M/s. UNICHEM LABORATORIES LTD., MUMBAI V. DCIT C.C. - 33, MUMBAI

ITA 1990/MUM/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3760 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 06-10-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 28-03-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: P J PARDIWALA
• Keywords: Capital asset; Business income; Business expenditure; Principle of natural justice; Proportionate interest; Competent authority; Revenue expenditure; Capital expenditure
• Section: 143(3); 80HHC; 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE SHRI R K PANDA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) UNICHEM LABORATORIES LTD, UNICHEM BHAVAN, PRABHAT ESTATE S V ROAD, JOGESHWARI (W), MUMBAI-400012 PAN: AAACU0551B APPELLANT VS DCIT-33, MUMBAI. RESPONDENT ASSESSEE BY : S/SHRI P.J.PARDIWALA AND NITESH JOSHI REVENUE BY : SHRI GOLI SRINIVAS RAO O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE REVISION ORDER DATED 03.01.2006 OF CIT(A)-CENTRAL- VIII FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW IN ISSUING VARIOUS NOTICES, WHICH ARE ILLEGAL A ND BAD IN LAW. THE CONSEQUENTIAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT IS ALSO ILLEGAL, BAD-IN-LAW AND HENCE NULL AND VOID; 2. THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW IN PASSING THE ASSESSMENT ORDER IN GROSS VIOLATIONS OF PRINCIPALS OF NATURAL JUSTICE. THE ASSESSMENT ORDER HAS BEEN PASSED WITHOUT GIVING PROPER AND EFFECTIVE OPPORTUNITY. ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 2 3. THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW IN AND IN FACTS IN CONFIRMING THE ADDITION OF RS`.1,96,694/- MADE BY THE AO BY TREATING REPAIRS AND MAINTENANCE EXPENSES INCURRED FOR PLANT AND MACHINERY AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS`.4,41,045/- U/S 14A OF THE ACT BEING PROPORTIONATE INTEREST EXPENSE RELATABLE TO THE INVESTMENTS MADE BY THE APPELLANT. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE AFORESAID INTEREST EXPENDITURE IS NOT ALLOWABLE UNDER ANY PROVISIONS O F THE ACT. 6. THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW AND IN FACTS IN UPHOLDING THE DISALLOWANCE OF DEDUCTION MADE U/S 80HHC OF RS`.4,51,253/- BY THE LEARNED AO 7. THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF EXPOR T PROCEEDS REALIZED AFTER SIX MONTHS FROM THE END OF THE YEAR BUT WITHIN THE EXTENDED TIME PERIOD ALLOWE D BYS THE COMPETENT AUTHORITY. 8. THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW IN CONFIRMING THE TREATMENT OF INTEREST INCOM E AMOUNTING TO RS`.83,57,352/- AS INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME TREATED BY THE APPELLANT, WHILE COMMUTING DEDUCTION U/S 80HHC OF THE ACT. 9. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS I N LEVYING INTEREST UNDER SECTION 234D OF THE ACT. 3. AT THE TIME OF HEARING, THE LEARNED AR OF THE AS SESSEE STATED THAT THE ASSESSEE DOES NOT PRESS GROUNDS OF APPEAL NO.1 AND 2, THE SAME MAY BE DISMISSED AS NOT PRESSE D FOR WHICH THE LEARNED DR HAS NO OBJECTION FOR THE REQU EST MADE ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 3 BY THE LEARNED AR. ACCORDINGLY, WE DISMISS THE GRO UNDS OF APPEAL NO.1 AND 2 AS NOT PRESSED. 4. THE GROUNDS OF APPEAL NO.3, REGARDING THE DISALL OWANCE OF REPAIRS AND MAINTENANCE EXPENSES BY TREATING THE SAME AS CAPITAL EXPENDITURE. THE ASSESSEE CLAIMED RS`.116. 96 LAKHS AS REPAIRS TO PLANT AND MACHINERY. THE AO FO UND THAT THE CERTAIN AMOUNTS DEBITED TO REPAIRS ACCOUNT RELA TE TO PURCHASE OF CAPITAL ASSET. ACCORDINGLY, THE AO T REATED THE SUM OF RS.1,96,694/- PAID TO UNITED ENGINEERS FOR INSTALLATION OF HOT WATER PIPELINE AND AFTER ALLOWING THE DEPREC IATION AT THE RATE OF 12.5%, THE NET ADDITION OF RS.1,72,108/- WA S MADE BY THE AO. 5. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLOW ANCE MADE BY THE AO VIDE IMPUGNED ORDER. 6. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE HAS SET UP THE FACTORY AT GOA IN THE YEAR 1996 AND CERTAIN EXPENDITURES WERE INCURRED FOR RE PLACEMENT OF THE OLD PIPELINES WHICH WAS REQUIRED FOR AIR-CON DITIONING TO BE SUPPLIED TO THE UNIT OF MANUFACTURING OF PHARMA CEUTICALS. HE HAS FURTHER CONTENDED THAT THE REPAIRS AND MAINT ENANCE WORK WAS CARRIED OUT BY M/S UNITED ENGINEERS. THE COPIES OF ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 4 THE INVOICES ARE PLACED AT PAGES 35 TO 37 OF THE PAPER BOOK. THUS, THE LEARNED AR HAS SUBMITTED THAT THE SAID P IPELINES WAS REPLACED AND NO NEW INSTALLATION OF ANY MACHINE RY IS UNDERTAKEN BY THE ASSESSEE. HE HAS FURTHER CONTEN DED THAT BY INCURRING THE SAID EXPENDITURE NO NEW ASSET WAS BROUGHT INTO EXISTENCE AND NO ENDURING BENEFIT IS DRAWN BY REPLACING THE OLD PIPELINE BY NEW PIPELINE. THE LEARNED AR S UBMITTED THAT THE PIPELINE WAS USED AS FOR AIR-CONDITIONED F ACILITIES. THUS, THE EXPENDITURE IS ALLOWABLE UNDER REPAIRS AND MAINTENANCE. HE HAS RELIED UPON THE DECISION OF TH E HON. ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RENU S AGAR POWER CO. LTD. (2008) 298 ITR 94 (ALL). THE LEARNE D AR HAS ALTERNATIVELY SUBMITTED THAT EVEN IF THE REPAIRS A ND MAINTENANCE INVOLVED SOME CAPITAL EXPENDITURE , THE SAME CANNOT BE DISALLOWED BECAUSE THE EXPLANATION TO SEC TION 31 HAS BEEN BROUGHT WITH EFFECT FROM 1.4.2004 AND NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 7. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE INSTALLATION OF NEW PIPELINE IS CERTAINLY AMOU NTS TO ADDITION OF CAPITAL ASSET, THEREFORE, IT HAS BROUG HT INTO EXISTENCE A NEW ASSET AND ADVANTAGE. HE HAS FURTHE R CONTENDED THAT THE NATURE OF PIPELINE AND FUNCTION OF THE PIPELINE CLEARLY SHOWS THAT IT IS A PART OF PLANT AND MACHINERY ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 5 AND THEREFORE IT AMOUNTS TO INSTALLATION OF NEW ASS ETS. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. AT THE OUTSET, WE NOTE THAT THE AO HAS NOT GIVEN ANY FINDING ON THIS ISSUE. THE AO HAS GONE BY THE FACT THAT THE PURCHASE OF PIPELINE AMOUNTS TO PURCHASE OF CAPITAL ASSET. THE CIT(A) HAS ALSO NOT EXAMINED THIS ISSUE IN RE SPECT OF THE REPLACEMENT OF THE PIPELINE AND THE NATURE OF INSTA LLATION OF THE MACHINERY. THUS, WHEN IT IS ONLY REPLACEMENT O F THE PIPELINE WHICH IS ONLY PART OF THE ENTIRE AIR-CONDI TIONING SYSTEM AND THE PIPELINE ITSELF CANNOT FUNCTION AS AIR-CON DITIONING OR PLANT AND MACHINERY, THEN THE SAME CANNOT BE SAID T O BE INSTALLATION OF A NEW ASSET OR ENHANCING ANY MANUFA CTURING CAPACITY OF THE ASSESSEE. MOREOVER, WHEN THE EXPLA NATION TO SECTION 31 IS NOT APPLICABLE FOR THE ASSESSMENT YEA R UNDER CONSIDERATION THEN EVEN IF ANY CAPITAL EXPENDITURE IS INCURRED FOR THE PURPOSES OF THE REPAIRS AND MAINTENANCE, TH E SAME IS ALLOWABLE IF THE ENTIRE EXPENDITURE FALLS UNDER TH E CURRENT REPAIRS. IN THE CASE, IN HAND, THOUGH IT IS NOT C URRENT REPAIRS BUT REPLACEMENT OF PART OF THE MACHINERY IS BECAUS E OF ACCUMULATED REPAIRS OVER THE YEARS, THEREFORE, THE SAME IS ALLOWANCE AS REVENUE EXPENDITURE BECAUSE IT IS NOT ENHANCEMENT OF ANY CAPITAL ASSET OR GIVING ANY END URING BENEFIT TO THE ASSESSEE. IT IS CLEAR FROM THE BI LLS AS REFERRED BY THE AR THAT THESE EXPENSES IS REGARDING THE PIP ELINE AND ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 6 FITTING OF THE SAME ALONG WITH THE ACCESSORIES. TH EREFORE, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE L OWER AUTHORITIES ON THIS ACCOUNT IS NOT JUSTIFIED. ACC ORDINGLY, WE ALLOW THE CLAIM OF THE ASESEEE ON ACCOUNT OF THE SA ID REPAIRS AND MAINTENANCE BEING BUSINESS EXPENDITURE U/S 37( 1). WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON T HIS ISSUE. 9. GROUND NO.3 OF ASSESSEES APPEAL IS ALLOWED. 10. GROUNDS OF APPEAL NO.4 AND 5 ARE REGARDING DISALLOWANCE U/S 14A. THE AO HAS NOTED THAT THE AS SESSEE HAS TAKEN INTEREST BEARING LOANS AND ALSO MADE INVE STMENT IN SHARES IN OTHER COMPANIES. THE AO HAS REPRODUCED THE DETAILS OF SHARE CAPITAL, RESERVE, SURPLUS AND LOAN S IN PARAGRAPH 4 OF THE ASSESSMENT ORDER WHICH READ AS U NDER : I SHARE CAPITAL, ` .8,52.99 II RESERVE AND SURPLUS `.80,33.38 III LOANS `.43.97.69 11. THE ASSESSEE TOOK THE STAND BEFORE THE AO THAT THE ASSESSEE UTILIZED ITS OWN FUNDS FOR THE INVESTMENT, WHEREIN INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR THE P URPOSE OF BUSINESS OF THE ASSESSEE. THE AO DID NOT ACCEPT T HE CONTENTION OF THE ASSESSEE AND DISALLOWED THE INTER EST EXPENDITURE ON AVERAGE COST OF COMMON POOL OF FUNDS . I.E. THE ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 7 AVERAGE RATE OF INTERESTS. THE AO COMPUTED THE AV ERAGE RATE OF INTEREST AT THE RATE OF 4.36 PER CENT AND T HEREBY INTEREST EXPENDITURE RELATABLE TO THE INVESTMENT O F RS`.102.07 LAKHS WAS WORKED OUT BY APPLYING THE RATE AT 4.36 PER CENT TO RS.4,45,025/- 12. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISA LLOWANCE MADE BY THE AO. 13. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE MADE INVESTMENT IN SHAR ES, UNITS, MUTUAL FUNDS OUT OF ITS OWN CAPITAL AND RESERVE FRO M THE PROFIT EARNED OVER THE YEARS. THUS, THE ASSESSEE HAS NOT UTILIZED THE BORROWED FUNDS FOR MAKING SUCH INVESTMENTS. HE HAS FURTHER CONTENDED THAT THE BORROWED FUNDS WERE UTIL IZED FOR THE PURPOSE OF PLANT AND MACHINERY AND MADE THE REQUIR ED REPAIRS NECESSARY FOR THE BUSINESS ACTIVITIES. HE HAS REFERRED THE DETAILS PRODUCED BEFORE THE AO REGARDING THE A VAILABILITY OF THE ASSESSEES OWN FUNDS AND SUBMITTED THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS FOR MAKI NG THE ABOVE SAID INVESTMENT. THE LEARNED AR FURTHER CONTENDED THAT OUT OF THE TOTAL INVESTMENT SOME OF THE INVESTMENTS ARE I N SHARES OF THE FOREIGN COMPANIES. THE DIVIDEND INCOME OF WHIC H IS TAXABLE, THEREFORE, NO DEDUCTION IS CALLED FOR TO T HE EXTENT OF THE INVESTMENT OF SHARES IN THE FOREIGN COMPANIES. HE HAS ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 8 FURTHER CONTENDED THAT AS REGARD OTHER INVESTMENTS, THE ASSESSEE ITSELF HAS DISALLOWED RS.1,30,307/- UNDER SECTION 14A. MOREOVER IN THE PAST NO DISALLOWANCE WAS MADE BY THE AO. THUS, THE LEARNED AR OF THE ASSESSEE HAS SUBMI TTED THAT IN VIEW OF THE AVAILABILITY OF THE OWN FUNDS FOR THE INVESTMENT AND THE DIVIDEND WHICH IS TAXABLE IN THE CASE OF IN VESTMENT IN FOREIGN COMPANIES, THE DISALLOWANCE IS UNJUSTIFIED AND NOT CALLED FOR. HE HAS RELIED UPON THE ORDER OF HON. K ARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TA X VS SRIDEV ENTERPRISES REPORTED IN 192 ITR 165. 14. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ASSESSEE HAS FAILED TO ESTABLISH THE NEXUS OF THE O WN FUNDS TO THE INVESTMENT AND THE ENTIRE FUNDS WAS IN THE COMM ON POOL,. THE ASSESSEE HAS NOT PRODUCED ANY RECORD TO PROVE THE NEXUS. THE AO HAS GIVEN CATEGORICAL FINDING THAT T HE ASSESSEE HAS FAILED TO SHOW THAT ITS OWN FUNDS WER E USED FOR INVESTMENT IN SHARES. HE HAS RELIED UPON THE ORDER S OF THE LOWER AUTHORITIES. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. AS FAR AS THE AVAILABILITY OF THE ASSESSEE S OWN FUNDS IS CONCERNED , IT IS CLEAR FROM THE RECORD THAT THE ASESEEE HAS NOT ESTABLISHED THE AVAILABILITY OF ITS OWN FUND F OR UTILIZING FOR INVESTMENT IN SHARES, UNITS AND MUTUAL FUNDS. THE AO HAS ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 9 DISCUSSED THIS ISSUE IN DETAILED. MOREOVER, THE AS ESEEE HAS USED THE INTEREST BEARING FUNDS FOR INVESTMENT AN D DISALLOWED INTEREST EXPENDITURE ON IS OWN U/S 14A AND HAS NOT CLEARLY ESTABLISHED THAT THE INTEREST BEARING FUNDS WAS USE D ONLY FOR PURCHASE OF PLANT AND MACHINERY AND WORKING CAPITA L USED FOR THE BUSINESS ACTIVITIES THEN THE APPORTIONMENT OF THE EXPENDITURE IS PERMITTED UNDER SECTION 14A. AS REGARDS THE CONTENTION OF THE LEARNED AR THAT SOME OF THE INVES TMENTS WERE MADE IN THE SHARES OF THE FOREIGN COMPANIES, D IVIDEND OF WHICH ARE TAXABLE. WE FIND THAT THE ASSESSEE RAISE D THIS CONTENTION FOR THE FIRST TIME BEFORE THIS TRIBUNAL AND NO SUCH CONTENTION WAS RAISED BEFORE THE LOWER AUTHORITIES . THEREFORE, THIS ISSUE NEEDS EXAMINATION AND VERIFIC ATION AT THE LEVEL OF AO. MOREOVER, IN VIEW OF THE RECENT DECIS ION IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI.VS.DY. COMMISSIONER OF INCOME TAX, REPORTED IN 234 DTR (BO M)-1. ACCORDINGLY, WE REMIT THIS ISSUE TO THE RECORD OF T HE AO. THE AO IS DIRECTED TO EXAMINE AND VERIFY THE ISSUE IN V IEW OF THE DECISION IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI.VS.DY. COMMISSIONER OF INCOME TAX (SUPRA) A ND DECIDE THE ISSUE AFTER GIVING FAIR AND REASONABLE O PPORTUNITY TO THE ASESEEE OF BEING HEARD. 16. THE GROUNDS OF APPEAL NO.4 AND 5 ARE ALLOWED FO R STATISTICAL PURPOSES. ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 10 17. GROUNDS OF APPEAL NO.6 AND 7, REGARDING DISALLO WANCE OF DEDUCTION U/S 80HHC OF ` 4,51,253/- BEING LATE REALIZATION OF THE EXPORT PROCEEDS. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSEE FILED REVISED CLAIM OF DE DUCTION U/S 80HHC IN RESPECT OF FUNDS REALIZED AFTER SIX MONTHS FROM THE END OF THE YEAR. THE ASSESSEE ENCLOSED CERTIFICATE OF THE AUTHORIZED DEALER I.E. BANK OF INDIA, WHEREIN IT HAS BEEN CERTIFIED THAT THE EXPORT BILL OUTSTANDING AS ON 3 1.3.2001 WERE ALLOWED EXTENSION AND WERE SUBSEQUENTLY RECEIVED. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE POWER TO SANCTION THE EXTENSION OF TIME IS VESTED WITH THE RESERVE BANK OF INDIA WHICH IS COMPETENT AUTHORI9TY AS PER EXPLANATION TO SETON 80HHC (2)(A) AND THE ASSESSE E HAS NOT FILED THE PERMISSION FROM RBI. THE AO ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE. 18. ON APPEAL, THE CIT(A) ALSO CONCURRED THE VIEW OF THE AO THAT THE SANCTION SHOULD HAVE BEEN GRANTED BY THE RESERVE BANK OF INDIA WHICH IS THE COMPETENT AUTHO RITY. 19. BEFORE US, THE LEARNED AR HAS SUBMITTED THAT TH E EXTENSION OF THE TIME WAS ALLOWED BY THE BANK OF IN DIA BEING AUTHORIZED DEALER OF THE ASSESSEE. HE HAS REFER RED TO EXPLANATION TO SECTION 80HHC (2)(A) AND SUBMITTED THAT THE ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 11 COMPETENT AUTHORITY AS PER EXPLANATION MEANS THE RE SERVE BANK OF INDIA OR SUCH AUTHORITY AS AUTHORIZED UNDE R ANY LAW FOR THE TIME BEING IN FORCE FOR REGULATING THE PAYM ENT. HE HAS REFERRED THE CIRCULAR DATED 28.1.2002 ISSUED BY THE RESERVE BANK OF INDIA WHEREBY GENERAL PERMISSION HAS BEEN G IVEN TO THE AUTHORIZED DEALER WHO HAS HANDLED THE EXPORT D OCUMENTS ON BEHALF OF THE ASSESSEE TO GRANT EXTENSION OF P ERIOD OF REALIZATION BEYOND THE PRESCRIBED PERIOD OF SIX MON THS. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE P ERMISSION FOR EXTENSION OF TIME FROM THE AUTHORIZED DEALER IS AS PER THE CIRCULAR OF THE RESERVE BANK OF INDIA DATED 28.01. 2002, THEREFORE, THE AMOUNT REALIZED AFTER THE TIME OF S IX MONTHS IS AS PER THE EXTENSION GRANTED IS ELIGIBLE FOR DEDUCT ION U/S 80HHC. THE LEARNED AR HAS ALSO FILED A COPY OF T HE CIRCULAR OF RBI DATED 28.01.2002. 20. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO SHOW THA T THE BANK OF INDIA WAS AUTHORIZED TO GRANT SUCH PERMISSION. HE HAS FURTHER POINTED OUT THAT AS PER THE CIRCULAR THE PE RIOD OF REALIZATION BEYOND SIX MONTHS CAN BE EXTENDED, WHER EAS INVOICE VALUE DOES NOT EXCEED US $ 1,00,000. HE HA S RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 12 21. IN THE REBUTTAL, THE LEARNED AR HAS REFERRED TH E LETTER DATE 15.09.2003 OF THE BANK OF INDIA, THEREBY THE TIME LIMIT WAS EXTENDED AND SUBMITTED THAT ALL THE DETAILS OF INVOICE ARE MENTIONED IN THE SAID LETTER GRANTING EXTENSION. 22. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE LOWER AUTHORITIES HAVE DIS ALLOWED THE CLAIM OF THE ASESEEE FOR DEDUCTION U/S 80HHC, IN RE SPECT OF EXPORT REALIZATION AFTER TIME PERIOD OF SIX MONTHS ON THE GROUND THAT THE COMPETENT AUTHORITY TO GRANT THE E XTENSION IS RESERVE BANK OF INDIA AND NOT BANK OF INDIA. IT IS TO BE NOTED THAT THE RESERVE BANK OF INDIA VIDE ITS CIRCULAR DA TED 28.01.2002 ALLOWED THE EXPORTER TO GET THE EXTENSIO N DIRECTLY FROM THE AUTHORIZED DEALER WHO HAS HANDLED THE EX PORT DOCUMENT WITHOUT ANY REFERENCE TO THE RBI AND THE AUTHORIZED DEALER AFTER OBTAINING THE APPLICATION FROM THE EXP ORTER MAY GRANT EXTENSION OF THE PERIOD OF REALIZATION BEYON D THE PERIOD OF SIX MONTHS FROM THE DATE OF EXPORT WHERE THE IN VOICES OF THE EXPORT VALUE DOES NOT EXCEEDS US $ 1,00,000 SUB JECT TO OTHER CONDITIONS REGARDING DELAY ARE SATISFIED VIZ (I) THAT THE EXPORTER HAS NOT BEEN ABLE TO REALIZE THE EXPORT PR OCEEDS FOR THE REASONS BEYOND HIS CONTROL, (II) THE EXPORTER SUBMITTED A DECLARATION THAT HE WILL REALIZE EXPORT PROCEEDS DU RING THE EXTENDED PERIOD, (III) THE EXTENSION MAY BE GRANTED UP TO THE PERIOD OF THREE MONTHS AT THE TIME WHILE CONSIDERI NG THE ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 13 EXTENSION BEYOND ONE YEAR FROM THE DATE OF EXPORT AND THE TOTAL EXPORT OUTSTANDING OF THE EXPORT SHOULD NOT BE MORE THAN 10% OF THE AVERAGE EXPORT REALIZATION. THUS, WE A RE OF THE VIEW THAT BY VIRTUE OF THIS CIRCULAR DATED 28.1.20 02 ISSUED BY THE RESERVE BANK OF INDIA, THE BANK OF INDIA WHO W AS AUTHORIZED DEALER AND HANDLED THE EXPORT DOCUMENTS OF THE ASSESSEE WAS COMPETENT TO GRANT EXTENSION OF TIME P ERIOD SUBJECT TO THE CONDITIONS PROVIDED IN THE SAID CIR CULAR. IT IS EVIDENT FROM THE DETAILS OF THE INVOICES IN THE EX TENSION LETTER DATED 15.09.2003 THAT OUT OF 10 INVOICES IN WHICH THE EXTENSION WAS GRANTED THE LAST INVOICE AT SERIAL N O.10 BEING NO.62242 IS MORE THAN US$1,00,000, THEREFORE, THE EXTENSION IN RESPECT OF THE SAID INVOICE IS IN CONTRAVENTION OF THE SAID CIRCULAR ISSUED BY THE RBI DATED 28.01.2002. FOR ALL OTHER INVOICES, THE AO IS DIRECTED TO CONSIDER THE CLAIM OF THE ASSESSEE IN VIEW OF THE CIRCULAR DATED 28.01.2002 AND ALLOW IF OTHER CONDITIONS ARE SATISFIED.. 23. GROUNDS OF APPEAL NO.8, REGARDING EXCLUSION OF INTEREST INCOME AMOUNTING TO ` 83,57,352/- BY TREATING THE SAME INCOME FROM OTHER SOURCES WHILE COMPUTING THE DEDUC TION U/S 80HHCC. THE AO NOTICED FROM THE COMPUTATION OF THE INCOME FOR THE DEDUCTION U/S 80HHC FILED BY THE ASESEEE TH AT THE PROFIT ELIGIBLE FOR DEDUCTION ALSO INCLUDES THE IN TEREST RECEIPT OF RS.83,57,352/-. THE SAID INTEREST INCOME IS NE TTED OFF AGAINST THE INTEREST EXPENDITURE AND THE NET RESULT ANT ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 14 EXPENDITURE IS DEDUCTED FROM THE PROFIT. THUS, TH E ASSESSEE HAS INCLUDED INTEREST INCOME FOR THE PURPOSE OF C LAIMING THE DEDUCTION U/S 80HHC. THE AO HAS TREATED THE INTER EST INCOME AS INCOME FROM OTHER SOURCES AND ACCORDINGLY EXCLUDED THE SAME WHILE COMPUTING THE DEDUCTING U /S 80HHC. 24. ON APPEAL, THE CIT(A) HAS ALSO CONFIRMED THE O RDER OF THE AO IN TREATING THE INTEREST INCOME AS INCOME F ROM OTHER SOURCES FOR THE PURPOSE OF DEDUCTION U/S 80HHC. 25. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO REDUCED THE INTEREST INCOME EARNED ;BY THE ASSESSEE FROM THE PROFIT OF THE BUSINESS BY IN VOKING THE PROVISIONS OF EXPLANATION (BAA) TO SECTION 80HHC. H E HAS FURTHER SUBMITTED THAT THE INTEREST RECEIVED ON DEP OSITS KEPT IN THE BANK SHOULD NOT BE REDUCED FROM THE PROFIT OF BUSINESS AS CONTEMPLATED UNDER THE EXPLANATION (BAA) TO SECT ION 80HHC. THE LEARNED AR OF THE ASSESSEE HAS FURTHER S UBMITTED THAT AT THE MOST 90% OF THE INTEREST SHOULD HAVE BEEN EXCLUDED INSTEAD OF 100% EVEN IF THE INTEREST INC OME WAS TREATED AS INCOME FROM THE OTHER SOURCES BECAUSE 1 0% OF THE SAME HAS TO BE EXCLUDED TOWARDS THE EXPENSES ATTRI BUTED TO THE EARNING OF THE SAID INCOME. HE HAS RELIED UPO N THE ORDER OF THIS TRIBUNAL IN THE CASE OF M/S CREATION BY SH ANGAR V/S ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 15 DCIT IN ITA NO.4808/MUM/06 (AY 2003-04) ORDER DATED 3.11.2008. 26. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTE D THAT WHEN THE INTEREST INCOME HAS BEEN TREATED AS INCOME FROM OTHER SOURCES THEN THERE IS NO PROVISIONS OF EXCLU SION OF 90% OF THE SAME AND THE 100% OF THE INCOME HAS TO BE EX CLUDED FROM THE BUSINESS INCOME FOR THE PURPOSES OF COMPU TATION OF DEDUCTION U/S 80HHC. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 27. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. IT IS NOT THE CONTENTION OF THE ASESEEE BE FORE US THAT THE INTEREST INCOME SHOULD BE TREATED AS BUSINESS INCOME OF THE ASSESSEE AND SHALL BE EXCLUDED AS PER THE PROVI SIONS OF CLAUSE (BAA) OF THE EXPLANATION TO THE SECTION 80HH C. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT DESPITE THE INTEREST INCOME TREATED AS INCOME FROM OTHER SOURCES ONLY 90 % OF THE SAME SHALL BE EXCLUDED FROM THE PROFITS OF BUSINESS OF THE ASSESSEE AND NOT THE 100%. THE CONTENTION OF THE LEARNED AR IN THIS RESPECT IS BASED ON THE ANALOGY THAT 1 0% OF THE INTEREST INCOME SHOULD BE TREATED AS ATTRIBUTABLE E XPENDITURE FOR EARNING THE SAID INCOME. WE ARE NOT CONVINCE D WITH THE DEEMING PROVISIONS OF THE SECTION WHEN THE INTEREST INCOME HAS BEEN TREATED AS INCOME FROM OTHER SOURCES. ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 16 28. THE PROVISIONS OF EXCLUSION OF 90% OF THE EXP ENDITURE FROM THE INCOME ARE ONLY AS PER THE CLAUSE (BAA) T O SECTION 80HHC. ONCE, THE INTEREST INCOME IS TREATED AS INC OME FROM OTHER SOURCES, THE PROVISIONS OF CLAUSE (BAA) OF EXPLANATION TO S. 80HHC HAS NO ROLE TO PLAY WHEN THE SAID INCO ME FALLS UNDER THE PROVISIONS OF SECTION 57, NO DEEMING FICT ION IS APPLICABLE BUT THE ACTUAL EXPENDITURE IF ANY HAS BE EN INCURRED BY THE ASESEEE FOR EARNING THE INCOME UNDER THIS HE AD OTHER SOURCES HAS TO BE ALLOWED. IN THE CASE OF M/S CREA TION BY SHANGAR V/S DCIT (SUPRA), THIS TRIBUNAL HAS TAKEN A VIEW THAT IF THE INTEREST INCOME HAS TREATED AS BUSINESS INC OME 90% THEREOF IS TO BE EXCLUDED AND IF NO INTEREST INCOM E IS TO BE TREATED AS INCOME FROM OTHER SOURCES 10% IS TO BE R EDUCED ON ACCOUNT OF ATTRIBUTABLE EXPENSES BY FOLLOWING THE DECISION OF THE HON. APEX COURT IN THE CASE OF HERO EXPORTS RE PORTED IN 295 ITR 454(SC). IT IS TO BE NOTED THAT IN THE CASE OF HERO EXPORTS V/S CIT, THE ISSUE WAS NOT APPORTIONMENT OF ANY COST ON THE INTEREST INCOME BEING TREATED AS INCOME FROM OTHER SOURCES BUT THE ISSUE IN THE SAID CASE WAS FOR RED UCTION OF INDIRECT COST INCURRED FOR EARNING THE INCENTIVE, COMMISSION, INTEREST ETC U/S 80HHC 3 (B) READ WITH CLAUSE (C) T O EXPLANATION TO S. 80HHC. THUS, IN THE SAID CASE, T HE ISSUE WAS REGARDING THE BUSINESS INCOME THOUGH HAVING THE ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 17 INDEPENDENT INCOME NOT THE INCOME FROM EXPOR T BUT BEING PART OF THE BUSINESS PROFIT OF THE ASSESSEE AND THEREFORE, THE HON. APEX COURT HAS DECIDED THE ISSUE ONLY UNDER THE PROVISIONS OF SECTION 80HHC AND FROM THE SCHEME OF SECTION 80HHC. IN OUR VIEW, THE RELEVANT AND PROP ER DECISION DIRECT ON THE ISSUE IS IN THE CASE OF CIT V/S K RA VINDRANATHAN NAIR REPORTED IN (2007)295 ITR 228(SC) IN WHICH VID E PARAGRAPHS 18 TO 22, THE APEX COURT HELD AS UNDER : 18. IN THE PRESENT CASE THE A.O. HAD WORKED OUT BUSINESS PROFITS OF RS.1,94,08,220 AS GROSS TOTAL INCOME ON THE BASIS OF INCOME RECEIVED FROM CASHEW BUSINESS (SEE: PAGES 50 AND 52 OF THE SLP PAPER BOOK). EVEN ACCORDING TO ASSESSEES, IN THE ABOVE FORMULA HIS BUSINESS PROFITS INCLUDED THE ABOVEMENTIONED PROCESSING CHARGES. HOWEVER, ACCORDING TO ASSESSEES, THE SAID CHARGES WERE NOT T O BE INCLUDED IN THE TOTAL TURNOVER. WE ARE NOT INCLI NED TO ACCEPT THE CONTENTION OF THE ASSESSEES. THE ABOV E DISCUSSION INDICATES THAT THE FORMULA IN SECTION 80HHC(3) OF THE I.T. ACT PROVIDED FOR A FRACTION OF EXPORT TURNOVER DIVIDED BY TOTAL TURNOVER TO BE APP LIED TO BUSINESS PROFITS CALCULATED AFTER DEDUCTING 90% OF THE SUMS MENTIONED IN CLAUSE (BAA) TO THE SAID EXPLANATION. THAT, PROFIT INCENTIVES AND ITEMS LIKE RENT, COMMISSION, BROKERAGE, CHARGES ETC. THOUGH FORMED PART OF GROSS TOTAL INCOME HAD TO BE EXCLUDE D AS THEY WERE 'INDEPENDENT INCOMES' WHICH HAD NO ELEMENT OF EXPORT TURNOVER. THAT, THE SAID ITEMS DISTORTED THE FIGURE OF EXPORT PROFITS. 19. IN OUR VIEW, FOR THE ABOVE REASONS, THE SAID PROCESSING CHARGES, WHICH WAS PART OF GROSS TOTAL INCOME, WAS AN INDEPENDENT INCOME LIKE RENT, COMMISSION, BROKERAGE ETC. AND, THEREFORE, 90% OF T HE SAID SUM HAD TO BE REDUCED FROM THE GROSS TOTAL INCOME TO ARRIVE AT THE BUSINESS PROFITS AND SINCE THE SAID PROCESSING CHARGE WAS AN IMPORTANT COMPONENT OF BUSINESS PROFITS, IT ALSO HAD TO BE INCLUDED IN THE TOTAL TURNOVER IN THE SAID FORMULA TO ARRIVE AT BUS INESS ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 18 PROFITS IN TERMS OF CLAUSE (BAA) TO THE SAID EXPLANATION. 20. ONE POINT STILL REMAINS FOR CONSIDERATION. ON BEHALF OF ASSESSEES IT HAS BEEN VEHEMENTLY URGED THAT THE ABOVE-MENTIONED PROCESSING CHARGES, EARNED BY THE ASSESSEES BY PROCESSING RAW CASHEW NUTS FOR THIRD PARTIES, HAD NO NEXUS WITH THE EXPORT BUSINES S AND, THEREFORE, SUCH CHARGES WERE NOT INCLUDIBLE IN THE TOTAL TURNOVER. IT WAS ALSO FURTHER ARGUED THAT EXPORT INCENTIVES WERE ADMISSIBLE ONLY IN RESPECT O F PROFITS ON EXPORT SALES. IN THIS CONNECTION, IT WAS SUBMITTED THAT THE ASSESSEES EARNED PROCESSING CHARGES FROM AN ACTIVITY WHICH HAD NO CONNECTION WI TH EXPORTS. ACCORDING TO ASSESSEES, NO EXPORT TURNOVER AROSE FROM PROCESSING OF RAW MATERIAL BY THE ASSESSEES FOR THIRD PARTIES AND, THEREFORE, THE SAI D RECEIPTS DID NOT CONSTITUTE AN ELEMENT OF TOTAL TURNOVER. THEREFORE, ACCORDING TO ASSESSEES, THE A. O. HAD ERRED IN INCLUDING THE SAID CHARGES IN THE TOTA L TURNOVER. ACCORDING TO ASSESSEES, PROFITS DERIVED F ROM LOCAL SALES WERE INCLUDIBLE IN BUSINESS PROFITS BUT NOT IN THE TOTAL TURNOVER. 21. AT THE OUTSET, WE MAY STATE THAT, IN THE PRESEN T CASE, WE ARE DEALING WITH THE LAW AS IT STOOD DURIN G ASSESSMENT YEAR 1993-94. AT THAT TIME SECTION 80HHC(3) OF THE I.T. ACT CONSTITUTED A CODE BY ITSE LF. SUBSEQUENT AMENDMENTS HAVE IMPOSED RESTRICTIONS/QUALIFICATIONS BY WHICH THE SAID PROVI SION HAS CEASED TO BE A CODE BY ITSELF. IN THE ABOVE FORMULA THERE EXISTED FOUR VARIABLES, NAMELY, BUSIN ESS PROFITS, EXPORT TURNOVER, TOTAL TURNOVER AND 90% OF THE SUMS REFERRED TO IN CLAUSE (BAA) TO THE SAID EXPLANATION. IN THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC ALL FOUR VARIABLES HAD TO BE TAKEN IN TO ACCOUNT. ALL FOUR VARIABLES WERE REQUIRED TO BE GIV EN WEIGHTAGE. THE SUBSTITUTION OF SECTION 80HHC(3) SECURES PROFITS DERIVED FROM THE EXPORTS OF ELIGIBL E GOODS. THEREFORE, IF ALL THE FOUR VARIABLES ARE KEP T IN MIND, IT BECOMES CLEAR THAT EVERY RECEIPT IS NOT INCOME AND EVERY INCOME WOULD NOT NECESSARILY INCLUDE ELEMENT OF EXPORT TURNOVER. THIS ASPECT NEE DS TO BE KEPT IN MIND WHILE INTERPRETING CLAUSE (BAA) TO THE SAID EXPLANATION. THE SAID CLAUSE STATED THAT 9 0% OF INCENTIVE PROFITS OR RECEIPTS BY WAY OF BROKERAG E, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF LIKE NATURE INCLUDED IN BUSINESS PROFITS , HAD TO BE DEDUCTED FROM BUSINESS PROFITS COMPUTED IN ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 19 TERMS OF SECTIONS 28 TO 44D OF THE I.T. ACT. IN OTH ER WORDS, RECEIPTS CONSTITUTING INDEPENDENT INCOME HAVING NO NEXUS WITH EXPORTS WERE REQUIRED TO BE REDUCED FROM BUSINESS PROFITS UNDER CLAUSE (BAA). A BARE READING OF CLAUSE (BAA)(1) INDICATES THAT RECE IPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES ETC. FORMED PART OF GROSS TOTAL INCOME BEIN G BUSINESS PROFITS. BUT FOR THE PURPOSES OF WORKING O UT THE FORMULA AND IN ORDER TO AVOID DISTORTION OF ARR IVING EXPORT PROFITS CLAUSE (BAA) STOOD INSERTED TO SAY T HAT ALTHOUGH INCENTIVE PROFITS AND 'INDEPENDENT INCOMES ' CONSTITUTED PART OF GROSS TOTAL INCOME, THEY HAD TO BE EXCLUDED FROM GROSS TOTAL INCOME BECAUSE SUCH RECEIPTS HAD NO NEXUS WITH THE EXPORT TURNOVER. THEREFORE, IN THE ABOVE FORMULA, WE HAVE TO READ AL L THE FOUR VARIABLES. ON READING ALL THE VARIABLES IT BECOMES CLEAR THAT EVERY RECEIPT MAY NOT CONSTITUTE SALE PROCEEDS FROM EXPORTS. THAT, EVERY RECEIPT IS NOT INCOME UNDER THE I.T. ACT AND EVERY INCOME MAY NOT BE ATTRIBUTABLE TO EXPORTS. THIS WAS THE REASON FOR THIS COURT TO HOLD THAT INDIRECT TAXES LIKE EXCISE DUTY WHICH ARE RECOVERED BY THE TAXPAYERS FOR AND ON BEHALF OF THE GOVERNMENT, SHALL NOT BE INCLUDED IN THE TOTAL TURNOVER IN THE ABOVE FORMULA (SEE: COMMISSIONER OF INCOME TAX, COIMBATORE V. M/S. LAKSHMI MACHINE WORKS - 2007(6) SCALE 168). 22. IN THE PRESENT CASE, THE PROCESSING CHARGES WER E INCLUDED IN THE GROSS TOTAL INCOME FROM CASHEW BUSINESS. THAT, EVEN ACCORDING TO ASSESSEE THE SAID CHARGES CONSTITUTED AN IMPORTANT COMPONENT OF GROSS TOTAL INCOME FROM CASHEW BUSINESS. THIS IS NOT DISPUTED. THEREFORE, IN TERMS OF CLAUSE (BAA), 90% OF THE 'INDEPENDENT INCOME' HAD TO BE DEDUCTED FROM GROSS TOTAL INCOME TO ARRIVE AT BUSINESS PROFITS TO WHICH THE FRACTION HAD TO BE APPLIED. SINCE, THE PROCESSING CHARGES CONSTITUTED INDEPENDENT INCOME SIMILAR TO RENT, COMMISSION, ETC., WHICH FORMED PAR T OF THE GROSS TOTAL INCOME, THE SAME HAD TO BE REDUCED BY 90% AS CONTEMPLATED IN CLAUSE (BAA) TO ARRIVE AT BUSINESS PROFITS. THEREFORE, THE SAID PROCESSING CHARGES WERE INCLUDIBLE IN THE TOTAL TURNOVER IN TH E FORMULA UNDER SECTION 80HHC(3) OF THE I.T. ACT. 29. IN VIEW OF THE ABOVE DECISION OF THE HON. APEX COURT IN THE CASE OF RAVINDRANATHAN NAIR (SUPRA), THE INDEP ENDENT ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 20 INCOME LIKE RENT, COMMISSION, BROKERAGE AND INTERE ST ETC HAS TO BE REDUCED TO THE EXTENT OF 90% FROM THE GROSS TOTAL INCOME ARRIVED AT THE BUSINESS PROFIT AND THE SAME HAS TO BE INCLUDED IN THE TOTAL TURNOVER IN THE FORMULAE TO A RRIVE AT BUSINESS INCOME IN TERMS OF CLAUSE (BAA) OF THE SAI D EXPLANATION. THUS, IT IS CLEAR THAT IF THE INTERES T INCOME IS TREATED AS PART OF THE GROSS TOTAL INCOME OF THE BU SINESS PROFIT OF THE ASSESSEE THEN 90% OF THE SAME WILL BE EXCLUD ED FROM THE TOTAL INCOME AS PER CLAUSE (BAA) OF THE EXPLANA TION AND AT THE SAME TIME IT HAS TO BE INCLUDED IN THE TOTAL TU RNOVER. WHEREAS IF THE SAID INTEREST INCOME HAS BEEN TREAT ED UNDER THE INCOME FROM OTHER SOURCES, THEN 100% OF THE SAM E HAS TO BE EXCLUDED FROM THE BUSINESS PROFIT AND AT THE SAM E TIME IT HAS NOT TO BE INCLUDED IN THE TOTAL TURNOVER. AS REGARDS DEEMING EXPENDITURE TO BE ALLOCATED ONCE THE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES THERE IS NO PROVISION FOR ALLOCATION OF THE EXPENDITURE BY APPLYING THE DEEMING FICTION BUT WHATEVER EXPENSES IS ACTUALLY I NCURRED FOR EARNING THE SAID INCOME IS ALLOWABLE U/S 57. THUS ACTUAL EXPENDITURE AND CANNOT BE RESTRICTED TO 10%. AT T HE SAME TIME IF NO EXPENDITURE IS INCURRED THEN THERE CANNO T BE ANY ALLOCATION OF ANY EXPENDITURE. ACCORDINGLY, WE DE CIDE THIS ISSUE AGAINST THE ASSESSEE. 30. THE GROUNDS OF APPEAL NO.6 AND 7 ARE DISMISSED. ITA NO. 1990//MUM/2006 (ASSESSMENT YEAR : 2001-02) 21 31. THE GROUNDS OF APPEAL NO.9, REGARDING LEVY OF I NTEREST U/S 234D. 32. WE HAVE HEARD THE LEARNED AR AND LEARNED DR A ND CONSIDERED THE RELEVANT RECORD. WE FIND THAT THIS ISSUE STANDS COVERED BY THE DECISION OF THE HON.SPECIAL BENCH O F THIS TRIBUNAL IN THE CASE OF EKTA PROMOTORS PRIVATE LI MITED REPORTED IN (2008) 117 TTJ DELHI 289 IN WHICH IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 234D ARE APPLICABLE WITH EFFECT FROM THE DATE OF ITS AMENDMENT IN THE STATUTE. THE REFORE, THE SAME IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 33. THE APPEAL OF THE ASESEEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.11.2010 SD SD (R K PANDA) ( VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10 TH NOV 2010 SRL:21110 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI