The Dy. CIT., Circle-1(1)(1), Ahmedabad V. M/s. Anil Ltd., Ahmedabad

ITA 2174/AHD/2016

AI Insights

The case involves multiple appeals by the Revenue and the assessee, Anil Ltd., concerning disallowances and deductions claimed under various sections of the Income Tax Act for the assessment years 2010-11, 2011-12, and 2012-13. The primary issues revolved around the disallowance of expenses under Section 14A, deductions under Section 80JJA for expenses related to scientific research, and the treatment of prior period expenses. The Tribunal examined the legal and factual basis for each issue, referencing relevant sections of the Income Tax Act and previous judicial decisions. The Tribunal's decision emphasized the need for proper documentation and substantiation of claims made under the Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125613 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-02-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 18-08-2016
• Other Referred Cases: ACIT vs. Vireet Investments (P.) Ltd, CIT vs. Corrtech Energy Ltd., CIT vs. Padma S. Bora, CIT vs. Gujarat Mineral Development Corporation, CIT vs. Mahanagar Gas Ltd, CIT vs. Exxon Mobil Lubricants Pvt. Ltd, CIT vs. Jagatjit Industries, CIT vs. Shri Ram Piston & Rings Ltd, CIT vs. Nagri Mills Co. Ltd, CIT vs. Bagasse, CIT vs. Bioplus Ltd, CIT vs. Madhusudan Industries Ltd, CIT vs. Laxhmi Bidi Trading Co.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Question of law; Revenue expenditure; Capital expenditure; Rule 8D; Liquidation
• Section: 37; 14A; 115JB; 12A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER Sl. No ITA No(s) AY Appeal(s) by Appellant Respondent 1 1705/Ahd/2016 2010-11 Anil Ltd. (Formerly Anil Products Ltd.), Anil Starch Premises, Anil Road, Naroda, Ahmedabad-380025 PAN : AABCA 3154 H Deputy Commissioner of Income-tax (OSD), Range-1, Ahmedabad 2 2174/Ahd/2016 2010-11 Deputy Commissioner of Income-tax, Cir. 1(1)(1), Ahmedabad Anil Ltd. (Formerly Anil Products Ltd.), Having same address as at Sr.No.1 3 2175/Ahd/2016 2011-12 Deputy Commissioner of Income-tax ,Cir. 1(1)(1), Ahmedabad Anil Ltd. (Formerly Anil Products Ltd.), Having same address as at Sr.No.1 4 858/Ahd/2017 2012-13 Deputy Commissioner of Income-tax. Cir. 1(1)(1), Ahmedabad Anil Ltd. (Formerly Anil Products Ltd.), Having same address as at Sr.No.1 Assessee by : None Revenue by : Shri Vijay Kumar Jaiswal, CIT-DR स ु नवाई क तार ख/Date of Hearing : 01.03.2023 घोषणा क तार ख /Date of Pronouncement: 19.05.2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The present appeals relate to the same assessee pertaining to different assessment years.ITA Nos. 1705&2174/Ahd/2016are cross appeals filed by the assessee and Revenue respectively against the order of the learned 2 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited Commissioner of Income-tax (Appeals), Gandhinagar, Ahmedabad [hereinafter referred to as "CIT(A)" for short] dated 09.05.2016 for Assessment Year 2010-11. ITA Nos. 2175/Ahd/2016& 858/Ahd/2017 are appeals filed by the Revenue against separate orders of the learned CIT(A) dated 10.05.2016 and 30.01.2017 for Assessment Years 2011-12 & 2012-13, respectively. Since all these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. Nobody has been appearing on behalf of the assessee right from the beginning when the appeals were first posted for hearing. Though the hearing in these appeals commenced way back in the year 2018, it was only on the 10 th May, 2022, when the matter came up for hearing, that the learned CIT-DR apprised the Bench that the assessee’s case had been referred to NCLT and the matter is pending. He was accordingly directed by the Bench to ascertain the status of the case pending with the NCLT; to which on the next date of hearing i.e. on 7 th July, 2022, the learned DR submitted that the assessee-company was in liquidation. Notice was directed to be issued to the Official Liquidator namely CARamchandra Dallaram Choudhary and the matter was adjourned for hearing on 24.08.2022. In the meanwhile, on 21.07.2022, the Official Liquidator Shri Ramchandra Dallaram Choudhary filed a letter in the Registry mentioning the entire facts relating to the assessee’s case for all the appeals before us stating that the NCLT vide its order dated 23.08.2017 in C.P. No. (IB) 66/7/NCLT/AHM/2017 had passed an order for initiation of Corporate Insolvency Resolution Process (CIRP) against the assessee – the corporate debtor. Subsequently, Shri Ramchandra D. Choudhary was appointed as a Resolution Professional by the NCLT on 10.11.2017. That the NCLT vide its order dated 25.10.2018 passed liquidation 3 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited order against the assessee-company in view of the resolution so passed in the meeting of the Committee of Creditors (CoC). The Resolution Professional Shri Ramchandra D. Choudhary was to continue as Official Liquidator. The Official Liquidator has stated in his letter that he did not have records of the books of accounts relating to the impugned appeals since the suspended Board of Management or Directors had handed over incomplete records to him. He further stated in the said letter that the Department, in any case, had lodged claim of Rs.39,95,35,310/- to him and the details of which are as under:- AY 2016-17 - Rs.12,87,49,490/- AY 2011-12 - Rs. 6,79,16,350/- AY 2015-16 - Rs. 1,36,46,780/- AY 2013-14 - Rs. 7,96,97,520/- AY 2014-15 - Rs. 10,93,25,170/- 3. Thereafter, on the schedule date of hearing on 24.08.2022, Shri Sumit Parikh appeared on behalf of the Official Liquidator and sought time to prepare the case. Accordingly, the matter was adjourned to 01.09.2022. Since the Bench did not function on the said date, the case was adjourned to 04.10.2022 and that on the date also none appeared on behalf of the assessee. Thereafter, the case was adjourned to 21.11.2022 and the notice issued by RPAD. On the said date also, none appeared on behalf of the assessee. All the above notices were issued to the Official Liquidator at the address mentioned by him. In the consistent absence of any representation for the assessee before us, therefore, the matter was heard exparte by the Bench on 21.11.2022. Thereafter, on 16.02.2023, it was fixed for seeking clarification from the Department, that after the admission of the claim of the Department by the Official Liquidator, whether there lay any cause of action to proceed with the hearing of the appeals. On the next date i.e. 01.03.2023 4 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited when the appeal was fixed for hearing, the learned DR informed the Bench that the Department’s claim before the Official Liquidator, in any case, pertained to only one of the years in appeal before us i.e. AY 2011-12 and that the admission of the Department’s claim made no difference or had no impact to the hearing of appeal being proceeded with since if the Department won the case, the claim would remain intact; but, on the contrary, if the Department lost the case, the claim would get reduced to that extent. Therefore, noting the same, the matter was treated as heard on 01.03.2023. 4. As noted above, since the assessee has remained unrepresented throughout the course of hearing before us, we proceed to dispose of the appeals ex-parte qua the assessee, on the basis of material available on record. 5. We have noted that in the three appeals pertaining to the Department for AYs 2010-11, 2011-12 and 2012-13, the issues raised are identical relating to disallowance of expenses under Section 14A of the Act, disallowance of deduction under Section 80JJA of the Act, disallowance of prior period expenses and disallowance of interest under Section 36(1)(iii) of the Act. These issues are more or less repeated in all the appeals of the Department. Therefore, we shall be taking up the appeals pertaining to AY 2010-11 and if the facts in the subsequent years are found identical, the appeals will be treated as covered by our decision for AY 2010-11. 6. We shall first take up assessee’s appeal for AY 2010-11 in ITA No. 1705/Ahd/2016. The grounds raised by the assessee are as under:- 5 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited “1. In law and in the facts and in the circumstances of the appellant’s case, The LdCIT(A) has erred in not allowing deduction u/s 35(1)(iv) for Rs.7,50,72,249/-, being capital expenditure incurred for scientific research. The CIT(A) ought to have allowed the same. 1.1 In law and in the facts and in the circumstances of the appellant’s case, The Ld CIT(A) has erred in denying deduction u/s 35(1)(iv) on the ground that such claim was not made before Assessing Officer without appreciating the fact that additional claim/ground can be taken at appellate stage. 2. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) while upholding disallowance u/s 35(2AB) has erred in not allowing depreciation and additional depreciation on capital assets The learned CIT(A) ought to have appreciated that such depreciation was not claimed in Return of Income as such assets were considered as part of higher deduction u/s 35(2AB) but when such higher deduction is itself not granted, the appellant is entitled to depreciation and additional depreciation on such assets which in fact is used for Research and Development of appellant’s business.” 7. As transpires from a bare perusal of the grounds raised as above, the solitary issue raised by the assessee relates to claim of deduction under Section 35 of the Act. A perusal of the order of the Assessing Officer reveals the facts relating to the case as the assessee having claimed deduction under Section 35 of the Act of Rs.11,26,08,375/- (150% of capital expenses) and after debiting revenue expenses to the P&L account weighted deduction @ 50% thereof, at Rs.18,49,000/-, of expenses on account of Research and Development. Thus total deduction claimed by the assessee under Section 35(2AB) of the Act amounted to Rs.11,44,57,375/-. The assessee, during the assessment proceedings, was asked to explain with documentary evidence as to how it fulfilled the conditions for claiming deduction u/s 35 of the Act. Due reply was filed by the assessee in this regard; after considering which the Assessing Officer held that the assessee had not furnished any documentary evidence to prove its eligibility for deduction under Section 35(2AB) of the Act of Rs.11.44 crores since it had failed to prove with 6 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited evidence that the in-house research and development facility was approved by DSIR. The Assessing Officer noted that the assessee had not furnished copies of Form 3CK, 3CL and 3CM for claiming the aforesaid deduction and accordingly he held that the assessee was, therefore, not entitled to claim deduction under Section 35(2AB) of the Act of Rs.11,44,57,375/-. His findings in this regard are recorded at paragraph No.5.5 & 5.6 of the order which read as under:- “5.5 On perusal of the above submissions it is seen that the assessee has not furnished any details/documentary evidence to prove that the in house research facility was approved by DSIR. The assessee has also not furnished any evidence to prove that it fulfilled the requisite conditions for allowance of deduction as prescribed in section 35 of the Act. The assessee was specifically requested to furnished copies of Form 3CK, 3CL and 3CM. The assessee has not furnished copies of such forms. It may be mentioned that Form No.3CM is the order of approval of In-house Research & Development facility u/s.35(2AB) by the Secretary, DSIR. Similarly, Form No.3CK is the application form for entering into an agreement with the DSIR for co- operation in In-house Research & Development facility and for the audit of the accounts maintained for that facility. Similarly, Form No.3CL is the report of the DSIR to the DG (Income-taxExemptions) u/s.35(2AB) of the Income-tax Act. This form inter-alia includes the details of cost of In-house research facility, giving break-up of expenditure on land & building and details of expenses incurred by the assessee as duly certified by the DSIR. 5.6 Despite a number of opportunities provided, the assessee has not produced either of the prescribed forms. Since the assessee has not produced form 3CK, 3CL and 3CM, it is deemed that the assessee has not fulfilled the prescribed conditions for allowance of deduction, as prescribed in section 35(2AB) of the Act. Accordingly, it is confirmed that there is no evidence to show that the assessee applied in Form No.3CK for entering into an agreement with DSIR for co-operation in in-house research and development facility and for the audit of the accounts maintained for that facility. There is no evidence to prove that such in house research facility was approved by DSIR. Further there is no evidence to show that the prescribed authority DSIR was satisfied that the conditions provided in section 35(2AB) were fulfilled by the assessee. Thus, it cannot be said that the assessee is entitled for deduction u/s.35 (2AB) as claimed by it and the same is accordingly, rejected. Accordingly disallowance of deduction is made to the tune of 7 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited Rs.11,44,57,375/-. Penalty u/s.271(1)(c) is being separately initiated for furnishing inaccurate particulars of income.” 8. Before the learned CIT(A), the assessee withdrew its grounds of appeal pertaining to disallowance of deduction under Section 35 of the Act of Rs.11,44,57,375/-. Thereafter, the learned CIT(A) noted that the assessee has raised an alternate ground for allowing 100% of capital cost. The written submissions of the assessee in this regard making this claim before the learned CIT(A) are reproduced at paragraph No.8.2 of the impugned order which reads as under:- “8.2 So far as alternate ground of allowing 100% of capital cost is concerned, the Appellant has filed following written submission: 5.4 Without prejudice the aforementioned, it is submitted that the appellant has incurred capital expenditure of Rs.7,50,72,249/- and revenue expenditure of Rs.36,98,000/- on scientific research facility. Accordingly while claiming deduction u/s 35(2AB), 150% of capital expenditure amounting to Rs.11,26,08,374/- (150% of 7,50,72,249/-) was claimed. Since Rs.36,98,000/- on account of revenue expense was already debited in profit and loss account, an additional 50% of such expenditure amounting to Rs. 18,49,000/- (50% of 36,98,000/-) was claimed. While computing the impugned disallowance the Assessing Officer has disallowed Rs.11,44,57,375/- (11,26,08,374 + 18,49,000) u/s 35(2AB). In this connection the appellant would like to mention that the Assessing Officer is not justified in making entire disallowance @ 150% in case ' of capital expenditure of Rs.7,50,72,249/-. Such expenditure is even otherwise allowable @ 100% as per the provisions laid down in section 35(l)(iv). The relevant excerpts of section 35 (1) (iv) are as follows: 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed : .... (i) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub- section (2) Hence, it is submitted that even if claim of appellant is not accepted and deduction u/s 35(2AB) is not allowed @ 150%, the appellant is eligible for deduction of capital expenditure @ 100% as Assessing 8 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited Officer has not held that capital expenditure is incurred other than for the purpose of Scientific Research. Accordingly the appellant is eligible for relief of Rs.7,50,72,249/-out of total disallowance made by Assessing Officer in light of provisions of section 35(1)(iv).” 9. Taking note of the above, the learned CIT(A) dismissed this alternate ground of appeal of the assessee also, noting that the assessee had been unable to prove its eligibility to claim deduction under Section 35(2AB) of the Act in the first place and has been unable to substantiate its claim that the capital expenditure pertained to Research and Development. The relevant finding of the learned CIT(A) at paragraph No.8.3 of his order is as under:- “8.3 I have carefully considered the Assessment Order and submission filed by the Appellant. The Appellant has alternatively argued that though it has claimed deduction under Section 35(2AB) being 150% of capital expenditure in Return of Income and if such disallowance is upheld on the ground that there is no approval DSIR, it is entitled to 100% of capital expenditure on the ground that same is for scientific research and allowable as deduction under Section 35(1)(iv) of the Act. This argument was not taken before the AO and even Appellant itself is not able to provide any documentation or evidences that expenditure of capital nature pertains to scientific research hence alternate argument taken by Appellant is not entertained. This Ground of Appeal is dismissed.” 10. Before us, the assessee has challenged the disallowance of claim of deduction under Section 35(1)(iv) of the Act of Rs.7,50,72,249/- being 100% of capital expenditure incurred on in-house R&D facility. Alternatively, the assessee has sought depreciation to be allowed on the same. 11. The learned DR before us relied on the orders of the authorities below. 9 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited 12. We have perused the material available on record and gone through the orders of the authorities below. The Ld.CIT(A) has given a categorical finding of fact, while denying assesses claim of 100% capital expenditure incurred on research and development as per section 35(1)(iv) of the Act, that the assessee was unable to substantiate its claim of having incurred capital expenditure for Research and Development. In the absence of any representation on behalf of the assessee, the said finding of fact by the Ld.CIT(A) has remained uncontroverted before us. We therefore see no reason to interfere in the order of the Ld.CIT(A) denying assesses claim of 100% deduction of capital expenses incurred on Research and development u/s 35(1)(iv) of the Act. Also since the assesses claim of having incurred capital expense is not established its alternate claim of allowance of depreciation on the same also is not tenable. In view of the above ground of appeal No.1-2 raised by the assessee is dismissed. 13. In effect appeal of the assessee is dismissed. 14. We shall now deal with Department’s appeal No.2174/Ahd/2016 for Asst.Year 2010-11. Ground no.1 raised by the Revenue reads as under: “1) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.1,58,643/- made on account of disallowance u/s.14A Rule 8D of the Act.” 15. As is evident from bare perusal of the ground, the issue relates to disallowance of expenses pertaining to earning of exempt income as per the provisions of Section 14A of the Act, which the ld.CIT(A) had deleted to the extent of Rs.1,58,643/-. 10 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited 16. The facts relating to the issue have been dealt with by the ld.CIT(A) at para-5 of his order, noting that the AO had made a total disallowance under section 14A of the Act with Rule 8D of the Income Tax Rules,1962,of Rs.2,46,343/-, being disallowance pertaining to interest incurred for the purpose of earning of exempt income amounting to Rs.2,25,000/- computed as per Rule 8D(2)(ii) and other expenses so incurred as per the Rule 8D(2)(iii) being Rs.21,000/-. The ld.CIT(A) has also noted the fact that the assessee had earned exempt income of only Rs.87,700/- and accepting the assessee’s plea that the disallowance in any case could not exceed the exempt income earned, he restricted the disallowance to the extent of exempt income earned i.e. Rs.87,700/-, and deleted the balance of Rs.1,58,643/- out of total disallowance of Rs.2,46,343/- made by the AO. He relied upon the decision of the ITAT on this proposition that the disallowance under section 14A cannot exceed the exempt income earned. His finding in this regard at para 5.3 of his order is as under: “5.3 I have considered the facts of the case, Assessment order and submission made by the Appellant. During the course of Assessment Proceeding, AO observed that Appellant has shown investments from which dividend income is earned which is claimed exempt u/s 10(38) of the Income tax Act, 1961. The AO has worked out the disallowance under Rule 8D being interest and administrative expenditure at Rs.2,46,343/-. During the course of appellate proceeding it was submitted by the appellant that, it has been claimed by the appellant that in this case, the appellant has the dividend income which was exempt amounting to Rs.87,700/- and therefore, the disallowance cannot exceed to the exempt income of dividend as has Been held by the Hon'ble ITAT, Ahmedabad in case of ChudgarRanchodlalJethalal V/s DCIT ITA No. 245/Ahd/2013 [A.Y. 2008-09]. The relevant para of the decision is reproduced as under: "12. We have heard the rival submissions and perused the material on record. On perusing the Balance sheet, we find that there is no change in investments at the year under as at 31st March, 2007 and as at 31st March 2008 meaning thereby that prima facie no new investments have been made by the Appellant during the year. Further on perusing the Balances sheet as at 31st 8 ITA No 245/AHD/2013 . A.Y. 2008-09 March 2008 we find that the 11 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited share holders fund comprising of Share capital and reserves and surplus were to the extent of Rs.1.49 crores and during the year Appellant has also earned profit after tax of Rs.60.39 lacs meaning that the availability of interest free funds with Appellant at the year-end were in excess of investments. From the details of other income placed on record, it is seen that during the year dividend earned by the Appellant is of Rs.20,498/- and the disallowance made by A.O u/s 14A is of Rs. 1,02,007/- and thus the disallowance u/s. 14A worked out by A.O is more than the tax free income. Before us, Id. D.R. has not brought any decision of Tribunal or High Court on record to controvert the submissions made by Id. A.R that disallowance u/s. 14A cannot be more than tax free income. On the other hand, while dictating the order, we have come across the decision of Hon'ble Delhi High court in the case of Joint Investment Pvt. Ltd. vs. CIT ITA No.117 of 2015 decided on 25.02.2015 wherein the Hon'ble High Court has held as under: "9. In the present case, the AO has not firstly disclosed why the appellant/appellant's claim for attributing Rs. 2,97, 440/- as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the appellant's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT(A)~and the IT AT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs. 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire lax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure 'incurred by the appellant in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case." Considering the totality of the facts and in view of the fact that the provisions of Rule 8D are applicable for the year under consideration and in the light of the aforesaid decision of Delhi High Court cited hereinabove and in view of the fact that the disallowance worked out by A.O u/s. 14A is more than the exempt income and considering the alternate submission of Id. A.R. to make a reasonable disallowance u/s. 14A as deemed fit, we are of the view that disallowance of Rs. 5,000/- if made in the present case will meet the ends of justice. We thus direct accordingly. " Reliance is also placed on the decision of jurisdictional ITAT Ahmedabad in the following cases: (i) Decision of Hon'ble UAT Ahmedabad in case of Shri Laxhmi Bidi Trading company ITA No. 2662/Ahd/2014 dated 30th April, 2014 12 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited (ii) Decision of Hon'ble ITAT Ahmedabad in case of Madhusudan Industries Ltd TTA No. 1715/Ahd/2011 dated 13/02/2015 Considering the above ratio of decisions, disallowance u/s r.w.r. 8D of Rs.2,46,343 is directed to be restricted to Rs.87,700/- i.e. exempt income received in the form of the balance disallowance. Thus, this ground of Appeal of the Appellant is therefore, partly allowed.” 17. Before us, the ld.DR was unable to either controvert the facts relating to the issue that the exempt income earned by the assessee amounted to Rs.87,700/- nor was he able to controvert the legal proposition that disallowance under section 14A of the Act could not exceed exempt income. 18. We have noted the decision of the Hon’ble Gujarat High Court in the case of CIT Vs.Corrtech Energy Ld., 372 ITR 97. As held by us, the disallowance under section 14A of the Act cannot exceed the exempt income. 19. In view of the above, in the absence of the ld.DR being able to controvert the finding of the ld.CIT(A), either on facts or in law, we therefore, see no reason to interfere in order of the ld.CIT(A) deleting the disallowance under section 14A of the Act to the extent of Rs.1,58,643/-. Ground no.1 raised by the Revenue is dismissed. 20. Ground no.2 of the appeal reads as under: 2) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.12,31,000/- made on account of disallowance of prior period expenses.” 21. As is evident from the above, the issue relates to prior period expenditure amounting toRs.12,31,000/- disallowance of which made by the AO was deleted by the ld.CIT(A). 13 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited 22. The facts relating to the issue has been dealt with by the ld.CIT(A) in para-6 of his order, wherein he has noted that the AO made the disallowance of prior of period expenditure of Rs.12,31,000/- noting that it did not relate to the impugned year and the assessee had failed to submit evidences of crystallisation of the expenditure in the impugned year. The ld.CIT(A) however deleted the disallowance noting that the AO has not doubted genuineness of the expenditure, and if it is not allowable in the impugned year, it is to be allowed in the earlier year and the entire exercise is revenue neutral. For this reason, he held that there was no reason to make disallowance of prior period expenses in the impugned year and relied on the order of the Delhi High Court in the case of CIT Vs. M/s.Vishnu Industrial Gases P.Ltd. dated 6.5.2008 and the decision of Hon’ble Delhi High Court in the case of CIT Vs. Shri Ram Piston & Rings Ltd., dated 5.5.2008. The ld.CIT(A) has also relied on the decision of ITAT, Ahmedabad Bench in the case of Adani Enterprise P.Ltd., ITA No.1859/Ahd/2011 dated 1.1.2006. His finding in this regard at para 6.3 of the order is as under: “6.3 I have carefully considered the Assessment Order and submission filed by Appellant. The Audited Annual Accounts of Appellant shows that it has claimed prior period expenditure of Rs.12,31,000/- in current year. The AO has disallowed such claim on the ground that Appellant has not proved that such expenditure is crystallised in current year. On the other hand Appellant has reiterated that such expenditure is crystallized only in year under consideration and looking to the turnover, such expenditure cannot be disallowed only on the ground that same pertains to earlier Assessment Year. It was also argued by Appellant that if expenditure pertains to earlier Assessment Year, it may be allowed in the year to which it pertains or no disallowance should be made as entire exercise would be tax neutral and in support of its argument, Appellant relies on decision of Ahmedabad ITAT and other High Courts in para 3.4 of its written submission. On careful consideration of entire facts, it is observed that Appellant has not given any proof that such expenditure is crystallised in current year hence argument of Appellant that such expenditure is as under: 14 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited "5. We have heard rival contentions. Page 13 to 16 of the paper book comprise all details of assessee's prior period expenditure amounting to Rs. 67,88,591/-falling under major heads of C & F, misc. expenditure, outward freight and travelling etc. Its ledger accounts reveals that the same have been recognized on various dates from 01-04-2005 to 31-03-2006. There is hardly any dispute on genuineness aspect of the above stated expenditure heads. This is not the Revenue's case that the same is capital expenditure otherwise not allowable u/s. 37 of the Act. Both the lower authorities nowhere rebut assessee's case that it has been following past practice or the issue stands decided in its favour in earlier assessment years. Case law (1958) 33 ITR 681 (Bom) CIT vs. Nagri Mills Co. Ltd holds that when an assessee company is assessed at uniform rate, year of raising an expenditure claim is of no consequence, more particularly, when the same is allowable. Next judgment (2010) 194 TAXMANN 158 (Del) CIT vs. Jagatjit Industries accepts consistent accounting practice claiming identical expenditure in mercantile system of accounting wherein the necessary expenditure vouchers have been received after 31st March of the relevant accounting period. Case law (2014) 221 TAXMANN 80 (Bom) CIT vs. Mahanagar Gas Ltd supports assessee's case that prior period expenditure crystallize during the year on receipt of bills is allowable. This is followed by (2010) 328 ITR 17 (Del) CIT vs. Exxon Mobil Lubricants Pvt. Ltd upholding ClT(A)'s and tribunal's view that if the assessee admits prior period income which was not excluded while working out relevant previous year income, it is unreasonable to allow one part of prior period adjustment i.e. prior period expenditure. We come to Revenue's case law now. The first one is (2013) 33 taxmann.com 92 (Bang) Bearing Point Business Solutions vs. DCIT and (2013) 35 taxmann.com (Hyd) now Bharat Ventures Ltd vs. CIT deciding the issue in Revenue's favour. We find that these tribunal's decisions do not confirm to different views of various Hon’ble high courts hereinabove. Next case law (2013) 42 taxmann.com 142 (Guj) CIT vs. Gujarat Mineral Development Corporation is an admission order after framing substantial question of law wherein the main case is-still pending for final disposal. We observe that this latter order does not settle a ratio. We take into account above stated discussions, relevant facts and case law to conclude that both the lower authorities have wrongly disallowed assessee's claim or prior period expenditure. The same stands deleted. This first substantive ground is treated as allowed." Following the above decisions of Hon'ble Ahmedabad ITAT which is directly on the issue, addition of Rs. 12,31,000/- made by the AO is directed to be deleted. This Ground of Appeal is allowed.” 23. Before us, the ld.DR was unable to distinguish the decisions relied upon by the ld.CIT(A)for the proposition that the disallowance of prior period expenses being a tax neutral exercise no disallowance was warranted,while deleting the disallowance of Rs.12,31,000/-. 15 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited 24. In view of the above , in the absence of the ld.DR being able to controvert the finding of the ld.CIT(A), either on facts or in law, we see no reason to interfere in order of the ld.CIT(A) deleting the disallowance of prior period expenses of Rs.12,31,000/-. Ground no.2 raised by the Revenue is dismissed. 25. Ground no.3 reads as under: “3. That the ld.CIT(A) erred in law and on facts in deleting the disallowance of deduction of Rs.8,10,34,266/- made u/s.80JJA of the I.T. Act.” 26. Issue raised by the Revenue in the above grounds relates to disallowance of deduction made by the AO of Rs.8,10,34,266/- claimed by the assessee under section 80JJA of the Act which was deleted by the ld.CIT(A). 27. The ld.CIT(A) has dealt with the issue at para-7 of his order. The Ld,CIT(A) noted the reasons for the AO disallowing the claim, as finding that the assessee failed to qualify for claiming deduction under section 80JJA of the Act on account of the assessee not fulfilling either of the criteria laid down in the section for claiming the deduction, of employing biodegradable waste and producing any item as referred to in Section 80JJA of the Act out of the same. Thus, the ld.CIT(A) noted that pre-requisite for claiming deduction under section 80JJA of the Act being employment of biodegradable waste for producing articles referred to in the section, not being fulfilled by the assessee, therefore the assessee was held by the AO as not entitled to claim deduction under section 80JJA of the Act, and the entire claim of the assessee under the said section amounting to Rs.8,10,34,266/- was denied by the AO. 16 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited 28. At para 7.1 to 7.5 of his order, the ld.CIT(A) has exhaustively dealt with the issue of this claim of the assessee, and has thrashed itboth on facts and law applicable, and thereafter held that the AO was wrong in holding that the assessee had not fulfilled the necessary pre-requisite for claiming deduction under section 80JJA of the Act. The ld.CIT(A) exhaustively dealt with the facts of the case and has given a finding of the fact that the assessee did use biodegradable waste and did produce an article being biological agent as mentioned in the section and was thus entitled to deduction under section 80JJA of the Act. The ld.CIT(A) also noted that the AO had found that the allocation of expenditure by the assessee to its eligible and non-eligible units was also not correct. The ld.CIT(A) has dealt with this aspect also and controverted the finding of the AO by bringing out the facts clearly in his order. 29. At para 7.1 of his order, the ld.CIT(A) dealt first with the facts of the case, pointing out the observation of the AO leading to make the disallowance of assessee’s claim of deduction under section 80JJA of the Act. He noted that the AO had observed that out of total purchase in the bio-feed division of the assessee of Rs.20.77 crores the AO had noted that captive purchases were to the tune of Rs.7.40 crores, and out of the balance of Rs.13.37 crores, the purchases of Rs.11.64 crores was shown as purchases of feed but classified as biodegradable waste as defined in section 80JJA of the Act. Thereafter, the ld.CIT(A) dealt with the arguments of the assessee on facts countering the finding of the AO that feed purchases was nothing but waste generated by processing guar, tamarind, seed etc. and these waste materials consisted of residual maize, unwanted proteins, fibres, seeds and on these wastes, biological process was carried out by the assessee with the help of fermentation to produce 17 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited biological agent i.e. enzymes which are biocatalysts and are rich in energy value. He noted that the assessee, therefore argued that the feed therefore purchased by the assessee was nothing but biological waste and from the same the assessee had produced biological agents i.e. enzymes, and thus qualified for the deduction under section 80JJA of the Act. The observation of the facts as noted by the AO and the arguments made before him at para 7.1 of his order are as under: “7.1 I have carefully considered the Assessment Order and the submission filed by the Appellant. The AO has observed that Appellant has shown total purchases of Rs. 20.77 crores in Profit & Loss Account of Biofeed Division which includes captive purchase at Rs.7.40 crores (including Maize purchased of Rs. 5.97 crores) and out of the balance Rs.13.37 crores, Rs.11.64 crores are shown as purchase of feed and these items are not bio-degradable waste as defined in Section 80DA. The AO also referred to definition of European Commission for Environment wherein Bio-degradable Waste is defined and came to conclusion that raw material used by Appellant is not bio-degradable waste. It was also contended by AO that Appellant has not produced any article being generation of power, production of bio-fertilizer, bio-pesticide, production of bio-gas or biological agent or making pellets/briquettes for fuel hence deduction claimed under Section 80JJA cannot be made available. The AO at para 4.9 of his order has made alternate argument that entire expenditure incurred by Appellant is required to be allocated between 80JJA undertaking and non~80JJA undertaking and if this allocation is made, Appellant is entitled for lower deduction by Rs.464.19 lacs. On the other hand, Appellant has argued that during the production starch waste material being residue maize, proteins, fibres are separated (which are not usable hence Appellant has converted these waste material; into bio-feeds. It is also argued by Appellant that it has purchased waste from outside parties and on such feeds, It had made process to generate bio-feed. The Appellant has submitted that out of the total purchase of Rs.13.37 crores, feed purchase is Rs.11.63 crores and these feeds is nothing but waste generated by processing guar, tamarind seed, etc. these waste material consists of residual maize/grain, unwanted proteins, fibres, seeds, etc., and on these wastes biological process is carried out with the help of fermentation to produce biological agent i.e. enzymes which are biocatalysts and are rich in energy value. These biological feed help in improving digestion in animals and poultry. On this basis, Appellant has argued 18 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited that it has collected wastage from outside parties as well as from in- house activities, such wastages are processed and it has produced "biofeeds", which are biological agents, which are nutrition boosters derived by a combination of various biological processes and useful in animal healthcare industry. So far as argument of AO that wastages purchased by Appellant are not biodegradable, Appellant has referred to various definitions of waste and argued that they are agricultural waste or by-product from agro-processing industry, which is capable of being decomposed in the nature without creating any damage to nature hence such items are biodegradable waste. The Appellant has also explained the manufacturing process of biological agents in its written submission along with diagram to further strengthen its argument that it is entitled for deduction under Section 80JJA. So far as issue of allocation of expenditure between undertaking eligible for deduction 80JJA and unit not eligible for deduction under Section 80JJA, it was argued by Appellant that allocation is on scientific basis hence allocation on turnover basis is not required. 30. The ld.CIT(A) thereafter went on to first to deal with requirement under the law for claiming deduction under section 80JJA of the Act noting that to be eligible to claim deduction under the said section, the assessee needed to satisfy two conditions, viz. (i) there should a collection and processing of or treatment of bio- degradable waste, and (ii) this waste should be used for generating power or producing bio-fertilizers, bio-pesticides or other bio-logical agents etc. This analysis of the ld.CIT(A) is at para 7.2 of his order as under: “7.2 On careful consideration of entire facts, it is observed that provisions of section 80JJA reads as under: "Where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power or producing bio fertilizers, bio-pesticides or other biological agents or for producing bio- gas or making pellets or briquettes for fuel or organic manure, there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to the whole of such profits and gains for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences." 19 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited The provisions as referred herein above states that following conditions need to be satisfied by Assessee to claim above deduction: (i) there should be collection and processing of or treatment of bio-degradable waste; (ii) The Assessee should use such waste for generating power or producing bio fertilizers, bio-pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure.” 31. The ld.CIT(A) analysed provision of law for the purpose of claiming deduction under section 80JJA, and then went on to deal with the facts, whether in the facts of the present case, the assessee fulfilled the conditions required under the law for claiming deduction under section 80JJA, i.e. whether it used bio-degradable waste for producing biological agents as claimed by the assessee. 32. Dealing with the issue, whether waste collected by the assessee from outside party qualified as bio-degradable waste, which the AO had held did not so qualify, he first dealt at length the meaning of “bio-degradable waste” and found that as per the Collins Dictionary and dictionary of Wikipedia, it meant, the waste which can be broken down and decomposed by bacteria or other living organisms. Then noting the fact that the assessee had purchased material amounting to Rs.11.63 crores which was mainly waste generated during process of guar seeds, tamarind seed etc. which were classified as feed purchase, he noted that they were all capable of decomposing in nature without creating any damage to the nature. He accordingly held that on this basis the “feed purchases” by the assessee of Rs.11.63 crores, qualified as biodegradable waste as required by the provisions of section 80JJA of the Act. His finding in this regard at para 7.3 of his order is as under: 20 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited “7.3 Now, the first issue would be whether waste collected by Appellant from outside party as well as in-house is biodegradable waste or not and whether Appellant is carrying on any process on such waste or not. The provisions of Section 80J3A states that there should be collection of waste and this collection of waste can be from in-house activity or from outside purchase. Hon'ble Bombay High Court in the case of CIT vs. Padma S. Bora [2013] 355 ITR 368 wherein it is held as under: "7. We have considered the submissions. We find that on examination of the evidence both Commissioner of Income Tax (appeals) as well as Tribunal have reached finding of fact that bagasse is a biodegradable waste used for making briquettes for fuel by the respondent assessee. This finding of fact was based on evidence led before the authorities by the respondent- assessee. We find that bagasse is a waste of the sugar factory. This waste is a bio-degradable waste and the same is collected on consideration by the respondent assessee from the factory. There could be no universal definition of the word "waste". The term waste has to be understood contextually i.e. place where it arises and the manner h-. which it arises during the processing of some article. The fact that sugar industry also regards Bagasse as waste is evident from Circular dated 4/2/2006 issued by the Sugar Commissioner, Maharashtra State, Pune. Besides the ITC classification of the Exim policy also classifies bagasse as a waste of sugar industry under Chapter 23 Heading 23.20 thereof. Further, the Central Excise Tariff Act 1985 also regards bagasse as waste of sugar manufacture and is classified under Chapter 23 heading 23.01 of the Central Excise Tariff Act, 1985. We do not agree with the submissions of the appellant's Counsel that collection would mean collecting free of charge and not by purchasing the same. The word "collecting" means to gather; to fetch. It is a neutral word and does not mean collection for consideration or collection without consideration. It is an admitted/undisputed position that the respondent assessee has collected bagasse from sugar factories after having made payment for the same. Therefore, the aforesaid requirement of collecting as provided under Section 80JJA of the Act is satisfied. It is an undisputed finding of fact that the collected bagasse has been used by the respondent- assessee to make , briquettes for fuel as that indeed is the business of the respondent-assessee. The reliance upon the circular No. 772 dated 23/12/1998 by the appellant is misplaced. The aforesaid Circular does not restrict its benefits only to local bodies. In any event the circular cannot override the clear words of Section 80JJA of the Act which provides deduction in respect of profits and gains derived from the business of collecting and processing/treating of bio degradable 21 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited waste i.e. bagasse into briquettes for fuel. In these circumstances, we find no fault with the order of the Tribunal both on facts as well as in law." It is further observed that provisions of Income Tax Act nowhere define the word "bio-degradable waste". However, Collins Dictionary defines "bio-degradable" means "capable of being decomposed by bacteria or other living organisms". The Dictionary of Wikipedia defines "bio- degradable waste" as a type of waste which can be broken down in a reasonable amount of time into its base compounds by micro- organisms and other living things regardless of what those compounds may be. The Appellant has collected waste of Rs.7.39 crore from in-house activity which mainly include husk of Rs.94.47 lacs and residue maize of Rs.5.97 crores. Apart from above, Appellant has purchased material of Rs. 13.37 crores which mainly includes waste generated during processing of guar seed and tamarind seed, etc., for Rs. 11.63 crores. The above purchases of waste was classified as "feed purchase". It is observed that all these residue maize, husk, feeds are generated from agro-processing industries and same are capable of being decomposed in nature without creating any damage to the nature. Appellant has argued that in environment there are plenty of micro- organisms and these micro-organisms consume any material and release simple elements those are useful for environment and materials which can be consumed by these micro-organisms is called biodegradable. Further, bio-degradable agro-waste used by Appellant for producing biological agent being bio-feed are composed of various nutrition components such as protein, fibre, fat, vitamins, minerals, etc., and such waste is used to cultivate and multiply the useful micro- organisms. It is the natural principle that when nutrition available in biodegradable waste is used by micro-organism, they rapidly grow and multiply manifold under suitable temperature. These facts reveals that Appellant has collected and processed bio-gradable waste only. In assessment order, AO has stated that waste collected by Appellant is not bio-degradable but he has not made any brought any evidences in support of his claim that how waste used by appellant is not bio- degradable. The AO has referred to definition of biodegradable waste used by European Commission for Environment. However, on the website of said entity, definition is given for bio-waste and not bio- gradable waste. The definition as available on website in verbatim is reproduced hereunder: "Bio-waste is defined as biodegradable garden and park waste, food and kitchen Waste from households, restaurants, caterers and retail premises and comparable waste from food processing plants. It does not include forestry or agricultural residues, 22 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited manure, sewage sludge, or other bio-degradable waste such as natural textiles, paper or processed wood. It also excludes those by-products of food production that never become ''waste." Thus/definition given by European Commission for Environment is for bio-waste and not for bio-deqradable waste. The facts discussed herein clearly establishes that Appellant has used bio-degradable waste for generation of biological agents as defined in Section 80JJA of the Act. Thus, considering the above facts brought on record by the appellant, the appellant falls under first condition as narrated above. 33. The ld.CIT(A) thereafter went on to deal with other aspect/criteria, that whether the products manufactured by the assessee qualified as “biological agents” as claimed by the assessee, to be eligible to claim deduction under section 80JJA of the Act. He noted that the assessee had explained the entire process of bio-feed for converting into enzymes in three parts, being culture development, seed preparation and final production in plants. He noted that specific micro-organisms are added in the fermentation process which at specified control parameters of pH, temperature, time and to produce specific enzymes. He thereafter noted that this enzymes produced by the assessee were used to replace chemical based antibiotics in animals and poultry. He further noted that the AO had not disproved the contention of the assessee, that the items produced by the assessee were not biological agent. Accordingly, based on the above, he held that the assessee fulfilled other parameters as per the section 80JJA of the Act of having produced biological agents, and his finding in this regard at 7.4 of his order as under: “7.4 The second issue that requires adjudication is whether Appellant has manufactured item as defined in 80JJA or not. The AO has simpliciter stated that Appellant has not manufactured any item referred in Section 80JJA whereas Appellant has emphatically argued that Appellant manufactures "bio-feed" which are biological agent as defined in Section 80JJA. During the course of Assessment 23 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited Proceedings as well in Appellate Proceedings the Appellant submitted the process of manufacturing of bio-feed along with charts reproduced hereinabove. It is observed that biodegradable waste collected by Appellant are further processed with the help of fermentation to produce biological agents being enzymes which are biocatalysts. Appellant has also explained the process of bio-feed in three parts being culture development, seed preparation and final production in plant. It is observed that specific micro-organisms are added in the fermentation process which at specified control parameters of pH, temperature, aeration and time produces specific Enzymes. For each Enzyme a specific microorganism is used will changing the raw material (bio-degradable waste) proportions. Enzymes help in improving the any metabolic reaction in various industrial applications. They help in speeding up the breaking down the complex compounds into simpler compounds thus helping to avoid using conventional and hazardous chemicals which are harmful to the environment. The appellant has further argued that it has manufactured bio degradable agents like Bio-feed Active, Bio-feed Plus and Bio-feed Ultra, etc., and these biological agents have helped in improving the digestion in animals and poultry. They have helped in breaking down the complex feeds into simpler compounds thus making it easy for the animal / poultry to get the extra energy which is locked in the complex feeds. The biological agents present in Biofeeds are also used to replace chemical based antibiotics in animals and poultry. In entire process, appellant has claimed that it has produced biological agents and deduction u/s.80JJA simply state that appellant should produce or manufacture biological agents and AO has not disproved the contention of appellant that items manufactured by appellant are not biological agents. Appellant has also relied on Circular no. 772 dated 23/12/1998 wherein intention of introducing provisions of section 80JJA has been explained, it has been categorically stated that section is introduced to promote activities like recycling of waste which could in turn be converted into useful resources. The activities carried out by appellant as stated herein above clearly suggest that it has produced biological agents which are rich in nutritional value and same is generated out of biodegradable waste hence profit and gains earned form such process is entitled to deduction u/s 80JJA of the Act. Appellant has referred to the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 wherein it was held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Since the provisions intended for promoting economic growth has to be interpreted liberally the restriction on it too has to be construed so as to advance the objective of the section and not to frustrate it. Considering the facts of the case as discussed herein above, it is concluded that appellant has produced biological agents after utilizing 24 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited biodegradable waste and profits and gains earned from such activity entitles appellant to deduction u/s 80JJA of the Act. Appellant has also drawn attention of the undersigned that the group company of the Appellant being Anil Bioplus Limited has also claimed similar deduction under Section 80JJA which was disallowed by Assessing Officer on similar ground and such disallowance was deleted by CIT (Appeals)-l, Ahmedabad vide his order dated 27th January, 2016 in Appeal No. 66/CIT(A)-l. Considering the facts discussed herein above, the Appellant has manufactured biological agent which is entitled for deduction under Section 80JJA of the Act. 34. On the basis of the above factual aspects to which the provision of law were applied by the ld.CIT(A), he held, the assessee was entitled to claim deduction under section 80JJA of the Act having fulfilled all the parameters required by the said section and also finding no basis with the AO for denying deduction tothe assessee. 35. The ld.CIT(A) thereafter went on to note that the AO had also raised another issue regarding allocation of expenditure between eligible and non-eligible units also. On this aspect, theld.CIT(A) noted certain pertinent points that the assessee had given comprehensive working of profits derived from 80JJA units on purchases, could not be allocated on the basis of turnover as contended by the AO, since the profits relating tothe eligible units had to be allocated to it, and could not be disturbed between the eligible and non-eligible units. He noted that the assessee had also given a method for allocating power and fuel expenditure, store expenditure and other expenditure which were on actual basis. He further noted that the AO did not find the allocation to be improper nor the AO pointed out any single instance of expenses which could prove that profit shown in 80JJA unit was higher. He further noted that this basis of allocation had been consistently followed by the assessee in the past also, and allowed by the Department in regular 25 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited assessment. Therefore, considering all these aspects, the ld.CIT(A) dismissed the alternative contentions of the assessee regarding reduction of 80JJA unit on account of allocation of expenditure. His finding in this regard at para 7.5 of his order are as under: “7.5 The Assessing Officer has also raised one more issue regarding allocation of expenditure on the basis of turnover of 80JJA unit and non-80JJA unit. It is observed that Appellant has given the comprehensive working of profit derived from 80JJA unit wherein the Appellant has given method of debiting/allocating expenditure between both the units is given. It is pertinent to note that purchases would naturally be on the basis of actual expenditure and cannot be allocated on the basis of turnover as contended by AO. The Appellant has also given the method of allocating power and fuel expenditure, stores expenditure and other expenditure which are on actual basis and this allocation is not found to be improper by the AO. The AO has neither pointed out any single instance of expense which can prove that profit shown in 80JJA unit is higher or expenditure pertaining to 80JJA unit is allocated to non-80JJA unit. Even method of allocating expenditure is accepted by the AO as, such while passing Assessment Orders for subsequent Assessment Years as submitted by the appellant. When the Appellant has used scientific method of claiming expenditure in 80JJA unit and other unit, allocation of expenditure on turnover basis on presumption is not justified. Considering these facts, the alternate argument of AO regarding reduction of 80JJA Unit by allocating expenditure on turnover basis is rejected. In the nutshell, entire disallowance under Section 80UA made by the AO for Rs.8,10,34,266/- is deleted. This ground of Appeal is allowed. As noted by us above, the ld.CIT(A) has based his order of allowing the entire claim of deduction to the assessee under section 80JJA of the Act applying provision of law to the facts of the case . 36. The ld.DR has been unable to point out any infirmity in the finding of the ld.CIT(A) that items purchased by the assessee, classified as bio-feed, did qualify as biodegradable waste as defined in section 80JJA of the Act, and item produced by the assessee from these bio-feed i.e. enzymes, qualified as “biological agents” as 26 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited required by section 80JJA, and that thebasis of allocation of expenditure by the assessee between the units and eligible for deduction under section 80JJA of the Act and not eligible for deduction 80JJA adopted by the assessee was consistent and correct. The ld.DR having unable to disturb the finding of the ld.CIT(A) either on facts and or in law, we see no reason to interfere inthe order of the ld.CI(A) allowing the assessee’s entire claim of deduction under section 80JJA of the Act. Ground of the appeal No.3 of the Revenue is dismissed. 37. In the result, the appeal of the Revenue in ITA No.2174/Ahd/2016 is dismissed. Now we take up Revenue’s appeal, ITA No.2175/Ahd/2016 (AY 2011-12) 38. The Revenue has raised the following two grounds for adjudication: 1. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.1,15,440/- made on account of disallowance u/s.14A r.w. Rule 8 of the Act. 2. That the ld.CIT(A) erred in law and on facts in deleting the disallowance of deduction of Rs.15,06,65,677/- made u/s.80JJAof the I.T. Act. 39. At the outset, the ld.DR fairly conceded that facts and circumstances in the present case are similar to Asst.Year 2010-11 of the Revenue’s appeal. 40. We find that the issues raised in this year are also identical to the issues raised in the AY 2010-11 except variation in the quantum. Therefore, the observations and findings we made in the foregoing 27 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited paragraph no.18-19 and 27 to 36 while adjudicating the appeal of the Revenue in ITA No.2174/Ahd/2016 shall apply mutatis mutandis in the present assessment year also i.e.Asst.Year 2011-12. In the Asst.Year 2010-11, we rejected similar grounds of the Revenue based on the reasons and conclusion made in that year. Since admittedly there is no disparity in the facts and circumstances between the present year and the earlier assessment cited (supra) qua the present issues, we reject the above two grounds in the present year as well, by adopting same conclusion. 41. In the result, the appeal of the Revenue being ITA No.2175/Ahd/2016 is dismissed. Next we take up the Revenue’s appeal in ITA No.858/Ahd/2017 for AY 2012-13. 42. The Revenue has raised five grounds in this appeal. We shall first take up ground no.(a), (c) and (d) raised in the appeal. They read as under: “(a) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.13,32,326/- made u/s. 12A r.w.r. 8D of the Act. (c) That the ld.CIT(A) erred in law and on facts in deleting the disallowance of deduction of Rs.19,27,10,326/- made u/s.80JJA of the Act. (d) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.21,82,000/- made on account of disallowance of “Prior Period Expenses.” 43. We find that the issues raised in this appeal are also identical to the issues raised in the AY 2010-11 except variation in the quantum. In the Asst.Year 2010-11, we rejected the above identical grounds of the Revenue based on the reasons and conclusion made 28 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited in that year. Admittedly there is no disparity on the facts and circumstances between the present year and the earlier assessment year cited (supra) qua the issues presently before us. Therefore, the observations and findings, we made in the foregoing paragraph no.14 to 37 holds good and apply mutatis mutandis to this appeal for Asst.Year 2012-13 also. We reject the above three grounds also in the present year by adopting same conclusion. 44. Next ground is ground no.(b) which reads as under: “That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.13,32,326/- made u/s.115JB of the Act.” 45. The issues raised in the above grounds are two folds viz. (i) with respect of disallowance made under section 14A of the Act, (ii) addition of disallowance made under section 14A while computing MAT income as per the provisions of section 115JB of the Act. 46. Here we are concerned with issue no.(ii) where the Revenue is aggrieved by action of the ld.CIT(A) in deleting the addition of Rs.13,32,326/- made under section 115JB of the Act. 47. We find that the issue on hand is no more remain res integra because Special Bench ITAT, Delhi in the case of ACIT vs. Vireet Investments (P.) Ltd [2017] (82 taxmann.com 415 (Delhi Trib.) (SB) held that disallowance under section 14A of the Act shall not apply to MAT computation. In holding so, the Tribunal has relied upon the decision of Hon’ble Delhi High Court in the case of Bhushan Steel Ltd., where it has been held that the computation under the MAT provisions is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income Tax Rules. Various Benches of the Tribunal considered similar issue in favour of the assessee on the basis of the decision of 29 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited Special Bench cited (supra). Therefore, respectfully following the decision of the Special Bench in the case of Vireet Investments P.Ltd. (supra), we uphold order of the ld.CIT(A) on the issue and reject the ground (b) of the Revenue’s appeal. 48. Next is ground no.(e) against the deletion of disallowance of interest of Rs.37,80,000/-. The ground reads as under: “(e) That the ld.CIT(A) erred in law and on facts in deleting the disallowance of interest of Rs.37,80,000/- made u/s.36(1)(iii) of the Act.” 49. As evident from the assessment order, the AO noticed that the assessee has debited an amount of Rs.399.74 lakhs being interest & financial charges on secured and unsecured loans. It was also noticed by the AO that the assessee has not charged any interest from persons/ or parties to whom it has given advances. Before the AO, the explanation of the assessee was that the advances made by the assessee represented purchase of goods from the parties, and therefore no disallowance under section 36(1)(iii) of the Act could be made. The assessee has furnished copy of ledger accounts from whom the assessee had purchased goods. However, the ld.AO did not accept the explanation of the assessee and doubted the genuineness of the transactions. The ld.AO was of the view that the assessee has diverted part of borrowed funds for non-business purpose. Accordingly, he invoked provisions of section 36(1)(iii) of the Act and made an adhoc disallowance of Rs.37,80,000/- at the rate of 12% on the loans & advances of Rs.3,15,00,000/- shown by the assessee. 50. Before the ld.CIT(A), the assessee agitated the issue. The assessee has interalia pleaded before the ld.CIT(A) that the assessee 30 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited has utilised the funds for the business purpose; that if the holding company advances loan to its subsidiary and the subsidiary has utilised the same for the business purpose, then the assessee would be entitled to claim deduction of interest on its borrowed loans; that the assessee has sufficient interest free funds in the form of own capital, accumulated profits and other interest free creditors and loans to cover interest free advances to sister concern, and therefore no disallowance under section 36(1)(iii) of the Act was called for. After considering the submissions of the assessee, the ld.CIT(A) observed that the assessee has huge own funds as against the interest free advances given by the assessee for Rs.3.15 crores, and the presumption would be that such interest bearing advances were given out of own funds and not out of interest bearing funds available with the assessee. To support this observation, the ld.CIT(A) has relied on various case laws, which are noticed in the impugned order from page nos.52 to 54. He accordingly deleted the impugned addition made by the AO. 51. We have heard the ld.DR; perused orders of the Revenue authorities. It is evident that the AO has disallowed the impugned interest amount under section 36(1)(iii) of the Act under the presumption that borrowed funds have been diverted for non- business purpose. However, we find that the assessee has huge own funds to the extent of Rs.299.90 crores as against the advances made by the assessee to the tune of Rs.3.15 crores, and that the amount so advanced was to its sister concerns. These facts have not been denied by the Department. The ld.CIT(A) has elaborately discussed the issue in the light of various judgments to proposition that when interest free funds available with the assessee was more than the loan advance to the sister concerns, the presumption is that 31 ITA Nos. 1705, 2174& 2175/Ahd/2016 & 858/Ahd/2017- Assessee: Anil Limited investment and/or the advances were made out of the same funds, and therefore there is no room for the assuming that borrowed money was utilised for the purpose of advances to the sister concerns unless there is evidence to contrary with the Department. Undoubtedly, there is no evidence with the AO to controvert that the borrowed money was utilised for the purpose of advance for non- business purposes. We are satisfied that the assessee has substantial amount own funds in the form of reserve/ surplus which the assessee could utilise for giving advances. In the absence of any contrary material with the AO to negate the claim of the assessee, we are unable to disturb the finding of the ld.CIT(A) on the above. Therefore, considering the findings of the ld.CIT(A), which are based on several judgments of Hon’ble High Courts and Supreme Court, the assessee’s claim of expenditure under section 36(1)(iii) of the Act is to be allowed. Thus, we do not find any infirmity in the order of the ld.CIT(A), and therefore, the ground no.(e) raised by the Revenue is dismissed. 52. In the result, the appeal of Revenue in ITA No.858/Ahd/2017 is dismissed. 53. To sum up the combined result, all the appeals of the Revenue and the appeal assessee are dismissed. Order pronounced in the open Court on 19/05/2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 19/05/2023 VK Vk