DCIT Rg. 1(1), MUMBAI V. M/s HINDUSTAN LIVER LTD., MUMBAI

ITA 3857/MUM/2003

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0573 (ITAT-MUMBAI)
• Duration Of Justice: 14 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 01-01-2015
• Assessment Year: 1996-1997
• Appeal Filed On: 19-05-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Depreciation; Retrospective amendment; Commercial expediency; Unabsorbed depreciation
• Section: 43B; 143(3); 80HHC

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI ,JUDICIAL MEMBER /.ITA/3857/MUM/2003, /ASSESSMENT YEARS: 1996-97 DCIT RANGE-1(1) AAYAKAR BHAVAN MUMBAI-400 020. VS. M/S. HINDUSTAN LEVER LTD. 165/166, BACKBAY RECLAMATION MUMBAI-400 020. PAN/GIR.NO:AAACH 1004 N ( /APPELLANT ) ( / RESPONDENT) /.ITA/3070/MUM/2003, /ASSESSMENT YEARS: 1996-97 M/S. HINDUSTAN LEVER LTD. MUMBAI-400 020. VS. DCIT-RANGE1(1) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI ALOK JOHRI-CIT-DR ASSESSEE BY: SHRI NISHAN THAKKAR/ MS. JASMIN AMALRADVALA / DATE OF HEARING: 24.05.2016 / DATE OF PRONOUNCEMENT: 02.06.2017 , 1961 254 )1( ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 10/02/2000,OF CIT(A)-I, MUMBAI THE ASSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR THE YEAR UNDE R CONSIDERATION.ASSESSEE -COMPANY,ENGAGED IN THE BUSINESS OF MANUFACTURING OF PERSONAL CARE PROD UCTS AND CHEMICALS,FILED ITS RETURN OF INCOME ON 30.11.1996,DECLARING TOTAL INCOME OF RS.2.45 CRO RES .THE AO COMPLETED THE ASSESSMENT ON 29/01/1999, U/S. 143(3) OF THE ACT,DETERMINING ITS INCOME AT RS. 3.89 CRORES ITA/3857/MUM/2003: 2. FIRST WE WOULD LIKE TO TAKE-UP THE APPEAL FILED BY THE AO.REPRESENTATIVES OF BOTH THE SIDES AGREED THAT FOLLOWING GROUNDS OF APPEAL,DEALING WIT H THE BELOW MENTIONED ISSUES,ARE COVERED BY THE ORDERS OF THE TRIBUNAL FOR EARLIER AY.S. GOA ISSUE PAGE AND PARA OF TRIBUNAL ORDERS 1 FOREIGN TRAVELLING EXPENSES OF WIVES OF SENIOR MA NAGERS PARA-16,PG-12,AY.1995-96* 2 SUBSCRIPTION AND ENTRANCE FEES PAID TO CLUBS PARA -18,PG.-14,AY.1995-96* 3 REFRESHMENT TO SHAREHOLDERS AT AGM PARA-19,PG.14, AY.1995-96* 4 EXPENSE REIMBURSED TO HINDUSTAN LEVER SPORTS CLUB AND TATA SPORTS PARA-20,PG.-15,AY.1995-96* 3857/M/03&3070/M/03(96-97) HLL 2 5 DEDUCTION UNDER SECTION 80HH, 80I AND 80IA TO BE ALLOWED SEPARATELY AND SIMULTANEOUSLY PARA-22,PG.16,AY.1995-96* 8 DELETION OF DISALLOWANCE TOWARDS ADMINISTRATION A ND TRAINING EXPENDITURE ON THE RURAL DEVELOPMENT PARA-7 PG.7,AY.1993-94** *ITA/1606/MUMBAI/2000-DATED 11/01/2017 ** ITA/1606/MUMBAI/2000 RESPECTFULLY,FOLLOWING THE ORDERS FOR THE EARLIER Y EARS,WE DECIDE GROUNDS NO.1 TO 5 AGAINST THE AO. 3. GROUND NO.6 IS ABOUT DIRECTION GIVEN TO THE AO TO E XCLUDE EXCISE DUTY AND SALES TAX FROM THE TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER S ECTION 80HHC OF THE ACT.BEFORE US,THE DR STATED THAT THE AO HAD FOLLOWED THE PRACTICE PREVAI LING AT THE TIME OF PASSING OF ASSESSMENT ORDER.THE AR REFERRED TO THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1995-96(SUPRA).HE ALSO RELIED UPON THE CASE OF LAKSHMI MACHINE WORKS (160 TAXMAN 404).WE ARE REPRODUCING PARAGRAPHS 8 OF THE PAGE 7 OF THE ORDER OF THE TRIB UNAL FOR THE EARLIER ASSESSMENT YEAR AND IT READS AS UNDER: 8. GROUND NO.8 (8A,8B AND 8C) DEALS WITH DEDUCTION U/S . 80HHC OF THE ACT.DURING THE COURSE OF HEARING BEFORE US,REPRESENTATIVES OF BOTH THE SIDES STATED THAT THE TRIBUNAL HAD SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION,WHILE DECIDING THE APPEAL FOR AY 1994-95. THE AR FURTHER STATED THAT THE ISSUE STANDS DECIDED IN FAV OUR OF THE ASSESSEE, THAT THE AO SHOULD BE DIRECTED TO CONSIDER THE MATTER OF LAKSHMI MACHINE WORKS (160TAXMANN404),WHILE RE-COMPUTING THE DEDUCTION. 8.1. AFTER CONSIDERING THE SUBMISSION OF THE RIVAL PARTI ES WE ARE SETTING ASIDE THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION. HE IS DIRECTED TO FOL LOW INSTRUCTIONS OF TRIBUNAL AT PARAGRAPH 47 AT PAGE-9 OF THE ORDER OF THE TRIBUNAL IN EARLIER YEAR .HE SHOULD ALSO CONSIDER THE MATTER OF LAKSHMI MACHINE WORKS (SUPRA),RELIED UPON BY THE AUTHORISED REPRESENTATIVE, WHILE RE-COMPUTING THE DEDUCTION.GROUND NO.8 IS DECIDED IN FAVOUR OF THE A SSESSEE ,IN PART. ACCORDINGLY,WE DIRECT THE AO TO DECIDE THE ISSUE IN LIGHT OF THE ABOVE DISCUSSION AND AFTER CONSIDERING THE JUDGMENT OF THE HONORABLE SUPREME C OURT IN THE CASE OF LAKSHMI MACHINE WORKS (SUPRA).SIXTH GROUND STANDS PARTLY ALLOWED. 4. GROUND NO.7 PERTAINS TO DELETING PROVISION FOR RETI REMENT PENSION SCHEME.THE DR ARGUED THAT PROVISIONS WERE MADE FOR CONTINGENT LIABILITIES AND NOT FOR ASCERTAINED LIABILITIES,THAT LIABILITIES DETERMINED ON ACTURIALS COULD BE ALLOWED.THE AR MEN TIONED THAT THE TRIBUNAL HAD DECIDED THE IDENTICAL ISSUE AGAINST THE AO,WHILE ADJUDICATING T HE APPEAL FOR THE ASSESSMENT YEAR 1995-96.WE FIND THAT AT PARA-13, PAGE 11 OF THE SAID ORDER, TH E TRIBUNAL HAD DECIDED THE ISSUE AS UNDER: 13. GROUND NO.13 IS ABOUT PROVISION FOR RETIREMENT PENS ION PAYABLE TO BOTH THE EMPLOYEES. REPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE I SSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY 3857/M/03&3070/M/03(96-97) HLL 3 THE ORDER OF THE TRIBUNAL FOR THE AY.1994-95(SUPRA) .WE ARE RE-PRODUCING PARAGRAPH 51,PAGE -10 OF THE SAID ORDER AND IT READS AS UNDER :- 51.GROUND NO. 9 PERTAINS TO ALLOWANCE OF CLAIM FOR PROVISION OF RS. 6,99,89,558/- FOR RETIREMENT PENSION U/S 37(1). 52.THE ISSUE WAS DEALT WITH BY THE ITAT IN ITA NO. 5331/MUM/1998 IN PARA 12 WHEREIN THE COORDINATE BENCH RESTORED THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION, FOLLOWING COORDINATE BENCH ORDER IN ASSESSMENT YEAR 1991. 53.IN THE APPEAL EFFECT ORDER PERTAINING TO ASSESSM ENT YEAR 1991 IN PARA 3, THE AO ALLOWED THE CLAIM OF PROVISION FOR RETIREMENT PENSI ON. 54.SINCE THE ISSUE HAS BEEN ACCEPTED BY THE AO TO B E ALLOWABLE, FOLLOWING THE ORDER OF THE ITAT, WE, THEREFORE DIRECT THE AO TO ALLOW THE SIMILAR CLAIM MADE IN THE INSTANT YEAR. GROUND NO. 9 IS THEREFORE, ALLOWED. RESPECTFULLY FOLLOWING THE SAME,WE DECIDE GROUND NO .13 IN FAVOUR OF THE ASSESSEE. NOTHING HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE T HAT FACTS OF THE EARLIER YEARS ARE DISTINGUISHABLE FROM THE FACTS FOR THE YEAR UNDER C ONSIDERATION.THEREFORE, FOLLOWING THE ORDER FOR THE ASSESSMENT YEAR 1995-96 WE DISMISS GROUND NO.7, RAISED BY THE AO. 5. LAST GROUND OF APPEAL IS ABOUT DELETION OF DISALLOW ANCE TOWARDS ADMINISTRATION AND TRAINING EXPENDITURE ON THE RURAL DEVELOPMENT.BEFOER US,THE DR SUPPORTED THE ORDER OF THE AO.THE AR STATED THAT IN THE AY.1993-94 (ITA/ 5579/MUM/1998 & 5331/MUM/1998 DATED 21.08.2013) THE TRIBUNAL HAD DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE.WE ARE REPRODUCING THE SAME AS UNDER :- 7. GROUND NO. 7 RELATES TO THE ASSESSEES CLAIM F OR DEDUCTION OF RS.24,13,987/- U/S 37 BEING EXPENSE S INCURRED ON RURAL DEVELOPMENT WHICH HAS BEEN DISALLOWED BY T HE AO AND THE LD.CIT(A) RESTORING THE ISSUE TO AO T O CONSIDER THE EXTENT OF INTERRELATION WITH THE BUSIN ESS ACTIVITIES OF THE ASSESSEE. THE ITAT IN THE ASS ESSEES OWN CASE IN ITA NO. 1783/M/1996 FOR THE A.Y. 1992-93 DE CIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. THE REL EVANT FINDINGS OF THE ITAT IN THE SAID ORDER READS AS UND ER: GROUND NO.10 RELATES TO ALLOWABILITY OF EXPENDITUR E ON RURAL DEVELOPMENT ACTIVITIES. IN THIS REGARD, THE LEARNED COUNSEL MENTIONED THAT THE CIT (A) FAILED TO ADJUDICATE THIS GROUND ALTHOUGH THE SAID CLAIM IS SUPPORTED BY THE ORDER O F THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 1991-92 VIDE PARAS 61 TO 63 OF THE TRIBUNAL ORDER, DATED 8.2.2011. THE SAID PARAGRAPHS READ AS UNDER: 61. GROUND NO.6 IS REGARDING EXPENDITURE ON RURAL DEVELOPMENT. 62. WE HAVE HEARD THE LD DR AS WELL AS THE LD SR C OUNSEL FOR THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT THE TRIBUNAL WHILE DECIDING THE APPEAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSME NT YEAR 1989- 90 HAS DECIDED THIS ISSUE IN PARA. 25.3 AS UNDER: 25.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EXPENDITURE IN CURRED BY THE ASSESSEE ON RURAL DEVELOPMENT PROGRAMMES. THE EXPENDITURE INCLUDED TH E EXPENSES ON ANIMAL HEALTH, HUMAN HEALTH, TRAVEL AND TRAINING COST OF EMPLOYEES VISIT ING RURAL AREAS, SUBSIDY TO FARMERS FOR FREE TREE PLANTATION ETC. THE REVENUE HAS NOT DISPUTED T HAT THE ASSESSEE WAS IN AGRI PRODUCT BUSINESS SUCH AS FERTILIZERS, HYBRID SEEDS ETC. AND , THEREFORE, THE CLAIM OF THE ASSESSEE THAT SUCH EXPENSES WERE NECESSARY FOR GROWTH OF THE BUSI NESS IN THE RURAL AREAS, IS QUITE 3857/M/03&3070/M/03(96-97) HLL 4 REASONABLE. SUBSTANTIAL PORTION OF THE EXPENDITURE WAS ON SALARY AND TRAVEL EXPENSES OF EMPLOYEES IN THE RURAL AREAS AND ADMINISTRATIVE COS T OF TRAINING. THE ASSESSEE HAD ALSO INCURRED EXPENDITURE ON RESEARCH PROJECTS IN RURAL AREAS INCLUDING EXPENSES AT KRISHI AND PASU VIKAS KENDRAS, HUMAN HEALTH PROGRAMMES AND INF RASTRUCTURE DEVELOPMENT PROJECTS ETC. THERE IS NO PERSONAL ELEMENT INVOLVED IN THE EXPEND ITURE INCURRED BY THE ASSESSEE. EXPENDITURE WAS CLOSELY RELATED TO THE BUSINESS BEI NG DONE BY THE ASSESSEE AND, THEREFORE, EVEN IF THERE WERE NO SPECIFIC PROVISION FOR ALLOWI NG SUCH EXPENSES, THESE EXPENSES HAVE TO BE ALLOWED AS INCURRED ON COMMERCIAL EXPEDIENCY. WE SEE NO INFIRMITY IN THE ORDER OF CIT (A) IN ALLOWING THE CLAIM AND, THEREFORE, THE SAME IS UPHELD. 63. ACCORDINGLY, FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL, WE DECIDE THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 14. IT IS A FACT THAT THE ABOVE GROUND WAS NOT ADJU DICATED BY THE LEARNED CIT (A) APPROPRIATELY. HOWEVER, CONSIDERING THE FINDING OF THE TRIBUNAL FO R AY 1991-92, WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE, WE ARE OF THE CONSIDERED OPINION, THE ASSESSEE IS ENTITLED TO RELIEF AND THEREFORE, THE GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORD INGLY, GROUND NO.10 IS ALLOWED. WE, THEREFORE FOLLOWING THE SAID ORDER OF THE ITAT DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE AS TH E ASSESSEE IS ENTITLED TO THE RELIEF CLAIMED. GROUND NO. 7 IS ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE ORDER,WE DECIDE GR OUND OF APPEAL NO.8 AGAINST THE AO. ITA/3070/MUM/2003: 6. DURING THE COURSE OF HEARING BEFORE US,THE AR FAIRL Y CONCEDED THAT GOA 1,2,4 AND 17 WERE DECIDED AGAINST THE ASSESSEE BY THE ORDER OF THE TR IBUNAL FOR THE EARLIER AY.S.,INCLUDING THE AY.1995-96 (SUPRA). HENCE,WE DISMISS THE SAME. 7. THIRD GROUND OF APPEAL IS ABOUT EXPENDITURE INCURRE D ON FOOD AND BEVERAGES(F&B) PROVIDED DURING THE YEAR. FIRST SUB-GROUND DEALS WITH F&B PR OVIDED TO THE EMPLOYEES.THE AR STATED THAT IDENTICAL ISSUE WAS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS.THE DR CONTENDED THAT THE ASSESSEE HAD NOT FILED REQUISITE INFORMATI ON.WE FIND THAT ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR TH E AY. 1994-95(SUPRA). AT PAGE-6 , PARA-20 OF THE ORDER,THE TRIBUNAL HAS HELD AS UNDER: 20.GROUND NO. 4 PERTAIN TO PROVISIONS O F FOOD & BEVERAGES TO EMPLOYEES. 21.THE ISSUE HAS BEEN DECIDED BY THE COORDINATE BEN CH IN THE ASSESSEES OWN CASE IN VARIOUS PRECEDING YEARS. SINCE THERE IS NO CHANGE IN THE FA CTS, AND AS PER THE DECISIONS OF IN THE VARIOUS PRECEDING YEARS AND SIMILAR ISSUE DEALT WITH IN THE CASE OF TELCO VS DCIT IN ITA NO. 7061/MUM/1998, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE EXISTING CONSISTENT STAND. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DI RECT THE AO TO ALLOW THE CLAIM OF EXPENSE OF RS. 4,68,511/-. RESPECTFULLY,FOLLOWING THE SAME,GROUND NO.3 IS DEC IDED IN FAVOUR OF THE ASSESSEE,AS THE FACTS ARE IDENTICAL FOR BOTH THE AY.S. 3857/M/03&3070/M/03(96-97) HLL 5 7.1. GROUND 3.1 PERTAINS TO EXPENDITURE INCURRED BY THE RESEARCH SCIENTIST.THE AR STATED THAT AN AMOUNT OF RS.2.56 LAKHS WAS INCURRED BY THE SCIENTI STS AND THAT SAME WAS ALLOWABLE U/S.35(1) (I) OF THE ACT.WE FIND THAT THE TRIBUNAL HAS DEALT THE SIMILAR ISSUE IN THE AY.1995-96 AS UNDER: 5.1. GROUND NO.4.1 IS ABOUT EXPENDITURE OF RS.1.49 LAKHS INCURRED BY RESEARCH SCIENTISTS.IT IS FOUND THAT THE TRIBUNAL HAD DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE.WHILE DECIDING THE APPEAL FOR AY 1994-95 (SUPRA).WE ARE REPRODUCING PARA -22 AT PAGE -27 OF THE SAID ORDER AND SAME READS AS UNDER :- 22. GROUND NO. 4.1 PORTION TO EXPENSE OF RS. 1,21,422/- ON RESEARCH SCIENTIST. 23.THE AR SUBMITTED THAT THE ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE VARIOUS ORDER IN THE PRECEDING YEARS. 24.SINCE THERE IS NO DEVIATION ON FACTS, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE ORDERS OF COORDINATE BENCH IN ITS OWN CASE. 25.WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE AS MADE. 26.GROUND NO. 4.1 IS THEREFORE, ALLOWED. RESPECTFULLY FOLLOWING THE SAME,GROUND NO.4.1 IS DE CIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.3.1 IS ALLOWED. 7.2. GROUND 3.2. DEALS WITH EXPENDITURE INCURRED ON F&B PROVIDED TO OUTSIDERS AT THE TIME OF STAFF GET TOGETHER AND CONFERENCES .THE AR CONCEDED THAT THE ISSUE WAS DECIDED AGAINST THE ASSESEE BY THE TRIBUNAL IN THE AY.1995-96.WE DISMISS GROUND NO .3.2. 7.3. LAST SUB-GROUND IS ABOUT ALLOWING 50% OF THE ESTIMA TED EXPENDITURE ON F & B PROVIDED TO BUSINESS ASSOCIATES VISITING OFFICE PREMISES.IT IS FOUND THAT THE TRIBUNAL HAD DECIDED THE SAME ISSUE AGAINST THE ASSEESSE IN THE AY.1995-96.(PARA 5.3.PAGE 4).SO,WE DISMISS THE SUB GROUND 3.3. 8 .NEXT GROUND IS ABOUT DEDUCTION U/S.80HH AND 80I/IA OF THE ACT.WE FIND THAT THE TRIBUNAL HAD RESTORED BACK THE ISSUE TO THE FILE OF THE AO WHILE ADJUDICATING THE APPEAL FOR THE EARLIER AY. (SUPRA).THE RELEVANT PORTION OF THE ORDER READS AS FOLLOWS: 7. GROUND NO.6,6.1,6.2,6.3 AND 7DEAL WITH DEDUCTION U/ S. 80HH(RS.28.89 CRORES), 80I/ IA (RS. 21.35CRORES)AND ALLOCATION OF EXPENSES OF HEAD OFFI CE.WE FIND THAT WHILE DECIDING THE APPEAL FOR AY 1994-95,THE TRIBUNAL HAD RESTORED BACK THE MATT ER TO THE FILE IF THE AO WHICH READS AS UNDER: 37.GROUND NO. 6 PERTAINS TO TREATMENT OF DEDUCTION CLAIMED AT RS. 28,87,43,854/- U/S 80HH AND RS. 10,59,90,498/- U/S 80I/80IA. 38.THE AR SUBMITTED THAT IDENTICAL ISSUE WAS SUBJEC T MATTER IN ITA NO. 5331/ MUM/1998, WHEREIN THE COORDINATE BENCH FOLLOWED THE ORDER IN ASSESSEES OWN CASE IN ITA NO. 7868/MUM/2010, WHEREIN, THE ISSUE WAS PARTLY ALLOWE D BY RESTORING THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO WORK OUT THE COMMON EXPENSES. 39.THE DR ACCEPTED THAT THE IDENTICAL ISSUE WAS ADJ UDICATED AND A SIMILAR VIEW / DIRECTION MAY BE GIVEN IN THE INSTANT GROUND AS WELL. 40.WE HAVE HEARD THE ARGUMENT AND HAVE PURSUED THE ORDER AS MENTIONED AND A NUMBER OF ORDERS OF THE COORDINATE BENCHES. SINCE THE ISSUE HAS ALRE ADY BEEN DEALT WITH BY THE ITAT MUMBAI 3857/M/03&3070/M/03(96-97) HLL 6 BENCHES, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE DECISION ALREADY IN PLACE, AS MENTIONED IN PARA 8 OF THE ORDER IN ITA NO. 5331/MUM/1998, WHERE IN THE ISSUE WAS RESTORED TO THE FILE OF THE AO. 41.FOLLOWING THE SAME, WE TOO TAKE THE SIMILAR VIEW AND RESTORE THE ISSUE TO THE FILE OF THE AO, WHO SHALL REWORK OUT THE COMMON EXPENSES. 42.GROUND NO. 6 IS THEREFORE ALLOWED FOR STATISTICA L PURPOSES. 43.GROUND NO. 7 PERTAINS TO ALLOCATE COMMON INCOME IN SAME PROPORTION TO THAT OF COMMON EXPENSES. 44.THE ISSUE IS ALSO COVERED BY THE ORDER OF THE DC IT IN ITA NO. 5331/MUM/1998 WHEREIN THE COORDINATE BENCH IN THE ASSESSEES OWN CASE HAS DIR ECTED THE AO WORK OUT IN THE SAME TERMS AS THAT OF COMMON EXPENSES. 45.AS THERE IS NO CHANGE IN THE FACTS, WE FOR THE S AKE OF CONSISTENCY AND EQUITY, RESTORE THE ISSUE TO THE AO WITH THE DIRECTION TO DECIDE THE ISSUE ON SA ME TERMS AND IN ACCORDANCE WITH LAW. 46.THE GROUND, THEREFORE, ALLOWED FOR STATISTICAL P URPOSES. 47.GROUND NO. 8 PERTAINS TO ADJUSTMENTS TO BE MADE IN COMPUTING THE DEDUCTION U/S 80HHC IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE ITAT IN PRECEDING YEARS IN ITA NO. 5331/MUM/1998 IN PARA 10, PAGE 10 OF THE ORDER, WHE REIN THE COORDINATE BENCH HAD PLACED RELIANCE ON THE DECISION IN ASSESSEES OWN CASE IN ITA NO. 1783/MUM/1996. 48.IN THE ORDER IN ITA NO. 5331/MUM/1998, THE COORD INATE BENCH HAD SET ASIDE THE ISSUE TO THE AO FOR FRESH ADJUDICATION AS DONE IN ASSESSMENT YEA R 1992-93. 49.AS NO DISTINCTION HAS BEEN DRAWN IN THE FACTS OF THE PRECEDING YEARS & THE CURRENT YEAR, WE, THEREFORE, DO NOT FIND ANY REASON TO DEVIATE FROM T HE CONSISTENT STAND TAKEN BY THE ITAT. WE, THEREFORE, SET ASIDE THE ISSUES OF EXCISE DUTY, SAL ES TAX AND MISCELLANEOUS INCOME FOR INCLUSION IN THE QUALIFYING AMOUNT FOR COMPUTATION OF DEDUCTION U/S 80HHC. RESPECTFULLY FOLLOWING THE SAME, THE ISSUE OF DEDUC TION U/S. 80HH AND 80I IS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTE D TO FOLLOW THE DIRECTION GIVEN BY THE TRIBUNAL FOR THE EARLIER YEAR.WHILE DECIDING THE ISSUE HE SH OULD ALSO CONSIDER THE CASE RELIED UPON BY THE AR OF THE ASSESSEE, NAMELY MADIDEEP ENGG. & PKG. IN DIA (P.) LTD., (292 ITR 1). GROUNDS NO.6 - 6.3 AND 7 ARE DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. GROUND NO.5 IS ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART.GROUND NO.6 IS AN ALTERNATE GROUND AND THEREFORE,IS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND 7 PERTAINS TO DEDUCTION IN RESPECT OF CDP-CH INDWARA FCC-HALDIA,ZEOLITE-HALDIA AND FOOTWEAR-PONDICHERY WITHOUT ADJUSTING BROUGHT FORWA RD LOSSES AND DEPRECIATION ON EARLIER AY.S. WHICH WAS ALREADY SET OFF AGAINST THE PROFIT FROM O THER UNDERTAKING/ACTIVITIES.THE AR STATED THAT DEDUCTION IN RESPECT OF 80HH WAS DECIDED IN FAVOUR OF THE BY THE TRIBUNAL IN THE AY.1989-90 AND THAT DEDUCTION IN RESPECT OF 80I WAS DECIDED AG AINST THE ASSESSEE IN THE ORDER FOR THE AY. 1991-92.THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. CONSIDERING THE FACT THAT THE AR HAD FAIRLY CONCEDE D THAT ISSUE OF 80I DEDUCTION STANDS DECIDED AGAINST THE ASSESSEE WE PARTLY DISMISS THE GROUND.A S FAR AS DEDUCTION U/S.80HH IS CONCERNED WE WOULD LIKE TO REPRODUCE THE ORDER OF THE TRIBUNAL F OR THE AY.1989-90 (ITA/ 8681 &8605 MUM/1992,DATED21/09/2011) AND IT READS AS UNDER: 27. THE DISPUTE RAISED IN GROUND NO.14 IS REGARDIN G SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED 3857/M/03&3070/M/03(96-97) HLL 7 DEPRECIATION WHILE ALLOWING DEDUCTION U/S. 80HH AN D 80I AT HALDIA UNIT. THE ASSESSING OFFICER ALLOWED THE CLAIM U/S. 80HH AND 80I IN RELATION THE PROFIT OF BUSINES S AFTER SETTING OFF BROUGHT FORWARD LOSSES AND UNAB SORBED DEPRECIATION. IN APPEAL CIT(A) FOLLOWING THE DECISI ON IN ASSESSMENT YEAR 1988-89, DIRECTED THE ASSESSI NG OFFICER TO ALLOW THE CLAIM WITHOUT ADJUSTING BROUGH T FORWARD LOSSES AND UNABSORBED DEPRECIATION. AGGRIEVED BY THE DECISION, THE REVENUE IS IN APPEAL . 27.1. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS ALSO COVERED BY THE DECISION OF TRIB UNAL IN ASSESSMENT YEAR 1988-89 (SUPRA). IN THAT YEAR, THE REVENUE HAD RELIED ON THE JUDGMENT OF HON'BLE SUPRE ME COURT IN CASE OF SYNCO INDUSTRIES LTD. VS. AO (299 ITR 444), TO ARGUE THAT THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION HAVE TO BE ADJUSTED BEFORE ALLOWING CLAIM OF DEDUCTION U/S. 80HH & 80I. THE TRIBUNAL DISTINGUISHED THE SAID CASE ON THE GROUND THAT BROUGHT FORWARD LOSSES/DEPRECIATION OF THE NEW UNIT HAD ALREADY BEEN SET OFF AGAINST OTHER INCOME OF TH E ASSESSEE AND NOTHING WAS BROUGHT FORWARD EITHER A S LOSS OR UNABSORBED DEPRECIATION. THEREFORE, THE TRI BUNAL HELD THAT THE DEDUCTION U/S. 80HH HAS TO BE ALLOWED WITHOUT ADJUSTING THE BROUGHT FORWARD LOSSE S/DEPRECIATION. HOWEVER, IN RELATION DEDUCTION U/S. 80I, THE TRIBUNAL NOTED THAT IN VIEW OF THE SPECIFIC PRO VISION OF SEC.80I(6) AS PER WHICH DEDUCTION U/S. 80 I HAS TO BE ALLOWED ON STAND ALONE BASIS, TREATING THE UNDER TAKING AS THE ONLY SOURCE OF INCOME. THEREFORE, THE TRIBUNAL DIRECTED THAT BROUGHT FORWARD LOSSES AND U NABSORBED DEPRECIATION OF THE UNIT OF EARLIER YEARS STARTING FROM THE INITIAL YEAR HAS TO BE SET OFF BE FORE, ALLOWING CLAIM U/S.80I. FACTS OF THIS YEAR AR E IDENTICAL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T RIBUNAL IN ASSESSMENT YEAR 1988-89 (SUPRA), WE CONF IRM THE ORDER OF THE CIT(A) IN RELATION TO DEDUCTION U/ S.80HH AND SET ASIDE THE ORDER IN RELATION TO SEC.8 0I ON WHICH THE ORDER OF ASSESSING OFFICER IS RESTORED. FOLLOWING THE ABOVE,GROUND NO.7 IS PARTLY ALLOWED I N FAVOUR OF THE ASSESSEE. 10. NEXT GROUND IS ABOUT DEDUCTION U/S.80HHC OF THE ACT .IN THE SUB-GROUNDS VARIOUS ISSUES RELATED TO THE DEDUCTION HAS BEEN RAISED.WE FIND TH AT ALL THE ISSUES WERE DELIBERATED UPON AND WERE DECIDED BY THE TRIBUNAL IN THE AY.1995-96(SUPR A)AS FOLLOW: 8. GROUND NO.8 (8A,8B AND 8C) DEALS WITH DEDUCTION U/S . 80HHC OF THE ACT.DURING THE COURSE OF HEARING BEFORE US,REPRESENTATIVES OF BOTH THE SIDES STATED THAT THE TRIBUNAL HAD SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION,WHILE DECIDING THE APPEAL FOR AY 1994-95. THE AR FURTHER STATED THAT THE ISSUE STANDS DECIDED IN FAV OUR OF THE ASSESSEE, THAT THE AO SHOULD BE DIRECTED TO CONSIDER THE MATTER OF LAKSHMI MACHINE WORKS (160TAXMANN404),WHILE RE-COMPUTING THE DEDUCTION. 8.1. AFTER CONSIDERING THE SUBMISSION OF THE RIVAL PARTI ES WE ARE SETTING ASIDE THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION. HE IS DIRECTED TO FOL LOW INSTRUCTIONS OF TRIBUNAL AT PARAGRAPH 47 AT PAGE-9 OF THE ORDER OF THE TRIBUNAL IN EARLIER YEAR .HE SHOULD ALSO CONSIDER THE MATTER OF LAKSHMI MACHINE WORKS (SUPRA),RELIED UPON BY THE AUTHORISED REPRESENTATIVE, WHILE RE-COMPUTING THE DEDUCTION.GROUND NO.8 IS DECIDED IN FAVOUR OF THE A SSESSEE ,IN PART. 9. GROUND NO.9 DEALS WITH EXPENDITURE BY WAY OF EXPORT COMPENSATION GIVEN TO ITS CUSTOMERS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD CLAIMED COMPENSATION TO THE TUNE OF RS.87,11,912/,THAT THE COMPENSATION WAS STATED TO BE PAID TO THE EXPORT PURCHASERS OUTSIDE INDIA TO COMPENSATE FOR DAMAGED PRODUCT, ET C.HE HELD THAT THE ASSESSEE HAD ALLOWED DISCOUNT ON THE SALE PRICE TO THIS EXTENT TO THE FO REIGN CUSTOMERS,THAT THE AMOUNT IN QUESTION GIVEN AS DISCOUNT/COMPENSATION TO THE FOREIGN CUSTO MERS HAD TO BE REDUCED FROM THE EXPORT TURNOVER FOR CALCULATION OF DEDUCTION U/S. 80HHC. 3857/M/03&3070/M/03(96-97) HLL 8 9.1. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERR ED AN APPEAL BEFORE FAA. IT WAS ARGUED THAT THE AO HAD REDUCED THE F.O.B. VALUE OF EXPORTS BY AMOUNT OF EXPORT COMPENSA-TION OF RS.87,11,912/-,THAT THE ASSESSEE WAS REQUIRED TO PA Y COMPENSATION TO ITS CUSTOMERS IN SELECTED CASES TOWARDS COSTS INCURRED BY THEM IN CASES WHERE THE CONSIGNMENT SUFFERED MINOR DAMAGES ETC. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND ASSESSMENT ORDER,THE FAA HELD THAT BY FOLLOWING THE PRACTICE OF MAKING PAYMENT TO THE FOR EIGN CUSTOMERS THE ASSESSEE ,IN A WAY,HAD ALLOWED DISCOUNT ON THE PRICE TO THIS EXTENT TO FOR EIGN BUYERS, THAT THE NOMENCLATURE COULD BE DIFFERENT BUT THE EFFECT WAS THAT OF ALLOWING DISCO UNT TO CUSTOMERS IN RESPECT OF DAMAGED GOODS,THAT THE AO HAD RIGHTLY REDUCED THE VALUE FRO M EXPORT TURNOVER FOR WORKING OUT ADMISSIBLE AMOUNT OF DEDUCTION U/S. 80HHC. 9.2. BEFORE US, THE AR STATED THAT THE EXPENDITURE INCUR RED BY THE ASSESSEE WAS NEITHER A DISCOUNT NOT A REDUCTION IN THE SELLING PRICE, THAT SAME COU LD NOT BE REDUCED FROM THE AMOUNT OF EXPORT TURNOVER, THAT IT WAS A PURE REIMBURSEMENT, THAT PA YMENT COULD NOT BE CONSIDERED AKIN TO DISCOUNT, THAT COMPENSATION WAS GIVEN TO CUSTOMERS ON A SELECTIVE BASIS TO REIMBURSE COST WHICH WAS REQUIRED TO BE INCURRED BY THEM IN VIEW OF DAMA GED TO THE GOODS IN HANDLING/ TRANSIT.ON A QUERRY BY THE BENCH ABOUT THE TREATMENT GIVEN BY TH E AO.S IN THE SUBSEQUENT ASSESSMENT YEARS WITH REGARD TO THE EXPORT COMPENSATION, THE AR STAT ED THAT IN THE SUBSEQUENT YEARS THE IDENTICAL CLAIM MADE BY THE ASSESSEE HAS BEEN REJECTED BY THE DEPARTMENTAL AUTHORITIES.ALTERNATIVELY, IT WAS ARGUED THAT IN THE EVENT THE DISPUTED COMPENSA -TION AMOUNT WAS TO BE REDUCED FROM THE EXPORT TURNOVER THE SAME WILL HAVE TO BE ADDED BACK TO THE PROFITS OF THE BUSINESS WHILE COMPUTING THE DEDUCTION UNDER SECTION 80 HHC OF THE ACT.THE DR SUPPORTED THE ORDER OF THE FAA. 9.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAD CLAIMED THAT IT HAD PAID CERTAIN AMOUNT TO ITS FOREIGN BUYERS ON ACCOUNT OF DAMAGES SUFFERED BY THEM ON ACCOUNT OF TRANSPORTATI ON OF THE GOODS, THAT THE AO AND THE FAA HELD THAT PAYMENT MADE TO THE FOREIGN BUYERS WAS PA RT OF DISCOUNT/COMMISSION, THAT SAME HAD TO BE REDUCED FROM THE EXPORT TURNOVER FOR THE PURPOSE OF CALCULATING DEDUCTION U/S. 80HHC OF THE ACT.WE FIND THAT THE BASIS FOR CLAIMING THE SO-CALL ED REIMBURSEMENT WAS NEVER PRODUCED BY THE ASSESSEE BEFORE THE AO/FAA. CORRESPONDENCE OR TERMS OF CONDITIONS AGREED INTO BETWEEN THE FOREIGN BUYER THE ASSESSEE WERE NOT REFERRED TO BY THE ASSESSEE BEFORE US. THEREFORE,IN OUR OPINION THE MATTER NEEDS FURTHER VERIFICATION.IN TH ESE CIRCUMSTANCES, THE MATTER IS RESTORED BACK TO THE FILE OF THE AO.HE WOULD AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE. WITH REGARD TO THE ALTERNATIVE CLAIM MADE BY THE AS SESSEE,THAT IF THE DISPUTED AMOUNT IS REDUCED FROM THE EXPORT TURNOVER THE SAME HAS TO BE CONSIDE RED AND HAD TO BE ADDED BACK TO THE PROFITS OF BUSINESS WHILE COMPUTING THE DEDUCTION UNDER SECTIO N 80 HHC OF THE ACT,WE WANT TO MENTION THAT THE CLAIM SHOULD BE CONSIDERED BY THE AO WHILE DECI DING THE ISSUE. GROUND NUMBER NINE IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 10. GROUND NO.10,FILED BY THE ASSESSEE AND GROUND NO. 5 OF THE AO,IS ABOUT COMPUTATION OF INTEREST WHILE COMPUTING THE DEDUCTION U/S. 80 HHC OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT WHILE COMPUTING PRO FITS OF THE BUSINESS FOR COMPUTATION OF DEDUCTION U/S. 80HHC, THE ASSESSEE HAD REDUCED 90% OF NET INTEREST INCOME ONLY AFTER REDUCING THE INTEREST PAID DURING THE YEAR FROM THE TOTAL IN TEREST RECEIPT. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY 90% OF THE TOTAL INTEREST INCOME SHOULD NOT BE REDUCED,FROM THE PROFITS AND GAINS OF BUSINESS,AS PER EXPLANATION (BAA) OF SECTI ON 80-HHC(4A)OF THE ACT.IN ITS RESPONSE,DATED 8.9.97,THE ASSESSEE MADE DETAILED SUBMISSIONS.HOWEV ER, THE AO HELD THAT WORD USED THE SECTION WERE RECEIPTS BY WAY OF INTEREST AND NOT INCOME BY WAY OF INTEREST, THAT THE DISPUTED AMOUNT HAD TO BE REDUCED FOR CALCULATING THE DEDUCTION,THA T THE TOTAL INTEREST RECEIVED WAS 3857/M/03&3070/M/03(96-97) HLL 9 RS.13,10,92,965/- THAT THE SAID INTEREST HAD ARISEN MAINLY ON ACCOUNT OF INVEST -MENT MADE FROM TIME TO TIME DUE TO SURPLUS AVAILABLE IN BUSINESS,T HAT THE COMPANY HAS ALSO INCURRED INTEREST COST OF RS.27,13,96,537/- WHICH HAD BEEN MAINLY PAID TO BANKS FOR CERTAIN SHORT-TERM UTILISATION OF FUNDS,THAT. THE NET INTEREST COST-INCLUDED IN THE P ROFITS AND GAINS FROM BUSINESS-WAS RS.14,03,03,572,THAT THE INTEREST COST WAS HIGHER T HAN THE AMOUNT OF INTEREST RECEIVED BY THE COMPANY RESULTING IN A NET INTEREST COST,THAT NO FU RTHER ADJUSTMENT WAS REQUIRED TO BE MADE IN REGARD TO THE AMOUNT OF PROFITS AND GAINS FROM BUSI NESS. FINALLY, THE AO REJECTED THE CLAIM MADE BY THE ASSESSEE. 10.1. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE CONT ENDED THAT THE INTEREST EXPENDITURE INCURRED BY THE APPELLANT WAS MUCH HIGHER THAN THE INTEREST INCOME.AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSE E,THE FAA HELD THAT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC,THE AO HAD REDUCED 90% OF THE AMOUNT,UNDER THE HEADS INTEREST(-RS.12,92,92,965/-)FROM THE PROFITS OF BUSINESS UNDER CLAUSE (BAA)UNDER THE EXPLANATION TO SECTION 80HHC,THAT THERE WAS A NET C HARGE IN THE PROFIT AND LOSS ACCOUNT OF INTEREST,THAT NO ADJUSTMENT WAS WARRANTED UNDER CLA USE (BAA) TO THE EXPLANATION TO SECTION 80HHC.HE REFERRED TO MATTERS KANTILAL CHHOTALAL(ITA NO.2045/MUM/1996) AND MANGALYA TRADING INVESTMENT LTD. 10.2. DURING THE COURSE OF HEARING BEFORE US,THE REPRESE NTATIVES OF BOTH THE SIDES AGREED THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE AO IN LIGHT OF THE JUDGMENT OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF ACG ASS OCIATED CAPSULES PVT. LTD. (343ITR89). CONSIDERING THE ABOVE,GROUND NO.10 IS DECIDED IN FA VOUR OF THE ASSESSEE AND GROUND NO.5,FILED BY THE AO IS DECIDED AGAINST HIM. 11. NEXT GROUND IS ABOUT REDUCTION OF ROYALTY AND MARKE T SERVICE FEES (MSF)(ROYALTY- RS.16,89,41,669/- AND MSF-RS.41,47,031/-)RECEIVED B Y THE ASSESSEE.WHILE COMPUTING DEDUCTION U/S.80HHC, THE AO HAD ALLOWED THE DEDUCTION AFTER R EDUCING 90% OF THE AMOUNT OF ABOVE MENTIONED TWO ITEMS. 11.1. WITH REGARD TO THE ROYALTY AND MSF, THE ASSESSEE C ONTENDED, BEFORE THE FAA,THAT THOSE WERE NORMAL BUSINESS RELATED RECEIPTS AND WERE NOT SPECIFICALLY COVERED UNDER CLAUSE (BAA) OF SECTION 80 HHC OF THE ACT AND THEREFORE COULD NOT B E REDUCED FROM BUSINESS FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER THE SAID SECTION.HOWEVER, HE DID NOT AGREE WITH THE ASSESSEE AND UPHELD THE ORDER OF THE AO. 11.2. BEFORE US,THE AR ARGUED THAT THE ADJUSTMENTS REQUIR ED TO BE MADE TO THE AMOUNT OF PROFITS AND GAINS UNDER CLAUSE (BAA) REFER SPECIFICALLY TO THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INEREST,RENT, CHARGES AND ANY OTHER RECEIPT OF A SI MILAR NATURE INCLUDED IN SUCH PROFITS,THAT ROYALTY AND MSF WERE NOT SPECIFICALLY INCLUDED UNDE R THE CLAUSE, THAT BOTH THE ITEMS COULD NOT BE TREATED AS BEING SIMILAR TO THE ITEMS MENTIONED IN THE CLAUSE OF THE EXPLA -NATION.HE REFERRED TO THE CASES OF GLAXO SMITHKLINE ASIA (P)LTD. (97TTJ1 08) AND PFIZER LTD.(330ITR662).HE FURTHER STATED THAT BOTH THE ITEMS WERE NOT IN THE LIST AND HENCE SAME SHOULD NOT BE CONSIDERED FOR THE PURPOSES OF EXPLANATION (BAA).THE DR CONTENDED THAT ROYALTY AND MSF SHOULD BE REDUCED WHILE COMPUTING THE PROFITS OF THE BUSINESS, THAT BOTH TH E ITEMS WERE AKIN TO THE ITEMS MENTIONED IN THE CLAUSE OF THE EXPLANATION. 11.3. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE CASE OF GLAXO SMITHKLINE ASIA (P.)LTD.(SUPRA),THE T RIBUNAL HAS HELD THAT THE ROYALY INCOME WAS NOT RECEIPT OF A SIMILAR NATURE AS THAT OF BROKERAG E COMMISSION ETC.,THAT THE ACTION OF THE REVENUE AUTHORITIES IN EXCLUDING 90% OF THE INCOME COULD NO T BE SUSTAINED. RESPECTFULLY FOLLOWING THE ABOVE,WE HOLD THAT 90% OF THE AMOUNT OF ROYALTY SHO ULD NOT BE REDUCED FROM THE AMOUNT OF PROFITS FROM THE BUSINESS WHILE CALCULATING DEDUCTI ON UNDER SECTION 80HHC OF THE ACT. 3857/M/03&3070/M/03(96-97) HLL 10 WE ALSO HOLD THAT MSF IS NOT PART OF THE SECTION I. E. CLAUSE (BAA)TO THE EXPLANATION AND THEREFORE, FOLLOWING THE DECISION OF GLAXO (SUPRA),WE HOLD THA T 90% OF THE MSF SHOULD NOT BE REDUCED FOR CALCULATING 80HHC DEDUCTION. GROUND NO.11 IS DECIDED IN FA VOUR OF THE ASSESSEE. 12. GROUND NO.12 PERTAINS TO LOSS INCURRED BY ASSESSEE IN RESPECT OF EXPORT OF TRADED GOODS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80HHC. 12.1. BEFORE US,THE AR FAIRLY CONCEDED THAT THE ISSUE STA NDS DECIDED AGAINST THE ASSESSEE,IN LIGHT OF THE RETROSPECTIVE AMENDMENT TO THE SECTION. GROUND NO. 12 IS DISMISSED. ACCORDINGLY,GOA-8 IS DECIDED IN FAOUR OF THE ASSESSEE,IN PART. RESPECTFULLY FOLLOWING THE ABOVE,WE DECIDE GROUNDS NO.8,9 AND 10 IN FAVOUR OF THE ASSESSEE. 11. PROVISION FOR RETIREMENT PENSION PAYABLE TO EMPLOYE ES IS THE SUBJECT MATTER OF NEXT GROUND OF APPEAL.THE AR STATED THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE PASSING ORDER FOR THE YEAR 1995-96.THE DR ARG UED THAT LIABILITY WAS CONTINGENT IN NATURE,THAT THAT THE ASSESSEE HAD NOT PROVIDED ACTU ARIAL. WE HAVE CONSIDERED THE AVAILABLE MATERIAL.WE FIND THAT IN THE EARLIER YEAR THE TRIBU NAL HAD DEALT THE IDENTICAL ISSUE AS UNDER: 13. GROUND NO.13 IS ABOUT PROVISION FOR RETIREMENT PENS ION PAYABLE TO BOTH THE EMPLOYEES. REPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE I SSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE AY.1994-95(SUPRA) .WE ARE RE-PRODUCING PARAGRAPH 51,PAGE -10 OF THE SAID ORDER AND IT READS AS UNDER :- 51.GROUND NO. 9 PERTAINS TO ALLOWANCE OF CLAIM FOR PROVISION OF RS. 6,99,89,558/- FOR RETIREMENT PENSION U/S 37(1). 52.THE ISSUE WAS DEALT WITH BY THE ITAT IN ITA NO. 5331/MUM/1998 IN PARA 12 WHEREIN THE COORDINATE BENCH RESTORED THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION, FOLLOWING COORDINATE BENCH ORDER IN ASSESSMENT YEAR 1991. 53.IN THE APPEAL EFFECT ORDER PERTAINING TO ASSESSM ENT YEAR 1991 IN PARA 3, THE AO ALLOWED THE CLAIM OF PROVISION FOR RETIREMENT PENSI ON. 54.SINCE THE ISSUE HAS BEEN ACCEPTED BY THE AO TO B E ALLOWABLE, FOLLOWING THE ORDER OF THE ITAT, WE, THEREFORE DIRECT THE AO TO ALLOW THE SIMILAR CLAIM MADE IN THE INSTANT YEAR. GROUND NO. 9 IS THEREFORE, ALLOWED. RESPECTFULLY FOLLOWING THE SAME,WE DECIDE GROUND NO .13 IN FAVOUR OF THE ASSESSEE. IN OUR OPINION,FACTS OF BOTH THE YEARS ARE SAME,SO, FOLLOWING THE ABOVE ORDER,WE DECIDE GROUND 11 IN FAVOUR OF THE ASSESSEE. 12. NEXT TWO GROUNDS ARE ABOUT PAYMENTS MADE TO LAKME L TD. , LAKME EXPORTS LTD. AND PURAN FOODS PVT.LTD. RESPECTIVELY. THE AR INFORMED THAT S IMILAR GROUND WAS REMANDED BY THE TRIBUNAL IN THE CASE OF THE GROUP COMPANY INDEX PORT LTD.(IT A/4333/MUM/99 FOR A.Y. 1996-97, DT. 22/8/2006). ON A QUERY BY THE BENCH HE COULD NOT TH ROW LIGHT AS TO WHAT HAPPENED TO THE ORDER GIVING PROCEEDINGS. IN OUR OPINION CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE ISSUE 3857/M/03&3070/M/03(96-97) HLL 11 WE ARE OF THE OPINION THAT MATTER SHOULD BE REMANDE D BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE FOR GROUND NO.12 & 13 FILED BY THE ASSESSEE BEFORE THE TRIBUNAL.BOTH THE GROUNDS ARE DECIDED IN FAVOUR OF THE ASSESSEE IN PART. 13. GROUND NO.14 DEALS WITH SALES TAX COLLECTED BUT NO T PAID BY THE DUE DATE OF RETURN REQUIRED TO BE DISALLOWED U/S. 43B OF THE ACT. THE AR REFERRED TO THE ORDER OF THE TRIBUNAL FOR THE AY 1987- 88 (ITA/1679/MUM/91, DT.8/7/2009).THE DR ARGUED THA T THERE WAS NO CLARITY AS TO WHETHER THE SALES TAX REMAINED UNPAID EVEN AFTER DUE DATE OF FI LING OF RETURN OF INCOME. WE FIND THAT THE TRIBUNAL HAD SET ASIDE THE ISSUE WHILE DEICING THE APPEAL FOR AY 87-88 (SUPRA).FOLLOWING THE SAME, WE DIRECT THE AO TO DECIDE THE ISSUE AFRESH A FTER HEARING THE ASSESSEE. GROUND NO.14 IS PARTLY ALLOWED. 14. NEXT GROUND DEALS WITH DISALLOWANCE FOR PROVISION M ADE FOR LEAVE WAGES CREATED AS PER ACCOUNTING STANDARD-15 ISSUED BY THE INSTITUTE OF C HARTERED ACCOUNTANTS OF INDIA THAT WERE MADE APPLICABLE FOR THE FIRST TIME DURING THE YEAR UNDE R APPEAL. THE AR ARGUED THAT THE ASSESSEE HAD MADE THE PROVISIONS FOLLOWING AS-15, THAT THE PROVI SION WAS FOR ASCERTAINED LIABILITIES.THE DR ADVANCED THE SAME ARGUMENTS THAT WERE ADVANCED WITH REGARD TO PROVISION FOR RETIREMENT PENSION.IN OUR OPINION AFTER JUDGMENT OF BHARAT EAR TH MOVERS LTD. (245/428), THE LAW WITH REGARD TO PROVISION HAS ATTAINED FINALITY. THEREFOR E, IN THE INTEREST OF JUSTICE WE WANT TO SEND BACK THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION. THE ASSESSEE IS DIRECTED TO FURNISH DETAILS TO PROVE THAT THE PROVISIONS WERE NOT FOR CONTINGENT L IABILITY. ACCORDINGLY GROUND NO.15 IS ALLOWED IN FAVOUR OF THE ASSESSEE IN PART. 15. SUBSIDY RECEIVABLE UNDER THE WEST BENGAL INDUSTRIA L PROMOTION SCHEME, 1994 IS THE SUBJECT MATTER OF GROUND NO.16.THE AR STATED THAT SIMILAR I SSUE WAS DECIDED IN CASE OF RASOI CEMENT BY THE TRIBUNAL . THE DR ARGUED THAT IN THE CASE OF RELIANCE INDUSTRIES THE HON'BLE SUPREME COURT HAD SENT BACK THE ISSUE TO THE HON'BLE BOMBA Y HIGH COURT WITH REGARD TO SALES TAX SUBSIDY SCHEME, THAT THE HONBLE APEX COURT HAD DIR ECTED TO EXAMINE THE SCHEME AND TAKE A FINAL DECISION.WE FIND THAT IN THE CASE OF RELIANCE INDUSTRIES SPECIAL BENCH AND THE HON'BLE BOMBAY HIGH COURT HAD HELD THAT SUBSIDY RECEIVED B Y THE ASSESSEE WAS REVENUE RECEIPT, THAT THE HON'BLE SUPREME COURT HAD RESTORED BACK THE ISSUE T O THE HON'BLE BOMBAY HIGH COURT FOR 3857/M/03&3070/M/03(96-97) HLL 12 EXAMINING THE SCHEME. IN THESE CIRCUMSTANCES WE HOL D THAT WITHOUT EXAMINING THE ENTIRE SCHEME THE ISSUE CANNOT BE DECIDED. THEREFORE, WE A RE DIRECTING THE AO TO DECIDE THE ISSUE AFRESH. GROUND NO.16 IS DECIDED IN FAVOUR OF THE AS SESSEE IN PART. 16. LAST GROUND OF APPEAL IS BUSINESS SWAP AGREEMENT F OR TRANSFER OF BULK CHEMICALS AND FERITILIZER DIVISION. DURING THE ASSESSMENT PROCEED INGS THE AO FOUND THAT THE ASSESSEE WAS PROPOSING TO TRANSFER IT BULK CHEMICAL AND FERTILIZ ER TO ITS SISTER CONCERN NAMELY HIND LEVER CHEMICALS LTD.( HLCL), THAT IT WAS PROPOSING TO ACQ UIRE THE DETERGENT BUSINESS FROM HLCL, THAT THE EFFECTIVE DATE OF TRANSFER WAS 1.1.1996, THAT I N DRAWING ITS ACCOUNTS FOR THE YEAR ENDED 1996 THE ASSESSEE HAD EXCLUDED PROFIT FOR THE PERIOD JA NUARY-MARCH 1996, ARISING IN THE BULK CHEMICAL AND FERTILIZER BUSINESS, THAT IN TURN IT HAD INCLUD ED THE PROFIT OF DETERGENT BUSINESS.THE AO HELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE IN THA T REGARD WAS NOT TENABLE, THAT THE FIRST BILATERAL AGREEMENT WAS ENTERED IN 25/11/1996, THAT THE SUPPL EMENTARY AGREEMENT WAS SIGNED ON 31.6.1996, THAT BOTH THE COMPANIES WERE DOING BUSI NESS AS ABSOLUTE OWNERS OF RESPECTIVE UNDERTAKINGS, THAT THE EFFECTIVE CONTROL AND MANAGE MENT INCLUDING THE RIGHTS, TITLE AND INTEREST IN THE POSITION OF ASSETS OF BULK CHEMICALS AND FERTIL IZERS CONTINUED WITH THE ASSESSEE COMPANY UPTO 31.12.1996, THAT THE AGREEMENT ENTERED MONTHS AFTER THE END OF PREVIOUS YEAR COULD NOT CHANGE THE PROFIT RELEVANT TO THE YEAR UNDER CONSI DERATION, THAT THE PROFITS FROM BULK CHEMICALS AND FERTILIZER FOR PERIOD JANUARY-MARCH, 1996 WAS L IABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE, THAT THE PROFIT ARISING OUT OF DETERGENT BUSINESS W AS LIABLE TO BE TAXED IN THE HANDS OF HLCL. 16.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA. BEFORE HIM IT WAS ARGUED THAT TRANSFER WAS W.E.F. 01.01.19 96 THAT THE BUSINESSES WERE VALUED BY INDEPENDENT VALUERS,THAT THE RELEVANT PARTICULARS PROVIDED TO AO SHAREHOLDERS APPROVED THE TRANSFER AT EXTRA ORDINARY GENERAL MEETING HELD ON 08.01.1996, THAT THE ASSESSEE COULD NOT CARRY OUT THE TRANSFER IMMEDIATELY, THAT IT HAD TO OBTAIN CERTAIN APPROVALS FOR TRANSFER OF LEASE HOLD RIGHT TO HLCL, THAT ACCORDINGLY IT WAS DECIDED THAT BOTH THE COMPANIES WOULD CARRYOUT BUSINESS IN TURNS FOR EACH OTHER 16.2. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE A ND THE ASSESSMENT ORDER THE FAA UPHELD THE ORDER OF THE AO STATING THAT THE AGREEMENTS WER E ENTERED MUCH AFTER THE PREVIOUS YEAR. BEFORE US AR REFERRED THE CASE OF CHANDIGARH BENCH OF THE TRIBUNAL (ITA 3857/M/03&3070/M/03(96-97) HLL 13 NO.305/CHAND.2003 A.Y.1996-97 DT.9/5/2006)IN THE CA SE OF HLCL AND STATED THAT THE TRIBUNAL HAD ALREADY DEALT WITH THE ISSUE .WE ARE R EPRODUCING PARA -15 AT PAGE-15 OF THE TRIBUNAL ORDER WHICH READS AS UNDER: 15.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON TH IS ISSUE AND FIND OURSELVES IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE FIRST APPELLATE AUTHORITY.T HE FACT SITUATION NOTED BY US IN THE EARLIER PARAGR APHS IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ADMITTE DLY, THE RESOLUTION AUTHORIZING THE SALE OF UNDERT AKING OF DETERGENT BUSINESS WAS PASSED BY ASSESSEES SHAREHO LDERS BEFORE 31.3.96. THE ACTUAL TRANSFER OF ASSETS OF THE BUSINESS HAS INDEED TAKEN PLACE SUBSEQUENTLY BY WAY OF AGREEMENT DATED 25.11.96. THE RESOLUTION OF THE SHAREHOLDERS OF THE RESPECTIVE COMPANIES AS ALSO TH E AGREEMENT FOR TRANSFER ENVISAGED THE EFFECTIVE DA TE OF TRANSFER AS 1.1.1996.IT IS THIS DATE WHICH IS RELEV ANT TO DECIDE AS TO FROM WHAT TIME THE BUSINESS BEL ONGS TO THE OTHER CONCERN. CLEALRY, THE PROFITS OF DETERGENT BU SINESS W.E.F. 1.1.96 STOOD VESTED IN THE HANDS OF T HE HINDUSTAN LEVER LIMITED AND THEREFORE IT CANNOT BE CONSIDERED FOR TAXATION IN THE HANDS OF THE ASSESSE E COMPANY. THE STAND OF THE REVENUE, ON THE BASIS OF THE DATE OF THE FORMAL AGREEMENT IS MISCONSTRUED I N AS MUCH AS THE SAID AGREEMENT IS ONLY AN INSTRUMENT TO EFFECTUATE THE TRANSFER AS CONTEMPLATED AND APPROV ED IN THE MEETING OF THE SHARE HOLDERS OF THE RESPECTIVE COMPANIES, WHICH WAS PRIOR TO 31.3.96. THEREFORE, T HE CIT(A) HAS CORRECTLY UPHELD THE STAND OF THE ASSESS EE ON THIS COUNT. WE HEREBY AFFIRM THE SAME. THE RE VENUE FAILS ON THIS GROUND. CONSIDERING THE ABOVE, WE DECIDE THE ISSUE IN FAVOU R OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED AND THE APPEAL OF THE AO STANDS DISMIS SED . . ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JUNE, 2017. 02 , 2017 SD/- SD/- ( / RAM LAL NEGI) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02 .06.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.