JCIT SP RG 1, MUMBAI V. THE INDIAN HOTELS CO. LTD, MUMBAI

ITA 3871/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9339 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 09-10-2012
• Assessment Year: 1994-1995
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Keywords: Depreciation; Retrospective amendment; Wholly owned subsidiary
• Section: 143(3); 244A; 80HHC; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER.. SR. NO. I.T.A. NO. ASSTT. YEAR. 1. 3871/MUM/2010 1994-95 2. 2273/MUM/2009 1998-99 3. 393/MUM/2010 1999-2000 4. 1115/MUM/2010 2000-01 5. 3872/MUM/2010 2001-02 6. 5965/MUM/2010 2002-03. DCIT, CIRCLE-2(2)/ M/S THE INDIAN HOTEL COMPANY LTD. JCIT,SPL RANGE-1, VS. MANDLIK HOUSE, MANDLIK ROAD, MUMBAI. COLABA, MUMB AI 400 005. PAN AAACT 3957G APPELLANT. RESPONDENT. 7. 3620/MUM/2010 1994-95 THE INDIAN HOTELS COMPANY LTD., THE JCIT, MUMBAI. VS. SPL. RANGE-1, MUMBAI. APPELLANT. RESPONDENT. SR.NO. CO NO. ARISING OUT OF ASSTT. YEAR. ITA NO. 8. 203/MUM/ 2009 2273/MUM/2009 1998-99 9. 148/MUM/ 2010 393/MUM/2010 1999-2000 10. 168/MUM/2 010 1115/MUM/2010 2000-01 11. 54/MUM/ 2010 3872/MUM/2010 2001-02 12. 131/MUM/ 2011 5965/MUM/2010 2002-03 M/S THE INDIAN HOTELS COMPANY LTD., THE DCIT/ACIT, MUMBAI. VS. CIRCLE-2(2), MUMBAI. CROSS OBJECTOR. RESPONDENT. 2 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 DEPARTMENT BY : SHRI P.K. SHU KLA. ASSESSE E BY : SHRI SUNIL M. LALA, SHRI SANDEEP BHALLA, SHRI ABHISHEK MUNDADA. DATE OF HEARING : 09-10-2012 DATE OF PRONOUNCEMENT : -11-2012. O R D E R PER BENCH OUT OF THESE SEVEN APPEALS AND FIVE CROSS OBJECTIO NS FILED IN THIS CASE, TWO APPEALS BEING ITA NO. 3871/MUM/2010 AND ITA NO.3620 /MUM/2010 ARE CROSS APPEALS FOR ASSESSMENT YEAR 1994-95 WHILE THE REMAI NING FIVE APPEALS ARE THE APPEALS OF THE REVENUE FILED FOR ASSESSMENT YEARS 1 998-99 TO 2002-03 AGAINST WHICH THE ASSESSEE HAS FILED ITS CROSS OBJECTIONS. SINCE THE ISSUES INVOLVED THEREIN ARE COMMON, THE SAME HAVE BEEN HEARD TOGETHER AND A RE BEING DISPOSED OF BY THIS SINGLE COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON ISSUE INVOLVED IN THE APPEALS O F THE REVENUE FOR ALL THE SIX YEARS UNDER CONSIDERATION RELATING TO THE DELETION BY THE LEARNED CIT(APPEALS) OF THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PROPO RTIONATE INTEREST ATTRIBUTABLE TO THE ADVANCES GIVEN BY THE ASSESSEE TO ITS SUBSID IARY/GROUP COMPANIES AT CONCESSIONAL INTEREST RATE OR INTEREST FREE IS RAIS ED IN THE FOLLOWING GROUNDS : ASSESSMENT YEAR GROUND NO. 1994-95 1 1998-99 1 1999-2000 2 2000-01 1 2001-02 2 3 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 2002-03 2 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T THE SIMILAR DISALLOWANCE ON ACCOUNT OF INTEREST ATTRIBUTABLE TO THE ADVANCES GI VEN BY THE ASSESSEE TO ITS SUBSIDIARY COMPANY WAS MADE IN THE CASE OF THE ASSE SSEE FOR THE EARLIER YEARS. IN ASSESSMENT YEAR 1989-90, THIS ISSUE WAS REFERRED TO A THIRD MEMBER AND VIDE THE THIRD MEMBER DECISION REPORTED AS DCIT VS. INDIAN H OTEL CO. LTD. IN 92 ITD 97 (MUM) (TM), THE SAME WAS DECIDED IN FAVOUR OF THE A SSESSEE BY A MAJORITY VIEW HOLDING THAT THE RELEVANT ADVANCES HAVING BEEN MADE BY THE ASSESSEE TO ITS SUBSIDIARY COMPANY WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF ITS BUSINESS, THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO THE SAID A DVANCE WAS NOT JUSTIFIED. FOLLOWING THE SAID THIRD MEMBER DECISION FOR ASSESS MENT YEAR 1989-90, THE TRIBUNAL HAS CONSISTENTLY DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE SUBSEQUENT YEARS UPTO ASSESSMENT YEAR 1997-98. AS T HE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FAC TS RELEVANT THERETO ARE SIMILAR TO THAT OF THE EARLIER YEARS, WE RESPECTFULLY FOLLOW T HE DECISION RENDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEA RS AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) DELETING THE DISA LLOWANCE MADE BY THE AO ON THIS ISSUE. THE RELEVANT GROUNDS OF THE REVENUES A PPEAL FOR ALL THE SIX YEARS UNDER CONSIDERATION ARE ACCORDINGLY DISMISSED. 4. THE NEXT COMMON ISSUE INVOLVED IN ALL THE SIX YE ARS UNDER CONSIDERATION RELATING TO DELETION BY THE LEARNED CIT(APPEALS) OF THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST ON SHARE APPLICATION MONE Y IS RAISED IN THE FOLLOWING GROUNDS : 4 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 ASSESSMENT YEAR GROUND NO. 1994-95 6 1998-99 2 1999-2000 3 2000-01 2 2001-02 3 2002-03 3 5. THE AMOUNT PAID BY THE ASSESSEE ON ACCOUNT OF SH ARE APPLICATION MONEY TO SEVERAL COMPANIES WAS HELD BY THE AO AS DIVERSION O F BORROWED FUNDS AND INTEREST ATTRIBUTABLE TO THE AMOUNT SO DIVERTED WAS DISALLOW ED BY HIM AFTER REJECTING THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE SHARE AP PLICATION MONEY WAS PAID BY IT OUT OF NON-INTEREST BEARING FUNDS. THE LEARNED CIT( APPEALS), HOWEVER, ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE EN TIRE SHARE APPLICATION MONEY HAVING BEEN PAID BY THE ASSESSEE COMPANY OUT OF INT EREST FREE FUNDS AVAILABLE AT THE RELEVANT TIME, THE DISALLOWANCE OF INTEREST AS MADE BY THE AO WAS NOT JUSTIFIED. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR THE EARLIER YEARS. IN ASSESSMENT YEAR 1995-96, IT WAS HELD BY THE TRIB UNAL VIDE ITS ORDER DATE 12 TH SEPT., 2006 PASSED IN ITA NO. 2527 AND 3264/MUM/200 2 THAT THERE BEING NO DIVERSION OF INTEREST BEARING FUNDS FOR NON BUSINES S PURPOSE AS ALLEGED BY THE AO, THERE WAS NO JUSTIFICATION IN MAKING ANY DISALLOWAN CE ON ACCOUNT OF INTEREST PAID ON THE BORROWED FUNDS .IT WAS ALSO NOTED BY THE TRI BUNAL THAT THE SHARE APPLICATION MONEY WAS FINALLY REFUNDED TO THE ASSESSEE WITH INT EREST AT THE RATE OF 19% AND THE INTEREST SO RECEIVED WAS DULY OFFERED TO TAX BY THE ASSESSEE IN THE RELEVANT YEAR. A 5 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE IMMEDIATELY SUCCEEDING YEAR I.E. ASSESSMENT YEARS 1996-97 AND 1997-98. AS THE ISSUE INVOLVED IN THE YEARS UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS REL EVANT THERETO ARE SIMILAR TO ASSESSMENT YEARS 1995-96 TO 1997-98, WE RESPECTFULL Y FOLLOW THE ORDER OF THE TRIBUNAL FOR THE SAID YEARS AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. THE RELEVANT GROUNDS OF THE REVENUES APPEALS ARE ACCORDINGLY DISMISSED. 7. THE NEXT COMMON ISSUE INVOLVED IN THE FIVE YEARS UNDER CONSIDERATION I.E. ASSESSMENT YEARS 1998-99 TO 2002-03 RELATING TO DEL ETION BY THE LEARNED CIT(APPEALS) OF THE ADDITION MADE BY THE AO ON ACCO UNT OF NOTIONAL GAIN ON CONVERSION OF FOREIGN EXCHANGE DEPOSIT PLACED BY TH E ASSESSEE WITH ITS WHOLLY OWNED SUBSIDIARY COMPANY IS RAISED IN THE FOLLOWING GROUNDS : ASSESSMENT YEAR GROUND NO. 1998-99 3 1999-2000 4 2000-01 5 2001-02 7 2002-03 5 8. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS ISSUE ARE AS FOLLOWS : THE ASSESSEE COMPANY HAD SET UP A WHOLLY OWNED SUB SIDIARY COMPANY, NAMELY, TAJ INTERNATIONAL, HONGKONG LTD. (TIHK IN S HORT) TO ACQUIRE HOTEL PROPERTIES OUTSIDE INDIA AND/OR TO INVEST IN THE SH ARE CAPITAL OF HOTEL OWNING COMPANIES OUTSIDE INDIA. THE PURPOSE OF SETTING UP THE SAID COMPANY THUS WAS TO EXPAND ITS BUSINESS OPERATIONS OUTSIDE INDIA. THE I NVESTMENT INTENDED TO BE MADE BY THE ASSESSEE COMPANY IN TIHK WAS TO THE TUNE OF USD 95 MILLION WHICH WAS IN 6 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 THE FORM OF EQUITY INVESTMENT OF USD 25 MILLION AND SHAREHOLDERS DEPOSIT OF USD 70 MILLION. THE FUNDING FOR THE SAID INVESTMENT WAS DONE BY THE ASSESSEE COMPANY MAINLY BY WAY OF ISSUE OF GDRS AND A BRIDGE LOAN OF USD 40.78 MILLION WAS ALSO TAKEN IN THE MEANTIME. IN THE APPLICATION MADE TO T HE RESERVE BANK OF INDIA FOR THE NECESSARY APPROVAL, IT WAS STATED BY THE ASSESSEE T HAT THE SHAREHOLDERS DEPOSIT WOULD NOT BEAR ANY INTEREST AND IT WOULD BE IN THE NATURE OF ADDITIONAL SHAREHOLDERS FUNDS. IT WAS ALSO STATED THAT THE AS SESSEE COMPANY WILL HAVE THE RIGHT TO CONVERT PART OR WHOLE OF THE SAID DEPOSIT INTO FURTHER EQUITY OF TIHK ANY TIME OVER A PERIOD OF 10 YEARS AND ANY PORTION OF T HE DEPOSIT NOT SO CONVERTED INTO EQUITY WILL BE REPATRIATED BACK TO INDIA ONLY AFTER THE PERIOD OF 10 YEARS. IN THE LIGHT OF THESE FACTS, IT WAS CLAIMED BY THE ASSESSE E THAT THE SHAREHOLDERS DEPOSIT WITH TIHK IS LONG TERM INVESTMENT AKIN TO EQUITY AN D THE SAME WAS LIABLE TO BE RECOGNIZED AT THE EXCHANGE RATE PREVAILING ON THE T RANSACTION DATE. THIS CLAIM OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO ON THE FOLLOWING GROUNDS : A) AS-11 REQUIRES MONETARY ITEMS TO BE REPORTED AT THE CLOSING RATE. THE ASSESSEE FOLLOWS THIS ACCOUNTING STANDARD AND HAS, THEREFORE, DEFAULTED IN NOT TRANSLATING THE DEPOSIT MADE TO TIHK AT THE CLOSING EXCHANGE RATE. B) THE AUDITORS HAVE ALSO QUALIFIED ON THE ABOVE DEPAR TURE FROM THE ACCOUNTING POLICY. C) IN A.Y. 1996-97 THE ASSESSEE HAS SUO-MOTO BOOKED EX CHANGE GAIN ON REPATRIATION OF A PART OF THE SHAREHOLDERS DEPOSIT . FOR THE REASONS GIVEN ABOVE, THE AO CONVERTED THE A MOUNT OF SHAREHOLDERS DEPOSIT OUTSTANDING AS ON THE LAST DATES OF THE RELEVANT PR EVIOUS YEARS AT THE EXCHANGE RATE PREVAILING ON SUCH LAST DATES AND BROUGHT TO TAX TH E RESULTANT GAIN ARISING FROM FLUCTUATION IN FOREIGN EXCHANGE RATE IN THE HANDS O F THE ASSESSEE BEING INCOME ON REVENUE ACCOUNT. 7 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 9. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(AP PEALS) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE HIM THAT AS-11 WAS WRONGLY APPLIED BY THE AO IN ITS CASE. IT WAS POINTED OUT THAT AS PER AS-11, ONLY MONETARY ITEMS WERE LIABLE TO BE REPORTED USING THE FOREIGN EXCHANGE RA TE ON THE LAST DATE OF THE PREVIOUS YEAR WHILE NON-MONETARY ITEMS WERE REQUIRED TO BE R EPORTED USING ONLY THE EXCHANGE RATE AS PREVAILING ON THE DATE OF RELEVANT TRANSACTION. IT WAS CONTENDED THAT AS PER THE CLASSIFICATION MADE IN AS-11, NON-M ONETARY ITEMS INCLUDED INVESTMENT IN EQUITY SHARES AND SINCE THE SHAREHOLD ERS DEPOSIT PLACED BY THE ASSESSEE COMPANY WITH TIHK WAS AKIN TO INVESTMENT I N EQUITY SHARES AND IT WAS IN THE NATURE OF INVESTMENT BLOCKED FOR A VERY LONG PE RIOD OF 10 YEARS, THE SAME WAS RIGHTLY REPORTED/RECOGNIZED AT THE EXCHANGE RATE PR EVAILING ON THE TRANSACTION DATE. AS REGARDS THE COMMENTS BY THE AUDITORS IN THEIR RE PORT, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE COMPANY THAT THE SAME WAS NOT IN TH E NATURE OF ANY QUALIFICATORY REMARK BUT IT WAS IN THE NATURE OF ONLY A CLARIFICA TORY REMARK MADE BY THE AUDITORS. AS REGARDS THE EXCHANGE GAIN DECLARED BY THE ASSESS EE IN ASSESSMENT YEAR 1996-97, IT WAS SUBMITTED THAT IT WAS RELATED TO REPATRIATIO N OF PORTION OF SHAREHOLDERS DEPOSIT WHICH WAS RECOGNIZED AS PER AS-11. FINALLY IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE COMPANY THAT ANY ITEM TO CON VERT THE CLOSING BALANCE OF SHAREHOLDERS DEPOSIT AT THE RATE PREVAILING ON THE LAST DATE OF THE PREVIOUS YEAR WOULD AMOUNT TO RECOGNIZING INCOME OF THE CONTINGEN T NATURE WHICH IS NOT PERMISSIBLE EVEN AS PER AS-11. IN SUPPORT OF THE CO NTENTIONS RAISED ON THIS ISSUE, RELIANCE WAS PLACED ON BEHALF OF THE ASSESSEE, INTE R ALIA, ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SATLEJ COTTON MILLS LT D. VS. CIT 116 ITR 1 AS WELL AS ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HOMI MEHTA AND SONS VS. CIT 222 ITR 528 AND CIT VS. SANDOZ INDIA L TD. 206 ITR 599. 8 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 10. THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSE E BEFORE HIM ON THIS ISSUE WERE FOUND ACCEPTABLE BY THE LEARNED CIT(APPEALS) FOR THE FOLLOWING REASONS AS SUMMARIZED BY HIM IN PARAGRAPH NO. 4.27 OF HIS IMPU GNED ORDER : A) THE SHAREHOLDERS DEPOSIT OF USD 33.784M WITH TI HK IS ON CAPITAL ACCOUNT AND IS MORE IN THE NATURE OF INVESTMENT IN SHARES OF OVERSEAS VENTURES; B) IT IS IN THE NATURE OF NON-MONETARY ASSET AND GA INS THEREON ARE TAXABLE, IF AT ALL, ONLY IN THE YEAR OF REALIZATION. C) NO GAIN HAS ARISEN DURING THIS YEAR EVEN UNDER T HE MERCANTILE SYSTEM OF ACCOUNTING EVEN AS PER AS-11 AND D) AS PER SETTLED JUDICIAL PRONOUNCEMENTS, SUCH GAI NS ARE ON CAPITAL ACCOUNT NOT TAXABLE AT ALL. FOR THE REASONS GIVEN ABOVE AS WELL AS RELYING ON T HE DECISIONS OF HONBLE SUPREME COURT AND HONBLE BOMBAY HIGH COURT CITED O N BEHALF OF THE ASSESSEE COMPANY, THE LEARNED CIT(APPEALS) HELD THAT THERE W AS NO GAIN THAT HAD ARISEN TO THE ASSESSEE DURING THE YEARS UNDER CONSIDERATION E VEN AS PER AS-11 AND THE ADDITIONS MADE BY THE AO ON THIS ISSUE FOR ALL THE FIVE YEARS UNDER CONSIDERATION WERE NOT SUSTAINABLE. ACCORDINGLY, HE DELETED THE S AID ADDITIONS. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS STRONGLY RELIED ON THE ORDER OF THE LEARNED CIT(APPEALS) IN SUPPORT OF THE ASSESSEES CASE ON THIS ISSUE WHEREAS THE LEARNED DR HAS RELIED ON THE ORDER OF T HE AO IN SUPPORT OF THE REVENUES CASE. IT IS OBSERVED THAT THE IMPUGNED AD DITIONS WERE MADE BY THE AO MAINLY RELYING ON AS-11. ACCORDING TO THE AO, AS PE R THE SAID ACCOUNTING STANDARD, THE INVESTMENT MADE IN SHAREHOLDERS DEPO SIT WITH TIHK BY THE ASSESSEE COMPANY WAS REQUIRED TO BE RECOGNIZED AT THE EXCHAN GE RATE PREVAILING ON THE LAST DATE OF THE RELEVANT PREVIOUS YEAR. HOWEVER, AS SUB MITTED ON BEHALF OF THE ASSESSEE 9 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 BEFORE THE LEARNED CIT(APPEALS) AS WELL AS BEFORE U S, ONLY THE MONETARY ITEMS ARE REQUIRED TO BE REPORTED/RECOGNIZED AT THE EXCHANGE RATE PREVAILING ON THE LAST DATE OF THE RELEVANT PREVIOUS YEAR WHEREAS NON-MONETARY ITEMS ARE REQUIRED TO BE REPORTED/RECOGNIZED AT THE EXCHANGE RATE PREVAILING ON THE DATE OF RELEVANT TRANSACTION. AS PER THE CLASSIFICATION MADE IN AS- 11, MONETARY ITEMS MAINLY INCLUDE AMOUNTS HELD ON CURRENT ACCOUNT, SUCH AS, CASH RECEIVABLES, PAYABLES ETC. WHILE NON-MONETARY ITEMS INCLUDE AMOUNTS HELD ON CA PITAL ACCOUNT, SUCH AS, FIXED ASSETS, INVESTMENT IN SHARES ETC. IN THE PRESENT CA SE, THE SHAREHOLDERS DEPOSIT REPRESENTED THE AMOUNT HELD BY THE ASSESSEE ON CAPI TAL ACCOUNT INASMUCH AS IT WAS CONVERTIBLE INTO EQUITY SHARES WITHIN A PERIOD OF 1 0 YEARS AND IF NOT SO CONVERTED, IT WAS LIABLE TO BE REFUNDED TO THE ASSESSEE COMPANY O NLY AFTER A PERIOD OF 10 YEARS. IN OUR OPINION, THE SAID AMOUNT THUS WAS IN THE NAT URE OF NON-MONETARY ITEM WHICH WAS REQUIRED TO BE REPORTED/RECOGNIZED AT THE EXCHA NGE RATE PREVAILING ON THE DATE OF RELEVANT TRANSACTION EVEN AS PER AS-11 AS RIGHTL Y HELD BY THE LEARNED CIT(APPEALS). WE, THEREFORE, FIND NO INFIRMITY IN T HE IMPUGNED ORDERS OF THE LEARNED CIT(APPEALS) DELETING THE ADDITIONS MADE BY THE AO ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS RELEVANT GROUNDS OF THE REVENUES APPEALS. 12. THE NEXT COMMON ISSUE INVOLVED IN ALL THE SIX Y EARS UNDER CONSIDERATION RELATING TO ASSESSEES CLAIM FOR DEDUCTION U/S 80HH C WITH REGARD TO MEALS SUPPLIED BY ITS FLIGHT KITCHEN UNITS TO FOREIGN AIRLINES IS RAISED IN THE FOLLOWING GROUNDS : ASSESSMENT YEAR GROUND NO. 1994-95 3 1998-99 4 1999-2000 7 10 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 2000-01 6 2001-02 7 2002-03 6 13. THE SALE PROCEEDS OF MEALS SUPPLIED BY THE ASSE SSEE COMPANY FROM ITS FLIGHT KITCHENS TO FOREIGN AIRLINES WERE CLAIMED TO BE EXP ORT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. ACCORDING TO THE AO, THE SAME DID NOT CONSTITUTE EXPORT OUT OF INDIA AND THE ASSESSEE, THEREFORE, WAS NOT ENTITLED TO CLAIM DEDUCTION U/S 80HHC THEREON. THE LEARNED CIT(APPEALS), HOWEVER, ACCEPTE D THE CONTENTION OF THE ASSESSEE THAT THE RELEVANT SALE PROCEEDS CONSTITUTE D EXPORT IN RESPECT OF WHICH THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S 80HHC. 14. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T A SIMILAR ISSUE WAS INVOLVED IN ASSESSEES OWN CASE FOR THE EARLIER YEARS AND THE S AME HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE CONSISTENTLY FRO M ASSESSMENT YEARS 1989-90 TO 1997-98. RESPECTFULLY FOLLOWING THE SAID DECISIONS OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR THE EARLIER YEARS ON A SIMI LAR ISSUE, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80HHC IN RESPECT OF SALE PROCEEDS OF MEALS SUPPLIED BY ITS FLIGHT KITCHEN TO FOREIGN AIRLINES HOLDING THAT THE SAME C ONSTITUTED EXPORT ELIGIBLE FOR DEDUCTION U/S 80HHC. THE RELEVANT GROUNDS OF THE RE VENUES APPEALS ARE ACCORDINGLY DISMISSED. 15. THE NEXT COMMON ISSUE INVOLVED IN ALL THE SIX Y EARS UNDER CONSIDERATION RELATING TO ASSESSEES CLAIM FOR DEDUCTION ON ACCOU NT OF EXPENDITURE INCURRED ON REPLACEMENT OF CARPETS IS RAISED IN THE FOLLOWING GROUNDS : 11 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 ASSESSMENT YEAR GROUND NO. 1994-95 4 1998-99 5 1999-2000 5 2000-01 3 2001-02 4 2002-03 4(A) 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT A SIMILAR ISSUE HAS BEE N CONSISTENTLY DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE EARLIER Y EARS. IN ASSESSMENT YEAR 1992-93, THE TRIBUNAL VIDE ITS ORDER DATED 10 TH SEPT., 2004 PASSED IN ITA NO. 3530/MUM/1996 UPHELD THE ORDER OF THE LEARNED CIT(A PPEALS) ALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE FOR EXPENSES INCU RRED ON REPLACEMENT OF CARPETS FOLLOWING THE ORDERS OF THE COORDINATE BENCH IN ASS ESSEES OWN CASE FOR THE EARLIER YEARS UPTO ASSESSMENT YEAR 1991-92. SIMILARLY, IN T HE SUBSEQUENT YEARS UPTO 1997- 98, THE TRIBUNAL FOLLOWED ITS ORDERS FOR THE EARLIE R YEARS AND DECIDED A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. THE DECISION OF HONBLE RAJASTAN HIGH COURT IN THE CASE OF CIT VS. LAKE PALACE HOTELS AND MOTELS P. LTD. 258 ITR 562 WAS ALSO REFERRED TO AND RELIED UPON BY THE TRIBUNAL WHEREIN A SIMILA R ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THESE JUDICIAL PRONOUNCEMENTS, WE UPHOLD THE IMPUGNED ORDERS OF THE LEARNED CIT(APPEALS) ALLOWIN G THE ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF EXPENSES INCURRED FOR REPLA CEMENT OF CARPETS AND DISMISS THE RELEVANT GROUNDS OF THE REVENUES APPEALS. 12 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 17. THE NEXT COMMON ISSUE INVOLVED IN ALL THE SIX Y EARS UNDER CONSIDERATION RELATING TO ASSESSEES CLAIM FOR DEDUCTION ON ACCOU NT OF EXPENDITURE INCURRED ON REPLACEMENT OF LINEN IS RAISED IN THE FOLLOWING GRO UNDS : ASSESSMENT YEAR GROUND NO. 1994-95 5 1998-99 6 1999-2000 6 2000-01 4 2001-02 5 2002-03 4(B) 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THIS ISSUE IS SIMILAR T O THE ISSUE RELATING TO ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF EXPENDITURE ON RE PLACEMENT OF CARPETS AND THE SAME ALSO HAS BEEN CONSISTENTLY DECIDED BY THE TRIB UNAL IN FAVOUR OF THE ASSESSEE IN THE EARLIER YEARS. RESPECTFULLY FOLLOWING THE OR DERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS UPTO ASSESSMENT 1996-97 ON A SIMILAR ISSUE, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ALLO WING THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF EXPENDITURE INCURRED ON REPLACEMENT ON LINEN AND DISMISS THE RELEVANT GROUNDS OF THE REVENUES APPEA LS. 19. GROUND NO.7 RAISED IN THE APPEALS OF THE REVENU E FOR ASSESSMENT YEARS 1998-99, 2000-01, 2001-02 AND 2002-03 AS WELL AS GR OUND NO. 8 OF ITS APPEAL FOR ASSESSMENT YEAR 1999-2000 ARE GENERAL IN NATURE SEE KING NO SPECIFIC DECISION FROM US. 13 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 20. GROUND NO. 8 OF THE REVENUES APPEAL FOR ASSESS MENT YEAR 2001-02 IS RELATING TO THE ISSUE OF INTEREST LEVIED BY THE AO U/S 234D WHICH HAS BEEN CANCELLED BY THE LEARNED CIT(APPEALS). 21. THE RETURN OF INCOME FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 WAS INITIALLY PROCESSED BY THE AO U/S 143(1) ON 15-11-2 002 AND REFUND DUE AMOUNTING TO RS. 6,06,88,637/- WAS GRANTED TO THE ASSESSEE WH ICH WAS COMPRISING OF INTEREST U/S 244A AMOUNTING TO RS.73,45,958/-. THEREAFTER, A SSESSMENT WAS COMPLETED U/S 143(3) VIDE AN ORDER DATED 23-02-2004 AND A DEMAND WAS RAISED FOR RS.5,41,49,706/- INCLUDING INTEREST LEVIED U/S 234D OF THE ACT AMOUNTING TO RS.29,04,572/- FOR THE PERIOD FROM 01-06-2003, THE DATE ON WHICH 234D WAS INSERTED IN THE STATUTE TO 22-03-2004 I.E. THE DATE OF ASSESSMENT ORDER. ON APPEAL, THE LEARNED CIT(APPEALS) CANCELLED THE INTEREST LEV IED BY THE AO U/S 234D RELYING ON THE DECISION OF DELHI SPECIAL BENCH OF ITAT IN T HE CASE OF ITO VS. EKTA PROMOTERS P. LTD. 113 ITD 719 (DEL)(SB) WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 234D ARE APPLICABLE ONLY PROSPECTIVELY I .E. FROM ASSESSMENT YEAR 2004- 05. 22. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSE RVED THAT SECTION 234D HAS BEEN AMENDED BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 01-06-2003 WHEREBY EXPLANATION 2 HAS BEEN INSERTED DECLARING T HAT THE PROVISIONS OF SECTION 234D SHALL ALSO APPLY TO ASSESSMENT YEAR COMMENCIN G BEFORE THE FIRST DAY OF JUNE, 2003 IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSME NT YEAR IS COMPLETED AFTER THE SAID DATE. IN THE PRESENT CASE, THE ASSESSMENT YEAR INVOLVED IN ASSESSMENT YEAR 2001-02 WHICH IS COMMENCING BEFORE THE FIRST DAY OF JUNE, 2003 AND SINCE THE 14 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 ASSESSMENT FOR THE SAME HAS BEEN COMPLETED ON 22-03 -2004 I.E. AFTER 1 ST JUNE, 2003, THE PROVISIONS OF SECTION 234D ARE CLEARLY AP PLICABLE AND THE ASSESSEE IS LIABLE TO PAY INTEREST U/S 234D AS PER THE AMENDMEN T MADE BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 01-06-2003. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CANCELLI NG THE INTEREST LEVIED BY THE AO U/S 234D AND RESTORE THAT OF THE AO CHARGING SUC H INTEREST. GROUND NO. 8 OF THE REVENUES APPEAL FOR ASSESSMENT YEAR 2001-02 IS ACCORDINGLY ALLOWED. 23. AS REGARDS THE CROSS OBJECTIONS FILED BY THE AS SESSEE FOR ASSESSMENT YEARS 1998-99 TO 2002-03, THE LEARNED COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT THE ISSUES RAISED THEREIN HAVE EITHER BECOME INFRUCTUOU S OR THE ASSESSEE IS NOT INTERESTED IN PRESSING THE SAME. HE HAS SUBMITTED T HAT THE SAID CROSS OBJECTIONS MAY ACCORDINGLY BE DISMISSED. WE, THEREFORE, DISMIS S ALL THE CROSS OBJECTIONS FILED BY THE ASSESSEE. 24. AS REGARDS THE APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 1994-95 BEING ITA NO. 3620/MUM/2010 WHICH IS DIRECTED AGAINST THE ORD ER OF LEARNED CIT(APPEALS)- 5, MUMBAI DATED 11-03-2010, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 2 TO 10 RAISED THEREIN. THE SAME ARE ACC ORDINGLY DISMISSED AS NOT PRESSED. 25. WHAT SURVIVES FOR OUR CONSIDERATION NOW IS ONLY GROUND NO. 1 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 1994-95 WHICH INVOLVE THE ISSUE RELATING TO ADDITION OF RS.3,14,70,562/- MADE BY THE AO AND CON FIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF INTEREST CAPITALIZED IN THE BOOKS TREATING THE SAME AS INCOME OF THE ASSESSEE. 15 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 26. DURING THE PREVIOUS YEARS RELEVANT TO ASSESSMEN T YEARS 1991-92, 1992-93 AND 1993-94, THE ASSESSEE COMPANY HAD INCURRED INTE REST EXPENDITURE ON CAPITAL BORROWED FOR THE PURPOSE OF CONSTRUCTION OF FIXED A SSETS IN RESPECT OF ITS LUCKNOW HOTEL PROJECT AND AURANGABAD HOTEL PROJECT AGGREGAT ING TO RS.3,14,70,562/- AND THE SAID EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOU NT WAS CLAIMED AS DEDUCTION. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY, HOWEVER, CHANGED THE METHOD OF ACCOUNTING FOR SUCH INTEREST AND ACCORDINGLY THE INTEREST CHARGED IN THE EARLIER YEARS WAS REVERSED IN THE BOOKS OF ACCOUNT AND THE SAME WAS CONSIDERED AS PART OF COST OF RELEVANT FIXED ASSET. THE INTEREST OF RS.3, 14,70,562/- THUS WAS TREATED AS INCOME OF THE ASSESSEE COMPANY IN ITS BOOKS OF ACCO UNT BUT THE SAME WAS EXCLUDED WHILE COMPUTING THE TOTAL INCOME FOR THE PURPOSE OF INCOME-TAX. THE AO DID NOT ACCEPT THIS TREATMENT GIVEN BY THE ASSESSEE AND INC LUDED THE AMOUNT OF INTEREST REVERSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IN THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 27. THE ADDITION MADE BY THE AO ON ACCOUNT OF REVER SAL OF INTEREST WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFOR E THE LEARNED CIT(APPEALS). IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) THAT THE METHOD OF ACCOUNTING FOR INTEREST WAS CHANGED AS RE QUIRED BY AS-10 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND ACC ORDINGLY INTEREST CHARGED TO THE PROFIT & LOSS ACCOUNT IN THE EARLIER YEARS WAS REVE RSED IN THE BOOKS OF ACCOUNT MERELY TO COMPLY WITH THE REQUIREMENTS OF AS-10. IT WAS CONTENDED THAT THIS TREATMENT GIVEN IN THE BOOKS OF ACCOUNT, HOWEVER, H AD NO IMPLICATION ON THE TAXABLE INCOME OF THE ASSESSEE AND, THEREFORE, THE AMOUNT OF CREDIT APPEARING IN THE PROFIT & LOSS ACCOUNT WAS REDUCED WHILE COMPUTING T HE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT IT DID NOT 16 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 RECEIVE ANY BENEFIT FROM THE LENDERS EITHER BY WAY OF WAIVER OF INTEREST OR ANY REFUND BY VIRTUE OF THE ENTRIES PASSED IN ITS BOOKS OF ACCOUNT AND EVEN NO DEPRECIATION WAS CLAIMED U/S 32 OF THE ACT ON THE A MOUNT OF INTEREST NOW CAPITALIZED IN THE BOOKS OF ACCOUNT. IT WAS CONTEND ED THAT THE ASSESSEE COMPANY THUS DID NOT RECEIVE ANY BENEFIT FROM THE RELEVANT ENTRIES PASSED IN THE BOOKS OF ACCOUNT REVERSING/CREDITING THE INTEREST WHICH WAS DEBITED IN THE EARLIER YEARS AND THE SAME WAS DONE ONLY FOR THE LIMITED PURPOSE OF C OMPLYING WITH THE MONETARY REQUIREMENTS OF AS-10. 28. THE LEARNED CIT(APPEALS) DID NOT FIND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND PROCEEDED TO CONFIRM THE ADDITION MADE BY THE AO ON ACCOUNT OF REVERSAL OF INTEREST TREATING THE SAME AS INCOME OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO. 69 AND 69.1 OF HIS IMPUGNED ORDER : 69. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS. T HE APPELLANT HAS DEBITED INTEREST EXPENDITURE IN EARLIER YEARS WHICH WAS DUL Y ALLOWED AS DEDUCTION U/S 36(1)(III) BY THE ASSESSING OFFICER IN THE RESPECTI VE YEARS. THOUGH IT IS STATED THAT IT CREDITED THE INTEREST INCOME MERELY TO COMP LY WITH THE REQUIREMENT OF AS-10 ISSUED BY THE ICAI WHICH ARE MANDATORILY REQU IRED TO BE FOLLOWED BY THE CORPORATE, THE FACTS REMAINS THAT THE AMOUNT HA VING BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT, IS AN ADMITTANCE OF THE FA CT THAT THE SAID SUM REPRESENT INCOME OF THE APPELLANT IN TERMS OF SECTI ON 41(1) OF THE ACT AS CESSATION OF LIABILITY. THE PASSING OF SUCH ENTRY A MOUNTED TO CESSATION OF LIABILITY AS THE SAME HAD BEEN TAKEN INTO ACCOUNT I N EARLIER YEARS AND SECTION IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE. IN THIS CONNECTION, RELIANCE COULD BE PLACED ON GEE BROS VS. ITO (2009) 34 SOT 5 19 (MUM) IN WHICH IT WAS HELD THAT REMISSION OR CESSATION OF TRADING LIA BILITY BY UNILATERAL ACT OF THE ASSESSEE BY WAY OF WRITING OFF ITS LIABILITY IN ITS BOOKS OF ACCOUNT WILL AMOUNT TO OBTAINING A BENEFIT FOR THE PURPOSES OF S ECTION 41(1) AND SAID ACT BY ITSELF WOULD BE SUFFICIENT TO ATTRACT THE PROVIS IONS OF THE SECTION. THE COMPANY NOT ONLY WROTE OFF THE LIABILITY BUT ALSO O FFERED THE SAID LIABILITY IN 17 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 THE RETURN OF INCOME ON THE GROUND THAT THE SAME HA D CEASED TO EXIST. SUCH WRITING OFF WOULD BE LIABLE TO TAX AS PER EXPLANATI ON 1 TO SECTION 41(1) BROUGHT IN THE STATUTE W.E.F. 1.4.1997 BY THE FINAN CE ACT (NO.2) OF 1996. SIMILAR DECISION WAS RENDERED IN ACIT VS COSMO FILM S LTD. 2009) 28 SOT 353 (DEL) IN WHICH LIKEWISE, IT WAS HELD THAT IN VI EW OF THE EXPLANATION TO SECTION 41(12), ANY UNILATERAL ACT ON THE PART OF T HE ASSESSEE IN WRITING BACK ANY TRADING LIABILITY IN RESPECT OF WHICH DEDUCTION HAS BEEN ALLOWED OR MADE IN ASSESSMENT OF ANY EARLIER YEAR IS TAXABLE. IN TH IS CASE THE ASSESSEE A SUM ALLOWED AS DEDUCTION AS DEFERRED SALES TAX LIABILIT Y WAS LATER WRITTEN BACK IN THE BOOKS WHICH WAS HELD TO BE TAXABLE INCOME. 69.1 IT MAY ALSO BE STATED HERE THAT THE APPELLANT AFTER WRITING OFF THE INTEREST HAD ITSELF SHOWN AS INCOME BY CREDITING TH E PROFIT AND LOSS ACCOUNT BUT CLAIMED THE SAME NOT TAXABLE IN THE RETURN FILE D. THUS, THE APPELLANT IS FOLLOWING DOUBLES STANDARDS ON THE ISSUE AND ITS AP PROACH IS SELF- CONTRADICTORY. THE ENTRIES IN THE BOOKS OF ACCOUNT CANNOT BE IGNORED AS LIGHTLY AS DONE BY THE APPELLANT. IN THIS CONNECTIO N, IT WOULD BE RELEVANT TO MAKE REFERENCE TO SOME OF THE DECISIONS ON SUCH ASP ECT. IN THE CASE OF JCIT VS TIRUMALAL CHEMICALS LTD. (2006) 9 SOT 744(MUM)- IN WHICH ON SIMILAR CLAIM, IT WAS HELD THAT WHETHER THE ENTRIES IN THE BOOKS OF ACCOUNT ARE DECISIVE OR NOT WOULD DEPEND ON FACTS OF THE CASE A ND THEY CANNOT BE LIGHTLY DISCARDED UNLESS THEY ARE SHOWN TO BE INCORRECT EIT HER ON FACTS OR LAW. THE ENTRIES IN THE BOOKS CANNOT BE REGARDED INCORRECT B Y THE PERSON MAINTAINING IT UNLESS SHOWN TO BE INCORRECT. IF THE ENTRIES ARE CONSISTENT WITH THE METHOD OF ACCOUNTING AND SHOW CORRECT PROFIT AND ARE ALSO CONSISTENT WITH THE PROVISIONS OF THE ACT, THEY CANNOT BE DISCARDED. FO LLOWED TAPARIA TOOLS LTD. VS CIT 260 ITR 102 (MUM) AND ALSO MADRAS INDUSTRIA L INVESTMENT CORPORATION LTD. VS CIT 225 ITR 802 (SC). IN ANOTHE R CASE OF ITO VS SHREYAS SHIPPING LTD. (2002) 76 TTJ(MUM) 11, IT WAS HELD THAT THE ASSESSEE CANNOT HAVE ONE METHOD OF ACCOUNTING FOR MAKING UP ITS ACCOUNTS AND ANOTHER FOR FILING OF THE RETURN. THE AO RIGHTLY IN SISTED UPON COMPLETING THE ASSESSMENT IN ACCORDANCE WITH THE TREATMENT GIVEN B Y THE ASSESSEE ITSELF IN ITS BOOKS OF ACCOUNT RATHER THAN BEING SWAYED BY AN Y DOGMATIC COMPULSIONS. IT IS NOT THE CASE THAT THE ASSESSEE COMMITTED ANY ERROR IN WRITING THE BOOKS AND IT IS ALSO NOT THE CASE THAT THE TREATMENT GIVE N IN THE BOOKS ARE NOT REFLECTIVE OF THE TRUE NATURE OF THE TRANSACTION. 18 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 29. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T THE ADDITION MADE BY THE AO ON ACCOUNT OF REVERSAL OF INTEREST CLAIMED IN THE EARL IER YEARS BY CREDITING THE SAME IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATI ON HAS BEEN CONFIRMED BY THE LEARNED CIT(APPEALS) RELYING ON THE PROVISIONS OF S ECTION 41(1) OF THE ACT. HOWEVER, AS SUBMITTED ON BEHALF OF THE ASSESSEE BEF ORE THE AUTHORITIES BELOW AS WELL AS BEFORE US, THE ACCOUNTING ENTRIES REVERSING THE INTEREST CLAIMED IN THE EARLIER YEARS AND INCLUDING THE SAME IN THE COST OF RELEVAN T FIXED ASSETS IN THE YEAR UNDER CONSIDERATION WAS DONE BY THE ASSESSEE TO COMPLY WI TH THE MONETARY REQUIREMENTS OF AS-10 AND THERE WAS NO REMISSION OR CESSATION OF ANY LIABILITY ON ACCOUNT OF INTEREST WHICH WAS PAYABLE TO THE LENDING COMPANIES . AS SUBMITTED ON BEHALF OF THE ASSESSEE, EVEN NO DEPRECIATION ON THE INTEREST AMOUNT CAPITALIZED WAS CLAIMED BY THE ASSESSEE. THE ASSESSEE THUS HAD NOT OBTAINED ANY ADVANTAGE OR BENEFIT EITHER IN CASH OR IN ANY OTHER MANNER IN RESPECT OF LIABIL ITY ON ACCOUNT OF INTEREST IN QUESTION AND THIS BEING SO, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 41(1) ARE NOT ATTRACTED IN THE CASE OF THE ASSESSEE. THE LEARNED CIT(APPEALS) HAS RELIED ON EXPLANATION 1 TO SECTION 41(1) WHICH PROVIDES TH AT FOR THE PURPOSE OF SECTION 41(1), THE EXPRESSION LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY UNILATER AL ACT BY THE ASSESSEE. AS ALREADY NOTED, THE ACCOUNTING ENTRIES PASSED BY THE ASSESSE E IN ITS BOOKS OF ACCOUNT REVERSING INTEREST DEBITED IN THE EARLIER YEAR AND INCLUDING THE SAME IN THE COST OF RELEVANT FIXED ASSET DID NOT RESULT IN ANY REMISSIO N OR CESSATION OF ANY LIABILITY AND IT CANNOT BE SAID THAT THERE WAS ANY SUCH REMISSION OR CESSATION OF ANY LIABILITY BY UNIVERSAL ACT BY THE ASSESSEE SO AS TO INVOKE EXPLA NATION 1 TO SECTION 41(1). IN OUR 19 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 OPINION, IT IS JUST A CASE OF CAPITALIZING THE INTE REST EXPENDITURE TO COMPLY WITH THE MONETARY REQUIREMENTS OF AS-10 BY PASSING THE NECES SARY ENTRIES IN THE BOOKS OF ACCOUNT WHICH HAS NOT RESULTED IN ANY ADVANTAGE OR BENEFIT TO THE ASSESSEE EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY OR I N ANY OTHER MANNER. THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) ON THIS ISSUE THUS IS NOT SUSTAINABLE AND DELETING THE SAME, WE ALLOW GRO UND NO. 1 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 1994-95. 30. IN THE RESULT, THE APPEALS OF THE REVENUE FOR A SSESSMENT YEARS 1994-95, 1998-99, 1999-2000, 2000-01 AND 2002-03 ARE DISMISS ED. THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2001-02 IS PARTLY ALLOW ED. THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 1994-95 IS PARTLY ALLOWED AND A LL THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED COURT ON THIS 23 RD DAY OF NOV., 2012. SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 23 RD NOV., 2012. WAKODE 20 ITA NOS.2273/M/2009.3620,3871,393,1115,3872 AND 5965/MUM/2010 AND CO NOS.203/M/2009, 148,168,54/M/2010 AND 131/MUM/2011 COPY TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. D.R., I-BENCH. (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.