The DCIT, Circle- 4, Baroda V. M/s. Panasonic Energy India Co.Ltd, Baroda

ITA 318/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63112 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D P GUPTA
• Keywords: Business income; Transfer pricing; Business expenditure; Opportunity of being heard; Additional evidence; Procedural lapse; Capital expenditure
• Section: 80HHC; 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.45 / AHD/2009 & 46/AHD/2009 (ASSESSMENT YEAR 2003-04 & 2004-05) M/S. PANASONIC ENERGY INDIA CO. LTD., FORMERLY: MATSUSHITA LAKHANPAL BATTERY INDIA CO. LTD., GIDC, MAKARPURA, VADODARA I.T.A. NOS. 317 & 318/AHD/2009 (ASSESSMENT YEAR 2003- 04 & 2004 ACIT, CIRCLE 4, BARODA ACIT, CIRCLE-4, VS. M/S. PANASONIC ENERGY INDIA BARODA CO. LTD. FORMERLY: MATSUSHITA LAKHANPAL BATTERY INDIA CO. LTD., GIDC, MAKARPURA, VADODARA PAN/GIR NO. : AAACL3332K (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI MILIN MEHTA, AR RESPONDENT BY: SHRI D P GUPTA, CIT DR DATE OF HEARING: 15.10.2012 DATE OF PRONOUNCEMENT: 30.11.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE CROSS APPEALS OF THE ASSESSEE AND THE RE VENUE FOR TWO ASSESSMENT YEARS WHICH ARE DIRECTED AGAINST TWO SEP ARATE ORDERS OF LD. CIT(A) III, BARODA BOTH DATED 03.11.2008 FOR THE AS SESSMENT YEARS 2003- 04 & 2004-05. ALL THESE APPEALS WERE HEARD TOGETHE R AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. I.T.A.NO.45,46,317,318 /AHD/2009 2 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 IN I.T.A.NO. 45/AHD/2009. 2.1 GROUND NO.1 IS GENERAL. GROUND NO.2 IS AS UNDE R: 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN DISALLOWING PAYMENT OF RS. 40,7 09/- BEING AMORTIZATION OF PREMIUM PAID FOR LAND TAKEN ON LEAS E ON THE GROUND THAT THE SAME REPRESENTS CAPITAL EXPENDITURE. 2.1.1 AT THE VERY OUTSET, IT WAS SUBMITTED BY THE L D. A.R. THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNA L ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03, COPY OF W HICH IS AVAILABLE ON PAGE 485 OF THE PAPER BOOK AND THE RELEVANT PARA OF THE TRIBUNAL ORDER IS PARA 8.4. HE ALSO SUBMITTED THAT THIS ISSUE IS ALS O COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE GUJARAT HIGH C OURT RENDERED IN THE CASE OF SUN PHARMACEUTICAL IND. LTD. VS DCIT 24 DTR 262. 2.1.2 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.1.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. SINCE THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 , THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY LD. CIT(A) CANNOT BE SUSTAINED AND HENCE, WE DELETE THE SAME. THIS GROUND OF THE ASSE SSEE IS ALLOWED. 2.2 GROUND NO.3 IS AS UNDER: 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING AD HOC DISALLOWANCE OF RS. 84,908/- BEING 10% OF MISCELLANEOUS EXPENSES ON THE GROUND O F NON- BUSINESS USE. 2.2.1 IT WAS FAIRLY ADMITTED BY THE LD. A.R. THAT T HIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE SAME TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 AND THE RELEVANT PARA I S PARA 6.3. I.T.A.NO.45,46,317,318 /AHD/2009 3 ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTE D BY FOLLOWING THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 2002-03. 2.3 GROUND NO.4 IS AS UNDER: 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING AD HOC DISALLOWANCE OF RS.2,08,999/- OUT OF WELFARE EXPENSES. 2.3.1 IT WAS FAIRLY ADMITTED BY THE LD. A.R. THAT T HIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE SAME TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 AND THE RELEVANT PARA O F THE TRIBUNAL ORDER IS PARA 6.3. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALSO REJECTED BY FOLLOWING THE EARLIER YEAR TRIBUNAL ORDER. 2.4 GROUND NO.5, 5.1 AND 6 ARE INTERCONNECTED, WHIC H ARE REGARDING DEDUCTION CLAIMED BY THE ASSESSEE U/S 80-IB OF THE INCOME TAX ACT, 1961. IT WAS SUBMITTED BY THE LD. A.R. THAT GROUND NO.5.1 IS NOT PRESSED AND ACCORDINGLY, THE SAME IS REJECTED AS NOT PRESSED. REMAINING GROUNDS NO.5 & 6 ARE AS UNDER: DEDUCTION U/S. 80IB: 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN HOLDING THAT THE FOLLOWING AMOU NTS ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE INCOME TAX A CT, 1961 ['THE ACT'] ON THE GROUND THAT THESE INCOMES ARE NOT DERI VED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING: SR.NO: PARTICULARS AMOUNT (IN RS.) 1 INTEREST ON STAFF LOAN 28,261 2 INSURANCE CLAIM 8,13,129 3 DISCOUNT RECEIPT 13,03,545 TOTAL 21,44,935 I.T.A.NO.45,46,317,318 /AHD/2009 4 6. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN CONSIDERING REPAIRS TO BUILDING AMOUNTING TO RS.1,64,032/- AS CAPITAL EXPENDITURE INSTEAD OF REV ENUE EXPENDITURE AS CLAIMED BY THE APPELLANT. 2.4.1 IT WAS SUBMITTED BY THE LD. A.R. THAT THERE A RE THREE ISSUES INVOLVED REGARDING THE CLAIM OF THE ASSESSEE FOR DE DUCTION U/S 80-IB WHICH WAS REJECTED BY THE AUTHORITIES BELOW. HE SU BMITTED THAT THE FIRST ISSUE IS REGARDING INCOME OF THE ASSESSEE ON ACCOUN T OF INTEREST ON STAFF LOAN OF RS.28,261/-. HE FAIRLY CONCEDED THAT THIS ASPECT OF THE MATTER IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 AND THE RELEVANT PA RA OF THE TRIBUNAL ORDER IS PARA 13.4. ACCORDINGLY, THIS PART OF THIS GROUND IS REJECTED. 2.4.2 HE FURTHER SUBMITTED THAT THE 2 ND ASPECT OF THE MATTER IS REGARDING THE INCOME OF THE ASSESSEE ON ACCOUNT OF INSURANCE CLAIM OF RS.8,13,129/- . HE SUBMITTED THAT THIS ASPECT OF THE MATTER IS C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF THE TR IBUNAL RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. VS ACIT AS REPORTED I N 295 ITR 199 (AHD.)(AT). LD. D.R. COULD NOT POINT OUT ANY DIFFE RENCE IN FACTS IN THE PRESENT CASE AND IN THE CASE OF NIRMA INDUSTRIES LT D.(SUPRA). HENCE, BY RESPECTFULLY FOLLOWING THIS DECISION OF SPECIAL BEN CH OF THE TRIBUNAL, THIS ASPECT OF THE MATTER IS DECIDED IN FAVOUR OF THE AS SESSEE. 2.4.3 HE FURTHER SUBMITTED THAT THE 3 RD ASPECT OF THE MATTER IS REGARDING INCOME OF THE ASSESSEE ON ACCOUNT OF DISCOUNT RECEI VED OF RS.13,03,545/-. HE SUBMITTED THAT IT IS REDUCTION IN PURCHASE PRICE AND NOT IN THE NATURE OF INCOME AND THIS ASPECT OF THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE SAME TRIBUNAL ORDER IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2002-03. HE FURTHER SUBMITTED THAT THE RELEVANT PA RA IS PARA 13.6 OF THE TRIBUNAL ORDER WHICH IS AVAILABLE ON PAGE 493 OF TH E PAPER BOOK. I.T.A.NO.45,46,317,318 /AHD/2009 5 2.4.3.1 WE HAVE CONSIDERED RIVAL SUBMISSIONS AND ON MERIT, THE ASSESSEE HAS A CASE FOR ITEMS NO. 2 & 3 I.E. INSURANCE CLAIM AND DISCOUNT RECEIPT BUT THE A.O. HAS DISALLOWED DEDUCTION U/S 80IB ON T HIS BASIS THAT MANDATORY FORM NO. 10CCB WAS NOT SUBMITTED EVEN BEF ORE COMPLETION OF ASSESSMENT PROCEEDINGS AND THIS ISSUE IS RAISED BY REVENUE IN GR. 1 OF ITS APPEAL AND HENCE NO DEDUCTION IS ALLOWABLE TO A SSESSEE U/S 80IB IF THE REVENUE SUCCEEDS IN GR. 1 OF ITS APPEAL. OTHERWISE , THE A.O. SHOULD ALLOW DEDUCTION FOR THESE TWO ITEMS. HELD ACCORDI NGLY. 2.4.4 REGARDING GROUND NO.6, IT WAS SUBMITTED THAT THESE REPAIRS ARE IN THE NATURE OF REPLACEMENT OF WORN OUT PARTS OF THE BUILDING SUCH AS REPLACEMENT OF OLD TILES, FABRICATION AND LEVELING CHARGES ETC. HE DRAWN OUR ATTENTION TO PARA 5.3 OF THE TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 AND 2002-03 WHICH I S AVAILABLE ON PAGE 500 OF THE PAPER BOOK. LD. D.R. SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 2.4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION RENDERED IN THE ASSESSEES OWN CA SE FOR THE ASSESSMENT YEAR 2002-03. IN THAT YEAR ALSO, IN RESPECT OF REP AIRS TO BUILDING, THE CLAIM OF THE ASSESSEE WAS REGARDING PVC CARPET FLOO RING, REPAIRS AND REPLACEMENT OF OLD TILES, CARPETING OF LPG AREA ETC AND IN THAT YEAR, THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE. ACCORDINGL Y, IN THE PRESENT YEAR ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) AND HENCE, THIS GROUND OF THE ASSESSEE IS REJECTED. 2.5 GROUND NO.7, 7.1 AND 7.2 ARE IN RESPECT OF DIST RIBUTION OF FREE CELLS. THE BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STA GE OF THIS ISSUE ARE NOTED BY LD. CIT(A) IN PARA 7 AND 7.1 OF HIS ORDER WHICH ARE REPRODUCED BELOW: I.T.A.NO.45,46,317,318 /AHD/2009 6 7. GROUND NO. 6 RELATES TO THE DISALLOWA NCE OF QUANTITY DISCOUNT U/S 40A(2)(B). 7.1 IT WAS STATED BY THE ASSESSING OFFICER THAT QUA NTITY RECORD ATTACHED WITH THE BCD REPORT U/S 44AB ALONG WITH TH E RETURN OF INCOME SHOWS THAT ASSESSEE HAS GIVEN QUANTITY OF FR EE DRY CELLS AS PER THEIR SALES SCHEME. THE ASSESSEE WAS ASKED TO G IVE DETAILS OF FREE CELLS GIVEN TO ITS DISTRIBUTORS. IT WAS STATED BY THE ASSESSEE THAT FREE CELL SCHEME WAS GIVEN TO THE DISTRIBUTORS ON T HE BASIS OF THE PERFORMANCE. THE ASSESSEE COMPANY HAS SUBMITTED DET AILS OF FREE CEILS GIVEN TO ITS DISTRIBUTOR M/S LAKHANPAL P. LTD . M/S LAKHANPA! P. LTD IS ALSO AN ASSOCIATE CONCERN COVERED U/S 40A (2)(B) OF THE ACT. ON PERUSAL OF REPLIES RECEIVED FROM M/S LAKHAN PAL P. LTD DOES NOT TAKE THESE FREE CELLS RECEIVED UNDER THE S CHEME OF FREE CELLS IN THEIR STOCK REGISTER AND AIL THE FREE CEIL S ARE PASSED ON TO THEIR STOCKIST ON PRO-RATA BASIS. IT WAS STATED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT SUBMITTED EVIDENC ES RELATING TO MONITORING OF THE FREE CEILS GIVEN TO M/S LAKHANPAL P. LTD BEING A PERSONS COVERED U/S 40A(2)(B) THOUGH FREE CELLS GIV EN TO OTHER DISTRIBUTORS TO PASS ON TO THE RESPECTIVE STOCKISTS ARE PROVED BY THESE PARTIES. THEREFORE, FREE CELLS GIVEN TO M/S L AKHANPAL P. LTD NUMBERING 71,01,456 VALUING RS.3,00,39,158/- ON THE BASIS OF AVERAGE SALE COST OF CELLS AMOUNTING TO 4.234 PER C ELL WAS DISALLOWED BY THE ASSESSING OFFICER AND ADDED TO TH E TOTAL INCOME. 2.5.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 2.5.2 IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASS ESSEE HAS DISTRIBUTED FREE DRY CELLS IN THE FORM OF QUANTITY DISCOUNT AS PER INCENTIVE SCHEME TO VARIOUS DISTRIBUTORS INCLUDING M/S. LAKHANPAL PVT. LTD. HE FURTHER SUBMITTED THAT THE A.O. HAS INVOKED THE PROVISIONS OF SECTION 40A(2B) AND APPLIED NOTIONAL SALE PRICE TO THE QUANTITY OF FREE CELLS AND WORKED OUT THE ADDITION. IT WAS FURTHER SUBMITTED THAT SE CTION 40A(2B) CAN BE APPLIED IN CASE OF CLAIM FOR EXPENDITURE AND NOT TO DISCOUNT ALLOWED ON SALE AND IN THE PRESENT CASE, THERE IS NO EXPENDITU RE INCURRED BY THE I.T.A.NO.45,46,317,318 /AHD/2009 7 ASSESSEE. HE ALSO SUBMITTED THAT IN THE EARLIER YEA RS, THE DEPARTMENT HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND THERE IS NO CHANGE IN THE FACTS IN THE CURRENT YEAR AS COMPARED TO PAST SEVERAL YEARS. THIS WAS ALSO SUBMITTED THAT THE SCHEME IS UNIVERSAL AND THE ASSE SSEE HAS OFFERED SUCH SCHEME TO OTHER DISTRIBUTORS ALSO AND ALL THE DISTR IBUTORS INCLUDING PARTIES COVERED U/S 40A(2B) WERE ALLOWED QUANTITY DISCOUNT UNDER IDENTICAL TERMS. THE A.O. HAS PRESUMED THAT FREE CELLS DISTR IBUTED TO M/S. LAKHANPAL HAVE TO BE DISTRIBUTED BY THE SAID PARTY AND THEREFORE, DISALLOWANCE WAS REQUIRED TO BE MADE IN THE HANDS O F THE ASSESSEE. RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONO UNCEMENTS IN SUPPORT OF THIS CONTENTION THAT DISCOUNT ON SALE IS NOT THE EXPENDITURE.:- (A) EWAC ALLOYS LTD. VS DCIT 42 ITD 218 (BOM) (B) VIKSHARA TRADING & INVESTMENT (P) LTD. V. DCIT 61 TTJ 6 (AHD.) (C) CIT VS A K SUBBARAYA CHETTY & SONS 123 ITR 592 (MAD.) (D) CIT VS UDHOJI SHRIKRISHNADAS 139 ITR 827 (MP) (E) UNITED EXPORTS VS CIT 229 CTR 93 (DEL.) (F) ACIT VS GRANDPRIX FAB (P) LTD. 128 TTJ 60 (DEL. ) 2.5.3 AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDER S OF AUTHORITIES BELOW. 2.5.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE VARIOUS JUDGEMENTS CITED BY THE LD. A.R. OF THE ASS ESSEE. WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) IN PARA 7.3 OF HIS ORDER THAT AS PER THE SCHEME, DISCOUNT IS TO BE PASSED ON TO THE STOK IST BUT ON VERIFICATION, THE A.O. FOUND THAT ALL OTHER DISTRIBUTORS HAVE SUB MITTED DETAILS OF FREE CELLS DISTRIBUTED BY THEM BUT REPLY RECEIVED FROM M /S. LAKHANPAL P. LTD. STATED THAT THEY HAD NOT TAKEN FREE CELLS IN THE ST OCK ALTHOUGH PASSED ON THE SAME TO THE STOKISTS. HE HAS ALSO NOTED IN THE SAME PART THAT AS PER THE CIRCULAR ISSUED BY THE ASSESSEE ON 31.12.2002, FOR THE CLAIM FOR THE MONTH OF JAN 2003, IT WAS STATED THAT THE FREE CELLS SCHE ME IS ON THE BASIS OF SALES AT THE POINT OF STOKIST AND, THEREFORE, DETAILS OF FREE CELLS PASSED ON TO I.T.A.NO.45,46,317,318 /AHD/2009 8 VARIOUS STOKISTS IS NECESSARY TO DETERMINE WHETHER FREE CELLS WERE ACTUALLY PASSED ON OR NOT. REGARDING THIS ARGUMENT OF THE A SSESSEE THAT DISTRIBUTION OF FREE CELLS IS BY WAY OF QUANTITY DI SCOUNT AND, THEREFORE, THE SAME IS NOT COVERED U/S 40A(2B), IT WAS DECIDED BY LD. CIT(A) THAT THE ASSESSEE HAS CLAIMED COSTS IN RESPECT OF DISTRIBUTI ON OF FREE CELLS IN THE P & L ACCOUNT AND, THEREFORE, IT AMOUNTS TO CLAIM OF EXPENSES. NOW, WE EXAMINE THE APPLICABILITY OF VARIOUS JUDGEMENTS CIT ED BY THE ASSESSEE IN THE FACTS OF VARIOUS CASES AS NOTED ABOVE. - THE FIRST DECISION CITED BY THE LD. A.R. IS THE T RIBUNAL DECISION RENDERED IN THE CASE OF EWAC ALLOYS LTD. VS DCIT (S UPRA). THE FACTS OF THIS CASE ARE THAT THE TERMS AND CONDITIONS OF THE AGREEMENT BETWEEN THE ASSESSEE AND LT WERE APPROVED BY THE GOVERNMENT OF INDIA. UNDER THESE FACTS, IT WAS HELD THAT THERE WAS NO JUSTIFICATION IN THAT CASE FOR TAKING THE VIEW THAT THE TERMS AND CONDITIONS OF THE AGREEMENT APPROVED BY THE GOVERNMENT OF INDIA WERE UNREASONABLE AND THEREFORE THEY WERE TO THE DISADVANTAGE TO THE SHAREHOLDERS OF THE ASSESSEE CO MPANY. THE FACTS OF THE PRESENT CASE ARE DIFFERENT AND HENCE, THIS JUDG EMENT IS OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. - RELIANCE WAS ALSO PLACED ON THE JUDGEMENT OF HON BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS A K SUBBA RAYA CHETTY & SONS (SUPRA). AS PER THE FACTS OF THIS CASE, IT WAS THE CASE OF THE REVENUE THAT PARTNERS OF TWO FIRMS WERE CLOSELY RELATED AND SALE S BY ONE FIRM TO ANOTHER WAS FOUND TO BE AT LOWER PRICE AND FOR DIFF ERENCE BETWEEN ACTUAL PRICE AND THE PRICE AT WHICH GOODS WERE SOLD IT WAS HELD THAT THIS IS NOT AN EXPENDITURE WHICH CAN BE DISALLOWED. IN THE PRESEN T CASE, THERE IS NO DISPUTE REGARDING SALE PRICE. THE DISPUTE IS REGAR DING FREE SAMPLES GIVEN BY THE ASSESSEE TO RELATED PAY ALONG WITH OTHER PAR TIES WHICH WERE NOT RELATED AND SUCH FREE CELLS WERE TO BE PASSED ON TO THE STOCKISTS. ALL OTHER I.T.A.NO.45,46,317,318 /AHD/2009 9 PARTIES WHO WERE NOT RELATED TO THE ASSESSEE HAD FU RNISHED FULL DETAILS REGARDING PASSING ON OF SUCH FREE CELLS TO THE STOC KISTS BUT THE RELATED PARTY HAS NOT PROVIDED THOSE DETAILS AND IT WAS SIM PLY STATED BY THAT PARTY THAT SUCH FREE CELLS WERE NOT TAKEN INTO STOCK BY T HE RELATED PARTY AND HENCE, THEY CANNOT PROVIDE THE DETAILS REGARDING PA SSING ON THE SAME TO THE STOCKISTS. SINCE THE FACTS IN THE PRESENT CA SE ARE DIFFERENT, THIS JUDGEMENT OF HONBLE MADRAS HIGH COURT IS ALSO NOT OF ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. IN THE PRESENT CASE, MORE THAN THIS ASPECT THAT SUCH FREE CELLS WERE GIVEN TO THE RELATED PARTY, SU CH ADDITION IS CALLED FOR EVEN IF SUCH CELLS ARE GIVEN TO A NON RELATED PARTY BECAUSE THE TERMS & CONDITIONS ARE NOT FULFILLED BY THAT PARTY AND NO D ETAILS ARE BROUGHT ON RECORD TO SHOW THAT THE TERMS AND CONDITIONS ARE FU LFILLED BY THIS PARTY BECAUSE IN THAT SITUATION, IT HAS TO BE ACCEPT4ED T HAT THE ASSESSEE FAILED TO ESTABLISH THAT SUCH FREE CELLS WERE GIVEN FOR BUSIN ESS CONSIDERATION. HENCE, THIS JUDGEMENT IS ALSO NOT APPLICABLE. - THE NEXT DECISION CITED BY THE LD. A.R. IS THE JU DGEMENT OF HONBLE MP HIGH COURT RENDERED IN THE CASE OF CIT V S UDHOJI SHRIKRISHNADAS (SUPRA). IN THAT CASE, THE ASSESSEE APPOINTED SOLE SELLING AGENT FOR BIDIES ON PAYMENT OF COMMISSION AND IT WA S THE CASE OF THE REVENUE THAT APART FROM PAYING THE COMMISSION TO TH IS SOLE SELLING AGENT, BIDIES SOLD TO HIM WERE AT LESS THAN MARKET PRICE. UNDER THESE FACTS, IT WAS HELD THAT PROFIT EARNED BY THE SELLING AGENT BY SALE OF BIDIES IS NOT ADDITIONAL COMMISSION AND THE EXPENDITURE INCURRED BY THE ASSESSEE. IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE REVEN UE THAT THE SALE PRICE CHARGED BY THE ASSESSEE IS LOWER THAN THE MARKET RA TES AND HENCE, THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CAS E. - RELIANCE WAS ALSO PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF VIKSHARA TRADING & INVESTMENT (P) LTD VS DC IT (SUPRA). WE I.T.A.NO.45,46,317,318 /AHD/2009 10 FIND THAT THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE ASSESSE E PURCHASED EXPORT QUALITY DETERGENT SUPPLIED BY M/S. GREEN PRODUCTS, ONE OF T HE SISTER CONCERNS OF THE ASSESSEE COMPANY AND NECESSARY EVIDENCE WERE FI LED BEFORE THE A.O. BUT THE AUTHORITIES MISTOOK THE GOODS OF A LOCAL/IN FERIOR QUALITY OF DETERGENT SUPPLIED AND COMPARED THE PRICES. SINCE THE FACTS ARE DIFFERENT TO THAT OF THE PRESENT CASE, THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BY THE ASSESSEE IS THE D ECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS GRANDPRIX FAB (P) L TD. (SUPRA). THE HEADNOTES OF THIS DECISION ARE AS UNDER: BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40A(2) TRADE DISCOUNT ALLOWED TO SISTER CONCERNDISCOUNT ALLOWED BY ASSESSEE WORKED OUT TO ABOUT 9.97 PER CENT OF TOTAL SALESAO ALLOWED DISCOUNT ONLY TO THE EXTENT OF 5 PER CENT AND DISAL LOWED THE REMAINING AMOUNT UNDER S. 40A(2) NOT JUSTIFIEDSIM ILAR DISALLOWANCE HAS BEEN DELETED BY THE CIT(A) AND THE TRIBUNAL IN THE EARLIER YEARSMOREOVER, THIS IS A CASE OF TRADE DISCOUNT ALLOWED TO A SISTER CONCERN ON SALE MADE TO IT, AND NOT A CASE OF ANY BUSINESS EXPENDITURE PAID TO SISTER CONCERN, AND AS SUCH, PROVISIONS OF S. 40A(2)(A) ARE NOT APPLICABLEALSO THE AO HAS NOT BEEN ABLE TO PROVE THAT THE DISCOUNT ALLOWED BY THE ASSESSEE TO THE SISTER CONCERN WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO / THE COMMERCIAL PRACTICE PREVAILING IN THE MARKETDISALL OWANCE RIGHTLY DELETED BY CIT / (A)-UNITED EXPORTS VS. CIT (2009) 28 DTR (DEL) 315 FOLLOWED. IN THE PRESENT CASE, THE DISPUTE IS FOR FREE CELLS AND NOT TRADE DISCOUNT. HENCE, THIS JUDGEMENT IS NOT APPLICABLE. - THE NEXT JUDGEMENT CITED BY THE LD. A.R. IS THE J UDGEMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF UN ITED EXPORTS VS CIT (SUPRA). THE HEADNOTES OF THIS CASE ARE AS UNDER: BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40A(2) TRADE DISCOUNTA DISCOUNT OF 11 PER CENT WAS ALLOWED IN E ARLIER YEAR I.T.A.NO.45,46,317,318 /AHD/2009 11 WHEN THE SALES TO SISTER CONCERN WAS RS. 2.09 CRORE S AS COMPARED TO RS. 8.30 CRORES MADE TO OTHERSIN THE CURRENT ASSES SMENT YEAR THE SALES TO SISTER CONCERN WAS RS. 11.11 CRORES AND TO OTHERS IT WAS RS. 2.09 CRORESFURTHER, IT IS NOT UNKNOWN IN TRADE CIR CLES TO GIVE BULK DISCOUNT FOR BULK SALESTHERE WAS ALSO NO RATI ONALE OR BASIS OR ANY LOGIC OF THE AUTHORITIES BELOW IN UNILATERAL LY DECIDING A DISALLOWANCE BY REDUCING THE ENTITLEMENT FROM 11 PE R CENT AS CLAIMED BY THE ASSESSEE TO 3 PER CENT (BY THE AO), 8 PER CENT [BY THE CIT(A)] AND 5 PER CENT (BY THE TRIBUNAL)THAT A PART, TRADE DISCOUNT IS NOT AN EXPENDITURE AND THEREFORE S. 40A (2) WAS NOT ATTRACTED AT ALL. IN THE PRESENT CASE ALSO, THE DISPUTE IS FOR FREE C ELLS AND NOT TRADE DISCOUNT. HENCE, THIS JUDGEMENT IS ALSO NOT APPLIC ABLE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CI T(A) ON THIS ISSUE. THESE GROUNDS ARE REJECTED. 2.6 GROUNDS NO.8, 9, 9.1, 9.2 AND 9.3 ARE CONNECTED WITH DISALLOWANCE OF ROYALTY OF RS.4,45,53,651/- BY INVOKING THE PROV ISIONS OF SECTION 40A(2B) OF THE INCOME TAX ACT, 1961. 2.6.1 IT WAS SUBMITTED BY THE LD. A.R. THAT THE TPO HAS MADE ADDITION ON ACCOUNT OF PAYMENT OF ROYALTY ON THE GROUND THAT THE ASSESSEE DID NOT PROVIDE DETAILS OF COST OF DEVELOPMENT OF TECHNOLOG Y BY THE SEPARATE ENTERPRISE AND THE INFORMATION RELATING TO PAYMENT OF ROYALTY BY OTHER GROUP COMPANIES. HE FURTHER SUBMITTED THAT THIS MA TTER MAY BE RESTORED BACK TO THE FILE OF THE TPO FOR AFRESH DECISION. L D. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.6.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS IS THE ADMITTED POSITION OF FACTS THAT VA RIOUS DETAILS CALLED FOR BY THE TPO WERE NOT SUBMITTED BY THE ASSESSEE BEFORE H IM. LD. CIT(A) HAS ALSO NOTED THAT THE RELEVANT INFORMATION ASKED FOR BY TPO WERE NOT I.T.A.NO.45,46,317,318 /AHD/2009 12 SUBMITTED BY THE ASSESSEE BEFORE T.P.O. BUT HE HAS NOT MENTIONED ANYTHING ON THIS ASPECT THAT THE INFORMATION CALLED FOR BY THE TPO WAS SUBMITTED BEFORE HIM.. IT IS SUBMITTED BY THE LD. A.R. THAT THESE DOCUMENTS WERE FURNISHED BEFORE LD. CIT(A) AS PER P AGE 391-400 OF THE PAPER BOOK. WHEN WE EXAMINED THESE PAGES OF THE PA PER BOOK, WE FIND THAT ON PAGE 391 IS A LETTER DATED 15.6.2009 WHEREA S THE ORDER OF LD. CIT(A) IS DATED 3.11.2008 AND HENCE, THIS CANNOT BE SUBMITTED BEFORE LD. CIT(A). ON PAGE 391 ALSO IS THE LETTER DATED 21.07 .2009 AND ON PAGE 398 IS THE LETTER DATED 21.7.2009. ON PAGES 393-397 AR E THE ENCLOSURES TO LETTER DATED 21.07.2009 AVAILABLE ON PAGED 392 OF T HE PAPER BOOK AND SIMILARLY ON PAGES 399-400 ARE THE ATTACHMENTS TO L ETTER DATED 21.07.2009 AVAILABLE ON PAGE 398 OF THE PAPER BOOK AND HENCE, NONE COULD HAVE BEEN SUBMITTED BEFORE THE LD. CIT(A) BECAUSE THE ORDER W AS PASSED BY LD. CIT(A) ON 03.11.2008 I.E. WELL BEFORE THE DATES OF THESE LETTERS AS NOTED ABOVE. BEFORE US ALSO, THESE DOCUMENTS ARE NOT SUB MITTED PROPERLY AS FRESH EVIDENCE BY COMPLYING WITH THE RELEVANT TRIBU NAL RULES I.E. SUB- RULE (4) OF RULE 18 OF THE APPELLATE TRIBUNAL RULES 1963 AND THERE IS NO APPLICATION MADE FOR ADMISSION OF ADDITIONAL EVIDEN CE BEFORE US AND HENCE, THESE DOCUMENTS BEING ADDITIONAL EVIDENCE AR E NOT ADMITTED. 2.6.3 IT IS ALSO SUBMITTED IN THE CHART SUBMITTED B Y THE LD. A.R. THAT DATA IN RESPECT TO ALP REGARDING PAYMENT OF ROYALTY IS A LSO SUBMITTED DURING THE APPELLATE PROCEEDING AS PER THE DOCUMENTS AVAIL ABLE ON PAGES 415-430 OF THE PAPER BOOK. THESE DOCUMENTS ON PAGES 415-43 0 OF THE PAPER BOOK ARE DATED 31.10.2008 AND THE ORDER OF LD. CIT(A) IS DATED 03.11.2008. THERE IS NO COVERING LETTER AVAILABLE IN THE PAPER BOOK INDICATING THAT THESE DOCUMENTS WERE SUBMITTED BEFORE LD. CIT(A). THERE IS NO MENTION IN THE ORDER OF LD. CIT(A) REGARDING THESE DOCUMENT S AND WE HAVE I.T.A.NO.45,46,317,318 /AHD/2009 13 ALREADY SEEN THAT THE DOCUMENTS ON PAGES 391-400 OF THE PAPER BOOK CLAIMED TO HAVE BEEN SUBMITTED BEFORE LD. CIT(A), C OULD NOT HAVE BEEN SUBMITTED BEFORE LD. CIT(A) BECAUSE THOSE DOCUMENTS ARE OF JUNE-JULY 2009 AND THESE DOCUMENTS ON PAGES 415-430 ARE DATED 31.10.2008 I.E. BEFORE THE DATE OF THE ORDER PASSED BY LD. CIT(A) O N 03.11.2008 BUT IN THE ABSENCE OF THE EVIDENCE REGARDING ACTUAL SUBMIS SION OF THESE DOCUMENTS BEFORE LD. CIT(A), IT CANNOT BE ACCEPTED THAT THESE DOCUMENTS WERE SUBMITTED BEFORE LD. CIT(A). THE ASSESSEE COU LD HAVE BROUGHT OUT EVIDENCE ON RECORD IN THIS REGARD BY BRINGING CERTI FIED COPIES OF THE DOCUMENTS IF AVAILABLE IN THE FILE OF LD. CIT(A) BU T NO SUCH ATTEMPT HAS BEEN MADE BY THE ASSESSEE. UNDER THESE FACTS, WE D O NOT FIND THAT ANY CASE HAS BEEN MADE OUT BY THE LD. A.R. FOR RESTORIN G THE MATTER BACK TO THE FILE OF LD. CIT(A). ADDITIONAL EVIDENCE FILED BEFORE US ARE NOT ADMITTED BY US BECAUSE THE SAME IS NOT IN COMPLIANC E WITH THE RELEVANT TRIBUNAL RULES 1963 AS MENTIONED ABOVE AND THEREFOR E, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON HIS ISSUE BECAUSE THE CLAIM OF THE ASSESSEE WAS REJECTED BY TPO ON THIS B ASIS THAT THE REQUIRED EVIDENCES WERE NOT PRODUCED BEFORE HIM AND, THEREFO RE THE ORDER OF TPO/A.O. WAS CONFIRMED BY LD. CIT(A) ON THIS BASIS THAT TPO HAS RIGHTLY ASKED FOR THESE DOCUMENTS AND SINCE THE SAM E WERE NOT FURNISHED BEFORE HIM, DISALLOWANCE WAS RIGHTLY MADE BY HIM BE CAUSE IT IS THE ONUS OF THE ASSESSEE TO PROVE THAT THE TRANSACTIONS ARE AT ALP AND IF THE ASSESSEE IS NOT ABLE TO PROVE THE SAME, THERE IS NO REASON FOR NOT MAKING THE ADJUSTMENT. BEFORE US ALSO, APART FROM MAKING THESE SUBMISSIONS THAT NECESSARY DOCUMENTS WERE FILED BEFORE LD. CIT(A), N O OTHER ARGUMENT IS MADE TO JUSTIFY INTERFERENCE IN THE ORDER OF LD. CI T(A) AND WE HAVE ALREADY SEEN THAT THIS CLAIM OF ASSESSEE IS NOT COR RECT THAT THOSE DOCUMENTS WERE FURNISHED BY THE ASSESSEE BEFORE LD. CIT(A) AND BEFORE I.T.A.NO.45,46,317,318 /AHD/2009 14 US ALSO, THESE DOCUMENTS ARE NOT SUBMITTED BY WAY O F COMPLIANCE OF THE RELEVANT TRIBUNAL RULES AND, THEREFORE, THE SAME AR E NOT ADMITTED BY US AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE I N THE ORDER OF LD. CIT(A) ON THIS ISSUE. THESE GROUNDS OF THE ASSESSE E ARE REJECTED. 2.7 GROUND NO.10 IS AS UNDER: 10 THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ADDING SALE OF SCRAP GENERATED FROM MANUFACTURING ACTIVITIES AMOUNTING TO RS. 18,66012/ - IN TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. 2.7.1 IT WAS SUBMITTED BY THE LD. A.R. THAT THE TRI BUNAL IN ASSESSEES OWN CASE HAS FOLLOWED THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS K RAVINDRANATHN NAIR AS REPORTED IN 295 ITR 228 AND DECIDED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUC TION U/S 80HHC BUT IT WOULD BE INCLUDED IN FORMULA FOR THE PURPOSE OF COM PUTATION OF DEDUCTION U/S 80HHC. IN THIS REGARD, IT WAS POINTE D OUT THAT PARA 5 OF THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 1998-99 IS RELEV ANT. ACCORDINGLY, IN THIS YEAR ALSO, WE HOLD BY RESPECTFULLY FOLLOWING T HIS JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF K RAVIND RANATHAN NAIR (SUPRA) THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE INCOME TAX ACT, 1961 IN RESPECT OF SALES OF SCRAP. THE A.O. SHOULD DECIDE THIS ISSUE AFRESH AS PER THE TRIBUNAL DIRECT ION GIVEN IN ASSESSMENT YEAR 1998-99. THIS GROUND OF THE ASSESSEE STANDS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 2.8 GROUND NO.11 IS AS UNDER: 11. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN REDUCING 90% OF THE FOLLOWING A MOUNTS FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPU TING DEDUCTION U/S. 80HHC OF THE ACT ON THE GROUND THAT THEY DO NO T CONSTITUTE BUSINESS INCOME DESPITE THE FACT THAT THE AO HAS CO NSIDERED THESE AMOUNTS WHILE COMPUTING TOTAL TURNOVER OF THE APPEL LANT. I.T.A.NO.45,46,317,318 /AHD/2009 15 PARTICULARS AMOUNT (IN RS.) INTEREST RECEIVED FROM CUSTOMERS ON OVERDUE 1,24,60,000 INTEREST ON STAFF LOAN 1,66,417 INTEREST ON NSC 2,030 INTEREST ON FDR 13,35,843 INTEREST ON INCOME TAX REFUND 70,63,203 REFUND OF BROKERAGE ON INVESTMENT 5,15,007 TOTAL 2,15,42,500 2.8.1 IT WAS SUBMITTED BY THE LD. A.R. THAT THIS IS SUE IS THE SAME AS GROUND NO.8 OF THE ASSESSEES APPEAL FOR THE ASSESS MENT YEAR 2002-03 AND IN THAT YEAR, THIS ISSUE WAS DECIDED AGAINST THE AS SESSEE AS PER PARA 12 OF THE TRIBUNAL ORDER AND ACCORDINGLY, IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. GROUND NO.11 OF THE ASSESSEE IS REJECTED. 2.9 GROUND NO.11.1 IS AS UNDER: 11.1 THE LEARNED CIT(A) ERRED IN FACT AND IN LAW I N CONFIRMING ACTION OF THE AO IN HOLDING THAT GROSS AMOUNT OF IN TEREST AND OTHER INCOME IS REQUIRED TO BE EXCLUDED FROM THE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC AND NO DEDUCTION SHOULD BE GRANTED FOR EXPENSES INCURRED FOR EARNING THE SAID INCOME. 2.9.1 IT WAS SUBMITTED BY THE LD. A.R. THAT THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS CIT 24 7 CTR 372 (S.C.), WHEREIN NETTING IS ALLOWED. HE FURTHER SUBMITTED T HAT THIS ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. FOR A FRESH DECISI ON REGARDING NETTING IN THE LIGHT OF THIS JUDGMENT OF HONBLE APEX COURT. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.9.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND WE FIND THAT THIS IS BY NOW A SETTLED PO SITION OF LAW THAT NETTING CAN BE ALLOWED PROVIDED THE ASSESSEE CAN ES TABLISH NEXUS BETWEEN I.T.A.NO.45,46,317,318 /AHD/2009 16 THE INCOME AND THE EXPENDITURE INCURRED FOR EARNING THIS INCOME. HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION I N THE LIGHT OF ABOVE DISCUSSION AND BY FOLLOWING THE JUDGEMENT OF HONBL E APEX COURT RENDERED IN THE CASE OF ACG ASSOCIATED CAPSULES PVT . LTD. (SUPRA). NEEDLESS TO SAY, THE A.O. SHOULD PROVIDE ADEQUATE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 2.10 GROUND NO.12 IS AS UNDER: 12 THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ALLOCATING EXPORT EXPENSES OF R S.16,70,000/- IN PROPORTION OF EXPORT TURNOVER OF TRADING GOODS TO E XPORT TURNOVER OF MANUFACTURED GOODS, FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. 2.10.1 IT WAS SUBMITTED BY THE LD. A.R. THAT IN ASS ESSMENT YEAR 1998-99, AS PER PARA 11, THE TRIBUNAL HAS SET ASIDE THIS ISS UE TO THE FILE OF THE A.O. FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE. ACC ORDINGLY, IN THE PRESENT YEAR ALSO, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION AFTER VERIFICATION OF THE CLAIM OF THE ASSESSEE. THIS GR OUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 2.11 GROUND NO.13, 13.1 AND 13.2 ARE AS UNDER: 13. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ALLOCATING INDIRECT EXPENSES OF RS.12,31,413/- INSTEAD OF INDIRECT EXPENSES OF RS.1,40,249/- TO EX PORT OF TRADING GOODS AS DONE BY THE APPELLANT, FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. 13.1 THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ALLOCATING INDIRECT COSTS OF SA LES DEPOTS AND PITHAMPUR UNITS DESPITE THE FACT THAT ENTIRE EXPORT OF TRADING GOODS HAVE TAKEN PLACE FROM BARODA. I.T.A.NO.45,46,317,318 /AHD/2009 17 13.2 WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN NOT RE DUCING INDIRECT EXPENSES BY 10% OF OTHER INCOME AND INTEREST INCOME FOR WORKING OUT DEDUCTION U/S. 80HHC ON EXPORT OF TRADING GOODS . 2.11.1 IT WAS FAIRLY CONCEDED BY THE LD. A.R. THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL VIDE PARA 10 O F THE TRIBUNAL ORDER FOR THE ASSESSMENT YEAR 1998-99. ACCORDINGLY, IN THE P RESENT YEAR ALSO, ALL THESE GROUNDS ARE REJECTED. 2.12 IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 3. NOW, WE TAKE UP THE REVENUES APPEAL FOR THE ASS ESSMENT YEAR 2003-04 IN I.T.A.NO. 317/AHD/2009. 3.1 GROUND NO.1 IS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DIRECTING TO ALLOW THE REDU CTION U/S 80IB AMOUNTING TO RS.1,30,09,683/- OVERLOOKING THE FACT THAT THE ASSESSEE FAILED TO FILE MANDATORY FORM NO. 10CCB WI TH THE RETURN OF INCOME WHICH WAS IN VIOLATION OF PROVISIONS OF S ECTION 80IB(13) R.W.S. 80IA(7). 3.1.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITT ED THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1998-99 AND IN THIS REGARD, HE DRAWN OUR ATTENTION TO PARA 7 OF THIS TRIBUNAL ORDER. HE FURTHER SUBMI TTED THAT IT IS A PROCEDURAL LAPSE AND THE DISALLOWANCE CANNOT BE MAD E ON THIS GROUND. 3.1.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 1998- 99. WHEN WE EXAMINED PARA 7 OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1998-99, WE FIND THAT AS PER THIS PARA OF THE I.T.A.NO.45,46,317,318 /AHD/2009 18 TRIBUNAL ORDER IN THAT YEAR, THIS ASPECT WAS DECIDE D BY THE TRIBUNAL THAT NEW UNIT HAS COME INTO EXISTENCE AND, THEREFORE, TH E ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80-IA OF THE INCOME TAX ACT, 1961 . IN FACT, IN THE PRESENT YEAR, DISALLOWANCE WAS MADE BY THE A.O. ON THIS BASIS THAT THE ASSESSEE HAS FAILED TO FILE THE REQUIRED MANDATORY FORM 10CCB WITH THE RETURN OF INCOME. HE HAS ALSO NOTED THAT TILL THE PASSING OF HIS ORDER I.E. ASSESSMENT ORDER, THE ASSESSEE COMPANY HAS FAILED T O SUBMIT FORM 10CCB. HENCE, THIS TRIBUNAL ORDER IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 1998-99 IS NOT RELEVANT IN THE PRES ENT YEAR. THIS DISALLOWANCE WAS DELETED BY LD. CIT(A) AS PER PARA 5.1 OF HIS ORDER. WE FIND THAT THERE IS NO DECISION OF LD. CIT(A) ON THI S ASPECT OF THE MATTER I.E. NON FILING OF MANDATORY FORM 10CCB WITH THE RE TURN OF INCOME. REGARDING THIS ARGUMENT OF THE LD. A.R. THAT THIS I S A PROCEDURAL LAPSE, WE FIND THAT IN VARIOUS CASES, IT WAS HELD BY THE T RIBUNAL AND VARIOUS HIGH COURTS THAT IF SUCH PROCEDURAL LAPSE IS RECTIFIED A ND MADE GOOD BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS, NO ADVERSE IN FERENCE SHOULD BE DRAWN BUT IN THE PRESENT CASE, EVEN BEFORE COMPLETI ON OF THE ASSESSMENT PROCEEDINGS, THE MANDATORY FORM 10CCB WAS NOT SUBMI TTED BY THE ASSESSEE AND HENCE, IN OUR HUMBLE CONSIDERED OPINIO N, THIS ORDER OF LD. CIT(A) CANNOT BE SUSTAINED BECAUSE EVEN IF IT WAS A PROCEDURAL REQUIREMENT AND THE ASSESSEE COULD NOT SUBMIT THE S AME ALONG WITH RETURN OF INCOME FOR ANY REASON, THERE COULD NOT BE ANY RE ASON FOR NON SUBMISSION OF THE SAME BEFORE THE COMPLETION OF THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE IN THE PRESENT CASE H AS NOT SUBMITTED THE SAME EVEN DURING ASSESSMENT PROCEEDINGS. WE ARE OF THE CONSIDERED OPINION THAT DISALLOWANCE WAS RIGHTLY MADE BY THE A .O. AND THE DELETION OF DISALLOWANCE BY LD. CIT(A) CANNOT BE SUSTAINED. WE, THEREFORE, I.T.A.NO.45,46,317,318 /AHD/2009 19 REVERSE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND R ESTORE THAT OF THE A.O. THIS GROUND OF THE REVENUE IS ALLOWED. 3.2 GROUND NO.2 IS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DIRECTING THE A.O NOT TO RE DUCE INTEREST ON OVERDUE CUSTOMERS AT RS.45,92,754/- AND ON STAFF LO AN AT RS.28,261/- IN THE COMPUTATION OF ELIGIBLE PROFIT F OR ARRIVING AT THE DEDUCTION U/S 80IB OVERLOOKING THE RATIO LAID DOWN BY APEX COURT IN STERLING FOODS LTD 237 ITR 579 (SC). 3.2.1 IT WAS SUBMITTED BY HE LD. A.R. THAT THIS ISS UE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. AS RE PORTED IN 283 ITR 402 AND REGARDING INTEREST ON STAFF LOAN OF RS.28,261/- , IT WAS SUBMITTED THAT THIS ISSUE IS NOT PRESSED AND MAY BE DECIDED IN FAV OUR OF THE REVENUE. LD. D.R. SUPPORTED THE ASSESSMENT ORDER. 3.2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT CITED BY TH E LD. A.R. WE FIND THAT THERE ARE TWO TYPES OF INTEREST INCOME COVERED IN THIS GROUND OF THE REVENUE. ONE IS OVERDUE INTEREST ON CUSTOMERS OF R S.45,97,254/- AND INTEREST FROM STAFF LOAN OF RS.28,261/-. AS PER TH E A.O., BOTH THESE AMOUNTS CANNOT BE INCLUDED FOR THE PURPOSE OF COMPU TATION OF DEDUCTION ALLOWABLE U/S 80-IB OF THE INCOME TAX ACT, 1961. I N VIEW OF OUR DECISION IN RESPECT OF GROUND NO.1 OF THE REVENUES APPEAL, THIS GROUND OF THE REVENUE, HAS BECOME REDUNDANT BECAUSE IF DEDUCTION IS NOT ALLOWABLE TO THE ASSESSEE U/S 80-IB, INDIVIDUAL ITEM OF INCOME I S NOT REQUIRED TO BE EXAMINED FOR ELIGIBILITY OF DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. IN THE RESULT, APPEAL OF THE REVENUE STANDS ALLOWED IN TERMS INDICATED ABOVE. I.T.A.NO.45,46,317,318 /AHD/2009 20 4. NOW, WE TAKE UP THE ASSESSEES APPEAL NO.46/AHD/ 2009 FOR THE ASSESSMENT YEAR 2004-05. 4.1 GROUND NO.1 IN THIS YEAR IS GENERAL. 4.2 REGARDING GROUND NO.2 & 3, IT WAS SUBMITTED BY THE LD. A.R. IN THE REMARKS COLUMN OF THE CHART THAT THESE TWO ISSU ES WERE DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2002-03 AND THE RELEVANT PARA OF THE TRIBUNAL ORDER IS PARA 6.3. A CCORDINGLY IN THE PRESENT YEAR ALSO, BOTH THESE GROUNDS OF THE ASSESSEE ARE R EJECTED. 4.3 GROUNDS NO.4, 5, 5.1 AND 5.2 ARE REGARDING DISA LLOWANCE OF ROYALTY U/S 40A (2B) OF RS.3,72,73,513/-. IT WAS SUBMITTED BY THE LD. A.R. IN THE CHART THAT THESE GROUNDS ARE SIMILAR TO GROUNDS NO. 8 & 9 IN THE ASSESSEES APPEAL IN ASSESSMENT YEAR 2003-04. IN THAT YEAR, W E HAVE DECIDED THESE ISSUE AGAINST THE ASSESSEE AS PER PARA 2.6.2ABOVE O N THIS BASIS THAT THE DOCUMENTS STATED TO HAVE BEEN SUBMITTED BY THE ASSE SSEE BEFORE LD. CIT(A) IN THAT YEAR WERE NOT IN FACT SUBMITTED BEFO RE CIT(A) AND THESE WERE ALSO NOT SUBMITTED BEFORE THE A.O. OR TPO AND BEFORE US ALSO, THESE DOCUMENT WE NOT SUBMITTED BY COMPLYING WITH T HE REQUIREMENTS OF SUB RULE (4) OF RULE 18 OF THE APPELLATE TRIBUNAL R ULES 1963. IN THE PRESENT YEA ALSO, IT IS NOTED BY LD. CIT(A) IN PARA 9 OF HIS ORDER THAT THE ASSESSEE NEITHER DEMONSTRATED THROUGH ANY METHOD TH AT THE ROYALTY PAYMENT IS AT ARMS LENGTH PRICE NOR SUBMITTED THE D ETAILS AND INFORMATION WHICH WERE AVAILABLE WITH THE ASSESSEE GROUP ITSELF . SIMILAR FINDING WAS GIVEN BY LD. CIT(A) IN ASSESSMENT YEAR 2003-04 ALSO AND HENCE, IT IS SEEN THAT THE FACTS IN THE PRESENT YEAR ARE IDENTIC AL TO THE FACTS OF ASSESSMENT YEAR 2003-04 AND HENCE, ON SIMILAR LINES , IN THIS YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND THES E GROUND OF THE ASSESSEE ARE REJECTED. I.T.A.NO.45,46,317,318 /AHD/2009 21 4.4 GROUNDS NO.7 & 7.1 ARE IN RESPECT OF THE CLAIM OF THE ASSESSEE REGARDING DEDUCTION DISALLOWED BY THE A.O. U/S 80-I B IN RESPECT OF INTEREST ON OTHER INCOME AND ALTERNATIVE CONTENTION IS REGARDING GRANTING OF NETTING. CONSEQUENTIAL ISSUE HAS BEEN RAISED BY THE REVENUE ALSO IN ITS APPEAL FOR THIS YEAR AS PER WHICH IT IS THE CLAIM O F THE REVENUE THAT DEDUCTION U/S 80-IB IS NOT ALLOWABLE BECAUSE FORM 1 0CCB WAS NOT FILED ALONG WITH THE RETURN OF INCOME OR IN THE COURSE OF ASSESSMENT PROCEEDINGS. BUT WHEN WE EXAMINED THE ASSESSMENT O RDER PARA 14 & 15 WHERE THIS ISSUE HAS BEEN DECIDED BY THE A.O., WE F IND THAT THERE IS NO MENTION REGARDING THIS ASPECT THAT THE ASSESSEE HAS NOT SUBMITTED FORM 10CCB ALONG WITH THE RETURN OF INCOME FOR CLAMING D EDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. IN FACT, THE A.O. HAS MADE DISALLOWANCE ON THIS BASIS THAT IT WAS HELD IN EARLIER YEARS THAT N O NEW INDUSTRIAL UNDERTAKING HAS COME INTO EXISTENCE AND IT WAS AN EXPANSION OF THE EXISTING UNIT AND, THEREFORE, THE DEDUCTION U/S 80- IB IS NOT ALLOWABLE. ON THIS ASPECT, THE TRIBUNAL DECISION IN ASSESSMENT YE AR 1998-99 I.E. THE 1 ST YEAR IS IN FAVOUR OF THE ASSESSEE AND HENCE, THIS O BJECTION OF THE A.O. IS NOT VALID AND, THEREFORE, WE HAVE TO EXAMINE THE IS SUE RAISED BY THE ASSESSEE ON MERITS. AS PER ANNEXURE 1 SUBMITTED BY THE LD. A.R. ALONG WITH THE CHART, IT IS STATED BY HIM THAT NO SUCH DE DUCTION IS ALLOWABLE IN RESPECT OF INTEREST ON STAFF LOAN OF RS.24,165/- BE CAUSE THIS ASPECT OF THE MATTER WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSE SSEE IN THE TRIBUNAL ORDER FOR THE ASSESSMENT YEAR 2002-03 AS PER PARA 1 3.4. ACCORDINGLY, THIS ASPECT OF THE MATTER IS DECIDED AGAINST THE ASSESSE E. REGARDING 2 ND ASPECT I.E. INSURANCE CLAIM RECEIVED BY THE ASSESSEE OF RS .7,18,461/- AND DISCOUNT RECEIVED BY THE ASSESSEE OF RS.5,81,881/-, IT WAS SUBMITTED BY THE LD. A.R. IN THE CHART THAT THESE TWO ASPECTS AR E COVERED IN FAVOUR OF THE ASSESSEE. REGARDING RECEIPT OF INSURANCE CLAIM , IT IS SUBMITTED THAT I.T.A.NO.45,46,317,318 /AHD/2009 22 THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD (SUPRA ). THE REMAINING ASPECT REGARDING DISCOUNT RECEIVED IS SAID TO BE CO VERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CA SE FOR THE ASSESSMENT YEAR 2002-03 AS PER PARA 13.6 OF THE TRIBUNAL ORDER OF THAT YEAR. LD. D.R. COULD NOT SHOW THAT THESE TWO ASPECTS ARE NOT COVER ED IN FAVOUR OF THE ASSESSEE AND, THEREFORE, BY RESPECTFULLY FOLLOWING THE JUDGEMENTS CITED BY THE LD. A.R., WE DECIDE THESE TWO ASPECTS IN FAVOUR OF THE ASSESSEE. GROUND NO.7 IS PARTLY ALLOWED AND REGARDING GROUND NO.7.1, WE HOLD THAT IT IS NOT ALLOWABLE BECAUSE MAJOR ISSUE IN GRO UND NO.7 IS ALLOWED AND IT IS NOT ESTABLISHED BY THE LD. A.R. THAT THERE IS AN EXPENDITURE INCURRED FOR EARNING THIS INCOME OF RS.24,165/- ON ACCOUNT O F INTEREST ON STAFF LOAN AND, THEREFORE, NO NETTING IS ALLOWABLE ON THIS ACC OUNT. HENCE, GROUND NO.7 IS PARTLY ALLOWED AND GROUND NO.7.1 IS REJECTE D. 4.5 GROUNDS NO.8-10.2 ARE IN RESPECT OF DEDUCTION U /S 80HHC, WHICH ARE AS UNDER: DEDUCTION U/S. 80HHC: 8. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN REDUCING 90% OF THE FOLLOWING A MOUNTS FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPU TING DEDUCTION U/S. 80HHC OF THE ACT ON THE GROUND THAT THEY DO NO T CONSTITUTE BUSINESS INCOME DESPITE THE FACT THAT THE AO HAS CO NSIDERED THESE AMOUNTS WHILE COMPUTING TOTAL TURNOVER OF THE APPEL LANT. PARTICULARS AMOUNT (IN RS.) INTEREST ON STAFF LOAN 1,42,046 INTEREST ON NSC 1,831 I.T.A.NO.45,46,317,318 /AHD/2009 23 INTEREST ON FDR 12,45,245 IN TEREST ON INCOME TAX REFUND 2,82,44,710 TOTAL 2,96,33,832 8.1 THE LEARNED CIT(A) ERRED IN FACT AND IN LAW I N CONFIRMING ACTION OF THE AO IN HOLDING THAT GROSS AMOUNT OF IN TEREST AND OTHER INCOME IS REQUIRED TO BE EXCLUDED FROM THE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC AND NO DEDUCTION SHOULD BE GRANTED FOR EXPENSES INCURRED FOR EARNING THE SAID INCOME. 9. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ALLOCATING EXPORT EXPENSES OF R S. 14,10,000/- IN PROPORTION OF EXPORT TURNOVER OF TRADING GOODS T O EXPORT TURNOVER OF MANUFACTURED GOODS, FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. 10. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ALLOCATING INDIRECT EXPENSES OF RS. 30,86,947/- INSTEAD OF INDIRECT EXPENSES OF RS. 1,40,249/- TO E XPORT OF TRADING GOODS AS DONE BY THE APPELLANT, FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. 10.1 THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN ALLOCATING INDIRECT COSTS OF SA LES DEPOTS AND PITHAMPUR UNITS DESPITE THE FACT THAT ENTIRE EXPORT OF TRADING GOODS HAVE TAKEN PLACE FROM BARODA. 10.2 WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING ACTION OF THE AO IN NOT RE DUCING INDIRECT EXPENSES BY 10% OF OTHER INCOME AND INTEREST INCOME FOR WORKING OUT DEDUCTION U/S. 80HHC ON EXPORT OF TRADING GOODS . 4.5.1 REGARDING GROUND NO.8, IT WAS SUBMITTED THAT THIS IS SIMILAR TO GROUND NO.8 IN ASSESSMENT YEAR 2002-03. THE LD. A. R. HAS ALSO FURNISHED A CHART ON 4 DIFFERENT TYPES OF INTEREST INCOME AND THE DEDUCTION IS CLAIMED BY THE ASSESSEE U/S 80HHC AND THIS IS AL SO POINTED OUT IN THE CHART THAT ALL THESE FOUR ISSUES WERE DECIDED BY TH E TRIBUNAL AGAINST THE ASSESSEE IN ASSESSMENT YEAR 1998-99 IN PARA 14 OF T HE TRIBUNAL ORDER. ACCORDINGLY, IN THIS YEAR ALSO, THIS ISSUE IS DECID ED AGAINST THE ASSESSEE AND, THEREFORE, GROUND NO.8 IS REJECTED. I.T.A.NO.45,46,317,318 /AHD/2009 24 4.5.2 REGARDING GROUND NO.8.1, IT WAS SUBMITTED THA T NETTING HAS TO BE ALLOWED AS PER THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT AS REP ORTED IN 247 CTR 372 (S.C.). SINCE, THE AUTHORITIES BELOW HAVE NOT EXAMINED THIS ASPECT IN THE LIGHT OF THIS JUDGEMENT; WE FEEL IT PROPER TO R ESTORE THIS MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LI GHT OF THIS JUDGEMENT AND THE FACTS OF THE PRESENT CASE. THE A.O. SHOULD PAS S NECESSARY ORDER AS PER LAW IN THE LIGHT OF THE FACTS OF THE PRESENT CASE A FTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.8.1 IS ALLOWED FOR STATISTICAL PURPOSE. WE WOULD LIKE TO MAKE IT CLEA R THAT THE BURDEN ON THE ASSESSEE TO SHOW AND ESTABLISH NEXUS BETWEEN THE EX PENDITURE INCURRED FOR WHICH THE NETTING IS CLAIMED WITH THE INCOME EA RNED AGAINST WHICH NETTING CLAIMED AND NETTING IS ALLOWABLE ONLY TO T HE EXTENT, SUCH NEXUS IS ESTABLISHED BY THE ASSESSEE. GROUND NO.8.1 IS ALLO WED FOR STATISTICAL PURPOSE. 4.5.3 REGARDING GROUND NO.9, IT WAS SUBMITTED THAT IN ASSESSMENT YEAR 1998-99, THE TRIBUNAL HAS RESTORED BACK THIS MATTER TO THE FILE OF THE A.O. FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE AND I N THIS REGARD, HE DRAWN OUR ATTENTION TO PARA 11 OF THE TRIBUNAL DECISION. ACCORDINGLY, IN THE PRESENT YEAR ALSO, WE SET ASIDE THIS ISSUE AND REST ORE THE MATTER BACK TO THE FILE OF THE A.O. FOR AFRESH DECISION IN THE LIGHT O F THE DIRECTIONS WHICH ARE GIVEN BY THE TRIBUNAL IN ASSESSMENT YEAR 1998-99. GROUND NO. 9 IS ALLOWED FOR STATISTICAL PURPOSES. 4.5.4 REGARDING GROUND NO.10, 10.1 AND 10.2, IT IS FAIRLY CONCEDED BY THE LD. A.R. THAT THESE ISSUES ARE COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSMENT YEAR 1998-99 AND THE RELEVAN T PARA OF THE TRIBUNAL ORDER IS PARA 10. ACCORDINGLY, IN THIS YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND THESE GROUNDS OF THE ASSES SEE ARE REJECTED. I.T.A.NO.45,46,317,318 /AHD/2009 25 4.6 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 5. NOW, WE TAKE UP THE REVENUES APPEAL FOR THE ASS ESSMENT YEAR 2004-05 IN I.T.A.NO. 318/AHD/2009. 5.1 GROUND NO.1 IS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) I ERRED IN DIRECTING TO ALLOW THE RE DUCTION U/S 80IB AMOUNTING TO RS.90,07,020/- OVERLOOKING THE FACT TH AT THE ASSESSEE FAILED TO FILE THE MANDATORY FORM NO. 10CCB WITH TH E RETURN OF INCOME WHICH WAS IN VIOLATION OF PROVISIONS OF SECT ION 80IB(13) R.W.S. 80IA(7). 5.1.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 5.1.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE ONLY OBJECTION OF THE REVENUE AS PER THIS GROUND IS REGARDING NON FILING OF FORM 10CCB FOR CLAIMING DEDUCTION U/S 80- IB BUT WHEN WE GO THROUGH THE ASSESSMENT ORDER, WE DO NOT FIND ANY ME NTION IN THE ASSESSMENT ORDER REGARDING THIS OBJECTION THAT ASSE SSEE HAD NOT FURNISHED REQUISITE FORM 10CCB FOR CLAIMING DEDUCTION U/S 80- IB. HENCE, THIS GROUND OF THE REVENUE IS UNFOUNDED AND, THEREFORE, LIABLE TO BE REJECTED. WE, THEREFORE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 5.2 GROUND NO.2 IS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) I ERRED IN DIRECTING THE A.O NOT TO REDUCE INTEREST ON OVERDUE CUSTOMERS AT RS. 83,19,297/- AND ON STAF F LOAN AT RS. 24,165/- IN THE COMPUTATION OF ELIGIBLE PROFIT FOR ARRIVING AT THE DEDUCTION U/S 80IB OVERLOOKING THE RATIO LAID DOWN BY APEX COURT IN STERLING FOODS LTD 237 ITR 579 (SC). 5.2.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS IT IS SUBMITTED BY THE LD. A.R. THAT THIS ISSUE IS IN RESPECT OF OVERD UE INTEREST FORM I.T.A.NO.45,46,317,318 /AHD/2009 26 CUSTOMERS OF RS.83,19,297/- WHICH IS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA) AND THE 2 ND ASPECT I.E. INTEREST ON STAFF LOAN OF RS.28,261/- CAN BE DECIDED IN FAVOUR OF THE REVENUE . ACCORDINGLY, WE HOLD THAT THE REVENUE SUCCEEDS IN RESPECT OF INTERE ST INCOME OF RS.28,261/- IN RESPECT OF INTEREST ON STAFF LOAN BU T NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) IN RESPECT OF OVERDU E INTEREST FROM CUSTOMERS OF RS.83,19,297/- BECAUSE THIS ISSUE IS C OVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE GUJARAT HIGH C OURT RENDERED IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA). THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 5.3 GROUND NO.3 IS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 14A OF RS. 2,22,333/- OVERLOOKING THE FACT THAT THE ASSESSEE H AD CLAIMED DIVIDEND INCOME OF RS.22,23,326/- EXEMPT U/S 10(34) AND EXPENDITURE ATTRIBUTABLE TO EARN IT WAS NOT DISALLO WED U/S 14A. 5.3.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 5.3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) ON THIS B ASIS THAT SINCE THE A.O. HAS MADE ADDITION ON ACCOUNT OF SECTION 14A WITHOUT MAKING DISCUSSION IN ASSESSMENT ORDER SUCH ADDITION IN COMPUTATION OF INCOME CANNOT SURVIVE. WHEN WE GO THROUGH THE ASSESSMENT ORDER, WE FIND THAT IN FACT, THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER REGA RDING THIS DISALLOWANCE AND, THEREFORE, WE DO NOT FIND ANY REASON TO INTERF ERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 5.4 IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. I.T.A.NO.45,46,317,318 /AHD/2009 27 6. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE REVENUE AS WELL AS BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED . 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 06/11/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07/11/2012. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 30/11/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/11/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .