The Addl Cit Sr-8, Ahmedabad V. M/S Nirma Ltd, Ahmedabad

ITA 2543/AHD/2000

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0564 (ITAT-AHMEDABAD)
• Duration Of Justice: 12 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-01-2013
• Assessment Year: 1997-1998
• Appeal Filed On: 07-12-2000
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Gift; Business income; Depreciation; Business expenditure; Opportunity of being heard; Fair market value
• Section: 80HHC; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.2512 & 2543/AHD/2000 ASSESSMENT YEAR :1997-98 NIRMA LTD., NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD PAN NO. 31-969-CY- 2919 ADDL. CIT.SR.8, AHMEDABAD V/S . V/S . JT. COMMISSIONER OF INCOME-TAX, S.R.-8, AHMEDABAD NIRMA LTD., AHMEDABAD /APPELLANT .. /RESPONDENT) /BY ASSESSEE SHRI S.N.SOPARKAR, SR-AR AND SHRI HIMANSHU SHAH, AR /BY REVENUE SHRI SHELLEY JINDAL, CIT-DR /DATE OF HEARING 16-01-2013 /DATE OF PRONOUNCEMENT 28-02-2013 ! ! ! ! /O R D E R PER A.K.GARODIA, ACCOUNTANT MEMBER:- THESE CROSS-APPEALS FILED BY THE ASSESSEE AND REVE NUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (AP PEALS)-VII, AHMEDABAD DATED 05-09-2000 FOR THE ASSESSMENT YEAR (AY) 1997- 98. THESE ARE HEARD TOGETHER AND WERE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO.2512/A HD/2000. 2. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 3. GROUND NO.2 IS AS UNDER:- 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN CONFIRMING DISALLOWANCE OF DEDUCTION U/S. 80I & 80H H OF I.T. ACT IN RESPECT OF FOLLOWING INCOMES:- ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 2 (A) IN MANDALI DIVISION :- (I) F.D. INTEREST RS. 78,698 (II) RENT INCOME RS. 32,400 (III) INTEREST ON LOANS RS.1,93,93,359 (B) IN KANPUR DIVISION: (I) INTEREST ON FD RS.2,77,442 (II) INTEREST INCOME RS. 20,300 (III) RENT INCOME RS. 3,500 IN INDORE DIVISION: (I) INTEREST ON FD RS.83,58,945 (II) INTEREST ON LOANS RS.92,06,866 (III) INTEREST ON FD RS. 5,07,976 (IV) DISCOUNT RS.29,02,192 (V) INSURANCE RS. 3,37,561 (VI) TRANSPORT INCOME RS.6,22,409 (VII) WAREHOUSING CHARGES RS. 2,000 (VIII) TANK RENT RS. 3,000 (IX) RENT INCOME RS. 8,000 4. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE T HAT THE FIRST ITEM IS FD INTEREST OF RS.78,698/- IN RESPECT OF MANDALI DIVIS ION FOR WHICH THE ASSESSING OFFICER (AO) HAS DISALLOWED THE DEDUCTION U/S. 80I AND 80HH OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). IT WAS SUBMITTED BY HIM THAT AS PER THE TRIBUNALS ORDERS IN ASSESSEES OWN CASE FOR AY 1994-95, 1995-96 AND 1996-97, COPY OF WHICH ARE AVAILABLE IN THE PAP ER BOOK, THIS ISSUE IS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE BUT AS PER THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF LALSONS ENTERPRISES V. DCIT (2004) 89 ITD 25 (DEL) (SB), BENEFIT OF NETTING IS ALLOWABLE TO THE ASSESSEE AND ONLY NET INTEREST INCOME IS TO BE EXCL UDED FROM THE BUSINESS PROFIT FOR ALLOWING DEDUCTION UNDER THESE TWO SECTI ONS. LD. DR OF THE REVENUE SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE AS SESSEE BY THE TRIBUNALS DECISION IN ASSESSEES OWN CASE AND HENCE, THIS GRO UND OF ASSESSEE SHOULD BE REJECTED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 3 TRIBUNALS JUDGMENT CITED BY THE LD. AR OF THE ASSE SSEE, LD. AR OF THE ASSESSEE FAIRLY CONCEDED THAT REGARDING ALLOWABILIT Y OF DEDUCTION UNDER THESE TWO SECTIONS IN RESPECT OF THIS INCOME OF RS.78,698 /- ON ACCOUNT OF FD INTEREST, THE ISSUE IS COVERED AGAINST THE ASSESSEE AND HENCE, WE HOLD ACCORDINGLY. HOWEVER, THE REQUEST OF ASSESSEE IS TH IS THAT AS PER THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN TH E CASE OF LALSONS ENTERPRISES (SUPRA), BENEFIT OF NETTING SHOULD BE ALLOWED TO T HE ASSESSEE. WE FIND THAT AS PER THIS DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL AND ALSO AS PER SUBSEQUENT DECISIONS OF VARIOUS HONBLE HIGH CO URTS ALSO, BENEFIT OF NETTING HAS TO BE ALLOWED TO THE ASSESSEE IF THE AS SESSEE CAN ESTABLISH THE NEXUS BETWEEN SUCH INTEREST INCOME AND INTEREST EXP ENDITURE. HENCE, TO THIS EXTENT, WE HOLD THAT THE ISSUE SHOULD GO BACK TO TH E FILE OF ASSESSING OFFICER FOR DECIDING THE NETTING ASPECT AND IF THE ASSESSEE CAN ESTABLISH THE NEXUS BETWEEN INTEREST EXPENDITURE AND INTEREST INCOME BY ESTABLISHING THAT SUCH INTEREST EXPENDITURE WAS INCURRED FOR EARNING THIS INTEREST INCOME THEN BENEFIT OF NETTING SHOULD BE ALLOWED AND ONLY NET INTEREST INCOME SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF ALLOWING DE DUCTION U/S. 80I AND 80HH OF THE ACT. WE HOLD ACCORDINGLY. 6. IT WAS FURTHER SUBMITTED BY LD. AR OF THE ASSESS EE THAT SECOND ITEM OF INCOME IS RENT INCOME OF RS.32,400/- OF THE SAME DI VISION AND FOR THIS ITEM ALSO, IT WAS SUBMITTED THAT THE ISSUE MAY BE RESTOR ED BACK TO THE FILE OF AO FOR GRANTING BENEFIT OF NETTING. LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE ALSO. BUT WE SET AS IDE THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO AND RESTORE THE MATTER BACK TO T HE FILE OF AO FOR DECIDING THIS ASPECT OF BENEFIT OF NETTING WITH SAME DIRECTION TH AT IF THE ASSESSEE CAN ESTABLISH THE NEXUS OF ANY EXPENDITURE HAVING BEEN INCURRED FOR EARNING RENTAL INCOME THEN, BENEFIT OF NETTING SHOULD BE ALLOWED T O THE ASSESSEE AND IN THAT SITUATION, ONLY NET RENTAL INCOME SHOULD BE EXCLUDE D FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80I AND 80HH OF THE ACT. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 4 7. IT WAS FURTHER SUBMITTED BY THE LD. AR OF THE AS SESSEE THAT THIRD ITEM OF INCOME IN THIS REGARD IS INTEREST ON LOAN OF RS.1,9 3,93,359/- AND HE SUBMITTED THAT AS IN THE CASE OF FD INTEREST, FOR THIS INTERE ST INCOME ALSO, THE ISSUE SHOULD BE RESTORED TO THE FILE OF AO FOR GRANTING B ENEFIT OF NETTING AND HE FAIRLY CONCEDED THAT REGARDING ALLOWABILITY OF THESE TWO D EDUCTIONS FOR THE INTEREST INCOME, THE ISSUE IS COVERED AGAINST THE ASSESSEE B Y THE TRIBUNALS DECISION IN EARLIER THREE YEARS. HENCE, AS PER OUR DECISION IN RESPECT OF FD INTEREST INCOME, FOR THIS INCOME ON ACCOUNT OF INTEREST ON L OAN ALSO, WE DIRECT THE AO TO ALLOW BENEFIT OF NETTING IF THE ASSESSEE CAN EST ABLISH THE NEXUS BETWEEN INTEREST EXPENDITURE AND INTEREST INCOME AND IN THA T SITUATION, ONLY NET INTEREST INCOME SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER THESE TWO SECTIONS. THE MAIN ASPEC T I.E. ALLOWABILITY OF THESE DEDUCTIONS FOR THIS INCOME IS DECIDED AGAINST THE A SSESSEE. 8. IT WAS ALSO SUBMITTED BY LD. AR OF THE ASSESSEE THAT THE ISSUE REGARDING KANPUR DIVISION IS ALSO IDENTICAL BEING F D INTEREST OF RS.2,77,442/-, INTEREST INCOME OF RS.20,300/- AND RENT INCOME OF R S.3,500/- AND FOR THESE THREE ITEMS OF INCOME ALSO, THE ISSUE SHOULD BE RES TORED BACK TO THE FILE OF AO FOR GRANTING BENEFIT OF NETTING. AS PER OUR DECISIO N IN THE ABOVE PARAS IN RESPECT OF MANDALI DIVISION, FOR KANPUR DIVISION AL SO, WE DIRECT THE AO TO GRANT BENEFIT OF NETTING TO THE ASSESSEE IN RESPECT OF TH ESE THREE INCOMES IF ASSESSEE IS ABLE TO ESTABLISH NEXUS BETWEEN THESE I NCOME AND EXPENDITURE INCURRED FOR EARNING THESE INCOMES AS PER OUR DIREC TION GIVEN FOR MANDALI DIVISION. THE MAIN ASPECT I.E. ALLOWABILITY OF THES E DEDUCTIONS FOR THESE INCOMES IS DECIDED AGAINST THE ASSESSEE. 9. HE FURTHER SUBMITTED THAT SIMILARLY FOR INDORE D IVISION ALSO, THE ISSUE INVOLVED IS REGARDING FD INTEREST OF RS.83,58,945/- , INTEREST ON LOAN OF RS.92,06,866/-, FD INTEREST OF RS.5,07,976/-, DISCO UNT OF RS.29,02,192/-, INSURANCE OF RS.3,37,561/-, TRANSPORT INCOME OF RS. 6,22,409/-, WAREHOUSING ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 5 CHARGES OF RS.2,000/-, TANK RENT OF RS.3,000/- AND RENT INCOME OF RS.8,000/-. HE SUBMITTED THAT ISSUE REGARDING DISCOUNT INCOME O F RS.29,02,192/- IS COVERED IN FAVOUR OF ASSESSEE AS PER THE TRIBUNALS ORDER IN ASSESSEES OWN CASE IN AY 1995-96 COPY OF WHICH IS AVAILABLE ON PA GE-42 OF THE PAPER BOOK AND ALSO AS PER TRIBUNALS DECISION IN ASSESSEES O WN CASE FOR AY 1996-97, COPY OF WHICH IS AVAILABLE ON PAGES-96 OF THE PAPER BOOK. SIMILARLY, HE SUBMITTED THAT FOR THE TRANSPORT INCOME OF RS.6,22, 409/-, THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE SAME TWO TRIBUNALS DE CISION FOR AY 1995-96 AND 1996-97. HE SUBMITTED THAT FOR ALL OTHER ITEMS, ISS UE MAY BE RESTORED BACK TO THE FILE OF AO FOR GRANTING BENEFIT OF NETTING. LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW ON ALL THESE ISSUES . 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT TWO ISSUES OF DISCOUNT OF RS.29,02,192/- AND TRANSPORT INCOME OF RS.6,22,409/- ARE COVERED IN FAVOUR OF ASSESSEE BY THESE TWO TRIBUNAL S DECISIONS IN ASSESSEES OWN CASE FOR A.Y 1995-96 AND 1996-97 AND LD. DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YE ARS. HENCE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT Y EAR AND THEREFORE, FOR THESE TWO ITEMS, WE DECIDE THE ISSUE IN FAVOUR OF ASSESSE E BY FOLLOWING THE TRIBUNALS ORDERS IN EARLIER YEARS. FOR ALL THE REM AINING ITEMS, THE MAIN ASPECT I.E. ALLOWABILITY OF THESE DEDUCTIONS FOR THESE INC OMES IS DECIDED AGAINST THE ASSESSEE BUT FOR THESE REMAINING ITEMS, THE ISSUE I S RESTORED TO THE FILE OF AO FOR GRANTING BENEFIT OF NETTING INCOME TO ASSESSEE IN CASE THE ASSESSEE IS ABLE TO ESTABLISH NEXUS BETWEEN EXPENSES INCURRED, IF AN Y, FOR EARNING THESE INCOME. IN THAT SITUATION, ONLY NET INCOME SHOULD B E EXCLUDED FROM THE BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCT ION ALLOWABLE TO ASSESSEE UNDER THESE TWO SECTIONS. 11. GROUND NO.3 IS AS UNDER:- IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN CONFIRMING DISALLOWANCE OF INTEREST EXPENSE RS.56,6 70/-. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 6 12. IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT ASSESSEE IS HAVING CURRENT ACCOUNTS WITH BANK AND ALL BUSINESS RECEIPT S ARE DEPOSITED IN THE SAID ACCOUNTS AND ALSO BUSINESS PAYMENTS ARE MADE FROM T HE SAID ACCOUNTS AND ONLY BECAUSE ON THE DATE OF PAYMENT OF ADVANCE TAXE S, THE ASSESSEE WAS HAVING TEMPORARY OVERDRAFT, IT CANNOT BE SAID THAT INTEREST EXPENDITURE IS INCURRED FOR PAYMENT OF ADVANCE TAX AND THEREFORE, DISALLOWANCE OF INTEREST IS NOT JUSTIFIED. LD. DR OF THE REVENUE SUPPORTED THE ORDER OF LD. CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT DISALLOWANCE WAS CONFIRMED BY LD. CIT(A) ON THIS BASIS THAT INTE REST EXPENDITURE IS CO- RELATED WITH THE PAYMENT OF ADVANCE TAX AND HENCE, THAT IS NOT AN ALLOWABLE EXPENDITURE AND HE HAS NOTED VARIOUS CONTENTIONS OF LD. AR OF THE ASSESSEE RAISED BEFORE HIM AS PER WHICH, IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE BEFORE LD. CIT(A) THAT ALL BUSINESS RECEIPTS ARE CR EDITED IN THE SAME BANK ACCOUNTS AND ALL BUSINESS PAYMENTS ARE ALSO MADE AN D DEBITED IN THE SAME BANK ACCOUNT AND MOREOVER, THE ASSESSEE HAS ALSO EA RNED INTEREST INCOME OF RS.1,032,992/- AND THEREFORE, DISALLOWANCE OF SMALL AMOUNT OF INTEREST IS NOT JUSTIFIED. NO FINDING HAS BEEN GIVEN BY LD. CIT (A) REGARDING THESE CONTENTIONS OF LD. AR OF THE ASSESSEE. IN THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT SINCE ALL THE BUSINESS PAYMENTS ARE ALSO MADE FROM THE SAME BANK ACCOUNTS AND BUSINESS RECEI PTS ARE CREDITED IN THE SAME BANK ACCOUNT, IT CANNOT BE SAID CONCLUSIVELY THAT OVERDRAFT IN THE BANK ACCOUNT ON THE DATE OF PAYMENT OF ADVANCE TAX IS ON ACCOUNT OF PAYMENT OF ADVANCE TAX AND NOT ON ACCOUNT OF OTHER BUSINESS PA YMENTS MADE ON THE SAME DATE OR PRECEDING DATES. CONSIDERING ALL THESE FACTS, WE FEEL THAT IN THE FACT OF THE PRESENT CASE, THIS DISALLOWANCE IS NOT JUSTIFIED AND WE, THEREFORE, DELETE THE SAME. THIS GROUND OF ASSESSEES APPEAL I S ALLOWED. 14. GROUND NO.4 IS AS UNDER:- 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 7 CONFIRMING EXCLUSION OF INCOME RS.1,34,690/- FOR TH E PURPOSE OF CALCULATION OF DEDUCTION U/S. 80HHC OF I.T. ACT. 15. IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT AMOUNT OF RS.1,34,690/- INCLUDES MISCELLANEOUS INCOME OF RS.8 1,683/-, WAREHOUSING INCOME OF RS.2,000/-, TANK RENT OF RS.3,000/- AND R ENT INCOME OF RS.48,280/-. HE SUBMITTED THAT FOR THESE ITEMS ALSO, THE MATTER SHOULD BE RESTORED TO THE FILE OF AO FOR ALLOWING THE BENEFIT OF NETTING. LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT FOR SIMILAR INCOMES, WE HAVE ALREADY RESTORED THE MATTER TO THE FILE OF AO FOR ALLOWING THE BENEFIT OF NETTING TO THE ASSESSEE IF THE ASSESSEE IS ABLE TO ESTABLISH THE NEXUS FOR THE PURPOSE OF ALLOWING DEDUCTION U/S. 80 I AND 80HH OF THE ACT. HENCE, FOR THE PURPOSE OF ALLOWING DEDUCTION U/S. 8 0HHC ALSO, WE DIRECT THE AO TO EXAMINE THE ALLOWABILITY OF BENEFIT OF NETTIN G TO THE ASSESSEE AND IF THE ASSESSEE IS ABLE TO ESTABLISH THE NEXUS BETWEEN INT EREST EXPENDITURE INCURRED FOR EARNING THESE INCOME, IF ANY, HE SHOULD ALLOW T HE BENEFIT OF NETTING TO THE ASSESSEE AND 90% OF SUCH NET INCOME ONLY SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF ALLOWED DEDUCTION U/S. 80 HHC OF THE ACT. THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 17. GROUND NO.5 IS AS UNDER:- 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO CHARGE INTEREST U/S. 234B OF I.T. ACT CONSEQUENTIAL ON GIVING EFFECT TO THE APPELLATE ORD ER. HE OUGHT TO HAVE APPRECIATED THAT APPELLANT COMPANY CHALLENGED VERY BASIC LEVY OF INTEREST U/S. 234B OF I.T. ACT. HE OUGHT TO HAVE DE LETED INTEREST U/S. 234B OF I.T. ACT. 18. GROUND NO.5 IS FOR CHARGING OF INTEREST U/S. 23 4B AND IT IS HELD TO BE CONSEQUENTIAL. GROUND NO. 6 FOR INITIATION OF PENAL TY PROCEEDING IS PREMATURE AND HENCE REJECTED. GROUND NO. 7 IS GENERAL. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 8 19. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED IN THE TERMS INDICATED ABOVE. COMING TO REVENUES APPEAL IN ITA NO.2543/AHD/2000. 20. GROUND NO.(I) IS AS UNDER:- (I) TO ALLOW DEDUCTION U /S. 80HH ON INCOME FROM A OS UNDERTAKING. 21. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER AND LD. AR OF THE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE IS COV ERED AGAINST THE ASSESSEE BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 1994-95 AS PER TRIBUNALS DECISION AVAILABLE IN PAPER BOOK. ACCORD INGLY, THIS GROUND IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESS EE. 22. GROUND NO.(II) IS AS UNDER:- (II) TO ALLOW DEDUCTION U/S. 80I ON GROSS PROFIT A T IND. UNDERTAKING WITHOUT REDUCING DEDUCTION US. 80HH. 23. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY TRIBUNALS ORDER IN ASSESSEES OWN CASE IN AY 1993-94 AND 1994-95. HE ALSO SUBMITTED THAT THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF CIT V. AMOD STAMPING (2005) 274 ITR 176 (GUJ) AND AS PER JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF JCIT V. MANDIDEEP ENG. AND PKG. IND. P. LTD. (2007) 292 ITR 1 (SC) ALSO, THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 24. RESPECTFULLY FOLLOWING THE JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT, THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE AND THIS GROUND OF REVENUES APPEAL IS REJECTED. 25. GROUND NO.3 IS AS UNDER:- (III) TO ALLOW DEDUCTION U/S. 80-I / 90IA / 80HH O N PROFIT OF MANDALI DIVISION-ON-FOLLOWING INCOME:- ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 9 (I) ON INTEREST ON LC RS.20,83,941/- (II) ON MISC. SALES ON NEWSPAPER RS. 29,110/ - (III) TRUCK HIRE CHARGES RS. 33,22,485/- (IV) SALES OF POSTER PAPERS, IRON SCRAP, GUNNY BAGS, PLASTIC WASTE SALE BARDANA ETC. R S.2,95,10,650/- (V) INTEREST ON LOAN GIVEN TO STAFF RS. 5 5,287/- (VI) EXCHANGE RATE DIFFERENCE RS. 11,91,096/- (VII) INSURANCE CLAIM RS. 4,04,133/- 26. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER FOR ALL THE ITEMS INCLUDED IN THIS GROUND WHEREAS LD. AR OF THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT (A). 27. REGARDING FIRST ITEM I.E. INTEREST ON LC OF RS. 20,83,941/-, HE SUBMITTED THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN EARLIER ORDERS BUT AS PER THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF LALSONS ENTERPRISES (SUPRA), BENEFIT OF NETTING SHOULD BE ALLOWED TO THE ASSESSEE. WE HAVE ALREADY DECIDED WHILE DECIDIN G THE APPEAL OF ASSESSEE THAT ASSESSING OFFICER SHOULD ALLOW THE BE NEFIT OF NETTING IF THE ASSESSEE CAN ESTABLISH THE NEXUS BETWEEN INTEREST E XPENDITURE AND INTEREST INCOME. HENCE, IN RESPECT OF THIS GROUND OF REVENUE ALSO, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR A FRESH DECISION IN RESPECT OF ALLOWABILITY OF BENEFIT OF N ETTING TO THE ASSESSEE ALTHOUGH THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER TH ESE SECTIONS IN RESPECT OF THIS INCOME BUT IN CASE, THE ASSESSEE IS ABLE TO ES TABLISH THE NEXUS THEN ONLY NET INTEREST INCOME SHOULD BE EXCLUDED FROM THE BUS INESS PROFIT FOR COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80I / 80IA / 80HH OF THE ACT IN RESPECT OF PROFIT OF MANDALI DIVISION. 27.1 REGARDING SECOND ITEM OF MISCELLANEOUS INCOME I.E. SALE OF NEWSPAPER OF RS.29,110/-, LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE AS PER TRIBUNALS ORDER IN AS SESSEES OWN CASE FOR AYS 1993-94, 1994-95 AND 1995-96 COPY OF WHICH ARE AVAI LABLE ON PAGE 6, 37, AND ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 10 41 OF THE PAPER BOOK. HE ALSO SUBMITTED THAT AS PER THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF DCIT V, HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (2002) 258 ITR 785 (GUJ) ALSO, THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 27.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW AND THE JUDGMENTS CITED BY LD. AR OF THE ASSESSEE. IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (SUPRA), THE ISSUE BEFORE THE HONBLE JURISDICTION AL HIGH COURT WAS THIS AS TO WHETHER DEDUCTION U/S. 80I IS ALLOWA BLE IN RESPECT OF INCOME ON ACCOUNT OF JOB WORK, SALE OF SODA ASH BARDANA, EMPT Y BARRELS AND PLASTIC WASTE. ON THIS ISSUE, IT WAS HELD BY THE HONBLE HI GH COURT THAT THE SAME GOES TO REDUCE COST AND AS A RESULT, THE PROFIT REM AINS SAME AND THEREFORE, DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80I OF THE ACT IS NOT REQUIRED TO BE REDUCED ON ACCOUNT OF THIS RECEIPT. HENCE, BY RESPE CTFULLY FOLLOWING THIS JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. 27.3 FOR THE NEXT ISSUE OF RS.33,22,485/-, LD. DR O F THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) AND IT WAS ALSO SUBMITTED BY HIM THAT TH IS ISSUE WAS ALSO THERE IN ASSESSEES OWN CASE IN AY 1995-96 AS PER PARE-29 AV AILABLE OF PAGE NO. 42 OF THE PAPER BOOK. FROM PARA-29 OF THE TRIBUNALS O RDER, WE FIND THAT IN THAT YEAR, THIS WAS THE CONTENTION RAISED BEFORE TRIBUNA L THAT TRUCK HIRE CHARGES RECEIVED IS NOTHING BUT REIMBURSEMENT OF EXPENSES A ND SINCE ASSESSING OFFICER HAS NOT EXCLUDED EXPENDITURE ON THIS ACCOUN T, THIS RECEIPT IS NOT REQUIRED TO BE EXCLUDED FROM BUSINESS PROFIT. WE FE EL THAT THIS ASPECT HAS TO BE EXAMINED BY THE AO IN THE PRESENT YEAR THAT WHET HER THIS RECEIPT IS IN THE NATURE OF REIMBURSEMENT OF EXPENSES OR NOT AND IF T HE ASSESSEE CAN ESTABLISH THAT EXACT AMOUNT OF TRUCK HIRE CHARGES WERE PAID B Y THE ASSESSEE FOR HIRING CHARGES RECEIPTS THEN IT CAN BE ACCEPTED THAT IT IS A CASE OF REIMBURSEMENT OF EXPENSES AND IN THAT SITUATION, IT IS NOT REQUIRED TO BE EXCLUDED FROM BUSINESS PROFIT BUT IF THE ASSESSEE IS NOT ABLE TO ESTABLIS H THAT ALL THESE RECEIPTS ARE ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 11 NOTHING BUT REIMBURSEMENT OF EXPENSES, THEN ALSO TH E ASSESSING OFFICER SHOULD EXAMINE THE ALTERNATIVE CLAIM OF THE ASSESSE E I.E. BENEFIT OF NETTING SHOULD BE ALLOWED TO THE ASSESSEE. FOR THIS BENEFIT ALSO, THE ASSESSEE HAS TO ESTABLISH NEXUS BETWEEN TRUCK HIRE CHARGES RECEIVED AND TRUCK HIRE CHARGES PAID BY SHOWING THAT FOR THE SAME INCOME, EXPENSES WAS INCURRED BY THE ASSESSEE AND IN THAT SITUATION, THE AO SHOULD EXCLU DE ONLY NET INCOME ON ACCOUNT OF TRUCK HIRE CHARGES FROM PROFIT OF MANDAL I DIVISION FOR COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80I, 80A A ND 80HH OF THE ACT. 27.4 THE 4 TH ITEM RECEIVED OF RS.2,95,10,650/- IS ON ACCOUNT OF SALE OF POSTER PAPERS, IRON SCRAP, GUNNY BAGS, PLASTIC WASTE SALE BARDANA ETC., AND IN RESPECT OF THESE ITEMS, LD. DR OF THE REVENUE SUPPO RTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) AND IT WAS ALSO SUBMITTED THAT AS PER JUDGMENT OF HONB LE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (SUPRA), THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE. WHILE DECIDING GROUND NO. (III) (II) WE HAVE SEEN THAT AS PER THE JUDGMENT OF HONBLE JU RISDICTIONAL HIGH COURT, NO EXCLUSION IS REQUIRED FROM BUSINESS PROFIT ON ACCOU NT OF SALE OF SODA ASH BARDANA, EMPTY BARRELS AND PLASTIC WASTE AND IN THE PRESENT CASE, THE IMPUGNED RECEIPTS ON ACCOUNT OF SALE OF POSTER PAPE RS, IRON SCRAP, GUNNY BAGS, PLASTIC WASTE SALE BARDANA ETC., ARE OF SIMIL AR NATURE AND HENCE, RESPECTFULLY FOLLOWING THIS JUDGMENT OF HONBLE JUR ISDICTIONAL HIGH COURT RENDERED IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (SUPRA), WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. 27.5 NEXT ITEM IS INTEREST ON LOAN GIVEN TO STAFF O F RS.55,287/- AND FOR THIS ITEM, LD. DR OF THE REVENUE SUPPORTED THE ASSESSMEN T ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT IN ASSESSE ES OWN CASE FOR AY 1993-94, THE TRIBUNAL HAD RESTORED THIS MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR GRANTING BENEFIT OF NETTING IN THE LIGH T OF DECISION OF TRIBUNAL IN THE CASE OF LALSONS ENTERPRISES (SUPRA) AND ACCORDINGLY, IN THIS YEAR ALSO, WE RESTORE THIS MATTER BACK TO THE FILE OF AO FOR ALLO WING BENEFIT OF NETTING IN THE LIGHT OF DECISION CITED BY LD. AR OF THE ASSESSEE. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 12 27.6 NEXT ITEM IS EXCHANGE RATE DIFFERENCE OF RS.11 ,91,096/- AND IN RESPECT OF THIS ITEM ALSO, LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE T HAT IN ASSESSEES OWN CASE FOR AY 1999-00, THIS ISSUE WAS RESTORED BACK T O THE FILE OF ASSESSING OFFICER TO RE-EXAMINE IN THE LIGHT OF TRIBUNALS DE CISION RENDERED IN THE CASE OF PRIYANKA GEMS V. ACIT (2005) 95 TTJ 557 (AHD). ACCORDINGLY, IN THE PRESE NT YEAR ALSO, WE RESTORE THE MATTER BACK TO THE FILE O F AO FOR FRESH DECISION WITH SIMILAR DIRECTION AS HAD BEEN GIVEN BY THE TRIBUNAL ON THIS ISSUE IN ASSESSEES OWN CASE FOR AY 1999-00. 27.7 REGARDING LAST ITEM IN RESPECT OF INSURANCE CL AIM OF RS.4,04,133/-, IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS I SSUE MAY BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR ALLOWING BENEF IT OF NETTING WHEREAS LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 27.8 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A S PER OUR DECISION IN RESPECT OF OTHER VARIOUS ITEMS, WE FEEL THAT IF THE ASSESSEE CAN ESTABLISH NEXUS OF ANY EXPENDITURE INCURRED FOR INSURANCE CLA IM THEN BENEFIT OF NETTING SHOULD BE ALLOWED TO THE ASSESSEE AND ONLY NET INCO ME SHOULD BE EXCLUDED FROM THE BUSINESS PROFIT FOR THE PURPOSE OF ALLOWIN G DEDUCTION TO THE ASSESSEE U/S. 80I, 80IA AND 80HH OF THE ACT. WE DIRECT THE A SSESSING OFFICER ACCORDINGLY AND IF THE ASSESSEE CAN ESTABLISH THE N EXUS, NETTING SHOULD BE ALLOWED. THE ASSESSING OFFICER SHOULD DECIDE THIS I SSUE AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO AS SESSEE. 27.9 IN THE RESULT, THIS GROUND OF REVENUES APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 28. GROUND NO.(IV) IS AS UNDER:- IV) TO ALLOW DEDUCTION U/S. 80J / 80JA / 80HH FOR TRIKAMPURA DIVISION ON FOLLOWING INCOME: ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 13 (I) INTEREST FROM DEBTORS RS.39,26,316/- (II) INSURANCE CLAIM RS 72,902/- (III) TRUCK HIRE CHARGES RS. 1,40,000/- (IV) OTHER SALES RS. 63,08,141/- 29. REGARDING FIRST ITEM I.E. INTEREST FROM DEBTORS OF RS.39,26,316/-, LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHERE AS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THAT AS PER TRIBUNALS DECISION IN ASSESSEES OWN CASE FOR AY 1 994-95, THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE. HE ALSO PLACED RELIA NCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASE OF NIRMA INDUSTRIES LTD. V. DCIT (2006) 283 ITR 402 (GUJ). RESPECTFULLY FOLLOWING T HIS JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, THIS ISSUE IS DE CIDED IN FAVOUR OF ASSESSEE AND THIS GROUND OF REVENUE IS REJECTED. 29.1 REGARDING ITEMS NO. 2 AND 3 I.E., INSURANCE CL AIM OF RS.72,902/- AND TRUCK HIRE CHARGES OF RS.1.40 LAKH, IT WAS AGREED B Y BOTH SIDES THAT THIS CAN BE DECIDED ON SIMILAR LINE AS IN THE CASE OF MANDALI D IVISION. WHILE DECIDING SIMILAR ISSUE IN RESPECT OF MANDALI DIVISION, WE HA VE ALREADY RESTORED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FR ESH DECISION IN RESPECT OF GRANTING THE BENEFIT OF NETTING TO THE ASSESSEE. WI TH SIMILAR DIRECTION, IN RESPECT OF TRIKAMPURA DIVISION ALSO, WE SET ASIDE THE ORDER OF LD. CIT ( A) IN RESPECT OF THESE TWO RECEIPTS AND RESTORE THE MATTE R BACK TO THE FILE OF AO FOR ALLOWING THE BENEFIT OF NETTING TO THE ASSESSEE IF THE ASSESSEE IS ABLE TO PROVE THE NEXUS. 29.2 FOR THE 4 TH ITEM I.E., SALE OF PLASTIC WASTE, IRON SCRAP, GUNN Y BAGS, BARDANA ETC., OF RS.63,08,141/- FOR TRIKAMPURA DIVI SION, IT WAS AGREED BY BOTH SIDES THAT THIS ISSUE CAN BE DECIDED ON SIMILAR LIN E AS IN RESPECT OF MANDALI DIVISION. WHILE DECIDING SIMILAR ISSUE IN RESPECT O F MANDALI DIVISION, WE HAVE ALREADY DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASE OF HARJIVANDAS ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 14 JUTHABHAI ZAVERI AND ANOTHER (SUPRA). ACCORDINGLY FOR THIS DIVISION ALSO, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 30. GROUND NO.(V) IS AS UNDER:- TO ALLOW DEDUCTION U/S. 80J / 80I / 80HH FOR KANPU R DIVISION ON FOLLOWING INCOME: (I) INTEREST FROM DEBTORS RS.33,63,494/- (II) INTEREST ON LOAN GIVEN TO STAFF RS 58 3/- (III) MISC. INCOME IN RESPECT OF PRINTING CHARGES RECOVERED RS. 45,326/- (IV) TRUCK HIRE CHARGES RS. 90,950/- (IV) OTHER SALES RS. 57,40,830/- 30.1 REGARDING VARIOUS ITEMS OF KANPUR DIVISION, IT WAS SUBMITTED THAT THREE ITEMS I.E., INTEREST ON DEBTORS OF RS.33,63,494/-, INCOME IN RESPECT OF TRUCK HIRE CHARGES RECOVERED OF RS.45,326/- AND INCOME IN RESP ECT OF SALE OF GUNNY BAGS AND BARDANA OF RS.57,40,830/-, THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE AS IN THE CASE OF MANDALI DIVISION AND TRIKAMPURA DIVI SION AND HENCE FOR KANPUR DIVISION ALSO, IT CAN BE DECIDED ON SIMILAR LINE. F OR THESE TWO DIVISIONS, WE HAVE ALREADY DECIDED SIMILAR ISSUE AND HENCE FOR TH IS DIVISION ALSO, WE HOLD ACCORDINGLY AND DECLINE TO INTERFERE IN THE ORDER O F LD. CIT(A) BY RESPECTFULLY FOLLOWING THE DECISIONS OF HONBLE JURISDICTIONAL H IGH COURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA) AND HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (SUPRA). FOR THE REMAINING TWO ITEMS OF KANPUR DIV ISION I.E. INTEREST ON LOAN GIVEN TO STAFF OF RS.583/- AND TRUCK HIRE C HARGES OF RS.90,950/-, WE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OF FICER FOR GRANTING THE BENEFIT OF NETTING IF ASSESSEE CAN ESTABLISH THE NEXUS OF T HESE INCOMES WITH EXPENDITURE INCURRED IF ANY. 31. GROUND NO.(VI) IS AS UNDER:- TO ALLOW DEDUCTION U/S. 80J / 80JA / 80HH FOR INDO RE DIVISION ON FOLLOWING INCOME: (I) INTEREST FROM DEBTORS RS.238,97,496/- ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 15 (II) OTHER SALES RS. 75,68,786/- 31.1 FOR THE INDORE DIVISION, THERE ARE TWO ISSUES INVOLVED I.E., INTEREST FROM DEBTORS OF RS.2,38,97,496/- AND SALES OF PLASTIC WA STE, BARRELS, IRON SCRAP, GUNNY BAGS AND BARDANA OF RS.S75,68,786/- AND BOTH THESE ARE COVERED IN FAVOUR OF ASSESSEE BY SAME TWO JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA) AND HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (SUPRA) AND RESPECTFULLY FOLLOWING THESE TWO JUDGMENTS, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) FOR THE INDORE DIVISION ALSO. 32. GROUND NO.(VII) IS AS UNDER:- VII) TO EXCLUDE FOLLOWING INTEREST EXPENDITURE AGA INST PART OF INTEREST INCOME HELD AS NOT ELIGIBLE FOR DEDUCTION U/S. 80-I / 80IA / 80HH AND TO EXCLUDE NET INTEREST INCOME FOR DEDUCTION: (A) MANDALI DIVISION RS. 82,98,839/- (B) TRIKAMPURA DIVISION RS. 9,25,330/- KANPUR DIVISION RS.40,38,063/- (D) INDORE DIVISION RS. 4,75,178/- 32.1 LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL RENDERED IN TH E CASE OF LALSONS ENTERPRISES (SUPRA). ACCORDINGLY, WE DECLINE TO INTERFERE IN T HE ORDER OF LD. CIT(A). WE OBSERVE THAT BEFORE ALLOWING THE NETTING , ASSESSING OFFICER SHOULD EXAMINE AS TO WHETHER ASSESSEE IS ABLE TO ESTABLISH THE NEXUS OR NOT AND NETTING SHOULD BE ALLOWED ONLY TO THE EXTENT THE AS SESSEE IS ABLE TO ESTABLISH THE NEXUS BETWEEN INTEREST EXPENDITURE AND INTEREST INCOME. WITH THIS OBSERVATION, THIS GROUND OF REVENUE IS REJECTED. 33. GROUND VIII) IS AS UNDER:- VIII) NOT TO EXCLUDE INCOME FROM SALE OF DIESEL OF RS.1,05,00,1000/- WHILE WORKING OUT DEDUCTION U/S. 80I AND 80HH. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 16 33.1 LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT MATTER MAY BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR ALLOWING BENEFIT OF N ETTING. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE MATT ER BACK TO THE FILE OF AO TO ALLOW THE BENEFIT OF NETTING TO THE ASSESSEE IN RES PECT OF SALE OF DIESEL OF RS.1,05,00,1000/- IF ASSESSEE CAN ESTABLISH THE NEX US BETWEEN SALE AND EXPENDITURE INCURRED FOR SALE OF DIESEL THEN NETTIN G SHOULD BE ALLOWED AND ONLY NET INCOME SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO ASSESSEE U/S. 80I AND 80HH OF THE ACT. 34. GROUND IX) IS AS UNDER:- NOT TO EXCLUDE TO THE SALE OF BARDANA OF RS.29,962 /- FOR DEDUCTION U/S. 80HH / 80IA ON CHHATRAL DIVISION. 34.1 LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A ) AND IT IS ALSO SUBMITTED BY HIM THAT AS PER THE JUDGMENT OF HONBLE JURISDIC TIONAL HIGH COURT RENDERED IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER (SUPRA), THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE. ACCORDINGLY THIS ISS UE IS DECIDED IN FAVOUR OF ASSESSEE AND WE DECLINE TO INTERFERE IN THE ORDER O F LD. CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUES APPEAL IS REJECTED. 35. GROUND NO. (X) IS AS UNDER:- X) TO DELETE DISALLOWANCE OF EXPENDITURE ON GUEST HOUSE U/S. 37(4) FOR RS.1,28,227/-. 35.1 IT WAS FAIRLY CONCEDED BY LD. AR OF THE ASSESS EE THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNALS ORDE R IN ASSESSEES OWN CASE FOR AY 1993-94 AND ALSO THE JUDGMENT OF HONBLE SUP REME COURT RENDERED IN THE CASE OF BRITANNIA INDUSTRIES LTD. V. CIT AND ANOTHER (2005) 278 ITR 546 ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 17 (SC). ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. THIS GROUND OF REVENUES APPEAL IS ALLOWE D. 36. GROUND (XI) IS AS UNDER:- XI) TO DELETE DISALLOWANCE OF ENTERTAINMENT EXPENS ES OF RS.7,92,720/-. 36.1 LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT ACTUAL AMO UNT DISALLOWED BY THE ASSESSING OFFICER IS RS.6,77,888/- BECAUSE THE ASSE SSEE HAS ALREADY DISALLOWED RS.1,14,883/- IN THE RETURN OF INCOME. H E SUBMITTED THAT THIS EXPENSE IS INCURRED ON ACCOUNT OF TEA AND COFFEE FO R THE EMPLOYEES AND THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE TRIBU NALS DECISION IN ASSESSEES OWN CASE FOR AY 1995-96 AND OUR ATTENTIO N WAS DRAWN TO PARA-28 OF THE TRIBUNALS ORDER ON PAGE-41 OF THE PAPER BOO K. WE HAVE EXAMINED THE EARLIER YEARS ORDER OF TRIBUNAL FOR AY 1996-97 AND FIND THAT THERE IS NO SPECIFIC DISCUSSION IN THE TRIBUNALS ORDER ON ACCOUNT OF EN TERTAINMENT EXPENSES. HOWEVER, WE FEEL THAT THIS ISSUE SHOULD ALSO GO BAC K TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION AND IF ASSESSEE CAN ESTA BLISH THE AMOUNT OF EXPENDITURE INCURRED FOR TEA AND COFFEE FOR EMPLOYE ES, THEN NO DISALLOWANCE IS CALLED FOR TO THAT EXTENT. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. HE SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 37. GROUND NO. XII) IS AS UNDER:- II) TO DELETE FOLLOWING EXPENSES DISALLOWED IN AO. (A) HOTEL EXPENSES RS. 22,288/- (GEN. DIVN.) (B) HOTEL EXPENSES RS. 54,609/- (T.S. DIVN.) CHANDLA EXPENSES RS. 501/- ( DO ) (D) DISTRIBUTION EXPS. RS. 93,138/- (GEN. EXPS ) (E) DISTRIBUTION EXP. RS. 8,880/- (CHHATRAL DIVN.) (F) DIWALI EXPS. RS. 12,686/- (INDORE DIVN.) (G) GIFT EXPS. RS. 12,415/- (GEN. DIVN.) RS.1,91.831/- ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 18 37.1 LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASES FOR AY 1992-93 AND OUR ATTENTION WAS DRAWN TO PARA-9 ON PAGE 15 OF THE PAPER BOOK. 38. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT AS PER PARA- 9 ON PAGE 15 OF THE PAPER BOOK, THE ISSUE INVOLVED WAS REGARDING DISALLOWANCE OF GIFT EXPENSES OF RS.19,280/- UNDER RULE 6B OF THE IT RULES, 1962. IN THE PRESENT YEAR ALSO, GIFT EXPENSES WAS O F RS.12,415/- AND HENCE, TO THIS EXTENT, THE ISSUE IS COVERED IN FAVOUR OF ASSE SSEE BY THE TRIBUNALS ORDER AND WE HOLD ACCORDINGLY. THE REMAINING ITEMS OF EXP ENSES ARE HOTEL EXPENSES FOR VARIOUS DIVISIONS, DISTRIBUTION EXPENS ES, CHANDLA EXPENSES AND DIWALI EXPENSES AND THESE DISALLOWANCES WERE DELETE D BY LD. CIT(A) ON THIS BASIS THAT THESE ARE BUSINESS EXPENSES. HE HAS FOLL OWED THE ORDER OF CIT (A) FOR EARLIER YEARS I.E., AYS 1994-95 AND 1996-97 AN D ALSO TRIBUNALS ORDER FOR AY 1996-97 WHICH IS AVAILABLE IN PAPER BOOK SUBMITT ED BY ASSESSEE. LD. DR OF THE REVENUE COULD NOT POINT OUT THAT ORDER OF LD . CIT(A) IN EARLIER YEARS HAS BEEN REVISED BY THE TRIBUNAL ON THIS ISSUE IN ANY O F THE EARLIER YEARS AND HENCE, WE DECLINE TO INTERFERE IN ORDER OF LD. CIT( A) ON THIS ISSUE. THIS GROUND OF REVENUES APPEAL IS REJECTED. 39. GROUND XIII) IS AS UNDER:- XIII) TO DELETE DISALLOWANCE OF CLAIM OF SODA ASH PROJECT EXPENSES OF RS.4,90,73,761/- AND LAB PROJECT EXPENSES OF RS.16, 71,71,909/-. 40. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT IN RESPECT OF INTEREST EXPENSES AND PART OF THE PROJECT EXPENSES, THE MATTER IS COVERED IN FAVOUR OF ASSESSEE BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 1996-97. REGARDING ALLOWABILITY OF DEPRECIATION EXPENDITURE OF BOTH TH E PROJECTS I.E. SODA ASH PROJECT AND LAB. PROJECT, IT WAS SUBMITTED THAT THI S ISSUE IS ALSO COVERED IN ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 19 FAVOUR OF ASSESSEE BY THE TRIBUNALS ORDER IN ASSES SEES OWN CASE FOR AY 1997-98 IN ITA NO. 1823/AHD/2001 DATED 30-09-2008 W HICH IS AVAILABLE ON PAGE 122 TO 158 OF THE PAPER BOOK. HE ALSO PLACED R ELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN TH E CASE OF CIT V. CORE HEALTHCARE LTD. TAX APPEAL NO. 284 OF 2010 DATED 19-06-2009 AND SUBMITTED THAT THE COPY OF THIS JUDGMENT IS AVAILABLE ON PAGE S 1 TO 9 OF PAPER BOOK 3. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE MAD RAS HIGH COURT RENDERED IN THE CASE OF CIT V. RANE (MADRAS) LTD. 293 ITR 459 (MAD). HE ALSO SUBMITTED THAT DEPRECIATION IS NOT EXPENDITURE. 41. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) IN PARA 15 TO 15.6 OF HIS ORDER AND WHILE DISCUSSING THE ALLOWABIALITY OF INTEREST EXPENDITURE U/S. 36(1)(III) OF THE ACT, HE HAS NOTED THAT THIS ASPE CT OF THE MATTER IS COVERED IN FAVOUR OF ASSESSEE BY THE JURISDICTIONAL HIGH COURT DECISION RENDERED IN THE CASE OF CIT V. ALAMBIC GLASS INDUSTRIES LTD. (1976) 103 ITR 715 (GUJ) BUT HE HAS NOT MADE ANY COMMENT THAT THIS DISALLOWANCE INC LUDES DEPRECIATION EXPENDITURE ALSO AND WHETHER THE SAME IS ALLOWABLE OR NOT. AS PER CHART GIVEN BY THE ASSESSEE SODA ASH PROJECT INCLUDES INTEREST OF RS. 333,23,108, DEPRECIATION OF RS.2,06,790/- AND BALANCE BEING OTH ER EXPENSES AND THE EXPENDITURE OF LAB PROJECT EXPENSES INCLUDES INTERE ST OF RS. 1227,78,792/, DEPRECIATION OF RS.37,43,247/- AND BALANCE AMOUNT I S OF OTHER EXPENDITURE. SINCE LD. CIT(A) HAS NOT SPECIFICALLY DECIDED THE ALLOWABILITY OF OTHER EXPENSES EXCEPT ALLOWABILITY OF INTEREST EXPENDITUR E U/S. 36(1)(III) OF THE ACT, WE FEEL THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF LD. CIT(A) FOR A DECISION REGARDING ALLOWABILITY OF OTHER EXPENSES EXCLUSIVE OF INTEREST EXPENDITURE OF RS.3,33,23,108/- FOR SODA ASH PROJECT AND RS.12,27, 78,792/- FOR LAB PROJECT EXPENSES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD . CIT (A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE FOR FRESH DECIS ION REGARDING ALLOWABILITY OF EXPENDITURE INCLUDED IN THESE TWO PROJECTS EXPENDIT URE OTHER THAN INTEREST EXPENDITURE. REGARDING ALLOWABILITY OF INTEREST EXP ENDITURE, WE CONFIRM THE ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 20 ORDER OF LD. CIT (A) BECAUSE THE DECISION OF LEARNE D CIT (A) IS BY RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HI GH COURT RENDERED IN THE CASE OF ALAMBIC GLASS INDUSTRIES LTD. (SUPRA). FOR THE REMAINING EXPENDITURE, LD. CIT(A) SHOULD DECIDE THE ISSUE AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES AND WHILE DECIDING THAT A SPECT OF THE MATTER, HE SHOULD KEEP IN MIND THE VARIOUS JUDICIAL PRONOUNCEM ENTS CITED BY THE LD. AR OF THE ASSESSEE BEFORE US. THIS GROUND OF REVENUE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 42. GROUND NO. XIV) IS AS UNDER:- TO DELETE DISALLOWANCE OF CLAIM OF DEDUCTION U/S. 35AB ON RS.16,78,93,425/-. 43. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT ( A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 1999-00 AND IT WAS POINT ED OUT BY HIM THAT RELEVANT PARA IS PARA-5 OF THIS TRIBUNALS ORDER WH ICH IS AVAILABLE ON PAGE-45 OF THE PAPER BOOK. AT THIS JUNCTURE, THE BENCH WANT ED TO KNOW AS TO WHICH IS THE YEAR IN WHICH THE RELEVANT EXPENDITURE WAS INCU RRED BECAUSE DEDUCTION IS ALLOWABLE IN RESPECT OF SUCH EXPENDITURE IN SIX YEA RLY INSTALLMENTS AND IF THAT PERIOD OF THIS SIX YEARS HAS ALREADY EXPIRED IN EAR LIER YEAR THEN NO MORE DEDUCTION IS ALLOWABLE U/S. 35AB OF THE ACT. IN REP LY, IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS IS SECOND YEAR AND TO VERIFY THIS ASPECT, THE MATTER MAY BE RESTORED BACK TO THE FILE OF ASSESSIN G OFFICER FOR VERIFICATION. 44. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THAT THE PROVISION OF SECTION 35AB OF THE ACT WAS INTRODUCED IN THE STATUTE BOOK AS PER FINANCE ACT 1985 WHICH EFFECT FROM 01-04-1986 A ND DEDUCTION IS ALLOWABLE TO THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED ON ACQUIRING TECHNICAL KNOW-HOW IN SIX YEARLY INSTALLMENTS. HENC E, THIS IS VERY MUCH NECESSARY TO KNOW AS TO IN WHICH YEAR, THE RELEVANT EXPENDITURE WAS INCURRED ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 21 AND HOW MUCH SUCH EXPENDITURE WAS INCURRED AND WHET HER THE PRESENT YEAR FALLS WITHIN THE PERIOD OF SIX YEARS AS PRESCRIBED IN SECTION 35AB OF THE ACT AND WHETHER THE AMOUNT OF DEDUCTION CLAIMED BY THE ASSESSEE IS 1/6 TH OF SUCH EXPENDITURE INCURRED ON ACQUIRING TECHNICAL KNOW-HO W. HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE T HE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION AFTER EXAMININ G THE FACTUAL ASPECT AND IF IT IS FOUND THAT THIS CLAIM OF THE ASSESSEE IN THE PRE SENT YEAR IS FULFILLING THIS REQUIREMENT U/S. 35AB OF THE ACT I.E., ALL THE EXPE NDITURE WAS INCURRED BY THE ASSESSEE FOR ACQUIRING TECHNICAL KNOW-HOW ON OR AFT ER 01-04-1986 AND IF THE CLAIM OF THE ASSESSEE IS WITHIN THE PERIOD OF SIX Y EARS FROM THE YEAR IN WHICH THE EXPENDITURE WAS INCURRED AND THE AMOUNT IS ALSO EQUAL TO 1/6 TH OF SUCH EXPENDITURE THEN THE CLAIM OF ASSESSEE SHOULD BE AL LOWED. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTE R PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 45. GROUND NO. XV) IS AS UNDER:- TO ALLOW EXPENDITURE OF RS.1,85,000/- BEING PAYMEN T MADE TO MANDALIGRAM PANCHAYAT. 46. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 1999-00 IN PARA-7 OF THE TRIBUNALS ORDER WHICH IS AVAILABLE O N PAGE NO. 48 OF THE PAPER BOOK. 47. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED O UT BY LD. DR OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REA SON TO TAKE A CONTRARY VIEW. HENCE, RESPECTFULLY FOLLOWING THE EARLIER TRI BUNALS ORDER, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). THIS GROUND O F REVENUES APPEAL IS REJECTED. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 22 48. GROUND NO. XVI) IS AS UNDER:- XVI) TO DELETE DISALLOWANCE OF RS.3,88,122/- MADE UNDER SEC. 40A(2) OF IT ACT. 49. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A ). HE ALSO SUBMITTED THAT THE PRICE PAID BY THE ASSESSEE TO OUTSIDERS IS AT R S.0.60 PER KG. WHEREAS FROM SISTER CONCERN, PRICE PAID IS AT RS.0.61 PER KG. AN D DIFFERENCE OF RS.0.01 PER KG. IS NEITHER EXCESSIVE NOR UNREASONABLE. 50. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. WE FIND THAT AS PER THE REQUIREMENT OF SECTION 40A(2) OF THE ACT, IF TH E ASSESSING OFFICER FINDS THAT EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE TO RELATED PERSONS IS EXCESSIVE OR UNREASONABL E HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS OR THE BENEFIT DERIV ED BY THE ASSESSEE THEREFROM THEN SUCH EXCESSIVE AMOUNT CAN BE DISALLO WED. IN THE PRESENT CASE, THE DIFFERENCE IN PRICE PAID TO THE RELATED P ARTY WITH THE PRICE PAID TO OUTSIDER IS RS.0.01 PER KG AS COMPARED TO PRICE PAI D TO OUTSIDER OF RS.0.60 PER KG. WHICH IS NOT EVEN 2% OF SUCH PRICE PAID TO OUTS IDER. APART FROM GETTING THE GOODS FROM THE OUTSIDER AND FROM THE RELATED PARTY, THERE MAY BE OTHER BENEFITS ACCRUING TO THE ASSESSEE IN RESPECT OF PUR CHASE FROM RELATED PARTY AS COMPARED TO PURCHASE FROM OUTSIDER I.E., THERE MAY BE AN ASSURED AND TIMELY SUPPLY, THERE MAY BE EXTRA CREDIT ALLOWED BY THE RE LATED PARTY ETC., AND HENCE, MERELY BECAUSE THE PRICE PAID TO RELATED PARTY IS E XCESSIVE BY PRICE OF RS.0.01 PER KG. WHICH IS LESS THAN 2% PAID TO THE OUTSIDER, THERE CANNOT BE ANY CONCLUSIVE FINDING THAT PRICE PAID BY THE ASSESSEE TO THE RELATED PARTY IS EXCESSIVE OR UNREASONABLE WITHOUT GOING INTO THIS A SPECT AS TO WHETHER SOME OTHER BENEFIT IS ALSO RECEIVED BY THE ASSESSEE OR N OT FROM THE RELATED PARTY AS DISCUSSED ABOVE. BECAUSE OF SMALLNESS OF AMOUNT, WE FEEL THAT GOING INTO THESE ASPECTS WILL BE A FUTILE EXERCISE AND HENCE, WE DECLINE TO INTERFERE IN THE ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 23 ORDER OF LD. CIT (A) ON THIS ISSUE. THIS GROUND OF REVENUES APPEAL IS REJECTED. 51. GROUND NO. XVII) IS AS UNDER:- TO DELETE ADDITION MADE UNDER HEAD OF INCOME FROM OTHER SOURCES OF RS.2,50,74.457/- OF SODA ASH PROJECT AND RS.1,09,97 3/- FOR LAB PROJECT AND DIRECTED NOT TO CONSIDER INTEREST OF RS.2,39,92 ,013/- AS INCOME OF THE ASSESSEE AND TO ALLOW PROJECT EXPENSES NET OF B ALANCE INCOME. 52. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT ( A). HE ALSO SUBMITTED THAT OUT OF THE AMOUNT OF RS.2,50,74,457/-, THE AMOUNT O F RS.2,39,92,013/- IS PERTAINING TO FUND UTILIZED BY GENERAL DIVISION AND HENCE, THIS IS NOT INCOME BECAUSE TRANSFER OF SUCH INTEREST EXPENDITURE TO GE NERAL DIVISION WAS BECAUSE OF THIS REASON THAT FUNDS WERE UTILIZED BY GENERAL DIVISION. HE SUBMITTED THAT THIS SAME SHOULD NOT BE ASSESSED AS INCOME FROM OTHER SOURCES BECAUSE IT WILL AMOUNT TO DOUBLE ADDITION. HE ALSO SUBMITTED THAT IN AY 1999-00 IN ASSESSEES OWN CASE, THE TRIBUNAL HAS RESTORED THIS MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICAT ION AND AFTER VERIFICATION THE AO DID NOT MAKE SUCH ADDITION. HE SUBMITTED THAT TH E TRIBUNALS ORDER IS AVAILABLE ON PAGE-89 OF THE PAPER BOOK AND RELEVANT PARA IS 13. REGARDING THE ORDER PASSED BY ASSESSING OFFICER FOR GIVING EF FECT TO THE TRIBUNALS ORDER IT WAS SUBMITTED THAT SAME IS AVAILABLE ON PAGES 10 TO 15 OF PAPER BOOK NO.3. 53. REGARDING OTHER INTEREST INCOME OF SODA ASH PRO JECT, IT WAS SUBMITTED THAT THIS INCLUDES INTEREST ON FD OF RS.7,56,704/-, INTEREST ON NSC OF RS.1,35,069/- AND LATE PAYMENT FROM SPN/NCD HOLDER OF RS.1,85,794/- AND BUSINESS INCOME OF RS.4,877/- IN RESPECT OF SODA AS H PROJECT. REGARDING LAB PROJECT, IT WAS SUBMITTED THAT THE AMOUNT OF RS.1,0 9,973/- CONSIST OF INTEREST INCOME OF RS.60,473/- AND MISCELLANEOUS INCOME OF R S.49,500/-. HE SUBMITTED THAT AT LEAST THIS INTEREST EXPENDITURE O F RS.2,39,92,013 PERTAINING TO ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 24 FUND UTILIZED BY GENERAL DIVISION SHOULD NOT BE ASS ESSED AS INCOME OF THE ASSESSEE AND PROJECT EXPENSES SHOULD BE ALLOWED NET OF THIS INCOME. 54. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. WE FIND THAT ON PAGE NO.25 OF THE ASSESSMENT ORDER, THE ALLEGATION OF TH E ASSESSING OFFICER IS THIS THAT ASSESSEE IS CLAIMING DOUBLE DEDUCTION FOR INTE REST EXPENSES, ONE ON ACCOUNT OF INTEREST PAYMENT TO THE LENDERS AND SECO NDLY FOR THE PAYMENT MADE BY ONE DIVISION I.E., GENERAL DIVISION TO OTHE R DIVISION BY PASSING BOOK ENTRY. THE CASE OF AR IS THIS THAT NO DOUBLE DEDUC TION IS CLAIMED. THE FINDING OF THE LD. CIT(A) ON THIS ISSUE IS IN PARA-24.4 ON PAGE NO.25 OF HIS ORDER AND FINDING IS THIS THAT TRANSFER OF EXPENSES FROM SODA ASH PROJECT TO GENERAL DIVISION CANNOT BE CONSIDERED AS INCOME OF THE ASSE SSEE BUT HE HAS NOT GIVEN ANY FINDING AS TO WHETHER THE ASSESSEE HAS CL AIMED DOUBLE DEDUCTION OF INTEREST EXPENSES. IN AY 1999-00, THE MATTER WAS RE STORED BACK BY THE TRIBUNAL TO THE FILE OF ASSESSING OFFICER WITH A DI RECTION TO VERIFY THE CONTENTIONS OF THE ASSESSEE. THE CLAIM OF THE ASSES SEE BEFORE THE TRIBUNAL IN THAT YEAR WAS THAT THE REVENUE ON ONE HAND DISALLOW ED COMPLETE INTEREST AND OUT OF THIS TOTAL INTEREST ACCOUNT ADJUSTMENT OF IN TER DIVISION INTEREST HAVE BEEN ADDED WHICH RESULTED INTO DOUBLE ADDITION. THE TRIB UNAL CONFIRMED THE DISALLOWANCE OF WHOLE INTEREST AS EXPENSES AND THER EFORE, IT WAS HELD THAT INTER DIVISION INTEREST OUT OF THAT INTEREST IS NOT REQUIRED TO BE SEPARATELY ADDED AND IT WAS HELD THAT THE CONSEQUENTIAL EFFECT AND B ENEFITS GRANTED TO THE ASSESSEE ARE REQUIRED TO BE WITHDRAWN. HENCE, IN TH E PRESENT YEAR ALSO, WE SET ASIDE THE ORDER OF LD. CIT (A) ON THIS ISSUE AN D RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION. T HE AO SHOULD FOLLOW THE DIRECTION GIVEN BY THE TRIBUNAL IN AY 1999-00 AND S HOULD DECIDE THE ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF BE ING HEARD TO ASSESSEE. THIS GROUND OF REVENUES APPEAL STANDS ALLOWED FOR STATI STICAL PURPOSES. 55. GROUND NO.XVIII) IS AS UNDER:- ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 25 XVIII) TO EXCLUDE 90% OF NET INTEREST INCOME AFTER CONSIDERING INTEREST EXPENDITURE OF RS.228.27 LACS FROM PROFIT FROM BUSI NESS AND NOT TO EXCLUDE 90% OF INTEREST FROM DEBTORS OF RS.448.36 L ACS. FROM PROFIT OF THE BUSINESS WHILE COMPUTING DEDUCTION U/S. 80HHC. 56. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT ( A). HE ALSO SUBMITTED THAT AMOUNT OF INTEREST FROM DEBTORS OF RS.448.36 LAKHS SHOULD BE CONSIDERED AS BUSINESS INCOME AND NO PART OF IT SHOULD BE CONSIDE RED FOR 90% EXCLUSION FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING D EDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80HHC OF THE ACT. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HI GH COURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA). REGARDING OTHER INTEREST INCOME, IT WAS SUBMITTED THAT BENEFIT OF NETTING SHOULD BE ALLOWED TO THE ASSESSEE AS IS HELD BY THE LD. CIT (A) AND IN SUPPORT OF THIS CONTENTIO N LD. AR OF THE ASSESSEE PLACED RELIANCE ON THE TRIBUNALS DECISION IN ASSES SEES OWN CASE FOR AY 2000-01. 57. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THE ISSUE REGARDING INTEREST FROM DEBTORS IS COVERED BY THE J UDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA) AND AS PER THIS JUDGMENT, INTEREST FROM THE DEBTORS IS TO BE CONSIDERED AS PART OF SALE PRICE AND HENCE, NO EXCLUSION IS CALLED FOR IN RESPECT OF SUCH INTEREST FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING D EDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80HHC OF THE ACT. REGARDING OTHER INT EREST INCOME, IT IS HELD BY LD. CIT (A) THAT NETTING SHOULD BE ALLOWED OF INTER EST EXPENDITURE OF RS.228.27 LAKHS AND 90% OF NET INTEREST INCOME ONLY SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOW ABLE TO THE ASSESSEE U/S. 80HHC. IN THIS REGARD, WE FEEL THAT MATTER SHOULD G O BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION BECAUSE THE AS SESSEE HAS TO ESTABLISH NEXUS OF INTEREST EXPENDITURE AND INTEREST INCOME. HENCE, FOR THIS PART OF ISSUE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RES TORE THE MATTER BACK TO THE ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 26 FILE OF ASSESSING OFFICER FOR FRESH DECISION. THE B URDEN IS ON THE ASSESSEE TO ESTABLISH THE NEXUS BETWEEN INTEREST INCOME EXCLUDI NG INTEREST FROM DEBTORS OF RS.448.36 LAKH AND TO THE EXTENT, THE ASSESSEE I S ABLE TO ESTABLISH NEXUS, NETTING SHOULD BE ALLOWED TO THE ASSESSEE AND 90% O F SUCH NET INTEREST INCOME SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80HHC OF T HE ACT. THIS GROUND OF REVENUES APPEAL STANDS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. 58. GROUND XIX) IS AS UNDER:- XIX) NOT TO EXCLUDE 90% OF INSURANCE CLAIM, TRUCKS HIRE CHARGES AND TRANSPORT INCOME FROM PROFIT OF THE BUSINESS WHILE COMPUTING DEDUCTION U/S. 80HHC. 59. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A ) AND ALSO SUBMITTED THAT BENEFIT OF NETTING SHOULD BE ALLOWED TO THE ASSESSE E AND FOR THIS PURPOSE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF ASSESSIN G OFFICER TO ENABLE THE ASSESSEE TO ESTABLISH NEXUS. WE, THEREFORE, SET ASI DE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FI LE OF ASSESSING OFFICER FOR FRESH DECISION AND BURDEN IS ON THE ASSESSEE TO PRO VE THE NEXUS OF EXPENDITURE INCURRED FOR EARNING THIS INCOME ON ACC OUNT OF INSURANCE CLAIM, TRUCK HIRE CHARGES AND TRANSPORT INCOME AND TO THE EXTENT, THE ASSESSEE IS ABLE TO ESTABLISH THE NEXUS, THE ASSESSING OFFICER SHOULD ALLOW THE BENEFIT OF NETTING AND 90% OF NET INCOME ONLY SHOULD BE REDUCE D FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80HHC OF THE ACT. THIS GROUND OF REVENUES APPEAL STANDS ALL OWED FOR STATISTICAL PURPOSES. 60. GROUND NO. XX) IS AS UNDER:- XX) NOT TO CHARGE INTEREST U/S. 234C OF THE IT ACT ON THE INSTALLMENTS DUE FROM 15 TH JUNE, 96 TO DECEMBER, 96. ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 27 61. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A ). HE FURTHER SUBMITTED THAT THREE COMPANIES WERE AMALGAMATED WITH ASSESSE E-COMPANY WITH EFFECT FROM 01-09-1986 BUT HONBLE HIGH COURT APPROVED THE SCHEME VIDE ORDER DATED 16-01-1997 AND HENCE, INTEREST U/S. 234C OF T HE ACT UP TO 31-12-1996 SHOULD NOT BE CHARGED. 62. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE ARE OF THE CONSIDERED OPINION THAT EVEN IF THE AMALGAMA TION SCHEME WAS APPROVED BY HONBLE GUJARAT HIGH COURT ON 16-01-199 7, THE SAME IS WITH EFFECT FROM 01-09-1996 AND IN ANY CASE, INCOME FROM THIS DATE IS TO BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR THIS YEA R AND THEREFORE, THE INTEREST ALSO IS TO BE PAID BY THE ASSESSEE IN RESPECT OF AN Y DEFICIT IN PAYMENT OF ADVANCE TAX ON 15-09-1996 AND 15-12-1996, IF ANY, B UT IF ANY ADVANCE TAX ON THESE TWO DATES, WAS PAID BY THOSE AMALGAMATING COM PANIES THEN THE SAME SHOULD ALSO BE CONSIDERED FOR COMPUTING THE TOTAL A DVANCE TAX PAID BY THE ASSESSEE ON THESE TWO DATES, AND INTEREST LIABILITY U/S. 234C OF THE ACT SHOULD BE WORKED OUT ON THAT BASIS. HENCE, WE SET ASIDE TH E ORDER OF LD. CIT (A) ON THIS ISSUE AND WE RESTORE THE MATTER BACK TO THE FI LE OF ASSESSING OFFICER FOR FRESH DECISION. SINCE, THE DATE OF AMALGAMATION IS WITH EFFECT FROM 01-09- 1996, THE INCOME OF THESE COMPANIES UP TO 31-08-199 6 DOES NOT BELONG TO ASSESSEE-COMPANY AND HENCE, THERE IS NO EFFECT OF A MALGAMATION IN RESPECT OF INSTALLMENT OF ADVANCE TAX FALLING DUE ON 15-06- 1996. FOR THE PURPOSE OF COMPUTING ADVANCE TAX TO BE PAID ON 15-09-1996, INC OME OF AMALGAMATING COMPANIES HAS TO BE CONSIDERED WITH EFFECT FROM 01- 09-1996 AND IF ANY ADVANCE TAX WAS PAID BY THESE AMALGAMATING COMPANIE S ON 15-09-1996 OR 15-12-1996 THEN SUCH PAYMENT OF ADVANCE TAX BY AMAL GAMATING COMPANIES SHOULD ALSO BE CONSIDERED AS ADVANCE TAX PAID BY TH E ASSESSEE-COMPANY AND THE INTEREST LIABILITY U/S. 234C OF THE ACT SHOULD BE WORKED OUT ON THIS BASIS. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER A S PER LAW AFTER PROVIDING ITA NO.2543 & 2512/AHD/2000 A.Y. 1997- 98 ACIT SR-8 ABD V. NIRMA LTD. PAGE 28 REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THIS GROUND OF REVENUES APPEAL STANDS ALLOWED FOR STATISTICAL PUR POSES. 63. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 64. IN COMBINED RESULT, BOTH THE APPEAL OF ASSESSEE AND REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATE D ABOVE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (KUL BHARAT) (A.K.GARODIA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, *DKP '#$- 28/02/2013 ,-. / ! ! ! ! 001 001 001 001 2 1 2 1 2 1 2 1 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. #.#04 5 / CONCERNED CIT 4. 5- / CIT (A) 5. 1 89 0004, 04 , ,-. / DR, ITAT, AHMEDABAD 6. 9<= >? / GUARD FILE. BY ORDER/ ! , /TRUE COPY/ @/, # 04 , ,-. / STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 05/02 & 06/02 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 06/02, 07/02 4) DATE OF CORRECTION 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 27/02 7) ORDER UPLOADED ON 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 28/02