DCIT - 7(3), MUMBAI V. M/s. TATA INTERNATIONAL LTD., MUMBAI

ITA 3884/MUM/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62491 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 03-04-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 16-06-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYA KUMAR
• Assessee Lawyers: AJIT C SHAH; DINESH VYAS SENIOR
• Keywords: Business income; Depreciation; Business expenditure; Earning of tax free income; Retrospective amendment; Corroborative evidences; Commercial expediency; Unabsorbed depreciation; Capital expenditure
• Section: 37; 244A; 80HHC; 234B; 14A

Judgement Text

I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 1 OF 5 3 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.AS. NO. 3957, 3958 & 3959/MUM/2006 ASSESSMENT YEARS: 2000-01, 2001-02 & 2002-03 TATA INTERNATIONAL LTD. BLOCK A, SHIVSAGAR ESTATES, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 018. PAN: NO. VS. THE ASST. COMMISSIONER OF I.T. 7(3), MUMBAI. AND I.T.AS. NO. 3884, 3885 & 3886/MUM/2006 ASSESSMENT YEARS: 2000-01, 2001-02 & 2002-03 DY. COMMISSIONER OF I.T. 7(3), MUMBAI. M/S. TATA INTERNATIONAL LTD., MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. DINESH VYAS, SENIOR ADVOCATE & MR. AJIT C. SHAH. REVENUE BY : MR. JAYA KUMAR. DATE OF HEARING : : 03 /04/2012 DATE OF PRONOUNCEMENT : : 08/06/2012. O R D E R PER VIVEK VARMA, JM: THE APPEALS ARE FILED BY THE ASSESSEE AND THE DEPA RTMENT AGAINST THE COMMON ORDER PASSED BY THE CIT(A) XXIII , MUMBAI, DATED 02-01-2006, CONCERNING ASSESSMENT YEARS 2000-01, 20 01-02 AND 2002- 03. SINCE THE APPEAL ARISE FROM THE COMMON ORDER OF THE CIT(A), WE, I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 2 OF 5 3 FOR THE SAKE OF BREVITY ARE PASSING COMMON ORDER IN THE SIX APPEALS. WE SHALL DEAL WITH ASSESSEES APPEALS FIRST. ITA NO. 3957/MUM/2009 A.Y. 2000-01 (ASSESSEES APPEAL) 2. THE ASSESSEE ALONG WITH MEMORANDUM OF APPEAL IN FORM NO. 36, FILED AS MANY AS 16 GROUNDS ALONG WITH THEIR SU B-GROUNDS. LATER ON THE ASSESSEE FILED CONCISE GROUNDS OF APPEAL WHICH ALSO RAN INTO 16 GROUNDS ALONG WITH THEIR SUB GROUNDS. ALONG WITH TH E CONCISE GROUND OF APPEAL THE ASSESSEE HAS ALSO FILED ADDITIONAL GR OUND WHICH IS NUMBERED 1.11, BEING SUB GROUNDS OF GROUND NO. 1, A DDITIONAL GROUND NO. 3A AND ADDITIONAL GROUND NO. 16A. THE SENIOR AR , THEREFORE, PROCEEDED ON THE CONCISE GROUNDS OF APPEAL. AT THE TIME OF HEARING BEFORE US THE SENIOR AR OF THE ASSESSEE COMPANY PLA CED BEFORE US THE SYNOPSIS IN A CHART FORM FOR THE ASSISTANCE OF THE BENCH. 3. GROUNDS NO. 1.1 TO 1.11 BASICALLY ARE AGAINST TH E DISALLOWANCE OF INTEREST OF RS. 4,67,52,000/- ON THE GROUNDS OF DIVERSION OF BORROWED FUNDS FOR NON BUSINESS PURPOSES FOR MAKING INVESTMENTS. THE ASSESSEES MAIN PLEA WAS THAT THE CLAIM MADE U/ S 36(1)(III) WAS A VALID CLAIM. TO SUPPORT ITS CLAIM AS A BUSINESS DED UCTION, THE ASSESSEE HAS PLEADED ALTERNATIVE GROUNDS, WHEREIN IT HAD PRA YED BEFORE THE CIT(A) TO ALLOW THE IMPUGNED INTEREST EITHER AS BUS INESS DEDUCTION U/S 37(1), OR STILL ALTERNATIVELY U/S 57(III). AS PER G ROUNDS RAISED ON THIS ISSUE, THE ASSESSEES CLAIM HAS BEEN THAT THE REVEN UE AUTHORITIES OUGHT I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 3 OF 5 3 TO, UNDER ONE CIRCUMSTANCE OR OTHER, SHOULD HAVE AL LOWED THE CLAIM OF EXPENSE OF INTEREST. 4. FROM THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER IT IS SEEN THAT ASSESSEE HAS MADE INVESTMENTS IN SHARES A ND HAD ALSO ADVANCED FUNDS TO SISTER CONCERNS. THE AO ALSO INVI TED ASSESSEES COMMENTS AS TO WHY THE INTEREST EXPENSES CLAIMED SH OULD NOT BE APPORTIONED TOWARDS INVESTMENTS IN SHARES AND NOT B E DISALLOWED U/S 14A. THE ASSESSEE BEFORE THE AO SUBMITTED THAT IT H AS ITS OWN FUNDS TO THE TUNE OF RS. 115.04 CRORES AND BORROWED FUNDS TO THE TUNE OF RS. 170.64 CRORES. THESE FUNDS HAD BEEN UTILISED AND RE PRESENTED BY FIXED ASSETS OF RS. 42.51 CRORES, INVESTMENTS OF RS. 99.5 5 CRORES AND NET CURRENT ASSETS OF RS. 143.60 CRORES. THE ASSESSEE F URTHER CLARIFIED THAT OUT OF TOTAL BORROWINGS OF RS. 170.64 CRORES, THERE WERE SECURED LOANS OF RS. 128.84 CRORES OF UNSECURED LOANS, RS. 41.80 CRORES. OUT OF RS. 128.84 CRORES OF SECURED LOANS, RS. 120.24 CRORES W ERE UTILISED FOR EXPORT PACKING CREDIT IN ITS BUSINESS OF EXPORT AND RS. 8.46 CRORES FOR ACQUIRING FIXED ASSETS. THE UNSECURED LOAN OF RS. 4 1.80 REPRESENTED BORROWINGS FOR THE PURPOSE OF LONG TERM WORKING CAP ITAL. THE ASSESSEE FURTHER SUBMITTED THAT BORROWINGS OF RS. 170.64 CRO RES AGAINST THE TOTAL TURNOVER OF RS. 1600 CRORES IS VERY REASONABL E. THE ASSESSEE FURTHER SUBMITTED THAT THE ENTIRE INVESTMENTS HAD B EEN FINANCED BY THE SHAREHOLDER FUND AND NOT FROM THE BORROWINGS. THE A SSESSEE SUBMITTED THAT SINCE THE ENTIRE INVESTMENT HAVE BEE N FINANCED FROM OWN FUNDS, NO EXPENDITURE CAN BE SAID TO HAVE BEEN INCURRED FOR THE I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 4 OF 5 3 PURPOSE OF EARNING THE DIVIDEND INCOME. THE ASSESSE E, AFTER HAVING RELIED UPON A NUMBER OF CASE LAWS, SUBMITTED THAT I NTEREST PAYABLE ON SUCH BORROWINGS IS ADMISSIBLE AS BUSINESS EXPENSE U /S 36(1)(III). AS ON THE ISSUE OF DISALLOWANCE U/S 14A, THE ASSESSEE COM PANY SUBMITTED THAT INVESTMENT IN SHARES ETC. IS INDIVISIBLE PART OF THE BUSINESS OF THE ASSESSEE WHO WAS CARRYING ON BUSINESS IN DIVERSE CO MMODITIES INCLUDING INVESTMENTS IN STOCKS AND SHARES. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE COMPANY BY SAYING THAT INVESTMENTS MADE BY THE ASSESSEE COMPANY IN VARIOUS GROUP COMPANIES WOULD NEITHER RESULT IN THE PROMOTION OF EXPORT BUSINESS, NOR IT IS A CASE OF FURTHERANCE OF BUSINESS EVEN IN THE CASE WHERE THE TRANSACTION CAN BE TAKEN TO BE AT ARMS LENGTH. THE AO THEREFORE, HELD THAT THE ONLY INCOME RESULTING FROM HOLDING OF SHARES WOULD BE DI VIDEND ONLY, AND NO OTHER TYPE OF INCOME. THE AO HAS FURTHER HELD TH AT THE BORROWINGS WERE PREDOMINANTLY USED FOR ACQUIRING SHARES ON WHI CH DIVIDEND HAS BEEN EARNED AND THEREFORE ANY INCOME EXEMPT FROM TA X, EXPENSES RELATABLE TO THAT INCOME SHALL BE DISALLOWED AS PER THE PROVISIONS OF SEC 14A. THE AO DWELLED ON SEC 37 AND HELD THAT SINCE D IVIDEND RECEIVED ON HOLDING OF SHARES IS THE INCOME RESULTING FROM S HARES, IT CANNOT BE BUSINESS INCOME, THEREFORE, IT CANNOT BE SAID THAT THE EXPENDITURE IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS , HENCE DEDUCTION U/S 37 CANNOT BE ALLOWED. 5. THE AO THEN OBSERVED THAT FOR CLAIMING AN ALLOWA NCE U/S 57(III), IT HAS TO BE PROVED THAT THE EXPENDITURE INCURRED I S LAID OUT WHOLLY AND I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 5 OF 5 3 NECESSARILY FOR EARNING SUCH INCOME. ACCORDING TO H IM, THE INTEREST ON MONEYS BORROWED FOR INVESTMENT IN SHARES WHICH HAS NOT YIELDED ANY DIVIDEND WAS DEDUCTIBLE U/S 57(III). DEDUCTION U/S 57(III) WAS ALLOWABLE ONLY IN RESPECT OF EXPENDITURE INCURRED OR LAID OUT WHOLLY AND NECESSARILY FOR EARNING SUCH INCOME. ACCORDING TO H IM, THE ASSESSEE HAD NOT ADDUCED ANY EVIDENCE TO PROVE THAT THE LOAN S BORROWED WERE UTILIZED FOR THE PURPOSE OF BUSINESS AND BORROWED F UNDS WERE NOT UTILIZED IN MAKING INVESTMENT IN SHARES. HE FURTHER OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN ANY SEPARATE BANK ACCOUNT FOR INVESTMENTS AND ON THIS OBSERVATION, HE SAYS THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVED THAT LOANS BORROWED WERE CONTINUOUSLY UTI LIZED FOR THE PURPOSE OF BUSINESS AND NOT MAKING INVESTMENT IN SH ARES. THE AO HAS THUS CATEGORICALLY OBSERVED THAT CLEAR BIFURCATION BETWEEN THE MONEY UTILISED FOR THE PURPOSE OF BUSINESS AND THAT UTILI SED FOR THE PURPOSE OF MAKING INVESTMENTS IS NOT AVAILABLE. THE AO, THUS A SKED THE ASSESSEE TO BIFURCATE THE INTEREST EXPENSES CLAIMED ON THE B ASIS OF LOANS AND THEIR UTILISATION, WHICH WAS COMPLIED BY THE ASSESS EE VIDE LETTER DATED 14-01-2003. BASED ON THIS WORKING, THE AO MADE AN A DDITION OF RS. 4,67,52,000/- 6. THE ASSESSEE TOOK THIS ISSUE BEFORE THE CIT(A) W HEREIN IT RAISED THE ISSUE IN GROUNDS NO. 1.1 TO 1.11 ON ALTERNATE B ASIS AS WAS CLAIMED BEFORE THE AO. 7. THE ASSESSEE VIRTUALLY REITERATED ITS STAND TAKEN BEFORE THE AO, WHICH THE CIT(A) DID NOT ACCEPT AND THE CIT(A) ON F INAL ANALYSIS I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 6 OF 5 3 SUSTAINED THE ADDITION MADE BY THE AO AT RS. 4,67,5 2,000/- ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID ON BORROWED CAPITA L. NOT SATISFIED, THE ASSESSEE IS BEFORE THE ITAT ON THIS ISSUE. 8. BEFORE US, THE SENIOR AR OF THE ASSESSEE COMPAN Y PLACED A BRIEF SYNOPSIS IN THE FORM OF A TABLE, DESCRIBING T HE ISSUES TAKEN UP IN APPEAL BEFORE US AND HOW THE SENIOR AR INTENDED TO DEAL WITH EACH OF THE ISSUES/GROUNDS. THE SENIOR A.R. HAS ALSO PLACED BEFORE US THE COMPENDIUM OF CASE LAW THAT HE INTENDED TO RELY UPO N. THE SENIOR AR THROUGH THE SYNOPSIS TOUCHED ON EACH OF THE SUB GRO UNDS TO GROUND NO. 1. I.E. DISALLOWANCE ON GROUND OF ALLEGED DIVER SION OF BORROWED FUNDS FOR NON BUSINESS PURPOSE OF MAKING SHARE INVE STMENTS BY FOLLOWING WEIGHTED AVERAGE COST METHOD. THE SENIOR AR REITERATED THE FACT THAT THE ASSESSEES OWN FUNDS AT RS. 115.04 CR ORES FAR EXCEEDED THE TOTAL INVESTMENTS AT RS. 99.56 CRORES AND THAT IT SHOULD BE HELD THAT THE ENTIRE DISALLOWANCE U/S 14A TO BE DELETED. THE SENIOR A.R. TO SUPPORT THE CONTENTION RELIED UPON THE DECISION OF EAST INDIA PHARMACEUTICAL WORKS LTD. VS. CIT, REPORTED IN 224 ITR 627 (SC), WHEREIN THE HON'BLE SUPREME COURT UPHELD THE VIEW T AKEN BY THE HON'BLE CALCUTTA HIGH COURT IN WOOLCOMBERS CASE RE PORTED IN 134 ITR 219, WHEREIN IT WAS FACTUALLY CONTENDED THAT PROFIT S WERE SUFFICIENT TO MEET THE ADVANCE TAX LIABILITY AND PROFITS WERE DEP OSITED INTO THE OVERDRAFT ACCOUNT, THEN IT SHOULD BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFIT AND NOT OUT OF THE OVERDRAFT ACCO UNT FOR THE RUNNING OF THE BUSINESS. THE SENIOR A.R. ALSO RELIED UPON THE DECISION OF CIT VS. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 7 OF 5 3 RELIANCE UTILITIES & POWERS LTD. REPORTED IN 313 IT R 340 (BOM), WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT HELD (HEAD NOTE) THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST FREE AND O VERDRAFT AND/OR LOANS TAKEN, THEN PRESUMPTION WOULD ARISE THAT INVE STMENTS WOULD BE OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABLE W ITH THE COMPANY IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. THE HON'BLE BOMBAY HIGH COURT HELD THAT INTEREST WAS DE DUCTIBLE. THE SENIOR A.R. RELIED UPON AN UNREPORTED JUDGMENT (COP Y PLACED ON RECORD) IN THE CASE OF CIT VS POLYOLEFINS INDUSTRIE S LTD. (I.T.A. NO.3897/2010) DATED 16-06-2011, WHEREIN THE HON'BLE BOMBAY HIGH COURT DISMISSED THE APPEAL FILED BY THE CIT AGAINST THE DECISION OF HON'BLE ITAT REPLY UPON THE CASE OF CIT VS. RELIANC E UTILITIES & POWERS LTD. (SUPRA). THE SENIOR A.R. ALSO RELIED UPON THE DECISION OF NATIONAL ORGANIC CHEMICAL INDS. LTD. VS. DCIT, RENDERED BY M UMBAI ITAT IN ITA NO. 3250/MUM/1990, WHEREIN THE CO-ORDINATE BENCH OF THE ITAT HELD THAT THE ASSESSEE HAS SUFFICIENT SELF GENERATED FUN DS TO MAKE INVESTMENTS. THE CO-ORDINATE BENCH ALSO FOLLOWED TH E DECISION IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWERS LTD. (S UPRA), TO ARRIVE AT THE APPROPRIATE DECISION. THE A.R. FURTHER RELIED UPON THE DECISION OF ADIT (INTL TAXATION) VS. INTERNATIONAL NEDERLAND BANK N V REPORTED IN 2011- TIOL-314 ITAT, MUMBAI, WHEREIN THE CO-ORDINATE BENC H DISMISSED THE GROUND RAISED BY THE REVENUE AGAINST THE DECISION O F THE CIT(A), WHEREIN IT WAS HELD THAT NO DISALLOWANCE SHOULD BE MADE TO THE EXTENT OF CAPITAL, PROFIT RESERVE AND SURPLUS WAS AVAILABL E WITH THE BANK. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 8 OF 5 3 9. THE SENIOR A.R. FURTHER DEALT WITH THE DISALLOWA NCE U/S 14A, WHEREIN THE AO HAD OBSERVED THAT APPELLANTS FUNDS H AD BEEN DIVERTED FOR MAKING INVESTMENTS AS AO HAS NOT ESTABLISHED TH E NEXUS BETWEEN THE BORROWED FUNDS AND FUNDS USED FOR MAKING INVEST MENTS. THE A.R. RELIED ON THE FOLLOWING DECISIONS: A) CIT VS. RELIANCE UTILITIES & POWERS LTD. [313 ITR 3 40] B) CIT VS. HERO CYCLES LTD. 189 TAXMAN 50 (P&H) C) WIMCO SEEDINGS LTD. VS. DCIT [107 ITD 267] (DEL-TM) D) INDO GERMAN INTERNATIONAL (P) LTD. VS. ITO 185 TAXM AN 103 (DEL) E) DCIT VS. BECK INDIA LTD. 26 SOT 141 (MUM) F) ASHOK BROS. VS. ITO 76 TTJ (HYD) 427 G) ALLEN BRADLEY INDIA LTD. VS. DCIT 80 ITD 43 (DEL) H) ITO VS. P.S.SUNDERRAJAN & CO. 116 TTJ 191 (MAD) AND I) ITO VS. ASSANDAS & SONS. 18 TTJ 199 (BOM), WHEREIN THE BASIC ISSUE WAS THAT UNLESS THE AO CREA TES A NEXUS BETWEEN THE BORROWED FUNDS AND FUNDS USED FOR MAKIN G THE INVESTMENTS, DISALLOWANCE CANNOT BE SUSTAINED. THE A.R. TO FURTHER HIS ARGUMENTS PLEADED THAT IF INTEREST IS NOT ALLOWABLE U/S 36(1)(III) THEN IT SHOULD BE ALLOWED AS A BUSINESS DEDUCTION U/S 37 OR IF NOT U/S 37 THEN U/S 57(III). THE A.R. THROUGH GROUND NO. 1.7 SUBMIT TED THAT IF NOTHING IS ACCEPTABLE THEN THE MAXIMUM DISALLOWANCE THE REVENU E AUTHORITIES COULD DISALLOW WAS ONLY RS. 4,32,000/- ONLY AND REL IED UPON THE DECISION OF THE CONSOLIDATED COFFEE LTD. VS. STATE OF KARNATAKA REPORTED IN (2001) 9 SCC 720, WHEREIN THE HON'BLE S UPREME COURT ACCEPTING THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. MANJUSHREE PLANTATION LTD. REPORTED IN 130 ITR 908 HELD THAT I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 9 OF 5 3 DEDUCTION ADMISSIBLE UNDER THE ACT SHALL BE SUCH P ROPORTION OF THE COMMON CHARGE AS THE AGRICULTURAL INCOME U/S 2(A) O F THE ACT BEARS TO THE TOTAL OF SUCH AGRICULTURAL INCOME AND THE INCOM E CHARGEABLE UNDER THE INDIAN INCOME-TAX ACT, 1922, IN RESPECT OF WHIC H SUCH COMMON CHARGE IS INCURRED . 10. THE SENIOR A.R. ON THE ISSUE OF WEIGHTED AVERAG E COST IN GROUND NO. 1.8, ARGUED AND CITED THE CASE AGAINST HIMSELF WHEREIN, HE SUBMITTED THAT IF THE CASE OF CHEMINVEST LTD. VS. I TO REPORTED IN 121 ITD 318 (DEL-SB) IS TAKEN INTO ACCOUNT THEN THE DIS ALLOWANCE WOULD BE TO THE TUNE OF RS. 2,11,67,000/- WHEREIN THIS FIGUR E COULD BE ARRIVED AT BY COMPUTING EXEMPT DIVIDEND YIELDING INVESTMENTS A GAINST THE TOTAL BORROWED FUNDS. 11. THE SENIOR A.R. IN GROUNDS NO. 1.9 AND 1.10 S UBMITTED THAT ALTERNATIVELY THE INTEREST PAID ON BORROWED CAPITAL ON ACCOUNT OF SEC 14A, AO SHOULD HAVE EXCLUDED INVESTMENTS MADE IN TH E PRECEDING YEAR WHICH AMOUNTED TO RS. 7596.15 LACS. WHILE SUBMITTIN G THIS, THE SR. A.R. CITED THE CASE OF CIT VS. SRIDEV INDS. REPORTED IN 192 ITR 165 (KAR), DCIT VS. BECK INDIA LTD. (2008) 26 SOT 141 (MUM), S ALEEM CHAWDA VS. ITO 96 TTJ (JODH), SAW PIPES LTD. VS. ADDL. CIT (2005) 3 SOT 237 (DEL) AND MEENAKSHI SYNTHETICS P. LTD. VS. ACIT 84 ITD 563 (LUCK). 12. THE SENIOR A.R. REFERRED TO GROUND NO. 1.11, BE ING THE ADDITIONAL GROUND RAISED, WHEREIN HE PLEADED THAT T HE AO SHOULD HAVE EXCLUDED INVESTMENTS MADE IN FOREIGN COMPANIES. ON THIS PROPOSITION, I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 10 OF 53 HE REFERRED TO THE CASE OF BIRLA GROUP HOLDINGS LTD . VS. DCIT (2007) 13 SOT 642. 13. ON THE OTHER HAND, DR SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 14. WE HAVE HEARD THE REPRESENTATIVES OF BOTH SIDES AND HAVE PERUSED THE MATERIAL BROUGHT ON RECORD AND CONSIDER THE SAME IN LINE WITH THE FACTS OF THE CASE AND VARIOUS JUDICIAL DEC ISIONS IN THE ASSESSEES OWN CASE IN THE PRECEDING YEARS AND OTHE R JUDICIAL PRONOUNCEMENTS BY VARIOUS HIGH COURTS AND THE APEX COURT. 15. COMING TO GROUND NO. 1, WHEREIN THE REVENUE AUT HORITIES HAD DISALLOWED THE INTEREST U/S 36(1)(III), ON GOING TH ROUGH THE ENTIRE FACTS, WE FIND THAT AGAINST THE TOTAL INVESTMENTS OF RS. 9 9.56 CRORES, THE ASSESSEE WAS HAVING ITS OWN FUNDS TO THE TUNE OF RS . 115.04 CRORES. FROM THE FACTS AS PLACED ON RECORD, NEITHER THE REV ENUE AUTHORITIES NOR THE DR HAS BEEN ABLE TO CLEARLY ESTABLISH THAT THE INVESTMENTS MADE BY THE ASSESSEE WERE EITHER NOT IN THE COURSE OF BUSIN ESS OR NOT FROM OWN AND NON INTEREST BEARING FUNDS. THE DETAILS PROVE T HE FACT THAT THE ASSESSEES OWN FUNDS EXCEEDED THE INVESTMENTS. THE BENCH SPECIFICALLY ASKED THE DR TO ESTABLISH THAT HOW THE FUNDS UTILIS ED IN INVESTMENTS COULD BE IDENTIFIED FROM THE TOTAL FUNDS AVAILABLE WITH THE ASSESSEE, MORE SO IN A CASE WHERE THERE ARE MIXED FUNDS. FROM THE SUBMISSIONS PLACED BEFORE THE AO AND INCORPORATED IN THE ASSESS MENT ORDER, WE FIND THAT THE TOTAL TURNOVER OF THE ASSESSEE COMPAN Y EXCEEDED 1600 CRORES. THE ASSESSEE HAD EXPLAINED TO THE AO THAT T HE ASSESSEE HAD I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 11 OF 53 OWN FUNDS OF RS. 115.04 CRORES AND THE CURRENT ASSE TS OF RS. 143.60 CRORES AND THE ASSESSEES UTILISATION WAS INVESTMEN TS OF RS. 99.55 CRORES AND FIXED ASSETS OF RS. 42.51 CRORES. IF WE LOOK INTO THIS FACTUAL MATRIX WE FIND THAT THE OWN FUNDS AND CURRENT ASSET S ALSO EXCEEDED THE UTILISATION OF FUNDS IN INVESTMENTS AND FIXED A SSETS. FROM THE IMPUGNED ORDER OF THE CIT(A), WE FIND THAT EVEN THE CIT(A) DID NOT APPRECIATE THE PATENT FACTS IN THIS LIGHT. WE FIND THAT THE FACTS THEMSELVES SPEAK, SINCE THE ASSESSEE IS HAVING A M IXED BAG OF FUNDS, A CLEAR CUT DISTINGUISHABLE ASCERTAINMENT COULD NOT BE MADE. ACTUALLY, WE HAVE SEEN FROM THE AOS ORDER THAT HE ACCEPTS TH E FACT THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE BANK ACCOUNTS FO R INVESTMENTS AND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT T HE LOANS BORROWED WERE CONTINUOUSLY UTILIZED FOR THE PURPOSE OF BUSIN ESS AND NOT MAKING INVESTMENTS IN SHARES . THE REVENUE AUTHORITIES ACCEPT THAT THE ASSESSEE WAS MAINTAINING COMMON POOL ACCOUNT AND WE ALSO FIND THAT THE REVENUE AUTHORITIES DID NOT MAKE ANY EFFORT ON THEIR OWN TO MAKE ANY ASCERTAINMENT TO CARVE OUT A CASE FOR THEMSELVE S, BUT RELIED UPON THE FIGURES PROVIDED BY THE ASSESSEE. THE PLAIN REA DING OF THOSE FIGURES PATENTLY TILTS THE CASE HEAVILY IN FAVOR OF THE ASSESSEE. AT THE TIME OF HEARING THE SR. A.R. HAD SUBMITTED THAT BES IDES THE CASE LAWS CITED BEFORE THE REVENUE AUTHORITIES, CERTAIN OTHER CASE LAWS, WHICH HE HAD PLACED IN THE PAPER BOOK OF CASE LAWS (EXTRACTE D RELEVANT PORTION). WE FIND THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWERS LTD. REPORTED IN 313 I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 12 OF 53 ITR 340 SQUARELY COVERS THE ISSUE OF THE ASSESSEE C OMPANY, HOLDING, IF THERE WERE FUNDS AVAILABLE BOTH INTEREST FREE A ND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT IN VESTMENTS WOULD BE OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABL E WITH THE COMPANY. THE INTEREST WAS DEDUCTIBLE . THIS CASE WAS FOLLOWED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. POLYOLEFIN S INDUSTRIES LTD., I.T.A. NO. 3897 OF 2010 (UNREPORTED) AND DECISIONS OF THE CO-ORDINATE BENCHES OF MUMBAI ITAT IN THE CASES OF NATIONAL ORG ANIC CHEMICAL INDUSTRIES LTD. VS. DCIT, I.T.A. NO. 3250/MUM/1996 AND ADIT (INT. TAX) VS. INTERNATIONAL NEDERLANDEN BANK NV, I.T.A. NOS. 5098 & 5099/MUM/2004. WE, THEREFORE, RESPECTFULLY FOLLOWIN G THE DECISION OF HON'BLE BOMBAY HIGH COURT AND OTHER DECISIONS, ALLO W THE CLAIM OF PAYMENT OF INTEREST U/S 36(1)(III). 16. SINCE WE HAVE ALLOWED THE DEDUCTION ON ACCOUNT OF INTEREST PAID U/S 36(1)(III) AS PER GROUNDS NO. 1.1 AND 1.2, HOLD ING THAT THE REVENUE AUTHORITIES HAD NOT BEEN ABLE TO ESTABLISH THE CONN ECTION AND/OR NEXUS OF BORROWED FUNDS TO MAKE INVESTMENTS. 17. GROUND NO. 1.3 ALSO STANDS ALLOWED AND GROUNDS NO. 1.4, 1.5 & 1.6 BEING ALTERNATIVE GROUNDS (TO GROUNDS NO. 1.1, 1.2 & 1.3), ARE RENDERED REDUNDANT, HENCE THESE GROUNDS ARE DISMISS ED. 18. GROUNDS NO. 1.7 & 1.8 ARE AGAINST SUSTAINING OF THE DISALLOWANCE U/S 14A. THE CIT(A) HAS MENTIONED IN T HE ORDER THAT IN THE INSTANT CASE IT IS A QUESTION OF DISALLOWANCE O F INTEREST PAID ON BORROWED FUNDS DIVERTED FOR NON BUSINESS PURPOSES, I.E. IN I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 13 OF 53 INVESTMENTS. WE HAVE ALREADY HELD THAT THE ISSUE OF INTEREST GETS COVERED U/S. 36 (1)(III), BUT IN ANY CASE, AN APPRO PRIATE DISALLOWANCE HAS TO BE MADE AS PER THE PROVISIONS OF SECTION 14A AGAINST THE EXEMPT INCOME. WE, THEREFORE, DIRECT THE AO TO COMP UTE THE DISALLOWANCE OF EXPENDITURE AT 5% OF THE INCOME CLA IMED EXEMPT U/S 10(33) OF THE ACT. GROUNDS NO. 1.7 TO 1.8 ARE ALLOWED FOR STATISTICAL PURPOSES. 19. GROUNDS NO. 1.9 & 1.10 ARE BEING ALTERNATIVE GR OUNDS HELD TO BE REDUNDANT, HENCE THESE GROUNDS ARE TO BE DISMISSED. 20. GROUND NO. 1.11, WHICH WAS NOT DEALT WITH EITHE R THE AO OR THE CIT(A) IS COVERED BY THE DECISION BY THE COORDINATE BENCH IN MUMBAI IN THE CASE OF BIRLA GROUP HOLDINGS LTD. VS DCIT, R EPORTED IN 13 SOT 642 (MUM), WHEREIN ITS WAS HELD, THE INTEREST ON BORROWINGS ATTRIBUTABLE TO INVESTMENTS MADE IN FOREIGN COMPANI ES IS TO BE CONSIDERED FOR ALLOWANCE UNDER SECTION 57(III) OF T HE IT ACT AND THE SAME SHALL BE CONSIDERED BY THE AO AS PER PROVISION S OF THE ACT. AS THE ISSUE HAS NOT BEEN DEALT WITH EITHER OF THE REV ENUE AUTHORITIES, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO, WHO SHALL EXCLUDE THE EXPENSE ATTRIBUTABLE TO INVESTMENTS MADE IN FOR EIGN COMPANIES, FOR THE PURPOSES OF COMPUTING THE DISALLOWANCE UNDER SE CTION 14A FOR THE PURPOSES OF GROUND NO. 1.8. 21. GROUNDS NO. 1.1 TO 1.11 ARE ALLOWED, WITH SPECI FIC DIRECTIONS IN GROUNDS NO. 1.7, 1.8 AND 1.11. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 14 OF 53 22. IN THE RESULT : GROUNDS NO. 1.1 TO 1.3 ARE ALLOWED. GROUNDS NO. 1.4, 1.5 & 1.6 ARE HELD TO BE RENDERED REDUNDANT, HENCE THESE ARE DISMISSED. GROUNDS NO. 1.7 & 1.8 ARE RESTORED TO THE FILE OF T HE AO WITH DIRECTIONS. GROUNDS NO. 1.9 & 1.10 ARE HELD TO BE RENDERED REDU NDANT, HENCE THESE ARE DISMISSED. GROUND NO. 1.11 IS RESTORED TO THE FILE OF THE AO W ITH DIRECTIONS. GROUND NO. 2 23. GROUND NO. 2.1 IS AGAINST THE ORDER OF THE CIT(A), WHEREIN THE CIT(A) HAD SUSTAINED THE DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S 80HHC AMOUNTING TO RS. 17,20,46,510/-. 24. THE DR SUPPORTED THE FINDINGS OF THE REVENUE A UTHORITIES. 25. AT THE OUTSET, THE SR. A.R. SUBMITTED THAT IN VIEW OF THE INSERTION OF 5 TH PROVISO TO SECTION 80HHC(3) BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 W.E.F. 01-04-1992 AND BY VIRT UE OF DECISION OF THE CO-ORDINATE BENCHES IN THE ASSESSEES OWN CASE IN I.T.A. NO. 5591/MUM/2005 DATED 11/09/2009 FOR ASSESSMENT YEAR 1999-2000; I.T.AS. NO. 4823 TO 4825/M/2005 COVERING ASSESSMENT YEARS 1996-97 TO 1998-99 AND I.T.AS. NO. 2781, 2697 & 4171/MUM/20 05 FOR ASSESSMENT YEARS 1992-93, 1994-95 AND 1995-96, THE ISSUE IS AGAINST IT. THE SR. A.R PRAYED FOR TAKING AN APPROPRIATE D ECISION, THE DR ON I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 15 OF 53 THE OTHER HAND, RELIED ON THE VIEWS TAKEN BY THE RE VENUE AUTHORITIES AND ALSO THE DECISION OF THE ASSESSEES OWN CASE AN D THE AMENDMENT MADE WITH THE INSERTION OF THE PROVISO, THE VIEW IS COVERED IN FAVOUR OF THE REVENUE. IN THE CIRCUMSTANCES, KEEPING IN VIEW THE AMENDMENT AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCHES IN THE ASSESSEES OWN CASES IN THE PRECEDING YEARS, WE UPHOLD THE DISALLOWANCE AND REJECT THE GROUND. HENCE, GROUND NO. 2.1 IS REJECTED. 26. GROUNDS NO. 2.2, 2.3 AND 2.4 WERE NOT PRES SED. 27. HE REFERRED TO GROUND NO. 2.5 WHEREIN THE ISSU E OF UNREALIZED EXPORT PROCEEDS OF RS. 94,44,61,792 WAS PRAYED TO B E EXCLUDED FROM THE TOTAL EXPORT TURN OVER AND TOTAL TURNOVER. THE SR. A.R. CONCEDED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE ITAT AND PRAYED THAT AN APPROPRIATE DECISION BE TAKEN BY THE BENCH. 28. RESPECTFULLY FOLLOWING THE DECISION OF EARLIER YEARS RENDERED BY THE CO-ORDINATE BENCHES, WE REJECT THIS GROUND. ACCORDINGLY, GROUND NO. 2.5 IS REJECTED. 29. GROUND NO. 2.6 IS NOT PRESSED. 30. GROUND NO. 2.7 PERTAINS TO EXCLUSION OF DIREC T COSTS OF RS. 37,64,85,020/-. THE SENIOR AR SUBMITTED THAT THIS I SSUE WAS ALSO RAISED BEFORE THE CO-ORDINATE BENCHES OF THE ITAT, MUMBAI AND THE SAME IS DECIDED IN FAVOUR OF THE ASSESSEE CONSISTEN TLY. THE RELEVANT I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 16 OF 53 PORTION OF THE JUDGMENT IN I.T.A. NOS. 4823 TO 4825 /MUM/2005, ORDER DATED 26.03.2009 IS BEING REPRODUCED AS HEREUNDER: HE FURTHER SUBMITTED THAT ISSUE RELATED GROUND N O. 6 HAS BEEN DECIDED IN FAVOUR THE ASSESSEE BY THE ITAT IN ASSESSEES OWN C ASES FOR AY 1996-97 TO 1998-99 VIDE ITA NOS. 4823 TO 4825/MUM/2005 ORDER DA TED 26TH MARCH, 2009, WHEREIN THE ITAT HELD AS UNDER: 4.6 GROUND 6 IN THE APPEALS FILED BY THE ASSESSEE IS ANOTHER ALTERNATIVE GROUND WHICH PERTAINS TO DEDUCTION U/S 80HHC OF THE ACT, WHEREIN UNREALIZED EXPORT SALE PROCEEDS ARE EXCLUDE D FROM TRADING EXPORT TURNOVER. THE ASSESSEE CLAIMS THAT IN SUCH AN EVENT , THE DIRECT COSTS OF TRADING GOODS ATTRIBUTABLE TO SUCH UNUTILIZED EXPOR T SALE PROCEEDS IS ALSO TO BE EXCLUDED. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE EARLIER ASSESSMENT YEARS WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION IN THE CASE OF ITO VS. ARTMIS EXPORTS (P) LTD., 108 ITD 1 (MUM.). I THIS DECISION THE BENCH HELD AS FOLLOWS: AS REGARDS THE ISSUE AS TO WHETHER DIRECT COST TO B E CONSIDERED FOR WORKING OUT DEDUCTION U/S 80HHC WITH REGARD TO TRADING EXPO RT SHOULD BE ONLY THAT DIRECT COST WHICH WAS ATTRIBUTABLE TO REALIZED TRAD ING EXPORT OR TOTAL DIRECT COST ATTRIBUTABLE TO REALIZED AS WELL AS UNREALIZED TRADING EXPORT, THE WORDS DIRECT COST MEAN COST DIRECTLY ATTRIBUTABLE TO THE TRADING EXPORT EXPORTED OUT OF INDIA INCLUDING PURCHASE PRICE OF SUCH GOODS. SI NCE DIRECT COST IS DEDUCTED FROM EXPORT TURNOVER OF TRADING GOODS WHICH IS ONLY REALIZED TRADING EXPORT TURNOVER, DIRECT COST TO BE CONSIDERED FOR THAT PUR POSE SHOULD BE ONLY THAT PORTION OF THE DIRECT COST REGARDING TRADING EXPORT TURNOVER WHICH IS ATTRIBUTABLE TO REALIZED TRADING EXPORT TURNOVER. F ROM A READING OF SUB- SECTION (3)(B) OF SECTION 80HHC, IT IS CLEAR THAT AS PER THE MANDATE OF THIS CLAUSE, DIRECT COST TO BE REDUCED FROM EXPORT TURNO VER OF TRADING GOODS IN DIRECT COST ATTRIBUTABLE TO SUCH EXPORT, I.E. TRADI NG EXPORT TURNOVER. SINCE AS PER DEFINITION OF EXPORT TURNOVER DEFINED IN EXPLA NATION (B) TO SECTION 80HHC(4C), THE EXPORT TURNOVER MEANS, SALE PROCEEDS RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN E XCHANGE, EXPORT TURNOVER OF TRADING GOODS FOR THE PURPOSE OF ABOVE CLAUSE (B) OF SECTION 80HHC(3) SHOULD ALSO BE REALIZED TRADING EXPORT TURNOVER AND DIRECT COST TO BE CONSIDERED SHOULD BE DIRECT COSTS ATTRIBUTABLE TO S UCH EXPORT, I.E., REALIZED TRADING EXPORT TURNOVER. THEREFORE, THE AO WAS NOT CORRECT IN DEDUCTING THE DIRECT COST OF UNREALIZED TRADING EXPORT ALSO FROM TRADING EXPORT TURNOVER FOR THE PURPOSE OF CALCULATING PROFIT WITH REGARD TO TR ADING EXPORT AS PER SECTION 80HHC(3)(B). RESPECTFULLY FOLLOWING THE SAME WE ALLOW THIS GROUN D OF THE ASSESSEE IN ALL THE THREE ASSESSMENT YEARS UNDER APPEAL. THE SENIOR AR PRAYED THAT AN APPROPRIATE FINDING BE GIVEN BY THE BENCH. ON THE OTHER HAND, DR SUPPORTED THE ORDERS O F THE REVENUE AUTHORITIES. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 17 OF 53 31. ON THIS ISSUE, WE WOULD RESPECTFULLY FOLLOW THE DECISION OF THE CO-ORDINATE BENCHES IN THE ASSESSEES OWN CASES AND ALLOW THE EXCLUSION OF DIRECT COSTS ATTRIBUTABLE TO UNREALISE D EXPORT PROCEEDS. ACCORDINGLY, GROUND NO. 2.7 IS ALLOWED. 32. GROUND NO. 2.8 PERTAINS TO EXPLANATION (BAA) TO SEC 80HHC ACCORDING TO WHICH THE AO SHOULD HAVE REDUCED 90% O F THE NET AMOUNT OF RECEIPTS BY WAY OF INTEREST EARNED, INSTE AD OF 90% OF THE GROSS AMOUNT OF SUCH RECEIPTS. THE SR. A.R. TOOK US THROUGH THE RELEVANT PORTION OF THE CIT(A)S ORDER WHEREIN THE CIT(A) HAS SUSTAINED THE VIEW OF THE AO BY FOLLOWING THE DECISION OF HIS PREDECESSOR, WHO HAD RELIED ON VARIOUS JUDGMENTS TO ARRIVE AT THE DE CISION. THE CIT(A), THUS DECIDED THE ISSUE AGAINST THE ASSESSEE. 33. THE SR. A.R. REFERRED TO THE LATEST DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD. VS CIT, C.A. NO. 1914 OF 2012 WHEREIN THE HON'BLE S UPREME COURT CEASED WITH THE ISSUED HELD AS UNDER: ..IN OUR CONSIDERED OPINION IT WAS NOT NECESSARY TO REFER TO THE EXPLANATORY MEMORANDUM WHEN THE LANGUAGE OF EXPLANA TION (BAA) TO SECTION 80HHC WAS CLEAR THAT ONLY NINETY PER CENT O F RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS COMPUTED UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OF AN ASSESSEE COULD BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) AND NOT NINETY PER CENT OF THE QUA NTUM OF ANY OF THE AFORESAID RECEIPTS WHICH ARE ALLOWED AS EXPENSES AN D THEREFORE NOT INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE. 16. IN THE RESULT, WE ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED ORDER OF THE HIGH COURT AND REMAND THE MATTER TO THE ASSESSING O FFICER TO WORK OUT THE DEDUCTIONS FROM RENT AND INTEREST IN ACCORDANCE WIT H THIS JUDGMENT. NO COST. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 18 OF 53 THE SENIOR AR PRAYED THAT SINCE THE ISSUE IS NOW SE TTLED BY THE HONBLE APEX COURT A DEFINITE FINDING ON THE ISSUE BE TAKEN BY THE BENCH AS WELL. 34. ON THE OTHER HAND, DR SUPPORTED THE ORDERS OF T HE REVENUE AUTHORITIES. 35. RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE SUPREME COURT, COURT IN THE CASE OF ACG ASSOCIATED CAPSULE PVT. LTD. VS CIT (SUPRA), WE ALLOW THE GROUND AND DIRECT THE AO TO R ECOMPUTE THE PROFITS OF BUSINESS IN ACCORDANCE WITH LAW, AS HELD BY THE HON'BLE APEX COURT. GROUND NO. 2.8 IS ALLOWED. 36. GROUND NO. 2.9 WAS AN ADDITIONAL GROUND TAKEN B EFORE THE C.I.T. (A), WHEREIN VIDE LETTER DATED 25/02/2005 THE ASSES SEE HAD RAISED GROUND NO. 2.6B, WHICH READ AS UNDER: IN COMPUTING THE PROFITS OF BUSIN ESS UNDER EXPLANATION (BAA) TO SECTION 80HHC, THE LEARNED ASSESSING OFFIC ER OUGHT TO HAVE REDUCED, UNDER SUB-CLAUSE (1) OF THAT EXPLANATION, NINETY PERCENT OF THE NET AMOUNTS OF T HE RECEIPTS BY WAY OF INTEREST EARNED AND COMMISSION EARNED, INSTEAD OF NINETY PER CENT OF GROSS AMOUNTS OF SUCH RECEIPTS. WE HAVE GONE THROUGH THE SUBMISSIO NS MADE IN THE COURSE OF HEARING AND ALSO AS APPENDED WITH THE GROUNDS. IN THE INTEREST OF JUSTICE, WE DIRECT THE AO TO COMPUTE THE PROFITS OF BUSINESS, FOR THE PURPOSES O F SECTION 80HHC EXPLANATION (BAA) IN ACCORDANCE WITH LAW, AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 37. GROUND NO. 2.9, THE CIT(A) IN HIS ORDER SIMPLY MENTIONS THAT NO SUCH GROUND IS BORNE OUT OF THE RECORDS. WE HAVE GO NE THROUGH THE LETTER AND THE GROUND AS TAKEN BY THE ASSESSEE AS A DDITIONAL GROUND I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 19 OF 53 AND WE FIND THAT THE CIT(A) HAS NOT DEALT WITH THE SAME AS IT MAY HAVE GROUND NO. 2.9, THE CIT(A) IN HIS ORDER SIMPLY MENT IONS THAT NO SUCH GROUND IS BORNE OUT OF THE RECORDS. 38. A.R. PRAYED THAT THE GROUND NEEDS TO BE RESTORE D TO THE FILE OF THE CIT(A), HE PRAYED ACCORDINGLY. 39. WE HAVE GONE THROUGH THE LETTER AND THE GROUND AS TAKEN BY THE ASSESSEE AS ADDITIONAL GROUND AND WE FIND THAT THE CIT(A) HAS NOT DEALT WITH THE SAME AS IT MAY HAVE BEEN GOT MISPLAC ED FROM HIS RECORDS. IN THE INTERESTS OF JUSTICE, WE DIRECT THE CIT(A) TO ADJUDICATE ON THIS ISSUE IN ACCORDANCE WITH THE LAW. ACCORDINGLY, GROUND NO. 2.9 IS ALLOWED FOR STATISTI CAL PURPOSES. 40. GROUND NO. 2.10 IS NOT PRESSED BY THE A.R., HENCE IT IS DISMISSED AS NOT PRESSED. 41. IN THE RESULT : GROUND NO. 2.1 IS REJECTED GROUNDS NO. 2.2, 2.3 AND 2.4 ARE DISMISSED BEING N OT PRESSED. GROUND NO. 2.5 IS REJECTED. GROUND NO. 2.6 IS NOT PRESSED, HENCE DISMISSED. GROUND NO. 2.7 IS ALLOWED. GROUND NO. 2.8 IS ALLOWED. GROUND NO. 2.9 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 2.10 IS NOT PRESSED, HENCE IS DISMISSED. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 20 OF 53 42. GROUND NO. 3 IS NOT PRESSED BEFORE US BY THE SR . A.R., HENCE IT IS DISMISSED AS NOT PRESSED.. 43. GROUND NO. 3A IS ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON PLANT & MACHINERY USED IN TEXTILE GARMENTS BUSINESS , THE DISALLOWANCE MADE IS AT RS. 19,22,474/-. THE SR. A.R. TOOK US TH ROUGH THE ORDER OF THE CIT(A), WHEREIN THE CIT(A) HAS FOLLOWED HIS OWN ORDER AND CIT(A)S ORDERS IN A.YRS. 1996-97 TO 1999-2000. THE SR. A.R. POINTED OUT THAT THE ISSUE HAS BEEN DECIDED BY THE CO-ORDIN ATE BENCHES IN THE ASSESSEES OWN CASES COVERING A.YRS. 1996-97 TO 199 9-2000 IN I.T.A. NOS. 4823 TO 4825/M/2005 AND I.T.A. NO. 5591/M/2005 . 11.1 THE REPRESENTATIVES OF THE PARTIES AGREED TH AT THE ISSUE DECIDED IN FAVOR OF THE ASSESSEE BY THE ITAT IN ASSESSEES OWN C ASES FOR AY 1996-97 TO 1998-99 VIDE ITA NOS. 4823 TO 4825/MUM/2005,ORDER DA TED 26TH MARCH, 2009, WHEREIN THE ITAT HELD AS UNDER: IN OUR CONSIDERED OPINION, THESE ARE NOT THE TESTS LAID DOWN FOR ALLOWANCE OR OTHERWISE OF THE DEPRECIATION CLAIM MADE BY THE ASSESSEE. IN FACT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION U/S 32. THE ESSENTIAL CONDITIONS FOR THE ALLOWANCE OF A DEPRECIATION CLAIM ARE (A) HE S HOULD BE THE OWNER OF THE ASSET; (B) IT SHOULD BE UTILIZED FOR BUSINESS PUR POSES. BOTH THESE CONDITIONS ARE FULFILLED IN THIS CASE. THE FACT THA T THE ASSESSEE HAD MADE A BUSINESS DECISION TO RECOVER LEASE RENT FROM THE OT HER PARTY I.E. VGMPL IS NOT RELEVANT CONSIDERATION FOR THE ISSUE AS TO WHET HER DEPRECIATION ALLOWANCE IS TO BE ALLOWED OR NOT. BE IT AS IT MAY, IT IS WEL L SETTLED THAT THE REVENUE CANNOT STEP INTO THE SHOES OF THE ASSESSEE AND DECI DE WHETHER A PARTICULAR COMMERCIAL DECISION IS PROPER OR NOT. IN VIEW OF THE ABOVE, DISCUSSION AND ALSO IN VIEW OF THE FACT THAT THE JURISDICTIONAL HI GH COURT IN THE CASE OF ASSOCIATED CEMENT CO. LTD., 68 ITR 478 (BORN.) HAS LAID DOWN THAT IT IS IMMATERIAL AS TO WHO USES THE ASSET AS LONG AS IT B ELONGS TO THE ASSESSEE AND THE ASSET HAS BEEN USED IN THE COURSE OF CARRYING O N THE BUSINESS OF THE ASSESSEE, IT IS ENTITLED TO DEPRECIATION, WE UPHOLD THE CONTENTION OF THE ASSESSEE AND ALLOW GROUND 16 FOR THE ASSESSMENT YEA R 1997-98 AND GROUND 12 FOR ASSESSMENT YEAR 1 998-99 OF THE ASSESSEE. 11.2 SINCE THE FACTS OF THE CASE AND GROUND OF APP EAL UNDER CONSIDERATION IS SIMILAR TO THAT OF AYS. 1996-97 TO 1998-99 CITED S UPRA, WE RESPECTFULLY FOLLOW THE DECISION OF THE ITAT AND IN THE LIGHT OF THAT WE ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. BESIDES, THIS, THE SR. A.R ALSO RELIED UPON THE DEC ISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. INDIAN EXPR ESS (MADURAI) PVT. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 21 OF 53 LTD. (MAD) 255 ITR 68 AND IN CIT V. ASSOCIATED CEM ENT CO. LTD. REPORTED IN 68 ITR 478 (BOM). 44. GROUND NO. 3A WAS NOT TAKEN IN THE GROUNDS OF A PPEAL FILED ALONG WITH FORM NO. 35. BUT WHILE FILING THE CONCIS E GROUNDS, THE ASSESSEE HAS TAKEN GROUND AGAINST THE DISALLOWANCE OF DEPRECIATION IN RESPECT OF PLANT & MACHINERY USED IN APPELLANTS TEX TILES AND GARMENTS BUSINESS AT RS. 19,22,474/-. THE CIT(A) HAD REJECTE D THE APPEAL AS HIS PREDECESSOR HAD DISALLOWED THE ISSUE IN ASSESSMENT YEARS 1996-97 TO 1999-2000, HE, THEREFORE, FOLLOWED HIS PREDECESSOR S DECISION. 45. BEFORE US, SR. A.R SUBMITTED THAT THE ISSUE HAS NOW BEEN COVERED BY THE CO-ORDINATE BENCHES IN THE ASSESSEE S OWN CASES IN THE PRECEDING YEARS, WHEREBY DECISION OF THE CIT(A) IN THE EARLIER YEARS HAD BEEN OVER-RULED IN ITA NO. 5591/MUM/2005, WHERE IN THE COORDINATE BENCH REFERS TO THE EARLIER DECISION, EX TRACTED IN PARA 23. 46. RESPECTFULLY FOLLOWING THE DECISION TAKEN BY TH E CO-ORDINATE BENCHES IN THE ASSESSEES OWN CASE AND AS HELD BY T HE HON'BLE MADRAS HIGH COURT AND HON'BLE BOMBAY HIGH COURT IN THE CAS ES OF CIT V. INDIAN EXPRESS (MADURAI) PVT. LTD. & CIT V. ASSOCIA TED CEMENT CO. LTD. (SUPRA), WE ALLOW THE DEPRECIATION AT RS. 19,22,474 /- AS CLAIMED BY THE ASSESSEE ON THE PLANT & MACHINERY USED BY THE ASSES SEE IN ITS GARMENT MANUFACTURING FACILITY. HENCE, GROUND NO. 3A IS ALL OWED. 47. GROUNDS NO. 4.1 TO 4.3 WERE NOT PRESSED BY T HE SR. A.R., THEREFORE, SAME ARE DISMISSED AS NOT PRESSED I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 22 OF 53 48. GROUND NO. 5 IS ON ACCOUNT OF DISALLOWANCE OF R S.1,12,63,157/- OF DEPRECIATION ON TWO HELICOPTERS OWNED BY THE ASS ESSEE. THE CIT(A) HAS FOLLOWED THE CIT(A)S ORDER FOR A.Y. 1997-98. T HIS ISSUE TOO HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUN AL IN ASSESSEES OWN CASE IN ITA NO. 4823 TO 4825/M/2005 AND I.T.AS. NO. 5591/M/2005, COVERING A.YRS. 1996-97 TO 1999-2000, OVER-RULING THE CIT(A)S DECISION. THE AR FURTHER SUBMITTED THAT TH E ISSUE IS COVERED BY THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. INDIAN EXPRESS (MADURAI) PVT. LTD. REPORTED IN 255 ITR 68 (MAD) AND HON'BLE BOMBAY HIGH COURT IN CIT VS. ASSOCIATED CEMENT CO. LTD. 68 ITR 478 (BOM). 12.1 THE LEARNED REPRESENTATIVES OF THE PARTIES AG REED THAT THE /ISSUE DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN AS SESSEES OWN CASES FOR AY 1996-97 TO 1998-99 VIDE ITA NOS. 4823 TO 4825/MUM/20 05 ORDER DATED 26TH MARCH, 2009, WHEREIN THE ITAT HELD AS UNDER:- 4.19 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACT IS THAT TH E ASSESSEES HELICOPTER WAS UTILIZED BY THE SISTER CONCERNS OF THE ASSESSEE AND IT HAD RECOVERED CERTAIN AMOUNTS FROM THOSE SISTER CONCERNS. THE ASSESSEE AS WELL AS THE FIRST APPELLATE; AUTHORITY DISALLOWED THE CLAIM ON THE GR OUND THAT THE HELICOPTER WAS USED BY THOSE SISTER CONCERNS FOR THEIR OWN PUR POSES, WHICH IS AN INCORRECT FINDING AS LONG AS THE REVENUE DOES NOT D ISPUTE THAT THE ASSESSEE ACTS AS A MARKETING ARM OF THOSE SISTER CONCERNS FO R THEIR PRODUCTS. THE CLAIM OF THE ASSESSEE THAT IT IS FOR THE BUSINESS INTERES T THE ASSESSEE HAD TO TRANSPORT ITS CUSTOMERS TO THE MANUFACTURING FACILITIES OF IT S SUPPORTING MANUFACTURERS, WHO ARE ACCOMPANIED BY THE PERSONAL FROM THE ASSESS EE COMPANY. THUS, A CERTAIN PORTION OF THE TOTAL EXPENDITURE IS APPORTI ONED TOWARDS THE EMPLOYEES ACCOMPANYING ITS CUSTOMERS AND THE REST ARE RECOVER ED FROM ITS SISTER CONCERNS. THIS IS A FACT ON RECORD. UNDER THESE FAC TS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE ASSE SSEE HAS TO SUCCEED IN ITS GROUND. WITH REGARD TO THE ALLOWABILITY OF DEPRECIA TION, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ASS OCIATED CEMENT LTD. (SUPRA) UNDER SIMILAR SET OF FACTS AND CIRCUMSTANCES HAS HELD AS FOLLOWS: HELD, AS DEPRECIATION ALLOWANCE IS GRANTED IN RESPE CT OF ASSETS BEING THE PROPERTY OF THE ASSESSEE, IT IS THE OWNER OF THE PR OPERTY WHO IS ENTITLED TO THE DEPRECIATION, IT IS IMMATERIAL AS TO WHO USES THE A SSET. SINCE THE APPELLATE ASSISTANT COMMISSIONER AND THE TRIBUNAL HAD CONCURR ENTLY FOUND THAT THE ASSETS BELONGED TO THE ASSESSEE COMPANY AND THAT TH E ASSETS HAVE BEEN USED I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 23 OF 53 IN THE COURSE OF CARRYING ON ITS BUSINESS AND THE P OSITION OF THE CEMENT MARKETING CO. WAS NO MORE THAN THAT OF A SALES MANA GER, DEPRECIATION SHOULD BE ALLOWED TO THE ASSESSEE. IN THE JUDGMENT REPORTED IN 255 ITR 68 (MAD) IN THE C ASE OF CIT VS. INDIAN EXPRESS (MADURAI) PVT. LTD. THE HONBLE MADRAS HIGH C OURT, ALSO UNDER A SIMILAR SET OF FACTS AND CIRCUMSTANCES, HELD AS UND ER:- SECTIONS 30, 31 AND 32 UNIFORMLY USE THE EXPRESSION USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. BY SUBSECTION (2) OF SECTION 38, IN ORDER TO CLAIM FULL BENEFIT OF THOSE PROVISIONS SUCH USER IS REQUIRED TO BE EXCLUSIVE FOR THE PURPOSE OF THE BUSINESS OR PROFESSION. THE EMPH ASIS HERE IS ON THE USER FOR BUSINESS OR PROFESSION. TO THE EXTENT OF SUCH U SER FOR NON-BUSINESS OR NON- PROFESSIONAL PURPOSES, THE BENEFIT ALLOWED UNDER SE CTIONS 30, 31 AND 32 IS REQUIRED TO BE REDUCED PROPORTIONATELY. IF PAYMENT OR EXPENDITURE IS INCURRED FOR THE PURPOSE OF THE TRADE OF THE ASSESSEE IT DOE S NOT MATTER THAT THE PAYMENT MAY BENEFIT A THIRD PARTY. THE FACT THAT A BENEFIT IS OBTAINED BY A THIRD PARTY BY REASON OF AN EXPENDITURE INCURRED BY AN ASSESSEE DOES NOT IPSO FACTO RESULT IN THE ASSESSEE NOT BEING REGARDED AS HAVING INCURRED THE EXPENDITURE SOLELY AND EXCLUSIVELY FOR ITS BUSINESS . WHAT IS IMPORTANT IS THE INTENTION OF THE ASSESSEE AND THE USER BY THE ASSES SEE OF THE MACHINERY IN RELATION TO HIS BUSINESS. IF THE INVESTMENT IS MADE BY THE ASSESSEE AND OWNERSHIP VESTS IN THE ASSESSEE, EXPENSE IS INCURRE D BY THE ASSESSEE, THE MACHINE IS USED FOR THE BUSINESS OF THE ASSESSEE, A ND THE MACHINE HAS NOT BEEN USED BY THE ASSESSEE FOR ANY NON-BUSINESS OR NO N-PROFESSIONAL USE, THE EXPENDITURE INCURRED ON THE MACHINERY IS COMMERCIAL LY EXPEDIENT FROM THE POINT OF VIEW OF THE BUSINESS OF THE ASSESSEE, AND IF THE BUSINESS OF THE ASSESSEE IS BENEFITED FROM THE USER OF THE MACHINE, THEN THE IDENTICAL SHARING OF THE BENEFITS OBTAINED FORM THE USER OF THE MACHI NE WITH AN ASSOCIATE WOULD NOT RENDER THE USER OF THE MACHINE NON-EXCLUSIVE FOR THE PURPOSE OF SECTION 38(2). 4.20 RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS, WE ALLOW THE GROUND RAISED BY THE ASSESSEE. 12.2 SINCE THE FACTS OF THE CASE AND GROUND OF APPE AL UNDER CONSIDERATION IS SIMILAR TO THAT OF AYS. 1996-97 TO 1998-99 CITED SU PRA, WE RESPECTFULLY FOLLOW THE DECISION OF THE ITAT AND IN THE LIGHT OF THAT W E ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 49. RESPECTFULLY FOLLOWING THE DECISIONS, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE DEPRECIATION AS CLAIMED. ACCORDINGLY, GROUND NO. 5 IS ALLOWED. 50. GROUNDS NO. 6.1 TO 6.3 AND 8 PERTAINED TO THE D ISALLOWANCE OF RS. 73,15,005/- AND RS. 16,81,310 ON ACCOUNT OF PRO VISION FOR INCOME TAX CHARGEABLE IN NEPAL AND THAILAND. THE SR. A.R. CONCEDED THAT WITH THE INSERTION OF EXPLANATION 1 TO SEC 40(A)(II) THE ISSUE IS COVERED I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 24 OF 53 AGAINST THE ASSESSEE. WE HOLD IT ACCORDINGLY AND AG AINST THE ASSESSEE. ACCORDINGLY, GROUNDS NO. 6.1 TO 6.3 AND NO. 8 ARE DISMISSED. 51. GROUND NO. 7 PERTAINS TO TRAVELLING EXPENSES OF RS. 80,564/- ON Y2K PROFESSIONALS. THE CIT(A) IN THE ORDER MENTIONS THAT TRAVELLING EXPENSES AT RS. 80,564/- CANNOT BE ALLOWED AS THE A SSESSEE DID NOT SUBMIT ANY EVIDENCE IN SUPPORT OF ITS CONTENTIONS. THE CIT(A) FURTHER OBSERVED THAT THE AUDIT REPORT AS PRESCRIBED U/S 36 (1)(XI) OF THE ACT HAD EXCLUDED THIS EXPENDITURE. THE CIT(A) OBSERVED THAT THE AUDITOR WOULD HAVE INCLUDED THIS EXPENDITURE HAD IT BEEN LE GITIMALLY ALLOWABLE IN THE SECTION. ON THIS BASIS THE CIT(A) SUSTAINED THE ADDITION. 52. THE SR. A.R. SUBMITS THAT AN APPROPRIATE DECISI ON MAY BE TAKEN BY THE BENCH ON THIS ISSUE. 53. BEFORE US ALSO, ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE. WE, THEREFORE, DO NOT FIND ANY REASON TO DISTURB THE FI NDINGS OF THE REVENUE AUTHORITIES AND DISMISS THE SAME. GROUND NO. 7 IS DISMISSED. 54. GROUNDS NO. 9.1 TO 9.3 HAVE NOT BEEN PRESSED BY THE SR. A.R. WE, THEREFORE, DISMISS THE SAME. 55. GROUNDS NO. 10.1 IS CHARGING OF INTEREST OF RS. 2,16,90,335/- U/S 244A, WHICH SHOULD NOT HAVE BEEN CHARGED PARTICULAR LY WHEN THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A ). THE SR. A.R. SUBMITTED THAT THE ASSESSEE WAS IN RECEIPT OF INTER EST U/S 244A, WHICH SHOULD NOT BE CHARGED TO TAX. THE CIT(A) HELD THAT IT IS A REVENUE I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 25 OF 53 RECEIPT, CHARGEABLE TO TAX IN THE FORM OF DAMAGES. THE CIT(A) THUS SUSTAINED THE OBSERVATION OF THE AO. 56. BEFORE US THE SENIOR AR HAS CONCEDED THAT TH E ISSUE IS AGAINST THE ASSESSEE IN ITS OWN CASE IN I.T.A. NO. 5591/M/0 5 IN A.Y 1999-2000, RENDERED BY THE CO-ORDINATE BENCH OF THE MUMBAI TRI BUNAL. RESPECTFULLY FOLLOWING THE SAID DECISION IN THE ORD ER, WE DISMISS THE GROUND. GROUND NO. 10.1 IS DISMISSED. 57. GROUND NO. 10.2 IS ON ACCOUNT OF TREATMENT OF I NTEREST OF RS. 2,16,90,335/- U/S 244A AS BUSINESS INCOME AND NOT A S INCOME FROM OTHER SOURCES. THE CIT(A) HAS TREATED AS INCOME FRO M OTHER SOURCES BY CREATING A DISTINCTION OF THE CASE OF R.B. JODHAMAL KUTHIALA VS. CIT REPORTED IN 83 ITR 464 (P&H). THE CIT(A) OBSERVED T HAT THAT CASE WAS ON THE ISSUE OF EXCESS PROFIT TAX. THE SR. A.R., HO WEVER, REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND PLEADED THAT IT IS A BUSINESS RECEIPT AND NOT INCOME FROM OTHER SOURCE S. 58. GROUND NO. 10.2 IS ON THE TREATMENT OF INTEREST RECEIVED BY THE ASSESSEE U/S. 244-A OF THE I.T.ACT. AS REFERRED TO BY THE SR. A.R, THE CHARACTER OF THE RECEIPT SHALL REMAIN THE SAME WHEN IT WAS ALLOWED OR DISALLOWED ON THE PREVIOUS OCCASION BY REFERRING TO THE HON'BLE PUNJAB & HARYANA HIGH COURT IN R. B. JODHAMAL KUTHIALA VS. CIT, REPORTED IN 83 ITR 464, WE ARE INCLINED TO AGREE WITH THE SUBMI SSIONS MADE BY THE SR. A.R THAT THE INTEREST RECEIVED SHALL BE TREATED AS BUSINESS RECEIPT AND NOT INCOME FROM OTHER SOURCES, WE ALLOW THIS GR OUND. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 26 OF 53 GROUND NO. 10.2 IS ALLOWED. 59. GROUND NO. 11 IS DISALLOWANCE OF RS. 21,689/- T REATING THE PURCHASE OF CARPETS AS CAPITAL EXPENDITURE. THE SR. A.R. SUBMITS THAT THOUGH THE AMOUNT IS SMALL BUT THE FACTS ARE INCORR ECT, I.E. THE EXPENDITURE IS NOT ON ACCOUNT OF PURCHASE OF CARPET S BUT ON ACCOUNT OF PROVIDING FLOOR COVERINGS ON THE ASSESSEES LEASED PREMISES. THE SR. A.R. REFERRED TO THE CASE LAWS RENDERED BY VARIOUS HIGH COURTS, I.E. CIT VS. LAKE PALACE HOTELS & MOTELS (P) LTD. 131 TAXMAN 836 (RAJ), CIT VS. INDIAN METAL AND METALLURGICAL CORPORATION 182 ITR 460 (MAD), 141 ITR 40 (MAD) AND MODERN TRADERS (CHINESE ROOM) VS ACIT [1995] 53 TTJ 237. HE THEREFORE, SUBMITTED THAT IN THE LIGHT OF T HE ABOVE DECISIONS, THE EXPENSE IS AN ALLOWABLE BUSINESS EXPENSE. 60. GROUND NO. 11 IS THE TREATMENT OF FLOOR COVERIN GS ON THE LEASED PREMISES. THOUGH THE AMOUNT IS SMALL, BUT THE SR. A .R SUBMITTED THAT THE FLOOR COVERING WAS ORDINARY FLOOR COVERING USED FOR OFFICE PREMISES AND NOT CARPETS AS MADE OUT BY THE REVENUE AUTHORIT IES. THE SR. A.R HAS CITED JUDGMENTS IN THE FAVOR OF THE ASSESSEE BU T HAS NOT ASSISTED US BY PROVIDING ANY EVIDENCE SUCH AS ANY BILLS OR V OUCHERS TO SHOW THE FACTUAL POSITION, WE, CANNOT DECIDE THE ISSUE OF FA CTS WITHOUT ANY EVIDENCE, AND PURELY ON THE DECISIONS OF VARIOUS CO URTS, WE THEREFORE, DO NOT FIND ANY REASONS TO DEVIATE FROM THE FINDING S OF THE CIT(A), WE THEREFORE, DISMISS THIS GROUND. GROUND NO. 11 IS DISMISSED. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 27 OF 53 61. GROUND NO. 12 IS ON ACCOUNT OF DISALLOWANCE OF LIABILITY FOR CENTRAL SALES TAX OF RS. 1,57,638/-, THE SR. A.R. C ONCEDED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN KEDARNATH JUTE MFG. CO. LTD. VS. CIT REPORTED IN 82 ITR 363 (SC). 61. GROUND NO. 12 HAS BEEN CONCEDED BY THE SENIOR A R TO BE AGAINST THE ASSESSEE, FOLLOWING THE HONBLE SUPREME COURTS DECISION IN KEDAR NATH JUTE MFG. CO. LTD. VS CIT, REPORTED IN 8 2 ITR 363 (SC). RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COU RT, WE DO NOT INTEND TO DISTURB THE FINDINGS OF THE CIT(A). GROUND NO. 12 IS DISMISSED. 62. GROUNDS NO. 13 & 14 ARE NOT PRESSED, HENCE THES E ARE DISMISSED. 63. GROUND NO. 15 IS ON ACCOUNT OF OMISSION TO SET OFF AND ALLOW CARRY FORWARD OF RS. 2,16,45,977/- BEING THE TAX CR EDIT U/S 115JA FROM A.Y 1998-99. THE CIT(A) HAS DISALLOWED THE CARRY FO RWARD AND TAX CREDIT BECAUSE HIS PREDECESSOR HAD HELD THAT THE CL AIM MADE BY THE ASSESSEE WAS PRE MATURE AS THE APPELLATE ORDERS FOR A.YRS. 1997-98 TO 1999-2000 HAD JUST BEEN PASSED AND ACCORDING TO THE CIT(A), THE ASSESSEE SHOULD HAVE AWAITED TOO EXAMINE AND GIVE E FFECT TO THE APPELLATE ORDERS. THE SR. A.R. SUBMITS THAT TECHNIC ALLY THE OBSERVATIONS OF THE CI(A) WERE CORRECT BUT SIMULTANEOUSLY, HE HA S POINTED OUT THAT THE ISSUE HAS GOT COVERED IN ITS OWN CASE IN I.T.A. NOS. 4823 TO 4825/M/2005 COVERING ASSESSMENT YEARS 1996-97 TO 19 98-99 AND I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 28 OF 53 I.T.A. NO. 5591/MUM/2005 FOR ASSESSMENT YEAR 1999-2 000 BY THE CO- ORDINATE BENCHES OF MUMBAI, WHEREIN IT WAS HELD AS UNDER: 15. GROUND NO. 17 IS IN RESPECT OF OMISSION TO SET OFF AND CARRY FORWARD TO AY 2000-01 TAX CREDIT U/S 115JAA BROUGHT FORWARD FRO M AY 1998-99 OF RS. 2,16,45,977/-. 15.1. THE LEARNED REPRESENTATIVES OF THE PARTIES A GREED THAT THE ISSUE DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN AS SESSEES OWN CASES FOR AY 1996-97 TO 1998-99 VIDE ITA NOS. 4823 TO 4825/MUM/20 05 ORDER DATED 26TH MARCH, 2009, WHEREIN THE ITAT HELD AS UNDER: 4.23 GROUND NO. 19 FOR THE ASSESSMENT YEAR 1997-98 AND GROUND 14 FOR THE ASSESSMENT YEAR 1998-99 ARE ON THE ISSUE OF GRA NTING OF TAX CREDIT U/S 115JAA WHICH IS BROUGHT FORWARD FROM THE EARLIER AS SESSMENT YEAR. AS THE UNDISPUTED FACT IS THAT THE ASSESSEE IS ENTITLED TO TAX CREDIT, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION WITH A DIRECTION TO CONSIDER THE CLAIM OF THE ASSESSEE FOR GRANT OF TAX CREDIT A S PER LAW. 15.2 SINCE THE FACTS OF THE CASE AND GROUND OF APPE AL UNDER CONSIDERATION IS SIMILAR TO THAT OF AYS. 1996-97 TO 1998-99 CITED SU PRA, WE RESPECTFULLY FOLLOW THE DECISION OF THE ITAT AND IN THE LIGHT OF THAT WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH IDENTICAL DIRECTIONS GIVEN BY ITAT FOR AYS. 1996-97 TO 1998-99. 64. GROUND NO. 15, THE COORDINATE BENCH IN ASSESSEE S OWN CASE IN ITA NO. 5591/MUM/2005, COVERING ASSESSMENT YEAR 199 9-2000 HAS RESTORED THE ISSUE TO THE FILE OF THE AO. WE ALSO T HINK THAT IN THE INTEREST OF JUSTICE, THE ISSUE MUST GO TO THE FILE OF THE AO, WHO SHALL ALONG WITH THE EARLIER YEARS COMPUTATIONS, COMPUTE THE TAX CREDIT IN LINE AND IN SYMMETRY. THE ISSUE IS RESTORED TO THE AO, WITH SPECIFIC DIRECTION. THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 65. GROUND NO. 16 IS ON ACCOUNT OF LEVY OF INTEREST U/S 234B. THE SR. A.R. SUBMITS THAT THIS BEING CONSEQUENTIAL, APP ROPRIATE DIRECTIONS MAY BE GIVEN. 66. GROUND NO. 16 IS CONSEQUENTIAL. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 29 OF 53 67. GROUND NO. 16A IS ADDITIONAL GROUND TAKEN BY TH E ASSESSEE, WHERE IT SAYS THAT INTEREST U/S 234B BECOMES NOT CH ARGEABLE IN RESPECT OF DISALLOWANCE OF CLAIM FOR DEDUCTION U/S 80HHC ON RS. 17,20,46,510/-. THE CLAIM OF THE ASSESSEE IS THAT A T THE TIME OF COMPUTATION INCOME FOR THE CURRENT YEAR, THE RELEVA NT FIFTH PROVISO TO SECTION 80HHC(3) VIDE TAXATION LAWS (AMENDMENT) ACT , 2005 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 1992, I.E. ALMOST 6 YEARS AFTER THE PREVIOUS YEAR ENDED ON 31-03-2000. SINCE THE RELEVA NT PROVISO WAS NOT ON THE STATUTE BOOK, THE ASSESSEE HAD NO OPPORTUNIT Y TO PAY ADVANCE TAX. THE SR. A.R. SUBMITS THAT THE ISSUE IS NOW COV ERED BY ITS OWN CASES BY THE MUMBAI BENCHES IN I.T.A. NOS. 4823 TO 4825/M/2005 COVERING ASSESSMENT YEARS 1996-97 TO 1998-99 AND I. T.A. NO. 5591/MUM/2005 FOR ASSESSMENT YEAR 1999-2000 AS UNDE R: 17.1 THE LEARNED REPRESENTATIVES OF THE PARTIES AG REED THAT THE SUE DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN AS SESSEES OWN CASES FOR AY 1996-97 TO 1998-99 VIDE ITA NOS. 4823 TO 4825/MUM/20 05 ORDER DATED 26TH MARCH, 2009, WHEREIN THE ITAT HELD AS UNDER: 4.15 THE ASSESSEE, RAISED AN ADDITIONAL GROUND FOR ALL THE ASSESSMENT YEARS UNDER APPEAL, VIDE GROUND 17 FOR ASSESSMENT YEAR 19 96-97, GROUND 21 FOR ASSESSMENT YEAR 1997-98 AND GROUND 16 FOR THE ASSES SMENT YEAR 1998-99. THE ASSESSEE MADE A CLAIM U/S 80HHC AND THIS CLAIM STOOD DEFEATED BY THE INSERTION OF FIFTH PROVISO TO SECTION 80HHC(3) BY TH E TAXATION LAWS (AMENDMENT) ACT, 2005 WITH EFFECT FROM 01.04.1992. DUE TO THIS RETROSPECTIVE AMENDMENT THE ASSESSEE RAISES THIS LEGAL CLAIM THAT INTEREST U/S 234B IS NOT CHARGEABLE IN RESPECT OF DISALLOWANCE OF THE ASSESS EES CLAIM FOR DEDUCTION U/S 80HHC. AFTER HEARING RIVAL CONTENTIONS WE ARE O F THE CONSIDERED OPINION THAT THIS IS A PURE LEGAL CLAIM AND DOES NOT REQUIR E ANY NEW EVIDENCE AND AS ALL THE FACTS ARE ON RECORD, THE SAME CAN BE ADMITT ED. THE ASSESSEE WHILE FILING THIS RETURN OF INCOME HAS CLAIMED DEDUCTION U/S 80HHC BY NOT TAKING INTO CONSIDERATION THE AMOUNT OF NEGATIVE PROFITS C OMPUTED UNDER THE PROVISIONS TO SECTION 80HHC(3)(C) AND AGAINST THE AMO UNT COMPUTED UNDER THE THEN PROVISO TO SECTION 80HHC(3) THE ASSESSING O FFICER DISALLOWED, IN FULL, THE ASSESSEES AFORESAID CLAIM. FURTHER, THE L EARNED AO ALSO CHARGED INTEREST U/S 234B. VIDE TAXATION LAWS (AMENDMENT) AC T, 2005, ALMOST 8 YEARS FROM THE END OF THE PREVIOUS YEAR ENDING, ON 31ST M ARCH, .1998 RELEVANT TO ASSESSMENT YEAR 1998-99 UNDER CONSIDERATION, THE PAR LIAMENT INSERTED FIFTH PROVISO TO SECTION 80 HHC WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1992. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 30 OF 53 CONSEQUENT TO WHICH THE ASSESSEES CLAIM FOR DEDUCTI ON STOOD DEFEATED IN TOTO. THE ASSESSEES SUBMISSION IS THAT, AS THE FIFT H PROVISO TO SECTION 80 HHC(3) WAS NOT ON THE STATUTE BOOK DURING THE PREVIO US YEAR ENDED 3JST MARCH, 1998, THE ASSESSEE HAD NO OPPORTUNITY TO PAY ADVANCE TAX DURING THE YEAR ON THE BASIS OF LAW LAID DOWN BY THE FIFTH PRO VISO. THUS, THE ASSESSEE DENIES ITS LIABILITY TO PAY INTEREST U/S 234B IN RE SPECT OF THE DISALLOWANCE IN QUESTION. THE LEARNED COUNSEL PLACED RELIANCE ON TH E DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF B.S.C. TEXTILE S VS. 1840/MDS/2006 DATED 26.02.2008 2008-TIOL-459-ITAT (MAD). THE LEARNED DEPAR TMENTAL REPRESENTATIVE SUBMITS THAT LEVY OF INTEREST IS MAN DATORY AND CONSEQUENTIAL AND THUS IT SHOULD BE UPHELD. AFTER HEARING RIVAL C ONTENTIONS WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF B.S.C. TEXTILE S VS. ITO (SUPRA). RESPECTFULLY FOLLOWING THE SAME WE DECIDE THE ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 17.2 SINCE THE FACTS OF THE CASE AND GROUND OF APPE AL UNDER CONSIDERATION IS SIMILAR TO THAT OF AYS. 1996-97 TO 19 98-99 CITED SUP RA, WE RESPECTFULLY FOLLOW THE DECISION OF THE ITAT AND IN THE LIGHT OF THAT WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. AND BY CO-ORDINATE BENCH OF ITAT, CHENNAI IN THE CA SE OF BSC TEXTILES VS. ITO, I.T.A. NO. 1840/MAD/2006, REPORTED IN 2008 TIOL 459 (ITAT- CHENNAI), AS EXTRACTED IN THE ABOVE PARA. 68. GROUND NO. 16A, THE ASSESSEE PRAYS THAT INTERES T U/S 234B IS NOT CHARGEABLE IN RESPECT OF ADDITIONS MADE DUE TO RETR OSPECTIVE AMENDMENTS OF NON EXISTENT PROVISIONS. THE ISSUE IS NOW SETTLED IN ASSESSEES OWN CASE IN EARLIER YEARS, WE ALLOW THE GROUND AND DIRECT THE AO TO NOT TO CHARGE INTEREST, AS CLAIMED BY THE DEPARTMENT AS A CONSEQUENCE OF INSERTION OF THE FIFTH PROVISO TO SE CTION 80HHC(3), RETROSPECTIVELY, YEARS AFTER THE CLOSURE OF ACCOUNT S OF THE ASSESSEE. IN THE RESULT, GROUND NO. 16A IS ALLOWED. I.T.A. NO. 3958/MUM/06 A.Y. 2001-02 (ASSESSEES APPEAL : I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 31 OF 53 THE GROUNDS ARISE FROM THE COMMON ORDER OF THE CIT( A) XXIII, MUMBAI, DATED 02-01-2006, COVERING ASSESSMENT YEARS 2000-01, 2001- 02 AND 2002-03. GROUNDS NO. 1.1 TO 1.11: 69. GROUNDS NO. 1.1 TO 1.11 ARE IDENTICAL GROUNDS T AKEN IN ASSESSMENT YEAR 2000-01. AS THE GROUNDS ARE IDENTIC AL, FOR THE REASONS/FINDINGS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN IN EACH OF THE GROUNDS NUMBERED 1.1 TO 1.11 WHICH ARE AS FOLLOWS: GROUNDS NO. 1.1 TO 1.3 ARE ALLOWED. GROUNDS NO. 1.4, 1.5 & 1.6 ARE HELD TO BE RENDERED REDUNDANT, HENCE THESE ARE DISMISSED. GROUNDS NO. 1.7 & 1.8 ARE RESTORED TO THE FILE OF T HE AO WITH DIRECTIONS. GROUNDS NO. 1.9 & 1.10 ARE HELD TO BE RENDERED REDU NDANT, HENCE THESE ARE DISMISSED. GROUND NO. 1.11 IS RESTORED TO THE FILE OF THE AO W ITH DIRECTIONS. GROUNDS NO. 2.1 TO 2.10 : 70. GROUNDS NO. 2.1 TO 2.10 ARE IDENTICAL GROUNDS T AKEN IN ASSESSMENT YEAR 2000-01. AS THE GROUNDS ARE IDENTIC AL, FOR THE REASONS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN IN EACH OF THE GROUNDS NUMBERED 2.1 TO 2.10 WHICH ARE AS FOLLOWS: GROUND NO. 2.1 IS REJECTED. GROUND NO. 2.2 TO 2.4 HAVE NOT BEEN PRESSED, HENCE THESE ARE DISMISSED AS NOT PRESSED. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 32 OF 53 GROUND NO. 2.5 IS REJECTED. GROUND NO. 2.6 IS NOT PRESSED, HENCE REJE CTED AS NOT PRESSED. GROUND NO. 2.7 IS ALLOWED. GROUND NO. 2.8 IS RESTORED TO THE FILE OF THE AO WITH DIRECTIONS. GROUND NO. 2.9 IS RESTORED TO THE FILE OF THE CIT(A ) WITH DIRECTIONS. GROUND NO. 2.10 IS NOT PRESSED HENCE REJEC TED AS NOT PRESSED. 71. GROUND NO. 3 IS NOT PRESSED BEFORE US BY SR. A. R HENCE IT IS DISMISSED AS NOT PRESSED. 72. GROUND NO. 3A: 73. GROUND NO. 3A IS IDENTICAL GROUND TAKEN IN ASSE SSMENT YEAR 2000-01 IS IDENTICAL GROUNDS TAKEN IN ASSESSMENT YE AR 2000-01. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION T AKEN IN ASSESSMENT YEAR 2000-01, WHERE WE HAVE ALLOWED THE DEPRECIATIO N IN RESPECT OF PLANT & MACHINERY USED IN APPELLANTS TEXTILES AND G ARMENTS BUSINESS. WE, THEREFORE, SET ASIDE THE ORDER OF THE REVENUE A UTHORITIES ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE DEPRECIATION A S CLAIMED BY THE ASSESSEE. ACCORDINGLY, GROUND NO. 3A IS ALLOWED. GROUNDS NO. 5 & 6: 74. GROUNDS NO. 5 AND 6 ARE IDENTICAL GROUNDS NO. 6 .1 TO 6.3 IN ASSESSMENT YEAR 2000-01, WHEREIN WE HAVE DISMISSED THE GROUND. FOR THE REASONS/FINDINGS GIVEN THEREIN, WE SHALL FOLLOW THE SAME DECISION IN THE CURRENT YEAR AND DISMISS GROUNDS NO. 5 AND 6. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 33 OF 53 GROUNDS NO. 5 & 6 ARE DISMISSED. 75. GROUND NO. 7.1 HEREIN IS IDENTICAL TO GROUND NO . 10.1 IN ASSESSMENT YEAR 2000-01. AS THE GROUND IS IDENTICAL , FOR THE REASONS/FINDINGS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN IN GROUND NO. 10.1 FOR ASSESSMENT YEAR 2000-01 WHERE T HE GROUND HAS BEEN DISMISSED. HENCE GROUND NO. 7.1 IS DISMISSED. 76. GROUND NO. 7.2 HEREIN IS IDENTICAL TO GROUND NO . 10.2 TAKEN IN ASSESSMENT YEAR 2000-01, WHERE WE HAVE ALLOWED THE GROUND. 77. WE ADOPT THE SAME REASONS IN THE CURRENT YEAR A ND ALLOW THE GROUND TAKEN IN THE CURRENT YEAR. HENCE GROUND NO. 7.2 IS ALLOWED. 78. GROUNDS NO. 8.1 AND 8.2 ARE AGAINST THE CHARGIN G OF INTEREST RECEIVED U/S 244A TO TAX. THE ISSUE IS COVERED BY T HE DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 1999-2000. R ESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, WE REJECT THE GROUND. GROUNDS NO. 8.1 & 8.2 ARE REJECTED. 79. GROUND NO. 8.3 HEREIN IS IDENTICAL TO GROUND NO . 10.2 TAKEN IN ASSESSMENT YEAR 2000-01, WHERE WE HAVE ALLOWED THE GROUND. AS THE GROUND IS IDENTICAL, FOR THE REASONS/FINDINGS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND. HENCE GROUND NO. 8.3 IS ALLOWED. 80. GROUNDS NO. 9, 10 & 11 : I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 34 OF 53 SINCE THE ASSESSEE HAS BEEN ABLE TO PROCURE TAX CER TIFICATES FROM THE RESPECTIVE COUNTRIES, THE ASSESSEE PRAYS THAT APPRO PRIATE DIRECTIONS BE GIVEN TO THE AO TO GIVE APPROPRIATE RELIEF. 81. WE HAVE GONE THROUGH THE ARGUMENTS, WE THEREFOR E, DIRECT THE AO TO GIVE APPROPRIATE RELIEF TO THE EXTENT OF TAX CERTIFICATES PRODUCED BEFORE HIM SO THAT THE ASSESSEE GETS APPROPRIATE RE LIEF. GROUNDS NO. 9, 10 & 11 ARE ALLOWED WITH DIRECTIONS TO THE AO. 82. GROUND NO. 12 HEREIN IS IDENTICAL TO GROUND NO . 15 TAKEN IN ASSESSMENT YEAR 2000-01, WHERE WE HAVE ALLOWED THE GROUND FOR STATISTICAL PURPOSES. AS THE GROUND IS IDENTICAL, F OR THE REASONS/FINDINGS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN I N THE GROUND. HENCE GROUND NO. 12 IS ALLOWED FOR STATISTICAL PURP OSES. 83. GROUND NO. 13 IS CONSEQUENTIAL. 84. GROUND NO. 13A HEREIN IS IDENTICAL TO GROUND NO . 16A TAKEN IN ASSESSMENT YEAR 2000-01, WHERE WE HAVE PARTLY ALLOW ED THE GROUND. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DEC ISION TAKEN IN THE GROUND. HENCE GROUND NO. 13A IS PARTLY ALLOWED 85. GROUNDS NO. 14.1 AND 14.2 ARE DISMISSED AS NOT PRESSED. 86. GROUNDS NO. 15.1 AND 15.2 ARE DISMISSED AS NOT PRESSED. 87. GROUNDS NO. 16.1 AND 16.2 ARE DISMISSED AS NOT PRESSED. 88. GROUND NO. 17 RELATES TO DISALLOWANCE OF RS. 1, 36,84,114/- TAKEN AS CAPITAL EXPENDITURE BY THE REVENUE AUTHORI TIES. 89. THE SR. A.R PLEADED THAT THE AMOUNT WAS SPENT O N REPAIRS CONDUCTED ON TENANTED/LEASED PROPERTY AND IS PURELY IN THE NATURE OF I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 35 OF 53 BUSINESS EXPENDITURE. ACCORDING TO SENIOR AR, THE T IME HAS COME TO ACCEPT THE FACT THAT THERE CAN BE NO BUSINESS WITHO UT A PROPER DISPLAY AND SINGLE ROOF DISPLAY OF ONES OWN PRODUCTS. THE SR. AR SUBMITTED THAT THE ASSESSEE HAD ONLY UNDERTAKEN THE REPAIRS A ND THAT TOO, ON THE LEASED PROPERTY, BECAUSE ON THE DAY, THE LEASE EXPI RES, THE ASSESSEE SHALL HAVE TO VACATE THE PREMISES AND THE REPAIRS U NDERTAKEN BY THE ASSESSEE TODAY, SHALL BE OF NO USE, LET ALONE ENDUR ING USE FOR TOMORROW. THE SR. A.R CITED CASES OF LAKSHMI SUGAR MILLS CO. (P) LTD. V/S CIT REPORTED IN 82 ITR 376 (S.C) AND THE CASE O F L H. SUGAR FACTORY & OIL MILLS (P) LTD. V/S CIT REPORTED IN 12 5 ITR 293 (S.C) FOR HIS SUPPORT. 90. THE REVENUE AUTHORITIES AND THE D.R. ARGUED TH AT THE REPAIRS UNDERTAKEN BY THE ASSESSEE EVEN ON LEASED PROPERTY SHALL GIVE ENDURING BENEFIT TO THE ASSESSEE, THEREFORE, THE EX PENSES SOUGHT TO BE UNDER REPAIRS WERE ACTUALLY CAPITAL IN NATURE. 91. WE HAVE PERUSED THE ORDERS OF THE REVENUE AUTHO RITIES AND THE FACT BROUGHT TO THE NOTICE OF THE BENCH BY THE SR. A.R. WE FIND THAT THE ASSESSEE HAD UNDERTAKEN REPAIRS AND RENOVATION WORK IN THE LEASED PROPERTY, MEANT TO BE FOR THE PURPOSE TO SHOWCASE T HE PRODUCTS UNDER THE BRAND TATA. THERE IS, NO DENIAL FROM THE FACT BY THE REVENUE AUTHORITIES AND BY THE DR, THAT THE PROPERTY IN WHI CH THE REPAIRS, AS CLAIMED WERE DONE WAS A LEASED PROPERTY. WE HAVE TO ACCEPT THAT THE TIME HAS COME THAT THERE HAS TO BE A PROPER DISPLAY AND SINGLE ROOF DISPLAY OF ONES OWN PRODUCTS SHALL BOOST THE BUSIN ESS, IF THE BUSINESS I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 36 OF 53 IS MULTI PRODUCT. WE HAVE GONE THROUGH THE CASES CI TED BY THE SR. A.R., OF LAKSHMI SUGAR MILLS CO. (P) LTD. V/S CIT REPORTE D IN 82 ITR 376 (S.C) AND THE CASE OF L. H. SUGAR FACTORY & OIL MIL LS (P) LTD. V/S CIT REPORTED IN 125 ITR 293 (SC) FOR HIS SUPPORT. 92. WE ARE INCLINED TO ACCEPT THE ARGUMENTS OF THE SENIOR AR AND ALLOW THE GROUND OF APPEAL. WE, THEREFORE, SET ASID E THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE EXPENSES OF R S. 1,36,88,114/- AS REPAIRS. GROUND NO. 17 IS ALLOWED. 93. GROUND NO. 18 IS AGAINST THE DISALLOWANCE OF RS . 1,08,73,000/- ON ACCOUNT OF SYSTEM SOFTWARE DEVELOPMENT EXPENSES. 94. THE SENIOR AR SUBMITTED THAT THE ISSUE HAS NO W BEEN UNDER DISPUTE BEFORE VARIOUS HONBLE HIGH COURTS. HE SUBM ITTED THAT NOW THE ISSUE HAS VIRTUALLY BEEN SET AT REST BY THE DECISIO NS BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ASAHI INDIA SAFETY GLASS LTD., ITA NO. 1110 & 1111 OF 2006, ORDER DATED 04/11/2011 , WHEREIN THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: 11. SOFTWARE IS NOTHING BUT ANOTHER WORD FOR COMPU TER PROGRAMMES, I.E., INSTRUCTIONS, THAT MAKE THE HARDWARE WORK. SOFTWARE IS BROADLY OF TWO TYPES, I.E., THE SYSTEMS SOFTWARE, WHICH IS ALSO KNOWN AS THE OPERATING SYSTEM WHICH CONTROLS THE WORKING OF THE COMPUTER; WHILE T HE OTHER BEING APPLICATIONS SUCH AS WORD PROCESSING PROGRAMS, SPRE AD SHEETS AND DATA BASE WHICH PERFORM THE TASKS FOR WHICH PEOPLE USE COMPUT ERS. BESIDES THESE THERE ARE TWO OTHER CATEGORIES OF SOFTWARE, THESE BEING: NETWORK SOFTWARE AND LANGUAGE SOFTWARE. THE NETWORK SOFTWARE ENABLES GRO UPS OF COMPUTERS TO COMMUNICATE WITH EACH OTHER, WHILE LANGUAGE SOFTWAR E PROVIDES WITH TOOLS REQUIRED TO WRITE PROGRAMMES. (SEE MICROSOFT COMPUT ER DICTIONARY, 5TH EDITION SOFTWARE AT PAGE 489). 12. THE AFORESAID WOULD SHOW THAT WHAT THE ASSESSEE ACQUIRED THROUGH ARTHUR ANDERSON AND ASSOCIATES WAS APPLICATION SOFT WARE WHICH, ENABLED IT TO EXECUTE TASKS IN THE FIELD OF ACCOUNTING, PURCHA SES AND INVENTORY I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 37 OF 53 MAINTENANCE. THE FACT THAT THE APPLICATION SOFTWARE WOULD HAVE TO BE UPDATED FROM TIME TO TIME BASED ON THE REQUIREMENTS OF THE ASSESSEE IN THE CONTEXT OF THE ADVANCEMENT OF ITS BUSINESS AND/OR I TS DIVERSIFICATION, IF ANY; THE CHANGES BROUGHT ABOUT DUE TO STATUTORY AMENDMEN TS BY LAW OR BY PROFESSIONAL BODIES LIKE THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, WHICH ARE GIVEN THE RESPONSIBILITY OF CONCEIVING AN D FORMULATING THE ACCOUNTING STANDARDS FROM TIME TO TIME, AND PERHAPS ALSO, BY REASON OF THE FACT THAT EXPENSES MAY HAVE TO BE INCURRED ON ACCOU NT OF CORRUPTION OF THE SOFTWARE DUE TO UNINTENDED OR INTENDED INGRESS INTO THE SYSTEM - OUGHT NOT GIVE A COLOUR TO THE EXPENDITURE INCURRED AS ONE EX PENDED ON CAPITAL ACCOUNT. GIVEN THE FACT THAT THERE ARE MYRIAD FACTO RS WHICH MAY CALL FOR EXPENSES TO BE INCURRED IN THE FIELD OF SOFTWARE AP PLICATIONS, IT CANNOT BE SAID THAT EITHER THE EXTENT OF THE EXPENSE OR THE EXPENS E BEING INCURRED IN CLOSE PROXIMITY, IN THE SUBSEQUENT YEARS, WOULD BE CONCLU SIVELY DETERMINATIVE OF ITS NATURE. THE ASSESSING OFFICER HAS, IN OUR VIEW, ERRED PRECISELY FOR THESE VERY REASONS. THE SENIOR AR ALSO CITED THE CASE OF HONBLE JURISD ICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF CIT VS RAYCHEM RPG LTD., M UMBAI, ITA NO. 4176 OF 2009, ORDER DATED 04/07/2011, WHEREIN THE H ONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS MADE DEPOSIT OF EARNEST MONEY IN ORDER TO GET EXPORT QUOTA. THE ASSESSEE WAS ALLOTTE D QUOTA ON THE BASIS OF PAST PERFORMANCE/PROJECTED FIGURES SUBMITTED BY THE EXPORTERS AND HAD TO GIVE EMD/GUARANTEE FOR THE PURPOSE OF EXECUTION OF ALLOTTED QUANTITY OF QUOTA TO THE EXTENT OF 90 PER CENT OF THE QUOTA ALL OTTED. FROM THESE FACTS IT IS CLEAR THAT THE QUOTA WAS ALLOTTED TO THE ASSESSEE O N THE BASIS OF PAST PERFORMANCE IN RESPECT OF EXPORTS MADE BY THE ASSES SEE. THE EMD IN THE FORM OF DD/FIXED DEPOSIT/BANK GUARANTEE WAS IN RESP ECT OF EXECUTION OF EXPORT QUOTA ALLOTTED TO THE ASSESSEE. THEREFORE, T HE QUOTA WAS ALLOTTED ON THE BASIS OF PAST PERFORMANCE OF THE ASSESSEE AS AN EXPORTER AND NOT ON THE BASIS OF EARNEST MONEY DEPOSITED. THE QUOTA WAS ALL OTTED DURING THE COURSE OF EXPORT ACTIVITIES OF THE ASSESSEE AND WHEN THE A SSESSEE DID NOT EXECUTE THE FULL QUOTA ALLOTTED, EMD WAS FORFEITED BY AEPC. THUS THE FORFEITURE OF EMD HAS OCCURRED DURING THE COURSE OF BUSINESS ACTI VITIES CARRIED ON BY THE ASSESSEE. HENCE, IT IS A CASE OF BUSINESS LOSS. THE AO HAS DISALLOWED THE AMOUNT ON THE GROUND THAT IT WAS IN THE NATURE OF P ENALTY. FORFEITURE OF EMD ON ACCOUNT OF NON-FULFILLMENT OF QUOTA ALLOTTED TO THE ASSESSEE CANNOT BE TREATED PENAL IN NATURE, AS HELD BY THE AO. IN THE CASE OF TARUN COMMERCIAL MILLS CO. LTD. (SUPRA) THE ASSESSEE EXECUTED A BOND TOWARDS SHORTFALL IN EXPORT OBLIGATIONS. UNDER THE TERMS OF BOND EXECUTE D WITH THE GOVERNMENT THE ASSESSEE HAD OPTION TO EITHER ACHIEVE THE TARGE T OR PAY FOR THE SHORTFALL. THE TERMS OF THE BOND CLEARLY INDICATED THAT THE AU CTION WITH THE MANUFACTURER ASSESSEE OF PAYING FOR THE SHORTFALL C OULD BE FOR VARIETY OF REASONS IN THE INTEREST OF COMMERCIAL EXPEDIENCY. H ONBLE GUJARAT HIGH COURT I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 38 OF 53 HAS HELD THAT THE EXERCISE OF OPTION OF THE ASSESSE E FOR PAYMENT ON ACCOUNT OF SHORTFALL WAS NOT IN THE NATURE OF PENALTY. IN T HE CASE OF CIT V. SURYA PRABHA MILLS (SUPRA) THE ASSESSEE COMPANY WAS RUNNI NG A TEXTILE MILL, WAS A MEMBER OF COTTON MILL ASSOCIATION, WHICH ALLOTTED Q UOTA OF FOREIGN COTTON TO ITS MEMBERS. THE ALLOTMENT WAS MADE ON THE BASIS OF NUMBER OF SPINDLES WORKING ON HIGHER COUNTS. THE ASSESSEE DID NOT IMPO RT THE ALLOTTED QUANTIFY OF COTTON, BUT PAID THE AGREED GUARANTEE AMOUNT FOR THE NON-IMPORT OF THE COTTON. HONBLE MADRAS HIGH COURT HELD THAT PAYMENT MADE WAS NOT FOR PENALTY FOR INFRACTION OF ANY LAW, BUT WAS AN EXPEN DITURE LAID OUT EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. FROM THE ABOVE DECISIO NS IT IS CLEAR THAT PAYMENT OF AMOUNT ON ACCOUNT OF NON-FULFILLMENT OF QUOTA CA NNOT BE TREATED AS PENALTY AS HELD BY THE AO. THE LEARNED CIT(A) HAS, HOWEVER, CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE EMD WAS IN THE NATURE OF CAPITAL EXPENDITURE AS THE ASSESSEE GOT ALLOTMENT OF QUOTA BECAUSE OF EMD. THIS, IN OUR VIEW, IS NOT CORRECT APPRECIATION OF FACTS. AS DISCUSSED EARLIER, THE ASSESSEE GOT QUOTA ALLOTTED ON THE BASIS OF PAST PE RFORMANCE OF EXPORT BUSINESS AND NOT ON THE BASIS OF THE EARNEST MONEY DEPOSITED. THE EARNEST MONEY WAS PAID ON PERCENTAGE BASIS OF QUOTA ALLOTTE D. THEREFORE, THE PAYMENT OF EARNEST MONEY WAS IN THE COURSE OF BUSIN ESS ACTIVITIES AND HENCE, CANNOT BE TREATED AS CAPITAL IN NATURE. HON BLE ALLAHABAD HIGH COURT IN THE CASE OF SUGAR DEALERS CASE (SUPRA) HAS HELD THAT FORFEITURE OF EARNEST MONEY DUE TO NON-PERFORMANCE OF CONTRACT TO PURCHAS E RICE WAS LOSS ATTRIBUTABLE TO THE ASSESSEE AND WAS ALLOWABLE AS D EDUCTION. SIMILARLY, IN THE CASE OF THACKERS H.P. & CO. CASE (SUPRA) FORFEITURE OF SECURITY BY THE FOREST DEPARTMENT ON ACCOUNT OF NON-FULFILMENT OF CONTRACT OBLIGATION WAS HELD TO BE BUSINESS LOSS ALLOWABLE AS DEDUCTION BY HONBLE MADHYA PRADESH HIGH COURT. SIMILARLY IN THE CASE OF NARANDAS MATHURADAS & CO. CASE (SUPRA) HONBLE BOMBAY HIGH COURT HAS HELD THAT MAKING DEPO SIT BY WAY OF SECURITY FOR CARRYING OUT A CONTRACT OF SUPPLY OF GOODS WAS NOT FOR ACQUIRING THE BUSINESS, BUT INCIDENTAL TO CARRYING ON BUSINESS. T HEREFORE, FORFEITURE OF DEPOSIT WAS HELD TO BE ALLOWABLE AS BUSINESS LOSS. LIKEWISE, TRIBUNAL, CUTTACK BENCH IN THE CASE OF DHIRAJLAL RAGHAVJI & CO. CASE (SUPRA) HAS HELD THE FORFEITURE OF EARNEST MONEY AND SECURITY DEPOSIT AS DEDUCTIBLE FROM THE INCOME. THE AMOUNT WAS HELD TO HAVE BEEN PAID FOR S ECURING RIGHT TO PURCHASE STOCK-IN-TRADE AND HENCE WAS NOT IN THE NA TURE OF CAPITAL EXPENDITURE. IN THE INSTANT CASE, THE QUOTA HAS BEE N ALLOTTED ON THE BASIS OF PAST PERFORMANCE IN THE FIELD OF EXPORT AND PAYMENT OF EARNEST MONEY IS INCIDENTAL TO FULFILMENT OF THE QUOTA SO ALLOTTED A ND, THEREFORE, IT CANNOT BE SAID TO HAVE BEEN DEPOSITED FOR ACQUISITION OF THE QUOTA. THEREFORE, FORFEITURE OF SECURITY DEPOSIT IS IN THE NATURE OF BUSINESS LOSS AND HAS TO BE ALLOWED AS DEDUCTION. ACCORDINGLY, NEITHER THE AO W AS JUSTIFIED IN TREATING NEITHER THE FORFEITURE OF SECURITY DEPOSIT AS PENAL IN NATURE NOR THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THE SECURITY DEPOSI T IN THE NATURE OF CAPITAL EXPENDITURE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 95. RESPECTFULLY FOLLOWING THE SAID DECISIONS OF TH E HON'BLE BOMBAY HIGH COURT AND HON'BLE DELHI HIGH COURT, WE HOLD TH AT THESE EXPENSES I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 39 OF 53 ARE REVENUE IN NATURE AND HENCE WE DELETE THE ADDIT ION MADE BY THE REVENUE AUTHORITIES. GROUND NO. 18 IS ALLOWED. I.T.A. NO. 3959/MUM/06 A.Y. 2002-03 (ASSESSEES APPEAL : 96. THE GROUNDS ARISE FROM THE COMMON ORDER OF T HE CIT(A) XXIII, MUMBAI DATED 02-01-2006, COVERING ASSESSMENT YEARS 2000-01, 2001- 02 AND 2002-03. 97. GROUNDS NO. 1.1 TO 1.11 ARE IDENTICAL GROUNDS T AKEN IN ASSESSMENT YEARS 2000-01 AND 2001-02. AS THE GROUND S ARE IDENTICAL, FOR THE REASONS/FINDINGS GIVEN THEREIN, WE SHALL FO LLOW THE DECISION TAKEN IN EACH OF THE GROUNDS NUMBERED 1.1 TO 1.11 W HICH ARE AS FOLLOWS : GROUNDS NO. 1.1 TO 1.3 ARE ALLOWED. GROUNDS NO. 1.4, 1.5 & 1.6 ARE HELD TO BE RENDERED REDUNDANT, HENCE THESE ARE DISMISSED. GROUNDS NO. 1.7 & 1.8 ARE RESTORED TO THE FILE OF T HE AO WITH DIRECTIONS. GROUNDS NO. 1.9 & 1.10 ARE HELD TO BE RENDERED REDU NDANT, HENCE THESE ARE DISMISSED. GROUND NO. 1.11 IS RESTORED TO THE FILE OF THE AO W ITH DIRECTIONS. GROUNDS NO. 2.1 TO 2.10 AND 2A : I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 40 OF 53 98. GROUNDS NO. 2.1 TO 2.10 ARE IDENTICAL GROUNDS T AKEN IN ASSESSMENT YEAR 2000-01. AS THE GROUNDS ARE IDENTIC AL, FOR THE REASONS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN I N EACH OF THE GROUNDS NUMBERED 2.1 TO 2.10 WHICH ARE AS FOLLWOS: 99. GROUND NO. 2.1 IS IDENTICAL GROUND TAKEN IN ASS ESSMENT YEARS 2000-01 AND 2001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION TAKEN THE GROUND NO. 2.1 THEREIN. 100. GROUNDS NO. 2.2 TO 2.3 ARE NOT PRESSED BEFORE US, HENCE BEING DISMISSED AS NOT PRESSED. 101. GROUND NO. 2.5 IS IDENTICAL GROUND TAKEN IN AS SESSMENT YEARS 2000-01 AND 2001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION TAKEN THE GROUND NO. 2.5 THEREIN 102. GROUND NO. 2.6 IS NOT PRESSED BEFORE US. THERE FORE, SAME IS DISMISSED AS BEING NOT PRESSED. 103. GROUND NO. 2.7 IS IDENTICAL TO GROUND TAKEN IN ASSESSMENT YEARS 2000-01 AND 2001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION TAKEN THE GROUND NO. 2.7 THEREIN. 104. GROUND NO. 2.8 IS IDENTICAL GROUND TAKEN IN AS SESSMENT YEARS 2000-01 AND 2001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION TAKEN THE GROUND NO. 2.8 THEREIN. 105. GROUND NO. 2.9 IS NOT PRESSED HENCE SAME IS DI SMISSED AS NOT PRESSED. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 41 OF 53 106. GROUND NO. 2A IS IDENTICAL GROUND TO GROUND NO . 3A TAKEN IN ASSESSMENT YEARS 2000-01 AND 2001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND NO. 3 A THEREIN. 107. GROUNDS NO. 3.1 TO 3.2 ARE NOT PRESSED BEFORE US HENCE THEY ARE DISMISSED AS NOT PRESSED. 108. GROUND NO. 3.3 PERTAINS TO DISALLOWANCE OF EXP ENDITURE OF RS. 7,42,805/- ON CLAIM HAVING SETTLED WITH PAYMEN TS MADE TO AEPC. 109. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED AS UNDER: FOR THE PURPOSE OF EXPORTING OUT OF INDIA, TEXTILE S GARMENTS, THE APPELLANT HAD DURING THE YEAR UNDER CONSIDERATION H ELD EXPORT ENTITLEMENT QUOTAS, UNDER AND IN TERMS OF WHICH, SH IPMENTS OF THE RELEVANT EXPORTS WERE REQUIRED TO BE EFFECTED ON OR BEFORE THE 30TH DAY OF SEPTEMBER OF THE YEAR IMMEDIATELY SUCCEEDING THE YEAR IN WHICH THE CONCERNED QUOTA WAS ISSUED BY THE AEPC. IN CASE SHIPMENT(S) UNDER A QUOTA COULD NOT BE EFFECTED BEF ORE THE 30TH DAY OF SEPTEMBER AFORESAID, THE AEPC PERMITTED REVALIDAT ION OF THE QUOTA UNTIL THE 31ST DAY OF DECEMBER, UPON THE CONCERNED EXPORTER (QUOTA- HOLDER) FURNISHING TO THE AEPC, A BANK GUARANTEE AN D/OR A LEGAL UNDERTAKING. IF, HOWEVER, SHIPMENT(S) UNDER THE QUO TA COULD NOT BE EFFECTED EVEN ON OR BEFORE THE 31ST DAY OF DECEMBER AFORESAID, THE AEPC COULD RECOVER FROM THE CONCERNED EXPORTER, CERT AIN AMOUNTS IN CASH FOR NOT EFFECTING SHIPMENT(S) WITHIN THE EXTEN DED PERIOD OF THE QUOTA. DURING THE YEAR UNDER CONSIDERATION, THE APP ELLANT HAD PAID TO THE AEPC, A SUM OF RS. 7,42,805/-, FOR BEING UNABLE TO MAKE THE REQUIRED SHIPMENT(S) WITHIN THE EXTENDED PERIOD AFO RESAID. THE LEARNED ASSESSING OFFICER HAS DISALLOWED IN FULL TH E SAID SUM OF RS. 7,42,805/-. THE CIT(A) HELD AS UNDER: 72. I HAVE CAREFULLY PERUSED THE SUBMISSION OF APPE LLANT COMPANY WHICH EXPLAINS THE QUOTA SYSTEM ADOPTED BY AEPC AND THE RECOVERY OF CASH EFFECTED BY IT FROM THE QUOTA HOLDERS IN THE E VENT OF THEIR FAILURE TO EFFECT THE QUOTA EVEN DURING REVALIDATED PERIOD. BUT THEN IF THESE ARE THE FACTS OF THE CASE, WHAT PREVENTS THE APPELL ANT COMPANY FROM ESTABLISHING THEM ON THE BASIS OF APPROPRIATE SUPPO RTING DOCUMENTS. AS A MATTER OF FACT, THE APPELLANT COMPANY HAD TAKE N A STAND BEFORE AC THAT NO SUPPORTING EVIDENCE CAN BE PRODUCED AS I T IS A FORFEITURE OF EARNEST MONEY DEPOSIT PAID EARLIER TO AEPC. I AM IN DEED ASTONISHED I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 42 OF 53 AT THE INABILITY OF THE APPELLANT TO PRODUCE ANY EV IDENCE IN SUPPORT OF ITS CLAIM THAT THE AEPC HAD FORFEITED ITS EARNEST MO NEY DEPOSIT WORTH RS.7,42,805/-. SINCE THE APPELLANT ITSELF HAD ADMIT TED ITS INABILITY TO SUBMIT SUPPORTING EVIDENCE TO PROVE ITS CLAIM OF EX PENDITURE, THE AC WAS PERFECTLY JUSTIFIED IN DISALLOWING THE CLAIM PR EFERRED IN RESPECT OF AEPC AT RS.7,42,805/-. EVEN DURING THE APPELLATE PRO CEEDINGS, NO EVIDENCE HAS BEEN FURNISHED TO PROVE THE GROUND OF APPEAL PRESSED. AS A SEQUEL, HAVE NO ALTERNATIVE BUT TO CONFIRM THE DISALLOWANCE MADE BY THE LEARNED AO AT RS. 7,42,805/-. THE GROUND NO. 6-C OF APPEAL FILED FOR AY 2002-03 FAILS CLEARLY ON MERIT DUE TO ADMISSION OF APPELLANT IN RESPECT OF ITS INABILITY TO SUBMIT ANY SUPPORTING EVIDENCE TO PROVE THE IMPUGNED EXPENDITURE. 110. THE SR. A.R SUBMITS THAT THE ISSUE IN QUESTION IS NOW FULLY COVERED BY THE ORDER OF THE CO-ORDINATE BENCH OF DE LHI ITAT IN THE CASE OF PYOGINAM VS. ACIT, REPORTED IN 130 TTJ 7 (D ELHI) (UO) (COPY ENCLOSED), WHEREIN THE CO-ORDINATE BENCH HAS HELD AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS MADE DEPOSIT OF EARNEST MONEY IN ORDER TO GET EXPORT QUOTA. THE ASSESSEE WAS ALLO TTED QUOTA ON THE BASIS OF PAST PERFORMANCE/PROJECTED FIGURES SUBMITT ED BY THE EXPORTERS AND HAD TO GIVE EMD/GUARANTEE FOR THE PUR POSE OF EXECUTION OF ALLOTTED QUANTITY OF QUOTA TO THE EXTE NT OF 90 PER CENT OF THE QUOTA ALLOTTED. FROM THESE FACTS IT IS CLEAR TH AT THE QUOTA WAS ALLOTTED TO THE ASSESSEE ON THE BASIS OF PAST PERFO RMANCE IN RESPECT OF EXPORTS MADE BY THE ASSESSEE. THE EMD IN THE FORM O F DD/FIXED DEPOSIT/BANK GUARANTEE WAS IN RESPECT OF EXECUTION OF EXPORT QUOTA ALLOTTED TO THE ASSESSEE. THEREFORE, THE QUOTA WAS ALLOTTED ON THE BASIS OF PAST PERFORMANCE OF THE ASSESSEE AS AN EXP ORTER AND NOT ON THE BASIS OF EARNEST MONEY DEPOSITED. THE QUOTA WAS ALLOTTED DURING THE COURSE OF EXPORT ACTIVITIES OF THE ASSESSEE AND WHEN THE ASSESSEE DID NOT EXECUTE THE FULL QUOTA ALLOTTED, EMD WAS FO RFEITED BY AEPC. THUS THE FORFEITURE OF EMD HAS OCCURRED DURING THE COURSE OF BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE. HENCE, IT IS A CASE OF BUSINESS LOSS. THE AC HAS DISALLOWED THE AMOUNT ON THE GROUN D THAT IT WAS IN THE NATURE OF PENALTY. FORFEITURE OF EMD ON ACCOUNT OF NON-FULFILLMENT OF QUOTA ALLOTTED TO THE ASSESSEE CANNOT BE TREATED PENAL IN NATURE, AS HELD BY THE AC. IN THE CASE OF TARUN COMMERCIAL MIL LS CO. LTD. (SUPRA) THE ASSESSEE EXECUTED A BOND TOWARDS SHORTFALL IN E XPORT OBLIGATIONS. UNDER THE TERMS OF BOND EXECUTED WITH THE GOVERNMEN T THE ASSESSEE HAD OPTION TO EITHER ACHIEVE THE TARGET OR PAY FOR THE SHORTFALL. THE TERMS OF THE BOND CLEARLY INDICATED THAT THE AUCTIO N WITH THE MANUFACTURER ASSESSEE OF PAYING FOR THE SHORTFALL C OULD BE FOR VARIETY OF REASONS IN THE INTEREST OF COMMERCIAL EXPEDIENCY . HONBLE GUJARAT HIGH COURT HAS HELD THAT THE EXERCISE OF OPTION OF THE ASSESSEE FOR PAYMENT ON ACCOUNT OF SHORTFALL WAS NOT IN THE NATU RE OF PENALTY. IN I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 43 OF 53 THE CASE OF CIT V. SURYA PRABHA MILLS (SUPRA) THE AS SESSEE COMPANY WAS RUNNING A TEXTILE MILL, WAS A MEMBER OF COTTON MILL ASSOCIATION, WHICH ALLOTTED QUOTA OF FOREIGN COTTON TO ITS MEMBE RS. THE ALLOTMENT WAS MADE ON THE BASIS OF NUMBER OF SPINDLES WORKING ON HIGHER COUNTS. THE ASSESSEE DID NOT IMPORT THE ALLOTTED QU ANTIFY OF COTTON, BUT PAID THE AGREED GUARANTEE AMOUNT FOR THE NON-IM PORT OF THE COTTON. HONBLE MADRAS HIGH COURT HELD THAT PAYMENT MADE WAS NOT FOR PENALTY FOR INFRACTION OF ANY LAW, BUT WAS AN E XPENDITURE LAID OUT EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. FROM THE A BOVE DECISIONS IT IS CLEAR THAT PAYMENT OF AMOUNT ON ACCOUNT OF NON-FULF ILLMENT OF QUOTA CANNOT BE TREATED AS PENALTY AS HELD BY THE AC. THE LEARNED CIT(A) HAS, HOWEVER, CONFIRMED THE DISALLOWANCE ON THE GRO UND THAT THE EMD WAS IN THE NATURE OF CAPITAL EXPENDITURE AS THE ASS ESSEE GOT ALLOTMENT OF QUOTA BECAUSE OF EMD. THIS, IN OUR VIEW, IS NOT CORRECT APPRECIATION OF FACTS. AS DISCUSSED EARLIER, THE ASSESSEE GOT QU OTA ALLOTTED ON THE BASIS OF PAST PERFORMANCE OF EXPORT BUSINESS AND NO T ON THE BASIS OF THE EARNEST MONEY DEPOSITED. THE EARNEST MONEY WAS PAID ON PERCENTAGE BASIS OF QUOTA ALLOTTED. THEREFORE, THE PAYMENT OF EARNEST MONEY WAS IN THE COURSE OF BUSINESS ACTIVITIES AND HENCE, CANNOT BE TREATED AS CAPITAL IN NATURE. HONBLE ALLAHABAD HIG H COURT IN THE CASE OF SUGAR DEALERS CASE (SUPRA) HAS HELD THAT FORFEIT URE OF EARNEST MONEY DUE TO NON-PERFORMANCE OF CONTRACT TO PURCHAS E RICE WAS LOSS ATTRIBUTABLE TO THE ASSESSEE AND WAS ALLOWABLE AS D EDUCTION. SIMILARLY, IN THE CASE OF THACKERS H.P. & CO. CASE (SUPRA) FOR FEITURE OF SECURITY BY THE FOREST DEPARTMENT ON ACCOUNT OF NON-FULFILLM ENT OF CONTRACT OBLIGATION WAS HELD TO BE BUSINESS LOSS ALLOWABLE A S DEDUCTION BY HONBLE MADHYA PRADESH HIGH COURT. SIMILARLY IN THE CASE OF NARANDAS MATHURADAS & CO. CASE (SUPRA) HONBLE BOMBAY HIGH C OURT HAS HELD THAT MAKING DEPOSIT BY WAY OF SECURITY FOR CARRYING OUT A CONTRACT OF SUPPLY OF GOODS WAS NOT FOR ACQUIRING THE BUSINESS, BUT INCIDENTAL TO CARRYING ON BUSINESS. THEREFORE, FORFEITURE OF DEPO SIT WAS HELD TO BE ALLOWABLE AS BUSINESS LOSS. LIKEWISE, TRIBUNAL, CUT TACK BENCH IN THE CASE OF DHIRAJIAL RAGHAVJI & CO. CASE (SUPRA) HAS H ELD THE FORFEITURE OF EARNEST MONEY AND SECURITY DEPOSIT AS DEDUCTIBLE FR OM THE INCOME. THE AMOUNT WAS HELD TO HAVE BEEN PAID FOR SECURING RIGHT TO PURCHASE STOCK-IN-TRADE AND HENCE WAS NOT IN THE NATURE OF C APITAL EXPENDITURE. IN THE INSTANT CASE, THE QUOTA HAS BEEN ALLOTTED ON THE BASIS OF PAST PERFORMANCE IN THE FIELD OF EXPORT AND PAYMENT OF E ARNEST MONEY IS INCIDENTAL TO FULFILLMENT OF THE QUOTA SO ALLOTTED AND, THEREFORE, IT CANNOT BE SAID TO HAVE BEEN DEPOSITED FOR ACQUISITI ON OF THE QUOTA. THEREFORE, FORFEITURE OF SECURITY DEPOSIT IS IN THE NATURE OF BUSINESS LOSS AND HAS TO BE ALLOWED AS DEDUCTION. ACCORDINGL Y, NEITHER THE AC WAS JUSTIFIED IN TREATING NEITHER THE FORFEITURE OF SECURITY DEPOSIT AS PENAL IN NATURE NOR THE LEARNED CIT(A) WAS JUSTIFIE D IN HOLDING THE SECURITY DEPOSIT IN THE NATURE OF CAPITAL EXPENDITU RE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIREC T THE AC TO ALLOW THE CLAIM OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 44 OF 53 RESPECTFULLY FOLLOWING THE DECISION BY THE CO-ORDIN ATE BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIR ECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 111. GROUND NO. 4.1 IS IDENTICAL TO GROUND NO. 8.1 TAKEN IN ASSESSMENT YEAR 2001-02. AS THE GROUND IS IDENTICAL , WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND THEREIN. 112. GROUND NO. 4.2 IS IDENTICAL TO GROUND NO. 8.2 TAKEN IN ASSESSMENT YEAR 2001-02. AS THE GROUND IS IDENTICAL , WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND THEREIN. 113. GROUND NO. 4.3 IS IDENTICAL TO GROUND NO. 8.3 TAKEN IN ASSESSMENT YEAR 2001-02. AS THE GROUND IS IDENTICAL , WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND THEREIN. 114. GROUND NO. 5 IS IDENTICAL TO GROUND NO. 9 TAKE N IN ASSESSMENT YEAR 2001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND THEREIN. 115. GROUND NO. 6 IS NOT PRESSED BEFORE US HENCE IT IS DISMISSED AS NOT PRESSED. 116. GROUND NO. 7 IS IDENTICAL TO GROUND NO. 15 TAK EN IN ASSESSMENT YEAR 2000-01 AND GROUND NO. 12 IN ASSESSMENT YEAR 2 001-02. AS THE GROUND IS IDENTICAL, WE SHALL FOLLOW THE DECISION T AKEN IN THE GROUND THEREIN. 117. GROUND NO. 8 IS AGAINST THE LEVY OF INTEREST C HARGED U/S 234D AT RS. 14,62,067/-. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 45 OF 53 118. BEFORE THE CIT(A) IT WAS PLEADED THAT THE ASSE SSEE RECEIVED THE REFUND PRIOR TO THE INSERTION OF SECTION 234D, THER EFORE, THE INTEREST SO CHARGED MUST BE ANNULLED. THE CIT(A) HELD THAT THE SECTION CONTEMPLATED THE LEVY OF INTEREST WHERE EXCESS INTE REST WAS GRANTED AND THE DETERMINATION OF DEFAULT OF GRANTING EXCESS REFUND WAS POSSIBLE ONLY AFTER THE COMPLETION OF REGULAR ASSES SMENT. THE REGULAR ASSESSMENT WAS MADE ON 24-03-2005, I.E. AFTER 01-06 -2003, WHEN THE PROVISION WAS INCORPORATED, THE CIT(A) THEREFORE, H ELD THE INTEREST WAS EXIGIBLE U/S 234D. 119. THE SR. A.R SUBMITTED THAT THE ISSUE IS COVERE D BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S EKTA PROMOTERS (P) LTD. REPORTED IN 113 ITD 719 (DEL SB) AND BY HON'BLE DELHI HIGH COURT IN THE CASE OF DIT V/S JACOBS CIVI L INCORPORATED/MITSUBISHI CORPORATION, REPORTED IN 19 4 TAXMAN 495 (DEL). HE, THEREFORE, PLEADED THAT SINCE THE ISSUE IS COVERED, THE LEVY OF INTEREST BE CANCELLED. 120. THE DR, ON THE OTHER HAND, SUPPORTED THE ORDER S OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THERE WAS A DECISION BY KERALA HIGH COURT SUBSEQUENT TO THE DECISION RENDERED BY THE DE LHI HIGH COURT, WHICH IS AGAINST THE ASSESSEE (DR COULD NOT GIVE TH E CITATION OR ANY OTHER REFERENCE WITH REGARD TO THE CASE THAT HE WAN TED TO REFER TO). 121. WE HAVE PERUSED THE ORDERS OF THE REVENUE AUTH ORITIES AND ALSO THE DECISION CITED BY THE SR. A.R. WE ARE INCLINED TO ACCEPT THE SUBMISSIONS OF THE SR. A.R BUT SINCE THE DR HAS REF ERRED TO A LATER I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 46 OF 53 DECISION, WHICH ACCORDING HIM IS AGAINST THE ASSESS EE, WE WOULD LIKE TO CRYSTALLIZE THE ISSUE. WE, WILL ALLOW THE APPEAL ON THE BASIS, WHEN TWO VIEWS ARE POSSIBLE, THE ONE FAVOURABLE TO THE ASSES SEE SHOULD BE FOLLOWED. WE DIRECT THE AO TO CANCEL THE LEVY OF IN TEREST, LEVIED BY HIM. ACCORDINGLY, GROUND NO. 8 IS ALLOWED. 122. GROUND NO. 9.1 PERTAINED TO THE CLAIM OF RS. 2 ,70,178/- BEING PRIOR PERIOD EXPENSES AND GROUND NO. 9.2 IS CLAIM O F DUTY DRAWBACKS OF RS. 2,41,571/- REFUSED. 123. IT HAS BEEN CONCEDED BY THE SR. A.R THAT THE E XPENSES OF RS. 2, 70,178/- AND INCOME OF RS. 2,41,571/- PERTAINED TO EARLIER YEAR. SINCE NOWHERE DO WE FIND THAT BOTH THESE FIGURES EITHER F ALL IN THE PROVISIONS OR IN THE ACCRUAL IN THE PRECEDING YEAR, WE DO NOT INTEND TO DEVIATE FROM THE DECISION ARRIVED AT BY THE CIT(A). WE, THE REFORE, REJECT THE GROUND OF APPEAL ON BOTH THESE ISSUES. 124. GROUND NO. 9.2 (II) IS NOT PRESSED, HENCE IT I S DISMISSED AS NOT PRESSED. 125. GROUND NO. 10 IS IDENTICAL TO GROUND NO. 18 IN ASSESSMENT YEAR 2001-02. AS THE GROUND IS IDENTICAL, FOR THE REASON S/FINDINGS GIVEN THEREIN, WE SHALL FOLLOW THE DECISION TAKEN IN THE GROUND WHERE WE HAVE ALLOWED THE GROUND. GROUND NO. 10 IS ALLOWED. 126. GROUNDS NO. 11.1 TO 11.3 ARE NOT PRESSED BEFOR E US, HENCE THEY ARE DISMISSED AS NOT PRESSED. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 47 OF 53 127. GROUND NO. 12 IS ON OMISSION TO ALLOW THE CARR Y FORWARD OF UNABSORBED DEPRECIATION OF RS. 3,96,89,454/-. THIS GROUND IS OTHERWISE ALLOWABLE BUT CONSEQUENTIAL EFFECT HAS TO BE GIVEN, CONSEQUENTIAL TO OUR FINDINGS IN THE CURRENT APPEALS. HENCE GROUND N O. 12 IS ALLOWED. 128. IN THE RESULT, APPEAL FOR THE ASSESSMENT YEAR 2002-03 IS PARTLY ALLOWED. 129. NOW WE TAKE UP APPEALS FILED BY THE DEPARTMENT IN I TAS NO. 3884, 3885 & 3886/MUM/2006. SINCE MOST OF THE G ROUNDS ARE IDENTICAL, A CONSOLIDATED ORDER IS BEING PASSED . 130. GROUND NO. 1 (IDENTICAL IN ALL THREE YEARS) : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A ) ERRED IN DIRECTING TO EXCLUDE DIRECT COST ATTRIBUTABLE TO THE EXPORTS AND DOMESTIC SALE OF MANUFACTURED GOODS FROM THE TOTAL COST. 131. THE CIT(A) ALLOWED THE GROUND RAISED AGAINST T HE DISALLOWANCE MADE BY THE AO, FOLLOWING HIS PREDECESSORS DECISIO N IN PRECEDING YEAR YEARS. THE ISSUE WAS TAKEN BEFORE THE ITAT IN THE P RECEDING YEARS, WHEREIN IN I.T.A. NO. 5508/MUM/2005, COVERING ASSES SMENT YEAR 1999-2000 AND EARLIER YEAR IN ASSESSEES OWN CASES, THE CO-ORDINATE BENCH HAD DECIDED THE CASE IN FAVOUR OF THE ASSESSE E BY REJECTING THE GROUND FILED BY THE DEPARTMENT BY HOLDING AS UNDER: 20. GROUND NO. 1 OF APPEAL IS AGAINST THE ACTION O F THE CIT(A) IN DIRECTING THE AO TO RECOMPUTED THE DEDUCTION U/S 80 HHC(3)(II) BY THE METHOD OF PROPORTIONAL ALLOCATION OF ONLY THE INDIRECT COST W HICH DO NOT INCLUDE DIRECT COST OF MANUFACTURING GOODS. 20.1 THE LEARNED REPRESENTATIVES OF THE PARTIES AGR EED THAT THE ISSUE DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN ASSESSEES OWN CASES FOR AY 1996-97 TO 1998-99 VIDE ITA NOS. 4976/MUM/2005 TO 4978/MUM/20 05(REVENUE APPEALS) ORDER DATED 26TH MARCH, 2009, WHEREIN THE ITAT HELD AS UNDER: I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 48 OF 53 5 GROUND NO. 1 IN ALL THE APPEALS PERTAIN TO DEDU CTION U/S 80 HHC. THE LEARNED CIT(A) DIRECTED THE AO TO COMPUTE INDIREC T COSTS OF TRADING GOODS BY EXCLUSION OF DIRECT COSTS OF MANUFACTURED GOODS FROM TOTAL DIRECT COSTS. THIS FINDING OF THE FIRST APPELLATE AUTHORIT Y IS IN LINE WITH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEARS 1992- 93, 1994-95 AND 1995-96. THIS VIEW OF THE TRIBUNAL IS FU RTHER SUPPORTED BY THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF GLAXO SMITHKLINE ASIA (F) LTD. VS. ACIT [2006] 6 SOT 113 (DEL) AND SURENDRA ENGG. CO RPN. VS. ACIT [2003] 86 ITD 121 (MUM)(SB). RESPECTFULLY FOLLOWING T HE SAME WE REJECT THE FIRST GROUND. 20.2 SINCE THE FACTS OF THE CASE AND GROUND OF APPE AL UNDER CONSIDERATION IS SIMILAR TO THAT OF AYS. 1996-97 TO 1998-99 CITED SUPRA, WE RESPECTFULLY FOLLOW THE DECISION OF THE ITAT AND IN THE LIGHT OF THAT WE DISMISS THE GROUND NO.1 OF THE REVENUES APPEAL. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH IN THE ASSESSEES OWN CASE, WE DISMISS THIS GROUND FILED B Y THE DEPARTMENT. 132. GROUND NO. 2 (IDENTICAL IN ALL THREE YEARS) : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CI T(A) ERRED IN DIRECTING TO EXCLUDE SALES TAX AND EXCISE DUTY COLL ECTED FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 8OHHC OF THE ACT. 133. THE ISSUE BEFORE US IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN I.T.AS. NO. 2738, 2 846 & 4296/MUM/2000, WHEREIN THE BENCH HELD AS UNDER: 11. IN SECOND PART OF GROUND NO. 3 THE ISSUE INVOLV ED IS REGARDING INCLUSION OF SALES TAX AND EXCISE DUTY IN THE TOTAL TURNOVER IN CONNECTION WITH COMPUTATION OF DEDUCTION UNDER SECTION 8OHHC. BOTH THE PARTIES AGREED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE . HENCE WE ACCEPT THIS GROUND OF THE ASSESSEE. THUS GROUND NO 3 STANDS PAR TLY ALLOWED. THE A.R. ALSO CITES THE CASE OF CIT V/S LAXMI MACHI NE WORKS, REPORTED IN 290 ITR 667 (S.C). RESPECTFULLY FOLLOWING THE DE CISION IN THE ASSESSEES OWN CASE (AS REFERRED IN THE ABOVE PARA) AS ALSO BY THE DECISION OF THE HON'BLE SUPREME COURT , WE DISMISS THIS GROUND FILED BY THE DEPARTMENT. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 49 OF 53 134. GROUND NO. 3 (IDENTICAL IN ALL THREE YEARS) : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CI T(A) ERRED IN DIRECTING THE AO NOT TO REDUCE AMOUNT OF RS. 46,76, 32,192/- BEING 90% OF TECHNICAL, PROFESSIONAL AND MANAGEMENT SERVI CES FEES FROM THE PROFITS OF THE BUSINESS WHILE COMPUTING DEDUCTION U /S 8OHHC OF THE ACT. 135. THE A.R. CONCEDES THAT THE ISSUE NOW HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S RAVINDRANATHAN NAIR, REPORTED IN 295 ITR 228 (S.C) AND BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CIT V/S DRESSER RAND INDIA (P) LTD., REPORTED IN 323 ITR 42 9 (BOM). 136. AS THE A.R. HAS HIMSELF CONCEDED THE ISSUE TO BE AGAINST ITSELF, WE ALLOW THE GROUND, HOLDING THAT THE DIRECTION GIV EN BY THE CIT(A) IS INFIRM. 137. GROUND NO. 4 (IDENTICAL IN ASSESSMENT YEARS 20 00-01 & 2001-02 AND GROUND NO. 5 IN ASSESSMENT YEAR 2002-03) : ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C IT(A) ERRED IN DELETING THE DISALLOWANCE MADE OF RS. 7,20,688/, BE ING COMMUNITY WELFARE EXPENSES. 138. THE ISSUE HAS BEEN CONSISTENTLY BEING HELD IN FAVOUR OF THE ASSESSEE BY THE APPELLATE AUTHORITY AND BY THE CO-O RDINATE BENCH, WE DO NOT INTEND TO DEVIATE FROM THE FINDINGS OF THE C IT(A) AND RESPECTFULLY FOLLOWING THE ORDERS OF THE CO-ORDINAT E BENCH IN I.T.A. NO. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 50 OF 53 5591/MUM/2005 AND EARLIER CO-ORDINATE BENCHES, IN T HE ASSESSEES OWN CASE, WE DISMISS THE GROUND RAISED BY THE DEPAR TMENT. 139. GROUND NO. 5 (IDENTICAL IN ASSESSMENT YEARS 20 00-01 AND 2001- 02) : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2, 15,963/- MADE U/S 40A(IX) OF THE INCOME TAX ACT, REPRESENTING PAYMENT S MADE DURING THE YEAR TO TATA EMPLOYEES CONSUMERS CO-OP SOC. LTD ., DEWAS. 140. THE ISSUE HAS BEEN CONSISTENTLY BEING HELD IN FAVOUR OF THE ASSESSEE BY THE APPELLATE AUTHORITY AND BY THE CO-O RDINATE BENCH, WE DO NOT INTEND TO DEVIATE FROM THE FINDINGS OF THE C IT(A) AND RESPECTFULLY FOLLOWING THE ORDERS OF THE CO-ORDINAT E BENCH IN I.T.A. NO. 5591/MUM/2005 AND EARLIER CO-ORDINATE BENCHES, IN T HE ASSESSEES OWN CASE, WE DISMISS THE GROUND RAISED BY THE DEPAR TMENT. 141. GROUND NO. 6 (ONLY IN ASSESSMENT YEAR 2000-01) : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 38,54,354/- IN CON TRAVENTION OF PROVISO TO 36(1)(XI) OF THE ACT. 142. THE CIT(A) IN HIS ORDER HAD ALLOWED THE CLAIM OF Y2K EXPENSES, WHICH WERE DISALLOWED BY THE AO, AS THE ASSESSEE HA D NOT FILED THE AUDIT REPORT IN COMPLIANCE WITH SECTION 36 (1)(IX) ALONG WITH THE RETURN. IT WAS NOTICED BY THE CIT(A), THAT THE REQU IRED AUDIT REPORT WAS LATER FILED DURING THE COURSE OF THE ASSESSMENT PRO CEEDINGS, THE CIT(A) HELD THAT DISALLOWANCE COULD NOT BE SUSTAINED BECAU SE THE AUDIT REPORT WAS NOT FILED, WHICH WAS MADE AVAILABLE LATER ON. W E FIND THAT THE I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 51 OF 53 CIT(A) HAS TAKEN A JUDICIOUS DECISION AND ALLOWED T HE APPEAL, WE, ON PERUSING THE ORDERS OF THE REVENUE AUTHORITIES, FIN D THAT THE DECISION TAKEN BY THE CIT(A) IS MORE ON LIBERAL SIDE WHICH W E ACCEPT AND WE DO NOT INTEND TO DISTURB THE DECISION TAKEN BY THE CIT (A) ON THIS ISSUE, WE THEREFORE, DISMISS THE GROUND FILED BY THE DEPARTME NT. 143. IN ASSESSMENT YEAR GROUND NO. 4 IS INDEPENDENT LY TAKEN WHEREIN THE CIT(A) DIRECTED THE AO TO REDUCE NET CO MMISSION AS AGAINST GROSS COMMISSION RECEIVED FROM PROFITS OF B USINESS. 144. THE SENIOR AR SUBMITTED THAT THE ISSUE IS NOW COVERED BY THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE C ASE OF ACG ASSOCIATED CAPSULES PVT. LTD VS CIT (COPY APPENDED IN THE PAPER BOOK), WHEREIN THE HONBLE APEX COURT HELD AS UNDER : WE HAVE HELD IN OUR JUDGMENT IN THE CASE OF M/S AC G ASSOCIATED CAPSULES PVT. LTD. V. COMMISSIONER OF INCOME TAX TH AT NINETY PER CENT OF NOT THE GROSS INTEREST BUT ONLY THE NET INTEREST , WHICH HAS BEEN INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSE SSEE AS COMPUTED UNDER THE HEADS PROFITS AND GAINS OF BUSINESS OR PR OFESSION IS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO S ECTION 8OHHC FOR DETERMINING THE PROFITS OF THE BUSINESS. SINCE, THE VIEW TAKEN BY THE HIGH COURT IN THE IMPUGNED ORDER IS CONSISTENT WITH OUR AFORESAID VIEW, WE FIND NO MERIT IN THIS APPEAL AND WE ACCORD INGLY DISMISS THE SAME. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT, WE HOLD THAT THE DECISION TAKEN BY THE CIT(A) SHOULD NOT BE DISTURBED AND HAS TO BE UPHELD. WE, THEREFORE, DISMISS THE GROUND FIL ED BY THE DEPARTMENT. 145. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE AS UNDER IN I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 52 OF 53 I.T.A. NO. 3957/MUM/2006 FOR A.Y 2000-01 IS PARTLY ALLOWED I.T.A. NO. 3958/MUM/2006 FOR A.Y 2001-02 IS PARTLY ALLOWED I.T.A. NO. 3959/MUM/2006 FOR A.Y 2002-03 IS PARTLY ALLOWED. THE APPEALS FILED BY THE DEPARTMENT AS UNDER IN I.T.A. NO. 3884/MUM/2006 FOR A.Y. 2000-01 IS PARTLY ALLOWED I.T.A. NO. 3885/MUM/2006 FOR A.Y. 2001-02 IS PARTLY ALLOWED I.T.A. NO. 3886/MUM/2006 FOR A.Y. 2002-03 IS PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 08/06/2012. SD/- SD/- ( P.M.JAGTAP ) ( VIVEK VARMA ) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI: 08/06/2012. P/-* COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. I.T.A. NOS. 3957, 3958 & 3959/MUM/2009 TATA INTERNATIONAL LIMITED PAGE 53 OF 53 SR.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON HAND WRITTEN MNS. P 2 DRAFT PLACED BEFORE AUTHOR 16-5-12 P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R 10 DATE OF DISPATCH OF ORDER