M/s International Fresh Farm Products (India) Ltd., Chandigarh V. ACIT, Chandigarh

ITA 311/CHANDI/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5055 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANT
• Keywords: Unexplained cash credit; Proportionate interest; Question of law
• Section: 14A; 80IB; 10B; 68; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.311/CHD/2015 (ASSESSMENT YEAR : 2010-11) M/S INTERNATIONAL FRESH FARM VS. THE A.C.I.T., PRODUCTS(INDIA) LTD., CIRCLE 1(1), #3, SECTOR 5, CHANDIGARH. CHANDIGARH. PAN: AAACI5038D ITA NO.703/CHD/2015 (ASSESSMENT YEAR : 2012-13) M/S INTERNATIONAL FRESH FARM VS. THE A.C.I.T., PRODUCTS(INDIA) LTD., CIRCLE 1(1), #3, SECTOR 5, CHANDIGARH. CHANDIGARH. PAN: AAACI5038D AND ITA NO.754/CHD/2015 (ASSESSMENT YEAR : 2012-13) THE A.C.I.T., VS. M/S INTERNATIONAL FRESH FARM CIRCLE 1(1), PRODUCTS(INDIA) LTD., CHANDIGARH. #3, SECTOR 5, CHANDIGARH. PAN: AAACI5038D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SMT.CHANDRA KANT, SR.DR DATE OF HEARING : 12.07.2017 DATE OF PRONOUNCEMENT : 27.07.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THE ABOVE APPEALS PERTAIN TO THE SAME ASSESSEE WITH THE APPEAL IN ITA NO.311/CHD/2015 HAVING BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD.CIT(APPEALS), CHANDIGARH DATED 4.10.2013 FOR 2 ASSESSMENT YEAR 2010-11 WHILE THE APPEALS FILED IN ITA NO.703/CHD/2015 AND IN ITA NO.754/CHD/2015 ARE CR OSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF LD.CIT(APPEALS)-I, CHANDIGARH DATED 3.6.2 015 RELATING TO ASSESSMENT YEAR 2012-13. 2. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES T HAT THE ISSUE INVOLVED IN THE APPEALS WAS IDENTICAL. TH EREFORE THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE W E SHALL BE DEALING WITH THE ASSESSEES APPEAL IN ITA NO.311/CHD/2015. ITA NO.311/CHD/2015(ASSESSEES APPEAL): 3. GROUND NO.1 RAISED BY THE ASSESSEE READS AS UNDER: THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING DIS ALLOWANCE OF DEDUCTION U/S 80IB(11) OF THE INCOME TAX ACT, 1961 . THAT THE ACTION OF THE LEARNED CIT(A) IS DE-VOID OF ANY MERITS AS N ON- CLAIM OF DEDUCTION IN EARLIER YEARS DUE TO IGNORANCE C ANNOT BE AGROUND FOR SUSTAINING THE DISALLOWANCE OF DEDUCTIO N. THE APPELLANT COMPANY SATISFIES ALL THE CONDITIONS FOR CLA IM OF DEDUCTION U/S 80IB(11) OF THE INCOME TAX ACT, 1961. IT IS PRAYED THAT THE DEDUCTION BE ALLOWED . 4. THE ASSESSEE IN THE AFORESAID GROUND HAS CHALLENGED THE ACTION OF THE LD.CIT(APPEALS) IN UPH OLDING THE DENIAL OF DEDUCTION CLAIMED U/S 80IB(11) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 5. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED DEDUCTION AMOUNTING TO RS.27,66,031/- U/S 80IB(11) OF THE ACT WHICH ALLOWS DEDUCTION OF PROFITS DERIVED FROM THE BUSINESS OF S ETTING UP 3 AND OPERATING A COLD CHAIN FACILITY FOR AGRICULTURA L PRODUCE. BEFORE THE ASSESSING OFFICER THE ASSESSEE DEMONSTRA TED THAT IT WAS RUNNING A COLD CHAIN FACILITY FOR STORAGE AN D TRANSPORTATION OF AGRICULTURAL PRODUCE. THE ASSESS ING OFFICER AFTER EXAMINING THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S PEPSICO INDIA HOLDING (P) LTD. FO R COLD STORAGE MANAGEMENT, DISALLOWED THE CLAIM OF DEDUCTI ON STATING THAT THE ASSESSEE WAS NOT DOING ANY COLD CHAIN BUSINESS DIRECTLY BUT WAS ONLY PROVIDING SERVICES T O M/S PEPSICO INDIA HOLDING (P) LTD. AND EARNING INCOME F ROM CONTRACT AND RENT. THE ASSESSING OFFICER FURTHER S TATED THAT THOUGH THE ASSESSEE HAD ENTERED INTO THE SAID AGREE MENT WITH M/S PEPSICO INDIA HOLDING (P) LTD. IN THE YEAR 2005 AND HAD BEEN PROVIDING SERVICES TO IT SINCE THEN IT HAD NEVER CLAIMED THE SAID DEDUCTION IN EARLIER YEARS. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE ASSESSE E WAS NOT ENTITLED TO DEDUCTION U/S 80IB(11) OF THE ACT SINCE IT DID NOT FULFILL CONDITIONS LAID DOWN THEREIN. THE DEDU CTION, THEREFORE, CLAIMED OF RS.27,66,031/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. 6. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WHO UPHELD THE ORDER OF THE ASSESSI NG OFFICER. THE RELEVANT FINDINGS OF THE LD.CIT(APPEA LS) AT PARAS 2.3 TO 2.3.5 ARE AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSION OF THE LD. COUNSEL. THE APPELLANT HAD CL AIMED DEDUCTION U/S 80IB OF RS. 27,66,031/-, WHEREAS AS P ER THE AUDIT REPORT IN FORM NO. 10CCB, THE ALLOWABLE DEDUC TION IS 4 ONLY RS, 10,77,611/- AND SO THE CLAIM OF DEDUCTION OF THE APPELLANT IS NOT AS PER THE AUDIT REPORT (CLAIM IS HIGHER BY RS.16,88,420/-). 2.3.1 THE APPELLANT COMPANY HAD CLAIMED BEFORE THE ASSESSING OFFICER THAT IT WAS ELIGIBLE FOR DEDUCTIO N U/S 80IB(11), SINCE IT WAS RUNNING COLD CHAIN FACILITY AND SATISFIED THE CONDITIONS LAID DOWN FOR THE SAID DEDUCTION. HO WEVER, BEFORE ME THE APPELLANT HAS ARGUED THAT THE ASSESSI NG OFFICER HAS DISALLOWED THE CLAIM OF DEDUCTION 80IB (11A)OF THE ACT, BUT THIS ARGUMENT OF THE APPELLANT IS NOT CORRECT, SINCE THE ASSESSING OFFICER HAS ACTUALLY DISALLOWED THE CLAI M U/S 80.IB(11), CLAIMED BY THE APPELLANT. THUS, THERE WA S MISREPRESENTATION EITHER BEFORE THE ASSESSING OFFIC ER OR THE UNDERSIGNED IN THE APPELLATE PROCEEDINGS. 2.3.2 IT IS ALSO SEEN THAT THE. APPELLANT HAD NOT CLAIMED DEDUCTION U/S 80IB IN ANY OF THE EARLIER YEARS AND HAS CLAIMED THE SAME FOR THE FIRST TIME DURING THE YEAR UNDER C ONSIDERATION. RELEVANT PROVISION RELATING TO THIS ISSUE IS SUB-SE CTION (11) OF SECTION 80IB, WHICH IS REPRODUCED BELOW FOR THE SAK E OF READY REFERENCE: 'NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (III) OF SUB-SECTION (2) AND SUB-SECTIONS (3), (4) AND (5), THE AMOUNT O F DEDUCTION IN A CASE OF INDUSTRIAL UNDERTAKING DERIVING PROFIT FR OM THE BUSINESS OF SETTING UP AND OPERATING A COLD CHAIN F ACILITY FOR AGRICULTURAL PRODUCE, SHALL BE HUNDRED PER CENT, OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSM ENT YEAR AND THEREAFTER, TWENTY-FIVE PER CENT, (OR THIR TY PER CENT, WHERE THE ASSESSES IS A COMPANY) OF THE PROFITS AND GAINS DERIVED FROM THE OPERATION OF SUCH FACILITY IN A MA NNER THAT THE TOTAL PERIOD OF DEDUCTION DOES NOT EXCEED TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECUTIVE ASSESSMENT YEARS WHERE THE ASSESSES IS A CO-OPERATIVE SOCIETY) AND SUBJECT TO FULFILMENT OF THE CONDITION THAT IT BEGINS TO OPERATE SUCH FACILITY ON OR AFTER THE 1ST DAY OF AP RIL, 1999 BUT BEFORE THE 1ST DAY OF APRIL 2004.' 5 2.3.3 THUS, THE DEDUCTION IS 100% OF THE PROFITS AN D GAINS DERIVED FROM ELIGIBLE INDUSTRIAL UNDERTAKING FOR FI RST FIVE YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR AND THER EAFTER 30% OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING. THE POINT IS WHY SUCH A CLAIM WAS NOT MADE BY THE A PPELLANT DURING THE EARLIER YEARS. WHEN QUESTIONED, THE REPR ESENTATIVE OF THE APPELLANT STATED THAT THE CLAIM WAS NOT MADE IN THE EARLIER YEARS BECAUSE THE APPELLANT WAS NOT AWARE O F THE LAW IN THIS REGARD. TO ME, IT APPEARS THAT THE CLAI M WAS NOT MADE IN THE EARLIER YEARS BECAUSE THE APPELLANT WAS TOO WELL AWARE OF THE LAW AND WAS CONSCIOUS OF THE FACT THAT IT WAS NOT ENTITLED TO BENEFIT OF THIS PROVISION. EVEN FOR THE YEAR UNDER APPEAL, FOR WHICH THE APPELLANT OBVIOUSLY, TOOK A C HANCE, IT HAS NOT HELD A CONSISTENT STAND. 2.3.4 IT IS ALSO OBSERVED THAT THE APPELLANT HAS PR OVIDED SERVICES TO M/S PEPSICO AND EARNING INCOME FROM CON TRACT AND RENT. THE APPELLANT HAS NOT SEGREGATED THE AMOUNT E LIGIBLE FOR DEDUCTION U/S 80IB OUT OF THE RECEIPTS FROM PEP SICO, BUT THIS OBSERVATION/ FINDING IS NOT MUCH RELEVANT, SIN CE IT HAS BEEN HELD THAT THE APPELLANT IS NOT ELIGIBLE FOR DE DUCTION U/S 80IB OF THE ACT. 2.3.5 IN VIEW OF THE ABOVE, IT IS HELD THAT THE APP ELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AND THE FINDING OF THE ASSESSING OFFICER IN THIS REGARD IS UPHELD, THOUGH ON DIFFERENT GROUNDS. GROUND OF APPEAL NO.1 IS DISMISSED. 7. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE MADE DETAILED ARGU MENTS AGAINST THE DISALLOWANCE SO MADE. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ASSESSEE WAS RUNNING A COLD CHAIN FACILITY AND ASSESSMENT YEAR 2004-05 WAS THE FIRST YEAR OF COMMENCING OPERATIONS. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE IMPUGNED ASSESSMENT Y EAR, I.E. 2010-11, WAS THE 7 TH YEAR SINCE IT HAD COMMENCED 6 OPERATIONS AND IT WAS IN THIS YEAR THAT THE ASSESSE E HAD FOR THE FIRST TIME CLAIMED DEDUCTION U/S 80IB(11) OF TH E ACT. THEREAFTER THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT FROM THE ORDER OF THE LD.CIT(APPEALS) IT EMERGED TH AT THE PRIMARY REASON FOR DENYING DEDUCTION U/S 80IB(11) O F THE ACT WERE TWO FOLD; A) SINCE THE AFORESAID DEDUCTION HAD NOT BEEN CLAIM ED IN THE EARLIER YEAR; B) SINCE IT HAD MERELY RENTED OUT PREMISES TO M/S PEPSICO INDIA HOLDING (P) LTD. FOR STORAGE OF AGRICULTURAL PRODUCE AND THE REVENUE EARNED WAS RENTAL INCOME WHICH WAS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT BUSINESS INCOM E. 8. THEREAFTER THE LD. COUNSEL FOR ASSESSEE STATED THAT IT WAS AMPLY DEMONSTRATED BOTH TO THE ASSESSIN G OFFICER AND THE LD.CIT(APPEALS) THAT THE ASSESSEE H AD NOT MERELY LEASED OUT IT PREMISES OF COLD STORAGE TO M/ S PEPSICO INDIA HOLDING (P) LTD. FOR STORING ITS AGRICULTURAL PRODUCE BUT HAD ALSO RENDERED SERVICES AND TAKEN ALL RESPON SIBILITY FOR THE PROPER STORAGE OF THE GOODS AND THAT IT WAS A CONSOLIDATED AGREEMENT FOR PROVIDING COLD STORAGE F ACILITY TO M/S PEPSICO INDIA HOLDING (P) LTD.. THE LD. COUNSE L FOR ASSESSEE AT THIS JUNCTURE DREW OUR ATTENTION TO THE COPY OF THE AGREEMENT ENTERED INTO WITH M/S PEPSICO INDIA H OLDING (P) LTD. WHICH WAS REPRODUCED IN THE ASSESSMENT ORD ER ALSO AT PAGES 4 TO 8. THE SAME IS REPRODUCED HEREUNDER ALSO FOR REFERENCE: 7 COLD STORE MANAGEMENT AGREEMENT THIS AGREEMENT IS MADE AT THIS 15 TH DAY OF MAY, 2005 BETWEEN PEPSICO INDIA HOLDINGS PVT LTD, (FRITOLAY DIVISION) , A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1953 AND H AVING ITS REGISTERED OFFICE AT 3B, DLF CORPORATE PARK, CIUTAB ENCLAVE- HI, GURGAON, HARYANA AND HEAD OFFICE AT 4 M FLOOR, TOWER A, GLOBAL' BUSINESS PARK, GURGAON HARYANA, AND FACTORY AT VILLAG E CHANNO HEREINAFTER REFERRED TO AS PIH (WHICH EXPRES SION SHALL UNLESS THE CONTEXT'' OTHERWISE 'REPUGNANT TO THE C ONTEXT OR MEANING THERE OF BE DEEMED TO INCLUDE ITS SUCCESSORS IN BUSINESS AND ASSIGNS) OF THE ONE PART AND M/S INTERNATIONAL FRESH FARM PRODUCTS (INDIA) LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING, ITS REGISTERED OFFICE AT HOUSE, NO 3,' SECTO R 5, CHANDIGARH, HEREINAFTER REFERRED TO IFF (WHICH EXPR ESSION SHALL UNLESS THE CONTEXT OTHERWISE REPUGNANT TO THE CONTE XT OR MEANING THERE OF BE DEEMED TO INCLUDE ITS SUCCESSORS IN BUSINESS AND ASSIGNS). ON THE OTHER PART. WHEREAS 1) PIH IS ENGAGED IN THE DISTRIBUTION OF SNACK FOOD PRODUCTS (HEREINAFTER CALLED 'PIH PRODUCTS') MANUFACTURED BY P EPS! FOODS PRIVATE LIMITED FOR PIH AT ITS FACTORY LOCATED AT C HANNO (HEREINAFTER CALLED PFL FACTORY'). 2) IFF APPROACHED PIH AND OFFERED ITS SERVICES FOR MANAGEMENT OF COLD STORE FOR STORAGE OF POTATOES OWN ED AND OWNED AND STORED BY PIH (HEREINAFTER PIH PRODU CTS') AT THE COLD STORE OWNED AND MANAGED BY IFF AND LOCA TED AT VILLAGE CHANNO (HEREINAFTER 'IFF COLD STORE'). 3) PIH HAS DECIDED TO ENTRUST ALT FUNCTIONS RELATIN G TO COLD STORE MANAGEMENT TO IFF AND WHEREAS PIH AND IFF HAVE AGRE ED TO THE TERMS AND CONDITIONS SET OUT IN THIS AGREEMENT AS UNDER; NOW THIS AGREEMENT WITNESSETH AS UNDER 1. RESPONSIBILITIES OF IFF PIH HEREBY AGREES TO ENTRUST AND ALLOW IFF AND IFF, I N TURN, AGREES TO UNDERTAKE FOR AND ON BEHALF AND FOR THE B ENEFIT OF PIH THE FOLLOWING FUNCTIONS IN RESPECT OF THE PIH PROD UCTS FROM TIME TO TIME: A) RECEIPT OF PIH GOODS AT IFF COLD STORE. B) STORAGE AND PRESERVATION OF PIH GOODS AS PER THE TERMS OF THIS AGREEMENT. C) TRANSPORTATION OF PIH GOODS FROM IFF COLD STORE T O PIH FACTORY LOCATED AT VILLAGE CHANNO. 8 D) CONDUCT PHYSICAL VERIFICATION OF PIH GOODS. 1. WAREHOUSING A) IFF SHALL STORE THE PIH PRODUCTS RECEIVED BY IT IN IFF COLD STORE B) IFF SHALL RECEIVE THE PIH PRODUCTS FROM THE PIH A S PER INSTRUCTIONS RECEIVED FROM PIH FROM TIME TO TIME AND ISSUE A GOODS RECEIPT FOR THE SAME. C) IFF SHALL TAKE ALL REASONABLE CARE FOR STORAGE OF THE PIH PRODUCTS AND SHALL BE DEEMED TO BE IN THE POSITION OF A BAILEE IN RELATION TO SUCH GOODS. D) BOTH THE PARTIES AGREE THAT TRANSACTION RELATING TO RECEIPT & ISSUE OF PIH PRODUCTS, AFFECTING THE STOCK BALANCES IN THE INVENTORY SYSTEM FOR STOCKS AT IFF COLD STORE SHALL BE EFFECTED UNDER THE CONTROL OF I FF' AND PIH RESERVES THE RIGHT TO AUDIT SUCH TRANSACTION S TO DETERMINE THE SOURCE OF EACH TRANSACTION. E) IFF SHALL BE RESPONSIBLE TO FOLLOW SUCH STORAGE NORMS AS ARE SPECIFIED IN ANNEXURE-2 F) THE PARTIES HERETO AGREE TO THE REVIEW AND REPOR TING SCHEDULE CONTAINED IN THE OPERATING PROTOCOL CONTAINED IN ANNEXURE 3. G) THE OWNERSHIP OF ENTIRE STOCKS AT THE IFF COLD STO RE SHALL REMAIN WITH PIH AT ALL TIMES. 2. TRANSFER FROM IFF COLD STORE A) AIFF SHALL KEEP 2 (TWO) NO. OF TRUCKS OF THE SPECIFICATION MENTIONED ANNEXURE 1 OF THIS AGREEMENT AT ALL TIMES AT THE IFF COLD STORE FOR TRANSPORT OF THE PIH PRODUCTS TO THE PIH FACTORY. B) BIFF SHALL BE LIABLE FOR ANY LOSS, DAMAGE, MIS-DELIVER Y, NON-DELIVERY OR SHORTAGE OF THE PRODUCTS BY REASON O F ANY ACTS OF OMISSION OR COMMISSION ON THEIR PART OR BY ITS EMPLOYEES, CONTRACTORS, AGENTS OR SUB-AGENTS. IFF SH ALL WITHIN TWO WEEKS FROM THE DATE OF ANY DEMAND MADE BY PIH IN THAT BEHALF WITHOUT DEMUR AND NOTWITHSTANDING ANY OBJECTION RAISED BY THEM, AND WITHOUT ANY RIGHT OF SET-OFF OR COUNTER CLAIM, REIMBUR SE PIH THE AMOUNT OF LOSS INCURRED BY PIH, FAILING WHICH PIH SHALL BE ENTITLED TO RECOVER SUCH AMOUNTS FROM THEM IN ANY MANNER IT DEEMS FIT. C) IFF SHALL, IN THE PERFORMANCE OF ITS OBLIGATI ONS UNDER THIS AGREEMENT, USE ITS BEST ENDEAVORS TO PROMOTE THE INTEREST OF PIH AND COMPLY WITH THE INSTRUCTIONS A ND DIRECTIONS OF PIH ISSUED FROM TIME TO TIME. 9 D) IFF WILL BE FULLY RESPONSIBLE FOR THE PRODUCTS RECEIVED BY IT FOR ANY SHORTAGES/LOSS/DAMAGE IN TRANSIT BETWEEN IFF COLD STORE AND PIH FACTORY. E) IFF SHALL ARRANGE TO PROCURE ALL REQUIRED LICENSES AND/OR COMPLY WITH ALL REGULATIONS AND LAWS. 3. RELATIONSHIP IT IS CLEARLY UNDERSTOOD BETWEEN PIH AND IFF THAT THE RELATIONSHIP BETWEEN PIH AND IFF SHALL BE ON PRINCI PAL TO PRINCIPAL BASIS AND IFF SHALL NOT ACT AS AN AGENT O R SHALL NOT REPRESENT ITSELF AS A REPRESENTATIVE OF PIH IN ANY MANNER TO THIRD PARTY. BOTH PARTIES, SHALL BE RESPONSIBLE TOWARDS THEIR RESPECTIVE EMPLOYEES AND COMPLIANCE WITH STATUTORY LAWS. IFF AGREES TO INDEMN IFY AND KEEP INDEMNIFIED PIH AGAINST ANY NON-COMPLIANCE AND VICE-VERSA 4. CONSIDERATION PIH HEREBY AGREES TO PAY IFF CONSIDERATION AS PER ANNEXURE- 4 5. VALIDITY THIS AGREEMENT SHALL BE EFFECTIVE FROM FEB 15 TH , 2005 AND SHALL BE VALID FOR A PERIOD OF 3 YEARS, PROVIDED THAT EITHER PARTY MAY WITH THREE MONTHS PRIOR NOTICE IN WRITING TERMINATE THIS AGREEMENT IN THE EVENT OF BREACH OF ANY OF THE TERMS OF THIS AGREEMENT BY THE OTHER PARTY. PROVIDED FURTHER THAT THE PARTIES MAY REVIEW THE SC OPE OF SERVICES AND PURSUANT COSTS AFTER EVERY 12 MONTH S, THE FIRST REVIEW BY NOVEMBER 15 TH , 2005. 6. ARBITRATION IF ANY DISPUTE OR DIFFERENCES SHALL ARISE BETWEEN THE PARTIES HERETO RELATING TO THE OPERATIONS MENTI ONED HEREIN ABOVE OR ANY OTHER ASPECT THEREOF OR IF ANY MATTER SHALL ARISE AS TO THE MEANING OR CONSTRUCTION OF AN Y OF THE PROVISIONS OF THIS AGREEMENT ALL SUCH DISPUTES OR DIFFERENCES SHALL BE REFERRED TO IN ACCORDANCE WITH ARBITRATION- & CONCILIATION ACT 1996, AND THE PLACE O F SUCH ARBITRATION SHALL BE IN THE STATE OF PUNJAB. THIS AGREEMENT IS MADE AND EXECUTED ON THIS THE 27T H DAY OF JANUARY 2006, BETWEEN M/S INTERNATIONAL FRESH FARM PRODUCTS (INDIA) LTD., A LIMITED COMPANY HAVING IT S REGISTERED OFFICE AT, H NO. 3, SECTOR 5, CHANDIGARH - 160 022. HEREIN AFTER CALLED 'IFFPIL' (WHICH EXPRESSION SHALL UNLESS OTHERWISE REPUGNANT TO THE CONTEXT OR MEANIN G THEREOF BE DEEMED TO INCLUDE ITS SUCCESSORS IN BUSI NESS AND ASSIGNS) OF THE ONE FART 10 AND M/S PEPSICO INDIA HOLDINGS- PRIVATE LIMITED (FRITOL AY DIVISION), A COMPANY INCORPORATED UNDER THE COMPANI ES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT 3B, C ORPORATE PARK OLF QUTAB ENCLAVE, PHASE 111, GURGAON, HARYANA AND AN OFFICE A( 13'' FLOOR. MOHAN DEV BUILDING 13 TOLS TOY MARG, NEW DELHI AND HAVING ITS FACTORY AT VILLAGE CHNNNO DISTT BHAWANIGARH, PUNJAB HEREIN AFTER CALLED 'PIH 1 (WHICH EXPRESSION SHALL UNLESS OTHERWISE REPUGNANT T O THE CONTEXT OR MEANING THEREOF BE DEEMED TO INCLUDE ITS 'SUCCESSORS IN BUSINESS AND ASSIGNS) OF THE OTHER PART. WHEREAS 1) PIH MANUFACTURES, SELLS AND DISTRIBUTES A LARGE RANGE OF PACKAGED SALTED SNACK FOOD PRODUCTS UNDER THE TRADE MARKS LAYS, UNCLE CHIPPS, KURKURE, NAMKEEN, LEHAR NAMKEEN, CHEETOS ETC.. AND REQUIRES COLD STORAGE FACILITIES FOR THE STORAGE OF POTATOES USED IN THE MANUFACTURE OF SOME OF THESE PRODUCTS 2) IFFPL HAS ENTERED INTO A COLD STORE AGREEMENT DA TED DECEMBER 1, 2004 WITH PEPSICO INDIA HOLDINGS PRIVAT E LIMITED (FRITOLAY DIVISION) FOR LEASE OF ITS COLD STORE LOCATED AT VILLAGE CHANNO (THE 'COLD STORE'). 3) IFFPL AND PIH HAVE AGREED TO IN MAKE CERTAIN IMPROVEMENTS TO THE FACILITIES AVAILABLE IN THE COLD S TORE TO THIS END IFFPI SHALL, AT ITS OWN COST, INSTALL CERTAIN ADDITIONAL AMENITIES AND FIXTURES IN THE COLD STORE WHICH PJH HAS AGREED TO TAKE ON LEASE ON THE TERMS AND CONDITIONS CONTAINED HEREIN. NOW THEREFORE IN CONSIDERATION OF THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN THIS AGREEMENT WITNESSETH AS FOLLOWS: 1) IFFPIL WILL BUILD RACKS IN 3 CHAMBERS (CHAMBER # 1,2 AND 3) AND IN HALF AREA OF CHAMBER #4 OF THE COLD STORE (THE 'FACILITIES') AS PER THE AGREED DESIGN AND, HANDOVE R TO PIH FOR USE BY FEBRUARY 1, 2006 2. PIH SHALL TAKE THE FACILITIES ON LEASE FROM IFFPL F OR RENT OF RS.227,000/-( RUPEES TWO LACS TWENTY SEVEN THOUSAND ONLY} (THE 'RENT') PER MONTH TO BE PAID BY PIH TO IFFPIL FROM THE DATE THE FACILITIES ARE HANDED OVER FOR USE TO PIH. 3) THIS AGREEMENT SHALL SUBSIST FOR A PERIOD OF 5 (FIV E) YEARS FORM THE DATE OF HANDOVER OF THE FACILITIES TO PIH (!.. FEBRUARY 1,2006) ON THE TERMS AND CONDITIONS CONTAINED HEREIN AND SHALL EXPIRE ON JANUARY 31, '20.11 UNLESS TERMINATED EARLIER IN TERMS HEREOF. 4) THE EITHER PARTY MAY TERMINATE THIS AGREEMENT AT ANY TIME DURING THE TERM WITHOUT ASSIGNING ANY REASON BY GIVING TO THE OTHER 3 MONTHS WRITTEN NOTICE AT THE ADDRES S CONTAINED HEREIN. 11 5) IN THE EVENT OF-ANY DISPUTE OR DIFFERENCE LATHE B ETWEEN THE PARTIES REGARDING THE INTERPRETATION OF THIS AGR EEMENT OR ANY OTHER ISSUE PARTIES HERETO SHALL REFER THE DISPUTE TO ARBITRATION PER THE TERMS OF THE ARBITRATION AND CONCILIATION ACT, 1996. COURTS IN DE LHI SHALL HAVE EXCLUSIVE JURISDICTION. 9. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THEREFROM THAT AS PER CLAUSE-2 OF THE SAID AGREEMEN T THE ASSESSEE HAD OFFERED SERVICES FOR MANAGEMENT OF COL D STORAGE FOR STORAGE OF POTATOES OF M/S PEPSICO INDI A HOLDING (P) LTD. (HEREINAFTER REFERRED TO AS PIH). REFER RING TO CLAUSE-3 OF THE SAID AGREEMENT THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT ALL FUNCTIONS RELATING TO COLD STO RAGE MANAGEMENT HAD BEEN ENTRUSTED TO THE ASSESSEE. THEREAFTER THE LD. COUNSEL FOR ASSESSEE DREW OUR AT TENTION TO THE RESPONSIBILITIES OF THE ASSESSEE IN DISCHARG ING ITS FUNCTIONS AND POINTED OUT THAT IT INCLUDED ALL ACTI VITIES RIGHT FROM RECEIPT OF GOODS FROM PIH AT THE COLD ST ORAGE TO TRANSPORTING THE GOODS TAKEN TO PIH ON DEMAND INCLU DING STORING AND PRESERVING THEM IN THE INTERIM PERIOD A ND CONDUCTING PHYSICAL VERIFICATION OF THE SAME. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE WARE HOUSING CLAUSE AND POINTED OUT TO POINT NO.(C) THEREIN WHIC H REQUIRED THE ASSESSEE TO TAKE ALL REASONABLE CARE O F STORAGE OF THE PRODUCTS AND STATED THAT THE ASSESSEE WOULD BE IN THE POSITION OF BAILEE TO SUCH GOODS. THE LD. COUN SEL FOR ASSESSEE THEREAFTER DREW OUR ATTENTION TO CLAUSE DE ALING WITH TRANSFER FROM ASSESSEES COLD STORAGE AND POIN TED OUT THAT THE SAID CLAUSE REQUIRED THE ASSESSEE TO KEEP TWO TRUCKS AT ITS DISPOSAL FOR TRANSPORTING GOODS TO PI H AND THAT 12 THE ASSESSEE WOULD BE LIABLE IN CASE OF ANY LOSS OR DAMAGE, MIS- DELIVERY OR NON-DELIVERY ON ITS PART. 10. THE LD. COUNSEL FOR ASSESSEE THEREAFTER STATED THAT IT IS EVIDENT FROM THE AFORESAID AGREEMENT THA T THE ASSESSEE HAD NOT MERELY LET OUT ITS COLD STORAGE FA CILITY TO PIH, SINCE THE RESPONSIBILITY OF STORING THE AGRICU LTURAL PRODUCE OF PIH PROPERLY IN ITS FACILITY RESTED WITH THE ASSESSEE AND IT WAS THE DUTY OF THE ASSESSEE TO ADE QUATELY STORE THE AGRICULTURAL PRODUCE SENT BY PIH TO ITS C OLD STORAGE FACILITY. THE LD. COUNSEL FOR ASSESSEE STA TED THAT AFTER RECEIVING THE GOODS FROM PIH FOR COLD STORAGE THE ENTIRE RESPONSIBILITY FOR MAINTAINING THE GOODS IN PROPER CONDITION IN ITS COLD STORAGE FACILITY RESTED WITH THE ASSESSEE AND PIH THEREAFTER HAD NOTHING TO DO WITH THE GOODS AND WAS ALSO NOT INVOLVED IN PROPER MAINTENAN CE OF THE GOODS IN THE COLD STORAGE FACILITY PROVIDED BY THE ASSESSEE. THE LD. COUNSEL FOR ASSESSEE STATED THAT IT WAS EVIDENT FROM THE ABOVE THAT THE ASSESSEE WAS NOT ME RELY PROVIDING PREMISES TO PIH BUT WAS PROVIDING COLD ST ORAGE FACILITY TO PIH AND, THEREFORE, THE LD.CIT(APPEALS) HAD ERRED IN HOLDING THAT THE ASSESSEE WAS AS A CONSEQUENCE N OT ENTITLED TO DEDUCTION U/S 80IB(11) OF THE ACT. THE LD. COUNSEL FOR ASSESSEE PLACED RELIANCE ON THE FOLLOWI NG CASE LAWS IN SUPPORT OF ITS ABOVE CONTENTION: 1) CIT VS. NATIONAL STORAGE P.LTD. 66 ITR 596 (1967) (SC) 2) CIT VS. DISTRICT CO-OPERATIVE FEDERATION 271 ITR 22(2004)(ALL) 13 3) CIT VS. AMBIKA SHEET GRAH (P) LTD. 84 CCH 289 (2013)(ALL) 4) ITO VS. AMBIKA SHEET GRAH (P) LTD. 119 ITD 235 (2009) (AGR) 11. THE LD. COUNSEL FOR ASSESSEE FURTHER POINTED O UT THAT IT HAD RETURNED ITS INCOME FROM COLD STORAGE F ACILITY PROVIDED AS INCOME UNDER THE HEAD PROFITS AND GAIN S FROM BUSINESS AND PROFESSION AND THE ASSESSING OFFICER HAD ASSESSED IT AS SUCH. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER HAD NOT TREATED THE RENTAL INCOME EARNED BY IT AS INCOME UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. THEREFORE ALSO, LD.COUNSEL FOR TH E ASSESSEE STATED THAT, HAVING ASSESSED THE INCOME AS INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY, TH E ASSESSING OFFICER HAD NOT TREATED THE AFORESAID INC OME AS MERELY RENT RECEIVED BY THE ASSESSEE BY LETTING OUT ITS PROPERTY. 12. THE LD. COUNSEL FOR ASSESSEE THEREAFTER TOOK U P THE SECOND REASON FOR DENYING DEDUCTION I.E. SINCE THE ASSESSEE HAD NOT CLAIMED SAID DEDUCTION IN EARLIER YEARS. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT IT HA S BEEN HELD BY COURTS IN A NUMBER OF DECISIONS THAT MEREL Y BECAUSE DEDUCTION HAS NOT BEEN CLAIMED IN EARLIER Y EARS, THE ASSESSEE COULD NOT BE DENIED DEDUCTION IN A SUB SEQUENT YEAR. THE LD. COUNSEL FOR ASSESSEE STATED THAT IT H AS BEEN HELD THAT CLAIMING DEDUCTION FROM THE INITIAL ASSES SMENT YEAR IT IS NOT A CONDITION WHICH IS A PRE-REQUISITE FOR CLAIMING DEDUCTION IN SUBSEQUENT YEARS. THE LD. CO UNSEL 14 FOR ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING DE CISIONS IN SUPPORT OF ITS ABOVE CONTENTIONS: 1) CIT VS. EXCEL SOFTECH LTD. 219 CTR 405 (2008 (P&H) 2) PRAVEEN SONI VS. CIT 333 ITR 324 (2011)(DEL) 3) CIT VS. LAXMI METAL INDUSTRIES 236 ITR 130 (1999) (ALL) 4) CIT VS. SUNDER FORGING ITA NO.242 OF 2012 (P&H) 13. THUS THE LD. COUNSEL FOR ASSESSEE ARGUED THAT DENIAL OF DEDUCTION U/S 80IB(11) WAS AGAINST THE FA CTS AND CIRCUMSTANCES OF THE CASE AND IN CONTRAVENTION OF T HE LAW IN THIS REGARD. 14. PER CONTRA, THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AND LD.CIT(APPEALS). THE LD. DR FURTHER POINTED OUT THAT THE ASSESSING OFFICER HAD NOT INVESTIGATED WHETHER THE ASSESSEE HAD COMMENCED OPERATIONS BEFORE 1.4.2004 WHICH IS AN ESSENTIAL CO NDITION FOR CLAIMING DEDUCTION U/S 80IB(11) OF THE ACT AND, THEREFORE, REQUESTED THAT THE MATTER BE RESTORED BA CK TO THE ASSESSING OFFICER TO ESTABLISH THIS FACT. 15. TO THIS, THE LD. COUNSEL FOR ASSESSEE COUNTERE D BY SAYING THAT THE DATE OF COMMENCEMENT OF OPERATION B Y THE ASSESSEE WAS CLEARLY POINTED OUT IN THE AUDIT REPOR T OF THE CHARTERED ACCOUNTANT CERTIFYING THE ASSESSEES CLAI M OF DEDUCTION U/S 80IB(11) OF THE ACT, AS 27.3.2004. T HE SAME WAS FILED BEFORE THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS WHEN HE WAS EXAMINING THE SA ID 15 CLAIM OF THE ASSESSEE AND MERELY BECAUSE THE ASSESS ING OFFICER HAD NOT MENTIONED SO IN HIS ORDER ABOUT THI S ASPECT IT WOULD NOT MEAN THAT HE HAS NOT APPLIED HIS MIND TO IT AND ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAD COMMENCED OPERATIONS BEFORE THE PRESCRIBED DATE. TH E LD. COUNSEL FOR ASSESSEE FURTHER POINTED OUT THAT BY AC CEDING TO THE REQUEST OF THE LD. DR IT WOULD AMOUNT TO REV IEWING THE ORDER OF THE ASSESSING OFFICER, THE POWER FOR W HICH LAY ONLY WITH THE CIT AND FURTHER POINTED OUT THAT IT W OULD TANTAMOUNT TO GIVING SECOND INNINGS TO THE ASSESSIN G OFFICER ON THE IMPUGNED ISSUE. THE LD. DR COUNTERE D BY SAYING THAT SINCE THIS WAS THE MOST BASIC CONDITION TO BE FULFILLED BY THE ASSESSEE FOR CLAIMING DEDUCTION U/ S 80IB(11) OF THE ACT WHICH APPARENTLY THE ASSESSING OFFICER HAD NOT LOOKED INTO, THE MATTER SHOULD BE SENT BACK TO THE ASSESSING OFFICER WITH THE DIRECTIONS TO INVESTIGAT E THE SAME. 16. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PART IES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE BEFORE US PERTAINS TO CLAIM OF DEDUCTION U/S 80IB(1 1) OF THE ACT WHICH READS AS UNDER: (11) NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE ( III) OF SUB-SECTION (2) AND SUB-SECTIONS (3), (4) AND (5), THE AMO UNT OF DEDUCTION IN A CASE OF INDUSTRIAL UNDERTAKING DERIVIN G PROFIT FROM THE BUSINESS OF SETTING UP AND OPERATING A COLD CHAIN FACILITY FOR AGRICULTURAL PRODUCE, SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UN DERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PR OFITS AND GAINS DERIVED FROM THE OPERATION OF SUCH FACILITY IN A MANNER THAT THE TOTAL PERIOD OF DEDUCTION DOES NOT EXCEED TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECUTIVE 16 ASSESSMENT YEARS WHERE THE ASSESSEE IS A CO-OPERATIV E SOCIETY) AND SUBJECT TO FULFILMENT OF THE CONDITION THAT IT BEGINS TO OPERATE SUCH FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1999 BUT BEFORE THE [1ST DAY OF APRIL, 2004]. 17. THE SAID SECTION ALLOWS DEDUCTION OF PROFITS DERIVED BY INDUSTRIAL UNDERTAKINGS FROM THE BUSINES S OF SETTING UP AND OPERATING OF COLD CHAIN FACILITY FOR AGRICULTURAL PRODUCE. 18. IN THE PRESENT CASE, THE FACT THAT THE ASSESSE E IS THE OWNER OF A COLD STORAGE FACILITY IS NOT DENIED. THE BONE OF CONTENTION OR THE PRIMARY REASON FOR DENYING THE DEDUCTION TO THE ASSESSEE BY THE REVENUE IS THAT TH E PROFITS EARNED BY THE ASSESSEE HAVE NOT BEEN DERIVED FROM T HE BUSINESS OF OPERATING THE COLD CHAIN FACILITY FOR A GRICULTURAL PRODUCE BUT IN FACT ARE MERE RENTALS EARNED FROM LE TTING OUT THE FACILITY OF COLD STORAGE. 19. HAVING HEARD THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE AND ON GOING THROUGH THE AGREEMENT ENT ERED INTO BY THE ASSESSEE WITH PIH, ON ACCOUNT OF WHICH THE ENTIRE INCOME WAS EARNED BY THE ASSESSEE, WE FIND T HAT WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. COU NSEL FOR THE ASSESSEE THAT IT HAD PROVIDED COLD CHAIN FACILI TY TO PIH AND HAD NOT MERELY LET OUT ITS PREMISES TO PIH. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THE AGREEME NT PROVIDED FOR THE ASSESSEE TO ASSUME ALL RESPONSIBIL ITY PERTAINING TO STORING THE AGRICULTURAL PRODUCE SENT BY PIH TO ITS COLD CHAIN FACILITY. THE ASSESSEE AS PER TH E AGREEMENT WAS RESPONSIBLE FOR MAINTAINING AND KEEPI NG THE GOODS IN PROPER CONDITION AND WAS REQUIRED TO RENDE R ALL 17 SERVICES FOR THE SAME. ALL FUNCTIONS AND RESPONSIB ILITIES VIS-A-VIS THE GOODS SENT FOR STORAGE BY PIH, BEGINN ING FROM RECEIPT OF GOODS, THEIR STORAGE AND PRESERVATION, C ONDUCTING PHYSICAL VERIFICATION AND TRANSPORTING GOODS BACK T O PIH ALL RESTED WITH THE ASSESSEE. THE ASSESSEE WAS RESPONSI BLE FOR STORING THE GOODS WITH REASONABLE CARE AND WAS IN T HE POSITION OF A BAILEE IN RESPECT OF THOSE GOODS. THE RESPONSIBILITY OF TRANSPORTING THE GOODS BACK TO PI H IN GOOD CONDITION ALSO RESTED WITH THE ASSESSEE. THE ASSESS EE WAS ALSO LIABLE FOR ANY LOSS, OR DAMAGE BY REASON OF AN Y ACT OF OMISSION OR COMMISSION ON ITS PART OR ON THE PART O F ITS EMPLOYEES. MEANING THEREBY THAT THE RIGHT FROM THE MOMENT THE GOODS WERE RECEIVED BY THE ASSESSEE THE RESPONS IBILITY FOR THEIR UPKEEP LAY WITH THE ASSESSEE TILL IT WAS DELIVERED BACK TO PIH. THE REVENUE HAS NOT BROUGHT TO OUR NO TICE ANY CLAUSE IN THE AGREEMENT WHICH GAVE RIGHTS TO PI H TO MANAGE THE GOODS ONCE DELIVERED IN THE COLD STORAGE . PIH HAS NOT BEEN SHOWN TO US TO HAVE BEEN IN CONTROL OF THE COLD STORAGE FACILITY, WHICH WOULD HAVE BEEN THE CA SE IF THE PREMISES HAD BEEN LET OUT TO PIH. IN FACT WHAT EME RGES FROM THE AGREEMENT IS THAT THE COLD CHAIN FACILITY WAS IN THE OWNERSHIP AND CONTROL OF THE ASSESSEE AND IT WAS RE QUIRED TO RENDER ALL SERVICES FOR STORING THE AGRICULTURAL PRODUCE SENT TO IT. WHAT EMERGES THEREFORE FROM THE VARIOUS CLAUSES POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSEE HAD DEFINITELY NOT MERELY LET OUT ITS COLD STORAGE PREMISES TO PIH, BUT HAD INFACT GIVEN COLD STORAGE FACILITY TO PIH. THEREFORE, THERE IS NO IOTA OF DOUBT IN OUR M INDS IN 18 HOLDING THAT THE ASSESSEE WAS INDULGING IN THE BUSI NESS OF OPERATING COLD CHAIN FACILITY AND WAS NOT MERELY LE TTING OUT ITS COLD CHAIN FACILITY TO PIH. THE CASE LAWS RELI ED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD ARE APT. IN THE CASE OF COMMISSIONER OF INCOME TAX VS DISTRICT CO- OPERATIVE FEDERATION (2004) 271 ITR 22(ALL), THE DE FINITION OF COLD STORAGE BUSINESS WAS BORROWED FROM WORDS AN D PHRASES ,PERMANENT EDITION VOLUME 7A AS UNDER: COLD STORAGE BUSINESSDOING A COLD STORAGE BUSINESS MEANS CARRYING ON THE BUSINESS OF STORING COMMODITIES IN A COOL PLACE FOR HIRE OR REWARD, AND A PACKING HOUSE WHICH USED COLD STORAGE FOR PRESERVING ITS OWN COMMODITIES ALONE, BUT DID NOT RECEIVE AND STORE FOR THE PUBLIC OR ANY PART TH EREOF, IS NOT DOING A COLD-STORAGE BUSINESS WITHIN GENERAL TAX ACT, 2 6TH DEC., 1890, 22, IMPOSING A TAX ON ALL PACKING HOUSES DOING A COLD STORAGE BUSINESS. [STWART VS. ATLANTA BEEF CO. 18 S.E. 981, 985, 93 GA. 12, 44, AM. ST. REPRESENTATION 119].' 20. THE ASSESSEE IN THE PRESENT CASE HAS CLEARLY DEMONSTRATED THAT IT WAS CARRYING ON THE BUSINESS O F STORING COMMODITIES IN A COOL PLACE FOR REWARD AND THEREFORE AS PER THE ABOVE DEFINITION CAN BE SAFELY SAID TO B E CARRYING ON COLD STORAGE BUSINESS. 21. THE HON'BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS NATIONAL STORAGE PVT. LTD. (1967) 66 ITR 596(SC) WHILE DEALING WITH THE ISSUE WHETHER LETTING OUT OF VAULTS FOR STORING FILMS TANTAMOUNTE D TO INCOME DERIVED FROM EXERCISE OF PROPERTY RIGHTS OR WAS AN ADVENTURE IN THE NATURE OF TRADE, HELD AFTER EXAMIN ING THE FACTS OF THE CASE THAT THE SUBJECT HIRED WAS A COMP LEX ONE SINCE THE ASSESSEE HAD CONSTRUCTED SPECIALLY DESIGN ED VAULTS AND RENDERED OTHER SERVICES TO THE VAULT HOL DERS FOR 19 SAFE KEEPING OF THE ITEMS AND FOR DISPATCHING AND R ECEIVING THE ITEMS. THE HONBLE APEX COURT THEREFORE HELD TH AT THE INCOME DERIVED WAS NOT MERELY FROM THE EXERCISE OF PROPRIETARY RIGHTS BUT WAS IN THE NATURE OF BUSINES S INCOME. THE RELEVANT FINDINGS ARE AS UNDER: THE ASSESSEE WAS CARRYING ON AN ADVENTURE OR CONCE RN IN THE NATURE OF TRADE. THE ASSESSEE NOT ONLY CONSTRUCTE D VAULTS OF SPECIAL DESIGN AND SPECIAL DOORS AND ELECTRIC FITTINGS, BUT ALSO RENDERED OTHER SERVICES TO THE VAU LT- HOLDERS. IT INSTALLED FIRE ALARM AND WAS INCURRING EXPENDITURE FOR THE MAINTENANCE OF FIRE ALARM BY PA YING CHARGES TO THE MUNICIPALITY. TWO RAILWAY BOOKING OFFI CES WERE OPENED IN THE PREMISES FOR THE DESPATCH AND RE CEIPT OF FILM PARCELS. THIS IS A VALUABLE SERVICE. IT ALSO MAINTAIN ED A REGULAR STAFF CONSISTING OF A SECRETARY, A PEON, A WAT CHMAN AND A SWEEPER, AND APART FROM THAT IT PAID FOR THE EN TIRE STAFF OF THE INDIAN MOTION PICTURE DISTRIBUTORS' ASSO CIATION AN AMOUNT OF RS. 800 PER MONTH FOR SERVICES RENDERED TO THE LICENSEES. THESE VAULTS COULD ONLY BE USED FOR THE SPECIFIC PURPOSE OF STORING OF FILMS AND OTHER ACTI VITIES CONNECTED WITH THE EXAMINATION, REPAIRS, CLEANING, WAXI NG AND REWINDING OF THE FILMS. THE AGREEMENTS ARE LICEN CES AND NOT LEASES. THE ASSESSEE KEPT THE KEY OF THE ENTR ANCE WHICH PERMITTED ACCESS TO THE VAULTS IN ITS OWN EXCLU SIVE POSSESSION. THE ASSESSEE WAS THUS IN OCCUPATION OF A LL THE PREMISES FOR THE PURPOSE OF ITS OWN CONCERN, THE CON CERN BEING THE HIRING OUT OF SPECIALLY BUILT VAULTS AND P ROVIDING SPECIAL SERVICES TO THE LICENSEES. 'THE SUBJECT WHICH IS HIRED OUT IS A COMPLEX ONE' AND THE RETURN RECEIVED BY THE ASSESSEE IS NOT THE INCOME DERIVED FROM THE EXERCIS E OF PROPERTY RIGHTS ONLY BUT IS DERIVED FROM CARRYING O N AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE. 22. IN THE PRESENT CASE UNDISPUTEDLY THE ASSESSEE WAS THE OWNER OF THE COLD STORAGES WHICH AGAIN ARE SPECIALLY DESIGNED STRUCTURES AND BESIDES BEING THE OWNER HAS ALSO RENDERED SERVICES OF COLD STORAGE TAKING ALL RESPON SIBILITY FOR THE PROPER MAINTENANCE OF THE GOODS SENT TO IT FOR STORAGE. THE ASSESSEE AS PER THE ABOVE JUDGEMENT WA S THUS IN OCCUPATION OF THE PREMISES FOR THE PURPOSE OF IT S OWN CONCERN BEING HIRING OUT THE SPECIALLY CONSTRUCTED STORAGE 20 FACILITY AND PROVIDING SERVICES TO THE LICENSEES.TH E AGREEMENTS IN THE PRESENT CASE WERE CLEARLY LICENSE S AND NOT LEASES. 23. MOREOVER, WE FIND NO MERIT IN THE CONTENTION O F THE REVENUE THAT SINCE THE ASSESSEE HAD NOT CLAIMED DEDUCTION UNDER THE SAID SECTION IN EARLIER YEARS, IT WAS NOT ENTITLED TO CLAIM THE SAID DEDUCTION IN THE IMPUGNE D YEAR. A PERUSAL OF THE CONDITIONS STIPULATED UNDER THE SA ID SECTION TO BE FULFILLED BY THE ASSESSEE REVEALS THA T NO SUCH CONDITION HAS BEEN SPECIFICALLY STIPULATED IN THE S AID SECTION. THERE IS NO REQUIREMENT SPECIFIED IN SECT ION STATING THAT THE ASSESSEE HAS TO NECESSARILY CLAIM DEDUCTION FROM THE INITIAL ASSESSMENT YEAR ITSELF, IN THE ABS ENCE OF WHICH IT WOULD NOT BE ENTITLED TO CLAIM SO IN THE S UBSEQUENT YEARS. THE SECTIONS OF THE ACT HAVE TO BE INTERPRE TED STRICTLY AND LITERALLY AND NO WORDS OR MEANING CAN BE ADDED TO WHAT HAS BEEN STATED IN THE SECTION. THIS IS A BASIC RULE OF INTERPRETATION OF STATUTE. IN THE ABSENCE OF AN Y SPECIFIC STIPULATION IN THE SECTION, WE HOLD THAT THE LD.CIT (APPEALS) HAD ERRED IN STATING THAT THE ASSESSEE WAS NOT ENTI TLED TO CLAIM DEDUCTION UNDER SECTION 80IB(11) OF THE ACT S INCE IT HAD NOT CLAIMED THE SAID DEDUCTION IN THE EARLIER Y EARS. THE DECISIONS RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE ARE APT. IN THE CASE OF CIT VS EXCEL SOFTE CH LTD.(2008) 219 CTR 405 (P&H) THE JURISDICTIONAL HIG H COURT HAS IN THE CONTEXT OF EXEMPTION GRANTED U/S 10B HEL D THAT IN THE ABSENCE OF ANY SUCH STIPULATION IN THE STATU TE THERE 21 IS NO BAR IN CLAIMING EXEMPTION FROM ANY OF THE ASS ESSMENT YEARS FROM THE ELIGIBLE BLOCK OF YEARS. THE RELEVAN T FINDINGS AT PARA 7 OF THE ORDER ARE AS UNDER: IN OUR OPINION, THE CONTENTION RAISED BY THE REVEN UE IS LIABLE TO BE REJECTED. SEC. 10B OF THE ACT READS AS UNDER : '10B. SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISH ED HUNDRED PER CENT EXPORT-ORIENTED UNDERTAKINGS(1) SUB JECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT-OR IENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE P REVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS T HE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE.' THE AFORESAID PROVISION PROVIDES THAT SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAI NS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT-ORIENTED UNDERT AKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SO FTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WIT H THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHI CH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLE S OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. SUB-S. (2) PROVIDES THAT THIS SECTION APPLIES TO ANY UNDERTAKI NG WHICH FULFILS CERTAIN CONDITIONS, MENTIONED IN THIS SUB-SECTIO N ITSELF. THE EXEMPTION UNDER THIS SECTION IS AVAILABLE FOR 10 YEARS. THE INITIAL YEAR IS THE YEAR IN WHICH THE ELIGIBLE UNDE RTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE. IT IS NOT DISPUTED THAT THE ASSESS EE UNIT FULFILLS ALL THE CONDITIONS, AS MENTIONED IN SUB-S. (2). IN THE PRESENT CASE, THE ASSESSEE HAD STARTED THE DEVELOPMEN T OF COMPUTER SOFTWARE IN THE ASST. YR. 1998-99 AND WAS REGISTERED WITH THE SOFTWARE TECHNOLOGY PARK W.E.F. 24 TH MARCH, 2000, THEREFORE, THE 10 YEARS PERIOD HAS TO BE RECKONED FROM THE ASST. YR. 1998-99. THE ASSESSEE HAS CLAIMED EXEMPTION FOR THE FIRST TIME IN THE ASST. YR. 2 001-02, WHICH IS WELL WITHIN 10 YEARS. THEREFORE, THE UNIT OF THE ASSESSEE CANNOT BE DENIED THE SAID EXEMPTION ON THE GROUND THAT IT IS NOT THE NEWLY ESTABLISHED UNDERTAKING IN THE ASSESSMENT YEAR IN QUESTION. IN OUR VIEW, THE WORDS 'NEWLY ESTABLISHED UNDERTAKING' ARE ONLY TO IDENTIFY THE I NITIAL YEAR OF THE PERIOD OF 10 YEARS FOR WHICH THE ASSESSEE IS EL IGIBLE FOR CLAIM OF EXEMPTION UNDER S. 10B OF THE ACT. SEC. 10B(1) OF THE ACT DOES NOT USE THE WORDS 'NEWLY ESTABLISHED UNDER TAKING'. ONLY IN THE HEADING, THE WORDS 'NEWLY ESTABLISHED HUN DRED PER CENT EXPORT-ORIENTED UNDERTAKINGS' HAVE BEEN MEN TIONED. IT IS WELL-SETTLED LAW THAT HEADINGS OR TITLES PREFIXED T O 22 SECTIONS OR GROUP OF SECTIONS CAN BE REFERRED TO IN CONSTRUING AN ACT OF THE LEGISLATION, ONLY WHEN THE ENACTING WOR DS ARE AMBIGUOUS, BUT WHEN THE LANGUAGE OF THE SECTION IS CLEAR, TH EN THE HEADING CANNOT BE USED TO GIVE A DIFFERENT EFFE CT TO CLEAR WORDS IN THE SECTION. IN OUR VIEW, THERE IS NO AMBIGUIT Y IN S. 10B OF THE ACT, WHICH PROVIDES EXEMPTION TO CERTAIN NE WLY ESTABLISHED HUNDRED PER CENT EXPORT ORIENTED UNDERT AKINGS, ON FULFILLING CERTAIN CONDITIONS, FOR A PERIOD OF TEN CO NSECUTIVE ASSESSMENT YEARS. THE INITIAL YEAR IS THE YEAR IN WHIC H THE ELIGIBLE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUC E ARTICLES OR THINGS OR COMPUTER SOFTWARE. SEC. 10B OF THE ACT D OES NOT PROVIDE ANY RESTRICTION THAT IN EACH OF THE YEARS OF CLAIM, THE EXPORT-ORIENTED UNDERTAKING SHOULD BE NEWLY ESTABLISH ED. INDEED, RELEVANCE OF 'NEWLY ESTABLISHED UNDERTAKING' IS ONLY TO IDENTIFY THE INITIAL YEAR OF THE PERIOD OF TEN YEAR S FOR WHICH THE ASSESSEE IS ELIGIBLE FOR CLAIM OF EXEMPTION UNDER S . 10B OF THE ACT. SINCE IN THE PRESENT CASE, UNDISPUTEDLY, THE INITIAL YEAR IS THE ASST. YR. 1998-99, THEREFORE, THE ASSESSEE W AS RIGHTLY HELD TO BE FULLY ELIGIBLE FOR EXEMPTION UNDER S. 10B OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E., 2001-02, AS IT WAS THE FOURTH YEAR, OUT OF TEN YEARS B EGINNING WITH THE INITIAL ASSESSMENT YEAR, IN WHICH IT BEGAN TO DEVELOP AND EXPORT THE COMPUTER SOFTWARE. 24. THE HONBLE DELHI HIGH COURT IN THE CASE OF PRAVEEN SONI VS CIT (2011) 333 ITR 324 IN THE CONT EXT OF DEDUCTION CLAIMED U/S 80 IB(3 )ALSO UPHELD THIS VIE W AT PARA 6 OF ITS ORDER AS UNDER: IF THE ASSESSEE FULFILS THE REQUIREMENT OF SMALL-SCAL E INDUSTRIAL UNDERTAKING (WHICH ASPECT SHALL BE DEALT WHILE ANSWERING OTHER QUESTION OF LAW), IT IS NOT IN DISPUTE THAT THE ASSESSEE WOULD HAVE QUALIFIED FOR THIS DEDUCTION FRO M THE ASST. YR. 1998-99. HAD THE ASSESSEE CLAIMED THIS BENEFIT IN THAT YEAR, HE WOULD HAVE BEEN ALLOWED THIS BENEFIT FOR 10 CONSECUTIVE YEARS, I.E., TILL ASST. YR. 2007-08. THE ASSESSE E, THUS, BECOMES ENTITLED TO CLAIM THE BENEFIT IN THE ASS T. YR. 1998-99. HOWEVER, MERELY BECAUSE OF THE REASON THAT TH OUGH THE ASSESSEE WAS ELIGIBLE TO CLAIM THIS BENEFIT, BUT D ID NOT CLAIM IN THAT YEAR WOULD NOT MEAN THAT HE WOULD BE DEP RIVED FROM CLAIMING THIS BENEFIT TILL THE ASST. YR. 2007-08, W HICH IS THE PERIOD FOR WHICH HIS ENTITLEMENT WOULD ACCRUE. THE PROVISIONS CONTAINED IN S. 80-IB OF THE IT ACT NOWHE RE STIPULATE ANY CONDITION THAT SUCH A CLAIM HAS TO BE MA DE IN THE FIRST YEAR FAILING WHICH THERE WOULD BE FORFEITU RE OF SUCH CLAIM IN THE REMAINING YEARS. IT IS NOT THE CASE OF TH E ASSESSEE THAT HE SHOULD BE ALLOWED TO AVAIL THIS CLAIM FOR 10 YE ARS FROM THE ASST. YR. 2004-05. THE ASSESSEE HAS REALIZED HIS MI STAKE IN NOT CLAIMING THE BENEFIT FROM THE FIRST ASST. YR. 1 998-99. AT THE SAME TIME, THE ASSESSEE FOREGOES THE CLAIM UPTO TH E ASST. YR. 2003-04 AND IS MAKING THE SAME ONLY FOR THE REMAIN ING 23 PERIOD. THERE IS NO REASON NOT TO GIVE THE BENEFIT O F THIS CLAIM TO THE ASSESSEE IF THE CONDITIONS STIPULATED UNDER S. 80-IB OF THE IT ACT ARE FULFILLED. 25. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSE E IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(11) OF THE ACT AND DIRECT THE ASSESSING OFFICER TO GRANT THE SAME IN A CCORDANCE WITH LAW. 26. WE MAY ALSO POINT OUT THAT WE FIND NO MERIT IN THE ARGUMENT OF THE LD. D.R. THAT THE ISSUE OF ALLO WABILITY OF CLAIM UNDER SECTION 80IB(11) OF THE ACT BE RESTO RED BACK TO THE ASSESSING OFFICER FOR THE PURPOSE OF DETERMI NING WHETHER THE ASSESSEE HAD ACTUALLY COMMENCED IT OPER ATION BEFORE 1.4.2004, WHICH IS AN ESSENTIAL CONDITION FO R CLAIMING THE SAID DEDUCTION. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, ALL RELEVANT FACTS HAD BE EN PLACED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THE DATE OF COMMENCEMENT BEING 27.3 .2004 WAS VERY MUCH CERTIFIED BY THE CHARTERED ACCOUNTANT AND MENTIONED IN HIS CERTIFICATE PROVIDED IN FORM NO.10 CCB. IN SUCH CIRCUMSTANCES IT IS REASONABLE TO PRESUME THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE SAID FACTS AND ARRIVED AT CONCLUSION THAT THE ASSESSEE FULFILLED T HE CONDITIONS OF COMMENCING THE OPERATION BEFORE 1.4.2 004. IN ANY CASE, SINCE THIS ADMITTEDLY WAS NOT THE REASON FOR DENYING DEDUCTION UNDER SECTION 80IB(11) OF THE ACT BY THE ASSESSING OFFICER, WE CANNOT ENHANCE SCOPE OF ASSES SMENT BY RESTORING THE SAID ISSUE TO THE ASSESSING OFFICE R. THE CONTENTION RAISED BY THE LD. D.R. IS, THEREFORE, DI SMISSED. 24 27. IN VIEW OF THE ABOVE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 28. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDER: 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION O F RS 410145/- AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 29. IN THE AFORESAID GROUND, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF INTEREST UNDER SECTI ON 36(1)(III) OF THE ACT. 30. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSING OFFICER MADE DISALLOWANCE OF INTEREST PER TAINING TO INTEREST FREE ADVANCES MADE TO TWO PARTIES AS UN DER: 1) M/S MEGA FOOD PARK LTD. = RS.10,00,000/- 2) M/S ZENITH FOOD & NUTRIENTS PVT.LTD. = RS.34,75,363/- FOR THE REASON THAT THE BUSINESS EXPEDIENCY OF THE SAID ADVANCE HAD NOT BEEN ESTABLISHED AND THE ASSESSEE W AS FOUND TO HAVE DIVERTED INTEREST BEARING FUNDS FOR T HE PURPOSE OF MAKING SUCH ADVANCES. 31. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT (APPEALS) WHO UPHELD THE ORDER OF THE ASSESS ING OFFICER. 32. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE PRIMARILY RAISED ONLY ONE CONTENTION THAT THE AFORE SAID ADVANCE HAD BEEN MADE OUT OF OWN INTEREST FREE FUND S OF THE ASSESSEE AND NO INTEREST BEARING FUNDS HAS BEEN USED 25 FOR THE SAID PURPOSE. SUBSTANTIATING ITS CONTENTIO N THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE BALANCE SHEET OF THE ASSESSEE FOR THE IMPUGNED YEAR PLACED AT PAPER BOOK PAGE NOS.11 TO POINT OUT THAT IT CLEARLY REFL ECTED THAT OWN FUNDS OF THE ASSESSEE IN THE FORM OF SHAREHOLDE RS FUNDS, BEING SHARE CAPITAL AND RESERVES & SURPLUS, AMOUNTED TO RS.15.98 CRORES, WHICH INCLUDED RS.2.8 CRORES SHARE CAPITAL AND RS.13.18 CRORES RESERVES AND SURP LUS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER DREW OUR A TTENTION TO SCHEDULE 2 OF THE BALANCE SHEET, BEING SCHEDULE OF RESERVES AND SURPLUS, TO POINT OUT THEREFROM THAT T HE REVENUE RESERVES OF THE ASSESSEE IN THE FORM OF BAL ANCE IN THE PROFIT AND LOSS ACCOUNT AMOUNTED TO RS.1.53 CRO RES . THEREAFTER THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE TOTAL ADVANCES ON WHICH INTEREST HAD BEEN DISALLOWE D AMOUNTED TO RS.44.75 LACS. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, STATED THAT IT WAS EVIDENT THA T THE ASSESSEE HAD ENOUGH OWN FUNDS TO MAKE THE IMPUGNED ADVANCES. THE LD. COUNSEL FOR THE ASSESSEE THEREAF TER STATED THAT IT HAD UTILIZED ITS INTEREST BEARING FU NDS CLEARLY FOR THE BUSINESS PURPOSE OF THE ASSESSEE WHICH IS E VIDENT FROM THE FACT THAT THE INTEREST BEARING FUNDS, COMP RISING OF ONLY SECURED LOANS, WHICH INCLUDED LOANS TAKEN FROM SIDBI AND HDFC TRUCK LOAN. THE LD. COUNSEL FOR THE ASSES SEE DREW OUR ATTENTION TO SCHEDULE-3 OF SECURED LOANS F OR POINTING OUT THIS FACT. THE LD. COUNSEL FOR THE AS SESSEE THEREAFTER STATED THAT THE LOAN FROM SIDBI WAS A TE RM LOAN TAKEN FOR CONSTRUCTION OF LAND AND BUILDING AND WAS UTILIZED 26 FOR THE SAID PURPOSE. SO ALSO HDFC TRUCK LOAN WAS FOR THE PURPOSE OF FINANCING THE PURCHASE OF TRUCK AND HAD BEEN UTILIZED FOR THE SAME. THE LD. COUNSEL FOR THE ASS ESSEE STATED THAT THE ASSESSEE HAD ONLY CURRENT ACCOUNT I N THE BANK REFLECTED IN THE SCHEDULE OF CURRENT ASSET LOA NS AND ADVANCES, SCHEDULE-7 ,AND ON WHICH NO INTEREST HAD BEEN PAID AND FUNDS FROM WHICH HAD BEEN UTILIZED FOR THE PURPOSE OF MAKING THE SAID ADVANCES. THE LD. COUNS EL FOR THE ASSESSEE ALSO POINTED OUT AND STATED AT BAR THA T THE UNSECURED LOANS TAKEN BY THE ASSESSEE CARRIED NO IN TEREST. THUS THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT T HAT IT IS EVIDENT THAT THE INTEREST BEARING LOANS IN ANY CASE COULD NOT AND HAD NOT BEEN USED FOR THE PURPOSE OF MAKING THE SAID ADVANCES AND, THEREFORE, ALSO THERE WAS NO REA SON FOR MAKING ANY DISALLOWANCE OF INTEREST UNDER SECTION 3 6(1)(III) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE IN SU PPORT OF ITS CONTENTION STATED THAT WHERE ENOUGH OWN FUNDS ARE AVAILABLE THE PRESUMPTION IS THAT THE SAID FUNDS HA VE BEEN UTILIZED FOR THE PURPOSE OF MAKING THE INTEREST FRE E ADVANCES AND RELIED UPON THE FOLLOWING CASE LAWS: 1) HERO CYCLES PVT. LTD VS CIT, LUDHIANA 379 ITR 347(SC) 2) BRIGHT ENTERPRISES PVT. LTD. VS CIT, JALANDHAR 381 ITR 107(P&H) 33. THE LD. D.R., ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE LD.CIT (APPEALS). 27 34. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES. WE FIND MERIT IN THE CONTENTION OF THE LD . COUNSEL FOR THE ASSESSEE THAT WHERE THE NEXUS BETWEEN INTER EST BEARING FUNDS AND INTEREST FREE ADVANCES IS RULED O UT AND WHERE THE ASSESSEE HAS DEMONSTRATED THE AVAILABILIT Y OF ENOUGH OWN FUNDS FOR THE PURPOSE OF MAKING THE INTE REST FREE ADVANCES, NO DISALLOWANCE UNDER SECTION 36(1)( III) OF THE ACT COULD BE MADE. THE LD. COUNSEL FOR THE ASS ESSEE HAS RIGHTLY RELIED UPON CASE LAWS AS CITED BEFORE U S. BUT AT THE SAME TIME, WE FIND THAT ALL FACTS AND FIGURES L EADING TO THE SAID CONCLUSION HAVE NOW FOR THE FIRST TIME BEE N POINTED OUT TO US. SINCE THE SAID FIGURES NEED TO BE VERIF IED WE RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CONTENTION OF THE ASSESSEE THAT NO INTER EST BEARING FUNDS HAVE BEEN USED FOR THE PURPOSE OF MAK ING THE SAID ADVANCES AND ALSO THE AVAILABILITY OF ENOUGH O WN SURPLUS FUNDS FOR MAKING THE SAID ADVANCES. THE AS SESSING OFFICER IS THEREAFTER DIRECTED TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE ASSE SSEE BE GRANTED DUE OPPORTUNITY OF HEARING BY THE AO. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 35. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.703/CHD/2015(ASSESSEES APPEAL) : 36. THE ASSESSEE IN THIS APPEAL HAS RAISED FOLLOWI NG 28 GROUNDS OF APPEAL: 1. THAT ON THE FACTS, CIRCUMSTANCES OF THE CASE AND IN LAW, THE WORTHY C1T(A), THROUGH HIS ORDER DATED 03.06.2015, HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, WORTHY CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE APPELLANT U/S 80-IB(11) OF THE ACT AMOUNTING TO RS.1,21,36,078/- BY ERRONEOUSLY HOLDING THAT THE APPELLANT IS NOT ELIGIBLE FOR SAID DEDUCTION AS THE SAME WAS NOT CLAIMED IN PRIOR YEARS SINCE THE 'INIT IAL ASSESSMENT YEAR'. BOTH THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN HOLDING THAT NON-CLAIM OF ELIGIBLE DEDUCTION U/S 80IB FROM THE INITIAL ASSESSMENT YEAR WOULD BE FATAL TO SAID CLAIM IN SUBSEQUENT YEARS. 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, WORTHY CIT (A), VIDE PARA 2.3.4 OF HIS ORDER FOR AY 2010-11, HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE APPELLANT U/S 80-IB(11) OF THE ACT AMOUNTING TO RS.1,21,36,078/-, WHEREIN WITHOUT MAKING ANY DECISION ON ADVERSE INFERENCE DRAWN BY THE LD. AO AND SERIOUSLY OBJECTED TO BY TH E APPELLANT, HE CONFIRMED THE DISALLOWANCE SINCE THE ISSUE HAD BEEN DECIDED AGAINST THE APPELLANT ON OTHER OBJECTIONS VIDE PARA 2.3.3 OF HIS ORDER FOR AY 2010-11. THE WORTHY CIT(A) HAS ERRED IN NOT PASSING THE ORDER IN REGARD TO THIS ISSUE AND THEREFORE THE SAME DESERVES TO BE SET-ASIDE. 4. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO. IN MAKING ADDITION OF RS.6,00,000/- U/S 36(L)(III) OF THE ACT ON ESTIMATE D, ARBITRARY, PRESUMPTIVE AND PREJUDICED BASIS WITHOUT ASSIGNING ANY LOGICAL REASONS AND HAS ERRONEOUSLY DISALLOWED THE PROPORTIONATE INTEREST ON ADVANCE GIVEN FOR BUSINESS PURPOSE TO M/S TEMPTATION FOODS AS INTEREST FREE ADVANCE. BOTH THE LOWER AUTHORITIES HAVE ERRED IN APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THEREON. 5. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION , DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON O R BEFORE THE DISPOSAL OF THE SAME. 37. IT IS RELEVANT TO OBSERVE HERE THAT IT WAS SUBMITTED BY BOTH THE PARTIES THAT THE FACTS AND CIRCUMSTANCES OF THIS APPEAL ARE SIMILAR TO THE FAC TS AND 29 CIRCUMSTANCES IN ITA NO.311/CHD/2015.THE FINDINGS G IVEN IN ITA NO.311/CHD/2015 SHALL THEREFORE APPLY MUTATI S MUTANDIS TO THIS APPEAL ALSO. THIS APPEAL OF THE A SSESSEE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. ITA NO.754/CHD/2015(REVENUES APPEAL) : 38. THE ONLY GROUND RAISED BY THE REVENUE IN THE PR ESENT APPEAL PERTAINS TO DELETION OF ADDITION OF RS.2,41, 360/- MADE U/S 14A OF THE INCOME TAX ACT,1961. IT IS STATED THAT IN THE PRESENT APPEAL THE TAX EF FECT IS LESS THAN THE PRESCRIBED LIMIT PROVIDED BY THE RECE NT CBDT CIRCULAR. 39. ACCORDING TO CIRCULAR NO.21/2015 DATED 10.12.2015, THE CBDT IN SUPERCESSION OF EARLIER INSTRUCTIONS HAS DIRECTED THAT DEPARTMENTS APPEALS BEFORE ITAT SHALL NOT BE FILED IN CASES WHERE THE TAX EFFE CT DOES NOT EXCEED THE MONETARY LIMIT OF RS.10 LACS. THE TAX W ILL NOT INCLUDE ANY INTEREST THEREON. IT IS FURTHER CLARIF IED THAT IF IN THE CASE OF AN ASSESSEE, DISPUTED ISSUES ARISE I N MORE THAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RE SPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFE CT IN RESPECT OF DISPUTED ISSUES EXCEEDS THE MONETARY LIM IT SO SPECIFIED. THIS INSTRUCTION WILL APPLY RETROSPECTIV ELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH BEFORE THE TRIBUNAL. THE PENDING APPEALS BELOW THE SPECIFI ED TAX LIMIT MAY BE WITHDRAWN/NOT PRESSED. 30 40. ADMITTEDLY, IN THE DEPARTMENTAL APPEAL, THE TA X EFFECT IS LESS THAN RS.10 LACS, THEREFORE, DEPARTME NTAL APPEAL IS NOT MAINTAINABLE. THE LEARNED CIT (APPEA LS) DECIDED THE ISSUE IN DEPARTMENTAL APPEAL ON FACTS A ND THE CASE OF THE REVENUE WOULD NOT FALL IN THE EXCEPTION S PROVIDED IN THE ABOVE CIRCULAR. 41. IN VIEW OF THE ABOVE, LEARNED D.R. STATED THAT SINCE DEPARTMENTAL APPEAL IS FILED AGAINST THE CBDT INSTRUCTIONS, THEREFORE, HE WOULD NOT BE PRESSING DEPARTMENTAL APPEAL. THEREFORE, THE ABOVE DEPARTME NTAL APPEAL IS DISMISSED BEING NOT PRESSED. 42. THE APPEAL OF THE REVENUE IS DISMISSED. 43. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH JULY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH