Vardhman Textile Ltd., Ludhiana V. Addl. CIT, Ludhiana

ITA 270/CHANDI/2011

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5858 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-12-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 16-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S PHANI KISHORE
• Assessee Lawyers: SUBHASH AGGARWAL; VINEET J AIN
• Keywords: Capital asset; Business income; Capital receipt; Revenue expenditure; Capital expenditure; Rule 8D; Set aside; Capital Gains
• Section: 14A; 80IB; 10B; 80IC

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NOS. 1429/CHD/2010 / ASSESSMENT YEARS : 2006-07 VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA THE ADDL.CIT, RANGE- 1, LUDHIANA ./PAN NO: AABCM4692E APPEAL AGAINST THE ORDER OF CIT(A) - 1, LUDHIANA DATED 15.10.2010 ./ ITA NO. 35/CHD/2011 / ASSESSMENT YEARS : 2006-07 THE ACIT, CIRCLE 1, LUDHIANA VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA ./PAN NO: AABCM4692E APPEAL AGAINST THE ORDER OF CIT(A) - 1, LUDHIANA DATED 15.10.2010 ./ ITA NOS. 270/CHD/2011 / ASSESSMENT YEARS : 2007-08 VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA THE ADDL.CIT, RANGE- 1, LUDHIANA ./PAN NO: AABCM4692E APPEAL AGAINST THE ORDER OF CIT(A) - 1, LUDHIANA DATED 30.12.2010 / APPELLANT /RESPONDENT & ./ ITA NO. 286/CHD/2011 / ASSESSMENT YEARS : 2007-08 THE ACIT, CIRCLE 1, LUDHIANA VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA ./PAN NO: AABCM4692E APPEAL AGAINST THE ORDER OF CIT(A) - 1, LUDHIANA DATED 30.12.2010 ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 2 ! /ASSESSEE BY : SH. SUBHASH AGGARWAL, ADVOCATE & SHRI VINEET JAIN, CA ' ! / REVENUE BY : SH. G.S. PHANI KISHORE, CIT DR # $ % /DATE OF HEARING : 18.12.2018 &'() % /DATE OF PRONOUNCEMENT : 18.12.2018 (*/ ORDER PER SANJAY GARG, JUDICIAL MEMBER BENCH: THESE ARE CROSS APPEALS BY THE ASSESSEE AND REVENUE PREFERRED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 1, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)] RELATING TO RESPECTIVE ASSESSMENT YEARS. 2. SINCE THE ISSUES INVOLVED IN ALL THE APPEALS AR E IDENTICAL, HENCE, THE APPEALS HAVE BEEN HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS COMMON ORDER. FIRST, WE SHALL DEAL WITH THE APPEA L OF THE ASSESSEE IN ITA NO. 1429/CHD/2010 FOR ASSESSMENT YEAR 2006-07. ITA NO. 1429/CHD/2010 (A.Y. 2006-07). 3. THE ASSESSEE IN THIS APPEAL HAS TAKEN THE FOLLOW ING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE TREATING INTEREST INCOME AMOUNTING TO RS.16517422/- AS ''INC OME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM BUSINESS AND PROFESSION'. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE REDUCING PROFITS OF UNDERTAKING FOR CALCULATING DEDUCTION U/ S 10B. 80IB AND 80IC BY THE FOLLOWING AMOUNTS: ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 3 NAME OF THE UNIT ANANT SPINNIN G MILLS UNIT 3 VSGM EOU AURO WEAVING UNIT-2 AURO WVG UNIT-3 AUTO SPINNING MILLS AUTO TEXTILES. DEDUCTION CLAIMED 10B 10B/ 80IB 80IB 80IB 80IC 80IC RENT 494567 249016 73301 38982 1032309 1072193 MISC. RECEIPTS 238725 3482 1275 282989 696527 DEPB/DUTY DRAWBACK 370206 5820457 68903960 COMMISSION 7141 1426 2771 INTEREST 93264 3. THAT THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS W HILE CONFIRMING THE ACTION OF LD.AO. FOR REDUCING PROFIT S OF UNITS ELIGIBLE FOR DEDUCTION U/S 10B, 801B AND 801C BY AL LOCATING HEAD OFFICE EXPENSES. 4. THAT WITHOUT PREJUDICE TO GROUND NO. 3, THE LD. CIT (A) ERRED IN LAW AND ON FACTS WHILE ALLOCATING GROSS HEAD OFFICE EXPENSES INSTEAD OF EXPENSES NET OF INCOME. 5. THAT THE LD. C1T(A) ERRED IN LAW AND ON THE FACT S WHILE CONFIRMING THEACTION OF LD. AO WHILE TAXING THE CAPITAL RECEIPT AMOUNTING TO RS. 8,55,37,074/- ON ACCOUNT OF SALES TAX EXEMPTION; SUBSIDY RECEIVED FROM GOVERNMENT OF PUNJ AB AS REVENUE RECEIPT OF THE APPELLANT. 6. WITHOUT PREJUDICE TO THE GROUND (5) ABOVE, THE L D. CIT{A) ERRED IN LAW AND ON THE FACTS WHILE CONFIRMING THE ACTION OF LD. AO WHILE TAXING THE CAPITAL RECEIPT AMOUNTING TO RS. 8,55,3 7,074/- ON ACCOUNT OF SALES TAX EXEMPTION/SUBSIDY RECEIVED FROM GOV ERNMENT OF PUNJAB AS 'INCOME FROM OTHER SOURCES'. 7. THE. CIT(A) ERRED IN LAW AND ON THE FACTS WHILE DIRECTING THE ASSESSING OFFICER TO MAKE DISALLOWANCE UNDER SECTIO N 14A OF THE INCOME TAX ACT W.R.T. DIVIDEND INCOME EARNED BY THE ASSESSEE. 8. THAT THE LD. CIT(A) ERRED IN LAW AND ON THE FACT S WHILE CONFIRMING THE ACTION OF LD.AO FOR DISALLOWING FORE IGN TRAVELING EXPENSES OF WIFE OF CHAIRMAN & MANAGING DIRECTOR AMOUNTING TO RS. 11,46,863/-. 9. THAT THE LD. CIT(A) ERRED IN LAW AND ON THE FACT S WHILE CONFIRMING THE ACTION OF LD.AO FOR NOT ALLOWING PRE MIUM ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 4 PAYABLE ON REDEMPTION OF OPTIONALLY CONVERTIBLE FOR EIGN CURRENCY BONDS AS REVENUE EXPENDITURE. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND ANY GROUND OF APPEAL ON OR BEFORE THE DUE DATE OF HEARING OF APPE AL. 4. GROUND NO.1: VIDE GROUND NO.1, THE ASSESSEE HAS AGITATED THE ACT ION OF THE CIT(A) IN TREATING THE INTEREST INCOME AMOUN TING TO RS. 1,65,17,422/- AS INCOME FROM OTHER SOURCES INSTEA D OF INCOME FROM BUSINESS OR PROFESSION AS WAS CLAIMED BY THE ASSES SEE. 5. THE FACTS RELATING TO THE ABOVE ISSUE ARE THAT T HE ASSESSING OFFICER HAD TREATED INTEREST FROM CUSTOMERS AND SUP PLIERS AMOUNTING TO RS. 355.28 LACS AND FURTHER INTEREST FROM BANK & OT HERS AMOUNTING TO RS. 165.17 LACS AS INCOME FROM OTHER SOURCES AS A GAINST THE CLAIM OF THE BUSINESS INCOME. THE LD. CIT(A) HELD THAT SINCE INCOME ON THE DELAYED PAYMENT FROM CUSTOMERS AND SUPPLIERS WAS IN TRINSICALLY LINKED WITH THE BUSINESS ACTIVITY OF THE ASSESSEE, HENCE, THE SAME WAS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE, W HEREAS, THE INTEREST RECEIVED FROM BANK & OTHERS WAS DIRECTED TO BE TREA TED AS INCOME FROM OTHER SOURCES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS ISSU E. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) SO FA R AS THE TREATMENT OF THE INTEREST FROM CUSTOMERS AND SUPPLIERS AS BUSIN ESS INCOME AND INTEREST FROM BANK AND OTHER SOURCES AS INCOME FR OM OTHER SOURCES IS CONCERNED. HOWEVER, A CONTENTION HAS BEEN RAISE D BY THE LD. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 5 COUNSEL FOR THE ASSESSEE THAT WHERE THERE IS A DIR ECT NEXUS BETWEEN THE INTEREST INCOME EARNED AND THE INTEREST EXPENDI TURE INCURRED IN THIS RESPECT, THE ASSESSEE SHOULD BE ALLOWED NETTING OF THE SAME BEFORE COMPUTING THE SAME UNDER THE HEAD INCOME FROM OTHE R SOURCES. WE FIND MERIT IN THE ABOVE CONTENTION OF THE ASSESSEE AND WE ORDER ACCORDINGLY. 7. GROUND NO.2 : VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFF ICER TO REDUCE THE ELIGIBLE PROFITS OF THE UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 10B, 80IB AND 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF OTHER INCOME RECEIVED. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS GIVEN DETAI LS OF OTHER INCOME WHICH IS MENTIONED IN THE GROUND NO. 2 ITSEL F. A PERUSAL OF THE AFORESAID DETAILS WILL REVEAL THAT THE ASSESSEE CLAIMED RENT, MISC. RECEIPTS, DEPB, COMMISSION AND INTEREST INCOME AS OTHER INCOME AND HAS CLAIMED DEDUCTIONS IN RESPECT OF THE SAME U /S 10B, 80IB AND 80IC ETC., AS APPLICABLE IN RESPECT OF THE RESPECTI VE UNIT. THE LD. COUNSEL FOR THE ASSESSEE HAS FAIRLY AGREED THAT EXC EPT THE BROKERAGE FROM OCEAN FREIGHT, THE OTHER ITEMS DO NOT CONSTITU TE INCOME DERIVED FROM UNDERTAKING. SO FAR AS THE BROKERAGE OF OCEAN FREIGHT IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUB MITTED THAT THE SAME IS NOTHING BUT REFUND / REBATE OUT OF THE FREI GHT EXPENDITURE ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 6 INCURRED BY THE ASSESSEE WHICH HAS RESULTED IN INCR EASE IN INCOME OF THE ASSESSEE. 9. THE LD. DR ALSO COULD NOT REBUT THE AFORESAID AR GUMENTS OF THE ASSESSEE 10. IN VIEW OF THIS, OUT OF THE ITEMS MENTIONED IN GROUND NO.2, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE REBAT E ON OCEAN FREIGHT AS INCOME OF THE UNDERTAKING OF THE ASSESSEE. HOWEVER, THE FINDINGS OF THE LOWER AUTHORITIES IN RESPECT OF THE REMAINING I TEMS IS AFFIRMED. 11. GROUND NOS. 3 & 4 : VIDE THESE GROUNDS, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER IN CONFIRMING THE ACTION OF THE CIT(A) FOR REDUCING PR OFITS OF THE UNITS ELIGIBLE FOR DEDUCTIONS U/S 10B, 80IC AND 80IB OF T HE ACT BY ALLOCATING HEAD OFFICE EXPENSES. THE LD. CIT(A) WHI LE HOLDING SO, HOWEVER, HAS DIRECTED THE ASSESSING OFFICER TO ALLO CATE THE NET HEAD OFFICE EXPENSES AND NOT THE GROSS NET EXPENDITURE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THE ISSUE A ND THE SAME IS ACCORDINGLY UPHELD. 12. GROUND NO.5 : VIDE GROUND NO.5, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN TAXING THE AMOUNT RECEIVED ON SALE TAX EXEMPTION / SUBSIDY. BOTH THE LD. REPRESENTATIVES O F THE PARTIES HAVE FAIRLY SUBMITTED THAT THE ISSUE IS NOW COVERED BY T HE VARIOUS DECISIONS OF THE HON'BLE HIGH COURTS INCLUDING THE DECISION O F THE HON'BLE ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 7 SUPREME COURT IN CIT-I VS. M/S CHAPHALKAR BROTHERS, PUNE AND OTHERS IN CIVIL APPEAL NOS. 6513-6514 OF 2012 ORD ER DATED 7.12.2017, WHEREIN, IT HAS BEEN HELD THAT THE AFORESAID RECEIP T IS A CAPITAL RECEIPT AND NOT EXIGIBLE TO TAXATION. WE HOLD ACCORDINGLY AND THE LOWER AUTHORITIES ARE DIRECTED NOT TO TAX THE AFORESAID R ECEIPTS. 13. GROUND NO.7 : VIDE GROUND NO. 7, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSIN G OFFICER TO MAKE DISALLOWANCE U/S 14A OF THE ACT ON THE ACTUAL EXPEN DITURE INCURRED BY THE ASSESSEE. 14. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ASSESSEE IN ITA NO.141 OF 2012 DATED 31.7.2013 AND HAS POINTED OUT THAT IN THE YEAR 2000-01, THE ASSESSEE HAD EARNED DIVIDEND INCO ME OF RS. 2.16 CRORES WHEREUPON THE DISALLOWANCE OF RS. 1 LAC WAS AFFIRMED BY THE HON'BLE HIGH COURT. THE LD. COUNSEL FOR THE ASSESS EE HAS FURTHER SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 1.59 CRORES. 15. THE LD. DR, ON THE OTHER HAND HAS, HOWEVER, RE LIED ON THE FINDINGS OF THE LOWER AUTHORITIES. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 8 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A SSESSMENT YEAR INVOLVED ADMITTEDLY IS 2006-07. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 234 CTR 1 (B OM.) HELD THAT RULE 8D OF THE INCOME TAX RULES IS APPLI CABLE FROM THE ASSESSMENT YEAR 2008-09 ONWARDS AND THAT FOR THE YE AR PRIOR TO ASSESSMENT YEAR 2008-09, THE DISALLOWANCE U/S 14A I S TO BE MADE ON SOME REASONABLE BASIS. CONSIDERING THE OVERALL FACT S AND CIRCUMSTANCES OF THE CASE AND THE RESPECTIVE SUBMIS SIONS OF THE LD. REPRESENTATIVES OF THE PARTIES, WE CONFIRM THE DISA LLOWANCE OF RS. 2 LACS U/S S 14A OF THE ACT ON THIS ISSUE FOR THE YEA R UNDER CONSIDERATION. THE REMAINING DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS ORDERED TO BE DELETED. 17. GROUND NO. 8 : VIDE THIS GROUND THE ASSESSEE ASSESSEE HAS AGITATED THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSE S OF RS. 11,46,863/- IN RESPECT OF EXPENDITURE ON FOREIGN TRAVELLING OF THE WIFE OF THE CHAIRMAN & MANAGING DIRECTOR, PLEADING THAT SHE HAD ACCOMPANIED HIM FOR BUSINESS PURPOSE AND THAT SHE HAD DULY ASSI STED FOR PROCURING BUSINESS. 18. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED TH AT SINCE THE WIFE OF THE MANAGING DIRECTOR OF THE ASSESSEE IS NEITHER EMPLOYEE NOR THE DIRECTOR OF THE COMPANY, HENCE, THE EXPENDITURE RE LATING TO HER FOREIGN TRAVELLING SHOULD BE DISALLOWED. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 9 IN REBUTTAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE COMPANY HAD PASSED A RESOLUTION AUTHORIZING THE DIRECTOR OF THE COMPANY TO ACCOMPANY HIS WIFE ON THE FOREIGN TRAVEL AND FURTHER THAT SHE HAD DULY HELPED THE DIRECTOR IN HIS BUSINESS T OUR. 19. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANCE S OF THE CASE, WE ARE OF THE VIEW THAT THE INTEREST OF JUSTICE WILL B E WELL SERVED IF 50% OF THE EXPENDITURE INCURRED ON THE FOREIGN TRAVELIN G OF THE WIFE OF THE DIRECTOR IS ALLOWED. WE, THEREFORE, CONFIRM THE DIS ALLOWANCE UPTO THE EXTENT OF 50% OF THE AFORESAID AMOUNT AND THE REMAI NING 50% OF THE DISALLOWANCE ON THIS ISSUE IS ORDERED TO BE DELETED . 20. GROUND NO. 9 : VIDE GROUND NO.9, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER IN NOT ALLOWING PREMIUM PAYABLE ON REDEMPTION OF OP TIONALLY CONVERTIBLE FOREIGN CURRENCY BONDS AS REVENUE EXPEN DITURE. 21. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPEC T HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT PATIALA VS. INDUSTRIAL CABLES (P) LTD. REPORT ED IN (2007) 162 TAXMAN 272 (P&H), WHEREIN, THE ISSUE IS AS TO WHETH ER THE PREMIUM PAID ON EXPIRY / REDEMPTION OF DEBENTURES WAS TO BE TREATED AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. THE HON'BLE CO URT WHILE RELYING UPON THE OTHER CASE LAWS HELD THAT THE SAID PREMIUM PAID BY THE ASSESSEE ON REDEMPTION OF DEBENTURES AS REVENUE EXP ENDITURE. THE LD. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 10 COUNSEL HAS FURTHER RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS LTD VS. JCIT ( 2015) 7 TAXMAN 361 WHEREIN, THE HON'BLE SUPREME COURT HAS HELD THAT SU CH TYPE OF PREMIUM / INTEREST PAID TO DEBENTURE HOLDERS WAS TO BE ALLOWED AS REVENUE EXPENDITURE IN THE YEAR OF PAYMENT ITSELF . ADMITTEDLY, IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS BOOKED T HE AFORESAID EXPENSES PAYABLE WHICH WAS PAID IN THE ASSESSMENT Y EAR 2011-12. IN VIEW OF THIS, THE SAID EXPENDITURE IS TO BE ALLOWED IN THE YEAR OF PAYMENT. SUBJECT TO THE ABOVE OBSERVATION, THIS GR OUND OF THE ASSESSEES APPEAL FOR THE YEAR UNDER CONSIDERATION IS HEREBY DISMISSED. 22. APART FROM THE ABOVE, THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER:- THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING THE INTEREST REIMBURSEMENT OF RS. 24,64,44,644/- UNDER TECHNOLOGY UPGRADATION FUND SCHEME (TUFS) AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT . 23. THE ASSESSEE HAS CLAIMED THAT INTEREST REIMBURS EMENT OF RS. 24,64,44,644/- RECEIVED UNDER TECHNOLOGY UPGRADATI ON FUND SCHEME (TUFS) SHOULD BE TREATED AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPT AS TREATED BY THE LOWER AUTHORITIES. ADMITTEDLY, THIS GROUND HAS BEEN TAKEN AS ADDITION GROUND WHICH HAS NOT BEEN EXAMINED BY THE LOWER AUTHORITIES. TH E LD. COUNSEL FOR ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 11 THE ASSESSEE SUBMITTED THAT IN THE EARLIER YEARS AL SO THIS ISSUE HAS BEEN RESTORED TO THE FILE OF THE CIT(A) FOR DECISION AF RESH. 24. CONSIDERING THE ABOVE SUBMISSIONS OF THE LD. CO UNSEL FOR THE ASSESSEE, THIS ADDITIONAL GROUND IS RESTORED TO THE FILE OF THE CIT(A) FOR ADJUDICATION AFRESH IN ACCORDANCE WITH LAW TAKI NG INTRO CONSIDERATION THE RELEVANT CASE LAWS AS MAY BE AVAI LABLE OR CITED BEFORE HIM. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY TREATED A S PARTLY ALLOWED. ITA NO. 35/CHD/2011 (A.Y.2006-07) 25. NOW COMING TO THE REVENUE APPEAL IN ITA NO. 35/CHD/2011 (A.Y.2006-07) , IN ITS APPEAL, HAS TAKEN THE FOLLOWING GROUNDS:- 1. THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DIRECTING THE A.O. TO CONSIDER INTEREST INCOME RECE IVED BY THE ASSESSEE ON DELAYED PAYMENTS FROM CUSTOMERS AS 'BUSINESS INCOME' INSTEAD OF 'INCOME FROM OTHER SOURCES' AS CONSIDERED BY THE A.O. 2 (I) THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACT S IN DIRECTING THE A.O. TO TREAT THE INTEREST RECEIVED F ROM THE CUSTOMERS AND SUPPLIERS TO BE THE INCOME DERIVE D FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR EXEMPTION U/S 10B AND DEDUCTION U/S 80IB AND 80IC. (II) THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DIRECTING THE A.O. TO ALLOW DEDUCTION U/S 80IB AND 80IC AND EXEMPTION 10B ON PROFITS AFTER EXCLUDING LOSS DEBITED IN THE ACCOUNTS IN RESPECT OF WHICH TH E INSURANCE CLAIMS WERE RECEIVED. (III) THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACT S IN DIRECTING THE A.O. NOT TO REDUCE FOREIGN EXCHANGE FLUCTUATION GAIN FROM ELIGIBLE PROFITS OF UNITS ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 12 ELIGIBLE FOR DEDUCTION U/S 80IB AND 80IC AND EXEMPTION U/S 10B. 3 . THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DI RECTING THE A.O. TO ALLOCATE THE ELIGIBLE HEAD OFFICE INCOM E TO THE RESPECTIVE UNIT FOR CALCULATING DEDUCTION U/S 801B AND SECTION 80IC AND EXEMPTION U/S 10B. 4 . THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN ALLOWING THE DEDUCTION U/S 80IB ON PROFITS OF UNIT NAMED VARDHMAN SPINNING & GENERAL MILLS (100% EOU) ON WHICH EXEMPTION U/S 10B HAS BEEN CLAIMED. 5 . THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 16,43,668/- MADE U/S I 4A BY THE A.O. ON PROPORTIONATE BASIS OUT OF PERSONAL, ADMINISTRATIVE AND FINANCIAL EXPENSES FOR EARNING O F DIVIDEND INCOME. 6. THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS I N TREATING THE INCOME FROM SALE OF SHARES AMOUNTING T O RS.2,35,69,012/- AS INCOME FROM CAPITAL G AIN INSTEAD OF INCOME FROM SPECULATIVE BUSINES S AS CONSIDERED BY THE ASSESSING OFFICER IN V IEW OF EXPLANATION TO SECTION 73. 7. THAT THE ORDER OF THE ID. CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 8. THAT THE APPELLATE CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 26. GROUND NO.1 :THE REVENUE VIDE GROUND NO.1 OF THE APPEAL HAS AGITATED THE ACTION OF CIT(A) IN DELETING THE INTER EST RECEIVED ON ACCOUNT OF DELAYED PAYMENT FROM CUSTOMERS AND SUPP LIERS AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. IN VIEW OF OUR FINDINGS GIVEN ABOVE AWHILE DECIDING GROUND NO.1 OF THE ASSESSEES APPEAL IN ITA NO. 1429/CHD/2010, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS IS SUE. GROUND NO.1 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 13 27. GROUND NO.2 : GROUND NO.2 RAISED BY THE REVENUE IS IN THREE PARTS. THE REVENUE IN THE IST PART HAS AGITATED T HE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INTEREST RECEIVED FROM THE CUSTOMERS AND SUPPLIERS TO BE INCOME DERIV ED FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR EXEMPTION U/S 10B AND DEDUCTION U/S 80IB AND 80IC OF THE ACT. SINCE WE HAVE ALREADY HEL D THAT THE INTEREST INCOME RECEIVED ON DELAYED PAYMENT IS IN FACT PART OF THE SALE CONSIDERATION / RECEIVABLE FROM THE CUSTOMERS AND W E HAVE ALSO HELD THAT THE SAME TO BE TREATED AS BUSINESS INCOME AND SINCE THE AFORESAID RECEIPTS ARE RELATING TO THE SALE RECEIPTS OF THE A SSESSEE OF THE PRODUCED MANUFACTURED, HENCE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE CIT(A) IN THIS RESPECT. IN THE SECOND PART OF GROUND NO.2, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFF ICER TO ALLOW DEDUCTION U/S 80IB AND 80IC AND EXEMPTION U/S 10B ON PROFIT AFTER EXCLUDING LOSES DEBITED IN THE ACCOUNTS IN RESPECT OF WHICH INSURANCE CLAIMS WERE RECEIVED. THE LD. COUNSEL FOR THE ASSES SEE IN THIS RESPECT HAS INVITED OUR ATTENTION TO THE PAPER BOOK PAGE 2 WHEREIN THE DETAILS OF THE ITEMS HAS BEEN GIVEN ON WHICH INSURANCE CLAI M WAS RECEIVED. HOWEVER, AFTER PERUSAL OF THE SAME, IT IS NOT CLE AR AS TO WHICH OF THE ITEMS CONSTITUTED CAPITAL ASSETS AND WHICH OF THE I TEMS CONSTITUTED TRADING ASSET OF THE ASSESSEE. WE THEREFORE, RESTOR E THIS ISSUE TO THE FILE OF THE ASSESSEE TO BIFURCATE THE ITEMS BETWEEN CAPITAL ASSETS AND TRADING ASSETS AND TO ALLOW THE CLAIM IN RESPECT OF INSURANCE CLAIM RECEIVED ON TRADING ASSETS ONLY. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 14 28. THE THIRD PART OF GROUND NO.2 IS AGAINST THE AC TION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER NOT TO REDUCE FO REIGN EXCHANGE FLUCTUATION GAIN FROM ELIGIBLE PROFITS OF UNITS ELI GIBLE FOR DEDUCTION U/S 80IB AND 80IC AND EXEMPTION U/S 10B OF THE ACT. 29. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN IS IN RESPECT OF EXPORT R ECEIPTS / RECEIVABLE OF THE ASSESSEE AND ANY GAIN IN RESPECT OF RECEIVA BLE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN FACT CONTRIBUTES TO THE PROFITS OF THE ASSESSEE FROM THE SALE/ EXPORT OF THE PRODUCTS. WE FIND FORCE IN THE AFORESAID CONTENTION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN THIS RESPECT ALSO. 30. GROUND NO. 3 :VIDE GROUND NO.3, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFF ICER TO ALLOCATE THE ELIGIBLE HEAD OFFICE EXPENSES TO THE RESPECTIVE U NITS FOR REDUCING THE SAME OUT OF ELIGIBLE PROFITS OF ASSESSEE FOR CLAIM OF EXEMPTION / DEDUCTION U/S 80IB, 80IC AND U/S 10B OF THE ACT. THIS ISSUE HAS ALREADY BEEN DISCUSSED WHILE ADJUDIC ATING GROUND NO.4 OF THE ASSESSEES APPEAL WHEREIN WE HAVE UPHEL D THE ORDER OF THE CIT(A) ON THIS ISSUE. IN VIEW OF THIS, GROUND NO.3 OF THE REVENUES APPEA LS IS HEREBY DISMISSED. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 15 31. GROUND NO.4 : VIDE GROUND NO.4, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN ALLOWING DEDUCTION U/S 80I B IN RESPECT OF UNIT WHICH HAS ALREADY CLAIMED EXEMPTION U/S 10B OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASS ESSEE HAS CLAIMED DEDUCTION U/S 80IB IN RESPECT OF UNIT VARDHMAN SPIN NING & GENERAL MILLS ON THE BALANCE AMOUNT, AFTER EXCLUDING THE AM OUNT UPON WHICH THE EXEMPTION U/S 10B OF THE ACT HAS BEEN CLAIMED. IN VIEW OF THIS, IT IS NOT A CASE OF DOUBLE DEDUCT ION, HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON TH IS ISSUE ALSO. THE ORDER OF THE CIT(A)ON THIS ISSUE IS ACCORDINGLY UPH ELD. 32. GROUND NO.5: THE REVENUE VIDE THIS GROUND HAS AGITATED THE ACTION OF THE CIT(A) IN REDUCING / DELETING THE AD DITION MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT ON ACCOUNT OF EXPENDITURE INCURRED FOR EARNING OF TAX EXEMPT DIVIDEND INCOME. THIS GROUND HAS ALREADY BEEN DEALT WITH WHILE ADJUDICATING GROUND N O.7 OF THE ASSESSEES APPEAL WHEREIN AFTER CONSIDERING THE OVE R FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE DIRECTED TO REST RICT THE DISALLOWANCE TO RS. 2 LACS ON THIS ISSUE. WE ORDER ACCORDINGLY. 33. GROUND NO.6 : VIDE GROUND NO.6, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN TREATING THE INCOME FROM SA LE OF SHARES AS INCOME FROM CAPITAL GAINS INSTEAD OF INCOME FROM SP ECULATIVE LOSS AS ASSESSED BY THE ASSESSING OFFICER. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 16 34. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE PARTIES AND AFTER GOING THROUGH THE IMPUGNED ORDER OF THE CIT(A), WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT IT WAS NO T A CASE OF SPECULATIVE / TRADING IN SALE AND PURCHASE OF THE S HARES. THE LD. CIT(A) THEREFORE, HAS RIGHTLY TREATED THE SAME AS I NCOME FROM CAPITAL GAINS WHILE FOLLOWING THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2005-06. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. 35. GROUND NOS. 7 & 8 : THESE GROUNDS ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. IN VIEW OF OUR FINDINGS GIVEN ABOVE, BOTH THE APPEA LS OF THE ASSESSEE AND REVENUE ARE TREATED AS PARTLY ALLOWED. ITA NO. 270 & 286/CHD/2011 (A.Y.2007-08) 36. THE ASSESSEE IN ITS APPEAL (ITA NO. 270/CHD/2011) HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE TREATING INTEREST INCOME AMOUNTING TO RS. 11,50,8 9,979/- AS INCOME FROM OTHER SOURCES 1 ' INSTEAD OF INCOME FROM BUSINESS AND PROFESSION'. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE REDUCING PROFITS OF UNDERTAKING FOR CALCULATING DEDUCTION U /S I0B. 80IB AND 801C BY THE FOLLOWING AMOUNTS: NAME OF THE UNIT ANANT SPINNING MILLS UNIL3 VSGM EOU AURO WCAVIN G UNIT-2 AURO WVG UNIT-3 AURO SPINNING MILLS AURO TEXTILES ARISHT SPINNING MILLS ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 17 DEDUCTION CLAIMED 10B 10B/ 80IB 801 B 801 B 80IC 80IC 80IC INTEREST FROM BANK 304 INTEREST FROM OTHERS 103854 1627 DEPB 142386 97833 134407 769738 2056766 DUTY DRAWBACK 2447280 2755000 293032 201342 13696283 8894379 11284064 RENT 471200 235503 80710 43397 12359452 1 593793 636884 MISC. RECEIPTS 1406002 978 51888 1 586025 53682 COMMISSION 603 1996 1083 94395 TOTAL 4429243 2993477 516128 342572 26243113 11845562 14125791 3 . THAT THE LD. CIT(A) ERRED IN LAW AND ON THE FACT S WHILE CONFIRMING THE ACTION OF LD. AO FOR REDUCING PROFITS OF UNITS ELIG IBLE FOR DEDUCTION U/S 10B, 80IB AND 801C BY ALLOCATING HEAD OFFICE EXPENSES AS UNDER: ANANT-III VSGM(EOU) AURO WEV.II AURO WEV.III AURO SPG. AURO TEX. ARISHT 6449934 6077375 3632454 1746372 10711082 36161544 1 8348549 4. THAT WITHOUT PREJUDICE TO GROUND NO. 3, THE LD. CIT (A) ERRED IN LAW AND ON FACTS WHILE ALLOCATING GROSS HEAD OFFICE EXP ENSES INSTEAD OF EXPENSES NET OF INCOME. 5. THAT THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS W HILE CONFIRMING THE ACTION OF LD.AO WHILE TAXING THE CAPITAL RECEIPT AM OUNTING TO RS. 9,87,63,065/- ON ACCOUNT OF SALES TAX EXEMPTION/SUB SIDY RECEIVED FROM GOVERNMENT OF PUNJAB AS REVENUE RECEIPT OF THE APPELLANT. 6. WITHOUT PREJUDICE TO THE GROUND (5) ABOVE, THE LD. CTT(A) ERRED IN LAW AND ON THE FACTS WHILE CONFIRMING THE ACTION OF LD.AO WHILE TAXING THE CAPITAL RECEIPT AMOUNTING TO RS. 9.87,63 ,065/- ON ACCOUNT OF SALES TAX EXEMPTION/SUBSIDY RECEIVED FROM GOVERN MENT OF PUNJAB AS INCOME FROM OTHER SOURCES'. 7. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE ACTION OF LD.AO WHILE MISINTERPRETING AND APPLYING THE PROVISIONS OF RULE 8D OF INCOME TAX RULES AS THE SAID PROVISION I S EFFECTIVE FROM ASSESSMENT YEAR 2008-09 ONLY. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 18 8. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE ACTION OF THE LD.AO IN ALLOCATING AND DISALLOWING E XPENSES AMOUNTING TO RS.34,28,175/- FOR EARNING DIVIDEND INCOME UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES. 9. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE ACTION OF THE LD.AO IN ALLOCATING PROPORTIONATE INDIRECT PERSONNEL, ADMINISTRATIVE AND FINANCIAL EXPENSES AMOUNTI NG TO RS.22.84,306/- TO DIVIDEND INCOME. 10. THAT THE LD. C)T(A) ERRED IN LAW AND ON THE FACTS W HILE CONFIRMING THE ACTION OF LD.AO FOR DISALLOWING FOREIGN TRAVELING E XPENSES OF WIFE OF CHAIRMAN & MANAGING DIRECTOR AMOUNTING TO RS. 5,16, 573/-. 11. THAT THE LD. C1T( A) ERRED IN LAW AND ON THE FACTS WHILE CONFIRMING THE ACTION OF LD.AO FOR NOT ALLOWING PREMIUM PAYABL E ON REDEMPTION OF OPTIONALLY CONVERTIBLE FOREIGN CURREN CY BONDS AS REVENUE EXPENDITURE. 12. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND ANY GROUND OF APPEAL ON OR BEFORE THE DUE DATE OF HEARING OF APPE AL. HENCE THE APPEAL MAY KINDLY BE ALLOWED, NECESSARY R ELIEFS AS PER AFORESAID GROUNDS MAY KINDLY BE GRANTED AND/OR OTHER RELIEFS DEEMED FIT AND PROPER UNDER THE CIRCUMSTANCES OF THE CASE MAY KINDLY BE G RANTED. 37. APART FROM THE ABOVE GROUNDS, THE ASSESSEE HAS ALSO TAKEN AS ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER:- THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING THE INTEREST REIMBURSEMENT OF RS. 37,77,75,988/- UNDER TECHNOLOGY UPGRADATION FUND SCHEME (TUFS) AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT . 38. THE REVENUE IN ITS APPEAL, IN ITA NO.286/CHD/2011 HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 19 1. THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DIRECTING THE A.O. TO CONSIDER INTEREST INCOME RECE IVED BY THE ASSESSEE ON DELAYED PAYMENTS FROM CUSTOMERS AS 'BUSINESS INCOME, INSTEAD OF INCOME FROM OTHER SOU RCES' AS CONSIDERED BY THE A.O. 2 (I) THAT THE ID. CIT(A) HAS ERRED IN LAW AND FA CTS IN DIRECTING THE A.O. TO TREAT THE INTEREST RECEIVED FROM THE CUSTOMERS AND SUPPLIERS TO BE THE INCOME DERIVE D FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR EXEMPT ION U/S 10B AND DEDUCTION U/S 801B AND 80IC. (II) THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DIRECTING THE A.O. TO ALLOW DEDUCTION U/S 8OIB AND 80IC AND EXEMPTION 10B ON PROFITS AFTER EXCLUDING LOSS DEBITED IN THE ACCOUNTS IN RESPECT OF WHICH THE INS URANCE CLAIMS WERE RECEIVED. (III) THAT THE ID. CIT(A) HAS ERRED IN LAW AND FACT S IN DIRECTING THE A.O. NOT TO REDUCE FOREIGN EXCHANGE FLUCTUATION GAIN FROM ELIGIBLE PROFITS OF UNITS ELI GIBLE FOR DEDUCTION U/S 801B AND 80IC AND EXEMPTION U/S 10B. 3 . THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN DIRECTING THE A.O. TO ALLOCATE THE ELIGIBLE HEAD OFFICE INCOM E TO THE RESPECTIVE UNIT FOR CALCULATING DEDUCTION U/S SOIB AND SEC 80IC AND EXEMPTION U/S 10B. 4 . THAT THE ID. CIT(A) HAS ERRED IN L AW AND FACTS IN ALLOWING THE DEDUCTION U/S 80IB ON PROFITS OF UNIT NAMED VARDHMAN SPINNING & GENERAL MILLS (100% EOU) ON WHI CH EXEMPTION U/S JOB HAS BEEN CLAIMED. 5. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND T HAT OF THE A.O. BE RESTORED. 6. 7. THAT THE APPELLANT CRAVES LEAVE LO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 39. BOTH THE LD. REPRESENTATIVES OF THE PARTIES STATED AT BAR TH AT ALL THE ISSUES EITHER BY THE ASSESSEE OR BY THE REVENUE ARE IDENTICAL TO THAT HAVE BEEN TAKEN FOR ASSESSMENT YEAR 2006-07, HENCE OUR FINDINGS ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 20 ARRIVED AT IN RESPECT OF EACH OF THE ISSUE WILL APP LY MUTATIS-MUTANDIS TO THE ISSUES TAKEN BY THE ASSESSEE AS WELL AS BY T HE REVENUE FOR ASSESSMENT YEAR UNDER CONSIDERATION I.E ASSESSMENT YEAR 2007-08. IT IS CLARIFIED THAT ONE OF THE ISSUE WHICH IS IDENTIC AL TO ASSESSMENT YEAR 2006-07 IN RELATION TO THE DISALLOWANCE U/S 14A OF THE ACT, THERE IS A DIFFERENCE IN FIGURE OF TAX EXEMPT DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR. THE ASSESSEE DURING THE Y EAR HAD EARNED DIVIDEND INCOME OF RS. 2.19 CORES WHEREAS IN THE AS SESSMENT YEAR 2006-07, THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 1.59 CRORES. 40. CONSIDERING THE FACTS AND CIRCUMSTANCES, THE DI SALLOWANCE U/S 14A OF THE ACT IS RESTRICTED TO RS. 2.50 LACS FOR T HE YEAR UNDER CONSIDERATION. AS DISCUSSED ABOVE, OUR FINDINGS AS ARRIVED AT IN THE ASSESSMENT YEAR 2006-07 ON THE REMAINING ISSUES WIL L APPLY TO THE ISSUES RAISED IN APPEALS RELATING TO ASSESSMENT YEA R 2007-08 ALSO. ACCORDINGLY, THE APPEALS OF THE ASSESSEE AS WELL OF THE REVENUE ARE TREATED AS PARTLY ALLOWED. ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT IMM EDIATELY ON COMPLETION OF HEARING. SD/- SD/- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 18.12. 2018 .. ITA NOS. 1429-C-10 & 35-C-2011- & 270 & 286-C-2011- M/S VARDHMAN TEXTILES LTD., LUDHIANA 21 '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR