National Dairy Development Board, Anand V. The Addln.CIT.,Anand Circle, Anand

ITA 3328/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6556 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N S DAYAM
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Retrospective amendment
• Section: 43B; 14A

Judgement Text

ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH,AHM EDABAD. ( BEFORE SHRI BHAVNESH SAINI & SHRI D.C. AGRAWAL) I.T .A. NO. 3328/AHD/2009 (ASSESSMENT YEAR 2006-07) NATIONAL DAIRY DEVELOPMENT BOARD P.O. BOX NO. 40, ANAND-388 001 (GUJARAT) (APPELLANT) VS. THE JOINT COMMISSIONER OF INCOME TAX, ANAND CIRCLE, ANAND. (RESPONDENT) PAN: AABCN 2029C APPELLANT BY : SHRI YOGESH SHAH RESPONDENT BY : SHRI N. S. DAYAM, CIT (D.R.) ( (( ( )/ )/)/ )/ ORDER PER: SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST ORDER O F LD. C.I.T.(A)-IV, BARODA DATED 30-9-2009 FOR ASSESSMENT YEAR 2006-07. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. 3. GROUND NO.1 IS GENERAL AND HENCE REQUIRES NO ADJ UDICATION. 4. GROUND NO.2 READS AS UNDER:- ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 2 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN DISALLOWING THE APPELLANTS CLAIM FOR DEDUCTION U/S. 36(1)(VIII) OF RS. 5,28,36,280/-. IT IS SUBMITTED THAT APPELLANT HAS SATISFIED NECESSARY CONDITIONS AND LD. CIT (A) OUGHT TO HAVE ALLOWED THE DEDUCTION AS CLAIMED. IT IS SUBMIT TED THAT IT BE SO HELD NOW. 2.1. THE LD. CIT (A) HAS ERRED IN UPHOLDING THAT PR ODUCING MILK AND MILK PRODUCTS IS NOT AN INDUSTRY BY RELYING O N THE FINDING OF HON. ITAT THAT MEANING OF INDUSTRY UNDER THE I NDUSTRIAL DEVELOPMENT & REGULATION ACT CANNOT BE IMPORTED UND ER THE INCOME TAX ACT TO GRANT BENEFIT U/S. 36(1)(VIII). I T IS SUBMITTED THAT PRODUCTION OF MILK AND MILK PRODUCTS IS CONSID ERED AS AN INDUSTRY UNDER THE INCOME TAX ACT ITSELF IN NOTIF ICATION NO. SO627 (E) DATED 4-8-1999 ISSUED BY THE CENTRAL BOAR D OF DIRECT TAXES (CBDT) AND ACCORDINGLY ENTITLED TO ALL OWANCE U/S. 36(1)(VIII). IT IS SUBMITTED THAT IT BE SO HELD NOW . 2.2. THE LD. CIT (A) HAS ERRED IN UPHOLDING THAT IN ABSENCE OF SHARE CAPITAL, NO DEDUCTION U/S. 36(1)(VIII) CAN BE ALLOW ED TO THE APPELLANT. IT IS SUBMITTED THAT PROVISO TO SECTION 36 (1)(VIII) LIMITS DEDUCTION THAT CAN BE ALLOWED AND IN ABSENCE OF SHARE CAPITAL, SUCH LIMITATION ONLY WOULD BECOME INAPPLIC ABLE (RATHER THAN THE WHOLE SECTION BECOMING INAPPLICABLE). IT I S SUBMITTED THAT IT BE SO HELD NOW. 2.3. WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED TH AT THE LIMIT OF DEDUCTION SHOULD BE COMPUTED BY TREATING SHARE CAPI TAL AS NIL. IT IS SUBMITTED THAT IT BE SO HELD NOW. 5. THE ASSESSING OFFICER FOLLOWED THE DECISION IN A SSESSMENT YEAR 2003-04 OF THE ITAT AHMEDABAD BENCH IN REVENUES FA VOUR THAT ASSESSEES CONTENTION OF PROVIDING LONG TERM FINANCE FOR INDUS TRIAL OR AGRICULTURAL DEVELOPMENT TO VARIOUS DAIRY COOPERATIVES WAS NOT T ENABLE, AS ITS ACTIVITIES OF EXTENDING LONG TERM FINANCE TO DAIRY COOPERATIVE S COULD NOT BE TERMED AS LONG TERM FINANCE GIVEN FOR AGRICULTURAL AND INDUST RIAL DEVELOPMENT. THE ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 3 ITAT IN THIS CONTEXT, IN A.Y. 2003-04 HELD THAT AS THE ASSESSEE HAD NO CAPITAL, WHICH WAS NECESSARY TO COMPUTE AGGREGATE A MOUNT TO BE CARRIED FORWARD TO SPECIAL RESERVE AS PER THE PROVISIONS OF SECTION 36(1)(VIII) AND SINCE ACTIVITIES CARRIED OUT BY THE ASSESSEE DID NO T AMOUNT TO MANUFACTURE, IT WAS NOT ELIGIBLE TO CLAIM BENEFIT OF SECTION 36(1)( VIII). ASSESSING OFFICER MADE DISALLOWANCE OF RS.5,28,36,280/- CLAIMED U/S. 36(1)(VIII) BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL. 6. THE LD. CIT (A) NOTED THAT THE MATTER WAS CONSID ERED AT LENGTH BY THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 AND REPRODUCED THE OPERATIVE PORTION OF THE FINDING OF THE TRIBUNAL IN THE IMPUGNED ORD ER AND HELD THAT SINCE THE FACTS REMAINED THE SAME AS HAVE BEEN CONSIDERED IN A.Y. 2003-04, THEREFORE, ADDITION MADE BY THE A.O. WAS CONFIRMED. ASSESSEE S CONTENTION THAT LIMIT OF DEDUCTION U/S. 36(1)(VIII) BE COMPUTED BY TREATI NG THE SHARE CAPITAL TO BE NIL WAS ALSO NOT TENABLE AS WAS HELD BY THE TRIBUNA L, THEREFORE, ASSESSEE IS NOT LEGIBLE FOR DEDUCTION U/S. 36(1)(VIII) DUE TO N ON FULFILLMENT OF OTHER CONDITIONS FOR CLAIMING DEDUCTION U/S. 36(1)(VIII) AS WELL. THE LD. CIT (A) THEREFORE, REJECTED THIS GROUND OF APPEAL OF THE AS SESSEE. 7. THE LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE FACTS ARE IDENTICAL AS HAVE BEEN CONSIDERED IN ASSESSMENT YEA R 2003-04 IN WHICH THE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSESSEE VID E PARAGRAPH 51 OF THE ORDER DATED 17-8-2007 IN ITA NO.454/AHD/2006. HE HA S SUBMITTED THAT THE MATTER IS NOW PENDING IN THE HIGH COURT. 8. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISSI ONS OF LD. COUNSEL FOR THE ASSESSEE WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED AGAINST ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 4 THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESS MENT YEAR 2003-04 (P.B. PAGE-102 & 103) BECAUSE THE TRIBUNAL DECIDED THE IS SUE AGAINST THE ASSESSEE. FACTS ARE ADMITTEDLY THE SAME, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2003-04, WE DISMISS TH IS GROUND OF APPEAL OF THE ASSESSEE. 9. GROUND NO.3 READS AS UNDER:- 3. THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DIS ALLOWANCE OF GRANT OF RS.2,29,25,823/- GIVEN TO VARIOUS COOPERA TIVE SOCIETIES AND OTHER ORGANIZATIONS AS DEDUCTIBLE EXPENDITURE U /S. 36(1)(XII) OF THE INCOME TAX ACT. IT IS SUBMITTED THAT THE AMO UNT REPRESENTS AN EXPENDITURE INCURRED BY THE APPELLANT FOR THE PURPOSE OF OBJECTS OF THE APPELLANT AND THEREBY FUL FILLS ALL CONDITIONS OF SECTION 36 (1)(XII) OF THE INCOME TAX ACT AD ACCORDINGLY IT IS ENTITLED TO DEDUCTION U/S. 36(1)( XII). IT IS SUBMITTED THAT IT BE SO HELD NOW. 3.1. THE LD. CIT (A) HAS ERRED IN UPHOLDING THAT TH E AMOUNT IS NOT IRRETRIEVABLY GONE AND ACCORDINGLY CANNOT BE TREATE D AS EXPENDITURE. IT IS SUBMITTED THAT, IN THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE AMOUNT IS DEBITED TO INCOME AND EXPENDITURE ACCOUNT ONLY WHEN THE AMOUNT IS IRRETRI EVABLY GONE AND THERE EXISTS NO POSSIBILITY OF ITS CONVERS ION INTO LOAN. ACCORDINGLY, IT IS SUBMITTED THAT THE AMOUNT DEBITE D TO PROFIT AND LOSS ACCOUNT REPRESENTS EXPENDITURE INCURRED BY THE APPELLANT. IT BE SO HELD NOW. 3.2. IN ANY EVENT THE SAME IS ALLOWABLE U/S. 37/28 OF THE INCOME TAX ACT AND THEREFORE, THE SAME OUGHT TO HAVE BEEN ALLO WED AS DEDUCTION. IT BE SO HELD NOW. 10. THE ASSESSEE CHALLENGED THE ADDITION OF RS. 2,2 9,25,823/- BEFORE THE LD. CIT (A) IN RESPECT OF GRANT GIVEN TO VARIOUS CO OPERATIVES AS DEDUCTIBLE EXPENDITURE U/S. 36(1)(XII). THE A.O. NOTED THAT SI MILAR EXPENSES ON ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 5 PERSPECTIVE PLAN WERE HELD TO BE NOT ELIGIBLE FOR D EDUCTION U/S. 36(1)(XII) IN A.Y. 2003-04, WHERE THE A.O. FOUND AN IN-BUILT COND ITION IN THE ARGUMENTS OF THE ASSESSEE WITH VARIOUS COOPERATIVE UNIONS THA T IF THE UTILIZATION OF DISBURSEMENT MADE BY THE ASSESSEE WAS NOT AS PER TH E OBJECTIVES/TERMS LAID DOWN IN THE AGREEMENT, THEN SUCH GRANTS/DISBURSEMEN T WOULD BE CONVERTED EITHER INTO INTEREST FREE LOANS OR INTEREST BEARING LOANS. THE A.O. IN THE ASSESSMENT YEAR 2003-04 HAD THEREFORE, HELD THAT TH ERE WAS A POSSIBILITY OF MONEY COMING BACK TO THE ASSESSEE AND SUCH DISBURSE MENT TO VARIOUS COOPERATIVE UNIONS WAS NOT EXPENDITURE. IT WAS ALS O NOTED THAT THE TRIBUNAL HAD CONFIRMED AOS ORDER IN A.Y. 2003-04 WHICH WAS FOLLOWED BY THE A.O. IN THE ASSESSMENT YEAR UNDER APPEAL AND ADDITION WA S ACCORDINGLY MADE. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT (A). WRITTEN SUBMISSION OF THE ASSESSEE IS INCORPORATED IN THE I MPUGNED ORDER OF THE LD. CIT (A). THE ASSESSEE IN THE WRITTEN SUBMISSION NOT ONLY CHALLENGED THE ADDITION ON MERIT BUT ALSO STATED THAT THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 WAS FACTUALLY INCORRECT AND THE ASSESSEE FILED MISCELLANEOUS APPLICATION BEFORE THE TRIBUNAL FOR R ECTIFYING THE MISTAKE CONTAINED IN THE ORDER OF THE TRIBUNAL. THE LD. CIT (A) THEREFORE, NOTED THAT THE MISC. APPLICATION OF THE ASSESSEE FOR RECTIFICA TION IN THE ORDER OF THE TRIBUNAL FOR A.Y. 2003-04 IS PENDING, THEREFORE, TH E ORDER OF HIS PREDECESSOR FOR A.Y. 2003-04 IS CONFIRMED AT THIS STAGE AND ACC ORDINGLY FOLLOWING THE ORDER OF THE TRIBUNAL CONFIRMED THE ADDITION AND DI SMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 11. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT (A) ON MERIT CHALLENGING THE ADD ITION AND FURTHER, SUBMITTED THAT THE ORDER OF THE TRIBUNAL IN ITA NO. 454/AHD/2006 FOR ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 6 ASSESSMENT YEAR 2003-04 DATED 17-8-2007 IS FILED AT PAGE NO.62 OF THE PAPER BOOK IN WHICH ON PAGE 114, THE TRIBUNAL CONFI RMED THE ORDER OF THE CIT (A) DISALLOWING THE DEDUCTION CLAIM U/S. 36(1)( XII) OF THE ACT. HE HAS FURTHER, SUBMITTED THAT ASSESSEE PREFERRED MISC. AP PLICATION NO.214/AHD/2007 BEFORE THE TRIBUNAL FOR RECTIFICATI ON OF THE MISTAKE IN THE ORDER AND THE TRIBUNAL VIDE ORDER DATED 28-8-2009 R ECALLED THE EARLIER ORDER OF THE TRIBUNAL AND FIXED THE SAME FOR FRESH DISPOS AL (P.B. PAGE NO.131) AND THE TRIBUNAL VIDE ORDER DATED 21-4-2011 (P.B. PAGE NO.140) RECONSIDERING THE ISSUE RESTORED THE MATTER TO THE FILE OF A.O. W ITH DIRECTION TO RE-DECIDE THE ABOVE ISSUE BY GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HE HAS SUBMITTED THAT THE M ATTER IS STILL PENDING BEFORE THE A.O. FOR RECONSIDERATION. HE HAS SUBMITT ED THAT SINCE THE A.O. DECIDED THE ISSUE AGAINST THE ASSESSEE ON THE BASIS OF THE ORDER PASSED FOR ASSESSMENT YEAR 2003-04, THEREFORE, MATTER COULD BE REMANDED TO THE FILE OF THE A.O. FOR RECONSIDERATION. 12. THE LD. D.R. DID NOT OPPOSE TO THE REQUEST OF T HE LD. COUNSEL OF THE ASSESSEE. 13. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISS IONS OF THE PARTIES, WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE AND PRO PER TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR RE-ADJUDICATION. THE A.O. FOLLOWED THE ORDER FOR ASSESSMENT YEAR 2003-04 FOR REJECTING THE CLAIM OF THE ASSESSEE AND ALSO NOTED THAT THE TRIBUNAL ALSO DECIDED THE ISSUE AGAI NST THE ASSESSEE IN THE PRECEDING YEAR I.E. A.Y. 2003-04. HOWEVER, THE LD. COUNSEL FOR ASSESSEE HAS BEEN ABLE TO DEMONSTRATE NOW THAT THE TRIBUNAL RECA LLED ITS ORDER ON THE MATTER UNDER ISSUE IN ASSESSMENT YEAR 2003-04 AND R ESTORED THE MATTER IN ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 7 ISSUE TO THE FILE OF A.O. FOR RECONSIDERATION. IT I S AN ADMITTED FACT THAT THE ISSUE IS STILL PENDING BEFORE THE A.O. FOR FRESH AD JUDICATION. WE FIND FROM THE ORDER OF THE A.O. THAT CLAIM OF THE ASSESSEE WA S REJECTED BECAUSE THE FINDINGS OF THE A.O. WERE UPHELD BY THE TRIBUNAL IN ASSESSMENT YEAR 2003- 04. NO OTHER SPECIFIC REASONS HAVE BEEN GIVEN FOR D ENYING THE CLAIM OF THE ASSESSEE. SINCE THE MATTER IS PENDING BEFORE THE A. O. FOR A.Y. 2003-04, THEREFORE, WE ARE OF THE OPINION THAT MATTER SHOULD ALSO BE RESTORED TO THE FILE OF THE A.O. FOR RECONSIDERATION. WE ACCORDINGLY SE T ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF A.O. FOR RECONSIDERATION AFRESH. A.O. SHALL GIVE REASONABLE AND SUFFICIENT O PPORTUNITY OF BEING HEARD TO THE ASSESSEE AND SHALL PASS REASONED ORDER IN AC CORDANCE WITH LAW. 14. IN THE RESULT, GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 15. GROUND NO.4 READS AS UNDER:- 4. THE LD. C.I.T.(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.2,95,89,940/- BY APPLYING PROVISIONS OF SECTION 14A. IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS SUBMITTED THAT NO DISALLOWANCE U/S. 14A IS REQUIRED TO BE MADE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 4.1. THE LD. CIT(A)1 HAS ERRED IN NOT UPHOLDING THAT SEC TION 14A WAS NOT APPLICABLE TO THE APPELLANTS CASE AS THE I NVESTMENTS IN SECURITIES YIELDING TAX FREE INCOME WERE MADE FROM OWN FUNDS OF THE APPELLANT AND NO EXPENSES ARE INCURRED IN R ELATION TO THE EXEMPT INCOME. ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 8 4.2. THE LD. CIT (A) ERRED IN CONFIRMING THE APPLIC ATION OF THE RULE 8D WITH RETROSPECTIVE EFFECT WHEN THE RULE WAS INSE RTED IN STATUTE BOOK W.E.F. 24-3-2008 AND HENCE WAS NOT APP LICABLE TO YEAR UNDER CONSIDERATION. IT IS SUBMITTED THAT IT B E SO HELD NOW. 4.2. ALTERNATIVELY, THE APPELLANT SUBMITS THAT THE DISAL LOWANCE SHOULD BE RESTRICTED TO RS. 27,000/- WHICH IS CONSI DERED TO BE ATTRIBUTABLE TO TAX FREE INCOME. IT IS SUBMITTED TH AT IT BE SO HELD NOW. 16. BRIEF FACTS ARE THAT ASSESSEE HAD EARNED INCOME OF RS. 17,84,96,976/- FROM TAX FREE BONDS/INSTRUMENTS ISSUED BY NABARD, N HB, NPCIL AND IRFC. INITIAL CLAIM OF THE ASSESSEE BEFORE THE A.O. WAS THAT NO EXPENSES WERE INCURRED FOR EARNING THE EXEMPT INCOME, HOWEVE R, IT WAS CONCEDED LATER THAT EXPENSES OF RS.27,000/- MAY BE DIRECTLY ATTRIBUTED TO EARNING OF TAX FREE INTEREST INCOME. THE A.O. FOUND ASSESSEES CON TENTION IN THE RETURN OF INCOME THAT NO EXPENSES AT ALL WERE INCURRED IN REL ATION TO EARNING OF TAX FREE INCOME AND SUBSEQUENT SUBMISSION THAT AT THE MOST, PAYMENT OF ONE CLERKS SALARY BE ATTRIBUTED TO EARNING OF TAX FREE INCOME TO BE UNACCEPTABLE. THE A.O. RELIED ON THE DECISION IN THE CASE OF SOUTHERN PETRO CHEMICAL INDUSTRIES VS. DCIT (2005) 93 TTJ 161, UPHOLDING THE PART OF T HE ADMINISTRATIVE AND MANAGERIAL EXPENSES AS ATTRIBUTABLE TO EARNING OF D IVIDEND INCOME. THE A.O. ALSO RELIED UPON THE DECISIONS IN THE CASE OF KALPT ARU CONSTRUCTION OVERSEAS PVT. LTD., 13 SOT 194 (MUM.) AND PRAKASH HEAT TREAT MENT & INDUSTRIES PVT. LTD., (2007) 14 SOT 348 (MUM.) HOLDING THAT TERM EXPENDITURE OCCURRING IN SECTION 14A WOULD TAKE IN ITS SWEEP NOT ONLY DIR ECT EXPENDITURE BUT ALSO OTHER FORMS OF EXPENDITURE REGARDLESS OF WHETHER TH EY ARE FIXED, VARIABLE, DIRECT, INDIRECT, ADMINISTRATIVE, MANAGERIAL OR FIN ANCIAL. THE AO FURTHER OBSERVED THAT IN VIEW OF DECISION OF SPECIAL BENCH ITAT MUMBAI IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD., RULE 8D THOUGH ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 9 INTRODUCED W.E.F. 24-3-2008 HAS RETROSPECTIVE EFFEC T AND IS APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL I.E. A.Y. 2006-07. AO ACCORDINGLY, CALCULATED DISALLOWANCE AS PER RULE 8D OF RS. 2,95, 89,940/-. 17. IT WAS SUBMITTED BEFORE THE LD. CIT (A) THAT SU B-SECTION (2) OF SECTION14A WAS INSERTED BY FINANCE ACT, 2006 AND IS APPLICABLE FROM ASSESSMENT YEAR 2007-08. CERTAIN DECISIONS OF THE TRIBUNAL WERE RELIED UPON. IT WAS SUBMITTED THAT TILL 24-3-2008 THERE WE RE NO METHOD PRESCRIBED FOR COMPUTING SUCH DISALLOWANCE. THEREFORE, NO LIAB ILITY COULD BE FASTENED UPON THE ASSESSEE. IT WAS SUBMITTED THAT RULE 8D IS NOT RETROSPECTIVE IN NATURE. IT WAS SUBMITTED THAT INVESTMENT IN SECURIT IES YIELDING TAX FREE INCOME WERE FROM ITS OWN FUNDS IN THE PAST YEAR AND NO EXPENSES WERE INCURRED IN RELATION TO EXEMPT INCOME. IT WAS SUBM ITTED THAT AT THE BEST RS.27,000/- COULD BE DISALLOWED. THE LD. CIT (A) CO NSIDERING THE SUBMISSION OF THE ASSESSEE IN THE LIGHT OF DECISION OF THE SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD., (MUM .) DISMISSED THE APPEAL OF THE ASSESSEE. THE FINDINGS OF THE LD. CIT (A) IN PARAGRAPH 8.2 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER:- 8.2. I HAVE CONSIDERED THE MATTER. APPELLANTS CON TENTION IS THAT SUB- SECTION (2) OF SECTION 14A IS APPLICABLE FROM A.Y. 2007-08 BY RELYING UPON DECISIONS OF DELHI ITAT IN CASE OF VIDYUT INVE STMENT LTD., AND WIMCO SEEDLING LTD. IN THE CASE OF DAGA CAPITAL MAN AGEMENT PVT. LTD., (2008) 119 TTJ 289, THE SPECIAL BENCH OF IT AT HAS HELD THAT SUB-SECTION (1) OF SECTION 14A ITSELF BEING CLARIFI CATORY AND RETROSPECTIVE, SUB-SECTION (2) AND (3) PROVIDING FO R MECHANISM TO GIVE EFFECT TO SUB-SECTION (1) CANNOT BE CONSTRUED AS PR OSPECTIVE. THIS CONTENTION OF APPELLANT IS THEREFORE, NOT ACCEPTABL E. AS REGARDS APPELLANTS CONTENTION THAT TILL 24-03-2008, THERE WAS NO METHOD FOR COMPUTING DISALLOWANCE U/S. 14A(2) AND RULE 8D CANN OT HAVE RETROSPECTIVE EFFECT, THE SPECIAL BENCH OF ITAT IN CASE OF DAGA ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 10 CAPITAL MANAGEMENT PVT. LTD., HELD THAT RULE 8D INS ERTED IN THE INCOME TAX RULES PRESCRIBING A METHOD TO DETERMINE DISALLOWANCE IN TERMS OF SUB-SECTION (2) AND (3) OF SECTION 14A ALS O CANNOT BE CONSTRUED AS PROSPECTIVE. THIS CONTENTION OF APPELL ANT IS THEREFORE, NOT VALID. NEXT CONTENTION OF THE APPELLANT IS THAT ASS ESSING OFFICER HAS FAILED TO DEMONSTRATE AS TO HOW AND WHY HE WAS NOT SATISFIED ABOUT THE CORRECTNESS OF THE CLAIM OF THE APPELLANT REGARDING NO EXPENSES AS ATTRIBUTABLE TO EARNING OF TAX FREE INCOME. THE APP ELLANT HAD, INITIALLY THROUGH SUBMISSION DATED 12-11-2008 BEFORE THE ASSE SSING OFFICER CONTENDED THAT NO EXPENSES WERE INCURRED FOR EARNIN G THE EXEMPT INCOME. LATER, THROUGH SUBMISSION DATED 2-12-2008, APPELLANT CONCEDED THAT EXPENSES OF RS. 27,000/- WERE DIRECTL Y ATTRIBUTABLE TO EARNING OF TAX FREE INCOME. THUS, APPELLANTS STAND BEFORE THE ASSESSING OFFICER WAS NOT CONSISTENT. FURTHER, AS H ELD BY ITAT, CHENNAI BENCH IN THE CASE OF SOUTHERN PETRO CHEMICA LS INDUSTRIES (2005) 93 TTJ 161 AND OTHER DECISIONS RELIED UPON B Y THE ASSESSING OFFICER, WHETHER TO INVEST OR NOT WERE STRATEGIC DE CISIONS TAKEN BY THE TOP MANAGEMENT AND HENCE PART OF ADMINISTRATIVE AND MANAGERIAL EXPENSES HAD TO BE HELD AS ATTRIBUTABLE TO EARNING OF TAX FREE INCOME FROM SUCH INVESTMENTS. APPELLANTS CLAIM OF HAVING INCURRED NO EXPENSES OR ONLY RS. 27,000/- FOR EARNING TAX FREE INCOME OF RS.17.84 CRORES FOR WHICH NO SEPARATE ACCOUNTS WERE MAINTAIN ED, WAS PRIMA FACIE NOT ACCEPTABLE. THE ASSESSING OFFICER WAS THE REFORE, JUSTIFIED IN INVOKING SECTION 14A (2) AND RULE 8D TO DETERMINE T HE EXPENDITURE IN RELATION TO TAX FREE INCOME. APPELLANTS CONTENTION THAT INVESTMENTS IN SECURITIES YIELDING TAX FREE INCOME WERE FROM ITS O WN FUNDS IN THE PAST YEARS AND NOT OUT OF INTEREST BEARING FUNDS IS NOT SUPPORTED BY ANY WORKING OF CASH FLOWS. ASSESSING OFFICER HAS ALLOCA TED ONLY THAT PORTION OF INTEREST UNDER RULE 8D, WHICH WAS NOT DI RECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. LASTLY, APPELL ANT HAD RELIED ON THE DECISION IN THE CASE OF GHCL LTD. IN THIS CASE, IN PARA 8 OF ITS ORDER, THE HONBLE ITAT FOLLOWED THE DECISION OF ITAT MUMB AIS SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. L TD. SINCE DECISION IN THE CASE OF DAGA CAPITAL IS IN FAVOUR O F REVENUES STAND, THE DECISION IN THE CASE OF GHCL CANNOT BE SAID TO BE SUPPORTING APPELLANTS CASE. DISALLOWANCE OF RS. 2,955,89,940/ - MADE BY THE ASSESSING OFFICER U/S. 14A BY APPLYING RULE 8D IS C ONFIRMED. ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 11 18. LEARNED COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ISSUE IS NOW FINALLY DECIDED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT & OTHER 328 ITR -81 IN WHICH THE HONBLE BOMBAY HIGH COURT HELD THAT SECTION 14A IS APPLICABLE TO D IVIDEND INCOME AND INCOME FROM MUTUAL FUNDS EXEMPT U/S. 10 (33) OF THE ACT. HE HAS FURTHER SUBMITTED THAT HONBLE BOMBAY HIGH COURT HAS ALSO H ELD THAT RULE 8D IS NOT RETROSPECTIVE AND IS APPLICABLE FROM ASSESSMENT YEA R 2008-09 AND THE DISALLOWANCE FOR THE EARLIER PERIOD TO BE DETERMINE D ON REASONABLE BASIS. HE HAS SUBMITTED THAT IN VIEW OF THE ABOVE DECISION, T HE HONBLE SPECIAL BENCH ORDER IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. L TD., HAS BEEN OVERRULED WHICH WAS THE SOLE BASIS TO DISALLOW THE CLAIM OF T HE ASSESSEE. HE HAS THEREFORE, SUBMITTED THAT THE MATTER MAY BE REMANDE D BACK TO THE FILE OF THE A.O. FOR RECONSIDERATION. THE LD. DR DID NOT DISPU TE THE ABOVE FACT AND THE DECISION OF HONBLE BOMBAY HIGH COURT. 19. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISS IONS OF THE PARTIES, WE ARE OF THE VIEW, THAT THE MATTER IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE & MFG . CO. LTD., VS. DCIT & OTHERS 328 ITR 81 IN WHICH IT WAS HELD AS UNDER:- HELD, THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APP LY WITH EFFECT FROM ASSESSMENT YEAR 2008-09.EVEN PRIOR TO ASSESSME NT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFI CER HAD TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTGION14A. F OR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EX PENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFIC ER MUST ADOPT A ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 12 REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D. THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002-03 WOULD STAND REMANDE D TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHOULD DET ERMINE AS TO WHETHER THE ASSESSEE HAD INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/ INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED U NDER SECTION 14A.THE ASSESSING OFFICER CAN ADOPT A REASONABLE BA SIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION , THE ASSESSING OFFICER SHOULD PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATE RIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 20. WE MAY ALSO NOTE THAT RECENTLY HONBLE GUJARAT HIGH COURT IN THE CASE OF C.I.T. VS. GUJARAT POWER CORPORATION LTD., (2011) TIOL-219 HELD THAT THE ASSESSEE HAD DEMONSTRATED THAT IT HAD OTH ER SOURCE OF INVESTMENT AND THAT THEREFORE, ACCORDING TO ASSESSEE NO PART O F THE BORROWED FUNDS COULD BE STATED TO HAVE BEEN DIVERTED TO EARN TAX FREE IN COME. IT WAS OBSERVED BY THE CIT (A) AS WELL AS ITAT THAT ASSESSEE DID NOT I NVEST BORROWED FUNDS FOR EARNING INTEREST FREE INCOME. IN VIEW OF THE SAME, SECTION 14A CANNOT BE APPLIED. CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE ABOVE DECISIONS, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSI DERATION AT THE LEVEL OF THE A.O. THE A.O. SHOULD DETERMINE AS TO WHETHER THE AS SESSEE HAD INCURRED ANY EXPENDITURE DIRECTLY OR INDIRECTLY IN RELATION TO D IVIDEND INCOME/ INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE T OTAL INCOME AS CONTEMPLATED U/S. 14A OF THE ACT. FURTHER, THE DECI SION IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA) IS NO MORE REL EVANT TO THE MATTER IN ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 13 ISSUE AND FURTHER, RULE 8D WOULD NOT BE APPLICABLE FOR THE ASSESSMENT YEAR UNDER APPEAL. FURTHER, A.O. SHALL HAVE TO VERIFY TH E CONTENTION OF THE ASSESSEE WHETHER ASSESSEE DID NOT INVEST BORROWED F UNDS FOR EARNING INTEREST FREE INCOME. IN VIEW OF THE ABOVE, WE FIND THAT A.O . SHALL HAVE TO GIVE SPECIFIC FINDING ON THE MATTER IN ISSUE IN VIEW OF THE ABOVE DECISIONS. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF A.O. WITH DIRECTION TO REDECID E THE ISSUE AFRESH AS PER THE DECISION OF THE BOMBAY HIGH COURT AND THE HONBLE G UJARAT HIGH COURT (SUPRA) A.O. SHALL GIVE A REASONABLE AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF PRODUCING RELEVANT MATERIAL BEFORE HIM ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 21. IN THE RESULT, APPEAL OF THE ASSESSEE ON THIS I SSUE IS ALLOWED FOR STATISTICAL PURPOSES. 22. GROUND NO.5 READS AS UNDER:- THE LD. CIT(A) ERRED IN CONFIRMING THE1 DISALLOW ANCE OF RS.2,06,934/- BEING PAYMENT MADE DURING THE YEAR OF EMPLOYEES CONTRIBUTION TO PF BEYOND GRACE PERIOD PROVIDED UND ER THAT ACT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) OUG HT TO HAVE DIRECTED THE AO TO GRANT THE DEDUCTION. IT IS SUBMITTED IT B E SO HELD NOW. 23. THE AO NOTED FROM FORM NO.3CD AUDIT REPORT THAT EMPLOYEES CONTRIBUTION TO PF/ESI WAS DEPOSITED LATE BY THE AS SESSEE TO THE EXTENT OF RS.6,97,273/-. IN VIEW OF THIS SPECIFIC PROVISION O F SECTION 36(1)(VA), THE AO HELD LATE PAYMENTS TO BE NOT ALLOWABLE AS EXPENSES AND OBSERVED THAT AMENDMENT TO SECTION 43B W.E.F. 1-4-2004WAS WITH RE GARD TO EMPLOYERS CONTRIBUTION ONLY. ADDITION WAS ACCORDINGLY MADE. I T WAS SUBMITTED BEFORE ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 14 THE LD. CIT (A) THAT THE EMPLOYEES CONTRIBUTION TO PF WAS MADE WITHIN THE GRACE PERIOD TO THE EXTENT OF RS. 4,90,339/- AND AF TER GRACE PERIOD TO EXTENT OF RS.1,34,853 AND DUE DATE BUT WITHIN THE FINANCIA L YEAR TO THE EXTENT OF RS.72,081/-. IT WAS SUBMITTED THAT THE PAYMENTS MAD E BEYOND THE GRACE PERIOD HAVE BEEN DISALLOWED. IT WAS FURTHER EXPLAI NED THAT AMOUNT WAS PAID WITHIN THE GRACE PERIOD AND FURTHER CONTRIBUTION IN RESPECT OF JUNAGADH DAIRY OF RS.72,081/- WAS FOR THE MONTHS OF OCTOBER,2005 A ND JANUARY, 2006 AND WAS MADE IN FEBRUARY, 2006 AFTER THE FUND WAS APPRO VED BY THE COMMISSIONER OF INCOME TAX. LD. CIT(A) CONSIDERING THE DECISION OF THE GUJARAT HIGH COURT AND ITAT AHMEDABAD BENCH HELD TH AT THE PAYMENTS WHICH WERE MADE WITHIN THE GRACE PERIOD OF 5 DAYS I S AN ALLOWABLE DEDUCTION AND THE PAYMENTS MADE BEYOND DUE DATE CAN NOT BE ALLOWED. SUBJECT TO THIS, AO WAS DIRECTED TO GIVE RELIEF TO THE ASSESSEE. 24. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PAY MENTS FOR EMPLOYEES CONTRIBUTION TO PF/ESI AFTER DUE DATE BUT WITHIN TH E FINANCIAL YEAR WAS MADE IN A SUM OF RS.1,34,853/-. FURTHER, PAYMENT OF RS.7 2,081/- WAS MADE ON APPROVAL BY THE COMMISSIONER OF INCOME TAX. HE HAS THEREFORE, SUBMITTED THAT THE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DAT E OF FILING OF THE RETURN AND THEREFORE SUBMITTED THAT THE ISSUE IS NOW COVER ED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. P.M . ELECTRONICS LTD., 313 ITR 161 AS WELL AS DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. VINAY CEMENT 213 CTR 268. ON THE OTHER HAND LD. D.R SUBMITTED THAT THE PAYMENTS MAY BE VERIFIED BY THE A.O. AS PER ABOVE D ECISIONS. ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 15 25. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE A.O. L D. CIT (A) HAS ALREADY ALLOWED THE RELIEF TO THE ASSESSEE FOR THE PAYMENTS MADE WITHIN THE GRACE PERIOD BUT NOTED THAT THE PAYMENTS MADE BEYOND THE GRACE PERIOD ARE NOT ADMISSIBLE FOR DEDUCTION. THE LD. COUNSEL FOR THE A SSESSEE FURTHER, SUBMITTED THAT SINCE THE CONTRIBUTION TOWARDS PF/ES I HAVE BEEN PAID BEFORE THE DUE DATE OF THE FILING OF THE RETURN U/S. 139(1 ) OF THE ACT IN THE LIGHT OF VIEW TAKEN BY THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. P.M. ELECTRONICS (SUPRA) AND THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA), WE ARE OF THE VIEW THAT SINCE ASSESSEE MADE A CLAIM THAT EMPLOYEES CONTRIBUTION TOWARDS PF HAVE BEEN MADE BY THE WITHIN THE DUE DATE OF FILING OF THE RETURN FOR THE YEAR UNDER CONSIDERATION, THEREFORE NO GROUND LEFT FOR THE A.O. TO MAKE DISAL LOWANCE ON THIS ISSUE. SINCE THE LD. CIT (A) HAS ALREADY APPROVED THE CLAI M SUBJECT TO VERIFICATION BY THE A.O. THEREFORE, WE DIRECT THE A.O. TO VERIFY THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE ABOVE DECISIONS AND GRANT RE LIEF ACCORDINGLY. RESULTANTLY, THE ORDERS OF THE AUTHORITIES BELOW AR E MODIFIED TO THE ABOVE EXTENT AND WE DIRECT THE A.O. TO DO THE NECESSARY E XERCISE ACCORDINGLY BY VERIFYING THE PAYMENTS BY GIVING REASONABLE AND SUF FICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 26. IN THE RESULT, GROUND NO.5 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 27. THERE IS NO OTHER MAIN GROUND RAISED IN THE GRO UND OF APPEAL BY THE ASSESSEE. ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 16 28. THE ASSESSEE RAISED FOLLOWING ADDITIONAL GROUND S OF APPEAL:- 1. THE LD. A.O. & CIT(A) HAVE ERRED IN NOT GRANTIN G DEPRECIATION ON THE CLOSING WRITTEN DOWN VALUE OF THE BLOCK OF A SSETS FOR THE A.Y. 2005-06. 2. THE LD. A.O AND LD. CIT (A) HAS ERRED IN TAXING INTEREST EARNED ON A NORTH KERALA PROJECT DEVELOPMENT FUND, AMOUNTI NG TO RS.1,08,11,269/- AS INCOME OF THE APPELLANT. IT IS SUBMITTED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APP ELLANT IS ACTING AS A NODAL AGENCY AND INCOME IS DIVERTED AT SOURCE AND DOES NOT BELONG TO THE APPELLANT. 2.1. WITHOUT PREJUDICE TO ABOVE, IF THE INTEREST IS CONSIDERED AS INCOME OF THE ASSESSEE, DIRECTION BE GIVEN TO ALLOW THE EXPENDITURE IN THE SAME YEAR IN WHICH THEY ARE INCU RRED AS DEDUCTION. IT BE SO DONE NOW. 3. THE LD. AO AND LD. CIT(A) HAS ERRED IN MAKING D ISALLOWANCE OF RS.4,64,341/- BEING CONTRIBUTION MADE TO EMPLOYE ES RECREATION TRUST BY INVOKING PROVISIONS OF SECTION 40A(9) IS NOT APPLICABLE AND NO DISALLOWANCE WAS REQUIRED TO BE MADE. 29. LD. COUNSEL FOR THE ASSESSEE WITH REGARD TO ADD ITIONAL GROUND NO.1 SUBMITTED THAT ADDITIONAL GROUND WAS FILED IN A.Y. 2005-06 BEFORE THE ITAT AND THIS ADDITIONAL GROUND IS CONSEQUENTIAL TO THAT . HE HAS FURTHER SUBMITTED THAT ADDITIONAL GROUND NO.1 IS RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND NO FACTS ARE AVAILABLE ON RECORD. 30. LD. COUNSEL FOR THE ASSESSEE WITH REGARD TO ADD ITIONAL GROUND NO.2 SUBMITTED THAT THIS ISSUE IS CONSIDERED BY THE LD. CIT (A) IN PARAGRAPH 3 IN WHICH IT IS NOTED THAT DURING THE ASSESSMENT PROCEE DINGS FOR ASSESSMENT YEAR ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 17 UNDER APPEAL, THE ASSESSEE VIDE LETTER DATED 21-8-2 008 CONCEDED THE ISSUE REGARDING TAXABILITY OF INTEREST INCOME RECEIVED IN RESPECT OF NKPD PROJECT FUND DEDUCTION AND ACCORDINGLY ADDITION WAS MADE., HE HAS HOWEVER, SUBMITTED THAT COMMITTEE ON DISPUTE (COD) DID NOT G IVE ITS APPROVAL FOR THIS GROUND FOR APPEAL BEFORE THE GUJARAT HIGH COUR T IN ASSESSMENT YEAR 2003-04 AND FOR THE ITAT IN ASSESSMENT YEAR 2005-06 THEREFORE, ASSESSEE HAS OFFERED TO TAX INTEREST RECEIVED FOR PROJECT AN D NO SUCH CLAIM WAS MADE. HE HAS SUBMITTED THAT SINCE THE PROCEDURE OF COD IS RECALLED RECENTLY BY THE HONBLE SUPREME COURT IN THE CASE OF ELECTRONICS CO RPORATION OF INDIA VS. UOI 332 ITR 58 THEREFORE, THE ASSESSEE WOULD LIKE T O CONTEST THE ISSUE. HE HAS FURTHER SUBMITTED THAT ITAT AHMEDABAD IN THE CA SE OF THE SAME ASSESSEE IN ASSESSMENT YEAR 2003-04 DECIDED THE ISSUE AGAINS T THE ASSESSEE VIDE PARAGRAPH 32. AS REGARDS ADDITIONAL GROUND NO.3, L D. COUNSEL FOR THE ASSESSEE MADE A SIMILAR STATEMENT AND SUBMITTED THA T THIS GROUND WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASS ESSMENT YEAR 2003-04 VIDE PARAGRAPH 79. HE HAS FURTHER SUBMITTED THAT TH IS GROUND WAS NOT BEFORE THE LD. CIT (A) AND HAS RAISED FOR THE FIRST TIME B EFORE THE TRIBUNAL. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT SIN CE THESE ISSUES WERE DECIDED AGAINST THE ASSESSEE IN ASSESSMENT YEAR 200 3-04 AND NO COD APPROVAL WAS GRANTED, THEREFORE, THE ASSESSEE CONCE DED THESE GROUNDS BEFORE THE A.O. AND ADDITIONS WERE ACCORDINGLY MADE. HE HA S SUBMITTED THAT SINCE NOW THERE IS NO NEED FOR GETTING COD APPROVED, THER EFORE, ADDITIONAL GROUND MAY BE ADMITTED FOR HEARING AND RELIED UPON THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383AND SUBMITTED THAT SINCE THESE ARE LEGAL ISS UES THEREFORE, THE SAME MAY BE ADMITTED FOR HEARING. ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 18 31. ON THE OTHER HAND LD. D.R. SUBMITTED THAT THESE GROUNDS HAVE ALREADY BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL A ND THAT ASSESSEE CONCEDED THE TAXABILITY OF THESE ISSUES BEFORE THE A.O. THER EFORE, ASSESSEE HAS NO GRIEVANCE FOR FILING ANY APPEAL BEFORE THE TRIBUNAL , THEREFORE, ADDITIONAL GROUND MAY BE DISMISSED. 32. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERI AL AVAILABLE ON RECORDS. AS REGARDS ADDITIONAL GROUND NO.1, IT IS A DMITTED FACT THAT IT WAS NOT RAISED EITHER BEFORE THE A.O. OR BEFORE THE CIT (A) . IT IS RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL. IT IS ALSO FACT THAT NO F ACTS ARE AVAILABLE ON RECORD TO ADJUDICATE UPON THIS ISSUE. ON ADDITIONAL GROUND NO.1 THE MATTER REQUIRES FRESH ADJUDICATION BY PROBING THE FACTS WHICH ARE N OT ON RECORD. FURTHER ON ADDITIONAL GROUND NO.2 AND 3, THE A.O. NOTED THAT T HE TRIBUNAL HAS ALREADY DECIDED THE ISSUE AGAINST THE ASSESSEE IN ASSESSMEN T YEAR 2003-04 AND THE ASSESSEE ALSO CONCEDED BEFORE HIM THAT ADDITIONS MA Y BE MADE ACCORDINGLY VIDE LETTER DATED 21-8-2008. EVEN LD. COUNSEL FOR T HE ASSESSEE ADMITTED BEFORE US DURING THE COURSE OF HEARING THAT THIS IS SUE IS COVERED AGAINST THE ASSESSEE VIDE PARAGRAPH 32 AND 79 OF THE ORDER OF T RIBUNAL DATED 17-8-2007. IT IS ALSO ADMITTED FACT THAT ON THESE GROUNDS NO C OD APPROVAL WAS GRANTED FOR FILING THE APPEAL BEFORE THE GUJARAT HIGH COURT IN A.Y. 2003-04 AND AS SUCH, THE FINDING OF FACT RECORDED BY THE TRIBUNAL IN A.Y. 2003-04 HAVE BECOME FINAL AGAINST THE ASSESSEE. FURTHER, THE AS SESSEE CONCEDED BEFORE THE A.O. VIDE LETTER DATED 21-8-2008 REGARDING THE TAXA BILITY OF THE SAME AND HENCE CLAIM WAS WITHDRAWN. THE ASSESSEE THEREFORE, ADMITTED THE TAXABILITY ON THE ABOVE ADDITIONS AND AS SUCH NO GRIEVANCE IS LEFT FOR THE ASSESSEE TO ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 19 PREFER AN APPEAL BEFORE THE TRIBUNAL ON THESE GROUN DS. SECTION 253(1) OF THE ACT PROVIDES ANY ASSESSEE AGGRIEVED BY THE ORDE R OF THE CIT (A) MAY APPEAL TO THE TRIBUNAL AGAINST THE SPECIFIED ORDERS . SINCE ASSESSEE ADMITTED THE TAXABILITY OF THE INCOME ON ADDITIONAL GROUND N O.2 AND 3 BEFORE THE A.O. AND CLAIM WAS WITHDRAWN, THEREFORE, THERE IS NO QUE STION OF ASSESSEE HAVING AGGRIEVED AGAINST THE FINDINGS OF THE A.O. HONBLE BOMBAY HIGH COURT IN THE CASE OF JIVANLAL PURTAPSHI VS. CIT 65 ITR 261 HELD AS UNDER:- HELD THAT THE DEPARTMENT, HAVING AGREED TO DELETE THE AMOUNT FROM THE ASSESSMENT AND HAVING CONCEDED THE DELETION BEF ORE THE APPELLATE ASSISTANT COMMISSIONER CANNOT BE HELD TO BE AGGRIEV ED BY THIS PART OF THE ORDER TO ENABLE IT TO FILE AN APPEAL TO THE TRI BUNAL; THE APPEAL OF THE DEPARTMENT REGARDING THE DELETION OF THE AMOUNT WAS NEITHER COMPETENT NOR CAPABLE OF BEING ENTERTAINED BY THE T RIBUNAL. 33. HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS . VAMADEVAN BHANU (2011) 330 ITR 559 (KER.) HELD ASSESSMENT ASSESS MENT ON AGREED BASIS ASSESSEE CANNOT APPEAL AGAINST SUCH ORDER INCOME TAX ACT,1961. 34. FURTHER IT IS ALSO ADMITTED FACT THAT THE TRIB UNAL HAS ALREADY DECIDED THESE ADDITIONAL GROUND NO.2 AND 3 AGAINST THE ASSE SSEE IN ASSESSMENT YEAR 2003-04 AND THOSE ISSUES HAVE BECOME FINAL AGAINST THE ASSESSEE BECAUSE NO COD APPROVAL WAS ACCORDED TO THE ASSESSEE FOR FILIN G THE APPEAL BEFORE THE GUJARAT HIGH COURT. THESE FACTS WOULD SHOW THAT THE ASSESSEE HAS NO GRIEVANCE ON ADDITIONAL GROUND NO.2 AND 3 FOR FILIN G APPEAL BEFORE THE TRIBUNAL AND EVEN IF THE ASSESSEE WOULD HAVE PREFER RED APPEAL ON THESE GROUNDS, THE APPEAL OF THE ASSESSEE WOULD NOT HAVE BEEN MAINTAINABLE. THEREFORE, THERE IS NO QUESTION OF ADMISSION OF THE SE ADDITIONAL GROUNDS AT ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 20 THIS STAGE. FURTHER ADDITIONAL GROUND NO.1 AND 3 HA VE NOT BEEN RAISED BEFORE THE CIT (A) AND NO FACTS ARE AVAILABLE ON RECORD TH EREFORE, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL T HERMAL POWER LTD., (SUPRA) WOULD NOT SUPPORT THE CASE OF THE ASSESSEE. CONSIDERING THE ABOVE DISCUSSION AND IN THE LIGHT OF THE ABOVE FACTS AND THE DECISIONS NOTED ABOVE, WE ARE NOT INCLINED TO ADMIT THESE ADDITIONAL GROUN DS OF APPEAL. 35. IN THE RESULT, REQUEST OF THE ASSESSEE FOR ADMI SSION OF 3 ADDITIONAL GROUNDS OF APPEAL IS REJECTED. 36. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E IS PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 7-06- 2011. S/- SD/- (D. C. AGRAWAL) (BHAVNESH SAINI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD. DATED: 7-06- 2011. S.A.PATKI. LK ITA NO. 3328/AHD /2009 . ASSESSMENT YEAR 2006-07. 21 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-IV, BAFRODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 2 - 6 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 3 / 6 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER ..