The ACIT, Corp Circle-1(1), Kochi, Ernakulam V. Appolo Tyres Ltd, Ernakulam

ITA 247/COCH/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1106 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: MRS ANANYA KAPOOOR
• Keywords: Transfer pricing; Business expenditure; Opportunity of being heard; Bad and doubtful debts; Right to appeal; Commercial expediency; Revised return; Revenue expenditure; Capital expenditure; Set aside
• Section: 37; 144; 143(3); 37(1); 80IA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 247/COCH/2018 ASSESSMENT YEAR : 2006 - 07 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE CIRCLE - 1(1), RANGE 1, KOCHI. VS. APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION, PANAMPILLY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] ( REVENUE - APPELLANT) ( ASS ESSEE - RESPONDENT) I. T.A. NO. 339 /COCH/20 18 ASSESSMENT YEA R : 2006 - 07 APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION, PANAMPILLY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE C IRCLE - 1(1), KOCHI. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) I.T.A. NO. 302/COCH/2018 ASSESSMENT YEAR : 2007 - 08 THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), KOCHI. VS. APPOLLO TYRES, CHERUPUSHPAM BUIL DING, SHANMUGHAM ROAD, KOCHI - 682 031 . [PAN: AAACA 6990Q] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 2 I.T.A. NO. 249/COCH/2018 ASSESSMENT YEAR : 2007 - 08 APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION, PANAMPIL LY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE CIRCLE - 1(1), KOCHI. ( ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) I.T.A. NO. 268/COCH/2018 ASSESSMENT YEAR : 2 008 - 09 THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), KOCHI. VS. APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION, PANAMPILLY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) C.O. NO. 56/COCH /2018 (I.T.A. NO. 2 68 /COCH/2018) ASSESSMENT YEAR : 2008 - 09 APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION, PANAMPILLY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE CIRCLE - 1(1), KOCHI. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 3 I.T.A. NO.336/COCH/2018 ASSESSMENT YEAR : 2009 - 10 THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), KOCHI. VS. APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION, PANAMPILLY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) C.O. NO.57/COCH/2018 (I.T.A. NO.336/COCH/2018) ASSESSMENT YEAR : 2009 - 10 APPOLLO TYRES, 3 RD F LOOR, AREEKAL MANSION, PANAMPILLY NAGAR, KOCHI - 682 036. [PAN: AAACA 6990Q] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE CIRCLE - 1(1), KOCHI. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) REVENUE BY S HRI ALOK MITRA, CIT(DR) ASSESSEE BY SHRI SALIL KAPOOR AND MRS. ANANYA KAPOOOR, ADV. D ATE OF HEARING 14 / 0 3 / 201 9 DATE OF PRONOUNCEMENT 21/ 0 3 /201 9 O R D E R PER CHANDRA POOJARI, AM: TH E SE ARE CROS S APPEAL S FILED BY THE ASSESSEE AND THE REVENUE AGAINST DIFFERENT ORDERS OF THE CIT(A) - I, KOCHI FOR THE ASSESSMENT YEARS 2005 - 06, 2006 - 07, 2008 - 09 AND 2009 - 10. THE ASSESSEE HAS ALSO RAISED CROSS OBJECTIONS IN C.O. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 4 NO.56/COCH/2018 FOR THE ASSESSMENT YEAR 2008 - 09 AND C.O. NO. 57/COCH/2018 FOR THE ASSESSMENT YEAR 2009 - 10. ITA NO. 247/COCH/2018 : REVENUES APPEAL A .Y. 2006 - 07 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. I N THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF I NCOME TAX (APPEALS ) ERRED IN ALLOWING LOSS INCURRED BY THE ASSESSEE DURING THE PREVIOUS YEAR ENDED 31.03 - 2006 ON ACCOUNT OF LOSS OF RAW MATERIALS IN FIRE WHICH WAS REJECTED BY THE AO RELYING UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOETZ E (INDIA] LTD VS. CIT REPORTED IN 284 ITR 323 WHEREIN IT IS HELD THAT AFTER THE FILING OF THE RETURN OF INCOME THE ASSESSING AUTHORITY HAS NO AUTHORITY TO ENTERTAIN ANY CLAIM MADE OTHERWISE THAN BY WAY OF REVISED RETURN. 3. IN THE FACTS AND CIRCUMSTANC ES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING DEDUCTING U/S. 80IA ON GAS TURBINE UNIT 'OTHER THAN STEAM' AND GAS TURBINE UNIT 'STEAM PROFIT' AS CLAIMED BY THE ASSESSEE ON POWER GENERATION ACTIVITIES OF GAS TURBINE UNITS. THE CI T (A) HAS NOT APPRECIATED THE FACT THAT THE GAS GENERATION UNIT DOES NOT HAVE AN INDEPENDENT EXISTENCE AND IS NOT AN 'UNDERTAKING' CAPABLE OF, HAVING PROFITS. 4 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N ALLOWING CLUB EXPENSES WHICH WAS DISALLOWED BY THE AO IN ABSENCE OF VOUCHERS FOR VERIFICATION. 3. THE FIRST GROUND IN REVENUES APPEAL IS WITH REGARD TO LOSS OF RS. 17,34,34,860/ - WAS INCURRED BY THE COMPANY BECAUSE OF FIRE. 3.1 THE FACTS OF THE CA SE ARE THAT A SSESSMENT U/S. 143(3 ) WAS ORIGINALLY COMPLETED ON 1 9/12/2008 ON AN INCOME OF RS.66,15,44,477/ - MAKING AN ADDITION OF RS.20,58,67,559/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND HE CIT(A) DISPOSED OF THE APPEA L VIDE ORDER DATED 30/11 /2009. THE DEPARTMENT AND THE ASSESSEE FILED BEFORE THE ITA T. THE ITAT PASSED A COMBINED ORDER DATED 29/05/2013 AND SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE AO I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 5 PASSED ORDER U/S. 143(3) R.W.S. 254 GIVING EFFECT TO THE ORDER OF THE ITAT . THE ASSESSEE HAD FILED THE APPEAL AGAINST THE ASSESSING OFFICERS ORDER DATED 31.5.2015. THE ASSESSING OFFICER DISALLOWED THE CLAIM ALONG WITH OTHER CLAIMS OF THE ASSESSEE AS FOLLOWS: 2. THE ITAT IN PARAGRAPH NO. 25 OF ITS ORDER HAS STATED AS UNDER: WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN GOETZE INDIA LTD. (SUPRA). THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SEC. 254 OF THE INCOME - TAX ACT 1961 IS TO ENTERTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDED THE FACTS ON THE BASIS OF WHICH THE ISSUE OF LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NOT IN ANY WAY RELATE TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE CIRCUMS TANCES OF THE CASE, WE DISMISS THE CIVIL APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING OFFICER AND DOES NOT IMPINGE ON THE POWER OF THE INCOME TAX APPELLATE TRIBUNAL U/S. 254 OF THE INCOME - TAX ACT 1 961. THESE SHALL BE NO ORDER AS TO COSTS. IN VIEW OF THE JUDGMENT OF THE APEX COURT IT IS OBVIOUS THAT THE POWER OF THE INCOME - TAX APPELLATE TRIBUNAL TO ENTERTAIN AN ADDITIONAL CLAIM WILL NOT IMPINGE. THEREFORE, EVEN IF THE CLAIM OF THE LOSS WAS NOT M ADE IN THE RETURN OF INCOME THE CIT(A) OUGHT TO HAVE BEEN ADMITTED THE CLAIM AS AN ADDITIONAL GROUND AND EXAMINED THE ISSUE ON MERIT. THIS TRIBUNAL ALSO HAS TO ENTERTAIN THE SAME AS AN ADDITIONAL GROUND SINCE THE CLAIM WAS MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. SHELLY PRODUCTS (2003) 261 ITR 367 (SC). IN VIEW OF THE ABOVE, THE CIT(A) IS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. HOWEVER, SINCE THE ASSESSING OFFICER HAS NOT C ONSIDERED THE MATTER ON MERIT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER HAS TO BE ADJUDICATED BY THE ASSESSING OFFICER AT THE FIRST INSTANCE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF LOSS OF RS.18,2 6,47,613/ - ON ACCOUNT OF FIRE IS REMITTED BACK TO THE FILE O THE ASSESSING OFFICER . THE ASSESSING OFFICER SHALL CONSIDER THE ISSUE ON MERIT AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSE E. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 6 3.2 THE ASSESSEE WAS GRANTED AN OPPORTUNITY TO EXPLAIN WITH REGARD TO THE ABOVE ISSUE AND SUBMITTED THAT SINCE THE LOSS OF RS.17,34,34,860/ - WAS INCURRED DURING THE PREVIOUS YEAR ENDED 31.3.2006, HENCE THE LOSS IS ALLOWABLE U/S. 26/37 OF THE ACT, DU RING THE ASSESSMENT YEAR 2006 - 07, I.E., THE YEAR IN WHICH THE SAME WAS INCURRED. THE ASSESSEE SUBMITTED THAT THE ACCOUNTING TREATMENT GIVEN BY THE COMPANY IN THE BOOKS OF ACCOUNT WAS NOT RELEVANT FOR THE ALLOWABILITY OF THE EXPENDITURE INCURRED IN THE INCO ME - TAX ASSESSMENT . HENCE, EVEN THOUGH THE LOSS WAS SHOWN AS RECOVERABLE IN THE BOOKS DURING THE PREVIOUS YEAR ENDED 31/3/2006, THE SAME WAS ALLOWABLE IN THE ASSESSMENT YEAR 2006 - 07 IN WHICH THE SAME WAS INCURRED. IT WAS FURTHER SUBMITTED THAT IN THE EVEN T OF THE ASSESSEE BEING ALLOWED LOSS ON ACCOUNT OF FIRE AT MSWC GODOWNS IN THE INCOME TAX ASSESSMENT FOR A.Y. 2006 - 07, ANY AMOUNT RECEIVED BY THE ASSESSEE FROM THE MSWC IN THE SUBSEQUENT YEARS AGAINST THE SAID LOSS CLAIM SHALL BE OFFERED TO TAX BY THE ASSESS EE IN THE RESPECTIVE ASSESSMENT YEARS. IT WAS SUBMITTED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.4,24,96,060/ - AS PART PAYMENT OF THE CLAIM FROM MSWC DURING THE ASSESSMENT YEAR 2008 - 09 AGAINST THE TOTAL LOSS CLAIM LODGED WITH MSWC. FURTHER, THE ASSESS EE HAD ALSO PROVIDED FOR LOSS AMOU N TING TO RS. 7 CRORES AND CHARGED THE SAME TO THE P&L ACCOUNT DURING THE YEAR ENDED 31/3/2007, I.E. A.Y. 2008 - 09. THE ASSESSEE HAS FURTHER PROVIDED A SUM OF RS.6,09,38,800/ - AGAINST THE LOSS CLAIMED AND CHARGED THE SAME T O THE P&L ACCOUNT DURING THE YEAR ENDED 31/3/2010. IT WAS SUBMITTED THAT IN CASE THE ASSESSEE LOSS CLAIM OF RS.17,34,34,860/ - WAS ALLOWED DURING A.Y. 2006 - 07, THEN THE AMOUNTS PROVIDED IN THE BOOKS IN THE SUBSEQUENT ASSESSMENT I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 7 YEARS AGAINST THE SAID MAY BE TAXED IN THE HANDS OF THE ASSESSEE IN THE SUBSEQUENT YEARS AS UNDER: 1. A.Y. 2008 - 09 RS.11,24,96,060/ - (RS.4,24,96,060/ - (PART PAYMENT AGAINST CLAIM RECEIVED FROM MSWC) PLUS RS.7,00,00,000/ - PROVIDED IN BOOKS (DEBITED TO P&L A/C.) 2. A.Y. 2010 - 11 RS.6,09,38,800/ - PROVIDED IN THE BOOKS (DEBITED TO THE P&L ACCOUNT). 3.3 THUS, THE ASSESSEE PRAYED THAT THE LOSS INCURRED BY THE ASSESSEE DURING THE YEAR ENDED 31/3/2006 MAY BE ALLOWED IN THE ASSESSMENT YEAR 2006 - 07 IN ACCORDANCE WITH THE PROVISIONS O F SECTION 28/37 OF THE ACT. 3.4 ON APPEAL, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE BALANCE LOSS OF RS.4,24,29,060/ - DURING THE ASSESSMENT YEAR 2006 - 07. 3.5 AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 3. 6 WE HAVE HEARD THE RIVA L SUBMISSIONS AND PERUSED THE RECORD. F OR A.Y. 2006 - 07, THE ASSESSEE ESTIMATED THE LOSS AT RS.17,34,34,860/ - WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. HOWEVER, SUBSEQUENTLY, IT WAS ALLOWED BY THE ASSESSING OFFICER AT RS. 7 CRORES IN A.Y. 2008 - 09 AND AT RS.6,09,38,800 IN A.Y. 2010 - 11, TOTALING RS.13,09,38,800/ - . THE BALANCE AMOUNT OF R.4,24,29,060/ - WAS NOT ALLOWED. IT IS BROUGHT ON RECORD THAT THE ASSESSEE HAD RECEIVED INSURANCE CLAIM TO THE EXTENT OF THAT AMOUNT A ND OFFERED TO TAX DURING A.Y. 2008 - 09. HOWEVER, THE CLAIM OF THE I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 8 BALANCE LOSS OF RS.4,24,29,060/ - FOR THE ASSESSMENT YEAR 2006 - 07 WAS NOT ALLOWED BY THE ASSESSING OFFICER ON THE REASON THAT THE ASSESSEE HAD NOT CLAIMED IT IN THE REVISED RETURN. HOWEVER, THE SAME WAS ALLOWED BY THE CIT(A) A S THE ASSESSEE HAD OFFERED THE RECEIPT OF INSURANCE CLAIM DURING THE SUBSEQUENT YEAR, I.E., 2008 - 09. BEING SO, IT IS REVENUE NEUTRAL. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF LOSS OF THE ASSESSEE, THOUGH THERE WAS NO REVISE D RETURN OF INCOME FILED BY THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 4. THE NEXT GROUND RELATES TO DISALLOWANCE OF CLAIM OF DEDUCTION MADE ON THE P ROFITS OF GAS TURBINE BOILER AMOUNTING TO RS.2,06,20,739/ - . 4.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME AND CLAIMED DEDUCTION U/S. 80IA ON ITS POWER GENERATION PLANTS AS UNDER: DIESEL GENERATION UNIT RS. 71,20,803/ - GAS TURBINE UNIT RS.10,16,77,289/ - TOTAL RS.10,87,98,092/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE MADE ANOTHER CLAIM OF RS.2,06,20,739/ - AS PROFIT ON GENERATION OF STEAM FROM GAS TURBINE UNIT. THE ASSESSING OFFICER DISALLOWED PROFIT ON GAS TURBINE UNIT AND DID NOT CONSIDER THE CLAIM OF STEAM PROFIT. THE CIT(A) ALLOWED THE CLAIM OF DEDUCTION ON GAS TURBINE UNIT AMOUNTING TO RS.10,16,77,289/ - . BUT HE ALSO DID NOT CONSIDER THE FRESH CLAIM OF RS. 2,06,20,739/ - ON STEAM PROFITS. ON APPEAL TO THE TRIBUNAL, THE TRIBUNAL DIRECTED I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 9 THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. HOWEVER, THE ASSESSING OFFICER DID NOT FOLLOW THE DIRECTIONS OF THE TRIBUNAL AND DISALLOWED THE CLAIM OF RS.10,16,77,389/ - . 4.2 BEFORE THE CIT(A) TH E ASSESSEE CONTENDED THAT THE PROFIT ARISING OUT OF CAPTIVE CONSUMPTION OF STEAM GENERATED FROM THE GAS TURBINE BY UTILISING WASTE HEAT RELEASED FROM THE GAS TURBINE WAS ERRONEOUSLY NOT CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. IT WAS CONTENDED THAT THE ASSESSEE HAD PLACED THE AUDITED PROFITABILITY STATEMENT OF THE GAS TURBINE (BOTH FOR POWER AND STEAM GENERATION) ALONG WITH THE CERTIFICATE OF THE AUDITOR BEFORE T HE ASSESSING OFFICER. FURTHER, THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF ACIT VS. SIAL SBEC BIOENERGY (83 TTJ 866)(DEL) WHEREIN IT WAS HELD THAT STEAM IS A FORM OF ENERGY AND THUS POWER FROM THAT WOULD QUALIFY FOR DEDUCTIO N U/S. 80IA. SIMILARLY, THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF WEST COAST PAPER MILLS LTD. VS. ACIT (52 TAXMAN.COM 268) WHEREIN IT WAS HELD THAT DEDUCTION U/S. 80IA IS ALLOWABLE IN RESPECT OF CAPTIVE POWER CONSUMPTION UNITS AND GENERATION OF STEAM AMOUNTS TO GENERATION OF POWER FOR THE PURPOSE OF DEDUCTION U/S. 80IA. THE ASSESSEE ALSO SUBMITTED THAT THE GAS TURBINE UNIT IS A SEPARATE UNDERTAKING AND IS NOT A RESULT OF SPLITTING UP OF RECONSTRUCTION OF AN ALREADY EXIST ING UNIT. THE TECHNOLOGY USED IN GAS TURBINE VIS - - VIS DIESEL TURBINE IS DIFFERENT FROM EACH OTHER. IN VIEW OF THE ABOVE, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE ON GAS TURBINE UNIT AMOUNTING TO RS.10,16,77,289/ - AND ON GENERATION OF STEAM POWER AMOUNTING TO RS.2,06,20,739/ - . I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 10 4.3 AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF ITAT, MUMBAI BENCH IN THE CASE OF WEST COAST PAPER MILLS LTD. VS. ACIT (52 TAXMAN.COM 268) WHEREIN IT WAS HELD THAT DEDUCTION U/S. 80IA IS ALLOWABLE IN RESPECT OF CAPTIVE POWER CONSUMPTION UNITS AND GENERATION OF STEAM AMOUNTS TO GENERATION OF POWER FOR THE PURPOSE OF DEDUCTION U/S. 80IA. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND CONFIRM THE SAME. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 5. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE OF AMOUNT OF RS . 5 0 ,09,299/ - BEING CLUB EXPENSES. 5.1 THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER TREATED THE CLUB EXPENSES AS PERSONAL IN NATURE AND DISALLOWED THEM. THE CIT(A) ALLOWED THESE EXPENSES. AGAINST THE REVENUES APPEAL, THE TRIBUNAL SET ASIDE TH E ISSUE TO THE FILE OF THE ASSESSING OFFICER STATING THAT ENTRANCE FEES, SUBSCRIPTION FEES ETC . BE TREATED A S BUSINESS EXPENDITURE AND FOR BALANCE EXPENDITURE, COMMERCIAL EXPEDIENCY BE VERIFIED. DURING THE COURSE OF RE - ASSESSMENT, THE ASSESSING OFFICER AS KED FOR BILLS, VOUCHERS ETC. AND GAVE TIME OF ONLY TWO DAYS . THE SAME WAS PRODUCED BUT THEY I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 11 WERE NOT ADMITTED AS THE ASSESSEE WAS AWARE THAT THESE VERIFICATIONS WERE REQUIRED TO BE CARRIED OUT BY THE ASSESSING OFFICER. 5.2 ON APPEAL, THE CIT(A) CONFIR MED THE ADDITION OF RS. 20,00,000/ - AND BALANCE RS.30,09,299/ - WAS DELETED BECAUSE THE ASSESSING OFFICER HAD GIVEN ADEQUATE TIME BUT THE ASSESSEE WAS NOT PREPARED DESPITE THE TRIBUNAL S CLEAR DIRECTIONS. THUS, RS.30,09,299/ - WAS TREATED AS BUSINESS PURPOSE AND BALANCE WAS TREATED AS PERSONAL IN NATURE. 5.3 AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE. 5.4 THE LD. AR RELIED ON THE JUDGMENT O F THE GUJARAT H IGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS. CIT ( 253 I TR 749 ) WHEREIN IT WAS HELD THAT THE DIRECTORS OF THE ASSESSEE WERE ENTITLED TO USE THE VEHICLES FOR THEIR PERSONAL USE IN ACCORDANCE WITH THE TERMS AND CONDITIONS ON WHICH THEY WERE APPOINT ED AND THE PREREQUISITES GIVEN TO THE DIRECTORS FORMED PART OF THEIR REMUNERATION UNDER THE EXPLANATION TO SECTION 198 OF THE COMPANIES ACT, 1956, FOR THE PURPOSE OF DETERMINING THEIR REMUNERATION UNDER SECTION 309 OF THAT ACT. ONCE SUCH REMUNERATION WA S FIXED AS PROVIDED IN SECTION 309 IT WAS NOT POSSIBLE TO STATE THAT THE ASSESSEE INCURRED THE EXPENDITURE FOR THE PERSONAL USE OF THE DIRECTORS. EVEN IF THERE WAS ANY PERSONAL USE BY THE DIRECTORS THAT WAS AS PER THE TERMS AND I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 12 CONDITIONS OF SERVICE AND, I N SO FAR AS THE ASSESSEE WAS CONCERNED, IT WAS BUSINESS EXPENDITURE AND NO PART OF THE EXPENDITURE COULD BE DISALLOWED. 5.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR OPINION, THE OBSERVATION MADE BY THE CIT(A) IS JUSTIFIED. TH E ASSESSING OFFICER HAD GIVEN ONLY TWO DAYS TO PRODUCE THE REQUISITE VOUCHERS AND BILLS. THE ASSESSEE HAS ALSO NOT PRODUCED ANY DOCUMENTS. MORE SO, THERE WAS NO DISALLOWANCE IN THE SUBSEQUENT YEAR ON THIS COUNT. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) DISALLOWED RS. 20 LAKHS AND BALANCE RS.30,09,299/ - WAS DELETED. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND CONFIRM THE SAME. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. THE APPEAL OF T HE REVENUE IN ITA NO. 247/COCH/2018 IS DISMISSED. ITA NO.339/COCH/2018 : ASSESSEES APPEAL : A.Y. 2006 - 07 6. TH E FIRST GROUND RELATES TO DISALLOWANCE OF CLAIM OF REDUCTION U/S. 35(2AB) AMOUNTING TO RS.3,67,43,119/ - . 6.1 THERE WAS A DELAY OF 52 DAYS IN FILING THIS APPEAL BEFORE THE TRIBUNAL. THE LD. AR HAS FILED CONDONATION PETITION ACCOMPANIED BY AN AFFIDAVIT CITING THE REASONS FOR THE DELAY IN FILING THE APPEAL. ON PERUSAL OF THE AFFIDAVIT, WE FIND THAT THE THERE WAS SUFFICIENT CAUSE FOR THE DELA Y IN FILING THE APPEAL BEFORE THE TRIBUNAL. ACCORDINGLY, WE CONDONE THE DELAY OF 52 DAYS AND ADMIT THE APPEAL FOR ADJUDICATION. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 13 6. 2 THE FACTS OF THE CASE ARE THAT THIS CLAIM WAS NOT MADE IN T HE ORIGINAL RETURN OF INCOME OR THROUGH A REVISED RETURN OF INCOME. THE CLAIM WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FOR THE REASONS, ALREADY DISCUSSED ABOVE, THE ASSESSING OFFICER REFUSED TO ENTERTAIN THIS CLAIM. ON APPEAL, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ENTERTAIN THE CLAIM ON ME RITS. ON VERIFICATION , THE ASSESSING OFFICER FOUND THAT THE DSIR APPROVAL WAS NOT THERE FOR 2006 - 07. THE DEDUCTION WAS NOT ALLOWABLE FO R THIS ASSESSMENT YEAR THIS DISALLOWANCE WAS ALSO CONFIRMED BY THE CIT(A) FOR THE ASSESSMENT YEAR 2007 - . 6.3 ON APPEA L, THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS.3,67,43,119/ - . 6.4 AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. AS RIGHTLY OBSERVED BY THE CIT(A), THE ASSESSEE WAS NOT GRANTED DSI R APPROVAL FOR THE ASSESSMENT YEAR 2006 - 07. HENCE, THERE IS NO QUESTION OF GRANTING REDUCTION U/S. 35(2AB) OF THE ACT. HENCE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. THE APPEAL OF THE ASSESSEE IN ITA NO.339/COCH/2018 IS DISMISSED. ITA NO. 2 49/COCH/2018 : ASSESSEES APPEAL : A.Y. 2007 - 08 ITA NO. 302/COCH/2018 : REVENUES APPEAL : A.Y. 2007 - 08 7. THE FIRST GROUND RAISED BY THE ASSESSEE IN ITA NO. 249/COCH/2018 RELATES TO THE DISALLOWANCE OF RS.6,29,87,576/ - U/S. 35(2AB) OF THE ACT IN RE SPECT OF I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 14 EXPENDITURE INCURRED BY IT FOR ITS IN - HOUSE R&D FACILITY. IT WAS SUBMITTED THAT THE APPROVAL OF THE DSIR HAS RETROSPECTIVE APPLICATION CONSIDERING THE FACT THAT R&D UNIT ALREADY HAS THE RECOGNITION AND HENCE, DEDUCTION OUGHT TO HAVE BEEN ALLOWED. 7.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. AS RIGHTLY OBSERVED BY THE CIT(A), THE ASSESSEE WAS NOT GRANTED DSIR APPROVAL FOR THE ASSESSMENT YEAR 2007 - 08 . HENCE, THERE IS NO QUESTION OF GRANTING REDUCTION U/S. 35(2AB) OF THE AC T. HENCE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 7. 2 THE ASSESSEE HAS RAISED ADDITIONAL GROUND IN ITA NO. 249/COCH/2018 WHICH READS AS FOLLOWS: WITH REFERENCE TO THE APPEAL FILED BY THE DEPARTMENT VIA ITA NO.302/COCH/2017 DATED 8 TH J UNE, 2017, IF FOR ANY REASON, THE ENTIRE EXPENDITURE OF RS.63,607,257/ - INCURRED ON ISSUE OF SHARES AND RS.12,50,000/ - INCURRED ON ROC FEES BY THE APPELLANT COMPANY IS NOT ALLOWED BY THE BENCH MEMBERS OF THE HONBLE ITAT, AS ALLOWED BY THE CIT(A), THEN THE DEDUCTION U/S. 35D AMOUNTING TO RS.12,972,451 [1/5 TH OF (63,607,257 + 1,250,000)] SHOULD BE ALLOWED AS THE SAID EXPENDITURE IS INCURRED FOR EXPANDING THE CURRENT BUSINESS OF TYRE MANUFACTURE AND HENCE CLEARLY COVERED U/S. 35D OF THE ACT. 7. 3 WE FIND THAT THE REASON EXPLAINED BY THE ASSESSEE FOR NOT RAISING THIS GROUND ON EARLIER OCCASION IS BONA FIDE. HENCE, WE ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 15 7. 4 THE FACTS OF THE CAS E ARE THAT THE ASSESSING OFFICER DISALLOWED DEDUCTION U/S. 3 5D OF THE ACT SINCE SUCH DEDUCTION WAS AVAILABLE ONLY FOR INITIAL SETTING UP OR IN CONNECTION WITH SETTING UP A NEW INDUSTRIAL UNIT BUT NOT FOR MEETING THE EXPANDING NEEDS OF THE BUSINESS. 7. 5 ON APPEAL, THE CIT(A) CONSIDERED THE ALLOWABILITY OF THIS EX PENDITURE U/S. 37 (1) OF THE ACT AND ALLOWED IT. HOWEVER, THE CIT(A) HAS NOT CONSIDERED THE ALLOWABILITY OF EXPENDITURE U/S. 35D OF THE ACT. 7. 6 THUS, ON THE ISSUE OF ALLOWABILITY OF EXPENDITURE U/S. 37(1) OF THE ACT, THE REVENUE IS IN APPEAL BEFORE U S IN ITA NO. 302/COCH/2018 AND ON THE ALLOWABILITY OF EXPENDITURE U/S. 35D OF THE ACT, THE ASSESSEE IS IN APPEAL BEFORE US IN ITA NO . 249/COCH/2018 BY WAY OF ADDITIONAL GROUND. 7.6.1 WITH REGARD TO ALLOWABILITY OF EXPENDITURE U/S. 37(1), WE ARE OF THE O PINION THAT THIS ISSUE WAS ALREADY SETTLED BY THE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT (225 ITR 798) WHEREIN IT WAS HELD THAT EXPENDITURE INCURRED BY A COMPANY IN CONNECTION WITH ISSUE OF SHARES, WITH A VIEW TO INCREASE ITS SHARE CAP ITAL, IS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY, AND IS CAPITAL EXPENDITURE, EVEN THOUGH IT MAY INCIDENTALLY HELP IN THE BUSINESS OF THE COMPANY AND IN THE PROFIT MAKING. BEING SO, WE ARE INCLINED TO REVERSE THE FINDING OF TH E CIT(A) ON THIS ISSUE. ACCORDINGLY, WE ALLOW THE GROUND TAKEN BY THE REVENUE. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 16 7. 7 WITH REGARD TO ALLOWABILITY OF EXPENDITURE U/S. 35D, T HE ASSESSEE CLAIMED EXPENDITURE OF RS.6,36,07,257/ - ON ISSUE OF SHARES AND RS.12,50,000/ - INCURRED ON ROC FEES AND SUBMITTED THAT IT SHOULD BE ALLOWED U/S. 35D OF THE ACT. THIS ISSUE WAS RAISED FOR THE FIRST TIME BEFORE US. THE ASSESSING OFFICER HAD NO OCCASION TO EXAMINE THE SAME. HENCE, WE REMIT THIS ISSUE TO THE FILE OF THE A O FOR FRESH CONSIDERATION AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE NEXT GROUND IN REVENUES APPEAL IN ITA NO. 302/COCH/2018 IS WITH R EGARD TO DISALLOWANCE OF CLAIM OF DEDUCTION MADE ON THE PROFITS OF GAS TURBINE BOILER . 8.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECOR D. AS DISCUSSED EARLIER IN PARA 4.4, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 80IA ON CAPTIVE POWER CONSUMPTION UNITS AND GENERATION OF STEAM AMOUNTS TO GENERATION OF POWER FOR THE PURPOSE OF DEDUCTION U/S. 80IA. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND CONFIRM THE SAME. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. THE APPEAL OF THE REVENUE IN ITA NO. 302/COCH/2018 IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IN ITA NO.249/COCH/2018 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 268/COCH/2018: REVENUE APPEAL: A.Y. 2008 - 09 C.O. NO. 56/COCH/2018: ASSESSE E APPEAL: A.Y. 2008 - 09 I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 17 ITA NO. 336/COCH/2018: REVENUE APPEAL: A.Y. 2009 - 10 C.O. NO. 57/COCH/2018 : ASSESSEE APPEAL:A.Y. 2009 - 10 9. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO. 268/COCH/18 : 1. THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) - I , KOCHI ARE OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING WEIGHTED DEDUCTION OF 50% U/S. 35(2AB) OF THE ACT AND FAILED TO APPRECIATE THAT EXPENSES CERTIFIED BY STATUTORY AUDITOR HAVE TO BE ALLOWED AS DEDUCTION AND THE EXPENSES INCURRED ON THE IN HOUSE R&D CENTRE ARE ONLY ELIGIBLE FOR WEIGHTED DEDUCTION U/S. 35(2AB) OF THE ACT. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING DISALLOWANCE OF PRE - OPERATIVE EXPENDITURE AS CLAIMED BY THE ASSESSEE FOR SETTING UP A NEW MANUFACTURING PLANT AT CHENNAI, SINCE THIS EXPENDITURE IS RELATED TO THE ERECTION AND CONSTRUCTION OF PLANT AND MACHINERY AND BUILDING AND CAN BE THE PART OF THE COST OF PLANT AND MACHINERY AND OF BUILDING. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE TPO TO RECALCULATE THE TRANS FER PRICING ADJUSTMENT @ 0.6% AS CLAIMED BY THE ASSESSEE AND TO REMOVE THE THREE COMPANIES OUT OF FIVE COMPANIES ARRIVED BY THE TPO, WHICH ARE BROADLY ENGAGED IN SIMILAR SERVICES AND THEREFORE FUNCTIONALLY COMPARABLE. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING DEDUCTION U/S. 80IA ON GAS TURBINE UNIT 'OTHER THAN STEAM' AND GAS TURBINE UNIT 'STEAM PROFIT' AS CLAIMED BY THE ASSESSEE ON POWER GENERATION ACTIVITIES OF GAS TURBINE UNITS, SINC E THE GAS TURBINE GENERATION UNIT DOES NOT HAVE AN INDEPENDENT EXISTENCE AND IS NOT AN 'UNDERTAKING' CAPABLE OF HAVING PROFITS. FURTHER, PROFIT FROM GAS TURBINE UNIT IS A NOTIONAL BASIS AND NOT AS PER THE PROVISIONS OF THE ACT. 6. FOR THESE AND OTHER GROU NDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 18 9.1 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO.336/COCH/2018 : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS RIGHT IN LAW HOLDING THAT EXPENDITURE INCURRED DURING THE SETUP PERIOD OF THE UNIT AT CHENNAI AND PASSENGER CAR RADIAL TYRES PROJECT, LIMDA (B AR O DA) AMOUNTING TO RS.19,57,05,626 / - ARE REVENUE EXPENDITURE? 1.1 IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE PROVISIONS OF SECTION 43(1) WHICH STATES THAT COST OF AN ASS ET INCLUDES ALL KINDS OF EXPENSES RELATED TO ERECTION AND INSTALLATION OF AN ASSET. 1.2 LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE ASSESSEE HAD CAPITALIZED THESE EXPENSES IN ITS BOOKS AND CLAIMED THE EXPENSES AS REVENU E EXPENSES IN THE COMPUTATION OF INCOME. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED ON MERITS IN HOLDING THAT UPWARD ADJUSTMENT DONE BY THE TPO IS NOT JUSTIFIED. 2.1 THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING TO EXCLUDE 3 COMPARABLE FROM THE LIST AND TO COMPUTE THE ARM'S LENGTH PRICE AT THE RATE OF 0.605% ON SALARY AMOUNT ONLY INSTEAD OF TOTAL REIMBURSED AMOUNT FROM THE ASSOCIATE ENTERPRISE. 2.2 THE LD. COMMISS IONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE SAID 3 COMPANIES ARE BROADLY ENGAGED IN SIMILAR SERVICES AND THEREFORE FUNCTIONALLY COMPARABLE AND THE SAME COMPARABLE WAS ACCEPTED IN EARLIER YEAR WHEN IT WAS HAVING LOWER PROFIT MARGIN. 3 I N THE FACT AND CIRCUMSTANCES OF THIS CASE, COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT ONCE THE AMOUNTS WRITTEN OFF HAVE NOT BEEN CARRIED FORWARD TO THE BALANCE SHEET OF THE SUBSEQUENT YEARS, THE WRITE OFF NEEDS TO BE ALLOWED 3.1 THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE HAS CARRIED FORWARD THE BAD DEBTS TO THE SUBSEQUENT ASSESSMENT YEARS. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 19 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS ERRED IN HOLDING THAT GAS TURBINE UNITS ARE ELIGIBLE FOR DEDUCTION U/S. 80IA. 4.1 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)' S STAND IS WITHOUT APPRECIATING THE FACTUAL MATRIX BROUGHT ON RECORD BY THE ASSESSING OFFICER. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN NOT APPRECI ATING THE FACT THAT GAS TURBINE UNITS ARE NOT NEW UNITS AS CLAIMED BY THE ASSESSEE AND THEY ARE MERELY RECONSTRUCTION OF OLD UNITS. AND THE PROFIT CALCULATED IN FORM 10CCB IS ON THE NOTIONAL BASIS. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT T HE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 10. THE ASSESSEE HAS ALSO RAISED COMMON ADDITIONAL GROUND IN C.O. NO S . 56& 57/COCH/2018 WHICH RE ADS AS FOLLOWS: GROUND NO. 2: THAT THE ASSESSING OFFICER ERRED IN NOT PASSING A DRAFT ASSESSMENT ORDER, WHICH IS A MANDATORY REQUIREMENT AS PER SECTION 144A. HENCE, THE ORDER PASSED BY THE ASSESSING OFFICER DATED 02/03/2016 IS ILLEGAL, BAD IN LAW AND WITH OUT JURISDICTION. GROUND NO. 3 : THAT NOT FOLLOWING THE MANDATORY PROCEDURE VITITATES THE ENTIRE PROCEEDINGS AND RENDERS THE ORDER DATED 02/03/2016 ILLEGAL, VOID AB - INITIO AND HENCE LIABLE TO BE QUASHED. 10.1 THE ISSUE RAISED IN THE ADD ITIONAL GROU ND IN C.O. NOS. 56&57/COCH/2018 WHICH IS A LEGAL ISSUE AND GOES TO THE ROOT OF THE MATTER, IT IS TO BE ADMITTED . WE ALSO PLACE RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (229 ITR 383) (SC) WHEREIN IT WAS HELD THAT UNDER SECTION 254 OF THE INCOME TAX ACT, 1961, THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH APP EALS IS THUS I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 20 EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESSS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECIS ION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIR ST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THE ITEM. THERE IS NO REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254, ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS). BOT H THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS OBJECTIONS BEFORE THE TRIBUNAL. THE TRIBUNAL SHOULD NOT BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS, ALTHOUGH NOT RAISED EARLIER. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO ISSUES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER(APPEALS) IS TOO NARROW A VIEW TO TAKE OF THE POWERS OF THE TRIBUNAL. IN VIEW OF THE ABOVE JUDGMENT OF SUPREME COURT, WE ARE INCLINED TO ADMIT THE ADDITIONAL GRO UND RAISED BY THE ASSESSEE. 10.2 IN THE PRESENT CASE, ORIGINALLY, THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE ASSESSMENT YEARS. THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH AFTER GIVI NG REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . CONSEQUENTLY, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008 - 09 U/S. 143(3) R.W.S. 144C AND FOR THE ASSESSMENT YEAR 2009 - 10 ON 31/12/2013. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 21 10.3 NOW THE CONTENTION OF THE LD. AR IS THAT THE ASSESSING OFFICER DIRECTLY PASSED THE FINAL ORDER WITHOUT PASSING THE DRAFT ASSESSMENT ORDER U/S. 144C OF THE I.T. ACT WHICH IS INVALID . AS SUCH, THE FINAL ASSESSMENT ORDER DATED 02/03/2018 IS BAD IN LAW. 10.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT THIS ISSUE HAS COME UP FOR CONSIDERATION IN VARIOUS COURTS AND SUPREME COURT AS FOLLOWS: (A) IN THE CASE OF JCB INDIA LTD. VS. DCIT (398 ITR 189) (DELHI), THE DELHI HIGH COURT HELD THAT SECTION 144 C(1) IS UNAMBIGUOUS. IT REQUIRES THE ASSESSING OFFICER TO PASS A DRAFT ASSESSMENT ORDER AFTER RECEIPT OF THE REPORT FROM THE TPO. THERE IS NOTHING IN THE WORDING OF SECTION 144C(1) WHICH WOULD INDICATE THAT THIS REQUIREMENT OF PASSING A DRAFT ASSESSMENT ORDER DOES NOT ARISE WHERE THE EXERCISE HAD BEEN UNDERTAKEN BY THE TPO ON REMAND TO IT, OF THE SAID ISSUE, BY THE TRIBUNAL. IT WAS THEN CONTENDED BY THE REVENUE THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SHOULD NOT BE DECLARED TO BE INVALID BECAUSE OF THE FAILURE TO PASS A DRAFT ASSESSMENT ORDER U/S. 144C. IN THIS REGARD, REFERENCE IS MADE TO 292B OF THE ACT. AS ALREADY NOTED, THE FINAL ASSESSMENT ORDER OF THE ASSESSING OFFICER STOOD VITIATED NOT ON ACCOUNT OF MERE IRREGULARITY BUT SINCE IT WAS AN INCURABLE ILLEGALITY, SECTION 292B WOULD NOT PROTECT SUCH AN ORDER. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 22 (B) IN THE CASE OF ADDL. CITVS. NOKIA INDIA (P) LTD. (259 TAXMAN 81 (SC), THE SUPREME COURT HELD THAT ONCE THERE IS A CLEAR ORDER OF SETTING ASIDE OF AN ASSESSMENT ORDER WITH REQU IREMENT OF ASSESSING OFFICER/TPO TO UNDERTAKE A FRESH EXERCISE OF DETERMINING THE ARMS LENGTH PRICE, FAILURE TO PASS A DRAFT ASSESSMENT ORDER, WOULD VIOLATE SECTION 144C(1) . ( C) IN THE CASE OF INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (290 CTR 46) (BOM.), THE BOMBAY HIGH COURT HELD THAT IN CASE OF FOREIGN COMPANY, PRIOR TO FINAL ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) A DRAFT ASSESSMENT ORDER U/S. 144C(1) IS MANDATED. (D) IN THE CASE OF VIJAY TELEVISION (P) LTD. VS. DRP (MAD.), THE MADR AS HIGH COURT HELD THAT WHERE PURSUANT TO ORDER OF TPO, ASSESSING OFFICER PASSED A FINAL ORDER U/S. 143(3) INSTEAD OF PASSING A DRAFT ASSESSMENT ORDER U/. 144C, THERE BEING VIOLATION OF PROCEDURE PRESCRIBED UNDER ACT, IMPUGNED ORDER WAS TO BE SET ASIDE AN D, IN SUCH A CASE, EVEN CORRIGENDUM ISSUED BY ASSESSING OFFICER MODIFYING FINAL ORDER OF ASSESSMENT TO BE READ AS A DRAFT ASSESSMENT ORDER, COULD NOT CURE DEFECT EXISTING IN ORIGINAL ORDER. (E) IN THE CASE OF ACI T VS. VIJAY TELEVISION (P) LTD. (407 ITR 64 2) (MAD.), THE MADRAS HIGH COURT HELD THAT WHERE WITHOUT FIRST PASSING DRAFT ASSESSMENT ORDER, FINAL ASSESSMENT ORDER WAS PASSED U/S. 144C AND DEMAND WAS RAISED AND PENALTY IMPOSED, FINAL ASSESSMENT, DEMAND AND PENALTY WOULD BE INVALID. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 23 (F) IN THE CASE OF PR.CIT VS. ANDREW TELECOMMUNICATIONS (96 TAXMAN.COM 613) (BOM.), THE BOMBAY HIGH COURT HELD THAT WHERE T.P. PROCEEDINGS WERE STARTED AFRESH ON REMAND BY TRIBUNAL, NON - ISSUANCE OF DRAFT ASSESSMENT ORDER WOULD VITIATE FINAL ASSESSMENT ORDER. (G) IN THE CA SE OF EATON FLUID POWER LTD. (96 TAXMAN.COM 512) (ITAT, PUNE), THE TRIBUNAL HELD THAT THE IMPUGNED ORDER PASSED BY ASSESSING OFFICER WAS CONTRARY TO MANDATORY PROVISIONS OF SECTION 144C AND THUS SAME WAS TO BE DECLARED AS ONE WITHOUT JURISDICTION, NULL AND VOID. (H) IN THE CASE OF ADDL. CIT VS. ORACLE INDIA (P) LTD. (93 TAXMANN.COM 8) (DELHI - TRIB.), THE TRIBUNAL HELD THAT IF DRAFT ASSESSMENT ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH THE PROCEDURE LAID DOWN IN SECTION 144C(1) AND INSTEAD FINAL ASSESSM ENT ORDER HAS BEEN PASSED THOUGH WITHIN LIMITATION TIME, THEN SUCH AN ORDER CANNOT BE CURED AFTER LIMITATION HAS EXPIRED BY ANY SUBSEQUENT RECTIFICATION PROCEEDINGS OR CORRIGENDUM AND IN SUCH A SITUATION ALL SUBSEQUENT PROCEEDINGS AND FINAL ASSESSMENT ORDE R WILL GET INVALIDATED. 10.5 IN VIEW OF THE ABOVE DECISIONS, THE FACTS OF THE PRESENT CASE BEING SIMILAR TO THAT CONSIDERED BY THE VARIOUS COURTS AND SUPREME COURT, WE HOLD THAT WHEN THE FINAL ASSESSMENT ORDER IS PASSED WITHOUT PASSING THE DRAFT ASSESSM ENT ORDER, IT IS ILLEGAL AND WITHOUT JURISDICTION. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDERS FOR I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 24 BOTH THE ASSESSMENT YEARS. THIS GROUND OF APPEALS OF THE REVENUE IS DISMISSED. THE APPEAL S OF THE REVENUE IN ITA NO S . 336/COCH/2018 AND 268/COCH/2018 ARE D ISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE IN C.O. NOS. 56 & 57/COCH/2018 ARE ALLOWED. 1 1 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO. 247/COCH/2018 IS DISMISSED, THE APPEAL FILED BY THE A SSESSE E IN ITA NO 339/COCH/2018 IS D IS MISSED, THE APPEAL FILED BY THE REVENUE IN ITA NOS. 336 & 268/COCH/2018 ARE DISMISSED. THE APPEAL OF THE ASSESSEE IN ITA NO. 249/COCH/2018 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE APPEAL FILED BY THE REVENUE IN ITA NO. 302/COCH/2018 IS PARTLY AL LOWED. THE CROSS OBJECTIONS OF THE ASSESSEE IN C.O. NOS. 56&57/ C OCH/2018 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST MARCH , 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 21 ST MARCH , 2019 GJ COPY TO: 1 . APPOL LO TYRES, CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, KOCHI - 682 031 . 2. APPOLLO TYRES, 3 RD FLOOR, AREEKAL MANSION,PANAMPILLY NAGAR, KOCHI - 682 036. 3. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE CIRCLE - 1(1) , KOCHI. 4 . THE COMMISSIONER OF INCOME - TAX ( AP P EALS) - I , KO CHI. I.T.A. NO S . 247,302, 339, 268&336/COCH/2018& C.O . NOS. 56&57/COCH/2018 25 5 . THE PR. COMMISSIONER OF INCOME - TAX, KOCHI. 6. D R., I.T.A.T., COCHIN BENCH, COCHIN. 7 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN