M/S. JINDAL IRON & STALL CO. LTD., V. THE ACIT RG. 5(2),

ITA 2910/MUM/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1253 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 01-06-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 21-04-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K PAHWA
• Assessee Lawyers: ARVIND SONDE
• Keywords: Capital asset; Business income; Depreciation; Additional depreciation; Retrospective amendment; Bad and doubtful debts; Valuation report; Capital receipt; Set aside; Capital Gains
• Section: 80HHC; 115JB; 264; 192; 154

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NO. 989/MUM/2001 A.Y. 1997-98 ITA NO. 4431/MUM/2003 A.Y. 1998-99 ITA NO. 4432/MUM/2003 A.Y. 1999-2000 ITA NO. 2910/MUM/2004 A.Y. 2000-01 M/S. JINDAL IRON & STEEL CO. LTD., JINDAL MANSION, 5A, G. DESHMUKH MARG, MUMBAI-400 026 PAN-AAACJ2902K VS. THE JCIT, SPL RANGE 28, AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ARVIND SONDE RESPONDENT BY: SHRI S.K. PAHWA O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THESE APPEALS ARE FILED BY ASSESSEE ARE DIRECTED A GAINST THE ORDERS PASSED BY THE LD. CIT(A)-V, MUMBAI. WE HEARD THESE APPEALS TOGETHER AND PREFERRED TO ADJUDICATE THEM BY THE SINGLE CONS OLIDATED ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRODUCER OF HOT ROLLED, COLD ROLLED AND GALVANIZED STEEL. THE COMP ANY OPERATES FROM ITS TWO PLANTS AT TARAPUR AND VASIND IN THE STATE OF M AHARASHTRA. ITA NO. 989/MUM/2001 3. THE FIRST GROUND RAISED BY THE ASSESSEE IS REGAR DING ADDITION OF RS. 1,58,99,000/- BEING LEASE EQUALIZATION ACCOUNT TO T HE BOOK PROFITS U/S. 115JA OF THE I.T. ACT. JINDAL IRON & STEEL LTD. 2 4. THE LD. CIT(A) HELD AS FOLLOWS: THE NOMENCLATURE LEASE EQUALIZATION RESERVE IS N OTHING BUT A RESERVE/PROVISIONS TO BE ADJUSTED LATER ON. SO, THE AO IS PERFECTLY JUSTIFIED IN ADDING THE SAME TO THE BOOKS PROFITS. THE SEC. 115JA EXPLANATION (B) IS QUITE SPEAKING BECAUSE IT TALKS OF THE AMOUNTS CARRIED TO ANY RESERVES BY WHATEVER NAME CALLED. THUS, IT TAKES UNDER ITS WINGS ALL SORTS OF RESERVES INCLUDING LEA SE EQUALISATION RESERVE. FURTHER, IT IS ALSO AN ADMITTED FACT THAT THE EXPENDITURE HAS NOT BEEN INCURRED, ON THE CONTRARY, IT ALSO RES TS IN THE REALM OF RESERVE TO BE ADJUSTED, NEED-BASED, AT A FUTURE POI NT OF TIME. THEIR LORDSHIPS OF KERALA HIGH COURT IN THE CASE OF CIT V S MALAYALA MANORAMA CO. LTD. 161 CTR 383 (KER) HELD AS UNDER: A RESERVE IS A STAND-BY CREATED OUT OF THE PROFI TS OF A BUSINESS TO MEET CONTINGENCIES WHICH ARE UNKNOWN AN D WHICH CANNOT BE FORETOLD. IT IS CREATED BY WAY OF APPRO PRIATION OF PROFITS AND IS NOT A CHARGE, AGAINST THE PROFITS THUS THE AMOUNT IN QUESTION HAS RIGHTLY BEEN DISALLOWED/ADDED U/S. 115JA, EXPLANATION (B) AND AN Y ACCOUNTING JUGGLERY BACKED BY ABSTRACT AND HIGHLY CEREBRAL REA SONINGS, WONT BE ABLE TO BAIL OUT THE APPELLANT COMPANY. ON A CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE BY THE LEARNED COUNSEL AND IN THE LIGHT OF THE DISCUSSION GIVEN ABOVE, I AM OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY DISA LLOWED RS. 1,58,99,000/- PERTAINING TO LEASE EQUALIZATION RESE RVE. THE SAME IS ACCORDINGLY CONFIRMED. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING CASE LAWS : 1) RELIANCE INDUSTRIAL INFRASTRUCTURE LTD., BY THE MUMBAI TRIBUNAL IN ITA NO. 2535 & 2536/M/02. 2) TVS FINANCE AND SERVICES LTD. VS JCIT (318 ITR 4 35)(MAD) 3) DCIT VS SREI INTERNATIONAL FINANCE LTD. (10 SOT 722) (DEL) 4) GE CAPITAL TRANSPORTATION FINANCIAL SERVICES LTD . VS ACIT (301 ITR (AT) 69)(DEL) 5) GOODWILL INDIA LTD. VS DCIT (306 ITR (AT)34)(DEL ) JINDAL IRON & STEEL LTD. 3 6. THE LD. COUNSEL FOR THE ASSESSEE SHRI ARVIND SON DE SUBMITTED THAT LEASE EQUALIZATION RESERVE IS A CHARGE CREATED AND IS IN ACCORDANCE WITH THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF C HARTERED ACCOUNTANTS OF INDIA. HE ALSO SUBMITTED THAT UNDER THE COMPANI ES ACT, GUIDANCE NOTE IS REQUIRED TO BE ADHERED TO BY ALL THE COMPAN IES. IT IS NOTHING BUT AN ADDITIONAL DEPRECIATION CHARGE CREATED AGAINST T HE ASSETS GIVEN ON LEASE. HE FURTHER EXPLAINED THAT IT IS NOT A PROVI SION AS CHARGE IS CREATED FOR DIMINISHING THE VALUE OF ASSETS AND IT IS NOT A RESERVE. THE LD. COUNSEL POINTED OUT THAT SECTION 115JA OF THE I.T. ACT REQUIRES BOOK PROFITS TO BE COMPUTED ON THE BASIS OF PROFIT & LOS S ACCOUNT WHICH HAS TO BE PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PA RTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT AND NO ADJUSTMENT S CAN BE MADE UNLESS THOSE ARE SPECIFIED IN THE EXPLANATION. HE RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF APOLLO TYRES LT D. VS CIT (255 ITR 273 (SC) 7. IN THE CASE OF GE CAPITAL TRANSPORTATION FINANCI AL SERVICES LTD. VS ACIT 301 ITR (AT) 69 (DEL) IT HAS BEEN HELD AS FOLL OWS: THE AMOUNT OF LEASE EQUALISATION CHARGES WAS NEITH ER DEBITED BY THE ASSESSEE-COMPANY TO ITS PROFIT AND L OSS APPROPRIATION ACCOUNT NOR WAS THE PURPOSE THEREOF TO ENABLE THE A SSESSEE TO TIDE OVER A DIFFICULT FINANCIAL PERIOD. THE PURPOSE OF P ROVIDING FOR THE LEASE EQUALISATION CHARGES WAS ENTIRELY DIFFERENT A S EXPLAINED IN THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THE AMOUNT SO PROVIDED WAS NOT TRANSFERRE D BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT TO ANY RESERVE ACC OUNT, BUT IT WAS ADJUSTED AGAINST DEPRECIATION OR WRITTEN DOWN VALUE OF THE RELEVANT FIXED ASSETS GIVEN ON LEASE. THE AMOUNT OF LEASE EQ UALISATION WAS A CHARGE WHICH HAD BEEN DEDUCTED TO ARRIVE AT THE TRU E AND CORRECT PROFIT OF THE LEASING BUSINESS AND IT WAS THUS NEIT HER AN APPROPRIATION OF PROFIT NOR ALLOCATION OF PART OF T HE PROFITS TO ANY FUND SO AS TO CALL IT AS A RESERVE. THE SAID CHARGE THUS WAS CREATED AS A RESULT OF DEBIT TO THE PROFIT AND LOSS ACCOUNT AND NOT A DEBIT TO THE APPROPRIATION ACCOUNT. RESERVES WERE PART OF UNDIST RIBUTED PROFITS OF THE BUSINESS AND THEREFORE PART OF CAPITAL OF THE B USINESS. THE JINDAL IRON & STEEL LTD. 4 AMOUNT OF LEASE EQUALISATION CHARGES HOWEVER WERE N EITHER THE PORTION OF EARNING OR PROFITS OF AN ENTERPRISE NOR WAS IT APPROPRIATED FOR A GENERAL OR SPECIFIC PURPOSE. IT WAS A CHARGE AGAINST THE PROFIT TO ARRIVE AT THE TRUE AND CORRECT PROFITS OF THE LEASI NG BUSINESS WHICH BY NO MEANS COULD BE TREATED AS PART OF UNDISTRIBUT ED PROFITS OR CAPITAL OF THE BUSINESS. THE ADJUSTMENT MADE BY THE ASSESSING OFFICER BY ADDING THE AMOUNT OF LEASE EQUALISATION CHARGES WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JA WAS N OT PERMISSIBLE SINCE THE SAID AMOUNT WAS NOT COVERED WITHIN ANY OF THE CLAUSES OF THE EXPLANATION BELOW SECTION 115JA(2) INCLUDING CL AUSE (B) AND THE COMMISSIONER (APPEALS) THEREFORE WAS NOT JUSTIFIED IN CONFIRMING THE ADJUSTMENT SO MADE BY THE ASSESSING OFFICER ON THIS COUNT. THE ORDER WAS TO BE SET ASIDE AND THE ASSESSING OFFICER WAS DIRECTED TO DELETE THE ADJUSTMENT/ADDITION MADE. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ALLOW THIS GROUND RAISED BY THE ASSESSEE. 8. THE SECOND GROUND RELATES TO ADDITION OF RS. 63 ,54,35,000/- BEING PROVISION FOR DEBENTURE REDEMPTION RESERVE TO THE B OOK PROFITS U/S. 115JA OF THE I.T. ACT. 9. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE GIVEN A CAREFUL THOUGHT TO THE SUBMISSIONS MADE BY THE LEARNED COUNSEL VIS--VIS THE AOS ORDER ON THI S SCORE AND I AM OF THE CONSIDERED VIEW THAT THE AOS ORDER IS QUITE EL OQUENT. IN THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT PREPA RED AS PER THE PROVISIONS OF THE COMPANIES ACT, THE APPELLANT COMP ANY ITSELF HAS TERMED THIS ITEM AS A RESERVE AND NOT AS A PROVIS IONS. FURTHER, PART III OF SCHEDULE VI TO THE COMPANIES ACT PROVID ES FOR SEPARATE CRITERIA TRANSFERRING THE AMOUNT TO RESERVE OR PROV ISIONS ACCOUNT. THE DECISION IN THE CASE OF NATIONAL RAYON CORPN., AS RELIED UPON BY THE LEARNED COUNSEL, IS NOT APPLICABLE TO THE FACTS OF THE CASE, BECAUSE THE SAID DECISION WAS RENDERED IN THE CONTE XT OF SUR TAX. IN THE SUR TAX, ONLY FREE RESERVES WHICH WERE NOT RELA TED TO ANY LIABILITY WERE LIABLE TO BE INCLUDED IN THE COMPUTATION OF CA PITAL EMPLOYED FOR LEVY OF SUR TAX. BESIDES, THE SAID DECISION IN THE CONTEXT OF COMPANIES (PROFITS) SUR TAX ACT, 1964 WAS GIVEN W ITH SPECIAL REFERENCE TO RULE 1 OF THE SECOND SCHEDULE TO THE S UR TAX ACT AND AS SUCH, CANT BE APPLIED AS A JIG-SAW-FIT AT OTHER PLACES ALSO. IN FACT, ACCORDING TO THE DICTIONARIES (BOTH OXFORD AND WE BSTER) THE JINDAL IRON & STEEL LTD. 5 APPLICABLE PRIMARY MEANING OF THE WORK RESERVE IS TO KEEP FOR FUTURE USE AS ENJOYMENT, TO SET APART FOR MORE PURP OSE OR END IN VIEW; TO KEEP IN STORE FOR FUTURE OR SPECIAL USE; T O KEEP IN RESERVE. BASED ON THIS DEFINITION, THE DEBENTURE REDEMPTION RESERVE COMES TO BE WITHIN THE AMBIT OF RESERVE AS IT IS SET O UT FOR SOME SPECIAL PURPOSE/USE. FURTHER, EVEN AS PER PART III OF THE SCHEDULE VI TO THE COMPANIES ACT, THE AMOUNT IN QUESTION HAS NECESSARI LY GOT TO BE PROVIDED AS A RESERVE AND THE APPELLANT COMPANY H AD ALSO RIGHTLY DONE LIKE THAT. NOW, I AM OF THE CONSIDERED VIEW T HAT THE APPELLANT COMPANY HAS RAISED THE BOGEY OF CONTROVERSY THAT TH E SAID AMOUNT IS NOT RESERVE BUT IS A PROVISION AGAINST THE AS CERTAINED LIABILITIES WITH THE SOLE AIM OF WRIGGLE OUT OF THE RIG OURS OF EXPLANATION (B) TO SEC. 115JAM CANOPY OF EXPLANATION (C) TO SEC. 115JA . IT IS AN AXIOM THAT EXPLANATION (B) TO SEC. 115JA ROPES IN EVEN TH E RESERVE AGAINST THE ASCERTAINED LIABILITIES, SO, THE APPELLANT COMP ANY THOUGHT TO TAKE SHELTER IN THE ARGUMENTS OF THE AMOUNT BEING A PRO VISION AGAINST THE ASCERTAINED LIABILITIES. ON A CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE BY THE LEARNED COUNSEL AND HAVING REGARD TO THE DISCUSSION GIVEN IN THE PRECEDING PARAS, I AM OF THE CONSIDERED VIEW THAT T HE STAND OF THE REVENUE MERITS TO BE SUSTAINED. I ACCORDINGLY, DEC LINE TO INTERFERE ON THIS POINT. IN OTHER WORDS, THE ADDITION OF RS. 63 54.35 LAKHS U/S. 115JA EXPLANATION (B) IS HEREBY SUSTAINED. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING CASES: 1) RAYMOND LTD. VS ACIT (ITA NO. 623/M/2003 (MUM) 2) IOL LTD., VS CIT (80 TTJ 525((CAL). 11. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT DEBENTURE REDEMPTION RESERVE IS CREATED IN ACCORDANCE WITH TH E SEBI GUIDELINES AND DEBENTURE TRUST DEED. AMOUNT OF RS. 6354.35 LA KHS SET APART TO MEET A KNOWN LIABILITY. IT IS NOT A RESERVE AS HEL D BY THE DECISION IN THE CASE OF NATIONAL RAYON CORPN. LTD. VS CIT (227 ITR 764). JINDAL IRON & STEEL LTD. 6 12. WE HEARD BOTH THE PARTIES. IN THE CASE OF NATI ONAL RAYON CORPN., THE HONBLE SUPREME COURT POINTED OUT THAT BY ISSUI NG DEBENTURES, THE ASSESSEE HAD RECEIVED LOAN AGAINST SECURITY OF ITS ASSETS AND THOUGH THE LOAN MAY NOT BE REPAYABLE IN THE YEAR OF ACCOUNT TH ERE WAS OBLIGATION TO PAY THE LOAN WHICH WAS KNOWN LIABILITY. THEREFORE THE DEBENTURE REDEMPTION RESERVE COULD NOT BE TREATED AS RESERVE AND HAS TO BE CONSIDERED AS A PROVISION FOR MEETING AS ASCERTAINE D LIABILITY. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE ALLO W THIS GROUND OF THE ASSESSEE. 13. THE THIRD GROUND RELATES TO ADDITION OF RS. 58, 92,000/- BEING PROVISION FOR DOUBTFUL DEBTS/ADVANCES TO THE BOOK P ROFITS U/S. 115JA OF THE I.T. ACT. 14. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE GIVEN A CAREFUL THOUGHT TO THE SUBMISSIONS MADE BY THE LEARNED COUNSEL VIS--VIS THE AOS ORDER. IN MY CO NSIDERED OPINION, THE LIABILITY IN RESPECT OF DOUBTFUL DEBTS/ADVANCES BECOMES ASCERTAINED LIABILITY ONLY WHEN AN ASSESSEE HAS EXH AUSTED ALL THE REMEDIES TO RECOVER THE SAME, AND ANTERIOR TO THIS, IT IS ONLY A PROVISION FOR UNASCERTAINED LIABILITY TO BE SQUAREL Y HIT BY THE PROVISIONS OF SEC. 115JA EXPLANATION C. FURTH2ER, THE TERM ASCERTAINED LIABILITY HAS NOT BEEN DEFINED IN THE ACT. SO, ONE WILL HAVE TO DEPEND UPON THE DICTIONARY MEANING AND JUDI CIAL PRONOUNCEMENTS. ACCORDING TO WEBSTERS DICTIONARY THE WORD ASCERTAIN MEANS TO MAKE CERTAIN, TO MAKE SURE OF . ACCORDING TO WORCESTER, ASCERTAIN IS TO MAKE SURE OR CERTAIN, T O ESTABLISH, TO FIX. SIMILARLY IN THE LEGAL SIGNIFICANCE, IT HAS BEEN DE FINED TO FIND OUT OR LEARN FOR A CERTAINTY BY TRIAL EXAMINATION, OR EXPE RIMENT; TO MAKE SURE BY INVESTIGATION(DALLAS RY AND TERMINAL COMPA NY VS GRAHAM TEX CIV. APP 185, SW 180, 184). BESIDES, THE ASCER TAINMENT NEED TO BE ABSOLUTE, AND FINAL JUDGEMENT AND RETURN NULL A BONA ARE NOT ALWAYS PREREQUISITES. (AMERICAN TRUST CO. VS COMM. OF INTERNAL REVENUE, CCA, CAL, 31F (2D) 47, 48). BASED ON THE ABOVE, IF THE INSTANT ISSUE IS ANALYSED, THE PROVISION OF DOUBTFU L DEBTS IS OUT AND UNASCERTAINED LIABILITY, BECAUSE THE ASCERTAINMENT IS NOT ABSOLUTE JINDAL IRON & STEEL LTD. 7 AND FINAL. AS SUCH, THE AO IS PERFECTLY JUSTIFIED IN TREATING IT AS A PROVISION FOR UNASCERTAINED LIABILITY. ACCORDINGLY , THE ADDITION MADE BY THE AO TO THE BOOK PROFIT ON THIS SCORE IS PERFE CTLY JUSTIFIED. THE PLEAS OF THE DIMINUTION IN THE VALUE, WILL ALSO, I BELIEVE, NOT COME TO THE HELP OF THE APPELLANT COMPANY. AS SUCH, I DECL INE TO INTERFERE ON THIS GROUND. 15. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE BY THE SUPREME CO URT DECISION IN THE CASE OF CIT VS HCL COMNET SYSTEMS & SERVICES LTD. ( 305 ITR 409)(SC) AND MUMBAI TRIBUNAL DECISION IN THE CASE OF CIT VS ECHJAY FORGINS (P) LTD. (251 ITR 15)(BOM). 16. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT IT IS A PROVISION FOR DIMINUTION IN THE VALUE OF AN ASSET. IT IS NOT A PROVISION FOR MEETING ANY CONTINGENT LIABILITY. HE ALSO SUBMITTE D THAT IT IS NOT AN ADHOC AMOUNT AND IT IS AN EXACT ASCERTAINMENT OF TH E VALUE OF THE ASSET. 17. IN THE CASE OF CIT VS HCL COMNET SYSTEMS & SERV ICES LTD. (305 ITR 409)(SC), IT HAS BEEN HELD AS FOLLOWS: WHILE RESORTING TO THE PROVISIONS OF SECTION 115JA OF THE INCOME-TAX ACT, 1961, ON THE BASIS THAT THE TOTAL I NCOME OF THE COMPANY AS COMPUTED UNDER THE ACT IS LESS THAN 30 P ER CENT. OF ITS BOOK PROFITS, THE ASSESSING OFFICER HAS TO ACCEPT T HE AUTHENTICITY OF THE ACCOUNTS MAINTAINED BY THE COMPANY IN ACCORDANC E WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI T O THE COMPANIES ACT, 1956, WHICH ARE CERTIFIED BY THE AUDITORS AND PASSE D BY THE COMPANY IN GENERAL MEETING. THE ASSESSING OFFICER H AS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE DULY CERTIFIED AND WHETHER SUCH BOOKS HAVE BEEN PROPERLY MAINTAINE D IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OF FICER DOES NOT HAVE THE JURISDICTION TO GO BEYOND THE NET PROFIT S HOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN T HE EXPLANATION TO SECTION 115JA. THE EXPLANATION HAS PROVIDED SIX ITE MS, VIZ., ITEMS (A) TO (F), WHICH IF DEBITED TO THE PROFIT AND LOSS ACCOUNT CAN BE ADDED BACK TO THE NET PROFIT FOR COMPUTING THE BOOK PROFI T. THE PROVISION FOR BAD AND DOUBTFUL DEBTS CAN BE ADDED BACK TO THE NET PROFIT ONLY IF ITEM (C) OF THE EXPLANATION IS ATTRACTED. ITEM (C) DEALS WITH AMOUNTS JINDAL IRON & STEEL LTD. 8 SET ASIDE FOR MEETING LIABILITIES OTHER THAN ASCERT AINED LIABILITIES. THE ASSESSEES CASE CAN FALL WITHIN THE AMBIT OF ITEM ( C) ONLY IF THE AMOUNT (I) IS SET ASIDE AS A PROVISION, (II) THE PR OVISION IS MADE FOR MEETING A LIABILITY, AND (III) THE PROVISION SHOULD BE FOR OTHER THAN AN ASCERTAINED LIABILITY, I.E., IT SHOULD BE FOR AN UN ASCERTAINED LIABILITY. ITEM (C) OF THE EXPLANATION TO SECTION 115JA IS NOT ATTRACTED TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS. THE PROVI SION FOR BAD AND DOUBTFUL DEBTS IS MADE TO COVER UP PROBABLE DIMINUT ION IN THE VALUE OF THE ASSETS, I.E., A DEBT WHICH IS AN AMOUNT RECE IVABLE BY THE ASSESSEE. SUCH A PROVISION CANNOT BE SAID TO BE A P ROVISION FOR A LIABILITY, BECAUSE EVEN IF THE DEBT IS NOT RECOVERA BLE NO LIABILITY CAN BE FASTENED ON THE ASSESSEE. ANY PROVISION MADE TOW ARDS IRRECOVERABILITY OF A DEBT CANNOT BE SAID TO BE A P ROVISION FOR LIABILITY. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ALLOW THE ASSESSEES APPEAL ON THIS GROUND. 18. THE FOURTH GROUND RELATES TO SURPLUS OF RS. 6,6 9,30,000/- ON REPURCHASE OF OWN DEBENTURES CREDITED TO CAPITAL RE SERVE. 19. THE LD. CIT(A) HELD AS FOLLOWS: ON A CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE BY THE LD. COUNSEL AND HAVING REGARD TO THE DISCUSSION GIV EN ABOVE, THE AO IS DIRECTED TO TAX THE SURPLUS AS CAPITAL GA INS UNDER THE NORMAL COMPUTATION OF INCOME INSTEAD OF TAXING THE SAME U/S. 28(IV) OF THE ACT. THE AO, WHILE TAXING THE S AID RECEIPT AS CAPITAL GAINS, WOULD HOWEVER, LOOK INTO OTHER ASPEC TS SUCH AS PERIOD OF HOLDING THE ASSET ETC., AND WOULD DETERMI NE THE CAPITAL GAINS LEVIABLE IN CONSONANCE WITH THE PROVI SIONS OF THE ACT. 20. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEBENTURES REPURCHASED WERE CANCELLED. SUBSEQUENTLY IT COULD BE VERIFIED FROM MINUTES OF MEETING OF BOARD OF DIRECTORS. THE LD. COUNSEL SUBMITTED THAT THERE IS NO TRANSFER OF CAPITAL ASSET. HE FUR THER SUBMITTED THAT THE AMOUNT RECEIVED ON FORFEITURE OF OWN SHARE IS A CAP ITAL RECEIPT. JINDAL IRON & STEEL LTD. 9 21. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING CASES: 1) INDUSTRIAL CREDIT AND DEVELOPMENT SYNDICATE LTD. (285 ITR 310) (KARN) 2) PRISM CEMENTS LTD. (285 ITR (AT) 43) 3) MULTAN ELECTRIC SUPPLY CO. (13 ITR 457_(LAH) 4) ASIATIC OXYGEN LTD VS DCIT (49 ITR 355)(CAL) 22. WE HEARD BOTH THE PARTIES. IN THE CASE OF PRIS M CEMENTS LTD.( 285 ITR (AT) 43 IT HAS BEEN HELD AS FOLLOWS: HELD, ALLOWING THE APPEAL, SINCE THE DEBENTURES WE RE ISSUED IN ORDER TO BORROW FUNDS TO RAISE CAPITAL, THE AMOU NT RECEIVED IN LIEU THEREOF ASSUMED THE CHARACTER OF A CAPITAL RECEIPT , IF AT ALL NOT TREATED TO BE A LOAN LIABILITY, INASMUCH AS ISSUANC E OF DEBENTURES WAS NOT A BUSINESS OF THE ASSESSEE. THUS, IF THE EA RNEST MONEY OR ADVANCE AMOUNT RECEIVED ON ACCOUNT OF ISSUANCE OF D EBENTURES, WAS FORFEITED ON ACCOUNT OF NON-PAYMENT OF CALL MONEY, THE LOAN LIABILITY WOULD ONLY CONVERT INTO A CAPITAL RECEIPT. IT WOULD NOT ASSUME THE CHARACTER OF A REVENUE RECEIPT OR BUSINESS RECEIPT BECAUSE THE DEBENTURES WERE NOT ISSUED IN THE COURSE OF REGULAR BUSINESS OF THE ASSESSEE. THEREFORE, THE AMOUNT RECEIVED BY THE ASS ESSEE IN LIEU OF ISSUANCE OF DEBENTURES WHICH WERE FORFEITED LATER O N ACCOUNT OF NON- PAYMENT OF CALL MONEY ASSUMED THE CHARACTER OF A CA PITAL RECEIPT WHICH WAS SHOWN EARLIER AS A LOAN LIABILITY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. EVEN IF THIS RECEIPT WERE TO BE CO NSIDERED AS A BUSINESS RECEIPT IT WOULD NOT BE TAXABLE UNDER THE PROVISIONS OF SECTION 41(1) INASMUCH AS THERE WAS NO ALLOWANCE OR DEDUCTION OF THIS LIABILITY IN THE EARLIER YEARS. THERE WAS NO P ROVISION IN THE ACT ACCORDING TO WHICH THIS TYPE OF RECEIPTS WAS CHARGE ABLE TO TAX. THEREFORE, THE REVENUE WAS NOT JUSTIFIED IN TREATIN G THIS RECEIPT AS A REVENUE RECEIPT. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ALLOW THIS GROUND RAISED BY THE ASSESSEE. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. JINDAL IRON & STEEL LTD. 10 ITA NO. 4431/M/03 A.Y. 1998-99 24. GROUND NO. 1 RELATES TO TAXABILITY ON SALE OF N ASRAPUR UNIT ON A GOING CONCERN BASIS FOR A LUMPSUM PRICE. 25. DURING THE YEAR UNDER CONSIDERATION THE AO OBSE RVED THAT THE ASSESSEE HAS SOLD ITS ALUMINIUM UNIT AS NASARPUR. THE SAID UNIT WAS ACQUIRED BY PROCESS OF AMALGATION OF NASARPUR METAL S LTD. WITH THE ASSESSEE COMPANY. THE LIABILITY OF THE SAID COMPAN Y WAS DISCHARGED BY ISSUING SHARES OF THE ASSESSEE COMPANY TO THE SHARE HOLDER OF THE SAID AMALGAMATING COMPANY AND A LIABILITY WAS CREATED FO R RS. 202.50 LAKHS. THE SAID UNIT WAS SOLD BY THE ASSESSEE COMPANY AT A N AGREED PRICE OF RS. 12,37,32,131/-. HOWEVER IT WAS OBSERVED BY THE AO THAT THE ASSESSEE COMPANY DID NOT REDUCE THE BLOCK OF ASSETS BY THE S ALE CONSIDERATION NOR DID IT OFFER THE CAPITAL GAIN ON SALE OF SUCH UNIT . 26. IN RESPONSE TO THE NOTICE ISSUED BY THE AO, IT WAS CONTENDED THAT THE SAID UNIT WAS TRANSFERRED TO SUN INDUSTRIES LTD . AS A GOING CONCERN FOR A LUMP SUM CONSIDERATION OF RS. 12,37,32,131/-. IT WAS ALSO STATED BY THE ASSESSEE THAT THERE WAS NO BASIS FOR ARRIVIN G AT THE VALUE OF THE AFORESAID UNIT AND ASSESSEE RELYING ON THE JUDGEMEN T OF THE APEX COURT IN THE CASE OF ELECTRIC CONTROL GEAR CO. LTD. 227 I TR 278 CLAIMED THAT THE AFORESAID SALE IS CAPITAL RECEIPT NOT EXIGIBLE TO T AX. IT WAS ALSO SUBMITTED THAT NO INDIVIDUAL SALE PRICE WAS ASSIGNED TO THE U NIT PROVISIONS OF SEC. 50 WOULD NOT BE APPLIED. HOWEVER, WITHOUT PREJUDIC E TO ITS CLAIM IT WAS SUBMITTED THAT IT WAS AT THE MOST LIABLE TO CAPITAL GAIN U/S. 45 OF THE I.T. ACT AND IN THIS REGARDS THE COST OF THE UNIT BASED ON THE BALANCE SHEET SHOULD BE TAKEN AS NET WORTH OF THE COMPANY WHICH W ORKED OUT TO RS. 1,66,23,900/-. JINDAL IRON & STEEL LTD. 11 27. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLANT AS WELL AS FINDINGS OF THE AO. THERE IS NO DISPUTE AS TO THE FACT THAT THE APPELLANT COMPANY HAS SOLD A UNIT AT NASARPUR. THERE IS ALSO NO DISPUTE AS TO THE FACT THAT THE AMOUNT OF SALE CONSIDERATION WAS DERIVED AT RS. 12,37,32,131/-. THE ONLY DISPUTE REGARDING THE FAC T IS THE DETERMINATION OF SUCH PRICE I.E. WHETHER THE SALE P RICE WAS DETERMINED ON THE BASIS OF THE VALUE OF THE ASSET A S ENVISAGED BY THE AO OR THE SAME WAS LUMP SUM PRICE WITHOUT AS SIGNING ANY VALUE TO THE INDIVIDUAL ASSETS. IN THIS REGAR DS I DO NOT FIND ANY MERIT IN THE APPELLANTS CASE. FIRSTLY TH OUGH THE APPELLANT HAS CONTENDED THAT THE SALE IS FOR LUMP S UM CONSIDERATION IT WOULD BE DIFFICULT TO ACCEPT SUCH CONTENTION OF THE APPELLANT AS IS EVIDENT FROM THE FACT THAT THE BUYER HAD ALREADY VALUED THE INDIVIDUAL ASSET THROUGH THE APP ROVED VALUER AND THE CONTENTS OF THE SAID VALUATION ARE N OT DENIED BY THE APPELLANT. FURTHER FROM VERIFICATION OF TH E AFORESAID VALUATION REPORT IT IS AMPLY CLEAR THAT THE APPELLA NT HAS TRANSFERRED ONLY SELECTED ITEMS OF ASSETS WITHOUT T RANSFERRING ANY LIABILITY OF THE SAID UNITS. IN CASE IF THE TR ANSFER WAS MADE AS A GOING CONCERN THE APPELLANT WOULD HAVE TRANSFERRED LIABILITIES AS WELL WHICH IS NOT THE CA SE HERE AND IF THAT BE SO, IT WOULD BE DIFFICULT FOR ANYBODY TO AC CEPT THE APPELLANTS THEORY OF TRANSFER OF GOING CONCERN. I T IS WELL ESTABLISHED PRINCIPLES OF LAW THAT IT IS THE SUBSTA NCE WHICH IS IMPORTANT THAN THAT OF THE FORM. IN THE INSTANT CA SE THOUGH THERE IS NO MENTION OF VALUE ASSIGNED TO THE INDIVI DUAL ASSETS IT CANNOT ALWAYS BE PRESUMED THAT IN REALITY NO VAL UES WERE ASSIGNED TO SUCH ASSETS AND MORE PARTICULARLY WHEN THE BUY2ER HAS ALREADY VALUED THE ASSETS. SIMILAR ISSU E HAD CAME UP BEFORE THE HONBLE ITAT MUMBAI IN CASE OF C IT VS PREMIER AUTOMOBILES LTD. 84 ITD 169 WHERE IN IT WAS HELD THAT THE EVIDENCE PROVED THAT THE APPELLANTS INTENTION WAS TO GIVE COLOUR TO THE TRANSACTION OF SLUMP SALE THOUGH IN F ACT PRICE OF EACH ITEM TRANSFERRED TO PURCHASER WAS PROPERLY KN OWN TO THE ASSESSEE BEFORE THE DATE ON WHICH THE PURCHASER RECORDED IN ITS BOOKS SPECIFIC PRICE FOR THE PURPOSE OF CLAI MING DEPRECIATION. IT WAS IN THIS PERSPECTIVE THE HONB LE ITAT TREATED THE TRANSACTION AS THAT OF SALE OF THE ASSE TS AS AGAINST THAT OF THE BUSINESS. LOOKING TO THE FACTS OF THE CASE AND HAS BEEN DISCUSSED HEREIN ABOVE I DO NOT FIND ANY INFIR MITY IN THE FINDINGS OF THE AO ON THIS ACCOUNT AND ACCORDINGLY THE APPELLANTS CLAIM THAT ITS CASE IS COVERED BY THE D ECISION OF THE JINDAL IRON & STEEL LTD. 12 APEX COURT IN THE CASE OF B.C. SRINIVASA SHETTY (SU PRA) AS WELL AS THAT OF ELECTRIC CONTROL GEAR CO. LTD. (227 ITR 278) ARE OF NO AVAIL. AS REGARDS APPELLANTS ALTERNATIVE ARGUMENTS THAT T HE APPELLANTS INCOME SHOULD BE TAXED AS CAPITAL GAINS THE SAME CAN ALSO NOT BE ACCEPTED, AS AFTER THE INTRODUCTION OF CONCEPT OF BLOCK OF ASSETS, THE AMOUNT RECEIVED ON SALE OF DEPRECIABLE ASSETS BELONGING TO ONE BLOCK IS REQUIRED TO BE RE DUCED FROM THAT BLOCK TO THE EXTENT THE AMOUNT OF WDV IN THAT BLOCK IS EXHAUSTED TO FULL EXTENT. IN THE INSTANT CASE THE AO HAS RIGHTLY DEDUCTED THE AMOUNT RECEIVED ON SALE OF ASS ET FROM THE RELEVANT BLOCK. I DO NOT FIND ANY INFIRMITY IN THE AO ACTION IN THIS REGARDS AS WELL ACCORDINGLY THE APPELLANTS CL AIM ON THIS ACCOUNT IS ALSO REJECTED. CONSEQUENTLY THE AOS AC TION OF REDUCING THE DEPRECIATION IS ALSO CONFIRMED. HOWEV ER, THE APPELLANT HAS SUBMITTED THAT WHILE CONSIDERING THE WDV OF BLOCK OF ASSET THE APPELLANT HAS NOT CLAIMED ANY DE PRECIATION ON THOSE ASSETS PERTAINING TO THE UNIT SO SOLD AND THEREFORE THE AOS ACTION FOR FURTHER REDUCTION OF DEPRECIATION W OULD AMOUNT TO DOUBLE TAXATION. IN THIS REGARDS THE AO IS DIRE CTED TO VERIFY THE APPELLANTS CLAIM THAT THE APPELLANT HAS REDUCE D THE AFORESAID SALE PRICE WHILE ARRIVING AT THE WDV OF S UCH BLOCK OF ASSETS AND IF THE SAME IS FOUND TO BE TRUE THE APPR OPRIATE RELIEF MAY BE GIVEN TO THE APPELLANT IN THIS REGARD S. 28. THE DEED OF ASSIGNMENT DT. 2 ND JULY, 1997 BETWEEN THE COMPANY AND SUN INDUSTRIES LTD. SECTION 50B INTRODUCED FOR LEVY AND COMPUTATION OF CAPITAL GAINS IN THE CASE OF SLUMP S ALE IS APPLICABLE FROM A.Y. 2000-01 AND ACCORDINGLY, SLUMP SALE IN EARLIER ASSESSMENT YEARS WOULD NOT BE TAXABLE. THE ASSESSEE RELIED ON THE D ECISION IN THE CASE OF INDUSTRIAL MACHINERY ASSOCIATES VS CIT (81 ITD 482) (AHM). THIS HAS BEEN APPROVED BY THE GUJARAT HIGH COURT. SLP FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE SUPREME COURT IN 264 ITR 141. 29. IN THE CASE OF AVAYA GLOBAL CONNECT LTD. VS ACI T (26 SOT 397), IT HAS BEEN HELD THAT NO CAPITAL GAINS U/S. 45 WOULD BE APPLICABLE, WHERE THERE IS TRANSFER OF WHOLE CONCERN AND CONSIDERATIO N IS NOT APPORTIONED ON CAPITAL ASSETS IN SPECIE. JINDAL IRON & STEEL LTD. 13 RESPECTFULLY FOLLOWING THE ABOVE, WE ALLOW THIS GRO UND RAISED BY THE ASSESSEE. 30. THE SECOND GROUND REGARDING ADDITION OF RS. 17, 24,694/- BEING PROVISION FOR DOUBTFUL DEBTS/ADVANCES TO THE BOOK P ROFITS U/S. 115JA OF THE I.T. ACT. 31. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO. 3 FOR A.Y. 1997-98. THIS ISSUE IS AGAINST THE ASSESSEE IN VIEW OF AMEND MENT MADE BY THE FINANCE BILL 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 1998. THEREFORE WE DISMISS THIS GROUND RAISED BY THE ASSESSEE. 32. THE THIRD GROUND REGARDING ADDITION OF RS. 1,58 ,99,000/- BEING LEASE EQUALIZATION ACCOUNT TO THE BOOK PROFITS U/S. 115JA OF THE I.T. ACT. 33. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO.1 FOR A.Y. 1997-98. THEREFORE, WE ALLOW THIS GROUND RAISED BY THE ASSES SEE. 34. THE FOURTH GROUND RELATES TO ADDITION OF RS. 31 ,25,00,000/- BEING PROVISION FOR DEBENTURE REDEMPTION RESERVE TO THE B OOK PROFITS U/S. 115JA OF THE I.T. ACT. 35. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 2 FOR A.Y. 1997-98. THEREFORE, WE ALLOW THIS GROUND OF THE ASSESSEE. 36. GROUND NO. 5 HAS NOT PRESSED BY THE ASSESSEE TH EREFORE IT IS DISMISSED AS NOT PRESSED. JINDAL IRON & STEEL LTD. 14 36.1 IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED. ITA NO. 4432/MUM/2003 A.Y. 1999-2000 37. GROUND NO. 1 RELATES TO SURPLUS OF RS. 2,76,01 ,040/- ON ACCOUNT OF FORFEITURE AND REPURCHASE OF OWN DEBENTURES CRED ITED TO CAPITAL RESERVE. 38. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 4 FOR A.Y. 1997-98. THEREFORE, WE ALLOW THIS GROUND RAISED BY THE ASSES SEE. 39. THE SECOND GROUND RELATES TO ADDITION OF RS. 16 ,15,934/- BEING CLUB EXPENSES INCURRED. 40. DURING THE APPEAL PROCEEDINGS THE ASSESSEE HAS SUBMITTED VIDE LETTER DT. 14.2.2002 BEFORE THE AO A NOTE ALONG WIT H STATEMENT SHOWING DETAILS OF CLUB EXPENSES. THE COPY OF THE SAME IS FILED ALONGWITH THE PAPER BOOK WHICH ARE AT PAGE 204-205. IN THE COPY OF THE LETTER IT IS FOUND THAT THE ASSESSEE HAD BROADLY GIVEN THE BIFUR CATION OF EXPENSES AS MEMBERSIP FEES, SUBSCRIPTION FEES AND SERVICE CHARG ES AS STATED BY THE AO. THE ASSESSEE FURTHER RELIED ON THE JUDGEMENT O F OTIS ELEVATORS LTD. (195 ITR 682) (BOM) AS ALSO THAT OF BOMBAY ITAT IN THE CASE OF HINDITRON COMPUTER PVT. LTD. (ITA NO. 1307/B/90 DT. 19.7.1995 ) AND THAT OF MADRAS HIGH COURT IN THE CASE OF SUNDRAM INDUSTRIES LTD. 240 ITR 335 (MAD) AND HAD CONTENDED THAT THE ABOVE EXPENSES FOR THE PURPOSE OF THE BUSINESS THE SAME SHOULD HAVE BEEN ALLOWED. THE AS SESSEE DURING THE APPEAL PROCEEDINGS HAVE ALMOST REITERATED ITS EARLI ER CLAIM AND HAS ALSO RELIED ON THOSE JUDGEMENT AND CONTENDED THAT THE DI SALLOWANCE MADE BY THE AO SHOULD BE DELETED. 41. THE LD. CIT(A) HELD AS FOLLOWS: JINDAL IRON & STEEL LTD. 15 I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO. THE APPELLANT APART FROM RELYING O N THE JUDGEMENTS AS AFORESAID AND GIVING BIFURCATION OF EXPENSES HAV E FAILED TO ESTABLISH THAT THE AFORESAID EXPENSES WERE INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT. IN ABSENCE OF SU CH ESTABLISHMENT I FAIL TO UNDERSTAND AS TO HOW THE RELIANCE PLACED BY THE APPELLANT ON VARIOUS JUDGEMENT WOULD BE APPLICABLE TO ITS CASE. IN VIEW OF THE AFORESAID FACT, I AM IN AGREEMENT WITH THE AOS STA ND AND THEREFORE, CONFIRM THE DISALLOWANCE OF EXPENSES AS FOR NON BUS INESS PURPOSE. 42. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED AS FOLLOWS: THE ASSESSEE HAD FILED THE DETAILS OF EXPENSES BEF ORE THE AO VIDE LETTER DT. 14.2.2002. THE CORPORATE MEMBERSHIP FEES PAID FOR ENTRANCE, MEMBERSHIP FEES ETC. PAID TO DIRECTORS HA S ALSO BEEN FILED. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM. 1) OTIS ELEVATOR CO. (INDIA) LTD. VS CIT (195 ITR 6 82) (BOM) 2) MAHINDRA & MAHINDRA LTD. VS JCIT (36 SOT 348)(MU M) 3) CIT VS SAMTEL COLOR LTD (180 TAXMAN 82) (DEL) 43. THE BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVA TOR CO. (INDIA) LTD. VS CIT (195 ITR 682) IN WHICH IT HAS BEEN HELD AS U NDER: PAYMENT OF CLUB FEES MADE TO PROMOTE BUSINESS INTE RESTS AND MEMBERSHIP OF CLUB WOULD PROVIDE OFFICERS BETTER CO NTACT WITH PERSONS IN GOOD POSITION AND WOULD RESULT IN PUBLIC ITY. THEREFORE CLUB FEES IS ALLOWABLE EXPENDITURE. RESPECTFULLY FOLLOWING THE ABOVE, WE ALLOW THIS GR OUND OF THE ASSESSEE. 44. THE THIRD GROUND RELATES TO ADDITION OF RS. 2,8 0,61,300/- BEING UNUTILIZED MODVAT CREDIT TO THE VALUE OF CLOSING ST OCK AS ON 31.3.1999. JINDAL IRON & STEEL LTD. 16 45. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANC E ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM. 1) CIT VS THE MAHALAKSHMI GLASS WORKS PVT. LTD. (IT A NO. 192 OF 2009)(BOM.HC) 2) MAHAVIR ALUMINIUM LTD. (297 ITR 77)(DEL) 3) HAWKINS COOKERS LTD. VS ITO (14 DTR 206)(MUM) 46. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE BOMBAY HIGH COURT DECISION IN THE CASE OF MAHALAXMI GLASS WORK AND HAWKINS COOKERS LTD. VS ITO 14 DTR 206 (MUM), WHERE IN IT HAS BEEN HELD AS FOLLOWS: THE CBDT HAS CLARIFIED THAT WITH A VIEW TO PUT AN E ND TO THIS POINT OF LITIGATION, BOTH THE OPENING AND C LOSING STOCK SHOULD REFLECT THE CORRECT VALUE AND THAT IS WHY SE CTION 145A WAS INSERTED TO THE STATUTE BOOK. IT IS FURTHER STA TED THAT THE VALUATION SHALL BE FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED ), ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON TH E DATE OF VALUATION. THE DELHI HIGH COURT IN THE CASE OF CIT VS. MAHAVIR ALLUMINIUM LTD., 168 TAXMAN 27 (DELHI) HAS HELD THAT CORRESPONDING ADJUSTMENT MUST BE MADE IN OPENI NG STOCK SUBJECT; HOWEVER, TO A CONDITION THAT SUCH AD JUSTMENT SHOULD NOT RESULT IN DOUBLE DEDUCTION FOR SAME EXPE NDITURE. THE DELHI HIGH COURT JUDGMENT IS THE ONLY HIGH COUR T JUDGMENT AVAILABLE ON THE ISSUE. IN SUCH CIRCUMSTAN CE THE JUDICIAL PROPRIETARY DEMANDS THAT WE ARE TO FOLLOW THE ABOVE JUDGMENT OF THE HIGH COURT. SINCE WE FOLLOW THE JUD GMENT OF THE DELHI HIGH COURT THEREFORE THE DECISIONS OF TRI BUNAL RELIED UPON BY THE LD DR DOES NOT HELP TO REVENUE. THE JUD GMENT OF THE APEX COURT IN THE CASE OF CIT V INDO NIPPON CHEMICALS CO. LTD.261 ITR 275(SC), CITED BY THE LD DR IS DISTINGUISHABLE ON FACTS AS THE SAID CASE DECIDED B Y THE APEX COURT CONSIDERING THE FACTS OF THAT CASE. THE APEX COURT IN THAT CASE HELD THAT ADOPTING GROSS` METHOD FOR P URCHASES JINDAL IRON & STEEL LTD. 17 AND NET METHODS FOR UNCONSUMED STOCK AT THE END OF YEAR IS NOT PERMISSIBLE. ON CONSIDERATION OF SECTION 145A, ABOVE MEMORANDUM AND CBDT CIRCULAR EXPLAINING THE PROVISIONS OF SECT ION 145A AND ABOVE JUDGMENT OF THE DELHI HIGH COURT WE NOTED THAT WHEN THE ADJUSTMENTS ARE MADE IN THE VALUATION OF INVENTORIES, THIS WILL AFFECT BOTH THE OPENING AS W ELL AS CLOSING STOCK. WHATEVER ADJUSTMENT IS MADE IN THE V ALUATION OF CLOSING STOCK, THE SAME WILL BE REFLECTED IN THE OPENING STOCK ALSO IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX PURPOSES. WE FURTHER NOTICED THAT SECTION 145A STARTS WITH THE NON-OBSTANTE CLAU SE NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145. THEREFORE, TO GIVE EFFECT TO SECTION 145A, THE OPENING STOCK AS ON 1.4.98 WILL HAVE TO BE INCREASE D BY ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED WI TH REFERENCE TO SUCH STOCK IF THE SAME HAS NOT BEEN AD DED FOR THE PURPOSE OF VALUATION IN THE ACCOUNTS. THE AO IS DIRECTED TO GIVE THE EFFECT OF SECTION 145A AS PER ABOVE DIS CUSSION. THEREFORE, WE SET ASIDE THIS ORDER TO THE FILE OF T HE AO TO REDO THE ASSESSMENT ACCORDING TO THE DECISION IN THE CASE OF HAWKINS COOKERS 14 DTR 206 (MUM) 47. THE FOURTH GROUND RELATES TO ADDITION OF RS. 77 ,98,815/- BEING EXPENSES PERTAINING TO PRIOR PERIOD. 48. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE GONE THROUGH THE ASSESSMENT ORDER FOR THE Y EAR UNDER CONSIDERATION AND FIND THAT AO HAS NOT DELIBERATED ON THIS POINT. HOWEVER WHILE COMPUTING THE TAXABLE INCOME, THE AO HAS ADDED BACK THE SUM OF RS. 77,98,815/- AS PER CLAUSE 22(B) & ANNEXURE-14 OF THE TAX AUDIT REPORT. DURING THE APPEAL PROCEED INGS ALSO THE APPELLANT HAS RAISED VARIOUS LEGAL ISSUES REGARDING THE ALLOWABILITY OF SUCH EXPENSES. HOWEVER, IT HAS NOT SUBMITTED AS TO WHY SUCH POINT WAS NOT TAKEN UP WITH THE AO AT THE TIME OF T HE ASSESSMENT PROCEEDINGS. IN VIEW OF THIS FACT IT APPEARS THAT THE ISSUE RAISED BY THE APPELLANT IS NOT ARISING OUT OF THE ASSESSMENT ORDER BUT THE SAME JINDAL IRON & STEEL LTD. 18 IS ADDITIONAL GROUND NOT CONTENDED BEFORE THE AO. EVEN THE APPELLANT COULD MOVE THE APPLICATION U/S. 154 OF TH E I.T. ACT. THEREFORE IN LINE WITH PROVISIONS OF RULE 46A, I AM NOT INCLINED TO ACCEPT THIS GROUND OF APPEAL AND THE SAME IS HEREBY REJECTED. 49. BEFORE US THE ASSESSEE SUBMITTED REVISED STATEM ENT OF TOTAL INCOME CLAIMING PRIOR PERIOD EXPENSES ALONGWITH A NOTE ON PREVIOUS EXPENSES ANNEXED THERETO. IT IS ALSO SUBMITTED DETAILS OF P RIOR PERIOD EXPENSES AS PER CLAUSE 22(B) OF THE TAX AUDIT REPORT. IT IS SU BMITTED THAT THE TOTAL TURNOVER OF THE COMPANY FOR THE YEAR UNDER CONSIDER ED IS RS. 1129.88 CRORES AS AGAINST PRIOR PERIOD EXPENSES OF RS. 77,9 8,815/-. 50. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANC E ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM. 1) RASHTRIYA CHEMICALS & FERTILIZERS LTD. VS JCIT ( MUM) 2) RASHTRIYA CHEMICALS & FERTILIZERS LTD. VS ACIT ( MUM) 3) NELCO LTD. VS ITO (MUM) 51. THE ITAT MUMBAI E BENCH IN THE CASE OF RASHT RIYA CHEMICALS & FERTILIZERS LTD., VS ACIT IN ITA NO. 3863/M/06 HEL D AS UNDER: IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CAS E WHERE THE TURNOVER OF THE ASSESSEE IS SUBSTANTIAL, SOME BONAF IDE ADJUSTMENTS IN THE BOOKS OF ACCOUNT WHERE THE ACCOU NTS FOR THE RELEVANT YEAR MAY HAVE BEEN CLOSED OR THE ASSES SEES AVENUES FOR CLAIMING THESE DEDUCTIONS IN THE RELEVA NT YEAR HAVE BEEN EXHAUSTED THE ASSESSEE WOULD BE ENTITLED TO CLAIM SUCH DEDUCTION IN A SUBSEQUENT YEAR. THEREFORE, WE ARE UNABLE TO COME TO ANY OTHER CONCLUSION AND ARE OF T HE OPINION THAT NO INTERFERENCE IN THE IMPUGNED ORDER IS CALLE D FOR. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS RE JECTED. 52. WE FIND THAT THE LD. CIT(A) HAS NOT DISCUSSED T HE ISSUE IN THE LIGHT OF THE ABOVE SAID DECISION HENCE WE SET ASIDE THE I SSUE TO THE FILE OF THE LD. CIT(A) TO DECIDE IN ACCORDANCE WITH LAW. JINDAL IRON & STEEL LTD. 19 53. THE FIFTH GROUND IS REGARDING ADDITION OF RS. 1 ,98,16,622/- BEING PROVISION FOR DOUBTFUL DEBTS/ADVANCES TO THE BOOK P ROFITS U/S. 115JA OF THE I.T. ACT. 54. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 3 FOR A.Y. 1997-98. BU THIS ISSUE IS AGAINST THE ASSESSEE IN VIEW OF AM ENDMENT MADE BY THE FINANCE BILL 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 1998. THEREFORE THIS GROUND IS DISMISSED. 55. THE SIXTH GROUND IS REGARDING ADDITION OF RS. 1 ,58,99,000/- BEING LEASE EQUALIZATION ACCOUNT TO THE BOOK PROFITS U/S. 115JA OF THE I.T. ACT. 56. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 1 FOR A.Y. 1997-98. THEREFORE, WE ALLOW THIS GROUND OF THE ASSESSEE. 57. THE SEVENTH GROUND RELATES TO ADDITION OF RS. 1 0,81,00,000/- BEING PROVISION FOR DEBENTURE REDEMPTION RESERVE TO THE B OOK PROFITS U/S. 115JA 58. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 3 FOR A.Y. 1997-98. THEREFORE, WE ALLOW THIS GROUND OF THE ASSESSEE. 59. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 2910/MUM/2004 A.Y. 2000-01 60. THE FIRST GROUND IS REGARDING ADDITION OF RS. 1,15, 528 BEING CLUB EXPENSES . THE ASSESSEE SUBMITTED THE CLUB EXPENSE S ALONGWITH DETAILS OF NATURE OF TOTAL CLUB EXPENDITURE INCURRED. JINDAL IRON & STEEL LTD. 20 61. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 2 FOR A.Y. 1999- 2000. THEREFORE, WE ALLOW THIS GROUND OF THE ASSESS EE. 62. THE SECOND GROUND RELATES TO ADDITION OF RS. 3, 49,12,221/- BEING UNUTILIZED MODVAT CREDIT TO THE VALUE OF CLOSING ST OCK AS ON 31.3.2000. 63. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. COUNSEL FOR THE ASSESSEE FILED MODVAT CREDIT AND COPY OF PROFIT & LOSS ACCOUNT CONSIDERING SEC. 145A OF THE I.T. ACT. 64. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 3 FOR A.Y. 1999- 2000. THEREFORE, WE SET ASIDE THIS ORDER TO THE FIL E OF THE AO TO REDO THE ASSESSMENT ACCORDING TO THE DECISION IN THE CASE OF HAWKINS COOKERS 14 DTR 206 (MUM) 65. THE THIRD GROUND RELATES TO DEDUCTION OF RS. 2, 80,61,300/- BEING ADJUSTMENT TO THE CLOSING STOCK OF 31 ST MARCH, 1999 IN A.Y. 99-2000. 66. THIS IS AN ALTERNATIVE GROUND TO GROUND NO. 2. THE DECISION IN THE CASE OF THE ASSESSEE WITH RESPECT TO GROUND NO. 2 W OULD APPLY. THEREFORE WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO RE DO THE ASSESSMENT ACCORDING TO THE DECISION IN THE CASE OF HAWKINS C OOKERS 14 DTR 206 (MUM) 67. FOURTH GROUND RELATES TO ADDITION OF RS. 50,59, 543/- BEING EXPENSES PERTAINING TO YEAR UNDER CONSIDERATION WHI CH WERE DEBITED IN A.Y. 2000-01. 68. THE LD. CIT(A) HELD AS FOLLOWS: THIS ISSUE IS NOT DELIBERATED BY THE AO IN HER ORD ER. HOWEVER FROM THE VERIFICATION OF FACTS IT IS FOUND THAT THE APPE LLANT HAD FILED ITS JINDAL IRON & STEEL LTD. 21 RETURN OF INCOME ON 30.11.2000 DECLARING THE LOSS O F RS. 33,32,08,011/- WHEREAS THE SAME WAS REVISED ON 28.3 .2002 DECLARING THE REVISED LOSS OF RS. 33,97,21,438/-. AS PER THE REVISED STATEMENT OF INCOME IN ITEM NO. 10 THE APPELLANT HA S SUO-MOTO ADDED THIS SUM AS INADMISSIBLE CONSIDERING THE SAME AS PRIOR PERIOD EXPENSES (AS PER CLAUSE 22(B) & ANNEXURE 14 OF TAX AUDIT REPORT) . AS THE AO HAS COMPUTED THE INCOME AS PER THE REVISION AS SUBMITTED BY THE APPELLANT I DO NOT FIND ANY INFIRM ITY IN THE APPELLANTS CASE AND AS SUCH THIS GROUND OF APPEAL IS REJECTED. 69. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE US. 70. BEFORE US, THE ASSESSEE FILED PREVIOUS REVISED STATEMENT OF TOTAL INCOME CLAIMING PRIOR PERIOD EXPENSES ALONGWITH A N OTE ON PREVIOUS EXPENSES. DETAILS OF PRIOR PERIOD EXPENSES AS PER CLAUSE 22(B) OF THE TAX AUDIT REPORT HAD ALSO BEEN FILED. THE LD. COUNSEL SUBMITTED BEFORE US THAT THE TOTAL TURNOVER OF THE COMPANY FOR THE YEAR UNDER CONSIDERATION IS RS. 1186.13 CRORES AS AGAINST PRIOR PERIOD EXPENSES OF RS. 50,59,543/-. 71. WE FIND THAT THE LD. CIT(A) HAS NOT DISCUSSED T HE ISSUE IN THE LIGHT OF THE ABOVE SAID DECISION HENCE WE SET ASIDE THE I SSUE TO THE FILE OF THE LD. CIT(A) TO DECIDE IN ACCORDANCE WITH LAW. 72. FIFTH GROUND RELATES TO DEDUCTION OF RS. 5,60,5 5,200/- AS SUO- MOTTO DISALLOWED BY THE COMPANY IN A.Y. 2001-02. 73. THE LD. CIT(A) HELD AS FOLLOWS: THIS ISSUE IS NOT DELIBERATED BY THE AO IN HER ORD ER. HOWEVER FROM THE VERIFICATION OF FACTS IT IS FOUND THAT THE APPELLANT HAD FILED ITS RETURN OF INCOME ON 30.11.2 000 DECLARING THE LOSS OF RS. 33,32,08,011/- WHEREAS TH E SAME WAS REVISED ON 28.3.2002 DECLARING THE REVISED LOSS OF RS. 33,97,21,438/-. IN THE NOTE ATTACHED IN THIS REGARD S GIVING REASON FOR SUCH REVISION, ONE OF THE REASON FOR REV ISING THE RETURN WAS STATED BE THE ADJUSTMENT OF THE AMOUNT I N QUESTION. IN VIEW OF THE FACT THAT THE AO HAS ACCE PTED THE REVISED FIGURE OF INCOME AS SUBMITTED BY THE APPELL ANT, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE AO AND HENCE THIS GROUND OF APPEAL IS ALSO REJECTED. JINDAL IRON & STEEL LTD. 22 74. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED DETAILS OF PRIOR PERIOD EXPENSES FOR THE PREVIOUS YEAR ENDED 3 1 ST MARCH, 2001 I.E. A.Y. 2001-02. 75. WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO A ND DIRECT THE AO TO ALLOW EXPENSES AMOUNTING TO RS. 5,60,55,200/- AS DE DUCTION IN A.Y. 2000-01. THESE WERE DISALLOWED BY THE ASSESSEE ITS ELF IN SUBSEQUENT ASSESSMENT YEAR 2001-02 ON THE GROUND THAT THEY WER E PERTAINING TO THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2000-01. 76. THE SIXTH GROUND IS REGARDING ADDITION OF RS. 2 ,96,28,629 BEING PROVISION FOR DOUBTFUL DEBTS/ADVANCES TO THE BOOK P ROFITS U/S. 115JA OF THE I.T. ACT. 77. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 3 FOR A.Y. 1997-98. BUT THIS ISSUE IS AGAINST THE ASSESSEE IN VIEW OF A MENDMENT MADE BY THE FINANCE BILL 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 1998. THEREFORE THIS GROUND IS DISMISSED. 78. THE SEVENTH GROUND IS REGARDING ADDITION OF RS. 66,24,750/- BEING LEASE EQUALIZATION ACCOUNT TO THE BOOK PROFITS U/S. 115JA OF THE I.T. ACT. 79. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 1 FOR A.Y. 1997-98. THEREFORE WE ALLOW THIS GROUND RAISED BY THE ASSESS EE. 80. THE EIGHTH GROUND IS REGARDING ADDITION OF RS. 8,69,56,000/- BEING PROVISION FOR DEBENTURE REDEMPTION RESERVE TO THE B OOK PROFITS U/S. 115JA OF THE I.T. ACT. 81. THIS GROUND IS IDENTICAL TO THAT OF GROUND NO . 2 FOR A.Y. 1997-98. THEREFORE, WE ALLOW THIS GROUND OF THE ASSESSEE. JINDAL IRON & STEEL LTD. 23 82. THE LAST GROUND IS REGARDING DEDUCTION U/S. 80H HC WHILE COMPUTING BOOK PROFIT U/S. 115JA WITH REFERENCE TO PROFIT UNDER NORMAL PROVISIONS AS AGAINST ADJUSTED BOOK PROFIT. 83. THE LD. CIT(A) HAS DISCUSSED THIS ISSUE AT PARA 11.1 TO 11.3 OF HIS ORDER. 84. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALLOWED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING CASE LAWS. 1) SYNCOME FORMULATIONS (I) LTD. (13 SOT 414)(MUM)( SB) 2) DCIT VS GLENMARK LABORATORIES LTD. (32 DTR 183)( MUM) 85. THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY T HE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF AJANTA PHARMA LTD. 318 ITR 252 WHEREIN IT HAS BEEN HELD AS FOLLOWS: WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUT ORY PROVISION PRODUCES A MANIFESTLY ABSURD AND UNJUST R ESULT WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLA TURE, THE COURT MAY MODIFY THE LANGUAGE USED BY THE LEGISLATU RE OR EVEN DO SOME VIOLENCE IT, SO AS TO ACHIEVE THE OB VIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTION. THE STATEMENT OF THE FINANCE MINISTER WHO MOVED TH E BILL IN PARLIAMENT COULD BE LOOKED INTO TO ASCERTAI N THE MISCHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION A ND THE OBJECT AND PURPOSE FOR WHICH THE LEGISLATION IS ENA CTED. WHEN SECTION 115J OF THE I.T. ACT, 1961 WAS ORIGI NALLY INTRODUCED MAT COMPANIES WERE NOT ENTITLED TO DEDUC TION OF PROFITS U/S. 80HHC WHILE WORKING OUT THE BOOK PROFI TS. THAT BENEFIT CAME TO BE INTRODUCED BY THE DIRECT TAX LAW S (AMENDMENT)ACT, 1989, W.E.F. APRIL 1, 1989. PARLIA MENT, THEREFORE, INITIALLY HAD EVEN DENIED TO MAT COMPANI ES DEDUCTION U/S. 80HHC. WHEN SECTION 115JA WAS INTR ODUCED W.E.F. APRIL 1,1997, SEC. 80HHC BENEFITS WERE ONCE AGAIN NOT JINDAL IRON & STEEL LTD. 24 AVAILABLE TO MAT COMPANIES. THE AMENDMENT BY THE F INANCE ACT, 1997 TO GIVE THE BENEFIT WAS W.E.F. APRIL 1,19 98. THUS, MAT COMPANIES , CONSIDERING SEC. 115JB(2) EXPLANATI ON 1 (IV) ARE NOT ENTITLED TO BE PLACED IN A BETTER POSITION THAN OTHER COMPANIES ENTITLED TO THE EXPORT DEDUCTION U/S. 80H HC THOUGH EARLIER THEY CONSTITUTED ONE CLASS. NO RULE OF CONSTRUCTION NOR THE LANGUAGE OF SEC. 80HHC READ WI TH SEC. 115JB, WILL PERMIT SUCH CONSTRUCTION. IF SUCH CONS TRUCTION IS NOT POSSIBLE THEN BOTH THE CLASSES OF COMPANIES WIL L BE ENTITLED TO THE SAME DEDUCTION. THIS WOULD CONTEMP LATE THAT BOTH WOULD BE ENTITLED TO DEDUCTION OF PROFITS IN T ERMS OF SEC. 80HHC(1B). SO READ, IT WOULD BE A HARMONIOUS CONST RUCTION. A CLASS OF COMPANIES COVERED BY SEC. 80HHC CANNOT B E SUB- CLASSIFIED INTO TWO CLASSES, MORE SO, WHEN FOR INTE RMITTENT PERIODS PARLIAMENT HAD EVEN DENIED THE BENEFIT TO S EC. 80HHC TO MAT COMPANIES. THE LANGUAGE USED IN SEC. 115JB IS DEDUCTION AVAIL ABLE U/S. 80HHC. IT IS DIFFICULT TO CONCEIVE OF ANY RAT IONAL REASON AS TO WHY THE LEGISLATURE SHOULD HAVE THOUGHT TO GI VE MAT COMPANIES ADDITIONAL BENEFITS THAN THE OTHER COMPAN IES WHO ARE PAYING TAX ON THEIR TOTAL INCOME AND NOT THE TA X BASED ON BOOK PROFIT AS CALCULATED U/S. 115JB. THE OBJECT O F SEC. 115JB OR FOR THAT MATTER SEC. 115J OR 115JA WAS TO IMPOSE TAX ON THOSE COMPANIES WHICH OTHERWISE CONSIDERING VARIOUS EXEMPTION OR DEDUCTIONS AVAILABLE UNDER THE ACT, TH OUGH MAKING HUGE PROFITS AND PAYING LARGE DIVIDENDS, WER E NOT PAYING ANY TAX. IT IS THEREFORE, NOT POSSIBLE TO A CCEPT THE CONSTRUCTION THAT THEY SHOULD BE TREATED ON A DIFFE RENT FOOTING IN COMPUTING EXPORT PROFITS U/S. 80HHC FOR THE PURP OSE OF SEC. 115JB. MAT COMPANIES ARE ENTITLED TO THE SAME DEDUCTION O F EXPORT PROFITS U/S. 80HHC AS ANY OTHER COMPANY INVO LVED IN EXPORT IN TERMS OF SECTION 80HHC (1B). 86. DECISION IN THE CASE OF SYNCOME FORMULATIONS (I ) LTD., (13 SOT 414) (MUM) (SB) HAS BEEN REVERSED BY THE BOMBAY H IGH COURT DECISION IN THE CASE OF AJANTA PHARMA LTD. 318 ITR 252(SUPRA ) RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF AJANTA PHARMA LTD. 318 ITR 252 (SUPRA), WE DISMISS THE ASSESSEES APPEAL ON THIS ISSUE. JINDAL IRON & STEEL LTD. 25 87. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED ON THIS 25 TH DAY OF JUNE, 2010 SD/- SD/- (R.K. PANDA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 25 TH JUNE, 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI JINDAL IRON & STEEL LTD. 26 DATE INITIALS 1 DRAFT DICTATED ON: 18.6.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 3 . 6 .2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/ PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______