ITO, New Delhi V. M/s. S-Net Freight (India) Pvt. Ltd., New Delhi

ITA 2223/DEL/2010

• Counselvise Citation: 222320114 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 11-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 11-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: SURESH RAM CHANDANI
• Keywords: Capital asset; Gift; Depreciation; Business expenditure; Additional evidence; Wrong claim; Revenue expenditure; Capital expenditure
• Section: 32; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NOS. 2223, 2224 & 2443(DEL)2010 ASSESSMENT YEARS: 2001-02, 2002-03 & 2003-04 INCOME TAX OFFICER, M/S. S-NET FREIGHT (INDIA)P.LTD., WARD 7(1), NEW DELHI. V. A-250, LANE NO .6, NH-8, MAHIPALPUR EXTN., NEW DELHI. ITA NO.867(DEL)2010 ASSESSMENT YEAR: 2002-03 M/S. S-NET FREIGHT (INDIA)P.LTD. INCOME TAX OF FICER, A-250, NH 8, MAHIPALPUR EXTN. V. WARD 7(1), NEW DE LHI. NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. S. MOHANTY, DR ASSESSEE BY: SHR I SURESH RAM CHANDANI, ADVOCATE ORDER PER A.D. JAIN, J.M . ITA NO. 2223(DEL)2010: THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 200 1-02, TAKING THE FOLLOWING GROUND:- ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION OF ` 8,52,643/- MADE ON ACCOUNT OF DEPRECIATION ON LEASE HOLD BUILDING TREATING THE SAME AS CAPITAL EXPENDITURE B Y THE AO AND DIRECTING TO ALLOW 100% DEPRECIATION. 2. THE ASSESSEE IS IN THE BUSINESS OF AIR FREIGHT, OCEAN FREIGHT, AND LAND TRANSPORT OR ANY BUSINESS OF FREIGHT CONTRACTO RS AND AGENTS, FORWARDING PACKING, HAULING AND TRANSPORT AGENTS AN D TO ARRANGE FOR THE TRANSPORTATION OF GOODS, WARES AND MERCHANDISE OF E VERY KIND, NATURE AND DESCRIPTION BY ALL MEANS OF TRANSPORT BY AIR, LAND, SEA AND INLAND WATERWAYS. IN THE ORIGINAL RETURN FILED FOR THE YEAR UNDER CON SIDERATION, THE ASSESSEE CLAIMED A LOSS OF ` 54,17,818/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT AND THE LOSS CLAIMED WAS ACCEPTED. SUBSE QUENTLY, IT CAME TO THE NOTICE OF THE AO THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION. AS SUCH, A NOTICE U/S 148 OF THE ACT WAS ISSUED. IN RESPONSE, THE ASSESSEE FILED A RETURN DECLARING THE SAME LOSS, AS DECLARED IN THE ORIGINAL RETURN. THE AO ASKED THE ASSESSEE AS TO WHY IT SHOULD BE ALLOWED 100% DEPRECIATION ON THE LEASEHOLD IMPROVEMENTS, WHEN SUCH DEPRECIATION WAS AVAILABLE @ 10% IN TERMS OF SECTION 32 OF THE ACT. ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 3 3. THE ASSESSEE SUBMITTED THAT IT DID NOT OWN ANY O FFICE BUILDING; THAT LEASEHOLD IMPROVEMENT IN THE FORM OF TEMPORARY ERE CTION HAD BEEN DONE IN THE OFFICE PREMISES TAKEN ON LEASE BY THE ASSESSEE COMPANY AND THAT THE ASSESSEE WAS ENTITLED TO 100% DEPRECIATION THEREON U/S 32 OF THE ACT. 4. IN THE ASSESSMENT ORDER, THE AO HELD THAT EXPLAN ATION (1) TO SECTION 32(1) HAD WRONGLY BEEN SOUGHT TO BE INVOKED BY THE ASSESSEE; THAT THE SAID EXPLANATION STATES THAT WHERE THE BUSINESS OR PROFE SSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RE SPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PUR POSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN, THE PROVISIONS OF SECTION 32(1) SH ALL APPLY AS IF THE SAID STRUCTURE OF THE WORK IS A BUILDING OWNED BY THE AS SESSEE; THAT AS SUCH, THE EXPLANATION ONLY SPECIFIES THAT THE ASSESSEE COMPAN Y WOULD BE ELIGIBLE FOR DEPRECIATION ON THE LEASEHOLD IMPROVEMENTS; THAT IT NOWHERE SPECIFIES THE RATE OF DEPRECIATION ; THAT THE DEPRECIATION RATES FOR THE RELEVANT YEAR ARE SPECIFIED IN OLD APPENDIX I OF I.T. RULES WHICH WAS APPLICABLE FOR THE ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 4 ASSESSMENT YEARS 1988-89 TO 2002-03; THAT IN RESPEC T OF ANY STRUCTURE OR WORK BY WAY OF RENOVATION OR IMPROVEMENT IN, OR IN RELATION TO A BUILDING REFERRED TO IN EXPLANATION (1) TO SECTION 32(1)(II) , THE PERCENTAGE TO BE APPLIED WILL BE THE PERCENTAGE SPECIFIED AGAINST SU B-ITEM (1), (2) OR (3) OF ITEM 1 AS MAY BE APPROPRIATE TO THE CLASS OF BUILDI NG IN OR IN RELATION TO WHICH THE RENOVATION OR IMPROVEMENT IS EFFECTED; TH AT WHERE THE STRUCTURE IS CONSTRUCTED OR THE WORK IS DONE BY WAY OF EXTENSION OF ANY SUCH BUILDING, THE PERCENTAGE TO BE APPLIED WOULD BE SUCH PERCENTA GE AS WOULD BE APPROPRIATE, AS IF THE STRUCTURE OR WORK CONSTITUTE D A SEPARATE BUILDING; AND THAT THEREFORE, IN CASE THE CONSTRUCTION OF STRUCTU RES AND EXTENSIONS IS CARRIED OUT IN A BUILDING TAKEN ON LEASE FOR BUSINESS PURPO SES, THE RATE OF DEPRECIATION TO BE APPLIED IS 10%. 5. IN THIS MANNER, THE AO TREATED THE EXPENDITURE O N THE LEASEHOLD BUILDING AS A CAPITAL EXPENDITURE AND ALLOWED DEPRE CIATION @ 10% THEREOF, AS AGAINST THAT CLAIMED @ 100%. 6. BY VIRTUE OF THE IMPUGNED ORDER, HOLDING THAT TH E EXPENDITURE IN QUESTION HAD BEEN INCURRED ON WOODEN PARTITION, CAB IN MAKING, INTERIOR WORK, FIXING OF DOOR LOCKS, FIXING OF GLASS PARTIT ION, WALLS, ETC., NOT ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 5 CONSTITUTING CAPITAL EXPENDITURE, THE LD. CIT(A) DI RECTED THE AO TO ALLOW 100% DEPRECIATION TO THE ASSESSEE. 7. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. 8. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 8,52,643/- MADE ON ACCOUNT OF DEPRECIATION ON LEASEHOLD BUILDING TREATING THE SAM E AS CAPITAL EXPENDITURE; THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO T O ALLOW 100% DEPRECIATION, WHILE IGNORING THE OBSERVATIONS OF TH E AO IN THE ASSESSMENT ORDER, TO THE EFFECT THAT AS PER THE LAW, THE ASSES SEE WAS ENTITLED TO DEPRECIATION @ ONLY 10%. RELIANCE HAS BEEN PLACED ON UTTAR BHARAT EXCHANGE LTD. V. CIT, 55 ITR 550(DEL), WHERE THE A SSESSEE HAD TAKEN ON LEASE, FOR A PERIOD OF 2 YEARS, THE FIRST AND SECON D FLOORS OF A HOTEL BUILDING, WITH AN OPTION FOR REMOVAL AT THE END OF THE PERIOD AND WAS DIRECTED TO ERECT SHADES, PARTITIONS AND OTHER TEMPORARY STRUCTURES F OR CARRYING ON HIS EXCHANGE BUSINESS, BUT WAS NOT ALLOWED TO REMOVE TH ESE STRUCTURES AT THE END OF THE LEASE AND THE ASSESSEE SPENT A SUM OF ` 17,917/- IN ALL DURING THE YEARS 1954-55, 1955-56 AND 1956-57 FOR ERECTING SUCH STRU CTURES AND CLAIMED THE AMOUNT AS BUSINESS EXPENDITURE IN THE RESPECTIVE YE ARS, BUT HIS CLAIM WAS DISALLOWED, HOLDING THAT THE EXPENDITURE WAS ESSENT IALLY ONE OF A CAPITAL ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 6 NATURE AND ITS NATURE WAS NOT CHANGED BY THE FACT T HAT THE LEASE WAS IN THE FIRST INSTANCE ONLY FOR A PERIOD OF TWO YEARS; AND THAT IT COULD ALSO NOT BE TREATED AS AN ADDITION TO THE RENT MERELY BECAUSE T HE LESSEE HAD NO RIGHT TO REMOVE THEM. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN CONTENDE D THAT WHILE RIGHTLY DIRECTING THE AO TO ALLOW DEPRECIATION TO THE ASSES SEE @ 100%, THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE FACT THAT T HE LEASE WAS FOR A LIMITED PERIOD AND IMPROVEMENTS WERE QUA TERMINUS WITH THE LEASING PERIOD; THAT THE LD. CIT(A) HAS ALSO DULY TAKEN INTO ACCOUNT THAT TH E EXPENDITURE WAS IN THE NATURE OF FREIGHT, WOODEN PARTITION, INTERIOR WORK AND NO CAPITAL ASSET COULD BE ASSUMED TO HAVE COME INTO EXISTENCE; THAT THEREF ORE, THE NATURE OF THE EXPENDITURE WAS DEFINITELY OF A REVENUE NATURE; THA T DURING THE ASSESSMENT ITSELF, THE ASSESSEE HAD MADE ITS CLAIM U/S 37 OF T HE ACT, WHICH HAD WRONGLY BEEN REJECTED BY THE AO BY OBSERVING THAT SINCE THE ASSESSEE COMPANY HAD ITSELF TREATED THE EXPENDITURE TO BE CAPITAL IN NAT URE IN ITS RETURN, ITS CONTENTION TO TREAT THE EXPENDITURE AS A CAPITAL EX PENDITURE COULD NOT BE ACCEPTED . RELIANCE HAS BEEN PLACED ON THE FOLLO WING CASE LAWS:- ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 7 1. DSP MERYILL LYNCH LTD. V. JCIT, 102 ITD 337(TBOM); 2. CIT V. M/S. HI LINE PENS PVT. LTD., JUDGMENT DATED 15.9.08, PASSED BY THE HONBLE DELHI HIGH COURT IN ITA NO. 1202/200 6(COPY PLACED ON RECORD); AND 3. DCIT V. CHAYA LAKSHMI CREATIONS (P)LTD., ORDER DATE D 30.6.2010, PASSED BY THE HYDERABAD BENCH OF THE TRIBUNAL, IN I TA NOS. 250 TO 252/HYD/2010 (COPY PLACED ON RECORD. 10. IT HAS BEEN CONTENDED THAT THEREFORE, THERE BEI NG NO ERROR WHATSOEVER THEREIN, THE ORDER OF THE LD. CIT(A) BE UPHELD WHIL E DISMISSING THE APPEAL FILED BY THE DEPARTMENT. 11. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE LEASE IN QUESTION WAS FOR A LIMIT ED PERIOD. THE IMPROVEMENTS WERE QUA TERMINUS FOR THE PERIOD OF LE ASE. THE EXPENDITURE INCURRED BY THE ASSESSEE WAS ON WOODEN PARTITION, C ABIN MAKING, INTERIOR WORK, FIXING OF DOOR LOCKS, FIXING OF GLASS PARTITI ON, WALLS, ETC. AS TO HOW THIS EXPENDITURE CONSTITUTED CAPITAL EXPENDITURE, W AS NOWHERE ELABORATED UPON BY THE AO IN THE ASSESSMENT ORDER. ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 8 12. IN DSP MERYILL LYNCH LTD. (SUPRA), FOLLOWING KEDARNATH JUTE MFG. CO. LTD. V. CIT, 82 ITR 363(SC), IT WAS HELD THAT ACCOUNTING ENTRIES DO NOT DECIDE MATTERS FOR THE PURPOSE OF COMPUTATION OF IN COME UNDER THE INCOME TAX ACT; THAT IT IS THE SUBSTANCE THAT HAS TO BE LO OKED INTO; THAT AN INCOME DOES NOT CEASE TO BE INCOME OR AN EXPENSE DOES NOT CEASE TO BE EXPENSE ONLY FOR THE REASON THAT THE ASSESSSEE HAS PASSED A WRONG ACCOUNTING ENTRY IN ITS BOOKS OF ACCOUNT. 13. IN M/S. HI LINE PENS PVT. LTD.(SUPRA), THE EX PENDITURE INCURRED BY THE ASSESSEE WAS TOWARDS FALSE CEILING, FIXING TILE S, REPLACING GLASSES, WOODEN PARTITIONS, REPLACEMENT OF ELECTRIC WIRING, EARTHING, REPLACEMENT OF GI PIPES ETC., IN RESPECT OF A RENTED PREMISES TAKE N BY THE ASSESSEE ON LEASE FOR ITS BUSINESS PURPOSES, TO MAKE THE PREMISES, IN USE FOR A LONG TIME, USEABLE. IT WAS HELD BY THE HONBLE HIGH COURT THA T THE TRIBUNAL HAD RIGHTLY FOUND THE ASSESSEE TO HAVE CARRIED OUT REPAIRS AND HAD NOT BROUGHT ABOUT ANY NEW ASSET, NOR WAS IT THE INTENTION OF THE ASSESSEE TO BRING ABOUT ANY NEW CAPITAL ASSET; THAT THE EXPENSES WERE TOWARDS REPAI RING THE PREMISES TAKEN ON LEASE SO AS TO MAKE IT MORE CONDUCIVE TO ITS BUSINE SS ACTIVITY. 14. IN CHAYA LAKSHMI CREATIONS (P)LTD. (SUPRA), H OLDING THE EXPENDITURE TO BE A REVENUE EXPENDITURE, IT WAS HEL D, INTER ALIA, AS FOLLOWS:- ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 9 AFTER INCURRING THE EXPENDITURE THE ASSESSEE HAS N OT OBTAINED ANY NEW ENDURING BENEFIT. NO CAPITAL ASSE T CAME INTO EXISTENCE. THE ASSESSEE CONTINUED TO EXH IBIT FEATURE FILMS IN THE VERY SAME PREMISES PROBABLY WI TH A LITTLE MORE PROFIT. ADMITTEDLY THE SEATING CAPACIT Y WAS NOT INCREASED AFTER THE EXPENDITURE. HOWEVER, IT M AY BE LITTLE MORE ATTRACTIVE AND COMFORTABLE FOR CINE GOE RS. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE IS ONLY FOR CARRYING ON THE BUSINESS OF EXHIBITING FEA TURE FILMS. THEREFORE, IT IS NOT CORRECT TO SAY THAT TH E ASSESSEE HAS OBTAINED ANY ENDURING BENEFIT BECAUSE OF THIS EXPENDITURE. THE ASSESSEE CAN USE THE PREMISE S TAKEN ON LEASE ONLY DURING THE LEASE PERIOD AS FOUN D BY THE AO. AFTER EXPIRY OF THE LEASE PERIOD, THE ASSE SSEE HAS TO LEAVE THE ENTIRE THING AS IT IS AND HANDOVER THE SAME TO THE LESSOR. THE NATURE OF WORK UNDERTAKEN BY THE ASSESSEE IS TO CARRY ON THE BUSINESS AND NOT TO OBTAIN ANY ASSET. FURTHERMORE, AS ALREADY OBSERVED , NO CAPITAL ASSET OF ENDURING NATURE CAME INTO EXISTENC E. IN OTHER WORDS, THE ASSESSEE HAS NOT ACQUIRED ANY ASSET/INCOME EARNING APPARATUS. IT IS WELL SETTLED PRINCIPLES OF LAW THAT THE EXPENDITURE INCURRED FOR ACQUISITION OF AN ASSET IS CAPITAL EXPENDITURE AND EXPENDITURE INCURRED IN THE PROCESS OF EARNING PROF IT IS REVENUE EXPENDITURE. IN THE CASE BEFORE US, THE AS SESSEE ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 10 INCURRED THE EXPENDITURE IN ORDER TO ATTRACT MORE CUSTOMERS AND MAKE THE CUSTOMERS COMFORTABLE. THEREFORE, IT IS OBVIOUS THAT THE ASSESSEE HAS TO I NCUR THE EXPENDITURE, IN ORDER TO CARRY ON THE BUSINESS AND IN THE PROCESS OF EARNING PROFIT AND, THEREFORE, THE EXPENDITURE IS OF REVENUE IN NATURE. 