ACIT, UDAIPUR V. M/s. Madhav Marbles & Granites Ltd., UDAIPUR

ITA 335/JODH/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70345 (ITAT-JODHPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Assessee Lawyers: G K GARGIEYA
• Keywords: Depreciation; Bad and doubtful debts; Accommodation entries; Commercial expediency; Revised return; Unabsorbed depreciation; Bonafide mistake; Revenue expenditure
• Section: 143(3); 244A; 80HHC; 234B; 115JB; 37(1); 10B; 32; 147; 148; 56; 139; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO.360/JU/2008 ASSESSMENT YEAR: 2000-01 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, N.H. 8, AMBERI, UDAIPUR. (PAN: AAACM 9243 N). ITA NO.730/JU/2007 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, N.H. 8, AMBERI, UDAIPUR. (PAN: AAACM 9243 N). ITA NO.335/JU/2009 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, N.H. 8, AMBERI, UDAIPUR. (PAN: AAACM 9243 N). DATE OF HEARING : 27.11.2013 ITA NO.378/JU/2008 ASSESSMENT YEAR: 2005-06 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, 2 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 N.H. 8, AMBERI, UDAIPUR. (PAN: AAACM 9243 M). ITA NO.308/JDPR/2008 ASSESSMENT YEAR: 2005-06 M/S. MADHAV MARBLES & GRANITES VS ASSTT. COMMISSION ER OF INCOME TAX, LIMITED, CIRCLE-2, UDAIPUR. N.H. 8, AMBERI, UDAIPUR. (PAN: AAACM 9243 N). ITA NO.194/JODH/2013 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, 59, MOTI MAGRI SCHEME, UDAIPUR. (PAN: AAACM 9243 N). ITA NO.449/JODH/2013 ASSESSMENT YEAR: 2009-10 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, 59, MOTI MAGRI SCHEME, UDAIPUR. (PAN: AAACM 9243 N). ITA NO.390/JODH/2011 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, 59, MOTI MAGRI SCHEME, UDAIPUR. (PAN: AAACM 9243 N). 3 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ITA NO.200/JODH/2013 ASSESSMENT YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. MADHAV MARBLES & GRANITES CIRCLE-2, UDAIPUR. LIMITED, 59, MOTI MAGRI SCHEME, UDAIPUR. (PAN: AAACM 9243 N). (APPELLANTS) (RESPONDENTS) REVENUE BY : DR. DEEPAK SEHGAL, CIT- D.R. ASSESSEE BY : SHRI G.K. GARGIEYA & SHRI SARVESH BALDI DATE OF HEARING : 28.11.2013 DATE OF PRONOUNCEMENT : 29.11.2013 ORDER PER HARI OM MARATHA, JUDICIAL MEMBER: THIS IS A BUNCH OF ABOVE CAPTIONED APPEALS PERTAI NING TO THE SAME ASSESSEE NAMELY M/S. MADHAV MARBLES & GRANITES LIMITED, UDAI PUR. 2. THE SKELETAL FACTS OF ALL THESE APPEALS ARE ALMO ST IDENTICAL. MANY OF THE ISSUES ARE ALSO COMMON IN THESE APPEALS. THEREFORE , FOR THE SAKE OF CONGRUENCE, CONVENIENCE AND BREVITY, WE ARE PROCEEDING TO DECID E THESE APPEALS BY A COMMON ORDER. 3. BRIEFLY STATED, THE MOST COMMON FACTS OF THESE A PPEALS ARE THAT THE ASSESSEE IS A RESIDENT COMPANY REGISTERED UNDER THE COMPANY S ACT WHICH CARRIES ON THE 4 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 BUSINESS OF SAWING, TRADING AND EXPORTING OF MARBLE S AND GRANITES. THE ASSESSEE COMPANY HAS BEEN CLAIMING EXEMPTION UNDER SECTION 1 0B OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) IN RESPECT OF ITS GRANIT E DIVISION WHICH IS ENGAGED IN THE PROCESSING AND EXPORTING OF GRANITE TILES. A) ITA NO.360/JU/2008 FOR A.Y. 2004-05 BY THE REVENU E 4. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF LD. CIT(A), UDAIPUR DATED 31.03.2008. 5. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE RE VENUE IN ITS APPEAL:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 1. DELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF DEDUCTION U/S 10B OF THE I.T. ACT. 2. DELETING THE DISALLOWANCE OF RS.3,34,541/- MAD E ON ACCOUNT OF CONTRIBUTION MADE TO GROUP GRATUITY FUND. 3. DELETING THE ADDITION OF RS.4,24,000/- U/S. 68 OF THE I.T. ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND HAVE CARE FULLY PERUSED THE ENTIRE RECORDS. 5 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 7. GROUND NO.1 PERTAINS TO DELETION OF DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF DEDUCTION UNDER SECTION 10B OF THE ACT. 8. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE C OMPANY HAS THREE UNITS NAMELY (1) GRANITE DIVISION, (2) UNIT-II: GRANITE S LAB DIVISION AND (3) MARBLE DIVISION. THE COMPANY IS ENGAGED IN THE EXPORT OF MARBLE AND GRANITES. THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10B OF THE ACT IN RESPECT OF UNIT-II AND IN RESPECT OF OTHER TWO UNITS IT HAS CLAIMED DE DUCTION UNDER SECTION 80HHC OF THE ACT. ACCORDING TO THE ASSESSEE, UNIT-II IS A 1 00% EXPORT ORIENTED UNIT (EOU) APPROVED BY THE CENTRAL GOVERNMENT WHICH IS A BASIC CONDITION FOR ELIGIBILITY UNDER SECTION 10B OF THE ACT. THAT THE PROCESS INV OLVED IN THE CONVERSION OF GRANITE BLOCK INTO GRANITE SLABS IS COMPREHENSIVE A ND INVOLVED VARIOUS STEPS. FURTHER THE MINISTRY OF COMMERCE, COMMISSIONER OF C USTOMS, DEVELOPMENT COMMISSIONER (EPZ) AND CENTRAL EXCISE DEPARTMENT HA VE CONSIDERED THIS UNIT AS A MANUFACTURING UNIT. THE COMPANY HAS INSTALLED PL ANT AND MACHINERY HAVING COST OF MORE THAN RS.15 CRORES FOR PRODUCING GRANITE SLA BS FROM GRANITE BLOCKS INVOLVING SUBSTANTIAL VALUE ADDITION. THE GRANITE BLOCKS ARE RAW MATERIAL WHEREAS GRANITE SLABS ARE THE FINISHED GOODS AND THE TWO AR E DISTINCT AND SEPARATE ENTITY. THUS, ACCORDING TO THE ASSESSEE, THE PROCESS INVOLV ED IN THIS UNIT AMOUNTS TO PRODUCTION/MANUFACTURING OF ARTICLE OR THING. THE A.O. WAS OF THE VIEW THAT THE 6 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. LUCKYMINMAT PVT. LTD, REPORTED IN 245 ITR 830 AND THAT OF HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. VIJAY GRANITES LIMITED REPORTED IN 267 ITR 606 TO SAY THAT THE PROCESSING OF GRANITE SLABS FROM GRANITE BLOCKS IS NOT TO BE T REATED AS EITHER MANUFACTURING ACTIVITY OR PRODUCTION ACTIVITY. ON THE CONTRARY, T HE ASSESSEE HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF CIT VS. MYSORE MINERAL LIMITED REPORTED AS 250 ITR 725 AND THAT OF CIT VS. SESA GOA LIMITED, 271 ITR 331 (SC), INTER ALIA. THE A.O. AFTER CONSI DERING THE ASSESSEES VERSION FOUND THAT THE ASSESSEE COMPANY IS ENGAGED IN THE C ONVERSION OF GRANITE INTO GRANITE SLABS. ACCORDING TO HIM THE PROVISIONS OF SECTION 10B OF THE ACT SAYS THAT TO CLAIM EXEMPTION THE UNDERTAKING SHOULD MANUFACTU RE OR PRODUCE ANY ARTICLE OR THING BUT IN THIS CASE THERE IS NO MANUFACTURING OR PRODUCTION ACTIVITY IS INVOLVED. SINCE THE ASSESSEE IS JUST ENGAGED IN THE PROCESS O F CUTTING, SIZING AND POLISHING GRANITE BEFORE THE SAME IS EXPORTED AND HENCE NO AR TICLE OR THING COMES INTO EXISTENCE. THEREAFTER, THE A.O. DISCUSSED VARIOUS CASES AS WELL AS THE PROVISIONS OF SECTION 10B OF THE ACT AND DENIED THE CLAIM OF EXEM PTION UNDER SECTION 10B OF THE ACT TO THE ASSESSEE. 9. AGGRIEVED, THE ASSESSEE WENT IN APPEAL AND THE L D. CIT(A) HAS REVERSED THE FINDING OF THE A.O. BY FOLLOWING HIS PREDECESSORS ORDER DATED 16.06.2006 PASSED 7 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 FOR A.Y. 2003-04. NOW, THE REVENUE IS AGGRIEVED AN D HAS COME IN APPEAL BEFORE THIS APPELLATE TRIBUNAL. 10. BEFORE US, BOTH THE PARTIES HAVE REITERATED THE IR EARLIER STAND. IT WAS FURTHER ARGUED THAT NOW THIS ISSUE AS TO WHETHER THE PROCES SING IS OF CUTTING SIZING AND POLISHING THE GRANITE BLOCKS INTO GRANITE SLABS AMO UNTS TO MANUFACTURING/PRODUCTION ACTIVITY OR NOT STANDS COV ERED BY THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. ARIHANT TILES & MARBLES P. LTD. REPORTED IN 320 ITR 79 (S.C.) 11. AFTER CONSIDERING RIVAL SUBMISSIONS, WE FOUND T HAT THE FACTS OF THE CASE OF THIS ASSESSEE AND THE FACTS IN THE CASE OF CIT VS. ARIHANT TILES & MARBLES P. LTD. ARE EXACTLY IDENTICAL. THE HONBLE SUPREME COURT H AS HELD IN THE CASE OF CIT VS. ARIHANT TILES & MARBLES P. LTD. AS UNDER :- HELD, AFFIRMING THE DECISION OF THE HIGH COURT, T HAT THIS WAS NOT A CASE OF MERELY CUTTING MARBLE BLOCKS INTO SLABS. T HERE WAS THE FURTHER ACTIVITY OF POLISHING AND ULTIMATE CONVERSION OF TH E BLOCKS INTO POLISHED SLABS AND TILES. THERE WERE VARIOUS STAGES THROUGH WHICH THE LOCKS HAD TO GO THROUGH BEFORE THEY BECAME POLISHED SLABS AND TILES. THE ORIGINAL BLOCK DID NOT REMAIN MARBLE BLOCK; IT BECAME A SLAB OR TILE. BLOCKS WERE CONVERTED INTO POLISHED SLABS AND TILES RESULTING I N THE EMERGENCE OF A NEW AND DISTINCT COMMODITY. SUCH AN ACTIVITY WAS S OMETHING BEYOND MANUFACTURE AND BROUGHT A NEW PRODUCT INTO EXISTENC E. THE STEPWISE 8 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ACTIVITY CONSTITUTED MANUFACTURE OR PRODUCTION IN TERMS OF SECTION 80- IA 12. ACCORDINGLY, BY FOLLOWING THE HONBLE SUPREME C OURTS WELL REASONED ORDER (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND, THEREFORE, HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10B OF THE ACT IN RESPECT OF UNIT-II. THER EFORE, WE CANNOT ALLOW GROUND NO.1 OF REVENUES APPEAL AND HENCE DISMISS THE SAME . 13. THE SECOND GROUND OF THIS APPEAL PERTAINS TO DE LETION OF DISALLOWANCE OF RS.3,34,541/- MADE ON ACCOUNT OF CONTRIBUTION MADE TO GROUP GRATUITY FUND. 14. THIS CLAIM OF THE ASSESSEE WAS DISALLOWED ONLY BECAUSE THE COMPANYS GROUP GRATUITY FUND WAS NOT APPROVED AT THE TIME WH EN THIS ISSUE CAME BEFORE THE A.O. NOW THE CIT (ADMN.) VIDE HIS ORDER DATED 23 .12.2008 HAS APPROVED THE COMPANY GROUP GRATUITY FUND FOR UDAIPUR AND SALEM B RANCH W.E.F. 01.02.1998 AND 01.02.1999 RESPECTIVELY. THIS ISSUE ALSO STANDS CO VERED BY THE DECISION OF JAIPUR BENCH OF APPELLATE TRIBUNAL REPORTED IN 20 TAX WORL D 501 IN THE CASE OF RAJASTHAN FINANCIAL CORPORATION. THEREFORE, THE LD . CIT(A) HAS HELD THAT IN FACT THE ASSESSEE HAS MOVED APPLICATION TO THE CIT, UDAI PUR ON 03.08.1999 FOR APPROVAL ITS GRATUITY FUND UNDER PART C OF SCH. IV OF THE IN COME TAX ACT W.E.F. 14.12.1998 9 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 BUT NO REPLY HAD BEEN RECEIVED TILL DATE WHEN THE I SSUE WAS BEFORE THE A.O. BUT NOW AS STATED ABOVE, THE CIT HAS APPROVED THE SAME. ADORINGLY, THERE IS NO DISPUTE REGARDING THIS FACTUAL POSITION AND THE ASS ESSEE BECOMES ENTITLED TO THIS CLAIM. 15. SECTION 36(1)(V) SAYS THAT ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TOWARDS AN APPROVED GRATUITY FU ND CREATED BY HIM FOR THE EXCLUSIVE BENEFIT OF HIS EMPLOYEES UNDER AN IRREVOC ABLE IS ALLOWABLE A DEDUCTION. ACCORDINGLY, THIS GROUND IS ALSO GOT NO MERIT AND H ENCE DISMISSED. 16. THE THIRD GROUND PERTAINS TO DELETION OF ADDITI ON OF RS.4,24,000/- ADDED UNDER SECTION 68 OF THE ACT. 17. THE FACTS OF THIS ISSUE ARE THAT FROM THE INFOR MATION AND DOCUMENTS RECEIVED BY THE A.O. FROM THE CENTRAL CIRCLE AND INVESTIGATI ON WING, UDAIPUR THE ASSESSEE HAD ENTERED INTO A TRANSACTION OF RS.5,00,000/- PER TAINING TO REVERSAL OF ADVANCES GIVEN TO M/S. JALKANTA TECHNICAL & FINANCIAL SERVIC ES LIMITED. THE A.O. ASKED THE ASSESSEE TO FURNISH THE COPY OF LEDGER FOR A.Y. 1998-99 AND 1999-2000 IN THE BOOKS OF THE ASSESSEE. IT WAS FOUND THAT THE ACCOU NT OF M/S. JALKANTA TECHNICAL & FINANCIAL SERVICES LIMITED WAS SQUIRED UP IN THE EA RLIER YEAR AND THERE IS NO 10 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ACCOUNT OR TRANSACTION WITH THIS PARTY. FROM THE S CRUTINY OF THE DETAILS FILED BY THE ASSESSEE, IT WAS NOTICED THAT ON 31.03.1999 AN AMOU NT OF RS.4,24,000/- WAS OUTSTANDING AS DEBT TO M/S. JALKANTA ORGANIC CHEMIC ALS WHICH IS ANOTHER ENTITY OF GAJENDRA PORWAL GROUP OF CONCERN WHO USED TO GIVE A CCOMMODATION ENTRIES. THIS AMOUNT WAS SQUARED UP BY THE ASSESSEE DURING THE RE LEVANT A.Y. I.E. 2000-01 BY SHOWING RECEIPT OF CHEQUE OF RS.4,24,000/- ON 22.03 .2000 BECAUSE THIS SUM REPRESENTS CREDIT IN THE BOOKS OF THE ASSESSEE FROM A CONCERN WHICH HAS BEEN FOUND TO BE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. THE A.O. ASKED THE ASSESSEE TO FILE CONFIRMATION OF DETAILS REGARDING THIS CREDIT. THE ASSESSEE FURNISHED CONFIRMATION OF DETAILS BUT BECAUSE THE GROUP OF GA JENDRA PORWAL WAS FOUND TO BE INDULGING IN EXTREME ACTIVITIES, THE A.O. DISBELIEV ED THE EVIDENCE PRODUCED BY THE ASSESSEE AND ADDED THIS AMOUNT OF RS.4,24,000/- UND ER SECTION 68 OF THE ACT. 18. IN APPEAL, THE LD. CIT(A) DELETED THIS ADDITION BY ACCEPTING CONFIRMATIONS FILED BY THE PARTIES. THE LD. CIT(A) HAS HELD THAT THIS AMOUNT CANNOT BE ADDED UNDER SECTION 68 OF THE ACT BY GIVING VARIOUS REASO NS IN PARAGRAPH NO.13 AT PAGE NO.8 OF HIS ORDER WHICH IS BEING REPRODUCED AS UNDE R :- I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMI SSION OF THE LD. A/R AND FOUND THAT THE A.O. HAD RECEIVED INFORMATION FR OM CENTRAL CIRCLE AND INVESTIGATION WING, UDAIPUR THAT THE APPELLANT HAD ENTERED INTO THE TRANSACTION OF RS.5 LAC PERTAINING TO REVERSAL OF A DVANCE GIVEN TO M/S. 11 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 JALKANTA TECHNICAL & FINANCIAL SERVICES LIMITED. F ROM THE SCRUTINY OF THE DETAILS FILED, THE A.O. FOUND THAT THE ACCOUNT OF M/S JTFSPL WAS SQUIRED UP IN EARLIER YEAR AND THERE IS NO ACCOUNT OR TRANSACTION WITH M/S JTFSPL OF APPELLANT DURING THE RELEVANT FINANCI AL YEAR. FURTHER, ON SCRUTINY OF LIST OF DEBTORS IT WAS FOUND THAT AS ON 31-3-99 AN AMOUNT OF RS.4,24,000/- WAS OUTSTANDING AS DEBT TO M/S JALKAN TA ORGANIC CHEMICAL LIMITED WHICH IS ANOTHER GAJENDRA PRORWAL GROUP CONCERN USED FOR GIVING ACCOMMODATION ENTRIES. THIS AMOUNT OF RS.4,24,000/ WAS SQUARED UP BY THE APPELLANT DURING THE RELEVANT ASS ESSMENT YEAR I.E. 2000-01BY RECEIPT OF CHEQUE OF RS.4,24,000/- ON 22- 3-2000. A LETTER U/S 13(6) WAS ISSUED TO JALKANTA ORGANIC CHEMICAL LIMIT ED TO FURNISH THE COPY OF LEDGER ACCOUNT OF M/S MADHAV MARBLES AND G RANITE PVT. LTD. ALONG WITH DETAILS OF TRANSACTION ENTERED INTO WITH THEM DURING THE FINANCIAL YEAR 1999-2000. IN REPLY M/S. JOCL STATE D THAT THEY HAD NOT ENTERED INTO ANY TRANSACTION WITH THE APPELLANT DUR ING THE FINANCIAL YEAR 1999-2000. AS PER A.O., CREDIT MEANS ANY CREDIT FO R THE PURPOSE OF SECTION 68, ANY CREDIT MAY BE A FRESH CREDIT OR REP AYMENT OF OUTSTANDING DUE BOTH ARE COVERED U/S. 68 OF THE ACT. THE A/R SUBMITTED THAT THE NOTICE U/S 148 WAS ISSUE D FOR THE TRANSACTION ENTERED INTO WITH M/S JTFSL FOR RS.5 LAC. BUT THE A.O. HAS MADE THE ADDITION IN OTHER ACCOUNT OF M/S JALKANTA ORGANIC C HEMICALS LTD. FOR RS.4,24,000/- WHICH IS NOT CORRECT AND ACT IN U/S 1 48 IS ILLEGAL AND BAD IN LAW DESERVES TO BE QUASHED. WHILE MAKING THE ADDITION U/S 68 OF THE ACT THE AO HAS FAILED TO APPRECIATE THAT THE AMOUNT OF RS.4,24,000/- WAS NOT A LOAN OR ADVANCE BY THE APPELLANT BUT WAS RECOVERY OF THE OUTSTANDIN G AMOUNT FROM GAJENDRA PORWAL GROUP. THUS IT WAS NOT A CREDIT BU T WAS RECOVERY OF THE DEBIT IN THE BOOKS OF THE APPELLANT. THE APPEL LANT HAD GIVEN THIS AMOUNT PRIOR TO 31-3-1999 PRECISELY DURING THE ASSE SSMENT YEAR 1995-96 WHICH IS NOT IN DISPUTE. THE PRESENT RECOVERY OF R S.4,24,000/- IS THE REALIZATION OF THE SAME AMOUNT. THERE IS NO REVERS AL OF OPENING BALANCE IN ITS BOOK. THE TRANSACTION WAS TRULY REFLECTED I N THE BOOKS, THE BANK STATEMENT AND THE FULL PARTICULARS OF THE RECEIPT O F CHEQUE HAVE BEEN FURNISHED. FURTHER IN REPLY TO THE NOTICE U/S 147 THE APPELLANT HAD CLEARLY MENTIONED THAT THE OUTSTANDING DEBT WAS REC OVERED FROM THE DEBTOR THROUGH CHEQUE BUT THE A.O. DID NOT VERIFY T HE SAME. THE A/R ALSO PLACED RELIANCE IN THE CASE OF ADI. CIT VS. BH ARI BROTHERS P. LTD. 12 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 (1998) 154 ITR 244 (PAT), ORIENT TRADING CO. LTD. V S. CIT (1963) 49 ITR 723 (BOM) ETC. 19. BEFORE US SIMILAR REASONS WERE GIVEN BY THE LD. AUTHORIZED REPRESENTATIVE IN RESPECT OF DELETION WHEREAS THE LD. DEPARTMENTAL RE PRESENTATIVE REPEATED THE SAME REASON THAT THE TRANSACTION PERTAINING TO DOUBTFUL GROUP HAS TO BE TREATED AS NOT PROVED. HOWEVER, WE ARE NOT CONVINCED BY THE GROUN D TAKEN BY THE REVENUE BECAUSE NO NEXUS BETWEEN THE ASSESSEE AND THE ALLEG ED ILLEGAL TRANSACTION IS FOUND EXISTING ON RECORD. THERE IS NO PROOF THAT THE ASS ESSEE GAVE ADVANCE OF RS.4,00,000/- TO JALKANTA ORGANIC CHEMICAL LIMITED IN THE YEAR 1995-96 FOR PURCHASE A OF RAW MATERIAL AND THE SAME WAS REPAID IN 2000-01. THE REPAYMENTS OF ADVANCES HAVE BEEN DELETED IN SOME OF THE CASES. THEREFORE, WE ARE SATISFIED BY THE REASONING GIVEN BY THE LD. CIT(A) HEREIN AS ABO VE. ACCORDINGLY, WE CANNOT ALLOW THIS GROUND OF REVENUE AS WELL AND DISMISS TH E SAME. 20. RESULTANTLY, THIS APPEAL OF THE REVENUE STANDS DISMISSED. B) ITA NO.730/JU/2007 FOR A.Y. 2004-05 BY THE RE VENUE 21. THIS APPEAL OF THE REVENUE FOR A.Y. 2004-05 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 30.07.2007. 13 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 22. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 1. DELETING THE DISALLOWANCE OF EXEMPTION CLAIMED U/S 10B AMOUNTING TO RS.8,62,52,801/- IGNORING THE FINDINGS OF HONBL E SUPREME COURT IN THE CASE OF M/S LUCKY MINMET PVT. LTD., VS. CIT 245 ITR 830 THAT CUTTING OF MARBLE BLOCKS INTO MARBLE SLABS AND TILES AND S ELLING THE SAME AFTER POLISHING DOES NOT AMOUNT TO EITHER PROD UCTION OR MANUFACTURE OF ANY ARTICLE OR THING. 2. DIRECTING THE AO TO CALCULATE THE DEDUCTION U/ S 80HHC FOR EACH UNITS SEPARATELY WHICH IS NOT PERMISSIBLE IN VIEW O F THE CASE REPORTED AT 266 ITR 521 (SC) IN THE CASE OF IPCA LAB VS. CIT. 3. DIRECTING THE AO NOT TO REDUCE 90% OF MACHINE HIRE CHARGES FROM THE PROFITS OF BUSINESS FOR THE PURPOSE OF CALCULAT ING THE DEDUCTION U/S 80HHC. 4. DELETING DISALLOWANCE OF RS.1,10,69,804/- ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCES WRITTEN OFF. 5. DELETING THE DISALLOWANCE OF RS.50,26,080/- ON ACCOUNT OF PROVISIONS FOR DOUBTFUL DEBTS WRITTEN OFF. 6. DELETING THE DISALLOWANCE OF RS.1,84,699/- ON ACCOUNT OF MINE DEVELOPMENT EXPENSES IGNORING THE FACT THAT MINE DO ES NOT PERTAIN TO THE ASSESSEE AND THE EXPENDITURE INCURRED IS NEITHER CO VERED U/S.35B NOR U/S. 37(1) OF THE I.T. ACT. 7. DELETING THE DISALLOWANCE OF RS.2,89,622/- ON ACCOUNT OF PAYMENT TO GROUP GRATUITY FUND. 8. DELETING THE DISALLOWANCE OF RS.1,01,177/- ON AC COUNT OF REIMBURSEMENT OF CREDIT CARD EXPENSES TO ASHOK DOSH I INCURRED FOR NON BUSINESS PURPOSE OF THE ASSESSEE. 9. ALLOWING CLAIM OF RS.3,21,831/- ON A/C. OF PRI OR PERIOD INCOME WHICH WAS NEITHER CLAIMED BY THE ASSESSEE IN HIS RETURN O F INCOME NOR 14 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 DISALLOWED BY THE AO. 10. ALLOWING CLAIM OF RS.3,27,000/- ON ACCOUNT OF P ROVISION WRITTEN BACK WHICH WAS NEITHER CLAIMED BY THE ASSESSEE IN HIS RE TURN OF INCOME NOR DISALLOWED BY THE AO. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DEL ETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TI ME OF HEARING. 23. AFTER HEARING BOTH THE SIDES, WE FOUND THAT GRO UND NO.1 PERTAINING TO DELETION OF DISALLOWANCE MADE UNDER SECTION 10B OF THE ACT TO THE TUNE OF RS.8,62,52,801/-, THIS ISSUE STANDS COVERED BY THE ORDER OF THIS BENCH RENDERED IN ASSESSEES OWN CASE IN ITA NO.317/JU/2001 FOR A.Y. 2001-02, ORDER DATED 12.03.2013 (PARAGRAPH NOS.4 & 5) IN WHICH THE HONB LE SUPREME COURTS DECISION IN THE CASE OF ARIHANT ARBLES & TILES LIMITED HAS B EEN FOLLOWED. ON THE SAME REASONING AS WE HAVE TAKEN IN THE EARLIER APPEAL OF THE REVENUE, WE CANNOT ALLOW THIS GROUND AND DISMISS THE SAME. 24. GROUND NO.2 OF THIS APPEAL PERTAINS TO CALCULAT ION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT FOR EACH UNIT SEPARATELY. THE A.O . HAS GIVEN HIS FINDING IN THIS REGARD AT PAGE NOS.10 TO 12 OF HIS ORDER. THE LD. CIT(A) HAS GIVEN FINDING IN PARAGRAPH NOS.11 AND 12 AT PAGE NOS.4 & 5 OF HIS OR DER. IN FACT, IT WAS FOUND THAT THIS ISSUE STANDS COVERED AGAINST THE ASSESSEE BY T HE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN ASSESSEES OW N CASE AND THE DECISION IS 15 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 REPORTED AS 352 ITR 331. THEREFORE, WE ALLOW GROUN D NO.2 IN FAVOUR OF THE REVENUE. 25. GROUND NO.3 OF THIS APPEAL IS REGARDING DIRECTI ON OF THE LD. CIT(A) TO THE A.O. NOT TO REDUCE 90% OF MACHINE HIRE CHARGES FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF CALCULATION OF DEDUCTION UNDER S ECTION 80HHC OF THE ACT. 26. THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF ITAT, JODHPUR BENCH GIVEN IN ITA NO.456/JU/2006 FOR A.Y. 2003-04, ORDER DATED 20.07.2007 WHICH HAS BEEN FURTHER CONFIRMED BY THE HONBLE RAJASTHAN HIGH COURT IN ITA NO.7/2008, ORDER DATED 14.01.2008. AC CORDINGLY, THIS GROUND CANNOT BE ALLOWED IN FAVOUR OF THE REVENUE AND, THEREFORE, IS DISMISSED. 27. GROUND NO.4 PERTAINS TO DELETION OF DISALLOWANC E OF RS.1,10,69,804/- ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCES WRITTEN OFF. 28. AFTER HEARING BOTH THE SIDES, IT WAS FOUND THAT THIS ISSUE STANDS COVERED BY THE DECISION OF THIS VERY BENCH RENDERED IN THE CAS E OF M/S. MUMAL MARBLES LTD. IN ITA NO.401/JU/2010 FOR A.Y. 2007-08, ORDER DATED 04 .12.2012. THIS AMOUNT WAS DENIED TO BE WRITTEN-OFF ONLY BECAUSE THE A.O. WAS OF THE VIEW THAT IT HAD NOT 16 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 BECOME BAD AS THE ASSESSEE HAS NOT GIVEN DETAILS OF STEPS TAKEN BY HIM TO RECOVER THE AFORESAID ADVANCES. AS PER THE SETTLED LAW, TH IS IS NO LONGER A REQUIREMENT THAT THE ASSESSEE HAS TO PROVE THAT THE DEBT HAS ACTUALL Y BECAME BAD. ACCORDINGLY, WE CONFIRM THE IMPUGNED DELETION AND DISMISS GROUND NO .4 OF REVENUES APPEAL. 29. GROUND NO.5 OF REVENUES APPEAL PERTAINS TO DIS ALLOWANCE OF RS.50,26,080/- ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS WRITTEN OFF. 30. THIS ISSUE IS SIMILAR TO GROUND NO.4 AND WITH S IMILAR REASONING THE IMPUGNED DELETION IS CONFIRMED AND GROUND NO.5 OF REVENUES APPEAL IS ALSO DISMISSED. 31. GROUND NO.6 PERTAINS TO DELETION OF RS.1,84,699 /- ADDED ON ACCOUNT OF DISALLOWANCE OF THE CLAIM MADE IN RESPECT OF MINE D EVELOPMENT EXPENSES. 32. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE I NCURRED THIS EXPENDITURE WHEREAS THE MINE DOES NOT BELONG TO THE ASSESSEE AND THE EX PENDITURE IS NEITHER COVERED UNDER SECTION 35B NOR UNDER SECTION 37(1) OF THE AC T. HOWEVER, IT IS FOUND THAT THIS ISSUE STANDS COVERED BY THE DECISION OF HONBL E RAJASTHAN HIGH COURT IN THE CASE OF BAJAJ SEVASHARAM REPORTED IN 280 ITR 480 (R AJ) WHICH HAS FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RA JASTHAN SYNTHETICS REPORTED IN 17 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 269 ITR 461 WHICH DECISION HAS BEEN FOLLOWED BY THI S VERY BENCH IN ASSESSEES OWN CASE FOR A.Y. 2003-04 WHICH HAS BEEN DECIDED IN ITA NO.456/JU/2006 VIDE ORDER DATED 27.07.2007 VIDE WHICH SUCH EXPENSES HAV E BEEN ALLOWED. ACCORDINGLY, THIS ISSUE SANDS COVERED IN FAVOUR OF THE ASSESSEE. 33. GROUND NO.7 IS REGARDING PAYMENT OF GROUP GRATU ITY FUND WHICH CANNOT BE ALLOWED AS NOW THE CIT HAS APPROVED THE COMPANY GRO UP GRATUITY FUND VIDE ORDER DATED 23.12.2008 AS DISCUSSED IN THE EARLIER APPEAL. THEREFORE, GROUND NO.7 ALSO STANDS DISMISSED. 34. GROUND NO.8 PERTAINS TO REIMBURSEMENT OF CREDIT CARD EXPENSES PAID TO SHRI ASHOK DOSHI, ONE OF THE DIRECTORS OF THE COMPANY WH EREAS THE EXPENSES WERE INCURRED FOR NON-BUSINESS PURPOSES. THE A.O. HAS M ENTIONED THIS FACT AT PAGE NO.21 AND THE LD. CIT(A) HAS GIVEN HIS FINDING IN P ARAGRAPH NO.31, PAGE NO.18 OF HIS ORDER. IT WAS ARGUED BY THE LD. C.I.T. D.R. THAT NO VERIFICATION TO THE EXPENSES SHOULD BE DONE WHEN SUCH CREDIT CARD IS UTILIZED BY THE DIRECTORS OF THE COMPANY AND THIS AMOUNT CAN BE TREATED AS A PERQUISITE IN T HE HANDS OF THE DIRECTOR. 35. AFTER HEARING BOTH THE SIDES IT WAS FOUND THAT THE MANAGING DIRECTOR OF THE COMPANY HAD INCURRED A TOTAL EXPENDITURE OF RS.2,2 0,474/- THROUGH CREDIT CARD AND 18 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 OUT OF WHICH THE A.O. HAS FOUND EXPENSES VERIFIABLE EXCEPT FOR A SUM OF RS.1,01,177/- WHICH HAS BEEN DISALLOWED. WE HAVE F OUND FROM RECORD THAT MOST OF THE EXPENSES WERE INCURRED FOR THE BENEFIT OF THE A SSESSEE COMPANY AND TO A GREATER EXTENT THESE WERE VERIFIED. THE DETAILS OF THE EXP ENDITURE INCURRED THROUGH CREDIT CARD ARE AS UNDER :- FURNITURE & FIXTURES RS.1,61,150/- LEAVE TRAVEL EXPRESSES RS.37,543/- TRAVELLING ALLOWANCE EXPENSES RS.21,780/- 36. THE EXPENSES HAVE BEEN EXPLAINED AND ARE STATED TO BE ON ACCOUNT OF COMMERCIAL EXPEDIENCY WHICH BENEFITED THE BUSINESS OF THE ASSESSEE COMPANY. THEREFORE, WE ALSO FIND THAT THE A.O. IS NOT JUSTIF IED IN DISALLOWING THIS CLAIM OF THE ASSESSEE. THE DELETION IS UPHELD AND GROUND NO.8 O F THE REVENUES APPEAL IS DISMISSED. 37. GROUND NO.9 RELATES TO CLAIM ON ACCOUNT OF PRIO R PERIOD INCOME WHICH WAS NEITHER CLAIMED BY THE ASSESSEE IN THIS RETURN NOR DISALLOWED BY THE A.O. THIS ISSUE STANDS COVERED BY THE DECISION OF THIS VERY B ENCH IN ASSESSEES OWN CASE FOR A.Y. 2003-04 VIDE ORDER DATED 20.07.2007 PASSED IN ITA NO.456/J U /2006. ACCORDINGLY, WE DO NOT INTERFERE IN THIS FINDING OF THE LD. CIT(A). 19 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 38. GROUND NO.10 PERTAINS TO CLAIM OF RS.3,27,000/- ON ACCOUNT OF PROVISIONS WRITTEN BACK WHICH WAS NEITHER CLAIMED BY THE ASSES SEE IN THE RETURN NOR DISALLOWED BY THE A.O. THIS PROVISION WAS NOT ALLO WED AS DEDUCTION IN THE YEAR WHEN IT WAS CREATED. THEREFORE, IN A.Y. 2003-04 IT WAS ADDED BACK TO THE INCOME FOR COMPUTATION OF TAXABLE INCOME. IN OUR CONSIDER ED OPINION, THIS CLAIM BECOMES ALLOWABLE AS DEDUCTION FROM THE INCOME WHEN IT IS W RITTEN BACK , OTHERWISE IT WOULD AMOUNT TO DOUBLE TAXATION. ACCORDINGLY, WE F IND MERIT IN LD. CIT(A)S FINDING AND CONFIRM THE SAME. 39. IN THE RESULT, APPEAL OF THE REVENUE STANDS PAR TLY ALLOWED. C) ITA NO.335/JU/2009 FOR A.Y. 2006-07 BY THE REV ENUE 40. THIS APPEAL OF THE REVENUE FOR A.Y. 2006-07 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 03.03.2009. 41. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL :- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 1. DELETING THE DISALLOWANCE OF EXEMPTION U/S.10B OF THE I.T. ACT AND DIRECTED THE A.O. TO ALLOW EXEMPTION U/S.10B BY TAK ING THE INTEREST INCOME ON NET BASIS. 2. DELETING THE DISALLOWANCE OF RS.2,27,000/- ON ACCOUNT OF DEFERRED TAX REVENUE EXPENDITURE. 20 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 3. DELETING THE DISALLOWANCE OF RS.1950518/- U/S. 40(A)(IA) OF THE I.T. ACT. 4. DELETING THE DISALLOWANCE OF RS.1,60,481/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 42. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORDS. 43. GROUND NO.1 REGARDING CLAIM OF EXEMPTION UNDER SECTION 10B STANDS COVERED IN FAVOUR OF THE ASSESSEE AND, THEREFORE, NO INTERF ERENCE IS CALLED FOR. SIMILAR REASONS WILL APPLY AS WE HAVE DISCUSSED IN OTHER YE ARS. GROUND NO.1 IS THUS DISMISSED. 44. GROUND NO.2 OF THIS APPEAL IS REGARDING DISALLO WANCE OF RS.2,27,000/- ON ACCOUNT OF DEFERRED TAX REVENUE EXPENDITURE. THIS ISSUE SANDS COVERED BY THE DECISION OF THIS VERY BENCH RENDERED IN ASSESSEES OWN CASE FOR A.Y. 2003-04 VIDE ORDER DATED 20.07.2007 IN ITA NO.456/JU/2006. THER EFORE, NO INTERFERENCE IS CALLED FOR. GROUND NO.2 IS THUS DISMISSED. 45. GROUND NO.3 IS REGARDING DISALLOWANCE OF RS.19, 50,518/- UNDER SECTION 40(A)(IA) OF THE ACT. THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE 21 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 DECISION OF THIS VERY BENCH IN THE CASE OF MINPRO I NDUSTRIES REPORTED IN 143 TTJ 1 AND ANOTHER DECISION OF THIS BENCH IN THE CASE OF A CIT VS. GALAXY EXPORT IN ITA NOS.350 & 351/J U/2009. IN THIS YEAR THERE IS NO C HANGE OF FACTS FROM OTHER YEARS. THEREFORE, IN KEEPING WITH THE PRINCIPLE OF CONSIST ENCY, WE UPHOLD THE IMPUGNED FINDING AND DISMISS GROUND NO.3 OF THIS APPEAL. 46. GROUND NO.4 PERTAINS TO DELETION OF DISALLOWANC E OF RS.1,60,481/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. THIS ISSUE STAND S COVERED IN FAVOUR OF THE ASSESSEE AS DISCUSSED ABOVE. 47. IN THE RESULT, THIS APPEAL OF THE REVENUE STAND S DISMISSED. D) ITA NO.378/JU/2008 A.Y. 2005-06 BY THE REVENUE 48. THIS APPEAL OF THE REVENUE FOR A.Y. 2005-06 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 31.03.2008. 49. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 22 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 1. DELETING THE DISALLOWANCE OF RS.8,60,06,570/- MADE ON ACCOUNT OF DEDUCTION U/S 10B OF THE I.T. ACT. 2. DELETING THE DISALLOWANCE OF RS.2,32,310/- ON ACCOUNT OF MINE DEVELOPMENT EXPENDITURE. . 3. DELETING THE DISALLOWANCE OF RS.11,73,021/- ON ACCOUNT OF PAYMENT TO GROUP GRATUITY FUND. 4. DELETING THE DISALLOWANCE OF RS.19,63,431/- U/ S. 40(A)(IA) OF THE ACT. 5. DELETING THE DISALLOWANCE OF RS.4,25,541/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 6. DELETING THE DISALLOWANCE OF RS.63,099/- ON AC COUNT OF ESI AND PF PAYMENTS. 7. DELETING THE DISALLOWANCE OF RS.47,32,226/- ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCES WRITTEN OFF. 50. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORDS. ALL THE GROUNDS STATED ABOVE ARE SIMILAR TO ONE OR OTHER GROUND RAISED IN THE EARLIER APPEAL AND THEY STAND COVERED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE REVENUE AND DISMISS THE SAME. 51. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. E) ITA NO.308/JDPR/2008 FOR A.Y. 2005-06 BY THE A SSESSEE 23 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 52. THIS IS A CROSS APPEAL OF ITA NO.378/JU/2008. THE APPEAL OF THE ASSESSEE AS ABOVE IN WHICH THE FOLLOWING GROUNDS HAVE BEEN R AISED:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW LD. COMMISSIONER OF INCOME TAX (APPEALS), UDAIPUR HAS E RRED IN COMPUTING THE ELIGIBLE PROFIT U/S 10B AT RS.8,88,41,768/- BY REDUCING RS.7,70,908/- BEING INTEREST ON DEPOSITS. HE HAS FURTHER ERRED I N OBSERVING THAT SINCE THE INTEREST SO RECEIVED IS DERIVED FROM THE BUSINE SS OF EOU, THE EXEMPTION U/S 10B OF THE ACT IS NOT AVAILABLE IN RE SPECT OF THE SAME. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), UDAIPUR HAS E RRED IN NOT REDUCING FROM THE NET PROFIT OF THE APPELLANT COMPA NY, THE INCOME OF UNIT- I AMOUNTING TO RS.5,43,20,468/- FOR COMPUTATI ON OF BOOK PROFITS U/S 115JB OF THE INCOME TAX ACT, 1961, IN ACCORDANCE WI TH THE PROVISIONS OF CLAUSE (II) OF EXPLANATION TO SUB-SECTION (2) OF SE CTION 115JB OF THE ACT. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. ASSISTANT COMMISSIONER OF INCOME (APPEALS), UDAIPUR HAS ERRED IN LEVYING INTEREST U/S 234B & 234C OF THE INCOME TAX ACT, 1961 AND WITHDRAWING THE INTEREST U/S 244A OF THE ACT. 4. THE COST AS MAY BE APPROPRIATE BE GRANTED TO THE APPELLANT. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, AND MO DIFY ALL OR ANY GROUND OF APPEAL ON OR BEFORE THE DATE OF HEARING. 53. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. 24 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 54. GROUND NO.1 IS REGARDING EXEMPTION UNDER SECTIO N 10B OF THE ACT TO THE EXTENT OF RS.7,70,908/- WHICH HAS BEEN REDUCED FROM THE TOTAL CLAIM MADE UNDER SECTION 10B OF THE ACT ON THE REASONING THAT THIS I S RECEIPT OF INTEREST ON DEPOSIT AND NOT AN INCOME DERIVED FROM BUSINESS. 55. THE FACTS OF THIS GROUND ARE THAT QUA THIS AMOU NT THE A.O. OBSERVED THAT THE INTEREST SO RECEIVED IS DERIVED FROM DEPOSITS IN BA NK AND NOT DERIVED FROM THE BUSINESS. ACCORDING TO THE ASSESSEE, THIS IS A COM PULSORY DEPOSIT INVESTED TO RUN THE BUSINESS AND, THEREFORE, THE INCOME RECEIVED ON INTEREST CAN BE TREATED AS DERIVED FROM THE BUSINESS ITSELF. 56. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE ASSESSEE IS REQUIRED TO KEEP A MARGIN MONEY AGAINST ISSUANCE OF BANK GUARANTEE LET TER OF CREDIT. FOR THAT PURPOSE, THE ASSESSEE HAD PURCHASED FDRS AS REQUIRE D NECESSARY FOR THE EXPORT BUSINESS. IT IS FOUND THAT THIS ISSUE STAND COVERE D BY THE DECISION OF ITAT, AHMADABAD BENCH IN THE CASE OF KABRA PLASTIC VS. DC IT VIDE ORDER DATED 28.09.2012 IN ITA NO.118/AHD/2010 WHEREIN IT HAS BE EN HELD BY FOLLOWING TWO DECISIONS OF HONBLE APEX COURT NAMELY CIT VS. SHRI RAM HONDA POWER EQUIPMENT & ORS, 289 ITR 475 AND ASSOCIATED CAPSULE S PVT. LTD VS. CIT, (2012) 343 ITR 89 THAT SUCH NECESSARY DEPOSIT WILL RESULT RELATED TO THE SAME BUSINESS AND 25 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 THE INTEREST SO DERIVED SHALL BE ELIGIBLE FOR EXEMP TION UNDER SECTION 10B. ACCORDINGLY, BY RESPECTFULLY FOLLOWING THE ABOVE DE CISIONS, WE ALLOW GROUND NO.1 OF ASSESSEES APPEAL. 57. GROUND NO.2 OF THIS APPEAL IS REGARDING COMPUTA TION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE COMPANY HAS DECLARED NET LOSS OF RS.1,54,89,745 AS PER COMP UTATION OF INCOME. THE NET PROFIT AS PER P&L ACCOUNT IS RS.14,36,78,456/-. OU T OF THIS AMOUNT THE ASSESSEE HAS CLAIMED RS.8,96,12,676/- AS EXEMPTION UNDER SEC TION 10B BEING PROFIT OF UNIT- II. ACCORDING TO THE A.O. THE ASSESSEE COMPANY SHO ULD HAVE DECLARED BOOK PROFIT OF RS.5,40,65,780/- UNDER SECTION 115JB OF THE ACT AS AGAINST WHICH THE ASSESSEE HAS DECLARED ONLY A SUM OF RS.15,27,966/- BY REDUCI NG THE PROFIT AMOUNTING TO RS.5,43,20,468/- PERTAINING TO PROFIT OF GRANITE UN IT I.E. UNIT-I AS PER BOOKS OF ACCOUNT. ACCORDING TO A.O., UNIT NO.1 WAS ESTABLIS HED AS EOU AND THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10B FOR THE LAST TE N YEARS. THEREFORE, THE PERIOD OF EXEMPTION WHICH IS 10 YEARS HAS ALREADY EXPIRED. ACCORDING TO A.O., UNIT NO.1 CANNOT BE TREATED AS COVERED UNDER SECTION 10B FOR CALCULATION OF BOOK PROFIT UNDER SECTION 115JB. THE A.O. DEMANDED EXPLANATION FROM THE ASSESSEE FOR MAKING SUCH COMPUTATION. THE ASSESSEE REPLIED THAT THE ASSESSE E IS ENTITLED TO THE BENEFIT OF SECTION 115JB OF THE ACT. IN THIS REGARD, RELIANCE WAS PLACED ON EXPLANATION OF 26 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 SECTION 115JB OF THE ACT. IT WAS FURTHER PLEADED T HAT THE PROVISIONS TALKS ABOUT THE EXCLUSION OF PROFIT OF EOU TO WHICH SECTION 10B APP LIES. RELIANCE WAS ALSO PLACED ON THE EXTRACT OF BUDGET SPEECH WHEREIN IT W AS STATED THAT PROFIT OF EOU SHALL BE EXCLUDED FOR THE PURPOSE OF MAT. IT WAS A RGUED THAT THIS SECTION DOES NOT TALK ABOUT THE ELIGIBILITY BUT IT REFERS TO THE FAC T THAT IF THE PROVISION OF SECTION 10B APPLIES THEN THE PROFIT SHALL BE REDUCED FROM THE N ET PROFIT AS PER THE P&L ACCOUNT UNDER SECTION 115JB OF THE ACT. HOWEVER, AFTER CON SIDERING THE ABOVE REPLY OF THE ASSESSEE, THE A.O. HAS OPINED THAT THE PROVISIONS O F SECTION 115JB HAS BEEN FRAMED SO AS TO EXCLUDE PROFIT OF EOU EXEMPTED UNDER SECTI ON 10B FROM INCIDENCE OF TAXATION UNDER MAT. HE FURTHER OBSERVED THAT FOR R EDUCING THE PROFIT THE PRINCIPLE CRITERION IS THAT TO SUCH EOU, PROVISION OF SECTION 10B SHOULD APPLY. AS PER A.O. WHEN PROFIT OF EOU FALLS WITHIN THE PURVIEW OF SECT ION 10B ONLY THEN ITS PROFIT SHALL BE REDUCED. AS PER A.O. IN THE GIVEN CASE, T HE PERIOD OF EXEMPTION AS ENVISAGED UNDER SECTION 10B IS 10 YEARS AND THIS CO MPANY HAS AVAILED THIS BENEFIT IN RESPECT OF UNIT-I. THIS UNIT IS NO LONGER ELIGI BLE FOR EXEMPTION UNDER SECTION 10B, THEREFORE, PROVISIONS OF SECTION 10B ARE NOT A PPLICABLE TO THIS UNIT AND THIS UNIT HAS TO PAY TAX IN THE ORDINARY MANNER AS PER T HE GENERAL PROVISIONS OF THE ACT. HE ALSO INFORMED THAT IF THE EXPLANATION OF THE ASS ESSEE IS ACCEPTED, THEN IT WOULD MEAN THAT EVEN AFTER THE EXEMPTION PERIOD SUCH UNIT DOES NOT HAVE TO PAY MAT TAX UNDER SECTION 115JB OF THE ACT, ALTHOUGH IT HAS TO PAY TAX AS PER THE NORMAL 27 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 PROVISIONS OF THE ACT, ACCORDING TO HIM, IT WOULD B E AN ABSURD CONCLUSION. ACCORDINGLY, HE DISALLOWED THIS CLAIM WHICH ALSO CO NFIRMED BY LD. CIT(A). 58. BEFORE US, SIMILAR ARGUMENTS WERE MADE FROM BOT H THE SIDES. LD. AUTHORIZED REPRESENTATIVE IN ADDITION TO THE ARGUME NTS ADVANCED BEFORE A.O. AND CIT(A) HAS ALSO PLACED RELIANCE ON NUMEROUS DECISIO NS WHICH ARE CONTAINED IN HIS PAPER BOOK. THE LD. C.I.T. - D.R. HAS REPEATED THE REASONS GIVEN BY BOTH THE AUTHORITIES TO DENY THIS CLAIM AND HAS HEAVILY SUPP ORTED THEM. 59. AFTER COGITATING RIVAL SUBMISSIONS VIS--VIS AV AILABLE EVIDENCES ON RECORD IN THE LIGHT OF THE LEGAL PROVISION AND PRECEDENTS ,WE HAVE FOUND THAT THE PROVISIONS OF SECTION 115JB WERE BROUGHT INTO ACT SO AS TO ENSURE MINIMUM TAX FROM COMPANIES IN ACCORDANCE WITH THEIR BOOK PROFIT WHO HAVE NO TA X LIABILITIES OTHERWISE THAN AS PER NORMAL PROVISIONS OF THE ACT. THE COMPANY HAS TO PAY MINIMUM TAX AS PER SECTION 115JB IF THE TAX COLLECTED AS PER NORMAL PR OVISIONS OF THE ACT IS LOWER THAN THAT. TO ADDRESS THIS CONTROVERSY, WE HAVE TO EXTR ACT PROVISIONS OF SECTION 115JB ALONG WITH ITS EXPLANATION HEREIN AS UNDER :- 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEING A COMPANY, THE INCOME-TA X, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELE VANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, [2012], IS LESS THAN [ EIGHTEEN AND ONE-HALF PER CENT] OF ITS BOOK PROFIT, [SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL I NCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOU NT OF INCOME-TAX AT THE RATE OF [EIGHTEEN AND ONE-HALF PER CENT]]. 28 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 (2) [ EVERY ASSESSEE, ( A ) BEING A COMPANY, OTHER THAN A COMPANY REFERRED TO IN CLAUSE ( B ), SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT F OR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDU LE VI TO THE COMPANIES ACT, 1956 (1 OF 1956); OR ( B ) BEING A COMPANY, TO WHICH THE PROVISO TO SUB-SECT ION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY: ] PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SU CH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURP OSE OF PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 1956 (1 OF 1956) : PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE F INANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956), WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THIS ACT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SU CH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUN TING STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPRECIATION WHICH HAVE BEEN ADOPTE D FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION [ 1 ].FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PRE VIOUS YEAR PREPARED UNDER SUB-SECTION (2), AS INCREASED BY ( A ) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND THE PROVISION THEREFOR; OR 29 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ( B ) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED [, OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC ]; OR ( C ) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MAD E FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR ( D ) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBS IDIARY COMPANIES; OR ( E ) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPOS ED ; OR ( F ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH [ SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF) OR [***] SECTION 11 OR SECTION 12 APPLY; OR] [( G ) THE AMOUNT OF DEPRECIATION,] [( H ) THE AMOUNT OF DEFERRED TAX AND THE PROVISION THER EFOR, [( I ) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, [ ( J ) THE AMOUNT STANDING IN REVALUATION RESERVE RELATI NG TO REVALUED ASSET ON THE RETIREMENT OR DISPOSAL OF SUCH ASSET, IF ANY AMOUNT REFERRED TO IN CLAUSES ( A ) TO ( I ) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF A NY AMOUNT REFERRED TO IN CLAUSE ( J ) IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT, A ND AS REDUCED BY, ]]] [( I ) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISIO N (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 OTHERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO TH E PROFIT AND LOSS ACCOUNT: PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO AN ASSESSE E IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES CREATED OR PROVI SIONS MADE IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AF TER THE 1ST DAY OF APRIL, 1997 SHALL NOT BE REDUCED FROM THE BOOK PROFIT UNLESS TH E BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW THE SECOND PROVISO TO SECTION 115JA , AS THE CASE MAY BE; OR] ( II ) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIO NS OF [ SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF)] OR [***] SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFI T AND LOSS ACCOUNT; OR [( IIA ) THE AMOUNT OF DEPRECIATION DEBITED TO THE PROFIT AND LOSS ACCOUNT (EXCLUDING THE DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS); OR 30 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ( IIB ) THE AMOUNT WITHDRAWN FROM REVALUATION RESERVE AND CREDITED TO THE PROFIT AND LOSS ACCOUNT, TO THE EXTENT IT DOES NOT EXCEED THE AMOUN T OF DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS REFERRED TO IN CLAUSE ( IIA ); OR] [( III ) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. EXPLANATION .FOR THE PURPOSES OF THIS CLAUSE, ( A ) THE LOSS SHALL NOT INCLUDE DEPRECIATION; ( B ) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL; OR] ( IV ) TO ( VI ) [***] ( VII ) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPA NY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIA L PROVISIONS) ACT, 1985 (1 OF 1986) AND ENDING WITH THE ASSESSMENT YEAR DURING WH ICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMU LATED LOSSES. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE ( GA ) OF SUB-SECTION (1) OF SECTION 3 OF THE SICK INDUS TRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986 ); OR [( VIII ) THE AMOUNT OF DEFERRED TAX, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT.] [ EXPLANATION 2. FOR THE PURPOSES OF CLAUSE ( A ) OF EXPLANATION 1 , THE AMOUNT OF INCOME-TAX SHALL INCLUDE ( I ) ANY TAX ON DISTRIBUTED PROFITS UNDER SECTION 115-O OR ON DISTRIBUTED INCOME UNDER SECTION 115R ; ( II ) ANY INTEREST CHARGED UNDER THIS ACT; ( III ) SURCHARGE, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME; ( IV ) EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIED B Y THE CENTRAL ACTS FROM TIME TO TIME; AND ( V ) SECONDARY AND HIGHER EDUCATION CESS ON INCOME-TAX , IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME.] 31 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 [EXPLANATION 3. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT FOR THE PURPOSES OF THIS SECTION, THE ASSESSEE, BEING A COMPANY TO WHICH THE PROVISO TO SUB-SECTION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS APPLICABLE, HAS, FOR AN ASSESSMENT YEAR COMMENCING ON OR BEFORE THE 1ST DAY OF APRIL, 2012, AN OPTION TO PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR EITHER IN ACCORDANCE WITH TH E PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 OR IN ACCORD ANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY. ] (3) NOTHING CONTAINED IN SUB-SECTION (1) SHALL AFFE CT THE DETERMINATION OF THE AMOUNTS IN RELATION TO THE RELEVANT PREVIOUS YEAR TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR OR YEARS UNDER THE PROVISIONS OF SUB-SECTION (2) OF SECTION 32 OR SUB-SECTION (3) OF SECTION 32A OR CLAUSE ( II ) OF SUB- SECTION (1) OF SECTION 72 OR SECTION 73 OR SECTION 74 OR SUB-SECTION (3) OF SECTION 74A . (4) EVERY COMPANY TO WHICH THIS SECTION APPLIES, SH ALL FURNISH A REPORT IN THE PRESCRIBED FORM FROM AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 , CERTIFYING THAT THE BOOK PROFIT HAS BEEN COMPUTED I N ACCORDANCE WITH THE PROVISIONS OF THIS SECTION ALONG WITH THE RETURN OF INCOME FILED UNDER SUB-SECTION (1) OF SECTION 139 OR ALONG WITH THE RETURN OF INCOME FURNISHED IN RESPONSE TO A NOT ICE UNDER CLAUSE ( I ) OF SUB-SECTION (1) OF SECTION 142 . (5) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSEE, BEING A COMPANY, MENTIONED IN THIS SECTIO N.] [(5A) THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y TO ANY INCOME ACCRUING OR ARISING TO A COMPANY FROM LIFE INSURANCE BUSINESS REFERRED TO IN SECTION 115B .] [(6) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO THE INCOME ACCRUED OR ARISING ON OR AFTER THE 1ST DAY OF APRIL, 2005 FROM ANY BUSINESS CARRIED ON , OR SERVICES RENDERED, BY AN ENTREPRENEUR OR A DEVELOPER, IN A UNIT OR SPECIAL ECONOMIC ZONE, AS T HE CASE MAY BE:] [ PROVIDED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL CEASE TO HAVE EFFECT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON OR AFTER THE 1ST DAY OF APRIL, 2012.] 60. AS IS EVIDENT FROM THE PLAIN READING OF THE ABO VE SECTION IT BECOMES OBVIOUS THAT IT IS AN OVERRIDING PROVISION. AS PER THIS PR OVISION A COMPANY HAS TO PAY TAX ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN R ESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE A.Y. COMMENCING ON OR AFTER THE FIR ST DAY OF APRIL 2012. IN CASE THE INCOME TAX PAYABLE IS FOUND LESS THAN 18 % OF ITS BOOK PROFIT, BOOK PROFIT 32 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSES SEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT O F INCOME TAX @ 18 %. EVERY COMPANY HAS TO COMPULSORILY PREPARE ITS PROFIT & LO SS ACCOUNT FOR THE PURPOSE OF THIS SECTION IN ACCORDANCE WITH PROVISIONS OF PART- II & III OF SCHEDULE-VI TO THE COMPANIES ACT, 1956 (1 OF 1956). THIS MAIN PROVISI ON IS SUBJECT TO A CONDITION THAT WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT THE ACCOUNTING POLICIES SHALL BE THE SAME AS ADOPTED FO R THE PURPOSE OF PREPARING SUCH ACCOUNT INCLUDING PROFIT & LOSS ACCOUNT. THIS PROV ISION IS CLARIFIED BY TWO EXPLANATIONS - EXPLANATION(1) WAS BROUGHT BY FINANC E ACT, 2008 W.R.E. FROM 01.04.2001. THIS EXPLANATION SAYS THAT FOR THE PUR POSE OF THIS SECTION BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCOUNT FOR THE RELE VANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION(2), AS INC REASED BY THE AMOUNT OF INCOME TAX PAID OR PAYABLE INCLUDING PROVISION THER EFORE, OR THE AMOUNTS CARRIED TO ANY RESERVES, THE AMOUNTS SET ASIDE TO PROVISIONS M ADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES, THE AMOUNT BYWAY OF P ROVISION FOR LOSSES OF SUBSIDIARY COMPANIES OR THE AMOUNTS OF DIVIDENDS PAID OR PROPO SED, THE AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTIO N 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF) OR SECTION 11 OR SECTION 12 APPLIES ETC. THE EXPLANATION(2) INSERTED BY FINANCE ACT W.R.E. 01.04 .2001 SAYS THAT FOR THE PURPOSE OF CLAUSE (A) OF EXPLANATION(1) THE AMOUNTS OF INCO ME TAX SHALL INCLUDE VARIOUS 33 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ITEMS WHICH HAVE BEEN DISCUSSED ABOVE. UNDISPUTEDL Y, UNIT-I OF THE ASSESSEE COMPANY WAS ELIGIBLE FOR THE BENEFIT OF SECTION 10B OF THE ACT, AND IT HAS ALREADY AVAILED OF THIS BENEFIT. THEREFORE, WITHOUT MINCIN G, WE CAN SAFELY HOLD THAT THE NET PROFIT FROM UNIT-I HAS TO BE TAXED UNDER SECTION 11 5JB OF THE ACT. ALL SEPARATE UNITS OF A COMPANY ARE SEPARATELY ELIGIBLE, IF THEY FULFILL THE REQUISITE CONDITIONS OF SECTION 10B WHICH IS AN INCENTIVE PROVISION TO BOOS T THE NEWLY ESTABLISHED EOU. THEREFORE, THIS GROUND STANDS DISMISSED. 61. IN THE RESULT, THIS APPEAL OF THE ASSESSEE STAN DS PARTLY ALLOWED. F) ITA NO.194/JODH/2013 FOR A.Y. 2006-07 BY THE R EVENUE 62. THIS APPEAL OF THE REVENUE FOR A.Y. 2006-07 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 04.01.2013. 63. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 1. DELETING THE DISALLOWANCE OF RS.1,77,30,000/- ON ACCOUNT OF REVERSAL OF PROVISION FOR ASSETS IMPAIRMENT IGNORING THE FAC T THAT THE DEDUCTION ON ACCOUNT OF CARRYING THE PART OF PROFIT TO RESERVE O F ANY KIND WAS NOT ALLOWABLE UNDER ANY OF THE PROVISIONS OF SECTION 28 TO 40 OF THE I.T. ACT. 34 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 2. DIRECTING TO ALLOW THE DEPRECIATION ON SITE DE VELOPMENT EXPENSES OF RS.2,59,405/- IGNORING THE FACT THAT THE SITE DEVEL OPMENT IS NOT COVERED UNDER THE BLOCK BUILDING. 64. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. 65. THE FACTS APROPOS GROUND NO.1 OF THIS APPEAL PE RTAINING TO A.Y. 2006-07 ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSEE WAS ASKED TO GIVE EXPLANATION REGARDING CLAIM OF DEDUCTION OF RS.1,77 ,30,000/- MADE ON ACCOUNT OF REVERSAL OF PROVISIONS FOR ASSETS IMPAIRMENT. TH IS AMOUNT WAS DEEMED TO BE FOUND AS CARRIED TO RESERVE IN SCHEDULE-B RESERVE & SURPLUS OF THE BALANCE SHEET. AS PER THE A.O., ANY DEDUCTION ON ACCOUNT OF CARRYI NG ANY PART OF PROFIT TO THE RESERVE OF ANY KIND IS NOT ALLOWABLE UNDER THE ACT, MORE PARTICULARLY UNDER SECTIONS 28 TO 40 OF THE ACT. THEREFORE, THE A.O. HAS DISAL LOWED THIS AMOUNT. THE ASSESSEE FILED APPEAL AND THE LD. CIT(A) AGREED WITH THE ASS ESSEE IN ALLOWING THIS CLAIM. NOW THE REVENUE IS AGGRIEVED AND HAS COME IN SECOND APPEAL. 66. AFTER HEARING BOTH THE SIDES WE HAVE FOUND THAT THE ASSESSEE HAS CREATED PROVISION TOWARDS IMPAIRMENT OF ASSETS AS PER THE A CCOUNTING STANDARD-28 (AS-28). DURING THE A.Y. 2005-06, THE ASSESSEE HAS NOT DEBIT ED THE PROVISIONS TO THE P&L ACCOUNT AS PER AS-28 IN THE YEAR OF INTRODUCTION OF STANDARD, THE PROVISIONS WILL BE 35 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 MADE OUT OF RESERVES. IT IS NOTED THAT IN RETURN F OR A.Y. 2005-06, NO ADJUSTMENT WAS MADE IN THE COMPUTATION OF INCOME I.E. IT WAS N OT CLAIMED. OUT OF PROVISIONS CREATED, A SUM OF RS.1,77,30,000/- HAS BEEN RECEIVE D DURING THE A.Y. 2006-07 AND HAS BEEN CREDITED TO THE P&L ACCOUNT. THIS AMOUNT PERTAINS TO RECOVERY OF DOUBTFUL LOANS/ADVANCES. IT HAS BEEN DIRECTLY REDU CED FROM THE RESERVES AT THE TIME OF MAKING PROVISIONS AND A SIMULTANEOUS REDUCTION F ROM THE CONCERNED ASSETS WERE ALSO MADE. IT IS FOUND THAT THIS AMOUNT REPRESENTS LOANS AND ADVANCES AND THIS SUM CANNOT BE TAXED UNDER SECTION 28 OF THE ACT OR SECT ION 56 OF THE ACT. THIS AMOUNT WAS NOT EARLIER DEBITED TO THE P&L ACCOUNT BUT WAS DIRECTLY WITHDRAWN FROM THE RESERVES FORMING PART OF RS.8,31,71,118/-. IT IS F OUND FROM THE RECORDS THAT THE A.O. HAS DISALLOWED THIS CLAIM ON THE REASONING THA T THE ASSESSEE HAS MADE AN INCORRECT CLAIM OF DEDUCTION OUT OF WHICH TAXABLE I NCOME ON ACCOUNT OF REVERSAL OF PROVISION FOR ASSET IMPAIRMENT. THE HONBLE RAJAST HAN HIGH COURT WHILE DECIDING THE CASE OF CIT VS. BHAWAN VA PATH NIRMAN (BOHRA) & CO. (2002) 258 ITR 440 (RAJ) HELD THAT WHEN THE ASSESSEE HAS CLAIMED DEDUC TION OF ANY AMOUNT AS EXPENSES INCURRED BY HIM AND THE SAME IS ALLOWED, IT RESULTS IN REDUCING ASSESSEES TAX LIABILITY TO THAT EXTENT. WHEN SUCH AMOUNT IS RECE IVED BACK BY WAY OF REFUND OR OTHERWISE THEN ON RECEIPT OF THE SAME, THE ASSESSEE IS NOT ALLOWED TO RETAIN THE BENEFIT WHICH HAS BEEN OBTAINED EARLIER BY REDUCING TAX LIABILITY ON EARLIER OCCASION. HOWEVER, WHEN NO DEDUCTION FOR ANY EXPEN SES INCURRED BY THE ASSESSEE 36 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ON EARLIER OCCASION HAS BEEN CLAIMED, OR CLAIMED BU T NOT ALLOWED BY THE A.O. IN DETERMINING THE INCOME CHARGEABLE TO TAX UNDER THE ACT, IN THAT EVENTUALITY MERELY MAKING ENTRIES IN BOOKS NO BENEFIT OF REDUCING THE TAX LIABILITY BY REDUCING THE TAXABLE INCOME IS OBTAINED BY THE ASSESSEE. SIMILA RLY, ON REFUND OF SUCH AMOUNT IN A LATER DATE IN THE SUBSEQUENT A.Y., NO QUESTION OF SUBJECTING THIS AMOUNT TO TAX WOULD ARISE EVEN UNDER SECTION 41(1)(A) OF THE ACT. IN THIS CASE, ADMITTEDLY, NO SUCH DEDUCTION WAS CLAIMED. MOREOVER, IN A.Y. 2007 -08, THE CLAIM OF DEDUCTION ON ACCOUNT OF REVERSAL OF PROVISIONS FOR ASSETS IMP AIRMENT HAS BEEN ALLOWED BY THE A.O. HIMSELF UNDER SECTION 143(3) OF THE ACT. ACCO RDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF LD. CIT(A) AND CONFIRM THE SAME. AS A RESULT, WE DISMISS GROUND NO.1 OF REVENUES APPEAL. 67. THE FACTS APROPOS GROUND NO.2 RELATES TO DIRECT ION GIVEN BY CIT(A) TO A.O. TO ALLOW DEPRECIATION ON SITE DEVELOPMENT EXPENSES AT RS.2,59,405/-. THE FACTS OF THIS GROUND ARE THE THE ASSESSEE CLAIMED DEPRECIATI ON TO THE TUNE OF RS.2,59,405/- AT THE RATE OF 10% ON EXPENDITURE INURED ON SITE DEVEL OPMENT OF RS.25,94,052/-. AS PER THE A.O., THE ACT DOES NOT ALLOW DEPRECIATION I N RESPECT OF EXPENDITURE INCURRED ON SITE DEVELOPMENT IN VIEW OF THE PROVISIONS OF SE CTION 32 OF THE ACT. WHILE REPLYING SHOW CAUSE, THE ASSESSEE STATED THAT IT HA D DEBITED AMOUNT FOR ARRANGING EASY AND FREE ACCESS TO THE POINT OF WTG (WIND MILL ) AND FOR 37 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ARRANGING/MAINTAINING/KEEPING THE LEGALLY AND TECHN ICALLY REQUISITE SURROUNDING AREA, FREE AND UNOCCUPIED FOR SMOOTH OPERATION OF T HE WTG. THE ASSESSEE HAS NOT CREATED ANY ASSET AND HAS DEBITED 1/10 TH OF THE TOTAL EXPENDITURE OF RS.25,94,052/- BY WAY OF DEPRECIATION. THE A.O. WAS NOT AGREEABLE AND HAS HELD THAT THIS CLAIM OF DEPRECIATION INCURRED ON SITE DEVELOPMENT IS NOT CO VERED UNDER THE BLOCK BUILDING ON WHICH DEPRECIATION OF 10% IS ALLOWABLE. THEREFO RE, HE HAS ADDED THE DEPRECIATION CLAIMED AT RS.2,59,405/- TO ASSESSEE S TOTAL INCOME. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL AND THE LD. CIT(A) HAS FOLLOWED THE ORDER OF JODHPUR BENCH AND HAS ALLOWED THE CLAIM OF THE ASSE SSEE. 68. BEFORE US BOTH THE PARTIES HAVE REITERATED THEI R SIMILAR STAND WHICH WAS TAKEN BEFORE THE LD. CIT(A). 69. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THIS VERY BENCH TAKEN IN THE CASE OF M/S. MALANI IMPEX INC. VS. DEPARTMENT OF IN COME TAX IN ITA NO.622/JODH/2008 AND ITA NO.422/JODH/2009 FOR THE A .YS. 2005-06 & 2006-07 IN WHICH CASE SITE DEVELOPMENT EXPENSES HAVE BEEN ALLO WED. THEREFORE, BY FOLLOWING THE TRIBUNAL ORDER, WE FIND NO INFIRMITY IN THE FIN DING OF LD. CIT(A). ACCORDINGLY, GROUND NO.2 OF THIS APPEAL IS DISMISSED. 38 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 70. IN THE RESULT, THIS APPEAL OF THE REVENUE STAND S DISMISSED. G) ITA NO.449/JODH/2013 FOR A.Y. 2009-10 BY THE R EVENUE 71. THIS APPEAL OF THE REVENUE FOR A.Y. 2009-10 IS DIRECTED AGAINST THE ORDER LD. CIT(A), UDAIPUR DATED 14.06.2013. 72. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVEN UE IN THIS APPEAL:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 1. DELETING THE DISALLOWANCE OF DEPRECIATION AMOUN TING TO RS.5,74,111/- WITHOUT APPRECIATING THE FACT THAT BY INCURRING THE SUN OF RS.76,54,811/- ON ACCOUNT OF EXCHANGE RATE DIFFERENCE THE ASSESSEE HAS NEITHER ACQUIRED ANY NEW ASSET NOT THERE WAS ANY VALUE ADDITION TO T HE ASSET BY SUCH ACCOUNTING PROCESS AND HENCE THE DEPRECIATION OF RS .5,74,111/- HAS RIGHTLY BEEN DISALLOWED BY THE A.O. IN VIEW OF THE PROVISIONS OF SECTION 43(6) OF THE I.T. ACT. 2. DELEING THE ADDITION OF RS.9,79,888/- MADE BY THE A.O. ON ACCOUNT OF APPORTIONMENT OF INTEREST TO THE EOU UNIT WITHOUT A PPRECIATING THE FACT THAT WHILE COMPUTING THE INCOME OF THE EOU THOUGH T HE ASSESSEE HAS APPORTIONED HEAD OFFICE EXPENSES IN THE RATIO OF TU RNOVER OF EOU, EXPENDITURE INCURRED ON INTEREST BY GRANITE DIVISIO N HAS NOT BEEN APPORTIONED BY THE ASSESSEE DESPITE THE FACT HENCE INTEREST OF RS.9,79,888/- HAS RIGHTLY BEEN APPORTIONED BY THE A .O. 3. ALLOWING THE DEDUCTION U/S 10B MORE THAN THE TO TAL INCOME WITHOUT APPRECIATING THE FACT THAT IN VIEW OF THE PROVISION S OF SECTION 10B OF THE I.T. ACT AND THE DEFINITION OF TOTAL INCOME S PROVI DED IN SECTION 2(45) OF THE I.T. ACT, THE A.O. HAS RIGHTLY RESTRICTED THE A SSESSEE CLAIM OF DEDUCTION 10B SINCE THE SAID DEDUCTION HAS TO BE AL LOWED TO THE EXTENT OF TOTAL INCOME AND THE SAID DEDUCTION CANNOT BE GREAT ER THAN THE TOTAL INCOME. 39 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 73. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. 74. THE FACTS APROPOS GROUND NO.1 ARE THAT THE ASSE SSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 26.09.2009 ALONG WITH COPIES OF AUDITED ACCOUNTS AND TAX AUDIT REPORT. THE ASSESSEE HAS FOUR SEPARATE UNITS UNI T-I (GRANITE SALAM DIVISION), UNIT-II (EOU), UNIT-III (MARBLE DIVISION) AND UNIT- IV (WIND MILL DIVISION). ALL THE FOUR UNITS HAVE THEIR SEPARATE OFFICES. DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS BOOKED EXCHANGE R ATE FLUCTUATION OF RS.76,54,811/- IN THE PLANT/MACHINERY ACCOUNT OF GR ANITE DIVISION AFTER 30.09.2008. IT WAS STATED BY THE ASSESSEE COMPANY THAT THE EXCHANGE RATE DIFFERENCE BELONGED TO THE FOREIGN EXCHANGE LOAN TA KEN BY IT TO PURCHASE PLANT & MACHINERY WHICH HAVE ALREADY BEEN INSTALLED IN THE EARLIER YEAR. THERE BEING FLUCTUATION OF RATE OF DOLLAR AMOUNT PAYABLE IN RUP EES (INR) HAS INCREASED. THE WORKING DONE RESULTED IN THE INCREASE OF PAYABLE AM OUNT BY RS.76,54,811/- THEREFORE, THIS AMOUNT HAS BEEN, SIMULTANEOUSLY, BO OKED IN THE LOAN PAYABLE ACCOUNT. THE ASSESSEE HAS ALSO INCREASED THE WDV O F ASSETS. THE ASSESSEE HAS ALSO CLAIMED DEPRECIATION ON THE INCREASED WDV. HO WEVER, THE A.O. WAS OF THE OPINION THAT WDV CANNOT BE INCREASED ON ACCOUNT OF EXCHANGE RATE DIFFERENCE. ACCORDING TO THE A.O. NEITHER THE ASSESSEE HAS ACQU IRED A NEW ASSET NOR ANY VALUE 40 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ADDITION TO THE ASSETS HAS OCCURRED. THEREFORE, TH E A.O. HAS MADE AN ADDITION OF RS.5,74,111/- BEING 50% OF THE DEPRECIATION CLAIMED . 75. AGGRIEVED, THE ASSESSEE COMPANY WENT BEFORE THE LD. CIT(A), WHO HAS DELETED THIS ADDITION. 76. WE HAVE FOUND IT FOR A FACT THAT THE ASSESSEE C OMPANY HAS BOOKED EXCHANGE RATE FLUCTUATION AT RS.76,54,811/- IN THE PLANT & M ACHINERY OF THE GRANITE DIVISION AFTER 30.09.2008. THE A.O. HAS ADMITTED THIS FACT (REFER PAGE NO.2 OF HIS ORDER). IT IS ALSO AN UNDENIABLE FACT THAT THE REPAID FOREIGN CURRENCY LOAN AMOUNTING TO RS.1,07,79,183/- DURING THE RELEVANT YEAR. AS PER THE PROVISIONS OF SECTION 43A OF THE ACT, WHEN THE ASSESSEE HAS ACQUIRED ANY ASSET I N ANY PREVIOUS YEAR FROM A FOREIGN COUNTRY OUTSIDE INDIA, FOR THE PURPOSE OF I TS BUSINESS/PROFESSION AND THERE IS A CHANGE IN EXCHANGE RATES DURING THE YEAR AFTER TH E ACQUISITION OF THIS ASSET, THIS INCREASED COST HAS TO BE ADDED TO THE COST OF THAT ASSET, WHICH IS TO BE MADE IN THE PREVIOUS YEAR IN WHICH THE ACTUAL PAYMENT IS MADE T O PAY THE LOAN. IN VIEW OF THE ABOVE CLEAR PROVISION, THIS CLAIM OF THE ASSESSEE B ECOMES ALLOWABLE. THE PROVISIONS OF SECTION 43(6) OF THE ACT ARE NOT RELE VANT FOR THIS PURPOSE. ACCORDINGLY, GROUND NO.1 OF THIS APPEAL OF THE REVE NUE IS DISMISSED. 41 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 77. THE FACTS APROPOS GROUND NO.2, WHICH RELATES TO THE DELETION OF RS.9,79,888/- MADE BY THE A.O. ON ACCOUNT OF APPORTIONMENT OF INT EREST TO EOU UNIT, ARE THAT WHILE COMPUTING THE INCOME OF THE EOU THE ASSESSEE HAS APPORTIONED HEAD-OFFICE EXPENSES IN THE RATIO OF TURNOVER OF EOU. IT WAS N OTICED THAT EXPENDITURE INCURRED TOWARDS PAYMENT OF INTEREST BY THE GRANITE DIVISIO N HAVE NOT BEEN APPORTIONED. WHEN EXPLANATION WAS CALLED FOR, IT WAS STATED THAT EACH UNIT HAS SEPARATE ARRANGEMENT FOR LOAN WITH BANKS FOR THE PURPOSE OF WORKING OUT CAPITAL AND TERM LOAN. HOWEVER, ON EXAMINATION OF INTER-UNIT ACCOUN TS IN THE BOOKS OF UNIT-I, THERE IS AN OPENING DEBIT BALANCE OF RS.7.74 CRORES IN TH E LEDGER ACCOUNT OF EOU UNIT-II. THIS IS FOUND REDUCED TO RS.6.18 CRORES AT THE END OF THE FINANCIAL YEAR. FROM THIS THE A.O. HAS FOUND THAT BORROWED CAPITAL OF GRANITE DIVISION WAS BEING UTILIZED IN THE EOU UNIT. A SUM OF RS.15,70,873/- WAS PAID AS INTEREST BY THE GRANITE DIVISION, APART FROM THE INTEREST ON SPECIFIC TERM LOAN ON POLISHING LINE MACHINERY. FROM THE PERUSAL OF THE LEDGER ACCOUNT AND OPENING AND CLOSING BALANCES OF THE EOU, IN THE BOOKS OF THE GRANITE DIVISION BORROWALS ARE NOT RELATED TO THE PURCHASES/SALES. THESE ARE IN THE FORM OF CREDIT F ACILITIES. WHEN THIS AMOUNT OF RS.15,70,873/- WAS APPORTIONED TO THE EOU UNIT IN T HE RATIO OF TOTAL TURNOVER AND THE TURNOVER OF THE EOU, THE APPORTIONABLE AMOUNT I S WORKED OUT AT RS.9,79,888/- AND THIS HAS BEEN ADDED. 42 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 78. IN FIRST APPEAL, THE ASSESSEE COMPANY WAS SUCCE SSFUL IN GETTING THIS AMOUNT DELETED. NOW THE REVENUE HAS RAISED THIS GROUND IN THIS SECOND APPEAL. 79. BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS FOR AND AGAINST THIS ADDITION. WE HAVE FOUND THAT DURING THE YEAR NO FU NDS HAVE BEEN ADVANCED BY THE GRANITE DIVISION TO THE EOU DIVISION. THE GRANITE DIVISION HAS ENOUGH RESERVES TO THE TUNE OF MORE THAN RS.44 CRORES. SIMILAR ISS UE IS FOUND TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE APEX COURT WH ILE DECIDING APPEAL PERTAINING TO A.Y. 2002-03. ACCORDINGLY, WE CONFIRM THE IMPUG NED DELETION AND DISMISS GROUND NO.2 OF THIS APPEAL. 80. THE FACTS APROPOS GROUND NO.3 OF THIS APPEAL AR E THAT THE ASSESSEE HAS CLAIMED A DEDUCTION UNDER SECTION 10B OF THE ACT WH ILE COMPUTING PROFITS AND GAINS OF BUSINESS ITSELF AND NOT FROM THE GROSS TOT AL INCOME. THE A.O. AFTER REFERRING TO SECTION 4 OF THE ACT AND SECTION 2(45) READ WITH SECTION 5 AND 80B(5), HAS CONCLUDED THAT IN ORDER TO ARRIVE AT GROSS TOTA L INCOME ADJUSTMENT AND BROUGHT FORWARD LOSSES ARE NECESSARY IN VIEW OF THE PROVISI ONS OF SECTION 80B(5) & SECTION 70 AND THE ASSESSEE HAS TO SET-OFF THE LOSSES OF TH E BUSINESS FIRST. THE A.O., ACCORDINGLY HAS REVISED THE CLAIM OF DEDUCTION UNDE R SECTION 10B OF THE ACT. AGGRIEVED, THE ASSESSEE FILED APPEAL AND LD. CIT(A) HAS DECIDED THIS ISSUE, IN 43 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 FAVOUR OF THE ASSESSEE BY MAKING THE FOLLOWING OBSE RVATIONS IN HIS ORDER IN PARA 5.3 :- 5.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AS WELL AS THE FINDINGS OF THE A.O. GIVEN IN THE ASSESSMENT ORDER UNDER APPEAL ALONG WITH THE VARIOUS DECISIONS RELIED UPON BY THE APPEL LANT AS WELL AS THE A.O. AND IT IS SEEN THAT THE LD. A.O. HAS RESTRICTE D THE CLAIM OF THE APPELLANT U/S 10B OF THE ACT ON THE PRETEXT THAT EV EN THOUGH SECTION 10B ARE PART OF CHAPTER-III, BUT THE DEDUCTION COMPUTAT ION OF TOTAL INCOME CAN BE COMPUTED ONLY AFTER ALLOWING INTRA HEAD SET- OFF. THE ASSESSING OFFICER HAD COMPARED THE DEDUCTIONS ALLOWABLE UNDER CHAPTER-VIA, AND HELD THAT IT IS SIMILAR TO CHAPTER-III AND, THEREFO RE, THE DECISION LAID DOWN IN SWORD GLOBAL (I) PVT. LTD. (2008) 122 ITR 1 03 CHENNAI BENCH- C AND IN CASE OF ACIT VS. JEWELLERY SOLUTIONS INTER NATIONAL PVT. LTD. WHEREIN IT HAS BEEN HELD THAT BROUGHT FORWARD LOSS IS TO BE SET OFF FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B APPLIES TO T HE APPELLANTS CASE. THE APPELLANT ON THE CONTRARY RELIED ON THE CASE OF SPECIAL BENCH DIVISION OF ITAT, CHENNAI IN CASE OF SCIENTIF IC ATLANTA INDIA TECHNOLOGY (P) LTD. VS. ASSISTANT COMMISSIONE R OF INCOME TAX (2010) 129 TTJ (CHENNAI)(SB) 273: (2010) 2 ITR 66 WHICH IS FOR SEC 10A BUT THE PROVISIONS ARE SIMILAR AND IT WILL BE APPLICABLE TO SEC 10B ALSO WHEREIN IT HAS BEEN HELD THAT AS PER THE SCHEME OF THE ACT, THE PROFITS OF THE UNIT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT FORM PART OF THE INCOME COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND A DEDUCTION IN RESPECT OF THE PROFITS AS SPECIFIED IN S.10A IS REQUIRED TO BE MADE AT THE STAGE OF COMPUTING THE INCOME UNDER THAT HEAD THUS, DEDUCTION UNDER S.10 A IS TO BE GRANTED WHILE COMPUTING THE PROFITS AND GAINS OF BUSINESS I TSELF AND NOT FROM THE GROSS TOTAL INCOME HENCE, AS LONG AS S.10A DOES N OT FALL UNDER CHAPTER VI-A, S.80AB CANNOT BE APPLIED. IN CASE OF APPELLANT SINCE OUT OF FOUR UNITS, THE UNITNO.2 BEING EOU IS QUALIFIED FOR THE DEDUCTION, ONLY THE PROFIT S AND GAINS OF THAT PARTICULAR UNDERTAKING WHICH QUALIFIES FOR DEDUCT ION UNDER S.10B ARE TO BE RECKONED THUS, IN COMPUTING DEDUCTION UNDER S.10B, THE TOTAL INCOME AS PER THE PROVISIONS OF THE ACT IN RESPECT OF THAT UNDERTAKING HAS TO BE ASCERTAINED. FURTHER, IT IS NOWHERE MENT IONED IN S.10B THAT SUCH DEDUCTION IS TO BE RESTRICTED TO THE TOTAL INC OME OF THE ASSESSEE 44 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 COMPUTED UNDER THE PROVISIONS OF THE ACT, BEFORE AL LOWING SUCH DEDUCTION. THE A.O. HAS RELIED ON SWORD GLOBAL (I) PVT. LTD. (2008) 122 ITR 103 CHENNAI BENCH AND THE SAME BENCH LATE RELYING O N SPECIAL BENCH DECISION REFERRED SUPRA HAS HELD IN CASE OF ASSISTA NT COMMISSIONER OF INCOME TAX VS. CHARON TEC P. LTD. (2012) 34 CCH 177 CHEN TRIB CONTRARY THAT WHEN DIVERGENT VIEWS HAVE BEEN TAKEN BY THE HIGH COURTS OF DIFFERENT JURISDICTIONS ON THIS ISSUE DECISION FAVOURABLE TO THE ASSESSEE IS TO BE FOLLOWED TRIBUNAL RIGHTLY FOLLO WED THE JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOK OGAWA INDIA LTD. HAS HELD THAT EXEMPTION/DEDUCTION UNDER S.10B IS TO BE ALLOWED WITHOUT SETTING OFF BROUGHT FORWARD UNABSORBED LOSS AND DEP RECIATION FROM EARLIER ASSESSMENT YEAR OR CURRENT ASSESSMENT YEAR. IN VIEW OF ABOVE DECISION OF THE HONBLE SPECIAL BENCH OF ITAT, CHENNAI WHICH IS APPLICABLE IN THE CASE OF APPELLAN T IT IS HELD THAT THE APPELLANT HAS RIGHTY CLAIMED THE DEDUCTION U/S 10B OF THE IT ACT, 1961 AND THE DISALLOWANCE MADE BY THE A.O. IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 81. AFTER COGITATING THE ARGUMENTS OF THE PARTIES, WE ARE CONVINCED THAT IN COMPUTING DEDUCTION UNDER SECTION 10B, THE TOTAL IN COME AS PER THE PROVISIONS OF THE ACT, IN RESPECT OF THAT UNDERTAKING HAS TO BE ASCERTAINED. THIS DEDUCTION CANNOT BE RESTRICTED TO THE TOTAL INCOME AS COMPUTE D BEFORE ALLOWING SUCH DEDUCTIONS. THE DEDUCTION UNDER SECTION 10A AND 10 B ARE ON THE SAME FOOTING AND WHATEVER DECISION ARE RENDERED ON SECTION 10A IT WI LL ALSO APPLY TO SECTION 10B. THERE ARE NUMEROUS DECISIONS AND WE HAVE MADE THE A BOVE DISCUSSION ON THOSE LINES ONLY. ACCORDINGLY, GROUNDNO.3 IS ALSO DISMIS SED. 82. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. 45 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 H) ITA NO.390/JODH/2011 FOR A.Y. 2007-08 BY THE R EVENUE 83. THIS APPEAL OF THE REVENUE FOR A.Y. 2007-08 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 30.08.2011. 84. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. ALLOWING THE EXPENSES OF RS.2,52,75,103/- ON A CCOUNT OF CONVERSION CHARGES INSPITE OF THE FACTS THAT NEITHER THE LIABI LITY WAS QUANTIFIED/CRYSTALLIZED NOR PAYABLE BY THE ASSESSEE AS PER THE AUDITED BOOKS OF ACCOUNTS. 2. ACCEPTING THE REVISED RETURN INSPITE OF THE FA CT THAT THE RETURN WAS REVISED THOUGH THE EXPENDITURE OF RS.2,52,75,103/- WAS QUANTIFIED, CRYSTALLIZED AND PAID THE FINANCIAL YEAR RELEVANT T O SUBSEQUENT ASSESSMENT YEAR. 3. ALLOWING THE CLAIM OF RS.13,55,978/- MADE U/S 8 0IA OF THE I.T. ACT. 4. DELETING THE ADDITION OF RS.9,41,303/- MADE U/S . 40(A)(IA) OF THE I.T. ACT. 85. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORDS AVAILABLE ON RECORD. 86. GROUND NOS.3 & 4 OF THE APPEAL STAND COVERED IN FAVOUR OF THE ASSESSEE. THEREFORE, THE SAME HAVE TO BE DISMISSED. 46 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 87. GROUND NOS.1 & 2 ARE INTERCONNECTED AND RELATE TO THE ALLOWABILITY OF DEVELOPMENT EXPENSES PAYMENT MADE TO UIT, BHILWARA. 88. THE FACTS APROPOS GROUND NOS.1 & 2 ARE THAT THE ASSESSEE FILED ORIGINAL RETURN FOR THE A.Y. 2007-08 ON 26.10.2007 DECLARING TOTAL INCOME OF RS.5,42 CRORES. THIS RETURN WAS REVISED ON 07.01.2009 IN WHICH TOTA L INCOME WAS DECLARED AT RS.2.09 CRORES. IN THE REVISED RETURN, THE ASSESSE E HAS CLAIMED RS.2,52,75,103/- AS CONVERSION CHARGES OF PLOTS. THE ASSESSEE HAD PURC HASED 124.80 BIGHA LAND @ RS.12,00,000/- PER BIGHA FOR A TOTAL CONSIDERATION OF RS.1,59,59,520/- IN THE MONTH OF DECEMBER 2006. THE ASSESSEE DEVELOPED THIS PIEC E OF LAND WITH THE EXPENDITURE OF RS.72,79,991/-. THE ASSESSEE COMPANY APPLIED FO R CONVERSION ON 04.01.2007. THE UIT, BHILWARA ISSUED A LETTER APPROVING LAYOUT PLAN ON THE FULFILLMENT OF VARIOUS CONDITIONS IMPOSED VIDE LETTER DATED 19.02. 2007. ONE OF THE CONDITIONS WAS THAT THE COMPANY HAS TO DEPOSIT CONVERSION CHAR GES AND DEVELOPMENT CHARGES AS PER RULES AND REGULATION OF UIT. BY COMPLYING W ITH THE REQUISITE DIRECTIONS AND FULFILLING THE CONDITIONS SO FIXED, THE ASSESSEE CO MPANY UNDERTOOK DEVELOPMENTAL WORK BY MAKING GATE, SEWERAGE AND DRAINAGE AND INCU RRED RS.72,79,991/- UPTO 31.03.2007. AT THE TIME OF BOOKING 1064960 SQ. FT. OF LAND WERE SOLD FOR RS.15.13 CRORES. THE COMPANY UNDERTOOK TO GET CONVERSION OF LAND FOR RESIDENTIAL USE AND TO MANAGE ROADS, SEWERAGE ETC. IN THE BOOKS OF ACC OUNT EXPENSES OF 47 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 RS.72,79,991/- HAVE BEEN REFLECTED. THE FIRST SALE TOOK PLACE ON 18.08.2007 AND THE ASSESSEE COMPANY WAS ASKED TO PAY CONVERSION AN D DEVELOPMENTAL CHARGES TO UIT BEFORE ISSUING PATTA. DURING AUDIT PROCEEDINGS FOR A.Y. 2008-09 IT WAS LEGALLY OPINED THAT CONVERSION CHARGES WERE PAID FO R THE LAND WHICH WAS SOLD IN THE A.Y. 2007-08. THEREFORE, THESE ARE PRIOR PERIOD EX PENSES. ON REALIZING THIS BONAFIDE MISTAKE, RETURN FOR A.Y. WAS REVISED AND D URING THE YEAR, SALES OF RS.15.13 CRORES HAVE BEEN EFFECTED AGAINST WHICH PU RCHASE COST OF LAND OF RS.15.95 CRORES AND DEVELOPMENT COST OF RS.73,79,99 1/- HAS BEEN DEBITED. DURING THE F.Y. 2007-08 WHATEVER EXPENSES WERE INCURRED TO WARDS CONVERSION WERE DEBITED AND HAS BEEN SHOWN AS PRIOR PERIOD ADJUSTME NT IN F.Y. 2007-08. THE ASSESSEE HAS BOOKED THIS SALE DURING THE CURRENT A. Y. BUT THE A.O. WAS NOT AGREEABLE. 89. DURING APPEAL, SIMILAR REASONS WERE GIVEN AND T HE LD. CIT(A) HAS ALLOWED THIS CLAIM OF THE ASSESS. 90. BEFORE US, BOTH THE PARTIES HAVE REITERATED THE IR EARLIER STAND BUT WE HAVE FOUND THAT THE RETURN HAS BEEN REVISED UNDER THE TE RMS OF SECTION 132(5) OF THE ACT AND THE ASSESSEE HAD FILED ORIGINAL RETURN WITHIN T IME. AS THE ASSESSEE COMMITTED OMISSION TO INCLUDE THE CONVERSION CHARGES OF LAND, THIS SEEMS TO BE A BONAFIDE 48 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 MISTAKE. THIS MISTAKE WAS DISCUSSED BY THE ASSESSE E ITSELF AND NOT DUE TO ANY ENQUIRY MADE BY THE DEPARTMENT. SO IT WAS A BONAFI DE OMISSION WHICH CAN BE RECTIFIED AS PER LAW. THUS, THERE IS NO INFIRMITY OR FALLACY IN THIS FINDING OF LD. CIT(A). WE WILL REPRODUCE PARA NO.5. 3 OF CIT(A)S ORDER AT PAGE NOS.7 TO 9 WHICH WILL GIVE A CLEAR PICTURE OF REASONS WHY HE H AS DELETED THE IMPUGNED ADDITION. 5.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPEL LANT COMPANY AS WELL AS ASSESSMENT ORDER. THE A.O. HAS BASICALLY TR EATED THAT CONVERSION CHARGES WERE NOT IN PURSUANCE OF ANY DEMAND NOTICE AND IT WAS NOT LIABILITY WHICH HAS ACCRUED DURING THE YEAR AND IT WAS A CONTINGENT LIABILITY. ALSO, THE PAYMENT OF THE AMOUNT WAS MADE IN THE NEXT YEAR SO THE AMOUNT OF RS.2,52,75,103/- IS NOT DEDUCTABLE. IN THIS REGARD, IT IS WORTHWHILE TO MENTION THAT IT IS A FACT THAT BEFORE THE PLOTS CAN BE SOLD TO THE PUBLIC, THEY HA VE TO BE CONVERTED FROM 'AGRICULTURAL USE' TO 'RESIDENTIAL USE' BY THE UIT FOR WHICH ASSESSEE HAD APPLIED ON 4.1.2007. ASSESSEE'S LAY-OUT PLAN WAS AP PROVED BY THE UIT SUBJECT TO VARIOUS CONDITIONS AND AS PER CONDITION NO.L, ASSESSEE HAS TO DEPOSIT CONVERSION CHARGES AND DEVELOPMENT CHARGES AS PER RULES. THE ASSESSEE HAS SOLD 10,64,960 SQFT OF THE LAND DURING THE CURRENT YEAR AND SALES OF RS.15.13 CRORE THEREOF HAVE BEEN OFFERED F OR TAXATION. NOW ISSUE IS WHETHER THE LIABILITY TO PAY CONVERS ION CHARGES AS ARISEN DURING THE YEAR OR NOT. IT IS EVIDENT THAT A SSESSEE CANNOT SALE AGRICULTURAL LAND WITHOUT GETTING IT CONVERTED FOR THE RESIDENTIAL USE AND FOR THIS, CONVERSION CHARGES FOR CHANGE OF USE OF T HE LAND ARE TO BE PAID AS PER THE APPROVAL LETTER OF UIT. THE SAID CHARGES WERE TO BE PAID BEFORE SALES BE REGISTERED IN THE NAME OF THE BUYER S. AS PER MEMORANDUM OF UNDERSTANDING WITH, SHRI DILIP SINGH CHOUHAN WHO HAD BOOKED THE SALES OF THE PLOTS, IT WAS ONE OF THE CO NDITIONS THAT ASSESSEES LAYOUT PLAN HAS BEEN APPROVED BY THE UIT SUBJECT TO FULFILLMENT OF THE VARIOUS TERMS & CONDITIONS IN THE APPROVAL LETTER A ND ASSESSEE HAS FULL RIGHTS AND POSSESSION OVER THE SAID PLOTS. ALSO, AS SESSEE HAD TO GET NECESSARY PERMISSION FROM THE UIT AS PER RULES & RE GULATIONS FOR 49 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 ISSUANCE OF PATTAS. BASED ON THESE CONDITIONS ONLY, THE SALES OF PLOTS WAS MADE BY SH. DILIP SINGH CHOUHAN. SO IT IS EVIDENT T HAT BEFORE ASSESSEE COULD HAVE ENTERED INTO ANY SALE OF PLOTS, IT HAD T O GET THE LAND CONVERTED FROM AGRICULTURAL USE TO RESIDENTIAL USE. THIS WAS POSSIBLE ONLY IF THE CONVERSION CHARGES ARE PAID BY THE ASSESSEE. AS THE ASSESSEE HAS SOLD LAND MEASURING 10,64,960 SQFT. DURING THE YEAR UNDE R CONSIDERATION, LIABILITY OF CONVERSATION CHARGES HAD BECOME DUE ON THE ASSESSEE AS PER THE TERMS OF MEMORANDUM OF UNDERSTANDING WITH SHRI DILIP SINGH CHOUHAN AS WELL AS WITH THE ULTIMATE BUYERS OF THE LAND. SUCH LIABILITY HAS ACCRUED DURING THE CURRENT FINANCIAL YEAR AS SA LES WERE MADE DURING THE CURRENT YEAR ITSELF & ASSESSEE IS FOLLOWING MER CANTILE SYSTEM OF ACCOUNTING. IN THIS CONTEXT, HON'BLE RAJASTHAN HIGH COURT HAS HELD IN THE CASE OF UDAIPUR MINERAL DEVELOPMENT SYNDICATE (P.) LTD. VS. DCIT 261 ITR 706 (RAJ.) REGARDING YEAR OF ALLOWABILITY OF TH E LIABILITY INCURRED FOR RESTORING TO SURFACE LAND USED FOR EXCAVATING SOAPS TONE TO ITS ORIGINAL CONDITION, WHERE WAS DECIDED AS UNDER:- ASSESSEE-LESSEE BEING LIABLE UNDER THE TERMS OF LE ASE TO RESTORE THE SURFACE LAND USED BY IT FOR EXCAVATING SOAPSTONE CRUDE TO ITS ORIGINAL CONDITION AS FAR AS POSSIBLE, LIABILITY ACCRUED ON THE DATE WHEN THE PITS WERE DIGGED AND D EDUCTION OF RESTORATION EXPENSES WAS ALLOWABLE ACCORDINGLY A S THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING. FURTHER IN RESPECT TO WARRANTY EXPENSES, IN THE C ASE OF BHARAT EARTH MOVERS VS. CIT 245 ITR 428 (SC) IT HAS BEEN H ELD UNDER :- THE LAW IS SETTLED: IF A BUSINESS LIABILITY HAS DE FINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALL OWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AN D DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPAB LE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTU AL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUI REMENTS ARE SATISFIED THE LIABILITY IS NOT A CONTINGENT ONE. T HE LIABILITY IS IN PRARSENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOSE NOT MAKE ANY DIFFERENCE IT THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN - METAL BOX CO. OF INDIA LTD. VS. THEIR WORKMEN (1969) 73 ITR 53 (SC) AND 50 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 CALCUTTA CO. LTD. VS. CIT (1959) 37 ITR 1 (SC) :TC 16R.197. IT IS SEEN THAT A,O. HAS BROUGHT TO TAX AND THE I NCOME FROM THE SALES OF THE ABOVE PLOTS TO THE TAX, IT CANNOT BE S TATED THAT CORRESPONDING LIABILITIES AND EXPENSES SHOULD NOT BE ALLOWED IN T HE ASSESSEE'S CASE. AS REGARDING ENTRIES IN THE BOOKS OF ACCOUNT, IT IS WORTHWHILE TO NOTE THAT ASSESSEE HAS REVISED ITS RETURN OF INCOME LOOKING INTO THE FACT THAT THIS LIABILITY PERTAINS TO CURRENT YEAR AND TH IS WAS A VALID REVISED RETURN. HAD THE ASSESSEE CLAIMED THE SAID LIABILITY IN THE NEXT YEAR, REVENUE WOULD HAVE DISALLOWED THE SAME TREATING IT AS 'PRIOR PERIOD EXPENSES'. AS REGARDING TREATMENT GIVEN IN THE BOOK S OF ACCOUNT, IT HAS BEEN HELD THAT A RECEIPT WHICH CANNOT BE RECORDED A S INCOME CANNOT BECOME SO MERELY BECAUSE THE ASSESSEE HAS ERRONEOUS LY CREDITED INTO P&L ACCOUNT IN THE CASE OF CIT VS. STEWARD LOYAD IN DIA 165 ITR 416 & CIT VS. INDIA DISCOUNT CO. LTD. 75 ITR 191 (SC). SI MILAR IS THE CASE IN RESPECT OF THE LIABILITIES AND ITS BOOKS TREATMENT CANNOT GO TO DECIDE WHETHER SAID LIABILITY IS ALLOWABLE OR NOT. ONE HAS TO EXAMINE FROM THE FACTUAL ASPECT WHETHER ABOVE AMOUNT HAS BECOME AS D UE OR NOT. AS SOON AS SALES HAVE BEEN BOOKED, IT IS BUT NATURAL THAT C ORRESPONDING EXPENSES ARE LIABLE TO BE DEDUCTED AS THE ASSESSEE IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING. IN VIEW OF ABOVE DISCUSSION, THE ADDITION OF RS.2 ,52,75,103/- ON ABOVE ACCOUNT IS DELETED. 91. AS WE HAVE DISCUSSED ABOVE, THIS DECISION IS CO RRECTLY AS PER LAW AND NO INTERFERENCE IS CALLED FOR. AS A RESULT, GROUND NO S.1 & 2 OF REVENUES APPEAL STAND DISMISSED. 92. AS WE HAVE ALREADY STATED, GROUND NOS.3 & 4 STA ND ALLOWED BEING COVERED IN FAVOUR OF THE ASSESSEE AS WE HAVE DISCUSSED IN OTHE R A.YS. BY DISPOSING OF THOSE 51 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 GROUNDS IN THE EARLIER PART OF THIS APPEAL. BOTH T HESE GROUNDS ARE COVERED IN FAVOUR OF THE ASSESSEE AND THEREFORE, THESE GROUNDS CANNOT BE ALLOWED. AS A RESULT, GROUND NOS.3 & 4 OF REVENUES APPEAL STAND DISMISSED. 93. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. I) ITA NO.200/JODH/2013 FOR A.Y. 2008-09 BY THE R EVENUE 94. THIS APPEAL OF THE REVENUE FOR A.Y. 2008-09 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 04.01.2013. 95. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE R EVENUE IN ITS APPEAL:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN :- 1. DELETING THE DISALLOWANCES U/S 40(A)(IA) OF THE I.T. ACT OF RS.1,06,635/- MADE BY THE A.O. ON ACCOUNT OF PAYMEN T MADE UNDER CONTRACTUAL OBLIGATION TO M/S CONCOR ONWARDS HANDLI NG CHARGES FOR SERVICE RENDERED BY HIM ON WHICH NO TDS WAS DEDUCTE D. 2. DIRECTING TO ALLOW THE CLAIM OF THE ASSESSEE U /S 80IA OF RS.1,09,16,118/- WHICH WAS DISALLOWED BY THE AO IGN ORING THE FACT THAT THE PROFIT FROM ELIGIBLE BUSINESS FOR THE PURPOSE O F DETERMINATION OF QUANTUM OF DEDUCTION U/S 80IA OF THE I.T. ACT HAS T O BE COMPUTED TREATING IT TO BE INDEPENDENT AND THE ONLY UNIT AND THEREFORE, BROUGHT FORWARD LOSES AND DEPRECIATION OF ELIGIBLE HAVE TO BE SET-OFF FOR COMPUTING THE DEDUCTION U/S 80IA OF THE I.T. ACT EV EN THOUGH THEY HAVE BEEN ALLOWED TO BE SET-OFF AGAINST THE OTHER INCOME IN EARLIER YEARS. 52 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 96. THE FACTS OF GROUND NO.1 OF THIS REVENUES APPE AL ARE THAT THE ASSESSEE HAS DIRECTLY MADE PAYMENT OF RS.1,06,635/- TO M/S. CONC OR UNDER THE CONTRACTUAL OBLIGATION. AS PER THE A.O., TDS WAS TO BE DEDUCTE D ON THIS PAYMENT. THE ASSESSEE HAS FAILED TO DEDUCT TDS AT SOURCE, THEREF ORE, THE A.O. DISALLOWED THE ENTIRE PAYMENT OF RS.1,06,635/- UNDER SECTION 40(A) (IA) OF THE ACT. 97. IN FIRST APPEAL, THE ASSESSEE WAS SUCCESSFUL IN GETTING THIS FINDING REVERSED. NOW THE REVENUE HAS DISPUTED THE IMPUGNED FINDING. BOTH THE PARTIES HAVE REITERATED THEIR ORIGINAL STAND. 98. AFTER HEARING BOTH THE SIDES, WE HAVE FOUND THA T THE ASSESSEE IS NOT OBLIGED TO TDS AS UNDER IDENTICAL FACTS AND CIRCUMSTANCES O F THE ASSESSEES CASE AND THERE BEING NO SLIGHTEST DIFFERENCE IN THE FACTS IN A.Y. 2007-08, WE HAVE TAKEN A SIMILAR VIEW. ACCORDINGLY, THIS GROUND CANNOT BE ALLOWED, THUS WE DISMISS THIS GROUND OF THE REVENUE. 99. THE FACTS OF GROUND NO.2 ARE THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT OF RS.1,09,16,118/- WHICH W AS NOT ALLOWED BY THE A.O. BUT ALLOWED BY THE LD CIT(A). THE ASSESSEE HAS CLAIMED EVEN UNDER SECTION 80IA AMOUNTING TO RS.1,09,16,118/- IN RESPECT OF INCOME FROM WIND MILL DIVISION BEFORE SETTING-OFF YEAR-WISE CARRY FORWARD LOSS/UN ABSORBED DEPRECIATION OF THIS 53 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 UNIT. THIS ISSUE STANDS COVERED IN FAVOUR OF THE A SSESSEE BY NUMEROUS DECISIONS. ACCORDINGLY, WE DO NOT FIND ANY VALID REASON TO INT ERFERE IN THIS FINDING OF LD. CIT(A) AND DISMISS GROUND NO.2 OF THIS APPEAL. 100. IN THE RESULT, APPEAL OF THE REVENUE STANDS DI SMISSED. 101. TO SUM UP, APPEAL IN ITA NO.360/JU/2008 OF THE REVENUE IS DISMISSED, ITA NO.730/JU/2007 OF THE REVENUE IS PARTLY ALLOWED , ITA NO.335/JU/2009 OF THE REVENUE IS DISMISSED, ITA NO.378/JU/2008 OF THE REV ENUE IS DISMISSED, ITA NO.308/JDPR/2008 OF THE ASSESSEE IS PARTLY ALLOWED, ITA NO.194/JODH/2013 OF THE REVENUE IS DISMISSED, ITA NO.449/JODH/2013 OF T HE REVENUE IS DISMISSED, ITA NO.390/JODH/2011 OF THE REVENUE IS DISMISSED, I TA NO.200/JODH/2013 OF THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.2013) SD/- SD/- (N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH NOVEMBER, 2013 PBN/* 54 ITA NO.360/JU/2008, 730/JU/2007, 335/JU/2009, 378/JU/2008, 308/JDPR/2008, 194/JODH/2013, 449/JODH/2013, 390/JODH/2011, 200/JODH/2013 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, JODHPUR BENCH, JODHPUR 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, JODHPUR