M/s Batronics India Ltd., Hyderabad V. ACIT, Circle-1(3), Hyderabad

ITA 2188/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61899 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 28-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAO
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Depreciation; Right to appeal; Capital expenditure
• Section: 43B; 143(3); 10B; 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD ` BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 2188/HYD/2011 ASSESSMENT YEAR 2006-07 I.T.A. NO. 2189/HYD/2011 ASSESSMENT YEAR 2007-08 M/S. BARTRONICS INDIA LTD. HYDERABAD PAN: AAACB8231F VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1(3) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI P. MURALI MOHANA RAO RESPONDENT BY: SHRI M.S. RAO DATE OF HEARING: 16 . 04 .201 2 DATE OF PRONOUNCEMENT: 31. 05.2012 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE CIT(A)-II, HYDERABA D DATED 10.10.2011 AND 28.10.2011 FOR ASSESSMENT YEARS 2006 -07 AND 2007-08. SINCE COMMON ISSUES ARE INVOLVED, THE SAM E ARE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. I.T.A. NO. 2188/HYD/2011 2. THE ASSESSEE HAS RAISED THE FOLLOWING PRECISE GROUN DS OF APPEAL. 1. THE LEARNED CIT(A) ERRED WHILE SUSTAINING THE DISALLOWANCES MADE U/S. 43B AND 40(A)(IA) IGNORING THE FACT THAT ANY DISALLOWANCES MADE WILL INCREASE THE EXEMPTION U/S. 10B AND WILL HAVE NO IMPACT FOR THE DISALLOWANCE MADE. 2. THE ASSESSEE HAS PLACED THE RELIANCE ON THE DECISIO N OF THE ITAT, HYDERABAD IN THE CASE OF PLANET ONLINE P. LTD VIDE ITA NO. 1016/H/07 IN SUPPORT OF ITS CLAIM. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 2 3. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCE MADE U/S. 43B AGGREGATING 2,01,586/- REJECTING THE PLEA OF THE ASSESSEE THAT THESE STATU TORY LIABILITIES ARE OLD AND UNCLAIMED BALANCES WHICH IS NOT CORRECT AND NOT JUSTIFIED. 4. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCES MADE U/S. 40(A)(IA) OF RS. 9,24,853/- , RS. 6,93,777/-, RS. 13,88,511/- WHICH IS NOT CORRECT AN D NOT JUSTIFIED. HENCE, THE DISALLOWANCES MAY PLEASE BE DELETED. 5. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCE OF CONVEYANCE EXPENSES OF RS. 2,20,000 /-, DISALLOWANCE OF INTEREST OF RS. 3,27,501/- AND DISALLOWANCE OF DEPRECIATION OF RS. 1,70,770/- WHIC H IS NOT CORRECT AND NOT JUSTIFIED. HENCE, THE DISALLOWA NCES MAY PLEASE BE DELETED. 6. THE ASSESSING OFFICER HAS ERRED WHILE DISALLOWING A SUM OF RS. 1,11,73,133/- FROM THE EXPORT PROFIT CLAIMED BY THE ASSESSEE COMPANY ON THE CONTENTION THAT COMMON EXPENDITURE RELATING TO THE EXPORT AND DOMESTIC BUS INESS ARE NOT DEDUCTED FROM EXPORT PROFIT AND THE SAME HA S BEEN CONFIRMED BY THE LEARNED CIT, APPEALS WHICH IS NOT CORRECT AND NOT JUSTIFIED. 7. THE ASSESSEE COMPANY HAS ALREADY SUBMITTED THE LOWE R AUTHORITIES THAT IT IS MAINTAINING SEPARATE SET OF BOOKS OF ACCOUNTS FOR THE TURNOVER RELATING TO DOMESTIC AS W ELL AS 100% EOU OF THE COMPANY. IT HAS PROPERLY ALLOCATED THE EXPENSES AS PER THE ACCEPTED METHOD OF ACCOUNTING A ND THE SAME PRACTICE IS BEING FOLLOWED BY THE COMPANY YEAR BY YEAR, ADHERING TO THE PRINCIPLES OF CONSISTENT ACCOUNTING PRACTICES. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER WH EREIN THE ABOVE SUM OF RS. 1,11,73,133/- HAS BEEN DISALLO WED FROM THE EXPORT TURNOVER CLAIMED BY THE ASSESSEE COMPANY WHICH IS NOT CORRECT AND NOT JUSTIFIED. HEN CE, THE DISALLOWANCE MAY PLEASE BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S PUBLIC LIMITED COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 31,71,911/-. THE ASSESSING OFFICER COMPLETED THE AS SESSMENT U/S 143(3) AND COMPUTED THE TAXABLE INCOME AT RS. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 3 2,20,17,601/- AFTER DISALLOWING CERTAIN EXPENDITURE U/S 40(A)(IA) AND LIABILITIES U/S 43B OF THE INCOME-TAX ACT, 1961. 4. GROUND NO 1 & 2 REGARDING DISALLOWANCES U/S 43B AND 40(A) (IA) AND CASCADING EFFECT ON DEDUCTION U/S 10 B. THE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT OF RS. 2,01,586/- TOWARDS DISALLOWANCE U/S. 43B, RS. 9,24,853/- TOWAR DS DISALLOWANCE U/S. 40(A)(IA), RS. 6,93,777/- TOWARDS DISALLOWANCE U/S. 40(A)(IA), RS. 13,88,511/- TOWARDS DISALLOWANC E U/S 40(A)(IA), RS. 2,20,000/- TOWARDS DISALLOWANCE OF REPAYMENT OF CAR LOANS, RS. 3,27,501/- TOWARDS DISALLOWANCE OF CAPITALIZED EXPENDITURE AND RS. 1,70,770/- TOWARDS DISALLOWANCE OF DEPRECIA TION AND ARRIVED AT AMOUNT OF RS. 2,20,17,601/-. THE ASSESSE E COMPANY WAS DIRECTED TO GET ACCOUNTS AUDITED UNDER SECTION 142(2A) OF THE INCOME-TAX ACT, 1961 FOR THE A.Y. 2006-2007. THE R EPORT OF THE SPECIAL AUDIT HAS ALSO BEEN SUBMITTED AND THE CERTA IN AMOUNTS HAVE BEEN DISALLOWED. 5. THE ASSESSING OFFICER HAS DISALLOWED U/S. 43B A SUM OF RS. 18,666/- TOWARDS PROFESSIONAL TAX, RS. 10,554/- TOW ARDS OTHER STATUTORY LIABILITIES AND RS. 1,72,366/- TOWARDS NO N-REMITTANCE OF SERVICE TAX WITHIN THE TIME I.E., BEFORE 31 ST DECEMBER 2006 AGGREGATING RS. 2,01,586/- U/S. 43B. THE ASSESSEE HAS ALREADY SUBMITTED THE ASSESSING OFFICER THAT THE STATUTORY LIABILITIES ARE OLD AND UNCLAIMED BALANCES AND REQUESTED NOT TO DIS ALLOW THE EXPENSES. HOWEVER, THE ASSESSING OFFICER HAS NOT CO NSIDERED THE SAME AND DISALLOWED A SUM OF RS. 2,01,586 U/S. 43B. 6. THE ASSESSING OFFICER HAS ALSO DISALLOWED A SUM OF RS. 9,24,853 U/S. 40(A)(IA) ON THE CONTENTION THAT TDS AMOUNT PAYABLE TO THE EXTENT OF RS. 18,867/- HAS NOT BEEN REMITTED TO THE GOVERNMENT ACCOUNT WHICH IS NOT CORRECT, NOT JUSTIF IED AND BAD IN LAW. THE AR SUBMITTED THAT THE ASSESSEE HAD COMPUTE D THE TDS AT HIGHER RATES THAN THE ACTUAL APPLICABLE RATE WHICH RESULTED IN ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 4 HIGHER TDS PAYABLE AND THIS WAS RECTIFIED SUBSEQUEN TLY AND ACTUAL TAX PAYABLE WAS ONLY RS. 84,502/-. HOWEVER, THE ASS ESSING OFFICER HAS NOT CONSIDERED THE SAME AND DISALLOWED A SUM OF RS. 9,24,853/- U/S. 40(A)(IA) WHICH IS NOT CORRECT, NOT JUSTIFIED AND B AD IN LAW. HENCE, THE ADDITION MAY PLEASE BE DELETED. 7. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 6,93,777/- U/S. 40(A)(IA) O N THE CONTENTION THAT TDS AMOUNT PAYABLE HAS NOT BEEN REMITTED TO TH E GOVERNMENT ACCOUNT WITHIN THE STIPULATED TIME. IT IS SUBMITTED THAT THE DELAY IN REMITTANCE OF TDS DEDUCTED IN THE JANUARY, 2006 AND FEBRUARY, 2006 HAPPENED BY OVERSIGHT AND REQUES TED NOT TO DISALLOW THE SAME U/S. 40(A)(IA). 8. THE ASSESSING OFFICER HAS ALSO DISALLOWED AN AMOUNT OF RS. 13,88,511 U/S. 40(A)(IA) ON THE CONTENTION THAT NO TDS HAS BEEN DEDUCTED ON THE PAYMENTS MADE TO THE FOLLOWING PART IES: S. NO. PARTICULARS OF PAYMENTS AMOUNT (RS.) 1. CDSL (INDIA) LTD. 24,323 2. STICK LABLES 11,04,385 3. SREE PRINTERS 92,090 4. IMAGES MULTI PVT. LTD. 1,10,200 5. CHIRAN FORT CLUB 57,513 TOTAL 13,88,511 9. THE AR OF THE ASSESSEE SUBMITTED THAT ANY DISALLOWA NCES MADE WILL INCREASE THE EXEMPTION U/S 10B AND WILL H AVE NO IMPACT ON THE DISALLOWANCE MADE. THE ASSESSEE RELIE D ON THE DECISION OF ITAT HYDERABAD A BENCH IN RESPECT OF PL ANET ONLINE PVT. LTD VIDE ITA NO. 1016/H/2007, WHEREIN T HE BENCH HELD AS FOLLOWS: 'PROFITS AND GAINS OF BUSINESS IS DEFINED IN SECTIO N 28 AND AS PER SECTION 29 INCOME REFERRED TO IN SECTION 28 SHA LL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 30 TO 43D. FROM THE ABOVE PROVISIONS IN THE STATUTE, IT THUS CLEAR THAT THE PROFIT OF THE UNDERTAKING IN THE CASE OF T HE APPELLANT HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISION S OF THE ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 5 SECTION 30 TO 43D., I.E., INCLUDING THE PROVISIONS OF SECTION 43B OF THE ACT. IN VIEW OF THE ABOVE LEGAL PROVISIONS I N MY CONSIDERED VIEW, EXEMPTION UNDER SECTION 10B HAS TO BE COMPUTED ON THE PROFITS DETERMINED AFTER TAKING INT O ACCOUNT THE DISALLOWANCES TO BE MADE UNDER SECTION 43B OF T HE ACT. ' 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS THE WELL ESTABLISHED FAC T THAT AS PER THE PROVISIONS OF SECTION 10B RECOMPUTED PROFITS SH ALL BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF DEDUCT ION U/S 10B. IN VIEW OF VARIOUS TRIBUNALS & HIGH COURTS HA VE HELD THAT DISALLOWANCES OF EXPENDITURE SHOULD BE COMPUTE D FOR THE PURPOSE OF DEDUCTION U/S 10B ACCORDINGLY IF THE ASS ESSING OFFICER RECOMPUTES THE PROFIT FROM ELIGIBLE BUSINES S BY DISALLOWING CERTAIN EXPENDITURE AND LIABILITY U/S 4 0(A) (IA) AND 43B, SUCH RECOMPUTED PROFIT SHALL BE CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S 43B. THE ASSESSEE HAS PLAC ED HIS RELIANCE ON THE FOLLOWING JUDGMENTS WHICH SUPPORT T HE CLAIM OF THE ASSESSEE: (A) THE DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT V S. PLANET ONLINE PVT. LTD. IN ITA NO. 1016/HYD/07 WHERE IT HA S BEEN HELD: 'PROFITS AND GAINS OF BUSINESS IS DEFINED IN SECTI ON 28 AND AS PER SECTION 29 INCOME REFERRED TO IN SECTION 28 SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 30 TO 43D. FROM THE ABOVE PROVISIONS IN THE STATUTE, IT THUS CLEAR THAT THE PROFIT OF THE UNDERTAKING IN THE CASE OF T HE APPELLANT HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISION S OF THE SECTION 30 TO 43D., I.E., INCLUDING THE PROVISIONS OF SECTION 43B OF THE ACT. IN VIEW OF THE ABOVE LEGAL PROVISIONS I N MY CONSIDERED VIEW, EXEMPTION UNDER SECTION 10B HAS TO BE COMPUTED ON THE PROFITS DETERMINED AFTER TAKING INT O ACCOUNT THE DISALLOWANCES TO BE MADE UNDER SECTION 43B OF T HE ACT. ' (B) THE DELHI TRIBUNAL IN THE CASE OF ITO VS. M/S. SAHA SRA ELECTRONICS PRIVATE LIMITED (2010-TIOL-89-ITAT-DEL) HELD THAT IT IS A SETTLED PROPOSITION THAT WHEN THE ASSESSEE IS CLAIMING EXEMPTION UNDER SECTION 10A AND ASSESSEE'S PROFIT FROM ELIGIBLE BUSINESS BY THE AO IS RECOMPUTED THE DEDUCTION UNDER SECTION 10A IS ALSO TO BE ALLOWED ON THE RECO MPUTED PROFIT UNDER SECTION 10A. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 6 (C) DELHI TRIBUNAL IN THE CASE OF M/S. INTERNATIONAL GO LD CO. LTD. VS. INCOME TAX OFFICER 2010-TIOL-652-ITAT- MUM ) HELD THAT EVEN IF THE DISALLOWANCE IS SUSTAINED, IT WILL ONLY GO TO INCREASE THE BUSINESS PROFITS OF THE ASSESSEE WHICH IS EXEMPT UNDER SECTION 10A AS PER THE DECISION OF THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF GEMPLUS JEWELLERY INDIA L TD AND ALLOWED THE ASSESSEE'S APPEAL. (D) HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GE M PLUS JEWELLERY INDIA LTD [(2010) 233-CTR(BOM)-24 : 42-DTR-73] HELD THAT EXEMPTION UNDER SECTION 10A - PROFITS AND GAINS DERIVED FROM EXPORTS - ADDITION ON ACCOUNT OF DISAL LOWANCE OF EMPLOYER'S AND EMPLOYEES' CONTRIBUTION TOWARDS PF/E SIC - DISALLOWANCE OF THE PF/ESIC PAYMENTS HAS BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS I.E. SEC. 43B I N THE CASE OF THE EMPLOYER'S CONTRIBUTION AND SEC. 36(1)(V) R.W.S . 2(24)(X) IN THE CASE OF THE EMPLOYEES' CONTRIBUTION WHICH HAVE BEEN DEEMED TO BE THE INCOME OF THE ASSESSEE - PLAIN CON SEQUENCE OF THE DISALLOWANCE AND THE ADD BACK THAT HAS BEEN MADE BY THE AO IS AN INCREASE IN THE BUSINESS PROFITS OF TH E ASSESSEE - EXEMPTION UNDER SECTION LOA IS ALLOWABLE WITH REFER ENCE TO SUCH ENHANCED INCOME. 11. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSING OFFI CER IS DIRECTED TO CONSIDER THE ADDITIONS MADE ABOVE WHILE CALCULATING DEDUCTION U/S 10B. ACCORDINGLY THE AO I S DIRECTED TO RECOMPUTE THE DEDUCTION AFTER TAKING INTO ACCOUN T DISALLOWANCES MADE ABOVE. ACCORDINGLY THESE GROUNDS OF THE ASSESSEE ARE ALLOWED. 12. GROUND NO. 3 REGARDING DISALLOWANCES OF RS. 2,01,58 6/- BEING STATUTORY LIABILITIES U/S 43B IS NOT PRESSED BEFORE US AND HENCE DISMISSED FOR NOT PRESSED. 13. GROUND NO. 4 IS REGARDING DISALLOWANCES U/S 40(A)(I A). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THE ASSESSING OFFICER DISALLOW ED RS. 9,24,853/- WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE MATERIALS ON RECORD. ADMITTEDLY THE ASSESSEE HAS NO T DEDUCTED TAX AT SOURCES ON PAYMENTS MADE WHICH ATTRACTS TDS ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 7 PROVISIONS. THE ASSESSING OFFICER HAS DISALLOWED TH E EXPENDITURE U/S 40(A)(IA) AND ADDED TO INCOME. NOW THE ASSESSEE ARGUMENTS BEFORE US BEING THAT THE PROVISI ONS OF SECTION 40(A)(IA) ATTRACTS THOSE AMOUNTS SHOWN AS P AYABLE AND IT DOES NOT APPLICABLE TO THE AMOUNTS ALREADY INCUR RED AND PAID. IT IS THE WELL ESTABLISHED POSITION OF LAW TH AT VARIOUS TRIBUNALS AND COURTS HELD THAT, SECTION 40(A)(IA) H AS NO APPLICATION WHERE THE AMOUNT INCURRED AND PAID WITH OUT DEDUCTION OF TDS. IT IS APPLICABLE ONLY WHEN PROVIS ION IS MADE IN THE BOOKS OF ACCOUNTS AND SHOWN AS PAYABLE WITHO UT BEING DEDUCTING TDS. THE MATTER HAS BEEN ALREADY COVERED BY SPECIAL BENCH DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT, IN I.T.A. NO. 477/VIZ/2008 ORD ER DATED 29 TH MARCH, 2012 WHEREIN IT WAS HELD THAT THE PROVISION S OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, ARE APPLICABLE ONLY TO THE AMOUNT OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW WHICH HAD BEEN ACTUALLY PAID DURING THE PR EVIOUS YEAR, WITHOUT DEDUCTION OF TDS. 15. IN VIEW OF THE ABOVE DECISION AND BASED ON THE RATI O OF ABOVE CASES WE ARE OF THE OPINION THAT, DISALLOWANC ES U/S 40(A)(IA) WOULD NOT HAVE ANY APPLICATION ON EXPENDI TURE INCURRED AND PAID DURING THE YEAR ITSELF WITHOUT DE DUCTION OF TDS. IN THE PRESENT CASE ALL THE PAYMENTS ARE BEING PAID AND NONE OF THE PAYMENTS ARE SHOWN AS PAYABLE AND HENCE DISALLOWANCES MADE U/S 40(A)(IA) IS DELETED. ACCORD INGLY THE GROUND OF THE ASSESSEE IS ALLOWED. 16. GROUND NO. 5 NOT PRESSED BEFORE US HENCE DISMISSED AS NOT PRESSED. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 8 17. GROUND NO 6 TO 8 REGARDING DISALLOWANCES OF RS. 1,11,73,133/- FROM EXPORT PROFIT. 18. THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS. 1,11,73,133/- T OWARDS COMMON EXPENDITURE INCURRED TOWARDS EXPORT BUSINESS ON THE GROUND THAT THE ASSESSEE HAS NOT DEDUCTED COMMON EXPENDITURE TOWARDS EXPORT BUSINESS. THE ASSESSEE S UBMITS THAT, IT HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR DOMESTIC AND EXPORT BUSINESS. IT HAS PROPERLY ALLOC ATED THE EXPENSES AS PER THE ACCEPTED METHOD OF ACCOUNTING A ND THE SAME IS BEING FOLLOWED YEAR BY YEAR ADHERING THE CO NSISTENT PRINCIPLES OF ACCOUNTING. THE ASSESSEE FURTHER SUBM ITTED THAT, THE ASSESSING OFFICER HIMSELF GET THE ACCOUNTS AUDI TED U/S 142(2A) FROM SPECIAL AUDITORS AND OBTAINED THE SPEC IAL AUDIT REPORT. THE SPECIAL AUDITORS AUDITED THE BOOKS OF A CCOUNTS AND SUBMITTED THEIR REPORT AND THE AUDIT REPORT DID NOT POINT OUT ANY DISCREPANCIES OF WHATSOEVER IN THE MATTER UNDER CONSIDERATION. 19. ON THE OTHER HAND THE DR RELIED ON THE CIT (A) ORDE R AND SUBMITTED THAT, IN RESPECT OF SOME EXPENDITURE THE AMOUNT OF EXPENDITURE APPORTIONED TOWARDS EXPORT PROFIT ARE T OO LOW AS COMPARED TO THE TOTAL TURNOVER AND EXPORT TURNOVER. THE ASSESSEE HAS RECORDED EXPORT AND DOMESTIC TURNOVER AND ALSO CERTAIN EXPENDITURE SEPARATELY BUT HAS NOT CONSIDER ED ALL THE EXPENDITURE RELATING TO EXPORT. THE ASSESSEE HAS RE CORDED TOO LOW EXPENDITURE FOR EXPORT TURNOVER WHEN COMPARED T O DOMESTIC TURNOVER. HE ALSO STATED THAT NO METHOD OF ACCOUNTING CAN ALLOW SUCH IMPROPER ALLOCATION OF EX PENSES AND THEREFORE COMMON EXPENDITURE OUTLINED IN THE AS SESSMENT ORDER TO BE ALLOCATED IN THE RATIO OF EXPORT TURNOV ER TO TOTAL TURNOVER. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 9 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ASSESSEE IS 100% EOU HAS M ADE EXPORT AND DOMESTIC SALES DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR 100% EOU AND DOMESTIC BUSINESS AND REC ORDED ALL THE CORRESPONDING EXPENDITURE. DURING THE COURS E OF ASSESSMENT, THE ASSESSING OFFICER HAS ORDERED FOR S PECIAL AUDIT OF BOOKS OF ACCOUNTS U/S 142(2A) AND ENTRUSTED THE WORK TO M/S RATNAM DHAVEJI & CO., CHARTERED ACCOUNTANTS. TH E SPECIAL AUDITORS HAVE SUBMITTED THEIR AUDIT REPORT ON 21/05/2009. THE SPECIAL AUDITORS APPOINTED FOR THE PURPOSE HAVE SUBMITTED THEIR REPORT POINTING OUT NO DISCREP ANCIES IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER WHO OR DERED FOR SPECIAL AUDIT TO FIND OUT THE CORRECTNESS OF THE BO OKS OF ACCOUNTS AS REGARDS ALLOCATION OF COMMON EXPENDITUR E FOR EXPORT AND DOMESTIC BUSINESS, HAS IGNORED THE SPECI AL AUDIT REPORT AND COMPLETE THE ASSESSMENT ON THE BASIS HIS OWN ESTIMATION. THE ASSESSING OFFICER IS NOT CORRECT BY IGNORING THE SPECIAL AUDIT REPORT WHEN HE HIMSELF ORDERED FOR SP ECIAL AUDIT. THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE AUDI T REPORT AND COMPLETED THE ASSESSMENT BASED ON THE FINDINGS OF SPECIAL AUDIT. THE MATTER WOULD HAVE DIFFERENT IF THE SPECI AL AUDITOR FINDS DISCREPANCIES IN THE BOOKS. WHEN THE SPECIAL AUDITOR REPORTED THAT THERE WAS NO DISCREPANCIES IN THE BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE THE ASSESSING O FFICER SHOULD HAVE ACCEPTED THE BOOKS OF ACCOUNTS. THE ASS ESSING OFFICER HAS IN TURN REJECTED THE ASSESSEE BOOKS OF ACCOUNTS AND RESORTED TO ESTIMATION ON PURELY SURMISES, SUSPICIO US AND CONJECTURE MANNER WITHOUT ANY EVIDENCE WITH HIM TO SUSPECT THE BOOKS OF ACCOUNTS. BOOKS OF ACCOUNTS CAN BE RE JECTED AND ESTIMATION CAN BE MADE ONLY WHEN THE ASSESSING OFFI CER FINDS OUT ANY MISTAKES IN THE BOOKS OF ACCOUNTS MAINTAINE D BY THE ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 10 ASSESSEE. WHEN THERE ARE NO MISTAKES IN THE BOOKS O F ACCOUNTS AND BOOKS OF ACCOUNTS ARE IN VERIFIABLE MA NNER, THE ASSESSING OFFICER CANNOT REJECT THE BOOKS OF ACCOUN TS AND RESORT TO BEST JUDGMENT ASSESSMENT. MORE OVER IN TH E INSTANT CASE THE ASSESSING OFFICER HIMSELF GOT THE ACCOUNTS AUDITED FROM SPECIAL AUDITORS U/S 142(2A) CANNOT IGNORE THE AUDIT REPORT SUBMITTED BY THE SPECIAL AUDITORS. IF THE SP ECIAL AUDITOR POINTS OUT ANY DISCREPANCIES WITH REGARD TO ALLOCAT ION OF EXPENDITURE AND CORRECTNESS OF BOOKS OF ACCOUNTS, T HEN IT IS OPEN TO THE ASSESSING OFFICER TO REJECT THE BOOKS O F ACCOUNTS AND RESORT TO ESTIMATION. IN THE PRESENT CASE, HE CANNOT DO SO AS HE HIMSELF REFERRED THE CASE FOR SPECIAL AUDIT A ND OBTAINED THE AUDIT REPORT FROM SPECIAL AUDITORS WITHOUT POIN TING OUT ANY DISCREPANCIES IN THE BOOKS OF ACCOUNTS. THEREFO RE THE AO IS NOT CORRECT IN RE-ALLOCATING THE COMMON EXPENDIT URE ON THE BASIS OF RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER BY REJECTING THE BOOKS OF ACCOUNTS. 21. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH E ASSESSING OFFICER IS NOT CORRECT IN DISALLOWING THE COMMON EXPENDITURE FROM THE EXPORT PROFIT. WE DIRECT THE A SSESSING OFFICER TO ALLOW THE EXPENDITURE AND RECOMPUTE THE DEDUCTION U/S 10B AS CLAIMED BY THE ASSESSEE. ACCORDINGLY WE ALLOW THE GROUND OF THE ASSESSEE. ITA NO. 2189/HYD/2011 22. THIS APPEAL DIRECTED AGAINST THE ORDER OF CIT(A) DA TED 28.10.2011 THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL. 1. THE LEARNED CIT(A) ERRED WHILE SUSTAINING THE DISALLOWANCES MADE U/S. 43B AND 40(A)(IA) IGNORING THE FACT THAT ANY DISALLOWANCES MADE WILL INCREASE THE EXEMPTION U/S. 10B AND WILL HAVE NO IMPACT FOR THE DISALLOWANCE MADE. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 11 2. THE ASSESSEE HAS PLACED THE RELIANCE ON THE DECISION OF THE HON'BLE ITAT, HYDERABAD IN THE CASE OF PLANET ONLINE P LTD VIDE ITA NO. 1016/H/07 IN SUPPORT OF ITS CLAIM. 3. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCE MADE U/S. 43B AGGREGATING 2,01,586/- REJECTING THE PLEA OF THE ASSESSEE THAT THESE STATUTORY LIABILITIES ARE OLD AND UNCLAIMED BALANCES WHICH IS NOT CORRECT AND NOT JUSTIFIED. 4. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCES MADE U/S. 40(A)(IA) OF RS. 9,00,000/-, RS. 10,72,000/- WHICH IS NOT CORRECT AND NOT JUSTIFIED. 5. THE LEARNED CIT(A) ERRED WHILE SUSTAINING THE ABOVE DISALLOWANCES IGNORING THE FACT THAT THE SAID SECTION APPLIES ONLY IN RESPECT OF AMOUNT OUTSTANDING BUT NOT IN RESPECT OF EXPENDITURE ALREADY PAID. 6. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCE OF SERVICE TAX OF RS. 11,051/- AND DISALLOWANCE TOWARDS PROVISION FOR LEAVE ENCASHMENT OF RS. 7,24,955/- IGNORING THE FACT THAT SERVICE TAX AND LEAVE ENCASHMENT ARE NOT COVERED U/S. 43B WHICH IS NOT CORRECT AND NOT JUSTIFIED. 7. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCE OF DEPRECIATION ON PLANT & MACHINERY OF RS. 1,45,155/- WHICH IS NOT CORRECT AND NOT JUSTIFIED. 8. THE LEARNED CIT(A) HAS ERRED WHILE SUSTAINING THE DISALLOWANCE OF RS. 11,94,471/- ON THE GROUND THAT THE WHOLE AMOUNT SHOULD BE CAPITALIZED WHICH IS NOT CORRECT AND NOT JUSTIFIED. THE DEDUCTION U/S. 35D MAY BE ALLOWED TOWARDS THE EXPENDITURE INCURRED BY THE ASSESSEE. 9. THE ASSESSING OFFICER HAS ERRED WHILE DISALLOWING A SUM OF RS. 2,08,94,401/- FROM THE EXPORT PROFIT CLAIMED BY THE ASSESSEE COMPANY ON THE CONTENTION THAT COMMON EXPENDITURE RELATING TO THE EXPORT AND DOMESTIC BUSINESS ARE NOT DEDUCTED FROM EXPORT PROFIT AND THE SAME HAS BEEN CONFIRMED BY THE CIT(A) WHICH IS NOT CORRECT AND NOT JUSTIFIED. 10. THE ASSESSEE COMPANY HAS ALREADY SUBMITTED THE LOWER AUTHORITIES THAT IT IS MAINTAINING ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 12 SEPARATE SET OF BOOKS OF ACCOUNTS FOR THE TURNOVER RELATING TO DOMESTIC AS WELL AS 100% EOU OF THE COMPANY. IT HAS PROPERLY ALLOCATED THE EXPENSES AS PER THE ACCEPTED METHOD OF ACCOUNTING AND THE SAME PRACTICE IS BEING FOLLOWED BY THE COMPANY YEAR BY YEAR, ADHERING TO THE PRINCIPLES OF CONSISTENT ACCOUNTING PRACTICES. 11. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER WHEREIN THE ABOVE SUM OF RS. 2,08,94,401/- HAS BEEN DISALLOWED FROM THE EXPORT TURNOVER CLAIMED BY THE ASSESSEE COMPANY WHICH IS NOT CORRECT AND NOT JUSTIFIED. HENCE, THE DISALLOWANCE MAY PLEASE BE DELETED. 23. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PUBLIC LIMITED COMPANY FILED ITS RETURN OF INCOME F OR THE A.Y. 2007-08 DECLARING TOTAL INCOME OF RS. 1,72,,88,329/ -. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143( 3) AND COMPUTED THE TAXABLE INCOME OF RS. 4,42,47,791/- AF TER DISALLOWING COMMON EXPENDITURE ALLOCATED TO EXPORT TURNOVER, CERTAIN EXPENDITURE U/S 40(A)(IA) AND LIABILITIES U /S 43B. 24. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE A.Y. 2007-2008 ON 31/10/2007 DECLARING TOTAL INCOME OF R S 1,72,88,329/-. THE SAID RETURN WAS PROCESSED U/S 1 43(1) OF THE INCOME-TAX ACT, 1961 ON 19/03/2009. LATER THE ASS ESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. 25. THE ASSESSING OFFICER NOTICED THAT TDS OF RS 201960 /- WHICH WAS DEDUCTED ON 24/01/2007 (RS 100980) AND 28/02/20 07 (RS 100980) IN RESPECT OF THE RENT PAID TO ETS TECHNOLO GY SOLUTIONS PVT. LTD AGGREGATING TO RS 900000 ON 5.5.2007, THE SAID TDS AMOUNT WAS NOT REMITTED WITHIN THE PRESCRIBED DUE D ATE TO THE GOVT. ACCORDINGLY, THE CORRESPONDING RENT OF RS 9,0 0,000 IS ADDED TO THE INCOME RETURNED. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 13 26. THE ASSESSING OFFICER DISALLOWED A SUM OF RS 7,24,9 55/- BEING PROVISION FOR LEAVE ENCASHMENT. THE ASSESSEE HAD FURNISHED ALL THE DETAILS RELATING TO LEAVE ENCASHMENT BUT WI THOUT CONSIDERING THE EXPLANATION GIVEN BY ASSESSEE, ASSE SSING OFFICER DISALLOWED EXPENDITURE OF RS 7,24,955. FURTHER THE ASSESSING OFFICER DISALLOWED A SUM OF 1,45,155/- BEING THE DE PRECIATION OF VARIOUS PLANTS AND MACHINERIES. 27. THE ASSESSING OFFICER DISALLOWED EXPENDITURE OF RS 10,72,000 WHICH CONSISTS OF PAYMENT TOWARDS STALL FOR EXHIBIT ION TO M/S. INFOCOM EXPOSITION & CONVENTIONS RS 216000 & 162000 RESPECTIVELY, CUSTODIAN CHARGES PAID TO CDSL AMOUNT ING 30,000, PROCESSING FEE PAID TO NATIONAL INFORMATIC CENTRE R S 2,25,000, FEES PAID TO L.R. SWAMI & CO TOWARDS TRADEMARK REGISTRAT ION AMOUNTING RS 24,000, AUDIT FEES TO YAJI ASSOCIATES RS 75000, CERTIFICATION & CONSULTING CHARGES PAID TO IRIS SMA RT CARDS AMOUNTING RS 340000 ON THE GROUND THAT NO TDS WAS D EDUCTED AND DISALLOWED EXPENDITURE OF RS 10,72,000 UNDER PR OVISIONS OF SECTION 40(A)(IA) OF THE IT. ACT. 28. THE ASSESSING OFFICER DISALLOWED EXPENDITURE OF RS 18,36,252/- WHICH CONSISTS OF CENTRAL SALES TAX AID C AMOUNTING TO RS 3,31,383, CENTRAL SALES TAX- RETAIL AMOUNTING TO RS 9,881 , VALUE ADDED TAX-OTHERS AMOUNTING RS 14,70,099, VALU E ADDED TAX-RETAIL AMOUNTING TO RS 9,490, VALUE ADDED TAX R FID AMOUNTING TO RS 4,348 AND SERVICE TAX RFID AMOUNTIN G TO RS 11,051 ON THE GROUND THAT STATUTORY LIABILITIES ARE NOT PAID UNDER THE PROVISIONS OF SECTION 43B OF THE LT. ACT . 29. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS 11,94 ,471 RELATING TO FILING FEE TO ROC FOR INCREASE IN SHARE CAPITAL OF RS 6,50,000, PAYMENTS MADE TO ARUN SHOURIE IN CONNECTI ON WITH PURCHASE OF STAMP DUTY TOWARDS INCREASE IN SHARE CA PITAL (RS ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 14 1,95,000), LEGAL ADVICE CHARGES AND OTHER EXPENSES AMOUNTING TO RS 50,561 AND RS 2,98,910 RESPECTIVELY ON THE GROUN D THAT EXPENDITURE INCURRED FOR RAISING SHARE CAPITAL AMOU NTS TO CAPITAL EXPENDITURE WITHOUT CONSIDERING EXPLANATION OFFERED BY ASSESSEE. 30. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS 2,08, 94,401 RELATING TO THE EXPENDITURE INCURRED FOR 100% EOU O N THE GROUND THAT NO PROPER SEPARATE BOOKS OF ACCOUNTS ARE NOT M AINTAINED WITHOUT CONSIDERING THE BOOKS PRODUCED BY THE ASSES SEE BEFORE ASSESSING OFFICER. 31. GROUND NOS. 1 & 2 REGARDING DISALLOWANCES U/S 43B A ND 40(A)(IA) AND CASCADING EFFECT ON DEDUCTION U/S 10B . 32. IDENTICAL ISSUE WAS DEALT WITH BY US IN PARA NOS. 1 0 AND 11 OF THIS ORDER. IN VIEW OF OUR DECISION IN PARA NO. 10 AND 11 THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE A DDITIONS MADE ABOVE WHILE CALCULATING DEDUCTION U/S 10B. ACCORDIN GLY THE AO IS DIRECTED TO RE-COMPUTE THE DEDUCTION AFTER TA KING INTO ACCOUNT DISALLOWANCES MADE ABOVE. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS ALLOWED. 33. THE NEXT GROUND OF APPEAL RAISED BY THE ASSESSEE RE LATES TO DISALLOWANCES OF EXPENDITURE U/S 40(A)(IA). THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 9,00,000/- TOWARDS RENT PAID TO ETS TECHNOLOGY SOLUTIONS PVT. LTD. SIMILARLY THE ASSESSEE PAID RS. 10,72,000/- TO VARIOUS PARTIES TOWARDS PRO FESSIONAL AND CONSULTANCY CHARGES AND NOT DEDUCTED THE TAX AT SOURCE. THE AO HAS DISALLOWED THE SAME U/S 40(A)(IA) ON THE GROUND THAT THE ASSESSEE HAS NOT DEDUCTED AND AFTER DEDUCT ION NOT REMITTED THE TAX DEDUCTED AT SOURCE WITHIN THE DUE DATE AND ACCORDINGLY DISALLOWED RS. 9,00,000/- AND RS. 10,72 ,000/- U/S 40(A)(IA) AND ADDED BACK TO INCOME. THE CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSEE. ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 15 34. THIS ISSUE WAS ALREADY DEALT BY US IN PARA NO. 14 O F THIS ORDER. FOLLOWING THE SAME RATIO, THIS ISSUE IS DEC IDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 35. GROUND NO. 6 REGARDING DISALLOWANCES OF UNPAID LIABILITY U/S 43B. THE AUTHORIZED REPRESENTATIVE AP PEARED FOR ASSESSEE SUBMITTED THAT THE SERVICE TAX IS NOT COVE RED WITHIN THE MEANING OF ANY TAX OR DUTY UNDER SECTION 43B AN D URGED US TO DELETE THE ADDITION MADE BY THE ASSESSING OFF ICER. HE REITERATED THAT SERVICE TAX IS NOT A DUTY AND NOT C OVERED BY PROVISIONS OF SECTION 43B AND THE ASSESSING OFFICER WAS ERRED IN ADDING THE SAME UNDER SECTION 43B. SIMILARLY THE ASSESSEE HAS MADE PROVISION IN THE BOOKS OF ACCOUNTS FOR PRO VISION FOR LEAVE ENCASHMENT AND SAID THAT HE HAS MAINTAINED HI S BOOKS OF ACCOUNTS ON ACCRUAL BASIS AND RECOGNIZED THE LEA VE ENCASHMENT WHICH ACCRUE FOR THE YEAR HAS BEEN MADE PROVISION IN THE BOOKS OF ACCOUNTS. HE FURTHER SUBM ITS THAT IT IS LIABILITY WHICH NEEDS TO BE PAID IN FUTURE, HE F URTHER SUBMITS THAT IT IS NOT TAX OR DUTY WHICH IS NOT COV ERED BY SECTION 43B, THEREBY A PROVISION IS CREATED IN THE BOOKS OF ACCOUNTS AND REQUESTED TO DELETE THE ADDITION. 36. ON THE OTHER HAND THE DR SUBMITTED THAT THE ASSESSI NG OFFICER HAS MADE THE ADDITION AND THE AUTHORIZED REPRESENTATIVE OF ASSESSEE HAS AGREED FOR THE ADDIT ION IS NOW FILED APPEAL AGAINST THE ADDITION. HAVING CONSENTED FOR DISALLOWANCES DURING ASSESSMENT PROCEEDINGS THE APP ELLANT CANNOT TAKE A PLEA THAT THE AO HAS ERRED IN DISALLO WING THE SAME. ONCE THE ASSESSEE GIVES HIS CONSENT FOR ADDIT ION HE HAS LOST HIS RIGHT OF APPEAL. THE DR PLACED HIS RELIANC E ON THE ORDER OF TRIBUNAL, HYDERABAD BENCH IN THE CASE OF S RI. D. RAJARAM (HUF) IN ITA. NO. 718/HYD/202. IT WAS FURT HER ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 16 SUBMITTED THAT MOREOVER SECTION 43B VERY CLEARLY CO VERS EVEN SERVICE TAX WHICH IS A STATUTORY LIABILITY. THE PRO VISIONS OF SECTION 43B WHICH STATE THAT ANY SUM PAYABLE BY TH E ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATE VER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE . THE DR SUBMITTED THAT SERVICE TAX IS A TAX LEVIED IS ALSO COVERED U/S 43B. 37. THE DR FURTHER SUBMITTED THAT THE ASSESSEE HAS CLAI MED PROVISION FOR LEAVE ENCASHMENT WHICH WAS NOT ALLOWE D AS DEDUCTION UNDER THE PROVISIONS OF INCOME TAX ACT AN D IT IS AGAINST ACCOUNTING STANDARDS, THEREFORE PRAYED TO U PHOLD THE ORDER OF THE CIT(A). 38. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD AND CAREFULLY CONSIDERED ASSESSMENT ORDER AND CIT(A) ORDER. ADMITTEDLY THE ASSESSEE HAS NOT PAID THE SERVICE AS REQUIRED UNDER THE PROVISIONS OF SECTION 43B WHI CH IS ALSO VERY MUCH COVERED U/S 43B. THE PROVISIONS OF SECTIO N 43B IS VERY CLEAR AND IT STATES THAT ANY SUM PAYABLE BY T HE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE. THEREFO RE EVEN SERVICE TAX IS LIABILITY WHICH COVERS U/S 43B AND N ON -PAYMENT THE SAME WITHIN THE STIPULATED TIME AS SPECIFIED UN DER SECTION 43B ATTRACTS DISALLOWANCES. ACCORDINGLY WE UPHELD T HE DISALLOWANCES AND CONFIRMED THE DISALLOWANCES. 39. NOW WE TAKE UP THE ISSUE RELATING TO DISALLOWANCES OF LEAVE ENCASHMENT. LEAVEN ENCASHMENT IS ALLOWED AS D EDUCTION ON PAYMENT BASIS. THE ASSESSEE HAS DEBITED SUM OF RS. 7,24,955/- TOWARDS PROVISION FOR LEAVE ENCASHMENT F OR FUTURE LIABILITY. PROVISION FOR LEAVE ENCASHMENT WHICH WAS NOT ALLOWED AS DEDUCTION UNDER THE PROVISIONS OF INCOME TAX ACT ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 17 AND IT IS AGAINST THE PROVISIONS OF INCOME TAX ACT AND ACCOUNTING STANDARDS. NO JUDGEMENTS IN FAVOUR OF TH E ASSESSEE ARE CITED BEFORE US. THEREFORE, WE UPHOLD THE DISALLOWANCES OF PROVISIONS FOR LEAVE ENCASHMENT AN D ACCORDINGLY CONFIRMED THE DISALLOWANCES. THIS GROUN D OF THE ASSESSEE IS DISMISSED. 40. GROUND NO. 7 THE ASSESSEE NOT PRESSED THE GROUND HENCE DISMISSED FOR NOT PRESSED. 41. GROUND NO-8 REGARDING ADDITION OF RS. 11,94,471/- BEING ROC & OTHER EXPENSES INCURRED FOR INCREASE IN AUTHORIZED CAPITAL. THE AUTHORISED REPRESENTATIVE S UBMITTED THAT, THE ASSESSEE HAS INCURRED SUM OF RS. 11,94,47 1/- TOWARDS INCREASE IN AUTHORIZED CAPITAL OF THE COMPA NY AND THE SAME ALLOWABLE AS DEDUCTION U/S 35D. THE ASSESSEE F URTHER SUBMITTED THAT THEY HAVE TREATED IT AS REVENUE EXPE NDITURE AS IT WAS INCURRED OWING TO THE REQUIREMENTS OF INCREA SE IN CAPITAL AND ALSO THE CLAIM IS SUPPORTED BY ACCOUNTI NG STANDARDS. THEREFORE REQUESTED TO DELETE THE ADDITI ON. 42. ON THE OTHER HAND THE DR SUBMITTED THAT, THE EXPENDITURE INCURRED TOWARDS INCREASE IN AUTHORIZED CAPITAL IS IN THE NATURE OF CAPITAL EXPENDITURE AND CANNOT BE ALLOWED. THE DR RELIED ON THE JUDGMENTS OF HONBLE APEX COUR T DECISION IN THE CASE OF BROOKE BOND INDIA LTD VS. CIT (1997) 225 ITR 798 AND THE JUDGEMENT IN THE CASE OF VAZIR SULTAN T OBACCO CO LTD VS. CIT (1998) 174 ITR 689. 43. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THE AMOUNT INCURRED FOR INCREA SE IN AUTHORIZED CAPITAL IS IN THE NATURE OF CAPITAL EXPE NDITURE IN VIEW OF THE HONBLE SUPREME COURT JUDGMENT IN THE C ASE OF BROOKE BOND INDIA LTD VS. CIT (1997) 225 ITR 798 AN D, ITA NO. 2188/HYD/2011 M/S. BARTRONICS INDIA LTD. ================== 18 THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E ASSESSING OFFICER RIGHTLY DISALLOWED THE EXPENDITURE. ACCORDI NGLY WE DISMISS THE GROUND OF THE ASSESSEE. 44. GROUND NOS. 9 TO 11 ARE WITH REGARD TO THE DISALLOW ANCE OF RS. 2,08,94,401 FROM EXPORT TURNOVER. WE HAVE AL READY DEALT WITH THIS ISSUE IN PARA NOS. 20 AND 21 OF THI S ORDER AND THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE FOLL OWING THE SAME RATIO. THESE GROUNDS ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 45. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 31 ST MAY, 2012 COPY FORWARDED TO: 1. M/S. BARTRONICS INDIA LTD., C/O. M/S. P. MURALI & C O., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD-82. 2. THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE - 1(3), HYDERABAD. 3. THE CIT(A) - II, HYDERABAD. 4 . THE CIT - I, HYDERABAD 5. THE DR B BENCH, ITAT, HYDERABAD. TPRAO