THE CONTROVERSY, REFERRED TO THE RELEVANT PROVISIONS RELATING TO DEPRECIATION IN T HE 1922 ACT AND COMPARED THE SAME WITH SECTION 32 OF THE 1961 ACT. AFTER OBSERVING THAT SECTION 32 OF THE 1961 ACT HAS PRACT ICALLY RE- ENACTED SECTION 10(2)(VI) OF THE OLD ACT, IT WAS FURTHER OBSERVED THAT BOTH UNDER THE OLD ACT AND UNDER THE NEW ACT , IT WAS PROVIDED THAT THE ASSESSEE MUST BE THE OWNER OF T HE MACHINERY AND MUST HAVE USED THE SAME FOR THE PURPO SES OF THE BUSINESS. AFTER REFERRING TO THE JUDGMENT OF TH E BOMBAY HIGH COURT IN CIT V. VISWANATH BHASKAR SATHE [193 7] 5 ITR 621 WHERE IT WAS HELD THAT THE WORD USED APPEARI NG IN SECTION 10(2)(VI) OF THE OLD ACT EMBRACED PASSIVE AS WELL AS ACTIVE USER AND AFTER REFERRING TO THE LATER JUDGMENT OF T HE BOMBAY HIGH COURT IN WHITTLE ANDERSON LTD. V. CIT [1971] 7 9 ITR 613, IT WAS NOTICED BY THE HONBLE MADRAS HIGH COURT THAT T HE VIEW TAKEN BY THE BOMBAY HIGH COURT IS THE MORE APPROP RIATE VIEW TO TAKE ON THE CONSTRUCTION OF THE PROVISION, AS AG AINST A CONTRARY VIEW EXPRESSED BY THE MADHYA PRADESH HIG H COURT IN CIT V. JIWAJI RAO SUGAR CO. LTD. [1969] 71 ITR 319. THUS, THE DECISION OF THE HONBLE MADRAS HIGH COURT IN VAYITH RI PLANTATIONS LTD. [1981] 128 ITR 675 (MAD) ; 18 CTR 9 IS A BINDING PRECEDENT SO FAR AS THE TRIBUNAL IS CONCE RNED IN FAVOUR OF THE VIEW THAT IN ORDER TO CLAIM DEPRECIATION U NDER SECTION 32 OF THE ACT IT IS NOT NECESSARY THAT THE MACHINERY I N QUESTION SHOULD HAVE BEEN ACTUALLY USED IN THE RELEVANT PREV IOUS YEAR FOR THE PURPOSE OF BUSINESS AND IT IS SUFFICIENT IF THE SAME IS KEPT READY FOR USE DURING THE RELEVANT PREVIOUS YEAR, THOUGH NOT ACTUALLY USED DUE TO CIRCUMSTANCES BEYOND THE ASS ESSEES CONTROL. SECTION 32 OF THE ACT HAS RECEIVED SEVERAL AMENDMEN TS BUT OUR ATTENTION WAS NOT DRAWN TO ANY AMENDMENT WHICH HA S CLARIFIED THAT DEPRECIATION WOULD BE ALLOWED ONLY IF THE AS SET IN QUESTION WAS ACTUALLY USED DURING THE RELEVANT PREVIOUS YE AR AND MERE KEEPING READY FOR BEING USED IN THE BUSINESS WAS NO T SUFFICIENT. I.T.A.NO.1979 & 1981/11 :- 23 -: IT SEEMS TO ME THAT WHEN THE INTERPRETATION OF SECT ION 32, ESPECIALLY OF THE WORD USED APPEARING IN THAT SEC TION WAS THE SUBJECT-MATTER OF A JUDGMENT OF THE BOMBAY HIGH COU RT AS LONG BACK IN 1937 IN THE OLD INCOME-TAX ACT, THE SAME WORD WHICH IS USED IN SECTION 32 OF THE 1961 ACT MUST RECEIV E THE SAME CONSTRUCTION. IN THIS CONNECTION IT IS NOT OUT OF PLACE TO MENTION THAT THE SAME VIEW WAS EXPRESSED BY THE PATNA HIG H COURT IN CIT V. DALMIA CEMENT LTD. [1945] 13 ITR 415. A CONT RARY VIEW WAS HOWEVER EXPRESSED IN BHIKAJI VENKATESH V. CIT [ 1937] 5 ITR 626 (NAG) AND IN CENTRAL PROVINCES AND MANGAN ESE ORE CO. LTD. V. CIT [1937] 5 ITR 734 (NAG). THUS, DES PITE CONTRARY VIEWS HAVING BEEN EXPRESSED BY DIFFERENT HIGH COU RTS THERE WAS NO AMENDMENT IN SECTION 32 TO CLARIFY THE POS ITION AND THE SAME WORD WAS USED. BE THAT AS IT MAY, SO FAR AS THIS CASE IS CONCERNED , THE VIEW TAKEN BY THE HONBLE MADRAS HIGH COURT IN VAYITHR I PLANTATIONS LTD. [1981] 128 ITR 675; 18 CTR 9 HAS TO BE GIVEN EFFECT TO AS IT IS THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT . IN THIS CASE, THE HIGH COURT HAS REFERRED TO THE CLEAVAGE OF OPIN ION ON THE INTERPRETATION OF THE WORD USED BUT STILL PREFERR ED TO FOLLOW THE JUDGMENT OF THE BOMBAY HIGH COURT IN CIT V. VISWANA TH BHASKAR SATHE [1937] 5 ITR 621 AS THE MORE APPROPR IATE VIEW TO TAKE ON THE CONSTRUCTION OF THE PROVISION. I WILL NOW REFER TO THE JUDGMENT OF THE HONBLE MAD RAS HIGH COURT IN HEERA FINANCIAL SERVICES LTD. [2008] 298 ITR 245. THIS CASE AROSE UNDER SECTION 32 OF THE 1961 ACT IN RELATION TO THE ASSESSMENT YEAR 1997-98. ONE OF THE TWO QUEST IONS THAT WAS SOUGHT TO BE RAISED BEFORE THE HONBLE MADRAS HIGH COURT AT THE INSTANCE OF THE REVENUE WAS WHETHER THE TRIB UNAL WAS RIGHT IN ALLOWING DEPRECIATION ON AN ASSET WHICH WA S NEITHER USED NOR KEPT READY FOR USE, APPLYING THE THEORY OF PASSIVE USER. IT WAS FOUND AS A FACT THAT THE FILM ROLLS LEASED OUT BY THE ASSESSEE COULD NOT BE USED BY THE LESSEE, EVEN TH OUGH KEPT READY FOR USE, ON ACCOUNT OF STRIKE IN THE FILM I NDUSTRY. THE HONBLE MADRAS HIGH COURT HELD THAT THE FILM ROLLS KEPT UNDER FORCED IDLENESS, WERE IN USE DURING THE ENTIRE PERI OD OF THE YEAR AND CONSEQUENTLY THE ASSESSEE, EVEN THOUGH A PASS IVE USER, WAS DEEMED TO BE AN ACTIVE USER WITHIN THE MEANIN G OF THE WORD USED AND THEREFORE, THE TRIBUNAL WAS RIGHT IN ALLOWING DEPRECIATION. IT IS NOTEWORTHY THAT THE HONBLE M ADRAS HIGH COURT DID NOT DECIDE THE QUESTION ON THE GROUND THA T IT IS THE BUSINESS OF THE ASSESSEE TO LEASE OUT FILM ROLLS AN D THEREFORE ONCE THE FILM ROLLS WERE LEASED OUT THEY MUST BE TAKEN TO HAVE BEEN USED FOR THE PURPOSE OF THE BUSINESS, APPLYI NG THE RULING OF THE SUPREME COURT IN THE CASE OF CIT V. SHAAN FINANCE P. I.T.A.NO.1979 & 1981/11 :- 24 -: LTD. [1998] 231 ITR 308. THE TRIBUNAL HAD ALLOWED THE ASSESSEES CLAIM ONLY ON THE GROUND THAT THE FILM R OLLS WERE KEPT READY FOR USE BY THE LESSEE THOUGH THEY COULD NOT BE ACTUALLY USED DUE TO STRIKE. ACCORDINGLY, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSEE HAS TO BE GIVEN DEPREC IATION ALLOWANCE ON THE GROUND OF A PASSIVE USER. THE HIGH COURT AFFIRMED THE DECISION OF THE TRIBUNAL BY A REASONED JUDGMENT AND DISMISSED THE APPEAL, FINDING THAT NO SUBSTAN TIAL QUESTION OF LAW AROSE FOR CONSIDERATION. I AM UNABLE TO AC CEPT THE ARGUMENT PUT FORWARD BY THE DEPARTMENT BEFORE ME THAT THIS JUDGMENT CANNOT BE TAKEN AS AN AFFIRMATION OF THE T RIBUNALS ORDER ON THE MERITS. THE LAST PARAGRAPH OF THE JUDG MENT CLEARLY SHOWS THAT THE APPEAL OF THE DEPARTMENT WAS DISMISS ED. FURTHER THE DISMISSAL IS BY AN ELABORATE JUDGMENT C ONSIDERING SEVERAL AUTHORITIES AND THE LEGAL POSITION. THE E ARLIER JUDGMENT IN VAYITHRI PLANTATIONS LTD. [1981] 128 ITR 675 (MA D) ; 18 CTR 9 WAS FOLLOWED AND APPLIED TO THE CASE WHICH AROS E UNDER SECTION 32 OF THE ACT AND IN RESPECT OF A YEAR IN WHICH THE CONCEPT OF BLOCK OF ASSETS WAS APPLICABLE. IN THE L IGHT OF TWO BINDING JUDGMENTS OF THE HONBLE MADRAS HIGH COURT AND RESPECTFULLY FOLLOWING THEM, I HOLD THAT THE ASSE SSEE BEFORE ME IS ENTITLED TO THE CLAIM OF DEPRECIATION ON THE G AS SWEETENING PLANT WHICH WAS KEPT READY FOR USE DURING THE ENT IRE PREVIOUS YEAR, THOUGH NOT ACTUALLY USED DUE TO LACK OF RAW MATERIAL. 26. THE LD. CIT/DR COULD NOT POINT OUT ANY SPECIFIC ERR OR IN THE ORDER OF THE LD. CIT(A) ALLOWING THE CLAIM OF DEPRE CIATION TO THE ASSESSEE ON GAS SWEETENING PLANT FOLLOWING THE DEC ISION OF THE TRIBUNAL IN ASSESSMENT YEAR 1998-99 (SUPRA). NO M ATERIAL WAS BROUGHT ON RECORD BY THE LD. CIT/DR TO SHOW THAT TH E DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE RELIED ON BY THE L D. CIT(A) WAS VARIED IN APPEAL BY ANY HIGHER FORUM. IN THE ABSENCE OF A NY SUCH MATERIAL HAVING BEEN BROUGHT ON RECORD, WE DO NOT FIND ANY G OOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF T HE LD. CIT(A) ON THIS I.T.A.NO.1979 & 1981/11 :- 25 -: ISSUE. IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 27. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS DIRECTE D AGAINST THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLO WANCE OF COMMUNITY WELFARE EXPENSES MADE BY THE ASSESSING OFFICER. 28. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED COMMUNITY WELFARE EXPENSES OF ` 65,35,000/- BY FOLLOWING HIS ORDER OF THE IMMEDIATELY PRECEDING YEAR WHEREIN IT WAS HELD THAT THE EXPENSES ARE NOT RELATED TO THE BUSINESS AND HE NCE, ARE NOT ALLOWABLE DEDUCTION U/S 37(1) OF THE ACT. 29. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AN D SUBMITTED THAT THE CHENNAI BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE VIDE ORDER DATED 19.3.2010, IN I.T.A.NOS.578/MDS/1996 AND 22/MDS/199 7 FOR ASSESSMENT YEARS 1992-93 AND 1993-94 RESPECTIVELY. IT WAS ALSO SUBMITTED THAT THE DECISION OF THE HON'BLE MADRAS H IGH COURT IN THE CASE OF CIT VS MADRAS REFINERIES LTD, 266 ITR 170 ( MDS) ON THIS ISSUE WAS IN FAVOUR OF THE ASSESSEE. I.T.A.NO.1979 & 1981/11 :- 26 -: 30. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, VACATED THE DISALLOWANCE BY OBSERVING THA T THE TRIBUNAL, AFTER DETAILED DISCUSSION, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 31. THE LD. CIT/DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE A.R OF THE ASSESSEE RELIED ON THE ORDE R OF THE LD. CIT(A). 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER DISALLOWED DEDUCTION FOR COMMUNITY WELFARE EXPENSES OF ` 65,35,000/- FOR THE REASON THAT IT DID NOT RELATE TO THE BUSINESS AND THEREFORE, CANNOT BE ALLOWED DEDUCTION U/S 37(1) OF THE ACT. 33. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR ASSESSMENT YEARS 1992-93 AND 1993-94 IN I.T.A.NOS.5 78/MDS/1996 AND 22/MDS/1997, WHEREIN THE TRIBUNAL HAS HELD AS U NDER: '10. AS WE HAVE RECORDED THE FINDINGS OF THIS TRIBUNAL IN THE ASSESSEE'S APPEAL IN I TA. NO. 532/MDS/1996, IT IS EVIDENT THAT THIS TRIBUNAL IN THE ASSESSEE'S APPEAL HAS CONSIDER ED AND ADJUDICATED THIS ASPECT. MOREOVER, THE EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR THE WELFARE OF THE NEIGHBOURHOO D RESIDENTS. WHO ARE ADVERSELY AFFECTED BY THE ACTIVITIES OF THE ASSESSEE, BECAUSE THE REFINERY INDUSTRY IS UNDISPUTEDLY A POL LUTING INDUSTRY AND ALSO TO AVOID PROTEST AND AGITATION BY NEIGHBOU RHOOD I.T.A.NO.1979 & 1981/11 :- 27 -: RESIDENTS AND OTHER ACTIVISTS SO THAT THE FUNCTIONI NG OF THE BUSINESS CONTINUES SMOOTHLY AND UNINTERRUPTEDLY. TH US, THE EXPENDITURE INCURRED ON THE WELFARE OF THE NEIGHBOU RHOOD RESIDENTS IS ESSENTIAL FOR THE VERY EXISTENCE AND F UNCTIONING OF THE BUSINESS OF THE ASSESSEE AND IS ALLOWED AS BUS INESS EXPENDITURE U/S 37 OF THE INCOME TAX ACT. 34. WE FIND THAT THE LD. CIT(A) HAS DELETED THE DISALLO WANCE OF ` 65,35,000/- UNDER THE HEAD COMMUNITY WELFARE EXPEN SES BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE I N THE EARLIER ASSESSMENT YEARS. THE LD. CIT/DR COULD NOT SHOW AN Y GOOD AND JUSTIFIABLE REASON FOR NOT FOLLOWING THE ABOVE QUOT ED ORDER OF THE TRIBUNAL. HE ALSO COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE QUOTED ORDER OF THE TRIBUNAL WHICH WAS RE LIED UPON BY THE LD. CIT(A) WAS VARIED IN APPEAL BY ANY HIGHER FORUM . IN THE ABSENCE OF ANY SUCH MATERIAL BEING BROUGHT ON RECORD, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 35. GROUND NO.4 OF THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE U/S 14 A OF THE ACT TO 2% OF THE EXEMPT INCOME. I.T.A.NO.1979 & 1981/11 :- 28 -: 36. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED ` 88,04,500/- U/S 14A OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS EARNED TAX FREE INCOME BEING DIVIDEND FROM M/S INDIAN ADDITIVES OF ` 88,75,508/- AND PETROLEUM INDIAN LTD. OF ` 1,02,94,685/, THEREFORE, THE EXPENDITURE INCURRED IN RELATION TO EARNING OF SUCH INCOME WAS NOT ALLOWABLE DEDUCTION TO THE ASSESSEE . ACCORDINGLY, HE DISALLOWED INTEREST OF ` 76.465 LAKHS AND INDIRECT EXPENDITURE BEING % OF THE AVERAGE VALUE OF INVESTMENT BEING ` 11.58 LAKHS. THUS, HE MADE TOTAL DISALLOWANCE OF ` 88,04,500/-. 37. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS DCIT, 328 ITR 81 (BOM) HAS HELD THAT PROVISIONS OF RULE 8D WERE APPLICABLE ONL Y FROM ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS. THE HON'BLE HI GH COURT HELD THAT FOR THE YEARS PRIOR TO THE ASSESSMENT YEAR 200 8-09 DISALLOWANCE CAN BE MADE ON A REASONABLE BASIS. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE WAS A GOVERNMENT COMPANY AND HAD NOT INCURRED ANY EXPENDITURE IN EARNING DIVIDEND INCOME AS CLAIM ED BY THE ASSESSEE. THE ASSESSING OFFICER HAS NOT ESTABLISHE D ANY NEXUS BETWEEN THE EXEMPT INCOME AND THE EXPENDITURE INCUR RED BY THE I.T.A.NO.1979 & 1981/11 :- 29 -: ASSESSEE. HOWEVER, HE HELD THAT MONITORING OF THE INVESTMENT AND TRACKING OF THE MUTUAL FUNDS REQUIRES INVOLVEMENT O F SOME MANPOWER AND INVOLVEMENT OF TREASURY DEPARTMENT AND IT WOULD BE REASONABLE TO ATTRIBUTE 2% OF THE EXEMPT INCOME OF ` 1,91,70,193/- AS EXPENDITURE TOWARDS EARNING THE SAME. ACCORDINGLY, HE RESTRICT ED THE DISALLOWANCE TO ` 3,83,405/-. 38. THE LD. CIT/DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE A.R OF THE ASSESSEE SUPPORTED THE ORDE R OF THE LD. CIT(A). 39. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASS ESSEE, DURING THE YEAR HAS EARNED EXEMPT INCOME OF ` 1,91,70,193/-. THE ASSESSING OFFICER DISALLOWED ` 88,04,500/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. 40. ON APPEAL, THE LD. CIT(A), FOLLOWING THE DECISION O F THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS DCIT (SUPRA) ESTIMATE D THE EXPENDITURE ATTRIBUTABLE TO THE EXEMPT INCOME AT 2% OF THE EXEMPT INCOME AND THEREBY RESTRICTED THE DISALLOWANCE TO ` 3,83,405/-. I.T.A.NO.1979 & 1981/11 :- 30 -: 41. WE FIND THAT THE HON'BLE MADRAS HIGH COURT IN THE C ASE OF M/S SIMPSON AND CO. LTD VS DCIT, IN TAX CASE (APPEA L) NO.2621 OF 2006, ORDER DATED 15.10.2012 PASSED IN ASSESSMENT Y EAR 2001-02, HAS HELD THAT ESTIMATION MADE OF EXPENDITURE ATTRIBUTAB LE TO DIVIDEND INCOME AT 2% OF THE EXEMPT INCOME WAS JUSTIFIED AND HENCE, DISMISSED THE APPEAL OF THE ASSESSEE. THUS, WE FI ND THAT THE ORDER OF THE LD. CIT(A) FINDS SUPPORT FROM THE ABOVE QUOTED DECISION OF THE HON'BLE MADRAS HIGH COURT. THEREFORE, WE DO NOT FI ND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF T HE LD. CIT(A) ON THIS ISSUE WHICH IS CONFIRMED AND THE GROUND OF APPEAL O F THE REVENUE IS DISMISSED. 42. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 21 ST OF MARCH, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 21 ST MARCH, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR