ACIT, Chandigarh V. M/s Vardhman Threads Ltd., Chandigarh

ITA 265/CHANDI/2007

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68611 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 02-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Assessee Lawyers: SHIVNEET JAIN
• Keywords: Capital asset; Business income; Depreciation; Capital receipt; Revenue expenditure
• Section: 80HHC; 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 265/CHD/2007 ASSESSMENT YEAR : 2003-04 A.C.I.T. CIRCLE 2(1) VS. VARDHMAN THREADS LTD. CHANDIGARH SCO 1-2-3, SECTOR 17 CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AMARVEER SINGH RESPONDENT BY: S/SHRI G.N. GUPTA & SHIVNEET JAIN DATE OF HEARING 18.11.2013 DATE OF PRONOUNCEMENT 23.12.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 18.12.2006 OF THE LD. CIT(A), CHANDIGARH. 2 IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING G ROUNDS. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. C.I.T. (APPEALS) IN APPEAL NO. 239/P/05-06, THROUGH ORDER DATED 18.12.2006, HAS ERRED IN DELETING / ALLOWING THE FO LLOWING: (I) ADDITION OF RS. 1,34,24,319/- MADE ON ACCOUNT O F INCOME ACCRUAL SHOWN AS LOAN WRITTEN BACK. (II) ADDITION OF RS. 1,73,783/- MADE ON ACCOUNT OF STOCK DISCREPANCY. (III) ADDITION OF RS. 32,290/- MADE ON ACCOUNT OF F INISHED GOODS SUPPLIED AS FREE SAMPLES. (IV) ALLOWING RELIEF OF RS. 2,70,262/- ON ACCOUNT O F DEDUCTION U/S 80IB OF THE INCOME-TAX ACT, 1961. (V) ALLOWING RELIEF OF RS. 6,31,073/- ON ACCOUNT OF DEDUCTION U/S 80HHC OF THE INCOME-TAX ACT, 1961. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF ASSESSING OFFICER BE RESTORED. 3 1(I) AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAS SHOWN INCOME OF RS. 1,34,24,390/- UNDER THE HEAD L OAN WRITTEN BACK. HOWEVER, THIS AMOUNT WAS REDUCED FROM THE N ET PROFIT 2 WHILE DETERMINING THE ASSESSABLE INCOME BY GIVING F OLLOWING NOTE: 2.1(I) DURING THE YEAR, COMPANY HAS WRITTEN BACK A SUM OF RS. 1,34,24,319 BEING THE AMOUNT OF LOAN PAYABLE TO M/S BARBOUR CAMPBELL TEXTILES LTD. (BCTL) AS THE SAME HAS BEEN WAIVED BY BCTL. THE COMPANY FORMERLY KNOWN AS BARBOUR VARDHMAN THREADS LTD. (BVTL) WAS A JOINT VENTURE BETWEEN BCTL AND MAHAVIR SPINNING M ILLS LTD. (MSML). THE COMPANY WAS REGULAR SUPPLIER OF ITS PRODUCTS TO BCTL. IN ORDER TO CATER THE ADDITIONAL REQUIREMENT OF BCTL, THE COMPA NY AT THE INSTANCE OF BCTL EXPANDED ITS PRODUCTION CAPACITY WHICH WAS PARTLY FUNDED BY BCTL THROUGH AN INTEREST FREE LOAN OF POUNDS STERLI NG 226500. HOWEVER THE SAID ARRANGEMENT OF SUPPLY TO BCTL WAS DISCONTI NUED AS BCTL WITHDREW FROM THE JOINT VENTURE. ON ABOVE DISENGAGE MENT, BCTL AGREED TO RECEIVE POUNDS 31,750 IN FULL AND FINAL SETTLEME NT OF THE ABOVE MENTIONED LOAN AND WAIVED OFF THE BALANCE AMOUNT OF POUNDS 1,94,750, KEEPING IN MIND THE DIFFICULTY TO BE FACED BY THE C OMPANY IN SERVICING THE LOAN, WHICH WAS EARLIER TO BE PAID OUT OF EARNI NG FROM MATERIALS EXPORTED BY COMPANY TO BCTL. THE SAID LOAN WAS FOR EXPANSION OF PLANT BEING OF PERMANENT AND CAPITAL NATURE AND WAS AN AP PARATUS TO EARN ENDURING BENEFITS OVER A LONG PERIOD OF TIME. THERE FORE, THE WAIVER OF LOAN BY M/S BCTL IS A CAPITAL RECEIPT AND HAS NOT B EEN INCLUDED IN TAXABLE INCOME OF THE COMPANY. IN SUPPORT OF THE ABOVE CLAIM THE ASSESSEE PLACED R ELIANCE ON THE FOLLOWING DECISIONS: 2.2 THE ASSESSEE HAS CITED THE FOLLOWING CASE LAWS IN S UPPORTS OF ITS VIEW:- I) HOSHIARPUR ELECTRIC SUPPLY CO. LTD. VS. CIT(1961 ) 41 ITR 608(SC) II) KETTELEWELL BULLEN & CO. LTD. VS. CIT(1964)53 I TR 261(SC) III) TIRUNELVELI MOTOR BUS SERVICES CO. (P) LTD. VS . CIT(1970) 78 ITR 55(SC) IV) CIT VS. BARIUM CHEMICALS LTD. (1987) 168 ITR 16 4(AP) V) BOMBAY BURMAH TRADING CORPORATION LTD. VS. CIT ( 1971)81ITR 777(BOM.) VI) ASHOK ENGG. CO. VS. ITO(1990) 31TTJ 1 (HYD). 4 THE ASSESSEE WAS FURTHER ASKED TO FURNISH DETAIL S OF THIS TRANSACTION IN RESPONSE THE ASSESSEE FIELD FOLLOWI NG DETAILS: I) THE ASSESSEES PARENT COMPANY M/S MAHAVIR SPINNI NG MILLS LIMITED (MSML) HAD ENTERED INTO A JOINT VENTURE WIT H M/S BARBOUR CAMPBELL TEXTILE LIMITED (BCTL) TO FORM A COMPANY C ALLED M/S BARBOUR VARDHMAN THREADS LIMITED (BVTL). THIS COMPANY HAD I NITIAL SHARE CAPITAL OF RS. 8 CRORES IN THE FORM OF 80 LAKH SHAR ES OF RS. 10/- EACH. THIS ARRANGEMENT WAS ARRIVED PRIOR TO THE PREVIOUS YEAR 2002-03, RELEVANT TO THE A.Y. 2003-04 I.E. IN F.Y. 1998-99. II) ON 31.3.2000, M/S BCTL DECIDED TO WITHDRAW ITSE LF FROM M/S BVTL DECIDED TO WITHDRAW ITSELF FROM M/S BVTL BECAUSE OF SOME BUSINESS RELATED ISSUES. THIS HAS HAPPENED BECAUSE OF ANOTHE R BUSINESS VENTURE OF M/S BCTL WITH A FOREIGN COMPANY WHEREBY IT WOULD NO LONGER BUY THE PRODUCTS OF M/S BVTL. THEREFORE, IT NEGOTIATED WITH THE PARENT COMPANY OF M/S BVTL I.E. M/S MSML REGARDING WITHDRAWAL OF I TS INVESTMENT. 3 III) PRIOR OF 31.3.2000, 50% SHARES OF M/S BVTL WE RE HELD BY M/S BCTL. REMAINING 50% SHARES WERE HELD BY M/S MSML AN D ITS PROMOTER, SH. S.P. OSWAL. IV) SUBSEQUENT TO THE DISENGAGEMENT OF M/S BCTL, TH E SHARES HELD BY M/S BCTL WRE PURCHASED BY M/S MSML (75% OF SHARE S ) AND THE BALANCE BY M/S VSGML(A GROUP COMPANY OF SH. S.P. OS WAL). THUS, AS ON 1 ST APRIL, 2000, THE ENTIRE CAPITAL HOLDING OF M/S BCT L IN M/S BVTL CAME IN THE HANDS OF THE PROMOTER GROUP OF THE ASSE SSEE. V) THE NAME OF M/S BVTL WAS CHANGED TO M/S VARDHMAN THREADS LIMITED (PRESENT ASSESSEE) W.E.F. 27.06.2000. SUBSE QUENTLY, THE COMPOSITION OF THE BOARD OF DIRECTORS OF THE ASSESS EE COMPANY WAS ALSO CHANGED W.E.F. 24.08.2000. THE DIRECTORS OF M/S BCT L NAMELY, SH. TUDO DAVIS, SH. CERI MARC JONES AND SH. ALEX ATKINSON CE ASED TO BE A DIRECTORS OF THE ASSESSEE COMPANY W.E.F. THIS DATE. VI) IN THE MEANTIME, VIDE LETTER DATED 28.10.1998 ( I.E. N THE BEGINNING OF THE JOIN VENTURE MENTIONED ABOVE) M/S BCTL EXPRE SSED ITS READINESS TO PART FINANCE THE PROPOSED EXPANSION OF CAPACITY OF M/S BVTL, BY MAKING AN INTEREST FREE ADVANCES OF POUNDS 2,26,500 WHICH WAS MEANT FOR SETTING UP ADDITIONAL PRODUCTION FACILITY. IT W AS ALSO CONVEYED BY M/S BCTL THAT THE ADVANCE AMOUNT MAY BE REPAYED DURING THE PERIOD OF SIX YEARS IN QUARTERLY INSTALLMENTS OF POUNDS 9500 STAR TING FROM 30.06.99. IT WAS FURTHER MENTIONED THAT THE TOTAL AMOUNT MAY BE REPAIRED NOT LATER THAN 31.12.2005. VII) BASED UPON THIS LETTER, M/S BVTL CARRIED OUT E XPANSION OF THE PROJECT. TOTAL PLANT AND MACHINERY TO THE TUNE OF R S. 1,56,12,645/- (POUND 2,26,500 X 68.93) WAS PURCHASED BY M/S BVTL. THIS PURCHASE OF MACHINERY WAS ENTIRELY FINANCED BY M/S BCTL. THE DU E CLAIM OF DEPRECIATION HAS ALSO BEEN MADE BY THE ASSESSEE COM PANY ON THIS MACHINERY. AT THE SAME TIME, THIS AMOUNT HAS BEEN S HOWN AS A NON INTEREST BEARING LOAN RAISED FROM M/S BCTL, IN THE BOOKS OF ASSESSEE COMPANY. VIII) SUBSEQUENTLY, VIDE LETTER DATED 01.03.2001, M /S BCTL HAS STATED THAT NO PAYMENT OF THE LOAN WHICH WAS REPAYABLE IN 24 EQUAL INSTALLMENTS W.E.F. 30.06.1999 HAS BEEN MADE. IT HA S BEEN FURTHER CONVEYED IN THIS LETTER THAT KEEPING IN MIND THE DI FFICULTIES TO MAINTAIN THE FURTHER RELATIONSHIP AND THE FACT THAT THE ASSE SSEE COMPANY WILL FACE DIFFICULTY IN SERVING THE LOAN, IT HAS BEEN DECIDED THAT PORTION OF THE LOAN NOT DUE FOR REPAYMENT WOULD BE WAIVED OFF. IT HAS A LSO BEEN STATED THAT M/S BCTL WOULD AGREE TO WAIVE OFF THE BALANCE AMOUN T OF POUNDS 1,94,750, IF AN AMOUNT OF POUNDS 31,750 IS PAID BY THE ASSESSEE COMPANY TO M/S BCTL. THIS AMOUNT OF POUNDS 31,750 H AS SUBSEQUENTLY BEEN PAID, AFTER THE APPROVAL OF RBI VIDE LETTER DA TED 31.05.2002. IX) THUS, AN ASSESSEE HAS EFFECTIVELY GAINED AN AMO UNT OF RS. 1,34,24,319/- (POUNDS 1,94,750) DURING THE FY 2002- 03, ON ACCOUNT OF WAIVER OF LOAN BY M/S BCTL. ON THE BASIS OF ABOVE THE DETAILS AND CHAIN OF EVE NTS THE ASSESSING OFFICER CONCLUDED THAT HE ASSESSEE BECAME OWNER OF THE MACHINERY ACQUIRED FROM TIME TO TIME WHEN THIS LOAN WAS ADVANCED BY BCTL. THE ASSESSEE HAS CLAIMED DEPRECI ATION ON THESE ASSETS FROM YEAR TO YEAR. THEREFORE, THE AS SESSEE HAS GOT DOUBLE BENEFIT IN THE SENSE THAT ON ONE HAND TH E ASSESSEE HAS CLAIMED DEPRECIATION AND ON THE OTHER HAND, LO AN WAS WAIVED. ACCORDING TO HIM WHOLE CHAIN OF EVENTS WAS ARRANGED 4 IN SUCH A WAY THAT THAT THE ASSESSEE WOULD ULTIMATE LY ESCAPE THE TAXES. ASSESSING OFFICER FURTHER FOUND THAT TH E CASE LAWS CITED BY THE ASSESSEE WERE DISTINGUISHABLE. HE ULT IMATELY HELD THAT THE ARRANGEMENT WAS CONTRIVED AND THEREFORE, S AME WAS ASSESSED AS INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. 5 ON APPEAL BEFORE THE LD. CIT(A) IT WAS MAINLY CO NTENDED THAT IT WAS A CASE OF WAIVER OF LOAN WHICH WAS TAKE N FOR ACQUIRING CAPITAL ASSETS AND THEREFORE, RECEIPT AT THE TIME OF RECEIVING WAS IN NATURE OF CAPITAL RECEIPT AND THE SAME CANNOT BE SUBJECTED TO TAX. 6 THE LD. CIT(A) FOUND FORCE IN THE SAME AND OBSERV ED THAT THE TRANSACTION INTO WHICH THE ASSESSEE HAD ENTERED FALLS SQUARELY WITHIN THE AMBIT OF CATEGORY OF TRANSACTIO NS IN THE NATURE OF CAPITAL FIELD AND THEREFORE, SAME WERE N OT TAXABLE. 7 BEFORE US THE LD. DR FOR THE REVENUE CARRIED US T HROUGH THE FACTS AS NOTED BY THE ASSESSING OFFICER AND SUB MITTED THAT THE ASSESSEE HAD GOT BENEFIT OF DEPRECIATION AND TH EREFORE, THIS AMOUNT WAS TAXABLE. IN THIS REGARD HE RELIED ON THE ORDER OF HON'BLE DELHI HIGH COURT IN CASE OF LOGITRONICS P LTD. VS. CIT, 333 ITR 386 (DELHI) . 8 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE STRONGLY SUPPORTED THE IMPUGNED ORDER AND EMPHASIZE D THAT WHEN THE LOAN WAS TAKEN THE RECEIPT WAS OF CAPITAL NATURE AND THEREFORE, SAME CANNOT BE TAXED NOW. IN THIS REGA RD HE STRONGLY RELIED ON THE DECISION OF HON'BLE BOMBAY H IGH COURT IN CASE OF MAHINDRA AND MAHINDRA LTD. VS. CIT, 261 ITR 501(BOMBAY). HE FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY CASH THEREFORE, SAME CANNOT BE TAXED EVEN U/S 28(IV) AS BENEFIT BY PERQUISITE ARISING FROM BUSIN ESS AND IN THIS REGARD HE STRONGLY RELIED ON THE DECISION OF H ON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. ALCHEMIC PVT L TD. 130 ITR 168 (GUJARAT) . 5 9 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. NATURE OF TRANSACTION HAS BEEN SUMMARIZED BY THE LD. CIT(A) C ORRECTLY AT PAGE 5 & 6 OF HIS ORDER WHICH IS AS UNDER: I) THE ASSESSEES PARENT COMPANY M/S MAHAVIR SPINN ING MILLS LIMITED(MSML) HAD ENTERED INTO A JOINT VENTURE WITH M/S BARBOUR CAMPBELL TEXTILE LIMITED (BCTL) TO FORM A COMPANY C ALLED M/S BARBOUR VARDHMAN THREADS LIMITED (BVTL). THIS COMPANY HAD I NITIAL SHARE CAPITAL OF RS. 8 CRORES IN THE FORM OF 80 LAKH SHAR ES OF RS. 10/- EACH. THIS ARRANGEMENT WAS ARRIVED PRIOR TO THE PREVIOUS YEAR 2002-03, RELEVANT TO THE A.Y. 2003-04 I.E. IN F.Y. 1998-99. II) ON 31.3.2000, M/S BCTL DECIDED TO WITHDRAW ITSE LF FROM M/S BVTL BECAUSE OF SOME BUSINESS RELATED ISSUES. THIS HAS H APPENED BECAUSE OF ANOTHER BUSINESS VENTURE OF M/S BCTL WITH A FOREIGN COMPANY WHEREBY IT WOULD NO LONGER BUY THE PRODUCTS OF M/S BVTL. THERE FORE, IT NEGOTIATED WITH THE PARENT COMPANY OF M/S BVTL I.E. M/S MSML R EGARDING WITHDRAWAL OF ITS INVESTMENT. III) PRIOR OF 31.03.2000, 50% SHARES OF M/S BVTL WE RE HELD BY M/S BCTL. REMAINING 50% SHARES WERE HELD BY M/S MSML AN D ITS PROMOTER, SH. S.P. OSWAL. IV) SUBSEQUENT TO THE DISENGAGEMENT OF M/S BCTL, TH E SHARES HELD BY M/S BCTL WERE PURCHASED BY M/S MSML (75% OF SHAR ES) AND THE BALANCE BY M/S VSGML ( A GROUP COMPANY OF SH. S.P. OSWAL). THUS, AS ON 1 ST APRIL, 2000, THE ENTIRE CAPITAL HOLDING OF M/S BCT L IN M/S BVTL CAME IN THE HANDS OF THE PROMOTER GROUP OF THE ASSE SSEE. V) THE NAME OF M/S BVTL WAS CHANGED TO M/S VARDHMAN THREADS LIMITED (PRESENT ASSESSEE) W.E.F 27.06.2000. SUBSEQ UENTLY, THE COMPOSITION OF THE BOARD OF DIRECTORS OF THE ASSESS EE COMPANY WAS ALSO CHANGED W.E.F. 24.08.2000. THE DIRECTORS OF M/S BCT L NAMELY, SH. TUDO DAVIS, SH. CERI MARC JONES AND SH. ALEX ATKINSON CE ASED TO BE A DIRECTORS OF THE ASSESSEE COMPANY W.E.F THIS DATE. VI) IN THE MEANTIME, VIDE LETTER DATED 28.10.1998 ( I.E. IN THE BEGINNING OF THE JOINT VENTURE MENTIONED ABOVE) M/S BCTL EXPRESSED ITS READINESS TO PART FINANCE THE PROPOSED EXPANSION OF CAPACITY OF M/S BVTL, BY MAKING AN INTEREST FREE ADVANCES OF POUNDS 2,26,500 WHICH WAS MEANT FOR SETTING UP ADDITIONAL PRODUCTION FACI LITY. IT WAS ALSO CONVEYED BY M/S BCTL THAT THE ADVANCE AMOUNT MAY BE REPAYED DURING THE PERIOD OF SIX YEARS IN QUARTERLY INSTALLMENTS O F POUNDS 9500 STARTING FROM 30.06.99. IT WAS FURTHER MENTIONED THAT THE TO TAL AMOUNT MAY BE REPAIRED NOT LATER THAN 31.12.2005. VII) BASED UPON THIS LETTER, M/S BVTL CARRIED OUT E XPANSION OF THE PROJECT. TOTAL PLANT AND MACHINERY TO THE TUNE OF R S. 1,56,12,645/- (POUND 2,26,500 X 68.93) WAS PURCHASED BY M/S BVTL. THIS PURCHASE OF MACHINERY WAS ENTIRELY FINANCED BY M/S BCTL. THE DU E CLAIM OF DEPRECIATION HAS ALSO BEEN MADE BY THE ASSESSEE COM PANY ON THIS MACHINERY. AT THE SAME TIME, THIS AMOUNT HAS BEEN S HOWN AS A NON INTEREST BEARING LOAN RAISED FROM M/S BCTL, IN THE BOOKS OF ASSESSEE COMPANY. VIII) SUBSEQUENTLY , VIDE LETTER DATED 1.03.01, M/S BCTL HAS STATED THAT NO PAYMENT OF THE LOAN WHICH WAS REPAYABLE IN 24 EQUAL INSTALLMENTS W.E.F 30.06.1999 HAS BEEN MADE. IT HAS BEEN FURTHER CONVEYED IN THIS LETTER THAT KEEPING IN MIND THE DI FFICULTIES TO MAINTAIN THE FURTHER RELATIONSHIP AND THE FACT THAT THE ASSE SSEE COMPANY WILL FACE DIFFICULTY IN SERVING THE LOAN, IT HAS BEEN DECIDED THAT PORTION OF THE LOAN NOT DUE FOR REPAYMENT WOULD BE WAIVED OFF. IT HAS A LSO BEEN STATED THAT M/S BCTL WOULD AGREE TO WAIVE OFF THE BALANCE AMOUN T OF POUNDS 1,94,750, IF AN AMOUNT OF POUNDS 31,750 IS PAID BY THE ASSESSEE COMPANY TO M/S BCTL. THIS AMOUNT OF POUNDS 31,750 H AS SUBSEQUENTLY BEEN PAID, AFTER THE APPROVAL OF RBI VIDE LETTER DA TED 31.05.2002. 6 IX) THUS, AN ASSESSEE HAS EFFECTIVELY GAINED AN AMO UNT OF RS. 1,34,24,319/- (POUNDS 1,94,750) DURING THE FY 2002- 03, ON ACCOUNT OF WAIVER OF LOAN BY M/S BCTL. THE ABOVE CLEARLY SHOW THAT WHEN THE LOAN WAS TAKEN BY THE ASSESSEE-COMPANY IT WAS IN THE NATURE OF CAPITAL RE CEIPT BECAUSE THE LOAN WAS USED FOR ACQUISITION OF ASSETS FOR EXPANSION OF THE CAPACITY. THEREFORE, LATER ON WHE N SUCH LOAN IS WAIVED THE NATURE OF RECEIPT CANNOT BE CHANGED I NTO REVENUE RECEIPT. IN THE SIMILAR CIRCUMSTANCES, THE HON'BLE BOMBAY HIGH COURT IN CASE OF MAHINDRA AND MAHINDRA LTD VS. CIT (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. IN TH AT CASE THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING OF JE EPS. IN JUNE 1964 IT ENTERED INTO AN AGREEMENT WITH AN AMER ICAN COMPANY WHICH AGREED TO SELL TO THE ASSESSEE DIES, WELDING EQUIPMENT AND DIE MODELS TOOLINGS FOR PRODUCTION O F SPECIAL TYPES OF JEEPS BY THE ASSESSEE IN INDIA. THE PRICE OF THE TOOLINGS WAS AGREED AT POUNDS 6,50,000 C.I.F., BOMB AY. THE IMPORT OF THE TOOLINGS WAS APPROVED BY THE GOVERNME NT OF INDIA. SINCE THE ASSESSEE COULD NOT SECURE FOREIGN EXCHANGE, THE AMERICAN COMPANY AGREED TO PROVIDE A LOAN OF AN AMOUNT OF POUND 6,50,000 REPAYABLE AFTER TEN YEARS IN INST ALLMENTS WITH INTEREST AT 6 PERCENT FREE OF INCOME-TAX. CON SEQUENTLY, IN TERMS OF THE APPROVAL GRANTED BY THE CENTRAL GOVERN MENT, THE ASSESSEE RECEIVED THE LOAN FOR SECURING THE TOOLING S FROM THE AMERICAN COMPANY FOR WHICH THE ASSESSEE GAVE THREE PROMISSORY NOTES DATED SEPT 16, 1965, OCT 28,1965 A ND NOV 19,1965 IN ALL FOR POUND 6,50,000. ACCORDINGLY, TH E TOOLINGS WERE SUPPLIED BY THE AMERICAN COMPANY. IN FEBRUARY 1976, THE AMERICAN COMPANY WAS TAKEN OVER AND AS A TERM T HEREOF IT HAD BEEN AGREED TO WAIVE THE PRINCIPAL AMOUNT OF LO AN ADVANCED TO THE ASSESSEE AND TO CANCEL THE PROMISSO RY NOTES AS AND WHEN THEY MATURED. THE ASSESSEE FILED ITS R ETURN FOR THE ASSESSMENT YEAR 1976-77. IN PART III OF THE RE TURN, THE ASSESSEE SHOWED AN AMOUNT OF RS. 57,74,064 AS CESSA TION OF ITS LIABILITY TOWARDS THE AMERICAN COMPANY. THE IN COME-TAX OFFICER CAME TO THE CONCLUSION THAT WITH THE WAIVER OF THE LOAN THE CREDITS REPRESENTED INCOME AND NOT A LIABILITY. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE SUM OF RS. 57,7 4,064 WAS 7 TAXABLE U/S 28 OF THE INCOME TAX ACT, 1961. THE CO MMISSIONER (APPEALS) HELD THAT THE SUM OF RS. 57,74,064 WAS TA XABLE AS INCOME U/S 28(IV) OF THE ACT AS SUCH BENEFIT WAS OB TAINED IN THE COURSE OF BUSINESS AND THE MONETARY VALUE OF TH AT BENEFIT WAS INCOME. ALTERNATIVELY, THE COMMISSIONER (APPEAL S) TOOK THE VIEW THAT THE WAIVER OF THE LOAN AMOUNT OF RS. 57,74,064 AMOUNTED TO REMISSION OF TRADING LIABILITY AND, CON SEQUENTLY, THE SAID AMOUNT WAS TAXABLE U/S 41(1). ACCORDING T O THE TRIBUNAL, SECTION 28(IV) WAS NOT APPLICABLE BECAUSE BENEFIT OF WAIVER WAS NOT RECEIVED BY THE ASSESSEE IN KIND. T HE TRIBUNAL FURTHER TOOK THE VIEW THAT EVEN SECTION 41(1) OF TH E ACT WAS NOT APPLICABLE BECAUE THERE WAS NO CESSATION OF TRADING LIABILITY. IN ABOVE FACTS IT WAS HELD AS UNDER: HELD (I) THAT THERE WERE TWO IMPORTANT FACTS WHICH HAD BEEN OVERLOOKED BY THE ASSESSING OFFICER. FIRSTLY, THE A SSESSEE CONTINUED TO PAY INTEREST AT 6 PER CENT FOR A PERIO D OF TEN YEARS ON THE LOAN AMOUNT. THE AGREEMENT FOR PURCHASE OF TOO LING WAS ENTERED INTO MUCH PRIOR TO THE APPROVAL OF THE LOAN ARRANGEMENT GIVEN BY THE RESERVE BANK OF INDIA. THEREFORE, THE LOAN AGREEMENT, IN ITS ENTIRELY WAS NOT OBLITERATED BY S UCH WAIVER. SECONDLY THE PURCHASE CONSIDERATION RELATED TO CAP ITAL TO CAPITAL ASSETS. THE TOOLINGS WERE IN THE NATURE OF DIES. THE ASSESSEE WAS A MANUFACTURER OF HEAVY VEHICLES AND JEEPS. IT REQUIRED THESE DIES FOR EXPANSION. THEREFORE, THE IMPORT WAS THA T OF PLANT AND MACHINERY. THE CONSIDERATION PAID WAS FOR SUCH IMP ORT. IN THE CIRCUMSTANCES, SECTION 28(IV) WAS NOT ATTRACTED. L ASTLY THE PRI9NCIPAL AMOUNT OF LOAN HAD BEEN FORGONE AS A PAR T OF TAKEOVER ARRANGEMENT TO WHICH THE ASSESSEE WAS NOT A PARTY. THE WAIVER OF THE PRINCIPAL AMOUNT WAS UNEXPECTED. IN THE CIRCUM STANCES, SUCH WAIVER WOULD NOT CONSTITUTE BUSINESS INCOME. (II) THAT IN ORDER TO APPLY SECTION 41(1), AN ASSES SEE SHOULD HAVE OBTAINED A DEDUCTION IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. THE ASSESSEE HAD NOT OBTAINED SUCH ALLOW ANCE OR DEDUCTION IN RESPECT OF EXPENDITURE OR TRADING LIA BILITY. THE ASSESSEE HAD PAID INTEREST AT 6 PER CENT OVER A PER IOD OF TEN YEARS ON RS. 57,74,064. IN RESPECT OF THAT INTEREST, TH E ASSESSEE NEVER GOT DEDUCTION U/S 36(1)(III) OR SECTION 37. IN THE CIRCUMSTANCES, SECTION 41(1) OF THE ACT WAS NOT APPLICABLE. SECON DLY, EVEN ASSUMING THAT THE ASSESSEE HAD GOT DEDUCTION ON ALL OWANCE SECTION 41(1) WAS NOT APPLICABLE BECAUSE SUCH DEDUC TION WAS NOT IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILIT Y. LASTLY THE TOOLINGS CONSTITUTED CAPITAL ASSET AND NOT STOCK-IN -TRADE. THEREFORE, TAKING INTO ACCOUNT ALL THE ABOVE FACTS, SECTION 41(1) OF THE ACT WAS NOT APPLICABLE. FROM ABOVE IT IS CLEAR EVEN IF THE LOAN WAS TAKEN F OR ACQUISITION OF CAPITAL ASSETS I.E. IN THE NATURE OF CAPITAL FIE LD THEN UPON WAIVER SAME CANNOT BE TAXED. 8 10 AS FAR AS DECISION OF HON'BLE DELHI HIGH COURT I N CASE OF OF LOGITRONICS P LTD. VS. CIT IS CONCERNED, IN THAT CASE AT PAGE 386 IT WAS OBSERVED AS UNDER: UNDER A ONE-TIME SETTLEMENT WITH THE BANK, THE ASS ESSEE DISCHARGED RS. 1,85,00,000 AGAINST THE PRINCIPAL AM OUNT OF LOAN OF RS. 4,76,92,213 AND THE REMAINING SUM OF RS. 1,90,4 2,295 WAS WAIVED. THE ASSESSING OFFICER TAXED THE PRINCIPAL AMOUNT OF LOAN WAIVED AS INCOME. THE COMMISSIONER (APPEALS) DELE TED THE ADDITION HOLDING THAT THE PROVISIONS OF SECTION 2(2 4), 28(I),(IV) AND 41(1) WERE NOT APPLICABLE AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 2,91,42,213 BEING THE PRINCIPAL AMOUNT OF LOAN WAIVED. THE TRIBUNAL REVE RSED THE ORDER OF THE COMMISSIONER (APPEALS). ON ABOVE FACTS IT WAS HELD AS UNDER: HELD - DISMISSING THE APPEAL THAT THE TRIBUNAL HAD FOUND THAT NOTHING WAS BROUGHT ON RECORD TO SHOW THAT THE LOAN TAKEN BY THE ASSESSEE FROM THE BANK WAS UTILIZED FOR THE PURSE O F ACQUIRING CAPITAL ASSETS. ON THE CONTRARY, THE MATERIAL ON R ECORD INDICATED THAT THE ASSESSEE HAD OBTAINED THE LOAN OR CREDIT F ACILITY BY WAY OF HYPOTHECATION OF FINISHED GOODS, SEMI FINISHED GOOD S, RAW MATERIAL, BOOK DEBTS, RECEIVABLE CLAIMS, SECURITIES AND RIGHTS BY WAY OF FIRST CHARGE WHICH INDICATED THAT THE ASSESS EE HAD OBTAINED THE LOAN FACILITY FOR ITS BUSINESS ACTIVITY OR TRAD ING OPERATIONS. ON THE QUESTION WHETHER THE WHOLE AMOUNT OF THE LOAN H AD BEEN UTILIZED EITHER FOR THE PURPOSE OF ACQUIRING A CAPI TAL ASSET OR FOR THE PURPOSE OF BUSINESS ACTIVITY OR TRADING ACTIVIT Y THE TRIBUNAL REMITTED THE MATTER TO THE ASSESSING OFFICER FOR FR ESH ADJUDICATION. THE JUDGMENTS AND HAD GIVEN AN OPPORTUNITY TO THE A SSESSEE TO PROVE ITS CASE BEFORE THE ASSESSING OFFICER. THERE FORE, THERE WAS NO REASON OR OCCASION FOR THE ASSESSEE TO FEEL AGGR IEVED BY THE ORDER OF THE TRIBUNAL. FROM ABOVE IT BECOMES CLEAR THAT IN THE ABOVE CASE WAIVER OF LOAN WAS HELD TO BE TAXABLE BECAUSE THE TRIBUNAL HA S CLEARLY FOUND THAT NO MATERIAL WAS BROUGHT ON RECORD TO SHO W THAT THE LOAN TAKEN BY THE ASSESSEE FROM THE BANK, WAS USED FOR THE ACQUISITION OF CAPITAL ASSETS. RATHER THE RECORD I NDICATED THAT LOAN WAS TAKEN BY HYPOTHECATING FINISHED STOCK. THU S IT IS CLEAR THE LOAN WAS IN THE NATURE OF REVENUE AND IT WAS HE LD TO BE TAXABLE AND THEREFORE, THE FACTS OF THIS CASE ARE TOTALLY DISTINGUISHABLE. THE FACTS IN CASE BEFORE US ARE S IMILAR TO THE FACTS IN CASE OF MAHINDRA & MAHINDRA VS. CIT (SUPRA ) AND THEREFORE, FOLLOWING THE DECISION OF MAHINDRA & MA HINDRA VS. CIT (SUPRA) WE CONFIRM THE ORDER OF THE LD. CIT(A). 11 1(II) AFTER HEARING BOTH THE PARTIES WE FIND THA T DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT IN THE TAX AUDIT REPORT THE AUDITOR HAS POINTED OUT CERTAIN SHORTAGE IN RAW MATERIAL FINISHED GOODS. THE ASSESSEE WAS ASKED TO FURNISH 9 EXPLANATION. IT WAS STATED THAT TOTAL SHORTAGES IN RAW MATERIAL AND FINISHED GOOD WAS ONLY 13 KG AND 407 KG WHICH W AS WHICH WAS FOUND DURING PHYSICAL VERIFICATION OF STOCK. T HE SHORTAGE WAS NEGLIGIBLE. HOWEVER, THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SAME AND ADDED THE AMOUNT ON ACCOUNT O F THESE SHORTAGES TO THE INCOME OF THE ASSESSEE. 12 ON APPEAL, IT WAS SUBMITTED THAT SHORTAGE ON AC COUNT OF RAW MATERIAL WAS BECAUSE OF WASTAGE AND SHORTAGES O N ACCOUNT OF FINISHED GOODS WAS DUE TO THE REASON THAT SOME OF THE YARN WAS SENT TO THE LABORATORY FOR TESTING THE STRENGTH OF YARN BEFORE THE CLEARANCE FROM THE FACTORY. SOME SHORTA GE WAS DUE TO REDUCTION IN WEIGHT BECAUSE OF EVAPORATION OF TH E MOISTURE IN THE YARN. THE LD. CIT(A) FOUND FORCE IN THE SUB MISSIONS AND DELETED THE ADDITION. 13 BEFORE US, THE LD. DR FOR THE REVENUE STRONGLY S UPPORTED THE ORDER OF THE ASSESSING OFFICER AND ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE IMPUGNED ORDER. 14 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT SHORTAGE IS VERY NEGLIGIBLE AND IT IS 0.007% IN CAS E OF RAW MATERIAL AND THE SAME HAS OCCURRED DUE TO WASTAGE. THE ASSESSEE HAS ALSO GIVEN THE JUSTIFICATION FOR SHORT AGE ON ACCOUNT OF FINISHED GOODS WHICH HAS BEEN RIGHTLY AC CEPTED BY THE LD. CIT(A). THEREFORE, WE FIND NOTHING WRONG I N THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 15 1(III) AFTER HEARING BOTH THE PARTIES WE FIND TH AT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASS ESSEE HAS ISSUED 93.4 KG OF INDUSTRIAL SEWING THREADS AS SAMP LES TO VARIOUS PARTIES. UPON ENQUIRIES IT WAS SUBMITTED T HAT THESE SAMPLES WERE GIVEN TO VARIOUS CUSTOMERS TO PROMOTE THE PRODUCT AND THE VALUE OF THE SAME HAS BEEN REDUCED FROM THE CLOSING STOCK. HOWEVER, THE ASSESSING OFFICER NOTE D THAT PERUSAL OF CLOSING STOCK DETAILS, BOTH VALUEWISE AN D QUANTITATIVELY, DID NOT MAKE CLEAR THAT HOW THIS AM OUNT HAS BEEN REDUCED, THEREFORE, HE MADE AN ADDITION OF RS . 32,290/- TO THE INCOME OF THE ASSESSEE. 10 16 ON APPEAL THIS ADDITION WAS DELETED BY THE LD. C IT(A). 17 BOTH THE PARTIES WERE HEARD. 18 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE WHEN THE ASSESSEE IS MANUFACTURING HUGE QUANTITY OF SEWING T HREAD, IT IS CUSTOMARY THAT SOME OF THE SAMPLES MAY BE DISTRIBUT ED FOR PROMOTION OF THE PRODUCT. THEREFORE, WE FIND NOTHI NG WRONG WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SA ME. 19 1(IV) AFTER HEARING BOTH THE PARTIES WE FIND THA T DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASS ESSEE HAS CLAIMED DEDUCTION U/S 80IB AMOUNTING TO RS. 1,38,22 ,970/-. THIS AMOUNT INCLUDED FOLLOWING AMOUNTS UNDER THE HE AD OTHER INCOMES. SL.NO HEAD AMOUNT (RS.) 1 INTEREST RECEIVED 1,50,932 2 CLAIMS RECEIVED 84,753 3 PROVISIONS NO LONGER REQUIRED WRITEN BACK 781,720 4 MISC. RECEIPTS 85,248 TOTAL 2,461,653 ACCORDING TO HIM THESE AMOUNTS WERE DERIVED FROM IN DUSTRIAL UNDERTAKING AND THEREFORE, HE RELIED ON THE DECISIO N IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL COMPANY LTD. V S. CIT, 113 ITR 84 (S.C) AS WELL AS IN CASE OF PANDIAN CHEM ICALS LTD. VS. CIT, 262 ITR 278 (S.C) AND DID NOT ALLOW DEDUCT ION TO THE ABOVE EXTENT. 20 ON APPEAL THE LD. CIT(A) DISCUSSED THE ISSUE IN DETAIL AND ULTIMATELY DIRECTED THE ASSESSING OFFICER TO INCLUD E THESE ITEMS IN THE PROFIT FOR COMPUTING DEDUCTION U/S 80IB AS U NDER: THE ASSESSING OFFICER IS DIRECTED TO INCLUDE INTER EST FROM CUSTOMERS OF RS. 34,400/- CLAIM RECEIVED RS. 84,753 /- AND PROVISIONS NO LONGER REQUIRED WRITTEN BACK RS. 7,81 ,720/- IN THE PROFITS AND GAINS DERIVED FROM THE UNDERTAKING FOR THE PURPOSE OF SECTION 80IB AND EXCLUDE THE REMAINING RECEIPTS. 21 BEFORE US, THE LD. DR FOR THE REVENUE STRONGLY S UPPORTED THE ORDER OF ASSESSING OFFICER AND HE ALSO RELIED O N THE 11 DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT V. KHEMKA CONTAINER (P) LTD. 275 ITR 559 PH) . 22 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE REFERRED TO THE DETAILS OF VARIOUS ITEMS WHICH HAVE BEEN DISPUTED BY THE REVENUE WHICH CONSIST OF INTEREST F ROM CUSTOMERS AMOUNTING TO RS. 34,400/- CLAIMS RS. 84,7 53/- (INCLUDING RECEIPT FOR INSURANCE CLAIM OF DG SET AM OUNTING TO RS. 24,420/-) AND REST OF THE ITEMS ARE ON ACCOUNT OF VARIOUS PROVISIONS WHICH ARE WRITTEN BACK DURING THE YEAR. AS FAR AS INTEREST FROM CUSTOMERS, IS CONCERNED, HE SUBMITTED THAT IT IS A PART OF INCOME AS HELD BY HON'BLE GUJARAT HIGH COUR T IN CASE OF NIRMA INDUSTRIES LTD. VS. DCIT, 283 ITR 402 (GUJARA T) . INSURANCE CLAIM WAS ALSO CREDITED BECAUSE IT WAS EX CESS OF CLAIM OVER W.D.V OF DG SET THEREFORE, SAME SHOULD BE TREATED AS PROFIT. CLAIM OF WRITING BACK OF VARIOUS PROVIS IONS ARE ON ACCOUNT OF REVENUE NATURE AND SHOULD BE TREATED AS PROFITS ONLY. 23 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE IN RESPECT OF INTEREST ON CUSTOMERS. HON'BLE GUJARAT HIGH CO URT IN CASE OF NIRMA INDUSTRIES LTD. VS. DCIT(SUPRA) HAS CLEAR LY HELD THAT INTEREST FROM CUSTOMERS WOULD CONSTITUTE INCOME FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IB AND THEREFO RE, TO THIS EXTENT THERE IS NOTHING WRONG WITH THE ORDER OF THE LD. CIT(A). 24 AS FAR AS CLAIMS ARE CONCERNED, THERE IS FORCE I N THE SUBMISSIONS OF THE LD. DR. HON'BLE PUNJAB & HARYAN A HIGH COURT IN CASE OF CIT VS. KHEMKA CONTAINER (P) LTD. (SUPRA) HAS CLEARLY OBSERVED THAT INSURANCE RECEIPT IN RESPECT OF RAW MATERIAL DESTROYED IN THE FIRE CANNOT BE TREATED AS INCOME FOR DEDUCTION U/S 80IB. IT WAS FURTHER OBSERVED THAT ON LY PROFIT PART OF THE RECEIPT HAS TO BE IGNORED FOR COMPUTING DEDU CTION. IN CASE BEFORE US THE ASSESSEE HAS RECEIVED EXCESS CLA IM IN RESPECT OF DG SET FROM THE INSURANCE WHICH IS OF C APITAL NATURE. THEREFORE, CASE OF THE ASSESSEE IS MUCH W ORSE THAN THE CASE OF CIT VS. KHEMKA CONTAINER (P) LTD. (SUPR A) WHETHER CLAIM WAS ON ACCOUNT OF REVENUE ITEM. THEREFORE, RECEIPT OF 12 CLAIM FROM INSURANCE COMPANY AGAINST DG SET CANNOT BE TAKEN AS PART OF THE PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IB. NO DETAILS HAVE BEEN FILED IN RESPECT OF OTH ER CLAIMS, THEREFORE, SAME WOULD ALSO NOT TO BE TREATED AS PA RT OF THE PROFITS FOR COMPUTING THE DEDUCTION U/S 80IB AND TO THIS EXTENT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTOR E THAT OF THE ASSESSING OFFICER. 25 AS FAR AS THE ISSUE REGARDING WRITING BACK OF VA RIOUS PROVISIONS IS CONCERNED, THE DETAILS ARE NOT AVAILA BLE BEFORE US. BUT IF THE CLAIMS HAVE BEEN WRITTEN BACK ON RE VENUE SIDE THEN THE SAME HAS TO BE INCLUDED IN THE PROFITS BEC AUSE EXCESS REVENUE EXPENDITURE WOULD HAVE REDUCED THE PROFITS IN THE EARLIER YEAR WHICH HAS TO BE RESTORED IN THIS YEAR. AT THE SAME TIME IF THE PROVISIONS OF WRITTEN BACK RELATES TO T HE CAPITAL ASSET THEN SAME CANNOT BE INCLUDED IN THE PROFITS F OR COMPUTING DEDUCTION U/S 80IB. THEREFORE, WE SET ASIDE THE O RDER OF THE LD. CIT(A) AND REMIT THIS MATTER BACK TO THE FILE O F ASSESSING OFFICER FOR FRESH EXAMINATION AND TO INCLUDE THE AM OUNTS WRITTEN BACK IN THE PROFITS IF THEY RELATE TO REVEN UE NATURE. 26 1(IV) AFTER HEARING BOTH THE PARTIES WE FIND THA T DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASS ESSEE HAS CLAIMED DEDUCTION U/S 80HHC. PROFIT FOR THIS PURPO SE WAS ARRIVED AT WITHOUT REDUCING THE AMOUNT OF DEDUCTION UNDER SUB- SECTION (9) OF SECTION 80IA. THEREFORE, HE RECALC ULATED THE DEDUCTION. 27 ON APPEAL THE ISSUE WAS DISCUSSED IN DETAIL BY T HE LD. CIT(A) AND IT WAS HELD THAT THE ASSESSING OFFICER I S NOT JUSTIFIED IN EXCLUDING THE DEDUCTION ALLOWABLE U/S 80IB (10) FROM ELIGIBLE PROFITS FOR COMPUTING DEDUCTION U/S 8 0HHC. 28 BEFORE US, THE LD. DR FOR THE REVENUE STRONGLY R ELIED ON THE ORDER OF SPECIAL BENCH IN CASE OF A.C.I.T. VS. HINDUSTAN MINT & AGRO PRODUCTS (P) LTD, 119 ITD 107 (DELHI)(S .B). 29 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE RELIED ON THE DECISION OF CIT AND ANOTHER VS. MILLIPORE IN DIA P. LTD, 341 ITR 219 (KAR) . 13 30 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY LARGER BENCH (CONSISTING OF FIVE MEMBERS OF THE TRIBUNAL) IN CASE OF A.C.I.T . VS. HINDUSTAN MINT & AGRO PRODUCTS (P) LTD (SUPRA) AND HEAD NOTE READS AS UNDER: SECTION 80IA OF INCOME TAX ACT - DEDUCTIONS - PR OFITS AND GAINS FROM INDUSTRIAL UNDERTAKING, ETC. AFTER CERTAIN DAT ES/INFRASTRUCTURE UNDERTAKINGS ASSESSMENT YEAR 1998-99, 2001-02, 20 03-04 AND 2004-05 WHETHER DECISION OF MADRAS HIGH COURT IN CASE OF SCM CREATIONS VS. ASSTT CIT (2008) 304 ITR 319 IS NOT A N AUTHORITY FOR PROPOSITION AS TO HOW PROVISIONS OF SECTION 80IA(9) MADE APPLICABLE WITH EFFECT FROM ASSESSMENT YEAR 1999-20 00 ARE TO BE APPLIED AND IT DOES NOT IMPLIEDLY OVERRULE DECISION OF SPECIAL BENCH OF TRIBUNAL IN CASE OF ASSTT CIT VS. ROGINI G ARMENTS (2007) 108 ITD 49 (CHENNAI) HELD, YES WHETHER RESTRICT ION CONTAINED IN SECTION 80IA OR 80IB NOT TO ALLOW REPEATED DEDUC TION IS APPLICABLE TO SAME PROFIT HELD, YES WHETHER IF P ROFITS ARE DERIVED FROM SEPARATE UNDERTAKINGS, RESTRICTION CON TAINED IN ABOVE PROVISION WOULD NOT BE APPLICABLE HELD, YES. FOLLOWING THE ABOVE WE DECIDE THIS ISSUE AGAINST TH E ASSESSEE BECAUSE THERE IS MANDATORY PROVISION OF SECTION 80I A(9) WHICH MAKES IT CLEAR THAT DEDUCTION U/S 80IA HAS TO BE RE DUCED FOR COMPUTING DEDUCTION UNDER OTHER PROVISIONS OF THE A CT. RECENTLY THIS ISSUE HAS BEEN DISCUSSED BY HON'BLE P UNJAB & HARYANA HIGH COURT IN CASE OF M/S BROADWAY OVERSEAS LIMITED, SURANUSSI VS. CIT, ITA NO. 234 OF 2009 (O&M) DATED 22.11.2013 IN DETAIL. AFTER DETAILED DISCUSSION AN D FOLLOWING THE DECISION OF COORDINATE BENCH IT WAS OBSERVED TH AT DEDUCTION U/S 80HHC IS TO BE GRANTED ONLY AFTER RED UCING THE DEDUCTION TO THE EXTENT ALREADY ALLOWED U/S 80IB. THEREFORE, FOLLOWING THESE DECISIONS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 31 IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.12.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 14