M/S. GUJARAT AMBUJA CEMENTS LTD., V. THE DY CIT RG3(1),

ITA 2524/MUM/2005

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3890 (ITAT-MUMBAI)
• Duration Of Justice: 11 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 30-11-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 05-04-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH
• Keywords: Capital asset; Depreciation; Business expenditure; Revised return; Revenue expenditure; Capital expenditure
• Section: 244A; 80HHC; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI BEFORE SHRI B.R. BASKARAN, AM AND SHRI SANDEEP GOSA IN, JM ./ I.T.A. NO. 2524/MUM/2005 ( / ASSESSMENT YEAR: 1998-99) GUJARAT AMBUJA CEMENTS LIMITED 122, MAKER CHAMBERS III, NARIMAN POINT, MUMBAI-400 021. / VS. THE DEPUTY COMMISSIONER OF INCOME TAX, RANGE 3(1), AAYAKAR BHAWAN, M.K. ROAD, MUMBAI-400 020. ./ ./PAN/GIR NO. AAAPJ 8040P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SOUMEN ADAK / RESPONDENT BY : SHRI P.R. GHOSH ./ I.T.A. NO. 2654/MUM/2005 ( / ASSESSMENT YEAR: 1998-99) THE DEPUTY COMMISSIONER OF INCOME TAX, RANGE 3(1), AAYAKAR BHAWAN, M.K. ROAD, MUMBAI-400 020. / VS. GUJARAT AMBUJA CEMENTS LIMITED 122, MAKER CHAMBERS III, NARIMAN POINT, MUMBAI-400 021. ./ ./PAN/GIR NO. AAAPJ 8040P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SOUMEN ADAK / RESPONDENT BY : SHRI P.R. GHOSH / DATE OF HEARING : 30/11/2015 / DATE OF PRONOUNCEMENT : 05/08/2016 2 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS !' / O R D E R PER SANDEEP GOSAIN, J. M.: THESE CROSS APPEALS ARE FILED BY THE ASSESSEE AND R EVENUE FOR AY 1998-1999 AGAINST ORDER OF LD. CIT(A)-XXVII DATED 10.01.2005. FIRST OF ALL, WE TAKE UP ITA NO.2524/MUM/2005 (A.Y. 1998-89) FOR DISPOSAL. ITA NO.2524/MUM/2005 (A.Y.1998-89): IN THIS APPEAL, THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) [HERE-IN-AFTER REFERRED TO A S LD. CIT(APPEALS)] WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF EXPENDI TURE INCURRED FOR POOJA FUNCTION EXPENSES AMOUNTING TO RS. 29,87,781/. L(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN NOT HOLDING THAT THE EXPENDITURE WAS INCURRED WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 2(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CON SULTANCY CHARGES AMOUNTING TO RS. 8,40,000/- BY HOLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. 2(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT THE EXPENDITURE ON ACCO UNT OF CONSULTANCY CHARGES AMOUNTING TO RS. 8,40,000/- IS OF REVENUE NATURE IN VIEW OF THE DECISION OF IT AT IN THE APPELLANT'S OWN CASE ON AN IDENTICAL ISSUE. 2(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN HOLDING THAT THE NATURE OF EXPENSE IS DISTINCT F ROM EXPENDITURE INCURRED IN EARLIER YEARS INSPITE OF THE FACT THAT THERE IS NO MATERIAL CHANGE IN THE NATURE OF EXPENSES. 3 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 2(D) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT BY INCURRING THE SAID E XPENDITURE NO NEW ASSETS OR ADVANTAGE OF ENDURING NATURE WAS BROUGHT INTO EXIST ENCE. 2(E) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 2(A), 2(B), 2(C) AND 2(D) TAKEN HERE-IN- ABOVE, HAVING HELD THAT THE IMPUGNED EXPENDITURE IS CAPITAL IN NATURE, THE LD. CIT(APPEALS) ERRED IN NOT ALLOWING DEPRECIATION ON THE SAME. 3(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD .. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CHA RGES FOR SERVICE AMOUNTING TO RS. 1,51,048/- BY HOLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. 3(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT THE EXPENDITURE ON ACCO UNT OF CHARGES FOR SERVICES AMOUNTING TO RS. 1,51,048/- IS OF REVENUE NATURE IN VIEW OF THE DECISION OF ITA T IN THE APPELLANT'S OWN CASE ON AN IDENTICAL ISSUE. 3(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) . ERRED IN HOLDING THAT THE NATURE OF EXPENSE IS DIST INCT FROM EXPENDITURE INCURRED IN EARLIER YEARS INSPITE OF THE FACT THAT THERE IS NO MATERIAL CHANGE IN THE NATURE OF EXPENSES. 3(D) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT BY INCURRING THE SAID E XPENDITURE NO NEW ASSETS OR ADVANTAGE OF ENDURING NATURE WAS BROUGHT INTO EXIST ENCE. 3(E) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WITHOUT PREJUDICE TO GROUND NO. 3(A), 3(B), 3(C) AND 3(D) TAKEN HERE IN ABOVE, HAVING HELD THAT THE IMPUGNED EXPENDITURE IS CAPITAL IN NATURE, THE LD. CIT(APPEALS) ERRED IN NOT ALLOWING DEPRECIATION ON THE SAME. 4(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF THE EXPENSES ON ACCOUNT OF NON- COMPETE FEES PAID TO MR. D. K. MODI OF RS. 50,00,00 01- AS BUSINESS EXPENDITURE. 4(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THAT BY INCURRING THE EXPENDITURE BEI NG NON-COMPETE FEES PAID TO MR. D.K. MODI OF RS. 50,00,0001- THE APPELLANT DID NOT DERIVE ANY BENEFIT OF ENDURING NATURE. 4 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 5(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DENIAL OF CLAIM FOR EXCLUSION OF INTEREST U/S 244A RECEIVED DURING THE YEAR AMOUNTING TO RS. 28,71,804 /-. 5(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 5(A) TAKEN HEREINABOVE, THE LD. CIT(APPE ALS) FAILED TO TAKE COGNIZANCE OF THE FACT THAT THE SAID AMOUNT OF RS. 28,71,804/- ONLY REPRESENTED INTEREST INCOME OF A CONTINGENT NATURE AT THE STAGE OF PROVISIONAL ASSESSMENT OR OTHERWISE, THE ACCRUAL OF WHICH COULD BE SAID TO TAKE PLACE ONLY I N FURTHER PENDING PROCEEDINGS AND HENCE AS SUCH, WAS COMPLETELY OUTSIDE THE PURVI EW OF TAXABILITY AS PER THE PROVISIONS OF THE INCOME-TAX ACT, 1961. 6(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF THE PRO PORTIONATE AMOUNT OF PREMIUM PAID ON LEASEHOLD LAND OF RS. 21,07,945/- WRITTEN O FF DURING THE YEAR AS REVENUE EXPENDITURE BY TREATING THE SAME AS CAPITAL EXPENDI TURE. 6(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT THE PREMIUM PAID ON LEA SEHOLD LAND, ESSENTIALLY BEARS THE CHARACTER OF RENT PAID IN ADVANCE WHICH DOES NO T ENTAIL ACQUISITION OF ANY ASSET. 7(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, HAVING DISALLOWED PREMIUM ON LEASEHOLD LAND IN RESPECT OF UNIT GAJ-1 IN COMPU TING TAXABLE INCOME, THE LD. CIT(APPEALS) HAS GROSSLY ERRED IN CONFIRMING DEDUCT ION OF THE SAME IN COMPUTING PROFITS OF UNIT GAJ-1 AND IN THE PROCESS, THERE WAS CORRESPONDING ERRONEOUS AND UNJUST REDUCTION IN THE QUANTUM OF DEDUCTION U/S 80 -IA ON UNIT GAJ-L. 7(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS GROSSLY ERRED IN DIRECTING THE A.O. TO VERIFY THE C LAIM THAT THE EXPENDITURE ON POWERLINE IS IN RESPECT OF UNIT GAJ-2 AND SHOULD NO T BE EXCLUDED FROM THE PROFIT OF UNIT GAJ-I, INSTEAD OF OUTRIGHT DECIDING THE ISSUE. 8(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DECISION OF THE A.O . IN ASSESSING INTEREST INCOME OF RS. 18,28,39,247/-, INCOME FROM BILL DISCOUNTING OF RS. 18,42,4011- AND TRUCK HIRE CHARGES OF RS. 2,18,10,1581- AS INCOME UNDER T HE HEAD 'INCOME FROM OTHER SOURCES'. 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, HAVING HELD TH AT THE SAID INCOME WERE TO BE 5 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' , THE LD. CIT(APPEALS) OUGHT TO HAVE ALLOWED THE EXPENDITURE INCURRED TO E ARN THE AFORESAID INCOME. 8(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 8(A) TAKEN HERE-IN-ABOVE, HAVING HELD TH AT TRUCK HIRE CHARGES ARE ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCE S', THE LD. CIT(APPEALS) OUGHT TO HAVE ALLOWED DEPRECIATION ON TRUCKS. 9(A) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DECISION OF THE A.O. OF NOT ALLOWING DEDUCTION OF PROFITS DERIVED BY THE HIMACHAL UNIT (AN INDUSTRIAL UNDERTA KING LOCATED IN AN INDUSTRIALLY BACKWARD STATE OR DISTRICT) IN COMPUTING THE BOOK P ROFITS, AS PER CLAUSE (V) TO THE EXPLANATION BELOW THE SECOND PROVISO TO SECTION 115 JA. 9(B) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE PROFITS TO BE EXCLUDE D UNDER CLAUSE (V) OF THE EXPLANATION BELOW SECTION 115JA (2) SHALL BE THE PR OFITS AS COMPUTED UNDER SECTION 80-IA OF THE INCOME TAX ACT, AND NOT THE AM OUNT OF BOOK PROFITS OF THE SPECIFIED NEW UNIT WHICH FORMS PART OF THE BOOK PRO FITS OF THE COMPANY AS A WHOLE. 9(C) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, WITHOUT PREJUDICE TO GROUND NO. 9(A) AND 9(B) TAKEN HERE IN ABOVE, HAVING HELD, BY FOLLOWING THE DECISION TAKEN BY HIS PREDECESSOR IN A. Y. 1997-98 THAT THE PROFIT CO MPUTED U/S 80IA IS TO BE REDUCED IN COMPUTING BOOK PROFIT, THE LD. CIT(APPEALS) ERRE D IN NOT DIRECTING THE A.O. TO EXCLUDE BROUGHT FORWARD LOSSES, WHILE COMPUTING BOO K PROFITS FOR THE YEAR AS WAS HELD BY HIS PREDECESSOR IN THE SAME ORDER. 10(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN GRANTING EXCLUSION OF EXPORT PROFI T AS COMPUTED UNDER THE PROVISIONS OF THE ACT IN COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JA OF THE ACT INSTEAD OF ALLOWING DEDUCTION FOR EXPORT PROFITS AS PER PROFIT COMPUTED UNDER THE PROVISIONS OF COMPANIES ACT. 10(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN NOT DIRECTING TO COMPUTE DEDUCTION U/S 80HHC BASED ON PROFIT OF THE BUSINESS AS PER THE ACCOUNTS PREPARED UNDER THE COMPANIES ACT IN COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JA OF THE ACT. 11 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE NON-EXCLUSION OF CAPITA L PROFIT ON SALE OF INVESTMENT 6 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS AMOUNTING TO RS. 4,97,27,379/- (NET) FROM THE NET P ROFIT IN COMPUTING BOOK PROFIT AS PER PROVISION OF SECTION 115JA OF THE ACT. 12 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) ERRED IN NOT HOLDING THAT IMPOSITION OF INTEREST U/S 234C IS ERRONEOUS AND BAD IN LAW. 13 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, ON DISPOSAL OF THIS APPEAL, MATERIAL ADJUSTMENTS WOULD BE REQUIRED IN COMPUTING TOTAL INCOME, INTEREST AND TAX AND NECESSARY DIRECTION MAY BE GIVEN TO THE A.O . ON THIS FRONT. 14 THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY, RESCIND, SUPPLEMENT, OR ALTER ANY OF THE GROUNDS STATED HERE IN ABOVE, EITH ER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. THE ASSESSEE VIDE LETTER DATED 14.04.2009 HAS ALSO TAKEN ADDITIONAL GROUNDS WHICH IS AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CLAIM FOR DEDUCTION U/S 80IA AMOUNTING TO RS.3,38,07,839/-, IN RESPECT OF POWER GENERATING UNIT, MADE BY THE APPELLANT IN THE COMPUTATION OF TOTAL I NCOME UNDER THE PROVISIONS OF THE ACT OTHER THAN SEC.115JA FOR THE ASSESSMENT YEAR UNDER CONSIDERATION BE TREATED AS WITHDRAWN. SINCE THE ASSESSEE HAS SUBMITTED THAT THE ADDITIONA L GROUNDS RAISED IN VIEW OF AMENDMENT IN FINANCE ACT, 1999 AND AS PER AMENDED P ROVISIONS OF SECTION 80IA, THE ASSESSEE HAS THE OPTION OF CLAIMING DEDUCTION FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FRO M THE YEAR IN WHICH THE UNDERTAKING BEGINS TO GENERATE POWER IN RESPECT OF THE UNITS SET UP ON OR AFTER 01.04.1993. 7 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS WE HAVE CONSIDERED THE SUBMISSIONS RAISED BY THE AS SESSEE AND ADDITIONAL GROUND BEING RAISED BY ASSESSEE IS PURELY OF LEGAL NATURE AND CAN BE DECIDED FROM THE FACTS WHICH ARE ALREADY IN RECORD THEREFORE, WE ALLOW THE ASSESSEE TAKE THE ADDITIONAL GROUND. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME BY THE ASSESSEE WAS FILED ON 26.11.1998 DECLARING AN INCOME OF RS.13,35 ,74,640/- U/S 115JAOF THE ACT. THEREAFTER A REVISED RETURN OF INCOME WAS FILED ON 31.03.2000 DECLARING INCOME OF RS.8,25,05,680/- U/S 115 JA OF THE ACT. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND THE CASE WAS SELECTED FOR SCRUTINY BY ISSUI NG NOTICE U/S 143(2) OF THE ACT. AFTER CONSIDERING THE REPLY SUBMITTED BY THE ASSESS EE, THE AO PASSED THE ORDER OF ASSESSMENT THEREBY MAKING DISALLOWANCES AND CONSEQU ENTLY MAKING SEVERAL ADDITIONS UNDER DIFFERENT HEADS VIDE ORDER DATED 15/03/2001. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE PARTLY ALLOWE D THE APPEAL OF ASSESSEE VIDE ITS ORDER DATED 10.01.2005. AGGRIEVED BY THE DECISION OF THE CIT (A), THE ASSE SSEE FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HERE IN ABOVE. 8 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS GROUND NO. 1(A) & 1(B): 3. THIS GROUND RELATES TO DISALLOWANCE OF EXPENDITU RE INCURRED FOR POOJA/FUNCTION EXPENSES AMOUNTING TO RS.29,87,781/-. 3.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. AS PER LD. AR , THE AFORE MEN TIONED EXPENDITURE HAS BEEN INCURRED FOR PERFORMING DAILY POOJA IN PLANTS, CELE BRATION OF REPUBLIC DAY, INDEPENDENCE DAY, ETC. THE SAME WAS CLAIMED AS BUSI NESS EXPENDITURE BUT THE LD. AO WHILE PASSING ORDER OF ASSESSMENT HAS HELD THAT THE EXPENSES ARE OF NON BUSINESS NATURE AND DISALLOWED THE SAME. THE LD. AR SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO WAS ONLY ON THE BASIS T HAT IN THE EARLIER YEARS I.E. 1998-99 THE SIMILAR EXPENDITURE WERE DISALLOWED. IT WAS FURTHER ARGUED BY LD. AR THAT THIS GROUND IS COVERED BY THE ORDER OF HONBLE ITAT MUMBAI BENCH IN ASSESSEES OWN CASE IN AY 1988-99, 1989-90, 1996-97 , 1997-98. IN THIS REGARD OUR ATTENTION WAS DRAWN TO THE AFORE MENTIONED DECISION S AND WE FOUND THAT IN ITA NO.3733/MUM/96, AT PAGE NO. 2 PARA NO.6 WHICH IS AT TACHED IN PAPER BOOK PAGE NO.110 THE SAME GROUND HAS ALREADY BEEN DECIDED BY HONBLE ITAT IN FAVOUR OF ASSESSEE WHICH IS REPRODUCED BELOW: 9 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS THE FIFTH GROUND IS REGARDING DISALLOWANCE OF POOJA EXPENSES OF RS.61,984/-. ACCORDING TO THE ASSESSEE, THE ISSUE I S COVERED IN ITS FAVOUR BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE , IN ITA NO.2690/M/93 VIDE ITS ORDER DATED 20.12.02 FOR ASSESSMENT YEAR 8 9-90. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE A BOVE DECISION OF THE TRIBUNAL. IN THE ASSESSMENT YEAR 89-90, THE TRIBUNA L ALLOWED THE TEMPLE INAUGURATION EXPENSES EXCEPT DISALLOWANCE OF RS.3.0 0 LAC OUT OF LAVISH TRAVELING EXPENSES OF RS.3.8 LACS ON TRAVELLING AND FOOD. THE PRESENT YEAR EXPENDITURE SEEMS TO BE NORMAL DAY TO DAY EXPENSES ON POOJA FOR RUNNING THE TEMPLE IN THE VICINITY OF THE PLANT. ACCORDINGL Y, AFTER CONSIDERING THE RIVAL SUBMISSIONS, FACTS OF THE ISSUE AS STATED ABO VE, AND TRIBUNALS DECISION REFERRED ABOVE, THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. THE ADDITION SO SUSTAINED BY CIT(A) IS DELETED. 3.2 IN VIEW OF THE AFORE MENTIONED DECISION OF HON BLE ITAT IN FVAOUR OF ASSESSEE, WHILE ADHERE TO THE PRINCIPLES OF JUDICIA L CONSISTENCY AND WHILE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH WE ALLOW THE ISSUE IN FAVOUR OF ASSESSEE AND ADDITIONS MAD BY AO AND SUST AIN BY CIT(A) ARE DELETED. GROUND NO.2 & 3(A) TO 3(E) 4. THESE GROUNDS RELATES TO DISALLOWANCE OF CONSULT ANCY CHARGES FOR SERVICES OF RS.1,51,048/-. 4.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR SUBMITTED THAT THE ASS ESSEE HAS APPOINTED MR. S.K. 10 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS SEKHSARIA FOR ADVICE IN CIVIL CONSTRUCTION PERTAINI NG TO FACTORY BUILDINGS AND HAS APPOINTED MR. L.M. HIRANI FOR ADVICE IN CONSTRUCTIO N AND REGULAR MAINTENANCE OF COLONY. TOWARDS THIS ASSESSEE HAS INCURRED CONSULTA NCY AND SERVICE CHARGES. LD. AR SUBMITTED THAT THE AO WHILE FOLLOWING THE ORDER OF EARLIER YEARS HAD DISALLOWED THE EXPENDITURE BY TREATING THE SAME AS CAPITAL NATURE. IT WAS FURTHER ARGUED BY LD. AR THAT CIT(A) HAS SUSTAINED THE SAID DISALLOWANCE ERRONEOUSLY. IT WAS ALSO ARGUED BY LD. AR THAT SIMILAR GROUND WAS A LLOWED BY HONBLE ITAT IN ASSESSEES OWN CASE FOR AY 1995-96, 1996-97, 1997-9 8. IN THIS RESPECT OUR ATTENTION WAS DRAWN TO PAGE NO. 5 &7 AND PARA 8-11 IN SUPPLEMENTARY PAPER BOOK AT PAGE NO. 53-55. 8. THE FOURTH GROUND RAISED BY THE ASSESSEE IS AS F OLLOWS: '4(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 CONSULTANCY CHARGES AMOUNTING TO RS. 5,40, 000/ - B Y HOLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. 4(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES IF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE E XPENDITURE ON ACCOUNT OF CONSULTANCY CHARGES AMOUNTING TO RS,5,40 ,OOO/- IS OF REVENUE IN NATURE IN VIEW A/THE DECISION OF ITAT IN THE APPELLANT'S OWN CASE ON AN IDENTICAL ISSUE 4((C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT BY IN CURRING THE SAID EXPENDITURE, 110 NEW ASSETS OR ADVANTAGE OF ENDURIN G NATURE WAS BROUGHT INTO EXISTENCE. 11 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE'S OWN CASE IN ITA NO.2292/M/94 FOR A.Y. 1990-91 IN WHICH IT HAS B EEN HELD AS UNDER: 'AS REGARDS CONSULTANCY FEES, LD. COUNSEL DREW OUR ATTENTION TO THE FINDING BY THE AO THAT THE CONSTRUCTION OF BUILDING , STAFF QUARTERS ETC. HAD ALREADY BEEN COMPLETED. ON THE BASIS OF THAT FI NDING, THE AO HAD ALLOWED DEPRECIATION. THE LD. COUNSEL POINTED OUT T HAT SINCE CONSTRUCTION HAD ALREADY BEEN COMPLETED, THE IMPUGN ED CONSULTANCY FEES WERE FOR THE PROPER MAINTENANCE OF THE PROPERTY AND HENCE ADMISSIBLE AS REVENUE DEDUCTION. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE LI GHT OF THE FACTS AND FINDINGS AS STATED ABOVE, THE LEGAL PROVISIONS AND THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT, WE ARE INCLINED TO U PHOLD THE ORDER OF CIT(A) ON THIS GROUND. THE CIT(A) HAS RIGHTLY HELD THAT THE IMPUGNED EXPENDITURE IS NOT DIRECTLY RELATED TO CREATION OF NEW CAPITAL ASSETS AND IS IN THE NATURE OF REVENUE EXPENDITURE. IN THIS VI EW, OF THE MATTER, THE DEPRECIATION ALLOWED BY AO ON RS.1,51,995/- IS REQU IRED TO BE WITHDRAWN. THE GROUND OF APPEAL FAILS. RESPECTFULLY FOLLOWING THE ABOVE DECISION, THIS GRO UND OF THE APPEAL IS ALLOWED. 10. GROUND NO. 5 RAISED BY THE ASEESSEE READS AS FO LLOWS: 5(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF CHARGES FOR SERVICE AMOUNTING TO RS.1,17,939/- BY H OLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. 5(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE E XPENDITURE ON ACCOUNT OF CHARGES FOR SERVICE AMOUNTING TO RS.1,17 ,939/- IS OF REVENUE IN NATURE IN VIEW OF THE DECISION OF ITAT I N THE APPELLANTS OWN CASE ON AN IDENTICAL ISSUE. 5(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT BY IN CURRING THE SAID 12 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS EXPENDITURE NO NEW ASSETS OR ADVANTAGE OF ENDURING NATURE WAS BROUGHT INTO EXISTENCE. 11. THIS ISSUE IS COVERED BY THE DECISION IN ASSESS EES OWN CASE IN ITA NO.4032/M/99 FOR THE A.Y. 1994-95 IN WHICH IT HAS B EEN HELD AS UNDER: GROUND NO.3 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PA YMENT OF RS.97,512/- MADE TO SHRI HIRANI AS REVENUE EXPENDIT URES. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF TH E PARAGRAPHS 9 AND 10 OF THE ORDER PASSED IN ITA NO.4 189/B/96 FOR THE A.Y. 1992093, AS THE CIRCUMSTANCES AND NATURE O F THAT CASE ARE SIMILAR TO THAT OF PREVIOUS YEAR AND HENCE SERV ICE CHARGES TO THE EXTENT OF RS.97,512/- IS IN THE NATURE OF REVEN UE EXPENDITURE AND HENCE THIS GROUND OF REVENUES APPEAL IS DISMIS SED. 4.2 IN VIEW OF THE AFORE MENTIONED DECISION OF HON BLE ITAT IN FAVOUR OF ASSESSEE, WHILE ADHERE TO THE PRINCIPLES OF JUDICIA L CONSISTENCY AND WHILE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH WE ALLOW THE ISSUE IN FAVOUR OF ASSESSEE AND ADDITIONS MAD BY AO AND SUST AIN BY CIT(A) ARE DELETED. GROUND NO.4(A) & 4(B): 5. THIS GROUND RELATES TO DISALLOWANCES OF EXPENSES ON ACCOUNT OF NON- COMPLETE FEES AS BUSINESS EXPENDITURE AMOUNTING TO RS.50,00,000/- 5.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE 13 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSES SEE SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH MR. D.K. MODI FO R : (I) TRANSFER OF CONTROL AND MANAGEMENT IN MODI CEMENTS LTD. (II) RESIGNING AS MANAGING DIRECTOR (III) GETTING HIS NOMINEES RESIGN FROM THE BOARD AND (IV) FOR NOT CARRYING ON THE BUSINESS OF MANUFACTURING O R MARKETING OF CEMENT FOR 5 YEARS WITHIN RADIUS OF 250 KM OF THE E XISTING PLANT. 5.2 LD. AR ARGUED THAT THE AO HAS HELD THAT THE PAY MENT WAS NOT MADE TO WARD OFF COMPETITION BUT TO ACQUIRE MANAGEMENT CONTROL. THE SAME RESULTS IN DERIVING ENDURING BENEFITS AND HENCE THE EXPENDITURE WAS CON SIDERED BY THE AO IS CAPITAL IN NATURE. LD. AR FURTHER ARGUED THAT THE CIT(A) HAS A LSO ERRONEOUSLY UPHELD THE ORDER OF AO. LD. DR REPRESENTING THE REVENUE RELIED UPON THE ORDERS PASSED BY LOWER AUTHORITIES. 6. AFTER CONSIDERING THE FACTS OF THE CASE WE NOTIC ED THAT CONTROVERSY IN QUESTION RELATES TO MAKING PAYMENT ON ACCOUNT OF NO N-COMPETE FEES AND CONSIDERING THE SAME TO THE BUSINESS EXPENDITURE. U NDER THE SIMILAR FACTS THE HONBLE MADRAS HIGH COURT IN CASE OF CARBORANDUM VS . JCIT IN ITA NO.244 OF 2006 AS HELD THAT THE PAYMENT OF NON COMPETE FEES FOR FRUITFUL EXERCISE OF 14 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS BUSINESS IS A COMMERCIAL DECISION AND HENCE SHOULD BE TREATED AS A REVENUE EXPENDITURE. FURTHER IN THE CASE OF CIT VS. EICHER LTD. (2008) 302 ITR 249 (DEL) IT HAS BEEN HELD PAYMENT OF NON COMPETE FEES HAS N OT RESULTED IN ACQUISITION OF CAPITAL ASSET. BUT MERELY ELIMINATED COMPETITION FO R A WHILE AND RESTRICTIVE COVENANT WAS NEITHER PERMANENT NOR EPHEMERAL. HENCE , THE ADVANTAGE WAS NOT OF AN ENDURING NATURE. 6.1 IN ADDITION TO THE ABOVE WE ALSO FOUND THAT SIM ILAR GROUNDS WERE ALSO CONSIDERED IN THE FOLLOWING CASE JCIT VS. SYNERGY CREDIT CORPORATION LTD. (2006) 9 SOT 75 (MUM) AND IN THE CASE OF ACIT VS. CLARIANT CHEMICALS (I) LTD. (ITA NO.7428/MUM/2011). AFTER CONSIDERING AFORE ME NTIONED JUDGEMENTS WE FOUND THAT THE SIMILAR POINTS HAVE ALREADY BEEN CON SIDERED BY HONBLE HIGH COURT AS WELL AS CO-ORDINATE BENCH OF ITAT. 6.2 IN VIEW OF THE AFORE MENTIONED DECISION OF HON BLE ITAT IN FAVOUR OF ASSESSEE, WHILE ADHERE TO THE PRINCIPLES OF JUDICIA L CONSISTENCY AND WHILE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH WE ALLOW THE ISSUE IN FAVOUR OF ASSESSEE AND ADDITIONS MAD BY AO AND SUST AIN BY CIT(A) ARE DELETED. WE ALLOW THIS GROUND. 15 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS GROUND NO.5(A)& 5(B): 7. THIS GROUND RELATES TO NON-EXCLUSION OF INTEREST U/S 244A RECEIVED DURING THE YEAR AMOUNTING TO RS.28,71,804/-. 7.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSES SEE SUBMITTED THAT IN INTIMATION U/S 143(1)(A) FOR A.Y. 1996-97, INTEREST U/S 244A W AS GRANTED AT RS. 28,06,140/- IN THE RETURN OF INCOME, THE SAID AMOUNT WAS EXCLUDED FROM THE COMPUTATION OF TOTAL INCOME SINCE THE ASSESSMENT WAS IN PROGRESS AND THE SAID INTEREST WAS NOT ATTAINED FINALITY. THEREFORE, LD.CIT(A) UPHELD THE ORDER OF THE AO. 7.2 WE HAVE CONSIDERED THE ORDER OF CIT(A) AND THE CIT(A) HAS DISCUSSED THE FACTS AND HAS RELIED UPON THE DECISION IN THE CASE OF SAFFRON TRADING CO. (P) LTD. VS. ACIT (2003) 84 ITD 70 (MUM). 7.3 IN OUR VIEW CIT(A) HAS RIGHTLY UPHELD THE ORDER S PASSED BY AO WHEREIN IT HAS BEEN CATEGORICALLY MENTIONED THAT THE INTEREST RECEIVED ON THE REVENUE ISSUED BY THE DEPARTMENT IS TAXABLE IN THE YEAR OF RECEIPT AN IN THE PRESENT CASE THE ASSESSEE HAS RECEIVED THE INTEREST INCOME DURING TH E PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1998-99 AND EVEN OF TAXABLE OF INTE REST CANNOT BE POSTPONED IN THE 16 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS DIES OF FINALITY OF THE PROCEEDINGS. IT WAS RIGHTLY HELD BY AO AS WELL AS CIT(A) THAT INTEREST RECEIVED ON THE REFUND U/S 244(A) IS TREAT ED AS INCOME RECEIVED DURING THE YEAR AND TAXED ACCORDINGLY. HENCE, WE SEE NO REASON S TO INTERFERE OR DEVIATE FROM THE FINDINGS RECORDED AND ORDERS PASSED BY THE CIT( A) AND HENCE THIS GROUND OF APPEAL RAISED BY ASSESSEE STANDS DISMISSED AND THE ORDERS PASSED BY CIT(A) ARE UPHELD. THEREFORE, WE DISMISS THE APPEAL OF THE ASS ESSEE. GROUND NO.6(A)&6(B): 8. THIS GROUND RELATES TO DISALLOWANCE OF PROPORTIO NATE AMOUNT OF PREMIUM ON LEASEHOLD LAND AMOUNTING TO RS.21,07,945/-. 8.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. WE HAVE NOTICED THAT THE ASSE SSEE HAS ACQUIRED VARIOUS LANDS ON LEASE AND HAD PAID LEASE PREMIUM IN ADVANCE FOR ACQUIRING SUCH LAND ON LEASE. AO HELD THAT THE EXPENDITURE INCURRED ON LEASEHOLD RIGHT IN THE LAND HAS RESULTED IN ADVANTAGE HAVING ENDURING BENEFIT. THEREFORE, THE S AME WAS TREATED AS CAPITAL EXPENDITURE. AFTER CONSIDERING THE CASE WE ARE ALSO OF THE CONSIDERED VIEW THAT THE PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHTS AS CAPI TAL EXPENDITURE AND IN THIS RESPECT THIS VIEW IS VERIFIED BY THE DECISION OF TH E SPECIAL BENCH OF HONBLE 17 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS MUMBAI ITAT IN THE CASE OF JCIT VS. MUKUND LTD. (20 07) 106 ITD 231 (MUM) (SB). THEREFORE, CONSIDERING THE AFORE MENTIONED FACTS, T HIS GROUND RAISED BY ASSESSEE IS DISMISSED. GROUND NO.7(A)&7(B) 9. THIS GROUND IS NOT PRESSED AND THEREFORE THE SAM E IS DISMISSED AS NOT PRESSED. GROUND NO.8(A) TO 8(C): 10. THIS GROUND RELATES TO ASSESSING INTEREST INCOM E, INCOME FROM BILL DISCOUNTING & TRUCK HIRE CHARGES UNDER THE HEAD INCOME FROM OT HER SOURCES. 10.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR SUBMITTED THAT THE ASSESSEE HAD TREATED INTE REST INCOME, INCOME FROM BILLS DISCOUNTING AND TRUCK HIRE CHARGE S AS INCOME FROM BUSINESS IN THE COMPUTATION OF TOTAL INCOME CHARGEABLE TO TAX BUT T HE AO HAS HELD THAT THE SAID INCOME SHALL BE TAXED UNDER THE HEAD INCOME FROM O THER SOURCES. LD. AR FURTHER ARGUED THAT CIT(A) HAS ALSO ERRONEOUSLY UPHELD THE ORDER PASSED BY AO. LD. AR ARGUED THAT THE HONBLE ITAT MUMBAI BENCH IN ASSESS ES OWN CASE FOR A.Y. 1995- 18 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 96, 1996-97, 1997-98 AS SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH DECISION AND TO VERIFY THE NEXUS BETWEEN THE EARNINGS. OUR ATTEN TION WAS DRAWN TO OPERATIVE PARA OF ITA NO.942/MUM/2004 FOR A.Y. 1995-96 AT PAGE NO.8-9 OF THE SAID ORDER PASSED BY ITAT WHICH IS NOW ANNEXED IN SUPPLEMENTARY PAPER BO OK OF PAGE NO. 56-57. 10.2 THEREFORE THE ISSUE WITH REGARD TO TRUCK HIRE CHARGES ARE SET ASIDE TO THE FILE OF THE AO FOR FRESH DECISION AND THE ISSUE OF INTEREST INCOME AND BILL DISCOUNTING ARE ALSO SET ASIDE TO THE FILE OF THE AO TO VERIFY THE NEXUS BETWEEN THE EARNINGS FROM MONEY DEPLOYED OUR OF UNUTILIZED FUNDS AND INTEREST ON BO RROWED FUNDS. FURTHER THE AO IS ALSO DIRECTED TO REDUCE THE ACTUAL EXPENDITURE INCU RRED AND TAX ONLY THE NET INCOME UNDER THE HEAD OF INCOME FROM OTHER SOURCES. GROUND NO.9(A) TO 9(C): 11. THIS GROUND RELATES TO NON ALLOWANCE OF EXCLUSI ON OF THE PROFITS OF HIMACHAL UNIT AS PER THE BOOKS IN COMPUTING THE BOOK PROFIT U/S 115JA AMOUNTING TO RS.58,57,93,526/- 11.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSESSEE HAS CLAIMED EXCLUS ION OF PROFIT COMPUTED AS PER BOOKS OF HIMACHAL PRADESH UNIT LOCA TED IN BACKWARD AREA IN COMPUTING BOOK PROFIT U/S 115JA IN TERMS OF CLAUSE (V) OF THE EXPLANATION TO 19 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS SEC.115JA BUT THE AO HELD THAT ASSESSEE CAN CLAIM E XCLUSION ONLY OF THE PROFIT COMPUTED U/S 80IA FOR COMPUTING TOTAL INCOME UNDER THE NORMAL PROVISIONS. LD. AR SUBMITTED THAT CIT(A) HAS ERRONEOUSLY UPHELD THE OR DER OF AO WHEREAS THE SIMILAR GROUND HAS ALREADY BEEN DECIDED BY ITAT IN ASSESSEE S OWN CASE FOR A.Y. 1997-98 IN ITA NO.1859/MUM/2004 IN THIS RESPECT OUR ATTENTION WAS DRAWN TO PAGE NO. 7-8 AT PARA 2.6 TO 2.6.1 OF PAGE NO.24-25 OF SUPPLEMENTARY PAPER BOOK. 2.6 THE SEVENTH DISPUTE IS REGARDING NOT ALLOWING THE EXCLUSION OF PROFIT FROM THE HIMACHAL UNIT COMPUTED AS PER BOOKS WHILE COMPUTING THE BOOK PROFIT AS PER CLAUSE (V) TO EXPLANATION TO SECTION 115JA(2). THE INCOME FROM HIMACHAL UNIT WAS EXEMPT UNDER SECTION 80IA. T HE AO HELD THAT INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT AND AS REDUCED BY BROUGHT FORWARD LOSSES WAS ONLY TO BE DEDUCTED. CIT (A) UPHELD THE VIEW OF THE AO THAT THE INCOME COMPUTED UNDER THE PROVISION S OF ACT HAS TO BE DEDUCTED BUT HE DIRECTED NOT TO DEDUCT THE BROUGHT FORWARD LOSSES. 2.6.1 AFTER HEARING BOTH THE PARTIES WE FIND THAT T HIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN CASE OF TUSHAKO PUMP LTD. (2SOT 556) IN WHICH IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JA, THE PROF IT OF INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA MUST BE COMPUTED AS PER THE BOOKS OF ACCOUNTS AND NOT AS PER THE PROVIS ION OF THE ACT. RESPECTFULLY FOLLOWING THE SAID DECISION WE HELD TH AT THE PROFIT OF THE HIMACHAL UNIT COMPUTED AS PER THE BOOKS AND AFTER M AKING ADJUSTMENTS AS PERMISSIBLE UNDER SECTION 115JA WILL ONLY BE EXCLUD ED WHILE COMPUTING THE BOOK PROFIT. 20 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS GROUND NO.10(A)&10(B) 12. THIS GROUND RELATES TO NON ALLOWANCE OF EXCLUSI ON OF DEDUCTION U/S 80HHC COMPUTED ON PROFIT OF THE BUSINESS AS PER THE ACCOU NTS PREPARED UNDER THE COS. ACT IN COMPUTING BOOK PROFIT U/S 115JA AMOUNTING TO RS.11, 11,94,842/-. 12.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSES SEE SUBMITTED THAT IN COMPUTING BOOK PROFIT U/S 115JA, THE ASSESSEE HAS CLAIMED EXC LUSION OF DEDUCTION U/S 80HHC BY CONSIDERING THE PROFIT AS PER BOOKS OF ACCOUNTS BUT THE LD. AO WHILE FOLLOWING THE DECISION OF ROYAL CUSHION VINYL PRODUCTS LTD. V S. DCIT (1993) 47 ITD 111 (BOM). LD. AR FURTHER ARGUED THAT CIT(A) HAS ALSO ERRONEOU SLY UPHELD THE ORDER PASSED BY AO. LD. AR ARGUED THAT THE HONBLE ITAT M UMBAI BENCH IN ASSESSES OWN CASE FOR A.Y. 1997-98 IN ITA NO.1859/MUM/04 IN THIS RESPECT OUR ATTENTION WAS DRAWN TO PAGE NO. 7-8 AT PARA 2.6 TO 2.6.1 OF SUPPL EMENTARY PAPER BOOK PAGE NO. 24- 25. THEREFORE, CONSIDERING AFORE MENTIONED FACTS, THIS GROUND RAISED BY ASSESSEE IS ALLOWED. 21 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS GROUND NO.11 13. THIS GROUND RELATES TO NON-EXCLUSION OF PROFIT ON SALE OF INVESTMENT IN COMPUTING BOOK PROFIT U/S 115JA AMOUNTING TO RS.4,9 7,27,379/-. 13.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSES SEE SUBMITTED THAT DURING THE YEAR, THE ASSESSEE HAS CLAIMED EXCLUSION OF PROFIT (NET OF LOSS) ON SALE OF INVESTMENTS IN COMPUTING BOOK PROFIT U/S 115JA LD. AR FURTHER SUBMITTED AO WHILE RELYING ON THE DECISION OF CIT VS. VEEKAYLAL INVESTMENTS CO. (P) LTD. (2001) 249 ITR 597 (BOMB). LD. AR FURTHER ARGUED THAT CIT(A) HAS ALSO ERRONEO USLY UPHELD THE ORDER PASSED BY AO. LD. AR ARGUED THAT THE ISSU E IS COVERED BY THE DECISION OF THE HONBLE DELHI TRIBUNAL IN THE CASE OF ACIT VS. NORT HERN INDIA THEATERS (P) LTD. (1996) 133 CTR 326 (DEL) WHEREIN IT HAS BEEN HELD T HAT PROFIT DERIVED ON SALE OF FIXED ASSETS YIELD ONLY CAPITAL GAINS AND THEY DO NOT PAR TAKE THE CHARACTER OF BUSINESS PROFITS AND THE SAME SHOULD NOT BE SHOWN AS BUSINESS PROFIT S IN A PROPERLY PREPARED PROFIT AND LOSS ACCOUNT AS PER PROVISIONS OF PAR II & III OF S CHEDULE VI OF COMPANIES ACT. 13.2 ON THE OTHER HAND, LD. DR RELIED UPON THE ORDE RS PASSED BY REVENUE AUTHORITIES. AFTER CONSIDERING THE RIVAL CONTENTIONS WE ARE OF T HE CONSIDERED VIEW THAT THE CIT(A) HAS DISCUSSED THIS GROUND IN DETAIL AND THE OPERATI VE PARA IS REPRODUCED BELOW: 22 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 16.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE APPELLANT SUBMITTED THAT THE BOOK PROFIT ON SALE OF INVESTMEN TS AND ASSETS OF RS. 4,97,27,379/- (NET) WAS EXCLUDED, UNDER THE CONTENT ION THAT IT WAS THE PROFIT DERIVED ON REALIZATION OF CAPITAL ASSET AND THEREFORE WOULD NOT BE AN ITEM OF INCOME EARNED DURING THE REGULAR COURSE OF BUSINESS. SECTION 115JA(2) SPECIFICALLY PROVIDES THAT EVERY ASSESSEE, BEING A COMPANY, SHALL FOR THE PURPOSES OF THIS SECTION PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH T HE PROVISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956). THEREFORE, THE PROFIT REALISED FROM SALE OF INVESTM ENTS DID NOT FORM PART OF THE BOOK PROFIT AS REQUIRED TO BE SHOWN IN THE P ROFIT AND LOSS ACCOUNT UNDER THE PROVISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. RELIANCE WAS PLACED AMONG OTHERS ON THE DECISIONS OF ASST. CIT -VS- NORTHERN INDIA THEATERS (P) LTD. (1996) 13 3 CTR 326 (DEL), SUTLEJ COTTON MILLS LTD. -VS- ASST. CIT (1993) 45 I TD 22 (CAL.)(SB), OSWAL AGRO MILLS LTD. -VS.- DY. CIT (1994) 51 ITD 4 47 (DEL), CIT -VS.- INDIA DISCOUNT COMPANY LTD. [1970] 75 ITR 191(SC), CIT -VS.- MIS SHOORJI VALLABHDAS & CO. (1962) 46 ITR 144 (SC) AND SUTLEJ COTTON MILLS LTD. -VS.- CIT (1979} 116 ITR 1 (SC). AS REG ARDS THE DECISION RELIED UPON BY THE A.O., THE APPELLANT SUBMITTED TH AT THE SAID DECISION WAS IN RELATION TO AN INVESTMENT COMPANY, WHICH HAS NO APPLICATION IN THE CASE OF THE APPELLANT. 16.3 I HAVE PERUSED THE SUBMISSION MADE BY THE APPE LLANT AND THE RELEVANT PROVISIONS OF THE ACT. PROVISION OF SEC.11 5JA SPECIFIES THE ITEMS TO BE ADDED BACK AND TO BE DEDUCTED. IN THE SAID SE CTION THERE IS NO PROVISION OF DEDUCTION OF CAPITAL PROFIT IN COMPUTI NG BOOK PROFIT. THUS, 23 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS FOLLOWING THE PROVISIONS OF THE ACT, THE GROUND IS DECIDED AGAINST THE APPELLANT. 13.3 AFTER CONSIDERING THE AFORE MENTIONED DETAILED ORDER WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED JUDICIAL ORDERS THERE IS NO REASO N TO INTERFERE OR DEVIATE INTO THE ORDER PASSED BY THE CIT(A) AND UPHELD BY THE AO. TH EREFORE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. GROUND NO.12 14. THIS GROUND RELATES TO IMPOSITION OF INTEREST U /S 234C AMOUNTING TO RS.64,854/- 14.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSES SEE SUBMITTED THAT AS PER THE LD. AR THE ASSESSEE IS NOT LIABLE TO FILE THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, AND ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234C. IT IS ARGUED BY LD. AR THAT THE AO IMPOSE INTEREST WITHOUT ASSIG NING ANY REASON. LD. AR FURTHER ARGUED THAT CIT(A) HAS ALSO ERRONEOUSLY UPH ELD THE ORDER PASSED BY AO. LD. AR RELIED UPON THE DECISION OF BOMBAY GYMKHANA LTD VS. ITO (2008) 115 TTJ 639 (MUM) WHEREIN IT HAS BEEN HELD THAT INTEREST U/S 23 4C NEEDS TO THE LEVIED AS PER RETURNED INCOME. 24 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 14.2 ON THE OTHER HAND, LD. DR RELIED UPON THE ORDE RS PASSED BY THE LOWER AUTHORITIES. AFTER PERUSAL OF ALL THE FACTS OF THE CASE LAWS WE ARE OF THE CONSIDERING VIEW THAT THE INTEREST IS U/S 234C TO BE LEVIED AS INTEREST INCOME THEREFORE WE DIRECT THE AO TO RECALCULATE THE INTEREST AS PER THE RETU RN INCOME. THIS GROUND OF APPEAL IS ALLOWED IN TERMS OF ABOVE DIRECTION. GROUND NO. 13&14 15. BOTH GROUNDS ARE GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION IN VIEW OF THE ABOVE DECISION. ADDITIONAL GROUND NO.1 16. THIS GROUND RELATES TO WITHDRAWAL OF CLAIM OF D EDUCTION U/S 80-IA IN RESPECT OF UNIT ENGAGED IN THE BUSINESS OF GENERATION OF POWER UNDER THE NORMAL COMPUTATION AMOUNTING TO RS.3,38,07,839/-. 16.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. IT WAS ARGUED BY LD. AR FOR THE ASSESSEE THAT AS PE R SECTION 80IA(2) AS AMENDED VIDE FINANCE ACT,1999, THE ASSES SEE HAS AN OPTION TO CLAIM DEDUCTION U/S 80-IA ON GENERATION OF POWER FOR ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 ASSESSMENT YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING BEGINS TO 25 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS GENERATE POWER. LD. AR ALSO RELIED UPON THE JUDGEME NT IN THE CASE OF ACIT VS. VODAFONE ESSAR GUJARAT LTD. (2010) 131 TTJ 544 (AHM ) WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE HAVING FULFILLED ALL THE CONDITIONS AS SPECIFIED IN THE PROVISIONS OF SEC.80- IA IT CANNOT BE DENIED THE BENEFIT OF THE OPTION CL AIMING DEDUCTION FOR 10 ASSESSMENT YEARS OUT OF 15 ASSESSMENT YEARS AS GRANTED BY THE AMENDED PROVISIONS APPLICABLE W.E.F. 01.04.2000 EVEN IF THE UNDERTAKING HAS COMME NCED OPERATIONS PRIOR TO AMENDMENT. 16.2 ON THE OTHER HAND LD. DR RELIED UPON THE ORDER S PASSED BY THE REVENUE AUTHORITIES. 16.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND AP PRECIATING THE CITED JUDGEMENTS WE ARE OTHER CONSIDERED VIEW THAT THE ASSESSEE COUL D NOT BE DENIED THE BENEFIT OF AMENDED PROVISION ONCE IT FULFILL THE CONDITIONS ST IPULATED IN THE RELEVANT PROVISION AND THEREFORE IN VIEW OF SECTION 80IA (2) THE ASSES SE IS ENTITLED TO VIEW THE OPTION OF CLAIMING DEDUCTION U/S 80IA ON GENERATION OF POWER FOR ASSESSMENT YEAR 1999-2000 ONWARDS. HOWEVER THE ISSUE ON MERITS NEEDS TO BE CO NSIDERED BY THE AO, ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO. 16.4 WITH THIS DIRECTION THIS ADDITIONAL GROUND IS TREATED AS ALLOWED. IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 26 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS ITA NO. 2654/MUM/2005 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF COMMUNITY WEL FARE EXPENSES OF RS.146,39,374/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT OF TE MPLE EXPENSES OF RS.5,89,535/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF MINES PROSPEC TING CHARGES OF RS.15,79,162/-. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF FOREIGN EXCHA NGE LOSS OF RS.157,16,034/-. 5. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON TH E ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . GROUND NO.1 17. THIS GROUND RELATES TO DELETION OF DISALLOWANCE OF COMMUNITY WELFARE EXPENSES AMOUNTING TO RS.1,46,39,374/-. 17.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR SUBMITTED THAT THE COMMUNITY WELFARE EXPENSE S HAVE BEEN INCURRED FOR MAINTENANCE OF SCHOOL, TEMPLE, ASHRAM, VILLAGE HOUSES FOR THE BENEFITS OF THE EMPLOYEES AND LOCAL RESIDENTS RESIDING NEARBY T HE FACTORIES FOR SMOOTH FUNCTIONING 27 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS OF FACTORIES. THE SAME IS BEING CLAIMED AS BUSINESS EXPENDITURE. IT WAS FURTHER SUBMITTED BY LD AR THAT THE AO DISALLOWED THE EXPEN DITURE WHILE FOLLOWING THE ORDERS OF EARLIER YEARS. IT WAS FURTHER ARGUED THAT CIT(A) HAS ALSO RIGHTLY DELETED THE ADDITION. LD. AR SUBMITTED THAT THIS GROUND IS ALREADY BEEN D ECIDED BY HONBLE ITAT IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR DIFFERENT YE ARS IN THIS RESPECT OUR ATTENTION IS DRAWN ON THE DECISION OF ITA NO. 3733/MUM/96 FOR AS SESSMENT YEAR 1988-89 AT PAGE NO. 3 PARA NUMBER 7 OF PAPER BOOK PAGE NO. 47 WHICH IS REPRODUCED HERE UNDER: THE SIXTH GROUND IS REGARDING DISALLOWANCE OF RS.9 3,220/- BEING VILLAGE WELFARE EXPENSES. THIS EXPENDITURE RELATES TO EXPENDITURE TOWARDS GENERAL VILLAGE WELFARE IN THE VICINITY OF THE PLANT. WE FIND THAT THIS ISSUE ALSO COVERED BY THE DECISION OF ITAT IN ITA NO. 2690/MUM/93 VIDE ITS ORDER DATED 20.12.2002 IN ASSESSEES OWN C ASE FOR ASSESSMENT YEAR 89-90. ACCORDINGLY FOLLOWING ABOVE ORDER, THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. THE APPEAL OF THE ASSESSEE SUCCEEDS ON THIS ISSUE. 17.2 THIS GROUND OF APPEAL IS DISMISSED. GROUND NO.2 18. THIS GROUND RELATES TO DELETION OF DISALLOWANCE OF TEMPLE EXPENSES AMOUNTING TO RS.5,89,535/-. 18.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR SUBMITTED THAT TEMPLE EXPENSES COMPRISES OF DAILY POOJA 28 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS EXPENSES, TEMPLE FUNCTION EXPENSES, ETC PERFORMED I N THE TEMPLE SITUATE INSIDE THE FACTORY PREMISES. THE SAME HAS BEEN INCURRED FOR TH E GENERAL WELFARE OF EMPLOYEES AND TO BOOST UP THEIR MORALE IN ORDER TO RUN THE BU SINESS MORE EFFICIENTLY AND ECONOMICALLY. HENCE THE SAME HAS BEEN CLAIMED AS BU SINESS EXPENDITURE. LD. AR FURTHER SUBMITTED THAT THE AO HAS DISALLOWED THE EX PENDITURE FOLLOWING THE ORDERS OF EARLIER YEARS. IT WAS FURTHER ARGUED THAT CIT(A) HA S RIGHTLY DELETED THE ADDITION. LD. AR SUBMITTED THAT THE SAID GROUND HAS ALREADY BEEN DECIDED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE BY HONBLE ITAT AND OUR ATTENTI ON WAS DRAWN TO ITA NO. 2690/MUM/1993 FOR ASSESSMENT YEAR 1989-90 PARA 6 PA GE NO. 14-17 OF PAPER BOOK PAGE NO.57-60. 6. THE FIFTH GROUND PERTAINS BY CIT(A)S ACTION IN CONFIRMING THE DISALLOWANCE IN RESPECT OF TEMPLE INAUGURATION EXPE NSES OF RS.8,33,943/-. 6.1 IT WAS SUBMITTED BY THE LD. COUNSEL OF THE ASSE SSEE THAT THE COMPANY HAD CONSTRUCTED A TEMPLE CALLED RADHAKRISHNA TEMPLE NEAR THE FACTORY. IT WAS STATED THAT IN THE YEAR OF ACCOUNT THE SAID TEM PLE WAS INAUGURATED AND PUJA FUNCTIONS HAD TAKEN PLACE FOR 10 DAYS. IT WAS POINTED OUT THAT THE TEMPLE WAS CONSTRUCTED AT A COST OF RS.71.91 LAKHS AND ITS INAUGURATION EXPENDITURE WAS INCURRED FOR THE WELFARE OF THE EMP LOYEES AND IT INCLUDED EXPENSES LIKE PURCHASE OF PUJA MATERIALS, DAKSHINA/ FEES PAID TO PUNDITS AND OTHER EXPENSES LIKE DISTRIBUTION OF PRASAD TO ALL T HE EMPLOYEES, EXPENDITURE OF FLOWERS ETC. IN THIS REGARD THE LD. COUNSEL ADVE RTED OUR ATTENTION TO DETAILS OF TEMPLE INAUGURATION EXPENSES GIVEN AT PA GE 110 OF THE PAPER BOOK. THESE DETAILS ARE REPRODUCED AS UNDER- 29 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS AMOUNT (RS.) MANDAP DECORATION ETC 1,33,210 PRASAD DISTRIBUTION 82,067 ELECTRICITY CHARGES 12,826 POOJA MATERIALS 55,210 TRAVELLING & TRANSPORTATION 3,79,499 LABOUR CHARGES 38,762 MISCELLANEOUS EXPENSES 30,933 FOOD EXPENSES 1,01,436 8,33,943 6.2 IT WAS FURTHERS SUBMITTED BY THE LD. COUNSEL TH AT THE AFORESAID EXPENSES WERE INCURRED FOR THE PURPOSE OF THE TEMPLE LOCATED AT FACTORY COMPLEX JUST OUTSIDE THE FACTORY. IT WAS STATED THAT THE SAID EX PENDITURE WAS INCURRED TO MEET THE EMOTIONAL AND RELIGIOUS NEEDS OF THE EMPLO YEES AND HENCE, THE EXPENDITURE WAS INCURRED FORT THE WELFARE AND RECRE ATION OF THE EMPLOYEES OF THE ASSESSEE AND LIKE ANY OTHER EXPENDITURE INCU RRED FOR THE EMPLOYEES, IT IS ALSO DIRECTLY RELATED TO THE BUSINESS OF THE ASS ESSEE. RELIANCE WAS PLACED BY THE LD. COUNSEL ON THE FOLLOWING DECISIONS. I) COMMERCIAL AHMEDABAD MILLS CO. LTD. VS. CIT (199 3) 204 ITR 505 (GUJ) II) ALLAS CYCLE INDUSTRIES LTD. VS. CIT (1982) 134 ITR 458 (P&H) III) ALLAS CYCLE INDUSTRIES VS. CIT 181 ITR 18 (P&H ) IV) KEDARNATH JUTE MFG. CO. LTD. VS. CIT 82 ITR 363 (SC) V) SUTLEJ COTTON MILLS LTD. VS. CIT 116 ITR 1 (SC) & VI) CEHEMOSYN (P) LTD. VS. 2 ND ITO (1992) 42 ITD 1(BOM)(SB) 6.3 ON THE OTHER HAND, THE LD. DR HAS ARGUED THAT S INCE THE ASSESSEE HAS SUFFERED HUGE LOSSES DURING THIS PERIOD, THERE WAS NO NECESSITY FOR INCURRING SO MUCH OF THE EXPENDITURE. SHE ALSO ARGUED THAT TH E SAID EXPENDITURE IS NOT RELATED TO THE BUSINESS OF THE ASSESSEE AND HENCE I T IS DISALLOWABLE. SHE ALSO 30 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS REFERRED TO DECISION OF BOMBAY HIGH COURT IN THE CA SE OF KOLHAPUR SUGAR MILLS LTD (119 ITR 387) WHICH IS RELIED UPON BY CIT (A). 6.4 WE HAVE HEARD THE RIVAL SUBMISSIONS IN THE LIGH T OF MATERIAL PLACED BEFORE US. THE CIT(A) IN CONFIRMING THE DECISION OF THE AO RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF KO LHAPUR SUGAR MILLS LTD. (SUPRA) AND ALSO N. SIRUR AND CO. PVT. LTD. VS . CIT (1977) 109 ITR 432 (BOM), WHEREIN THE BOMBAY HIGH COURT RELIED ON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF ANDREW YULE & CO. LTD. VS . CIT (1963) 49 ITR 57(CAL.) 6.5 THE LD. COUNSEL OF THE ASSESSEE HAS REPLIED THA T THE DECISION OF KOLHAPUR SUGAR MILLS LTD. (SUPRA) IS NOT RELEVANT IN THE PR ESENT CONTEXT. IN THE SAID CASE THE EXPENDITURE WAS INCURRED FOR FOOD AND ENTE RTAINMENT OF LABOURERS WORKING IN THE ASSESSEES OWN SUGAR FACTORY. IN THE CASE OF ANDREW YULE & CO. (SUPRA) THE HONBLE CALCUTTA HIGH COURT HAS HEL D THAT TO ARRIVE AT THE CONCLUSION THAT THE EXPENDITURE WAS DICTATED SOLELY BY BUSINESS CONSIDERATION, ONE HAS TO CONSIDER NATURE OF THE BU SINESS, THE WAY IT IS CONDUCTED AND ANY LIKELIHOOD OF THE BUSINESS BEING ADVERSELY AFFECTED OR ITS INTEREST BEING PROMOTED BY THE REFUSAL OR THE INCUR RING OF THE EXPENDITURE AS THE CASE MAY BE. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SAID DECISION SQUARELY AND FAVOURABLY APPLIES TO THE ASS ESSEES CASE. IT WAS POINTED OUT IN THE INSTANT CASE THE ASSESSEE WAS CA RRYING ON THE BUSINESS OF MANUFACTURING CEMENT IN A REMOTE AREA, WHERE NO FAC ILITIES FOR SOCIAL AND OTHER RECREATION OF THE WORKERS ARE AVAILABLE. IT W AS STATED THAT THE IMPUGNED EXPENDITURE WAS INCURRED FOR BOOSTING UP T HE MORALE OF THE EMPLOYEES OF THE PURPOSE OF THE ASSESSEES BUSINESS . 6.6 IN THIS CONTEXT, WE WOULD LIKE TO REFER TO THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF ATLAS CYCLE INDU STRIES (SUPRA) WHEREIN IT WAS HELD THAT NO CURB CAN BE PLACED ON THE DISCRETION OF THE ASS ESSEE TO PROVIDE THE TYPE OF RECREATION WHICH, ACCORDING TO IT, WOULD BEST AD VANCE THE INTEREST OF ITS BUSINESS. IF THE RECREATION PROVIDED, EVEN IF IT IS IN THE NATURE OF A RELIGIONS ACTIVITY, HAS A DIRECT NEXUS WITH THE WELFARE OF A CLASS OF WORKERS ENGAGED BY THE ASSESSEE, IT WAS WHOLLY IMMATERIAL IF THE RE CREATION PROVIDED IS 31 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS DIRECTLY OR INDIRECTLY CONNECTED WITH THE RELIGIOUS TENETS OF A SECTION OF THE SOCIETY. 6.7 WE ARE IN RESPECTFUL AGREEMENT WITH THE AFORESA ID DECISION, AS WELL AS MOST OF OTHER DECISIONS RELIED UPON BY THE LD. COUN SEL OF THE ASSESSEE, INCLUDING THE DECISION OF THE BOMBAY TRIBUNAL IN TH E CASE OF CHEMOSYN P. LTD. (SUPRA). HOWEVER, WE FIND THAT SOME OF THE DEC ISIONS REFERRED BY THE LD. COUNSEL ARE IRRELEVANT FOR THE JUDGMENT OF SUPREM E COURT IN THE CASE OF SUTLEJ COTTON MILLS LTDS CASE (SUPRA) PERTAINS TO LOSS DUE TO EXCHANGE FLUCTUATION AND HENCE IS DISTINGUISHABLE ON FACTS. IN PRINCIPLE WE HOLD THAT THE GENUINE AND REASONABLE TEMPLE INAUGURATION EXPE NDITURE IS NECESSARILY FOR THE WELFARE OF THE EMPLOYEES AND HENCE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HOWEVER, FROM THE DETAILS OF THE EXPE NSES GIVEN BY THE ASSESSEE WE FIND THAT APART FROM EXPENDITURE OF RS. 82,067/- INCURRED ON PRASAD DISTRIBUTION, THE ASSESSEE INCURRED FOOD EX PENSES OF RS.1,01,436/-. THESE WERE NOT EXPENSES ON FOOD OR BEVERAGES PROVID ED BY THE ASSESSEE TO ITS EMPLOYEES IN OFFICE, FACTORY OR OTHER PLACE OF WORK. THEREFORE, IN VIEW OF EXPLANATION 2 TO SEC.37(2A) (AS EXISTING AT THE REL EVANT TIME). FOOD EXPENSES ARE CLEARLY IN THE NATURE OF ENTERTAINMENT AND HENCE ARE INADMISSIBLE AS BUSINESS EXPENSES. IN HOLDING THIS VIEW WE ARE FORTIFIED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF INDIA PLASTICS LTD.240 ITR 528. BUT THE EXPENDITURE INCURRED ON P RASAD DISTRIBUTION IS, IN OUR OPINION, ALLOWABLE AS BUSINESS EXPENDITURE K EEPING IN VIEW THE FACT THAT IT WAS SINCE QUA NON IN TEMPLE INAUGURATION FU NCTION. WE FURTHER FIND THAT ASSESSEE HAS INCURRED HUGE EXPENSES OF RS.3,79 ,499/- ON TRAVELLING AND TRANSPORTATION IN CONNECTION WITH TEMPLE INAUGURATI ON. THE DETAILS OF SUCH EXPENSE ARE NOT AVAILABLE ON RECORDS. BUT DURING TH E COURSE OF HEARING IT WAS STATED BY THE LD. COUNSEL THAT THESE EXPENSES I NCLUDED EXPENSES FOR AIR TICKETS OF PUNDITS AND OTHER GUESTS AND EMPLOYEES W HO WERE INVITED TO ATTEND THE TEMPELE INAUGURATION FUNCTION. WE ARE OF THE OPINION THAT SUCH LAVISH EXPENDITURE ON AIR TICKETS ETC. WAS NOT DICT ATED BY CONSIDERATIONS O COMMERCIAL OR BUSINESS EXPEDIENCY PARTICULARLY WHEN THE ASSESSEE WAS SUFFERING HUGE LOSSES. THE JUDGEMENT OF HONBLE BOM BAY HIGH COURT IN KOLHAPUR SUGAR MILLS LTDS CASE DOES FORTIFY OUR VI EW. BUT WE ARE OF THE VIEW THAT SOME REASONABLE EXPENSES ON TRAVELLING AN D TRANSPORTATION HAVE TO BE ALLOWED AS PUNDITS AND SOME EMPLOYEES FOR THE FUNCTION WERE CALLED 32 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS FOR FROM OUTSIDE STATIONS. IN OUR VIEW IT WILL MEET THE ENDS OF JUSTICE IF DISALLOWANCE OF RS.3,00,000/- IS MADE OUT OF TRAVEL LING AND TRANSPORTATION EXPENSES. THUS, THE TOTAL DISALLOWANCE UNDER THIS H EAD IS RESTRICTED TO RS.4,01,436/-(I.E. 1,01,436+3,00,000) WHICH WILL RE SULT IN A RELIEF OF RS.4,32,507/- TO THE ASSESSEE. THE ASSESSEE, THEREF ORE, PARTLY SUCCEEDS ON THIS ISSUE. 18.3 WE DISMISS THIS GROUND OF APPEAL. GROUND NO.3 19. THIS GROUND RELATES TO DELETION OF DISALLOWANCE OF MINES PROSPECTING EXPENSES AMOUNTING TO RS.15,79,162/-. 19.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 19.2 LD. AR SUBMITTED THAT MINES PROSPECTING EXPENS ES HAS BEEN INCURRED FOR IDENTIFYING DEPOSITS OF LIMESTONE AT VARIOUS MINING LOCATIONS. THE SAME HAS BEEN CLAIMED AS REVENUE EXPENDITURE U/S 37(1). LD AR FUT HER SUBMITTED THAT THE AO HAS WRONGLY HELD THAT THE EXPENDITURE INCURRED IS CAPIT AL IN NATURE. IT WAS FURTHER ARUGUED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. L D. AR SUBMITTED THAT THIS ISSUE IS ALREADY BEEN DECIDED IN ASSESSEES OWN CASE FOR ASS ESSEMENT YEAR 1988-89 IN ITA NO. 3733/MUM/1996 PARA 17 OF PAPER BOOK PAGE NO.48. 33 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 17 GROUND NO.8 RELATES TO DISALLOWANCE OF MISCELLA NEOUS EXPENDITURE AS UNDER:- I) QUARRY DEVELOPMENT EXPENSES OF RS.25,69,139/ II) MARKET RESEARCH AND DEVELOPMENT EXPENSES OF RS.8,18 ,712/- AND III) ADVERTISEMENT FOR CORPORATE IMAGE OF RS.8,53,980/- ACCORDING TO LEARNED COUNSEL, THESE ITEMS ARE COVER ED BY FOLLOWING DECISIONS: A) ITA NO.2690/M/93 VIDE ITS ORDER DATED 20.12.2002 FO R ASSESSMENT YEAR 1989-90 B) ITA NO.2419/M/94 VIDE ITS ORDER DATED 4.8.2003 FOR ASSESSMENT YEAR 90-91 C) EMPIRE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1(SC) D) CIT VS. ANANDA BAZAR PATNIKA (P) LTD. 91990) 184 IT R 542 (CAL) E) CIT VS. BERGER PAINTS (INDIA) LTD. (NO.S2) (2002) 2 54 ITR 503 (CAL) VIDE PARA 17.3 OF ITS ORDER DATED 20.12.2002, THE T RIBUNAL FOR THE ASSESSMENT YEAR 89-90 IN ITA NO.2690/M/93 HELD AS U NDER:- 17.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN T HE LIGHT OF MATERIAL PLACED BEFORE US. IT IS A FACT THAT ASSESSEES BUSI NESS HAD STARTED DURING THE PRECEDING YEAR AND IT HAD ALREADY STARTED EXTRA CTING LIMESTONE FORM THE MINES. THE IMPUGNED EXPENSES ARE TO BE INCURRED ON YEAR TO YEAR BASIS AND CANNOT BE SAID TO BE INCURRED PRIOR TO CO MMENCEMENT OF BUSINESS. SINCE THE BUSINESS HAD ALREADY COMMENCED, THE SAME WILL NOT BE COVER BY THE PROVISIONS OF SECTION 35(1). FURTHE R THE SAID EXPENDITURE WAS INCURRED FOR EXTRACTING RAW MATERIAL AND NOT FO R ACQUIRING ANY ASSET OF ENDURING BENEFIT OR ADVANTAGE. IN THIS CONTEXT, WE RELY ON THE DECISION OF APEX COURT IN THE CASE OF EMPIRE CO. LTD. (SUPRA ) WHEREIN IT WAS HELD THAT IF THE ADVANTAGE CONSISTS MERELY IN FACILITATI NG THE ASSESSEES TRADING OPERATION, THE EXPENDITURE WOULD BE ON REVENUE ACCO UNT. RESPECTFULLY, FOLLOWING THE SAID DECISION AND OTHER DECISIONS REL IED UPON BY THE LD. COUNSEL; WE HOLD THAT THE SAID EXPENDITURE CAN IN N O WAY BE TREATED AS CAPITAL IN NATURE. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) WHO HAS HELD THAT THE IMPUGNED EXPENDITURE IS REVENUE EXPEN DITURE ALLOWABLE U/S 34 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS 37(1). THE ASSESSING OFFICER HAS NOT DISCUSSED THE ISSUE AT ALL. THE APPEAL OF THE REVENUE FAILS ON THIS ISSUE AS WELL. IN VIEW OF THE ABOVE, QUARRY DEVELOPMENT EXPENSES A RE TREATED AS REVENUE EXPENDITURE AND ARE ALLOWED. THE ASSESSEE S UCCEEDS ON THIS GROUND. OTHER TWO EXPENSES VIZ MARKET RESEARCH AND DEVELOPM ENT EXPENSES OF RS.8,18,712/- AND ADVERTISEMENT OF CORPORATE IMAGE OF RS.85,39,801/- THE ASSESSEE HAS PLACED RELIANCE ON THREE DECISIONS (SUPRA). THE ASSESSING OFFICER HAVE TREATED THEM AS CAPITAL EXPE NDITURE AND SO CONFIRMED BY THE CIT(A) VIDE PARA 15 AND 15.1 OF HI S ORDER. SINCE THE BUSINESS OF THE ASSESSEE HAS COMMENCED DURING THIS YEAR, THE EXPENDITURE ON QUARRY DEVELOPMENT EXPENSES, WILL BE TREATED AS REVENUE EXPENDITURE, FOLLOWING THE 19.3 THEREFORE, WE DISMISS THIS GROUND OF APPEAL. GROUND NO.4 20. THIS GROUND RELATES TO DELETION OF DISALLOWANCE S OF FOREIGN EXCHANGE LOSS AMOUNTING TO RS.1,57,16,034/-. 20.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. DR APPEARING ON BEHALF OF REVENUE SUPPORTED THE ORDER PASSED BY AO AND SUBMITTED THAT FOREIGN EXCHANGE FLUCTUATION LOSS IS NOTIONAL OR ANTICIPATED LOSS COMPUTED ON THE BASIS OF PREVAILING EXCHANGE RATE A S ON 31.03.1998 THEREFORE THE AO HAS RIGHTLY DISALLOWED THE SAME. ON THE OTHER HAND LD. AR APPEARING ON BEHALF OF 35 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS ASSESSEE SUBMITTED THAT FOREIGN EXCHANGE FLUCTUATIO N LOSS HAS BEEN INCURRED FOR VARIOUS TYPES OF REVENUE EXPENDITURE AS WELL AS FOR LOAN IN FOREIGN CURRENCY TAKEN FOR DAY TO DAY FUNCTIONING OF THE BUSINESS. THE SAME IS BEING ACCOUNTED AS PER AS-11 ISSUED BY ICAI. LD. AR ALSO SUBMITTED THAT THIS ISS UE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF CIT VS. WOODWARD GOVERN OR INDIA PVT. LTD. (2009) 312 ITR 254 (SC) WHERE IS HAS BEEN HELD THAT LOSS SUFFE RED BY THE ASSESSEE ON ACCOUNT OF THE EXCHANGE DIFFERENCE AS ON THE DATE ON THE BALAN CE SHEET IS AN ITEM OF EXPENDITURE U/S 37(1) OF THE ACT. 20.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY DIFFERENT JUDICIAL PRONOUNCEM ENTS AS MENTIONED ABOVE AND THE CIT9A) HAS ALSO PASSED ORDER WHILE FOLLOWING THE DE CISION OF OIL AND NATURAL GAS CORPN. LTD. VS. CIT (2010) 322 ITR 180 (SC) AND DCI T VS. BANK OF BAHRAIN & KUWAIT (2010) 41 SOT 290 (MUM) (SB). 20.3 ORDER PASSED BY CIT(A) ARE JUDICIOUS AND WELL REASONED THEREFORE WE SEE NO REASON TO INTERFERE OR DEVIATE HENCE WE UPHELD THE ORDERS OF CIT(A) AND DISMISSED THIS GROUND OF APPEAL. 20.4 SINCE THE ASSESSEE HAS SUBMITTED THAT THE ADDI TIONAL GROUNDS RAISED IN VIEW OF AMENDMENT IN FINANCE ACT, 1999 AND AS PER AMENDED P ROVISIONS OF SECTION 80IA, THE ASSESSEE HAS THE OPTION OF CLAIMING DEDUCTION FOR A PERIOD OF TEN CONSECUTIVE 36 ITA NO. 2524/M/05 & 2654/M/05 (A.Y.1998-89) GUJARAT AMBUJA CEMENTS ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FRO M THE YEAR IN WHICH THE UNDERTAKING BEGINS TO GENERATE POWER IN RESPECT OF THE UNITS SET UP ON OR AFTER 01.04.1993. 22. IN THE NET RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016 SD/- SD/- (B.R. BASKARAN) (SANDEEP GOSAIN) ! / ACCOUNTANT MEMBER # $ ! / JUDICIAL MEMBER % & MUMBAI; '! DATED : 05.08.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ( ) / THE CIT(A) 4. ( / CIT - CONCERNED 5. )* + $$,- , ,- , % & / DR, ITAT, MUMBAI 6. + ./ 0 / GUARD FILE / BY ORDER, / ! (DY./ASSTT. REGISTRAR) !' # , % & / ITAT, MUMBAI