M/s. HINDUSTAN PETROLEUM CORPORATION LTD., MUMBAI V. ADDL. CIT. Rg. - 1(1), MUMBAI

ITA 2736/MUM/2007

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1919 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 18-10-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 09-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Maximum Marginal Rate; Rule of consistency; Earning of tax free income; Surrender of tenancy right; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 244A; 14A; 80IB; 37(1); 80G; 37; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2736/MUM/2007 FOR ASSESSMENT YEAR: 2003- 04 HINDUSTAN PETROLEUM CORPORATION LTD. 17, JAMSHEDJI TATA ROAD, MUMBAI -400020 PAN: AAACH1118B VS. ADD. CIT, RANGE- 1(1), AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.649/MUM/2009 FOR ASSESSMENT YEAR: 2004- 05 HINDUSTAN PETROLEUM CORPORATION LTD. 17, JAMSHEDJI TATA ROAD, MUMBAI -400020 PAN: AAACH1118B VS. ADD. CIT, RANGE- 1(1), AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.1186/MUM/2009 FOR ASSESSMENT YEAR: 2004- 05 ADD. CIT, RANGE- 1(1), AAYAKAR BHAVAN, MUMBAI-400020. VS. HINDUSTAN PETROLEUM CORPORATION LTD. 17, JAMSHEDJI TATA ROAD, MUMBAI -400020 PAN: AAACH1118B (APPELLANT) (RESPONDENT) ITA NO.699/MUM/2009 FOR ASSESSMENT YEAR: 2005- 06 HINDUSTAN PETROLEUM CORPORATION LTD. 17, JAMSHEDJI TATA ROAD, MUMBAI -400020 PAN: AAACH1118B VS. ADD. CIT, RANGE- 1(1), AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 2 ITA NO.1187/MUM/2009 FOR ASSESSMENT YEAR: 2005- 06 ADD. CIT, RANGE- 1(1), AAYAKAR BHAVAN, MUMBAI-400020. VS. HINDUSTAN PETROLEUM CORPORATION LTD. 17, JAMSHEDJI TATA ROAD, MUMBAI -400020 PAN: AAACH1118B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.J. PARDIWALA SR ADVOCATE WITH MS. ARTI SATHE ADVOCATE REVENUE BY : SHRI RAHUL RAMA N, (CIT-DR) & SHRI K.C. KANOJA (DR) DATE OF HEARING : 18.10.2016 DATE OF PRONOUNCEMENT : 23.11.2016 O R D E R PER PAWAN SINGH, JM: 1. THESE FIVE APPEALS U/S 253 OF THE INCOME-TAX ACT ( ACT) ARE DIRECTED AGAINST THE DIFFERENT ORDER(S) OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)- I, MUMBAI [FOR SHORT CIT(A)] FOR ASSESSMENT YEARS (AYS)- 2003-04 TO 2005-06. IN ALL APPEALS THE FACTS ARE COMMON HENCE ALL APPEALS WERE CLUBBED TOGETHER, HEARD AND ARE DECIDED BY CONSOLIDATED ORD ER TO AVOID THE CONFLICTING DECISIONS . 2. FIRST WE ARE TAKING APPEAL ITA NO. 2736/MUM/2007 (F OR AY-2003-04), THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-I, MUMBAI DATED 25.01.2007. THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. RIGHT TO USE TECHNICAL KNOW-HOW - DISALLOWANCE O F CLAIM U/S 37(1) AND ALLOWING ONLY 1/6TH U/S 35 AB: RS. 15,61,759/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 37(1) TOWA RDS RIGHT TO USE TECHNICAL KNOW-HOW AND INSTEAD ALLOWING THE CLAIM OVER 6 YEARS AT A RATE O F 1/6TH EVERY YEAR U/S 35AB. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 3 2. PROVISION TOWARDS POST RETIREMENT MEDICAL BENEFI T - DISALLOWANCE U/S 37(1) - RS. 1,93,00,000/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM U/S 3 7(1). 3. NOTIONAL DISALLOWANCE U/S 14A AGAINST INCOME EAR NED FROM AN AOP - RS. 4,88,576/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A ON INC OME EARNED FROM AOP AS THOUGH IT IS AN EXEMPT INCOME WHEREAS THE IN COME QUALIFIES FOR DEDUCTION U/S 86(V) OF THE ACT. 4. DISALLOWANCE OF DEDUCTION CLAIMED U/S 80M - RS. 1,27,57,500/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING AO'S METHOD OF COMPUTING NOTION AL DISALLOWANCE OF EXPENDITURE ALLEGED TO HAVE BEEN INCURRED TOWARDS E ARNING DIVIDEND INCOME. IN THE PROCESS, HE ERRED IN CONFIRMING THE DISALLOWANCE OF ENTIRE INCOME AS THE NOTIONAL EXPENDITURE FAR EXCEEDED THE DIVIDEND INCOME. 5. SURRENDER OF TENANCY RIGHTS TREATED AS INCOME FR OM OTHER SOURCES INSTEAD OF CAPITAL GAIN - RS. 34,67,520/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THAT THE APPELLANTS DID NOT HAV E TENANCY RIGHTS THEREBY DENYING TAXATION OF IT UNDER 'CAPITAL GAINS ' AND FURTHER HELD THAT COMPENSATION RECEIVED WAS TOWARDS SETTLEMENT O F LITIGATION AND HENCE TO BE TREATED AS 'INCOME FROM OTHER SOURCES'. 6. EXPENDITURE ON RAILWAY SIDING FACILITIES - DISAL LOWANCE U/S 37(1) - RS. 3,81,07,718/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE TOWARDS EXPEND ITURE ON RAILWAY SIDING FACILITIES ON THE GROUND THAT EXPENDITURE IS OF CAPITAL IN NATURE (FALLING UNDER EXPLANATION 1 TO SECTION 32(1)(II)) WITHOUT APPRECIATING FACTS OF THE CASE. WITHOUT PREJUDICE TO THE AFORESAID GROUND CIT(A) ER RED IN NOT ALLOWING DEPRECIATION IN RESPECT OF ABOVE CAPITAL ASSETS. 7. DENIAL OF INTEREST CLAIMED U/S 36(1)(III) - RS. 11,21,917 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING DISALLOWANCE ON THE GROUND THAT THE CAPITALIZED INTEREST IS INTEGRAL PART OF CAPITAL WORK IN PROGRE SS AND NOT DEDUCTIBLE U/S. 36(1)(III) THOUGH THE PROVISO TO THE SAID SECT ION INTRODUCED IN FINANCE ACT, 2003 WAS EFFECTIVE 01/04/2004 AND THER EBY APPLICABLE ONLY EFFECTIVE ASSESSMENT YEAR 2004-05. 8. ESTABLISHMENT EXPENDITURE - DISALLOWANCE U/S 37( 1)- RS. 12,57,42,793/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF EXPENDITURE OF THE NATURE SUCH AS SALARIES INCURRED ON PROJECT MONITORING TEAM WHICH QUALIFIES U/S 37(1) OF THE ACT ON THE GROUND THAT ONCE A PARTICULAR TREATM ENT IS GIVEN IN THE BOOKS OF ACCOUNTS (TREATED AS ASSET IN BOOKS) IT SH ALL BE BINDING UNLESS IT IS PROVED TO BE ERRONEOUS OR CONTRARY TO CONCEPT OF LEGAL POSITION. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 4 9. LEVY OF INTEREST U/S 2340 - RS. 4,15,65,158/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING LEVY OF INTEREST U/S 234D THOUG H THE SAID SECTION WAS INSERTED BY THE FINANCE ACT, 2003 W.E.F. 1/6/2003 O NLY. ADDITIONAL GROUNDS: 1. DEDUCTION U/S 35(1)(II) CONTRIBUTION TO LERC - RS. 5,10,250/- (RS.25,51,250 - RS.20,41,000) WHILE SECTION 35(1)(II) PERMITS WEIGHTED DEDUCTION OF 125% ON CONTRIBUTION TO LPG EQUIPMENT RESEARCH CENTRE, DEDU CTION WAS CLAIMED ONLY TO THE EXTENT OF 100%. THE DIFFERENTIAL AMOUNT OF 25% IS BEING CLAIMED NOW. 2. DEDUCTION U/S 37(1) TOWARDS DETAILED FEASIBILITY STUDY EXPENSE - RS. 3,31,82,835/- THE EXPENDITURE INCURRED ON FEASIBILITY STUDY IN EX ISTING LINE OF BUSINESS IS DEDUCTIBLE U/S 37(1) OF THE ACT THOUGH IT WAS CA PITALIZED IN BOOKS OF ACCOUNT. THIS WAS OMITTED TO BE CLAIMED DURING ASSE SSMENT PROCEEDING AND BEFORE CIT(A)AND IS BEING CLAIMED NOW. 3. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD AR FO R THE PARTIES AND SEEN THE RECORD OF THE CASE. GROUND NO.1 RELATES TO DISALLOW ANCE OF CLAIM FOR DEDUCTION U/S 37(1) (EXPENDITURE FOR USES OF KNOW H OW). THE LD. AUTHORISED REPRESENTATIVE (AR) OF ASSESSEE ARGUED THAT SIMILAR DISALLOWANCE WAS MADE IN EARLIER YEARS AND THE ISSUE CAME UP FOR CONSIDER ATION BEFORE THE TRIBUNAL IN EARLIER YEARS AS WELL, WHEREIN THIS ISSUE HAS BEEN ALLOWED IN FAVOUR OF ASSESSEE. THE LD. AR DREW OUR ATTENTION TO ORDER OF ITAT DATED 31.03.2012 FOR AY 1992-92 TO 1995-96 AND AGAIN FOR AY 2000-01, 2001-02 & 2002-03 IN ITA NO. 8575, 8576/M/2004 & ITA 5825/M/2005 DAT ED 16.01.2013. 4. WE HAVE SEEN THE ORDER OF LOWER AUTHORITIES AND THE ORDER PASSED BY CO- ORDINATE BENCH OF THIS TRIBUNAL IN ITS CONSOLIDATED ORDER FOR AY 2000-01, 2001-02 AND 2002-03 IN ITA NO ITA NO. 8575, 8576/ M/2004 & ITA 5825/M/2005 DATED 16.01.2013, WHILE RELYING ON THE ORDER FOR 1992-93 TO 1995-96 IN ITA NO. 212 AND IN ITA NO, 5856 TO 5858/ MUM/1999 DATED 31.07.2012, PASSED THE FOLLOWING ORDER: ` 15. THE NEXT GROUND RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1993-94, 1994-95 AND 1995-96 IS REGARDING DISALLOWANCE OF EX PENDITURE ON 20, POINT PROGRAMME. WE REPRODUCE THE GROUND NUMBER 2 FOR THE ASSESSMENT YEAR 1993-94 AS UNDER: ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 5 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISAL LOWING THE EXPENDITURE INCURRED U/S 37(1) TOWARD 20 POINT PROG RAMME AMOUNTING TO RS. 41,86,000/- 16. WE HAVE HEARD THE LD SR COUNSEL AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD, AT THE OUTSET, WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEE 'S OWN CASE FOR THE ASSESSMENT YEAR AT 1989-90 IN PARAS 7 TO 10 AS UNDE R: 7. WE FIND THAT AS HELD BY HON'BLE KAMATAKA HIGH CO URT IN THE CASE OF MYSORE KIRLOSKAR LTD. V. CIT [1987] 166 ITR 836, WH ILE 'THE BASIC REQUIREMENTS FOR INVOKING SECTIONS 37(1) AND 80G AR E QUITE DIFFERENT', 'BUT NONETHELESS THE TWO SECTIONS ARE NOT MUTUALLY EXCLUSIVE'. THUS, THERE ARE OVERLAPPING AREAS BETWEEN THE DONATIONS G IVEN BY THE ASSESSEE AND THE BUSINESS EXPENDITURE INCURRED BY T HE ASSESSEE. IN OTHER WORDS, THERE CAN BE CERTAIN AMOUNTS, THOUGH IN THE NATURE OF DONATIONS, AND NONETHELESS, THESE AMOUNTS MAY BE DEDUCTIBLE UN DER SECTION 37(1) AS WELL. THEREFORE, MERELY BECAUSE AN EXPENDITURE I S IN THE NATURE OF DONATION, OR, TO USE THE WORDS OF THE CIT(A), 'PROM OTED BY ALTRUISTIC MOTIVES', IT DOES NOT CEASE TO BE AN EXPENDITURE DE DUCTIBLE UNDER SECTION 37(1). IN MYSORE KIRLOSKAR LTD.S CASE.THEIR LORDSH IPS HAVE OBSERVED THAT EVEN IF THE CONTRIBUTIONS BY THE ASSESSEE IS I N THE FORMS OF DONATIONS, BUT IF IT COULD BE TERMED AS EXPENDITURE OF THE CATEGORY FALLING IN SECTION 37(1), THEN THE RIGHT OF THE ASS ESSEE TO CLAIM THE WHOLE OF IT AS A DEDUCTION UNDER SECTION 37(1) CANNOT BE DEFINED. WHAT IS MATERIAL IN THIS CONTEXT IS WHETHER OR NOT THE EXPE NDITURE IN QUESTION WAS NECESSITATED BY BUSINESS CONSIDERATIONS OR NOT. ONCE IT IS FOUND THAT THE EXPENDITURE WAS DICTATED BY COMMERCIAL EXP EDIENCIES, THE DEDUCTION UNDER SECTION 37(1) CANNOT BE DECLINED. A S TO WHAT SHOULD BE RELEVANT FOR EXAMINING THIS ASPECT OF THE MATTER, W E MAY ONLY REFER TO THE OBSERVATIONS OF HON'BLE SUPREME COURT IN THE CA SE OF SRI VENKATA SATUANARTUMA RICE MILL CONTRACTORS CO. V. CIT [1997 ] 223 ITR 101: ... ANY CONTRIBUTION MADE BY AN ASSESSEE TO A PUBLI C WELFARE FUND WHICH IS DIRECTLY CONNECTED OR RELATED WITH THE CAR RYING ON OF THE ASSESSEE'S BUSINESS OR WHICH RESULTS IN THE BENEFIT TO THE ASSESSEE'S BUSINESS HAS TO BE REGARDED AS AN ALLOWABLE DEDUCTI ON UNDER SECTION 37(1) OF THE ACT. SUCH A DONATION, WHETHER VOLUNTARY OR AT THE INSTANCE OF THE AUTHORITIES CONCERNED, WHEN MAD E TO A 'CHIEF MINISTER'S DROUGHT RELIEF FUND OR A DISTRICT WELFAR E FUND ESTABLISHED BY THE DISTRICT COLLECTOR OR ANY OTHER FUND FOR THE BENEFIT OF THE PUBLIC AND WITH A VIEW TO SECURE BEN EFIT TO THE ASSESSEE'S BUSINESS, CANNOT BE REGARDED AS PAYMENT OPPOSED TO PUBLIC POLICY. IT IS NOT AS IF THE PAYMENT IN THE P RESENT CASE HAD BEEN MADE AS AN ILLEGAL GRATIFICATION. THERE IS NO LAW WHICH PROHIBITS THE MAKING OF SUCH A DONATION. THE MERE F ACT THAT MAKING ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 6 OF A DONATION FOR CHARITABLE OR PUBLIC CAUSE OR INT EREST RESULTS IN THE GOVERNMENT GIVING PATRONAGE OR BENEFIT NO GROUN D TO DENY THE ASSESSEE A DEDUCTION OF THAT AMOUNT UNDER SECTION 3 7(1) OF THE ACT WHEN SUCH PAYMENT HAD BEEN MADE FOR THE PURPOSE OF ASSESSEE'S BUSINESS. 8. IN THE CASE OF CIT U. MADRAS REFINERIES LTD. [20 04] 266 ITR 170, HON'BLE MADRAS HIGH COURT HAS UPHELD DEDUCTIBILITY OF THE A MOUNT SPENT BY THE ASSESSEE EVEN ON BRINGING DRINKING WATER TO LOCALIT Y AND IN AIDING LOCAL SCHOOL. WHILE DOING SO, THEIR LORDSHIPS OBSERVED AS FOLLOWS: THE CONCEPT OF BUSINESS IS NOT STATIC. IT HAS EVOLV ED OVER A PERIOD OF TIME TO INCLUDE WITHIN ITS FOLD THE CONCRETE EXPRES SION OF CARE AND CONCERN FOR THE SOCIETY AT LARGE AND THE LOCALITY I N WHICH BUSINESS IS LOCATED IN PARTICULAR. BEING A GOOD CORPORATE CITIZ EN BRINGS GOODWILL OF THE LOCAL COMMUNITY AS ALSO WITH THE REGULATORY AGE NCIES AND SOCIETY AT LARGE, THEREBY CREATING AN ATMOSPHERE IN WHICH THE BUSINESS CAN SUCCEED IN A GREATER MEASURE WITH THE AID OF SUCH G OODWILL. 9. LET US NOW TAKE A LOOK AT THE UNDISPUTED FACTS O F THIS CASE. THE ASSESSEE IS A COMPANY OWNED BY THE GOVERNMENT OF INDIA AND WORKIN G UNDER THE CONTROL AND DIRECTIONS OF THE GOVERNMENT OF INDIA. AS THE S TATEMENT OF FADS CLEARLY SETS OUT, THE EXPENDITURE ON 20-POINT PROGRAMMES WA S INCURRED IN VIEW OF SPECIFIC DIRECTIONS OF THE GOVERNMENT OF INDIA. THI S FACTUAL ASPECT IS NOT EVEN DISPUTED OR CHALLENGED BY THE REVENUE AT ANY STAGE. IT CANNOT BUT BE IN THE BUSINESS INTEREST OF THE ASSESSEE COMPANY TO ABIDE BY THE DIRECTIONS OF THE GOVERNMENT OF INDIA WHICH ALSO OWNS THE ASSESSEE-CO MPANY. IN ANY EVENT, AS OBSERVED BY THE HON'BLE MADRAS HIGH COURT IN MADRAS REFINERIES LTD. 'S CASE, MONIES SPENT BY THE ASSESSEE AS A GOOD CORPOR ATE CITIZEN AND TO EARN THE GOODWILL OF THE SOCIETY HELP CREATING AN ATMOSPHERE IN WHICH THE BUSINESS CAN SUCCEED IN A GREATER MEASURE WITH THE HELP OF SUCH GOODWILL. THE MONIES SO SPENT THEREFORE ARE REQUIRED TO BE TREATED AS BUSIN ESS EXPENDITURE ELIGIBLE FOR DEDUCTION UNDER SECTION 37(1) OF THE ACT. WHAT IS T HE EXPENDITURE FOR THE IMPLEMENTATION OF 20-POINT PLANT AFTER ALL? IT ISOL ELY FOR THE WELFARE OF THE OPPRESSED CLASSES OF SOCIETY, FOR WHICH EVEN THE CO NSTITUTION OF INDIA SANCTIONS POSITIVE DISCRIMINATION, AND FOR CONTRIBU TION TO ALL AROUND DEVELOPMENT OF VILLAGES, WHICH HAS ALWAYS BEEN THE CENTRAL THEME OF GOVERNMENT'S DEVELOPMENT INITIATIVES. AN EXPENDITUR E OF SUCH A NATURE CANNOT BUT BE, TO USE THE WORDS EMPLOYED BY THE HON'BLE MA DRAS HIGH COURT IN MADRAS REFINERIES LTD.'S CASE, 'A CONCRETE EXPRESSI ON OF CARE AND CONCERN FOR THE SOCIETY AT LARGE' AND AN EXPENDITURE TO DISCHAR GE THE RESPONSIBILITIES OF A 'GOOD CORPORATE CITIZEN WHICH BRINGS GOODWILL OF WI TH THE REGULATORY AGENCIES AND SOCIETY AT LARGE, THEREBY CREATING AN ATMOSPHER E IN WHICH THE BUSINESS CAN SUCCEED IN A GREATER MEASURE WITH THE AID OF SU CH GOODWILL'. 10. TURNING TO REVENUE'S STAND THAT THESE EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE-COMPANY BUT, ON THE ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 7 CONTRARY, THESE EXPENSES ARE VOLUNTARILY INCURRED B Y THE COMPANY FOR THE BENEFIT OF NON-EMPLOYEES, AND AS SUCH THE INCURRING OF SUCH EXPENDITURE MUST BE CONSTRUED AS APPLICATION OF INCOME RATHER THAN E XPENDITURE TO EARN INCOME, WE MAY ONLY QUOTE A PASSAGE FROM THE JUDGME NT OF HOUSE OF LORDS IN THE CASE OF ATHERTON V. BRITISH INSULATED & HEISBEY CABLES LTD. [1925] 10 TAX CASES 155, REFERRED TO WITH APPROVAL BY THE HON'BLE SUPREME COURT IN THE EASE OF CIT U. CHANDULAL KESHAUIAL & CO. (1960] .8 ITR 601, WHICH READS AS FOLLOWS: IT WAS MADE CLEAR IN THE ABOVE CITED CASES OF USHE R'S WILSHIRE BREWERY V. BRUCE AND SMITH V. INCORPORATED COUNCIL OF LAW REPORTING 1914 (6 TAX CASES 477) THAT A SUM OF MONEY EXPENDED NOT WITH A NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE B ENEFIT TO THE TRADE, BUT VOLUNTARILY ARID ON THE GROUNDS OF COMMERCIAL E XPEDIENCY AND IN ORDER TO INDIRECTLY FACILITATE, CARRYING ON OF THE BUSINESS MAY YET BE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE TRADE. IT WILL, THEREFORE, BE CLEAR THAT EVEN IF AN EXPENS E IS INCURRED VOLUNTARILY, IT MAY STILL BE CONSTRUED AS 'WHOLLY A ND EXCLUSIVELY' JUST BECAUSE THE EXPENSES ARE VOLUNTARY IN NATURE ARID A RE NOT FORCED ON THE ASSESSEE BY A STATUTORY OBLIGATION, THESE EXPENSES CANNOT CEASE TO BE A BUSINESS EXPENDITURE. KEEPING ALL THESE FACTORS IN MIND, AS ALSO ENTIRETY OF THE CASE, WE ARE NOT INCLINED TO SUSTAIN THE DIS ALLOWANCE OF RS. 10,55,648 AS EXPENDITURE INCURRED ON IMPLEMENTATION 20-POINT PROGRAMMES. WE ARE, THEREFORE, OF THE CONSIDERED VI EW THAT THE AUTHORITIES BELOW INDEED ERRED IN LAW IN DECLINING DEDUCTION OF EXPENSES INCURRED ON 20-POINT PROGRAMMES WHICH WAS, BEYOND DISPUTE OR CONTROVERSY, AT THE INSTANCE OF THE GOVERNMENT, AND WAS TO DISCHARGE THE ASSESSEE'S OBLIGATIONS TOWARDS SOCIETY AND AS A RESPONSIBLE CORPORATE CITIZEN. 17. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' THEREFORE, CONSIDERING THE ORDER OF CO-ORDINATE BEN CH AND FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND NO.1 OF APPEA L RAISED BY ASSESSEE IS ALLOWED. 5. GROUND NO.2 RELATES WITH THE PROVISION TOWARDS POST RETIREMENT MEDICAL BENEFIT. THE LD. AR OF THE ASSESSEE ARGUED THAT SIM ILAR DISALLOWANCE WAS MADE IN EARLIER YEARS AND THE MATTER TRAVELLED UP T O TRIBUNAL AND THE SIMILAR GROUND OF APPEAL WAS ALLOWED IN FAVOUR OF ASSESSEE. LD. DEPARTMENTAL ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 8 REPRESENTATIVE (DR) FOR THE REVENUE SUBMITTED THAT THE ISSUE HAS BEEN SET- ASIDE TO THE FILE OF AO TO ALLOW THE CLAIM ON THE B ASIS OF ACTUAL REPORT. 6. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW AND THE ORDER PASSED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE, WE FIND THAT SIMILAR ISSUE HAD COME UP CONSIDERATION BEFORE THIS TRIBUNAL IN AY 1997-98 AND AGAIN IN AYS 2000-01, 2001-02 AND 2002-03 AND THE CO-ORDINATE BENCH VIDE ORDER DATED 16.01.2013 IN ITA NOS. 8575, 8576 & 5885/MUM/2004 FOR AYS 2000-01, 2001-02 AND 2002-03 RESPECTIVELY MADE THE FOLLOWING ORDER: 9. WE HAVE HEARD THE ARGUMENTS OF THE TWO SIDES AN D PERUSED THE IMPUGNED ORDERS AND THE MATERIAL PLACED BEFORE US. THE POST RETIREMENT MEDICAL BENEFIT IS A PROVISION, WHICH HAS BECOME A MUST FOR ALL THE CONCERNS, SPECIALLY WHERE THERE ARE HEALTH HAZARDS. IT IS BECAUSE OF THESE RE ASONS, THE GOVERNMENT HAS NOTIFIED THAT POST RETIREMENT MEDICAL BENEFIT BE AL LOWED. WE HAVE SEEN FROM THE PAPERS APPENDED IN THE APE THAT A SERVICE CONTR ACT IS WORDED IN SUCH A WAY THAT THESE BENEFITS ARE INTEGRAL PART OF THE CO NTRACTS AND THE LIABILITY GETS ATTACHED, THE MOMENT A SERVICE CONTRACT IS SIGNED; INDUCTING A NEW EMPLOYEE. THE ARGUMENT OF SENIOR COUNSEL IS, THEREFORE, WELL FOUNDED. WE SHALL ALSO, REFER TO THE CASE OF BHARAT EARTH MOVERS LTD. VS CI T REPORTED IN 245 ITR 428, WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT LEA VE ENCASHMENT IS NOT A CONTINGENT LIABILITY. TAKING THE SAME CUE, THAT POS T RETIREMENT MEDICAL BENEFIT IS ALSO A LIABILITY WHICH GETS ATTACHED TO THE COMP ANY THE MOMENT, THE SERVICE CONTRACT IS SIGNED, WE HOLD THAT THE REVENUE AUTHOR ITIES ERRED IN DISALLOWING THE PROVISION UNDER THIS HEAD. HAVING HELD SO IN PR INCIPLE, NEITHER WE HAVE BEEN ABLE TO GATHER THE YEAR WISE BREAKUP OF THE AC TUARIAL VALUATION MADE BY THE ACTUARY AS UN 31.03.1997, NOR THE SENIOR COUNSE L, WAS ABLE TO APPRISE US ON THE VALUATION, PERTAINING TO THE YEAR UNDER CONS IDERATION. 10. TAKING INTO ACCOUNT THE ABOVE REASON, WE DEEM I T FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO, WHO SHALL CALL FOR THE YEAR WIS E VALUATION AND THEN ALLOW THE CLAIM ACCORDINGLY. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE CLAIM OF PROVI SION AFTER VERIFICATION OF THE ACTUARY'S REPORT PERTAINING TO THE CURRENT YEAR . THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF EARL IER YEARS, WE SET-ASIDE THE MATTER TO THE FILE OF AO TO VERIFY THE ACTUARIAL VA LUATION REPORT AND THEN ALLOWED THE CLAIMS OF ASSESSEE IN ACCORDANCE WITH T HE ORDER DATED 16.01.2013. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 9 7. GROUND NO.3 RELATES TO NOTIONAL DISALLOWANCE U/S 14 A. THE LD. AR OF ASSESSEE ARGUED THAT DISALLOWANCE U/S 14A WAS MADE FOR THE FIRST TIME. IT WAS ARGUED THAT THE PROVISION OF SECTION ARE NOT APPLIC ABLE TO THE FACT OF THE CASE OF ASSESSEE, AS ASSESSEE RECEIVED DIVIDEND FROM HIN DUSTAN COLAS LTD. AS WELL AS SHARE OF PROFIT FROM PETROLEUM INDIA INTERNATION AL (PIL) BOTH ARE NOT TAX FREE INCOMES. LD. AR OF THE ASSESSEE ARGUED THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO THESE INCOMES. IT WAS FURTH ER ARGUED THAT PIL IS A CONSORTIUM OF MEGA CORPORATE IS FORMED IN 1986 UNDE R THE AEGIS OF THE MINISTRY OF PETROLEUM AND NATURAL GAS, GOVERNMENT O F INDIA WHICH CONSISTS OF INDIAN OIL CORPORATION LTD.(IOCL) BHARAT PETROLE UM CORPORATION LTD. (BRPL), CHENNAI PETROLEUM COMPANY LTD. (CPCL), ENGI NEERS INDIA LTD. (EIL), HINDUSTAN PETROLEUM CORPORATION LTD. (HPCL), INDIAN PETROCHEMICALS CORPORATION LTD. (IPCL), INDO-BURMA PETROLEUM COMPA NY LTD.(IBP), BONGAIGON REFINERY & PETRO CHEMICALS P. LTD. (BRPL) AND KOCHI REFINERIES LTD. (KRL). PII IS AN AOP AND ITS ACCOUN TS ARE AUDITED EVERY YEAR AND ARE ASSESSED TO SEPARATELY AS PER THE PROVISION S OF SECTION 86 OF THE ACT. THUS, AS PER THE PROVISIONS OF SECTION 86, THE SHAR E OF MEMBER COMPANY (HPCL) SHALL NOT BE INCLUDED; THEREFORE, TOTAL INCO ME WITHOUT AOP IS CHARGEABLE TO TAX. LD. DR FOR REVENUE RELIED UPON T HE ORDER OF AUTHORITIES BELOW. WE HAVE CONSIDERED THE RIVAL CONTENTION OF T HE PARTIES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE LD. CIT (A) WHILE CONSIDERING THIS GROUND OF APPEAL OBSERVED THAT WHILE PASSING ORDER FOR AY 1999-2000 CONFIRMED THE DISALLOWANCE @ 3% OF TAX FREE INTERES T. THE ASSESSEE RECEIVED EXEMPT INCOME FROM AOP, THE ASSESSEE WAS REQUIRED T O ASSOCIATE WITH THE ACTIVITIES OF PIL (AOP) TO SPEND ITS RESOURCES FOR ITS SUCCESSFUL FUNCTIONING, THEREFORE, SECTION 14A IS SQUARELY APPLICABLE BUT T HE LD. CIT(A) DESCENDED REGARDING THE INTEREST EXPENDITURE ATTRIBUTABLE TO EARN EXEMPT INCOME AND CONCLUDED THAT ASSESSEE INVESTED OUT OF COMPOSITE F UND AND ASSOCIATED IN FUNCTIONING OF AOP WITH ITS RESOURCES AND GRANTED THE PARTIAL RELIEF AT RS. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 10 4,88,576/-. WE HAVE SEEN THAT DURING THE YEAR, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 1,62,85,873/- AS A SHARE OF PROFIT FR OM PIL. PIL IS BEING ASSESSED SEPARATELY AS PER THE PROVISIONS OF SECTIO N 86 AND AS PER PROVISO OF SECTION 86, THE SHARE OF MEMBER SHALL NOT BE INCLUD ED IN THE TOTAL INCOME AS THE AOP IS CHARGED AT THE MAXIMUM MARGINAL RATE, TH US, NO DISALLOWANCE FOR EARNING FROM AOP/PIL WAS WARRANTED, THUS, WE DIRECT THE AO TO DELETE THE ENTIRE ADDITION. 8. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. 9. GROUND NO.4 RELATES TO DISALLOWANCE OF DEDUCTION U/ S 80M. THE LD. AR OF THE ASSESSEE ARGUED THAT THE LOWER AUTHORITIES ERRONEOU SLY HELD THAT DIVIDEND INCOME OF RS. 1.27 CRORE, AND EXPENDITURE OF RS. 10 CRORE WAS INCURRED BY THE ASSESSEE. THE LOWER AUTHORITIES ERRED IN HOLDI NG THAT CERTAIN PART OF THE DEBIT FOR THE YEAR HAS FOUND ITS WAY IN EQUITY AND THE INTEREST COST OF SUCH DEBT IS ATTRIBUTABLE TO THE DIVIDEND INCOME. IT WAS ARGUED BY THE LD. AR THAT ASSESSEE HAS MADE THE INVESTMENT OF RS. 4.72 CRORE AND THE AMOUNT INVESTED WAS OUT OF THE SURPLUS EARNING IN THE EARLIER YEARS AND NOT FROM THE BORROWING MADE DURING THE YEAR, THERE HAVE BEEN NEITHER EXPEN SES WHICH HAVE BEEN DEBITED NOR CLAIM IN RESPECT OF EXPENDITURE INCURRE D IN RELATION TO DIVIDEND INCOME. THE ASSESSEE EARNED DIVIDEND OF RS. 1.28 CR ORE ON THE INVESTMENT OF RS. 4.72 CRORE WHICH WAS MADE DURING THE FINANCIAL YEAR (FY) 1995-96, 1996-97 & 1999-2000. THE CORRESPONDING PROFIT BEFOR E TAX AND IN THESE YEARS WAS SUBSTANTIALLY HIGHER AT RS. 845.96 CRORE, RS. 941.70 CRORE AND RS. 1273.57 CRORE RESPECTIVELY. THE ASSESSEE HAS MADE I NVESTMENT IN SEVERAL GROUPS OF COMPANIES AT VARIOUS POINT OF TIME INCLUD ING OIL BONDS OF RS. 1231 CRORE ISSUED IN LIEU OF CASH COMPENSATION BY G OVERNMENT OF INDIA TOWARDS SUBSIDIES. THE LD. AR OF THE ASSESSEE ARGUE D THAT U/S 80M ONLY EXPENSES WHICH HAVE BEEN INCURRED TO EARN THE DIVID END CAN BE DEDUCTED; NO OTHER AMOUNT CAN BE DEDUCTED. THEREFORE, NO EXPENSE S INCURRED TO EARN THE DIVIDEND INCOME; HENCE, THE DISALLOWANCE OF RS. 10 CRORE TO EARN AN AMOUNT ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 11 OF RS. 1.27 CRORE WAS NOT JUSTIFIED. ON THE OTHER H AND, LD. DR FOR REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE HAS SUFFICIENT SURPLUS FUND. THE REVENUE H AS NOT BROUGHT ON RECORD THAT ANY BORROWING WAS UTILIZED FOR EARNING THE DIV IDEND INCOME FOR THE YEAR UNDER CONSIDERATION. 10. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE HONBLE JURISDICTI ONAL HIGH COURT IN CIT VS. CENTRAL BANK OF INDIA REPORTED IN 264 ITR 0522 (BOM ). HELD THAT THE DEDUCTION U/S 80M HAS TO BE CALCULATED WITH REFEREN CE TO THE AMOUNT OF INTEREST COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AFTER DEDUCTING INTEREST ON MONEY BORROWED FOR EARNING SU CH INCOME AND NOT WITH REFERENCE TO FULL AMOUNT OF DIVIDEND RECEIVED BY TH E ASSESSEE, THE HONBLE COURT FURTHER HELD THAT THERE IS NO SCOPE FOR ANY E STIMATE OF EXPENDITURE BEING MADE AND FURTHER NO SCOPE OF NOTIONAL EXPENDI TURE ON PRO-RATA BASIS FOR DISALLOWANCE UNLESS THE FACT OF PARTICULAR CASE SO WARRANTED. HENCE, CONSIDERING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND THE FACT THAT ASSESSEE HAS INVESTED RS. 4.72 CRORE OUT OF SU RPLUS FUND AND THE INVESTMENT WAS MADE DURING THE FYS- 1995-96, 1996-9 7 AND 1999-2000. THE ASSESSEE HAS MADE NO EXPENSES IN RELATION TO DIVIDE ND INCOME. NEITHER THE AO NOR THE LD. CIT(A) BROUGHT ON RECORD THE ACTUAL EXPENDITURE, IF ANY INCURRED BY ASSESSEE IN RELATION TO DIVIDEND INCOME . THE ASSESSEE IS CLAIMING THROUGHOUT THAT THE AMOUNT OF INVESTMENT WAS OUT OF SURPLUS AVAILABLE WITH THEM, THUS, CONSIDERING THE PECULIARITY OF THE CASE , THE DISALLOWANCE MADE BY AO AND SUSTAINED BY LD. CIT(A) ARE DELETED. IN THE RESULT, THIS GROUND OF APPEAL RAISED BY ASSE SSEE IS ALLOWED. 11. GROUND NO.5 RELATES TO DISALLOWANCE OF RECEIPT OF A MOUNT AGAINST THE SURRENDER OF TENANCY RIGHT. THE LD. AR OF ASSESSEE ARGUED THAT ASSESSEE EARNED CAPITAL GAIN ON SURRENDER OF TENANCY RIGHT O N ACCOUNT OF COMPENSATION TOWARDS SURRENDERED OF TENANCY RIGHT. THE AO TAXED IT AS A ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 12 BUSINESS INCOME INSTEAD OF CAPITAL GAIN. THE LD. A R OF THE ASSESSEE ARGUED THAT THE ASSESSEE WAS IN POSSESSION OF FLAT, ALT V IEW CO-OP. HOUSING SOCIETY LTD. FROM 1986. THE TENANCY/LICENSE OF THE ASSESSEE WAS PROTECTED BY THE PROVISIONS OF MAHARASHTRA RENT CONTROL ACT AND ASSE SSEE RECEIVED A SUM OF RS. 34,67,520/- ON ACCOUNT OF SURRENDER OF TENANCY RIGHT TO ITS OWNER. LD. DR FOR REVENUE SUPPORTED THE ORDER OF AUTHORITIES B ELOW. 12. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES. THERE IS NO DISPUTE THAT THE ASSESSEE WAS IN POSSESSION OF A FLAT IN AL T VIEW CO-OP. HOUSING SOCIETY AND THE POSSESSION OF ASSESSEE WAS PROTECTE D UNDER THE PROVISIONS OF RENT CONTROL ACT. THE ASSESSEE RECEIVED A SUM OF RS . 34,67,520/- ON ACCOUNT OF SURRENDER OF TENANCY RIGHT TO ITS OWNER. IT IS S ETTLED LEGAL POSITION THAT AMOUNT RECEIVED ON ACCOUNT OF SURRENDER OF TENANCY RIGHT IS A CAPITAL GAIN AND NOT TO BE TAXED AS BUSINESS RECEIPT. THUS THIS GROUND OF APPEAL IS ALSO ALLOWED IN FAVOUR OF THE ASSESSEE. 13. GROUND NO.6 RELATES TO THE EXPENDITURE ON RAILWAY S IDING FACILITIES. THE LD. AR OF THE ASSESSEE ARGUED THAT ASSESSEE CLAIMED DED UCTION OF RS. 3,81,07,718/- ON ACCOUNT OF RAILWAY SIDING FACILITI ES. THE EXPENSES WERE INCURRED FOR CONNECTION OF RAILWAY STATIONS AND CON NECTING BY GOVERNMENT RAILWAY SIDING PUT UP BY OIL COMPANIES AS THE SIDIN G WERE CONSTRUCTED AT THE COST OF ASSESSEE, THOUGH OWNERSHIP ALWAYS VESTE D WITH THE RAILWAYS DUE TO THE SAFETY AND OTHER STATUTORY PROVISIONS AND TH E EXPENSES IS ALLOWABLE U/S 37 OF THE ACT. LD. DR FOR THE REVENUE RELIED UPON T HE ORDER OF AUTHORITIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE HONBLE GUWAHATI HIGH COURT IN CIT VS. BONGAIGON REFINERY & PETRO CHEMICALS P. LTD. (222 I TR 208) WHILE DEALING WITH ALMOST ON SIMILAR GROUNDS BASE ON SIMILAR FA CTS HELD THAT EXPENDITURE AS INCURRED ON CONSTRUCTION OF RAILWAY TRACK AND SI DING IS REVENUE EXPENDITURE AND NOT A CAPITAL EXPENDITURE. THUS, RE SPECTFULLY FOLLOWING THE ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 13 DECISION OF HONBLE GUJARAT HIGH COURT, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. 15. GROUND NO.7 RELATES TO THE DENIAL OF INTEREST U/S 3 6(1)(III) AS REVENUE EXPENDITURE. THE LD. AR OF THE ASSESSEE ARGUED THAT THOUGH THE SECTION WAS AMENDED ONLY FROM AY 2004-05 AND WAS NOT APPLICABLE FOR THE ORDER UNDER CONSIDERATION AND RELIED UPON THE DECISION OF CIT V S. CORE HEALTH CARE LTD. (298 ITR 194). LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. 16. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND SEEN THAT THE AO WHILE MAKING THE DISALLOWANCE U/S 36(1)(III) OF THE ACT HELD THAT ASSESSEE IN CAPITALIZING THE INTEREST AS INTEGRAL PART OF THE C OST OF WORK-IN-PROGRESS IS IN ACCORDANCE WITH THE ACCEPTED PRINCIPLE OF ACCOUNTAN CY AND THE ASSESSEE IS NOT ENTITLED TO CLAIM THIS AMOUNT AS REVENUE EXPENDITUR E THE AMOUNT OF INTEREST MERGED INTO THE COST OF ASSET. THE COST OF ASSET MA Y COMPRISE OF VARIOUS COMPONENT LIKE FREIGHT, INSURANCE, TRAVELLING EXPEN SES, PAYMENT OF SALARIES AND WAGE. THE AO FURTHER CONCLUDED THAT THERE IS NO BASIS TO HOLD THAT PROVISION OF SECTION 36(1)(III) SUPERSEDE THE PROVI SION OF SECTION 43(1) RELATING TO ACTUAL COST IN SO FAR AS INTEREST PAID ON BORROWING MADE FOR ACQUISITION OF CAPITAL ASSET. AND DISALLOWED IT AND TREATED AS CAPITAL EXPENDITURE. THE LD. CIT(A) WHILE CONSIDERING THIS GROUND CONCLUDED THAT CAPITALIZED INTEREST IS AN INTEGRAL PART OF COST OF CAPITAL WORK-IN-PROGRESS AND SUSTAINED THE DISALLOWANCE. THE HONBLE SUPREME COU RT IN DCIT VS. CORE HEALTH CARE LTD. (298 ITR 194) HELD THAT SECTION 36 (1)(III) IS ATTRACTED WHEN THE ASSESSEE BORROWS THE CAPITAL FOR THE PURPOSE OF HIS BUSINESS. IT DOES NOT MATTER WHETHER CAPITAL IS BORROWED IN ORDER TO ACQU IRE A REVENUE ASSET OR A CAPITAL ASSET, BECAUSE ALL THAT THE SECTION REQUIRE S IS THAT THE ASSESSEE MUST BORROWED THE CAPITAL FOR THE PURPOSE OF HIS BUSINES S. THIS DICHOTOMY BETWEEN THE BORROWING OF A LOAN AND ACTUAL APPLICATION THER EOF IN THE PURCHASE OF A CAPITAL ASSET, SEEMS TO PROCEED ON THE BASIS THAT A MERE TRANSACTION OF ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 14 BORROWING DOES NOT, BY ITSELF BRING ANY NEW ASSET O F ENDURING NATURE INTO EXISTENCE, AND THAT IT IS THE TRANSACTION OF INVEST MENT OF THE BORROWED CAPITAL IN THE PURCHASE OF A NEW ASSET WHICH BRINGS THAT AS SET INTO EXISTENCE. THE TRANSACTION OF BORROWING IS NOT THE SAME AS THE TRA NSACTION OF INVESTMENT. THUS, FOLLOWING THE DECISION OF HONBLE APEX COURT, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 36(1)(III). THUS, GROUND NO.7 RAISED IN THE PRESENT APPEAL IS A LLOWED. 17. GROUND NO.8 RELATES TO THE ESTABLISHMENT EXPENSES C HARGED TO CAPITAL WORK- IN-PROGRESS. THE LD. AR OF THE ASSESSEE ARGUED THA T THE ASSESSEE HAD CLAIMED DEDUCTION ON NORMAL BUSINESS EXPENSES E.G. SALARY, TRAVELLING, CONVEYANCE ETC. INCURRING IN CONNECTION WITH CAPITAL WORK-IN-P ROGRESS FOR ONGOING PROJECT IN THE SAME BUSINESS LINE AS REVENUE EXPENDITURE. H OWEVER, THE REVENUE AUTHORITIES HAS DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE HAS CHARGED, THUS, EXPENDITURE PERTAINING TO CAPITAL WO RK-IN-PROGRESS AND IS NOT PROVED AS REVENUE IN NATURE BUT THE SAME IS CAPITAL IN NATURE. THE LD. DR FOR REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW 18. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE SEEN THAT AO HA S TREATED THE ADMINISTRATIVE EXPENSES INCURRED ON ENGINEERING PRO JECT AND THE LD. CIT(A) WHILE CONSIDERING THIS GROUND OF APPEAL CONCURRED W ITH THE FINDING OF AO. 19. THE HONBLE SUPREME COURT IN TUTICORIN ALKALI CHEMI CALS AND FERTILIZERS LTD. VS. CIT (227 ITR 172(SC) HELD THAT WHEN THE QU ESTION IS WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT, OR WHETHER CERT AIN DEDUCTION FROM RECEIPT ARE PERMISSIBLE IN LAW OR NOT. THE QUESTION HAS TO BE DECIDED ACCORDING TO THE PRINCIPLE OF LAW AND NOT IN ACCORDANCE WITH THE ACC OUNTING PRACTICE. THE HONBLE APEX COURT HELD THAT ACCOUNTING PRACTICES C ANNOT BE OVERRIDE SECTION 56 OR ANY OTHER PROVISIONS OF THE ACT. THE ASSESSEE INCURRED EXPENSES ON VARIOUS PERSONNEL/ EMPLOYEE IN THE PROJECT FOR S UPERVISION AND MONITORING THE VARIOUS PROJECT AND MARKETING ALLOCATION AND RE FINERIES WHICH IS CERTAINLY ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 15 ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(1) OF THE ACT. EXPENSES WERE MADE ON ACCOUNT OF SALARY, DEARNESS ALLOWANCE (DA), CONV EYANCE EXPENSES, POSTAL CHARGES, BANK CHARGES, RENT FOR HOUSING ACCO MMODATION, MOTORCAR ETC. WHICH IS CERTAIN OF REVENUE EXPENDITURE. THUS, THE GROUND NO.8 RAISED BY THE ASSESSEE IS ALLOWED. 20. GROUND NO.9 RELATES TO INTEREST LEVIED U/S 234D. TH E LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE IS ENTITLED TO INTEREST U/ S 244A ON THE EXCESS TAX PAID @ % PER MONTH FROM 1 ST DAY OF APRIL TO THE DATE ON WHICH REFUND IS GRANTED. THE ASSESSEE HAS PAID TDS OF RS. 816 CRORE . THE ASSESSEE FILED RETURN ADMITTING THE TAX LIABILITY OF RS. 640 CRORE THE EXCESS TAX AMOUNTING TO RS. 173 CRORE WAS REFUNDED TO THE ASSESSEE CONSIDER ING THE INTEREST U/S 234C AMOUNTING TO RS. 6 CRORE AND NO INTEREST WAS GRANTE D ON THE REFUND. ON THE OTHER HAND, THE AO LEVIED THE INTEREST U/S 234D. TH OUGH, IT WAS APPLICABLE FROM 01.06.03. THE LD. CIT(A) WHILE CONSIDERING THI S GROUND CONCLUDED THAT SECTION 234D INTRODUCED W.E.F. 01.06.2003 IS PROCED URAL IN NATURE AND THEREFORE, INTEREST IS TO BE CHARGED ON THE BASIS O F ASSESSMENT ORDER MADE ON 01.06.2003. AND THEREAFTER, AND REJECTED THE GROUND . WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PARTIES AND GONE THROUGH T HE ORDERS OF AUTHORITIES BELOW. WE HAVE SEEN THAT SECTION 234D WAS INTRODUCE D W.E.F. 01.06.2003. THUS, THE ASSESSEE IS ENTITLED FOR THE INTEREST AS PER SECTION 234D W.E.F. 01.06.2003. THUS, THE AO IS DIRECTED TO CALCULATE T HE INTEREST IN ACCORDANCE WITH THE PROVISIONS OF SECTION 234D OF THE ACT. THU S, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 21. NEXT GROUND OF APPEAL IS ADDITIONAL GROUND NO.1 REL ATES TO DEDUCTION U/S 35(1)(II) OF THE ACT. THE LD. AR OF THE ASSESSEE AR GUED THAT ASSESSEE OMITTED TO CLAIM THE DEDUCTION U/S 35(1)(II) DURING THE ASS ESSMENT PROCEEDING AS WELL AS BEFORE THE LD. CIT(A). THE GROUND OF APPEAL RAIS ED ARE PURELY LEGAL IN NATURE AND THE ASSESSEE CLAIMED DEDUCTION ONLY TO T HE EXTENT OF 100%, THOUGH THE ASSESSEE IS ENTITLED TO DEDUCTION OF 125% OF CO NTRIBUTION TO LPG ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 16 EQUIPMENT RESOURCE CENTRE AND THE ASSESSEE IS CLAIM ING THE DIFFERENCE AMOUNT OF 25% NOW. IT WAS ARGUED BY LD. AR OF THE A SSESSEE THAT THIS GROUND OF APPEAL IS COVERED IN HIS FAVOUR IN ASSESSEES OW N CASE FOR AY 2000-01, 2001-02 & 2002-03. THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. 22. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND HAVE SEEN THE ORDER OF TRIBUNAL IN ITA NO. 8575 & 5825/MUM/05. IN PARA-49 OF THE ORDER OF TRIBUNAL, THE IDENTICAL GROUNDS OF APPEAL WAS AL LOWED IN FAVOUR OF ASSESSEE DIRECTING THE AO TO EXAMINE THE ISSUE AND ALLOWED THE CLAIM IN ACCORDANCE WITH THE PROVISIONS OF LAW. THUS, RESPEC TFULLY FOLLOWING THE ORDER OF CO-ORDINATE BENCH, THIS GROUND OF APPEAL I S ALLOWED AS MUTATIS MUTANDIS AS PER THE ORDER IN ITA NO8575&5825/M/05 D ATED 16.01.2013 PASSED BY TRIBUNAL. IN THE RESULT, THIS GROUND OF A PPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 23. NEXT ADDITIONAL GROUND NO.2 RELATES TO DEDUCTION U/ S 37(1) TOWARDS FEASIBILITY STUDY EXPENSES. LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE OMITTED TO CLAIM THE RELIEF IN RETURN OF INCOME. DU RING THE ASSESSMENT PROCEEDING AS WELL AS BEFORE THE FAA. THE LD. AR OF THE ASSESSEE ARGUED THAT THE GROUNDS OF APPEAL RAISED ARE PURELY LEGAL IN NA TURE AND THE ASSESSEE IS ENTITLED FOR THE RELIEF. WE HAVE SEEN THAT THE SIMI LAR GROUNDS OF APPEAL WAS RAISED BY THE ASSESSEE IN AY 2001-02 BY WAY OF ADDI TIONAL GROUND AND THE SAME WAS NOT ADMITTED (VIDE PARA 50 OF THE ORDER DA TED 16.01.2013) IN ITA NO. 8575/MUM/05. THUS, KEEPING IN VIEW THE ORDER OF EARLIER YEARS, THIS GROUND OF APPEAL IS NOT ADMITTED. THUS, THIS GROUND OF APPEAL IS REJECTED AS UN-ADMITTED. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 649/MUM/2009 24. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APP EAL FOR AY 2004-05. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 17 1. EXPENDITURE ON RAILWAY SIDING FACILITIES - DISAL LOWANCE U/S 37(1) - RS. 7,85,08,485/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE TOWARDS EXPENDITURE ON RAILWAY SIDING FACILITIES BY MERELY FOLLOWING HIS PREDECESSOR'S OR DER. 2. ESTABLISHMENT EXPENDITURE - DISALLOWANCE U/S 37( 1) - RS. 14,34,56,521/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF EXPENDITURE OF THE NA TURE SUCH AS SALARIES INCURRED ON PROJECT MONITORING TEAM WHICH QUALIFIES U/S 37(1) OF THE ACT ON THE GROUND THAT ONCE A PARTICULAR TREATMENT IS G IVEN IN THE BOOKS OF ACCOUNTS (TREATED AS ASSET IN BOOKS) IT SHALL BE BI NDING UNLESS IT IS PROVED TO BE ERRONEOUS OR CONTRARY TO CONCEPT OF LEGAL POS ITION. 3. PROVISION TOWARDS POST-RETIREMENT MEDICAL BENEFI T - DISALLOWANCE U/S 37(1) - RS. 3,17,91,388/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM U/S 37(1). 4. INTEREST ON INCOME TAX REFUND - DOUBLE TAXATION OF INCOME - RS. 86,20,377/- AO ERRED IN NOT ALLOWING THE REDUCTION TO THE INTER EST INCOME U/S 244A CLAIMED BY THE APPELLANT. CIT(A) OMITTED TO PASS OR DER ON THIS GROUND. 5. DEPRECIATION ON EXPENDITURE ON FACILITIES PUT UP BUT OWNERSHIP LYING WITH OTHER STATUTORY AUTHORITIES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN NOT ALLOWING DEPRECIATION ON FACILITIES PUT UP O N THE GROUND THAT THE ASSETS ARE NOT OWNED THOUGH AO HAS AGREED TO ALLOW DEPRECIATION BUT HAS NOT GIVEN THE SAME. 6. DEPRECIATION ON ESTABLISHMENT EXPENSES CHARGED T O CAPITAL WORK IN PROGRESS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN NOT ALLOWING DEPRECIATION ON ESTABLISHMENT EXPEN SES CHARGED TO CAPITAL WORK IN PROGRESS ON THE GROUND THAT CWIP IS NOT THE PART OF BLOCK OF ASSETS ON WHICH DEPRECIATION IS TO BE ALLOWED. ADDITIONAL GROUNDS: 1. DEDUCTION U/S 35(1)(II) CONTRIBUTION TO LERC RS. 6,79,750/- (RS.33,98,750 - RS.27,19,000) ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 18 WHILE SECTION 35(1) (II) PERMITS WEIGHTED DEDUCTION OF 125% ON CONTRIBUTION TO LPG EQUIPMENT RESEARCH CENTRE, DEDU CTION WAS CLAIMED ONLY TO THE EXTENT OF 100%. THE DIFFERENTIAL AMOUNT OF 25% IS BEING CLAIMED NOW. 2. DEDUCTION U/S 37(1) TOWARDS DETAILED FEASIBILITY STUDY EXPENSE - RS.26,03,200/- THE EXPENDITURE INCURRED .ON FEASIBILITY STUDY IN E XISTING LINE OF BUSINESS IS DEDUCTIBLE U/S 37(1) OF THE ACT THOUGH IT WAS CAPIT ALIZED IN BOOKS OF ACCOUNT. THIS WAS OMITTED TO BE CLAIMED DURING ASSE SSMENT PROCEEDING AND BEFORE CIT(A)AND IS BEING CLAIMED NOW. 25. GROUND NO. 1 RELATES TO THE EXPENDITURE ON RAILWAY SIDING FACILITIES. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE G ROUND NO.6 OF ITA NO. 2736/MUM/2007 WHICH WE HAVE ALLOWED IN FAVOUR OF AS SESSEE (SUPRA). THUS, CONSIDERING THE PRINCIPLE OF CONSISTENCY, THIS GROU ND OF APPEAL RAISED BY ASSESSEE IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 26. GROUND NO.2 RELATES TO THE ESTABLISHMENT EXPENDITUR E I.E. SALARY, ADMINISTRATIVE EXPENSES INCURRED ON PERSONNEL OF PR OJECT DEPARTMENT, THOUGH CAPITALIZED IN THE BOOKS. WE HAVE SEEN THAT THIS GR OUND OF APPEAL IS SIMILAR TO THE GROUND NO.8 OF ITA NO. 2736/MUM/2007 WHICH WE H AVE ALLOWED IN FAVOUR OF ASSESSEE (SUPRA). THUS, CONSIDERING THE P RINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL RAISED BY ASSESSEE IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 27. GROUND NO.3 RELATES TO PROVISION TOWARDS POST-RETIR EMENT MEDICAL BENEFIT CLAIMED U/S 37(1) OF THE ACT. WE HAVE SEEN THAT SIM ILAR GROUND OF APPEAL WAS RAISED IN ITA NO. 2736/MUM/2007 FOR AY-2003-04, WHI CH WE HAVE ALLOWED IN FAVOUR OF ASSESSEE (SUPRA). THUS, CONSIDERING THE P RINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL RAISED BY ASSESSEE IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 28. GROUND NO.4 RELATES TO THE INTEREST ON INCOME TAX R EFUND U/S 244A OF THE ACT. LD. AR OF THE ASSESSEE ARGUED THAT AN AMOUNT OF RS. 82,20,377/- TOWARDS INTEREST ON INCOME TAX REFUND WAS OFFERED AND DUE T AX WAS PAID. THE INTEREST WAS RECOMPUTED ON ACCOUNT OF RE-ASSESSMENT AND REDU CED INCOME AS THE ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 19 INTEREST RECEIVED WAS ALREADY TAXED. EARLIER THE DE DUCTION IN INTEREST WAS CLAIMED AS DEDUCTION WHICH WAS DISALLOWED ON THE GR OUND THAT ISSUE IS PENDING BEFORE THE TRIBUNAL. THE LD. DR FOR THE REVENUE REL IED UPON THE ORDER OF AUTHORITIES BELOW. WE HAVE CONSIDERED THE CONTENTIO N OF THE PARTIES AND SEEN THAT THE REFUND ON INTEREST IS CONSEQUENTIAL IN NAT URE, THUS, WE DIRECT THE AO TO RECOMPUTE THE INTEREST IN ACCORDANCE WITH LAW. 29. GROUND NO.5 RELATES TO DEPRECIATION ON EXPENDITURE ON FACILITIES. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS RAISED IN ALTERN ATIVE TO THE GROUND NO.1. WE HAVE ALREADY GRANTED FULL RELIEF TO THE ASSESSEE UN DER GROUND NO.1. THUS, THIS GROUND OF APPEAL HAS BECOME INFRUCTUOUS. 30. GROUND NO.6 RELATES TO THE DEPRECIATION ON ESTABLIS HMENT EXPENSES CHARGED TO CAPITAL WORK IN PROGRESS. WE HAVE SEEN THAT THIS GR OUND OF APPEAL IS ALSO RAISED IN ALTERNATIVE TO THE GROUND NO.2. WE MAY NO TE THAT WE HAVE ALREADY ALLOWED THE GROUND NO.2. THUS, THIS GROUND OF APPEA L HAS BECOME INFRUCTUOUS. 31. ADDITIONAL GROUND NO.1 RELATES TO THE DEDUCTION U/S 35(1)(II) @ 125% CLAIMED BEFORE THE TRIBUNAL AND WHICH WAS OMITTED TO BE CLA IMED IN RETURN OF INCOME. DURING THE ASSESSMENT PROCEEDING AND BEFORE THE LD. CIT(A). WE HAVE SEEN THAT SIMILAR GROUND OF APPEAL WAS RAISED BY ASSESSE E IN ITA NO. 2736/MUM/2007 FOR AY-2003-04 WHICH WE HAVE ALREADY ALLOWED. THUS, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THUS GROUND OF APPEAL IS ALLOWED MUTATES MUTANDIS. 32. ADDITIONAL GROUND NO.2 RELATES TO THE DEDUCTION U/S 37(1) TOWARDS DETAILED FEASIBILITY STUDY EXPENSE. WE HAVE SEEN THAT SIMILA R GROUNDS OF APPEAL WAS RAISED BY ASSESSEE IN ITA NO. 2736/MUM/2007 FOR AY- 2003-04 WHEREIN THE SIMILAR ADDITIONAL GROUND OF APPEAL IS NOT ADMITTED BEFORE US. THUS, THIS ADDITIONAL GROUND OF APPEAL IS REJECTED ON THE SIMI LAR LINES. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 20 ITA NO. 1186/MUM/2009 FOR AY 2004-05 33. THIS APPEAL IS FILED BY REVENUE RAISING THE FOLLOW ING OF APPEAL: 1. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) IS RIGHT IN DELETING THE DISALLOWANCE OF PAYMEN T TO CLUB MADE BY THE ASSESSEE AMOUNTING TO RS. 40,53,403/- U/S.40A(9) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S RIGHTLY MADE THE SAME DISALLOWANCE AND THE PROVISIONS OF SEC. 36(1) OF TH E ACT CLEARLY RULES OUT THE ALLOWABILITY OF ANY SUM MADE BY THE ASSESSEE AS AN EMPLOYER TOWARDS THE CLUB WHICH IS AN AOP.' 2. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) IS RIGHT IN DELETING THE DISALLOWANCE OF NOTION AL EXPENDITURE TO EARN TAX FREE INCOME U/S. 14A OF THE ACT WITHOUT APPRECIATIN G THE FACT THAT THE ASSESSING OFFICER HAS RIGHTLY MADE THE SAID DISALLO WANCE IN VIEW OF THE SPECIFIC PROVISIONS OF SEC.14A OF THE ACT WHICH HOL DS THAT NO DEDUCTION SHALL BE ALLOWED TO THE ASSESSEE IN RESPECT OF EXPE NDITURE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT.' 3. 'WHETHER ON THE FACT & CIRCUMSTANCES OF THE CASE & IN LAW THE CIT (A) IS RIGHT IN DIRECTING THE ASSESSING OFFICER TO ADOP T THE VALUE OF POWER GENERATED BY THE CONCERNED CAPTIVE POWER PLANT AS D ISCLOSED BY THE ASSESSEE FOR THE PURPOSE OF CALCULATING THE DEDUCTI ON U/S. 80IA/80IB.' 34. GROUND NO. 1 RELATES TO DELETING THE DISALLOWANCE O F PAYMENT TO CLUB MEMBERSHIP. THE LD. DR FOR THE REVENUE SUPPORTED TH E ORDER OF AO AND PRAYED THAT THE ORDER OF CIT(A) BE SET ASIDE AND TH AT THE ORDER OF AO MAY BE RESTORED. ON THE OTHER HAND THE LD AR OF THE ASSESS EE ARGUED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY DECISIONS OF VARIO US HIGH COURTS. 35. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND OBSERVED THAT THIS GROUND OF APPEAL IS NO MORE RES-INTEGRA AFTER THE DECISION OF HONBLE SUPREME COURT IN CIT VS. UNITED GAS MANUFACTURING C OMPANY IN CIVIL APPEAL NO. 6440/2012, WHEREIN THE HONBLE APEX COUR T ON THE BASIS OF SERIES OF JUDGMENT ON VARIOUS HIGH COURTS HELD THAT CLUB MEMBERSHIP FEES FOR EMPLOYEES INCURRED BY ASSESSEE IS BUSINESS EXPE NSES U/S 37 OF THE ACT. THUS, KEEPING IN VIEW THE DECISION OF HONBLE APEX COURT, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. THUS THIS GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 21 36. GROUND NO.2 RAISED BY THE REVENUE RELATES TO DELETI NG THE DISALLOWANCE OF NOTIONAL EXPENDITURE TO EARN TAX FREE INCOME U/S 14 A. THE LD DR FOR REVENUE RELIED UPON THE ORDER OF AO. ON THE OTHER H AND, LD. AR FOR ASSESSEE ARGUED THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.3 IN ASSESSEES APPEAL FOR AY-2003-04. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PARTIES AND SEEN THAT THE ASSESSEE HAS RAISED SIMIL AR GROUND, WHICH WE HAVE ALLOWED IN FAVOUR OF ASSESSEE. THUS, CONSIDERING TH E SIMILARITIES OF THE FACT OF THIS YEAR, THE GROUND OF APPEAL RAISED BY REVENUE I S DISMISSED. 37. GROUND NO.3 RAISED BY REVENUE RELATES TO THE DIRECT ION OF LD. CIT(A) TO AO TO ADOPT THE VALUE OF POWER GENERATED BY THE CONCER NED CAPTIVE POWER PLANT FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80IA. THE LD. DR FOR REVENUE RELIED UPON THE ORDER OF AO. ON THE OTHER HAND, LD. AR FOR ASSESSEE ARGUED THAT ASSESSEE CLAIMED DEDUCTION OF RS. 13,78,24,000 /- AS PER DULY CERTIFIED COMPENSATION VIDE ANNEXURE-11AI OF ITS AUDIT REPOR T AS THE POWER GENERATED BY CAPTIVE POWER PLANT HAS BEEN CONSUMED WITHIN THE REFINERY. THE ASSESSEE ADOPTED APSEB UNIT RATE AS PRICE OF COMPEN SATION OF PROFIT OF POWER. THE AO ADOPTED PROFIT MARGIN OF 15% OF APSE B UNIT RATE AND REDUCED THE DEDUCTION OF VALUE OF POWER GENERATION. THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF ACIT VS. JINDA L STEEL AND POWER (2007) 16 SOT 509 (DEL.) (TRIB.) AND THE DECISION OF MUMBA I IN WASTE COST POWER MILLS LTD. VS. DCIT REPORTED IN (2006) 103 ITD 19 ( MUM) AND THE DECISION OF RELIANCE INFRASTRUCTURE LTD. VS. DCIT IN ITA NO. 463/MUM/2009 (AY- 2006-07) DATED 31.01.2011. 38. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND SEEN THAT ASSESSEE CLAIMED DEDUCTION U/S 80IA/80IB IN RESPECT OF CAPTI VE POWER PLANT UNIT CTG- 3 & 4. THE POWER GENERATED BY THIS UNIT WAS TRANSFE RRED TO THE ASSESSEES OWN BUSINESS. THE ASSESSEE CREDITED RS. 66,12,174/- AS VALUE OF POWER GENERATED AND TRANSFERRED TO ITS OWN BUSINESS. THE AO ASKED THE ASSESSEE TO JUSTIFY THE VALUE OF UNIT GENERATED AND TRANSFERRE D TO ITS OWN BUSINESS. THE ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 22 ASSESSEE EXPLAINED BEFORE THE AO THAT THE BENEFIT O F DEDUCTION U/S 80IA WILL BE APPLICABLE IF (I) THE PROFIT ON ELIGIBLE BUSINES S HAVE TO BE COMPUTED AND IS SUCH ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOM E, (II) WHERE THE GOODS OF SERVICE ARE TRANSFERRED TO ANY OTHER BUSINESS, THE PROFIT AND GAINS OF ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF TRANSFERRED TO ANY OTHER BUSINESS HAS BEEN MADE AND (III) MARKET VALUE MEANS THE PRICE OF SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN OPEN MARKET AND NOT ON SALE. IT WAS ALSO CONTENDED THAT POWER GENERATED IN CAPTIVE POWER PLANT WAS PRIMARIL Y MEANT TO BE USED IN THE REFINERY OPERATION OF THE ASSESSEE AND SURPLUS, THE BENEFIT WAS DIVERTED TO APSEB. THE ASSESSEE WAS NOT A POWER PRODUCER AND IT S MAIN BUSINESS WAS REFINERY AND DISTRIBUTION OF PETROLEUM PRODUCTS. TH E VALUE OF THE POWER GENERATED HAS BEEN ACCORDINGLY AT THE RATE CHARGED BY APSEB TO ITS CUSTOMER. THE AO WAS NOT SATISFIED WITH THE EXPLANA TION HELD THAT APSEB WOULD NOT BE POWER AT THE RATE FROM POWER PRODUCER AND THEREAFTER PRESUMED MARGIN @ 15% ON THE SALE PRICE OF RS.3.60 PER UNIT CHARGED BY APSEB AND ACCORDINGLY REDUCED 15% FROM THE VALUE OF ELECTRICI TY SHOWN BY ASSESSEE. LD. CIT(A) WHILE CONSIDERED THIS GROUND OF APPEAL, CONCLUDED THAT AO HAS NOT DISPUTED THAT APSEB SALES POWERS TO ITS CUSTOME R @ 3.60 PER UNIT AS ASSESSEE HAS DELETED THE RATE TO THE VALUE OF POWER GENERATED AND CONSUMED INTERNALLY, THERE IS NO REASON FOR THE AO TO DOUBT THE ASSESSEE AND THE AO HAS NEEDLESSLY MADE THE EXERCISE FOR ESTIMATING THE PRO FIT OF 15%. THE LD. CIT(A) FURTHER CONCLUDED THAT ASSESSEE HAS REASONAB LY ADOPTED THE RATE OF VALUE OF POWER GENERATION BY ASSESSEE WHEREBY AND C ANCELLED THE SAME AND DIRECT THE AO TO ADOPT THE VALUE OF POWER GENERATED BY ASSESSEE AS DISCLOSED BY IT FOR THE PURPOSE OF CALCULATING THE DEDUCTION. WE HAVE SEEN THAT THE ORDER OF LD. CIT(A) IS BASED ON SOUND REASONING AND DOES NOT REQUIRE OUR INTERFERENCE THUS, WE AFFIRMED THE ORDER OF LD. CIT (A). IN THE RESULT THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. ITA NO. 699/MUM/2009 FOR AY 2005-06 ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 23 39. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: 1. DONATION U/S 80G - DENIAL OF CLAIM - RS. 1,25,00 0/- THE IMPUGNED ORDER HAS BEEN PASSED ON A COMPLETE NO N-APPRECIATION OF THE EVIDENCE & FACTS OF THE CASE. THE CIT(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD RIGHTLY CLAIMED THE BENEFIT U/S B OG OF THE ACT. 2. EXPENDITURE ON RAILWAY SIDING FACILITIES - DISAL LOWANCE U/S 37(1) - RS. 1,93,48,386/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 37(1) TOWARDS EX PENDITURE ON RAILWAY SIDING FACILITIES ON THE GROUND THAT EXPENDITURE IS OF CAPITAL IN NATURE (FALLING UNDER EXPLANATION 1 TO SECTION 32(1)(II)) WITHOUT APPRECIATING FACTS OF THE CASE. 3. ESTABLISHMENT EXPENDITURE - DISALLOWANCE U/S 37( 1) - RS. 19,39,56,264/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF EXPENDITURE OF THE NA TURE SUCH AS SALARIES INCURRED ON PROJECT MONITORING TEAM WHICH QUALIFIES U/S 37(1) OF THE ACT ON THE GROUND THAT ONCE A PARTICULAR TREATMENT IS G IVEN IN THE BOOKS OF ACCOUNTS (TREATED AS ASSET IN BOOKS) IT SHALL BE BI NDING UNLESS IT IS PROVED TO BE ERRONEOUS OR CONTRARY TO CONCEPT OF LEGAL POS ITION. 4. PROVISION TOWARDS POST-RETIREMENT MEDICAL BENEFI T - DISALLOWANCE U/S 37(1) - RS. 1,75,16,017/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM U/S 37(1). 5. FEASIBILITY STUDY EXPENDITURE - DISALLOWANCE U/S 37(1) - RS. 2,72,39,200/- THE CIT(A) ERRED IN NOT ALLOWING THE EXPENDITURE IN CURRED ON FEASIBILITY STUDY REPORT, THOUGH THE SAME WAS OF A REVENUE IN N ATURE, WITHOUT APPRECIATING FACTS OF THE CASE. THIS WAS OMITTED TO BE CLAIMED THROUGH ORIGINAL/REVISED RETURN. CIT(A) ERRED IN UPHOLDING THE DECISION ON THE GROUND THAT ONLY TRIBUNAL HAS THE POWER TO ENTERTAI N THE NEW GROUND. 6. PROVISION FOR LEAVE ENCASHMENT - DENIAL OF CLAIM U/S 43B - RS. 16,78,80,535/- THIS WAS OMITTED TO BE CLAIMED THROUGH ORIGINAL/REV ISED RETURN. CIT(A) ERRED IN UPHOLDING THE DECISION ON THE GROUND THAT ONLY TRIBUNAL HAS THE POWER TO ENTERTAIN THE NEW GROUND. 40. GROUND NO.1 RELATES TO THE DONATION U/S 80G OF THE ACT. THE LD. AR OF THE ASSESSEE ARGUED THAT THOUGH THIS GROUND OF APPEAL W AS RAISED BEFORE THE LD. CIT(A) BUT THE SAME WAS NOT ADJUDICATED. THE LD. DR FOR REVENUE NOT DISPUTED WITH THE FACTUAL POSITION OF THE GROUND. C ONSIDERING THE CONTENTION OF BOTH THE PARTIES, WE DEEM IT APPROPRIATE TO REST ORE THIS GROUND OF APPEAL ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 24 TO THE FILE OF LD. CIT (A) TO CONSIDER AFRESH AND P ASS THE ORDER IN ACCORDANCE WITH LAW. HENCE, THIS GROUND OF APPEAL IS ALLOWED F OR STATISTICAL PURPOSE. 41. GROUND NO.2 RELATES WITH THE EXPENDITURE ON RAILWAY SIDING FACILITIES. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.6 OF ITA NO. 2376/MUM/2007 FOR AY 2003-04, WHICH WE HAVE ALR EADY ALLOWED IN FAVOUR OF ASSESSEE. THUS, CONSIDERING THE SIMILARIT IES OF THE FACT, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE ON THE S IMILAR LINES. 42. GROUND NO.3 RELATES WITH ESTABLISHMENT EXPENDITURE I.E. SALARY, ADMINISTRATIVE EXPENSES ETC. INCURRED ON PERSONNEL OF PROJECT DEPARTMENT. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.8 OF ITA NO. 2376/MUM/2007 FOR AY 2003-04, WHICH WE HAVE ALREADY ALLOWED IN FAVOUR OF ASSESSEE. THUS, CONSIDERING THE SIMILA RITIES OF THE FACT, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. 43. GROUND NO.4 RELATES WITH THE PROVISION TOWARDS POST RETIREMENT BENEFIT. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.2 OF ITA NO. 2376/MUM/2007 FOR AY 2003-04, WHICH WE HAVE ALR EADY ALLOWED IN FAVOUR OF ASSESSEE. THUS, CONSIDERING THE SIMILARIT IES OF THE FACT, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. 44. GROUND NO. 5 RELATES WITH THE DEDUCTION OF FEASIBIL ITY STUDY EXPENSES. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE ADDITIONAL GROUND NO. 2OF ITA NO. 2376/MUM/2007 FOR AY 2003-04. WE HAVE ALREADY REJECTED THE SIMILAR GROUND ON THE BASIS OF DECISION IN EARLIER YEAR. THUS, CONSIDERING THE SIMILARITIES OF THE FACT, THIS GROUND OF APPEAL IS NOT ADMITTED. 45. GROUND NO.6 RELATES WITH THE DEDUCTION ON LEAVE ENC ASHMENT U/S 43B OF THE ACT. LD. AR OF ASSESSEE ARGUED THAT THE LOWER AUTHO RITIES HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE HOLDING THAT THE CLAIM WA S FILED WITHOUT FILING THE REVISE RETURN OF INCOME. ON THE OTHER HAND LD DR FO R REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 25 46. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SEEN THAT CLAI M OF THE ASSESSEE WAS NOT CONSIDERED BY THE LOWER AUTHORITIES FOR THE REGIONS THAT IT WAS CLAIMED WITHOUT FILING THE REVISE RETURN OF INCOME. THE HON BLE APEX COURT IN GOETZ INDIA LTD VERSUS CIT TO 84 ITR 322 HELD THAT WHENEV ER THE ASSESSEE MAKES A MISTAKE OR OMITTED TO LODGE A LEGITIMATE CLAIM , TH E APPELLATE AUTHORITY BE IT FIRST APPELLATE AUTHORITY OR THE SECOND APPELLATE AUTHORITY, HAS VIDE POWER TO ENTERTAIN THE NEW GROUNDS OF APPEAL. RESPECTFULLY F OLLOWING THE DECISION OF HONBLE APEX COURT WHICH HAS A BINDING PRECEDENT BY VIRTUE OF ARTICLE 141 OF THE CONSTITUTION OF INDIA, WE ADMITS THE GROUND S OF APPEAL RAISED BY THE ASSESSEE AND RESTORE THIS GROUND OF APPEAL TO THE F ILE OF AO TO RECONSIDER IT AFRESH AND PASS ORDER IN ACCORDANCE WITH LAW. THUS, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 47. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 1187/MUM/2009 FOR AY 2005-06. 48. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) IS RIGHT IN DELETING THE DISALLOWANCE OF PAYMEN T TO CLUB MADE BY THE ASSESSEE AMOUNTING TO RS. 40,94,457/- U/S.40A(9) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S DIRECTLY MADE THE SAME DISALLOWANCE IN VIEW OF THE SPECIFIC PROVISIONS OF SEC. 36(1) OF THE ACT WHICH CLEARLY RULES OUT THE ALLOWABILITY OF ANY SUM MADE BY THE ASSESSEE AS AN EMPLOYER TOWARDS THE CLUB WHICH IS AN AOP.' 2. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) IS RIGHT IN DELETING THE DISALLOWANCE OF NOTION AL EXPENDITURE TO EARN TAX FREE INCOME AMOUNTING TO RS. 7,29,529/- U/S. 14A OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S RIGHTLY MADE THE SAID DISALLOWANCE IN VIEW OF THE SPECIFIC PROVISIONS OF SEC.14A OF THE ACT WHICH HOLDS THAT NO DEDUCTION SHALL BE ALLOWED TO THE ASS ESSEE IN RESPECT OF EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME UNDER THE ACT.' 3. 'WHETHER ON THE FACT & CIRCUMSTANCES OF THE CASE & IN LAW THE CIT (A) IS RIGHT IN DIRECTING TO ACCEPT THE ASSESSEE'S CALC ULATION OF PROFIT FROM VREP-II FOR THE PURPOSE OF DEDUCTION U/S.80IB.' 49. GROUND NO.1 RELATES TO CORPORATE MEMBERSHIP IN CLUB . WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.1 OF REVENUES APPEAL FOR ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 26 AY 2004-05 IN ITA NO. 1186/MUM/2009 WHICH WE HAVE A LREADY DISMISSED. THUS, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS ALSO DISMISSED. 50. GROUND NO.2 RELATES WITH APPLICABILITY OF SECTION 1 4A ON SHARE OF PROFIT FROM AOP WHICH DEDUCTIBLE U/S 86(V) OF THE ACT. WE HAVE SEEN THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.2 OF REVENUES A PPEAL FOR AY 2004-05 IN ITA NO. 1186/MUM/2009 WHICH WE HAVE ALREADY DISMISS ED. THUS, THIS GROUND OF APPEAL IS ALSO DISMISSED. 51. GROUND NO.3 RELATES WITH THE VALUATION OF RAW-MATER IAL ON AN ELIGIBLE BUSINESS U/S 80IB (9), THE LD DR FOR THE REVENUE SU PPORTED THE ORDER OF ASSESSING OFFICER AND WOULD ARGUE THAT ORDER OF AO MAY BE RESTORED BY SETTING ASIDE THE ORDER PASSED BY COMMISSIONER(APPE ALS). ON THE OTHER HAND THE LD AR OF THE ASSESSEE ARGUED THAT THE SIMILAR D EDUCTION WAS ALLOWED FROM THE AY 2002 -03 TO 2004-05. THE ASSESSEE HAS GIVEN SUFFICIENT DOCUMENTARY EVIDENCE IN SUPPORT OF THEIR CLAIM FOR THE COST OF VGO CONSIDERED BY THEM FOR INTER-UNIT PRODUCT PURCHASED COST WHICH WAS MUC H HIGHER AS COMPARED TO MARKET VALUE OF VGO. THE LD AR FURTHER ARGUED THAT NO SUCH DISALLOWANCE WAS WARRANTED AS THE ASSESSEE IS FOLLOWING CONSISTE NTLY THE SAME METHOD FROM THE INITIAL YEAR AND WAS ALLOWED IN ALL EARLIE R ASSESSMENTS. 52. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE ORDER OF AUTHORITIES BELOW. WE HAVE NOTICED THAT THE AO N OT DISPUTED THE MARKET PRICE OF COST OF PROCESSING VGO IN ALL REFINERY UNI TS. HOWEVER THE SAME WAS CONSIDERED TO BE BELOW THE CRUDE OIL PRICE AND WAS NOT ACCEPTED BY AO. THE AO FURTHER OBSERVED THAT ASSESSEE IS REQUIRED TO IN CLUDE AT LEAST COST OF PROCESSING CRUDE OIL TO VGO IN COMPUTING THE PRICE OF INTER-UNIT TRANSFER. THE AO FURTHER CONCLUDED THAT THE ASSESSEE WAS REQU IRED TO SUBMIT AVERAGE PROCESSING COST IN CDU AND THE SAME WORKS OUT TO BE RS. 36.24/MT. THE AO ACCORDINGLY TOOK RS. 14400.79/MT AS THE TRANSFER PR ICE OF MT VGO. AND INTER-UNIT TRANSFER WAS CALCULATED AT RS. 1204.19 C RORE REDUCING THE NET PROFIT ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 27 OF THE VERP II OF RS 664,51,07,775/-. THE LD CIT(A) WHILE CONSIDERING THIS GROUND OF APPEAL CONCLUDED AS UNDER: 10.6 I HAVE CAREFULLY CONSIDERED THE SUBMIS SION OF LD AR AND GONE THROUGH THE FACTS BROUGHT BEFORE ME. AS I FILED, THE AO HAS MENTIONED THE MARKET PRICE IN HIS ORDER AND HAS NOT DISPUTED THE SAME. S INCE THE MARKET PRICE IS LOWER THAN THE VALUE ADOPTED BY THE APPELLANT THERE IS NO REDUCTION OF COST RESULTING IN INFLATION OF THE PROFIT OF THE ELIGIBL E UNIT AND THEREBY A CLAIM OF DEDUCTION UNDER SECTION 80I. IN FACT BY ADOPTING TH E VALUE WHICH IS SUBSTANTIALLY HIGHER THAN THE MARKET PRICE, THE APP ELLANT HAS INCREASED ITS COST, REDUCED THE PROFITS OF ELIGIBLE UNIT AND THER EBY HAS CLAIMED A LESSER REDUCTION UNDER SECTION 80 IA THEN WHAT COULD HAVE BEEN CALCULATED IF MARKET PRICE OF THE PRODUCT WAS ADOPTED. IN SUCH A SCENARIO THERE WAS NO REGION FOR THE AO TO DISTURB THE CALCULATION MADE B Y THE APPELLANT. HE HAS INCREASED THE VALUE ONLY MARGINALLY FROM 14.365 P.M . TO 14.479 P.M. OWN ESTIMATE BASIS WHICH CANNOT BE ACCEPTED UNDER THE C IRCUMSTANCES. 10.7. TAKING INTO CONSIDERATION THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND THE RELEVANT PROVISION OF THE INCOME TAX ACT, I FIND NO REASON TO SUPPORT THE ACTION OF AO. ACCORDI NGLY HE IS DIRECTED TO ACCEPT THE APPELLANTS CLAIM OF PROFIT FROM THE VER P II FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 IB. THIS GROUND OF APPEA L IS ALLOWED. 53. WE HAVE SEEN THAT THE LD COMMISSIONER (APPEALS) GR ANTED THE RELIEF AFTER CONSIDERING THE ENTIRE FACT RELATED WITH THE CLAIM OF ASSESSEE. WE DO NOT FIND ANY REASON TO DIFFER WITH THE FINDING OF LEARNED CO MMISSIONER (APPEALS). THUS THIS GROUND OF APPEAL IS DISMISSED. IN THE RESULT, APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD NOVEMBER, 2016 SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 23/11/2016 S.K.PS ITA NOS.2736/M/07, 649, 1186, 699 & 1187/M/09 HINDUSTAN PETROLEUM CORPORATION LTD. 28 COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/