15. IN THE PRESENT CASE, AS OBSERVED BY THE LD. CIT (A), THE ASSESSEE MADE ITS CLAIM U/S 37 DURING THE ASSESSMENT PROCEEDINGS, THOUGH IT HAD CLAIMED DEPRECIATION TO START WITH. THE LD. CIT(A) HELD T HAT THE AO WAS WRONG IN REJECTING THE CLAIM OF THE ASSESSEE. IN THIS REGAR D, M/S. HI LINE PENS PVT. LTD.(SUPRA), HAS RIGHTLY BEEN PRESSED INTO SERVICE . THEREIN, IT HAS BEEN HELD, BESIDES THE ABOVE, THAT THE REPAIRS ALL KIND CARRIED OUT THEREIN LIKE IN THE PRESENT CASE, WERE EXPENSES INCURRED FOR REPAIRS FO R MAKING THE PREMISES MORE CONDUCIVE TO THE ASSESSEES BUSINESS ACTIVITI ES AND ITS EXPENSES DID NOT BRING ABOUT ANY NEW CAPITAL ASSET. 16. APROPOS UTTAR BHARAT EXCHANGE LTD.(SUPRA), IT IS NOT OF MUCH AID TO THE DEPARTMENT. IN THAT CASE, THE ASSESSEE COULD N OT, AT THE EXPIRY OF THE LEASE, REMOVE THE STRUCTURES CONSTRUCTED BY IT AT T HE END OF THE LEASE. IT, HOWEVER, IN THE PRESENT CASE, HAS NOTED BY THE LEAR NED CIT(A) AT PAGE 22 OF ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 11 THE IMPUGNED ORDER, CLAUSE 5 OF THE LEASE DEED SPE CIFICALLY PROVIDES THAT ..ON TERMINATION OF THE LEASE THE ASSESSEE WI LL BE ENTITLED TO TAKE AWAY SUCH FITTINGS AND FIXTURES 17. MOREOVER, M/S. HI LINE PENS PVT. LTD.(SUPRA), HAS ALSO BEEN RENDERED BY A DIVISION BENCH OF THE HONBLE HIGH CO URT, AS IS THE CASE WITH UTTAR BHARAT EXCHANGE LTD.(SUPRA), BUT M/S. HI LINE PENS PVT. LTD.(SUPRA), IS THE LATER OF THE TWO DECISIONS. 18. IN VIEW OF THE ABOVE, FINDING NO MERIT IN THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT IN THIS REGARD, THE GROUND TAKEN IS HEREBY REJECTED. ITA NO. 2224 (DEL)2010 : 19. THIS APPEAL FILED BY THE DEPARTMENT FOR THE ASS ESSMENT YEAR 2002-03 RAISES AN ISSUE IDENTICAL TO THE ONE TAKEN BY THE D EPARTMENT FOR ASSESSMENT YEAR 2001-02 IN ITA NO. 2223(DEL)2010 (SUPRA). T HE FOLLOWING GROUND HAS BEEN TAKEN:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION OF ` 9,43,993/- MADE ON ACCOUNT OF DEPRECIATION ON LEASE HOLD BUILDING TREATING THE SAME AS CAPITAL EXPENDITURE B Y THE AO AND ALLOWING DEPRECIATION @ 10%. ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 12 20. THE FACTS HEREIN ARE, MUTATIS MUTANDIS, EXACTLY SIMILAR TO THOSE PRESENT IN ITA NO. 2223(DEL)2010 (SUPRA). THEREFORE, OUR FINDINGS IN ITA NO. 2223(DEL)2010 (SUPRA) ARE SQUARELY APPLICABLE, MUTA TIS MUTANDIS HERETO ALSO. ACCORDINGLY, FOLLOWING OUR DISCUSSION ON THE ISSUE IN ITA NO. 2223(DEL)2010 (SUPRA), THE GROUND RAISED BY THE DEP ARTMENT IS REJECTED FOR THIS YEAR ALSO. ITA NO.867(DEL)2010: 21. THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2 002-03, TAKING THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT(APPEALS) ERRED IN: 1. CONFIRMING THE DISALLOWANCE OF RS. 1,01,500/- MADE BY THE AO ON ACCOUNT OF PAYMENT FOR THE INTERIOR WORK; 2. STATING THAT AN OPPORTUNITY WAS ALLOWED TO THE APPE LLANT DURING THE APPELLATE PROCEEDINGS TO PRODUCE EVIDENCE IN RE GARD TO ABOVE EVEN THOUGH NO SUCH EVIDENCE WAS CALLED FOR; 3. CONFIRMING THE DENIAL OF APPELLANTS CLAIM FOR SET OFF OF BROUGHT FORWARD LOSSES OF A.Y. 2001-02; 4. IN HOLDING THAT THE APPELLANT DOES NOT FULFILL THE CONDITIONS LAID DOWN IN SEC. 79 OF THE INCOME TAX ACT EVEN THOUGH T HE TRANSFER OF SHARES BY SUBSCRIBERS WERE IN CONFORMITY TO LEGAL C OMPLIANCE. ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 13 22. APROPOS GROUND NOS. 1&2, THE AO DISALLOWED AN A MOUNT OF ` 1,01,500/- PAID BY THE ASSESSEE TO QADIR CARPENTERS AGAINST INTERIOR WORKS, DUE TO NON-PRODUCTION OF BILLS. THE LD. CIT(A) CO NFIRMED THE DISALLOWANCE. 23. BEFORE US, IT HAS BEEN CONTENDED THAT THE ASSES SEE COULD NOT PRODUCE BEFORE THE TAXING AUTHORITIES, THE BILLS WITH REGAR D TO THE EXPENDITURE INCURRED TOWARDS WOODEN WORK AND DECORATION OF OFFI CE AT BOMBAY, SINCE THE BRANCH MANAGER, MR. VARGHESE HAD RESIGNED AND T HE PAYMENT WAS ROUTED THROUGH HIS IMPRESSED ACCOUNT, THE RECORD WH EREOF UNTRACEABLE HITHERTO. NOW THE RECORD HAS BEEN TRACED OUT AND T HE BILL IS BEING FILED BY WAY OF ADDITIONAL EVIDENCE. 24. THE LEARNED DR HAS OPPOSED THE ADMISSION OF THE BILL BY WAY OF ADDITIONAL EVIDENCE. WE, HOWEVER, ARE NOT IN AGRE EMENT WITH THE DEPARTMENTS STAND. THE BILL OF ` 1,01,500/- SHOWS WOODEN WORK AND DECORATION OF NEW OFFICE BUILDING, CABIN AND WORK E XPENSES, AT BOMBAY. IT HAS BEEN APPROVED BY GEORGE V. GEORGE V HAS BEEN STATED TO BE THE BRANCH MANAGER, MR. VARGHESE, WHO HAD RESIGNED AND WHOSE IMPRESSED ACCOUNT, THE PAYMENT HAD BEEN ROUTED THROUGH. THE RECORDS OF THIS ACCOUNT HAVE BEEN STATED TO BE UNTRACEABLE EARLIER AND THEY HAVE NOW BEEN TRACED OUT AS PER THE LEARNED COUNSEL. AS SUCH, WE ADMIT THI S BILL IN EVIDENCE AND, IN ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 14 THESE CIRCUMSTANCES, REMIT THE MATTER TO THE FILE O F THE AO FOR DECISION AFRESH ON TAKING INTO CONSIDERATION THIS BILL TENDE RED BY THE ASSESSEE. 25. GROUND NOS. 1&2 ARE, THEREFORE, FOR STATISTICAL PURPOSES, TREATED AS ACCEPTED. 26. SO FAR AS REGARDS GROUND NOS. 3&4, THE AO DISAL LOWED THE ASSESSEES CLAIM OF SET OFF OF LOSS OF ASSESSMENT YEAR 2001-02 AGAINST THE INCOME OF ASSESSMENT YEAR 2002-03, BY INVOKING THE PROVISIONS OF SECTION 79 OF THE I.T. ACT. THE LD. CIT(A) UPHELD THE AOS ORDER. 27. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A SYNOPSIS IN THIS REGARD AND HAS CONTENDED THAT M/S. S-NET FREIGHT (INDIA)P. LTD. IS A COMPANY INCORPORATED IN SINGAPORE, OPERATING IN THE FIELD O F FREIGHT AND LOGISTICS ALL OVER THE COUNTRY, THROUGH SUBSIDIARIES AND ASSOCIAT ES; THAT GA GOSS(S)PVT. LTD. IS ONE OF THE COMPANIES INCORPORATED IN PROVI DING SUCH SERVICES; THAT BOTH THESE COMPANIES AGREED TO SET UP A PRIVATE LIM ITED COMPANY IN INDIA, TO BE A SUBSIDIARY OF S-NET FREIGHT PVT. LTD.; THAT TH EY ENTERED INTO A JOINT VENTURE AGREEMENT IN THIS REGARD; THAT THE FOREIGN COMPANIES CANNOT INVEST TILL AN APPROVAL IS OBTAINED FROM THE FIPB; THAT FO R SUCH AN APPROVAL, A COMPANY IS REQUIRED ; THAT IT IS THEREFORE THAT A C OMPANY IS INCORPORATED THROUGH THEIR INDIAN NOMINEES, WITH NOMINAL SHARE C APITAL; THAT ON RECEIPT OF ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 15 THE NECESSARY APPROVALS, THE INVESTMENT IS BROUGHT INTO INDIA; THAT IN THE PRESENT CASE, THE J.V. PARTNERS HAD, TOWARDS THIS O BJECTIVE, AS THEIR DIRECT NOMINEES, DR. PREM CHAND JAIN AND MRS. DAKSHAYANI R EDDY, THROUGH WHOM THEY HELD THE SHARES BENEFICIALLY DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2001-02 AND THE COMPANY INCURRED A LOSS DURING THE YEAR; THAT IN THE SUBSEQUENT ASSESSMENT YEAR, ON GETTING THE REQUISIT E APPROVALS, THE TWO COMPANIES THEMSELVES BECAME THE SHAREHOLDERS INSTEA D OF THROUGH THE NOMINEES CAME TO AN END; THAT THE ESSENTIAL REQUIRE MENT OF THE PROVISIONS OF SECTION 79 OF THE ACT IS THAT ON THE LAST DAY OF TH E PREVIOUS YEAR THE SHARES OF THE COMPANY CARRYING NOT LESS THAN FIFTY ONE PER CE NT OF THE VOTING POWER WERE BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY HELD SHARES OF THE COMPANY CARRYING NOT LESS THAN FIFTY ONE PER CENT O F THE VOTING POWER ON THE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED; THAT IN THE PRESENT CASE, 100% OF THE SHARES WERE, AS ON 31.3.2 002, HELD BY PERSONS WHO BENEFICIALLY HELD SHARES ON THE LAST DAY OF MAR CH, 2001; THAT AS ON 31.3.2001, S. NET FREIGHT (HOLDING) PVT. LTD. AND G .A. GOSS (S)PVT. LTD. BENEFICIALLY HELD SHARES CARRYING 100% OF THE VOTIN G POWER THROUGH THEIR NOMINEES, DR. PREM CHAND JAIN AND MRS. DAKSHAYANI R EDDY; THAT THE ESSENTIAL CONDITION IS THAT THE SHARES SHOULD HAVE BEEN BENEFICIALLY HELD BY ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 16 CERTAIN PERSONS; THAT THE LEGISLATION HAS NOT USED THE WORDS SHAREHOLDERS WHICH WOULD NECESSARILY IMPLY THEIR BEING REGISTERE D SHAREHOLDERS ; THAT ON THE OTHER HAND, SUCH WORDS HAVE BEEN USED WHEREVER SUCH INTENDMENT WAS THERE, E.G., IN SECTION 2(22)(D) AND SECTION 47. RELIANCE HAS BEEN PLACED ON CIT V. SWADESHI MATCH CO., 139 ITR 833(BOM). 28. THE LEARNED DR, ON THE OTHER HAND, HAS STRONGLY RELIED ON THE IMPUGNED ORDER IN THIS REGARD. IT HAS BEEN CONTEND ED THAT THE LEGAL REQUIREMENTS WERE NOT FOLLOWED BY THE ASSESSEE; THA T AS RIGHTLY NOTED BY THE LD. CIT(A), AS PER SECTION 79 OF THE ACT, TRANSFER SHARES BY SUBSCRIBERS AMOUNTS TO A CHANGE IN THE SHAREHOLDING; AND THAT T HEREFORE, BROUGHT FORWARD LOSS COULD NOT BE ADJUSTED OR CARRIED FORWARD WHEN FIFTY ONE PERCENT BENEFICIARY SHAREHOLDERS WERE NOT THE SAME IN THE T WO YEARS, AS PER THE PROVISIONS OF SECTION 79 OF THE ACT. 29. IN THIS REGARD, IT IS SEEN THAT SECTION 79 OF T HE ACT PROVIDES AS FOLLOWS:- NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTE R, WHERE A CHANGE IN SHAREHOLDING HAS TAKEN PLACE IN A PREVIOU S YEAR IN THE CASE OF A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBL IC ARE SUBSTANTIALLY INTERESTED, NO LOSS INCURRED IN ANY Y EAR PRIOR TO THE PREVIOUS YEAR SHALL BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR UNLESS (A) ON THE LAST DAY O F THE PREVIOUS YEAR THE SHARES OF THE COMPANY CARRYING NOT LESS THAN FI FTY ONE PER CENT OF ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 17 THE VOTING POWER WERE BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY THE SHARES OF THE COMPANY CARRYING NOT LESS THAN F IFTY ONE PER CENT OF THE VOTING POWER ON THE LAST DAY OF THE YEAR OR YEA RS IN WHICH THE LOSS WAS INCURRED. PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY TO A CASE WHERE A CHANGE IN THE SAID VOTING POWER TAKES PLACE IN A PREVIOUS YEAR CONSEQUENT UPON THE DEATH OF A SHAREHOLDER OR ON ACCOUNT OF TRANSFER OF SHARES BY WAY OF GIFT TO ANY RELATIVE O F THE SHAREHOLDER MAKING SUCH GIFT. PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS SEC TION SHALL APPLY TO ANY CHANGE IN THE SHAREHOLDING OF AN INDIAN COMPANY WHICH IS A SUBSIDIARY OF A FOREIGN COMPANY AS A RESULT OF AMAL GAMATION OR DEMERGER OF A FOREIGN COMPANY SUBJECT TO THE CONDIT ION THAT FIFTY ONE PER CENT SHAREHOLDERS OF THE AMALGAMATING OR DEMERG ED FOREIGN COMPANY CONTINUE TO BE THE SHAREHOLDERS OF THE AMAL GAMATED OR THE RESULTING FOREIGN COMPANY. 30. THE LD. CIT(A) HAS CONFIRMED THE ASSESSMENT ORD ER ON THE ISSUE BY OBSERVING AS FOLLOWS:- THE ABOVE CONTENTIONS AND ARGUMENTS OF THE APPELLA NT HAVE BEEN CAREFULLY CONSIDERED. THE SUM AND SUBSTA NCE OF THE APPELLANTS ARGUMENTS IS THAT NECESSARY LEGA L REQUIREMENTS WERE FOLLOWED BY THE APPELLANT AND FOREIGN EQUITY INVESTMENT COULD NOT HAVE BEEN ATTRA CTED BY ANY OTHER WAY EXCEPT THE WAY ADOPTED BY THE APPELLANT. IT WAS THE SIGNATORIES AND THE TRUSTEES WHO ACTUALLY LATER BECAME SUBSCRIBERS THROUGH THEIR NOMINEES AND THE SHARES WERE TRANSFERRED IN THEIR NAMES ONLY AFTER NECESSARY APPROVALS WERE OBTAINED. THEREFORE, THE APPELLANTS CASE IS THAT THE COMPANY HAD TO ABIDE BY THE RELEVANT LAWS RELATING TO FOREIGN D IRECT INVESTMENTS BEFORE THE SHARES COULD BE ALLOTTED TO THE FOREIGN SHAREHOLDERS. ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 18 HOWEVER, AFTER CONSIDERING THE ARGUMENTS OF THE APPELLANT IT IS OBSERVED THAT IT CANNOT BE ACCEPTED THAT THE NOMINEES WERE USED ONLY AS A LEGAL NECESSITY WH ICH COULD BE ACCEPTABLE AS PER THE RELEVANT PROVISIONS IN ORDER TO FACILITATE THE FORMATION OF THE COMPANY BY THE FOREIGN EQUITY HOLDERS. IN TERMS OF SEC. 79 THE TR ANSFER OF SHARES BY SUBSCRIBERS TO MEMORANDUM AND ARTICLES HAVE TO BE NECESSARILY VIEWED AS A CHANGE IN THE SHAREHOLDING OF THE ASSESSEE COMPANY. HENCE, IT IS HELD THAT THE BROUGHT FORWARD LOSS CANNOT BE ADJUSTED OR A CARRIED FORWARD WHEN 51% BENEFICIAL SHAREHOLDERS AR E NOT THE SAME IN THE TWO YEARS. HENCE, FOR THE REAS ONS RELIED UPON BY THE AO, THE ADDITION MADE BY HIM IS UPHELD AND THE LOSS IS DIRECTED NOT TO BE CARRIED FORWARD. THIS GROUND IS DISMISSED. 31. THUS, AS PER THE TAXING AUTHORITIES, SECTION 79 OF THE ACT PROVIDES THAT NO LOSS INCURRED BY CLOSELY HELD COMPANY IN AN Y YEAR PRIOR TO THE PREVIOUS YEAR SHALL BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR, UNLESS ON THE LAST DAY OF THE PREVIO US YEAR, THE SHARES OF THE COMPANY CARRYING NOT LESS THAN FIFTY ONE PER CENT O F THE VOTING POWERS WERE BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY HELD THE SHARES OF THE COMPANY CARRYING NOT LESS THAN FIFTY ONE PER CENT OF THE VO TING POWER ON THE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED ; AND THAT THE ASSESSEE HAD NOT FULFILLED THOSE PRESCRIBED CONDITION. 32. THE CASE OF THE ASSESSEE IS THAT THE INVESTMENT BY FOREIGN COMPANIES IS NOT PERMISSIBLE IN THE ABSENCE OF APPROVAL FROM FIP B. IT WAS FOR SUCH A ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 19 PURPOSE THAT A JV AGREEMENT WAS ENTERED INTO BETWEE N M/S. S-NET FREIGHT (INDIA)P.LTD., AND G.A. GOSS (S)PVT. LTD., BOTH SI NGAPORE INCORPORATED COMPANIES CARRYING ON BUSINESS IN THE FIELD OF FREI GHT AND LOGISTICS, TO SET UP A PRIVATE LIMITED COMPANY IN INDIA, AS A SUBSIDIARY OF M/S. S-NET FREIGHT (INDIA)P.LTD. THE COMPANY WAS INCORPORATED THROUG H INDIAN NOMINEES OF THE TWO COMPANIES, THROUGH WHOM THE SHARES WERE HEL D BENEFICIALLY DURING ASSESSMENT YEAR 2001-02. IN THE SUBSEQUENT YEAR, THE TWO COMPANIES THEMSELVES BECAME SHAREHOLDERS, ON GETTING THE REQ UISITE APPROVALS FROM FIPB. THE SHAREHOLDING PATTERN FOR ASSESSMENT YEA RS 2001-02 AND 2002-03 IS GIVEN AT PAGE 17 OF THE ASSESSEES PAPER BOOK ( APB FOR SHORT), AS SUBMITTED BEFORE BOTH THE TAXING AUTHORITIES, AS FO LLOWS:- SHAREHOLDERS FUND SHAREHOLDERS NAME A.Y. 2001-02 PERCENT AS ON 31.3.01 A.Y. 2002-03 AS ON 31.3.02 PERCENT DR. PREM CHAND JOHN MRS. DAKSHAYANI REDDY S-NET FREIGHT (HOLDINGS) PTE. LTD. G A GOSS (S) PTE. LTD. 1000 50% 1000 50% 369260 74% 129740 26% TOTAL 2000 100% 4990000 100% ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 20 33. IN THE SUBMISSIONS BEFORE THE LD. CIT(A) (APB 1 0 TO 13), THE ISSUE WAS EXPLAINED BEFORE THE CIT(A), STATING, INTER ALI A, THAT THE FOREIGN EXCHANGE MANAGEMENT ACT , PROVIDES RULES FOR FOREIG N INVESTMENT IN INDIA; THAT AS PER FEMA RULES, THESE ARE SECTORIAL CAPS IN WHICH AUTOMATIC ROUTE IS NOT AVAILABLE AND FOR WHICH SPECIFIC APPROVAL OF FOREIGN INVESTMENT PROMOTION BOARD IS REQUIRED. IN THE INSTANT CASE, THE PROCESS STARTED FROM 05.06.2000 AND ENDED ON 20.11.2001, I.E., F.Y. 2001 -02 RELEVANT TO ASSESSMENT YEAR 2002-03; THAT THE COMPANY HAD ALLOT TED SHARES TO SUBSCRIBERS TO THE MEMORANDUM OF ASSOCIATION FOR ` 2,000/- ONLY; THAT THE FURTHER SUM OF ` 49.90 LAKHS WAS CONTRIBUTED FROM THE FOREIGN SHAREH OLDERS AS CAPITAL AND THE COMPANYS ACTIVITIES COULD ONLY HAPPEN WITH THIS SHARE CAPITAL AND THE WHOLE INFRASTRUCTURE WAS BUILT USIN G THAT MONEY; THAT THE COMPANY HAD TO ABIDE BY RELEVANT LAWS OF FOREIGN DI RECT INVESTMENT, BEFORE THE SHARES COULD BE ALLOTTED TO THE FOREIGN SHAREHO LDERS; AND THAT THE SUBSCRIBERS TO THE MEMORANDUM OF ASSOCIATION WERE N EVER INTENDED TO BE THE SHAREHOLDERS OF THE COMPANY AT THE OUTSET. 34. THESE CONTENTIONS OF THE ASSESSEE HAVE NOWHERE BEEN REFUTED BY THE LD. CIT(A) AND HE HAS ONLY OBSERVED THAT IT COULD N OT BE ACCEPTED THAT THE NOMINEES WERE USED ONLY AS A LEGAL NECESSITY. NOW, ONCE, THE REQUIREMENTS ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 21 OF THE PROVISIONS WERE FEMA THE FACTS ARE TO BE ST RINGENTLY FOLLOWED AND IT HAS BEEN SO DONE, IT WAS THE REQUIREMENT OF THE FOR EIGN DIRECT INVESTMENT LAWS WHICH MADE THE ASSESSEE TO ACT IN THE MANNER D ISCUSSED ABOVE. THE PROVISIONS OF SECTION 79 OF THE I.T. ACT, THEREFORE , CANNOT BE SAID TO ENVISAGE THE TRANSFER OF SHARES BY THE SUBSCRIBERS OF THE ME MORANDUM OF ARTICLES OF ASSOCIATION AS A CHANGE IN THE SHAREHOLDING OF THE ASSESSEE COMPANY. THE PROVISIONS OF FEMA HAVE NOT BEEN SHOWN TO BE NON-MA NDATORY. IN ORDER TO CARRY ON BUSINESS IN INDIA, FOREIGN COMPANY NEED MU ST ABIDE BY THE PROVISIONS OF THE SAID ACT. MOREOVER, THE TWO SHAR EHOLDERS INDEED ACTED ONLY AS THE NOMINEES TO ENABLE THE SMOOTH PASSAGE O F THE OTHER SHAREHOLDER IN THE SUBSEQUENT YEAR. THEREFORE, WE DO NOT FIND OURSELVES AT ONE WITH THE OBSERVATIONS MADE BY THE LD. CIT(A) IN THIS REGARD. THE CONTENTION OF THE ASSESSEE IS, THEREFORE, ACCEPTED, PARTICULARLY KEEP ING IN VIEW THE OBSERVATIONS IN SWADESHI MATCH CO. (SUPRA), WHER EIN IT WAS HELD THAT HOLDING WITHIN THE MEANING OF EXPLANATION II OF P ARA D OF PART II OF THE FIRST SCHEDULE I OF THE FINANCE (NO.2) ACT, 1962 HA D NOT BEEN DEFINED AND, THEREFORE, IT WAS POSSIBLE TO CONSTRUE THAT THE BEN EFICIAL SHAREHOLDING WAS INCLUDED IN IT AND VIS--VIS, THAT HOWEVER, WHEN A PROVISION UNDER CONSIDERATION IS A PROVISION FOR GIVING ENHANCED BE NEFIT BY WAY OF ADDITIONAL ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 22 REBATE TO THE ASSESSEE AND BOTH CONSTRUCTIONS ARE P OSSIBLE, THEN IT IS DISCERNABLE TO ADOPT THE CONSTRUCTION WHICH WILL B ENEFIT THE ASSESSEE; AND THAT THEREFORE, FOR THE PURPOSE OF EXPLANATION II, BOTH LEGAL OWNERSHIP AND BENEFICIAL OWNERSHIP SHOULD BE TAKEN INTO ACCOUNT. 35. IN VIEW OF THE ABOVE, GROUND NOS. 3&4 ARE ACCEP TED. ITA NO. 2443(DEL)2010: 36 . THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEA R 2003-04, RAISING THE FOLLOWING GROUND:- LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN ALLOWING TH E LOSS FOR THE ASSESSMENT YEAR 2002-03 TO BE CARRIED FORWARD. 37. THE LEARNED CIT(A) DIRECTED TO ALLOW CARRY FORW ARD OF LOSSES PERTAINING TO THE PREVIOUS ASSESSMENT YEAR, I.E., A SSESSMENT YEAR 2002-03, AS PER LAW, SUBJECT TO THE ASSESSEES FULFILLING THE P RESCRIBED CONDITIONS, IF ANY. THE LOSS PERTAINING TO ASSESSMENT YEAR 2001-02 AMOU NTING TO ` 54,17,818/- HAVING NOT HELD TO BE CARRIED FORWARD TO ASSESSMENT YEAR 2002-03, IT IS FURTHER CARRIED FORWARD TO ASSESSMENT YEAR 2002-03 WAS DISALLOWED. 38. THIS APPEAL IS CONSEQUENTIAL TO OUR DECISION ON GROUND NOS. 3&4 TAKEN BY THE ASSESSEE IN ITS APPEAL IN ITA NO.867 (DEL)2010, FOR ASSESSMENT YEAR 2002-03. THE SET OFF OF BROUGHT FORWARD LOSS FOR ASSESSMENT YEAR ITA NOS. 2223, 2224 & 2443 & 867(DEL)2010 23 2001-02 HAS BEEN ALLOWED THEREIN. IT IS, ACCORDING LY, ALLOWED FOR ASSESSMENT YEAR 2003-04 ALSO. 39. THE GROUND RAISED BY THE DEPARTMENT IS, THEREFO RE, REJECTED. 40. IN THE RESULT, THE DEPARTMENTS APPEALS IN ITA NOS. 2223, 2224 & 2443(DEL)2010 FOR ASSESSMENT YEARS 2001-02, 2002 -03 & 2003-04 ARE DISMISSED AND ASSESSEES APPEAL IN ITA NO.867(DEL)2 010 FOR ASSESSMENT YEAR 2002-03 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 05.10.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR