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

ITA 3858/MUM/2003

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9763 (ITAT-MUMBAI)
• Duration Of Justice: 14 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 26-07-2017
• Assessment Year: 1997-1998
• Appeal Filed On: 19-05-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: JASMIN
• Keywords: Capital asset; Depreciation; Retrospective amendment; Valuation report; Unabsorbed depreciation
• Section: 43B; 143(3); 80HHC

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , BEFORE S/SHRI RAJENDRA,ACCOUNTA NT MEMBER AND SHRI PAWAN SINGH ./ITA NO. 3858/MUM/2003, /ASSESSMENT YEAR: 1997-98 JCIT-SPL. RANGE.31 R.NO.556, AAYAKAR BHAVAN MUMBAI-400020. VS. M/S. HINDUSTAN LEVER LTD. 165/166, BACKBAY RACLAMATION MUMBAI-400 020. PAN/GIR.NO:AAA-CH-100-4N ( /APPELLANT ) ( / RESPONDENT) ./ITA/4048/MUM/2003, /ASSESSMENT YEAR: 1997-98 M/S. HINDUSTAN LEVER LTD. MUMBAI-400 071. VS. JCIT-SPL. RANGE.31 MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI ALOK JOHRI-CIT-DR ASSESSEE BY: SHRI PERCY PARDIWALA AND MS. JASMIN / DATE OF HEARING: 26.07.2017 / DATE OF PRONOUNCEMENT: 28/07/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 07.03.2003,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 P RODUCTS AND CHEMICALS,FILED ITS RETURN OF INCOME ON 01.02.1997,DECLARING TOTAL INCOME OF RS.4 ,09,25,84,550/-.THE AO COMPLETED THE ASSESSMENT ON 29.02.2000, U/S. 143(3) OF THE ACT,DE TERMINING ITS INCOME AT RS.5,32,41,67,290/-. ITA NO.3858/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.(ITA/3857 /MUM/2003,DATED 02.06.2017,AY.1996-97). GOA ISSUE PAGE AND PARA OF TRIBUNAL ORDERS 1 FOREIGN TRAVELLING EXPENSES OF WIVES OF SENIOR MA NAGERS PARA-2,PG-1-2 2 REFRESHMENT TO SHAREHOLDERS AT AGM PARA-2,PG.1-2 3 EXPENSE REIMBURSED TO HINDUSTAN LEVER SPORTS CLUB AND TATA SPORTS PARA-2,PG.1-2 4 DEDUCTION UNDER SECTION 80HH, 80I AND 80IA TO BE ALLOWED SEPARATELY AND SIMULTANEOUSLY PARA-2,PG.1-2 5 EXCLUDING EXCESI DUTY AND SALE TAX FOR 80HHC DEDU CTION PARA-2,PG.1-2 6 DELETING THE PROVISION FOR RETIREMENT PENSION SCH EME PARA-4, PG. 2 2 7 DELETION OF DISALLOWANCE TOWARDS ADMINISTRATION A ND TRAINING EXPENDITURE ON THE RURAL DEVELOPMENT PARA-2,PG.1-2 8 DIRECTION TO CONSIDER RECEIPT AND EXPENSE OF REPR ESENT BUSINESS AND TO EXCLUDE THE COST AND REVENUE OF BULK CHEMICA LS AND FERTILIZER BUSINESS PARA-16- 16.2,PG.12-13 RESPECTFULLY,FOLLOWING THE ORDERS FOR THE EARLIER Y EARS,WE DECIDE ALL THE GROUNDS OF APPEAL AGAINST THE AO. ITA/4048/MUM/2003 3. DURING THE COURSE OF HEARING BEFORE US,THE AR FAIRL Y CONSIDERED THAT GROUNDS DEALING WITH DISALLOWANCE OF TRAVELLING EXPENSES CALCULATED PERS ON-WISE AS AGAINST TRIP-WISE (GOA-1), DISALLOWANCE U/S. 37(4) REGARDING GUEST HOUSE EXPEN SES (GOA-2), SALARY AND WAGES, SUBSCRIPTION FOR BOOKS AND PERIODICALS, EXPENDITURE ON FOOD AND BEVERAGES (F&B)AND TELEPHONE EXPENSES (GOA-2.2, 2.3) WERE DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL,WHILE ADJUDICATING THE APPEAL FOR AY. 1996-97 (SUPRA).RESPECTFULLY FOLLOWING THE SAME, ABOVE GROUNDS STAND DISMISSED. 4. GOA-3 IS ABOUT VARIOUS EXPENDITURES,NAMELY F&B PROV IDED TO EMPLOYEES,EXPENDITURE INCURRED BY RESEARCH SCIENTIST (GOA 3.1), EXPENDITU RE INCURRED ON F & B PROVIDED TO OUTSIDERS AT THE TIME OF STAFF GET TOGETHER AND CONFERENCES(GOA- 3.2)AND EXPENDITURE INCURRED ON F&B PROVIDED TO BUSINESS ASSOCIATES VISITING OFFICE PRE MISES (GOA-3.3). 4.1 THE AUTHORISED REPRESENTATIVE (AR) AND THE DEPARTME NTAL REPRESENTATIVE (DR)AGREEDTHAT GROUND NOS. 3 AND 3.1 WERE DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE PASSING THE ORDER FOR A.Y. 1996-97 AT PARA NO.7 AND 7.1, PGS. 4 & 5,THAT REMAINING TWO GROUNDS(GOA 3.2 AND 3.3)WERE DISMISSED BY THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ORDER OF THE EARLIER YEA R, GOA 3.2 AND 3.3 ARE DECIDED AGAINST THE ASSESSEE. 5. NEXT GROUND OF APPEAL IS ABOUT DEDUCTION U/S. 80-HH AND 80-I OF THE ACT.WE FIND THAT,WHILE DECIDING THE APPEAL FOR THE EARLIER ASSESSMENT YEAR ,THE TRIBUNAL HAD DEALT WITH IDENTICAL ISSUE AS UNDER : 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: 3 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 ASSESSEE S OWN CASE IN ITA NO. 7868/MUM/2010, WHEREIN, THE ISSUE WAS PARTLY ALLOWED 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 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 YEAR 1 992-93. 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 TH E 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 FO R THE EARLIER YEAR.WHILE DECIDING THE ISSUE HE SHOULD ALSO CONSIDER THE CASE RELIED UPON BY THE AR OF THE ASSESSEE, NAMELY MADIDEEP ENGG. & PKG. INDIA (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. RESPECTFULLY FOLLOWING THE ABOVE,WE DIRECT THE A.O. TO DECIDE THE ISSUE AFRESH IN LIGHT OF THE DIRECTIONS ISSUED IN THE EARLIER YEARS.GROUND NO.4 STANDS PARTLY ALLOWED AND GROUND NO. 5 IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE ISSUE,IN GROUND NO.6 IS AS TO WHETHER WITHOUT A DJUSTING BROUGHT FORWARD LOSSES AND DEPRECIATION OF EARLIER AY.S.WHICH WAS ALREADY SET OFF AGAINST THE PROFIT FROM OTHER UNDERTAKING/ 4 ACTIVITIES CAN DEDUCTIONS U/S. 80HH BE ALLOWED.WE F IND THAT IN THE EARLIER AY.,THE TRIBUNAL HAD DEALT WITH SIMILAR ISSUE AS UNDER: CONSIDERING THE FACT THAT THE AR HAD FAIRLY CONCE DED THAT ISSUE OF 80I DEDUCTION STANDS DECIDED AGAINST THE ASSESSEE WE PARTLY DISMISS THE GROUND.AS FAR AS DEDUCTION U/S.80HH IS CONCERNED WE WOULD LIKE TO REPRODUCE THE ORDER OF THE TRIBUNAL FOR 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 DEPRECIATION WHILE ALLOWING DEDUCTION U/S. 80HH AND 80I AT HALDIA UNIT. THE ASSESSING OFFICER ALLOWED THE CLAIM U/S. 80HH AND 80I IN RELATION THE PROFIT OF BUSINESS AFTER SETTING OFF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. IN APPE AL CIT(A) FOLLOWING THE DECISION IN ASSESSMENT YEAR 1988-89, DIRECTED THE ASSESSING OFF ICER TO ALLOW THE CLAIM WITHOUT ADJUSTING BROUGHT 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 TRIBUNAL IN ASSESSMENT YEAR 1988-89 (SUPRA). IN THA T YEAR, THE REVENUE HAD RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF SYNCO INDUSTRIE S 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 DISTINGUISH ED THE SAID CASE ON THE GROUND THAT BROUGHT FORWARD LOSSES/DEPRECIATION OF THE NEW UNIT HAD ALR EADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND NOTHING WAS BROUGHT FORWARD EITHER AS LOSS OR UNABSORBED DEPRECIATION. THEREFORE, THE TRIBUNAL HELD THAT THE DEDUCTION U/S. 80HH HAS TO BE ALLOWED WITHOUT ADJUSTING THE BROUGHT FORWARD LOSSES/DEPRECIATION. HOWEVER, IN RELATION D EDUCTION U/S.80I, THE TRIBUNAL NOTED THAT IN VIEW OF THE SPECIFIC PROVISION OF SEC.80I(6) AS PER WHICH DEDUCTION U/S. 80I HAS TO BE ALLOWED ON STAND ALONE BASIS, TREATING THE UNDERTAKING AS THE ONLY SOURCE OF INCOME. THEREFORE, THE TRIBUNAL DIRECTED THAT BROUGHT FORWARD LOSSES AND UNABSORBED 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 DE CISION OF TRIBUNAL IN ASSESSMENT YEAR 1988-89 (SUPRA), WE CONFIRM THE ORDER OF THE CIT(A) IN RELA TION TO DEDUCTION U/S.80HH AND SET ASIDE THE ORDER IN RELATION TO SEC.80I ON WHICH THE ORDER OF ASSESSING OFFICER IS RESTORED. FOLLOWING THE ABOVE,GROUND NO.7 IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. IN LIGHT OF THE ABOVE, WE DECIDE GROUND NO. 6 IN FA VOUR OF THE ASSESSEE,IN PART. 7. NEXT GROUND OF APPEAL DEALS WITH VARIOUS ASPECTS OF DEDUCTION U/S. 80HHC.WE FIND THAT GOA 6.3,6.4,7,8.1,8.2 AND 9 DEAL WITH CALCULATION OF DE DUCTION U/S.80-HHC OF THE ACT AND/OR REDUCING OR INCREASING CERTAIN ITEMS.WE FIND THAT AT PARA 10 OF THE ORDER FOR THE A.Y. 1996-97 (SUPRA) THE TRIBUNAL HAS DISCUSSED THE ISSUE AS UNDER: 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 5 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. 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 -TIO N 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 SU PPORTED 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 THESE CIRC UMSTANCES, 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 6 THAT THE CLAIM SHOULD BE CONSIDERED BY THE AO WHILE DECIDING 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 N OT BE REDUCED,FROM THE PROFITS AND GAINS OF BUSINESS,AS PER EXPLANATION (BAA) OF SECTION 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 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 UNDER THE CL AUSE, THAT BOTH THE ITEMS COULD NOT BE TREATED AS BEING SIMILAR TO THE ITEMS MENTIONED IN THE CLAU SE OF THE EXPLA -NATION.HE REFERRED TO THE CASES OF GLAXO SMITHKLINE ASIA (P)LTD. (97TTJ108) AND PF IZER 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 7 EXPLANATION (BAA).THE DR CONTENDED THAT ROYALTY AN D MSF SHOULD BE REDUCED WHILE COMPUTING THE PROFITS OF THE BUSINESS, THAT BOTH THE ITEMS WE RE 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. 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 FAOU R OF THE ASSESSEE,IN PART. RESPECTFULLY FOLLOWING THE ABOVE,WE D ECIDE GROUNDS NO.8,9 AND 10 IN FAVOUR OF THE ASS ESSEE. RESPECTFULLY FOLLOWING THE ABOVE,GROUND RELATED WIT H SECTION 80-HHC DEUDUCITON ARE PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE.THE A.O. IS DIREC TED TO FOLLOW THE INSTRUCTIONS OF THE TRIBUNAL OF THE EARLIER YEARS WHILE DECIDING THE APPEAL. 8. NEXT GROUND (GOA-10) IS ABOUT PROVISION OF RETIREME NT PENSION PAYABLE TO EMPLOYEES. WE WOULD LIKE TO REPRODUCE PARA 11 OF AY.1996-97 AND I TS READS AS UNDER: 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 ARGUED TH AT LIABILITY WAS CONTINGENT IN NATURE,THAT THAT THE ASSESSEE HAD NOT PROVIDED ACTUARIAL. WE HA VE CONSIDERED THE AVAILABLE MATERIAL.WE FIND THAT IN THE EARLIER YEAR THE TRIBUNAL 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. 8 ACCORDINGLY,GROUND NO.10 STANDS ALLOWED. 9. SALES TAX COLLECTED,BUT REMAINED UNPAID BY THE DUE DATE OF RETURN AND DISALLOWANCE U/S. 43B OF THE ACT IS THE SUBJECT MATTER OF GOA 11.WE FIND THA T IN PARA 13 OF THE ORDER FOR THE AY.1996-97, THE TRIBUNAL HAS DEALT THE ISSUE AS UNDER: 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 REFERR ED TO THE ORDER OF THE TRIBUNAL FOR THE AY 1987-88 (ITA/1679/MUM/91, DT.8/7/2009).THE DR ARGUE D THAT THERE WAS NO CLARITY AS TO WHETHER THE SALES TAX REMAINED UNPAID EVEN AFTER DUE DATE O F FILING 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. FOLLOWING THE SAME,WE ALLOW GROUND NO.11 IN FAVOUR OF THE ASSESSEE,IN PART. 10. GROUND NO.12 IS ABOUT DISALLOWING PROVISION MADE FO R LEAVE WAGES CREATED AS PER AS-15.WE FIND THAT WHILE DECIDING THE APPEAL FOR AY.1996-97 (SUPRA),THE TRIBUNAL AT PARA 14 OF PAGE 11, HAD REMANDED BACK THE IDENTICAL ISSUE TO THE FILE O F THE AO FOR FRESH ADJUDICATION.THE AO IS DIRECTED TO DECIDE THE ISSUE AFTER GIVING REASONABL E OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO. 12 IS ALLOWED IN FAVOUR OF THE ASSESSEE, IN PART. 11. NEXT GROUND OF APPEAL IS ABOUT SUBSIDY RECEIVED UND ER THE WEST BENGAL INDUSTRIAL PROMOTION SCHEME,1994.THE TRIBUNAL HAD,WHILE DECIDING THE EAR LIER YEARS APPEAL,REMANDED THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRE SH AFTER EXAMINING THE SCHEME.THE AO IS DIRECTED TO FOLLOW THE INSTRUCTIONS GIVEN BY THE TR IBUNAL FOR A.Y.1996-97.GOA 13 STANDS PARTLY ALLOWED. 12. LAST GROUND OF APPEALS (G.S.OA 14 TO 18)ARE ABOUT T RANSFER OF BULK CHEMICAL AND FERTILIZER BUSINESS AS A GOING CONCERN FOR A LUMP SUM CONSIDER ATION.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD SOLD ITS ENTIRE BUSINESS UNDERTAKING OF MANUFACTURING AND SALE OF BULK CHEMICALS AND FERTILIZERS TO ITS SUBSIDIARY COMPANY NAMELY HIND LIVER CHEMICALS LTD. (HLCL)FOR A LUMPSUM CONSIDERAITON OF RS.143 CRORES AS GOING CONCERN ALONG WITH ALL TANGIBLE AND INTANGIBLE ASSETS INCLUDING THE MANUFACTURING F ACILITIES LOCATED AT HALDIA(WEST BENGAL),THAT THE CONSIDERATION WAS BASED ON THE VALUATION REPORT PREPARED BY TWO FIRMS OF CHARTERED ACCOUNTANTS AND WAS APPROVED BY THE SHAREHOLDERS OF THE COMPANY BY ITS EXTRA ORDINARY GENERAL MEETING,THAT THE EFFECTIVE DATE OF TRANSFER OF BUSI NESS WAS 01.01.1996,THAT THE LEGAL FORMALITIES AND CONVEYANCE OF IMMOVABLE PROPERTY HAD BEEN COMPL ETED DURING THE PREVIOUS YEAR,THAT SALE WAS OF A CAPITAL ASSET,THAT THE CAPITAL GAINS/LOSS ON TRANSFER OF THE UNDERTAKING WOULD HAVE TO BE 9 DETERMINE U/S. 45 R.W.S 48 OF THE ACT, THAT THE UND ERTAKING COMPRISED OF LAND AND OTHER STRUCTURES, FIXTURES FITTINGS, P & M,THAT IT ALSO INCLUDED TRAN SFER OF LICENSES, REGISTRATIONS, CURRENT ASSETS AND LIABILITIES, TRADE MARK,BRAND NAME,COPY RIGHT, MANP OWER,THAT THE PURCHASER HAD ASSIGNED VALUE TO ALL THE ASSETS BOUGHT BY IT FROM THE ASSESSEE.THE A O FURTHER OBSERVED ORIGINAL AGREEMENT FOR SALE OF AGREEMENT WAS ENTERED INTO ON 25.11.1996, THAT T HE SUPPLEMENTARY AGREEMENTS WERE ENTERED IN THE MONTH OF DECEMBER,1996, THAT BOTH THE COMPANIES WERE DOING BUSINESS TILL 31.12.1996 AS ABSOLUTE OWNERS OF THE UNDERTAKING,THAT THE SALE MA DE BY THE ASSESSEE COULD NOT BE TERMED SLUMP SALE,AS THE VALUATION OF EACH BLOCK OF ASSET WAS AV AILABLE BEFORE EXECUTING THE SALE AGREEMENT, THAT IT WAS NOT A CASE OF SALE OF GOING CONCERN.COM PUTING THE LONG TERM CAPITAL GAIN (LTCG) IN RESPECT OF LAND AND GOODWILL, THE A.O. CALCULATED L TCG AS UNDER: I) LONG TERM CAPITAL GAIN IN RESPECT OF LAND : SALE PRICE OF THE LAND RS.67.71 LACS LESS: INDEXED COST OF LAND RS.1.42 LACS X 305 L.T.C.G. RS. 4.33 LACS 100 RS.63.38 LACS ========== (REDUCTION IN LAND IN FIXED ASSETS SCHEDULE IS SHOWN AT RS.1,42 LACS) II) LONG TERM CAPITAL GAIN ON SALE OF GOODWILL: SALE PRICE (AS DISCUSSED IN PARA 4.2) RS.3417.73 LACS LESS: COST RS. NIL -------------------- L.T.C.G. RS.3147.73 LACS ============ 12.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA AND MADE SUBMISSIONS BEFORE HIM. AFTER CONSIDERING THE AVAILABLE MATERIAL, HE HELD THAT SISTER CONCERN OF THE ASSESSEE HAD VALUED THE ASSETS, THAT IT WAS NOT A SLUMP-SALE, THAT IT WAS AN ITEMIZED SALE. HE REFERRED TO THE CASES OF ARTEX MFG. CO.(22 7 ITR 260).HE ALSO HELD THAT ALLOCATION OF VALUE AS BETWEEN THE ASSETS IN THE HANDS OF THE PUR CHASER WAS AVAILABLE, THAT THE METHOD OF COMPUTATION OF LTCG IN RESPECT OF SALE OF LAND AND GOODWILL AND THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS WERE RIGHTLY ADOPTED BY THE AO.FINA LLY,HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 10 12.2 .BEFORE US,THE AR ARGUED THAT THE AGREEMENTS TO SEL L THE BUSINESS COULD NOT TAKE PLACE IN TIME,THAT THE PORT TRUST AUTHORITIES HAS NOT TRANSF ERRED THE LEASED PLOT OF LAND,THAT IT WAS NOT A CASE OF ITEMISED SALE,THAT IN SLUMP SALE THE ASSESS EE HAD ADOPTED PRICE EARNING METHOD FOR DETERMINING THE TOTAL VALUE OF THE BUSINESS.HE REFE RRED TO PAGE NO. 204 AND 206 OF THE PAPER BOOK.HE FURTHER ARGUED THAT VALUE ADOPTED BY THE PU RCHASER OF THE UNDERTAKING WOULD HAVE NO BEARING ON TAXABILITY OF THE TRANSACTION,THAT DURIN G THE YEAR UNDER CONSIDERATION NO TAX WAS PAYABLE ON SLUMP SALE.HE REFERRED TO THE CASES OF C ORAMANDAL FERTILIZERS LTD.(90 ITD 344), NOVARTIS INDIA LTD.(64 SOT 182),ELECTRIC CONTROL GE AR MFG. CO.(227 ITR 278),ARTEX MFG. CO. (SUPRA),PNB FINANCE LTD.(307 ITR 75),M/S. LARSON AN D TUBRO (ITA/4442/MUM/2010,AY 1998- 99,DATED 27.07.2016)AND AEGIS LOGISTICS LTD.(ITA/78 25 7 OTHERES/MUM/2004-AY.1999-2000, DATED 10.03.2017). THE DR STATED THAT IT WAS THE CASE SWAPPING OF BUSI NESSES, THAT THE EFFECTIVE DATE FOR TRANSFER WAS 01.01.1996,THAT THE AGREEMENTS WERE ENTERED INTO BY THE PARTIES LATER ON, THAT THE SUBSIDIARY AND THE ASSESSEE HAD ENTERED INTO A SWAP SALE,THAT THE ENTIRE TRANSACTION HAD TO BE TAKEN AS ONE,THAT THE VALUATION REPORT WAS NOT AVAILABLE TO THE AO,TH AT HLCLHAD VALUED THE ASSETS, THAT SAME VALUE HAD TO BE CONSIDERED FOR CALCULATING THE CAPITAL GA INS,THAT THE CASES RELIED UPON BY THE ASSESSEE WERE NOT APPLICABLE TO THE FACTS OF THE CASE. 12.3 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL. WE FIND THAT THE ASSESSEE HAD SOLD ITS PHOSPHATE BUSINESS,THAT IT HAD OBTAINED A VALUATION REPORT FROM THE REGISTERED VALUER, THAT AS PER VALUATION REPORT,DATED 26.10.1995,VALUATION WAS MADE AT AROUND RS.143 CRORES (INCLUDING RS.15 CRORES REPRESENTING THE VALUE OF NET CURRENT ASSETS AS AT DECEMBER 31, 1994 WHICH VALUES WILL NEED TO BE SUITABLY ADJUSTED TO REFLECT THEIR ACTUAL VALUES TO BE DETERMINED AS OF THE DATE OF TRANSFER/SALE)AS PER PAGE 204 OF THE PB.THE VALUER HAD SPECIFICALLY MENTIONED THAT THE VALUATION WAS DONE ON THE ASSUMPTION THAT BUSINESS WAS TO BE VALUED AS A GOING CONCERN AND THAT THE VALUATION ARRIVED BY THEM WAS ON A YIELD BASIS(PAGE 206 OF THE PB).WE FIND THAT THE AO HAD CALLED FOR EXPLANATION ABOUT SLUMP SALE FROM THE AS SESSEE AND VIDE ITS LETTER,DATED 29.02.2000,THE ASSESSEE HAD SUBMITTED THE VALUATION REPORT AND ANN EXURES TO THE VALUATION REPORT BEFORE THE AO. THEREFORE,THE ARGUMENT OF THE DR THAT VALUATION REP ORT WAS NOT SUBMITTED BY THE ASSESSEE CANNOT BE ACCEPTED. 11 12.4.THE ASSESSEE HAD TRANSFERRED ITS TANGIBLE AND INTANGIBLE ASSETS TO HLCL,AS PER THE VALUATION REPORT OF THE REGISTERED VALUER.SO,THE BASIS ADOPTE D BY THE PURCHASER,TO ASSIGN VALUE TO INDIVIDUAL ASSET IN ITS BOOKS OF ACCOUNT,WAS NOT RELEVANT FOR THE PURPOSE OF DETERMINING THE CAPITAL GAINS, IN CASE OF THE ASSESSEE.WE FIND THAT IN THE CASE OF LA RSON AND TUBRO LTD. (SUPRA) THE TRIBUNAL HAS HELD AS UNDER: 4.7.WE FIND THAT ONE OF THE REASONS, GIVEN BY THE FAA, FOR NOT CONSIDERING THE TRANSACTION AS SLUMP SALE WAS THAT THE PURCHASER HAD ASSIGNED COST TO THE ASSETS ACQUIRED BY IT. IT IS A COINCIDENCE THAT THE AO FOR THE ASSESSEE HAPPENED T O BE THE AO FOR THE JV ALSO AND FROM THE RETURN OF INCOME OF THE JV HE FOUND THAT THE PURCHA SER HAD SHOWN EXACT COST OF EACH OF THE ASSETS. IN OUR OPINION, IT CANNOT BE THE DECIDING F ACTOR. A PURCHASER OF A GOING CONCERN HAS TO ASSIGN COST TO THE ASSETS RECEIVED BY IT. ACCOUNTIN G STANDARD MANDATES THAT THE ENTITY ACQUIRING A GOING CONCERN HAS TO GET ITS ASSETS VALUED. BUT, VALUATION REPORT OBTAINED BY THE PURCHASER DO NOT PROVE THAT ALL THAT THE ASSETS HAD THE SAME VAL UE FOR THE SELLER. ONCE AN ASSESSEE SELLS THE LOCK STOCK AND BARREL OF A UNIT FOR THAT ASSESSEE I NDIVIDUAL ITEMS LOOSE EXISTENCE. IN THE CASE BEFORE US, THERE IS NOTHING ON RECORD TO SHOW THAT THE VALUE SHOWN BY THE JV WAS HE ITEMIZED VALUE OF THE ASSETS OWNED BY THE ASSESSEE. CONSIDER ING THE ABOVE DISCUSSION, WE HOLD THAT THE SALE OF EARTH MOVING MANUFACTURING UNIT WAS A SLUMP SALE. HERE, WE WANT TO MAKE IT CLEAR THAT THE ASSESSEE WOULD NOT BE ENTITLED TO CLAIM LOSS FO R THE TRANSACTION IN QUESTION. FINALLY, REVERSING THE ORDER OF THE FAA, WE DECIDE GROUND NO . 3 IN FAVOUR OF THE ASSESSEE, IN PART. IT IS FOUND THAT IN THE CASE OF NOVARTIS INDIA LTD. (SUPRA)THAT TRIBUNAL HAS DEALT WITH SIMILAR ISSUE. IN THAT MATTER THE ASSESSEE HAD SOLD ITS ORAL HYGIE NE BUSINESS AND HAD CLAIMED THAT IT WAS A CASE OF SLUMP SALE.IT WAS ALSO ARGUED THAT CAPITAL GAIN ARISING FROM THE SAID TRANSACTION WAS NOT LIABLE TO TAX.THE AO AND THE FAA REJECTED THE CLAIM MADE B Y IT.THE TRIBUNAL,AFTER CONSIDERING RIVAL SUBMISSIONS,HELD THAT THE ASSESSEE HAD TRANSFERRED ALL THE INTANGIBLE ASSETS ALONGWITH THE IMMOVA -BLES,THAT THE SALE CONSIDERATION WAS NOT ITEMIZED. FINALLY,IT HELD THAT TRANSACTION OF THE SALE OF ORAL HYGIENE BUSINESS WAS SLUMP SALE,THAT THERE COU LD NOT BE ANY CAPITAL GAIN TAX LIABILITY IN THE YEAR UNDER CONSIDERATION, I.E. AY.1995-06.IN THE CA SE BEFORE US,THERE IS NO EVIDENCE THAT THERE WAS ITEMIZED SALE,SO,IN OUR OPINION IT IS A PURE AN D SIMPLE CASE OF SLUMP SALE. WE WOULD LIKE TO REFER TO THE CASE OF CORAMANDAL FE RTILIZERS LTD. (SUPRA).IN THAT MATTER THE ASSESSEE HAD SOLD ITS CEMENT UNIT TO INDIA CEMENT L TD. FOR A CONSIDERATION OF RS.105.69 CRORES. DECIDING THE MATTER,THE TRIBUNAL HELD THAT FOR COMP UTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS THREE CONDITIONS HAD TO BE FULFILLED NAMELY, THE TRANSFERRED ASSETS SHOULD FORM PART OF A BLOCK,THAT DEPRECIATION HAD TO BE ALLOWED UNDER THE ACT AND FINALLY FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER OF SUCH ASSETS HAD TO BE ASCER TAINED.IT WAS FURTHER OBSERVED THAT IN A SLUMP SALE NONE OF THESE CONDITIONS WERE ATTRACTED,THAT I N SLUMP SALE NOT ONLY DEPRECIABLE ASSET ALONE IS 12 TRANSFERRED BUT ENTIRE UNDERTAKING AS ONE ASSET IS TRANSFERRED.IN THE PRESENT CASE BUSINESS AS A WHOLE WAS TRANSFERRED TO HLCL AND BUSINESS AS A UNI T INCLUDED ALL THE ASSETS AND NOT INDIVIDUAL ASSETS. NOW,WE WOULD DISCUSS THE CASE OF ARTEX MFG. CO. (SU PRA),RELIED UPON BY THE FAA.IN THAT MATTER IT WAS FOUND THAT PLANT, MACHINERY AND STOCK WAS VA LUED AT THE TIME OF AGREEMENT FOR SALE. CLEARLY,THE FACTS OF THE PRESENT CASE ARE DIFFERENT FROM THE FACT OF ARTEX.HERE,AS STATED EARLIER,ON MORE THAN ONE OCCASIONS,NO VALUATION OF ASSETS WAS MADE AND THE UNIT AS A WHOLE WAS SOLD. FROM THE ABOVE,IT IS CLEAR THAT IF ITEMIZED SALE IS NOT AFFECTED AND THE UNIT OR BUSINESS IS TRANSFERRED AS A WHOLE IT WOULD CONSTITUTE A SLUMP SALE.THE CONCEPT OF SLUMP SALE IS TO SELL THE UNIT/BUSINESS AS IS WHERE IS BASIS.IN SUCH TRANSACT IONS THE ASSESSEE DETERMINES A LUMP SUM VALUE FOR THE ENTIRE UNIT/BUSINESS AND THE PURCHASER PURC HASES THE UNIT NOT THE INDIVIDUAL ITEMS.AS PER THE MANDATE OF THE ACCOUNTING STANDARDS THE PURCHAS E HAVE TO ASSIGN VALUE TO THE INDIVIDUAL ASSETS TO CLAIM DEPRECIATION FOR VARIOUS BLOCK OF A SSETS.WITHOUT ASSIGNING THE VALUE IT WOULD NOT BE POSSIBLE FOR THE PURCHASER TO CLAIM DEPRECIATION .BUT,IT WOULD NOT MEAN THAT THE SELLER HAD NOT SOLD THE BUSINESS AS SLUMP SALE.IN THE CASE UNDER C ONSIDERATION THE ASSESSEE HAD TRANSFERRED THE UNIT/BUSINESS TO HLCL ON LUMP SUM BASIS.WE ARE DEAL ING THE ISSUE FOR AY 1997-98. IN THAT YEAR, AS PER JUDGMENT OF PNB FINANCE (SUPRA) CAPITAL GAIN S TAX WAS NOT LEVIABLE FOR SUCH TRANSACTION. THEREFORE,REVERSING THE ORDER OF THE FAA,WE DECIDE LAST EFFECTIVE GROUND OF APPEAL (GROUND OF APPEAL NO. 14-18) IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEAL FILED BY THE AO IS DISMISSE D AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH ,JULY, 2017. 28, , 2017 SD/- SD/- ( / PAWAN SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :28.07.2017 ROSHANI, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// 13 / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.