M/S. CLARIANT (I) LTD., V. THE ADDL CIT RG 6(2),

ITA 270/MUM/2005

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48727 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 28-04-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 12-01-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL; PERMINDER
• Assessee Lawyers: FAROOK IRANI
• Keywords: Business income; Depreciation; Earning of tax free income; Retrospective amendment; Right to appeal; Revenue expenditure; Capital expenditure
• Section: 43B; 80HHC; 14A; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , , ! # BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA , ACCOUNTANT MEMBER . / ITA NO.270/MUM/2005 $ $ $ $ / ASSESSMENT YEAR 2001-02 CLARIANT CHEMICALS (INDIA) LIMITED RAVINDRA ANNEX., 194 CHURCHGATE RECLAMATION D.V. ROAD MUMBAI-400 020 / VS. THE ADDL. COMMISSIONER OF INCOME TAX RANGE-6(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. % ! ./ &' ./ PAN/GIR NO. : AAACC 4298 H ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) . / ITA NO.4982/MUM/2011 $ $ $ $ / ASSESSMENT YEAR 2004-05 THE ADDL. COMMISSIONER OF INCOME TAX-1(1) ROOM NO.579 AAYAKAR BHAVAN MUMBAI-400 020. / VS. M/S. CLARIANT INDIA LIMITED RAVINDRA ANNEX., 194 CHURCHGATE RECLAMATION D.V. ROAD MUMBAI-400 020 % ! ./ &' ./ PAN/GIR NO. : AAACC 4298 H ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) . / ITA NO.4280/MUM/2011 $ $ $ $ / ASSESSMENT YEAR 2004-05 CLARIANT CHEMICALS (INDIA) LIMITED (INTO WHICH CLARIANT INDIA LIMITED MERGED) P.O. SANDOZ BAUG, KOLSHET ROAD, MUMBAI-400 607. / VS. THE ADDL. COMMISSIONER OF INCOME TAX RANGE-1(1) AAYAKAR BHAVAN MUMBAI-400 020. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 2 % ! ./ &' ./ PAN/GIR NO. : AAACC 4298 H ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) . / ITA NO.2398/MUM/2011 $ $ $ $ / ASSESSMENT YEAR 2005-06 THE DY. COMMISSIONER OF INCOME TAX-1(1) ROOM NO.533, 5 TH FLOOR AAYAKAR BHAVAN MUMBAI-400 020. / VS. M/S. CLARIANT (INDIA) LIMITED (NOW MERGED WITH CLARIANT CHEMICALS (INDIA) LTD.) P.O. SANDOZ BAUG, KOLSHET ROAD, THANE-400 607. % ! ./ &' ./ PAN/GIR NO. : AAACC 4298 H ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) ASSESSEE BY: SHRI FAROOK IRANI REVENUE BY : SHRI A.C. TEJPAL AND MS. PERMINDER + ,-! / DATE OF HEARING : 01/05/2014 ./$ + ,-! / DATE OF PRONOUNCEMENT : 09/05/2014 0 / O R D E R PER I.P.BANSAL, J.M: ITA NO.270/MUM/05 IS AN APPEAL FILED BY THE ASSESS EE. IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)XXX, MUMBAI DATED 16/11/2004 FOR ASSESSMENT YEAR 2001-02. 1.1 ITA NOS. 4280/MUM/11 AND ITA NO.4982/MUM/11 ARE CROSS APPEALS FOR ASSESSMENT YEAR 2004-05. THEY ARE DIRECTED AGAINST ORDER PASSED BY LD. CIT(A) DATED 9/2/2011 FOR ASSESSMENT YEAR 2004-05. 1.2 ITA NO.2398/MUM/11 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER PASSED BY LD. CIT(A)15, MUMBAI DATED 25/1/20 11 FOR ASSESSMENT YEAR 2005-06. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 3 1.3 GROUNDS OF APPEAL IN EACH OF THE APPEAL READ AS UNDER: GROUNDS OF APPEAL IN ITA NO.270/MUM/2005: T H E FO LLO W IN G GROUNDS / SUB-GROUNDS OF APPEAL ARE INDEPENDENT OF, AND STRICTL Y WITHOUT P RE JUDIC E TO , ONE ANOTHER: 1. T HE COMMI S SIONER OF INCOME-TAX (APPEALS) - XXX , MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UPHO LDING [IN PAGE 2, PARAGRAPH 5 OF THE ORDER] THE ADDITION OF R S . 6,93,000/ - TO THE CLOSING STOCK ON ACCOUNT OF UNUTILIZED MOD VAT CREDIT AT THE Y EAR END, AS PER THE PRO V ISION OF SECTION 145 A. THE APPELLANTS SUBMIT THAT THE CIT(A) OUGHT TO HAVE , ACCEPTING THE SUBMISSION S MADE BEFORE HIM , D E LETED THE ABOVE ADDITION . FURTHER, THE CIT(A) OUGHT TO HAVE ACCEPTED THE COMPUTATION A S PER SECTION 145A GIVEN IN THE T AX A UDIT REPORT. 2. THE CIT( A ) ERRED IN DISALLOWING [IN PAGE 9, PARAGRAPH 5 . 4.1 OF THE ORDER] THE EXCISE DUT Y OF RS . 1,01,60,301[RS.17,03 , 16 , 071(BEING AMOUNT DEBITED TO THE PROFIT & LOSS A/C.)-RS.16,01,55,777 (BEING THE PA Y MENT/ MODV A T CREDIT UTILIZATION CONSIDERED B Y CIT(A)] UNDER SECTION 43B . THE APPELLANT SUBMIT THAT THE CIT(A) OUGHT T O HAVE HELD THAT NO SUCH DISALLOWANCE, WAS CALLED FOR AS THE SAME HAS A LREADY BEEN PAID. THE CIT(A) OUGHT TO HAVE CONSIDERED THE E X CISE DUT Y PA Y MENT AS RS. 17 , 51 , 48,218 AS AGAINST RS. 16,01,55,777 AND THEREB Y MADE NO DISALLOWANCE UNDER SECTION 43B. 3. INCLUSION OF THE FOLLOWING IN 'TOTAL TURNOVER ' [REFER PAGE 11 , PARAGRAPH 6 OF THE ORD E R] FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC: I) SALES TAX OF RS. 36,29,612 THE CIT( A ) ERRED IN DIRECTING THE A SSESSING OFFICER ( A O) TO E X CLUDE SALES TA X OF RS . 7,95,21 , 388 FROM 'TOTAL TURNOVER' AS AGAINST RS . 8,31,51,000 CLAIMED BY THE APPE L LANTS , ON THE GROUND SALES TAX SET-OFF NEEDS TO BE INCLUDED IN 'TOTAL TURNOVER'. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 4 T HE APPELLANT SUBMIT THAT THE CIT(A) OUGHT TO HAVE, ACCEP TING THE SUBMISSIONS MADE BEFORE - HIM, DELETED THE ENTIRE AMOUNT OF SALES TAX RS. 8,31,51,000 FROM THE 'TOTAL TURNOVER ' . II. EXCISE DUTY OF RS. 1,01,60 , 301 THE CIT(A) ERRED IN DIRECTING THE AO TO EXCLUDE NET EXCI SE DUT Y OF RS.16,01,55,777(BEING THE PA Y MENT/ MODVAT CREDIT UTILIZATION CONSIDERED BY CIT(A) FROM 'TOTAL TURNOVER' AS AGAINST RS.17,03,16,071 (BEING AMOUNT DEBITED TO THE PROFIT & LOSS A/C . ) CLAIMED BY THE APPELLANT. THE APPELLANT SUBMIT THAT THE CIT(A) OUGHT TO HAVE, ACC EPTING THE SUBMISSIONS MADE BEFORE HIM, DELETED THE ENTIRE AMOUNT OF THE EXCISE DUT Y RS. 17,03,16,071 FROM THE 'TOTAL TURNOVER' . WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANTS SUBMIT T HAT THE CIT(A) ERRED IN CONSIDERING 16,01,55,777 AS THE ACTUAL PA Y MENT/ MODVAT CREDIT UTILIZATION AS AGA I NST THE CORRECT FIGURE OF RS. 17,51,48,218, FURNISHED TO HIM V IDE OUR LETTER DATED 9 TH NOVEMBER, 2004. III. SALE OF SCRAP OF RS. 51,54,437 THE CIT(A) ERRED IN UPHOLDING THE INCLUSION OF SALE OF SC RAP OF RS. 51,54,437 IN THE 'TOTAL TURNOVER' ON THE GROUND THAT T HE SCRAP BEING MANUFACTURING WASTE/BY-PRODUCT FETCHING GOOD MARK ET VALUE AND BEING RECURRING IN NATURE CANNOT BE EQUATED WITH THE RECEIPTS MENTIONED IN THE EXPLANATION (BAA) TO SECTION 80HHC . THE APPELLANT SUBMIT THAT THE CIT(A) OUGHT TO HAVE, ACC EPTING THE SUBMISSIONS MADE BEFORE HIM, DELETED THE INCLUSION OF SALE O F SCRAP OF RS.5154,437 IN THE TOTAL TURNOVER. 4. REDUCTION OF THE 'PROFITS OF THE BUSINESS ' B Y THE FOLLOWING AMOUNTS [REFER PAGE 14, PARAGRAPH 7 OF THE ORDER] F OR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC : I. 100% OF DEPB ENTITLEMENTS OF RS. 75,05,000/- THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF EXCL UDING 100 % OF THE DEPB ENTITLEMENTS FROM THE PROFITS OF THE BUSI NESS. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 5 THE APPELLANTS SUBMIT THAT CIT(A) OUGHT TO HAVE, AC CEPTING THE SUBMISSIONS MADE BEFORE HIM, TREATED THE DEPB ENTIT LEMENTS AS EXPORT INCENTIVE COVERED UNDER SECTION 28(IIIA) / (IIIB) AND REDUCED ONLY 90% OF THE SAME FROM THE 'PROFITS OF T HE BUSINESS' . WITHOUT PREJUDICE TO ABOVE, THE APPELLANTS SUBMIT THAT ENTIRE DEPB ENTITLEMENTS SHOULD BE CONSIDERED AS PART OF THE PROFITS OF BUSINESS AND NOT TO BE REDUCED FROM THE PROFITS OF THE BUSINESS. II. 100% OF INTEREST INCOME OF R S.72,99,634/- THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF EXCLUDING 100% OF INTEREST ON SHORT TERM DEPOSITS WITH THE BANKS R S. 67,68,374, INTEREST ON SECURITY DEPOSITS RS.48,000 AND INTERES T ON SALES TAX REFUNDS RS.4,83,260 FROM THE 'PROFITS OF THE BUSINE SS'. THE APPELLANTS SUBMIT THAT CIT(A) OUGHT TO HAVE ACC EPTING THE SUBMISSIONS MADE BEFORE HIM, TREATED THE ABOVE INTE RESTS AS PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUT ING DEDUCTION U/S. 80 HHC OF THE ACT. III. NET INTEREST INCOME OF RS.24,27,012 THE CIT(A) ERRED IN DIRECTING AO TO EXCLUDE NET INT EREST INCOME OF RS.24,27,012 [RS.1,40,60,701 {BEING INTEREST ON OVE RDUE DEBTORS RS.1,33,08,365, INTEREST ON LOANS GIVEN TO EMPLOYEE S RS.7,06,431 AND OTHER INTEREST RS.45,905/-} RS.1,16,33,689 (B EING INTEREST EXPENDITURE)] FROM THE PROFITS OF THE BUSINESS THE APPELLANTS SUBMIT THAT HAVING DECIDED THAT ABO VE INTEREST INCOME ARE OF BUSINESS NATURE, THE SAME SHOULD HAVE BEEN CONSIDERED AS A PART OF THE PROFITS OF THE BUSINES S. IV. COMMISSION OF RS.65,17,862 AND RENT OF RS.2,17, 10,565: THE CIT(A) ERRED IN CONFIRMING THE ACTION O F AO OF EXCLUDING 90% OF THE ABOVE SUMS FROM THE 'PROFITS OF THE BUSINESS' [ REFER PAGE 19, PARAGRAPH 8 OF THE ORDER]. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 6 THE APPELLANT SUBMITS THAT THE CIT(A) OUGH T TO HAVE, ACCEPTING THE SUBMISSIONS MADE BEFORE HIM, HELD THAT THE 'PRO FITS OF THE BUSINESS' SHOULD NOT BE REDUCED BY 90% OF T HE ABOVE SUMS. WITHOUT PREJUDICE TO ABOVE, THE APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE, ACCEPTED THE ALTERNATIVE CONTENTION OF REDUCING THE NET INCOME OF THE ABOVE SUMS AND NOT FROM THE GROSS RECEIPTS OF THE SAME. 5. THE CIT(A) ERRED IN UPHOLDING [IN PAGE 2221, PARAGRAPH 11 OF THE ORDER] THE DISALLOWANCE OF RS.23,30,926/- , BEING THE AMOUNT INCURRED ON LOTUS NOTES CHARGES, AS CAPITA L IN NATURE AS AGAINST REVENUE EXPENDITURE CLAIMED BY TH E APPELLANTS. THE APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE, ACCEP TING THE APPELLANTS CONTENTION THAT SAID EXPENDITURE WAS NOT F OR ACQUIRING ANY SOFTWARE BUT WERE SERVICE CHARGES FOR MAINTAINING THE COMMUNICATION CHANNEL, PAID ON QUARTERLY BASIS, ALLO WED THE DEDUCTION OF SAID EXPENDITURE. WITHOUT PREJUDICE TO ABOVE, THE APPELLANT SUBMITS T HAT THE CIT(A) ERRED IN CONFIRMING THE RATE OF DEPRECIATION AT 25% ON THE GROUND THAT THE RATE OF 60% IS EFFECTIVE ONLY FROM 1 ST APRIL, 2003. THE APPELLANT SUBMIT THAT THE DEPRECIATION ON SOFTW ARE, IF TREATED AS CAPITAL IN NATURE, SHOULD HAVE BEEN ALLOWED AT 6 0% I.E. DEPRECIATION RATE APPLICABLE TO COMPUTERS. 6. THE CIT(A) ERRED IN UPHOLDING [IN PAGE 22, PARAGRAPH 12 OF THE ORDER ] THE DISALLOWANCE OF RS.3,80,080/- , UNDER SECTION 14A, BY ESTIMATING 5% OF DIVIDEND INCOME, T OWARDS EXPENSES INCURRED IN EARNING TAX FREE DIVIDEND INCO ME. THE APPELLANT SUBMITS THAT NO EXPENDITURE WAS INCUR RED BY THE APPELLANT IN EARNING THE SAID DIVIDEND INCOME AND H ENCE, THE QUESTION OF DISALLOWING NOTIONAL EXPENDITURE UNDER SECTION 14A DOES NOT ARISE. WITHOUT PREJUDICE TO ABOVE, APPELLANTS SUBMIT THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWAN CE OF 5% OF DIVIDEND BEING EXCESSIVE, SHOULD BE REDUCED. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 7 GROUNDS OF APPEAL IN ITA NO.4280/MUM/2011: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF THE REPAIRS EXPENSES OF RS.28,61,000/- CONSIDERING THAT IT WAS A CAPITAL EX PENDITURE. HE OUGHT NOT TO HAVE DONE SO. GROUNDS OF APPEAL IN ITA NO.4982/MUM/2011: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.4,7 2,099/- ON ACCOUNT OF ENTRANCE FEE PAID TO CLUB. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.8,23,035/- U/S.14A R.W.R 8D? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPEND ITURE OF SOFTWARE CHARGES AMOUNTING TO RS.50,29,342/-? GROUNDS OF APPEAL IN ITA NO.2398/MUM/2011: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 45,80,090/- U/S. 14A TO RS.2.44 LACS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) FURTHER ERRED IN REVERSING THE ACTION OF THE A.O. IN TREATING THE EXPENDITURE FOR USE OF SOFTWARE (LOTUS NOTE CHARGES ) RS.1,19,13,490/- AS A CAPITAL EXPENDITURE. 2. THESE APPEALS WERE ARGUED TOGETHER BY THE PARTIE S AS MANY OF THE ISSUES ARE COMMON. THEY WERE ALSO HEARD TOGETHER, THEREFO RE, FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS ARE DISPOSED OF BY TH IS CONSOLIDATED ORDER. 3. IT MAY ALSO BE MENTIONED HERE THAT THE CROSS AP PEAL FILED BY THE REVENUE IN RESPECT OF A.Y 2001-02 WAS EARLIER DISPOSED OF E X-PARTE, QUA THE ASSESSEE BY THE TRIBUNAL VIDE ITS ORDER DATED 21/8/2006 IN ITA NO.723/MUM/2005 AND COPY OF THIS ORDER WAS PLACED ON OUR RECORD DURING THE COURSE OF HEARING OF THESE APPEALS. THE MAIN GROUND RAISED BY THE REV ENUE IN THAT APPEAL WAS RELATING TO THE QUESTION THAT WHETHER SALES TAX AN D EXCISE DUTY FORM PART OF ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 8 THE TURN OVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT, 1961 (THE ACT). SUCH QUESTION RAISED BY THE REVENUE IN ITS APPEAL FOR A.Y 2001-02 WAS DISPOSED OF BY THE TRIBUNAL IN FAVOUR OF ASSESSEE BY FOLLOWING THE DECISION OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUDARSHAN CHEMICAL INDUSTRIES LTD., 245 ITR 769(BOM). IT MAY ALSO BE MENTIONED HERE THAT ON THIS VERY GROUND A PART RELIEF WAS GIVEN BY LD. CIT(A) TO THE ASSESSEE IN ITS APPEAL AND TH E ASSESSEE HAS AGITATED THE SUSTENANCE OF PART OF THE ADDITION. THE ANOTHER IS SUE RAISED BY THE REVENUE WAS WITH REGARD TO DEDUCTION 80 HHC AND SUCH ISSUE WAS RESTORED BACK TO THE FILE OF AO FOR RE-DECIDING THE SAME AFRESH IN THE LIGHT OF RETROSPECTIVE AMENDMENT BROUGHT IN SECTION 80HHC OF THE ACT. 3.1 DURING THE COURSE OF HEARING OF THE PRESENT APP EALS THIS ISSUE WAS DELIBERATED UPON AND BOTH THE PARTIES WERE MADE AWA RE OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER O F SALES TAX, UTTAR PRADESH .VS. VIJAY INT. UDYOG, 152 ITR 111(SC), WHE REIN THEIR LORDSHIPS HAVE HELD THAT IN CASE CROSS APPEALS ARE FILED, BOTH SHO ULD HAVE BEEN CLUBBED TOGETHER AND TRIBUNALS ATTENTION SHOULD HAVE BEEN DRAWN TO THE FACT THAT ASSESSEES APPEAL AGAINST THE SAME ORDER OF THE CO MMISSIONER WAS PENDING. THUS, IT WAS A MISTAKE OF THE TRIBUNAL IN NOT CLUBB ING THE TWO APPEALS AS IF IT IS SO DONE THE RIGHT OF APPEAL OF ONE PARTY COULD BE N EGATIVE. AS PER WELL SETTLED PROPOSITION OF LAW NO PARTY SHOULD SUFFER ON ACCOUN T OF MISTAKE OF THE COURT OR TRIBUNAL. ON THIS ISSUE LD. AR SUBMITTED THE DECIS ION OF THE TRIBUNAL ON FIRST ISSUE IS IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I.E. IN THE CASE OF SUDARSHAN CHEMICALS LTD.,(SUPRA ) AND HE POINTED OUT THAT THE VIEW TAKEN BY JURISDICTIONAL HIGH COURT IN THAT CASE HAS ALSO BEEN APPROVED BY HONBLE SUPREME COURT IN THE CASE OF LA XMI MACHINE TOOL WORKS , 290 ITR 667 (SC). THEREFORE, LD. AR SUBMITTED THAT THERE IS NO QUESTION OF SUFFERING BY THE REVENUE AS WHAT HAS BEEN DECIDED B Y THE TRIBUNAL IS IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME COU RT AND TILL DATE NO CONTRARY DECISION HAS BEEN RENDERED EITHER BY THE J URISDICTIONAL HIGH COURT OR ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 9 BY HONBLE SUPREME COURT. ON THE SECOND ISSUE THE TRIBUNAL HAS ONLY RESTORED BACK THE MATTER TO THE FILE OF AO FOR RE-C OMPUTATION OF DEDUCTION UNDER SECTION 80HHC IN ACCORDANCE WITH RETROSPECTIV E AMENDMENT IN THE STATUTE. THUS ON THIS ACCOUNT ALSO IT CANNOT BE SA ID THAT REVENUE HAS SUFFERED. IT WAS FURTHER MENTIONED BY HIM THAT THE ORDER OF THE TRIBUNAL IN CROSS APPEAL WAS PASSED LONG BACK IN 2006 AND THE SAID ORDER CANNOT EITHER BE RECALLED OR RECTIFIED. THEREFORE, HE PLEADED TH AT THOUGH IT IS A MISTAKE THAT CROSS APPEALS ARE NOT DECIDED TOGETHER BUT ON ACCO UNT OF THAT THE REVENUE HAS NOT BEEN PUT INTO ADVERSE SITUATION. 3.2 IN VIEW OF THE SITUATION, AFTER CONSIDERING AFO REMENTIONED FACTS AND AFTER HEARING BOTH THE PARTIES WE ARE OF THE OPINION TH AT THE APPEAL FILED BY THE ASSESSEE IN RESPECT OF ASSESSMENT YEAR 2001-02 IS A VERY OLD APPEAL AND CANNOT BE KEPT PENDING FOR ANOTHER LONG TIME AS TH E ORDER OF TRIBUNAL IN CROSS APPEAL CANNOT EITHER BE RECALLED OR RECTIFIED DUE T O LIMITATION DESCRIBED IN SECTION 254(2) OF THE ACT AND KEEPING IN VIEW THE E NTIRETY OF AFOREMENTIONED FACTS WE CONSIDER IT JUST AND PROPER TO PROCEED TO DECIDE THE APPEAL FILED BY THE ASSESSEE INDEPENDENTLY. WE, THEREFORE, PROCEED TO DECIDE THE PRESENT APPEALS. 3.3. IT MAY ALSO BE MENTIONED HERE THAT LD. AR HAS FURNISHED A CHART SHOWING APPEAL WISE GRIEVANCES OF THE ASSESSEE AS WELL AS R EVENUE AND FOR ARGUING THE APPEALS THE SAID CHART WAS REFERRED AND APPEALS WE RE DISCUSSED ON THE BASIS OF THE SAID CHART WHICH IS PLACED ON RECORD AND COPIES WERE ALSO GIVEN TO LD. DR. ITANO.270/MUM/05A.Y.2001-02: 4. GROUND NO.1 RAISED BY THE ASSESSEE WAS STATED TO BE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y 2003-04, WHEREBY THE ISSUE WAS RESTORED BACK TO THE FILE OF AO. REFEREN CE IN THIS REGARD WAS MADE TO THE ORDER OF THE TRIBUNAL DATED 27/08/2010 IN ITA N O.1272/MUM/2007, COPY ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 10 OF WHICH WAS PLACED ON OUR RECORD. THE ISSUE WAS R ESTORED BACK TO THE A.O WITH THE FOLLOWING OBSERVATIONS: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE MAIN CONTENTION RAISED BY, THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT IN QUESTION ON ACCOUNT UNUTILIZED MODVAT CREDIT PERTAINING TO THE CLOSING STOCK IS NOT IN THE NATUR E OF TAX OR DUTY QUA THE ASSESSE COMPANY AND IT IS ONLY AS PART OF COST OF PURCHASE AS HELD BY THE SPECIAL BENCH OF ITAT IN THE CASE OF GLAXO SMITHKLINE HEALTH CA RED LTD. (SUPRA), IT IS OBSERVED THAT THE ASSESSEE COMPANY HAS FOLLOWED THE EXCLUSI VE METHOD WHEREBY ONLY THE NET AMOUNT OF PURCHASES IS DEBITED TO THE PURCHASE ACCOUNT AND THE BALANCE AMOUNT REPRESENTING EXCISE DUTY IS DEBITED SEPARATE LY TO MODVAT ACCOUNT. GOING BY THE SAID METHOD, THE ASSESSEE COMPANY ITSELF THU S IS NOT CONSIDERING THE DUTY PAID ON RAW MATERIAL AS PART OF THE COST OF PURCHAS E IN ITS BOOKS OF ACCOUNT AND THE SAME IS TREATED SEPARATELY AS DUTY. THE STAND B EING TAKEN NOW BY THE ASSESSE THAT THE SAID DUTY IS PART OF PURCHASES TH US IS CONTRARY TO THE ACCOUNTING TREATMENT GIVEN TO THE RELEVANT TRANSAC TIONS. IN ANY CASE, IF IT IS PART OF COST OF PURCHASES OF THE RAW MATERIAL LYING IN T HE CLOSING STOCK, IT IS EVEN OTHERWISE LIABLE TO BE ADDED TO THE VALUE OF CLO SING STOCK BEING THE COST INCURRED IN RESPECT OF THE SAID RAW MATERIAL. AS RIGHTLY SU BMITTED BY THE LD. DR, IT IS NOT THE EXCISE DUTY PAYABLE BY THE ASSESSEE UNDER ANY LAW BUT IT IS A CASE OF REIMBURSEMENT OF EXCISE DUTY PAID BY THE SUPPLIER OF THE SAID RAW MATERIAL AND GOING BY THIS VERY NATURE WE ARE OF THE VIEW THAT THE SAID AMOUNT IS LIABLE TO BE ADDED TO THE VALUE OF CLOSING STOCK AS PER THE SPE CIFIC PROVISIONS CONTAINED IN SECTION 1 45A. WE, THEREFORE, FIND NO MERIT IN THE CONTENTION OF THE 1D. COUNSEL FOR THE ASSESSEE ON THIS ISSUE. 10. WE, HOWEVER, FIND MERIT IN THE CONTENTION OF T HE LEARNED COUNSEL FOR THE ASSESSEE THAT AS PER THE PROVISIONS OF SECTION 145A , ADJUSTMENT ON ACCOUNT OF EXCISE DUTY IS REQUIRED TO BE MADE NOT ONLY TO THE VALUE OF CLOSING STOCK ALONE BUT THE SAME IS REQUIRED TO BE MADE TO THE VALUE OF PUR CHASES, SALES AND OPENING STOCK OF THE YEAR UNDER CONSIDERATION. IN THIS REGA RD, THE ID. COUNSEL FOR THE ASSESSEE HAS FURNISHED A WORKING SHOWING THEREIN TH AT IF SUCH ADJUSTMENTS ARE MADE TO THE VALUE OF PURCHASES, SALES AS WELL AS IN VENTORY AS PER THE PROVISIONS OF SECTION 145A, THERE WILL BE NO EFFECT ON THE PRO FIT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HE HAS ALSO MADE AN ATTEMPT TO SUBSTANTIATE THE CASE OF THE ASSESSEE ON THIS ISSUE BY RELYING ON THE GUIDANCE N OTE ISSUED BY THE 1CAI WHEREIN HYPOTHETICAL WORKING IS GIVEN TO SHOW THAT IN THE CASE OF AN ASSESSEE FOLLOWING EXCLUSIVE METHOD, ADJUSTMENTS. MADE BY INCLUDING THE EXCISE DUTY IN THE VALUE OF PURCHASES,. SALES AND INVENTORY WILL N OT HAVE ANY EFFECT ON THE PROFIT. HOWEVER, AS RIGHTLY SUBMITTED BY THE LD. D .R., THIS WORKING MADE BY THE ASSESSEE NEEDS VERIFICATION AND SINCE THE SAME HAS NOT BEEN DONE EITHER BY THE A.O. OR BY THE LD. CIT(A), WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE SAME FROM THE RELEVANT RECO RD AND ACCORDINGLY QUANTITY THE ADDITION, IF ANY, THAT IS REQUIRED TO BE MADE IN AC CORDANCE WITH THE PROVISIONS OF SECTION 145A. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 11 4.1 IN THIS VIEW OF THE SITUATION AFTER HEARING BOT H THE PARTIES THIS ISSUE IS RESTORED BACK TO THE FILE OF AO, WITH SIMILAR OBSER VATIONS. THIS GROUND OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 5. APROPOS GROUND NO.2, LD. CIT(A) VIDE PARA 5.4.1 OF HIS ORDER HAS NOTICED THAT THE ASSESSEE HAS DEBITED EXCISE DUTY PAYMENT OF RS.17,03,16,071/- ON SALE OF FINISHED GOODS AND AS AGAINST THAT ACTUAL P AYMENT OF EXCISE DUTY MADE TO THE DEPARTMENT IS A SUM OF RS.16,01,55,770/-. IN THIS MANNER LD. CIT(A) HAS DIRECTED THE AO TO DISALLOW UNPAID EXCISE DUTY OF RS.1,01,60,301/- UNDER SECTION 43B OF THE ACT. AS AGAINST SUCH ORDER OF LD. CIT(A) LD. AR DREW OUR ATTENTION TOWARDS PAGE 33 OF THE PAPER BOOK, WHEREI N ACCORDING TO LD. AR PAYMENT MADE ON ACCOUNT OF EXCISE DUTY IS A TOTAL SUM OF RS.17,51,48,218/- IN PLACE OF RS.16,01,55,770/- UNDERSTOOD BY LD. CIT (A). LD. AR HAS ALSO FILED FOLLOWING NOTE SHOWING THAT HOW LD. CIT(A) HAS COM MITTED AN ERROR IN ARRIVING AT A CONCLUSION THAT ASSESSEE HAD PAID A SUM OF RS. 16,01,55,770/- WHEN ACTUALLY ASSESSEE HAS PAID A SUM OF RS.17,51,48,218 /-. THE SAID NOTE IS REPRODUCED BELOW: NOTE ON MODVAT ISSUE PARA 5.4.1 (PAGE 9) OF CIT(A)S ORDER 1. THE EXCISE DUTY DEBITED TO PROFIT & LOSS A/C (P AGE-33 OF PAPER BOOK)- RS.17,03,16,071/- 2. THE PAYMENT OF EXCISE DUTY DURING THE YEAR MODVAT A/C. UTILISATION- RS.9 ,53,12,448/- (PAGE-33-SR.NO.2 OF PAPER BOOK) ACTUAL PAYMENT OUT OF THE DEPOSIT TO EXCISE DUTY (PLA BALANCE UTILIZATION RS.7,98,35, 770/- (PAGE 33 SR.NO. 3 OF PAPER BOOK) RS .17,51,48,218/- 3. THE CIT(A) HAS TAKEN A FIGURE OF PAYMENT OF EXC ISE DUTY OF RS.16,01,55,770/- WHICH IS NOT CORRECT S THE SAID AMOUNT REPRESENTS : DEPOSIT IN PLA A/C. RS.8, 03,20,000/-(PAGE 33-SR.NO.3 OF PAPER BOOK) UTILISATION OUT OF THE ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 12 SAID DEPOSIT R S.7,98,35,770/- (PAGE-33-SR.NO.3 OF PAPER BOOK) RS.16,01,55,770/- 4. THE CIT(A) FINDING THAT THE DIFFERENCE BETWEEN E XCISE DUTY LIABILITY I.E. RS.17,03,16,071/- AND ACTUAL PAYMENT CONSIDERED BY HIM OF RS.16,01,55,770/- IS A PROVISION ON THE BSR STOCK APPEARING ON THE LIABIL ITY SIDE OF THE BALANCE SHEET I.E. RS.1,01,60,301/- IS NOT CORRECT IN VIEW OF THE ABOV E MISTAKE. 5.1 IN THIS VIEW OF THE SITUATION, AFTER HEARING BO TH THE PARTIES, WE RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO VE RIFY THE ACTUAL PAYMENT MADE BY THE ASSESSEE IN RESPECT OF EXCISE DUTY AND ALLO W THE CLAIM OF THE ASSESSEE ACCORDINGLY. THIS GROUND IS CONSIDERED TO BE ALLO WED FOR STATISTICAL PURPOSES. 6. THE ISSUE RAISED IN GROUND NO.3(I) RELATES TO ISSUES RAISED BY REVENUE IN ITS APPEAL WHICH HAS ALREADY BEEN DISPOSED OFF AS DISCUSSED IN EARLIER PART OF THIS ORDER. IT IS ALSO MENTIONED THAT THE MAIN ISSUE DECIDED BY THE TRIBUNAL IN DEPARTMENTAL APPEAL IS EVEN NOW STANDS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE APEX COURT. THEREFORE, WE PROCEED ONLY TO DECIDE THE ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL AS T HE ISSUE DECIDED IN DEPARTMENTAL APPEAL HAS ATTAINED FINALITY. 6.1 THIS ISSUE IS DECIDED BY LD. CIT(A) IN PARA 6.3 (I), WHICH IS REPRODUCED AS UNDER: 6.3 FINDING: (I) IN THE COURSE OF HEARING, ON INQUIRY THE REPRESENTA TIVES OF THE APPELLANT COMPANY HAVE STATED THAT SALES TAX PAID ON PURCHASES BY THE APPELLANT COMPANY IS INCLUDED IN THE TOTAL PURCHASES DEBITED TO THE PROF IT & LOSS ACCOUNT. HOWEVER, ON SALES EFFECTED BY THE APPELLANT COMPANY THE SALES-T AX COLLECTED IS NOT INCLUDED IN THE TOTAL SALES CREDITED TO THE PROFIT & LOSS ACCOU NT BUT THE SALES TAX PORTION IS SEPARATELY CREDITED TO A SALES TAX ACCOUNT WHICH IS SQUARED OFF ON MAKING PAYMENT THEREOF. AS REQUIRED BY ME THE APPELLANT CO MPANY PRODUCED A COPY OF SALES TAX RETURN/ASSESSMENT ORDER OF EACH OF ITS KO LSHET AND PANOLI UNTIS. AS PER THE RETURN OF SALES TAX OF KOLSHET UNIT A REFUND OF RS.25,19,444/- ON ACCOUNT OF PURCHASE SET OFF IS REDUCED FROM THE TOTAL SALES TA X LIABILITY. SIMILARLY IN THE SALES TAX RETURN OF PANOLI UNIT A REFUND OF RS.11,10,168/ - IS DETERMINED ON ACCOUNT OF PURCHASE SET OFF. IN THE TAX AUDIT REPORT (ANNEXURE -I, NOTES) IT IS STATED THAT A ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 13 PORTION OF SALES TAX SET OFF IS INCLUDED IN CLOSING STOCK OF FINISHED GOODS AND WORK IN PROCESS. IT IS THUS EVIDENT THAT ENTIRE SALES TA X COLLECTION IS NOT A GOVERNMENT LEVY AND A PROFIT TO THE EXTENT OF AMOUNT OF REFUND OF SALES TAX SET OFF IS EMBEDDED IN THE CLOSING STOCK THEREFORE, ONLY THE N ET AMOUNT OF SALES TAX CAN BE CONSIDERED WITHOUT PROFIT AND COVERED BY THE DECISI ON OF BOMABY HIGH COURT IN THE CASE OF CIT VS. M/S. SUDARSHAN CHEMICAL INDUSTR IES LTD. I THEREFORE, DIRECT AO TO EXCLUDE NET SALES TAX OF RS.7,95,21,388 ( 8,31,5 1,000 25,19,444 11,10,168) WHILE DETERMINING TOTAL TURNOVER FOR THE PURPOSE OF GRANTING DEDUCTION U/S. 80HHC OF THE ACT. 6.2 AFTER NARRATING THE FACTS IT WAS SUBMITTED BY L D. AR THAT MY SALES TAX LIABILITY REMAIN INTACT EVEN AFTER REFUND IS ISSUED TO ME. HE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 80HHC MY SALES TAX LI ABILITY WAS REQUIRED TO BE EXCLUDED AND, THEREFORE, LD. CIT(A) HAS COMMITTED A N ERROR TO EXCLUDE SALES TAX OF RS.7,95,21,388/- IN PLACE OF RS.8,31,51,000/-. 6.3 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. WE CONSIDER IT JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO VERIFY THE CONTENTION OF THE ASSESSEE AND AFTER GIVING REASONA BLE OPPORTUNITY TO THE ASSESSEE, THE SALES TAX LIABILITY OF THE ASSESSEE WILL BE DETERMINED AND THE SAME WILL BE EXCLUDED FROM THE TURNOVER WHILE COMP UTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. WE DIRECT ACCORDINGLY. F OR STATISTICAL PURPOSES, THIS GROUND IS TREATED AS ALLOWED. 7. APROPOS GROUND NO.3(II) THIS ISSUE HAS ALREADY B EEN DEALT WITH IN GROUND NO.2 OF THIS APPEAL, WHEREIN THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF AO FOR DETERMINATION OF ACTUAL PAYMENT MADE BY THE ASSESSEE AND THIS GROUND OF THE ASSESSEE BECOME CONSEQUENTIAL TO GROU ND NO.2. AFTER DECIDING THE ISSUE IN GROUND NO.2, THE AO WILL GIVEN APPROPR IATE RELIEF TO THE ASSESSEE IN RESPECT OF GROUND NO.3.2. WE DIRECT ACCORDINGLY. THIS GROUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.3(III) IS STATED TO BE COVERED IN FAVO UR OF THE ASSESSEE BY THE EARLIER DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 14 1998-99 VIDE ORDER DATED 20/7/2005 IN ITA NO.2210/ MUM/2002, COPY OF THIS DECISION WAS PLACED ON OUR RECORD AND WAS ALSO GIVE N TO LD. DR. THE RELEVANT PARA 4 & 5 ARE REPRODUCED BELOW: 4. WE HAVE HEARD BOTH PARTIES AND HAVE ALSO PERUS ED THE DECISION OF CHANDIGARH BENCH IN THE CASE OF AVON CYCLES LTD. , IT IS NOTED THAT IN THE SAID CASE THE COUNSEL OF THE ASSESSEE DID NOT ARGUE THIS ISSUE BEFORE THE TRIBUNAL AND CONCEDED THAT THE SALE OF SCRAP WAS PART OF THE TOT AL TURNOVER AND SUBMITTED THAT ISSUE TO BE DECIDED IN FAVOUR OF THE REVENUE . IT I S IN THIS BACKGROUND THAT THE TRIBUNAL AT CHANDIGARH HELD IN THE SAID CASE IS AS UNDER :AFTER CAREFULLY CONSIDERING THE SUBMISSIONS OF BO TH THE SIDES, WE HOLD THAT SALE OF SCRAP SHALL BE TREATED AS PART OF TOTA L TURNOVER AND TO THIS PROPOSITION THE LEARNED COUNSEL HAS ALSO AGREED. AS REGARDS THE CST AND ST THE SAME SHALL NOT BE TREATED AS PART OF TOTAL T URNOVER IN VIEW OF THE SUBMISSIONS MADE BY THE LEARNED COUNSEL. 5. THE ISSUE WAS NEVER ARGUED BEFORE THE CHANDIGARH BENCH AND THERE IS NO DETAILED DISCUSSION IN THE ORDER. WHEREAS, THE ISSU E WAS DISCUSSED IN DETAIL IN THE ORDERS OF THE MUMBAI BENCH AND PUNE BENCH, WHIC H ARE CITED BEFORE US. THE MATTER IS DECIDED IN FAVOUR OF ASSESSEE, AFTER DETA ILED DISCUSSION BY THE MUMBAI AND PUNE BENCHES. THE HONBLE APEX COURT IN THE CASE OF KULWANT KAUR VS. GURDIAL SINGH MANN (2001) 4 SCC 262 AND DIRECTOR OF SETTLEMENTS VS. M.R. APPARA (2002) 4 SCC 638 HAS HELD THAT, IF THE COURT PROCEEDS ON THE BASIS OF CONCESSION MADE BY THE PARTY THE DECISION CANNOT BE UNSTRETCHED BY TERMED A BINDING PRECEDENT AND CANNOT HAVE SENTIENT AND SOLE MNLY OF A BINDING PRECEDENT. IN VIEW OF THE RATIO LAID DOWN BY THE HON BLE APEX COURT, WE FOLLOW THE DECISION OF BOMBAY AND PUNE BENCHES AND HOLD THAT THE SCRAP SALES CANNOT BE INCLUDED IN THE TOTAL TURNOVER AS WAS DONE BY THE AUTHORITIES B ELOW. IN THE RESULT, THE GROUND NO. 1.1 OF ASSESSEES APPEAL IS ALLOWED. 8.1 IN THIS VIEW OF THE SITUATION, AFTER HEARING BO TH THE PARTIES WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND THIS ISSUE IS D ECIDED IN FAVOUR OF THE ASSESSEE AND THIS GROUND IS ALLOWED. 9. GROUND NO.4(I)WAS NOT PRESSED ON THE GROUND THAT RELIEF HAS ALREADY BEEN GRANTED, ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 10. GROUND NO.4(II) WAS STATED TO BE COVERED AGAIN ST THE ASSESSEE BY THE EARLIER DECISION OF THE TRIBUNAL RENDERED IN RESPEC T OF A.Y 2000-01. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 15 10.1 HERE IT IS THE CASE OF ASSESSEE THAT THOUGH M AIN GROUND HAS TO BE DECIDED AGAINST THE ASSESSEE BUT NETTING HAS TO BE ALLOWED AS PER DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES, 343 ITR 89 (SC) AND IN THE CASE OF VIKAS KALRA 345 ITR 557 (S C). 10.2 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE RELEVANT OBSERVATIONS OF TRIBUNAL VIDE ITS ORDER DATED 31/5/2006 IN ITA N O.3800/MUM/2004 FOR A.Y.2000-01 ARE AS UNDER. 9. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOT H THE SIDES, MATERIAL ON RECORD AND ORDERS OF AUTHORITIES BELOW. ADMITTEDLY , IN THE PRESENT CASE, ASSESSEE HAS EARNED INTEREST FROM BANK ON SHORT TERM DEPOSIT S MADE OUT OF SURPLUS FUNDS NOT REQUIRED BY THE ASSESSEE FOR THE TIME BEING. T HUS, THE INTEREST HAS BEEN EARNED AS A RESULT OF APPLICATION OF SURPLUS FUNDS AND NOT AS A MATTER OF ANY BUSINESS NECESSITY OR REQUIREMENT FOR MAKING SUCH D EPOSITS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS NOT ENGAGED IN THE MON EY LENDING /FINANCE BUSINESS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F TRANSCON BUILDER & CONTRACTORS PVT. LTD. CITED SUPRA, AFTER ANALYZING VARIOUS CASE LAWS, HAS HELD THAT INTEREST INCOME IN SUCH CASES WOULD BE LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSIN ESS OR PROFESSION. IN THIS VIEW OF THE MATTER WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF THE LEARNED CIT(A) IS IN ACCORDANCE WITH LAW AND ACCORDINGLY WE UPHOLD THE SAME . THUS, THIS GROUND OF THE ASSESSEE STANDS REJECTED. THEREFORE, THE MAIN ISSUE HAS TO BE DECIDED AGAINST THE ASSESSEE. SO FAR AS IT RELATES TO NETTING, WE RESTORE THIS ISSUE TO THE F ILE OF AO TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE AND RE-ADJUDICATE THE S AME AS PER PROVISIONS OF LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUN ITY OF HEARING. THIS GROUND IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOS ES IN THE MANNER AFORESAID. 11. GROUND NO.4(III) WAS NOT PRESSED ON THE GROUND THAT RELIEF HAS ALREADY BEEN GRANTED, THEREFORE, THIS GROUND IS DISMISSED A S NOT PRESSED. 12. APROPOS GROUND NO.4(IV), LD. AR SUBMITTED THAT NETTING BENEFIT SHOULD BE GRANTED OUT OF COMMISSION INCOME AND RENTAL INC OME AND FOR THIS PURPOSE HE RELIED UPON THE DECISIONS AS HAVE BEEN RELIED I N RESPECT OF GROUND NO.4(II). ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 16 12.1 AFTER HEARING BOTH THE PARTIES, WE RESTORE THI S ISSUE TO THE FILE OF AO FOR ALLOWING APPROPRIATE RELIEF TO THE ASSESSEE AS PER LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. THIS GROUND IS ALSO PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 13. APROPOS GROUND NO5; THIS ISSUE IS DISCUSSED BY A.O IN PARA-3 AT PAGES 9 & 10 OF ASSESSMENT ORDER. A SUM OF RS.23,30,926 /- WAS CLAIMED BY THE ASSESSEE AS SOFTWARE EXPENSES. THIS AMOUNT REPRESE NT PAYMENT MADE TO CLARIANT INTERNATIONAL LTD. TOWARDS ACQUISITION OF RIGHT TO USE THE SOFTWARE LOTUS NOTES DEVELOPED BY CLARIANT INTERNATIONAL LTD. WHICH ACCORDING TO ASSESSEE IS POWERFUL, MULTIFACETED SOFTWARE THAT H ELP TO WORK EFFECTIVELY. IT EXTENDS THE POWER OF MESSAGING AND DATA EXCHANGE T O BRING ALL INFORMATION WHETHER FROM NOTES OR FROM INTERNET AND OFFERS VERY USEFUL TOOLS LIKE E-MAIL, CALENDER, TO-DO LISTS ETC. ALL CLARIANT GROUP CO MPANIES ARE INTER CONNECTED WITH LOTUS NOTE AND CONNECTIVITY IS EFFECTED, AD MINISTERED. THE AO REJECTED THE CLAIM OF THE ASSESSEE OF THE EXPENDITURE BEING IN THE NATURE OF REVENUE AND HELD THAT AS IT HAD PROVIDED ENDURING BENEFIT AND THE EXPENDITURE BEING ON ACCOUNT OF CAPITAL, THE ASSESSEE WAS ENTITLED TO CL AIM DEPRECIATION ONLY. HE PROVIDED DEPRECIATION @ 25% AND THE BALANCE AMOUNT OF RS.17,48,195/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A ) HAS SUSTAINED THE ACTION OF A.O. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILE D AFOREMENTIONED GROUNDS. 13.1 IT WAS SUBMITTED BY LD. AR THAT SIMILAR EXPENS ES IN RESPECT OF A.Y 2002- 03 AND 2003-04 WERE HELD TO BE ALLOWABLE AS REVENUE EXPENDITURE BY LD. CIT(A). HE FURTHER SUBMITTED THAT THE EXPENDITUR E IS IN THE NATURE OF USER OF SOFTWARE WHICH BY NO STRETCH OF IMAGINATION CAN BE SAID TO BE OF EXPENDITURE IN THE NATURE OF CAPITAL. IT DID NOT PROVIDE ANY ENDU RING BENEFIT TO THE ASSESSEE AND WAS A POWERFUL TOOL TO CARRY OUT THE WORK OF TH E ASSESSEE EFFECTIVELY. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS TO CONTEND THAT THE EXPENDITURE WAS IN THE NATURE OF REVENUE. (I) CIT VS. RAYCHEM RPG LTD., 346 ITR 183 (BOM) ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 17 (II)CIT VS. ASAHI INDIA SAFETY GLASS LTD. 346 ITR 329(DEL) (III) CIT VS.AMWAY INDIA ENTERPRISES, 346 ITR 341(D EL) (IV) SANGHVI SALVI STOCK BROKER LTD,ITAT MUMBAI (UN REPORTED)(COPY PLACED ON RECORD) 13.2 ON THE OTHER HAND, LD. DR RELIED UPON THE ORDE R PASSED BY A.O AND LD. CIT(A). 13.3 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTE NTIONS HAVE CAREFULLY BEEN CONSIDERED. ACCORDING TO DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF RAYCHEM RPG LTD.(SUPRA), IF THE EXPENDITURE INCURRE D ON SOFTWARE ARE TO FACILITATE THE ASSESSEES BUSINESS OR ENABLING THE MANAGEMENT TO CONDUCT THE BUSINESS MORE EFFICIENTLY OR MORE PROFITABLY THEN IT CANNOT BE SAID TO BE IN THE NATURE OF PROFIT MAKING AND HAS TO BE TREATED AS R EVENUE EXPENDITURE. SIMILARLY, HONBLE DELHI HIGH COURT IN THE CASE O F ASAHI INDIA SAFETY GLASS LTD (SUPRA) HELD THAT SOFTWARE EXPENDITURE WERE REV ENUE IN NATURE. IN THE CASE OF CIT VS. AMWAY INDIA ENTERPRISES (SUPRA) ALSO IT WAS HELD THAT PURCHASE OF SOFTWARE IS REVENUE EXPENDITURE. THE CONTENTIONS R AISED BY THE ASSESSEE BEFORE AO WERE THAT THIS EXPENDITURE WAS INCURRED BY THE ASSESSEE TO EFFECTIVELY CARRY ON ITS BUSINESS HAS NOT BEEN CONTROVERTED BY ANY M ATERIAL BROUGHT ON RECORD. IN THIS VIEW OF THE SITUATION, WE HOLD THAT LD. CI T(A) WAS NOT RIGHT IN UPHOLDING THE ACTION OF AO. THE EXPENDITURE INCURR ED BY THE ASSESSEE ON SOFTWARE WAS IN THE NATURE OF REVENUE, HENCE, ALLOW ABLE AS AN EXPENDITURE. THIS GROUND OF THE ASSESSEE IS ALLOWED. 13. GROUND NO.6 WAS NOT PRESSED DUE TO SMALLNESS OF AMOUNT AND THE SAME IS DISMISSED AS NOT PRESSED. 14. IN THE RESULT, FOR STATISTICAL PURPOSES THE APP EAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 18 ITA NO.4280/MUM/2011:A.Y. 2004-05: 15. THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS A PPEAL IS REGARDING EXPENDITURE OF RS.28,61,000/- WHICH WAS INCURRED ON REPAIRS AND CLAIMED AS REVENUE EXPENDITURE. THE AO HAS DISCUSSED THIS ISS UE IN PARA -8 OF THE ASSESSMENT ORDER. HE NOTED THAT ASSESSEE HAD CLAIM ED EXPENDITURE UNDER THE HEAD OTHER REPAIRS AGGREGATING TO RS.2,06,54,000 /-. FROM THE DETAILS HE FOUND THAT SUM OF RS.15,79,000/- WAS DEBITED ON ACC OUNT OF PURCHASE OF WOODEN PARTITION AND THE SAME WAS DEBITED UNDER THE HEAD REPAIRS AND RENOVATION IN MARKETING OFFICE. HE ALSO NOTICED T HAT ASSESSEE HAD DONE COMPLETE OVERHAULING OF ITS HEAD OFFICE AND AN AMOU NT OF RS.12,82,000/- WAS DEBITED. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THESE EXPENDITURE SHOULD NOT BE TREATED AS CAPITAL IN NATURE. IN VI EW OF EXPLANATION -1 TO SECTION-32, AO HAS COME TO A CONCLUSION THAT EXTENS IVELY RENOVATION UNDERTAKEN BY THE ASSESSEE COULD NOT BE TREATED AS REVENUE EXPENDITURE. THEREFORE, AGGREGATE OF BOTH AFOREMENTIONED AMOUNTS I.E. A TOTAL SUM OF RS.28,61,000 WAS HELD TO BE INCURRED ON ACCOUNT OF CAPITAL EXPENDITURE AND AFTER ALLOWING 15% DEPRECIATION FOR A SUM OF RS.4,2 9,150/- BALANCE AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. LD. CIT(A ) HAS DISCUSSED THIS ISSUE IN PAR-8 OF HIS ORDER AND HE HAS ARRIVED AT A CONCL USION THAT AO WAS RIGHT IN TREATING THE SAME AS CAPITAL EXPENDITURE. 15.1 AFTER NARRATING THE FACTS AND REFERRING TO THE DETAILS, IT WAS SUBMITTED BY LD. AR THAT THE EXPENDITURE INCURRED BY THE ASSESSE E IS IN THE NATURE OF REVENUE AND RELIANCE WAS PLACED ON THE FOLLOWING DE CISIONS. 1, CIT VS. HEDE CONSULTANCY PVT. LTD., 258 ITR 380 (BOM) 2. CIT VS. NILA PRODUCTS LTD., 148 ITR 99 (BOM)148 ITR 99 3. ACIT VS. INDIA UNITED MILLS LTD. 141 ITR 399(BO M) ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 19 4. STANDARD MILLS CO. LTD. VS. CIT181 ITR 233(BOM) 15.2 THE DETAILS WITH REGARD TO SUM OF RS.12,82,000 /- IS AS FOLLOWS: 9. REPAIRS & RENOVATION AT HEAD OFFICE : REMOVING CABIN FLOOR TILES 11 PROVIDING & FIXING IVORY PLAIN TILES IN CABINS 216 REMOVING AND FIXING OF PARTITIONS 161 PANELLING OF WALL BY USING PLY, VENEER MOULDING 94 TABLES CUTTING, REDUCING SIZE & REFIXING 17 TEMPORARY WIDEN PARTITIONS 8 3 MAKING OF SOFT BOARDS WITH FRAMES 14 PROVIDING & FIXING VENEER ON EXISTING SKIRTING 21 REMOVING OF VERTICAL BLINDS, REPAIRING & REFIXING 24 MAKING OF NEW ELECTRICAL POINTS 36 MELAMINE POLISH ON EXISTING VENEER PARTITIONS 170 APPLYING OF PRIMER COATS ON WALL & CEILING 35 PROVIDING & FIXING VERTICAL FABRIC BLINDS 22 MAKING OF RUNNING WORKING COUNTERS 68 CUTTING OLD FILING CABINS, CHANGING SIZE & REFIXIN G 55 PROVIDING & FIXING CUPBOARD LOCKS WITH KEY HOLES 6 REPARING VISITORS CHAIRS 8 PROVIDING & FIXING OF DRAWER LOCKS 5 OTHER MISC. WORK 236 FOR A SUM OF RS.15,79,000/- THEY REPRESENT ONLY TEM PORARY WOODEN PARTITION. 15.3 ON THE OTHER HAND, LD. DR RELIED UPON THE ORDE R PASSED BY AO & LD. CIT(A). 15.4 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. A SUM OF RS.15,79,000/- HAS BEEN INCURRED BY THE ASSESSEE ON WOODEN PARTITION FOR REPAIR AND RENOVAT ION OF ITS MARKETING OFFICE. THIS EXPENDITURE CANNOT BE SAID TO HAVE GIVEN ENDU RING BENEFIT TO THE ASSESSEE AS IT MAY BE REQUIRED BY THE ASSESSEE FOR EFFECTIVE LY CARRYING ON ITS BUSINESS AND IT MAY ALSO BE MENTIONED HERE THAT THE ASSESSEE HAS HUGE TURNOVER FOR THE YEAR UNDER CONSIDERATION WHICH IS A SUM OF RS .340000.72 LACS AND NET PROFIT OF THE ASSESSEE BEFORE TAX IS A SUM OF RS.3 54.44 LACS. THESE FIGURES ARE ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 20 MENTIONED BY THE AO IN PARA 3 OF THE ASSESSMENT O RDER. FOR THIS PURPOSE THE ASSESSEE MAY REQUIRE HUGE STRENGTH OF STAFF AND WO ODEN PARTITIONS, THEREFORE, IT CANNOT BE SAID THAT THE AMOUNT INCURRED BY THE A SSESSEE ON WOODEN PARTITION WILL BE IN THE NATURE OF CAPITAL. SIMILARLY, P ERUSAL OF DETAILS IN RESPECT OF RS.12.82 LACS WILL REVEAL THAT ALL THE EXPENSES IN CURRED IN THIS REGARD ARE IN THE NATURE OF CURRENT REPAIRS OR RENOVATIONS AND IT CANNOT BE SAID THAT ANY NEW ASSET HAS BEEN ACQUIRED BY THE ASSESSEE WHICH COULD HAVE GIVEN ENDURING BENEFIT TO THE ASSESSEE SO AS TO CALL IT AS CAPITAL IN EXPENDITURE. WE, THEREFORE, DELETE THE ADDITION UPHELD BY LD. CIT(A) AND THIS G ROUND OF THE ASSESSEE IS ALLOWED. 15.5 IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ITA NO.4982/MUM/2011:A.Y. 2004-05: 16. APROPOS GROUND NO.1, IT WAS SUBMITTED THAT THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN GROUP CASE OF THE ASSESSEE, WHEREIN SIMILAR ISSUE WAS DECIDED BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVATORS CO. LTD. V S. CIT, 195 ITR 682 (BOM). REFERENCE IN THIS REGARD WAS MADE TO THE DECISION O F THE TRIBUNAL DATED 11/2/2014 RENDERED IN ITA NO.2606/MUM/2011 IN THE C ASE OF DCIT VS. M/S. COLOR CHEM LTD. FOR A.Y 2004-05, COPY OF THIS ORDER WAS PLACED ON OUR RECORD AND REFERENCE WAS INVITED TO THE FOLLOWING OBSERVA TIONS: 9. GROUND NO. 2 RELATES TO THE DELETION OF THE DIS ALLOWANCE OF ENTRANCE FEES PAID TO CLUBS. 10. THE AO NOTICED THAT THE ASSESSEE HAS INCURRED R S.1,73,085/- AS CLUB ENTRANCE AND SUBSCRIPTION FEE. THE AO CALLED FOR AN EXPLANATION FROM THE ASSESSEE WHICH WAS DULY FILED. THE AO WAS OF THE OP INION THAT SINCE THIS IS THE EXPENDITURE INCURRED AS ENTRANCE FEE THOUGH IT MAY NOT BE A LIFE MEMBERSHIP FEES BUT IT IS NOT THE ANNUAL FEES BUT FEES WHICH IS NOT INCURRED EVERY YEAR. THE AO ACCORDINGLY HELD THE SAME TO BE NOT ALLOWABLE AS RE VENUE EXPENDITURE. 11. BEFORE THE LD. CIT(A), IT WAS EXPLAINED THAT THE SUBSCRIPTIONS PAID FOR ANNUAL CORPORATE MEMBERSHIP FEES AND THE SENIOR MANAGEMENT EXECUTIVE WERE ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 21 NOMINATED FOR USING THE FACILITY OF THE CLUB. LD. C IT(A) RELYING UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F OTIS ELEVATOR CO. (INDIA) LTD VS CIT 195 ITR 682 DELETED THE ADDITION. 12. BEFORE US, THE LD. DR COULD NOT BRING ANY DI STINGUISHING FACTS/CASE LAWS TO SUPPORT THE FINDINGS OF THE AO. SINCE THE LD. CIT(A ) HAS DELETED THE ADDITION RELYING UPON THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. IN THIS VIEW OF THE POSITION, AFTER HEARING BOTH T HE PARTIES, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE TRIBUN AL VIDE WHICH DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVA TORS VS. CIT (SUPRA) HAS BEEN FOLLOWED, WE DECLINE TO INTERFERE IN THE RELIE F GRANTED BY LD. CIT(A). THIS GROUND OF THE REVENUE IS DISMISSED. 17. APROPOS GROUND NO.2, IT IS THE CASE OF LD. AR T HAT THIS GROUND OF THE REVENUE IS MISCONCEIVED AS DISALLOWANCE IS NOT DE LETED BY LD. CIT(A) BUT THE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF A.O. 17.1 HOWEVER, LD. DR RELIED UPON THE ORDER PASSED B Y A.O. 17.2 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS AND PERUSED THE ORDER PASSED BY LD. CIT(A). IT IS OBSERVED THAT IN PARA 5.3 LD. CIT(A) HAS SIMPLY RESTORED THIS ISSUE TO THE FILE OF A.O WITH A DIRECTION TO MAKE DISALLOWANCE IN ACCORDANCE WITH THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, 328 ITR 81(BOM). IN THIS VIEW OF THE SITUATION, WE ARE OF THE OPINION THAT THERE SHOULD NOT BE ANY GRIEVANCE TO THE REVENUE AS THE ISSUE IS RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO RECOMPUTED THE DISALLOWANCE IN ACCORDA NCE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT. WE DECLINE TO INTERFERE AND THIS GROUND OF THE REVENUE IS DISMISSED. 18. APROPOS GROUND NO.3, THIS GROUND IS SIMILAR TO GROUND NO. 5 OF ASSESSEES APPEAL FOR A.Y 2001-02 I.E. ITA NO.270/M UM/2005. FOLLOWING THE ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 22 SAID DECISION, WE HOLD THAT LD. CIT(A) HAS RIGHTLY DELETED THIS ADDITION AND THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 19. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.2398/MUM/2011:A.Y.2005-06: 20. APROPOS GROUND NO.1, WITH REFERENCE TO RULE 8D DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS MADE AT A SUM OF RS.45,8 0,090/-. THE DISALLOWANCE WAS AGITATED IN AN APPEAL FILED BEFORE LD. CIT(A). IT WAS SUBMITTED THAT RULE 8D IS NOT APPLICABLE PRIOR TO ASSESSMENT YEAR 2008- 09 AS PER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS. DCIT, 328 ITR 81(BOM). CONSIDERING ALL THESE SUBMI SSIONS OF THE ASSESSEE LD. CIT(A) HAS RECORDED A FINDING THAT ACCORDING TO DE CISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. (SUPRA) SOME REASONABLE DISALLOWANCE HAS TO BE MADE IRRESPECTIVE OF THE FACT THAT WHETHER OR NOT RULE 8D IS APPLICABLE. HE HAS RETURNED A FINDI NG THAT IN THE PRESENT CASE THERE IS NO DIRECT EXPENDITURE ATTRIBUTABLE TO EA RNING OF EXEMPT INCOME. THERE IS NOTHING ON RECORD TO SUGGEST THAT BORROWE D FUNDS HAVE BEEN DIVERTED FOR EARNING THIS INCOME. THEREFORE, WHAT REMAIN TO BE CONSIDERED ARE INDIRECT/ ADMINISTRATIVE EXPENSES WHICH CAN BE ESTIMATED ON R EASONABLE BASIS. HE FURTHER FOUND THAT DURING THE YEAR UNDER CONSIDERAT ION INCREMENTAL INVESTMENT IS ONLY A SUM OF 489.77 LACS. THEREFOR E, HE RESTRICTED THE DISALLOWANCE TO 0.5% OF THE SAME AND IT WAS CALCULA TED TO RS.2.44 LACS. THE DEPARTMENT IS AGGRIEVED BY SUCH RELIEF GIVEN BY LD. CIT(A) AND HAS FILED AFOREMENTIONED GROUNDS. 20.1 AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY LD. DR THAT LD.CIT(A) SHOULD HAVE RESTORED THIS ISSUE TO THE FILE OF AO SO THAT AO MAY HAVE GOT THE OPPORTUNITY TO DECIDE THE ISSUE IN ACCORDANCE WITH DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD.(SUPRA). THUS, HE ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 23 PLEADED THAT THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE SHOULD BE SET ASIDE AND MATTER MAY BE SENT BACK TO THE FILE OF A.O FOR RE-ADJUDICATION. 20.2 ON THE OTHER HAND SUCH ARGUMENTS OF LD. DR WER E OBJECTED BY LD. AR. HE SUBMITTED THAT LD. CIT(A) HAS TAKEN A REASONABLE VIEW AND HIS ORDER SHOULD BE UPHELD. HE SUBMITTED THAT FOR A.Y 2000-0 1 AND 2002-03 THE DISALLOWANCE WAS RESTRICTED TO 2% OF THE DIVIDEND I NCOME AND THUS, LD. CIT(A) HAS TAKEN A REASONABLE VIEW AND HIS ORDER SHOULD BE UPHELD. 20.3 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTE NTIONS HAVE CAREFULLY BEEN CONSIDERED. THOUGH LD. CIT(A) HAS RECORDED A FINDING THAT NO DIRECT EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE WHICH COULD BE ATTRIBUTED TO EARNING OF EXEMPT INCOME. HE HAS ALSO OBSERVED TH AT THERE IS NOTHING ON RECORD TO SUGGEST THE BORROWED FUNDS WERE UTILIZED FOR EARNING EXEMPT INCOME BUT AO DID NOT GET OPPORTUNITY TO VERIFY THIS ISSU E. THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE REQUIRES TO BE RESTORED BAC K TO THE FILE OF AO FOR RE- ADJUDICATION AS WAS DONE BY LD. CIT(A) IN RESPECT O F A.Y 2004-05. TO BE CONSISTENT WITH THE SAID VIEW, WE RESTORE THIS ISS UE TO THE FILE OF AO FOR FRESH ADJUDICATION AS PER ASSESSMENT YEAR 2004-05. WE DI RECT ACCORDINGLY. THIS GROUND IS CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 21. APROPOS GROUND NO.2, THIS GROUND HAS BEEN ADJUD ICATED IN ASSESSEES APPEAL FOR A.Y 2001-02 BEING GROUND NO.5 IN THAT AP PEAL. THE SAID DECISION WILL BE APPLICABLE TO THIS GROUND ALSO. FOLLOWING THE SAID DECISION WE UPHOLD THE ORDER OF LD. CIT(A) VIDE WHICH ADDITION OF RS.1 ,19,13,490/- IS DELETED. THIS GROUND OF REVENUE IS DISMISSED. 21.1 IN THE RESULT, REVENUES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ITA NO.270/MUM/2005 & OTHERS CLARIANT CHEMICALS (INDIA) LIMITED . 24 22. TO SUM UP: (1) ITA NO.270/MUM/2005 IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES IN THE MANNER AFORESAID. (2) ITA NO.4820/MUM/2011 IS ALLOWED. (3) ITA NO.4982/MUM/2011 IS DISMISSED. (4) ITA NO.2398/MUM/2011 IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES IN THE MANNER AFORE SAID. ORDER PRONOUNCED IN THE OPEN COURT ON 09/05/2014 0 + ./$ ! 1 23 09/05/2014 / + 4 5 SD/- SD/- ( / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) ! / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2 DATED 09/05/2014 0 0 0 0 + ++ + ), ), ), ), 6$, 6$, 6$, 6$, / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 84 ), , , / DR, ITAT, MUMBAI 6. 49 : / GUARD FILE. 0 0 0 0 / BY ORDER, *, ), //TRUE COPY// ; ;; ; / < < < < & & & & (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS