The DCIT, Circle-4, Ahmedabad V. Hitachi Home & Life Solutions (India) Ltd., Ahmedabad

ITA 2286/AHD/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2919 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N R SONI
• Keywords: Business income; Transfer pricing; International transaction; Royalty expenses; Capital receipt; Set aside; Deduction Disallowance
• Section: 92B; 80HHC; 115JB; 80IB; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER SL. NOS. ITA NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 2399/AHD/2013 2008-09 THE DCIT CIRCLE-4 AHMEDABAD (REVENUE) HITACHI HOME & LIFE SOLUTION (INDIA) LTD. 9 TH FLOOR ABHIJEET MITHAKHALI, AHMEDABAD PAN:AAACA 2392K (ASSESSEE) 2. 2286/AHD/2014 2009-10 -DO-REVENUE DO-ASSESSEE 3. 931/AHD/2016 2010-11 -DO-REVENUE -DO-ASSESSEE 4. 860/AHD/2016 2010-11 BY ASSESSEE BY REVENUE REVENUE BY : SHRI N.R.SONI, CIT-DR & SHRI VINOD TANWANI, SR.DR ASSESSEE BY : SHRI S.N. SOPARKAR, ADVOCATE / DATE OF HEARING 17/01/2019 / DATE OF PRONOUNCEMENT 04/03/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE REVENUE AND ASSESSEE (IN ITA NO.860/AHD/2016 FOR AY 2010-11) AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)VIII, AHMEDABAD [CIT(A) IN SHORT] DATED 2 5/07/2013, 21/05/2014, 27/01/2016 RELEVANT TO ASSESSMENT YEA RS (AYS) 2008-09, 2009-10 & 2010-11 RESPECTIVELY. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 2 - 2. SINCE ALL THESE APPEALS ARE INTER-CONNECTED, THEREFORE THESE ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. 3. TO BEGIN WITH, WE SHALL ADDRESS THE REVENUES AP PEAL IN ITA NO.2339/AHD/2013 FOR AY 2008-09 AS A LEAD CASE. 4. THE REVENUE RAISED THE COMMON GROUND OF APPEA L WHICH READS AS UNDER:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 71,57,055/- ON ACCOUNT OF UPWARD AD JUSTMENT OF INTERNATIONAL TRANSACTION IN RESPECT OF ROYALTY PAY MENT. 2. THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 1,100,09,859/- MADE BY THE AO ON ACCOUNT OF PROVISION FOR WARRANTIES WITHOUT APPRECI ATING FACTS THAT THIS AMOUNT IS A PROVISION AND A CONTINGENT, U NASCERTAINED AND NON-CRYSTALLIZED LIABILITY. 3. THE LD. CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW DEDUCTION U/S.80IB(10) ON FOREIGN EXCHANGE FL UCTUATION GAIN ATTRIBUTABLE TO JAMMU UNIT. 4. THE LD. CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW DEDUCTION OF RS. 5,83,00,000/- U/S. 80IB(4) I N RESPECT OF JAMMU UNIT. 5. THE LD. CIT(A) ALSO ERRED IN DIRECTING TO ALLOW MAT CREDIT AS INCREASED BY SURCHARGE AND DEDUCTION CESS WHEN THE SAID MAT ALREADY INCLUDES THE SUCH CHARGE AND CESS. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 3 - 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 7. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 5. THE FIRST ISSUE RAISED BY THE REVENUE IS THA T THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR RS. 71,57,055/- ON ACCOUNT OF ROYALTY PAYMENT TO THE ASSOCIATED ENT ERPRISES (AES). 6. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G IN HITACHI BRANDS OF HOME APPLIANCES. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS MADE THE ROYALTY PAYMENT TO ITS AE IN JAPAN FOR THE TECHNOLOGY DEVELOPED BY IT. THE ASSESSEE MADE THE PAYMENT OF ROYALTY @ 3.75% OF THE NET SALES WHICH IS WORKED OUT AS UNDER: NET EX-FACTORY SALES LESS : EXCISE DUTY, SALES TAX, CESS & ANY OTHER DUT Y LESS : DEALERS COMMISSION, SPECIAL COMMISSION AND WARRANTY AS PER COMPANY POLICY LESS : LANDED COST OF IMPORTED COMPONENTS LESS : COST OF STANDARD BOUGHT OUT COMPONENTS USED IN THE MANUFACTURE OF THE PRODUCTS LESS : PACKING CHARGES LESS : TRANSPORTATION CHARGES AND INSURANCE ON SHIP MENT TO CUSTOMERS BALANCE BEING NET SALES ON WHICH ROYALTY IS PAYABLE ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 4 - 6.1. HOWEVER, THE TPO FOUND THAT THE OTHER AES HAVE MADE THE PAYMENT OF ROYALTY FOR USING THE TECHNOLOGY @ 3% OF THE NET SALES. ACCORDINGLY, THE TPO FOUND DIFFERENT OF 0.75% IN TH E PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. ON A QUESTION BY THE TPO , THE ASSESSEE SUBMITTED THAT THE OTHER AES WHILE WORKING OUT THE ROYALTY @ 3% OF THE NET SALES HAVE NOT MADE THE FOLLOWING DEDUCTIONS: A) COST OF STANDARD BOUGHT OUT COMPONENTS USED IN T HE MANUFACTURE OF THE PRODUCTS B) LANDED COST OF IMPORTED COMPONENTS C) PACKING CHARGES 6.2. IN VIEW OF THE ABOVE, THE ASSESSEE CLAIMED THA T IF THE ELEMENTS ABOVE ARE CONSIDERED IN WORKING OUT THE RATE OF ROY ALTY, THE ASSESSEE IS PAYING ROYALTY AT LESS THAN 3% OF THE NET SALES VAL UE. 6.3. HOWEVER, THE TPO DISAGREED WITH THE SUBMISSION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS FAILED TO FURNIS H THE ROYALTY AGREEMENT AS WELL AS THE FINANCIAL STATEMENTS OF THE AES. TH E TPO WAS OF THE VIEW THAT IN THE ABSENCE OF THE EVIDENCE OR DETAILS, IT WAS NOT POSSIBLE TO VERIFY THE CHART FILED BY THE ASSESSEE AS DETAILED ABOVE. 6.4. THE TPO ALSO NOTED THAT THERE WAS NO DETA IL FURNISHED BY THE ASSESSEE DEPICTING THE COST OF DEVELOPMENT OF THE T ECHNOLOGY BY THE AE AND THE BASIS OF RECOVERY OF THE SAME FROM THE OTHE R AES. ACCORDINGLY, ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 5 - THE TPO DISALLOWED THE AMOUNT OF ROYALTY PAYMENT OF RS. 71,57,055/- OUT OF THE TOTAL ROYALTY PAYMENT OF RS. 3,57,85,275 /- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO TH E LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: 3.3 DECISION I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE A DDITION HAS BEEN MADE ON ACCOUNT OF UPWARD ADJUSTMENT OF RS. 71,57,0 55/- FOR ROYALTY PAID TO THE AE. IT HAS BEEN POINTED OUT BY THE APP ELLANT THAT WHILE DECIDING THE APPEAL PERTAINING TO AY 2007-08, THE S IMILAR ISSUE WAS DECIDED IN FAVOUR OF THE APPELLANT BY MY PREDECESSO R CIT(A) VIDE APPEAL NUMBER CIT(A)-VIII/DC CIR-4/744/10-11 DATED 23-06-11. SINCE THE FACTS AND THE ISSUE ARE IDENTICAL, RESPEC TFULLY FOLLOWING THE DECISION OF MY PREDECESSOR THE ADDITION MADE ON ACC OUNT OF UPWARD ADJUSTMENT FOR ROYALTY PAID TO THE AE IS DIRECTED T O BE DELETED. 8. BEING AGGRIEVED BY ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 9. BOTH THE PARTIES BEFORE US RELIED ON THE ORDERS OF AUTHORITIES BELOW AS FAVORABLE TO THEM. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT T HE ITAT IN ASSESSEES OWN CASE INVOLVING IDENTICAL ISSUE HAS DELETED THE ADDITION MADE BY THE ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 6 - TPO IN ITA NO. 2119/AHD/2011 FOR AY 2007-08 VIDE OR DER DATED 29/08/2018. THE RELEVANT EXTRACT OF THE ORDER IS R EPRODUCED AS UNDER: 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD CAREFULLY. THE ASSESSING OFFICER HAS MADE UPWARD A DJUSTMENT WITH REFERENCE TO INTERNATIONAL TRANSACTION U/S. 92B IN RESPECT OF ROYALTY PAYMENT TO ASSOCIATED ENTERPRISE AS PER ORDER PASS ED U/S. 92CA(3) OF THE IT ACT. IN RESPECT OF PAYMENT OF ROYALTY BY TH E ASSESS TO THE ASSOCIATE CONCERNS THE TPO HAS APPLIED THE RATE OF ROYALTY PAYMENT 3% IN RESPECT OF COMPUTATION OF ROYALTY RATE AS AGAINS T RATE OF 3.75% ADOPTED BY THE ASSESSEE. WE FIND THAT AN IDENTICA L ISSUE IN THE CASE OF THE ASSESSEE ITSELF WAS DECIDED BY THE CO-ORDINAT E BENCH OF THE ITAT VIDE ITA NO. 182, 216 & 1137/AHD/2011 AGAINST THE REVENUE PERTAINING TO ASSESSMENT YEAR 2005-06 AND 2006-07. THE RELEVA NT PART OF THE DECISION OF THE ITAT IS REPRODUCED AS UNDER:- 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE RECORD. WE FIND THAT THE CIT(A) WHILE DEL ETING THE ADDITION HAS NOTED THAT FACTS OF THE CASE OF THE ASSESSEE IN THIS YEAR ARE IDENTICAL TO THE EARLIER YEARS, AND HE HAD FOLLOWED THE D ECISION OF HIS PREDECESSOR. WE FURTHER FIND THAT IN ITA NO. 2363/AHD/2008 FOR A.Y.2004-05, SIMILAR ISSUE WAS DECIDED BY THE C O-ORDINATE BENCH OF 1TAT IN FAVOUR OF THE ASSESEE AND THE ADDITION WAS DELETED FOLLOWING THE ORDER IN REVENUE'S APPEAL FOR A.Y.2003-04 IN IT A NO.2281/AHD/2007, WHILE DECIDING THE REVENUE'S APPE AL, THE ISSUE WAS DECIDED BY HOLDING AS UNDER: '36. WE HAVE CONSIDERED RIVED SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD, AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE REGARDING PAYMENT OF ROYALTY AT THE RATE OF3.75% TO THE AE BY THE ASSESS EE, AS AGAINST THE ROYALTY AT THE RATE OF 3% BY OTHER GROUP ENTITI ES, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE AO THAT THE RO YALTY AT 3.75% WAS APPLIED AFTER REDUCING VARIOUS EXPENSES F ROM EX- FACTORY SALE VALUE OF THE CONCERNED PRODUCTS. IT WA S ALSO EXPLAINED BEFORE THE LEARNED CIT(A) THAT IF THE EFF ECTIVE RATE IS CONSIDERED, THEN THE EFFECTIVE RATE OF ROYALTY IS L ESS THAN THE ROYALTY PAID BY OTHER AES TO HITACHI LIMITED I.E., PARENT COMPANY. IN OUR CONSIDERED OPINION, ONLY STATED RAT E IS NOT DECISIVE AND EFFECTIVE RATE HAS TO BE CONSIDERED, A ND WHEN THE ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 7 - AMOUNT OF ROYALTY PAID BY THE ASSESSEE IS CONSIDERE D WITH EX- FACTORY SALE VALUE, WITHOUT DEDUCTING VARIOUS EXPEN SES, SUCH AS DEALER COMMISSION, SPECIAL COMMISSION, WARRANTY ETC ., AS HAS BEEN NOTED BY THE LEARNED CIT(A) AT PAGE NO.4 OF HI S ORDER, THEN THE EFFECTIVE RATE WORKED OUT IS ONLY 2.3% ON SALE, AS AGAINST 3% PAID BY OILIER GROUP ENTITIES. THIS FINDING OF THE FACT GIVEN BY LEARNED CIT(A) COULD NOT BE CONTROVERTED BY THE LEA RNED DR OF THE REVENUE, AND HENCE, ON THIS ASPECT, WE HOLD THA T NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LEAR NED CIT(A), AND ACCORDINGLY, THE GROUND NO.5 OF THE REVENUE IS REJE CTED. ' SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTI CAL TO EARLIER YEARS AS ADMITTED BY BOTH THE PARTIES, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT( A) ON THIS ISSUE, AND THUS, THIS GROUND OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH AS CITED ABOVE ON IDENTICAL FACTS AND ISSUE INVOLVED DURING THE YEAR UNDER CONSIDERATION WE DO NOT FIND ANY MERIT IN THE APPE AL OF THE REVENUE, THEREFORE, THE SAME IS DISMISSED. 11. AS THE ISSUE INVOLVED IN APPEAL ON HAND IS I DENTICAL TO THE ISSUE AS DISCUSSED ABOVE, THEREFORE RESPECTFULLY FOLLOWING T HE SAME, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DEL ETE THE ADDITION MADE BY HIM AS SUGGESTED BY THE TPO. HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 12. THE SECOND ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER FOR RS. 1,00,09,859/- ON ACCOUNT OF PROVISIONS FOR WARRANTY . ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 8 - 12.1. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED EXPENSES OF RS. 3,26,14,162/- ON ACCOUNT OF SALES AND WARRAN TY PROVISION. THE SAID AMOUNT WAS TOWARDS THE COST OF 5-YEAR WARRANTY OF C OMPRESSOR AMOUNTING TO RS. 33,75,124/- AND A ONE-YEAR COMPREH ENSIVE WARRANTY ON AIR CONDITIONER AMOUNTING TO RS. 2,92,39,038/- ONLY . 12.2. THE ASSESSING OFFICER DURING THE ASSESSMENT P ROCEEDINGS NOTICED THAT THE PERIOD OF WARRANTY EXTENDS THE PERIOD BEYO ND THE FINANCIAL YEAR UNDER CONSIDERATION. THUS, HE WAS OF THE VIEW THAT THE AMOUNT OF PROVISION FOR THE WARRANTY BEYOND THE FINANCIAL YEA R UNDER CONSIDERATION IS NOT ELIGIBLE FOR DEDUCTION AS PER THE MERCANTILE SYSTEM OF ACCOUNTING. ACCORDINGLY, THE ASSESSING OFFICER ISSUED A SHOW-CA USE NOTICE TO THE ASSESSEE FOR ITS EXPLANATION. 12.3. IN COMPLIANCE WITH IT, THE ASSESSEE SUBMITTED THAT THE PROVISION FOR WARRANTY IS MADE ON THE SALE OF THE AIR CONDITI ONER TO THE PARTY. AS SUCH, THE SALE PRICE OF THE AIR CONDITIONER COMPRIS ES THE WARRANTY EXPENSES. THE PROVISION FOR THE WARRANTY WAS MADE O N A SCIENTIFIC BASIS WHICH IS ACCORDINGLY ALLOWABLE AS HELD BY THE HONB LE APEX COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. VS. CIT REP ORTED IN 314 ITR 62. 12.4. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE ALSO CLAIMED THAT IF THE PROVISION FOR WARRANTY EXPENSE IS DISALLOWED, T HEN THE CORRESPONDING INCOME BOOKED IN THE FORM OF SALES SHOULD ALSO BE A LLOWED AS A DEDUCTION IN ITS PROPORTION. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 9 - 12.5. HOWEVER, THE ASSESSING OFFICER DISREGARDED TH E CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE PROVISION FOR THE WA RRANTY HAS NOT BEEN CALCULATED ON A SCIENTIFIC BASIS. AS THE ASSESSEE I S FOLLOWING MERCANTILE ACCOUNTING SYSTEM, THEN THE EXPENSES SHOULD BE ALLO WED IN THE YEAR IN WHICH THE LIABILITY OF THE SAME ACCRUES. ACCORDINGL Y, THE ASSESSING OFFICER HELD THAT THE PROVISIONS FOR THE WARRANTY O F ONE YEAR FOR AC SHOULD BE ALLOWED IN PROPORTION TO NINE MONTHS ONLY IN THE YEAR UNDER CONSIDERATION. THUS, THE ASSESSING OFFICER WORKED OUT THE PROVISION FOR WARRANTY EXPENSES PERTAINING TO THREE MONTHS FOR RS . 73,09,760/- BEING RS. 2,92,39,038 X 3 12. 12.6. SIMILARLY, THE ASSESSING OFFICER WAS OF THE V IEW THAT THE COMPRESSOR WARRANTY EXPENSES FOR FIVE YEARS SHOULD BE ALLOWED ONLY FOR ONE YEAR. ACCORDINGLY, THE ASSESSING OFFICER WORK ED OUT THE EXPENSES OF RS. 27,00,099/- BEING RS. 33,75,124 X 4 5. TH US, THE SUM OF RS. 1,00,09,859/- (RS. 73,09,760 + 27,00,099) WAS DISA LLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 13. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO T HE LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: 6.3. DECISION ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 10 - I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. IT HAS BEEN POINTED OUT BY THE APPELLANT THAT WHILE DECIDING TH E APPEAL PERTAINING TO A.Y. 2007-08, THE SIMILAR ISSUE WAS D ECIDED IN FAVOUR OF THE APPELLANT BY MY PREDECESSOR CIT(A) VIDE APPE AL NUMBER CIT(A)-VIII/DC CIR-4/744/10-11 DATED 23-06-11. SIN CE THE FACTS AND THE ISSUE ARE IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF MY PREDECESSOR THE ADDITION MADE ON ACCOUNT WARRANT Y EXPENSES OF RS. 1,00,09,859/- IS DIRECTED TO BE DELETED. 14. BEING AGGRIEVED BY ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 15. BOTH THE LD. AR AND THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS FAVORABLE TO THEM. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT T HE ITAT IN ASSESSEES CASE INVOLVING IDENTICAL ISSUE HAS DELETED THE ADDI TION MADE BY THE AO IN ITA NO. 2119/AHD/2011 FOR AY 2007-08 VIDE ORDER DAT ED 29/08/2018. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER:- 12. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIALS ON RECORD CAREFULLY. WE HAVE NOTICED THAT THE CO-OR DINATE BENCH OF THE ITAT VIDE ITA 2303 & 2420/AHD/2015 FOR ASSESSMENT Y EAR 2000-01 TO 2001-02 HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR O F THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE CO-ORDINATE BE NCH IS REPRODUCED AS UNDER:- 5. LEARNED DEPARTMENT REPRESENTATIVE FAILS TO CONTR OVERT THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING CONSISTEN T METHOD IN ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 11 - CREATING SIMILAR WARRANTY PROVISION IN SUBSEQUENT A SSESSMENT YEARS AS WELL. RELEVANT ASSESSMENT ORDER IN SUCH A CASE DATED 30.04.2015 FOR ASSESSMENT YEAR 2011-12 INDICATES TH AT THERE IS NO SUCH DISALLOWANCE MADE AT THE REVENUES BEHEST. THE ASSESSEE IS ASSESSED AT THE SAME RATE THROUGHOUT. ALL THE ABOVE NARRATED FACTS THEREFORE MAKE IT CRYSTAL CLEAR THA T THE ASSESSEE HAS SATISFIED THE RELEVANT CONDITIONS FOR CLAIMING THE IMPUGNED WARRANTY PROVISIONS AS DEDUCTION AS ENVISAGED IN HO NBLE APEX COURTS DECISION(SUPRA). WE ACCORDINGLY ACCEPT ASS ESSEES SUBSTANTIVE GROUND SEEKING TO CLAIM THE IMPUGNED WA RRANTY PROVISION QUA BOTH FIVE YEARS AND ONE YEAR (SUPRA) AS COMPUTED ON SCIENTIFIC BASIS AS PER ITS FORGOING EXPERIENCE. ITS IDENTICAL SUBSTANTIVE GROUNDS IN BOTH CASES ITA NOS. 2303 & 2304/AHD/2015 AS WELL AS THE MAIN CASES STAND ACCEP TED WHEREAS REVENUES CORRESPONDING SUBSTANTIVE GROUNDS ARE DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH AS CITED ABOVE WE DO NOT FIND ANY ERROR IN THE DECISION OF T HE LD. CIT(A), THEREFORE, THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. 17. AS THE ISSUE INVOLVED IN APPEAL ON HAND IS I DENTICAL TO THE ISSUE AS DISCUSSED ABOVE, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD . CIT(A). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDIT ION MADE BY HIM. 17.1. WE ALSO NOTE THAT THE REVENUE PREFERRED AN AP PEAL AGAINST THE ORDER OF ITAT WHICH WAS DECIDED BY THE HONBLE GUJ ARAT HIGH COURT IN THE TAX APPEAL NO. 1236 OF 2018, DATED 09/10/2018, IN FAVOR OF THE ASSESSEE. THE RELEVANT EXTRACT IS REPRODUCED AS UN DER: ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 12 - 5. QUITE APART FROM THE TRIBUNALS OBSERVATIONS ON THE ISSUE OF CONSISTENCY WHICH SEEM TO BE COMMENCING, INDEPENDEN TLY ALSO WE DO NOT THINK THAT THE DISALLOWANCE WAS JUSTIFIED ON MERITS. THE ASSESSEE WHO WAS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND SELLING AIR CONDITIONED UNITS WOULD PROVIDE FIVE YE AR WARRANTY TO THE CUSTOMER. THE EXPENDITURE WAS ESTIMATED ON THE BASIS OF DATE OF PAST FIVE YEARS OF FAILURE OF THE COMPRESSORS WH ICH OBVIOUSLY IN ALL AIR CONDITIONED UNITS WOULD BE THE MAIN CONCERN . THE PRINCIPLE OF ALLOWING EXPENDITURE ON THE BASIS OF ESTIMATION WHICH IS DERIVED THROUGH SOME SCIENTIFIC EXERCISE, WHICH IN STATISTI CAL TERMS USED AS ACTUARY IS WELL ESTABLISHED. 17.2. THE ISSUE IN REVENUES APPEAL IS ALSO IDENT ICAL TO THE ISSUE AS DISCUSSED ABOVE. HENCE, THE GROUND OF APPEAL OF TH E REVENUE IS DISMISSED. 18. THE THIRD GROUND RAISED BY THE REVENUE IS THAT THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S 80IB(10) OF THE ACT ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION GAIN IN RESPECT OF ITS JAMMU UNIT. 19. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S SHOWN FOREIGN EXCHANGE FLUCTUATION GAIN OF RS. 1,97,47,523/- ONLY . AS PER THE ASSESSEE, IT HAS EARNED SUCH GAIN IN RESPECT OF RAW-MATERIAL PURCHASED ON CREDIT AS WELL AS THE WORKING CAPITAL BORROWED IN FOREIGN CUR RENCY. THE ASSESSEE FURTHER CLAIMED THAT THESE INCOME IS ARISING IN THE COURSE OF BUSINESS AND ACCORDINGLY, DEDUCTION U/S. 80IB(10) OF THE ACT IS AVAILABLE TO IT. 19.1. HOWEVER, THE ASSESSING OFFICER DISREGARDED TH E CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE GAIN SHOWN BY THE AS SESSEE IS NOT ARISING ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 13 - FROM ITS BUSINESS ACTIVITIES. THEREFORE, THE SAME S HOULD BE TREATED AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ASSESS ING OFFICER HELD THAT THE IMPUGNED GAIN IS NOT SUBJECT TO DEDUCTION U/S 8 0IB(10) OF THE ACT. THUS, THE SAME WAS DISALLOWED AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. 20. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A). 21. THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED TH AT THE ASSESSING OFFICER HAD ACCEPTED SUCH KIND OF GAIN AS BUSINESS INCOME IN RESPECT OF OTHER UNITS OF THE ASSESSEE. THUS, THE ASSESSING O FFICER HAS TAKEN A CONTRARY VIEW BY HOLDING SUCH GAIN AS INCOME FROM O THER SOURCES. 21.1. THE ASSESSEE ALSO SUBMITTED THAT IT HAS BEEN SHOWING SUCH GAIN AS BUSINESS INCOME FROM THE LAST SEVERAL YEARS CONSIST ENTLY. AS SUCH, IN THE SUBSEQUENT YEAR, IT HAS INCURRED A LOSS ON ACCOUNT OF EXCHANGE FLUCTUATION AMOUNTING TO RS. 4,20,47,705/- AND ACCORDINGLY IT C LAIMED LESS DEDUCTION U/S 80IB(10) OF THE ACT. 22. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE HELD THAT THE IMPUGNED GAIN IS ARISING TO THE ASSES SEE IN THE COURSE OF ITS BUSINESS ACTIVITIES. THEREFORE, THE SAME IS ELIGIBL E FOR DEDUCTION U/S 80IB (10) OF THE ACT. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 14 - 23. BEING AGGRIEVED BY ORDER OF LD. CIT(A), THE REV ENUE IS IN APPEAL BEFORE US. 24. BOTH THE PARTIES RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS FAVORABLE TO THEM. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSE SSEE CLAIMED THAT IT HAD EARNED FOREIGN EXCHANGE GAIN IN CONNECTION WITH THE RAW-MATERIAL IMPORTED AND WORKING CAPITAL BORROWED IN FOREIGN CU RRENCY AND THE ASSESSING OFFICER HAS NOT DOUBTED THIS FACT. THERE FORE, WE CAN SAFELY PRESUME THAT ASSESSEE HAS EARNED FOREIGN EXCHANGE G AIN FROM THE ACTIVITIES CARRIED OUT IN CONNECTION WITH THE BUSIN ESS. THE PURCHASE OF RAW MATERIALS AND WORKING CAPITAL LOAN ARE AN INTEG RAL PART AND HAS DIRECT NEXUS WITH THE BUSINESS. THEREFORE, ANY GAIN ARISI NG IN THE COURSE OF BUSINESS ARE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. 25.1. IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESS EE IN THE SUCCEEDING YEAR HAS INCURRED A LOSS OF RS. 4,20,47,705/- WHICH WAS ACCEPTED AS A BUSINESS LOSS BY THE REVENUE. THEREFORE, WE HOLD THAT THE I MPUGNED GAIN IS A BUSINESS INCOME AND ELIGIBLE FOR DEDUCTION U/S. 80I B(10) OF THE ACT. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF METROCHEM INDUSTR IES LTD. REPORTED IN 389 ITR 181 WHEREIN IT WAS HELD AS UNDER: ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 15 - 33. LEARNED COUNSEL MR. NITIN MEHTA FOR THE REVENU E, HOWEVER, CONTENDED THAT THE FOREIGN EXCHANGE FLUCTUATION GAI N MAY ARISE UNDER VARIOUS CIRCUMSTANCES, NOT ALL OF THEM MAY BE COVER ED UNDER SECTION 80HHC OF THE ACT. PRIMARILY, WE DO NOT SEE ANY DIST INCTION POSSIBLE ON THE BASIS OF DIFFERENT SITUATIONS UNDER WHICH FOREI GN EXCHANGE FLUCTUATION MAY RESULT. WE ARE CONSCIOUS THAT LAW P ERMITS HEDGING OF FOREIGN EXCHANGE FLUCTUATION RISK TO AN IMPORTER OR AN EXPORTER. THE EXPORTER MAY, THEREFORE, TAKE STEPS AS FOUND COMMER CIALLY PRUDENT TO SAFEGUARD HIMSELF AGAINST DRASTIC FOREIGN EXCHANGE RATE FLUCTUATIONS AND IN THE PROCESS MAY ALSO LIMIT THE POSSIBILITY O F GAIN IN CASE OF FAVOURABLE CURRENCY RATE TRENDS. NEVERTHELESS, THE RESULTANT GAIN IN FOREIGN EXCHANGE RATE WOULD STILL BE DUE TO THE EXP ORT MADE BY THE ASSESSEE. IN ANY CASE, NO SUCH FACTS ARE RECORDED B Y THE ASSESSING OFFICER IN ANY OF THESE CASES. WE WOULD, THEREFORE, NOT ENTERTAIN SUCH SPECULATIVE CONTENTION. 34. IN THE RESULT, THE QUESTION IS ANSWERED IN FAVO UR OF THE ASSESSEES AND AGAINST THE REVENUE. ALL TAX APPEALS ARE DISMISSED. ' 25.2. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY RE ASON TO DISTURB THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE BY HIM. HENCE, THE GROU ND OF REVENUES APPEAL IS DISMISSED. 26. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S 80IB(4) OF THE ACT FO R RS. 5,83,00,000/- IN RESPECT OF JAMMU UNITS. 27. AT THE OUTSET, WE FIND THAT THE ASSESSEE HAS FI LED AN APPLICATION DATED 28/06/2018 UNDER RULE 27 OF THE INCOME TAX AP PELLATE TRIBUNAL RULES, 1963 CLAIMING THAT THE EXCISE DUTY REFUND SH OULD BE TREATED AS CAPITAL RECEIPTS. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 16 - 28. THE ASSESSEE DURING THE YEAR HAS CLAIMED TO HAV E RECEIVED A REFUND OF EXCISE DUTY AMOUNTING TO RS. 5,83,00,000/- WHICH WAS SHOWN AS BUSINESS INCOME. ACCORDINGLY, THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IB(4) OF THE ACT IN RESPECT OF SUCH REFUND OF EXC ISE DUTY. 29. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE AL SO CLAIMED THAT REFUND OF EXCISE DUTY SHOULD BE TREATED AS A CAPITA L RECEIPT WHICH IS NOT CHARGEABLE TO TAX. 29.1. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE REFUND OF EXCISE DUTY INCOME IS NOT ARISING FROM THE ACTIVITI ES OF THE BUSINESS OF THE ELIGIBLE UNIT. THEREFORE, THE SAME IS INELIGIBLE FO R DEDUCTION U/S 80IB(4) OF THE ACT. THE ASSESSING OFFICER WAS ALSO OF THE V IEW THAT THE REFUND OF EXCISE DUTY INCOME IS IN THE NATURE OF REVENUE RECE IPTS. THEREFORE, THE SAME CANNOT BE TREATED AS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. 30. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO T HE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFI CER BY OBSERVING AS UNDER: 8.3. DECISION I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS HELD THAT THE EXCISE DUTY REFUND RECEIVED BY THE APPELLANT WA S NOT A PROFIT DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING BUT IT WAS A RESULT OF ESTABLISHMENT OF INDUSTRIAL UNDERTAKING IN INDUSTRI ALLY BACKWARD AREA. HE HELD THAT IT WAS AN INCENTIVE AND NOT THE PROFIT DERIVED FROM ANY ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 17 - BUSINESS AND ACCORDINGLY, IT WAS NOT ELIGIBLE FOR D EDUCTION UNDER SECTION 80-IB. THE APPELLANT HAS SUBMITTED THAT TH E EXCISE DUTY REFUND IS AN INTEGRAL PART OF BUSINESS ACTIVITY AND THEREF ORE, IT SHOULD BE ALLOWED DEDUCTION UNDER 80IB ON THE SAME. AFTER CONSIDERING THE FACTS IT IS NOTED THAT THE AP PELLANT AT THE TIME OF MANUFACTURING AND CLEARING THE GOODS PAYS T HE EXCISE DUTY FROM ITS P&L ACCOUNT AFTER TAKING THE DUE CREDIT OF CENV AT WHICH IS AVAILABLE ON ACCOUNT OF PURCHASE OF RAW MATERIAL. THE EXCISE DUTY WHICH CANNOT BE ADJUSTED FROM THE CREDIT AVAILABLE TO IT IS PAID BY THE COMPANY. THE STATEMENT INCLUDING THE TOTAL EXCISE DUTY, THE CREDIT TAKEN FOR CENVAT AND THE EXCISE DUTY PAID IS SUBMITTED TO THE EXCISE AUTHORITIES CLAIMING THE REFUND. THE AUTHORITIES A FTER VERIFYING THE DETAILS GRANT THE REFUND OF THE EXCISE DUTY. THERE FORE, THE WHOLE PROCESS CLEARLY SHOWS THAT THE EXCISE DUTY WHICH IS PAID IS REFUNDED TO THE APPELLANT. THEREFORE, THERE IS NO NET GAIN TO THE APPELLANT. THE EXCISE DUTY WHICH IS PAID IS REFUNDED AND THEREFORE , THE RESULTANT EFFECT IS NIL. THE PAYMENT OF CENTRAL EXCISE DUTY HAS A D IRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY THE REFUND OF CENTRAL EXCISE DUTY ALSO HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTI VITY. THEREFORE, THERE WAS AN INEXTRICABLE LINK BETWEEN THE MANUFACT URING ACTIVITY, THE PAYMENT OF CENTRAL EXCISE DUTY AND ITS REFUND. THE REFORE, IT IS DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDER TAKING AND ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. IT IS FURTHER NOTED THAT THE ISSUE IS SQUARELY COVE RED IN THE FAVOUR OF APPELLANT BY SEVERAL JUDGEMENTS OF HIGH COURT AS WELL AS ITAT. RECENTLY, THE HONOURABLE B BENCH OF AHMEDABAD ITAT IN THE CASE OF ELECTRO-FERRO ALLOYS ITA NO.4523 TO 4527/AHD/2007 A ND CO NO.171/AHD/2008 HAS TAKEN A SIMILAR VIEW AND DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE MENTIONED DISCUSSION AND THE J UDICIAL PRONOUNCEMENTS IT IS HELD THAT THE EXCISE DUTY REFE RRED IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB. THE DISALLOWANCE MAD E BY THE A.O. IS DIRECTED TO BE DELETED. 31. AGGRIEVED BY ORDER OF THE LD. CIT(A), THE REVEN UE IS IN APPEAL BEFORE US. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 18 - 32. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AS SESSING OFFICER. 33. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT TH E EXCISE DUTY REFUND IS DIRECTLY LINKED WITH HIS BUSINESS ACTIVIT IES. THEREFORE, THE SAME SHOULD BE ELIGIBLE FOR DEDUCTION U/S 80IB(4) OF THE ACT. 34. WITHOUT PREJUDICE TO THE ABOVE, THE LD. AR ALSO SUBMITTED THAT THE REFUND OF EXCISE DUTY SHOULD BE TREATED AS A CAPITA L RECEIPT AS IT RELATES TO THE PROMOTION OF THE INDUSTRIES IN THE BACKWARD ARE A. 35. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW, THE E XCISE DUTY REFUND HAS A LIVE LINK WITH THE BUSINESS ACTIVITIES OF THE ASSES SEE. THEREFORE, WE HOLD THAT THE EXCISE DUTY REFUND IS ELIGIBLE U/S. 80IB(4 ) OF THE ACT. IN THIS REGARD, WE SUPPORT AND GUIDANCE FROM THE JUDGMENT O F HONBLE SUPREME COURT IN THE CASE OF MEGHALAYA STEEL LTD. REPORTED IN 383 ITR 217, WHEREIN IT WAS HELD AS UNDER: SECTION 28(III)(B)* SPECIFICALLY STATES THAT INCOM E FROM CASH ASSISTANCE, BY WHATEVER NAME CALLED, RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA , WILL BE INCOME CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS OR PROFESSION'. IF CASH ASSISTANCE RECEIVED OR RECE IVABLE AGAINST EXPORTS SCHEMES ARE INCLUDED AS BEING INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', IT IS OBVIOUS THA T SUBSIDIES WHICH GO TO REIMBURSEMENT OF COST IN THE PRODUCTION OF GOODS OF A PARTICULAR BUSINESS WOULD ALSO HAVE TO BE INCLUDED UNDER THE H EAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', AND NOT UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 19 - 36. WE ALSO FIND SUPPORT AND GUIDANCE FROM THE ORDE R OF THIS TRIBUNAL IN THE CASE OF M/S. CADILA PHARMACEUTICALS LTD. VS. DCIT IN ITA NO.1117/AHD/2012 VIDE ORDER DATED 11/09/2017, WHERE IN IT WAS HELD AS UNDER: 21. THE ASSESSEES FIFTH SUBSTANTIVE GROUND CHA LLENGES SECTION 80IB DEDUCTION DISALLOWANCE OF RS. 16,34,58,692/- OUT OF TOTAL CLAIM OF RS. 53,25,79,553/; AS MADE BY THE LOWER AUTHORITIES. T HE ABOVE DISALLOWANCE FIGURE INVOLVES EXCISE DUTY REFUND AMO UNT OF RS. 8,12,71,702/-. THE DRP QUOTED HONBLE APEX COURTS DECISION IN LIBERTY INDIA VS. CIT (2009) 317 ITR 218 IN CONCLUD ING THE ABOVE EXCISE REFUND TO BE NOT AN INCOME DERIVED FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING. WE FIND THAT EARLIER CO-ORDINATE BENC H IN ASSESSMENT YEAR 2007-08(SUPRA) HAD FOLLOWED HONBLE APEX COURTS RE CENT DECISION IN CIT VS. MEGHALAYA STEEL LTD. CIVIL APPEAL NO.7622/2 014 IN HOLDING THAT SUCH A REFUND BY WAY OF AN INCENTIVE SUBSIDY RESULT S IN REIMBURSEMENT OF COST OF PRODUCTION AS COVERED U/S.28 OF THE ACT. THE REVENUE FAILS TO REBUT THIS FACTUAL AND LEGAL POSITION. WE THEREFOR E TREAT ASSESSEES ABOVE EXCISE REFUND COMPONENT TO BE AN INCOME ELIGI BLE FOR SECTION 80IB DEDUCTION. 37. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB(4) OF THE ACT IN RESPECT OF EXCI SE DUTY REFUND. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). COMING TO THE APPLICATION FILED BY THE ASSESSEE UND ER RULE 27 OF ITAT RULES, 1963. 38. IN THIS REGARD, WE NOTE THAT THE ASSESSEE HA S RECEIVED THE REFUND OF EXCISE DUTY IN TERMS OF NOTIFICATION NO. 56/2002 AN D 57/2002 DATED 14.11.2002 WHICH HAS BEEN HELD AS CAPITAL SUBSIDY B Y THE JUDGMENT OF ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 20 - HONBLE HIGH COURT OF JAMMU & KASHMIR IN THE CASE O F SHREE BALAJI ALLOYS VS. CIT REPORTED IN 333 ITR 335, WHEREIN IT WAS HELD AS UNDER: 30. FOR ALL WHAT HAS BEEN SAID ABOVE, THE FINDING OF T HE TRIBUNAL ON THE FIRST ISSUE THAT THE EXCISE DUTY REFUND, INTERE ST SUBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCENTIVES, HENCE REVENUE RECEIPT, CANNOT BE SUSTAINED, BEING AGAINST THE LAW LAID DOW N BY HON'BLE SUPREME COURT OF INDIA IN SAHNEY STEEL & PRESS WORK S LTD.'S CASE (SUPRA) AND PONNI SUGARS & CHEMICALS LTD.'S CASE (S UPRA). 31. THE FINDING OF THE TRIBUNAL THAT THE INCENTIVES WE RE REVENUE RECEIPT IS, ACCORDINGLY, SET ASIDE HOLDING THE INCENTIVES T O BE CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEES. 38.1. WE FURTHER NOTE THAT THE HONBLE SUPREME COU RT UPHELD THE ABOVE JUDGMENT OF HON'BLE J&K HIGH COURT IN THE CASE OF C IT VS. SHREE BALAJI ALLOY REPORTED IN 80 TAXMANN.COM 239. 38.2. FROM THE ABOVE, THERE REMAINS NO AMBIGUITY TH AT THE AMOUNT OF EXCISE DUTY IS CAPITAL RECEIPT NOT CHARGEABLE TO TA X. 38.3. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REAS ON TO DISTURB THE FINDINGS OF THE LD. CIT(A), THEREFORE THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED, AND THE GROUND OF APPEAL OF T HE ASSESSEE IN THE APPLICATION FILED UNDER RULE NO. 27 OF ITAT IS ALLO WED. 39. THE LAST ISSUE RAISED BY THE REVENUE IS THAT TH E LD. CIT(A) ERRED IN DIRECTING TO ALLOW MAT CREDIT U/S 115JAA OF THE ACT AS INCREASED BY THE AMOUNT OF SURCHARGE AND EDUCATION CESS. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 21 - 40. THE ASSESSEE WHILE WORKING OUT THE TAX LIABILIT Y UNDER THE NORMAL PROVISIONS OF ACT HAS CLAIMED THE CREDIT OF THE TAX PAID UNDER MAT ALONG WITH THE SURCHARGE AND EDUCATION CESS. HOWEVER, TH E ASSESSING OFFICER DID NOT ALLOW THE BENEFIT OF MAT CREDIT TO THE ASSE SSEE BY THE AMOUNT OF SURCHARGE AND EDUCATION CESS. 41. THE AGGRIEVED ASSESSEE, PREFERRED AN APPEAL TO THE LD. CIT(A) WHO HELD THAT THE MEANING OF TAX AS DEFINED UNDER THE P ROVISIONS OF SECTION 2(43) OF THE ACT R.W. THE EXPLANATION 2 TO SECTION 115JB OF THE ACT INCLUDES THE AMOUNT OF SURCHARGE AND EDUCATION CESS . ACCORDINGLY, THE LD. CIT(A) ALLOWED THE MAT CREDIT TO THE ASSESSEE I NCLUDING SURCHARGE AND EDUCATION CESS. 42. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A), REV ENUE IS IN APPEAL BEFORE US. 43. BOTH THE PARTIES BEFORE US HAVE RELIED ON THE O RDERS OF THE AUTHORITIES BELOW AS FAVORABLE TO THEM. 44. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THE ISSUE OF MAT CREDIT U/S. 115JAA OF THE ACT HAS BEEN SETTLED BY THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHREE S.R.EI INFRASTRUCT URE FINANCE REPORTED IN 395 ITR 291 (CAL.), WHEREIN IT WAS HELD AS UNDER : ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 22 - THEREFORE, THE TRIBUNAL WAS RIGHT IN CONFIRMING THE SET OFF OF MAT CREDIT UNDER SECTION 115JAA BROUGHT FORWARD FROM EA RLIER YEARS AGAINST TAX ON TOTAL INCOME INCLUDING SURCHARGE AND EDUCATION CESS INSTEAD OF ADJUSTING THE SAME FROM TAX ON TOTAL INC OME BEFORE CHARGING SUCH SURCHARGE AND EDUCATION CESS. 45. THE ISSUE IN THE CASE ON HAND IS IDENTICAL TO T HE ISSUE AS DISCUSSED ABOVE. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). HENCE, THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 46. REMAINING GROUNDS ARE GENERAL IN NATURE WHICH R EQUIRES NO INDEPENDENT ADJUDICATION. 47. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, AND THE ISSUE RAISED BY THE ASSESSEE IN THE APPLICATION UNDER RUL E 27 OF ITAT RULES IS ALLOWED. REVENUES APPEAL IN ITA NO.2286/AHD/2014 FOR AY 200 9-10 48. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 98,58,674/- MADE ON ACCOUNT OF UPWA RD ADJUSTMENT FOR ROYALTY PAYMENT MADE TO THE AE, WITHOUT PROPERL Y APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON R ECORD. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS. 2,44,01,506/- MADE ON ACCOUNT OF WA RRANTY ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 23 - EXPENSES, WITHOUT PROPERLY APPRECIATING THE FACTS O F THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS. 4,62,45,307/- MADE U/S.80IB OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 49. SO FAR AS GROUND NOS.1 & 2 ARE CONCERNED, THE S AME ARE IDENTICAL TO THE FACTS OF GROUND NOS.1 & 2 IN ITA NO.2399/AHD /2013 FOR AY 2008-09 OF REVENUES APPEAL(SUPRA). SINCE IDENTICA L ISSUES ARE INVOLVED IN THIS YEAR ALSO, THEREFORE, TAKING A CONSISTENT V IEW AND RESPECTFULLY FOLLOWING THE ORDER PASSED IN ITA NO.2399/AHD/2013, GROUND NOS.1 & 2 OF REVENUES APPEAL ARE DISMISSED. 50. LIKEWISE, GROUND NO.3 IS ALSO IDENTICAL TO THE FACTS OF GROUND NO.4 IN ITA NO.2399/AHD/2013 FOR AY 2008-09 OF REVENUES APPEAL (SUPRA). RESPECTFULLY FOLLOWING THE ORDER PASSED IN ITA NO.2 399/AHD/2013, GROUND NO.3 OF REVENUES APPEAL IS DISMISSED. 51. REMAINING GROUNDS ARE GENERAL IN NATURE WHICH R EQUIRES NO INDEPENDENT ADJUDICATION. REVENUES APPEAL IN ITA NO.931/AHD/2016 FOR AY 2010 -11 52. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEA L: ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 24 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS. 1,59,20,901/- ON ACCOUNT OF UPWARD ADJUSTMENT OF INTERNATIONAL TRACTION IN RESPECT OF ROYALTY PAY MENT. 2. THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE TO BOOK PROFIT UNDER 115JB CONSEQUENT TO THE UPWARD ADJUSTM ENT MADE U/S.92CA. 3. THE LD.CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 2,86,64,963/- MADE BY THE A O ON ACCOUNT OF PROVISION FOR WARRANTIES WITHOUT APPRECI ATING FACTS THAT THIS AMOUNT IS A PROVISION AND A CONTINGENT, U NASCERTAINED AND NON-CRYSTALLIZED LIABILITY, WHICH IS NOT SCIENT IFICALLY ARRIVED AT. 4. THE LD.CIT(A) ERRED IN DELETING THE 115JB ADJUSTMEN T MADE CONSEQUENTIAL TO THE ADDITION OF WARRANTY EXPENSES. 5. THE LD.CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW DEDUCTION OF RS. 3,94,53,426/- U/S. 80IB(4) I N RESPECT OF JAMMU UNIT. 6. THE LD.CIT(A) ALSO ERRED IN DIRECTING TO ALLOW MAT CREDIT AS INCREASED BY SURCHARGE AND EDUCATION CESS WHEN THE SAID MAT ALREADY INCLUDES THE SURCHARGE AND CESS. 53. APROPOS TO GROUND NO.1 OF REVENUES APPEAL, THE ISSUE IS SIMILAR TO GROUND NO.1 OF ITA NO. 2399/AHD/2013 FOR AY 2008 -09. THUS, FOR PARITY OF REASONS NOTED ABOVE, OUR VIEW IN ITA NO.2 399/AHD/2013 FOR AY 2008-09 ABOVE SHALL APPLY MUTATIS MUTANDIS TO THE GROUND CAPTIONED ABOVE. AS A RESULT, THE GROUND OF APPEAL OF THE RE VENUE IN ITA NO.931/AHD/2016 FOR AY 2010-11 IS DISMISSED. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 25 - 54. GROUND NO.2 OF REVENUES APPEAL FOR THE DISALLO WANCE OF ROYALTY EXPENSES IS CONNECTED WITH THE ADJUSTMENT ON ACCOUN T OF TRANSFER PRICING UNDER SECTION 92CA(4) WHICH HAS ALSO BEEN ADDED IN DETERMINING THE INCOME UNDER SECTION 115JB OF THE ACT. HOWEVER, THE UPWARD ADJUSTMENT ON ACCOUNT OF ROYALTY PAYMENT HAS ALREADY BEEN DELE TED BY US IN THE PARA NO. 53 OF THIS ORDER. THEREFORE, IN OUR CONSIDERED VIEW, THERE IS NO NEED TO MAKE ANY ADDITION IN THE BOOK PROFIT UNDER SECTI ON 115JB OF THE ACT. HENCE THE GROUND OF APPEAL OF THE REVENUE BEING CON SEQUENTIAL IN NATURE IS DISMISSED. 55. GROUND NOS.3, 5 & 6 ARE SIMILAR TO GROUND N OS. 2, 4 & 5 OF REVENUES APPEAL IN ITA NO.2399/AHD/2013 FOR AY 200 8-09(SUPRA). FOR THE PARITY OF REASONS NOTED ABOVE, OUR VIEW IN ITA NO.2399/AHD/2013 FOR AY 2008-09 ABOVE SHALL APPLY MUTATIS MUTANDIS TO THE GROUNDS CAPTIONED ABOVE. THUS, GROUND NOS. 3, 5 & 6 RAISED BY THE REVENUE IN ITS APPEAL ARE DISMISSED. 56. GROUND NO.4 OF REVENUES APPEAL FOR THE ADDITIO N OF WARRANTY EXPENSES IN THE BOOK PROFIT IS CONNECTED WITH THE D ISALLOWANCE OF THE WARRANTY EXPENSES UNDER NORMAL COMPUTATION OF INCOM E WHICH HAS ALREADY BEEN DELETED BY US UNDER NORMAL COMPUTATION OF INCOME VIDE PARA NO. 55 OF THIS ORDER. THEREFORE, IN OUR CONSID ERED VIEW, THERE IS NO NEED TO MAKE ANY ADDITION IN THE BOOK PROFIT UNDER SECTION 115JB OF THE ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 26 - ACT ON ACCOUNT OF WARRANTY EXPENSES. HENCE THE GROU ND OF APPEAL OF THE REVENE BEING CONSEQUENTIAL IN NATURE IS DISMISSED. 57. IN THE RESULT, REVENUES APPEAL IN ITA NO.931/A HD/2016 FOR AY 2010-11 IS DISMISSED. ASSESSEES APPEAL IN ITA NO.860/AHD/2016 FOR AY 201 0-11 58. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN PARTLY UPHO LDING THE DISALLOWANCE ON ACCOUNT OF PROVISION FOR WARRANTY E XPENSES AMOUNTING TO RS. 91,44,050 (OUT OF TOTAL DISALLOWAN CE OF RS. 3,78,09,013) WHICH PERTAINED TO PROVIDING FIVE YEAR WARRANTY ON THE COMPRESSORS USED IN THE AIR CONDITIONERS SOLD D URING THE PRESENT ASSESSMENT YEAR. HE OUGHT TO HAVE APPRECIA TED, INTER ALIA, THAT THE APPELLANTS METHOD FOR ESTIMATING SUCH WAR RANTY EXPENSES YIELDED A RELIABLE ESTIMATE AND IN TERMS OF THE RAT IO OF THE SUPREME COURT DECISION IN ROTORK CONTROLS (INDIA) P.LTD. VS . CIT (180 TAXMAN 422), THE SAME DESERVED TO BE ALLOWED. 1.2. WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN T HE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT IT WAS AN INCONTROVERTIBLE FA CT THAT THE APPELLANT WAS PROVIDING A FIVE YEAR WARRANTY ON THE COMPRESSORS USED IN THE AIR CONDITIONERS SOLD BY IT AND, THEREF ORE, IT WAS NOT OPEN TO THE LEARNED CIT(A) TO UPHOLD THE IMPUGNED D ISALLOWANCE OF RS. 91,44,050 IN ITS ENTIRETY BUT INSTEAD, HE OU GHT TO HAVE GRANTED DEDUCTION OR DIRECTED FOR GRANTING DEDUCTIO N FOR SUCH AMOUNT AS WOULD BE WORKED OUT ON THE BASIS OF WHAT HE THOUGHT WAS A METHOD YIELDING A RELIABLE ESTIMATE FOR MAKIN G PROVISION ON ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 27 - THIS ACCOUNT, IF INDEED HE HAD CONCLUDED THAT THE A PPELLANTS METHOD OF ESTIMATE WAS NOT RELIABLE. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING T HE LEARNED ASSESSING OFFICERS ACTION OF MAKING AN ADDITION OF THE AMOUNT DISALLOWED BY HIM ON ACCOUNT OF PROVISION FOR WARRA NTY EXPENSES WHILE COMPUTING THE APPELLANTS NORMAL TOTAL INCOME , ALSO WHILE COMPUTING THE APPELLANTS BOOK PROFIT U/S.115JB ON THE GROUND THAT IT WAS NOT FOR AN ASCERTAINED LIABILITY AND IN SUSTAIN ING AN ADDITION OF RS. 91,44,050 TO THE APPELLANTS BOOK PROFIT ON THA T ACCOUNT. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISPOSING OF GR OUND NO.4.2 OF THE APPELLANTS APPEAL BEFORE HIM OSTENSIBLY IN FAV OUR OF THE APPELLANT BUT IN AN AMBIGUOUS MANNER AS UNDER: 5.6. ------- DDD NOW WITH REGARD TO THE DISALLOWANCE OF THE DEDUCTIO N U/S.80IB ON THE WARRANTY EXPENSES THIS ISSUE IS SIMILAR TO THAT OF THE PREVIOUS ASSESSMENT YEAR, FOLLOWING THE FINDING GIVEN FOR AY RS. 2009-10 & 2008-09 THE SAME IS DELETED. THUS THE SUB GROUND N O.4.2 IS ALLOWED IN FAVOUR OF THE APPELLANT THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE APPELLA NTS AFORESAID GROUND IN A CATEGORICAL MANNER SO AS NOT TO LEAVE A NY DOUBT ABOUT THE SAME HAVING BEEN DECIDED IN THE APPELLANTS FA VOUR. 3.2. WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT ANY ADDITION OR DISALLOWANCE THAT WAS MADE WHILE COMPUTING THE APPELLANTS INCOME UNDER THE HE AD PROFITS AND GAINS OF BUSINESS OR PROFESSION IN RESPECT OF WHICH THE APPELLANT WAS ELIGIBLE TO DEDUCTION U/S.80IB WAS BO UND TO RESULT INTO A CORRESPONDING INCREASE IN THE QUANTUM OF DED UCTION TO ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 28 - WHICH THE APPELLANT WAS ELIGIBLE UNDER THAT PROVISI ON AND THEREFORE, HE OUGHT TO HAVE DECIDED THE AFORESAID G ROUND NO.42 OF THE APPELLANTS APPEAL BEFORE HIM IN FAVOUR OF THE APPELLANT AND THAT TOO, IN A CATEGORICAL MANNER. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO.8 OF THE APPELLANTS APPEAL BEFORE HIM CHALLENGING THE L EVY OF INTEREST U/S.234B. HE OUGHT TO HAVE APPRECIATED, INTER ALIA , THAT THE APPELLANT HAD CHALLENGED THE VERY LEVY OF THIS INTE REST AND, IN THE PECULIAR FACTS AND CIRCUMSTANCES OF ITS CASE, EVEN IF THE IMPUGNED DISALLOWANCE CAME TO BE ULTIMATELY SUSTAINED, THE R ATIO OF THE DECISION OF THE GUJARAT HIGH COURT IN BHARAT MACHIN ERY AND HARDWARE MARTS CASE (136 ITR 875) AND OF THE DECIS ION OF THE ITAT, DELHI BENCH IN HARYANA WAREHOUSING CORPORATIO N V. DCIT [252 ITR (A.T.) 34] WAS ATTRACTED AND THE LEVY DESE RVED TO BE CANCELLED. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO.9 OF THE APPELLANTS APPEAL BEFORE HIM CHALLENGING THE I NITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C), AS PREMATURE. H E OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THERE BEING ABSOLUTELY NO WARRANT/JUSTIFICATION FOR INITIATING THE PENALTY PR OCEEDINGS, HE OUGHT TO HAVE ORDERED FOR THEIR BEING DROPPED, THER EBY SAVING BOTH THE APPELLANT AND THE DEPARTMENT FROM LONG DRAWN UN NECESSARY LITIGATION. 59. GROUND NO.1.1 & 1.2 IS SIMILAR TO GROUND NO.1 O F REVENUES APPEAL IN ITA NO. 2399/AHD/2013 FOR AY 2008-09(SUPR A) WHEREIN WE HAVE DECIDED THE ISSUE AGAINST THE REVENUE AND IN F AVOR OF THE ASSESSEE. FOR THE PARITY OF REASONS NOTED ABOVE, OUR VIEW IN ITA NO.2399/AHD/2013 FOR AY 2008-09 ABOVE SHALL APPLY MUTATIS MUTANDIS ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 29 - TO THE GROUND CAPTIONED ABOVE. THUS, GROUND NO.1.1 AND 1.2 RAISED BY THE ASSESSEE IN ITS APPEAL IS ALLOWED. 60. GROUND NOS. 2 OF THE ASSESSEES APPEAL IS SIMIL AR TO GROUND NO.4 OF REVENUES APPEAL IN ITA NO. 931/AHD/2016 FOR AY 2010-11(SUPRA) WHEREIN WE HAVE DECIDED THE ISSUE AGAINST THE REVEN UE AND IN FAVOR OF THE ASSESSEE. FOR THE PARITY OF REASONS NOTED ABOVE , OUR VIEW IN ITA NO. 931/AHD/2016 FOR AY 2010-11 ABOVE SHALL APPLY MUTATIS MUTANDIS TO THE GROUND CAPTIONED ABOVE. THUS, GROUND NO. 2 AND 1.2 RAISED BY THE ASSESSEE IN ITS APPEAL IS ALLOWED. 61. THE ISSUES RAISED IN GROUND NOS.3.1 & 3.2 BY TH E ASSESSEE IS THAT THE LD. CIT-A HAS DECIDED THE ISSUE RAISED BEFORE H IM IN THE GROUND NO. 4.2 IN FAVOR OF IT BUT IN AN AMBIGUOUS MANNER, AS W ELL AS THE DISALLOWANCE MADE, WILL BE SUBJECT TO DEDUCTION UNDER SECTION 80 -IB OF THE ACT. 61.1. THERE IS NO DISPUTE THAT THE ASSESSEE IS ELI GIBLE FOR DEDUCTION UNDER SECTION 80 IB OF THE ACT. THUS IF ANY DISALLOWANCE IS MADE ON ACCOUNT OF THE EXPENSES CLAIMED BY THE ASSESSEE THEN THE INCOM E OF THE ASSESSEE SHALL INCREASE WITH THE CORRESPONDING AMOUNT. HOWEV ER, THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB OF TH E ACT ON THE INCOME ENHANCED DUE TO SUCH DISALLOWANCE. REGARDING THIS, WE FIND RELEVANT TO REPRODUCE THE NECESSARY PORTION OF CIRCULAR NO.37 O F 2016 ISSUED BY CBDT DATED 02.11.2016 WHICH IS REPRODUCED BELOW:- ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 30 - 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED TH E SETTLED POSITION THAT THE DISALLOWANCES MADE UNDER SECTIONS 32, 40(A )(IA), 40A(3), 43B, ETC. OF THE ACT AND OTHER SPECIFIC DISALLOWANCES, R ELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION H AS BEEN CLAIMED, RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBL E BUSINESS, AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON THE P ROFITS SO ENHANCED BY THE DISALLOWANCE. 61.2. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW T HAT EVEN THE AMOUNT DISALLOWED THEN THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT FOR THE ENHANCED AMOUNT. IN VIEW OF ABOVE P ROPOSITION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD . CIT(A). WE UPHOLD THE SAME. HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 63. GROUND NO. 4 IS ALSO CONSEQUENTIAL AS NO AD DITION IS LEFT. THEREFORE WE DO NOT FIND ANY REASON TO ADJUDICATE THE SAME. H ENCE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 64. GROUND NO. 5 IS PRE-MATURE WHICH DOES NOT REQUI RE ANY INDEPENDENT ADJUDICATION. 65. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.860/ AHD/2016 FOR AY 2010-11 IS PARTLY ALLOWED. ITA NOS.2399/AHD/13, 2286/AHD/14 & 860/AHD/16 (REVE NUE) & 931/AHD/2016 (BY ASSESSEE) DCIT VS. HITACHI HOME& LIFE SOLUTIONS (I) LTD. ASST.YEARS 2008-09, 2009-10, 2010 -11 - 31 - 66. IN THE COMBINED RESULT, ALL THE THREE APPEALS O F THE REVENUE ARE DISMISSED, WHEREAS ASSESSEES APPEAL IS PARTLY ALLO WED. THIS ORDER PRONOUNCED IN OPEN COURT ON 04 /03/2019 SD/- SD/- ( RAJPAL YADAV ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 04/03/2019 .. ,... / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' ( / CONCERNED CIT 4. ( ( ) / THE CIT(A)-VIII, AHMEDABAD 5. +,-'&' , &' , % / DR, ITAT, AHMEDABAD 6. -012 / GUARD FILE. / BY ORDER, #+' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, / ITAT, AHMEDABAD 1. DATE OF DICTATION (9.2.2019DICTATION PAD 44- PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.2.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.4.3.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 4.3.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER