The DCIT, Circle-1(1), Baroda V. M/s. Alembic Limited, Baroda

ITA 3530/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2059 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R R PATHAK
• Assessee Lawyers: S N SOPARKARSR
• Keywords: Depreciation; Earning of tax free income; Retrospective amendment; Bad and doubtful debts; Rule 8D; Set aside
• Section: 80HHC; 14A; 115JB; 80IA; 10; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI BHAVNESH BHAVNESH BHAVNESH BHAVNESH SAINI SAINI SAINI SAINI, , , , JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI N.S.SAINI SHRI N.S.SAINI SHRI N.S.SAINI SHRI N.S.SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING : 10-2-11. DRAFTED O N:10-2-11 ITA NO. 3530 /AHD/ 2008 ASSESSMENT YEAR :2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), AAYAKAR BHAVAN, NEAR RACE COURSE CIRCLE, BARODA. VS. M/S. ALEMBIC LIMITED, ALEMBIC ROAD, GORWA, BARODA. PAN/GIR NO. : AABCA7950P (A PPELLANT ) .. ( RESPONDENT ) ATE OF HEARING : 10-2-11. DRAFTED ON:10-2-11 C.O. NO.322/AHD/2008 (ARISING OUT OF ITA NO.3530/AHD/2008) ASSESSMENT YEAR :2006-07 M/S. ALEMBIC LIMITED, ALEMBIC ROAD, GORWA, BARODA. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), AAYAKAR BHAVAN, NEAR RACE COURSE CIRCLE, BARODA. PAN/GIR NO. : AABCA7950P (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI R. R.PATHAK, CIT (D.R.) RESPONDENT BY: SHRI S.N.SOPARKAR,SR. ADV. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, BAR ODA, DATED 29-8- 2008 AND THE ASSESSEE HAS FILED CROSS OBJECTION AGA INST THE SAME ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). - 2 - 2. WE FIRST TAKE UP THE REVENUES APPEAL. 3. GROUND NO.1 OF REVENUES APPEAL IS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN DELETING THE DISALLOWANCE OF DEDUCTION UNDER SECTION. 80IA(4 ) ON CAPTIVE POWER PLANT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER:- 5. AS REGARDS GROUND NO.(II) REGARDING DEDUCTION U NDER SECTION 80IA(IV) IN RESPECT OF BUSINESS OF GENERATION OF EL ECTRICITY FOR CAPTIVE PURPOSES, THE APPELLANT HAS DRAWN ATTENTION TO ITA T, AHMEDABADS DECISION IN ITS OWN CASE FOR ASSESSMENT YEAR 2003-0 4 ON SAME ISSUE IN ITS FAVOUR IN ITA NO.3594/AHD/2007 AND ALSO LEAR NED COMMISSIONER OF INCOME TAX (APPEALS)S ORDER FOR ASSESSMENT YEAR 2005-06 FOLLOWING THE ITAT ORDER. IT IS SEEN THAT THE HONB LE ITATS DECISION IN THIS REGARD IS AS UNDER: WE HAVE HEARD THE PARTIES AND CONSIDERED RIVAL SU BMISSIONS. THE CONTROVERSY IN QUESTION IS SQUARELY DECIDED BY THE TRIBUNAL, DELHI BENCH, IN THE CASE OF JINDAL STEEL & POWER LTD. (SU PRA) AND MUMBAI BENCH IN THE CASE OF WEST COAST PAPER MILLS LTD. (S UPRA) HOLDING ON UNEQUIVOCAL TERMS THAT THE MARKET VALUE POSTULATED BY THE PROVISIONS OF SECTION 80IA SHALL BE THE PRICE AT WHICH THE ASS ESSEE PURCHASES ELECTRICITY FROM ELECTRICITY BOARD AND NOT THE ONE WHICH IS FIXED BY THE LEGISLATIVE MANDATE. THEREFORE, RESPECTFULLY FOLLOW ING THE ABOVE TRIBUNAL DECISIONS, WE DIRECT THE A.O.TO ALLOW GRAN T OF DEDUCTION UNDER SECTION 80IA TO THE ASSESSEE BY TAKING THE PRICE OF ELECTRICITY SUPPLIED BY GEB TO ASSESSEE AS CONSUMER AS MARKET VALUE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IA. THE ASSESSEE SUCCEEDS ON THIS GROUND. SINCE IN ASSESSMENT YEAR 2006-07, FACTS ARE IDENTIC AL TO ASSESSMENT YEAR 2003-04 AND ASSESSMENT YEAR 2005-06, RESPECTFU LLY FOLLOWING THE DECISION OF HONBLE ITAT FOR ASSESSMENT YEAR 20 03-04, DEDUCTION UNDER SECTION 80IA IS TO BE ALLOWED BY THE ASSESSIN G OFFICER TO THE APPELLANT IN ASSESSMENT YEAR 2006-07 BY TAKING THE PRICE OF ELECTRICITY SUPPLIED BY GEB TO THE APPELLANT AS A C ONSUMER, AS MARKET VALUE FOR THE PURPOSE OF THE DEDUCTION UNDER SECTIO N 80IA. THIS GROUND OF THE APPEAL IS THUS ALLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE SIMPLY RELIED ON THE OR DER OF THE LEARNED ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECI FIC ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). W E FIND THAT THE - 3 - LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDERS OF T HE TRIBUNAL FOR ASSESSMENT YEAR 2003-04 DATED 6-6-2008 IN ITA NO.35 94/AHD/2007. NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED DEPAR TMENTAL REPRESENTATIVE TO SHOW THAT THE SAID ORDER OF THE T RIBUNAL WAS REVERSED IN APPEAL BY A HIGHER FORUM. THEREFORE, WE DO NOT ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WH ICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 6 GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDE R:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWANCE UNDER SECTION 14A OF `.1,74,4 55/- TOWARDS INTEREST AND OTHER EXPENSES IN RELATION TO EXEMPTED INCOME. (DIVIDEND AND TAX FREE INTEREST). 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DECIDED THE ISSUE BY OBSERVING AS UNDER:- GROUND NO.(III) IS REGARDING DISALLOWANCE OF `.1, 74,455/-, BEING EXPENSES ESTIMATED FOR EARNING EXEMPT DIVIDEND AND TAX FREE INTEREST INCOME. THE APPELLANT HAS DRAWN ATTENTION TO DECISI ON IN APPELLANTS OWN CASE FOR A.Y. 2005-06, WHERE I HAVE DECIDED THE ISSUE IN FAVOUR OF APPELLANT VIDE PARA-6 (PAGE 5-6 OF THE ORDER FOR A. Y. 2005-06 DATED 24-7-2008) BY RELYING UPON THE ORDER OF MY PREDECES SOR CIT(A) FOR A.Y. 2004-05 DATED 25-9-2007, WHO HELD AS UNDER :- I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS OB SERVED THAT THE APPELLANT HAD FURNISHED DETAILS OF SHARE CAPITAL, R ESERVES ETC., SHOWING THAT THE SAME WERE MUCH MORE THAN THE INVES TMENT MADE. HOWEVER, THE ASSESSING OFFICER HELD THAT THE APPELL ANT HAD NOT FILED THE CASH/FUND FLOW STATEMENT TO SHOW THAT NO BORROW ED FUNDS HAD BEEN UTILIZED FOR MAKING SUCH INVESTMENTS AND, THER EFORE, HELD THAT THE APPELLANT HAD ACTUALLY USED INTEREST BEARING BO RROWED FUNDS FOR MAKING THESE INVESTMENTS. HE FURTHER HELD THAT THE APPELLANT MUST HAVE INCURRED AND CLAIMED OTHER EXPENSES LIKE DEMAT , TELEPHONE, CONVEYANCE, CONSULTANCY FEES, ADMINISTRATIVE EXPENS ES TOWARDS MAKING SUCH INVESTMENTS AND EARNING EXEMPT INCOME T HERE FROM. THEREFORE, HE MADE AN ADHOC DISALLOWANCE OF 10% OF THE TOTAL DIVIDEND AND INTEREST INCOME. IN THIS REGARD, IT IS OBSERVED THAT THE ASSESSING OFFICER HAS NOWHERE MENTIONED IN THE ORDE R THAT HE HAD SPECIFICALLY ASKED FOR THE FURNISHING OF THE CASH / FUND FLOW STATEMENT AND THAT THE APPELLANT HAD FAILED TO DO SO. THE APP ELLANT HAS BEEN OF THE BELIEF THAT ITS OWN FUNDS WERE MUCH HIGHER THAN ITS INVESTMENTS AND IT HAD SHOWN THIS ON RECORD. FROM THIS, IT CANN OT BE SAID THAT THE APPELLANT FAILED TO DISCHARGE THE ONUS. MOREOVER, F ROM THIS IT CANNOT - 4 - BE AUTOMATICALLY PRESUMED THAT THE APPELLANT HAD UT ILIZED THE BORROWED FUND FOR NON BUSINESS PURPOSES I.E. FOR MA KING SUCH INVESTMENTS. THE OTHER OBSERVATION OF THE ASSESSING OFFICER THAT THE APPELLANT MUST HAVE INCURRED AND CLAIMED VARIOUS OT HER EXPENSES LIKE DEMAT, TELEPHONE ETC., IS ALSO IN THE REALM OF CONJ ECTURES AND UNFOUNDED ASSUMPTION. IT IS IN THESE CIRCUMSTANCES THAT THE DELHI ITAT HAD HELD IN THE CASE OF MARUTI UDYOG LTD., (SU PRA) THAT NO DISALLOWANCE COULD BE MADE UNDER SECTION. 14A OF TH E ACT. IT IS PERTINENT TO POINT OUT THE OBSERVATIONS OF THE DELH I ITAT IN THE CASE OF EICHER LTD. (2006) 101 TTJ 369 WHERE THE HONBLE IT AT HAVE OBSERVED THAT THE WORD INCURRED USED IN SECTION 14A CLEARL Y IMPLIES THAT IT MUST BE SHOWN AS A FACT THAT SOME EXPENDITURE WAS I N FACT INCURRED BY THE ASSESSEE TO PRODUCE EXEMPTED INCOME. UNDER S ECTION 14A THE ASSESSING OFFICER HAS NO POWER TO ESTIMATE THE EXPE NDITURE WHICH THE ASSESSEE WOULD HAVE, IN THE OPINION OF THE ASSESSIN G OFFICER, INCURRED IN RELATION TO THE EXEMPTED INCOME. FURTHER MORE, I T SEEMS IMPLICIT IN THE EXPRESSION IN RELATION TO USED IN THE SECTION THE CONCEPT THAT THE ASSESSING OFFICER SHOULD BE IN A POSITION TO PI NPOINT, WITH AN ACCEPTABLE DEGREE OF ACCURACY, THE EXPENDITURE WHIC H WAS INCURRED BY THE ASSESSEE TO PRODUCE NON TAXABLE INCOME. THE WORD INCURRED SIGNIFIES THAT THE EXPENDITURE MUST HAVE BEEN ACTUA LLY INCURRED, NOT NOTIONALLY. THE HONBLE ITAT FURTHER HELD THAT IT F OLLOWED FROM THIS THAT IT WAS THE DUTY OF THE ASSESSING OFFICER TO PINPOIN T SUCH EXPENDITURE ON THE BASIS OF THE MATERIAL ON RECORD. THE LANGUAG E OF THE SECTION DOES NOT RELIEVE THE ASSESSING OFFICER OF THE BURDE N OF PROVING, ON THE BASIS OF EVIDENCE OR MATERIAL ON RECORD THAT THE AS SESSEE HAS IN FACT INCURRED EXPENDITURE WHICH HAS RELATION TO THE EXEM PTED INCOME. RELYING ON THE DECISION OF THE HONBLE DELHI ITAT, THE DISALLOWANCE MADE OF `.3,90,519/- UNDER SECTION 14A OF THE ACT I S CANCELLED. THE FACTS AND CIRCUMSTANCES FOR ASSESSMENT YEAR 20 06-07 AND LEARNED ASSESSING OFFICERS ORDER BEING IDENTICAL T O ASSESSMENT YEAR 2005-06, FOLLOWING THE SAME DECISION, THE DISALLOWA NCE OF `.1,74,455/- ON THIS ACCOUNT IS CANCELLED. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDER OF THE LEARNED ASSESSING OFFICER. 9. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT THE TRIBUNAL IN ASSESSMENT YEAR 2005-06 IN ITA NO.3308/AHD/2008 ORDER DATED 12-12-2008 HAD SET ASIDE THE ISSUE TO T HE FILE OF THE LEARNED ASSESSING OFFICER FOR READJUDICATING THE SAME IN LI GHT OF THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD., FOR ASSESSMENT YEAR 2001-02 I N ITA NO.8057/MUM/2003 ORDER DATED 22-10-2008. HE SUBMITT ED THAT LATER ON THE HONBLE BOMBAY HIGH COURT HAS DECIDED THE ISSUE IN THE CASE OF GODREJ AND - 5 - BOYCE MANUFACTURING CO. LTD. V. P. K. GUPTA, COMMIS SIONER OF INCOME-TAX (2010) 328 ITR 81 (BOM) AND THEREFORE THE MATTER SH OULD BE RESTORED BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR RE ADJUDICATING THE ISSUE IN THE LIGHT OF THE DECISION OF THE HONBLE BOMBAY HIG H COURT. 10. WE FIND THAT THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER:- BY THE FINANCE ACT OF 2001, PARLIAMENT ENACTED SECT ION 14A OF THE INCOME-TAX ACT, 1961, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 1962. PRIOR TO THE INSERTION OF SECTION 14A, THE REVENUE HAD SOUGHT TO DISALLOW THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. HOWEVER, THE SUPREME COU RT IN CIT V. MAHARASHTRA SUGAR MILLS LTD. [1971] 82 ITR 452AND IN RAJASTHAN STATE WAREHOUSING CORPORATION V. CIT [2000] 242 ITR 450HELD THAT WHER E THERE IS ONE INDIVISIBLE BUSINESS GIVING RISE TO TAXABLE INCOME AS WELL AS E XEMPT INCOME, THE ENTIRE EXPENDITURE INCURRED IN RELATION TO THAT BUSINESS W OULD HAVE TO BE ALLOWED EVEN IF A PART OF THE INCOME EARNED FROM THE BUSINESS IS EXEMPT FROM TAX. SECTION 14A HAS BEEN ENACTED TO OVERCOME THESE JUDICIAL PRO NOUNCEMENTS. THE INSERTION OF SECTION 14A WAS CURATIVE AND DECLARATO RY OF THE INTENT OF PARLIAMENT. THE BASIC OBJECT OF SECTION 14A IS TO DISALLOW THE DIRECT AND INDIRECT EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE FOLLOWING PRINCIPLES WOULD EMERGE FROM SECTION 14A AND THE DECISION IN CIT V. WALFORT SHARE AND STOCK BROKERS P. LTD. [2010] 3 26 ITR 1 (SC): (A) THE MANDATE OF SECTION 14A IS TO PREVENT CLAIMS FOR DEDUCTION OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME OF THE ASSESSEE ; (B) SECTION 14A(1) IS ENACTED TO ENSURE THAT ONLY E XPENSES INCURRED IN RESPECT OF EARNING TAXABLE INCOME ARE ALLOWED ; (C) THE PRINCIPLE OF APPORTIONMENT OF EXPENSES IS W IDENED BY SECTION 14A TO INCLUDE EVEN THE APPORTIONMENT OF EXPENDITURE BETWE EN TAXABLE AND NON- TAXABLE INCOME OF AN INDIVISIBLE BUSINESS ; (D) THE BASIC PRINCIPLE OF TAXATION IS TO TAX NET I NCOME. THIS PRINCIPLE APPLIES EVEN FOR THE PURPOSES OF SECTION 14A AND EXPENSES T OWARDS NON-TAXABLE INCOME MUST BE EXCLUDED ; (E) ONCE A PROXIMATE CAUSE FOR DISALLOWANCE IS ESTA BLISHED-WHICH IS THE RELATIONSHIP OF THE EXPENDITURE WITH INCOME WHICH D OES NOT FORM PART OF THE TOTAL INCOME-A DISALLOWANCE HAS TO BE EFFECTED. ALL EXPENDITURE INCURRED IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT HAS TO BE DISALLOWED UNDER SECTION 14A. INCOME WHICH DOES NOT FORM PART OF THE TOTAL I NCOME IS BROADLY ADVERTED TO AS EXEMPT INCOME AS AN ABBREVIATED APPELLATION. THE PLAIN MEANING OF SECTION 14A IS THAT NO DEDUCTION CAN BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY - 6 - AN ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME UNDER THE ACT. SECTION 10 PROVIDES FOR INCOMES WHICH SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON. PRIO R TO THE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2003 WITH EFFECT FROM A PRIL 1, 2003, INCOME BY WAY OF DIVIDENDS REFERRED TO IN SECTION 115-O AND INCOM E RECEIVED IN RESPECT OF THE UNITS OF A MUTUAL FUND DID NOT FORM PART OF THE TOT AL INCOME BY VIRTUE OF THE PROVISIONS OF CLAUSE (33) OF SECTION 10. (CLAUSE (3 3) OF SECTION 10 WAS OMITTED BY THE FINANCE ACT OF 2003. CLAUSES (34) AND (35) W HICH WERE INSERTED BY THE SAME FINANCE ACT, NOW PROVIDE THAT INCOME BY WAY OF DIVIDENDS REFERRED TO IN SECTION 115-O AND INCOME RECEIVED IN RESPECT OF THE UNITS OF A MUTUAL FUND SPECIFIED IN CLAUSE (23)(B) SHALL NOT BE INCLUDED I N COMPUTING THE TOTAL INCOME OF ANY PERSON FOR THE PREVIOUS YEAR). PLAINLY DIVIDEND INCOME AND INCOME FROM MUTUAL FUNDS ARE INCOMES WHICH BY VIRTUE OF THE PRO VISIONS OF SECTION 10, DO NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. EXPEND ITURE INCURRED IN RELATION TO THE EARNING OF SUCH INCOME HAS TO BE DISALLOWED UND ER SECTION 14A. THE EXPRESSION 'INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME' UNDER THE ACT MUST RECEIVE ITS PLAIN AND GRAMMATICAL CONSTRUCTION . SUCH INCOME IS INCOME WHICH IS NOT INCLUDIBLE IN COMPUTING THE TOTAL INCO ME OF THE ASSESSEE UNDER THE PROVISIONS OF THE ACT FOR A PREVIOUS YEAR. INCOME-T AX IS A TAX ON INCOME IN THE HANDS OF THE ASSESSEE. HENCE, WHEN SECTION 14A DISA LLOWS EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME, IT WOULD INCLUDE CATEGORIES OF INCOME SUCH AS DIVIDEND FROM SHARES AND INCOME FROM MUTUAL FUNDS WHICH UNDER SEC TION 10 ARE NOT TO BE INCLUDED IN THE TOTAL INCOME. THE CHARGE UNDER SUB-SECTION (1) OF SECTION 115-O I S NOT ON INCOME BY WAY OF DIVIDEND IN THE HANDS OF THE SHAREHOLDER. VIEWED FR OM THE PERSPECTIVE OF SECTION 115-O AS WELL AS SECTION 14A, IT IS EVIDENT THAT THE TAX ON DISTRIBUTED PROFITS IS A CHARGE ON THE COMPANY. THE COMPANY IS CHARGEABLE TO TAX ON ITS PROFITS AS A DISTINCT TAXABLE ENTITY. IT DOES NOT D O SO ON BEHALF OF THE SHAREHOLDER. THE COMPANY DOES NOT ACT AS AN AGENT OF THE SHAREHO LDER IN PAYING THE TAX UNDER SECTION 115-O. IN THE HANDS OF THE RECIPIENT SHAREHOLDER DIVIDEND DOES NOT FORM PART OF THE TOTAL INCOME. ON THE CONTRARY, SECTION 10(33) CLEARLY EVINCES PARLIAMENTARY INTENT THAT INCOMES FROM DIVIDEND (AN D FROM MUTUAL FUNDS) ARE NOT INCLUDIBLE IN THE TOTAL INCOME. SUB-SECTIONS (2) AND (3) OF SECTION 14A WERE INSERT ED BY AN AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2006 WITH EFFEC T FROM APRIL 1, 2007. UNDER SUB-SECTION (2), THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED BY AN ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCO RDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. SUB-SECTION (2) WAS INSERTED SO AS TO PROVIDE A UNIFORM METHOD APPLICABLE WHERE THE ASSESSING OFFICER IS NO T SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. PARLIAMEN T HAS PROVIDED AN ADEQUATE SAFEGUARD TO THE INVOCATION OF THE POWER TO DETERMI NE THE EXPENDITURE INCURRED IN RELATION TO THE EARNING OF NON-TAXABLE INCOME BY ADOPTION OF THE PRESCRIBED METHOD. THE INVOCATION OF THE POWER IS MADE CONDITI ONAL ON THE OBJECTIVE SATISFACTION OF THE ASSESSING OFFICER IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THESE SAFEGUARDS - 7 - WHICH ARE IMPLICIT IN THE REQUIREMENTS OF FAIRNESS AND FAIR PROCEDURE UNDER ARTICLE 14 MUST BE OBSERVED BY THE ASSESSING OFFICER WHEN H E ARRIVES AT HIS SATISFACTION UNDER SUB-SECTION (2) OF SECTION 14A. SUB-RULE (1) OF RULE 8D OF THE INCOME-TAX RULES, 1962, HAS ALSO INCORPORATED THE E SSENTIAL REQUIREMENTS OF SUB-SECTION (2) OF SECTION 14A BEFORE THE ASSESSING OFFICER PROCEEDS TO APPLY THE METHOD PRESCRIBED UNDER SUB-RULE (2). THE PROVI SIONS OF SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT, ARE CONSTITUTION ALLY VALID. THE PROVISIONS OF RULE 8D OF THE RULES, ARE NOT ULTRA VIRES THE PROVI SIONS OF SECTION 14A, MORE PARTICULARLY SUB-SECTION (2) AND DO NOT OFFEND ARTI CLE 14 OF THE CONSTITUTION. DIFFERENT DATES HAVE BEEN PROVIDED IN THE PROVISION S OF SECTION 14A AND RULE 8D FOR THEIR ENFORCEMENT. SUB-SECTION (1) OF SECTION 1 4A WAS INSERTED WITH RETROSPECTIVE EFFECT FROM APRIL 1, 1962, TO OVERCOM E THE DECISIONS OF THE SUPREME COURT. AT THE SAME TIME, THE THEORY OF APPO RTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE INCOME HAS, IN PRIN CIPLE, BEEN NOW WIDENED UNDER SECTION 14A. READING SECTION 14 IN JUXTAPOSIT ION WITH SECTIONS 15 TO 59, IT HAS BEEN OBSERVED THAT THE WORDS 'EXPENDITURE INCUR RED' IN SECTION 14A REFER TO EXPENDITURE ON RENT, TAX, SALARY, INTEREST, ETC., I N RESPECT OF WHICH ALLOWANCES ARE PROVIDED FOR. THIRDLY, SUB-SECTIONS (2) AND (3) WER E INTRODUCED BY A LEGISLATIVE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2006. RULE 8D HAS ESSENTIALLY PUT INTO PLACE AN ARTIFICIAL METHOD OF ESTIMATING T HE EXPENDITURE THAT CAN BE REGARDED AS BEING RELATABLE TO INCOME THAT DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. SUB-SECTION (4) OF SECTION 29 5 EMPOWERS THE RULE-MAKING AUTHORITY TO GIVE RETROSPECTIVE EFFECT TO SUBORDINA TE LEGISLATION. HOWEVER, UNLESS EXPRESSLY OR BY NECESSARY IMPLICATION, A CONTRARY P ROVISION IS MADE, NO RETROSPECTIVE EFFECT IS TO BE GIVEN TO ANY RULE SO AS TO PREJUDICIALLY AFFECT THE INTERESTS OF THE ASSESSEE. THE RULES WERE NOTIFIED TO COME INTO FORCE ON MARCH 24, 2008. IT IS A TRITE PRINCIPLE OF LAW THAT THE L AW WHICH WOULD APPLY TO AN ASSESSMENT YEAR IS THE LAW PREVAILING ON THE FIRST DAY OF APRIL. CONSEQUENTLY, RULE 8D WHICH HAS BEEN NOTIFIED ON MARCH 24, 2008, WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. ITO V. DAGA CAPITAL MANAGEMENT P. LTD. [2009] 312 I TR (AT) 1 (MUMBAI) [SB] IMPLIEDLY DISAPPROVED ON THIS POINT. FOR THE ASSESSMENT YEAR 2002-03, THE ASSESSEE CLAIM ED A DIVIDEND OF RS.34.34 CRORES AS BEING EXEMPT FROM THE TOTAL TAXABLE INCOM E. THE ASSESSEE CONTENDED THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR EARNIN G THE DIVIDEND INCOME AND THAT NO DISALLOWANCE WAS WARRANTED. THE ASSESSING OFFICE R MADE A DISALLOWANCE OF RS. 6.92 CRORES TOWARDS EXPENSES ATTRIBUTED TO THE EARNING OF THE DIVIDEND INCOME. THE COMMISSIONER (APPEALS) FOLLOWING EARLIE R DECISIONS IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 1998-99 AND 1999- 2000 HELD THAT NO EXPENDITURE WAS ATTRIBUTABLE TO THE EARNING OF THE DIVIDEND RECEIVED AND CONSEQUENTLY DELETED THE DISALLOWANCE. THE ASSESSEE CLAIMED THAT A MAJOR PORTION OF ITS DIVIDEND AMOUNTING TO RS. 19.86 CROR ES WAS RECEIVED FROM GROUP COMPANIES AND OF THE TOTAL SHARES, 95 PER CENT. CON SISTED OF BONUS SHARES FOR WHICH NO COST HAD BEEN INCURRED. THE SHARES OF GS W ERE STATED TO HAVE BEEN ACQUIRED SEVERAL YEARS EARLIER, THE ASSESSEE BEING A PROMOTER OF THAT COMPANY. DURING THE YEAR IN QUESTION, THE ASSESSEE CLAIMED T HAT IT HAD NOT INVESTED ANY AMOUNT IN INVESTMENTS ON WHICH INCOME WAS EXEMPT UN DER SECTION 10(33) AND IT HAD DISPOSED OF SOME OF ITS INVESTMENTS AT A SUBSTA NTIAL PROFIT. THE TRIBUNAL NOTED THAT THE ASSESSING OFFICER HAD NOT EXAMINED T HE CORRECTNESS OF THE CLAIM - 8 - OF THE ASSESSEE WITH REFERENCE TO THE ACCOUNTS OF T HE ASSESSEE, HAVING REGARD TO THE PROVISIONS OF SECTION 14A(2). THE PROCEEDING S WERE REMANDED TO THE ASSESSING OFFICER FOR A FRESH EXAMINATION ON THE BA SIS OF THE PROVISIONS OF SECTION 14A(2). ON APPEAL TO THE HIGH COURT : _ HELD, _ THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008- 09. EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RUL E 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAD TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUT Y BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSI NG OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. THE PROCE EDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE ASSESSING OFFIC ER. THE ASSESSING OFFICER SHOULD DETERMINE AS TO WHETHER THE ASSESSEE HAD INC URRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME /INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CON TEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT A REASON-ABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHOULD PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON TH E FACTS AND CIRCUMSTANCES OF THE CASE. 11. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND THE MATTER BACK TO THE FILE OF THE LEARNED A SSESSING OFFICER FOR READJUDICATING THE ISSUE IN THE LIGHT OF THE ABOVE QUOTED DECISION OF THE BOMBAY HIGH COURT AFTER ALLOWING REASONABLE OPPORTU NITY TO THE ASSESSEE. THUS, THIS GROUND OF THE APPEAL OF THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.3 & 4 OF REVENUES APPEAL READS AS UN DER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWANCE OF `.3,73,74,980/- BEING PROV ISION OF BAD DEBTS FOR COMPUTING BOOK PROFIT. 13. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) DECIDED THE ISSUE BY OBSERVING AS UNDER:- GROUND NO.(IV) IS REGARDING ADDITION OF PROVISIO N ON ACCOUNT OF LEAVE ENCASHMENT AND PROVISION FOR DOUBTFUL DEBTS, AS UNASCERTAINED LIABILITY TO THE BOOK PROFIT U/S115JB. IT WAS SUBMI TTED BY THE APPELLANT THAT THE PROVISION OF DOUBTFUL DEBTS WAS DECIDED IN FAVOUR OF THE APPELLANT BYHONBLE ITAT IN ITS OWN CASE IN ASSESSM ENT YEAR 2003-04 (PAGE 47, PARA-74) AND ASSESSMENT YEAR 2002-03 (PAG E-74 PARA-126). THE OBSERVATIONS OF HONBLE ITAT ARE REPRODUCED AS UNDER:- - 9 - WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED RI VAL SUBMISSIONS. THE FACTS AND CASE LAWS HAVE BEEN NARR ATED ABOVE. ON PERUSAL OF THE RECORDS PLACED BEFORE US WE FIND THA T THE DECISION OF THE TRIBUNAL IN CASE OF USHA MARTIN INDUSTRIES LTD. , (SUPRA) HAS CLEARLY LAID DOWN THAT CLAUSE (C) OF EXPLANATION TO SECTION 115JA WAS APPLICABLE IN RESPECT OF LIABILITY AND NOT FOR PROV ISION OF ASSETS. PROVISION OF BAD AND DOUBTFUL DEBTS AND DIMINUTION IN VALUE OF INVESTMENTS BEING PROVISIONS FOR ASSETS, CLAUSE (C) OF EXPLANATION TO SECTION 115JA WAS NOT APPLICABLE. CONSEQUENTLY WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) AND NO INTERFERENCE IS CALLED FOR. HIS OR DER IS ACCORDINGLY UPHELD. REVENUE FAILS ON THIS GROUND. RELYING ON DECISION OF HONBLE ITAT IN APPELLANTS OWN CASE, THE ADDITION OF PROVISION FOR DOUBTFUL DEBTS IS CANCELL ED. FURTHER, AS POINTED OUT BY THE APPELLANT, THE ISSUE OF PROVISI ON FOR LEAVE ENCASHMENT CAME UP BEFORE OFFICE OF LEARNED COMMISS IONER OF INCOME TAX (APPEALS) IN THE APPELLANTS OWN CASE FO R ASSESSMENT YEAR 2002-03, ASSESSMENT YEARS 2003-04, 2004-05 AND ASSE SSMENT YEAR 2005-06, WHERE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAVE DECIDED THE ISSUE IN FAVOUR OF APPELLANT VIDE PARA 40 AND PARA-41 PAGE NO.42 TO PAGE NO.43 OF ORDER FOR ASSESSMENT YE AR 2002-03 DATED 20-4-2007) AS UNDER: I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE CASE LAW. I AM IN AGREEMENT WITH THE APPELLANTS SUBMISSION. FO LLOWING THE SUPREME COURT DECISION IN CASE OF BHARAT EARTH MOVE RS (SUPRA) AND OF THE INDORE TRIBUNAL IN CASE OF EICHER MOTORS LTD. ( SUPRA), THE ADDITION MADE ON ACCOUNT OF THE PROVISION FOR LEAVE ENCASHME NT AND FOR GRATUITY CANCELLED. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED ASSESSING OFFICER. 15. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT AFTER THE RETROSPECTIVE AMENDMENT MADE IN SECT ION 115JB THE PROVISION BAD AND DOUBTFUL DEBT IS NOT ALLOWABLE DEDUCTION IN COMPUTING THE BOOK PROFITS AND ACCORDINGLY THE DECISION OF HONBLE SUP REME COURT IN CIT VS. HCL COMNET SYSTEMS AND SERVICES LTD., 305 ITR 409(SC) I S NEUTRALIZED. HOWEVER, HE SUBMITTED THAT THE ISSUE HAS BEEN DECID ED BY AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. GUJARA T PAGUTHAN ENERGY CORPORATION LTD., WHEREIN THE TRIBUNAL IN ITA NO.19 53 & 3458/AHD/2007 WITH CO NO.317/AHD/2007 IN ASSESSMENT YEARS 2003-04 AND 2004-05 VIDE CONSOLIDATED ORDER DATED 12-11-2010 HAS HELD THAT T HE PROVISION FOR BAD - 10 - AND DOUBTFUL DEBTS WAS NOT ALLOWABLE AS DEDUCTION B UT THE ACTUAL AMOUNT OF BAD DEBT CLAIMED DURING THE YEAR SHOULD BE ALLOWED DEDUCTION IN COMPUTING THE BOOK PROFITS. HE THEREFORE, URGED THAT THE MATT ER SHOULD BE RESTORED BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER F OR READJUDICATING THE SAME IN LIGHT OF THE ABOVE CITED DECISION OF THE TRIBUNA L. 16. WE FIND THAT THE TRIBUNAL WHILE DECIDING THE IS SUE HAS HELD AS UNDER:- 14. GROUND NO.5 RELATES TO DELETING ADDITION TOWAR DS PROVISIONS FOR DOUBTFUL DEBTS AT RS.3,76,27,965/-. THE LD. CIT(A) HAS DIRECTED TO ADD AMOUNT OF PROVISION IN T HE BOOK PROFIT FOR THE PURPOSE OF COMPUTING TAX PAYABLE UND ER SECTION 115JB. SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNAL IN ASST. YEAR 2002-03 AND IT WAS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT VS.HCL COMNET SYSTEMS AND SERVICES LTD. 305 ITR 409 (SC). AMENDMENT WITH RETROSPECTIVE EFFE CT HAS TAKEN PLACE WHEREIN ANY AMOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBT WILL NOT BE ALLOWED AS DEDUCTION WHIL E COMPUTING BOOK PROFITS. ACCORDINGLY THE DECISION OF HON. SUPREME COURT IN CIT VS. HCL COMNET SYSTEMS AND SER VICES LTD. (SUPRA) WAS NEUTRALIZED. THE RESULT IS THAT PR OVISION FOR BAD AND DOUBTFUL DEBT WILL NOT BE ALLOWED WHILE COM PUTING BOOK PROFIT FOR THE PURPOSE AND COMPUTING TAX UNDER SECTION 115 JB. THE LD. AR, HOWEVER, SUBMITTED THAT ASSESSE E HAS BEEN CLAIMING BAD DEBTS BY ADOPTING PROVISIONS OF B AD AND DOUBTFUL DEBTS. IN CASE OF PROVISION OF BAD AND DOU BTFUL DEBTS IS NOT ALLOWED AS DEDUCTION THEN ACTUAL AMOUN T OF BAD DEBTS CLAIMED DURING THIS YEAR SHOULD BE ALLOWED AS DEDUCTION WHILE COMPUTING BOOK PROFITS. CONSIDERING THE ARGUMENT OF LD. AR WE RESTORE THE MATTER TO THE FIL E OF AO SO AS TO CONSIDER THE ALLOWABILITY OF DEDUCTION OF ACT UAL AMOUNT OF BAD DEBT CLAIMED AND TO BE ALLOWED AS DEDUCTION WHILE COMPUTING PROFITS UNDER SECTION 115JB. THIS IS ALSO THE PART OF THE CROSS OBJECTION RAISED BY THE ASSESSEE. BOTH ARE DISPOSED OF ACCORDINGLY. HOWEVER, GROUND OF REVENUE IS ALLOWED WHILE GROUND RELATING TO THE CO IS ALSO ALL OWED BUT FOR STATISTICAL PURPOSES. 17. RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIO N OF THE TRIBUNAL WE RESTORE THIS ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO READJUDICATE THE SAME IN THE LIGHT OF THE ABOVE QUO TED DECISION OF THE TRIBUNAL AFTER ALLOWING REASONABLE AND PROPER OPPOR TUNITY OF HEARING TO THE ASSESSEE. THUS, THESE GROUNDS OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. - 11 - 18. GROUND NO.5 OF REVENUES APPEAL READS AS UNDER: - THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING REDUCTION OF `.16,55,000/- BEING WITHDRAWA L FROM REVALUATION RESERVE FOR COMPUTING BOOK PROFIT. 19. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) DECIDED THE ISSUE BY OBSERVING AS UNDER:- GROUND NO.(V) IS REGARDING ADDITION OF WITHDRAWAL FROM REVALUATION RESERVE OF `.16,55,000/- TO THE BOOK PR OFIT UNDER SECTION. 115JB. IT IS SUBMITTED BY THE APPELLANT THAT THE SA ME ISSUE WAS DECIDED IN ITS FAVOUR BY THE HONBLE ITAT IN ITS OW N CASE IN A.Y. 2003- 04 (PAGE-50, PARA-78) AS UNDER:- WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED RIVA L SUBMISSIONS. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FO LLOWED THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 1998- 99, WHICH IN TURN, HAS HELD THAT THE ASSESSEE IS EN TITLED TO REDUCE AMOUNT OF DEPRECIATION ON REVALUED ASSETS FOR WORKI NG OUT PROFIT FOR CALCULATION OF MAT TAX UNDER SECTION. 115JB. FOLLOW ING TRIBUNAL DECISION IN ASSESSEES OWN CASE, WE DIRECT LEARNED ASSESSING OFFICER TO WORK OUT THE SAME ACCORDINGLY. REVENUE FAILS ON THIS GROUND. RELYING ON DECISION OF HONBLE ITAT, THE ADDITION O F WITHDRAWAL FROM REVALUATION RESERVE IS CANCELLED. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LEARNED ASSESSING OFFICER. 21. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT THE ISSUE HAS BEEN DECIDED BY THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ORDER OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 IN ITA NO.3810/AHD/2007 ORD ER DATED 6-6-2008. THEREFORE, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD BE UPHELD. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. WE FIND THAT THE ISSUE OF ALLOWING DEPRECIATION ON REVALUED ASSETS F OR WORKING OUT PROFIT FOR CALCULATION OF MAT TAX UNDER SECTION. 1115JB WAS DE CIDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ORDER OF THE TRIBUNAL - 12 - FOR ASSESSMENT YEAR 2003-04. NO SPECIFIC DEFECT IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) COULD BE POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE LEARNED DE PARTMENTAL REPRESENTATIVE ALSO COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE DECISION OF THE TRIBUNAL FOLLOWED BY THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE DEPRECIATION ON REVAL UED ASSETS WAS REVERSED IN APPEAL BY A HIGHER FORUM. THUS, WE DO NOT FIND A NY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) WHICH IS HE REBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 23. GROUND NO.6 OF REVENUES APPEAL READS AS UNDER: - THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWANCE OF DEDUCTION OF `. 7 LACS REG ARDING WEALTH TAX PROVISION FOR COMPUTING BOOK PROFIT. 24. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) DECIDED THE ISSUE BY OBSERVING AS UNDER:- GROUND NO.(VII) IS REGARDING ADDITION OF WEALTH T AX PROVISION OF `.7 LACS TO BOOK PROFIT UNDER SECTION. 115JB. AS PO INTED OUT BY THE APPELLANT, THE IDENTICAL ISSUE CAME UP IN APPELLANT S OWN CASE FOR ASSESSMENT YEAR 2005-06, WHERE I DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT (PARA-10 PAGE 20-21) FOLLOWING MY PREDECE SSOR, LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IS ORDER DATE D 25-9-2007 FOR ASSESSMENT YEAR 2004-05 (PAGE 27, PAGE 23) AS UNDER : AS REGARDS THE ADDITION OF PROVISION FOR WEALTH TAX TO THE BOOK PROFITS, IT IS OBSERVED THAT THE ISSUE IS DIRECTLY COVERED BY THE DECISION OF ITAT KOLKATTA SPL. BENCH IN CASE OF USHA MARTIN INDUSTRIES LTD. (SUPRA) WHERE IT HAS BEEN HELD THAT PROVISION FOR WEALTH TAX DOES NOT FALL WITHIN ANY OF THE ITEMS OF THE EXPLANATION TO SECTION115JA AND THEREFORE, THE SAME CANNOT BE ADDED BACK TO ARRIVE AT BOOK PROFIT. FOLLOWING THE ABOVE DECISION FOR THE PURPOSE OF SEC TION 115JB SINCE THE TWO PROVISIONS ARE SIMILAR, THE ADDITION MADE B Y THE ASSESSING OFFICER OF `.90,00,000/- IS CANCELLED. AS THERE ARE NO CHANGES IN FACTS AND FOLLOWING THE ABOVE ORDERS, THE DISALLOWANCE OF `.7 LACS MADE ON THIS ACCOUNT IS CA NCELLED. 25. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED ASSESSING OFFICER. - 13 - 26. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT IN ASSESSMENT YEAR 2005-06 THE TRIBUNAL IN ASS ESSEES OWN CASE IN ITA NO.3308/AHD/2008 ORDER DATED 12-12-2008 HAD RESTORE D THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICATION OF THE ISSUE BY FOLLOWING THE DECISION OF CALCUTTA BENCH OF THE TRIBUNAL IN CASE OF USHA MARTIN INDUSTRIES LTD., 288 ITR 63 (AT) (CAL). HOW EVER HE SUBMITTED THAT IN ASSESSMENT YEAR 2000-01 AND 2001-02 IN ASSESSEES O WN CASE IN ITA NOS.1750 & 1751/AHD/2004 CONSOLIDATED ORDER DATED 1 6-7-2008 THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT (A) ALLOWIN G DEDUCTION FOR PROVISION OF WEALTH TAX LIABILITY WHILE COMPUTING BOOK PROFIT UNDER SECTION. 115JB. HE THEREFORE, PRAYED THAT THE APPEAL OF THE REVENUE SH OULD BE DISMISSED. 27. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEARS 2 000-01 AND 2001-02 IN THE ASSESSEES OWN CASE WHILE DECIDING THE ISSU E AND UPHOLDING THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) IN DELETING ADDITION OF PROVISION OF WEALTH TAX IN COMPUTING TH E BOOK PROFITS HAS HELD AS UNDER:- 29. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE JUD GMENTS OF (I) APOLLO TYRES LTD., 255 ITR 273; AND (II) USHA MARTI N INDUSTRIES LTD., 104 ITD 249 (KOL.) 30. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED R IVAL SUBMISSIONS. SECTION 115JB, EXPLANATION 1(A), THE W ORD INCOME TAX WHAT IS TO BE ADDED IS INCOME TAX WHICH IS FURTHE R AMPLIFIED BY EXPLANATION-2. HOWEVER, THIS DOES NOT INCLUDE WEALT H TAX. IN VIEW THEREOF, WE SEE NO INFIRMITY IN THE ORDER OF LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE PROVISIONS OF WEALTH TAX LIABILITY WHICH IS ASCERTAINED LIABILITY WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB. THE RELIANCE PLACED BY THE COUNSEL F OR THE ASSESSEE CITED SUPRA IS WELL PLACED. ACCORDINGLY, THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS UPHELD. THI S GROUND IS DISMISSED. 28. FURTHER, THE KOLKATA SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF JOINT COMMISSIONER OF INCOME-TAX V. USHA MARTIN INDUSTRIE S LTD. [2007] 288 ITR [2007] 288 ITR [2007] 288 ITR [2007] 288 ITR (A.T.) 0063 (A.T.) 0063 (A.T.) 0063 (A.T.) 0063- -- -(SB)(KOL) (SB)(KOL) (SB)(KOL) (SB)(KOL)HELD AS UNDER HELD AS UNDER HELD AS UNDER HELD AS UNDER- -- - THAT IN THE EXPLANATION TO SECTION 115JA, THERE WA S NO PROVISION FOR MAKING ADDITION WITH REGARD TO ANY PROVISION FOR WE ALTH-TAX. THE - 14 - PROVISION FOR WEALTH-TAX DOES NOT FALL WITHIN ANY O F THE ITEMS OF THE EXPLANATION TO SECTION 115JA AND THE DELETION OF TH E ADDITION OF RS. 1,25,000 WAS JUSTIFIED. 29. WE ALSO FIND THAT THE PROVISIONS OF SECTION115J A AND 115JB ARE PARA MATERIA. THEREFORE RESPECTFULLY FOLLOWING THE DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF USHA MARTIN INDUSTRI ES LTD (SUPRA) AND THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FO R ASSESSMENT YEARS 2000- 01 AND 2001-02 DATED 16-7-2008 IN ITA NOS.1750 AND 1751/AHD/2004 WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IN DELETING THE ADDITION OF `. 7 LACS ON ACCOUNT OF WE ALTH TAX PROVISION IN COMPUTING THE BOOK PROFITS OF THE ASSESSEE. THUS, T HIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 30. THE CROSS OBJECTION FILED BY THE ASSESSEE READS AS UNDER:- 1. CONFIRMING DISALLOWANCE OF DEDUCTION UNDER SEC TION 80HHC FOR COMPUTING BOOK PROFIT. 31. AT THE OUTSET, WE WOULD LIKE TO OBSERVE THAT TH E CROSS OBJECTION FILED BY THE ASSESSEE IS BARRED BY LIMITATION OF 22 DAYS AND THE ASSESSEE HAS FILED CONDONATION APPLICATION FOR CONDONING THE DELAY IN FILING THE CROSS OBJECTION. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT HE HAS NO OBJECTION IN CONDONING THE DELAY IN FILING OF CR OSS OBJECTION BY THE ASSESSEE AND DECIDING THE GROUND TAKEN BY THE ASSES SEE IN THE CROSS OBJECTION ON MERITS. THEREFORE, THE DELAY IN FILIN G OF CROSS OBJECTION BY THE ASSESSEE WAS CONDONED AND THE PARTIES WERE ALLOWED TO MAKE THEIR SUBMISSIONS THEREON. 32. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSEE IN THIS GROUND OF CROSS OBJECTION AGITATED THAT LOWER AUTHORITIES WERE NOT JUSTIFIED IN NOT ALLOWING DEDUCTION FOR EXPORT PROF ITS ELIGIBLE UNDER SECTION 80-HHC WHILE COMPUTING BOOK PROFITS UNDER SECTION 1 15JB FOR THE YEAR UNDER CONSIDERATION. - 15 - 33. WE FIND THAT THIS ISSUE DO NOT ARISE OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AGAINST WHICH CROSS OBJECTION UNDER CONSIDERATION HAS BEEN PREFERRED. NO SUCH GROUND O F APPEAL WAS PREFERRED BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) . FURTHER FROM THE ASSESSMENT ORDER ALSO WE FIND THAT THERE IS NO MENT ION ABOUT THE ABOVE ISSUE. BEFORE US THE ASSESSEE HAS NOT SHOWN ANY RE ASON AS TO WHY THIS ISSUE WHICH IS NOT ARISING OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CAN BE ADMITTED BY THIS TRIBUN AL. IN ABSENCE OF ANY SUCH EXPLANATION THIS GROUND OF CROSS OBJECTION IS NOT ADMITTED AS NOT ARISING OUT OF THE ORDERS OF THE LOWER AUTHORITIES. THUS THIS GROUND OF CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 34. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FILED BY THE ASSES SEE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON THIS 15 TH DAY OF FEBRUARY, 2011. SD/- SD/- (BHAVNESH SAINI) ( N.S. SA INI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: AHMEDABAD, 15 TH DAY OF FEBRUARY, 2011. COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD - 16 - DATE INITIALS 1. DRAFT DICTATED ON 10-2-2011 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 11-2-2011 ----- -------------- 3. DRAFT PROPOSED & PLACED 14-2-2011 ---------- --------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 14-2-2011 --------- ---------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE AR -------------- -- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------