DCIT, Circle-11(1), V. IRCON International Ltd.,

ITA 2234/DEL/2005

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6847 (ITAT-DELHI)
• Duration Of Justice: 14 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-05-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 05-05-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Business income; Depreciation; Business expenditure; Search and seizure; Double taxation relief; Rule of consistency; Retrospective amendment; Permanent establishment; Bad and doubtful debts; Capital receipt; Revenue expenditure; Capital expenditure; TDS; Set aside; Liquidation; Capital Gains
• Section: 143(3); 244A; 80HHC; 115JB; 37(1); 80G; 139(5); 143(1); 80IA; 201; 274; 251; 143(2); 64; 145; 154

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH C, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 ASSESSMENT YEARS: 2001-02, 2002-03 & 2003-04 IRCON INTERNATIONAL LIMITED, PALIKA BHAWAN, R.K. PURAM SECTOR-13, NEW DELHI (PAN: AAACI0684H) (APPELLANT) VS. ADDL. C.I.T., RANGE - 11, NEW DELHI. (RESPONDENT) ITA NO. 2234/DEL/2005& 3805/DEL/2008 ASSESSMENT YEAR: 2001-02& 2003-04 DY. C.I.T., RANGE - 11 (1) , NEW DELHI. (APPELLANT) VS. IRCON INTERNATIONAL LIMITED, PALIKA BHAWAN, R.K. PURAM SECTOR-13, NEW DELHI (RESPONDENT) ASSESSEE BY DR. RAKESH GUPTA, ADVOCATE & SH. SOMIL AGGARWAL, ADVOCATE REVENUE BY SH. J.K. MISHRA, CIT/DR DATE OF HEARING 2 1 .08.2019 DATE OF PRONOUNCEMENT 31 .10.2019 ORDER PER O.P. KANT, A.M.: THESE APPEALS BY THE ASSESSEE AND THE REVENUE HAVE BEEN RAISED AGAINST SEPARATE ORDERS OF THE LD. COMMISSIO NER OF INCOME- ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 2 TAX (APPEALS)-XIV, NEW DELHI [IN SHORT THE LD. CIT(A )] I.E.: ORDER DATED 16/02/2005 FOR ASSESSMENT YEAR 2001-02; ORDER DATED 23/12/2005 FOR ASSESSMENT YEAR 2002-03 AND ORDER DA TED 29/10/2008 FOR ASSESSMENT YEAR 2003-04 RESPECTIVELY . AS COMMON ISSUES IN SAME SET OF CIRCUMSTANCES ARE INVOLVED IN THESE APPEALS, WE HAVE HEARD THESE APPEALS TOGETHER AND DISPOSED OF F BY WAY OF THIS CONSOLIDATED ORDER FOR SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEAR 2001-02. THE GROUNDS OF THE APP EAL OF THE ASSESSEE IN ITA NO. 1825/DEL/2005 ARE REPRODUCED AS UNDER: 1(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE-IN-A FTER REFERRED TO AS CIT(A)], WAS NOT JUSTIFIED IN UPHOLD ING THE DISALLOWANCE OF THE APPELLANT'S CLAIM FOR DEDUCTION OF DEPRECIATION AMOUNTING TO RS. 24,41,250/- ON THE VA LUE OF MACHINERY SPARE PARTS CAPITALIZED DURING THE YEAR. 1(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.1(A) TAKEN HERE IN A BOVE, THE LD. CIT(A)GROSSLY ERRED IN HOLDING THAT ALTHOUGH DEPREC IATION IS ALLOWABLE ON MACHINERIES IN 'READY TO USE' CONDITIO N BUT THE SAME IS NOT ALLOWABLE ON MACHINERY SPARES WHICH ARE ALSO IN 'READY TO USE 'CONDITION. 1(C). THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 1(A) & 1(B) TAK EN HERE IN ABOVE, THE APPELLANT MAY OTHERWISE BE ALLOWED DEDUC TION ON ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 3 THE BASIS OF ACTUAL CONSUMPTION, IN CASE THE CLAIM OF DEPRECIATION IS NOT ALLOWABLE TO THE APPELLANT. 2(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM O F THE APPELLANT FOR DEDUCTION U/S 80IA IN RESPECT OF INCOME EARNED FROM THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITIE S AMOUNTING TO RS.16,82,00,160/- 2(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 2(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING THAT THE APPELL ANT'S ROLE IN EXECUTING VARIOUS INFRASTRUCTURE PROJECTS IS THAT O F A CONTRACTOR WHICH CANNOT BE EQUATED TO THE BUSINESS OF DEVELOPI NG THE INFRASTRUCTURE FACILITIES AND THEREBY DISALLOWING T HE CLAIM FOR DEDUCTION U/S 80IA OF THE ACT. 3(A). THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOW ANCE OF THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80HHC IN R ESPECT OF INCOME EARNED FROM THE BUSINESS OF EXPORT OF GOODS AMOUNTING TO RS.23,17,36,491/-. 3(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 3(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING THAT THE APPELL ANT ENTERED INTO 'COMPOSITE CONTRACT' WHICH CANNOT BE EQUATED T O THE 'SUPPLY CONTRACT' THEREBY DISALLOWING THE CLAIM FOR DEDUCTI ON U/S 80HHC OF THE ACT. 4.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF RS. 9,32,902/- ON ACCOUNT OF OTHER MISCELLANEOUS DO NATIONS. 5(A). THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE CLA IM OF THE APPELLANT IN RESPECT OF 'PRIOR PERIOD EXPENSES' AMO UNTING TO RS. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 4 1,80,20,765/- OUT OF THE TOTAL CLAIM OF APPELLANT O F RS. 2.43,27,000/-. 5(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.5(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) COMPLETED THE APPELLANT PROCE EDINGS IN HASTE WITHOUT AFFORDING REASONABLE OPPORTUNITY TO T HE APPELLANT FOR FURNISHING ALL THE RELEVANT DOCUMENTS AND HENCE THE ISSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. 6(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR DEMOBI LIZATION AMOUNTING TO RS 2,13,04,431/- OUT OF THE TOTAL CLAI M FOR RS.4,80,49,000/-. 6(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.6(A) TAKEN HERE IN ABOVE, THE LD. CIT(A)COMPLETED THE APPELLATE PROCEE DINGS IN HASTE WITHOUT AFFORDING REASONABLE OPPORTUNITY TO T HE APPELLANT FOR FURNISHING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED ISSUE MAY BE SET ASIDE FOR ALLOWING THE SA ME ON MERITS. 7(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THELD.CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DI SALLOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR O THER EXPENSES AMOUNTING TO RS 1,61,25,533/- OUT OF THE T OTAL CLAIM FOR RS.3,57,49,802/-. 7(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.7(A) TAKEN HERE IN A BOVE, THE LD. CIT(A)COMPLETED THE APPELLATE PROCEEDINGS IN HA STE WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT F OR FURNISHING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED I SSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 5 8(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER IN R ESPECT OF INTEREST RECEIVED VIDE INTIMATION U/S143(1) FOR THE ASSESSMENT YEAR 2000-01 AMOUNTING TO RS 25,56,813/- 8(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 8(A) TAKEN HERE IN ABOVE, THE LD. CIT(A)GROSSLY ERRED IN HOLDING THAT THE INTEREST RECEIVED BY THE APPELLANT ON PROVISIONAL ASSESSMENT U/S 143(1) FOR THE ASSESSMENT YEAR 2000-01 TO BE DUE AND FINAL , DISREGARDING THE FACT THAT THE SAME WAS SUBSEQUENTL Y WITHDRAWN ON FINALIZATION OF THE APPELLANT'S CASE F OR THE SAID ASSESSMENT YEAR U/S 143(3) OF THE ACT. 9(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADD ITION OF RS.2,00,30,000/- TOWARDS INTEREST INCOME ON ACCRUAL BASIS ON THE DISPUTED DUES WITH NBCC WHOSE MATTER IS PENDING BEFORE THE HON'BLE DELHI HIGH COURT. 9(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 9(A) TAKEN HERE IN ABOVE, THE LD. CIT (A)GROSSLY ERRED IN HOLDING THAT PRINCI PAL AND INTEREST AMOUNTS DUE FROM A GOVERNMENT COMPANY CANN OT BE CONSIDERED TO BE DOUBTFUL OR STICKY UNLESS THE SAID COMPANY HAS GONE INTO LIQUIDATION. 10. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF RS. 2,48,73,000/- AND RS. 53,98,000/- TOWARDS PROVI SION FOR DOUBTFUL ADVANCES RESPECTIVELY IN COMPUTING THE BOO K PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 11. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF RS. 2,13,04,431/- ON ACCOUNT OF PROVISION FOR DEMOB ILIZATION IN COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF 115JB OF THE ACT. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 6 12. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF RS. 1,61,25,533/- ON ACCOUNT OF PROVISION FOR OTHER EXPENSES IN COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF 15JB O F THE ACT. 13. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT (A) WAS NOT JUSTIFIED AND GROSSLY ERRED IN DISALLOWING DEDUCTION FROM INCOME EARNED FROM PERMANENT ESTABLI SHMENT IN FOREIGN COUNTRIES AND NOT CHARGEABLE TO TAX UNDER D OUBLE TAXATION AVOIDANCE AGREEMENT AMOUNTING TO RS.76,80, 17,697/- IN COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SEC TION 115JB OF THE ACT. 14. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF THE CLAIM OF THE APPELLANT AMOUNTING TO RS.6,77,97, 458/- ON ACCOUNT OF THE PROFIT ON SALE OF FIXED ASSET IN COM PUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 15. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN DISALLOWING RS. 28 ,96,70,614/- TOWARDS THE CLAIM OF DEDUCTION U/S 80HHC IN COMPUTI NG THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 16. THAT THE APPELLANT CRAVES LEAVE, TO ADD, TO AME ND, TO MODIFY, TO RESCIND, SUPPLEMENT OR ALTER ANY GROUND STATED HEREIN ABOVE EITHER BEFORE OR AT THE TIME OF HEARIN G. 3. THE GROUNDS OF THE APPEAL OF THE REVENUE IN ITA NO. 2234/DEL/2005 ARE REPRODUCED AS UNDER: '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE ALTERN ATE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S80HHB(A)DISREGARDING THE FACT THAT THE ASSESSEE HAD ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 7 NEITHER FURNISHED WITH THE RETURN OF INCOME THE REP ORT OF THE AUDITOR IN FORM NO.10CCAA NOR CREATED THE REQUISITE RESERVE REQUIRED AS PER THE LAW. SINCE THE ASSESSEE DID NOT FULFILL THE REQUISITE REQUIREMENTS OF LAW, THE CIT(A) ERRED IN GRANTING THE AFORESAID RELIEF TO THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A)HAS ERRED IN ALLOWING THE ASSESSE E RELIEF WITH REGARD TO THE ALTERNATE CLAIM OF DEDUCTION U/S 80HHB DISREGARDING THE FACT THAT THE ASSESSEE DID NOT FIL E THE REQUISITE FORM NO.10CCAH WITH THE RETURN OF INCOME FROM THE A CCOUNTANT AND ALSO DID NOT CREATE THE PROJECT RESERVE ACCOUNT , REQUIRED AS PER THE LAW. SINCE THE ASSESSEE DID NOT QUALIFY FOR DEDUCTION U/S 80HHB AS PER THE LAW, THE CIT(A) ERRED IN GRANT ING THE AFORESAID RELIEF TO THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THE A.O. TO DELET E THE ADJUSTMENT MADE BY THE AO AND DIRECTING HIM TO ALLO W THE DEDUCTION U/S 80HHB WITHOUT CONSIDERING THE CORPORA TE OFFICE EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A)HAS ERRED IN DELETING TH E DISALLOWANCE OF THE ASSESSEES CLAIM MADE BY THE AO U/S 35DDA, DISREGARDING THE OBJECTIONS RAISED BY THE AO AS PER THE REMAND REPORT. SINCE REQUISITE CONDITIONS WERE NOT SATISFIED, THE CIT(A) ERRED IN GRANTING THE AFORESAID RELIEF TO TH E ASSESSEE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A)HAS ERRED IN DELETING TH E DISALLOWANCE OF PROPORTIONATE CORPORATE EXPENSES MA DE BY THE AO FROM THE PROFIT OF FOREIGN PROJECT FOR THE PURPO SE OF ALLOWING EXCLUSION OF INCOME UNDER THE DOUBLE TAXATION AVOID ANCE AGREEMENT. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 8 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN GRANTING PARTIAL RELIEF TO THE ASSESSEE WITH REGARD TO THE CLAIM OF PRIOR PERIOD EXPENSES I GNORING THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING AND AS SUCH THE ASSESSEE WAS NOT ENTITLED TO GRANT OF THE CLAIM RELATING TO THE PRIOR PERIOD EXPENSES. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING T HE DISALLOWANCE OF RS.2,67,45,000/- OUT OF TOTAL DISAL LOWANCE OF RS.4,80,49,000/- ON ACCOUNT OF PROVISION FOR DEMOBI LIZATION MADE BY THE AO DISREGARDING THE FACT THAT THE SAID EXPENDITURE WAS CLAIMED BY THE ASSESSEE ON ESTIMATE AND ADHOC B ASIS AND THE EXPENDITURE HAD NOT CRYSTALLIZED IN THE RELEVAN T FINANCIAL YEAR. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING T HE DISALLOWANCE OF RS.1,96,24,269/- OUT OF TOTAL DISAL LOWANCE OF RS.3,57,49,802/- MADE BY THE AO ON ACCOUNT OF PROVI SION FOR OTHER EXPENSES DISREGARDING THE FACT THAT THE SAID EXPENDITURE WAS CLAIMED BY THE ASSESSEE ON ESTIMATE AND ADHOC B ASIS AND THE EXPENDITURE HAD NOT CRYSTALLIZED IN THE RELEVAN T FINANCIAL YEAR. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANC E OF PROVISION FOR DEMOBILIZATION TO RS.2,13,04,000/- AND PROVISIO N FOR OTHER EXPENSES TO RS. 1,61,25,533/- IN COMPUTATION OF BOO K PROFIT FOR THE PURPOSE OF SECTION 115JB AS AGAINST THE DISALLO WANCE MADE BY THE AO OF AN AMOUNT OF RS.4,80,49,000/- AS PROVI SION FOR DEMOBILIZATION AND RS.3,57,49,802/- AS PROVISION FO R OTHER EXPENSES. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 9 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN GRANTING RELIEF TO THE ASSESSEE WITH REGARD TO THE AOS ACTION OF ADDING BACK THE PROVIS ION FOR GRATUITY AMOUNTING TO RS.44,39,494/- TO COMPUTE THE BOOK PROFIT U/S 115JB OF THE I.T. ACT, 1961. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN PARTIALLY SETTING ASID E THE ISSUE RELATING TO DISALLOWANCE ON ACCOUNT OF PROVISION WR ITTEN BACK AND CREDITED TO P&L ACCOUNT IN COMPUTING THE BOOK P ROFIT FOR THE PURPOSE OF SECTION 115JB, IGNORING THAT CIT(A) DOES NOT HAVE THE POWER TO SET ASIDE ISSUES AND RESTORE THEM TO FILE OF THE AO. 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THE AO TO AL LOW DEDUCTION U/S 80HHB IN RESPECT OF THE CLAIM MADE BY THE ASSES SEE DURING THE COURSE OF APPELLATE PROCEEDINGS FOR COMPUTATION OF BOOK PROFIT U/S 115JB OF THE I.T. ACT DISREGARDING THE F ACT THAT THE SUCH ADJUSTMENT IS NOT PERMISSIBLE AS PER PROVISION S OF SECTION 115JB OF THE ACT. 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING INTEREST CHAR GED BY THE AO U/S 234D OF THE I.T. ACT.' 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS A GOVERNMENT UNDERTAKING AND WAS ENGAGED IN EXECU TION OF CIVIL ENGINEERING PROJECT IN INDIA AND ABROAD. FOR THE YE AR UNDER CONSIDERATION, THE ASSESSEE COMPANY FILED ITS RETUR N OF INCOME ON 30/10/2001 DECLARING TOTAL INCOME OF RS. 28,43,46,2 90/-UNDER REGULAR PROVISIONS OF INCOME TAX ACT, 1961 (IN SHOR T THE ACT) AND ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 10 BOOK PROFIT OF RS. 6,75,31,827/-UNDER SECTION 115JB OF THE ACT. THE TOTAL INCOME WAS FURTHER REVISED TO RS. 16,43,46,29 0/-ON 31/03/2003, WHILE THE BOOK PROFIT REMAINED SAME AS I N THE ORIGINAL RETURN OF INCOME. THE CASE WAS SELECTED FOR A SCRUT INY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND COMP LIED. IN THE ASSESSMENT COMPLETED ON 25/03/2004 UNDER SECTION 14 3(3) OF THE ACT, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/D ISALLOWANCES AND COMPUTED BOOK PROFIT OF THE ASSESSEE UNDER SECT ION 115JB AT RS. 1,41,37,92,764/-AND WORKED OUT THE TAX PAYABLE T HEREON AT RS. 11,98,18,937/-. THE ASSESSING OFFICER ALSO COMPUTED ASSESSED INCOME UNDER NORMAL PROVISIONS OF THE ACT AT RS. 76 ,67,30,425 /- AND WORKED OUT THE TAX PAYABLE THEREON AT RS. 30,32 ,41,883/-. AS THE TAX PAYABLE ON THE BUSINESS INCOME ASSESSED AS PER NORMAL PROVISIONS OF THE ACT WAS HIGHER THAN THE TAX PAYABL E ON BOOK PROFIT ASSESSED, THE ASSESSING OFFICER RAISED DEMAND OF TA X ON THE BASIS OF THE TAX PAYABLE UNDER NORMAL PROVISIONS OF THE ACT. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE FINDING O F THE LD. CIT(A), ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 11 BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL RAI SING THE RESPECTIVE GROUNDS AS REPRODUCED ABOVE. 5. IN GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE, T HE ISSUE OF DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 24,41, 250/-ON THE VALUE OF THE MACHINERY PART TREATED AS CAPITAL ASSE T BY THE ASSESSEE ,IS INVOLVED. IN GROUND NUMBER 1(A) & 1(B), THE ASS ESSEE HAS CONTESTED THE DISALLOWANCE WHEREAS IN GROUND NO. 1(C) , THE ASSESSEE HAS SOUGHT ALTERNATIVE DEDUCTION ON THE BASIS OF TH E ACTUAL CONSUMPTION OF MACHINERY SPARES AS REVENUE EXPENDIT URE. 6. THE FACTS QUA THE ISSUE IN DISPUTE ARE THAT IN T HE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERAT ION, THE ASSESSEE COMPANY HAD BEEN FOLLOWING THE PRACTICE OF CHARGING THE COST OF MACHINERY SPARES AS REVENUE EXPENDITURE I N THE YEAR OF ACTUAL CONSUMPTION. IN THE YEAR UNDER CONSIDERATION , IT IS CLAIMED THAT PURSUANT TO CHANGE IN THE ACCOUNTING POLICY TO COMPLY WITH ACCOUNTING STANDARDS, THE ASSESSEE CAPITALISED THE MACHINERY SPARES. ACCORDINGLY, THE ASSESSEE ADDED BACK THE A MOUNT OF RS. 97.65 LAKHS INCURRED ON PURCHASE OF MACHINERY SPAR ES UNDER COMPUTATION OF THE INCOME AND CLAIMED DEPRECIATION AMOUNTING TO ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 12 RS. 24,41,250/-AT THE RATE OF 25% ON THE MACHINERY SPARES CAPITALISED. BOTH THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) DISALLOWED THE CLAIM OF DEPRECIATION OF THE ASSESSE E ON THE MACHINERY SPARES. 7. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING PAGES 1 TO 266 AND REFERRED PAGE 71 TO H IGHLIGHT THE ACCOUNTING STANDARD (AS-10). THE LD. COUNSEL POINTE D OUT TO PARA 8.2 OF THE ACCOUNTING STANDARD WHICH READS THAT STAN DBY EQUIPMENT AND SERVICING EQUIPMENT ARE NORMALLY CAPI TALISED AND MACHINERY SPARES ARE USUALLY CHARGED TO THE PROFIT AND LOSS ACCOUNT AS AND WHEN CONSUMED, HOWEVER IF SUCH A SPARE CAN BE USED ONLY IN CONNECTION WITH AN ITEM OF FIXED ASSET AND THEIR USE IS EXPECTED TO BE REGULAR, IT MAY BE APPROPRIATE TO ALLOCATE TH E TOTAL COST ON A SYSTEMATIC BASIS OVER A PERIOD NOT EXCEEDING THE US EFUL LIFE OF THE PRINCIPAL ITEM. THE LD. COUNSEL SUBMITTED THAT IN V IEW OF THE CHANGE IN ACCOUNTING POLICY, THE ASSESSEE HAS CAPITALISED ITS MACHINERY SPARE PARTS AND THUS ELIGIBLE FOR DEPRECIATION ON T HE SAME. THE LD. COUNSEL RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS INSILCO LTD. REPORTED IN (2010) 320 ITR 322 (DEL) . IN ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 13 SUPPORT OF THE CONTENTION THAT DEPRECIATION IS ALLO WABLE ON STANDBY SPARE ITEMS, WHICH ARE NOT TAKEN FOR USE DURING THE ACCOUNTING YEAR , THE LD. COUNSEL RELIED ON THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LTD (2007) 291 ITR 362 (MAD) AND SPIC L TD (2010) 37 DTR 177 (MAD. )THE LD. COUNSEL FURTHER CLAIMED THAT DEPRECIATION IS ALLOWABLE NOT ONLY ON THE ASSET ACTUALLY USED BUT AL SO ON THE ASSET KEPT READY FOR USE. IN SUPPORT OF THE CONTENTION , HE RELIED ON THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF NATIONAL THERMAL POWER CORPORATION LIMITED VS CIT (2013) 357 IT 253(DEL) AND CIT VS YAMAHA MOTOR INDIA PRIVATE LIMITED (2009 ) 328 ITR 297(DEL). 8. IN SUPPORT OF THE ALTERNATIVE GROUND 1(C), THE L D. COUNSEL SUBMITTED THAT DEVIATION BETWEEN ACTUAL CONSUMPTION OF THE SPARES AND THE DEPRECIATION CHARGED IS NOT SUBSTANTIAL WHEN COMPARED WITH THE TOTAL EXPENDITURE OF THE ASSESSEE COMPANY A ND IN ASSESSMENT YEAR 2002-03, THE ASSESSING OFFICER HAS ALLOWED DEDUCTION IN RESPECT OF THE ACTUAL CONTINUATION OF THE SPARES AND THUS IN SUCH CIRCUMSTANCES, IF THE DEDUCTION OF DEP RECIATION OF THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 14 MACHINERY SPARES IS NOT ALLOWED, THE ASSESSEE MAY B E ALLOWED DEDUCTION ON THE BASIS OF THE ACTUAL CONSUMPTION OF THE MACHINERY SPARES. 9. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT IN THE CASE OF INSILCO LTD (SUPRA), IT IS HELD THAT FOR ELIGIBILIT Y OF DEPRECIATION, THE SPARES MUST BE INTEGRAL PART OF THE MACHINERY, OTHE RWISE NO DEPRECIATION IS ALLOWABLE. HE SUBMITTED THAT THE ASS ESSEE HAS SUBSTANTIATED WITH DOCUMENTARY EVIDENCES THAT THE SP ARE PARTS IN QUESTION ARE INTEGRAL PART OF THE MACHINERY. HE DI D NOT OBJECT ON THE ALTERNATIVE GROUND FOR ALLOWING EXPENDITURE ON T HE BASIS OF THE ACTUAL CONSUMPTION OF MACHINERY SPARES. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. 11.1 THE 1 ST ISSUE IN THE GROUNDS RAISED IS WHETHER CAPITALISING OF MACHINERY SPARES FOR THE PURPOSE OF INCOME TAX ACT IN VIEW OF ACCOUNTING STANDARDS IS JUSTIFIED. 11.2 IN THE CASE OF INSILCO LTD (SUPRA) HONBLE HI GH COURT HAS REFERRED TO ACCOUNTING STANDARD (AS-10) AND OBSERVE D OBLIGATION OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 15 THE ASSESSEE TO TREAT THE SPARES WHICH ARE INTEGRAL PARTS OF FIXED ASSET AS CAPITAL EXPENDITURE AS UNDER: 16.4 IT IS CLEAR UPON READING THE PROVISIONS OF AS- 2 AND AS-10 THAT, THE OPINION OF THE COUNSEL OF THE ICAI IN RES PECT OF TREATMENT OF MACHINERY SPARES IS BRIEFLY THAT; MACH INERY SPARES WHICH ARE NOT SPECIFIC TO ANY FIXED ASSET AND CAN B E USED GENERALLY SHOULD BE TREATED AS PART OF INVENTORY AN D CHARGED TO P&L A/C AS AND WHEN THEY ARE CONSUMED DURING THE ORDINARY COURSE OF BUSINESS. ON THE OTHER HAND, , IF THE MAC HINERY SPARES ARE OF THE NATURE OF CAPITAL SPARES/INSURANCE SPARE S WHICH ARE SPECIFIC TO A PARTICULAR ITEM OF FIXED ASSET AND TH EIR USE IS IRREGULAR, THEN , THEY SHOULD BE CAPITALIZED SEPARA TELY AND DEPRECIATED ON A SYSTEMATIC BASIS OVER A TIME FRAME NOT EXCEEDING THE USEFUL LIFE OF THE FIXED ASSET TO WHI CH THEY RELATE. AS A MATTER OF FACT, IN CASE THE FIXED ASSET TO WHI CH THEY RELATE, IS DISCARDED, THE MACHINERY SPARES WILL ALSO HAVE T O BE DISPOSED OF AS THESE SPARES ARE INTEGRAL PARTS OF T HE FIXED ASSET. 16.5 IT IS TO BE NOTED THAT THESE ACCOUNTING STANDA RDS ARE MANDATORY IN NATURE AND APPLIED TO ACCOUNTS PREPARE D AFTER 1ST APRIL, 1999. IN THAT SENSE THE SUBMISSION OF THE AS SESSEE HAS TO BE ACCEPTED THAT THE CHANGE IN THE ACCOUNTING POLIC Y HAD BEEN BROUGHT ABOUT BY VIRTUE OF THE ISSUANCE OF THE REVI SED ACCOUNTING STANDARDS ISSUED BY THE COUNSEL OF THE I CAI, WHICH WAS, APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSI DERATION. FURTHERMORE, THE PROVISIONS OF SUB-SS. (3A), (3B) A ND (3C) OF S. 211 OF THE COMPANIES ACT, 1956, CLEARLY PROVIDE THA T EVERY P&L A/C AND BALANCE SHEET OF A COMPANY SHALL COMPLY WIT H THE ACCOUNTING STANDARDS PRESCRIBED. WHERE THE ACCOUNTS OF THE COMPANY DO NOT COMPLY WITH THE ACCOUNTING STANDARDS IT IS REQUIRED TO DISCLOSE IN THE P&L A/C AND THE BALANCE SHEET : (A) THE DEVIATION FROM THE ACCOUNTING STANDARDS ; (B) T HE REASONS FOR SUCH DEVIATION; AND (C) THE FINANCIAL EFFECT, I F ANY, ARISING, DUE TO SUCH DEVIATION. WHAT IS IMPORTANT IS THAT; S UB-S. (3) OF S. 211 PROVIDES THAT UNTIL THE CENTRAL GOVERNMENT PRES CRIBES AN ACCOUNTING STANDARDS IN CONSULTATION WITH THE NATIO NAL ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 16 ADVISORY COMMITTEE AS SET UP UNDER S. 210A OF THE C OMPANIES ACT, 1956 PURSUANT TO A RECOMMENDATION OF THE ICAI; THE ACCOUNTING STANDARDS ISSUED BY THE ICAI SHALL PREVA IL. THEREFORE, WE HAVE NO DIFFICULTY IN ACCEPTING THE S UBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT WAS OB LIGED TO CAPITALIZE THE ENTIRE COST OF SPARES IN CONSONANCE WITH THE MANDATORY PROVISIONS OF AS-2 AND AS-10. 11.3 IN ABOVE CASE, THE LEARNED COUNSEL OF THE ASS ESSEE SUBMITTED THAT IN VIEW OF THE MERCANTILE SYSTEM OF A CCOUNTING FOLLOWED UNDER SECTION 145(1) OF THE ACT, THE TREAT MENT OF ASSESSEES EMERGENCY SPARES AS CAPITAL EXPENDITURE IN ACCORDAN CE TO REVISED AS-2 AND AS-10 WOULD BE IN CONSONANCE WITH PROVISIONS OF THE ACT. HOWEVER THIS PROPOSITION WAS OBJECTED BY THE LEARNED COUNSEL OF THE REVENUE. THE RELEVANT OBSERVATION OF THE HONBLE HI GH COURT ON THE ISSUE WHETHER REVENUE AUTHORITIES ARE REQUIRED TO FO LLOW ACCOUNTING STANDARD IS REPRODUCED AS UNDER: 16.6 IT IS NOT DISPUTED THAT THE ASSESSEE IS MAINT AINING THE ACCOUNTS BASED ON A MERCANTILE SYSTEM. UNDER SUB-S. (1) OF S. 145 OF THE ACT THE ASSESSEE'S INCOME WHICH IS CHARG EABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON' IS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH EITHER C ASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. 16.7 AS INDICATED ABOVE THE ASSESSEE HAS BEEN MAINT AINING A MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, THE TRE ATMENT OF EMERGENCY SPARES IN ACCORDANCE WITH THE REVISED AS- 2 AND AS- ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 17 10 WOULD BE IN CONSONANCE WITH THE MERCANTILE SYSTE M OF ACCOUNTING WHICH UNDER THE ACT THE REVENUE IS REQUI RED TO LOOK AT FOR COMPUTING INCOME OF THE ASSESSEE CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS'. THE SUBMISS ION OF THE LEARNED COUNSEL FOR THE REVENUE THAT THE ACCOUNTING TREATMENT TO BE METED OUT TO A TRANSACTION IN ACCORDANCE WITH THE ACCOUNTING STANDARDS HAS NO RELEVANCE FOR THE PURPO SES OF THE IT ACT, 1961 IS A SUBMISSION WHICH DOES NOT COMMEND TO US. 16.8 IN THE PAST, COURTS HAVE APPLIED RULES AND PRI NCIPLES OF ACCOUNTANCY WHERE WORDS AND EXPRESSIONS USED IN THE ACT HAVE NOT BEEN GIVEN A DEFINITIVE MEANING. THE SUPREME CO URT IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT 1974 CTR (S C) 309 : (1975) 98 ITR 167 (SC) WAS CALLED UPON TO INTERPRET THE MEANING OF THE EXPRESSION 'ACTUAL COST' FOR THE PURPOSES OF DETERMINING THE JUSTIFIABILITY OF THE ASSESSEE'S CLAIM FOR DEPR ECIATION AND DEVELOPMENT REBATE UNDER THE INDIAN IT ACT, 1961. T HE ASSESSEE SOUGHT TO INCLUDE IN THE COST OF ASSET THE INTEREST PAID BY IT FOR THE PERIOD PRIOR TO COMMENCEMENT OF BUSIN ESS ON BORROWINGS TAKEN UP BY IT. THE SUPREME COURT IN COM ING TO THE CONCLUSION THAT THE ASSESSEE'S STAND WAS CORRECT RE SORTED TO THE RULES OF ACCOUNTANCY PREVAILING IN THE INDUSTRY. IN THIS CONTEXT THE FOLLOWING OBSERVATIONS OF THE SUPREME COURT BEI NG APPOSITE ARE EXTRACTED BELOW : 'IN FINDING THE ANSWER TO THE QUESTION MENTIONED AB OVE, WE HAVE TO BEAR IN MIND THAT IT ARISES IN THE CONTEXT OF PROFITS OR GAINS OF BUSINESS AND THE PERMISSIBLE DEDUCTIONS ON ACCOUNT OF DEPRECIATION AND DEVELOPMENT REBATE RELATING TO THE MACHINERY AND PLANT OF THE ASSESSEE. AS THE EXPRESSION 'ACTUA L COST' HAS NOT BEEN DEFINED, IT SHOULD, IN OUR OPINION, BE CON STRUED IN THE SENSE WHICH NO COMMERCIAL MAN WOULD MISUNDERSTAND. FOR THIS PURPOSE, IT WOULD BE NECESSARY TO ASCERTAIN THE TEM PTATION OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 18 THE ABOVE EXPRESSION IN ACCORDANCE WITH THE NORMAL RULES OF ACCOUNTANCY PREVAILING IN COMMERCE AND INDUSTRY. ....IT WOULD APPEAR FROM THE ABOVE THAT THE ACCEPTE D ACCOUNTANCY RULE FOR DETERMINING THE COST OF FIXED ASSETS IS TO INCLUDE ALL EXPENDITURE NECESSARY TO BRING SUCH ASS ETS INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION. IN CASE MONEY IS BORROWED BY NEWLY STARTED COMPANY WHICH IS IN TH E PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT, THE INTERES T INCURRED BEFORE THE COMMENCEMENT OF PRODUCTION ON SUCH BORRO WED MONEY CAN BE CAPITALIZED ADDED TO THE COST OF THE F IXED ASSET WHICH HAVE BEEN CREATED AS A RESULT OF SUCH EXPENDI TURE. THE ABOVE RULE OF ACCOUNTANCY SHOULD, IN OUR VIEW, BE A DOPTED FOR DETERMINING THE ACTUAL COST OF THE ASSETS IN THE AB SENCE OF ANY STATUTORY DEFINITION OR OTHER INDICATION TO THE CON TRARY.' 16.9 THE LEARNED COUNSEL FOR THE REVENUE RELIED UPO N THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICO RIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC) TO BUTTRESS HER SUBMISSION THAT ACCOUNTANCY PRINCIPLES CANNOT OVERRIDE THE PROVISIO NS OF THE ACT. THIS PROPOSITION IS UNASSAILABLE. ONE CANNOT TAKE R ESORT TO A PRINCIPLE OR RULE OF ACCOUNTANCY WHEN THE ACT PROVI DES SPECIFICALLY FOR THE SITUATION AT HAND. BUT WHEN TH E SITUATION IS ONE WHERE THERE IS NO DEFINITIVE PROVISION, A COURT CAN TAKE RESORT TO WELL ACCEPTED ACCOUNTANCY RULES AND PRINC IPLES. THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) HAS NOT DEROGATED FROM THIS PRINCIPLE ENUNCIATED IN CHALLAP ALLI SUGAR MILLS LTD. (SUPRA). SEE OBSERVATION IN TUTICORIN AL KALI CHEMICALS (SUPRA) AT PP. 183 TO 186, IN PARTICULAR, OBSERVATI ONS AT P. 185(H) TO P. 186(D). 16.10 THE APPLICABILITY OF THE PRINCIPLES OF ACCOUN TANCY BY THE COURTS HAS ALSO FOUND FAVOUR IN THE JUDGMENTS OF TH E SUPREME ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 19 COURT IN THE CASES OF CIT VS. INDO NIPPON CHEMICALS CO. LTD. (2003) 182 CTR (SC) 291 : (2003) 261 ITR 275 (SC) A T P. 277(D- E) AND CIT VS. U.P. STATE INDUSTRIAL DEVELOPMENT CO RPORATION (1997) 139 CTR (SC) 267 : (1997) 225 ITR 703 (SC) A ND ALSO THE JUDGMENT OF A DIVISION BENCH OF THIS COURT IN CIT V S. WOODWARD GOVERNOR INDIA (P) LTD. & ORS. (2007) 210 CTR (DEL) 354 : (2007) 294 ITR 451 (DEL) AT P. 463-464 (PARAS 15-16). THE OBSERVATIONS OF UPSIDC BEING APPOSITE ARE EXTRACTED HEREINBELOW : 'IN OUR OPINION, THIS CONTENTION IS DEVOID OF FORCE . THE ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE IN THE INSTANT CASE WAS IN CONSONANCE WITH THE GENERAL PRINCIPLES OF ACCOUNTANCY GOVERNING UNDERWRITING ACCOUNTS. IT IS A WELL ACCEPTED PROPOSITION THAT 'FOR THE PURPOSES OF ASCE RTAINING PROFITS AND GAINS THE ORDINARY PRINCIPLES OF COMMER CIAL ACCOUNTING SHOULD BE APPLIED, SO LONG AS THEY DO NO T CONFLICT WITH ANY EXPRESS PROVISION OF THE RELEVANT STATUTES, [SEE WHIMSTER & CO. VS. IRC (1925) 12 TAX CASES 813 (C. SESS); IRC VS. COCK RUSELL & CO. LTD. (1949) 29 TAX CASES 387 (KB)]. THIS PROPOSITION HAS BEEN AFFIRMED BY TH IS COURT IN P.M. MOHAMMED MEERAKHAN VS. CIT (1969) 73 ITR 73 5 (SC). IN THE SAID CASE IT HAS BEEN OBSERVED (AT P. 743) : 'FOR THAT PURPOSE IT WAS THE DUTY OF THE ITO TO FIN D OUT WHAT PROFIT THE BUSINESS HAS MADE ACCORDING TO THE TREATMENT OF EMERGENCY SPARES IN ACCORDANCE WITH TH E REVISED AS-2 AND AS-10 WOULD BE IN CONSONANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING WHICH UNDER THE ACT THE REVENUE IS REQUIRED TO LOOK AT FOR COMPUTING INCOME OF THE ASSESSEE CHARGEABLE UNDER THE HEAD 'PROFITS AND GAI NS FROM BUSINESS'. THE SUBMISSION OF THE LEARNED COUNS EL FOR THE REVENUE THAT THE ACCOUNTING TREATMENT TO BE MET ED OUT TO A TRANSACTION IN ACCORDANCE WITH THE ACCOUNTING ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 20 STANDARDS HAS NO RELEVANCE FOR THE PURPOSES OF THE IT ACT, 1961 IS A SUBMISSION WHICH DOES NOT COMMEND TO US. 16.8 IN THE PAST, COURTS HAVE APPLIED RULES AND PRI NCIPLES OF ACCOUNTANCY WHERE WORDS AND EXPRESSIONS USED IN THE ACT HAVE NOT BEEN GIVEN A DEFINITIVE MEANING. THE SUPREME CO URT IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT 1974 CTR (S C) 309 : (1975) 98 ITR 167 (SC) WAS CALLED UPON TO INTERPRET THE MEANING OF THE EXPRESSION 'ACTUAL COST' FOR THE PURPOSES OF DETERMINING THE JUSTIFIABILITY OF THE ASSESSEE'S CLAIM FOR DEPR ECIATION AND DEVELOPMENT REBATE UNDER THE INDIAN IT ACT, 1961. T HE ASSESSEE SOUGHT TO INCLUDE IN THE COST OF ASSET THE INTEREST PAID BY IT FOR THE PERIOD PRIOR TO COMMENCEMENT OF BUSIN ESS ON BORROWINGS TAKEN UP BY IT. THE SUPREME COURT IN COM ING TO THE CONCLUSION THAT THE ASSESSEE'S STAND WAS CORRECT RE SORTED TO THE RULES OF ACCOUNTANCY PREVAILING IN THE INDUSTRY. IN THIS CONTEXT THE FOLLOWING OBSERVATIONS OF THE SUPREME COURT BEI NG APPOSITE ARE EXTRACTED BELOW : 'IN FINDING THE ANSWER TO THE QUESTION MENTIONED AB OVE, WE HAVE TO BEAR IN MIND THAT IT ARISES IN THE CONTE XT OF PROFITS OR GAINS OF BUSINESS AND THE PERMISSIBLE DE DUCTIONS ON ACCOUNT OF DEPRECIATION AND DEVELOPMENT REBATE RELATING TO THE MACHINERY AND PLANT OF THE ASSESSEE . AS THE EXPRESSION 'ACTUAL COST' HAS NOT BEEN DEFINED, IT S HOULD, IN OUR OPINION, BE CONSTRUED IN THE SENSE WHICH NO COMMERCIAL MAN WOULD MISUNDERSTAND. FOR THIS PURPOS E, IT WOULD BE NECESSARY TO ASCERTAIN THE TEMPTATION OF T HE ABOVE EXPRESSION IN ACCORDANCE WITH THE NORMAL RULE S OF ACCOUNTANCY PREVAILING IN COMMERCE AND INDUSTRY. ....IT WOULD APPEAR FROM THE ABOVE THAT THE ACCEPTE D ACCOUNTANCY RULE FOR DETERMINING THE COST OF FIXED ASSETS IS TO INCLUDE ALL EXPENDITURE NECESSARY TO BRING SUCH ASSETS ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 21 INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION . IN CASE MONEY IS BORROWED BY NEWLY STARTED COMPANY WHI CH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT, THE INTEREST INCURRED BEFORE THE COMMENCEMENT OF PRODUC TION ON SUCH BORROWED MONEY CAN BE CAPITALIZED ADDED TO THE COST OF THE FIXED ASSET WHICH HAVE BEEN CREATED AS A RESULT OF SUCH EXPENDITURE. THE ABOVE RULE OF ACCOUNTANCY SHOULD, IN OUR VIEW, BE ADOPTED FOR DETERMINING THE ACTUAL COST OF THE ASSETS IN THE ABSENCE OF ANY STATUTORY DEFINITION OR OTHER INDICATION TO THE CONTRARY.' 16.9 THE LEARNED COUNSEL FOR THE REVENUE RELIED UPO N THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICO RIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC) TO BUTTRESS HER SUBMISSION THAT ACCOUNTANCY PRINCIPLES CANNOT OVERRIDE THE PROVISIO NS OF THE ACT. THIS PROPOSITION IS UNASSAILABLE. ONE CANNOT TAKE R ESORT TO A PRINCIPLE OR RULE OF ACCOUNTANCY WHEN THE ACT PROVI DES SPECIFICALLY FOR THE SITUATION AT HAND. BUT WHEN TH E SITUATION IS ONE WHERE THERE IS NO DEFINITIVE PROVISION, A COURT CAN TAKE RESORT TO WELL ACCEPTED ACCOUNTANCY RULES AND PRINC IPLES. THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) HAS NOT DEROGATED FROM THIS PRINCIPLE ENUNCIATED IN CHALLAP ALLI SUGAR MILLS LTD. (SUPRA). SEE OBSERVATION IN TUTICORIN AL KALI CHEMICALS (SUPRA) AT PP. 183 TO 186, IN PARTICULAR, OBSERVATI ONS AT P. 185(H) TO P. 186(D). 16.10 THE APPLICABILITY OF THE PRINCIPLES OF ACCOUN TANCY BY THE COURTS HAS ALSO FOUND FAVOUR IN THE JUDGMENTS OF TH E SUPREME COURT IN THE CASES OF CIT VS. INDO NIPPON CHEMICALS CO. LTD. (2003) 182 CTR (SC) 291 : (2003) 261 ITR 275 (SC) A T P. 277(D- E) AND CIT VS. U.P. STATE INDUSTRIAL DEVELOPMENT CO RPORATION (1997) 139 CTR (SC) 267 : (1997) 225 ITR 703 (SC) A ND ALSO THE JUDGMENT OF A DIVISION BENCH OF THIS COURT IN CIT V S. WOODWARD ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 22 GOVERNOR INDIA (P) LTD. & ORS. (2007) 210 CTR (DEL) 354 : (2007) 294 ITR 451 (DEL) AT P. 463-464 (PARAS 15-16). THE OBSERVATIONS OF UPSIDC BEING APPOSITE ARE EXTRACTED HEREINBELOW : 'IN OUR OPINION, THIS CONTENTION IS DEVOID OF FORCE . THE ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE IN THE INSTANT CA SE WAS IN CONSONANCE WITH THE GENERAL PRINCIPLES OF ACCOUNTAN CY GOVERNING UNDERWRITING ACCOUNTS. IT IS A WELL ACCEP TED PROPOSITION THAT 'FOR THE PURPOSES OF ASCERTAINING PROFITS AND GAINS THE ORDINARY PRINCIPLES OF COMMERCIAL ACCOUNT ING SHOULD BE APPLIED, SO LONG AS THEY DO NOT CONFLICT WITH AN Y EXPRESS PROVISION OF THE RELEVANT STATUTES, [SEE WHIMSTER & CO. VS. IRC (1925) 12 TAX CASES 813 (C. SESS); IRC VS. COCK RUS ELL & CO. LTD. (1949) 29 TAX CASES 387 (KB)]. THIS PROPOSITIO N HAS BEEN AFFIRMED BY THIS COURT IN P.M. MOHAMMED MEERAKHAN V S. CIT (1969) 73 ITR 735 (SC). IN THE SAID CASE IT HAS BEE N OBSERVED (AT P. 743) : 'FOR THAT PURPOSE IT WAS THE DUTY OF THE ITO TO FIN D OUT WHAT PROFIT THE BUSINESS HAS MADE ACCORDING TO THE TRUE ACCOUNTANCY PRACTICE. 11.4 THE DECISION IN THE CASE OF CIT VS SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LIMITED(SUPRA) WHEREIN IT IS HELD THAT DEPRECIATION IS ALLOWABLE ON STANDBY SPAR E PARTS ITEMS WHICH ARE NOT TAKEN FOR USE DURING THE ACCOUNTING YE AR, HAS BEEN CONSIDERED IN THE CASE OF CIT VS INSILCO LTD (SUPRA ). WE ALSO NOTE THAT THE FINDING IN THE CASE OF SPIC LTD (SUPRA) IS IDENTICAL TO THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 23 FINDING IN THE CASE OF SOUTHERN PETROCHEMICAL INDUS TRIES CORPORATION LIMITED (SUPRA). 11.5 THUS, ACCORDING TO THE ABOVE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF INSILCO LTD (SUPRA), PRIME REQ UIREMENT IS THAT THE MACHINERY SPARES SHOULD BE INTEGRAL PART OF THE FIXED ASSET OR IT SHOULD BE OF EMERGENCY NATURE. THE HONBLE DELHI HI GH COURT HAS FURTHER LAID DOWN FOLLOWING REQUIREMENTS FOR CONSIDER ING MACHINERY SPARES FOR CAPITALISATION: (I) THE SPARES SHOULD BE IN THE NATURE OF CAPITAL SPARES/INSURANCES SPARES (II) THOSE CAPITAL/INSURANCE SPARES SHOULD BE SPECIFIC T O A PARTICULAR ITEM OF FIXED ASSET (III) USE OF THOSE CAPITAL/INSURANCES SPARES IS IRREGULAR 11.6 WE FIND THAT IN THE INSTANT CASE BEFORE US, TH E ASSESSEE HAS NOWHERE DEMONSTRATED THE ABOVE REQUIREMENTS OF T HE RATIO IN THE CASE OF INSILCO LTD (SUPRA), AND THUS FACTS OF THE INSTANT CASE BEING DISTINGUISHABLE, THE RATIO OF THE ABOVE DECIS ION CANNOT BE APPLIED AND ARGUMENTS OF THE ASSESSEE TO TREAT THOS E MACHINERY SPARES AS CAPITAL EXPENDITURE IS REJECTED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 24 11.7 FURTHER WE FIND THAT HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD VS COMMISSIONER OF INCO ME TAX, (1971) AIR 2145, 1972 SCR (1) 277, [1971] 82 I TR 363(SC) HELD THAT WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DE DUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHT S NOR CAN THE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACC OUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER . 11.8 WE FURTHER NOTE THAT THE HONBLE SUPREME COUR T IN THE CASE OF LAKKSHMIJI SUGAR MILLS P CO. LTD VS CIT (19 71) 82 ITR 376 (SC) , WHICH HAS BEEN FURTHER REFERRED IN CIT VS SRI MANGAYARKARASI MILLS P.LTD (2009) 315 ITR 114(SC) , IT IS HELD THA T BRINGING INTO EXISTENCE A NEW ASSET OR AN ENDURING BENEFIT FOR TH E ASSESSEE AMOUNTS TO CAPITAL EXPENDITURE. THIS PRINCIPLE HAS ALSO BEEN REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHARVANA SPINNING MILLS P LTD. (2007) 293 ITR 201(S C) AS UNDER: 12. THIS COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT (1997) 138 CTR (SC) 284 : (1997) 2 SCC 449 APPROVED THE TEST FORMULATED BY CHAGLA C.J. IN THE CASE OF NEW SHORROCK SPINNING & MANUFACTURING CO. LTD. VS. CIT (1956) 30 ITR 338 (BOM) AS TO WHEN THE EXPENDITURE CAN BE SAID TO ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 25 HAVE BEEN INCURRED ON CURRENT REPAIRS. IN THAT CASE IT WAS OBSERVED AS FOLLOWS : 'THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN M IND IS THAT AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EX PENDITURE FOR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AN D MAINTAIN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITU RE IS NOT TO BRING A NEW ASSET INTO EXISTENCE, NOR IS ITS OBJECT THE O BTAINING OF A NEW OR FRESH ADVANTAGE. THIS CAN BE THE ONLY DEFINITION OF 'REPAIRS' BECAUSE IT IS ONLY BY REASON OF THIS DEFINITION OF REPAIRS THAT THE EXPENDITURE IS A REVENUE EXPENDITURE. IF THE AMOUNT SPENT WAS FOR THE PURPOSE OF BRINGING INTO EXISTENCE A NEW ASSET OR OBTAINING A NEW ADVANTAGE, THEN OBVI OUSLY SUCH AN EXPENDITURE WOULD NOT BE AN EXPENDITURE OF A REVENU E NATURE BUT IT WOULD BE A CAPITAL EXPENDITURE, AND IT IS CLEAR THAT THE DEDUCTION WHICH THE LEGISLATURE HAS PERMITTED UNDER S. 10(2)( V) IS A DEDUCTION WHERE THE EXPENDITURE IS A REVENUE EXPENDITURE AND NOT A CAPITAL EXPENDITURE.' . 11.9 BEFORE US, THE ASSESSEE HAS FAILED TO DEMONST RATE WHETHER THE SPARE PARTS WHICH ARE USED WHEN A MACHINE MALFUNCTIONS, HAS BROUGHT INTO EXISTENCE A NEW ASSE T OR GIVEN ENDURING BENEFIT TO THE ASSESSEE. IN ABSENCE OF SAT ISFYING THE REQUIREMENT FOR CONSTITUTING A MACHINERY SPARE AS C APITAL EXPENDITURE AS LAID DOWN IN THE ABOVE DECISIONS OF T HE HONBLE SUPREME COURT, EXPENDITURE INCURRED ON MACHINERY RE PAIRS CAN NOT BE ALLOWED AS CAPITAL EXPENDITURE AND CONSEQUENT DE PRECIATION CLAIMED ALSO CANNOT BE ALLOWED. THUS THE GROUND NUM BER 1(A) OF THE APPEAL IS DISMISSED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 26 11.10 THE 2 ND ISSUE RAISED IS CAN THE DEPRECIATION BE ALLOWED ON MACHINERY IN READY TO USE CONDITION, THOUGH ACTUALL Y NOT PUT TO USE. 11.11 ON THIS ISSUE, THE LD. COUNSEL HAS REFERRED T O THE DECISIONS IN THE CASE OF NATIONAL THERMAL POWER COR PORATION LIMITED VERSUS CIT (SUPRA) AND CIT VS YAMAHA MOTOR INDIA PR IVATE LIMITED(SUPRA) TO SUPPORT THE CONTENTION THAT DEPRE CIATION IS ALLOWABLE ON THE ASSET KEPT READY FOR USE BUT NOT AC TUALLY USED. BUT IN THE INSTANT CASE AS WE HAVE ALREADY HELD THAT MA CHINERY SPARES DOES NOT CONSTITUTE CAPITAL EXPENDITURES AND THUS T HE ISSUE OF WHETHER THE SAME WERE READY FOR USE OR ACTUALLY USED IS NOT RELEVANT IN THE FACTS OF THE CASE. THIS GROUND OF T HE APPEAL NO 1(B), IS ACCORDINGLY DISMISSED. 11.12 THE 3 RD ISSUE WHICH HAS BEEN RAISED BY THE ASSESSEE IS THAT IN THE EVENT DEDUCTION TOWARDS DEPRECIATION ON MACHINERY SPARE IS NOT ALLOWED, DEDUCTION MAY BE ALLOWED ON TH E BASIS OF THE ACTUAL CONSUMPTION OF THE SPARES. IT HAS BEEN MENTI ONED BY THE ASSESSEE THAT IN ASSESSMENT YEAR 2002-03 ALSO THE A SSESSEE HAS ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 27 BEEN ALLOWED DEDUCTION ON THE BASIS OF THE ACTUAL C ONSUMPTION OF THE MACHINERY SPARES. IN OUR OPINION, THIS PRAYER O F THE ASSESSEE IS JUSTIFIED AS THE MACHINERY SPARES WHICH HAVE BEEN CO NSUMED IN REPAIR OF FIXED ASSET, SATISFIES THE REQUIREMENT OF SECTION 37(1) OF THE ACT AND ACCORDINGLY, GROUND NO.1(C) OF THE APPEAL O F THE ASSESSEE IS ALLOWED. 12.1 INGROUND NO. 2, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA(4) OF T HE ACTAMOUNTING TO RS. 16.82 CRORES. 12.2 THE BRIEF FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE IS ENGAGED IN CONSTRUCTION OF INFRASTRUCTU RE FACILITIES SUCH AS RAIL SYSTEMS, ROAD AND BRIDGES ETC. THE AS SESSEE CLAIMED DEDUCTION UNDER SECTION 8IA OF THE ACT AMOUNTING TO RS. 16.82 CRORES IN RESPECT OF THE PROJECTS AWARDED TO IT BY V ARIOUS CENTRAL/STATE/LOCAL AUTHORITIES. THE ASSESSEE CLAIM ED THAT THOSE PROJECTS WERE DEVELOPED BY IT. THE ASSESSING OFFICE R DISALLOWED THE CLAIM ASSIGNING FOLLOWING REASONS: ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 28 (A) ASSESSEE IS ONLY A CONTRACTOR EXECUTING CERTAIN SPECIFIC CIVIL WORK AND NOT A DEVELOPER (B) SUCH INFRASTRUCTURE PROJECT SHOULD BE NOTIFIED IN THE OFFICIAL GAZETTE AND NO EVIDENCE REGARDING THE SAME WAS SUBMITTED BY THE ASSESSEE (C) THE ASSESSEE IS NOT INVOLVED IN CONSTRUCTION OF THE ENTIRE INFRASTRUCTURE FACILITY AS A WHOLE. (D) THE REAL MOTIVE AND INITIATIVE BEHIND UNDERTAKING OF THE PROJECT REMAINS THAT OF THE PRINCIPAL AND THE CONTACTORS CANNOT LAY CLAIM ON THE SAME. (E) THE ASSESSEE COMPANY HAS NOT INFUSED FRESH CAPITAL OR ANY TECHNICAL EXPERTISE IN ANY MANNER SO AS TO LAY CLAIM OVER THE FACT THAT IT IS ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILITY. (F) SIMILAR DISALLOWANCE WAS MADE IN ASSESSMENT YEAR 2000-01. 12.3 THE LD. CIT(A) UPHELD THE DISALLOWANCE RELYING ON THE DECISION OF LD. 1 ST APPELLATE AUTHORITY IN ASSESSMENT YEAR 2000-01, WHEREIN IT WAS HELD THAT;- ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 29 (A) THE ROLE OF THE ASSESSEE IS THAT OF A CONTRACTOR ON LY; (B) THE ASSESSEE WAS ONLY EXECUTING CERTAIN CIVIL WORKS RELATING TO CONSTRUCTION OF INFRASTRUCTURE FACILITY ; (C) DEDUCTION UNDER SECTION 80IA IS ADMISSIBLE TO AN ASSESSEE WHO IS ENGAGED IN DEVELOPING INFRASTRUCTURE FACILITY AS A WHOLE, WHEN SUCH A FACILITY BELONGS TO THE ASSESSEE. AT NO POINT OF TIME SUCH A FACILITY BELON GED TO THE ASSESSEE; (D) RECEIPT ON ACCOUNT OF CONTRACTS HAVE BEEN CATEGORIS ED AS WORK RECEIPTS AND ON SUCH RECEIPTS, TDS HAS BEEN DEDUCTED, WHICH FURTHER SHOWS THAT THE PAYMENT RECEIVED BY THE ASSESSEE ARE AS A CONTACTOR ONLY; (E) THE PROMINENT GAINS OF THE ASSESSEE CANNOT BE SAID TO BE DERIVED FROM THE ELIGIBLE BUSINESS. 12.4 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN THE FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASS ESSEE FOR ASSESSMENT YEAR 2000-01. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 30 12.5 THE LD.DR ON THE OTHER HAND RELIED ON THE ORD ER OF THE LOWER AUTHORITIES. 12.6 WE HAVE HEARD THE RIVAL SUBMISSION OF PARTIES AND PERUSED THE RELEVANT MATERIAL ON THE RECORD. THE TR IBUNAL IN THE CASE OF THE ASSESSEE IN ORDER DATED 12/06/2017IN IT A NO. 2596/12/2004 FOR ASSESSMENT YEAR 2000-01 HAS HELD A S UNDER: 3.5 CONSIDERING THE ARGUMENTS ADVANCED BY THE PART IES AND. AFTER GOING THROUGH THE ORDERS AND MATERIAL PL ACED BEFORE US, WE HOLD AS UNDER : REGARDING THE CLAIM OF DEDUCTED U/S. 80IA, IT IS SE EN THAT APPELLANT IS A COMPANY AND HAS ENTERED INTO CONTRAC TS WITH VARIOUS CENTRAL GOVERNMENT, STATE GOVERNMENT, STATE GOVERNMENT AND LOCAL AUTHORITY AND OTHER STATUTORY BODIES. A CLOSE READING OF THE AGREEMENT (FOR INSTA NCE AGREEMENT WITH MSRDC ENCLOSED IN THE PAPER BOOK) CLEARLY SHOWS THAT APPELLANT DEVELOPED THE INFRASTR UCTURE FACILITY AND HAS NOT ACTED MERELY AS CONTRACTOR AS SOUGHT TO BE MADE OUT BY ASSESSING OFFICER AND CIT (APPEAL S). THE OXFORD DICTIONARY DEFINES THE TERM DEVELOPER AS A PERSON THAT DESIGNS AND CRATE NEW PRODUCTS, WHEREAS CONTRACTOR IS A PERSON OR A COMPANY THAT HAS A CONT RACT TO DO WORK OR TO PROVIDE GOODS OR SERVICES. VARIOUS CL AUSES OF THE ABOVE REFERRED AGREEMENT TO WHICH REFERENCE HAS BEEN MADE BY US LITTLE BELOW WOULD SHOW7 THAT THE CONSTR UCTION RAIL OVER BRIDGE PROJECTION (ROB) AWARDED BY MSRDC TO THE APPELLANT IS NOTHING BUT DEVELOPMENT OF INFRASTRUCT URE FACILITY, WHICH WAS TO BE LEGALLY HANDED OVER TO TH E- RAILWAYS AND MSRDC AFTER THE PAYMENT WAS RECEIVED. VARIOUS CLAUSES OF THE AGREEMENT WOULD SHOW7 THAT T HE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 31 JOBS DONE BY THE APPELLANT WERE PLANNING, EXECUTION , CONSTRUCTION AND MAKING THE INFRASTRUCTURE FACILITY READY FOR OPERATIONS. LD. ASSESSING OFFICER HAS NOT POINT ED OUT ANY SPECIFIC CLAUSES OF ANY AGREEMENT, WHICH SHOW'S THAT ALL ATTRIBUTES OF DEVELOPMENT WERE NOT PRESENT. MAK ING A BALD ASSERTION THAT ASSESSES WAS A CONTRACTOR DOES NOT SERVE ANY PURPOSE. MERELY USING THE TERMS CONTRACTO R IN THE AGREEMENT WOULD NOT MAKE ANY DIFFERENCE AS WHAT HAS TO BE SEEN IS THE SUBSTANCE. ANYBODY WHO ENTERS INTO A CONTRACT IS CLOSELY CALLED A CONTRACTOR BUT THAT DOES NOT MEAN THAT SUCH PERSON ENTERING INTO THE CONTRACT CA NNOT BE DEVELOPER. THE OTHER AGREEMENT WITH MSRDC SHOWN TO US AS ONE AS INSTANCE CLEARLY SHOWS THAT APPELLANT WAS ENGAGED IN INVESTIGATION, PLANNING,, ORGANIZING AND CONSTRUCTION OF ROAD OVER BRIDGE WITHIN THE STIPULA TED TIME. IF THE ACTIVITIES UNDERTAKEN BY THE APPELLANT CANNO T BE TERMED AS DEVELOPMENT, WE ARE AFRAID THEN WHAT CAN BE CALLED DEVELOPMENT? THEREFORE, WE DO NOT HAVE ANY HESITATION IN HOLDING IN VIEW OF THE ARGUMENTS ADVA NCED FROM THE SIDES OF BOTH PARTIES AND DECISIONS RELIED UPON THAT APPELLANT WAS DEVELOPING INFRASTRUCTURE FACILI TY AND CLAIMED DEDUCTION U/S 80IA IN RESPECT OF INCOME DER IVED FROM THE DEVELOPMENT OF INFRASTRUCTURE FACILITIES. EXPLANATION INSERTED BELOW SECTION 80IA(13) DOES NO T PREVENT DEVELOPERS IN CLAIMING DEDUCTION U/S 80IA(4 ). SIMILARLY SHOWING THE RECEIPTS AS WORK RECEIPTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT ALONE CANNOT DET ERMINE THE CHARACTER OF THE APPELLANT WHICH IN OUR OPINION WAS THAT OF DEVELOPMENT. THE ARGUMENT OF REVENUE THAT INFRASTRUCTURE FACILITY SHOULD BE OWNED BY THE APPE LLANT IS ALSO MISPLACED IN VIEW OF ITO VS. CABLE CONSTRUCTIO NS 354 ITR 13 (GUJ.) AND VARIOUS DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE APPELLANT. WE ALSO NOTE THAT THE LD . CIT (DR) TRIED TO RAISE ISSUES WHICH WERE NOT EVEN THE CASE OF THE ASSESSING OFFICER AND THIS IN OUR CONSIDERED OP INION IS CLEARLY IMPRESSIBLE. CASE LAWS RELIED BY THE REVENU E ARE CLEARLY MISPLACED ON FACTS AND ARE CLEARLY DISTINGU ISHABLE. SPECIAL BENCH DECISION IN THE CASE OF R. T. PATIL ( MUM.) 126 ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 32 TTJ 577 WAS RECALLED LATER ON AS IT DID NOT CONSIDE R THE BINDING DECISION OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF ABG 322 ITR 323 (BOM). ACCORDING TO THE ASSESSME NT ORDER, COPIES OF ALL THE AGREEMENTS WERE BEFORE ASS ESSING OFFICER YET ASSESSING OFFICER CHOSE TO MAKE SWEEPIN G OBSERVATION THAT THE ASSESSEE IS NOT DEVELOPER. SUC H SWEEPING AND BALD ASSERTION CANNOT BE APPROVED BY U S. THEREFORE, TAKING INTO THE FACTS OF THE PRESENT CA SE, WE ARE OR THE CONSIDERED VIEW THAT APPELLANT IS ENTITLED T O CLAIM DEDUCTION U/S 80IA, WHICH WAS WRONGLY DENIED. WE SE T ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 801A HAS CLAIMED BY THE APPELLANT. GROUND NO. 1 IS ALLOWED. 12.7 IN VIEW OF IDENTICAL FACTS AND CIRCUMSTANCES I N THE INSTANT ASSESSMENT YEAR AND THAT THE LD. CIT(A) HIM SELF FOLLOWED FINDING OF 1 ST APPELLATE AUTHORITY IN ASSESSMENT YEAR 2000-01, RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL ( SUPRA), WE SET ASIDE THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTI ON 80IA OF THE ACT ON THE ELIGIBLE PROJECTS. THE GROUND NUMBER 2(A ) AND 2(B) OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. 13.1 THE GROUND NOS. 3(A) AND 3(B) OF THE APPEAL O F THE ASSESSEE RELATE TO DISALLOWANCE OF CLAIM OF RS. 23. 18 CRORES FOR ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 33 DEDUCTION UNDER SECTION 80HHC OF THE ACT IN RESPECT OF SUPPLY OF SIGNALLING EQUIPMENT. 13.2 THE BRIEF FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF IRAN FOR SUPPLY OF SIGNALLING & ELECTRICAL EQUIP MENT AND SUPERVISION OF ITS INSTALLATION AND COMMISSIONING. THE AGREEMENT ALSO PROVIDED FOR SERVICES SUCH AS SUPERVISION OF I NSTALLATION, COMMISSIONING AND TRAINING. 13.3 THE ASSESSING OFFICER DISALLOWED DEDUCTION AM OUNTING TO RS. 23.18 CRORES CLAIMED UNDER SECTION 80HHC OF THE ACT ON THE GROUND THAT THE ASSESSEE COMPANY WAS OBLIGED TO SUPP LY SERVICES AND WAS ALSO RESPONSIBLE FOR TRAINING & COMMISSIONI NG AND THE SAID SERVICES ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80HHC OF THE ACT. THE ASSESSING OFFICER ALSO OBSERVED THAT NO CL EARANCE OF AN INDIAN CUSTOM STATION HAD TAKEN PLACE AND THE GOODS HAVE BEEN TRANSPORTED DIRECTLY FROM THIRD COUNTRIES. THE LD. CIT(A) RELYING ON THE ORDER OF 1 ST APPELLATE AUTHORITY IN ASSESSMENT YEAR 2000-01 UPHELD THE ACTION OF THE ASSESSING OFFICER. IN ASSE SSMENT YEAR ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 34 2000-01, THE 1 ST APPELLATE AUTHORITY HELD THAT SUPPLY AND ERECTION OF SIGNALLING SYSTEM CANNOT BE CATEGORISED AS EXPORT O F GOODS. 13.4 BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUB MITTED THAT ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESS EE BY THE ORDER OF THE TRIBUNAL IN ASSESSMENT YEAR 2000-01. 13.5 THE LD. DR ON THE OTHER HAND RELIED ON THE OR DER OF THE LOWER AUTHORITIES. 13.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE TRIBU NAL IN ITA NO. 2596/12/2004 FOR ASSESSMENT YEAR 2000-01 HAS HELD A S UNDER: 4.4 WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY TH E PARTIES ON THE ISSUE RAISED IN GROUND NO.2 IN THE M ATTER OF DEDUCTION U/.S 80HHC.WE HAVE GONE THROUGH THE AGREEMENT ENCLOSED IN THE PAPER BOOK AND VARIOUS CL AUSES AND VARIOUS OTHER PAGES OF THE PAPER BOOK TO WHICH OUR ATTENTION WAS DRAWN. ALL THESE DOCUMENTS WOULD SHOW THAT IT WAS A PURCHASE / SALE CONTRACT IN WHICH GOVERNMENT OF. IRAN WAS BUYER AND APPELLANT IS A SE LLER AND THE CONTRACT WAS THAT OF SALE THE GOODS AND THE PRICE OF EQUIPMENTS COMPLETELY BUILT UP WAS FIXED IN WHIC H THE TOTAL CONTRACT PRICE OF US$ 2,50,000 WAS BIFURCATED BETWEEN EQUIPMENTS AND ENGINEERING, SUPERVISION OF INSTALLATION AND COMMISSIONING, TRAINING AND THUS 9 7.5 % APPROXIMATE OF THE CONTRACT PRICE WAS FOR SUPPLY AN D DESIGNING AND ONLY 2.5% WAS FOR SUPERVISION AND TRA INING. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 35 SERVICES ARE INCIDENTAL TO THE SUPPLY OF THE MATERI AL. DOMINANT OBJECTIVE OF THE CONTRACT IS PURCHASE OF EQUIPMENT BY GOVERNMENT OF IRAN. THEREFORE, THE APP ELLANT ASSESSEE BEFORE US WAS RIGHTFULLY ENTITLED TO CLAIM DEDUCTION U/S 80HHC IN RESPECT OF THE EXPORT MADE Q UA THE AMOUNT OF ENTIRE BILL. CASE LAWS RELIED UPON BY THE LEARNED COUNSEL SUPPORTS THE CASE OF THE APPELLANT. HENCE APPELLANT BE ALLOWED DEDUCTION UNDER SECTION 80HHC. SIMILARLY, IT IS SEEN THAT IN RESPECT OF THE DEDUCT ION U/S 80HHC CLAIMED IN RESPECT OF GOODS EXPORTED FROM ONE COUNTRY TO THE OTHER COUNTRY OUTSIDE INDIA, HONBLE KARNATAKA HIGH COURT IN THE CASE OF ANIL KUMAR VS. JTO 343 1TR 30 (KAR.) HAS HELD THAT DIRECT SHIPMENT OF GOODS CANNOT DISENTITLE ASSESSEE IN CLAIMING THE DEDUCTIO N U/S 80HHC. THIS DECISION WAS RENDERED AFTER TAKING INTO ACCOUNT EXPLANATION (AA) TO SECTION 80HHC. CASE LAW S RELIED UPON BY LEARNED CIT (DR) ARE NOT ON THE ISSU E AT HAND AND ARE DISTINGUISHABLE ON FACTS. DECISION OF N.C. BUDHIRAJA WAS ENTIRELY ON DIFFERENT FACTUAL MATRIX. DEDUCTION UNDER SECTION 80HHC ON SUCH EXPORT OF GOO DS WAS WRONGLY DISALLOWED. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE DEDUCTION U/S 80HHC DENIED TO THE APPELLANT IS NOT SUSTAINABLE AND THE DISALLOWAN CE MADE IS HEREBY DELETED 13.7 THUS, THE TRIBUNAL HAS HELD THAT SERVICES ARE IDENTICAL TO THE SUPPLY OF MATERIAL AND DOMINANT OBJECTIVE OF TH E CONTRACT IS PURCHASE OF EQUIPMENT BY THE GOVERNMENT OF IRAN. FU RTHER, IT IS HELD THAT DIRECT SHIPMENT OF THE GOODS CANNOT DISEN TITLE ASSESSEE IN CLAIMING THE DEDUCTION UNDER SECTION 80HHC IN RESPE CT OF THE GOODS EXPORTED FROM ONE COUNTRY TO THE OTHER COUNTR Y OUTSIDE INDIA. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 36 13.8 IN VIEW OF FACTS AND CIRCUMSTANCES EXISTED IN THE YEAR UNDER CONSIDERATION BEING IDENTICAL AS COMPARED TO ASSESSMENT YEAR 2000-01 AND THE FACT THAT LD. CIT(A) HIMSELF H AS FOLLOWED FINDING OF THE 1 ST APPELLATE AUTHORITY IN ASSESSMENT YEAR 2000-01, RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL ( SUPRA), WE SET ASIDE THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION CLAIME D UNDER SECTION 80HHC OF THE ACT. 14.1 IN GROUND NO. 4, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF RS. 9,32,902/-ON ACCOUNT OF MISCELLA NEOUS DONATIONS. 14.2 THE ASSESSING OFFICER OBSERVED THAT FOLLOWING DONATIONS HAVE BEEN PAID TO VARIOUS SPORTS AND RAILWAY WELFARE ORGANISATIONS, IN ADDITION TO DONATION OF RS.1,00,00,000/- TO THE PRIME MINISTER RELIEF FUND: 1 PRIME MINSISTER RELIEF FUND 1,00,00,000/ - 2 RAILWAY BOARD SPORTS ASSOCIATION, NEW DELHI 50,000/ - 3 RAILWAY MINISTERS WELFARE FUND, NEW DELHI 5,00,000/ - 4 RAILWAY WO MENS WELFARE CENTRAL ORGANIZATION NEW DELHI 2,50,000/ - 5 RAILWAY WOMENS WELFARE CENTRAL ORGANIZATION 10,000/ - ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 37 CHENNAI 6 ANDHRA PRADESH ROAD PROJECT, HUZURABAD 835/ - 7 MALAYSIA LOCO & K.L. CENTRAL 1,22,067/ - 14.3 THE CLAIM OF DONATION MADE TO PRIME MINISTER RELIEF FUND HAS BEEN SUBSEQUENTLY ALLOWED BY THE ASSESSING OFFI CERIN TERMS OF SECTION 80G OF THE ACT ON THE BASIS OF THE RECEIPT SUBMITTED BEFORE HIM, BUT RECEIPT(S) ISSUED BY OTHER ORGANISATION(S) UNDER SECTION 80G OF THE ACT, WAS NOT PRODUCED BY THE ASSESSEE. T HE CLAIM OF THE ASSESSEE FOR ALLOWING SAID EXPENDITURE UNDER SECTION 37 OF THE ACTWAS DISALLOWED BY THE ASSESSING OFFICER HOLDING T HAT SAME WAS NOT HAVING ANY RELATION WITH THE BUSINESS OF THE ASS ESSEE COMPANY. FURTHER, THE LD. CIT(A) UPHELD THE DISALLOWANCE OBSE RVING AS UNDER: 8.3.1. ON GOING THROUGH THE DETAILS FILED OF PETTY DONATIONS, IT IS OBSERVED THAT THE DONATIONS HAVE BEEN MADE TO RA ILWAY BOARD SPORTS ASSOCIATION, RAILWAY MINISTERS WELFARE FUND , RAILWAY WOMENS WELFARE CENTRAL ORGANIZATION, ANDHRA PRADES H ROAD PROJECT AND MALAYSIA LOCO & KL CENTRAL. THE APPELLA NT HAS NO WHERE JUSTIFIED HOW THE PAYMENTS MADE TO THESE ORGA NIZATIONS AS MENTIONED ABOVE ARE CONNECTED WITH THE SMOOTH FUNCT IONING OF ITS BUSINESS. THE CONTRIBUTIONS ARE NOT ON ACCOUNT OF F ESTIVALS OR OTHER COMMUNITY CELEBRATIONS CONSIDERED AS ALLOWABLE IN T HE CASE OF THE CIT VS. BATA INDIA LTD. (SUPRA). IN FACT, THEY ARE IN THE NATURE OF DONATIONS ONLY. AS NO EVIDENCE WAS SUBMITTED DURING THE COURSE OF ASSESSMENT OR DURING THE COURSE OF APPELLATE PROCEE DINGS AS TO HOW THE DONATIONS MADE TO THE ORGANIZATIONS ARE ALL OWABLE AS BUSINESS EXPENDITURE, THE SAME HAS BEEN RIGHTLY DIS ALLOWED BY THE A.O. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 38 14.4 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RE ITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT DONATIONS WERE MADE ON ACCOUNT OF SOCIAL FUNCTION A ND FESTIVAL TO ENSURE SMOOTH FUNCTIONING OF THE BUSINESS. 14.5 THE LD. DR ON THE OTHER HAND RELIED ON THE OR DER OF THE LOWER AUTHORITIES. 14.6 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PAR TIES. BEFORE THE LOWER AUTHORITIES, THE ASSESSEE FAILED TO ESTAB LISH THAT EXPENDITURE INCURRED ON DONATIONS ARE WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS AS REQUIRED IN TERMS OF SEC TION 37 OF THE ACT. BEFORE US ALSO, THE ASSESSEE FAILED TO SUBSTAN TIATE AS HOW CASE OF THE ASSESSEE IS COVERED BY THE DECISION IN THE C ASE OF CIT VS BATA INDIA LTD(SUPRA). THE EXPENSES HAVE EVIDENTLY INCUR RED ON DONATION TO RAILWAY BOARD ASSOCIATION AND WELFARE SOCIETIES O F RAILWAY EMPLOYEES AND NOT ON FESTIVALS OR COMMUNITY CELEBRA TION IN THE AREA OF PROJECTS EXECUTED BY THE ASSESSEE.IN ABSENC E OF ANY SUCH EVIDENCES OF INCURRING EXPENSES ON ACCOUNT OF FESTI VAL OR COMMUNITY CELEBRATION IN THE VICINITY OF PROJECT EXECUTED, TH E RELIANCE PLACED BY ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 39 THE ASSESSEE ON THE DECISION IN THE CASE OF CIT VS BATA INDIA LTD(SUPRA) IS MISPLACED. WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDIN GLY, WE UPHOLD THE SAME. THE GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 15.1 THE GROUND NO. 5 OF THE APPEAL OF THE ASSESSE E RELATES TO DISALLOWANCE OF PRIOR PERIOD EXPENSES AMOUNTING TO R S. 1,80,20,765/-SUSTAINED BY THE LD. CIT(A). THE GROUN D NO. 6 OF THE APPEAL OF THE REVENUE, PERTAINS TO RELIEF OF RS.63, 06,235/-ALLOWED BY THE LD. CIT(A) OUT OF THE DISALLOWANCE OF PRIOR P ERIOD EXPENSES. BOTH THE GROUNDS BEING CONNECTED WITH THE SAME ISSUE , THESE ARE ADJUDICATED TOGETHER. 15.2 THE ASSESSING OFFICER DISALLOWED PRIOR PERIOD EXPENSES OF RS. 2,43,27,000/-STATING THAT THOSE DID NOT PERTAIN TO THE PREVIOUS YEAR RELEVANT TO THE CURRENT ASSESSMENT YEAR AND TH ERE IS NO PROVISION IN THE INCOME-TAX ACT TO ALLOW DEDUCTION O F PRIOR PERIOD EXPENSES. THE LD. CIT(A)PARTLY CONFIRMED THE DISALL OWANCE TO THE EXTENT OF RS. 1,80,20,765/- , HOLDING THAT EXPENDI TURE HAS NOT CRYSTALLISED IN THE YEAR UNDER CONSIDERATION AND NO EVIDENCE FILED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 40 15.3 WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIE S ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. CIT(A) ADJUDICATED THE ISSUE OF PRIOR PERIOD EX PENSES OBSERVING AS UNDER: 10.3. THE RATIO LAID DOWN BY THE VARIOUS HIGH COUR TS IN THE CASES REFERRED TO BY THE APPELLANT AS MENTIONED ABOVE IS THAT EVEN IF THE EXPENDITURE RELATES TO EARLIER YEARS BUT THE LIABIL ITY CRYSTALLIZES IN THE SUBSEQUENT YEARS OR IT IS ASCERTAINED IN THE SU BSEQUENT YEARS, THEN IT IS ALLOWABLE AS AN EXPENSE. TAKING THIS INT O CONSIDERATION THE APPELLANT COUNSEL WAS DIRECTED TO PROVE THAT TH E LIABILITY HAS GOT ASCERTAINED DURING THE YEAR IN RELATION TO THE EXPENSES CLAIMED UNDER THE HEAD PRIOR PERIOD EXPENSES. THE APPELLA NT HAS CLAIMED PRIOR PERIOD EXPENDITURE TO THE AMOUNT OF RS.2,43,2 7,000. 10.3.1 THE APPELLANT COUNSEL MADE SUBMISSIONS VIDE LETTER DATED 17-01-2005, 18- 01-2005 AND 25-01-2005. THE APPELLA NT COUNSEL FILED DETAILS IN RESPECT OF FEW OF THE EXPENSES ONL Y VIDE THE ABOVE MENTIONED LETTERS AND ARE BEING EXAMINED FOR THEIR ALLOWABILITY. THE APPELLANT HAS FILED DETAILS IN RESPECT OF THE P ROJECT AT CIC NOIDA, KATHMANDU NEPAL, IRAQ, ANAND VIHAR MAINTENAN CE AND CORPORATE OFFICE CLAIMING AN AMOUNT OF RS.8,22,887/ -, RS.11,78,541/-, RS.22,12,452/-, RS.9,44,372 AND RS. 11,70,450 RESPECTIVELY. ON GOING THROUGH THE DETAILS, IT IS O BSERVED THAT THE LIABILITY IN RESPECT OF THE ABOVE MENTIONED EXPENDI TURE CRYSTALISED DURING THE YEAR EXCEPT OF RS.2,36,798 INCLUDED IN T HE CORPORATE OFFICE EXPENSES OF RS.11,70,450 WHICH RELATES TO AR REARS OF FOREIGN SERVICE CONTRIBUTION OF SHRI MANOHAR LAI FOR THE FY 1986-87. NO EVIDENCE HAS BEEN PRODUCED THAT THE LIABILITY IN RE SPECT OF THE EXPENSES PERTAINING TO THE FY 1986-87 CRYSTALISED D URING THE YEAR. IN VIEW OF THE ABOVE FACTS, EXPENSES TO THE AMOUNT OF RS.69,91.904 (RS.8,22.887 + RS.11.78.541 + RS.22.12.452 + RS.9.4 4.372 + RS.1[1.70.450 - RS.2.36.798) IS ALLOWED. 10.3.2 THE APPELLANT COUNSEL HAS ALSO FILED THE DET AILS REGARDING THE CLAIM OF RS.11,56,337 IN RESPECT OF NOIDA EXPRE SS WAY PROJECT VIDE ITS LETTER DATED 17-01-2005. ON GOING THROUGH THE DETAILS FILED, IT IS OBSERVED THAT THE LIABILITY OF THE EXPENSES W AS COMMUNICATED TO THE APPELLANT VIDE LETTER DATED 18-04-2001 BY TH E CONCERNED ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 41 AUTHORITY. AS THE LIABILITY HAS NOT CRYSTALISED DUR ING THE YEAR,THE SAME CANNOT BE ALLOWED AS EXPENDITURE. 10.3.3 IN THE LETTER DATED 18-01-2005, PRIOR PERIOD EXPENSES IN RESPECT OF THE NTPC KORBA PROJECT HAS BEEN CLAIMED OF RS.11,48,247. ON GOING THROUGH THE DETAILS SUBMITTE D ON PAGE NO.6, IT IS OBSERVED THAT THE BIFURCATION OF THE EX PENSES RELATING TO VARIOUS YEARS HAVE BEEN GIVEN BUT NO PROOF HAS BEEN ATTACHED THAT THE LIABILITY AROSE DURING THE YEAR, HENCE, THE SAM E CANNOT BE ALLOWED AS EXPENDITURE. 10.3.4 FOR THE MALAYSIA PROJECT, A SUM OF RS.24,23, 120 HAS BEEN CLAIMED VIDE LETTER DATED 18-01-2005. AS PER THE DE TAILS SUBMITTED ON PAGE NO.7, IT IS OBSERVED THAT ONLY EXPENSES OF RS.1,24,352/-, RS.12,279 AND RS.77,700 WAS ASCERTAINED DURING THE YEAR AND FOR ALL THE OTHER EXPENDITURE CLAIMED, THE LIABILITY HA S NOT ASCERTAINED DURING THE YEAR. THE MAJOR EXPENDITURE CLAIMED IS I N RESPECT OF OIL CANALIZATION COMMISSION AS PER THE NOTE SUBMITTED A LONGWITH THE LETTER DATED 25-01-2005 AT PAGE NO.50. ON GOING THR OUGH THE NOTE, IT IS OBSERVED THAT 2% PAYMENT WAS REQUIRED TO BE M ADE TO AGENCIES SUCH AS MMTC & STC DURING THE YEAR 1999-00 WHICH WAS NOT PROVIDED IN THE FY 1999- 00. IT HAS BEEN EXPLAI NED BY THE APPELLANT COUNSEL AS THE OIL WAS LIFTED IN THE SUBS EQUENT FY I.E. 2000-01, THE LIABILITY WAS ALSO CLAIMED IN THE AY 2 001-02. HOWEVER, NO EVIDENCE HAS BEEN FILED IN SUPPORT OF T HE SAME, HENCE, THE SAME IS ALSO NOT ALLOWABLE AS. EXPENDITURE. 10.3.5 THE APPELLANT COUNSEL HAS ALSO CLAIMED AN AM OUNT OF RS.53,20,297 AND RS.17,56,806 IN RESPECT OF GAIL, S &T AND OFC AMBALA RESPECTIVELY VIDE LETTER DATED 18.01.2005. N O EVIDENCE HAS BEEN FILED IN SUPPORT OF THE CLAIM MADE THAT THE LI ABILITY AROSE DURING THE YEAR, THEREFORE, THE SAME CANNOT BE ALLO WED AS EXPENDITURE. 15.4 BEFORE US THE LD. COUNSEL OF THE ASSESSEE REI TERATED THAT PRIOR PERIOD EXPENSES IS ALLOWABLE AS DEDUCTION,IF L IABILITY TO PAY HAS CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION. W E NOTE THAT THE LD. CIT(A) ALSO AGREED WITH THIS PROPOSITION OF LAW, AND ASKED THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 42 ASSESSEE TO DEMONSTRATE WHETHER THE EXPENSES WERE CRY STALLISED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE F AILED IN DEMONSTRATING SO NOT ONLY BEFORE THE LD. CIT(A), B UT BEFORE US AS WELL. 15.5 THE LD. COUNSEL ALSO SUBMITTED THAT THE DEPAR TMENT IN EARLIER YEARS HAS ACCEPTED AND ALLOWED THE IDENTICAL EXPENSES IN THE YEAR IN WHICH IT HAS BEEN DEBITED. IN OUR OPINION, T HE SETTLED PRINCIPLES IS THAT EXPENSES CAN BE ALLOWED AS DEDUC TION IN THE YEAR IF CRYSTALLISED DURING THE RELEVANT YEAR UNDER CONS IDERATION. THE PRIOR PERIOD EXPENSES IN THE YEAR UNDER CONSIDERATI ON CANNOT BE ALLOWED MERELY ON THE GROUND THAT PRIOR PERIOD EXPE NSES HAVE BEEN ALLOWED BY THE DEPARTMENT IN EARLIER ASSESSMENT YEA RS. THE RULE OF CONSISTENCY DOES NOT APPLY AS THE PRIOR PERIOD EXPE NSES HAVE TO BE SEEN IN THE LIGHT OF THE PRINCIPLE OF CRYSTALLISATI ON IN THE YEAR UNDER CONSIDERATION. 15.6 WE FIND THAT THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE AFTER EXAMINING AND VERIFYING THE DETAI LS IN RESPECT OF THE EXPENSES FILED BEFORE HIM . THE LD. CIT(A) HELD THAT IN RESPECT OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 43 THE EXPENSES AMOUNTING TO RS. 11,70, 450 /-CLAIMED AS PRIOR PERIOD EXPENSES FOR CORPORATE OFFICE, THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE FOR LIABILITY IN RESPECT OF RS. 2,36,798/- RELATED TO ARREARS OF FOREIGN SERVICE CONTRIBUTION OF SRI MANOHER LAL FOR THE FINANCIAL YEAR 1986-87, CLAIMED AS CRYSTALLISED IN THE YEAR U NDER CONSIDERATION AND ACCORDINGLY SUSTAINED THE DISALLO WANCE IN RESPECT OF THE AMOUNT OF RS. 2,36,798/-. BEFORE US ALSO NO EVIDENCES IN THIS RESPECT HAVE BEEN FURNISHED BY THE ASSESSEE. ACCORD INGLY, WE UPHOLD THE SAID DISALLOWANCE OF RS.2,36,798/-. 15.7 THE LD. CIT(A) DISALLOWED CLAIM OF PRIOR PERI OD EXPENSES OF RS. 11,56,337 IN RESPECT OF NIODA EXPRESSWAY PR OJECT HOLDING THAT LIABILITY OF THE EXPENSES WAS COMMUNICATED TO T HE ASSESSEE VIDE LETTER DATED 18/04/2001 BY THE CONCERNED AUTHO RITY AND THUS THE LIABILITY HAD NOT CRYSTALLISED DURING THE YEAR AND SAME WAS NOT ALLOWABLE AS EXPENDITURE IN THE YEAR UNDER CONSIDERA TION. BEFORE US THE LD. COUNSEL HAS SUBMITTED THAT THIS AMOUNT REPR ESENTS EXPENDITURE NOT ACCEPTED BY THE CLIENT FOR REIMBURS EMENT IN A COST- PLUS CONTRACT. HE FURTHER SUBMITTED THAT AS THE LOS S WAS QUANTIFIED AND SAME WAS PROVIDED IN THE EARLIEST AVAILABLE ACCO UNTS AND ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 44 MOREOVER, THE ABOVE LETTER DATED 18.04.2001 IS WITH REFERENCE TO THE LETTER DATED 1/02/2001 AND RELATES TO WORK DONE TILL 31/03/2000. 15.8 AS EVIDENT FROM THE FACTS ON RECORD , WE FIND THAT THE CLIENTS OF THE ASSESSEE HAVE REJECTED THE CLAIM OF REIMBURSEMENT OF THE EXPENSES IN PREVIOUS YEAR RELEVANT TO SUBSEQUEN T ASSESSMENT YEAR, THUS, IT CANNOT BE SAID THAT EXPENDITURE CRYS TALLIZED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS FAIL ED TO SUBSTANTIATE BEFORE US THAT THE SAID EXPENDITURE WAS CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION. THUS, WE DO NO T FIND ANY ERROR IN THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DI SPUTE AND ACCORDINGLY , UPHOLD THE SAME. 15.9 THE NEXT DISALLOWANCE SUSTAINED BY THE LD. CI T(A) RELATES TO PRIOR PERIOD EXPENSES AMOUNTING TO RS. 11,48,247 CLAIMED BY THE ASSESSEE IN RESPECT OF NTPC KORBA PROJECT. THE LD . CIT(A) HELD THAT NO PROOF WAS PROVIDED BY THE ASSESSEE THAT THE LIABI LITY AROSE DURING THE YEAR UNDER CONSIDERATION, AND HENCE HE SUSTAINE D THE DISALLOWANCE. BEFORE US THE LD. COUNSEL SUBMITTED TH AT THE EXPENDITURE REPRESENTS THE AMOUNT OF EXPENDITURE NO T ACCEPTED BY ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 45 THE CLIENT FOR REIMBURSEMENT IN A COST-PLUS CONTRAC T AND IT IS A REGULAR EXPENDITURE IN RELATION TO VARIOUS YEARS. I N OUR OPINION, MERELY MAKING A CLAIM WITHOUT SUBSTANTIATING THAT LI ABILITY CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION, T HE CLAIM CANNOT BE ALLOWED TO THE ASSESSEE. WE DO NOT FIND ANY ERRO R IN THE FINDING OF THE OF THE LD. CIT(A) IN SUSTAINING THE DISALLOWA NCE, AND ACCORDINGLY WE UPHOLD THE SAME. 15.10 NEXT DISALLOWANCE OF PRIOR PERIOD EXPENSES AMO UNTING TO RS. 22,08,789/-WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A), RELATES TO MALAYSIA PROJECT. THE LD. CIT(A) OBSERVED THAT MAJOR EXPENDITURE CLAIMED WAS IN RESPECT OF OIL CANALISATI ON COMMISSION, WHICH THE ASSESSEE WAS REQUIRED TO PAY AT THE RATE O F 2% TO AGENCY SUCH AS MMTC AND STC DURING THE YEAR 1999-2000, WHICH WAS NOT PROVIDED IN THE RELEVANT FINANCIAL YEAR. THE AS SESSEE CLAIMED THAT OIL WAS LIFTED IN THE SUBSEQUENT FINANCIAL YEAR 2000-01, AND THEREFORE LIABILITY WAS CLAIMED IN ASSESSMENT YEAR 2 001-02 I.E. YEAR UNDER CONSIDERATION. HOWEVER , IN VIEW OF NO EVIDEN CE FILED IN SUPPORT OF THE CLAIM OF LIABILITY INCURRED IN THE Y EAR UNDER CONSIDERATION, THE LD. CIT(A) SUSTAINED THE DISALLO WANCE TO THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 46 EXTENT OF RS. 22,08,789/-. BEFORE US, ALSO NO EVIDE NCE IN SUPPORT OF THE CLAIM THAT OIL WAS LIFTED IN THE YEAR UNDER CONS IDERATION, HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE. IN ABSENCE OF ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM, WE UPH OLD THE FINDING OF THE LD. CIT(A) IN SUSTAINING THE DISALLO WANCE OF RS. 22,08,789/-. 15.11 NEXT DISALLOWANCE UNDER PRIOR PERIOD EXPENSES AMOUNTING TO RS. 53,20,297/-PERTAINING TO GAIL, L&T, AND RS. 17,56,806/- PERTAINING TO OFC AMBALA WAS UPHELD BY THE LD. CIT(A), IN VIEW OF NO DOCUMENTARY EVIDENCES. SIMILAR LY DISALLOWANCE OF RS. 63, 06, 235/-HAS BEEN SUSTAINED BY THE LD. C IT(A) IN VIEW OF NO DETAILS AND EVIDENCE OF THE EXPENSES. AS NO EVI DENCES WERE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM THAT LIABIL ITY AROSE DURING THE YEAR UNDER CONSIDERATION, THE LD. CIT(A) UPHELD THE DISALLOWANCE. BEFORE US THE LD. COUNSEL CLAIMED THAT RETENTION MONEY DEDUCTED AND RELEASED BY THE CLIENT HAS BEEN BOOKED AS INCOME TWICE. HE SUBMITTED THAT AT THE TIME OF RAISI NG BILL IN 1997- 98 AND AGAIN ON RECEIPT OF RETENTION MONEY IN THE Y EAR 1999 AND THIS ERROR WAS DETECTED IN THE PREVIOUS YEAR RELEVAN T TO THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 47 ASSESSMENT YEAR 2001-02 AND THEREFORE SAME WAS CHARG ED TO EXPENSES UNDER THE HEAD PRIOR PERIOD EXPENSES. HOWE VER, IN SUPPORT OF THE ABOVE EXPLANATION, NO DOCUMENTARY EV IDENCES HAVE BEEN FILED EITHER BEFORE THE LD. CIT(A) OR BEFORE U S, ACCORDINGLY THE CONTENTION OF THE ASSESSEE ARE NOT ACCEPTED AND DIS ALLOWANCE SUSTAINED BY THE LD. CIT(A) IS THEREFORE CONFIRMED. THE GROUND NO. 5(A) OF THE APPEAL IS ACCORDINGLY DISMISSED. 15.12 IN GROUND NUMBER 5(B) OF THE ASSESSEE, THE LD . COUNSEL SUBMITTED THAT THE LD. CIT(A) HAS DECIDED THE ISSUE WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE FO R FURNISHING ALL THE RELEVANT DOCUMENTS AND HENCE ISSUE MIGHT BE SET ASIDE FOR CONSIDERING THE SAME ON THE MERIT. BUT WE FIND THAT BEFORE US NO ANY ADDITIONAL DOCUMENTS HAVE BEEN SUBMITTED AS FRE SH EVIDENCE, WHICH CAN BE A BASIS FOR SENDING THE MATTER BACK TO THE LD. CIT(A) FOR FRESH CONSIDERATION AND THUS THIS PLEA OF THE A SSESSEE OF RESTORING MATTER TO THE LD. AO IS REJECTED. THE GRO UND NO. 5(B) OF THE APPEAL IS ACCORDINGLY DISMISSED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 48 15.13 AS FAR AS GROUND NO. 6 OF THE APPEAL OF THE R EVENUE IS CONCERNED, WE FIND THAT THE LEARNED CIT(A) HAS ALLO WED THE RELIEF TO THE ASSESSEE AFTER VERIFICATION OF THE FACT THAT EX PENSES OF RS. 63,06,235/-HAVING DETAILS AS UNDER WERE CRYSTALLISE D DURING THE YEAR UNDER CONSIDERATION: DETAILS OF EXPENDITURE ALLOWED BY THE CIT(A) : SL.NO. PARTICULARS AMOUNT PG OF PB-D DETAILS OF PR OJECT (IN RS.) 1. CIC NOIDA 8,22,887 188-190 SALES TAX COLLECTED BUT NOT PAID AND PAID IN THE PRESENT YEAR 2. KATHMANDU, NEPAL 11,78,541 200 CLIENT HAS OVERP AID WORK RECEIPTS HENCE TO BE REFUNDED 3. IRAQ 22,12,452 201-214 AMOUNT PAYABLE TO HCCL AS INTEREST PURSUANCE TO AN ARBITRATION AWARD DT. 25.1.2001 4. ANAND VIHAR 9,44,372 216-223 SETTLEMENT OF DIS PUTE WITH MAINTENANCE NORTHERN RAILWAYS IN RELATION TO DBVS BILLS OF ELECTRICITY 5. CORPORATE OFFICE EXPENSES 9,33,652 225 INCLUDES COST OF AIR TICKE TS AND VARIOUS FEES BONUS ETC PAYABLE FOR EARLIER YEARS ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 49 6. MALAYSIA PROJECT 2,14,331 231 INCLUDES TICKET & TRAINING EXPENSES FOR THE YEAR 1999-00 TOTAL 63,06,235 15.14 THIS FACTUAL FINDING HAS NOT BEEN REBUTTED BY THE LEARNED DR BEFORE US. IN VIEW OF UNREBUTTED FACT THAT THE LI ABILITY AMOUNTING TO RS. 63,06,235/-CRYSTALLISED DURING THE YEAR UNDE R CONSIDERATION, THE ACTION OF THE LEARNED CIT(A) IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT, IS JUSTIFIED. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) IN THIS REGARD. THE GROUND NO. 6 OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 16.1 THE GROUND NO. 6 OF THE APPEAL OF THE ASSESSE E RELATES TO PROVISION FOR DEMOBILISATION EXPENSES SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF RS. 2,13,04,431/-. THE GROUND NO. 7 O F THE APPEAL OF THE REVENUE RELATES TO DISALLOWANCE OF PROVISION FOR MOBILISATION EXPENSES OF RS.2.67 CRORES DELETED BY THE LD. CIT(A ). 16.2 REGARDING THE PROVISION OF DEMOBILISATION EXP ENSES OF RS. 4,80,49,000/-CLAIMED BY THE ASSESSEE AS DEDUCTION, IT WAS EXPLAINED BEFORE THE LEARNED ASSESSING OFFICER THAT SAID PROVISION ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 50 WAS MADE FOR REMOVAL OF TEMPORARY STRUCTURE CONSTRUC TED AT THE PROJECT SITES DURING CONSTRUCTION PERIOD AND SHIFTI NG PLANT AND EQUIPMENT FROM THE PROJECT SITE AFTER COMPLETION OF THE PROJECTS. THE ASSESSEE SUBMITTED THAT THOUGH THE EXACT AMOUNT MIG HT NOT BE QUANTIFIED, THE LIABILITY HAD TO BE INCURRED. ACCOR DING TO THE ASSESSEE, THE PROVISION REPRESENTED DEFINITE OBLIGA TION TO BE DISCHARGED BY THE ASSESSEE. THE LEARNED ASSESSING O FFICER, HOWEVER HELD THAT PROVISION IS AN ESTIMATED LIABILITY AND N OT QUANTIFIED EXACTLY. THE LEARNED ASSESSING OFFICER OBSERVED FRO M PAST HISTORY OF THE CASE THAT THE ASSESSEE REGULARLY MAKE SUCH PROV ISIONS AND AFTER A GAP OF THREE TO FOUR YEARS, IT WRITES BACK A PORTI ON OF THE SAID PROVISIONS, WHICH ITSELF INDICATES THAT THE EXPENSES WERE CLAIMED PURELY ON ESTIMATE BASIS. THE LEARNED ASSESSING OFF ICER ACCORDINGLY, DISALLOWED THE EXPENSE HOLDING THE SAME AS PURELY E STIMATED, AD- HOC AND NOT CRYSTALLISED DURING THE RELEVANT PREVIO US YEAR. 16.3 THE LD. CIT(A) AFTER TAKING INTO CONSIDERATIO N SUBMISSION OF THE ASSESSEE, SUSTAINED DISALLOWANCE AMOUNTING T O RS.2,13,04,000/ + RS. 431, IN VIEW OF NO EVIDENCES SUBMITTED TO ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 51 SUBSTANTIATE THE CLAIM. THE RELEVANT PART OF THE OR DER OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 13.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E VARIOUS SUBMISSIONS MADE BY THE APPELLANT COUNSEL WHICH ARE SUMMARIZED BELOW: (I) FOR WORKING ON AN ON-SITE PROJECT, THE APPELLAN T COMPANY HAD TO CREATE SEVERAL TEMPORARY STRUCTURES AT THE PROJECT SITE ITSELF BESIDES CARRYING OF THE PLANT AND MACHINERY TO THE PROJECT SITE. ON COMPLETION OF THE PROJECT, THE TEMPORARY STRUCTURE ALONGWITH PLAN T AND MACHINERY ARE TO BE REMOVED AND THE EXPENSES ON THIS ACCOUNT ARE CLAIMED UNDER THE HEAD DEMOBILIZATION EXPENSE. THESE EXPENSES NO DOUB T ARE CLAIMED ON ESTIMATE BASIS BUT ARE BASED UPON THE EXPERIENCE IN THE INDUSTRY. (II) FOR THE PROVISION FOR OTHER EXPENSES, THE TAX AUDITORS HAVE GIVEN COMPLETE ITEM- WISE DETAILS OF THE ABOVE PROVISION OF RS.6,43,12,810 AND THE TAX AUDITORS HAVE CERTIFIED OUT OF THE ABOVE, E XPENDITURE AMOUNTING TO RS.2,85,63,198 IS CONTINGENT IN NATURE AND ARE N OT ALLOWABLE AS BUSINESS EXPENDITURE. ACCORDINGLY, THE APPELLANT CL AIMED THE BALANCE PROVISION OF RS.3,57,49,612. AS THE EXPENDITURE HAS BEEN INCURRED DURING THE NORMAL COURSE OF BUSINESS, THE SAME IS T HUS ALLOWABLE AS EXPENDITURE. III) IT IS A SETTLED LAW NOW THAT THE ESTIMATED PRO VISIONS BASED ON DEFINITE OBLIGATIONS ARE ALLOWABLE AS EXPENDITURE EVEN IF TH E PART OF THE SAME IS WRITTEN BACK. RELIANCE HAS BEEN PLACED ON THE FOLLO WING CASE LAWS: (A) ITO VS. WANSON INDIA LTD., 5 ITD 102; (B) THERMAX BABCOCK & WILCOX LTD. VS. DCIT,72 TTJ 8 271; (C) VOLTAS LTD. VS. DCIT, 64 ITD 232; (D) CALCUTTA CO. LTD. VS. CIT, 37 ITR 1, (E) CIT VS. NAVBHARAT NIRMAN LTD., 141 ITR 723 (IV) THE CLAIM OF THE APPELLANT IS ALLOWED IN ITS O WN CASE IN THE EARLIER YEARS. THE CLAIM ON ACCOUNT OF DEMOBILIZATION EXPEN SES AND OTHER EXPENSES WERE DISALLOWED ONLY IN AY 1985-86 AND 199 5-96 AND IN THOSE YEARS ALSO, THE SAME WAS ALLOWED BY THE CIT (A). TH E DEPARTMENT DID NOT FILE ANY APPEAL ON THE ISSUE BEFORE THE ITAT. THERE FORE, AS DISCUSSED ABOVE IN THE CASE OF RADHA SATSANG VS. CIT (SUPRA), THE SAME SHOULD NOT HAVE BEEN DISALLOWED DURING THE YEAR. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 52 13.3 AS FAR AS THE PROVISION FOR DEMOBILIZATION EXP ENSES ARE CONCERNED, AS THE APPELLANT HAS ESTIMATED THE SAME ON COMPLETI ON OF THE WORK AT THE WORK SITE, THERE IS NO DISPUTE THAT THE TEMPORARY S TRUCTURES AND THE PLANT AND MACHINERY MOVED AT THE SITE IS REQUIRED T O BE MOVED BACK FOR WHICH THE APPELLANT IS SUPPOSED TO INCUR AN EXPENDI TURE. IT CANNOT BE SAID THAT THE LIABILITY IS NOT AN ASCERTAINED LIABI LITY THOUGH IT IS A FACT THAT IT IS NOT EXACTLY QUANTIFIABLE. IT IS ALSO A FACT T HAT IN THE EARLIER YEARS, THE ADDITION HAS BEEN DELETED BY THE CIT(A) AND THE APP ELLANT HAS ALSO CERTIFIED THAT NO APPEAL HAS BEEN FILED BY THE DEPA RTMENT BEFORE THE ITAT. TAKING INTO CONSIDERATION THE ABOVE FACTS, THE APPE LLANT WAS DIRECTED TO FILE THE DETAILS TO VERIFY WHETHER THE LIABILITY AR OSE DURING THE YEAR OR NOT. 13.3.1 THE APPELLANT COUNSEL FILED DETAILS VIDE LET TER DATED 17-01- 2005, 18-01-2005 AND 25-01-2005. IT IS OBSERVED FRO M THE DETAILS FILED OF RS.4,80,48,569/-, THE LIABILITY AROSE DURING THE YE AR EXCEPT THREE OF THE CLAIMS WHICH ARE DISCUSSED BELOW: (A) IT IS OBSERVED THAT THE APPELLANT HAS CLAIMED A SUM OF RS.3,04,000 IN RESPECT OF DELHI - MATHURA ROAD PROJECT. ON GOING T HROUGH THE DETAILS ENCLOSED BY THE APPELLANT, IT IS OBSERVED THAT THE PROJECT WAS COMPLETED IN HARYANA ON 26-12-1997 AND IN UP ON 20- 02-1998. THE DEFECT LIABILITY PERIOD WAS UPTO 26-12-1998 FOR HARYANA AND 20-02-19 99 FOR UP. NO EXPLANATION HAS BEEN GIVEN WHY AFTER THE COMPLETION OF DEFECT LIABILITY PERIOD IN THE FY 1998-99 THEMSELVES HOW THE EXPENSE S ARE BEING CLAIMED IN THE FY 2000-01. NO EXPLANATION IS COMING FORWARD AS THE APPELLANT COUNSEL HAS NOT BEEN ABLE TO GIVE EVIDENCE THAT THE LIABILITY TO THE ABOVE AMOUNT WAS ASCERTAINED DURING THE YEAR, THE SAME IS NOT ALLOWABLE AND THE ADDITION MADE TO THIS EXTENT IS UPHELD. (B) AN AMOUNT OF RS. 1,14,00,000 HAS BEEN CLAIMED I N RESPECT OF NTPC KAHALGAON PROJECT AS PER THE DETAILS SUBMITTED. THI S IS THE COST OF 44 EMPLOYEES ON THE PAY ROLL OF IRCON OUT OF WHICH, 38 EMPLOYEES HAVE FILED A CASE IN PATNA HIGH COURT AGAINST THE COMPANY AND THERE IS A STAY ORDER. IT HAS BEEN FURTHER MENTIONED IN THE NOTE TH AT THE COST OF DEMOBILIZATION ASSET IS FOR TWO FINANCIAL YEARS. TH E APPELLANT COUNSEL HAS NOT BEEN ABLE TO PROVIDE ANY EVIDENCE THAT THIS LIA BILITY GOT ASCERTAINED DURING THE YEAR NOR INFORMATION HAS BEEN GIVEN WHEN THE PROJECT WAS COMPLETED AND WHAT IS THE MATTER OF DISPUTE PENDING IN THE PATNA HIGH COURT. THEREFORE, THE SAME CANNOT BE ALLOWED AS AN EXPENDITURE AND THE AO HAS RIGHTLY NOT ALLOWED THE SAME. (C) IN RESPECT OF NTPC FARAKKA MGR PROJECT, DEMOBIL IZATION EXPENSES OF RS.96 LAKHS HAVE BEEN CLAIMED. AGAIN IN THE ANNE XURE FILED IN PAGE NO.22 ALONGWITH LETTER DATED 25-01-2005, IT IS OBSE RVED THAT THE EXPENSES ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 53 HAS BEEN CLAIMED AS ESTABLISHMENT CHARGES OF 42 EMP LOYEES FOR TWO YEARS AS THERE IS NO WORK AT FARAKKA. AGAIN NO EVIDENCE H AS BEEN FILED WHEN THIS PROJECT WAS COMPLETED AND HOW AFTER COMPLETION OF THE PROJECT, THE LIABILITY OF THE APPELLANT TO PAY THE EMPLOYEES ARI SES. THEREFORE, THE AO HAS RIGHTLY MADE THE ADDITION. TO SUM UP. OUT OF THE TOTAL DISALLOWANCE MADE BY TH E AO OF RS.4,80,49,000/-, A SUM OF RS.2,13,04,000 (RS.3,04, 000 + RS.1,14,00.000 + RS.96,00,000) IS CONFIRMED AND THE BALANCE IS DELETED. AS NO DETAILS HAVE BEEN FILED FOR RS.431 (RS.4,80,4 9,000 - RS.4,80,00,569), THE SAME IS CONFIRMED. 16.4 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSE E REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A) AND FURTH ER SUBMITTED THAT PROVISION FOR DEMOBILISATION REPRESENTED DEFIN ITE BUSINESS LIABILITY AND WAS PROVIDED IN ACCOUNTS FOLLOWING MERC ANTILE SYSTEM OF THE ACCOUNTING THOUGH A PART OF THE SAME WAS WRIT TEN BACK IN THE FUTURE YEARS. THE LD. COUNSEL RELIED ON THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROL INDIA (P) LTD VS CIT (2009) 314 ITR 62 (SC). IN SUPPORT OF THE PR OPOSITION THAT ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE IS PRESU MED TO BE CORRECT TILL THE ASSESSING OFFICER COMES TO THE CON CLUSION THAT THE ESTIMATE DOES NOT REFLECT TRUE AND CORRECT PROFIT, LD. COUNSEL OF ASSESSEE RELIED ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA P LTD(2009) 3 12 ITR 254 (SC). HE ALSO SUBMITTED THAT SIMILAR DISALLOWANCE MA DE BYASSESSING ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 54 OFFICER HAS BEEN DELETED BY THE LD. CIT(A) IN ASSES SMENT YEAR 1995- 96 AND NO APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE SAID DELETION. 16.5 ON THE CONTRARY, THE LD. DR RELIED ON THE ORD ER OF THE LOWER AUTHORITIES AND FILED WRITTEN SUBMISSION, WHICH IS REPRODUCED AS UNDER: 6.1 THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUN T OF PROVISION FOR DEMOBILIZATION. THE AO HAS HELD IN PARA 13.3 ON PAG E 18 OF HIS ORDER THAT THE PROVISIONS MADE BY THE ASSESSEE ARE NOTHIN G BUT ESTIMATED LIABILITY AS THE ASSESSEE WAS NO ABLE TO EXACTLY QU ANTIFY THE LIABILITIES ON THIS ACCOUNT. ON PERUSAL OF LIST OF PROVISION OF MO BILIZATION EXPENSES ON PAGE 274 OF ASSESSEES PB , IT MAY BE NOTED THAT PR OVISION OF 1.22 CRORES HAS BEEN MADE IN RESPECT OF MALAYSIA LOCO PROJECT W HILE PROVISION OF RS. 1.14 CRORES. NO SUBSTANTIATING DOCUMENT HAS BEEN FI LED TO PROVE THAT THE PROVISIONING WAS MADE ON A SOLID BASIS. IN RESPECT OF AMRE BANKRA PROJECT, PROVISION IS OF RS. 50 LAKH(ROUND FIGURE) HAS BEEN MADE IN RESPECT OF KAHALGAON PROJECT, WHICH SHOWS THAT IT W AS MERELY AN ESTIMATE. IN ITS EXPLANATION BEFORE THE A.O, THE AS SESSEE ITSELF HAS SUBMITTED, AS MENTIONED IN PARA 13.2 OF THE ASSESSM ENT ORDER, THAT - THE PROVISIONS ARE MADE ON BEST ESTIMATE BASIS THE AO HAS ALSO MENTIONED THAT A PART OF SUCH PROVI SION OF EXPENSES WAS WRITTEN OFF IN SUBSEQUENT YEARS WHICH PROVE THAT TH E EXPENSES WERE MERELY ESTIMATION. THE ONUS WAS ON THE ASSESSEE TO PROVE THAT THERE WAS ASCERTAINED LIABILITY, WHICH HAS NOT BEEN DISCHARGE D BY THE ASSESSEE. IT IS TRITE THAT MERELY PROVISION OF AN EXPENSE CANNOT BE ALLOWED. REFERENCE IS MADE TO PARA 2.2 ON PAGE 277 OF THE PB. IT WAS SUBM ITTED BEFORE THE CIT(A) THAT THE ASSESSEE HAS NOT BEEN ABLE TO IDENT IFY THE ACTUAL YEAR OF COMPLETION OF PROJECTS IN RESPECT OF WHICH PROVISIO NING OF EXPENSES WAS MADE AND THE DETAILS WERE BEING COMPILED HENCE, THE PROVISION OF EXPENSES WAS MERELY ESTIMATION AND HENCE, UNASCERTA INED LIABILITY WHICH IS NOT ALLOWABLE U/S 37(1) OF THE ACT. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 55 6.2 IN THIS REGARD, RELIANCE IS MADE ON THE DECISIO N OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF FFE MINERALS INDIA PVT. L TD. VS. JCIT [2018] 98 TAXMANN.COM 170 (MADRAS), PARTICULARLY PARA 26-28. IN PARA 26 OF THE ORDER, THE HONBLE COURT HAS HELD THAT POSSIBILITY HAS BEEN DEFINED AS AN EVENT THAT MAY OR MAY NOT HAPPEN. THUS, DEGREE OF PROOF REQUIRED TO SHOW THAT THERE I S A PROBABILITY OF OUTFLOW OF RESOURCE IS HIGHER, AS THE EFFECT IS WHICH IS MO RE LIKELY TO HAPPEN THAN NOT TO HAPPEN AS TO WHERE POSSIBILITY IS AN EVENT, WHICH MAY OR MAY NOT HAPPEN. THEREFORE, THE ASSESSEE HAS TO DEFINITELY S HOW THAT THERE IS EVERY PROBABILITY THAT AN OUTFLOW OF RESOURCES WILL BE RE QUIRED TO SETTLE. 6.3 THE HONBLE COURT HAS FURTHER HELD THAT - THUS, ONLY THOSE OBLIGATIONS ARISEN FOR PAST EVENT EXISTING INDEPENDENTLY ON THE FUTURE CONTRACT OF THE ENTERPRISE IS RECOGNI ZED PROVISION. IN THIS CASE ALSO THE ASSESSEE HAS FAILED TO PRODUC E THE PAST EVENTS BEFORE THE AO TO SHOW THAT THERE IS EVERY PROBABILITY THAT THE EXPENDITURE WILL BE INCURRED. AT BEST, THE CASE OF THE ASSESSEE IS OF P OSSIBILITY BUT NOT A CASE OF PROBABILITY. THUS, THE ASSESSEE HAVING FAILED TO FULFIL THE TRIPLE TEST PRESCRIBED IN ROTORK CONTROLS INDIA PVT. LTD. VS. C IT 314 ITR 62 (SC), IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF PROVI SIONING OF EXPENSES. 6.4 RELIANCE IS PLACED ON THE FOLLOWING DECISIONS A LSO- (I) OSWAL AGRO MILLS LTD. VS. CIT [2014] 363 ITR 48 6 - A PROVISION CAN ONLY BE RECOGNIZED WHEN THE OBLIGA TION HAS ALREADY FRUCTIFIED. (II) GRACE SHELTER VS. ACIT [2019] 104TAXMANN.COM 1 33 (III) TAPARIA TOOLS LTD. VS. JCIT [2003] 260 ITR 10 2 (IV) DCIT VS. FAG BEARING INDIA LTD. [2008] 115 ITD 53 (V) CIT VS. AMAN KHERA [2016] 387 ITR 33 6.5 THE DECISIONS RELIED UPON BY THE ASSESSEE, AS S UBMITTED IN CASE LAW COMPILATION, ARE MAINLY IN RESPECT OF PROVISION FOR WARRANTY. IN THOSE CASES, THE COURTS HAVE OBSERVED THAT THERE HAS TO B E SCIENTIFIC METHOD/HISTORICAL TREND TO SUBSTANTIATE THE CLAIM F OR PROVISION ON ACCOUNT OF WARRANTY. IN THE INSTANT CASE, ASSESSEE HAS CLAIMED DEDUCTION ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 56 ON ACCOUNT OF MERELY ESTIMATION/POSSIBILITY OF EXPE NSES AND PROVISIONING OF EXPENSES IS NOT BASED ON ANY SCIENTIFIC WORKING/ SOLID MATERIAL. HENCE, CLAIM OF THE ASSESSEE IS NOT ADMISSIBLE. 16.6 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LD. C IT(A) HAS TAKEN INTO CONSIDERATION VARIOUS DECISIONS RELIED UPON BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND CONCURRED THAT T HE LIABILITY CANNOT BE SAID TO BE AN UN-ASCERTAINED LIABILITY TH OUGH IT WAS NOT EXACTLY QUANTIFIABLE . THE LD. CIT(A) HAS SUSTAINE D THE DISALLOWANCE ONLY IN THE EVENT WHERE THE ASSESSEE FAILED TO SUBST ANTIATE ITS CLAIM WITH DOCUMENTARY EVIDENCES. AS THE ASSESSEE FAILED T O DISCHARGE ITS ONUS OF SUBSTANTIATING WHETHER THE RESPECTIVE LIABIL ITIES WERE ASCERTAINED OR AROSE DURING THE YEAR UNDER CONSIDER ATION, THE LD. CIT(A) IS JUSTIFIED IN SUSTAINING THE RESPECTIVE DI SALLOWANCES. AS FAR AS THE DECISIONS RELIED UPON THE LEARNED COUNSEL OF THE ASSESSEE ARE CONCERNED, SAME CANNOT BE APPLIED WITHOUT ASCERTAINI NG THE FACTS WITH DOCUMENTARY EVIDENCES. NO SUCH DOCUMENTARY EVID ENCES, AS POINTED OUT BY THE LD. CIT(A), HAVE BEEN PRODUCED B EFORE US ALSO. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY UPHO LD THE SAME. THE GROUND NO. 6 (A) OF THE APPEAL THE ASSESSEE IS DISMISSED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 57 16.7 THE GROUND NO. 6(B) OF THE APPEAL OF THE ASSE SSEE BEING IDENTICAL TO GROUND NUMBER 5(B), SAME IS DISMISSED FOLLOWING OUR REASONING WHILE DECIDING GROUND NUMBER 5(B) OF THE A PPEAL. 16.8 AS REGARD TO THE RELIEF OF RS.2.67 CRORES ALL OWED BY THE LEARNED CIT(A) , AGAINST WHICH REVENUE IS IN APPEAL IN GROUND NO. 7, WE FIND THAT LEARNED CIT(A) HAS VERIFIED EACH AND EVERY PROVISION TO ASCERTAIN WHETHER THE LIABILITY HAD CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION. THIS FACTUAL FINDING HAS NOT B EEN REBUTTED BY THE LD. DR BEFORE US. IN ABSENCE OF ANY SUCH REBUTT AL TO SUBSTANTIATE GROUNDS OF APPEAL BY THE REVENUE, WE D O NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) IN DELETIN G THE PART OF DISALLOWANCE OF PROVISION OF MOBILISATION EXPENSES A MOUNTING TO RS. 2.67 CRORES. THE GROUND NO. 7 OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 17.1 THE GROUND NO. 7 OF THE APPEAL OF THE ASSESSE E RELATES TO DISALLOWANCE OF PROVISION FOR OTHER EXPENSES AMOUNTI NG TO RS. 1,61,25, 533/-SUSTAINED BY THE LD. CIT(A). THE GROU ND NO. 8 OF THE APPEAL OF THE REVENUE RELATES TO RELIEF OF RS.1.96 CRORES ALLOWED ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 58 AGAINST PROVISION FOR OTHER EXPENSES. BOTH GROUNDS BEING CONNECTED, SAME ARE ADJUDICATED TOGETHER. 17.2 THE FACTS QUA THE ISSUE IN DISPUTE ARE THAT T HE ASSESSING OFFICER OBSERVED PROVISION FOR OTHERSOF RS. 6,43, 13,000/-DEBITED IN THE PROFIT AND LOSS ACCOUNT AND OUT OF WHICH RS. 3,5 7,49,802/-WAS NOT CONSIDERED FOR DISALLOWANCE BY THE ASSESSEE. TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS BEEN REGULARLY MAKING SUCH PROVISION AND AFTER A GAP OF THREE TO F OUR YEARS, IT WRITES BACK A PORTION OF THE SAID PROVISIONS. ACCORD ING TO THE ASSESSING OFFICER THE PROVISION IS PURELY ESTIMATED , AD-HOC AND NOT CRYSTALLISED IN THE RELEVANT FINANCIAL YEAR AND THU S, HE DISALLOWED PROVISION OF RS.3,37,49,802/-. 17.3 THE LD. CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSION FILED BY THE ASSESSEE, RESTRICTED THE DISALLOWANCE T O RS. 1,61,25,533/-. THE RELEVANT PART OF THE FINDING OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 13.3.4 THE APPELLANT COUNSEL FILED DETAILS AND SUBM ISSIONS VIDE ITS LETTER DATED 17-01-2005 AND 25-01-2005. THE CLAIM O F THE APPELLANT ARE DISCUSSED BELOW: ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 59 (A) ON GOING THROUGH THE SUBMISSIONS MADE, IT IS OB SERVED THAT THE APPELLANT COUNSEL HAS CLAIMED A SUM OF RS.8,79,814 ON ACCOUNT OF THE PROJECT NCLKBJ ANNAPARA FOR THE THEFT OF RAILS AT T HE PROJECT SITE. ON GOING THROUGH THE DETAILS SUBMITTED BY THE APPELLAN T COUNSEL AT PAGE NO.10I ALONGWITH THE SUBMISSIONS DATED 17-01-2005, IT IS OBSERVED THAT THE THEFT TOOK PLACE DURING THE NIGHT OF 14/15-04-1 999 AND FIR WAS ALSO LODGED AT SHAKTI NAGAR POLICE STATION. AS THEFT OCC URRED IN THE FY 1999- 00 RELEVANT TO AY 2000-01, THE LIABILITY DID NOT AR ISE DURING THE FY RELEVANT TO THE AY 2001-02 AND THE SAME CANNOT BE A LLOWED. (B) THE APPELLANT HAS CLAIMED A SUM OF RS.1,27,32,3 38 FOR JAIPUR BY- PASS ROAD PROJECT. AS PER THE DETAILS FILED AT PAGE NO.41 TO 49 IN THE SUBMISSIONS MADE VIDE LETTER DATED 25-01-2005, IT I S OBSERVED THAT THE LIABILITY OF RS.69,44,024 IN RESPECT OF GUPTA CONST RUCTION COMPANY WAS ONLY ASCERTAINED DURING THE YEAR WHICH CAN BE ALLOW ED AS EXPENDITURE. THE FURTHER PAPERS ATTACHED FOR CLAIMING THE BALANC E LIABILITY OF KAMAL BUILDERS SHOWS THAT THEY HAVE ONLY MADE A REQUEST F OR RELEASING AN AMOUNT OF RS.60 LAKHS AS AN ADVANCE TO CLEAR THE LI ABILITY VIDE THEIR LETTER DATED 10-10-2000 AND THE OTHER LETTER OF M/S. KAMAL BUILDERS IS DATED 24-08-2001 WHICH IS RELATED TO SUBSEQUENT FINANCIAL YEAR AND IS ALSO ON THE ISSUE OF REFUND OF ADDITIONAL RETENTION MONEY. THEREFORE, ONLY A SUM OF RS.69,44,024 IS ALLOWABLE FROM THE CLAIM MADE OF RS.1,27,32,338. (C) REGARDING THE CLAIM IN RESPECT OF PROJECTS APSH -1A, 1B & 3 AND BHOPAL HOSPITAL, A SUM OF RS.76 LAKHS AND RS. 18,57 ,405 HAS BEEN CLAIMED BUT IT HAS BEEN SUBMITTED THAT THE DOCUMENT S ARE BEING COLLECTED. AS NO EVIDENCE HAS BEEN FILED THAT THE L IABILITIES IN RESPECT OF ABOVE TWO PROJECTS HAVE BEEN ASCERTAINED DURING THE YEAR, THE SAME CANNOT BE ALLOWED. (D) THE PROVISIONS WERE MADE IN RESPECT OF CORPORAT E OFFICE EXPENSES OF RS.90 LAKHS AND IN RESPECT OF SECL-DIPKA OF RS.36,8 0,055. AS PER THE DETAILS SUBMITTED, THE LIABILITY AROSE DURING THE Y EAR FOR BOTH THE EXPENDITURE CLAIMED, HENCE, THE SAME ARE ALLOWED. TO SUM UP, OUT OF THE CLAIM OF RS.3,57,49,612/-, TH E DISALLOWANCE IS UPHELD TO THE AMOUNT OF RS. 1,61,25,533 [RS.8,79,81 4 + RS.57,88,314 (RS.1,27,32,338 - RS.69,44,024) + RS.76,00,000 + RS .18,57,405] AND THE BALANCE IS DELETED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 60 17.4 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSE E REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A) AND ADVAN CED ARGUMENTS SIMILAR TO ARGUMENTS MADE WITH REFERENCE T O GROUND NO. 6 OF THIS APPEAL OF THE ASSESSEE. 17.5 THE LD. DR ON THE OTHER HAND RELIED ON THE OR DER OF THE LOWER AUTHORITIES AND SUBMITTED AS UNDER: 7.2 THE SUBMISSION IN PARA 6 ABOVE, MADE IN RESPEC T OF PROVISIONING OF MOBILIZATION EXPENSES, IS REITERATE D IN RESPECT OF THE ABOVE GROUND OF APPEAL ALSO. THE ASSESSEE HAS NOT B EEN ABLE TO SUBSTANTIATE ITS CASE BEFORE THE A.O AS TO HOW THE PROVISION OF EXPENSES WAS ASCERTAINED LIABILITY AND WAS BASED ON SPECIFIC WORKING. ONUS HAS NOT BEEN DISCHARGED BY THE ASSESS EE. IT MAY BE NOTED THAT ON PAGE 322, LIST OF PROVISION OF OTHER EXPENSES IS GIVEN. LAST ITEM IS OF RS. 90.00 LAKH. ON PAGE 324 OF PB, 3RD ITEM IS REGARDING RS.90 LAKH. IT IS SEEN THAT IN THE BOARD MEETING ON 25.04.2001, IT WAS DECIDED TO AWARD EMPLOYEES WITH A GOLD COIN AND TOTAL EXPENSE FOR THE SAME WAS ADMITTED AT RS. 1.80 CRORES. HALF OF THE SAID ESTIMATED EXPENSE-RS. 90 LAKHS WAS CLAIMED AS PROVISION IN AY 2001-02 WHEREAS BOARD MEETING TOOK PLACE IN A Y. 2002-03. ATTENTION IS DRAWN TO PAGE 326 OF PB, IN W HICH IT WAS SUBMITTED BEFORE THE CIT(A) THAT IN RESPECT OF PRIO R PERIOD EXPENSES, PROVISION FOR DEMOBILIZATION AND PROVISIO N FOR OTHER EXPENSES WERE STILL BEING COMPILED. NO SUBSTANTIATI NG DOCUMENTS WERE FILED BEFORE THE A.O, LD. CIT(A) AND BEFORE TH E HONBLE ITAT IN SUPPORT OF ITS CLAIM OF DEDUCTION IN ORDER TO PROVE THAT THE PROVISIONING WAS BASED ON ASCERTAINED LIABILITY AND WAS NOT MERELY ESTIMATION. 17.6 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND TH AT THE LD. CIT(A) ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 61 HAS SUSTAINED THE DISALLOWANCE DUE TO FAILURE ON THE PART OF ASSESSEE IN SUBSTANTIATING WHETHER THE LIABILITY ARO SE DURING THE YEAR UNDER CONSIDERATION AND ALSO FAILURE TO SUBMIT NECESSARY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM. BEFOR E US ALSO, NO EVIDENCES HAVE BEEN FURNISHED BY THE ASSESSEE TO SU BSTANTIATE THE CLAIM WHETHER THE EXPENSES CRYSTALLISED DURING THE Y EAR. IN OUR OPINION, THE ORDER OF THE LD. CIT(A) ON THE ISSUE I N DISPUTE IS WELL REASONED AND WE DO NOT FIND ANY INFIRMITY IN THE SA ME. ACCORDINGLY, THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPU TE IS UPHELD. THE GROUND NO.7(A) OF THE APPEAL OF THE ASSESSEE GROUND NO. 8 OF THE APPEAL OF THE REVENUE, ARE DISMISSED. 17.7 THE GROUND NUMBER 7(B) OF THE APPEAL OF THE R EVENUE IS ALSO DISMISSED, BEING IDENTICAL TO GROUND NUMBER 5( B) OF THE APPEAL, WHICH HAS ALREADY BEEN DISMISSED BY US. 18.1 THE GROUND NO. 8 OF THE APPEAL OF THE ASSESSE E RELATES TO INTEREST RECEIVED VIDE INTIMATION UNDER SECTION 143 (1) OF THE ACT AMOUNTING TO RS. 25,56,813/-, WHICH WAS NOT SHOWN BY T HE ASSESSEE AS INCOME IN THE YEAR UNDER CONSIDERATION. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 62 18.2 BRIEF FACTS QUA THE ISSUE IN DISPUTE ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR CONSIDERA TION , THE ASSESSEE RECEIVED INTEREST UNDER SECTION 244A OF TH E ACT VIDE INTIMATION DATED 30/07/2002 UNDER SECTION 143(1) OF THE ACT FOR ASSESSMENT YEAR 2000-01, WHICH WAS DEBITED BY THE ASS ESSEE UNDER THE LOANS AND ADVANCES AND WAS NOT CREDITED TO THE P ROFIT AND LOSS ACCOUNT FORPREVIOUS YEAR CORRESPONDING TO ASSESSMEN T YEAR 2001- 02. ON COMPLETION OF THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2000-01 IN FINANCIAL YEAR 2003-04, THE INTERES T UNDER SECTION 244A WAS WITHDRAWN. ACCORDING TO THE ASSESSEE THE AFOR ESAID INTEREST RECEIVED UNDER INTIMATION U/S 143(1) WAS NO T FINAL AND THEREFORE THE ASSESSEE HAD NEITHER CREDITED THE SAM E IN ITS BOOKS OF ACCOUNTS NOR OFFERED THE SAME TO TAX. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS REQUIRED TO OFFER THE SAID AMOUNT TO TAX FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING REGULA RLY EMPLOYED BY THE ASSESSEE. THE LD. CIT(A) UPHELD THE INTEREST RE CEIVED AS INCOME FOR THE YEAR UNDER CONSIDERATION ON THE GROUND THAT INTEREST WAS ACTUALLY RECEIVED BY THE ASSESSEE AND IT WAS DUE TO THE ASSESSEE IN THE YEAR IN CONSIDERATION. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 63 18.3 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RE LIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF AVADA TRADING COMPANY (P) LTD VS ACIT (2006) 100 ITD 131 WHEREIN IT IS HELD THAT IF INTEREST UNDER SECTION 244A GRANTED UN DER SECTION 143(1) IS REDUCED ON ACCOUNT OF SUBSEQUENT PROCEEDI NG, THE INTEREST ORIGINALLY GRANTED WOULD BE SUBSTITUTED BY THE REDUC ED AMOUNT. ACCORDINGLY, THE LEARNED COUNSEL SUBMITTED THAT IN THE PRESENT CASE, THE INTEREST ORIGINALLY GRANTED HAS BEEN REDU CED TO NIL ON COMPLETION OF THE ASSESSMENT PROCEEDING UNDER SECTI ON 143(3) OF THE ACT, THUS, NO INTEREST INCOME SHOULD BE CONSIDE RED AS CHARGEABLE TO TAX IN THE INSTANT YEAR. 18.4 THE LD. DR ON THE OTHER HAND RELIED ON THE OR DER OF THE LOWER AUTHORITIES. 18.5 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE IN DISPUTE IN THE CASE IS COVERED BY THE DECISION OF THE SPECIAL BENC H IN THE CASE OF AVADA TRADING COMPANY (P) LTD. (SUPRA). THE TRIBUNA L (SUPRA) CLEARLY HELD THAT WHEN THE ASSESSEE RECEIVED REFUND UNDER ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 64 INTIMATION UNDER SECTION 143(1) OF THE ACT, AN ENFO RCEABLE DEBT WAS CREATED IN FAVOUR OF THE ASSESSEE IN RESPECT OF THE INTEREST DUE ON SUCH REFUND AND THUS INCOME ACCRUED AS THE RIGHT TO RECEIVE WAS ACQUIRED. THE RELEVANT FINDING OF THE TRIBUNAL IS R EPRODUCED AS UNDER: 9. THE MAIN CONTENTION OF THE ASSESSEE'S COUNSEL I S THAT SUCH RIGHT IS CONTINGENT AS THE INTEREST SO RECEIVED CAN BE VARIE D OR WITHDRAWN AFTER THE ASSESSMENT UNDER S. 143(3). WE ARE UNABLE TO A CCEPT SUCH CONTENTION OF ASSESSEE FOR THE REASONS GIVEN HEREAF TER. ACCORDING TO THE DICTIONARY MEANING, A RIGHT OR AN OBLIGATION CAN BE SAID TO BE CONTINGENT WHEN SUCH RIGHT OR OBLIGATION IS DEPENDENT ON SOMET HING NOT YET CERTAIN. ACCORDING TO S. 244A. THE ONLY CONDITION FOR GRANT OF INTEREST IS THAT THERE MUST BE A REFUND DUE TO ASSESSEE UNDER ANY PROVISIO N OF THE ACT. THERE IS NO OTHER CONDITION IN THE SAID PROVISION AFFECTI NG SUCH RIGHT. THEREFORE, THE MOMENT A REFUND BECOMES DUE TO ASSESSEE, AN ENF ORCEABLE DEBT IS CREATED IN FAVOUR OF ASSESSEE AND ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INTEREST. SUB-S. (3) OF S. 244A ONLY AFFECTS ITS QU ANTIFICATION UNDER CERTAIN CIRCUMSTANCES AND NOT THE RIGHT OF INTEREST. THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS. SHRI GOVERDHAN LTD. (1968) 6 9 ITR 675 (SC) HAS OBSERVED AT P. 681 THAT ONCE A DEBT IS CREATED, THE N THE LIABILITY CANNOT BE SAID TO BE CONTINGENT MERELY BECAUSE IT IS TO BE QUANTIFIED AT LATER DATE. UNDER S. 244A, EVEN THE INTEREST IS QUANTIFIE D IMMEDIATELY WHENEVER A REFUND IS ISSUED. IN OUR VIEW, THE RIGHT TO GRANT INTEREST IS ABSOLUTE SINCE EXISTENCE OF SUCH RIGHT IS NOT DEPEN DENT ON ANY EVENT. FOR EXAMPLE, ASSESSEE IS GRANTED INTEREST OF RS. 1,000 ON THE DATE OF GRANTING REFUND. SUBSEQUENTLY, UNDER S. 244A(3), IT IS REDUC ED TO RS. 600 BY VIRTUE OF ASSESSMENT UNDER S. 143(3). CAN IT BE SAID THAT RIGHT TO INTEREST DID NOT ACCRUE ON THE DATE OF REFUND ? IN OUR OPINION, THE RIGHT OF INTEREST CAME INTO EXISTENCE ON THE DATE OF REFUND BY VIRTUE OF S. 244A(1) THOUGH ITS QUANTIFICATION MAY OR MAY NOT VARY DEPENDING UP ON THE OUTCOME OF ASSESSMENT. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 65 18.6 HOWEVER THE TRIBUNAL, FURTHER HELD THAT IN CA SE SUBSEQUENTLY, THE SAID INTEREST IS WITHDRAWN, THE SAI D INTEREST INCOME CAN BE RECTIFIED UNDER SECTION 154 OF THE AC T. THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER: 14. IT HAS BEEN APPREHENDED BY ASSESSEE'S COUNSEL T HAT ASSESSEE WOULD BE WITHOUT REMEDY IF THE INTEREST IS REDUCED BY VIRTUE OF ASSESSMENT UNDER S. 143(31. THIS APPREHENSION, IN O UR OPINION, IS UNFOUNDED. IF INTEREST IS REDUCED BY VIRTUE OF SUB- S. (3) OF S. 244A ON ACCOUNT OF ASSESSMENT UNDER S. 143(3), THE INTER EST GRANTED IN EARLIER YEAR GETS SUBSTITUTED AND IT IS THE REDUCED AMOUNT OF INTEREST THAT WOULD FORM PART OF INCOME OF THAT YEA R. THUS, IT WOULD AMOUNT TO MISTAKE RECTIFIABLE UNDER S. 154 OF THE A CT. IN OUR OPINION, IF THE BASIS, ON WHICH INCOME WAS ASSESSED IS VARIED OR CEASES TO EXIST, THEN SUCH ASSESSMENT WOULD BECOME ERRONEOUS AND CAN BE RECTIFIED. THIS CAN BE EXPLAINED WITH AN EXAMPLE. FOR INSTANCE, LAND IN A VILLAGE BELONGING TO VARIOUS PE RSONS IS ACQUIRED BY GOVERNMENT FOR SOME DEVELOPMENT WORKS AND THE CO MPENSATION IS AWARDED BY THE COLLECTOR WITH INTEREST, IF ANY. BUT ONE OF THE LAND HOLDERS CHALLENGES THE ACQUISITION PROCEEDINGS IN THE HIGH COURT AND LATER ON SUCCEEDS AS THE ACQUISITION IS D ECLARED ILLEGAL. BY VIRTUE OF SUCH HIGH COURT ORDER, SUCH COMPENSATI ON HAS TO BE RETURNED AND GOVERNMENT WILL HAVE TO RESTORE THE LA ND TO THE VILLAGERS. THEREFORE, IF CAPITAL GAIN HAS BEEN ASSE SSED IN THE HANDS OF SOME OF THE PERSONS WHERE LANDS WERE ACQUIRED, S UCH ASSESSMENT WOULD BECOME PATENTLY ERRONEOUS, AS THE BASIS ITSELF HAS CEASED TO EXIST. SUCH ASSESSMENT WOULD, THEREFO RE, AMOUNT TO MISTAKE, WHICH, IN OUR OPINION, CAN BE RECTIFIED. S IMILARLY, ANY INCOME ASSESSED MAY BECOME NON-TAXABLE BY VIRTUE OF RETROSPECTIVE AMENDMENT AND CONSEQUENTLY, ERRONEOUS ASSESSMENT CAN BE RECTIFIED. THEREFORE, IN OUR HUMBLE OPINION, IF THE INTEREST GRANTED UNDER S. 244A(1) IS VARIED UNDER SUB-S. (3) OF SUCH SECTION, THEN THE INTEREST ORIGINALLY GRANTED WOULD BE SUBST ITUTED BY THE REDUCED/INCREASED AMOUNT AS THE CASE MAY BE. THUS, INCOME ON ACCOUNT OF INTEREST IF ASSESSED CAN BE RECTIFIED UN DER S. 154. 18.7 IN VIEW OF THE ABOVE FINDING OF THE TRIBUNAL ( SUPRA), WE RESTORE THE ISSUE IN DISPUTE TO THE FILE OF THE LD. ASSESSING OFFICER ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 66 FOR VERIFYING THAT THE INTEREST GRANTED UNDER SECTI ON 143 (1) IN RELATION TO ASSESSMENT YEAR 2000-01 IN THE PREVIOUS YEAR CORRESPONDING TO ASSESSMENT YEAR UNDER CONSIDERATIO N, BUT SAME HAS BEEN SUBSEQUENTLY WITHDRAWN UNDER SECTION 143(3) OF THE ACT PASSED IN FINANCIAL YEAR 2003-04 AND DECIDE THE ISS UE IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, THE GROUND NO . 8 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 19.1 THE GROUND NO. 9 OF THE APPEAL OF THE ASSESSE E RELATES TO INTEREST INCOME OF RS. 2,00,30,000/- FROM M/S NATIO NAL BUILDING CONSTRUCTION COMPANY (NBCC), WHICH ACCORDING TO THE ASSESSING OFFICER ACCRUED TO THE ASSESSEE DURING YEAR UNDER C ONSIDERATION. 19.2 BEFORE THE ASSESSING OFFICER, THE ASSESSEE CO NTENDED THAT INTEREST INCOME FROM NBCC HAD NOT BEEN TAKEN INTO A CCOUNT ON THE BASIS OF THE ACCOUNTING POLICY FOLLOWED BY THE ASSE SSEE AND IT WAS FURTHER STATED THAT THE INTEREST AMOUNT WAS DISPUTED AND THEREFORE IT WAS NOT TAXABLE PURSUANT TO SECTION 145 OF THE AC T, HOWEVER THE ASSESSING OFFICER OBSERVED THAT IN VIEW OF THE MERCA NTILE SYSTEM OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 67 ACCOUNTING FOLLOWED, THE ASSESSEE WAS OBLIGED TO CRE DIT THE SAID INTEREST OF RS. 2,00,30,000/-IN ITS PROFIT AND LOSS ACCOUNT. 19.3 THE ASSESSEE IN REVISED COMPUTATION OF INCOME CREDITED DISPUTED INTEREST INCOME OF RS. 2,00,30,000/-IN THE PROFIT AND LOSS ACCOUNT AND CONSEQUENTLY CLAIMED THE SAID AMOUNT AS DEDUCTION IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UCO BANK VS CIT 237 ITR 889 WHEREIN IT IS HELD THAT INTEREST ARISING OUT OF STICKY AND DISPUTED LOANS ARE FULLY DEDUCTIBLE. THIS REVISED CLAIM WAS NOT ACCEPTED BY THE LD. ASSESSING OFFICER ON THE GROUND THAT MANDATED PERIOD FOR REVISING RETURN OF INCOME UNDER SECTION 139(5) OF THE ACT HAD ALREADY EXPIRED AND O THERWISE ALSO, THE REVISION OF THAT NATURE WAS NOT COVERED UNDER TH E PROVISION OF SECTION 139(5) OF THE ACT. ACCORDINGLY THE ASSESSIN G OFFICER ADDED THE SUM OF RS. 2,00,30,000/-TO THE INCOME OF THE AS SESSEE. THE ASSESSEE MADE DETAILED SUBMISSION BEFORE THE LD. CI T(A), WHO HAS SUMMARISED THE SUBMISSION OF THE ASSESSEE AS UNDER: 14A.2 THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT COUNSEL VIDE LETTER DATED 04-01-2005 AND LETTER DATED 09-02-2005 DURING THE COURSE OF APPELLATE PROCEEDINGS ARE SUMMARIZED BELOW: ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 68 (I) THE APPELLANT ENTERED INTO A CONTRACT WITH NATI ONAL BUILDING CONSTRUCTION CORPORATION (NBCC) LTD. FOR PURCHASE O F 7500 SQ. MTR. OF OFFICE SPACE WITH PARKING AND STORAGE SPARE IN NBCC TOWER FOR RS.17 CRORES VIDE AGREEMENT DATED 22-09-1989. A DISPUTE A ROSE BETWEEN THE APPELLANT AND NBCC. (II) THE COMMITTEE ON DISPUTES (COD) REFERRED THE M ATTER TO ARBITRATION IN AUGUST 1996. THE ARBITRATOR AWARDED THAT 20% OF THE CONTRACT AMOUNT BE FORFEITED AND THE BALANCE TO BE REFUNDED TO THE APPELLANT. THE APPELLANT APPEALED AGAINST THE AWARD BUT THE APPELL ATE AUTHORITY UPHELD THE AWARD ON 08-10-1999 AND HELD THAT THE ENTIRE AM OUNT OF RS. 15.93 CRORES PAID BY THE APPELLANT BE REFUNDED TO IT BY N BCC WITHIN TWO MONTHS BEYOND WHICH INTEREST WOULD BE LEVIABLE AT T HE RATE OF 15%. (III) AFTER CONTINUOUS PERSUASION, NBCC ONLY REFUND ED A SUM OF RS.416.50 LAKHS ON 14-02-2001 AND RS. 126.50 LAKHS ON 28-02-2001. IRCON THEREAFTER WROTE NUMBER OF LETTERS DATED 30-0 3-2001, 01-06- 2001, 16-08-2001, ETC. THE APPELLANT HAS GONE INTO LITIGATION AND THE APPEAL IS PENDING BEFORE THE HONBLE HIGH COURT OF DELHI. (IV) THE OUTSTANDING INTEREST RECEIVABLE TO THE APP ELLANT WAS RS.2 CRORES ARISING OUT OF THE DELAYED REFUND OF ADVANCE PAYMEN T BY NBC TO THE APPELLANT. THE DISPUTED AND UNACCRUED INTEREST IS N OT CHARGEABLE TO TAX UNDER THE MERCANTILE SYSTEM OF ACCOUNTING AS PER TH E JUDGMENT OF THE APEX COURT IN THE CASE OF UCO BANK, THE INTEREST AR ISING OUT OF STICKY AND DISPUTED LOANS IS WHOLLY DEDUCTIBLE. (V) RELIANCE HAS BEEN PLACED ON THE CASE OF CIT VS. BAVALA GOPALAK VIVID KARYA KARI SAHAKARI MANDALI LTD., 253 ITR 97 WHERE IT HAS BEEN HELD THAT AN AMOUNT WHICH IS SUBJECT MATTER OF DISPUTE C ANNOT BE SAID TO HAVE ACCRUED TO THE APPELLANT AND CAN BE TAXED ONLY WHEN THE DISPUTE IS SETTLED. (VI) IN THE CASE OF STATE BANK OF TRAVANCORE VS. CI T, 158 ITR 102, THE PRINCIPLE OF REAL INCOME HAS BEEN LAID. (VII) RELIANCE HAS ALSO BEEN PLACED ON THE CASE OF ANOOP ENGINEERING LTD. VS. CIT, 247 ITR 457 WHERE IT HAS BEEN HELD THAT FO R THE PURPOSE OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 69 ASCERTAINING WHETHER INCOME HAD ACCRUED TO THE ASSE SSEE ONE HAS TO FIND OUT WHETHER THE ASSESSEE HAD A VESTED RIGHT TO RECE IVE THE INCOME. (VIII) RELIANCE HAS BEEN PLACED ON THE DECISION OF CIT VS. MOTOR CREDIT CO. LTD., 127 ITR 572 WHERE IT HAS BEEN HELD THAT W HERE NO INCOME HAS RESULTED , IT CANNOT BE SAID THAT THE INCOME HAS AC CRUED MERELY ON THE GROUND THAT THE ASSESSEE HAS BEEN FOLLOWING THE MER CANTILE SYSTEM OF ACCOUNTING. IT HAS ALSO BEEN OBSERVED THAT THE MERC ANTILE SYSTEM OF ACCOUNTING CAN BE ONLY RELEVANT ONLY TO DETERMINE T HE POINT OF TIME AT WHICH TAX LIABILITY IS ATTRACTED AND IT CANNOT BE R ELIED ON TO DETERMINE WHETHER INCOME HAS IN FACT RESULTED OR MATERIALIZED IN FAVOUR OF THE ASSESSEE MERELY BECAUSE THE ASSESSEE HAS BEEN MAINT AINING HIS ACCOUNT ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING. (IX) IT HAS BEEN SUBMITTED IN THE INSTANT CASE THAT THE INTEREST RECEIVABLE BY IT IS CLEARLY IN DISPUTE AND THE APPELLANT HAS S INCE FILED A PETITION BEFORE THE HONBLE DELHI HIGH COURT FOR RECOVERY OF THE SAID PRINCIPAL AND INTEREST WIL L DEPEND UPON THE OUTCOME OF THE DECISION OF THE HONBLE HIGH COURT. (X) IN THE CASE OF CIT VS. PONDICHERY INDUSTRIAL PR OMOTION DEVELOPMENT INVESTMENT CORPORATION LTD., 254 ITR 748, IT HAS BE EN HELD THAT - HAVING REGARD TO THE DECISION OF THE APEX COURT, IT CANNOT BE SAID THAT IT WAS IMPERMISSIBLE FOR THE ASSESSEE HERE TO HAVE FOLLOWE D A MIXED OR HYBRID SYSTEM OF ACCOUNTING AND THAT WHILE FOLLOWING THE M ERCANTILE SYSTEM, IT WAS PERMISSIBLE FOR IT TO ADOPT A CASH SYSTEM OF AC COUNTING SO FAR AS INTEREST AND RENT WERE CONCERNED. (XI) THROUGH ITS LETTER DATED 25-03-2004, THE APPEL LANT MERELY SUBSTANTIATED ITS CLAIM BY RELYING UPON A SUPREME C OURT JUDGMENT AND NO REVISED CLAIM WAS FILED BY THE APPELLANT. IN ANY CASE, THE FRESH CLAIM SHOULD HAVE BEEN ENTERTAINED BY THE AO HAS BEEN HEL D IN THE APPELLANTS OWN CASE FOR THE AY 2000-01 AND 1994-95 BY THE CIT( A). 19.4 THE LD. CIT(A) DISTINGUISHED THE DECISION IN THE CASE OF UCO BANK (SUPRA) AS UNDER: ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 70 IN THE ABOVE DECISION, THE APEX COURT HAS DECIDED THE ISSUE TAKING INTO CONSIDERATION THE CBDT CIRCULAR OF 9TH OCT 1984 AND HAVE HELD THAT THE CIRCULARS ARE BINDING. EVEN IN THIS CASE, AS PER TH E CIRCULAR OF 1984, THE INTEREST CHARGED IN AN ACCOUNT WHERE THERE HAS BEEN NO RECOVERY FOR THREE CONSECUTIVE ACCOUNTING YEARS IS NOT TO BE SUB JECTED TO TAX IN THE FOURTH YEAR AND ONWARDS. THUS, THE DECISION OF THE APEX COURT IS UNDER DIFFERENT SET OF CIRCUMSTANCES AND IS IN RELATION T O WHETHER THE CIRCULAR ISSUED BY THE CBDT IS BINDING OR NOT. IN THE CASE O F THE APPELLANT, THE FACTS ARE ENTIRELY DIFFERENT BECAUSE NBCC HAS NOT D ENIED ITS LIABILITY TO PAY THE PRINCIPAL AND INTEREST DUE DURING THE YEAR. IN FACT, NBCC HAS AGREED TO MAKE THE PAYMENT DUE TO IRCON IN THREE IN STALMENTS PAYABLE ON 31-01-2001, 28-02-2001 AND 31-03-2001 AND HAS PA ID PART OF THE AMOUNT ALSO. IN THE CASE OF THE APPELLANT, UNDER NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT THE PRINCIPAL HAD BECOME STICKY DURING THE YEAR, HENCE, NO INTEREST IS DUE TO THE APPELLAN T. 19.5 THE LD. CIT(A) DISTINGUISHED THE OTHER DECISI ONS RELIED UPON BY THE ASSESSEE AND REJECTED THE CONTENTION OF THE ASSESSEE OBSERVING AS UNDER: 14A3.1 IN THE LETTER DATED 09-02-2005, THE APPELLAN T HAS ENCLOSED PAPERS OF THE MEETING HELD BY COD OR ADDRESSED TO HIGH POW ER COMMITTEE. AS PER THE LETTER DATED 14-11-2002 ADDRESSED TO COD BY THE APPELLANT, IT IS OBSERVED THAT AFTER DETAILED DISCUSSION, THE SCHEDU LE FOR PAYMENT OF DUES BY NBCC TO IRCON WAS JOINTLY AGREED ALONGWITH CERTA IN ATTENDANT CONDITIONS. AS PER THE AGREEMENT, THE AMOUNT WAS TO BE PAID IN THREE INSTALLMENTS I.E. 31-01-2001 28-02-2001 AND 31-03-2 001 AND THE AMOUNT PAYABLE IN EACH INSTALLMENT WAS 25%, 35% AND 40% RESPECTIVELY OF THE AMOUNT DUE ALONGWITH THE INTEREST. NBCC HAS INFORMED IRCON VIDE LETTER DATED 04-12-2000 THAT THEY ARE FULLY CO MMITTED TO HONORING ITS LIABILITY TOWARDS IRCON IN TERMS OF APPELLATE AUTHO RITY ORDER DATED 08- 10-1999 READ WITH THE ORDER OF THE SECRETARY (LAW) DATED 18-04-2000 AND IT WAS FURTHER CONFIRMED THAT NBCC SHOULD BE ABLE T O LIQUIDATE THEIR LIABILITY TOWARDS IRCON LATEST BY 31-03-2001. AGAIN THE CMD, NBCC VIDE LETTER DATED 12-06-2001 ADDRESSED TO IRCON MENTIONE D THAT DUE TO THE FINANCIAL CONSTRAINTS BEING FACED BY NBCC, THE COMM ITMENT MADE BY ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 71 NBCC WAS GETTING DELAYED AND THEY WERE MAKING ALL E FFORTS TO PAY THE BALANCE AMOUNT TO IRCON BY MAKING ALTERNATE ARRANGE MENTS AT THE EARLIEST POSSIBLE. THUS, TAKING INTO THE ABOVE FACT S OF THE CASE, THE INTEREST HAS DEFINITELY ACCRUED TO THE APPELLANT ON THE AMOUNT PAYABLE BY NBCC AND NBCC HAS ALSO NOT DENIED ITS LIABILITY TO PAY THE AMOUNT. IN FACT, NBCC HAS AGREED TO LIQUIDATE THE PRINCIPAL AN D INTEREST DUE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR ITSELF AND UNDER NO CIRCUMSTANCES IT CAN BE SAID THAT THE INTEREST WAS NOT DUE TO THE APPELLANT DURING THE YEAR OR THE PRINCIPAL AMOUNT H AS BECOME UNRECOVERABLE DURING THE YEAR. AS ALREADY MENTIONED ABOVE, NBCC IS A GOVERNMENT COMPANY AND IT IS NOT THAT IT HAS GONE I NTO LIQUIDATION AND THE RECOVERY OF PRINCIPAL AND INTEREST HAS BECOME D OUBTFUL. IN THE FY 2000-01 RELEVANT TO THE ASSESSMENT YEAR, THE INTERE ST HAS BECOME DUE TO THE APPELLANT AND NEITHER THE LIABILITY TO PAY THE SAME HAS BEEN DENIED BY THE NBCC. THEREFORE, UNDER NO STRETCH OF IMAGINA TION, IT CANNOT BE SAID THAT INTEREST HAS NOT BECOME DUE TO THE APPELL ANT OR THE ACCRUED INTEREST IS NOT THE REAL INCOME OF THE APPELLANT. M ERELY FILING OF A SUIT FOR RECOVERY AGAINST NBCC IN SUBSEQUENT YEAR BY THE APP ELLANT DOES NOT MEAN THAT THE INTEREST HAS NOT BECOME ACCRUED TO TH E APPELLANT DURING THE YEAR OR THE LOAN HAS BECOME STICKY, HENCE, NO I NTEREST IS DUE. IN ANY CASE, THE PRINCIPAL AND INTEREST HAS NOT BECOME STI CKY AT LEAST DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT THOUGH AS MEN TIONED ABOVE, IN THE PRESENT CIRCUMSTANCES OF THE CASE, IT CANNOT BE HEL D THAT THE RECOVERY OF DUE AMOUNT FROM NBCC HAS BECOME STICKY. THEREFORE, THE ADDITION MADE BY THE AO IS CONFIRMED AND THE APPEAL OF THE APPELL ANT ON THIS ISSUE IS DISMISSED. 19.6 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RE LIED ON THE DECISION IN THE CASE OF UCO BANK (SUPRA) AND SUBMIT TED THAT INTEREST ARISING OUT OF STICKY AND DISPUTED LOANS C ANNOT BE SHOWN AS INCOME AS LONG AS ITS REALISATION IS DOUBTFUL. 19.7 THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LOWER AUTHORITIES. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 72 19.8 WE HAVE HEARD RIVAL SUBMISSION OF PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. CIT(A) DIS TINGUISHED THE DECISION IN THE CASE OF UCO BANK(SUPRA) OBSERVING T HAT IN THAT CASE THERE HAS BEEN NO RECOVERY FOR THREE CONSECUTIVE AC COUNTING YEARS. IN FOURTH YEAR ONWARDS THE INTEREST CHARGED WAS HELD TO BE NOT SUBJECTED TO TAX. THE LD. CIT(A) HAS OBSERVED THAT IN THE INSTANT CASE THE NBCC HAS NOT DENIED ITS LIABILITY TO PAY T HE PRINCIPAL AND INTEREST DURING THE YEAR. WE AGREE WITH THE OBSERVAT ION OF THE LD. CIT(A) AND CONCUR WITH THE FINDING THAT DECISION IN THE CASE OF UCO BANK (SUPRA) IS NOT APPLICABLE OVER THE FACTS OF TH E INSTANT CASE. THE LD. CIT(A) HAS BROUGHT ON RECORD FACTS IN DETAIL TH AT THE NBCC HAD AGREED TO LIQUIDATE THE PRINCIPAL AND INTEREST DUE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT ITSELF AN D THEREFORE UNDER NO CIRCUMSTANCES THE INTEREST DUE COULD BE SAID TO BE UNRECOVERABLE DURING THE YEAR UNDER CONSIDERATION. BEFORE US THE LD. COUNSEL DID NOT REBUT ANY OF THE OBSERVATION OF THE LD. CIT(A) OR SUBMITTED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM EXCEPT THE CLAIM THAT LOAN WAS STICKY AND DISPUTED. IN THE CASE, THE APPE LLATE AUTHORITY AGAINST THE AWARD BY THE ARBITRATOR, DIRECTED TO REF UND ENTIRE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 73 AMOUNT OF RS. 15.93 CRORES WITHIN 2 MONTHS AND BEYON D WHICH INTEREST WOULD BE LEVIED AT THE RATE OF 15%. THE NB CC COMPLIED AND PARTLY REFUNDED THE AMOUNT ALSO. BY MERELY FILING A PPEAL BY THE ASSESSEE BEFORE THE HONBLE DELHI HIGH COURT, IT CA NNOT BE SAID THAT INTEREST WAS NOT ACCRUED TO THE ASSESSEE. THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THAT LOAN WAS UNRECOVERABLE D URING THE YEAR UNDER CONSIDERATION AND NO SUCH EVIDENCES HAVING BE EN FILED EITHER BEFORE THE LD. CIT(A) OR BEFORE US. IN VIEW OF THE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY, WE UPHOLD THE SAME. THE GROUND NO. 9(A) AND 9(B) OF THE APPEAL OF THE A SSESSEE ARE ACCORDINGLY DISMISSED. 20.1 THE GROUND NO. 10 RELATES TO DISALLOWANCE OF D EDUCTION OF PROVISION FOR DOUBTFUL DEBTS (RS. 2, 48, 73,000/-) AND DOUBTFUL ADVANCES ( RS.53,98,000/-) FOR COMPUTING BOOK PROFI T UNDER SECTION 115JB OF THE ACT. 20.2 THE ASSESSING OFFICER ON PERUSAL OF COMPUTATI ON OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT , OBSERVED TH AT THE ASSESSEE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 74 FAILED TO ADD BACK THE PROVISION FOR BAD AND DOUBTF UL DEBTS AMOUNTING TO RS. 2,48,73,000/-AND PROVISION FOR DOU BTFUL ADVANCES OF RS.53,98,000/-. IT WAS SUBMITTED BY THE ASSESSEE THAT THE PROVISIONS WERE ASCERTAINED LIABILITY AND, THEREFOR E, IT WAS NOT REQUIRED TO ADDED BACK IN COMPUTING THE BOOK PROFIT . THE ASSESSEE EXPLAINED THAT PROVISIONS FOR DOUBTFUL DEBTS AND DO UBTFUL ADVANCES WERE INFACT ASSETS AND NOT LIABILITIES AND THUS, NO ADJUSTMENT UNDER CLAUSE (C) OF EXPLANATION-II, BELOW PROVISION OF SEC TION 115JBWAS TO BE CALLED FOR, RELYING ON THE JUDGEMENT IN THE CASE OF CIT VS ECHJAY FORGING (P) LTD (2001) 251 ITR 15 (BOMBAY). 20.3 THE ASSESSING OFFICER REJECTED THE CONTENTION OF ASSESSEE WITH THE DETAILED REASONS MENTIONED IN PARA 16.1.2 O F THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSING OFFICE R, SINCE PROVISION WAS MADE, IT CLEARLY SIGNIFIED THAT LIABIL ITIES WERE UNASCERTAINED LIABILITIES. THE LD. ASSESSING OFFICE R OBSERVED THAT WHILE COMPUTING THE BUSINESS INCOME, THE ASSESSEE AD DED THE PROVISIONS THEREFORE THERE IS NO REASON AS WHY THE S AME ARE NOT ADDED FOR COMPUTING BOOK PROFIT. REGARDING THE PROV ISION FOR DOUBTFUL ADVANCES, THE LD. ASSESSING OFFICER OBSERV ED THAT THOSE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 75 ADVANCES HAD NOT BEEN TREATED AS INCOME OF THE ASSE SSEE OR CREDITED TO THE PROFIT AND LOSS ACCOUNT IN EARLIER YEARS AND THEREFORE, THERE WAS NO BASIS FOR DEBITING THE SAME IN PROFIT A ND LOSS ACCOUNT. THE LD. ASSESSING OFFICER ALSO REJECTED THE CONTENT ION OF THE ASSESSEE THAT PROVISION FOR DOUBTFUL DEBT AND DOUBT FUL ADVANCES PERTAIN TO ASSET SIDE OF THE BALANCE SHEET. ACCORDI NG TO THE ASSESSING OFFICER IT WAS ONLY MANNER OF PRESENTATIO N IN THE BALANCE SHEET OF DOUBTFUL DEBT AND DOUBTFUL ADVANCES. THE L D. ASSESSING OFFICER POINTED OUT THAT IN THE INSTANT CASE, THE P ROVISION FOR DOUBTFUL DEBT HAS BEEN REDUCED FROM THE TOTAL DEBTO RS AND SIMILARLY PROVISION FOR DOUBTFUL ADVANCES HAS BEEN REDUCED FR OM THE TOTAL ADVANCES IN THE ASSET SIDE OF THE BALANCE SHEET. TH US, INSTEAD OF REDUCING PROVISIONS OF DOUBTFUL DEBT AND ADVANCES O N THE ASSET SIDE OF THE BALANCE SHEET, THE SAME PROVISION OF THE DOU BTFUL DEBT AND ADVANCES CAN BE SHOWN ON THE LIABILITY SIDE OF THE B ALANCE SHEET AND THE EFFECT IN THE BALANCE SHEET SHALL REMAIN TH E SAME. THUS ACCORDING TO THE ASSESSING OFFICER, THE MANNER OF D EPICTION IS NOT OF SUCH MEANINGFUL SIGNIFICANCE AND THE SAID PROVISION S REMAIN UNASCERTAINED LIABILITIES. IN SUPPORT, HE RELIED ON THE DECISION OF THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 76 MADRAS HIGH COURT IN THE CASE OF DCIT VS BEARDSELL LTD 244 ITR 256, WHEREIN IT IS HELD THAT PROVISION FOR BAD AND D OUBTFUL DEBTS ARE UNASCERTAINED LIABILITIES AND LIABLE FOR ADDING BAC K FOR THE PURPOSE OF COMPUTATION OF THE BOOK PROFIT. THE ASSESSING OF FICER ACCORDINGLY ADDED THE PROVISION IN DISPUTE TO THE COMPUTATION O F BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 20.4 BEFORE THE LD. CIT(A) THE ASSESSEE FILED DETA ILED SUBMISSION. THE LD. CIT(A) DISTINGUISHED THE DECISI ON IN THE CASE OF ECHJAY FORGING PRIVATE LIMITED (SUPRA). THE LD. CIT (A) RELYING ON THE DECISION IN THE CASE OF THE CIT VERSUS BEARDSELL LT D. ( SUPRA) AND THE TRIBUNAL THIRD MEMBER DECISION IN THE CASE OF S TEEL AUTHORITY OF INDIA LTD (SUPRA), UPHELD THE ADDITION IN DISPUTE M ADE BY THE ASSESSING OFFICER. 20.5 BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUB MITTED THAT SAID PROVISIONS FOR BAD AND DOUBTFUL DEBT /ADVANCES WERE REDUCED FROM THE DEBTORS/ADVANCES AND THEREFORE SUCH PROVIS IONS REPRESENTED ACTUAL WRITE OFF AND THUS CLAUSE (I) OF EXPLANATION TO SEC ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 77 115JB DOES NOT APPLY IN THE FACTS OF THE CASE. THE LD. COUNSEL IN SUPPORT OF HIS CONTENTION RELIED ON FOLLOWING DECISI ONS: (I) CIT VERSUS YOKOGAWA INDIA LTD (2012) 204 TAXMAN 305 (KAR). (II) PHILLIPS CARBON BLACK LTD VERSUS ACIT (ITA NO. 741/KOL/2012) (III) MURIGAPPA MORGAN THERMAL CERAMICS LTD. VS ACIT (ITA NO. 2208/MDS/2010) (IV) TRENT LIMITED VS DCIT (ITA NO. 1073/MUM/2005). 20.6 THE LD. DR ON THE OTHER HAND RELIED ON THE OR DER OF THE LOWER AUTHORITIES AND SUBMITTED AS UNDER: 10.1. ON PERUSAL OF P & L ACCOUNT (PB-PAGE-2 FOR ITA 1825), IT IS NOTED THAT PROVISION OF RS.36.38 CRORES HAS BEEN DEDUCTED OUT OF OPERATING PROFIT. THE DETAILS OF SUCH PROVISIONS ARE GIVENIN SCH P )PB-PG 19). PROVISION FOR BAD AND DOUBTFUL DEBTS IS FOR RS.248. 73 LAKHS WHILEPROVISION FOR BAD AND DOUBTFUL ADVANCES AMOUNT ED TO RS.53.98 LAKHS.THE SAID PROVISION HAS BEEN DEBITED TO P & L ACCOUNT. 10.2. THE AFORESAID PROVISION IS REQUIRED TO BE AD DED TO TOTAL INCOME IN TERMS OF CLAUSE )I) TO EXPLANATION 1 TO S ECTION 115JB. THIS ISSUE IS IN FACT NO LONGER RES INTEGRA IN VIEW OF T HE SAID INSERTION OF CLAUSE (I) W.E.F. 01.04.2001. IN THIS REGARD, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS : 1. CIT V LLPEA PARAMOUNT P. LTD[2010] 336 ITR 54(DE LHI)(PARA 4 &5) 2. EASTERN INDIA POWERTECH LTD V ADDL CIT, RG 10, N EW DELHI[2013] 32 TAXMANN.COM 11 (DELHI-TRIB.) IN THIS ORDER HONBLE ITAT HAS DISCUSSED THE ISSUE IN DETAIL AND HAS HELD THAT AFTER INSERTION OF CLAUSE(I) TO EXPLN 1 TO SEC TION 115JB, ADDITION OF DOUBTFUL DEBTS HAS TO BE MADE TO TOTAL INCOME TO DE RIVE THE BOOK PROFIT. HONBLE I TAT HAS RELIED ON THE DECISION OF JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V LLPEA PARAMOUNT P. LTD.(SUPRA). ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 78 3. WHIRLPOOL OF INDIA LTD. V UOI [2013] 31 TAXMANN. COM 200(DELHI) IN THIS CASE,IN PARA 3 OF THE ORDER HONBLE COURT H AS DISCUSSED THE BACKGROUND OF INSERTION OF CLAUSE (I) TO EXPLN 1 TO SECTION 115JB. 4. LUSTURE MANUFACTURERS P LTD V ITO, SURAT [2016] 73 TAXMANN.COM 203(AHMEDABAD-TRIB.) 5. CIT V STERIPLATE P LTD [2012] 338 ITR 547(PUNJAB & HAR.) 6. CIT V YASHASWI LEASING & FINANCE LTD. [2012] 204 TAXMAN 602(KAR) 7. DCM SRIRAM CONSOLIDATED LTD V ASST CIT[2010] 39 SOT 203(ITAT - DELHI) 8. ITO V TCFC FINANCE LTD. [2011 ] 131 ITD 103(ITAT - MUMBAI) 9. KAMAT HOTELS INDIA LTD. V DCIT[2018] 89 TAXMANN. COM 225(ITAT- MUMBAI). 20.7 WE HAVE HEARD RIVAL SUBMISSION AND PERUSED TH E RELEVANT MATERIAL ON RECORD. WE FIND THAT IN THE CASE OF PHI LIPS CARBON BLACK LTD (SUPRA) FOLLOWING THE DECISION OF THE HONBLE KA RNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD (SUPRA),THE ISSUE OF NO ADDITION OF THE AMOUNT OF PROVISION FOR DOUBTFUL DE BT/ADVANCES IN THE EVENT OF SAME IS REDUCED FROM TOTAL DEBTS AND O NLY NET BALANCES SHOWN IN THE BALANCE SHEET, HAS BEEN RESTORED BACK B Y THE TRIBUNAL TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATI ON OBSERVING AS UNDER: ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 79 9. VIS-A-VIS THE CLAIM IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, RELEVANT SCHEDULE 7 OF ITS BALANCE-SHEET IS REPRODU CED HEREUNDER:- SCHEDULE 7 SUNDRY DEBTORS (UNSECURED) DEBTS OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS CONSIDERED GOOD 4,446.29 4,263.29 DOUBTFUL 1063.70 439.00 LESS : PROVISION 1063.70 439.00 4,446.20 4,263.29 OTHER DEBTS CONSIDERED GOOD 18,920.26 1 7,948.30 33,366.55 22,211.59 IT IS NOT CLEAR WHETHER THE TOTAL DEBTS OF RS.23,36 6.55 LAKHS IS AFTER DEDUCTING THE PROVISION OF RS.1,063.70 LAKHS. THE A MOUNT OF RS.624.70 LAKHS CONSIDERED BY THE ASSESSING OFFICER FOR ADDIT ION IS OBVIOUSLY DIFFERENCE BETWEEN OPENING PROVISION OF RS.439 LAKH S AND CLOSING PROVISION OF RS.1063.70 LAKHS, MENTIONED IN THE ABO VE SCHEDULE. IF THE PROVISION DEBITED BY ASSESSEE IS INDEED DEDUCTED FR OM THE TOTAL DEBTS AND ONLY THE NET BALANCE SHOWN IN THE BALANCE-SHEET THEN BY VIRTUE OF DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) THERE CANNOT BE ANY ADDITION OF SUCH AMOUNT UNDER SECTION 115JB OF THE ACT. HOWEVER, AS MENTIONED BY US, THIS ASPECT IS NOT CLEAR. HENCE WE ARE OF THE OPINION THAT THE ISSUE R EGARDING PROVISION FOR DOUBTFUL DEBTS REQUIRES A FRESH LOOK BY THE ASSESSI NG OFFICER. WE, THEREFORE, SET ASIDE THE ORDER OF AUTHORITIES BELOW IN SO FAR AS THIS ASPECT IS CONCERNED, AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICE FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 20.8 THE ISSUE IN DISPUTE BEING IDENTICAL AND NEED VERIFICATION AT THE END OF THE ASSESSING OFFICER, WE FEEL IT APPR OPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER FOR DECIDING AFRESH ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 80 IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, THE GRO UND NO. 10 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 21.1 THE GROUND NO. 11 AND 12 OF THE APPEAL OF THE ASSESSEE RELATE TO DISALLOWANCE OF CLAIM TOWARDS PROVISION F OR DEMOBILISATION AMOUNTING TO RS. 2,13,04,431/- IN COMPUTING BOOK PR OFIT UNDER SECTION 115JB OF THE ACT AND DISALLOWANCE OF CLAIM T OWARDS PROVISION FOR OTHER EXPENSES AMOUNTING TO RS. 1,61, 25,533/-IN COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE AC T RESPECTIVELY. THE GROUND NO. 9 OF THE APPEAL OF THE REVENUE IS RE LATED TO THE RELIEF GRANTED BY THE LD CIT(A) FOR CONSIDERING THE PART P ROVISION OF DEMOBILISATION AND OTHER EXPENSES FOR COMPUTING BOO K PROFIT U/S 115JB OF THE ACT IN VIEW OF ASCERTAINED LIABILITY. 21.2 THE LD. CIT(A) IN PARA 15A.1 OF THE IMPUGNED ORDER HAS HELD GROUNDS CORRESPONDING TO THE GROUND NO. 6 AND 7 OF THE PRESENT APPEAL AS CONSEQUENTIAL IN NATURE. THE LEAR NED COUNSEL OF THE ASSESSEE HAS ALSO CONCURRED WITH THE FINDING OF THE LD. CIT(A) THAT THESE ISSUES ARE CONSEQUENTIAL TO THE GROUND N O. 6 AND 7 ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 81 RESPECTIVELY OF THE PRESENT APPEAL. WE HAVE ALREADY DISMISSED THE GROUND NO. 6 AND 7 OF THE APPEAL OF THE ASSESSEE IN PRECEDING PARAS, AND HELD THAT THOSE PROVISIONS ARE NOT ASCER TAINED LIABILITY. ONCE THE RESPECTIVE ITEMS ARE NOT ASCERTAINED LIABI LITY, SAME ARE LIABLE TO BE ADDED BACK TO THE BOOK PROFIT FOR COMP UTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. ACCORDINGLY TO HAVE CONSISTENCY IN OUR DECISION, THE GROUND NO. 11 AND 12 OF THE APPEAL OF THE ASSESSEE ARE DISMISSED. 21.3 AS REGARDS TO GROUND NO. 9 OF THE APPEAL OF T HE REVENUE IS CONCERNED, WE FIND THAT WHILE ADJUDICATING THE GR OUND NO. 7 AND 8 OF THE APPEAL OF THE REVENUE, WE HAVE ALREADY UPH ELD THE DECISION OF THE LD CIT(A) OF HOLDING THE RELEVANT AMOUNT OF PROVISION UNDER DEMOBILISATION AND OTHER EXPENSES AS ASCERTAINED LI ABILITY AND HENCE , WE CONCUR WITH THE DECISION OF THE LD CIT(A) THAT SAME ARE NOT REQUIRED TO BE ADDED TO BOOK PROFIT U/S 115JB O F THE ACT. THE GROUND NO. 9 OF THE APPEAL OF THE REVENUE IS ACCORD INGLY DISMISSED. 22.1 THE GROUND NO. 13 OF THE APPEAL OF THE ASSESS EE RELATES TO DENIAL OF EXCLUSION OF INCOME AMOUNTING TO RS. 76,8 0,17,697/- ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 82 EARNED FROM PERMANENT ESTABLISHMENT IN FOREIGN COUN TRIES WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE AC T BY APPLYING THE PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEMENT (D TAA). 22.2 THE ASSESSING OFFICER HELD THAT ADJUSTMENT CA N BE MADE ONLY AS PROVIDED IN EXPLANATION TO SECTION 115J AS DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES V S CIT (2002) 255 ITR 273 (SC). ACCORDING TO HIM, EXCLUSION OF DT AA IS NOT PROVIDED IN THAT EXPLANATION. THE LD. CIT(A) CONFIR MED THE ACTION OF THE ASSESSING OFFICER. 22.3 BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUB MITTED THAT ISSUE IN DISPUTE IS COVERED IN THE FAVOUR OF THE AS SESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSE E FOR ASSESSMENT YEAR 2000-01, WHEREIN IT IS HELD THAT WHEN SUCH INCOM E IS NOT TO BE TAXED AS PER DTAA, IT CANNOT BE BROUGHT TO TAX INDI RECTLY UNDER THE DEEMING FICTION UNDER SECTION 115JB OF THE ACT. 22.4 THE LD. DR, ON THE OTHER HAND RELIED ON THE O RDER OF THE LOWER AUTHORITIES. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 83 22.5 WE HAVE HEARD RIVAL SUBMISSION AND PERUSED TH E RELEVANT MATERIAL ON RECORD. THE TRIBUNAL IN ITA NO. 2596/DE L/2004 IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2000-01 HA S ADJUDICATED ON THE IDENTICAL ISSUE IN DISPUTE INVOLVED AS UNDER : 9. WE CONSIDERED THE ABOVE HEARD THE RIVAL SUBMISS IONS MADE BY THE PARTIES IN RESPECT OF GROUND NO.7 AND IT IS SEE N THAT INCOME EARNED FROM PERMANENT ESTABLISHMENT IN FOREIGN COUNTRIES I S LIABLE TO BE EXCLUDED FROM THE COMPUTATION OF BOOK PROFIT IN VIE W OF THE DECISION IN THE CASE OF THE BANK OF TOKYO-MITSUBISHI UFJ LTD VS . ADIT 152 1TD 796 (DEL.), WHICH HAS BEEN AFFIRMED BY HONBLE HIGH COU RT OF DELHI. WHEN SUCH INCOME IS NOT TO BE TAXED AS PER DTAA, IT CANN OT BE BROUGHT TO TAX INDIRECTLY UNDER THE DEEMING FICTION UNDER SECTION 115JA ACCORDINGLY, THIS GROUND OF APPEAL IS DECIDED IN FA VOR OF THE APPELLANT. 22.6 THE ISSUE IN DISPUTE INVOLVED IN THE PRESENT GROUND OF THE APPEAL, BEING IDENTICAL TO THE ISSUE ADJUDICATED BY THE TRIBUNAL (SUPRA) ABOVE, RESPECTFULLY FOLLOWING THE FINDING O F THE TRIBUNAL (SUPRA), WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE INCOME WHICH IS SUBJECT MATTER OF DISPUTE UNDER THIS GROUND OF T HE APPEAL FROM THE AMBIT OF THE COMPUTATION OF BOOK PROFIT UNDER S ECTION 115JB OF THE ACT. THE GROUND OF THE APPEAL IS ACCORDING ALLO WED. 23.1 IN GROUND NO. 14 OF THE APPEAL, THE ASSESSEE HAS DISPUTED DENIAL OF EXCLUSION OF PROFIT ON SALE OF F IXED ASSETS AMOUNTING TO RS. 6,77,97,458/-IN COMPUTING BOOK PRO FIT UNDER ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 84 SECTION 115JB OF THE ACT. IT WAS THE CONTENTION OF T HE ASSESSEE THAT PROFIT ON SALE OF FIXED ASSETS WAS IN THE NATURE OF CAPITAL RECEIPTS. THE LD. ASSESSING OFFICER DISALLOWED THE CLAIM BASE D ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F APOLLO TYRES LIMITED (SUPRA). THE LD. CIT(A) UPHELD THE FINDING OF THE ASSESSING OFFICER IN VIEW OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VEEKAYLAL INVESTMENT COMPANY PRIVATE LIMITED REPORT ED IN (2001) 249 ITR 597(BOMBAY). 23.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE CL EARLY CONCEDED THAT ISSUE IN DISPUTE IS COVERED AGAINST T HE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF VEE KAY LAL INVESTMENT COMPANY PRIVATE LIMITED (SUPRA) AND THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CA SE OF NJ JOSE AND COMPANY PRIVATE LIMITED VS CIT (2010) 321 ITR 1 32 (KER.). 23.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THE HONBLE BOMBAY HIG H COURT IN THE CASE OF VEEKAYLAL INVESTMENT COMPANY PRIVATE LIMITE D (SUPRA) HELD THAT WHILE COMPUTING THE BOOK PROFIT UNDER THE COMPA NIES ACT, THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 85 ASSESSEE HAS TO INCLUDE CAPITAL GAINS FOR COMPUTING THE BOOK PROFIT UNDER SECTION 115J OF THE ACT. THE RELEVANT FINDING OF THE HONBLE HIGH COURT IS REPRODUCED AS UNDER : 7. WE FIND MERIT IN THIS APPEAL. ACCORDING TO S. 1 153(1), IN THE CASE OF AN ASSESSEE BEING A COMPANY IF THE TOTAL INCOME IS LES S THAN 30 PER CENT OF ITS BOOK PROFITS THEN THE TOTAL INCOME OF SUCH COMP ANY SHALL BE DEEMED TO BE AN AMOUNT EQUAL TO 30 PER CENT OF SUCH BOOK-P ROFIT AND SUCH INCOME SHALL BE CHARGEABLE TO TAX. THAT, THE ASSESS EE HAS TO FIRST COMPUTE THE TOTAL INCOME IN ACCORDANCE WITH THE IT ACT AND IF THE TOTAL INCOME IS LESS THAN 30 PER CENT OF THE BOOK PROFIT THEN THE ASSESSEE HAS TO PREPARE A P&L A/C FOR THE PREVIOUS YEAR IN ACCOR DANCE WITH PART II AND III OF SCH. VI TO THE COMPANIES ACT. IN OTHER WORDS , A PLAIN READING OF S. 1153 SHOWS THAT IF THE ASSESSEE IS A COMPANY AND IT S TOTAL INCOME UNDER THE IT ACT IS LESS THAN 30 PER CENT OF ITS BOOK PRO FITS THEN, FICTIONALLY, IT WILL BE DEEMED THAT ITS TOTAL INCOME CHARGEABLE TO TAX WOULD BE AN AMOUNT EQUAL TO 30 PER CENT OF SUCH BOOK PROFITS. H ENCE, IN SUCH A CASE, THE TOTAL INCOME OF THE ASSESSEE IS FIRST REQUIRED TO BE COMPUTED UNDER THE IT ACT AND IF THE TOTAL INCOME SO COMPUTED IS L ESS THAN 30 PER CENT OF THE BOOK PROFITS THEN THE P&L A/C SHALL HAVE TO BE PREPARED IN ACCORDANCE WITH PART II AND PART III OF SCH. VI OF THE COMPANIES ACT. THE IMPORTANT THING TO BE NOTED IS THAT WHILE CALCULATI NG THE TOTAL INCOME UNDER THE IT ACT, THE ASSESSEE IS REQUIRED TO TAKE INTO ACCOUNT INCOME BY WAY OF CAPITAL GAINS UNDER S. 45 OF THE IT ACT. IN THE CIRCUMSTANCES, ONE FAILS TO UNDERSTAND AS TO HOW IN COMPUTING THE BOOK S PROFITS UNDER THE COMPANIES ACT, THE ASSESSEE-COMPANY CANNOT CONSIDER CAPITAL GAINS FOR THE PURPOSES OF COMPUTING BOOK PROFITS UNDER S. 115 J OF THE ACT. FURTHER, UNDER CL. (2) OF PART II OF SCH. VI TO THE COMPANIES ACT WHERE A COMPANY RECEIVES THE AMOUNT ON ACCOUNT OF SURRENDER OF LEASEHOLD RIGHTS, THE COMPANY IS BOUND TO DISCLOSE IN THE P&L A/C THE SAID AMOUNT AS NON-RECURRING TRANSACTION OR A TRANSACTION OF AN EXCEPTIONAL NATURE IRRESPECTIVE OF ITS NATURE I.E. WHETHER CAPITAL OR REVENUE. THAT, IT WOULD BE INAPPROPRIATE TO DIRECTLY TRANSFER SUCH AMOUNT TO C APITAL RESERVE [SEE COMPANIES ACT BY A. RAMAIYA, P. 1669 (FOURTEENTH ED N.]. SUCH RECEIPTS ARE ALSO COVERED BY CL. 2(B) OF PART II OF SCH. VI OF THE COMPANIES ACT WHICH, INTER ALIA, STATES THAT P&L A/C SHALL DISCLO SE EVERY MATERIAL FEATURE, INCLUDING CREDITS OR RECEIPTS AND DEBITS O R EXPENSES IN RESPECT OF NON-RECURRING TRANSACTIONS OR TRANSACTIONS OF AN EX CEPTIONAL NATURE. LASTLY, EVEN UNDER CL. 3(XII)(B) PROFITS OR LOSSES IN RESPECT OF TRANSACTIONS NOT USUALLY UNDERTAKEN BY THE COMPANY OR UNDERTAKEN IN CIRCUMSTANCES ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 86 OF EXCEPTIONAL OR NON-RECURRING NATURE SHOWS CLEARL Y THAT CAPITAL GAINS SHOULD BE INCLUDED FOR THE PURPOSES OF COMPUTING BO OK PROFITS. THAT, CAPITAL GAINS WOULD CERTAINLY BE ONE OF THE VARIOUS ITEMS WHOSE INFORMATION IS REQUIRED TO BE GIVEN TO THE SHARE HO LDERS UNDER THE SAID CL. 3 (XII)(B). SO ALSO, THE DISCLOSURE IS REQUIRED TO BE MADE IN RESPECT OF INVESTMENT IN THE CAPITAL OF A PARTNERSHIP FIRM IF THE COMPANY IS A PARTNER ON THE DATE OF THE BALANCE SHEET (SEE P. 16 51 OF THE COMPANIES ACT BY A. RAMAIYA [FOURTEENTH EDN.]. SIMILARLY, PRO FITS OR LOSSES ON SUCH INVESTMENTS ARE ALSO REQUIRED TO BE DISCLOSED. [SEE CL. 3(XII)(A) OF PART II OF SCH. VI OF THE COMPANIES ACT]. 23.4 AS THE LD. CIT(A) HAS FOLLOWED A BINDING PREC EDENT ON THE ISSUE IN DISPUTE, WE DO NOT FIND ANY ERROR IN THE OR DER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY, WE UPHOLD THE SAME. THE GROUND NO. 14 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 24.1 THE GROUND NO. 15 OF THE APPEAL OF THE ASSESS EE RELATES TO DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 80H HC OF THE ACT AMOUNTING TO RS.28.97 CRORES WHILE COMPUTING THE BOO K PROFIT UNDER SECTION 115JB OF THE ACT. 24.2 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT UNDER NORMAL BUSINES S INCOME AND CONSEQUENTLY HE HELD THAT THE ASSESSEE CANNOT BE AL LOWED DEDUCTION UNDER SECTION 80HHC FOR THE PURPOSE OF SECTION 115J B ( MAT PROVISIONS) OF THE ACT. THE LD. CIT(A) HELD THAT TH E ISSUE IS ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 87 CONSEQUENTIAL IN NATURE TO THE DISALLOWANCE OF DEDU CTION SECTION 80HHC UNDER NORMAL PROVISIONS OF BUSINESS INCOME. 24.3 THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THA T TRIBUNAL IN THE ASSESSMENT YEAR 2000-01 HAS ALLOWED THE BENE FIT OF DEDUCTION UNDER SECTION 80HHC UNDER NORMAL PROVISIO NS OF THE ACT AND THEREFORE IN VIEW OF THE CLAUSE (IV) OF EXPLANAT ION TO SECTION 115JB OF THE ACT, THE ASSESSEE IS ENTITLED TO BENEF IT OF DEDUCTION UNDER SECTION 80HHC UNDER THE PROVISIONS OF THE MAT . 24.4 ON THE OTHER HAND, THE LD.DR RELIED ON THE OR DER OF THE LOWER AUTHORITIES. 24.5 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. WHILE ADJUDICATING THE GROUND NO. 3, WE HAVE ALLOWED THE DEDUCTION UNDER SECTION 80HHC OF THE ACT FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE O F THE ASSESSEE FOR ASSESSMENT YEAR 2000-01. FURTHER, AS PER THE CLAUSE (IV) OF EXPLANATION 115JB OF THE ACT WHICH WAS IN OPERATION D URING RELEVANT PERIOD, THE DEDUCTION UNDER SECTION 80HHC OF THE ACT WAS TO BE REDUCED FROM THE BOOK PROFIT AS PER THE COMPA NIES ACT FOR THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 88 PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE RELEVANT PROVISION IS REPRODUCED AS UNDER: OMITTED BY THE FINANCE ACT, 2011, W.R.E.F. 1.4.05. PRIOR TO THEIR OMISSION, CLAUSES (IV), (V) AND (VI) READ AS UNDER : (IV). THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC, COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB -SECTION (3) OR SUB-SECTION (3A), AS THE CASE MAY BE, OF THAT SECTION, AND SUBJECT TO THE CO NDITIONS SPECIFIED IN THAT SECTION; OR (V). (VI). .. 24.6 AS THE ASSESSEE WAS ENTITLED FOR REDUCING THE DEDUCTION UNDER SECTION 80HHC OUT OF THE BOOK PROFIT DURING R ELEVANT PERIOD, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE BENEFIT IN VIEW OF CLEAR PROVISION OF CLAUSE (IV) BELOW EXPLANATION OF SECTIO N 115JB OF THE ACT. THE GROUND NO. 15 OF THE APPEAL OF THE ASSESSE E IS ALLOWED. 25. NOW, WE TAKE UP THE APPEAL OF THE REVENUE. 26.1 THE GROUND NO.1(ONE) OF THE APPEAL OF THE REV ENUE RELATES TO DEDUCTION OF RS.1.42 CRS. UNDER SECTION 80HHB(A) ALLOWED TO THE ASSESSEE. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 89 26.2 THIS CLAIM OF DEDUCTION WAS MADE FOR THE FIRST TIME BEFORE THE LD. CIT(A). IT WAS SUBMITTED THAT IF DEDUCTION U NDER SECTION 80IA OF THE ACT IS DENIED TO THE ASSESSEE, THEN THE DEDUCTION UNDER SECTION 80HHB(A) OF THE ACT MIGHT BE ALLOWED AS THE ASSESSEE FULFILS ALL THE REQUISITE CONDITION OF THE SAID PROVISION. THE ASSESSEE SUBMITTED THAT THREE PROJECTS NAMELY APSH 1A HAZUR ABAD , APSH 1B KAREEM NAGARAND APSH 3 KAMALAPURAM TOTA LLING RS. 2,03,55,02,091/-WHICH WERE FUNDED BY THE WORLD BANK, WERE ELIGIBLE FOR CLAIM OF DEDUCTION AT THE RATE OF 40% OF SUCH PROFIT, WHICH WAS WORKED OUT TO RS.1,42,00,837/-. THE ASSESSEE SUBMITTED THAT ALL THE REQUIRED CONDITIONS INCLUDING MAINTENA NCE OF SEPARATE BOOKS OF ACCOUNTS, FURNISHING OF AUDIT REPORT OF CH ARTERED ACCOUNTANT CERTIFICATE IN PRESCRIBED FORM 10CCAA, C REATION OF A SPECIAL RESERVE ETC HAVE BEEN FULFILLED, AND HENCE THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION. 26.3 THE LD. CIT(A) CALLED FOR THE REMAND REPORT F ROM THE ASSESSING OFFICER, WHEREIN HE SUBMITTED THAT THE TWO CONDITIONS OF FURNISHING OF A CERTIFICATE IN FORM NO. 10CCAA AND CREATION OF HOUSING PROJECT RESERVE ACCOUNT WERE NOT SATISFIED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 90 26.4 REGARDING CREATION OF A SPECIAL RESERVE THE L D. CIT(A) , FOLLOWED THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CONTINENTAL CONSTRUCTION LTD. VERSUS CIT 185 ITR 23 0. REGARDING FILING OF THE CHARTERED ACCOUNTANT CERTIFICATE IN F ORM NO. 10CCAA, THE LD. CIT(A) FOLLOWED THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BERGER PAINTS INDIA LT D 254 ITR 503. THE LD. CIT(A) ALSO PLACED RELIANCE ON CIT VS. SHIV ANAND ELECTRONICS 209 ITR 63 AND CIT VERSUS GUJARAT OIL A ND ALLIED INDUSTRIES 201 ITR 325. IN VIEW OF THE DECISIONS REL IED UPON, THE LD. CIT(A) FOUND THE CLAIM OF THE ASSESSEE IN ORDER AND ALLOWED THE CLAIM ACCORDINGLY. 26.5 BEFORE US, THE LD. DR RELIED ON THE SUBMISSIO N OF THE ASSESSING OFFICER MADE DURING THE REMAND PROCEEDING S AND SUBMITTED THAT THE ASSESSEE HAS NOT FULFILLED THE R EQUIRED CONDITIONS FOR ELIGIBILITY OF DEDUCTION IN DISPUTE. 26.6 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASS ESSEE SUBMITTED THAT DEDUCTION UNDER SECTION 80 HHB(A) OF THE ACT WAS CLAIMED AS ALTERNATIVE TO THE DEDUCTION UNDER SECTI ON 80IA OF THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 91 ACT. HE SUBMITTED THAT THE TRIBUNAL IN ITA NO. 2596 /DEL/2004 FOR ASSESSMENT YEAR 2000-01 HAS ALREADY ALLOWED THE CLA IM OF DEDUCTION UNDER SECTION 80IA OF THE ACT, AND THUS T HE ASSESSEE IS NOT PRESSING FOR THE DEDUCTION UNDER SECTION 80HHB( A) OF THE ACT. 26.7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. BEFORE THE LD. CIT(A), THE ASSESSEE CLAIM DEDUCTION UNDER SECTION 80HHB(A) OF THE ACT A S ALTERNATIVE CLAIM THAT IF THE DEDUCTION UNDER SECTION 80IA OF T HE ACT IS DENIED TO IT, THEN THE ASSESSEE MIGHT BE ALLOWED DEDUCTION UNDER SECTION 80 HHB(A) OF THE ACT. SINCE THE ASSESSEE HAS ALREAD Y BEEN ALLOWED DEDUCTION UNDER SECTION 80IA OF THE ACT BY US WHIL E ADJUDICATING THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE, THI S ALTERNATIVE CLAIM OF DEDUCTION UNDER SECTION 80HHB(A) CANNOT BE ALLOWED IN ADDITION TO THE CLAIM UNDER SECTION 80IA OF THE ACT . THE ASSESSEE HAS ALSO NOT INSISTED FOR THIS CLAIM BEFORE US. ACC ORDINGLY, THE GROUND OF THE APPEAL OF THE REVENUE IS ALLOWED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 92 27.1 THE GROUND NO. 2 OF THE APPEAL OF THE REVENUE RELATES TO ALTERNATIVE CLAIM OF DEDUCTION UNDER SECTION 80HHB AMOUNTING TO RS. 12.66 CRORES, WHICH HAS BEEN ALLOWED BY THE LD. CIT(A). 27.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT IT WAS AN ALTERNATIVE GROUND FOR DEDUCTION UNDER SEC TION 80HHB OF THE ACT, IN THE UNLIKELY EVENT, THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80HHC IS UPHELD IN APPEAL. HE SUBMITTED THA T THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000- 01 HAS ALLOWED THE DEDUCTION UNDER SECTION 80HHC OF THE AC T, THUS, THE ASSESSEE IS NOT INSISTING FOR CLAIM UNDER SECTION 8 0HHB OF THE ACT. THE LD. DR, ON THE OTHER HAND, HAS NOT OBJECTED TO THE WITHDRAWAL OF THE CLAIM BY THE ASSESSEE. 27.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. WE HAVE ALREADY ALLOWE D CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80HHC OF THE A CT, WHILE ADJUDICATING, THE GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE, AND THUS, THIS ALTERNATIVE CLAIM CANNOT BE ALLOWED TO T HE ASSESSEE. THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 93 ASSESSEE HAS ALSO WITHDRAWN THIS CLAIM BEFORE US. ACC ORDINGLY THIS GROUND OF THE APPEAL OF THE REVENUE IS ALLOWED. 28.1 THE GROUND NO.3(THREE) OF THE APPEAL OF THE R EVENUE RELATES TO THE GRANT OF DEDUCTION UNDER SECTION 80H HB IN RESPECT OF FOREIGN PROJECT WITHOUT ALLOCATING CORPORATE OFFICE EXPENSES. 28.2 THE LD. COUNSEL OF THE ASSESSEE BEFORE US SU BMITTED THAT THE CLAIM OF DEDUCTION UNDER SECTION 80HHB OF THE ACT WAS MADE AS AN ALTERNATIVE CLAIM UNDER SECTION 80HHC OF THE ACT. HE SUBMITTED THAT THE CLAIM OF THE ASSESSEE UNDER SECT ION 80HHC OF THE ACT HAS BEEN ALLOWED BY THE TRIBUNAL IN ASSESSM ENT YEAR 2000- 01, THEREFORE THE CLAIM OF DEDUCTION UNDER SECTION 80 HHB OF THE ACT IS NOT INSISTED. HOWEVER, IT WAS SUBMITTED THAT THE ISSUE IN DISPUTE WAS COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF THE TRIBUNAL IN THE CASE OF TELECOMMUNICATION CONSULTAN T INDIA LTD VERSUS DCIT (ITA NO. 333/DEL/1990) WHEREIN IT IS HEL D THAT EXPENSES NOT CONNECTED WITH THE ACTIVITY OF THE ASSE SSEE I.E. EXCLUSION OF FOREIGN PROJECT CANNOT BE TAKEN INTO C ONSIDERATION, WHILE COMPUTING THE INCOME DERIVED FROM SUCH ACTIVIT Y AND ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 94 CONSEQUENTLY THE HEAD OFFICE EXPENSES CANNOT BE APP ORTIONED IN THE PRESENT CASE FOR SETTING OFF THE SAME AGAINST THE I NCOME OF THE FOREIGN PROJECTS. 28.3 THE LD. DR, ON THE OTHER HAND, SUBMITTED THA T WHEN THE MAIN CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY THE TRIBUNAL IN EARLIER YEARS, THE ASSESSEE IS NOT ENTITLED FOR DED UCTION UNDER SECTION 80 HHB OF THE ACT DURING THE YEAR UNDER CON SIDERATION. 28.4 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PAR TIES. WE FIND THAT THIS CLAIM OF DEDUCTION UNDER SECTION 80H HB WAS MADE ONLY AS ALTERNATIVE CLAIM BEFORE THE LD. CIT(A). S INCE WE HAVE ALREADY ALLOWED THE MAIN CLAIM OF THE ASSESSEE UNDE R SECTION 80HHC OF THE ACT WHILE ADJUDICATING THE GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE, AND THUS THIS CLAIM OF DEDUCTION U NDER SECTION 80HHB IS DENIED TO THE ASSESSEE. BEFORE US, THE ASS ESSEE HAS ALSO NOT INSISTED FOR ALLOWING THIS CLAIM. ACCORDINGLY, T HE GROUND OF THE APPEAL OF THE REVENUE IS ALLOWED. 29.1 THE GROUND NO.4(FOUR) OF THE APPEAL OF THE RE VENUE RELATES TO DEDUCTION OF RS. 12.51 LAKHS UNDER SECTI ON 35DDA OF THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 95 ACT BEING 1/5 TH AMOUNT OF RS.62,54,482/-PAID TO THE EMPLOYEES UNDER THE VOLUNTARY RETIREMENT SCHEME (VRS) AS APPL ICABLE IN THE ASSESSEE COMPANY. THE LD. ASSESSING OFFICER DISALLO WED THE CLAIM IN VIEW OF NO DETAILS FILED. THE ASSESSEE FILED DETA IL BEFORE THE LD. CIT(A), WHO REMANDED THE MATTER TO THE ASSESSING OFF ICER. THE ASSESSING OFFICER HAS OBJECTED ON THE GROUND THAT I T WAS NOT EVIDENT THAT THE DEDUCTION CLAIMED PERTAINED TO THOSE EMPLO YEES WHO HAD ACTUALLY RESIGNED DURING THE CONCERNED PERIOD. THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE CONSIDERING THAT - (I) THE ASSESSEE IS A GOVERNMENT OF INDIA UNDERTAKING, WHOSE ACCOUNTS ARE AUDITED BY THE STATUTORY AND GOVERNMENT AUDITORS. (II) ALL THE DETAILS ARE AVAILABLE IN THE AUDITED BALANC E SHEET AND THE ASSESSEE HAS ALSO SUBMITTED ALL THE DETAILS OF THE VRS BEFORE HIM AND ALSO BEFORE THE ASSESSING OFFICER IN REMAND PROCEEDINGS. 29.2 BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT REQUISITE DETA ILS OF EMPLOYEES RESIGNED WERE NOT FILED BY THE ASSESSEE, AND THEREF ORE DELETING THE DISALLOWANCE BY THE LD. CIT(A) WAS NOT JUSTIFIED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 96 29.3 WE HAVE HEARD THE RIVAL SUBMISSIONS IN VIEW OF THE ORDER OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECO RD. WE FIND THAT THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE DEDUCT ION OF THE ASSESSEE OBSERVING AS UNDER: 7.2.3 IN THE REJOINDER FILED BY THE APPELLANT COUN SEL VIDE LETTER DATED 09- 02-2005, IT HAS BEEN SUBMITTED THAT IT IS OBVIOUS T HAT THE EMPLOYEES WHO RESIGNED AND ARE ELIGIBLE FOR VRS ARE ONLY THOSE WH O ARE COVERED UNDER THE VRS SCHEME AS IS APPLICABLE TO THE COMPANY. IT IS NOT POSSIBLE UNDER ANY CIRCUMSTANCES THAT EXPENDITURE INCURRED UNDER T HE HEAD VOLUNTARY RETIREMENT SCHEME MAY PERTAIN TO EMPLOYEES WHO ARE NOT COVERED UNDER THE VRS SCHEME OR HAS RESIGNED WHEN THE SCHEME WAS NOT IN OPERATION. THE APPELLANT IS A GOVERNMENT UNDERTAKING AND ITS A CCOUNTS ARE BEING STATUTORILY AUDITED BY THE STATUTORY AUDITOR? AND A GAIN AUDITED BY CAG AND PLACED BEFORE THE PARLIAMENT FOR APPROVAL THERE OF. 7.3 TAKING INTO CONSIDERATION THAT THE APPELLANT IS THE GOVERNMENT OF INDIA UNDERTAKING, THERE IS NO DOUBT, ITS ACCOUNTS ARE AUDITED BOTH BY STATUTORY AND GOVERNMENT AUDITORS. IT IS ALSO A FAC T THAT ALL THE DETAILS WERE AVAILABLE IN THE AUDITED BALANCE SHEET AND THE APPELLANT HAS ALSO SUBMITTED ALL THE DETAILS OF VOLUNTARY RETIREMENT S CHEME VIDE ITS LETTER DATED 22-01-2004. IT IS ALSO A FACT THAT DURING THE COURSE OF REMAND PROCEEDINGS, THE APPELLANT HAS ALSO FILED THE COPY OF THE VOLUNTARY RETIREMENT SCHEME AND ITS RATIFICATION BY THE BOARD OF DIRECTORS. TAKING ALL THE ABOVE FACTS INTO CONSIDERATION, NO DISALLOW ANCE IS CALLED FOR AND THE ADDITION MADE BY THE AO IS DELETED. 29.4 WE FIND THAT ALL THE REQUISITE DETAILS OF THE VOLUNTARY RETIREMENT SCHEME AND THE EXPENSES INCURRED OF RS. 62, 54, 482/- TOWARDS SAID SCHEME HAVE ALREADY BEEN FILED BY THE A SSESSEE AND THUS THE CONTENTION OF THE LD. DR THAT NO DETAILS OF THE EMPLOYEE RESIGNED WERE FILED, CANNOT BE MADE A BASIS FOR DIS ALLOWANCE OF THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 97 CLAIM OF THE ASSESSEE. IN OUR OPINION, THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IS WELL REASONED AND WE DO NOT FIND ANY ERROR IN THE SAME. THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 30.1 THE GROUND NO. 5 OF APPEAL OF THE REVENUE REL ATES TO DEDUCTION OF CORPORATE OFFICE EXPENSES BY THE ASSES SING OFFICER WHILE GRANTING EXCLUSION OF INCOME FROM FOREIGN PROJ ECTS UNDER DTAA. 30.2 THE ASSESSEE HAS COMPUTED INCOME EARNED UNDER THE DTA AGREEMENT FROM BANGLADESH AND MALAYSIA AT RS.2, 96,13,866/- AND RS. 73, 84, 03, 831/-RESPECTIVELY. ACCORDING TO THE ASSESSING OFFICER THOSE INCOMES HAVE BEEN DETERMINED WITHOUT D EDUCTING THE CORPORATE OFFICE EXPENSES. IN VIEW OF THE ASSESSING OFFICER APPROPRIATION OF THE CORPORATE OFFICE EXPENSES WAS N ECESSITATED BY THE RATIONAL OF SECTION 14, WHICH PRESCRIBED THAT NO DEDUCTION OF EXPENDITURE SHALL BE ALLOWED IN RELATION TO INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME. IN VIEW OF THIS OBSER VATION, THE LD. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 98 ASSESSING OFFICER ALLOCATED RS. 51,68,697/-AND RS.3 ,15,44,520/- TOWARDS DTA INCOME FROM BANGLADESH AND MALAYSIA RESP ECTIVELY. 30.3 BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTE D THAT ALL CORPORATE OFFICE EXPENSES ATTRIBUTABLE TO PERMANENT ESTABLISHMENT OUTSIDE INDIA HAD BEEN CHARGED TO THE RELATED PROJE CTS. ACCORDING TO THE ASSESSEE, SEPARATE BOOKS OF ACCOUNTS WERE MAINT AINED FOR EACH PROJECT AT THE PROJECT SITE ITSELF AND ALL THE EXPE NSES WERE DEBITED TO PROFIT AND LOSS ACCOUNT. IT WAS SUBMITTED THAT EVEN THE EXPENDITURE RELATING TO ANY VISIT OF AN EXECUTIVE FROM CORPORAT E OFFICE AND/OR ANY EXPENDITURE INCURRED BY THE CORPORATE OFFICE HAS BE EN DIRECTLY BOOKED IN THE ACCOUNTS OF THE PROJECT ITSELF. 30.4 THE LD. CIT(A) DELETED THE ALLOCATION OF COR PORATE OFFICE EXPENSES TOWARDS THE DTAA INCOME OBSERVING AS UNDER: 9.2.4. IN THE PRECEDING ASSESSMENT YEARS 1999-00 A ND 2000-01, IT WAS ALLOWED IN FAVOUR OF THE APPELLANT. 9.3. THE ADJUSTMENT MADE BY THE A.O. WAS DELETED BY MY LD. PREDECESSORS ON THE GROUND THAT AS THE ENTIRE EXPEN DITURE ATTRIBUTABLE TO FOREIGN PROJECTS HAVE BEEN DULY CONSIDERED IN THE P & L ACCOUNT PREPARED FOR THE FOREIGN PROJECTS, NO PART OF THE CORPORATE OFFICE EXPENDITURE COULD BE ATTRIBUTABLE TO THE FOREIGN PROJECTS AND, HENCE, THE SAME WAS DELETED. I AGREE WITH THE DECISION OF MY LD. PREDECESSORS AND FOLLOWING THE SAME FOR THE SAME REASONS, THE ADJUSTMENT MADE BY THE A.O. I S DELETED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 99 30.5 BEFORE US, THE LD. DR RELIED ON THE FINDING OF THE ASSESSING OFFICER. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A ) AND SUBMITTED THAT ALL THE EXPENSES ATTRIBUTABLE TO THE PROJECT, WHETHER CORPORATIVE OR ADMINISTRATIVE HAVE ALREADY BEEN DEBITED TO THE RESPECTIVE PROFIT AND LOSS ACCOUNT OF THE PROJECTS AND THEREFORE NO F URTHER ALLOCATION OF CORPORATE EXPENSES ARE JUSTIFIED. THE LD. COUNSE L SUBMITTED THAT ISSUE IN DISPUTE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE LD. CIT(A) IN ITS OWN CASE IN ASSESSMENT YEAR 1999- 2000 AND 2000-2001 ON THE BASIS OF THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF TELECOMMUNICATION CONSULTANT INDIA LTD VERS US DCIT IN ITA NO. 333/DEL/1990. 30.6 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THE INCOME OF THE FORE IGN PROJECTS THROUGH THEIR PERMANENT ESTABLISHMENT, IS CHARGEABL E IN THE RESPECTIVE COUNTRY AND IN SUCH A SITUATION, REDUCIN G OF PROMOTIONAL CORPORATE OFFICE EXPENSES IN WORKING OUT THE INCOME OF THE PERMANENT ESTABLISHMENT IN THE FOREIGN COUNTRY EXCL UDABLE WHILE COMPUTING INCOME CHARGEABLE TO TAX IN INDIA, CANNOT BE JUSTIFIED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 100 WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. C IT(A) IN FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF TELECOMMUN ICATION CONSULTANT INDIA LTD. (SUPRA), WHICH IS A BINDING PR ECEDENT. ACCORDINGLY, THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IS UPHELD. THE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 31.1 THE GROUND NO. 10 OF THE APPEAL OF THE REVENUE RELATES TO THE PROVISION OF GRATUITY ALLOWED WHILE COMPUTING BOOK PROFIT U/S 115JB BY THE LD. CIT(A). ACCORDING TO THE LD. AO, I T IS UNASCERTAINED LIABILITY, WHEREAS THE LD. CIT(A) HELD THE PROVISION OF THE GRATUITY AS ASCERTAINED LIABILITY IN VIEW OF ACT UARIAL VALUATION, FOLLOWING A BINDING PRECEDENT. THE FINDING OF THE LD . CIT(A) IS REPRODUCED AS UNDER: 15B. THE NEXT ISSUE OF APPEAL TAKEN BY THE APPELLA NT IN GROUND NO.15(C) IS THAT THE AO IS NOT JUSTIFIED AND GROSSLY ERRED I N CONSIDERING THAT THE PROVISION FOR GRATUITY AMOUNTING TO RS.44,39,494 IS ON ACCOUNT OF LIABILITY OTHER THAN ASCERTAINING LIABILITY AND ADD ING IT TO THE COMPUTATION OF BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 15B.1 THE GROUNDS TAKEN FOR DISALLOWING THE PROVISI ON FOR GRATUITY BY THE AO HAVE ALREADY BEEN SUMMARIZED IN THE GROUND NO. 1 5(A). 15B.2 THE SUBMISSIONS MADE BY THE APPELLANT COUNSEL ON THE ISSUE DURING THE COURSE OF APPELLATE PROCEEDINGS ARE SUMM ARIZED BELOW: ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 101 (I) THE COMPANY HAS SET UP A GRATUITY TRUST FUND WH ICH IS BEING ADMINISTERED BY LIC OF INDIA. THE ANNUAL GRATUITY L IABILITY IS DETERMINED BY LIC BASED ON ACTUARIAL VALUATION UNDER GROUP GRA TUITY SCHEME. DURING THE PREVIOUS YEAR UNDER CONSIDERATION, THE C OMPANY PROVIDED FOR GRATUITY AMOUNTING TO RS.44,39,494 BASED ON ACTUARI AL VALUATION. (II) SINCE THE DETERMINATION OF THE GRATUITY PROVIS ION IS BY WAY OF AN ACTUARIAL VALUATION IT CANNOT BE SAID THAT THE SAME IS AN UNASCERTAINED LIABILITY. THE APPELLANT VIDE ITS LETTER DATED 24-0 3-2004 HAS SUBMITTED BEFORE THE AO THAT GRATUITY HAS BEEN PROVIDED ON TH E BASIS OF ACTUARIAL VALUATION. THE AO DID NOT SOUGHT FOR ACTUARIAL VALU ATION CERTIFICATE, HOWEVER, THE SAME IS ENCLOSED HEREWITH. THIS DISALL OWANCE HAS NEVER BEEN MADE IN ANY OF THE EARLIER YEARS. (III) THE DELHI ITAT IN THE CASE OF GD RATHI STEELS LTD. VS. DCIT, 56 ITD 103 HAS STATED THAT GRATUITY WHICH HAS BEEN ACTUARI ALLY VALUED IS AN ASCERTAINED LIABILITY. SIMILAR VIEW HAS BEEN EXPRES SED BY HONBLE MUMBAI HIGH COURT IN. THE CASE ECHJAY FORGING (SUPRA). 15B.3 THE PROVISION FOR GRATUITY HAS BEEN ADDED BY THE APPELLANT U/S 40A(7) BECAUSE THE GRATUITY TRUST FUND WHICH HAS BE EN ESTABLISHED AND IS BEING ADMINISTERED BY LIC IS NOT AN APPROVED GRATUI TY TRUST FUND. HOWEVER, FOR THE PROVISION OF SECTION 115JB OF THE ACT, IT IS REQUIRED TO BE SEEN WHETHER THE PROVISION CREATED IS IN RESPECT OF ASCERTAINED LIABILITY OR UNASCERTAINED LIABILITY. AS IN THE CASE OF THE APPE LLANT, THE PROVISION HAS BEEN CREATED ON THE BASIS OF ACTUARIAL VALUATION, T HE SAME IS ASCERTAINED LIABILITY AS PER THE ITAT DELHI DECISION IN THE CAS E OF GD RATHI STEEL LTD. AND IS ALLOWABLE EXPENDITURE. THEREFORE, THE ADDITI ON MADE ON THIS ACCOUNT FOR COMPUTING THE INCOME UNDER THE MAT PROV ISION IS DELETED. 31.2 BEFORE US THE LD. DR RELIED ON THE ORDER OF T HE AO, WHEREAS THE LD. COUNSEL OF THE ASSESSEE RELIED ON TH E ORDER OF LD. CIT(A) AND FURTHER RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF THE CLAIM THAT PROVISION BASED ON ACTUARIAL VALUATION A MOUNTS TO ASCERTAINED LIABILITY: (I). CIT VS. IIPEA PARAMOUNT P. LTD. (2010) 336 ITR 54 (DEL) ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 102 (II). EASTERN INDIA POWERTECH LTD. V ADDL. CIT (201 3) 32 TAXMANN.COM 11 (DEL. TRIB.) 31.3 WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIE S. THE LD. CIT(A) HAS ALLOWED THE ISSUE IN DISPUTE IN VIEW OF T HE DECISION OF THE TRIBUNAL IN THE CASE OF GD RATHI STEELS LTD VS DCI T 56 ITD 103, WHEREIN IT IS HELD THAT GRATUITY WHICH HAS BEEN ACTUA LLY VALUED IS AN ASCERTAINED LIABILITY. WE DONT FIND ANY ERROR IN T HE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE FOLLOWING A BINDING P RECEDENT ON THE ISSUE. ACCORDINGLY, WE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND NO. 10 OF T HE APPEAL OF THE REVENUE. 32.1 THE GROUND NO. 11 OF THE APPEAL OF THE REVENU E RELATES TO AMOUNT OF RS. 9,00,77,782/- WHICH HAS BEEN REDUCED BY THE ASSESSEE FROM THE BOOK PROFIT FOR COMPUTATION OF M AT LIABILITY U/S 115JB OF THE ACT IN VIEW OF CLAUSE (I) OF EXPLANATIO N BELOW SECTION 115JB(2) OF THE ACT. ACCORDING TO THE AO THE ASSESS EE WAS REQUIRED TO ENHANCE THE BOOK PROFIT OF PREVIOUS/ EARLIER YEA RS CORRESPONDING ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 103 TO THE REDUCTION IN BOOK PROFIT CLAIMED ON ACCOUNT OF WRITTEN BACK LIABILITIES. 32.2 THE LD. CIT(A) KEEPING IN VIEW THE PROVISIONS OF THE ACT AS AMENDED AND THE DECISIONS RELIED UPON BY THE ASS ESSEE RESTORED THE ISSUE PARTLY FOR VERIFICATION BY THE ASSESSING OFFICER OBSERVING AS UNDER: 18.2 THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT COUNSEL DURING THE COURSE OF APPELLATE PROCEEDINGS ARE AS UNDER: (I) THE OBSERVATION OF THE AO IS TOTALLY INCORRECT AND CONTRARY TO THE PROVISIONS OF THE ACT. ACCORDING TO CLAUSE (I) OF E XPLANATION TO SECTION 115JB OF THE ACT, IT IS CLEAR THAT ANY AMOUNT WITHD RAWN FROM RESERVES OR PROVISIONS WHICH ARE CREATED AND/OR PROVIDED IN THE PREVIOUS YEAR ENDED ON OR BEFORE 31-03-1996 SHOULD BE ALLOWED. THE SAID CLAUSE IMPOSES CERTAIN RESTRICTIONS IN RESPECT OF PROVISIONS CREAT ED IN THE PREVIOUS YEAR RELEVANT TO THE AY BEGINNING ON OR AFTER THE 1ST DA Y OF APRIL 1997. HOWEVER, AS FAR AS THE PROVISION CREATED ON OR BEFO RE 31-03-1996 IS CONCERNED, THE PROVISIONS OF THE ACT ARE VERY CLEAR AND THERE IS NO DOUBT THAT THE SAME SHOULD BE EXCLUDED IN COMPUTING THE B OOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. (II) THE CLAUSE (I) WAS AMENDED WITH RETROSPECTIVE EFFECT BY THE FINANCE ACT, 2002 FROM 01-04-2001. IN THE ORIGINAL CLAUSE ( I), WHEN IT WAS BROUGHT INTO FORCE W.E.F. 01-04-2001, ALONGWITH THE NEW PROVISIONS OF SECTION 115JB OF THE ACT, INSTEAD OF 1ST DAY OF APR IL 1997, THE TERM USED IN THE STATUTE WAS 1ST DAY OF APRIL 2001 AND, ACCOR DINGLY, IT CLAIMED THE SAID DEDUCTION IN RELATION TO THE PROVISIONS UTILIZ ED AND/OR WITHDRAWN, WHICH WERE MADE PRIOR TO THE PREVIOUS YEAR RELEVANT TO THE AY UNDER CONSIDERATION. HOWEVER,IN VIEW OF THE RETROSPECTIVE AMENDMENT, THE AMOUNT OF PROVISIONS UTILIZED AND/OR WITHDRAWN DURI NG THE YEAR UNDER CONSIDERATION, WHICH WERE CREATED IN THE FY 1995-96 , AND/OR EARLIER FYS IS RS.87,90,316 ONLY. HENCE, IT IS STATED THAT THE SAME SHOULD BE EXCLUDED IN COMPUTING THE BOOK PROFIT FOR THE PURPO SE OF SECTION 115JB OF THE ACT. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 104 (III) RELIANCE HAS BEEN PLACED ON THE DECISION OF T HE FOLLOWING CASE LAWS: (A) J.K. COTTON SPINNING & WEAVING MILLS CO. LTD. V S. ACJT, 60 ITD 99 (ALL); (B) SRF LTD. VS. ACIT, 47 ITD 504 (DEL); (IV) THE CIT(A) WHILE PASSING THE APPELLATE ORDER I N THE APPELLANTS OWN CASE FOR THE AY 2000-01 HAS DELETED THE ADDITION. 18.3 TAKING INTO CONSIDERATION THAT THE PROVISIONS WERE AMENDED FROM RETROSPECTIVE EFFECT BY THE FINANCE ACT, 2002 W.E.F . 01-04-2001, THE CLAIM ALLOWABLE TO THE APPELLANT AS PER THE APPELLANTS O WN ADMISSION IS ONLY RS.87,90,316 AS AGAINST THE CLAIM MADE BY THE APPEL LANT OF RS.9,77,00,872 AS PER THE PROVISIONS AT THE TIME OF FILING OF THE RETURN. THE AO IS DIRECTED TO VERIFY THAT THE SUM OF RS.87, 90,316 RELATES TO PROVISION OR RESERVE CREATED BEFORE FIRST DAY OF AP RIL 1997 AND IF FOUND TO BE CORRECT, THE SAME SHOULD BE ALLOWED. 32.3 BEFORE US THE LD DR RELIED ON THE ORDER OF AS SESSING OFFICER, WHEREAS THE LD COUNSEL OF THE ASSESSEE SUBM ITTED THAT ISSUE IS ALREADY DECIDED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN ASSESSMENT YEAR 2000-01 BY THE LD. CIT(A) AND NO A PPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ISSUE BEFOR E THE TRIBUNAL. 32.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. CI T(A) HAS EXPLAINED THE CLAUSE(I) OF EXPLANATION TO SECTION 1 15JB OF THE ACT THAT IT APPLIES TO ANY AMOUNT WITHDRAWN FROM THE RESE RVES OR ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 105 PROVISION WHICH ARE CREATED AND/OR PROVIDED IN THE P REVIOUS YEAR ENDED ON OR BEFORE 31/03/96 AND SHOULD BE ALLOWED. IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY APPRECIATED THE POSITION OF THE LAW INTO THE FACTS OF THE INSTANT CASE. WE DO NOT FI ND ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE AND ACCOR DINGLY, WE UPHOLD THE SAME. 33.1 THE GROUND NO. 12 OF THE APPEAL OF THE REVENU E RELATES TO ALLOWANCE OF CLAIM FOR DEDUCTION UNDER SECTION 80HHB WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE AC T. 33.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THIS GROUND WAS ONLY TAKEN AS ALTERNATIVE GROUND IN UNLIKELY EVENT THE DISALLOWANCE UNDER SECTION 80IA AND 80HHC IS NO T ALLOWED. SINCE, WE HAVE ALREADY ALLOWED THE DEDUCTION UNDER S ECTION 80IA AND 80HHC OF THE ACT WHILE COMPUTING BOOK PROFIT UND ER SECTION 115JB OF THE ACT, THIS CLAIM OF THE ASSESSEE IS REN DERED INFRUCTUOUS AND ACCORDINGLY, WE ALLOW THE GROUND OF THE APPEAL O F THE REVENUE. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 106 34.1 THE GROUND NO. 13 OF THE APPEAL OF THE REVENU E RELATES TO INTEREST UNDER SECTION 234D OF THE ACT AMOUNTING TO RS.2,23,26,453/-. 34.2 THE LD. CIT(A) DELETED THE INTEREST CHARGED UNDER SECTION 234D OF THE ACT ON THE GROUND THAT RELEVANT SECTION WAS INTRODUCED WITH EFFECT FROM 01/06/2003 AND REFUND IN THE PRESEN T CASE WAS GRANTED BEFORE THE SAID DATE ( I.E. ON 30/07/2002). 34.3 BEFORE US, THE LD. DR SUBMITTED THAT IN THE I NSTANT CASE ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED ON 25/03 /2004 AND THEREFORE PROVISION OF SECTION 234D IS APPLICABLE. 34.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES . THE EXPLANATION -2 TO SECTION 234D HAS BEEN INSERTED BY WAY OF FINANCE ACT 2012 WHICH PROVIDES THAT PROVISIONS OF SECTION 2 34D WOULD BE APPLICABLE FOR ASSESSMENT YEAR COMMENCING BEFORE 01 /06/2003 IF THE PROCEEDING FOR SUCH ASSESSMENT YEAR IS COMPLETE D ON OR AFTER 1.6.2003. IT IS UNDISPUTED THAT IN THE PRESENT CASE ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED ON 25/03/2004 AND H ENCE PROVISION OF SECTION 234D ARE APPLICABLE. ACCORDING LY, THE FINDING OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 107 THE LD. CIT(A) ARE SET ASIDE AND INTEREST CHARGED B Y THE LEARNED ASSESSING OFFICER UNDER SECTION 234D IS RESTORED. T HE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY ALLOWED. 35. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED PARTLY FOR STATISTICAL PURPOSE WHEREAS THE APPEAL OF THE REVENU E IS PARTLY ALLOWED. 36. NOW, WE COME TO THE REMAINING APPEALS OF ASSESSE E FOR A.YRS. 2002-03 AND 2003-04 AND APPEAL OF THE REVENUE FOR A .Y. 2003-04. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEALS F OR BOTH THE YEARS READ AS UNDER : GROUNDS RAISED BY ASSESSEE IN APPEAL FOR A.Y. 2002- 03 1(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE-IN-A FTER REFERRED TO AS 'CIT(A)'], WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF THE APPELLANT'S CLAIM FOR DEDUCTION OF DEPRECIATION AMOUNTING TO RS. 18,30,937/- ON THE VALUE OF MACHINERY SPARE PAR TS CAPITALIZED DURING THE YEAR. 1(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 1(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN HOLDING THAT ALTHOUGH DEPRE CIATION IS ALLOWABLE ON MACHINERIES IN 'READY TO USE' CONDITIO N BUT THE SAME IS NOT ALLOWABLE ON MACHINERY SPARES WHICH ARE ALSO IN 'READY TO USE 'CONDITION. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 108 2(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING APPELLA NT'S CLAIM FOR DEDUCTION U/S 80-IA IN RESPECT OF INCOME EARNED FRO M THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITIE S AMOUNTING TO RS.19,03,52,236/-. 2(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 2(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING THAT THE APPELL ANT'S ROLE IN EXECUTING VARIOUS INFRASTRUCTURE PROJECTS IS THAT O F A CONTRACTOR WHICH CANNOT BE EQUATED TO THE BUSINESS OF DEVELOPI NG THE INFRASTRUCTURE FACILITIES AND THEREBY DISALLOWING T HE CLAIM FOR DEDUCTION U/S 80-IA OF THE ACT. 2(C). THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND WITHOUT PREJUDICE TO GROUND NO. 2(A) AND 2(B) TAKEN HERE IN ABOVE, THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT TAKI NG INTO CONSIDERATION THE DECISION OF HON'BLE THE CASE OF P ATEL ENGG. LTD - VS. - DY CIT (2005) 94 ITD WHEREIN BASED ON THE I DENTICAL FACTS AS OF THE APPELLANT THE DEDUCTION U/S 80-IA OF THE ACT HAS BEEN ALLOWED. 3(A). THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF THE CLAIM OF THE APPELLANT TOR DEDUCTION U/S 80HHC AMOUNTING TO RS. 17,09,53,587/- IN RESPECT OF INCOME EARNED F ROM THE BUSINESS OF EXPORT OF GOODS. 3(B). THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 3(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING THAT TH E APPELLANT ENTERED INTO 'COMPOSITE CONTRACT' WHICH CANNOT BE E QUATED TO THE 'SUPPLY CONTRACT' THEREBY DISALLOWING THE CLAIM FOR DEDUCTION U/S 80HITC OF THE ACT. 3(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 3(A) AND 3(B) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN NOT ALLOWING THE ALTERNATE CLAIM OF THE APPELLANT U/S 80HHB IN RESPECT OF SUPP LIES MADE TO ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 109 SYRIA WHEN UNDER THE SIMILAR CIRCUMSTANCES ALTERNAT E CLAIM U/S 80HIIB WAS ALLOWED TO THE APPELLANT IN RESPECT OF S UPPLIES MADE TO IRAN. 4(A). THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR DEMOBI LIZATION AMOUNTING TO RS. 20,32,836/- OUT OF THE TOTAL CLAIM FOR RS 2,95,17,122/-. 4(B) THAT ON THE FACTS- AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 4(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) COMPLETED THE APPELLATE PROCEEDINGS WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT FOR FURNISH ING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED ISSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. 5(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR MAINTE NANCE EXPENSE AMOUNTING TO RS. 50,54,000/- OUT OF THE TOT AL CLAIM FOR RS. 87,33,107/-. 5(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 5(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) COMPLETED THE APPELLATE PROCEEDINGS WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT FOR FURNISH ING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED ISSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. 6(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR OT HER EXPENSES AMOUNTING TO RS 28,85,31 1/- OUT OF THE TOTAL CLAIM FOR RS 1,18,85,311 /-. 6(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF FLU* CASE AND WITHOUT PREJUDICE TO GROUND NO. 6(A) TAKEN HERE IN ABOVE, THE LD. C1T(A) COMPLETED THE APPELLATE PROCEEDINGS WITHOUT AFFORDING ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 110 REASONABLE OPPORTUNITY TO THE APPELLANT FOR FURNISH ING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED ISSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. 7(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE MADE BY THE LD. AO IN RESPECT OF INTEREST RECEIVED VIDE INTIMATION U/S 143(1) FOR THE ASSESSMENT YEAR 2001- 02 AMOUNTING TO RS 2,00,469/-. 7(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 7(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN HOLDING THAT THE INTEREST R ECEIVED BY THE APPELLANT ON PROVISIONAL ASSESSMENT U/S 143(1) FOR THE ASSESSMENT YEAR 2001-02 WAS DUE AND FINAL, DISREGAR DING THE FACT THAT THE SAME WAS SUBSEQUENTLY WITHDRAWN ON FI NALIZATION OF ASSESSMENT U/S 143(3) OF THE ACT FOR THE SAID AS SESSMENT YEAR 2001-02. 8(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADD ITION OF RS. 1,60,30,000/- TOWARDS INTEREST INCOME ON ACCRUAL BA SIS ON THE DISPUTED DUES WITH NBCC WHOSE MATTER IS PENDING BEF ORE THE HON'BLE DELHI HIGH COURT. 8(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 8(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN HOLDING THAT PRINCIPAL AND INTEREST AMOUNTS DUE FROM A GOVERNMENT COMPANY CANNOT BE CONSIDERED TO BE DOUBTFUL OR STICKY UNLESS THE SAID COMPANY HAS GONE INTO LIQUIDATION. 8(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 8(A) AND 8(B) TAKEN HERE IN ABOVE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDIN G THE ADDITION OF INTEREST CALCULATED @ 15% P.A. AS AWARDED BY THE ARBITRATION AWARD INSTEAD OF INTEREST CALCULATED @ 6% P.A. BEIN G ACTUALLY PAID BY NBCC ON OUTSTANDING DUES, WHICH HAS BEEN DU LY OFFERED TO TAX BY THE APPELLANT IN THE ASSESSMENT Y EAR 2003-04. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 111 9.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF RS. 13,37,89,617/- TOWARDS PROVISION FOR BAD & DOUBTFUL DEBTS AND RS. 1,64,73,633/- TOWARDS PROVISION FOR BAD & DOUBT FUL ADVANCES FOR COMPUTING THE BOOK PROFITS FOR THE PUR POSE OF SECTION 115JB OF THE ACT. 10.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR DEMOBI LIZATION AMOUNTING TO RS 20,32,836/- OUT OF THE TOTAL CLAIM FOR RS 15,93,46,597/- FOR COMPUTING THE BOOK PROFITS FOR T HE PURPOSE OF 115JB OF THE ACT. 11.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR MAINTE NANCE EXPENSES AMOUNTING TO RS 5,53,92,513/- OUT OF THE T OTAL CLAIM FOR RS 7,46,71,237/- FOR COMPUTING THE BOOK PROFITS FOR THE PURPOSE OF 115JB OF THE ACT. 12.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR OTHER EXPENSES AMOUNTING TO RS 28,85,311/- OUT OF THE TOTAL CLAIM FOR RS 1,18,85,311/- FOR COMPUTING THE BOOK PROFITS FOR TH E PURPOSE OF 115JB OF THE ACT. 13.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) WAS NOT JUSTIFIED AND GROSSLY ERRED IN DISALLOWING DEDUCTION OF INCOME EARNED FROM PERMANENT ESTABLISH MENT IN FOREIGN COUNTRIES AND NOT CHARGEABLE TO TAX UNDER D OUBLE TAXATION AVOIDANCE AGREEMENT AMOUNTING TO RS. 1,10,27,05,706/- IN COMPUTING THE BOOK PROFIT FOR T HE PURPOSE OF SECTION L15JB OF THE ACT. 14.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF THE CLAIM OF THE APPELLANT AMOUNTING TO RS. 2,24,79 ,738/- ON ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 112 ACCOUNT OF THE PROFIT ON SALE OF FIXED ASSET IN COM PUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE 15.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN DISALLOWING RS. 24 ,42,19,410/- TOWARDS THE CLAIM OF DEDUCTION U/S 80HHC IN COMPUTI NG THE BOOK PROFIT FOR THE PURPOSE OF SECTION L15JB OF THE ACT. GROUNDS RAISED BY ASSESSEE IN APPEAL FOR A.Y. 2003 -04: 1(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE- IN-AFTER REFERRED TO AS CTT(A)], WAS NOT JUSTIFIED IN UPHOLD ING THE DISALLOWANCE OF THE APPELLANT'S CLAIM FOR DEDUCTION OF DEPRECIATION AMOUNTING TO RS. 13,73,203/- ON THE WD V OF MACHINERY SPARE PARTS CAPITALIZED IN THE EARLIER YEARS(ASSESSMENT YEAR 2001-2002). 1(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.1(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) GROSSLY ERRED IN HOLDING THAT ALTHO UGH DEPRECIATION IS ALLOWABLE ON MACHINERY IN 'READY TO USE' CONDITION BUT THE SAME IS NOT ALLOWABLE ON MACHINER Y SPARES WHICH ARE ALSO IN 'READY TO USE 'CONDITION. 1(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.1(A) AND 1(B) TAKEN HERE IN ABOVE, THE LD.CIT (A)GROSSLY ERRED IN NOT FOLLOWING THE DECISION OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CAPITAL BUS SERVICES (123 ITR 404) WHEREIN DEPRECIATION ON PARTS OF MACHINERY WHICH IS READY FOR USE HAS BEEN CATEGORIC ALLY ALLOWED. 2(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE,LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM O F THE APPELLANT ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 113 FOR DEDUCTION U/S 80IAIN RESPECT OF INCOME EARNED F ROM THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITIE S AMOUNTING TO RS.13,19,72,609/-. 2(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 2(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) GROSSLY ERRED IN CONSIDERING THAT T HE APPELLANT'S ROLE IN EXECUTING VARIOUS INFRASTRUCTURE PROJECTS I S THAT OF A CONTRACTOR WHICH CANNOT BE EQUATED TO THE BUSINESS OF DEVELOPING THE INFRASTRUCTURE FACILITIES AND THERE BY DISALLOWING THE CLAIM FOR DEDUCTION UNDER SECTION 80IA OF THE A CT. 2(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 2(A) AND 2(B) T AKEN HERE IN ABOVE, THE LD. CIT (A) GROSSLY ERRED IN NOT CONSIDE RING THAT THE APPELLANT IS AN ENTERPRISE AND NOT A PERSON, WHO EX ECUTES A WORK CONTRACT WITH AN UNDERTAKING AND THEREBY DISAL LOWING THE CLAIM FOR DEDUCTION U/S 80IA OF THE ACT. 2(D) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 2(A) AND 2(B) T AKEN HERE IN ABOVE, THE LD. CIT (A) WAS NOT JUSTIFIED IN NOT TAK ING INTO CONSIDERATION THE DECISION OF HON'BLE MUMBAI ITAT I N THE CASE OF ACIT VS BHARAT UDHYOG LTD., (ITA NO 6137/MUM/200 5) WHEREIN BASED ON THE IDENTICAL FACTS AS THAT OF THE APPELLANT, THE BENEFIT OF DEDUCTION U/S 80-IA OF THE ACT HAS B EEN ALLOWED. 3(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOW ANCE OF THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80HHC RELA TING TO THE EXPORT OF GOODS AND SUPPLIES MADE TO THE GOVERNMENT OF SYRIA AMOUNTING TO RS.1,60,34,887/- . 3(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 3(A) TAKEN HERE IN ABOVE, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING THAT THE APPELL ANT ENTERED INTO 'COMPOSITE CONTRACT' WHICH CANNOT BE EQUATED T O THE 'SUPPLY CONTRACT' THEREBY DISALLOWING THE CLAIM FOR DEDUCTI ON U/S 80HHC OF THE ACT. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 114 4(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF THE TOTAL CLAIM OF THE APPELLANT TOWARDS PROVISION FOR OTHER EXPENSES AMOUNTING TO RS 4,30,61,843/- UNDER NORMAL PROVISIONS OF THE ACT. 4(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 4(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) COMPLETED THE APPELLATE PROCEEDINGS IN HAST E WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT F OR FURNISHING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED I SSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. 5(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADD ITION MADE BY THE ASSESSING OFFICER TOWARDS INTEREST RECEIVED ON PROVISIONAL ASSESSMENT U/S 143(1) AMOUNTING TO RS. 2,05,90,009/ -. 5(B) THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 5(A) TAKEN HEREIN A BOVE, THE LD. CIT (A) GROSSLY ERRED IN INCLUDING THE ABOVE INTERE ST INCOME RECEIVED ON PROVISIONAL BASIS WHICH WAS SUBSEQUENTL Y WITHDRAWN ON FINALIZATION OF ASSESSMENT U/S 143(3). 6(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADD ITION OF RS.1,36,70,000/- TOWARDS INTEREST INCOME ON ACCRUAL BASIS ON THE DISPUTED DUES WITH NBCC WHOSE MATTER IS PENDING BEFORE THE HON'BLE DELHI HIGH COURT. 6(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 6(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) GROSSLY ERRED IN HOLDING THAT PRINCIPAL AND INTEREST AMOUNTS DUE FROM A GOVERNMENT COMPANY CANNOT BE CONSIDERED TO BE DOUBTFUL OR STICKY UNLESS THE SAID COMPANY HAS GONE INTO LIQUIDATION. 7(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 115 THE CLAIM OF THE APPELLANT TOWARDS PROVISION FOR DE MOBILIZATION AND OTHER EXPENSES AMOUNTING TO RS. 99,12,075/- UTI LIZED DURING THE YEAR ALTHOUGH THE SAME HAS ALREADY BEEN TAXED IN EARLIER YEARS UNDER THE NORMAL PROVISIONS OF THE AC T. 7(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 7(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) COMPLETED THE APPELLATE PROCEEDINGS IN HAST E WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT F OR FURNISHING ALL THE RELEVANT DOCUMENTS AND HENCE THE IMPUGNED I SSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MERITS. 8(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN NOT ALLOWING ASSES SEE'S CLAIM OF RS. 25,56,813/- ARISING FROM WITHDRAWAL MADE BY THE DEPARTMENT IN THE INSTANT ASSESSMENT YEAR IN RESPEC T OF INTEREST GRANTED U/S 244A PERTAINING TO ASSESSMENT YEAR 2000 - 2001 WHICH WAS ALREADY TAXED IN THE ASSESSMENT YEAR 2001 -2002. 8(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 8(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) GROSSLY ERRED IN HOLDING THAT THE INTEREST AMOUNTING TO RS. 25,56,813/- RECEIVED BY THE APPELLANT ON PROVIS IONAL ASSESSMENT U/S 143(1) FOR THE ASSESSMENT YEAR 2000- 01 TO BE DUE AND FINAL, DISREGARDING THE FACT THAT THE SAME WAS SUBSEQUENTLY WITHDRAWN ON FINALIZATION OF THE APPEL LANT'S CASE FOR THE SAID ASSESSMENT YEAR U/S 143(3) OF THE ACT. 9(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) WAS NOT JUSTIFIED IN MAKING THE ADDITIO NS WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOSES OF SEC. 115JB, OF THE AMOUNTS OF RS. 1,70,85,297/- AND RS. 6,37,472/- RES PECTIVELY ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AND PROVISION FOR BAD AND DOUBTFUL ADVANCES. 9(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 9(A) TAKEN HERE IN ABOVE, THE LD. CIT (A) GROSSLY ERRED IN HOLDING THAT ADDITION BE M ADE TO BOOK PROFIT ON ACCOUNT OF THE PROVISION FOR BAD AND DOUB TFUL DEBTS ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 116 AND PROVISION FOR BAD AND DOUBTFUL ADVANCES ON THE GROUND THAT THESE ARE LIABILITY OTHER THAN ASCERTAINED LIABILIT Y. 9(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 9(A) AND 9(B) TAKEN HERE IN ABOVE, THE LD. CIT (A) WAS NOT JUSTIFIED IN NOT TAK ING INTO CONSIDERATION THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. HCL COMNET SYSTEMS & SERVICES [2008] 305 ITR 409 , WHEREIN IT WAS HELD THAT THE P ROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT FOR MEETING A LIABILI TIES IS NOT TO BE INCLUDED IN THE BOOK PROFITS FOR THE PURPOSES OF SEC. 115JB. 10.0 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) WAS NOT JUSTIFIED IN REJECTING THE APPELLANT'S CLAIM FOR PROVISION FOR OTHER EXPENSES AMOUNTING TO RS. 4,30, 61,843/- IN RESPECT OF NON DTAA PROJECTS. THE APPELLANT CLAIMED THE SAID PROVISIONS AS DEDUCTIBLE EXPENDITURE WHILE COMPUTIN G THE BOOK PROFITS FOR THE PURPOSES OF SECTION 115JB OF THE AC T, SINCE THE SAME WERE QUANTIFIABLE AND ASCERTAINED LIABILITIES IN THE HANDS OF THE APPELLANT. THE LD. OFFICERS HOWEVER, NOT ACC EPTING THE CONTENTION OF THE APPELLANT REJECTED THE CLAIM OF T HE APPELLANT ON THE GROUND THAT THE SAID PROVISION IS ON ACCOUNT OF LIABILITY OTHER THAN ASCERTAINED AND/OR ACCRUED LIABILITY AND HENCE , ADDED BACK THE SAME WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOSES OF SECTION 115JB OF THE ACT. 11.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) WAS NOT JUSTIFIED AND GROSSLY ERRED IN DISALLOWING DEDUCTION FROM INCOME EARNED FROM PERMANENT ESTABLI SHMENT IN FOREIGN COUNTRIES AND NOT CHARGEABLE TO TAX UNDER D OUBLE TAXATION AVOIDANCE AGREEMENT AMOUNTING TO RS. 84,82,65,351/- IN COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 12.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISA LLOWANCE OF THE CLAIM OF THE APPELLANT AMOUNTING TO RS. 1,90,11 ,891/- ON ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 117 ACCOUNT OF THE PROFIT ON SALE OF FIXED ASSET IN COM PUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 13.A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) GROSSLY ERRED IN NOT CONSIDERING THE CL AIM OF THE APPELLANT AMOUNTING TO RS.99,12,075/- TOWARDS PROVI SION FOR BAD AND DOUBTFUL DEBTS, ADVANCES, DEMOBILIZATION EX PENSES, MAINTENANCE EXPENSES, ETC., UTILIZED DURING THE YEA R, WHICH HAVE ALREADY BEEN TAXED IN THE EARLIER YEARS BY THE DEPARTMENT, RESULTING TAXATION OF THE AFORESAID PROVISIONS ONCE AGAIN IN THE INSTANT ASSESSMENT YEAR WHILE COMPUTING THE BOOK PR OFITS. 13.B). THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 13(A) TAKEN HER E IN ABOVE, THE LD. CIT (A) COMPLETED THE APPELLATE PROCEEDINGS IN HASTE WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APP ELLANT FOR FURNISHING ALL THE RELEVANT DOCUMENTS AND DETAILS O F THE ALLOWANCE/DISALLOWANCES IN EARLIER YEARS. HENCE THE IMPUGNED ISSUE MAY BE SET ASIDE FOR ALLOWING THE SAME ON MER ITS. 14.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN DISALLOWING RS. 3, 20,69,774/- TOWARDS THE CLAIM OF DEDUCTION U/S 80HLIC WHILE COM PUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 15.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN REJECTING ASSESSEE 'S CLAIM OF EXCESS LEVY OF INTEREST U/S 234D BY RS. 8,45,013/-. GROUNDS RAISED BY REVENUE IN APPEAL FOR A.Y. 2003- 04 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 69,58,033/- ON ACCOUNT OF DEDUCTION U/S 80HHB. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 118 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 1,29,214/- ON ACCOUNT OF CORPORATE OFFICE EXPENSES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 7,78,00,676/- ON ACCOUNT OF CORPORATE EXPENSES PROP ORTIONATE TO PROFIT OF FOREIGN PROJECTS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1, 10,71,800/- ON ACCOUNT OF THE PROVISION FOR DEMOBILIZATION EXPENDI TURE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1, 28,77,257/- ON ACCOUNT OF PROVISION FOR MAINTENANCE EXPENDITURE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1, 10,71,800, RS. 1,28,77,257/- & RS. 4,30,61,843/- ON ACCOUNT OF THE PROVISION FOR DEMOBILIZATION, PROVISION FOR MAINTENANCE AND O THER EXPENSES RESPECTIVELY. 37. ADVERTING TO THE APPEALS OF THE ASSESSEE FOR A .Y. 2002-03 AND 2003-04, GROUNDS NOS. 1(A) AND 1(B) FOR A.Y. 20 02-03 AND 1(A), 1(B) & 1(C) FOR A.Y. 2003-04 ARE COVERED BY OUR DEC ISION ON GROUND NOS. 1(A) & 1(B) IN APPEAL OF ASSESSEE FOR A.Y. 200 1-02, WHICH WE HAVE DISMISSED AS PER OUR DISCUSSION MADE HEREIN AB OVE. ACCORDINGLY, THESE GROUNDS OF ASSESSEES BOTH THE A PPEALS ARE DISMISSED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 119 38. SIMILARLY, GROUNDS NOS. 2(A), 2(B) & 2(C) RAISE D BY ASSESSEE FOR A.Y. 2002-03 AND 2003-04 ARE COVERED BY OUR DECISIO N ON GROUNDS NOS. 2(A) &2(B) IN APPEAL OF ASSESSEE FOR A.Y. 2001 -02. ACCORDINGLY, GROUND NO. 2(A),&2(B) OF ASSESSEES APPEALS FOR BOT H THESE YEARS ARE ALLOWED. AS REGARDS GROUND NO. 2(C) WAS RAISED WITHOU T PREJUDICE TO GROUND NO. 2(A) AND 2(B) ONLY AND NOT REQUIRED TO B E ADJUDICATED , WHEN WE HAVE ALREADY ALLOWED GROUND NO. 2(A) AND 2(B ) OF THE APPEAL. 39. GROUNDS NOS. 3(A) AND 3(B) IN BOTH THESE APPEAL S OF THE ASSESSEE ARE COVERED BY OUR DECISION ON GROUNDS NOS . 3(A) & 3(B) IN APPEAL OF ASSESSEE FOR A.Y. 2001-02. ACCORDINGLY, T HESE GROUNDS OF ASSESSEES APPEALS FOR BOTH THESE YEARS, ARE ALLOWE D. 40. GROUND NOS. 4(A) & 4(B) FOR A.Y. 2002-03 ARE CO VERED BY OUR DECISION ON GROUND NOS. 6(A) & 6(B) OF ASSESSEES A PPEAL FOR A.Y. 2001-02. ACCORDINGLY, THESE GROUNDS OF ASSESSEE ARE DISMISSED. SIMILARLY, GROUND NOS. 4(A) & 4(B) RAISED IN A.Y. 2003-04, ARE IDENTICAL TO GROUNDS NOS. 7(A) AND 7(B) RAISED IN A .Y. 2001-02, ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 120 WHICH WE HAVE DECIDED AGAINST THE ASSESSEE. ACCORDING LY, THESE GROUNDS OF APPEAL FOR A.Y. 2003-04 ARE ALSO DISMISS ED. 41. GROUNDS NOS. 5(A) & 5(B) FOR A.Y. 2002-03 RELAT ES TO PROVISION OF MAINTENANCE EXPENSES OF RS. 50,54,000/- UPHELD B Y THE LD. CIT(A) , OUT OF PROVISION OF RS. 87,33,107/- DISALL OWED BY THE ASSESSING OFFICER. THE LD CIT(A) UPHELD THE WITH DET AILED REASONING IN PARA 10.3 OF THE IMPUGNED ORDER. THE LD CIT(A) H AS IN PRINCIPLE ALLOWED THE CLAIM OF THE ASSESSEE THAT MAINTENANCE EXPENSES ARE REQUIRED TO BE INCURRED AS PART OF CONTRACT , HOWEV ER , IN CASE FATWA-PATNA PROJECT ( RS. 20,54,000/-) AND RAXUL BIR GANJ PROJECT ( RS. 30,00,000/-) , NO DETAILS WERE FURNISHED BEFOR E HIM AND THUS HE SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS. 50,54,000/-. BEFORE US ALSO NO SUCH DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE, WE UPHOLD THE DISALLOWANCE AS WE HAVE DECIDED IN OTH ER GROUNDS OF THE APPEALS OF THE ASSESSEE. THE GROUND NO. 5(A) AN D 5(B) OF THE AY 2002-03 ARE DISMISSED ACCORDINGLY. 42. GROUNDS NOS. 5(A) & 5(B) RAISED BY ASSESSEE IN APPEAL FOR A.Y. 2003-04 ARE COVERED BY OUR DECISION ON GROUND NO. 8 (A) & 8(B) ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 121 RAISED IN A.Y. 2001-02. ACCORDINGLY, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR DECISION ON GR OUND NO. 8 OF ASSESSEES APPEAL FOR A.Y. 2001-02. 43. GROUNDS NOS. 6(A) & 6(B) RAISED BY ASSESSEE IN ITS APPEAL FOR A.Y. 2002-03 AND GROUNDS NOS. 6(A) & 6(B) RAISED IN APPEAL FOR A.Y. 2003-04 ARE COVERED BY OUR DECISION RENDERED ON GRO UNDS NOS. 7(A) & 7(B) AND 9(A) & 9(B) OF ASSESSEES APPEAL FOR A.Y . 2001-02 RESPECTIVELY, WHEREBY THE RESPECTIVE CLAIMS OF THE A SSESSEE HAVE BEEN DISMISSED. ACCORDINGLY, THESE GROUNDS NOS. 6(A ) & 6(B) RAISED BY ASSESSEE IN BOTH THE APPEALS FOR A.Y. 2002-03 AN D 2003-04 ARE ALSO DISMISSED. 44. GROUNDS NOS. 7(A) & 7(B) RAISED BY ASSESSEE IN ITS APPEAL FOR A.Y. 2002-03 ARE COVERED BY OUR DECISION RENDERED O N GROUNDS NOS. 8(A) & 8(B) IN ASSESSEES APPEAL FOR A.Y. 2001-02, WHICH HAVE BEEN ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY, THES E GROUNDS OF APPEAL FOR A.Y. 2002-03 ARE ALSO ALLOWED FOR STATIS TICAL PURPOSES IN TERMS OF OUR DECISION ON GROUNDS NOS. 8(A) AND 8(B) IN APPEAL FOR A.Y. 2001-02. SIMILARLY, GROUNDS NOS. 7(A) & 7(B) RAISED IN APPEAL ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 122 FOR A.Y. 2003-04ARE COVERED BY OUR DECISION GIVEN O N GROUND NOS. 6(A) AND 6(B) OF ASSESSEES APPEAL FOR A.Y. 2001-02 , WHEREBY THE IDENTICAL CLAIM OF ASSESSEE HAS BEEN DISMISSED. ACC ORDINGLY, THESE GROUNDS FOR A.Y. 2003-04 ARE ALSO DISMISSED. 45. GROUNDS NOS. 8(A) & 8(B) IN APPEAL FOR A.Y. 200 2-03 ARE SIMILAR TO GROUND NOS. 9(A) AND 9(B) OF ASSESSEES APPEAL FOR A.Y. 2001-02, WHICH HAVE BEEN DISMISSED. ACCORDINGLY, THE SE GROUNDS OF ASSESSEE FOR A.Y. 2002-03 ARE ALSO DISMISSED. 46. AS REGARDS GROUND NO. 8(C) OF ASSESSEES APPEAL FOR A.Y. 2002- 03, WHICH HAS BEEN TAKEN WITHOUT PREJUDICE TO GROUND NO. 8(A) AND 8(B) IS CONCERNED, WE ARE OF THE OPINION THAT THE A SSESSEE IS NOT ENTITLED TO DEDUCTION OF INTEREST ON LOANS TO NBCC AS ALREADY HELD BY US. ACCORDINGLY, THIS GROUND NO. 8(C) OF THE APP EAL FOR AY 2002- 03 IS DISMISSED. 47. THE GROUND NO. 8(A) AND 8(B) IN ASSESSEES APPE AL FOR A.Y. 2003-04, PERTAIN TO INTEREST U/S 244A OF THE ACT. T HE ISSUE IN DISPUTE HAS BEEN ADJUDICATED WHILE DECIDING THE GRO UND NO. 8(A) AND 8(B) FOR ASSESSMENT YEAR 2001-02, WHEREIN WE HAV E REMITTED ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 123 THE ISSUE IN DISPUTE TO FILE OF THE ASSESSING OFFIC ER FOR DECIDING IN VIEW OF THE DECISION OF SPECIAL BENCH IN THE CASE OF AVADA TRADING COMPANY (P) LTD. (SUPRA). THE ISSUE IN DISPUTE BEIN G IDENTICAL, THE GROUND NO. 8(A) AND 8(B) OF THE APPEAL FOR AY 2003- 04 ARE ALSO ALLOWED FOR STATISTICAL PURPOSE. 48. GROUNDS NOS. 9 RAISED BY ASSESSEE IN ITS APPEAL FOR A.Y. 2002- 03 AND GROUNDS NOS. 9(A), 9(B) AND 9(C) RAISED IN A PPEAL FOR A.Y. 2003-04 ARE COVERED BY OUR DECISION RENDERED ON GRO UNDS NOS. 10 OF ASSESSEES APPEAL FOR A.Y. 2001-02, WHICH HAS BEE N ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY, ALL THESE GROUND S OF ASSESSEE FOR BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR RELEVANT DECISION GIVEN ON GROUND NO. 10 FOR A.Y. 2 001-02. 49. THE ISSUES RAISED BY ASSESSEE BY WAY OF GROUND N OS. 10 IN BOTH THE YEARS, PERTAINING TO DISALLOWANCE OF PROVI SION FOR DEMOBILIZATION AND DISALLOWANCE OF PROVISION FOR OTH ER EXPENSES UNDER MAT U/S. 115JB ARE COVERED BY OUR DECISION GI VEN ON GROUNDS NOS. 11 AND 12FOR A.Y. 2001-02 RESPECTIVELY , WHEREBY THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 124 RESPECTIVE CLAIMS OF THE ASSESSEE HAVE BEEN DISMISS ED. ACCORDINGLY, THESE GROUNDS OF APPEAL OF ASSESSEE ARE ALSO DISMIS SED. 50. GROUND NO. 11 OF APPEAL OF ASSESSEE FOR A.Y. 20 02-03 RELATES TO DISALLOWANCE OF PROVISION FOR MAINTENANCE 5, 53, 92, 513/-OUT OF 7, 46, 71, 237/-. THE LD. CIT(A) UPHELD THE DISALL OWANCE HOLDING THE SAME AS UNASCERTAINED LIABILITY AS HELD IN THE CASE OF DEMOBILISATION EXPENSES. AS WE HAVE ALREADY UPHELD DISALLOWANCE OF THE SIMILAR NATURE, WHILE ADJUDICATING GROUND NO. 11 OF THE APPEAL FOR ASSESSMENT YEAR 2001-02, THE PROVISION FOR MAIN TENANCE OF 5, 53, 92, 513/- MADE UNDER MY PROVISIONS IN THE ASSES SMENT YEAR 2002-03, IS ALSO UPHELD. THE GROUND NO. 11 OF THE A PPEAL FOR ASSESSMENT YEAR 2002-03, IS ACCORDINGLY DISMISSED. 51. GROUND NO. 11 RAISED BY ASSESSEE IN APPEAL FOR A.Y. 2003-04 IS SIMILAR TO GROUND NO. 13 OF A.Y. 2001-02, WHICH WE HAVE ALLOWED IN THE IDENTICAL FACTS AND CIRCUMSTANCES. ACCORDING LY, THIS GROUND OF APPEAL OF ASSESSEE IS ALSO ALLOWED. 52. GROUND NO. 12 OF ASSESSEES APPEAL FOR A.Y. 200 2-03 IS SIMILAR TO GROUND NO. 12 OF A.Y. 2001-02 AND GROUND NO. 12 OF ASSESSEES ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 125 APPEAL FOR A.Y. 2003-04 IS SIMILAR TO GROUND NO. 14 OF ASSESSEES APPEAL FOR A.Y. 2001-02. SINCE WE HAVE REJECTED THE RESPECTIVE CLAIMS OF THE ASSESSEE IN A.Y. 2001-02, THE GROUND NOS. 12 OF ASSESSEES APPEALS FOR A.Y. 2002-03 AND 2003-04 ARE DISMISSED. 53. GROUND NO. 13 OF ASSESSEES APPEAL FOR A.Y. 200 2-03 IS COVERED BY OUR DECISION GIVEN ON GROUND NO. 13 OF A.Y. 2001 -02. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 54. GROUND NO. 13(A) AND 13(B) OF ASSESSEES APPEAL FOR A.Y. 2003- 04 PERTAIN TO DISALLOWANCE OF PROVISION OF RS.99,12 ,075/-. THE ASSESSEES CLAIM THAT RELEVANT AMOUNT OF PROVISIONS WERE DISALLOWED IN ASSESSMENT YEAR 2001-02 AND 2002-03, OUT OF WHICH THE ASSESSEE UTILISED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003-04, THE AMOUNT OF RS. 20,15,350/-AND RS.78,96, 725 FROM THE PROVISION FOR DEMOBILISATION EXPENSES AND OTHER EXP ENSES RESPECTIVELY TOTALLING RS.2,99,12,075/-. WE FIND TH AT THE IDENTICAL ISSUE RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) IN ASSESSMENT YEAR 2002-03 HAS BEEN RESTORED TO THE ASSESSING OFF ICER FOR VERIFICATION IN PARA 16.3 OF THE ORDER OF THE LD. C IT(A) FOR ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 126 ASSESSMENT YEAR 2002-03. IN OUR OPINION, THE ISSUE NEEDS VERIFICATION AT THE END OF THE ASSESSING OFFICER AN D ACCORDINGLY, WE REST OF THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER FOR VERIFICATION AND DECIDING A FRESH. THE GROUND OF THE APPEAL IS A CCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 55. THE GROUND NO. 14 FOR ASSESSMENT YEAR 2002-03 R ELATES TO DISALLOWANCE ON PROFIT ON SALE OF FIXED ASSET RS.2,2 4,79,738/- UNDER SECTION 115JB OF THE ACT. THE ISSUE BEING IDENTICAL TO GROUND NO. 14 OF THE ASSESSMENT IN 2001-02, IT IS DISMISSED ACCOR DINGLY. THE GROUND NO. 14 FOR ASSESSMENT YEAR 2003-04 RELATES T O DEDUCTION UNDER SECTION 80HHC OF RS.3,20,69,774/-UNDER SECTIO N 115 JB, WHICH BEING IDENTICAL TO GROUND NO.15 OF ASSESSMENT YEAR 2001-02, IT IS DISMISSED ACCORDINGLY. 56. THE GROUND NO. 15 FOR ASSESSMENT YEAR 2002-03 R ELATES TO DEDUCTION UNDER SECTION 80 HHC OF RS.24, 42, 19, 41 0/-UNDER SECTION 115 JB OF THE ACT, WHICH BEING IDENTICAL TO GROUND NO. 15 FOR ASSESSMENT YEAR 2001-02, IS DISMISSED ACCORDING LY. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 127 57. IN GROUND NO. 15 FOR ASSESSMENT YEAR 2003-04, T HE ASSESSEE HAS RAISED THE ISSUE OF ACCESS LEVY OF INTEREST UND ER SECTION 234D BY RS.8,45,013/-. THE LD. CIT(A) HELD THAT INTEREST UN DER SECTION 234D IS CONSEQUENTIAL IN NATURE AND INCORRECT COMPUTATIO N IF ANY HAS TO BE RECTIFIED UNDER SECTION 154 OF THE ACT. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED ANY DETAILS/EVI DENCE OF FILING A RECTIFICATION PETITION UNDER SECTION 154 OF THE ACT BEFORE THE ASSESSING OFFICER. ACCORDINGLY HE REJECTED THE CLAI M OF THE ASSESSEE. IN OUR OPINION, THE LD. CIT(A) HAS DIRECTED TO AVAI L THE REMEDY PROVIDED IN THE ACT. WE DO NOT FIND ANY ERROR IN TH E SAID FINDING OF THE LD. CIT(A), AND ACCORDINGLY WE DISMISS THE GROU ND OF THE APPEAL OF THE ASSESSEE. REVENUES APPEAL FOR A.Y. 2003-04: 58. IN GROUND NOS. 1 , THE REVENUE HAD CHALLENGED A LLOWING ALTERNATIVE CLAIM OF RS.69,58,033 /- UNDER SECTION 80 HHB OF THE ACT . THE IDENTICAL CLAIM OF DEDUCTION UNDER SECTIO N 88HHB OF THE ACT IN ASSESSMENT YEAR 2001-02 HAS BEEN REJECTED BY US WHILE ADJUDICATING GROUND NO.2, ACCORDINGLY FOLLOWING OUR FINDING, THE ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 128 GROUND NO. ONE OF THE APPEAL OF THE REVENUE FOR ASS ESSMENT YEAR 2003-04 IS ALLOWED. 59. THE GROUND NO. 2 OF THE APPEAL OF THE REVENUE R ELATES TO DEDUCTION OF CORPORATE OFFICE EXPENSES OF RS.1,29,2 14/-FROM THE PROFIT OF THE ELIGIBLE PROJECTS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHB OF THE ACT. THE IDENT ICAL ISSUE RAISED IN GROUND NO. 3 FOR ASSESSMENT YEAR 2001-02 HAS BEEN ALLOWED, ACCORDINGLY THE GROUND NO. TWO OF THE APPEA L OF THE REVENUE FOR ASSESSMENT YEAR 2003-04 IS ALSO ALLOWED . 60. GROUND NO. 3 OF REVENUES APPEAL IS SIMILAR TO GROU ND NO. 5 OF REVENUES APPEAL FOR A.Y. 2001-02, WHICH AS PER OUR ABOVE DECISION, HAS BEEN DISMISSED. ACCORDINGLY, THIS GROUND OF REV ENUE IS ALSO DISMISSED. 61. GROUND NO. 4 OF THIS APPEAL IS COVERED BY OUR D ECISION RENDERED ON GROUND NO. 7 OF REVENUES APPEAL FOR A. Y. 2001-02, WHICH HAS BEEN DISMISSED IN THE IDENTICAL FACTS OF T HE CASE. ACCORDINGLY, THIS GROUND OF REVENUE IS ALSO DISMISS ED. ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 129 62. GROUND NO. 5 THE APPEAL RELATES TO ADDITION OF RS.1,28,77,257/-DELETED BY THE LD. CIT(A) ON ACCOUN T OF PROVISION FOR MAINTENANCE EXPENSES. WE FIND THAT THE LD. CIT( A) HAS VERIFIED THAT THE LIABILITY ON ACCOUNT OF MAINTENANCE EXPENS ES ARISEN IN THE YEAR UNDER CONSIDERATION. THE LD. DR COULD NOT REBU T THIS FACTUAL FINDING OF LD. CIT(A). ACCORDINGLY WE DO NOT FIND A NY ERROR IN THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANC E. THE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 63. THE ISSUE RAISED IN GROUND NO. 6 PERTAINING TO PROV ISION FOR DEMOBLIZATION AND PROVISION FOR MAINTENANCE AND OTH ER EXPENSES, IS COVERED BY OUR DECISION GIVEN ON GROUND NO. 9 OF RE VENUES APPEAL FOR A.Y. 2001-02, WHICH WE HAVE DISMISSED VIDE OUR F INDINGS GIVEN HEREIN ABOVE. ACCORDINGLY, GROUND OF REVENUE IS ALS O DISMISSED. 64. GROUND NO. 7 IS GENERAL IN NATURE AND NEEDS NO SPECIFIC ADJUDICATION. 65. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE FOR A.YRS. 2001-02, 2002-03 AND 2003-04 ARE ALLOWED PARTLY FOR STATISTICAL ITA NOS. 1825/DEL/2005, 705/DEL/2006 & 3804/DEL/200 8 AND ITA NOS. 2234/DEL/2005 & 3805/DEL/2008 130 PURPOSE WHEREAS BOTH THE APPEALS OF THE REVENUE FOR A.YRS. 2001- 02 AND 2002-03 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2019 SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 OCT., 2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI