Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 94324 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 8 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-09-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
09-07-2015
Assessment Year
2010-2011
Appeal Filed On
29-12-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD , BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER . IT A NO. 3 773 /AHD/20 08 (ASSESSMENT YEAR: 2007 - 08 ) M/S. SUZLON ENERGY LIMITED, SUZLON HOUSE, 5, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD APPELLANT VS. ACIT, CIRCLE - 8, AHMEDABAD RESPONDENT & IT A NO. 113 /AHD/20 09 (ASSESSMENT YEAR: 2007 - 08 ) AC IT (OSD) , CIRCLE - 8 , AHMEDABAD APPELLANT VS. SUZLON ENERGY LIMITED, SUZLON HOUSE, 5, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD RESPONDENT & IT A NO. 2052 /AHD/20 09 (ASSESSMENT YEAR: 2005 - 06 ) I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 2 DCIT(OSD), CIRCLE - 8, AHMEDABAD APPELLANT VS. SUZLON ENERGY LIMITED, SUZLON HOUSE, 5, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD RESPONDENT & ITA NOS. 3475 & 3476/AHD/2010 (ASSESSMENT YEAR: 2010 - 11 ) THE ADIT (INTL. TAXN.), AHMEDABAD. 4 TH FLOOR, NATURE VI EW BUILDING, ASHRAM ROAD, AHMEDABAD APPELLANT VS. SUZLON ENERGY LIMITED, SUZLON, 5, SHRIMALY SOCIETY, NR. SHRI KRISHNA CENTRE, NAVRANGPURA, AHMEDABAD - 380009 RESPONDENT & C.O. NOS. 61 & 62/AHD/2014 (ASSESSMENT YEAR: 2010 - 1 1 ) SUZLON ENERGY LIMITED, 5, SHRIMALY SOCIETY, SUZLON HOUSE, NR. SHRI KRISHNA CENTRE, NAVRANGPURA, AHMEDABAD - 380009 APPELLANT VS. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 3 ADIT, INT. TAX., AHMEDABAD RESPONDENT PAN: A A D C S0472 N / BY REVENUE :S MT. VIBHA BHALLA, CIT. D.R. / SHRI D. C. MISHRA, SR. D.R. / BY ASSESSEE : SHRI TUSHAR HEMANI , A.R. / DATE OF HEARING : 09 . 0 7 .201 5 / DATE OF PRONOUNCEMENT : 03 . 0 9 .201 5 ORDER PER SHAILENDRA KUMAR YADAV, J . M: ALL THESE APPEALS AND CROSS OBJECTIONS PERTAIN TO SAME ASSESSEE FOR DIFFERENT YEARS. SO, THEY ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR SAKE OF CONVENIENCE. 2. FIRST WE TAKE ITA NO. 3 773 /AH D/20 08 FOR A.Y. 200 7 - 0 8 . A SSESSEE HAS FILED TH IS APPEAL ON THE FOLLOWING GROUND S : 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN APPLYING THE PROVISIONS OF SEC.14A OF THE ACT IN DISALLOWING AN AMOUNT OF RS.2,66, 38,938/ - ON AN ESTIMATED AND PRESUMPTIVE BASIS. 2. ALTERNATIVELY AND WITHOUT PREJUDICE THE SAID DISALLOWANCE IS HIGHLY EXAGGERATED AND EXCESSIVE. IN I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 4 THE FACTS AND CIRCUMSTANCES OF THE CASE, THE SAID DISALLOWANCE OUGHT TO HAVE BEEN ESTIMATED AT SOME REASO NABLE TOKEN FIGURE. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN NOT GRANTING DEDUCTION U/S.80IB OF THE ACT ON INTEREST ON FDR AND ICD AMOUNTING TO RS.18,15,43,011/ - . 4. BOTH THE LOWER AUTHORITIES HAVE ERRED I N LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS SUBMISSIONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING THE COURSE OF THE PROCEEDINGS AND NOT PROPERLY APPRECIATING VARIOUS FACTS AND LAW IN ITS PROPER RESPECTIVE. 5. LEVY OF IN TEREST U/S 234A/B/C/D OF THE ACT IS NOT JUSTIFIED. 6. LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN INITIATING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CONTEMPLATED UNDER T HE ACT. 3. AT THE OUTSET OF HEARING LEARNED AUTHORIZED REPRESENTATIVE DID NOT PRESS GROUND NOS. 4, 5 & 6. SO, THEY ARE DISMISSED AS NOT PRESSED. 3.1 ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING WIND TURBINE GENERATORS (WTGS) AT VARIOUS UNITS, D AMAN AND PONDICHERRY DHULE. 4. FIRST ISSUE IS ASSESSEES APPEAL FOR A.Y. 2007 - 08 IS WITH REGARDS TO DISALLOWING AN AMOUNT OF RS.2,66,38,938/ - BY INVOKING PROVISIONS OF SECTION 14A. ASSESSING OFFICER FOUND THAT ASSESSEE HAS MADE HUGE INVESTMENTS IN ITS SU BSIDIARY I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 5 COMPANIES AND PREFERS SHARES AMOUNTING TO RS.521,58,85,747/ - . HE FOUND THAT ASSESSEE HAD TAKEN HUGE BORROWED FUNDS ON WHICH IT HAS PAID INTEREST, SO PART OF INTEREST ON BO RROWED FUNDS FOR EARNING THE EX EMPT DIVIDEND WAS REQUIRED TO BE DISALLOWED. SIMILAR DISALLOWANCE WAS MADE IN A.Y. 2006 - 07 WORKING OUT THE INTEREST FROM THE DATE OF INVESTMENT TO 31.03.2006. FOR THE REASONS SIMILAR TO THOSE IN A.Y. 2006 - 07, ASSESSING OFFICER MADE DISALLOWANCE IN THE YEAR UNDER CONSIDERATION. ASSESSING OFFICER R EJECTED THE CONTENTION OF ASSESSEE THAT RULE 8D IS NOT APPLICABLE. AS RULE 8D WAS NOTIFIED ON 24.03.2008 AND IT PRESCRIBED THE METHOD OF WORKING THE DISALLOWANCE, ASSESSING OFFICER WORKED OUT THE DISALLOWANCE AS PER RULE 8D AND DISALLOWED RS.2 , 66,38,938/ - BY APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT. 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFIC ER ON THE ISSUE. 4.2 SAME HAS BEEN OPPOSED ON BEHALF OF ASSESSEE INTER ALIA STATING THAT ISSUE IS DIRECTLY COVERED IN FAVOUR OF ASSESSEE BY THE ORDER OF ITAT IS ASSESSEES OWN CASE FOR A.Y. 2005 - 06 AND 2006 - 07 REPORTED AT [2012] 20 ITR (TRIB) 391 @ 400 (A HMEDABAD). ACCORDING TO LEARNED AUTHORIZED REPRESENTATIVE, ASSESSING OFFICER MADE DISALLOWANCE U/S.14A AS PER RULE 8D FOR THE REASONS SIMILAR TO THOSE IN A.Y. 2006 - 07. WORKING OF DISALLOWANCE U/S. 14A AS PER RULE 8D IS PLACED AT PAGE NO.146 I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 6 OF THE PAPER BOOK. DISALLOWANCE OF RS.2,66,38,938/ - COMPRISES OF TWO ELEMENTS VIZ. (A) OUT OF INTEREST RS.1,85,03,081/ - AND (B) OUT OF OTHER EXPENSES RS.81,35,856/ - . WITH REGARDS TO DISALLOWANCE OUT OF INTEREST EXPENSES, STAND OF ASSESSEE HAS BEEN THAT INVESTMENT S WERE MADE BY ASSESSEE IN ITS INDIAN SUBSIDIARIES FOR THE PURPOSES OF PROMOTING, SUPPORTING AND PROTECTING BUSINESS INTEREST OF ASSESSEE OUT OF COMMERCIAL EXPEDIENCY AND BUSINESS PRUDENCE. BANKS LENDING MONEY TO ASSESSEE MONITOR THE USE OF FUNDS SO AS TO ENSURE THAT BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF FINANCING WORKING CAPITAL. WORKING CAPITAL LIMITS ARE SANCTIONED SUBJECT TO A CONDITION THAT BORROWED FUNDS SHALL NOT BE UTILIZED FOR THE PURPOSE OF SUBSCRIPTION OF SHARES OR DEBENTURES. SAMPLE COPY OF SANCTION LETTER ISSUED BY IDBI IS PLACED AT PAGE NOS. 134 TO 145 OF PAPER BOOK . RULE 8D PRESCRIBED FOR WORKING OUT DISALLOWANCE U/S 14A IS NOT APPLICABLE FOR ASSESSMENT YEARS PRIOR TO A.Y. 2008 - 09. HENCE, FOR A.YS. PRIOR TO A.Y. 2008 - 09 (AS IN TH E PRESENT CASE), ASSESSING OFFICER HAS TO PROVE THE NEXUS THAT BORROWED FUNDS HAVE BEEN USED FOR MAKING INVESTMENTS WHICH GENERATE TAX FREE INCOME PRIOR TO MAKING DISALLOWANCE U/S.14A. ASSESSING OFFICER HAS NOT RECORDED ANY FINDING REGARDING ANY DIRECT NE XUS BETWEEN INTEREST BEARING BORROWED FUNDS AND INVESTMENT IN SUBSIDIARIES. FURTHER, STAND OF ASSESSEE HAS BEEN THAT ASSESSEE WAS HAVING SUBSTANTIAL INTEREST FREE FUNDS FOR MAKING SUCH INVESTMENTS. ASSESSEES TOTAL INVESTMENTS IN INDIAN SUBSIDIARIES WER E ONLY I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 7 RS.176.25 CRORES WHEREAS ITS SHARE CAPITAL AND RESERVES AND SURPLUS AGGREGATED TO RS.3,713.31 CRORES WHICH IS SUFFICIENT FOR INVESTMENT IN INDIAN SUBSIDIARIES. FURTHER, ACCORDING TO LEARNED AUTHORIZED REPRESENTATIVE, ASSESSEES OWN FUNDS HAVE INCRE ASED BY RS.891.06 CRORES (I.E. RS.3713.31 CRORES RS.2,822.25 CRORES) DURING YEAR UNDER CONSIDERATION WHICH IS MORE THAN IN PURSUANT TO THE INVESTMENTS IN INDIAN SUBSIDIARIES. LEARNED AUTHORIZED REPRESENTATIVE FURTHER CONTENDED THAT ASSESSEES CASH PROFI TS WERE TO THE TUNE OF RS.1,134.63 CRORES (N.P. RS.1061.14 CRORES + DEPRECIATION RS.73.49 CRORES) DURING YEAR UNDER CONSIDERATION WHICH IS MORE THAN IN RESPECT OF INVESTMENTS IN INDIAN SUBSIDIARIES. HENCE, THE PRESUMPTION HAS TO BE THAT INVESTMENTS HAVE C OME OUT OF CAPITAL AND RESERVES AND NOT FROM BORROWED FUNDS. WHERE INVESTMENTS ARE MADE OUT OF NON - INTEREST BEARING FUNDS, DISALLOWANCE U/S 14A OUT OF INTEREST EXPENDITURE IS UNSUSTAINABLE. AS REGARDS DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES, ITAT HAS IN A.Y. 2006 - 07 [2012] 20 ITR (TRIB) 391 (AHMEDABAD) HAS HELD THAT DISALLOWANCE U/S.14A SHOULD BE MADE AFTER ALLOCATING ONLY DIRECTORS REMUNERATION, DIRECTORS FEES AND TRAVELLING EXPENSES AND EXCLUDING OTHER INDIRECT EXPENSES. HENCE, SIMILAR DIRECTION MAY BE GIVEN FOR THE YEAR UNDER CONSIDERATION AS WELL. ON OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF AUTHORITIES BELOW AND CONTENDED THAT ASSESSING OFFICER HAS JUSTIFIED IN APPLYING PROVISIONS OF SECTION 14A OF THE ACT WHILE DI SALLOWING AMOUNT OF RS.2,66,38,938/ - . I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 8 4.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER MADE DISALLOWANCE U/S.14A AS PER RULE 8D FOR REASONS SIMILAR TO THOSE IN A.Y. 2006 - 07. DISALLOWANCE OF RS.2,66,38,938/ - COMPRISES OF TWO ELEMENTS VIZ. (A) OUT OF INTEREST RS.1,85,03,081/ - AND (B) OUT OF OTHER EXPENSES RS.81,35,856/ - . WITH REGARDS TO DISALLOWANCE OUT OF INTEREST EXPENSES, STAND OF ASSESSEE HAS BEEN THAT INVESTMENTS WERE MADE BY ASSESSEE IN ITS INDIAN SU BSIDIARIES FOR THE PURPOSES OF PROMOTING, SUPPORTING AND PROTECTING BUSINESS INTEREST OF ASSESSEE OUT OF COMMERCIAL EXPEDIENCY AND BUSINESS PRUDENCE. BANKS LENDING MONEY TO ASSESSEE MONITOR THE USE OF FUNDS SO AS TO ENSURE THAT BORROWED FUNDS WERE UTILIZE D FOR THE PURPOSE OF FINANCING WORKING CAPITAL. WORKING CAPITAL LIMITS ARE SANCTIONED SUBJECT TO A CONDITION THAT BORROWED FUNDS SHALL NOT BE UTILIZED FOR THE PURPOSE OF SUBSCRIPTION OF SHARES OR DEBENTURES AS DETAILED ABOVE. RULE 8D PRESCRIBED FOR WORKI NG OUT DISALLOWANCE U/S 14A IS NOT APPLICABLE FOR ASSESSMENT YEARS PRIOR TO A.Y. 2008 - 09. HENCE, FOR A.YS. PRIOR TO A.Y. 2008 - 09 (AS IN THE PRESENT CASE), ASSESSING OFFICER HAS TO PROVE THE NEXUS THAT BORROWED FUNDS HAVE BEEN USED FOR MAKING INVESTMENTS W HICH GENERATE TAX FREE INCOME PRIOR TO MAKING DISALLOWANCE U/S.14A. ASSESSING OFFICER HAS NOT RECORDED ANY FINDING REGARDING ANY DIRECT NEXUS BETWEEN INTEREST BEARING BORROWED FUNDS AND INVESTMENT IN SUBSIDIARIES. APART FROM THIS, LEARNED AUTHORIZED REPRE SENTATIVE SUBMITTED THAT ASSESSEE WAS HAVING SUBSTANTIAL I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 9 INTEREST FREE FUNDS . SO DISALLOWANCE U/S.14A IS NOT REQUIRED AS DISCUSSED ABOVE. WE FIND THAT ITAT, AHMEDABAD C BENCH IN ASSESSEES OWN CASE FOR A.Y. 2005 - 06 & 2006 - 07 REPORTED IN [2013] 32 TAXMAN N.COM 349 (AHMEDABAD TRIB.) HAS DEALT WITH SIMILAR ISSUE AND DECIDED AS UNDER: 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. REGARDING THE GROUNDS RAISED BY THE REVE NUE IN RESPECT OF DISALLOWANCE OF INTEREST EXPENDITURE MADE BY THE ASSESSING OFFICER U NDER S ECTION 14A AND DELETION M ADE BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) . WE HOLD SO BECAUSE WE FIND THAT WITH REGARD TO THE INVESTMENT OF RS.5907.18 LA KH S IN FOREIGN SUBSIDIARIES, NO DISALLOWANCE CAN B E MADE UNDER SECTION 14A BECAUSE DIVIDEND INCOME FROM FOREIGN SUBSIDIARIES IS TAXABLE IN INDIA. R EGARDING BALANCE INVESTMENT OF RS.38 CRORES APPROXIMATELY IN INDIAN SUBSIDIARIES, WE FIND THAT INTEREST FREE OWN FUNDS OF THE ASSESSEE IS MANY TIMES MORE THAN THIS INVESTMENT BECAUSE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AS ON MARCH 31 , 2005 AS PER THE B ALANCE - SHEET AS ON THAT DATE IS OF RS.929.57 CRORES. THERE IS NO FINDING GIVEN BY THE ASSESSING OFFICER REGARDING ANY DIRECT NEXUS BETWEEN INTEREST BEARING BORROWED FUNDS AND INVESTMENT IN INDIAN SUBSIDIARIES. HENCE, IN OUR CONSIDERED OPINION, NO DISALLOWA NCE U/S 14A CAN BE MADE OUT OF INTEREST EXPENDITURE IN THE FACTS OF THE PRESENT CASE. ACCORDINGLY, GROUND NO.2 & 3 OF THE REVENUES APPEAL ARE REJECTED. 15. REGARDING GROUND NO.2 OF THE ASSESSEES APPEAL AS PER WHICH, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO ALLOCATE DIRECTORS REMUNERATION FEE AND TRAVELING ALLOWANCE TOWARD EARNING DIVIDEND AND TO MAKE PROPORTIONATE DISALLOWANCE U NDER S ECTION 14A OF THE INCOME - TAX ACT, 1961, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER SHOULD MAKE PROPORTIONATE DISALLOWANCE ONLY IN RESPECT OF DIVIDEND I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 10 INCOME FROM INDIAN SUBSIDIARIES. WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT NO DISALLOWANCE IS CALLED FOR OUT OF ADMINISTRATIVE EXPENDITURE BECAUSE DIVIDEND INCOME IS EXEMPT AND HENCE, PROPORTIONATE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES IS JUSTIFIED. ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) . ACCORDINGLY GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALSO REJECTED . NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING WE HOLD THAT: (A) WITH REGARD TO DISALLOWANCE OF INTEREST EXPENDITURE MADE BY ASSESSING OFFICER U/S.14A SPECIAL LY TO INVEST IN INDIAN SUBSIDIARIES. W E FIND THAT INTEREST FREE OWN FUNDS OF THE ASSESSEE IS MANY TIMES MORE THAN THIS INVESTMENT BECAUSE INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE AS ON MARCH 31, 200 6 . THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY DIREC T NEXUS BETWEEN INTEREST BEARING BORROWED FUNDS AND INVESTMENT IN INDIAN SUBSIDIARIES. IN SUCH FACTS AND CIRCUMSTANCES , ACCORDING TO US, NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE OUT ON INTEREST EXPENDITURE . ASSESSING OFFICER IS DIRECTED ACCORDINGLY. (B) REGARDING DIRECTION TO ASSESSING OFFICER TO ALLOCATE DIRECTORS REMUNERATION FEE AND TRAVELING ALLOWANCE TOWARD S EARNING DIVIDEND AND TO MAKE PROPORTIONATE DISALLOWANCE UNDER SECTION 14A OF THE INCOME - TAX ACT, 1961, WE ARE OF THE VIEW THAT ASSESSING OF FICER SHOULD MAKE PROPORTIONATE DISALLOWANCE ONLY IN RESPECT OF DIVIDEND INCOME FROM INDIAN SUBSIDIARIES. WE DO NOT FIND ANY MERIT IN THE CONTENTION OF ASSESSEE THAT NO DISALLOWANCE IS CALLED FOR OUT OF ADMINISTRATIVE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 11 EXPENDITURE BECAUSE DIVIDEND INCOME IS EXEMPT AND HENCE, PROPORTIONATE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES IS JUSTIFIED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) TO THAT EXTENT . SAME IS UPHELD. 5. NEXT ISSUE IN ASSESSEES APPEAL FOR A.Y. 2007 - 08 IS WITH REGARDS TO ALLOWABILITY OF DEDUCTION U/S.80IB OF THE ACT ON INTEREST ON FDR AND ICD AMOUNTING TO RS.18,15,43,011/ - . ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB FOR ITS DAMAN UNIT - II AND DAMAN RBU UNIT - III @ 30%, WHILE @ 10 0% FOR PONDICHERRY AND DHUNETHA UNIT AT DAMAN. ASSESSING OFFICER HAS NOT GRANTED THE BENEFIT OF DEDUCTION U/S.80IB ON INTEREST ON FDR AND ICD AMOUNTING TO RS.18,15,43,011/ - RELYING ON THE DECISION OF ITAT IN ITS OWN CASE FOR A.Y. 1998 - 99 AND RELYING ON TH E DECISION OF HONBLE SUPREME COURT IN CASE OF PANDIAN CHEMICALS LTD. VS. CIT(A) REPORTED IN 262 ITR 278. 5.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN CONSIDERING THE SUBMISSION ON BEHALF OF ASSESSEE, CIT(A) OBSERVED THAT IN THE YE AR UNDER CONSIDERATION 2006 - 07, ISSUE HAS BEEN DECIDED AGAINST ASSESSEE, HOWEVER, DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SRI RAM HONDA POWER EQUIPMENTS SUPPORTS NETTING OF INTEREST. HENCE, FOLLOWING SAME, CIT(A) AGREED WITH THE ALTERNATIVE GROUND OF APPEAL THAT NET INTEREST SHOULD BE REDUCED FROM THE PROFITS OF BUSINESS. ASSESSING OFFICER WAS DIRECTED ACCORDINGLY TO EXCLUDE NET INTEREST INCOME AFTER VERIFYING THE NEXUS OF INTEREST INCOME I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 12 WITH THE INTEREST PAYMENT FROM ELIGIBLE PROFIT. IN THIS RE GARD, STAND OF ASSESSEE HAS BEEN THAT ASSESSEE HAD DEPOSITED CERTAIN AMOUNTS AS FDS WITH BANK TO ASK THEM TO ISSUE GUARANTEES FOR SECURING SUPPLY OF MATERIAL AND EQUIPMENTS REQUIRED FOR THE PLANT WHICH WAS PART OF BUSINESS UNDERTAKING. INTEREST EARNED ON BANK DEPOSIT PLACED FOR OPENING LC HAS DIRECT NEXUS WITH THE ACTIVITY OF INDUSTRIAL UNDERTAKING AND HENCE, THE SAME QUALIFIES FOR CLAIM OF DEDUCTION U/S. 80IB. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, ONLY NET INTEREST MAY BE EXCLUDED FROM PROFITS OF THE BUSINESS AND NOT THE GROSS INTEREST WHILE COMPUTING DEDUCTION U/S. 80IB OF THE ACT. ASSESSEE PLACED RELIANCE ON THE DECISION OF ITAT, AHMEDABAD IN ASSESSEES OWN CASE FOR A.Y. 2005 - 06 AND 2006 - 07 REPORTED AT [2012] 20 ITR (TRIB) 391 (AHMEDABAD), WHER EIN TRIBUNAL HAS HELD AS UN D ER: 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE JUDGMENT CITED BY THE LEARNED AUTHORISED REPRESENTATIVE. WE FIND THAT INTEREST INCO ME CANNOT BE SAID TO BE AN INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING AND, THEREFORE, SECTION 80 - IB DEDUCTION IS NOT ALLOWABLE IN RESPECT OF INTEREST INCOME. REGARDING NETTING OF INTEREST INCOME, WE FIND THAT THIS ISSUE IS NOW COVERED BY THE JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF ACG ASSOCIATED CAPSULES (P.) LTD. (SUPRA). IN THAT CASE, IT WAS HELD BY THE HON'BLE COURT THAT ONLY 90 PER CENT, OF THE NET INTEREST INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE HAS TO BE EXCLUDED UNDE R CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF BUSINESS. ALTHOUGH THIS JUDGMENT IS IN RESPECT OF DEDUCTION UNDER SECTION 80HHC BUT WE FIND NO REASON AS TO WHY THE SAME LOGIC SHOULD NOT BE APPLIED IN RESPECT OF DEDUCTION U NDER SECTION 80 - IB OF THE INCOME - TAX ACT, 1961. WE, THEREFORE, HOLD THAT NET INTEREST ONLY SHOULD BE CONSIDERED I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 13 FOR REDUCING FROM PROFITS OF BUSINESS FOR COMPUTING DEDUCTION UNDER SECTION 80 - IB AND FOR THE PURPOSE OF COMPUTING NET INTEREST, ONLY THESE EXPE NDITURE, WHICH ARE INCURRED FOR EARNING INTEREST INCOME SHOULD BE CONSIDERED AND REDUCED FROM INTEREST INCOME. GROUND NO. 3 OF THE ASSESSEE IS REJECTED WHEREAS GROUND NO. 4 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. FACTS BEING SIMILAR, SO FOLL OWING SAME REASONING, WE HOLD THAT NET INTEREST ONLY SHOULD BE CONSIDERED FOR REDUCING FROM PROFITS OF BUSINESS FOR COMPUTING DEDUCTION U/S.80 - IB AND FOR THE PURPOSE OF COMPUTING NET INTEREST, ONLY THESE EXPENDITURE, WHICH ARE INCURRED FOR EARNING INTEREST INCOME SHOULD BE CONSIDERED AND REDUCED FROM INTEREST INCOME. AS A RESULT, MAIN GROUND IS REJECTED, HOWEVER ASSESSEES ALTERNATIVE NETTING INTEREST FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IB IS ALLOWED FOR STATISTICAL PURPOSE AS INDICATED ABOVE. 6. AS A RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED ABOVE . 7 . NOW, WE TAKE ITA NO. 113 /AHD/20 09 FOR A.Y. 2007 - 08. REVENUE HAS FILED TH IS APPEAL ON THE FOLLOWING GROUND S : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIO N MADE ON ACCOUNT OF DISALLOWANCE OF SALES COMMISSION EXPENSES OF RS.18,04,87,694/ - BY THE ASSESSING OFFICER. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO REDUCE THE NET INTEREST ON FDR & ICD AMOUNTING TO RS.18,15,43,011/ - FROM THE PR OFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80IB OF THE AS AGAINST THE GROSS INTEREST ON FDR & ICD REDUCED BY THE ASSESSING OFFICER. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 14 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO GIVE BENEFIT ON THE DEDUCTION U/S.80IB ON DUTY DRAWBACK OF RS.17,02,03,470/ - . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME - TAX (A) - XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS THEREFORE, PRAYED THAT THE OR DER OF THE LD. COMMISSIONER OF INCOME - TAX(A) - XIV, AHMEDABAD MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8. FIRST ISSUE IN REVENUES APPEAL FOR A.Y. 2007 - 08 IS WITH REGARDS TO ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF SALES COMMISSIO N EXPENSES OF RS.18,04,87,694/ - BY ASSESSING OFFICER. ASSESSING OFFICER MADE DISALLOWANCE OF SALES COMMISSION EXPENSES OF RS.18,04,87,694/ - . AS STATED ABOVE, ASSESSEE IS IN BUSINESS OF MANUFACTURING WIND TURBINE GENERATORS AT DAMAN & PONDICHERRY. DURING YEAR UNDER CONSIDERATION, ASSESSEE CLAIMED SALES COMMISSION EXPENSES OF RS.18,04,87,694/ - . ASSESSING OFFICER HELD THAT THERE IS NO EVIDENCE THAT ASSESSEE COMPANY RECEIVED INBOUND SERVICES AND ITS CLAIM OF PAYMENT OF COMMISSION WAS NOT JUSTIFIED, AS NO SE RVICES WERE RENDERED BY THE AGENTS. HENCE, HE DISALLOWED THE ENTIRE SALES COMMISSION EXPENSES OF RS.18,04,87,694/ - AND ADDED THE SAME TO THE INCOME OF ASSESSEE. 8 . 1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WER E RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) CONFIRMED THE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 15 DISALLOWANCE OF COMMISSION IN QUESTION. CIT(A) OBSERVED THAT AGREEMENTS HAVE BEEN ENTERED INTO FOR PAYMENT OF COMMISSION IN RESPECT OF WORK DONE BY AGENTS AND FOR PROVIDIN G INFORMATION WHICH RESULTED IN MATURITY OF SALES. PAYMENTS WERE MADE AS PER TERMS OF AGREEMENT. THIS ISSUE WAS DISCUSSED IN DETAIL BY CONCERNED CIT(A) IN A.Y. 2006 - 07, WHEREIN HE HAS DISCUSSED THE SCOPE OF SERVICES REQUIRED TO BE DONE BY THE AGENTS AS P ER THE AGREEMENTS. SO, HIS PREDECESSOR CIT(A) DELETED THE DISALLOWANCE BY HOLDING THAT THE PAYMENT OF COMMISSION WAS GENUINE. BUT THE YEAR UNDER CONSIDERATION, ASSESSEE HAS GIVEN EVIDENCE THAT RECIPIENTS HAVE PROVIDED INFORMATION ABOUT POTENTIAL BUYERS AND PROVIDED SERVICES, WHICH HELPED THE SALES TO BE MATURED AND REALIZED AND AS THE FACTS ARE SIMILAR IN THE INSTANT YEAR. SO, CIT(A) HELD THAT PAYMENT OF COMMISSION BY ASSESSEE WAS JUSTIFIED. 8 . 2 BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER AND CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF SALES COMMISSION EXPENSES. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEA RNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A) AND REQUESTED IN LIGHT OF ITAT, AHMEDABAD DECISION IN A.Y. 2005 - 06 & 06 - 07 TO UPHOLD THE ORDER OF CIT(A) ON THE ISSUE, WHEREIN SUCH SLAES COMMISSION PAID BY ASSESSEE HAS BEEN HELD TO BE ALLOWABLE U/S. 37. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 16 8.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER FOUND THAT SALES COMMISSION PAID IN THE YEAR UNDER CONSIDERATION WAS SIMILAR TO PAYMENTS MADE IN EARLIER YEARS. ACCORDINGLY , HE MADE ADDITION IN QU ESTION, WHICH WAS DELETED BY CIT(A) BY FOLLOWING ITS PREDECESSORS ORDER FOR A.Y. 2005 - 06 & 2006 - 07. WE FIND THAT IN A.Y. 2005 - 06 & 2006 - 07 REPORTED AT [2012] 20 ITR (TRIB) 391 (AHMEDABAD) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THIS ISSUE WAS DECIDED B Y THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AS PER PARAGRAPH 3.2 OF HIS ORDER W HICH IS REPRODUCED BELOW : '3.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS AS ADVANCED BY THE APPELLANT ALONG WITH THE CASE LAW AS RELIED UPON. THE FACTS EMERGED THAT AGREEMENTS HAVE BEEN ENTERED INTO FOR PAYMENT OF COMMISSION IN RESPECT OF WORK DONE BY THE AGENTS AND FOR PROVIDING INFORMATION WHICH RESULTED IN MATURITY OF SALES. THE PAYMENTS WERE MADE AS PER THE AGREEMENT. AS PER THE AGREEMENT, THE SCOPE OF SERVICES DEPENDING ON TYPE OF CUSTOMER REQUIRED TO BE DONE BY THE AGENTS WERE AS U NDER : (A) THE REMISSIOR BASED ON THEIR INTERNAL RESOURCES SHALL AMONGST ITS BUSINESS ASSOCIATES IDENTIFY THE BUYERS WHO PROPOSE TO/HAVE INTENTION TO BUY AND HAVE THE CAPACITY TO BUY THE WTGS. (B) THE REMISSIOR ON IDENTIFYING THE BUYERS WOULD SUGGES T, INFORM, INDICATE, INTRODUCE, RECOMMEND AND/OR SOLICIT THEM TO THE COMPANY SO AS TO FACILITATE THE COMPANY IN CARRYING OUT THE SALES OF WTG AS PER THE REQUIREMENTS OF THE BUYER. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 17 (C) THE REMISSIOR WOULD FUNCTION AS A SILENT PROFESSIONAL TO RENDER INBOU ND SERVICES TO THE COMPANY AND DEPENDING UPON THE CIRCUMSTANCES, LOOKING AT HIS REPUTATION, STATUS, FINANCIAL STANDING, THE COMPANY WILL NOT REVEAL THE NAME OF REMISSIOR TO THE PARTY REFERRED TO BY HIM BUT ANY REFERRED SOURCE RESULTING INTO SUCCESSFUL COMM ERCIAL TRANSACTION WOULD MAKE THE REMISSIOR ENTITLED TO THE COMMISSION AT THE AGREED RATE REFERRED TO HEREINAFTER. (D) IN MAJORITY OF CIRCUMSTANCES THE BUYER WOULD PREFER NO INTERMEDIATE WITH A VIEW TO CONTROL HIS COST AND HENCE IT IS IN THE INTEREST OF BOTH THE PARTY THAT THE REMISSIOR WOULD NOT COME ON FRONT LINE. IN THE CASE OF THE APPELLANT, IT IS SEEN THAT: (I) ALL THE PAYMENTS WERE MADE BY CHEQUES AND PARTIES WERE GENUINE. THE PARTIES HAVE CONFIRMED THE RECEIPT OF PAYMENTS AND RENDERING OF SERVIC ES IN THE FORM OF GIVING INFORMATION ABOUT ITS CUSTOMERS ; (II) ALL THE AGENTS ARE TAX PAYERS AND THE COMMISSION RECEIVED BY THE ASSESSEE - COMPANY IS SHOWN IN THEIR INCOME - TAX RETURNS AND THE TAX HAS BEEN PAID THEREON : (II I) FOR THE APPELLANT, THERE IS N O MOTIVE TO SAVE TAXES AS UNITS OF APPELLANT ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80 - IB : AND (IV) ALL THE RECIPIENTS OF THE COMMISSION ARE INDEPENDENT PERSONS AND THEY ARE NOT RELATED TO THE APPELLANT - COMPANY ; (V) THERE IS INCREASE IN THE SALES TH IS YEAR, WHICH JUSTIFIES THE PAYMENT OF COMMISSION ; (V) AS PER THE HON'BLE SUPREME COURT'S DECISION RELIED ON BY THE APPELLANT, THE ASSESSING OFFICER CANNOT SIT IN THE JUDGMENT OVER I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 18 COMMERCIAL WISDOM OF THE APPELLANT AND DETERMINE THE REASONABLENESS OFTH E EXPENDITURE, UNLESS THE PERSON IS A RELATED PERSON TO THE ASSESSEE UNDER SECTION 40A(2)(B). AS THE APPELLANT HAS GIVEN THE EVIDENCE THAT THE RECIPIENTS PROVIDED INFORMATION IN RESPECT OF THE SERVICES, WHICH HELPED THE SALES TO BE MATURED AND REALISED, T HE PAYMENT OF COMMISSION IS JUSTIFIED. HOWEVER, AT THE SAME TIME, IT IS ALSO OBSERVED THAT THE ENTIRE EXPENDITURE OF COMMISSION CANNOT BE ALLOWED, IN VIEW OF THE SPECIFIC FINDING BROUGHT ON RECORD BY THE ASSESSING OFFICER AFTER ENQUIRY IN CERTAIN CASES, WH EREIN HE EXAMINED THE SIX CUSTOMERS AND BROUGHT ON RECORD THAT IN RESPECT OF THESE CUSTOMERS, THE AGENTS PLAYED NO ROLE IN ACHIEVING THE SALES AND THESE CUSTOMERS DIRECTLY APPROACHED THE ASSESSEE FOR THE TRANSACTION : NAME OF PERSON CALLED UNDER SECTION 1 31 NAME OF PART Y TO WHOM SALES MADE COMMISSION AGENT COMMISSION PAID (RS.) SHRI SOMCHAND LALJIBHAI SAVIA SAVIA T WISTE RS P. LTD. INDIA WIND POWER LTD. 8,00,000 SHRI DHANJIBHAI ANANDHHAI MAKVANA MAKSON PHARMACEUTICALS LTD. V ISHAL CORPOR ATION 8,00,000 SHRI AMRUTLAL JETHALAL KALARIA INTRICAST P. LTD. TRIKAYA METALIC LTD. 2,00,000 SHRI NIRBHAYA KRISHNA AGRAWAL HARSHA ENGINEERS LTD. SHRE E RADHIKA STEEL - CHEM LTD. 8, 8 1,6 00 SHRI PARESHKUMA R LABSANKAR VYAS ARNBUJA INTERMEDIATES LTD. PKM INDUSTRIES 8, 00 , 000 I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 19 SHRI NARESHBHAI MANCHAND SHAH M/S. SAHASTRA PROPERTIES P. LTD. SONIC A GRANITE P. LTD. 8,00, 000 42,81,600 IN RESPECT OF THE ABOVE SIX TRANSACTIONS, THE COMPANY HAS N OT INITIATED ANY DIALOGUE AND NOT APPROACHED THE CUSTOMERS ON THE BASIS OF ANY INFORMATION RECEIVED FROM THE AGENTS. THEREFORE, IT IS HELD THAT THE STATEMENTS RECORDED FROM THE SIX PERSONS PROVE THAT THE INITIATION OF THE TRANSACTION WAS FROM THE SIDE OF T HE CUSTOMERS AND IT NEGATES THE CLAIM OF THE APPELLANT - COMPANY OF HAVING RECEIVED THE SO CALLED INBOUND SERVICES. IF THE APPELLANT HAD RECEIVED ANY INBOUND SERVICES, THEN THE INITIATION FOR THE SALES WOULD HAVE BEEN MADE BY THE APPELLANT - COMPANY AND NOT BY THE CUSTOMERS. FURTHER, THERE IS NO EVIDENCE IN SUPPORT OF THE CONTENTION THAT THE CUSTOMERS WERE INDUCED BY THE AGENTS TO APPROACH THE APPELLANT - COMPANY. HENCE, IT IS HELD THAT IN RESPECT OF THE SIX PARTIES, THE PAYMENT IS NOT MADE FOR RECEIVING THE INFO RMATION, WHICH RESULTED INTO MATURITY OF SALES. THEREFORE, I HOLD THAT THE PAYMENT IS NOT MADE IN ACCORDANCE WITH THE TERMS OF CONTRACT ENTERED INTO IN THIS RESPECT AND THESE PAYMENTS ARE NOT MADE FOR THE BUSINESS PURPOSES. THE ASSESSING OFFICER WAS JUSTIF IED IN DISALLOWING THE PAYMENT OF COMMISSION IN RESPECT OF THESE TRANSACTIONS AND THE DISALLOWANCE OF RS. 42,81.600 IS CONFIRMED. HOWEVER, THE ENTIRE EXPENDITURE CANNOT BE DISALLOWED MERELY BASED ON THE STATEMENTS OF SIX CUSTOMERS, WHO FORM, A VERY NEGLIGI BLE PERCENTAGE OF SALES AND THE COMMISSION EXPENDITURE. THEREFORE, THE APPELLANT IS ALLOWED RELIEF IN RESPECT OF THE BALANCE AMOUNT OF COMMISSION PAID.' 8. F ROM THE ABOVE PARAGRAPH OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), WE FIND THAT A CLEAR FINDING IS GIVEN BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THAT THE ASSESSEE HAS GIVEN EVIDENCE THAT THE RECIPIENT PROVIDED INFORMATION IN RESPECT OF SERVICES WHICH HELPED THE SALES TO MATURE AND REALISE AND , THEREFORE, I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 20 PAYMENT OF CO MMISSION IS JUSTIFIED EXCEPT FOR 6 PARTIES. IN RESPECT OF THESE 6 PARTIES, IT IS NOTED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THAT THE ASSESSING OFFICER AFTER INQUIRY HAS BROUGHT ON RECORD IN RESPECT OF THESE 6 CUSTOMERS, THE AGENTS HAD NO ROL E IN ACHIEVING THE SALES AND THESE CUSTOMERS DIRECTLY APPROACHED THE ASSESSEE FOR ALL TRANSACTIONS. THE INCOME OF ALL THE UNITS OF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 - IB OF THE INCOME TAX ACT. 1961. WE ALSO FIND THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ALLOWED ADDITIONAL DEDUCTION UNDER SECTION 80 - IB IN RESPECT OF VARIOUS ADDITIONS MADE BY HIM IN THE ASSESSMENT AND HENCE, THIS CONTENTION OF THE ASSESSEE IS SUPPORTED BY FACTS ON RECORD THAT THERE IS NO MOTIVE TO SAVE TAXES BY PAYING COMMISSION SINCE THE UNITS OF THE ASSESSES ARE ELIGIBLE FOR DEDUCTION AT 100 PER CENT UNDER SECTION 80 - IB. IN RESPECT OF 6 PARTIES, WHICH WERE NOT INTRODUCED BY THE COMMISSION AGENT, IT WAS THE SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE AGENTS HAD FURNISHED OTHER INFORMATION SUCH AS REPORT ABOUT REPUTATION, STATUS, FINANCIAL STANDINGS, ETC. REGARDING THESE 6 PARRIES, HE ALSO SUBMITTED THAT THEY HAVE ALSO HELPED IN REALISATION. THE LEARNED AUTHORISED REPRESENTATIVE WAS ASKED TO F ILE LETTERS OF THESE AGENTS BUT THE SAME ARE NOT FILED BY THE LEARNED AUTHORISED REPRESENTATIVE AND HENCE. IN THE FACTS OF THE PRESENT CASE, WE FEEL THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THIS ISSUE DOES NOT CALL FOR ANY INTE RFERENCE FROM OUR SIDE BECAUSE PART DISALLOWANCE CONFIRMED BY HIM IS ON THIS BASIS OF THESE 6 CUSTOMERS WERE NOT INTRODUCED BY THESE AGENTS WHEREAS FOR THE BALANCE AMOUNT FOR WHICH DISALLOWANCE OF COMMISSION IS DELETED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), HE HAS GIVEN A CLEAR FINDING TH AT THESE PARTIES WERE INTRODUCED BY THE COMMISSION AGENTS AND EVIDENCE WERE TILED REGARDING RENDERING OF THE SERVICES BY THEM AND THESE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) COULD NOT BE CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. REGARDING THE JUDGMENT OF THE HON'BLE APEX COURT ON WHICH RELIANCE HAS BEEN PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE FIND THAT THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE BE CAUS E THE FACTS ARE DIFFERENT. I N THAT CA SE, THIS FINDING WAS RECORDED BY THE TRIBUNAL THAT SELLING I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 21 AGENCY FIRM AND THE ASSESSEE HAS NO GENUINE EXISTENCE AND SUCH SELLING AGENCY WAS FOUND TO BE MAKE BELIEVE DOCUMENT. THE FACTS IN T HE PRESENT CASE ARE NOT SO. I N THE PRESENT CASE, A CLEAR FINDING IS GIVEN BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THAT SERVICES WERE RENDERED BY THE COMMISSION AGENTS AND THIS FINDING OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) COULD NOT BE CONTROVERTED BY THE LEAR NED DEPARTMENTAL REPRESENTATIVE. HENCE, T HIS JUDGMENT OF THE HON BLE APEX COURT DOES NOT RENDER ANY HELP TO THE REVENUE IN THE PRESENT CASE. IN VIEW OF OUR ABOVE DISCUSSION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 1 OF THE REVENUE AS WELL AS GROUND NO. OF THE ASSESSEE'S APPEALS IS REJECTED. IN THIS BACKGROUND, WE FIND THAT CIT(A) HAS GIVEN CLEAR FINDING ON THE ISSUE THAT ASSESSEE HAS GIVEN EVIDENCE THAT T HE RECIPIENT PROVIDED INFORMATION IN RESPECT OF SERVICES WHICH HELPED THE SALES TO MATURE AND REALISE AND , TH EREFORE, PAYMENT OF COMMISSION WA S JUSTIFIED AND INCOME OF ALL UNITS OF ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IB. THEREFORE, THERE IS NO MOTIV E TO SAVE TAXES BY PAYING COMMISSION. THUS, WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS DELETED THE ADDITION OF RS.18,04,87,694/ - ON ACCOUNT OF DISALLOWANCE OF SALES COMMISSIONS PAID U/S. 37. SAME IS UPHELD. 9. NEXT ISSUE IN REVENU ES APPEAL FOR A.Y. 2007 - 08 IS WITH REGARDS TO DEDUCTION U/S.80IB IN RESPECT OF RS.18,15,43,011/ - . THIS ISSUE HAS BEEN DISCUSSED IN GROUND NO. 3 VIDE PARA 5 OF ASSESSEES APPEAL FOR A.Y. 2007 - 08. THE W HOLE ISSUE HAS BEEN DISCUSSED, WHICH IS NOT BEING REPE ATED FOR SAKE OF BREVITY AND SAME MAY BE REFERRED IN THIS REGARD. ACCORDINGLY THIS GROUND IS ALSO DISMISSED. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 22 10. NEXT ISSUE IN REVENUES APPEAL FOR A.Y. 2007 - 08 IS WITH REGARDS TO BENEFIT ON DEDUCTION U/S.80IB ON DUTY DRAWBACK OF RS.17,02,03,470/ - . ASSES SING OFFICER HAS DENIED BENEFIT U/S.80IB IN RESPECT OF DUTY DRAWBACK BY REFERRING ASSESSMENT ORDER FOR A.Y. 2005 - 06 & 2006 - 07. IN APPEAL, CIT(A) DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE BY FOLLOWING ITS PREDECESSORS ORDER FOR EARLIER YEARS AS DISCUSSED A BOVE. 10.1 BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GIVE BENEFIT ON DEDUCTION U/S.80IB ON DUTY DRAWBACK OF RS.17,02,03,470/ - . ACCORDINGLY, ORDER OF CIT(A) BE SET ASIDE A ND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE IN A.Y. 2005 - 06 & 2006 - 07 REPORTED AT [2012] 20 ITR (TRIB) 391 (AHMEDABAD), WHEREIN TRIBUNAL HAS HELD AS UNDER: 30. IN REJOINDER, IT WAS SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT IN THE CASE OF LIBERTY INDIA (SUPRA), THE ISSUE WAS DECIDED NOT IN RESPECT OF DEPB ONLY BUT IN RESPECT OF DUTY DRAWBACK ALSO AND ON BOTH THE ACCOUNTS, THE ISSUE WAS DECIDED BY THE HONBLE APEX COURT AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 31. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE JUDGMENT CITED BY BOTH THE SID ES. WHEN WE GO THROUGH PARAGRAPHS 16, 17 AND 18 OF THE JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) WE FIND THAT THIS DECISION IS ON THIS BASIS THAT THE RULES DO NOT ENVISAGE A REFUND OF THE AMOUNT I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 23 ARITHMETICALLY EQUAL T O CUSTOMS DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER - CUM - MANUFACTURER. IT IS ALSO STALED BY THE HON'BLE APEX COURT IN PARAGRAPH 17 OF THIS JUDGMENT THAT SUB - SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUNT OF DRAWBA CK TO BE DETERMINED ON A CONSIDERATION OF ALL THE CIRCUMSTANCES PREVALENT IN A PARTICULAR TRADE AND ALSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARIOUS CLASSES OF GOODS IMPORTED. WE, THEREFORE, FEEL THAT PARAGRAPHS 16, 17 AND 18 OF THI S JUDGMENT OF THE HON'BLE APEX COURT SHOULD BE REPRODUCED BELOW FOR READY REFERENCE (PAGE 233) : '16. DEPB IS AN INCENTIVE. IT IS GIVEN UNDER THE DUTY EXEMPTION REMISSION SCHEME. ESSENTIALLY, IT IS AN EXPORT INCENTIVE. NO DOUBT, THE OBJECT BEHIND DEPB IS TO NEUTRALISE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CONTENT OF EXPORT PRODUCT. THIS NEUTRALISATION IS PROVIDED FOR BY CREDIT TO CUSTOMS DUTY AGA INST EXPORT PRODUCT. UNDER DEPB, AN EXPORTER MAY APPLY FOR CREDIT AS A PERCENTAGE OF THE FOB VALUE OF EXPORTS MADE IN FREELY CONVERTIBLE CURRENCY. CREDIT IS AVAILABLE ONLY AGAINST THE EXPORT PRODUCT AND AT RATES SPECIFIED BY THE DGFT FOR IMPORT OF RAW MATERIALS, COMPONENTS, ETC., DEPB CREDIT UNDER THE SCHEME HAS TO BE CALCULATED BY TAKING INTO ACCOUNT THE DEEMED IMPORT CONTENT OF THE EXPORT PRODUCTS AS PER BASIC CUSTOMS DUTY AND SPECIAL ADDITIONAL DUTY PAYABLE ON SUCH DEEMED IMPORTS. THEREFORE, IN OUR VIEW, DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM THE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT OR FRO M SECTION 75 OF THE CUSTOMS ACT, 1962, HENCE, INCENTIVES PROFITS ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS UNDER SECTION 80 - IB. THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKINGS. 17. THE NEXT QUESTION IS - WHAT IS DUTY DRAWB ACK ? SECTION 75 OF THE CUSTOMS ACT, 1962 , AND SECTION 37 OF THE CENTRAL EXCISE ACT. 1944, EMPOWERS THE GOVERNMENT OF INDIA TO PROVIDE FOR REPAYMENT O F CUSTOMS DUTY AND EXCISE DUTY PAID BY AN ASSESSEE. THE REFUND IS OF THE AVERAGE AMOUNT OF DULY PAID ON M ATERIALS OF ANY PARTICULAR CLASS OR DESCRIPTION OF GOODS USED IN THE MANUFACTURE OF EXPORT GOODS O F SPECIFIED CLASS. THE RULES DO NOT ENVISAGE A REFUND OF AN AMOUNT AR ITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXCISE DUTY I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 24 ACTUALLY PAID BY AN INDIVIDUAL IMPORTER - C U M - MANUFACTURER. SUB - SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUNT OF DRAWBACK TO BE DETERMINED ON A CONSIDERATION OF ALL THE CIRCUMSTANCES PREVALENT IN A PARTICULAR TRADE AND ALSO BASED ON THE FACTS SITUATION RELEVANT IN RESP ECT OF EACH OF VARIOUS CLASSES OF GOODS IMPORTED. BASICALLY THE SOURCE OF THE DUTY DRAWBACK RECEIPT LIES IN SECTION 75 OF THE CUSTOMS ACT AND SECTION 37 OF THE CENTRAL EXCISE ACT. 18. ANALYSING THE CONCEPT OF REMISSION OF DUTY DRAWBACK AND DEPB. WE ARE SA TISFIED THAT THE REMISSION OF DUTY IS ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT / SCHEME(S) FAMED BY THE GOVERNMENT OF INDIA. IN THE CIRCUMSTANCES, WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NO T FALL WITHIN THE EXPRESSIO N 'PROFITS DERIVED FROM INDUSTR IAL UNDERTAKING' IN SECTION 80 - I B.' 32. SINCE IT IS HELD BY THE HON'BLE APEX COURT THAT SECTION 75 OF THE CUSTOMS ACT IS RELEVANT OF THE PURPOSE OF DUTY DRAWBACK, WE REPRODUCE CLAUSE (A) OF SUB - SECTION (2) OF SECTION 75 OF T HE CUSTOMS ACT, 1962 , WHICH IS AS UNDER : '(A) FOR THE PAYMENT OF DRAWBACK EQUAL TO THE AMOUNT OF DUTY ACTUALLY PAID ON THE IMPORTED MATERIALS USED IN THE MANUFACTURED OR PROCESSING OF THE GOODS OR CARRYING OUT ANY OPERATION ON THE GOODS OR AS IS SPECIFIE D IN THE RULES AS THE AVERAGE AMOUNT OF DUTY PAID ON THE MATERIALS OF THAT CLASS OR DESCRIPTION USED IN THE MANUFACTURE OR PROCESSING OF EXPORT GOODS OR CARRYING OUT ANY OPERATION ON EXPORT GOODS OF THAT CLASS OR DESCRIPTION EITHER BY MANUFACTURERS GENERAL LY OR BY PERSONS PROCESSING OR CARRYING ON ANY OPERATION GENERALLY OR BY ANY PARTICULAR MANUFACTURER OR PARTICULAR PERSON CARRYING ON ANY PROCESS OR OTHER OPERATION, AND INTEREST IF ANY PAYABLE THEREON.' 33. WE ALSO REPRODUCE THE RELEVANT PORTION OF THE C USTOMS AND CENTRAL EXCISE DUTIES AND SERVICE TAX DRAWBACK RULES , 1995 AS PER NOTIFICATION NO. 37 OF 1995, DATED MAY 26, 1995. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 25 34. IN THE BEGINNING TO THE NOTIFICATION, IT IS STATED THAT ON EXERCISE OF POWERS CONFERRED BY SECTION 75 OF THE CUSTOMS ACT, 196 2 , SECTION 37 OF THE CENTRAL EXCISE ACT, 1944 , AND SECTION 93A READ WITH SECTION 75 OF THE FINANCE ACT, 1944 THESE RULES ARE MADE BY THE CENTRAL GOVERNMENT. RULE 6 IS RELEVANT AND THE SAME IS REPRODUCED BELOW : 'RULE 6. CASES WHERE AMOUNT OR RATE OF DRAWB ACK HAS NOT BEEN DETERMINED. - (L)(A) WHERE NO AMOUNT OR RATE OF DRAWBACK HAS BEEN DETERMINED IN RESPECT OF ANY GOODS, ANY MANUFACTURERS OR EXPORTER OF SUCH GOODS MAY. WITHIN SIXTY DAYS FROM THE DATE RELEVANT FOR THE APPLICABILITY OF THE AMOUNT OR RATE OF DR AWBACK IN TERMS OF SUB - RULE (3) OF RULE 5 APPLY IN WRITING TO THE COMMISSIONER OF CENTRAL EXCISE OR THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, HAVING JURISDICTION OVER THE MANUFACTURING UNIT, OF THE MANUFACTURER EXPORTER OR, OF THE SUPPORTING MA NUFACT URERS, AS THE CASE MAY BE, FOR DETERMINATION OF THE AMOUNT OR RATE OF DRAWBACK THEREOF STATING ALL THE RELEVANT FACTS INCLUDING THE PROPORTION IN WHICH THE MATERIALS OR COMPONENTS OR INPUTS SERVICES ARE USED IN THE PRODUCTION OR MANUFACTURE OF GOOD AND THE DUTIES PAID ON SUCH MATERIALS OR COMPONENTS OR THE TAX PAID ON INPUT SERVICES.' 35. WE HAVE GONE THROUGH CLAUSE (A) OF SUB - SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT, 1962 AND WE FIND THAT THERE ARE TWO TYPES OF DUTY DRAWBACK WHICH CAN BE ALLOWED. THE FIRST CATEGORY IS THAT PAYMENT OF DUTY DRAWBACK IS EQUAL TO THE AMOUNT OF DUTY ACTUALLY PAID ON AN IMPORTED MATERIAL USED IN MANUFACTURING OR PROCESSING OF GOODS OR CARRYING OUT ANY OPERATION OF THE GOODS. THE SECOND CATEGORY IS THAT AS SPECIFIED IN THE RU LE, AN AVERAGE AMOUNT OF DUTY PAID ON THE M ATE R IAL OF THAT CLASS OR DESCRIPTION USED IN MANUFACTURING OR PROCESSING OF EXPORT OF GOODS OR CARRYING OUT ANY OPERATI ON ON EXPORT GOODS OF THIS CASE, ETC. IN THE FIRST CATEGORY, THE DUTY DRAWBACK IS ARITHMETICAL LY EQUAL TO THE DUTY PAID BY THE ASSESSE E ON IMPORT OF MATERIAL USED IN THE MANUFACTURE OR PROCESSING OF THE GOODS. IN THE SECOND CATEGORY, THE AVERAGE AMOUNT OF DUTY DRAWBACK IS PAID WITHOUT ANY CORRELATION WITH THE ACTUAL DUTY PAID BY THE ASSE SSEE ON IMP ORT. AS PER RULE 6 OF CUSTOMS AND CENTRAL EXCISE DUTIES AND SERVICE TAX DUTY DRAWBACK RULES. 1995, I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 26 WHERE NO AMOUNT OR RATE OF DRAWBACK HAS BEEN DETERMINED IN RESPECT OF ANY GOODS, ANY EXPORTER OF SUCH GOODS MAY WITHIN 60 DAYS FROM THE DATE OF RELEVANT OF T HE APPLICABILITY OF AMOUNT APPLY IN WRITING TO THE COMMISSIONER OF CENTRAL EXCISE OR THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE HAVING JURISDICTION OVER THE MANUFACTURING UNIT OR MANUFACTURER EXPORTER OR THE SUPPORTING MANUFACTURER, ETC., TO DETERMINE THE AMOUNT AND RATE OF DRAWBACK THEREOF STATING AL L THE RELEVANT FACTS, ETC. IN THE PRESENT CASE, THE DUTY DRAWBACK IS AVAILABLE TO THE ASSESSEE AS PER THE FIRST CATEGORY AND AS P ER THE DETAILS GIVEN BY THE ASSESSEE, AN AMOUNT OF RS. 2, 72,395 WAS PAID BY T HE ASSESSEE A S CUSTOMS DUTY, OUT OF WHICH RS. 5,697 WAS DEDUCTED BEING AT RS. 3 PER KG. FOR 1899 KG. BEING RECOVERABLE WASTAGE AND THE BALANCE AMOUNT WAS PAID AS DULY DRAWBACK BEING RS. 2,66.698. SIMILARLY, FOR THE ASSESSMENT YEAR 2006 - 07 ALSO, THE ASSESSE E HAS SUBMITTED COMPLETE DETAILS ABOUT DUTY DRAWBACK, AS PER WHICH, DUTY PAID BY THE ASSESSEE IS OF RS. 15.71,42,086 AND DUTY DRAWBACK RECEIVED IS RS. 15,48, 64,977. THIS GOES TO SHOW THAT IN BOTH THE YEARS, THERE IS DIRECT AND ARITHMETIC CORRELATION BETWEE N THE DUTY PAID BY THE ASSESSEE AND DUTY DRAWBACK RECEIVED BY THE ASSESSEE. THESE FACTS ALONG WITH RELEVANT PROVISIONS OF THE CUSTOMS ACT. 1962 AND CUSTOM AND CENTRAL EXCISE DUTY AND SERVICE TAX DRAWBACK RULES, 1995 OF WHICH RELEVANT PORTION IS REPRODUCED ABOVE, WE FIND THAT THE FACTS IN THE PRESENT CASE ARE DISTINGUISHABLE FROM THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA). IN THE CASE OF LIBERTY INDIA (SUPRA), THE ISSUE WAS DECIDED BY THE HON'BLE APEX COURT AGAINST THE ASSESSEE ON THIS BASIS THAT SINCE T HE RULE DOES NOT ENVISAGE REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY PAID BY THE INDIVIDUAL EXPORTER/MANUFACTURER, THE DUTY DRAWBACK AND D EPB RECEIPT OF THE ASSE SSEE IS ON ACCOUNT OF STATUTORY POLICY AND THE PROVISIONS IN THE CUSTOMS ACT BY T HE GOVERNMENT OF INDIA AND HENCE, THIS PROFIT DERIVED BY WAY OF SOME INCENTIVE DOES NOT FALL WITHIN THE EXPRESSION 'PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING' IN SECTION 80 - ID. IN THE PRESENT CASE, DUTY DRAWBACK RECEIVED BY THE ASSESSEE HAS A DIRECT AND ARITHMETIC CORRELATION WITH THE CUSTOMS DUTY PAID BY THE ASSESSEE AND, THEREFORE, THERE IS NO INCOME AS SUCH ON ACCOUNT OF DU TY DRAWBACK RECEIVED BY THE ASSE SSEE BECAUSE WHATEVER CUSTOMS DUTY IS PAID BY THE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 27 ASSESSEE HAS BEEN RECEIVED BACK BY THE ASSESSEE A ND IT LEAVES NO INCOME WITH THE ASSESSEE. 36. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF J.K. ALUMINIUM CO. V. ITO IN I.T.A. NO. 3303/DEL/20IO DATED APRIL 29, 201 I. IN THAT CASE ALSO, THE ISSUE INVOLVED WAS WIT H REGARD TO ALLOWABILITY OF DEDUCTION UNDER SECTION 80 - 1B IN RESPECT OF EXCISE DUTY REFUND OF RS. 5,68,41,800 RECEIVED BY THE ASSESSEE. THE TRIBUNAL HAS DULY CONSIDERED THIS JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) AND THE TRIBUNAL HAS ALSO CONSIDERED ANOTHER JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF CIT V. DHARAM PAL PREM CHAND LTD. [20091 317 ITR 353/180 TAXMAN 557 (DELHI) AND THEREAFTER, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSEE IS ELIGIBLE FO R DEDUCTION UNDER SECTION 80 - 1B IN RESPECT OF REFUND OF EXCISE DUTY BECAUSE THE RULES CLEARLY ENVISAGE REFUND OF AMOUNT ARITHMETICALLY EQUAL TO EXCISE DULY PAID. IT WAS HELD BY THE TRIBUNAL IN THAT CASE THAT THERE IS DISTINCTION OF FACTS AS COMPARED TO THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA) BECAUSE AS PER THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA) THE ISSUE WAS NOT CONCERNED WITH THE REFUND OF AMOUNT PAID. WE HAVE SEEN THAT IN THE PRESENT CASE, THE ASSESSEE IS GETTING REFUND OF CU STOMS DUTY PAID BY THE ASSE SSEE IN THE FORM OF DUTY DRAWBACK AND THE DUTY DRAWBACK RELIEF ARE OF TWO TYPES. THE FIRST CATEGORY OF DUTY DRAWBACK IS AS PER ALL INDIA RATES WHERE THE DUTY DRAWBACK HAS NO CORRELATION WITH THE ACTUAL DUTY PAID BY THE ASSESSEE AND UNDER THESE FACTS, IT WAS HELD BY THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 - IB WITH REGARD TO DUTY DRAWBACK. AS PER THE SAME, DUTY DRAWBACK HAS NO ARITHMETICAL CORRELATION WITH ACTUAL D UTY PAID BY THE ASSESSEE BUT IN THE PRESENT CASE ACTUAL DUTY PAID IS REFUNDED AS DUTY DRAWBACK AND HENCE, THE FACTS OF THE PRESENT CASE ARE DISTINCT THAN THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA) AND, THEREFORE, THIS JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) CANNOT BE APPLIED IN THE PRESENT CASE BECAUSE WE HAVE SEEN THAT FACTUALLY, ALL DUTY DRAWBACK RECEIVED BY THE ASSESSEE IS ALMOST ARITHMETICALLY EQUAL TO THE DUTY PAID BY THE ASSESSEE WHEREIN SOME AMOUNT FOR WHI CH DRAWBACK WAS NOT ALLOWED I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 28 IS ON THIS BASIS THAT THE SAME IS RELATABLE TO RECOVERABLE WASTAGE. UNDER THESE FACTS, IT IS ESTABLISHED BY THE ASSESSEE THAT THE DUTY DRAWBACK REC EIV ED BY THE ASSESSEE IS ARITHMETICALLY EQUAL TO THE DUTY PAID BY THE ASSESSEE AN D, THEREFORE, IN THE FACTS OF THE PRESENT CASE. WE ARE OF THE CONSIDERED OPINION THAT DUTY DRAWBACK IN THE PRESENT CASE IS NOTHING BUT REFUND OF DUTY PAID BY THE ASSESSEE AND, THEREFORE, RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION RENDERED IN THE CASE OF J.K. ALUMINIUM CO. (SUPRA) WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND HOLD THAT IN THE FACTS OF THE PRESENT CASE, DUTY DRAWBACK RECEIVED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 - IB. THIS GROUND OF THE ASSESSEE IS ALLOWED. WE FIND THAT FOR EARLIER YEARS IN ASSESSEES OWN CASE WH EREIN CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN CASE OF LIBERTY INDIA (SUPRA) , THE DUTY DRAWBACK A S APPLICABLE TO ASSESSEE ENVISAGE A REFUND OF AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTR AL EXCISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER - CUM - MANUFACTURER. AFTER CONSIDERING CLAUSE (A) OF SUB - SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT, IT WAS FOUND BY TRIBUNAL THAT THERE W ERE TWO TYPES OF DUTY DRAWBACK BENEFIT WHICH CAN BE CONFERRED U NDER THE SCHEME OF THAT ACT. THE FIRST CATEGORY IS THAT PAYMENT OF DUTY DRAWBACK IS EQUAL TO THE AMOUNT OF DUTY ACTUALLY PAID ON AN IMPORTED MATERIAL USED IN MANUFACTURING OR PROCESSING OF GOODS OR CARRYING OUT ANY OPERATION OF THE GOODS. AS PER THE SECON D CATEGORY IS THAT AS SPECIFIED IN RULE, AN AVERAGE AMOUNT OF DUTY PAID ON MATERIAL OF THAT CLASS OR DESCRIPTION USED IN MANUFACTURING OR PROCESSING OF EXPORT OF GOODS OR CARRYING OUT ANY OPERATION ON EXPORT GOODS OF THIS CASE, ETC. IN THE FIRST CATEGORY, THE DUTY DRAWBACK IS ARITHMETICALLY EQUAL TO DUTY I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 29 PAID BY ASSESSEE ON IMPORT OF MATERIAL USED IN MANUFACTURE OR PROCESSING OF GOODS. IN SECOND CATEGORY, THE AVERAGE AMOUNT OF DUTY DRAWBACK IS PAID WITHOUT ANY CORRELATION WITH ACTUAL DUTY PAID BY ASSESSEE ON IMPORT. AS PER R ULE 6 OF CUSTOMS AND CENTRAL EXCISE DUTIES AND SER VICE TAX DUTY DRAWBACK RULES, 1995, WHERE NO AMOUNT OR RATE OF DRAWBACK HAS BEEN DETERMINED IN RESPECT OF ANY GOODS, ANY EXPORTER OF SUCH GOODS MAY WITHIN 60 DAYS FROM THE DATE OF RELEV ANT OF APPLICABILITY OF AMOUNT APPLY IN WRITING TO THE COMMISSIONER OF CENTRAL EXCISE OR THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE HAVING JURISDICTION OVER THE MANUFACTURING UNIT OR MANUFACTURER EXPORTER OR THE SUPPORTING MANUFACTURER, ETC., TO DETERM INE THE AMOUNT AND RATE OF DRAWBACK THEREOF STATING ALL THE RELEVANT FACTS, ETC. A S CLAIMED BEFORE US LEARNED AUTHORIZED REPRESENTATIVE THAT DUTY DRAWBACK IS AVAILABLE TO ASSESSEE AS PER FIRST CATEGORY AND AS PER COMPLETE DETAILS FOR DUTY DRAW BACK FURNIS HED BY ASSESSEE , DUTY PAID BY ASSESSEE IS OF RS. 17,52,72,297 / - AND DUTY DRAWBACK RECEIVED IS RS.17,35,80,618 / - WHICH INDICATES THAT FOR THE YEAR UNDER CONSIDERATION ALSO, THERE IS DIRECT AND ARITHMETIC CORRELATION BETWEEN THE DUTY PAID BY ASSESSEE AND DUTY DRAWBACK RECEIVED BY THE ASSESSEE. HOWEVER, WE FIND THAT WHILE DENYING THE BENEFIT OF DEDUCTION U/S.80IB ON THE DUTY DRAW BACK AMOUNT OF RS.17.02 CRORE, ASSESSING OFFICER HAD SIMPLY AT PARA 5.6 OF PAGE 21 OF ORDER HELD THAT SINCE THE CLAIM OF ASSESSEE WA S DISALLOWED IN A.Y. 2005 - 06 & 2006 - 07, THE CLAIM OF ASSESSEE WAS DISALLOWED. CIT(A) ALSO WHILE DECIDING THE ISSUE IN FAVOUR I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 30 OF ASSESSEE HAD ALSO SIMPLY FOLLOWED EARLIER YEARS ORDERS OF CIT(A). WE HOWEVER FIND THAT WHILE DECIDING THE APPEAL FOR A.Y. 200 6 - 07, THE CO - ORDINATE BENCH OF TRIBUNAL HAS NOTED THAT THE DUTY PAID BY THE ASSESSEE AND THE DUTY DRAW BACK RECEIVED BY IT HAS DIRECT AND ARITHMETIC CORRELATION BUT, IN THE YEAR UNDER APPEAL, THERE IS NO SUCH FINDING OF EITHER OF THE LOWER AUTHORITIES. IN VIEW OF THE AFORESAID FACTS, WE RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS AND IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER SHALL G RANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS GROUND OF REVENU E IS ALLOWED FOR STATISTICAL PURPOSES. 1 1. AS A RESULT, REVENUES APPEAL FOR A.Y. 2007 - 08 IS PARTLY ALLOWED . 1 2 . NOW, WE TAKE ITA NO. 2052 /AHD/20 09 FOR A.Y. 2005 - 06. REVENUE HAS FILED TH IS APPEAL ON THE FOLLOWING GROUND S : 1. THE LD. CIT(A)XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DIRECTING TO DELETE THE PENALTY OF RS.1,51,36,069/ - . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CO MMISSIONER OF INCOME - TAX (A) - XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 1 2 .1 ASSESSING OFFICER LEVIED PENALTY ON ACCOUNT OF THREE ADDITIONS: I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 31 (I) DISALLOWANCE OF SALES RS.42,81,600/ - (II) DISALLOWANCE OF CLAIME U/S.80I B IN RESPECT OF INTEREST ON FDR AND ICD RS.3,58,83,397/ - (III) DISALLOWANCE U/S. 14A RS.11,98,860/ - ALL ADDITIONS WERE DELETED BY CIT(A) BY OBSERVING AS UNDER: 3. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS PUT FORTH BY THE APPELLAN T CAREFULLY ALONG WITH VARIOUS CASE LAWS CITED BY THE A.R. IT IS SEEN THAT THE APPELLANT HAS DISCLOSED FULL DETAILS OF SALES COMMISSION PAID TO VARIOUS AGENTS /REMISSIERS ALONG WITH THE NAMES OF CORRESPONDING CUSTOMERS TO WHOM WINDMILLS WERE SOLD AND BAS IS OF PAYMENT OF COMMISSION AS ANNEXURE TO THE RETURN OF INCOME AND HAS FURNISHED A NOTE IN THE STATEMENT OF INCOME REGARDING CLAIM OF DEDUCTION U/S.80IB ON INTEREST INCOME. IT IS ALSO NOTICED THAT THE A.O. DID NOT QUESTION THE RECIPIENTS OF COMMISSION, B UT HE VERIFIED THE CUSTOMERS AND THE A.O. HAS NOT EXAMINED THE KEY PERSONS INVOLVED IN PURCHASE OF WINDMILLS. IT IS ALSO SEEN THAT THE A.O. HAS NOT VERIFIED ALL THE CUSTOMERS NOR HE HAS VERIFIED ANY REMISSIER. THE DISALLOWANCE MADE BY THE A.O. WAS A HUGE FIGURE OF RS.9.77 CORES I.E. ENTIRE COMMISSION, BUT THE C.I.T. (A) REDUCED THE DISALLOWANCE AND CONFIRMED THE DISALLOWANCE ONLY IN RESPECT OF SIX CUSTOMERS. BUT THE CLAIM OF THE APPELLANT IS THAT IT HAS INCURRED THE SAID EXPENDITURE OF COMMISSION, WHEREA S THE DEPARTMENT DISALLOWED BASING ON THE STATEMENTS OF SIX CUSTOMERS. IT IS THE CONTENTION OF THE APPELLANT THAT IT HAS ENGAGED CERTAIN PROMINENT PARTIES AS REMISSIERS FOR RENDERING SERVICES TO PROMOTE SALES AND GET REFERENCES FROM THEIR ACQUAINTANCES AN D THAT THE CUSTOMERS MAY NOT BE AWARE THAT SOME COMMISSION WAS PAID ON THE REMISSIER BY THE APPELLANT. FURTHER, FOR DEDUCTION U/S.80IB OF THE ACT, WHETHER INTEREST INCOME IS DERIVED FROM INDUSTRIAL UNDERTAKING OR NET AND WHETHER GROSS OR NOR INTEREST IS T O BE EXCLUDED AND DISALLOWANCE U/S.14A ARE HIGHLY DISPUTABLE AND DEBATABLE ISSUES AS THERE ARE VARIOUS CONTRADICTORY DECISIONS OF HIGH COURTS AND I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 32 TRIBUNALS. WHEN ALL THE FACTS WERE DISCLOSED BY THE APPELLANT REGARDING CLAIM U/S.80IB AND WHEN THE APPE LLANT HAS CLAIMED THAT IT HAS NOT INCURRED ANY ADMINISTRATIVE EXPENSES FOR EARNING DIVIDEND INCOME AND SO NO DISALLOWANCE BE MADE U/S.14A AND CLAIM OF THE APPELLANT HAS BEEN REJECTED RELYING ON DIFFERENT JUDICIAL DECISIONS, IT CAN NOT BE SAID THAT TH ERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHER IT IS NOT THE CASE THAT EXPLANATION OF THE APPELLANT IN RESPECT OF THE VARIOUS CLAIMS WHICH HAVE BEEN DISALLOWED AND FOR WHICH PENALTY HAS BEEN LEVIED HAS NOT BEEN SUBSTANTIATED OR FOUND T O BE FALSE SO AS TO ATTRACT EXPLANATION 1 TO SECTION 271(1) (C) . FURTHER MERELY BECAUSE THE ADDITIONS STOOD CONFIRMED AT THE FIRST APPELLATE STAGE, THERE IS NO JUSTIFICATION IN HOLDING THAT THERE IS CONCEALMENT OF INCOME AND/OR FILING OF INACCURATE PARTICUL ARS OF INCOME. FURTHER, THE ISSUE IS DISPUTABLE AND DEBATABLE AND SO DISALLOWANCES WOULD NOT RESULT INTO LEVY OF PENALTY U/S. 271(L)(C), AS THE PENALTY PROCEEDINGS ARE ENTIRELY DIFFERENT FROM THE ASSESSMENT PROCEEDINGS AND NO PENALTY CAN BE LEVIED, UNLES S IT IS ESTABLISHED THAT THERE IS CLEAR CUT FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN VIEW OF THE ABOVE FACTS AND CASE LAWS, I HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S. 271(L)(C) AND SO I DIRECT THE PENALTY TO BE DELETED. 1 2 .2 SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTER ALIA SUBMITTING THAT CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY OF RS.1,51,36,069/ - . LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE EXPLANATION 1 TO SECTION 271(1)(C) AND REQUESTED TO SET ASIDE TH E ORDER OF CIT(A) ON THE ISSUE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 1 2 .3 AFTER GOING THROUGH RIVAL SUBMISSION AND MATERIAL ON RECORD, WHEREIN AS STATED ABOVE ASSESSEE I S ENGAGED IN THE BUSINESS OF MANUFACTURING WIND TURBINE GENERATORS. ASSESSEE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 33 PAID SALES COMMISSION OF RS.9,77,76, 800 / - @ 0.51% OF TOTAL TURNOVER OF RS.1917.50 CRORES TO TOTAL 27 REMISSIERS FOR INBOUND SERVICES PROVIDED TO IT , WHICH WAS DISALLOWED BY ASSESS ING OFFICER . CIT(A) DELETED RS.9,34,95 , 200 / - AND CONFIRMED THE BALANCE SUM OF RS.42,81,600/ - . IN QUANTUM, THE ACTION OF CIT(A) HAS BEEN CONFIRMED BY ITAT VIDE ORDER DATED 21.09.2012. AS PER ASSESSEE, IT HAS SOLD 451 WIND MILLS AND PAID COMMISSION ON 137 TRANSACTIONS. INSTEAD OF VERIFYING PARTIES TO WHOM COMMISSION HAS BEEN PAID, ASSESSING OFFICER C ALLED 6 CUSTOMERS FOR PERSONAL VERIFICATION BY ISSUING SUMMONS U/S 131. A SSESSEE HAS ENTERED INTO AGREEMENTS WITH VARIOUS REMISSIERS FOR PROVIDING IN FORMATION ABOUT PERSONS LOOKING FORWARD TO BUY WTGS. SUCH REMISSIERS, PURSUANT TO SUCH AGREEMENTS, HAVE PROVIDED INFORMATION ABOUT PERSONS LOOKING FORWARD TO BUY WTGS TO THE ASSESSEE . HENCE, COMMISSION WA S IN THE NATURE OF 'INTRODUCTORY COMMISSION'. A SSESS EE SUBMITTED LETTERS FROM REMISSIERS FOR INFORMATION FOR PLANNING FOR PURCHASE OF WTG, COPY OF AGREEMENT AND INVOICES OF REMISSIERS, THEIR PAN, ADDRESSES, ACCOUNT CONFIRMATION, DETAIL OF PAYMENT BY ACCOUNT PAYEE CHEQUES, DEDUCTION OF TAX AT SOURCE BY ASSES SEE FROM THE PAYMENT OF COMMISSION, REFLECTION OF CO MMISS I O N I NCOME IN TAX RETURN OF RESPECTIVE PARTIES TO PROVE THE SAME. ASSESSING OFFICER EXAMINED/VERIFIED A SSESSEE 'S CUSTOMERS WHO MAY OR MAY NOT BE AWARE OF THE REMISSIERS AND THE SERVICES RENDERED BY THEM DIRECTLY TO ASSESSEE INSTEAD OF EXAMINING THE ACTUAL RECIPIENT OF THE COMMISSION . NONE OF THE CUSTOMERS VERIFIED BY ASSESSING I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 34 OFFICER WERE CROSS EXAMINED BY ASSESSEE . M ANY OF THE CUSTOMERS DID NOT UNDERSTAND THE EXACT NATURE OF THE QUESTIONING AND THE REFORE IN A CONFUSED STATE OF MIND GAVE MISLEADING AND INACCURATE ANSWERS. ASSESSING OFFICER HAS NOT VERIFIED ALL THE KEY PERSONS INVOLVED IN THE PURCHASE OF WINDMILL AT THE END OF THE RESPECTIVE CUSTOMERS WHO MIGHT BE AWARE OF SUCH REMISSIERS BEING INVOLV ED IN THE SAID TRANSACTIONS. AL L REMISSIERS WERE COMPLETELY UNCONNECTED TO THE A SSESSEE . THEY WERE PAYING TAXES AND THE TRANSAC T IONS WERE ENTERED INTO WITH A COMMERCIAL MOTIVE AND NOT WITH A MOTIVE TO SAVE TAXES AS UNITS OF A SSESSEE WE RE ELIGIBLE FOR DED UCTION U/S.801B. ALL THE TRANSACTIONS IN RESPECT OF WHICH COMMISSION HAS BEEN PAID ARE ALSO ON SIMILAR FOOTING . WITHOUT PREJUDICE TO THE QUANTUM ADDITION SUSTAINED BY ITAT, WE FIND THAT FULL DETAILS OF SALES COMMISSION PAID TO REMISSIERS ALONGWITH NAMES OF CO R RESPONDING CUSTOMERS TO WHOM WINDMILLS WERE SOLD AND BASIS OF PAYMENT OF COMMISSION WERE FURNISHED. A SSESSEE HAS ENGAGED CERTAIN PROMINENT PARTIES AS REMISSIERS. FURTHER, CUSTOMERS MIGHT NOT BE AWARE THAT SOME COMMISSION WAS PAID TO SUCH REMISSIERS A ND NON AWARENESS OF THE CUSTOMER DOES NOT FALL BACK OF ASSESSEE AS FAR AS PENALTY IS CONCERNED. IN VIEW OF THIS, WE FIND THAT ASSESSEE HAS FURNISHED ALL THE DETAILS. ASSESSEE HAS NEITHER CONSCIOUSLY CONCEALED ANY INCOME NOR HAS EVADED ANY TAX. HENCE, I N SUCH CIRCUMSTANCES , CIT(A) WAS JUSTIFIED IN DELETING PENALTY IN QUESTION. THIS VIEW IS FORTIFIED BY THE DECISION OF HON'BLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS PVT. LTD. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 35 REPORTED AT 322 ITR 158 (SC). IN VIEW OF ABOVE, WE ARE NOT INCLINED TO I NTERFERE WITH THE ORDER OF CIT(A) O N THIS POINT . SAME IS UPHELD. 1 2 .4 NEXT POINT IN PENALTY IS DISALLOWANCE OF CLAIM U/S.80IB IN RESPECT OF INTEREST ON FDR AND ICD. A SSESSEE HAD TO DEPOSIT CERTAIN AMOUNT AS FDS WITH BANK TO ASK THEM TO ISSUE GUARANTEES FOR SECURING SUPPLY OF MATERIAL AND EQUIPMENT REQUIRED FOR THE PLANT WHICH IS A PART OF THE BUSINESS UNDERTAKING. ACCORDING TO LEARNED AUTHORIZED REPRESENTATIVE, I NTEREST EARNED ON BANK DEPOSIT PLACED FOR OPENING LC HAS DIRECT NEXUS WITH THE ACTIVITY OF INDUSTRIAL UNDERTAKING AND HENCE SAME QUALIFIES FOR THE CLAIM OF DEDUCTION U/S. 80IB. TRIBUNAL ON THE ISSUE IN THE YEAR UNDER CONSIDERATION , IN QUANTUM APPEAL, HELD THAT ONLY NET INTEREST SHOULD BE CONSIDERED FOR REDUCTION FROM PROFITS OF BUSINESS FOR CO MPUTING DEDUCTION U/S 80IB. WITH SUCH A DIRECTION, THE MATTER HAS BEEN REMITTED AS DISCUSSED ABOVE . SINCE THE MATTER HAS BEEN REMITTED, PENALTY ON THIS GROUND DOESN'T SURVIVE. IN VIEW OF ABOVE, CIT(A)(A) WAS JUSTIFIED IN DELETING PENALTY. WE UPHOLD THE SAM E. 1 2 .5 PENALTY ON ACCOUNT OF DISALLOWANCE U/S.14A. INTEREST OF RS. 2,56,29,272/ - (I.E. AGGREGATE OF RS.1.56.57,540/ - BEING INTEREST ON INVESTMENTS MADE IN SUBSIDIARIES FOR F . Y . 2003 - 04 AND RS. 9,971,732/ - BEING INTEREST FOR FY 2004 - 05) HAVE BEEN DISALLO WED U/S 14A. INTEREST HAS BEEN CALCULATED F ROM THE DATE OF INVESTMENT TO 3 1 ST MARCH 2005. FURTHER, RS.50, 19,716/ - HAS I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 36 ALSO BEEN DISALLOWED OUT OF CERTAIN ADMINISTRATIVE EXPENSES (VIZ. DIRECTORS REMUNERATION, FEES & TRAVELING EXP.; SALARY OF CORPORATE OFFIC E; AUDIT FEES; REPAIRS TO BLDG.; RENT & COMMUNICATION EXP.) IN PROPORTION OF DIVIDEND EARNED TO THE TURNOVER. SUCH INVESTMENTS HAVE BEEN MADE BY THE APPELLANT IN ITS ASSOCIATE CONCERNS FOR THE PURPOSES OF PROMOTING, SUPPORTING AND PROTECTING BUSINESS INTER EST OF THE APPELLANT OUT OF COMMERCIAL EXPEDIENCY AND BUSINESS PRUDENCE. ASSESSING OFFICER HAS WHILE WORKING OUT DISALLOWANCE U/S. 14A, INCLUD ED THE AMOUNT OF INVESTMENT IN FOREIGN SUBSIDIARIES ALSO, INCOME OF DIVIDEND FROM WHICH IS TAXABLE AS EVIDENT FR OM PAGE 14 - 15 OF THE ASSESSMENT ORDER. OUT OF TOTAL INVESTMENT OF RS.97,74,38,092/ - , A SUM OF RS.59,07 , 18,092/ - PERTAINS TO THE INVESTMENTS IN FOREIGN SUBSIDIARIES . SINCE THE DIVIDEND RECEIVED FROM FOREIGN COMPANIES IS TAXABLE, PROVISIONS OF SECTION 14A CA NNOT BE INVOKED WITH REGARD TO SAME. RULE 8D PRESCRIBED FOR WORKING OUT DISALLOWANCE U/S 14A IS NOT APPLICABLE FOR ASST. YEARS PRIOR TO AY 2008 - 09. HENCE, FOR A . YS . PRIOR TO A . Y . 2008 - 09 (AS IN THE PRESENT CASE). ASSESSING OFFICER HAS TO PROVE THE NEXUS T HAT BORROWED FUNDS HAVE BEEN USED FOR MAKING INVESTMENTS WHICH GENERATE TAX FREE INCOME PRIOR TO MAKING DISALLOWANCE U/S 14A. IN ABSENCE OF ASSESSING OFFICER PROVING SUCH A NEXUS, THE METHOD OF ADOPT ING ASSESSEES CLAIM CAN NO T BE DISTURBED. WITHOUT PREJUD ICE TO ABOVE, THE STAND OF ASSESSEE HAS BEEN THAT IT WAS HAVING SUBSTANTIAL INTEREST FREE FUNDS FOR MAKING SUCH INVESTMENTS. IN VIEW OF ABOVE, CIT(A) HAS GRANTED PARTIAL RELIEF. ITAT HAS CONFIRMED PROPORTIONATE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 37 DISALLOWANCE U/S . 14A OUT OF ADMINISTRATIVE EXPENSES ON WHICH PENALTY HAS BEEN LEVIED. IN VIEW OF ABOVE, WE FIND THAT ASSESSEE HAS FURNISHED ALL THE DETAILS. ASSESSEE HAS NEITHER CONSCIOUSLY CONCEALED ANY INCOME NOR HAS EVADED ANY TAX. IN SUCH CIRCUMSTANCES , PENALTY WAS RIGHTLY DELETED BY CIT(A) O N THIS ACCOUNT. FURTHER M ERE DISALLOWANCE U/S 14A OUT OF ADMINISTRATIVE EXPENSES CANNOT BE JUSTIF IED PENALTY U/S 271(L)(C) . SAME HAS BEEN RIGHTLY DELETED BY CIT(A). WE UPHOLD THE SAME. 1 2 .6 AS A RESULT, APPEAL FILED BY REVENUE FOR A.Y. 2005 - 06 IS DISMIS SED. 1 3 . NOW, WE TAKE ITA NO. 3475 /AHD/20 10 FOR A.Y. 2010 - 11. REVENUE HAS FILED TH IS APPEAL ON THE FOLLOWING GROUND S : 1. THE LD. CIT (A), GANDHINAGAR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT COMPANY WAS NOT LIABLE TO DEDUCT TAX AT SOUR CE U/S . 196C R . W . S . 11 5 AC ON THE INTEREST PAYABLE ON FCCBS (I.E. CONSENT INCENTIVE). 2. LD. CIT (A) HAS ERRED ON FACTS AND LAW IN NOT CONSIDERING THE ISSUE THAT AN INDIAN COMPANY (ASSESSEE) HAS TAKEN LIABILITY OF ISSUING FCCBS FROM INDIA AFTER TAKING APPR OVAL OF RESERVE BANK OF INDIA (INDIAN AUTHORITY), AS PER RULES AND GUIDELINES OF RBI AND HAS REMITTED INTEREST FROM INDIA AS ITS LIABILITY DULY RECOGNIZED IN HIS BOOKS OF ACCOUNT PREPARED FOR INDIAN REGULATORY AUTHORITIES, RESULTING INTO INCOME ACCRUING AN D ARISING TO THE NON - RESIDENT UNDER SECTION 5(2) OF THE ACT FOR WHICH THE DEEMING PROVISIONS OF SECTION 9(1) ARE NOT APPLICABLE. 3. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN HOLDING THAT BOTH SECTIONS 5(2) AND 9(1) (V) OF THE ACT, ARE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 38 APPLICABLE TO D ETERMINE THE SITUS OF INTEREST INCOME IN CASE OF NON RESIDENT. 4. THE LD. CIT(A) ALSO ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INTEREST PAID BY THE APPELLANT ON ITS FCCBS IS COVERED BY EXCEPTION TO SECTION 9(1)(V)(B) OF THE ACT AND CONSEQUENTLY IT FA LLS OUTSIDE THE AMBIT OF DEEMED INCO M E ARISING AND ACCRUING IN INDIA AND AS A RESULT OUT OF SECTION 5 ALSO. 5. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THERE IS AMBIGUITY IN DETERMINING WHETHER INCOME HAS BEEN RECEIVED OR ARISEN IN INDIA AND THUS THERE IS A NEED TO TRAVEL FROM SECTION 5(2) TO SECTION 9(1) OF THE ACT. 6. THE LD. CIT (A) HAS ERRED IN LAW BY CONTRADICTING HIS OWN OBSERVATION THAT SECTION 11 5 AC IS A CODE ITSELF AND THEN TRAVELING TO ANOTHER CHARGING SECTION OF THE ACT FOR DE CIDING THE TAXABILITY OF INTEREST INCOME. 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS PRAYED THAT THE ORDER OF LD. CIT (A) GANDHINAGAR BE CANCELLED AND THAT OF A O RESTORED TO THE ABOVE EXTENT. 1 3 . 1 C.O. NO.61/AHD/2014 FILED BY ASSESSEE ON F OLLOWING GROUND: 1. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THAT NO SURCHARGE IS TO BE ADDED WHILE DETERMINING WITHHOLDING TAX ON REMITTANCE BEING MADE TO THE NON - RESIDENT, AND THEREFORE, SURCHARGE OUGHT NOT HAVE BEEN INCLUDED WHILE DETERMINI NG LIABILITY OF TDS U/S.201(1) OF THE ACT. 1 3 . 2 SIMILAR ISSUES AROSE IN ITA NO.3476/AHD/2010 FOR SAME YEAR AND SIMILAR C.O. NO.62/AHD/2014 WAS FILED ON BEHALF OF ASSESSEE. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 39 13.3 LEARNED COUNSEL FOR ASSESSEE WAS FAIR ENOUGH NOT TO PRESS BOTH CROSS OBJECTI ONS. SO, SAME ARE DISMISSED AS NOT PRESSED. 1 4 . IN ITA NO.3475/AHD/2010, ASSESSING OFFICER OBSERVED THAT CONSEQUENT TO REMITTANCE BY ASSESSEE AMOUNTING TO RS.68,70,18,465/ - FOR CONSENT INCENTIVE (INTEREST) IN THE MONTH OF JUNE 2009 AND RS.10,63,50,697/ - FOR INTEREST DURING YEAR ENDED MARCH 31, 2010 TO DEUTSCHE BANK AG, LONDON BRANCH PAYABLE ON FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBS), ISSUED BY ASSESSEE I.E. SUZLON ENERGY LIMITED. NO TAX HAS BEEN DEDUCTED AT THE TIME OF REMITTANCE. ASSESSING OFFICER I SSUED A SHOW CAUSE NOTICE TO ASSESSEE AS TO WHY PROCEEDINGS U/S.201(1) & 201(1A) R.W.S. 196C BE NOT INITIATED FOR THE ABOVE FAULT. ASSESSING OFFICER HELD THAT CONSENT INCENTIVE IS IN NATURE OF INTEREST IN TERMS OF DEFINITION CONTAINED IN SECTION 2(28)A OF THE ACT. NOT AGREEING WITH THE EXPLANATION GIVEN BY ASSESSEE IN RESPONSE TO THIS SHOW CAUSE NOTICE THROUGH VARIOUS WRITTEN SUBMISSIONS MADE FROM TIME TO TIME ALONG WITH DOCUMENTARY EVIDENCES AND DETAILED EXPLANATIONS, ASSESSING OFFICER BROUGHT ON RECORD T HAT B ONDS HAVE BEEN ISSUED BY AN INDIAN COMPANY AND THE CONSENT INCENTIVE AND INTEREST HAS BEEN PAID BY AN INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY THE CONSENT INCENTIVE AND INTEREST RESTED WITH ASSESSEE ONLY. THEREFORE, ACCORDING T O HIM THE CONSENT INCENTIVE AND INTEREST HAS ACCRUED OR ARISEN IN THE HANDS OF NON - RESIDENT BONDHOLDERS IN INDIA AS SOON AS THE INTEREST BECAME DUE TO THE BONDHOLDERS. ACCORDING TO HIM, THE INTEREST ON FCCBS IS I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 40 CHARGEABLE TO TAX U/S 5(2 ) ITSELF AND ASSESSE ES ASSERTION THAT SAME IS COVERED BY SECTION 9 WAS FOUND INCORRECT BY ASSESSING OFFICER . ACCORDING TO HIM, WHEN INCOME IS ACTUALLY RECEIVED OR ACCRUED IN INDIA, THE PROVISIONS CONTAINED IN SECTION 5(2) IS SUFFICIENT TO CREATE A CHARGE IN RESPECT OF A NON - RESIDENT'S INCOME AND RESORT TO DE EMING PROVISIONS OF SECTION 9(1)(V) WA S NOT WARRANTED, COMMENTING ON THE ASSESSEE S REFERENCE TO THE WORDS 'SUBJECT TO PROVISIONS OF THIS ACT', IN SECTION 5. ASSESSING OFFICER STATED THAT THIS DOES NOT LEAD TO THE CONCLUS ION THAT CHARGING PROVISIONS OF SECTION 5(2) IS CONTROLLED BY ANOTHER CHARGING PROVISION IN SECTION 9( 1). AT THE STRENGTH OF ABOVE LEGAL PORTION , ASSESSING OFFICER CAME TO THE CONCLUSION THAT INCOME DERIVED FROM NON - RESIDENT BONDHOLDERS IS CHARGEABLE U/ S. 5(2] AS INCOME ACCRUED IN INDIA AND ONCE IT IS COVERED U/S. 5(2) SECTION 9(L)(V)(B) IS NOT APPLICABLE. ASSESSING OFFICER ALSO STATED THAT CIRCULAR OF CBDT (SUPRA) CITED BY THE ASSESSEE IS NOT APPLICABLE TO THE PRESENT CASE AS THE SAME HAS BEEN ISSUED WIT H REGARD TO SECTION 9(L)(I) AND 9(L)(V) OF THE ACT, BUT IN PRESENT CASE , THE PROVISIONS OF SECTION 5(2) ARE APPLICABLE AND ONE NEED NOT TRAVEL TO THE PROVISIONS OF SECTION 9 OF THE ACT. 1 4 .1 ASSESSING OFFICER , IN PARA 7.2 O F THE ASSESSMENT ORDE R , WENT FUR THER TO ESTABLISH THAT EVEN IF WE TAKE T HE PROVISIONS OF SECTION 9(L)(V) (B), ASSESSEES CASE IS NOT COVERED BY THE EXCLUSIONS STATED THEREIN. T HE REASONS ADVANCED BY THE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 41 ASSESSING OFFICER FOR THE EXCLUSIONS BEING NOT APP LICA BLE ARE AS UNDER : '7.2 A CLOSE READING OF THE ABOVE SUBSECTION MAKES IT DEAR THAT INTEREST PAID BY A RESIDENT IS CHARGEABLE TO INCOME TAX EXCEPT WHEN THE INTEREST IS PAYABLE IN RESPECT OF ANY DEBT INCURRED FOR THE PURPOSES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA. THIS EXCLUSION COVERS, THE CASES WHERE THE AS SESSEE THROUGH A 'BRANCH OFFICE' OR THROUGH A 'PERM ANENT ESTABLISHMENT' CARRIES OUT ITS BUSINESS OUTSIDE INDIA OR MAKES OR EARNS INCOME OUTSIDE INDIA. BUT IN THE PRESENT CASE THERE IS NO SUCH BRANCH OFFICE OR PERMANENT ESTABLISHMENT OF THE ASSESSES THROUGH - W HICH THE BUSINESS OF THE ASSESSES IS CARRIED OUT OR THROUGH WHICH IT CAN SOURCE INCOME. IN VIEW OF THE ABOVE, THE EXEMPTION AVAILABLE AS PER SUB CLAUSE (B) OF CLAUSE (V) OF SUB - SECTION (2) OF SECTION 9 OF THE ACT, IS NOT APPLICABLE IN PRESENT CASE AND THUS SAME IS CHA RG EA B LE TO TAX IN INDIA. ASSESSING OFFICER ANALYSE D THE ISSUE IN CONTEXT OF ISSUE OF FCCB WHICH IS GOVERNED BY ' ISSUE OF FOREIGN CURRENCY C ONVERTIBLE B ONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT (MECHANISM) S CHEME, 1993 ' NOTIFIED BY DEPARTMENT OF ECONOMIC AFFAIRS NO.GSR 700(E), DA TED 12 NOVEMBER, 1993 AND FOREIGN CU RRE NCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITORY RECEIPT MECHANISM) SCHEME IS THE NOTIFIED SCHEME FOR THE PURPOSE OF SECTION 115AG(L)(A) IN RESPECT OF ASSESSMENT YEAR 2002 - 2003 AND SUB SEQUENT ASSESSMENT Y EARS VIDE C BDT NOTIFICATION NO.SO 987 (E) DATED 10/09/2002 ALONG WITH THE NOTIFICATION OF DEPARTMENT OF ECONOMIC AFFAIRS VIDE G.S.R. 89(E) DATED FEBRUARY 15, 2008, TO THE POINT THAT IRRESPECTIVE OF THE END USE OF THE PROCEEDS , ONCE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 42 THE SCHEME IS PA RT OF TH E SECTION 115 AC OF THE ACT DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATED UNTIL SUCH TIME THE CONVERSION OPTION IS EXERCISED. HE ALSO REFERRED T O T HE PROSPECTUS ISSUED BY ASSESSEE AT T HE TIME OF ISSUE OF FCCBS WHEREIN IT WAS MENTIONED THAT PAYMENT OF INTERE ST SHALL BE SUBJE CTED TO PROVISIONS OF SECTION 1 15AC . THEREFORE, ACCORDING TO ASSESSING OFFICER , CONSIDERING ALL THE FACTS, ASSESSEE HAS TO BE TREATED AS AN ASSESSEE IN DEFAULT AS PER PROVISIONS OF SECTION 201(1), SINCE TH E ENTIRE CONSENT INCENTIVE AND IN TEREST PAYABLE STANDS REMITTED WITHOUT DEDUCTION OF TAX . 1 4 .2 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE INCLUDING SYNOPSIS OF ARGUMENT AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELI EF TO ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT CIT(A) ERRED IN LAW AND FACTS IN HOLDING THAT ASSESSEE COMPANY WAS NOT LIABLE TO DEDUCT TAX AT SOURCE 196C R.W.S. 115AC ON THE INTEREST PAYABLE ON FCCBS (I.E. CONSENT INCE NTIVE). CIT(A) ERRED ON FACTS AND LAW IN NOT CONSIDERING THE ISSUE THAT AN INDIAN COMPANY HAS TAKEN LIABILITY OF ISSUING FCCBS FROM INDIA AFTER TAKING APPROVAL OF RESERVE BANK OF INDIA (INDIAN A UTHORITY) AS PER RULES AND GUIDELINES OF RBI AND HAS REMITTE D INTEREST FROM INDIA AS LIABILITY DULY RECOGNIZED IN HIS BOOKS OF ACCOUNT PREPARED FOR INDIAN REGULATORY AUTHORITIES, RESULTING INTO INCOME ACCRUING AND ARISING TO NON - RESIDENT U/S.5(2) OF THE ACT FOR WHICH DEEMING PROVISIONS OF SECTION 9(1) ARE NOT APPLI CABLE. I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 43 CIT(A) ERRED IN HOLDING THAT BOTH SECTIONS 5(2) AND 9(1)(V) OF THE ACT, ARE APPLICABLE TO DETERMINE THE STATUS OF INTEREST INCOME IN CASE OF NON RESIDENT. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT INTEREST PAID BY ASSESSEE ON ITS FCCBS IS COVERED B Y EXCEPTION TO SECTION9(1)(V)(B) OF THE ACT AND CONSEQUENTLY IT FALLS OUTSIDE THE AMBIT OF DEEMED INCOME ARISING AND ACCRUING IN INDIA AND AS A RESULT OUT OF SECTION 5 ALSO. CIT(A) ERRED IN HOLDING THAT THERE IS AMBIGUITY IN DETERMINING WHETHER INCOME HAS BEEN RECEIVED OR ARIS E N IN INDIA AND THUS, THERE IS A NEED TO TRAVEL FROM SECTION 5(2) TO SECTION 9(1) OF THE ACT. CIT(A) ERRED IN LAW BY CONTRADICTING ITS OWN OBSERVATION THAT SECTION 115AC IS A CODE ITSELF AND THEN TRAVELLING TO ANOTHER CHARGING SECTIO N OF THE ACT FOR DECIDING THE TAXABILITY OF INTEREST INCOME. IN VIEW OF ABOVE, LEARNED DEPARTMENTAL REPRESENTATIVE REQUESTED TO SET ASIDE THE ORDER OF CIT(A) AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPP ORTED THE ORDER OF CIT(A) AND STATED THAT ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN HOLDING THAT ASSESSEE COMPANY WAS LIABLE TO DEDUCT TAX AT SOURCE U/S.196C R.W.S. 115AC OF THE INCOME TAX ACT ON REMITTANCE TO DEUTSCHE BANK AG, LONDON BRANCH FOR MAKIN G PAYMENT OF CONSENT INCENTIVE ON IS BEHALF OF FOREIGN CURRENCY CONVERTIBLE BOND HOLDERS. ASSESSING OFFICER ERRED IN NOT APPRECIATING THE INCOME OF RECIPIENT NON - RESIDENT IS NOT AT ALL CHARGEABLE TO TAX IN INDIA AND THEREFORE, THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE AND THEREFORE NO QUESTION OF INVOKING PROVISIONS OF SECTION 201(1) OF THE ACT. ASSESSING OFFICER ERRED IN NOT APPRECIATING THAT BY VIRTUE OF I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 44 PROVISIONS OF SECTION 9(1)(V)(B) OF THE ACT, INTEREST INCOME CANNOT BE SAID TO HAVE ACCRUED O R ARISEN AS THE SAID INTEREST IS PAID FOR EARNING INCOME FROM SOURCE OUTSIDE INDIA. ONCE INCOME IS NOT ACCRUED OR ARISEN, NO QUESTION OF TAX DEDUCTION AT SOURCE WOULD ARISE. ASSESSING OFFICER ERRED IN APPLYING PROVISIONS OF SECTION 5(2)(B) OF THE ACT WHE N THE SAID PROVISIONS HAVE NO APPLICATION WHATSOEVER IN THE FACTS OF THE CASE. ASSESSING OFFICER ERRED IN TREATING ASSESSEE COMPANY TO BE AN ASSESSEE IN DEFAULT U/S.201(1) OF ACT IN RESPECT OF TAX ALLEGEDLY DEDUCTIBLE AT SOURCE ON SUBJECT REMITTANCE TO DE UTSCHE BANK AG, LONDON BRANCH FOR MAKING PAYMENT OF CONSENT INCENTIVE ON ITS BEHALF TO FOREIGN CURRENCY CONVERTIBLE BOND (FCCB) HOLDERS. ASSESSING OFFICER ERRED IN APPLYING THE PROVISIONS OF SECTION 195A OF THE ACT WHEREAS THE SAID SECTION IS NOT APPLICABL E TO ANY INCOME REFERRED TO IN SECTION 196C OF THE ACT. IN VIEW OF THIS, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 1 4 . 3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ASSESSEE HAD ISSUED TWO SERIES OF FO REIGN CURRENCY CONVERTIBLE BONDS (FCCB) IN F.Y. 2007 - 08, NAMELY, FCCB FOR US $ 300 MILLIONS MATURING IN JUNE 2012 AND ANOTHER FCCB FOR US$ 200 MILLIONS MATURING IN OCTOBER 2012. THE PROCEEDS OF SUBJECT FCCB WERE USED FOR ACQUISITION OF SHARES IN OVERSEAS SUBSIDIARY WHICH IS CARRYING ON BUSINESS OUTSIDE INDIA RESULTING IN SOURCE OF INCOME OUTSIDE INDIA. THE BONDS HAVE BEEN ISSUED UNDER THE PERMISSION OF RESERVE BANK I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 45 OF INDIA UNDER EXTERNAL COMMERCIAL BORROWING (ECB) GUIDELINES. ASSESSEE CARRIED OUT RE STRUCTURING OF SUBJECT FCCB IN MAY 2009 WITH PERMISSION OF RESERVE BANK OF INDIA AND AS A PART OF IT AND AS A PART OF IT ASSESSEE REPLACED ZERO COUPON FCCB AMOUNTING TO US$ 9,40,04,000/ - WITH 7.50% INTEREST BEARING FCCB AMOUNTING TO US$ 5,63,88,000/ - . AS A PART OF RESTRUCTURING ASSESSEE COMPANY HAS MADE PAYMENT TO NON - RESIDENT BOND HOLDERS ON ACCOUNT OF CONSENT INCENTIVE FOR CHANGE IN FINANCIAL COVENANTS OF FCCB AMOUNTING TO RS.68,70,18,465/ - THROUGH DEUTSCHE BANK AG LONDON BRANCH. ASSESSEE COMPANY HAS AL SO REMITTED INTEREST ON THE SAID FCCBS AMOUNTING TO RS.10,63,50,697/ - TO NON - RESIDENT BOND - HOLDERS THROUGH DUTSCHE BANK AG LONDON BRANCH. HOWEVER, ASSESSING OFFICER PASSED THE ORDER INVOKING PROVISIONS OF SECTION 201(1)/ (1A) OF ACT AFTER HOLDING THAT AS SESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S.196C R.W.S. 115AC OF THE ACT ON REMITTANCE MADE BY ASSESSEE. ASSESSING OFFICER GAVE FOLLOWING REASONING WHILE PASSING ORDER: (A) ASSESSING OFFICER WAS OF THE VIEW THAT THE BONDS WERE ISSUED BY AN INDIAN COMPAN Y AND INTEREST HAS BEEN PAID BY AN INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY THE INTEREST RESTED WITH ASSESSEE ONLY AND ACCORDINGLY CHARGEABLE U/S.5(2) OF THE ACT; (B) FOR THE SAID CONTENTION, ASSESSING OFFICER RELIE UPON THE SUPREME COURT DECISION IN THE CASE OF PERFORMING RIGHTS SOCIETY VS. CIT 106 ITR 11 AND ALLAHABAD HIGH COURT DECISION IN THE CASE OF HIRA MILLS LTD. VS. ITO 14 ITR 417; I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 46 (C) ASSESSING OFFICER WAS FURTHER OF THE VIEW THAT ONCE THE INCOME IS COVERED U/S.5(2), SECTION 9(1)(V)(B) IS NOT APPLICABLE; (D) ASSESSING OFFICER WAS FURTHER OF THE VIEW THAT THE ISSUE OF FCCB IS GOVERNED BY ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT MECHANISM) SCHEME, 1992 AND THE SAID SCHEME IS NOTIFIED SCHEME FOR THE PURPOSE OF SECTION 115AC(I)(A) OF THE ACT AND THEREFORE, IRRESPECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115AC, DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATE UNTIL SUCH TIME THE CONVERSION OPTION IS EXERCISED; (E) ASSESSING OFFICER FURTHER WENT TO ESTABLISH THAT EVEN IF THE PROVISIONS OF SECTION 9(1)(V)(B) IS APPLICABLE, THE ASSESSEES CASE WILL NOT BE COVERED BY THE EXCLUSIONS STATED THEREIN. IN THIS BACKGROUND, LEARNED AUTHORIZED REPRESENTATIVE SUB MITTED THAT ISSUE IS COVERED BY CO - ORDINATE BENCH DECISION IN ITA NOS. 3072/AHD/2009 WITH C.O. NO.291/AHD/2009 IN CASE OF ADIT (INT. TAX.) VS. ADANI ENTERPRISE LTD. WHEREIN ITAT AFTER CONSIDERING THE CONTENTIONS OF ASSESSING OFFICER AND CASE LAWS RELIED UP ON BY HIM, HELD THAT INTEREST PAID BY ASSESSEE TO NON - RESIDENT INVESTOR IS SPECIFICALLY EXCLUDED FROM THE DEEMING PROVISIONS AS PER SECTION 9(1)(V)(B), AND THEREFORE, SUCH INTEREST PAYMENT CANNOT BE COVERED IN THE DEFINITION OF INCOME DEEMED TO ACCRUE OR A RISE IN INDIA. IT IS FURTHER HELD THAT SINCE INCOME IN QUESTION IS FALLING WITHIN THE AMBIT OF THIS EXCLUSION CLAUSE OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA AS PER SECTION 9(1)(V)(B), IT CANNOT FALL WITHIN THE AMBIT OF INCOME ACCRUED AND I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 47 ARISEN IN IN DIA, AND HENCE, THE SAME CANNOT BE SAID TO BE COVERED U/S.5(2) OF THE ACT. THEREFORE, THERE WAS NO NEED TO DEDUCT TAX AT SOURCE ON SUCH REMITTANCE. 1 4 .4 IN THE PRESENT APPELLATE PROCEEDINGS ,T HE APPELLANT SUBMITTED A PAPER BOOK ON 10 - 09 - 2010 CONTAINING T HE COPY OF ALL THE DOCUMENTS; A N D SUBMISSIONS MADE TO AO FROM TIME TO TIME AS WELL AS WRITTEN SUBMISSIONS ONCE AGAIN COMPILING THE ARGUMENT A DVANCE D BEFORE AO ALON G W I T H EXPL ANATION ON THE FINDING OF AO. IT WAS ARGUED THAT THE QUESTION OF APPLYING PROVIS IONS OF SECTION 196 C R.W.S 11 5 AC ARISES ONLY WHEN THE INCOME IS CHARGEABLE TO TAX IN L:IDIA AND IN PRESENT CASE NONE OF THE REMITTANCES ARE NOT AT ALL CHARGEABLE TO TAX IN INDIA IN HANDS OF FCCB BONDHOLDERS A ND HENCE THERE WAS NO OBLIGATION ON APPELLANT T O D E DUCT TAX AT SOURCE AND THUS APPELLANT CAN NOT BE FASTE NED WITH THE DEFAULT U/S. 201(L) AND 201(1A) OF THE ACT. 14.5 FROM DETAILED SUBMISSION IN THIS REGARD , WE FIND THAT ASSESSEE HAS ISSUED TWO SERIES OF FOREIGN CURRENCY CONVERTIBLE BONDS ('FCCB') IN F.Y: 2007 - 08 NAMELY; FCCB FOR US$ 300 MILLIONS MATURING IN JUN E 2012 AND ANOTHER FCCB FOR US$ 200 MILLIONS MATURING IN OCTOBER 2012. WE FIND THAT PROCEEDS OF SUBJECT FCCB WERE USED TO BE USED AND AS A MATTER OF FACT USED, FOR ACQUISITION OF SHARES IN OVE RSEAS SUBSIDIARY WHICH WA S CARRYING ON BUSINESS OUTSIDE INDIA RESULTING IN SOURCE OF INCOME OUTSIDE INDIA. WE ALSO FIND THAT THE BONDS HAVE BEEN ISSUED UNDER THE PERMISSION OF RESERVE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 48 BANK OF INDIA UNDER EXTERNAL COMMERCIAL BORROWING ('ECB') GUIDELINES. HOWEVER, DUE TO FINANCIAL CONSTRAINT, ASSESSEE CARRIED OUT RESTRUCTURING OF SUBJECT FCCB IN MAY 2009 WITH THE PERMISSION OF RESERVE BANK OF INDIA AND PURSUANT TO THE SAME, ASSESSEE REPLACED ZERO COUPON FCCB AMOUNTING TO US$ 9,40,04,000 / - WITH 7.50% I NTEREST BEARI NG FCCB AMOUNTING TO US$ 5,63,88,000 / - . AS A PART OF RESTRUCTURING OF ASSESSEE COMPANY HAS MADE PAYMENT TO NON - RESIDENT BOND HOLDERS ON ACCOUNT OF 'CONSENT INCENTIVE' FOR CHANGES IN THE FINANCIAL COVENANTS OF THE FOREIGN CURRENCY CONVERTI BLE BONDS AMOUNTING TO RS.68,70,18,465 / - THROUGH DEUTSCHE BANK AG LONDON BRANCH. A SSESSEE COMPANY HAD ALSO REMITTED INTEREST ON SAID FCCB'S AMOUNTING TO RS.10,63,50,697/ - TO THE NON - RESIDENT BOND - HOLDERS THROUGH DEUTSCHE BANK AG LONDON BRANCH. NOW, THE QU ESTION IS WHETHER THESE PAYMENTS ARE SUBJECT TO TAX IN THE HANDS OF THE RECIPIENT NON - RESIDENTS? IF THE ANSWER IS IN AFFIRMATIVE, THE ASSESSEE IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE AND IF THE ANSWER IN IN NEGATIVE, THE ASSESSEE CANNOT BE HELD LIAB LE TO DEDUCT TAX AND CONSEQUENTLY, THE ORDERS U/S 201(1) / (1 A) HAS TO BE QUASHED. AS STATED EARLIER, THE ENTIRE ISSUE IS SQUARELY COVERED BY THE ORDER OF CO - ORDINATE BENCH OF AHMEDABAD IN CASE OF ADANI ENTERPRISE (SUPRA). WE FIND THAT THE FACTS OF PRESENT CASE ARE IDENTICAL TO ADANI (SUPRA) WHICH CAN BE SUMMARIZED AND COMPARED IN THE FOLLOWING TABULAR CHART: I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 49 FACTS IN THE CASE OF ADANI ENTERPRISE LTD. FACTS IN THE PRESENT CASE (A) ADANI ENTERPRISE HAD ISSUED FCCB IN NEW YORK AND THE PROCEEDS F ROM FCCB WERE USED FOR MAKING OVERSEAS DIRECT INVESTMENT IN ITS SINGAPORE SUBSIDIARY SUCH AS ADANI SHIPPING PTE LTD., ADANI GLOBAL PTE LTD. ETC.; (B) ADANI REMITTED INTEREST TO THE BANK OF NEW YORK, MELLON TOWARDS THE INTEREST PAYABLE ON FCCBS ISSUED BY A DANI. (C) TRIBUNAL IN ITS ORDER ON PG. NO. 14 VIDE PARA 11 HAS REPRODUCED THE PARA 4.7 OF AO'S ORDER, WHICH SHOWS THAT AO WAS OF THE VIEW THAT THE BONDS WERE ISSUED BY AN INDIAN COMPANY AND INTEREST HAS BEEN PAID BY AN INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY THE INTEREST RESTED WITH THE ASSESSEE ONLY AND ACCORDINGLY CHARGEABLE U/S 5(2) OF THE ACT; (D)FOR THE SAID CONTENTION, AO RELIED UPON THE SUPREME COURT DECISION IN THE CASE OF PERFORMING (A) THE ASSESSEE HAS ISSUED FCCB IN LONDON AND THE PROCEEDS OF SUCH FCCBS WERE UTILIZED FOR THE PURPOSE OF INVESTMENTS AND ACQUISITION OF FOREIGN SUBSIDIARIES OUTSIDE INDIA THROUGH FOREIGN SUBSIDIARIES; (B)THE ASSESSEE REMITTED THE AMOUNT DUE ON ACCOUNT INTEREST AND CONSENT INCENTIVES TO DEUTSCHE BANK AG, LONDON BRANCH AS ITS AGENT TO DISTRIBUTE THE INTEREST AND CONSENT INCENTIVE AMOUNT; WHICH IN TURN GAVE TO DEUTSCHE TRUSTEES CO LIMITED LONDON WHO STOOD NOMINATED AS THE TRUSTEE OF THE BOND HOLDERS AND THE SAID TRUSTEE MADE THE PAYMENT IN FOREIGN CURRENCY TO THE CLEARING SYSTEM WHERE INDIVIDUAL BOND HOLDERS ARE HAVING ACCOUNTS. (C) IN THE PRESENT CASE ALSO THE AO ON PG. NO.9 VIDE PARA 6.1.4 HAS PASSED THE SAME OBSERVATIONS AS NOTED IN PARA 4.7 OF ADANI ENTERPRISE LTD. ORDER. IN THE PRESENT CASE ALSO, AO WAS OF THE VIEW THAT THE BONDS WERE ISSUED BY AN INDIAN COMPANY AND INTEREST HAS BEEN PAID BY A N INDIAN COMPANY FROM INDIA ONLY AND FURTHER THE OBLIGATION TO PAY THE INTEREST RESTED WITH THE ASSESSEE ONLY AND ACCORDINGLY CHARGEABLE U/S 5(2) OF THE ACT; (D)IN THIS CASE ALSO, FOR THE ABOVE CONTENTION AO HAS RELIED UPON THE SUPREME COURT DECISION IN T HE I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 50 RIGHTS SOCIETY VS. CIT 1 06 ITR 11 AND ALLAHABAD HIGH COYRT DECISION IN THE CASE OF HIRA MILLS LTD. VS. ITO 14 ITR 417 (REFER PG. NO. 12 OF THE ORDER); (E) AO WAS FURTHER OF THE VIEW THAT ONCE THE INCOME IS COVERED U/S 5(2), S.9(L)(V)(B) IS NOT APPLICABLE; (F) AO WAS FURTHER OF THE VIEW THAT THE ISSUE OF FCCB IS GOVERNED BY 'ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT MECHANISM) SCHEME, 1993' AND THE SAID SCHEME IS NOTIFIED SCHEME FOR THE PURPOSE OF S.115AC(I)(A)OF THE ACT, AND T HEREFORE, IRRESPECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115AC, DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATE UNTIL SUCH TIME THE CONVERSION OPTION IS EXERCISED; (G)AO FURTHER WENT TO ESTABLISH THAT EVEN IF THE PROVIS IONS OF S.9(L)(V)(B) IS APPLICABLE, THE ASSESSEE'S CASE WILL NOT BE COVERED BY THE EXCLUSIONS STATED THEREIN. CASE OF PERFORMING RIGHTS SOCIETY VS. CIT 106 ITR 11 AND ALLAHABAD HIGH COURT DECISION IN THE CASE OF HIRA MILLS LTD. VS. ITO 14 ITR 417; (PG. NOS.6 - 8 VIDE PARA 6.1.3 OF AO ORDER) (E)IN THE PRESENT CASE ALSO, AO WAS FURTHER OF THE VIEW THAT ONCE THE IN COME IS COVERED U/S 5(2), S.9(L)(V)(B) IS NOT APPLICABLE. (PG. NO.9 VIDE PARA 6.1.4 OF AO ORDER) (F) IN THE PRESENT CASE ALSO, AO WAS FURTHER OF THE VIEW THAT THE ISSUE OF FCCB IS GOVERNED BY 'ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARE S (THROUGH DEPOSITARY RECEIPT MECHANISM) SCHEME, 1993' AND THE SAID SCHEME IS NOTIFIED SCHEME FOR THE PURPOSE OF S.115AC(I)(A)OF THE ACT, AND THEREFORE, IRRESPECTIVE OF THE END USE OF THE PROCEEDS, ONCE THE SCHEME IS PART OF THE SECTION 115AC, DEDUCTION OF TAX AT SOURCE @ 10% IS MANDATE UNTIL SUCH TIME THE CONVERSIO N OPTION IS EXERCISED.(PG.NOS.L0 - 14 VIDE PARAS 6.2 TO 6.6) (G)IN THE PRESENT CASE ALSO, AO FURTHER WENT TO ESTABLISH THAT EVEN IF THE PROVISIONS OF S.9(L)(V)(B) IS APPLICABLE, THE ASSESSEE'S CAS E WILL NOT BE COVERED BY THE EXCLUSIONS STATED THEREIN; (PG. NOS.14 - 15 VIDE PARAS 7 TO 7.3) THEREFORE, TRIBUNAL IN ADANI (SUPRA)'S CASE, AFTER CONSIDERING THE RIVAL CONTENTIONS, HELD THAT INTEREST PAID BY ASSESSEE TO NON - RESIDENT INVESTOR IS SPE CIFICALLY EXCLUDED FROM THE DEEMING I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 51 PROVISIONS AS PER S.9(L)(V)(B), AND THEREFORE, SUCH INTEREST PAYMENT CANNOT BE COVERED IN DEFINITION OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. IT WAS THUS HELD THAT SINCE THE INCOME IN QUESTION IS FALLING WITHIN THE AMBIT OF THIS EXCLUSION CLAUSE OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA AS PER S.9(L)(V)(B), IT CANNOT FALL WITHIN THE AMBIT OF INCOME ACCRUED AND ARISEN IN INDIA, AND HENCE, SAME CANNOT BE SAID TO BE COVERED U/S 5(2) OF THE ACT. THEREFORE, THERE WAS NO OCCASION TO DEDUCT TAX AT SOURCE ON SUCH REMITTANCE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE ADANI (SUPRA), WHICH IS IDENTICAL BOTH IN TERMS OF THE FACTS AND LAWS RELIED UPON BY THE ASSESSING OFFI CER , WE HOLD THAT SINCE INCOME IN QUESTION IS SQUARELY FALLING UNDER THE EXCLUSION CLAUSE OF INCOME DEEMED TO ACCRUE OR ARISE IN INDIA U/S 9(L)(V)(B) OF THE ACT, IT CANNOT FALL WITHIN THE AMBIT OF INCOME ACCRUED AND ARISEN IN INDIA, AND HENCE, THE SAME CAN NOT BE SAID TO BE COVERED U/S 5(2) O F THE ACT. SINCE THE RECIPIENT NON - R ESIDENT ARE NOT TAXABLE ON THIS INCOME IN INDIA, THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE ON SUCH REMITTANCE. HENCE , ASSESSEE CANNOT BE HELD LIABLE U/S . 201(1)/(1A) OF THE ACT. IN VIEW OF THIS LEGAL DISCUSSION, THIS GROUND OF REVENUE IS DISMISSED. CONSEQUENTLY REVENUES APPEAL IN ITA NO.3476/AHD/10 IS ALSO DISMISSED. 1 5 . IN RESULT, ASSESSEES APPEAL IN ITA NO.3773/AHD/08 IS PARTLY ALLOWED WHEREAS REVENUE S APPEAL S IN ITA NO. 1 13/AHD/2009 IS PARTLY ALLOWED, ITA NOS. 2052/AHD/09, 3475/AHD/2010 & 3476/AHD/10 ARE DISMISSED AS INDICATED I T A. NO S . 3773/A/08, 113 & 2052/A/09, 3475 & 3476/A/10 & C.O. NO. 61 & 62/A/14 (M/S. SUZLON ENERGY LTD.) PA GE 52 ABOVE AND ASSESSEES CROSS OBJECTIONS IN C.O. NOS. 61 & 62/AHD/2014 FOR BOTH YEARS ARE ALSO DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 3 RD DAY OF SEPTEMBER , 201 5 . SD/ - SD/ - (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 03 /0 9 /2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER / , / ,
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