The ACIT, Circle-1, JUNAGADH V. Gujarat Sidhee Cement Ltd., Veraval

ITA 290/RJT/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0428 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Business expenditure
• Section: 115JB; 40(a)(ia); 37(1); 37

Judgement Text

GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 1 OF 27 INCOM TAX APPELLATE TRIBUNAL-RAJKOT-BENCH-RAJKOT BEFORE C .M. GARG, JUDICIAL MEMBER AND O. P. MEENA, ACCOUNTANT MEMBER I.T.A NO.319 & 290/RJT/2014 ASSESSMENT YEAR: 2007-08 APPELLANT V. RESPONDENT 1. GUJARAT SIDHEE CEMENT LTD. VERAVAL KODINAR ROAD VERAVAL PAN: AAACG8075G 2.ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JUNAGARH 1. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JUNAGARH. 2.GUJARAT SIDHEE CEMENT LTD. VERAVAL KODINAR ROAD VERAVAL PAN: AAACG8075G I.T.A NO.607 & 688/RJT/2014 ASSESSMENT YEAR: 2010-11 APPELLANT V. RESPONDENT 1. GUJARAT SIDHEE CEMENT LTD. VERAVAL KODINAR ROAD VERAVAL PAN: AAACG8075G. 2.ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JUNAGARH 1. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JUNAGARH. 2. GUJARAT SIDHEE CEMENT LTD. VERAVAL KODINAR ROAD VERAVAL PAN: AAACG8075G ASSESSEE BY SHRI VIMAL DESAI, CA REVENUE BY SHRI JITENDER KUMAR, CIT(D.R.) DATE OF HEARING 27.11.2018 DATE OF PRONOUNCEMENT 1 1 . 12 .2018 ORDER PER O. P. MEENA, AM 1. THESE ARE TWO CROSS APPEAL AT THE INSTANCE OF THE ASSESSEE AND REVENUE WHICH ARE IS DIRECTED AGAINST THE ORDERS OF LEARNED GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 2 OF 27 COMMISSIONER OF INCOME TAX (APPEALS)- IV, RAJKOT [IN SHORT CIT(A)] DATED 06.02.2014 AND 15.09.2014 RESPECTIVELY FOR THE ASSESSMENT YEAR 2007-08 AND 2010-11 RESPECTIVELY. I.T.A.NO. 319/RJT/2014/A.Y. 2007-08/ BY ASSESSEE: 2. GROUND NO. 1 RELATES TO DISALLOWANCE OF COMMISSION EXPENSES OF RS.19,59,390/- UNDER SECTION 40(A)(IA) OF THE ACT. 3. THE AO MADE DISALLOWANCE OF COMMISSION EXPENSES OF RS.19,59,390/- UNDER SECTION 40(A)(IA) AS THE ASSESSEE HAS MADE PROVISIONS OF COMMISSION AT THE YEAR END BUT DID NOT DEDUCT TDS. 4. THE CIT (A) HAS CONFIRMED THE SAME ON THE GROUND THAT IF THE PROVISIONS WERE CREDITED TO SUSPENSE ACCOUNT, THE TDS PROVISIONS WOULD BE APPLICABLE. IT IS JUST A CASE WHERE THE APPELLANT HAS BRING TO DECIDE THE NAME OF PARTY IN THE ACCOUNTS AT A LATER POINT OF TIME, WHEN THE BILL IS RECEIVED. SUCH ACCOUNTING PRACTICE IS CANNOT DEFER THE PAYMENTS OF TDS. FURTHER, THE RAJKOT TRIBUNAL HAS ALSO CONFIRMED SUCH DISALLOWANCE IN A.Y. 2006-07. IN VIEW OF THIS MATTER, CIT (A) HAS CONFIRMED THE SAME. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND HAS TO BOOK ALL GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 3 OF 27 EXPENSES PERTAINING TO YEAR IN WHICH IT HAS BEEN INCURRED, ALL THOUGH THE BILL OR THE PAYMENT HAS BEEN MADE IN SUBSEQUENT YEAR. 6. PER CONTRA, LEARNED CIT (D.R.) SUBMITTED THAT ISSUE IS COVERED IN FAVOUR OF REVENUE BY THE ORDER OF TRIBUNAL FOR THE ASSESSMENT YEAR 2006-07. HENCE, CIT (A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE SO MADE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS CREDITED AMOUNT OF EXPENSES AS PROVISIONS IN THE ACCOUNT HENCE, THE LIABILITY HAS BEEN CREDITED IN BOOKS OF ACCOUNTS THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TDS THEREON. HENCE, THE FINDING OF CIT (A) ARE UPHELD. FURTHER, THE ISSUE IS COVERED BY THE DECISION OF CO-ORDINATE BENCH IN ASSESSEE`S OWN CASE VIDE ORDER DATED 13.09.2013 DTD. IN I.T.A.NO.341/RJT/2012 FOR THE ASSESSMENT YEAR 2006-07. HENCE, FOLLOWING THE SAME THIS GROUND OF APPEAL IS DISMISSED. 8. GROUND NO. 2 & 3 RELATES TO DISALLOWANCE OF RS.1,14,30,400/- INCURRED TOWARDS INCREASE IN AUTHORIZED SHARE CAPITAL CONFIRMING THE SAME TO THE EXTENT OF RS.1,13,94,000/-. GROUND NO. 3 STATES THAT CIT (A) ERRED IN NOT ALLOWING ALTERNATE DEDUCTION CLAIM UNDER SECTION 35D GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 4 OF 27 OF THE ACT IN RESPECT OF FILING FEES INCURRED TO INCREASE AUTHORIZED CAPITAL. 9. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.1,14,30,400/- FOR PAYMENTS TOWARDS ROC FEES TO INCREASE AUTHORIZED CAPITAL HENCE, THE AO BY TREATING THE EXPENDITURE AS CAPITAL IN NATURE, DISALLOWED THE SAME. IN APPEAL, IT WAS CLAIMED THAT EXPENDITURE OF RS.36,400/- IS TOWARDS FEES FOR FILING APPEAL, WHICH IS REVENUE IN NATURE. THE CIT (A) CONSIDERING THE SAME ALLOWED THIS EXPENDITURE BUT CONFIRMED THE BALANCE EXPENDITURE OF RS.1,13,94,000/- BY RELYING ON THE DECISION IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT [1997] 225 ITR 798(SC) AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION [1997] 225 ITR 792 (SC). 10. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EXPENSES WERE INCURRED AS BUSINESS EXPENDITURE FOR ARRANGING FUNDS FOR THE EXISTING BUSINESS OF THE ASSESSEE COMPANY. THE CIT (A) EVEN DID NOT ALLOW THAT PROPORTIONATE DEDUCTION INSTALLMENTS WHICH SHOULD BE ALLOWED UNDER SECTION 35D OF THE ACT. 11. PER CONTRA, THE LD. CIT (DR) RELIED ON LOWER AUTHORITIES. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 5 OF 27 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE EXPENDITURE HAS BEEN INCURRED TOWARDS INCREASE OF AUTHORIZED CAPITAL OF THE COMPANY. HENCE, EXPENDITURE RELATED TO ENDURING BENEFIT THEREFORE, SAME HAS BEEN RIGHTLY HELD TO BE CAPITAL IN NATURE. THEREFORE, FOLLOWING DECISION OF HON`BLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT [1997] 225 ITR 798(SC) AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION 225 ITR 792 (SC), WE UPHELD THE SAME. SO FAR THE CLAIM OF DEDUCTION UNDER SECTION 35D IS CONCERNED, THE SAME IS NOT ALLOWABLE AS THE EXPENDITURE IS NOT RELATED TO PLANTS AND MACHINERY AS IT WAS RELATED TO INCREASE OF SHARE CAPITAL. THEREFORE, GROUND NO. 2 &3 OF APPEAL OF THE ASSESSEE ARE DISMISSED. 13. GROUND NO. 4 RELATES TO DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES OF RS.97,33,000/- UNDER SECTION 37(1) OF THE ACT. 14. THE ASSESSEE HAS DEBITED FOREIGN TRAVELLING EXPENSES OF RS.1,21,66,257/-. THE AO EXAMINED THE DETAILS OF EXPENDITURE OF ABOVE RS. 1 LAKHS AS FILED BY THE ASSESSEE AS PER CHART REFLECTED IN PARA 6 OF ASSESSMENT ORDER. ON VERIFICATION OF THE SAME, THE AO NOTICED THAT THESE EXPENSES INCLUDE EXPENSES ON PURCHASE OF GIFT ITEMS OF RS. $10,000 FROM THE PALACE ART CO., AS PER BILL GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 6 OF 27 DTD.06.06.2006. ANOTHER EXPENDITURE OF RS. $ 480 HAVE BEEN INCURRED ON DUTY FREE SHOP FOR PURCHASES OF CDS AND DVDS. FURTHER, EXPENSES OF RS.5,20,336/- SPENT ON PLEASER TRIP AT FOUR SEASON MULTITRADE PVT. LTD. RESORT, BALI. THE VOUCHER OF EXPENSES ARE SELF-MADE AND ONLY CERTIFIED BY THE DIRECTORS. CONSIDERING THESE FACTS AND SOME BUSINESS CONNECTION WITH GULF COUNTRIES WHERE THE ASSESSEE COMPANY HAS EXPORTED CEMENT AND TINKER, THE AO HAS ALLOWED 20% EXPENSES AS FAIR, REASONABLE, AND DISALLOWED REMAINING 80% OF FOREIGN EXPENSES, WHICH WORK OUTS TO RS.97,33,000/- WHICH WERE DISALLOWED BY TREATING THE SAME AS PERSONAL IN NATURE. 15. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT (A) CONFIRMED THE DISALLOWANCE BY OBSERVING THAT IDENTICAL DISALLOWANCE MADE IN A.Y. 2006-07 WERE CONFIRMED BY THE TRIBUNAL IN THE APPELLANT`S CASE. THE APPELLANT HAS NOT PROVED THAT SITUATION IS DIFFERENT IN THE YEAR UNDER APPEAL. THE AO HAS REASONABLY ALLOWED 20% OF EXPENSES TO TAKE CARE OF THE EXPENDITURE ATTRIBUTABLE TO BUSINESS ACTIVITIES. 16. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT JUSTIFICATION FOR EXPENSES WAS SUBMITTED VIDE LETTER DATED 13.11.2009 GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 7 OF 27 AND 23.11.2009 AND SAMPLE OF SUPPORTING DOCUMENTS WERE FILED. THE CIT (A) SIMPLY RELIED ON THE ORDER OF TRIBUNAL DTD. 13.09.2013 IN APPELLANT`S OWN CASE, HENCE, DISALLOWANCE SUSTAINED MAY PLEASE BE DELETED. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT THE FINDING OF THE CIT (A) THAT FACTS ARE NOT IDENTICAL AS IN A.Y. 2006-07. THE DETAILED CHART REPRODUCED IN ASSESSMENT ORDER REVEALED THAT EXPENDITURE WERE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE PERUSAL OF TRIBUNAL ORDER DTD. 13.09.2013 IN THE ASSESSEE`S OWN CASE ALSO SHOWS THAT THE DETAILS OF EACH AND EVERY ITEMS OF EXPENDITURE WAS DISCUSSED AND IT WAS NOTICED THAT EXPENSES INCURRED BY JAY MEHTA AND JUHI MEHTA , SHRI RAJ PODDAR AND HIS WIFE WERE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSE. THE AO HAS POINTED OUT THAT EXPENDITURE OF RS.5.20 LAKHS WAS INCURRED FOR PLEASURE TRIP TO FOUR SEASON MULTITRADE PVT. LTD. RESORTS, BALI. FURTHER, VOUCHERS PREPARED AND PASSED ARE SELF-PREPARED WITHOUT ANY CHECK. THE EXPENSES WERE INCURRED ON GIFT ARTICLES AND DVD AS WELL AS CDS. THEREFORE, IN SUCH CIRCUMSTANCES AND IN ABSENCE OF ANYTHING BROUGHT ON RECORD TO SHOW THAT THING ARE GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 8 OF 27 DIFFERENT FOR THIS YEAR AS IN A.Y.2006-07. IN VIEW OF THIS MATTER, RESPECTFULLY FOLLOWING THE FINDINGS OF TRIBUNAL IN ASSESSEE OWN CASE IN PRECEDING ASSESSMENT YEAR. THEREFORE, THE FINDING ARRIVED AT BY THE LOWER AUTHORITIES ARE CONFIRMED. ACCORDINGLY, THIS GROUNDS OF APPEAL IS THEREFORE, DISMISSED. 18. GROUND NO. 5 RELATES TO DISALLOWING OF GIFT EXPENSES OF RS.58,52,176/- AND DIWALI GIFT EXPENSES OF RS.8,47,352/- AGGREGATING TO RS.66,99,528/- UNDER SECTION 37 (1) OF THE ACT. THE CIT(A) ERRED IN CONFIRMING THE SAME TO THE EXTENT OF RS.23,44,835/-. 19. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSEE HAS DEBITED EXPENSES OF RS.58,52,176/- BEING GIFT ARTICLE EXPENSES AND RS.8,47,352/- BEING DIWALI GIFT IN THE PROFIT & LOSS ACCOUNT. ON VERIFICATION, THE AO FOUND THAT THE RECIPIENT OF GIFTS ARE ALL NOT THOSE PERSONS WITH WHOM THE ASSESSEE HAS BUSINESS TRANSACTION. THEREFORE, THERE IS INHERENT ELEMENT OF PERSONAL NATURE INVOLVED IN THIS KIND OF GIFTS. THE AO FURTHER, NOTICED THAT FBT EXPENSES WERE MEANT FOR THE BENEFITS DERIVED BY THE EMPLOYEES FROM THE EMPLOYER AND THE EXPENSES NOT RELATED TO EMPLOYEES ARE CANNOT BE CONSIDERED AS PERQUISITE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE AO MADE GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 9 OF 27 DISALLOWANCE OF RS.58,52,176/- AND RS.8,47,352/- AGGREGATING TO RS.66,99,528/-. 20. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) OBSERVED THAT SIMILAR DISALLOWANCE WERE ALSO MADE IN A.Y. 2006-07 AND CIT (A) HAS RESTRICTED SUCH DISALLOWANCE TO 35%. THIS DECISION OF CIT (A) WAS ALSO CONFIRMED BY THE ITAT. THEREFORE, FOLLOWING THE SAME THE CIT (A) HAS RESTRICTED THE DISALLOWANCE TO 35% OF EXPENSES OF RS.66,99,528/- AND HENCE, DISALLOWANCE WAS RESTRICTED TO RS.23,44,835/-. 21. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CIT(A) HAS SIMPLY FOLLOWED THE ITAT ORDER WHEREAS CHART-SHOWING DETAILS OF GIFT EXPENSES WAS FILED. THEREFORE, DISALLOWANCE SUSTAINED SHOULD BE DELETED. 22. AU CONTRAIRE, THE LD. CIT (DR) RELIED ON THE ORDER OF CIT (A) AND SUBMITTED THAT THE NATURE OF GIFT EXPENSES ARE SUCH WHICH ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE EXPENSE WERE INCURRED ON ACCOUNT OF GIFT FOR THE PERSON WHO ARE NOT CONNECTED WITH THE GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 10 OF 27 BUSINESS OF THE ASSESSEE. THEREFORE, THE EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS CARRIED ON BY THE ASSESSEE. FURTHER, THE FACTS ARE IDENTICAL OF A.Y. 2006-07 AND SAME HAS NOT BEEN CONTROVERTED BY THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING DECISION OF TRIBUNAL IN ASSESSEE`S OWN CASE FOR THE A.Y. 2006-07 DTD. 13.09.2013, WE ARE OF THE VIEW THAT LD. CIT (A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 35% OF CLAIM. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THIS GROUND IS THEREFORE, DISMISSED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 IS DISMISSED. I.T.A.NO.290/RJT/2014/A.Y. 2007-08/ BY REVENUE: 25. GROUND NO. 1 & 2 STATES THAT LD. CIT (A) HAS ERRED IN LAW IN DELETING ADDITION OF RS.3,32,77,919/- MADE ON ACCOUNT OF BAD DEBT WRITTEN OFF CLAIMED BY THE ASSESSEE UNDER SECTION 36(1)(VIIA) OF THE ACT BY CITING DECISION OF HON`BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT. WITHOUT APPRECIATING THAT, THE ASSESSEE HAS NOT FURNISHED FULL DETAILS BEFORE THE AO. 26. THE LD. CIT (DR) HEAVILY RELIED UPON THE AO AND CONTENDED THAT THE ASSESSEE HAS NOT FURNISHED DETAIL LIKE COPY OF ACCOUNT WHEN THE GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 11 OF 27 AMOUNT WAS CREDITED AND WHEN THE ASSESSEE HAS ENTERED IN TO LAST TRANSACTION WITH PARTIES AND COPIES OF SUCH ACCOUNTS DULY CONFIRMED BY THE PARTIES. 27. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF THE AMOUNT OF BAD DEBT IN THE BOOKS OF ACCOUNTS AS IN RESPECT OF CUSTOMERS WHO WERE NO LONGER FOUND RECOVERABLE AND SAME WERE REPRESENTED VERY OLD. THE DETAILS OF SUCH DEBTORS WERE SUBMITTED BEFORE THE CIT (A) (VIDE PB 11 TO 14). THEREFORE, CIT (A) WAS RIGHT IN DELETING SUCH DISALLOWANCE BY FOLLOWING THE RATIO LAID DOWN BY THE HON`BLE SUPREME COURT IN THE CASE OF T. R. F. LTD. VS. CIT [2010] 323 ITR 397(SC)/[2010] 190 TAXMAN 391(SC). 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON`BLE SUPREME COURT IN THE CASE OF T. R. F. LTD. VS. CIT [2010] 323 ITR 397(SC)/[2010] 190 TAXMAN 391(SC). AS THE ASSESSEE WAS NOT REQUIRED TO ESTABLISH THE DEBT BECOME BAD IF IT HAS BEEN WRITTEN OFF IN BOOKS OF ACCOUNTS AS IRRECOVERABLE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THIS GROUNDS OF APPEAL OF THE REVENUE IS DISMISSED. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 12 OF 27 29. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WELL AS REVENUE FOR THE ASSESSMENT YEAR 2007-08 IS DISMISSED. I.T.A.NO.607/RJT/2014/A.Y. 2010-11/ BY ASSESSEE: 31. GROUND NO.1 RELATES TO DISALLOWANCE OF RS.47,89,996/- OUT OF GIFT EXPENSES ON ACCOUNT OF ALLEGED NON BUSINESS PURPOSE AND CIT(A) ERRED IN CONFIRMING THE SAME TO THE EXTENT OF RS.16,76,488/- BEING 35% OF TOTAL DISALLOWANCE OF RS.47,89,996. 32. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSEE HAS DEBITED EXPENSES OF RS.47,89,966/- BEING GIFTS. ON VERIFICATION, THE AO FOUND THAT THE ASSESSEE HAS NOT SUBMITTED THE LIST OF PERSONS TO WHOM GIFT WAS MADE. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE AO MADE DISALLOWANCE OF RS.47,89,966/-. 33. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) OBSERVED THAT SIMILAR DISALLOWANCE WERE ALSO MADE IN A.Y. 2006-07 AND THIS DECISION OF CIT (A) WAS ALSO CONFIRMED BY THE ITAT. THE CIT (A) HAS ALSO RESTRICTED SUCH DISALLOWANCE TO 35% IN A.Y. 2007-08. THEREFORE, FOLLOWING THE SAME THE CIT (A) HAS RESTRICTED GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 13 OF 27 THE DISALLOWANCE TO 35% OF EXPENSES OF RS.47,89,966/- HENCE, DISALLOWANCE WERE RESTRICTED TO RS.16,76,488/-. 34. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CIT(A) HAS SIMPLY FOLLOWED THE ITAT ORDER WHEREAS CHART-SHOWING DETAILS OF GIFT EXPENSES WAS FILED. THEREFORE, DISALLOWANCE SUSTAINED SHOULD BE DELETED. 35. AU CONTRAIRE, THE LD. CIT (DR) RELIED ON THE ORDER OF CIT (A) AND SUBMITTED THAT THE NATURE OF GIFT EXPENSES ARE SUCH WHICH ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. 36. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE EXPENSE WERE INCURRED ON ACCOUNT OF GIFT FOR THE PERSON WHO ARE NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE. THEREFORE, THE EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS CARRIED ON BY THE ASSESSEE. FURTHER, THE FACTS ARE IDENTICAL AND SAME HAS NOT BEEN CONTROVERTED BY THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING DECISION OF TRIBUNAL IN ASSESSEE`S OWN CASE FOR THE A.Y. 2006-07 DTD. 13.09.2013, WE ARE OF THE VIEW THAT LD. CIT (A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 35% OF CLAIM. SUCH DISALLOWANCES HAVE GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 14 OF 27 BEEN SUSTAINED BY US IN A.Y. 2007-08 AS DISCUSSED ABOVE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), ACCORDINGLY, SAME IS UPHELD. THIS GROUND IS THEREFORE, DISMISSED. 37. GROUND NO.2 RELATES TO DISALLOWANCE FOREIGN TRAVELLING EXPENSES OF RS.25,37,807/- UNDER SECTION 37(1) OF THE ACT. 38. THE ASSESSEE HAS DEBITED FOREIGN TRAVELLING EXPENSES OF RS.25,37,807/-. THE AO EXAMINED THE DETAILS OF EXPENDITURE OF LEDGER ACCOUNT AND FIND THAT THE ASSESSEE HAS NOT FURNISHED THE EVIDENCE THAT FOREIGN VISIT LED TO INVESTMENT IN BUSINESS DURING THE YEAR. NO REPORT HAS BEEN FILED IN RESPECT OF PERSONS WHO TRAVELED ABROAD AND PLACES VISITED BY THEM. THE VOUCHER OF EXPENSES ARE SELF- MADE AND ONLY CERTIFIED BY THE DIRECTOR ONLY. ACCORDINGLY, THE ASSESSEE IS DISALLOWED THE EXPENSES OF RS.25,37,807/- BY TREATING THE SAME AS NO BUSINESS EXPENDITURE. 39. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) CONFIRMED THE DISALLOWANCE BY OBSERVING THAT IDENTICAL DISALLOWANCE MADE IN A.Y. 2006-07 WERE CONFIRMED BY THE TRIBUNAL IN THE APPELLANT`S CASE. THE APPELLANT HAS NOT PROVED THAT SITUATION IS DIFFERENT IN THE YEAR UNDER APPEAL. THEREFORE, THE DISALLOWANCE SO MADE WERE CONFIRMED. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 15 OF 27 40. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT JUSTIFICATION FOR EXPENSES WAS SUBMITTED DURING ASSESSMENT PROCEEDING AND ALSO FURNISHED SAMPLE OF SUPPORTING DOCUMENTS WERE FILED. THE CIT (A) SIMPLY RELIED ON THE ORDER OF TRIBUNAL DTD. 13.09.2013 IN APPELLANT`S OWN CASE, HENCE, DISALLOWANCE SUSTAINED MAY PLEASE BE DELETED. 41. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT THE FINDING OF THE CIT (A) THAT FACTS ARE IDENTICAL AS IN A.Y. 2006-07. THE DETAILED CHART REPRODUCED IN ASSESSMENT ORDER REVEALED THAT EXPENDITURE WERE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE PERUSAL OF TRIBUNAL ORDER DTD. 13.09.2013 IN THE ASSESSEE`S OWN CASE ALSO SHOWS THAT THE DETAILS OF EACH AND EVERY ITEMS OF EXPENDITURE WAS DISCUSSED AND IT WAS NOTICED THAT EXPENSES INCURRED BY JAY MEHTA AND JUHI MEHTA , SHRI RAJ PODDAR AND HIS WIFE WERE NOT WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE. THEREFORE, IN SUCH CIRCUMSTANCES AND IN ABSENCE OF ANYTHING BROUGHT ON RECORD TO SHOW THAT THING ARE DIFFERENT FOR THIS YEAR. IN VIEW OF THIS MATTER, RESPECTFULLY FOLLOWING THE FINDINGS OF TRIBUNAL IN ASSESSEE OWN CASE IN GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 16 OF 27 PRECEDING ASSESSMENT YEAR. SUCH DISALLOWANCES HAVE BEEN ALSO CONFIRMED IN A.Y.2007-08. THUS, THE FINDING ARRIVED AT BY THE LOWER AUTHORITIES ARE THEREFORE, CONFIRMED. ACCORDINGLY, THIS GROUNDS OF APPEAL IS THEREFORE, DISMISSED. 42. GROUND NO. 3 RELATES TO DISALLOWANCE OF BUSINESS PROMOTION EXPENSES RS.26,59,000/-. 43. THE ASSESSEE HAS CLAIMED BUSINESS PROMOTION EXPENSES OF RS. 26, 59,000 ON THE GROUND THAT THEY WERE INCURRED FOR DEALERS, CUSTOMERS, SUPPLIERS ETC. AND HENCE, HAVE DIRECT CONNECTION WITH THE BUSINESS. HOWEVER, ON PERUSAL OF THE DETAILS FURNISHED BY THE ASSESSEE. THE AO NOTICED THAT THE EXPENDITURE OF RS.22.26 LAKHS HAS BEEN PAID TOWARDS GIFT PURCHASED FROM KHAZIR MOHAMED AND RS.1.1 LAKHS HAS BEEN PAID TO HEERAMANEK & SONS OF BOMBAY FOR PURCHASE OF GIFT ARTICLES AND RS.26.59 LAKHS HAS BEEN INCURRED FOR PURCHASE OF TICKETS OF T20 AND MOVIE TICKETS. THE PURPOSE TOWARDS WHICH THE EXPENSES INCURRED WAS NOT EXPLAINED. SINCE THE ASSESSEE HAS NOT ABLE TO ESTABLISH THAT THE EXPENDITURE INCURRED BY HIM WAS FOR THE PURPOSE OF BUSINESS, THE CLAIM OF THE ASSESSEE WAS THEREFORE REJECTED. ACCORDINGLY, AN ADDITIONAL RS.26,59,000/- WAS MADE ON THIS ACCOUNT. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 17 OF 27 44. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A). BEFORE HIM, IT WAS CONTENDED THAT THE EXPENDITURE WAS INCURRED FOR DEALERS, CUSTOMERS ETC. AND HAVE DIRECT CONNECTION WITH BUSINESS AND THESE EXPENDITURE CONTRIBUTED TOWARDS INCREASE IN SALES DURING THE YEAR UNDER APPEAL. HOWEVER, THE CIT (A) OBSERVED THAT EXPENDITURE HAS BEEN INCURRED FOR PURCHASER OF KASHMIRI SHAWLS, SILVER BOXES, AND T20 & MOVIE TICKETS. HOWEVER, THE APPELLANT HAS SUBMITTED BILLS OF PURCHASE, BUT THE NAMES OF BENEFICIARIES OF IMPUGNED EXPENSES ARE NOT FURNISHED. THEREFORE, THE CONTENTION OF THE APPELLANT THAT ITEMS PURCHASED WERE GIVEN TO THE DEALERS, SUPPLIERS ETC. CANNOT BE ACCEPTED AT FACE VALUE. IT IS THE DUTY OF THE APPELLANT TO COME OUT WITH THE SPECIFIC EVIDENCES TO DEMONSTRATE THAT THE EXPENDITURE CLAIMED IS RELATED TO THE BUSINESS. IN THE ABSENCE OF SUCH EVIDENCE, THE CLAIM CANNOT BE ALLOWED MERELY ON THE BASIS OF AVERMENTS. SINCE THE APPELLANT HAS FAILED TO ADDUCE NECESSARY EVIDENCES IN SUPPORT OF THE CLAIM OF DEDUCTION OF THE BUSINESS PROMOTION EXPENSES, THE CIT (A) HAS HELD THAT THE AO WAS JUSTIFIED IN DISALLOWING THE SAME. 45. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 18 OF 27 COPIES OF BILLS AND VOUCHERS WERE PRODUCED BEFORE THE AO. THEREFORE, THE EXPENDITURE RELATED TO BUSINESS PROMOTION PURPOSE SHOULD HAVE BEEN ALLOWED AS DEDUCTION. 46. PER CONTRA, THE LD. CIT (DR) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO PRODUCE NECESSARY EVIDENCE TO JUSTIFY THE CLAIM AND NAMES OF BENEFICIARIES OF IMPUGNED EXPENSES, THEREFORE, THE LOWER AUTHORITIES WERE JUSTIFIED IN DISALLOWING THE SAME AS NON-BUSINESS EXPENDITURE. 47. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT EXPENDITURE HAS BEEN INCURRED FOR THE PURCHASE OF MOVIE TICKETS, T20 MATCH TICKETS, KASHMIRI SHAWLS, SILVER BOXES AND OTHER GIFT ARTICLES. THOUGH THE ASSESSEE HAS GIVEN THE COPIES OF THE BILLS / VOUCHERS BUT THE NAMES OF BENEFICIARIES OF THE IMPUGNED EXPENDITURE HAS NOT BEEN SUPPLIED, THEREFORE, IT CANNOT BE SAID THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAME WAS INCURRED IN RELATION TO EXPENDITURE ON DEALER, SUPPLIERS ETC. IN VIEW OF THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A). ACCORDINGLY, SAME IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 19 OF 27 I.T.A.NO. 688/RJT/2014/ A.Y. 2010-11/BY REVENUE: 48. GROUND NO. 1 RELATES DELETION OF ADDITION OF RS.31,13,478/- OUT OF GIFT EXPENSES. 49. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSEE HAS DEBITED EXPENSES OF RS.47,89,966 BEING GIFTS. ON VERIFICATION, THE AO FOUND THAT THE ASSESSEE HAS NOT SUBMITTED THE LIST OF PERSONS TO WHOM GIFT WAS MADE. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE AO MADE DISALLOWANCE OF RS.47,89,966/-. 50. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) OBSERVED THAT SIMILAR DISALLOWANCE WERE ALSO MADE IN A.Y. 2006-07 AND THIS DECISION OF CIT (A) WAS ALSO CONFIRMED BY THE ITAT. THE CIT (A) HAS ALSO RESTRICTED SUCH DISALLOWANCE TO 35% IN A.Y. 2007-08. THEREFORE, FOLLOWING THE SAME THE CIT (A) HAS RESTRICTED THE DISALLOWANCE TO 35% OF EXPENSES OF RS.47,89,966/- HENCE, DEDUCTION OF RS.31,13,478/- WAS ALLOWED. 51. BEING, AGGRIEVED THE REVENUE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. CIT (DR) RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE NATURE OF GIFT EXPENSES ARE SUCH, WHICH ARE NOT GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 20 OF 27 WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, HENCE, WHOLE DISALLOWANCES SHOULD HAVE BEEN CONFIRMED. 52. AU CONTRAIRE, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF CIT (A) WHO HAS SIMPLY FOLLOWED THE ITAT ORDER. 53. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS COVERED BY GROUND NO.1 OF THE ASSESSEE FOR A.Y.2010-11 AS DISCUSSED ABOVE BY OUR ORDER. IT IS SEEN THAT THE EXPENSE WERE INCURRED ON ACCOUNT OF GIFT FOR THE PERSON WHO ARE NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE. THEREFORE, THE EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS CARRIED ON BY THE REVENUE. FURTHER, THE FACTS ARE IDENTICAL AND SAME HAS NOT BEEN CONTROVERTED BY THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING DECISION OF TRIBUNAL IN ASSESSEE`S OWN CASE FOR THE A.Y. 2006-07 DTD. 13.09.2013, WE ARE OF THE VIEW THAT LD. CIT (A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 35% OF TOTAL CLAIM. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THIS GROUND IS THEREFORE, DISMISSED. 54. GROUND NO. 2 RELATES TO DELETING THE DISALLOWANCE OF RS.88,357/-BEING CLUB EXPENSES. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 21 OF 27 55. THE ASSESSEE HAS CLAIMED CLUB EXPENSES OF RS.88,357/- ON THE GROUND THAT THE ASSESSEE IS HAVING CORPORATE MEMBERSHIP OF VARIOUS CLUBS AND EXPENDITURE HAS BEEN INCURRED TOWARDS ENTRANCE FEES, SUBSCRIPTION FOR COMPANY OFFICIALS AND BUSINESS ASSOCIATES. HENCE, IT IS BEING BUSINESS EXPENDITURE, NO PERSONAL ELEMENT IS INVOLVED. HOWEVER, THE AO HAS TREATED THE SAME AS PERSONAL IN NATURE AND DISALLOWED THE SAME. 56. IN APPEAL LD.CIT (A) HAS DELETED THE SAME ON THE GROUND THAT THE COMPANY HAVE NO PERSONAL ELEMENT AND SUCH DISALLOWANCE WERE ALSO DELETED BY HIM IN APPEAL FOR THE ASSESSMENT YEAR 2008-09. 57. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. CIT (DR) SUPPORTED THE ORDER OF THE AO, WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF CIT (A). 58. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT EXPENDITURE HAS BEEN INCURRED FOR CORPORATE MEMBERSHIP OF CLUB FOR THE OFFICIALS AND CLIENTS OF THE ASSESSEE COMPANY. THE ASSESSEE IS BEING COMPANY, THERE CANNOT BE ANY PERSONAL ELEMENT INVOLVED. HENCE, WE CONCUR WITH THE FINDINGS OF THE CIT (A). THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 22 OF 27 59. GROUND NO. 3 RELATES TO DELETION OF DISALLOWANCE OF DEDUCTION OF RS.50,60,02,295/- CLAIMED FROM BOOK PROFIT UNDER CLAUSE (VII) OF EXPLANATION TO SECTION 115JB AVAILABLE TO SICK COMPANY. 60. BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED THAT ENTIRE BOOK PROFIT IS NOT LIABLE TO TAX ON THE GROUND THAT IT WAS A SICK INDUSTRIAL COMPANY AND THE PROFITS OF SICK INDUSTRIAL COMPANY ARE ELIGIBLE FOR EXCLUSION FROM THE COMPUTATION OF BOOK PROFIT UNDER SUB-CLAUSE (VII) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT. THE AO QUESTIONED THE ELIGIBILITY OF SICK COMPANY. THE AO NOTED APPELLATE AUTHORITY OF INDUSTRIAL & FINANCIAL RECONSTRUCTION (AAIFR) IN CASE NO. 10/490 DTD. 21.11.2002 HELD THAT THE ACCUMULATED LOSSES WERE TO BE EXPECTED TO WIPE OUT BY A.Y. 2008-09. HENCE, THIS YEAR IS CUT OFF YEAR AS THE NET WORTH OF THE COMPANY BECOMES POSITIVE. THE BIFR HAS NOT SANCTIONED THE REVISED MADRAS IN APPEAL ORDER DTD. 21.11.2002 IN APPEAL NO. 367/01 HENCE, ACCUMULATED LOSSES WERE TO BE WIPED OUT BY A.Y. 2008-09. THE ASSESSEE WAS UNABLE TO FILE ANY EVIDENCE TO SHOWS THAT IT WAS CATEGORIZED AS SICK INDUSTRIAL UNDERTAKING AND CONTINUED TO BE SICK COMPANY. THEREFORE, THE AO DISALLOWED THE CLAIM OF RS.50,60,02,295/-. UNDER SECTION 115JB OF THE ACT. GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 23 OF 27 61. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE CIT (A) OBSERVED THAT AS PER OUTCOME OF BIFR ORDER DTD. 15.02.2011, THE BIFR HELD THAT NET WORTH HAS TURNED OUT TO BE POSITIVE AS ON 31.03.2010 AND THEREFORE, THE APPELLANT CEASED TO BE A SIC COMPANY. THEREFORE, CONTENTION OF THE APPELLANT THAT IT WAS STILL SIC COMPANY WAS NOT FOUND ACCEPTABLE. THE CIT (A) QUOTED THE PROVISION OF SUB-CLAUSE (VII) OF SECTION 115JB AND OBSERVED THAT COMMENCING POINT AND THE ENDING POINT FOR SUCH EXCLUSION OF PROFIT IS CLEARLY PROVIDED. THE COMMENCING POINT IS THAT YEAR IN WHICH THE COMPANY BECOMES A SICK COMPANY AND THE ENDING POINT IN THE YEAR IN WHICH THE NET WORTH OF THE COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. IN THE APPELLANTS CASE, THE COMMENCING POINT IS NOT UNDER DISPUTE. WHAT IS UNDER DISPUTE IS THE ENDING POINT. ON THE BASIS OF BIFR`S ORDER AS PER WHICH THE NET WORTH HAS BECOME POSITIVE AS ON 31.03.2010, THE APPELLANT WOULD BE ELIGIBLE FOR THE BENEFIT OF ABOVE SUB-CLAUSE FOR THE YEAR UNDER APPEAL OR IS IT TO BE DECIDED. FROM THE PLAIN READING OF THE ABOVE SUB-CLAUSE, IT IS CLEARLY APPEARS THAT THE BENEFIT OF EXCLUSION OF THE ENTIRE PROFIT UNDER THE ABOVE SUB- CLAUSE SHALL BE AVAILABLE FOR THE YEAR IN WHICH NET WORTH BECOMES POSITIVE AND THE COMPANY SHALL BE LIABLE TO PAY TAX UNDER SECTION GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 24 OF 27 115JB FROM THE NEXT YEAR. THE AO HAS FAILED TO PROPERLY INTERPRET THE PLAIN PROVISIONS OF THE ABOVE SUB-CLAUSE. THE IDENTICAL SITUATION WAS IN INVOLVED IN THE HYDERABAD ITAT DECISION IN THE CASE OF M/S.PRAGA TOOLS LTD.[59 SOT 14) RELIED UPON BY THE APPELLANT. IN THE SAID CASE, THE NET WORTH OF THE ASSESSEE BECAME POSITIVE FOR ASSESSMENT YEAR 20007-08 AND THE ASSESSEE CLAIMED THE BENEFIT OF EXCLUSION OF ITS PROFIT FOR THAT YEAR UNDER SUB-CLAUSE (VII) OF THE EXPLANATION 1 TO SECTION 115JB. THE ITAT ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING THAT THE BENEFIT OF REDUCTION OF THE ENTIRE PROFIT GIVEN UNDER SUB- CLAUSE (VII) IS AVAILABLE FOR THE YEAR IN WHICH THE NET WORTH BECOMES POSITIVE. THIS DECISION IS SQUARELY APPLICABLE AND ANSWERS THE QUESTION ON HAND IN FAVOUR OF THE APPELLANT. THE CLEAR AND AMBIGUOUS POINT PROVISION OF SUB-CLAUSE (VII) OF EXPLANATION 1 IS DULY EXPLAINED BY THE ITAT IN THE DECISION AND IT IS SQUARELY APPLIES TO THE CASE OF THE APPELLANT. IT IS VERY MUCH CLEAR THAT A SIC COMPANY IS ENTITLED TO EXCLUSION OF ITS ENTIRE PROFIT IN THE COMPUTATION OF PROFIT UNDER SECTION 115JB IN THE YEAR IN WHICH THE NET WORTH BECOMES POSITIVE AND IT SHALL BE LIABLE TO TAX ON ITS PROFIT FROM THE SUBSEQUENT YEAR. THEREFORE, THE CIT (A) FOLLOWING THE SAID DECISION HELD THAT THE APPELLANT IS ELIGIBLE FOR EXCLUSION OF THE EXTENT THAT PROFIT UNDER SUB- GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 25 OF 27 CLAUSE (VII) OF THE EXPLANATION1 TO SECTION 115JB IN THE COMPUTATION OF BOOK PROFIT. 62. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. CIT (DR) VEHEMENTLY SUPPORTED THE ORDER OF THE AO. IT WAS CONTENDED THAT THAT SINCE THE NET WORTH OF THE ASSESSEE COMPANY BECOMES POSITIVE THIS YEAR HENCE, THE ASSESSEE IS NOT A SIC COMPANY THEREFORE, NOT ELIGIBLE FOR BENEFIT OF EXCLUSION OF PROFIT UNDER SUB-CLAUSE (VII) OF EXPLAIN ONE TO SECTION 115JB OF THE ACT. 63. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SUBMITTED DETAILS ALONG WITH COPIES OF ALL ORDERS OF BIFR AND AAIFR. HE CONTENDED THAT BENEFIT OF DEDUCTION UNDER CLAUSE (VII) IS AVAILABLE UP TO THE YEAR IN WHICH NET WORTH OF THE ASSESSEE COMPANY BECOMES POSITIVE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE IN THE CASE OF ACIT V. PRAGA TOOLS LTD. 59 SOT 14 (HYDERABAD). 64. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF CLAUSE (VII) OF EXPLAIN 1 TO SECTION 115JB READS AS UNDER: ( VII ) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 26 OF 27 YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB- SECTION (1) OF SECTION 17 27 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986) AND END ING WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. 65. THUS, PLAIN READING OF ABOVE CLAUSE PROVIDES THAT THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY WOULD BE ELIGIBLE WITH ENDING WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. THE COMMENCING POINT AND THE ENDING POINT FOR SUCH EXCLUSION OF PROFIT IS CLEARLY PROVIDED. THE COMMENCING POINT IS THAT YEAR IN WHICH THE COMPANY BECOMES A SICK COMPANY AND THE ENDING POINT IN THE YEAR IN WHICH THE NET WORTH OF THE COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. IN THE ASSESSEE`S CASE, THE COMMENCING POINT IS NOT UNDER DISPUTE. WHAT IS UNDER DISPUTE IS THE ENDING POINT. ON THE BASIS OF BIFR`S ORDER AS PER WHICH THE NET WORTH HAS BECOME POSITIVE AS ON 31.03. 2010, THE APPELLANT WOULD BE ELIGIBLE FOR THE BENEFIT OF ABOVE SUB-CLAUSE FOR THE YEAR UNDER APPEAL OR IS IT TO BE DECIDED. FROM THE PLAIN READING OF THE ABOVE SUB-CLAUSE, IT IS CLEARLY APPEARS THAT THE BENEFIT OF EXCLUSION OF THE ENTIRE PROFIT UNDER THE ABOVE SUB-CLAUSE SHALL BE AVAILABLE FOR THE YEAR IN WHICH GUJARAT SIDHEE CEMENT LTD. V. ACIT & VICE- VERSA/I.T.A. NO. 319 & 290 & 607 & 688/RJT/2014/A.Y.07-08 & 2010-11 PAGE 27 OF 27 NET WORTH BECOMES POSITIVE AND THE COMPANY SHALL BE LIABLE TO PAY TAX UNDER SECTION 115JB FROM THE NEXT YEAR. THIS VIEW IF FURTHER, SUPPORTED BY THE DECISION OF HYDERABAD ITAT WHEREIN IT WAS HELD THAT THAT THE BENEFIT OF REDUCTION OF THE ENTIRE PROFIT GIVEN UNDER SUB- CLAUSE (VII) IS AVAILABLE FOR THE YEAR IN WHICH THE NET WORTH BECOMES POSITIVE. THEREFORE, THE CIT (A) HAS RIGHTLY FOLLOWED THE SAID DECISION OF TRIBUNAL. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WERE HAVE NO REASON TO INTERFERE WITH THE FINDINGS RECORDED BY THE LD. CIT(A). IN VIEW OF THIS MATTER, THIS GROUND OF APPEAL IS DISMISSED. 66. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND APPEAL OF REVENUE IS ALSO DISMISSED FOR THE ASSESSMENT YEAR 2010-11 IN I.T.A.NO. 607 & 688/RJT/2014. 67. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2018. SD/- SD/- ( C.M. GARG) (O. P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: DATED: 11 TH DECEMBER, 2018 /OPM COPY OF ORDER SENT TO - ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT